Franklin Covey 2000 Annual Report Management’s Discussion and Analysis 23 RESTRUCTURING  RESULTS OF OPERATIONS During the fourth quarter of fiscal 1999, the Company’s Board of Directors approved a plan to restructure the Company’s operations, reduce its workforce and formally exit the majority of its leased office space located in Provo, Utah. These changes were intended to align the Company’s products, services, and channels in a manner that focuses Company resources on providing integrated learning and performance solutions to both individuals and organizations. The restructuring was also intended to lay strategic, operational, organizational, and financial foundations for profitable growth. In connection with the restructuring plan, the Company recorded a restruc- turing charge of $16.3 million, which is included in the Company’s statement of income for the fiscal year ended August 31, 1999. Included in the restructuring charge were costs to provide severance and related benefits to former employees, as well as costs to formally exit the leased office space. The restructuring plan was sub- stantially completed as of August 31, 2000. As part of the restructuring, the Company provided severance and related benefits to employees affected by the changes. The cost to provide these benefits under the restructuring plan was estimated to be $11.7 million and covered a reduction of approximately 600 employees across all areas of the business. At August 31, 2000, the remaining accrued severance costs were reviewed and reduced based upon estimates of remaining liability for the severance program. The adjustment was primarily due to favorable economic conditions that reduced the average time necessary for terminated employees to find new employment. Remaining accrued severance costs are expected to be sufficient for remaining payments related to the severance plan. Also included in the restructuring provision was a charge to exit the majority of the Company’s leased office space in Provo, Utah. These facilities contained sales, marketing, and other functions primarily aligned with the training and education SBU. Before exiting the lease, sales and other sales support functions located in Provo were moved to regional offices located in New York, Chicago, Los Angeles, San Francisco, Columbus, Dallas, Atlanta and Washington, D.C. Remaining busi- ness and support functions were moved to the Company’s corporate headquarters located in Salt Lake City, Utah. The Company anticipated the costs to exit the facilities and sublease the space to be approximately $4.6 million. During fiscal 2000, the office space was subleased and the exit accrual was reduced by $0.4 million to reflect favorable building transition costs. The remaining building exit accrual at August 31, 2000 represents the difference between base rental charges and the off setting expected sublease revenue receipts. The remaining accrual is expected to be sufficient to complete the building exit plan. The following table sets forth consolidated income statement data and other selected operating data expressed as percentages of total sales: YEAR ENDED AUGUST 31, 2000 1999 1998 Sales 100.0% 100.0% 100.0% Cost of sales 43.4 43.8 39.1 Gross margin 56.6 56.2 60.9 Operating expenses: Selling, general and  administrative 46.0 42.4 40.5 Stock option purchase  and relocation costs 1.9 Depreciation and amortization 7.7 7.1 6.1 Restructuring costs (0.8) 2.9 Loss on impaired assets 3.0 Total operating expenses 54.8 55.4 46.6 Income from operations 1.8 0.8 14.3 Interest income 0.3 0.2 0.4 Interest expense (1.1) (1.8) (1.5) Net interest expense (0.8) (1.6) (1.1) Income (loss) before provision  (benefit) for income taxes  and change in accounting  principle 1.0 (0.8) 13.2 Provision (benefit) for  income taxes 1.7 (0.8) 5.5 (Loss) income before change  in accounting principle (0.7) (1.6) 7.7 Cumulative effect of change  in accounting principle,  net of tax (0.4) Net (loss) income (0.7) (1.6) 7.3 Preferred dividends (1.4) (0.3) (Loss) income available to  common shareholders (2.1)% (1.9)% 7.3% Sales Data: Consumer Products 51.8% 48.5% 47.4% Training and Education 36.7 37.1 37.9 International 8.5 9.1 8.2 Other 3.0 5.3 6.5