Exhibit 99
Audit report
Jo-Ann Stores, Inc. Associate Stock Ownership Plan
December 31, 2002 and 2001
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 statement of financial condition of the Jo-Ann
Stores, Inc. Associate Stock Ownership Plan (the Plan) as of December 31, 2002,
and the related statement of operations and changes in participants'
contributions for the year 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 audit. The financial
statements of the Plan as of and for the year ended December 31, 2001 were
audited by other auditors who have ceased operations and whose report dated
March 20, 2002 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 financial condition of the Plan as of December 31,
2002, and the changes in its financial condition for the year ended December 31,
2002 in conformity with accounting principles generally accepted in the United
States of America.
/s/
GRANT THORNTON LLP
Cleveland, Ohio
March 25, 2003
Jo-Ann Stores, Inc.
Associate Stock Ownership Plan
STATEMENTS OF OPERATIONS AND
CHANGES IN PARTICIPANTS' CONTRIBUTIONS
For the Years Ended December 31, 2002 and 2001
2002 2001
---------- ----------
Participant contributions, net $1,756,413 $1,122,963
Employer contributions 267,731 195,103
---------- ----------
Total additions 2,024,144 1,318,066
---------- ----------
Stock purchases 1,784,874 1,300,687
Change in contributions reserved for future
Stock purchases 239,270 17,379
---------- ----------
Total deductions 2,024,144 1,318,066
---------- ----------
NET ADDITIONS $ -- $ --
========== ==========
The accompanying notes to financial statements are an
integral part of these statements.
Jo-Ann Stores, Inc.
Associate Stock Ownership Plan
STATEMENTS OF FINANCIAL CONDITION
As of December 31, 2002 and 2001
2002 2001
-------- --------
ASSETS
Receivable from employer, net $558,563 $319,293
-------- --------
Total assets $558,563 $319,293
======== ========
LIABILITIES
Liability to participants for future Stock purchases $558,563 $319,293
-------- --------
Total liabilities $558,563 $319,293
======== ========
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, 2002 and 2001
NOTE 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 a share price 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, 2002 the participants had purchased 823,076 shares of stock
since the Plan's inception at a discounted weighted average share price of
$5.89
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).
ELIGIBILITY
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.
Jo-Ann Stores, Inc.
Associate Stock Ownership Plan
NOTES TO FINANCIAL STATEMENTS - CONTINUED
December 31, 2002 and 2001
NOTE 1 - DESCRIPTION OF THE PLAN (CONTINUED)
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.
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 $267,731 and $195,103 for the years ended December 31, 2002 and
2001, 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.
Jo-Ann Stores, Inc.
Associate Stock Ownership Plan
NOTES TO FINANCIAL STATEMENTS - CONTINUED
December 31, 2002 and 2001
NOTE 1 - DESCRIPTION OF THE PLAN (CONTINUED)
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.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF ACCOUNTING
The accompanying financial statements are prepared on the accrual basis of
accounting.
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
$16,788 and $15,092 for the years ended December 31, 2002 and 2001,
respectively.
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 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.
NOTE 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.