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As Of Filer Filing As/For/On Docs:Pgs Issuer Agent 1/22/07 U/S/Auto Parts Network/Inc S-1/A 11:377 RR Donnelley/FA
Document/Exhibit Description Pages Size
1: S-1/A Amendment No. 3 to Form S-1 on U.S. Auto Parts HTML 1,990K
Network, Inc.
2: EX-1.1 Form of Underwriting Agreement HTML 146K
3: EX-3.4 Proposed Amended and Restated Certificate of HTML 21K
Incorporation
4: EX-3.6 Proposed Amended and Restated Bylaws HTML 69K
5: EX-4.1 Specimen Common Stock Certificate HTML 13K
6: EX-10.5 2007 Omnibus Plan HTML 207K
7: EX-10.28 Employment Agreement HTML 34K
8: EX-10.30 Offer Letter of Employment HTML 20K
9: EX-23.1 Consent of Ernst & Young Llp HTML 6K
10: EX-23.2 Consent of Stonefield Josephson, Inc. HTML 6K
11: EX-23.3 Consent of J.H. Cohn Llp HTML 6K
| Amendment No. 3 to Form S-1 on U.S. Auto Parts Network, Inc. |
As filed with the Securities and Exchange Commission on January 22, 2007
Registration No. 333-138379
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
AMENDMENT NO. 3
TO
Form S-1
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
U.S. Auto Parts Network, Inc.
(Exact name of registrant as specified in its charter)
| Delaware | 5531 | 68-0623433 | ||
| (State or Other Jurisdiction of Incorporation or Organization) |
(Primary Standard Industrial Classification Number) |
(I.R.S. Employer Identification No.) |
17150 South Margay Avenue
(310) 719-8666
(Address, Including Zip Code and Telephone Number, Including Area Code, of Registrant’s Principal Executive Offices)
Michael J. McClane
Chief Financial Officer, Executive Vice President of Finance, Treasurer and Secretary
U.S. Auto Parts Network, Inc.
17150 South Margay Avenue
(310) 735-0085
(Name, Address, Including Zip Code, and Telephone Number, Including Area Code, of Agent for Service)
Copies to:
| Ellen S. Bancroft, Esq. J.R. Kang, Esq. Jason R. Wisniewski, Esq. Dorsey & Whitney LLP |
Michael J. Sullivan, Esq. Julia Vax, Esq. San Francisco, CA 94111-4024 |
Approximate date of commencement of proposed sale to the public: As soon as practicable after this Registration Statement becomes effective.
If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box. ¨
If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ¨
(continued on next page)
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ¨
If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ¨
CALCULATION OF REGISTRATION FEE
| Title of Each Class of Securities to be Registered |
Proposed Maximum Aggregate Offering Price(1)(2) |
Amount of Registration Fee(3) | ||
| Common Stock, $0.001 par value |
$138,000,000 | $14,766 |
| (1) | Includes the offering price attributable to shares that the Underwriters have the option to purchase solely to cover over-allotments, if any. |
| (2) | Estimated solely for the purpose of calculating the registration fee pursuant to Rule 457(o) under the Securities Act of 1933, as amended. |
| (3) | Previously paid. |
The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the Registration Statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine.
The information in this prospectus is not complete and may be changed. Neither we nor the selling stockholders may sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any state where the offer or sale is not permitted.
Subject to completion, dated January 22, 2007
PROSPECTUS
10,000,000 Shares
Common Stock
This is U.S. Auto Parts Network, Inc.’s initial public offering. We are offering 8,000,000 shares of our common stock and 2,000,000 shares are being offered by the selling stockholders identified in this prospectus. We will not receive any of the proceeds from the sale of the shares by the selling stockholders.
We expect the public offering price to be between $10.00 and $12.00 per share. Currently, no public market exists for the shares. After pricing the offering, we expect that the common stock will be traded on the NASDAQ Global Market under the symbol “PRTS.”
Investing in our common stock involves risks. See “ Risk Factors” beginning on page 8.
