UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
☒ |
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended October 29, 2022
OR
☐ |
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from ____________ to ____________
Commission File Number: 001-40204
JOANN Inc.
(Exact name of registrant as specified in its charter)
Delaware |
46-1095540 |
(State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer |
|
|
5555 Darrow Road, Hudson, Ohio |
44236 |
(Address of principal executive offices) |
(Zip Code) |
Registrant’s telephone number, including area code: (330) 656-2600
Securities registered pursuant to Section 12(b) of the Act:
Title of each class |
|
Trading Symbol(s) |
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Name of each exchange on which registered |
Common stock, par value $0.01 per share |
|
JOAN |
|
The Nasdaq Global Market |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer |
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☐ |
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Accelerated filer |
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☐ |
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Non-accelerated filer |
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☒ |
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Smaller reporting company |
|
☐ |
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Emerging growth company |
|
☐ |
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|
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
As of December 9, 2022, the registrant had 40,786,993 shares of common stock, par value $0.01 per share, outstanding.
Table of Contents
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Page |
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1 |
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PART I. |
2 |
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Item 1. |
2 |
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2 |
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3 |
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4 |
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5 |
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7 |
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Item 2. |
Management’s Discussion and Analysis of Financial Condition and Results of Operations |
15 |
Item 3. |
24 |
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Item 4. |
24 |
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PART II. |
25 |
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Item 1. |
25 |
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Item 1A. |
25 |
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Item 2. |
25 |
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Item 3. |
25 |
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Item 4. |
25 |
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Item 5. |
25 |
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Item 6. |
26 |
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27 |
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FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. We intend such forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained in Section 27A of the Securities Act of 1933, as amended (the “Securities Act”) and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). You can generally identify forward-looking statements by our use of forward-looking terminology such as “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “might,” “plan,” “potential,” “predict,” “seek,” “vision,” “should,” or the negative thereof or other variations thereon or comparable terminology. Forward-looking statements include those we make regarding the following matters:
The preceding list is not intended to be an exhaustive list of all of our forward-looking statements. We have based these forward-looking statements on our current expectations, assumptions, estimates and projections. While we believe these expectations, assumptions, estimates and projections are reasonable, such forward-looking statements are only predictions and involve known and unknown risks and uncertainties, many of which are beyond our control. Furthermore, the potential impact of the COVID-19 pandemic on our business operations and financial results and on the world economy as a whole may heighten the risks and uncertainties that affect our forward-looking statements. Given these risks and uncertainties, you are cautioned not to place undue reliance on such forward-looking statements. The forward-looking statements included elsewhere in this Quarterly Report on Form 10-Q are not guarantees of future performance, and our actual results of operations, financial condition and liquidity and the development of the industry in which we operate may differ materially from the forward-looking statements included elsewhere in this Quarterly Report on Form 10-Q. In addition, even if our results of operations, financial condition and liquidity and events in the industry in which we operate are consistent with the forward-looking statements included elsewhere in this Quarterly Report on Form 10-Q, they may not be predictive of results or developments in future periods. Any forward-looking statement that we make in this Quarterly Report on Form 10-Q speaks only as of the date of such statement. Except as required by law, we do not undertake any obligation to update or revise, or to publicly announce any update or revision to, any of the forward-looking statements, whether as a result of new information, future events or otherwise, after the date of this Quarterly Report on Form 10-Q.
1
PART I—FINANCIAL INFORMATION
Item 1. Financial Statements.
JOANN Inc.
Consolidated Balance Sheets
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(Unaudited) |
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||||||
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October 29, |
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October 30, |
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January 29, |
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|||
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(In millions) |
|
|||||||||
Assets |
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|||
Current assets: |
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|
|
|
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|
|
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|||
Cash and cash equivalents |
|
$ |
27.5 |
|
|
$ |
30.9 |
|
|
$ |
22.5 |
|
Inventories |
|
|
747.0 |
|
|
|
744.3 |
|
|
|
658.6 |
|
Prepaid expenses and other current assets |
|
|
79.6 |
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|
|
82.6 |
|
|
|
39.2 |
|
Total current assets |
|
|
854.1 |
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|
|
857.8 |
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720.3 |
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|||
Property, equipment and leasehold improvements, net |
|
|
295.8 |
|
|
|
261.1 |
|
|
|
256.8 |
|
Operating lease assets |
|
|
802.6 |
|
|
|
842.1 |
|
|
|
818.0 |
|
Goodwill, net |
|
|
162.0 |
|
|
|
162.0 |
|
|
|
162.0 |
|
Intangible assets, net |
|
|
369.3 |
|
|
|
372.1 |
|
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|
370.3 |
|
Other assets |
|
|
40.9 |
|
|
|
26.8 |
|
|
|
34.8 |
|
Total assets |
|
$ |
2,524.7 |
|
|
$ |
2,521.9 |
|
|
$ |
2,362.2 |
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|||
Liabilities and Shareholders’ Equity |
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|||
Current liabilities: |
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|
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|
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|||
Accounts payable |
|
$ |
270.3 |
|
|
$ |
311.3 |
|
|
$ |
253.8 |
|
Accrued expenses |
|
|
123.4 |
|
|
|
128.6 |
|
|
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142.4 |
|
Current portion of operating lease liabilities |
|
|
162.4 |
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|
176.7 |
|
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173.8 |
|
Current portion of long-term debt |
|
|
6.8 |
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|
|
6.8 |
|
|
|
6.8 |
|
Total current liabilities |
|
|
562.9 |
|
|
|
623.4 |
|
|
|
576.8 |
|
|
|
|
|
|
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|
|
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|||
Long-term debt, net |
|
|
1,062.4 |
|
|
|
853.8 |
|
|
|
778.6 |
|
Long-term operating lease liabilities |
|
|
735.5 |
|
|
|
758.2 |
|
|
|
733.0 |
|
Long-term deferred income taxes |
|
|
89.3 |
|
|
|
91.2 |
|
|
|
87.7 |
|
Other long-term liabilities |
|
|
31.3 |
|
|
|
48.7 |
|
|
|
36.3 |
|
|
|
|
|
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|
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|||
Shareholders’ equity: |
|
|
|
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Common stock, stated value $0.01 per share; 200.0 million authorized; issued 44.1 million shares at October 29, 2022, October 30, 2021 and January 29, 2022 |
|
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0.4 |
|
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0.4 |
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0.4 |
|
Additional paid-in capital |
|
|
208.4 |
|
|
|
203.6 |
|
|
|
203.3 |
|
Retained (deficit) |
|
|
(148.1 |
) |
|
|
(34.4 |
) |
|
|
(24.9 |
) |
Accumulated other comprehensive income |
|
|
11.4 |
|
|
|
1.1 |
|
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|
1.8 |
|
Treasury stock at cost; 3.3 million shares at October 29, 2022, 2.9 million shares at October 30, 2021 and 3.5 million shares at January 29, 2022 |
|
|
(28.8 |
) |
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|
(24.1 |
) |
|
|
(30.8 |
) |
Total shareholders’ equity |
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|
43.3 |
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|
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146.6 |
|
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149.8 |
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Total liabilities and shareholders’ equity |
|
$ |
2,524.7 |
|
|
$ |
2,521.9 |
|
|
$ |
2,362.2 |
|
See notes to unaudited consolidated financial statements.
2
JOANN Inc.
Consolidated Statements of Comprehensive Income (Loss)
(Unaudited)
|
|
Thirteen Weeks Ended |
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Thirty-Nine Weeks Ended |
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October 29, |
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October 30, |
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October 29, |
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October 30, |
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||||
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(In millions except per share data) |
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|||||||||||||
Net sales |
|
$ |
562.8 |
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|
$ |
611.0 |
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$ |
1,524.1 |
|
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$ |
1,682.3 |
|
Cost of sales |
|
|
281.8 |
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|
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292.2 |
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787.5 |
|
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794.0 |
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Selling, general and administrative expenses |
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269.0 |
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257.6 |
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786.6 |
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|
754.5 |
|
Depreciation and amortization |
|
|
19.9 |
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|
|
19.6 |
|
|
|
59.9 |
|
|
|
60.1 |
|
Operating profit (loss) |
|
|
(7.9 |
) |
|
|
41.6 |
|
|
|
(109.9 |
) |
|
|
73.7 |
|
Interest expense, net |
|
|
18.1 |
|
|
|
11.8 |
|
|
|
42.5 |
|
|
|
39.8 |
|
Debt related loss, net |
|
|
— |
|
|
|
— |
|
|
|
— |
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|
|
3.0 |
|
Investment remeasurement |
|
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(2.0 |
) |
|
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— |
|
|
|
(1.0 |
) |
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|
— |
|
Gain on sale leaseback |
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— |
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|
|
— |
|
|
|
— |
|
|
|
(24.5 |
) |
Income (loss) before income taxes |
|
|
(24.0 |
) |
|
|
29.8 |
|
|
|
(151.4 |
) |
|
|
55.4 |
|
Income tax provision (benefit) |
|
|
(6.5 |
) |
|
|
7.0 |
|
|
|
(41.9 |
) |
|
|
12.3 |
|
Net income (loss) |
|
$ |
(17.5 |
) |
|
$ |
22.8 |
|
|
$ |
(109.5 |
) |
|
$ |
43.1 |
|
|
|
|
|
|
|
|
|
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|
||||
Other comprehensive income (loss): |
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|
|
|
|
|
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|
||||
Foreign currency translation |
|
|
(0.1 |
) |
|
|
— |
|
|
|
(0.1 |
) |
|
|
— |
|
Cash flow hedges |
|
|
13.9 |
|
|
|
1.4 |
|
|
|
13.0 |
|
|
|
1.8 |
|
Income tax (provision) on cash flow hedges |
|
|
(3.5 |
) |
|
|
(0.3 |
) |
|
|
(3.3 |
) |
|
|
(0.4 |
) |
Other comprehensive income |
|
|
10.3 |
|
|
|
1.1 |
|
|
|
9.6 |
|
|
|
1.4 |
|
Comprehensive income (loss) |
|
$ |
(7.2 |
) |
|
$ |
23.9 |
|
|
$ |
(99.9 |
) |
|
$ |
44.5 |
|
|
|
|
|
|
|
|
|
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|
|
|
|
||||
Earnings (loss) per common share: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Basic |
|
$ |
(0.43 |
) |
|
$ |
0.55 |
|
|
$ |
(2.69 |
) |
|
$ |
1.06 |
|
Diluted |
|
$ |
(0.43 |
) |
|
$ |
0.53 |
|
|
$ |
(2.69 |
) |
|
$ |
1.02 |
|
Weighted-average common shares outstanding: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Basic |
|
|
40.8 |
|
|
|
41.7 |
|
|
|
40.7 |
|
|
|
40.8 |
|
Diluted |
|
|
40.8 |
|
|
|
43.1 |
|
|
|
40.7 |
|
|
|
42.1 |
|
See notes to unaudited consolidated financial statements.
3
JOANN Inc.
Consolidated Statements of Cash Flows
(Unaudited)
|
|
Thirty-Nine Weeks Ended |
|
|||||
|
|
October 29, |
|
|
October 30, |
|
||
|
|
(In millions) |
|
|||||
Net cash provided by (used for) operating activities: |
|
|
|
|
|
|
||
Net income (loss) |
|
$ |
(109.5 |
) |
|
$ |
43.1 |
|
Adjustments to reconcile net income (loss) to net cash (used for) |
|
|
|
|
|
|
||
Non-cash operating lease expense |
|
|
127.0 |
|
|
|
120.8 |
|
Depreciation and amortization |
|
|
59.9 |
|
|
|
60.1 |
|
Deferred income taxes |
|
|
(1.7 |
) |
|
|
3.4 |
|
Stock-based compensation expense |
|
|
6.1 |
|
|
|
2.1 |
|
Amortization of deferred financing costs and original issue discount |
|
|
1.5 |
|
|
|
2.0 |
|
Debt related loss, net |
|
|
— |
|
|
|
3.0 |
|
Investment remeasurement |
|
|
(1.0 |
) |
|
|
— |
|
Gain on sale leaseback |
|
|
— |
|
|
|
(24.5 |
) |
Loss (gain) on disposal and impairment of fixed and operating lease assets |
|
|
0.3 |
|
|
|
(0.1 |
) |
Changes in operating assets and liabilities: |
|
|
|
|
|
|
||
(Increase) in inventories |
|
|
(88.4 |
) |
|
|
(188.4 |
) |
(Increase) in prepaid expenses and other current assets |
|
|
(39.3 |
) |
|
|
(11.0 |
) |
Increase in accounts payable |
|
|
16.5 |
|
|
|
61.2 |
|
(Decrease) in accrued expenses |
|
|
(16.4 |
) |
|
|
(45.4 |
) |
(Decrease) in operating lease liabilities |
|
|
(120.6 |
) |
|
|
(144.6 |
) |
(Decrease) in other long-term liabilities |
|
|
(13.1 |
) |
|
|
(6.0 |
) |
Other, net |
|
|
5.1 |
|
|
|
0.7 |
|
Net cash (used for) operating activities |
|
|
(173.6 |
) |
|
|
(123.6 |
) |
Net cash provided by (used for) investing activities: |
|
|
|
|
|
|
||
Capital expenditures |
|
|
(80.4 |
) |
|
|
(42.9 |
) |
Proceeds from sale leaseback |
|
|
— |
|
|
|
48.1 |
|
Other investing activities |
|
|
(4.3 |
) |
|
|
(0.2 |
) |
Net cash provided by (used for) investing activities |
|
|
(84.7 |
) |
|
|
5.0 |
|
Net cash provided by (used for) financing activities: |
|
|
|
|
|
|
||
Term loan proceeds, net of original issue discount |
|
|
— |
|
|
|
671.6 |
|
Term loan payments |
|
|
(5.1 |
) |
|
|
(708.0 |
) |
Borrowings on revolving credit facility |
|
|
544.1 |
|
|
|
429.9 |
|
Payments on revolving credit facility |
|
|
(256.1 |
) |
|
|
(318.9 |
) |
Purchase and retirement of debt |
|
|
— |
|
|
|
(0.9 |
) |
Principal payments on finance lease obligations |
|
|
(7.1 |
) |
|
|
(5.4 |
) |
Issuance of common stock, net of underwriting commissions and offering costs |
|
|
— |
|
|
|
76.9 |
|
Purchase of common stock |
|
|
— |
|
|
|
(10.8 |
) |
Proceeds from employee stock purchase plan and exercise of stock options |
|
|
1.1 |
|
|
|
— |
|
Payments of taxes related to the net issuance of team member stock awards |
|
|
(0.1 |
) |
|
|
— |
|
Dividends paid |
|
|
(13.4 |
) |
|
|
(8.4 |
) |
Financing fees paid |
|
|
— |
|
|
|
(3.9 |
) |
Net cash provided by financing activities |
|
|
263.4 |
|
|
|
122.1 |
|
Effect of exchange rate changes on cash |
|
|
(0.1 |
) |
|
|
— |
|
Net increase in cash and cash equivalents |
|
|
5.0 |
|
|
|
3.5 |
|
Cash and cash equivalents at beginning of period |
|
|
22.5 |
|
|
|
27.4 |
|
Cash and cash equivalents at end of period |
|
$ |
27.5 |
|
|
$ |
30.9 |
|
Cash paid (received) during the period for: |
|
|
|
|
|
|
||
Interest |
|
$ |
39.6 |
|
|
$ |
38.6 |
|
Income taxes, net of refunds |
|
|
(6.6 |
) |
|
|
17.2 |
|
See notes to unaudited consolidated financial statements.
