##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 WASHINGTON, D.C. 20549
 
 FORM 10 - Q
 QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
 For the Quarterly Period Ended May 2, 2009
 Commission File No. 1-6695
 
 Jo-Ann Stores, Inc.
  Ohio
    
    34-0720629(State or other jurisdiction of
    
    (I.R.S. Employer Identification No.)incorporation or organization)5555 Darrow Road, Hudson, Ohio
    
    44236(Address of principal executive offices)
    
    (Zip Code)
 (330) 656-2600
 þ o
 o o
  Large accelerated filer o
    
    Accelerated filer þ
    
    Non-accelerated filer o
(Do not check if a smaller reporting company)
    
    Smaller reporting company o
 Yes o No þ




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##### 



Jo-Ann Stores, Inc.
Form 10-Q Index
For the Quarter Ended May 2, 2009
 Page NumbersPart I. Financial InformationItem 1. Financial StatementsConsolidated Balance Sheets  May 2, 2009 (Unaudited),
May 3, 2008 (Unaudited) and January 31, 2009
    
    
    1Unaudited Consolidated Statements of Operations for the Thirteen
Weeks Ended May 2, 2009 and May 3, 2008
    
    
    2Unaudited Consolidated Statements of Cash Flows for the
Thirteen Weeks Ended May 2, 2009 and May 3, 2008
    
    
    3Notes to Unaudited Consolidated Financial Statements
    
    
    4Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    12Item 3. Quantitative and Qualitative Disclosures About Market Risk
    
    
    22Item 4. Controls and Procedures
    
    
    22Part II. Other InformationItem 1. Legal Proceedings
    
    
    23Item 1A. Risk Factors
    
    
    23Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    24Item 3. Defaults Upon Senior Securities
    
    
    24Item 4. Submission of Matters to a Vote of Security Holders
    
    
    24Item 5. Other Information
    
    
    24Item 6. Exhibits
    
    
    24Signatures
    
    
    25Exhibit 31.1Exhibit 31.2Exhibit 32.1




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##### Table of Contents



PART I. FINANCIAL INFORMATION
 
 Item 1. Financial Statements
 Jo-Ann Stores, Inc.
 
 Consolidated Balance Sheets
 (Unaudited)May 2,
    
    
    May 3,
    
    
    January 31,2009
    
    
    2008
    
    
    2009(Dollars in millions, except share and per share data)AssetsCurrent assets:Cash and cash equivalents
    
    $
    85.0
    
    
    $
    57.9
    
    
    $
    80.6Inventories
    
    
    406.6
    
    
    
    426.9
    
    
    
    429.4Deferred income taxes
    
    
    21.0
    
    
    
    25.6
    
    
    
    23.5Prepaid expenses and other current assets
    
    
    28.5
    
    
    
    23.3
    
    
    
    31.7Total current assets
    
    
    541.1
    
    
    
    533.7
    
    
    
    565.2Property, equipment and leasehold improvements, net
    
    
    307.0
    
    
    
    297.5
    
    
    
    314.8Goodwill
    
    
    11.6
    
    
    
    11.8
    
    
    
    11.6Other assets
    
    
    8.4
    
    
    
    11.8
    
    
    
    9.5Total assets
    
    $
    868.1
    
    
    $
    854.8
    
    
    $
    901.1Liabilities and Shareholders EquityCurrent liabilities:Accounts payable
    
    $
    135.6
    
    
    $
    125.8
    
    
    $
    145.1Accrued expenses
    
    
    94.0
    
    
    
    95.9
    
    
    
    112.5Total current liabilities
    
    
    229.6
    
    
    
    221.7
    
    
    
    257.6Long-term debt
    
    
    50.5
    
    
    
    100.0
    
    
    
    66.0Long-term deferred income taxes
    
    
    3.1
    
    
    
    
    
    
    
    3.2Lease obligations and other long-term liabilities
    
    
    97.1
    
    
    
    88.4
    
    
    
    96.6Shareholders equity:Preferred stock, no par value, 5,000,000 shares authorized, none issued
    
    
    
    
    
    
    
    
    
    
    Common stock, stated value $0.05 per share; 150,000,000 authorized;
issued 29,188,133; 28,319,612 and 28,872,085 shares, respectively
    
    
    1.5
    
    
    
    1.4
    
    
    
    1.4Additional paid-in capital
    
    
    214.2
    
    
    
    197.2
    
    
    
    211.7Retained earnings
    
    
    319.0
    
    
    
    291.5
    
    
    
    310.4534.7
    
    
    
    490.1
    
    
    
    523.5Treasury stock, at cost; 3,744,482; 3,645,488 and 3,667,677 shares, respectively
    
    
    (46.9
    )
    
    
    (45.4
    )
    
    
    (45.8
    )Total shareholders equity
    
    
    487.8
    
    
    
    444.7
    
    
    
    477.7Total liabilities and shareholders equity
    
    $
    868.1
    
    
    $
    854.8
    
    
    $
    901.1
   1




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##### Table of Contents



Jo-Ann Stores, Inc.
 
