UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended
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:
(Exact name of registrant as specified in its charter)
(State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer |
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(Address of principal executive offices) |
(Zip Code) |
Registrant’s telephone number, including area code: (
Securities registered pursuant to Section 12(b) of the Act:
Title of each class |
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Trading Symbol(s) |
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Name of each exchange on which registered |
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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.
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).
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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Non-accelerated filer |
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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
As of August 28, 2023, the registrant had
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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6 |
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Item 2. |
Management’s Discussion and Analysis of Financial Condition and Results of Operations |
14 |
Item 3. |
23 |
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Item 4. |
23 |
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PART II. |
24 |
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Item 1. |
24 |
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Item 1A. |
24 |
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Item 2. |
24 |
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Item 3. |
24 |
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Item 4. |
24 |
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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. 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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July 29, |
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July 30, |
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January 28, |
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(In millions) |
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Assets |
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Current assets: |
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Cash and cash equivalents |
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$ |
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$ |
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$ |
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Inventories |
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Prepaid expenses and other current assets |
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Total current assets |
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Property, equipment and leasehold improvements, net |
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Operating lease assets |
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Goodwill, net |
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Intangible assets, net |
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Other assets |
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Total assets |
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$ |
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$ |
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$ |
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Liabilities and Shareholders’ Equity (Deficit) |
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Current liabilities: |
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Accounts payable |
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$ |
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$ |
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$ |
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Accrued expenses |
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Current portion of operating lease liabilities |
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Current portion of long-term debt |
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Total current liabilities |
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Long-term debt, net |
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Long-term operating lease liabilities |
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Long-term deferred income taxes |
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Other long-term liabilities |
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Shareholders’ equity (deficit): |
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Common stock, stated value $ |
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Additional paid-in capital |
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Retained (deficit) |
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( |
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( |
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Accumulated other comprehensive income |
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Treasury stock at cost; |
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( |
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( |
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( |
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Total shareholders’ equity (deficit) |
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( |
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( |
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Total liabilities and shareholders’ equity (deficit) |
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$ |
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$ |
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$ |
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See notes to unaudited consolidated financial statements.
2
JOANN Inc.
Consolidated Statements of Comprehensive Income (Loss)
(Unaudited)
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Thirteen Weeks Ended |
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Twenty-Six Weeks Ended |
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July 29, |
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July 30, |
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July 29, |
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July 30, |
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(In millions except per share data) |
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Net sales |
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$ |
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$ |
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$ |
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$ |
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Cost of sales |
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Selling, general and administrative expenses |
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Depreciation and amortization |
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Operating (loss) |
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( |
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( |
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( |
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( |
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Interest expense, net |
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Investment remeasurement |
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(Loss) before income taxes |
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( |
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( |
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( |
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( |
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Income tax (benefit) |
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( |
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( |
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( |
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( |
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Loss from equity method investments |
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Net (loss) |
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$ |
( |
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$ |
( |
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$ |
( |
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$ |
( |
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Other comprehensive income (loss): |
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Cash flow hedges |
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( |
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( |
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Income tax benefit (provision) on cash flow hedges |
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( |
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( |
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Other comprehensive income (loss) |
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( |
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( |
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Comprehensive (loss) |
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$ |
( |
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$ |
( |
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$ |
( |
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$ |
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(Loss) per common share: |
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Basic |
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$ |
( |
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$ |
( |
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$ |
( |
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$ |
( |
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Diluted |
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$ |
( |
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$ |
( |
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$ |
( |
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$ |
( |
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Weighted-average common shares outstanding: |
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Basic |
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Diluted |
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See notes to unaudited consolidated financial statements.
3
JOANN Inc.
Consolidated Statements of Cash Flows
(Unaudited)
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Twenty-Six Weeks Ended |
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July 29, |
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July 30, |
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(In millions) |
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Net cash provided by (used for) operating activities: |
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Net (loss) |
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$ |
( |
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$ |
( |
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Adjustments to reconcile net (loss) to net cash (used for) |
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Non-cash operating lease expense |
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Depreciation and amortization |
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Deferred income taxes |
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( |
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Stock-based compensation expense |
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Amortization of deferred financing costs and original issue discount |
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Investment remeasurement |
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Loss on disposal and impairment of fixed assets |
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Loss on equity method investment |
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Changes in operating assets and liabilities: |
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(Increase) in inventories |
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( |
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( |
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(Increase) in prepaid expenses and other current assets |
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( |
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( |
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Increase in accounts payable |
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Increase (decrease) in accrued expenses |
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( |
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(Decrease) in operating lease liabilities |
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( |
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( |
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Increase (decrease) in other long-term liabilities |
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( |
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Other, net |
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( |
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Net cash (used for) operating activities |
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( |
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( |
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Net cash (used for) investing activities: |
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Capital expenditures |
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( |
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( |
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Other investing activities |
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( |
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( |
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Net cash (used for) investing activities |
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( |
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( |
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Net cash provided by (used for) financing activities: |
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Term loan payments |
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( |
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( |
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FILO proceeds |
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Borrowings on revolving credit facility |
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Payments on revolving credit facility |
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( |
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( |
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Principal payments on finance lease obligations |
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( |
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( |
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Proceeds from employee stock purchase plan and exercise of stock options |
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Payments of taxes related to the net issuance of team member stock awards |
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( |
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( |
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Dividends paid |
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( |
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Financing fees paid |
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( |
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Net cash provided by financing activities |
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Net (decrease) in cash and cash equivalents |
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( |
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( |
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Cash and cash equivalents at beginning of period |
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Cash and cash equivalents at end of period |
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$ |
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$ |
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Cash paid (received) during the period for: |
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Interest |
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$ |
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$ |
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Income taxes, net of (refunds) |
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( |
) |
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See notes to unaudited consolidated financial statements.
4
JOANN Inc.
(Unaudited)
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Net |
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Treasury |
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Common |
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Additional |
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Treasury |
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Retained |
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Accumulated |
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Total |
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(In millions) |
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Balance, January 28, 2023 |
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$ |
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$ |
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$ |
( |
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$ |
( |
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$ |
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$ |
( |
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Net (loss) |
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— |
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— |
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— |
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— |
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— |
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( |
) |
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— |
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( |
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Other comprehensive income |
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— |
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— |
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— |
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— |
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— |
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— |
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Stock-based compensation |
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— |
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— |
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— |
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— |
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— |
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— |
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Exercise of stock options |
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— |
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— |
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— |
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( |
) |
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— |
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— |
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— |
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Vesting of restricted stock units |
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( |
) |
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— |
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( |
) |
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— |
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— |
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( |
) |
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Balance, April 29, 2023 |
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$ |
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$ |
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$ |
( |
) |
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$ |
( |
) |
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$ |
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$ |
( |
) |
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Net (loss) |
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— |
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— |
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— |
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— |
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— |
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( |
) |
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— |
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( |
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Other comprehensive income |
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— |
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— |
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— |
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— |
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— |
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— |
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||
Stock-based compensation |
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— |
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— |
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— |
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— |
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— |
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— |
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Vesting of restricted stock units |
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( |
) |
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|
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— |
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( |
) |
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— |
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— |
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— |
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Employee stock purchase plan purchases |
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( |
) |
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— |
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( |
) |
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— |
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— |
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Balance, July 29, 2023 |
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$ |
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$ |
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$ |
( |
) |
|
$ |
( |
) |
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$ |
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$ |
( |
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|||||
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Net |
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Treasury |
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Common |
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Additional |
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Treasury |
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Retained |
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Accumulated |
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Total |
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(In millions) |
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||||||||||||||||||||||||||||||
Balance, January 29, 2022 |
|
|
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|
|
|
|
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$ |
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$ |
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|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
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|
$ |
|
||||||
Net (loss) |
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— |
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|
|
— |
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— |
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— |
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— |
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( |
) |
|
|
— |
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( |
) |
Other comprehensive income |
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— |
|
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— |
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— |
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— |
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— |
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— |
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Dividends – $ |
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— |
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— |
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— |
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— |
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— |
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( |
) |
|
|
— |
|
|
|
( |
) |
Stock-based compensation |
|
|
— |
|
|
|
— |
|
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
||
Exercise of stock options |
|
|
— |
|
|
|
— |
|
|
|
|
— |
|
|
|
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|||
Vesting of restricted stock units |
|
|
|
|
|
( |
) |
|
|
|
— |
|
|
|
( |
) |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
||
Balance, April 30, 2022 |
|
|
|
|
|
|
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
|
|
$ |
|
||||||
Net (loss) |
|
|
— |
|
|
|
— |
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
( |
) |
Other comprehensive (loss) |
|
|
— |
|
|
|
— |
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
( |
) |
Dividends – $ |
|
|
— |
|
|
|
— |
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
( |
) |
Stock-based compensation |
|
|
— |
|
|
|
— |
|
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
||
Vesting of restricted stock units |
|
|
— |
|
|
|
— |
|
|
|
|
— |
|
|
|
( |
) |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
Employee stock purchase plan purchases |
|
|
|
|
|
( |
) |
|
|
|
— |
|
|
|
( |
) |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|||
Balance, July 30, 2022 |
|
|
|
|
|
|
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
|
|
$ |
|
||||||
See notes to unaudited consolidated financial statements.
