EXHIBIT 99.1
U.S.
AUTO PARTS NETWORK, INC. REPORTS
THIRD
QUARTER 2008 RESULTS
|
·
|
Net
sales of $36.6 million
|
|
·
|
Adjusted
EBITDA of $0.9 million
|
|
·
|
Acquisition
of AutoMD
|
CARSON,
California, October 30, 2008 ―
U.S. Auto Parts Network, Inc. (NASDAQ: PRTS), a leading online provider
of automotive aftermarket parts and accessories, today reported financial
results for the third quarter ended September 30, 2008.
Net
sales for the third quarter were $36.6 million, a decrease of 3.2% from $37.8
million in the prior year period and a decrease of 15.1% from $43.1 million in
the second quarter of 2008. Net loss for the third quarter of 2008
was $0.5 million, or $0.02 per diluted share, compared to net income of
$0.9 million, or $0.03 per diluted share for the prior year
period. Diluted EPS for the quarters ended September 30, 2008 and
2007 included amortization expense related to intangibles of $0.4 million or
$0.01 per diluted share and $2.1 million or $0.07 per diluted share,
respectively. The Company generated Adjusted EBITDA of $0.9
million in the third quarter of 2008 compared to $4.1 million in the prior year
period. Adjusted EBITDA is a non-GAAP financial measure that further
adjusts EBITDA to exclude share-based compensation expense of $0.8 million in
the third quarter of 2008 and $0.5 million in the prior year
period. For further information regarding Adjusted EBITDA, including
a reconciliation of Adjusted EBITDA to net income (loss), see Non-GAAP Financial
Measures below.
“We
are disappointed we did not meet our own expectations this quarter and find a
way to successfully fight through a very difficult economic environment as
strongly as we would have liked,” stated Shane Evangelist, Chief Executive
Officer. “Because of our strong cash position and continued belief in the
long-term opportunity, we will continue to execute our strategic
plan. We expect to invest in key areas of our business that will
allow us to emerge from this downward cycle stronger and better positioned to
capture market share.”
3Q
2008 Financial Highlights
|
·
|
Net
sales for the third quarter ended September 30, 2008 were $36.6 million, a
decrease of 3.2% from $37.8 million in the third quarter of
2007. The decrease was primarily attributable to
a decrease in our offline sales of 26.6% or $1.0
million.
|
|
·
|
Gross
profit was $12.1 million or 33.0% of net sales for the third quarter of
2008 compared to $13.7 million or 36.2% of net sales for the third quarter
of 2007. The decrease in gross margin was primarily due to higher
freight costs, higher raw material costs and lower vendor
rebates.
|
|
·
|
Online
advertising expense was $2.5 million or 6.8% of net sales for the third
quarter of 2008 compared to $2.9 million or 7.7% of net sales for the
prior year period which excludes $0.5 million of marketing co-op in the
2007 period to conform with current year presentation. The
decrease in advertising spend as a percent of sales is due to improvements
in our ROI based spending model.
|
|
·
|
Marketing
expense, excluding advertising expense, was $2.7 million or 7.4% of net
sales for the third quarter of 2008 compared to $2.5 million or 6.6% of
net sales in the prior year period. The increase was primarily
due to higher depreciation expense.
|
|
·
|
General
and administrative expense was $4.2 million or 11.5% of net sales for the
third quarter of 2008 compared to $3.2 million or 8.5% of net sales in the
prior year period. This increase was primarily due to $0.4
million of higher payroll and related costs, an increase of $0.3 million
in amortization expense, a $0.2 million increase in stock based
compensation and an increase of $0.1 million in professional fees compared
to the prior year period.
|
|
·
|
Fulfillment
expense was $2.3 million or 6.3% of net sales in the third quarter of 2008
compared to $1.9 million or 5.0% in the prior year period. The
increase in fulfillment was primarily due to higher costs in our third
party distribution center in Tennessee and increased depreciation
expense.
