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 Quarter Ended: Commission File Number:
October 31, 201529, 2016 001-16435

 
Chico’s FAS, Inc.
(Exact name of registrant as specified in charter)
 
 

Florida 59-2389435
(State of Incorporation) 
(I.R.S. Employer
Identification No.)
11215 Metro Parkway, Fort Myers, Florida 33966
(Address of principal executive offices)
239-277-6200
(Registrant’s telephone number, including area code)
 
 
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  ý    No  ¨
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  ý    No  ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of “large accelerated filer, accelerated filer and smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer ý  Accelerated filer ¨
    
Non-accelerated filer 
¨ (do not check if a smaller reporting company)
  Smaller reporting company ¨
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ¨    No  ý
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.
At November 18, 2015,14, 2016, the registrant had 139,401,313129,205,515 shares of Common Stock, $0.01 par value per share, outstanding.

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Table of Contents

CHICO’S FAS, INC. AND SUBSIDIARIES
TABLE OF CONTENTS
 
 
   
 
   
 
   
 
   
 
   
 
   
 
   
   
   
  
 
   
   
   
   
  

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PART I – FINANCIAL INFORMATION
 
ITEM 1.FINANCIAL STATEMENTS

CHICO’S FAS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONSINCOME (LOSS)
(Unaudited)
(In thousands, except per share amounts)
 
Thirteen Weeks Ended Thirty-Nine Weeks Ended
Thirty-Nine Weeks Ended Thirteen Weeks EndedOctober 29, 2016 October 31, 2015 October 29, 2016 October 31, 2015
October 31, 2015 November 1, 2014 October 31, 2015 November 1, 2014    (as adjusted)     (as adjusted)
Amount 
% of
Sales
 Amount 
% of
Sales
 Amount 
% of
Sales
 Amount 
% of
Sales
Amount 
% of
Sales
 Amount 
% of
Sales
 Amount % of
Sales
 Amount % of
Sales
Net sales$2,014,910
 100.0 % $2,018,304
 100.0% $641,219
 100.0 % $665,569
 100.0%$596,912
 100.0
 $645,433
 100.0
 $1,875,621
 100.0
 $2,029,025
 100.0
Cost of goods sold902,690
 44.8 % 920,148
 45.6% 290,737
 45.3 % 301,776
 45.3%366,618
 61.4
 396,270
 61.4
 1,142,182
 60.9
 1,219,543
 60.1
Gross margin1,112,220
 55.2 % 1,098,156
 54.4% 350,482
 54.7 % 363,793
 54.7%230,294
 38.6
 249,163
 38.6
 733,439
 39.1
 809,482
 39.9
Selling, general and administrative expenses964,229
 47.9 % 945,360
 46.8% 327,575
 51.1 % 321,574
 48.3%188,350
 31.6
 226,256
 35.1
 583,117
 31.1
 661,491
 32.6
Goodwill and intangible impairment charges112,455
 5.6 % 
 0.0% 45,514
 7.1 % 
 0.0%
 0.0
 45,514
 7.1
 
 0.0
 112,455
 5.6
Restructuring and strategic charges34,178
 1.6 % 
 0.0% 3,137
 0.5 % 
 0.0%10,820
 1.8
 3,137
 0.4
 31,027
 1.6
 34,178
 1.6
Income (loss) from operations1,358
 0.1 % 152,796
 7.6% (25,744) (4.0)% 42,219
 6.4%31,124
 5.2
 (25,744) (4.0) 119,295
 6.4
 1,358
 0.1
Interest (expense) income, net(1,421) (0.1)% 75
 0.0% (466) (0.1)% 44
 0.0%
Interest expense, net(526) (0.1) (466) (0.1) (1,474) (0.1) (1,421) (0.1)
Income (loss) before income taxes(63) 0.0 % 152,871
 7.6% (26,210) (4.1)% 42,263
 6.4%30,598
 5.1
 (26,210) (4.1) 117,821
 6.3
 (63) 0.0
Income tax (benefit) provision(23,100) (1.1)% 56,400
 2.8% (14,600) (2.3)% 15,800
 2.4%
Income tax provision (benefit)7,000
 1.1
 (14,600) (2.3) 40,100
 2.2
 (23,100) (1.1)
Net income (loss)$23,037
 1.1 % $96,471
 4.8% $(11,610) (1.8)% $26,463
 4.0%$23,598
 4.0
 $(11,610) (1.8) $77,721
 4.1
 $23,037
 1.1
Per share data:                              
Net income (loss) per common share-basic$0.16
   $0.63
   $(0.09)   $0.17
  $0.18
   $(0.09)   $0.59
   $0.16
  
Net income (loss) per common and common equivalent share–diluted$0.16
   $0.63
   $(0.09)   $0.17
  $0.18
   $(0.09)   $0.58
   $0.16
  
Weighted average common shares outstanding–basic139,386
   148,577
   136,172
   148,564
  128,753
   136,172
   129,830
   139,386
  
Weighted average common and common equivalent shares outstanding–diluted139,724
   149,093
   136,172
   149,037
  128,996
   136,172
   129,999
   139,724
  
Dividends declared per share$0.2325
   $0.2250
   $
   $
  $
   $
   $0.2400
   $0.2325
  

The accompanying notes are an integral part of these condensed consolidated statements.

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CHICO’S FAS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(Unaudited)
(In thousands)
 
Thirty-Nine Weeks Ended
Thirteen Weeks EndedThirteen Weeks Ended Thirty-Nine Weeks Ended
October 31, 2015
November 1, 2014
October 31, 2015
November 1, 2014October 29, 2016 October 31, 2015 October 29, 2016 October 31, 2015
Net income (loss)$23,037
 $96,471
 $(11,610) $26,463
$23,598
 $(11,610) $77,721
 $23,037
Other comprehensive income (loss):              
Unrealized (losses) gains on marketable securities, net of taxes(6) (81) 12
 (29)(35) 12
 4
 (6)
Foreign currency translation adjustment, net of taxes90
 116
 (31) 119
Foreign currency translation (losses) gains, net of taxes(19) (31) (46) 90
Comprehensive income (loss)$23,121
 $96,506
 $(11,629) $26,553
$23,544
 $(11,629) $77,679
 $23,121

The accompanying notes are an integral part of these condensed consolidated statements.

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CHICO’S FAS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(In thousands)
 
October 31, 2015 January 31, 2015 November 1, 2014October 29, 2016 January 30, 2016 October 31, 2015

   
     
ASSETS          
Current Assets:          
Cash and cash equivalents$91,256
 $133,351
 $67,172
$80,331
 $89,951
 $91,256
Marketable securities, at fair value47,316
 126,561
 124,042
50,411
 50,194
 47,316
Inventories268,968
 235,159
 294,234
261,341
 233,834
 268,968
Prepaid expenses and other current assets98,305
 51,088
 52,062
46,635
 45,660
 55,149
Income tax receivable3,402
 29,157
 16,225
Assets held for sale41,802
 16,800
 
18,520
 16,525
 41,802
Total Current Assets547,647
 562,959
 537,510
460,640
 465,321
 520,716
Property and Equipment, net556,172
 606,147
 641,187
495,587
 550,953
 556,172
Other Assets:          
Goodwill96,774
 145,627
 171,427
96,774
 96,774
 96,774
Other intangible assets, net38,930
 109,538
 114,927
38,930
 38,930
 38,930
Other assets, net13,691
 14,310
 12,897
18,382
 14,074
 40,622
Total Other Assets149,395
 269,475
 299,251
154,086
 149,778
 176,326

$1,253,214
 $1,438,581
 $1,477,948
$1,110,313
 $1,166,052
 $1,253,214
LIABILITIES AND STOCKHOLDERS’ EQUITY          
Current Liabilities:          
Accounts payable$147,526
 $144,534
 $162,641
$125,532
 $129,343
 $147,526
Current debt10,000
 
 
10,000
 10,000
 10,000
Other current and deferred liabilities140,557
 158,396
 145,972
148,706
 158,788
 140,557
Liabilities held for sale8,478
 
 

 
 8,478
Total Current Liabilities306,561
 302,930
 308,613
284,238
 298,131
 306,561
Noncurrent Liabilities:          
Long-term debt84,702
 
 
74,768
 82,219
 84,702
Deferred liabilities135,390
 142,371
 146,715
122,848
 130,743
 135,390
Deferred taxes20,385
 49,659
 42,306
9,320
 15,171
 20,385
Total Noncurrent Liabilities240,477
 192,030
 189,021
206,936
 228,133
 240,477
Commitments and Contingencies
 
 
Stockholders’ Equity:          
Preferred stock
 
 

 
 
Common stock1,394
 1,529
 1,529
1,301
 1,355
 1,394
Additional paid-in capital429,746
 407,275
 401,110
445,787
 435,881
 429,746
Treasury stock, at cost(249,854) 
 
(366,081) (289,813) (249,854)
Retained earnings524,244
 534,255
 577,528
538,134
 492,325
 524,244
Accumulated other comprehensive income646
 562
 147
Accumulated other comprehensive (loss) income(2) 40
 646
Total Stockholders’ Equity706,176
 943,621
 980,314
619,139
 639,788
 706,176
$1,253,214
 $1,438,581
 $1,477,948
$1,110,313
 $1,166,052
 $1,253,214

The accompanying notes are an integral part of these condensed consolidated statements.

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CHICO’S FAS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands)
 
Thirty-Nine Weeks EndedThirty-Nine Weeks Ended
October 31, 2015 November 1, 2014October 29, 2016 October 31, 2015
Cash Flows From Operating Activities:      
Net income$23,037
 $96,471
$77,721
 $23,037
Adjustments to reconcile net income to net cash provided by operating activities —   
Adjustments to reconcile net income to net cash provided by operating activities:   
Goodwill and intangible impairment charges, pre-tax112,455
 

 112,455
Depreciation and amortization90,266
 90,514
82,585
 90,266
Loss on disposal and impairment of property and equipment22,609
 757
6,434
 22,609
Deferred tax benefit(52,623) (9,204)(8,098) (52,623)
Stock-based compensation expense20,712
 20,041
15,483
 20,712
Excess tax benefit from stock-based compensation(2,992) (1,654)(322) (2,992)
Deferred rent and lease credits(15,018) (13,754)(14,264) (15,018)
Changes in assets and liabilities:      
Inventories(44,811) (56,089)(27,506) (44,811)
Prepaid expenses and other assets(27,653) (5,032)
Prepaid expenses and accounts receivable(6,237) (12,024)
Income tax receivable25,755
 (15,629)
Accounts payable7,377
 31,387
(3,789) 7,377
Accrued and other liabilities(3,300) 27,655
(3,391) (3,300)
Net cash provided by operating activities130,059
 181,092
144,371
 130,059
Cash Flows From Investing Activities:      
Purchases of marketable securities(43,479) (81,134)(43,266) (43,479)
Proceeds from sale of marketable securities122,712
 73,062
43,058
 122,712
Purchases of property and equipment, net(66,595) (98,084)(35,663) (66,595)
Net cash provided by (used in) investing activities12,638
 (106,156)
Net cash (used in) provided by investing activities(35,871) 12,638
Cash Flows From Financing Activities:      
Proceeds from borrowings124,000
 

 124,000
Payments on borrowings(29,000) 
(7,500) (29,000)
Proceeds from issuance of common stock10,614
 5,930
2,363
 10,614
Excess tax benefit from stock-based compensation2,992
 1,654
322
 2,992
Dividends paid(32,933) (34,329)(31,936) (32,933)
Repurchase of common stock(260,555) (17,579)(81,324) (260,555)
Net cash used in financing activities(184,882) (44,324)(118,075) (184,882)
Effects of exchange rate changes on cash and cash equivalents90
 116
(45) 90
Net (decrease) increase in cash and cash equivalents(42,095) 30,728
Net decrease in cash and cash equivalents(9,620) (42,095)
Cash and Cash Equivalents, Beginning of period
133,351
 36,444
89,951
 133,351
Cash and Cash Equivalents, End of period
$91,256
 $67,172
$80,331
 $91,256
Supplemental Disclosures of Cash Flow Information:      
Cash paid for interest$2,112
 $230
$1,713
 $2,112
Cash paid for income taxes, net$47,377
 $48,321
$22,752
 $47,377

The accompanying notes are an integral part of these condensed consolidated statements.