4
JOANN Inc.
(Unaudited)
|
|
Net |
|
|
Treasury |
|
|
|
Common |
|
|
Additional |
|
|
Treasury |
|
|
Retained |
|
|
Accumulated |
|
|
Total |
|
||||||||
|
|
(In millions) |
|
||||||||||||||||||||||||||||||
Balance, January 29, 2022 |
|
|
40.6 |
|
|
|
3.5 |
|
|
|
$ |
0.4 |
|
|
$ |
203.3 |
|
|
$ |
(30.8 |
) |
|
$ |
(24.9 |
) |
|
$ |
1.8 |
|
|
$ |
149.8 |
|
Net (loss) |
|
|
— |
|
|
|
— |
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(35.1 |
) |
|
|
— |
|
|
|
(35.1 |
) |
Other comprehensive income |
|
|
— |
|
|
|
— |
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
3.5 |
|
|
|
3.5 |
|
Dividends – $0.11 per share |
|
|
— |
|
|
|
— |
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(4.5 |
) |
|
|
— |
|
|
|
(4.5 |
) |
Stock-based compensation |
|
|
— |
|
|
|
— |
|
|
|
|
— |
|
|
|
1.0 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
1.0 |
|
Exercise of stock options |
|
|
— |
|
|
|
— |
|
|
|
|
— |
|
|
|
0.1 |
|
|
|
0.3 |
|
|
|
— |
|
|
|
— |
|
|
|
0.4 |
|
Vesting of restricted stock units |
|
|
0.1 |
|
|
|
(0.1 |
) |
|
|
|
— |
|
|
|
(0.7 |
) |
|
|
0.6 |
|
|
|
— |
|
|
|
— |
|
|
|
(0.1 |
) |
Balance, April 30, 2022 |
|
|
40.7 |
|
|
|
3.4 |
|
|
|
$ |
0.4 |
|
|
$ |
203.7 |
|
|
$ |
(29.9 |
) |
|
$ |
(64.5 |
) |
|
$ |
5.3 |
|
|
$ |
115.0 |
|
Net (loss) |
|
|
— |
|
|
|
— |
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(56.9 |
) |
|
|
— |
|
|
|
(56.9 |
) |
Other comprehensive (loss) |
|
|
— |
|
|
|
— |
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(4.2 |
) |
|
|
(4.2 |
) |
Dividends – $0.11 per share |
|
|
— |
|
|
|
— |
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(4.6 |
) |
|
|
— |
|
|
|
(4.6 |
) |
Stock-based compensation |
|
|
— |
|
|
|
— |
|
|
|
|
— |
|
|
|
1.2 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
1.2 |
|
Vesting of restricted stock units |
|
|
— |
|
|
|
— |
|
|
|
|
— |
|
|
|
(0.2 |
) |
|
|
0.2 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Employee stock purchase plan purchases |
|
|
0.1 |
|
|
|
(0.1 |
) |
|
|
|
— |
|
|
|
(0.2 |
) |
|
|
0.9 |
|
|
|
— |
|
|
|
— |
|
|
|
0.7 |
|
Balance, July 30, 2022 |
|
|
40.8 |
|
|
|
3.3 |
|
|
|
$ |
0.4 |
|
|
$ |
204.5 |
|
|
$ |
(28.8 |
) |
|
$ |
(126.0 |
) |
|
$ |
1.1 |
|
|
$ |
51.2 |
|
Net (loss) |
|
|
— |
|
|
|
— |
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(17.5 |
) |
|
|
— |
|
|
|
(17.5 |
) |
Other comprehensive income |
|
|
— |
|
|
|
— |
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
10.3 |
|
|
|
10.3 |
|
Dividends – $0.11 per share |
|
|
— |
|
|
|
— |
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(4.6 |
) |
|
|
— |
|
|
|
(4.6 |
) |
Stock-based compensation |
|
|
— |
|
|
|
— |
|
|
|
|
— |
|
|
|
3.9 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
3.9 |
|
Balance, October 29, 2022 |
|
|
40.8 |
|
|
|
3.3 |
|
|
|
$ |
0.4 |
|
|
$ |
208.4 |
|
|
$ |
(28.8 |
) |
|
$ |
(148.1 |
) |
|
$ |
11.4 |
|
|
$ |
43.3 |
|
5
|
|
Net |
|
|
Treasury |
|
|
|
Common |
|
|
Additional |
|
|
Treasury |
|
|
Retained |
|
|
Accumulated |
|
|
Total |
|
||||||||
|
|
(In millions) |
|
||||||||||||||||||||||||||||||
Balance, January 30, 2021 |
|
|
34.9 |
|
|
|
1.9 |
|
|
|
$ |
0.3 |
|
|
$ |
124.7 |
|
|
$ |
(13.3 |
) |
|
$ |
(69.0 |
) |
|
$ |
(0.3 |
) |
|
$ |
42.4 |
|
Net income |
|
|
— |
|
|
|
— |
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
15.1 |
|
|
|
— |
|
|
|
15.1 |
|
Other comprehensive income |
|
|
— |
|
|
|
— |
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
0.1 |
|
|
|
0.1 |
|
Issuance of common stock, net |
|
|
7.1 |
|
|
|
— |
|
|
|
|
0.1 |
|
|
|
76.9 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
77.0 |
|
Stock-based compensation |
|
|
— |
|
|
|
— |
|
|
|
|
— |
|
|
|
0.6 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
0.6 |
|
Exercise of stock options |
|
|
0.2 |
|
|
|
— |
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Balance, May 1, 2021 |
|
|
42.2 |
|
|
|
1.9 |
|
|
|
$ |
0.4 |
|
|
$ |
202.2 |
|
|
$ |
(13.3 |
) |
|
$ |
(53.9 |
) |
|
$ |
(0.2 |
) |
|
$ |
135.2 |
|
Net Income |
|
|
— |
|
|
|
— |
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
5.2 |
|
|
|
— |
|
|
|
5.2 |
|
Other comprehensive income |
|
|
— |
|
|
|
— |
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
0.2 |
|
|
|
0.2 |
|
Issuance of common stock, net |
|
|
— |
|
|
|
— |
|
|
|
|
— |
|
|
|
(0.1 |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(0.1 |
) |
Dividends – $0.10 per share |
|
|
— |
|
|
|
— |
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(4.2 |
) |
|
|
— |
|
|
|
(4.2 |
) |
Stock-based compensation |
|
|
— |
|
|
|
— |
|
|
|
|
— |
|
|
|
0.7 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
0.7 |
|
Balance, July 31, 2021 |
|
|
42.2 |
|
|
|
1.9 |
|
|
|
$ |
0.4 |
|
|
$ |
202.8 |
|
|
$ |
(13.3 |
) |
|
$ |
(52.9 |
) |
|
$ |
— |
|
|
$ |
137.0 |
|
Net income |
|
|
— |
|
|
|
— |
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
22.8 |
|
|
|
— |
|
|
|
22.8 |
|
Other comprehensive income |
|
|
— |
|
|
|
— |
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
1.1 |
|
|
|
1.1 |
|
Dividends – $0.10 per share |
|
|
— |
|
|
|
— |
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(4.3 |
) |
|
|
— |
|
|
|
(4.3 |
) |
Purchase of common stock |
|
|
(1.0 |
) |
|
|
1.0 |
|
|
|
|
— |
|
|
|
— |
|
|
|
(10.8 |
) |
|
|
— |
|
|
|
— |
|
|
|
(10.8 |
) |
Stock-based compensation |
|
|
— |
|
|
|
— |
|
|
|
|
— |
|
|
|
0.8 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
0.8 |
|
Balance, October 30, 2021 |
|
|
41.2 |
|
|
|
2.9 |
|
|
|
$ |
0.4 |
|
|
$ |
203.6 |
|
|
$ |
(24.1 |
) |
|
$ |
(34.4 |
) |
|
$ |
1.1 |
|
|
$ |
146.6 |
|
See notes to unaudited consolidated financial statements.
6
JOANN Inc.
Notes to Consolidated Financial Statements
(Unaudited)
Note 1—Significant Accounting Policies
Nature of Operations
JOANN (as defined below) is the nation’s category leader in sewing and fabrics (collectively, “Sewing”) and one of the fastest growing competitors in the arts and crafts category. The Company is well-positioned in the marketplace and has multiple competitive advantages, including a broad assortment of products, established omni-channel platform, multi-faceted digital interface with customers and skilled and knowledgeable team members. As a well-established and trusted brand for over 75 years, the Company believes it has a deep understanding of its customers, what inspires their creativity and what fuels their incredibly diverse projects. Since 2016, the Company has embarked on a strategy to transform JOANN, which has helped it pivot from a traditional retailer to a fully-integrated, digitally-connected provider of Creative Products. As of October 29, 2022, the Company operated 840 store locations in 49 states.
Basis of Presentation
The accompanying Consolidated Financial Statements and these notes are unaudited and have been prepared in accordance with the rules and regulations of the Securities and Exchange Commission (“SEC”) for interim financial information. The Consolidated Financial Statements reflect all normal, recurring adjustments which management believes are necessary to present fairly the Company’s financial condition, results of operations and cash flows for all periods presented. The Consolidated Financial Statements, however, do not include all information necessary for a complete presentation of financial condition, results of operations and cash flows in conformity with accounting principles generally accepted in the United States of America (“GAAP”). The accompanying Consolidated Financial Statements and these notes should be read in conjunction with the Company’s Annual Report on Form 10-K for the fiscal year ended January 29, 2022.
Consolidation
The Consolidated Financial Statements include the accounts of JOANN Inc. (the “Holding Company”), Needle Holdings LLC (“Needle Holdings”) and Jo-Ann Stores, LLC and its wholly-owned subsidiaries (collectively, “JOANN”). All of the entities referenced in the prior sentence hereinafter will be referred to collectively as the “Company” and are all controlled by affiliates of LGP. All intercompany accounts and transactions have been eliminated upon consolidation.
The Holding Company has no operating activities and is limited to the issuance of shares of common stock and stock-based awards, the repurchase of common shares, the issuance and repurchase of debt, the receipt and payment of dividends or distributions and the payment of interest expense. The authorized, issued and outstanding common shares and treasury shares shown on the Consolidated Balance Sheets are of the Holding Company. Likewise, Needle Holdings has no operating activities and is limited to the issuance of initial shares of common stock and stock-based awards and the payment of dividends or distributions.
Fiscal Periods
The Company’s fiscal year ends on the Saturday closest to January 31 and refers to the year in which the period ends (e.g., fiscal 2023 refers to the fiscal year ending January 28, 2023). Fiscal years consist of 52 weeks, unless noted otherwise. The fiscal quarters ended October 29, 2022 and October 30, 2021 were both comprised of 13 weeks.
Seasonality
Typical of most retail companies, the Company’s business is seasonal, with the majority of revenues and operating profits generated in the second half of the fiscal year. Accordingly, earnings or losses for a particular interim period are not necessarily indicative of full-year results.
7
Initial Public Offering
On March 11, 2021, the Company’s registration statement on Form S-1 (File No. 333-253121) relating to its initial public offering was declared effective by the SEC. The Company’s shares of common stock began trading on the Nasdaq Global Market on March 12, 2021. The public offering price of the shares sold in the initial public offering was $12.00 per share. The initial public offering closed on March 11, 2021 and included 5,468,750 shares of common stock. As part of the Company’s initial public offering, the underwriters were provided with an option to purchase 1,640,625 additional shares at the initial public offering price. This option was exercised on April 13, 2021. In aggregate, the shares issued in the offering, including the exercise of the underwriters’ option, generated $76.9 million in net proceeds, which amount is net of $5.7 million in underwriters’ discount and commissions and $2.7 million in offering costs incurred.
On March 19, 2021, in connection with the closing of the initial public offering, the Company used all net proceeds received from the initial public offering and borrowings from the Revolving Credit Facility (as defined below) to repay all of the outstanding borrowings and accrued interest under the Term Loan due 2024 (as defined below) totaling $72.7 million. Following such repayment, all obligations under the Term Loan due 2024 were terminated.
Use of Estimates
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Since actual results may differ from those estimates, the Company revises its estimates and assumptions as new information becomes available.
Recently Issued Accounting Guidance
There are no recently issued accounting pronouncements that the Company has not yet adopted which would have a material impact on the Consolidated Financial Statements.
Related Party Transactions
Prior to the completion of the Company’s initial public offering, the Company paid a monthly management fee to LGP, which is included in selling, general and administrative (“SG&A”) expenses on the accompanying Consolidated Statements of Comprehensive Income (Loss). Payment of the monthly management fee was discontinued upon the completion of the Company’s initial public offering in March 2021, as LGP no longer provides managerial services to the Company in any form.
The Company did not pay any management fees during the thirteen weeks ended October 29, 2022 and October 30, 2021. The Company paid management fees of $0.4 million during the thirty-nine weeks ended October 30, 2021, but paid no such fees during the thirty-nine weeks ended October 29, 2022.
During the thirteen and thirty-nine weeks ended October 29, 2022, the Company paid dividends of $3.1 million and $9.2 million, respectively, to LGP as part of the Company's quarterly dividend payments.
Note 2—Financing
Long-term debt consisted of the following:
|
|
October 29, |
|
|
October 30, |
|
|
January 29, |
|
|||
|
|
(In millions) |
|
|||||||||
Second Amended Revolving Credit Facility |
|
$ |
409.0 |
|
|
$ |
196.5 |
|
|
$ |
121.0 |
|
Term Loan due 2028 |
|
|
668.3 |
|
|
|
673.4 |
|
|
|
673.3 |
|
Total debt |
|
|
1,077.3 |
|
|
|
869.9 |
|
|
|
794.3 |
|
Less unamortized discount and debt costs |
|
|
(8.1 |
) |
|
|
(9.3 |
) |
|
|
(8.9 |
) |
Total debt, net |
|
|
1,069.2 |
|
|
|
860.6 |
|
|
|
785.4 |
|
Less current portion of debt |
|
|
(6.8 |
) |
|
|
(6.8 |
) |
|
|
(6.8 |
) |
Long-term debt, net |
|
$ |
1,062.4 |
|
|
$ |
853.8 |
|
|
$ |
778.6 |
|
8
Revolving Credit Facility
On October 21, 2016, the Company entered into an asset-based revolving credit facility agreement (the "Revolving Credit Facility"), which originally provided for senior secured financing of up to $400.0 million, subject to a borrowing base, maturing on October 20, 2021. On November 25, 2020, the Company entered into an agreement to amend various terms of the Revolving Credit Facility (as amended, the “First Amended Revolving Credit Facility”), which provided for senior secured financing of up to $500.0 million, subject to a borrowing base, maturing on November 25, 2025.
