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As Of Filer Filing For·On·As Docs:Size Issuer Filing Agent 12/05/23 JOANN Inc. 10-Q 10/28/23 58:6M Donnelley … Solutions/FA |
Document/Exhibit Description Pages Size
1: 10-Q Quarterly Report HTML 1.62M
2: EX-10.1 Material Contract HTML 139K
3: EX-10.2 Material Contract HTML 109K
4: EX-10.3 Material Contract HTML 35K
5: EX-10.4 Material Contract HTML 82K
6: EX-31.1 Certification -- §302 - SOA'02 HTML 23K
7: EX-31.2 Certification -- §302 - SOA'02 HTML 23K
8: EX-32.1 Certification -- §906 - SOA'02 HTML 20K
9: EX-32.2 Certification -- §906 - SOA'02 HTML 20K
15: R1 Document and Entity Information HTML 70K
16: R2 Consolidated Balance Sheets HTML 109K
17: R3 Consolidated Balance Sheets (Parenthetical) HTML 26K
18: R4 Consolidated Statements of Comprehensive Income HTML 103K
(Loss)
19: R5 Consolidated Statements of Cash Flows HTML 124K
20: R6 Consolidated Statements of Shareholders' Equity HTML 84K
21: R7 Consolidated Statements of Shareholders' Equity HTML 19K
(Parenthetical)
22: R8 Significant Accounting Policies HTML 31K
23: R9 Financing HTML 87K
24: R10 Derivative Instruments HTML 70K
25: R11 Fair Value Measurements HTML 50K
26: R12 Goodwill and Other Intangible Assets HTML 78K
27: R13 Income Taxes HTML 29K
28: R14 Earnings Per Share HTML 67K
29: R15 Segments and Disaggregated Revenue HTML 49K
30: R16 Commitments and Contingencies HTML 21K
31: R17 Gain on Sale Leaseback HTML 22K
32: R18 Significant Accounting Policies (Policies) HTML 38K
33: R19 Financing (Tables) HTML 52K
34: R20 Derivative Instruments (Tables) HTML 60K
35: R21 Fair Value Measurements (Tables) HTML 44K
36: R22 Goodwill and Other Intangible Assets (Tables) HTML 79K
37: R23 Earnings Per Share (Tables) HTML 65K
38: R24 Segments and Disaggregated Revenue (Tables) HTML 43K
39: R25 Significant Accounting Policies - Additional HTML 25K
Information (Details)
40: R26 Financing - Summary of Long-term Debt (Details) HTML 44K
41: R27 Financing - Additional Information (Details) HTML 165K
42: R28 Derivative Instruments - Additional Information HTML 46K
(Details)
43: R29 Derivative Instruments - Summary of Impacts of HTML 31K
Derivative Instruments on Accompanying
Consolidated Statements of Comprehensive Income
(Loss) (Details)
44: R30 Fair value Measurement - Summary of Carrying and HTML 26K
fair Value Of Interest Rate Derivatives (Details)
45: R31 Fair Value Measurements - Summary of Carrying and HTML 25K
Fair Values of Term Loans (Details)
46: R32 Goodwill and Other Intangible Assets - Summary of HTML 26K
Carrying Amount of Goodwill (Details)
47: R33 Goodwill and Other Intangible Assets - Schedule of HTML 44K
Carrying Amount and Accumulated Amortization of
Identifiable Intangible Assets (Details)
48: R34 Goodwill and Other Intangible Assets - Additional HTML 25K
Information (Details)
49: R35 Income Taxes - Additional Information (Details) HTML 28K
50: R36 Earnings Per Share - Summary of Reconciliation of HTML 54K
Numerator and Denominator of Basic and Diluted
Earnings Per Share and Stock-based Awards Excluded
from Calculation of Diluted Earnings Per Share
(Details)
51: R37 Segments and Disaggregated Revenue - Additional HTML 21K
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52: R38 Segments and Disaggregated Revenue - Summary of HTML 30K
Revenue by Product Category (Details)
53: R39 Gain on Sale Leaseback - Additional Information HTML 33K
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56: XML IDEA XML File -- Filing Summary XML 92K
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| 10-Q |
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM i 10-Q
(Mark One)
i ☒ |
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended i October 28, 2023
OR
i ☐ |
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: i 001-40204
i JOANN Inc.
(Exact name of registrant as specified in its charter)
i Delaware |
i 46-1095540 |
(State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer |
|
|
i 5555 Darrow Road, i Hudson, i Ohio |
i 44236 |
(Address of principal executive offices) |
(Zip Code) |
Registrant’s telephone number, including area code: ( i 330) i 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 |
i Common stock, par value $0.01 per share |
|
i JOAN |
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i 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. i 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). i Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer |
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☐ |
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i Accelerated filer |
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☒ |
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Non-accelerated filer |
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☐ |
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Smaller reporting company |
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i ☒ |
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Emerging growth company |
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i ☐ |
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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 i ☐ No ☒
As of November 30, 2023, the registrant had i 41,911,651 shares of common stock, par value $0.01 per share, outstanding.
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Page |
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1 |
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PART I. |
3 |
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Item 1. |
3 |
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3 |
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4 |
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5 |
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6 |
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7 |
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Item 2. |
Management’s Discussion and Analysis of Financial Condition and Results of Operations |
15 |
Item 3. |
24 |
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Item 4. |
24 |
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PART II. |
25 |
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Item 1. |
25 |
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Item 1A. |
25 |
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Item 2. |
Unregistered Sales of Equity Securities, Use of Proceeds and Issuer Purchases of Equity Securities |
26 |
Item 3. |
26 |
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Item 4. |
26 |
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Item 5. |
26 |
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Item 6. |
27 |
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28 |
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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
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
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(Unaudited) |
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(In millions) |
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Assets |
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Current assets: |
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|
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|||
Cash and cash equivalents |
|
$ |
i 28.3 |
|
|
$ |
i 27.5 |
|
|
$ |
i 20.2 |
|
Inventories |
|
|
i 679.6 |
|
|
|
i 747.0 |
|
|
|
i 584.1 |
|
Prepaid expenses and other current assets |
|
|
i 82.4 |
|
|
|
i 79.6 |
|
|
|
i 38.6 |
|
Total current assets |
|
|
i 790.3 |
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|
|
i 854.1 |
|
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i 642.9 |
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Property, equipment and leasehold improvements, net |
|
|
i 238.7 |
|
|
|
i 295.8 |
|
|
|
i 287.8 |
|
Operating lease assets |
|
|
i 760.2 |
|
|
|
i 802.6 |
|
|
|
i 778.4 |
|
Goodwill, net |
|
|
i 162.0 |
|
|
|
i 162.0 |
|
|
|
i 162.0 |
|
Intangible assets, net |
|
|
i 263.9 |
|
|
|
i 369.3 |
|
|
|
i 272.1 |
|
Other assets |
|
|
i 42.6 |
|
|
|
i 40.9 |
|
|
|
i 37.6 |
|
Total assets |
|
$ |
i 2,257.7 |
|
|
$ |
i 2,524.7 |
|
|
$ |
i 2,180.8 |
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|
|
|
|
|
|
|
|
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|
|||
Liabilities and Shareholders’ Equity (Deficit) |
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Current liabilities: |
|
|
|
|
|
|
|
|
|
|||
Accounts payable |
|
$ |
i 262.7 |
|
|
$ |
i 270.3 |
|
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$ |
i 197.5 |
|
Accrued expenses |
|
|
i 109.2 |
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|
i 123.4 |
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i 119.2 |
|
Current portion of operating lease liabilities |
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i 175.0 |
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|
i 162.4 |
|
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|
i 177.5 |
|
Current portion of long-term debt |
|
|
i 6.8 |
|
|
|
i 6.8 |
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|
|
i 6.8 |
|
Total current liabilities |
|
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i 553.7 |
|
|
|
i 562.9 |
|
|
|
i 501.0 |
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|
|
|||
Long-term debt, net |
|
|
i 1,148.2 |
|
|
|
i 1,062.4 |
|
|
|
i 976.0 |
|
Long-term operating lease liabilities |
|
|
i 692.0 |
|
|
|
i 735.5 |
|
|
|
i 707.3 |
|
Long-term deferred income taxes |
|
|
i 20.8 |
|
|
|
i 89.3 |
|
|
|
i 16.9 |
|
Other long-term liabilities |
|
|
i 26.0 |
|
|
|
i 31.3 |
|
|
|
i 28.7 |
|
|
|
|
|
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Shareholders’ equity (deficit): |
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Common stock, stated value $ i i i 0.01 / / per share; i i i 200.0 / / million authorized; issued i i i 44.1 / / million shares at October 28, 2023, October 29, 2022 and January 28, 2023 |
|
|
i 0.4 |
|
|
|
i 0.4 |
|
|
|
i 0.4 |
|
Additional paid-in capital |
|
|
i 207.3 |
|
|
|
i 208.4 |
|
|
|
i 208.0 |
|
Retained (deficit) |
|
|
( i 388.3 |
) |
|
|
( i 148.1 |
) |
|
|
( i 239.2 |
) |
Accumulated other comprehensive income |
|
|
i 16.6 |
|
|
|
i 11.4 |
|
|
|
i 8.3 |
|
Treasury stock at cost; i 2.2 million shares at October 28, 2023, i 3.3 million shares at October 29, 2022 and i 3.0 million shares at January 28, 2023 |
|
|
( i 19.0 |
) |
|
|
( i 28.8 |
) |
|
|
( i 26.6 |
) |
Total shareholders’ equity (deficit) |
|
|
( i 183.0 |
) |
|
|
i 43.3 |
|
|
|
( i 49.1 |
) |
Total liabilities and shareholders’ equity (deficit) |
|
$ |
i 2,257.7 |
|
|
$ |
i 2,524.7 |
|
|
$ |
i 2,180.8 |
|
See notes to unaudited consolidated financial statements.
