10-Q
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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

(Mark One)

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended October 28, 2023

OR

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ____________ to ____________

Commission File Number: 001-40204

 

JOANN Inc.

(Exact name of registrant as specified in its charter)

 

 

Delaware

46-1095540

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer
Identification No.)

 

 

5555 Darrow Road, Hudson, Ohio

44236

(Address of principal executive offices)

(Zip Code)

Registrant’s telephone number, including area code: (330) 656-2600

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class

 

Trading

Symbol(s)

 

Name of each exchange on which registered

Common stock, par value $0.01 per share

 

JOAN

 

The Nasdaq Global Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer

Accelerated filer

 

 

 

 

Non-accelerated filer

Smaller reporting company

 

 

 

 

Emerging growth company

 

 

 

 

 

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes No ☒

As of November 30, 2023, the registrant had 41,911,651 shares of common stock, par value $0.01 per share, outstanding.

 

 

 


 

Table of Contents

 

Page

 

FORWARD-LOOKING STATEMENTS

1

PART I.

FINANCIAL INFORMATION

3

Item 1.

Financial Statements

3

Consolidated Balance Sheets

3

Consolidated Statements of Comprehensive Income (Loss)

4

Consolidated Statements of Cash Flows

5

Consolidated Statements of Shareholders’ Equity (Deficit)

6

Notes to Consolidated Financial Statements

7

Item 2.

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

15

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

24

Item 4.

Controls and Procedures

24

PART II.

OTHER INFORMATION

25

Item 1.

Legal Proceedings

25

Item 1A.

Risk Factors

25

Item 2.

Unregistered Sales of Equity Securities, Use of Proceeds and Issuer Purchases of Equity Securities

26

Item 3.

Defaults Upon Senior Securities

26

Item 4.

Mine Safety Disclosures

26

Item 5.

Other Information

26

Item 6.

Exhibits

27

 

Signatures

28

 

 

 

 

 

 


 

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 impact of inflationary pressures and general economic conditions, including the impacts of public health epidemics or pandemics, on our ability to control costs and on our customers' level of discretionary income to spend on sewing, arts and crafts and select home décor products ("Creative Products");
our ability to anticipate and effectively respond to disruptions or inefficiencies in our distribution network, e-commerce fulfillment function and transportation system, including availability and cost of import and domestic freight;
the effects of potential changes to U.S. trade regulations and policies, including tariffs, on our business;
developments involving our competitors and our industry;
our ability to maintain adequate liquidity, manage our indebtedness, comply with our lease obligations or access additional capital, as any inability to do so could limit our financial flexibility and cash flows necessary to fund working capital, planned capital expenditures and other general corporate purposes or ongoing needs of our business;
our ability to access the capital markets and credit markets to obtain additional financing and maintain sufficient liquidity and working capital, while addressing payment obligations under our indebtedness, including upcoming debt maturities, and complying with covenants under our indebtedness;
our ability to amend, refinance, restructure or repurchase our outstanding indebtedness and/or raise additional equity financing;
our ability to obtain and maintain access to trade credit and favorable payment terms with our suppliers, and the impact of that trade credit on our liquidity;
our ability to sell or monetize assets or securitize receivables;
our ability to regain and maintain compliance with the continued listing requirements of The Nasdaq Global Market, our ability to transfer and maintain the listing of our common stock on The Nasdaq Capital Market, or our ability to otherwise maintain the listing of our common stock on Nasdaq;
our ability to timely identify or effectively respond to consumer trends, and the potential effects of that ability on our relationship with our customers, the demand for our products and our market share;
our expectations regarding the seasonality of our business;
our ability to manage the distinct risks facing our e-commerce business and maintain a relevant omni-channel experience for our customers;
our ability to maintain or negotiate favorable lease terms for our store locations;
our ability to execute on our strategy to renovate and improve the performance of our existing store locations;
our ability to achieve and maintain targeted annual cost reductions;
our ability to attract and retain a qualified management team and other team members while controlling our labor costs;
our reliance on and relationships with third-party service providers;
our reliance on and relationships with foreign suppliers and their ability to supply us with adequate, timely and cost-effective products for resale;
our ability, and our third-party service providers’ ability, to maintain security and prevent unauthorized access to electronic and other confidential information;
the impacts of potential disruptions to our information systems, including our websites and mobile applications;
our ability to respond to risks associated with existing and future payment options;
our ability to maintain and enhance a strong brand image;
our ability to maintain adequate insurance coverage;
our status as a “controlled company” and control of us as a public company by affiliates of Leonard Green & Partners, L.P. ("LGP");
the impact of evolving governmental laws and regulations and the outcomes of legal proceedings; and
the amount and timing of repurchases of our common stock, if any.

