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Fairway Group Holdings Corp. Reports First Quarter Fiscal 2014 Results

General and administrative expenses in the quarter increased $21.5 million to $33.9 million from $12.4 million in the first quarter of the prior year. The increase was primarily due to $18.1 million of expenses related to the IPO, an increase in equity compensation charges of approximately $2.0 million and an increase in public company costs of approximately $0.3 million.

Central Services, a component of general and administrative expenses that directly relate to the operation of our business, increased $1.5 million, or 18%, in the first quarter of fiscal 2014 to $9.9 million from $8.4 million in the first quarter of the prior year. The increase is primarily due to the continued investments in management, information technology systems, infrastructure, marketing and compliance to support the continued execution of our growth as well as an increase in public company costs. Central Services, as a percentage of sales, declined 10 basis points in the first quarter to 5.3% and excluding the public company costs, declined 20 basis points year over year. 

The following table sets forth a reconciliation to Central Services from General and Administrative expenses:
Central Services Reconciliation ($ in millions, % of net sales)
   13 weeks    13 weeks 
Quarter Ended: July 1, 2012 June 30, 2013
General & administrative expenses  $ 12.4 8.0%  $ 33.9 18.2%
Management agreement termination   --  0.0%  9.2 4.9%
Contractual IPO bonuses  --  0.0%  8.1 4.3%
Other IPO related expenses  --  0.0%  0.8 0.4%
(--) Sub-total IPO transaction expenses   --  0.0%  18.1 9.7%
(--) Management fees  0.8 0.5%  0.9 0.5%
(--) Non-recurring items  1.6 1.0%  0.9 0.5%
(--) Corporate depreciation & amortization   1.0 0.6%  1.1 0.6%
(--) Equity compensation charge   0.0 0.0%  2.1 1.1%
(--) Pre-opening advertising costs  0.7 0.5%  1.0 0.5%
Central Services  $ 8.4 5.4%  $ 9.9 5.3%

Store-opening costs in the first quarter included approximately $2.9 million for our Chelsea location which opened in July 2013 and $0.1 million for the Nanuet, New York location expected to open in the fall of 2013. These expenses decreased to $3.0 million from $5.8 million in the first quarter of the prior year. In addition, the Company incurred $0.5 million of start-up costs for the new production center. Approximately $0.8 million and $0.5 million of store opening and production center start-up costs in the first quarter of fiscal 2014 and in the first quarter of fiscal 2013, respectively, were non-cash charges primarily due to deferred rent.

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