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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 fiscal year increased 36% to $60.2 million from $44.3 million in the prior year. The increase was attributable to Fairway's continued investment in central infrastructure to support the execution of Fairway's growth strategy, and an increase in non-recurring expenses, including IPO related expenses of approximately $1.6 million and transaction expenses related to the senior credit facilities entered into in August 2012 and February 2013, of approximately $5.0 million.

Central Services 2 for the fiscal year increased 7% to $36.4 million from $34.1 million in the prior year. The Company has continued to leverage this expense, which declined, as a percentage of sales, 64 basis points to 5.5% in fiscal 2013 from 6.1% in 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 84 basis points to 5.3% in fiscal 2013. 1

Central Services Reconciliation ($ in millions, % of net sales)
   FY 2012   FY 2013 
General & Administrative $44.3 8.0% $60.2 9.1%
(-) Corporate depreciation & amortization   (5.7) -1.0%  (4.5) -0.7%
(-) Management fees  (2.6) -0.5%  (3.5) -0.5%
(-) Non-recurring expenses  (4.1) -0.7%  (12.5) -1.9%
(-) Equity compensation charge   (0.4) -0.1%  (0.1) 0.0%
(-) Pre-opening advertising  --  0.0%  (3.2) -0.5%
Central Services  31.4 5.7%  36.4 5.5%
(+) Re-class geography  2.7 0.5%  --  0.0%
Central Services $34.1 6.1% $36.4 5.5%
Note: In the fiscal year ended April 1, 2012, pre-opening advertising is included in store opening costs.

In fiscal 2013, the Company incurred a net loss of $62.9 million, compared to a net loss of $11.9 million in fiscal 2012. Net loss in fiscal 2013 includes a tax provision of $25.8 million which provides for a valuation allowance on deferred tax assets.

Net Loss Reconciliation ($ in millions, % of net sales)
   FY 2012   FY 2013 
Net Loss ($11.9) -2.2% ($62.9) -9.5%
Adjustments to net loss:        
(+) Non-recurring expenses   4.1 0.7%  12.5 1.9%
(+) Management fees  2.6 0.5%  3.5 0.5%
(+) Non-cash interest   1.4 0.3%  2.9 0.4%
(+) Equity compensation charge   0.4 0.1%  0.1 0.0%
(+) Income tax (benefit) expense  (8.3) -1.5%  25.8 3.9%
Adjusted Net Loss ($11.6) -2.1% ($18.0) -2.7%


(1) The Company's Red Hook, Brooklyn location was temporarily closed beginning October 29, 2012 due to damage sustained in Hurricane Sandy. The store re-opened on March 1, 2013. As a result, net sales for the quarter ended March 31, 2013 reflect a pro forma adjustment of $12.3 million based on the Red Hook location's net sales during the same 9 week period in the prior fiscal year and net sales for the fiscal year ended March 31, 2013 reflect a pro forma adjustment of $25.0 million based on net sales for the same 18 week period in the prior fiscal year.

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