Nordstrom 2013 Annual Report Download - page 45

Nordstrom, Inc. and subsidiaries 45
NOTE 2: HAUTELOOK
In 2011, we acquired 100% of the outstanding equity of HauteLook, Inc., an online private sale retailer offering limited-time sale events on
fashion and lifestyle brands, for upfront consideration of $180 in Nordstrom stock and an “earn-out” provision of up to $90 that was ultimately
settled in 2011 for $30 of additional Nordstrom stock. The upfront consideration included $27 related to amounts attributable to HauteLook
employees that are subject to ongoing vesting requirements and are recorded as compensation expense as the related service is performed
over the respective employee vesting periods of up to four years after the acquisition date.
On the acquisition date, we recorded intangible assets of $62 and goodwill of $146, offset by other net liabilities of $13. We amortize the
intangible assets over their estimated lives of two to seven years on a straight-line basis, which reasonably approximates the pattern of
expected economic benefit. We recorded intangible amortization expense of $10 for 2013 and $19 for 2012.
The goodwill value of $146 recorded at the time of the acquisition was the excess of the purchase price over the net assets recognized. We
include this goodwill, which is not deductible for tax purposes, in our Retail segment. In 2011, we recognized a goodwill impairment charge of
$25, reducing the HauteLook goodwill to $121 due to a reorganization of HauteLook, changes in expected business results and market
dynamics. Additionally, as part of the reorganization, we recorded income of $12 related to the settlement of the earn-out liability. We
recognized no goodwill impairment charge for fiscal 2012 and 2013. See Note 9: Fair Value Measurements for additional information relating
to the valuation of the goodwill impairment charge.
NOTE 3: ACCOUNTS RECEIVABLE
The components of accounts receivable are as follows:
February 1, 2014 February 2, 2013
Credit card receivables:
Nordstrom VISA credit card receivables $1,316 $1,348
Nordstrom private label card receivables 868 794
Total credit card receivables 2,184 2,142
Allowance for credit losses (80) (85)
Credit card receivables, net 2,104 2,057
Other accounts receivable173 72
Accounts receivable, net $2,177 $2,129
1 Other accounts receivable consist primarily of third party credit and debit card receivables.
Our credit card receivables are restricted under our securitization program. Our Series 2011-1 Class A Notes are secured by 100% of the
Nordstrom private label credit card receivables and 90% of the Nordstrom VISA credit card receivables. As of February 1, 2014 and
February 2, 2013, our restricted credit card receivables included more receivables than necessary to collateralize our outstanding secured
debt and variable funding facilities, and as such can be utilized to increase the current usage of our securitization program. Our credit card
securitization agreements set a maximum percentage of receivables that can be associated with various receivable categories, such as
employee or foreign receivables, and as of February 1, 2014 and February 2, 2013, these maximums were not exceeded.
Activity in the allowance for credit losses is as follows:
Fiscal year 2013 2012 2011
Allowance at beginning of year $85 $115 $145
Bad debt expense 52 42 84
Write-offs (80) (97) (136)
Recoveries 23 25 22
Allowance at end of year $80 $85 $115
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Nordstrom, Inc.
Notes to Consolidated Financial Statements
Dollar and share amounts in millions except per share, per option and unit amounts