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Leases

3 Months Ended

Sep. 30, 2023

Note (7) - Leases:

Company as Lessee

As of September 30, 2023, the Company had 32 facilities, consisting of warehouse facilities and administrative offices, financed under operating leases with lease term expirations between 2023 and 2030. Operating lease cost consists of monthly rental payments under the terms of the Company’s lease agreements recognized on a straight-line basis. Short-term lease costs are not material.

The following table provides details of the Company’s future minimum lease payments under operating lease liabilities recorded on the Company’s condensed consolidated balance sheet as of September 30, 2023. The table below does not include commitments that are contingent on events or other factors that are currently uncertain or unknown.

Fiscal years ending June 30,	Total Operating Lease Obligations (in thousands)
2024 (remainder of)	$	2,347
2025		2,574
2026		1,904
2027		1,019
2028		637
Thereafter		804
Total minimum lease payments		9,285
Less: amounts representing interest		603
Present value of minimum lease payments		8,682
Less: current portion		2,790
Long-term portion	$	5,892

The table below presents additional information related to the Company’s operating leases (in thousands):

	Three months ended September 30,
	2023		2022
Operating lease cost
Operating lease cost (1)	$	1,001	$	773
Variable lease cost (2)		1,076		18
Total lease cost	$	2,077	$	791

(1)

Expenses are classified as selling, general and administrative expenses in the Company’s condensed consolidated statements of operations.

(2)

Certain of the Company’s subsidiaries lease space at locations where (i) they install laundry equipment and customers pay for the use of equipment and (ii) the leased space is paid for as part of a revenue sharing arrangement. The Company did not report this variable lease cost in the quarter ended September 30, 2022 and does not believe the omission is material to the Company’s consolidated financial statements. These expenses are classified within cost of sales in the Company’s consolidated statements of operations.

The table below presents lease-related terms and discount rates as of September 30, 2023:

		September 30, 2023
Weighted average remaining lease terms
Operating leases		3.9 years
Weighted average discount rate
Operating leases		3.44 %

The table below presents supplemental cash flow information related to the Company’s long-term operating lease liabilities for the three months ended September 30, 2023 and 2022 (in thousands):

	Three months ended September 30,
	2023		2022
Cash paid for amounts included in the measurement of lease liabilities:	$	1,001	$	773
Operating lease right-of-use assets obtained in exchange for operating lease liabilities:	$	20	$	300

Company as Lessor

The Company derives a portion of its revenue from equipment leasing arrangements. Such arrangements provide for monthly payments covering the equipment provided, maintenance, and interest. These arrangements meet the criteria to be accounted for as sales type leases. Accordingly, revenue from the provision of the equipment is recognized upon delivery of the equipment and its acceptance by the customer. Upon the recognition of such revenue, an asset is established for the investment in sales type leases. Maintenance revenue and interest are recognized monthly over the lease term.

The future minimum lease payments receivable for sales type leases are as follows (in thousands):

Fiscal years ending June 30,	Total Minimum Lease Payments Receivable		Amortization of Unearned Income		Net Investment in Sales Type Leases
2024 (remainder of)	$	3,557	$	2,247	$	1,310
2025		3,683		2,411		1,272
2026		3,051		1,807		1,244
2027		2,248		1,197		1,051
2028		1,222		591		632
Thereafter		1,207		566		641
					$	6,148	*

* Excludes residual values of $2.9 million.

The total net investments in sales type leases, including stated residual values, as of September 30, 2023 and June 30, 2023 was $9.1 million and $9.0 million, respectively. The current portion of $1.6 million is included in other current assets in the consolidated balance sheets as of September 30, 2023 and June 30, and the long term portion of $7.5 million and $7.4 million is included in other assets in the consolidated balance sheets as of September 30, 2023 and June 30, 2023, respectively.