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Note 6 - Leases

9 Months Ended

Mar. 31, 2025

(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 two 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:

	March 31,
	2025		2024
Weighted average remaining lease term (in years)
Operating leases		5.5		5.6
Financing leases		2.0		3.0
Weighted average discount rate
Operating leases		6.0%		5.8%
Financing leases		5.6%		5.5%

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 March 31,						Nine months ended March 31,
	Statements of Comprehensive Income Location	2025			2024			2025			2024
Operating lease cost⁽¹⁾	SG&A expenses	$	8,164		$	8,006		$	24,452		$	23,824
Financing lease cost
Depreciation of property	SG&A expenses		87			120			260			368
Interest on lease liabilities	Interest and other financing costs		11			11			37			19
Short-term lease cost⁽²⁾	SG&A expenses		41			2			204			61
Variable lease cost⁽³⁾	SG&A expenses		2,602			2,522			7,522			7,313
Less: Sublease income	SG&A expenses		(412	)		(404	)		(1,223	)		(980	)
Total lease expense		$	10,493		$	10,257		$	31,252		$	30,605

(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 March 31, 2025 (in thousands):

Fiscal Year	Operating Leases			Financing Leases
2025 (remaining three months)	$	8,705		$	100
2026		32,990			398
2027		26,698			325
2028		23,466			-
2029		18,840			-
Thereafter		34,225			-
Total undiscounted future minimum lease payments		144,924			823
Less: imputed interest		(22,066	)		(44	)
Total present value of lease obligations⁽¹⁾	$	122,858		$	779

(1)	Excludes future commitments under short-term operating lease agreements of less than $0.1 million at March 31, 2025.

At March 31, 2025, we had 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 assets, which is expected within the next three months. These operating leases are for a period of five and ten years, respectively, and have aggregated undiscounted future lease payments of $2.7 million. At March 31, 2025, we did not have any financing leases that had not yet commenced.

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

	Nine months ended March 31,
	2025		2024
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows from operating leases	$	25,877	$	24,496
Operating cash flows from financing leases	$	262	$	350
Operating lease assets obtained in exchange for operating lease liabilities	$	15,043	$	16,942
Financing lease obligations obtained in exchange for new financing lease assets	$	-	$	825