3
JOANN Inc.
Consolidated Statements of Comprehensive Income (Loss)
(Unaudited)
|
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Thirteen Weeks Ended |
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Thirty-Nine Weeks Ended |
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(In millions except per share data) |
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|||||||||||||
Net sales |
|
$ |
i 539.8 |
|
|
$ |
i 562.8 |
|
|
$ |
i 1,471.7 |
|
|
$ |
i 1,524.1 |
|
Cost of sales |
|
|
i 257.7 |
|
|
|
i 281.8 |
|
|
|
i 708.6 |
|
|
|
i 787.5 |
|
Selling, general and administrative expenses |
|
|
i 273.4 |
|
|
|
i 269.0 |
|
|
|
i 806.2 |
|
|
|
i 786.6 |
|
Depreciation and amortization |
|
|
i 22.4 |
|
|
|
i 19.9 |
|
|
|
i 61.6 |
|
|
|
i 59.9 |
|
Intangible asset impairment |
|
|
i 1.7 |
|
|
|
i — |
|
|
|
i 1.7 |
|
|
|
i — |
|
Operating (loss) |
|
|
( i 15.4 |
) |
|
|
( i 7.9 |
) |
|
|
( i 106.4 |
) |
|
|
( i 109.9 |
) |
Interest expense, net |
|
|
i 28.4 |
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|
|
i 18.1 |
|
|
|
i 80.5 |
|
|
|
i 42.5 |
|
Investment remeasurement |
|
|
i — |
|
|
|
( i 2.0 |
) |
|
|
i — |
|
|
|
( i 1.0 |
) |
Gain on sale leaseback |
|
|
( i 12.1 |
) |
|
|
i — |
|
|
|
( i 12.1 |
) |
|
|
i — |
|
(Loss) before income taxes |
|
|
( i 31.7 |
) |
|
|
( i 24.0 |
) |
|
|
( i 174.8 |
) |
|
|
( i 151.4 |
) |
Income tax (benefit) |
|
|
( i 10.9 |
) |
|
|
( i 6.5 |
) |
|
|
( i 30.2 |
) |
|
|
( i 41.9 |
) |
Loss from equity method investments |
|
|
i 0.8 |
|
|
|
i — |
|
|
|
i 4.5 |
|
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|
i — |
|
Net (loss) |
|
$ |
( i 21.6 |
) |
|
$ |
( i 17.5 |
) |
|
$ |
( i 149.1 |
) |
|
$ |
( i 109.5 |
) |
|
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|
||||
Other comprehensive income (loss): |
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||||
Foreign currency translation |
|
|
( i 0.1 |
) |
|
|
( i 0.1 |
) |
|
|
i — |
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|
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( i 0.1 |
) |
Cash flow hedges |
|
|
i 1.6 |
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|
|
i 13.9 |
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|
|
i 11.3 |
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|
i 13.0 |
|
Income tax (provision) on cash flow hedges |
|
|
( i 0.4 |
) |
|
|
( i 3.5 |
) |
|
|
( i 2.9 |
) |
|
|
( i 3.3 |
) |
Other comprehensive income |
|
|
i 1.1 |
|
|
|
i 10.3 |
|
|
|
i 8.4 |
|
|
|
i 9.6 |
|
Comprehensive (loss) |
|
$ |
( i 20.5 |
) |
|
$ |
( i 7.2 |
) |
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$ |
( i 140.7 |
) |
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$ |
( i 99.9 |
) |
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(Loss) per common share: |
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Basic |
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$ |
( i 0.51 |
) |
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$ |
( i 0.43 |
) |
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$ |
( i 3.57 |
) |
|
$ |
( i 2.69 |
) |
Diluted |
|
$ |
( i 0.51 |
) |
|
$ |
( i 0.43 |
) |
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$ |
( i 3.57 |
) |
|
$ |
( i 2.69 |
) |
Weighted-average common shares outstanding: |
|
|
|
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|
|
|
|
|
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|
||||
Basic |
|
|
i 42.2 |
|
|
|
i 40.8 |
|
|
|
i 41.8 |
|
|
|
i 40.7 |
|
Diluted |
|
|
i 42.2 |
|
|
|
i 40.8 |
|
|
|
i 41.8 |
|
|
|
i 40.7 |
|
See notes to unaudited consolidated financial statements.
4
JOANN Inc.
Consolidated Statements of Cash Flows
(Unaudited)
|
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Thirty-Nine Weeks Ended |
|
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(In millions) |
|
|||||
Net cash provided by (used for) operating activities: |
|
|
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|
|
|
||
Net (loss) |
|
$ |
( i 149.1 |
) |
|
$ |
( i 109.5 |
) |
Adjustments to reconcile net (loss) to net cash (used for) |
|
|
|
|
|
|
||
Non-cash operating lease expense |
|
|
i 129.9 |
|
|
|
i 127.0 |
|
Depreciation and amortization |
|
|
i 61.6 |
|
|
|
i 59.9 |
|
Deferred income taxes |
|
|
i 1.1 |
|
|
|
( i 1.7 |
) |
Stock-based compensation expense |
|
|
i 6.6 |
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|
i 6.1 |
|
Amortization of deferred financing costs and original issue discount |
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|
i 2.6 |
|
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|
i 1.5 |
|
Investment remeasurement |
|
|
i — |
|
|
|
( i 1.0 |
) |
Gain on sale leaseback |
|
|
( i 12.1 |
) |
|
|
i — |
|
Loss on disposal and impairment of fixed assets |
|
|
i 8.6 |
|
|
|
i 0.3 |
|
Intangible asset impairment |
|
|
i 1.7 |
|
|
|
i — |
|
Loss on equity method investment |
|
|
i 4.5 |
|
|
|
i — |
|
Changes in operating assets and liabilities: |
|
|
|
|
|
|
||
(Increase) in inventories |
|
|
( i 95.5 |
) |
|
|
( i 88.4 |
) |
(Increase) in prepaid expenses and other current assets |
|
|
( i 34.7 |
) |
|
|
( i 39.3 |
) |
Increase in accounts payable |
|
|
i 65.2 |
|
|
|
i 16.5 |
|
(Decrease) in accrued expenses |
|
|
( i 4.2 |
) |
|
|
( i 16.4 |
) |
(Decrease) in operating lease liabilities |
|
|
( i 129.5 |
) |
|
|
( i 120.6 |
) |
(Decrease) in other long-term liabilities |
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|
( i 2.9 |
) |
|
|
( i 13.1 |
) |
Other, net |
|
|
( i 4.7 |
) |
|
|
i 5.1 |
|
Net cash (used for) operating activities |
|
|
( i 150.9 |
) |
|
|
( i 173.6 |
) |
Net cash provided by (used for) investing activities: |
|
|
|
|
|
|
||
Capital expenditures |
|
|
( i 36.1 |
) |
|
|
( i 80.4 |
) |
Proceeds from sale leaseback |
|
|
i 33.2 |
|
|
|
i — |
|
Other investing activities |
|
|
( i 1.6 |
) |
|
|
( i 4.3 |
) |
Net cash (used for) investing activities |
|
|
( i 4.5 |
) |
|
|
( i 84.7 |
) |
Net cash provided by (used for) financing activities: |
|
|
|
|
|
|
||
Term loan payments |
|
|
( i 5.1 |
) |
|
|
( i 5.1 |
) |
FILO proceeds |
|
|
i 97.0 |
|
|
|
i — |
|
Borrowings on revolving credit facility |
|
|
i 555.6 |
|
|
|
i 544.1 |
|
Payments on revolving credit facility |
|
|
( i 473.1 |
) |
|
|
( i 256.1 |
) |
Principal payments on finance lease obligations |
|
|
( i 6.1 |
) |
|
|
( i 7.1 |
) |
Proceeds from employee stock purchase plan and exercise of stock options |
|
|
i 0.5 |
|
|
|
i 1.1 |
|
Payments of taxes related to the net issuance of team member stock awards |
|
|
( i 0.1 |
) |
|
|
( i 0.1 |
) |
Dividends paid |
|
|
i — |
|
|
|
( i 13.4 |
) |
Financing fees paid |
|
|
( i 5.2 |
) |
|
|
i — |
|
Net cash provided by financing activities |
|
|
i 163.5 |
|
|
|
i 263.4 |
|
Effect of exchange rate changes on cash |
|
|
i — |
|
|
|
( i 0.1 |
) |
Net increase in cash and cash equivalents |
|
|
i 8.1 |
|
|
|
i 5.0 |
|
Cash and cash equivalents at beginning of period |
|
|
i 20.2 |
|
|
|
i 22.5 |
|
Cash and cash equivalents at end of period |
|
$ |
i 28.3 |
|
|
$ |
i 27.5 |
|
Cash paid (received) during the period for: |
|
|
|
|
|
|
||
Interest |
|
$ |
i 77.5 |
|
|
$ |
i 39.6 |
|
Income taxes, net of (refunds) |
|
|
( i 2.3 |
) |
|
|
( i 6.6 |
) |
See notes to unaudited consolidated financial statements.
