Year Ended

Thirteen Weeks Ended

Fifty-Two Weeks Ended

(in thousands, unless otherwise indicated)

January 28, 2017

January 30, 2016

January 31, 2015

April 29, 2017

April 30, 2016

April 29, 2017

Income Statement Data:

Total revenues

$2,425,462

$2,505,827

$2,579,695

$531,966

$567,499

$2,389,929

Cost of goods sold, including buying and occupancy costs

1,550,185

1,610,256

1,608,777

343,729

362,545

1,531,369

Gross profit

875,277

895,571

970,918

188,237

204,954

858,560

Selling, general and administrative expenses

818,546

834,137

845,953

210,423

192,235

836,734

Impairment losses

7,752

1,381,642

709,985

131,157

5,396

133,513

Income (loss) from operations

48,979

(1,320,208)

(585,020)

(153,343)

7,323

(111,687)

Interest expense, net

79,359

69,801

74,352

20,436

18,215

81,580

Loss on refinancings

435

–

58,960

–

–

435

Benefit for income taxes

(7,301)

(147,333)

(60,559)

(50,484)

(2,851)

(54,934)

Net loss

$(23,514)

$(1,242,676)

$(657,773)

$(123,295)

$(8,041)

$(138,768)

Year Ended

Thirteen Weeks Ended

Fifty-Two Weeks Ended

Cash Flows:

January 28, 2017

January 30, 2016

January 31, 2015

April 29, 2017

April 30, 2016

April 29, 2017

Net cash (used in) provided by operating activities

$137,833

$135,553

$158,118

$(11,281)

$(10,624)

$137,176

Net cash used in investing activities

$(80,140)

$(103,657)

$(132,691)

$(8,317)

$(19,056)

$(69,401)

Net cash used in financing activities

$(12,852)

$(53,984)

$(69,492)

$(7,835)

$(3,918)

$(16,769)

Selected Operating and Other Data:

Revenues:

J.Crew

$2,018,052

$2,146,710

$2,295,109

$428,500

$480,756

$1,965,796

Madewell

341,570

300,982

245,340

84,680

72,463

353,787

Other

65,840

58,135

39,246

18,786

14,280

70,346

Total revenues

$2,425,462

$2,505,827

$2,579,695

$531,966

$567,499

$2,389,929

Decrease in comparable company sales

(6.7)%

(8.2)%

(0.7)%

(9.0)%

(6.5)%

(7.2)%

J.Crew:

Sales per gross square foot

$493

$540

$618

$96

$113

$477

Stores open at end of period

462

448

419

457

451

457

Madewell:

Sales per gross square foot

$756

$746

$747

$181

$164

$771

Stores open at end of period

113

103

85

116

106

116

Adjusted EBITDA(a)(in millions)

$188.5

$203.4

$255.2

$26.6

$45.4

$169.7

Capital expenditures:

J.Crew new stores

$23,180

$32,389

$43,388

$717

$4,800

$19,097

Madewell new stores

9,016

14,286

14,938

2,873

2,986

     8,903

Other

47,944

56,982

69,548

4,727

11,270

41,401

Total capital expenditures

$80,140

$103,657

$127,874

$8,317

$19,056

$69,401

Depreciation of property and equipment

$109,503

$103,966

$93,458

$25,163

$26,210

$108,456

Amortization of intangible assets

$10,540

$15,559

$15,944

$2,288

$3,024

$9,804

Pro Forma Data:

As of and for the Fifty-Two Weeks Ended
April 29, 2017

As Adjusted(b)

As Further Adjusted(c)

Parent Group:

Total debt(d)

$  1,785,815

$  1,762,815

Interest expense(e)

117,828

131,086

Ratio of total debt to Adjusted EBITDA(a)

10.5x

10.4x

Total debt plus liquidation preference of preferred stock(d)

$  2,076,315

$  2,053,315

Interest expense plus preferred stock dividends(e)

138,163

151,421

New Notes Co-Issuers:

Total debt (New Notes)(d)

$    237,500

$    334,500

Interest expense (New Notes)(e)

30,875

43,485

License Fees per annum

42,500

59,000

As of

   As of

January 28, 2017

January 30, 2016(f)

January 31, 2015(f)(g)

April 29, 2017

April 30, 2016

Balance Sheet Data:

Cash and cash equivalents

$132,226

$87,812

$111,097

$104,568

$54,690

Working capital

$105,715

$91,685

$115,348

$73,591

$91,383

Total assets

$1,432,710

$1,499,976

$2,912,824

$1,282,261

$1,477,271

Total debt, net(h)

$1,377,934

$1,429,775

$1,417,833

$1,398,838

$1,460,060

Stockholders’ equity (deficit)

$(786,211)

$(768,987)

$516,024

$(907,027)

$(776,676)

(a)

