QKL Stores Inc. Announces Fourth Quarter and Full Year 2013 Financial Results

QKL Stores Inc. Announces Fourth Quarter and Full Year 2013 Financial Results

PR Newswire

DAQING, China, April 4, 2014

DAQING, China, April 4, 2014 /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, 2013.

Mr. Zhuangyi Wang, Chairman and CEO, said, "As QKL expands its market presence
in northeast China, we are uniquely positioned against our local competitors
through our large product offering, strong supplier relationships, efficient
distribution network and state-of-the-art IT system. We are comfortable with
our opportunities in 2014 and believe we'll see an improvement in operating
expenses and profit growth in coming quarters.

"In 2013, we closed three stores that have approximately 6,500 square meters
of space. As of December 31, 2013, we operated 27 supermarkets, 14
hypermarkets, 4 department stores and 2 distribution centers situated in
Daqing, and Harbin, respectively.

"As we advance into 2014, 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 2013 Financial Results

Revenue in the fourth quarter of 2013 decreased by 21.5% to $67.5 million from
$86.0 million in the fourth quarter of 2012. Comparable stores are stores that
were opened for at least one year before the beginning of the comparison
period, or by January 1, 2012. Those 45 stores generated approximately $67.5
million in sales in the fourth quarter of 2013, representing a decrease of
$5.2 million, or 7.2% compared with $72.7 million in sales in fiscal 2012.

Gross profit decreased by 21.7% year over year to $11.5 million, compared to
$14.6 million in the prior year period. Gross profit as a percentage of
revenue for the fourth quarter of 2013 was 17.0%, compared to 17.0% for the
fourth quarter of 2012.

Operating expenses decreased by 17.2% to $17.3 million compared to $20.9
million in the prior year period. This was primarily a result of our decrease
in net sales in the fourth quarter of 2013.

We had a net loss of $11.6 million in the fourth quarter of 2013 compared with
net loss of $30.8 million in the fourth quarter of 2012. Excluding the
impairment of goodwill, we had a net loss of $11.6 million in the fourth
quarter of 2013 compared with net income of $4.1 million in the fourth quarter
of 2012.

Full Year 2013 Financial Results

Revenue decreased by $82.8 million, or 22.6%, to $282.8 million for fiscal
2013 from $365.6 million for fiscal2012. The change in net sales was
primarily attributable to the following: comparable stores are stores that
were opened for at least one year before the beginning of the comparison
period, or by January 1, 2012. Those 45 stores generated approximately $277.7
million sales in fiscal 2013, a decrease of $50.2 million, or 15.3% compared
with $327.9 million sales in fiscal 2012.

Gross profit, or total revenue minus cost of sales, wasdecreased by $14.0
million, or 22.4%, to $48.4 million, or 17.1% of net sales, in fiscal 2013
from $62.4 million, or 17.1% of net sales, in fiscal 2012. The change in gross
profit was primarily attributable to net sales decreased by $82.8 million in
fiscal 2013 compared to fiscal 2012.

Operating expenses decreased by $12.2 million, or 20.7%, to $46.9 million, or
16.6% of net sales, in fiscal 2013 from $59.1 million, or 16.2% of net sales,
in fiscal 2012. The change in selling expense was mainly due to decreases in
labor costs, and utilities for fiscal 2013 compared with fiscal 2012. In
particular, labor costs decreased by $3.3 million or 14.6%, to $19.3 million
in fiscal 2013 from $22.6 million in fiscal 2012. Utilities decreased by $1.5
million, or 20.3%, to $6.2 million in fiscal 2013 from $7.7 million in fiscal
2012.

We had a net loss of $14.3 million in fiscal 2013 compared with net loss of
$31.0 million in fiscal 2012. Excluding the impairment of goodwill, adjusted
net loss for fiscal 2013 changed to $14.3 million, or $(9.41) per diluted
share, from adjusted net income of $4.3 million, or $3.31 per diluted share
for fiscal 2012. The number of shares used in the computation of diluted EPS
(excluding the impairment of goodwill) increased by 15.6% to 1,519,258 shares
in fiscal 2013 from 1,313,684 shares in fiscal 2012.