 Consolidated Statements of Operations
 (Unaudited)
 Thirteen Weeks EndedMay 2,
    
    
    May 3,2009
    
    
    2008(Dollars in millions, except shareand per share data)Net sales
    
    $
    460.0
    
    
    $
    446.1Cost of sales (exclusive of depreciation and
amortization shown separately
below)
    
    
    237.1
    
    
    
    239.3Gross margin
    
    
    222.9
    
    
    
    206.8Selling, general and administrative expenses
    
    
    190.4
    
    
    
    184.5Store pre-opening and closing costs
    
    
    3.6
    
    
    
    1.8Depreciation and amortization
    
    
    14.0
    
    
    
    13.1Operating profit
    
    
    14.9
    
    
    
    7.4Gain on purchase of senior subordinated notes
    
    
    (1.2
    )
    
    
    Interest expense, net
    
    
    1.6
    
    
    
    2.4Income before income taxes
    
    
    14.5
    
    
    
    5.0Income tax provision
    
    
    5.9
    
    
    
    2.0Net income
    
    $
    8.6
    
    
    $
    3.0Net income per common share  basic
    
    $
    0.34
    
    
    $
    0.12Net income per common share  diluted
    
    $
    0.33
    
    
    $
    0.12Weighted average shares outstanding (in thousands):Basic
    
    
    25,303
    
    
    
    24,542Diluted
    
    
    25,844
    
    
    
    25,043
   2




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##### Table of Contents



Jo-Ann Stores, Inc.
 
 Consolidated Statements of Cash Flows
 (Unaudited)
 Thirteen Weeks EndedMay 2,
    
    
    May 3,2009
    
    
    2008(Dollars in millions)Net cash flows provided by operating activities:Net income
    
    $
    8.6
    
    
    $
    3.0Adjustments to reconcile net income to net cash provided
by operating activities:Depreciation and amortization
    
    
    14.0
    
    
    
    13.1Deferred income taxes
    
    
    2.4
    
    
    
    0.4Stock-based compensation expense
    
    
    1.6
    
    
    
    2.0Amortization of deferred financing costs
    
    
    0.2
    
    
    
    0.2Loss on disposal of fixed assets
    
    
    0.5
    
    
    
    0.2Gain on purchase of senior subordinated notes
    
    
    (1.2
    )
    
    
    Changes in operating assets and liabilities:Decrease in inventories
    
    
    22.8
    
    
    
    45.3Decrease in prepaid expenses and other current assets
    
    
    3.2
    
    
    
    0.5Decrease in accounts payable
    
    
    (9.5
    )
    
    
    (3.6
    )Decrease in accrued expenses
    
    
    (18.5
    )
    
    
    (14.1
    )Decrease in lease obligations, net
    
    
    
    
    
    
    (1.6
    )Increase in other long-term liabilities
    
    
    0.5
    
    
    
    Other, net
    
    
    0.6
    
    
    
    0.3Net cash provided by operating activities
    
    
    25.2
    
    
    
    45.7Cash flows used for investing activities:Capital expenditures
    
    
    (6.6
    )
    
    
    (13.3
    )Cash used for investing activities
    
    
    (6.6
    )
    
    
    (13.3
    )Net cash flows (used for) provided by financing activities:Purchase of senior subordinated notes
    
    
    (14.1
    )
    
    
    Proceeds from stock-based compensation plans
    
    
    1.3
    
    
    
    1.0Other, net
    
    
    (1.4
    )
    
    
    (0.9
    )Net cash (used for) provided by financing activities
    
    
    (14.2
    )
    
    
    0.1Net increase in cash and cash equivalents
    
    
    4.4
    
    
    
    32.5Cash and cash equivalents at beginning of period
    
    
    80.6
    
    
    
    25.4Cash and cash equivalents at end of period
    
    $
    85.0
    
    
    $
    57.9Supplemental disclosures of cash flow information:Cash paid (received) during the period for:Interest
    
    $
    2.8
    
    
    $
    4.0Income taxes, net of refunds
    
    
    7.7
    
    
    
    1.7
   3




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##### Table of Contents



Notes to Consolidated Financial Statements (Unaudited)
 Jo-Ann Stores, Inc
 Note 1  Basis of Presentation
       Note 2  Earnings Per Share
   4