Adjusted EBITDA is a non-GAAP financial measure and is defined as net income before income taxes, interest expense, net and depreciation and amortization (EBITDA), adjusted for the other items described in the notes below. We present Adjusted EBITDA in this Offering Memorandum because we consider it an important supplemental measure of our performance and believe it is frequently used by securities analysts, investors and other interested parties in the evaluation of companies in our industry. Adjusted EBITDA is not a presentation made in accordance with GAAP, and our computation of Adjusted EBITDA may vary from others’ in our industry. Adjusted EBITDA should not be considered an alternative to income from operations or net income, as a measure of operating performance or cash flow, or as a measure of liquidity. Adjusted EBITDA has important limitations as an analytical tool, and you should not consider it in isolation, or as a substitute for analysis of our results as reported under GAAP. For example, Adjusted EBITDA:

•

does not reflect our cash expenditures, or future requirements, for capital expenditures or contractual commitments;

•

does not reflect changes in, or cash requirements for, our working capital needs;

•

does not reflect the significant interest expense, or the cash requirements necessary to service interest or principal payments, on our debt;

•

excludes income tax payments that represent a reduction in cash available to us;

•

does not reflect any cash requirements for assets being depreciated and amortized that may have to be replaced in the future;

•

does not reflect the impact of earnings or charges resulting from matters we consider not to be indicative of our ongoing operations; and

•

does not reflect adjustments for all non-cash income or expense items that are reflected in our statements of cash flows.

Year Ended

Thirteen Weeks Ended

Fifty-Two Weeks
Ended

(Dollars in millions)

January 28, 2017

January 30, 2016

January 31, 2015

April 29, 2017

April 30, 2016

April 29, 2017

Net loss

$(23.5)

$(1,242.7)

$(657.8)

$(123.3)

$(8.0)

$(138.8)

Benefit for income taxes

(7.3)

(147.3)

(60.6)

(50.5)

(2.9)

(54.9)

Interest expense (including the loss on refinancings)

79.8

69.8

133.3

20.4

18.2

82.0

Depreciation and amortization (including intangible assets)

120.0

119.5

109.4

27.5

29.3

118.2

EBITDA

$169.0

$(1,200.7)

$(475.7)

$(125.9)

$36.6

$6.5

Impairment losses

7.8

1,381.6

710.0

131.2

5.4

133.6

Charges related to a workforce reduction

–

4.8

–

10.7

–

10.7

Sponsor monitoring fees

10.0

10.3

10.4

2.4

2.6

9.8

Transformation costs

–

–

–

5.6

–

5.6

Debt transaction costs

–

–

–

2.5

–

2.5

Share-based compensation

1.0

2.6

6.0

0.2

0.4

0.8

Amortization of lease commitments

0.7

4.8

4.5

(0.1)

0.4

0.2

Adjusted EBITDA

$188.5

$203.4

$255.2

$26.6

$45.4

$169.7

(b)

As adjusted to give effect to (i) the completion of the Exchange Offer and the resulting issuance of the New Notes and the New Equity Securities (including the Early Tender Payment) to tendering holders of the Old Notes, assuming that 95% of the Old Notes are validly tendered in the Exchange Offer prior to the Early Deadline, and (ii) the Recapitalization, including the issuance of the New Series B Preferred Stock.

(c)

As further adjusted to give effect to the Term Loan Transactions, assuming approval of the Term Loan Amendment, including (i) the repurchase of $150 million principal amount of term loans under the Term Loan Agreement, which would be financed with $30 million principal amount (resulting in $29.4 million of net cash proceeds) of the New Term Loan Borrowings, $97 million principal amount of New Notes (resulting in $94.1 million of net cash proceeds) issued through the Concurrent Private Placement, with the remaining $26.5 million financed with existing cash resources. For a description of as adjusted and as further adjusted total debt, and liquidation preference of preferred stock, see “Capitalization.” The Old Notes surrendered in connection with the Exchange Offer will not be cancelled and will continue to be held by BrandCo, subject to the terms of the New Notes Indenture. Because such Old Notes would represent an intercompany obligation between Parent Group companies, they are eliminated in consolidation and are not set forth as outstanding in the table above.

(d)

For a description of as adjusted and as further adjusted total debt and liquidation preference of preferred stock, see “Capitalization.”

(e)

As adjusted and as further adjusted interest expense (and preferred stock dividends) assumes all repayments were made and new debt (or preferred stock) incurred as of the beginning of the fifty-two-week period. Preferred stock dividends include both cash dividends and paid-in-kind dividends.

(f)

In Fiscal 2016, we adopted an accounting standard that requires certain deferred financing costs related to a recognized debt liability to be presented in the balance sheet as a reduction of the carrying amount of that debt liability.  Certain prior year amounts have been reclassified

to conform to the current year’s presentation; specifically, long-term assets were reduced by $16,301, $19,509, $38,180 and $47,125, respectively, which resulted in corresponding reductions to long-term liabilities on our consolidated balance sheets as of the dates indicated.

