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U.S. Auto Parts Network, Inc. Reports First Quarter 2013 Results



       U.S. Auto Parts Network, Inc. Reports First Quarter 2013 Results

- Net sales $65.4 million.

- Adjusted EBITDA $1.5 million.

- Gross margin 30.2%.

PR Newswire

CARSON, Calif., May 7, 2013

CARSON, Calif., May 7, 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 first quarter ended
March 30, 2013 ("Q1 2013") of $65.4 million compared with the first quarter
ended March 31, 2012 ("Q1 2012") net sales of $87.4 million, a decrease of
25.2% from Q1 2012 net sales. Q1 2013 net loss was $3.3 million or $0.11 per
share, compared with Q1 2012 net loss of $0.8 million or $0.03 per share. The
Company generated Adjusted EBITDA (EBITDA plus share-based compensation
expense and restructuring costs) of $1.5 million for Q1 2013 compared to $4.2
million for Q1 2012. For further information regarding Adjusted EBITDA,
including a reconciliation of net loss to Adjusted EBITDA, see non-GAAP
Financial Measures below.

"This quarter, we successfully completed measures to strengthen the Company's
balance sheet and continue to implement strategies to return to profitable
growth," stated Shane Evangelist.

Q1 2013 Financial Highlights

  o Net sales decreased to $65.4 million for Q1 2013 compared to $87.4 million
    for Q1 2012. Our Q1 2013 net sales consisted of online sales, representing
    89.6% of the total (compared to 93.4% in Q1 2012), and offline sales,
    representing 10.4% of the total (compared to 6.6% in Q1 2012). The net
    sales decrease was primarily due to a decline of $23.0 million, or 28.2%,
    in online sales, partially offset by a $1.0 million, or 17.6%, increase in
    offline sales. Online sales decreased primarily due to a 23.2% reduction
    in e-commerce unique visitors. Our offline sales, which consist of our
    Kool-Vue™ and wholesale operations, continued to show solid growth.
  o Gross profit decreased $6.9 million, or 25.9%, in Q1 2013 compared to Q1
    2012. Gross margin rate decreased 0.3% to 30.2% in Q1 2013 compared to
    30.5% in Q1 2012. Gross margin was unfavorably impacted by higher freight
    and warehouse supplies expense partially offset by higher selling margins
    from higher penetration of sales from our private label business.
  o Marketing expense was $11.2 million, or 17.1%, of net sales in Q1 2013,
    down from $13.5 million, or 15.4%, of net sales in Q1 2012. Online
    advertising expense, which includes catalog costs, was $4.3 million, or
    7.4%, of online sales for Q1 2013, compared to $6.1 million, or 7.4%, of
    online sales for Q1 2012. Online advertising expense decreased primarily
    due to the reduction in our non-catalog online advertising expenses, which
    includes listing and placement fees paid to commercial and search engine
    websites, of $1.7 million as we adjusted our spend on lower sales volume.
    Marketing expense, excluding online advertising, was $6.9 million, or
    10.5%, of net sales for Q1 2013, compared to $7.4 million, or 8.4%, of net
    sales for Q1 2012. The decline was primarily due to lower call center
    wages of $1.0 million partially offset by higher depreciation and
    amortization expense of $0.2 million and restructuring costs related to
    employee severance of $0.3 million.
  o General and administrative expense was $4.7 million, or 7.2%, of net sales
    in Q1 2013, down from $5.9 million, or 6.7%, of net sales for Q1 2012. The
    decrease of $1.2 million, or 20.2%, for Q1 2013 compared to Q1 2012, was
    due to lower depreciation and amortization expense of $0.4 million and
    lower merchant fees of $0.5 million.
  o Fulfillment expense was $5.4 million, or 8.2%, of net sales in Q1 2013
    compared to $5.9 million, or 6.8%, of net sales in Q1 2012.
  o Technology expense was $1.5 million, or 2.3%, of net sales in Q1 2013,
    compared to $1.5 million, or 1.8%, of net sales in Q1 2012.
  o Capital expenditures for Q1 2013 were $2.6 million.
  o Cash and cash equivalents and investments were $1.3 million and total debt
    was $12.2 million as of March 30, 2013 compared to $1.0 million and $16.4
    million as of December 29, 2012.