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
                                         December31,2013   December31,2012
ASSETS
Cash                                     $   9,245,212       $   8,479,413
Restricted cash                              8,668,882           253
Accounts receivable                          557,745             796,897
Inventories                                  64,724,923          59,812,645
Other receivables                            21,979,152          18,042,360
Prepaid expenses                             9,915,479           11,083,708
Advances to suppliers                        7,822,660           9,525,250
Income taxes receivables                     1,739,773           -
Deferred income tax assets- current         2,788,918           3,068,803
portion
Total current assets                         127,442,744         110,809,329
Property, plant equipment, net               40,247,576          45,439,360
Land use rights, net                         718,337             724,760
Deferred income tax assets-                 66,956              3,259,129
non-current portion
Other assets                                 17,276              12,976
Total assets                             $   168,492,889     $   160,245,554
LIABILITIES AND STOCKHOLDERS' EQUITY
Short term bank loans                        40,889,761          15,832,555
Accounts payable                             35,840,964          30,900,586
Cash card and coupon liabilities             18,465,030          18,604,188
Customer deposits received                   984,308             1,248,278
Accrued expenses and other payables          18,827,472          28,097,212
Income taxes payable                         -                   2,726
Total current liabilities                    115,007,535         94,685,545
Warrant liabilities                          -                   -
Total liabilities                            115,007,535         94,685,545
Commitments and contingencies                -                   -
Shareholders' equity
Common stock, $0.001 par value per
share, authorized 100,000,000 shares,
issued and
outstanding 1,522,326 and 1,443,949          1,522               1,444
shares at December 31, 2013 and
December 31,
2012* respectively
Series A convertible preferred stock,
par value $0.01, authorized 10,000,000
shares, issued
and outstanding 529,412 and 2,386,110        5,294               23,861
shares at December 31, 2013 and
December 31,
2012
Additional paid-in capital                   93,337,957          92,503,000
Retained earnings- appropriated             8,329,586           8,323,312
Retained earnings                            (62,145,794)        (47,841,708)
Accumulated other comprehensive income       13,956,789          12,550,100
Total shareholders' equity                   53,485,354          65,560,009
Total liabilities and shareholders'      $   168,492,889     $   160,245,554
equity



QKL STORES INC. AND SUBSIDIARIES

Consolidated Statements of Operations
                                               YearsEndedDecember31,
                                               2013             2012
Net sales                                      $ 282,790,433    $ 365,624,781
Cost of sales                                    234,421,906      303,198,690
Gross profit                                     48,368,527       62,426,091
Operating expenses:
Selling expenses                                 46,854,916       59,084,865
General and administrative expenses              10,384,659       9,231,987
Impairment of goodwill                           -                26,697,561
Total operating expenses                         57,239,575       95,014,413
Loss from operations                             (8,871,048)      (32,588,322)
Non-operating income(expense):
Interest income                                  441,718          259,713
Interest expense                                 (1,386,810)      (1,014,145)
Total non-operating income                       (945,092)        (754,432)
Loss before income tax                           (9,816,140)      (33,342,754)
Income taxes                                     4,481,672        (2,300,214)
Net loss                                       $ (14,297,812)   $ (31,042,540)


Comprehensive loss statement:
Net loss                                         (14,297,812)     (31,042,540)
Foreign currency translation adjustment          1,406,689        1,322,788
Comprehensive loss                             $ (12,891,123)   $ (29,719,752)

                                               $ (9.41)         $ (23.63)
*Basic earnings per share of common stock
*Diluted earnings per share                    $ (9.41)         $ (23.63)
*Weighted average shares used in calculating     1,519,258        1,313,684
net income per ordinary share- basic
*Weighted average shares used in calculating     1,519,258        1,313,684
net income per ordinary share- diluted



QKL STORES INC. AND SUBSIDIARIES

Consolidated Statements of Cash Flows
                                               YearsEndedDecember31,
                                               2013             2012
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss                                       $ (14,297,812)   $ (31,042,540)
Depreciation-property, plant and equipment       6,502,288        6,702,740
Amortization                                     29,968           29,391
Deferred income tax                              3,631,238        (3,330,517)
Loss on disposal of property, plant and          2,850            (303,396)
equipment
Share-based compensation                         816,468          850,381
Impairment of goodwill                           -                26,697,561
Provision on inventory, other receivables and    518,453          453,311
sales return
Adjustments to reconcile net income to net
cash provided by operating activities:
Accounts receivable                              261,888          (680,445)
Inventories                                      (2,895,295)      (5,481,236)
Other receivables                                (3,018,049)      (5,289,513)
Prepaid expenses                                 1,509,946        (4,437,289)
Advances to suppliers                            1,990,054        713,061
Accounts payable                                 3,865,732        2,262,687
Cash card and coupon liabilities                 (743,884)        2,454,996
Customer deposits received                       (301,087)        309,322
Accrued expenses and other payables              (10,898,312)     13,357,512
Income taxes payable                             (1,718,925)      (225,903)
Net cash (used in)/provided by operating         (14,744,479)     3,040,123
activities
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property, plant and equipment       (598,043)        (9,411,202)
Sales proceeds of fixed assets disposal          177,346          947,049
Increase of restricted cash                      (8,668,629)      -
Net cash used in investing activities            (9,089,326)      (8,464,153)
CASH FLOWS FROM FINANCING ACTIVITIES:
Bank repayment                                   (16,133,794)     (11,076,230)
Bank borrowings                                  40,334,486       15,823,185
Net cash provided by financing activities        24,200,692       4,746,955
Net increase/(decrease) in cash                  366,887          (677,075)
Effect of foreign currency translation           398,912          118,938
Cash at beginning of period                      8,479,413        9,037,550
Cash at end of period                          $ 9,245,212      $ 8,479,413
Supplemental disclosures of cash flow
information:
Interest paid                                    1,386,810        1,014,145
Income taxes paid                              $ 999,271        $ 822,923

SOURCE QKL Stores Inc.

Website: http://www.qklstoresinc.com
 
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