EXHIBIT 99
JO-ANN STORES, INC.
ASSOCIATE STOCK OWNERSHIP PLAN
Financial Statements
As of December 31, 2001 and 2000
Together With Report of Independent Public Accountants
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Advisory Committee of Jo-Ann Stores, Inc. and Participants
of the Jo-Ann Stores, Inc. Associate Stock Ownership Plan:
We have audited the accompanying statements of financial condition of the Jo-Ann
Stores, Inc. Associate Stock Ownership Plan (the Plan) as of December 31, 2001
and 2000, and the related statements of operations and changes in participants'
contributions for the years then ended. These financial statements are the
responsibility of the Plan's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial condition of the Plan as of December 31,
2001 and 2000, and the changes in its financial condition for the years then
ended, in conformity with accounting principles generally accepted in the United
States.
Cleveland, Ohio,
March 20, 2002.
JO-ANN STORES, INC.
ASSOCIATE STOCK OWNERSHIP PLAN
Statements of Financial Condition
As of December 31, 2001 and 2000
2001 2000
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ASSETS:
Receivable from employer $319,293 $301,914
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Total assets $319,293 $301,914
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LIABILITIES:
Liability to participants for future Stock purchases $319,293 $301,914
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Total liabilities $319,293 $301,914
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The accompanying notes to financial statements are an integral part of these
statements.
JO-ANN STORES, INC.
ASSOCIATE STOCK OWNERSHIP PLAN
Statements of Operations and Changes in Participants' Contributions
for the Years Ended December 31, 2001 and 2000
2001 2000
---------------- ----------------
Participant contributions $1,122,963 $1,306,423
Employer contributions 195,103 280,330
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Total additions 1,318,066 1,586,753
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Stock purchases 1,300,687 1,869,435
Change in contributions reserved for future Stock purchases
17,379 (282,682)
---------------- ----------------
Total deductions 1,318,066 1,586,753
---------------- ----------------
Net additions $ - $ -
================ ================
The accompanying notes to financial statements are an integral part of these
statements.
JO-ANN STORES, INC.
ASSOCIATE STOCK OWNERSHIP PLAN
Notes to Financial Statements
December 31, 2001 and 2000
1. DESCRIPTION OF THE PLAN:
------------------------
The Jo-Ann Stores, Inc. Associate Stock Ownership Plan (the Plan), represents
rules adopted April 1, 1999 as part of the Company's 1998 Incentive Compensation
Plan (the Incentive Plan). The Incentive Plan is administered by the
Compensation Committee of the Board of Directors (Committee) of Jo-Ann Stores,
Inc. (the Company). Participants should refer to the Plan document for a more
complete description of the Plan's provisions.
GENERAL
- -------
The Plan is an employee stock purchase plan that allows participants to acquire
a proprietary interest in Jo-Ann Stores, Inc. Class A Common Stock (Stock)
through payroll deductions. Payroll deductions for the purpose of purchasing
Stock are accumulated during two six-month periods, April 1 to September 30 and
October 1 to March 31 (Accumulation Periods). At the end of each Accumulation
Period, the participants' accumulated payroll deductions are used to purchase
shares, or fractional shares, of Stock. The shares are purchased for an amount
equal to 85% of the lesser of (1) the closing price of a share of Stock on the
first trading day of the Accumulation Period or (2) the closing price of a share
of Stock on the last trading day of the Accumulation Period (Purchase Price).
Subject to limitations set forth in the Incentive Plan, the maximum number of
shares which may be purchased under the Plan for any fiscal year of the Company
is 1,000,000 shares. Shares purchased under the Plan may be authorized and
unissued shares, treasury shares, outstanding shares reacquired in private
transactions or open market purchases, or any combination of any of the
foregoing, as determined by the Committee. At December 31, 2001, the
participants had purchased 604,801 shares of stock since the Plan's inception at
a discounted weighted average share price of $5.51.
The Plan is neither qualified under Section 401(a) of the Internal Revenue Code
(IRC) of 1986, as amended, nor subject to any of the provisions of the Employee
Retirement Income Security Act of 1974, as amended (ERISA).
JO-ANN STORES, INC.
