Note 12 - Discontinued Operations

9 Months Ended

Aug. 27, 2022

Notes to Financial Statements

Disposal Groups, Including Discontinued Operations, Disclosure [Text Block]

12. Discontinued Operations

On January 31, 2022, we entered into a definitive agreement to sell substantially all of the assets of Zenith to J.B. Hunt. The sale was completed on February 28, 2022, at which time we received the following net proceeds:

Sales price prior to post-closing working capital adjustment	$	86,939
Less:
Amount held in escrow for contingencies related to representations and warranties (1)		1,000
Seller expenses paid at closing		418
Working capital adjustment paid to buyer		987
Net proceeds from the sale (2)	$	84,534

(1) To be held in escrow until the first anniversary of the sale, at which time any amount not distributed or reserved for specified claims will be released to the Company. This amount is included in other current assets in the accompanying condensed consolidated balance sheet at August 27, 2022.

(2) Included in cash flows from investing activities in the accompanying condensed consolidated statement of cash flows for the nine months ended August 27, 2022.

The sales price was subject to a customary post-closing working capital adjustment which was paid during the third quarter of fiscal 2022. Including the effect of the working capital adjustment, we recognized a pre-tax gain from the sale of Zenith of $53,061.

The operations of our logistical services segment, which consisted entirely of the operations of Zenith, are presented in the accompanying condensed consolidated statements of income as discontinued operations, and the assets sold to and liabilities assumed by J.B. Hunt are presented in the accompanying condensed consolidated balance sheet as assets and liabilities of discontinued operations held for sale as of November 27, 2021.

The following table summarizes the major classes of assets and liabilities of the discontinued operations held for sale as reported in the condensed consolidated balance sheet as of November 27, 2021:

	November 27, 2021
Carrying amounts of major classes of assets included as part of discontinued operations:
Accounts receivable, net	$	7,601
Other current assets		3,463
Property and equipment, net		24,898
Goodwill and other intangible assets		9,094
Right of use assets under operating leases		18,193
Other		572
	$	63,821
Balance sheet classification:
Current assets of discontinued operations held for sale	$	11,064
Long-term assets of discontinued operations held for sale		52,757
Total assets of discontinued operations held for sale	$	63,821
Carrying amounts of major classes of liabilities included as part of discontinued operations:
Accounts payable	$	4,336
Accrued compensation and benefits		3,295
Current portion operating lease obligations		7,458
Other current liabilites and accrued expenses		1,006
Long-term portion of operating lease obligations		10,996
Other long-term liabilities		5,214
	$	32,305
Balance sheet classification:
Current liabilities of discontinued operations held for sale	$	16,095
Long-term liabilities of discontinued operations held for sale		16,210
Total liabilities of discontinued operations held for sale	$	32,305

Following the sale of Zenith, certain of Zenith’s liabilities primarily representing reserves and accrued liabilities for pre-disposal workers’ compensation, health insurance and auto liability claims were retained by Bassett. The remaining balance of these reserves and accruals total $537 at August 27, 2022 and are included in other current liabilities and accrued expenses in the accompanying condensed consolidated balance sheet.

The following table summarizes the major classes of line items constituting income of the discontinued operations, as reported in the condensed consolidated statements of income for the three and nine months ended August 27, 2022 and August 28, 2021:

	Quarter Ended						Nine Months Ended
	August 27, 2022			August 28, 2021			August 27, 2022			August 28, 2021
Major line items constituting pretax income of discontinued operations:
Logistical services revenue	$	-		$	14,036		$	16,776		$	40,116
Cost of logistical services		-			14,522			15,001			38,849
Other loss, net		-			(79	)		(63	)		(188	)
Income (loss) from operations of logistical services		-			(565	)		1,712			1,079
Gain on disposal (less adjustments)		(193	)		-			53,061			-
Pretax income of discontinued operations		(193	)		(565	)		54,773			1,079
Income tax expense (benefit)		(48	)		(140	)		14,261			294
Income (loss) from discontinued operations, net of tax	$	(145	)	$	(425	)	$	40,512		$	785

The amounts for revenue and costs of logistical services shown above represent the results of Zenith’s business transactions with third parties. Zenith also charged Bassett for logistical services provided to our wholesale segment in the amount of $9,121 during the nine months ended August 27, 2022, and $7,164 and $23,409, respectively, for the three and nine months ended August 28, 2021. We have entered into a service agreement with J.B. Hunt for the continuation of these services for a period of seven years following the sale of Zenith. Subsequent to the sale, we incurred $10,307 and $19,852 of expense during the three and nine months ended August 27, 2022, respectively, for the performance of logistical services, of which $17,818 had been paid in cash as of August 27, 2022.

Included in other loss, net, is interest arising from finance leases assumed by J.B. Hunt as part of the transaction. Such interest amounted to $78 for the nine months ended August 27, 2022, and $86 and $207, respectively, for the three and nine months ended August 28, 2021.

The following table summarizes the cash flows generated by discontinued operations during the nine months ended August 27, 2022 and August 28, 2021:

	Nine Months Ended
	August 27, 2022			August 28, 2021
Cash provided by operating activities	$	1,681		$	3,231
Cash used in investing activities		(81	)		(2,706	)
Cash used in financing activities		(371	)		(834	)
Net cash provided by (used in) discontinued operations	$	1,229		$	(309	)