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

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

- Net sales $67.9 million.

- Adjusted EBITDA $1.1 million.

- Gross margin 28.0%.

PR Newswire

CARSON, Calif., Aug. 6, 2013

CARSON, Calif., Aug. 6, 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 second quarter ended
June 29, 2013 ("Q2 2013") of $67.9 million compared with the second quarter
ended June 30, 2012 ("Q2 2012") net sales of $80.7 million, a decrease of
15.9% from Q2 2012 net sales. Q2 2013 net loss was $9.6 million or $0.29 per
share, compared with Q2 2012 net loss of $1.7 million or $0.06 per share. The
Company generated Adjusted EBITDA (EBITDA plus share-based compensation
expense, impairment losses and restructuring costs) of $1.1 million for Q2
2013 compared to $3.7 million for Q2 2012. For further information regarding
Adjusted EBITDA, including a reconciliation of net loss to Adjusted EBITDA,
see non-GAAP Financial Measures below.

"We believe in the strategies that we have implemented to return to profitable
growth and increase customer traffic, and expect these strategies to overcome
the challenges of the past year." stated Shane Evangelist.

Q2 2013 Financial Highlights

  oNet sales decreased to $67.9 million for Q2 2013 compared to $80.7 million
    for Q2 2012. Our Q2 2013 net sales consisted of online sales, representing
    91.0% of the total (compared to 92.5% in Q2 2012), and offline sales,
    representing 9.0% of the total (compared to 7.5% in Q2 2012). The net
    sales decrease was primarily due to a decline of $12.9 million, or 17.3%,
    in online sales. Online sales decreased primarily due to an 18.4%
    reduction in e-commerce unique visitors partially offset by growth in our
    online marketplaces. Our offline sales, which consist of our Kool-Vue™ and
    wholesale operations, were flat compared to the prior year.
  oGross profit decreased to $19.0 million for Q2 2013 compared to $24.3
    million for Q2 2012. Gross margin rate decreased 2.2% to 28.0% in Q2 2013
    compared to 30.2% in Q2 2012. Gross margin was unfavorably impacted by the
    lower margin from online sales, reduced purchase discounts and higher
    freight expense.
  oMarketing expense was $11.2 million, or 16.5%, of net sales in Q2 2013,
    down from $13.0 million, or 16.1%, of net sales in Q2 2012. Online
    advertising expense, which includes catalog costs, was $4.6 million, or
    7.4%, of online sales for Q2 2013, compared to $5.2 million, or 7.0%, of
    online sales for Q2 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 $0.6 million as we adjusted our spend on lower sales volume.
    Marketing expense, excluding online advertising, was $6.6 million, or
    9.7%, of net sales for Q2 2013, compared to $7.7 million, or 9.6%, of net
    sales for Q2 2012. The decline was primarily due to lower call center
    wages partially offset by restructuring costs related to employee
    severance. 
  oGeneral and administrative expense was $4.7 million, or 6.9%, of net sales
    in Q2 2013 and $4.7 million, or 5.8%, of net sales for Q2 2012.
  oFulfillment expense was $5.0 million, or 7.4%, of net sales in Q2 2013
    compared to $5.6 million, or 7.0%, of net sales in Q2 2012. The decrease
    was primarily due to lower depreciation and amortization expense and lower
    warehouse wages partially offset by restructuring costs related to
    employee severance. 
  oTechnology expense was $1.3 million, or 1.9%, of net sales in Q2 2013,
    compared to $1.7 million, or 2.1%, of net sales in Q2 2012. The decrease
    was primarily due to lower telephone and lower technology wages partially
    offset by restructuring costs related to employee severance. 
  oTotal impairment loss was $6.1 million in Q2 2013, of which $4.8 million
    was for impairment losses on property and equipment and $1.3 million was
    for impairment losses on intangible assets. The impairment charges were
    recorded in Q2 2013 due to declines in the Company's overall financial
    performance. 
  oCapital expenditures for Q2 2013 were $2.2 million. 
  oCash and cash equivalents and investments were $1.0 million and total debt
    under our revolver was $3.3 million as of June 29, 2013 compared to $1.4
    million and $12.2 million as of March 30, 2013. 