PRICE $ PER SHARE
| Per Share | Total | |||||
| Public offering price |
$ | $ | ||||
| Underwriting discounts and commissions |
$ | $ | ||||
| Net proceeds, before expenses, to U.S. Auto Parts |
$ | $ | ||||
| Net proceeds, before expenses, to the selling stockholders |
$ | $ | ||||
The underwriters may also purchase up to an additional 1,500,000 shares from the selling stockholders at the public offering price, less the underwriting discounts and commissions, within 30 days from the date of this prospectus to cover over-allotments, if any.
The underwriters expect to deliver the shares on or about , 2007.
Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.
| RBC CAPITAL MARKETS | THOMAS WEISEL PARTNERS LLC | |
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| PIPER JAFFRAY | JMP SECURITIES | |
, 2007.
| 1 | ||
| 8 | ||
| 25 | ||
| 26 | ||
| 27 | ||
| 28 | ||
| 29 | ||
| 30 | ||
| 33 | ||
| 35 |
| Management’s Discussion and Analysis of Financial Condition and Results of Operations |
38 | |
| 59 | ||
| 71 | ||
| 84 | ||
| 87 | ||
| 89 | ||
| 93 | ||
| 95 | ||
| 98 | ||
| 98 | ||
| 98 | ||
| F-1 |
You should rely only on the information contained in this prospectus. We have not authorized any other person to provide you with different information. If anyone provides you different or inconsistent information, you should not rely on it. We and the selling stockholders are offering to sell and seeking offers to buy shares of our common stock only in jurisdictions where offers or sales are permitted. The information in this prospectus is only accurate as of the date of this prospectus. Our business, financial condition, results of operations and prospects may have changed since that date.
For investors outside the United States: Neither we nor any of the underwriters for the offering of our common stock have done anything that would permit this offering or possession or distribution of this prospectus in any jurisdiction where action for that purpose is required, other than in the United States. You are required to inform yourselves about, and to observe any restrictions relating to, our offering and the distribution of this prospectus.
This summary highlights selected information contained elsewhere in this prospectus and may not contain all the information you should consider before investing in our common stock. You should read the entire prospectus carefully, including the “Risk Factors” and the consolidated financial statements and related notes, before making an investment decision.
Our Business
Overview
We are a leading online provider of aftermarket auto parts, including body parts, engine parts, performance parts and accessories. Our network of websites provides individual consumers with a comprehensive selection of approximately 550,000 products, identified as stock keeping units or SKUs. We have developed a proprietary product database that maps our 550,000 SKUs to over 4.3 million product applications based on vehicle makes, models and years. Our flagship websites are located at www.partstrain.com and www.autopartswarehouse.com, and our corporate website is located at www.usautoparts.net.
Our online sales channel and relationships with suppliers enable us to eliminate several intermediaries in the traditional auto parts supply chain, allowing us to acquire many of our products directly from manufacturers and sell them to our customers. Additionally, as an online retailer, we do not incur many of the costs associated with operating brick and mortar stores. We believe that our ability to disintermediate the auto parts supply chain, combined with our efficient e-commerce platform, enables us to sell products at competitive prices while achieving higher operating margins and return on invested capital than many traditional automotive parts retailers.
Our business has grown consistently since we launched our first website in 2000. Net sales increased to $59.7 million and $83.5 million for the year ended December 31, 2005 and the nine months ended September 30, 2006, respectively, from $40.7 million and $44.0 million for the year ended December 31, 2004 and the nine months ended September 30, 2005, respectively. Net income decreased slightly to $6.8 million and $3.6 million for the year ended December 31, 2005 and the nine months ended September 30, 2006, respectively, from $7.1 million and $4.8 million for the year ended December 31, 2004 and the nine months ended September 30, 2005, respectively. Our Adjusted EBITDA increased to $8.8 million and $10.3 million for the year ended December 31, 2005 and the nine months ended September 30, 2006, respectively, from $8.0 million and $6.1 million for the year ended December 31, 2004 and the nine months ended September 30, 2005, respectively.
