JOANN Inc. (NASDAQ: JOAN) (“JOANN”), the nation’s category leader
in sewing and one of the fastest growing competitors in the arts
and crafts category, today reported results for its third quarter
ending October 30, 2021.
JOANN’s President and Chief Executive Officer,
Wade Miquelon, stated: “Our business continues to demonstrate
strong top and bottom line growth from pre-pandemic levels. I am
most proud of the work our team has put in to overcome what are now
well publicized and wide-spread supply chain challenges. As a
result of proactive measures taken, we have enjoyed a very strong
fall seasonal business and have robust holiday assortments ready to
support our key fourth quarter customer demand. In addition, our
digital platforms continue to be industry leading as evidenced by
our growth in ecommerce sales versus pre-pandemic levels and
expanded capabilities fueled by several strategic partnerships. We
remain encouraged by the level of positive customer engagement with
our brand and the potential of our strategies to deliver sustained
growth.”
Third Quarter Highlights:
- Net sales decreased by 14.4%
compared to the same period last year, to $611.0 million with total
comparable sales decreasing 14.2%. On a two-year stack, total
comparable sales increased by 8.0%.
- Omni-channel net sales were $66.4
million for the quarter, 137% growth on a two-year basis and
representing approximately 11% of total third quarter sales.
- Our gross profit of $318.8 million
increased 12.3% on a two-year basis. After adjusting for $11.3
million of excess ocean freight and related supply chain costs
during the third quarter ending October 30, 2021, gross profit
two-year growth was 16.3%.
- As a percent of sales, gross profit
margin was 52.2%, and after adjusting for excess supply chain costs
during the third quarter ending October 30, 2021 was 54.0%, or a
410 basis points improvement on a two-year basis and 110 basis
points higher than the 3rd quarter last year.
- Net income of $22.8 million increased by $31.2 million from two
years ago. Fully diluted earnings per share were $0.53 compared to
a loss of $(0.24) for the same quarter two years ago. Fully diluted
adjusted earnings per share were $0.73 compared to a loss of
$(0.11) for the same quarter two years ago.
- Adjusted EBITDA of $72.6 million
improved by 84% compared to the same quarter two years ago.
- Our quarterly dividend of $0.10 per
share was paid to holders of JOANN common stock on September 24,
2021.
- We further expanded the rollout of
our international e-commerce platform, currently shipping to 58
countries across every product category and also expanded our
online payment options domestically to include Klarna and Apple
Pay.
Balance Sheet Highlights:
- Adjusted EBITDA for Credit
Agreement reporting was $266.8 million on a trailing 12-month
basis, resulting in net debt to Adjusted EBITDA leverage of 3.2x
for Credit Agreement Reporting, which will represent maximum annual
leverage as we have built inventories for our peak selling
season.
- Long-term debt, net was $853.8
million as of October 30, 2021, with cash and cash equivalents of
$30.9 million.
- During the quarter we repurchased
978,930 shares of our common stock at a total cost of $10.8
million.
Webcast and Conference Call
Information: JOANN management will host a conference call
and webcast to discuss the results today, Thursday, December 2,
2021 at 5:00 p.m. ET. The number to call for the live interactive
teleconference is 1 (800) 774-6070 and the passcode is
8705951#.
The live broadcast of JOANN’s conference call
will be available online at the Company's website, www.joann.com,
under the Investor Relations section, on December 2, 2021,
beginning at 5:00 p.m. ET. The online replay will follow shortly
after the call and will be available for one year.
