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| 8-K - FORM 8-K - QKL Stores Inc. | v328432_8k.htm |
QKL Stores Inc. Announces Third Quarter 2012
Financial Results
-- 3Q12 Revenue increased by 2.8% to $84.3 million from $82.1 million in 3Q11--
-- 3Q12 Gross Profit decreased by 0.3% to $14.15 million from $14.19 million in 3Q11 –
Daqing, China, November 14, 2012 – 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 third quarter ended September 30, 2012.
Mr. Zhuangyi Wang, Chairman and CEO, said, “Our third quarter results generally met our levels of expectation. The variety, value and freshness of our products continue to resonate with our customers driving sales higher. This store growth was also driven by in-store promotional events such as store anniversary celebrations.
“We plan to open 1 additional store this year. The new stores we will open in the future will be located in Daqing City where we have stronger relationships with local vendors and the cost of goods is slightly lower than the other cities in which we operate.”
“As our new store opening plan modifies from the first half of the year, we believe that preliminary new store opening expenses will decrease in the coming quarters as our total store sales rise, labor & utility costs stabilize and new store marketing expenses ease. For the remaining one quarters of 2012, we believe our gross margin will remain stable in the 16.8%-17.3% range, operating expenses as a percent of total revenue will move back into the 14.5%-15.5% range.”
“We look forward to the upcoming holiday season as we have a number of exciting marketing initiatives planed. Our balance sheet is healthy with a strong cash position, low level of debt and stable flow of cash from operations. We continue to make progress with our store operations and that can result in greater sales and profits over time.”
Third Quarter 2012 Financial Results
Revenue in the third quarter of 2012 increased by $2.2 million, or 2.8%, to $84.3 million for the three months ended September 30, 2012 from $82.1 million for the three months ended September 30, 2011. Same store sales represent sales from stores that were opened for at least one year before the beginning of the comparison period, or by July 1, 2011. Same store (47 stores) sales generated approximately $78.1 million sales in the third quarter of 2012, an increase of $2.7 million, or 3.6% compared with $75.4 million net sales in the third quarter of 2011. New store sales increased, reflecting the net opening of 4 new stores since July 1, 2011. The new stores generated approximately $4.1 million sales in the third quarter of 2012.
Gross profit decreased by 0.3% year-over-year to $14.15 million, compared to $14.19 million in the prior year period. The decrease in gross margin was primarily attributable to the increase in competition in Daqing area. In this competitive marketplace, it is likely that we will focus on providing our customers with low prices in order to increase our market share and long-term sales volume.
Selling expenses increased by $0.3 million, or 2.2%, to $13.3 million, or 15.8% of net sales, in the third quarter of 2012 from $13.0 million, or 15.9% of net sales, in the third quarter of 2011. The change in selling expense was mainly due to increase in labor costs resulting from an increase in the number of store employees and pay increases.
General and administrative expenses decreased by $0.2 million, or 11.1%, to $2.1 million, or 2.5% of net sales, in the third quarter of 2012 from $2.3 million, or 2.8% of net sales, in the third quarter of 2011. The decrease was mainly due to our control on our headquarters’ expenses.
For the three months ended September 30, 2012, our net loss was $1.1 million, or $(0.105) per diluted share, compared to $0.8 million, or ($0.082) per diluted share, for the three months ended September 30, 2011.
As of September 30, 2012, the Company had $27.4 million in unrestricted cash and bank loans of $15.8 million, compared to $28.0 million as of September 30, 2011 with bank loans of $3.1 million.
As of September 30, 2012, the Company operated 51 stores totaling 275,000 sq. meters compared to 53 stores totaling 283,000 sq. meters in the prior year period.
