CESSATION OF MINING AT LEASED PUEBLO GRAVEL SITE

12 Months Ended

Dec. 28, 2019

CESSATION OF MINING AT LEASED PUEBLO GRAVEL SITE

CESSATION OF MINING AT LEASED PUEBLO GRAVEL SITE

2. CESSATION OF MINING AT LEASED PUEBLO GRAVEL SITE

Subsequent to the end of the third quarter, on October 9, 2019, the Company and Valco filed a Joint Notice of Settlement regarding the Company’s previously disclosed litigation, Continental Materials Corporation v. Valco, Inc., Civil Action No. 2014-cv-2510, filed in the United States District Court for the District of Colorado. The Settlement stated that the parties had reached a settlement agreement resolving all claims. Trial had previously been scheduled for October 21, 2019. On October 16, 2019, the Company and Valco filed a Stipulated Motion for Dismissal with Prejudice which stated: the parties “agree that this matter, including all claims and counterclaims, dismissed with prejudice and without costs, each party to bear its own attorneys’ fees.” The Court entered the Order of Dismissal with Prejudice on October 16, 2019.  

As part of the Settlement, the Company agreed to pay Valco $9,000,000, which included purchase of previously leased land. There is no intention to resume mining of the property that ceased several years prior when litigation began. As the litigation claim was a known event prior to the third quarter balance sheet date, the Company recognized the portion of the agreement related to the legal settlement in its financial statements for the period ended September 28, 2019. Since the asset purchase agreement was not a known event prior to the balance sheet date it was not recorded in the financial statements for the period ended September 28, 2019. The Company used its best estimate, based on currently available information, to record an estimated loss on litigation settlement of $6,400,000 for the third quarter of 2019. During the fourth quarter of 2019, a third-party appraisal of the property was obtained which valued the land at $2,200,000. Using this valuation, the Company recorded the property purchase in the fourth quarter and revised the loss on litigation settlement to $6,800,000 for the year-ended December 28, 2019. See Note 20 for discussion of asset retirement obligation and related asset impairment related to the purchased property.