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 and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post 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 ☒

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

	April 29, 2017			January 28, 2017			July 29, 2017			January 28, 2017
ASSETS
Current assets:
Cash and cash equivalents	$	104,568		$	132,226		$	62,426		$	132,226
Merchandise inventories		324,977			314,492			299,796			314,492
Prepaid expenses and other current assets		76,667			59,494			63,773			59,494
Total current assets		506,212			506,212			425,995			506,212
Property and equipment, net		344,503			362,187			330,006			362,187
Intangible assets, net		318,116			450,204			313,161			450,204
Goodwill		107,900			107,900			107,900			107,900
Other assets		5,530			6,207			7,321			6,207
Total assets	$	1,282,261		$	1,432,710		$	1,184,383		$	1,432,710
LIABILITIES AND STOCKHOLDERS’ DEFICIT
Current liabilities:
Accounts payable	$	214,173		$	194,494		$	188,297		$	194,494
Other current liabilities		171,714			157,141			150,321			157,141
Interest payable		5,091			7,977			6,769			7,977
Income taxes payable to Parent		25,973			25,215			25,332			25,215
Current portion of long-term debt		15,670			15,670			19,588			15,670
Total current liabilities		432,621			400,497			390,307			400,497
Long-term debt, net		1,487,736			1,494,490			1,701,887			1,494,490
Lease-related deferred credits, net		130,195			132,566			129,228			132,566
Deferred income taxes, net		97,614			148,200			98,011			148,200
Other liabilities		41,122			43,168			40,101			43,168
Total liabilities		2,189,288			2,218,921			2,359,534			2,218,921
Stockholders’ deficit:
Common stock $0.01 par value; 1,000 shares authorized, issued and outstanding		—			—			—			—
Additional paid-in capital		980,577			980,368			731,145			980,368
Accumulated other comprehensive loss		(9,266	)		(11,536	)		(7,304	)		(11,536	)
Accumulated deficit		(1,878,338	)		(1,755,043	)		(1,898,992	)		(1,755,043	)
Total stockholders’ deficit		(907,027	)		(786,211	)		(1,175,151	)		(786,211	)
Total liabilities and stockholders’ deficit	$	1,282,261		$	1,432,710		$	1,184,383		$	1,432,710

	Thirteen Weeks Ended April 29, 2017			Thirteen Weeks Ended April 30, 2016			Thirteen Weeks Ended July 29, 2017			Thirteen Weeks Ended July 30, 2016
Revenues:
Net sales	$	513,180		$	553,219		$	536,180		$	554,998
Other		18,786			14,280			24,726			14,822
Total revenues		531,966			567,499			560,906			569,820
Cost of goods sold, including buying and occupancy costs		343,729			362,545			344,274			366,621
Gross profit		188,237			204,954			216,632			203,199
Selling, general and administrative expenses		210,423			192,235			210,136			196,522
Impairment losses		131,157			5,396			3,898			—
Income (loss) from operations		(153,343	)		7,323
Income from operations								2,598			6,677
Interest expense, net of interest income		20,436			18,215			22,818			20,621
Loss before income taxes		(173,779	)		(10,892	)		(20,220	)		(13,944	)
Benefit for income taxes		(50,484	)		(2,851	)
Provision (benefit) for income taxes								434			(5,317	)
Net loss	$	(123,295	)	$	(8,041	)	$	(20,654	)	$	(8,627	)
Other comprehensive income (loss):
Reclassification of losses on cash flow hedges, net of tax, to earnings		1,864			605			1,682			1,927
Unrealized loss on cash flow hedges, net of tax		(4	)		(1,071	)		(497	)		(1,806	)
Foreign currency translation adjustments		410			460			777			(1,153	)
Comprehensive loss	$	(121,025	)	$	(8,047	)	$	(18,692	)	$	(9,659	)

	Twenty-six Weeks Ended July 29, 2017			Twenty-six Weeks Ended July 30, 2016
Revenues:
Net sales	$	1,049,359		$	1,108,216
Other		43,513			29,103
Total revenues		1,092,872			1,137,319
Cost of goods sold, including buying and occupancy costs		688,004			729,167
Gross profit		404,868			408,152
Selling, general and administrative expenses		420,558			388,756
Impairment losses		135,055			5,396
Income (loss) from operations		(150,745	)		14,000
Interest expense, net of interest income		43,254			38,836
Loss before income taxes		(193,999	)		(24,836	)
Benefit for income taxes		(50,050	)		(8,168	)
Net loss	$	(143,949	)	$	(16,668	)
Other comprehensive income (loss):
Reclassification of losses on cash flow hedges, net of tax, to earnings		3,546			2,532
Unrealized loss on cash flow hedges, net of tax		(501	)		(2,877	)
Foreign currency translation adjustments		1,187			(693	)
Comprehensive loss	$	(139,717	)	$	(17,706	)

	Common stock				Additional paid-in		Accumulated			Accumulated other comprehensive			Total stockholders’			Common stock				Additional paid-in			Accumulated			Accumulated other comprehensive			Total stockholders’
	Shares		Amount		capital		deficit			loss			deficit			Shares		Amount		capital			deficit			loss			deficit
Balance at January 30, 2016		1,000	$	—	$	979,333	$	(1,731,529	)	$	(16,791	)	$	(768,987	)		1,000	$	—	$	979,333		$	(1,731,529	)	$	(16,791	)	$	(768,987	)
Net loss		—		—		—		(23,514	)		—			(23,514	)		—		—		—			(23,514	)		—			(23,514	)
Share-based compensation		—		—		1,035		—			—			1,035			—		—		1,035			—			—			1,035
Reclassification of realized losses on cash flow hedges, net of tax of $4,083, to earnings		—		—		—		—			6,387			6,387
Reclassification of realized losses on cash flow hedges, net of tax of $4,083, to earnings																	—		—		—			—			6,387			6,387
Unrealized loss on cash flow hedges, net of tax of $287		—		—		—		—			449			449			—		—		—			—			449			449
Foreign currency translation adjustments		—		—		—		—			(1,581	)		(1,581	)		—		—		—			—			(1,581	)		(1,581	)
Balance at January 28, 2017		1,000	$	—	$	980,368	$	(1,755,043	)	$	(11,536	)	$	(786,211	)		1,000	$	—	$	980,368		$	(1,755,043	)	$	(11,536	)	$	(786,211	)
Net loss		—		—		—		(123,295	)		—			(123,295	)		—		—		—			(143,949	)		—			(143,949	)
Share-based compensation		—		—		209		—			—			209			—		—		373			—			—			373
Reclassification of realized losses on cash flow hedges, net of tax of $1,192, to earnings		—		—		—		—			1,864			1,864
Unrealized loss on cash flow hedges, net of tax of $3		—		—		—		—			(4	)		(4	)
Non-cash contribution to Parent in connection with Exchange Offer																	—		—		(249,596	)		—			—			(249,596	)
Reclassification of realized losses on cash flow hedges, net of tax of $2,267, to earnings																	—		—		—			—			3,546			3,546
Unrealized loss on cash flow hedges, net of tax of $320																	—		—		—			—			(501	)		(501	)
Foreign currency translation adjustments		—		—		—		—			410			410			—		—		—			—			1,187			1,187
Balance at April 29, 2017		1,000	$	—	$	980,577	$	(1,878,338	)	$	(9,266	)	$	(907,027	)
Balance at July 29, 2017																	1,000	$	—	$	731,145		$	(1,898,992	)	$	(7,304	)	$	(1,175,151	)

	Thirteen Weeks Ended April 29, 2017			Thirteen Weeks Ended April 30, 2016			Twenty-six Weeks Ended July 29, 2017			Twenty-six Weeks Ended July 30, 2016
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss	$	(123,295	)	$	(8,041	)	$	(143,949	)	$	(16,668	)
Adjustments to reconcile to cash flows from operating activities:
Impairment losses		131,157			5,396			135,055			5,396
Depreciation of property and equipment		25,163			26,210			49,739			52,887
Reclassification of hedging losses to earnings		3,056			992			5,814			4,151
Amortization of intangible assets		2,288			3,024			4,558			5,544
Amortization of deferred financing costs and debt discount		1,227			1,265			2,554			2,529
Share-based compensation		209			358			373			607
Foreign currency transaction gains		(191	)		(2,289	)		(627	)		(1,579	)
Deferred income taxes		(51,775	)		(6,208	)		(52,136	)		(11,943	)
Changes in operating assets and liabilities:
Merchandise inventories		(10,618	)		(17,983	)		15,067			(19,080	)
Prepaid expenses and other current assets		(17,134	)		(3,672	)		(4,060	)		(1,750	)
Other assets		631			(1,087	)		(543	)		(622	)
Accounts payable and other liabilities		26,148			(13,133	)		(23,718	)		(19,148	)
Federal and state income taxes		1,853			4,544			2,225			5,174
Net cash used in operating activities		(11,281	)		(10,624	)
Net cash provided by (used in) operating activities								(9,648	)		5,498
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures		(8,317	)		(19,056	)		(20,173	)		(36,137	)
Net cash used in investing activities		(8,317	)		(19,056	)		(20,173	)		(36,137	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal repayments of Term Loan Facility		(7,835	)		(3,918	)
Proceeds from New Money Notes, net of discount								94,090			—
Proceeds from New Term Loan Borrowings, net of discount								29,400			—
Repayments pursuant to the Term Loan amendment								(150,456	)		—
Costs paid and deferred in connection with refinancing of debt								(5,740	)		—
Quarterly principal repayments of Term Loan Facility								(7,835	)		(7,835	)
Net cash used in financing activities		(7,835	)		(3,918	)		(40,541	)		(7,835	)
Effect of changes in foreign exchange rates on cash and cash equivalents		(225	)		476			562			(178	)
Decrease in cash and cash equivalents		(27,658	)		(33,122	)		(69,800	)		(38,652	)
Beginning balance		132,226			87,812			132,226			87,812
Ending balance	$	104,568		$	54,690		$	62,426		$	49,160
Supplemental cash flow information:
Income taxes paid	$	16		$	72		$	825		$	490
Interest paid	$	21,928		$	18,179		$	41,467		$	37,246
Non-cash contribution to Parent in connection with Exchange Offer							$	249,596		$	—

J.Crew Group, Inc. and its wholly owned subsidiaries (the “Company” or “Group”) were acquired (the “Acquisition”) on March 7, 2011 through a merger with a subsidiary of Chinos Holdings, Inc. (the “Parent”). The Parent was formed by investment funds affiliated with TPG Capital, L.P. (“TPG”) and Leonard Green & Partners, L.P. (“LGP” and together with TPG, the “Sponsors”). Subsequent to the Acquisition, Group became an indirect, wholly owned subsidiary of Parent, which is owned by affiliates of the Sponsors, ~~co-investors~~investors and members of management. Prior to March 7, 2011, the Company operated as a public company with its common stock traded on the New York Stock Exchange.

The accompanying unaudited condensed consolidated financial statements were prepared in accordance with generally accepted accounting principles (“GAAP”) for interim financial information. Certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted. Therefore, these financial statements should be read in conjunction with the Company’s Annual Report on Form 10-K for the fiscal year ended January 28, 2017.

The Company’s fiscal year ends on the Saturday closest to January 31. All references to “fiscal 2017” represent the 53-week fiscal year that will end on February 3, 2018 and to “fiscal 2016” represent the 52-week fiscal year that ended January 28, 2017.

In the opinion of management, the accompanying unaudited condensed consolidated financial statements contain all adjustments, consisting of normal recurring adjustments, necessary to present fairly in all material respects the Company’s financial position, results of operations and cash flows for the applicable interim periods. Certain prior year amounts have been reclassified to conform to current period presentation. The results of operations for these periods are not necessarily comparable to, or indicative of, results of any other interim period or for the fiscal year as a whole.

Management is required to make estimates and assumptions about future events in preparing financial statements in conformity with generally accepted accounting principles. These estimates and assumptions affect the amounts of assets, liabilities, revenues and expenses and the disclosure of loss contingencies at the date of the unaudited condensed consolidated financial statements. While management believes that past estimates and assumptions have been materially accurate, current estimates are subject to change if different assumptions as to the outcome of future events are made. Management evaluates estimates and judgments on an ongoing basis and predicates those estimates and judgments on historical experience and on reasonable factors. Since future events and their effects cannot be determined with absolute certainty, actual results may differ from the estimates used in preparing the accompanying unaudited condensed consolidated financial statements.

On July 13, 2017, the Parent and certain of its subsidiaries completed the following interrelated liability management transactions:

Pursuant to a management services agreement entered into in connection with the Acquisition, and in exchange for ongoing consulting and management advisory services (the “Services”), the Sponsors ~~receive~~received an aggregate annual monitoring fee prepaid quarterly equal to the greater of (i) 40 basis points of consolidated annual revenues or (ii) $8 ~~million.~~million (in either case, the “Advisory Fee”). The Sponsors also receive reimbursement for out-of-pocket expenses incurred in connection with services provided pursuant to the agreement.

