PRTS » Topics » Liquidity and Capital Resources

These excerpts taken from the PRTS 10-K filed Mar 26, 2009.

Liquidity and Capital Resources

Sources of Liquidity

We have historically funded our operations from cash generated from operations, credit facilities, bank and stockholder loans, an equity financing and capital lease financings. We had no balance outstanding under our bank line of credit during 2008. In connection with the transition of our commercial banking relationship to a new bank in the fourth quarter of 2008, we cancelled our line of credit effective December 31, 2008.

Cash Flows

We had cash and cash equivalents of $32.5 million as of December 31, 2008, representing a $9.6 million decrease from $42.1 million of liquid assets as of December 31, 2007. The decrease in our cash and cash equivalents as of December 31, 2008 was primarily due to a reclassification of $6.4 million of our investments in ARPS to long-term and a $3.4 million payment related to our securities litigation settlement in July 2008.

Operating Activities

We generated $3.0 million of net cash from operating activities for the year ended December 31, 2008. The significant components of cash flows from operating activities were a net loss of $16.9 million; an increase of $11.7 million in deferred tax assets primarily related to the tax benefit from the impairment loss on our intangibles; a $3.3 million net change in other current assets and liabilities, which primarily related to the $3.4 million settlement in our securities class action litigation; offset by $8.6 million in non-cash depreciation and amortization expense; $23.4 million of a non-cash impairment loss on goodwill and intangibles; and $2.9 million of non-cash stock-based compensation expense.

Investing Activities

Cash provided by investing activities during the year ended December 31, 2008 totaled $11.2 million and was primarily attributable to our net change in investments of $16.2 million in ARPS and purchases of $5.0 million of property and equipment and other intangible assets.

Financing Activities

Cash used in financing activities during the year ended December 31, 2008 totaled $1.0 million and was primarily due to repayments made on notes payable.

Funding Requirements

We had working capital of $36.0 million as of December 31, 2008, which was primarily due to cash generated from our initial public offering. The historical seasonality in our business during the fourth and first calendar quarters of each year cause cash and cash equivalents, inventory and accounts payable to be generally higher in these quarters, resulting in fluctuations in our working capital. We anticipate that funds generated from operations and our existing cash balance of $32.5 million will be sufficient to meet our working capital needs and expected capital expenditures for at least the next twelve months. Our future capital requirements may, however, vary materially from those now planned or anticipated. Changes in our operating plans, lower than anticipated net sales, increased expenses or other events, including those described in “Risk Factors,” may cause us to seek additional debt or equity financings in the future. Financing may not be available on acceptable terms, on a timely basis, or at all, and our failure to raise adequate capital when needed could negatively impact our growth plans and our financial condition and results of operations. In addition, our $6.4 million (fair value) of ARPS investments as of December 31, 2008 were classified as long-term investments as a result of failed auctions and liquidity issues and we may not have immediate access to those funds.

 

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We opened a new distribution center on the East Coast in the first quarter of 2009, which is expected to result in a significant capital investment in that quarter. We expect to incur approximately $2.0 million in facility start-up costs which includes a new warehouse technology platform and up to an additional $3.0 million for inventory. We are also accelerating our technology investments in an effort to improve our websites, operating systems and backend platforms. We anticipate these decisions will increase our technology costs as a percentage of sales as well as increase our capitalized software and website development costs over the next several quarters.

Liquidity and Capital Resources

FACE="Times New Roman" SIZE="2">Sources of Liquidity

We have historically funded our operations from cash generated from operations,
credit facilities, bank and stockholder loans, an equity financing and capital lease financings. We had no balance outstanding under our bank line of credit during 2008. In connection with the transition of our commercial banking relationship to a
new bank in the fourth quarter of 2008, we cancelled our line of credit effective December 31, 2008.

Cash Flows

STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%">We had cash and cash equivalents of $32.5 million as of December 31, 2008, representing a $9.6 million decrease from $42.1 million of liquid assets
as of December 31, 2007. The decrease in our cash and cash equivalents as of December 31, 2008 was primarily due to a reclassification of $6.4 million of our investments in ARPS to long-term and a $3.4 million payment related to our
securities litigation settlement in July 2008.