|
|
·
|
Technology
expense was $1.0 million or 2.7% of net sales in the third quarter of 2008
compared to $0.4 million or 1.1% of net sales in the prior year
period. This increase was primarily related to increased
headcount as well as a $0.2 million impairment of capitalized software
development costs.
|
|
·
|
Capital
expenditures for the third quarter of 2008 were $0.9 million which
included $0.3 million of internally developed software and website
development costs.
|
|
·
|
Cash,
cash equivalents and short term investments were $33.1 million at
September 30, 2008. The Company includes $6.4 million of
investments in auction rate preferred securities in long-term assets,
which are not included in cash.
|
“While
we are dissatisfied with our performance this quarter for both sales and
profitability, we did execute in some areas well. We eliminated $1.0
million per quarter in Marketing and G&A expenses that will reduce our fixed
operating costs going forward,” stated Michael McClane, Chief Financial
Officer. “We expect to continue to be negatively impacted by
macroeconomic conditions in the near term and plan to use this period
to continue to build out a world-class enterprise. As many of our
competitors are facing liquidity concerns, US Auto is well
capitalized with over $33 million in cash that will enable us to not only
survive, but to continue to intelligently invest in our future.”
3Q
2008 Operating Metrics
|
·
|
Conversion
rate - The conversion rate in the third quarter of 2008 was 1.26% compared
to 1.22% during the corresponding period of 2007 and 1.39% for the second
quarter of 2008.
|
|
·
|
Customer
acquisition cost - The customer acquisition cost in the third quarter of
2008 was $6 per customer, compared to $7 during the corresponding period
of 2007 and $6 for the second quarter
2008.
|
|
·
|
Unique
visitors - The number of monthly unique visitors in the third quarter of
2008 decreased 4.5% to 23.1 million compared to the third quarter of 2007,
and a decrease of 4.1% over the second quarter of
2008.
|
|
·
|
Orders
- The number of orders placed through our e-commerce websites was
approximately 291,000 orders in the third quarter of 2008 compared to
297,000 in the corresponding period of 2007 and 334,000 in the second
quarter of 2008.
|
|
·
|
Average
order value - The average order value of purchases on our websites was
$121 during the third quarter of 2008, down from $127 during the
corresponding period of 2007, and down from $128 for the second quarter of
2008.
|
Guidance
Due to
the uncertain market conditions, US Auto Parts will not be providing guidance at
this time.
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 income (expense), net; (b) income tax provision (benefit); (c)
amortization of intangibles and impairment loss; (d) depreciation and
amortization; and (e) share-based compensation expense related to stock
options.
The
Company believes this non-GAAP financial measure provides important supplemental
information to management and investors. This non-GAAP financial measure
reflects 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 measurement of the Company's operating performance
because it assists in comparisons of 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 income (loss) to Adjusted EBITDA for the periods
presented:
|
Three
Months Ended
|
Nine
Months Ended
|
||||||||||||
|
September
30,
|
September
30,
|
||||||||||||
| 2008 |
2007
|
2008
|
2007
|
||||||||||
|
(in
thousands)
|
(in
thousands)
|
||||||||||||
|
Net
income (loss)
|
$ | (491 | ) | $ | 894 | $ | (13,429 | ) | $ | 1,901 | |||
|
Interest
(income) expense, net
|
(238 | ) | (389 | ) | (741 | ) | (654 | ) | |||||
|
Income
tax provision (benefit)
|
(362 | ) | 633 | (8,968 | ) | 1,309 | |||||||
|
Amortization
of intangibles
|
365 | 2,097 | 4,560 | 6,251 | |||||||||
|
Depreciation
and amortization
|
916 | 328 | 2,674 | 870 | |||||||||
|
EBITDA
|
190 | 3,563 | (15,904 | ) | 9,677 | ||||||||
|
Impairment
loss on intangibles
|
— | — | 18,445 | — | |||||||||
|
Share-based
compensation
|
750 | 532 | 2,068 | 1,562 | |||||||||
|
Adjusted
EBITDA
|
$ | 940 | $ | 4,095 | $ | 4,609 | $ | 11,239 | |||||
Conference Call
As
previously announced, the Company will conduct a conference call with analysts
and investors to discuss the results today, Thursday, October 30, 2008, at 2:00
pm Pacific Time (5:00 pm Eastern Time). The conference call will be
conducted by Shane Evangelist, Chief Executive Officer and Michael McClane,
Chief Financial Officer. Participants may access the call by dialing
(800) 762-8779 (domestic) or (480) 629-9041 (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 13, 2008. To access the
replay, please dial (800) 406-7325 (domestic) or (303) 590-3030 (international),
passcode 3932404. To view the press release or the financial or other
statistical information required by SEC Regulation G, please visit the Investor
Relations section of the U.S. Auto Parts website at investor.usautoparts.net.