On July 13, 2017, the management services agreement was amended and restated to require the Parent to provide the Services previously provided by the Sponsors. In addition to the amendment, the Parent and Sponsors entered into a new management services agreement, pursuant to which the Sponsors will provide the Services to the Parent for an amount equal to the Advisory Fee less the accrued cash dividend in an amount equal to 5% of the liquidation preference on the outstanding Series A Preferred Stock of the Parent.

The Company recorded an expense of ~~$2.4~~$4.7 million and ~~$2.6~~$5.0 million in the first ~~quarter~~half of fiscal 2017 and fiscal 2016, respectively, for monitoring fees and out-of-pocket expenses, included in selling, general and administrative expenses in the statements of operations and comprehensive loss.

	Favorable Lease Commitments			Madewell Trade Name			Key Money			J.Crew Trade Name			Favorable Lease Commitments			Madewell Trade Name			Key Money			J.Crew Trade Name
Balance at January 28, 2017	$	8,640		$	57,742		$	3,827		$	379,995		$	8,640		$	57,742		$	3,827		$	379,995
Amortization expense		(1,160	)		(1,025	)		(103	)		—			(1,160	)		(1,025	)		(103	)		—
Impairment losses		—			—			—			(129,800	)		—			—			—			(129,800	)
Balance at April 29, 2017	$	7,480		$	56,717		$	3,724		$	250,195		$	7,480		$	56,717		$	3,724		$	250,195
Total accumulated amortization or impairment losses at April 29, 2017	$	(53,529	)	$	(25,283	)	$	(1,093	)	$	(635,105	)
Amortization expense														(1,160	)		(1,025	)		(85	)		—
Impairment losses														—			—			(2,060	)		—
Effect of changes in foreign exchange rates														—			—			(625	)		—
Balance at July 29, 2017													$	6,320		$	55,692		$	954		$	250,195
Total accumulated amortization or impairment losses at July 29, 2017													$	(54,689	)	$	(26,308	)	$	(3,863	)	$	(635,105	)

During the first quarter of fiscal 2017, the Company generated less than expected revenues in its J.Crew reporting unit, which the Company ~~considered~~determined to be a triggering event with regard to the valuation of its J.Crew trade name. As a result, the Company recorded a non-cash impairment charge of $129.8 million related to the intangible asset for the J.Crew trade name. After recording the impairment charge in the first quarter, the carrying value of the J.Crew trade name was $250.2 ~~million at April 29, 2017.~~million. If revenues or operating results decline below the Company’s current expectations, additional impairment charges may be recorded in the future.

The impairment losses were the result of the write-down of the following assets:

	For the Thirteen Weeks Ended				For the Thirteen Weeks Ended				For the Twenty-six Weeks Ended
	April 29, 2017		April 30, 2016		July 29, 2017		July 30, 2016		July 29, 2017		July 30, 2016
Intangible asset related to the J.Crew trade name	$	129,800	$	—	$	—	$	—	$	129,800	$	—
Long-lived assets (see note 7)		1,357		5,396
Long-lived assets (see note 8)						3,898		—		5,255		5,396
Impairment losses	$	131,157	$	5,396	$	3,898	$	—	$	135,055	$	5,396

The carrying value of goodwill of $107.9 million relates to the Madewell reporting unit. There is no remaining goodwill attributable to the J.Crew reporting unit, which has previously recorded accumulated impairment losses of $1,579.0 million.

On March 4, 2011, the Parent adopted the Chinos Holdings, Inc. 2011 Equity Incentive Plan (the “2011 Plan”), which authorizes equity awards to be granted for up to 91,740,627 shares of the common stock of the Parent. The types of equity awards issued from the 2011 Plan include: (i) stock options that become exercisable over the requisite service period, (ii) stock options that only become exercisable when certain owners of the Parent receive a specified level of cash proceeds, as defined in the equity incentive plan, from the sale of their initial investment, (iii) restricted stock that vests over the requisite service period, and (iv) restricted stock that vests when certain performance conditions are met.

On July 13, 2017, in connection with a debt exchange and refinancing, the Parent completed a recapitalization of its outstanding equity. The recapitalization resulted in, among other things, a reverse stock split of the shares of common stock which underline the share-based awards issued by the Company. The following disclosures give effect to a reverse stock split of 10,000-to-1. Additionally, the recapitalization also included (i) the issuance of preferred stock of the Parent, including an authorization for equity awards to be granted up to 20,000 shares and (ii) the issuance of additional shares of common stock of the Parent, including an authorization for equity awards to be granted up to 13,003,295 shares. As of July 29, 2017, no equity awards have been granted from the shares authorized in connection with the recapitalization.

A summary of share-based compensation recorded in the statements of operations and comprehensive loss is as follows:

A summary of shares available for grant as stock options or other share-based awards, as adjusted for the reverse stock split, is as follows:

	April 29, 2017			January 28, 2017			July 29, 2017			January 28, 2017
Term Loan Facility	$	1,519,990		$	1,527,825		$	1,369,534		$	1,527,825
Less current portion		(15,670	)		(15,670	)
Exchange Notes								249,596			—
New Money Notes								97,000			—
New Term Loan Borrowings								30,000			—
Less current portion of Term Loan								(19,588	)		(15,670	)
Less deferred financing costs		(12,293	)		(13,095	)		(17,171	)		(13,095	)
Less discount		(4,291	)		(4,570	)		(7,484	)		(4,570	)
Long-term debt, net	$	1,487,736		$	1,494,490		$	1,701,887		$	1,494,490
Borrowings under the ABL Facility	$	—		$	—		$	—		$	—

The Company has an ABL Facility, which is governed by an asset-based credit agreement with Bank of America, N.A., as administrative agent and the other agents and lenders party thereto, that provides for a $350 million senior secured asset-based revolving line of credit (which may be increased by up to $100 million in certain circumstances), subject to a borrowing base limitation. The ABL Facility includes borrowing capacity in the form of letters of credit up to $200 million, and up to $25 million in U.S. dollars for loans on same-day notice, referred to as swingline loans, and is available in U.S. dollars, Canadian dollars and Euros. Any amounts outstanding under the ABL Facility are due and payable in full on November 17, 2021.

On ~~April~~July 29, 2017, standby letters of credit were ~~$22.7~~$30.8 million, excess availability, as defined, was ~~$299.6~~$282.4 million, and there were no borrowings outstanding. There were no average short term borrowings under the ABL Facility in the first ~~quarter~~half of fiscal 2017. Average short-term borrowings under the ABL Facility were ~~$4.3~~$5.4 million in the first ~~quarter~~half of fiscal 2016.

The Company has an unsecured demand letter of credit ~~facilities~~facility with HSBC ~~and Bank of America~~ which ~~provide~~provides for the issuance of up to ~~$50 million and~~ $20 million ~~respectively,~~ of documentary letters of credit on a no fee basis. On ~~April~~July 29, 2017, outstanding documentary letters of credit were ~~$8.4~~$17.1 million and ~~aggregate~~ availability under ~~these facilities~~this facility was ~~$61.6~~$2.9 million.

Recent Amendment. On July 13, 2017, concurrently with the settlement of the Exchange Offer, the Company amended its Term Loan Facility to, among other things, (i) increase the interest rate applicable to the loans held by consenting lenders, which represented 88% of lenders, (the “Consenting Lenders”; and the loans held by the Consenting Lenders, the “Amended Loans”) by 22 basis points, (ii) increase the amount of amortization payable to Consenting Lenders, (iii) provide for the New Term Loan Borrowings of $30.0 million, (iv) amend certain covenants and events of default and (v) direct Wilmington Savings Fund Society, FSB, as administrative agent under the Term Loan Facility, to dismiss, with prejudice, certain litigation regarding the Initial Transferred IP (and the related actions). Additionally, the Company repaid $150.5 million of principal amount of term loans outstanding under the Term Loan Facility, which was financed with (i) the net proceeds from the New Money Notes of $94.1 million, (ii) the net proceeds from the New Term Loan Borrowings of $29.4 million and (iii) cash on hand of $27.0 million.

Interest Rate. Borrowings under the Term Loan Facility bear interest at a rate per annum equal to an applicable margin (which, in the case of the Amended Loans, was increased by 22 basis points) plus, at Group’s option, either (a) LIBOR determined by reference to the costs of funds for U.S. dollar deposits for the relevant interest period adjusted for certain additional costs (subject to a floor) or (b) a base rate determined by reference to the highest of (1) the prime rate of Bank of America, N.A., (2) the federal funds effective rate plus 0.50% and (3) a LIBOR determined by reference to the costs of funds for U.S. dollar deposits for an interest period of one month, ~~adjusted for certain additional costs,~~ plus 1.00%.

The weighted average interest rate on the borrowings outstanding under the Term Loan Facility was 4.65% on July 29, 2017. The applicable margin (i) in effect for base rate borrowings was, (x) in the case of term loans, other than the New Term Loan Borrowings and the Amended Loans, 2.00%, (y) in the case of the Amended Loans, 2.22% and (z) in the case of the New Term Loan Borrowings, 12.00% (of which 3.00% is payable in kind) and (ii) with respect to LIBOR borrowings was, (x) in the case of term loans, other than the New Term Loan Borrowings and the Amended Loans, 3.00% and the LIBOR Floor, (y) in the case of the Amended Loans, 3.22% and the LIBOR Floor and (z) in the case of the New Term Loan Borrowings, 12.00% (of which 3.00% is payable in kind), respectively, at July 29, 2017.

Principal Repayments. The Company is required to make principal repayments equal to 0.25% of the original principal amount of the Term Loan Facility (excluding the New Term Loan Borrowings), or $3.9 million, on the last business day of January, April, July, and October. The Company is also required (i) to repay the term loan based on an annual calculation of excess cash flow, as defined in the ~~agreement.~~ agreement, (ii) in the second quarter of fiscal 2019, to make a principal repayment of $11.9 million which is equal to 1.00% of the aggregate principal amount of Amended Loans outstanding on July 13, 2017 and (iii) beginning on July 31, 2019, on the last business day of January, April, July and October, to make additional principal repayments of $1.5 million equal to 0.125% of the aggregate principal amount of Amended Loans outstanding on July 13, 2017. The maturity date of the Term Loan Facility is March 5, 2021.

General. On July 13, 2017, in connection with settlement of the ~~borrowings outstanding under the Term Loan Facility was 4.08% on April 29, 2017. The applicable margin in effect for base rate borrowings was 2.00%~~Exchange Offer and the ~~LIBOR Floor and applicable margin with respect to LIBOR borrowings were 1.00% and 3.00%, respectively, at April 29, 2017.~~

~~On December 30, 2016, Bank~~issuance of America, N.A. (“BAML”) resigned as administrative agent under the Company’s Term Loan Facility. Effective as of January 29, 2017, Wilmington Savings Fund Society, FSB (“WSFS”) was appointed to replace BAML as administrative agent under its Term Loan Facility.

~~On February 1, 2017, the Company filed a complaint in~~ the New ~~York State Supreme Court, Commercial Division, against WSFS,~~Notes, J.Crew Brand, LLC and J.Crew Brand Corp. (together, the “New Notes Co-Issuers”) and the Guarantors (as defined below) entered into (i) an indenture with U.S. Bank National Association, as ~~successor~~Trustee and collateral agent, ~~under the Term Loan Facility seeking a declaration from the court that its actions with respect to certain intellectual property assets are in full compliance with~~governing the terms of the ~~Term Loan Facility.~~ Exchange Notes (the “Exchange Notes Indenture”) and (ii) an indenture with the Trustee and U.S. Bank, as collateral agent, governing the terms of the New Money Notes (the “New Money Notes Indenture”), which is in substantially the same form as the Exchange Notes Indenture.

Interest Rate. The New Notes bear interest at a rate of 13% per annum, and interest is payable semi-annually on March 15 and September 15 of each year. The New Notes mature on September 15, 2021.

New Notes Guarantee. The New Notes are guaranteed by J.Crew Brand Intermediate, LLC, IPCo and J.Crew International Brand, LLC, each of which is a Delaware limited liability company and a wholly-owned indirect subsidiary of the Company ~~asserts that any attempt~~(collectively, the “Guarantors,” and each, a “Guarantor”). The PIK Notes Issuer also unconditionally guarantees the payment obligations of the New Notes Co-Issuers and the Guarantors.

Exchange Notes Collateral. The Exchange Notes and the guarantees thereof are general senior secured obligations of the New Notes Co-Issuers and the Guarantors, secured on a first priority lien basis by ~~WSFS or~~ the ~~ad hoc group~~Initial Transferred IP and certain other assets of ~~lenders under its Term Loan Facility~~the New Notes Co-Issuers and Guarantors, and on a second priority lien basis by the Additional Transferred IP, subject, in each case, to ~~challenge its actions is invalid and intends to vigorously assert its rights~~permitted liens under the ~~Term Loan Facility.~~Exchange Notes Indenture and that certain intercreditor agreement, entered into between the collateral agents on July 13, 2017.

~~On March 24, 2017, WSFS filed its counterclaims~~New Money Notes Collateral. The New Money Notes and the guarantees thereof are general senior secured obligations of the New Notes Co-Issuers and the Guarantors, secured on a first priority lien basis by the Additional Transferred IP and certain other assets, and on a second priority lien basis by the Initial Transferred IP, subject, in ~~response~~each case, to permitted liens under the New Money Notes Indenture and the intercreditor agreement.