5
JOANN Inc.
Notes to Consolidated Financial Statements
(Unaudited)
Note 1—Significant Accounting Policies
Nature of Operations
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 28, 2023.
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. Fiscal 2024 consists of 53 weeks and ends February 3, 2024. The fiscal quarters ended July 29, 2023 and July 30, 2022 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.
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.
6
Recently Adopted Accounting Guidance
In December 2022, the Financial Accounting Standards Board issued Accounting Standards Update (“ASU”) 2022-06, Reference Rate Reform (Topic 848): Deferral of the Sunset Date of Topic 848. This ASU defers the sunset date of Topic 848 (ASU 2020-04) from December 31, 2022 to December 31, 2024, after which entities will no longer be permitted to apply the relief in Topic 848. Topic 848 provides optional guidance for a limited period of time to ease the potential burden in accounting for (or recognizing the effects of) reference rate reform on financial reporting and, particularly, the risk of cessation of the London Interbank Offered Rate (“LIBOR”). The amendments in this ASU are elective and apply to all entities, subject to meeting certain criteria, that have contracts, hedging relationships, and transactions that reference LIBOR or another reference rate expected to be discontinued because of reference rate reform. These amendments were effective upon issuance and may be applied prospectively to contract modifications made and hedging relationships entered into or evaluated on or before December 31, 2024. In May 2023, the Company entered into the Amendment No. 3 (“Amendment No. 3”) to the credit agreement, dated as of October 21, 2016, which replaced LIBOR as the benchmark rate with the Term Secured Overnight Financing Rate (“SOFR”) as administered by the Federal Reserve Bank of New York. See Note 2 for further discussion regarding our Term Loan due 2028 (as defined below). In June 2023, the Company entered into an amended and restated agreement for each of its interest rate swap agreements with U.S. Bank N.A., each of which replaced LIBOR as the benchmark rate with SOFR, as administered by CME Group Benchmark Administration, Ltd. See Note 3 for further discussion regarding the Company's interest rate swaps. In connection with these amendments, the Company adopted the above standard in the second quarter of fiscal 2024 and elected the optional expedients. The Company concluded that neither the modifications to the Term Loan due 2028 nor the interest rate swaps are substantial, and this adoption did not have a material impact on its consolidated financial statements.
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
During the thirteen and twenty-six weeks ended July 30, 2022, the Company paid dividends of $
Note 2—Financing
Long-term debt consisted of the following:
|
|
July 29, |
|
|
July 30, |
|
|
January 28, |
|
|||
|
|
(In millions) |
|
|||||||||
ABL Facility |
|
$ |
|
|
$ |
|
|
$ |
|
|||
Term Loan due 2028 |
|
|
|
|
|
|
|
|
|
|||
FILO Loan |
|
|
|
|
|
|
|
|
|
|||
Total debt |
|
|
|
|
|
|
|
|
|
|||
Less unamortized discount and debt costs |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Total debt, net |
|
|
|
|
|
|
|
|
|
|||
Less current portion of debt |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Long-term debt, net |
|
$ |
|
|
$ |
|
|
$ |
|
|||
ABL Facility
On
On December 22, 2021, the Company entered into an agreement to amend various terms of the ABL Facility, which provides for senior secured financing of up to $
7
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.
As further described under FILO Loans below, on March 10, 2023, the Company entered into a third amendment to the ABL Facility (the “Third Amendment"). As amended by the Third Amendment, the ABL Facility base rate loans bear an additional margin of
The Third Amendment also replaced LIBOR as the interest rate benchmark under the credit agreement with the forward-looking term rate based on SOFR. SOFR loans, previously Eurodollar rate loans, bear an additional margin of
As of July 29, 2023, there were $
FILO Loans
On March 10, 2023 (the “Closing Date”), the Company entered into the Third Amendment to the ABL Facility. The Third Amendment, among other things, adds a series of first-in last-out loans (the “FILO Loans”) in an aggregate amount of $
The FILO Loans and the revolving commitments under the credit agreement (the “Revolving Commitments”) mature on December 22, 2026. The FILO Loans will not amortize.
The Third Amendment also amends the credit agreement to (i) include certain trade receivables in the borrowing base, (ii) provide that loans drawn pursuant to the Revolving Commitments may be made at JOANN’s election as base rate loans or SOFR loans and (iii)
Other than the changes described above, all other material provisions of the credit agreement remain unchanged and as previously disclosed.
During the second quarter of fiscal 2024, the weighted average interest rate for borrowings under the FILO Loans due 2026 was
8
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 $
Covenants
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 28, 2023.
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 $
In May 2022, the Company entered into a second interest rate swap agreement with U.S. Bank N.A., which has a $
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
9
have been presented in the Company's Consolidated Balance Sheet on a net basis. As of July 29, 2023, none of the netting arrangements involved collateral. The net fair value of the interest rate swaps as of July 29, 2023 was $
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 twenty-six weeks ended July 29, 2023 and July 30, 2022 are presented in the table below:
|
|
Thirteen Weeks Ended |
|
|
Twenty-Six Weeks Ended |
|
||||||||||
|
|
July 29, |
|
|
July 30, |
|
|
July 29, |
|
|
July 30, |
|
||||
|
|
(In millions) |
|
|||||||||||||
Interest rate swap - $200M notional amount |
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|
$ |
|
|||
Interest rate swap - $250M notional amount |
|
|
|
|
|
( |
) |
|
|
|
|
|
( |
) |
||
Gain (loss) recognized in other comprehensive income (loss), gross of income taxes |
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|
$ |
( |
) |
||
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 SOFR-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.
Instrument |
|
Balance Sheet Location |
|
July 29, |
|
|
July 30, |
|
||
|
|
|
|
(In millions) |
|
|||||
Interest rate swaps - current |
|
Prepaid expenses and other current assets |
|
$ |
|
|
$ |
|
||
Interest rate swaps - long-term |
|
Other assets |
|
$ |
|
|
$ |
|
||
The fair values of cash and cash equivalents, accounts payable and borrowings on the Company’s ABL 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.
10
|
|
July 29, 2023 |
|
|
July 30, 2022 |
|
||||||||||
|
|
Carrying |
|
|
Fair |
|
|
Carrying |
|
|
Fair |
|
||||
|
|
(In millions) |
|
|||||||||||||
Term Loan due 2028 (a) |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
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 July 29, 2023 and July 30, 2022 was as follows:
|
|
July 29, |
|
|
July 30, |
|
||
|
|
(In millions) |
|
|||||
Goodwill, gross |
|
$ |
|
|
$ |
|
||
Accumulated impairment |
|
|
( |
) |
|
|
( |
) |
Goodwill, net |
|
$ |
|
|
$ |
|
||
The carrying amount and accumulated amortization of identifiable intangible assets at July 29, 2023 and July 30, 2022 was as follows:
|
|
|
|
July 29, 2023 |
|
|
July 30, 2022 |
|
||||||||||
|
|
Estimated |
|
Gross |
|
|
Accumulated |
|
|
Gross |
|
|
Accumulated |
|
||||
|
|
|
|
(In millions) |
|
|||||||||||||
Indefinite-lived intangible assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
JOANN trade name |
|
|
$ |
|
|
|
|
|
$ |
|
|
$ |
|
|||||
Joann.com domain name |
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Intangible assets subject to amortization: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Creativebug trade name |
|
|
|
|
|
|
( |
) |
|
|
|
|
|
( |
) |
|||
Technology |
|
|
|
|
|
|
( |
) |
|
|
|
|
|
( |
) |
|||
Customer relationships |
|
|
|
|
|
|
( |
) |
|
|
|
|
|
( |
) |
|||
Total intangible assets |
|
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|
$ |
( |
) |
||
The Company recognized intangible asset amortization of $
Note 6—Income Taxes
Effective Tax Rate
The effective income tax rate for the second quarter of fiscal 2024 was
11
quarter of fiscal 2023 to the second quarter of fiscal 2024 and from the first half of fiscal 2023 to the first half of fiscal 2024 primarily because the Company continues to anticipate, beginning with the first quarter of fiscal 2024, the need to record a valuation allowance for the full year against a significant portion of the Company’s current year deferred tax asset relating to the future carryover of disallowed interest expense deductions for federal and state income tax purposes under Section 163(j) of the Internal Revenue Code of 1986, as amended (the "Code"), along with related state law. As the anticipated additional valuation allowance is included in the Company’s annual estimated effective tax rate, a portion of the unfavorable valuation allowance impact is included in the net income tax benefit recorded during both the second quarter and first half of fiscal 2024.