Operating Activities

STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%">We generated $3.0 million of net cash from operating activities for the year ended December 31, 2008. The significant components of cash flows from
operating activities were a net loss of $16.9 million; an increase of $11.7 million in deferred tax assets primarily related to the tax benefit from the impairment loss on our intangibles; a $3.3 million net change in other current assets and
liabilities, which primarily related to the $3.4 million settlement in our securities class action litigation; offset by $8.6 million in non-cash depreciation and amortization expense; $23.4 million of a non-cash impairment loss on goodwill and
intangibles; and $2.9 million of non-cash stock-based compensation expense.

Investing Activities

STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%">Cash provided by investing activities during the year ended December 31, 2008 totaled $11.2 million and was primarily attributable to our net change
in investments of $16.2 million in ARPS and purchases of $5.0 million of property and equipment and other intangible assets.

Financing
Activities

Cash used in financing activities during the year ended December 31, 2008 totaled $1.0 million and was primarily due to
repayments made on notes payable.

Funding Requirements

STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%">We had working capital of $36.0 million as of December 31, 2008, which was primarily due to cash generated from our initial public offering. The
historical seasonality in our business during the fourth and first calendar quarters of each year cause cash and cash equivalents, inventory and accounts payable to be generally higher in these quarters, resulting in fluctuations in our working
capital. We anticipate that funds generated from operations and our existing cash balance of $32.5 million will be sufficient to meet our working capital needs and expected capital expenditures for at least the next twelve months. Our future capital
requirements may, however, vary materially from those now planned or anticipated. Changes in our operating plans, lower than anticipated net sales, increased expenses or other events, including those described in “Risk Factors,” may cause
us to seek additional debt or equity financings in the future. Financing may not be available on acceptable terms, on a timely basis, or at all, and our failure to raise adequate capital when needed could negatively impact our growth plans and our
financial condition and results of operations. In addition, our $6.4 million (fair value) of ARPS investments as of December 31, 2008 were classified as long-term investments as a result of failed auctions and liquidity issues and we may not
have immediate access to those funds.

 


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We opened a new distribution center on the East Coast in the first quarter of 2009, which is expected to
result in a significant capital investment in that quarter. We expect to incur approximately $2.0 million in facility start-up costs which includes a new warehouse technology platform and up to an additional $3.0 million for inventory. We are
also accelerating our technology investments in an effort to improve our websites, operating systems and backend platforms. We anticipate these decisions will increase our technology costs as a percentage of sales as well as increase our
capitalized software and website development costs over the next several quarters.

This excerpt taken from the PRTS 10-Q filed May 13, 2008.

Liquidity and Capital Resources

Sources of Liquidity

We have historically funded our operations from cash generated from operations, credit facilities, bank and stockholder loans, an equity financing and capital lease financings. At March 31, 2008, we had no balance outstanding under term loans or our bank line of credit, which expires on October 30, 2009 and bears interest at prime minus 0.5%.

Cash Flows

We had cash and cash equivalents of $32.2 million as of March 31, 2008, representing a $9.9 million decrease from $42.1 million of liquid assets as of December 31, 2007. The decrease in our cash and cash equivalents as of March 31, 2008 was primarily due to a reclassification of our investments in ARPS to long-term assets totaling $7.6 million.

Operating Activities

We used $91,000 of net cash from operating activities for the three months ended March 31, 2008. The significant components of cash flows from operating activities were a net loss of $875,000; a decrease of $1.4 million in inventory; a decrease of $1.3 million in other current assets and liabilities; offset by $2.9 million in non-cash depreciation and amortization expense and $631,000 of non-cash stock-based compensation expense.

Investing Activities

Cash provided by investing activities during the three months ended March 31, 2008 totaled $13.9 million and was primarily attributable to our net change in investments of $14.9 million in ARPS and purchases of $1.0 million of property and equipment.

Financing Activities

Cash used in financing activities during the three months ended March 31, 2008 totaled $1.0 million and was primarily due to repayments made on notes payable.

Funding Requirements

We had working capital of $34.3 million as of March 31, 2008, which was primarily due to the cash generated from our initial public offering. The historical seasonality in our business during the fourth and first calendar quarters of each year cause cash and cash equivalents, inventory and accounts payable to be generally higher in these quarters, resulting in fluctuations in our working capital. We anticipate that funds generated from operations, cash on hand and funds available under our line of credit will be sufficient to meet our working capital needs and expected capital expenditures for at least the next twelve months. Our future capital requirements may, however, vary materially from those now planned or anticipated. Changes in our operating plans, lower than anticipated net sales, increased expenses or other events, including those described in “Risk Factors,” may cause us to seek additional debt or equity financings in the future. Financings may not be available on acceptable terms, on a timely basis, or at all, and our failure to raise adequate capital when needed could negatively impact our growth plans and our financial condition and results of operations. In addition, our $7.6 million of short-term investments as of March 2008 was reclassified as long-term investments as a result of failed auctions and liquidity issues and we may not have access to those funds.