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Chico’s FAS, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
October 31, 201529, 2016
(Unaudited)

Note 1. Basis of Presentation
The accompanying unaudited condensed consolidated financial statements of Chico’s FAS, Inc. and its wholly-owned subsidiaries (collectively, the “Company”) have been prepared in accordance with the instructions to Form 10-Q and do not include all of the information and notes required by accounting principles generally accepted in the U.S. (“U.S. GAAP”) for complete financial statements. In the opinion of management, such interim financial statements reflect all normal, recurring adjustments considered necessary to present fairly the condensed consolidated financial position, the results of operations and cash flows for the interim periods presented. All significant intercompany balances and transactions have been eliminated in consolidation. For further information, refer to the consolidated financial statements and notes thereto for the fiscal year ended January 31, 2015,30, 2016, included in the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission (“SEC”) on March 9, 2015.8, 2016.
As used in this report, all references to “we,” “us,” “our,” and “the Company,” refer to Chico’s FAS, Inc. and all of its wholly-owned subsidiaries.
Our fiscal years end on the Saturday closest to January 31 and are designated by the calendar year in which the fiscal year commences. Operating results for the thirteen weeks and thirty-nine weeks ended October 31, 201529, 2016 are not necessarily indicative of the results that may be expected for the entire year.
Reclassifications
Reclassifications of certain prior year balances were made in order to conform to the current year presentation.
Change in Accounting Policy
Effective January 31, 2016, the Company made a voluntary change in accounting principle related to our classification of shipping expenses. Historically, we have presented shipping expenses within selling, general and administrative expenses ("SG&A"). Under the new policy, the Company is presenting these expenses within cost of good sold ("COGS") in the unaudited Condensed Consolidated Statements of Income. The Company believes that this change is preferable as the shipping expenses represent direct costs associated with the sale of our merchandise and improves comparability with the Company's peers. The accounting policy change was applied retrospectively to all periods presented. There was no change to consolidated net income, however, cost of sales increased by $8.8 million and SG&A decreased by the same amount for the thirteen weeks ended October 31, 2015. The Company recorded $8.6 million in shipping expense as a component of COGS during the thirteen weeks ended October 29, 2016. For the year-to-date period ended October 31, 2015, cost of sales increased by $27.6 million and SG&A decreased by the same amount. The Company recorded $25.5 million in shipping expense as a component of COGS during the thirty-nine weeks ended October 29, 2016.
Reclassification of Occupancy Expenses and Correction of Immaterial Accounting Error
The Company has changed its classification of store occupancy expenses. Historically, we have presented store occupancy expenses within SG&A. As now reclassified, the Company is presenting these expenses within COGS in the unaudited Condensed Consolidated Statements of Income. The Company believes that the store occupancy expenses represent direct costs associated with the sale of our merchandise and improves comparability with the Company’s peers. This reclassification was applied retrospectively to all periods presented. There was no change to consolidated net income, however, cost of sales increased by $96.8 million and SG&A decreased by the same amount for the thirteen weeks ended October 31, 2015. The Company recorded $95.4 million in store occupancy expenses as a component of COGS during the thirteen weeks ended October 29, 2016. For the year-to-date period ended October 31, 2015, cost of sales increased by $289.3 million and SG&A decreased by the same amount. The Company recorded $287.3 million in store occupancy expenses as a component of COGS during the thirty-nine weeks ended October 29, 2016.
The Company has also elected to correct the historical classification of shipping revenue within SG&A. To correct the immaterial error, we are classifying shipping revenue as a component of net sales within the unaudited Condensed Consolidated Statements of Income for all periods presented. There was no change to consolidated net income, however, net sales increased by $4.2 million and SG&A increased by the same amount for the thirteen weeks ended October 31, 2015. The Company recorded $3.0 million in shipping revenue as a component of net sales during the thirteen weeks ended October 29, 2016. For the year-to-date period ended October 31, 2015, net sales increased by $14.1 million and SG&A increased by the same amount. The Company recorded $9.7 million in shipping revenue as a component of net sales during the thirty-nine weeks ended October 29, 2016.


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Chico’s FAS, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
October 29, 2016
(Unaudited)

Adjustments to Presentation
The above mentioned changes had no cumulative effect on the presentation of the unaudited Condensed Consolidated Statements of Income, Condensed Consolidated Balance Sheets, or Condensed Consolidated Statements of Cash Flows. The effects of the aforementioned accounting policy change, change in classification and error correction to the October 31, 2015 unaudited Condensed Consolidated Statement of Income are as follows (dollars in thousands):
 As Previously Reported % of Sales Change in Accounting Policy Effect of Change in Occupancy Classification Effect of Error Correction As Adjusted % of Sales
              
Thirteen Weeks Ended October 31, 2015          
Net sales$641,219
 100.0 $
 $
 $4,214
 $645,433
 100.0
Cost of goods sold290,737
 45.3 8,760
 96,773
 
 396,270
 61.4
Gross Margin350,482
 54.7 (8,760) (96,773) 4,214
 249,163
 38.6
Selling, general and administrative expenses327,575
 51.1 (8,760) (96,773) 4,214
 226,256
 35.1
 As Previously Reported % of Sales Change in Accounting Policy Effect of Change in Occupancy Classification Effect of Error Correction As Adjusted % of Sales
              
Thirty-Nine Weeks Ended October 31, 2015          
Net sales$2,014,910
 100.0 $
 $
 $14,115
 $2,029,025
 100.0
Cost of goods sold902,690
 44.8 27,585
 289,268
 
 1,219,543
 60.1
Gross Margin1,112,220
 55.2 (27,585) (289,268) 14,115
 809,482
 39.9
Selling, general and administrative expenses964,229
 47.9 (27,585) (289,268) 14,115
 661,491
 32.6
Footnotes to the unaudited Condensed Consolidated Financial Statements herein have been adjusted to reflect the impact of these changes accordingly.

Note 2. New Accounting Pronouncements
In March 2016, the Financial Accounting Standards Board ("FASB") issued ASU No. 2016-09, Compensation - Stock Compensation. ASU 2016-09 is effective for fiscal years, and interim periods within those years, beginning after December 15, 2016. ASU 2016-09 requires entities to recognize the income tax effects of awards in the income statement when the awards vest or are settled. The standard also permits an employer to repurchase more of an employee's shares for tax withholding purposes without triggering liability accounting and to make a policy election to account for forfeitures as they occur. This standard will be effective and adopted for our first quarter 2017. We are currently assessing the new standard and its impact to our consolidated results of operations, financial position and cash flows.
In February 2016, the FASB issued ASU No. 2016-02, Leases, which replaces the existing guidance in Accounting Standard Codification 840, Leases. ASU 2016-02 is effective for fiscal years, and interim periods within those years, beginning after December 15, 2018. ASU 2016-02 requires a dual approach for lessee accounting under which a lessee would account for leases as finance leases or operating leases. Both finance leases and operating leases will result in the lessee recognizing a right-of-use asset and corresponding lease liability. For finance leases, the lessee would recognize interest expense and amortization of the right-of-use asset and for operating leases, the lessee would recognize straight-line total rent expense. We are currently assessing the new standard and its impact to our consolidated results of operations, financial position and cash flows.


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Chico’s FAS, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
October 29, 2016
(Unaudited)

In November 2015, the FASB issued ASU No. 2015-17, Balance Sheet Classification of Deferred Taxes, which modifies the presentation of noncurrent and current deferred taxes. ASU 2015-17 requires that all deferred tax assets and liabilities be classified as noncurrent on the balance sheet instead of separating deferred taxes into current and noncurrent amounts. The standard is effective for interim and annual reporting periods beginning after December 15, 2016. Early adoption is permitted. We early adopted this standard in the fourth quarter of 2015, with retrospective presentation, as shown in our consolidated balance sheets. Our retrospective presentation resulted in a $26.9 million reclassification from current assets to other assets, net for the period ending October 31, 2015.
In July 2015, the Financial Accounting Standards Board ("FASB") issued ASU No. 2015-11, Simplifying the Measurement of Inventory (Topic 330). The amendments, which apply to inventory that is measured using any method other than the last-in, first-out (LIFO) or retail inventory method, require that entities measure inventory at the lower of cost or net realizable value. ASU 2015-11 is effective for fiscal years, and interim periods within those years, beginning after December 15, 2016 and should be applied on a prospective basis. We are currently assessing the potential impact of adopting this ASU, but do not, at this time, anticipate a material impact to our consolidated results of operations, financial position or cash flows.
In April 2015, the FASB issued ASU No. 2015-03, Simplifying the Presentation of Debt Issuance Costs, which modifies the presentation of debt issuance costs in financial statements. ASU 2015-03 requires that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability, consistent with debt discounts, rather than the Company's current classification as a deferred asset within Other Assets. ASU 2015-03 is effective for interim and annual reporting periods beginning after December 15, 2016. Early adoption is permitted. We elected to early adopt this guidance in the second quarter ended August 1, 2015, and have presented the debt issuance costs related to our revolving credit facility as a deferred asset within Other Assets, as is permitted by ASU No. 2015-15, Imputation of Interest, which was issued in August 2015. Such adoption did not have a material impact to our consolidated financial position.
In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers. The update outlines a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and supersedes most current revenue recognition guidance, including industry-specific guidance. ASU 2014-09 requires entities to recognize revenue in a way that depicts the transfer of promised goods or services to customers in an amount that reflects the consideration the entity expects to be entitled to in exchange for those goods or services. In August 2015, the FASB approved a one year deferral of the effective date, to make it effective for annual and interim reporting periods beginning after December 15, 2017. The standard allows for either a full retrospective or a modified retrospective transition method. The FASB has issued subsequent ASUs related to ASU No. 2014-09, which detail amendments to the ASU, implementation considerations, narrow-scope improvements and practical expedients. We are currently assessing the new standard and all related ASUs and its potential impact to our consolidated results of operations, financial position and cash flows.
In April 2014, the FASB issued ASU No. 2014-08, Presentation of Financial Statements (Topic 205) and Property, Plant, and Equipment (Topic 360). Under ASU 2014-08, only disposals that represent a strategic shift that has (or will have) a major effect on the entity's operations and financial results would qualify as discontinued operations. The update also requires expanded disclosures for discontinued operations and requires entities to disclose information about disposals of individually significant components that don't qualify for discontinued operations reporting. ASU 2014-08 was effective prospectively for interim and annual reporting periods beginning after December 15, 2014. We adopted this standard beginning with the first quarter ended May 2, 2015 and have applied this standard to the Boston Proper disposal, as further discussed in Note 3.   ��


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Chico’s FAS, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
October 31, 2015
(Unaudited)

Note 3. Restructuring and Strategic Charges
During the fourth quarter of fiscal 2014, we initiated a restructuring program, including the acceleration of domestic store closures and an organizational realignment, to ensure that resources align with long-term growth initiatives, including omni-channel. In connection with this effort, in the fourth quarter of fiscal 2014, we recorded pre-tax restructuring and other charges of approximately $16.7 million primarily related to severance, store closures and other impairment charges.
During the second quarter of fiscal 2015, in connection with the restructuring program, we completed an evaluation of the Boston Proper brand, and initiated a plan (the "Plan") to sell the direct-to-consumer ("DTC") business and close its stores, allowing us to focus our efforts on our core omni-channel brands. During the third quarter of fiscal 2015 we signed a non-binding letter of intent to sell the Boston Proper DTC business. Subject to finalization of an asset purchase agreement and a transition services agreement, we expect to complete the sale in the fourth quarter of 2015. As of October 31, 2015, all assets and liabilities of the Boston Proper DTC business have been recorded as held for sale in the accompanying condensed consolidated balance sheets at fair value less costs to sell. While we currently expect to sell the Boston Proper DTC business, the sale is dependent on various factors. There can be no assurance that we will realize our expected proceeds or that the sale, if any, will be complete within a reasonable time. We assessed the disposal group and determined thatcompleted the sale of the Boston Proper DTCdirect-to-consumer business, will not have a major effect on our consolidated results of operations, financial position or cash flows. Accordingly,and closed its stores. 
During the disposal group is not presented in the consolidated financial statements as a discontinued operation. Pretax losses in the thirdfirst quarter of fiscal 20152016, we announced an expansion of our restructuring program to further align the organizational structure with long-term growth initiatives, including transition of executive leadership, and 2014 forto reduce COGS and SG&A through strategic initiatives. These strategic initiatives include realigning marketing and digital commerce, improving supply chain efficiency, and reducing non-merchandise and marketing expenses. In fiscal 2016, the Boston Proper DTC business were $4.1 million and $2.3 million, respectively. Pretax losses in the year-to-date period of fiscal 2015 and 2014 were $8.4 million and $4.0 million, respectively.
A summary of the restructuring and strategic charges is presented in the table below:
 Thirty-Nine Weeks Ended Thirteen Weeks Ended
 October 31, 2015 November 1, 2014 October 31, 2015 November 1, 2014
        
 (in thousands)
Impairment charges$21,259
 $
 $329
 $
Continuing employee-related costs5,639
 
 
 
Severance charges1,808
 
 (12) 
Lease termination charges4,903
 
 2,146
 
Other569
 
 674
 
Total restructuring and strategic charges, pre-tax$34,178
 $
 $3,137
 $
During the third quarter of fiscal 2015, we recorded pre-tax restructuring and strategic charges in the accompanying condensed consolidated statements of operations of $3.1 million, primarily consisting of $2.1 million in lease termination charges. During the year-to-date period of fiscal 2015, weCompany recorded pre-tax restructuring and strategic charges of $34.2$10.8 million for the third quarter and $31.0 million year-to-date, primarily related to $21.3 million in propertyoutside services, severance and equipment impairment charges, $5.6 million in continuing employee-related costs, $1.8 million in severance charges and $4.9 million in lease termination charges.proxy solicitation costs.
In connection with the restructuring program, we evaluated our domestic store portfolio and strategic activities, inidentified approximately 175 stores for closure, with 90 stores across our brands, including 20 Boston Proper stores, closed through the third quarter of fiscal 2015 we continued our evaluation of our domestic store portfolio and increased the number of under-performing stores identified for closure to 170-175, including the Boston Proper stores. Through the third quarter of 2015, 33 stores across our brands have been closed. We plan to close an additional 40 stores, including 20 Boston Proper stores, in fiscal 2015, with the remainder to be closed in fiscal 2016 and 2017.2016. As a result, we expect to incur additional cash charges related to lease termination expenses of approximately $10.0 million.$1.7 million through fiscal 2017 related to these future closures.