On December 22, 2021, the Company entered into an agreement to amend various terms of the First Amended Revolving Credit Facility (as amended, the “Second Amended Revolving Credit Facility”), which provides for senior secured financing of up to $500.0 million, subject to a borrowing base, maturing on December 22, 2026. No changes were made to the borrowing base formula. The Second Amended Revolving Credit Facility is secured by a first priority security interest in JOANN’s inventory, accounts receivable and related assets with a second priority interest in all other assets, excluding real estate. It also continues to be guaranteed by existing and future wholly-owned subsidiaries of JOANN, subject to certain exceptions.
Under the Second Amended Revolving Credit Facility, the base rate loans bear an additional margin of 0.50% when average historical excess capacity is less than 40.00% of the maximum credit and 0.25% when average historical excess capacity is greater than or equal to 40.00% of the maximum credit. Eurodollar rate loans bear an additional margin of 1.50% when average historical excess capacity is less than 40.00% of the maximum credit and 1.25% when average historical excess capacity is greater than or equal to 40.00% of the maximum credit. Unused commitment fees on the Second Amended Revolving Credit Facility are calculated based on a rate of 0.20% per annum. In the event LIBOR ceases to be available during the term of the facility, the facility provides procedures to determine a “LIBOR Successor Rate.” The Company has the option to request an increase in the size of the Second Amended Revolving Credit Facility up to $150.0 million (for a total facility of $650.0 million) in increments of not less than $20.0 million, provided that no default exists or would arise from the increase. However, the lenders under the Second Amended Revolving Credit Facility are under no obligation to provide any such additional amounts.
As of October 29, 2022, there were $409.0 million of borrowings on the Second Amended Revolving Credit Facility, and the Company’s outstanding letters of credit obligation was $16.5 million. As of October 29, 2022, the Company’s excess availability on the Second Amended Revolving Credit Facility was $74.5 million. During the third quarter of fiscal 2023, the weighted average interest rate for borrowings under the Second Amended Revolving Credit Facility was 4.28%, compared to 2.86% for the third quarter of fiscal 2022. As of October 30, 2021, the Company had $196.5 million of borrowings on the Second Amended Revolving Credit Facility, and the Company’s outstanding letters of credit obligation was $20.5 million. As of October 30, 2021, the Company’s excess availability on the Second Amended Revolving Credit Facility was $270.0 million.
Term Loan Due 2023
On October 21, 2016, the Company entered into a $725.0 million senior secured term loan facility (the “Term Loan due 2023”) which was issued at 98.0% of face value. The Term Loan due 2023 was with a syndicate of lenders and was secured by substantially all the assets of JOANN, excluding the Revolving Credit Facility collateral, and had a second priority security interest in the Revolving Credit Facility collateral. It was guaranteed by existing and future wholly-owned subsidiaries of JOANN, subject to certain exceptions.
The Term Loan due 2023 was refinanced on July 7, 2021 pursuant to Amendment No. 2 to the Company’s Credit Agreement (see Term Loan Due 2028 below). A write-off of the deferred charges and original issue discount, totaling $3.1 million, associated with the original debt issuance was recognized in debt related loss, net within the accompanying Consolidated Statements of Comprehensive Income (Loss) in the second quarter of fiscal 2022 as a result of the refinancing.
Term Loan Due 2024
On May 21, 2018, the Company entered into a $225.0 million term loan facility (the “Term Loan due 2024”), which was issued at 98.5% of face value. The Term Loan due 2024 was with a syndicate of lenders. The Term Loan due 2024 was secured by a second priority security interest in all the assets of JOANN, excluding the Revolving Credit Facility collateral, and had a third priority security interest in the Revolving Credit Facility collateral. It was guaranteed by existing and future wholly-owned subsidiaries of JOANN, subject to certain exceptions.
On March 19, 2021, in connection with the closing of the initial public offering, the Company used all net proceeds received from the initial public offering and borrowings from the Revolving Credit Facility to repay all of the outstanding borrowings and accrued interest under the Term Loan due 2024 totaling $72.7 million. Following such repayment, all obligations under the Term Loan due 2024 were terminated in the first quarter of fiscal 2022. A write-off of the deferred charges and original issue discount, totaling $0.9 million,
9
associated with the original debt issuance was recognized in debt related loss, net within the accompanying Consolidated Statements of Comprehensive Income (Loss) in the first quarter of fiscal 2022 as a result of the repayment.
Term Loan Due 2028
On July 7, 2021, the Company entered into the Amendment No. 2 (“Amendment No. 2”) to the Credit Agreement, dated as of October 21, 2016. Amendment No. 2, among other things, provided for a new $675 million incremental first-lien term loan credit facility with a maturity date of July 7, 2028 (the “Term Loan due 2028” and, together with the Term Loan due 2023 and Term Loan due 2024, the “Term Loans”). The Term Loan due 2028 was issued at 99.5% of face value and was used to refinance the Company’s outstanding Term Loan due 2023, as well as to reduce amounts borrowed under the Revolving Credit Facility and pay related fees and expenses. The Amendment No. 2 reduced the applicable interest rates for Eurodollar rate loans and base rate loans from 5.00% and 4.00% to 4.75% and 3.75%, respectively, and reduced the LIBOR floor from 1.00% to 0.75%. Other than the changes described above, all other material provisions of the Credit Agreement remain unchanged. During the third quarter of fiscal 2023, the weighted average interest rate for borrowings under the Term Loan due 2028 was 7.69% compared to 5.58% during the third quarter of fiscal 2022.
The Term Loan due 2028 was issued at a $3.4 million discount. A portion of the discount in the amount of $3.1 million was recorded as a reduction of debt and set up to amortize over the life of the Term Loan due 2028, and $0.3 million of the discount was charged to earnings. The total fees and expenses associated with the Term Loan due 2028 were $6.8 million, which fees represent banking, legal and other professional services. The Company capitalized $3.8 million of these fees as a reduction of debt and the remaining fees were charged to earnings.
Covenants
The covenants contained in the credit agreements restrict JOANN’s ability to pay dividends or make other distributions; accordingly, any dividends may only be paid in accordance with such covenants. Among other restrictions, the credit agreements permit the public parent company to pay dividends on its common stock in amounts not to exceed the greater of 6% per annum of the net proceeds received by, or contributed to Jo-Ann Stores, LLC from any such public offering of common stock of Jo-Ann Stores, LLC or its direct or indirect parent company, or 7% of Market Capitalization (as defined in the credit agreements). So long as there is no event of default, the credit agreements also allow dividends in amounts up to $100 million, which amount can increase if certain other conditions are satisfied, including if JOANN’s leverage does not exceed certain thresholds. Additionally, the Second Amended Revolving Credit Facility allows for unlimited dividends, so long as there is no event of default and the Company’s excess availability after giving pro forma effect for the thirty-day period immediately preceding such payment shall be greater than (a) the greater of 12.5% of the maximum credit and $40 million and the consolidated fixed charge coverage ratio shall be greater than or equal to 1.0 to 1.0 or (b) 17.5% of the maximum credit calculated. At October 29, 2022, the Company was in compliance with all covenants under its credit agreements.
For further details on the Company’s debt, see Note 2 to the Consolidated Financial Statements in the Company’s Annual Report on Form 10-K for the year ended January 29, 2022.
Note 3—Derivative Instruments
The Company is exposed to certain market risks during the normal course of its business arising from adverse changes in interest rates. The Company’s exposure to interest rate risk results primarily from its variable-rate borrowings. The Company may selectively use derivative financial instruments to manage the risks from fluctuations in interest rates. The Company does not purchase or hold derivatives for trading or speculative purposes. Fluctuations in interest rates can be volatile, and the Company’s risk management activities do not totally eliminate these risks. Consequently, these fluctuations could have a significant effect on the Company’s financial results.
Interest Rate Swaps
In August 2021, the Company entered into an interest rate swap agreement with U.S. Bank N.A., which has a $200 million notional value with an effective date of October 26, 2023 and a maturity date of October 26, 2025. Beginning in January 2024, the Company receives 1-month, 3-month or 6-month LIBOR, at the Company's election, subject to a 0.75% floor, and pays a fixed rate of interest of 1.43% per annum on a quarterly basis. In connection with the execution of the interest rate swap agreement, no cash was exchanged between the Company and the counterparty. The fair value of the interest rate swap as of October 29, 2022 was $10.1 million.
In May 2022, the Company entered into a second interest rate swap agreement with U.S. Bank N.A., which has a $250 million notional value with an effective date of July 26, 2023 and a maturity date of January 26, 2026. Beginning in October 2023, the Company receives 1-month, 3-month or 6-month LIBOR, at the Company's election, subject to a 0.75% floor, and pays a fixed rate of interest of
10
3.37% per annum on a quarterly basis. In connection with the execution of the interest rate swap agreement, no cash was exchanged between the Company and the counterparty. The fair value of the interest rate swap as of October 29, 2022 was $5.3 million.
All of the Company's derivative financial instruments are eligible for netting arrangements that allow the Company and its counterparties to net settle amounts owed to each other. Derivative assets and liabilities that can be net settled under these arrangements have been presented in the Company's Consolidated Balance Sheet on a net basis. As of October 29, 2022, none of the netting arrangements involved collateral. The net fair value of the interest rate swaps as of October 29, 2022 was $15.4 million.
The Company designated its interest rate swaps as cash flow hedges and structured them to be highly effective. Unrealized gains and losses related to the fair value of the interest rate swaps are recorded to accumulated other comprehensive income (loss), net of tax. In the event of early termination of the interest rate swaps, the Company will receive from or pay to the counterparty the fair value of the interest rate swap agreements, and the unrealized gain or loss outstanding will be recognized in earnings.
The impacts of the Company’s derivative instruments on the accompanying Consolidated Statements of Comprehensive Income (Loss) for the thirteen and thirty-nine weeks ended October 29, 2022 and October 30, 2021 are presented in the table below:
|
|
Thirteen Weeks Ended |
|
|
Thirty-Nine Weeks Ended |
|
||||||||||
|
|
October 29, |
|
|
October 30, |
|
|
October 29, |
|
|
October 30, |
|
||||
|
|
(In millions) |
|
|||||||||||||
Interest rate swap - $200M notional amount |
|
$ |
5.4 |
|
|
$ |
1.4 |
|
|
$ |
7.7 |
|
|
$ |
1.4 |
|
Interest rate swap - $250M notional amount |
|
|
8.5 |
|
|
|
— |
|
|
|
5.3 |
|
|
|
— |
|
Gain recognized in other comprehensive income (loss), gross of income taxes |
|
$ |
13.9 |
|
|
$ |
1.4 |
|
|
$ |
13.0 |
|
|
$ |
1.4 |
|
Note 4—Fair Value Measurements
Fair value is defined as an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or liability. As a basis for considering such assumptions, a fair value hierarchy has been established that prioritizes the inputs used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurement) and the lowest priority to unobservable inputs (Level 3 measurement).
The three levels of the fair value hierarchy are as follows:
Level 1 – Quoted prices in active markets for identical assets or liabilities;
Level 2 – Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations whose significant inputs are observable; and
Level 3 – Unobservable inputs in which there is little or no market data which require the reporting entity to develop its own assumptions.
The valuations of the Company's interest rate derivatives are measured as the present value of all expected future cash flows based on LIBOR-based yield curves. The present value calculation uses discount rates that have been adjusted to reflect the credit quality of the Company and its counterparty which is a Level 2 fair value measurement. The carrying and fair value of the Company’s interest rate derivatives were as follows:
Instrument |
|
Balance Sheet Location |
|
October 29, |
|
|
October 30, |
|
||
|
|
|
|
(In millions) |
|
|||||
Interest rate swaps - current |
|
Prepaid expenses and other current assets |
|
$ |
1.0 |
|
|
$ |
— |
|
Interest rate swaps - long-term |
|
Other assets |
|
$ |
14.4 |
|
|
$ |
1.4 |
|
11
The fair values of cash and cash equivalents, accounts payable and borrowings on the Company’s Second Amended Revolving Credit Facility approximated their carrying values because of the short-term nature of these instruments. If these instruments were measured at fair value in the financial statements, they would be classified as Level 1 in the fair value hierarchy.
Long-term debt is presented at carrying value in the Company’s Consolidated Balance Sheets. The fair value of the Company’s Term Loan due 2028 was determined based on quoted market prices or recent trades of this debt instrument in less active markets. If the Company’s long-term debt was recorded at fair value, it would be classified as Level 2 in the fair value hierarchy. The following provides the carrying and fair value of the Company’s Term Loan due 2028 as of October 29, 2022 and October 30, 2021:
|
|
October 29, 2022 |
|
|
October 30, 2021 |
|
||||||||||
|
|
Carrying |
|
|
Fair |
|
|
Carrying |
|
|
Fair |
|
||||
|
|
(In millions) |
|
|||||||||||||
Term Loan due 2028 (a) |
|
$ |
660.2 |
|
|
$ |
439.9 |
|
|
$ |
664.1 |
|
|
$ |
652.5 |
|
Certain assets and liabilities are measured at fair value on a nonrecurring basis; that is, the assets and liabilities are not measured at fair value on an ongoing basis but are subject to fair value adjustments in certain circumstances (e.g., when there is evidence of impairment). The fair values are determined based on either a market approach, an income approach, in which the Company utilizes internal cash flow projections over the life of the underlying assets discounted using a discount rate that is considered to be commensurate with the risk inherent in the Company’s current business model, or a combination of both. These measures of fair value and related inputs are considered a Level 3 approach under the fair value hierarchy.
The Company uses the end of the period when determining the timing of transfers between levels. There were no transfers between levels during the periods presented.
Note 5—Goodwill and Other Intangible Assets
The carrying amount of goodwill at October 29, 2022 and October 30, 2021 was as follows:
|
|
October 29, |
|
|
October 30, |
|
||
|
|
(In millions) |
|
|||||
Goodwill, gross |
|
$ |
643.8 |
|
|
$ |
643.8 |
|
Accumulated impairment |
|
|
(481.8 |
) |
|
|
(481.8 |
) |
Goodwill, net |
|
$ |
162.0 |
|
|
$ |
162.0 |
|
The carrying amount and accumulated amortization of identifiable intangible assets at October 29, 2022 and October 30, 2021 was as follows:
|
|
|
|
October 29, 2022 |
|
|
October 30, 2021 |
|
||||||||||
|
|
Estimated |
|
Gross |
|
|
Accumulated |
|
|
Gross |
|
|
Accumulated |
|
||||
|
|
|
|
(In millions) |
|
|||||||||||||
Indefinite-lived intangible assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
JOANN trade name |
|
|
$ |
325.0 |
|
|
$ |
— |
|
|
$ |
325.0 |
|
|
$ |
— |
|
|
Joann.com domain name |
|
|
|
10.0 |
|
|
|
— |
|
|
|
10.0 |
|
|
|
— |
|
|
Intangible assets subject to amortization: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Creativebug trade name |
|
10 |
|
|
0.1 |
|
|
|
(0.1 |
) |
|
|
0.1 |
|
|
|
— |
|
Technology |
|
3 |
|
|
5.3 |
|
|
|
(1.2 |
) |
|
|
— |
|
|
|
— |
|
Customer relationships |
|
16 |
|
|
110.0 |
|
|
|
(79.8 |
) |
|
|
110.0 |
|
|
|
(73.0 |
) |
Total intangible assets |
|
|
|
$ |
450.4 |
|
|
$ |
(81.1 |
) |
|
$ |
445.1 |
|
|
$ |
(73.0 |
) |
The Company recognized intangible asset amortization of $2.1 million and $6.3 million for the thirteen and thirty-nine weeks ended October 29, 2022, respectively. The Company recognized intangible asset amortization of $1.7 million and $5.1 million for the thirteen and thirty-nine weeks ended October 30, 2021, respectively. The weighted average amortization period of amortizable intangible assets as of October 29, 2022 approximated 4.1 years.
