10-Q
20230001834585falseQ1--01-280001834585us-gaap:LondonInterbankOfferedRateLIBORMemberjoan:UsBankMemberus-gaap:InterestRateSwapMember2021-08-310001834585joan:TermLoanDueTwoThousandTwentyEightMemberus-gaap:CarryingReportedAmountFairValueDisclosureMember2022-04-3000018345852022-04-3000018345852021-01-300001834585us-gaap:RetainedEarningsMember2021-01-312021-05-010001834585joan:TermLoanDueTwoThousandTwentyThreeMember2022-04-300001834585joan:EurodollarRateLoansMemberjoan:ExcessCapacityMemberjoan:SecondAmendmentMember2022-01-302022-04-300001834585joan:UsBankMemberus-gaap:InterestRateSwapMember2022-01-302022-04-300001834585us-gaap:AccumulatedOtherComprehensiveIncomeMember2021-01-300001834585joan:JOANNTradeNameMember2022-04-300001834585us-gaap:TreasuryStockMember2021-05-010001834585joan:BaseRateLoansMemberjoan:SecondAmendmentMember2022-01-302022-04-300001834585joan:TermLoanDue2023Member2021-07-070001834585joan:TermLoanDueTwoThousandTwentyEightMember2022-01-290001834585joan:BaseRateLoansMemberjoan:ExcessCapacityMemberjoan:SecondAmendmentMember2022-01-302022-04-300001834585us-gaap:CommonStockMember2022-04-300001834585joan:ArtsAndCraftsAndHomeDecorMember2021-01-312021-05-010001834585joan:SecondAmendmentMember2022-03-042022-03-040001834585joan:TermLoanDueTwoThousandTwentyEightMemberjoan:ReductionOfDebtAndSetUpToAmortizeOverLifeOfTermLoanMember2021-07-070001834585us-gaap:AdditionalPaidInCapitalMember2022-04-300001834585us-gaap:CommonStockMember2022-01-302022-04-300001834585srt:MaximumMember2022-01-302022-04-300001834585us-gaap:RetainedEarningsMember2022-04-300001834585us-gaap:CarryingReportedAmountFairValueDisclosureMemberjoan:TermLoanDueTwoThousandTwentyFourMember2022-04-300001834585srt:MinimumMember2022-04-300001834585joan:TermLoanDueTwoThousandTwentyFourMember2022-04-300001834585joan:TermLoanDueTwoThousandTwentyEightMemberjoan:SecondAmendmentMember2022-01-302022-04-300001834585joan:TermLoanDue2024Member2022-04-300001834585joan:TermLoanDueTwoThousandTwentyThreeMember2021-05-0100018345852022-01-290001834585joan:TermLoanDueTwoThousandTwentyThreeMember2022-01-290001834585joan:TermLoanDue2023Member2016-10-212016-10-210001834585joan:TermLoanDueTwoThousandTwentyEightMember2021-07-072021-07-070001834585us-gaap:CustomerRelationshipsMember2021-05-010001834585joan:CreativebugTradeNameMember2021-05-010001834585joan:TermLoanDue2024Member2018-05-210001834585joan:AmendedCreditAgreementMember2022-01-302022-04-300001834585joan:TermLoanDue2023Member2016-10-210001834585us-gaap:AdditionalPaidInCapitalMember2021-01-300001834585us-gaap:TechnologyBasedIntangibleAssetsMember2022-04-300001834585joan:TermLoanDueTwoThousandTwentyEightMemberjoan:EurodollarRateLoansMemberjoan:SecondAmendmentMember2021-07-070001834585joan:TermLoanDue2024Member2021-03-190001834585us-gaap:CommonStockMember2022-01-290001834585us-gaap:TechnologyBasedIntangibleAssetsMember2021-05-010001834585us-gaap:SeniorNotesMemberjoan:AmendedCreditAgreementMember2020-11-250001834585joan:UsBankMemberus-gaap:InterestRateSwapMember2021-08-310001834585joan:TermLoanDueTwoThousandTwentyEightMemberjoan:ChargedToEarningsMember2021-07-070001834585us-gaap:TreasuryStockMember2022-01-290001834585joan:TermLoanDue2024Member2021-03-192021-03-190001834585joan:BaseRateLoansMemberjoan:TermLoanDueTwoThousandTwentyEightMemberjoan:SecondAmendmentMember2021-07-060001834585joan:TermLoanDueTwoThousandTwentyEightMember2021-07-070001834585us-gaap:CommonStockMember2021-01-300001834585joan:TermLoanDueTwoThousandTwentyFourMember2021-03-192021-03-190001834585us-gaap:CustomerRelationshipsMember2022-01-302022-04-300001834585us-gaap:TreasuryStockMember2022-04-300001834585us-gaap:AccumulatedOtherComprehensiveIncomeMember2022-01-302022-04-300001834585joan:OtherMember2022-01-302022-04-300001834585joan:SecondAmendmentMember2022-04-300001834585us-gaap:RetainedEarningsMember2021-05-010001834585joan:JoannComDomainNameMember2022-04-300001834585joan:JOANNTradeNameMember2022-01-302022-04-300001834585us-gaap:TreasuryStockMember2021-01-300001834585us-gaap:RetainedEarningsMember2022-01-302022-04-3000018345852022-01-302022-04-300001834585joan:JOANNTradeNameMember2021-05-010001834585us-gaap:OtherAssetsMemberus-gaap:InterestRateSwapMember2021-05-010001834585joan:TermLoanDueTwoThousandTwentyEightMember2021-05-010001834585us-gaap:RevolvingCreditFacilityMemberjoan:TermLoanDue2023Member2022-04-300001834585joan:JoannComDomainNameMember2022-01-302022-04-300001834585us-gaap:RetainedEarningsMember2022-01-290001834585joan:TermLoanDueTwoThousandTwentyEightMemberus-gaap:EstimateOfFairValueFairValueDisclosureMember2021-05-0100018345852021-03-110001834585joan:LeonardGreenAndPartnersLPMember2022-01-302022-04-300001834585joan:SewingMember2022-01-302022-04-300001834585srt:MinimumMember2022-01-302022-04-300001834585joan:SewingMember2021-01-312021-05-010001834585joan:EurodollarRateLoansMemberjoan:SecondAmendmentMember2022-01-302022-04-300001834585us-gaap:AdditionalPaidInCapitalMember2022-01-302022-04-300001834585joan:TermLoanDueTwoThousandTwentyThreeMemberus-gaap:EstimateOfFairValueFairValueDisclosureMember2021-05-010001834585joan:TermLoanDueTwoThousandTwentyThreeMemberus-gaap:CarryingReportedAmountFairValueDisclosureMember2021-05-010001834585joan:TermLoanDueTwoThousandTwentyEightMemberjoan:EurodollarRateLoansMemberjoan:SecondAmendmentMember2021-07-060001834585joan:ArtsAndCraftsAndHomeDecorMember2022-01-302022-04-300001834585joan:SecondAmendmentMember2021-12-222021-12-220001834585joan:TermLoanDueTwoThousandTwentyFourMemberus-gaap:EstimateOfFairValueFairValueDisclosureMember2021-05-010001834585us-gaap:AdditionalPaidInCapitalMember2022-01-290001834585joan:TermLoanDueTwoThousandTwentyFourMember2022-01-290001834585us-gaap:CustomerRelationshipsMember2022-04-300001834585joan:JoannComDomainNameMember2021-05-010001834585joan:BaseRateLoansMemberjoan:TermLoanDueTwoThousandTwentyEightMemberjoan:SecondAmendmentMember2021-07-0700018345852022-05-270001834585us-gaap:CarryingReportedAmountFairValueDisclosureMemberjoan:TermLoanDueTwoThousandTwentyFourMember2021-05-010001834585us-gaap:RevolvingCreditFacilityMember2016-10-210001834585joan:TermLoanDueTwoThousandTwentyEightMemberus-gaap:EstimateOfFairValueFairValueDisclosureMember2022-04-300001834585us-gaap:RevolvingCreditFacilityMember2022-04-300001834585joan:TermLoanDue2024Member2018-05-212018-05-210001834585us-gaap:LondonInterbankOfferedRateLiborSwapRateMemberjoan:TermLoanDueTwoThousandTwentyEightMemberjoan:SecondAmendmentMember2021-07-072021-07-070001834585joan:TermLoanDueTwoThousandTwentyFourMember2021-05-010001834585joan:LeonardGreenAndPartnersLPMember2021-01-312021-05-010001834585us-gaap:AdditionalPaidInCapitalMember2021-01-312021-05-010001834585us-gaap:RevolvingCreditFacilityMember2021-05-010001834585joan:WeaveupIncMember2022-03-040001834585us-gaap:LondonInterbankOfferedRateLiborSwapRateMemberjoan:TermLoanDueTwoThousandTwentyEightMemberjoan:SecondAmendmentMember2021-07-062021-07-060001834585joan:WeaveupIncMember2022-03-042022-03-040001834585joan:TermLoanDueTwoThousandTwentyEightMemberjoan:SecondAmendmentMember2021-07-072021-07-070001834585us-gaap:AdditionalPaidInCapitalMember2021-05-010001834585us-gaap:RevolvingCreditFacilityMember2022-01-302022-04-300001834585us-gaap:TreasuryStockMember2022-01-302022-04-300001834585us-gaap:TechnologyBasedIntangibleAssetsMember2022-01-302022-04-300001834585us-gaap:RevolvingCreditFacilityMember2022-01-290001834585joan:UsBankMemberus-gaap:InterestRateSwapMember2022-04-300001834585joan:TermLoanDueTwoThousandTwentyEightMember2022-04-300001834585us-gaap:RevolvingCreditFacilityMember2023-04-300001834585joan:OtherMember2021-01-312021-05-010001834585joan:TermLoanDueTwoThousandTwentyFourMemberus-gaap:EstimateOfFairValueFairValueDisclosureMember2022-04-300001834585us-gaap:AccumulatedOtherComprehensiveIncomeMember2022-04-300001834585joan:SecondAmendmentMember2021-12-2200018345852021-05-010001834585us-gaap:AccumulatedOtherComprehensiveIncomeMember2021-01-312021-05-010001834585us-gaap:AccumulatedOtherComprehensiveIncomeMember2021-05-010001834585joan:CreativebugTradeNameMember2022-01-302022-04-300001834585joan:TermLoanDueTwoThousandTwentyEightMemberus-gaap:CarryingReportedAmountFairValueDisclosureMember2021-05-010001834585us-gaap:RevolvingCreditFacilityMemberjoan:TermLoanDueTwoThousandTwentyEightMember2023-04-300001834585joan:TermLoanDueTwoThousandTwentyThreeMemberus-gaap:EstimateOfFairValueFairValueDisclosureMember2022-04-3000018345852021-01-312021-05-010001834585joan:CreativebugTradeNameMember2022-04-300001834585us-gaap:RetainedEarningsMember2021-01-300001834585joan:TermLoanDueTwoThousandTwentyEightMemberjoan:SecondAmendmentMember2021-07-070001834585us-gaap:AccumulatedOtherComprehensiveIncomeMember2022-01-290001834585us-gaap:OtherAssetsMemberus-gaap:InterestRateSwapMember2022-04-3000018345852021-03-112021-03-110001834585us-gaap:CommonStockMember2021-01-312021-05-010001834585joan:TermLoanDueTwoThousandTwentyThreeMemberus-gaap:CarryingReportedAmountFairValueDisclosureMember2022-04-300001834585us-gaap:CommonStockMember2021-05-01joan:Segmentxbrli:pureiso4217:USDxbrli:sharesxbrli:sharesjoan:OperatedRetailStoresiso4217:USDjoan:States

