RELATED PARTY TRANSACTIONS

According to statements on Schedule 13D filed with the SEC by ESL, ESL beneficially owns 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. In connection with and subsequent to 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 the Company. Descriptions of these transactions are included in the Company's Fiscal 2017 Form 10-K filed with the SEC on March 29, 2018 and proxy statement filed with the SEC on April 6, 2018.

The components of the transactions between the Company and Sears Holdings, which exclude pass-through payments to or from 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, except for number of stores)	November 2, 2018		October 27, 2017		November 2, 2018		October 27, 2017
Rent, CAM and occupancy costs	$	3,483	$	5,376	$	12,004	$	16,882
Retail services, store labor	3,231		5,268		11,084		16,410
Financial services and payment processing	350		479		1,191		1,627
Supply chain costs	126		167		362		558
Total expenses	$	7,190	$	11,290	$	24,641	$	35,477
Number of Lands’ End Shops at Sears at period end	125		188		125		188

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)	November 2, 2018		October 27, 2017		November 2, 2018		October 27, 2017
Sourcing	$	2,830	$	3,445	$	6,144	$	8,525
Shop Your Way	251		83		633		780
Shared services	48		48		143		143
Total expenses	$	3,129	$	3,576	$	6,920	$	9,448

The Company's contract under which it receives sourcing services from an affiliate of Sears Holdings runs through June 30, 2020. The Company participates in Sears Holdings' Shop Your Way program in the Lands' End Shops at Sears.

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)	November 2, 2018			October 27, 2017			November 2, 2018			October 27, 2017
Call center services	$	—		$	—		$	—		$	1,160
Lands' End business outfitters revenue	216			222			834			764
Credit card revenue	184			205			506			638
Royalty income	43			55			156			169
Gift card (expense)	(4		)	(7		)	(12		)	(20		)
Total income	$	439		$	475		$	1,484		$	2,711

Call Center Services

The Company had entered into a contract with SHMC to provide call center services in support of Sears Holdings’ Shop Your Way member loyalty program. This income was net of agreed upon costs directly attributable to the Company providing these services. The income was included in Net revenue and costs are included in Selling and administrative expenses in the Condensed Consolidated Statements of Operations. The contract for call center services expired on April 30, 2017.

Additional Balance Sheet Information

At November 2, 2018, October 27, 2017 and February 2, 2018, the Company included $1.0 million, $3.1 million and $2.0 million in Accounts receivable, net, respectively, and $3.1 million and $2.9 million in Accounts payable on October 27, 2017 and February 2, 2018, respectively, in the Condensed Consolidated Balance Sheets to reflect amounts due from and owed to Sears Holdings.

Following the Sears Filing, the Company began netting payables due to Sears against receivables due from Sears if and as allowed under its contracts. As a result, receivables and payables have been netted, and are presented as a net receivable balance in Accounts receivable, net.

In the Third Quarter 2018, the Company recorded a non-cash charge of $2.6 million in Other expense, net, in the Condensed Statement of Operations due to establishing a reserve against the indemnification asset related to 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. Due to the Sears Filing, there is substantial doubt regarding the collectability of this contingent asset. At October 27, 2017 and February 2, 2018, respectively, a $12.0 million and $7.4 million indemnification receivable was recorded in Other assets in the Condensed Consolidated Balance Sheets.