U.S. Auto Parts Network, Inc. Reports Third Quarter 2012 Results
CARSON, Calif., Nov. 6, 2012 /PRNewswire/ -- U.S. Auto Parts
Network, Inc. (NASDAQ: PRTS), one of the largest online providers
of automotive aftermarket parts and accessories, today reported net
sales for the third quarter ended September
29, 2012 ("Q3 2012") of $73.0
million compared with the third quarter ended October 1, 2011 ("Q3 2011") net sales of
$78.6 million, a decrease of 7.1%
from Q3 2011 net sales. Q3 2012 net loss was $2.7 million or $0.09 per share, compared with Q3 2011 net loss
of $5.3 million or $0.17 per share. The Company generated Adjusted
EBITDA of $2.7 million for Q3 2012
compared to $3.1 million for Q3 2011,
a decrease of 14.1% from Q3 2011. For further information regarding
Adjusted EBITDA, including a reconciliation of Adjusted EBITDA to
net loss, see non-GAAP Financial Measures below.
"This quarter we executed well by growing margins and by
achieving double digit growth in both our online marketplace and
offline businesses. However, as expected, we are still
battling headwinds with respect to customer acquisition and online
traffic to our sites, all of which we are addressing
strategically." stated Shane
Evangelist.
Q3 2012 Financial Highlights
|
|
|
- Net sales decreased $5.6 million, or 7.1%, for Q3
2012 compared to Q3 2011. Our Q3 2012 net sales consisted of online
sales, representing 90.8% of the total (compared to 94.0% in Q3
2011), and offline sales, representing 9.2% of the total (compared
to 6.0% in Q3 2011). The net sales decrease was primarily due to a
decline of $7.6 million, or 10.2%, in online sales, partially
offset by a $2.0 million, or 42.0%, increase in offline
sales. Online sales decreased primarily due to a 9.5%
reduction in e-commerce unique visitors and a decline in average
order value by 5.4%, partially offset by an increase of 2.8% in
revenue capture (revenues retained after taking into consideration
returns, credit card declines and product fulfillment). Our offline
sales, which consist of our Kool-Vue™ and wholesale operations,
continued to show solid growth.
|
|
|
|
- Gross profit decreased $1.5 million, or 6.0%, in Q3
2012 compared to Q3 2011. Gross margin rate increased 0.4% to 31.4%
in Q3 2012 compared to 31.0% in Q3 2011. Gross margin increased in
Q3 2012 primarily due to improved margin from online
sales.
|
|
|
|
- Marketing expense was $12.9 million, or 17.7%, of net
sales in Q3 2012, down from $14.0 million, or 17.8%, of net sales
in Q3 2011. Online advertising expense, which includes catalog
costs, was $5.0 million, or 7.5%, of online sales for Q3 2012,
compared to $7.0 million, or 9.5%, of online sales for Q3 2011.
Marketing expense, excluding online advertising, was $7.9 million,
or 10.9%, of net sales for Q3 2012, compared to $7.0 million, or
8.9%, of net sales for Q3 2011. Online advertising expense
decreased primarily due to reduction of catalog advertising costs
of $0.9 million and non-catalog online advertising expenses of $1.1
million. Marketing expenses, excluding online advertising,
increased primarily due to higher depreciation and amortization
expense related to software deployments.
|
|
|
|
- General and administrative expense was $4.9 million,
or 6.7%, of net sales for Q3 2012, down from $9.1 million, or
11.6%, of net sales for Q3 2011. The decrease of $4.2 million, or
45.8%, for Q3 2012 compared to Q3 2011, was primarily due to WAG
restructuring costs of $3.8 million in Q3 2011 compared to none in
Q3 2012 and lower depreciation and amortization expense in Q3
2012.
|
|
|
|
- Fulfillment expense was $5.7 million, or 7.8%, of net
sales in Q3 2012, up from $4.4 million, or 5.7%, of net sales in Q3
2011. The increase of $1.2 million, or 27.8%, for Q3 2012 compared
to Q3 2011, was primarily due to higher depreciation and
amortization expense from software deployments.
