Leases

6 Months Ended

Jun. 30, 2022

NOTE 12. LEASES

The Company leases real estate used for dispensaries, production plants, and corporate offices. Lease terms for real estate generally range from five to ten years. Most leases include options to renew for varying terms at the Company’s sole discretion. Other leased assets include passenger vehicles, trucks, and equipment. Lease terms for these assets generally range from three to five years.

Lease right-of-use assets and liabilities are recognized based on the present value of future minimum lease payments over the lease term at commencement date.

Leases with an initial term of 12 months or less are not recorded on the balance sheet. Lease agreements for some locations provide for rent escalations and renewal options. Certain real estate leases require payment for taxes, insurance and maintenance which are considered non-lease components. The Company accounts for real estate leases and the related fixed non-lease components together as a single component.

The Company recorded a loss on disposal of operating right of use assets of less than $0.1 million and $10.5 million for the three and six months ending June 30, 2022, respectively, which is the result of repositioning of assets in the southeast. This loss was recorded in impairment and disposal of long-lived assets, net in the condensed consolidated statements of operations and comprehensive (loss) income.

The following table provides the components of lease cost recognized in the condensed consolidated statements of operations and comprehensive (loss) income:


		Three Months Ended June 30,				For the Six Months Ended June 30,
	Statement of operations and comprehensive (loss) income location	2022		2021		2022		2021
		(in thousands)
Operating lease cost	Cost of goods sold, sales and marketing, general and administrative	$	6,091	$	1,695	$	12,184	$	3,267
Finance lease cost:
Amortization of lease assets	Cost of goods sold, sales and marketing, general and administrative		2,713		1,797		5,229		3,367
Interest on lease liabilities	Interest expense		1,674		958		3,253		1,737
Finance lease cost			4,387		2,755		8,482		5,104
Variable lease cost	Cost of goods sold, sales and marketing, general and administrative		1,897		215		3,831		610
Short term lease expense	Cost of goods sold, sales and marketing, general and administrative		156		—		255		—
Total lease cost		$	12,531	$	4,665	$	24,752	$	8,981

Short term lease expense for the three and six months ended June 30, 2021 was nominal. During the three and six months ended June 30, 2022, the Company earned $0.1 million and $0.3 million of sublease income, respectively. During the three and six months ended June 30, 2021, the Company earned a nominal amount of sublease income. Sublease income is recorded in other income (expense), net on the consolidated statements of operations and comprehensive (loss) income.

Other information related to operating and finance leases is as follows:


	Three Months Ended June 30,				Six Months Ended June 30,
	2022		2021		2022		2021
	(in thousands)
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases		5,706		1,532		11,093		2,956
Operating cash flows from finance leases		1,665		916		3,244		1,718
Financing cash flows from finance leases		1,784		1,063		3,205		2,091
Lease assets obtained in exchange for new lease liabilities:
Operating leases		2,404		8,550		11,970		14,163
Finance leases		12,112		10,044		18,413		15,128


	June 30, 2022			December 31, 2021
	(in thousands)
Weighted average discount rate:
Operating leases		9.56	%		9.69	%
Finance leases		8.58	%		8.68	%
Weighted average remaining lease term (in years):
Operating leases		9.74			10.09
Finance leases		8.10			8.16

Future minimum lease payments under the Company's non-cancellable leases as of June 30, 2022 are as follows:


	Operating leases			Finance leases
	(in thousands)
Remainder of 2022	$	11,728		$	7,420
2023		22,854			17,996
2024		22,578			14,289
2025		22,358			13,757
2026		21,822			12,813
Thereafter		120,265			55,984
Total undiscounted lease liabilities		221,605			122,259
Interest on lease liabilities		(82,321	)		(36,103	)
Total present value of minimum lease payments		139,284			86,156
Lease liabilities- current portion		(10,899	)		(7,697	)
Lease liabilities	$	128,385		$	78,459