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##### Table of Contents



Thirteen Weeks EndedMay 2,
    
    
    May 3,2009
    
    
    2008Weighted average shares outstanding:Basic common shares
    
    
    25,303
    
    
    
    24,542Incremental shares from assumed exercise of stock options
    
    
    60
    
    
    
    177Incremental restricted shares
    
    
    481
    
    
    
    324Diluted common shares
    
    
    25,844
    
    
    
    25,043
   Note 3  Shareholders Equity
  Common


    
    
    Additional
    
    
    
    
    
    
    
    
    TotalCommon
    
    

    Treasury



    
    
    Stock Stated
    
    
    Paid-In
    
    
    Treasury
    
    
    Retained
    
    
    ShareholdersShares
    
    
    Shares



   
    
    Value
    
    
    Capital
    
    
    Stock
    
    
    Earnings
    
    
    Equity(Shares in thousands)

    
    
    (Dollars in millions)Balance, January 31, 2009
    
    
    25,204
    
    
    
    3,668



    
    
    $
    1.4
    
    
    $
    211.7
    
    
    $
    (45.8
    )
    
    $
    310.4
    
    
    $
    477.7Net income
    
    
    
    
    
    
    



    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    8.6
    
    
    
    8.6Exercise of stock options
    
    
    40
    
    
    
    



    
    
    
    
    
    
    
    0.4
    
    
    
    
    
    
    
    
    
    
    
    0.4Excess tax benefits
(deficits) on
equity compensation
    
    
    
    
    
    
    



    
    
    
    
    
    
    
    (0.3
    )
    
    
    
    
    
    
    
    
    
    
    (0.3
    )Stock-based compensation
    
    
    214
    
    
    
    



    
    
    
    0.1
    
    
    
    1.5
    
    
    
    
    
    
    
    
    
    
    
    1.6Purchase of common stock
    
    
    (76
    )
    
    
    76



    
    
    
    
    
    
    
    
    
    
    
    (1.1
    )
    
    
    
    
    
    
    (1.1
    )Associate Stock
Ownership Plan
    
    
    62
    
    
    
    




    
    
    
    
    
    
    
    0.9
    
    
    
    
    
    
    
    
    
    
    
    0.9Year-to-date activity
    
    
    240
    
    
    
    76



    
    
    
    0.1
    
    
    
    2.5
    
    
    
    (1.1
    )
    
    
    8.6
    
    
    
    10.1Balance, May 2, 2009
    
    
    25,444
    
    
    
    3,744



    
    
    $
    1.5
    
    
    $
    214.2
    
    
    $
    (46.9
    )
    
    $
    319.0
    
    
    $
    487.8
  Note 4  Financing
   5




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Note 5  Segment Reporting
    Large-format
    
    
    Small-format(Dollars in millions)
    
    Stores
    
    
    Stores
    
    
    Other
    
    
    ConsolidatedThirteen Weeks Ended May 2, 2009Net sales
    
    $
    244.1
    
    
    $
    206.4
    
    
    $
    9.5
    
    
    $
    460.0Store pre-opening and closing costs
    
    
    1.8
    
    
    
    1.8
    
    
    
    
    
    
    
    3.6Depreciation and amortization
    
    
    7.8
    
    
    
    2.7
    
    
    
    3.5
    
    
    
    14.0Operating profit (loss)
    
    
    21.5
    
    
    
    26.0
    
    
    
    (32.6
    )
    
    
    14.9Capital expenditures
    
    
    3.6
    
    
    
    0.8
    
    
    
    2.2
    
    
    
    6.6Property, equipment and leasehold
improvements, net
    
    
    166.3
    
    
    
    49.4
    
    
    
    91.3
    
    
    
    307.0Thirteen Weeks Ended May 3, 2008Net sales
    
    $
    230.8
    
    
    $
    207.1
    
    
    $
    8.2
    
    
    $
    446.1Store pre-opening and closing costs
    
    
    1.2
    
    
    
    0.6
    
    
    
    
    
    
    
    1.8Depreciation and amortization
    
    
    7.8
    
    
    
    2.2
    
    
    
    3.1
    
    
    
    13.1Operating profit (loss)
    
    
    15.6
    
    
    
    24.8
    
    
    
    (33.0
    )
    
    
    7.4Capital expenditures
    
    
    4.5
    
    
    
    0.8
    
    
    
    8.0
    
    
    
    13.3Property, equipment and leasehold
improvements, net
    
    
    161.4
    
    
    
    34.9
    
    
    
    101.2
    
    
    