|
|
|
|
- Technology expense was $1.6 million, or 2.2%, of net
sales in Q3 2012, down from $1.7 million, or 2.1%, of net sales in
Q3 2011.
|
|
|
|
- Capital expenditures for Q3 2012 were $2.5
million.
|
|
|
|
- Cash and cash equivalents and investments were $1.2
million and total debt was $17.3 million as of September 29, 2012
compared to $1.5 million and $13.1 million as of June 30,
2012.
|
Q3 2012 Operating Metrics
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Q3 2012
|
|
|
Q3 2011
|
|
|
Q2 2012
|
|
Conversion
Rate
|
|
|
1.50%
|
|
|
|
1.57%
|
|
|
|
1.62%
|
|
Customer
Acquisition Cost
|
|
$
|
7.74
|
|
|
$
|
9.70
|
|
|
$
|
7.10
|
|
Marketing
Spend (% Internet Sales)
|
|
|
7.7%
|
|
|
|
9.7%
|
|
|
|
7.7
%
|
|
Visitors
(millions) 1
|
|
|
38.1
|
|
|
|
42.1
|
|
|
|
39.2
|
|
Orders
(thousands)
|
|
|
573
|
|
|
|
662
|
|
|
|
635
|
|
Revenue
Capture (% Sales) 2
|
|
|
83.9%
|
|
|
|
81.2%
|
|
|
|
84.4%
|
|
Average
Order Value
|
|
$
|
115
|
|
|
$
|
122
|
|
|
$
|
116
|
|
1
|
Visitors
do not include traffic from media properties (e.g.
AutoMD).
|
2
|
Revenue
capture is the amount of actual dollars retained after taking into
consideration returns, credit card declines and product
fulfillment.
|
Non-GAAP Financial Measures
Regulation G, "Conditions for Use of Non-GAAP Financial
Measures," and other provisions of the Securities Exchange Act
of 1934, as amended, define and prescribe the conditions for use of
certain non-GAAP financial information. We provide "Adjusted
EBITDA," which is a non-GAAP financial measure. Adjusted
EBITDA consists of net income before (a) interest expense,
net; (b) income tax provision; (c) amortization of
intangible assets and impairment loss; (d) depreciation
and amortization; (e) share-based compensation expense; (f)
loss on debt extinguishment; (g) legal costs to enforce
intellectual property rights and (h) restructuring costs.
The Company believes that this non-GAAP financial measure
provides important supplemental information to management and
investors. This non-GAAP financial measure reflect an additional
way of viewing aspects of the Company's operations that, when
viewed with the GAAP results and the accompanying reconciliation to
corresponding GAAP financial measures, provides a more complete
understanding of factors and trends affecting the Company's
business and results of operations.
Management uses Adjusted EBITDA as a measure of the Company's
operating performance because it assists in comparing the Company's
operating performance on a consistent basis by removing the impact
of items not directly resulting from core operations. Internally,
this non-GAAP measure 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
|
Thirty-Nine Weeks Ended
|
|
September 29
|
|
October
1
|
September 29
|
|
October
1
|
|
2012
|
|
2011
|
2012
|
|
2011
|
|
|
|
|
|
|
|
Net
loss
|
$
(2,711)
|
|
$
(5,308)
|
$
(5,195)
|
|
$
(8,118)
|
Interest
expense, net
|
118
|
|
283
|
500
|
|
719
|
Income tax
provision
|
41
|
|
2
|
293
|
|
215
|
Amortization of intangible assets
|
331
|
|
338
|
1,012
|
|
3,328
|
Depreciation and amortization expense
|
3,785
|
|
3,126
|
11,533
|
|
9,202
|
EBITDA
|
1,564
|
|
(1,559)
|
8,143
|
|
5,346
|
Share-based compensation expense
|
450
|
|
623
|
1,408
|
|
1,946
|
Loss on
debt extinguishment
|
-
|
|
-
|
360
|
|
-
|
Legal
costs to enforce intellectual property rights
|
-
|
|
211
|
-
|
|
443
|
Restructuring costs
|
640
|
|
3,816
|
640
|
|
6,591
|
Adjusted
EBITDA
|
$
2,654
|
|
$
3,091
|
$
10,551
|
|
$
14,326
|
Conference Call
The conference call is scheduled to begin at 2:00 pm Pacific Time (5:00
pm Eastern Time) on Tuesday, November
6, 2012. Participants may access the call by dialing
877-941-4774 (domestic) or 480-629-9760 (international). In
addition, the call will be broadcast live over the Internet and
accessible through the Investor Relations section of the Company's
website at www.usautoparts.net where the call will be archived for
two weeks. A telephone replay will be available through
November 20, 2012. To access the
replay, please dial 877-870-5176 (domestic) or 858-384-5517
(international), passcode 4569475.