We are currently evaluating the feasibility of opening a new distribution center which would result in a significant capital investment, should we move forward with these plans.

This excerpt taken from the PRTS 10-K filed Mar 28, 2008.

Liquidity and Capital Resources

Sources of Liquidity

We have historically funded our operations from cash generated from operations, credit facilities, bank and stockholder loans, an equity financing and capital lease financings. At December 31, 2007, the only notes payable outstanding related to a $1.0 million payable to the former stockholders of Partsbin.

We currently maintain a $7.0 million bank line of credit, which expires on October 30, 2009 and bears interest at prime minus 0.5% (7.75% at December 31, 2006). As of December 31, 2007, we had no amount outstanding under this line of credit. The bank line of credit is with a commercial lender and is secured by substantially all of our assets. The notes payable to the former stockholders of Partsbin were also secured by substantially all of our assets.

Cash Flows

We had cash and cash equivalents of $19.4 million and short-term investments in auction rate securities of $22.7 million for a total of $42.1 million in highly-liquid assets as of December 31 2007, representing a $40.9 million increase from $1.2 million in cash and cash equivalents as of December 31, 2006. The increase in our cash and cash equivalents and short-term investments as of December 31, 2007 was primarily due to the net proceeds from our initial public offering that was completed in February 2007. We received net cash proceeds from our initial public offering of approximately $71.5 million after deducting the underwriting discounts and commissions and offering expenses. Approximately $28.0 million of the net proceeds from the offering was used to repay our outstanding indebtedness of approximately $18.0 million and $10.0 million under two term loans to our commercial lender. In addition, we repaid $4.0 million on the notes payable to the former stockholders of Partsbin.

Operating Activities

We generated $9.6 million of net cash from operating activities for the year ended December 31, 2007. The significant components of cash flows from operating activities were a net loss of $3.6 million primarily resulting from $9.8 million in non-cash depreciation and amortization expense, $2.2 million of non-cash stock-based compensation expense and an increase of $4.0 million in accounts payable and other current liabilities.

Investing Activities

Cash used in investing activities during the year ended December 31, 2007 totaled $29.0 million and was primarily attributable to our net investments of $22.7 million in auction rate securities, purchases of $5.0 million of property and equipment primarily for the expansion of our Philippine operations and the capitalized cost from software, hardware and technology infrastructure upgrades. We also acquired an assembled workforce in the Philippines valued at approximately $1.3 million.

Financing Activities

Cash provided in investing activities during the year ended December 31, 2007 totaled $37.6 million and was primarily due to the net proceeds from our initial public offering that was completed in February 2007.

Funding Requirements

We had working capital of $40.4 million as of December 31, 2007, which was primarily due to cash generated from our initial public offering. The historical seasonality in our business during the fourth and first calendar quarters of each year, cause cash and cash equivalents, inventory and accounts payable to be generally higher in these quarters, resulting in fluctuations in our working capital. We anticipate that funds generated from operations and funds available under our line of credit will be sufficient to meet our working capital needs and expected capital expenditures for at least the next twelve months. Our future capital requirements may, however, vary materially from those now planned or anticipated. Changes in our operating plans, lower than anticipated net sales, increased expenses or other events, including those described in “Risk Factors,” may cause us to seek additional debt or equity financings in the future. Our $7.8 million of short-term investments as of March 2008 was reclassified as long-term investments as a result of failed auctions and liquidity issues and we may not have access those funds. Financings may not be available on acceptable terms, on a timely basis, or at all, and our failure to raise adequate capital when needed could negatively impact our growth plans and our financial condition and results of operations.

 

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We are currently evaluating the feasibility of opening a new distribution center and expect to spend approximately $5.0 million in 2008 on this facility should we move forward with these plans.

This excerpt taken from the PRTS 10-Q filed May 15, 2007.

