Exhibit 99
JO-ANN STORES, INC. SAVINGS PLAN 401(K)
Financial Statements
As of December 31, 2001 and 2000
Together With Report of Independent Public Accountants
JO-ANN STORES, INC. SAVINGS PLAN 401(K)
INDEX
Report of Independent Public Accountants
Financial Statements:
Statements of Net Assets Available for Benefits
as of December 31, 2001 and 2000
Statement of Changes in Net Assets Available for Benefits
for the Year Ended December 31, 2001
Notes to Financial Statements
Supplemental Schedules as of December 31, 2001:
Schedule I
Form 5500 Schedule H, Line 4i -
Schedule of Assets (Held at End of Year)
Schedule II
Form 5500 Schedule H, Line 4j -
Schedule of Reportable Transactions
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
TO THE ADVISORY COMMITTEE OF
JO-ANN STORES, INC. SAVINGS PLAN 401(k)
We have audited the accompanying statement of net assets available for benefits
of Jo-Ann Stores, Inc. Savings Plan 401(k) (the "Plan") as of December 31, 2001,
and the related statement of changes in net assets available for benefits for
the year ended December 31, 2001, as listed in the accompanying index. These
financial statements and the supplemental schedules referred to below are the
responsibility of the Plan's management. Our responsibility is to express an
opinion on these financial statements and supplemental schedules based on our
audit. The financial statements of the Plan as of and for the year ended
December 31, 2000 were audited by other auditors whose report dated June 13,
2001 expressed an unqualified opinion on those statements.
We conducted our audit in accordance with auditing standards generally accepted
in the United States of America. 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 audit provides a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the net assets available for benefits of the Plan as of
December 31, 2001, and the changes in its net assets available for benefits for
the year ended December 31, 2001, in conformity with accounting principles
generally accepted in the United States of America.
Our audit was performed for the purpose of forming an opinion on the financial
statements taken as a whole. The supplemental schedule of assets (held at end of
year) (Schedule I) and schedule of reportable transactions (Schedule II), as
listed in the accompanying index, are presented for purposes of additional
analysis and are not a required part of the financial statements, but are
supplementary information required by the Department of Labor's Rules and
Regulations for Reporting and Disclosure under the Employee Retirement Income
Security Act of 1974. The supplemental schedules have been subjected to the
auditing procedures applied in the audit of the financial statements and, in our
opinion, are fairly stated in all material respects in relation to the financial
statements taken as a whole.
Cleveland, Ohio
June 26, 2002
Jo-Ann Stores, Inc. Savings Plan 401(k)
STATEMENTS OF NET ASSETS AVAILABLE FOR BENEFITS
As of December 31, 2001 and 2000
2001 2000
------------------ ------------------
ASSETS
Investments, at market:
Participant directed $29,895,584 $28,969,524
Nonparticipant directed:
Company Stock Fund A 3,587,350 2,219,764
Company Stock Fund B 844,007 622,295
------------------ ------------------
Total investments, at market 34,326,941 31,811,583
Receivables:
Employer contribution - 43,024
Participant contribution - 159,504
------------------ ------------------
Total receivables - 202,528
------------------ ------------------
Total Assets 34,326,941 32,014,111
LIABILITIES
Other (12,872) -
------------------ ------------------
Total Liabilities (12,872) -
------------------ ------------------
NET ASSETS AVAILABLE FOR BENEFITS $34,314,069 $32,014,111
================== ==================
The accompanying notes to the financial statements are an integral part
of these statements.
Jo-Ann Stores, Inc. Savings Plan 401(k)
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS
For the Year Ended December 31, 2001
NON-PARTICIPANT DIRECTED
-----------------------------------
COMPANY COMPANY
PARTICIPANT STOCK STOCK
DIRECTED FUND A FUND B TOTAL
----------------- ---------------- --------------- ----------------
Increases:
Investment income $ 575,699 $ 6,990 $ 577 $ 583,266
Employee contributions 3,587,530 - - 3,587,530
Employer contributions - 1,041,340 - 1,041,340
Rollover contributions 314,850 - - 314,850
Merger of HOF Plan 3,174,961 - - 3,174,961
Unrealized gain on investments 1,717,778 385,804 422,569 2,526,151
Other 48,648 3,564 670 52,882
----------------- ---------------- --------------- ----------------
Total Increases 9,419,466 1,437,698 423,816 11,280,980
DECREASES:
Distributions 3,888,943 254,526 48,529 4,191,998
Administrative expenses 178,523 13,340 1,923 193,786
Realized loss on sale of investments 873,715 348,059 114,113 1,335,887
Unrealized loss on sale of investments 3,195,218 - - 3,195,218
Other 53,599 9,864 670 64,133
----------------- ---------------- --------------- ----------------
Total Decreases 8,189,998 625,789 165,235 8,981,022
----------------- ---------------- --------------- ----------------
NET INCREASE FOR
THE YEAR 1,229,468 811,909 258,581 2,299,958
Net Assets - beginning of year 29,258,447 2,040,093 715,571 32,014,111
Net Interfund Transfers (244,219) 185,308 58,911 -
----------------- ---------------- --------------- ----------------
Net Assets - end of year $ 30,243,696 $ 3,037,310 $ 1,033,063 $ 34,314,069
================= ================ =============== ================
The accompanying notes to the financial statements are an integral part
of this statement.
