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 ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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 such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of December ~~13, 2018,~~12, 2019, the registrant had ~~43,747,757~~44,034,608 shares of common stock, $0.01 par value per share, outstanding.

	November 3, 2018		February 3, 2018		November 2, 2019			February 2, 2019
Assets
Current assets:
Cash	$	59,890	$	25,978	$	16,958		$	66,204
Accounts receivable		7,509		4,733		7,684			4,007
Inventories, net		78,844		80,591		81,420			77,349
Prepaid expenses and other current assets		25,053		21,166		26,391			27,734
Total current assets		171,296		132,468		132,453			175,294
Property and equipment, net		113,932		118,420		113,224			118,044
Intangible assets, net		139,373		148,961		120,730			136,177
Goodwill		197,026		197,026		108,597			197,026
Operating lease assets, net						218,008			—
Other assets		501		682		1,544			447
Total assets	$	622,128	$	597,557	$	694,556		$	626,988
Liabilities and Shareholders’ Equity
Current liabilities:
Accounts payable	$	51,648	$	53,962	$	50,966		$	55,012
Accrued expenses and other current liabilities		47,099		48,759		44,639			45,306
Current portion of long-term debt		2,799		2,799		2,799			2,799
Current portion of operating lease liabilities						31,372			—
Total current liabilities		101,546		105,520		129,776			103,117
Long-term debt, net of discount and current portion		237,813		238,881		236,450			237,464
Deferred income taxes		42,348		46,263		33,934			41,842
Operating lease liabilities, net of current portion						216,324			—
Other liabilities		30,008		27,577		2,000			30,770
Total liabilities		411,715		418,241		618,484			413,193
Commitments and contingencies (see Note 9)
Shareholders’ Equity
Common stock, par value $0.01 per share; 250,000,000 shares authorized; 43,747,757 and 43,752,790 shares issued and outstanding at November 3, 2018 and February 3, 2018, respectively		437		437
Common stock, par value $0.01 per share; 250,000,000 shares authorized; 44,034,608 and 43,672,418 shares issued and outstanding at November 2, 2019 and February 2, 2019, respectively						440			437
Additional paid-in capital		120,347		117,393		123,986			121,635
Accumulated earnings		89,629		61,486
Accumulated (deficit) earnings						(48,354	)		91,723
Total shareholders’ equity		210,413		179,316		76,072			213,795
Total liabilities and shareholders’ equity	$	622,128	$	597,557	$	694,556		$	626,988

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

	For the Thirteen Weeks Ended				For the Thirty-Nine Weeks Ended				For the Thirteen Weeks Ended				For the Thirty-Nine Weeks Ended
	November 3, 2018		October 28, 2017		November 3, 2018		October 28, 2017		November 2, 2019		November 3, 2018		November 2, 2019			November 3, 2018
Net sales	$	174,106	$	161,975	$	535,360	$	509,473	$	166,085	$	174,106	$	523,281		$	535,360
Costs of goods sold		58,643		53,479		182,901		162,721		59,137		58,643		194,736			182,901
Gross profit		115,463		108,496		352,459		346,752		106,948		115,463		328,545			352,459
Selling, general and administrative expenses		101,589		95,240		299,248		289,284		97,972		101,589		308,115			299,248
Operating income		13,874		13,256		53,211		57,468
Impairment of goodwill										—		—		88,428			—
Impairment of indefinite-lived intangible assets										—		—		7,000			—
Operating income (loss)										8,976		13,874		(74,998	)		53,211
Interest expense, net		4,698		4,496		14,368		14,525		4,826		4,698		14,852			14,368
Income before provision for income taxes		9,176		8,760		38,843		42,943
Provision for income taxes		2,488		2,766		10,412		16,926
Net income and total comprehensive income	$	6,688	$	5,994	$	28,431	$	26,017
Net income per common share attributable to common shareholders:
Income (loss) before provision for income taxes										4,150		9,176		(89,850	)		38,843
Income tax provision										1,763		2,488		132			10,412
Net income (loss) and total comprehensive income (loss)									$	2,387	$	6,688	$	(89,982	)	$	28,431
Net income (loss) per common share attributable to common shareholders:
Basic	$	0.16	$	0.14	$	0.67	$	0.62	$	0.05	$	0.16	$	(2.06	)	$	0.67
Diluted	$	0.15	$	0.14	$	0.64	$	0.60	$	0.05	$	0.15	$	(2.06	)	$	0.64
Weighted average number of common shares outstanding:
Basic		42,953,173		41,731,765		42,674,957		41,933,244		43,838,667		42,953,173		43,653,178			42,674,957
Diluted		44,475,793		43,554,000		44,199,800		43,468,846		43,950,702		44,475,793		43,653,178			44,199,800

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

							Additional					Total									Additional			Accumulated			Total
	Common Stock						Paid-in		Accumulated			Shareholders’			Common Stock						Paid-in			Earnings			Shareholders’
	Shares			Amount			Capital		Earnings			Equity			Shares			Amount			Capital			(Deficit)			Equity
Balance, February 3, 2018		43,752,790		$	437		$	117,393	$	61,486		$	179,316
Adoption of ASU 2014-09⁽¹⁾		—			—			—		(288	)		(288	)
Balance, February 2, 2019																43,672,418		$	437		$	121,635		$	91,723		$	213,795
Adoption of ASU 2016-02 ⁽¹⁾																—			—			—			59			59
Special cash dividend ($1.15 per share)																—			—			—			(50,154	)		(50,154	)
Vesting of restricted stock units		6,410			1			—		—			1			734,474			7			(7	)		—			—
Equity-based compensation		—			—			760		—			760
Net income		—			—			—		11,258			11,258
Balance, May 5, 2018		43,759,200		$	438		$	118,153	$	72,456		$	191,047
Vesting of restricted stock units		3,192			—			—		—			—
Shares withheld for net-share settlement of equity-based compensation																(239,117	)		(2	)		(1,266	)		—			(1,268	)
Forfeiture of restricted stock awards		(18,359	)		(1	)		—		—			(1	)		(69,978	)		(1	)		1			—			—
Equity-based compensation		—			—			1,083		—			1,083			—			—			1,202			—			1,202
Net income		—			—			—		10,485			10,485			—			—			—			4,366			4,366
Balance, August 4, 2018		43,744,033		$	437		$	119,236	$	82,941		$	202,614
Balance, May 4, 2019																44,097,797		$	441		$	121,565		$	45,994		$	168,000
Vesting of restricted stock units		3,724			—			—		—			—			—			—			—			—			—
Forfeitable dividend																—			—			107			—			107
Forfeiture of restricted stock awards																(92,685	)		(1	)		1			—			—
Equity-based compensation																—			—			1,214			—			1,214
Net loss																—			—			—			(96,735	)		(96,735	)
Balance, August 3, 2019																44,005,112		$	440		$	122,887		$	(50,741	)	$	72,586
Vesting of restricted stock units																50,434			0			(0	)		—			—
Shares withheld for net-share settlement of equity-based compensation																(14,829	)		(0	)		(35	)		—			(35	)
Forfeitable dividend																—			—			7			—			7
Forfeiture of restricted stock awards																(6,109	)		(0	)		0			—			—
Equity-based compensation		—			—			1,111		—			1,111			—			—			1,128			—			1,128
Net income		—			—			—		6,688			6,688			—			—			—			2,387			2,387
Balance, November 3, 2018		43,747,757		$	437		$	120,347	$	89,629		$	210,413
Balance, November 2, 2019																44,034,608		$	440		$	123,986		$	(48,354	)	$	76,072

Common Units

Common Stock

Contributed

Additional
Paid-in

Accumulated

Total
Shareholders’

Shares

Amount

Shares

Amount

Capital

Capital

Earnings

Equity

Balance, January 28, 2017

1,000,000

—

—

—

116,743

—

6,121

122,864

Other equity transactions

—

—

—

—

305

—

—

305

Corporate Conversion

(1,000,000
)

—

—

—

(117,048
)

117,048

—

—

Issuance of Common Stock

—

—

43,747,944

437

—

(437
)

—

—

Equity-based compensation

—

—

—

—

—

24

—

24

Net income

—

—

—

—

—

—

8,027

8,027

Balance, April 29, 2017

—

$
—

43,747,944

$
437

$
—

$
116,635

$
14,148

$
131,220

Equity-based compensation

—

—

—

—

—

237

—

237

Net income

—

—

—

—

—

—

11,996

11,996

Balance, July 29, 2017

—

$
—

43,747,944

$
437

$
—

$
116,872

$
26,144

$
143,453

Equity-based compensation

—

—

—

—

—

278

—

278

Net income

—

—

—

—

—

—

5,994

5,994

Balance, October 28, 2017

—

$
—

43,747,944

$
437

$
—

$
117,150

$
32,138

$
149,725

							Additional					Total
	Common Stock						Paid-in		Accumulated			Shareholders’
	Shares			Amount			Capital		Earnings			Equity
Balance, February 3, 2018		43,752,790		$	437		$	117,393	$	61,486		$	179,316
Adoption of ASU 2014-09		—			—			—		(288	)		(288	)
Vesting of restricted stock units		6,410			1			—		—			1
Equity-based compensation		—			—			760		—			760
Net income		—			—			—		11,258			11,258
Balance, May 5, 2018		43,759,200		$	438		$	118,153	$	72,456		$	191,047
Vesting of restricted stock units		3,192			—			—		—			—
Forfeiture of restricted stock awards		(18,359	)		(1	)		—		—			(1	)
Equity-based compensation		—			—			1,083		—			1,083
Net income		—			—			—		10,485			10,485
Balance, August 4, 2018		43,744,033		$	437		$	119,236	$	82,941		$	202,614
Vesting of restricted stock units		3,724			—			—		—			—
Equity-based compensation		—			—			1,111		—			1,111
Net income		—			—			—		6,688			6,688
Balance, November 3, 2018		43,747,757		$	437		$	120,347	$	89,629		$	210,413

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

	For the Thirty-Nine Weeks Ended						For the Thirty-Nine Weeks Ended
	November 3, 2018			October 28, 2017			November 2, 2019			November 3, 2018
Net income	$	28,431		$	26,017
Net (loss) income							$	(89,982	)	$	28,431
Operating activities:
Adjustments to reconcile net income to net cash provided by operating activities
Depreciation and amortization		27,397			25,759			28,301			27,397
Impairment of goodwill and indefinite-lived intangible assets								95,428			—
Impairment of long-lived assets								2,064			—
Loss on disposal of fixed assets		87			569			85			87
Gain on liquidation of inventory								(1,274	)		—
Noncash amortization of deferred financing and debt discount costs		1,196			2,012			1,250			1,196
Equity-based compensation		2,954			539			3,544			2,954
Deferred rent liability		(99	)		978			(133	)		(99	)
Deferred income taxes		(3,812	)		(2,342	)		(7,908	)		(3,812	)
Changes in operating assets and liabilities:
Accounts receivable		(2,777	)		(5,211	)		(3,677	)		(2,777	)
Inventories		1,747			(18,764	)		(4,797	)		1,747
Prepaid expenses and other current assets		(4,958	)		2,173			(1,662	)		(4,958	)
Accounts payable		(3,032	)		15,278			(4,102	)		(3,032	)
Accrued expenses		44			667			(60	)		44
Operating lease assets and liabilities								718			—
Other noncurrent assets and liabilities		2,850			6,860			(108	)		2,850
Net cash provided by operating activities		50,028			54,535			17,687			50,028
Investing activities:
Purchases of property and equipment		(14,017	)		(22,325	)		(13,493	)		(14,017	)
Net cash used in investing activities		(14,017	)		(22,325	)		(13,493	)		(14,017	)
Financing activities:
Repayments on long-term debt		(2,099	)		(22,099	)		(2,099	)		(2,099	)
Receivable from related party		—			2,227
Payments of withholding tax on net-share settlement of equity-based compensation plans								(1,301	)		—
Special dividend paid to shareholders								(50,154	)		—
Forfeitable dividend								114			—
Net cash used in financing activities		(2,099	)		(19,872	)		(53,440	)		(2,099	)
Net change in cash		33,912			12,338			(49,246	)		33,912
Cash:
Beginning of Period		25,978			13,468			66,204			25,978
End of Period	$	59,890		$	25,806		$	16,958		$	59,890

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

J.Jill, Inc.,~~“J.Jill”~~ “J.Jill” or the “Company”, is a premier omnichannel retailer and nationally recognized women’s apparel brand committed to delighting customers with great wear-now product. The brand represents an easy, ~~relaxed,~~thoughtful and inspired style that reflects the confidence of remarkable women who live life with joy, passion and ~~comfort of~~purpose. J.Jill offers a ~~woman with a rich, full life. J.Jill provides~~ guiding ~~service~~customer experience through more than ~~270~~280 stores nationwide and a robust ~~e-commerce~~E-commerce platform. J.Jill is headquartered outside Boston.

