QKL Stores Inc. Announces Fourth Quarter and Full Year 2012 Financial Results PR Newswire DAQING, China, April 15, 2013 DAQING, China, April 15, 2013 /PRNewswire/ --QKL Stores Inc. (the "Company") (Nasdaq: QKLS), a leading regional supermarket chain in Northeastern China and Inner Mongolia, today announced its financial results for the fourth quarter and full year financial results ended December 31, 2012. Mr. Zhuangyi Wang, Chairman and CEO, said, "In the fourth quarter, we were more active with the level of promotional activities among our existing stores opened at least one year in order to strengthen our competitive position. Our 47 older stores that have been operating for more than one year have outperformed our younger stores as many of our new store locations are in new smaller markets which typically take longer to ramp up sales and profit. We believe our product quality, assortment and value can result in improved performance over time." "In 2012, we opened up one new store that has approximately 5,700 square meters of space. During the fourth quarter, we closed three stores that have approximately 26,800 square meters of space. As of December 31, 2012, we operated 30 supermarkets, 14 hypermarkets, 4 department stores and 3 distribution centers situated in Daqing, Shenyang and Harbin, respectively. As we advance into 2013, we plan to slow down the pace of our new store openings. Currently, we expect to open three new supermarket or hypermarket stores this year. We maintain confidence in our strategy of strengthening our store presence in Tier 4 and 5 cities in northeastern China as well as in our core region of operation around Daqing where the majority of our older stores are based." Fourth Quarter 2012 Financial Results Revenue in the fourth quarter of 2012 decreased by 17.1% to $86.0 million from $103.7 million in the fourth quarter of 2011. Comparable stores are stores that were opened for at least one year before the beginning of the comparisonperiod, or by January 1, 2011. Those 47 stores generated approximately $84.4 million in sales in the fourth quarter of 2012, representing a decrease of $8.4 million, or 9.1% compared with $92.8 million in sales in fiscal 2011. Gross profit decreased by 13.1% year over year to $14.6 million, compared to $16.8 million in the prior year period. Gross profit as a percentage of revenue for the fourth quarter of 2012 was 17.0%, compared to 16.2% for the fourth quarter of 2011. The decrease in gross profit percentage was primarily attributable to increased competition and the low profit margin in our new stores. Operating expenses increased by 35.7% to $20.9 million compared to $15.4 million in the prior year period. This was primarily a result of increases in labor costs, depreciation, rent expense and other operating costs for 2012 compared with the same period in 2011. We had a net loss of $30.8 million in the fourth quarter of 2012 compared with net income of $18.4 million in the fourth quarter of 2011. Excluding the impairment of goodwill, we had a net loss of $4.1 million in the fourth quarter of 2012 compared with net income of $0.8 million in the fourth quarter of 2011. Full Year 2012 Financial Results Revenue decreased by 1.4% to $365.6 million for fiscal 2012 from $370.5 million for fiscal 2011. Comparable stores are stores that were opened for at least one year before the beginning of the comparison period, or by January 1, 2011. Those 35 stores generated approximately $294.0 million in sales in fiscal 2012, an increase of $0.9 million, or 0.3% compared with $293.1 million in sales in fiscal 2011. New store sales increased, reflecting the opening of 13 new stores since January 1, 2011. One store opened in fiscal 2012 generated approximately $2.0 million for fiscal 2012, and 11 stores opened in fiscal 2011 generated $48.6 million in sales for fiscal 2012 and $38.4 million in sales for fiscal 2011, respectively. Gross profit decreased by 2.0% to $62.4 million in fiscal 2012, compared to $63.7 million in fiscal 2011. Gross profit as a percentage of revenue for fiscal 2012 was 17.1%, compared to 17.2% for fiscal 2011. The slight decrease in gross profit percentage was