U.S. Auto Parts Network, Inc. Reports Record Sales of $120 Million
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Fourth Quarter 2006 Net Sales Increase 134% to $36.8 Million Over 2005
CARSON, Calif., March 20 -- U.S. Auto Parts Network, Inc. , a leading online provider of aftermarket auto parts and accessories, today reported its financial results for the fourth quarter and fiscal year ended December 31, 2006.
Net sales for the fourth quarter ended December 31, 2006 were $36.8 million, an increase of 134% from $15.7 million in the prior year period. Net loss for the fourth quarter of fiscal 2006 was $(0.02) million, or $(0.00) per diluted share on approximately 22 million shares outstanding, compared to net income of $2.1 million, or $0.16 per diluted share on approximately 13 million shares outstanding. Adjusted EBITDA for the fourth quarter of 2006, which excludes share-based compensation expense related to option grants of $0.3 million, was $3.2 million compared to Adjusted EBITDA of $2.7 million in the prior year period.
Net sales for fiscal year 2006 were $120.1 million, an increase of 101% from $59.7 million for fiscal year 2005. Net income for the fiscal year ended December 31, 2006 was $3.5 million, or $0.17 per diluted share on approximately 20.0 million shares outstanding, compared to net income of $6.8 million, or $0.52 per diluted share on approximately 13.2 million shares outstanding. Adjusted EBITDA for fiscal year 2006, which excludes share-based compensation expense related to option grants of $0.9 million, was $13.3 million, an increase of 51% from $8.8 million for fiscal year 2005.
"2006 marked a year of many accomplishments," said Mehran Nia, President and Chief Executive Officer. "We raised a significant amount of capital through debt and equity offerings, completed the acquisition of our largest competitor, as well as prepared the Company for its initial public offering. Through these events, we believe we have set the foundation for U.S. Auto Parts to accelerate growth and continue to gain market share. We achieved revenue growth in excess of 100%, driven by growth in our SKU count, as we expanded our product offering to include engine parts and performance parts and accessories, as well as growth in the number of unique visitors to our network of websites in 2006."
Mr. Nia continued, "This is a very dynamic time in the fragmented aftermarket auto parts market, and we have a number of initiatives in place which we believe will enable us to profitably capitalize on these opportunities. We recently added several key members to our management team and we are confident that we have the leadership in place to execute on the many growth opportunities that lie ahead."
Mr. Nia concluded, "We remain especially committed to increasing stockholder value as evidenced by our recent decision to extend the lock-up agreements of our major shareholders, our executive team and our board of directors for an additional six months from the original lock-up period committed in order to further align ourselves with our stockholders and to focus on our long-term strategy."
Michael McClane, Chief Financial Officer, added, "We saw growth in many of our key metrics during the year, validating the strength of our product offering and business model. Our recent initial public offering and subsequent repayment of debt has strengthened our financial position. While we are proud of these major accomplishments, we still have opportunities for improvement. Our entire team is focused on completing the integration of Partsbin, improving the technology and systems infrastructure, and increasing overall profitability."
Key Full Year and Q4 2006 Operating Metrics
* Unique visitors - The number of monthly unique visitors in the fourth
quarter of 2006 rose to 20.4 million, an increase of 35% compared to
the fourth quarter of 2005 on a pro-forma basis after giving effect to
the acquisition of Partsbin.
* Conversion rate - The conversion rate in 2006 increased to 1.2% from
1.1% in 2005.
* Orders - The number of orders placed through our e-commerce websites
rose to approximately 748,000 orders in 2006 from 288,000 in 2005,
representing an increase of approximately 160%.
* Average order value - The average order value of purchases on our
websites remained stable at approximately $120 in 2006.
* Customer acquisition cost - The customer acquisition cost in 2006 was
$10 per customer, compared to $8 in 2005.
Mr. McClane concluded, "Looking ahead, we plan to continue to execute on our growth strategy while maintaining a strict focus on profitability through focusing on gross margin expansion and operating expense control. While we are confident we have the initiatives and people in place to achieve this goal, we believe it will require some time to fully implement, and the results will not be realized immediately. As a industry leader in the aftermarket auto parts space, we believe we are uniquely positioned to grow our market share and we are confident about our long-term prospects."
Outlook for 2007
Expectations for the first quarter of 2007 are as follows:
* Net sales are expected to be in the range of $39 million to $41
million.