Jo-Ann Stores, Inc. Savings Plan 401(k)
NOTES TO FINANCIAL STATEMENTS
December 31, 2001 and 2000
1. SUMMARY OF PLAN
The original Jo-Ann Stores, Inc. Savings Plan 401(k) (the "Plan"), formally
known as the Jo-Ann Stores, Inc. Employees' Savings and Profit Sharing Plan, was
adopted as of September 1, 1974, and has been amended on occasion in order to,
among other things, maintain compliance with the requirements of the Employee
Retirement Income Security Act of 1974 (ERISA). Effective July 1, 1998,
employees of the former House of Fabrics, Inc., which was acquired by Jo-Ann
Stores, Inc., (the "Company") during 1998, are able to participate in the Plan.
Effective June 1, 2001, the House of Fabrics, Inc. 401(k) Plan ("HOF Plan") was
merged with the Plan. The investment options that were offered in the HOF Plan
are also available in the Plan. As a result, investments in the HOF Plan were
transferred into the same funds that they were invested in prior to the merger.
The principal provisions of the Plan are as follows:
ELIGIBILITY
The Plan was amended effective July 1, 2001. All active employees of the Company
and its wholly owned subsidiaries who have completed at least 90 days of
service, and are not members of a recognized collective bargaining organization,
are eligible to participate in the Plan.
DEFERRED INCOME CONTRIBUTIONS
Plan participants may elect to defer from 1% to 15% of their compensation,
subject to an annual limitation under the Internal Revenue Code (IRC), and such
amounts will be contributed to the Plan by the Company as deferred income
contributions.
EMPLOYER MATCHING CONTRIBUTIONS
The Company will contribute to the Plan, subject to the forfeiture provision
outlined below, an adjustable percentage of the deferred income contributions
made by participants (up to a 4% employee deferred income contribution), as well
as such additional amounts as the Board of Directors may determine. These
contributions are allocated among eligible participants after completing one
year of service, in proportion to the deferred income contributions made on
their behalf for such period and credited to their separate accounts.
The Company's matching contribution can range from 0% to 100% and can be
modified prior to the beginning of a month by the Company. For the 2001 and 2000
Plan years, the Company's matching contribution was 50% of the first 4%
contributed by participants. Subsequent to March 1, 1999, all Company matching
contributions are in the form of common stock of the Company and are invested in
the Company Stock Fund A. Prior to that date, the Company's matching
contributions were invested in the Company Stock Fund A and Company Stock Fund B
based on the employees' elective deferrals in such funds.
Company contributions are funded only to the extent that they exceed cumulative
forfeitures of participants terminated from the Plan. Forfeitures in the amount
of $36,000 were utilized to fund Company contributions during 2001. The amount
of unutilized forfeitures as of December 31, 2001 was approximately $53,000.
Jo-Ann Stores, Inc. Savings Plan 401(k)
NOTES TO FINANCIAL STATEMENTS - PAGE TWO
December 31, 2001 and 2000
1. SUMMARY OF PLAN (CONTINUED)
INVESTMENT OF EMPLOYEE CONTRIBUTIONS
Under the Plan, each participant selects the manner in which deferred income
contributions to their account are to be invested. With each of the investment
accounts there is risk of loss, although the degree varies by the nature of the
investment. None of the accounts provide for any guarantee against loss.
Participants should refer to the Plan document for a more complete description
of the Plan's investment options. Contributions are invested in 1% increments,
up to 100%, in any one of the following investment options:
a. One Group Bond Fund - Investments are made in investment-grade debt
securities issued by corporations and obligations of the U.S.
