Restructuring and Exit Activities

9 Months Ended

Sep. 30, 2012

Restructuring and Exit Activities

Restructuring and Exit Activities

3.     Restructuring and Exit Activities

In April 2011, we initiated a restructuring plan to realign certain management and support functions across the organization.  As part of the restructuring plan, we relocated the operations of our direct response business from Medford, Oregon to Southern California.  We believe that having our Guitar Center and direct response operations at a single location will improve our ability to execute strategic initiatives.

In connection with this restructuring activity, we incurred employee termination costs, which included retention bonuses and severance pay to personnel in Medford and at our corporate office.  We also incurred other transition costs, such as relocation assistance, additional recruiting and travel expense, information technology integration costs and other similar costs.

We incurred restructuring costs totaling $1.4 million at our corporate segment and $0.5 million at our direct response segment during the nine months ended September 30, 2012. Restructuring costs incurred during the three months ended September 30, 2012 were not significant.

Restructuring costs incurred for each segment during the three and nine months ended September 30, 2011 were as follows (in thousands):

	Three months ended September 30, 2011
	Guitar Center		Direct Response		Corporate		Total
Employee termination costs	$	123	$	1,459	$	149	$	1,731
Employee relocation and recruiting costs	—		190		841		1,031
Consulting costs	65		872		148		1,085
Other costs	278		989		334		1,601
Total	$	466	$	3,510	$	1,472	$	5,448

	Nine months ended September 30, 2011
	Guitar Center		Direct Response		Corporate		Total
Employee termination costs	$	265	$	2,819	$	1,302	$	4,386
Employee relocation and recruiting costs	45		418		896		1,359
Consulting costs	66		932		368		1,366
Other costs	308		1,032		413		1,753
Total	$	684	$	5,201	$	2,979	$	8,864

Cumulative restructuring costs incurred for each segment from inception of the restructuring plan through September 30, 2012 were as follows (in thousands):

	Cumulative amount through September 30, 2012
	Guitar Center		Direct Response		Corporate		Total
Employee termination costs	$	190	$	4,418	$	1,043	$	5,651
Employee relocation and recruiting costs	177		433		2,888		3,498
Consulting costs	150		1,546		621		2,317
Other costs	987		2,011		427		3,425
Total	$	1,504	$	8,408	$	4,979	$	14,891

Cumulative employee termination costs through September 30, 2012 include retention bonuses of $4.4 million and severance payments of $1.3 million under employment agreements with certain executives whose positions were eliminated in the restructuring.

Restructuring and exit activity costs are included in selling, general and administrative expenses in our condensed consolidated statements of comprehensive loss.  The restructuring plan did not result in any impairment of property and equipment in 2011 or 2012.

The following table summarizes our restructuring accrual activity for the nine months ended September 30, 2012, as it relates to employee termination costs (in thousands):

	Termination Costs
Balance at December 31, 2011	$	3,926
Charges	244
Cash payments	(4,170		)
Balance at September 30, 2012	$	—

Accrued termination costs as of December 31, 2011 are included in accrued expenses and other current liabilities in our condensed consolidated balance sheets.

As of September 30, 2012 the restructuring plan was complete and we do not expect to incur additional restructuring costs.