About U.S. Auto Parts Network, Inc.
Established in 1995, U.S. Auto Parts is a leading online
provider of automotive aftermarket parts, including body parts,
engine parts, performance parts and accessories. Through the
Company's network of websites, U.S. Auto Parts provides individual
consumers with a broad selection of competitively priced products
that are mapped by a proprietary product database to product
applications based on vehicle makes, models and years. U.S. Auto
Parts' flagship websites are located at www.autopartswarehouse.com,
www.jcwhitney.com, www.partstrain.com, www.stylintrucks.com and
www.AutoMD.com and the Company's corporate website is located at
www.usautoparts.net .
U.S. Auto Parts is headquartered in Carson, California.
Safe Harbor Statement
This press release contains statements which are based on
management's current expectations, estimates and projections about
the Company's business and its industry, as well as certain
assumptions made by the Company. These statements are forward
looking statements for the purposes of the safe harbor provided by
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 value)
|
|
|
|
|
|
|
|
September 29
|
|
December 31
|
|
|
2012
|
|
2011
|
|
|
(Unaudited)
|
|
|
|
|
|
|
|
ASSETS
|
|
|
|
|
Current
assets:
|
|
|
|
|
Cash and cash
equivalents
|
|
$
1,076
|
|
$
10,335
|
Short-term investments
|
|
99
|
|
1,125
|
Accounts receivable, net of
allowances of $231 and $183
|
|
|
|
|
at September 29,
2012 and December 31, 2011, respectively
|
|
8,583
|
|
7,922
|
Inventory
|
|
48,658
|
|
52,245
|
Deferred income taxes
|
|
446
|
|
446
|
Other current assets
|
|
4,370
|
|
3,548
|
Total current
assets
|
|
63,232
|
|
75,621
|
Property
and equipment, net
|
|
32,191
|
|
34,627
|
Intangible
assets, net
|
|
8,997
|
|
9,984
|
Goodwill
|
|
18,854
|
|
18,854
|
Investments
|
|
-
|
|
2,104
|
Other
non-current assets
|
|
1,358
|
|
1,026
|
Total
assets
|
|
$
124,632
|
|
$
142,216
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS'
EQUITY
|
|
|
|
|
Current
liabilities:
|
|
|
|
|
Accounts payable
|
|
$
32,994
|
|
$
41,303
|
Accrued expenses
|
|
8,674
|
|
11,565
|
Revolving loan payable
|
|
17,126
|
|
-
|
Current portion of long-term
debt
|
|
-
|
|
6,250
|
Current portion of capital leases
payable
|
|
84
|
|
135
|
Other current
liabilities
|
|
4,044
|
|
7,702
|
Total current
liabilities
|
|
62,922
|
|
66,955
|
Long-term
debt, net of current portion
|
|
-
|
|
11,625
|
Capital
leases payable, net of current portion
|
|
89
|
|
37
|
Deferred
income taxes
|
|
1,970
|
|
1,596
|
Other
non-current liabilities
|
|
1,551
|
|
1,079
|
Total
liabilities
|
|
66,532
|
|
81,292
|
|
|
|
|
|
Commitments and contingencies
|
|
|
|
|
|
|
|
|
|
Stockholders' equity:
|
|
|
|
|
Common stock, $0.001 par value;
100,000 shares authorized;
|
|
|
|
31,125
shares and 30,626 shares issued and outstanding
|
|
|
|
|
at September 29,
2012 and December 31, 2011, respectively
|
|
31
|
|
31
|
Additional paid-in
capital
|
|
159,446
|
|
157,140
|
Accumulated other comprehensive
income
|
|
392
|
|
327
|
Accumulated deficit
|
|
(101,769)
|
|
(96,574)
|
Total
stockholders' equity
|
|
58,100
|
|
60,924
|
|
|
|
|
|
Total
liabilities and equity
|
|
$
124,632
|
|
$
142,216
|
U.S.
