GlobeNewswire Inc | Sep 2, 2021 04:01PM EDT

September 02, 2021

-- Net sales of $496.9 million, a total comparable sales growth of 8.1% on a two-year basis -- Continued margin expansion driving gross profit dollar growth of 17.8% on a two-year basis -- Net income of $5.2 million or an increase of $173.0 million compared to the second quarter of fiscal 2020 -- Adjusted EBITDA of $23.5 million or an increase of $27.8 million compared to the second quarter of fiscal 2020

HUDSON, Ohio, Sept. 02, 2021 (GLOBE NEWSWIRE) -- JOANN Inc. (NASDAQ: JOAN) (JOANN), the nations category leader in sewing and one of the fastest growingcompetitorsin the arts and crafts category,todayreportedresults for its second quarter ending July 31, 2021.

Wade Miquelon, JOANNs President and Chief Executive Officer stated, We achieved a number of important milestones in our first full quarter as a newly public company. We continued to accelerate growth in gross profit dollars and net earnings on a two-year basis in what is historically our lowest volume period of our fiscal year. We also continued to position our business for success in our upcoming key fall and holiday seasons. Despite numerous supply chain challenges, we are on track to deliver a broad and exciting array of fashion and seasonal products in time for our peak sales events and our customer engagement and satisfaction are at record levels as evidenced by our net promoter scores. Our team members continue to deliver a great customer experience amidst what continues to be a high level of uncertainty driven by the COVID-19 pandemic, and I could not be prouder of the job they do every day. We look forward to continuing to delight our customers and deliver strong results through the balance of this year.

SecondQuarter Highlights:

-- Net sales decreased by 29.8% compared to the same periodlastyear, to $496.9million with total comparable salesdecreasing29.9%. On atwo-yearstack, total comparable sales increased by 8.1%. -- Omni-channel net salesreached $53.5million,up 115% on a two-year basis andrepresented approximately 11% of totalsecond quartersales (compared to around 5% in the second quarter of fiscal 2020). Our buy online pick-up in store and curbside pickup features continue to be especially popular with our customers. -- Gross profit increased 17.8% to $266.8 million compared to the same periodtwo years ago. -- Gross profit as a percent of sales improved to 53.7%, up 410 basis pointscompared to the same period last year. The gross margin increased by 460 basis points on a two-year basis. -- Net income of $5.2 million, improved by $173.0 million compared to the same quarter two years ago. -- Adjusted EBITDA of $23.5 million, improved by $27.8 million compared to the same quarter two years ago. -- Our first quarterly dividend of $0.10 per share was paid to holders of JOANN common stock. -- We launched our international e-commerce platform, currently shipping to 29 countries offering products across every major product category.

Balance Sheet Highlights:

-- Completed a debt refinancing with a new $675 million term loan facility. Maturity was extended to July of 2028 with improved interest rate pricing and business terms. -- Adjusted EBITDA for Credit Agreement reporting was $295.8 million on a trailing 12-month basis, resulting in net debt toAdjustedEBITDA leverage of2.7x. -- Long-termdebt, net was $771.2million as ofJuly 31, 2021,with cash and cash equivalents of $22.1 million. -- Working capital efficiency continues to improve based on inventory turns of 2.1x as of July 31, 2021 - an improvement from 1.9x as of August 1, 2020.

Webcast and Conference Call Information:JOANNmanagement will host a conference call and webcast to discuss the results today, Thursday,September 2, 2021at5:00 p.m.ET. The number to call for the live interactive teleconference is 1 (800) 774-6070 and the passcode is 9752013#.

The live broadcast of JOANNs conference call will be available online at the Company's website, www.joann.com, under the Investor Relations section, on September 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.

JOANN Inc.

Consolidated Statements of Income

(Unaudited)

Thirteen Weeks Ended Twenty-Six Weeks Ended July 31, August 1, July 31, August 1, 2021 2020 2021 2020 (Dollars in millions except per share data) Net sales $ 496.9 $ 708.0 $ 1,071.3 $ 1,207.4 Cost of sales 230.1 356.6 501.8 610.2 Selling, generaland 247.0 283.6 496.9 525.7 administrativeexpensesDepreciation and 20.1 19.7 40.5 39.5 amortizationOperating (loss) (0.3 ) 48.1 32.1 32.0 profitInterest expense, 14.8 18.3 28.0 41.0 netDebt related loss 3.1 (146.8 ) 3.0 (149.9 )(gain)Gain on sale (24.5 ) ? (24.5 ) ? leasebackIncome before 6.3 176.6 25.6 140.9 income taxesIncome tax 1.1 26.7 5.3 14.6 provisionNet income $ 5.2 $ 149.9 $ 20.3 $ 126.3 Earnings per common share:Basic $ 0.12 $ 4.29 $ 0.50 $ 3.62 Diluted $ 0.12 $ 4.17 $ 0.49 $ 3.56 Weighted-averagecommon shares outstanding:Basic 42,159,899 34,902,380 40,272,308 34,902,380 Diluted 43,661,417 35,908,553 41,685,944 35,496,262

JOANN Inc.