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Chico’s FAS, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
October 31, 201529, 2016
(Unaudited)

A summary of the pre-tax restructuring and strategic charges is presented in the table below:
 Thirteen Weeks Ended Thirty-Nine Weeks Ended
 October 29, 2016 October 31, 2015 October 29, 2016 October 31, 2015
        
 (in thousands)
Impairment charges$
 $329
 $1,453
 $21,259
Continuing employee-related costs781
 
 1,796
 5,639
Severance charges65
 (12) 9,485
 1,808
Proxy solicitation costs108
 
 5,697
 
Lease termination charges79
 2,146
 427
 4,903
Outside services9,779
 
 12,013
 
Other charges8
 674
 156
 569
Total restructuring and strategic charges, pre-tax$10,820
 $3,137
 $31,027
 $34,178
As of October 31, 2015,29, 2016, a reserve of $5.7$18.1 million related to restructuring and strategic activities was included in other current and deferred liabilities in the accompanying condensed consolidated balance sheets. A roll-forward of the reserve is presented as follows:
Severance Charges Lease Termination Charges Other TotalContinuing Employee-related Costs Severance Charges Proxy Solicitation Costs Lease Termination Charges Outside Services Other charges Total
                    
(in thousands)(in thousands)
Beginning Balance, January 31, 2015$7,577
 $
 $486
 $8,063
Beginning Balance, January 30, 2016$2,549
 $1,678
 $
 $1,101
 $9
 $
 $5,337
Charges1,808
 4,903
 1,269
 7,980
1,796
 9,485
 5,697
 427
 12,013
 156
 29,574
Payments(7,488) (1,707) (1,184) (10,379)(3,702) (6,066) (5,697) (612) (623) (130) (16,830)
Ending Balance, October 31, 2015$1,897
 $3,196
 $571
 $5,664
Ending Balance, October 29, 2016$643
 $5,097
 $
 $916
 $11,399
 $26
 $18,081

Note 4. Goodwill and Intangible Impairment Charges
In the second quarter of fiscal 2015, in connection with the Plan, we recorded a pre-tax goodwill impairment charge of $48.9 million, reducing the carrying value of goodwill to zero, and a pre-tax impairment charge related to the Boston Proper trade name of $18.1 million, reducing the carrying value of the trade name to $23.6 million. In the third quarter of fiscal 2015, based on declining market indications of value as evidenced by our non-binding letter of intent, and as a result of a decline in third quarter sales, we recorded a pre-tax impairment charge related to the Boston Proper trade name of $21.3 million, reducing the carrying value of the trade name to $2.3 million, and a pre-tax impairment charge related to the Boston Proper customer relationship intangible of $24.2 million reducing the carrying value of the customer relationship intangible to $2.6 million. The carrying value of the Boston Proper trade name and customer list intangible are included in assets held for sale in the condensed consolidated balance sheet as of October 31, 2015.
The following table provides changes in the carrying amount of Boston Proper goodwill:
 October 31, 2015
  
 (in thousands)
Gross carrying amount$141,919
Cumulative impairment, January 31, 2015(93,066)
Impairment charges(48,853)
Cumulative impairment, October 31, 2015(141,919)
Net carrying amount$
Note 5.4. Stock-Based Compensation
For the thirty-nine weeks ended October 29, 2016 and October 31, 2015, and November 1, 2014, stock-based compensation expense was $20.7$15.5 million and $20.0$20.7 million, respectively. As of October 31, 2015,29, 2016, approximately 6.95.8 million shares remain available for future grants of equity awards under our 2012 Omnibus Stock and Incentive Plan.
Restricted Stock Awards
Restricted stock award activity for the thirty-nine weeks ended October 31, 201529, 2016 was as follows:

9
 Number of
Shares
 Weighted
Average
Grant Date
Fair Value
Unvested, beginning of period2,585,392
 $16.60
Granted1,719,380
 12.35
Vested(1,062,433) 17.06
Forfeited(776,587) 15.20
Unvested, end of period2,465,752
 13.88

10


Chico’s FAS, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
October 31, 201529, 2016
(Unaudited)

 Number of
Shares
 Weighted
Average
Grant Date
Fair Value
Unvested, beginning of period3,918,189
 $15.70
Granted1,322,270
 18.00
Vested(1,658,369) 14.76
Forfeited(482,662) 16.99
Unvested, end of period3,099,428
 16.99
Performance-based Restricted Stock Units
For the thirty-nine weeks ended October 31, 2015,29, 2016, we granted performance-based restricted stock units (“PSUs”), contingent upon the achievement of a Company-specific performance goal during fiscal 2015.2016. Any units earned as a result of the achievement of this goal will vest over 3 years from the date of grant and will be settled in shares of our common stock.
Performance-based restricted stock unit activity for the thirty-nine weeks ended October 31, 201529, 2016 was as follows:
Number of
Shares
 Weighted
Average
Grant Date
Fair Value
Number of
Shares
 Weighted
Average
Grant Date
Fair Value
Unvested, beginning of period213,453
 $15.01
469,898
 $18.23
Granted526,810
 18.23
733,360
 12.55
Vested(213,453) 15.01
(228,105) 18.23
Forfeited(1)(23,972) 18.23
(329,891) 15.29
Unvested, end of period502,838
 18.23
645,262
 13.28
(1) The performance goal for the PSUs granted in 2015 was not fully met. Forfeitures for the thirty-nine weeks ended October 29, 2016 include the portion of the fiscal 2015 PSUs that were not earned.
 Stock Option Awards
For the thirty-nine weeks ended October 29, 2016 and October 31, 2015, and November 1, 2014, we did not grant any stock options. In the years that we granted options, we used the Black-Scholes option-pricing model to value our stock options.
Stock option activity for the thirty-nine weeks ended October 31, 201529, 2016 was as follows:
Number of
Shares
 Weighted
 Average
Exercise Price
Number of
Shares
 Weighted
 Average
Exercise Price
Outstanding, beginning of period1,947,928
 $15.16
1,060,774
 $15.17
Granted
 

 
Exercised(718,628) 11.42
(46,810) 6.51
Forfeited or expired(156,776) 31.31
(202,783) 23.98
Outstanding and exercisable at October 31, 20151,072,524
 15.31
Outstanding and exercisable at October 29, 2016811,181
 13.47

Note 6.5. Income Taxes

The provision for income taxes is based on a current estimate of the annual effective tax rate and is adjusted as necessary for quarterly events. Our effective income tax rate may fluctuate from quarter to quarter as a result of a variety of factors, including changes in our assessment of certain tax contingencies, valuation allowances, changes in tax law, outcomes of administrative audits, the impact of discrete items, and the mix of earnings.
For the thirteen weeks ended October 29, 2016 and October 31, 2015, and November 1, 2014 the effective tax rate was 22.9% and (55.7)% and 37.4%, respectively. For the thirteen weeks ended October 29, 2016, the income tax provision was $7.0 million compared to the income tax benefit of $14.6 million for the thirteen weeks ended October 31, 2015. The favorability in the effective tax rate for the third quarter of 2016 primarily reflects an additional tax benefit related to the disposition of Boston Proper's stock and the realization of income tax credits in 2016. The income tax benefit for the third quarter of 2015 of $14.6 million and effective tax rate of (55.7)% primarily reflected the tax benefit related to the disposition of Boston Proper's stock and the impact of the Boston Proper goodwill and trade name impairment on the annual effective tax rate.

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Chico’s FAS, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
October 31, 201529, 2016
(Unaudited)

For the thirty-nine weeks ended October 29, 2016, the income tax provision of $40.1 million and effective tax rate of 34.0% primarily reflected the pre-tax net lossincome during the periodyear and the additional tax creditsbenefit related to the fiscal 2014 federaldisposition of Boston Proper's stock and the realization of income tax return, partially offset by the impact of the Boston Proper goodwill impairment on the annual effective tax rate.
credits in 2016. For the thirty-nine weeks ended October 31, 2015, the income tax benefit was $23.1 million. The effective tax rate of 34.0% for this periodthe thirty-nine weeks ended October 29, 2016 was not comparable to the 36.9% effective tax rate for the thirty-nine weeks ended November 1, 2014,October 31, 2015 primarily due to the tax benefit recorded in fiscal 2015 related to the expected disposition of Boston Proper's stock and the impact of the Boston Proper goodwill impairment on the annual effective tax rate.

Note 7.6. Earnings Per Share
In accordance with relevant accounting guidance, unvested share-based payment awards that include non-forfeitable rights to dividends, whether paid or unpaid, are considered participating securities. As a result, such awards are required to be included in the calculation of earnings per common share pursuant to the “two-class” method. For us, participating securities are composed entirely of unvested restricted stock awards and PSUs that have met their relevant performance criteria.
Earnings per share (“EPS”) is determined using the two-class method aswhen it is more dilutive than the treasury stock method. Basic EPS excludes dilution and is computed by dividing net income available to common stockholders by the weighted-average number of common shares outstanding during the period, including participating securities. Diluted EPS reflects the dilutive effect of potential common shares from non-participating securities such as stock options and PSUs.

The following table sets forth the computation of basic and diluted EPS shown on the face of the accompanying condensed consolidated statements of operations (in thousands, except per share amounts):
Thirty-Nine Weeks Ended Thirteen Weeks EndedThirteen Weeks Ended Thirty-Nine Weeks Ended
October 31, 2015 November 1, 2014 October 31, 2015 November 1, 2014October 29, 2016 October 31, 2015 October 29, 2016 October 31, 2015
              
Numerator              
Net income (loss)$23,037
 $96,471
 $(11,610) $26,463
$23,598
 $(11,610) $77,721
 $23,037
Net income and dividends declared allocated to participating securities(492) (2,648) 
 (745)(502) 
 (1,677) (492)
Net income (loss) available to common shareholders$22,545
 $93,823
 $(11,610) $25,718
$23,096
 $(11,610) $76,044
 $22,545
Denominator              
Weighted average common shares outstanding – basic139,386
 148,577
 136,172
 148,564
128,753
 136,172
 129,830
 139,386
Dilutive effect of non-participating securities338
 516
 
 473
243
 
 169
 338
Weighted average common and common equivalent shares outstanding – diluted139,724
 149,093
 136,172
 149,037
128,996
 136,172
 129,999
 139,724
Net income (loss) per common share:              
Basic$0.16
 $0.63
 $(0.09) $0.17
$0.18
 $(0.09) $0.59
 $0.16
Diluted$0.16
 $0.63
 $(0.09) $0.17
$0.18
 $(0.09) $0.58
 $0.16
For the thirty-ninethirteen weeks weeks ended October 29, 2016 and October 31, 2015, and November 1, 2014, 1.30.7 million and 0.60.3 million potential shares of common stock, respectively, were excluded from the diluted per share calculation relating to non-participating securities, because the effect of including these potential shares was antidilutive.
For the thirteenthirty-nine weeks ended October 29, 2016 and October 31, 2015, and November 1, 2014, 0.30.9 million and 0.51.3 million potential shares of common stock, respectively, were excluded from the diluted per share calculation relating to non-participating securities, because the effect of including these potential shares was antidilutive.



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Chico’s FAS, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
October 31, 201529, 2016
(Unaudited)

Note 8.7. Fair Value Measurements
Our financial instruments consist of cash, money market accounts, marketable securities, assets held in our non-qualified deferred compensation plan, accounts receivable and payable, and debt. Cash, accounts receivable and accounts payable are carried at cost, which approximates their fair value due to the short-term nature of the instruments. Refer to Note 11 for the fair value of the Company's outstanding debt instruments.
Marketable securities are classified as available-for-sale and as of October 31, 201529, 2016 generally consist of corporate bonds, U.S. government agencies, municipal securities, and commercial paper with $26.0$25.4 million of securities with maturity dates within one year or less and $21.3$25.0 million with maturity dates over one year and less than two years.
We consider all marketable securities available-for-sale, including those with maturity dates beyond 12 months, and therefore classify these securities within current assets on the condensed consolidated balance sheets as they are available to support current operational liquidity needs. Marketable securities are carried at fair value, with the unrealized holding gains and losses, net of income taxes, reflected in accumulated other comprehensive income until realized. For the purposes of computing realized and unrealized gains and losses, cost is determined on a specific identification basis.
Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in the principal or most advantageous market in an orderly transaction between market participants on the measurement date. Entities are required to use a three-level hierarchy, which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value.
The valuation hierarchy is based upon the transparency of inputs to the valuation of an asset or liability on the measurement date. The three levels are defined as follows: 
 Level 1Unadjusted quoted prices in active markets for identical assets or liabilities
    
 Level 2Unadjusted quoted prices in active markets for similar assets or liabilities, or; Unadjusted quoted prices for identical or similar assets or liabilities in markets that are not active, or; Inputs other than quoted prices that are observable for the asset or liability
    
 Level 3Unobservable inputs for the asset or liability
We measure certain financial assets at fair value on a recurring basis, including our marketable securities, which are classified as available-for-sale securities, certain cash equivalents, specifically our money market accounts, and assets held in our non-qualified deferred compensation plan. The money market accounts are valued based on quoted market prices in active markets. Our marketable securities are generally valued based on other observable inputs for those securities (including market corroborated pricing or other models that utilize observable inputs such as interest rates and yield curves) based on information provided by independent third party pricing entities, except for U.S. government securities which are valued based on quoted market prices in active markets. The investments in our non-qualified deferred compensation plan are valued using quoted market prices and are included in other assets on our condensed consolidated balance sheets.
From time to time, we measure certain assets at fair value on a non-recurring basis, including evaluation of long-lived assets, goodwill and other intangible assets for impairment using company-specific assumptions which would fall within Level 3 of the fair value hierarchy. The carrying value of the current assets and liabilities held for sale related to the the Boston Proper DTC business approximate their fair value due to their short-term nature. We estimate the fair value of other assets held for sale using market values for similar assets which would fall within Level 2 of the fair value hierarchy. During fiscal 2015, we recorded $128.1 million in pre-tax impairment charges related to assets measured at fair value on a non-recurring basis, comprised of $48.9 million in Boston Proper goodwill impairment, $39.4 million pre-tax in Boston Proper trade name impairment, $24.2 million in Boston Proper customer relationship intangible impairment, $13.9 million in property and equipment impairment charges related to Boston Proper and a $1.7 million loss recognized on Boston Proper DTC assets held for sale.
To assess the fair value of Boston Proper goodwill in the second quarter of fiscal 2015,long-term debt, we utilized an income approach, which incorporated market assumptions. Inputs used to calculate the fair value based on the income approach primarily included estimatedutilize a discounted future cash flowsflow model using current borrowing rates for the DTC business, discounted at a rate that approximates a rate that would be

12

Tablesimilar types of Contents

Chico’s FAS, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
October 31, 2015
(Unaudited)

used by a market participant. Inputs used to calculate the fair value also incorporated market assumptions and included considerationdebt of multiples of sales and earnings based on guidelines for publicly traded companies and recent transactions.
To assess the fair value of the Boston Proper trade name in the second quarter of fiscal 2015, we utilized a relief from royalty approach. Inputs used to calculate the fair value of the trade name utilizing the relief from royalty approach, in the second quarter of fiscal 2015, primarily included future sales projections for the DTC business, discounted at a rate that approximates a rate that would be used by a market participant and estimated royalty rate.
To assess the fair value of the Boston Proper trade name and customer relationship intangible in the third quarter of fiscal 2015, we utilized a market approach. The market approach estimated the fair value of the intangible assets based on indications of value received from third parties.comparable maturities.
Fair value calculations contain significant judgments and estimates, which may differ from actual results due to, among other things, economic conditions, changes to the business model or changes in operating performance.
During the quarter ended October 31, 2015,29, 2016, we did not make any transfers between Level 1 and Level 2 financial assets.instruments. Furthermore, as of October 29, 2016, January 30, 2016 and October 31, 2015, January 31, 2015 and November 1, 2014, we did not have any Level 3 cash equivalents or marketable securities.financial instruments. We conduct reviews on a quarterly basis to verify pricing, assess liquidity, and determine if significant inputs have changed that would impact the fair value hierarchy disclosure.