Our interim consolidated financial statements are unaudited. All significant intercompany balances and transactions have been eliminated in consolidation. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) have been omitted, in accordance with the rules of the Securities and Exchange Commission (the “SEC”). In the opinion of management, these interim consolidated financial statements contain all normal and recurring adjustments necessary to state fairly the financial position and results of operations of the Company. The consolidated balance sheet as of February ~~3, 2018~~2, 2019 is derived from the audited consolidated balance sheet as of that date. The unaudited results of operations for the thirteen and thirty-nine weeks ended November ~~3, 2018~~2, 2019 are not necessarily indicative of future results or results to be expected for the full year ending February ~~2, 2019.~~1, 2020 (“Fiscal Year 2019”). You should read these statements in conjunction with our audited consolidated financial statements and related notes in our Annual Report on Form 10-K for the year ended February ~~3, 2018.~~2, 2019.

Significant changes to our accounting policies as a result of adopting Accounting Standards Update (“ASU”) ~~2014-09~~2016-02 – ~~Revenue from Contracts with Customers~~Leases (Topic ~~606)~~842) are discussed below in “Significant Accounting Policies Update” and Note 3.10.

In ~~May 2014,~~February 2016, the FASB issued ASU ~~2014-09~~2016-02 – ~~Revenue from Contracts with Customers~~Leases (Topic ~~606)~~842),, which supersedes ~~the revenue recognition requirements in~~ FASB ~~ASC Topic 605 –~~ ~~Revenue Recognition~~. The new guidance established principles for reporting revenue and cash flows arising from an entity’s contracts with customers. The Company adopted ASU 2014-09 and related amendments, collectively known as Accounting Standards Codification ~~606~~ (“ASC”) Topic ~~606”)~~840 – Leases. The core principle of Topic 842 is that a lessee should recognize the assets and liabilities that arise from leases. The standard was adopted using the modified retrospective approach as of February ~~4, 2018 on a modified retrospective basis.~~3, 2019 with an immaterial cumulative adjustment to retained earnings. See “Significant Accounting Policies Update” and Note 313 for a discussion of our updated policies related to ~~revenue recognition~~leases and disclosures related to the impact of this standard.

~~In October 2016 the FASB issued~~ ~~ASU 2016-16 –~~ ~~Income Taxes (Topic 740): Intra-Entity Transfers of Assets Other Than Inventory~~. This update is intended to improve the accounting for the income tax consequences of intra-entity transfers of assets other than inventory. Under the new guidance, an entity would recognize the current and deferred income tax consequences of an intra-entity asset transfer when the transfer occurs. Intra-entity inventory transfers would still be an exception. The provisions of ASU 2016-16 were adopted as of February 4, 2018 under the modified retrospective method with no cumulative-effect adjustment to retained earnings.

~~In August 2016, the FASB issued ASU 2016-15 –~~ ~~Statement of Cash Flows - Classification of Certain Cash Receipts and Cash Payments,~~ which addresses eight specific cash flow issues with the objective of reducing the existing diversity in practice in how certain cash receipts and cash payments are presented and classified in the statement of cash flows. The standard was retrospectively adopted as of February 4, 2018 and did not have an impact on the consolidated statement of cash flows.

~~In September 2018, the FASB issued ASU 2018-15 –~~ ~~Intangibles—Goodwill and Other—Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract~~. The amendment is intended to address aspects of the guidance issued in the amendments in ASU 2015-05. ASU 2018-15 intends to improve an entities ability to evaluate the accounting for fees paid by a customer in a cloud computing arrangement that is a service contract. The provisions of ASU 2018-15 are effective for fiscal years beginning after December 15, 2019. The Company plans to adopt these standards beginning in the first quarter of fiscal 2020 using a prospective approach. The Company is evaluating the impact that adopting ASU 2018-15 will have on its consolidated financial statements.

In July 2018, the FASB issued ASU 2018-09 – Codification Improvements, which facilitates amendments to a variety of topics to clarify, correct errors in, or make minor improvements to the accounting standards codification. The effective date of the standard is dependent on the facts and circumstances of each amendment. Some amendments do not require transition guidance and will be effective upon the issuance of this standard. ~~A majority~~The standard was adopted as of the amendments in ASU 2018-09 will be effective in annual periods beginning after December 15, 2018. We will be required to adopt this standard in the first quarter of fiscal 2019. This standard is not expected to have aFebruary 3, 2019, and it had no material impact on our consolidated financial statements and related disclosures.

In June 2018, the FASB issued ASU 2018-07 – Compensation—Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting, which expands the scope of Topic 718 to include share-based payment transactions for acquiring goods and services from nonemployees. The Company adopted the standard as of February 3, 2019, and it had no impact on our consolidated financial statements and related disclosures.

In November 2018, the FASB issued ASU 2018-18 – Collaborative Arrangements (Topic 808), which clarifies the interaction between Topic 808 and Topic 606, Revenue from Contracts with Customers. The provisions of ASU ~~2018-07~~2018-18 are effective for fiscal years beginning after December 15, ~~2018. The Company plans to adopt these standards beginning in the first quarter of fiscal~~ 2019, ~~using a modified retrospective approach. The Company is evaluating the impact that adopting ASU 2018-07 will have on its consolidated financial statements,~~ and ~~does not expect that impact to be material.~~

~~In February 2016, the FASB issued ASU 2016-02 –~~ ~~Leases~~. The amendments in this update include a new FASB ASC Topic 842, which supersedes Topic 840. The core principle of Topic 842 is that a lessee should recognize the assets and liabilities that arise from leases. For public business entities, the amendments in this update are effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. ~~Early adoption~~The Company will be required to adopt this standard in the first quarter of Fiscal Year 2020. This standard is ~~permitted for all entities as~~not expected to have a material impact on our consolidated financial statements and related disclosures.

In ~~July~~September 2018, the FASB issued ASU ~~2018-10~~2018-15 – ~~Codification Improvements to Topic 842, Leases~~Intangibles—Goodwill and Other—Internal-Use Software (Subtopic 350-40):Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract. The ~~amendments are~~amendment is intended to address ~~narrow~~ aspects of the guidance issued in the amendments in ASU ~~2016-02. In July 2018,~~2015-05 – Intangibles – Goodwill and Other – Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Fees Paid in a Cloud Computing Arrangement. ASU 2018-15 intends to improve an entities ability to evaluate the ~~FASB issued~~accounting for fees paid by a customer in a cloud computing arrangement that is a service contract. The provisions of ASU ~~2018-11 –~~ ~~Leases (Topic 842): Targeted Improvements~~, which provides an additional (and optional) transition method by allowing entities to initially apply the new leases standard at the adoption date and recognize a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption. These provisions2018-15 are effective for ~~reporting periods~~fiscal years beginning after December 15, ~~2018. Early adoption is permitted.~~2019. The Company plans to adopt these standards using a prospective approach and is ~~currently~~ evaluating the impact that adopting ASU ~~2016-02 and related amendments~~2018-15 will have on its consolidated financial statements and expects to raise significant “Right of Use” assets and significant, offsetting lease liabilities. These amounts have not yet been quantified. The Company plans to adopt these standards beginning in the first quarter of fiscal 2019 using the modified retrospective approach with a cumulative adjustment to retained earnings.related disclosures.

~~On February 4, 2018, the~~The Company adopted ~~Topic 606~~ASU 2016-02- Leases (Topic 842) and related amendments, as of February 3, 2019, using the modified retrospective approach. The modified retrospective approach provides a method for recording existing leases at adoption with a cumulative adjustment to retained earnings. The Company elected the package of practical expedients which permits the Company to not reassess (1) whether any expired or existing contracts are or contain leases, (2) the lease classification for any expired or existing leases, and (3) any initial direct costs for any expired or existing leases as of the effective date.

The Company applied a portfolio approach to ~~contracts which were~~effectively account for the operating lease liabilities and operating lease assets; the Company did not ~~completed~~have financing leases. The Company excludes leases with an initial term of 12 months or less from the application of Topic 842. The Company did not elect the hindsight practical expedient; therefore, upon adoption, the Company used the remaining lease term of the current lease, option or extension.

Adoption of the new standard resulted in the recording of operating lease assets and operating lease liabilities of $223.3 million and $250.5 million, respectively, on the Company’s consolidated balance sheet as of February ~~4, 2018. As part~~3, 2019. The difference between the approximate value of the ~~adoption~~operating lease assets and liabilities is attributable to deferred rent, deferred rent incentives, leasehold interests and prepaid rent. There was no material impact on the Company’s consolidated statement of ~~Topic 606, Topic 340-20 –~~ ~~Capitalized Advertising Costs~~ ~~was superseded~~operations and ~~therefore, the Company transitioned to ASC 720-35 –~~ ~~Advertising Costs~~ ~~for reporting on costs of advertising. Results for reporting~~comprehensive income or consolidated statements cash flows. The Company’s comparative periods ~~beginning after February 4, 2018 are presented under Topic 606 and Topic 720, while prior period amounts are not adjusted and~~ continue to be ~~reported~~presented and disclosed in accordance with ~~our historic accounting under~~legacy guidance in Topic ~~605 and Topic 340.~~840.

The Company ~~recorded~~determines if an arrangement is a ~~cumulative reduction to opening retained earnings of $0.3 million.~~ lease at inception. Lease agreements will typically exist with lease and non-lease components, which are generally accounted for separately.

The impact on opening retained earnings was a $0.8 million decrease from the acceleration of prepaid catalog expenses offset by a $0.5 million increase from the recognition of direct revenues previously deferred under Topic 605.

~~Effective February 4, 2018, the~~ Company ~~changed its consolidated balance sheet presentation for expected sales returns and recorded a $5.0 million return asset and a corresponding increase~~recognizes operating lease liabilities equal to the ~~return liability to~~ present ~~our sales reserve gross in accordance with Topic 606. In addition, as~~value of the ~~date of adoption of Topic 606,~~lease payments and operating lease assets representing the right to use the underlying asset for the lease term. The lease expense for lease payments is recognized on a straight-line basis over the lease term.

As the Company’s leases do not provide an implicit rate, the Company will use an incremental borrowing rate based on the information available at lease commencement in determining the present ~~reimbursements~~value of ~~costs~~lease payments. The operating lease assets include any lease payments made prior to lease commencement and are reduced by any lease incentives.

Under Topic 842, for any new leases entered into, the Company will assess if it is reasonably certain to exercise lease options to extend or terminate the lease for inclusion (or exclusion) in the lease term when the Company measures the lease liability. The depreciable life of ~~marketing programs related to~~any assets and leasehold improvements are limited by the ~~private label credit card gross~~expected lease term.