 

 

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 April 30, 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
Identification No.)

 

 

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)

 

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

 

 

Accelerated filer

 

 

 

 

 

Non-accelerated filer

 

 

Smaller reporting company

 

 

 

 

 

Emerging growth company

 

 

 

 

 

 

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 May 27, 2022, the registrant had 40,667,434 shares of common stock, par value $0.01 per share, outstanding.

 

 

 


 

Table of Contents

 

 

 

Page

 

FORWARD-LOOKING STATEMENTS

1

PART I.

FINANCIAL INFORMATION

2

Item 1.

Financial Statements

2

 

Consolidated Balance Sheets as of April 30, 2022 (Unaudited), May 1, 2021 (Unaudited) and January 29, 2022

2

 

Consolidated Statements of Comprehensive Income (Loss) for the thirteen weeks ended April 30, 2022 and May 1, 2021 (Unaudited)

3

 

Consolidated Statements of Cash Flows for the thirteen weeks ended April 30, 2022 and May 1, 2021 (Unaudited)

4

 

Consolidated Statements of Shareholders’ Equity for the thirteen weeks ended April 30, 2022 and May 1, 2021 (Unaudited)

5

 

Notes to Consolidated Financial Statements (Unaudited)

6

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

14

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

22

Item 4.

Controls and Procedures

22

PART II.

OTHER INFORMATION

23

Item 1.

Legal Proceedings

23

Item 1A.