Liquidity and Capital Resources

We have historically funded our operations from cash generated from operations, credit facilities, bank and stockholder loans, an equity financing and capital lease financings. At March 31, 2007, the only long-term debt outstanding related to $1.0 million of notes payable to the former stockholders of Partsbin. We had no balance outstanding under term loans or our bank line of credit, which expires on May 19, 2007 and bears interest at prime minus 0.5%.

We had cash and cash equivalents of $45.6 million as of March 31, 2007, representing a $43.2 million increase from $2.4 million as of December 31, 2006. The increase in our cash and cash equivalents as of March 31, 2007 was primarily due to the net proceeds from our initial public offering that was completed in February 2007. We received net cash proceeds from our initial public offering of approximately $71.5 million (after deducting the underwriting discounts and commissions and offering expenses). The aggregate purchase price of the shares sold by us in the offering was $80.0 million. The aggregate purchase price of the shares sold by the selling stockholders in the offering was $35.0 million. We and the selling stockholders paid to the underwriters underwriting discounts and commissions totaling $5.6 million and $2.5 million, respectively, in connection with the offering. In addition, we incurred approximately $2.9 million of offering costs. We did not receive any proceeds from the sale of shares by the selling stockholders. Approximately $28.0 million of the net proceeds from the offering was used to repay our outstanding indebtedness of approximately $18.0 million and $10.0 million under two term loans to our commercial lender. In addition, we paid $4.0 million on the notes payable to the former stockholders of Partsbin.

We had working capital of $41.9 million as of March 31, 2007, which was primarily due to the cash generated from our initial public offering. Due to the historical seasonality in our business during the first calendar quarter of each year, cash and cash equivalents, inventory and accounts payable are generally higher in this quarter, resulting in fluctuations in our working capital. We anticipate that our existing cash balances, cash generated from operations and funds available under our line of credit will be sufficient to meet our working capital needs and expected capital expenditures for at least the next twelve months. Our future capital requirements may, however, vary materially from those now planned or anticipated. Changes in our operating plans, lower than anticipated net sales, increased expenses or other events, including those described in “Risk Factors,” may cause us to seek additional debt or equity financings in the future. Financings may not be available on acceptable terms, on a timely basis, or at all, and our failure to raise adequate capital when needed could negatively impact our growth plans and our financial condition and results of operations.

We are in the process of adding a new distribution center in Tennessee that is expected to become operational during the second quarter of 2007. Once our new distribution center is fully operational, we plan to consolidate our current Nashville distribution center into our new facility. The capital outlay for this distribution center is expected to be between $3.0 million and $5.0 million.

We are also planning to add a new call center facility in the Philippines. We expect to spend up to $1.0 million on this facility in the second half of 2007. In April 2007, we entered into a contract with our outsourced call center provider in the Philippines to transition many of the provider’s employees to us. Our purchase price for this assembled workforce was approximately $1.7 million.

This excerpt taken from the PRTS 10-K filed Apr 2, 2007.

Liquidity and Capital Resources

We have historically funded our operations from cash generated from operations, credit facilities, bank and stockholder loans, an equity financing and capital lease financings.

In March 2006, we completed a recapitalization pursuant to which we issued and sold 11,055,425 shares of our Series A preferred stock (which converted into 6,633,255 shares of our common stock upon the closing of our initial public offering in February 2007) in a private placement for an aggregate purchase price of $45.0 million and borrowed $10.0 million pursuant to a bank term loan. At the closing of the private placement, we terminated our S corporation status under the Internal Revenue Code of 1986, as amended, and became subject to taxation as a C corporation beginning in March 2006. The interest rate on the term loan was LIBOR for the first 12 months of the loan (5.33% at December 31, 2006). Interest accrued thereafter at LIBOR plus 1.5%. Only interest was payable on this loan until March 31, 2007, and thereafter, the remaining principal and any accrued, unpaid interest were to be paid monthly over the remaining three years of the term. Notwithstanding the foregoing, the term loan became due and payable upon completion of our initial public offering in February 2007, and we paid the note in full in February 2007. Concurrently with this recapitalization, we made stockholder distributions in the aggregate amount of $51.7 million, which included $1.7 million representing our final S corporation distribution.