The effective tax rate is subject to change based on the mix of income from different state jurisdictions, which have different tax 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 second quarter of fiscal 2024, unrecognized tax benefits were $
Note 7—Loss Per Share
Basic earnings (loss) per share is computed by dividing net income (loss) by 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. In periods in which a net loss has occurred, as is the case for fiscal 2024, the dilutive effect of equity-based awards is not recognized and thus not utilized in the calculation of diluted loss per share, because the effect of their inclusion would have been anti-dilutive.
The following table sets forth the reconciliation of the numerator and the denominator of basic and diluted loss per share and the stock-based awards excluded from the calculation of diluted loss per share because their effect would have been antidilutive for the thirteen and twenty-six weeks ended July 29, 2023 and July 30, 2022:
|
|
Thirteen Weeks Ended |
|
|
Twenty-Six Weeks Ended |
|
||||||||||
|
|
July 29, |
|
|
July 30, |
|
|
July 29, |
|
|
July 30, |
|
||||
|
|
(In millions except per share data) |
|
|||||||||||||
Net (loss) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Weighted-average common shares outstanding – basic |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Effect of dilutive stock-based awards |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Weighted-average common shares outstanding – diluted |
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Basic (loss) per common share |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
Diluted (loss) per common share |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Antidilutive stock-based awards excluded from diluted calculation |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Note 8—Segments and Disaggregated Revenue
The Company conducts its business activities and reports financial results as
12
The following table shows revenue by product category:
|
|
Thirteen Weeks Ended |
|
|
Twenty-Six Weeks Ended |
|
||||||||||
|
|
July 29, |
|
|
July 30, |
|
|
July 29, |
|
|
July 30, |
|
||||
|
|
(In millions) |
|
|||||||||||||
Sewing |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Arts and Crafts and Home Décor |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Other |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Note 9—Commitments and Contingencies
13
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 28, 2023. 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 28, 2023 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 ended January 28, 2023). Fiscal years consist of 52 weeks, unless noted otherwise. Fiscal 2024 consists of 53 weeks and ends on February 3, 2024. The fiscal quarters ended July 29, 2023 and July 30, 2022 were both comprised of 13 weeks.
JOANN Overview
JOANN is the nation’s category leader in Sewing, with one of the largest assortments of arts and crafts products. As a well-established and trusted brand for 80 years, we believe we have a deep understanding of our customers, what inspires their creativity and what fuels their incredibly diverse projects. In order to best serve our customers, JOANN has transformed itself into a fully-integrated, digitally-connected omni-channel retailer that provides Creative Products to our customers whenever and however they want.
Highlights for the Thirteen Weeks Ended July 29, 2023
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. We present Adjusted EBITDA 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 evaluation of the effectiveness of our business strategies; making budgeting decisions; and comparing our performance against that of other peer companies using similar measures.
14
We define Adjusted EBITDA as net income (loss) plus income tax provision (benefit), interest expense, net and depreciation and amortization, 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 other amortization, investment remeasurements, costs related to strategic initiatives, excess import freight costs, technology development expenses, stock-based compensation expense, gains and losses on disposal and impairment of fixed and operating lease assets, gains and losses from equity method investments and other one-time 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% to 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 been experiencing declines in overall ocean freight rates and a reduction in other fees associated with port congestion, which has positively impacted our cash payments and Adjusted EBITDA. 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.
15
The following is a reconciliation of our net (loss) to Adjusted EBITDA for the periods presented:
|
|
Thirteen Weeks Ended |
|
|
Twenty-Six Weeks Ended |
|
||||||||||
(In millions) |
|
July 29, |
|
|
July 30, |
|
|
July 29, |
|
|
July 30, |
|
||||
Net (loss) |
|
$ |
(73.3 |
) |
|
$ |
(56.9 |
) |
|
$ |
(127.5 |
) |
|
$ |
(92.0 |
) |
Income tax (benefit) |
|
|
(11.5 |
) |
|
|
(19.8 |
) |
|
|
(19.3 |
) |
|
|
(35.4 |
) |
Interest expense, net |
|
|
26.8 |
|
|
|
13.2 |
|
|
|
52.1 |
|
|
|
24.4 |
|
Depreciation and amortization |
|
|
18.9 |
|
|
|
19.9 |
|
|
|
39.2 |
|
|
|
40.0 |
|
Other amortization (1) |
|
|
1.0 |
|
|
|
0.3 |
|
|
|
1.7 |
|
|
|
0.8 |
|
Investment remeasurement (2) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
1.0 |
|
Strategic initiatives (3) |
|
|
6.3 |
|
|
|
1.6 |
|
|
|
9.9 |
|
|
|
3.7 |
|
Excess import freight costs (4) |
|
|
0.3 |
|
|
|
27.1 |
|
|
|
4.2 |
|
|
|
56.0 |
|
Technology development expense (5) |
|
|
1.9 |
|
|
|
2.9 |
|
|
|
3.6 |
|
|
|
5.0 |
|
Stock-based compensation expense |
|
|
1.5 |
|
|
|
1.2 |
|
|
|
6.8 |
|
|
|
2.2 |
|
Loss on disposal and impairment of fixed and operating lease assets |
|
|
2.8 |
|
|
|
1.1 |
|
|
|
3.4 |
|
|
|
1.1 |
|
Loss from equity method investments |
|
|
1.2 |
|
|
|
— |
|
|
|
3.7 |
|
|
|
— |
|
Other (6) |
|
|
2.2 |
|
|
|
0.5 |
|
|
|
3.8 |
|
|
|
2.9 |
|
Adjusted EBITDA |
|
$ |
(21.9 |
) |
|
$ |
(8.9 |
) |
|
$ |
(18.4 |
) |
|
$ |
9.7 |
|
16
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 |
|
|
Twenty-Six Weeks Ended |
|
||||||||||
(In millions) |
|
July 29, |
|
|
July 30, |
|
|
July 29, |
|
|
July 30, |
|
||||
Net sales |
|
$ |
453.8 |
|
|
$ |
463.3 |
|
|
$ |
931.9 |
|
|
$ |
961.3 |
|
Gross profit |
|
|
232.0 |
|
|
|
214.9 |
|
|
|
481.0 |
|
|
|
455.6 |
|
SG&A expenses |
|
|
269.9 |
|
|
|
258.5 |
|
|
|
532.8 |
|
|
|
517.6 |
|
Operating (loss) |
|
|
(56.8 |
) |
|
|
(63.5 |
) |
|
|
(91.0 |
) |
|
|
(102.0 |
) |
Net (loss) |
|
|
(73.3 |
) |
|
|
(56.9 |
) |
|
|
(127.5 |
) |
|
|
(92.0 |
) |
Other Operational Data:
|
|
Thirteen Weeks Ended |
|
|
Twenty-Six Weeks Ended |
|
||||||||||
(In millions) |
|
July 29, |
|
|
July 30, |
|
|
July 29, |
|
|
July 30, |
|
||||
Total (decrease) in comparable sales vs. prior year |
|
|
(2.0 |
)% |
|
|
(6.2 |
)% |
|
|
(3.1 |
)% |
|
|
(9.8 |
)% |
Gross margin |
|
|
51.1 |
% |
|
|
46.4 |
% |
|
|
51.6 |
% |
|
|
47.4 |
% |
SG&A expenses as a % of net sales |
|
|
59.5 |
% |
|
|
55.8 |
% |
|
|
57.2 |
% |
|
|
53.8 |
% |
Operating (loss) as a % of net sales |
|
|
(12.5 |
)% |
|
|
(13.7 |
)% |
|
|
(9.8 |
)% |
|
|
(10.6 |
)% |
Adjusted EBITDA (1) |
|
$ |
(21.9 |
) |
|
$ |
(8.9 |
) |
|
$ |
(18.4 |
) |
|
$ |
9.7 |
|
Adjusted EBITDA as a % of net sales |
|
|
(4.8 |
)% |
|
|
(1.9 |
)% |
|
|
(2.0 |
)% |
|
|
1.0 |
% |
Total store location count at end of period |
|
|
829 |
|
|
|
843 |
|
|
|
829 |
|
|
|
843 |
|
Comparison of the Thirteen Weeks ended July 29, 2023 and July 30, 2022
Net Sales
Net sales were $453.8 million for the thirteen weeks ended July 29, 2023, a decrease of $9.5 million or 2.1% compared to the same period in fiscal 2023. Total comparable sales for the thirteen weeks ended July 29, 2023 decreased 2.0% compared with a total comparable sales decrease of 6.2% in the same period in fiscal 2023. The total comparable sales decline resulted primarily from a decrease in average ticket, partially offset by an increase in transaction volume. On a category basis, net sales declines were most pronounced in our craft technology and non-Halloween seasonal businesses. Declines in our non-Halloween seasonal businesses were driven by strategic inventory receipt pullbacks in higher risk categories. We saw positive results in needle arts and our Halloween seasonal business driven by the pull forward and earlier set of Halloween merchandise.