    297.5
  6




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##### Table of Contents



Note 6  Recent Accounting Pronouncements
    
    
    FSP FAS 107-1 and Accounting Principles Board 28-1: Interim Disclosures about Fair
Value of Financial Instruments (FSP FAS 107-1), which requires disclosures regarding
fair value of financial instruments to be disclosed on an interim as well as on an annual
basis;
 
    
    FSP FAS 157-4, Determining Fair Value When the Volume and Level of Activity for the
Asset or Liability Have Significantly Decreased and Identifying Transactions That Are Not
Orderly (FSP FAS 157-4), which provides additional guidance regarding (1) estimating
the fair value of an asset or liability when the volume and level of activity for the
asset or liability have significantly declined and (2) identifying transactions that are
not orderly, as well as requiring disclosures in interim periods of the inputs and
valuation techniques used to measure fair value.
  Note 7  Consolidating Financial Statements (Unaudited)
   7




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##### Table of Contents



Note 7  Consolidating Financial Statements (Unaudited)  CONTINUED
  Consolidating Balance Sheets
May 2, 2009
 GuarantorParent
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    Consolidated(Dollars in millions)AssetsCurrent assets:Cash and cash equivalents
    
    $
    59.6
    
    
    $
    25.4
    
    
    $
    
    
    
    $
    85.0Inventories
    
    
    210.0
    
    
    
    196.6
    
    
    
    
    
    
    
    406.6Deferred income taxes
    
    
    14.9
    
    
    
    6.1
    
    
    
    
    
    
    
    21.0Prepaid expenses and other current assets
    
    
    23.3
    
    
    
    5.2
    
    
    
    
    
    
    
    28.5Total current assets
    
    
    307.8
    
    
    
    233.3
    
    
    
    
    
    
    
    541.1Property, equipment and leasehold improvements,
net
    
    
    161.0
    
    
    
    146.0
    
    
    
    
    
    
    
    307.0Goodwill
    
    
    11.6
    
    
    
    
    
    
    
    
    
    
    
    11.6Other assets
    
    
    (5.0
    )
    
    
    13.4
    
    
    
    
    
    
    
    8.4Investment in subsidiaries
    
    
    107.0
    
    
    
    
    
    
    
    (107.0
    )
    
    
    Intercompany receivable
    
    
    277.1
    
    
    
    
    
    
    
    (277.1
    )
    
    
    Total assets
    
    $
    859.5
    
    
    $
    392.7
    
    
    $
    (384.1
    )
    
    $
    868.1Liabilities and Shareholders EquityCurrent liabilities:Accounts payable
    
    $
    154.8
    
    
    $
    (19.2
    )
    
    $
    
    
    
    $
    135.6Accrued expenses
    
    
    96.5
    
    
    
    (2.5
    )
    
    
    
    
    
    
    94.0Total current liabilities
    
    
    251.3
    
    
    
    (21.7
    )
    
    
    
    
    
    
    229.6Long-term debt
    
    
    50.5
    
    
    
    
    
    
    
    
    
    
    
    50.5Long-term deferred income taxes
    
    
    (3.2
    )
    
    
    6.3
    
    
    
    
    
    
    
    3.1Lease obligations and other long-term liabilities
    
    
    73.1
    
    
    
    24.0
    
    
    
    
    
    
    
    97.1Intercompany payable
    
    
    
    
    
    
    277.1
    
    
    
    (277.1
    )
    
    
    Shareholders equity:Preferred stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Common stock
    
    
    1.5
    
    
    
    
    
    
    
    
    
    
    
    1.5Additional paid-in capital
    
    
    214.2
    
    
    
    
    
    
    
    
    
    
    
    214.2Retained earnings
    
    
    319.0
    
    
    
    107.0
    
    
    
    (107.0
    )
    
    
    319.0534.7
    
    
    
    107.0
    
    
    
    (107.0
    )
    
    
    534.7Treasury stock, at cost
    
    
    (46.9
    )
    
    
    
    
    
    
    
    
    
    
    (46.9
    )Total shareholders equity
    
    
    487.8
    
    
    
    107.0
    
    
    
    (107.0
    )
    
    
    487.8Total liabilities and shareholders equity
    
    $
    859.5
    
    
    $
    392.7
    
    
    $
    (384.1
    )
    
    $
    868.1
  8




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##### Table of Contents



Note 7  Consolidating Financial Statements (Unaudited)  CONTINUED
 Consolidating Balance Sheets
January 31, 2009
 GuarantorParent
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    Consolidated(Dollars in millions)AssetsCurrent assets:Cash and cash equivalents
    
    $
    55.0
    
    
    $
    25.6
    
    
    $
    
    
    
    $
    80.6Inventories
    
    
    206.5
    
    
    
    222.9
    
    
    
    
    
    
    