AUTO PARTS NETWORK, INC. AND SUBSIDIARIES
|
|
|
CONSOLIDATED STATEMENTS OF COMPREHENSIVE
LOSS
|
|
|
(In
thousands, except per share data)
|
|
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
Thirteen Weeks Ended
|
Thirty-Nine Weeks Ended
|
|
|
|
September 29
|
|
October
1
|
September 29
|
|
October
1
|
|
|
|
2012
|
|
2011
|
2012
|
|
2011
|
|
|
|
|
|
|
|
|
|
|
|
Net
sales
|
$
73,014
|
|
$
78,593
|
$
241,169
|
|
$
249,839
|
|
|
Cost of
sales (1)
|
50,121
|
|
54,248
|
167,307
|
|
166,664
|
|
|
Gross
profit
|
22,893
|
|
24,345
|
73,862
|
|
83,175
|
|
|
Operating
expenses:
|
|
|
|
|
|
|
|
|
Marketing
|
12,909
|
|
14,002
|
39,337
|
|
41,953
|
|
|
General and
administrative
|
4,926
|
|
9,096
|
15,510
|
|
25,739
|
|
|
Fulfillment
|
5,685
|
|
4,449
|
17,242
|
|
14,048
|
|
|
Technology
|
1,590
|
|
1,676
|
4,826
|
|
5,531
|
|
|
Amortization of intangible
assets
|
331
|
|
338
|
1,012
|
|
3,328
|
|
|
Total
operating expenses
|
25,441
|
|
29,561
|
77,927
|
|
90,599
|
|
|
Loss from
operations
|
(2,548)
|
|
(5,216)
|
(4,065)
|
|
(7,424)
|
|
|
Other
(expense) income :
|
|
|
|
|
|
|
|
|
Other (expense) income,
net
|
(1)
|
|
201
|
34
|
|
279
|
|
|
Interest expense
|
(121)
|
|
(291)
|
(511)
|
|
(758)
|
|
|
Loss on debt
extinguishment
|
-
|
|
-
|
(360)
|
|
-
|
|
|
Total
other expense, net
|
(122)
|
|
(90)
|
(837)
|
|
(479)
|
|
|
Loss
before income tax provision
|
(2,670)
|
|
(5,306)
|
(4,902)
|
|
(7,903)
|
|
|
Income tax
provision
|
41
|
|
2
|
293
|
|
215
|
|
|
Net
loss
|
(2,711)
|
|
(5,308)
|
(5,195)
|
|
(8,118)
|
|
|
Other
comprehensive income (loss), net of tax:
|
|
|
|
|
|
|
|
|
Foreign currency translation
adjustments
|
11
|
|
(18)
|
35
|
|
15
|
|
|
Unrealized gains on
investments
|
1
|
|
34
|
30
|
|
61
|
|
|
Total
other comprehensive income
|
12
|
|
16
|
65
|
|
76
|
|
|
Comprehensive loss
|
$
(2,699)
|
|
$
(5,292)
|
$
(5,130)
|
|
$
(8,042)
|
|
|
|
|
|
|
|
|
|
|
|
Basic and
diluted net loss per share
|
$
(0.09)
|
|
$
(0.17)
|
$
(0.17)
|
|
$
(0.27)
|
|
|
|
|
|
|
|
|
|
|
|
Shares
used in computation of basic and
|
|
|
|
|
|
|
|
|
diluted net loss per
share
|
30,854
|
|
30,571
|
30,716
|
|
30,522
|
|
|
|
|
|
|
|
|
|
|
|
(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)
|
(Unaudited)
|
|
|
|
|
|
|
Thirty-Nine Weeks Ended
|
|
|
September 29
|
|
October
1
|
|
|
2012
|
|
2011
|
|
Cash flows
from operating activities:
|
|
|
|
|
Net loss
|
$
(5,195)
|
|
$
(8,118)
|
|
Adjustments to reconcile net
loss to net cash (used in) provided by
|
|
|
|
|
operating activities:
|
|
|
|
|
Depreciation and amortization
|
11,533
|
|
9,202
|
|
Amortization of intangible assets
|
1,012
|
|
3,328
|
|
Deferred income taxes
|
374
|