Gross Profit
Gross profit was $232.0 million for the thirteen weeks ended July 29, 2023, an increase of $17.1 million or 8.0% compared to the same period in fiscal 2023. Gross margin was 51.1% for the thirteen weeks ended July 29, 2023, an increase of 470 basis points compared to the same period in fiscal 2023. The increase in gross margin was primarily driven by declining carrier and fuel rates, both domestic and import, partially offset by the timing and cycling of capitalized domestic freight expenses, the flowthrough of increased product costs and the timing of clearance activity.
Selling, General and Administrative Expenses
SG&A expenses were $269.9 million for the thirteen weeks ended July 29, 2023, an increase of $11.4 million or 4.4% compared to the same period in fiscal 2023. This increase was primarily driven by inflationary pressures on labor and other costs, particularly at our store locations, severance and other up-front costs to implement our cost reduction initiatives, incremental costs related to incentive compensation, increased general insurance expenses and higher asset impairment charges. These increases were partially offset by savings associated with improved operating efficiencies, primarily driven by the strategic management of store labor hours, lower store
17
pre-opening and closing costs due to fewer store projects, as well as the continued optimization of advertising spend as we shift to more digital channels.
As a percentage of net sales, SG&A expenses for the thirteen weeks ended July 29, 2023 were 59.5%, an increase of 370 basis points compared to the same period in fiscal 2023. The increase as a percentage of sales was primarily driven by the factors described above, as well as the 2.1% decrease in net sales in the second quarter of fiscal 2024 compared to the second quarter of fiscal 2023.
Interest Expense
Interest expense for the thirteen weeks ended July 29, 2023 was $26.8 million, an increase of $13.6 million compared to the same period in fiscal 2023. The increase in interest expense was primarily due to higher interest rates, as well as a higher average debt level during the second quarter of fiscal 2024 compared to the same period in fiscal 2023. The average debt level in the thirteen weeks ended July 29, 2023 was $1,079.0 million compared to $980.5 million in the thirteen weeks ended July 30, 2022. The weighted average interest rate was 9.82% and 5.00% for the thirteen weeks ended July 29, 2023 and July 30, 2022, respectively.
We had $1,115.2 million of debt outstanding (face value) as of July 29, 2023, compared to $1,027.3 million as of July 30, 2022.
Income Taxes
The effective income tax rate for the second quarter of fiscal 2024 was 13.8%, an income tax benefit on a pre-tax book loss, compared to the rate for the second quarter of fiscal 2023, which was 25.8%, also an income tax benefit on a pre-tax book loss. The effective tax rate decreased from the second quarter of fiscal 2023 to the second quarter of fiscal 2024 primarily because the Company continues to anticipate, beginning with the first quarter of fiscal 2024, the need to record a valuation allowance for the full year against a significant portion of the Company’s current year deferred tax asset relating to the future carryover of disallowed interest expense deductions for federal and state income tax purposes under Section 163(j) of the Code, along with related state law. As the anticipated additional valuation allowance is included in the Company’s annual estimated effective tax rate, a portion of the unfavorable valuation allowance impact is included in the net income tax benefit recorded during the second quarter of fiscal 2024.
Net Loss
Net loss was $73.3 million for the thirteen weeks ended July 29, 2023, compared to net loss of $56.9 million during the same period in fiscal 2023. The increase in net loss was driven by the factors described above.
Adjusted EBITDA
Adjusted EBITDA (as defined above) was ($21.9) million for the thirteen weeks ended July 29, 2023 compared to ($8.9) million for the same period in fiscal 2023. The decrease was driven by the factors described above.
Comparison of the Twenty-Six Weeks ended July 29, 2023 and July 30, 2022
Net Sales
Net sales were $931.9 million for the twenty-six weeks ended July 29, 2023, a decline of $29.4 million or 3.1% compared to the same period in fiscal 2023. Total comparable sales for the twenty-six weeks ended July 29, 2023 decreased 3.1% compared with a total comparable sales decrease of 9.8% in the same period in fiscal 2023. The total comparable sales decline resulted from a decrease in transaction volume and average ticket. On a category basis, net sales declines were most pronounced in our craft technology and non-Halloween seasonal businesses. Declines in our non-Halloween seasonal businesses were driven by strategic inventory receipt pullbacks in higher risk categories. We saw positive results in needle arts and our Halloween seasonal business driven by the pull forward and earlier set of Halloween merchandise.
Gross Profit
Gross profit was $481.0 million for the twenty-six weeks ended July 29, 2023, an increase of $25.4 million or 5.6% compared to the same period in fiscal 2023. Gross margin was 51.6% for the twenty-six weeks ended July 29, 2023, an increase of 420 basis points compared to the same period in fiscal 2023. The increase in gross margin was primarily driven by declining carrier and fuel rates, both domestic and import, partially offset by the timing and cycling of capitalized domestic freight expenses, the flowthrough of increased product costs, as well as higher shrink expenses.
18
Selling, General and Administrative Expenses
SG&A expenses were $532.8 million for the twenty-six weeks ended July 29, 2023, an increase of $15.2 million or 2.9% compared to the same period in fiscal 2023. This increase was primarily driven by incremental costs related to incentive and stock-based compensation, inflationary pressures on labor and other costs, particularly at our store locations, severance and other up-front costs to implement our cost reduction initiatives, increased general insurance expenses and higher asset impairment charges. These increases were partially offset by savings associated with improved operating efficiencies, primarily driven by the strategic management of store labor hours, lower medical benefit costs, the continued optimization of advertising spend as we shift to more digital channels and lower store pre-opening and closing costs due to fewer store projects.
As a percentage of net sales, SG&A expenses for the twenty-six weeks ended July 29, 2023, were 57.2%, an increase of 340 basis points compared to the same period in fiscal 2023. This increase was driven by the factors listed above as well as the 3.1% decrease in net sales in the first twenty-six weeks of fiscal 2023 compared to the same period in fiscal 2023.
Interest Expense
Interest expense for the twenty-six weeks ended July 29, 2023 was $52.1 million, an increase of $27.7 million compared to the same period in fiscal 2023. The increase was due to higher interest rates, as well as higher average debt levels during the first twenty-six weeks of fiscal 2024. The average debt level in the twenty-six weeks ended July 29, 2023 was $1,068.8 million compared to $936.7 million in the twenty-six weeks ended July 30, 2022. The weighted average interest rate was 9.28% and 4.82% for the twenty-six weeks ended July 29, 2023 and July 30, 2022, respectively.
We had $1,115.2 million of debt outstanding (face value) as of July 29, 2023 compared to $1,027.3 million as of July 30, 2022.
Income Taxes
The effective income tax rate for the first twenty-six weeks of fiscal 2024 was 13.5%, which was an income tax benefit on a pre-tax book loss, compared to 27.8% for the first twenty-six weeks of fiscal 2023, also an income tax benefit on a pre-tax book loss. The effective tax rate decreased from the first half of fiscal 2023 to the first half of fiscal 2024 because the Company continues to anticipate, beginning with the first quarter of fiscal 2024, the need to record a valuation allowance for the full year against a significant portion of the Company’s current year deferred tax asset relating to the future carryover of disallowed interest expense deductions for federal and state income tax purposes under Section 163(j) of the Code, along with related state law. As the anticipated additional valuation allowance is included in the Company’s annual estimated effective tax rate, a portion of the unfavorable valuation allowance impact is included in the net income tax benefit recorded during the first half of fiscal 2024.
