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United States securities and exchange commission logo
January 13, 2021
Matt Susz
Senior Vice President and Chief Financial Officer
Jo-Ann Stores Holdings Inc.
5555 Darrow Road
Hudson, Ohio 44236
Re: Jo-Ann Stores
Holdings Inc.
Draft Registration
Statement on Form S-1
Submitted December
21, 2020
CIK No. 0001834585
Dear Mr. Susz:
We have reviewed your draft registration statement and have the
following comments. In
some of our comments, we may ask you to provide us with information so
we may better
understand your disclosure.
Please respond to this letter by providing the requested
information and either submitting
an amended draft registration statement or publicly filing your
registration statement on
EDGAR. If you do not believe our comments apply to your facts and
circumstances or do not
believe an amendment is appropriate, please tell us why in your
response.
After reviewing the information you provide in response to these
comments and your
amended draft registration statement or filed registration statement, we
may have additional
comments.
Draft Registration Statement on Form S-1 Submitted December 21, 2020
Letter from our President and Chief Executive Officer, page vi
1. Please revise the
letter to address the following:
disclose when JOANN
was last a public reporting company.
clarify what you
mean by the current landscape, as the phrase is used in the last
sentence of the
first paragraph.
balance the letter
s emphasis on growth by also addressing challenges to your growth,
such as your
outstanding long-term debt, which was $921.6 million at October 31,
2020, the
year-over-year trend in your net sales for the last three completed fiscal
years, the
continued uncertainty engendered by the COVID-19 pandemic, and
competition.
Matt Susz
Jo-Ann Stores Holdings Inc.
January 13, 2021
Page 2
Prospectus Summary, page 1
2. Please revise the summary to provide a more balanced picture of your
business and
prospects. For example, regarding your financial performance, please
balance your
disclosure and graphics covering the thirty-nine weeks ended October
31, 2020 which
period substantially overlaps the occurrence of the COVID-19 pandemic
in the United
States with comparable disclosure and graphics for prior fiscal
periods. Likewise, when
you disclose the repayment of debt, please clarify amounts that remain
outstanding.
Finally, while we note the paragraph on page 15 of the summary that
discusses the impact
of COVID-19 on your business, we note the more detailed discussion of
the costs and the
continued uncertainty related to the pandemic that are addressed in
the risk factors on
pages 26 and 28, as well as in management s discussion and analysis
on page 66, and ask
that you work such detail into the summary.
JOANN Overview, page 1
3. In the first paragraph, second sentence, please explain what you mean
by multiple secular
themes and please explain why you believe you are a key
beneficiary of them. Please
make conforming revisions to the relevant portions of the Management's
Discussion and
Analysis and Business sections.
Our Opportunity, page 4
4. We note you estimate pure play e-commerce players represent less than
10% market share
of the Creative Products industry. To provide context for this
disclosure and your growth
opportunity, please provide management s estimates as to the
percentage market share of
the various other categories within the Creative Products industry. In
this regard we note
the information in the Market and Industry section on page ii.
Strong Cash Flow Generation and Solid Balance Sheet, page 11
5. You state here that you have used a portion of your free cash flow to
build a strong
balance sheet by consistently reducing net leverage, and that strong
operating metrics
combined with low maintenance capital spending and a focus on working
capital
efficiencies have driven the generation of $266 million of free cash
flow from the
beginning of fiscal year 2016 through the thirty-nine weeks ended
October 31, 2020.
Please note that free cash flow is a non-GAAP measure and, as such, the
most comparable
GAAP measure must be presented in a position of equal or greater
prominence. Please
revise this discussion to include the most comparable GAAP measure, net
cash flow
FirstName LastNameMatt Susz
provided by operating activities, for the same period. Please also
provide a reconciliation
Comapany
to netNameJo-Ann Stores Holdings
cash flow provided Inc. activities. Refer to Item
10(e)(1)(i)(A) and (B) of
by operating
JanuaryRegulation S-K.2
13, 2021 Page
FirstName LastName
Matt Susz
FirstName LastNameMatt Susz
Jo-Ann Stores Holdings Inc.
