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Note 6 - Leases

3 Months Ended

Sep. 30, 2024

(6)

Leases

We recognize leases on our consolidated balance sheets as a right-of-use (“ROU”) asset and a lease liability. We have operating leases for many of our design centers that expire at various dates through fiscal 2040. We also lease certain tangible assets, including computer equipment and vehicles, with initial lease terms ranging from three to five years. We determine if a contract contains a lease at inception based on our right to control the use of an identified asset and our right to obtain substantially all of the economic benefits from the use of that identified asset. For purposes of measuring our ROU asset and lease liability, we determine our incremental borrowing rate by computing the rate of interest that we would have to pay to (i) borrow on a collateralized basis (ii) over a similar term (iii) at an amount equal to the total lease payments and (iv) in a similar economic environment.

The Company's lease terms and discount rates are as follows:

	September 30,
	2024	2023
Weighted average remaining lease term (in years)
Operating leases	5.6	5.8
Financing leases	2.6	2.2
Weighted average discount rate
Operating leases	5.9%	5.7%
Financing leases	5.6%	3.8%

The following table discloses the location and amount of our operating and financing lease costs within our consolidated statements of comprehensive income (in thousands):

		Three months ended September 30,
	Statements of Comprehensive Income Location	2024			2023
Operating lease cost⁽¹⁾	SG&A expenses	$	8,118		$	7,925
Financing lease cost
Depreciation of property	SG&A expenses		85			124
Interest on lease liabilities	Interest and other financing costs		13			4
Short-term lease cost⁽²⁾	SG&A expenses		100			58
Variable lease cost⁽³⁾	SG&A expenses		2,437			2,427
Less: Sublease income	SG&A expenses		(405	)		(288	)
Total lease expense		$	10,348		$	10,250

(1)

Lease expense for operating leases consists of both fixed and variable components. Expenses related to fixed lease payments are recognized on a straight-line basis over the lease term.

(2)

Leases with an initial term of 12 months or less are not recorded on the balance sheet and instead expensed on a straight-line basis over the lease term.

(3)

Variable lease payments are generally expensed as incurred, where applicable, and include certain non-lease components, such as maintenance, utilities, real estate taxes, insurance and other services provided by the lessor, and other charges included in the lease. In addition, certain of our equipment lease agreements include variable lease payments, which are based on the usage of the underlying asset. The variable portion of payments are not included in the initial measurement of the asset or lease liability due to uncertainty of the payment amount and are recorded as expense in the period incurred.

The following table reconciles the undiscounted future minimum lease payments (by year and in the aggregate) under noncancelable leases with terms of more than one year to the total lease liabilities recognized on our consolidated balance sheets at September 30, 2024 (in thousands):

Fiscal Year	Operating Leases			Financing Leases
2025 (remaining nine months)	$	25,838		$	283
2026		31,368			374
2027		24,670			317
2028		21,421			-
2029		16,877			-
Thereafter		28,864			-
Total undiscounted future minimum lease payments		149,038			974
Less: imputed interest		(22,716	)		(65	)
Total present value of lease obligations⁽¹⁾	$	126,322		$	909

(1)	Excludes future commitments under short-term operating lease agreements of $0.1 million at September 30, 2024.

At September 30, 2024, we have two operating leases for retail design centers which have not yet commenced and are therefore not part of the tables above nor included in the lease ROU assets and liabilities. These leases will commence when we obtain possession of the underlying leased asset, which is expected within the next six months. These two operating leases are each for a period of 10 years, respectively, and have aggregate undiscounted future lease payments of $4.1 million. At September 30, 2024, we did not have any financing leases that had not commenced.

Other supplemental information for our leases is as follows (in thousands):

	Three months ended September 30,
	2024		2023
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows from operating leases	$	8,466	$	8,200
Operating cash flows from financing leases	$	85	$	131
Operating lease assets obtained in exchange for operating lease liabilities	$	4,685	$	7,680
Financing lease obligations obtained in exchange for new financing lease assets	$	-	$	-