Redemption. The New Notes are redeemable at the option of the New Notes Co-Issuers, in whole or in part, at any time, at a price equal to one hundred percent (100%) of the principal amount of the New Notes to be redeemed, plus accrued and unpaid interest, if any, to, but not including, the redemption date, plus a “make whole” premium. The New Notes are not subject to any mandatory redemption obligation, and there is no sinking fund provided for the New Notes.

Change in Control. Upon the occurrence of a Change of Control (as defined in each of the indentures, as applicable), the New Notes Co-Issuers will be required to offer to repay all of the New Notes at 100% of the aggregate principal amount repaid plus accrued and unpaid interest, if any, to, but not including, the date of purchase.

Covenants. Each of the indentures contains covenants covering (i) the payment of principal and interest, (ii) maintenance of an office or agency for the payment of the New Notes, (iii) reports to the ~~Company’s declaratory judgment action, including claims~~applicable Trustee and holders of ~~default under~~ the ~~Term Loan Facility,~~New Notes, (iv) stay, extension and usury laws, (v) payment of taxes, (vi) existence, (vii) maintenance of properties and (viii) maintenance of insurance. Each of the New Indentures also includes covenants that (i) limit the ability to transfer the Collateral and (ii) limit liens that may be imposed on the assets of the Guarantors, which covenants are, in each case, subject to certain exceptions set forth in each of the ~~Company intends to vigorously defend. On April 13, 2017, the Company filed its Reply and Affirmative Defenses to WSFS’s counterclaims.~~indentures.

	For the Thirteen Weeks Ended				For the Thirteen Weeks Ended				For the Twenty-six Weeks Ended
	April 29, 2017		April 30, 2016		July 29, 2017		July 30, 2016		July 29, 2017		July 30, 2016
Term Loan Facility	$	15,507	$	15,534	$	15,939	$	15,558	$	31,446	$	31,092
Realized hedging losses		3,056		995		2,758		3,158		5,814		4,153
Amortization of deferred financing costs and debt discount		1,227		1,265		1,325		1,265		2,554		2,529
New Notes						2,128		—		2,128		—
Other interest, net of interest income		646		421		668		640		1,312		1,062
Interest expense, net	$	20,436	$	18,215	$	22,818	$	20,621	$	43,254	$	38,836

In August 2014, the Company entered into interest rate cap and swap agreements that limit exposure to interest rate increases on a portion of the Company’s floating rate indebtedness. The interest rate cap agreements covered notional amounts of $400 million and capped LIBOR at 2.00% from March 2015 to March 2016. The interest rate swap agreements cover a notional amount of $800 million from March 2016 to March 2019 and carry a fixed rate of 2.56% plus the applicable margin.

The Company designated the interest rate swap agreements as cash flow hedges. As cash flow hedges, unrealized gains are recognized as assets while unrealized losses are recognized as liabilities. The effective portion of such gains or losses is recorded as a component of accumulated other comprehensive loss, while the ineffective portion of such gains or losses is recorded as a component of interest expense. Future realized gains and losses in connection with each required interest payment will be reclassified from accumulated other comprehensive loss to interest expense.

The fair values of the interest rate swap agreements are estimated using industry standard valuation models using market-based observable inputs, including interest rate curves (level 2 inputs). Liabilities for interest rate swaps, included in other liabilities, were ~~$15.4~~$13.4 million and $18.6 million at ~~April~~July 29, 2017 and January 28, 2017, respectively.

The Company uses a three-level fair value hierarchy that prioritizes the inputs used to measure fair value. This hierarchy requires entities to maximize the use of observable inputs and minimize the use of unobservable inputs. The three levels of inputs used to measure fair value are as follows:

The fair value of the Company’s debt was ~~$1,017~~$1,208 million and $878 million at ~~April~~July 29, 2017 and January 28, 2017, respectively, based on quoted market prices of the debt (level 1 inputs).

The Company’s interest rate swap agreements are measured in the financial statements at fair value on a recurring basis. See note 67 for more information regarding the fair value of this financial liability.

The carrying amounts reported in the consolidated balance sheets for cash and cash equivalents, accounts payable and other current liabilities approximate fair value because of their short-term nature.

Certain non-financial assets, including goodwill, the intangible asset for the J.Crew trade name, and certain long-lived assets, have been written down and measured in the financial statements at fair value. The Company does not have any other non-financial assets or liabilities as of ~~April~~July 29, 2017 or January 28, 2017 that are measured on a recurring basis in the financial statements at fair value.

The Company assesses the recoverability of goodwill and intangible assets whenever there are indicators of impairment, or at least annually in the fourth quarter. If the recorded carrying value of an intangible asset exceeds its fair value, the Company records a charge to write-down the intangible asset to its fair value. Impairment charges of goodwill are based on fair value measurements derived using a combination of an income approach, specifically the discounted cash flow, a market approach, and a transaction approach. Impairment charges of intangible assets are based on fair value measurements derived using an income approach, specifically the relief from royalty method. The valuation methodologies incorporate unobservable inputs reflecting significant estimates and assumptions made by management (level 3 inputs). For more information related to goodwill and intangible asset impairment charges, see note 3.4.

The Company performs impairment tests of long-lived assets whenever there are indicators of impairment. These tests typically contemplate assets at a store level (e.g. leasehold improvements). The Company recognizes an impairment loss when the carrying value of a long-lived asset is not recoverable in light of the undiscounted future cash flows and measures an impairment loss as the difference between the carrying amount and fair value of the asset based on discounted future cash flows. The Company has determined that the future cash flow approach (level 3 inputs) provides the most relevant and reliable means by which to determine fair value in this circumstance.

A summary of the impact of the impairment of certain long-lived assets on financial condition and results of operations is as follows:

	For the Thirteen Weeks Ended				For the Thirteen Weeks Ended				For the Twenty-six Weeks Ended
	April 29, 2017		April 30, 2016		July 29, 2017		July 30, 2016		July 29, 2017		July 30, 2016
Carrying value of long-term assets written down to fair value	$	1,357	$	5,396	$	3,898	$	—	$	5,255	$	5,396
Impairment charge	$	1,357	$	5,396	$	3,898	$	—	$	5,255	$	5,396

The Parent files a consolidated federal income tax return, which includes Group and all of its wholly owned subsidiaries. Each subsidiary files separate, or combined where required, state or local tax returns in required jurisdictions.

The financial statements of the Company account for income taxes at the Group level. The federal tax return, however, is filed at the Parent level. The difference between the entity at which the provision is calculated and the entity which files the tax return gives rise to intercompany balances. A summary of the components of the income taxes payable to Parent is as follows:

	April 29, 2017			January 28, 2017			July 29, 2017			January 28, 2017
Refundable income taxes of Parent	$	7,495		$	8,247		$	8,139		$	8,247
Due to Parent		(33,468	)		(33,462	)		(33,471	)		(33,462	)
Income taxes payable to Parent	$	(25,973	)	$	(25,215	)	$	(25,332	)	$	(25,215	)

The Company regularly assesses the need for a valuation allowance related to its deferred tax assets. In making that assessment, the Company considers both positive and negative evidence related to the likelihood of realization of the deferred tax assets to determine, based on a weighing process of available evidence, whether it is more-likely-than-not that its deferred tax assets will not be realized. In that weighing process, the Company assigns significant weight to the negative evidence of its cumulative losses in recent years. As a result, in fiscal 2016, the Company determined that the negative evidence outweighed the positive evidence and recorded a valuation allowance related to its deferred tax assets balance. As of ~~April~~July 29, 2017, there was no change to that determination. This accounting treatment has no effect on the Company’s ability to utilize deferred tax assets to reduce future cash tax payments. The Company will continue to assess the likelihood that the deferred tax assets will be realizable at the end of each reporting period and the valuation allowance will be adjusted accordingly.

The federal tax returns for the periods ended January 2013 through January 2016 are currently under examination. Various state and local jurisdiction tax authorities are in the process of examining income tax returns or hearing appeals for certain tax years ranging from 2009 to 2014. The results of these audits and appeals are not expected to have a significant effect on the results of operations or financial position.

In the first ~~quarter~~half of fiscal 2017, the Company recognized a deferred tax benefit of ~~$51.8~~$52.1 million primarily a result of the reversal of deferred taxes related to the intangible asset for the J.Crew trade name, which was written down by $129.8 million in the first quarter. The Company did not recognize any additional deferred tax benefit on other operating losses due to an increase in the valuation allowance. ~~Not~~The impact of not recognizing tax benefit on the Company’s other operating losses was the primary driver of the difference between the statutory rate of 35% to the effective rate of ~~29% for the quarter.~~ 26%.

The effective tax rate for the first ~~quarter~~half of fiscal 2016 was ~~26%~~33%. Items driving differences between the U.S. federal statutory rate of 35% and the effective rate include (i) ~~state and local income taxes,~~lower rates in certain foreign jurisdictions, (ii) the recognition of certain foreign valuation allowances, (iii) ~~lower rates in certain foreign jurisdictions, and (iv)~~ reserves for uncertain tax ~~positions.~~positions, and (iv) state and local income taxes.

While the Company expects the amount of unrecognized tax benefits to change in the next 12 months, the change is not expected to have a significant effect on the results of operations or financial position. However, the outcome of tax matters is uncertain and unforeseen results can occur.

The Company is subject to various legal proceedings and claims arising in the ordinary course of business. Management does not expect that the results of any of these legal proceedings, either individually or in the aggregate, would have a material effect on the Company’s financial position, results of operations or cash flows. As of ~~April~~July 29, 2017, the Company has recorded a reserve for certain legal contingencies in connection with ongoing claims and litigation. The reserve is not material to its results of operations. In addition, there are certain other claims and legal proceedings pending against the Company for which accruals have not been established.

J. Crew Group, Inc., et al. v. Wilmington Savings Fund Society, FSB, as Administrative Agent and Collateral Agent, Index No. 650574/2017, (Sup. Ct. N.Y. C’ty.).

On February 1, 2017, the Company filed a complaint in the New York State Supreme Court, Commercial Division, against Wilmington Savings Fund Society, FSB (“WSFS”), as successor agent under the Term Loan Facility seeking a declaration ~~from the court~~ that its actions with respect to certain intellectual property assets ~~are~~were in full compliance with the terms of the Term Loan Facility. The Company asserts that any attempt by WSFS or the ad hoc group of lenders under its Term Loan Facility to challenge its actions is invalid and intends to vigorously assert its rights under the Term Loan Facility.

On March 24, 2017, WSFS filed its counterclaims in response to the Company’s declaratory judgment action, including claims of default under the Term Loan ~~Facility, which the Company intends to vigorously defend.~~Facility. On April 13, 2017, the Company filed its Reply and Affirmative Defenses to WSFS’s counterclaims.

On July 17, 2017, pursuant to the terms of the July 13, 2017 Amendment to the Term Loan Facility (as described elsewhere herein), and a related direction letter issued to WSFS by the Required Lenders under the Term Loan Facility, the Company and WSFS entered into mutual releases, and filed a joint stipulation of discontinuance, dismissing the action and resolving the matter.

Eaton Vance Management, et al. v. Wilmington Savings Fund Society, FSB, as Administrative Agent and Collateral Agent, et al., Index No. 654397/2017, (Sup. Ct. N.Y. C’ty.).

~~10.~~On June 22, 2017, Eaton Vance Management and certain affiliated funds as well as Highland Capital Management and certain affiliated funds (collectively, the “Highland/EV Plaintiffs”), filed a complaint in the New York State Supreme Court, Commercial Division, against the Company and WSFS, seeking, among other things, declarations that the July 13, 2017 Amendment to the Term Loan Facility was ineffective absent unanimous consent of all Lenders under the facility, that certain of the Company’s actions with respect to certain of its intellectual property assets were taken in violation of the terms of the Term Loan Facility, and that those actions also constitute fraudulent conveyances. The Company believes that the Highland/EV Plaintiffs’ claims are wholly without merit, and intends to vigorously oppose these claims.

On August 7, 2017, WSFS and the Company filed separate motions to dismiss certain of the Highland/EV Plaintiffs claims for failure to state a claim and lack of standing, among other reasons.

On April 25, 2017, the Company eliminated approximately 150 full-time and 100 open positions, as part of a strategic reorganization. As a result, in the first quarter of fiscal 2017, the Company incurred a pre-tax charge of $10.7 million for severance and related costs, included in selling, general and administrative expenses. At ~~April~~July 29, 2017, accrued and unpaid severance and related costs were ~~$10.5~~$6.9 million.

In October 2016, the Company formed certain new, wholly-owned indirect subsidiaries, including IPCo and J.Crew Brand, LLC (collectively, “J.Crew BrandCo”). In December 2016, J.Crew International, Inc. (“JCI”) transferred an undivided 72.04% ownership interest in the U.S. intellectual property rights of the J.Crew brand to IPCo, and entered into a related intellectual property license agreement with IPCo. In July 2017, JCI transferred the remaining undivided 27.96% ownership interest in the U.S. intellectual property rights of the J.Crew brand to IPCo, which, together with the initial intellectual property contributed in December 2016, represent 100% of the U.S. intellectual property rights of the J.Crew brand, and entered into an additional intellectual property license agreement with IPCo (together with the agreement entered into in December 2016, the “IP License Agreements”).

