U.S. Auto Parts Network, Inc. Reports Third Quarter 2012 Results

       U.S. Auto Parts Network, Inc. Reports Third Quarter 2012 Results

- Net sales $73.0 million.

- Adjusted EBITDA $2.7 million.

- Gross margin 31.4%.

PR Newswire

CARSON, Calif., Nov. 6, 2012

CARSON, Calif., Nov. 6, 2012 /PRNewswire/ -- U.S. Auto Parts Network, Inc.
(NASDAQ: PRTS), one of the largest online providers of automotive aftermarket
parts and accessories, today reported net sales for the third quarter ended
September 29, 2012 ("Q3 2012") of $73.0 million compared with the third
quarter ended October 1, 2011 ("Q3 2011") net sales of $78.6 million, a
decrease of 7.1% from Q3 2011 net sales. Q3 2012 net loss was $2.7 million or
$0.09 per share, compared with Q3 2011 net loss of $5.3 million or $0.17 per
share. The Company generated Adjusted EBITDA of $2.7 million for Q3 2012
compared to $3.1 million for Q3 2011, a decrease of 14.1% from Q3 2011. For
further information regarding Adjusted EBITDA, including a reconciliation of
Adjusted EBITDA to net loss, see non-GAAP Financial Measures below.

"This quarter we executed well by growing margins and by achieving double
digit growth in both our online marketplace and offline businesses. However,
as expected, we are still battling headwinds with respect to customer
acquisition and online traffic to our sites, all of which we are addressing
strategically." stated Shane Evangelist.

Q3 2012 Financial Highlights

     oNet sales decreased $5.6 million, or 7.1%, for Q3 2012 compared to Q3
       2011. Our Q3 2012 net sales consisted of online sales, representing
       90.8% of the total (compared to 94.0% in Q3 2011), and offline sales,
       representing 9.2% of the total (compared to 6.0% in Q3 2011). The net
       sales decrease was primarily due to a decline of $7.6 million, or
       10.2%, in online sales, partially offset by a $2.0 million, or 42.0%,
       increase in offline sales. Online sales decreased primarily due to a
       9.5% reduction in e-commerce unique visitors and a decline in average
       order value by 5.4%, partially offset by an increase of 2.8% in revenue
       capture (revenues retained after taking into consideration returns,
       credit card declines and product fulfillment). Our offline sales, which
       consist of our Kool-Vue™ and wholesale operations, continued to show
       solid growth.
     oGross profit decreased $1.5 million, or 6.0%, in Q3 2012 compared to Q3
       2011. Gross margin rate increased 0.4% to 31.4% in Q3 2012 compared to
       31.0% in Q3 2011. Gross margin increased in Q3 2012 primarily due to
       improved margin from online sales.

     oMarketing expense was $12.9 million, or 17.7%, of net sales in Q3 2012,
       down from $14.0 million, or 17.8%, of net sales in Q3 2011. Online
       advertising expense, which includes catalog costs, was $5.0 million, or
       7.5%, of online sales for Q3 2012, compared to $7.0 million, or 9.5%,
       of online sales for Q3 2011. Marketing expense, excluding online
       advertising, was $7.9 million, or 10.9%, of net sales for Q3 2012,
       compared to $7.0 million, or 8.9%, of net sales for Q3 2011. Online
       advertising expense decreased primarily due to reduction of catalog
       advertising costs of $0.9 million and non-catalog online advertising
       expenses of $1.1 million. Marketing expenses, excluding online
       advertising, increased primarily due to higher depreciation and
       amortization expense related to software deployments.

     oGeneral and administrative expense was $4.9 million, or 6.7%, of net
       sales for Q3 2012, down from $9.1 million, or 11.6%, of net sales for
       Q3 2011. The decrease of $4.2 million, or 45.8%, for Q3 2012 compared
       to Q3 2011, was primarily due to WAG restructuring costs of $3.8
       million in Q3 2011 compared to none in Q3 2012 and lower depreciation
       and amortization expense in Q3 2012.