Risk Factors

23

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

23

Item 3.

Defaults Upon Senior Securities

23

Item 4.

Mine Safety Disclosures

23

Item 5.

Other Information

23

Item 6.

Exhibits

24

 

Signatures

25

 

 

 

 

 

 


 

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,” or “should,” or the negative thereof or other variations thereon or comparable terminology. Forward-looking statements include those we make regarding the following matters:

inflationary pressures, and their impact on our ability to control costs and on our customers level of discretionary income to spend on Creative Products;
our ability to anticipate and effectively respond to disruptions or inefficiencies in our distribution network, e-commerce fulfillment function and transportation system, including availability and cost of import and domestic freight;
the effects of potential changes to U.S. trade regulations and policies, including tariffs, on our business;
developments involving our competitors and our industry;
potential future impacts of the COVID-19 pandemic, including effects on supply chain costs and capacity;
our ability to timely identify or effectively respond to consumer trends, and the potential effects of that ability on our relationship with our customers, the demand for our products and our market share;
our expectations regarding the seasonality of our business;
our ability to manage the distinct risks facing our e-commerce business and maintain a relevant omni-channel experience for our customers;
our ability to maintain or negotiate favorable lease terms for our store locations;
our ability to execute on our growth strategy to renovate and improve the performance of our existing store locations;
our ability to attract and retain a qualified management team and other team members while controlling our labor costs;
the impact of our debt and lease obligations on our ability to raise additional capital to fund our operations and maintain flexibility in operating our business;
our reliance on and relationships with third party service providers;
our reliance on and relationships with foreign suppliers and their ability to supply us with adequate, timely and cost-effective products for resale;
our ability, and our third party service providers’ ability, to maintain security and prevent unauthorized access to electronic and other confidential information;
the impacts of potential disruptions to our information systems, including our websites and mobile applications;
our ability to respond to risks associated with existing and future payment options;
our ability to maintain and enhance a strong brand image;
our ability to maintain adequate insurance coverage;
our status as a “controlled company” and control of us as a public company by affiliates of Leonard Green & Partners, L.P.;
the impact of evolving governmental laws and regulations and the outcomes of legal proceedings; and
the amount and timing of repurchases of our common stock, if any.

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

 

 

 

(Unaudited)

 

 

 

 

 

 

April 30,
2022

 

 

May 1,
2021

 

 

January 29,
2022

 

 

 

(In millions)

 

Assets

 

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

22.3

 

 

$

22.7

 

 

$

22.5

 

Inventories

 

 

674.5

 

 

 

539.3

 

 

 

658.6

 

Prepaid expenses and other current assets

 

 

58.2

 

 

 

66.6

 

 

 

39.2

 

Total current assets

 

 

755.0

 

 

 

628.6

 

 

 

720.3

 

 

 

 

 

 

 

 

 

 

 

Property, equipment and leasehold improvements, net

 

 

263.1

 

 

 

282.0

 

 

 

256.8

 

Operating lease assets

 

 

803.2

 

 

 

828.2

 

 

 

818.0

 

Goodwill, net

 

 

162.0

 

 

 

162.0

 

 

 

162.0

 

Intangible assets, net

 

 

373.6

 

 

 

375.5

 

 

 

370.3

 

Other assets

 

 

35.4

 

 

 

25.2

 

 

 

34.8

 

Total assets

 

$

2,392.3

 

 

$

2,301.5

 

 

$

2,362.2

 

 

 

 

 

 

 

 

 

 

 

Liabilities and Shareholders’ Equity

 

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

 

Accounts payable

 

$

194.0

 

 

$

205.1

 

 

$

253.8

 

Accrued expenses

 

 

127.4

 

 

 

127.1

 

 

 

142.4

 

Current portion of operating lease liabilities

 

 

169.5

 

 

 

180.4

 

 

 

173.8

 

Current portion of long-term debt

 

 

6.8

 

 

 

 

 

 

6.8

 

Total current liabilities

 

 

497.7

 

 

 

512.6

 

 

 

576.8

 

 

 

 

 

 

 

 

 

 

 

Long-term debt, net

 

 

931.0

 

 

 

760.4

 

 

 

778.6

 

Long-term operating lease liabilities

 

 

725.5

 

 

 

755.2

 

 

 

733.0

 

Long-term deferred income taxes

 

 

88.8

 

 

 

86.9

 

 

 

87.7

 

Other long-term liabilities

 

 

34.3

 

