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; (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.

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				39 Weeks Ended
(in thousands)	October 30, 2015		October 31, 2014		October 30, 2015		October 31, 2014
Retail services, store labor	$	6,774	$	7,899	$	20,051	$	23,208
Rent, CAM and occupancy costs	6,167		6,485		19,049		20,078
Financial services and payment processing	627		713		1,876		2,144
Supply chain costs	219		246		768		751
Total expenses	$	13,787	$	15,343	$	41,744	$	46,181
Number of Lands’ End Shops at Sears at period end	227		242		227		242

General Corporate Services

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



	13 Weeks Ended				39 Weeks Ended
(in thousands)	October 30, 2015		October 31, 2014		October 30, 2015		October 31, 2014
Sourcing	$	3,632	$	3,203	$	7,670	$	6,939
Shop Your Way	751		992		2,007		3,040
Shared services	111		150		393		409
Co-location and services	—		2		—		15
Total expenses	$	4,494	$	4,347	$	10,070	$	10,403

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						39 Weeks Ended
(in thousands)	October 30, 2015			October 31, 2014			October 30, 2015			October 31, 2014
Call center services	$	674		$	605		$	1,343		$	1,462
Lands' End business outfitters revenue	323			450			1,043			1,682
Credit card revenue	300			353			868			1,025
Royalty income	60			20			183			67
Gift card revenue (expense)	(5		)	(72		)	(16		)	254
Total income	$	1,352		$	1,356		$	3,421		$	4,490

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 $2.2 million, $2.1 million, $5.3 million and $5.6 million for the Third Quarter 2015, Third Quarter 2014, Year to Date 2015 and Year to Date 2014, respectively.

Additional Balance Sheet Information

At October 30, 2015, October 31, 2014 and January 30, 2015 the Company included $5.1 million, $5.8 million and $5.7 million in Accounts receivable, net, respectively and $9.4 million, $11.0 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 October 30, 2015, October 31, 2014 and January 30, 2015 a $13.5 million, $14.1 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 UTBs (including penalties and interest) for which Sears Holdings Corporation is responsible Under the Tax Sharing Agreement. The Company reduced the indemnification receivable by $1.2 million in the Third Quarter 2015 as discussed in Note 2 Income Taxes.