DAQING, China, April 9, 2012 /PRNewswire-Asia/ -- QKL Stores Inc. (the "Company") (Nasdaq: QKLS), a leading regional supermarket chain in Northeastern China, today announced its financial results for the quarter ended December 31, 2011.
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 35 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."
"During the fourth quarter, we opened up one new store, a 2,400 sq. meter supermarket in Daqing City, Heilongjiang province. We successfully opened 14 new stores in 2011 bringing our store total to 54 locations, comprised of 34 supermarkets, 16 hypermarkets and 4 department stores. We opened a 9,000 sq. meter distribution center in the Liaoning province in the fourth quarter and now have 3 distribution centers situated in the Heilongjiang and Liaoning provinces to better support our growing base of stores."
As we advance into 2012, we plan to slow down the pace of our new store openings. Currently, we expect to open five new supermarket or hypermarket stores this year. We maintain confidence in our strategy of strengthening our store presence in Tier 4 & 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 2011 Financial Results
Revenue in the fourth quarter of 2011 increased 20.9% to $103.7 million from $85.8 million in the fourth quarter of 2010. Revenue performance reflected the growth of 35 comparable stores, which are stores that have been open for at least one year before the beginning of the comparison period, or by October 1, 2010, as well as sales from the opening of 19 new stores since October 1, 2010. Same-store sales were approximately $83.5 million in the fourth quarter of 2011, an increase of 9.2% from $76.5 million in the fourth quarter of 2010.The 19 new stores opened since October 1, 2010 generated approximately $20.2 million in the fourth quarter of 2011.
Gross profit increased 9.1% year over year to $16.8 million, compared to $15.4 million in the prior year period. Gross profit as a percentage of revenue for the fourth quarter of 2011 was 16.2%, compared to 18.0% for the fourth quarter of 2010. The decrease in gross profit percentage was primarily attributable to increased competition and the low profit margin in our new stores.
Operating expenses increased 172.4% to $34.6 million compared to $12.7 million in the prior year period. This was primarily a result of the impairment charge on goodwill of $19.2 million.
Excluding the non cash impairment charge on goodwill, operating expenses increased 21.3% to $15.4 million compared to $12.7 million in the prior year period. This was primarily a result of additional salary, rent and utility expenses, the hiring of more employees, and other operating costs related to the Company's increased store count over the past year.
Excluding the non cash impairment charge on goodwill, operating income was $1.4 million, or 1.4% of sales, from $2.8 million, or 3.2% of total sales, in the fourth quarter of 2010.
Fourth quarter 2011 net loss was approximately $(18.3) million, or $(0.60) per diluted share, compared with net income of $2.4 million, or $0.06 per diluted share, for the same period in 2010. Excluding the non cash impairment charge on goodwill and changes in the fair value of warrants, adjusted net income for the three months ended December 31, 2011 was $0.9 million, or $0.03 per diluted share, compared to $2.4 million, or $0.06 per diluted share, in the period prior year.
As of December 31, 2011, the Company had $9.0 million in unrestricted cash and $11.0 million in short term bank loans, compared to $17.5 million as of December 31, 2010 and no debt or bank loans.
As of December 31, 2011, the Company operated 54 stores totaling 324,400 sq. meters compared to 43 stores totaling 205,976 sq. meters in the prior year period. The Company opened 1 new store location in the fourth quarter of 2011.
Full Year 2011 Financial Results
Net sales increased by $72.1 million, or 24.2%, to $370.5 million for fiscal 2011 from $298.4 million for fiscal 2010. Thirty-three comparable stores opened for at least one year before the beginning of the comparison period, or by January 1, 2010, generated approximately $298.7 million in sales in 2011, a 9.2% increase compared to $273.5 million in sales in 2010. New store sales increased, reflecting the opening of 21 new stores since January 1, 2010. Fourteen stores opened in 2011 generating approximately $38.4 million for fiscal 2011, and seven stores opened in 2010 generating approximately $26.9 million for fiscal 2011.
Gross profit increased by $10.8 million, or 20.4%, to $63.7 million, or 17.2% of net sales, in fiscal 2011 from $52.9 million, or 17.7% of net sales, in fiscal 2010. The change in gross profit was primarily attributable to net sales increased by $71.7 million in 2011 compared to 2010.
Selling expenses increased by $19.4 million, or 60.1%, to $51.7 million, or 14.0% of net sales, in fiscal 2011 from $32.3 million, or 10.8% of net sales, in fiscal 2010. The change in selling expense was mainly due to increase in labor costs, depreciation, rent expense, and utilities and other operating costs for fiscal 2011 compared with fiscal 2010 primarily due to support of an increase in store count. In particular, labor costs increased by $11.0 million or 101.9%, to $21.8 million in fiscal 2011 from $10.8 million in fiscal 2010. Depreciation increased by $2.2 million, or 64.7%, to $5.6 million in fiscal 2011 from $3.4 million in fiscal 2010. Rent expenses increased by $4.5 million, or 112.5%, to $8.5 million in fiscal 2011 from $4.0 million in fiscal 2010. Utilities increased by $2.9 million, or 65.9%, to $7.3 million in fiscal 2011 from $4.4 million in fiscal 2010.