 

 

51.2

 

 

 

36.3

 

 

 

 

 

 

 

 

 

 

 

Shareholders’ equity:

 

 

 

 

 

 

 

 

 

Common stock, stated value $0.01 per share; 200.0 million authorized; issued 44.1 million shares at April 30, 2022, May 1, 2021 and January 29, 2022

 

 

0.4

 

 

 

0.4

 

 

 

0.4

 

Additional paid-in capital

 

 

203.7

 

 

 

202.2

 

 

 

203.3

 

Retained (deficit)

 

 

(64.5

)

 

 

(53.9

)

 

 

(24.9

)

Accumulated other comprehensive income (loss)

 

 

5.3

 

 

 

(0.2

)

 

 

1.8

 

Treasury stock at cost; 3.4 million shares at April 30, 2022, 1.9 million shares at May 1, 2021 and 3.5 million shares at January 29, 2022

 

 

(29.9

)

 

 

(13.3

)

 

 

(30.8

)

Total shareholders’ equity

 

 

115.0

 

 

 

135.2

 

 

 

149.8

 

Total liabilities and shareholders’ equity

 

$

2,392.3

 

 

$

2,301.5

 

 

$

2,362.2

 

 

See notes to unaudited consolidated financial statements.

2


 

JOANN Inc.

Consolidated Statements of Comprehensive Income (Loss)

(Unaudited)

 

 

 

Thirteen Weeks Ended

 

 

 

April 30,
2022

 

 

May 1,
2021

 

 

 

(In millions except per share data)

 

Net sales

 

$

498.0

 

 

$

574.4

 

Cost of sales

 

 

257.3

 

 

 

271.7

 

Selling, general and administrative expenses

 

 

259.1

 

 

 

249.9

 

Depreciation and amortization

 

 

20.1

 

 

 

20.4

 

Operating profit (loss)

 

 

(38.5

)

 

 

32.4

 

Interest expense, net

 

 

11.2

 

 

 

13.2

 

Debt related (gain)

 

 

 

 

 

(0.1

)

Step acquisition write-off

 

 

1.0

 

 

 

 

Income (loss) before income taxes

 

 

(50.7

)

 

 

19.3

 

Income tax provision (benefit)

 

 

(15.6

)

 

 

4.2

 

Net income (loss)

 

$

(35.1

)

 

$

15.1

 

 

 

 

 

 

 

 

Other comprehensive income:

 

 

 

 

 

 

Cash flow hedges

 

 

4.7

 

 

 

0.2

 

Income tax provision on cash flow hedges

 

 

(1.2

)

 

 

(0.1

)

Other comprehensive income

 

 

3.5

 

 

 

0.1

 

Comprehensive income (loss)

 

$

(31.6

)

 

$

15.2

 

 

 

 

 

 

 

 

Earnings (loss) per common share:

 

 

 

 

 

 

Basic

 

$

(0.86

)

 

$

0.39

 

Diluted

 

$

(0.86

)

 

$

0.38

 

Weighted-average common shares outstanding:

 

 

 

 

 

 

Basic

 

 

40.6

 

 

 

38.4

 

Diluted

 

 

40.6

 

 

 

39.7

 

 

See notes to unaudited consolidated financial statements.

3


 

JOANN Inc.

Consolidated Statements of Cash Flows

(Unaudited)

 

 

 

Thirteen Weeks Ended

 

 

 

April 30,
2022

 

 

May 1,
2021

 

 

 

(In millions)

 

Net cash provided by (used for) operating activities:

 

 

 

 

 

 

Net income (loss)

 

$

(35.1

)

 

$

15.1

 

Adjustments to reconcile net income (loss) to net cash (used for)
   operating activities:

 

 

 

 

 

 

Non-cash operating lease expense

 

 

41.4

 

 

 

39.3

 

Depreciation and amortization

 

 

20.1

 

 

 

20.4

 

Deferred income taxes

 

 

(0.1

)

 

 

(0.4

)

Stock-based compensation expense

 

 

1.0

 

 

 

0.6

 

Amortization of deferred financing costs and original issue discount

 

 

0.5

 

 

 

0.8

 

Debt related (gain)

 

 

 

 

 

(0.1

)

Step acquisition write-off

 

 

1.0

 

 

 

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

Decrease (increase) in inventories

 

 

(15.9

)

 

 

16.6

 

Decrease (increase) in prepaid expenses and other current assets

 

 

(18.9

)

 

 

