Quarterly report pursuant to Section 13 or 15(d)

Note 6 - Leases

Note 6 - Leases
9 Months Ended
Mar. 31, 2022
Notes to Financial Statements  
Lessee, Leases [Text Block]




We have operating leases for many of our design centers that expire at various dates through fiscal 2040. In addition, 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. Certain operating leases have renewal options and rent escalation clauses as well as various purchase options. We assess these options to determine if we are reasonably certain of exercising these options based on all relevant economic and financial factors. Any options that meet these criteria are included in the lease term at lease commencement. Most of our leases do not have an interest rate implicit in the lease. As a result, 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 incremental borrowing rate is subsequently reassessed upon a modification to the lease agreement. Some of our leases contain variable lease payments based on a consumer price index or percentage of sales, which are excluded from the measurement of the lease liability.


The Company's lease terms and discount rates are as follows:



March 31,






Weighted average remaining lease term (in years)


Operating leases

    5.9       6.3  

Financing leases

    1.9       2.9  

Weighted average discount rate


Operating leases

    4.1 %     4.2 %

Financing leases

    2.2 %     2.3 %


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,


Statement of Comprehensive Income Location










Operating lease cost(1)

Selling, general and administrative (“SG&A”) expenses

  $ 7,557     $ 7,618     $ 22,505     $ 22,571  

Financing lease cost


Depreciation of property

SG&A expenses

    119       247       371       542  

Interest on lease liabilities

Interest and other financing costs

    5       9       18       16  

Short-term lease cost(2)

SG&A expenses

    361       180       978       667  

Variable lease cost(3)

SG&A expenses

    2,417       2,362       7,101       6,975  

Less: Sublease income

SG&A expenses

    (292 )     (411 )     (1,091 )     (1,303 )

Total lease expense

  $ 10,167     $ 10,005     $ 29,882     $ 29,468  




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.




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.




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.



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 March 31, 2022 (in thousands):


Fiscal Year


Operating Leases


Financing Leases


2022 (remaining three months)

  $ 8,460     $ 123  


    28,780       490  


    23,678       320  


    19,912       8  


    16,189       -  


    36,572       -  

Total undiscounted future minimum lease payments

    133,591       941  

Less: imputed interest

    (16,165 )     (19 )

Total present value of lease obligations(1)

  $ 117,426     $ 922  




Excludes future commitments under short-term operating lease agreements of $0.4 million as of March 31, 2022.


As of  March 31, 2022, we did not have any operating leases which have not yet commenced. However, we have one financing lease which has not yet commenced and is therefore neither included in the tables above nor in the lease right-of-use assets and liabilities. The financing lease is for a period of five years and has aggregate undiscounted future lease payments of $0.4 million. This lease will commence when we obtain possession of the underlying leased asset, which is expected to occur in the fourth quarter of fiscal 2022.


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



Nine months ended

March 31,






Cash paid for amounts included in the measurement of lease liabilities


Operating cash flows from operating leases

  $ 25,027     $ 25,923  

Operating cash flows from financing leases

  $ 389     $ 455  

Operating lease assets obtained in exchange for operating lease liabilities

  $ 13,508     $ 23,672  


There were no non-cash financing lease obligations obtained in exchange for new financing lease assets during the nine months ended March 31, 2022. Financing lease obligations exchanged for new financing lease assets totaled $1.3 million during the same prior year period.