Press Releases

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

- Adjusted EBITDA $3.2 million.

- Net sales were $43.8 million.

- Gross margin 36.2%.

CARSON, Calif., Aug. 6 /PRNewswire-FirstCall/ -- U.S. Auto Parts Network, Inc. (Nasdaq: PRTS), the largest online provider of automotive aftermarket parts and accessories, today reported net sales for the second quarter ended July 4, 2009 of $43.8 million, an increase of $0.7 million or 2% over Q2 2008 net sales of $43.1 million. Q2 2009 net income was $0.6 million or $0.02 per diluted share, an increase of $12.7 million over Q2 2008. Diluted EPS for the quarters ended July 4, 2009 and June 30, 2008 included amortization expense and impairment charges related to intangibles of $0.1 million net of tax or $0.00 per diluted share and $12.3 million net of tax or $0.41 per diluted share, respectively. The Company generated adjusted EBITDA of $3.2 million for the quarter compared to $1.9 million for Q2 2008. For further information regarding adjusted EBITDA, including a reconciliation of Adjusted EBITDA to net income (loss), see non-GAAP Financial Measures below.

"The second quarter of 2009 is our second consecutive quarter of improved profitability and cash generation," stated Shane Evangelist, Chief Executive Officer. "These results were driven by both top line growth and intelligent expense management. Following our long term strategy, we continued to invest $2.0 million in our growth initiatives."

"The combination of favorable macro trends and better execution by our team produced a new company quarterly sales record," continued Evangelist. "June actually comped up 18% year-over-year and we are pleased to see similar trends continue through July."

Q2 2009 Financial Highlights

    --  Net sales for Q2 2009 increased by 2% from Q2 2008. Online sales for Q2
        2009 increased 3.5% and offline sales declined by 19.0% compared to Q2
        2008.  The decline in offline sales was primarily due to a loss of sales
        to a large customer in Q3 2008.
    --  Gross profit for Q2 2009 was $15.9 million or 36.2% of net sales
        compared to 33.8% of net sales for Q2 2008. The increase in gross margin
        was primarily due to initiatives that reduced freight expense.
    --  Online advertising expense was $2.8 million or 7.0% of internet net
        sales for the second quarter of 2009 compared to 7.5% of internet net
        sales for the prior year period, which excludes $0.2 million of
        marketing co-op received in 2008.  Marketing expense, excluding
        advertising expense, was $2.9 million or 6.6% of net sales for the
        second quarter of 2009 compared to 9.5% of net sales in the prior year
        period.  The decrease was primarily due to lower personnel related costs
        and depreciation expense.
    --  General and administrative expense was $4.8 million or 11.0% of net
        sales for the second quarter of 2009 compared to 10.6% of net sales in
        the prior year period.  This increase was primarily due to higher
        personnel incentive costs related to better company performance, higher
        depreciation and amortization related to capital investment, partially
        offset by a reduction in professional fees.
    --  Fulfillment expense was $2.8 million or 6.4% of net sales in the second
        quarter of 2009 compared to 5.6% in the prior year period.  The increase
        is primarily due to the opening of our new distribution center on the
        East Coast.
    --  Technology expense was $1.3 million or 3.0% of net sales in the second
        quarter of 2009 compared to 1.9% of net sales in the prior year period. 
        The increase reflects additional headcount resources deployed to support
        the Company's strategic technology plan.
    --  Amortization of intangibles and impairment loss was $0.2 million in the
        second quarter of 2009 compared to $20.5 million in the prior year
        period.  The decrease is primarily due to impairment charges of certain
        intangible assets during 2008.
    --  Capital expenditures for the second quarter of 2009 were $2.0 million
        which included $1.5 million of internally developed software and website
        development costs.

    --  Cash, cash equivalents and investments were $42.6 million at July 4,
        2009.  The Company includes $4.1 million of investments in United States
        treasury bills in short-term assets and $5.9 million of investments in
        auction rate preferred securities in long-term assets, which are not
        included in cash. Cash and securities increased $2.3 million over the
        previous quarter.