    429.4Deferred income taxes
    
    
    16.2
    
    
    
    7.3
    
    
    
    
    
    
    
    23.5Prepaid expenses and other current assets
    
    
    25.5
    
    
    
    6.2
    
    
    
    
    
    
    
    31.7Total current assets
    
    
    303.2
    
    
    
    262.0
    
    
    
    
    
    
    
    565.2Property, equipment and leasehold improvements,
net
    
    
    165.5
    
    
    
    149.3
    
    
    
    
    
    
    
    314.8Goodwill
    
    
    11.6
    
    
    
    
    
    
    
    
    
    
    
    11.6Other assets
    
    
    (3.9
    )
    
    
    13.4
    
    
    
    
    
    
    
    9.5Investment in subsidiaries
    
    
    100.0
    
    
    
    
    
    
    
    (100.0
    )
    
    
    Intercompany receivable
    
    
    307.7
    
    
    
    
    
    
    
    (307.7
    )
    
    
    Total assets
    
    $
    884.1
    
    
    $
    424.7
    
    
    $
    (407.7
    )
    
    $
    901.1Liabilities and Shareholders EquityCurrent liabilities:Accounts payable
    
    $
    158.6
    
    
    $
    (13.5
    )
    
    $
    
    
    
    $
    145.1Accrued expenses
    
    
    112.5
    
    
    
    
    
    
    
    
    
    
    
    112.5Total current liabilities
    
    
    271.1
    
    
    
    (13.5
    )
    
    
    
    
    
    
    257.6Long-term debt
    
    
    66.0
    
    
    
    
    
    
    
    
    
    
    
    66.0Long-term deferred income taxes
    
    
    (3.4
    )
    
    
    6.6
    
    
    
    
    
    
    
    3.2Lease obligations and other long-term liabilities
    
    
    72.7
    
    
    
    23.9
    
    
    
    
    
    
    
    96.6Intercompany payable
    
    
    
    
    
    
    307.7
    
    
    
    (307.7
    )
    
    
    Shareholders equity:Preferred stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Common stock
    
    
    1.4
    
    
    
    
    
    
    
    
    
    
    
    1.4Additional paid-in capital
    
    
    211.7
    
    
    
    
    
    
    
    
    
    
    
    211.7Retained earnings
    
    
    310.4
    
    
    
    100.0
    
    
    
    (100.0
    )
    
    
    310.4523.5
    
    
    
    100.0
    
    
    
    (100.0
    )
    
    
    523.5Treasury stock, at cost
    
    
    (45.8
    )
    
    
    
    
    
    
    
    
    
    
    (45.8
    )Total shareholders equity
    
    
    477.7
    
    
    
    100.0
    
    
    
    (100.0
    )
    
    
    477.7Total liabilities and shareholders equity
    
    $
    884.1
    
    
    $
    424.7
    
    
    $
    (407.7
    )
    
    $
    901.1
  9




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##### Table of Contents



Note 7  Consolidating Financial Statements (Unaudited)  CONTINUED
 Consolidating Statements of Operations
Thirteen Weeks Ended May 2, 2009 and May 3, 2008
 May 2, 2009GuarantorParent
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    Consolidated(Dollars in millions)Net sales
    
    $
    253.3
    
    
    $
    340.7
    
    
    $
    (134.0
    )
    
    $
    460.0Cost of sales (exclusive of depreciation and
amortization shown separately below)
    
    
    140.5
    
    
    
    230.6
    
    
    
    (134.0
    )
    
    
    237.1Gross margin
    
    
    112.8
    
    
    
    110.1
    
    
    
    
    
    
    
    222.9Selling, general and administrative expenses
    
    
    100.5
    
    
    
    89.9
    
    
    
    
    
    
    
    190.4Store pre-opening and closing costs
    
    
    2.2
    
    
    
    1.4
    
    
    
    
    
    
    
    3.6Depreciation and amortization
    
    
    7.6
    
    
    
    6.4
    
    
    
    
    
    
    
    14.0Operating profit
    
    
    2.5
    
    
    
    12.4
    
    
    
    
    
    
    
    14.9Gain on purchase of senior subordinated notes
    
    
    (1.2
    )
    
    
    
    
    
    
    
    
    
    
    (1.2
    )Interest expense, net
    
    
    0.8
    
    
    
    0.8
    
    
    
    
    
    
    
    1.6Income before income taxes
    
    
    2.9
    
    
    
    11.6
    
    
    
    
    
    
    
    14.5Income tax provision
    
    
    1.3
    
    
    
    4.6
    
    
    
    
    
    
    
    5.9Income before equity income
    
    
    1.6
    
    
    
    7.0
    
    
    
