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Fairway Group Holdings Corp. Reports First Quarter Fiscal 2014 Results

Forward-Looking Statements

Except for historical information contained herein, the statements in this release are forward-looking and made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements involve known and unknown risks and uncertainties and other factors that may cause Fairway's actual results in current or future periods to differ materially from forecasted results. Food retail is a large and highly competitive industry, and Fairway's business involves many risks and uncertainties, including, but not limited to: our ability to open new stores on a timely basis or at all; our ability to achieve sustained sales and profitable operating margins at new and existing stores; the availability of financing to pursue our new store openings on satisfactory terms or at all; our ability to compete effectively with other retailers; our ability to maintain price competitiveness; the geographic concentration of our stores; our ability to maintain or improve our operating margins; our history of net losses; ordering errors or product supply disruptions in the delivery of perishable products; restrictions on our use of the Fairway name other than on the East Coast and in California and certain parts of Michigan and Ohio; our ability to retain and attract senior management, key employees and qualified store-level employees; rising costs of providing employee benefits, including increased healthcare costs and pension contributions due to unfunded pension liabilities; our ability to satisfy our ongoing capital needs and unanticipated cash requirements; and other risk factors detailed in our filings with the Securities and Exchange Commission ("SEC"), and available at the SEC's website at www.sec.gov . You are urged to consider these factors carefully in evaluating the forward-looking statements herein and are cautioned not to place undue reliance on such forward-looking statements, which are qualified in their entirety by this cautionary statement. The forward-looking statements made herein speak only as of the date of this press release and the company undertakes no obligation to publicly update such forward-looking statements to reflect subsequent events or circumstances.

FAIRWAY GROUP HOLDINGS CORP. AND SUBSIDIARIES  
CONSOLIDATED BALANCE SHEETS     
(In thousands except per share amounts)  
  Quarter Ended
  March 31, 2013 June 30, 2013
     
ASSETS    
     
CURRENT ASSETS    
Cash and cash equivalents $21,723 $70,434
Accounts receivable, net  2,553 3,244
Merchandise inventories 24,759 25,606
Insurance claims receivable  5,184 1,235
Income tax receivable 817 696
Prepaid rent 3,146 4,250
Deferred financing fees 1,580 1,746
Prepaid expenses and other 5,604 4,896
Deferred income taxes 915 650
Total current assets 66,281 112,757
     
PROPERTY AND EQUIPMENT, NET 126,958 129,689
GOODWILL 95,412 95,412
INTANGIBLE ASSETS, NET  25,729 25,656
DEFERRED INCOME TAXES 3,781 1,722
OTHER ASSETS 20,340 19,655
Total assets $338,501 $384,891
     
LIABILITIES, REDEEMABLE PREFERRED STOCK AND STOCKHOLDERS' (DEFICIT) EQUITY  
     
CURRENT LIABILITIES    
Current portion of long-term debt  $2,750 $2,750
Accounts payable  39,399 34,625
Accrued expenses and other  18,360 14,686
Total current liabilities 60,509 52,061
     
NONCURRENT LIABILITIES     
Long-term debt, net of current maturities 256,563 253,281
Other long-term liabilities 22,629 24,637
Total liabilities 339,701 329,979
     