Under the IP License Agreements, J.Crew Operating Corp., a direct wholly-owned subsidiary of the Company, pays a fixed license fee of $59 million per annum. The license fees are payable on March 1 and September 1 of each fiscal year. These royalty payments have no impact on the Company’s consolidated results of operations, but any such payments to be made to IPCo are not subject to the covenants under the Company’s credit facilities or the PIK Notes.

The proceeds from the license fees to J.Crew BrandCo will be used to meet debt service requirements on the $347 million aggregate principal outstanding under the New Notes, which bear interest at a rate of 13% per annum, payable semi-annually on March 15 and September 15 of each fiscal year. License fees in excess of the debt service requirements will be loaned back to the Company on a subordinated basis. As of July 29, 2017, J.Crew BrandCo had total assets of $253.4 million, consisting of intangible assets of $250.2 million and license fee receivable of $3.2 million, and total liabilities of $340.3 million related to the New Notes. The New Notes are guaranteed by the intangible assets of J.Crew BrandCo.

On November 4, 2013, ~~Chinos Intermediate Holdings A, Inc. (the “Issuer”),~~the PIK Notes Issuer, which is an indirect parent holding company of Group, issued $500 million of PIK Notes. On July 13, 2017, the Company completed a private exchange offer pursuant to which $565.7 million aggregate principal amount of ~~7.75/8.50% Senior~~ PIK ~~Toggle~~ Notes ~~due May 1, 2019 (the “PIK Notes”).~~were exchanged for $249.6 million of Exchange Notes and shares of preferred and common stock of the Parent. For more information on the Exchange Offer, see note 2.

The PIK Notes ~~are (i) senior unsecured obligations of the Issuer, (ii) structurally subordinated to all of the liabilities of the Issuer’s subsidiaries, and (iii)~~were not guaranteed by any of the PIK Notes Issuer’s subsidiaries, and therefore ~~are~~were not recorded in the Company’s financial ~~statements~~statements. The Exchange Notes, however, are guaranteed by the Company’s subsidiaries, and therefore are recorded in its financial statements. In connection with recognizing the Exchange Notes, the Company recorded a non-cash contribution to its Parent as a reduction of additional paid-in capital. For more information on the long-term debt of the ~~Company.~~Company, see note 6.

~~On April 28, 2017,~~As part of the ~~Issuer~~ ~~delivered notice to U.S. Bank N.A., as trustee,~~debt refinancing, the Sponsors purchased $30.0 million principal amount of new term loans under the ~~indenture governing the PIK Notes, that with respect to the interest that will be due on such notes~~Term Loan Facility. For more information on the November 1, 2017 interest payment date, the Issuer will make such interest payment by paying in kind at the PIK interest rate of 8.50% instead of paying in cash. The PIK election will increase the outstanding principal balance of the PIK Notes by $24.1 million to $590.6 million. Therefore, the Company will not pay a dividend to the Issuer in the fourth quarter of fiscal 2017 to fund a semi-annual interest payment. Pursuant to the terms of the indenture governing the PIK Notes, the Issuer intends to evaluate this option prior to the beginning of each interest period based on relevant factors at that time.New Term Loan Borrowings, see note 6.

The Company has ~~recorded~~ a receivable of ~~$4.2~~$12.5 million due from the ~~Issuer,~~Parent, included in prepaid expenses and other current assets, primarily related to the payment of certain transactions costs on behalf of the PIK Notes Issuer.

In May 2014, a pronouncement was issued that clarified the principles of revenue recognition, which standardizes a comprehensive model for recognizing revenue arising from contracts with customers. The pronouncement is effective for fiscal years beginning after December 15, 2017. While the Company is currently evaluating the impact of the new pronouncement on its condensed consolidated financial statements, it does not expect there to be a significant impact on revenues.

In July 2015, a pronouncement was issued that more closely aligns the measurement of inventory in U.S. GAAP with International Financial Reporting Standards by requiring companies using the first-in, first-out and average costs methods to measure inventory using the lower of cost and net realizable value. The pronouncement is effective for fiscal years beginning after December 15, 2016. The adoption of this pronouncement does not impact the Company’s condensed consolidated financial statements.

In February 2016, a pronouncement was issued that requires lessees to recognize assets and liabilities on the balance sheet for leases with accounting lease terms of more than 12 months. The pronouncement is effective for fiscal years beginning after December 15, 2018. The Company is currently evaluating the impact of the new pronouncement on its condensed consolidated financial statements. However, the adoption is expected to have a significant impact because most of the Company’s leases will be subject to these new requirements.

In August 2016, a pronouncement was issued that aims to reduce the diversity in presentation and classification of the following specific cash flow issues: debt prepayment, settlement of zero-coupon bonds, contingent consideration, insurance proceeds, distributions received from equity method investees, beneficial interest in securitization transactions and separately identifiable cash flows. The pronouncement is effective for fiscal years beginning after December 15, 2017. The Company is currently evaluating the impact of the new pronouncement on its condensed consolidated financial statements.

In January 2017, a pronouncement was issued that simplifies the measurement of goodwill impairment by no longer requiring an entity to perform a hypothetical purchase price allocation. Instead, impairment will be measured using the difference between the carrying amount and the fair value of the reporting unit. The pronouncement is effective for annual and interim periods in fiscal years beginning after December 15, 2019. The Company is currently evaluating the impact of the new pronouncement on its condensed consolidated financial statements.

To address potential liquidity issues of the Issuer arising as a result of the PIK Notes maturity in 2019, the Company announced that it has reached agreement with certain holders of PIK Notes that also hold a portion of terms loans under our Term Loan Facility (the “Ad Hoc Creditors”) to conduct a series of transactions to enhance the Company’s capital structure. Pursuant to these transactions the Company or its affiliates, among other things, will seek to:

These transactions are subject to a number of important conditions, including a 95% minimum tender condition in the private exchange offer and majority consents to the amendments to the Term Loan Facility, and there is no guarantee that any of these

transactions will be completed. The private exchange offer in not conditioned on the approval of the proposed amendment to the Term Loan Facility, but each of the other transactions specified above is conditioned on, and would be entered into as part of, the approval of the proposed amendments to the Term Loan Facility by a majority of lenders thereunder.

This report contains “forward-looking statements,” which include information concerning our plans, objectives, goals, strategies, future events, future revenues or performance, capital expenditures, financing needs ~~our announced capital structure transactions~~ and other information that is not historical information. When used in this report, the words “estimate,” “expect,” “anticipate,” “project,” “plan,” “intend,” “believe” and variations of such words or similar expressions are intended to identify forward-looking statements. All forward-looking statements, including, without limitation, our examination of operating trends, are based upon our current expectations and various assumptions. We believe there is a reasonable basis for our expectations and beliefs, but there can be no assurance that we will realize our expectations or that our beliefs will prove correct.

There are a number of risks and uncertainties that could cause our actual results to differ materially from the forward-looking statements contained in this report. Important factors that could cause our actual results to differ include, but are not limited to, our substantial indebtedness, ~~and the indebtedness of our indirect parent, the retirement, repurchase or exchange of our indebtedness or the indebtedness of our indirect parent,~~ our substantial lease obligations, our ability to anticipate and timely respond to changes in trends and customer preferences, the strength of the global economy, declines in consumer spending or changes in seasonal consumer spending patterns, competitive market conditions, our ability to attract and retain key personnel, our ability to successfully develop, launch and grow our newer concepts and execute on strategic initiatives, product offerings, sales channels and businesses, our ability to implement our growth strategy, material disruption to our information systems, our ability to implement our real estate strategy, adverse or unseasonable weather interruptions in our foreign sourcing operations, and other factors which are set forth under the heading “Risk Factors” below as well as under the heading “Risk Factors” in part I of our Annual Report on Form 10-K for the fiscal year ended January 28, 2017 filed with the SEC. There may be other factors of which we are currently unaware or deem immaterial that may cause our actual results to differ materially from the forward-looking statements.

All forward-looking statements attributable to us or persons acting on our behalf apply only as of the date they are made and are expressly qualified in their entirety by the cautionary statements included in this report. Except as may be required by law, we undertake no obligation to publicly update or revise any forward-looking statement to reflect events or circumstances occurring after the date they were made or to reflect the occurrence of unanticipated events.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

This document should be read in conjunction with the Management’s Discussion and Analysis section of our Annual Report on Form 10-K for the fiscal year ended January 28, 2017 filed with the SEC. When used herein, the terms “J.Crew,” “Group,” “Company,” “we,” “us” and “our” refer to J.Crew Group, Inc., including its wholly-owned subsidiaries.

J.Crew is an internationally recognized multi-brand apparel and accessories retailer that differentiates itself through high standards of quality, style, design and fabrics. We are a vertically-integrated, omni-channel specialty retailer that operates stores and websites both domestically and internationally. We design, market and sell our products, including those under the J.Crew^® and Madewell^® brands, offering complete assortments of women’s, men’s and children’s apparel and accessories. We believe our customer base consists primarily of college-educated, professional and fashion-conscious women and men.

We sell our J.Crew and Madewell merchandise primarily through our retail and factory stores, our websites and our catalogs. As of ~~April~~July 29, 2017, we operated ~~278~~274 J.Crew retail stores, ~~179~~182 J.Crew factory stores (including 3942 J.Crew Mercantile^® stores), and ~~116~~119 Madewell stores throughout the United States, Canada, the United Kingdom, Hong Kong, and France; compared to 287 J.Crew retail stores, ~~164~~170 J.Crew factory stores (including 2227 J.Crew Mercantile stores), and ~~106~~107 Madewell stores as of ~~April~~July 30, 2016.

(Dollars in millions)	For the Thirteen Weeks Ended April 29, 2017		For the Thirteen Weeks Ended April 30, 2016		For the Thirteen Weeks Ended July 29, 2017		For the Thirteen Weeks Ended July 30, 2016
J.Crew	$	428.5	$	480.7	$	443.1	$	476.7
Madewell		84.7		72.5		93.1		78.3
Other(a)		18.8		14.3		24.7		14.8
Total revenues	$	532.0	$	567.5	$	560.9	$	569.8

(a)Consists primarily of revenues from third-party resellers and shipping and handling ~~fees and revenues from third-party resellers.~~fees.

(a)Consists primarily of revenues from third-party resellers and shipping and handling fees.

In assessing the performance of our business, we consider a variety of performance and financial measures. A key measure used in our evaluation is comparable company sales, which includes (i) net sales from stores that have been open for at least 12 months, (ii) e-commerce net sales, and (iii) shipping and handling fees.

A complete description of the measures we use to assess the performance of our business appears in the Management’s Discussion and Analysis section of our Annual Report on Form 10-K for the fiscal year ended January 28, 2017 filed with the SEC.

Results of Operations –~~First~~ Second Quarter of Fiscal 2017 compared to ~~First~~Second Quarter of Fiscal 2016

	For the Thirteen Weeks Ended April 29, 2017						For the Thirteen Weeks Ended April 30, 2016						Variance Increase/(Decrease)						For the Thirteen Weeks Ended July 29, 2017						For the Thirteen Weeks Ended July 30, 2016						Variance Increase/(Decrease)
(Dollars in millions)	Amount			Percent of Revenues			Amount			Percent of Revenues			Dollars			Percentage			Amount			Percent of Revenues			Amount			Percent of Revenues			Dollars			Percentage
Revenues	$	532.0			100.0	%	$	567.5			100.0	%	$	(35.5	)		(6.3	)%	$	560.9			100.0	%	$	569.8			100.0	%	$	(8.9	)		(1.6	)%
Gross profit		188.2			35.4			205.0			36.1			(16.8	)		(8.2	)		216.6			38.6			203.2			35.7			13.4			6.6
Selling, general and administrative expenses		210.4			39.6			192.2			33.9			18.2			9.5			210.1			37.5			196.5			34.5			13.6			6.9
Impairment losses		131.2			24.7			5.4			1.0			125.8			NM			3.9			0.7			—			—			3.9		NM
Income (loss) from operations		(153.3	)		(28.8	)		7.3			1.3			(160.6	)		NM
Income from operations																				2.6			0.5			6.7			1.2			(4.1	)		(61.1	)
Interest expense, net		20.4			3.8			18.2			3.2			2.2			12.2			22.8			4.1			20.6			3.6			2.2			10.7
Benefit for income taxes		(50.5	)		(9.5	)		(2.9	)		(0.5	)		(47.6	)		NM
Provision (benefit) for income taxes																				0.4			0.1			(5.3	)		(0.9	)		5.7		NM
Net loss	$	(123.3	)		(23.2	)%	$	(8.0	)		(1.4	)%	$	(115.3	)		NM	%	$	(20.7	)		(3.7	)%	$	(8.6	)		(1.5	)%	$	(12.1	)	NM		%

Total revenues decreased ~~$35.5~~$8.9 million, or ~~6.3%~~1.6%, to ~~$532.0~~$560.9 million in the ~~first~~second quarter of fiscal 2017 from ~~$567.5~~$569.8 million in the ~~first~~second quarter last year, driven primarily by a decrease in sales of ~~women’s~~men’s apparel, specifically ~~sweaters, dresses~~shirts, suiting and ~~knits.~~pants. Comparable company sales decreased ~~9.0%~~4.8% following a decrease of ~~6.5%~~7.6% in the ~~first~~second quarter last year.