    
    
    
    
    8.6Equity income from subsidiaries
    
    
    7.0
    
    
    
    
    
    
    
    (7.0
    )
    
    
    Net income
    
    $
    8.6
    
    
    $
    7.0
    
    
    $
    (7.0
    )
    
    $
    8.6
 May 3 , 2008GuarantorParent
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    Consolidated(Dollars in millions)Net sales
    
    $
    238.6
    
    
    $
    336.6
    
    
    $
    (129.1
    )
    
    $
    446.1Cost of sales (exclusive of depreciation and
amortization shown separately below)
    
    
    139.6
    
    
    
    228.8
    
    
    
    (129.1
    )
    
    
    239.3Gross margin
    
    
    99.0
    
    
    
    107.8
    
    
    
    
    
    
    
    206.8Selling, general and administrative expenses
    
    
    88.4
    
    
    
    96.1
    
    
    
    
    
    
    
    184.5Store pre-opening and closing costs
    
    
    0.9
    
    
    
    0.9
    
    
    
    
    
    
    
    1.8Depreciation and amortization
    
    
    6.5
    
    
    
    6.6
    
    
    
    
    
    
    
    13.1Operating profit
    
    
    3.2
    
    
    
    4.2
    
    
    
    
    
    
    
    7.4Interest expense, net
    
    
    1.1
    
    
    
    1.3
    
    
    
    
    
    
    
    2.4Income before income taxes
    
    
    2.1
    
    
    
    2.9
    
    
    
    
    
    
    
    5.0Income tax provision
    
    
    1.0
    
    
    
    1.0
    
    
    
    
    
    
    
    2.0Income before equity income
    
    
    1.1
    
    
    
    1.9
    
    
    
    
    
    
    
    3.0Equity income from subsidiaries
    
    
    1.9
    
    
    
    
    
    
    
    (1.9
    )
    
    
    Net income
    
    $
    3.0
    
    
    $
    1.9
    
    
    $
    (1.9
    )
    
    $
    3.0
  10




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##### Table of Contents



Note 7  Consolidating Financial Statements (Unaudited)  CONTINUED
 Consolidating Statements of Cash Flows  Thirteen Weeks Ended May 2, 2009 and May 3, 2008
 May 2, 2009GuarantorParent
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    Consolidated(Dollars in millions)Net cash provided by operating activities
    
    $
    22.8
    
    
    $
    2.4
    
    
    $
    
    
    
    $
    25.2Cash flows used for investing activities:Capital expenditures
    
    
    (4.0
    )
    
    
    (2.6
    )
    
    
    
    
    
    
    (6.6
    )Cash used for investing activities
    
    
    (4.0
    )
    
    
    (2.6
    )
    
    
    
    
    
    
    (6.6
    )Net cash flows used for financing activities:Purchase of senior subordinated notes
    
    
    (14.1
    )
    
    
    
    
    
    
    
    
    
    
    (14.1
    )Proceeds from stock-based compensation plans
    
    
    1.3
    
    
    
    
    
    
    
    
    
    
    
    1.3Other, net
    
    
    (1.4
    )
    
    
    
    
    
    
    
    
    
    
    (1.4
    )Net cash used for financing activities
    
    
    (14.2
    )
    
    
    
    
    
    
    
    
    
    
    (14.2
    )Net increase (decrease) in cash and cash equivalents
    
    
    4.6
    
    
    
    (0.2
    )
    
    
    
    
    
    
    4.4Cash and cash equivalents at beginning of period
    
    
    55.0
    
    
    
    25.6
    
    
    
    
    
    
    
    80.6Cash and cash equivalents at end of period
    
    $
    59.6
    
    
    $
    25.4
    
    
    $
    
    
    
    $
    85.0
 May 3, 2008GuarantorParent
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    Consolidated(Dollars in millions)Net cash provided by operating activities
    
    $
    42.3
    
    
    $
    3.4
    
    
    $
    
    
    
    $
    45.7Cash flows used for investing activities:Capital expenditures
    
    
    (9.9
    )
    
    
    (3.4
    )
    
    
    
    
    
    
    (13.3
    )Cash used for investing activities
    
    
    (9.9
    )
    
    
    (3.4
    )
    
    
    
    
    
    
    (13.3
    )Net cash flows provided by financing activities:Proceeds from stock-based compensation plans
    
    
    1.0
    
    
    
    
    
    
    
    
    
    
    
    1.0Other, net
    
    
    (0.9
    )
    
    
    
    
    
    
    
    
    
    
    (0.9
    )Net cash provided by financing activities
    
    
    0.1
    
    
    
    
    
    
    
    
    
    
    