5
JOANN Inc.
(Unaudited)
|
|
Net |
|
|
Treasury |
|
|
|
Common |
|
|
Additional |
|
|
Treasury |
|
|
Retained |
|
|
Accumulated |
|
|
Total |
|
||||||||
|
|
(In millions) |
|
||||||||||||||||||||||||||||||
Balance, January 28, 2023 |
|
|
i 41.1 |
|
|
|
i 3.0 |
|
|
|
$ |
i 0.4 |
|
|
$ |
i 208.0 |
|
|
$ |
( i 26.6 |
) |
|
$ |
( i 239.2 |
) |
|
$ |
i 8.3 |
|
|
$ |
( i 49.1 |
) |
Net (loss) |
|
|
— |
|
|
|
— |
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( i 54.2 |
) |
|
|
— |
|
|
|
( i 54.2 |
) |
Other comprehensive income |
|
|
— |
|
|
|
— |
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
i 0.8 |
|
|
|
i 0.8 |
|
Stock-based compensation |
|
|
— |
|
|
|
— |
|
|
|
|
— |
|
|
|
i 5.3 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
i 5.3 |
|
Exercise of stock options |
|
|
— |
|
|
|
— |
|
|
|
|
— |
|
|
|
( i 0.4 |
) |
|
|
i 0.4 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Vesting of restricted stock units |
|
|
i 0.1 |
|
|
|
( i 0.1 |
) |
|
|
|
— |
|
|
|
( i 0.9 |
) |
|
|
i 0.8 |
|
|
|
— |
|
|
|
— |
|
|
|
( i 0.1 |
) |
Balance, April 29, 2023 |
|
|
i 41.2 |
|
|
|
i 2.9 |
|
|
|
$ |
i 0.4 |
|
|
$ |
i 212.0 |
|
|
$ |
( i 25.4 |
) |
|
$ |
( i 293.4 |
) |
|
$ |
i 9.1 |
|
|
$ |
( i 97.3 |
) |
Net (loss) |
|
|
— |
|
|
|
— |
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( i 73.3 |
) |
|
|
— |
|
|
|
( i 73.3 |
) |
Other comprehensive income |
|
|
— |
|
|
|
— |
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
i 6.4 |
|
|
|
i 6.4 |
|
Stock-based compensation |
|
|
— |
|
|
|
— |
|
|
|
|
— |
|
|
|
i 1.5 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
i 1.5 |
|
Vesting of restricted stock units |
|
|
i 0.1 |
|
|
|
( i 0.1 |
) |
|
|
|
— |
|
|
|
( i 0.9 |
) |
|
|
i 0.9 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Employee stock purchase plan purchases |
|
|
i 0.6 |
|
|
|
( i 0.6 |
) |
|
|
|
— |
|
|
|
( i 5.0 |
) |
|
|
i 5.5 |
|
|
|
— |
|
|
|
— |
|
|
|
i 0.5 |
|
Balance, July 29, 2023 |
|
|
i 41.9 |
|
|
|
i 2.2 |
|
|
|
$ |
i 0.4 |
|
|
$ |
i 207.6 |
|
|
$ |
( i 19.0 |
) |
|
$ |
( i 366.7 |
) |
|
$ |
i 15.5 |
|
|
$ |
( i 162.2 |
) |
Net (loss) |
|
|
— |
|
|
|
— |
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( i 21.6 |
) |
|
|
— |
|
|
|
( i 21.6 |
) |
Other comprehensive income |
|
|
— |
|
|
|
— |
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
i 1.1 |
|
|
|
i 1.1 |
|
Stock-based compensation |
|
|
— |
|
|
|
— |
|
|
|
|
— |
|
|
|
( i 0.2 |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( i 0.2 |
) |
Vesting of restricted stock units |
|
|
— |
|
|
|
— |
|
|
|
|
— |
|
|
|
( i 0.1 |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( i 0.1 |
) |
Balance, October 28, 2023 |
|
|
i 41.9 |
|
|
|
i 2.2 |
|
|
|
$ |
i 0.4 |
|
|
$ |
i 207.3 |
|
|
$ |
( i 19.0 |
) |
|
$ |
( i 388.3 |
) |
|
$ |
i 16.6 |
|
|
$ |
( i 183.0 |
) |
|
|
Net |
|
|
Treasury |
|
|
|
Common |
|
|
Additional |
|
|
Treasury |
|
|
Retained |
|
|
Accumulated |
|
|
Total |
|
||||||||
|
|
(In millions) |
|
||||||||||||||||||||||||||||||
Balance, January 29, 2022 |
|
|
i 40.6 |
|
|
|
i 3.5 |
|
|
|
$ |
i 0.4 |
|
|
$ |
i 203.3 |
|
|
$ |
( i 30.8 |
) |
|
$ |
( i 24.9 |
) |
|
$ |
i 1.8 |
|
|
$ |
i 149.8 |
|
Net (loss) |
|
|
— |
|
|
|
— |
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( i 35.1 |
) |
|
|
— |
|
|
|
( i 35.1 |
) |
Other comprehensive income |
|
|
— |
|
|
|
— |
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
i 3.5 |
|
|
|
i 3.5 |
|
Dividends – $ i 0.11 per share |
|
|
— |
|
|
|
— |
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( i 4.5 |
) |
|
|
— |
|
|
|
( i 4.5 |
) |
Stock-based compensation |
|
|
— |
|
|
|
— |
|
|
|
|
— |
|
|
|
i 1.0 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
i 1.0 |
|
Exercise of stock options |
|
|
— |
|
|
|
— |
|
|
|
|
— |
|
|
|
i 0.1 |
|
|
|
i 0.3 |
|
|
|
— |
|
|
|
— |
|
|
|
i 0.4 |
|
Vesting of restricted stock units |
|
|
i 0.1 |
|
|
|
( i 0.1 |
) |
|
|
|
— |
|
|
|
( i 0.7 |
) |
|
|
i 0.6 |
|
|
|
— |
|
|
|
— |
|
|
|
( i 0.1 |
) |
Balance, April 30, 2022 |
|
|
i 40.7 |
|
|
|
i 3.4 |
|
|
|
$ |
i 0.4 |
|
|
$ |
i 203.7 |
|
|
$ |
( i 29.9 |
) |
|
$ |
( i 64.5 |
) |
|
$ |
i 5.3 |
|
|
$ |
i 115.0 |
|
Net (loss) |
|
|
— |
|
|
|
— |
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( i 56.9 |
) |
|
|
— |
|
|
|
( i 56.9 |
) |
Other comprehensive (loss) |
|
|
— |
|
|
|
— |
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( i 4.2 |
) |
|
|
( i 4.2 |
) |
Dividends – $ i 0.10 per share |
|
|
— |
|
|
|
— |
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( i 4.6 |
) |
|
|
— |
|
|
|
( i 4.6 |
) |
Stock-based compensation |
|
|
— |
|
|
|
— |
|
|
|
|
— |
|
|
|
i 1.2 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
i 1.2 |
|
Vesting of restricted stock units |
|
|
— |
|
|
|
— |
|
|
|
|
— |
|
|
|
( i 0.2 |
) |
|
|
i 0.2 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Employee stock purchase plan purchases |
|
|
i 0.1 |
|
|
|
( i 0.1 |
) |
|
|
|
— |
|
|
|
( i 0.2 |
) |
|
|
i 0.9 |
|
|
|
— |
|
|
|
— |
|
|
|
i 0.7 |
|
Balance, July 30, 2022 |
|
|
i 40.8 |
|
|
|
i 3.3 |
|
|
|
$ |
i 0.4 |
|
|
$ |
i 204.5 |
|
|
$ |
( i 28.8 |
) |
|
$ |
( i 126.0 |
) |
|
$ |
i 1.1 |
|
|
$ |
i 51.2 |
|
Net (loss) |
|
|
— |
|
|
|
— |
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( i 17.5 |
) |
|
|
— |
|
|
|
( i 17.5 |
) |
Other comprehensive income |
|
|
— |
|
|
|
— |
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
i 10.3 |
|
|
|
i 10.3 |
|
Dividends – $ i 0.11 per share |
|
|
— |
|
|
|
— |
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( i 4.6 |
) |
|
|
— |
|
|
|
( i 4.6 |
) |
Stock-based compensation |
|
|
— |
|
|
|
— |
|
|
|
|
— |
|
|
|
i 3.9 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
i 3.9 |
|
Balance, October 29, 2022 |
|
|
i 40.8 |
|
|
|
i 3.3 |
|
|
|
$ |
i 0.4 |
|
|
$ |
i 208.4 |
|
|
$ |
( i 28.8 |
) |
|
$ |
( i 148.1 |
) |
|
$ |
i 11.4 |
|
|
$ |
i 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 i 829 store locations in i 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 $ i 3.1 million and $ i 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:
|
|
|
|
|
|
|
||||||
|
|
(In millions) |
|
|||||||||
ABL Facility |
|
$ |
i 406.5 |
|
|
$ |
i 409.0 |
|
|
$ |
i 324.0 |
|
Term Loan due 2028 |
|
|
i 661.5 |
|
|
|
i 668.3 |
|
|
|
i 666.6 |
|
FILO Loan |
|
|
i 100.0 |
|
|
|
i — |
|
|
|
i — |
|
Total debt |
|
|
i 1,168.0 |
|
|
|
i 1,077.3 |
|
|
|
i 990.6 |
|
Less unamortized discount and debt costs |
|
|
( i 13.0 |
) |
|
|
( i 8.1 |
) |
|
|
( i 7.8 |
) |
Total debt, net |
|
|
i 1,155.0 |
|
|
|
i 1,069.2 |
|
|
|
i 982.8 |
|
Less current portion of debt |
|
|
( i 6.8 |
) |
|
|
( i 6.8 |
) |
|
|
( i 6.8 |
) |
Long-term debt, net |
|
$ |
i 1,148.2 |
|
|
$ |
i 1,062.4 |
|
|
$ |
i 976.0 |
|
ABL Facility
On i October 21, 2016, the Company entered into a senior secured asset based revolving credit facility (as amended from time to time, the "ABL Facility"), which originally provided for senior secured financing of up to $ i 400.0 million, subject to a borrowing base, maturing on i October 20, 2021. On November 25, 2020, the Company entered into an agreement to amend various terms of the ABL Facility, which provided for senior secured financing of up to $ i 500.0 million, subject to a borrowing base, maturing on i November 25, 2025.