COMMITMENTS AND CONTINGENCIES  
     
REDEEMABLE PREFERRED STOCK    
Series A Preferred Stock, $0.001 par value per share, 52,982 shares authorized at March 31, 2013 and 0 shares authorized at June 30, 2013 and 43,058 shares issued and outstanding at March 31, 2013 and 0 shares issued and outstanding at June 30, 2013 (inclusive of cumulative deemed dividends of $28,353 and $0 at March 31, 2013 and June 30, 2013, respectively) 84,328  -- 
Series B Preferred Stock, $0.001 par value per share, 64,018 shares authorized at March 31, 2013 and 0 shares authorized at June 30, 2013 and 64,016.98 shares issued and outstanding at March 31, 2013 and 0 shares issued and outstanding at June 30, 2013 (inclusive of cumulative deemed dividends of $85,899 and $0 at March 31, 2013 and June 30, 2013, respectively) 149,916  -- 
Total redeemable preferred stock 234,244  -- 
STOCKHOLDERS' (DEFICIT) EQUITY  
Class A Common stock, $0.00001 par value per share, 150,000,000 shares authorized,12,506,885 and 26,043,479 shares issued at March 31, 2013 and June 30, 2013,  respectively   --   -- 
Class B Common stock, $0.001 par value per share, 31,000,000 shares authorized, 0 shares and 15,470,720 shares issued and outstanding at March 31, 2013 and June 30, 2013, respectively  --   15
Treasury stock at cost, 136,485 shares at March 31, 2013 and June 30, 2013 (1,500) (1,500)
Additional paid-in capital  --  362,417
Accumulated deficit (233,944) (306,020)
Total stockholders' (deficit) equity (235,444) 54,912
Total liabilities, redeemable preferred stock and stockholders' (deficit) equity $338,501 $384,891
     
FAIRWAY GROUP HOLDINGS CORP. AND SUBSIDIARIES    
CONSOLIDATED STATEMENT OF OPERATIONS (Unaudited)    
(In thousands except share and per share amounts)    
  Quarter Ended 
  July 1, June 30,
  2012 2013
Net sales $154,683 $186,778
     
Cost of sales and occupancy costs (exclusive of depreciation and amortization) 103,996 125,378
Gross profit  50,687 61,400
Direct store expenses 34,484 44,132
General and administrative expenses 12,421 33,942
Store opening costs 5,774 2,986
Production center start-up costs  --  498
Loss from operations  (1,992) (20,158)
Interest expense, net (4,584) (5,385)
Loss before income taxes (6,576) (25,543)
Income tax benefit (provision) 2,695 (2,403)
Net loss (3,881) (27,946)
Preferred stock dividends  6,682 44,130
Net loss attributable to common stock holders  ($10,563) ($72,076)
Basic and diluted loss per common share  ($0.86) ($2.11)
Weighted average common shares outstanding  12,309,976 34,198,047
     
FAIRWAY GROUP HOLDINGS CORP. AND SUBSIDIARIES    
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)    
($ in thousands)    
  Quarter Ended 
  July 1, June 30,
  2012 2013
     
CASH FLOWS FROM OPERATING ACTIVITIES    
Net loss ($3,881) ($27,946)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities    
Deferred income taxes (2,695) 2,324
Deferred rent 3,106 1,997
Depreciation and amortization of property and equipment 4,347 6,238
Amortization of intangibles 70 73
Amortization of discount on term loans and subordinated notes 96 775
Amortization of deferred financing fees 297 423
Amortization of prepaid rent 78 80
Non-cash stock compensation expense 26 2,055
Changes in operating assets and liabilities    
Accounts receivable (510) (691)
Merchandise inventories  (2,410) (847)
Insurance claims receivable  --  3,949
Prepaid expense and other (3,734) (440)
Other assets (2,416) 681
Accounts payable 6,186 (4,774)
Accrued expenses and other (524) (3,664)
     
Net cash used in operating activities (1,964) (19,767)
     
CASH FLOWS FROM INVESTING ACTIVITIES    
Capital expenditures (16,338) (8,969)
     
Net cash used in investing activities (16,338) (8,969)
     
CASH FLOWS FROM FINANCING ACTIVITIES    
Payments on long-term debt (500) (688)
Proceeds from common shares issued in initial public offering, net of issuance costs  --  158,822
Dividends paid on preferred stock   --  (76,818)
Issuance costs from debt re-pricing   --   (3,869)
     
Net cash (used in) provided by financing activities (500) 77,447
     
Net (decrease) increase in cash and cash equivalents (18,802) 48,711
Cash and cash equivalents – beginning of period 30,172 21,723
Cash and cash equivalents – end of period $11,370 $70,434
Cash paid during the period for     
Interest  $4,287 $4,264
Income taxes  $32  -- 
CONTACT: Fairway Group Holdings Corp.
         Nicholas Gutierrez
         Manager of Finance & Investor Relations
         (646) 616-8103
         nicholas.gutierrez@fairwaymarket.com

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