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Fairway Group Holdings Corp. Reports Fourth Quarter And Full Year Fiscal 2013 Results

Stocks in this article: FWM

General and administrative expenses for the fourth quarter increased 29% to $17.7 million from $13.7 million in the fourth quarter of the prior year. The increase was attributable to the continued investment in central infrastructure to support the execution of the Company's growth strategy, and in increase in non-recurring expenses, including transaction expenses related to the Company's senior credit facility of approximately $2.1 million and approximately $0.3 million of expenses related to the initial public offering.

Central Services, 2 a component of general and administrative expenses, increased 14% in the fourth quarter to $10.8 million from $9.4 million in the fourth quarter of the prior year. The Company has continued to leverage this infrastructure investment, which, as a percentage of sales, declined 24 basis points to 6.0% in the fourth quarter from 6.3% in the fourth quarter of the prior year. On a pro forma basis to include the estimated lost sales at the Red Hook, Brooklyn location, central services, as a percentage of sales, declined 63 basis points to 5.7% in the fourth quarter from 6.3% in the fourth quarter of the prior year. 1

 
Central Services Reconciliation ($ in millions, % of net sales)
     
Quarter Ended: April 1, 2012 March 31, 2013
         
CENTRAL SERVICES        
General & Administrative $13.7 9.1% $17.7 9.9%
(-) Corporate depreciation & amortization  (1.4) -0.9%  (1.1) -0.6%
(-) Management fees  (1.1) -0.7%  (0.9) -0.5%
(-) Non-recurring expenses  (1.6) -1.1%  (4.4) -2.5%
(-) Equity compensation charge   (0.1) -0.1%  (0.0) 0.0%
(-) Pre-opening advertising  --  0.0%  (0.5) -0.3%
Central Services $9.4 6.3% $10.8 6.0%
         
Note: In the fiscal quarter ended April 1, 2012, pre-opening advertising is included in store opening costs.

For the fourth quarter, the Company had a net loss of $6.7 million, compared to a net loss of $2.0 million in the fourth quarter of fiscal 2012. Net loss in the fiscal 2013 fourth quarter includes the effect of a deferred tax valuation allowance of $2 million.

 
Net Loss Reconciliation ($ in millions, % of net sales)
     
Quarter Ended: April 1, 2012 March 31, 2013
         
Net Loss ($2.0) -1.3% ($6.7) -3.7%
         
Adjustments to net loss:        
(+) Non-recurring expenses   1.6 1.1%  4.4 2.5%
(+) Management fees  1.1 0.7%  0.9 0.5%
(+) Non-cash interest   0.4 0.3%  1.0 0.6%
(+) Equity compensation charge   0.1 0.1%  0.0 0.0%
(+) Income tax benefit  (1.4) -0.9%  (0.7) -0.4%
Adjusted Net Loss ($0.1) 0.0% ($1.1) -0.6%

Operating Results for the Full Year Fiscal 2013

Net sales increased 19% to $661.2 million in fiscal 2013 from $554.9 million in fiscal 2012. Excluding the Red Hook, Brooklyn store for the full fiscal year in both periods, net sales increased 27% over the prior year. Comparable store sales declined 1.9% as a result of sales transferred to newly opened stores and the Company's price optimization initiative.

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