Consolidated Balance Sheets

(Unaudited)

July 31, August 1, 2021 2020 (Dollars in millions) Assets Current assets: Cash and cash equivalents $ 22.1 $ 41.1 Inventories 632.0 601.1 Prepaid expenses and other current assets 78.2 39.4 Total current assets 732.3 681.6 Property, equipment and leasehold improvements, net 263.4 305.7 Operating lease assets 847.8 893.0 Goodwill, net 162.0 162.0 Intangible assets, net 373.8 380.7 Other assets 25.5 18.7 Total assets $ 2,404.8 $ 2,441.7 Liabilities and Shareholders? Equity (Deficit) Current liabilities: Accounts payable $ 266.2 $ 284.8 Accrued expenses 136.6 145.0 Current portion of operating lease liabilities 175.0 176.0 Current portion of long-term debt 6.8 ? Total current liabilities 584.6 605.8 Long-term debt, net 771.2 905.0 Long-term operating lease liabilities 771.8 838.4 Long-term deferred income taxes 87.5 92.2 Other long-term liabilities 52.7 44.9 Shareholders? equity (deficit): Common stock, stated value $0.01 per share 0.4 0.3 Additional paid-in capital 202.8 124.0 Retained deficit (52.9 ) (155.0 )Accumulated other comprehensive loss ? (0.6 )Treasury stock at cost (13.3 ) (13.3 )Total shareholders? equity (deficit) 137.0 (44.6 )Total liabilities and shareholders? equity $ 2,404.8 $ 2,441.7 (deficit)

JOANN Inc.

Reconciliation of Net Income (Loss) to Adjusted EBITDA

(Unaudited)

Thirteen Weeks Ended Twenty-Six Weeks Ended July August August July August August 31, 1, 3, 31, 1, 3, 2021 2020 2019 2021 2020 2019 (Dollars in millions) Net income $ 5.2 $ 149.9 $ (167.8 ) $ 20.3 $ 126.3 $ (180.1 )(loss)Income taxprovision 1.1 26.7 (16.0 ) 5.3 14.6 (19.2 )(benefit)Interest 14.8 18.3 25.4 28.0 41.0 51.5 expense, netDebt related 3.1 (146.8 ) ? 3.0 (149.9 ) ? loss (gain) (1)Gain on sale (24.5 ) ? ? (24.5 ) ? ? leaseback (2)Depreciationand 20.2 19.7 18.8 40.8 39.6 38.3 amortization(3)Strategic 0.5 1.3 1.8 0.8 2.4 5.9 initiatives (4)COVID-19 costs ? 21.1 ? 1.3 31.8 ? (5)Technologydevelopment 1.8 1.3 1.1 3.6 2.4 2.3 expense (6)Stock-basedcompensation 0.7 0.4 0.4 1.3 0.8 0.6 expenseLoss ondisposal andimpairment of ? 0.4 0.1 ? 3.8 0.1 fixed andoperating leaseassetsGoodwill andtrade name ? ? 130.4 ? ? 130.4 impairment (7)Sponsormanagement fee ? ? 1.3 0.4 0.8 2.6 (8)Other (9) 0.6 0.8 0.2 0.7 1.2 1.0 Adjusted EBITDA $ 23.5 $ 93.1 $ (4.3 ) $ 81.0 $ 114.8 $ 33.4

________ ?Debt related loss (gain)? represents losses and gains associated with debt(1) repurchases below par and write off of unamortized fees and original issue discount associated with debt refinancing.(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. ?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(4) 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. ?COVID-19 costs? represents premium pay for location team members, cleaning and location capacity management labor, one-time supply chain disruption(5) costs, incremental seasonal clearance associated with location closures, donations for our mask making initiative and additional location cleaning supplies. ?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(6) 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. Based on our evaluation for impairment of the carrying amount of goodwill and trade name on our balance sheet. Impairment recorded was driven(7) 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. ?Sponsor management fee? represents management fees paid to our sponsor, LGP (or advisory affiliates thereof), in accordance with our management(8) 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.(9) ?Other? represents one-time severance, certain legal, executive leadership transition and business transition expenses.

JOANN Inc.

Reconciliation of Net Income to Adjusted Net (Loss) Income

(Unaudited)

Thirteen Weeks Ended Twenty-Six Weeks Ended July 31, August 1, July 31, August 1, 2021 2020 2021 2020 (Dollars in millions except per share data) Net income $ 5.2 $ 149.9 $ 20.3 $ 126.3 Debt related 3.1 (146.8 ) 3.0 (149.9 )loss (gain)Gain on sale (24.5 ) ? (24.5 ) ? leasebackStrategic 0.5 1.3 0.8 2.4 initiativesCOVID-19 costs ? 21.1 1.3 31.8 Technologydevelopment 1.8 1.3 3.6 2.4 expenseStock-basedcompensation 0.7 0.4 1.3 0.8 expenseLoss on disposaland impairmentof fixed and ? 0.4 ? 3.8 operating leaseassetsSponsor ? ? 0.4 0.8 management feeOther 0.6 0.8 0.7 1.2 Tax impact of 4.3 18.5 3.2 16.6 adjustments (10)Adjusted net $ (8.3 ) $ 46.9 $ 10.1 $ 36.2 (loss) income Diluted earnings $ 0.12 $ 4.17 $ 0.49 $ 3.56 per shareAdjusted diluted(loss) earnings $ (0.20 ) $ 1.31 $ 0.24 $ 1.02 per share Weighted-averageshares 42,159,899 34,902,380 40,272,308 34,902,380 outstanding -basicWeighted-averageshares 43,661,417 35,908,553 41,685,944 35,496,262 outstanding -diluted

________ ?Tax impact of adjustments? represents the tax effect of the total(10) adjustments based on our forecasted annual effective tax rate, before discrete adjustments, for both fiscal 2021 and fiscal 2022.