In addition, we have experienced continued growth in the number of monthly unique visitors to our websites. In September 2006, approximately 6.9 million unique visitors viewed our websites. The number of orders placed through our e-commerce websites has also increased to approximately 288,000 and 505,000 for the year ended December 31, 2005 and the nine months ended September 30, 2006, respectively, from approximately 201,000 and 207,000 for the year ended December 31, 2004 and the nine months ended September 30, 2005, respectively. The average order value of purchases on our websites for the nine months ended September 30, 2006 was approximately $120.
Industry Overview
The United States automotive aftermarket industry is forecasted to be $204 billion in 2006 according to the Automotive Aftermarket Industry Association, or AAIA, an independent trade association. Our
1
addressable market is forecasted by AAIA to be approximately $91.3 billion, which consists of approximately $37.8 billion in sales to Do-It-Yourself, or DIY, customers, and approximately $53.5 billion in sales to Do-It-For-Me, or DIFM, customers. While the U.S. auto parts aftermarket is a large market characterized by modest growth, we believe there is an opportunity for e-commerce aftermarket auto parts retailers to grow faster than the overall market.
According to Forrester Research, an independent market research firm, online purchases by U.S. consumers are expected to grow from approximately $172 billion in 2005 to approximately $329 billion by 2010, representing a 13.9% compound annual growth rate. In 2006, the online and mail order portion of aftermarket auto part sales is forecasted to be $2.7 billion according to the AAIA. While the portion of online and mail order sales represents only 3% of our addressable market, we believe online penetration rates of aftermarket auto parts consumers will continue to increase and, as a result, sales for online aftermarket auto parts are expected to continue to grow at a faster rate than the overall auto parts market.
The auto parts market has traditionally been fragmented and inefficient, with multiple intermediaries, including importers, wholesalers, distributors and retailers, between manufacturers and consumers. Furthermore, auto parts retailers who operate brick and mortar stores generally stock only a small percentage of the products that are available for sale. The fragmented nature of the auto parts market has also meant an absence of a centralized database or a comprehensive, master catalog of products, which maps all aftermarket auto parts to all relevant applications for such parts. We believe this inadequacy of information leads to inefficiencies in the sale and purchase process for both the retailer and the consumer.
Our Solution
We believe our solution addresses the problems faced in the traditional auto parts market and provides additional benefits for our customers. The key components of our solution include:
| Ÿ | disintermediation of the traditional auto parts supply chain, which enables us to eliminate several intermediaries, allowing us to offer auto parts at competitive prices while maintaining higher profit margins; |
| Ÿ | a leading network of aftermarket auto parts websites; |
| Ÿ | a proprietary product catalog that maps our 550,000 SKUs to over 4.3 million product applications based on vehicle makes, models and years; |
| Ÿ | flexible fulfillment methods that allow us to offer a broad selection of products, while effectively managing our inventory and enhancing our overall profitability; |
| Ÿ | low-cost offshore and outsourced operations in the Philippines and India, which are responsible for a majority of the development and maintenance of our websites and product catalog and customer service and sales functions; and |
| Ÿ | long-standing, strong supplier relationships with manufacturers and distributors located in Asia and the United States. |
Benefits to Customers
We believe our solution provides multiple benefits to our customers, including:
| Ÿ | broad product selection and availability; |
| Ÿ | competitive pricing; |
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| Ÿ | prompt order fulfillment; |
| Ÿ | detailed product information; and |
| Ÿ | an overall satisfying shopping experience and knowledgeable customer service. |
Our Growth Strategy
Our primary objective is to continue our growth and to strengthen our position as a leading online provider of aftermarket auto parts. The key elements of our strategy are as follows:
| Ÿ | expand our product offering; |
| Ÿ | cost-effectively increase the number of visitors to our websites; |
| Ÿ | increase our visitor conversion rate; |
| Ÿ | increase repeat customers; |
| Ÿ | expand e-commerce distribution channels; and |
| Ÿ | pursue strategic acquisitions that augment our business. |
Corporate Information
We were formed as a California corporation in 1995 and reincorporated in Delaware in March 2006. Our executive offices are located at 17150 South Margay Avenue, Carson, California 90746, and our telephone number is (310) 719-8666. Our corporate website is located at www.usautoparts.net. Our flagship retail websites are located at www.partstrain.com and www.autopartswarehouse.com. The information contained in, or that can be accessed through, our websites does not constitute a part of this prospectus. Unless the context requires otherwise, as used in this prospectus, the terms “U.S. Auto Parts,” “we,” “us” and “our” refer to U.S. Auto Parts Network, Inc. and its subsidiaries, and the term “Partsbin” refers to All OEM Parts, Inc., ThePartsBin.com, Inc. and their affiliated companies, which we acquired in May 2006.