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 $ i 500.0 million, subject to a borrowing base, maturing on i December 22, 2026. No changes were made to the borrowing base formula. The ABL Facility is secured by a first priority security interest in JOANN’s inventory, accounts receivable and related assets with a second priority interest in all other assets, excluding real estate. It also continues to be guaranteed by existing and future wholly-owned subsidiaries of JOANN, subject to certain exceptions.
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 i 1.00% when average historical excess capacity is less than i 33.33% of the maximum credit, i 0.75% when average historical excess capacity is greater than i 33.33% but less than i 66.67% of the maximum credit, and i 0.50% when average historical excess capacity is greater than or equal to i 66.67% of the maximum credit. Prior to March 10, 2023, under the ABL Facility, the base rate loans bore an additional margin of i 0.50% when average historical excess capacity is less than i 40.00% of the maximum credit and i 0.25% when average historical excess capacity is greater than or equal to i 40.00% of the maximum credit.
The Third Amendment also replaced the London Interbank Offered Rate ("LIBOR") as the interest rate benchmark under the credit agreement with the forward-looking term rate based on the Term Secured Overnight Financing Rate ("SOFR") as administered by the Federal Reserve Bank of New York. SOFR loans, previously Eurodollar rate loans, bear an additional margin of i 2.00% when average historical excess capacity is less than i 33.33% of the maximum credit, i 1.75% when average historical excess capacity is greater than i 33.33% but less than i 66.67% of the maximum credit, and i 1.50% when average historical excess capacity is greater than or equal to i 66.67% of the maximum credit. Eurodollar rate loans bore an additional margin of i 1.50% when average historical excess capacity is less than i 40.00% of the maximum credit and i 1.25% when average historical excess capacity is greater than or equal to i 40.00% of the maximum credit. Unused commitment fees on the ABL Facility are calculated based on a rate of i 0.20% per annum. The Company has the option to request an increase in the size of the ABL Facility up to $ i 150.0 million (for a total facility of $ i 650.0 million) in increments
8
of not less than $ i 20.0 million, provided that no default exists or would arise from the increase. However, the lenders under the ABL Facility are under no obligation to provide any such additional amounts.
As of October 28, 2023, there were $ i 406.5 million of borrowings on the ABL Facility, and the Company’s outstanding letters of credit obligation was $ i 21.4 million. As of October 28, 2023, the Company’s excess availability on the ABL Facility was $ i 72.1 million. During the third quarter of fiscal 2024, the weighted average interest rate for borrowings under the ABL Facility was i 7.65%, compared to i 4.28% for the third quarter of fiscal 2023. As of October 29, 2022, the Company had $ i 409.0 million of borrowings on the ABL Facility, and the Company’s outstanding letters of credit obligation was $ i 16.5 million. As of October 29, 2022, the Company’s excess availability on the ABL Facility was $ i 74.5 million.
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 $ i 100.0 million, the full amount of which was drawn on the Closing Date and a portion of which proceeds were used, among other things, to refinance a portion of the revolving loans drawn and outstanding under the ABL Facility immediately prior to the Closing Date. The FILO Loans are secured by a subordinate priority security to the ABL Facility interest in JOANN’s inventory, accounts receivable and related assets with a second priority interest in all other assets, excluding real estate. The FILO Loans are guaranteed by existing and future wholly-owned subsidiaries of JOANN, subject to certain exceptions.
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. i The FILO Loans are SOFR loans (as defined in the Third Amendment), that bear monthly interest at an applicable margin of 9.75% with one 100 basis point stepdown based on minimum Consolidated EBITDA (as defined in the Third Amendment), plus a one-month term SOFR rate established at the beginning of each calendar month and is subject to a SOFR floor of 1.50%.
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) i increases the applicable margin for SOFR loans to 2.00% with two twenty-five basis point step-downs based on excess availability. Revolving loans made in SOFR are subject to a credit spread adjustment of i 0.10% and a floor of i 0.00%.
Other than the changes described above, all other material provisions of the credit agreement remain unchanged and as previously disclosed.
During the third quarter of fiscal 2024, the weighted average interest rate for borrowings under the FILO Loans due 2026 was i 15.28%.
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 $ i 675 million incremental first-lien term loan credit facility with a maturity date of i July 7, 2028 (the “Term Loan due 2028”). The Term Loan due 2028 was issued at i 99.5% of face value and was used to refinance the Company’s outstanding first-lien term loan credit facility due 2023, as well as to reduce amounts borrowed under the ABL Facility and pay related fees and expenses. Amendment No. 2 reduced the applicable interest rates for Eurodollar rate loans and base rate loans from i 5.00% and i 4.00% to i 4.75% and i 3.75%, respectively, and reduced the LIBOR floor from i 1.00% to i 0.75%. In May 2023, the Company entered into the Amendment No. 3 ("Amendment No. 3") to the credit agreement. Amendment No. 3 replaced the LIBOR reference rate with SOFR. Other than the changes described above, all other material provisions of the credit agreement remain unchanged. During the third quarter of fiscal 2024, the weighted average interest rate for borrowings under the Term Loan due 2028 was i 10.51% compared to i 7.69% during the third quarter of fiscal 2023. During the third quarter of fiscal 2024, the first interest rate swap benefit was received. After netting the swap with the term loan interest, the weighted average interest rate for the borrowing under the Term Loan due 2028 was i 9.65%.
Covenants
i The covenants contained in the credit agreements restrict JOANN’s ability to pay dividends or make other distributions; accordingly, any dividends may only be paid in accordance with such covenants. Among other restrictions, the credit agreements permit the public parent company to pay dividends on its common stock in amounts not to exceed the greater of i 6% per annum of the net proceeds received by, or contributed to Jo-Ann Stores, LLC from any such public offering of common stock of Jo-Ann Stores, LLC or its direct or indirect parent company, or i 7% of Market Capitalization (as defined in the credit agreements). So long as there is no event /
9
of default, the credit agreements also allow dividends in amounts up to $ i 100 million, which amount can increase if certain other conditions are satisfied, including if JOANN’s leverage does not exceed certain thresholds. Additionally, the ABL Facility allows for unlimited dividends, so long as there is no event of default and the Company’s excess availability after giving pro forma effect for the thirty-day period immediately preceding such payment shall be greater than (a) the greater of i 12.5% of the maximum credit and $ i 40 million and the consolidated fixed charge coverage ratio shall be greater than or equal to i 1.0 to i 1.0 or (b) i 17.5% of the maximum credit calculated. At October 28, 2023, the Company was in compliance with all covenants under its credit agreements.
For further details on the Company’s debt, see Note 2 to the Consolidated Financial Statements in the Company’s Annual Report on Form 10-K for the year ended January 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 $ i 200 million notional value with an effective date of i October 26, 2023 and a maturity date of i October 26, 2025. Beginning in January 2024, the Company receives 1-month, 3-month or 6-month LIBOR, at the Company's election, subject to a i 0.75% floor, and pays a fixed rate of interest of i 1.44% per annum on a quarterly basis. In connection with the execution of the interest rate swap agreement, no cash was exchanged between the Company and the counterparty. In June 2023, an amendment replaced LIBOR as the floating rate option under the swap agreement with the forward-looking term rate based on SOFR. The fair value of the interest rate swap as of October 28, 2023 was $ i 13.8 million.
In May 2022, the Company entered into a second interest rate swap agreement with U.S. Bank N.A., which has a $ i 250 million notional value with an effective date of i July 26, 2023 and a maturity date of i January 26, 2026. Beginning in October 2023, the Company receives 1-month, 3-month or 6-month LIBOR, at the Company's election, subject to a i 0.75% floor, and pays a fixed rate of interest of i 3.37% per annum on a quarterly basis. In connection with the execution of the interest rate swap agreement, no cash was exchanged between the Company and the counterparty. In June 2023, an amendment replaced LIBOR as the floating rate option under the swap agreement with the forward-looking term rate based on SOFR. The fair value of the interest rate swap as of October 28, 2023 was $ i 8.6 million.
All of the Company's derivative financial instruments are eligible for netting arrangements that allow the Company and its counterparties to net settle amounts owed to each other. Derivative assets and liabilities that can be net settled under these arrangements have been presented in the Company's Consolidated Balance Sheet on a net basis. As of October 28, 2023, none of the netting arrangements involved collateral. The net fair value of the interest rate swaps as of October 28, 2023 was $ i 22.4 million.
