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 28, 2017,February 3, 2018, included in the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission (“SEC”) on March 7, 2017.13, 2018.

As used in this report, all references to “we,” “us,” “our,”“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 and twenty-six weeks ended July 29, 2017August 4, 2018 are not necessarily indicative of the results that may be expected for the entire year.

For the twenty-six weeks ended August 4, 2018 and July 29, 2017, and July 30, 2016, stock-basedshare-based compensation expense was $10.2 million and $9.6$10.2 million, respectively. As of July 29, 2017,August 4, 2018, approximately 9.17.0 million shares remain available for future grants of equity awards under our Amended and Restated 2012 Omnibus Stock and Incentive Plan. The AmendedPlan, which was amended and Restated Plan was approved by the Company’s Board of Directors on April 6, 2017 and becamerestated effective upon shareholder approval at the 2017 Annual Meeting on June 22, 2017.

Restricted stock award activity for the twenty-six weeks ended July 29, 2017August 4, 2018 was as follows:

For the twenty-six weeks ended July 29, 2017,August 4, 2018, we granted performance-based restricted stock units (“PSUs”), contingent upon the achievement of a Company-specific performance goalgoals during the three fiscal 2017.years 2018-2020. Any units earned as a result of the achievement of this goal will vest 100% three years from the date of grant and will be settled in unvested shares of our common stock on the first anniversary of the grant date. Such unvested shares will then vest on the second and third anniversary dates.stock.

Performance-based restricted stock unit activity for the twenty-six weeks ended July 29, 2017August 4, 2018 was as follows:

For the twenty-six weeks ended August 4, 2018 and July 29, 2017, and July 30, 2016, we did not grant any stock options.

Stock option activity for the twenty-six weeks ended July 29, 2017August 4, 2018 was as follows:

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 August 4, 2018, the Company's 25.4% effective tax rate for income taxes differed from the Company’s federal income tax statutory rate of 21% primarily because of the effects of state and local taxes. The Company's provisions for income taxes for the thirteen weeks ended August 4, 2018 and July 29, 2017 included favorable audit settlements of approximately $0.2 million and July 30, 2016,$1.1 million, respectively. These items as well as the enactment of the Tax Act resulted in an effective tax rate wasfor the thirteen weeks ended August 4, 2018 of 25.4% compared to 35.1% and 38.0%, respectively. Forfor the thirteen weeks ended July 29, 2017, the income tax provision was $12.3 million compared to the income tax provision of $14.1 million for the thirteen weeks ended July 30, 2016. The reduction in effective tax rate of 290 basis points primarily related to favorable federal and state settlements, partially offset by a 67 basis point charge from the adoption of the new share-based payment accounting standard (the "Standard") effective the first quarter of 2017.

For the twenty-six weeks ended August 4, 2018 and July 29, 2017, and July 30, 2016, the Company's effective tax rate was 37.0%27.0% and 37.9%37.0%, respectively. For the twenty-six weeks ended July 29, 2017, the income tax provision was $33.1 million compared to the income tax provision of $33.1 million for the twenty-six weeks ended July 30, 2016. This 90 basis pointsThe 10.0% reduction in the effective tax rate was primarily related to favorable federal and state settlements,the result of the Tax Act, partially offset by a 58130 basis point charge fromincrease due to employee share-based payment accounting and a 95 basis point increase due to favorable tax audit settlements in the adoptionprior year.

In accordance with Staff Accounting Bulletin No. 118, the Company is performing an ongoing analysis of information necessary to estimate the accounting for the impacts of the Standard effectiveTax Act. We will continue to analyze additional information and guidance related to the firstTax Act as supplemental legislation, regulatory guidance, or evolving technical interpretations become available. Consequently, reasonable estimates of the impact of the Tax Act on the Company’s deferred tax balances and executive compensation deductions have been reported as provisional, as defined in Staff Accounting Bulletin No. 118. We expect to complete our analysis no later than the fourth quarter of 2017.fiscal 2018.

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 the Company, participating securities are comprised entirely of unvested restricted stock awards and performance-based restricted stock units (“PSUs”)PSUs that have met their relevant performance criteria.

Earnings per share (“EPS”) is determined using the two-class method when it is more dilutive than the treasury stock method. Basic EPS excludes dilution and is computed by dividing net income available to common shareholders 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, PSUs and restricted stock units.

