Discontinued Operations

9 Months Ended

Sep. 24, 2022

Discontinued Operations and Disposal Groups [Abstract]

Discontinued Operations

DISCONTINUED OPERATIONS

The Company has either sold or discontinued certain operations that are accounted for as "Discontinued Operations" under applicable accounting guidance. Discontinued operations are summarized as follows:

	Three Months Ended				Nine Months Ended
	September 24, 2022		September 25, 2021		September 24, 2022		September 25, 2021
Workers' compensation costs from former textile operations	$	(30)	$	(33)	$	(31)	$	(101)
Environmental remediation costs from former textile operations	(51)		(27)		(41)		(81)
Commercial business operations	(327)		2,394		(818)		(254)
Income (loss) from discontinued operations, before taxes	$	(408)	$	2,334	$	(890)	$	(436)
Income tax expense	—		1,498		—		912
Income (loss) from discontinued operations, net of tax	$	(408)	$	836	$	(890)	$	(1,348)

Workers' compensation costs from former textile operations

Undiscounted reserves are maintained for the self-insured workers' compensation obligations related to the Company's former textile operations. These reserves are administered by a third-party workers' compensation service provider under the supervision of Company personnel. Such reserves are reassessed on a quarterly basis. Pre-tax cost incurred for workers' compensation as a component of discontinued operations primarily represents a change in estimate for each period from unanticipated medical costs associated with the Company's obligations.

Environmental remediation costs from former textile operations

Reserves for environmental remediation obligations are established on an undiscounted basis. The Company has an accrual for environmental remediation obligations related to discontinued operations of $1,904 as of September 24, 2022 and $1,913 as of December 25, 2021. The liability established represents the Company's best estimate of possible loss and is the reasonable amount to which there is any meaningful degree of certainty given the periods of estimated remediation and the dollars applicable to such remediation for those periods. The actual timeline to remediate, and thus, the ultimate cost to complete such remediation through these remediation efforts, may differ significantly from the Company's estimates. Pre-tax cost for environmental remediation obligations classified as discontinued operations were primarily a result of specific events requiring action and additional expense in each period.

Commercial business operations

In accordance with the Asset Purchase Agreement dated September 13, 2021, the Company sold assets that include certain inventory, certain items of machinery and equipment used exclusively in the Commercial Business, and related intellectual property for a purchase price of $20,500. The Purchaser also assumed the liability to fulfill the orders represented by advance customer deposit liabilities of $3,127. As a result of the transaction the Company recognized a gain of $2.7 million.

The Company retained the Commercial Business’ cash deposits, all accounts receivable, and certain inventory and equipment. Additionally, the Company agreed not to compete with the specified commercial business and the Atlas|Masland markets for a period of 5 years following September 13, 2021. The agreement allows for the Company to sell the commercial inventory retained by the Company after the divestiture.

At closing, $2,100 of the proceeds were withheld and deposited in escrow to cover any claims arising with respect to the Commercial business for which the Company may be liable. The $2,100 was agreed to be released to the Company (net of claims paid, if any) in two installments with 50% of the escrow paid in 90 days from closing and the remaining amount paid 18 months from the closing date. The Company has received payment of the first installment and the remaining unpaid portion of $1,025 is recognized within current assets. As of September 24, 2022, the Company has not recognized amounts for potential indemnification settlements as those amounts cannot be reasonably estimated.

In order to release liens on certain fixed assets included in the Asset Purchase Agreement, the Company placed $2,100 in cash collateral in an account with the lender (Greater Nevada Credit Union). The remaining proceeds were applied to the Company's debt with its senior credit facility (Fifth Third Bank).

The Company reclassified the following assets and liabilities for discontinued operations in the accompanying consolidated balance sheets:

	As of
	September 24, 2022		December 25, 2021
Current Assets of Discontinued Operations:
Receivables, net	$	372	$	3,406
Inventories, net	338		1,927
Prepaid expenses	8		658
Current Assets Held for Discontinued Operations	718		5,991
Long Term Assets of Discontinued Operations:
Property, plant and equipment, net	273		292
Operating lease right of use assets	119		242
Other assets	1,363		2,218
Long Term Assets Held for Discontinued Operations	1,755		2,752
Current Liabilities of Discontinued Operations:
Accounts payable	130		2,133
Accrued expenses	2,078		3,062
Current portion of operating lease liabilities	119		167
Current Liabilities Held for Discontinued Operations	2,327		5,362
Long Term Liabilities of Discontinued Operations
Operating lease liabilities	—		75
Other long term liabilities	3,559		4,413
Long Term Liabilities Held for Discontinued Operations	$	3,559	$	4,488

For the three and nine months ended September 24, 2022 and September 25, 2021, the Company reclassified the following operations of the Commercial business included in discontinued operations in the accompanying consolidated statements of operations:

	Three Months Ended				Nine Months Ended
	September 24, 2022		September 25, 2021		September 24, 2022		September 25, 2021
Net sales	$	710	$	15,065	$	7,622	$	43,470
Cost of sales	929		12,086		7,247		34,679
Gross profit	(219)		2,979		375		8,791
Selling and administrative expenses	107		3,245		1,244		11,705
Other operating (income) expense	1		—		(51)		—
Discontinued loss, related to the divestiture of the Commercial business	(327)		(266)		(818)		(2,914)
Gain on sale of business	—		(2,660)		—		(2,660)
Income (loss) from discontinued Commercial operations before taxes	(327)		2,394		(818)		(254)