NOTE 3 – RESTRUCTURING COSTS



During the quarter ended May 31, 2017, we determined to exit the publishing business in Japan and restructured our U.S./Canada direct office operations in order to transition to an AAP centric business model.  We expensed $3.1 million related to these changes during the third quarter of fiscal 2017 as described below.  The majority of these costs were attributable to our Direct Offices operating segment.



Exit Japan Publishing Business



Due to a change in strategy designed to focus resources and efforts on sales of the All Access Pass in Japan, and declining sales and profitability of the publishing business, we decided to exit the publishing business in Japan.  As a result of this determination, we wrote off the majority of our book inventory located in Japan for $1.8 million, which was recorded as a component of product cost of sales in the accompanying condensed consolidated statements of operations for fiscal 2017.



U.S./Canada Direct Office Restructuring



During the third quarter of fiscal 2017, we restructured the operations of our U.S/Canada direct offices to create new smaller regional teams which are focused on selling the All Access Pass, helping clients strategically implement the AAP, and providing services to further develop long-term client relationships.  Accordingly, we determined that our three remaining sales offices located in Atlanta, Georgia; Irvine, California; and Chicago, Illinois were unnecessary since most client partners work from home-based offices; restructured the operations of the Sales Performance and Winning Customer Loyalty Practices; and eliminated certain functions to reduce costs in future periods.  The $1.3 million restructuring charge associated with these operational changes was comprised of the following (in thousands):







At May 31, 2017, we had $1.1 million accrued for these restructuring costs, including $0.6 million accrued for severance payments.  The majority of the accrued severance payments were paid prior to the end of June 2017.