The accompanying unaudited condensed consolidated financial statements of Chico’s FAS, Inc. and its wholly-owned subsidiaries (collectively, the “Company”) have been prepared in accordance with the instructions to Form 10-Q and do not include all of the information and notes required by accounting principles generally accepted in the U.S. (“U.S. GAAP”) for complete financial statements. In the opinion of management, such interim financial statements reflect all normal, recurring adjustments considered necessary to present fairly the condensed consolidated financial position, the results of operations and cash flows for the interim periods presented. All significant intercompany balances and transactions have been eliminated in consolidation. For further information, refer to the consolidated financial statements and notes thereto for the fiscal year ended January 30, 2016, included in the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission (“SEC”) on March 8, 2016.

As used in this report, all references to “we,” “us,” “our,” and “the Company,” refer to Chico’s FAS, Inc. and all of its wholly-owned subsidiaries.

Our fiscal years end on the Saturday closest to January 31 and are designated by the calendar year in which the fiscal year commences. Operating results for the thirteen and thirty-nine weeks ended April 30,October 29, 2016 are not necessarily indicative of the results that may be expected for the entire year.

Effective January 31, 2016, the Company made a voluntary change in accounting principle related to our classification of shipping expenses. Historically, we have presented shipping expenses within selling, general and administrative expenses ("SG&A"). Under the new policy, the Company is presenting these expenses within cost of good sold ("COGS") in the unaudited Condensed Consolidated Statements of Income. The Company believes that this change is preferable as the shipping expenses represent direct costs associated with the sale of our merchandise and improves comparability with the Company's peers. The accounting policy change was applied retrospectively to all periods presented. There was no change to consolidated net income, however, cost of sales increased by $9.3$8.8 million and SG&A decreased by the same amount for the thirteen weeks ended May 2,October 31, 2015. The Company recorded $8.3$8.6 million in shipping expensesexpense as a component of COGS during the thirteen weeks ended April 30,October 29, 2016. For the year-to-date period ended October 31, 2015, cost of sales increased by $27.6 million and SG&A decreased by the same amount. The Company recorded $25.5 million in shipping expense as a component of COGS during the thirty-nine weeks ended October 29, 2016.

Footnotes to the unaudited Condensed Consolidated Financial Statements herein have been adjusted to reflect the impact of these changes accordingly.

In March 2016, the Financial Accounting Standards Board ("FASB") issued ASU No. 2016-09, Compensation - Stock Compensation. ASU 2016-09 is effective for fiscal years, and interim periods within those years, beginning after December 15, 2016. ASU 2016-09 requires entities to recognize the income tax effects of awards in the income statement when the awards vest or are settled. The standard also permits an employer to repurchase more of an employee's shares for tax withholding purposes without triggering liability accounting and to make a policy election to account for forfeitures as they occur. This standard will be effective and adopted for our first quarter 2017. We are currently assessing the new standard and its impact to our consolidated results of operations, financial position and cash flows.

In February 2016, the FASB issued ASU No. 2016-02, Leases, which replaces the existing guidance in Accounting Standard Codification 840, Leases. ASU 2016-02 is effective for fiscal years, and interim periods within those years, beginning after December 15, 2018. ASU 2016-02 requires a dual approach for lessee accounting under which a lessee would account for leases as finance leases or operating leases. Both finance leases and operating leases will result in the lessee recognizing a right-of-use asset and corresponding lease liability. For finance leases, the lessee would recognize interest expense and amortization of the right-of-use asset and for operating leases, the lessee would recognize straight-line total rent expense. We are currently assessing the new standard and its impact to our consolidated results of operations, financial position and cash flows.

In January 2016,November 2015, the FASB issued ASU No. 2016-01, Recognition2015-17, Balance Sheet Classification of Deferred Taxes, which modifies the presentation of noncurrent and Measurementcurrent deferred taxes. ASU 2015-17 requires that all deferred tax assets and liabilities be classified as noncurrent on the balance sheet instead of Financial Assetsseparating deferred taxes into current and Financial Liabilities, under which entities will no longer be able to recognize unrealized holding gains and losses on equity securities they classify as available for sale in other comprehensive income but instead recognize the change in fair value in net income.noncurrent amounts. The standard is effective for interim and annual reporting periods beginning after December 15, 2017.2016. Early adoption is permitted. We are currently assessingearly adopted this standard in the new standard, but do not, at this time, anticipate a material impact tofourth quarter of 2015, with retrospective presentation, as shown in our consolidated results of operations, financial position or cash flows.balance sheets. Our retrospective presentation resulted in a $26.9 million reclassification from current assets to other assets, net for the period ending October 31, 2015.

