Page 66 - 2018 Annual Report

Table of Contents
NOTE 11: LEASES
The Company leases many service center and distribution center facilities, vehicles and equipment under non- cancelable lease agreements accounted for as operating leases. The minimum annual rental commitments under non-cancelable operating leases as of June 30, 2018 are as follows:
During Fiscal Years 2019
2020
2021
2022
2023
Thereafter
Total minimum lease payments
$ 38,100 27,500 17,800 11,200 5,800 11,000 $ 111,400
Rental expense incurred for operating leases, principally from leases for real property, vehicles and computer equipment was $41,000 in 2018, $35,900 in 2017 and $37,300 in 2016, and was classified within selling, distribution and administrative expenses in the statements of consolidated income.
The Company maintains lease agreements for many of the operating facilities of businesses it acquires from previous owners. In many cases, the previous owners of the business acquired become employees of Applied and occupy management positions within those businesses. The payments under lease agreements of this nature totaled $2,400, $2,400, and $3,800 and in 2018, 2017, and 2016, respectively.
NOTE 12: SEGMENT AND GEOGRAPHIC INFORMATION
Effective July 1, 2017, the Company completed a number of changes to its organizational structure that resulted in a change in how the Company manages its businesses, allocates resources and measures performance. As a result, the Company has revised its reportable segments to reflect how management currently reviews financial information and makes operating decisions. All Canadian and Mexican subsidiaries are now grouped under the Service Center Based Distribution segment. All prior-period amounts have been adjusted to reflect the reportable segment change.
The Company's reportable segments are: Service Center Based Distribution and Fluid Power & Flow Control. These reportable segments contain the Company's various operating segments which have been aggregated based upon similar economic and operating characteristics. The Service Center Based Distribution segment provides customers with solutions to their maintenance, repair and original equipment manufacturing needs through the distribution of industrial products including bearings, power transmission components, fluid power components and systems, industrial rubber products, linear motion products, tools, safety products, and other industrial and maintenance supplies. The Fluid Power & Flow Control segment distributes engineered fluid power components and specialty flow control solutions and operates shops that assemble fluid power systems and components, performs equipment repair, and offers technical advice to customers.
The accounting policies of the Company’s reportable segments are generally the same as those described in note 1. Intercompany sales, primarily from the Fluid Power & Flow Control segment to the Service Center Based Distribution segment of $25,556, $22,719, and $20,261, in 2018, 2017, and 2016, respectively, have been eliminated in the following table.
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