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Table of Contents

Chico’s FAS, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
October 31, 201529, 2016
(Unaudited)

In accordance with the provisions of the guidance, we categorized our financial assets,instruments, which are valued on a recurring basis, based on the priority of the inputs to the valuation technique for the instruments, as follows:
  Fair Value Measurements at Reporting Date Using  Fair Value Measurements at Reporting Date Using
Balance as of October 31, 2015 Quoted Prices in Active Markets for Identical Assets
(Level 1)
 Significant Other Observable Inputs
(Level 2)
 Significant Unobservable Inputs
(Level 3)
Balance as of October 29, 2016 Quoted Prices in Active Markets for Identical Assets
(Level 1)
 Significant Other Observable Inputs
(Level 2)
 Significant Unobservable Inputs
(Level 3)
       (in thousands)
Financial Assets:       
Current Assets       
Cash equivalents:       
Money market accounts$365
 $365
 $
 $
Marketable securities:       
Municipal securities3,193
 
 3,193
 
U.S. government agencies23,113
 
 23,113
 
Corporate bonds18,253
 
 18,253
 
Commercial paper5,852
 
 5,852
 
Non Current Assets       
Deferred compensation plan7,291
 7,291
 
 
Total$58,067
 $7,656
 $50,411
 $
(in thousands)       
Financial Liabilities:       
Long-term debt1
$84,768
 $
 $85,207
 $
       
Balance as of January 30, 2016      
Financial Assets:       
Current Assets              
Cash equivalents:              
Money market accounts$3,100
 $3,100
 $
 $
$275
 $275
 $
 $
Marketable securities:              
U.S. government agencies17,817
 
 17,817
 
21,800
 
 21,800
 
Corporate bonds27,256
 
 27,256
 
26,149
 
 26,149
 
Commercial paper2,243
 
 2,243
 
2,245
 
 2,245
 
Non Current Assets              
Deferred compensation plan8,632
 8,632
 
 
7,023
 7,023
 
 
Total$59,048
 $11,732
 $47,316
 $
$57,492
 $7,298
 $50,194
 $
              
Financial Liabilities:       
Long-term debt$92,219
 $
 $92,647
 $
Balance as of January 31, 2015             
Balance as of October 31, 2015      
Financial Assets:       
Current Assets              
Cash equivalents:              
Money market accounts$338
 $338
 $
 $
$3,100
 $3,100
 $
 $
Marketable securities:              
Municipal securities16,663
 
 16,663
 
U.S. government securities1,402
 1,402
 
 
U.S. government agencies26,299
 
 26,299
 
17,817
 
 17,817
 
Corporate bonds79,202
 
 79,202
 
27,256
 
 27,256
 
Commercial paper2,995
 
 2,995
 
2,243
 
 2,243
 
Non Current Assets              
Deferred compensation plan8,461
 8,461
 
 
8,632
 8,632
 
 
Total$135,360
 $10,201
 $125,159
 $
$59,048
 $11,732
 $47,316
 $
              
Balance as of November 1, 2014      
Current Assets       
Cash equivalents:       
Money market accounts$2,721
 $2,721
 $
 $
Marketable securities:       
Municipal securities22,103
 
 22,103
 
U.S. government securities1,403
 1,403
 
 
U.S. government agencies20,313
 
 20,313
 
Corporate bonds49,225
 
 49,225
 
Commercial paper30,998
 
 30,998
 
Non Current Assets       
Deferred compensation plan8,085
 8,085
 
 
Total$134,848
 $12,209
 $122,639
 $
Financial Liabilities:       
Long-term debt94,702
 
 $95,161
 
1 The carrying value of long-term debt includes the remaining unamortized discount of $0.2 million on the issuance of debt.

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Table of Contents

Chico’s FAS, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
October 31, 201529, 2016
(Unaudited)


Note 9. Inventories
As of October 31, 2015, in connection with the Plan, Boston Proper DTC inventories of $11.0 million were included in assets held for sale, as further discussed in Note 10. When including inventory related to the Boston Proper DTC business, inventories totaled $280.0 million compared to $294.2 million in last year's third quarter.
Note 10. Assets and Liabilities Held for Sale
As of October 31, 2015, all assets and liabilities of the Boston Proper DTC business have been recorded as held for sale in the accompanying condensed consolidated balance sheets. All assets held for sale were measured at fair value less costs to sell, resulting in a loss of $1.7 million in fiscal 2015, which is reflected in restructuring and strategic charges in the condensed consolidated statements of operations.
The following table summarizes the balances of assets and liabilities held for sale as of October 31, 2015. Other intangible assets are presented net of impairment charges, as further discussed in Note 4:
 October 31, 2015
  
 (in thousands)
Assets: 
Inventories$11,002
Other current assets1,891
Property and equipment, net2,258
Other intangible assets, net4,827
Boston Proper DTC assets19,978
Loss recognized on Boston Proper DTC assets held for sale(1,700)
Total Boston Proper DTC assets held for sale18,278
Land and other assets held for sale23,524
Total assets held for sale$41,802
  
Liabilities: 
Current liabilities$8,478
Total Boston Proper DTC liabilities held for sale$8,478

Note 11.8. Debt
On May 4,In fiscal 2015, we entered into a credit agreement (the "Agreement") among the Company, JPMorgan Chase Bank, N.A. as Administrative Agent, Bank of America, N.A., as Syndication Agent and the Lenders party hereto. Our obligations under the Agreement are guaranteed by certain of our material U.S. subsidiaries. The Agreement provides"Agreement) providing for a term loan commitment in the amount of $100.0 million and a revolving credit facility of which $100.0 million was drawn at closing,million. The term loan and maturesrevolving credit facility mature on May 4, 2020 payable in quarterly installments, as defined in the Agreement, with the remainder due at maturity. The Agreement also provides for a $100.0 million revolving credit facility, of which $24.0 million was drawn at closing and was repaid in the second quarter of 2015. The revolving credit facility matures on May 4, 2020. The Agreement has borrowing options which accrue interest by reference, at our election, at either an adjusted eurodollar rate tied to LIBOR or an Alternate Base Rate plus an interest rate margin, as defined in the Agreement. The Agreement contains customary representations, warranties, and affirmative covenants, including the requirement to maintain certain financial ratios. The Company was in compliance with the applicable ratio requirements and other covenants at October 31, 2015.
On May 4, 2015, in connection with our entry into the Agreement, we repaid and terminated, with no prepayment penalties, the $124.0 million outstanding obligation under our 2011 revolving credit facility. We used the proceeds from the initial draw of the term loan and revolving credit facility of the Agreement to repay such obligations.

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Chico’s FAS, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
October 31, 2015
(Unaudited)

29, 2016. As of October 31, 2015, $94.729, 2016, we had total available borrowing capacity of $100.0 million in net borrowings were outstanding under the Agreement, and are reflected as $10.0 million in current debt and $84.7 million in long-term debt in the accompanying condensed consolidated balance sheets. As of October 31, 2015, an unamortized debt discount of $0.4 million was outstanding related to the Agreement and is allocated to other assets and long-term debt in the accompanying condensed consolidated balance sheet.our revolving credit facility.
The following table provides details on our debt outstanding as of October 29, 2016, January 30, 2016 and October 31, 2015, January 31, 2015 and November 1, 2014:2015:
 October 31, 2015 January 31, 2015 November 1, 2014
      
 (in thousands)
Credit Agreement, net of unamortized debt discount$94,702
 $
 $
Less: current portion(10,000) 
 
Total long-term debt, net of unamortized debt discount$84,702
 $
 $
 October 29, 2016 January 30, 2016 October 31, 2015
 (in thousands)
Credit Agreement, net$84,768
 $92,219
 $94,702
Less: current portion(10,000) (10,000) (10,000)
Total long-term debt$74,768
 $82,219
 $84,702

Note 12.9. Share Repurchases
In December 2013,During the thirty-nine weeks ended October 29, 2016, we announced a $300.0repurchased 6.5 million shares, under our share repurchase authorization, and immediately prior toprogram announced in November 2015 at a total cost of approximately $76.3 million. As of October 29, 2016, the execution of the accelerated stock repurchase agreements ("ASR Agreements") described below, we had $290.0Company has $183.7 million remaining under the existing authority.share repurchase program. However, we have no continuing obligation to repurchase shares under this authorization, and the timing, actual number and value of any additional shares to be purchased will depend on the performance of our stock price, market conditions and other considerations.

Note 10. Commitments and Contingencies
In July 2015, the Company was named as a defendant in Altman v. White House Black Market, Inc., a putative class action filed in the United States District Court for the Northern District of Georgia. The Complaint alleges that the Company, in violation of federal law, published more than the last five digits of a credit or debit card number or an expiration date on customers' receipts. The Company denies the material allegations of the complaint. Its motion to dismiss was denied on July 13, 2016, but the Company continues to believe that the case is without merit and is not appropriate for class treatment. It intends to vigorously defend the matter. At this time however, it is not possible to predict whether the proceeding will be permitted to proceed as a class or the size of the putative class, and no assurance can be given that the Company will be successful in its defense on the merits or otherwise. Because the case is still in the early stages and class determinations have not been made, the Company is unable to estimate any potential loss or range of loss.
In June 2015, the Company was named as a defendant in Ackerman v. Chico’s FAS, Inc., a putative representative Private Attorney General action filed in the Superior Court of California, County of Los Angeles. The Complaint alleges numerous violations of California law related to wages, meal periods, rest periods, wage statements, and failure to reimburse business expenses, among other things. Plaintiff subsequently amended her complaint to make the same allegations on a class action basis. In June 2016, the parties submitted a proposed settlement of the matter to the court, and the court granted preliminary approval on August 26, 2016, and settlement notices have been distributed. If finally approved, the proposed settlement will not have a material adverse effect on the Company’s consolidated financial condition or results of operations.
In March 2015, we entered into ASR Agreements2016, the Company was named as a defendant in Cunningham v. Chico’s FAS, Inc., a putative class action filed in the Superior Court of California, County of San Diego. Given the overlap with eachthe claims alleged in the Ackerman case, described above, the Court initially stayed the Cunningham case pending final approval of Merrill Lynch, Pierce, Fennerthe Ackerman settlement. In October 2016, the parties agreed to lift the stay and Smith Incorporated ("Merrill Lynch")to resolve the matter as an individual action. The Court has since dismissed the case. The settlement amount was immaterial.