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.partstrain.com
and www.autopartswarehouse.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 forward-looking statements within the meaning of Section
27A of the Securities Act of 1933, as amended, and Section 21E of the Securities
Exchange Act of 1934, as amended, 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. Words such as
''anticipates,'' ''expects,'' ''intends,'' ''plans,'' ''believes,'' ''seeks,''
"estimates," "may,'' ''will'' 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,
our liquidity requirements, and the status of our auction rate preferred
securities. 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,
marketplace illiquidity; demand for the Company's products; the potential
economic downturn that could adversely impact retail sales; 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 Company’s need to assess impairment of
intangible assets and goodwill; 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; any changes in the search algorithms
by leading Internet search companies; and the Company’s ability to comply
with Section 404 of the Sarbanes-Oxley Act and maintain an adequate system of
internal controls; 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.
US
Auto Parts®, Auto Parts Train™, PartsTrain®, Partsbin™, Kool-Vue™ and Auto-Vend™
are among the trademarks of U.S. Auto Parts. All other trademarks and
trade names mentioned are the property of their respective owners.
U.S.
AUTO PARTS NETWORK, INC.
CONDENSED
CONSOLIDATED BALANCE SHEETS
(in
thousands, except share data and par value)
|
September
30,
|
December 31,
|
|||||||
|
2008
|
2007
|
|||||||
|
(unaudited)
|
||||||||
|
ASSETS
|
||||||||
|
Current
assets:
|
||||||||
|
Cash
and cash equivalents
|
$ | 33,122 | $ | 19,399 | ||||
|
Marketable
securities
|
— | 22,650 | ||||||
|
Accounts
receivable, net
|
1,489 | 2,907 | ||||||
|
Inventory,
net
|
12,105 | 11,191 | ||||||
|
Deferred
income taxes
|
831 | 831 | ||||||
|
Other
current assets
|
2,953 | 1,808 | ||||||
|
Total
current assets
|
50,500 | 58,786 | ||||||
|
Property
and equipment, net
|
7,210 | 6,945 | ||||||
|
Intangible
assets, net
|
3,710 | 26,444 | ||||||
|
Goodwill
|
14,201 | 14,201 | ||||||
|
Deferred
income taxes
|
12,428 | 3,562 | ||||||
|
Investments
|
6,351 | — | ||||||
|
Other
non-current assets
|
116 | 118 | ||||||
|
Total
assets
|
$ | 94,516 | $ | 110,056 | ||||
|
LIABILITIES
AND STOCKHOLDERS’ EQUITY
|
||||||||
|
Current
liabilities:
|
||||||||
|
Accounts
payable
|
$ | 5,821 | $ | 8,103 | ||||
|
Accrued
expenses
|
6,916 | 7,822 | ||||||
|
Notes
payable
|
— | 1,000 | ||||||
|
Capital
leases payable, current portion
|
66 | 73 | ||||||
|
Other
current liabilities
|
1,573 | 1,367 | ||||||
|
Total
current liabilities
|
14,376 | 18,365 | ||||||
|
Capital
leases payable, less current portion
|
— | 48 | ||||||
|
Total
liabilities
|
14,376 | 18,413 | ||||||
|
Commitments
and contingencies
|
||||||||
|
Stockholders’
equity:
|
||||||||
|
Common
stock, $0.001 par value; 100,000,000 shares authorized at September 30,
2008 and December 31, 2007; 29,846,757 shares issued and outstanding
at September 30, 2008 and December 31, 2007
|
30 | 30 | ||||||
|
Additional
paid-in capital
|
145,534 | 143,223 | ||||||
|
Accumulated
other comprehensive income
|
(73 | ) | 312 | |||||
|
Accumulated
deficit
|
(65,351 | ) | (51,922 | ) | ||||
|
Total
stockholders’ equity
|
80,140 | 91,643 | ||||||
|
Total
liabilities and stockholders’ equity
|
$ | 94,516 | $ | 110,056 | ||||
U.S.
