Act280 Joanne Fabrics PP Presentation Week 5

Running head: JO-ANN FABRIC STORE, INC 1

Jo-Ann Fabric Store, Inc.

Team B: Neil Bernardo, Stephanie Gelman, Will Hazlett, Aimalee Faasavalu

ACC/280 PRINCIPLES OF ACCOUNTING

January 4, 2011

Stanley Tanka

JO-ANN FABRIC STORE, INC. 2

Company History

Formerly known as Fabri-Centers of America, Jo-Ann Stores, Inc., is the country's largest

fabric retailer with sales of nearly $2 billion, 851 fabric stores in 48 states, and an estimated six

percent of the $29 billion retail fabric and craft-supplies market. The company's smaller

"traditional" stores and 35,000 square foot superstores carry wide selections of fabric, notions,

and craft goods. The chain boasts nearly double the sales and locations of its nearest competitor,

Hancock Fabrics. Surviving a dramatic shakeout in the retail fabric industry in the 1990s and

growth pains between 1998 and 2002, Jo-Ann made a strong recovery from its unprofitable years

and looked to expand to 600 or 700 superstores in the early decades of the 21st century.

Founding and Early Development

The chain was founded in 1943 by two German immigrant families, the Rohrbachs and

the Reichs. The Reichs had an importing business dealing in Swiss cheese, anchovy paste, and

pickles, and they invited their friends to start selling fabric in their suburban Cleveland

storefront. When Berthold Rohrbach died that same year, his 30-year-old daughter, Alma

Zimmerman, went to work full-time at the store with Hilda Reich. Hilda's daughter, Betty, joined

the family business in 1947, and she and Alma opened the chain's second store in Cleveland soon

thereafter. Betty married Martin Rosskamm in 1948, and he quit his upper-level management

position at a knitting mill to join the fabric company. Cofounder Hilda Reich continued to

supervise a Fabri-Center store until her death at the age of 87 in 1986. Alma, her husband,


Freddy, and Betty continued to serve on the board of directors into the mid-1990s, but it was

Martin Rosskamm who became a driving force behind the chain's continual expansion

throughout the Midwest. Seeking a less geographically exclusive name to take the chain into the

Pittsburgh area, the families created Jo-Ann by merging two of their children's names: Jo from

Joan Zimmerman and Ann from Jackie Ann Rosskamm. Fabri-Centers' small specialty stores,

which were often located in the regional shopping malls that sprung up in the postwar era,

competed well with the fabric departments of larger general merchandise stores. The chain

incorporated as Cleveland Fabric Shops, Inc. in February 1951, changing its name to Fabri-

Centers of America, Inc. in 1968 and going public the following year. In 1998, the company

changed its name to Jo-Ann Stores, Inc.

Stock Exchange Listing

Jo-Ann Fabric Stores, Inc. is listed on the NYEX Euronext and uses the symbol JAS

Key Dates

1943: The business is founded when the Reich family invites the Rohrbach family to sell fabric

at their suburban Cleveland import store.

1947: The Company opens its second store, in Cleveland.

1951: The Company incorporates as Cleveland Fabric Shops, Inc.

1960s: The shops are renamed Jo-Ann Fabrics as the company expands outside of Cleveland.

1968: The Company changes its name to Fabri-Centers of America, Inc.


1969: Fabri-Centers goes public.

1984: Jo-Ann launches Cargo Express, a discount housewares chain, in an attempt to diversify.

1988: The chain posts its first loss as the economy and the fabric market stagnate. Jo-Ann's

recovery strategy focuses on developing "superstores."

1992: The Company’s stock is reduced to junk-bond status, and it quickly institutes changes in

operations to counter the problem.

1990s: Craft supplies are introduced to the company's merchandise mix.

1993: Cargo Express is put up for sale.

1994: Unable to find a buyer, Jo-Ann liquidates Cargo Express at a loss of $5.2 million.

1998: The Company changes its name to Jo-Ann Stores, Inc.

2000: Jo-Ann struggles with heavy debt and inventory system problems, posting the second loss

in its history.

2003: The Company returns to profitability.

Independent Audit Committee for Jo-Ann Fabric Store, Inc.

Chairperson: Tracey T. Travis Senior Vice President and Chief Financial Officer Polo Ralph Lauren

Scott CowenPresidentTulane University

Frank NewmanChairperson and Chief Executive Officer Medical Nutrition, Inc.


David A. Perdue, Jr.Retired Chairperson and Chief Executive OfficerDollar General Corporation


Cash equivalents at the end of last two

reporting years

January 31

2009

January 31

2008

$80.6 $25.4

Total assets at the end of last two

reporting periods (reported in most

current assets first)

January 31

2009

January 31

2008

$565.2 $547.8

2009 2008

Property, equipment and leasehold

improvements, net$314.8 297.5

Inventories $416.80 $429.4

Companies total assets at end of last

two annual reporting periods

January 31

2009

January 31

2008


$901.1 $869.4

Accounts Payable totals at the end of

the last two annual reporting periods

January 31

2009

January 31

2008

$145.1 $129.4

Total current liabilities at the end of the

two most recent annual reporting

periods

January 31

2009

January 31

2008

$257.6 $239.4


Companies total liabilities at the end of

two most recent annual reporting

periods

January 31

2009

January 31

2008

. $256.6 $239.4

Companies net revenues for last three

annual reporting periods

January 31

2009

January 31

2008

January 31

2007

$1,901.1 - $1,878.8 $1,850.6

Companies net revenues for last three

annual reporting periods

January 31

2009

January 31

2008

January 31

2007

$0.86 $.062 $0.08

Annual net income difference between 2010 and 2009

Period End

2009 Net Income $66.5

2008 Net Income 21.9

$45.4


Annual net income difference between 2009 and 2008

Period End

2009 Net Income $21.9

2008 Net Income 15.4

$6.5


Joan Stores, Inc. is considered a forward thinking company. They seem to be able to spot

and react quickly to changing trends. The corporation’s willingness to diversify in order to keep

their share of the market is one of their strongest characteristics, though not always successful as

with their Cargo Express Company, a discount housewares chain. The highs and lows of Joann