Table 1.JOANN
Inc. Consolidated Statements of Income
(Loss)(Unaudited)
|
Thirteen Weeks Ended |
|
Thirty-Nine Weeks Ended |
|
October 30,2021 |
|
October 31,2020 |
|
November 2,2019 |
|
October 30,2021 |
|
October 31,2020 |
|
November 2,2019 |
|
(Dollars in millions except per share data) |
|
Net sales |
$ |
611.0 |
|
|
$ |
714.1 |
|
|
$ |
569.1 |
|
|
$ |
1,682.3 |
|
|
$ |
1,921.5 |
|
|
$ |
1,545.6 |
|
Cost of
sales |
|
292.2 |
|
|
|
339.6 |
|
|
|
285.2 |
|
|
|
794.0 |
|
|
|
949.8 |
|
|
|
768.6 |
|
Gross
profit |
|
318.8 |
|
|
|
374.5 |
|
|
|
283.9 |
|
|
|
888.3 |
|
|
|
971.7 |
|
|
|
777.0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling,
general and administrative expenses |
|
257.6 |
|
|
|
292.5 |
|
|
|
250.4 |
|
|
|
754.5 |
|
|
|
818.2 |
|
|
|
723.0 |
|
Depreciation and amortization |
|
19.6 |
|
|
|
20.3 |
|
|
|
19.4 |
|
|
|
60.1 |
|
|
|
59.8 |
|
|
|
57.3 |
|
Goodwill
impairment |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
130.4 |
|
Operating profit (loss) |
|
41.6 |
|
|
|
61.7 |
|
|
|
14.1 |
|
|
|
73.7 |
|
|
|
93.7 |
|
|
|
(133.7 |
) |
Interest
expense, net |
|
11.8 |
|
|
|
14.0 |
|
|
|
26.1 |
|
|
|
39.8 |
|
|
|
55.0 |
|
|
|
77.6 |
|
Debt
related (gain) loss |
|
— |
|
|
|
(3.0 |
) |
|
|
— |
|
|
|
3.0 |
|
|
|
(152.9 |
) |
|
|
— |
|
Gain on
sale leaseback |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(24.5 |
) |
|
|
— |
|
|
|
— |
|
Income (loss) before income taxes |
|
29.8 |
|
|
|
50.7 |
|
|
|
(12.0 |
) |
|
|
55.4 |
|
|
|
191.6 |
|
|
|
(211.3 |
) |
Income
tax provision (benefit) |
|
7.0 |
|
|
|
3.0 |
|
|
|
(3.6 |
) |
|
|
12.3 |
|
|
|
17.6 |
|
|
|
(22.8 |
) |
Net
income (loss) |
$ |
22.8 |
|
|
$ |
47.7 |
|
|
$ |
(8.4 |
) |
|
$ |
43.1 |
|
|
$ |
174.0 |
|
|
$ |
(188.5 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings
(loss) per common share: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
$ |
0.55 |
|
|
$ |
1.37 |
|
|
$ |
(0.24 |
) |
|
$ |
1.06 |
|
|
$ |
4.99 |
|
|
$ |
(5.40 |
) |
Diluted |
$ |
0.53 |
|
|
$ |
1.32 |
|
|
$ |
(0.24 |
) |
|
$ |
1.02 |
|
|
$ |
4.88 |
|
|
$ |
(5.40 |
) |
Weighted-average common shares outstanding: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
41,744,842 |
|
|
|
34,902,380 |
|
|
|
34,902,380 |
|
|
|
40,763,153 |
|
|
|
34,902,380 |
|
|
|
34,877,288 |
|
Diluted |
|
43,080,708 |
|
|
|
36,263,172 |
|
|
|
34,902,380 |
|
|
|
42,142,550 |
|
|
|
35,666,429 |
|
|
|
34,877,288 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Table 2.JOANN
Inc. Consolidated Balance
Sheets(Unaudited)
|
October 30,2021 |
|
October 31,2020 |
|
(Dollars in millions) |
Assets |
|
|
|
|
|
Current
assets: |
|
|
|
|
|
Cash and cash equivalents |
$ |
30.9 |
|
|
$ |
33.2 |
|
Inventories |
|
744.3 |
|
|
|
697.7 |
|
Prepaid expenses and other current assets |
|
82.6 |
|
|
|
68.7 |
|
Total
current assets |
|
857.8 |
|
|
|
799.6 |
|
|
|
|
|
|
|
Property, equipment and leasehold improvements, net |
|
261.1 |
|
|
|
296.0 |
|
Operating lease assets |
|
842.1 |
|
|
|
864.4 |
|
Goodwill, net |
|
162.0 |
|
|
|
162.0 |
|
Intangible assets, net |
|
372.1 |
|
|
|
378.9 |
|
Other
assets |
|
26.8 |
|
|
|
18.7 |
|
Total
assets |
$ |
2,521.9 |
|
|
$ |
2,519.6 |
|
|
|
|
|
|
|