In July 2015, the Financial Accounting Standards Board ("FASB") issued ASU No. 2015-11, Simplifying the Measurement of Inventory (Topic 330). The amendments, which apply to inventory that is measured using any method other than the last-in, first-out (LIFO) or retail inventory method, require that entities measure inventory at the lower of cost or net realizable value. ASU 2015-11 is effective for fiscal years, and interim periods within those years, beginning after December 15, 2016 and should be applied on a prospective basis. We are currently assessing the potential impact of adopting this ASU, but do not, at this time, anticipate a material impact to our consolidated results of operations, financial position or cash flows.

In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers. The update outlines a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and supersedes most current revenue recognition guidance, including industry-specific guidance. ASU 2014-09 requires entities to recognize revenue in a way that depicts the transfer of promised goods or services to customers in an amount that reflects the consideration the entity expects to be entitled to in exchange for those goods or services. In August 2015, the FASB approved a one year deferral of the effective date, to make it effective for annual and interim reporting periods beginning after December 15, 2017. The standard allows for either a full retrospective or a modified retrospective transition method. The FASB has issued subsequent ASUs related to ASU No. 2014-09, which detail amendments to the ASU, implementation considerations, narrow-scope improvements and practical expedients. We are currently assessing the new standard and all related ASUs and its impact to our consolidated results of operations, financial position and cash flows.

In connection with the restructuring program, we evaluated our domestic store portfolio and identified approximately 175 stores for closure, with 7790 stores across our brands, including 20 Boston Proper stores, closed through the firstthird quarter of fiscal 2016. As a result, we expect to incur additional cash charges related to lease termination expenses of approximately $1.6$1.7 million through fiscal 2017 related to these future closures.

For the thirteenthirty-nine weeks ended April 30,October 29, 2016 and May 2,October 31, 2015, stock-based compensation expense was $5.5$15.5 million and $7.6$20.7 million, respectively. As of April 30,October 29, 2016, approximately 5.35.8 million shares remain available for future grants of equity awards under our 2012 Omnibus Stock and Incentive Plan.

Restricted stock award activity for the thirteenthirty-nine weeks ended April 30,October 29, 2016 was as follows:

For the thirteenthirty-nine weeks ended April 30,October 29, 2016, we granted performance-based restricted stock units (“PSUs”), contingent upon the achievement of a Company-specific performance goal during fiscal 2016. Any units earned as a result of the achievement of this goal will vest over 3 years from the date of grant and will be settled in shares of our common stock.

Performance-based restricted stock unit activity for the thirteenthirty-nine weeks ended April 30,October 29, 2016 was as follows:

For the thirteenthirty-nine weeks ended April 30,October 29, 2016 and May 2,October 31, 2015, we did not grant any stock options.

Stock option activity for the thirteenthirty-nine weeks ended April 30,October 29, 2016 was as follows:

In accordance with relevant accounting guidance, unvested share-based payment awards that include non-forfeitable rights to dividends, whether paid or unpaid, are considered participating securities. As a result, such awards are required to be included in the calculation of earnings per common share pursuant to the “two-class” method. For us, participating securities are composed entirely of unvested restricted stock awards and PSUs that have met their relevant performance criteria.

Earnings per share (“EPS”) is determined using the two-class method when it is more dilutive than the treasury stock method. Basic EPS excludes dilution and is computed by dividing net income available to common stockholders by the weighted-average number of common shares outstanding during the period, including participating securities. Diluted EPS reflects the dilutive effect of potential common shares from non-participating securities such as stock options and PSUs.

The following table sets forth the computation of basic and diluted EPS shown on the face of the accompanying condensed consolidated statements of operations (in thousands, except per share amounts):

For the thirteen weeks weeks ended April 30,October 29, 2016 and May 2,October 31, 2015, 0.7 million and 0.3 million potential shares of common stock, respectively, were excluded from the diluted per share calculation relating to non-participating securities, because the effect of including these potential shares was antidilutive.

