Note 12 - Discontinued Operations

6 Months Ended

May 27, 2023

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. During the second quarter of fiscal 2022, 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
Net proceeds from the sale	$	85,521

(1) This was held in escrow until the first anniversary of the sale, at which time the full amount was released to the Company on March 2, 2023. As of November 26, 2022, this amount is included in other current assets in the accompanying condensed consolidated balance sheets.

The sales price was subject to customary post-closing working capital adjustments. For the three and six months ended May 28, 2022 we recognized a pre-tax gain on the sale of $53,254 which included a preliminary estimate of the post-closing adjustments. Upon settlement of the post-closing adjustments, which were paid in the second half of fiscal 2022, the final pre-tax gain was $52,534.

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.

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 six months ended May 28, 2022:

	Quarter Ended		Six Months Ended
	May 28, 2022		May 28, 2022
Major line items constituting pretax income of discontinued operations:
Logistical services revenue	$	-	$	16,776
Cost of logistical services		-		15,001
Other loss, net		-		(63	)
Income from operations of logistical services		-		1,712
Gain on disposal		53,254		53,254
Pretax income of discontinued operations		53,254		54,966
Income tax expense		13,879		14,309
Income from discontinued operations, net of tax	$	39,375	$	40,657

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 six months ended May 28, 2022. Upon the sale of Zenith we entered into a service agreement with J.B. Hunt for the continuation of these services for a period of seven years. We incurred expense for logistical services performed by J.B. Hunt of $6,717 and $14,094 during the three and six months ended May 27, 2023, respectively, and $9,546 for the three and six months ended May 28, 2022, respectively.

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 six months ended May 28, 2022.

The following table summarizes the cash flows generated by discontinued operations during the six months ended May 28, 2022:

	Six Months Ended
	May 28, 2022
Cash provided by operating activities	$	1,681
Cash used in investing activities		(81	)
Cash used in financing activities		(371	)
Net cash provided by discontinued operations	$	1,229