Certain of the Company’s retail operating leases include variable rental payments based on a percentage of retail sales over contractual levels. Variable rental payments are recognized in the consolidated statement of operations ~~with no impact to opening retained earnings.~~

~~Revenue is primarily derived~~and comprehensive income in the period in which the obligation for those payments are incurred. If such variable operating leases arise that include incentives from landlords in the ~~sale~~form of apparel and accessory merchandise through our retail channel and direct channel, which includes website and catalog phone orders. Revenue also includes shipping and handling fees collected from customers. Topic 606 requires entities to recognize revenue when controlcash, the Company will record the full amount of the promised goods or services are transferred to customers at an amount that reflects the consideration to which the entity expects to be entitled to in exchange for those goods or services. Revenue from our retail channel is recognized at the time of sale and revenue from our direct channel is recognized upon shipment of merchandise to the customer.

The Company has a return policy where merchandise returns will be accepted within 90 days of the original purchase date. At the time of sale, the Company records an estimated sales reserve for merchandise returns based on historical prior returns experience and expected future returns. The estimated sales reserve is recorded as a return asset (and corresponding adjustment to cost of goods sold) for the cost of inventory and a return liability for the amount to settle the return with a customer (and a corresponding adjustment to revenue). The return asset and return liability are recorded in prepaid expenses and other assets, and accrued expenses and other current liabilities, respectively, in the consolidated balance sheet. The Company collects and remits sales and use taxes in all states in which retail and direct sales occur and taxes are applicable. These taxes are reported on a net basis and are thereby excluded from revenue.

The Company sells gift cards without expiration dates to customers. The Company does not charge administrative fees on unused gift cards. Proceeds from the sale of gift cards are recorded as a contract liability until the customer redeems the gift card orincentive when the likelihood of redemption is remote. Based on historical experience, the Company estimates the value of outstanding gift cards that will ultimately not be redeemed (“gift card breakage”) and will not be escheated under statutory unclaimed property laws. This gift card breakage is recognized as revenue over the time period established by the Company’s historical gift card redemption pattern.

The Company recognizes revenues from shipments to customers before the shipping and handling activities occur and will accrue those related costs. Shipping and handling costs are recorded in selling, general and administrative expenses. There is no change to the Company’s comparative reporting of shipping and handling costs as a result of adopting of Topic 606.

The Company has an arrangement with a third party to provide a private label credit card to its customers through August 2023, and will automatically renew thereafter for successive two year terms. The Company does not bear the credit risk associated with the private label credit card at any point prior to the termination of the agreement, at which point the Company would be obligated to purchase the receivables. If the arrangement is terminated prior to September 7, 2021 and otherspecific performance criteria are met as a deferred liability. The deferred liability is amortized into income as a reduction of rent expense over the term of the applicable lease, including options to extend if they are reasonably certain to be exercised. The Company recognized those liabilities to be amortized within a year as a current liability and those greater than a year as a long-term liability. For purposes of recognizing these incentives and rental expenses on a straight-line basis, the Company uses the date it obtains the legal right to use and control the lease asset to begin amortization, which is ~~obligated to pay a purchase price premium. The potential impact~~generally when the Company takes possession of the ~~purchase obligation cannot be reasonably estimated, and therefore, has not been recorded.~~asset.

The Company receives royalty payments through its private label credit card agreement. The royalty payments are recognized as revenue when they are received. Royalty payments recognized in the thirteen and thirty-nine weeks ended November 3, 2018 were $1.5 million and $4.3 million, respectively, and in the thirteen and thirty-nine weeks ended October 28, 2017 were $1.2 million and $3.5 million, respectively.

The Company also receives reimbursements for costs of marketing programs related to the private label credit card, which are recorded as revenue as earned and the costs incurred are recorded as operating expenses in selling, general and administrative expenses in the accompanying consolidated statements of operations and comprehensive income (loss). Reimbursements for costs of marketing programs of $0.2 million and $1.7 million were recognized in the thirteen and thirty-nine weeks ended November 3, 2018, respectively.

~~The credit card agreement provides a signing bonus to the Company, which is recognized into revenue over the life of the agreement.~~

The Company incurs costs to produce, print, and distribute its catalogs. Catalog costs are considered direct response advertising, which are capitalized as incurred, and expensed when the catalog is mailed to the customer (the first time the advertising occurs). Advertising expenses were $11.3 million and $30.0 million in the thirteen and thirty-nine weeks ended November 3, 2018, respectively, and $9.6 million and $27.6 million in the thirteen and thirty-nine weeks ended October 28, 2017, respectively. The costs are included in selling, general and administrative expenses in the accompanying consolidated statements of operations and comprehensive income (loss).

Other advertising costs are recorded as incurred. Other advertising costs recorded were $5.9 million and $17.1 million in the thirteen and thirty-nine weeks ended November 3, 2018, respectively, and $5.4 million and $15.9 million in the thirteen and thirty-nine weeks ended October 28, 2017, respectively. The costs are included in selling, general and administrative expenses in the accompanying consolidated statements of operations and comprehensive income (loss).

The Company sells its products directly to consumers and the Company earns royalties under its credit card agreement. The following table presents disaggregated revenues ~~disaggregated~~ by ~~revenue~~ source (in thousands):

⁽¹⁾ ~~As previously noted, prior period amounts have not been adjusted under the modified retrospective method.~~

The Company recognizes a contract liability when it has received consideration from the customer and has a future obligation to the customer. Total contract liabilities consisted of the following (in thousands):

For the thirteen and ~~other current liabilities on~~thirty-nine weeks ended November 2, 2019, the ~~Company's consolidated balance sheet. The short term portion~~Company recognized approximately $2.0 million and $8.5 million of ~~the signing bonus is included in accrued expenses on the Company’s consolidated balance sheet.~~

revenue related to gift card redemptions and breakage, respectively. For the thirteen and thirty-nine weeks ended November 3, 2018, the Company recognized approximately $2.1 million and $8.2 million of revenue related to gift card redemptions and ~~breakage. For the thirteen and thirty-nine weeks ended October 28, 2017, the Company recognized approximately $2.0 million and $7.9 million of revenue related to gift card redemptions and breakage.~~breakage, respectively. Revenue recognized consists of gift cards that were part of the unredeemed gift card balance at the beginning of the period as well as gift cards that were issued during the period.

The Company has a remaining performance obligation of ~~$0.7~~$0.5 million for a signing bonus related to the private label credit card agreement. The Company will recognize revenue over the remaining life of the contract as follows (in thousands):

This disclosure does not include revenue related to performance obligations from unredeemed gift cards, as substantially all gift cards are redeemed in the first year of issuance.

The Company ~~excludes~~filed an insurance claim as a result of a cargo vessel fire on or about January 8, 2019, where contents of two containers carried J.Jill inventory. In July 2019, it was determined that the inventory onboard the cargo vessel was nonsalable and the insurance claim was settled for $3.3 million. The Company recorded a gain of $2.4 million on insurance proceeds in selling, general and administrative expenses in the consolidated statement of operations and comprehensive income (loss) for the thirty-nine weeks ended November 2, 2019.

In the second quarter of Fiscal Year 2019, the Company reduced the net carrying value of certain long-lived assets to their estimated fair value, determined using a discounted cash flows method. These impairment charges arose from ~~its transaction~~the Company’s decision to vacate and sublease one floor of the corporate headquarters located in Quincy, Massachusetts. The Company incurred impairment charges of $0.3 million on leasehold improvements and $1.8 million on the right-of-use asset. The impairment charges were recorded in selling, general and administrative expenses in the consolidated statement of operations and comprehensive income (loss).

In the second quarter of Fiscal Year 2019, the Company reduced comparable sales outlook for the second quarter that led to a reduced full year forecast of earnings for Fiscal Year 2019. The Company concluded that these factors, as well as the decrease in stock price ~~all amounts collected from customers~~represented indicators of impairment and required the Company to test goodwill and indefinite-lived intangible assets for ~~sales taxes that are remitted to taxing authorities.~~

~~Shipping and handling activities that occur after control~~impairment during the second quarter of ~~related goods transfers to the customer are accounted for as fulfillment activities rather than assessing these activities as performance obligations.~~Fiscal Year 2019 (the “Impairment Test”).

The Company ~~does not disclose remaining performance obligations~~performed the Impairment Test using a quantitative approach with the assistance of an independent valuation firm. The Impairment Test was performed using the income approach (or discounted cash flows method) for goodwill and the relief-from-royalty method for indefinite-lived intangible assets. The estimated fair values of goodwill and indefinite-lived intangible asset were below carrying values resulting in an $88.4 million impairment of goodwill and a $7.0 million impairment of the Company’s tradename (indefinite-lived intangible asset). The Company will perform their annual impairment assessment during the fourth quarter of Fiscal Year 2019 and may incur further impairments based on the results of that assessment which may be material.

In July 2019, the Company implemented a restructuring plan (the “2019 Restructuring Plan”) focused on cost reduction initiatives designed to execute against long-term strategies. The 2019 Restructuring Plan included headcount reductions primarily at the Company’s corporate headquarters in Quincy, Massachusetts and at the facility in Tilton, New Hampshire.

As a result of the 2019 Restructuring Plan, the Company recorded $1.6 million of restructuring costs in selling, general and administrative expenses in the consolidated statements of operations and comprehensive income. All restructuring costs have ~~an expected duration~~been incurred in the second quarter of ~~one year or less.~~Fiscal Year 2019 and payments are anticipated to be complete in the fourth quarter of Fiscal Year 2020, ending on January 30, 2021.

The following table summarizes the activity of the restructuring costs discussed above and related accruals recorded in accrued other and other current liabilities on the consolidated balance sheet (in thousands):

The components of the Company’s outstanding Term Loan were as follows (in thousands):

The Company was in compliance with all financial covenants as of November ~~3, 2018.~~2, 2019.

The Company recorded an income tax expense of $1.8 million and $0.1 million for the thirteen and thirty-nine weeks ended November 2, 2019, respectively, and income tax expense of $2.5 million and $10.4 million during the thirteen and thirty-nine weeks ended November 3, 2018, ~~respectively,~~respectively. The effective tax rates were 42.5% and ~~$2.8 million and $16.9 million during~~(0.1)% in the thirteen and thirty-nine weeks ended ~~October 28, 2017, respectively. The effective tax rates were~~November 2, 2019, respectively, and 27.1% and 26.8% in the thirteen and thirty-nine weeks ended November 3, 2018, ~~respectively, and 31.6% and 39.4% in~~respectively.

The effective tax rate for the thirteen and thirty-nine weeks ended ~~October 28, 2017, respectively.~~

November 2, 2019 differs from the federal statutory rate of 21% primarily due to the impact of recurring items including §162(m) officer compensation limitation, stock compensation and state income taxes. The effective tax rate for the thirty-nine weeks ended November 2, 2019 was also impacted by the goodwill impairment charge of $88.4 million. The effective tax rate for the thirteen and thirty-nine weeks ended November 3, 2018 ~~exceeds~~exceeded the federal statutory rate of 21.0% primarily due to ~~stock compensation, state income taxes and~~ §162(m) officer compensation ~~limitation. The effective tax rate for the thirteen~~limitation, stock compensation and ~~thirty-nine weeks ended October 28, 2017 exceeds the federal statutory rate of 35.0% primarily due to~~ state income ~~taxes and non-deductible IPO related expenses.~~taxes.

~~On December 22, 2017, the U.S. Tax Cuts and Jobs Act (TCJA) legislation was signed. The new U.S. tax legislation is subject to a number of provisions,~~ ~~including~~ a reduction of the U.S. federal corporate income tax rate from 35.0% to 21.0% (effective January 1, 2018) and a change in certain business deductions, including allowing for immediate expensing of certain qualified capital expenditures.