For the thirty-nine weeks ended October 29, 2016 and October 31, 2015, 0.9 million and 0.71.3 million potential shares of common stock, respectively, were excluded from the diluted per share calculation relating to non-participating securities, because the effect of including these potential shares was antidilutive.

Our financial instruments consist of cash, money market accounts, marketable securities, assets held in our non-qualified deferred compensation plan, accounts receivable and payable, and debt. Cash, accounts receivable and accounts payable are carried at cost, which approximates their fair value due to the short-term nature of the instruments.

Marketable securities are classified as available-for-sale and as of April 30,October 29, 2016 generally consist of corporate bonds, U.S. government agencies, municipal securities, and commercial paper with $26.1$25.4 million of securities with maturity dates within one year or less and $24.4$25.0 million with maturity dates over one year and less than two years.

We consider all marketable securities available-for-sale, including those with maturity dates beyond 12 months, and therefore classify these securities within current assets on the condensed consolidated balance sheets as they are available to support current operational liquidity needs. Marketable securities are carried at fair value, with the unrealized holding gains and losses, net of income taxes, reflected in accumulated other comprehensive income until realized. For the purposes of computing realized and unrealized gains and losses, cost is determined on a specific identification basis.

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in the principal or most advantageous market in an orderly transaction between market participants on the measurement date. Entities are required to use a three-level hierarchy, which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value.

The valuation hierarchy is based upon the transparency of inputs to the valuation of an asset or liability on the measurement date. The three levels are defined as follows: 

We measure certain financial assets at fair value on a recurring basis, including our marketable securities, which are classified as available-for-sale securities, certain cash equivalents, specifically our money market accounts, and assets held in our non-qualified deferred compensation plan. The money market accounts are valued based on quoted market prices in active markets. Our marketable securities are generally valued based on other observable inputs for those securities (including market corroborated pricing or other models that utilize observable inputs such as interest rates and yield curves) based on information provided by independent third party pricing entities, except for U.S. government securities which are valued based on quoted market prices in active markets. The investments in our non-qualified deferred compensation plan are valued using quoted market prices and are included in other assets on our condensed consolidated balance sheets.

From time to time, we measure certain assets at fair value on a non-recurring basis, including evaluation of long-lived assets, goodwill and other intangible assets for impairment using company-specific assumptions which would fall within Level 3 of the fair value hierarchy. We estimate the fair value of assets held for sale using market values for similar assets which would fall within Level 2 of the fair value hierarchy.

To assess the fair value of long-term debt, we utilize a discounted future cash flow model using current borrowing rates for similar types of debt of comparable maturities.

Fair value calculations contain significant judgments and estimates, which may differ from actual results due to, among other things, economic conditions, changes to the business model or changes in operating performance.

During the quarter ended April 30,October 29, 2016, we did not make any transfers between Level 1 and Level 2 financial instruments. Furthermore, as of April 30,October 29, 2016, January 30, 2016 and May 2,October 31, 2015, we did not have any Level 3 financial instruments. We conduct reviews on a quarterly basis to verify pricing, assess liquidity, and determine if significant inputs have changed that would impact the fair value hierarchy disclosure.

In fiscal 2015, we entered into a credit agreement (the "Agreement) providing for a term loan of $100.0 million and a revolving credit facility of $100.0 million. The term loan and revolving credit facility mature on May 4, 2020 and accrue interest by reference, at our election, at either an adjusted eurodollar rate tied to LIBOR or an Alternate Base Rate plus an interest rate margin, as defined in the Agreement. The Agreement contains customary representations, warranties, and affirmative covenants, including the requirement to maintain certain financial ratios. The Company was in compliance with the applicable ratio requirements and other covenants at April 30,October 29, 2016. As of April 30,October 29, 2016, we had total available borrowing capacity of $100.0 million under our revolving credit facility.

The following table provides details on our debt outstanding as of April 30,October 29, 2016, January 30, 2016 and May 2,October 31, 2015:

During the thirteenthirty-nine weeks ended April 30,October 29, 2016, we repurchased 3.26.5 million shares, under our share repurchase program announced in November 2015 at a total cost of approximately $36.6$76.3 million. As of April 30,October 29, 2016, the Company has $223.4$183.7 million remaining under the share repurchase program. However, we have no continuing obligation to repurchase shares under this authorization, and the timing, actual number and value of any additional shares to be purchased will depend on the performance of our stock price, market conditions and other considerations.