Conference Call
Management will host a conference call at 8:30 am ET on Wednesday, November 14th, 2012. To participate, please dial one of the local access numbers, listed below. The conference call identification number is 10017432.
| 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 |
QKL STORES INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
| September 30, 2012 | December 31, 2011 | |||||||
| (Unaudited) | ||||||||
| ASSETS | ||||||||
| Cash | $ | 27,387,082 | $ | 9,037,550 | ||||
| Restricted cash | 253 | 253 | ||||||
| Accounts receivable | 117,230 | 115,163 | ||||||
| Inventories | 45,567,703 | 54,336,501 | ||||||
| Other receivables | 8,990,737 | 11,991,134 | ||||||
| Prepaid expenses | 5,945,518 | 6,085,379 | ||||||
| Advances to suppliers | 8,124,527 | 10,160,552 | ||||||
| Deferred income tax assets | 2,979,111 | 2,972,570 | ||||||
| Total current assets | 99,112,161 | 94,699,102 | ||||||
| Property, plant and equipment, net | 41,973,123 | 43,042,136 | ||||||
| Land use rights, net | 725,192 | 748,410 | ||||||
| Goodwill | 26,567,797 | 26,346,942 | ||||||
| Other assets | 468,894 | 520,559 | ||||||
| Total assets | $ | 168,847,167 | $ | 165,357,149 | ||||
| LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||||||
| Short-term loans | $ | 15,787,812 | $ | 10,998,162 | ||||
| Accounts payable | 26,508,022 | 28,417,894 | ||||||
| Cash card and coupon liabilities | 16,273,617 | 16,024,437 | ||||||
| Customer deposits received | 791,673 | 931,604 | ||||||
| Accrued expenses and other payables | 14,005,318 | 14,328,656 | ||||||
| Income taxes payable | 176,242 | 227,016 | ||||||
| Total current liabilities | 73,542,684 | 70,927,769 | ||||||
| Total liabilities | 73,542,684 | 70,927,769 | ||||||
| Shareholders’ equity | ||||||||
| Common stock, $0.001 par value per share, authorized 100,000,000 shares, issued and outstanding 10,527,637 and 10,448,197 shares at September 30, 2012 and December 31, 2011, respectively* | 10,527 | 10,448 | ||||||
| Series A convertible preferred stock, par value $0.01, authorized 10,000,000 shares, issued and outstanding 5,457,960 and 5,694,549 at September 30, 2012 and December 31, 2011, respectively | 54,580 | 56,945 | ||||||
| Additional paid-in capital | 91,828,974 | 91,610,531 | ||||||
| Retained earnings – appropriated | 7,282,560 | 7,282,560 | ||||||
| Retained earnings | (16,025,611 | ) | (15,758,416 | ) | ||||
| Accumulated other comprehensive income | 12,153,453 | 11,227,312 | ||||||
| Total shareholders’ equity | 95,304,483 | 94,429,380 | ||||||
| Total liabilities and shareholders’ equity | $ | 168,847,167 | $ | 165,357,149 | ||||
QKL STORES INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Income
| (Unaudited) | (Unaudited) | |||||||||||||||
| Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
| 2012 | 2011 | 2012 | 2011 | |||||||||||||
| Net sales | $ | 84,343,510 | $ | 82,068,788 | $ | 279,603,670 | $ | 266,833,256 | ||||||||
| Cost of sales | 70,189,152 | 67,874,242 | 231,825,748 | 219,918,263 | ||||||||||||
| Gross profit | 14,154,358 | 14,194,546 | 47,777,922 | 46,914,993 | ||||||||||||
| Operating expenses: | ||||||||||||||||
| Selling expenses | 13,330,045 | 13,040,763 | 40,878,831 | 38,327,459 | ||||||||||||
| General and administrative expenses | 2,074,153 | 2,333,267 | 6,539,428 | 6,483,350 | ||||||||||||
| Total operating expenses | 15,404,198 | 15,374,030 | 47,418,259 | 44,810,809 | ||||||||||||
| (Loss) income from operations | (1,249,840 | ) | (1,179,484 | ) | 359,663 | 2,104,184 | ||||||||||
| Non-operating income (expense): | ||||||||||||||||