Q2 2013 Operating Metrics

                                    Q22013    Q22012    Q12013
Conversion Rate ^1                     1.49 %     1.48 %     1.44 %
Customer Acquisition Cost           $  7.52    $  7.07    $  6.94
Marketing Spend (% Internet Sales)     7.5  %     6.5  %     7.5  %
Unique Visitors (millions) ^ 1, 2      35.1       43.0       36.8
Total Number of Orders (thousands)     523        635        529
Revenue Capture (% Sales) ^ 3          83.2 %     84.4 %     82.2 %
Average Order Value                 $  114     $  116     $  109



  As we consolidate to fewer websites, we changed the measurement source of
  our unique visitors data to different third-party provider of that data in
1 the first quarter of 2013. Previously reported operating metrics data for
  the second quarter of 2012 was 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 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      Twenty-Six Weeks Ended
                          June 29      June 30      June 29        June 30
                          2013         2012         2013           2012
Net loss                 $       $       $          $     
                          (9,567)      (1,696)      (12,910)       (2,484)
Interest expense, net     226          183          411            382
Income tax provision      69           128          90             252
Amortization of           107          341          213            681
intangible assets
Depreciation and          3,626        4,001        7,264          7,748
amortization expense
EBITDA                    (5,539)      2,957        (4,932)        6,579
Share-based compensation  341          374          750            958
expense
Impairment loss on        4,832        -            4,832          -
property and equipment
Imapirment loss on        1,245        -            1,245          -
intangible assets
Loss on debt              -            360          -              360
extinguishment
Restructuring costs       225          -            723            -
Adjusted EBITDA           $       $       $        $     
                           1,104       3,691      2,618           7,897

Conference Call

The conference call is scheduled to begin at 2:00 pm Pacific Time (5:00 pm
Eastern Time) on Tuesday, August 6, 2013. Participants may access the call by
dialing 877-941-2068 (domestic) or 480-629-9712 (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 August 20, 2013. To access the replay, please dial
877-870-5176 (domestic) or 858-384-5517 (international), passcode 4633614.

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
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.



