Note 6 - Leases

12 Months Ended

Jun. 30, 2025

(6)

Leases

We recognize leases on our consolidated balance sheets as a 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:

	June 30,
	2025			2024
Weighted average remaining lease term (in years)
Operating leases		5.6			5.6
Financing leases		1.8			2.8
Weighted average discount rate
Operating leases		6.0	%		5.8	%
Financing leases		5.6	%		5.6	%

The following table discloses the location and amount of our operating and financing lease assets and liabilities within our consolidated balance sheets (in thousands):

		June 30,
	Consolidated Balance Sheet Location	2025		2024
Assets
Operating leases	Operating lease right-of-use assets (non-current)	$	109,173	$	114,242
Financing leases	Property, plant and equipment, net		630		930
Total lease assets		$	109,803	$	115,172
Liabilities
Current:
Operating leases	Current operating lease liabilities	$	27,403	$	27,387
Financing leases	Other current liabilities		371		336
Noncurrent:
Operating leases	Operating lease liabilities, long-term		96,263		100,897
Financing leases	Other long-term liabilities		319		658
Total lease liabilities		$	124,356	$	129,278

The ROU assets by segment are as follows (in thousands):

	June 30,
	2025		2024
Retail	$	109,173	$	114,242
Wholesale		630		930
Total ROU assets	$	109,803	$	115,172

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

		Fiscal Year Ended June 30,
	Statements of Comprehensive Income Location	2025			2024
Operating lease cost⁽¹⁾	SG&A expenses	$	32,748		$	31,959
Financing lease cost
Depreciation of property	SG&A expenses		346			453
Interest on lease liabilities	Interest expense and other financing costs		47			33
Short-term lease cost⁽²⁾	SG&A expenses		216			85
Variable lease cost⁽³⁾	SG&A expenses		9,983			9,710
Less: Sublease income	SG&A expenses		(1,636	)		(1,371	)
Total lease expense		$	41,704		$	40,869

(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 consolidated balance sheets 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 index-based changes in rent, certain non-lease components such as maintenance, 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 liability due to uncertainty of the payment amount and 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 the consolidated balance sheets at June 30, 2025 (in thousands):

Fiscal Year	Operating Leases			Financing Leases
2026	$	33,917		$	398
2027		28,218			326
2028		24,979			-
2029		20,363			-
2030		13,677			-
Thereafter		25,098			-
Total undiscounted future minimum lease payments		146,252			724
Less: imputed interest		(22,586	)		(34	)
Total present value of lease obligations⁽¹⁾	$	123,666		$	690

(1)

We had no future commitments under short-term operating lease agreements as of June 30, 2025.

At June 30, 2025, we had one retail design center operating lease 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 to be during the first quarter of fiscal 2026. The operating lease is for a period of five years and has aggregate undiscounted future lease payments of $1.0 million. At June 30, 2025, we did not have any financing leases that had not commenced.

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

	Fiscal Year Ended June 30,
	2025		2024
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows from operating leases	$	34,450	$	32,981
Operating cash flows from financing leases	$	351	$	421
Operating lease assets obtained in exchange for new operating lease liabilities	$	22,618	$	23,690
Financing lease obligations obtained in exchange for new financing lease assets	$	47	$	780

We sublease a select number of our leased locations, which generally match those of the leases we have with the lessor. At June 30, 2025, future minimum leases payments due to us under those subleases were as follows (in thousands):

	Sublease
Fiscal Year	Income
2026	$	1,504
2027		1,194
2028		791
2029		772
2030		633
Thereafter		1,027
Total future minimum sublease income	$	5,921