Net Loss
Net loss was $127.5 million for the twenty-six weeks ended July 29, 2023, an increase of $35.5 million compared to the same period in fiscal 2023. The increase in net loss was driven by the factors described above.
Adjusted EBITDA
Adjusted EBITDA (as defined above) decreased 289.7% to ($18.4) million or 2.0% of net sales for the twenty-six weeks ended July 29, 2023 compared to $9.7 million or 1.0% of net sales for the same period in fiscal 2023. Our decrease in Adjusted EBITDA of $28.1 million and decline of Adjusted EBITDA as a percentage of net sales of 300 basis points was driven primarily by lower total comparable sales in addition to an increase in our SG&A expenses.
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 ABL 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 ABL 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. As of July 29, 2023, we were in compliance with all covenants under our debt facilities and notes.
19
For the four quarters ended July 29, 2023, our ratio of consolidated net debt to Credit Facility Adjusted EBITDA, which is calculated in accordance with our credit facilities, was 5.02 to 1.0, and our ratio of consolidated senior secured net debt to Credit Facility Adjusted EBITDA was 5.02 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.
The following table provides a summary of our cash provided by (used for) operating, investing and financing activities for the twenty-six weeks ended July 29, 2023 and July 30, 2022:
|
|
Twenty-Six Weeks Ended |
|
|||||
(In millions) |
|
July 29, |
|
|
July 30, |
|
||
Net cash (used for) operating activities |
|
$ |
(82.3 |
) |
|
$ |
(166.1 |
) |
Net cash (used for) investing activities |
|
|
(31.0 |
) |
|
|
(55.0 |
) |
Net cash provided by financing activities |
|
|
112.2 |
|
|
|
220.1 |
|
Net (decrease) in cash and cash equivalents |
|
$ |
(1.1 |
) |
|
$ |
(1.0 |
) |
Net Cash Used for Operating Activities
Net cash used for operating activities was $82.3 million in the twenty-six weeks ended July 29, 2023, compared to $166.1 million of net cash used for operating activities in the twenty-six weeks ended July 30, 2022. The decrease in net cash used for operating activities was primarily due to declining carrier and fuel rates, both domestic and import, strategic inventory receipt reductions and the timing of vendor payments, partially offset by our total comparable sales decline.
Net Cash Used for Investing Activities
Cash used for investing activities in the first twenty-six weeks of fiscal 2024 and 2023 consisted primarily of capital expenditures, the majority of which were focused on strategic initiatives including: new store location and fiscal 2023 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.
20
Capital expenditures for the twenty-six weeks ended July 29, 2023 and July 30, 2022 are summarized as follows:
|
|
Twenty-Six Weeks Ended |
|
|||||
(In millions) |
|
July 29, |
|
|
July 30, |
|
||
Store locations |
|
$ |
25.3 |
|
|
$ |
41.1 |
|
Distribution centers |
|
|
1.9 |
|
|
|
3.1 |
|
Information technology |
|
|
1.9 |
|
|
|
6.0 |
|
Other |
|
|
0.3 |
|
|
|
0.5 |
|
Total capital expenditures |
|
|
29.4 |
|
|
|
50.7 |
|
Landlord contributions |
|
|
(7.4 |
) |
|
|
(10.2 |
) |
Total capital expenditures, net of landlord contributions |
|
$ |
22.0 |
|
|
$ |
40.5 |
|
During the first half of fiscal 2023, we purchased the remaining outstanding stock of WeaveUp for $4.3 million. We had no such activity during the first half of fiscal 2024.
Net Cash Provided by Financing Activities
Net cash provided by financing activities was $112.2 million during the twenty-six weeks ended July 29, 2023 compared with $220.1 million of net cash provided by financing activities in the same period in fiscal 2023.
Net cash provided by financing activities for the first twenty-six weeks of fiscal 2024 was the result of net proceeds from our FILO Loans and borrowings on our ABL Facility. This inflow of cash was partially offset by payments on our Term Loan Due 2028 and finance lease obligations. As of July 29, 2023, we had the ability to borrow an additional $58.4 million under the ABL Facility subject to the facility’s borrowing base calculation.
Net cash provided by financing activities for the first twenty-six weeks of fiscal 2023 was the result of net borrowings from the ABL Facility. This inflow of cash was partially offset by payments on our Term Loan Due 2028 and finance lease obligations, as well as to pay dividends totaling $8.9 million.
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, which aligns 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 28, 2023.
Goodwill and Other Indefinite Lived Intangible Assets
During the fiscal year ended January 28, 2023, we performed a quantitative impairment analysis of the indefinite lived intangible assets, as well as goodwill related to the JOANN reporting unit. For information related to the results of these assessments, see Part II, Item 8 "Notes to Consolidated Financial Statements, Note 8—Goodwill and Other Intangible Assets" in our Annual Report on Form 10-K for the fiscal year ended January 28, 2023. During the quarter ended July 29, 2023, we performed an evaluation of events occurring during the interim period and noted that no specific negative events occurred that would be considered a triggering event for goodwill or intangible asset impairment testing. However, given the inherent uncertainties resulting from global macroeconomic conditions,
21
actual results may differ from management’s current estimates and could have an adverse impact on one or more of the assumptions used in our quantitative model prepared for the reporting unit, which could result in impairment charges in subsequent periods, particularly since the previously performed quantitative assessment estimated that the fair value of the reporting unit exceeded the carrying value by approximately $103.0 million, or 10.1%. Additionally, a mutually exclusive increase in the assumed discount rate by approximately 120 basis points, or a decrease in gross margin by approximately 50 basis points, or a 50 basis point increase in selling, general, and administrative as a percentage of revenue could require us to record impairment charges to goodwill. Lastly, if our operating results deteriorate or there is a meaningful increase in our discount rate, an impairment charge, on our JOANN trade name, could be recognized in future periods. Management intends to continue to assess triggering events that may necessitate additional qualitative or quantitative analyses in future periods. If we were to have impairment, it could have a material adverse effect on our consolidated statements of operations and balance sheets in the reporting period of the charge. For further information, see Part II, Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Goodwill and Other Indefinite Lived Intangible Assets” in our Annual Report on Form 10-K for the fiscal year ended January 28, 2023.
22
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 28, 2023. During the twenty-six weeks ended July 29, 2023, 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 principal 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 principal 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 July 29, 2023. Based on that evaluation, our principal executive officer and Chief Financial Officer have concluded that, as of July 29, 2023, 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 twenty-six weeks ended July 29, 2023 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.
23
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.
Except as set forth below, 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 28, 2023.
We are not currently in compliance with Nasdaq’s continued listing requirements. If we are unable to comply with Nasdaq’s continued listing requirements, our common stock could be delisted, which could affect the price of our common stock and liquidity and reduce our ability to raise capital.
Our common stock is currently listed on The Nasdaq Global Market. The Nasdaq Global Market has established certain quantitative criteria and qualitative standards that companies must meet to remain listed for trading on this market.
On July 20, 2023 (the “Notice Date”), the Company received a written notice (the “Market Value Notice”) from the Listing Qualifications Department of The Nasdaq Stock Market LLC (“Nasdaq”) that the Company is not in compliance with the requirement to maintain a minimum market value of listed securities of at least $50 million, as set forth in Nasdaq Listing Rule 5450(b)(2)(A) (the “Market Value Standard”), because the market value of the Company’s common stock was less than $50 million for 30 consecutive business days. Also on the Notice Date, the Company received a second written notice (the “Publicly Held Market Value Notice” and, together with the Market Value Notice, the “Notices”) from the Listing Qualifications Department of Nasdaq that the Company is not in compliance with the requirement to maintain a minimum market value of publicly held listed securities of at least $15 million, as set forth in Nasdaq Listing Rule 5450(b)(2)(C) (the “Publicly Held Market Value Standard”), because the market value of the publicly held shares of the Company’s common stock was less than $15 million for 30 consecutive business days. The Notices do not impact the listing of the common stock on The Nasdaq Global Market at this time.
The Notices provided that, in accordance with Nasdaq Listing Rule 5810(c)(3)(C) and Nasdaq Listing Rule 5810(c)(3)(D), the Company has a period of 180 calendar days from the date of the Notices, or until January 16, 2024, to regain compliance under the Market Value Standard and the Publicly Held Market Value Standard, respectively.