Q1 2013 Operating Metrics
                                    Q1 2013    Q1 2012    Q4 2012
Conversion Rate ^1                     1.44 %     1.47 %     1.41 %
Customer Acquisition Cost           $  6.94    $  7.50    $  8.04
Marketing Spend (% Internet Sales)     7.5  %     7.6  %     8.6  %
Unique Visitors (millions) ^ 1, 2      36.8       47.9       36.5
Total Number of Orders (thousands)     529        705        514
Revenue Capture (% Sales) ^ 3          82.2 %     83.7 %     82.7 %
Average Order Value                 $  109     $  116     $  108

 

  As we consolidate to fewer websites, we changed the measurement source of
  our unique visitors data to another third-party provider in the first
1 quarter of 2013. Previously reported operating metrics data for the first
  quarter and fourth quarter of 2012 were revised to conform to the current
  third-party provider's data.
2 Visitors do not include traffic from media properties (e.g. AutoMD).
3 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) depreciation and amortization expense; (d) amortization of
intangible assets; (e) share-based compensation expense; and (f) 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 is also 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
                                      March 30    March 31
                                      2013        2012
Net loss                              $  (3,343)  $     (788)
Interest expense, net                 185         199
Income tax provision                  21          124
Amortization of intangible assets     106         340
Depreciation and amortization expense 3,638       3,747
EBITDA                                607         3,622
Share-based compensation expense      409         584
Restructuring costs                   498         -
Adjusted EBITDA                       $   1,514   $   4,206

 

Conference Call
The conference call is scheduled to begin at 2:00 pm Pacific Time (5:00 pm
Eastern Time) on Tuesday, May 7, 2013. Participants may access the call by
dialing 877-941-1428 (domestic) or 480-629-9713 (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 May 21, 2013. To access the replay, please dial 877-870-5176
(domestic) or 858-384-5517 (international), passcode 4618107.

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, 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
Section 21E of the Securities Exchange Act of 1934, as amended and Section 27A
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 future operating 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 Section 404 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.

 

U.S. AUTO PARTS NETWORK, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In Thousands, Except Par and Liquidation Value)
                                              March 30        December 29
                                              2013            2012
                                              (Unaudited)
ASSETS
Current assets:
    Cash and cash equivalents                 $        1,297  $          1,030
    Short-term investments                    111             110
    Accounts receivable, net of allowances
of $242 and $221 at March 30, 2013 and        7,040           7,431
December 29, 2012, respectively
    Inventory                                 37,633          42,727
    Deferred income taxes                     44              39
    Other current assets                      3,310           4,176
       Total current assets                   49,435          55,513
Property and equipment, net                   27,123          28,559
Intangible assets, net                        3,120           3,227
Other non-current assets                      1,669           1,578
       Total assets                           $      81,347   $        88,877
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
    Accounts payable                          $      23,055   $        28,025
    Accrued expenses                          9,475           10,485
    Revolving loan payable                    12,125          16,222
    Current portion of capital leases         35              70
payable
    Other current liabilities                 4,704           4,738
       Total current liabilities              49,394          59,540
Capital leases payable, net of current        69              70
portion 
Deferred income taxes                         350             314
Other non-current liabilities                 1,711           1,309
       Total liabilities                      51,524          61,233
Commitments and contingencies
Stockholders' equity:
    Series A convertible preferred stock,
$0.001 par value; $1.45 per share
liquidation value or aggregate of $5.8        4               -
million; 4,150 shares authorized; 4,000 and
0 shares issued and  outstanding at March
30, 2013 and December 29, 2012, respectively
    Common stock, $0.001 par value; 100,000
shares authorized; 31,151 shares and 31,128   31              31
shares issued and outstanding at March 30,
2013 and December 29, 2012, respectively
    Additional paid-in capital                165,305         159,781
    Accumulated other comprehensive income    378             384
    Accumulated deficit                       (135,895)       (132,552)
       Total stockholders' equity             29,823          27,644
       Total liabilities and equity           $      81,347   $        88,877

