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LEASES | 9 Months Ended
--- | ---
Sep. 30, 2024
Leases [Abstract] |
LEASES | LEASES Operating Leases The Company leases most of its skilled nursing and assisted living facilities, as well as its office space and certain vehicles and equipment, under various non-cancelable operating lease agreements. These operating leases expire at various dates through 2049. Substantially all operating leases for skilled nursing and assisted living facilities are on a “triple-net” basis, which require lessees to pay for all insurance, repairs, utilities, and real property taxes assessed on the leased property, and most of the leases are guaranteed by the Company and/or its stockholders. For 11 of the facility operating leases, the Company holds an option to purchase the real estate which can be exercised at varying times until March 31, 2038. At lease inception it was determined that the exercise of each of the purchase options was not reasonably certain. Options on three of the leases have become subject to disagreement with the landlord regarding whether the option exercise window has closed, and the Company is working with the landlord to resolve the disagreement. All facility leases provide for an additional percentage rent based upon specified rates per the terms of the agreements. This additional percentage rent is variable and is expensed as incurred. Finance Leases The Company leases certain skilled nursing and assisted living facilities under finance lease agreements. The lease terms of two of the facility finance leases allow for purchase options to be exercised at varying times until May 22, 2027. The Company has determined that it is reasonably certain to exercise the purchase option at the end of each purchase option window. Therefore the Company has calculated the lease term through the end of the purchase option window for each such lease. In addition, for six of the facility finance leases, the lessor holds an option which could require the Company to purchase the associated real estate. The total obligation to purchase such real estate is approximately $86,751 and can be exercised by the lessor through June 14, 2026 (the “Lessor Options”). For other facility finance leases, the duration of the lease term represented the major part of the remaining economic life of the facility at inception. Finance lease right-of-use assets are included in property and equipment and have a balance of $140,514 and $37,850 as of September 30, 2024 and December 31, 2023, respectively. The current portion of finance lease liabilities is included in other accrued expenses and has a balance of $1,181 and $942 as of September 30, 2024 and December 31, 2023, respectively. The non-current portion of finance lease liabilities is included in other liabilities and has a balance of $145,700 and $40,766 as of September 30, 2024 and December 31, 2023, respectively. The components of lease expense were as follows:
| Three Months Ended September 30, |  | Nine Months Ended September 30,
| 2024 |  | 2023 |  | 2024 |  | 2023
Operating lease expense |  |  |  |  |  |  |
Rent - cost of services (1) | $ | 72,632 |  |  | $ | 58,366 |  |  | $ | 200,954 |  |  | $ | 154,926 |
General and administrative expense | 607 |  |  | 233 |  |  | 2,024 |  |  | 941 |
Other variable lease costs (2) | 7,045 |  |  | 6,507 |  |  | 24,078 |  |  | 18,471 |
Total operating lease expense | $ | 80,284 |  |  | $ | 65,106 |  |  | $ | 227,056 |  |  | $ | 174,338 |
Finance lease expense |  |  |  |  |  |  |
Amortization of right-of-use assets | $ | 947 |  |  | $ | 322 |  |  | $ | 2,285 |  |  | $ | 943 |
Interest on lease liabilities | 2,164 |  |  | 327 |  |  | 5,074 |  |  | 656 |
Total financing lease expense | $ | 3,111 |  |  | $ | 649 |  |  | $ | 7,359 |  |  | $ | 1,599 |
Total Lease Expense | $ | 83,395 |  |  | $ | 65,755 |  |  | $ | 234,415 |  |  | $ | 175,937 |
__________________ (1)Rent - cost of services includes variable lease costs such as Consumer Price Index (CPI) increases and other rent adjustments of $633 and $566 for the three months ended September 30, 2024 and 2023, respectively, and $1,826 and $2,144 for the nine months ended September 30, 2024 and 2023, respectively. (2)Other variable lease costs of facilities, including property taxes and insurance, are classified in cost of services in the Company’s unaudited condensed combined/consolidated statements of income. The following table summarizes supplemental cash flow information related to leases:
| Nine Months Ended September 30,
| 2024 |  | 2023
Operating cash paid for amounts included in the measurement of operating lease liabilities | $ | 180,006 |  |  | $ | 139,979 |