J.Crew sales decreased ~~$52.2~~$33.6 million, or ~~10.9%~~7.1%, to ~~$428.5~~$443.1 million in the ~~first~~second quarter of fiscal 2017 from ~~$480.7~~$476.7 million in the ~~first~~second quarter last year. J.Crew comparable sales decreased ~~11.8%~~7.5% following a decrease of ~~8.0%~~9.0% in the ~~first~~second quarter last year.

Madewell sales increased ~~$12.2~~$14.8 million, or ~~16.9%~~18.9%, to ~~$84.7~~$93.1 million in the ~~first~~second quarter of fiscal 2017 from ~~$72.5~~$78.3 million in the ~~first~~second quarter last year. Madewell comparable sales increased ~~9.6%~~11.2% following an increase of ~~5.9%~~2.8% in the second quarter last year.

The approximate percentage of our sales by product category, based on our internal merchandising system, is as follows:

Other revenues increased $9.9 million to $24.7 million in the second quarter of fiscal 2017 from $14.8 million in the second quarter last year, primarily a result of revenue from third party resellers.

Gross profit increased $13.4 million to $216.6 million in the second quarter of fiscal 2017 from $203.2 million in the second quarter last year. This increase resulted from the following factors:

Gross margin increased to 38.6% in the second quarter of fiscal 2017 from 35.7% in the second quarter last year. The increase in gross margin was driven by: (i) a 250 basis point expansion in merchandise margin due to favorable product costs and (ii) a 40 basis point decrease in buying and occupancy costs as a percentage of revenues.

Selling, general and administrative expenses increased $13.6 million to $210.1 million in the second quarter of fiscal 2017 from $196.5 million in the second quarter last year. This increase primarily resulted from the following:

As a percentage of revenues, selling, general and administrative expenses increased to 37.5% in the second quarter of fiscal 2017 from 34.5% in the second quarter last year.

Interest expense, net of interest income, increased $2.2 million to $22.8 million in the second quarter of fiscal 2017 from $20.6 million in the second quarter last year. A summary of interest expense is as follows:

(1)We completed a debt exchange and refinancing in the second quarter of fiscal 2017. See “—Liquidity and Capital Resources” for more information.

The effective tax rate for the second quarter of 2017 was 2%. Items driving differences between the U.S. federal statutory rate of 35% and the effective rate include (i) the recognition of certain domestic and foreign valuation allowances, (ii) lower rates in certain foreign jurisdictions and (iii) reserves for uncertain tax positions.

As of the second quarter of fiscal 2017, we continue to maintain a full valuation allowance against our deferred tax assets. We will continue to assess the likelihood that the deferred tax assets will be realizable at the end of each reporting period and the valuation allowance will be adjusted accordingly.

The effective tax rate for the second quarter of 2016 was 38%. Items driving differences between the U.S. federal statutory rate of 35% and the effective rate include (i) lower rates in certain foreign jurisdictions, (ii) reserves for uncertain tax positions, (iii) the recognition of certain foreign valuation allowances, and (iv) state and local income taxes.

Net loss increased $12.1 million to $20.7 million in the second quarter of fiscal 2017 from $8.6 million in the second quarter last year. This increase was due to: (i) an increase in selling, general and administrative expenses of $13.6 million, (ii) a decrease in the benefit for income taxes of $5.7 million, (iii) impairment losses of $3.9 million, (iv) an increase in interest expense of $2.2 million, offset by (v) an increase in gross profit of $13.4 million.

Results of Operations – First Half of Fiscal 2017 compared to First Half of Fiscal 2016

	For the Twenty-six Weeks Ended July 29, 2017						For the Twenty-six Weeks Ended July 30, 2016						Variance Increase/(Decrease)
(Dollars in millions)	Amount			Percent of Revenues			Amount			Percent of Revenues			Dollars			Percentage
Revenues	$	1,092.9			100.0	%	$	1,137.3			100.0	%	$	(44.4	)		(3.9	)%
Gross profit		404.9			37.0			408.2			35.9			(3.3	)		(0.8	)
Selling, general and administrative expenses		420.6			38.5			388.8			34.2			31.8			8.2
Impairment losses		135.1			12.4			5.4			0.5			129.7		NM
Income (loss) from operations		(150.7	)		(13.8	)		14.0			1.2			(164.7	)	NM
Interest expense, net		43.3			4.0			38.8			3.4			4.5			11.4
Benefit for income taxes		(50.1	)		(4.6	)		(8.2	)		(0.7	)		(41.9	)	NM
Net loss	$	(143.9	)		(13.2	)%	$	(16.7	)		(1.5	)%	$	(127.2	)	NM		%

Total revenues decreased $44.4 million, or 3.9%, to $1,092.9 million in the first ~~quarter~~half of fiscal 2017 from $1,137.3 million in the first half last year driven primarily by a decrease in sales of (i) men’s apparel, specifically shirts, suiting and pants and (ii) women’s apparel, specifically sweaters, knits and dresses. Comparable company sales decreased 6.9% following a decrease of 7.1% in the first half last year.

J.Crew sales decreased $85.9 million, or 9.0%, to $871.6 million in the first half of fiscal 2017 from $957.5 million in the first half last year. J.Crew comparable sales decreased 9.7% following a decrease of 8.5% in the first half last year.

Madewell sales increased $27.1 million, or 17.9%, to $177.8 million in the first half of fiscal 2017 from $150.7 million in the first half last year. Madewell comparable sales increased 10.4% following an increase of 4.3% in the first half last year.

The approximate percentage of our sales by product category, based on our internal merchandising system, is as follows:

	For the Thirteen Weeks Ended April 29, 2017			For the Thirteen Weeks Ended April 30, 2016			For the Twenty-six Weeks Ended July 29, 2017			For the Twenty-six Weeks Ended July 30, 2016
Apparel:
Women's		57	%		56	%		57	%		55	%
Men's		21			21			22			23
Children's		8			8			7			7
Accessories		14			15			14			15
		100	%		100	%		100	%		100	%

Other revenues increased ~~$4.5~~$14.4 million to ~~$18.8~~$43.5 million in the first ~~quarter~~half of fiscal 2017 from ~~$14.3~~$29.1 million in the first ~~quarter~~half last year, primarily a result of revenue from third party resellers.

Gross profit decreased ~~$16.8~~$3.3 million to ~~$188.2~~$404.9 million in the first ~~quarter~~half of fiscal 2017 from ~~$205.0~~$408.2 million in the first ~~quarter~~half last year. This decrease resulted from the following factors:

(Dollars in millions)	Increase/ (decrease)			Increase/ (decrease)
Decrease in revenues	$	(18.2	)	$	(22.5	)
Decrease in merchandise margin		(0.8	)
Increase in merchandise margin					13.4
Decrease in buying and occupancy costs		2.2			5.8
Decrease in gross profit	$	(16.8	)	$	(3.3	)

Gross margin ~~decreased~~increased to ~~35.4%~~37.0% in the first ~~quarter~~half of fiscal 2017 from ~~36.1%~~35.9% in the first ~~quarter~~half last year. The ~~decrease~~increase in gross margin was driven by: (i) ~~an 60~~a 120 basis point expansion in merchandise margin due to favorable product costs, offset by (ii) a 10 basis point increase in buying and occupancy costs as a percentage of ~~revenues and (ii) a 10 basis point decrease in merchandise margin due to increased markdowns offset by favorable product costs.~~revenues.

Selling, general and administrative expenses increased ~~$18.2~~$31.8 million to ~~$210.4~~$420.6 million in the first ~~quarter~~half of fiscal 2017 from ~~$192.2~~$388.8 million in the first ~~quarter~~half last year. This increase primarily resulted from the following:

(Dollars in millions)	Increase/ (decrease)			Increase/ (decrease)
Transformation costs				$	19.6
Transaction costs					16.2
Charges related to a workforce reduction	$	10.7			10.7
Transformation costs		5.6
Corporate occupancy actions last year		3.8			7.2
Transaction costs		2.5
Decrease in foreign currency transaction gains		1.9
Decrease in insurance recoveries		1.0
Decrease in share-based and incentive compensation		(1.5	)
Decrease in advertising and catalog costs					(2.6	)
Decrease in operating and corporate expenses		(5.8	)		(8.3	)
Increase in selling, general and administrative expenses	$	18.2
Decrease in payroll and related expenses					(11.0	)
Total increase in selling, general and administrative expenses				$	31.8

As a percentage of revenues, selling, general and administrative expenses increased to ~~39.6%~~38.5% in the first ~~quarter~~half of fiscal 2017 from ~~33.9%~~34.2% in the first ~~quarter~~half last year.

During the first quarter of fiscal 2017, we recorded a non-cash impairment charge of $129.8 million related to the intangible asset for the J.Crew trade name. After recording the impairment charge in the first quarter, the carrying value of the J.Crew trade name was $250.2 ~~million at April 29, 2017.~~million. If revenues or operating results decline below our current expectations, additional impairment charges may be recorded in the future.

The impairment losses were the result of the write-down of the following assets:

(Dollars in millions)	For the Thirteen Weeks Ended April 29, 2017		For the Thirteen Weeks Ended April 30, 2016		For the Twenty-six Weeks Ended July 29, 2017		For the Twenty-six Weeks Ended July 30, 2016
Intangible asset related to the J.Crew trade name	$	129.8	$	—	$	129.8	$	—
Long-lived assets		1.4		5.4		5.3		5.4
Impairment losses	$	131.2	$	5.4	$	135.1	$	5.4

Interest expense, net of interest income, increased ~~$2.2~~$4.5 million to ~~$20.4~~$43.3 million in the first ~~quarter~~half of fiscal 2017 from ~~$18.2~~$38.8 million in the first ~~quarter~~half last year. A summary of interest expense is as follows:

(1)We completed a debt exchange and refinancing in the second quarter of fiscal 2017. See “—Liquidity and Capital Resources” for more information.

In the first ~~quarter~~half of fiscal 2017, we recognized a deferred tax benefit of ~~$51.8~~$52.1 million primarily a result of the reversal of deferred taxes related to the intangible asset for the J.Crew trade name, which was written down by $129.8 million in the first quarter. We did not recognize any additional deferred tax benefit on other operating losses due to an increase in the valuation allowance. ~~Not~~The impact of not recognizing tax benefit on our other operating losses was the primary driver of the difference between the statutory rate of 35% and our effective rate of ~~29%~~26%.

As of the first ~~quarter~~half of fiscal 2017, we continue to maintain a full valuation allowance against our deferred tax assets. We will continue to assess the likelihood that the deferred tax assets will be realizable at the end of each reporting period and the valuation allowance will be adjusted accordingly.

Net loss increased ~~$115.3~~$127.2 million to ~~$123.3~~$143.9 million in the first ~~quarter~~half of fiscal 2017 from ~~$8.0~~$16.7 million in the first ~~quarter~~half last year. This increase was due to: (i) higher impairment losses of ~~$125.8~~$129.7 million, (ii) an increase in selling, general and administrative expenses of ~~$18.2~~$31.8 million, (iii) an increase in interest expense of $4.5 million, (iv) a decrease in gross profit of ~~$16.8 million, (iv) an increase in interest expense of $2.2~~$3.3 million, offset by (v) an increase in the benefit for income taxes of ~~$47.6~~$41.9 million.

Our primary sources of liquidity are our current balances of cash and cash equivalents, cash flows from operations and borrowings available under the ABL Facility. Our primary cash needs are (i) meeting debt service requirements, (ii) capital expenditures in connection with opening new stores and remodeling our existing stores, investments in our distribution network and making information technology system enhancements ~~(ii) meeting debt service requirements (including paying dividends to an indirect parent company, when required, for the purposes of servicing debt)~~ and (iii) funding working capital requirements. The most significant components of our working capital are cash and cash equivalents, merchandise inventories and accounts payable and other current liabilities. See “—Outlook” below.

(Dollars in millions)	For the Thirteen Weeks Ended April 29, 2017			For the Thirteen Weeks Ended April 30, 2016			For the Twenty-six Weeks Ended July 29, 2017			For the Twenty-six Weeks Ended July 30, 2016
Net loss	$	(123.3	)	$	(8.0	)	$	(143.9	)	$	(16.7	)
Adjustments to reconcile to cash flows from operating activities:
Impairment losses		131.2			5.4			135.1			5.4
Depreciation of property and equipment		25.2			26.2			49.7			52.9
Reclassification of hedging losses to earnings		3.1			1.0			5.8			4.2
Amortization of intangible assets		2.3			3.0			4.6			5.5
Amortization of deferred financing costs and debt discount		1.2			1.3			2.6			2.5
Share-based compensation		0.2			0.4			0.4			0.6
Foreign currency transaction gains		(0.2	)		(2.3	)		(0.6	)		(1.6	)
Deferred income taxes		(51.8	)		(6.2	)		(52.1	)		(11.9	)
Changes in operating assets and liabilities		0.8			(31.4	)		(11.2	)		(35.4	)
Net cash used in operating activities	$	(11.3	)	$	(10.6	)
Net cash provided by (used in) operating activities							$	(9.6	)	$	5.5

Cash used in operating activities of ~~$11.3~~$9.6 million in the first ~~quarter~~half of fiscal 2017 resulted from: (i) a net loss of $123.3 million, partially offset by (ii) non-cash adjustments of $111.2 million and (iii) changes in operating assets and liabilities of $0.8 million primarily due to seasonal working capital fluctuations.