Government and its agencies or instrumentalities, as well as foreign
debt, dependent upon the prevailing interest rates.
b. One Group Mid-Cap Value Fund - Investments are made in equity
securities valued at price/earnings and price/book ratios below market
averages.
c. AIM Blue Chip Fund - Investments are made in common stocks of
domestic, foreign and multi-national companies believed to have
long-term growth potential.
d. AIM Aggressive Growth Fund - Investments are made in small and
mid-sized companies that have earnings growth well in excess of the
general economy.
e. Invesco Dynamics Fund - Investments are made in stocks of domestic and
international companies with market capitalizations ranging between $2
billion and $15 billion.
f. IRT Stable Value Fund - Investments are made in investment contracts
issued by insurance companies and banks providing for stability of
principal and attractive rates of interest.
g. IRT 500 Index Fund - Investments are made in a portfolio of stocks
attempting to match the Standard & Poor's 500 index with a rate of
return that may fluctuate substantially.
h. IRT Intermediate Return Fund - Investments are made in a conservative
combination of stable value, bond and equity funds, seeking a high
total return through current income and capital appreciation.
i. IRT Growth and Income Fund - Investments are made in a moderately
aggressive combination of stable value, bond and equity funds, seeking
a high total return through current income and capital appreciation.
j. IRT Maximum Appreciation Fund - Investments are made in an aggressive
combination of stable value, bond and equity funds, seeking a high
total return through current income and capital appreciation.
Jo-Ann Stores, Inc. Savings Plan 401(k)
NOTES TO FINANCIAL STATEMENTS - PAGE THREE
December 31, 2001 and 2000
1. SUMMARY OF PLAN (CONTINUED)
INVESTMENT OF EMPLOYEE CONTRIBUTIONS - CONTINUED
k. IRT Capital Growth Fund - Investments are made in a combination of
medium to large capitalization equities in the growth sector of the
U.S. economy.
l. IRT Small Cap Value Fund - Investments are made in a common stocks
with market capitalizations less than $2 billion.
m. Janus Worldwide Fund - Investments are made in common stocks of
foreign issuers, seeking long-term growth of capital in a manner
consistent with the preservation of capital.
n. American Fundamental Investors Fund - Investments are made in common
and preferred stocks, bond funds, and similar securities with fixed
income characteristics.
o. Company Stock Fund A - Investments are made in Jo-Ann Stores, Inc.
Class A common stock.
p. Company Stock Fund B - Investments are made in Jo-Ann Stores, Inc.
Class B common stock.
Participants may change their investment election with respect to future
contributions on a daily basis.
PAYSOP CONTRIBUTIONS
Prior to February 1, 1987, the Company made PAYSOP contributions to the Stock
Ownership Fund for each year in an amount equal to the tax credit available
under Section 44G of the IRC. This tax credit was eliminated by the Tax Reform
Act of 1986 and, therefore, the Company no longer makes PAYSOP contributions.
Distributions of the PAYSOP account balances to terminated participants are made
in shares of Company common stock unless otherwise specified by the participant.
VESTING REQUIREMENTS
Participants' deferred income contributions, together with earnings thereon,
vest immediately. All other Company contributions, plus earnings thereon, vest
over a four-year period based on years of service, as defined by the Plan
agreement. A participant's entire interest in the Plan becomes fully vested upon
his death while employed, attainment of age 65 or permanent and total
disability.
BENEFIT PAYMENTS
Upon termination of service, a participant may elect to receive either a
lump-sum amount or an installment payment equal to the vested portion of his or
her account, as defined by the Plan.
Prior to termination of employment or age 59 1/2, contributions may only be
withdrawn in the event of financial hardship as defined by the IRC.
Jo-Ann Stores, Inc. Savings Plan 401(k)
NOTES TO FINANCIAL STATEMENTS - PAGE FOUR
December 31, 2001 and 2000
1. SUMMARY OF PLAN (CONTINUED)
PARTICIPANT LOANS
Participants may borrow against their vested balances pursuant to the loan
provision of the Plan. The maximum loan amount available to a participant is 50%
of their vested account balance not to exceed $50,000. The maximum term of a
loan is five years. Participant loans are repaid through payroll deductions with
interest charged at the prime rate plus one percent.
TRUSTEE'S FEES AND OTHER EXPENSES
Generally, costs incidental to the purchase and sale of securities, such as
brokerage commissions and stock transfer taxes, are paid by the respective
funds. Other costs and expenses incurred in administering the Plan, including
fees of the trustee are generally paid by the Plan. Certain Plan expenses, such
as audit fees and database access fees, are paid by the Company.
TERMINATION
Although it has not expressed any intent to do so, the Company, with the
approval of the Board of Directors, has the right to discontinue its
contributions at any time and to terminate the Plan, subject to the provisions
of ERISA. In the event of Plan termination, participants will become 100% vested
in their accounts.
2. SIGNIFICANT ACCOUNTING POLICIES
BASIS OF ACCOUNTING
The accompanying financial statements are prepared on the accrual basis of
accounting.