12
On March 4, 2022, the Company purchased the remaining equity interest in WeaveUp, Inc. ("WeaveUp") for $4.3 million. Acquisition-related costs of $0.1 million were recognized in SG&A expenses within the accompanying Consolidated Statements of Comprehensive Income (Loss). Prior to the closing of the acquisition, the Company recorded its 12.3% equity investment in WeaveUp at cost and adjusted for observable transactions for same or similar investments in WeaveUp, as applicable. Upon acquisition of the remaining equity interest in WeaveUp, the Company decreased the value of its previously held investment to its fair value of $1.0 million, which resulted in a loss of $1.0 million. The fair value of the previously held investment was determined using Level 3 valuation techniques. The loss was recorded as investment remeasurement within the Consolidated Statements of Comprehensive Income (Loss) in the first quarter of fiscal 2023.
An intangible asset for WeaveUp’s developed technology with a preliminary value of $5.3 million was recorded as a result of the acquisition. The intangible asset will be amortized over its estimated useful life of 3 years. The other assets and liabilities acquired in the purchase of WeaveUp were not material.
Note 6—Income Taxes
Effective Tax Rate
The effective income tax rate for the third quarter of fiscal 2023 was 27.1%, an income tax benefit on a pre-tax book loss, compared to the rate for the third quarter of fiscal 2022, which was 23.5%, an income tax provision on pre-tax book income. The effective income tax rate for the first thirty-nine weeks of fiscal 2023 was 27.7%, an income tax benefit on a pre-tax book loss, compared to the rate for the first thirty-nine weeks of fiscal 2022, which was 22.2%, an income tax provision on pre-tax book income. The effective tax rate increased from the third quarter and first thirty-nine weeks of fiscal 2022 to the third quarter and first thirty-nine weeks of fiscal 2023, respectively, because there was a pre-tax loss in fiscal 2023 and pre-tax income in fiscal 2022. The Company's favorable permanent book-tax differences decrease the effective tax rate when applied to pre-tax income, while these favorable permanent book-tax differences increase the effective tax rate when there is a pre-tax loss.
The effective tax rate is subject to change based on the mix of income from different state jurisdictions, which tax at different rates, as well as the change in status or outcome of uncertain tax positions. The Company evaluates its effective tax rate on a quarterly basis and updates its estimate of the full-year effective rate as necessary.
Reserves for Uncertain Tax Positions
At the end of the third quarter of fiscal 2023, unrecognized tax benefits were $1.2 million, of which $0.9 million would affect the effective tax rate, if recognized. The Company records interest and penalties on uncertain tax positions as a component of the income tax provision. The total amount of interest and penalties accrued at the end of the third quarter of both fiscal 2023 and fiscal 2022 was $0.1 million. Within the next 12 months, it is reasonably possible that uncertain tax positions could be reduced by approximately $0.4 million resulting from resolution or closure of tax examinations. Any increase in the amount of uncertain tax positions within the next 12 months is expected to be insignificant.
Note 7—Earnings (Loss) Per Share
Basic earnings (loss) per share is computed based upon the weighted-average number of common shares outstanding. Diluted earnings (loss) per share is computed based upon the weighted-average number of common shares outstanding plus the dilutive effect of common share equivalents calculated using the treasury stock method. Treasury stock is excluded from the denominator in calculating both basic and diluted earnings (loss) per share.
13
The following table sets forth the reconciliation of the numerator and the denominator of basic and diluted earnings (loss) per share and the stock-based awards excluded from the calculation of diluted earnings (loss) per share because their effect would have been antidilutive for the thirteen and thirty-nine weeks ended October 29, 2022 and October 30, 2021:
|
|
Thirteen Weeks Ended |
|
|
Thirty-Nine Weeks Ended |
|
||||||||||
|
|
October 29, |
|
|
October 30, |
|
|
October 29, |
|
|
October 30, |
|
||||
|
|
(In millions except per share data) |
|
|||||||||||||
Net income (loss) |
|
$ |
(17.5 |
) |
|
$ |
22.8 |
|
|
$ |
(109.5 |
) |
|
$ |
43.1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Weighted-average common shares outstanding – basic |
|
|
40.8 |
|
|
|
41.7 |
|
|
|
40.7 |
|
|
|
40.8 |
|
Effect of dilutive stock-based awards |
|
|
— |
|
|
|
1.4 |
|
|
|
— |
|
|
|
1.3 |
|
Weighted-average common shares outstanding – diluted |
|
|
40.8 |
|
|
|
43.1 |
|
|
|
40.7 |
|
|
|
42.1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Basic earnings (loss) per common share |
|
$ |
(0.43 |
) |
|
$ |
0.55 |
|
|
$ |
(2.69 |
) |
|
$ |
1.06 |
|
Diluted earnings (loss) per common share |
|
$ |
(0.43 |
) |
|
$ |
0.53 |
|
|
$ |
(2.69 |
) |
|
$ |
1.02 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Antidilutive stock-based awards excluded from diluted calculation |
|
|
4.5 |
|
|
|
1.6 |
|
|
|
4.5 |
|
|
|
1.4 |
|
Note 8—Segments and Disaggregated Revenue
The Company conducts its business activities and reports financial results as one operating segment and one reportable segment, which includes the Company’s store locations and integrated omni-channel operations. Due to its integrated omni-channel strategy, the Company views omni-channel sales as an extension of its physical store locations. The presentation of financial results as one reportable segment is consistent with the way the Company operates its business and is consistent with the manner in which the Chief Operating Decision Maker (“CODM”) makes decisions about allocating resources and assessing performance. Furthermore, the Company notes that monitoring financial results as one reportable segment helps the CODM manage costs on a consolidated basis, consistent with the integrated nature of its operations.
The following table shows revenue by product category:
|
|
Thirteen Weeks Ended |
|
|
Thirty-Nine Weeks Ended |
|
||||||||||
|
|
October 29, |
|
|
October 30, |
|
|
October 29, |
|
|
October 30, |
|
||||
|
|
(In millions) |
|
|||||||||||||
Sewing |
|
$ |
256.9 |
|
|
$ |
275.2 |
|
|
$ |
694.6 |
|
|
$ |
760.2 |
|
Arts and Crafts and Home Décor |
|
|
298.1 |
|
|
|
329.5 |
|
|
|
805.5 |
|
|
|
897.1 |
|
Other |
|
|
7.8 |
|
|
|
6.3 |
|
|
|
24.0 |
|
|
|
25.0 |
|
Total |
|
$ |
562.8 |
|
|
$ |
611.0 |
|
|
$ |
1,524.1 |
|
|
$ |
1,682.3 |
|
Note 9—Commitments and Contingencies
The Company is involved in various litigation matters in the ordinary course of its business. The Company is not currently involved in any litigation that it expects, either individually or in the aggregate, will have a material adverse effect on its financial condition or results of operations.
Note 10—Gain on Sale Leaseback of Distribution Center
During the second quarter of fiscal 2022, the Company completed a sale and leaseback transaction for its distribution center located in Opelika, Alabama for a sale price of $48.1 million. The transaction qualifies for sales recognition under the sale leaseback accounting requirements and the Company recorded a gain of $24.5 million. Proceeds from the sale were primarily used to repay borrowings under the Term Loan due 2023 and Revolving Credit Facility.
The lease related to this transaction has an initial term of 20 years and two 10-year extension options. At commencement of the lease, the Company recorded operating lease liabilities of $37.5 million and operating lease assets of $37.5 million. The discount rate for the lease was 6.28%.
14
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
This discussion and analysis should be read in conjunction with the unaudited Consolidated Financial Statements and the related notes thereto included elsewhere in this Quarterly Report on Form 10-Q and the audited Consolidated Financial Statements and the related notes thereto and the Management’s Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K for the fiscal year ended January 29, 2022. Some of the information included in this discussion and analysis or set forth elsewhere in this Quarterly Report on Form 10-Q, including information with respect to our plans and strategy for our business, includes forward-looking statements that involve risks and uncertainties. You should review the “Cautionary Note Regarding Forward-Looking Statements” section in this Quarterly Report on Form 10-Q and the “Summary Risk Factors” and “Risk Factors” sections of our Annual Report on Form 10-K for the fiscal year ended January 29, 2022 for a discussion of important factors that could cause actual results to differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis.
Our fiscal year ends on the Saturday closest to January 31 and refers to the year in which the period ends (e.g., fiscal 2023 refers to the year ending January 28, 2023). Fiscal years consist of 52 weeks, unless noted otherwise. The fiscal quarters ended October 29, 2022 and October 30, 2021 were both comprised of 13 weeks.
JOANN Overview
JOANN is the nation’s category leader in Sewing and one of the fastest growing competitors in the arts and crafts category. We are well-positioned in the marketplace and have multiple competitive advantages, including a broad assortment, established omni-channel platform, multi-faceted digital interface with customers and skilled and knowledgeable team members. As a well-established and trusted brand for over 75 years, we believe we have a deep understanding of our customers, what inspires their creativity and what fuels their incredibly diverse projects. Since 2016, we have embarked on a strategy to transform JOANN, which has helped us pivot from a traditional retailer to a fully-integrated, digitally-connected provider of Creative Products.
Highlights for the Thirteen Weeks Ended October 29, 2022
Total Comparable Sales
Total comparable sales are an important measure throughout the retail industry. This measure allows us to evaluate how our store location base and e-commerce business are performing by measuring the change in period-over-period net sales in store locations that have been open for the applicable period. We define total comparable sales as net sales for store locations that have been open for at least 13 months and have not been relocated, expanded or downsized in the last 13 months. In addition, total comparable sales include our e-commerce sales generated via joann.com (online sales for all products) and creativebug.com (online sales of digital videos for crafting projects). There may be variations in the way in which some of our competitors and other retailers calculate comparable sales. As a result, data in this Quarterly Report on Form 10-Q regarding our total comparable sales may not be comparable to similar data made available by other retailers.
Non-GAAP Financial Measures
Adjusted EBITDA
We present Adjusted EBITDA, which is not a recognized financial measure under GAAP, because we believe it assists investors and analysts in comparing our operating performance across reporting periods on a consistent basis by excluding items that we do not believe are indicative of our core operating performance. Management believes Adjusted EBITDA is helpful in highlighting trends in our core operating performance compared to other measures, which can differ significantly depending on long-term strategic decisions regarding capital structure, the tax jurisdictions in which companies operate and capital investments. We also use Adjusted EBITDA in connection with establishing discretionary annual incentive compensation; supplementing GAAP measures of performance in the
15
evaluation of the effectiveness of our business strategies; making budgeting decisions; comparing our performance against that of other peer companies using similar measures; and because our credit facilities use measures similar to Adjusted EBITDA, to measure our compliance with certain covenants.
We define Adjusted EBITDA as net income (loss) plus income tax provision (benefit), interest expense, net and depreciation and amortization, as further adjusted to eliminate the impact of certain non-cash items and other items that we do not consider indicative of our ongoing operating performance, including debt related gains and losses, investment remeasurements, sale leaseback gains, costs related to strategic initiatives, COVID-19 costs, technology development expenses, stock-based compensation expense, gains and losses on disposal and impairment of fixed and operating lease assets, sponsor management fees and other one-time costs. Our adjustments for COVID-19 related costs include, as a separate line item, excess import freight costs. The excess import freight costs are directly attributable to surging market demand for shipping capacity as economies recovered from the COVID-19 pandemic, as well as actions taken by government and industry leaders designed to protect against further spread of the virus, which disrupted the efficient operation of domestic and international supply chains. These COVID-19 related conditions produced an imbalance of ocean freight capacity and related demand, as well as port congestion and other supply chain disruptions that added significant cost to our procurement of imported merchandise. These excess import freight costs included significantly higher rates paid per container to ocean carriers, as well as fees paid due to congested ports that we did not normally incur. In a normative operating environment, we would procure 70% to 80% of our needs for ocean freight under negotiated contract rates, with the balance procured in a brokered market, typically at no more than a 10% - 15% premium to our contract rates. Accordingly, we established a baseline cost (“standard cost”) assuming those contract capacities, established rates and typical premium in the brokered market for peak volume needs not covered under our contracts. The amount of excess import freight costs included as an adjustment to arrive at Adjusted EBITDA is calculated by subtracting, from our actual import freight costs, our standard cost for the applicable period. Negotiation of our current contract rates was finalized in the second quarter of fiscal 2023. We have started to see a decline in overall ocean freight rates and a reduction in other fees associated with port congestion, which has positively impacted our cash payments. However, a reduction in expense recognition will not occur until the fourth quarter of fiscal 2023, along with continued reductions in expense recognition in fiscal 2024. We are identifying these COVID-19 related excess import freight costs as a separate line item in the table below due to their magnitude and to distinguish them from other COVID-19 related costs we have previously excluded in calculating Adjusted EBITDA.
Adjusted EBITDA has its limitations as an analytical tool, and you should not consider it in isolation or as a substitute for analysis of our results as reported under GAAP. Some of these limitations include:
We compensate for these limitations by relying primarily on our GAAP results and using Adjusted EBITDA only as supplemental information.