~~Cash used in operating activities of $10.6 million in the first quarter of fiscal 2016 resulted from: (i) a net loss of $8.0~~$143.9 million and (ii) changes in operating assets and liabilities of ~~$31.4~~$11.2 million primarily due to seasonal working capital fluctuations, partially offset by (iii) non-cash adjustments of ~~$28.8~~$145.5 million.

Cash provided by operating activities of $5.5 million in the first half of fiscal 2016 resulted from: (i) non-cash adjustments of $57.6 million, partially offset by (ii) changes in operating assets and liabilities of $35.4 million due to seasonal working capital fluctuations and (iii) net loss of $16.7 million.

(Dollars in millions)	For the Thirteen Weeks Ended April 29, 2017		For the Thirteen Weeks Ended April 30, 2016		For the Twenty-six Weeks Ended July 29, 2017		For the Twenty-six Weeks Ended July 30, 2016
Capital expenditures:
Information technology	$	3.9	$	8.0	$	8.9	$	15.5
New stores		3.6		7.8		8.6		14.4
Other(1)		0.8		3.3		2.7		6.2
Net cash used in investing activities	$	8.3	$	19.1	$	20.2	$	36.1

Capital expenditures are planned at approximately ~~$50~~$45 to ~~$60~~$55 million for fiscal year 2017, including $30 to $35 million for information technology enhancements, $10 to $15 million for new stores and the remainder for warehouse improvements, store renovations and general corporate purposes.

(Dollars in millions)	For the Thirteen Weeks Ended April 29, 2017			For the Thirteen Weeks Ended April 30, 2016			For the Twenty-six Weeks Ended July 29, 2017			For the Twenty-six Weeks Ended July 30, 2016
Principal repayments of Term Loan Facility	$	(7.8	)	$	(3.9	)
Proceeds from New Money Notes, net of discount							$	94.1		$	—
Proceeds from New Term Loan Borrowings, net of discount								29.4			—
Repayments pursuant to the Term Loan amendment								(150.5	)		—
Costs paid and deferred in connection with refinancing of debt								(5.7	)		—
Quarterly principal repayments of Term Loan Facility								(7.8	)		(7.8	)
Net cash used in financing activities	$	(7.8	)	$	(3.9	)	$	(40.5	)	$	(7.8	)

Cash used in financing activities of $40.5 million in the first half of fiscal 2017 resulted primarily from (i) repayments pursuant to the Term Loan amendment, offset by (ii) the proceeds from New Money Notes and New Term Loan Borrowings.

Cash used in financing activities of $7.8 million in the first ~~quarter of fiscal 2017 resulted from the principal repayments of the Term Loan Facility.~~

~~Cash used in financing activities of $3.9 million in the first quarter~~half of fiscal 2016 resulted from the principal repayments of the Term Loan Facility.

On July 13, 2017, the Parent and certain of its subsidiaries completed the following interrelated liability management transactions:

We have an ABL Facility, which is governed by a credit agreement with Bank of America, N.A., as administrative agent and the other agents and lenders, which provides for a $350 million senior secured asset-based revolving line of credit (which may be increased by up to $100 million in certain circumstances), subject to a borrowing base limitation. The borrowing base under the ABL Facility equals the sum of: 90% of the eligible credit card receivables; plus, 85% of eligible accounts; plus, 90% (or 92.5% for the period of August 1 through December 31 of any fiscal year) of the net recovery percentage of eligible inventory multiplied by the cost of eligible inventory; plus 85% of the net recovery percentage of eligible letters of credit inventory, multiplied by the cost of eligible letter of credit inventory; plus, 85% of the net recovery percentage of eligible in-transit inventory, multiplied by the cost of eligible in-transit inventory; plus, 100% of qualified cash; minus, all availability and inventory reserves. The ABL Facility includes borrowing capacity in the form of letters of credit up to $200 million, and up to $25 million in U.S. dollars for loans on same-day notice, referred to as swingline loans, and is available in U.S. dollars, Canadian dollars and Euros. Any amounts outstanding under the ABL Facility are due and payable in full on the maturity date of November 17, 2021.

As of the date of this report, there were no outstanding borrowings of $10 million under the ABL Facility with excess availability of approximately ~~$320~~$245 million.

~~The Company has~~We have an unsecured demand letter of credit ~~facilities~~facility with HSBC ~~and Bank of America~~ which ~~provide~~provides for the issuance of up to ~~$50 million and~~ $20 million ~~respectively,~~ of documentary letters of credit on a no fee basis. On ~~April~~July 29, 2017, outstanding documentary letters of credit were ~~$8.4~~$17.1 million and ~~aggregate~~ availability under ~~these facilities~~this facility was ~~$61.6~~$2.9 million.

Recent Amendment. On July 13, 2017, concurrently with the settlement of the Exchange Offer, we amended our Term Loan Facility to, among other things, (i) increase the interest rate applicable to the loans held by consenting lenders, which represented 88% of lenders, (the “Consenting Lenders”; and the loans held by the Consenting Lenders, the “Amended Loans”) by 22 basis points, (ii) increase the amount of amortization payable to Consenting Lenders, (iii) provide for the New Term Loan Borrowings of $30.0 million, (iv) amend certain covenants and events of default and (v) direct Wilmington Savings Fund Society, FSB, as administrative agent under the Term Loan Facility, to dismiss, with prejudice, certain litigation regarding the Initial Transferred IP (and the related actions). Additionally, we repaid $150.5 million of principal amount of term loans outstanding under the Term Loan Facility, which was financed with (i) the net proceeds from the New Money Notes of $94.1 million, (ii) the net proceeds from the New Term Loan Borrowings of $29.4 million and (iii) cash on hand of $27.0 million.

Interest Rate. Borrowings under the Term Loan Facility bear interest at a rate per annum equal to an applicable margin (which, in the case of the Amended Loans, was increased by 22 basis points) plus, ~~at Group’s~~our option, either (a) LIBOR determined by reference to the costs of funds for U.S. dollar deposits for the relevant interest period adjusted for certain additional costs (subject to a floor) or (b) a base rate determined by reference to the highest of (1) the prime rate of Bank of America, N.A., (2) the federal funds effective rate plus 0.50% and (3) a LIBOR determined by reference to the costs of funds for U.S. dollar deposits for an interest period of one month, ~~adjusted for certain additional costs,~~ plus 1.00%.

The weighted average interest rate on the borrowings outstanding under the Term Loan Facility was 4.65% on July 29, 2017. The applicable margin ~~with respect to~~(i) in effect for base rate borrowings ~~is 2.00%~~was, (x) in the case of term loans, other than the New Term Loan Borrowings and the ~~LIBOR floor~~Amended Loans, 2.00%, (y) in the case of the Amended Loans, 2.22% and ~~applicable margin~~(z) in the case of the New Term Loan Borrowings, 12.00% (of which 3.00% is payable in kind) and (ii) with respect to LIBOR borrowings ~~are 1.00% and 3.00%, respectively.~~

~~On December 30, 2016, Bank~~was, (x) in the case of ~~America, N.A. (“BAML”) resigned as administrative agent under our~~term loans, other than the New Term Loan ~~Facility. Effective as~~Borrowings and the Amended Loans, 3.00% and the LIBOR Floor, (y) in the case of ~~January 29, 2017, Wilmington Savings Fund Society, FSB (“WSFS”) was appointed to replace BAML as administrative agent under our~~the Amended Loans, 3.22% and the LIBOR Floor and (z) in the case of the New Term Loan ~~Facility.~~

~~On February 1, 2017, we filed a complaint~~Borrowings, 12.00% (of which 3.00% is payable in the New York State Supreme Court, Commercial Division, against WSFS, as successor agent under the Term Loan Facility seeking a declaration from the court that our actions with respect to certain intellectual property assets are in full compliance with the terms of the Term Loan Facility. We assert that any attempt by WSFS or the ad hoc group of lenders under our Term Loan Facility to challenge our actions is invalid and intend to vigorously assert our rights under the Term Loan Facility.kind), respectively, at July 29, 2017.

~~On March 24, 2017, WSFS filed its counterclaims in response to our declaratory judgment action,~~Principal Repayments. ~~including claims of default under the Term Loan Facility, which we intend to vigorously defend.On April 13, 2017, we filed our Reply and Affirmative Defenses to WSFS’s counterclaims.~~

We are required to make principal repayments equal to 0.25% of the original principal amount of the Term Loan Facility (excluding the New Term Loan Borrowings), or $3.9 million, on the last business day of January, April, July, and ~~October, which commenced in July 2014.~~October. We are also required (i) to repay the term loan based on an annual calculation of excess cash flow, as defined in the agreement, (ii) in the second quarter of fiscal 2019, to make a principal repayment of $11.9 million which is equal to 1.00% of the aggregate principal amount of Amended Loans outstanding on July 13, 2017 and (iii) beginning ~~in fiscal 2014.~~ on July 31, 2019, on the last business day of January, April, July and October, to make additional principal repayments of $1.5 million equal to 0.125% of the aggregate principal amount of Amended Loans outstanding on July 13, 2017. The maturity date of the Term Loan Facility is March 5, 2021.

General. On July 13, 2017, in connection with settlement of the Exchange Offer and the issuance of the New Notes, J.Crew Brand, LLC and J.Crew Brand Corp. (together, the “New Notes Co-Issuers”) and the Guarantors (as defined below) entered into (i) an indenture with U.S. Bank National Association, as Trustee and collateral agent, governing the terms of the Exchange Notes (the “Exchange Notes Indenture”) and (ii) an indenture with the Trustee and U.S. Bank, as collateral agent, governing the terms of the New Money Notes (the “New Money Notes Indenture”), which is in substantially the same form as the Exchange Notes Indenture.

Interest Rate. The ~~weighted average~~New Notes bear interest at a rate of 13% per annum, and interest is payable semi-annually on March 15 and September 15 of each year. The New Notes mature on September 15, 2021.

New Notes Guarantee. The New Notes are guaranteed by J.Crew Brand Intermediate, LLC, IPCo and J.Crew International Brand, LLC, each of which is a Delaware limited liability company and a wholly-owned indirect subsidiary of the Company (collectively, the “Guarantors,” and each, a “Guarantor”). The PIK Notes Issuer also unconditionally guarantees the payment obligations of the New Notes Co-Issuers and the Guarantors.

Exchange Notes Collateral. The Exchange Notes and the guarantees thereof are general senior secured obligations of the New Notes Co-Issuers and the Guarantors, secured on a first priority lien basis by the Initial Transferred IP and certain other assets of the New Notes Co-Issuers and Guarantors, and on a second priority lien basis by the Additional Transferred IP, subject, in each case, to permitted liens under the Exchange Notes Indenture and that certain intercreditor agreement, entered into between the collateral agents on July 13, 2017.

New Money Notes Collateral. The New Money Notes and the guarantees thereof are general senior secured obligations of the New Notes Co-Issuers and the Guarantors, secured on a first priority lien basis by the Additional Transferred IP and certain other assets, and on a second priority lien basis by the Initial Transferred IP, subject, in each case, to permitted liens under the New Money Notes Indenture and the intercreditor agreement.

Covenants. Each of the indentures contains covenants covering (i) the payment of principal and interest, (ii) maintenance of an office or agency for the payment of the New Notes, (iii) reports to the applicable Trustee and holders of the New Notes, (iv) stay, extension and usury laws, (v) payment of taxes, (vi) existence, (vii) maintenance of properties and (viii) maintenance of insurance. Each of the New Indentures also includes covenants that (i) limit the ability to transfer the Collateral and (ii) limit liens that may be imposed on the ~~borrowings outstanding under~~assets of the ~~Term Loan Facility was 4.08% on April 29, 2017.~~Guarantors, which covenants are, in each case, subject to certain exceptions set forth in each of the indentures.

On November 4, 2013, ~~Chinos Intermediate Holdings A, Inc. (the “Issuer”),~~PIK Notes Issuer, an indirect parent holding company of Group, issued $500 million of PIK Notes. On July 13, 2017, we completed a private exchange offer pursuant to which $565.7 million aggregate principal amount of ~~7.75/8.50% Senior~~ PIK ~~Toggle~~ Notes ~~due May 1, 2019 (the “PIK Notes”).~~ were exchanged for $249.6 million of Exchange Notes and shares of preferred and common stock of the Parent.