    0.1Net increase in cash and cash equivalents
    
    
    32.5
    
    
    
    
    
    
    
    
    
    
    
    32.5Cash and cash equivalents at beginning of period
    
    
    (1.0
    )
    
    
    26.4
    
    
    
    
    
    
    
    25.4Cash and cash equivalents at end of period
    
    $
    31.5
    
    
    $
    26.4
    
    
    $
    
    
    
    $
    57.9
  11




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##### Table of Contents



Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
  General Overview
    Executive Overview
   
    
    Margin expansion;
 
    
    Further enhance our customer shopping experience;
 
    
    Continue to update our store base; and
 
    
    Improve our leasing terms.
   12




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##### Table of Contents




    
    More direct sourcing of products from Asia;
 
    
    Product cost deflation on imported merchandise;
 
    
    Lower transportation expenses;
 
    
    Reduced seasonal and fashion merchandise; and
 
    
    Improvements in markdown controls from our new POS system enhancements.
    13




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##### Table of Contents



Recent Developments and Business Update
 Outlook for Fiscal 2010
   
    
    Same-store sales decline of 2% to 4% for the year;
 
    
    Gross margin rate improvement for the year;
 
    
    Higher selling, general and administrative expenses as a percentage of net sales for the
year;
 
    
    Capital expenditures, net of landlord allowances, for the full year of $30 to $32
million;
 
    
    Earnings per diluted share in the range of $0.70 to $0.85 for the year (excluding any
gains on debt purchases);
 
    
    Free cash flow in the range of $50 to $58 million for the year; (free cash flow defined
as net income plus depreciation and amortization, stock-based compensation expense and
changes in working capital, less capital expenditures);
 
    
    Weighted-average diluted share count of approximately 26 million shares for the year.
  14




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##### Table of Contents



Results of Operations
  Percentage of Net SalesThirteen Weeks EndedMay 2,
    
    
    May 3,2009
    
    
    2008Net sales
    
    
    100.0
    %
    
    
    100.0
    %Gross margin
    
    
    48.5
    %
    
    
    46.4
    %Selling, general and administrative
expenses
    
    
    41.4
    %
    
    
    41.4
    %Store pre-opening and closing costs
    
    
    0.8
    %
    
    
    0.4
    %Depreciation and amortization
    
    
    3.1
    %
    
    
    2.9
    %Operating profit
    
    
    3.2
    %
    
    
    1.7
    %
 Comparison of the Thirteen Weeks Ended May 2, 2009 to May 3, 2008
 Net Sales .
  Percentage(Dollars in millions)
    
    May 2, 2009
    
    
    May 3, 2008
    
    
    ChangeConsolidated net sales
    
    $
    460.0
    
    
    $
    446.1
    
    
    
    3.1
    %Increase from prior year
    
    $
    13.9Same-store sales percentage change
    
    
    1.0
    %
    
    
    4.5
    %
     15




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##### Table of Contents



Percentage(Dollars in millions)
    
    May 2, 2009
    
    
    May 3, 2008
    
    
    ChangeLarge-format storesNet sales
    
    $
    244.1
    
    
    $
    230.8
    
    
    
    5.8
    %Increase from prior year
    
    $
    13.3Same-store sales percentage change
    
    
    (0.6
    )%
    
    
    3.3
    %Small-format storesNet sales
    
    $
    206.4
    
    
    $
    207.1
    
    
    
    (0.3
    )%Decrease from prior year
    
    $
    (0.7
    )Same-store sales percentage change
    
    
    3.0
    %
    
    
    5.8
    %OtherNet sales
    
    $
    9.5
    
    
    $
    8.2
    
    
    
    15.9
    %Increase from prior year
    
    $
    1.3
       16




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##### Table of Contents



Gross Margin.
  Percentage(Dollars in millions)
    
    May 2, 2009
    
    
    May 3, 2008
    
    
    ChangeGross margin
    
    $
    222.9
    
    
    $
    206.8
    
    
    
    7.8
    %Increase from prior year
    
    $
    16.1Percentage of consolidated net sales
    
    
    48.5
    %
    
    
    46.4
    %
  Selling, general and administrative expenses.
   Percentage(Dollars in millions)
    
    May 2, 2009
    
    
    May 3, 2008
    
    
    ChangeSG&A
    
    $
    190.4
    
    
    $
    184.5
    
    
    
    3.2
    %Increase from prior year
    
    $
    5.9Percentage of consolidated net sales
    
    
    41.4
    %
    
    
    41.4
    %
   17




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##### Table of Contents



Store pre-opening and closing costs.
    Depreciation and amortization.
 Operating Profit:
 Percentage(Dollars in millions)
    