U.S. Auto Parts™, U.S. Auto Parts Network™, PartsTrain™, Partsbin™, Kool-Vue™ and Auto-Vend™ are our United States common law trademarks. All other trademarks and trade names appearing in this prospectus are the property of their respective owners.
3
The Offering
| Common stock offered by us |
8,000,000 shares |
| Common stock offered by the selling stockholders |
2,000,000 shares |
| Common stock to be outstanding after this offering |
29,832,927 shares |
| Use of proceeds |
For repayment of approximately $33.0 million of indebtedness and for working capital and other general corporate purposes, including expanding our infrastructure and sales and marketing activities. In addition, we may use a portion of the net proceeds for acquisitions and investments in complementary businesses, technologies and strategic relationships. See “Use of Proceeds.” |
| Risk Factors |
See “Risk Factors” and the other information included in this prospectus for a discussion of factors you should consider carefully before investing in shares of our common stock. |
| Proposed NASDAQ Global Market symbol |
PRTS |
The number of shares of common stock outstanding after this offering is based on 21,832,927 shares outstanding as of December 31, 2006, which assumes the conversion of all of our outstanding preferred stock into 6,633,255 shares of common stock immediately prior to the completion of this offering, and does not include 2,400,000 shares of common stock reserved for future grant or issuance under our 2007 Omnibus Incentive Plan adopted in January 2007, and does not include, as of December 31, 2006:
| Ÿ | 2,786,532 shares of common stock issuable upon the exercise of outstanding options at a weighted average exercise price of $9.04 per share; |
| Ÿ | 716,309 shares of common stock reserved for future grant or issuance under our 2006 Equity Incentive Plan; and |
| Ÿ | 84,332 shares of common stock issuable upon the exercise of outstanding warrants at a weighted average exercise price of $7.29 per share. |
Unless otherwise indicated, all information in this prospectus assumes:
| Ÿ | the underwriters will not exercise their over-allotment option to purchase up to 1,500,000 additional shares of common stock from the selling stockholders; |
| Ÿ | no other person will exercise any other outstanding options or warrants; |
| Ÿ | the initial public offering price will be $11.00 per share, which is the midpoint of the range set forth on the cover of this prospectus; and |
| Ÿ | the effect of a 3-for-5 reverse stock split, which occurred in January 2007. |
4
Summary Consolidated Financial Data
The following tables summarize our consolidated financial data for the periods presented and should be read together with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our consolidated financial statements and related notes appearing elsewhere in this prospectus. The summary consolidated financial data for the years ended December 31, 2003, 2004 and 2005 are derived from our audited consolidated financial statements. We have also included data from our unaudited consolidated financial statements for the nine months ended September 30, 2005 and 2006.