    Q2 2009 Operating Metrics

                                Q2 2009    Q2 2008     Q1 2009
                                -------    -------     -------
    Conversion Rate               1.35%      1.39%      1.17%
    --------------------------    ----       ----       ----
    Customer Acquisition Cost    $6.65      $5.77      $6.40
    --------------------------   -----      -----      -----
    Unique Visitors (millions)    26.9       24.1       27.1
    --------------------------    ----       ----       ----
    Orders (thousands)             363        334        316
    --------------------------     ---        ---        ---
    Revenue Capture (% Sales)*    80.5%      76.6%      81.8%
    --------------------------    ----       ----       ----
    Average Order Value           $121       $128       $120
    --------------------------    ----       ----       ----

    *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 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 (in thousands):

                               Thirteen     Three      Twenty-       Six
                                Weeks      Months     Six Weeks     Months
                                Ended       Ended       Ended       Ended
                               --------   ----------  ---------   ----------
                                July 4,    June 30,    July 4,     June 30,
                                 2009        2008       2009         2008
                               --------   ----------  ---------   ----------

        Net income (loss)        $629     $(12,063)      $(50)   $(12,938)
        Interest income, net      (49)        (234)      (140)       (502)
        Income tax provision
         (benefit)                469       (8,042)     1,832      (8,606)
        Amortization of
         intangibles              153        2,096        520       4,195
        Depreciation and
         amortization           1,134          964      2,153       1,758
                                -----          ---      -----       -----
        EBITDA                  2,336      (17,279)     4,315     (16,093)
        Impairment loss on
         intangibles                -       18,445          -      18,445
        Share-based
         compensation             820          686      1,847       1,318
                                  ---          ---      -----       -----
        Adjusted EBITDA        $3,156       $1,852     $6,162      $3,670
                               ======       ======     ======      ======

Conference Call

As previously announced, the Company will conduct a conference call with analysts and investors to discuss the results today, Thursday, August 6, 2009, at 6:00 am Pacific Time (9:00 am Eastern Time). The conference call will be conducted by Shane Evangelist, Chief Executive Officer and Ted Sanders, Chief Financial Officer. Participants may access the call by dialing (866) 225-8754 (domestic) or (480) 629-9692 (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, 2009. To access the replay, please dial (800) 406-7325 (domestic) or (303) 590-3030 (international), passcode 4132450.

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.autopartswarehouse.com and www.partstrain.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, 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, 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; any changes in the search algorithms by leading Internet search companies; the Company's need to assess impairment of intangible assets and goodwill; 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.



                        U.S. AUTO PARTS NETWORK, INC.
                    CONDENSED CONSOLIDATED BALANCE SHEETS
                (in thousands, except share data and par value)

                                                July 4,      December 31,
                                                 2009            2008
                                             ------------    ------------
                                              (unaudited)
    ASSETS
    Current assets:
        Cash and cash equivalents              $32,597         $32,473
        Short-term investments                   4,096               -
        Accounts receivable, net                 1,864           1,353
        Inventory, net                          12,185          10,910
        Deferred income taxes                    2,095           2,095
        Other current assets                     3,133           2,090
                                                 -----           -----

              Total current assets              55,970          48,921

    Property and equipment, net                  9,927           8,203
    Intangible assets, net                       2,508           3,028
    Goodwill                                     9,772           9,772
    Deferred income taxes                       12,329          14,061
    Investments                                  5,876           6,351
    Other non-current assets                        93              94

                                               -------         -------
              Total assets                     $96,475         $90,430
                                               =======         =======

    LIABILITIES AND STOCKHOLDERS' EQUITY
    Current liabilities:
        Accounts payable                        $6,090          $5,702
        Accrued expenses                         8,466           5,663
        Capital leases payable,
         current portion                             8              47
        Other current liabilities                2,421           1,496
                                                 -----           -----

                Total current liabilities       16,985          12,908

    Commitments and contingencies                    -               -

    Stockholders' equity:
        Common stock, $0.001 par value;
         100,000,000 shares authorized at
         July 4, 2009 and December 31,
         2008; 29,846,757 shares issued
         and outstanding at July 4, 2009
         and December 31, 2008                      30              30
        Additional paid-in capital             148,366         146,408
        Accumulated other
         comprehensive loss                        (28)            (88)
        Accumulated deficit                    (68,878)        (68,828)

                                                ------          ------
                Total stockholders' equity      79,490          77,522
                                               -------         -------
                    Total liabilities and
                     stockholders' equity      $96,475         $90,430
                                               =======         =======



                         U.S. AUTO PARTS NETWORK, INC.
           UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                (in thousands, except share and per share data)

                                 Thirteen     Three     Twenty-Six     Six
                                  Weeks       Months      Weeks       Months
                                  Ended       Ended       Ended       Ended
                                 July 4,     June 30,    July 4,     June 30,
                                 -------     --------    -------     --------
                                  2009         2008        2009        2008
                                 -------     --------    -------     --------

    Net sales                   $43,805      $43,105     $83,469     $83,114
    Cost of sales                27,937       28,518      52,961      54,777
                                 ------       ------      ------      ------