Operating cash paid for amounts included in the measurement of finance lease liabilities | 5,074 |  |  | 657 |
Financing cash paid for amounts included in the measurement of finance lease liabilities | 577 |  |  | 1,442 |
Operating lease right-of-use assets obtained in exchange for lease liabilities | 784,291 |  |  | 723,584 |
Finance lease right-of-use assets obtained in exchange for lease liabilities | 18,298 |  |  | 2,028 |
Decrease in finance lease right-of-use assets and liabilities due to lease termination/modification | (2,272) |  |  | — |
Information relating to the lease term and discount rate is as follows:
| As of September 30, 2024
Weighted-average remaining lease term (years) |
Operating leases | 13
Finance leases | 7
Weighted-average discount rate |
Operating leases | 6.0 | %
Finance leases | 6.1 | %
Maturities of lease liabilities as of September 30, 2024 were as follows:
| Finance Leases |  | Operating Leases |  | Total
2024 (remainder) | $ | 2,531 |  |  | $ | 70,313 |  |  | $ | 72,844 |
2025 | 29,891 |  |  | 280,539 |  |  | 310,430 |
2026 | 92,513 |  |  | 281,184 |  |  | 373,697 |
2027 | 19,132 |  |  | 280,095 |  |  | 299,227 |
2028 | 1,949 |  |  | 282,587 |  |  | 284,536 |
2029 | 1,588 |  |  | 284,217 |  |  | 285,805 |
Thereafter | 54,734 |  |  | 2,421,350 |  |  | 2,476,084 |
Total lease payments | $ | 202,338 |  |  | $ | 3,900,285 |  |  | $ | 4,102,623 |
Less: present value discount | (55,457) |  |  | (1,277,576) |  |  | (1,333,033) |
Present value of lease liabilities | $ | 146,881 |  |  | $ | 2,622,709 |  |  | $ | 2,769,590 |
Maturities of finance leases include amounts the Company would pay in the earliest period in which the lessor can exercise the Lessor Options. In addition to its lessee activity, the Company generates an immaterial amount of revenue from arrangements where it is a lessor of certain facilities. Revenue from those arrangements is included in other revenue on the condensed combined/consolidated statements of income.
LEASES | LEASES Operating Leases The Company leases most of its skilled nursing and assisted living facilities, as well as its office space and certain vehicles and equipment, under various non-cancelable operating lease agreements. These operating leases expire at various dates through 2049. Substantially all operating leases for skilled nursing and assisted living facilities are on a “triple-net” basis, which require lessees to pay for all insurance, repairs, utilities, and real property taxes assessed on the leased property, and most of the leases are guaranteed by the Company and/or its stockholders. For 11 of the facility operating leases, the Company holds an option to purchase the real estate which can be exercised at varying times until March 31, 2038. At lease inception it was determined that the exercise of each of the purchase options was not reasonably certain. Options on three of the leases have become subject to disagreement with the landlord regarding whether the option exercise window has closed, and the Company is working with the landlord to resolve the disagreement. All facility leases provide for an additional percentage rent based upon specified rates per the terms of the agreements. This additional percentage rent is variable and is expensed as incurred. Finance Leases The Company leases certain skilled nursing and assisted living facilities under finance lease agreements. The lease terms of two of the facility finance leases allow for purchase options to be exercised at varying times until May 22, 2027. The Company has determined that it is reasonably certain to exercise the purchase option at the end of each purchase option window. Therefore the Company has calculated the lease term through the end of the purchase option window for each such lease. In addition, for six of the facility finance leases, the lessor holds an option which could require the Company to purchase the associated real estate. The total obligation to purchase such real estate is approximately $86,751 and can be exercised by the lessor through June 14, 2026 (the “Lessor Options”). For other facility finance leases, the duration of the lease term represented the major part of the remaining economic life of the facility at inception. Finance lease right-of-use assets are included in property and equipment and have a balance of $140,514 and $37,850 as of September 30, 2024 and December 31, 2023, respectively. The current portion of finance lease liabilities is included in other accrued expenses and has a balance of $1,181 and $942 as of September 30, 2024 and December 31, 2023, respectively. The non-current portion of finance lease liabilities is included in other liabilities and has a balance of $145,700 and $40,766 as of September 30, 2024 and December 31, 2023, respectively. The components of lease expense were as follows:
