Leases

6 Months Ended

Jun. 30, 2021

Leases [Abstract]

Leases

Leases

Headquarters and Fleet Vehicles

The Company has operating leases for its headquarters lease and its fleet vehicles. With respect to the fleet vehicle leases, given the volume of individual leases involved in the overall arrangement, the Company applies a portfolio approach to effectively account for the operating lease assets and liabilities. The Company also elected to combine the lease and non-lease components for the fleet vehicle and headquarters leases.

The Company's headquarters lease commenced on February 1, 2019 (the Commencement Date) and will continue until April 30, 2034, unless earlier terminated in accordance with the terms of the lease. The lease includes options to extend the lease for up to 10 years.

Contract Manufacturing Lease

Contemporaneous with the USWM Acquisition, USWM Enterprises adopted ASC 842, Leases. USWM Enterprises had an existing contract manufacturing agreement with Merz Pharma GmbH & Co. KGaA (Merz), for the manufacture and supply of rimabotulinumtoxinB finished products (Merz Agreement). Pursuant to the Merz Agreement, Merz agreed to provide a dedicated manufacturing facility that included a stand-alone building, dedicated clean room suites, dedicated manufacturing and purification

equipment, and filling and packaging production lines (collectively, the manufacturing facility) to manufacture finished products. The Merz Agreement will expire in July 2027, unless the Company and Merz mutually agree to extend the terms. The Merz Agreement may not be terminated for convenience.

Under the terms of the agreement, the Company is required to purchase a minimum quantity of finished products on an annual basis. This minimum purchase requirement represents the in-substance fixed contract consideration associated with the dedicated manufacturing facility which the Company accounts for as an embedded lease.

At the Closing Date of the USWM Acquisition, the Company preliminarily classified the embedded lease as a finance lease and preliminarily elected not to separate the lease and non-lease components. In the second quarter of 2021, the Company finalized its accounting of the USWM Acquisition. During the measurement period, the Company determined the fair market value of rent for the lease components and fair market value of the manufacturing facility associated with the Merz embedded lease. As a result, the Company made an accounting policy election, by class of underlying asset, to not combine lease and non-lease components for the manufacturing facility. A portion of the in-substance fixed contract consideration was allocated to the lease component based on the stand-alone selling price. Accordingly, the Company has finalized and updated the classification of the embedded lease from a finance lease to an operating lease. Refer to Note 3, USWM Acquisition, for further discussion.

Operating and finance lease assets and lease liabilities as reported on the condensed consolidated balance sheets are as follows (dollars in thousands):

	Balance Sheet Classification	June 30, 2021		December 31, 2020
		(unaudited)
Assets
Operating lease assets	Other assets	$	29,665	$	20,231
Finance lease asset	Property and equipment, net	—		20,874
Total lease assets		$	29,665	$	41,105
Liabilities
Lease liabilities, current
Operating lease liabilities, current portion	Accounts payable and accrued liabilities	$	5,900	$	3,760
Finance lease liability, current portion	Other current liabilities	—		3,761
Lease liabilities, long term
Operating lease liabilities, long term	Operating lease liabilities, long term	36,143		28,579
Finance lease liability, long term	Other liabilities	—		20,235
Total lease liabilities		$	42,043	$	56,335

Leases

Leases

Headquarters and Fleet Vehicles

The Company has operating leases for its headquarters lease and its fleet vehicles. With respect to the fleet vehicle leases, given the volume of individual leases involved in the overall arrangement, the Company applies a portfolio approach to effectively account for the operating lease assets and liabilities. The Company also elected to combine the lease and non-lease components for the fleet vehicle and headquarters leases.

The Company's headquarters lease commenced on February 1, 2019 (the Commencement Date) and will continue until April 30, 2034, unless earlier terminated in accordance with the terms of the lease. The lease includes options to extend the lease for up to 10 years.

Contract Manufacturing Lease

Contemporaneous with the USWM Acquisition, USWM Enterprises adopted ASC 842, Leases. USWM Enterprises had an existing contract manufacturing agreement with Merz Pharma GmbH & Co. KGaA (Merz), for the manufacture and supply of rimabotulinumtoxinB finished products (Merz Agreement). Pursuant to the Merz Agreement, Merz agreed to provide a dedicated manufacturing facility that included a stand-alone building, dedicated clean room suites, dedicated manufacturing and purification

equipment, and filling and packaging production lines (collectively, the manufacturing facility) to manufacture finished products. The Merz Agreement will expire in July 2027, unless the Company and Merz mutually agree to extend the terms. The Merz Agreement may not be terminated for convenience.

Under the terms of the agreement, the Company is required to purchase a minimum quantity of finished products on an annual basis. This minimum purchase requirement represents the in-substance fixed contract consideration associated with the dedicated manufacturing facility which the Company accounts for as an embedded lease.

At the Closing Date of the USWM Acquisition, the Company preliminarily classified the embedded lease as a finance lease and preliminarily elected not to separate the lease and non-lease components. In the second quarter of 2021, the Company finalized its accounting of the USWM Acquisition. During the measurement period, the Company determined the fair market value of rent for the lease components and fair market value of the manufacturing facility associated with the Merz embedded lease. As a result, the Company made an accounting policy election, by class of underlying asset, to not combine lease and non-lease components for the manufacturing facility. A portion of the in-substance fixed contract consideration was allocated to the lease component based on the stand-alone selling price. Accordingly, the Company has finalized and updated the classification of the embedded lease from a finance lease to an operating lease. Refer to Note 3, USWM Acquisition, for further discussion.

Operating and finance lease assets and lease liabilities as reported on the condensed consolidated balance sheets are as follows (dollars in thousands):

	Balance Sheet Classification	June 30, 2021		December 31, 2020
		(unaudited)
Assets
Operating lease assets	Other assets	$	29,665	$	20,231
Finance lease asset	Property and equipment, net	—		20,874
Total lease assets		$	29,665	$	41,105
Liabilities
Lease liabilities, current
Operating lease liabilities, current portion	Accounts payable and accrued liabilities	$	5,900	$	3,760
Finance lease liability, current portion	Other current liabilities	—		3,761
Lease liabilities, long term
Operating lease liabilities, long term	Operating lease liabilities, long term	36,143		28,579
Finance lease liability, long term	Other liabilities	—		20,235
Total lease liabilities		$	42,043	$	56,335