RELATED PARTY TRANSACTIONS

According to statements on form Schedule 13D filed with the SEC by ESL, ESL beneficially owned significant portions of both the Company's and Sears Holdings Corporation's outstanding shares of common stock. Therefore Sears Holdings Corporation, the Company's former parent company, is considered a related party both prior to and subsequent to the Separation.

Prior to the Separation, Sears Holdings Corporation (including certain non-Lands’ End subsidiaries) and the Company entered into various agreements to, among other things: (i) support the Lands’ End Shops at Sears; (ii) provide various general corporate services; and (iii) support the Company's participation in the SYW program; and (iv) allow for the use of intellectual property or services. The amounts charged to the Company by Sears Holdings do not necessarily reflect the costs of obtaining the services from unaffiliated third parties or of the Company providing the applicable services itself. Management believes that such costs are reasonable; however, the Combined Financial Statements contained herein may not be indicative of the Company’s financial position, operating results, and cash flows in the future, or what they would have been if it had been a stand-alone company during all periods presented.

In connection with the Separation, the Company entered into various agreements with Sears Holdings which, among other things, (i) govern specified aspects of the Company's relationship following the Separation, especially with regards to the Lands’ End Shops at Sears, and (ii) establish terms pursuant to which subsidiaries of Sears Holdings Corporation are providing services to us, including the International Buying Office under the Buying Agency Agreement.

References to and descriptions of the agreements below represent the agreements entered into in connection with the Separation.

See further descriptions of the transactions in the Company's 2015 Annual Report on Form 10-K. The components of the transactions between the Company and Sears Holdings, which exclude pass-through payments to third parties, are as follows:

Lands’ End Shops at Sears

Related party costs charged by Sears Holdings to the Company related to Lands’ End Shops at Sears are as follows:



	13 Weeks Ended				26 Weeks Ended
(in thousands)	July 31, 2015		August 1, 2014		July 31, 2015		August 1, 2014
Retail services, store labor	$	6,676	$	7,662	$	13,277	$	15,309
Rent, CAM and occupancy costs	6,532		6,754		12,882		13,593
Financial services and payment processing	627		700		1,250		1,431
Supply chain costs	272		222		549		505
Total expenses	$	14,107	$	15,338	$	27,958	$	30,838
Number of Lands’ End Shops at Sears at period end	229		247		229		247

General Corporate Services

Related party costs charged by Sears Holdings to the Company for general corporate services are as follows:



	13 Weeks Ended				26 Weeks Ended
(in thousands)	July 31, 2015		August 1, 2014		July 31, 2015		August 1, 2014
Sourcing	$	2,454	$	1,875	$	4,038	$	3,736
Shop Your Way	730		1,034		1,255		2,048
Shared services	131		126		281		259
Co-location and services	—		7		—		13
Total expenses	$	3,315	$	3,042	$	5,574	$	6,056

Use of Intellectual Property or Services

Related party revenue and costs charged by the Company to and from Sears Holdings for the use of intellectual property or services is as follows:



	13 Weeks Ended					26 Weeks Ended
(in thousands)	July 31, 2015			August 1, 2014		July 31, 2015			August 1, 2014
Call center services	$	455		$	631	$	669		$	857
Lands' End business outfitters revenue	317			482		720			1,232
Credit card revenue (expense)	281			313		568			672
Royalty income	103			35		124			47
Gift card revenue	(7		)	85		(11		)	326
Total income	$	1,149		$	1,546	$	2,070		$	3,134

Call Center Services

The Company has entered into a contract with Sears Holdings Management Corporation, a subsidiary of Sears Holdings Corporation, to provide call center services in support of Sears Holdings’ SYW member loyalty program. This income is net of agreed upon costs directly attributable to the Company providing these services. The income is included in Net revenue and costs are included in Selling and administrative expenses in the Condensed Consolidated and Combined Statements of Operations. Total call center service income included in Net revenue was $1.7 million, $2.0 million, $3.1 million and $3.6 million for the Second Quarter 2015, Second Quarter 2014, Year to Date 2015 and Year to Date 2014, respectively.

Additional Balance Sheet Information

At July 31, 2015, August 1, 2014 and January 30, 2015 the Company included $4.2 million, $5.3 million and $5.7 million in Accounts receivable, net, respectively and $9.5 million, $10.4 million and $9.1 million in Accounts payable, respectively, in the Condensed Consolidated Balance Sheets to reflect amounts due from and owed to Sears Holdings.

At July 31, 2015, August 1, 2014 and January 30, 2015 a $14.6 million, $13.9 million and $14.3 million receivable, respectively, was recorded by the Company in Other assets in the Condensed Consolidated Balance Sheets to reflect the indemnification by Sears Holdings Corporation of the pre-Separation uncertain tax positions (including penalties and interest) for which Sears Holdings Corporation is responsible.