PRTS » Topics » Overview

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

Overview

We are one of the largest online providers of aftermarket auto parts, including body parts, engine parts, and performance parts and accessories. We principally sell our products, identified as stock keeping units (“SKUs”), to individual consumers through our network of websites and online marketplaces. Our user-friendly websites provide customers with a comprehensive selection of approximately 700,000 SKUs with detailed product descriptions and photographs. We have developed a proprietary product database that maps our SKUs to product applications based on vehicle makes, models and years.

Our online sales channel and relationships with suppliers enable us to eliminate several intermediaries in the traditional auto parts supply chain and offer a broad selection of SKUs. Additionally, as an online retailer, we believe greater economies of scale can be achieved online than in brick and mortar stores.

We were incorporated in 1995 as a distributor of aftermarket auto parts and launched our first website in 2000. Since then, we have continued to expand our online operations, increasing the number of SKUs sold through our e-commerce network, adding additional websites, improving our Internet marketing proficiency, and commencing sales on online marketplaces. In October 2008, we acquired AutoMD.com for the purpose of developing content and a user community to educate consumers on maintenance and service of their vehicles. Our flagship websites are located at www.autopartswarehouse.com and www.partstrain.com, and our corporate website is located at www.usautoparts.net.

Overview

STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%">We are one of the largest online providers of aftermarket auto parts, including body parts, engine parts, and performance parts and accessories. We
principally sell our products, identified as stock keeping units (“SKUs”), to individual consumers through our network of websites and online marketplaces. Our user-friendly websites provide customers with a comprehensive selection of
approximately 700,000 SKUs with detailed product descriptions and photographs. We have developed a proprietary product database that maps our SKUs to product applications based on vehicle makes, models and years.

STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%">Our online sales channel and relationships with suppliers enable us to eliminate several intermediaries in the traditional auto parts supply chain and
offer a broad selection of SKUs. Additionally, as an online retailer, we believe greater economies of scale can be achieved online than in brick and mortar stores.

FACE="Times New Roman" SIZE="2">We were incorporated in 1995 as a distributor of aftermarket auto parts and launched our first website in 2000. Since then, we have continued to expand our online operations, increasing the number of SKUs sold through
our e-commerce network, adding additional websites, improving our Internet marketing proficiency, and commencing sales on online marketplaces. In October 2008, we acquired AutoMD.com for the purpose of developing content and a user community to
educate consumers on maintenance and service of their vehicles. Our flagship websites are located at www.autopartswarehouse.com and www.partstrain.com, and our corporate website is located at www.usautoparts.net.

STYLE="margin-top:18px;margin-bottom:0px">Our Products

We offer a broad selection of
aftermarket auto parts. We frequently refine our product offering by introducing new merchandise lines and updating the existing product selection to offer a more complete and relevant product line and to remove low-selling or obsolete SKUs. We
broadly classify our products into three categories: body parts, engine parts, and performance parts and accessories.

 


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Body Parts. The body parts category is primarily comprised of parts for the exterior of an
automobile. Our parts in this category are typically replacement parts for original body parts that have been damaged as a result of a collision or through general wear and tear. The majority of these products are sold through our websites. In
addition, we sell an extensive line of mirror products, including our own private-label brand called Kool-Vue™, which are marketed and sold as aftermarket replacement parts and as upgrades to existing parts.

STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%">Engine/Hard Parts. The engine parts category is comprised of engine components and other mechanical and electrical parts, which are often referred
to as hard parts. These parts serve as replacement parts for existing engine parts and are generally used by professionals and do-it-yourselfers for engine and mechanical maintenance and repair.

STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%">Performance Parts and Accessories. We offer performance versions of many parts sold in each of the above categories. Performance parts and
accessories generally consist of parts that enhance the performance of the automobile, upgrade existing functionality of a specific part or improve the physical appearance or comfort of the automobile.

STYLE="margin-top:18px;margin-bottom:0px">Our Sales Channels

Our sales channels include the
online channel and the offline channel.