Staff Accounting Bulletin No. 118 (“SAB 118”), issued by the Securities and Exchange Commission in December 2017, provides the Company with up to one year to finalize accounting for the impacts of TCJA. When the initial accounting for TCJA impacts is incomplete, the Company may include provisional amounts when reasonable estimates may be determined. As of February 3, 2018, the Company made a reasonable estimate of its deferred income tax benefit related to the corporate rate change of $24.0 million and estimates to expense qualifying capital expenditures.

~~In the thirteen and thirty-nine weeks ended November 3, 2018, the Company has not recognized any measurement period adjustments.~~ ~~The Company has not completed its~~ ~~process~~ to determine the final impact of TCJA. The final impact may differ from this estimate, possibly materially, due to, among other things, changes in interpretations and assumptions that the Company has made and the issuance of additional regulatory and other guidance. Further, any required adjustment would be reflected as a discrete expense or benefit in the quarter that it is identified, as allowed by SAB 118. A~~lthough no material changes are anticipated, the Company expects to complete the analysis within the measurement period in accordance with SAB 118.~~

The following table summarizes the computation of basic and diluted net income per share attributable to common shareholders (in thousands, except share and per share data):

	For the Thirteen Weeks Ended				For the Thirty-Nine Weeks Ended				For the Thirteen Weeks Ended				For the Thirty-Nine Weeks Ended
	November 3, 2018		October 28, 2017		November 3, 2018		October 28, 2017		November 2, 2019		November 3, 2018		November 2, 2019			November 3, 2018
Numerator
Net income attributable to common shareholders:	$	6,688	$	5,994	$	28,431	$	26,017
Net income (loss) attributable to common shareholders:									$	2,387	$	6,688	$	(89,982	)	$	28,431
Denominator
Weighted average number of common shares outstanding, basic:		42,953,173		41,731,765		42,674,957		41,933,244		43,838,667		42,953,173		43,653,178			42,674,957
Dilutive effect of stock options and restricted shares:		1,522,620		1,822,235		1,524,843		1,535,602		112,035		1,522,620		—			1,524,843
Weighted average number of common shares outstanding, diluted:		44,475,793		43,554,000		44,199,800		43,468,846		43,950,702		44,475,793		43,653,178			44,199,800
Net income per common share attributable to common shareholders, basic:	$	0.16	$	0.14	$	0.67	$	0.62
Net income per common share attributable to common shareholders, diluted:	$	0.15	$	0.14	$	0.64	$	0.60
Net (loss) income per common share attributable to common shareholders, basic:									$	0.05	$	0.16	$	(2.06	)	$	0.67
Net (loss) income per common share attributable to common shareholders, diluted:									$	0.05	$	0.15	$	(2.06	)	$	0.64

The weighted average common shares for the diluted earnings per share calculation exclude the impact of outstanding equity awards if the assumed proceeds per share of the award is in excess of the related fiscal period’s average price of the Company’s common stock. Such awards are excluded because they would have an antidilutive effect. There were 4,000,014 and 3,183,761 for the thirteen and thirty-nine weeks ended November 2, 2019, and 1,083,876 and 847,600 for the thirteen and thirty-nine weeks ended November 3, 2018, ~~respectively,~~such awards excluded.

Equity-based compensation expense was $1.1 million and ~~277,006 and 270,090~~$3.5 million for the thirteen and thirty-nine weeks ended ~~October 28, 2017, respectively, such awards excluded.~~

~~Compensation expense was~~November 2, 2019, and $1.1 million and $2.9 million for the thirteen and thirty-nine weeks ended November 3, ~~2018, respectively, and $0.3~~2018.

On March 6, 2019, the Company’s Board of Directors declared a special cash dividend (the “Special Dividend”) of $1.15 per share payable to shareholders of record as of March 19, 2019, of which $50.2 million ~~and $0.5 million for~~was paid on April 1, 2019 to shareholders.

In connection with the Special Dividend, pursuant to anti-dilution provisions in the 2017 Omnibus Equity Incentive Plan (the “2017 Plan”), the Company adjusted outstanding equity awards in order to prevent dilution of such awards. Accordingly, the Company adjusted the number of outstanding unvested restricted stock units (“RSUs”) as of the payment date of the dividend with an additional number of RSUs (“Dividend Equivalent Units” or “DEUs”) equal to the quotient obtained by dividing (x) the product of the number of unvested RSUs as of the record date by the amount of the dividend per share, by (y) the fair market value of share on the payment date of the Special Dividend. The DEUs will follow the same vesting pattern as the RSUs. For holders of outstanding options as of March 19, 2019, the option strike price on such options was reduced by the per share amount of the Special Dividend. Holders of unvested Restricted Stock Awards (“RSAs”) received a forfeitable $1.15 per share dividend on unvested RSAs as of March 19, 2019.

For both the thirteen and thirty-nine weeks ended ~~October 28, 2017, respectively.~~

~~For the thirteen~~November 2, 2019 and ~~thirty-nine weeks ended~~ November 3, 2018, the Company incurred an immaterial amount of related party transactions. ~~For the thirteen and thirty-nine weeks ended October 28, 2017 the~~ Company incurred an immaterial amount of out-of-pocket expenses in relation to the advisory services agreement with a related party. These expenses are included in operating expenses in the accompanying consolidated statements of operations and comprehensive income.

The Company ~~recorded a deferred lease liability~~is subject to various legal proceedings that arise in the ordinary course of ~~$11.2 million and $9.5 million as~~business. Although the outcome of ~~November 3, 2018 and February 3, 2018, respectively. In certain instances,~~ such proceedings cannot be predicted with certainty, management does not believe that the Company also receives tenant improvement incentives for its store leases, which it accrues and amortizes ratably over the life of the lease. The Company maintained a tenant improvement incentive liability of $18.8 million and $17.3 million as of November 3, 2018 and February 3, 2018, respectively.

Total rental and common area maintenance expense was $15.1 million and $45.7 million for the thirteen and thirty-nine weeks ended November 3, 2018, respectively, exclusive of contingent rental expense recorded of $0.4 million and $1.0 million for the same respective periods. Total rental and common area maintenance expense was $15.2 million and $44.6 million for the thirteen and thirty-nine weeks ended October 28, 2017, respectively, exclusive of contingent rental expense recorded of $0.4 million and $1.2 million for the same respective periods.

On October 13, 2017, a securities lawsuit was filed in the United States District Court for the District of Massachusetts against the Company, several members of our Board of Directors and our Chief Financial Officer, among others. The complaint was brought under the Securities Act of 1933 and sought certification of a class of plaintiffs comprised of all shareholders that acquired stock issued by the Company in its initial public offering in March 2017. The plaintiffs sought compensation for losses they incurred since purchasing the stock. Following the filing of this lawsuit, two additional, similar actions were brought in the same court. The three matters were eventually consolidated, and a lead plaintiff was appointed by the court. On March 9, 2018, an amended complaint captioned ~~The Pension Trust v. J.Jill, Inc., et al.~~ was filed. The Company filed a motion to dismiss on May 14, 2018, which was opposed by the plaintiffs on July 17, 2018. The Company believes the claims in the case are without merit and intends to defend the matter vigorously. No material amount has been accrued.

We ~~are not~~is presently party to any ~~other~~ legal proceedings the resolution of which ~~we believe~~ management believes would have a material adverse effect on ~~our~~the Company’s business, financial condition, operating results or cash flows. ~~We establish~~ The Company establishes reserves for specific legal matters when ~~we determine~~the Company determines that the likelihood of an unfavorable outcome is probable and the loss is reasonably estimable.

As of November 2, 2019, the Company leased certain retail stores, a distribution center, and office space. As of that same date, the Company did not have any financing leases and no operating leases contained any material residual value guarantees or material restrictive covenants. Certain of the Company’s retail operating leases include variable rental payments based on a percentage of retail sales over contractual levels.

Some retail leases include one or more options to renew, with renewal terms that can extend the lease term from one to fifteen years. The Company’s distribution center has renewal terms that can extend the lease term up to twenty years. The exercise of lease renewal options is at the Company’s sole discretion. As of November 2, 2019, the Company included options to renew that are reasonably certain to be exercised in the operating lease assets and liabilities.

As described in Note 2, the Company adopted Topic 842 as of February 3, 2019. Under this guidance the Company did not record any deferred lease liabilities as of November 2, 2019. The Company maintained a tenant incentive liability of $1.3 million as of November 2, 2019, related to certain variable retail leases. Under legacy guidance, Topic 840, the Company recorded a deferred lease liability of $11.9 million and maintained a tenant improvement incentive liability of $19.1 million as of February 2, 2019.

For the thirteen and thirty-nine weeks ended November 2, 2019, total common area maintenance expense was $3.6 million and $10.7 million, respectively. For the thirteen and thirty-nine weeks ended November 3, 2018, total rental expense was $11.6 million and $35.2 million, respectively, and common area maintenance expense was $3.6 million and $10.6 million, respectively, exclusive of contingent rental expense recorded of $0.4 million and $1.0 million, respectively.

The Company used an incremental borrowing rate on February 3, 2019, for operating leases that commenced prior to that date. The incremental borrowing rate is estimated based upon (1) the financial condition and credit rating of the Company and its peers, (2) the term of the lease, (3) the nature of the underlying asset, and (4) the relative economic environment.

For the thirteen and thirty-nine weeks ended November 2, 2019, operating lease liabilities arising from obtaining operating lease assets was $9.6 million and $19.2 million, respectively.

For the thirteen and thirty-nine weeks ended November 2, 2019, the total cash paid for amounts included in the measurement of operating lease liabilities was $12.1 million and $35.8 million, respectively.

Maturities of lease liabilities as of November 2, 2019 were as follows (in thousands):

Under Topic 840, future minimum rental payments required under all non-cancellable operating lease obligations as of February 2, 2019 were as follows (in thousands):

The Company entered into a bartering arrangement with Evergreen Trading, a vendor, where the Company provided inventory in exchange for media credits. During Q3 of fiscal 2019, the Company exchanged $3.3 million of inventory for certain media credits. To account for the exchange, the Company recorded the transfer of the inventory asset as a reduction of inventory offset by a $2.5 million decrease in reserves and an increase to a prepaid media asset of $2.0 million which is included in “Prepaid and other current assets” and “Other assets” on the accompanying consolidated balance sheet. A gain of $1.3 million was recorded upon shipment of the inventory. The Company had $2.0 million of unused media credits remaining as of November 2, 2019 that will be used over five years.

The Company accounted for this barter transactions under ASC Topic No. 606 “Revenue from Contract with Customers.” Barter transactions with commercial substance are recorded at the estimated fair value of the products exchanged, unless the products received have a more readily determinable estimated fair value. Revenue associated with barter transaction is recorded at the time of the exchange of the related assets.

On December 5, 2019, the Company announced the departure of President, CEO and Director, Linda Heasley effective immediately, after serving over a year and a half in the role. Ms. Heasley will be succeeded as Chief Executive Officer on an interim basis by James Scully, who currently serves on the Board of Directors of J.Jill, Inc., effective December 5, 2019.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis should be read in conjunction with our consolidated financial statements and related notes thereto included elsewhere in this Quarterly Report on Form 10-Q. The following discussion contains forward-looking statements that reflect our plans, estimates and assumptions. Our actual results could differ materially from those discussed in the forward-looking statements. Factors that could cause such differences are discussed in the sections of this Quarterly Report on Form 10-Q titled “Risk Factors” and “Special Note Regarding Forward-Looking Statements”.