Liabilities and Shareholders’ Equity |
|
|
|
|
|
Current
liabilities: |
|
|
|
|
|
Accounts payable |
$ |
311.3 |
|
|
$ |
328.9 |
|
Accrued expenses |
|
128.6 |
|
|
|
138.3 |
|
Current portion of operating lease liabilities |
|
176.7 |
|
|
|
184.2 |
|
Current portion of long-term debt |
|
6.8 |
|
|
|
— |
|
Total
current liabilities |
|
623.4 |
|
|
|
651.4 |
|
|
|
|
|
|
|
Long-term debt, net |
|
853.8 |
|
|
|
921.6 |
|
Long-term operating lease liabilities |
|
758.2 |
|
|
|
800.8 |
|
Long-term deferred income taxes |
|
91.2 |
|
|
|
91.6 |
|
Other
long-term liabilities |
|
48.7 |
|
|
|
50.7 |
|
|
|
|
|
|
|
Shareholders’ equity: |
|
|
|
|
|
Common stock, stated value $0.01 per share |
|
0.4 |
|
|
|
0.3 |
|
Additional paid-in capital |
|
203.6 |
|
|
|
124.3 |
|
Retained deficit |
|
(34.4 |
) |
|
|
(107.3 |
) |
Accumulated other comprehensive income (loss) |
|
1.1 |
|
|
|
(0.5 |
) |
Treasury stock at cost |
|
(24.1 |
) |
|
|
(13.3 |
) |
Total
shareholders’ equity |
|
146.6 |
|
|
|
3.5 |
|
Total
liabilities and shareholders’ equity |
$ |
2,521.9 |
|
|
$ |
2,519.6 |
|
|
|
|
|
|
|
|
|
Table 3.JOANN
Inc. Reconciliation of Net Income (Loss) to
Adjusted EBITDA(Unaudited)
|
Thirteen Weeks Ended |
|
Thirty-Nine Weeks Ended |
|
October 30,2021 |
|
October 31,2020 |
|
November 2,2019 |
|
October 30,2021 |
|
October 31,2020 |
|
November 2,2019 |
|
(Dollars in millions) |
|
Net income (loss) |
$ |
22.8 |
|
|
$ |
47.7 |
|
|
$ |
(8.4 |
) |
|
$ |
43.1 |
|
|
$ |
174.0 |
|
|
$ |
(188.5 |
) |
Income tax provision
(benefit) |
|
7.0 |
|
|
|
3.0 |
|
|
|
(3.6 |
) |
|
|
12.3 |
|
|
|
17.6 |
|
|
|
(22.8 |
) |
Interest expense, net |
|
11.8 |
|
|
|
14.0 |
|
|
|
26.1 |
|
|
|
39.8 |
|
|
|
55.0 |
|
|
|
77.6 |
|
Debt related (gain) loss
(1) |
|
— |
|
|
|
(3.0 |
) |
|
|
— |
|
|
|
3.0 |
|
|
|
(152.9 |
) |
|
|
— |
|
Gain on sale leaseback
(2) |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(24.5 |
) |
|
|
— |
|
|
|
— |
|
Depreciation and amortization
(3) |
|
19.8 |
|
|
|
20.6 |
|
|
|
19.4 |
|
|
|
60.6 |
|
|
|
60.2 |
|
|
|
57.7 |
|
Strategic initiatives (4) |
|
0.6 |
|
|
|
1.7 |
|
|
|
1.9 |
|
|
|
1.4 |
|
|
|
4.1 |
|
|
|
7.8 |
|
Excess import freight costs
(5) |
|
11.3 |
|
|
|
— |
|
|
|
— |
|
|
|
11.3 |
|
|
|
— |
|
|
|
— |
|
COVID-19 costs (6) |
|
— |
|
|
|
16.6 |
|
|
|
— |
|
|
|
1.3 |
|
|
|
48.4 |
|
|
|
— |
|
Technology development expense
(7) |
|
2.6 |
|
|
|
1.2 |
|
|
|
1.4 |
|
|
|
6.2 |
|
|
|
3.6 |
|
|
|
3.7 |
|
Stock-based compensation
expense |
|
0.8 |
|
|
|
0.3 |
|
|
|
0.3 |
|
|
|
2.1 |
|
|
|
1.1 |
|
|
|
0.9 |
|
(Gain) loss on disposal and
impairment of fixed and operating lease assets |
|
(0.1 |
) |
|
|
(0.2 |
) |
|
|
0.3 |
|
|
|
(0.1 |
) |
|
|
3.6 |
|
|
|
0.4 |
|
Goodwill and trade name
impairment (8) |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
130.4 |
|
Sponsor management fee
(9) |
|
— |
|
|
|
— |
|
|
|
1.2 |
|
|
|
0.4 |
|
|
|
0.8 |
|
|
|
3.8 |
|
Other (10) |
|
(4.0 |
) |
|
|
0.5 |
|
|
|
0.8 |
|
|
|
(3.3 |
) |
|
|
1.7 |
|
|
|
1.8 |
|
Adjusted EBITDA |
$ |
72.6 |
|
|
$ |
102.4 |
|
|
$ |
39.4 |
|
|
$ |
153.6 |
|
|
$ |
217.2 |
|
|
$ |
72.8 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