AUTO PARTS NETWORK, INC.
UNAUDITED
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in
thousands, except share and per share data)
|
Three
Months Ended
|
Nine
Months Ended
|
|||||||||||||||
|
September
30,
|
September
30,
|
|||||||||||||||
|
2008
|
2007
|
2008
|
2007
|
|||||||||||||
|
Net
sales
|
$ | 36,554 | $ | 37,787 | $ | 119,668 | $ | 123,642 | ||||||||
|
Cost
of sales
|
24,485 | 24,096 | 79,262 | 82,497 | ||||||||||||
|
Gross
profit
|
12,069 | 13,691 | 40,406 | 41,145 | ||||||||||||
|
Operating
expenses:
|
||||||||||||||||
|
General
and administrative (1)
|
4,170 | 3,184 | 13,381 | 9,715 | ||||||||||||
|
Marketing
(1)
|
5,240 | 4,917 | 17,842 | 15,738 | ||||||||||||
|
Fulfillment
(1)
|
2,322 | 1,920 | 6,787 | 5,499 | ||||||||||||
|
Technology
(1)
|
1,041 | 438 | 2,512 | 1,394 | ||||||||||||
|
Amortization
of intangibles and impairment loss
|
365 | 2,097 | 23,005 | 6,251 | ||||||||||||
|
Total
operating expenses
|
13,138 | 12,556 | 63,527 | 38,597 | ||||||||||||
|
Income
(loss) from operations
|
(1,069 | ) | 1,135 | (23,121 | ) | 2,548 | ||||||||||
|
Other
income:
|
||||||||||||||||
|
Other
income
|
(22 | ) | 3 | (17 | ) | 8 | ||||||||||
|
Interest
income, net
|
238 | 389 | 741 | 654 | ||||||||||||
|
Other
income, net
|
216 | 392 | 724 | 662 | ||||||||||||
|
Income
(loss) before income taxes
|
(853 | ) | 1,527 | (22,397 | ) | 3,210 | ||||||||||
|
Income
tax provision (benefit)
|
(362 | ) | 633 | (8,968 | ) | 1,309 | ||||||||||
|
Net
income (loss)
|
$ | (491 | ) | $ | 894 | $ | (13,429 | ) | $ | 1,901 | ||||||
|
Basic
and diluted net income (loss) per share
|
$ | (0.02 | ) | $ | 0.03 | $ | (0.45 | ) | $ | 0.07 | ||||||
|
Shares
used in computation of basic net income (loss) per
share
|
29,846,757 | 29,837,538 | 29,846,757 | 27,744,016 | ||||||||||||
|
Shares
used in computation of diluted net income (loss) per
share
|
29,846,757 | 30,009,891 | 29,846,757 | 28,749,521 | ||||||||||||
|
___________________________________
|
||||||||||||||||
|
Three
Months Ended
|
Nine Months
Ended
|
|||||||||||||||
|
September
30,
|
September
30,
|
|||||||||||||||
|
(1) Includes
share-based compensation expense as follows:
|
2008
|
2007
|
2008
|
2007
|
||||||||||||
|
General
and administrative
|
$ | 541 | $ | 389 | $ | 1,545 | $ | 1,196 | ||||||||
|
Marketing
|
62 | 93 | 257 | 248 | ||||||||||||
|
Fulfillment
|
37 | 29 | 100 | 70 | ||||||||||||
|
Technology
|
110 | 21 | 166 | 48 | ||||||||||||
|
Total
share-based compensation expense
|
$ | 750 | $ | 532 | $ | 2,068 | $ | 1,562 | ||||||||
U.S.