On November 22, 2016, we announced that our Board of Directors has declared a quarterly dividend of $0.08 per share on our common stock. The Companydividend will be payable on December 19, 2016 to shareholders of record at the close of business on December 5, 2016. Although it is not aware of any material subsequent events which would require recognition or disclosureour Company’s intention to continue to pay a quarterly cash dividend in the condensed consolidatedfuture, any decision to pay future cash dividends will be made by the Board of Directors and will depend on future earnings, financial statements.

Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) should be read in conjunction with the accompanying unaudited condensed consolidated financial statements and notes thereto and our 2015 Annual Report to Stockholders.

We are a leading omni-channel specialty retailer of women’s private branded, sophisticated, casual-to-dressy clothing, intimates, complementary accessories, and other non-clothing items operating under the Chico’s, White House Black Market (“WHBM”) and Soma brand names. We earn revenues and generate cash through the sale of merchandise in our domestic and international retail stores, on our various websites, through our call center which takes orders for all of our brands, and through an unaffiliated franchise partner in Mexico.

We utilize an integrated omni-channel approach to managing our business. WeFor each of our brands, we want our customers to experience our brands, not limited to a channel within our brands, and view ourthe brand, through all of its various sales channels, as an integrated experience, rather than viewing it through a single integrated process rather thanchannel (such as separate sales channels operating independently.the store or the website). This approach allows our customers to browse, purchase, return, or exchange our merchandise through whatever sales channel and at whatever time is most convenient. As a result, we track total sales and comparable sales on a combined basis.

We reported net income for the firstthird quarter of fiscal 2016 of $31.1$23.6 million, or $0.23$0.18 per diluted share, compared to a net loss of $11.6 million, or $0.09 per diluted share, in last year’s third quarter. Results for the third quarter of fiscal 2016 include restructuring and strategic charges of $6.8 million after-tax, or $0.05 per diluted share, primarily consisting of outside services, partially offset by an additional tax benefit on the disposition of Boston Proper's stock of $4.0 million, or $0.03 per diluted share. Results for the third quarter of fiscal 2015 include the impact of Boston Proper non-cash goodwill and trade name impairment charges of $23.9 million after-tax, or $0.18 per diluted share, restructuring and strategic charges of $1.9 million after-tax, or $0.01 per diluted share, primarily related to property and equipment impairment charges for the Boston Proper stores, and the operating loss related to Boston Proper of $3.5 million, or $0.03 per diluted share. The change in earnings per share also reflects the impact of approximately 10.2 million shares repurchased since the end of the third quarter last year.

Net sales for the year-to-date period of fiscal 2016 were $1.876 billion, a decrease of 7.5% compared to $2.029 billion in last year’s year-to-date period. Net income for the year-to-date period of fiscal 2016 was $77.7 million, or $0.58 per diluted share, compared to net income of $32.5$23.0 million, or $0.22$0.16 per diluted share in last year’s first quarter.year. Results for the first quarteryear-to-date period of fiscal 2016 include the impact of restructuring and strategic charges of $19.4 million after-tax, or $0.15 per diluted share, primarily consisting of executive transitionseverance, proxy solicitation costs, and consulting feesoutside services, partially offset by an additional tax benefit on the disposition of $2.3Boston Proper's stock of $4.0 million, after-tax, or $0.02$0.03 per diluted share. Results for the first quarteryear-to-date period of fiscal 2015 include the impact of Boston Proper non-cash goodwill and trade name impairment charges of $71.0 million after-tax, or $0.50 per diluted share, restructuring and strategic charges of $21.2 million after-tax, or $0.15 per diluted share, primarily consisting of employee-related costs andrelated to property and equipment impairment charges, employee-related costs and lease termination charges, a tax benefit related to the disposition of $9.3Boston Proper's stock of $23.8 million, after-tax, or $0.06$0.17 per diluted share, and the operating loss related to Boston Proper operating loss of $2.7$8.2 million, or $0.02$0.06 per diluted share. The change in earnings per share also reflects the impact of approximately 10.2 million shares repurchased since the end of the third quarter last year.

