U.S. Auto Parts Network, Inc.
Aug 2, 2010

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

- Net sales $53.2 million. - Adjusted EBITDA $3.3 million. - Gross margin 34.6%.

CARSON, Calif., Aug 02, 2010 /PRNewswire via COMTEX News Network/ -- 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 July 3, 2010 of $53.2 million compared with Q2 2009 net sales of $43.8 million. Excluding the impact of a $2.0 million non-cash reduction of reported sales related to a change in the Company's revenue recognition resulting from a change in freight contract terms, net sales were $55.2 million, an increase of 26.0% over Q2 2009 net sales. Q2 2010 net income was $0.5 million or $0.01 per diluted share, a decrease of $0.1 million over Q2 2009. Q2 2010 net income includes $0.8 million net of tax or $0.03 per diluted share of legal fees associated with intellectual property litigation and $0.3 million net of tax or $0.01 per diluted share related to a change in the Company's revenue recognition resulting from a change in freight contract terms. The Company generated adjusted EBITDA of $3.3 million for the quarter compared to $3.2 million for Q2 2009. Excluding $1.2 million of legal fees to protect intellectual property and $0.4 million related to a change in revenue recognition resulting from a change in freight contract terms, adjusted EBITDA was $5.0 million, an increase of 58%. For further information regarding adjusted EBITDA, including a reconciliation of adjusted EBITDA to net income (loss), see non-GAAP Financial Measures below.

"Q2 completes a full year of double digit growth in both sales and EBITDA," stated Shane Evangelist, Chief Executive Officer. "As I mentioned in our first quarter call, sales began accelerating in June of 2009 and we would face tough year over year comparisons starting in June 2010. Despite these tougher comps, I am happy to report that year over year Internet sales for June 2010 rose 18% on top of June 2009's 19% growth and July 2010 sales grew 23% on top of July 2009's 24% growth." Evangelist continued, "Our AutoMD.com (www.AutoMD.com) initiative continues to gain acceptance and recognition. AutoMD recently won a Stevie Award as the best auto repair site on the Web. Traffic is about 300,000 unique monthly visitors.

"Looking forward, we expect both the DIY market and Internet penetration of the auto parts market to continue to grow. Historically, the first half of the year outpaced the second half of the year by about 10% driven by seasonal demand for crash parts; however, based on our focus on engine part sales, which typically over-index in the second half, we now believe, based on sales data from June and July that our revenues for the second half of the year will not experience the pronounced decline from the first half of the year as in years past."

Q2 2010 Financial Highlights

Q2 2010 Operating Metrics


                                        Q2      Q2      Q1
                                       2010    2009    2010
    Conversion Rate                    1.58%   1.35%   1.48%
    ---------------                    ----    ----    ----
    Customer Acquisition Cost         $5.93   $6.65   $6.13
    -------------------------         -----   -----   -----
    Marketing Spend (% Internet
     Sales)                             6.3%    7.0%    6.4%
    ---------------------------         ---     ---     ---
    Visitors (millions)1               27.8    26.9    28.6
    --------------------               ----    ----    ----
    Orders (thousands)                  440     363     423
    ------------------                  ---     ---     ---
    Revenue Capture (% Sales)2         83.9%   80.5%   84.1%
    --------------------------         ----    ----    ----
    Average Order Value                $120    $121    $119
    -------------------                ----    ----    ----

    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 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 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 income (loss) to adjusted EBITDA for the periods presented (in thousands):


                                              Twenty-        Twenty-
                       Thirteen   Thirteen     Six              Six
                         Weeks    Weeks        Weeks           Weeks
                         Ended    Ended        Ended           Ended
                          -----   -----        -----          -----
                       July 3,  July 4,      July 3,         July 4,
                       -------  -------      -------         -------
                            2010     2009        2010         2009

