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.

On February 11, 2019 Transform Holdco acquired from Sears Holdings substantially all of the go-forward retail footprint, and other assets and component businesses of Sears Holdings as a going concern. The Company believes that ESL holds a significant portion of the membership interest of Transform Holdco and therefore considers that entity to be a related party as well.

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. Some of these agreements have been assumed by and assigned to Transform Holdco in connection with the proceedings related to the Sears Filing (as defined below).

The components of the transactions between the Company and Sears Holdings or Transform Holdco, 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 or Transform Holdco 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 1, 2019		November 2, 2018		November 1, 2019		November 2, 2018
Rent, CAM and occupancy costs	$	907	$	3,483	$	2,990	$	12,004
Retail services, store labor	779		3,231		2,637		11,084
Financial services and payment processing	106		350		249		1,191
Supply chain costs	5		126		93		362
Total expenses	$	1,797	$	7,190	$	5,969	$	24,641
Number of Lands’ End Shops at Sears at period end	36		125		36		125

General Corporate Services

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



	13 Weeks Ended				39 Weeks Ended
(in thousands)	November 1, 2019		November 2, 2018		November 1, 2019		November 2, 2018
Sourcing	$	3,192	$	2,830	$	6,173	$	6,144
Shop Your Way	25		251		79		633
Shared services	48		48		143		143
Total expenses	$	3,265	$	3,129	$	6,395	$	6,920

Use of Intellectual Property or Services

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



	13 Weeks Ended						39 Weeks Ended
(in thousands)	November 1, 2019			November 2, 2018			November 1, 2019			November 2, 2018
Lands' End business outfitters revenue	$	1		$	216		$	4		$	834
Credit card revenue	92			184			248			506
Royalty income	30			43			131			156
Gift card expense	(3		)	(4		)	(8		)	(12		)
Total income	$	120		$	439		$	375		$	1,484

Additional Balance Sheet Information

On October 15, 2018, Sears Holdings Corporation and certain of its subsidiaries filed voluntary petitions in the United States Bankruptcy Court for the Southern District of New York seeking relief under Chapter 11 of Title 11 of the United States Code (collectively the “Sears Filing"). Following the Sears Filing, the Company began netting payables due to Sears Holdings or Transform Holdco, as applicable, against receivables due from Sears Holdings or Transform Holdco 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 Condensed Consolidated Balance Sheets.

The Company recorded an Accounts receivable, net balance of $1.2 million and $1.0 million from Sears Holdings or Transform Holdco in the Condensed Consolidated Balance Sheets as of November 1, 2019 and November 2, 2018 respectively. The Company recorded an Accounts receivable, net balance of $0.1 million from Sears Holdings or Transform Holdco in the Consolidated Balance Sheets as of February 1, 2019.

In the Third Quarter 2018, the Company recorded a non-cash charge of $2.6 million in Other expense, net, in its Condensed Statement of Operations to reflect a reserve relating to pre-Separation UTBs (including penalties and interest) for which Sears Holdings Corporation indemnified the Company under a Tax Sharing Agreement entered into in connection with the Separation, the recovery of which had become uncertain as a result of the Sears Filing. Sears Holdings rejected the Tax Sharing Agreement, per an order approved on April 4, 2019. There was not an indemnification receivable as of November 1, 2019 and February 1, 2019.