Trulieve Cannabis Corp. - POS AM filing on 2022-01-21

Leases

9 Months Ended

12 Months Ended

Sep. 30, 2021

Dec. 31, 2020

NOTE 10. LEASES

The following table provides the components of lease cost recognized in the condensed consolidated statement of operations and comprehensive income for the three and nine months ended September 30, 2021 and 2020:


	For the Three Months Ended September 30,				For the Nine Months Ended September 30,
Lease Cost	2021		2020		2021		2020

	(dollars in thousands)
Operating lease cost		2,483		1,545		5,751		4,087
Finance lease cost:
Amortization of lease assets		1,990		1,496		5,357		3,688
Interest on lease liabilities		1,177		782		2,914		1,801

Finance lease cost		3,167		2,278		8,271		5,489
Variable lease cost		2,529		28		3,139		310

Total lease cost	$	8,179	$	3,851	$	17,161	$	9,886

Weighted average discount rate and remaining lease term for the nine months ended September 30, 2021 are as follows:


	Operating lease			Finance lease
Weighted average discount rate		8.75	%		8.46	%
Weighted average remaining lease term (in years)		8.67			8.20

The maturity of the contractual undiscounted lease liabilities as of September 30, 2021 is as follows:


	Operating leases			Finance leases

	(dollars in thousands)
Remainder of 2021	$	1,991		$	2,494
2022		8,173			10,509
2023		7,886			13,246
2024		7,759			9,395
2025		7,800			9,069
Thereafter		35,893			43,875

Total undiscounted lease liabilities		69,502			88,588
Interest on lease liabilities		(21,581	)		(26,000	)

Total present value of minimum lease payments		47,921			62,588
Lease liability—current portion		(4,264	)		(5,354	)

Lease liability	$	43,657		$	57,234

During the third quarter of 2021, the Company identified a misstatement in its accounting for leases in prior periods, primarily the second quarter of 2021. Refer to “

Note 2. Basis of Presentation

” under “

Revisions of Previously Issued Financial Statements

” above for additional details.

10.

LEASES

On January 1, 2019, the Company adopted ASC 842, Leases (“Topic 842”) using the modified retrospective transition method. Topic 842 requires the recognition of lease assets and liabilities for operating and finance leases. Beginning on January 1, 2019, the Company’s consolidated financial statements are presented in accordance with the revised policies.

Management elected to utilize the practical expedients permitted under the transition guidance within Topic 842, which allowed the Company to carry forward prior conclusions about lease identification, classification and initial direct costs for leases entered prior to adoption of Topic 842. Additionally, management elected not to separate lease and

non-lease

components for all of the Company’s leases. For leases with a term of 12 months or less, management elected the short-term lease exemption, which allowed the Company to not recognize

right-of-use

assets (“ROU”) or lease liabilities for qualifying leases existing at transition and new leases the Company may enter into in the future.

The Company leases real estate used for dispensaries, production plants, and corporate offices. Lease terms for real estate generally range from 5 to 10 years. Most leases include options to renew for varying terms at the Company’s sole discretion. Other leased assets include passenger vehicles and trucks and equipment. Lease terms for these assets generally range from 3 to 5 years. Certain leases include escalation clauses or payment of executory costs such as property taxes, utilities, or insurance and maintenance. Rent expense for leases with escalation clauses is accounted for on a straight-line basis over the lease term. The Company’s lease agreements do not contain any material residual value guarantees or material restrictive covenants.

As a result of the adoption of ASU

2016-02,

the Company recorded operating

right-of-use

assets of $21.7 million, operating lease liabilities of $22.4 million and finance ROU assets and corresponding lease liabilities of $1.2 million. Upon adoption of ASU

2016-02,

operating ROU assets were adjusted for deferred rent and prepaids as of January 1, 2019. The Company’s incremental borrowing rate is used in determining the present value of future payments at the commencement date of the lease, or for the adoption of ASU

2016-02,

at January 1, 2019. Balances related to operating and finance leases are included in ROU assets and lease liabilities in the 2019 consolidated balance sheet.

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


	Year Ended December 31,
Lease Cost	2020		2019
Operating lease cost		5,700		5,542
Finance lease cost:
Amortization of lease assets		4,956		1,984
Interest on lease liabilities		2,133		960

Finance lease cost		7,089		2,944
Variable lease cost		222		192

Total lease cost	$	13,010	$	8,678

Other information related to operating and finance leases as of and for the year ended December 31, 2020 are as follows:


	Finance Lease			Operating Lease
Weighted average discount rate		8.36	%		8.64	%
Weighted average remaining lease term (in years)		8.51			7.49

The maturity of the contractual undiscounted lease liabilities as of December 31, 2020 is as follows:


Year Ended December 31,	Finance Lease			Operating Lease

	(dollars in thousands)
2021	$	6,964		$	5,480
2022		6,642			5,405
2023		6,257			5,276
2024		5,787			4,921
2025		5,588			4,843
Thereafter		24,669			14,225

Total undiscounted lease liabilities		55,907			40,150
Interest on lease liabilities		(16,972	)		(10,545	)

Total present value of minimum lease payments		38,935			29,605
Lease liability—current portion		3,877			3,154

Lease liability	$	35,058		$	26,450