     oFulfillment expense was $5.7 million, or 7.8%, of net sales in Q3 2012,
       up from $4.4 million, or 5.7%, of net sales in Q3 2011. The increase of
       $1.2 million, or 27.8%, for Q3 2012 compared to Q3 2011, was primarily
       due to higher depreciation and amortization expense from software

     oTechnology expense was $1.6 million, or 2.2%, of net sales in Q3 2012,
       down from $1.7 million, or 2.1%, of net sales in Q3 2011.

     oCapital expenditures for Q3 2012 were $2.5 million.

     oCash and cash equivalents and investments were $1.2 million and total
       debt was $17.3 million as of September 29, 2012 compared to $1.5
       million and $13.1 million as of June 30, 2012.

Q3 2012 Operating Metrics

                                    Q32012   Q32011   Q22012
Conversion Rate                       1.50%     1.57%     1.62%
Customer Acquisition Cost           $ 7.74    $ 9.70    $ 7.10
Marketing Spend (% Internet Sales)    7.7%      9.7%      7.7 %
Visitors (millions) ^ 1               38.1      42.1      39.2
Orders (thousands)                    573       662       635
Revenue Capture (% Sales) ^ 2         83.9%     81.2%     84.4%
Average Order Value                 $ 115     $ 122     $ 116

1 Visitors do not include traffic from media properties (e.g. AutoMD).
2 Revenue capture is the amount of actual dollars retained after taking into
  consideration returns, credit card declines and product fulfillment.

Non-GAAP Financial Measures

Regulation G, "Conditions for Use of Non-GAAP Financial Measures," and other
provisions of the Securities Exchange Act of 1934, as amended, define and
prescribe the conditions for use of certain non-GAAP financial information. We
provide "Adjusted EBITDA,"which is a non-GAAP financial measure. Adjusted
EBITDA consists of net income before (a)interest expense, net; (b)income tax
provision; (c)amortization of intangible assets and impairment
loss;(d)depreciation and amortization; (e)share-based compensation expense;
(f) loss on debt extinguishment; (g)legal costs to enforce intellectual
property rights and (h)restructuring costs.

The Company believes that this non-GAAP financial measure provides important
supplemental information to management and investors. This non-GAAP financial
measure reflect an additional way of viewing aspects of the Company's
operations that, when viewed with the GAAP results and the accompanying
reconciliation to corresponding GAAP financial measures, provides a more
complete understanding of factors and trends affecting the Company's business
and results of operations.

Management uses Adjusted EBITDA as a measure of the Company's operating
performance because it assists in comparing the Company's operating
performance on a consistent basis by removing the impact of items not directly
resulting from core operations. Internally, this non-GAAP measure isalso used
by management for planning purposes, including the preparation of internal
budgets; for allocating resources to enhance financial performance; for
evaluating the effectiveness of operational strategies; and for evaluating the
Company's capacity to fund capital expenditures and expand its business. The
Company also believes that analysts and investors use Adjusted EBITDA as a
supplemental measure to evaluate the overall operating performance of
companies in our industry. Additionally, lenders or potential lenders use
Adjusted EBITDA to evaluate the Company's ability to repay loans.

This non-GAAP financial measure is used in addition to and in conjunction with
results presented in accordance with GAAP and should not be relied upon to the
exclusion of GAAP financial measures. Management strongly encourages investors
to review the Company's consolidated financial statements in their entirety
and to not rely on any single financial measure. Because non-GAAP financial
measures are not standardized, it may not be possible to compare these
financial measures with other companies' non-GAAP financial measures having
the same or similar names. In addition, the Company expects to continue to
incur expenses similar to the non-GAAP adjustments described above, and
exclusion of these items from the Company's non-GAAP measures should not be
construed as an inference that these costs are unusual, infrequent or

