QKL Stores Inc. Announces First Quarter 2013 Financial Results

-- 1Q13 Revenue Decreased 13.4% to $97.1 million from $112.0 million in 1Q12 --

-- 1Q13 Gross Profit Decreased 12.7% to $16.6 million from $19.1 million in 1Q12 --

News provided by

QKL Stores Inc.

May 14, 2013, 06:30 ET

DAQING, China, May 14, 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 first quarter ended March 31, 2013.

Mr. Zhuangyi Wang, Chairman and CEO, said, "We finished the first quarter operating a total of 46 stores, comprised of 28 supermarkets, 14 hypermarkets and 4 department stores. As our new store opening plan slows for 2013, the new stores are going to open particularly in the second half of the year, we expect our profitability to improve as we benefit from our improving new store sales, increased same store sales at existing stores and reduced store opening and promotional expenses." 

"We were also pleased with the improvement of our operating cash flows in the first quarter due to a reduction in inventory after the peak Chinese New Year season and a decrease in other receivables attributable to cash recovery from our vendors after the busy holiday season. We are pleased with our execution in the first quarter and are setting the stage for increased top and bottom line growth in the coming quarters."

First Quarter 2013 Financial Results

Revenue in the first quarter of 2013 decreased by 13.4% to $97.1 million from $112.0 million in the first quarter of 2012. Revenue performance reflected the 45 comparable stores, which are stores that have been open for at least one year before the beginning of the comparison period, or by January 1, 2012, as well as sales from the net opening of one new store since January 1, 2012.  Same-store sales were approximately $93.6 million in the first quarter of 2013, representing a decrease of 5.6% from $99.1 million in the first quarter of 2012. One new store opened since January 1, 2012 generated approximately $1.1 million in sales in the first quarter of 2013.

Gross profit decreased by 12.7% year over year to $16.6 million, compared to $19.1 million in the prior year period.  Gross margin for the first quarter of 2013 was 17.1%, compared to 17.0% for the first quarter of 2012. The decrease in gross profit was primarily attributable to a decrease in net sales of $14.9 million in the first quarter of 2013 compared to the first quarter of 2012.

Operating expenses decreased by 9.5% to $15.8 million compared to $17.5 million in the prior year period. This was primarily a result of lower salary, and reduced other operating costs related to the Company's decreased store count over the past year. Operating income for the first quarter of 2013 decreased to $0.80 million, or 0.8% of sales, from $1.5 million, or 1.4% of sales, in the first quarter of 2012.

First quarter 2013 net income was approximately $0.4 million, or $0.27 per diluted share, compared with $0.8 million, or $0.54 per diluted share, for the same period in 2012.

As of March 31, 2013, the Company had $32.5 million in unrestricted cash with bank loans of $15.9 million, compared to $36.1 million as of March 31, 2012 with bank loans of $9.5 million.

As of March 31, 2013, the Company operated 46 stores. The Company closed 2 stores in the first quarter of 2013 due to the expiration of the lease contracts.

The number of weighted average shares outstanding used in the computation of diluted EPS was approximately 1,510,828 in the first quarter 2013.

Net cash provided by operating activities for the 2013 first quarter was $24.3 million compared to $29.4 million in the prior year period. The decrease in cash provided by operating activities for the three months ended March 31, 2013 compared to the same period in 2012 primarily reflects the decrease in net sales for the three months ended March 31, 2013.

Conference Call

The Company will conduct a conference call to discuss its first quarter 2013 results on Tuesday, May 14, 2013 at 8:30 am ET. Listeners may access the call by dialing #1-719-325-2455. To participate, please dial one of the local access numbers, listed below. The conference call identification number is 10014237.

Participant Dial In (Toll Free):

1-800-860-2442

Participant International:

1-412-858-4600

Canadian Dial In (Toll Free):

1-866-605-3852

China (N) Toll Free:

10-800-712-2304

China (S) Toll Free:

10-800-120-2304

Hong Kong Toll Free:

800-962475

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

(Financial Tables on Following Pages)

QKL STORES INC. AND SUBSIDIARIES

Condensed Consolidated Balance Sheets







March 31, 
2013

December 31,
2012


(Unaudited)