Stores, Inc. follow key economic indicators. From about 1988 to 2002 the high tech industry

was creating minor and major windfalls all over the country. This was a hard time for Joann

Stores and their competition. Sales plummeted and the company took strategic measures to

recover their market share. Though larger than their nearest competitor Hancock Fabrics they

were worth much less due to higher debt load, lower market value and lower profitability. To

rectify this they closed many of their smaller stores and decided to focus on a “Superstore” plan.

They were also forced to liquidate Cargo Express because of its very low profitability and their

inability to sell its assets.. Along with the new store format they also expanded their line to

include arts and craft supplies. Other measures included freezing salaries and reducing

inventory. After these improvements were implemented sales and stocks finally started to rise in

2004. They made a strong recovery by expanding 600 to 700 stores.

In the current market Jo-Ann Stores growth is smaller than in the last five years, though

they are still making a profit. Their stock, JAS just recently took a 36% surge because of the

news that Leonard Green & Partners, a private equity firm, plans to acquire Jo-Ann Stores Inc.

for $1.6 billion in early 2011. Though not looking for a buyer, the Board of Directors decided

that this would be in the best interest of the investors and stockholders.


Jo-Ann Stores, Inc. Income Statement

All amounts in millions of US Dollars except per share amounts.Jan 10 Jan 09 Jan 08

Revenue 1,990.7 1,901.1 1,878.8Cost of Goods Sold 1,015.0 1,018.6 1,006.4Gross Profit 975.7 882.5 872.4Gross Profit Margin 49% 46.4% 46.4%SG&A Expense 805.3 787.6 783.2Depreciation & Amortization 56.3 54.2 51.8Operating Income 114.1 40.7 37.4Operating Margin 5.7% 2.1% 2%Nonoperating Income 1.3 4.2 (12.5)Nonoperating Expenses (6.3) -- --Income Before Taxes 109.1 35.5 24.9Income Taxes 42.5 13.6 9.5Net Income After Taxes 66.6 21.9 15.4Continuing Operations 66.6 21.9 15.4Discontinued Operations -- -- --Total Operations 66.6 21.9 15.4Total Net Income 66.6 21.9 15.4Net Profit Margin 3.3% 1.2% 0.8%Diluted EPS from Total Net Income 2.51 0.86 0.62Dividends per Share -- -- --


Jo-Ann Stores, Inc. Balance Sheet

All amounts in millions of US Dollars except per share amounts.Assets Jan 10 Jan 09 Jan 08Current AssetsCash 217.1 80.6 25.4Net Receivables -- -- --Inventories 416.8 429.4 472.2Other Current Assets 52.2 55.2 50.2Total Current Assets 686.1 565.2 547.8Net Fixed Assets 293.7 314.8 297.5Other Noncurrent Assets 20.6 21.1 24.1Total Assets 1,000.4 901.1 869.4Liabilities and Shareholder's Equity Jan 10 Jan 09 Jan 08Current LiabilitiesAccounts Payable 151.1 145.1 145.3Short-Term Debt 47.5 -- --Other Current Liabilities 128.6 112.5 97.1Total Current Liabilities 327.2 257.6 242.4Long-Term Debt 105.4 162.6 187.0Other Noncurrent Liabilities 2.2 3.2 0.0Total Liabilities 434.8 423.4 429.4Shareholder's EquityPreferred Stock Equity 0.0 -- --Common Stock Equity 565.6 477.7 440.0Total Equity 565.6 477.7 440.0Shares Outstanding (thou.) 26,332.2 26,332.2 26,332.2


Jo-Ann Stores, Inc. Cash Flow Statement

All amounts in millions of US Dollars except per share amounts.Jan 10 Jan 09 Jan 08

Net Operating Cash Flow 184 158 74Net Investing Cash Flow (42.8) (77.8) (49.4)Net Financing Cash Flow (4.7) (24.9) (17.2)Net Change in Cash 136.5 55.2 7.0Depreciation & Amortization 56.3 54.2 51.8Capital Expenditures (39.7) (74.7) (37.7)Cash Dividends Paid


References

Daily Finance. (January 4,2011). Jo-Ann Store, Inc. Retrieved from

http://www.dailyfinance.com/company/jo-ann-stores-inc/jas/nys

Hoovers.com. (2010). Jo-ann Stores, Inc.. Retrieved from http://www.hoovers.com/company/Jo-

Ann_Stores_inc/rfhcyi-1-1njea5

Jo-Ann Fabric Store, Inc.. (2010). Committee Compisition. Retrieved from

http://www.joann.com/joann/common/content_corporate.jsp?catName=irCorpGovCom

annualreports.com. (2010). Jo Ann Fabrics, Inc. Retrieved from

http://annualreports.com/HostData/AnnualReports/PDFArchive?jas.PDF.

www.annualreports.com. (2009). Jo-Ann Stores, Inc 2009 Annual Report. Retrieved from

http://www.annualreports.com/HostedData/AnnualReports/PDFArchive/jas2009.pdf

www.bizjournals.com. (January 23,2010). Washington Business Journal. Retrieved from

http://www.bizjournals.com/washington/news/2010/12/23/private-equity-firm-bids-16b-

for.html

Act280 Joanne Fabrics PP Presentation Week 5

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