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Fairway Group Holdings Corp. Reports Second Quarter Results

Stocks in this article: FWM

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 share and per share amounts)
 
  March 31, 2013 September 29, 2013
    (Unaudited)
ASSETS    
CURRENT ASSETS    
Cash and cash equivalents $ 21,723 $ 58,802
Accounts receivable, net 2,553 5,200
Merchandise inventories 24,759 25,601
Insurance claims receivable 5,184 1,300
Income tax receivable 817 661
Prepaid rent 3,146 3,562
Deferred financing fees 1,580 1,743
Prepaid expenses and other 5,604 4,187
Deferred income taxes 915 443
Total current assets 66,281 101,499
PROPERTY AND EQUIPMENT, NET 126,958 140,767
GOODWILL 95,412 95,412
INTANGIBLE ASSETS, NET 25,729 25,582
DEFERRED INCOME TAXES 3,781 1,162
OTHER ASSETS 20,340 19,311
Total assets $ 338,501 $ 383,733
LIABILITIES, REDEEMABLE PREFERRED STOCK AND STOCKHOLDERS' (DEFICIT) EQUITY    
CURRENT LIABILITIES    
Current portion of long-term debt $ 2,750 $ 2,750
Accounts payable 39,399 39,951
Accrued expenses and other 18,360 15,440
Total current liabilities 60,509 58,141
NONCURRENT LIABILITIES    
Long-term debt, net of current maturities 256,563 253,423
Other long-term liabilities 22,629 26,712
Total liabilities 339,701 338,276
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 September 29, 2013 and 43,058 shares issued and outstanding at March 31, 2013 and 0 shares issued and outstanding at September 29, 2013 (inclusive of cumulative deemed dividends of $28,353 and $0 at March 31, 2013 and September 29, 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 September 29, 2013 and 64,016.98 shares issued and outstanding at March 31, 2013 and 0 shares issued and outstanding at September 29, 2013 (inclusive of cumulative deemed dividends of $85,899 and $0 at March 31, 2013 and September 29, 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 September 29, 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 September 29, 2013, respectively 15
Treasury stock at cost, 136,485 shares and 132,858 shares at March 31, 2013 and September 29, 2013, respectively (1,500) (1,460)
Additional paid-in capital 365,146
Accumulated deficit (233,944) (318,244)
Total stockholders' (deficit) equity (235,444) 45,457
Total liabilities, redeemable preferred stock and stockholders' (deficit) equity $ 338,501 $ 383,733
 
 
FAIRWAY GROUP HOLDINGS CORP. AND SUBSIDIARIES
Consolidated Statements of Operations
(In thousands, except share and per share amounts)
(Unaudited)
 
  Thirteen Weeks Ended Twenty-Six Weeks Ended
  September 30, 2012 September 29, 2013 September 30, 2012 September 29, 2013
         
Net sales $ 160,510 $ 183,215 $ 315,193 $ 369,993
         
Cost of sales and occupancy costs (exclusive of depreciation and amortization) 108,631 123,845 212,627 249,223
         
Gross profit 51,879 59,370 102,566 120,770
         
Direct store expenses 38,504 45,470 72,988 89,602
         
General and administrative expenses 15,773 15,067 28,194 49,009
         
Store opening costs 5,530 3,911 11,304 6,897
         
Production center start-up costs 1,343 1,841
         
Loss from operations (7,928) (6,421) (9,920) (26,579)
         
Interest expense, net (5,785) (4,999) (10,369) (10,384)
         
Loss before income taxes (13,713) (11,420) (20,289) (36,963)
         
Income tax benefit (provision) 5,886 (804) 8,581 (3,207)
         
Net loss (7,827) (12,224) (11,708) (40,170)
         
Preferred stock dividends 8,064 14,746 44,130
         
Net loss attributable to common stockholders $ (15,891) $ (12,224) $ (26,454) $ (84,300)
         
Basic and diluted loss per common share $ (1.29) $ (0.30) $ (2.15) $ (2.23)
         
Weighted average common shares outstanding 12,331,157 41,248,805 12,320,567 37,723,426
 
 
FAIRWAY GROUP HOLDINGS CORP. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)
 
  Twenty-Six Weeks Ended
  September 30, 2012 September 29, 2013
CASH FLOWS FROM OPERATING ACTIVITIES    
Net loss $ (11,708) $ (40,170)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities    
Deferred income taxes (8,677) 3,091
Deferred rent 4,411 3,979
Depreciation and amortization of property and equipment 9,830 12,656
Amortization of intangibles 141 147
Amortization of discount on term loans and subordinated notes 409 1,606
Amortization of deferred financing fees 624 860
Amortization of prepaid rent 159 159
Non-cash stock compensation expense 28 4,824
Changes in operating assets and liabilities    
Accounts receivable (1,211) (2,647)
Merchandise inventories (3,005) (842)
Insurance claims receivable 3,884
Prepaid expense and other (3,266) 994
Other assets (2,132) 507
Accounts payable 7,010 552
Accrued expenses and other 1,902 (2,925)
Other long-term liabilities 203 109
Net cash used in operating activities (5,282) (13,216)
CASH FLOWS FROM INVESTING ACTIVITIES    
Capital expenditures (31,363) (26,465)
Net cash used in investing activities (31,363) (26,465)
CASH FLOWS FROM FINANCING ACTIVITIES    
Proceeds from long-term debt, net 256,225
Payments on long-term debt (208,125) (1,375)
Proceeds from common shares issued in initial public offering, net of issuance costs 158,821
Cash dividends paid on preferred stock (76,818)
Issuance costs from debt re-pricing (3,868)
Net cash provided by financing activities 48,100 76,760
Net increase in cash and cash equivalents 11,455 37,079
Cash and cash equivalents — beginning of period 30,172 21,723
Cash and cash equivalents — end of period $ 41,627 $ 58,802
Cash paid during the period for    
Interest $ 7,140 $ 7,722
Income taxes $ 135 $ 2
CONTACT: Fairway Group Holdings Corp.
         Nicholas Gutierrez
         Manager of Finance & Investor Relations
         (646) 616-8103
         nicholas.gutierrez@fairwaymarket.com

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