_______________(1) “Debt related (gain) loss”
represents losses and gains associated with debt repurchases below
par and the write off of unamortized fees and original issue
discount associated with debt refinancings.(2) “Gain on sale
leaseback” represents the gain attributable to the sale leaseback
of our distribution center in Opelika, Alabama.(3) “Depreciation
and amortization” represents depreciation, amortization of
intangible assets and amortization of content costs.(4) “Strategic
initiatives” represents non-recurring costs, such as third-party
consulting costs and one-time start-up costs, that are not part of
our ongoing operations and are incurred to execute differentiated,
project-based strategic initiatives, including costs (i) to design
a new prototype and assortment optimization process for locations,
(ii) related to our efforts to initially evaluate and implement
opportunities to offset the significant costs incurred due to the
new U.S. tariffs on merchandise produced in China, (iii) to start
up a new technology product that would traditionally be incurred by
our vendors, (iv) to evaluate our opportunity in new potential
lines of business and (v) to analyze improved supply chain
capabilities.(5) "Excess import freight costs" represents
non-recurring excess inbound freight costs due to increasing
freight rates, in particular the significant transitory impact of
constrained ocean freight capacity and incremental domestic
transportation costs incurred due to unprecedented congestion in
U.S. ports.(6) “COVID-19 costs” represents premium pay for location
team members, cleaning and location capacity management labor,
one-time supply chain disruption costs, incremental seasonal
clearance associated with location closures, donations for our mask
making initiative and additional location cleaning supplies.(7)
“Technology development expense” represents one-time IT project
management and implementation expenses, such as temporary labor
costs, third-party consulting fees and user fees incurred during
the development period of a new software application, that are not
part of our ongoing operations and are typically redundant during
the initial implementation of software applications or other
technology systems across different functional operations of our
business before they are in productive use.(8) Based on our
evaluation for impairment of the carrying amount of goodwill and
trade name on our balance sheet. Impairment recorded was driven
predominantly by the result of negative total comparable sales and
declining margins, primarily resulting from the incremental U.S.
tariffs on Chinese imports, along with a weaker than expected peak
selling season.(9) “Sponsor management fee” represents management
fees paid to our sponsor, Leonard Green & Partners (or advisory
affiliates thereof), in accordance with our management services
agreement. The management fee was discontinued upon the completion
of our initial public offering in March 2021, as LGP no longer
provides managerial services to us in any form.(10) “Other”
represents one-time impact of severance, certain legal matters,
executive leadership transition and business transition
activities.