AUTO PARTS NETWORK, INC.
UNAUDITED
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in
thousands)
|
Nine
Months Ended
September 30,
|
||||||||
|
2008
|
2007
|
|||||||
|
Operating
activities
|
||||||||
|
Net
income (loss)
|
$ | (13,429 | ) | $ | 1,901 | |||
|
Adjustments
to reconcile net income (loss) to net cash provided by operating
activities:
|
||||||||
|
Depreciation
and amortization
|
2,674 | 870 | ||||||
|
Amortization
of intangibles
|
4,560 | 6,251 | ||||||
|
Impairment
loss on intangibles
|
18,445 | — | ||||||
|
Non-cash
interest expense
|
— | 273 | ||||||
|
Loss
from disposition of assets
|
23 | — | ||||||
|
Share-based
compensation expense
|
2,068 | 1,562 | ||||||
|
Deferred
taxes
|
(8,866 | ) | — | |||||
|
Changes
in operating assets and liabilities:
|
||||||||
|
Accounts
receivable, net
|
1,418 | 302 | ||||||
|
Inventory,
net
|
(914 | ) | (3,147 | ) | ||||
|
Other
current assets
|
(1,162 | ) | (748 | ) | ||||
|
Other
non-current assets
|
(8 | ) | 1,719 | |||||
|
Accounts
payable and accrued expenses
|
(3,080 | ) | (1,442 | ) | ||||
|
Other
current liabilities
|
207 | (639 | ) | |||||
|
Net
cash provided by operating activities
|
1,936 | 6,902 | ||||||
|
Investing
activities
|
||||||||
|
Additions
to property and equipment
|
(2,894 | ) | (3,488 | ) | ||||
|
Proceeds
from the sale of marketable securities
|
21,650 | — | ||||||
|
Purchases
of marketable securities
|
(5,500 | ) | (25,000 | ) | ||||
|
Acquisition
of assembled workforce and other intangible assets
|
(414 | ) | (1,286 | ) | ||||
|
Net
cash provided by (used in) investing activities
|
12,842 | (29,774 | ) | |||||
|
Financing
activities
|
||||||||
|
Payments
on credit line
|
— | (2,000 | ) | |||||
|
Payments
made on notes payable
|
(1,000 | ) | (32,000 | ) | ||||
|
Proceeds
received on issuance of common stock in connection with initial public
offering, net of offering costs
|
— | 71,537 | ||||||
|
Payments
on short-term financing
|
(56 | ) | (51 | ) | ||||
|
Proceeds
from exercise of stock options
|
94 | |||||||
|
Net
cash provided by (used in) financing activities
|
(1,056 | ) | 37,580 | |||||
|
Effect
of changes in foreign currencies
|
1 | 97 | ||||||
|
Net
increase in cash and cash equivalents
|
13,723 | 14,805 | ||||||
|
Cash
and cash equivalents at beginning of period
|
19,399 | 2,381 | ||||||
|
Cash
and cash equivalents at end of period
|
$ | 33,122 | $ | 17,186 | ||||
Investor
Contacts:
Michael
McClane, Chief Financial Officer
U.S. Auto
Parts Network, Inc.
michael@usautoparts.com
(310)
735-0085
Anne
Rakunas / Laura Foster
ICR,
Inc.
(310)
954-1100
anne.rakunas@icrinc.com
laura.foster@icrinc.com