The Company designated its interest rate swaps as cash flow hedges and structured them to be highly effective. Unrealized gains and losses related to the fair value of the interest rate swaps are recorded to accumulated other comprehensive income (loss), net of tax. In the event of early termination of the interest rate swaps, the Company will receive from or pay to the counterparty the fair value of the interest rate swap agreements, and the unrealized gain or loss outstanding will be recognized in earnings.
The impacts of the Company’s derivative instruments on the accompanying Consolidated Statements of Comprehensive Income (Loss) for the thirteen and thirty-nine weeks ended October 28, 2023 and October 29, 2022 are presented in the table below:
|
|
Thirteen Weeks Ended |
|
|
Thirty-Nine Weeks Ended |
|
||||||||||
|
|
|
|
|
|
|
|
|
||||||||
|
|
(In millions) |
|
|||||||||||||
Interest rate swap - $200M notional amount |
|
$ |
i 1.2 |
|
|
$ |
i 5.4 |
|
|
$ |
i 5.3 |
|
|
$ |
i 7.7 |
|
Interest rate swap - $250M notional amount |
|
|
i 0.4 |
|
|
|
i 8.5 |
|
|
|
i 6.0 |
|
|
|
i 5.3 |
|
Gain recognized in other comprehensive income (loss), gross of income taxes |
|
$ |
i 1.6 |
|
|
$ |
i 13.9 |
|
|
$ |
i 11.3 |
|
|
$ |
i 13.0 |
|
10
The components of interest expense, including the amount of gains and losses on derivative instruments and related hedged items, as reported on the Consolidated Statements of Comprehensive Income (Loss) for the thirteen and thirty-nine weeks ended October 28, 2023 and October 29, 2022 are presented in the table below:
|
|
Thirteen Weeks Ended |
|
|
Thirty-Nine Weeks Ended |
|
||||||||||
|
|
|
|
|
|
|
|
|
||||||||
|
|
(In millions) |
|
|||||||||||||
Interest expense on debt |
|
$ |
i 29.8 |
|
|
$ |
i 18.1 |
|
|
$ |
i 81.9 |
|
|
$ |
i 42.5 |
|
Interest (income) of derivatives |
|
|
( i 1.4 |
) |
|
|
i — |
|
|
|
( i 1.4 |
) |
|
|
i — |
|
Interest expense on debt and derivatives |
|
$ |
i 28.4 |
|
|
$ |
i 18.1 |
|
|
$ |
i 80.5 |
|
|
$ |
i 42.5 |
|
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. i The carrying and fair value of the Company’s interest rate derivatives were as follows:
Instrument |
|
Balance Sheet Location |
|
|
|
|
||||
|
|
|
|
(In millions) |
|
|||||
Interest rate swaps - current |
|
Prepaid expenses and other current assets |
|
$ |
i 12.9 |
|
|
$ |
i 1.0 |
|
Interest rate swaps - long-term |
|
Other assets |
|
$ |
i 9.5 |
|
|
$ |
i 14.4 |
|
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. i The following provides the carrying and fair value of the Company’s Term Loan due 2028 as of October 28, 2023 and October 29, 2022:
|
|
|
|
|
||||||||||||
|
|
Carrying |
|
|
Fair |
|
|
Carrying |
|
|
Fair |
|
||||
|
|
(In millions) |
|
|||||||||||||
Term Loan due 2028 (a) |
|
$ |
i 654.5 |
|
|
$ |
i 189.8 |
|
|
$ |
i 660.2 |
|
|
$ |
i 439.9 |
|
11
Certain assets and liabilities are measured at fair value on a nonrecurring basis; that is, the assets and liabilities are not measured at fair value on an ongoing basis but are subject to fair value adjustments in certain circumstances (e.g., when there is evidence of impairment). The fair values are determined based on either a market approach, an income approach, in which the Company utilizes internal cash flow projections over the life of the underlying assets discounted using a discount rate that is considered to be commensurate with the risk inherent in the Company’s current business model, or a combination of both. These measures of fair value and related inputs are considered a Level 3 approach under the fair value hierarchy.
The Company uses the end of the period when determining the timing of transfers between levels. There were no transfers between levels during the periods presented.
/Note 5—Goodwill and Other Intangible Assets
The carrying amount of goodwill at October 28, 2023 and October 29, 2022 was as follows:
|
|
|
|
|
||||
|
|
(In millions) |
|
|||||
Goodwill, gross |
|
$ |
i 643.8 |
|
|
$ |
i 643.8 |
|
Accumulated impairment |
|
|
( i 481.8 |
) |
|
|
( i 481.8 |
) |
Goodwill, net |
|
$ |
i 162.0 |
|
|
$ |
i 162.0 |
|
The carrying amount and accumulated amortization of identifiable intangible assets at October 28, 2023 and October 29, 2022 was as follows:
|
|
|
|
|
|
|
||||||||||||
|
|
Estimated |
|
Gross |
|
|
Accumulated |
|
|
Gross |
|
|
Accumulated |
|
||||
|
|
|
|
(In millions) |
|
|||||||||||||
Indefinite-lived intangible assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
JOANN trade name |
|
— |
|
$ |
i 230.0 |
|
|
$ |
— |
|
|
$ |
i 325.0 |
|
|
$ |
i — |
|
Joann.com domain name |
|
— |
|
|
i 10.0 |
|
|
|
— |
|
|
|
i 10.0 |
|
|
|
i — |
|
Intangible assets subject to amortization: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Creativebug trade name |
|
i 10 |
|
|
i 0.1 |
|
|
|
( i 0.1 |
) |
|
|
i 0.1 |
|
|
|
( i 0.1 |
) |
Technology |
|
i 3 |
|
|
i 5.3 |
|
|
|
( i 4.6 |
) |
|
|
i 5.3 |
|
|
|
( i 1.2 |
) |
Customer relationships |
|
i 16 |
|
|
i 110.0 |
|
|
|
( i 86.7 |
) |
|
|
i 110.0 |
|
|
|
( i 79.8 |
) |
Total intangible assets |
|
|
|
$ |
i 355.4 |
|
|
$ |
( i 91.4 |
) |
|
$ |
i 450.4 |
|
|
$ |
( i 81.1 |
) |
The Company recognized intangible asset amortization of $ i 2.2 million and $ i 6.5 million for the thirteen and thirty-nine weeks ended October 28, 2023, respectively. Additionally, the Company recognized impairment of intangible assets, related to Technology, of $ i i 1.7 / million during the thirteen and thirty-nine weeks ended October 28, 2023. The Company recognized intangible asset amortization of $ i 2.1 million and $ i 6.3 million for the thirteen and thirty-nine weeks ended October 29, 2022, respectively. The weighted average amortization period of amortizable intangible assets as of October 28, 2023 approximated i 3.3 years.
/Note 6—Income Taxes
Effective Tax Rate
The effective income tax rate for the third quarter of fiscal 2024 was i 34.4%, an income tax benefit on a pre-tax book loss, compared to the rate for the third quarter of fiscal 2023, which was i 27.1%, also an income tax benefit on a pre-tax book loss. The effective income tax rate for the first thirty-nine weeks of fiscal 2024 was i 17.3%, an income tax benefit on a pre-tax book loss, compared to i 27.7%, also an income tax benefit on a pre-tax book loss, for the first thirty-nine weeks of fiscal 2023. The effective tax rate increased from the third quarter of fiscal 2023 to the third quarter of fiscal 2024 primarily because the Company, after considering updated information, including the filing of the fiscal 2023 federal income tax return, reduced the forecasted valuation allowance against a significant portion of the deferred tax asset relating to the disallowed interest expense deduction and related carryover under Section 163(j) of the Internal Revenue Code of 1986 (“the Code”), as amended, along with related state law. The decrease in the effective tax rate from the first thirty-nine weeks of fiscal 2023 to the first thirty-nine weeks of fiscal 2024 was 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
12
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 both the third quarter and first thirty-nine weeks 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 third quarter of fiscal 2024, unrecognized tax benefits were $ i 1.0 million, of which $ i 0.8 million would affect the effective tax rate, if recognized. The Company records interest and penalties on uncertain tax positions as a component of the income tax provision. The total amount of interest and penalties accrued at the end of the third quarter of both fiscal 2024 and fiscal 2023 was $ i i 0.1 / million. Within the next 12 months, it is reasonably possible that uncertain tax positions could be reduced by approximately $ i 0.1 million resulting from resolution or closure of tax examinations. Any increase in the amount of uncertain tax positions within the next 12 months is expected to be insignificant.
