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

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

- Net sales $62.8 million.

- Adjusted EBITDA $(1.1) million.

- Gross margin 28.3%.

PR Newswire

CARSON, Calif., March 25, 2013

CARSON, Calif., March 25, 2013 /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 fourth quarter ended
December 29, 2012 ("Q4 2012") of $62.8 million compared with the fourth
quarter ended December 31, 2011 ("Q4 2011") net sales of $77.2 million, a
decrease of 18.6% from Q4 2011 net sales. Q4 2012 net loss was $30.8 million
or $0.99 per share, compared with Q4 2011 net loss of $7.0 million or $0.23
per share. The Company generated Adjusted EBITDA (EBITDA plus share-based
compensation expense, impairment losses, legal costs related to intellectual
property rights, loss on debt extinguishment and restructuring costs) of
$(1.1) million for Q4 2012 compared to $1.9 million for Q4 2011. For further
information regarding Adjusted EBITDA, including a reconciliation of net loss
to Adjusted EBITDA, see non-GAAP Financial Measures below.

For the fiscal year ended December 29, 2012, the Company generated net sales
of $304.0 million compared with the fiscal year ended December 31, 2011 net
sales of $327.1 million, a decrease of 7.0% from the prior year's net sales.
Net loss for fiscal year 2012 was $36.0 million or $1.17 per share, compared
with net loss of $15.1 million or $0.50 per share. The Company generated
Adjusted EBITDA of $9.4 million for fiscal year 2012 compared to $16.3 million
for fiscal year 2011. For further information regarding Adjusted EBITDA,
including a reconciliation of net loss to Adjusted EBITDA, see non-GAAP
Financial Measures below.

"We continue to push through this challenging time by taking necessary steps,
including reducing operating costs and implementing strategies for increasing
customer traffic, to return to profitable growth" stated Shane Evangelist.

Q4 2012 Financial Highlights

  oNet sales decreased $14.4 million, or 18.6%, for Q4 2012 compared to Q4
    2011. Our Q4 2012 net sales consisted of online sales, representing 89.8%
    of the total (compared to 94.3% in Q4 2011), and offline sales,
    representing 10.2% of the total (compared to 5.7% in Q4 2011). The net
    sales decrease was primarily due to a decline of $16.4 million, or 22.5%,
    in online sales, partially offset by a $2.0 million, or 44.9%, increase in
    offline sales. Online sales decreased primarily due to a 17.7% reduction
    in e-commerce unique visitors and a decline in average order value by
    5.7%, partially offset by an increase of 1.3% in revenue capture. Our
    offline sales, which consist of our Kool-Vue™ and wholesale operations,
    continued to show solid growth.
  oGross profit decreased $6.0 million, or 25.4%, in Q4 2012 compared to Q4
    2011. Gross margin rate decreased 2.5% to 28.3% in Q4 2012 compared to
    30.8% in Q4 2011. Gross margin was unfavorably impacted by a write down of
    inventory slated for return to suppliers.
  oTotal impairment loss was $26.4 million in Q4 2012 compared to $5.1
    million for Q4 2011. Impairment losses on goodwill, property and equipment
    and intangible assets of $18.9 million, $1.9 million and $5.6 million,
    respectively, were recorded in Q4 2012 due to declines in the Company's
    overall financial performance.
  oMarketing expense was $12.1 million, or 19.2%, of net sales in Q4 2012,
    down from $13.8 million, or 17.9%, of net sales in Q4 2011. Online
    advertising expense, which includes catalog costs, was $4.8 million, or
    8.5%, of online sales for Q4 2012, compared to $6.9 million, or 9.5%, of
    online sales for Q4 2011. Marketing expense, excluding online advertising,
    was $7.3 million, or 11.6%, of net sales for Q4 2012, compared to $6.9
    million, or 9.0%, of net sales for Q4 2011. Online advertising expense
    decreased due to reduction of catalog advertising costs of $0.5 million
    and non-catalog online advertising expenses of $1.6 million. Marketing
    expenses, excluding online advertising, increased primarily due to higher
    depreciation and amortization expense related to software deployments.
  oGeneral and administrative expense was $4.3 million, or 6.9%, of net sales
    in Q4 2012, down from $6.2 million, or 8.1%, of net sales for Q4 2011. The
    decrease of $1.9 million, or 30.1%, for Q4 2012 compared to Q4 2011, was
    primarily due to WAG restructuring costs of $0.8 million in Q4 2011
    compared to none in Q4 2012 and lower depreciation and amortization
    expense and merchant fees in Q4 2012.
  oFulfillment expense was $5.0 million, or 8.0%, of net sales in Q4 2012
    compared to $5.1 million, or 6.6%, of net sales in Q4 2011.
  oTechnology expense was $1.4 million, or 2.3%, of net sales in Q4 2012,
    compared to $1.7 million, or 2.3%, of net sales in Q4 2011.
  oCapital expenditures for Q4 2012 were $2.3 million.
  oCash and cash equivalents and investments were $1.1 million and total debt
    was $16.2 million as of December 29, 2012 compared to $1.1 million and
    $17.1 million as of September 29, 2012.

