12. Customer Accounts Receivable, net

Customer accounts receivable, net are as follows:


	October 29,			January 29,
	2011			2011
	(In thousands)
Customer accounts receivable	$	163,364		$	149,872
Less: allowance for doubtful accounts		(2,000	)		(4,400	)

Customer accounts receivable, net	$	161,364		$	145,472

The allowance for doubtful accounts is based on a calculation that includes a number of factors such as historical collection rates, a percentage of outstanding customer account balances, historical write-offs and write-off forecasts. In the third quarter of 2011, the Company refined its approach to estimating its allowance for doubtful accounts by giving more weight to recent write-off and recovery trends. This adjustment, which management believes more closely aligns the balance of the allowance for doubtful accounts with its best estimate of customer accounts receivable likely to result in a write-off, resulted in a reduction of the allowance for doubtful accounts of approximately $1.3 million in the third quarter of 2011, with improvements in the aging of the Company’s customer accounts receivable further contributing to reductions in the allowance for doubtful accounts in the period.

In determining the appropriate allowance balance, the Company considers, among other factors, both the aging of the past-due outstanding customer accounts receivable as well as the credit quality of the outstanding customer accounts receivable.

As of October 29, 2011 and January 29, 2011, customer accounts receivable were aged as follows:


	October 29,			January 29,
	2011			2011
	(Percentage of gross customer accounts receivable)
Current		92.1	%		90.4	%
Up to 60 days past due		6.6	%		8.1	%
61-120 days past due		0.8	%		1.0	%
121-180 days past due		0.5	%		0.5	%

Customer accounts receivable are deemed to be uncollectible either when they are contractually 180 days past due or when events or circumstances, such as customer bankruptcy, fraud or death, suggest that collection of the amounts due under the account is unlikely. Once an account is deemed to be uncollectible, the Company ceases to accrue interest on the balance and the balance is written off at the next cycle billing date. The Company ceases to accrue late fees on a balance once the balance reaches 120 days past due or in certain other financial circumstances. At October 29, 2011 and January 29, 2011, the Company had recorded gross customer accounts receivable of $0.3 million and $0.4 million, respectively, which have been deemed uncollectible and have ceased to accrue finance charge income and $1.2 million of gross customer accounts receivable which are 90 days or more past due and upon which finance charge income continued to be accrued.

The Company performs an on-going evaluation of the credit quality of its outstanding customer accounts receivable, based on the Talbots credit cardholders’ respective credit risk scores. The Company utilizes an industry standard credit risk score model as its credit quality indicator. As of October 29, 2011 and January 29, 2011, customer accounts receivable were allocated by credit quality indicator (credit risk score) as follows:


	October 29,		January 29,
	2011		2011
	(In thousands)
Greater than or equal to 700	$	107,793	$	93,011
600 - 699		38,019		38,832
Less than or equal to 599		14,802		15,135
Other		2,750		2,894

Customer accounts receivable	$	163,364	$	149,872

The other customer accounts receivable in the table above include reconciling amounts of the most recent days’ net sales not yet posted to customer accounts, unapplied payments and the balance of Canadian customer accounts receivable for which the Company does not maintain credit risk score information.

Changes in the balance of the allowance for doubtful accounts are as follows:


	Allowance for
	Doubtful Accounts
	(In thousands)
Balance at January 29, 2011	$	4,400
Provision		542
Write-offs		(2,020	)
Recoveries, net		578

Balance at July 30, 2011	$	3,500

Provision		(311	)
Write-offs		(1,483	)
Recoveries, net		294

Balance at October 29, 2011	$	2,000

Write-offs include the principal amount of losses, including accrued and unpaid finance charges, and recoveries, net include current period collections on previously written-off balances. These amounts combined represent net write-offs.