The preceding list is not intended to be an exhaustive list of all of our forward-looking statements. We have based these forward-looking statements on our current expectations, assumptions, estimates and projections. While we believe these expectations, assumptions, estimates and projections are reasonable, such forward-looking statements are only predictions and involve known and unknown risks and uncertainties, many of which are beyond our control. 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

1


 

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.

2


 

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements.

JOANN Inc.

Consolidated Balance Sheets

 

 

 

(Unaudited)

 

 

 

 

 

 

October 28,
2023

 

 

October 29,
2022

 

 

January 28,
2023

 

 

 

(In millions)

 

Assets

 

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

28.3

 

 

$

27.5

 

 

$

20.2

 

Inventories

 

 

679.6

 

 

 

747.0

 

 

 

584.1

 

Prepaid expenses and other current assets

 

 

82.4

 

 

 

79.6

 

 

 

38.6

 

Total current assets

 

 

790.3

 

 

 

854.1

 

 

 

642.9

 

 

 

 

 

 

 

 

 

 

Property, equipment and leasehold improvements, net

 

 

238.7

 

 

 

295.8

 

 

 

287.8

 

Operating lease assets

 

 

760.2

 

 

 

802.6

 

 

 

778.4

 

Goodwill, net

 

 

162.0

 

 

 

162.0

 

 

 

162.0

 

Intangible assets, net

 

 

263.9

 

 

 

369.3

 

 

 

272.1

 

Other assets

 

 

42.6

 

 

 

40.9

 

 

 

37.6

 

Total assets

 

$

2,257.7

 

 

$

2,524.7

 

 

$

2,180.8

 

 

 

 

 

 

 

 

 

 

Liabilities and Shareholders’ Equity (Deficit)

 

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

 

Accounts payable

 

$

262.7

 

 

$

270.3

 

 

$

197.5

 

Accrued expenses

 

 

109.2

 

 

 

123.4

 

 

 

119.2

 

Current portion of operating lease liabilities

 

 

175.0

 

 

 

162.4

 

 

 

177.5

 

Current portion of long-term debt

 

 

6.8

 

 

 

6.8

 

 

 

6.8

 

Total current liabilities

 

 

553.7

 

 

 

562.9

 

 

 

501.0

 

 

 

 

 

 

 

 

 

 

Long-term debt, net

 

 

1,148.2

 

 

 

1,062.4

 

 

 

976.0

 

Long-term operating lease liabilities

 

 

692.0

 

 

 

735.5

 

 

 

707.3

 

Long-term deferred income taxes

 

 

20.8

 

 

 

89.3

 

 

 

16.9

 

Other long-term liabilities

 

 

26.0

 

 

 

31.3

 

 

 

28.7

 

 

 

 

 

 

 

 

 

 

Shareholders’ equity (deficit):

 

 

 

 

 

 

 

 

 

Common stock, stated value $0.01 per share; 200.0 million authorized; issued 44.1 million shares at October 28, 2023, October 29, 2022 and January 28, 2023

 

 

0.4

 

 

 

0.4

 

 

 

0.4

 

Additional paid-in capital

 

 

207.3

 

 

 

208.4

 

 

 

208.0

 

Retained (deficit)

 

 

(388.3

)

 

 

(148.1

)

 

 

(239.2

)

Accumulated other comprehensive income

 

 

16.6

 

 

 

11.4

 

 

 

8.3

 

Treasury stock at cost; 2.2 million shares at October 28, 2023, 3.3 million shares at October 29, 2022 and 3.0 million shares at January 28, 2023

 

 

(19.0

)

 

 

(28.8

)

 

 

(26.6

)

Total shareholders’ equity (deficit)

 

 

(183.0

)

 

 

43.3

 

 

 

(49.1

)

Total liabilities and shareholders’ equity (deficit)

 

$

2,257.7

 

 

$

2,524.7

 

 

$

2,180.8

 

 

See notes to unaudited consolidated financial statements.

