Note 6. Leases (Notes)

6 Months Ended

Dec. 31, 2020

Leases of Lessee Disclosure [Text Block]

Leases

We have operating leases for showrooms, manufacturing facilities, warehouses, certain offices, and other facilities to support our operations in addition to select equipment that expire at various dates through 2027. We have no financing leases. Certain operating lease agreements include rental payments adjusted periodically for inflationary indexes. Additionally, some leases include options to renew or terminate the leases which can be exercised at our discretion. Lease terms include the noncancellable portion of the underlying leases along with any reasonably certain lease periods associated with available renewal periods.

Certain leases have terms that are dependent upon the occurrence of events, activities, or circumstances in lease agreements and incur variable lease expense driven by warehouse square footage utilized, property taxes assessed, and other non-lease component charges. Variable lease expense is presented as operating expense in our Condensed Consolidated Statements of Income and Comprehensive Income in the same line item as expense arising from fixed lease payments for operating leases. For all classes of assets, we do not separate non-lease components of a contract from the lease components to which they relate. We do not recognize a right-of-use asset or lease liability for short-term leases that have a lease term of twelve months or less.

The components of our lease expenses are as follows:


	Three Months Ended				Six Months Ended
	December 31				December 31
(Amounts in Millions)	2020		2019		2020		2019
Operating lease expense	$	1.0	$	0.8	$	1.8	$	1.6

Variable lease expense	0.6		0.6		1.3		1.3
Total lease expense	$	1.6	$	1.4	$	3.1	$	2.9

Right-of-use assets for operating leases are tested for impairment in the same manner as long-lived assets used in operations as explained in Note 13 - Fair Value of Notes to Condensed Consolidated Financial Statements. During the first quarter of fiscal year 2021, we recorded $0.2 million of right-of-use asset and associated leasehold improvement impairment resulting from consolidating a production facility in Red Lion, Pennsylvania into our Baltimore, Maryland facility as part of our transformation restructuring plan. During the first quarter of fiscal year 2020, we recorded $2.2 million of right-of-use asset and associated leasehold improvement impairment resulting from ceasing use of four furniture showrooms as part of our transformation restructuring plan. The impairment charges are included in the Restructuring Expense line item on our Condensed Consolidated Statements of Income.

Supplemental cash flow and other information related to leases are as follows:


	Six Months Ended
	December 31
(Amounts in Millions)	2020			2019
Cash flow information:
Operating lease payments impacting lease liability	$	2.5		$	2.4
Non-cash impact of obtaining new right-of-use assets	$	5.1		$	0.1

	As of
	December 31
(Amounts in Millions)	2020			2019
Other information:
Weighted-average remaining term (in years)	4.6			6.0
Weighted-average discount rate	4.5		%	4.6		%

The following table summarizes the future minimum lease payments as of December 31, 2020:


	Fiscal Year Ended
(Amounts in Millions)	June 30 (1)
2021	$	3.5
2022	6.6
2023	5.6
2024	3.4
2025	2.7
Thereafter	2.6
Total lease payments	$	24.4
Less interest	2.3
Present value of lease liabilities	$	22.1

(1) Lease payments include options to extend lease terms that are reasonably certain of being exercised. The payments exclude legally binding minimum lease payments for leases signed but not yet commenced.