Our overall business strategy is focused on building and cultivating a portfolio of high-performing retail brands serving the fashion needs of women 35 years and older.Weolder. We are focused on increasing the sales volume and profitability of our existing brands through our four focus areas: (1) evolving the customer experience, (2) strengthening our brands' positions, (3) leveraging actionable retail science, and (4) sharpening our financial principles. Over the long term, we may build our brand portfolio by organic development or acquisition of other specialty retail concepts if research indicates that the opportunity complements our current brands and is appropriate and in the best interest of the shareholders.

We pursue the growth of the brands in our portfolio by building our omni-channel capabilities, which includes managing our store base and our growing online presence, executing marketing plans, effectively leveraging expenses and optimizing the potential of each of our three brands. We have invested heavily in our omni-channel capabilities in order to allow customers to fully experience our brands, and not just a channel within our brands.through more than one channel. In essence, we view our various sales channels as a single, integrated process rather than as separate sales channels operating independently. To that end, we often refer to our brands' respective websites as "our largest store" within the brand.

The following table depicts net sales by Chico’s, WHBM, Soma and Boston Proper in dollars and as a percentage of total net sales for the thirteen weeks ended April 30,October 29, 2016 and May 2,October 31, 2015:

The following table depicts comparable sales percentages by Chico's, WHBM and Soma for the thirteen weeks ended April 30,October 29, 2016 and May 2,October 31, 2015:

The following table depicts cost of goods sold and gross margin in dollars and gross margin as a percentage of total net sales for the thirteen weeks ended April 30,October 29, 2016 and May 2,October 31, 2015:

For the firstthird quarter of fiscal 2016, gross margin was $262.3$230.3 million, or 38.6%, compared to $295.6$249.2 million, or 38.6%, in last year’s firstthird quarter. GrossWhen excluding Boston Proper from fiscal 2015, gross margin was 40.8% of net sales,decreased 40 basis points in fiscal 2016 compared to 42.4%gross margin of $244.2 million, or 39.0% last year. This decrease in the first quarter of fiscal 2015. The decrease isgross margin rate primarily due to increased promotional activityreflects an improvement in response to lower traffic and salesmerchandise margin, which was more than offset by deleverage of store occupancy expenses, partially offset by reducedcosts and an increase in incentive compensation.

The following table depicts SG&A, which includes store and direct operating expenses, marketing expenses and National Store Support Center (“NSSC”) expenses, in dollars and as a percentage of total net sales for the thirteen weeks ended April 30,October 29, 2016 and May 2,October 31, 2015:

For the firstthird quarter of fiscal 2016, SG&A was $208.1$188.4 million compared to $228.1$226.3 million in last year’s firstyear's third quarter. SG&A was 32.4%31.6% of net sales, a 30350 basis point decrease from last year’s firstyear's third quarter, primarily reflecting $13.0due a reduction in marketing spend in fiscal 2016, $11.5 million of SG&A related to Boston Proper in the first quarter of fiscal 2015, and lowersavings in store labor, marketing expenses andpartially offset by an increase in incentive compensation, reflecting a slight decline in SG&A rate.compensation.

In connection with this effort, in the firstthird quarter of fiscal 2016, we recorded pre-tax restructuring and strategic charges of $3.7totaling $10.8 million, primarily consisting of outside services related to severance charges, continuing employee-related costscost reduction and consulting fees.operating efficiency initiatives, compared to $3.1 million in the third quarter of fiscal 2015, primarily consisting of Boston Proper lease termination charges. The after-tax impact of the restructuring and strategic charges in the firstthird quarter totaled $2.3$6.8 million, or $0.02$0.05 per diluted share.share, compared to $1.9 million, or $0.01 per diluted share in fiscal 2015.

We reported net income for the firstthird quarter of fiscal 2016 of $31.1$23.6 million, or $0.23$0.18 per diluted share, compared to net incomeloss of $32.5$11.6 million, or $0.22$0.09 per diluted share in last year’s firstthird quarter. Results for the firstthird quarter of fiscal 2016 include the impact of restructuring and strategic charges of $6.8 million after-tax, or $0.05 per diluted share, primarily related to executive transition costsoutside services related to cost reduction and consulting feesoperating efficiency initiatives, partially offset by an additional tax benefit related to the exit of $2.3Boston Proper of $4.0 million, after-tax, or $0.02$0.03 per diluted share. Results for the firstthird quarter of fiscal 2015 include the impactcharges of $29.3 million after-tax, or $0.22 per diluted share, related to Boston Proper non-cash goodwill and trade name impairment charges, restructuring and strategic charges primarily related to employee-related costs and property and equipment impairment charges of $9.3 million after-tax, or $0.06 per diluted share, and the Boston Proper operating loss of $2.7 million, or $0.02 per diluted share.results. The change in earnings per share also reflects the impact of 3.2approximately 10.2 million shares repurchased since the end of the third quarter last year.