General and administrative expenses increased by $0.3 million to $8.5 million, or 2.3% of net sales, in fiscal 2011 from $8.2 million, or 2.7% of net sales, in fiscal 2010. The increase was not material and was mainly due to the appreciation of Chinese Renminbi.
Net loss in fiscal 2011 was $(16.6) million compared with net income of $17.4 million in fiscal 2010. Excluding the impairment of goodwill and changes in the fair value of warrants, adjusted net income for fiscal 2011 decreased 72.7% to $2.6 million, or $0.07 per diluted share, from $9.6 million, or $0.24 per diluted share for fiscal 2010.
The number of weighted average shares outstanding used in the computation of diluted EPS decreased 24.1% to 30.5 million in fiscal 2011 from 40.2 million in fiscal 2010.
Restatement of EPS Results for the Year Ended December 31, 2010 and First Two Quarters of 2011
The Company also announced estimated amounts for the restatement of its earnings per share information for the fiscal year ended December 31, 2010 and the first two quarters of 2011. The Company originally filed an 8-K related to this restatement with the SEC on February 23, 2012. This restatement will have no financial impact on the Company's historically reported revenue or net income for the preceding financial reporting periods.
This restatement occurred because the Company should have calculated earnings per share for the relevant periods in accordance with ASC 260, Earnings Per Share, which requires presentation of earnings per share using the two class method when a company has securities that participate in common stock dividends. Specifically, the Company's issued and outstanding convertible preferred stock, which participates in dividends of the Company on the same basis as holders of the Company's common stock, should have been but was not included in the calculation of basic earnings per share for the relevant periods using the two class method.
A summary of the restatement, which impacts fiscal quarters ended December 31, 2010, March 31, 2011 and June 30, 2011, is as follows:
The Company will file promptly a Form 10-K/A and Forms 10-Q/A for the relevant periods reflecting the above changes.
Conference Call
The Company will conduct a conference call to discuss its fourth quarter and full year 2011 results on Monday, April 9, 2012 at 8:30 am ET. Listeners may access the call by dialing #1-719-325-4926. To listen to the live webcast of the event, please go to http://www.viavid.net. Listeners may access the call replay, which will be available through April 16th, by dialing #1-858-384-5517; conference ID: 6431584.
About QKL Stores Inc.:
Based in Daqing, China, QKL Stores, Inc. is a leading regional supermarket chain company operating in Northeastern China. 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: | ICR, Inc.
In U.S.: |
Mike Li, Investor Relations | Bill Zima |
+86-186-6228-1788 | +1-203-682-8233 |
QKL STORES INC. AND SUBSIDIARIES Consolidated Balance Sheets
| ||||||||
December 31, 2011 | December 31, 2010 | |||||||
ASSETS | ||||||||
Cash | $ | 9,037,550 | $ | 17,460,034 | ||||
Restricted cash | 253 | 77,205 | ||||||
Accounts receivable | 115,163 | 167,509 | ||||||
Inventories | 54,336,501 | 44,467,265 | ||||||
Other receivables | 11,991,134 | 28,236,397 | ||||||
Prepaid expenses | 6,085,379 | 5,088,825 | ||||||
Advances to suppliers | 10,160,552 | 3,740,327 | ||||||
Deferred income tax assets | 2,972,570 | 508,617 | ||||||
Total current assets | 94,699,102 | 99,746,179 | ||||||
Property, plant equipment, net | 43,042,136 | 24,792,149 | ||||||
Land use rights, net | 748,410 | 748,533 | ||||||
Goodwill | 26,346,942 | 43,863,929 | ||||||
Other assets | 520,559 | 467,927 | ||||||
Total assets | $ | 165,357,149 | $ | 169,618,717 | ||||
LIABILITIES AND STOCKHOLDERS' EQUITY | ||||||||
Short term bank loans | 10,998,162 | - | ||||||
Accounts payable | 28,417,894 | 38,944,917 | ||||||
Cash card and coupon liabilities | 16,024,437 | 10,814,546 | ||||||
Customer deposits received | 931,604 | 1,495,059 | ||||||
Accrued expenses and other payables | 14,328,656 | 9,883,282 | ||||||
Income taxes payable | 227,016 | 2,365,931 | ||||||
Total current liabilities | 70,927,769 | 63,503,735 | ||||||
Warrant liabilities | - | - | ||||||
Total liabilities | 70,927,769 | 63,503,735 | ||||||
Commitments and contingencies | - | - | ||||||
Shareholders' equity | ||||||||
Common stock, $.001 par value per share, authorized 100,000,000, shares, issued and outstanding 31,344,590 and 29,743,811 at December 31, 2011 and December 31, 2010, respectively | 31,345 | 29,744 | ||||||