/Note 7—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 thirty-nine weeks ended October 28, 2023 and October 29, 2022:
|
|
Thirteen Weeks Ended |
|
|
Thirty-Nine Weeks Ended |
|
||||||||||
|
|
|
|
|
|
|
|
|
||||||||
|
|
(In millions except per share data) |
|
|||||||||||||
Net (loss) |
|
$ |
( i 21.6 |
) |
|
$ |
( i 17.5 |
) |
|
$ |
( i 149.1 |
) |
|
$ |
( i 109.5 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Weighted-average common shares outstanding – basic |
|
|
i 42.2 |
|
|
|
i 40.8 |
|
|
|
i 41.8 |
|
|
|
i 40.7 |
|
Effect of dilutive stock-based awards |
|
|
i — |
|
|
|
i — |
|
|
|
i — |
|
|
|
i — |
|
Weighted-average common shares outstanding – diluted |
|
|
i 42.2 |
|
|
|
i 40.8 |
|
|
|
i 41.8 |
|
|
|
i 40.7 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Basic (loss) per common share |
|
$ |
( i 0.51 |
) |
|
$ |
( i 0.43 |
) |
|
$ |
( i 3.57 |
) |
|
$ |
( i 2.69 |
) |
Diluted (loss) per common share |
|
$ |
( i 0.51 |
) |
|
$ |
( i 0.43 |
) |
|
$ |
( i 3.57 |
) |
|
$ |
( i 2.69 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Antidilutive stock-based awards excluded from diluted calculation |
|
|
i 9.9 |
|
|
|
i 4.5 |
|
|
|
i 9.2 |
|
|
|
i 4.5 |
|
Note 8—Segments and Disaggregated Revenue
The Company conducts its business activities and reports financial results as i one operating segment and i one reportable segment, which includes the Company’s store locations and integrated omni-channel operations. Due to its integrated omni-channel strategy, the Company views omni-channel sales as an extension of its physical store locations. The presentation of financial results as one reportable segment is consistent with the way the Company operates its business and is consistent with the manner in which the Chief Operating Decision Maker (“CODM”) makes decisions about allocating resources and assessing performance. The role of CODM is performed by the Office of the Chief Executive Officer. Furthermore, the Company notes that monitoring financial results as one reportable segment helps the CODM manage costs on a consolidated basis, consistent with the integrated nature of its operations.
13
The following table shows revenue by product category:
|
|
Thirteen Weeks Ended |
|
|
Thirty-Nine Weeks Ended |
|
||||||||||
|
|
|
|
|
|
|
|
|
||||||||
|
|
(In millions) |
|
|||||||||||||
Sewing |
|
$ |
i 260.7 |
|
|
$ |
i 266.5 |
|
|
$ |
i 706.0 |
|
|
$ |
i 725.1 |
|
Arts and Crafts and Home Décor |
|
|
i 273.3 |
|
|
|
i 288.5 |
|
|
|
i 743.7 |
|
|
|
i 774.9 |
|
Other |
|
|
i 5.8 |
|
|
|
i 7.8 |
|
|
|
i 22.0 |
|
|
|
i 24.1 |
|
Total |
|
$ |
i 539.8 |
|
|
$ |
i 562.8 |
|
|
$ |
i 1,471.7 |
|
|
$ |
i 1,524.1 |
|
Note 9—Commitments and Contingencies
The Company is involved in various litigation matters in the ordinary course of its business. The Company is not currently involved in any litigation that it expects, either individually or in the aggregate, will have a material adverse effect on its financial condition or results of operations.
Note 10—Gain on Sale Leaseback
During the third quarter of fiscal 2024, the Company completed a sale and leaseback transaction for its Hudson Facility for a sale price of $ i 34.5 million. The transaction qualified as a completed sale under the sale leaseback accounting requirements and the Company recorded a gain of $ i 12.1 million. The cash proceeds from the sale, before income taxes and net of transaction fees, were $ i 33.2 million. Net after tax proceeds from the sale will be used to invest in assets for the business. The lease related to this transaction is classified as an operating lease and has an initial lease term of i 5 years and three i 5-year extension options.
/14
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
This discussion and analysis should be read in conjunction with the unaudited Consolidated Financial Statements and the related notes thereto included elsewhere in this Quarterly Report on Form 10-Q and the audited Consolidated Financial Statements and the related notes thereto and the Management’s Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K for the fiscal year ended January 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 October 28, 2023 and October 29, 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 October 28, 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.
15
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, gain on sale leaseback, 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, intangible asset impairment, gains and losses from equity method investments, non-recurring employee-related costs 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.
16
The following is a reconciliation of our net (loss) to Adjusted EBITDA for the periods presented:
|
|
Thirteen Weeks Ended |
|
|
Thirty-Nine Weeks Ended |
|
||||||||||
(In millions) |
|
|
|
|
|
|
|
|
||||||||
Net (loss) |
|
$ |
(21.6 |
) |
|
$ |
(17.5 |
) |
|
$ |
(149.1 |
) |
|
$ |
(109.5 |
) |
Income tax (benefit) |
|
|
(10.9 |
) |
|
|
(6.5 |
) |
|
|
(30.2 |
) |
|
|
(41.9 |
) |
Interest expense, net |
|
|
28.4 |
|
|
|
18.1 |
|
|
|
80.5 |
|
|
|
42.5 |
|
Depreciation and amortization |
|
|
22.4 |
|
|
|
19.9 |
|
|
|
61.6 |
|
|
|
59.9 |
|
Other amortization (1) |
|
|
1.9 |
|
|
|
0.4 |
|
|
|
3.6 |
|
|
|
1.2 |
|
Investment remeasurement (2) |
|
|
— |
|
|
|
(2.0 |
) |
|
|
— |
|
|
|
(1.0 |
) |
Gain on sale leaseback (3) |
|
|
(12.1 |
) |
|
|
— |
|
|
|
(12.1 |
) |
|
|
— |
|
Strategic initiatives (4) |
|
|
6.5 |
|
|
|
0.9 |
|
|
|
16.4 |
|
|
|
4.6 |
|
Excess import freight costs (5) |
|
|
— |
|
|
|
18.5 |
|
|
|
4.2 |
|
|
|
74.5 |
|
Technology development expense (6) |
|
|
2.0 |
|
|
|
2.0 |
|
|
|
5.6 |
|
|
|
7.0 |
|
Stock-based compensation expense |
|
|
(0.2 |
) |
|
|
3.9 |
|
|
|
6.6 |
|
|
|
6.1 |
|
Loss on disposal and impairment of fixed and operating lease assets |
|
|
9.3 |
|
|
|
— |
|
|
|
12.7 |
|
|
|
1.1 |
|
Intangible asset impairment (7) |
|
|
1.7 |
|
|
|
— |
|
|
|
1.7 |
|
|
|
— |
|
Loss from equity method investments |
|
|
0.8 |
|
|
|
— |
|
|
|
4.5 |
|
|
|
— |
|
Non-recurring employee-related costs (8) |
|
|
7.2 |
|
|
|
0.9 |
|
|
|
10.7 |
|
|
|
1.7 |
|
Other (9) |
|
|
2.1 |
|
|
|
1.6 |
|
|
|
2.4 |
|
|
|
3.7 |
|
Adjusted EBITDA |
|
$ |
37.5 |
|
|
$ |
40.2 |
|
|
$ |
19.1 |
|
|
$ |
49.9 |
|
17
Results of Operations
The following tables summarize key components of our results of operations for the periods indicated. The following discussion should be read in conjunction with our Consolidated Financial Statements and related notes.
Consolidated Income Data:
|
|
Thirteen Weeks Ended |
|
|
Thirty-Nine Weeks Ended |
|
||||||||||
(In millions) |
|
|
|
|
|
|
|
|
||||||||
Net sales |
|
$ |
539.8 |
|
|
$ |
562.8 |
|
|
$ |
1,471.7 |
|
|
$ |
1,524.1 |
|
Gross profit |
|
|
282.1 |
|
|
|
281.0 |
|
|
|
763.1 |
|
|
|
736.6 |
|
SG&A expenses |
|
|
273.4 |
|
|
|
269.0 |
|
|
|
806.2 |
|
|
|
786.6 |
|
Operating (loss) |
|
|
(15.4 |
) |
|
|
(7.9 |
) |
|
|
(106.4 |
) |
|
|
(109.9 |
) |
Net (loss) |
|
|
(21.6 |
) |
|
|
(17.5 |
) |
|
|
(149.1 |
) |
|
|
(109.5 |
) |
Other Operational Data:
|
|
Thirteen Weeks Ended |
|
|
Thirty-Nine Weeks Ended |
|
||||||||||
(In millions) |
|
|
|
|
|
|
|
|
||||||||
Total (decrease) in comparable sales vs. prior year |
|
|
(4.1 |
)% |
|
|
(8.0 |
)% |
|
|
(3.5 |
)% |
|
|
(9.2 |
)% |
Gross margin |
|
|
52.3 |
% |
|
|
49.9 |
% |
|
|
51.9 |
% |
|
|
48.3 |
% |
SG&A expenses as a % of net sales |
|
|
50.6 |
% |
|
|
47.8 |
% |
|
|
54.8 |
% |
|
|
51.6 |
% |
Operating (loss) as a % of net sales |
|
|
(2.9 |
)% |
|
|
(1.4 |
)% |
|
|
(7.2 |
)% |
|
|
(7.2 |
)% |
Adjusted EBITDA (1) |
|
$ |
37.5 |
|
|
$ |
40.2 |
|
|
$ |
19.1 |
|
|
$ |
49.9 |
|
Adjusted EBITDA as a % of net sales |
|
|
6.9 |
% |
|
|
7.1 |
% |
|
|
1.3 |
% |
|
|
3.3 |
% |
Total store location count at end of period |
|
|
829 |
|
|
|
840 |
|
|
|
829 |
|
|
|
840 |
|
Comparison of the Thirteen Weeks ended October 28, 2023 and October 29, 2022
Net Sales
Net sales were $539.8 million for the thirteen weeks ended October 28, 2023, a decrease of $23.0 million or 4.1% compared to the same period in fiscal 2023. Total comparable sales for the thirteen weeks ended October 28, 2023 decreased 4.1% compared with a total comparable sales decrease of 8.0% in the same period in fiscal 2023. The total comparable sales decline was driven by a decrease in average ticket and transaction volume. On a category basis, net sales declines were most pronounced in our non-Halloween seasonal and craft technology businesses. Declines in our non-Halloween seasonal businesses were driven by strategic inventory receipt pullbacks in higher risk categories. In addition, the pull forward and earlier set of Halloween merchandise in the second quarter had an adverse timing impact on third quarter sales results. These unfavorable drivers were partially offset by positive results in our needle arts, fleece, and sewing technology businesses.