Online Sales Channel. Our online sales channel consists of our e-commerce channel and
online marketplaces. Our e-commerce channel includes a network of e-commerce websites, supported by our call-center sales agents. Our e-commerce channel generated approximately 1.2 million orders for the year ended December 31, 2008. We
also sell our products through online marketplaces, which provide us with access to additional consumer segments. The majority of our online sales are to individual consumers.

STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%">Offline Sales Channel. We sell and deliver to collision repair shops throughout Southern California via our offline sales channel. We also market
our Kool-Vue™ products nationwide to auto parts wholesale distributors.

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

Overview

We are a leading online provider of aftermarket auto parts, including body parts, engine parts and performance parts and accessories. Our user-friendly websites provide customers with a broad selection of SKUs, with detailed product descriptions and photographs. Our proprietary product database maps our SKUs to product applications based on vehicle makes, models and years. We principally sell our products to individual consumers through our network of websites and online marketplaces. Our flagship websites are located at www.partstrain.com and www.autopartswarehouse.com. We believe our strategy of disintermediating the traditional auto parts supply channels and selling products directly to customers over the Internet allows us to more efficiently deliver products to our customers while generating higher margins.

Our History. We were formed in 1995 as a distributor of aftermarket auto parts and launched our first website in 2000. We rapidly expanded our online operations, increasing the number of SKUs sold through our e-commerce network, adding additional websites, improving our Internet marketing proficiency and commencing sales in online marketplaces. As a result, our business has grown consistently since 2000, generating net sales of $161.0 million for the year ended December 31, 2007.

Partsbin Acquisition. In May 2006, we completed the acquisition of Partsbin. As a result of this acquisition, we expanded our product offering and product catalog to include performance parts and accessories and additional engine parts, enhanced our ability to reach more customers, significantly increased our net sales and added a complementary, drop-ship order fulfillment method. Partsbin also expanded our international operations by adding a call center in the Philippines and an outsourced call center in India, as well as a Canadian subsidiary to facilitate sales in Canada. We also augmented our technology platform and expanded our management team. We may pursue additional acquisition opportunities in the future to increase our share of the aftermarket auto parts market or expand our product offerings. 

International Operations. In April 2007, we entered into a purchase agreement to bring in-house certain sales and customer service employees based in the Philippines who were providing support to us through our outsourced call center provider, Access Worldwide. As of the closing of this transaction, approximately 171 of the Access Worldwide employees had agreed to transition over to direct employment by our Philippines subsidiary. The purchase price for the right to acquire this assembled workforce was approximately $1.7 million. In addition to our Philippines operations, we have outsourced call center operations in India and own a Canadian subsidiary to facilitate sales of our products in Canada. We believe that the cost advantages of our offshore operations provide us with the ability to grow our business in a cost-effective manner, and we expect to continue to add headcount and infrastructure to our offshore operations.

New Chief Executive Officer. In October 2007, Shane Evangelist joined the Company as its Chief Executive Officer, succeeding Mehran Nia, who served as our President and Chief Executive Officer since founding U.S. Auto Parts in 1995. Mr. Nia continues to serve on our Board of Directors and has been working with Mr. Evangelist to facilitate an orderly transition of his responsibilities. Prior to joining us, Mr. Evangelist served as Senior Vice President and General Manager of BLOCKBUSTER Online where he was responsible for leading the creation, development and launch of Blockbuster Inc.’s online movie rental service.

 

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These excerpts taken from the PRTS 10-K filed Mar 28, 2008.

Overview

We are a leading online provider of aftermarket auto parts, including body parts, engine parts, performance parts and accessories. We principally sell our products, identified as stock keeping units (“SKUs”), to individual consumers through our network of websites and online marketplaces. Our user-friendly websites provide customers with a comprehensive selection of approximately 750,000 SKUs with detailed product descriptions and photographs. We have developed a proprietary product database that maps our SKUs to product applications based on vehicle makes, models and years.

