LEASES AND RELATED PARTY LEASES

9 Months Ended

Sep. 30, 2024

The Company leases administrative, manufacturing, research and distribution facilities, and vehicles through operating lease agreements. The Company has no finance leases as of September 30, 2024. Many of the Company’s leases include both lease (e.g., fixed payments including rent) and non-lease components (e.g., common-area or other maintenance costs). For vehicles, the Company has elected the practical expedient to group lease and non-lease components.

Most facility leases include one or more options to renew. The exercise of lease renewal options is typically at the Company’s sole discretion, therefore, the majority of renewals to extend the lease terms are not included in the Right of Use (“ROU”) assets and lease liabilities as they are not reasonably certain of exercise. The Company regularly evaluates renewal options and when they are reasonably certain of exercise, the renewal period is included in the lease term.

As most of the Company’s leases do not provide an implicit rate, the Company uses a collateralized incremental borrowing rate based on the information available at the lease commencement date in determining the present value of the lease payments.

Total operating lease expense for the nine months ended September 30, 2024 and September 30, 2023 was $18.8 million and $17.9 million, respectively, which includes $0.2 million, in related party operating lease expense.

Supplemental balance sheet information related to operating leases were as follows:


Dollars in thousands, except lease term and discount rate	September 30, 2024			December 31, 2023
ROU assets	$	146,342		$	156,184

Current lease liabilities	15,039			15,284
Non-current lease liabilities	167,808			166,849
Total lease liabilities	$	182,847		$	182,133

Weighted average remaining lease term (in years):
Leased facilities	16.2 years			16.3 years
Leased vehicles	2.2 years			1.9 years

Weighted average discount rate:
Leased facilities	5.6		%	5.9		%
Leased vehicles	2.6		%	2.7		%

Supplemental cash flow information related to leases for the nine months ended September 30, 2024 and 2023 were as follows:


Dollars in thousands	September 30, 2024		September 30, 2023
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	18,255	$	14,778

ROU assets obtained in exchange for lease liabilities, net of modifications:
Operating leases	$	1,575	$	19,540

Future minimum lease payments under operating leases at September 30, 2024 were as follows:


Dollars in thousands	Related Parties		Third Parties		Total
Remainder of 2024	$	74	$	6,057	$	6,131
2025	296		23,016		23,312
2026	296		21,317		21,613
2027	296		19,425		19,721
2028	296		17,163		17,459
2029	246		16,306		16,552
Thereafter	—		165,343		165,343
Total minimum lease payments	$	1,504	$	268,627	$	270,131
Less: Imputed interest					87,284
Total lease liabilities					182,847
Less: Current lease liabilities					15,039
Long-term lease liabilities					167,808

There were no future minimum lease payments under finance leases at September 30, 2024.

Related Party Leases

The Company leases one of its manufacturing facilities in Plainsboro, New Jersey, from a general partnership that is 50% owned by a principal stockholder of the Company. The term of the current lease agreement is through October 31, 2029 at an annual rate of approximately $0.3 million. The current lease agreement also provides (i) a 5-year renewal option for the Company to extend the lease from November 1, 2029 through October 31, 2034 at the fair market rental rate of the premises, and (ii) another 5-year renewal option to extend the lease from November 1, 2034 through October 31, 2039 at the fair market rental rate of the premises.

Lease Impairment Charge

The Company approved a plan to transition the commercial distribution of PriMatrix® and SurgiMend® from the Boston facility to the Company’s manufacturing facility in Braintree, Massachusetts and permanently cease use of the Boston facility. As a result, in the second quarter of 2024, the Company recorded a $4.6 million impairment charge, as the carrying amounts of the operating lease right-of-use asset and fixed assets related to the Boston facility exceeded their fair values based on the Company’s estimates of future discounted cash flows through the end of the lease term and the end of their remaining useful lives, respectively. The $4.6 million impairment charge was comprised of a $1.7 million impairment of an operating lease right-of-use asset and a $2.9 million write-off of fixed assets, which was recorded as a component of cost of goods sold in the condensed consolidated statements of operations.