The table below reconciles net loss to Adjusted EBITDA for the periods
presented (in thousands):

                          Thirteen Weeks Ended       Thirty-Nine Weeks Ended
                          September 29   October 1   September 29  October 1
                          2012           2011        2012          2011
Net loss                 $         $      $        $     
                          (2,711)        (5,308)     (5,195)       (8,118)
Interest expense, net     118            283         500           719
Income tax provision     41             2           293           215
Amortization of           331            338         1,012         3,328
intangible assets
Depreciation and          3,785          3,126       11,533        9,202
amortization expense
EBITDA                    1,564          (1,559)     8,143         5,346
Share-based compensation  450            623         1,408         1,946
Loss on debt              -              -           360           -
Legal costs to enforce
intellectual property     -              211         -             443
Restructuring costs       640            3,816       640           6,591
Adjusted EBITDA           $        $      $        $     
                          2,654           3,091     10,551        14,326

Conference Call

The conference call is scheduled to begin at 2:00 pm Pacific Time (5:00 pm
Eastern Time) on Tuesday, November 6, 2012. Participants may access the call
by dialing 877-941-4774 (domestic) or 480-629-9760 (international). In
addition, the call will be broadcast live over the Internet and accessible
through the Investor Relations section of the Company's website at
www.usautoparts.net where the call will be archived for two weeks. A telephone
replay will be available through November 20, 2012. To access the replay,
please dial 877-870-5176 (domestic) or 858-384-5517 (international), passcode

About U.S. Auto Parts Network, Inc.

Established in 1995, U.S. Auto Parts is a leading online provider of
automotive aftermarket parts, including body parts, engine parts, performance
parts and accessories. Through the Company's network of websites, U.S. Auto
Parts provides individual consumers with a broad selection of competitively
priced products that are mapped by a proprietary product database to product
applications based on vehicle makes, models and years. U.S. Auto Parts'
flagship websites are located at www.autopartswarehouse.com,
www.jcwhitney.com, www.partstrain.com, www.stylintrucks.com and www.AutoMD.com
and the Company's corporate website is located at www.usautoparts.net .

U.S. Auto Parts is headquartered in Carson, California.

Safe Harbor Statement

This press release contains statements which are based on management's current
expectations, estimates and projections about the Company's business and its
industry, as well as certain assumptions made by the Company. These statements
are forward looking statements for the purposes of the safe harbor provided by
Section21E of the Securities Exchange Act of 1934, as amended and Section27A
of the Securities Act of 1933, as amended. Words such as "anticipates,"
"could," "expects," "intends," "plans," "potential," "believes," "predicts,"
"projects," "seeks," "estimates," "may," "will," "would," "will likely
continue" and variations of these words or similar expressions are intended to
identify forward-looking statements.These statements include, but are not
limited to, the Company's expectations regarding its futureoperating results
and financial condition, impact of changes in our key operating metrics, our
potential growth and our liquidity requirements. We undertake no obligation to
revise or update publicly any forward-looking statements for any reason. These
statements are not guarantees of future performance and are subject to certain
risks, uncertainties and assumptions that are difficult to predict.Therefore,
our actual results could differ materially and adversely from those expressed
in any forward-looking statements as a result of various factors.