Table 4.JOANN
Inc. Reconciliation of Net Income (Loss) to
Adjusted Net Income (Loss)(Unaudited)
|
Thirteen Weeks Ended |
|
Thirty-Nine Weeks Ended |
|
October 30,2021 |
|
October 31,2020 |
|
November 2,2019 |
|
October 30,2021 |
|
October 31,2020 |
|
November 2,2019 |
|
(Dollars in millions except per share data) |
|
Net income (loss) |
$ |
22.8 |
|
|
$ |
47.7 |
|
|
$ |
(8.4 |
) |
|
$ |
43.1 |
|
|
$ |
174.0 |
|
|
$ |
(188.5 |
) |
Debt related (gain) loss |
|
— |
|
|
|
(3.0 |
) |
|
|
— |
|
|
|
3.0 |
|
|
|
(152.9 |
) |
|
|
— |
|
Gain on sale leaseback |
|
— |
|
|
|
— |
|
|
|
— |
|
|
$ |
(24.5 |
) |
|
|
— |
|
|
|
— |
|
Strategic initiatives |
|
0.6 |
|
|
|
1.7 |
|
|
|
1.9 |
|
|
|
1.4 |
|
|
|
4.1 |
|
|
|
7.8 |
|
Excess import freight
costs |
|
11.3 |
|
|
|
— |
|
|
|
— |
|
|
|
11.3 |
|
|
|
— |
|
|
|
— |
|
COVID-19 costs |
|
— |
|
|
|
16.6 |
|
|
|
— |
|
|
|
1.3 |
|
|
|
48.4 |
|
|
|
— |
|
Technology development
expense |
|
2.6 |
|
|
|
1.2 |
|
|
|
1.4 |
|
|
|
6.2 |
|
|
|
3.6 |
|
|
|
3.7 |
|
Stock-based compensation
expense |
|
0.8 |
|
|
|
0.3 |
|
|
|
0.3 |
|
|
|
2.1 |
|
|
|
1.1 |
|
|
|
0.9 |
|
(Gain) loss on disposal and
impairment of fixed and operating lease assets |
|
(0.1 |
) |
|
|
(0.2 |
) |
|
|
0.3 |
|
|
|
(0.1 |
) |
|
|
3.6 |
|
|
|
0.4 |
|
Goodwill and trade name
impairment |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
130.4 |
|
Sponsor management fee |
|
— |
|
|
|
— |
|
|
|
1.2 |
|
|
|
0.4 |
|
|
|
0.8 |
|
|
|
3.8 |
|
Other |
|
(4.0 |
) |
|
|
0.5 |
|
|
|
0.8 |
|
|
|
(3.3 |
) |
|
|
1.7 |
|
|
|
1.8 |
|
Tax impact of adjustments
(11) |
|
(2.7 |
) |
|
|
1.9 |
|
|
|
(1.4 |
) |
|
|
0.5 |
|
|
|
18.5 |
|
|
|
(4.4 |
) |
Adjusted net income
(loss) |
$ |
31.3 |
|
|
$ |
66.7 |
|
|
$ |
(3.9 |
) |
|
$ |
41.4 |
|
|
$ |
102.9 |
|
|
$ |
(44.1 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings (loss) per
share |
$ |
0.53 |
|
|
$ |
1.32 |
|
|
$ |
(0.24 |
) |
|
$ |
1.02 |
|
|
$ |
4.88 |
|
|
$ |
(5.40 |
) |
Adjusted diluted earnings
(loss) per share |
$ |
0.73 |
|
|
$ |
1.84 |
|
|
$ |
(0.11 |
) |
|
$ |
0.98 |
|
|
$ |
2.89 |
|
|
$ |
(1.26 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-average shares
outstanding - basic |
|
41,744,842 |
|
|
|
34,902,380 |
|
|
|
34,902,380 |
|
|
|
40,763,153 |
|
|
|
34,902,380 |
|
|
|
34,877,288 |
|
Weighted-average shares
outstanding - diluted |
|
43,080,708 |
|
|
|
36,263,172 |
|
|
|
34,902,380 |
|
|
|
42,142,550 |
|
|
|
35,666,429 |
|
|
|
34,877,288 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(11) “Tax impact of adjustments” represents the
tax effect of the total adjustments based on our forecasted annual
effective tax rate, before discrete adjustments, for fiscal 2020,
fiscal 2021 and fiscal 2022.