3


 

JOANN Inc.

Consolidated Statements of Comprehensive Income (Loss)

(Unaudited)

 

 

 

Thirteen Weeks Ended

 

 

Thirty-Nine Weeks Ended

 

 

 

October 28,
2023

 

 

October 29,
2022

 

 

October 28,
2023

 

 

October 29,
2022

 

 

 

(In millions except per share data)

 

Net sales

 

$

539.8

 

 

$

562.8

 

 

$

1,471.7

 

 

$

1,524.1

 

Cost of sales

 

 

257.7

 

 

 

281.8

 

 

 

708.6

 

 

 

787.5

 

Selling, general and administrative expenses

 

 

273.4

 

 

 

269.0

 

 

 

806.2

 

 

 

786.6

 

Depreciation and amortization

 

 

22.4

 

 

 

19.9

 

 

 

61.6

 

 

 

59.9

 

Intangible asset impairment

 

 

1.7

 

 

 

 

 

 

1.7

 

 

 

 

Operating (loss)

 

 

(15.4

)

 

 

(7.9

)

 

 

(106.4

)

 

 

(109.9

)

Interest expense, net

 

 

28.4

 

 

 

18.1

 

 

 

80.5

 

 

 

42.5

 

Investment remeasurement

 

 

 

 

 

(2.0

)

 

 

 

 

 

(1.0

)

Gain on sale leaseback

 

 

(12.1

)

 

 

 

 

 

(12.1

)

 

 

 

(Loss) before income taxes

 

 

(31.7

)

 

 

(24.0

)

 

 

(174.8

)

 

 

(151.4

)

Income tax (benefit)

 

 

(10.9

)

 

 

(6.5

)

 

 

(30.2

)

 

 

(41.9

)

Loss from equity method investments

 

 

0.8

 

 

 

 

 

 

4.5

 

 

 

 

Net (loss)

 

$

(21.6

)

 

$

(17.5

)

 

$

(149.1

)

 

$

(109.5

)

 

 

 

 

 

 

 

 

 

 

 

 

Other comprehensive income (loss):

 

 

 

 

 

 

 

 

 

 

 

 

Foreign currency translation

 

 

(0.1

)

 

 

(0.1

)

 

 

 

 

 

(0.1

)

Cash flow hedges

 

 

1.6

 

 

 

13.9

 

 

 

11.3

 

 

 

13.0

 

Income tax (provision) on cash flow hedges

 

 

(0.4

)

 

 

(3.5

)

 

 

(2.9

)

 

 

(3.3

)

Other comprehensive income

 

 

1.1

 

 

 

10.3

 

 

 

8.4

 

 

 

9.6

 

Comprehensive (loss)

 

$

(20.5

)

 

$

(7.2

)

 

$

(140.7

)

 

$

(99.9

)

 

 

 

 

 

 

 

 

 

 

 

 

(Loss) per common share:

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

(0.51

)

 

$

(0.43

)

 

$

(3.57

)

 

$

(2.69

)

Diluted

 

$

(0.51

)

 

$

(0.43

)

 

$

(3.57

)

 

$

(2.69

)

Weighted-average common shares outstanding:

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

42.2

 

 

 

40.8

 

 

 

41.8

 

 

 

40.7

 

Diluted

 

 

42.2

 

 

 

40.8

 

 

 

41.8

 

 

 

40.7

 

 

See notes to unaudited consolidated financial statements.

4


 

JOANN Inc.