Q4 2012 Operating Metrics
                                    Q42012    Q42011    Q32012
Conversion Rate                        1.53 %     1.68 %     1.50 %
Customer Acquisition Cost           $  8.04    $  9.87    $  7.74
Marketing Spend (% Internet Sales)     8.6  %     9.6  %     7.7  %
Unique Visitors (millions) ^ 1         33.5       40.7       38.1
Total Number of Orders (thousands)     514        682        573
Revenue Capture (% Sales) ^ 2          82.7 %     81.4 %     83.9 %
Average Order Value                 $  108     $  115     $  115

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;(d)depreciation and
amortization; (e)share-based compensation expense; (f) loss on debt
extinguishment; (g)legal costs related to intellectual property rights; (h)
impairment losses; and (i)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
non-recurring.

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

                            Thirteen Weeks Ended      Fifty-Two Weeks Ended
                            December 29  December 31  December 29  December 31
                            2012         2011         2012         2011
Net loss                   $        $       $        $    
                            (30,783)     (7,020)      (35,978)     (15,137)
Interest expense, net       274          244          774          963
Income tax benefit         (1,230)      (1,727)      (937)        (1,512)
Amortization of intangible  177          345          1,189        3,673
assets
Depreciation and            3,671        3,494        15,204       12,695
amortization expense
EBITDA                      (27,891)     (4,664)      (19,748)     682
Share-based compensation    265          660          1,673        2,607
expense
Impairment loss on goodwill 18,854       -            18,854       -
Impairment loss on property 1,960        -            1,960        -
and equipment
Impairment loss on          5,613        5,138        5,613        5,138
intangible assets
Loss on debt extinguishment -            -            360          -
Legal costs related to
intellectual property       67           19           67           462
rights
Restructuring costs         -            784          640          7,375
Adjusted EBITDA             $       $       $       $     
                            (1,132)       1,937       9,419      16,264

Conference Call
The conference call is scheduled to begin at 3:00 pm Pacific Time (6:00 pm
Eastern Time) on Monday, March 25, 2013. Participants may access the call by
dialing 877-941-1427 (domestic) or 480-629-9664 (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 throughApril 8, 2013. To access the replay, please dial
877-870-5176 (domestic) or 858-384-5517 (international), passcode 4609720.

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.comand
www.AutoMD.comand 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.netand 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.





U.S. AUTO PARTS NETWORK, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In Thousands, Except Par Value)
                                             December 29       December 31
                                             2012              2011
ASSETS
Current assets:
 Cash and cash equivalents                $     1,030  $    10,335
 Short-term investments                   110               1,125
 Accounts receivable, net of allowances
of $221 and $183
 at December 29, 2012 and December     7,431             7,922
31, 2011, respectively
 Inventory                                42,727            52,245
 Deferred income taxes                    39                446
 Other current assets                     4,176             3,548
 Total current assets                  55,513            75,621
Property and equipment, net                  28,559            34,627
Intangible assets, net                       3,227             9,984
Goodwill                                     -                 18,854
Investments                                  -                 2,104
Other non-current assets                     1,578             1,026
 Total assets                          $    88,877   $   142,216
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
 Accounts payable                         $    28,025   $    41,303
 Accrued expenses                         10,485            11,565
 Revolving loan payable                   16,222            -
 Current portion of long-term debt        -                 6,250
 Current portion of capital leases        70                135
payable
 Other current liabilities                4,738             7,702
 Total current liabilities             59,540            66,955
Long-term debt, net of current portion       -                 11,625
Capital leases payable, net of current       70                37
portion
Deferred income taxes                        314               1,596
Other non-current liabilities                1,309             1,079
 Total liabilities                     61,233            81,292
Commitments and contingencies
Stockholders' equity:
 Common stock, $0.001 par value; 100,000
shares authorized;
 31,128 shares and 30,626 shares
issued and outstanding
 at December 29, 2012 and December     31                31
31, 2011, respectively
 Additional paid-in capital               159,781           157,140
 Accumulated other comprehensive income   384               327
 Accumulated deficit                      (132,552)         (96,574)
 Total stockholders' equity            27,644            60,924
 Total liabilities and equity          $    88,877   $   142,216





