LEASES

9 Months Ended

Sep. 30, 2021

LEASES

Leases entered into by the Company are primarily for retail stores in certain U.S. states and Canadian provinces. Upon entering into an agreement, the Company determines if an arrangement is a lease.

Typically, a contract constitutes a lease if it conveys the right to control the use of an identified property, plant or equipment (an identified asset) for a period of time, in exchange for consideration. To determine whether a contract conveys the right to control the use of an identified asset for a period of time, the Company must assess whether, throughout the period of use, the customer has both (i) the right to obtain substantially all of the economic benefits from use of the identified asset and (ii) the right to direct the use of the identified asset. If the customer has the right to control the use of an identified asset for only a portion of the term of the contract, the contract contains a lease for that portion of the term.

Leases classified as finance were immaterial to the Company as of September 30, 2021. Operating leases expire at various times through 2032. Operating leases are included in "Right of use asset - operating leases" and "Lease liability - operating leases" in the unaudited Condensed Consolidated Balance Sheets.

The Company recognizes ROU assets and lease liabilities based on the present value of lease payments over the lease term at commencement date. The interest rates implicit in the Company's leases typically are not readily determinable. As a result, the Company uses its estimated incremental borrowing rate, as allowed by ASC 842, Leases, in determining the present value of lease payments. The incremental borrowing rate is based on internal and external information available at the lease commencement date and is determined using a portfolio approach (i.e., using the weighted average terms of all outstanding leases). This rate is the theoretical rate the Company would pay to borrow an amount equal to the lease payments on a collateralized basis over a similar term as that of the lease portfolio.

The Company uses quoted interest rates obtained from financial institutions as an input, adjusted for Company-specific factors, to derive the incremental borrowing rate as the discount rate for the leases. As new leases are added each period, the Company evaluates whether the incremental borrowing rate has changed. If the incremental borrowing rate has changed, the Company will apply the rate to new leases if not doing so would result in a material difference to the ROU asset and lease liability presented on the balance sheet.

The majority of leases have an original term of five years plus two five-year renewal options. The Consumer Price Index is generally used in determining future lease payments and for purposes of calculating operating lease liabilities. Lease terms include options to extend or terminate the lease when it is reasonably certain that the Company will exercise that option. Most of the leases have escalation clauses and certain leases also require payment of period costs, including maintenance, insurance and property taxes. The Company has elected to combine lease and non-lease components and to exclude short-term leases, defined as having an initial term of 12 months or less, from the unaudited Condensed Consolidated Balance Sheets. Some of the leases are with related parties and have terms similar to the non-related party leases. The Company's lease agreements do not contain any material residual value guarantees or material restrictive covenants.

The following table summarizes the operating lease costs and other information for the three and nine months ended September 30, 2021 and September 30, 2020 (dollars in thousands):


	Three Months Ended September 30,				Nine Months Ended September 30,
	2021		2020		2021			2020
Operating lease costs:
Third-Party	$	8,043	$	8,567	$	24,604		$	22,947
Related-Party	551		6		1,649			2,538
Total operating lease costs	$	8,594	$	8,573	$	26,253		$	25,485

Operating cash flow - Operating leases					$	26,556		$	25,329
New ROU assets - Operating leases					$	9,893		$	10,885
Weighted average remaining lease term - Operating leases					5.3 years			6.0 years
Weighted average discount rate - Operating leases					9.1		%	10.1		%

The following table summarizes the aggregate operating lease payments that the Company was contractually obligated to make under operating leases as of September 30, 2021 (in thousands):


	Third-Party		Related-Party		Total
Remainder of 2021	$	8,250	$	646	$	8,896
2022	31,419		2,468		33,887
2023	26,202		551		26,753
2024	20,594		174		20,768
2025	14,856		54		14,910
2026	10,778		50		10,828
Thereafter	22,347		—		22,347
Total	134,446		3,943		138,389
Less: Imputed interest	(29,394)		(340)		(29,734)
Operating lease liabilities	$	105,052	$	3,603	$	108,655

There were no material leases entered into subsequent to the balance sheet date.