Operating Leases

The Company leases all but one of its locations. Excluding renewal options that are not reasonably certain to be exercised, our leases have remaining contractual terms that range from 2 to 18 years. Most of the leases contain renewal options and escalation clauses. Our property leases require payment of real estate taxes, insurance, and common area maintenance, in addition to rent. Our lease agreements do not contain any material residual value guarantees or material restrictive covenants.

Lease Cost — Lease cost has been included within Office occupancy on our condensed consolidated statements of operations and consisted of the following:

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Lease cost associated with operating leases and short-term leases (i.e., leases with an initial term of 12 months or less) is recognized on a straight-line basis from the date we take possession of the property through the end of the lease term. Variable lease payments not recognized in the measurement of operating lease liabilities are expensed as incurred.

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Operating Right of Use Assets and Lease Liabilities — Operating right of use assets and lease liabilities included on our condensed consolidated balance sheets were as follows:

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Remaining Lease Terms and Discount Rates — We are required to recognize right of use assets and lease liabilities for our operating leases. In order to establish our lease obligation, we are required to determine the incremental borrowing rate, which is used to discount future lease payments. The incremental borrowing rate is defined as the rate of interest that a lessee would have to pay to borrow over a similar term, with similar security, the funds necessary to purchase the underlying asset in a similar economic environment. Since the interest rate implicit in our lease contracts is typically not readily determinable, we reviewed existing debt financing arrangements and the types of leases as well as the lease term and type of collateral to calculate the incremental borrowing rate.

The weighted-average remaining lease terms and discount rates associated with our operating lease liabilities were as follows:

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Supplemental Cash Flow Information — Supplemental cash flow information associated with our operating leases is as follows:

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Maturities of Operating Lease Liabilities — Scheduled minimum lease payments under noncancelable operating leases with initial or remaining lease terms in excess of one year at June 30, 2026, are summarized as follows:

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Legal Contingencies — We and our affiliated dental practices have been named as a defendant in lawsuits from time to time in the normal course of business, primarily for employment liability, alleged negligence in care or general liability and contractual business disputes. At the present time, we do not believe any pending lawsuits will have a material adverse effect on our operating results, cash flows, liquidity or financial position

In 2024, multiple claims were filed against us in state and federal courts in Minnesota based on a data breach event. Subsequently, certain of the claims were dismissed; however, the putative class action suit in Minnesota District Court entitled, In re Park Dental Data Breach Litigation, Case No. 27-CV-24-12335, Fourth Judicial District, County of Hennepin, State of Minnesota continues. We presently believe the settlement of this matter is probable. We expect the settlement, net of insurance recoveries, will have an immaterial impact to our financial results as we anticipate the costs to settle will be fully recovered under our insurance policy coverage.