Comapany
January 13,NameJo-Ann
2021 Stores Holdings Inc.
January
Page 3 13, 2021 Page 3
FirstName LastName
Summary Risk Factors, page 16
6. We note your reference to the risks you may face related to your
indebtedness. Please
quantify your outstanding indebtedness here.
Summary Consolidated Financial and Operating Data
Adjusted EBITDA, page 20
7. We note you have included the non-GAAP measure Adjusted EBITDA as a
performance
measure in your filing. We note one of your reconciling items,
"sponsor management fee,"
does not have an explanatory footnote. Please revise your presentation
and tell us in your
response what this item represents, and why you believe it is
allowable. Refer to the
guidance in the Compliance and Disclosure Interpretation on Non-GAAP
Measures.
8. We note that you have included "strategic initiatives" and "technology
development
expense" as reconciling items to Adjusted EBITDA, and have identified
both as either
non-recurring or one-time charges related to ongoing growth, business
development, or
technology projects that facilitate business development. Please
provide us with an
inventory, including associated valuation and robust description, of
each major category
of expense included in these line items, whether these expenses were
paid in cash, and
why you consider them non-recurring and not related to ongoing
operations. Further,
explain why these adjustments don't result in a non-GAAP measure that
is
misleading. Refer to Question 100.01 of the Compliance and Disclosure
Interpretations on
Non-GAAP Financial Measures.
Risk Factors
Because LGP owns a significant percentage of our common stock , page 42
9. We note your disclosure on pages 110-112 and 117 regarding the Voting
Agreement to be
entered into in connection with this offering. Please include in this
risk factor a discussion
of the Voting Agreement and the impact it will have on the composition
of your board of
directors.
Dividend Policy, page 53
10. Please tell us why you believe you will be able to pay quarterly
dividends to holders of
your common stock once you are a public company. In this regard we
note the significant
limitations and caveats on your ability to pay dividends that you
describe in this section,
as well as your risk factor disclosure beginning on pages 44 and 53.
Selected Consolidated Financial Data, page 59
11. Reference is made to footnote (b). Please tell us why you present
earnings per common
share calculated using comprehensive income (loss) as opposed to using
net income (loss).
Matt Susz
FirstName LastNameMatt Susz
Jo-Ann Stores Holdings Inc.
Comapany
January 13,NameJo-Ann
2021 Stores Holdings Inc.
January
Page 4 13, 2021 Page 4
FirstName LastName
Management's Discussion and Analysis
Overview, page 63
12. We note your disclosure here that your transformation efforts were
refined over the past
four years to enable 369% growth in omni-channel sales, 25% growth
in total
comparable sales, an increase in net (loss) income from ($188.5)
million to $174.0 million
and 179% growth in Adjusted EBITDA in the thirty-nine weeks ended
October 31, 2020,
compared to the same period in the prior fiscal year, and on page
64 that [y]our omni-
channel platform operates at a large scale, having generated $423
million in net sales in
the twelve months ended October 31, 2020. To give investors more
context for how the
thirty-nine weeks ended October 31, 2020 may differ from prior periods
as a result of the
impacts of COVID-19, please disclose the net sales and year-over-year
growth for each of
the categories listed above for each of your last three completed
fiscal years. Please make
conforming revisions in the prospectus summary.
Effects of COVID-19 on Our Business, page 66
13. Please balance your disclosure that it is difficult to estimate the
sales to date that have
been attributable to PPE-making with the graphics provided on pages
88 and 91
illustrating the percent of sales for the thirty-nine weeks ended
October 31, 2020
generated by new customers and that 37% of sewists who purchased
during the pandemic
were sewing masks, respectively. Please also include quantitative
disclosure regarding the
COVID-19-related costs you have incurred to date. Please make
conforming revisions in
the prospectus summary.
Results of Operations, page 70
14. We note your disclosure in your discussion of comparative periods
that, during fiscal year
2020, you repurchased $6.3 million in face value of the term loans
provided pursuant to
your Second Lien Facility at an average of 38% of par, resulting in a
$3.8 million gain,
and that during the thirty-nine weeks ended October 31, 2020, you
repurchased $347.1
million in face value of the term loans provided pursuant to your Term
Loan Facilities, at
an average of 54% of par, resulting in a $152.9 million gain. Please
tell us in your
response the facts and circumstances leading to your ability to
repurchase these term loans
at such a large discount to par.
15. To the extent you had material increases or decreases in net sales,
please quantify the
extent to which the change is due to average unit retail value and
number of items
purchased. Refer to Item 303(a) of Regulation S-K.
16. Reference is made to your discussion of changes in selling, general
and administrative
expenses. Where you describe two or more factors that contributed to a
material change in
a financial statement line item between periods, please quantify, to
the extent practicable,
the incremental impact of each factor identified. See Item 303(a) of
Regulation S-K.
Matt Susz
Jo-Ann Stores Holdings Inc.
January 13, 2021
Page 5
Liquidity and Capital Resources, page 76
17. We note your disclosure that as of February 1, 2020, you were in
compliance with all
covenants under your debt facilities and notes and that you had the
ability to borrow an
additional $206.2 million under your ABL Facility. Please include
comparable disclosure
as of October 31, 2020.
18. We note your disclosure on pages 32 and 97 regarding plans for your
location refresh
initiative, including that just over 50% of your existing locations
are targets over the next
seven to ten years for refresh projects at varying levels of scope. So
that investors
understand the magnitude of future investments and capital
expenditures, please disclose
any material trends in such expenditures, to the extent practicable.
We also note your
disclosure on page 95 that you have used a portion of [y]our free
cash flow to build a
strong balance sheet by consistently reducing net leverage. [You]
retired and repaid
$433.8 million in principal amount of debt from November 2, 2019 to
October 31, 2020.
Please disclose whether you intend to continue to consistently reduce
your net leverage.
Refer to Item 303(a)(2) of Regulation S-K.
Business, page 86
19. Please disclose your basis for the following claims made in this
section:
The Creative Products industry is a large and growing market in
excess of $40
billion;
You are the nation s category leader in Sewing with
approximately one-third market
share; and
Your market share in the highly fragmented arts and crafts
category has grown by
approximately 50 basis points over the past five years as of July
2020.
Competitive Landscape, page 105
20. Please clarify that Fabric.com is a subsidiary of Amazon.com, and make
conforming
revisions throughout the prospectus.
Government Regulation, page 106
21. Please include a discussion of the material effects that compliance with
the government
FirstName LastNameMatt Susz
regulations you have listed here that are applicable to your business
may have upon your
Comapany NameJo-Ann
capital Stores
expenditures, Holdings
earnings Inc.
and competitive position. Refer to Item
101(c)(2) of
JanuaryRegulation S-K.5
13, 2021 Page
FirstName LastName
Matt Susz
FirstName LastNameMatt Susz
Jo-Ann Stores Holdings Inc.
Comapany
January 13,NameJo-Ann
2021 Stores Holdings Inc.
January
Page 6 13, 2021 Page 6
FirstName LastName
Audited Consolidated Financial Statements
Note 2 - Financing, page F-16
22. We note your disclosure that the Revolving Credit Facility and Term
Loans restrict your
ability to pay dividends. Please revise to describe the most
significant restrictions
indicating their pertinent provisions. Refer to Rule 4-08(e)(1) of
Regulation S-X.
23. Reference is made to the table at the top of page F-20. Please explain
to us why there is
no principal maturity for the Revolving Credit Facility.
You may contact Amy Geddes at 202-551-3304 or Adam Phippen at
202-551-3336 if
you have questions regarding comments on the financial statements and related
matters. Please
contact Taylor Beech at 202-551-4515 or Dietrich King at 202-551-8071 with any
other
questions.
Sincerely,
Division of
Corporation Finance
Office of Trade &
Services
cc: Drew Capurro