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Chico’s FAS, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
October 29, 2016
(Unaudited)

In June 2016, the Company was named as a defendant in Rodems v. Chico’s FAS, Inc., a putative class action filed in the Superior Court of California, County of Fresno. Plaintiff sought to represent current and former nonexempt employees of Chico’s stores in California. The Complaint alleged many of the same Labor Code violations as agentAckerman, described above. As a result, the court stayed the matter pending final approval of the Ackerman proposed settlement. The Company and the plaintiff subsequently agreed to a lifting of the stay and a filing of an amended complaint in early November, and the Company removed the case to the United State District Court for Merrill Lynch International,the Eastern District of California on November 9, 2016. In the proposed First Amended Complaint, the plaintiff makes similar claims of Labor Code violations against the Company but does not seek to represent a putative class or make class action allegations. The Company disputes the allegations of the First Amended Complaint and, J.P. Morgan Securities, LLC ("JP Morgan")at this time, does not expect that this case will have a material adverse effect on the Company’s consolidated financial condition or results of operation.
On July 28, 2016, the Company was named as a defendant in Calleros v. Chico’s FAS, Inc., as agenta putative class action filed in the Superior Court of California, County of Santa Barbara. Plaintiff alleges that the Company failed to comply with California law requiring it to provide consumers cash for JPMorgan Chase Bank, N.A., to purchase $250.0 million in outstanding shares of our common stock. Under the ASR Agreements, we madegift cards with a payment of approximately $125.0 million to each of Merrill Lynch and JP Morgan and received from each of them an initial delivery of approximately 5.35 million common shares. Thestored value of less than $10.00. The Company believes that the initial shares receivedmatter is not appropriate for class treatment; however, it is not possible to predict whether it will be permitted to proceed as a class or the size of the putative class, and no assurance can be given that the Company will be successful in its defense of this action on the datemerits or otherwise. Because class determinations have not been made, the Company is unable to estimate any potential loss or range of purchase was approximately $187.5 million. Inloss were it to lose on the second quarter of fiscal 2015, Merrill Lynch and JP Morgan delivered an additional 3.9 million shares upon completionmerits of the ASR Agreements, valuedcase. However, the case is scheduled for voluntary mediation on November 28, 2016, and, at approximately $62.5 million.
We accounted forthis time, the ASR Agreements as treasury stock repurchase transactions, reducingCompany does not expect that the shares outstanding by the 10.7 million common shares initially repurchased and resulted in an immediate reduction of the outstanding shares used to calculate the weighted-average common shares outstanding for basic and diluted earnings per share. The additional 3.9 million shares delivered resulted incase will have a reduction of the outstanding sharesmaterial adverse effect on the dateCompany’s consolidated financial conditions or results of deliveryoperation.
Other than as noted above, we are not currently a party to any legal proceedings other than claims and lawsuits arising in the second quarternormal course of fiscal 2015.
Followingbusiness. All such matters are subject to uncertainties and outcomes may not be predictable. Consequently, the consummationultimate aggregate amount of the ASR Agreements, we had approximately $40.0 million remaining undermonetary liability or financial impact with respect to these matters as of October 29, 2016 are not estimable. However, while such matters could affect our share repurchase program. The repurchase program has no specific termination date and will expireconsolidated operating results when we have repurchased all securities authorized for repurchase thereunder, unless terminated earlier byresolved in future periods, management believes that upon final disposition, any monetary liability or financial impact to us would not be material to our Board of Directors. There were no share repurchases during the third quarter of fiscal 2015.annual consolidated financial statements.

Note 13.11. Subsequent Events
On November 24, 2015,22, 2016, we announced that our Board of Directors has canceled the remainder of the December 2013 share repurchase program, under which $40 million was remaining as of October 31, 2015,and approved a new $300 million share repurchase authorization for the Company's common stock. We also announced that our Board of Directors has declared a quarterly dividend of $0.0775$0.08 per share on our common stock. The dividend will be payable on December 21, 201519, 2016 to shareholders of record at the close of business on December 7, 2015.5, 2016. Although it is our Company’s intention to continue to pay a quarterly cash dividend in the future, any decision to pay future cash dividends will be made by the Board of Directors and will depend on future earnings, financial condition and other factors.



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ITEM 2.MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) should be read in conjunction with the accompanying unaudited condensed consolidated financial statements and notes thereto and our 20142015 Annual Report to Stockholders.

Executive Overview
We are a leading omni-channel specialty retailer of women’s private branded, sophisticated, casual-to-dressy clothing, intimates, complementary accessories, and other non-clothing items operating under the Chico’s, White House | Black Market (“WH|BM”WHBM”), Soma and Boston ProperSoma brand names. We earn revenues and generate cash through the sale of merchandise in our domestic and international retail stores, on our various websites, through our call center which takes orders for all of our brands, and through an unaffiliated franchise partner in Mexico.
We utilize an integrated omni-channel approach to managing our business. WeFor each of our brands, we want our customers to experience our brands, not a channel within our brands, and view ourthe brand, through all of its various sales channels, as an integrated experience, rather than viewing it through a single integrated process rather thanchannel (such as separate sales channels operating independently.the store or the website). This approach allows our customers to browse, purchase, return, or exchange our merchandise through whatever sales channel and at whatever time is most convenient for her.convenient. As a result, we track total sales and comparable sales on a combined basis.
During the second quarter of fiscal 2015, we completed an evaluation of the Boston Proper brand, including consideration of the long-term potential of stores for the brand, and initiated a plan (the "Plan") to sell the direct-to-consumer ("DTC") business and close its stores, as further discussed in Note 3, allowing us to focus our efforts on our core omni-channel brands. During the third quarter of fiscal 2015 we signed a non-binding letter of intent to sell the Boston Proper DTC business. Subject to finalization of an asset purchase agreement and a transition services agreement, we expect to complete the sale in the fourth quarter of 2015.
Net sales for the third quarter of fiscal 20152016 were $641.2$596.9 million a decrease of 3.7% compared to $665.6$645.4 million in last year's third quarter. TheThis decrease of 7.5% included $18.7 million related to Boston Proper. Excluding Boston Proper from fiscal 2015, net sales decreased 4.8% and primarily reflected a 3.3%4.9% decrease in comparable sales, and a 0.8% net decrease in selling square footage. The 3.3% decrease in comparable sales for the third quarter was following a 1.6% decrease in last year’s third quarter, reflectingcomprised of a decrease in transaction count and lower average dollar sale and transaction count.sale. Third quarter average unit retail increased with a decline in promotional activity.
We reported a net lossincome for the third quarter of fiscal 20152016 of $23.6 million, or $0.18 per diluted share, compared to a net loss of $11.6 million, or $0.09 per diluted share, compared to net income of $26.5 million, or $0.17 per diluted share, in last year’s third quarter. Results for the third quarter of fiscal 2016 include restructuring and strategic charges of $6.8 million after-tax, or $0.05 per diluted share, primarily consisting of outside services, partially offset by an additional tax benefit on the disposition of Boston Proper's stock of $4.0 million, or $0.03 per diluted share. Results for the third quarter of fiscal 2015 include the impact of Boston Proper non-cash intangiblegoodwill and trade name impairment charges of $23.9 million after-tax, or $0.18 per diluted share, restructuring and strategic charges primarily related to lease termination charges for the Boston Proper stores of $1.9 million after-tax, or $0.01 per diluted share, primarily related to property and equipment impairment charges for the Boston Proper stores, and the impact ofoperating loss related to Boston Proper's operating lossProper of $3.5 million, after tax, or $0.03 per diluted share. The change in earnings per share also reflects the impact of a net loss during the period andapproximately 14.610.2 million shares repurchased since the end of the third quarter last year, all of which were repurchased in fiscal 2015.year.
Net sales for the year-to-date period of fiscal 20152016 were $2.015$1.876 billion, a decrease of 0.2%7.5% compared to $2.018$2.029 billion in last year’s year-to-date period. Net income for the year-to-date period of fiscal 20152016 was $23.0$77.7 million, or $0.16$0.58 per diluted share, compared to net income of $96.5$23.0 million, or $0.63$0.16 per diluted share in last year'syear. Results for the year-to-date period.period of fiscal 2016 include restructuring and strategic charges of $19.4 million after-tax, or $0.15 per diluted share, primarily consisting of severance, proxy solicitation costs, and outside services, partially offset by an additional tax benefit on the disposition of Boston Proper's stock of $4.0 million, or $0.03 per diluted share. Results for the year-to-date period of fiscal 2015 include the impact of Boston Proper non-cash goodwill and intangibletrade name impairment charges of $71.0 million after-tax, or $0.50 per diluted share, restructuring and strategic charges of $21.2 million after-tax, or $0.15 per diluted share, primarily related to property and equipment impairment charges, employee-related costs and lease termination charges, of $21.2 million after-tax, or $0.15 per diluted share, a tax benefit related to the expected disposition of Boston Proper's stock of $23.8 million, or $0.17 per diluted share, and the impact ofoperating loss related to Boston Proper's operating lossProper of $8.2 million, after tax, or $0.06 per diluted share. The change in earnings per share also reflects a decrease in net income, partially offset by the impact of approximately 14.610.2 million shares repurchased since the end of the third quarter last year, all of which were repurchased in fiscal 2015.year.
Our Business Strategy
Our overall business strategy is focused on building and cultivating a portfolio of high-performing retail brands serving the fashion needs of women 35 years and older. In the near term, weWe are focused on increasing the sales volume and profitability of our existing brands.brands through our four focus areas: (1) evolving the customer experience, (2) strengthening our brands' positions, (3) leveraging actionable retail science, and (4) sharpening our financial principles. Over the long term, we may build our brand portfolio by considering the organic development or acquisition of other specialty retail concepts when ourif research indicates that the opportunity complements our current brands and is appropriate and in the best interest of the shareholders.

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We pursue the growth of the brands in our portfolio by building our omni-channel capabilities, which includes managing our store base and our growing online presence, executing innovative marketing plans, effectively leveraging expenses and optimizing the potential of each of our three brands. As part of our continuous efforts to improve our overall strategy while seeking to enhance and support our long-term growth,We have invested heavily in fiscal 2014, we initiated new capital allocation and cost reduction initiatives that are focused on advancing our omni-channel capabilities in order to improveallow customers to fully experience our brands, through more than one channel. In essence, we view our various sales channels as a single, integrated process rather than as separate sales channels operating independently. To that end, we often refer to our brands' respective websites as "our largest store" within the brand.
Under this integrated, omni-channel approach, we encourage our customers to take advantage of each of our sales channels in whatever way best fits their needs. Customers may shop our products through one channel and consummate the purchase through a different channel. Our domestic customers have the option of returning merchandise to a store or to our distribution center, regardless of the channel used for purchase. We believe this omni-channel approach meets our customers’ expectations, enhances the customer experience, contributes to the overall customer experience, reducing overall capital expenditures, re-balancingsuccess of our store fleet, effectively managing other expensesbrands, reflects that our customers do not differentiate between channels, and improvingis consistent with how we plan and manage our business. As a result, we maintain a shared inventory management. Additionally, in fiscal 2015, we completed an evaluation of the Boston Proper brand and initiated a Plan to sell the DTC business and close its stores,platform for our operations, allowing us to focusfulfill orders for all channels from our effortsdistribution center in Winder, Georgia. We also fulfill in-store orders directly from other stores or our distribution center and offer domestic online and catalog customers the option of returning items to our stores.
We seek to acquire and retain omni-channel customers by leveraging existing customer-specific data and through targeted marketing, including e-marketing, television, catalogs and mailers. We seek to optimize the potential of our brands with improved product offerings, which includes potential new merchandise opportunities and brand extensions that complement the current offerings, as well as our continued emphasis on our other omni-channel brands.“Most Amazing Personal Service” standard.
In 2016, we announced new initiatives to realign marketing and digital commerce, improve supply chain efficiency, and reduce non-merchandise and marketing expenses. Actions taken as part of these initiatives are expected to reduce expenses and complexity, standardize processes and improve the Company's ability to respond in real-time to changes in customer demand for merchandise.


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RESULTS OF OPERATIONS
Thirteen Weeks Ended October 31, 201529, 2016 Compared to the Thirteen Weeks Ended November 1, 2014October 31, 2015
Net Sales
The following table depicts net sales by Chico’s, WH|BM,WHBM, Soma and Boston Proper in dollars and as a percentage of total net sales for the thirteen weeks ended October 29, 2016 and October 31, 2015 and November 1, 2014:2015:
Thirteen Weeks EndedThirteen Weeks Ended
October 31, 2015 November 1, 2014October 29, 2016 October 31, 2015
        
(dollars in thousands)(dollars in thousands)
Chico's$332,033
 51.8% $347,562
 52.3%$312,203
 52.3% $333,421
 51.7%
WH|BM220,125
 34.3% 224,552
 33.7%
WHBM210,389
 35.2
 220,965
 34.2
Soma71,749
 11.2% 70,668
 10.6%74,320
 12.5
 72,349
 11.2
Boston Proper17,312
 2.7% 22,787
 3.4%
 
 18,698
 2.9
Total net sales$641,219
 100.0% $665,569
 100.0%$596,912
 100.0% $645,433
 100.0%
Net sales for the third quarter decreased 3.7% to $641.2$596.9 million from $665.6$645.4 million in last year’s third quarter. This 7.5% decrease includes $18.7 million related to Boston Proper in last year’s third quarter and primarily reflectingreflects a 3.3%4.9% decrease in comparable sales, comprised of reduced transaction count and lower average dollar sale. For the third quarter, average unit retail increased with a 0.8%decline in promotional activity. Net sales reflects 36 net store closures, including 20 Boston Proper store closures, or a 1.7% net decrease in selling square footage since last year's third quarter. The 3.3% decrease in comparable sales for the third quarter was following a 1.6% decrease in last year’s third quarter,reflecting a decrease in average dollar sale and transaction count.
The following table depicts comparable sales percentages by Chico's, WH|BMWHBM and Soma for the thirteen weeks ended October 29, 2016 and October 31, 2015 and November 1, 2014:2015:
Thirteen Weeks EndedThirteen Weeks Ended
October 31, 2015 November 1, 2014October 29, 2016 October 31, 2015
Chico's(4.7)% (2.6)%(5.6)% (4.7)%
WH|BM(2.0)% (1.4)%
WHBM(5.5)% (2.0)%
Soma(0.9)% 3.7 %0.4 % (0.9)%
Total Company(3.3)% (1.6)%(4.9)% (3.3)%
Cost of Goods Sold/Gross Margin
The following table depicts cost of goods sold and gross margin in dollars and gross margin as a percentage of total net sales for the thirteen weeks ended October 29, 2016 and October 31, 2015 and November 1, 2014:2015:
Thirteen Weeks EndedThirteen Weeks Ended
October 31, 2015 November 1, 2014October 29, 2016 October 31, 2015
      
(dollars in thousands)(dollars in thousands)
Cost of goods sold$290,737
 $301,776
$366,618
 $396,270
Gross margin$350,482
 $363,793
$230,294
 $249,163
Gross margin percentage54.7% 54.7%38.6% 38.6%
For the third quarter of fiscal 2015,2016, gross margin was $350.5$230.3 million, or 38.6%, compared to $363.8$249.2 million, or 38.6%, in last year’s third quarter. GrossWhen excluding Boston Proper from fiscal 2015, gross margin was 54.7%decreased 40 basis points in fiscal 2016 compared to gross margin of net sales, in line with the same period$244.2 million, or 39.0% last year. This decrease in gross margin rate primarily reflects an improvement in merchandise margin, which was more than offset by deleverage of occupancy costs and an increase in incentive compensation.


