NOTE 2: HAUTELOOK

On March 23, 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. We believe the acquisition will enable us to participate in the fast-growing private sale marketplace and provide a platform to increase innovation and speed in the way we serve customers across all channels. The terms of this acquisition included upfront consideration of $180 in Nordstrom stock and an "earn-out" provision originally for up to $90 of additional consideration payable in Nordstrom stock over a three-year period, subject to HauteLook's performance in meeting certain targets for sales and earnings before interest, taxes, depreciation and amortization ("EBITDA"). Subsequent to the acquisition, we amended the earn-out agreement and settled the 2011 earn-out for $30 in Nordstrom common stock and eliminated the potential future payments of $60 for 2012 and 2013.

HauteLook's results of operations are included in our consolidated results from the acquisition date, and were not material to our consolidated results as of January 28, 2012. We have not presented pro forma results of operations for periods prior to the acquisition because HauteLook's results of operations were not material to our consolidated results for any previous period.

Acquisition Purchase Price

Both the $180 upfront payment and the original $90 earn-out consideration include amounts attributable to HauteLook employees that are subject to ongoing vesting requirements. These amounts 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. The remaining (non-compensation) consideration was measured at its acquisition-date fair value to determine the purchase price, as summarized in the following table:

		000000000000			000000000000			000000000000
	Upfront			Earn-out			Total
Maximum total consideration		$180			$90			$270
Less: portion attributable to post-acquisition compensation		(27	)		(15	)		(42	)
Consideration attributable to purchase price		$153			$75			$228

Acquisition purchase price at fair value		$153			$42			$195

The $153 upfront component of the purchase price primarily included 3.5 shares of Nordstrom common stock at a closing stock price of $42 per share on the acquisition date. The $42 acquisition date fair value of the earn-out attributable to the purchase price was estimated using a valuation model and recorded in other liabilities on our consolidated balance sheet.

Net Assets Acquired

We allocated the total purchase price of $195 to the tangible and intangible assets acquired and liabilities assumed based on their estimated fair values on the acquisition date, with the remaining unallocated purchase price recorded as goodwill. As a result of the purchase price allocation, we recorded intangible assets of $62 and goodwill of $146, offset by other net liabilities of $13.

Intangible assets consist of $27 of trademarks/trade names, $20 of technology and $15 of customer relationships. We estimated the fair values of the acquired intangible assets based on discounted cash flow models using estimates and assumptions regarding future operations and cash flows. We will amortize the acquired 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. The aggregate intangible amortization expense for the year ended January 28, 2012 was $16, which is also equal to our total accumulated amortization expense. We expect to record total amortization expense of $42 associated with these intangible assets over the next five years.

Goodwill of $146 is equal to the excess of the purchase price over the net assets recognized and represents the acquisition's benefits that are not attributable to individually identified and separately recognized assets. These benefits include our expected ability to increase innovation and speed in the way we serve customers across all channels, HauteLook's assembled workforce including its key management and the going-concern value of acquiring HauteLook's business as a whole. We include this goodwill, which is not deductible for tax purposes, in our Retail segment.

Earn-out Amendment and Impairment

On November 23, 2011, we amended our acquisition agreement with HauteLook to settle the earn-out provisions and reorganize the HauteLook business. We settled the 2011 earn-out for $30 in Nordstrom common stock and eliminated the provision for potential future payments of $60 for 2012 and 2013. We reorganized HauteLook primarily by deconsolidating a portion of Sole Society, a HauteLook-launched shoe membership website that offers a personalized selection of high-quality shoes.

Upon amendment of the acquisition agreement, we reduced the fair value of the earn-out liability to $30 and recorded income of $12. The 2011 earn-out provision was ultimately settled for 0.6 shares of Nordstrom common stock at a closing price of $47 per share after taxes and forfeitures.

We also completed our annual impairment analysis for our HauteLook goodwill. Due to the reorganization of HauteLook, changes in expected business results and market dynamics, we recognized a goodwill impairment charge of $25 during the fourth quarter of 2011, reducing the HauteLook goodwill to $121. See Note 9: Fair Value Measurements for additional information relating to the valuation of the goodwill impairment charge.