Bonded Motors Announces Third Quarter Results
16 November 1999
Bonded Motors Announces Third Quarter Results
LOS ANGELES--Nov. 15, 1999--Warranty Expenses, Product Returns Increase
Valuation Allowance For Deferred Tax Asset Set At $2.4 Million
Aaron Landon, Chairman of the Board and Chief Executive Officer of Bonded Motors Inc. announced today operating results for the third quarter ended Sept. 30, 1999.
Revenues declined from $10.8 million in the corresponding 1998 third quarter, to $8.1 million. Gross profit declined from $2,184,307 in the corresponding 1998 third quarter to $886,937 for the quarter ended Sept. 30, 1999. Pre-tax loss for the quarter was ($484,101) versus a pre-tax profit of $740,704 for the corresponding 1998 quarter.
Also in the third quarter, 1999 the Company established a valuation allowance of $2,388,375 to reduce the Company's net deferred tax asset to its estimated net realizable value. This action was mentioned in our announcement of Oct. 14, 1999. Though these tax assets may be used through the year 2015, the Company can no longer support that it is more likely than not that such deferred tax assets will be realized in their entirety. As a result, the Company has recorded an after tax loss for the quarter ended Sept. 30, 1999, of ($2,560,906) or ($.83) per share.
Commenting on the results, Mr. Landon noted, "We are certainly disappointed in the revenue stream realized in the third quarter, and have met with our major customers so that we may forecast revenues. To compound the problem, product returns and related costs were higher than traditional levels, as were warranty expenses.
"Selling, general and administrative expenses declined in the quarter, but at a rate slower than the revenue decline.
"The resulting losses placed us in violation of our working capital line of credit and we are working diligently with both Comerica Bank and our trade suppliers in order to get us through this difficult period, and hope to reach an agreement with all parties before Nov. 30, 1999. As soon as a plan is finalized, the Company will issue a press release. If we are unable to reach an agreement with the Bank and or trade suppliers on a plan, we will be required to seek additional financing. If we are unable to obtain the necessary additional financing, our business, financial, and operating results may be materially adversely affected," Landon concluded.
Safe Harbor statement under the Private Securities Litigation Reform Act of 1995: The statements in this release regarding operational improvements, future revenue and earnings expectations and the expansion of the company's facilities and markets are subjective or forward-looking statements that include risks and uncertainties, included 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 and other information detailed from time to time in the Company's Securities and Exchange Commission filings.
Bonded Motors (www.bondedmotors.com) is a remanufacturer of car and light truck engines with headquarters in Los Angeles, manufacturing facilities in California and Georgia, and Distribution Centers in California, Washington, Colorado, Ohio, New York, and Georgia. The Company's principal customers are automotive parts chain stores, such as Pep Boys -- Manny, Moe and Jack, CSK Automotive (Checker, Schucks, Kragen), Paccar Automotive (Grand's and Al's Auto Parts), and Genuine Parts/NAPA.
BONDED MOTORS INC.
Condensed Balance Sheet
September 30, 1999
(Unaudited)
Assets
Current assets:
Cash $110,168
Trade accounts receivable (less allowance
for doubtful accounts of $502,029) 3,766,402
Inventories:
Parts 2,649,316
Work in process 1,398,171
Finished goods 6,275,832
------------
10,323,319
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Prepaid expenses and other current assets 320,631
Prepaid income taxes 13,216
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Total current assets 14,533,736
------------
Restricted investment, IDB 4,596,904
Property and equipment, at cost:
Machinery and equipment 3,779,282
Furniture and fixtures 650,076
------------
4,429,358
Less accumulated depreciation 1,859,886
------------
Net property and equipment 2,569,472
------------
Goodwill, less accumulated amortization of $45,024 166,855
Cost of issuance, IDB less accumulated amortization
of $3,315 247,911
------------
$22,114,878
------------
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Liabilities and Shareholders' Equity
Current liabilities:
Notes payable to bank $464,844
Short-term debt 7,025,793
Accounts payable 3,142,546
Accrued expenses 517,819
Accrued warranty obligations 961,813
Current installments of capital lease obligations 9,160
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Total current liabilities 12,121,975
------------
IDB obligation 5,130,000
Capital lease obligations, excluding
current installments 7,749
Shareholders' equity:
Preferred stock, no par value. Authorized 1,000,000
shares; none issued and outstanding --
Common stock, no par value. Authorized 10,000,000
shares; issued and outstanding 3,067,140 shares 5,040,719
Additional paid-in capital 104,000
Retained deficit (189,565)
Notes receivable from exercise of stock options (100,000)
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Total shareholders' equity 4,855,154
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$22,114,878
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BONDED MOTORS INC.
Condensed Statement of Operations
(Unaudited)
For the For the
Three Months Ended Nine Months Ended
Sept. 30 Sept. 30
1999 1998 1999 1998
------------ ----------- ------------ ------------
Net sales $ 8,140,658 $10,807,015 $27,536,117 $30,617,667
Cost of sales 7,253,721 8,622,708 23,426,494 24,440,356
------------ ----------- ------------ ------------
Gross profit 886,937 2,184,307 4,109,623 6,177,311
Selling, general and
administrative
expenses 1,208,700 1,336,788 4,172,483 4,203,289
------------ ----------- ------------ ------------
Earnings (loss)
from operations (321,763) 847,519 (62,860) 1,974,022
Other (expense)
income:
Interest expense (206,071) (108,903) (541,847) (364,582)
Interest income 43,733 2,088 53,741 6,259
Other -- -- -- (1,896)
------------ ----------- ------------ ------------
Earnings (loss)
before income
taxes (484,101) 740,704 (550,966) 1,613,803
Income tax benefit
(expense) (2,076,805) (262,501) (2,054,071) (531,064)
------------ ----------- ------------ ------------
Net earnings
(loss) $(2,560,906) $ 478,203 $(2,605,037) $ 1,082,739
------------ ----------- ------------ ------------
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Basic earnings
(loss) per share $ (0.83) $ 0.16 $ (0.85) $ 0.35
Diluted earnings
(loss) per share (0.83) 0.15 (0.85) 0.34
------------ ----------- ------------ ------------
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Weighted average
common shares
outstanding - basic 3,067,000 3,062,000 3,067,000 3,052,000
------------ ----------- ------------ ------------
------------ ----------- ------------ ------------
Weighted average
common and common
equivalent shares
outstanding -
diluted 3,067,000 3,133,000 3,067,000 3,168,000
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