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MotorVac Technologies Announces Second Quarter Results

6 August 1998

MotorVac Technologies Announces Second Quarter Results

    SANTA ANA, Calif.--Aug. 6, 1998--MotorVac(R) Technologies Inc. Thursday announced results for its second quarter and six months ended June 30, 1998.
    Net sales for the quarter ended June 30, 1998 decreased 7% to $2,494,464 from $2,691,124 for the same quarter a year earlier. For the current period, MotorVac(R) reported a net loss of $268,983, or $0.06 per basic and diluted share, compared with net income of $196,239, or $0.04 per basic and diluted share, for the second quarter of 1997, which, in 1997 included a one-time benefit of approximately $83,000, or $0.02 per basic and diluted share, from the settlement of a lawsuit.
    The primary reason for the revenue decline from the second quarter of 1997 to the second quarter of 1998 was a cutback of purchases by the company's largest customer as they attempted to lower their inventory levels on all of their product lines. This customer accounted for over 70% of the company's sales in 1997 and the first quarter of 1998.
    Net sales for the six months ended June 30, 1998 increased 18% to $5,578,079 from $4,717,907 for the same period a year earlier. For the current period, the company reported a net loss of $205,053 or $0.05 per basic and diluted share, compared with net income of $340,042 or $0.08 per basic and diluted share, for the first half of 1997, which, in 1997, included a one-time benefit of approximately $185,000, or $0.04 per basic and diluted share from the settlement of a lawsuit.
    The primary reason for the increase in net sales was a 52% increase in sales in the first quarter of 1998 compared with the similar period in 1997; this increase was due primarily to sales of the TRANSTECH transmission service machine, which did not have any sales in the year earlier period.
    The company's operating expenses increased approximately $495,000 to $1,375,509 from the second quarter of 1997 to the second quarter of 1998. Several factors account for the increase. The largest portion of the operating expense increase represented increased sales and marketing-related efforts with the objective of increasing the company's revenue and customer base. For example, $84,000 was incurred for a test with an independent agency to validate the effectiveness of the company's diesel machine. The test results were favorable and will be used in an upcoming diesel marketing campaign. In addition, there was a lawsuit recovery of approximately $83,000 which benefited the second quarter of 1997.
    Operating expenses for the six months ended June 30, 1998 increased 48% to $2,687,729 compared with $1,819,316 incurred for the same period in 1997. The law suit recovery benefited the first six months of 1997 by approximately $185,000. A major portion of the operating expense increase represented additional expenses in support of marketing diversification efforts as discussed previously.
    The company also announced that it is well underway in implementing several initiatives announced earlier with a goal of reducing its dependence on a single customer. These initiatives include the new Automotive Solutions product line that has a target market of over 20,000 outlets in the quick-service market and the expanded focus on the diesel engine market and on alternative channels of distribution.
    "While earnings results are disappointing, we are hopeful that our new initiatives will result in a more diversified customer and revenue base," said Lee W. Melody, president and chief executive officer.
    On July 23, 1998, MotorVac(R) announced the launch of a new MotorVac shop locator system. This locator system was developed to make it easier for consumers to locate a shop that is trained and authorized to perform the MotorVac(R) service. The system can give consumers the phone number of authorized service shops within a 20-mile radius of their home or work, in the United States and Canada. It can be accessed 24 hours a day, seven days a week by calling toll free 888/788-4108.
    MotorVac(R) Technologies designs, develops, assembles and markets unique technological solutions for the service and repair of automotive fluid systems. Product lines include specialty chemicals and shop equipment for servicing fuel systems and transmission systems. MotorVac(R)'s products are distributed to service shops, fleets and government agencies in more than 70 countries worldwide. For additional information, visit MotorVac(R)'s Web site at www.motorvac.com.
    This news release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. The company intends that such statements shall be protected by the safe harbor, provided for in such sections. In particular, statements regarding future results are subject to the risks and uncertainties that could cause actual results to vary materially from those projected in the forward-looking statements. The company may experience significant fluctuations in future operating results due to a number of economic, competitive, governmental and technological factors, including, among other things, changes in laws, the size and timing of customer orders, new or increased competition, unexpected increases in expenses, delays in acceptance of new products, product returns, seasonality in product purchases by distributors and end users, and pricing trends in the automotive after-market industry in general, and in specific, markets in which the company is active.
    Any of these factors, or others, could cause operating results to vary significantly from prior periods and those projected in the forward-looking statements. Additional information with respect to these and other factors which could materially affect the company and its operations is included in the company's filings with the Securities and Exchange Commission, including its Annual Report or Form 10-KSB for the year ended Dec. 31, 1997 and any subsequent filings.

                      MotorVac Technologies Inc.
                       Statements of Operations
                              (Unaudited)

                         Three Months Ended         Six Months Ended
                       June 30,      June 30,      June 30,   June 30,
                         1998          1997          1998       1997

Net sales             $2,494,464   $2,691,124  $5,578,079  $4,717,907

Cost of sales          1,400,782    1,620,487   3,120,993   2,569,688

Gross profit           1,093,682    1,070,637   2,457,086   2,148,219

Operating expenses     1,375,509      880,703   2,687,729   1,819,316

(Loss) income from 
 Operations             (281,827)     189,934    (230,643)    328,903

Interest (income) 
 expense net             (14,994)      (7,500)    (31,240)    (11,534)

Income (loss) before
 provision for 
 income taxes           (266,833)     197,434    (199,403)    340,437

Provision for income
 taxes                     2,150        1,195       5,650         395

Net (loss) income      ($268,983)    $196,239   ($205,053)   $340,042

Basic (loss) earnings
 per share                ($0.06)       $0.04      ($0.05)      $0.08

Weighted average shares
 used to calculate basic
 (loss) earnings 
 per share             4,514,918    4,514,918   4,514,918   4,514,918

Diluted (loss) earnings
 per share                ($0.06)       $0.04      ($0.05)      $0.08

Weighted average shares
 used to calculate diluted
 (loss) earnings 
 per share             4,514,918    4,514,918   4,515,020   4,514,918