 

U.S. AUTO PARTS NETWORK, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE OPERATIONS
(Unaudited, In Thousands, Except Per Share Data)
                                                      Thirteen Weeks Ended
                                                      March 30     March 31
                                                      2013         2012
Net sales                                             $ 65,405     $ 87,436
Cost of sales ^(1)                                    45,667       60,808
Gross profit                                          19,738       26,628
Operating expenses:
    Marketing                                         11,191       13,450
    General and administrative                        4,687        5,870
    Fulfillment                                       5,381        5,918
    Technology                                        1,515        1,536
    Amortization of intangible assets                 106          340
        Total operating expenses                      22,880       27,114
Loss from operations                                  (3,142)      (486)
Other income (expense):
    Other income, net                                 7            31
    Interest expense                                  (187)        (209)
        Total other expense, net                      (180)        (178)
Loss before income tax provision                      (3,322)      (664)
Income tax provison                                   21           124
Net loss                                              (3,343)      (788)
Other comprehensive (loss) income, net of tax:
    Foreign currency translation adjustments          (6)          27
    Unrealized gains on investments                   -            25
        Total other comprehensive (loss) income       (6)          52
Comprehensive loss                                    $  (3,349)   $     (736)
Basic and diluted net loss per share                  $    (0.11)  $    (0.03)
Shares used in computation of basic and diluted net   31,141       30,638
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
(Unaudited, In Thousands)
                                                       Thirteen Weeks Ended
                                                       March 30    March 31
                                                       2013        2012
Cash flows from operating activities:
     Net loss                                          $  (3,343)  $     (788)
     Adjustments to reconcile net loss to net cash
(used in) provided by operating activities:
          Depreciation and amortization                3,638       3,747
          Amortization of intangible assets            106         340
          Deferred income taxes                        31          126
          Share-based compensation                     409         584
          Stock awards issued for non-employee         11          -
director service
          Amortization of deferred financing costs     20          39
          Loss from disposition of assets              -           4
          Changes in operating assets and liabilities
                   Accounts receivable                 391         (1,267)
                   Inventory                           5,094       6,138
                   Other current assets                867         29
                   Other non-current assets            23          -
                   Accounts payable and accrued        (6,243)     (9,303)
expenses
                   Other current liabilities           (35)        (18)
                   Other non-current liabilities       370         149
                           Net cash provided by (used  1,339       (220)
in) operating activities
Cash flows from investing activities:
     Additions to property and equipment               (2,623)     (2,371)
     Proceeds from sale of property and equipment      -           14
     Cash paid for intangible assets                   -           (16)
     Proceeds from sale of marketable securities and   -           1,071
investments
     Purchases of marketable securities and            -           (7)
investments
     Purchases of company-owned life insurance         (106)       -
                           Net cash used in investing  (2,729)     (1,309)
activities
Cash flows from financing activities:
     Proceeds from revolving loan payable              5,903       -
     Payments made on revolving loan payable           (10,000)    -
     Proceeds from issuance of Series A convertible    5,800       -
preferred stock
     Payment of issuance costs from Series A           (30)
convertible preferred stock
     Payments of debt financing costs                  -           (14)
     Payments on capital leases                        (36)        (33)
     Proceeds from exercise of stock options           23          43
                           Net cash provided by (used  1,660       (4)
in) financing activities
Effect of exchange rate changes on cash and cash       (3)         32
equivalents
Net change in cash and cash equivalents                267         (1,501)
Cash and cash equivalents, beginning of period         1,030       10,335
Cash and cash equivalents, end of period               $   1,297   $   8,834
Supplemental disclosures of non-cash investing and
financing activities:
     Accrued asset purchases                           $   1,294   $   1,717
     Unpaid issuance costs related to Series A         765         -
convertible preferred stock
     Unrealized gain on investments                    -           17
Supplemental disclosures of consolidated cash flow
information:
     Cash paid for income taxes                        -           -
     Cash paid for interest                            112         218

 

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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