Leases

12 Months Ended

Dec. 31, 2021

NOTE 13. 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 following table provides the components of lease cost recognized in the consolidated statements of operations and comprehensive income for the year ended December 31, 2021, 2020, and 2019.


		Year Ended December 31,
	Statement of operations and comprehensive income location	2021		2020		2019
		(in thousands)
Operating lease cost	Cost of goods sold, sales and marketing, general and administrative	$	11,574	$	5,700	$	5,542
Finance lease cost:
Amortization of lease assets	Cost of goods sold, sales and marketing, general and administrative		7,866		4,956		1,984
Interest on lease liabilities	Interest expense		4,574		2,133		960
Finance lease cost			12,440		7,089		2,944
Variable lease cost	Cost of goods sold, sales and marketing, general and administrative		6,098		222		192
Short term lease expense	Cost of goods sold, sales and marketing, general and administrative		334		—		—
Total lease cost		$	30,446	$	13,011	$	8,678

Short term lease expense for the year ended December 31, 2020, and 2019, was nominal. During the year ended December 31, 2021, we earned a nominal amount of sublease income which is recorded in other income on the consolidated statements of operations and comprehensive income. During the year ended December 31, 2021, the Company terminated $1.0 million in leases.

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


	Year Ended December 31,
	2021			2020
	(in thousands)
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases		4,164			4,764
Operating cash flows from finance leases		4,574			2,485
Financing cash flows from finance leases		4,434			4,951
Lease assets obtained in exchange for new lease liabilities:
Operating leases		102,922			12,206
Finance leases		37,821			23,220
Weighted average discount rate:
Operating leases		9.69	%		8.64	%
Finance leases		8.68	%		8.36	%
Weighted average remaining lease term (in years):
Operating leases		10.09			7.49
Finance leases		8.16			8.51

Future lease payments under our non-cancellable leases as of December 31, 2021, are as follows:


Year Ending December 31,	Operating leases			Finance leases
	(in thousands)
2022	$	21,826		$	12,102
2023		21,371			15,039
2024		20,896			11,242
2025		20,536			10,840
2026		19,974			10,394
Thereafter		110,758			42,311
Total undiscounted lease liabilities		215,361			101,928
Less: Interest		(83,391	)		(30,499	)
Total present value of minimum lease payments		131,970			71,429
Lease liabilities- current portion		9,840			6,185
Lease liabilities	$	122,130		$	65,244