Bonded Motors Announces Second Quarter Results
30 July 1998
Bonded Motors Announces Second Quarter Results
LOS ANGELES--July 29, 1998--
Revenues Increase 80% to Record Levels
Gross Margins Continue to Improve
Earnings Exceed Analysts' Estimates
Positive Cash Flow Reduces Bank Debt
One-Time Non-Cash Charge Taken
Secondary Offering Withdrawn
Aaron Landon, chairman of the board and chief executive officer of Bonded Motors Inc. , Wednesday announced operating results for the second quarter ended June 30, 1998.
Revenues increased 80% to $11.3 million for the quarter versus $6.3 million for the comparable 1997 quarter. Earnings from operations more than doubled to $685,294 for the quarter versus $304,324 for the comparable 1997 quarter. Net income totaled $398,842 or 13 cents per share, exceeding analysts' estimates.
Commenting on the results, Landon noted, "We are pleased with the continued growth in revenues, and gross margin improvement has now been realized for thee consecutive quarters. That is a significant accomplishment, considering that this year alone we have hired an additional 171 employees (a 51% increase from Dec. 31, 1997 employee levels) to keep up with growing product demand. These new employees are less productive than our more experienced personnel, and the training costs associated with new employees affects gross margins.
"Our Macon, Georgia manufacturing facility is still not producing a sufficient number of engines to satisfy growing demand east of the Mississippi. As a result, our Los Angeles manufacturing facility had to ship a great number of engines to our East Coast Distribution Centers and directly to East Coast customers during the second quarter. This caused freight costs to rise substantially, which is reflected in higher than normal selling, general and administrative expenses. Our Macon plant is continuing to increase its productivity, and we expect that the Georgia manufacturing facility will be able to meet product demand east of the Mississippi some time in the fourth quarter. As this occurs, we expect S, G&A expenses to return to more traditional levels. In addition, we have employed the services of FDSI Logistics Inc., a third party logistics firm, to analyze and help us reduce our freight costs.
"Selling, general and administrative expenses were also affected by a one time non-cash charge of approximately $99,000 relating to issuance of stock options to outside consultants for services rendered.
"Cash flow for the quarter was very good," Landon continued. "Though revenues increased by 33% from the first quarter (March, 1998), inventories rose by only 8% and accounts receivable actually declined 14%. This allowed us to reduce bank debt by over $900,000 in the quarter.
"I am pleased with the progress that our new president, Richard Funk, and the whole Bonded team has made during the past three quarters," Landon added, "and we will continue to address challenges associated with our expanded growth rate. OUr five year business plan was to grow revenues by 30% per year. Over the past four years, revenues have grown steadily: 32.1% in 1994, 29.6% in 1995, 36.8% in 1996, and 29.2% in 1997. For the first six months of 1998, revenues have grown an additional 74.6% from comparable 1997 levels.
"In June, 1998 Bonded Motors withdrew its planned secondary offering, due primarily to pricing considerations. At present we are considering alternative methods of financing the company's growth, some of which may be non-dilutive (and perhaps accretive) to per share earnings," Landon concluded.
Bonded Motors is a remanufacturer of car and light truck engines with headquarters in Los Angeles, manufacturing plants in California and Georgia, and Distribution Centers in California, Washington, Colorado, Ohio, Georgia and New York. The company's principal customers are automotive parts chain stores, such as Pep Boys -- Manny, Moe and Jack, CSK Automotive (Checkers, Schucks, and Kragens), Paccar Automotive (Grand's and Al's Auto Parts) and Genuine Parts/NAPA .
Safe Harbor statement under the Private Securities Litigation Reform Act of 1995: The statements in this release regarding the business conditions of the automotive aftermarket for remanufactured engines and the expansion of the company's products and markets are forward looking statements that include risks and uncertainties, including but not limited to product demand and development, technological advancements, impact of competitive products and pricing, growth in targeted markets, manufacturing capacity, risks of foreign operations, ability to integrate and leverage acquisitions, and other information detailed from time to time in the company's Securities and Exchange Commission filings.
Bonded Motors Inc.
Balance Sheet
June 30, 1998
(Unaudited)
Assets
Current assets:
Cash $ 57,051
Trade accounts receivable (less allowance
for doubtful accounts of $145,646) 5,667,961
Inventories:
Parts 5,897,340
Work in process 904,170
Finished goods 1,657,197
8,458,707
Deferred tax assets 438,800
Prepaid expenses and other current assets 495,612
Prepaid income taxes 25,042
Total current assets 15,143,173
Property and equipment, at cost:
Machinery and equipment 3,030,895
Furniture and fixtures 449,486
3,480,381
Less accumulated depreciation 1,438,542
Net property and equipment 2,041,839
Goodwill, less accumulated amortization of
$18,539 193,340
Deferred tax assets 1,442,241
Other assets 140,597
$18,961,190
Liabilities and Shareholders' Equity
Current liabilities:
Current installments of notes payable to
bank $ 385,128
Accounts payable 3,167,225
Accrued expenses 646,442
Accrued warranty obligations 564,000
Total current liabilities 4,762,795
Notes payable to bank, excluding current
installments 278,831
Long-term debt 4,633,112
Shareholders' equity
Preferred stock, no par value. Authorized
1 million shares; none issued and
outstanding --
Common stock, no par value. Authorized
10 million shares; issued and outstanding
3,055,040 shares 4,972,069
Additional paid-in capital 99,000
Retained earnings 4,315,383
Notes receivable from exercise of stock
options (100,000)
Total shareholders' equity 9,286,452
$18,961,190
Bonded Motors Inc.
Statement of Earnings
(Unaudited)
Three Months Six Months
Ended Ended
June 30, June 30,
1998 1997 1998 1997
Net sales $11,302,610 6,272,321 $19,810,652 11,348,094
Cost of sales 8,833,411 5,078,212 15,817,648 8,767,628
Gross profit 2,469,199 1,194,109 3,993,004 2,580,466
Selling, general and
administrative
expenses 1,783,905 889,785 2,866,501 1,754,372
Earnings from
operations 685,294 304,324 1,126,503 826,094
Other (expense) income:
Interest expense (145,255) (34,242) (255,679) (46,535)
Interest income 2,086 4,083 4,171 8,160
Other -- (1,896)
Earnings before
income taxes 542,125 274,165 873,099 787,719
Income tax (expense) (143,283) 8,695 (268,563) (76,339)
Net earnings $ 398,842 282,860 $ 604,536 711,380
Basic earnings per
share 0.13 0.09 $ 0.20 0.24
Diluted earnings per
share 0.13 0.09 0.19 0.23
Weighted average common
shares outstanding 3,053,000 3,024,000 3,040,000 3,008,000
Weighted average common
and common equivalent
shares outstanding 3,187,000 3,127,000 3,181,000 3,115,000