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Selling, General and Administrative Expenses
The following table depicts SG&A, which includes store and direct operating expenses, marketing expenses and National Store Support Center (“NSSC”) expenses, in dollars and as a percentage of total net sales for the thirteen weeks ended October 29, 2016 and October 31, 2015 and November 1, 2014:2015:
Thirteen Weeks EndedThirteen Weeks Ended
October 31, 2015 November 1, 2014October 29, 2016 October 31, 2015
      
(dollars in thousands)(dollars in thousands)
Selling, general and administrative expenses$327,575
 $321,574
$188,350
 $226,256
Percentage of total net sales51.1% 48.3%31.6% 35.1%
For the third quarter of fiscal 2015,2016, SG&A was $327.6$188.4 million compared to $321.6$226.3 million in last year’syear's third quarter. SG&A was 51.1%31.6% of net sales, a 280350 basis point increasedecrease from last year’syear's third quarter, primarily reflecting sales deleverage as well asdue a reduction in marketing spend in fiscal 2016, $11.5 million of SG&A related to Boston Proper in fiscal 2015, and savings in store labor, partially offset by an increase in store occupancy and point-of-sale implementation costs.incentive compensation.
Restructuring and Strategic Charges
In fiscal 2014, we initiated a restructuring program, including the acceleration of domestic store closures and an organizational realignment, to ensure that resources are aligned with long-term growth initiatives, including omni-channel. During the first quarter of fiscal 2016, we announced an expansion of our restructuring program to further align the organizational structure with long-term growth initiatives, including transition of executive leadership, and to reduce COGS and SG&A through strategic initiatives. These strategic initiatives include realigning marketing and digital commerce, improving supply chain efficiency, and reducing non-merchandise and marketing expenses. We have continued to execute on our cost reduction and operating efficiency initiatives, including an organizational redesign in the third quarter of fiscal 2016 which clarified roles, responsibilities and processes across our brands and shared service center.
In connection with this effort, in the third quarter of fiscal 2015,2016, we recorded pre-tax restructuring and strategic charges of $3.1totaling $10.8 million, primarily consisting of $2.1outside services related to cost reduction and operating efficiency initiatives, compared to $3.1 million in the third quarter of fiscal 2015, primarily consisting of Boston Proper lease termination charges. The after-tax impact of the restructuring and strategic charges in the third quarter totaled $6.8 million, or $0.05 per diluted share, compared to $1.9 million, or $0.01 per diluted share.share in fiscal 2015.
In connection with the restructuring program, we evaluated our domestic store portfolio and strategic activities, inidentified approximately 175 stores for closure, with 90 stores across our brands, including 20 Boston Proper stores, closed through the third quarter of fiscal 2015 we continued our evaluation of our domestic store portfolio and increased the number of under-performing stores identified for closure to 170-175, including the Boston Proper stores. Through the third quarter of 2015, we have closed 33 stores across our brands. We plan to close an additional 40 stores, including 20 Boston Proper stores, in fiscal 2015, with the remainder to be closed in fiscal 2016 and 2017.2016. As a result, we expect to incur additional cash charges related to lease termination expenses of approximately $10.0 million.
Goodwill and Intangible Impairment Charges
In the third quarter of$1.7 million through fiscal 2015, based on declining market indications of value as evidenced by our non-binding letter of intent, and as a result of a decline in third quarter sales, the Company determined that certain Boston Proper intangibles were impaired and recorded $45.5 million in pre-tax, non-cash intangible impairment charges. The $45.5 million Boston Proper impairment charges included $21.3 million2017 related to the trade name and $24.2 million related to the customer relationship intangible.
The after-tax impact of the Boston Proper impairment charges totaled $23.9 million, or $0.18 per diluted share, inclusive of a $4.4 million non-cash tax benefit resulting from the tax effect of the goodwill impairment on the annual effective tax rate. The $4.4 million non-cash tax benefit in the third quarter is expected to be offset by non-cash tax charges in the fourth quarter of fiscal 2015.these future closures.
Provision for Income Taxes
Our effective tax rate for the third quarter of fiscal 2015 was (55.7)%,22.9% compared to an effective tax rate of 37.4%(55.7)% in last year's third quarter. The favorability in the effective tax rate for the third quarter of 2016 primarily reflects an additional tax benefit related to the disposition of Boston Proper's stock and the realization of income tax credits in 2016. The income tax benefit of $14.6 million for the third quarter of 2015 and effective tax rate of (55.7)% primarily reflected the pre-tax net loss during the period and tax creditsbenefit related to the fiscal 2014 federaldisposition of Boston Proper's stock and the tax return, partially offset by the impact of the Boston Proper goodwill and trade name impairment on the annual effective tax rate. Excluding the taxnet after-tax impact of the expected disposition of Boston Proper's stock, Boston Proper goodwill and trade name impairment charges, Boston Proper's operating loss and restructuring and strategic charges and the 2015 third quarterexit of Boston Proper, the effective tax rate would have been 37.0% compared to an effective tax rate of 37.4% infor the third quarter of fiscal 2014.2016 would have been 36.2% compared to 37.0% in the same period last year.
Net Income and Earnings Per Diluted Share
We reported a net lossincome for the third quarter of fiscal 20152016 of $11.6$23.6 million, or $0.09$0.18 per diluted share, compared to net incomeloss of $26.5$11.6 million, or $0.17$0.09 per diluted share in last year’s third quarter. Results for the third quarter of fiscal 20152016 include the impact of Boston Proper non-cash intangible impairment charges of $23.9 million after-tax, or $0.18 per diluted share, restructuring and strategic charges of $6.8 million after-tax, or $0.05 per diluted share, primarily related to lease termination chargesoutside services related to cost reduction and operating efficiency initiatives, partially offset by an additional tax benefit related to the exit of Boston Proper of $4.0 million, or $0.03 per diluted share. Results for the Boston Proper storesthird quarter of $1.9fiscal 2015 include charges of $29.3 million after-tax, or $0.01$0.22 per diluted share, related to Boston Proper non-cash goodwill and the impact oftrade name impairment charges, restructuring and strategic charges and Boston Proper'sProper operating loss of $3.5 million after tax, or $0.03

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per diluted share.results. The change in earnings per share also reflects the impact of a net loss during the period and approximately 14.610.2 million shares repurchased since the end of the third quarter last year, allyear.



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Table of which were repurchased in fiscal 2015.Contents

Thirty-Nine Weeks Ended October 31, 201529, 2016 Compared to the Thirty-Nine Weeks Ended November 1, 2014October 31, 2015
Net Sales
The following table depicts net sales by Chico’s, WH|BM,WHBM, Soma and Boston Proper in dollars and as a percentage of total net sales for the thirty-nine weeks ended October 29, 2016 and October 31, 2015 and November 1, 2014:2015:
Thirty-Nine Weeks EndedThirty-Nine Weeks Ended
October 31, 2015 November 1, 2014October 29, 2016 October 31, 2015
        
(dollars in thousands)(dollars in thousands)
Chico's$1,054,367
 52.3% $1,069,833
 53.1%$995,067
 53.0% $1,058,697
 52.2%
WH|BM657,082
 32.6% 655,639
 32.5%
WHBM633,420
 33.8% 659,682
 32.5%
Soma238,159
 11.8% 220,406
 10.8%247,134
 13.2% 240,347
 11.8%
Boston Proper65,302
 3.3% 72,426
 3.6%
 0.0% 70,299
 3.5%
Total net sales$2,014,910
 100.0% $2,018,304
 100.0%$1,875,621
 100.0% $2,029,025
 100.0%
Net sales for the year-to-date period decreased 0.2% to $2.015$1.876 billion from $2.018$2.029 billion in last year’s year-to-date period,period. This 7.6% decrease includes $70.3 million related to Boston Proper last year and primarily reflectingreflects a 1.0%4.0% decrease in comparable sales, partially offset by franchise sales. The 1.0% decrease in comparable sales for the year-to-date period was following a 1.3% decrease in last year’s year-to-date period, reflectingcomprised of a decrease in transaction count and average dollar sale and transaction count.sale.
The following table depicts comparable sales percentages by Chico's, WH|BMWHBM and Soma for the thirty-nine weeks ended October 29, 2016 and October 31, 2015 and November 1, 2014:2015:
Thirty-Nine Weeks EndedThirty-Nine Weeks Ended
October 31, 2015 November 1, 2014October 29, 2016 October 31, 2015
Chico's(2.1)% (0.9)%(5.4)% (2.1)%
WH|BM(0.8)% (4.0)%
WHBM(3.5)% (0.8)%
Soma3.6 % 5.7 %0.6 % 3.6 %
Total Company(1.0)% (1.3)%(4.0)% (1.0)%
Cost of Goods Sold/Gross Margin
The following table depicts cost of goods sold and gross margin in dollars and gross margin as a percentage of total net sales for the thirty-nine weeks ended October 29, 2016 and October 31, 2015 and November 1, 2014:2015:
Thirty-Nine Weeks EndedThirty-Nine Weeks Ended
October 31, 2015 November 1, 2014October 29, 2016 October 31, 2015
      
(dollars in thousands)(dollars in thousands)
Cost of goods sold$902,690
 $920,148
$1,142,182
 $1,219,543
Gross margin$1,112,220
 $1,098,156
$733,439
 $809,482
Gross margin percentage55.2% 54.4%39.1% 39.9%
Gross margin for the year-to-date period was $1,112.2$733.4 million, or 39.1%, compared to $1,098.2$809.5 million, or 39.9%, in last year’s year-to-date period. Gross margin was 55.2% of net sales, an 80 basis point increaseWhen excluding Boston Proper from fiscal 2014,2015, gross margin decreased 110 basis points in fiscal 2016 compared to $786.5 million, or 40.2%, last year. The decrease is primarily reflecting a decrease in promotional activity in responsedue to improved inventory management.sales deleverage of store occupancy expense.
 

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Selling, General and Administrative Expenses
The following table depicts SG&A, which includes store and direct operating expenses, marketing expenses and NSSC expenses, in dollars and as a percentage of total net sales for the thirty-nine weeks ended October 29, 2016 and October 31, 2015 and November 1, 2014:2015:
Thirty-Nine Weeks EndedThirty-Nine Weeks Ended
October 31, 2015 November 1, 2014October 29, 2016 October 31, 2015
      
(dollars in thousands)(dollars in thousands)
Selling, general and administrative expenses$964,229
 $945,360
$583,117
 $661,491
Percentage of total net sales47.9% 46.8%31.1% 32.6%

SG&A forFor the year-to-date period of fiscal 2016, SG&A was $964.2$583.1 million compared to $945.4$661.5 million in last year’s year-to-date period. SG&A was 47.9%31.1% of net sales, a 110150 basis point increasedecrease from last year’s year-to-date period,year, primarily reflecting an increasedue to $40.5 million of SG&A related to Boston Proper in fiscal 2015, and a reduction in marketing spend and store occupancy costs, point-of-sale implementation costs, and accrued incentive compensation,labor, partially offset by benefits from previously announced cost reduction efforts.employee benefit costs in fiscal 2016.
Restructuring and Strategic Charges
Restructuring and strategic charges for the year-to-date period wasof fiscal 2016 were $31.0 million pre-tax, primarily consisting of outside services, severance, proxy solicitation costs, compared to $34.2 million pre-tax, which consistedin fiscal 2015, primarily consisting of $21.3 million in non-cash property and equipment impairment charges, $5.6 million in continuing employee-related costs, $4.9 million in lease termination charges and $1.8 million in severance charges. The after-tax impact of the restructuring and strategic charges totaled $19.4 million, or $0.15 per diluted share, compared to $21.2 million, or $0.15 per diluted share.share in fiscal 2015.
GoodwillProvision for Income Taxes
For the year-to-date period of fiscal 2016, the income tax provision of $40.1 million and Intangible Impairment Charges
In fiscal 2015, based on declining market indicationseffective tax rate of value as evidenced by our non-binding letter of intent,34.0% primarily reflected the pre-tax net income during the period and as a result of a decline in third quarter sales, the Company determined that certain Boston Proper intangibles were impaired and recorded $112.5 million in pre-tax, non-cash goodwill and intangible impairment charges. The $112.5 million Boston Proper impairment charges included $48.9 million related to goodwill, $39.4 millionadditional tax benefit related to the trade name,disposition of Boston Proper's stock and $24.2 million related to the customer relationship intangible.
The after-tax impactrealization of the goodwill and intangible impairment charges totaled $71.0 million, or $0.50 per diluted share, inclusive of a $17.3 million non-cashincome tax benefit resulting from the tax effect of the goodwill impairment on the annual effective tax rate. The $17.3 million non-cash tax benefitcredits in 2016. For the year-to-date period is expected to be offset by approximately $17.3 million in non-cash tax charges in the fourth quarter of fiscal 2015.
Provision for Income Taxes
Our2015, the income tax benefit was $23.1 million. The effective tax rate for the year-to-date period of fiscal 2015 was not comparable to the 34.0% effective tax rate for the year-to-date period of 36.9% in last year's year-to-date period. The income tax benefit of $23.1 millionfiscal 2016, primarily reflecteddue to the tax benefit recorded in fiscal 2015 related to the expected disposition of Boston Proper's stock and the impact of the Boston Proper goodwill impairment on the annual effective tax rate. Excluding the tax impact of the expected disposition of Boston Proper's stock, Boston Proper goodwill and trade name impairment charges, Boston Proper's operating loss and restructuring and strategic charges, the effective tax rate for the year-to-date period of fiscal 2015 would have been 37.6% compared to an effective tax rate of 36.9% in last year's year-to-date period.
Net Income and Earnings Per Diluted Share
Net income for the year-to-date period of fiscal 20152016 was $23.0$77.7 million, or $0.16$0.58 per diluted share, compared to net income of $96.5$23.0 million, or $0.63$0.16 per diluted share, in last year's year-to-date period. Results for the year-to-date period of fiscal 20152016 include the impact of Boston Proper non-cash goodwill and intangible impairment charges of $71.0 million after-tax, or $0.50 per diluted share, restructuring and strategic charges primarily related to property and equipment impairment charges, employee-related costs and lease termination charges, of $21.2$19.4 million after-tax, or $0.15 per diluted share, theprimarily related to outside services, severance, proxy solicitation costs, partially offset by an additional tax benefit related to the expectedexit of Boston Proper of $4.0 million, or $0.03 per diluted share. Results for the year-to-date period of fiscal 2015 include charges of $76.7 million after tax, or $0.54 per diluted share, related to Boston Proper non-cash goodwill and trade name impairment charges, restructuring and strategic charges, a tax benefit as a result of the disposition of Boston Proper's stock of $23.8 million, or $0.17 per diluted share, and the impact of Boston Proper'sProper operating loss of $8.2 million after tax, or $0.06 per diluted share.results. The change in earnings per share also reflects a decrease in net income, partially offset by the impact of approximately 14.610.2 million shares repurchased since the end of the third quarter last year, all of which were repurchased in fiscal 2015.year.