     Net income (loss)      $462     $629      $2,009         $(50)
     Interest income,
      net                    (34)     (49)        (55)        (140)
     Income tax
      provision              225      469       1,175        1,832
     Amortization of
      intangibles            124      153         245          520
     Depreciation and
      amortization         1,950    1,134       3,934        2,153
                           -----    -----       -----        -----
     EBITDA                2,727    2,336       7,308        4,315
     Share-based
      compensation           612      820       1,472        1,847
                             ---      ---       -----        -----
     Adjusted EBITDA      $3,339   $3,156      $8,780       $6,162
                          ======   ======      ======       ======

Conference Call

As previously announced, the Company will conduct a conference call with analysts and investors to discuss the results today, Monday, at 2:00 pm Pacific Time (5:00 pm 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 1-877-941-8418 (domestic) or 1-480-629-9809 (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 16, 2010. To access the replay, please dial 1-877-870-5176 (domestic) or 1-858-384-5517 (international), passcode 4340251.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, www.partstrain.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, 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 and per share amounts)

                                                  July 3,     January 2,
                                                    2010         2010
                                                 --------    -----------
                                                (unaudited)
    ASSETS
    Current assets:
       Cash and cash equivalents                    $15,197       $26,251
       Short-term investments                        24,983        11,071
       Accounts receivable, net                       2,581         3,383
       Inventory                                     26,536        18,610
       Deferred income taxes                          1,513         1,513
       Other current assets                           4,013         3,148
                                                      -----         -----

         Total current assets                        74,823        63,976

    Property and equipment, net                      14,920        12,405
    Intangible assets, net                            3,870         3,114
    Goodwill                                          9,772         9,772
    Deferred income taxes                            10,065        10,985
    Investments                                       4,165         4,264
    Other non-current assets                            435            98

         Total assets                              $118,050      $104,614
                                                   ========      ========

    LIABILITIES AND STOCKHOLDERS' EQUITY
    Current liabilities:
       Accounts payable                             $17,173       $11,371
       Accrued expenses                               9,623         8,038
       Other current liabilities                      3,736         2,518
                                                      -----         -----

         Total current liabilities                   30,532        21,927

    Non-current liabilities                             317             -

         Total liabilities, commitments and
          contingencies                              30,849        21,927


    Stockholders' equity:
       Common stock, $0.001 par value;
        100,000,000 shares                               30            30
     authorized at July 3, 2010 and January
      02, 2010;
     30,336,020 and 29,893,631 shares issued
      and
     outstanding as of  July 3, 2010 and
      January 2, 2010
    respectively
       Additional paid-in capital                   152,510       150,084
       Accumulated other comprehensive income           163            84
       Accumulated deficit                          (65,502)      (67,511)


         Total stockholders' equity                  87,201        82,687

            Total liabilities and stockholders'
             equity                                $118,050      $104,614
                                                   ========      ========



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


                         Thirteen      Thirteen       Twenty-        Twenty-
                           Weeks         Weeks           Six            Six
                                                       Weeks          Weeks
                           Ended         Ended          Ended          Ended
                           July 3,      July 4,        July 3,        July 4,
                          -------      -------        -------        -------
                            2010          2009           2010           2009
                            ----          ----           ----           ----


     Net sales                 $53,188       $43,805    $109,479   $83,469
     Cost of sales              34,791        27,937      71,275    52,961
                                  ----          ----        ----      ----

     Gross profit               18,397        15,868      38,204    30,508
     Operating
      expenses:
            Marketing (1)        7,138         5,680      14,351    11,015
            General and
             administrative
             (1)                 6,395         4,811      12,132     9,576
            Fulfillment
             (1)                 2,924         2,809       6,167     5,461
            Technology (1)       1,158         1,343       2,176     2,271
            Amortization
             of
             intangibles
             and
             impairment
             loss                  124         153       245         520
                                   ---           ---         ---       ---

     Total
      operating
      expenses                  17,739        14,796      35,071    28,843
     Income from
      operations                   658         1,072       3,133     1,665
     Other income:
            Other income
             (loss)                 (5)          (23)         (4)      (23)
            Interest
             income, net            34            49          55       140
                                   ---           ---         ---       ---

     Other income,
      net                           29            26          51       117
     Income before
      income taxes                 687         1,098       3,184     1,782
     Income tax
      provision                    225           469       1,175     1,832