We operate on a 52- or 53-week fiscal year that ends on the Saturday that is closest to January 31. Each fiscal year generally is comprised of four 13-week fiscal quarters, although in the years with 53 weeks, the fourth quarter represents a 14-week period. The fiscal ~~year~~years ending February ~~2, 2019~~1, 2020 (“Fiscal Year ~~2018”~~2019”) and fiscal year ended February ~~3, 2018~~2, 2019 (“Fiscal Year ~~2017”~~2018”) are both comprised of 52 ~~weeks and 53 weeks, respectively.~~weeks.

J.Jill is a premier omnichannel retailer and nationally recognized women’s apparel brand committed to delighting customers with great wear-now product. The brand represents an easy, ~~relaxed,~~thoughtful and inspired style that reflects the confidence of remarkable women who live life with joy, passion and ~~comfort of~~purpose. J.Jill offers a ~~woman with a rich, full life. J.Jill provides~~ guiding ~~service~~customer experience through more than ~~270~~280 stores nationwide and a robust ~~e-commerce~~E-commerce platform. J.Jill is headquartered outside Boston.

Various factors are expected to continue to affect our results of operations going forward, including the following:

Overall Economic Trends. Consumerpurchasesof clothingand othermerchandisegenerallydeclineduring recessionaryperiodsand otherperiodswhen disposableincomeisadverselyaffected,and consequentlyour resultsof operationsmaybe affectedby generaleconomicconditions.For example,reducedconsumer confidenceand loweravailabilityand highercostof consumercreditmayreducedemandforour merchandise and maylimitour abilityto increaseor sustainprices.The growth rateof themarketcouldbe affectedby macroeconomicconditionsin theUnitedStates.

Consumer Preferences and Fashion Trends. Our abilityto maintainour appealto existingcustomersand attractnew customersdependson our abilityto anticipatefashiontrends.During periodsin which we have successfullyanticipatedfashion~~trend~~s, trends, we have generallyhad morefavorableresults.

Competition. The retailindustryishighlycompetitiveand retailerscompetebasedon a varietyof factors, includingdesign,quality,priceand customerservice.Levelsof competitionand theabilityof our competitorsto moreaccuratelypredictfashiontrendsand otherwiseattractcustomersthroughcompetitivepricingor other factorsmayimpactour resultsof operations.

Our Strategic Initiatives.~~Our business~~ The ongoing implementation of strategic initiatives will continue to have an impact on our results of ~~operations, including~~operations. These initiatives include our ~~e-commerce~~E-commerce site, which was re-platformed ~~earlier~~ in Fiscal ~~2018.~~Year 2017, and our initiative to upgrade and enhance our information systems. Although initiatives of this nature are designed to create growth in our business and continuing improvement in our operating results, the timing of expenditures related to these initiatives, as well as the achievement of returns on our investments, may affect our results of operation in future periods.

Pricing and Changes in Our Merchandise Mix. Our productofferingchangesfromperiodto period,as do thepricesatwhich goods aresoldand themarginswe areableto earnfromthesalesof thosegoods. The levels atwhich we areableto priceour merchandiseareinfluencedby a varietyof factors,includingthequalityof our products,costof production,pricesatwhich our competitorsaresellingsimilarproductsand thewillingnessof our customersto pay forproducts.

Potential Changes in Tax Laws and/or Regulations. Changes in tax laws in any of the multiple jurisdictions in which we operate, or adverse outcomes from tax audits that we may be subject to in any of the jurisdictions in which we operate, could adversely affect our business, financial condition and operating results. Additionally, any potential changes with respect to tax and trade policies, tariffs and government regulations affecting trade between the U.S. and other countries could adversely affect our business, as we source the majority of our merchandise from manufacturers located outside of the U.S.

In assessing the performance of our business, we consider a variety of financial and operating metrics, including GAAP and non-GAAP measures, including the following:

Net sales consistsprimarilyof revenues,netof merchandisereturnsand discounts,generatedfromthesale of appareland accessorymerchandisethroughour retailchanneland directchannel.Net salesalsoinclude shippingand handlingfeescollectedfromcustomers and royalty revenues and marketing reimbursements related to our private label credit card agreement.Revenue fromour retailchannelisrecognizedatthetime of saleand revenuefromour directchannelisrecognizedupon shipmentof merchandiseto thecustomer.

Net sales are impacted by the size of our active customer base, product assortment and availability, marketing and promotional activities and the spending habits of our customers. Net sales are also impacted by the migration of single-channel customers to omnichannel customers who, on ~~averag~~e,average, spend nearly three times more than ~~singl~~e~~-channel~~single-channel customers.

Total company comparable sales includesnetsalesfromour full-pricestoresthathave been open formore than52 weeks and fromour directchannel.This measurehighlightstheperformanceof existingstoresopen duringtheperiod,whileexcludingtheimpactof new storeopeningsand closures.When a storein thetotal companycomparablestorebaseistemporarilyclosedforremodelingor otherreasons,itisincludedin total companycomparablesalesonly usingthefullweeks itwas open. Certainof our competitorsand otherretailers maycalculatetotalcompanycomparablesalesdifferentlythanwe do. As a result,thereportingof our total companycomparablesalesmaynot be comparableto salesdatamadeavailableby othercompanies.

Number of stores reflectsallstoresopen attheend of a reportingperiod.In connectionwith openingnew stores,we incurpre-openingcosts.Pre-openingcostsincludeexpensesincurredpriorto openinga new storeand primarilyconsistof payroll,travel,training,marketing,initialopeningsuppliesand costsof transportinginitial inventoryand fixturesto storelocations,as wellas occupancycostsincurredfromthetimeof possessionof a storesiteto theopeningof thatstore.These pre-openingcostsareincludedin selling,generaland administrative expensesand aregenerallyincurredand expensedwithin30 days of openinga new store.

Gross profit is equal to our net sales less costs of goods sold. Gross profit as a percentage of our net sales is referred to as gross margin.

Costs of goods sold includesthedirectcostsof soldmerchandise,inventory shrinkage,and adjustmentsand reservesforexcess,aged and obsoleteinventory.We reviewour inventorylevels on an ongoing basisto identifyslow-movingmerchandiseand use productmarkdownsto ~~efficientlysell~~liquidate these products.Changes in theassortmentof our productsmayalsoimpactour grossprofit.The timingand levelof markdownsaredrivenby customeracceptanceof our merchandise.Certainof our competitorsand otherretailers mayreportcostsof goods solddifferentlythanwe do. As a result,thereportingof our grossprofitand gross marginmaynot be comparableto othercompanies.

The primary drivers of the costs of goods sold are raw materials, which fluctuate based on certain factors beyond our control, including labor conditions, transportation or freight costs, energy prices, currency fluctuations and commodity prices. We place orders with merchandise suppliers in United States dollars and, as a result, are not exposed to significant foreign currency exchange risk.

Selling, general and administrative expenses includealloperatingcostsnot includedin costsof goods sold. These expensesincludeallpayrolland relatedexpenses,occupancycosts, information systems costs and otheroperatingexpensesrelatedto our storesand to our operationsatour headquarters,includingutilities,depreciationand amortization.These expensesalsoincludemarketingexpense,includingcatalogproductionand mailingcosts,warehousing, distributionand shippingcosts,customerserviceoperations,consultingand softwareservices,professional servicesand otheradministrativecosts.

Our historical revenue growth has been accompanied by increased selling, general and administrative expenses. The most significant increases were in occupancy costs associated with retail store expansion, and in marketing and payroll investments.

Adjusted EBITDA and Adjusted EBITDA Margin. Adjusted EBITDA ~~which~~ represents net income ~~(loss)~~ plus net interest expense, provision (benefit) for income taxes, depreciation and amortization, equity-based compensation expense, write-off of property and equipment, and other non-recurring expenses, primarily consisting of outside legal and ~~one-time items.~~professional fees associated with certain non-recurring transactions and events. We present Adjusted EBITDA on a consolidated basis because management uses it as a supplemental measure in assessing our operating performance, and we believe that it is helpful to investors, securities analysts and other interested parties as a measure of our comparative operating performance from period to period. We also use Adjusted EBITDA as one of the primary methods for planning and forecasting overall expected performance of our business and for evaluating on a quarterly and annual basis actual results against such expectations. Further, we recognize Adjusted EBITDA as a commonly used measure in determining business value and as such, use it internally to report results. Adjusted EBITDA margin represents, for any period, Adjusted EBITDA as a percentage of net sales.

Whilewe believethatAdjustedEBITDAisusefulin evaluatingour business,AdjustedEBITDAisa non-GAAPfinancialmeasurethathas limitationsas an analyticaltool.AdjustedEBITDAshouldnot be considered an alternativeto, or substitutefor,netincome(loss),which iscalculatedin accordancewith GAAP.In addition, othercompanies,includingcompaniesin our industry,maycalculateAdjustedEBITDAdifferentlyor not atall, which reducestheusefulnessof AdjustedEBITDAas a toolforcomparison.We recommendthatyou reviewthe reconciliationand calculationof AdjustedEBITDAand AdjustedEBITDAmarginto netincome,~~(loss),~~themost directlycomparableGAAPfinancialmeasure,below and not relysolelyon AdjustedEBITDAor any single financialmeasureto evaluateour business.

Reconciliation of Net Income to Adjusted EBITDA and Calculation of Adjusted EBITDA Margin

The following table provides a reconciliation of net income to Adjusted EBITDA and the calculation of Adjusted EBITDA margin for the periods presented.

	For the Thirteen Weeks Ended						For the Thirty-Nine Weeks Ended						For the Thirteen Weeks Ended						For the Thirty-Nine Weeks Ended
(in thousands)	November 3, 2018			October 28, 2017			November 3, 2018			October 28, 2017			November 2, 2019			November 3, 2018			November 2, 2019			November 3, 2018
Statements of Operations Data:
Net income	$	6,688		$	5,994		$	28,431		$	26,017
Net income (loss)													$	2,387		$	6,688		$	(89,982	)	$	28,431
Interest expense, net		4,698			4,496			14,368			14,525			4,826			4,698			14,852			14,368
Provision for income taxes		2,488			2,766			10,412			16,926
Income tax (benefit) provision														1,763			2,488			132			10,412
Depreciation and amortization		9,149			8,628			27,398			25,768			9,458			9,149			28,307			27,398
Equity-based compensation expense^(a)		1,111			278			2,954			539			1,128			1,111			3,544			2,954
Write-off of property and equipment ^(b)		59			229			87			569			71			59			85			87
Other non-recurring expenses ^(c)		—			658			1,346			4,964
Impairment of goodwill and indefinite-lived intangible assets														—			—			95,428			—
Impairment of long-lived assets^(c)														—			—			2,064			—
Other non-recurring expenses ^(d)														—			—			(740	)		1,346
Adjusted EBITDA	$	24,193		$	23,049		$	84,996		$	89,308		$	19,633		$	24,193		$	53,690		$	84,996
Net sales	$	174,106		$	161,975		$	535,360		$	509,473		$	166,085		$	174,106		$	523,281		$	535,360
Adjusted EBITDA margin		13.9	%		14.2	%		15.9	%		17.5	%		11.8	%		13.9	%		10.3	%		15.9	%

Impairment losses. Our Fiscal Year 2019 year to date results reflect goodwill and intangible asset impairment losses of $95.4 million. We had no impairment losses in Fiscal Year 2018. See Note 5, Asset Impairments, in Item I, Financial Statements, for additional information on these impairment losses.

