BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

9 Months Ended

Oct. 28, 2023

Organization, Consolidation and Presentation of Financial Statements [Abstract]

BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The accompanying unaudited condensed consolidated financial statements of Chico’s FAS, Inc., a Florida corporation, and its wholly owned subsidiaries (“Company”) have been prepared in accordance with the instructions to Form 10-Q and do not include all of the information and notes required by accounting principles generally accepted in the U.S. for complete financial statements. In the opinion of management, such interim financial statements reflect all normal, recurring adjustments considered necessary to present fairly the condensed consolidated financial position, the results of operations, and cash flows for the interim periods presented. All significant intercompany balances and transactions have been eliminated in consolidation. The fiscal year ended January 28, 2023 balance sheet data was derived from audited consolidated financial statements. For further information, refer to the consolidated financial statements and notes thereto for the fiscal year ended January 28, 2023, included in the Company’s Annual Report on Form 10-K for the fiscal year ended January 28, 2023, filed with the Securities and Exchange Commission (“SEC”) on March 14, 2023 (“2022 Annual Report on Form 10-K”).

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

Our fiscal years end on the Saturday closest to January 31 and are designated by the calendar year in which the fiscal year commences. Operating results for the thirteen and thirty-nine weeks ended October 28, 2023 are not necessarily indicative of the results that may be expected for the entire year.

Adoption of New Accounting Pronouncements

In September 2022, the Financial Accounting Standards Board, or FASB, issued Accounting Standards Update (“ASU”) 2022-04, entitled “Supplier Finance Programs: Disclosure of Supplier Finance Program Obligations,” to improve the disclosures of supplier finance programs. Specifically, the ASU requires disclosure of key terms of the supplier finance programs and a roll-forward of the related obligations. The amendments in this ASU do not affect the recognition, measurement, or financial statement presentation of obligations covered by supplier finance programs. The ASU is effective for the fiscal years, and the interim periods within those years, beginning after December 15, 2022, except for the amendment on roll-forward information, which is effective for fiscal years beginning after December 15, 2023. Early adoption is permitted. The Company entered into a supplier financing agreement administered by a third-party platform in the fourth quarter of 2022. Payments to suppliers through this program began in the third quarter of fiscal 2023. Refer to Note 11 for additional information regarding the Company’s payment obligations to participating suppliers.

Entry into Merger Agreement

On September 27, 2023, the Company entered into an Agreement and Plan of Merger (“Merger Agreement”) with Daphne Parent LLC, a Delaware limited liability company (“Parent”), and Daphne Merger Sub, Inc., a Florida corporation and wholly owned subsidiary of Parent (“Merger Sub” and together with Parent, “Buyer Parties”), providing for the merger of Merger Sub with and into the Company, with the Company continuing as the surviving corporation and becoming a wholly owned subsidiary of Parent (“Merger”).

Upon the consummation of the Merger, each share of the Company’s common stock outstanding as of immediately prior to the effective time of the Merger (other than shares of the Company’s common stock that are (i) held by the Company or any subsidiary of the Company, (ii) owned by the Buyer Parties, or (iii) owned by any direct or indirect wholly owned subsidiary of the Buyer Parties as of immediately prior to the effective time (“Owned Company Shares”)) will be cancelled and extinguished and automatically converted into the right to receive cash in an amount equal to $7.60 per share, without interest thereon. Each Owned Company Share will be cancelled and extinguished without any conversion thereof or consideration paid therefor.

Consummation of the Merger is subject to certain conditions set forth in the Merger Agreement, including, but not limited to, the following: (i) the affirmative vote of the holders of a majority of all of the outstanding shares of the Company’s common stock to adopt the Merger Agreement; (ii) the absence of any law or order restraining, enjoining, or otherwise prohibiting the Merger; and (iii) the absence of a Company Material Adverse Effect (as defined in the Merger Agreement,

which is filed as Exhibit 2.1 to this Quarterly Report on Form 10-Q). The Go-Shop Period has ended, and the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, has expired. In addition, the Company filed its Definitive Merger Proxy Statement on Schedule 14A with the Securities and Exchange Commission on November 29, 2023. The transaction is not subject to a financing condition. The Merger Agreement includes customary representations, warranties, and covenants of the parties, including termination provisions for both the Company and the Buyer Parties. Under the Merger Agreement, the Company may be required to pay the Buyer Parties a termination fee of up to $29,956,324 if the Merger Agreement is terminated under certain specified circumstances. The Merger Agreement also places certain restrictions on the conduct of the Company’s business prior to the completion of the Merger, which could delay or prevent the Company from undertaking business opportunities that may arise or any other action it would otherwise take with respect to the operations of the Company absent these restrictions.

Parent and the Company expect to close the Merger by the end of the first calendar quarter of 2024.