primarily attributable to increased competition and the low profit margin in our new stores. Operating expenses increased by 13.5% to $68.3 million for fiscal 2012 compared to $60.2 million in the prior year. This was primarily a result of increase in labor costs, depreciation, rent expense and other operating costs for 2012 compared with 2011. We had a net loss of $31.0 million in fiscal 2012 compared with net loss of $16.6 million in fiscal 2011. Excluding the impairment of goodwill, adjusted net loss for fiscal 2012 changed to $4.3 million, or $3.31 per diluted share, from adjusted net income of $2.6 million, or $2.07 per diluted share for fiscal 2011. The number of shares used in the computation of diluted EPS (excluding the impairment of goodwill) increased by 3.37% to 1.31 million shares in fiscal 2012 from 1.27 million shares in fiscal 2011. As of December 31, 2012, the Company operated 48 stores totaling 297,800 sq. meters compared to 48 stores totaling 324,400 sq. meters in the prior year period. About QKL Stores Inc.: Based in Daqing, China, QKL Stores, Inc. is a leading regional supermarket chain company operating in Northeastern China and Inner Mongolia. QKL Stores sells a broad selection of merchandise, including groceries, fresh food, and non-food items, through its retail supermarkets, hypermarkets and department stores; the company also has its own distribution centers that service its supermarkets. For more information, please access the Company's website at: www.qklstoresinc.com. Safe Harbor Statement Certain statements in this release and other written or oral statements made by or on behalf of the Company are "forward looking statements" within the meaning of the federal securities laws. Statements regarding future events and developments and our future performance, as well as management's expectations, beliefs, plans, estimates or projections relating to the future, are forward-looking statements within the meaning of these laws. The forward looking statements are subject to a number of risks and uncertainties including market acceptance of the Company's services and projects and the Company's continued access to capital and other risks and uncertainties. The actual results the Company achieves may differ materially from those contemplated by any forward-looking statements due to such risks and uncertainties. These statements are based on our current expectations and speak only as of the date of such statements. Contact Information QKL Stores, Inc. In China: Mike Li, Investor Relations +86-459-460-7987 QKL STORES INC. AND SUBSIDIARIES Consolidated Balance Sheets December December 31,2012 31,2011 ASSETS Cash $ 8,479,413 $ 9,037,550 Restricted cash 253 253 Accounts receivable 796,897 115,163 Inventories 59,812,645 54,336,501 Other receivables 18,042,360 11,991,134 Prepaid expenses 11,083,708 6,085,379 Advances to suppliers 9,525,250 10,160,552 Deferred income tax assets 6,327,932 2,972,570 Total current assets 114,068,458 94,699,102 Property, plant equipment, 45,439,360 43,042,136 net Land use rights, net 724,760 748,410 Goodwill - 26,346,942 Other assets 12,976 520,559 Total assets $ 160,245,554 $ 165,357,149 LIABILITIES AND STOCKHOLDERS' EQUITY Short term bank loans 15,832,555 10,998,162 Accounts payable 30,900,586 28,417,894 Cash card and coupon 18,604,188 16,024,437 liabilities Customer deposits received 1,248,278 931,604 Accrued expenses and other 28,097,212 14,328,656 payables Income taxes payable 2,726 227,016 Total current liabilities 94,685,545 70,927,769 Warrant liabilities - Total liabilities 94,685,545 70,927,769 Commitments and contingencies - Shareholders' equity Common stock, $.001 par value per share, authorized 100,000,000, shares, issued and outstanding 11,551,587 11,552 10,448 and 10,448,197 at December 31, 2012 and December 31, 2011, respectively Series A convertible preferred stock, par value $0.01, 10,000,000 shares authorized, 2,386,110and 23,861 56,945 5,694,549 shares outstanding at December 31, 2012 and December 31, 2011, respectively Additional paid-in capital 92,492,892 91,610,531 Retained earnings – 8,323,312 7,282,560 appropriated Retained earnings (47,841,708) (15,758,416) Accumulated