~~On April 28, 2017, the Issuer delivered notice to U.S. Bank N.A., as trustee, under the indenture governing the PIK~~ The Exchange Notes, ~~that with respect to the interest that will be due on such notes on the November 1, 2017 interest payment date, the Issuer will make such interest payment~~however, are guaranteed by ~~paying~~our subsidiaries, and therefore are recorded in kind at the PIK interest rate of 8.50% instead of paying in cash. The PIK election will increase the outstanding principal balance of the PIK Notes by $24.1 million to $590.6 million. Therefore, we will not pay a dividend to the Issuer in the fourth quarter of fiscal 2017 to fund a semi-annual interest payment. Pursuant to the terms of the indenture governing the PIK Notes, the Issuer intends to evaluate this option prior to the beginning of each interest period based on relevant factors at that time.our financial statements.

OnIn October ~~12,~~ 2016, we ~~designated~~formed certain ~~newly formed Delaware entities that are~~new, wholly-owned indirect ~~wholly-owned~~ subsidiaries of the ~~Group as unrestricted subsidiaries under our ABL Facility~~Company, including IPCo and ~~Term Loan Facility and the indenture governing the PIK Notes (the “Unrestricted Subsidiaries”~~J.Crew Brand, LLC (collectively, “J.Crew BrandCo”). ~~Having been so designated, the Unrestricted Subsidiaries do not guarantee this debt, nor are they bound by the covenants contained~~In December 2016, J.Crew International, Inc. (“JCI”) transferred an undivided 72.04% ownership interest in the ~~ABL Facility and Term Loan Facility.~~

On December 5, 2016, J. Crew International, Inc., a Delaware corporation and an indirect subsidiary of J. Crew (“J. Crew International”), transferred a 72.04% undivided interest in certain domesticU.S. intellectual property ~~assets (the “Transferred IP”) to one~~rights of the Unrestricted Subsidiaries, J. Crew Domestic Brand, LLC, a newly formed Delaware limited liability company (“J. Crew Domestic Brand”), for the purpose of providing us flexibility in connection with evaluating opportunities to enhance our capital structure. The Transferred IP consists of J. Crew trademarks and service marks relating to the J.Crew brand ~~with a fair market value of approximately $250 million, which was reduced by $85 million as a result of the impairment loss recorded in the first quarter of fiscal 2017.~~

~~On December 6, 2016, J. Crew Domestic Brand~~to IPCo, and ~~J. Crew International~~ entered into ana related intellectual property license agreement ~~(the “Transferred~~with IPCo. In July 2017, JCI transferred the remaining undivided 27.96% ownership interest in the U.S. intellectual property rights of the J.Crew brand to IPCo, which, together with the initial intellectual property contributed in December 2016, represent 100% of the U.S. intellectual property rights of the J.Crew brand, and entered into an additional intellectual property license agreement with IPCo (together with the agreement entered into in December 2016, the “IP License Agreements”).

Under the IP License ~~Agreement”) pursuant to which we~~Agreements, J.Crew Operating Corp., our direct wholly-owned subsidiary, pays a fixed license fee of $59 million per annum. The license fees are payable on March 1 and ~~our subsidiaries will continue to have exclusive rights to use~~September 1 of each fiscal year. The terms of the ~~Transferred IP. Future payments under the Transferred~~ IP License ~~Agreement will be fixed in the future and on terms~~Agreements are no less favorable than could be obtained in an arm’s length transaction with an unaffiliated third party. These royalty payments ~~will~~ have no impact on our consolidated results of operations, but any such payments ~~will~~to be made to ~~an Unrestricted Subsidiary that is~~IPCo are not subject to the covenants under our credit facilities or the PIK Notes.

Below is consolidating balance sheet information reflecting the elimination of the accounts of ~~our Unrestricted Subsidiaries~~J.Crew BrandCo from our condensed consolidated balance sheet as of ~~April~~July 29, 2017.

	As of April 29, 2017									As of July 29, 2017
	(unaudited)									(unaudited)
	Consolidated balance sheet			Eliminations of unrestricted subsidiaries			Consolidated balance sheet of restricted subsidiaries			Consolidated balance sheet			Eliminations of J.Crew BrandCo			Consolidated balance sheet of subsidiaries excluding J.Crew BrandCo
ASSETS
Current assets:
Cash and cash equivalents	$	104,568		$	—		$	104,568		$	62,426		$	—		$	62,426
Merchandise inventories		324,977			—			324,977			299,796			—			299,796
Prepaid expenses and other current assets		76,667			—			76,667			63,773			—			63,773
Total current assets		506,212			—			506,212			425,995			—			425,995
Property and equipment, net		344,503			—			344,503			330,006			—			330,006
Intangible assets, net		318,116			(164,604	)		153,512			313,161			(250,195	)		62,966
Investment in subsidiary		—			100,408			100,408			—			185,999			185,999
Goodwill		107,900			—			107,900			107,900			—			107,900
Other assets		5,530			—			5,530			7,321			—			7,321
Total assets	$	1,282,261		$	(64,196	)	$	1,218,065		$	1,184,383		$	(64,196	)	$	1,120,187
LIABILITIES AND STOCKHOLDERS’ DEFICIT
Current liabilities:
Accounts payable	$	214,173		$	—		$	214,173		$	188,297		$	—		$	188,297
Other current liabilities		171,714			—			171,714			150,321			3,166			153,487
Interest payable		5,091			—			5,091			6,769			(2,128	)		4,641
Income taxes payable to Parent		25,973			—			25,973			25,332			—			25,332
Current portion of long-term debt		15,670			—			15,670			19,588			—			19,588
Total current liabilities		432,621			—			432,621			390,307			1,038			391,345
Long-term debt, net		1,487,736			—			1,487,736			1,701,887			(338,203	)		1,363,684
Due to J.Crew BrandCo											—			114,018			114,018
Lease-related deferred credits, net		130,195			—			130,195			129,228			—			129,228
Deferred income taxes, net		97,614			(64,196	)		33,418			98,011			(64,196	)		33,815
Other liabilities		41,122			—			41,122			40,101			—			40,101
Total liabilities		2,189,288			(64,196	)		2,125,092			2,359,534			(287,343	)		2,072,191
Stockholders’ deficit:
Common stock $0.01 par value; 1,000 shares authorized, issued and outstanding		—			—			—			—			—			—
Additional paid-in capital		980,577			—			980,577			731,145			249,596			980,741
Accumulated other comprehensive loss		(9,266	)		—			(9,266	)		(7,304	)		—			(7,304	)
Accumulated deficit		(1,878,338	)		—			(1,878,338	)		(1,898,992	)		(26,449	)		(1,925,441	)
Total stockholders’ deficit		(907,027	)		—			(907,027	)		(1,175,151	)		223,147			(952,004	)
Total liabilities and stockholders’ deficit	$	1,282,261		$	(64,196	)	$	1,218,065		$	1,184,383		$	(64,196	)	$	1,120,187

Below is consolidating statement of operations and comprehensive loss information reflecting the elimination of the accounts of ~~our Unrestricted Subsidiaries~~J.Crew BrandCo from our consolidated statement of operations and comprehensive loss for the thirteen and twenty-six weeks ended ~~April~~July 29, 2017. Because the payment terms under the Transferred IP License Agreement dated December 6, 2016 have not yet been fixed, the consolidating information below does not give effect to payments that may be made to the Unrestricted Subsidiaries upon any amendment to the Transferred IP License Agreement, which could be significant. Accordingly, the impact below relates exclusively to the impairment of the intellectual property held by the Unrestricted Subsidiaries.

	For the Thirteen Weeks Ended April 29, 2017									For the Thirteen Weeks Ended July 29, 2017
	(unaudited)									(unaudited)
	Consolidated			Eliminations of unrestricted subsidiaries			Consolidated restricted subsidiaries			Consolidated			Eliminations of J.Crew BrandCo			Consolidated subsidiaries excluding J.Crew BrandCo
Condensed Consolidated Statements of Operations and Comprehensive Loss

Revenues:
Net sales	$	513,180		$	—		$	513,180		$	536,180		$	—		$	536,180
Other		18,786			—			18,786			24,726			—			24,726
Total revenues		531,966			—			531,966			560,906			—			560,906
Cost of goods sold, including buying and occupancy costs		343,729			—			343,729			344,274			—			344,274
Royalty expense											—			28,666			28,666
Gross profit		188,237			—			188,237			216,632			(28,666	)		187,966
Selling, general and administrative expenses		210,423			—			210,423			210,136			—			210,136
Impairment losses		131,157			(85,396	)		45,761			3,898			—			3,898
Income (loss) from operations		(153,343	)		85,396			(67,947	)		2,598			(28,666	)		(26,068	)
Interest expense, net of interest income		20,436			—			20,436			22,818			(2,217	)		20,601
Loss before income taxes		(173,779	)		85,396			(88,383	)		(20,220	)		(26,449	)		(46,669	)
Benefit for income taxes		(50,484	)		33,304			(17,180	)		434			—			434
Net loss	$	(123,295	)	$	52,092		$	(71,203	)	$	(20,654	)	$	(26,449	)	$	(47,103	)
Other comprehensive income (loss):
Reclassification of losses on cash flow hedges, net of tax, to earnings		1,864			—			1,864			1,682			—			1,682
Unrealized loss on cash flow hedges, net of tax		(4	)		—			(4	)		(497	)		—			(497	)
Foreign currency translation adjustments		410			—			410			777			—			777
Comprehensive loss	$	(121,025	)	$	52,092		$	(68,933	)	$	(18,692	)	$	(26,449	)	$	(45,141	)

	For the Twenty-six Weeks Ended July 29, 2017
	(unaudited)
	Consolidated			Eliminations of J.Crew BrandCo			Consolidated subsidiaries excluding J.Crew BrandCo
Condensed Consolidated Statements of Operations and Comprehensive Loss

Revenues:
Net sales	$	1,049,359		$	—		$	1,049,359
Other		43,513			—			43,513
Total revenues		1,092,872			—			1,092,872
Cost of goods sold, including buying and occupancy costs		688,004			—			688,004
Royalty expense		—			28,665			28,665
Gross profit		404,868			(28,665	)		376,203
Selling, general and administrative expenses		420,558			—			420,558
Impairment losses		135,055			(85,396	)		49,659
Loss from operations		(150,745	)		56,731			(94,014	)
Interest expense, net of interest income		43,254			(2,127	)		41,127
Loss before income taxes		(193,999	)		58,858			(135,141	)
Benefit for income taxes		(50,050	)		33,304			(16,746	)
Net loss	$	(143,949	)	$	25,554		$	(118,395	)
Other comprehensive income (loss):
Reclassification of losses on cash flow hedges, net of tax, to earnings		3,546			—			3,546
Unrealized loss on cash flow hedges, net of tax		(501	)		—			(501	)
Foreign currency translation adjustments		1,187			—			1,187
Comprehensive loss	$	(139,717	)	$	25,554		$	(114,163	)

~~Short-term~~Our short-term and long-term liquidity needs ~~of J.Crew Group, Inc.~~ arise primarily from (i) ~~capital expenditures, (ii)~~ debt service requirements, including required (a) quarterly principal repayments and (b) repayments, if any, based on annual excess cash flows, if any, as defined, ~~and (c) dividends to the Issuer, when required, for the purposes of servicing debt,~~(ii) capital expenditures and (iii) working capital. Management anticipates that capital expenditures in fiscal 2017 will be approximately ~~$50~~$45 to ~~$60~~$55 million, including $30 to $35 million for information technology enhancements, $10 to $15 million for new stores and the remainder for warehouse improvements, store renovations and general corporate purposes. Management expects to pay interest of approximately ~~$80~~$90 million in fiscal 2017 to fund debt service ~~obligations, excluding payments of dividends, if any, to the Issuer.~~obligations. Management believes that our current balances of cash and cash equivalents, projected cash flow from operations and amounts available under the ABL Facility will be adequate to fund ~~primary~~our short-term and long-term liquidity ~~needs of J.Crew Group, Inc., subject to considerations described further below.~~needs. Our ability to satisfy these obligations and to remain in compliance with the financial covenants under our financing arrangements depends on our future operating performance, which in turn, may be impacted by prevailing economic conditions and other financial and business factors, some of which are beyond our control. ~~Please refer to Item 1A. “Risk Factors” in part I of our Annual Report on Form 10-K for the fiscal year ended January 28, 2017 filed with the SEC.~~

To address potential liquidity issues of the Issuer arising as a result of the PIK Notes maturity in 2019, concurrently with the release of this report we announced that we have reached agreement with certain holders of PIK Notes that also hold a portion of terms loans under our Term Loan Facility (the “Ad Hoc Creditors”) to conduct a series of transactions to enhance our capital structure. Pursuant to these transactions we or our affiliates, among other things, will seek to:

For further information regarding these potential transactions, we refer you to the other public information we are releasing concurrently with this report. These transactions are subject to a number of conditions and there is no guarantee that these transactions will be completed. Please refer to Item 1A. “Risk Factors – Actions we are taking to decrease our substantial leverage and strengthen our financial position may not be successful” in part II of this report.