Consolidated Statements of Cash Flows

(Unaudited)

 

 

 

Thirty-Nine Weeks Ended

 

 

 

October 28,
2023

 

 

October 29,
2022

 

 

 

(In millions)

 

Net cash provided by (used for) operating activities:

 

 

 

 

 

 

Net (loss)

 

$

(149.1

)

 

$

(109.5

)

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

 

 

 

 

 

 

Non-cash operating lease expense

 

 

129.9

 

 

 

127.0

 

Depreciation and amortization

 

 

61.6

 

 

 

59.9

 

Deferred income taxes

 

 

1.1

 

 

 

(1.7

)

Stock-based compensation expense

 

 

6.6

 

 

 

6.1

 

Amortization of deferred financing costs and original issue discount

 

 

2.6

 

 

 

1.5

 

Investment remeasurement

 

 

 

 

 

(1.0

)

Gain on sale leaseback

 

 

(12.1

)

 

 

 

Loss on disposal and impairment of fixed assets

 

 

8.6

 

 

 

0.3

 

Intangible asset impairment

 

 

1.7

 

 

 

 

Loss on equity method investment

 

 

4.5

 

 

 

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

(Increase) in inventories

 

 

(95.5

)

 

 

(88.4

)

(Increase) in prepaid expenses and other current assets

 

 

(34.7

)

 

 

(39.3

)

Increase in accounts payable

 

 

65.2

 

 

 

16.5

 

(Decrease) in accrued expenses

 

 

(4.2

)

 

 

(16.4

)

(Decrease) in operating lease liabilities

 

 

(129.5

)

 

 

(120.6

)

(Decrease) in other long-term liabilities

 

 

(2.9

)

 

 

(13.1

)

Other, net

 

 

(4.7

)

 

 

5.1

 

Net cash (used for) operating activities

 

 

(150.9

)

 

 

(173.6

)

Net cash provided by (used for) investing activities:

 

 

 

 

 

 

Capital expenditures

 

 

(36.1

)

 

 

(80.4

)

Proceeds from sale leaseback

 

 

33.2

 

 

 

 

Other investing activities

 

 

(1.6

)

 

 

(4.3

)

Net cash (used for) investing activities

 

 

(4.5

)

 

 

(84.7

)

Net cash provided by (used for) financing activities:

 

 

 

 

 

 

Term loan payments

 

 

(5.1

)

 

 

(5.1

)

FILO proceeds

 

 

97.0

 

 

 

 

Borrowings on revolving credit facility

 

 

555.6

 

 

 

544.1

 

Payments on revolving credit facility

 

 

(473.1

)

 

 

(256.1

)

Principal payments on finance lease obligations

 

 

(6.1

)

 

 

(7.1

)

Proceeds from employee stock purchase plan and exercise of stock options

 

 

0.5

 

 

 

1.1

 

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

 

 

(0.1

)

 

 

(0.1

)

Dividends paid

 

 

 

 

 

(13.4

)

Financing fees paid

 

 

(5.2

)

 

 

 

Net cash provided by financing activities

 

 

163.5

 

 

 

263.4

 

Effect of exchange rate changes on cash

 

 

 

 

 

(0.1

)

Net increase in cash and cash equivalents

 

 

8.1

 

 

 

5.0

 

Cash and cash equivalents at beginning of period

 

 

20.2

 

 

 

22.5

 

Cash and cash equivalents at end of period

 

$

28.3

 

 

$

27.5

 

Cash paid (received) during the period for:

 

 

 

 

 

 

Interest

 

$

77.5

 

 

$

39.6

 

Income taxes, net of (refunds)

 

 

(2.3

)

 

 

(6.6

)

 

See notes to unaudited consolidated financial statements.

5


 

JOANN Inc.

Consolidated Statements of Shareholders’ Equity (Deficit)

(Unaudited)

 

 

 

 

Net
Common
Shares

 

 

Treasury
Shares

 

 

 

Common
Stock
Par
Value

 

 

Additional
Paid-In
Capital

 

 

Treasury
Stock

 

 

Retained
(Deficit)

 

 

Accumulated
Other
Comprehensive
Income

 

 

Total
Shareholders'
(Deficit)

 

 

 

(In millions)

 

Balance, January 28, 2023

 

 

41.1

 

 

 

3.0

 

 

 

$

0.4

 

 

$

208.0

 

 

$

(26.6

)

 

