Running head: JO-ANN FABRIC STORE, INC

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

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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

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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 FabriCenters 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.

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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 Companys 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 Cowen President Tulane University Frank Newman Chairperson and Chief Executive Officer Medical Nutrition, Inc. David A. Perdue, Jr. Retired Chairperson and Chief Executive Officer Dollar General Corporation

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Cash equivalents at the end of last two reporting years

January 31 2009 $80.6

January 31 2008 $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 $314.8 improvements, net 297.5

Inventories

$416.80

$429.4

Companies total assets at end of last two annual reporting periods

January 31 2009 $901.1

January 31 2008 $869.4

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Accounts Payable totals at the end of the last two annual reporting periods

January 31 2009 $145.1

January 31 2008 $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

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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 $1,901.1

January 31 2008 - $1,878.8

January 31 2007 $1,850.6

Companies net revenues for last three annual reporting periods

January 31 2009 $0.86

January 31 2008 $.062

January 31 2007 $0.08

Annual net income difference between 2010 and 2009 Period End 2009 Net Income 2008 Net Income $66.5 21.9 $45.4

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Annual net income difference between 2009 and 2008 Period End 2009 Net Income 2008 Net Income $21.9 15.4 $6.5

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Joan Stores, Inc. is considered a forward thinking company. They seem to be able to spot and react quickly to changing trends. The corporations 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.

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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 1,878.8 Cost of Goods Sold 1,015.0 1,018.6 1,006.4 Gross Profit 975.7 882.5 872.4 Gross Profit Margin 49% 46.4% 46.4% SG&A Expense 805.3 787.6 783.2 Depreciation & Amortization 56.3 54.2 51.8 Operating Income 114.1 40.7 37.4 Operating 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 24.9 Income Taxes 42.5 13.6 9.5 Net Income After Taxes 66.6 21.9 15.4 Continuing Operations 66.6 21.9 15.4 Discontinued Operations ---Total Operations 66.6 21.9 15.4 Total Net Income 66.6 21.9 15.4 Net Profit Margin 3.3% 1.2% 0.8% Diluted EPS from Total Net Income 2.51 0.86 0.62 Dividends per Share ----

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Jo-Ann Stores, Inc. Balance Sheet

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

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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 74 Net 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 7.0 Depreciation & Amortization 56.3 54.2 51.8 Capital Expenditures (39.7) (74.7) (37.7) Cash Dividends Paid

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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/JoAnn_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-16bfor.html