Gross Profit
Gross profit was $282.1 million for the thirteen weeks ended October 28, 2023, an increase of $1.1 million or 0.4% compared to the same period in fiscal 2023. Gross margin was 52.3% for the thirteen weeks ended October 28, 2023, an increase of 240 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, favorable product category mix due to strength in our core Sewing categories, and improved clearance activity. These favorable drivers were partially offset by the flowthrough of inflationary product cost increases, lower overall pricing driven by actions taken to optimize and rightsize average unit retail levels, increased shipping costs associated with growth in our e-commerce business and lower vendor allowances.
Selling, General and Administrative Expenses
SG&A expenses were $273.4 million for the thirteen weeks ended October 28, 2023, an increase of $4.4 million or 1.6% compared to the same period in fiscal 2023. This increase was primarily driven by severance and other up-front costs to implement our cost
18
reduction initiatives and asset impairment and disposal expenses, which we do not expect to continue at the same rate in future periods. Additionally, there were increases due to inflationary pressures on labor and other costs as well as increased general insurance and medical benefit expenses. These increases were partially offset by improved operating efficiencies, including savings generated through our new store labor operating model as well as optimized corporate headcount, favorable incentive and stock-based compensation activity, and lower store pre-opening and closing costs due to fewer store projects.
As a percentage of net sales, SG&A expenses for the thirteen weeks ended October 28, 2023 were 50.6%, an increase of 280 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 4.1% decrease in net sales in the third quarter of fiscal 2024 compared to the third quarter of fiscal 2023.
Interest Expense
Interest expense for the thirteen weeks ended October 28, 2023 was $28.4 million, an increase of $10.3 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 third quarter of fiscal 2024 compared to the same period in fiscal 2023. The average debt level in the thirteen weeks ended October 28, 2023 was $1,144.6 million compared to $1,071.2 million in the thirteen weeks ended October 29, 2022. The weighted average interest rate, net of hedging instruments was 9.47% for the thirteen weeks ended October 28, 2023. The weighted average interest rate, excluding hedging instruments, was 9.97% and 6.41% for the thirteen weeks ended October 28, 2023 and October 29, 2022, respectively.
We had $1,168.0 million of debt outstanding (face value) as of October 28, 2023, compared to $1,077.3 million as of October 29, 2022.
Income Taxes
The effective income tax rate for the third quarter of fiscal 2024 was 34.4%, an income tax benefit on a pre-tax book loss, compared to the rate for the third quarter of fiscal 2023, which was 27.1%, also an income tax benefit on a pre-tax book loss. The effective tax rate increased from the third quarter of fiscal 2023 to the third quarter of fiscal 2024 primarily because the Company, after considering updated information, including the filing of the fiscal 2023 federal income tax return, reduced the forecasted valuation allowance against a significant portion of the deferred tax asset relating to the disallowed interest expense deduction and related carryover under Section 163(j) of the Code, along with related state law. As the anticipated 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 third quarter of fiscal 2024.
Net Loss
Net loss was $21.6 million for the thirteen weeks ended October 28, 2023, compared to net loss of $17.5 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 $37.5 million for the thirteen weeks ended October 28, 2023 compared to $40.2 million for the same period in fiscal 2023. The decrease was driven by the factors described above.
Comparison of the Thirty-Nine Weeks ended October 28, 2023 and October 29, 2022
Net Sales
Net sales were $1,471.7 million for the thirty-nine weeks ended October 28, 2023, a decline of $52.4 million or 3.4% compared to the same period in fiscal 2023. Total comparable sales for the thirty-nine weeks ended October 28, 2023 decreased 3.5% compared with a total comparable sales decrease of 9.2% in the same period in fiscal 2023. The total comparable sales decline was driven by a decrease in average ticket and transaction volume. On a category basis, net sales declines were most pronounced in our non-Halloween seasonal and craft technology businesses. Declines in our non-Halloween seasonal businesses were driven by strategic inventory receipt pullbacks in higher risk categories. These unfavorable drivers were partially offset by positive results in our needle arts, fleece, and Halloween merchandise businesses.
19
Gross Profit
Gross profit was $763.1 million for the thirty-nine weeks ended October 28, 2023, an increase of $26.5 million or 3.6% compared to the same period in fiscal 2023. Gross margin was 51.9% for the thirty-nine weeks ended October 28, 2023, an increase of 360 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, as well as favorable product category mix due to strength in our core Sewing categories. These favorable drivers were partially offset by the flowthrough of inflationary product cost increases.
Selling, General and Administrative Expenses
SG&A expenses were $806.2 million for the thirty-nine weeks ended October 28, 2023, an increase of $19.6 million or 2.5% compared to the same period in fiscal 2023. This increase was primarily driven by severance and other up-front costs to implement our cost reduction initiatives, inflationary pressures on labor and other costs, asset impairment and disposal expenses, increased general insurance expenses, and higher incentive and stock-based compensation costs. These increases were partially offset by improved operating efficiencies, including savings generated through our new store labor operating model as well as optimized corporate headcount and marketing spend, lower store pre-opening and closing costs due to fewer store projects, and lower medical benefit costs.
As a percentage of net sales, SG&A expenses for the thirty-nine weeks ended October 28, 2023, were 54.8%, an increase of 320 basis points compared to the same period in fiscal 2023. This increase was driven by the factors listed above as well as the 3.4% decrease in net sales in the first thirty-nine weeks of fiscal 2024 compared to the same period in fiscal 2023.
Interest Expense
Interest expense for the thirty-nine weeks ended October 28, 2023 was $80.5 million, an increase of $38.0 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 thirty-nine weeks of fiscal 2024. The average debt level in the thirty-nine weeks ended October 28, 2023 was $1,094.1 million compared to $981.5 million in the thirty-nine weeks ended October 29, 2022. The weighted average interest rate, net of hedging instruments was 9.34% for the thirty-nine weeks ended October 28, 2023. The weighted average interest rate, excluding hedging instruments, was 9.52% and 5.40% for the thirty-nine weeks ended October 28, 2023 and October 29, 2022, respectively.
We had $1,168.0 million of debt outstanding (face value) as of October 28, 2023 compared to $1,077.3 million as of October 29, 2022.
Income Taxes
The effective income tax rate for the first thirty-nine weeks of fiscal 2024 was 17.3%, which was an income tax benefit on a pre-tax book loss, compared to 27.7% for the first thirty-nine weeks of fiscal 2023, also an income tax benefit on a pre-tax book loss. The effective tax rate decreased from the first thirty-nine weeks of fiscal 2023 to the first thirty-nine weeks 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 thirty-nine weeks of fiscal 2024.
Net Loss
Net loss was $149.1 million for the thirty-nine weeks ended October 28, 2023, an increase of $39.6 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 61.7% to $19.1 million or 1.3% of net sales for the thirty-nine weeks ended October 28, 2023 compared to $49.9 million or 3.3% of net sales for the same period in fiscal 2023. Our decrease in Adjusted EBITDA of $30.8 million and decline of Adjusted EBITDA as a percentage of net sales of 200 basis points was driven primarily by lower total comparable sales in addition to an increase in our SG&A expenses.
20
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 may seek to obtain alternative sources of financing and working capital, including, among other sources, through the issuance of equity, incurrence of debt, utilization of trade credit, sale of assets or securitization of receivables. Any issuance of equity or debt may be for cash or in exchange for our outstanding securities or indebtedness. 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 anticipated working capital, capital expenditure and debt service requirement needs for the next twelve months. However, we may be required to obtain additional financing in the future, and subject to market conditions, we may from time to time seek to amend, refinance, restructure or repurchase our outstanding indebtedness and/or raise additional equity financing. Any debt we incur in the future may have terms (including cash interest rate, financial covenants, and covenants limiting our operating flexibility or ability to obtain additional financings) that are not favorable to us, and any such additional equity financing may dilute the economic and/or voting interests of our existing stockholders, may be preferred in right of payment to our outstanding common stock or confer other privileges to the holders, and may contain financial or operational covenants that restrict our operating flexibility or ability to obtain additional financings. Furthermore, our failure to obtain any necessary financing could have a material and adverse effect on our results of operations, cash flows, financial condition and liquidity. See Part II. Item 1A “Risk Factors” of this Quarterly Report on Form 10-Q set forth below. As of October 28, 2023, we were in compliance with all covenants under our debt facilities.
For the four quarters ended October 28, 2023, our ratio of consolidated net debt to Credit Facility Adjusted EBITDA, which is calculated in accordance with our credit facilities, was 5.68 to 1.0, and our ratio of consolidated senior secured net debt to Credit Facility Adjusted EBITDA was 5.68 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 thirty-nine weeks ended October 28, 2023 and October 29, 2022:
|
|
Thirty-Nine Weeks Ended |
|
|||||
(In millions) |
|
|
|
|
||||
Net cash (used for) operating activities |
|
$ |
(150.9 |
) |
|
$ |
(173.6 |
) |
Net cash (used for) investing activities |
|
|
(4.5 |
) |
|
|
(84.7 |
) |
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 |
|
Net Cash Used for Operating Activities
Net cash used for operating activities was $150.9 million in the thirty-nine weeks ended October 28, 2023, compared to $173.6 million of net cash used for operating activities in the thirty-nine weeks ended October 29, 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.