$

(239.2

)

 

$

8.3

 

 

$

(49.1

)

Net (loss)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(54.2

)

 

 

 

 

 

(54.2

)

Other comprehensive income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

0.8

 

 

 

0.8

 

Stock-based compensation

 

 

 

 

 

 

 

 

 

 

 

 

5.3

 

 

 

 

 

 

 

 

 

 

 

 

5.3

 

Exercise of stock options

 

 

 

 

 

 

 

 

 

 

 

 

(0.4

)

 

 

0.4

 

 

 

 

 

 

 

 

 

 

Vesting of restricted stock units

 

 

0.1

 

 

 

(0.1

)

 

 

 

 

 

 

(0.9

)

 

 

0.8

 

 

 

 

 

 

 

 

 

(0.1

)

Balance, April 29, 2023

 

 

41.2

 

 

 

2.9

 

 

 

$

0.4

 

 

$

212.0

 

 

$

(25.4

)

 

$

(293.4

)

 

$

9.1

 

 

$

(97.3

)

Net (loss)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(73.3

)

 

 

 

 

 

(73.3

)

Other comprehensive income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

6.4

 

 

 

6.4

 

Stock-based compensation

 

 

 

 

 

 

 

 

 

 

 

 

1.5

 

 

 

 

 

 

 

 

 

 

 

 

1.5

 

Vesting of restricted stock units

 

 

0.1

 

 

 

(0.1

)

 

 

 

 

 

 

(0.9

)

 

 

0.9

 

 

 

 

 

 

 

 

 

 

Employee stock purchase plan purchases

 

 

0.6

 

 

 

(0.6

)

 

 

 

 

 

 

(5.0

)

 

 

5.5

 

 

 

 

 

 

 

 

 

0.5

 

Balance, July 29, 2023

 

 

41.9

 

 

 

2.2

 

 

 

$

0.4

 

 

$

207.6

 

 

$

(19.0

)

 

$

(366.7

)

 

$

15.5

 

 

$

(162.2

)

Net (loss)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(21.6

)

 

 

 

 

 

(21.6

)

Other comprehensive income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1.1

 

 

 

1.1

 

Stock-based compensation

 

 

 

 

 

 

 

 

 

 

 

 

(0.2

)

 

 

 

 

 

 

 

 

 

 

 

(0.2

)

Vesting of restricted stock units

 

 

 

 

 

 

 

 

 

 

 

 

(0.1

)

 

 

 

 

 

 

 

 

 

 

 

(0.1

)

Balance, October 28, 2023

 

 

41.9

 

 

 

2.2

 

 

 

$

0.4

 

 

$

207.3

 

 

$

(19.0

)

 

$

(388.3

)

 

$

16.6

 

 

$

(183.0

)

 

 

 

Net
Common
Shares

 

 

Treasury
Shares

 

 

 

Common
Stock
Par
Value

 

 

Additional
Paid-In
Capital

 

 

Treasury
Stock

 

 

Retained
(Deficit)

 

 

Accumulated
Other
Comprehensive
Income

 

 

Total
Shareholders'
Equity

 

 

 

(In millions)

 

Balance, January 29, 2022

 

 

40.6

 

 

 

3.5

 

 

 

$

0.4

 

 

$

203.3

 

 

$

(30.8

)

 

$

(24.9

)

 

$

1.8

 

 

$

149.8

 

Net (loss)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(35.1

)

 

 

 

 

 

(35.1

)

Other comprehensive income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

3.5

 

 

 

3.5

 

Dividends – $0.11 per share

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(4.5

)

 

 

 

 

 

(4.5

)

Stock-based compensation

 

 

 

 

 

 

 

 

 

 

 

 

1.0

 

 

 

 

 

 

 

 

 

 

 

 

1.0

 

Exercise of stock options

 

 

 

 

 

 

 

 

 

 

 

 

0.1

 

 

 

0.3

 

 

 

 

 

 

 

 

 

0.4

 

Vesting of restricted stock units

 

 

0.1

 

 

 

(0.1

)

 

 

 

 

 

 

(0.7

)

 

 

0.6

 

 

 

 

 

 

 

 

