| Lessee, Leases [Text Block] |
We recognize leases on our balance sheet 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 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:
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Fiscal Year Ended
June 30,
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Statements of Comprehensive Income Location
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2023
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2022
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Operating lease cost(1)
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SG&A expenses
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$ |
30,235 |
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$ |
30,261 |
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Financing lease cost
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Depreciation of property
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SG&A expenses
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503 |
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|
489 |
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Interest on lease liabilities
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Interest expense and other financing costs
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26 |
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24 |
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Short-term lease cost(2)
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SG&A expenses
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1,099 |
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1,222 |
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Variable lease cost(3)
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SG&A expenses
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9,117 |
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9,351 |
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Less: Sublease income
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SG&A expenses
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(1,162 |
) |
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(1,384 |
) |
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Total lease expense
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$ |
39,818 |
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$ |
39,963 |
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The following table discloses the location and amount of our operating and financing lease assets and liabilities within our consolidated balance sheet (in thousands):
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June 30,
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Consolidated Balance Sheet Location
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2023
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2022
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Assets
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Operating leases
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Operating lease right-of-use assets (non-current)
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$ |
115,861 |
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$ |
100,782 |
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Financing leases
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Property, plant and equipment, net
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550 |
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1,060 |
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Total lease assets
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$ |
116,411 |
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$ |
101,842 |
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Liabilities
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Current:
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Operating leases
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Current operating lease liabilities
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$ |
26,045 |
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$ |
25,705 |
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Financing leases
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Other current liabilities
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378 |
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535 |
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Noncurrent:
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Operating leases
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Operating lease liabilities, long-trem
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104,301 |
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89,506 |
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Financing leases
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Other long-term liabilities
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204 |
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579 |
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Total lease liabilities
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$ |
130,928 |
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$ |
116,325 |
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The ROU assets by segment are as follows (in thousands):
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June 30,
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2023
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2022
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Retail
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$ |
115,861 |
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$ |
100,800 |
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Wholesale
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550 |
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1,042 |
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Total ROU assets
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$ |
116,411 |
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$ |
101,842 |
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The following table discloses the location and amount of our operating and financing lease costs within our consolidated statements of comprehensive income (in thousands):
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Fiscal Year Ended
June 30,
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Statements of Comprehensive Income Location
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2023
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2022
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Operating lease cost(1)
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SG&A expenses
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$ |
30,235 |
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$ |
30,261 |
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Financing lease cost
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|
|
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|
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Depreciation of property
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SG&A expenses
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|
503 |
|
|
|
489 |
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Interest on lease liabilities
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Interest expense and other financing costs
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|
26 |
|
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24 |
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Short-term lease cost(2)
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SG&A expenses
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1,099 |
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1,222 |
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Variable lease cost(3)
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SG&A expenses
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9,117 |
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9,351 |
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Less: Sublease income
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SG&A expenses
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(1,162 |
) |
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(1,384 |
) |
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Total lease expense
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$ |
39,818 |
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$ |
39,963 |
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(1)
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Lease expense for operating leases consists of both fixed and variable components. Expense related to fixed lease payments are recognized on a straight-line basis over the lease term.
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(2)
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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.
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(3)
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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 lease liability due to uncertainty of the payment amount and are recorded as expense in the period incurred.
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The table below reconciles the undiscounted future minimum lease payments (displayed 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 as of June 30, 2023 (in thousands):
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Fiscal Year
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Operating Leases
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Financing Leases
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2024
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$ |
32,145 |
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$ |
392 |
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2025
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29,607 |
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80 |
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2026
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25,520 |
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72 |
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2027
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19,127 |
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66 |
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2028
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15,947 |
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- |
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Thereafter
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30,007 |
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- |
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Total undiscounted future minimum lease payments
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152,353 |
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610 |
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Less: imputed interest
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(22,007 |
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(28 |
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Total present value of lease obligations(1)
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$ |
130,346 |
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$ |
582 |
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(1) Excludes future commitments under short-term operating lease agreements of less than $0.1 million as of June 30, 2023.
As of June 30, 2023, we did not have any operating or financing leases that have not yet commenced.
Other supplemental information for our leases is as follows (in thousands):
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Fiscal Year Ended
June 30,
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2023
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2022
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Cash paid for amounts included in the measurement of lease liabilities
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Operating cash flows from operating leases
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$ |
31,013 |
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$ |
33,588 |
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Operating cash flows from financing leases
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$ |
525 |
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$ |
512 |
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Operating lease assets obtained in exchange for new operating lease liabilities
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$ |
40,240 |
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$ |
18,674 |
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Financing lease obligations obtained in exchange for new financing lease assets
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$ |
- |
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$ |
315 |
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We sublease a small number of our leased locations. The terms of these leases generally match those of the lease we have with the lessor. As of June 30, 2023, future minimum leases payments due to us under those subleases were as follows (in thousands):
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Sublease
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Fiscal Year
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Income
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2024
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$ |
1,616 |
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2025
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1,641 |
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2026
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1,509 |
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2027
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1,171 |
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2028
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634 |
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Thereafter
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2,242 |
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Total future minimum sublease income
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$ |
8,813 |
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Sale-leaseback transaction. On August 1, 2022, we completed a sale-leaseback transaction with an independent third party for the land, building and related fixed assets of a retail design center. The design center was leased back to Ethan Allen via a multi-year operating lease agreement. As part of the transaction, we received net proceeds of $8.1 million, which resulted in a pre-tax gain of $1.8 million recorded within Restructuring and other impairment charges, net of gains and $5.2 million deferred as a liability to be amortized to Restructuring and other impairment charges, net of gains over the term of the related lease. For the year ended June 30, 2023, we amortized $2.4 million of this deferred liability as a gain within Restructuring and other impairment charges, net of gains. As of June 30, 2023, the deferred liability balance was $2.8 million, with $2.6 million in Other current liabilities and $0.2 million in Other long-term liabilities on our consolidated balance sheet.
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