U.S. AUTO PARTS NETWORK, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited, In Thousands, Except Par and Per Share Liquidation Value)
                                                        June 29    December 29
                                                        2013       2012
ASSETS
Current assets:
 Cash and cash equivalents                          $ 851      $ 1,030
 Short-term investments                             118        110
 Accounts receivable, net of allowances of $215
and $221
at June 29, 2013 and December 29, 2012, respectively    5,344      7,431
 Inventory                                          34,181     42,727
 Deferred income taxes                              51         39
 Other current assets                               4,481      4,176
 Total current assets                            45,026     55,513
Property and equipment, net                             21,009     28,559
Intangible assets, net                                  1,769      3,227
Other non-current assets                                1,492      1,578
 Total assets                                    $ 69,296   $ 88,877
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
 Accounts payable                                   $ 19,611   $ 28,025
  Accrued expenses                                   7,450      10,485
 Revolving loan payable                             3,269      16,222
 Current portion of capital leases payable          148        70
 Other current liabilities                          3,967      4,738
 Total current liabilities                       34,445     59,540
Capital leases payable, net of current portion          9,437      70
Deferred income taxes                                   416        314
Other non-current liabilities                           2,152      1,309
 Total liabilities                               46,450     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 $6,017;
4,150
shares authorized; 4,150 and 0 shares issued and
outstanding
at June 29, 2013 and December 29, 2012, respectively    4          -
 Common stock, $0.001 par value; 100,000 shares
authorized;
33,209 shares and 31,128 shares issued and outstanding
at June 29, 2013 and December 29, 2012, respectively    33         31
 Additional paid-in capital                         167,924    159,781
 Accumulated other comprehensive income             411        384
 Accumulated deficit                                (145,526)  (132,552)
 Total stockholders' equity                     22,846     27,644
 Total liabilities and equity                   $ 69,296   $ 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      Twenty-Six Weeks Ended
                              June 29      June 30      June 29      June 30
                              2013         2012         2013         2012
Net sales                     $ 67,889     $ 80,719     $ 133,294    $ 168,155
Cost of sales ^(1)            48,876       56,378       94,543       117,186
Gross profit                  19,013       24,341       38,751       50,969
Operating expenses:
 Marketing                11,186       12,978       22,377       26,428
 General and              4,678        4,714        9,365        10,584
administrative
 Fulfillment              4,991        5,639        10,372       11,557
 Technology               1,316        1,700        2,831        3,236
 Impairment loss on       4,832        -            4,832        -
property and equipment
 Impairment loss on       1,245        -            1,245        -
intangible assets
 Amortization of          107          341          213          681
intangible assets
 Total operating       28,355       25,372       51,235       52,486
expenses
Loss from operations          (9,342)      (1,031)      (12,484)     (1,517)
Other income (expense):
 Other income, net        72           4            79           35
 Interest expense         (228)        (181)        (415)        (390)
 Loss on debt             -            (360)        -            (360)
extinguishment
 Total other expense,  (156)        (537)        (336)        (715)
net
Loss before income tax        (9,498)      (1,568)      (12,820)     (2,232)
provision
Income tax provison           69           128          90           252
Net loss                      (9,567)      (1,696)      (12,910)     (2,484)
Other comprehensive income
(loss), net of tax:
 Foreign currency         31           (3)          25           24
translation adjustments
 Unrealized gains on      2            4            2            29
investments
 Total other           33           1            27           53
comprehensive income
Comprehensive loss            $ (9,534)    $ (1,695)    $ (12,883)   $ (2,431)
Basic and diluted net loss    $ (0.29)     $ (0.06)     $ (0.40)     $ (0.08)
per share
Shares used in computation of
basic and
diluted net loss per share    33,119       30,651       32,130       30,644
^(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)
                                                       Twenty-Six Weeks Ended
                                                       June 29      June 30
                                                       2013         2012
Cash flows from operating activities:
Net loss                                               $ (12,910)   $ (2,484)
Adjustments to reconcile net loss to net cash (used
in) provided by
operating activities:
 Depreciation and amortization expense             7,264        7,748
 Amortization of intangible assets                 213          681
 Impairment loss on property and equipment         4,832        -
 Impairment loss on intangible assets              1,245        -
 Deferred income taxes                             90           253
 Share-based compensation                          750          958
 Stock awards issued for non-employee director     21           32
service
 Amortization of deferred financing costs          41           51
 Loss on debt extinguishment                       -            360
 Loss from disposition of assets                   -            4
 Changes in operating assets and liabilities
 Accounts receivable                     2,087        (1,566)
Inventory                               8,546        3,018
 Other current assets                    (323)        (587)
 Other non-current assets                144          -
 Accounts payable and accrued expenses   (10,783)     (7,997)
 Other current liabilities               (771)        (2,430)
 Other non-current liabilities           490          294
 Net cash provided by (used in) 936          (1,665)
operating activities
Cash flows from investing activities:
 Additions to property and equipment               (4,815)      (5,374)
 Proceeds from sale of property and equipment      -            14
 Cash paid for intangible assets                   -            (16)
 Proceeds from sale of marketable securities and   -            3,171
investments
 Purchases of marketable securities and            -            (7)
investments
 Purchases of company-owned life insurance         (106)        (166)
 Net cash used in investing     (4,921)      (2,378)
activities
Cash flows from financing activities:
 Borrowings from revolving loan payable            10,187       16,561
 Payments made on revolving loan payable           (23,140)     (3,653)
 Proceeds from sale leaseback transaction          9,584        -
 Payments made on long-term debt                   -            (17,875)
 Paymentof debt extinguishment costs               -            (175)
 Proceeds from issuance of Series A convertible    6,017        -
preferred stock
 Payment of issuance costs from Series A           (822)        -
convertible preferred stock
 Proceeds from issuance of common stock            2,235        -
 Payment of issuance costs from common stock       (223)        -
 Payments of debt financing costs                  -            (345)
 Payments on capital leases                        (62)         (68)
 Proceeds from exercise of stock options           22           43
 Other                                             -            611
 Net cash provided by (used in) 3,798        (4,901)
financing activities
Effect of exchange rate changes on cash and cash       8            14
equivalents
Net change in cash and cash equivalents                (179)        (8,930)
Cash and cash equivalents, beginning of period         1,030        10,335
Cash and cash equivalents, end of period               $ 851        $ 1,405
Supplemental disclosures of non-cash investing and
financing activities:
 Accrued asset purchases                           $ 1,046      $ 1,616
 Property acquired under capital lease             -            104
 Unrealized gain on investments                    2            29
Supplemental disclosures of consolidated cash flow
information:
 Cash paid for income taxes                        -            -
 Cash paid for interest                            367          293

Investor Contacts:

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

SOURCE U.S. Auto Parts Network, Inc.

Website: http://www.usautoparts.net
 
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