Table 5.JOANN
Inc. Reconciliation of Gross Profit to Adjusted
Gross Profit(Unaudited)
|
Thirteen Weeks Ended |
|
Thirty-Nine Weeks Ended |
|
October 30,2021 |
|
October 31,2020 |
|
November 2,2019 |
|
October 30,2021 |
|
October 31,2020 |
|
November 2,2019 |
|
(Dollars in millions) |
|
Net sales |
$ |
611.0 |
|
|
$ |
714.1 |
|
|
$ |
569.1 |
|
|
$ |
1,682.3 |
|
|
$ |
1,921.5 |
|
|
$ |
1,545.6 |
|
Cost of sales |
|
292.2 |
|
|
|
339.6 |
|
|
|
285.2 |
|
|
|
794.0 |
|
|
|
949.8 |
|
|
|
768.6 |
|
Gross profit |
|
318.8 |
|
|
|
374.5 |
|
|
|
283.9 |
|
|
|
888.3 |
|
|
|
971.7 |
|
|
|
777.0 |
|
Excess import freight
costs |
|
11.3 |
|
|
|
— |
|
|
|
— |
|
|
|
11.3 |
|
|
|
— |
|
|
|
— |
|
COVID-19 costs |
|
— |
|
|
|
3.0 |
|
|
|
— |
|
|
|
— |
|
|
|
13.2 |
|
|
|
— |
|
Adjusted gross profit |
$ |
330.1 |
|
|
$ |
377.5 |
|
|
$ |
283.9 |
|
|
$ |
899.6 |
|
|
$ |
984.9 |
|
|
$ |
777.0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted gross margin |
|
54.0 |
% |
|
|
52.9 |
% |
|
|
49.9 |
% |
|
|
53.5 |
% |
|
|
51.3 |
% |
|
|
50.3 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Table 6.JOANN
Inc. Reconciliation of Net Cash Provided by
Operating Activities to Credit Facility Adjusted
EBITDA(Unaudited)
(in millions) |
|
Four Quarters Ended October 30,
2021 |
Net cash provided by operating activities |
|
$ |
17.7 |
|
Non-cash
operating lease expense |
|
|
(160.0 |
) |
Depreciation and amortization excluding content cost
amortization |
|
|
(80.4 |
) |
Deferred
income taxes |
|
|
1.0 |
|
Stock-based compensation expense |
|
|
(2.5 |
) |
Amortization of deferred financing costs and original issue
discount |
|
|
(2.8 |
) |
Debt
related loss |
|
|
(0.8 |
) |
Gain on
sale leaseback |
|
|
24.5 |
|
Loss on
disposal and impairment of other fixed assets |
|
|
(1.2 |
) |
Goodwill
and trade name impairment |
|
|
— |
|
Change
in operating assets and liabilities |
|
|
285.9 |
|
Net income |
|
$ |
81.4 |
|
Income
tax provision |
|
|
22.7 |
|
Interest
expense, net |
|
|
53.8 |
|
Debt
related loss |
|
|
0.8 |
|
Gain on
sale leaseback |
|
|
(24.5 |
) |
Depreciation and amortization |
|
|
81.0 |
|
Strategic initiatives |
|
|
3.5 |
|
Excess
import freight costs |
|
|
11.3 |
|
COVID-19
costs |
|
|
17.9 |
|
Technology development expense |
|
|
8.4 |
|
Stock-based compensation expense |
|
|
2.5 |
|
Loss on
disposal and impairment of fixed and operating lease assets |
|
|
1.9 |
|
Sponsor
management fee |
|
|
0.9 |
|
Other |
|
|
(1.9 |
) |
Adjusted EBITDA |
|
$ |
259.7 |
|
Pre-opening and closing costs excluding loss on disposal of fixed
assets |
|
|
7.1 |
|
Credit Facility Adjusted EBITDA |
|
$ |
266.8 |
|
|
|
|
|
|
Non-GAAP Financial Measures
Adjusted EBITDA
JOANN presents Adjusted EBITDA, which is not a
recognized financial measure under accounting principles generally
accepted in the United States of America (“GAAP”), because it
believes it assists investors and analysts in comparing JOANN’s
performance across reporting periods on a consistent basis by
excluding items that management does not believe are indicative of
JOANN’s core operating performance. Management believes that
Adjusted EBITDA is helpful in highlighting trends in JOANN’s 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. JOANN also uses Adjusted EBITDA in
connection with establishing discretionary annual incentive
compensation; supplementing GAAP measures of performance in the
evaluation of the effectiveness of its business strategies; making
budgeting decisions; comparing its performance against that of
other peer companies using similar measures; and because its credit
facilities use measures similar to Adjusted EBITDA to measure its
compliance with certain covenants.
JOANN defines Adjusted EBITDA as net income
(loss) plus income tax provision (benefit), interest expense, net,
debt related (gain) loss, sale leaseback gains and depreciation and
amortization, as further adjusted to eliminate the impact of
certain non-cash items and other items that management does not
consider indicative of its ongoing operating performance, including
costs related to strategic initiatives, excess import freight
costs, COVID-19 costs, technology development expense, stock-based
compensation expense, (gain) loss on disposal and impairment of
fixed and operating lease assets, goodwill and trade name
impairment, sponsor management fees and other one-time costs. The
further adjustments are itemized in the table above.