     Net income
      (loss)                      $462          $629      $2,009      $(50)
                                  ====          ====      ======      ====

     Basic net
      income (loss)
      per share                  $0.02         $0.02       $0.07    $(0.00)
     Diluted net
      income (loss)
      per share                  $0.01         $0.02       $0.06    $(0.00)
     Shares used in
      computation
      of basic net
      income (loss)
      per share             30,314,478    29,846,757  30,158,797 29,846,757
     Shares used in
      computation
      of diluted
      net income
      (loss)  per
      share                 31,994,447   30,395,189   31,723,316 29,846,757



    --------------------------
                                  Thirteen  Thirteen
                                   Weeks     Weeks   Twenty-Six Twenty-Six
                                                        Weeks      Weeks
                                   Ended     Ended       Ended      Ended
                                 July 3,   July 4,     July 3,    July 4,
                                 -------   -------     -------    -------
    (1)  Includes share-
     based compensation
     expense as follows:              2010      2009       2010       2009
                                      ----      ----       ----       ----
          Marketing                    $72      $110       $192       $216
          General and
           administrative              452       495      1,000      1,317
          Fulfillment                   64        57        189        104
          Technology                    24       158         91        210
                                       ---       ---        ---        ---
               Total share-based
                compensation
                expense               $612      $820     $1,472     $1,847
                                      ====      ====     ======     ======

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


                                                  Twenty-
                                                 Six Weeks    Twenty-Six
                                                   Ended     Weeks Ended
                                                  July 3,
                                                    2010    July 4, 2009
                                                 --------   ------------

      Operating activities
        Net income/(loss)                           $2,009            $(50)
        Adjustments to reconcile net income
         to net cash provided by operating
         activities:
           Depreciation and amortization             3,934           2,153
           Amortization of intangibles                 245             520
           Share-based compensation expense          1,472           1,847
           Excess tax benefits from share-based
            payment arrangements                      (237)              -
           Deferred taxes                              790           1,731
           Changes in cash surrender value of
            company-owned life insurance                25               -
           Loss from disposition of assets               6               -
        Changes in operating assets and
         liabilities:
           Accounts receivable, net                    800            (511)
           Inventory                                (7,926)         (1,274)
           Other current assets                       (869)         (1,044)
           Other non current assets                   (115)              -
           Accounts payable and accrued expenses     7,646           3,267
           Other current liabilities                 1,219             925
           Other non current liabilities               318               -
                                                         -               -

      Net cash provided by operating
       activities                                    9,317           7,564

      Investing activities
           Additions to property and equipment      (6,298)         (3,862)
           Proceeds from the sale of investments     4,237             475
           Purchases of investments                (17,984)         (4,096)
           Purchases of  company-owned life
            insurance                                 (250)              -
           Purchases of intangible assets           (1,001)              -
      Net cash used in investing activities        (21,296)         (7,483)

      Financing activities
           Payments on short-term financing              -             (39)
           Proceeds from exercise of stock
            options                                    658               -
           Excess tax benefits from share-based
            payment arrangements                       237               -
                                                       ---             ---
      Net cash provided by (used in)
       financing activities                            895             (39)
                                                       ---             ---
      Effect of changes in foreign
       currencies                                       30              82

      Net  (decrease) increase in cash and
       cash equivalents                            (11,054)            124
      Cash and cash equivalents at
       beginning of period                          26,251          32,473
                                                    ------          ------
      Cash and cash equivalents at end of
       period                                      $15,197         $32,597
                                                   =======         =======

    Supplemental disclosure of non-cash
     investing activities:
           Accrued asset purchases                     571              75
           Cash paid during the period for
            income taxes                                87               -



    Investor Contacts:

    Ted Sanders, Chief Financial Officer
    U.S. Auto Parts Network, Inc.
    tsanders@usautoparts.com
    (310) 735-0085

    Budd Zuckerman, President
    Genesis Select Corporation
    bzuckerman@genesisselect.com
    (303) 415-0200


SOURCE U.S. Auto Parts Network, Inc.

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