6.1

 

(Decrease) in accounts payable

 

 

(59.8

)

 

 

(45.0

)

(Decrease) in accrued expenses

 

 

(16.3

)

 

 

(47.5

)

(Decrease) in operating lease liabilities

 

 

(38.5

)

 

 

(48.5

)

(Decrease) in other long-term liabilities

 

 

(3.7

)

 

 

(1.5

)

Other, net

 

 

2.1

 

 

 

0.6

 

Net cash (used for) operating activities

 

 

(122.2

)

 

 

(43.5

)

Net cash (used for) investing activities:

 

 

 

 

 

 

Capital expenditures

 

 

(19.3

)

 

 

(10.5

)

Acquisitions

 

 

(4.3

)

 

 

 

Other investing activities

 

 

 

 

 

(0.2

)

Net cash (used for) investing activities

 

 

(23.6

)

 

 

(10.7

)

Net cash provided by (used for) financing activities:

 

 

 

 

 

 

Term loan payments

 

 

(3.4

)

 

 

(70.9

)

Borrowings on revolving credit facility

 

 

221.7

 

 

 

147.6

 

Payments on revolving credit facility

 

 

(66.2

)

 

 

(102.1

)

Purchase and retirement of debt

 

 

 

 

 

(0.9

)

Principal payments on finance lease obligations

 

 

(2.3

)

 

 

(1.2

)

Issuance of common stock, net of underwriting commissions and offering costs

 

 

 

 

 

77.0

 

Proceeds from exercise of stock options

 

 

0.4

 

 

 

 

Payments of taxes related to the net issuance of team member stock awards

 

 

(0.1

)

 

 

 

Dividends paid

 

 

(4.5

)

 

 

 

Net cash provided by financing activities

 

 

145.6

 

 

 

49.5

 

Net (decrease) in cash and cash equivalents

 

 

(0.2

)

 

 

(4.7

)

Cash and cash equivalents at beginning of period

 

 

22.5

 

 

 

27.4

 

Cash and cash equivalents at end of period

 

$

22.3

 

 

$

22.7

 

Cash paid during the period for:

 

 

 

 

 

 

Interest

 

$

10.4

 

 

$

12.8

 

Income taxes, net of refunds

 

 

(0.4

)

 

 

(0.3

)

 

See notes to unaudited consolidated financial statements.

4


 

JOANN Inc.

Consolidated Statements of Shareholders’ Equity

(Unaudited)

 

 

 

Thirteen Weeks Ended

 

 

 

Net
Common
Shares

 

 

Treasury
Shares

 

 

 

Common
Stock
Par
Value

 

 

Additional
Paid-In
Capital

 

 

Treasury
Stock

 

 

Retained
(Deficit)

 

 

Accumulated
Other
Comprehensive
Income (Loss)

 

 

Total
Shareholders'
Equity

 

 

 

(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

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

 

 

See notes to unaudited consolidated financial statements.

5


 

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, 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 April 30, 2022, the Company operated 846 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 Leonard Green & Partners, L.P. (“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 April 30, 2022 and May 1, 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.

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

6


 

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 have been 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 paid a management fee of $0.4 million for the thirteen weeks ended May 1, 2021, but paid no such fee for the thirteen weeks ended April 30, 2022.

During the thirteen weeks ended April 30, 2022, the Company paid dividends of $3.1 million to LGP as part of the Company's quarterly dividend payments.

 

Note 2—Financing

Long-term debt consisted of the following:

 

 

 

April 30,
2022

 

 

May 1,
2021

 

 

January 29,
2022

 

 

 

(In millions)

 

Second Amended Revolving Credit Facility

 

$

276.5

 

 

$

131.0

 

 

$

121.0

 

Term Loan due 2023

 

 

 

 

 

635.3

 

 

 

 

Term Loan due 2024

 

 

 

 

 

 

 

 

 

Term Loan due 2028

 

 

669.9

 

 

 

 

 

 

673.3

 

Total debt

 

 

946.4

 

 

 

766.3

 

 

 

794.3

 

Less unamortized discount and debt costs

 

 

(8.6

)

 

 

(5.9

)

 

 

(8.9

)

Total debt, net

 

 

937.8

 

 

 

760.4

 

 

 

785.4

 

Less current portion of debt

 

 

(6.8

)

 

 

 

 

 

(6.8

)

Long-term debt, net

 

$

931.0

 

 

$

760.4

 

 

$

778.6

 

 

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 $