| Interest income | 111,903 | 175,745 | 216,674 | 629,130 | ||||||||||||
| Interest expense | (295,564 | ) | (10,593 | ) | (691,212 | ) | (41,693 | ) | ||||||||
| Total non-operating income (expense) | (183,661 | ) | 165,152 | (474,538 | ) | 587,437 | ||||||||||
| (Loss) income before income taxes | (1,433,501 | ) | (1,014,332 | ) | (114,875 | ) | 2,691,621 | |||||||||
| Income taxes | (326,094 | ) | (164,822 | ) | 152,320 | 986,869 | ||||||||||
| Net (loss) income | $ | (1,107,407 | ) | $ | (849,510 | ) | $ | (267,195 | ) | $ | 1,704,752 | |||||
| Comprehensive income statement: | ||||||||||||||||
| Net (loss) income | $ | (1,107,407 | ) | $ | (849,510 | ) | $ | (267,195 | ) | $ | 1,704,752 | |||||
| Foreign currency translation adjustment | (25,012 | ) | 1,023,116 | 926,141 | 3,385,552 | |||||||||||
| Comprehensive income | $ | (1,132,419 | ) | $ | 173,606 | $ | 658,946 | $ | 5,090,304 | |||||||
| Weighted average number of shares outstanding: | ||||||||||||||||
| Basic* | 10,527,637 | 10,362,508 | 10,514,746 | 10,071,728 | ||||||||||||
| Diluted* | 10,527,637 | 10,362,508 | 10,514,746 | 12,346,380 | ||||||||||||
| (Losses) earnings per share: | ||||||||||||||||
| Basic* | $ | (0.105 | ) | $ | (0.082 | ) | $ | (0.025 | ) | $ | 0.138 | |||||
| Diluted* | $ | (0.105 | ) | $ | (0.082 | ) | $ | (0.025 | ) | $ | 0.138 | |||||
QKL STORES INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
| (Unaudited) | ||||||||
| Nine Months Ended September 30, | ||||||||
| 2012 | 2011 | |||||||
| CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||
| Net (loss) income | $ | (267,195 | ) | $ | 1,704,752 | |||
| Depreciation – property, plant and equipment | 4,926,896 | 5,815,703 | ||||||
| Amortization | 21,672 | 22,519 | ||||||
| Share-based compensation | 637,786 | 648,474 | ||||||
| Deferred income tax | 7,866 | (225,151 | ) | |||||
| Loss on disposal of fixed assets | 6,128 | 153,494 | ||||||
| Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||
| Accounts receivable | (1,510 | ) | (562,574 | ) | ||||
| Inventories | 9,041,509 | 3,086,917 | ||||||
| Other receivables | 3,319,138 | 18,037,812 | ||||||
| Prepaid expenses | 223,775 | 604,642 | ||||||
| Advances to suppliers | 2,087,430 | (2,500,125 | ) | |||||
| Accounts payable | (2,049,728 | ) | (3,476,958 | ) | ||||
| Cash card and coupon liabilities | 171,689 | 2,975,779 | ||||||
| Customer deposits received | (144,596 | ) | (13,012 | ) | ||||
| Accrued expenses and other payables | (490,608 | ) | 2,996,074 | |||||
| Income taxes payable | (51,928 | ) | (1,904,396 | ) | ||||
| Net cash provided by operating activities | 17,438,324 | 27,363,950 | ||||||
| CASH FLOWS FROM INVESTING ACTIVITIES: | ||||||||
| Purchases of property, plant and equipment | (3,648,874 | ) | (20,686,955 | ) | ||||
| Decrease of restricted cash | - | 69,952 | ||||||
| Net cash used in investing activities | (3,648,874 | ) | (20,617,003 | ) | ||||
| CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||||
| Bank loan borrowing | 7,902,077 | 3,074,081 | ||||||
| Bank loan repayment | (3,157,562 | ) | - | |||||
| Net cash provided by financing activities | 4,744,515 | 3,074,081 | ||||||
| Effect of foreign currency translation | (184,433 | ) | 701,027 | |||||
| Net increase in cash | 18,349,532 | 10,522,055 | ||||||
| Cash – beginning of period | 9,037,550 | 17,460,034 | ||||||
| Cash – end of period | $ | 27,387,082 | $ | 27,982,089 | ||||
| Supplemental disclosures of cash flow information: | ||||||||
| Interest paid | $ | 691,212 | $ | 41,693 | ||||
| Income taxes paid | $ | 548,175 | $ | 3,024,287 | ||||