Thirteen weeks ended November 2, 2019 Compared to Thirteen weeks ended November 3, 2018 ~~Compared to Thirteen weeks ended October 28, 2017~~

The following table summarizes our consolidated results of operations for the periods indicated:

																	For the Thirteen Weeks Ended										Change from the Thirteen Weeks Ended November 3, 2018 to the Thirteen Weeks
	For the Thirteen Weeks Ended										Change from the Thirteen Weeks Ended October 28, 2017 to the Thirteen Weeks						November 2, 2019					November 3, 2018					Ended November 2, 2019
(in thousands)	November 3, 2018					October 28, 2017					Ended November 3, 2018						Dollars		% of Net Sales			Dollars		% of Net Sales			$ Change			% Change
	Dollars		% of Net Sales			Dollars		% of Net Sales			$ Change			% Change
Net sales	$	174,106		100.0	%	$	161,975		100.0	%	$	12,131			7.5	%	$	166,085		100.0	%	$	174,106		100.0	%	$	(8,021	)		(4.6	)%
Costs of goods sold		58,643		33.7	%		53,479		33.0	%		5,164			9.7	%		59,137		35.6	%		58,643		33.7	%		494			0.8	%
Gross profit		115,463		66.3	%		108,496		67.0	%		6,967			6.4	%		106,948		64.4	%		115,463		66.3	%		(8,515	)		(7.4	)%
Selling, general and administrative expenses		101,589		58.3	%		95,240		58.8	%		6,349			6.7	%		97,972		59.0	%		101,589		58.3	%		(3,617	)		(3.6	)%
Operating income		13,874		8.0	%		13,256		8.2	%		618			4.7	%		8,976		5.4	%		13,874		8.0	%		(4,898	)		(35.3	)%
Interest expense, net		4,698		2.7	%		4,496		2.8	%		202			4.5	%		4,826		2.9	%		4,698		2.7	%		128			2.7	%
Income before provision for income taxes		9,176		5.3	%		8,760		5.4	%		416			4.7	%		4,150		2.5	%		9,176		5.3	%		(5,026	)		(54.8	)%
Provision for income taxes		2,488		1.4	%		2,766		1.7	%		(278	)		(10.1	)%
Income tax provision (benefit)																		1,763		1.1	%		2,488		1.4	%		(725	)		(29.1	)%
Net income	$	6,688		3.9	%	$	5,994		3.7	%	$	694			11.6	%	$	2,387		1.4	%	$	6,688		3.8	%	$	(4,301	)		(64.3	)%

Net sales for the thirteen weeks ended November ~~3, 2018~~2, 2019 ~~increased $12.1~~decreased $8.0 million, or ~~7.5%~~4.6%, to ~~$174.1~~$166.1 from ~~$162.0~~$174.1 million for the thirteen weeks ended ~~October 28, 2017.~~November 3, 2018. At the end ~~of both~~ of those same periods, we operated 290 and 275 retail stores, respectively. The ~~increase~~decrease in total net sales versus the prior year was driven by a ~~1.0% increase~~decrease in ~~total company~~retail comparable store sales ~~and reflects in part an increase in our active customer base. It further reflects the benefit~~ of a high-volume week in November that shifted into the third quarter, replacing a lower volume week in August that shifted into the second quarter due to the calendar shift created by the fifty-third week in fiscal 2017.-7.0% .

Our retail channel contributed ~~60.2%~~57.0% of our net sales in the thirteen weeks ended November ~~3, 2018~~2, 2019 and ~~60.5%~~60.2% in the thirteen weeks ended ~~October 28, 2017.~~November 3, 2018. Our direct channel contributed ~~39.8%~~43.0% of our net sales in the thirteen weeks ended November ~~3, 2018~~2, 2019 and ~~39.5%~~39.8% in the thirteen weeks ended ~~October 28, 2017.~~November 3, 2018.

Gross profit for the thirteen weeks ended November ~~3, 2018~~2, 2019 ~~increased~~decreased ~~$7.0~~$8.5 million, or ~~6.4%~~7.4%, to ~~$115.5~~$106.9 from ~~$108.5~~$115.5 million for the thirteen weeks ended ~~October 28, 2017.~~November 3, 2018. The gross margin for the thirteen weeks ended November ~~3, 2018~~2, 2019 was ~~66.3%~~64.4% compared to ~~67.0%~~66.3% for the thirteen weeks ended ~~October 28, 2017, reflecting clearance~~November 3, 2018, driven by added promotions, markdowns ~~taken early~~and liquidation actions to clear certain goods in the ~~quarter.~~

Selling, general and administrative expenses for the thirteen weeks ended November ~~3, 2018 increased~~2, 2019 decreased ~~$6.3~~$3.6 million, or ~~6.7%~~3.6%, to ~~$101.6~~$98.0 from ~~$95.2~~$101.6 million for the thirteen weeks ended ~~October 28, 2017.~~November 3, 2018. The ~~increase~~decrease was primarily driven ~~largely~~ by expense reduction actions taken in the second quarter ended August 3, 2019, which included a ~~$2.6 million increase~~reduction in headcount, lower management incentive costs, and lower marketing spend as well as a $1.9 million increase in compensation and executive recruitment. Additionally, there was increased spending of $0.7 million for sales related expenses, $0.6 million for technology investment and $0.5 million in depreciation and amortization due to increased capital spending.costs.

As a percentage of net sales, selling, general and administrative expenses were ~~58.3%~~59.0% for the thirteen weeks ended November ~~3, 2018~~2, 2019 compared to ~~58.8%~~58.3% for the thirteen weeks ended ~~October 28, 2017.~~November 3, 2018.

Interest expense, net, consists of interest expense on the Term Loan, partially offset by interest earned on cash. Interest expense for the thirteen weeks ended November ~~3, 2018~~2, 2019 increased ~~$0.2~~$0.1 million, or ~~4.5%~~2.7%, to ~~$4.7~~$4.8 million from ~~$4.5~~$4.7 million for the thirteen weeks ended ~~October 28, 2017. The increase was due to higher interest rates.~~November 3, 2018.

The provision for income taxes was ~~$2.5~~$1.8 million for the thirteen weeks ended November ~~3, 2018~~2, 2019 compared to $~~2.8~~2.5 million for the thirteen weeks ended ~~October 28, 2017.~~November 3, 2018. Our effective tax rates for the same periods were ~~27.1%~~42.5% and ~~31.6%~~27.1%, respectively. The ~~decrease in the effective~~higher tax rate was ~~primarily due to new U.S. tax legislation. The U.S. Tax Cuts~~driven by the impact of recurring items including §162(m) officer compensation limitation, stock compensation and ~~Jobs Act (the “TCJA”), enacted in December 2017, is subject to a number of provisions, including a reduction of the U.S. federal corporate~~state income ~~tax rate from 35.0% to 21.0% (effective January 1, 2018) and a change in certain business deductions, including allowing for immediate expensing of certain qualified capital expenditures.~~taxes.

Thirty-nine weeks ended November ~~3, 2018~~2, 2019 Compared to Thirty-nine weeks ended ~~October 28, 2017~~November 3, 2018

The following table summarizes our consolidated results of operations for the periods indicated:

	For the Thirty-Nine Weeks Ended										Change from the Thirty-Nine Weeks Ended October 28, 2017 to the Thirty-Nine Weeks						For the Thirty-Nine Weeks Ended											Change from the Thirty-Nine Weeks Ended November 3, 2018 to the Thirty-Nine Weeks
(in thousands)	November 3, 2018					October 28, 2017					Ended November 3, 2018						November 2, 2019						November 3, 2018					Ended November 2, 2019
	Dollars		% of Net Sales			Dollars		% of Net Sales			$ Change			% Change			Dollars			% of Net Sales			Dollars		% of Net Sales			$ Change			% Change
Net sales	$	535,360		100.0	%	$	509,473		100.0	%	$	25,887			5.1	%	$	523,281			100.0	%	$	535,360		100.0	%	$	(12,079	)		(2.3	)%
Costs of goods sold		182,901		34.2	%		162,721		31.9	%		20,180			12.4	%		194,736			37.2	%		182,901		34.2	%		11,835			6.5	%
Gross profit		352,459		65.8	%		346,752		68.1	%		5,707			1.6	%		328,545			62.8	%		352,459		65.8	%		(23,914	)		(6.8	)%
Selling, general and administrative expenses		299,248		55.9	%		289,284		56.8	%		9,964			3.4	%		308,115			58.9	%		299,248		55.9	%		8,867			3.0	%
Operating income		53,211		9.9	%		57,468		11.3	%		(4,257	)		(7.4	)%
Impairment of goodwill																		88,428			16.9	%		—		—			88,428			100.0	%
Impairment of indefinite-lived intangible assets																		7,000			1.3	%		—		—			7,000			100.0	%
Operating (loss) income																		(74,998	)		(14.4	)%		53,211		9.9	%		(128,209	)		(240.9	)%
Interest expense, net		14,368		2.7	%		14,525		2.9	%		(157	)		(1.1	)%		14,852			2.8	%		14,368		2.7	%		484			3.4	%
Income before provision for income taxes		38,843		7.2	%		42,943		8.4	%		(4,100	)		(9.5	)%
Provision for income taxes		10,412		1.9	%		16,926		3.3	%		(6,514	)		(38.5	)%
Net income	$	28,431		5.3	%	$	26,017		5.1	%	$	2,414			9.3	%
(Loss) income before provision for income taxes																		(89,850	)		(17.2	)%		38,843		7.3	%		(128,693	)		(331.3	)%
Income tax provision (benefit)																		132			-			10,412		1.9	%		(10,280	)		(98.7	)%
Net (loss) income																	$	(89,982	)		(17.2	)%	$	28,431		5.3	%	$	(118,413	)		(416.5	)%

Net sales for the thirty-nine weeks ended November ~~3, 2018~~2, 2019 ~~increased $25.9~~decreased $12.1 million, or ~~5.1%~~2.3%, to ~~$535.4~~$523.3 from ~~$509.5~~$535.4 million for the thirty-nine weeks ended ~~October 28, 2017.~~November 3, 2018. At the end of both of those same periods, we operated 290 and 275 retail ~~stores.~~stores, respectively. The ~~increase~~decrease in net sales was due to ~~a 1.8% increase in~~ total company comparable sales ~~which reflects an increase in our active customer base.~~of -3.8%.

Our retail channel contributed ~~59.6%~~57.5% of our net sales in the thirty-nine weeks ended November ~~3, 2018~~2, 2019 and ~~58.2%~~59.6% in the thirty-nine weeks ended ~~October 28, 2017.~~November 3, 2018. Our direct channel contributed ~~40.4%~~42.5% of our net sales in the thirty-nine weeks ended November ~~3, 2018~~2, 2019 and ~~41.8%~~40.4% in the thirty-nine weeks ended ~~October 28, 2017.~~November 3, 2018.

Gross profit for the thirty-nine weeks ended November ~~3, 2018~~2, 2019 ~~increased~~decreased ~~$5.7~~$24.0 million, or ~~1.6%~~6.8%, to ~~$352.5~~$328.5 from ~~$346.8~~$352.5 million for the thirty-nine weeks ended ~~October 28, 2017.~~November 3, 2018. The gross margin for the thirty-nine weeks ended November ~~3, 2018~~2, 2019 was ~~65.8%~~62.8% compared to ~~68.1%~~65.8% for the thirty-nine weeks ended ~~October 28, 2017,~~November 3, 2018, largely driven by added promotions, markdowns, and liquidation actions to clear certain goods.

Selling, general and administrative expenses for the thirty-nine weeks ended November ~~3, 2018~~2, 2019 increased ~~$10.0~~$8.9 million, or ~~3.4%~~3.0%, to ~~$299.2~~$308.1 million from ~~$289.3~~$299.2 million for the thirty-nine weeks ended ~~October 28, 2017.~~November 3, 2018. The increase ~~is related to~~was driven by (a) a ~~$5.4 million increase in marketing, $2.3~~$5.5 million increase in sales related expenses ~~driven by direct fulfillment~~with higher distribution and ~~retail payroll, $1.6 million increase in depreciation and amortization and a $0.9 million increase for investments in technology,~~store expenses partially offset by lower marketing expense, and (b) $4.6 million for technology initiatives the majority of which was related to a ~~decrease~~specific technology initiative which was paused in the second quarter of ~~$0.6~~Fiscal Year 2019 ended August 3, 2019. The increases were offset by a $1.2 million reduction in ~~compensation.~~general and administrative expenses driven by the expense reduction actions taken in the second quarter of Fiscal Year 2019 and $0.9 from lower management compensation and recruiting expense.