(g)

In Fiscal 2015, we adopted an accounting standard that requires deferred taxes be presented as noncurrent on the balance sheet.  Certain prior year amounts have been reclassified to conform to the current year’s presentation; specifically, current assets were reduced by $19,280, $11,831, and $14,686, respectively, which resulted in corresponding reductions to long-term liabilities on our consolidated balance sheets as of the dates indicated.

(h)

Total debt, net, equals our debt, measured in accordance with GAAP, minus cash and cash equivalents.

•

on an actual basis,

•

as adjusted  to give effect to (i) the completion of the Exchange Offer and resulting issuance of the New Notes and the New Equity Securities (including the Early Tender Payment) to tendering holders of the Old Notes, assuming that 95% of the Old Notes are validly tendered in the Exchange Offer prior to the Early Deadline, and (ii) the Recapitalization, including the issuance of the New Series B Preferred Stock; and

•

as further adjusted to give effect to the Term Loan Transactions, assuming approval of the Term Loan Amendment, including (i) the repurchase of $150 million principal amount of term loans under the Term Loan Agreement, (ii) the New Term Loan Borrowing and (iii) the issuance of $97 million principal amount of New Notes in the Concurrent Private Placement.

As of April 29, 2017

Actual

As Adjusted

As Further Adjusted

(in millions)

Cash and cash equivalents of Group⁽¹⁾

$104.6

$79.2

$52.7

Total debt of Parent Group:

Old Notes Issuer

Old Notes^{(2) (3)}

$566.5

$28.3

$28.3

Group

ABL Facility^(4)(5)(6)

—

—

—

Existing Term Loan Facility⁽⁵⁾⁽⁶⁾

1,520.0

1,520.0

1,370.0

New Term Loan Borrowing⁽⁵⁾⁽⁶⁾

—

—

30.0

Total Senior Credit Facilities Debt

1,520.0

1,520.0

1,400.0

New Notes Co-Issuers

New Notes offered hereby (up to $250.0 million)⁽⁷⁾

—

237.5

237.5

Notes issued in Concurrent Private Placement⁽⁵⁾⁽⁶⁾

—

—

97.0

Total debt capitalization⁽⁷⁾

2,086.5

1,785.8

1,762.8

Liquidation preference of Parent preferred stock:

New Series A Preferred Stock offered hereby (up to $190.0 million in liquidation preference)

—

180.5

180.5

New Series B Preferred Stock

—

110.0

110.0

Total liquidation preference of preferred stock

—

290.5

290.5

Total debt and liquidation preference of preferred stock⁽⁷⁾

$2,086.5

$2,076.3

$2,053.3

(1)

As adjusted and as further adjusted amounts reflect estimated fees and expenses in connection with the Exchange Offer, the Recapitalization and the Term Loan Transactions, in each case, of approximately $30 million, of which $4.6 million was paid as of April 29, 2017.

(2)

While the capitalization table is presented as of April 29, 2017, the interest payment due May 1, 2017 of $23.1 million, which was paid in kind, was included in the balance of the Old Notes. If 100% of the Old Notes are

validly tendered in the Exchange Offer prior to the Early Deadline, the principal amount of Old Notes outstanding on both an as adjusted basis and an as further adjusted basis will be $0.  

(3)

The Old Notes surrendered in connection with the Exchange Offer will not be cancelled and will continue to be held by BrandCo, subject to the terms of the New Notes Indenture. Because such Old Notes would represent an intercompany obligation between Parent Group companies, they are eliminated in consolidation and are not set forth as outstanding in the table above.

(4)

As of April 29, 2017, there were no outstanding borrowings under the ABL Facility, with excess availability of approximately $330.0 million.  See “Description of Certain Other Indebtedness—ABL Facility.”

(5)

As further adjusted to give effect to the Term Loan Transactions, assuming approval of the Term Loan Amendment, including (i) the repurchase of $150 million principal amount of term loans under the Term Loan Agreement, which would be financed with $30 million principal amount (resulting in $29.4 million of net cash proceeds) of the New Term Loan Borrowings, $97 million principal amount of New Notes (resulting in $94.1 million of net cash proceeds) issued through the Concurrent Private Placement, with the remaining $26.5 million financed with existing cash resources.

(6)

Reflects principal amounts only.

(7)

If 100% of the Old Notes are validly tendered in the Exchange Offer prior to the Early Deadline, the aggregate amount of New Notes offered hereby would be $250.0 million on both an as adjusted basis and an as further adjusted basis, the total debt capitalization would be $1,770 million on an as adjusted basis and $1,747.0 million on an as further adjusted basis and the total debt and liquidation preference of preferred stock would be $2,070.0 million on an as adjusted basis and $2,047.0 million on an as further adjusted basis.