Chemed and each of its operating subsidiaries are service companies. As such, real estate leases comprise the largest lease obligation (and conversely, right of use asset) in our lease portfolio. VITAS has leased office space, as well as space for inpatient units (“IPUs”) and/or contract beds within hospitals. Roto-Rooter mainly has leased office space. Our leases have remaining terms of under 1 year to 13 years, some of which include options to extend the lease for up to 5 years, and some of which include options to terminate the lease within 1 year.

Roto-Rooter purchases equipment and leases it to certain of its independent contractors. We analyzed these leases in accordance with ASC 842 and determined they are operating leases. As a result, Roto-Rooter capitalizes the equipment underlying these leases, depreciates the equipment and recognizes rental income.

We do not currently have any finance leases, therefore all lease information disclosed is related to operating leases.


	September 30,		‎December 31,
	2024		2023
Assets
Operating lease assets	$	134,111	$	126,387

Liabilities
Current operating leases		42,490		38,635
Noncurrent operating leases		105,416		100,776
Total operating lease liabilities	$	147,906	$	139,411

The components of lease expense for the third quarter are as follows (in thousands):


	Three months ended September 30,
	2024		2023
Lease Expense (a)
Operating lease expense	$	16,548	$	14,999
Sublease income		(103)		(23)
Net lease expense	$	16,445	$	14,976

The components of lease expense for the first nine months are as follows (in thousands):


	Nine months ended September 30,
	2024		2023
Lease Expense (a)
Operating lease expense	$	47,821	$	44,811
Sublease income		(216)		(70)
Net lease expense	$	47,605	$	44,741

(a)Includes short-term leases and variable lease costs, which are immaterial. Included in both cost of services provided and goods sold and selling, general and administrative expenses.


	Nine months ended September 30,
	2024		2023
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows from leases	$	38,564	$	37,352

Leased assets obtained in exchange for new operating lease liabilities	$	43,759	$	21,630


Maturity of Operating Lease Liabilities (in thousands)

2024	$	13,037
2025		46,769
2026		36,143
2027		23,190
2028		16,816
Thereafter		26,388
Total lease payments	$	162,343
Less: interest		(14,437)
Total liability recognized on the balance sheet	$	147,906

For leases commencing prior to April 2019, minimum rental payments exclude payments to landlords for real estate taxes and common area maintenance. Operating lease payments include $3.1 million related to extended lease terms that are reasonably certain of being exercised and exclude $1.8 million of lease payments for leases signed but not yet commenced.