16
The following is a reconciliation of our net income (loss) to Adjusted EBITDA for the periods presented:
|
|
Thirteen Weeks Ended |
|
|
Thirty-Nine Weeks Ended |
|
||||||||||
(In millions) |
|
October 29, |
|
|
October 30, |
|
|
October 29, |
|
|
October 30, |
|
||||
Net income (loss) |
|
$ |
(17.5 |
) |
|
$ |
22.8 |
|
|
$ |
(109.5 |
) |
|
$ |
43.1 |
|
Income tax provision (benefit) |
|
|
(6.5 |
) |
|
|
7.0 |
|
|
|
(41.9 |
) |
|
|
12.3 |
|
Interest expense, net |
|
|
18.1 |
|
|
|
11.8 |
|
|
|
42.5 |
|
|
|
39.8 |
|
Depreciation and amortization (1) |
|
|
20.3 |
|
|
|
19.8 |
|
|
|
61.1 |
|
|
|
60.6 |
|
Debt related loss, net (2) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
3.0 |
|
Investment remeasurement (3) |
|
|
(2.0 |
) |
|
|
— |
|
|
|
(1.0 |
) |
|
|
— |
|
Gain on sale leaseback (4) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(24.5 |
) |
Strategic initiatives (5) |
|
|
0.9 |
|
|
|
0.6 |
|
|
|
4.6 |
|
|
|
1.4 |
|
Excess import freight costs (6) |
|
|
18.5 |
|
|
|
11.3 |
|
|
|
74.5 |
|
|
|
11.3 |
|
Other COVID-19 costs (7) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
1.3 |
|
Technology development expense (8) |
|
|
2.0 |
|
|
|
2.6 |
|
|
|
7.0 |
|
|
|
6.2 |
|
Stock-based compensation expense |
|
|
3.9 |
|
|
|
0.8 |
|
|
|
6.1 |
|
|
|
2.1 |
|
Loss (gain) on disposal and impairment of fixed and operating lease assets |
|
|
— |
|
|
|
(0.1 |
) |
|
|
1.1 |
|
|
|
(0.1 |
) |
Sponsor management fee (9) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
0.4 |
|
Other (10) |
|
|
2.5 |
|
|
|
(4.0 |
) |
|
|
5.4 |
|
|
|
(3.3 |
) |
Adjusted EBITDA |
|
$ |
40.2 |
|
|
$ |
72.6 |
|
|
$ |
49.9 |
|
|
$ |
153.6 |
|
17
Results of Operations
The following tables summarize key components of our results of operations for the periods indicated. The following discussion should be read in conjunction with our Consolidated Financial Statements and related notes.
Consolidated Income Data:
|
|
Thirteen Weeks Ended |
|
|
Thirty-Nine Weeks Ended |
|
||||||||||
(In millions) |
|
October 29, |
|
|
October 30, |
|
|
October 29, |
|
|
October 30, |
|
||||
Net sales |
|
$ |
562.8 |
|
|
$ |
611.0 |
|
|
$ |
1,524.1 |
|
|
$ |
1,682.3 |
|
Gross profit |
|
|
281.0 |
|
|
|
318.8 |
|
|
|
736.6 |
|
|
|
888.3 |
|
SG&A expenses |
|
|
269.0 |
|
|
|
257.6 |
|
|
|
786.6 |
|
|
|
754.5 |
|
Operating profit (loss) |
|
|
(7.9 |
) |
|
|
41.6 |
|
|
|
(109.9 |
) |
|
|
73.7 |
|
Net income (loss) |
|
|
(17.5 |
) |
|
|
22.8 |
|
|
|
(109.5 |
) |
|
|
43.1 |
|
Other Operational Data:
|
|
Thirteen Weeks Ended |
|
|
Thirty-Nine Weeks Ended |
|
||||||||||
(In millions) |
|
October 29, |
|
|
October 30, |
|
|
October 29, |
|
|
October 30, |
|
||||
Total (decrease) in comparable sales vs. prior year |
|
|
(8.0 |
)% |
|
|
(14.2 |
)% |
|
|
(9.2 |
)% |
|
|
(12.4 |
)% |
Gross margin |
|
|
49.9 |
% |
|
|
52.2 |
% |
|
|
48.3 |
% |
|
|
52.8 |
% |
SG&A expenses as a % of net sales |
|
|
47.8 |
% |
|
|
42.2 |
% |
|
|
51.6 |
% |
|
|
44.8 |
% |
Operating profit (loss) as a % of net sales |
|
|
(1.4 |
)% |
|
|
6.8 |
% |
|
|
(7.2 |
)% |
|
|
4.4 |
% |
Adjusted EBITDA (1) |
|
$ |
40.2 |
|
|
$ |
72.6 |
|
|
$ |
49.9 |
|
|
$ |
153.6 |
|
Pre-opening and closing costs excluding loss on disposal of fixed assets |
|
$ |
9.3 |
|
|
$ |
2.0 |
|
|
$ |
19.1 |
|
|
$ |
6.6 |
|
Adjusted EBITDA as a % of net sales |
|
|
7.1 |
% |
|
|
11.9 |
% |
|
|
3.3 |
% |
|
|
9.1 |
% |
Total store location count at end of period |
|
|
840 |
|
|
|
852 |
|
|
|
840 |
|
|
|
852 |
|
Comparison of the Thirteen Weeks ended October 29, 2022 and October 30, 2021
Net Sales
Net sales were $562.8 million for the thirteen weeks ended October 29, 2022, a decrease of $48.2 million or 7.9% compared to the same period in fiscal 2022. Total comparable sales for the thirteen weeks ended October 29, 2022 decreased 8.0% compared with a total comparable sales decrease of 14.2% in the same period in fiscal 2022. The total comparable sales decrease resulted from a decrease in transaction volume, partially offset by an increase in average ticket. On a category basis, we saw declines in sewing as well as arts and crafts and home décor, with declines being more pronounced in our Fall categories as well as our Craft Technology business, which was unusually strong in the third quarter last year driven by new product launches.
Gross Profit
Gross profit was $281.0 million for the thirteen weeks ended October 29, 2022, a decrease of $37.8 million or 11.9% compared to the same period in fiscal 2022. Gross margin was 49.9% for the thirteen weeks ended October 29, 2022, a decrease of 230 basis points compared to the same period in fiscal 2022. The decrease in gross margin was primarily driven by increased supply chain costs, which resulted primarily from excess import freight. We believe the increase in excess import freight, including ocean freight and related port congestion costs, is transitory in nature. In addition, we experienced increases in domestic freight expense due to rising carrier rates and fuel costs.
Selling, General and Administrative Expenses
SG&A expenses were $269.0 million for the thirteen weeks ended October 29, 2022, an increase of $11.4 million or 4.4% compared to the same period in fiscal 2022. The increase was driven by incremental operating costs for our new multi-purpose distribution center located in West Jefferson, Ohio and increases in spending on strategic initiatives including pre-opening costs
18
associated with our new and remodeled store locations as well as costs incurred to support several emerging businesses, which we are referring to as our "Blue Ocean" initiatives. Additionally, we incurred higher stock-based compensation expense and had a reduction to incentive compensation in the prior year period that did not recur in the thirteen weeks ended October 29, 2022. Lastly, we have experienced inflationary pressures in energy, commodity and labor costs that have been partially offset by improved operating efficiencies.
As a percentage of net sales, SG&A expenses for the thirteen weeks ended October 29, 2022 were 47.8%, an increase of 560 basis points compared to the same period in fiscal 2022. The increase as a percentage of sales was primarily driven by the factors listed above as well as the 7.9% decrease in net sales in the third quarter of fiscal 2023 compared to the third quarter of fiscal 2022.
Depreciation and Amortization
Depreciation and amortization expense was $19.9 million in the thirteen weeks ended October 29, 2022, an increase of $0.3 million compared to the same period in fiscal 2022. This increase was driven by investments in our multi-purpose distribution center as well as store location refresh and technology projects in fiscal 2022 and fiscal 2023, partially offset by lower depreciation after the sale and leaseback of our distribution center in Opelika, Alabama in the second quarter of fiscal 2022.
Interest Expense
Interest expense for the thirteen weeks ended October 29, 2022 was $18.1 million, an increase of $6.3 million compared to the same period in fiscal 2022. The increase in interest expense was primarily due to higher interest rates as well as a higher average debt level during the third quarter of fiscal 2023 compared to the same period in fiscal 2022. The average debt level in the thirteen weeks ended October 29, 2022 was $1,071.2 million compared to $841.6 million in the thirteen weeks ended October 30, 2021. The weighted average interest rate was 6.41% and 5.04% for the thirteen weeks ended October 29, 2022 and October 30, 2021, respectively.
We had $1,077.3 million of debt outstanding (face value) as of October 29, 2022 versus $869.9 million as of October 30, 2021.
Income Taxes
The effective income tax rate for the third quarter of fiscal 2023 was 27.1 percent, which was an income tax benefit on a pre-tax book loss, compared to 23.5 percent for the third quarter of fiscal 2022, which was an income tax provision on pre-tax book income. The effective tax rate increased from the third quarter of fiscal 2022 to the third quarter of fiscal 2023 because there was a pre-tax loss in fiscal 2023 and pre-tax income in fiscal 2022. The Company's favorable permanent book-tax differences decrease the effective tax rate when applied to pre-tax income, while these favorable permanent book-tax differences increase the effective tax rate when there is a pre-tax loss.
Net Income (Loss)
Net loss was $17.5 million for the thirteen weeks ended October 29, 2022, compared to net income of $22.8 million during the same period in fiscal 2022. The decrease was driven by the factors described above.
Adjusted EBITDA
Adjusted EBITDA (as defined above) was $40.2 million for the thirteen weeks ended October 29, 2022 compared to $72.6 million for the same period in fiscal 2022. The decrease was driven by the factors described above.
Comparison of the Thirty-Nine Weeks ended October 29, 2022 and October 30, 2021
Net Sales
Net sales were $1,524.1 million for the thirty-nine weeks ended October 29, 2022, a decrease of $158.2 million or 9.4% compared to the same period in fiscal 2022. Total comparable sales for the thirty-nine weeks ended October 29, 2022 decreased 9.2% compared with a total comparable sales decrease of 12.4% in the same period in fiscal 2022. The total comparable sales decrease resulted from a decrease in transaction volume, partially offset by an increase in average ticket. On a category basis, declines in sales were more pronounced in our Craft Technology business, which was unusually strong in the first thirty-nine weeks of last year driven by new product launches. In addition, higher customer discretionary spending driven by government stimulus payments as well as more customer leisure time resulting from the COVID-19 pandemic, had a favorable impact on net sales in the first thirty-nine weeks of fiscal 2022.
19
Gross Profit
Gross profit was $736.6 million for the thirty-nine weeks ended October 29, 2022, a decrease of $151.7 million or 17.1% compared to the same period in fiscal 2022. Gross margin was 48.3% for the thirty-nine weeks ended October 29, 2022, a decrease of 450 basis points compared to the same period in fiscal 2022. The decrease in gross margin was primarily driven by increased supply chain costs, which resulted primarily from excess import freight. We believe the increase in excess import freight, including ocean freight and related port congestion costs, is transitory in nature. In addition, we experienced increases in domestic freight expense due to rising carrier rates and fuel costs, as well as higher shrink costs associated with the start-up of our new multi-purpose distribution center. These negative factors were partially offset by improved pricing efficiency and optimized promotional offers.
Selling, General and Administrative Expenses
SG&A expenses were $786.6 million for the thirty-nine weeks ended October 29, 2022, an increase of $32.1 million or 4.3% compared to the same period in fiscal 2022. This increase was driven by incremental operating costs for our new multi-purpose distribution center located in West Jefferson, Ohio and increases in spending on strategic initiatives including pre-opening costs associated with our new and remodeled store locations as well as costs incurred to support several emerging businesses, which we are referring to as our "Blue Ocean" initiatives. We have also experienced inflationary pressures in energy, commodity and labor costs that have been partially offset by improved operating efficiencies and lower incentive compensation costs.
As a percentage of net sales, SG&A expenses for the thirty-nine weeks ended October 29, 2022, were 51.6%, an increase of 680 basis points compared to the same period in fiscal 2022. This increase was primarily driven by the factors listed above as well as the 9.4% decrease in net sales in the first thirty-nine weeks of fiscal 2023 compared to the same period in fiscal 2022.
Depreciation and Amortization
Depreciation and amortization expense was $59.9 million in the thirty-nine weeks ended October 29, 2022, a decrease of $0.2 million compared to the same period in fiscal 2022. This decrease was driven primarily by lower depreciation after the sale and leaseback of our distribution center in Opelika, Alabama in the second quarter of fiscal 2022, partially offset by investments in our multi-purpose distribution center as well as store location refresh and technology projects in fiscal 2022 and fiscal 2023.
Interest Expense
Interest expense for the thirty-nine weeks ended October 29, 2022 was $42.5 million, an increase of $2.7 million compared to the same period in fiscal 2022. The increase was due to a higher debt level carried during the first thirty-nine weeks of fiscal 2023 when compared to the same period in fiscal 2022. The average debt level in the thirty-nine weeks ended October 29, 2022 was $981.5 million compared to $808.1 million in the thirty-nine weeks ended October 30, 2021. The weighted average interest rate was 5.40% and 5.39% for the thirty-nine weeks ended October 29, 2022 and October 30, 2021, respectively.
We had $1,077.3 million of debt outstanding (face value) as of October 29, 2022 versus $869.9 million as of October 30, 2021.
Debt Related Loss, Net
During the second quarter of fiscal 2022, we refinanced our Term Loan due 2023. A write-off of the deferred charges and original issue discount, totaling $3.1 million, associated with the original debt issuance was recognized as a debt related loss. During the first quarter of fiscal 2022, we repurchased $1.9 million in face value of the Term Loan due 2024 at an average of 53 percent of par, resulting in a $1.0 million gain. A write-off of the deferred charges and original issue discount, totaling less than $0.1 million, associated with the original debt issuance was recognized as an offset to this gain. Also offsetting the gain was a $0.9 million write-off of the original issue discount and deferred issuance costs related to the paydown of the Term Loan due 2024. The Term Loan due 2024 was retired at face value.
Gain on Sale Leaseback
We recognized a gain on the sale of fixed assets of $24.5 million during the thirty-nine weeks ended October 30, 2021. The gain was attributable to the sale and leaseback of our distribution center in Opelika, Alabama.
20
Income Taxes
The effective income tax rate for the first thirty-nine weeks of fiscal 2023 was 27.7 percent, which was an income tax benefit on a pre-tax book loss, compared to 22.2 percent for the first thirty-nine weeks of fiscal 2022, which was an income tax provision on pre-tax book income. The effective tax rate increased from the first thirty-nine weeks of fiscal 2022 to the first thirty-nine weeks of fiscal 2023 because there was a pre-tax loss in fiscal 2023 and pre-tax income in fiscal 2022. The Company's favorable permanent book-tax differences decrease the effective tax rate when applied to pre-tax income, while these favorable permanent book-tax differences increase the effective tax rate when there is a pre-tax loss.
Net Income (Loss)
Net loss was $109.5 million for the thirty-nine weeks ended October 29, 2022, compared to net income of $43.1 million during the same period in fiscal 2022. The decrease was driven by the factors described above.
Adjusted EBITDA
Adjusted EBITDA (as defined above) was $49.9 million for the thirty-nine weeks ended October 29, 2022 compared to $153.6 million for the same period in fiscal 2022. The decrease was driven by the factors described above.
Liquidity and Capital Resources
We have three principal sources of liquidity: cash and cash equivalents on hand, cash from operations and available borrowings under our Second Amended Revolving Credit Facility. In addition, we believe that we have the ability to obtain alternative sources of financing, if necessary. We believe that our cash and cash equivalents on hand, cash from operations and availability under our Second Amended Revolving Credit Facility will be sufficient to cover our working capital, capital expenditure and debt service requirement needs as well as dividend payments and share repurchases, if any, for the next twelve months, as well as the foreseeable future. Subject to market conditions, we may from time to time repurchase our outstanding debt. In order to increase liquidity and overall financial flexibility in response to near-term economic uncertainty, the Company is pausing its quarterly dividend at this time. As of October 29, 2022, we were in compliance with all covenants under our debt facilities and notes.