We enter into documentary letters of credit to facilitate a portion of our international purchase of merchandise. We also enter into standby letters of credit to secure reimbursement obligations under certain insurance and import programs and lease obligations. As of ~~April~~July 29, 2017, we had the following obligations under letters of credit in future periods:

	Total		Within 1 Year		2-3 Years		4-5 Years		After 5 Years		Total		Within 1 Year		2-3 Years		4-5 Years		After 5 Years
	(amounts in millions)										(amounts in millions)
Letters of Credit
Standby	$	22.7	$	21.8	$	0.9	$	—	$	—	$	30.8	$	29.9	$	0.9	$	—	$	—
Documentary		8.4		8.4		—		—		—		17.1		17.1		—		—		—
	$	31.1	$	30.2	$	0.9	$	—	$	—	$	47.9	$	47.0	$	0.9	$	—	$	—

The industry in which we operate is cyclical, and consequently our revenues are affected by general economic conditions. Purchases of apparel and accessories are sensitive to a number of factors that influence the levels of consumer spending, including economic conditions and the level of disposable consumer income, consumer debt, interest rates and consumer confidence.

Our business is seasonal. As a result, our revenues fluctuate from quarter to quarter. We have four distinct selling seasons that align with our four fiscal quarters. Revenues are usually higher in our fourth fiscal quarter, particularly December, as customers make holiday purchases. Our working capital requirements also fluctuate throughout the year, increasing substantially in September and October in anticipation of holiday season inventory requirements.

A summary of our critical accounting policies is included in the Management’s Discussion and Analysis section of our Annual Report on Form 10-K for the fiscal year ended January 28, 2017 filed with the SEC.

We are exposed to interest rate risk arising from changes in interest rates on the floating rate indebtedness under our Senior Credit Facilities. Borrowings pursuant to our Term Loan Facility bear interest at floating rates based on LIBOR, but in no event less than the floor rate of 1.00%, plus the applicable margin. Borrowings pursuant to our ABL Facility bear interest at floating rates based on LIBOR and the prime rate, plus the applicable margin. Accordingly, fluctuations in market interest rates may increase or decrease our interest expense which will in turn, increase or decrease our net income or net loss and cash flow.

We manage a portion of our interest rate risk related to floating rate indebtedness by entering into interest rate swaps whereby we receive floating rate payments based on the greater of LIBOR and the floor rate and make payments based on a fixed rate. Our interest rate swap agreements cover a notional amount of $800 million from March 2016 to March 2019. Under the terms of these agreements, our effective fixed interest rate on the notional amount of indebtedness is 2.56% plus the applicable margin.

As a result of the floor rate described above, we estimate that a 1% increase in LIBOR would increase our annual interest expense by $7$6 million.

Foreign currency exposures arise from transactions denominated in a currency other than the entity’s functional currency. Although our inventory is primarily purchased from foreign vendors, such purchases are denominated in U.S. dollars; and are therefore not subject to foreign currency exchange risk. However, we operate in foreign countries, which exposes the Company to market risk associated with exchange rate fluctuations. The Company is exposed to foreign currency exchange risk resulting from its foreign operating subsidiaries’ U.S. dollar denominated transactions.

Our management, with the participation of our Chief Executive Officer and our Chief Financial Officer, carried out an evaluation 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 Exchange Act of 1934, as amended (the “Exchange Act”)) as of the end of the period covered by this report. Based on that evaluation, our Chief Executive Officer and our Chief Financial Officer concluded that our disclosure controls and procedures were effective as of the end of the period covered by this report to ensure that information required to be disclosed in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms.

There were no changes in internal control over financial reporting that occurred during the last fiscal quarter that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

We are subject to various legal proceedings and claims arising in the ordinary course of business. Management does not expect that the results of any of these legal proceedings, either individually or in the aggregate, would have a material effect on our financial position, results of operations or cash flows. As of ~~April~~July 29, 2017, we have recorded a reserve for certain legal contingencies in connection with ongoing claims and litigation. The reserve is not material to our results of operations. In addition, there are certain other claims and legal proceedings pending against us for which accruals have not been established.

J. Crew Group, Inc., et al. v. Wilmington Savings Fund Society, FSB, as Administrative Agent and Collateral Agent, Index No. 650574/2017, (Sup. Ct. N.Y. C’ty.).

On February 1, 2017, we filed a complaint in the New York State Supreme Court, Commercial Division, against Wilmington Savings Fund Society, FSB (“WSFS”), as successor agent under the Term Loan Facility seeking a declaration ~~from the court~~ that ~~our~~its actions with respect to certain intellectual property assets ~~are~~were in full compliance with the terms of the Term Loan Facility. We assert that any attempt by WSFS or the ad hoc group of lenders under our Term Loan Facility to challenge our actions is invalid and intend to vigorously assert our rights under the Term Loan Facility.

On March 24, 2017, WSFS filed its counterclaims in response to our declaratory judgment action,including claims of default under the Term Loan ~~Facility, which we intend to vigorously defend.~~Facility. On April 13, 2017, we filed our Reply and Affirmative Defenses to WSFS’s counterclaims.

On July 17, 2017, pursuant to the terms of the July 13, 2017 Amendment to the Term Loan Facility (as described elsewhere herein), and a related direction letter issued to WSFS by the Required Lenders under the Term Loan Facility, we entered into mutual releases with WSFS, and filed a joint stipulation of discontinuance, dismissing the action and resolving the matter.

Eaton Vance Management, et al. v. Wilmington Savings Fund Society, FSB, as Administrative Agent and Collateral Agent, et al., Index No. 654397/2017, (Sup. Ct. N.Y. C’ty.).

On June 22, 2017, Eaton Vance Management and certain affiliated funds as well as Highland Capital Management and certain affiliated funds (collectively, the “Highland/EV Plaintiffs”), filed a complaint in the New York State Supreme Court, Commercial Division, against the Company and WSFS, seeking, among other things, declarations that the July 13, 2017 Amendment to the Term Loan Facility was ineffective absent unanimous consent of all Lenders under the facility, that certain of our actions with respect to certain of its intellectual property assets were taken in violation of the terms of the Term Loan Facility, and that those actions also constitute fraudulent conveyances. We believe that the Highland/EV Plaintiffs’ claims are wholly without merit, and intend to vigorously oppose these claims.

On August 7, 2017, WSFS and the Company filed separate motions to dismiss certain of the Highland/EV Plaintiffs claims for failure to state a claim and lack of standing, among other reasons.

Our Annual Report on Form 10-K for the fiscal year ended January 28, 2017 includes a detailed discussion of certain risks that could materially adversely affect our business, our operating results, or our financial condition. There have been no material changes to the risk factors previously ~~disclosed, except as set forth below.~~disclosed.

~~The capital structure transactions we announced are subject to a number of conditions and may not be successful.~~

To address potential liquidity issue of the Issuer arising as a result of the PIK Notes maturity in 2019, concurrently with the release of this report we announced that we have reached agreement with certain holders of PIK Notes to conduct a series of significant capital structure transactions involving the PIK Notes and Term Loan Facility. See “Outlook” above.

These transactions are subject to a number of conditions outside of our control and there is no guarantee that the transactions will be completed. Our failure to enter into these or an alternate refinancing or capital structure transaction involving the PIK Notes may have a material adverse effect on the Issuer’s ability to pay the PIK Notes on the maturity date and therefore on our business, financial condition and results of operations. For more information on the pending litigation, see Item 1 “Legal Proceedings.”

In order to incentivize key associates to improve the business performance of J.Crew in fiscal 2017 and beyond, the Company is adopting a bonus plan to reward these key individuals with a percentage of the value realized pursuant to these efforts (the “Transformation Incentive Plan” or the “TIP”). Executive officers, including NEOs, will be eligible to participate in the TIP. Although the TIP is in addition to the Company’s annual bonus plan (the “AIP”), with respect to fiscal 2017, the aggregate amount payable under the TIP and the AIP will not exceed the aggregate amount payable under the AIP, except in the event that the maximum Adjusted EBITDA target is achieved under the AIP, in which event the amounts payable under the TIP will be incremental to amounts payable under the AIP. The TIP pool will be funded with 10% of the Company’s Adjusted EBITDA that is directly attributable to these efforts (the “Transformation EBITDA”), as determined by the Compensation Committee (the “Committee”) in its sole discretion.

Payments will be made with respect to performance periods established by the Committee, with the first performance period commencing on January 29, 2017 and the last performance period ending no later than February 1, 2020. Payments, to the extent earned, under the TIP will be made promptly after the end of the applicable performance period. The initial performance periods will be the six fiscal months ending on each of July 29, 2017 and February 3, 2018. No payments will be made under the TIP until cumulative Transformation EBITDA equals or exceeds $60 million. At least with respect to fiscal 2017, payments under the TIP will be paid to participants before payments under the AIP.

For purposes of the TIP, Transformation EBITDA is measured by the Company as Adjusted EBITDA (calculated consistently with the methodology disclosed in the quarterly earnings release filed on Form 8-K) which is realized by the Company as a direct result of these business performance improvement efforts, all as determined by the Committee in its sole discretion. Unless otherwise provided in a written agreement with the Company, to be eligible to receive payments under the TIP, participants must be continuously employed by the Company from the date of grant to the date of payment. The grant of awards is discretionary to the Committee, and the Committee may set target awards for each participant, and the award may be based on performance goals and objectives (individual and/or team targets), which may differ for each participant.

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.

Large Accelerated Filer	☐		Accelerated Filer	☐

Non-Accelerated Filer	☒	(Do not check if a smaller reporting company)	Smaller Reporting Company	☐

			Emerging growth company	☐

Common Stock		Outstanding at ~~June 9,~~August 18, 2017
Common Stock, $.01 par value per share		1,000 shares

		Page Number

PART I. FINANCIAL INFORMATION

Item 1.	Condensed Consolidated Financial Statements (unaudited):	3

	Condensed Consolidated Balance Sheets at ~~April~~July 29, 2017 and January 28, 2017	3

	Condensed Consolidated Statements of Operations and Comprehensive Loss for the thirteen weeks ended ~~April~~July 29, 2017 and ~~April~~July 30, 2016	4

	Condensed Consolidated Statements of Operations and Comprehensive Loss for the twenty-six weeks ended July 29, 2017 and July 30, 2016	5

	Condensed Consolidated Statements of Changes in Stockholders’ Deficit for the ~~thirteen~~twenty-six weeks ended ~~April~~July 29, 2017 and the fifty-two weeks ended January 28, 2017	56

	Condensed Consolidated Statements of Cash Flows for the ~~thirteen~~twenty-six weeks ended ~~April~~July 29, 2017 and ~~April~~July 30, 2016	67

	Notes to Unaudited Condensed Consolidated Financial Statements	78

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	1619

Item 3.	Quantitative and Qualitative Disclosure About Market Risk	2533

Item 4.	Controls and Procedures	2533

PART II. OTHER INFORMATION

Item 1.	Legal Proceedings	2634

Item 1A.	Risk Factors	26

~~Item 5.~~	~~Other Information~~	2634

Item 6.	Exhibits	2734

	~~Shares~~
~~Available for grant at January 28, 2017~~		~~4,017,620~~
~~Granted~~		—
~~Cancelled~~		—
~~Forfeited and available for reissuance~~		~~880,950~~
~~Available for grant at April 29, 2017~~		~~4,898,570~~

	Common Stock Awards			Preferred Stock Awards
Available for grant at January 28, 2017		402			—
Authorized		13,003,295			20,000
Granted		(55	)		—
Forfeited and available for reissuance		480			—
Available for grant at July 29, 2017		13,004,122			20,000

Exhibit No.		Document

3.1		Amended and Restated Certificate of Incorporation of J.Crew Group, Inc., adopted March 7, 2011. Incorporated by reference to Exhibit 3.1 to the Form 8-K filed on March 10, 2011.

3.2		Amended and Restated By-laws of J.Crew Group, Inc., adopted March 7, 2011. Incorporated by reference to Exhibit 3.2 to the Form 8-K filed on March 10, 2011.

Exhibit No.		Document

10.1		~~Separation~~Amended and Restated Employment Agreement, ~~and General Release,~~ dated ~~April 4,~~July 7, 2017, between J.Crew Group, Inc. and ~~Jenna Lyons.~~Millard Drexler.*

10.2		Amendment to Letter Agreement, dated ~~May 31,~~August 2, 2017, between J.Crew Group, Inc. and James Brett.*

~~10.3~~		~~J.Crew Group, Inc. 2017 Transformation Incentive Plan, adopted June 12, 2017.~~Michael J. Nicholson.*

		J.CREW GROUP, INC. (Registrant)

Date: ~~June 12,~~August 23, 2017	By:	/S/ MJ~~ILLARD~~AMES DB~~REXLER~~RETT
		~~Millard Drexler~~James Brett
		~~Chairman of the Board and~~ Chief Executive Officer
		(Principal Executive Officer)

Date: ~~June 12,~~August 23, 2017	By:	/S/ MICHAEL J. NICHOLSON
		Michael J. Nicholson
		President, Chief Operating Officer and Chief Financial Officer
		(Principal Financial Officer)

Date: ~~June 12,~~August 23, 2017	By:	/S/ JEREMY BROOKS
		Jeremy Brooks
		Vice President, Chief Accounting Officer
		(Principal Accounting Officer)