Jo-Ann Stores 8-K 2011
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): February 23, 2011
Jo-Ann Stores, Inc.
(Exact Name of Registrant as Specified in Charter)
Registrants telephone number, including area code: (330) 656-2600
(Former Name or Former Address, if Changed Since Last Report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
Item 7.01 Regulation FD Disclosure.
In connection with proposed financing transactions, Jo-Ann Stores, Inc. (the Company) will be providing certain information to potential lenders and is therefore including such information in this Current Report on Form 8-K pursuant to Regulation FD.
The financial and other estimates as of and for the year ended January 29, 2011 set forth below have been prepared by, and are the responsibility of, management. The estimates are preliminary and remain subject to completion of managements year-end closing process. Actual financial results for the quarter and year may differ from these estimates. The following estimates are as of the date hereof and the Company does not undertake any obligation to update or revise any of the information provided to potential lenders, whether as a result of new information, future events or otherwise.
The Companys independent registered public accounting firm, Ernst & Young LLP, has not fully audited the accompanying preliminary financial data. Accordingly, Ernst & Young LLP does not express an opinion or any other form of assurance with respect thereto.
Preliminary Financial Results for the Periods Ended January 29, 2011
On February 3, 2011, the Company announced that net sales for the fourth quarter ended January 29, 2011 increased 3.6% to $624.1 million compared to $602.2 million for the same period last year. Same-store sales increased 2.0% versus a same-store sales increase of 4.4% for the fourth quarter last year. Customer transactions increased 1.1% and average ticket increased 0.9%. Severe winter weather negatively impacted fourth quarter same-store sales by approximately 0.8%.
Large-format store net sales for the quarter increased 1.8% to $330.6 million compared to the same period last year. Same-store sales for large-format stores increased 0.7% compared with an increase of 3.1% in the fourth quarter last year. Small-format store net sales increased 4.6% to $277.6 million compared to the same period last year. Same-store sales for small-format stores increased 3.8% compared with an increase of 6.1% in the fourth quarter last year. Internet sales through Joann.com increased 29.3% to $15.9 million compared to the same period last year.
Sewing same-store sales increased 1.8% for the quarter. The Company continued to experience positive trends in the majority of its fabric and sewing notions product categories. Non-sewing same-store sales increased 2.5% for the quarter due to growth in both craft and seasonal products.
Net sales for the fiscal year ended January 29, 2011 increased 4.4% to $2.079 billion versus $1.991 billion in the prior year. Same-store sales increased 3.5% for the fiscal year compared with a 3.1% increase last year. Sewing same-store sales increased 3.7% and represented 52% of the Companys fiscal 2011 sales volume. Non-sewing same-store sales increased 3.5% and represented 48% of the Companys fiscal 2011 sales volume.
Based on preliminary data, the Company expects gross margin for the fourth quarter of fiscal 2011 to improve by approximately 50 basis points to approximately 48.1% compared to 47.6% in the fourth quarter of fiscal 2010. For fiscal year 2011, the Company expects gross margin to improve by approximately 110 basis points to approximately 50.1% compared to 49.0% in fiscal year 2010.
Based on preliminary data, the Company expects net income for the fourth quarter of fiscal 2011 to be in the range of $39.7 million to $40.4 million compared to $37.1 million in the fourth quarter of fiscal 2010. Net income for fiscal year 2011 is expected to be in the range of $92.4 million to $93.1 million compared to $66.6 million in fiscal year 2010.
Based on preliminary data, the Company expects Adjusted EBITDA for the fourth quarter of fiscal 2011 to be in the range of $85.2 million to $86.2 million compared to $81.7 million in the fourth quarter of fiscal 2010. Adjusted EBITDA for fiscal year 2011 is expected to be in the range of $227.7 million to $228.7 million compared to $185.7 million in fiscal year 2010.
Store Openings, Closings and Remodels
During the fourth quarter of fiscal 2011, the Company opened five small-format stores and one large-format store, and closed 11 small-format stores. During fiscal year 2011, the Company opened 30 stores including six large-format and 24 small-format stores, and closed 25 small-format stores. For fiscal 2012, the Company continues to expect to open approximately 55 to 60 new stores and close approximately 30 to 40 stores, as previously communicated.
During the fourth quarter of fiscal 2011, the Company remodeled three stores. During fiscal 2011, the Company remodeled 42 stores, of which one was transitioned from a small-format to a large-format layout. For fiscal 2012, the Company continues to expect to remodel approximately 60 stores during the year, as previously communicated.
For fiscal 2011, capital expenditures, net of landlord reimbursement, were $49.8 million. For fiscal 2012, capital expenditures, net of landlord reimbursement, are expected to be in the range of $70 million to $75 million.