Our online sales channel and relationships with suppliers enable us to eliminate several intermediaries in the traditional auto parts supply chain and offer a broad selection of SKUs. Additionally, as an online retailer, we believe greater economies of scale can be achieved than brick and mortar stores.

We were incorporated in 1995 as a distributor of aftermarket auto parts and launched our first website in 2000. Since then, we have continued to expand our online operations, increasing the number of SKUs sold through our e-commerce network, adding additional websites, improving our Internet marketing proficiency, and commencing sales on online marketplaces. In May 2006, we acquired Partsbin, an online retailer focused on selling engine parts and performance parts and accessories. This acquisition significantly expanded our product offerings and enhanced our ability to reach more customers. Our flagship websites are located at www.partstrain.com and www.autopartswarehouse.com, and our corporate website is located at www.usautoparts.net.

Overview

STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%">We are a leading online provider of aftermarket auto parts, including body parts, engine parts, performance parts and accessories. We principally sell our
products, identified as stock keeping units (“SKUs”), to individual consumers through our network of websites and online marketplaces. Our user-friendly websites provide customers with a comprehensive selection of approximately 750,000
SKUs with detailed product descriptions and photographs. We have developed a proprietary product database that maps our SKUs to product applications based on vehicle makes, models and years.

STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%">Our online sales channel and relationships with suppliers enable us to eliminate several intermediaries in the traditional auto parts supply chain and
offer a broad selection of SKUs. Additionally, as an online retailer, we believe greater economies of scale can be achieved than brick and mortar stores.

FACE="Times New Roman" SIZE="2">We were incorporated in 1995 as a distributor of aftermarket auto parts and launched our first website in 2000. Since then, we have continued to expand our online operations, increasing the number of SKUs sold through
our e-commerce network, adding additional websites, improving our Internet marketing proficiency, and commencing sales on online marketplaces. In May 2006, we acquired Partsbin, an online retailer focused on selling engine parts and performance
parts and accessories. This acquisition significantly expanded our product offerings and enhanced our ability to reach more customers. Our flagship websites are located at www.partstrain.com and www.autopartswarehouse.com, and our
corporate website is located at www.usautoparts.net.

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

Overview

We are a leading online provider of aftermarket auto parts, including body parts, engine parts and performance parts and accessories. Our user-friendly websites provide customers with a broad selection of approximately 550,000 SKUs, with detailed product descriptions and photographs. Our proprietary product database maps our SKUs to over 4.3 million product applications based on vehicle makes, models and years. We principally sell our products to individual consumers through our network of websites and online marketplaces. Our flagship websites are located at www.partstrain.com and www.autopartswarehouse.com. We believe our strategy of disintermediating the traditional auto parts supply channels and selling products directly to customers over the Internet allows us to more efficiently deliver products to our customers while generating higher margins.

Our History. We were formed in 1995 as a distributor of aftermarket auto parts and launched our first website in 2000. We rapidly expanded our online operations, increasing the number of SKUs sold through our e-commerce network, adding additional websites, improving our Internet marketing proficiency and commencing sales in online marketplaces. As a result, our business has grown consistently since 2000, generating net sales of $120.1 million for the year ended December 31, 2006.

International Operations. We have entered into an agreement with the provider of our outsourced call center operations in the Philippines, whereby we have taken these operations in-house beginning in April 2007 by transitioning these outsourced personnel into our own operations. We paid this provider $1.7 million related to this transaction and we are currently evaluating the addition of a new call center in the Philippines and expect to spend up to $1.0 million on such facility in 2007. In addition to the call center operations in the Philippines and in India that we acquired in connection with the Partsbin acquisition, we own a Philippines subsidiary, which provides us with software development, Internet marketing, customer service and sales functions. We believe that the cost advantages of our offshore operations provide us with the ability to grow our business in a cost-effective manner, and we expect to continue to add headcount to our offshore operations. We also acquired a Canadian subsidiary in connection with our acquisition of Partsbin to facilitate sales of our products in Canada.