| Years Ended December 31, | Nine Months Ended September 30, | |||||||||||||||||||
| 2003 | 2004 | 2005 | Pro Forma 2005(1) |
2005 | 2006 | Pro Forma 2006(1) |
||||||||||||||
| (unaudited) | (unaudited) | (unaudited) | (unaudited) | |||||||||||||||||
| (in thousands, except share and per share data) | ||||||||||||||||||||
| Consolidated Statement of Income Data: |
||||||||||||||||||||
| Net sales |
$31,657 | $40,658 | $59,698 | $98,168 | $43,979 | $83,514 | $107,366 | |||||||||||||
| Cost of sales |
17,814 | 21,334 | 34,829 | 64,362 | 25,876 | 53,779 | 71,614 | |||||||||||||
| Gross profit |
13,843 | 19,324 | 24,869 | 33,806 | 18,103 | 29,735 | 35,752 | |||||||||||||
| Operating expenses: |
||||||||||||||||||||
| General and administrative(2) |
2,284 | 3,599 | 7,254 | 10,325 | 5,555 | 7,013 | 8,626 | |||||||||||||
| Marketing(2) |
3,617 | 4,526 | 5,802 | 10,862 | 4,315 | 10,134 | 13,360 | |||||||||||||
| Fulfillment(2) |
3,246 | 2,990 | 4,357 | 4,407 | 3,162 | 3,589 | 3,608 | |||||||||||||
| Technology(2) |
405 | 776 | 868 | 1,431 | 596 | 898 | 1,211 | |||||||||||||
| Amortization of intangibles |
— | 8 | 17 | 8,176 | 13 | 3,037 | 6,174 | |||||||||||||
| Total operating expenses |
9,552 | 11,899 | 18,298 | 35,201 | 13,641 | 24,671 | 32,979 | |||||||||||||
| Income (loss) from operations |
4,291 | 7,425 | 6,571 | (1,395 | ) | 4,462 | 5,064 | 2,773 | ||||||||||||
| Other income (expense), net |
(42 | ) | 36 | 85 | (1,852 | ) | 97 | (800 | ) | (1,529 | ) | |||||||||
| Income (loss) before income taxes |
4,249 | 7,461 | 6,656 | (3,247 | ) | 4,559 | 4,264 | 1,244 | ||||||||||||
| Income tax provision (benefit) |
478 | 328 | (163 | ) | (195 | ) | (199 | ) | 615 | (357 | ) | |||||||||
| Net income (loss) |
$3,771 | $7,133 | $6,819 | $(3,052 | ) | $4,758 | $3,649 | $1,601 | ||||||||||||
| Basic net income (loss) per share |
$0.33 | $0.54 | $0.52 | $(0.20 | ) | $0.36 | $0.26 | $0.11 | ||||||||||||
| Diluted net income (loss) per share |
$0.33 | $0.54 | $0.52 | $(0.20 | ) | $0.36 | $0.19 | $0.08 | ||||||||||||
| Shares used in computation of basic net income (loss) per share |
11,276,876 | 13,200,000 | 13,200,000 | 15,183,315 | 13,200,000 | 14,180,869 | 15,190,687 | |||||||||||||
| Shares used in computation of diluted net income (loss) per share |
11,276,876 | 13,200,000 | 13,200,000 | 15,183,315 | 13,200,000 | 19,362,189 | 20,372,007 | |||||||||||||
| Non-GAAP Financial Measures: |
||||||||||||||||||||
| EBITDA(3) |
4,382 | 7,961 | 8,755 | 8,947 | 6,095 | 9,792 | 10,740 | |||||||||||||
| Adjusted EBITDA(3) |
4,382 | 7,961 | 8,755 | 8,947 | 6,095 | 10,299 | 11,247 | |||||||||||||
| Unaudited Pro Forma Statement of Income Data(4): |
||||||||||||||||||||
| Income (loss) before income taxes |
4,249 | 7,461 | 6,656 | (3,247 | ) | 4,559 | 4,264 | 1,244 | ||||||||||||
| Pro forma provision (benefit) for income taxes |
1,729 | 2,964 | 2,657 | (1,301 | ) | 1,822 | 1,809 | 575 | ||||||||||||
| Pro forma net income (loss) |
$2,520 | $4,497 | $3,999 | $(1,946 | ) | $2,737 | $2,455 | $669 | ||||||||||||
| Pro forma basic net income (loss) per share |
$0.22 | $0.34 | $0.20 | $(0.13 | ) | $0.21 | $0.12 | $0.04 | ||||||||||||
| Pro forma diluted net income (loss) per share |
$0.22 | $0.34 | $0.20 | $(0.13 | ) | $0.21 | $0.12 | $0.03 | ||||||||||||
| Shares used in computation of pro forma basic net income per share |
11,276,876 | 13,200,000 | 19,833,255 | |||||||||||||||||