Selected Financial Information (Unaudited)
The following table presents a reconciliation of net income to EBITDA and Adjusted EBITDA for each of the periods presented:
Non-GAAP Reconciliation (Unaudited)
Non-GAAP Financial Information
In this release, Jo-Ann Stores discloses non-GAAP measures of EBITDA and Adjusted EBITDA. Jo-Ann Stores presents this non-GAAP information to provide investors with supplemental measures of the Companys operating performance. EBITDA, as used in this filing, is defined as net income before interest expense, depreciation and amortization, income taxes, and gain on purchase of senior subordinated notes. Adjusted EBITDA differs from the term EBITDA as it is commonly used. Adjusted EBITDA, as used in this filing, is defined as net income before interest expense, depreciation and amortization, income taxes, and gain on purchase of senior subordinated notes, and excludes other items such as transaction-related expenses, non-cash stock-based compensation expense, and other unusual or non-recurring charges. These measures should not be considered an alternative to measurements required by accounting principles generally accepted in the United States (GAAP), such as net income and earnings per share. In accordance with SEC regulations, reconciliation of the Jo-Ann Stores GAAP information to the pro forma information is provided in the table above.
Cautionary Statement Regarding Forward-Looking Statements
This release may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 with respect to the Company, its business and the proposed merger transaction (the Merger) among Needle Holdings Inc., Needle Merger Sub Corp. and the Company. These forward-looking statements can be identified by the use of terminology such as subject to, believe, expects, plan, project, estimate, intend, may, will, should, can, or anticipates, or the negative thereof, or variations thereon, or comparable terminology, or by discussions of strategy. Although all of these forward-looking statements are believed to be reasonable, they are inherently uncertain. Factors which may materially affect such forward-looking statements include, but are not limited to general economic conditions, risks in implementing new marketing initiatives, natural disasters and geo-political events, changes in customer demand, changes in trends in the fabric and craft industry, changes in the competitive pricing for products, the impact of competitors store openings and closings, our dependence on suppliers, seasonality, disruptions to the transportation system or increases in transportation costs, energy costs, our ability to recruit and retain highly qualified personnel, our ability to manage our inventory, our ability to effectively manage our distribution network, disruptions to our information systems, failure to maintain the security of our electronic and other confidential information, failure to comply with various laws and regulations, failure to successfully implement the store growth strategy, changes in accounting standards and effective tax rates, inadequacy of our insurance coverage, cash and cash equivalents held at financial institutions in excess of federally insured limits, volatility of our stock price, damage to our reputation, and other factors, and uncertainties associated with the proposed Merger, including uncertainties relating to the anticipated timing of
filings and approvals relating to the transaction, the expected timing of completion of the transaction and the ability to complete the transaction. Other important factors that may cause actual results to differ materially from those expressed in the forward-looking statements are discussed in the Companys Securities and Exchange Commission (SEC) filings.
Readers are cautioned not to place undue reliance on forward-looking statements. The Company cannot guarantee future results, trends, events, levels of activity, performance or achievements. The Company does not undertake and specifically declines any obligation to update, republish or revise forward-looking statements to reflect events or circumstances after the date hereof or to reflect the occurrences of unanticipated events. Consequently, such forward-looking statements should be regarded solely as the Companys current plans, estimates and beliefs.
Additional Information and Where to Find It
In connection with the Merger, on February 17, 2011, the Company filed with the SEC and began mailing to its shareholders a definitive proxy statement regarding the Merger. BEFORE MAKING ANY VOTING DECISION, THE COMPANYS SHAREHOLDERS ARE URGED TO READ THE DEFINITIVE PROXY STATEMENT REGARDING THE MERGER CAREFULLY AND IN ITS ENTIRETY BECAUSE IT CONTAINS IMPORTANT INFORMATION ABOUT THE PROPOSED MERGER. The Companys shareholders will be able to obtain, without charge, a copy of the definitive proxy statement and other relevant documents filed with the SEC from the SECs website at http://www.sec.gov. The Companys shareholders will also be able to obtain, without charge, a copy of the definitive proxy statement and other relevant documents (when available) by directing a request by mail or telephone to Jo-Ann Stores, Inc., Attn: Corporate Communications, 5555 Darrow Road, Hudson, Ohio 44236, telephone: (330) 463-6865, or from the investor relations section of the companys website, http://www.joann.com.
Participants in Solicitation
The Company and its directors and officers may be deemed to be participants in the solicitation of proxies from the Companys shareholders with respect to the special meeting of shareholders that will be held to consider the Merger. Information about the Companys directors and executive officers and their ownership of the Companys common stock is set forth in the proxy statement for the Companys 2010 Annual Meeting of Shareholders, which was filed with the SEC on April 26, 2010. Shareholders may obtain additional information regarding the interests of the Company and its directors and executive officers in the Merger, which may be different than those of the Companys shareholders generally, by reading the definitive proxy statement filed with the SEC on February 17, 2011 and other relevant documents regarding the Merger, when filed with the SEC.
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 hereunto duly authorized.