Partsbin Acquisition. In May 2006, we completed the acquisition of Partsbin. As a result of this acquisition, we expanded our product offering and product catalog to include performance parts and accessories and additional engine parts, enhanced our ability to reach more customers, significantly increased our net sales and added a complementary, drop-ship order fulfillment method. Partsbin also expanded our international operations by adding two outsourced call centers in the Philippines and in India, as well as a Canadian subsidiary to facilitate sales in Canada. We also augmented our technology platform and expanded our management team. The purchase price for Partsbin 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. Once we have completed the integration of Partsbin, we may pursue selective acquisition opportunities to increase our share of the aftermarket auto parts market and expand our product offerings

 

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Call Center Expansion. In April 2007, we entered into a purchase agreement to bring in-house certain sales and customer service employees based in the Philippines who were providing support to us through our outsourced call center provider, Access Worldwide. Under the terms of this purchase agreement, approximately 182 employees of Access Worldwide were given the opportunity to become employees of our Philippines subsidiary and join our 244 existing direct employees in the Philippines. As of the closing of this transaction, approximately 170 of the Access employees had agreed to transition over to direct employment by our Philippines subsidiary. The purchase price for the right to acquire these employees and for certain related assets was approximately $1.7 million, but we anticipate that this transaction will be cost-neutral for the remainder of 2007 and then be accretive to earnings once our new facility is operational.

As part of this transaction, we also entered into an agreement to lease workstations in the current Access Worldwide facility in the Philippines for a period of six months. We are currently anticipating opening our own call center facility in the Philippines in the second half of 2007 to augment the facilities we already operate there. Our call center agents provide an integral part of our operations by supporting our network of e-commerce sites and online marketplaces and generating cross-sell and up-sell opportunities. We believe that taking direct control over the employees who work for us in our call centers will allow us to better serve our customers.

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

Overview

We are a leading online provider of aftermarket auto parts, including body parts, engine parts and performance parts and accessories. Our user-friendly websites provide customers with a broad selection of approximately 550,000 SKUs, with detailed product descriptions and photographs. Our proprietary product database maps our SKUs to over 4.3 million product applications based on vehicle makes, models and years. We principally sell our products to individual consumers through our network of websites and online marketplaces. Our flagship websites are located at www.partstrain.com and www.autopartswarehouse.com. We believe our strategy of disintermediating the traditional auto parts supply channels and selling products directly to customers over the Internet allows us to more efficiently deliver products to our customers while generating higher margins.

Our History. We were formed in 1995 as a distributor of aftermarket auto parts and launched our first website in 2000. We rapidly expanded our online operations, increasing the number of SKUs sold through our e-commerce network, adding additional websites, improving our Internet marketing proficiency and commencing sales in online marketplaces. As a result, our business has grown consistently since 2000, generating net sales of $120.1 million for the year ended December 31, 2006.

Recent Acquisition. In May 2006, we completed the acquisition of Partsbin. As a result of this acquisition, we expanded our product offering and product catalog to include performance parts and accessories and additional engine parts, enhanced our ability to reach more customers, significantly increased our net sales and added a complementary, drop-ship order fulfillment method. Partsbin also expanded our international operations by adding two outsourced call centers in the Philippines and in India, as well as a Canadian subsidiary to facilitate sales in Canada. We also augmented our technology platform and expanded our management team. The purchase price for Partsbin 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. The acquisition of Partsbin did not result in a new operating segment for financial reporting purposes. Once we have completed the integration of Partsbin, we may pursue selective acquisition opportunities to increase our share of the aftermarket auto parts market and expand our product offerings.

We have recently discovered some integration challenges related to the Partsbin acquisition, which are expected to negatively impact our gross margins for the first half of 2007. First, we experienced a decrease in our fill rate, which is the rate our vendors were able to ship products to our customers. This fill rate issue related to the vendors used in the Partsbin drop-ship fulfillment method in our performance parts and accessories categories and resulted in higher than anticipated customer credits as we were not able to ship products that were ordered and paid for. These credits were handled by our customer service team in New Jersey and were not processed until the first quarter of 2007, which resulted in us having to significantly reduce sales for unfilled orders and increase our sales returns and allowances reserve for filled orders at the end of 2006 as well as reduce our net sales for 2006. We have since transferred the credit processing function to our accounting group in our principal offices in Carson, California, which now handles all of our credit processing. We plan to increase the number of performance part SKUs that we offer through our stock and ship fulfillment method by between approximately 5,000 to 10,000 additional SKUs, which is expected to improve margins.