If the Company fails to regain and maintain compliance with Nasdaq’s continued listing standards, our common stock will be subject to delisting from Nasdaq. The Company may, if appropriate, evaluate available options at such time, including applying for a transfer to The Nasdaq Capital Market to resolve any deficiency and regain compliance with the applicable Nasdaq requirements. While the Company is exercising diligent efforts to maintain the listing of the Company’s common stock on The Nasdaq Global Market, there can be no assurance that the Company will be able to regain and maintain compliance with the Market Value Standard, the Publicly Held Market Value Standard, or will otherwise be in compliance with other Nasdaq listing criteria. Any delisting of our common stock could adversely affect the market liquidity of our common stock and the market price of our common stock could decrease. Furthermore, if our common stock were delisted it could adversely affect our ability to obtain financing for the continuation of our operations and our ability to attract and retain employees by means of equity compensation and/or result in the loss of confidence by investors.
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.
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Item 5. Other Information.
During the Company’s fiscal quarter ended July 29, 2023, no director or officer (as defined in Rule 16a-1(f) promulgated under the Exchange Act) of the Company adopted or terminated a “Rule 10b5-1 trading arrangement” or “non-Rule 10b5-1 trading arrangement” (as each term is defined in Item 408 of Regulation S-K).
Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.
As previously reported, Wade Miquelon, the Company's former Chief Executive Officer, retired effective May 8, 2023 and the Board of Directors appointed each of Chris DiTullio, Executive Vice President and Chief Customer Officer, and Scott Sekella, Executive Vice President and Chief Financial Officer, to the Interim Office of the CEO, effective May 8, 2023. In connection with Messrs. DiTullio's and Sekella's service in this capacity (the "Interim CEO Service"), on August 29, 2023, the Compensation Committee of the Company’s Board of Directors approved additional compensation for Messrs. DiTullio and Sekella as follows: (1) an increase in each officer’s annual base salary rate by $78,833 per year, prorated for the duration of his Interim CEO Service, which additional amount will be paid in 2024 after the conclusion of his Interim CEO Service in a lump sum; (2) a grant, effective September 6, 2023 (the “Grant Date”), to each officer of stock options to purchase a number of Company shares equal to $225,000 divided by the closing price for the Company’s shares on the Grant Date (the “Closing Price”), with a per share exercise price equal to the Closing Price, under the Company’s current 2021 Equity Incentive Plan; and (3) an increase in each officer’s target award percentage under the Company's short-term cash incentive plan for fiscal 2024 (the "STI Plan") to 100% of his base salary rate (including his additional salary for the Interim CEO Service). For each of Messrs. DiTullio and Sekella, of the total number of shares subject to the stock option granted to him as described above, options regarding 99,115 of the shares will generally vest in full on February 3, 2024, and options regarding the remaining number of shares will generally vest on the first anniversary of the Grant Date, subject in each case to the officer’s continued service to the Company through the applicable vesting date and the other terms of the applicable stock option award agreements. At the conclusion of the Interim CEO Service, each of Messrs. DiTullio and Sekella's base salaries will revert, on a pro rated basis, to their previous base salary rates, and their target award percentages under the STI Plan will revert, on a pro rated basis, to their previous target award percentages of 75% of their base salaries.
In addition, on August 30, 2023, the Company determined that Janet Duliga, the Company’s Executive Vice President and Chief Administrative Officer, will be departing from the Company effective September 15, 2023. Ms. Duliga’s departure will constitute a termination of her employment by the Company without cause. In connection with Ms. Duliga’s departure, in lieu of receiving previously-disclosed severance compensation and benefits under her current severance agreement, the Company expects that Ms. Duliga will receive a reduced lump sum payment, less all applicable taxes and withholdings, in September 2023. The Company expects to enter into a separation agreement and release with Ms. Duliga to memorialize the terms of her departure from the Company.
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Item 6. Exhibits.
Exhibit Number |
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Description |
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10.1# |
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10.2# |
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10.3# |
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10.4# |
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Separation Agreement and Release, dated May 8, 2023, by and between JOANN Inc. and Wade Miquelon. |
10.5# |
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Agreement, dated July 12, 2023, between JO-ANN STORES, LLC and John Stalcup. |
31.1* |
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31.2* |
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32.1** |
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32.2** |
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101.INS |
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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 |
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Inline XBRL Taxonomy Extension Schema Document |
101.CAL |
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Inline XBRL Taxonomy Extension Calculation Linkbase Document |
101.DEF |
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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 |
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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.
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JOANN Inc. |
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Registrant |
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Date: August 31, 2023 |
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By: |
/s/ Scott Sekella |
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Scott Sekella |
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Executive Vice President, Chief Financial Officer and Member, Interim Office of the Chief Executive Officer |
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(principal financial officer) |
27
EXHIBIT 10.4
SEPARATION AGREEMENT AND RELEASE
This Separation Agreement and Release (this “Separation Agreement”), by and between JOANN Inc. (the “Company”) and Wade Miquelon (“you” and similar words), sets forth certain terms of your separation from the Company and its subsidiaries (including certain requirements under your Amended and Restated Severance Agreement, dated as of February 3, 2019, with Jo-Ann Stores, LLC (“Jo-Ann LLC”) (the “Severance Agreement”)), including certain terms required in order for you to receive certain separation payments and benefits, as set forth in detail below.
By signing this Separation Agreement, you and the Company agree as follows:
You agree that, effective May 8, 2023 (the “Separation Date”), you no longer serve as the Company’s President and Chief Executive Officer and your employment with the Company and all of its subsidiaries is terminated. You further agree that your termination of employment on the Separation Date shall be treated as set forth in Section 2 of this Separation Agreement. You also agree that, as of the Separation Date, you will terminate from all other positions you hold (if any) as an officer, employee or director of the Company and the Company’s subsidiaries and affiliates, and that you will promptly execute any documents and take any actions as may be necessary or reasonably requested by the Company to effectuate or memorialize your termination from all positions with the Company and its subsidiaries and affiliates.
In consideration for you (a) signing this Separation Agreement, and (b) signing, no earlier than the Separation Date and no later than 60 days following the Separation Date, a general waiver and release of claims, substantially in the form attached hereto as Exhibit A (the “Release”), and letting the Release become effective as set forth in the Release:
(i) for purposes of this Separation Agreement and related agreements, your separation from the Company will be deemed your voluntary retirement from employment with the Company and its subsidiaries and affiliates; and
(ii) you will receive the payments and benefits as specified on Exhibit B attached hereto, all subject to applicable tax withholding (the “Severance Benefits”). The Severance Benefits will be in full satisfaction of any amounts due under the Severance Agreement, your Employment Agreement, dated as of February 3, 2019, with Jo-Ann LLC (the “Employment Agreement”), the Stock Option Plan of Jo-Ann Stores Holdings, Inc. and applicable award agreements thereunder (the “2012 Equity Plan”) and/or the JOANN Inc. 2021 Equity Incentive Plan, as amended or amended and restated from time to time, and applicable award agreements thereunder (the “2021 Equity Plan” and, together with the 2012 Equity Plan, the “Equity Plans”), and other compensation arrangements of the Company and its subsidiaries and affiliates. You acknowledge and agree that certain portions of the Severance Benefits do not constitute benefits to which you would otherwise be entitled as a result of your termination of employment with the Company, that such portions of the Severance Benefits would not be due unless you sign the Release, and that the Severance Benefits constitute fair and adequate consideration for your promises and covenants set forth in this Separation Agreement and the Release.
By signing this Separation Agreement, you reaffirm that, subject to applicable law, you will continue to abide by the restrictive covenants to which you are subject, including as set forth in or applicable under the Equity Plans, Section 19 of the Employment Agreement, and Section 13 of the Severance Agreement, which expressly survive the termination of your employment without Cause pursuant to their terms.
Notwithstanding anything in this Separation Agreement, the Equity Plans, the Employment Agreement or the Severance Agreement to the contrary, nothing in such documents prevents you from providing, without prior notice to the Company, information to governmental authorities regarding possible legal violations or otherwise testifying or participating in any investigation or proceeding by any governmental authorities regarding possible legal violations, and for purpose of clarity you are not prohibited from providing information voluntarily to the Securities and Exchange Commission pursuant to Section 21F of the Securities Exchange Act of 1934, as amended.