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):income:

For the thirteen weeks ended August 4, 2018 and July 29, 2017, and July 30, 2016, 0.8 million and 0.8 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 twenty-six weeks ended August 4, 2018 and July 29, 2017, and July 30, 2016, 0.70.8 million and 0.90.7 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.

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.

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.

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 partythird-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, includingbasis. This includes the 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. We estimate

To assess the fair value of assets held for sale usinggoodwill, we utilize both an income approach and a market values for similar assets which would fall within Level 2 ofapproach. Inputs used to calculate the fair value hierarchy.based on the income approach primarily include estimated future cash flows, discounted at a rate that approximates the cost of capital of a market participant. Inputs used to calculate the fair value based on the market approach include identifying sales and EBITDA multiples based on guidelines for similar publicly traded companies and recent transactions.

To assess the fair value of long-term debt, we utilize a discounted future cash flow model using current borrowing rates for similar types of debt of 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 July 29, 2017,August 4, 2018, we did not make any transfers between Level 1 and Level 2 financial instruments.assets. Furthermore, as of August 4, 2018, February 3, 2018 and July 29, 2017, January 28, 2017 and July 30, 2016, we did not have any Level 3 financial instruments.assets measured on a recurring basis. 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.

In fiscal 2015, weOn August 2, 2018, the Company and certain of its domestic subsidiaries entered into a credit agreement (the "Agreement"“Agreement”) providingas borrowers and guarantors, with Wells Fargo Bank, National Association, as Agent, letter of credit issuer and swing line lender, and certain lenders party thereto. Our obligations under the Agreement are guaranteed by the subsidiary guarantors and secured by a lien on certain assets of the Company and the subsidiary borrowers and guarantors, including inventory, accounts receivable, cash deposits, and certain insurance proceeds. The Agreement provides for a termfive-year asset-based senior secured revolving loan of $100.0 million and a revolvingletter of credit facility of up to $200.0 million, maturing August 2, 2023. In addition, during the term of the Agreement, the Company may increase the commitments under the Agreement by up to an additional $100.0 million.million, subject to customary conditions, including obtaining the agreements from the lenders to provide such commitment increase. The term loan and revolving credit facility mature on May 4, 2020 and accrue interest rate applicable to the loans under the Agreement will be equal to, at the Company’s option, either a base rate, determined by reference at our election, at either an adjusted eurodollarto the federal funds rate, tied to LIBOR or an Alternate Base Rate plus an interest rate margin, as definedor a LIBO rate, plus an interest rate margin, in each case, depending on availability under the Agreement. The Company expects borrowings to be at a LIBO rate, plus an interest rate margin. In addition, the Company will pay a commitment fee per annum on the unused portion of the commitments under 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 July 29, 2017.August 4, 2018. As of July 29, 2017, weAugust 4, 2018, our outstanding debt consisted of $61.3 million in borrowings under the Agreement, resulting in $138.7 million available for borrowings under the revolving loan and letter of credit facility. As of August 4, 2018, an unamortized debt discount of $0.6 million was outstanding related to the Agreement and is presented in other current assets in the accompanying unaudited consolidated balance sheet.

The credit agreement entered into on May 4, 2015 with JPMorgan Chase Bank, N.A., as Administrative Agent, Bank of America, N.A., as Syndication Agent and other lenders, which was unsecured and had total available borrowing capacityprovided for a term loan commitment in the amount of $100.0$100 million under ourand a $100 million revolving credit facility.facility, was terminated on August 2, 2018 in connection with the Company entering into the Agreement described above, and all outstanding amounts thereunder were repaid. We used the proceeds from the initial draw of the revolving loan of the Agreement to repay such obligations.

The following table provides additional detail on our outstanding debt:

During the twenty-six weeks ended July 29, 2017,August 4, 2018, under our $300 million share repurchase program announced in November 2015, we repurchased 1.93.5 million shares at a total cost of approximately $20.7$30.8 million, at a weighted average of $10.96$8.70 per share. As of July 29, 2017,August 4, 2018, the Company has $142.9$105.4 million remaining for future repurchases under the 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.

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 20162017 Annual Report to Shareholders.on Form 10-K.

The following table depicts net sales by Chico’s, WHBM and Soma in dollars and as a percentage of total net sales for the thirteen weeks ended August 4, 2018 (the “second quarter”) and the thirteen weeks ended July 29, 2017 and July 30, 2016:(“last year's second quarter”):