The second integration challenge we have experienced related to the Partsbin acquisition involved product pricing by the Partsbin sales group, which function we had not yet integrated with our historical operations. During December 2006 and the first quarter 2007, our pricing team located in New Jersey, who is responsible for pricing certain performance parts and accessories, generally reduced prices on many SKUs under their supervision. These pricing reductions are lowering our average sales price and thereby reducing our gross margins in the first quarter of 2007. We have recently consolidated the pricing function from our Partsbin group to our principal offices in Carson, California, and we are working on improving the pricing levels and methodology in order to allow us to update prices on all of our websites more quickly and more easily. While we still plan to price our products competitively, we have recently increased prices for many of our performance parts and accessories in order to improve our average selling price and gross margins.

 

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Recent Initiatives. We have recently made several new investments to enhance the value of our business. Since June 30, 2005, we have hired additional key employees, including our Chief Financial Officer, Chief Operating Officer and Chief Information Officer, as well as additional sales and marketing, technology and operations personnel. During September 2006, we upgraded our accounting system and made significant software development efforts on our operational systems to support our expected future growth. We have added additional space to our distribution facilities to accommodate the stocking of additional products. We have also modified our product catalog to increase the number of applications available on our websites and have reformatted the catalog to more easily integrate with the Partsbin catalog.

International Operations. We are in negotiations with the provider of our outsourced call center operations in the Philippines and may take certain of these operations in-house in the near future, in part by transitioning some of the outsourced personnel into our own operations. We are evaluating the addition of a new call center in the Philippines and expect to spend approximately $1.0 million on such facility in 2007. We anticipate that we may incur significant costs associated with the transition of these outsourced personnel to our operations or our net sales may be reduced in the event we are not able to successfully acquire or integrate these personnel. In addition to the call center operations in the Philippines and in India that we acquired in connection with the Partsbin acquisition, we own a Philippines subsidiary, which provides us with software development, Internet marketing, customer service and sales functions. We believe that the cost advantages of our offshore operations provide us with the ability to grow our business in a cost-effective manner, and we expect to continue to add headcount to our offshore operations. We also acquired a Canadian subsidiary in connection with our acquisition of Partsbin to facilitate sales of our products in Canada.

Industry Issues. Certain industry issues could have an adverse impact on our future operating results. First, Ford Global Technologies, LLC has filed a complaint with the USITC alleging that we and certain other parties in the aftermarket auto part distribution chain have infringed certain of Ford’s design patents. A preliminary ruling on December 4, 2006 by the administrative law judge upheld the validity of seven of the ten patents, and the judge further ruled that the importation of automotive parts allegedly covered by these seven patents violates Section 337 of the Tariff Act of 1930, as amended. The ruling was subject to review by the USITC but became final upon notice by the USITC in March 2007 of its decision not to review the determination made by the administrative law judge. To date, our sales of these parts have been minimal, but as the design for the 2004 model is incorporated into later year models of the F-150 and these trucks have been on the road longer, sales of aftermarket replacement parts for these trucks may increase substantially. In addition, if Ford or other OEMs commence similar actions, we could be precluded from selling a greater number of parts, our costs could increase and the aftermarket auto parts industry in general could be adversely effected.

The second issue that could impact our operating results relates to certain changes in the paid search market. In particular, Yahoo! recently changed the manner in which it handles paid search advertising to an approach similar to the one used by Google. This change makes it more difficult for us to ascertain what other companies are bidding for specific key words. The adoption of this approach by Yahoo! and other paid search providers could significantly increase the cost of our Internet advertising.

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