In May 2006, we completed the acquisition of Partsbin. The purchase price for Partsbin of approximately $50.0 million consisted of $25.0 million in cash, promissory notes in the aggregate principal amount of $5.0 million payable to the former stockholders of Partsbin and 1,983,315 shares of our common stock. We funded this acquisition through the notes payable to the former stockholders of Partsbin and a $22.0 million bank term loan, which loan accrues interest at LIBOR plus 1.75% (7.10% at December 31, 2006). Only interest was payable on this term loan until March 31, 2007 and the remaining principal and any accrued, unpaid interest were payable monthly over the remaining three years of the term. The stockholder notes payable bore interest at LIBOR and were due and payable in four equal quarterly installments of principal and interest commencing June 30, 2007. These notes became due and payable upon completion of our initial public offering in February 2007, and we repaid $4.0 million of these notes in March 2007.

We currently maintain a $7.0 million bank line of credit, which expires on May 19, 2007 and bears interest at prime minus 0.5% (7.75% at December 31, 2006). As of December 31, 2006, we had $2.0 million outstanding under this line of credit. The bank line of credit and term loans referenced above are with the same commercial lender and are secured by substantially all of our assets. The notes payable to the former stockholders of Partsbin were also secured by substantially all of our assets.

We had cash and cash equivalents of $2.4 million as of December 31 2006, representing a $1.0 million increase from $1.4 million as of December 31, 2005. The increase in our cash and cash equivalents as of December 31, 2006 was primarily due to the $7.4 million in net cash provided by our operations during the year ended December 31, 2006, as well as the issuance of our Series A convertible preferred stock and proceeds from the two term loans. This increase was offset by distributions to stockholders and payments related to the acquisition of Partsbin. The December 31, 2005 cash balance represented a decrease of $0.8 million from the December 31, 2004 cash balance of $2.1 million. The decrease in cash as of December 31, 2005 was primarily due to the stockholder distributions and payments on our credit line, which was offset by cash generated from operations.

We had negative working capital of $11.2 million as of December 31, 2006, which was primarily due to an increase in accounts payable and accrued expenses and notes payable to stockholders related to the acquisition of Partsbin. Our working capital of $3.3 million as of December 31, 2005 represented an increase of $0.8 million from December 31, 2004. This increase was primarily due to an increase in our inventory, which was offset by an increase in accounts payable and accrued expenses. Due to the historical seasonality in our business during the fourth and first calendar quarters of each year, cash and cash equivalents, inventory and accounts payable are generally higher in these quarters, resulting in fluctuations in our working capital. We anticipate that funds generated from operations and funds available under our line of credit will be sufficient to meet our working capital needs and expected capital expenditures for at least the next twelve months. Our future capital requirements may, however, vary materially from those now planned or anticipated. Changes in our operating plans, lower than anticipated net sales, increased expenses or other events, including those described in “Risk Factors,” may cause us to seek additional debt or equity financings in the

 

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future. Financings may not be available on acceptable terms, on a timely basis, or at all, and our failure to raise adequate capital when needed could negatively impact our growth plans and our financial condition and results of operations.

In February 2007, we received net cash proceeds from our initial public offering of approximately $71.9 million (after deducting the underwriting discounts and commissions and offering expenses). The aggregate purchase price of the shares sold by us in the offering was $80.0 million. The aggregate purchase price of the shares sold by the selling stockholders was $35.0 million. We and the selling stockholders paid to the underwriters underwriting discounts and commissions totaling $5.6 million and $2.45 million, respectively, in connection with the offering. In addition, we incurred additional expenses of approximately $2.5 million in connection with the offering. We did not receive any proceeds from the sale of shares by the selling stockholders.

Approximately $28.0 million of the net proceeds from the offering was used to repay our outstanding indebtedness under two term loans for approximately $18.0 million and $10.0 million, payable to our commercial lender. In addition, $4.0 million of the net proceeds from the offering has been paid on the notes payable to the former stockholders of Partsbin.

We are in the process of adding a new distribution center in Nashville, Tennessee which is expected to be operational during the second quarter of 2007. Once our new distribution center is fully operational we will consolidate our original Nashville distribution center into our new facility. The expected capital outlay for this distribution center is between $3.0 million and $5.0 million.

In addition, we are evaluating the addition of a new call center facility in the Philippines. We expect to spend approximately $1.0 million on this facility during 2007. We are negotiating a historical billing dispute with our outsourced call center provider in the Philippines. While we cannot predict the ultimate outcome of these negotiations, we may make a payment of approximately $1.5 million in order to transition into our own operations the employees of the provider who are currently working on our behalf. We expect this transition will ultimately result in lower operating cost to us once complete.

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