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Note 6 - Leases

6 Months Ended

Dec. 31, 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 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:

	December 31,
	2024			2023
Weighted average remaining lease term (in years)
Operating leases		5.5			5.7
Financing leases		2.3			2.5
Weighted average discount rate
Operating leases		5.9	%		5.7	%
Financing leases		5.6	%		4.4	%

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 December 31,						Six months ended December 31,
	Statements of Comprehensive Income Location	2024			2023			2024			2023
Operating lease cost⁽¹⁾	SG&A expenses	$	8,170		$	7,893		$	16,288		$	15,818
Financing lease cost
Depreciation of property	SG&A expenses		88			124			173			248
Interest on lease liabilities	Interest and other financing costs		12			4			25			8
Short-term lease cost⁽²⁾	SG&A expenses		64			2			164			59
Variable lease cost⁽³⁾	SG&A expenses		2,482			2,365			4,919			4,791
Less: Sublease income	SG&A expenses		(352	)		(288	)		(757	)		(575	)
Total lease expense		$	10,464		$	10,100		$	20,812		$	20,349

(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 December 31, 2024 (in thousands):

Fiscal Year	Operating Leases			Financing Leases
2025 (remaining six months)	$	17,305		$	199
2026		32,189			398
2027		25,776			326
2028		22,545			-
2029		18,029			-
Thereafter		31,104			-
Total undiscounted future minimum lease payments		146,948			923
Less: imputed interest		(22,188	)		(55	)
Total present value of lease obligations⁽¹⁾	$	124,760		$	868

(1)	Excludes future commitments under short-term operating lease agreements of less than $0.1 million at December 31, 2024.

At December 31, 2024, we have one operating lease for a retail design center which has not yet commenced and is therefore not part of the tables above nor included in the lease ROU assets and liabilities. This lease will commence when we obtain possession of the underlying leased asset, which is expected within the next six months. This operating lease is for a period of 10 years and has an aggregate undiscounted future lease payment of $2.2 million. At December 31, 2024, we did not have any financing leases that had not yet commenced.

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

	Six months ended December 31,
	2024		2023
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows from operating leases	$	17,257	$	16,071
Operating cash flows from financing leases	$	172	$	263
Operating lease assets obtained in exchange for operating lease liabilities	$	10,111	$	10,092
Financing lease obligations obtained in exchange for new financing lease assets	$	-	$	-