    May 2, 2009
    
    
    May 3, 2008
    
    
    ChangeOperating profit
    
    $
    14.9
    
    
    $
    7.4
    
    
    
    101.4
    %Increase from prior year
    
    $
    7.5
   Percentage(Dollars in millions)
    
    May 2, 2009
    
    
    May 3, 2008
    
    
    ChangeLarge-format storesOperating profit
    
    $
    21.5
    
    
    $
    15.6
    
    
    
    37.8
    %Increase from prior year
    
    $
    5.9Small-format storesOperating profit
    
    $
    26.0
    
    
    $
    24.8
    
    
    
    4.8
    %Increase from prior year
    
    $
    1.2OtherOperating loss
    
    $
    (32.6
    )
    
    $
    (33.0
    )
    
    
    1.2
    %Increase from prior year
    
    $
    0.4
  18




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##### Table of Contents



Gain on purchase of senior subordinated notes.
 Interest expense.
 Income taxes .
 Liquidity and Capital Resources
    19




---



##### Table of Contents



Dollars in millions
    
    2010
    
    
    2009Net cash provided by operating activities
    
    $
    25.2
    
    
    $
    45.7Cash used for investing activities
    
    
    (6.6
    )
    
    
    (13.3
    )Net cash (used for) provided by financing activities
    
    
    (14.2
    )
    
    
    0.1Net increase in cash and cash equivalents
    
    $
    4.4
    
    
    $
    32.5Ending cash and cash equivalents
    
    $
    85.0
    
    
    $
    57.9
 Net cash provided by operating activities
  Cash used for investing activities
  Thirteen Weeks EndedMay 2,
    
    
    May 3,Dollars in millions
    
    2009
    
    
    2008Cash
    
    $
    1.8
    
    
    $
    12.7Cash  landlord reimbursed
    
    
    4.8
    
    
    
    0.6Total
    
    $
    6.6
    
    
    $
    13.3
   20




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##### Table of Contents



Net cash (used for) provided by financing activities
    Off-Balance Sheet Transactions
  Seasonality and Inflation
   Critical Accounting Policies
   21




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##### Table of Contents



Contractual Obligations
  Cautionary Statement Concerning Forward-Looking Statements
  
 Item 3. Quantitative and Qualitative Disclosures About Market Risk
  
 Item 4. Controls and Procedures
    22




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##### Table of Contents



PART II. OTHER INFORMATION
 
 Item 1. Legal Proceedings
   
 Item 1A. Risk Factors
  The effect of general economic conditions and the current financial crisis
     23




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##### Table of Contents



Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
 Purchases of Equity Securities by Jo-Ann Stores, Inc.
 Total Number of
    
    
    Maximum NumberShares Purchased
    
    
    of Shares that MayTotal Number
    
    
    Average
    
    
    as Part of Publicly
    
    
    Yet Be Purchasedof Shares
    
    
    Price Paid
    
    
    Announced Plans
    
    
    Under the Plans orPurchased
    
    
    per Share
    
    
    or Programs
    
    
    ProgramsFebruary 1  28, 2009
    
    
    690
    
    
    $
    13.10
    
    
    
    1,108,424
    
    
    
    1,041,576March 1  April 4, 2009
    
    
    75,973
    
    
    $
    13.27
    
    
    
    1,184,397
    
    
    
    965,603April 5  May 2, 2009
    
    
    142
    
    
    $
    17.18
    
    
    
    1,184,539
    
    
    
    965,461Total
    
    
    76,805
    
    
    $
    13.28
    
    
    
    1,184,539
    
    
    
    965,461
  
 Item 3. Defaults Upon Senior Securities
  
 Item 4. Submission of Matters to a Vote of Security Holders
  
 Item 5. Other Information
  
 Item 6. Exhibits
 Exhibits
 No.
    
    Exhibit Description31.1
    
    
    Section 302 Certification By Chief Executive Officer31.2
    
    
    Section 302 Certification By Chief Financial Officer32.1
    
    
    Section 906 Certification of Principal Executive Officer and
Principal Financial Officer
  24




---



##### Table of Contents



SIGNATURES
  JO-ANN STORES, INC.DATE: June 11, 2009
    
    /s/ Darrell Webb

Darrell Webb,President and Chief Executive Officer/s/ James Kerr

James Kerr,Executive Vice President and Chief Financial Officer
  25




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##### Table of Contents



EXHIBIT INDEX
 
 No.
    
    Exhibit Description31.1
    
    
    Section 302 Certification By Chief Executive Officer31.2
    
    
    Section 302 Certification By Chief Financial Officer32.1
    
    
    Section 906 Certification of Principal Executive Officer and
Principal Financial Officer
  26