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Liquidity and Capital Resources
We believe that our existing cash and marketable securities balances, cash generated from operations, available credit facilities and potential future borrowings will be sufficient to fund capital expenditures, working capital needs, dividend payments, potential share repurchases, commitments, and other liquidity requirements associated with our operations for the foreseeable future. Furthermore, while it is our intention to repurchase our stock and pay a quarterly cash dividend in the future, any determination to repurchase additional shares of our stock or pay future dividends will be made by the Board of Directors and will depend on our stock price, future earnings, financial condition, and other factors considered by the Board.

Our ongoing capital requirements will continue to be primarily for enhancing and expanding our omni-channel capabilities, including: information technology and relocated, remodeled and new stores.

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Operating Activities
Net cash provided by operating activities for the year-to-date period of fiscal 20152016 was $130.1$144.4 million, a decreasean increase of approximately $51.0$14.3 million from last year's year-to-date period. This decreaseincrease primarily reflected changesthe change in working capital, partially offset by higherlower net income compared to prior year when adjusted for non-cash impairment charges and the deferred tax benefit related to the exit of Boston Proper.Proper, as well as lower stock compensation expense and depreciation and amortization. The changeschange in working capital is primarily reflected thedue to a decrease in net income tax impact of the expected disposition of Boston Proper's stockreceivable, improved inventory management and Boston Proper goodwill and trade name impairment charges as well as the timing of payables.

At the end of the third quarter of 2015, inventories totaled $280.0 million, a decrease of 4.8% when including inventory related to the Boston Proper DTC business, compared to $294.2 million in last year's third quarter, primarily reflecting improved inventory management.
Investing Activities
Net cash provided byused in investing activities for the year-to-date period of fiscal 20152016 was $12.6$35.9 million compared to $106.2$12.6 million used inprovided by investing activities in last year's year-to-date period, primarily reflecting a $79.2$79.4 million decrease in marketable securities related to share repurchases in fiscal 2015 related to the partial funding of the ASR Agreements as further discussed in Note 12, compared to a $8.1 million increase in the same period last year related to the investment of cash from operations.2015. Investing activities in the year-to-date periodthird quarter of fiscal 20152016 included net purchases of property and equipment totaling $66.6$35.7 million compared to $98.1$66.6 million in the same period last year, consistent with our overall business strategy.
Financing Activities
Net cash used in financing activities for the year-to-date period of fiscal 20152016 was $184.9$118.1 million compared to $44.3$184.9 million in last year's year-to-date period. The increasedecrease in net cash used in financing activities primarily reflects $250.0a decrease of $179.2 million in fiscal 2015 share repurchases under our ASR Agreements,in fiscal 2016 compared to fiscal 2015, partially offset by net borrowings of $95.0 million in net proceeds from borrowings under theour Credit Agreement as further discussed in Note 11.fiscal 2015.
Credit Facility
On May 4, 2015, we entered into a credit agreement (the "Agreement") among the Company, JPMorgan Chase Bank, N.A. as Administrative Agent, Bank of America, N.A., as Syndication Agent and the Lenders party hereto. Our obligations under the Agreement are guaranteed by certain of our material U.S. subsidiaries. The Agreement provides for a term loan commitment in the amount of $100.0 million, of which $100.0 million was drawn at closing, and matures on May 4, 2020. The Agreement also provides for a $100.0 million revolving credit facility, of which $24.0 million was drawn at closing and was repaid in the second quarter of 2015. The revolving credit facility matures on May 4, 2020. The Agreement has borrowing options which accrue interest by reference, at our election, at either an adjusted eurodollar rate tied to LIBOR or an Alternate Base Rate plus an interest rate margin, as defined in the Agreement.
On May 4, 2015, in connection with our entry into the Agreement, we repaid and terminated, with no prepayment penalties, the $124.0 million outstanding obligation under our 2011 revolving credit facility. We used the proceeds from the initial draw of the term loan and revolving credit facility of the Agreement to repay such obligations.
As of October 31, 2015, $94.7 million in net borrowings were outstanding under the Agreement,and are reflected as $10.0 million in current debt and $84.7 million in long-term debt in the accompanying condensed consolidated balance sheets.


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Store and Franchise Activity
During the fiscal 20152016 year-to-date period, we had 18 net store closure, consisting of net closures of 410 Chico's and 6 WH|BM4 WHBM stores, and net openings of 86 Soma stores and 1 Boston Proper store.stores. Currently, we expect 30-35an additional 9 net store closures in fiscal 2015,2016, reflecting approximately 8 net closures of Chico's stores 9and 1 net closures of WH|BM stores, 6 net openings of Soma stores and 19 net closures of Boston Proper stores.WHBM closure. We continuously evaluate the appropriate new store growth rate in light of economic conditions and may adjust the growth rate as conditions require or as opportunities arise. As of October 31, 2015,29, 2016, we also sold merchandise through 3788 international franchise locations.

Critical Accounting Policies and Estimates
The discussion and analysis of our financial condition and results of operations are based upon the condensed consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of condensed consolidated financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenue, expenses, and related disclosure of contingent assets and liabilities. We base our estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. Management has discussed the development and selection of these critical accounting policies and estimates with the Audit Committee of our Board of Directors and believes the assumptions and estimates, as set forth in our Annual Report on Form 10-K for the fiscal year ended January 31, 2015,30, 2016, are significant to reporting our results of operations and financial position. There
In fiscal 2016 we implemented changes to our accounting policy for the classification of shipping expense, corrected an immaterial error in the classification of shipping revenue and changed the classification of occupancy expenses. Please see Note 1 in our Notes to Condensed Consolidated Financial Statements for a detailed description and reconciliation of these matters.
Other than discussed above, there have been no material changes to our critical accounting policies as disclosed in our Annual Report on Form 10-K for the fiscal year ended January 31, 2015.30, 2016.


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Forward-Looking Statements
This Form 10-Q may contain certain “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, which reflect our current views with respect to certain events that could have an effect on our future financial performance, including but without limitation, statements regarding our plans, objectives, the implementation of our previously announced restructuring program and organizational redesign for improved business performance, including our re-balancing of our store fleet and streamlining the headquarter workforce, and the future growth ratessuccess of our store concepts. These statements may address items such as future sales and sales initiatives, gross margin expectations, SG&A expectations (particularly estimated expected savings), operating margin expectations, earnings per share expectations, planned store openings, closings and expansions, future comparable sales, future product sourcing plans, inventory levels, planned marketing expenditures, planned capital expenditures and future cash needs. In addition, from time to time, we may issue press releases and other written communications, and our representatives may make oral statements, which contain forward-looking information.
These statements, including those in this Form 10-Q and those in press releases or made orally, relate to expectations concerning matters that are not historical fact and may include the words or phrases such as “expects,” “believes,” “anticipates,” “plans,” “estimates,” “approximately,” “our planning assumptions,” “future outlook,” and similar expressions. Except for historical information, matters discussed in such oral and written statements, including this Form 10-Q, are forward-looking statements. These forward-looking statements are based largely on information currently available to our management and on our current expectations, assumptions, plans, estimates, judgments and projections about our business and our industry, and are subject to various risks and uncertainties that could cause actual results to differ materially from historical results or those currently anticipated. Although we believe our expectations are based on reasonable estimates and assumptions, they are not guarantees of performance and there are a number of known and unknown risks, uncertainties, contingencies, and other factors (many of which are outside our control) that could cause actual results to differ materially from those expressed or implied by such forward-looking statements. Accordingly, there is no assurance that our expectations will, in fact, occur or that our estimates or assumptions will be correct, and we caution investors and all others not to place undue reliance on such forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those described in Item 1A, “Risk Factors” in our Annual Report on Form 10-K filed with the SEC on March 9, 20158, 2016, those described in Item 1A herein, and the following:
These potentialPotential risks and uncertainties include: the financial strength of retailing in particular and the economy in general; the extent of financial difficulties or uncertainty that may be experienced by customers; our ability to secure and maintain customer acceptance of styles and store concepts; the ability to effectively manage and maintain an appropriate level of inventory; the extent and nature of competition in the markets in which we operate; the extent of the market demand and overall level of spending for women’s private branded clothing and related accessories; the effectiveness of our brand awareness and marketing programs; the adequacy and perception of customer service; the ability to respond to actions of activist shareholders and others; the ability to coordinate product development with buying and planning; the quality of merchandise received from suppliers; the ability to efficiently, timely and successfully execute significant economic, labor or other shifts in the countries from which our merchandise is supplied; the ability of

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our suppliers to timely produce and deliver clothing and accessories; the changes in the costs of manufacturing, raw materials, labor and advertising; the availability of quality store sites; our ability to grow through newmanage our store openings;fleet and the buying public’s acceptance of any ofrisk that our new store concepts;investments in shopping initiatives may not deliver the results we anticipate; the risk that comparable sales and margins will experience fluctuations; the ability to successfully execute our business strategies; the continuing performance, implementation and integration of management information systems; the impact of any systems failures, cyber security or other data or security breaches, including any security breaches that result in theft, transfer, or unauthorized disclosure of customer, employee, or company information or our compliance with information security and privacy laws and regulations in the event of such an incident; the ability to hire, train, energize and retain qualified sales associates, managerial employees and other employees; the successful integration of our new management team; the ability to achieve the results of our previously announced restructuring program;program and expense initiatives the ability to expandrespond effectively to actions of activist shareholders and others; the ability to utilize our distribution center and other support facilities in an efficient and effective manner; the ability to effectively and efficiently establish our websites;websites and operate them in a manner that produces profitable sales and marketing; the ability to secure and protect trademarks and other intellectual property rights and to protect our reputation and brand images; and the ability to effectively and efficiently operate our brands; risks associated with terrorist activities; risks associated withrisk that natural disasters, such as hurricanespublic health crises, political uprisings or unrest, or other catastrophic events could adversely affect our operations and other risks.financial results. In addition, there are potential risks and uncertainties that are related to our reliance on sourcing from foreign suppliers, including the impact of work stoppages; transportation delays and other interruptions; political or civil instability; imposition of and changes in tariffs and import and export controls such as import quotas; changes in governmental policies in or towards foreign countries; currency exchange rates and other similar factors.
All written or oral forward-looking statements that are made or attributable to us are expressly qualified in their entirety by this cautionary notice. The forward-looking statements included herein are only made as of the date of this Quarterly Report on Form 10-Q. We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.


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ITEM 3.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The market risk of our financial instruments as of October 31, 201529, 2016 has not significantly changed since January 31, 2015.30, 2016. We are exposed to market risk from changes in interest rates on any future indebtedness and our marketable securities and from foreign currency exchange rate fluctuations.
Our exposure to interest rate risk relates in part to our revolving line of credit with our bank. On May 4, 2015, we entered into a credit agreement, as further discussed in Note 11.7. The Agreement, which matures on May 4, 2020, has borrowing options which accrue interest by reference, at our election, at either an adjusted eurodollar rate tied to LIBOR or an Alternate Base Rate plus an interest rate margin, as defined in the Agreement. An increase or decrease in market interest rates of 100 basis points would not have a material effect on annual interest expense. 
Our investment portfolio is maintained in accordance with our investment policy which identifies allowable investments, specifies credit quality standards and limits the credit exposure of any single issuer. Our investment portfolio consists of cash equivalents and marketable securities including municipal securities, corporate bonds, U.S. government agencies and commercial paper. The marketable securities portfolio as of October 31, 2015,29, 2016, consisted of $26.0$25.4 million of securities with maturity dates within one year or less and $21.3$25.0 million with maturity dates over one year and less than or equal to two years. We consider all marketable securities available-for-sale, including those with maturity dates beyond 12 months, and therefore classify these securities as short-term investments within current assets on the condensed consolidated balance sheets as they are available to support current operational liquidity needs. As of October 31, 2015,29, 2016, an increase or decrease of 100 basis points in interest rates would not have a material effect on the fair value of our marketable securities portfolio.

ITEM 4.CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
Our disclosure controls and procedures are designed to provide reasonable assurance that information required to be disclosed in our reports under the Securities and Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms.

