LEASES
The Company’s operating lease expense is recognized on a straight-line basis over the lease term and is recorded in selling, distribution, and administrative expense on the statements of consolidated income. Operating lease costs and short-term lease costs were $47,591 and $14,458, respectively, for the year ended June 30, 2025 and $38,905 and $12,683, respectively, for the year ended June 30, 2024. Variable lease costs and sublease income were not material.
Information related to operating leases is as follows:
| | | | | | | | | | | | | | |
| June 30, | | 2025 | | 2024 |
| Operating lease assets, net | | $ | 188,654 | | | $ | 133,289 | |
| | | | |
| Operating lease liabilities | | | | |
| Other current liabilities | | $ | 39,776 | | | $ | 33,466 | |
| Other liabilities | | 158,544 | | | 104,143 | |
| Total operating lease liabilities | | $ | 198,320 | | | $ | 137,609 | |
| | | | | | | | | | | | | | |
| June 30, | | 2025 | | 2024 |
| Weighted average remaining lease term (years) | | 6.6 | | 5.5 |
| Weighted average incremental borrowing rate | | 5.01 | % | | 4.51 | % |
| | | | | | | | | | | | | | |
| Year Ended June 30, | | 2025 | | 2024 |
| Cash paid for operating leases | | $ | 45,919 | | | $ | 38,130 | |
| Right of use assets obtained in exchange for new operating lease liabilities | | $ | 98,196 | | | $ | 67,535 | |
The table below summarizes the aggregate maturities of liabilities pertaining to operating leases with terms greater than one year for each of the next five years:
| | | | | |
| Fiscal Year | Maturity of Operating Lease Liabilities |
| 2026 | $ | 48,696 | |
| 2027 | 42,252 | |
| 2028 | 34,087 | |
| 2029 | 27,723 | |
| 2030 | 18,787 | |
| Thereafter | 65,160 | |
| Total lease payments | 236,705 | |
| Less interest | 38,385 | |
| Present value of lease liabilities | $ | 198,320 | |
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 $2,100 in fiscal 2025, $2,250 in fiscal 2024, and $1,500 in fiscal 2023.
About Leases Disclosures
Lease disclosures under ASC 842 provide a comprehensive view of a company's leased asset portfolio, including the split between operating and finance leases, discount rates used to present-value future payments, and the maturity schedule of lease obligations. This section reveals a significant source of off-balance-sheet commitments that were largely hidden before the current standard.
Key signals: the weighted-average discount rate affects the size of recorded lease liabilities — a higher rate reduces the reported obligation, so compare the chosen rate against the company's incremental borrowing rate. The operating versus finance lease mix affects both EBITDA and operating income presentation. Watch the maturity table for concentration risk: large payment cliffs in specific years may create cash flow pressure. Variable lease payments excluded from the liability measurement represent real obligations that do not appear on the balance sheet. Compare total lease costs against prior-year operating lease expense to assess the true economic burden.