21
Net Cash Used for Investing Activities
Cash used for investing activities in the first thirty-nine 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 e-commerce and 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.
Capital expenditures for the thirty-nine weeks ended October 28, 2023 and October 29, 2022 are summarized as follows:
|
|
Thirty-Nine Weeks Ended |
|
|||||
(In millions) |
|
|
|
|
||||
Store locations |
|
$ |
29.8 |
|
|
$ |
67.5 |
|
Distribution centers |
|
|
3.6 |
|
|
|
3.6 |
|
Information technology |
|
|
2.5 |
|
|
|
8.5 |
|
Other |
|
|
0.2 |
|
|
|
0.8 |
|
Total capital expenditures |
|
|
36.1 |
|
|
|
80.4 |
|
Landlord contributions |
|
|
(9.7 |
) |
|
|
(13.8 |
) |
Total capital expenditures, net of landlord contributions |
|
$ |
26.4 |
|
|
$ |
66.6 |
|
During the first thirty-nine weeks of fiscal 2023, we purchased the remaining outstanding stock of WeaveUp for $4.3 million. We had no such activity during the first thirty-nine weeks of fiscal 2024.
Net Cash Provided by Financing Activities
Net cash provided by financing activities was $163.5 million during the thirty-nine weeks ended October 28, 2023 compared with $263.4 million of net cash provided by financing activities in the same period in fiscal 2023.
Net cash provided by financing activities for the first thirty-nine 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 principal payments on finance lease obligations and our Term Loan Due 2028. As of October 28, 2023, we had the ability to borrow an additional $72.1 million under the ABL Facility subject to the facility’s borrowing base calculation.
Net cash provided by financing activities for the first thirty-nine weeks of fiscal 2023 was the result of net borrowings on our ABL Facility. This inflow of cash was partially offset by dividend payments as well as principal payments on finance lease obligations and our Term Loan Due 2028.
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.
22
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 October 28, 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, 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.
23
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
See Part II, Item 7A “Quantitative and Qualitative Disclosures About Market Risk” in our Annual Report on Form 10-K for the fiscal year ended January 28, 2023. During the thirty-nine weeks ended October 28, 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 October 28, 2023. Based on that evaluation, our principal executive officer and Chief Financial Officer have concluded that, as of October 28, 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 thirty-nine weeks ended October 28, 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.
24
PART II—OTHER INFORMATION
Item 1. Legal Proceedings.
The information required to be set forth under this heading is incorporated by reference from Note 9, Commitments and Contingencies, to the Consolidated Financial Statements included in Part I, Item 1.
Item 1A. Risk Factors.
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 and Part I, Item 1A “Risk Factors” in our Quarterly Report on Form 10-Q for the quarterly period ended July 29, 2023.
We may require additional capital to meet our financial obligations and support business growth, and this capital may not be available on acceptable terms or at all.
Based on our current plans and market conditions, we believe that our cash and cash equivalents on hand, cash flows generated from our operations and borrowing capacity under our credit facilities will be sufficient to satisfy our anticipated working capital, capital expenditure and debt service requirement needs for the next twelve months. However, we may be required to obtain additional financing in the future to address our liquidity needs, and subject to market conditions, we may from time to time seek to amend, refinance, restructure or repurchase our outstanding debt and/or raise additional equity financing to support our business and may require additional funds to respond to business challenges. If we raise additional funds through future issuances of equity, convertible debt or other equity-linked securities such as warrants, our existing shareholders could suffer significant dilution, and any new equity or equity-linked securities we issue could have rights, preferences and privileges superior to those of holders of our common stock. In addition, any debt financing we secure in the future could require an increase in our aggregate interest expense and include restrictive financial or operational covenants relating to our capital raising activities and other financial and operational matters, which may make it more difficult for us to obtain additional capital and to pursue business opportunities. We may not be able to obtain additional debt or equity financing on terms favorable to us or at all. If we are unable to obtain adequate financing or financing on terms satisfactory to us when we require it, our ability to continue to support our business and to respond to business challenges could be significantly impaired, and our business may be harmed. Furthermore, our failure to obtain any necessary financing could have a material and adverse effect on our results of operations, cash flows, financial condition and liquidity.
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 adversely affect the price of our common stock, reduce our ability to raise additional capital and make it more difficult for holders of our common stock to sell their shares.
Our common stock is currently listed on the Nasdaq Global Market. The Nasdaq Stock Market LLC ("Nasdaq") has established certain quantitative criteria and qualitative standards that companies must meet to remain listed for trading on Nasdaq, and we are therefore subject to Nasdaq’s continued listing requirements, including requirements with respect to the market value of publicly-held shares, market value of listed shares, minimum bid price per share, and minimum stockholder’s equity, among others.
On July 20, 2023, the Company received a written notice (the “Market Value Notice”) from the Listing Qualifications Department of 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 (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 July 20, 2023, the Company received a second written notice (the “Publicly Held Market Value Notice”) 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 (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. Such notices provided that the Company has a period of 180 calendar days, or until January 16, 2024, to regain compliance under the Market Value Standard and the Publicly Held Market Value Standard, respectively. In addition, on October 19, 2023, the Company received a written notice (the “Bid Price Notice” and, collectively with the Market Value Notice and the Publicly Held 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 closing bid price of $1.00 per share (the “Bid Price Requirement”), because the closing bid price of the Company’s common stock was below $1.00 per share for 30 consecutive business days. The Bid Price Notice provided that the Company has a period of 180 calendar days, or until April 16, 2024, to regain compliance under the Bid Price Requirement. The Notices do not impact the listing of the common stock on The Nasdaq Global Market at this time.
25
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, and if otherwise eligible to transfer, apply for a transfer to The Nasdaq Capital Market. 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 continued listing standards of the Nasdaq Global Market, be eligible to transfer to the Nasdaq Capital Market, or maintain compliance with the continued listing standards of the Nasdaq Capital Market. Any delisting of our common stock from Nasdaq could adversely affect the price of our common stock, reduce our ability to raise additional capital and make it more difficult for holders of our common stock to sell their shares. Furthermore, if our common stock were delisted from Nasdaq it could adversely affect our reputation 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, Use of Proceeds and Issuer Purchases of Equity Securities.
None.
Item 3. Defaults Upon Senior Securities.
None.
Item 4. Mine Safety Disclosures.
Not applicable.
Item 5. Other Information.
During the Company’s fiscal quarter ended October 28, 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).
26
Item 6. Exhibits.
Exhibit Number |
|
Description |
|
|
|
10.1#* |
|
|
10.2#* |
|
|
10.3#* |
|
General Release, dated September 13, 2023, by and between JOANN Inc. and Thomas Dryer. |
10.4#* |
|
|
31.1* |
|
|
31.2* |
|
|
32.1** |
|
|
32.2** |
|
|
101.INS |
|
Inline XBRL Instance Document – the instance document does not appear in the Interactive Data File because XBRL tags are embedded within the Inline XBRL document. |
101.SCH |
|
Inline XBRL Taxonomy Extension Schema Document |
101.CAL |
|
Inline XBRL Taxonomy Extension Calculation Linkbase Document |
101.DEF |
|
Inline XBRL Taxonomy Extension Definition Linkbase Document |
101.LAB |
|
Inline XBRL Taxonomy Extension Label Linkbase Document |
101.PRE |
|
Inline XBRL Taxonomy Extension Presentation Linkbase Document |
104 |
|
Cover Page Interactive Data File (embedded within the Inline XBRL document) |
** Furnished herewith.
# Management contract or compensatory plan or arrangement
27
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
|
|
JOANN Inc. |
|
|
|
Registrant |
|
|
|
|
|
Date: December 5, 2023 |
|
By: |
/s/ Scott Sekella |
|
|
|
|
|
|
|
Executive Vice President, Chief Financial Officer and Member, Interim Office of the Chief Executive Officer |
|
|
|
(principal financial officer) |
28
| This ‘10-Q’ Filing | Date | Other Filings | ||
|---|---|---|---|---|
 | ||||
| 7/7/28 | ||||
| 12/22/26 | ||||
| 1/26/26 | ||||
| 11/25/25 | ||||
| 10/26/25 | ||||
| 4/16/24 | ||||
| 2/3/24 | ||||
| 1/16/24 | ||||
| Filed on: | 12/5/23 | |||
| 11/30/23 | ||||
| For Period end: | 10/28/23 | |||
| 10/26/23 | ||||
| 10/19/23 | 8-K | |||
| 7/29/23 | 10-Q | |||
| 7/26/23 | ||||
| 7/20/23 | 3, 8-K | |||
| 4/29/23 | 10-Q | |||
| 3/10/23 | 8-K | |||
| 1/28/23 | 10-K, ARS | |||
| 10/29/22 | 10-Q | |||
| 7/30/22 | 10-Q | |||
| 4/30/22 | 10-Q | |||
| 1/29/22 | 10-K | |||
| 12/22/21 | ||||
| 10/20/21 | ||||
| 7/7/21 | 8-K | |||
| 11/25/20 | ||||
| 10/21/16 | ||||
| List all Filings | ||||
As Of Filer Filing For·On·As Docs:Size Issuer Filing Agent 12/14/23 JOANN Inc. S-8 12/14/23 4:72K Donnelley … Solutions/FA |