Series A convertible preferred stock, par value $0.01, 10,000,000 shares authorized, 5,694,549 and 7,295,328 shares outstanding at December 31, 2011 and December 31, 2010, respectively | 56,945 | 72,953 | ||||||
Additional paid-in capital | 91,589,634 | 90,710,619 | ||||||
Retained earnings - appropriated | 7,282,560 | 6,012,675 | ||||||
Retained earnings | (15,758,416) | 2,094,850 | ||||||
Accumulated other comprehensive income | 11,227, 312 | 7,194,141 | ||||||
Total shareholders' equity | 94,429,380 | 106,114,982 | ||||||
Total liabilities and shareholders' equity | $ | 165,357,149 | $ | 169,618,717 | ||||
QKL STORES INC. AND SUBSIDIARIES Consolidated Statements of Operations
| ||||||||
Years Ended December 31, | ||||||||
2011 | 2010 | |||||||
Net sales | $ | 370,500,420 | $ | 298,399,394 | ||||
Cost of sales | 306,770,553 | 245,548,576 | ||||||
Gross profit | 63,729,867 | 52,850,818 | ||||||
Operating expenses: | ||||||||
Selling expenses | 51,651,713 | 32,348,721 | ||||||
General and administrative expenses | 8,543,023 | 8,151,742 | ||||||
Impairment of goodwill | 19,219,870 | - | ||||||
Total operating expenses | 79,414,606 | 40,500,463 | ||||||
(Loss) income from operations | (15,684,739) | 12,350,355 | ||||||
Non-operating income(expense): | ||||||||
Decrease in fair value of warrants | - | 7,801,649 | ||||||
Interest income | 676,186 | 670,245 | ||||||
Interest expense | (121,425) | (10,469) | ||||||
Total non-operating (loss) income | 554,761 | 8,461,425 | ||||||
(Loss) income before income tax | (15,129,978) | 20,811,780 | ||||||
Income taxes | 1,453,403 | 3,381,216 | ||||||
Net (loss) income | $ | (16,583,381) | $ | 17,430,564 | ||||
Basic (loss) earnings per share of common stock | $ | (0.54) | $ | 0.47 | ||||
Diluted (loss) earnings per share | $ | (0.54) | $ | 0.24 | ||||
Weighted average shares used in calculating net income per ordinary share - basic | 30,499,855 | 29,670,468 | ||||||
Weighted average shares used in calculating net income per ordinary share - diluted | 30,499,855 | 40,170,511 | ||||||
QKL STORES INC. AND SUBSIDIARIES Consolidated Statements of Cash Flows
| ||||||||
Years Ended December 31, | ||||||||
2011 | 2010 | |||||||
CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||
Net income | $ | (16,583,381) | $ | 17,430,564 | ||||
Depreciation-property, plant and equipment | 6,065,858 | 4,858,011 | ||||||
Amortization | 28,693 | 28,294 | ||||||
Deferred income tax | (2,403,124) | (77,850) | ||||||
Loss on disposal of property, plant and equipment | 27,310 | 180,304 | ||||||
Share-based compensation | 864,608 | 1,014,755 | ||||||
Impairment of goodwill | 19,219,870 | - | ||||||
Change in fair value of warrants | - | (7,801,649) | ||||||
Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||
Accounts receivable | 58,849 | 125,240 | ||||||
Inventories | (8,142,931) | (19,009,023) | ||||||
Other receivables | 17,341,478 | (13,821,470) | ||||||
Prepaid expenses | (833,463) | (2,038,694) | ||||||
Advances to suppliers | (6,275,018) | (2,043,610) | ||||||
Accounts payable | (12,038,941) | 8,791,436 | ||||||
Cash card and coupon liabilities | 4,790,050 | 2,853,026 | ||||||
Customer deposits received | (621,496) | (2,487,840) | ||||||
Accrued expenses and other payables | 4,069,493 | 1,748,832 | ||||||
Income taxes payable | (2,230,766) | 1,175,844 | ||||||
Net cash (used in) provided by operating activities | 3,337,089 | (9,073,830) | ||||||
CASH FLOWS FROM INVESTING ACTIVITIES: | ||||||||
Purchases of property, plant and equipment | (23,640,152) | (8,618,288) | ||||||
Acquisition of business, net | - | (23,984,428) | ||||||
Refund of office building purchase | - | 11,343,373 | ||||||
Sales proceeds of fixed assets disposal | 155,310 | 11,533 | ||||||
Decrease of restricted cash | 76,952 | 104,631 | ||||||
Net cash used in investing activities | (23,407,890) | (21,143,179) | ||||||
CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||||
Bank borrowings | 10,998,162 | - | ||||||
Net cash provided by financing activities | 10,998,162 | - | ||||||
Net increase in cash | (9,072,639) | (30,217,009) | ||||||
Effect of foreign currency translation | 650,155 | 1,764,245 | ||||||
Cash at beginning of period | 17,460,034 | 45,912,798 | ||||||
Cash at end of period | $ | 9,037,550 | $ | 17,460,034 | ||||
Supplemental disclosures of cash flow information: | ||||||||
Interest paid | 121,425 | 10,469 | ||||||
Income taxes paid | $ | 5,995,442 | $ | 2,260,343 | ||||