* Operating expenses (including depreciation and amortization of software
and intangibles) as a percentage of net sales are expected to be in the
range of 31% to 33%.
* Net income per diluted share is expected to be in the range of $(0.02)
to $0.00 with approximately 26.7 million shares outstanding.
* This includes the estimated impact of share-based compensation
expense of approximately $0.02 per diluted share or $0.6 million.
* This includes the estimated impact of depreciation and
amortization of software and intangibles of approximately $0.09
per diluted share.
* Adjusted EBITDA is expected to be in the range of $2.5 million to $3.0
million.
Expectations for the fiscal year ending December 31, 2007 are as follows.
* Net sales are expected to be in the range of $170 million to $185
million.
* Operating expenses (including depreciation and amortization of software
and intangibles) as a percentage of net sales are expected to be in the
range of 30% to 33%.
* Diluted net income per share is expected to be in the range of $0.05 to
$0.17 assuming approximately 29.3 million shares outstanding.
* This includes the estimated impact of share-based compensation
expense of $0.09 per diluted share or $2.5 million.
* This includes the estimated impact of depreciation and
amortization of software and intangibles of approximately $0.31
per diluted share.
* Adjusted EBITDA is expected to be in the range of $14 million to $18
million.
The table below reconciles net income to EBITDA and Adjusted EBITDA for the periods presented:
Quarter Ended
Years Ended December 31, December 31,
2004 2005 2006 2005 2006
Net income $7,133 $6,819 $3,496 $2,063 $22
Interest
expense, net 44 106 1,510 37 560
Income tax
provision
(benefit) 328 (163) 550 35 23
Amortization of
intangibles 8 17 5,092 4 2,055
Depreciation
and
amortization 448 1,976 1,786 521 245
EBITDA 7,961 8,755 12,434 2,660 2,861
Share-based
compensation -- -- 856 -- 349
Adjusted
EBITDA $7,961 $8,755 $13,290 $2,660 $3,210
About U.S. Auto Parts Network, Inc.
Established in 1995, U.S. Auto Parts is a leading online provider of aftermarket auto 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 comprehensive selection of approximately 550,000 competitively priced products that are mapped by a proprietary product database to over 4.3 million 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 NETWORK, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except share and per share data)
Years Ended December 31,
2004 2005 2006
Net sales $40,658 $59,698 $120,060
Cost of sales 21,334 34,829 78,573
Gross profit 19,324 24,869 41,487
Operating expenses:
General and administrative(1) 3,599 7,254 9,594
Marketing(1) 4,526 5,802 15,102
Fulfillment(1) 2,990 4,357 4,963
Technology(1) 776 868 1,332
Amortization of intangibles 8 17 5,092
Total operating expenses 11,899 18,298 36,083
Income from operations 7,425 6,571 5,404
Other income (expense), net:
Loss from disposition of assets -- -- (5)
Other income 80 191 157
Interest income -- -- 95
Interest expense (44) (106) (1,605)
Other income (expense), net 36 85 (1,358)
Income before income taxes 7,461 6,656 4,046
Income tax provision (benefit) 328 (163) 550
Net income $7,133 $6,819 $3,496
Basic net income per share $0.54 $0.52 $0.24
Diluted net income per share $0.54 $0.52 $0.17
Shares used in computation of
basic net income
per share 13,200,000 13,200,000 14,437,657
Shares used in computation
of diluted net income
per share 13,200,000 13,200,000 19,990,431
Shares used in computation
of pro forma basic net
income per share
(unaudited) 13,200,000 19,833,255 21,070,912
Shares used in computation
of pro forma diluted net
income per share
(unaudited) 13,200,000 19,833,255 21,099,003
Pro forma provision for
income taxes (unaudited) 2,964 2,657 1,717
Pro forma basic net income
per share (unaudited) $0.34 $0.20 $0.11
Pro forma diluted net income
per share (unaudited) $0.34 $0.20 $0.11
(1) Includes share-based compensation expense related to option grants, as follows:
Years Ended December 31,
2004 2005 2006
General and administrative expense $-- $-- $582
Marketing expense -- -- 171
Fulfillment expense -- -- 25
Technology expense -- -- 78
$-- $-- $856
U.S. AUTO PARTS NETWORK, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
December 31,
2005 2006
Assets
Current assets:
Cash and cash equivalents $1,353 $2,381
