Restructuring and Exit Activities

12 Months Ended

Dec. 31, 2012

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 in the second half of 2011. We believe that having our Guitar Center and direct response management 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 include 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.

During 2012, we incurred restructuring costs totaling $0.6 million at our direct response segment and $1.5 million at our corporate segment. The restructuring plan was substantially complete in the first half of 2012.

Restructuring costs incurred for each segment during 2011 were as follows (in thousands):

	Year ended December 31, 2011
	Guitar Center		Direct Response		Corporate		Total
Employee termination costs	$	190	$	4,182	$	1,044	$	5,416
Employee relocation and recruiting costs	143		433		1,786		2,362
Consulting costs	150		1,604		424		2,178
Other costs	983		1,667		365		3,015

Total	$	1,466	$	7,886	$	3,619	$	12,971

Cumulative restructuring costs incurred for each segment from inception of the restructuring plan through December 31, 2012 were as follows (in thousands):

	Cumulative amount through December 31, 2012
	Guitar Center		Direct Response		Corporate		Total
Employee termination costs	$	190	$	4,419	$	1,043	$	5,652
Employee relocation and recruiting costs	178		433		3,021		3,632
Consulting costs	150		1,546		621		2,317
Other costs	987		2,063		427		3,477

Total	$	1,505	$	8,461	$	5,112	$	15,078

Cumulative employee termination costs through December 31, 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 the consolidated statements of comprehensive income or loss. The restructuring plan did not result in any impairment of property and equipment in 2012 or 2011.

The following table summarizes our restructuring accrual activity for the year ended December 31, 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 December 31, 2012	$	—

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

- Definition

The entire disclosure for restructuring and related activities. Description of restructuring activities such as exit and disposal activities, include facts and circumstances leading to the plan, the expected plan completion date, the major types of costs associated with the plan activities, total expected costs, the accrual balance at the end of the period, and the periods over which the remaining accrual will be settled.

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