The following table depicts net sales by Chico’s, WHBM, Soma and Boston Proper in dollars and as a percentage of total net sales for the first quarterthirty-nine weeks ended October 29, 2016 and October 31, 2015:

For the year-to-date period of fiscal 2016, SG&A was $583.1 million compared to $661.5 million in last year’s year-to-date period. SG&A was 31.1% of net sales, a 150 basis point decrease from last year, primarily due to $40.5 million of SG&A related to Boston Proper in fiscal 2015, and 18.3a reduction in marketing spend and store labor, partially offset by employee benefit costs in fiscal 2016.

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

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

Net cash provided by operating activities for the first quarteryear-to-date period of fiscal 2016 was $32.6$144.4 million, a decreasean increase of approximately $9.1$14.3 million from last year's first quarter.year-to-date period. This decreaseincrease primarily reflected the change in working capital, partially offset by lower net income compared to prior year when adjusted for non-cash impairment charges and the deferred tax benefit related to the exit of Boston Proper, as well as lower stock compensation expense and depreciation and amortization. The change in working capital is primarily due to propertya decrease in net income tax receivable, improved inventory management and equipment impairment charges in the prior year and decreases in depreciation and amortization. The changes in working capital primarily reflected the timing of payables and income taxes, partially offset by a decrease in accrued incentive compensation.payables.

Net cash used in investing activities for the first quarteryear-to-date period of fiscal 2016 was $13.3$35.9 million compared to $58.3$12.6 million provided by investing activities in last year's first quarter,year-to-date period, primarily reflecting a $78.3$79.4 million decrease in marketable securities related to the partial funding of the accelerated share repurchase agreementsrepurchases in fiscal 2015. Investing activities in the firstthird quarter of fiscal 2016 included net purchases of property and equipment totaling $13.1$35.7 million compared to $19.8$66.6 million in the same period last year, consistent with our overall business strategy.

Net cash used in financing activities for the first quarteryear-to-date period of fiscal 2016 was $52.8$118.1 million compared to $135.5$184.9 million in last year's first quarter.year-to-date period. The decrease in net cash used in financing activities primarily reflects a decrease of $217.8$179.2 million in share repurchases in fiscal 2016 compared to fiscal 2015, partially offset by net borrowings of $124.0$95.0 million under our Credit Agreement in fiscal 2015.

During the first quarter of fiscal 2016 year-to-date period, we had 18 net store closure, consisting of net closures of 410 Chico's and 14 WHBM stores, and openings of 46 Soma stores. Currently, we expect an additional 259 net store closures in fiscal 2016, reflecting approximately 208 net closures of Chico's stores 10and 1 net closures of WHBM stores and 5 net openings of Soma stores.closure. We continuously evaluate the appropriate new store growth rate in light of economic conditions and may adjust the growth rate as conditions require or as opportunities arise. As of April 30,October 29, 2016, we also sold merchandise through 7788 international franchise locations.

The discussion and analysis of our financial condition and results of operations are based upon the condensed consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of condensed consolidated financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenue, expenses, and related disclosure of contingent assets and liabilities. We base our estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. Management has discussed the development and selection of these critical accounting policies and estimates with the Audit Committee of our Board of Directors and believes the assumptions and estimates, as set forth in our Annual Report on Form 10-K for the fiscal year ended January 30, 2016, are significant to reporting our results of operations and financial position.

In fiscal 2016 we implemented changes to our accounting policy for the classification of shipping expense, corrected an immaterial error in the classification of shipping revenue and changed the classification of occupancy expenses. Please see Note 1 in our Notes to Condensed Consolidated Financial Statements for a detailed description and reconciliation of these matters.

Other than discussed above, there have been no material changes to our critical accounting policies as disclosed in our Annual Report on Form 10-K for the fiscal year ended January 30, 2016.

