During the third quarter of fiscal 2026, we determined that the Home Meridian segment no longer aligned with our long-term strategy to streamline our portfolio and enhance profitability by focusing on brands that generate consistent earnings. As a result, we initiated a process to sell two brands in the segment. On December 1, 2025, we entered into an Asset Purchase Agreement (the “Asset Purchase Agreement”) with a buyer to sell the Company’s Pulaski Furniture (“PFC”) and Samuel Lawrence (“SLF”) casegoods brands, including specified assets and liabilities associated with those brands. We retain the Samuel Lawrence brand in connection with the operation of its hospitality business.

On December 12, 2025, the Company completed the sale and received cash proceeds of approximately $5.5 million, representing the estimated net book value of the assets at closing, less a holdback amount of approximately $0.6 million, in accordance with the terms of the purchase agreement. Final transaction pricing, including working capital adjustments, resulted in approximately $0.3 million below the estimated fair value less costs to sell determined at the measurement date and the final net proceeds received.

Following the sale, the Home Meridian segment was eliminated, with its remaining Samuel Lawrence Hospitality brand reclassified into the “All Other” category.

We believe this transaction represented a single disposal plan that constituted a strategic shift that materially affects our operations and financial results. Accordingly, the financial results of the PFC and SLF businesses are reflected in our consolidated financial statements as discontinued operations for all periods presented.

Although the divestiture was completed in the prior fiscal year, current-period activity in discontinued operations primarily reflected tariff recoveries the Company received during the second quarter of fiscal 2027 associated with the divested business. Approximately $612,000 to be credited to customers were recorded as a reduction of revenue, while $1.6 million recoveries of tariff costs previously recognized in cost of sales were recorded as a reduction of cost of sales. The Company also recorded $54,000 of interest income.

Current-period activity also included approximately $0.5 million of additional charges arising from the net settlement of various divestiture-related balances with the buyer. These charges consisted of a $327,000 reduction of revenue for sales allowances, a $132,000 increase in cost of sales and a $74,000 additional loss on the divestiture related to final working capital adjustments.

The following table represents summarized statements of operations information of carrying amounts of major classes of line items constituting pretax income or loss of discontinued operations included as part of discontinued operations:

The significant components included in our condensed consolidated statements of cash flows for the discontinued operations are as follows: