v3.26.1
LEASES
 3 Months Ended
Mar. 31, 2026
Leases [Abstract]  
LEASES LEASES
Operating Leases
The Company leases most of its skilled nursing and assisted living facilities, as well as office space, under various non-cancelable operating lease agreements. These operating leases expire at various dates through 2050.
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 36 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 Company’s 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 a purchase option to be exercised during a specified window closing December 31, 2030. The Company has determined that it is reasonably certain to exercise the respective purchase options at the end of each purchase option window. Therefore the Company has calculated the lease terms through the end of the purchase option windows for these leases. In addition, for one 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 $32,000 and can be exercised by the lessor through June 30, 2026 (the “Lessor Option”). 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 $166,785 and $150,595 as of March 31, 2026 and December 31, 2025, respectively. The current portion of finance lease liabilities is included in other accrued expenses and has a balance of $29,583 and $28,935 as of March 31, 2026 and December 31, 2025, respectively. The non-current portion of finance lease liabilities is included in other liabilities and has a balance of $141,143 and $126,960 as of March 31, 2026 and December 31, 2025, respectively.
The components of lease expense were as follows:
Three Months Ended March 31,
20262025
Operating lease expense
Rent - cost of services (1)
$95,531 $93,795 
General and administrative expense664 627 
Other variable lease costs (2)
10,132 9,247 
Total operating lease expense$106,327 $103,669 
Finance lease expense
Amortization of right-of-use assets$1,343 $1,042 
Interest on lease liabilities2,765 2,292 
Total finance lease expense$4,108 $3,334 
Total Lease Expense$110,435 $107,003 
__________________
(1)Rent - cost of services includes variable lease costs such as Consumer Price Index (CPI) increases and other rent adjustments of $545 and $438 for the three months ended March 31, 2026 and 2025, 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 consolidated statements of income.
The following table summarizes supplemental cash flow information related to leases:
Three Months Ended March 31,
20262025
Operating cash paid for amounts included in the measurement of operating lease liabilities$85,194 $81,718 
Operating cash paid for amounts included in the measurement of finance lease liabilities2,765 2,292 
Financing cash paid for amounts included in the measurement of finance lease liabilities340 244 
Operating lease right-of-use assets obtained in exchange for lease liabilities— 126,107 
Decrease in operating lease right-of-use assets and liabilities due to lease termination/modification
(13,255)— 
Finance lease right-of-use assets obtained in exchange for lease liabilities
17,532 — 
Information relating to the lease term and discount rate is as follows:
As of March 31, 2026
Weighted-average remaining lease term (years)
Operating leases13
Finance leases20
Weighted-average discount rate
Operating leases6.5 %
Finance leases6.5 %
Maturities of lease liabilities as of March 31, 2026 were as follows:
Finance LeasesOperating LeasesTotal
2026 (remainder)$35,899 $256,515 $292,414 
202725,955 343,091 369,046 
20288,999 347,171 356,170 
20298,870 349,794 358,664 
203021,907 353,634 375,541 
20317,662 354,536 362,198 
Thereafter246,726 2,625,865 2,872,591 
Total lease payments$356,018 $4,630,606 $4,986,624 
Less: present value discount (185,292)(1,588,021)(1,773,313)
Present value of lease liabilities
$170,726 $3,042,585 $3,213,311 
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 consolidated statements of income.
LEASES LEASES
Operating Leases
The Company leases most of its skilled nursing and assisted living facilities, as well as office space, under various non-cancelable operating lease agreements. These operating leases expire at various dates through 2050.
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 36 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 Company’s 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 a purchase option to be exercised during a specified window closing December 31, 2030. The Company has determined that it is reasonably certain to exercise the respective purchase options at the end of each purchase option window. Therefore the Company has calculated the lease terms through the end of the purchase option windows for these leases. In addition, for one 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 $32,000 and can be exercised by the lessor through June 30, 2026 (the “Lessor Option”). 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 $166,785 and $150,595 as of March 31, 2026 and December 31, 2025, respectively. The current portion of finance lease liabilities is included in other accrued expenses and has a balance of $29,583 and $28,935 as of March 31, 2026 and December 31, 2025, respectively. The non-current portion of finance lease liabilities is included in other liabilities and has a balance of $141,143 and $126,960 as of March 31, 2026 and December 31, 2025, respectively.
The components of lease expense were as follows:
Three Months Ended March 31,
20262025
Operating lease expense
Rent - cost of services (1)
$95,531 $93,795 
General and administrative expense664 627 
Other variable lease costs (2)
10,132 9,247 
Total operating lease expense$106,327 $103,669 
Finance lease expense
Amortization of right-of-use assets$1,343 $1,042 
Interest on lease liabilities2,765 2,292 
Total finance lease expense$4,108 $3,334 
Total Lease Expense$110,435 $107,003 
__________________
(1)Rent - cost of services includes variable lease costs such as Consumer Price Index (CPI) increases and other rent adjustments of $545 and $438 for the three months ended March 31, 2026 and 2025, 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 consolidated statements of income.
The following table summarizes supplemental cash flow information related to leases:
Three Months Ended March 31,
20262025
Operating cash paid for amounts included in the measurement of operating lease liabilities$85,194 $81,718 
Operating cash paid for amounts included in the measurement of finance lease liabilities2,765 2,292 
Financing cash paid for amounts included in the measurement of finance lease liabilities340 244 
Operating lease right-of-use assets obtained in exchange for lease liabilities— 126,107 
Decrease in operating lease right-of-use assets and liabilities due to lease termination/modification
(13,255)— 
Finance lease right-of-use assets obtained in exchange for lease liabilities
17,532 — 
Information relating to the lease term and discount rate is as follows:
As of March 31, 2026
Weighted-average remaining lease term (years)
Operating leases13
Finance leases20
Weighted-average discount rate
Operating leases6.5 %
Finance leases6.5 %
Maturities of lease liabilities as of March 31, 2026 were as follows:
Finance LeasesOperating LeasesTotal
2026 (remainder)$35,899 $256,515 $292,414 
202725,955 343,091 369,046 
20288,999 347,171 356,170 
20298,870 349,794 358,664 
203021,907 353,634 375,541 
20317,662 354,536 362,198 
Thereafter246,726 2,625,865 2,872,591 
Total lease payments$356,018 $4,630,606 $4,986,624 
Less: present value discount (185,292)(1,588,021)(1,773,313)
Present value of lease liabilities
$170,726 $3,042,585 $3,213,311 
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 consolidated statements of income.