As of the end of the period covered by this report, an evaluation was carried out under the supervision and with the participation of management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities and Exchange Act of 1934, as amended). Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that, as of the end of such period, our disclosure controls and procedures were effective in providing reasonable assurance in timely alerting them to material information relating to us (including our consolidated subsidiaries) and that information required to be disclosed in our reports is recorded, processed, summarized, and reported as required to be included in our periodic SEC filings.
Changes in Internal Controls
There were no significant changes in our internal controls or in other factors that could significantly affect our disclosure controls and procedures subsequent to the date of the above referenced evaluation. Furthermore, there was no change in our internal control over financial reporting or in other factors during the quarterly period covered by this report that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.


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PART II – OTHER INFORMATION
 
ITEM 1.LEGAL PROCEEDINGS
In June 2015, the Company was named as a defendant in a putative representative Private Attorney General action filed in the Superior Court of California, County of Los Angeles, Ackerman v. Chico's FAS, Inc.  The Complaint attempts to allege numerous violations of California law related to wages, meal periods, rest periods, wage statements, and failure to reimburse business expenses, among other things. The Company denies the material allegations of the Complaint and filed its Answer on July 27, 2015. The Company believes that the case is without merit and intends to vigorously defend. As a result, the Company does not believe that the case should have a material adverse effect on the Company’s consolidated financial condition or results of operations.
In July 2015, the Company was named as a defendant in Altman v. White House Black Market, Inc., a putative class action filed in July 2015 in the United States District Court for the Northern District of Georgia, Altman v. White House Black Market, Inc.Georgia. The Complaint alleges that the Company, in violation of federal law, published more than the last five digits of a credit or debit card number or an expiration date on customers' receipts.The Company denies the material allegations of the complaint and filed acomplaint. Its motion to dismiss was denied on September 9, 2015, which is pending. TheJuly 13, 2016, but the Company believescontinues to believe that the case is without merit and​and is not appropriate for class treatment. It intends to vigorously defend. Asdefend the matter. At this time however, it is not possible to predict whether the proceeding will be permitted to proceed as a result,class or the size of the putative class, and no assurance can be given that the Company does not believe thatwill be successful in its defense on the merits or otherwise. Because the case shouldis still in the early stages and class determinations have not been made, the Company is unable to estimate any potential loss or range of loss.
In June 2015, the Company was named as a defendant in Ackerman v. Chico’s FAS, Inc., a putative representative Private Attorney General action filed in the Superior Court of California, County of Los Angeles. The Complaint alleges numerous violations of California law related to wages, meal periods, rest periods, wage statements, and failure to reimburse business expenses, among other things. Plaintiff subsequently amended her complaint to make the same allegations on a class action basis. In June 2016, the parties submitted a proposed settlement of the matter to the court, and the court granted preliminary approval on August 26, 2016, and settlement notices have been distributed. If finally approved, the proposed settlement will not have a material adverse effect on the Company’s consolidated financial condition or results of operations.
In March 2016, the Company was named as a defendant in Cunningham v. Chico’s FAS, Inc., a putative class action filed in the Superior Court of California, County of San Diego. Given the overlap with the claims alleged in the Ackerman case, described above, the Court initially stayed the Cunningham case pending final approval of the Ackerman settlement. In October 2016, the parties agreed to lift the stay and to resolve the matter as an individual action. The Court has since dismissed the case. The settlement amount was immaterial.
In June 2016, the Company was named as a defendant in Rodems v. Chico’s FAS, Inc., a putative class action filed in the Superior Court of California, County of Fresno. Plaintiff sought to represent current and former nonexempt employees of Chico’s stores in California. The Complaint alleged many of the same Labor Code violations as Ackerman, described above. As a result, the court stayed the matter pending final approval of the Ackerman proposed settlement. The Company and the plaintiff subsequently agreed to a lifting of the stay and a filing of an amended complaint in early November, and the Company removed the case to the United State District Court for the Eastern District of California on November 9, 2016. In the proposed First Amended Complaint, the plaintiff makes similar claims of Labor Code violations against the Company but does not seek to represent a putative class or make class action allegations. The Company disputes the allegations of the First Amended Complaint and, at this time, does not expect that this case will have a material adverse effect on the Company’s consolidated financial condition or results of operation.
On July 28, 2016, the Company was named as a defendant in Calleros v. Chico’s FAS, Inc., a putative class action filed in the Superior Court of California, County of Santa Barbara. Plaintiff alleges that the Company failed to comply with California law requiring it to provide consumers cash for gift cards with a stored value of less than $10.00. The Company believes that the matter is not appropriate for class treatment; however, it is not possible to predict whether it will be permitted to proceed as a class or the size of the putative class, and no assurance can be given that the Company will be successful in its defense of this action on the merits or otherwise. Because class determinations have not been made, the Company is unable to estimate any potential loss or range of loss were it to lose on the merits of the case. However, the case is scheduled for voluntary mediation on November 28, 2016, and, at this time, the Company does not expect that the case will have a material adverse effect on the Company’s consolidated financial conditions or results of operation.
Other than as noted above, we are not currently a party to any legal proceedings other than claims and lawsuits arising in the normal course of business. All such matters are subject to uncertainties and outcomes may not be predictable. Consequently, the ultimate aggregate amount of monetary liability or financial impact with respect to these matters as of October 31, 201529, 2016 are not ascertainable.estimable. However, while such matters could affect our consolidated operating results when resolved in future periods, management believes that upon final disposition, any monetary liability or financial impact to us would not be material to our annual consolidated financial statements.

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ITEM 1A.RISK FACTORS
In addition to the other information discussed in this report, the factors described in Part I, Item 1A. “Risk Factors” in our 20142015 Annual Report on Form 10-K filed with the SEC on March 9, 20158, 2016 should be considered as they could materially affect our business, financial condition or future results. Other than as noted below, there have not been any significant changes with respect to the risks described in our 20142015 Form 10-K, but these are not the only risks facing our company. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may adversely affect our business, financial condition or operating results.
During the second quarter of fiscal 2015, we completed an evaluation of the Boston Proper brand and initiated a Plan to sell the DTC business and close its stores, as further
As discussed in Note 3. As3 in our Notes to Condensed Consolidated Financial Statements, we are currently involved in significant strategic initiatives intended to increase the efficiency and productivity of October 31, 2015,our business processes. These initiatives require substantial internal change and effort, including reductions and changes in personnel and significant adjustments in how we design and source product and how we ultimately present it to our customers. While we are confident that these initiatives are appropriate for the long-term viability and success of our business, they may not deliver all current year assets and liabilities of the Boston Proper DTCresults we expect. Moreover, the process of implementing them places significant stress on the company and could result in unexpected short-term disruptions or negative impacts to our business, have been recorded as held for saleincluding, by way of example:
Unintended loss of key personnel or unexpected delay in the accompanying condensed consolidated balance sheets at fair value less costs to sell. Although we have an executed letterhiring of intentpersonnel whose expertise is needed for the proposed salesuccessful implementation of the Boston Proper DTCinitiatives.
Disruption to our current business there can be no assurance thatprocesses as we will ultimately enter into a definitive agreement for such salemigrate to the new processes, or if so, thatfailure to successfully migrate to those new processes, which could negatively impact product flow, product quality or inventory levels.
Inadvertent lapses or failures in our process, compliance or financial controls as we implement the transaction will be consummatednew initiatives.

These negative impacts, or will be at a price where we realizeothers, could adversely affect our expected proceeds from any such sale.  If a definitive agreement is not successfully negotiated, we would again need to seek buyersbusiness and results of operations. In addition, there is no assurance that we would be successfulcan complete the implementation of these initiatives in identifying a buyerthe manner or receive an acceptable offering price.in the time-frame planned, or that, once implemented, they will result in the expected increases in the efficiency or productivity of our business. Failure to successfully implement them or their failure to produce the savings and productivity increases we anticipate could materially adversely affect our business and results of operations.


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ITEM 2.UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
The following table sets forth information concerning our purchases of common stock for the periods indicated (amounts in thousands, except share and per share amounts):
PeriodTotal
Number of
Shares
Purchased (a)
 Average Price
Paid per Share
 Total Number
of Shares
Purchased as
Part of
Publicly
Announced
Plans (b)
 Approximate Dollar
Value of Shares that
May Yet Be
Purchased Under
the Publicly
Announced  Plans
August 2, 2015 - August 29, 2015109,949
 $14.88
 
 $40,000
August 30, 2015 - October 3, 20155,506
 $15.36
 
 $40,000
October 4, 2015 - October 31, 2015
 $
 
 $40,000
Total115,455
 $14.90
 
 $40,000
PeriodTotal
Number of
Shares
Purchased (a)
 Average Price
Paid per Share
 Total Number
of Shares
Purchased as
Part of
Publicly
Announced
Plans (b)
 Approximate Dollar
Value of Shares that
May Yet Be
Purchased Under
the Publicly
Announced Plans
July 31, 2016 - August 27, 20161,899
 $11.66
 
 $203,706
August 28, 2016 - October 1, 201657,168
  12.32
 
  203,706
October 2, 2016 - October 29, 20161,651,538
  12.13
 1,651,440
  183,673
Total1,710,605
  12.14
 1,651,440
  183,673

(a) The 115,455Total number of shares purchased includes 59,165 shares of restricted stock were repurchased in connection with employee tax withholding obligations under employee compensation plans, which are not purchases under any publicly announced plan.
(b) In December 2013,November 2015, we announced a $300.0 million share repurchase plan. There was approximately $40.0$183.7 million remaining under the program as of the end of the third quarter. The repurchase program has no specific termination date and will expire when we have repurchased all securities authorized for repurchase thereunder, unless terminated earlier by our Board of Directors.


 

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ITEM 5.OTHER INFORMATION
On November 17, 2016, the Company amended and restated the Company's Amended and Restated Bylaws (the "Bylaws") to add proxy access and to make other updates to the Bylaws (the “Amendments”), effective November 17, 2016. The Amendments include a new provisions Section 2.05 to the Bylaws that permits a stockholder, or a group of up to 20 stockholders, owning at least 3% of the number of outstanding shares of common stock of the Company continuously for at least three years, to include in the Company’s annual meeting proxy materials director nominees constituting up to 20% of the Board, provided that the stockholder(s) and the nominee(s) satisfy certain notice and other requirements specified in the Bylaws.

The foregoing description of the Amendments does not purport to be complete and is qualified in its entirety by reference to the full text of the Bylaws, as amended, a copy of which is attached hereto as Exhibit 3.1 to this Form 10-Q.

On November 20, 2015, the Company's Board of Directors passed a resolution, appointing Shelley E. Broader to22, 2016, we announced that its Board of Directors (the "Board") and appointing David F. Dyer as Vice-Chairdeclared a quarterly cash dividend of $0.08 per share of its common stock, a 3.2% increase over the Board, effectivedividend rate from November 2015. The dividend is payable on December 1, 2015, increasing19, 2016 to Chico’s FAS shareholders of record at the sizeclose of the Board from nine to ten. Ms. Broader will serve as a Class II director until the 2016 Annual Meeting of Stockholders and is expected to stand for re-election at that Meeting. Ms. Broader has not been appointed to servebusiness on any Committees of the Board of Directors at this time.December 5, 2016.

The Board also authorized a consulting arrangement for Mr. Dyer in order that he be available to assist Ms. Broader in her transition to Chief Executive Officer and President and, for such services, the Board approved a monthly consulting fee for Mr. Dyer of $73,705 through March 31,2016. In addition, supplementing the terms of his current employment letter, Mr. Dyer will receive an amount following the end of the fiscal year that he would have received under the Company's Management Bonus Plan if he were still an officer, an accelerated vesting of his outstanding restricted stock awards to December 1, 2015, and, to the extent that the Company satisfies the performance criteria for fiscal 2015 as set forth in his performance award agreements, his performance awards will vest entirely, following the end of the fiscal year.  Mr. Dyer will continue to serve as a Class II director and will receive standard remuneration in accordance with the Company’s non-employee director compensation policies as described in the Company’s 2015 Proxy Statement.


ITEM 6.EXHIBITS
(a)The following documents are filed as exhibits to this Quarterly Report on Form 10-Q:
Exhibit 3.1Amended and Restated Bylaws
Exhibit 3.2Amended and Restated Articles of Incorporation
Exhibit 10.1Amended Restricted Stock Agreement (Non-Soma Officers)
Exhibit 10.2Amended Restricted Stock Agreement (Soma Officers)
    
 Exhibit 31.1  Chico’s FAS, Inc. and Subsidiaries Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 - Chief Executive Officer
   
 Exhibit 31.2  Chico’s FAS, Inc. and Subsidiaries Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 - Chief Financial Officer
   
 Exhibit 32.1  Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
   
 Exhibit 32.2  Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
   
 Exhibit 101.INS  XBRL Instance Document
   
 Exhibit 101.SCH  XBRL Taxonomy Extension Schema Document
   
 Exhibit 101.CAL  XBRL Taxonomy Extension Calculation Linkbase Document
   
 Exhibit 101.DEF  XBRL Taxonomy Definition Linkbase Document
   
 Exhibit 101.LAB  XBRL Taxonomy Extension Label Linkbase Document
   
 Exhibit 101.PRE  XBRL Taxonomy Extension Presentation Linkbase Document



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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
      CHICO’S FAS, INC.
     
Date:November 25, 201522, 2016   By:/s/ David F. DyerShelley G. Broader
      David F. DyerShelley G. Broader
      President and Chief Executive Officer, President and Director
     
Date:November 25, 201522, 2016   By:/s/ Todd E. Vogensen
      Todd E. Vogensen
      Executive Vice President, Chief Financial Officer and Assistant Corporate Secretary
       
Date:November 25, 201522, 2016   By:/s/ David M. Oliver
      David M. Oliver
      Group Vice President Finance - Controller and Chief Accounting Officer and Treasurer

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