The MD&A is based upon, and should be read in conjunction with, our Consolidated Financial Statements and related Notes included under Item 8 of this Annual Report on Form 10-K.

Impact of COVID-19 on our Business

Our competitive advantages arise from:

? offering a wide array of custom made-to-order products across upholstery, case

goods, and accent product categories;

? complimentary design service of our interior design professionals combined

? our strong retail network, both of Company-operated locations and independent

A summary of our key operating metrics is presented in the following table (in millions, except per share data).

Measures section within this MD&A for the reconciliation of U.S. generally

accepted accounting principles ("GAAP") to adjusted key financial metrics.

The following table shows selected design center location information.

(in thousands, except per share data) Fiscal Year Ended

Diluted EPS was $4.05 compared to $2.37 per diluted share in the prior year. Adjusted diluted EPS was $3.93, up 65.8%. Our operating margin expansion, combined with double-digit delivered sales growth, helped generate record profits for the full fiscal 2022 year.

Regulation G Reconciliations of Non-GAAP Financial Measures

Despite the limitations of these non-GAAP financial measures, we believe these adjusted financial measures and the information they provide are useful in viewing our performance using the same tools that management uses to assess progress in achieving our goals. Adjusted measures may also facilitate comparisons to our historical performance.

The following tables below show a reconciliation of non-GAAP financial measures used in this filing to the most directly comparable GAAP financial measures.

Gain on sale of property, plant and equipment (retail) (1,518 )

Impairment of long-lived assets and lease exit costs (retail)

(1) Calculated using a tax rate of 25.1% in current fiscal year and 24.5% in

The following table illustrates the main components of our cash flows for each of the last three fiscal years (in millions):

Total used in investing activities $ (14.0 ) $ (7.1 )

Exchange Rate Changes. Due to changes in exchange rates, our cash and cash equivalents decreased by $0.1 million during 2022. These changes had an immaterial impact on our cash balances held in Canada, Mexico, and Honduras.

Capital Resources, including Material Cash Requirements

Letters of Credit. At June 30, 2022 and 2021, there was $4.0 million and $5.0 million, respectively, of standby letters of credit outstanding under the Facility.

Acquisitions. From time to time, we acquire design centers from our independent retailers in arm's length transactions. There were no independent retailer acquisitions in fiscal 2022 or fiscal 2021.

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? On August 3, 2021, our Board declared a $0.75 per share special cash dividend

in addition to our regular quarterly cash dividend of $0.25 per share, which

? On November 30, 2021, our Board increased our regular quarterly cash dividend

? On January 25, 2022, our Board declared a regular quarterly cash dividend of

? On April 26, 2022, our Board increased our regular quarterly cash dividend by

Our material cash requirements for our contractual obligations as of June 30, 2022 were as follows:

? Operating Leases. Our operating lease obligations decreased from $143.6

million last year to $131.6 million at June 30, 2022 due to monthly lease

payments made to landlords and the exiting of certain retail leased spaces in

the past 12 months partially offset by new leases and modifications to

existing leases entered into throughout the fiscal 2022 year. We enter into

operating leases in the normal course of business. Most lease arrangements

provide us with the option to renew the leases at defined terms. During fiscal

2022, we entered into four new leases and modified 21 other leases in the form

of a renewal or extension to the existing leased space. For more information

on our operating leases, see Note 6, Leases, in the notes to the Consolidated

Financial Statements included in Item 8 of this Annual Report on Form 10-K.

? Open Purchase Orders. We had purchase obligations, defined as agreements that

are enforceable and legally binding that specify all significant terms,

including fixed or minimum quantities to be purchased, of $40.8 million at

June 30, 2022, down from $50.2 million a year ago. We do, in the normal course

of business, regularly initiate purchase orders for the procurement of (i)

selected finished goods sourced from third-party suppliers, (ii) lumber,

fabric, leather and other raw materials used in production, and (iii) certain

outsourced services. All purchase orders are based on current needs and are

fulfilled by suppliers within short time periods. At June 30, 2022, our open

purchase orders with respect to such goods and services totaled $40.8 million

and are to be paid in less than one year. The decrease in purchase orders was

primarily due to lower open import vendor purchase orders as lead times have

decreased from improved import product receipts combined with a reduction in

upholstery purchase orders due to timing of inventory receipts, the

stabilization of inventory levels and the slowing of written order trends,

which has caused us to reduce our purchase order quantities to prevent excess

? Long-term Debt. We had no outstanding borrowings under our revolving credit

facility at June 30, 2022 or June 30, 2021, as we repaid $50.0 million in

September 2020. Further discussion of our contractual obligations associated

with long-term debt can be found in Note 11, Credit Agreement, in the notes to

the Consolidated Financial Statements included in Item 8 of this Annual Report

? Other Purchase Obligations. Other purchase commitments for services such as

telecommunication, computer-related software, royalties, web development,

insurance and other maintenance contracts was $19.7 million as of June 30,

2022, up from $8.8 million, primarily due to timing of contract signing and

extensions. Significant multi-year contracts were extended in fiscal 2022 and

include telecom services for our retail design centers, Microsoft Office

software, our retail accounting and order entry system, web and e-commerce

marketing tool software and technology used to create our 3D room planner and

The following critical accounting estimates affect our consolidated financial statements.

See Note 3, Summary of Significant Accounting Policies, in the notes to our consolidated financial statements included under Part II, Item 8, for a full description of our significant accounting policies.

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