Bonded Motors Announces Fourth Quarter Results; Revenues Decline 25 Percent From Prior-Year Levels; Losses for the Quarter Total $1.2 Million.

Business Editors

LOS ANGELES--(BUSINESS WIRE)--Feb. 10, 2000

Company Commences Review of Operations

Bonded Motors (Nasdaq:BMTR) today announced operating results for the fourth quarter ended Dec. 31, 1999.

Revenues declined 24.5 percent from the corresponding 1998 fourth quarter, to $5.7 million. Pre-tax loss for the quarter was $1,177,081, versus a pre-tax loss of $3,470,332 for the corresponding 1998 quarter.

Also during the quarter ended Dec. 31, 1999, production at both manufacturing plants was limited in order to reduce finished goods inventory, and to adjust for current demand for the company's products.

This reduced manufacturing activity caused plant inefficiencies, resulting in higher per-unit costs. The higher costs associated with fourth quarter 1999 production is expected to adversely impact gross margins in the first quarter 2000.

Selling, general and administrative expenses continued to decline in the fourth quarter, but at a rate slower than the revenue decline.

The company has been advised by its independent auditors, KPMG LLP, that it expects to issue a &uot;going concern&uot; opinion on the company's Dec. 31, 1999 fiscal statements, based on the company's current financial position.

Bonded Motors' board of directors recently appointed an outside board member as interim chief operating officer. He has full authority from the board of directors to assess the company's operations and to make any changes to operations that are in the best interests of the company.

In accordance with the company's plan to cut costs, Bonded Motors recently closed its distribution centers in Albany, N.Y., and Salida, Calif. Closure of a third distribution center is contemplated for the near future.

In addition, the company has recently reduced its workforce by approximately 8 percent, and repositioned other personnel in order to reduce expenses. These personnel actions are designed to reduce costs without impacting plant productivity.

The company intends to issue a news release in the near future announcing additional changes to operations, and to schedule an investor conference call at that time.

As reported Nov. 15, 1999, Bonded Motors is in violation of certain bank covenants, and continues to work with Comerica Bank and its trade suppliers in order to work through this difficult period. If the company is unable to reach an agreement with the bank and/or its trade suppliers, the company's business, financial and operating results may be materially adversely affected.

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, Texas, Minnesota, Illinois and Georgia.

The company's principal customers are automotive parts chain stores, such as Pep Boys - Manny, Moe &Jack, CSK Automotive (Checker, Schucks, Kragen), 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 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, 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 and other information detailed from time to time in the company's Securities and Exchange Commission filings.

                          BONDED MOTORS INC.
                        Condensed Balance Sheet
                             Dec. 31, 1999
                              (Unaudited)

                                Assets

Current Assets:
 Cash                                             $   739,565
 Trade accounts receivable (less allowance
  for doubtful accounts of $537,345)                2,743,388
 Inventories:
  Parts                                             2,140,839
  Work in process                                   1,375,377
  Finished goods                                    5,398,400

                                                    8,914,616

 Prepaid expenses and other current assets            262,804
 Prepaid income taxes                                  13,216

   Total current assets                            12,673,589

Restricted investment, IDB                          4,645,477
Property and equipment, at cost:
 Machinery and equipment                            3,798,249
 Furniture and fixtures                               651,511

                                                    4,449,760

 Less accumulated depreciation                      1,953,238

   Net property and equipment                       2,496,522


Goodwill, less accumulated
 amortization of $50,321                              161,558
Cost of issuance, IDB less accumulated
 amortization of $5,801                               242,830

                                                  $20,219,976

                 Liabilities and Shareholders' Equity

Current liabilities:
 Current maturities of note
  payable to related parties                      $    19,500
 Notes payable to bank                                396,918
 Short-term debt                                    6,300,850
 Accounts payable                                   3,525,735
 Accrued expenses                                     403,276
 Accrued warranty obligations                         683,076
 Current installments of capital
  lease obligations                                     9,160

   Total current liabilities                       11,338,515

IDB obligation                                      5,130,000
Capital lease obligations,
 excluding current installments                         4,931
Deferred rent liability                                68,457

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                                  (1,366,646)
 Notes receivable from exercise of stock options     (100,000)

   Total shareholders' equity                       3,678,073

                                                  $20,219,976


                          BONDED MOTORS INC.
                   Condensed Statement of Operations
                              (Unaudited)

                           For the                     For the
                      Three Months Ended        Twelve Months Ended
                           Dec. 31                     Dec. 31
                      1999          1998         1999          1998


Net sales         $ 5,661,856     7,500,929  $ 33,197,973   38,118,596
Cost of sales       5,546,032     8,418,689    28,972,526   32,859,045

 Gross profit         115,824      (917,760)    4,225,447    5,259,551

Selling, general
 and administrative
 expenses           1,114,956     2,402,520     5,287,439    6,605,809

Earnings (loss)
 from operations     (999,132)   (3,320,280)   (1,061,992) (1,346,258)

Other (expense)
 income:

 Interest expense    (239,643)     (150,108)     (781,490)   (514,690)
 Interest income       61,694         2,082       115,435       8,341
 Other                  -            (2,026)         -         (3,922)

 Earnings (loss)
  before income
  taxes            (1,177,081)   (3,470,332)   (1,728,047) (1,856,529)

Income tax
benefit
(expense)               -         1,092,218    (2,054,071)     561,154

 Net earnings
  (loss)         $ (1,177,081)   (2,378,114) $ (3,782,118) (1,295,375)

Basic earnings
 (loss)
 per share       $      (0.38)        (0.78) $      (1.23)      (0.42)

Diluted earnings
 (loss)
 per share              (0.38)        (0.78)        (1.23)      (0.42)

Weighted average
 common shares
 outstanding
 - basic            3,067,000     3,066,000     3,067,000    3,055,000

Weighted average
 common and
 common equivalent
 shares outstanding
 - diluted          3,067,000     3,066,000     3,067,000    3,055,000