    Gross profit                 15,868       14,587      30,508      28,337
    Operating expenses:
        Marketing (1)             5,680        6,635      11,015      12,602
        General and
         administrative (1)       4,811        4,588       9,576       9,211
        Fulfillment (1)           2,809        2,377       5,461       4,465
        Technology (1)            1,343          787       2,271       1,471
        Amortization of
         intangibles and
         impairment loss            153       20,541         520      22,640
                                    ---       ------         ---      ------

    Total operating expenses     14,796       34,928      28,843      50,389
    Income (loss) from
     operations                   1,072      (20,341)      1,665     (22,052)
    Other income:
        Other income (loss)         (23)           2         (23)          6
        Interest income, net         49          234         140         502
                                    ---          ---         ---         ---

    Other income, net                26          236         117         508
    Income (loss) before
     income taxes                 1,098      (20,105)      1,782     (21,544)
    Income tax provision
     (benefit)                      469       (8,042)      1,832      (8,606)

                                   ----     --------        ----    --------
    Net income (loss)              $629     $(12,063)       $(50)   $(12,938)
                                   ====     ========        ====    ========

    Basic net income (loss)
     per share                    $0.02       $(0.40)     $(0.00)     $(0.43)
    Diluted net income
     (loss) per share             $0.02       $(0.40)     $(0.00)     $(0.43)
    Shares used in
     computation of basic
     and diluted net loss
     per share               29,846,757   29,846,757  29,846,757   29,846,757
    Shares used in
     computation of diluted
     net income (loss)
     per share               30,395,189   29,846,757  29,846,757   29,846,757


    ----------------------------

                                 Thirteen     Three     Twenty-Six     Six
                                  Weeks       Months      Weeks       Months
                                  Ended       Ended       Ended       Ended
                                 July 4,     June 30,    July 4,     June 30,
                                 -------     --------    -------     --------
                                  2009         2008        2009        2008
                                 -------     --------    -------     --------

    (1) Includes share-based
         compensation expense
         as follows:
        Marketing                 $110         $112        $216        $196
        General and
         administrative            495          500       1,317       1,003
        Fulfillment                 57           30         104          63
        Technology                 158           44         210          56
                                   ---          ---         ---         ---
           Total share-based
            compensation
            expense               $820         $686      $1,847      $1,318
                                  ====         ====      ======      ======



                         U.S. AUTO PARTS NETWORK, INC.
            UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (in thousands)


                                                   Twenty-Six     Six Months
                                                   Weeks Ended       Ended
                                                   July 4, 2009  June 30, 2008
                                                   ------------  -------------
      Operating activities
        Net loss                                       $(50)      $(12,938)
        Adjustments to reconcile net loss
         to net cash provided by (used in)
         operating activities:
              Depreciation and amortization           2,153          1,758
              Amortization of intangibles               520          4,195
              Impairment loss on intangibles                        18,445
              Share-based compensation expense        1,847          1,318
              Deferred taxes                          1,731         (8,452)
        Changes in operating assets and
         liabilities:
              Accounts receivable, net                 (511)           472
              Inventory, net                         (1,274)        (2,651)
              Prepaid expenses and other
               current assets                        (1,044)        (1,532)
              Other non current assets                    -             (8)
              Accounts payable and accrued
               expenses                               3,267          1,321
              Other current liabilities                 925             19
                                                        ---            ---

      Net cash provided by (used in)
       operating activities                           7,564          1,947

      Investing activities
              Additions to property and equipment    (3,862)        (1,975)
              Proceeds from the sale of marketable
               securities                               475         21,275
              Purchases of marketable securities     (4,096)        (5,500)
                                                     ------         ------
      Net cash provided by (used in)
       investing activities                          (7,483)        13,800

      Financing activities
              Payments made on notes payable              -         (1,000)
              Payments on short-term financing          (39)           (31)
                                                        ---         ------
      Net cash used in financing activities             (39)        (1,031)
                                                        ---         ------

      Effect of changes in foreign currencies            82              5

      Net increase in cash and cash equivalents         124         14,721
      Cash and cash equivalents at
       beginning of period                           32,473         19,399
                                                    -------        -------
      Cash and cash equivalents at end
       of period                                    $32,597        $34,120
                                                    =======        =======

    Supplemental disclosure of non-cash
     investing activities:
      Accrued asset purchases                           $75              -

    Investor Contacts:

    Ted Sanders, Chief Financial Officer
    U.S. Auto Parts Network, Inc.
    tsanders@usautoparts.com
    (424) 702-1455

SOURCE U.S. Auto Parts Network, Inc.