Adjusted EBITDA has limitations as an analytical
tool, and you should not consider it in isolation or as a
substitute for analysis of JOANN’s results as reported under GAAP.
Some of these limitations are:
- Adjusted EBITDA does not reflect
its cash expenditures or future requirements for capital
expenditures or contractual commitments;
- Adjusted EBITDA does not reflect
changes in its cash requirements for its working capital
needs;
- Adjusted EBITDA does not reflect
the interest expense and the cash requirements necessary to service
interest and principal payments on its debt;
- Adjusted EBITDA does not reflect
cash requirements for replacement of assets that are being
depreciated and amortized;
- Adjusted EBITDA does not reflect
non-cash compensation, which is a key element of JOANN’s overall
long-term incentive compensation;
- Adjusted EBITDA does not reflect
the impact of certain cash charges or cash receipts resulting from
matters it does not find indicative of its ongoing operations;
and
- other companies in JOANN’s industry
may calculate Adjusted EBITDA differently, limiting its usefulness
as a comparative measure.
JOANN compensates for these limitations by
relying primarily on JOANN’s GAAP results and using Adjusted EBITDA
only as supplemental information.
Adjusted Net Income (Loss) and Adjusted
Diluted Earnings (Loss) per Share
JOANN presents adjusted net income (loss) and
adjusted diluted earnings (loss) per share, which are not
recognized financial measures under GAAP, because it believes these
additional key measures assist investors and analysts in comparing
JOANN’s performance across reporting periods on a consistent basis
by excluding items that management does not believe are indicative
of JOANN’s core operating performance. Management believes that
adjusted net income (loss) and adjusted diluted earnings (loss) per
share are helpful in highlighting trends in JOANN’s core operating
performance compared to other measures, which can differ
significantly depending on long-term strategic decisions regarding
capital structure and capital investments. JOANN also uses adjusted
net income (loss) and adjusted diluted earnings (loss) per share to
supplement GAAP measures of performance in the evaluation of the
effectiveness of its business strategies; to make budgeting
decisions; and to compare its performance against that of other
peer companies using similar measures.
JOANN defines adjusted net income (loss) as net
income (loss) adjusted to eliminate the impact of certain non-cash
items and other items that management does not consider indicative
of its ongoing operating performance, including debt related gains
and losses, sale leaseback gains, costs related to strategic
initiatives, excess import freight costs, COVID-19 costs,
technology development expense, stock-based compensation expense,
(gain) loss on disposal and impairment of fixed and operating lease
assets, goodwill and trade name impairment, sponsor management fees
and other one-time costs. The adjustments are itemized in the table
above. Adjusted diluted earnings (loss) per share is defined as
adjusted net income (loss) divided by the weighted-average number
of common shares outstanding assuming dilution in periods in which
there is an adjusted net income.
Adjusted Gross Profit and Adjusted Gross
Margin
JOANN presents adjusted gross profit and
adjusted gross margin, which are not recognized financial measures
under GAAP, because it believes they assist investors and analysts
in comparing JOANN’s performance across reporting periods on a
consistent basis by excluding items that management does not
believe are indicative of JOANN’s core operating performance.JOANN
defines adjusted gross profit as gross profit excluding excess
import freight costs and COVID-19 costs and adjusted gross margin
as adjusted gross profit divided by net sales.Credit
Facility Adjusted EBITDA
JOANN presents Credit Facility Adjusted EBITDA
because it is a measure that is calculated in accordance with
JOANN’s asset-based revolving credit facility agreement, as
amended, and senior secured term loan facility (collectively
“Credit Facilities”) and used to determine compliance with certain
ratios in the Credit Facilities, tested each quarter on the basis
of the preceding four quarters. Accordingly, management believes
that Credit Facility Adjusted EBITDA is material to an investor’s
understanding of JOANN’s financial condition and liquidity.
JOANN defines Credit Facility Adjusted EBITDA as
Adjusted EBITDA (as defined above) plus pre-opening and closing
costs excluding loss on disposal of fixed assets, which is
calculated consistently with the calculation of Adjusted EBITDA
under the Credit Facilities.