 

(0.1

)

Balance, April 30, 2022

 

 

40.7

 

 

 

3.4

 

 

 

$

0.4

 

 

$

203.7

 

 

$

(29.9

)

 

$

(64.5

)

 

$

5.3

 

 

$

115.0

 

Net (loss)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(56.9

)

 

 

 

 

 

(56.9

)

Other comprehensive (loss)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(4.2

)

 

 

(4.2

)

Dividends – $0.10 per share

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(4.6

)

 

 

 

 

 

(4.6

)

Stock-based compensation

 

 

 

 

 

 

 

 

 

 

 

 

1.2

 

 

 

 

 

 

 

 

 

 

 

 

1.2

 

Vesting of restricted stock units

 

 

 

 

 

 

 

 

 

 

 

 

(0.2

)

 

 

0.2

 

 

 

 

 

 

 

 

 

 

Employee stock purchase plan purchases

 

 

0.1

 

 

 

(0.1

)

 

 

 

 

 

 

(0.2

)

 

 

0.9

 

 

 

 

 

 

 

 

 

0.7

 

Balance, July 30, 2022

 

 

40.8

 

 

 

3.3

 

 

 

$

0.4

 

 

$

204.5

 

 

$

(28.8

)

 

$

(126.0

)

 

$

1.1

 

 

$

51.2

 

Net (loss)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(17.5

)

 

 

 

 

 

(17.5

)

Other comprehensive income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

10.3

 

 

 

10.3

 

Dividends – $0.11 per share

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(4.6

)

 

 

 

 

 

(4.6

)

Stock-based compensation

 

 

 

 

 

 

 

 

 

 

 

 

3.9

 

 

 

 

 

 

 

 

 

 

 

 

3.9

 

Balance, October 29, 2022

 

 

40.8

 

 

 

3.3

 

 

 

$

0.4

 

 

$

208.4

 

 

$

(28.8

)

 

$

(148.1

)

 

$

11.4

 

 

$

43.3

 

 

See notes to unaudited consolidated financial statements.

6


 

JOANN Inc.

Notes to Consolidated Financial Statements

(Unaudited)

Note 1—Significant Accounting Policies

Nature of Operations

JOANN (as defined below) is the nation’s category leader in sewing and fabrics (collectively, “Sewing”), with one of the largest assortments of arts and crafts products. As a well-established and trusted brand for 80 years, the Company believes it has a deep understanding of its customers, what inspires their creativity and what fuels their incredibly diverse projects. In order to best serve its customers, JOANN has transformed itself into a fully-integrated, digitally-connected omni-channel retailer that provides Creative Products to its customers whenever and however they want. As of October 28, 2023, the Company operated 829 store locations in 49 states.

Basis of Presentation

The accompanying Consolidated Financial Statements and these notes are unaudited and have been prepared in accordance with the rules and regulations of the Securities and Exchange Commission (“SEC”) for interim financial information. The Consolidated Financial Statements reflect all normal, recurring adjustments which management believes are necessary to present fairly the Company’s financial condition, results of operations and cash flows for all periods presented. The Consolidated Financial Statements, however, do not include all information necessary for a complete presentation of financial condition, results of operations and cash flows in conformity with accounting principles generally accepted in the United States of America (“GAAP”). The accompanying Consolidated Financial Statements and these notes should be read in conjunction with the Company’s Annual Report on Form 10-K for the fiscal year ended January 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 October 28, 2023 and October 29, 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.

7


 

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 thirty-nine weeks ended October 29, 2022, the Company paid dividends of $3.1 million and $9.2 million, respectively, to LGP as part of the Company's quarterly dividend payments. The Company did not pay any dividends during the first thirty-nine weeks of fiscal 2024.

Note 2—Financing

Long-term debt consisted of the following:

 

 

October 28,
2023

 

 

October 29,
2022

 

 

January 28,
2023

 

 

 

(In millions)

 

ABL Facility

 

$

406.5

 

 

$

409.0

 

 

$

324.0

 

Term Loan due 2028

 

 

661.5

 

 

 

668.3

 

 

 

666.6

 

FILO Loan

 

 

100.0