ASSOCIATE STOCK OWNERSHIP PLAN
Notes to Financial Statements
December 31, 2001 and 2000
Page 2
ELIGIBILITY
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All employees, except temporary and seasonal employees, as defined by the Plan
document, are eligible to participate in the Plan. Eligible employees may only
enroll in the Plan at the beginning of an Accumulation Period. Employees who are
directors or officers of the Company may participate in the Plan only in
accordance with the requirements of Rule 16b-3 under the Securities Exchange Act
of 1934.
STOCK PURCHASES
- ---------------
On the last trading day of each Accumulation Period, the amount of each
participant's accumulated payroll deductions is applied towards the purchase of
shares of Stock. The number of shares purchased is determined by dividing the
participant's total contribution by the per share Purchase Price applicable for
that Accumulation Period. Purchased shares of Stock are then issued by the
Company and transferred to a brokerage account outside of the Plan in the name
of the participant. Participants are required to hold shares for a minimum
period of six months following their purchase.
PARTICIPANT CONTRIBUTIONS
- -------------------------
Participants may elect to defer 1% to 15% of their "Covered Compensation" (as
defined in the Plan) on an after-tax basis for the purchase of Stock with a
maximum purchase of the lesser of 4,000 shares or $25,000 worth of Stock at fair
market value per calendar year. Participants may only change their deduction
percentages at the beginning of an Accumulation Period, but may cease making
contributions at any time. No interest accrues or is paid on participants'
accumulated payroll deductions. Once made, the Company may use the payroll
deductions for any corporate purpose, and the Company has no obligation to
segregate employees' payroll deductions from any other funds of the Company or
to hold funds representing the same pending the application thereof to the
purchase of shares at the end of each Accumulation Period in accordance with the
Plan.
JO-ANN STORES, INC.
ASSOCIATE STOCK OWNERSHIP PLAN
Notes to Financial Statements
December 31, 2001 and 2000
Page 3
EMPLOYER CONTRIBUTIONS
- ----------------------
The 15% discount from market value granted to Plan participants on the purchase
of Stock at the end of each Accumulation Period represents the Company's
non-cash contribution to the Plan. These non-cash contributions amounted to
$195,103 and $280,330 for the years ended December 31, 2001 and 2000,
respectively.
PARTICIPANT REFUNDS
- -------------------
Plan participants may withdraw from the Plan at any time by properly notifying
the Company. A participant's accumulated payroll deductions prior to withdrawal
from the Plan will continue to be applied toward the purchase of shares of Stock
on the last trading day of the Accumulation Period, or may be refunded in full
to the employee at the time of withdrawal from the Plan.
Participants who terminate their employment relationship with the Company are
not eligible to continue in the Plan. All payroll deductions accumulated during
the Accumulation Period through the date of such cessation of employment will be
refunded to the employee or, in the event of the employee's death, to his or her
estate.
PLAN TERMINATION
- ----------------
Although it has not expressed any intent to do so, the Company has the right
under the Plan to terminate the Plan at any time. Upon termination of the Plan,
all payroll deductions not used to purchase Stock would be refunded to Plan
participants.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
-------------------------------------------
BASIS OF ACCOUNTING
- -------------------
The accompanying financial statements are prepared on the accrual basis of
accounting.
JO-ANN STORES, INC.
ASSOCIATE STOCK OWNERSHIP PLAN
Notes to Financial Statements
December 31, 2001 and 2000
Page 4
ADMINISTRATIVE EXPENSES
- -----------------------
The Company bears all costs in connection with the Plan, including
administrative fees and all fees associated with the issuance of Stock.
Administrative expenses related to the Plan amounted to approximately $15,092
and $14,900 for the years ended December 31, 2001 and 2000, respectively.
ESTIMATES
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The preparation of financial statements in conformity with accounting principles
generally accepted in the United States requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of additions and deductions during the
reporting period. Since actual results could differ from those estimates,
management revises its estimates and assumptions as better or new information
becomes available.
3. INCOME TAX STATUS:
------------------
The Plan fulfills the requirements of an "employee stock purchase plan" as
defined in Section 423 of the IRC. As such, the Plan is not required to file
income tax returns or pay income taxes. Under Section 423, a participating
employee will recognize no income, and the Company will be entitled to no
deduction, for federal income tax purposes when an employee enrolls in the Plan
or when a participant purchases shares of Stock under the Plan.