ASSETS





Cash

$

32,459,219

$

8,479,413

Restricted cash

253

253

Accounts receivable

371,160

796,897

Inventories

43,528,151

59,812,645

Other receivables

17,706,392

18,042,360

Prepaid expenses

9,366,871

11,083,708

Advances to suppliers

3,510,707

9,525,250

Deferred income tax assets

6,827,412

6,327,932

Total current assets

113,770,165

114,068,458

Property, plant and equipment, net

44,336,463

45,439,360

Land use rights, net

719,526

724,760

Goodwill

-

-

Other assets

12,751

12,976

Total assets

$

158,838,905

$

160,245,554

LIABILITIES AND SHAREHOLDERS' EQUITY





Short-term loans

$

15,919,511

$

15,832,555

Accounts payable

25,779,751

30,900,586

Cash card and coupon liabilities

21,391,561

18,604,188

Customer deposits received

3,233,295

1,248,278

Accrued expenses and other payables

25,277,134

28,097,212

Income taxes payable

88,594

2,726

Total current liabilities

91,689,846

94,685,545







Total liabilities

91,689,846

94,685,545

Shareholders' equity





Common stock, $0.001 par value per share, authorized 100,000,000 shares, issued and outstanding 1,522,326 and 1,443,948 shares at March 31, 2013 and December 31, 2012* respectively

1,522

1,444

Series A convertible preferred stock, par value $0.01, authorized 10,000,000 shares, issued and outstanding 529,412 and 2,386,110 shares at March 31, 2013 and December 31, 2012 respectively

5,294

23,861

Additional paid-in capital

92,521,489

92,503,000

Retained earnings – appropriated

8,323,312

8,323,312

Retained earnings

(47,438,438)

(47,841,708)

Accumulated other comprehensive income

13,735,880

12,550,100

Total shareholders' equity

67,149,059

65,560,009

Total liabilities and shareholders' equity

$

158,838,905

$

160,245,554







*The number of shares of common stock has been retroactively restated to reflect the 1-for-8 Reverse Stock Split effected on February 4, 2013.


 

QKL STORES INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Income





(Unaudited)


Three Months Ended March 31,


2013

2012





Net sales

$

97,057,191

$

112,038,616

Cost of sales

80,417,743

92,983,490

Gross profit

16,639,448

19,055,126







Operating expenses:





Selling expenses

13,324,213

15,130,888

General and administrative expenses

2,518,336

2,375,774

Total operating expenses

15,842,549

17,506,662







Income from operations

796,899

1,548,464














Non-operating expense:





Interest income

193,573

26,528

Interest expense

(297,608)

(293,909)

Total non-operating loss

(104,035)

(267,381)







Income before income taxes

692,864

1,281,083







Income taxes

289,594

450,482







Net income

403,270

830,601







Comprehensive income statement:





Net income

403,270

830,601

Foreign currency translation adjustment

1,185,780

862,477

Comprehensive income

$

1,589,050

$

1,693,078





















Basic earnings per share of common stock

$

0.27

$

0.54

Diluted earnings per share

$

0.27

$

0.54







Weighted average shares used in calculating net income per ordinary share -- basic

1,476,735

1,306,025

Weighted average shares used in calculating net income per ordinary share -- diluted

1,510,828

1,543,297

See notes to unaudited condensed consolidated financial statements.

QKL STORES INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Cash Flows





(Unaudited)


Three Months Ended March 31,


2013

2012

CASH FLOWS FROM OPERATING ACTIVITIES:





Net income

$

403,270

$

830,601

Depreciation

1,678,164

1,641,431

Amortization

8,036

7,224

Share-based compensation

204,117

216,158

Deferred income tax

(464,414)

304,196

Loss on disposal of fixed assets

25,491

6,137

Adjustments to reconcile net income to net cash provided by operating activities:





Accounts receivable

429,824

11,978

Inventories

16,601,846

12,704,657

Other receivables

537,181

3,504,787

Prepaid expenses

1,776,872

1,229,951

Advances to suppliers

6,062,785

2,306,768

Accounts payable

(5,286,996)

(696,663)

Cash card and coupon liabilities

2,683,392

1,257,931

Customer deposits received

1,976,833

(415,828)

Accrued expenses and other payables

(2,453,301)

6,507,064

Income taxes payable

85,795

(8,580)

Net cash provided by operating activities

24,268,895

29,407,812







CASH FLOWS FROM INVESTING ACTIVITIES:





Purchases of property, plant and equipment

(350,987)

(827,585)

Decrease of restricted cash

-

-

Net cash used in investing activities

(350,987)

(827,585)







CASH FLOWS FROM FINANCING ACTIVITIES:





Bank loan repayment

-

(1,581,103)

Net cash used in financing activities

-

(1,581,103)







Effect of foreign currency translation

61,898

41,588







Net increase in cash

23,917,908

26,999,124

Cash -- beginning of period

8,479,413

9,037,550

Cash -- end of period

$

32,459,219

$

36,078,262







Supplemental disclosures of cash flow information:





Interest paid

$

297,608

$

293,909

Income taxes paid

$

203,799

$

459,062

SOURCE QKL Stores Inc.

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