This Form 10-Q may contain certain “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, which reflect our current views with respect to certain events that could have an effect on our future financial performance, including but without limitation, statements regarding our plans, objectives, the implementation of our previously announced restructuring program and organizational redesign for improved business performance, including our re-balancing of our store fleet and streamlining the headquarter workforce, and the future success of our store concepts. These statements may address items such as future sales and sales initiatives, gross margin expectations, SG&A expectations (particularly estimated expected savings), operating margin expectations, earnings per share expectations, planned store openings, closings and expansions, future comparable sales, future product sourcing plans, inventory levels, planned marketing expenditures, planned capital expenditures and future cash needs. In addition, from time to time, we may issue press releases and other written communications, and our representatives may make oral statements, which contain forward-looking information.

These statements, including those in this Form 10-Q and those in press releases or made orally, relate to expectations concerning matters that are not historical fact and may include the words or phrases such as “expects,” “believes,” “anticipates,” “plans,” “estimates,” “approximately,” “our planning assumptions,” “future outlook,” and similar expressions. Except for historical information, matters discussed in such oral and written statements, including this Form 10-Q, are forward-looking statements. These forward-looking statements are based largely on information currently available to our management and on our current expectations, assumptions, plans, estimates, judgments and projections about our business and our industry, and are subject to various risks and uncertainties that could cause actual results to differ materially from historical results or those currently anticipated. Although we believe our expectations are based on reasonable estimates and assumptions, they are not guarantees of performance and there are a number of known and unknown risks, uncertainties, contingencies, and other factors (many of which are outside our control) that could cause actual results to differ materially from those expressed or implied by such forward-looking statements. Accordingly, there is no assurance that our expectations will, in fact, occur or that our estimates or assumptions will be correct, and we caution investors and all others not to place undue reliance on such forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those described in Item 1A, “Risk Factors” in our Annual Report on Form 10-K filed with the SEC on March 8, 2016, those described in Item 1A herein, and the following:

These potentialPotential risks and uncertainties include: the financial strength of retailing in particular and the economy in general; the extent of financial difficulties or uncertainty that may be experienced by customers; our ability to secure and maintain customer acceptance of styles and store concepts; the ability to effectively manage and maintain an appropriate level of inventory; the extent and nature of competition in the markets in which we operate; the extent of the market demand and overall level of spending for women’s private branded clothing and related accessories; the effectiveness of our brand awareness and marketing programs; the adequacy and perception of customer service; the ability to respond to actions of activist shareholders and others; the ability to coordinate product development with buying and planning; the quality of merchandise received from suppliers; the ability to efficiently, timely and successfully execute significant economic, labor or other shifts in the countries from which our merchandise is supplied; the ability of our suppliers to timely produce and deliver clothing and accessories; the changes in the costs of manufacturing, raw materials, labor and advertising; the availability of quality store sites; our ability to manage our store fleet and the risk that our investments in shopping initiatives may not deliver the results we anticipate; the risk that comparable sales and margins will experience fluctuations; the ability to successfully execute our business strategies; the continuing performance, implementation and integration of management information systems; the impact of any systems failures, cyber security or other data or security breaches, including any security breaches that result in theft, transfer, or unauthorized disclosure of customer, employee, or company information or our compliance with information security and privacy laws and regulations in the event of such an incident; the ability to hire, train, energize and retain qualified sales associates, managerial employees and other employees; the successful integration of our new management team; the ability to achieve the results of our previously announced restructuring program;program and expense initiatives the ability to expandrespond effectively to actions of activist shareholders and others; the ability to utilize our distribution center and other support facilities in an efficient and effective manner; the ability to effectively and efficiently establish our websites;websites and operate them in a manner that produces profitable sales and marketing; the ability to secure and protect trademarks and other intellectual property rights and to protect our reputation and brand images; and the risk that natural disasters, public health crises, political rises,uprisings or unrest, or other catastrophic events could adversely affect our operations and financial results. In addition, there are potential risks and uncertainties that are related to our reliance on sourcing from foreign suppliers, including the impact of work stoppages; transportation delays and other interruptions; political or civil instability; imposition of and changes in tariffs and import and export controls such as import quotas; changes in governmental policies in or towards foreign countries; currency exchange rates and other similar factors.

All written or oral forward-looking statements that are made or attributable to us are expressly qualified in their entirety by this cautionary notice. The forward-looking statements included herein are only made as of the date of this Quarterly Report on Form 10-Q. We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

The market risk of our financial instruments as of April 30,October 29, 2016 has not significantly changed since January 30, 2016. We are exposed to market risk from changes in interest rates on any future indebtedness and our marketable securities and from foreign currency exchange rate fluctuations.