other 12,550,100 11,227,312 comprehensive income Total shareholders' equity 65,560,009 94,429,380 Total liabilities and $ 160,245,554 $ 165,357,149 shareholders' equity *The number of shares of common stock has been retroactively restated to reflect the Reverse Stock Split effected on June 11, 2012. See notes to audited consolidated financial statements. QKL STORES INC. AND SUBSIDIARIES Consolidated Statements of Operations YearsEndedDecember31, 2012 2011 Net sales $ 365,624,781 $ 370,500,420 Cost of sales 303,198,690 306,770,553 Gross profit 62,426,091 63,729,867 Operating expenses: Selling expenses 59,084,865 51,651,713 General and administrative 9,231,987 8,543,023 expenses Impairment of goodwill 26,697,561 19,219,870 Total operating expenses 95,014,413 79,414,606 Loss from operations (32,588,322) (15,684,739) Non-operating income(expense): Interest income 259,713 676,186 Interest expense (1,014,145) (121,425) Total non-operating income (754,432) 554,761 Loss before income tax (33,342,754) (15,129,978) Income taxes (2,300,214) 1,453,403 Net loss $ (31,042,540) $ (16,583,381) *Basic earnings per share of $ (2.95) $ (1.63) common stock *Diluted earnings per share $ (2.95) $ (1.63) *Weighted average shares used in calculating net income per ordinary 10,509,469 10,166,618 share – basic *Weighted average shares used in calculating net income per ordinary 10,509,469 10,166,618 share – diluted **Basic earnings per share of common stock (23.63) $ (13.05) **Diluted earnings per share $ (23.63) (13.05) **Weighted average shares used in calculating net income per ordinary 1,313,684 1,270,827 share – basic **Weighted average shares used in calculating net income per ordinary 1,313,684 1,270,827 share – diluted * The earnings (losses) per share data and the weighted average shares outstanding for all periods have been retroactively restated to reflect the 1-for-3 Reverse Stock Split effected on June 11, 2012. Reference for amount restated to reflect the 1-for-8 Reverse Stock Split effected on February 4, 2013.. See notes to audited consolidated financial statements. QKL STORES INC. AND SUBSIDIARIES Consolidated Statements of Cash Flows YearsEndedDecember31, 2012 2011 CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ (31,042,540) $ (16,583,381) Depreciation-property, plant and equipment 6,702,740 6,065,858 Amortization 29,391 28,693 Deferred income tax (3,330,517) (2,403,124) Loss on disposal of property, plant and (303,396) 27,310 equipment Share-based compensation 850,381 864,608 Impairment of goodwill 26,697,561 19,219,870 Provision on inventory and sales return 453,311 - Adjustments to reconcile net income to net cash provided by operating activities: Accounts receivable (680,445) 58,849 Inventories (5,481,236) (8,142,931) Other receivables (5,289,513) 17,341,478 Prepaid expenses (4,437,289) (833,463) Advances to suppliers 713,061 (6,275,018) Accounts payable 2,262,687 (12,038,941) Cash card and coupon liabilities 2,454,996 4,790,050 Customer deposits received 309,322 (621,496) Accrued expenses and other payables 13,357,512 4,069,493 Income taxes payable (225,903) (2,230,766) Net cash provided by operating activities 3,040,123 3,337,089 CASH FLOWS FROM INVESTING ACTIVITIES: Purchases of property, plant and equipment (9,411,202) (23,640,152) Sales proceeds of fixed assets disposal 947,049 155,310 Decrease of restricted cash - 76,952 Net cash used in investing activities (8,464,153) (23,407,890) CASH FLOWS FROM FINANCING ACTIVITIES: Bank repayment (11,076,230) - Bank borrowings 15,823,185 10,998,162 Net cash provided by financing activities 4,746,955 10,998,162 Net decrease in cash (677,075) (9,072,639) Effect of foreign currency translation 118,938 650,155 Cash at beginning of period 9,037,550 17,460,034 Cash at end of period $ 8,479,413 $ 9,037,550 Supplemental disclosures of cash flow information: Interest paid 1,014,145 121,425 Income taxes paid $ 822,923 $ 5,995,442 See notes to audited consolidated financial statements. SOURCE QKL Stores Inc. Website: http://www.qklstoresinc.com
QKL Stores Inc. Announces Fourth Quarter and Full Year 2012 Financial Results
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