No Company policy or individual agreement between the Company and you shall prevent you from providing information to government authorities regarding possible legal violations, participating in investigations, testifying in
proceedings regarding the Company’s past or future conduct, engaging in any future activities protected under the whistleblower statutes administered by any government agency (e.g., EEOC, NLRB, SEC, etc.) or receiving a monetary award from a government-administered whistleblower award program for providing information directly to a government agency. The Company nonetheless asserts and does not waive its attorney-client privilege over any information appropriately protected by privilege. By executing this Separation Agreement you represent that, as of the date you sign this Separation Agreement, no claims, lawsuits, or charges have been filed by you or on your behalf against the Company or any of its legal predecessors, successors, assigns, fiduciaries, parents, subsidiaries, divisions or other affiliates, or any of the foregoing’s respective past, present or future principals, partners, shareholders, directors, officers, employees, agents, consultants, attorneys, trustees, administrators, executors or representatives. You acknowledge and agree that you have in a timely manner received or waived all applicable notices required under the Severance Agreement and the Employment Agreement, or otherwise, in connection with the termination of your employment with the Company. The Company agrees that this Separation Agreement does not extend to, release or modify any rights to indemnification or advancement of expenses to which you are entitled from the Company or its insurers under the Company’s certificate of incorporation, by-laws, or other corporate governing law or instruments or your indemnification agreement with the Company.
Nothing in this Separation Agreement or the Severance Agreement shall be binding upon the parties hereto to the extent it is void or unenforceable for any reason, including, without limitation, as a result of any law regulating competition or proscribing unlawful business practices; provided, however, that to the extent that any provision in this Separation Agreement or the Severance Agreement could be modified to render it enforceable under applicable law, it shall be deemed so modified and enforced to the fullest extent allowed by law.
You agree that in the event of any breach of any provision of the restrictive covenants described in Section 3 of this Separation Agreement, the Company will be entitled to equitable and/or injunctive relief and, because the damages for such a breach will be impossible or impractical to determine and will not therefore provide a full and adequate remedy, the Company or (as applicable) any and all past, present or future parents, subsidiaries and affiliates of the Company (the “JOANN Companies”) will also be entitled to specific performance by you. Except with respect to any clawback rights the Company may have with respect to equity or incentive awards under the Equity Plans, no amount owing to you under this Separation Agreement shall be subject to set-off or reduction by reason of any claims that the Company and its subsidiaries and affiliates have or may have against you. You will be entitled to recover actual damages if the Company breaches this Separation Agreement, including any unexcused late or non-payment of any amounts owed under this Separation Agreement, or any unexcused failure to provide any other benefits specified in this Separation Agreement. Failure by any party hereto to enforce any term or condition of this Separation Agreement at any time shall not preclude that party from enforcing that provision, or any other provision, at a later time.
You understand that your employment with the Company is terminated on the Separation Date. You agree that you will not seek or accept employment with the Company and its subsidiaries and affiliates, including assignment to or on behalf of the Company as an independent contractor or through any third party, and the Company and its subsidiaries and affiliates have no obligation to consider you for any future employment or assignment.
This Separation Agreement is important. You are advised to review it carefully and consult an attorney before signing it, as well as any other professional whose advice you value, such as an accountant or financial advisor. If you agree to the terms of this Separation Agreement, sign in the space below where your agreement is indicated. The payments and benefits specified in this Separation Agreement are contingent on your (a) signing this Separation Agreement and (b) signing the Release no earlier than the Separation Date and no later than 60 calendar days following the Separation Date, and not revoking the Release.
You affirm that you have returned, or will have returned within a reasonable time after the Separation Date, to the Company in reasonable working order all Company Property, as described more fully below. “Company Property” includes company-owned or leased motor vehicles, equipment, supplies and documents. Such documents may include but are not limited
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to customer lists, financial statements, cost data, price lists, invoices, forms, passwords, electronic files and media, mailing lists, contracts, reports, manuals, personnel files, correspondence, business cards, drawings, employee lists or directories, lists of vendors, photographs, maps, surveys, and the like, including copies, notes or compilations made there from, whether such documents are embodied on “hard copies” or contained on computer disk or any other medium. You further agree that you will not retain any copies or duplicates of any such Company Property.
You agree that you shall, without any additional compensation, respond to reasonable requests for information from the Company regarding matters that may arise in the Company’s business. You further agree to fully and completely cooperate with the Company, its advisors and its legal counsel with respect to any litigation that is pending against the Company and any claim or action that may be filed against the Company in the future. Such cooperation shall include making yourself available at reasonable times and places for interviews, reviewing documents, testifying in a deposition or a legal or administrative proceeding, and providing advice to the Company in preparing defenses to any pending or potential future claims against the Company. The Company agrees to (or to cause one of its affiliates to) pay/reimburse you for any approved travel expenses reasonably incurred as a result of your cooperation with the Company, with any such payments/reimbursements to be made in accordance with the Company's expense reimbursement policy as in effect from time to time.
You agree that you will not make or issue, or procure any person, firm, or entity to make or issue, any statement in any form, including written, oral and electronic communications of any kind, which conveys negative or adverse information concerning the Company, the JOANN Companies, or any and all past, present, or future related persons or entities, including but not limited to the Company’s and the JOANN Companies’ officers, directors, managers, employees, shareholders, agents, attorneys, successors and assigns, specifically including without limitation the Company and its subsidiaries and affiliates, their business, their actions or their officers or directors, to any person or entity, regardless of the truth or falsity of such statement. This Section 10 does not apply to truthful testimony compelled by applicable law or legal process.
By signing this Separation Agreement, you acknowledge that you will be solely responsible for any taxes which may be imposed on you as a result of the Severance Benefits, all amounts payable to you under this Separation Agreement will be subject to applicable tax withholding by the Company or its subsidiaries or affiliates, and the Company has not made any representations or guarantees regarding the tax result for you with respect to any income recognized by you in connection with this Separation Agreement or the Severance Benefits.
By signing this Separation Agreement, you acknowledge that you are doing so freely, knowingly and voluntarily. You acknowledge that in signing this Separation Agreement you have relied only on the promises written in this Separation Agreement and not on any other promise made by the Company or JOANN Companies. This Separation Agreement is not, and will not be considered, an admission of liability or of a violation of any applicable contract, law, rule, regulation, or order of any kind. This Separation Agreement and the Release contain the entire agreement between the Company, other JOANN Companies and you regarding your departure from the Company, except that all post-employment covenants contained in the Severance Agreement, Employment Agreement or Equity Plans remain in full force and effect. The Severance Benefits are in full satisfaction of any severance benefits under the Severance Agreement, the Employment Agreement, and the Equity Plans, and of any other compensation arrangements between you and the Company or the JOANN Companies. This Separation Agreement may not be altered, modified, waived or amended except by a written document signed by a duly authorized representative of the Company and you. Except as otherwise explicitly provided, this Separation Agreement will be interpreted and enforced in accordance with the laws of the state of Ohio, and the parties hereto, including their successors and assigns, consent to the jurisdiction of the state and federal courts of Ohio. The headings in this document are for reference only, and shall not in any way affect the meaning or interpretation of this Separation Agreement.
[SIGNATURE PAGE FOLLOWS]
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IN WITNESS WHEREOF, you and the Company have executed this Separation Agreement as of the dates set forth below.
Wade Miquelon
/s/ Wade Miquelon
Date: May 8, 2023
JOANN INC.
By: /s/ Ann Aber
Name: Ann Aber
Title: Senior Vice President, Chief Legal Officer
Date: May 8, 2023
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Exhibit A
Release
This Release (the “Release”) is between JOANN Inc. (the “Company”) and __________ (“you” and similar words), in favor of the Company and its affiliates (meaning any entities that directly or indirectly control, are controlled by, or are under the same control as, the Company or any other entities affiliated with the Company or such entities), in consideration of the benefits provided to you and to be received by you from the Company as described in the Separation Agreement between the Company and you dated as of the applicable date referenced therein (the “Separation Agreement”). Capitalized terms used herein without definition have the meanings ascribed to such terms in the Separation Agreement.