JOANN Inc.

Reconciliation of Net Cash Provided by Operating Activities to Credit Facility Adjusted EBITDA

(Unaudited)

FourQuartersEnded(in millions) July 31, 2021Net cash provided by operating activities $ 41.8 Non-cash operating lease expense (157.1 )Depreciation and amortization excluding content (81.0 )cost amortizationDeferred income taxes 5.0 Stock-based compensation expense (2.0 )Amortization of deferred financing costs and (3.2 )original issue discountDebt related gain 2.2 Gain on sale leaseback 24.5 Loss on disposal and impairment of other fixed (1.2 )assetsChange in operating assets and liabilities 277.3 Net income $ 106.3 Income tax provision 18.7 Interest expense, net 55.9 Debt related gain (2.2 )Gain on sale leaseback (24.5 )Depreciation and amortization 81.8 Strategic initiatives 4.6 COVID-19 costs 34.5 Technology development expense 7.0 Stock-based compensation expense 2.0 Loss on disposal and impairment of fixed and 1.8 operating lease assetsSponsor management fee 0.9 Other 2.7 Adjusted EBITDA $ 289.5 Pre-opening and closing costs excluding loss on 6.3 disposal of fixed assetsCredit Facility Adjusted EBITDA $ 295.8

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 JOANNs performance across reporting periods on a consistent basis by excluding items that management does not believe are indicative of JOANNs core operating performance. Management believes that Adjusted EBITDA is helpful in highlighting trends in JOANNs 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 measuring 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, COVID-19 costs, technology development expense, stock-based compensation expense, loss on disposal and impairment of fixed and operating lease assets, 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 JOANNs 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 JOANNs 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 JOANNs industry may calculate Adjusted EBITDA differently, limiting its usefulness as a comparative measure.

JOANN compensates for these limitations by relying primarily on JOANNs 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 JOANNs performance across reporting periods on a consistent basis by excluding items that management does not believe are indicative of JOANNs core operating performance. Management believes that adjusted net income (loss) and adjusted diluted earnings (loss) per share are helpful in highlighting trends in JOANNs 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, COVID-19 costs, technology development expense, stock-based compensation expense, loss on disposal and impairment of fixed and operating lease assets, 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.

Credit Facility Adjusted EBITDA

JOANN presents Credit Facility Adjusted EBITDA because it is a measure that is calculated in accordance with JOANNs 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 investors understanding of JOANNs 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 JOANNs 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: the effects of potential changes to U.S. trade regulations and policies, including tariffs, on JOANNs business; developments involving JOANNs competitors and its industry; potential future impacts of the COVID-19 pandemic, including effects on supply chain costs and capacity; JOANNs 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 JOANNs products and its market share; JOANNs expectations regarding the seasonality of its business; JOANNs ability to manage the distinct risks facing its e-commerce business and maintain a relevant omni-channel experience for its customers; JOANNs ability to maintain or negotiate favorable lease terms; JOANNs ability to anticipate and effectively respond to disruptions or inefficiencies in its distribution network, e-commerce fulfillment function and transportation system; JOANNs ability to execute on its growth strategy to renovate and improve the performance of its existing locations; JOANNs ability to execute on its cost-saving initiatives; JOANNs ability to attract and retain a qualified management team and other team members while controlling its labor costs; the impact of JOANNs debt and lease obligations on its ability to raise additional capital to fund its operations and maintain flexibility in operating its business; JOANNs reliance on and relationships with third party service providers; JOANNs reliance on and relationships with foreign suppliers and their ability to supply it with adequate, timely, and cost-effective product supplies; JOANNs 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 JOANNs information systems, including its websites and mobile applications; JOANNs ability to respond to risks associated with existing and future payment options; JOANNs ability to maintain and enhance a strong brand image; JOANNs ability to maintain adequate insurance coverage; JOANNs status as a controlled company and control of JOANN as a public company by affiliates of Leonard Green & Partners, L.P.; and the impact of evolving governmental laws and regulations and the outcomes of legal proceedings.

The preceding list is not intended to be an exhaustive list of all of JOANNs 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 JOANNs control. Furthermore, the potential impact of the COVID-19 pandemic on JOANNs business operations and financial results and on the world economy as a whole may heighten the risks and uncertainties that affect JOANNs 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 JOANNs 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 JOANNs 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 nations category leader in sewing and fabrics and one of the fastest growing competitors in the arts and crafts industry has grown to include 853 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