FORWARD-LOOKING STATEMENTS
This document contains forward-looking
statements within the meaning of the Private Securities Litigation
Reform Act of 1995. JOANN intends 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”). Readers can
generally identify forward-looking statements by the use of
forward-looking terminology such as “anticipate,” “believe,”
“continue,” “could,” “estimate,” “expect,” “intend,” “may,”
“might,” “plan,” “potential,” “predict,” “seek,” “vision,” or
“should,” or the negative thereof or other variations thereon or
comparable terminology. Many factors could affect JOANN’s actual
financial results and cause them to vary materially from the
expectations contained in forward-looking statements, including
those set forth in this document. These risks, uncertainties, and
factors include, among other things: inflationary pressures and
their impact on JOANN’s ability to control costs and on its
customers level of discretionary income to spend on Creative
Products; JOANN’s ability to anticipate and effectively respond to
disruptions or inefficiencies in its distribution network,
e-commerce fulfillment function and transportation system,
including availability and cost of import and domestic freight; the
effects of potential changes to U.S. trade regulations and
policies, including tariffs, on JOANN’s business; developments
involving JOANN’s competitors and its industry; potential future
impacts of the COVID-19 pandemic, including effects on supply chain
costs and capacity; JOANN’s ability to timely identify or
effectively respond to consumer trends, and the potential effects
of that ability on its relationship with its customers, the demand
for JOANN’s products and its market share; JOANN’s expectations
regarding the seasonality of its business; JOANN’s ability to
manage the distinct risks facing its e-commerce business and
maintain a relevant omni-channel experience for its customers;
JOANN’s ability to maintain or negotiate favorable lease terms;
JOANN’s ability to execute on its growth strategy to renovate and
improve the performance of its existing locations; JOANN’s ability
to attract and retain a qualified management team and other team
members while controlling its labor costs; the impact of JOANN’s
debt and lease obligations on its ability to raise additional
capital to fund its operations and maintain flexibility in
operating its business; JOANN’s reliance on and relationships with
third party service providers; JOANN’s reliance on and
relationships with foreign suppliers and their ability to supply it
with adequate, timely, and cost-effective product supplies; JOANN’s
ability, and its third party service providers’ ability, to
maintain security and prevent unauthorized access to electronic and
other confidential information; the impacts of potential
disruptions to JOANN’s information systems, including its websites
and mobile applications; JOANN’s ability to respond to risks
associated with existing and future payment options; JOANN’s
ability to maintain and enhance a strong brand image; JOANN’s
ability to maintain adequate insurance coverage; JOANN’s status as
a “controlled company” and control of JOANN as a public company by
affiliates of Leonard Green & Partners, L.P.; the impact of
evolving governmental laws and regulations and the outcomes of
legal proceedings; and the amount and timing of repurchases of
JOANN’s common stock, if any. The preceding list is not intended to
be an exhaustive list of all of JOANN’s forward-looking statements.
JOANN has based these forward-looking statements on its current
expectations, assumptions, estimates and projections. While JOANN
believes 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 JOANN’s control. Furthermore, the
potential impact of the COVID-19 pandemic on JOANN’s business
operations and financial results and on the world economy as a
whole may heighten the risks and uncertainties that affect JOANN’s
forward-looking statements. Given these risks and uncertainties,
Readers are cautioned not to place undue reliance on such
forward-looking statements. The forward-looking statements included
elsewhere in this document are not guarantees of future performance
and JOANN’s actual results of operations, financial condition and
liquidity, and the development of the industry in which it
operates, may differ materially from the forward-looking statements
included elsewhere in this document. In addition, even if JOANN’s
results of operations, financial condition and liquidity, and
events in the industry in which it operates, are consistent with
the forward-looking statements included elsewhere in this document,
they may not be predictive of results or developments in future
periods. Any forward-looking statement that JOANN makes in this
document speaks only as of the date of such statement. Except as
required by law, JOANN does 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
document.About JOANN
For more than 75 years, JOANN has inspired
creativity in the hearts, hands, and minds of its customers. From a
single storefront in Cleveland, Ohio, the nation’s category leader
in sewing and fabrics and one of the fastest growing competitors in
the arts and crafts industry has grown to include 852 stores across
49 states and robust e-commerce business. With the goal of helping
every customer find their creative Happy Place, JOANN serves as a
convenient single source for all of the supplies, guidance, and
inspiration needed to achieve any project or passion.
Investor Relations Contacts:Ajay
Jainajay.jain@joann.com330-463-8585
Corporate Communications:Amanda
Hayesamanda.hayes@joann.com216-296-5887
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