Our exposure to interest rate risk relates in part to our revolving line of credit with our bank. On May 4, 2015, we entered into a credit agreement, as further discussed in Note 7. The Agreement, which matures on May 4, 2020, has borrowing options which accrue interest by reference, at our election, at either an adjusted eurodollar rate tied to LIBOR or an Alternate Base Rate plus an interest rate margin, as defined in the Agreement. An increase or decrease in market interest rates of 100 basis points would not have a material effect on annual interest expense. 

Our investment portfolio is maintained in accordance with our investment policy which identifies allowable investments, specifies credit quality standards and limits the credit exposure of any single issuer. Our investment portfolio consists of cash equivalents and marketable securities including municipal securities, corporate bonds, U.S. government agencies and commercial paper. The marketable securities portfolio as of April 30,October 29, 2016, consisted of $26.1$25.4 million of securities with maturity dates within one year or less and $24.4$25.0 million with maturity dates over one year and less than or equal to two years. We consider all marketable securities available-for-sale, including those with maturity dates beyond 12 months, and therefore classify these securities as short-term investments within current assets on the condensed consolidated balance sheets as they are available to support current operational liquidity needs. As of April 30,October 29, 2016, an increase or decrease of 100 basis points in interest rates would not have a material effect on the fair value of our marketable securities portfolio.

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

As of the end of the period covered by this report, an evaluation was carried out under the supervision and with the participation of management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities and Exchange Act of 1934, as amended). Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that, as of the end of such period, our disclosure controls and procedures were effective in providing reasonable assurance in timely alerting them to material information relating to us (including our consolidated subsidiaries) and that information required to be disclosed in our reports is recorded, processed, summarized, and reported as required to be included in our periodic SEC filings.

There were no significant changes in our internal controls or in other factors that could significantly affect our disclosure controls and procedures subsequent to the date of the above referenced evaluation. Furthermore, there was no change in our internal control over financial reporting or in other factors during the quarterly period covered by this report that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

In June 2015, the Company was named as a defendant in a putative representative Private Attorney General action filed in the Superior Court of California, County of Los Angeles, Ackerman v. Chico's FAS, Inc.  The Complaint attempts to allege numerous violations of California law related to wages, meal periods, rest periods, wage statements, and failure to reimburse business expenses, among other things. The Company denies the material allegations of the Complaint and filed its Answer on July 27, 2015. The Company believes that the case is without merit and intends to vigorously defend. As a result, the Company does not believe that the case should have a material adverse effect on the Company’s consolidated financial condition or results of operations.

In June 2015, the Company was named as a defendant in Ackerman v. Chico’s FAS, Inc., a putative representative Private Attorney General action filed in the Superior Court of California, County of Los Angeles. The Complaint alleges numerous violations of California law related to wages, meal periods, rest periods, wage statements, and failure to reimburse business expenses, among other things. Plaintiff subsequently amended her complaint to make the same allegations on a class action basis. In June 2016, the parties submitted a proposed settlement of the matter to the court, and the court granted preliminary approval on August 26, 2016, and settlement notices have been distributed. If finally approved, the proposed settlement will not have a material adverse effect on the Company’s consolidated financial condition or results of operations.

Other than as noted above, we are not currently a party to any legal proceedings other than claims and lawsuits arising in the normal course of business. All such matters are subject to uncertainties and outcomes may not be predictable. Consequently, the ultimate aggregate amount of monetary liability or financial impact with respect to these matters as of April 30,October 29, 2016 are not estimable. However, while such matters could affect our consolidated operating results when resolved in future periods, management believes that upon final disposition, any monetary liability or financial impact to us would not be material to our annual consolidated financial statements.

In addition to the other information discussed in this report, the factors described in Part I, Item 1A. “Risk Factors” in our 2015 Annual Report on Form 10-K filed with the SEC on March 8, 2016 should be considered as they could materially affect our business, financial condition or future results. Other than as noted below, there have not been any significant changes with respect to the risks described in our 2015 Form 10-K, but these are not the only risks facing our company. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may adversely affect our business, financial condition or operating results.

The following table sets forth information concerning our purchases of common stock for the periods indicated (amounts in thousands, except share and per share amounts):