By signing this Release, you and the Company hereby agree as follows:
You, for yourself and on behalf of anyone claiming through you including each and all of your legal representatives, administrators, executors, heirs, successors and assigns (collectively, the “Releasors”), do hereby fully, finally and forever release, absolve and discharge the Company and each and all of its legal predecessors, successors, assigns, fiduciaries, parents, subsidiaries, divisions and other affiliates, and each of the foregoing’s respective past, present and future principals, partners, shareholders, directors, officers, employees, agents, consultants, attorneys, trustees, administrators, executors and representatives (collectively, the “Company Released Parties”), of, from and for any and all claims, causes of action, lawsuits, controversies, liabilities, losses, damages, costs, expenses and demands of any nature whatsoever, at law or in equity, whether known or unknown, asserted or unasserted, foreseen or unforeseen, that the Releasors (or any of them) now have, have ever had, or may have against the Company Released Parties (or any of them) based upon, arising out of, concerning, relating to or resulting from any act, omission, matter, fact, occurrence, transaction, claim, contention, statement or event occurring or existing at any time in the past up to and including the date on which you sign this Release, including, without limitation: (a) all claims arising out of or in any way relating to your employment with or separation of employment from the Company or its affiliates; (b) all claims for compensation or benefits, including salary, commissions, bonuses, vacation pay, expense reimbursements, severance pay, fringe benefits, stock options, restricted stock units or any other ownership interests in the Company Released Parties; (c) all claims for breach of contract, wrongful termination and breach of the implied covenant of good faith and fair dealing; (d) all tort claims, including claims for fraud, defamation, invasion of privacy and emotional distress; (e) all other common law claims; and (f) all claims (including claims for discrimination, harassment, retaliation, attorneys fees, expenses or otherwise) that were or could have been asserted by you or on your behalf in any federal, state, or local court, commission, or agency, or under any federal, state, local, employment, services or other law, regulation, ordinance, constitutional provision, executive order or other source of law, including without limitation under any of the following laws, as amended from time to time: the Age Discrimination in Employment Act (the “ADEA”), Title VII of the Civil Rights Act of 1964, 42 U.S.C. §§ 1981 & 1981a, the Americans with Disabilities Act, the Equal Pay Act, the Employee Retirement Income Security Act, the Lilly Ledbetter Fair Pay Act of 2009, the Family and Medical Leave Act, Sarbanes-Oxley Act of 2002, the National Labor Relations Act, the Rehabilitation Act of 1973, the Worker Adjustment Retraining and Notification Act, the Uniformed Services Employment and Reemployment Rights Act, Federal Executive Order 11246, the Genetic Information Nondiscrimination Act, the Ohio Civil Rights Act, Ohio Revised Code 4112.01 et seq., and the Ohio Whistleblowers’ Protection Act.
Nothing in this Release (a) shall release the Company from any of its obligations set forth in the Separation Agreement or any claim that by law is non-waivable, (b) shall release the Company from any obligation to defend and/or indemnify you against any third party claims arising out of any action or inaction by you during the time of your employment and within the scope of your duties with the Company to the extent (i) you have any such defense or indemnification right (including under your indemnification agreement with the Company or to the extent the claims are covered by the Company’s director & officer liability insurance), and (ii) permitted by applicable law, (c) shall affect your right to file a claim for workers’ compensation or unemployment insurance benefits, or (d) shall prohibit you from instituting any action to challenge the validity of the release under the ADEA.
You further acknowledge that by signing this Release, you do not waive the right to file a charge against the Company with, communicate with or participate in any investigation by the Equal Employment Opportunity Commission, the Securities and Exchange Commission or any comparable state or local agency. However, you waive and release, to the fullest extent legally permissible, all entitlement to any form of monetary relief arising from a charge you or others may file, including without limitation any costs, expenses or attorneys’ fees. You understand that this waiver and release of monetary relief would
not affect an enforcement agency’s ability to investigate a charge or to pursue relief on behalf of others. Notwithstanding the foregoing, you will not give up your right to any benefits to which you are entitled under any retirement plan of the Company that is intended to be qualified under Section 401(a) of the Internal Revenue Code of 1986, as amended, or your rights, if any, under Part 6 of Subtitle B of Title I of the Employee Retirement Income Security Act of 1974, as amended (COBRA), or any monetary award offered by the Securities and Exchange Commission pursuant to Section 21F of the Securities Exchange Act of 1934, as amended, the Dodd-Frank Wall Street Reform and Consumer Protection Act or The Sarbanes-Oxley Act of 2002.
By executing this Release, you represent that, as of the date you sign this Release, no claims, lawsuits, grievances, or charges have been filed by you or on your behalf against the Company Released Parties.
In compliance with the requirements of the Older Workers’ Benefit Protection Act, you acknowledge by your signature below that, with respect to the rights and claims waived and released in this Release under the ADEA, you specifically acknowledge and agree as follows: (a) you have read and understand the terms of this Release; (b) you have been advised and hereby are advised, and have had the opportunity, to consult with an attorney before signing this Release; (c) the Release is written in a manner understood by you; (d) you are releasing the Company and the other Company Released Parties from, among other things, any claims that you may have against them pursuant to the ADEA; (e) the releases contained in this Release do not cover rights or claims that may arise after you sign this Release; (f) you will receive valuable consideration in exchange for the Release other than amounts you would otherwise be entitled to receive; (g) you have been given a period of at least 21 days in which to consider and execute this Release (although you may elect not to use the full consideration period at your option); (h) you may revoke this Release during the seven-day period following the date on which you sign this Release, and this Release will not become effective and enforceable until the seven-day revocation period has expired; and (i) any such revocation must be submitted in writing to the Company c/o Ann Aber, Chief Legal Officer, JOANN Inc., 5555 Darrow Road, Hudson, Ohio 44236, prior to the expiration of such seven-day revocation period. If you revoke this Release within such seven-day revocation period, it shall be null and void.
This Release, the Separation Agreement, and the documents referenced therein contain the entire agreement between you and the Company regarding the matters described therein, and take priority over any other written or oral understanding or agreement that may have existed in the past regarding the matters described therein. You acknowledge that no other promises or agreements have been offered for this Release (other than those described above) and that no other promises or agreements will be binding unless they are in writing and signed by you and the Company. Should any provision of this Release be declared by a court of competent jurisdiction to be illegal, void, or unenforceable, the remaining provisions shall remain in full force and effect; provided, however, that upon a finding that the Release, in whole or part, is illegal, void, or unenforceable, you shall be required to execute a release that is legal and enforceable.
[SIGNATURE PAGE FOLLOWS]
I agree to the terms and conditions set forth in this Release.
[NAME]
[exhibit copy – do not sign]
____________________________
Date: _______________________
Exhibit B
Severance and Other Benefits
Severance benefits under the Separation Agreement and the Severance Agreement, which severance benefits will consist of the following:
Exhibit 10.5
AGREEMENT
THIS AGREEMENT (“Agreement”) is made as of the 12th day of July, 2023 (the “Effective Date”) between JO-ANN STORES, LLC, an Ohio limited liability company (the “Company”), and John Stalcup (“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(d) 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) 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 shall cease immediately and the Company shall have no further obligations to Executive pursuant to Section 1(a). If the Company determines in its reasonable discretion that the New 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(d), 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.
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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
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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”).
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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.
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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 Chief Legal Officer 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 Chief Legal Officer 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.
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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.
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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).
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[signature page to follow]
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above.
JO-ANN STORES, LLC
By: _/s/ Janet Duliga ______________
Janet Duliga
Chief Administrative Officer
EXECUTIVE
/s/ John Stalcup _____________________
John Stalcup
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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
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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 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.
Executive and the Company further acknowledge and agree that nothing in this Release prevents Executive from instituting any action to challenge the validity of the release under the ADEA, to enforce the terms of this Release, or from enforcing rights, if any, under ERISA to recover any vested retirement benefits.
5. Admissibility. 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 Chief Legal Officer 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 Chief Legal Officer 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.
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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.
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, Christopher DiTullio, certify that:
Date: August 31, 2023 |
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By: |
/s/ Christopher DiTullio |
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Christopher DiTullio |
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Executive Vice President, Chief Customer Officer and Member, Interim Office of the Chief Executive Officer |
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(principal executive officer) |
Exhibit 31.2
CERTIFICATION
I, Scott Sekella, certify that:
Date: August 31, 2023 |
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By: |
/s/ Scott Sekella |
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Scott Sekella |
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Executive Vice President, Chief Financial Officer and Member, Interim Office of the Chief Executive 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 July 29, 2023 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Christopher DiTullio, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that, to the best of my knowledge:
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Date: August 31, 2023 |
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By: |
/s/ Christopher DiTullio |
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Christopher DiTullio |
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Executive Vice President, Chief Customer Officer and Member, Interim Office of the 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 on Form 10-Q of JOANN Inc. (the “Company”) for the period ended July 29, 2023 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Scott Sekella, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that, to the best of my knowledge:
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Date: August 31, 2023 |
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By: |
/s/ Scott Sekella |
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Scott Sekella |
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Executive Vice President, Chief Financial Officer and Member, Interim Office of the Chief Executive Officer |
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(principal financial officer) |