|
187
|
|
Share-based compensation
|
1,408
|
|
1,946
|
|
Stock awards issued for non-employee director service
|
43
|
|
-
|
|
Amortization of deferred financing costs
|
69
|
|
95
|
|
Loss on debt extinguishment
|
360
|
|
-
|
|
Loss from disposition of assets
|
4
|
|
-
|
|
Changes in operating assets and liabilities
|
|
|
|
|
Accounts receivable
|
(661)
|
|
(3,466)
|
|
Inventory
|
3,588
|
|
2,383
|
|
Other current assets
|
(881)
|
|
(105)
|
|
Accounts payable and accrued expenses
|
(12,138)
|
|
2,725
|
|
Other current liabilities
|
(3,659)
|
|
1,940
|
|
Other non-current liabilities
|
446
|
|
283
|
|
Net cash (used in) provided by operating activities
|
(3,697)
|
|
10,400
|
|
Cash flows
from investing activities:
|
|
|
|
|
Additions to property and
equipment
|
(7,853)
|
|
(11,140)
|
|
Proceeds from sale of
property and equipment
|
14
|
|
-
|
|
Cash paid for intangible
assets
|
(16)
|
|
(63)
|
|
Proceeds from sale of
marketable securities and investments
|
3,171
|
|
2,100
|
|
Purchases of marketable
securities and investments
|
(8)
|
|
(55)
|
|
Change in restricted
cash
|
-
|
|
319
|
|
Purchases of company-owned
life insurance
|
(166)
|
|
(281)
|
|
Proceeds from purchase price
adjustment
|
-
|
|
787
|
|
Net cash used in investing activities
|
(4,858)
|
|
(8,333)
|
|
Cash flows
from financing activities:
|
|
|
|
|
Proceeds from revolving loan
payable
|
23,061
|
|
-
|
|
Payments made on revolving
loan payable
|
(5,935)
|
|
-
|
|
Payment of debt
extinguishment costs
|
(175)
|
|
-
|
|
Payments made on long-term
debt
|
(17,875)
|
|
(4,562)
|
|
Payments of debt financing
costs
|
(359)
|
|
(53)
|
|
Payments on capital
leases
|
(104)
|
|
(122)
|
|
Proceeds from exercise of
stock options
|
663
|
|
324
|
|
Other
|
-
|
|
(85)
|
|
Net cash used in financing activities
|
(724)
|
|
(4,498)
|
|
Effect of
exchange rate changes on cash and cash equivalents
|
20
|
|
(13)
|
|
Net change
in cash and cash equivalents
|
(9,259)
|
|
(2,444)
|
|
Cash and
cash equivalents, beginning of period
|
10,335
|
|
17,595
|
|
Cash and
cash equivalents, end of period
|
$
1,076
|
|
$
15,151
|
|
|
|
|
|
|
Supplemental disclosures of non-cash investing and
financing activities:
|
|
|
|
|
Accrued asset
purchases
|
$
2,164
|
|
$
1,191
|
|
Property acquired under
capital lease
|
104
|
|
32
|
|
Unrealized gain on
investments
|
30
|
|
58
|
|
|
|
|
|
|
Supplemental disclosures of consolidated cash flow
information:
|
|
|
|
|
Cash paid for income
taxes
|
17
|
|
9
|
|
Cash paid for
interest
|
293
|
|
853
|
|
Investor Contacts:
David Robson, Chief Financial
Officer
U.S. Auto Parts Network, Inc.
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.