As a percentage of net sales, selling, general and administrative expenses were 58.9% for the thirty-nine weeks ended November 2, 2019 compared to 55.9% for the thirty-nine weeks ended November 3, ~~2018~~ ~~compared to 56.8% for the thirty-nine weeks ended October 28, 2017.~~2018.

Interest expense, net, consists of interest expense on the Term Loan, partially offset by interest earned on cash. Interest expense for the thirty-nine weeks ended November ~~3, 2018~~2, 2019 ~~decreased $0.2~~increased $0.5 million, or ~~1.1%~~3.4%, to ~~$14.4~~$14.9 from ~~$14.5~~$14.4 million for the thirty-nine weeks ended ~~October 28, 2017.~~November 3, 2018. The ~~decrease~~increase was driven by the lower balance of the Term Loan and the acceleration of $0.6 million of deferred financing costs in the second quarter of 2017 due to a voluntary principal prepayment on the Term Loan of $20.0 million made in June 2017, partially offset by the impact of higher interest ~~rates.~~rates and a reduction of interest earned on cash.

The provision for income taxes was a provision of $0.1 million for the thirty-nine weeks ended November 2, 2019compared to a provision of $10.4 million for the thirty-nine weeks ended November 3, ~~2018compared to $16.9~~ ~~million for the thirty-nine weeks ended October 28, 2017.~~2018. Our effective tax rates for the same periods were ~~26.8%~~-0.1% and ~~39.4%~~26.8%, respectively. The ~~decrease~~tax provision in the ~~effective tax rate~~thirty-nine weeks ended November 2, 2019 was ~~primarily due to new U.S. tax legislation under~~driven by the ~~TCJA.~~treatment of the impairment of goodwill and indefinite-lived intangible assets.

Our primary sources of liquidity and capital resources are cash generated from operating activities and availability under our ABL credit agreement, dated as of May 8, 2015, by and among Jill Holdings LLC, Jill Acquisition LLC, certain subsidiaries from time to time party thereto, the lenders party thereto and CIT Finance LLC as the administrative agent and collateral agent, as amended on May 27, 2016 by Amendment No. 1 thereto (the “ABL Facility”). and subsequently amended by Amendment No. 3 on June 12, 2019 to extend the maturity of the agreement. Our primary requirements for liquidity and capital are working capital and general corporate needs, including merchandise inventories, marketing, including catalog production and distribution, payroll, store occupancy costs and capital expenditures associated with opening new stores, remodeling existing stores and upgrading information systems and the costs of operating as a public company. We believe that our current sources of liquidity and capital will be sufficient to finance our continued operations for at least the next 12 months. There can be no assurance, however, that our business will generate sufficient cash flows from operations or that future borrowings will be available under our ABL Facility or otherwise to enable us to service our indebtedness, or to make capital expenditures in the future. Our future operating performance and our ability to service or extend our indebtedness will be subject to future economic conditions and to financial, business, and other factors, many of which are beyond our control.

Capital expenditures were $13.5 million for the thirty-nine weeks ended November 2, 2019 compared to $14.0 million for the thirty-nine weeks ended November 3, ~~2018 compared to $22.3 million for the thirty-nine weeks ended October 28, 2017.~~2018. The decrease in capital expenditures in Fiscal Year ~~2018~~2019 was due primarily to a decrease in technology projects, partially offset by an increase in spending on ~~stores investments and technology projects.~~store investments.

Net cash provided by operating activities during the thirty-nine weeks ended November 2, 2019 was $17.7 million. Key elements of cash provided by operating activities were (i) net loss of $90.0 million, (ii) adjustments to reconcile net income to net cash provided by operating activities of $122.6 million, primarily driven by impairment of goodwill and indefinite lived intangible assets, depreciation and amortization, partially offset by deferred income taxes, and (iii) an increase in net operating assets and liabilities of $(14.9) million, primarily driven by higher inventory and accounts receivable levels as well as lower accounts payable.

Net cash provided by operating activities during the thirty-nine weeks ended November 3, 2018 was $50.0 million. Key elements of cash provided by operating activities were (i) net income of $28.4 million, and (ii) adjustments to reconcile net income to net cash provided by operating activities of $27.7 million, primarily driven by depreciation and amortization ~~equity-based~~and equity based compensation and noncash amortization of deferred financing and debt discount costs, partially offset by deferred income taxes, and (iii) an increasein net operating assets and liabilities of $6.1 million, primarily driven by prepaid expenses and other current assets as well as accounts payable and accounts receivable, partially offset by other noncurrent assets and liabilities and inventory.

~~Net cash provided by operating activities during~~ ~~the thirty-nine weeks ended October 28, 2017~~ ~~was $54.5 million. Key elements of cash provided by operating activities were (i) net income of $26.0 million,~~ ~~and~~ (ii) adjustments to reconcile net income to net cash provided by operating activities of $27.5 million, primarily driven by depreciation and amortization and non-cash amortization of deferred financing and debt discount costs, and (iii) ~~a decrease~~ ~~in net operating assets and liabilities of $1.0 million, prima~~rily driven by cash provided by prepaid expenses and other current assets, accounts payable and other noncurrent assets and liabilities, partially offset with increases in accounts receivable and inventory.

Net cash used in investing activities during the thirty-nine weeks ended November ~~3, 2018~~2, 2019 was ~~$14.0~~$13.5 million, representing purchases of property and equipment related investments in stores and information systems.

~~Net cash~~ ~~used in~~ ~~investing activities during~~ ~~the thirty-nine weeks ended October 28, 2017~~ ~~was $22.3 million, representing purchases of property and equipment related investments in stores and information systems.~~

Net cash used in investingactivitiesduring the thirty-nine weeks ended November 3, 2018 was $14.0 million,representingpurchasesof propertyand equipmentrelatedinvestments in storesand information systems.

Net cash used in financing activities during the thirty-nine weeks ended November 2, 2019 was $53.4 million, which was driven primarily by the special dividend paid to shareholders.

Net cash used in financing activities during the thirty-nine weeks ended November 3, 2018was $2.1 million, which was the scheduled repayment of our Term Loan.

On April 1, 2019 the Company paid a special cash ~~used in financing activities during~~ dividend of $50.2 million to the ~~thirty-nine weeks ended October 28, 2017~~ ~~was $19.9 million, which was primarily due to a voluntary principal prepayment on the Term Loan~~shareholders of ~~$20.0 million made in June 2017.~~J.Jill, Inc.

~~Since our initial public offering, we have not declared or paid any cash dividends.~~ The payment of cash dividends in the future, if any, will be at the discretion of our board of directors and will depend upon such factors as earnings levels, capital requirements, restrictions imposed by applicable law, our overall financial condition, restrictions in our debt agreements, including our Term Loan and ABL Facility, and any other factors deemed relevant by our board of directors. As a holding company, our ability to pay dividends depends on our receipt of cash dividends from our operating subsidiaries, which may further restrict our ability to pay dividends as a result of restrictions on their ability to pay dividends to us under our Term Loan, our ABL Facility and under future indebtedness that we or they may incur.

At November ~~3, 2018~~2, 2019 and February ~~3, 2018~~2, 2019 there were no loan amounts outstanding under the ABL Facility. At November ~~3, 2018~~2, 2019 and February ~~3, 2018~~2, 2019 the Company had outstanding letters of credit in the amounts of ~~$1.8~~$1.7 million ~~and~~ ~~$1.6~~and $1.8 million, respectively, and had a maximum additional borrowing capacity of $~~38.2~~38.3 million and ~~$38.4~~$38.2, million respectively.

The Company’s contractual obligations consist primarily of long-term debt obligations, interest payments, operating leases and purchase orders for merchandise inventory. These contractual obligations impact the Company’s short-term and long-term liquidity and capital resource needs. During the thirty-nine weeks ended November ~~3, 2018,~~2, 2019, there were no material changes in the contractual obligations as of February ~~3, 2018.~~2, 2019.

~~On October 13, 2017, a securities lawsuit was filed~~We are subject to various legal proceedings that arise in the ~~United States District Court~~ordinary course of business. Although the outcome of such proceedings cannot be predicted with certainty, management does not believe that we are presently party to any legal proceedings the resolution of which management believes would have a material adverse effect on our business, financial condition, operating results or cash flows. We establish reserves for specific legal matters when we determine that the ~~District~~likelihood of ~~Massachusetts against~~an unfavorable outcome is probable and the Company, several members of our Board of Directors and our Chief Financial Officer, among others. The complaint was brought under the Securities Act of 1933 and sought certification of a class of plaintiffs comprised of all shareholders that acquired stock issued by the Company in its initial public offering in March 2017. The plaintiffs sought compensation for losses they incurred since purchasing the stock. Following the filing of this lawsuit, two additional, similar actions were brought in the same court. The three matters were eventually consolidated, and a lead plaintiff was appointed by the court. On March 9, 2018, an amended complaint captioned ~~The Pension Trust v. J.Jill, Inc., et al.~~loss is reasonably estimable. was filed. The Company filed a motion to dismiss on May 14, 2018, which was opposed by the plaintiffs on July 17, 2018. The Company believes the claims in the case are without merit and intends to defend the matter vigorously. No material amount has been accrued.

The most significant accounting estimates involve a high degree of judgment or complexity. Management believes the estimates and judgments most critical to the preparation of our consolidated financial statements and to the understanding of our reported financial results include those made in connection with revenue recognition, including accounting for gift card breakage and estimated merchandise returns; estimating the value of inventory; impairment assessments for goodwill and other indefinite-lived intangible assets, and long-lived assets; and estimating equity-based compensation expense. Management evaluates its policies and assumptions on an ongoing basis.

Our significant accounting policies related to these accounts in the preparation of our consolidated financial statements are described under the heading “Management Discussion and Analysis of Financial Condition and Results of Operations – Critical Accounting Policies and Significant Estimates” in our Annual Report on Form 10-K for the fiscal year ended February ~~3, 2018.~~2, 2019. As of the date of this filing, there were no significant changes to any of the critical accounting policies and estimates previously described in our Annual Report on Form 10-K, except for the effects of the adoption of ASC ~~606~~Topic 842 – ~~Revenue from Contracts with Customers~~Leases. Refer to Note 2 to our unaudited consolidated financial statements included in this Quarterly Report on Form 10-Q, under header, “Significant Accounting Policies Update” for the effects and disclosures of adoption.

Refer to Note 2 to our unaudited consolidated financial statements included in this Quarterly Report on Form 10-Q, for recently adopted accounting standards, including the dates of adoption and estimated effects on our results of operations, financial position or cash flows.

This Quarterly Report on Form 10-Q contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are generally identified by the use of forward-looking terminology, including the terms “anticipate,” “believe,” “could,” “estimate,” “expect,” “intend,” “may,” “plan,” “potential,” “predict,” “project,” “should,” “target,” “will,” “would” and, in each case, their negative or other various or comparable terminology. All statements other than statements of historical facts contained in this Quarterly Report on Form 10-Q, including statements regarding our strategy, future operations, future financial position, future revenue, projected costs, prospects, plans, objectives of management and expected market growth are forward-looking statements.