For the four quarters ended October 29, 2022, our ratio of consolidated net debt to Credit Facility Adjusted EBITDA, which is calculated in accordance with our Credit Facilities, was 6.0 to 1.0, and our ratio of consolidated senior secured net debt to Credit Facility Adjusted EBITDA was 6.0 to 1.0. We reference our ratio of consolidated net debt to Credit Facility Adjusted EBITDA and our ratio of consolidated senior secured net debt to Credit Facility Adjusted EBITDA because such ratios are calculated in accordance with our Credit Facilities and used to determine our compliance with certain covenants in our Credit Facilities, tested each quarter on the basis of the preceding four quarters. For example, we are permitted to prepay debt and make distributions on account of equity up to a certain amount under our Term Loan due 2028 if our ratio of consolidated net debt to Credit Facility Adjusted EBITDA for the prior four quarters as of the quarterly test is not greater than 4.90 to 1.0 and our ratio of consolidated senior secured net debt to Credit Facility Adjusted EBITDA for such period is not greater than 3.60 to 1.0. Additionally, our ratio of consolidated senior secured net debt to Credit Facility Adjusted EBITDA is measured once per year following the completion of our annual Consolidated Financial Statements and determines what percentage of our excess cash flow (as defined in our Term Loan due 2028) we are required to apply for the repayment of principal on our Term Loan due 2028, ranging from 50% of excess cash flow for ratios in excess of 2.50x to 0% of excess cash flow for ratios of less than 2.00x. Accordingly, we believe that our ratio of consolidated net debt to Credit Facility Adjusted EBITDA and our ratio of consolidated senior secured net debt to Credit Facility Adjusted EBITDA are material to an investor’s understanding of our financial condition and liquidity.
Our capital requirements are primarily for capital expenditures in connection with new store location openings, store location remodels, investments in information technology, investments in distribution centers and working capital requirements for seasonal inventory build. These requirements fluctuate during the year and reach their highest levels during the second and third fiscal quarters as we increase our inventory in preparation for our peak selling season during the months of September through December and complete most of our capital spending projects.
21
The following table provides a summary of our cash provided by (used for) operating, investing and financing activities for the thirty-nine weeks ended October 29, 2022 and October 30, 2021:
|
|
Thirty-Nine Weeks Ended |
|
|||||
(In millions) |
|
October 29, |
|
|
October 30, |
|
||
Net cash (used for) operating activities |
|
$ |
(173.6 |
) |
|
$ |
(123.6 |
) |
Net cash provided by (used for) investing activities |
|
|
(84.7 |
) |
|
|
5.0 |
|
Net cash provided by financing activities |
|
|
263.4 |
|
|
|
122.1 |
|
Effect of exchange rate changes on cash |
|
|
(0.1 |
) |
|
|
— |
|
Net increase in cash and cash equivalents |
|
$ |
5.0 |
|
|
$ |
3.5 |
|
Net Cash (Used for) Operating Activities
Net cash used for operating activities was $173.6 million in the thirty-nine weeks ended October 29, 2022, compared with $123.6 million of net cash used for operating activities in the thirty-nine weeks ended October 30, 2021. The increase in net cash used for operating activities was primarily due to our total comparable sales decline as well as increased import freight costs in fiscal 2023, partially offset by the change in net working capital. Working capital was positively impacted in the thirty-nine weeks ended October 29, 2022 as a result of payment lag at the end of the third quarter.
Net Cash Provided by (Used for) Investing Activities
Cash used for investing activities in fiscal 2023 and 2022 consisted primarily of capital expenditures, the majority of which were focused on strategic initiatives including: new store location and distribution center openings, store location remodels and refreshes and information technology investments, particularly those supporting our omni-channel platforms and other customer facing systems. We also incurred capital outlays for equipment and facility investments in our distribution centers, store locations and corporate offices.
Specifically, investment for each refresh project is tailored to each store location’s needs and unit economics. We have four general levels of investment and project scope tailored to what would benefit each store location, with future investment expected to range from $150,000 for the lightest-touch refreshes to $3 million for the relatively few but most-extensive refreshes. Over 80% of our existing store locations are refresh project targets over the next seven to ten years and we expect investments in relation to these future refresh projects to remain consistent with our capital expenditures in connection with completed refresh projects.
Capital expenditures for the thirty-nine weeks ended October 29, 2022 and October 30, 2021 are summarized as follows:
|
|
Thirty-Nine Weeks Ended |
|
|||||
(In millions) |
|
October 29, |
|
|
October 30, |
|
||
Store locations |
|
$ |
67.5 |
|
|
$ |
17.1 |
|
Distribution centers |
|
|
3.6 |
|
|
|
17.5 |
|
Information technology |
|
|
8.5 |
|
|
|
7.0 |
|
Other |
|
|
0.8 |
|
|
|
1.3 |
|
Total capital expenditures |
|
|
80.4 |
|
|
|
42.9 |
|
Landlord contributions |
|
|
(13.8 |
) |
|
|
(1.4 |
) |
Total capital expenditures, net of landlord contributions |
|
$ |
66.6 |
|
|
$ |
41.5 |
|
The increase in capital expenditures for store locations was primarily driven by an increase in new store location and refresh projects in fiscal 2023 compared to fiscal 2022.
Additionally, we purchased the remaining outstanding stock of WeaveUp for $4.3 million in the first thirty-nine weeks of fiscal 2023.
The cash used for investing activities in fiscal 2022 was more than offset by proceeds of $48.1 million from the sale leaseback of the Opelika Distribution Center in the second quarter of fiscal 2022, which resulted in net cash provided by investing activities for fiscal 2022.
22
Net Cash Provided by Financing Activities
Net cash provided by financing activities was $263.4 million during the thirty-nine weeks ended October 29, 2022 compared with $122.1 million of net cash provided by financing activities during the thirty-nine weeks ended October 30, 2021. Net cash provided by financing activities for the first thirty-nine weeks of fiscal 2023 was the result of net borrowings from the Second Amended Revolving Credit Facility. This inflow of cash was partially offset by cash used to pay down debt and finance lease obligations, as well as to pay dividends totaling $13.4 million. As of October 29, 2022, we had the ability to borrow an additional $74.5 million under the Second Amended Revolving Credit Facility subject to the facility’s borrowing base calculation.
Net cash provided by financing activities during the first thirty-nine weeks of fiscal 2022 was the result of net proceeds received from the initial public offering and borrowings from the Second Amended Revolving Credit Facility used to repay all of the outstanding borrowings and accrued interest under the Term Loan due 2024 totaling $72.7 million. In addition, we refinanced our Term Loan due 2023 with a $675 million Term Loan due 2028, with excess proceeds used to reduce amounts borrowed under our Revolving Credit Facility and fund working capital needs.
Off-Balance Sheet Transactions
Our liquidity is currently not dependent on the use of off-balance sheet transactions other than letters of credit, which are typical in a retail environment.
Seasonality
Our business exhibits seasonality, which is typical for most retail companies. Our net sales are stronger in the second half of the year than the first half of the year. Net income is highest during the months of September through December in alignment with our peak selling season. Working capital needed to finance our operations fluctuates during the year and reaches its highest levels during the second and third fiscal quarters as we increase our inventory in preparation for our peak selling season.
Critical Accounting Policies and Estimates
Accounting policies and estimates are considered critical when they require management to make subjective and complex judgments, estimates and assumptions about matters that have a material impact on the presentation of our financial statements and accompanying notes. For a description of our critical accounting policies and estimates, see Part II, Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Policies and Estimates” in our Annual Report on Form 10-K for the fiscal year ended January 29, 2022.
23
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
See Part II, Item 7A “Quantitative and Qualitative Disclosures About Market Risk” in our Annual Report on Form 10-K for the fiscal year ended January 29, 2022. During the thirty-nine weeks ended October 29, 2022, there have been no material changes in our exposure to market risk.
Item 4. Controls and Procedures.
Evaluation of Disclosure Controls and Procedures
Disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) are designed to ensure that information required to be disclosed in reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC rules and forms, and that such information is accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosures.
In connection with the preparation of this report, management, under the supervision and with the participation of the Chief Executive Officer and Chief Financial Officer, conducted an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures as of October 29, 2022. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that, as of October 29, 2022, our disclosure controls and procedures were effective.
Changes in Internal Control over Financial Reporting
There were no material changes in our internal control over financial reporting that occurred during the thirty-nine weeks ended October 29, 2022 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Limitations on Effectiveness of Controls and Procedures
In designing and evaluating our disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. In addition, the design of disclosure controls and procedures must reflect the fact that there are resource constraints and that management is required to apply judgment in evaluating the benefits of possible controls and procedures relative to their costs.
24
PART II—OTHER INFORMATION
Item 1. Legal Proceedings.
The information required to be set forth under this heading is incorporated by reference from Note 9, Commitments and Contingencies, to the Consolidated Financial Statements included in Part I, Item 1.
Item 1A. Risk Factors.
There have been no material changes from the risk factors disclosed in Part I, Item 1A “Risk Factors” in our Annual Report on Form 10-K for the year ended January 29, 2022.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
None.
Item 3. Defaults Upon Senior Securities.
None.
Item 4. Mine Safety Disclosures.
Not applicable.
Item 5. Other Information.
None.
25
Item 6. Exhibits.
Exhibit Number |
|
Description |
|
|
|
10.1*# |
|
|
10.2*# |
|
|
10.3*# |
|
|
10.4*# |
|
|
10.5*# |
|
JOANN Inc. 2021 Employee Stock Purchase Plan (amended and restated on October 11, 2022). |
10.6*# |
|
Severance Agreement by and between Jo-Ann Stores, LLC and Scott Sekella. |
31.1* |
|
|
31.2* |
|
|
32.1** |
|
|
32.2** |
|
|
101.INS |
|
Inline XBRL Instance Document – the instance document does not appear in the Interactive Data File because XBRL tags are embedded within the Inline XBRL document. |
101.SCH |
|
Inline XBRL Taxonomy Extension Schema Document |
101.CAL |
|
Inline XBRL Taxonomy Extension Calculation Linkbase Document |
101.DEF |
|
Inline XBRL Taxonomy Extension Definition Linkbase Document |
101.LAB |
|
Inline XBRL Taxonomy Extension Label Linkbase Document |
101.PRE |
|
Inline XBRL Taxonomy Extension Presentation Linkbase Document |
104 |
|
Cover Page Interactive Data File (embedded within the Inline XBRL document) |
* Filed herewith.
** Furnished herewith.
# Management contract or compensatory plan or arrangement
26
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
|
|
JOANN Inc. |
|
|
|
Registrant |
|
|
|
|
|
Date: December 12, 2022 |
|
By: |
/s/ Scott Sekella |
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Scott Sekella |
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Senior Vice President and Chief Financial Officer |
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(principal financial officer) |
27
Exhibit 10.1
JOANN INC.
2021 EQUITY INCENTIVE PLAN
Restricted Stock Unit Grant Notice
Capitalized terms not specifically defined in this Restricted Stock Unit Grant Notice (the “Grant Notice”) have the meanings given to them in the JOANN Inc. 2021 Equity Incentive Plan (the “Plan”) of JOANN Inc. (the “Company”). The Company hereby grants to the participant listed below (“Participant”) the Restricted Stock Units described in this Grant Notice (the “RSUs”), subject to the terms and conditions of the Plan and the Restricted Stock Unit Agreement attached hereto as Exhibit A (the “Agreement”), both of which are incorporated into this Grant Notice by reference.
Participant: |
[NAME] |
Grant Date: |
[DATE] |
Number of Restricted Stock Units: |
[NUMBER] |
Vesting Commencement Date: |
[DATE] |
Vesting Schedule: |
Subject to the Participant’s continued status as an Employee, Consultant or Non-Employee Director, the RSUs shall vest and become exercisable with respect to 33% of the Shares subject thereto (rounded down to the next whole number of Shares) on each of the first three (3) anniversaries of the Vesting Commencement Date, so that all of the Shares shall be vested on the third anniversary of the Vesting Commencement Date. |
Withholding Tax Provisions: By accepting this Award electronically through the Plan service provider’s online grant acceptance policy, the Participant understands and agrees that as a condition of the grant of the RSUs hereunder, but subject to the last sentence of this paragraph, the Participant is required to accept the Company’s determination from time to time of the method(s) by which all applicable withholding obligations with respect to any taxable events arising in connection with the RSUs will be satisfied (the “Withholding Methods”). Such Withholding Methods may include, at the determination of the Company, some or all of the following: (1) cash, wire transfer of immediately available funds or check; (2) Shares or cash otherwise deliverable pursuant to the settlement of the RSUs or Shares held for such minimum period of time as may be established by the Administrator, in each case, having a fair market value on the date of delivery equal to the aggregate payments required; (3) payment from a broker-assisted market sale (as reasonably acceptable to the Company) with respect to Shares otherwise deliverable pursuant to the settlement of the RSUs; or (4) any other form of legal consideration acceptable to the Administrator in its sole discretion. The Withholding Methods will otherwise be conducted in accordance with Section 10.2 of the Plan (except that, for purposes of clarification, such determination of the Withholding Methods shall not be made by the Participant or subject to affirmative election on the part of the Participant). Notwithstanding anything in this paragraph to the contrary, if the Participant is subject to Section 16 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), the Withholding Methods applicable to these RSUs shall consist solely of the mandatory withholding of Shares or cash otherwise deliverable pursuant to the settlement of the RSUs having a fair market value on the date of delivery equal to the aggregate payments required.
By accepting this Award electronically through the Plan service provider’s online grant acceptance policy, Participant agrees to be bound by the terms and conditions of the Plan, the Agreement and the Grant Notice. Participant has reviewed the Agreement, the Plan and the Grant Notice in their entirety, has had an opportunity to obtain the advice of counsel prior to executing the Grant Notice and fully understands all provisions of the Grant Notice, the Agreement and the Plan. Participant hereby agrees to accept as binding, conclusive and final all decisions or interpretations of the Administrator upon any questions arising under the Plan, the Grant Notice or the Agreement.
JOANN INC. |
PARTICIPANT |
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By: |
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Print Name: |
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Print Name: |
[NAME] |
Title: |
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2
Exhibit 10.1
EXHIBIT A
TO RESTRICTED STOCK UNIT GRANT NOTICE
RESTRICTED STOCK UNIT AGREEMENT
Pursuant to the Grant Notice to which this Agreement is attached, the Company has granted to Participant the number of RSUs set forth in the Grant Notice.
A-1
(a) In consideration of Participant’s past and/or continued employment with or service to any Participating Company and for other good and valuable consideration, effective as of the grant date set forth in the Grant Notice (the “Grant Date”), the Company has granted to Participant the number of RSUs set forth in the Grant Notice, upon the terms and conditions set forth in the Grant Notice, the Plan and this Agreement, subject to adjustments as provided in Article 12 of the Plan. Each RSU represents the right to receive one Share at the times and subject to the conditions set forth herein. However, unless and until the RSUs have vested, Participant will have no right to the payment of any Shares subject thereto. Prior to the actual delivery of any Shares, the RSUs will represent an unsecured obligation of the Company, payable only from the general assets of the Company.