Important factors that may cause such a difference include, but are not
limited to, the Company's ability to integrate and achieve efficiencies of
acquisitions, economic downturn that could adversely impact retail sales;
marketplace illiquidity; demand for the Company's products; increases in
commodity and component pricing that would increase the Company's per unit
cost and reduce margins; the competitive and volatile environment in the
Company's industry; the Company's ability to expand and price its product
offerings, control costs and expenses, and provide superior customer service;
the mix of products sold by the Company; the effect and timing of
technological changes and the Company's ability to integrate such changes and
maintain, update and expand its infrastructure and improve its unified product
catalog;the Company's ability to improve customer satisfaction and retain,
recruit and hire key executives, technical personnel and other employees in
the positions and numbers, with the experience and capabilities, and at the
compensation levels needed to implement the Company's business plans both
domestically and internationally; the Company's cash needs, including
requirements to amortize debt; regulatory restrictions that could limit the
products sold in a particular market or the cost to produce, store or ship the
Company's products; any changes in the search algorithms by leading Internet
search companies; the Company's need to assess impairment of intangible assets
and goodwill; the Company's ability to comply with Section404 of the
Sarbanes-Oxley Act and maintain an adequate system of internal controls; and
any remediation costs or other factors discussed in the Company's filings with
the Securities and Exchange Commission (the "SEC"), including the Risk Factors
contained in the Company's Annual Report on Form 10-K and Quarterly Reports on
Form 10-Q, which are available at www.usautoparts.net and the SEC's website at
www.sec.gov. You are urged to consider these factors carefully in evaluating
the forward-looking statements in this release and are cautioned not to place
undue reliance on such forward-looking statements, which are qualified in
their entirety by this cautionary statement.Unless otherwise required by law,
the Company expressly disclaims any obligation to update publicly any
forward-looking statements, whether as result of new information, future
events or otherwise.

(In thousands, except par value)
                                            September 29       December 31
                                            2012               2011
Current assets:
 Cash and cash equivalents               $      1,076  $    10,335
 Short-term investments                  99                 1,125
 Accounts receivable, net of allowances
of $231 and $183
 at September 29, 2012 and December   8,583              7,922
31, 2011, respectively
 Inventory                               48,658             52,245
 Deferred income taxes                   446                446
 Other current assets                    4,370              3,548
 Total current assets                 63,232             75,621
Property and equipment, net                 32,191             34,627
Intangible assets, net                      8,997              9,984
Goodwill                                    18,854             18,854
Investments                                 -                  2,104
Other non-current assets                    1,358              1,026
 Total assets                         $    124,632    $   142,216
Current liabilities:
 Accounts payable                        $     32,994   $    41,303
 Accrued expenses                        8,674              11,565
 Revolving loan payable                  17,126             -
 Current portion of long-term debt       -                  6,250
 Current portion of capital leases       84                 135
 Other current liabilities               4,044              7,702
 Total current liabilities            62,922             66,955
Long-term debt, net of current portion      -                  11,625
Capital leases payable, net of current      89                 37
Deferred income taxes                       1,970              1,596
Other non-current liabilities               1,551              1,079
 Total liabilities                    66,532             81,292
Commitments and contingencies
Stockholders' equity:
 Common stock, $0.001 par value; 100,000
shares authorized;
31,125 shares and 30,626 shares
issued and outstanding
 at September 29, 2012 and December   31                 31
31, 2011, respectively
 Additional paid-in capital              159,446            157,140
 Accumulated other comprehensive income  392                327
 Accumulated deficit                     (101,769)          (96,574)
 Total stockholders' equity           58,100             60,924
 Total liabilities and equity         $    124,632    $   142,216

(In thousands, except per share data)
                      Thirteen Weeks Ended       Thirty-Nine Weeks Ended
                      September 29   October 1   September 29   October 1
                      2012           2011        2012           2011
Net sales             $         $      $          $    
                      73,014         78,593      241,169        249,839
Cost of sales ^(1)    50,121         54,248      167,307        166,664
Gross profit          22,893         24,345      73,862         83,175
Operating expenses:
 Marketing         12,909         14,002      39,337         41,953
 General and       4,926          9,096       15,510         25,739
 Fulfillment       5,685          4,449       17,242         14,048
 Technology        1,590          1,676       4,826          5,531
 Amortization of   331            338         1,012          3,328
intangible assets
 Total         25,441         29,561      77,927         90,599
operating expenses
Loss from operations  (2,548)        (5,216)     (4,065)        (7,424)
Other (expense)
income :
 Other (expense)   (1)            201         34             279
income, net
 Interest expense  (121)          (291)       (511)          (758)
 Loss on debt      -              -           (360)          -
 Total other   (122)          (90)        (837)          (479)
expense, net
Loss before income    (2,670)        (5,306)     (4,902)        (7,903)
tax provision
Income tax provision 41             2           293            215
Net loss             (2,711)        (5,308)     (5,195)        (8,118)
Other comprehensive
income (loss), net of
 Foreign currency
translation           11             (18)        35             15
 Unrealized gains  1              34          30             61
on investments
 Total other   12             16          65             76
comprehensive income
Comprehensive loss    $         $      $         $     
                      (2,699)        (5,292)     (5,130)        (8,042)
Basic and diluted net $        $      $        $     
loss per share        (0.09)          (0.17)    (0.17)          (0.27)
Shares used in
computation of basic
 diluted net loss  30,854         30,571      30,716         30,522
per share
^(1)Excludes depreciation and amortization expense which is included in
marketing, general and administrative and fulfillment expense.