U.S. AUTO PARTS NETWORK, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE OPERATIONS
(In Thousands, Except Per Share Data)
                          Thirteen Weeks Ended        Fifty-Two Weeks Ended
                          December 29    December 31  December 29  December 31
                          2012           2011         2012         2011
Net sales                 $         $       $        $    
                          62,848         77,233       304,017      327,072
Cost of sales ^(1)        45,072         53,408       212,379      220,072
Gross profit              17,776         23,825       91,638       107,000
Operating expenses:
 Marketing             12,079         13,832       51,416       55,785
 General and           4,347          6,222        19,857       31,961
administrative
 Fulfillment           5,023          5,116        22,265       19,164
 Technology            1,448          1,743        6,274        7,274
 Amortization of       177            345          1,189        3,673
intangible assets
 Impairment loss on    18,854         -            18,854       -
goodwill
 Impairment loss on    1,960          -            1,960        -
property and equipment
 Impairment loss on    5,613          5,138        5,613        5,138
intangible assets
 Total operating   49,501         32,396       127,428      122,995
expenses
Loss from operations      (31,725)       (8,571)      (35,790)     (15,995)
Other (expense) income:
 Other (expense)       (14)           84           20           364
income, net
 Interest expense      (274)          (260)        (785)        (1,018)
 Loss on debt          -              -            (360)        -
extinguishment
 Total other       (288)          (176)        (1,125)      (654)
expense, net
Loss before income tax    (32,013)       (8,747)      (36,915)     (16,649)
provision
Income tax benefit        (1,230)        (1,727)      (937)        (1,512)
Net loss                 (30,783)       (7,020)      (35,978)     (15,137)
Other comprehensive
(loss) income, net of
tax:
 Foreign currency      (4)            7            31           22
translation adjustments
 Unrealized gains on   (4)            (5)          26           56
investments
 Total other
comprehensive (loss)      (8)            2            57           78
income
Comprehensive loss        $          $       $        $    
                          (30,791)       (7,018)      (35,921)     (15,059)
Basic and diluted net     $        $       $       $     
loss per share            (0.99)          (0.23)      (1.17)      (0.50)
Shares used in
computation of basic      31,128         30,618       30,818       30,546
anddiluted net loss per
share

^(1)   Excludes depreciation and amortization expense which is included in
       marketing, general and administrative and fulfillment expense.





U.S. AUTO PARTS NETWORK, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands)
                                                  Fifty-Two Weeks Ended
                                                  December 29    December 31
                                                  2012           2011
Cash flows from operating activities:
 Net loss                                     $          $    
                                                  (35,978)       (15,137)
 Adjustments to reconcile net loss to net
cash (used in) provided by
 operating activities:
 Depreciation and amortization           15,204         12,695
 Amortization of intangible assets       1,189          3,673
 Impairment loss on goodwill             18,854         -
 Impairment loss on property and         1,960          -
equipment
 Impairment loss on intangible assets    5,613          5,138
 Deferred income taxes                   (875)          (1,537)
 Share-based compensation                1,673          2,607
 Stock awards issued for non-employee    53             -
director service
 Amortization of deferred financing      94             147
costs
 Loss on debt extinguishment             360            -
 Loss (gain) from disposition of assets  14             (12)
 Changes in operating assets and
liabilities
 Accounts receivable            491            (2,583)
 Inventory                      9,520          (4,145)
 Other current assets           (618)          734
 Other non-current assets       (281)          -
 Accounts payable and accrued   (14,912)       6,218
expenses
 Other current liabilities      (2,964)        2,202
 Other non-current liabilities  203            378
 Net cash (used in)     (400)          10,378
provided by operating activities
Cash flows from investing activities:
 Additions to property and equipment          (10,155)       (14,303)
 Proceeds from sale of property and equipment 14             -
 Cash paid for intangible assets              (34)           (74)
 Proceeds from sale of marketable securities  3,171          2,600
and investments
 Purchases of marketable securities and       (8)            (572)
investments
 Change in restricted cash                    -              319
 Purchases of company-owned life insurance    (166)          (281)
 Proceeds from purchase price adjustment      -              787
 Net cash used in       (7,178)        (11,524)
investing activities
Cash flows from financing activities:
 Proceeds from revolving loan payable         26,731         -
 Payments made on revolving loan payable      (10,509)       -
 Payment of debt extinguishment costs         (175)          -
 Payments made on long-term debt              (17,875)       (6,125)
 Payments of debt financing costs             (407)          (74)
 Payments on capital leases                   (137)          (144)
 Proceeds from exercise of stock options      636            384
 Other                                        -              (141)
 Net cash used in       (1,736)        (6,100)
financing activities
Effect of exchange rate changes on cash and cash  9              (14)
equivalents
Net change in cash and cash equivalents           (9,305)        (7,260)
Cash and cash equivalents, beginning of period    10,335         17,595
Cash and cash equivalents, end of period          $        $     
                                                  1,030          10,335
Supplemental disclosures of non-cash investing
and financing activities:
 Accrued asset purchases                      $        $      
                                                  1,803          1,286
 Property acquired under capital lease        104            49
 Unrealized gain on investments               26             60
Supplemental disclosures of consolidated cash
flow information:
 Cash paid for income taxes                   -              9
 Cash paid for interest                       495            1,099



Investor Contacts:

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

Budd Zuckerman, President
Genesis Select Corporation
bzuckerman@genesisselect.com
(303) 415-0200

SOURCE U.S. Auto Parts Network, Inc.

Website: http://www.usautoparts.net
 
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