VALUATION OF INVESTMENTS
The assets included in the statements of net assets available for benefits are
stated at their market values as of December 31, 2001 and 2000. Schedule I
summarizes the Plan's investments held at December 31, 2001.
ESTIMATES
The preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America 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 increases and decreases
during the reporting period. Actual results could differ from those estimates.
3. TAX STATUS
The Internal Revenue Service has determined and informed the Company, by letter
dated February 20, 1997, that the Plan and related trust are designed in
accordance with applicable sections of the IRC. The Plan has been amended since
receiving the determination letter. However, the Company currently believes that
the Plan is designed and is currently being operated in compliance with the
applicable requirements of the IRC.
Jo-Ann Stores, Inc. Savings Plan 401(k)
NOTES TO FINANCIAL STATEMENTS - PAGE FIVE
December 31, 2001 and 2000
4. INVESTMENTS
The following investments of the Plan exceed 5% of the Plan's net assets
available for benefits at December 31, 2001 and 2000.
2001 2000
---------------- ---------------
One Group Bond Fund $2,609,932 $1,998,966
AIM Blue Chip Fund 5,881,247 7,065,691
IRT Stable Value Fund 6,091,704 5,448,983
IRT 500 Index Fund 7,414,865 8,228,483
Jo-Ann Stores, Inc. Class A common stock 6,445,726 4,091,484
Jo-Ann Stores, Inc. Class B common stock 1,900,653 n/a
5. PARTY-IN-INTEREST TRANSACTIONS
During the years ended December 31, 2001 and 2000, there were no prohibited
transactions with a party-in-interest, as defined by ERISA.
SCHEDULE I
Jo-Ann Stores, Inc. Savings Plan 401(k)
FORM 5500 SCHEDULE H, LINE 4i -
SCHEDULE OF ASSETS (HELD AT END OF YEAR)
December 31, 2001
Employer Identification Number: 34-0720629
Plan Number: 001
Market
Issuer Cost Value
- ------------------------------------------------------------------------------- ---------------- -----------------
NON-PARTICIPANT DIRECTED FUNDS:
* Jo-Ann Stores, Inc. Class A Common Stock $ 4,519,870 $ 3,609,607
* Jo-Ann Stores, Inc. Class B Common Stock 1,136,399 836,287
---------------- -----------------
TOTAL NON-PARTICIPANT DIRECTED FUNDS 5,656,269 4,445,894
PARTICIPANT DIRECTED FUNDS:
One Group Bond Fund n/a 2,609,932
One Group Mid-Cap Value Fund n/a 25,169
AIM Blue Chip Fund n/a 5,881,247
AIM Aggressive Growth Fund n/a 3,623
* Invesco Dynamics Fund n/a 1,074,263
* IRT Stable Value Fund n/a 6,091,704
* IRT 500 Index Fund n/a 7,414,865
* IRT Intermediate Return Fund n/a 285,295
* IRT Growth and Income Fund n/a 464,799
* IRT Maximum Appreciation Fund n/a 241,420
* IRT Capital Growth Fund n/a 22,085
* IRT Small Cap Value Fund n/a 4,332
Janus Worldwide Fund n/a 1,277,953
American Fundamental Investors Fund n/a 10,588
-----------------
Total Mutual Funds n/a 25,407,275
* Participant Loan Fund (interest rates varying from 6% to 10.5%) n/a 573,287
* Jo-Ann Stores, Inc. Class A Common Stock n/a 2,836,119
* Jo-Ann Stores, Inc. Class B Common Stock n/a 1,064,366
-----------------
TOTAL PARTICIPANT DIRECTED FUNDS 29,881,047
-----------------
TOTAL INVESTMENTS $34,326,941
=================
* Represents party-in-interest
The accompanying notes to the financial statements are an integral part
of this schedule.
SCHEDULE II
Jo-Ann Stores, Inc. Savings Plan 401(k)
FORM 5500 SCHEDULE H, LINE 4j -
SCHEDULE OF REPORTABLE TRANSACTIONS
For the Year Ended December 31, 2001
Employer Identification Number: 34-0720629
Plan Number: 001
Aggregate of transactions involving the same security exceeding 5% of beginning
current value of plan assets:
Purchase Selling
Description of Asset Price Price Cost of Asset Net Loss
- ------------------------------------ ------------------ ----------------- -------------------- -------------------
* Jo-Ann Stores, Inc.
Class A common stock $ 2,391,488 $ 981,478 $ 1,603,012 $ 621,534
* Represents a party-in-interest
The accompanying notes to the financial statements are an integral part
of this schedule.