| Three Months Ended September 30, |  | Nine Months Ended September 30,
| 2024 |  | 2023 |  | 2024 |  | 2023
Operating lease expense |  |  |  |  |  |  |
Rent - cost of services (1) | $ | 72,632 |  |  | $ | 58,366 |  |  | $ | 200,954 |  |  | $ | 154,926 |
General and administrative expense | 607 |  |  | 233 |  |  | 2,024 |  |  | 941 |
Other variable lease costs (2) | 7,045 |  |  | 6,507 |  |  | 24,078 |  |  | 18,471 |
Total operating lease expense | $ | 80,284 |  |  | $ | 65,106 |  |  | $ | 227,056 |  |  | $ | 174,338 |
Finance lease expense |  |  |  |  |  |  |
Amortization of right-of-use assets | $ | 947 |  |  | $ | 322 |  |  | $ | 2,285 |  |  | $ | 943 |
Interest on lease liabilities | 2,164 |  |  | 327 |  |  | 5,074 |  |  | 656 |
Total financing lease expense | $ | 3,111 |  |  | $ | 649 |  |  | $ | 7,359 |  |  | $ | 1,599 |
Total Lease Expense | $ | 83,395 |  |  | $ | 65,755 |  |  | $ | 234,415 |  |  | $ | 175,937 |
__________________ (1)Rent - cost of services includes variable lease costs such as Consumer Price Index (CPI) increases and other rent adjustments of $633 and $566 for the three months ended September 30, 2024 and 2023, respectively, and $1,826 and $2,144 for the nine months ended September 30, 2024 and 2023, respectively. (2)Other variable lease costs of facilities, including property taxes and insurance, are classified in cost of services in the Company’s unaudited condensed combined/consolidated statements of income. The following table summarizes supplemental cash flow information related to leases:
| Nine Months Ended September 30,
| 2024 |  | 2023
Operating cash paid for amounts included in the measurement of operating lease liabilities | $ | 180,006 |  |  | $ | 139,979 |
Operating cash paid for amounts included in the measurement of finance lease liabilities | 5,074 |  |  | 657 |
Financing cash paid for amounts included in the measurement of finance lease liabilities | 577 |  |  | 1,442 |
Operating lease right-of-use assets obtained in exchange for lease liabilities | 784,291 |  |  | 723,584 |
Finance lease right-of-use assets obtained in exchange for lease liabilities | 18,298 |  |  | 2,028 |
Decrease in finance lease right-of-use assets and liabilities due to lease termination/modification | (2,272) |  |  | — |
Information relating to the lease term and discount rate is as follows:
| As of September 30, 2024
Weighted-average remaining lease term (years) |
Operating leases | 13
Finance leases | 7
Weighted-average discount rate |
Operating leases | 6.0 | %
Finance leases | 6.1 | %
Maturities of lease liabilities as of September 30, 2024 were as follows:
| Finance Leases |  | Operating Leases |  | Total
2024 (remainder) | $ | 2,531 |  |  | $ | 70,313 |  |  | $ | 72,844 |
2025 | 29,891 |  |  | 280,539 |  |  | 310,430 |
2026 | 92,513 |  |  | 281,184 |  |  | 373,697 |
2027 | 19,132 |  |  | 280,095 |  |  | 299,227 |
2028 | 1,949 |  |  | 282,587 |  |  | 284,536 |
2029 | 1,588 |  |  | 284,217 |  |  | 285,805 |
Thereafter | 54,734 |  |  | 2,421,350 |  |  | 2,476,084 |
Total lease payments | $ | 202,338 |  |  | $ | 3,900,285 |  |  | $ | 4,102,623 |
Less: present value discount | (55,457) |  |  | (1,277,576) |  |  | (1,333,033) |
Present value of lease liabilities | $ | 146,881 |  |  | $ | 2,622,709 |  |  | $ | 2,769,590 |
Maturities of finance leases include amounts the Company would pay in the earliest period in which the lessor can exercise the Lessor Options. In addition to its lessee activity, the Company generates an immaterial amount of revenue from arrangements where it is a lessor of certain facilities. Revenue from those arrangements is included in other revenue on the condensed combined/consolidated statements of income.

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- Definition The entire disclosure for finance leases of lessee. Includes, but is not limited to, description of lessee's finance lease and maturity analysis of finance lease liability. + References Reference 1: http://www.xbrl.org/2003/role/disclosureRef -Topic 842 -SubTopic 20 -Name Accounting Standards Codification -Publisher FASB -URI https://asc.fasb.org/842-20/tableOfContent + Details
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- Definition The entire disclosure for operating leases of lessee. Includes, but is not limited to, description of operating lease and maturity analysis of operating lease liability. + References Reference 1: http://www.xbrl.org/2003/role/disclosureRef -Topic 842 -SubTopic 20 -Name Accounting Standards Codification -Publisher FASB -URI https://asc.fasb.org/842-20/tableOfContent + Details
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