(In thousands)
                                                 Thirty-Nine Weeks Ended
                                                 September 29   October 1
                                                 2012           2011
Cash flows from operating activities:
 Net loss                                    $         $     
                                                 (5,195)        (8,118)
 Adjustments to reconcile net loss to net
cash (used in) provided by
 operating activities:
 Depreciation and amortization          11,533         9,202
 Amortization of intangible assets      1,012          3,328
 Deferred income taxes                  374            187
 Share-based compensation               1,408          1,946
 Stock awards issued for non-employee   43             -
director service
 Amortization of deferred financing     69             95
 Loss on debt extinguishment            360            -
 Loss from disposition of assets        4              -
 Changes in operating assets and
 Accounts receivable           (661)          (3,466)
 Inventory                     3,588          2,383
 Other current assets          (881)          (105)
 Accounts payable and accrued  (12,138)       2,725
 Other current liabilities     (3,659)        1,940
 Other non-current liabilities 446            283
 Net cash (used in)    (3,697)        10,400
provided by operating activities
Cash flows from investing activities:
 Additions to property and equipment         (7,853)        (11,140)
 Proceeds from sale of property and          14             -
 Cash paid for intangible assets             (16)           (63)
 Proceeds from sale of marketable securities 3,171          2,100
and investments
 Purchases of marketable securities and      (8)            (55)
 Change in restricted cash                   -              319
 Purchases of company-owned life insurance   (166)          (281)
 Proceeds from purchase price adjustment     -              787
 Net cash used in      (4,858)        (8,333)
investing activities
Cash flows from financing activities:
 Proceeds from revolving loan payable        23,061         -
 Payments made on revolving loan payable     (5,935)        -
 Payment of debt extinguishment costs        (175)          -
 Payments made on long-term debt             (17,875)       (4,562)
 Payments of debt financing costs            (359)          (53)
 Payments on capital leases                  (104)          (122)
 Proceeds from exercise of stock options     663            324
 Other                                       -              (85)
 Net cash used in      (724)          (4,498)
financing activities
Effect of exchange rate changes on cash and cash 20             (13)
Net change in cash and cash equivalents          (9,259)        (2,444)
Cash and cash equivalents, beginning of period   10,335         17,595
Cash and cash equivalents, end of period         $        $     
                                                 1,076          15,151
Supplemental disclosures of non-cash investing
and financing activities:
 Accrued asset purchases                     $        $      
                                                 2,164          1,191
 Property acquired under capital lease       104            32
 Unrealized gain on investments              30             58
Supplemental disclosures of consolidated cash
flow information:
 Cash paid for income taxes                  17             9
 Cash paid for interest                      293            853

Investor Contacts:

David Robson, Chief Financial Officer
U.S. Auto Parts Network, Inc.
(310) 735-0085

Budd Zuckerman, President
Genesis Select Corporation
(303) 415-0200

SOURCE U.S. Auto Parts Network, Inc.

Website: http://www.usautoparts.net
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