These forward-looking statements involve known and unknown risks, uncertainties and other important factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. All written and oral forward-looking statements made in connection with this Quarterly Report on Form 10-Q that are attributable to us or persons acting on our behalf are expressly qualified in their entirety by the Risk Factors set forth in our Annual Report on Form 10-K for the year ended February ~~3, 2018~~2, 2019 and other cautionary statements included therein and herein.

These forward-looking statements reflect our views with respect to future events as of the date of this Quarterly Report on Form 10-Q and are based on assumptions and subject to risks and uncertainties. Given these uncertainties, you should not place undue reliance on these forward-looking statements. These forward-looking statements represent our estimates and assumptions only as of the date of this Quarterly Report on Form 10-Q and, except as required by law, we undertake no obligation to update or review publicly any forward-looking statements, whether as a result of new information, future events or otherwise after the date of this Quarterly Report on Form 10-Q. We anticipate that subsequent events and developments will cause our views to change. We qualify all of our forward-looking statements by these cautionary statements.

We are subject to interest rate risk in connection with borrowings under the Term Loan and ABL Facility, which bear interest at variable rates equal to LIBOR plus a margin as defined in the respective agreements described above. As of November ~~3, 2018,~~2, 2019, there was no outstanding balance under the ABL Facility, and ~~$1.8~~$1.7 million letters of credit outstanding. The undrawn borrowing availability under the ABL Facility was ~~$38.2~~$38.3 million and the amount outstanding under the Term Loan had decreased to ~~$246.1~~$243.3 million as a result of the scheduled repayments. We currently do not engage in any interest rate hedging activity. Based on the interest rate on the ABL Facility at November ~~3, 2018,~~2, 2019, and the schedule of outstanding borrowings under our Term Loan, a 10% change in our current interest rate would affect net income by $1.3 million during Fiscal Year ~~2018.~~2019.

Our results of operations and financial condition are presented based on historical cost. While it is difficult to accurately measure the impact of inflation due to the imprecise nature of the estimates required, we believe the effects of inflation, if any, on our results of operations and financial condition have been immaterial. We cannot assure you our business will not be affected in the future by inflation.

We maintain disclosure controls and procedures that are designed to provide reasonable assurance that information required to be disclosed in the reports we file or submit under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosure.

Our management, under the supervision of our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended) as of the end of the period covered by this Quarterly Report on Form-10-Q. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that as of the end of the period covered by this Quarterly Report on Form-10-Q, our disclosure controls and procedures were effective to provide such reasonable assurance.

There were no significant changes in our internal control over financial reporting, (as defined in Rules 13a-15(e) and 15d-15(e) under the Act) during the fiscal quarter ended November ~~3, 2018~~2, 2019 identified in connection with the evaluation by our management, including our Chief Executive Officer and Chief Financial Officer, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting..

In designing and evaluating our disclosure controls and procedures, our management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable, not absolute, assurance of achieving the desired control objectives. In addition, the design of disclosure controls and procedures must reflect the fact that there are resource constraints and our management is required to apply judgment in evaluating the benefits of possible controls and procedures relative to their costs. The design of any disclosure controls and procedures also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions.

~~On October 13, 2017, a securities lawsuit was filed~~We are subject to various legal proceedings that arise in the ~~United States District Court for~~ordinary course of business. Although the ~~District~~outcome of Massachusetts against the Company, several members of our Board of Directors and our Chief Financial Officer, among others. The complaint was brought under the Securities Act of 1933 and sought certification of a class of plaintiffs comprised of all shareholderssuch proceedings cannot be predicted with certainty, management does not believe that acquired stock issued by the Company in its initial public offering in March 2017. The plaintiffs sought compensation for losses they incurred since purchasing the stock. Following the filing of this lawsuit, two additional, similar actions were brought in the same court. The three matters were eventually consolidated, and a lead plaintiff was appointed by the court. On March 9, 2018, an amended complaint captioned ~~The Pension Trust v. J.Jill, Inc., et al.~~ ~~was filed. The Company filed a motion to dismiss on May 14, 2018, which was opposed by the plaintiffs on July 17, 2018. The Company believes the claims in the case~~we are ~~without merit and intends to defend the matter vigorously. No material amount has been accrued.~~

We ~~are not~~ presently party to any ~~other~~ legal proceedings the resolution of which ~~we believe~~management believes would have a material adverse effect on our business, financial condition, operating results or cash flows. We establish reserves for specific legal matters when we determine that the likelihood of an unfavorable outcome is probable and the loss is reasonably ~~estimable.~~estimable.

Factors that could cause our actual results to differ materially from those in this report are described under the heading “Risk Factors” in ~~our~~our Annual Report on Form 10-K for the fiscal year ended February ~~3, 2018~~2, 2019. Any of these factors could result in a significant or material adverse effect on our results of operations or financial condition. ~~As of the date of this Quarterly Report on Form 10-Q, there have been no material changes to the~~The following risk factor was updated from those risk factors ~~previously~~ disclosed in Part I, Item 1A of our Annual Report on Form ~~10-K.~~10-K for the fiscal year ended February 2, 2019.

Changes in our credit ratings may limit our access to capital markets and adversely affect our liquidity.

The credit rating agencies periodically review our capital structure and the quality and stability of our earnings. Any downgrades to our long-term credit ratings could result in reduced access to the credit and capital markets and higher interest costs on future financings. The future availability of financing will depend on a variety of factors such as economic and market conditions, the availability of credit and our credit ratings, as well as the possibility that lenders could develop a negative perception of us. There is no assurance that we will be able to obtain additional financing on favorable terms or at all.

There were no other material changes. However, additional risk factors not presently known to us or that we currently deem immaterial may also impair our business or results of operations and we may disclose changes to such factors or disclose additional factors from time to time in our future filings with the SEC.

The exhibits listed on the Exhibit Index are filed or furnished as part of this Quarterly Report on Form 10-Q.

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.

Delaware		45-1459825
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

4 Batterymarch Park, Quincy, MA 02169		02169
(Address of principal executive offices)		(Zip Code)

Title of each class	Trading symbol(s)	Name of each exchange on which registered
Common Stock, $0.01 par value	JILL	New York Stock Exchange

Large accelerated filer	☐	Accelerated filer	☐☒
Non-accelerated filer	☒☐	Smaller reporting company	☐☒
		Emerging growth company	☒

		Page
PART I.	FINANCIAL INFORMATION
Item 1.	Financial Statements
	Consolidated Balance Sheets (Unaudited)	2
	Consolidated Statements of Operations and Comprehensive Income (Loss) (Unaudited)	3
	Consolidated Statement of Shareholders’ Equity (Unaudited)	4
	Consolidated Statements of Cash Flows (Unaudited)	5
	Notes to Consolidated Financial Statements (Unaudited)	6
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	1314
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	2122
Item 4.	Controls and Procedures	2122
PART II.	OTHER INFORMATION
Item 1.	Legal Proceedings	2223
Item 1A.	Risk Factors	2223
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	2223
Item 3.	Defaults Upon Senior Securities	2223
Item 4.	Mine Safety Disclosures	2223
Item 5.	Other Information	2223
Item 6.	Exhibits	2223
Exhibit Index		2324
Signatures		2425

	For the Thirteen Weeks Ended				For the Thirty-Nine Weeks Ended				For the Thirteen Weeks Ended				For the Thirty-Nine Weeks Ended
	November 3, 2018		October 28, 2017⁽¹⁾		November 3, 2018		October 28, 2017⁽¹⁾		November 2, 2019		November 3, 2018		November 2, 2019		November 3, 2018
Retail	$	104,840	$	98,070	$	319,080	$	296,606	$	94,748	$	104,840	$	301,008	$	319,080
Direct	$	69,266	$	63,905		216,280		212,867		71,337		69,266		222,273		216,280
Net revenues	$	174,106	$	161,975	$	535,360	$	509,473	$	166,085	$	174,106	$	523,281	$	535,360

	Common Units					Common Stock				Contributed			Additional Paid-in			Accumulated		Total Shareholders’
	Shares			Amount		Shares		Amount		Capital			Capital			Earnings		Equity
Balance, January 28, 2017		1,000,000			—		—		—		116,743			—			6,121		122,864
Other equity transactions		—			—		—		—		305			—			—		305
Corporate Conversion		(1,000,000	)		—		—		—		(117,048	)		117,048			—		—
Issuance of Common Stock		—			—		43,747,944		437		—			(437	)		—		—
Equity-based compensation		—			—		—		—		—			24			—		24
Net income		—			—		—		—		—			—			8,027		8,027
Balance, April 29, 2017		—		$	—		43,747,944	$	437	$	—		$	116,635		$	14,148	$	131,220
Equity-based compensation		—			—		—		—		—			237			—		237
Net income		—			—		—		—		—			—			11,996		11,996
Balance, July 29, 2017		—		$	—		43,747,944	$	437	$	—		$	116,872		$	26,144	$	143,453
Equity-based compensation		—			—		—		—		—			278			—		278
Net income		—			—		—		—		—			—			5,994		5,994
Balance, October 28, 2017		—		$	—		43,747,944	$	437	$	—		$	117,150		$	32,138	$	149,725

	Fiscal Year 2018				Fiscal Year 2019				Thereafter
Signing bonus	$	35			$	141			$	506

	Fiscal Year 2019				Fiscal Year 2020				Thereafter
Signing bonus	$	35			$	141			$	365

	February 3, 2019		Charges Incurred		Cash Payments		Adjustments		November 2, 2019
Employee separation costs	$	—	$	1,402	$	828	$	—	$	574
Other		—		195		101		—		94
Total restructuring costs	$	—	$	1,597	$	929	$	—	$	668

Lease Cost	Classification	For the Thirteen Weeks Ended November 2, 2019		For the Thirty-Nine Weeks Ended November 2, 2019
Operating lease cost	SG&A Expenses	$	12,054	$	35,426
Variable lease cost	SG&A Expenses		976		2,516
Total lease cost		$	13,030	$	37,942

Lease Term and Discount Rate	November 2, 2019
Weighted-average remaining lease term (in years)
Operating leases		7.2
Weighted-average discount rate
Operating leases		6.5	%

Fiscal Year	Operating Leases⁽¹⁾
2019	$	7,413
2020		47,428
2021		46,893
2022		42,671
2023		39,374
Thereafter		132,172
Less: Imputed interest		68,255
Present value of lease liabilities	$	247,696

Fiscal Year
2019	$	49,399
2020		46,512
2021		43,872
2022		39,369
2023		36,459
Thereafter		110,376
Total	$	325,987

Exhibit Number		Description
3.1		Certificate of Incorporation of J.Jill, Inc. (incorporated by reference from Exhibit 3.1 to the Company’s Form 10-K, filed on April 28, 2017 (File No. 0001-38026))

3.2		Bylaws of J.Jill, Inc. (incorporated by reference from Exhibit 3.2 to the Company’s 10-K, filed on April 28, 2017 (File No.001-38026))

31.1		Certification of Principal Executive Officer required by Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2		Certification of Principal Financial Officer required by Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1*		Certification of Principal Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.2*		Certification of Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

101.INS		XBRL Instance Document

101.SCH		XBRL Taxonomy Extension Schema Document

101.CAL		XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF		XBRL Taxonomy Extension Definition Linkbase Document

101.LAB		XBRL Taxonomy Extension Label Linkbase Document

101.PRE		XBRL Taxonomy Extension Presentation Linkbase Document

	J.Jill, Inc.

Date: December ~~13, 2018~~12, 2019	By:	/s/ ~~Linda Heasley~~James Scully
		~~Linda Heasley~~James Scully
		Interim Chief Executive Officer ~~and Director~~

Date: December ~~13, 2018~~12, 2019	By:	/s/ ~~David Biese~~Mark Webb
		~~David Biese~~Mark Webb
		Executive Vice President and Chief Financial ~~and Operating~~ Officer