(b) The Company hereby grants to Participant an Award of Dividend Equivalents with respect to each RSU granted pursuant to the Grant Notice for all ordinary cash dividends which are paid to all or substantially all holders of the outstanding shares of Stock between the Grant Date and the date when the applicable RSU is distributed or paid to Participant or is forfeited or expires. The Dividend Equivalents for each RSU shall be equal to the amount of cash that is paid for an applicable quarter as a dividend on one share of Stock. All such Dividend Equivalents shall be credited to Participant as of the date of payment of any such dividend. The Dividend Equivalents granted hereunder shall be paid in cash and subject to the same vesting, distribution/payment timing, adjustment and other provisions (other than payment in Shares) which apply to the underlying RSUs to which such Dividend Equivalents relate.
A-2
A-3
A-4
A-5
A-6
other provisions
A-7
A-8
A-9
Exhibit 10.2
JOANN INC.
2021 EQUITY INCENTIVE PLAN
stock option Grant Notice
Capitalized terms not specifically defined in this Stock Option Grant Notice (the “Grant Notice”) have the meanings given to them in the 2021 Equity Incentive Plan (as amended from time to time, the “Plan”) of JOANN Inc. (the “Company”). The Company hereby grants to the participant listed below (“Participant”) the stock option described in this Grant Notice (the “Option”), subject to the terms and conditions of the Plan and the Stock Option Agreement attached hereto as Exhibit A (the “Agreement”), both of which are incorporated into this Grant Notice by reference.
Participant: |
[NAME] |
Grant Date: |
[DATE] |
Exercise Price per Share: |
[PRICE] |
Shares Subject to the Option: |
[NUMBER] |
Final Expiration Date: |
[DATE] |
Vesting Commencement Date: |
[DATE] |
Vesting Schedule: |
Subject to the Participant’s continued status as an Employee, Consultant or Non-Employee Director, the Option shall vest and become exercisable with respect to twenty-five percent (25%) of the Shares subject thereto (rounded down to the next whole number of Shares) on each of the first four (4) anniversaries of the Vesting Commencement Date, so that all of the Shares shall be vested on the fourth anniversary of the Vesting Commencement Date. |
Type of Option: |
☐ Incentive Stock Option ☐ Non-Qualified Stock Option |
By Participant’s signature below or electronic acceptance or authentication in a form authorized by the Company, Participant agrees to be bound by the terms of this Grant Notice, the Plan and the Agreement. Participant has reviewed the Plan, this Grant Notice and the Agreement in their entirety, has had an opportunity to obtain the advice of counsel prior to executing this Grant Notice and fully understands all provisions of the Plan, this Grant Notice and the Agreement. Participant hereby agrees to accept as binding, conclusive and final all decisions or interpretations of the Administrator upon any questions arising under the Plan or relating to the Option.
JOANN INC. |
PARTICIPANT |
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By: |
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By: |
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Print Name: |
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Print Name: |
[NAME] |
Title: |
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Exhibit 10.2
EXHIBIT A
STOCK OPTION AGREEMENT
A-1
Exhibit 10.1
A-2
Exhibit 10.1
(i) by cash or check made payable to the Participating Company with respect to which the withholding obligation arises;
(ii) by the deduction of such amount from other compensation payable to Participant;
(iii) with respect to any withholding taxes arising in connection with the exercise of the Option, with the consent of the Administrator, by requesting that the Participating Companies withhold a net number of vested Shares otherwise issuable upon the exercise of the Option having a then current Fair Market Value not exceeding the amount necessary to satisfy the withholding obligation of the Participating Companies based on the maximum statutory withholding rates in Participant’s applicable jurisdictions for federal, state, local and foreign income tax and payroll tax purposes that are applicable to such taxable income;
(iv) with respect to any withholding taxes arising in connection with the exercise of the Option, with the consent of the Administrator, by tendering to the Company vested Shares held for such period of time as may be required by the Administrator in order to avoid adverse accounting consequences and having a then current Fair Market Value not exceeding the amount necessary to satisfy the withholding obligation of the Participating Companies based on the maximum statutory withholding rates in Participant’s applicable jurisdictions for federal, state, local and foreign income tax and payroll tax purposes that are applicable to such taxable income;
(v) with respect to any withholding taxes arising in connection with the exercise of the Option, through the delivery of a notice that Participant has placed a market sell order with a broker acceptable to the Company with respect to Shares then issuable to Participant pursuant to the Option, and that the broker has been directed to pay a sufficient portion of the net proceeds of the sale to the Participating Company with respect to which
A-3
Exhibit 10.1
the withholding obligation arises in satisfaction of such withholding taxes; provided that payment of such proceeds is then made to the applicable Participating Company at such time as may be required by the Administrator, but in any event not later than the settlement of such sale; or
(vi) in any combination of the foregoing.
A-4
Exhibit 10.1
Notwithstanding any of the foregoing, the Administrator shall have the right to specify all conditions of the manner of exercise, which conditions may vary by country and which may be subject to change from time to time.
A-5
Exhibit 10.1
A-6
Exhibit 10.1
A-7
Exhibit 10.1
A-8
Exhibit 10.1
A-9
Exhibit 10.1
A-10
Exhibit 10.1
* * * * *
A-11
Exhibit 10.3
JOANN INC.
Notice of Amendment to Stock Option Agreement(s)
Introduction
You are receiving this notice (“Notice”) because you have been identified by JOANN Inc. (the “Company”) as, as of August 17, 2022 (the “Effective Date”), a holder (“Holder”) of one or more outstanding stock options (“Outstanding Stock Options”) granted prior to the Effective Date under either the Stock Option Plan of Jo-Ann Stores Holdings Inc. (the “2012 Plan”) or the JOANN Inc. 2021 Equity Incentive Plan (the “2021 Plan” and, together with the 2012 Plan, the “Equity Plans”), or granted under both Equity Plans. The purpose of this Notice is to inform you that the Compensation Committee (the “Committee”) of the Board of Directors (the “Board”) of the Company has taken action in August 2022 to amended certain terms of the Outstanding Stock Options under the Equity Plans to provide for certain retirement treatment for such Outstanding Stock Options, as further described in this Notice (the “Retirement Treatment Amendment”).
Retirement Treatment Amendment
Commencing as of the Effective Date, under the Retirement Treatment Amendment, if a Holder voluntary terminates his or her employment with the Company and its subsidiaries on or after such date upon which the Holder first achieves both a combined age (minimum of age 55) plus years of credited employment service to the Company and its subsidiaries equal to 65 (“Retire” or “Retirement”), then:
Each of the Holder’s Outstanding Stock Options shall continue to be governed by its applicable award agreement and Equity Plan (“Award Documentation”), as modified by the Retirement Treatment approved by the Committee and described in this Notice. All terms of the applicable Award Documentation governing such Outstanding Stock Options shall otherwise remain unchanged. Notwithstanding the foregoing, if the Holder’s employment with the Company and its subsidiaries is terminated for Cause (as defined with respect to applicable Outstanding Stock Options), then such Outstanding Stock Options will not receive the Retirement Treatment.
General Provisions
To the extent not expressly amended by the Retirement Treatment, including as described in this Notice, all provisions of the applicable Award Documentation governing Outstanding Stock Options shall remain in full force and effect. This Notice shall be taken together with, and shall serve as an amendment to, the applicable Award Documentation governing your Outstanding Stock Options. This Notice and the changes described herein are automatically effective as of the Effective Date.
Exhibit 10.4
JOANN INC.
Notice of Amendment to Restricted Stock Unit Agreement(s)
Introduction
You are receiving this notice (“Notice”) because you have been identified by JOANN Inc. (the “Company”) as a holder (“Holder”), as of August 17, 2022, of one or more outstanding restricted stock units awards granted prior to August 17, 2022 under the JOANN Inc. 2021 Equity Incentive Plan (the “Equity Plan”), with a grant date for such Outstanding RSUs occurring in either 2021 (the “2021 RSUs”) or 2022 (the “2022 RSUs” and, together with the 2021 RSUs, the “Outstanding RSUs”). The purpose of this Notice is to inform you that the Compensation Committee (the “Committee”) of the Board of Directors (the “Board”) of the Company has taken action in August 2022 to amended certain terms of the Outstanding RSUs under the Equity Plan to provide for certain retirement treatment for such Outstanding RSUs, as further described in this Notice (the “Retirement Treatment Amendment”).
Retirement Treatment Amendment
Commencing as of the Effective Date, under the Retirement Treatment Amendment:
Each of the Holder’s Outstanding RSUs shall continue to be governed by its applicable award agreement and Equity Plan (“Award Documentation”), as modified by the Retirement Treatment approved by the Committee and described in this Notice. All terms of the applicable Award Documentation governing such Outstanding RSUs shall otherwise remain unchanged. Notwithstanding the foregoing, if the Holder’s employment with the Company and its subsidiaries is terminated for Cause (as defined with respect to applicable Outstanding RSUs), then such Outstanding RSUs will not receive the Retirement Treatment.
General Provisions
To the extent not expressly amended by the Retirement Treatment, including as described in this Notice, all provisions of the applicable Award Documentation governing Outstanding RSUs shall remain in full force and effect. This Notice shall be taken together with, and shall serve as an amendment to, the applicable Award Documentation governing your Outstanding RSUs. This Notice and the changes described herein are automatically effective as of the Effective Date.
Exhibit 10.5
JOANN Inc.
2021 Employee Stock Purchase Plan
(Amended and Restated as of October 11, 2022)
The purposes of this JOANN Inc. 2021 Employee Stock Purchase Plan (as it may be amended or restated from time to time, the “Plan”) are to assist Eligible Employees of JOANN Inc., a Delaware corporation (the “Company”), and its Designated Subsidiaries in acquiring a stock ownership interest in the Company pursuant to a plan which is intended to qualify as an “employee stock purchase plan” within the meaning of Section 423(b) of the Code, and to help Eligible Employees provide for their future security and to encourage them to remain in the employment of the Company and its Designated Subsidiaries.
Wherever the following terms are used in the Plan they shall have the meanings specified below, unless the context clearly indicates otherwise. The singular pronoun shall include the plural where the context so indicates. Masculine, feminine and neuter pronouns are used interchangeably and each comprehends the others.
1
Exhibit 10.5
2
Exhibit 10.5
3
Exhibit 10.5
4
Exhibit 10.5
5
Exhibit 10.5
6
Exhibit 10.5
7
Exhibit 10.5
8
Exhibit 10.5
9
Exhibit 10.5
10
Exhibit 10.5
Such modifications or amendments shall not require stockholder approval or the consent of any Participant.
The Plan shall be effective on the Effective Date. The effectiveness of the Plan shall be subject to approval of the Plan by the stockholders of the Company within twelve months following the date the Plan is first approved by the Board. No right may be granted under the Plan prior to such stockholder approval. No rights may be granted under the Plan during any period of suspension of the Plan or after termination of the Plan.
11
Exhibit 10.5
12
Exhibit 10.5
13
Exhibit 10.6
AGREEMENT
THIS AGREEMENT (“Agreement”) is made as of the 26th day of September 2022 (the “Effective Date”) between JO-ANN STORES, LLC, an Ohio limited liability company (the “Company”), and Scott Sekella (“Executive”).
The Company is entering into this Agreement in recognition of the importance of Executive’s services to the continuity of management of the Company and based on its determination that it will be in the best interests of the Company to encourage Executive’s continued attention and dedication to Executive’s duties as a general matter and in the potentially disruptive circumstances of a possible Change of Control of the Company. (As used in this Agreement, the term “Change of Control” and certain other capitalized terms have the meanings ascribed to them in Section 16 of this Agreement).
The Company and Executive agree as follows:
(a) Subject to Section 1(e) of this Agreement, Base Salary continuation for a period of eighteen (18) months from the effective date of Executive’s termination from the Company, payable in accordance with the Company’s normal payroll practices in effect at the applicable time, commencing within ten (10) days after Executive’s Release becomes effective and irrevocable in accordance with its terms.
(b) Any short-term incentive that would have been earned (based on actual Company performance during the entire fiscal year and assuming that any individual goals applicable to Executive were satisfied at the “target” level) will be payable on a pro-rata basis based on the number of weeks that Executive worked in the current fiscal year. This amount will be payable at the same time as the short-term incentive is paid to similarly situated active employees of the Company.
(c) All long-term incentives (including, without limitation, stock options) will be governed by the terms of the Amended & Restated Stockholder’s Agreement between the Company and Executive dated March 16, 2021 (the “Stockholder’s Agreement”). Any unvested restricted stock units will be governed by the terms of the applicable Restricted Stock Unit Grant Agreement.
(d) Subject to Section 1(e) of this Agreement, the Company will provide six (6) months of outplacement service with a reputable outplacement consultant chosen by the Company.
(e) Executive agrees immediately to advise Company when Executive commences employment, self-employment, a consulting arrangement or other compensated work (the “New Arrangement”) during the period of Base Salary continuation pursuant to this Section 1, and to provide Company with sufficient information concerning the New Arrangement so that the Company can determine the equivalency of the New Arrangement and the Executive’s prior employment with the Company. Company shall have no obligation to continue payment of the Base Salary if Executive does not provide sufficient information regarding the New Arrangement, and the period of the payment obligation (i) shall not be extended due to Executive’s failure to timely provide notice of the New Arrangement, and (ii) in no event shall such time period extend beyond the date that is 18 months from the effective date of Executive’s termination of employment. If the Company determines in its reasonable discretion that the New Arrangement is at least generally equivalent to Executive’s prior employment with the Company, Base Salary continuation pursuant to Section 1(a) hereof and outplacement service pursuant to Section 1(d) hereof shall cease immediately and the Company shall have no further obligations to Executive pursuant to Sections 1(a) and 1(d). If the Company determines in its reasonable discretion that the New
1
Exhibit 10.6
Arrangement is less than the Executive’s prior compensation with the Company, the Company’s obligation to pay Base Salary shall be reduced by the amount of the New Arrangement. In making its determination of equivalency pursuant to this Section 1(e), the Company may consider the total compensation package associated with the New Arrangement including base compensation, short-term and long-term incentive compensation, equity grants and fringe benefits. If there is any overpayment of Base Salary due to a New Arrangement, the Company will be entitled to recoup any such overpayment from the Executive.
2
Exhibit 10.6
9.1 Acknowledgement. The Company and Executive acknowledge that, following a Change of Control, one or more payments or distributions to be made by the Company to or for the benefit of Executive (whether paid or payable or distributed or distributable pursuant to the terms of this Agreement, under some other plan, agreement, or arrangement, or otherwise, and including, without limitation, any income recognized by Executive upon exercise of an option granted by the Company to acquire Common Shares issued by the Company) (a “Payment”) may be determined to be an Excess Parachute Payment that is not deductible by the Company for federal income tax purposes and with respect to which Executive will be subject to an excise tax because of Sections 280G and 4999, respectively, of the Code (hereinafter referred to respectively as “Section 280G” and “Section 4999”).