Accounts receivable, net 1,637 2,789
Inventory, net 8,800 8,796
Other current assets 361 2,083
Total current assets 12,151 16,049
Property and equipment, net 2,259 2,716
Intangible assets, net 25 33,362
Goodwill -- 14,179
Deferred income taxes -- 1,703
Other noncurrent assets 49 1,901
Total assets $14,484 $69,910
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable $6,882 $9,091
Accrued expenses 1,307 2,912
Line of credit -- 2,000
Notes payable 96 10,805
Capital leases payable, current portion 170 62
Other current liabilities 423 2,392
Total current liabilities 8,878 27,262
Notes payable, less current portion, net -- 21,922
Capital leases payable, less current portion 357 114
Total liabilities 9,235 49,298
Noncontrolling interest in consolidated entity 10 --
Commitments and contingencies
Stockholders' equity:
Series A convertible preferred stock, par value
$0.001; 11,100,000 shares authorized; 0 and
11,055,425 issued and outstanding, as of
December 31, 2005 and 2006, respectively;
(liquidation preference of $45,000 at December
31, 2006) -- 11
Common stock, par value $0.001; 50,000,000 shares
authorized; 13,200,000 and 15,199,672 issued
and outstanding, as of December 31, 2005 and
December 31, 2006, respectively 13 15
Additional paid-in capital 526 68,906
Accumulated other comprehensive income -- 5
Retained earnings (accumulated deficit) 4,700 (48,325)
Total stockholders' equity 5,239 20,612
Total liabilities and stockholders'
equity $14,484 $69,910
U.S. AUTO PARTS NETWORK, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
Years Ended December 31,
2004 2005 2006
Operating activities
Net income $7,133 $6,819 $3,496
Adjustments to reconcile net
income to net cash provided
by operating activities:
Depreciation and amortization 448 1,976 1,786
Amortization of intangibles 8 17 5,092
Non-cash interest expense -- -- 61
Loss from disposition of assets -- -- 5
Share-based compensation and other -- -- 956
Realized gain on sale of
marketable securities (8) (75) --
Deferred income taxes 79 (79) (1,703)
Effect of changes in foreign
currencies -- -- 5
Changes in operating assets
and liabilities:
Accounts receivable, net (222) (489) (1,152)
Inventory, net (779) (3,336) 608
Other current assets (32) (286) (1,628)
Other noncurrent assets (91) 43 (1,824)
Accounts payable and accrued
expenses (37) 4,942 769
Other current liabilities 4 104 889
Net cash provided by operating
activities 6,503 9,636 7,360
Investing activities
Additions to property, equipment
and intangibles (1,368) (440) (1,890)
Acquisition of business, net
of cash acquired -- -- (24,381)
Proceeds from sale of equipment -- 154 --
Proceeds from sale of marketable
securities 63 653 --
Purchase of marketable
securities (558) -- --
Payments (borrowings) of
related-party loans (82) 356 --
Net cash provided by (used in)
investing activities (1,945) 723 (26,271)
Financing activities
Proceeds from credit line 1,500 2,000 2,000
Payments of credit line (10) (3,500) --
Proceeds received from notes
payable, net of discount -- -- 31,705
Payments made on notes payable -- -- (4,111)
Proceeds received on issuance of
Series A convertible preferred
stock,net of offering costs -- -- 42,246
Payments of short-term financing (45) (105) (351)
(Payments) borrowings to
related party 324 (230) --
Payments to related parties (685) (1,547) --
Contributed capital -- 10 --
Proceeds from sale of common
stock -- -- 150
Stockholder distributions (5,629) (7,764) (1,700)
Recapitalization distribution -- -- (50,000)
Net cash provided by (used in)
financing activities (4,545) (11,136) 19,939
Net increase (decrease) in
cash and cash equivalents 13 (777) 1,028
Cash and cash equivalents,
beginning of period 2,117 2,130 1,353
Cash and cash equivalents,
end of period $2,130 $1,353 $2,381
Supplemental disclosure of
noncash financing activities:
Property acquired under capital
leases $40 $500 $--
Property acquired under note
payable to related party 2,234 -- --
Undistributed earnings related
to terminated S corporation
status -- 4,821
Issuance of common stock in
connection with business
acquisition -- -- 20,000
Issuance of note payable to
selling shareholders in
connection with business
acquisition -- -- 5,000
Issuance of warrants for costs
associated with debt and equity
issuances -- -- 147
Cash paid during the period for:
Interest $7 $76 $1,330
Income taxes 147 469 3,378