3
Exhibit 10.6
10.1 Change of Control Severance Benefit Payment Obligation Absolute. Except as otherwise provided in Section 9, the Company’s obligation to make the payments and provide the benefits provided for in Section 2 herein shall be absolute and unconditional, and shall not be affected by any circumstances, including, without limitation, any offset, counterclaim, recoupment, defense, or other right which the Company may have against Executive or anyone else. All payments by the Company pursuant to Section 2 herein shall be paid without notice or demand. Each and every payment made by the Company pursuant to Section 2 herein shall be final, and the Company shall not seek to recover all or any part of such payment from Executive or from whomsoever may be entitled thereto, for any reasons whatsoever. This Section 10.1 shall not be applicable to Severance Benefits made pursuant to Section 1 hereof.
4
Exhibit 10.6
11.1 Payment of Legal Fees. In the event of litigation or arbitration with respect to the Severance Benefits or Change of Control Severance Benefits provided for under this Agreement, the prevailing party shall be entitled to recover its legal fees, costs of arbitration and/or litigation, prejudgment interest, and other reasonable expenses.
13.1 Obligation to Maintain Confidentiality. Executive agrees not to divulge to third parties or use in a manner not authorized by the Company, any confidential or Company proprietary information gathered or learned by Executive during his or her employment with the Company or a subsidiary or affiliate of the Company. “Confidential Information” includes, but is not limited to, information in oral, written or recorded form regarding business plans, trade or business secrets, Company financial records, supplier contracts or relationships, or any other information that the Company does not regularly disclose to the public. To the extent that Executive has any doubt as to whether information constitutes Confidential Information, Executive agrees to obtain advice from the Company’s General Counsel prior to divulging or using such information. Executive understands and agrees that divulging such information to third parties, or using such information in an unauthorized manner, would cause serious competitive harm to the Company. Confidential Information shall exclude: (a) information that is generally known by or available for use by the public, (b) information that was known by Executive prior to his or her employment with the Company (including its predecessor in interest, affiliates and subsidiaries) and was obtained, to the best of Executive’s knowledge, without violation of any obligation of confidentiality to the Company, or (c) information that is required to be disclosed pursuant to applicable law or a court order. If information is required to be disclosed because of a court order, Executive must notify the Company’s General Counsel immediately. Nothing in this section 13.1 shall be interpreted to preclude Executive from communicating to a governmental agency about terms or conditions of employment or legal compliance issues, or from cooperating with an investigation being conducted by a governmental agency.
5
Exhibit 10.6
6
Exhibit 10.6
7
Exhibit 10.6
14.1 Successors to the Company. The Company will require any successor (whether direct or indirect, by purchase, merger, consolidation, or otherwise) of all or substantially all of the business and/or assets of the Company to expressly assume and agree to perform the Company’s obligations under this Agreement in the same manner and to the same extent that the Company would be required to perform them if no such succession had taken place.
15.1 Employment Status. Except as may be provided under any other agreement between Executive and the Company, the employment of Executive by the Company is “at will” and, prior to the effective date of a Change of Control, may be terminated by either Executive or the Company at any time, subject to applicable law.
8
Exhibit 10.6
16.1 “Accounting Firm” means the independent auditors of the Company for the Fiscal Year preceding the year in which the Change of Control occurred and such firm’s successor or successors; provided, however, if such firm is unable or unwilling to serve and perform in the capacity contemplated by this Agreement, the Company shall select another national accounting firm of recognized standing to serve and perform in that capacity under this Agreement, except that such other accounting firm shall not be the then independent auditors for the Company or any of its affiliates (as defined in Rule 12b-2 promulgated under the Securities Exchange Act of 1934, as amended).
9
Exhibit 10.6
10
Exhibit 10.6
11
Exhibit 10.6
[signature page to follow]
12
Exhibit 10.6
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above.
JO-ANN STORES, LLC |
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By: |
/s/ Janet Duliga |
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Janet Duliga |
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Chief Administrative Officer |
EXECUTIVE |
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/s/ Scott Sekella |
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Scott Sekella |
13
Exhibit 10.6
EXHIBIT A
GENERAL RELEASE
This General Release (this “Release”) is entered into by and between ______________ (“Executive”) and JO-ANN STORES, LLC (the “Company”) (collectively, the “Parties”) as of the _____ day of __________, 20__.
NOW, THEREFORE, and in consideration of the mutual promises contained herein, and for other good and valuable consideration, the adequacy and sufficiency of which are hereby acknowledged, the Parties agree as follows:
1. Employment Status. Executive’s employment with the Company terminated effective as of ________________, 20__.
2. Payments and Benefits. Following the effectiveness of the terms set forth herein, the Company shall provide Executive with certain benefits as provided in Section of that certain Agreement between the Company and Executive dated as of ______________, 20_ (the “Agreement”). Such benefits shall be provided in accordance with the terms, and subject to the conditions, of the Agreement, including, but not limited to, the condition that this Release must become effective and irrevocable in accordance with its terms within twenty-eight (28) days after Executive’s Separation from Service (as defined in the Agreement). Executive agrees that the consideration set forth above is more than Executive is legally entitled to and reflects adequate consideration for the release of any potential claims that Executive may have arising from Executive’s employment and separation from employment with the Company.
3. No Liability. This Release does not constitute an admission by the Company, or its managers, officers, employees, affiliates or agents, or Executive, of any unlawful acts or of any violation of federal, state or local laws.
4. Claims Released by Executive. In consideration of the payments and benefits described in Section 2 of this Release, and by signing this Release, Executive agrees on behalf of Executive and his or her agents, heirs, executors, administrators, and assigns to unconditionally release, acquit, and forever discharge the Company, its parents, subsidiaries, and affiliates, and each of their respective agents, directors, managers, officers, employees, partners, shareholders, members, representatives, successors, insurers, assigns, and all persons acting by, through, under or in concert with any of them (“Releasees”) from any and all actions, complaints, claims, liabilities, obligations, promises, agreements, damages, demands, losses, and expenses of any nature whatsoever, known or unknown, suspected or unsuspected, including, but not limited to, rights under federal, state or local laws prohibiting discrimination (including but not limited to the Federal Age Discrimination in Employment Act) and claims for wrongful discharge, breach of contract, either oral or written, breach of any employment policy or any other claim against Releasees which Executive now has, heretofore had or at any time hereafter may have against Releasees arising prior to the date hereof and arising out of or in connection with Executive’s employment or separation from employment with the Company.
Executive acknowledges and understands that this is a general release which releases the Releasees from any and all claims that Executive may have under federal, state or local laws or common law, including but not limited to claims arising under Title VII of the Civil Rights Act of 1964, 42 U.S.C. § 2000e, et seq., as amended, the Age Discrimination in Employment Act, 29 U.S.C. §§ 621 et seq., the Older Workers Benefit Protection Act, the Americans with Disabilities Act, 42 U.S.C. § 12101, et seq., the Fair Labor Standards Act, 29 U.S.C. § 201, et seq., the Employee Retirement Income Security Act, and the Consolidated Omnibus Budget Reconciliation Act. This Release does not apply to any claim that as a matter of law cannot be released, or to any rights or claims that may arise after the date Executive executes this Release.
Without limiting the foregoing, Executive represents that he or she understands that this Release specifically releases and waives any claims of age discrimination, known or unknown, that Executive may have against Releasees as of the date Executive signs this Release. This Release specifically includes a waiver of rights and claims under the Age Discrimination in Employment Act of 1967, as amended, and the Older Workers Benefit Protection Act. Executive acknowledges that as of the date he or she signs this Release, Executive may have certain rights or claims under the Age Discrimination in Employment Act, 29 U.S.C. §626, and Executive voluntarily relinquishes any such rights or claims by signing this Release.
Nothing in this Release will prohibit Executive from communicating to and cooperating with any federal, state or local governmental agency in any investigation concerning the Company (including without limitation the Securities and Exchange Commission (“SEC”), the National Labor Relations Board, the Occupational Safety and Health Administration and the Equal Employment Opportunity Commission (“EEOC”)), but Executive acknowledges that this Release will bar Executive from recovering any funds in any future proceeding, including any brought by the EEOC or any similar state and local agencies. Further, Executive specifically waives any right to receive any benefit or remedy as a consequence of filing a charge of
14
Exhibit 10.6
discrimination with the EEOC or any similar state and local agencies. Notwithstanding the prior two sentences, Executive may receive incentive payments under SEC Rule 21F-17 and similar rules of other governmental agencies.
5. Bar. Executive, on behalf of Executive and his or her agents, heirs, executors, administrators, and assigns, also agrees and covenants not to file a lawsuit or to assert any claim with respect to any claims released or waived under this Release, and Executive agrees that Executive will not institute any actions, causes, suits, debts, liens, claims or demands for released matters, whether known or unknown, against Releasees or attributable to Releasees in any way. Execution of this Release by Executive operates as a complete bar and defense against any and all of the released claims against Releasees. If Executive or any of Executive’s agents, heirs, executors, administrators, and assigns should make any claims against any of the Releasees in any complaint, action, claim, or proceeding (with the exception of claims to enforce the Agreement and claims not released herein), this Release may be raised as and shall constitute a complete bar to any such complaint, action, claim, or proceeding, and Releasees shall be entitled to and shall recover from Executive all costs incurred, including attorneys’ fees, in defending against any such complaint, action, claim, or proceeding to the fullest extent. Executive and the Company agree that this Release may be introduced into evidence by a party in the event either party attempts to or actually commences any legal, equitable or administrative action, arbitration or other proceeding against the other party or any of its affiliated entities or any of the Releasees.
6. Confidentiality/Non-Disparagement/Restrictive Covenants. Except as permitted by the fourth paragraph of Section 4 above, Executive agrees not to divulge to third parties or use any confidential or Company proprietary information gathered or learned by Executive in the scope of his or her employment with the Company. Confidential information includes, but is not limited to, information in oral, written or recorded form regarding business plans, trade or business secrets, Company financial records, supplier contracts or relationships, or any other information that the Company does not regularly disclose to the public. To the extent that Executive has any doubt, either now or in the future, as to whether information Executive possesses is confidential or Company proprietary, Executive should contact the Company’s General Counsel for clarification before divulging or using such information. Executive understands and agrees that divulging such information to third parties or Executive’s unauthorized use of it would cause serious competitive harm to the Company. Confidential information shall exclude: (a) information that is generally known by or available for use by the public, (b) information that was known by Executive prior to his or her employment with the Company (including its predecessor in interest, affiliates and subsidiaries) and was obtained, to the best of Executive’s knowledge, without violation of any obligation of confidentiality to Company, or (c) information that is required to be disclosed pursuant to applicable law or a court order. If information is required to be disclosed because of a court order, Executive must notify the Company’s General Counsel immediately.
Executive agrees that the terms of this Release are confidential and that Executive will not disclose any information concerning this Release to any person other than Executive’s immediate family members and professional advisors who also agree to keep said information confidential, not to disclose it to others and not to use such information for any purpose other than advising Executive with respect to Executive’s rights and obligations under this Release, except as permitted under the fourth paragraph of Section 4 above. Executive also may make such disclosures as are required by law. Any disclosure in violation of the foregoing is a material breach of this Release giving rise to an appropriate remedy as determined by a court of law or equity.
Executive agrees that he or she is prohibited from and will refrain from sharing all Company-related materials in Executive’s possession with those who have not been authorized to receive such information, including but not limited to any competitors or retailers selling crafts, fabrics or other product lines also sold by the Company.
Executive acknowledges that he or she remains subject to the restrictive covenants referenced in Section 13 of the Agreement.
Each Party covenants not to make any disparaging statements or comments about the other party to any person or entity by any medium, whether oral or written.
7. Governing Law. To the extent not preempted by the laws of the United States, the laws of the State of Ohio, applicable to contracts made and to be performed wholly within that state, shall be the controlling law in all matters relating to this Release.
8. Acknowledgment. Executive has read this Release, understands it, and voluntarily accepts its terms, and Executive acknowledges that he or she has been advised by the Company to seek the advice of legal counsel before entering into this Release. Executive acknowledges that he or she was given a period of twenty-one (21) calendar days within which to consider and execute this Release, and to the extent that he or she executes this Release before the expiration of the 21-day period, he or she does so knowingly and voluntarily and only after consulting his or her attorney.
15
Exhibit 10.6
9. Revocation. Executive understands that he or she has a period of seven (7) calendar days following the execution of this Release during which Executive may revoke this Release by delivering written notice to the Company, and this Release shall not become effective or enforceable until such revocation period has expired. Executive understands that if he or she revokes this Release, it will be null and void in its entirety and Executive will not be entitled to any payments or benefits provided in Section 2.
10. Miscellaneous. This Release is the complete understanding between Executive and the Company in respect of the subject matter of this Release and supersedes all prior agreements relating to Executive’s employment with the Company, except those provisions of the Agreement that survive the termination of Executive’s employment and agreements that Executive has entered into with the Company pertaining to confidentiality or ownership of intellectual property or Company proprietary information. Executive has not relied upon any representations, promises or agreements of any kind except those set forth herein and in the Agreement in signing this Release. In the event that any provision of this Release should be held to be invalid or unenforceable, each and all of the other provisions of this Release shall remain in full force and effect. If any provision of this Release is found to be invalid or unenforceable, such provision shall be modified as necessary to permit this Release to be upheld and enforced to the maximum extent permitted by law. Executive agrees to execute such other documents and take such further actions as reasonably may be required by the Company to carry out the provisions of this Release.
11. Counterparts. This Release may be executed by the parties hereto in counterparts (including by means of facsimile or other electronic transmission), each of which shall be deemed an original, but all of which taken together shall constitute one original instrument.
IN WITNESS WHEREOF, the parties have executed this Release on the date first set forth above.
JO-ANN STORES, LLC
_________________________________
Name:
Title:
EXECUTIVE
________________________________
Name:
Date:
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Exhibit 31.1
CERTIFICATION
I, Wade Miquelon, certify that:
Date: December 12, 2022 |
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By: |
/s/ Wade Miquelon |
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Wade Miquelon |
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President and Chief Executive Officer |
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(principal executive officer) |
Exhibit 31.2
CERTIFICATION
I, Scott Sekella, certify that:
Date: December 12, 2022 |
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By: |
/s/ Scott Sekella |
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Scott Sekella |
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Senior Vice President and Chief Financial Officer |
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(principal financial officer) |
Exhibit 32.1
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report on Form 10-Q of JOANN Inc. (the “Company”) for the period ended October 29, 2022 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:
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Date: December 12, 2022 |
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By: |
/s/ Wade Miquelon |
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Wade Miquelon |
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President and Chief Executive Officer |
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(principal executive officer) |
Exhibit 32.2
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of JOANN Inc. on Form 10-Q (the “Company”) for the period ended October 29, 2022 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:
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Date: December 12, 2022 |
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By: |
/s/ Scott Sekella |
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Scott Sekella |
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Senior Vice President and Chief Financial Officer |
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(principal financial officer) |