UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to
Commission File Number:
(Exact name of registrant as specified in its charter)
(State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer |
(Address of principal executive offices) |
(Zip Code) |
Registrant’s telephone number, including area code: (
Securities registered pursuant to Section 12(b) of the Act:
Title of each class |
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Trading Symbol(s) |
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Name of each exchange on which registered |
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Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
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Non-accelerated filer |
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Smaller reporting company |
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Emerging growth company |
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If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No
As of April 28, 2023, the registrant had
Table of Contents
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2 |
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PART I. |
FINANCIAL INFORMATION |
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Item 1. |
Financial Statements (Unaudited) |
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3 |
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Condensed Consolidated Statements of Operations and Comprehensive Income |
4 |
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5 |
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6 |
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7 |
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Item 2. |
Management’s Discussion and Analysis of Financial Condition and Results of Operations |
20 |
Item 3. |
27 |
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Item 4. |
27 |
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PART II. |
OTHER INFORMATION |
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Item 1. |
28 |
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Item 1A. |
28 |
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Item 2. |
28 |
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Item 3. |
28 |
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Item 4. |
28 |
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Item 5. |
28 |
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Item 6. |
29 |
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30 |
i
FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. We intend such forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained in Section 27A of the Securities Act of 1933, as amended (the “Securities Act”) and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). All statements other than statements of present and historical facts contained in this Quarterly Report on Form 10-Q, including without limitation, statements regarding our future results of operations and financial position, business strategy and approach are forward-looking. You can generally identify forward-looking statements by our use of forward-looking terminology such as “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “might,” “plan,” “potential,” “predict,” “seek,” “vision,” or “should,” or the negative thereof or other variations thereon or comparable terminology.
Forward-looking statements are based on our management’s beliefs and assumptions and on information currently available to us. Such beliefs and assumptions may or may not prove to be correct. Additionally, such forward-looking statements are subject to a number of known and unknown risks, uncertainties and assumptions, and actual results may differ materially from those expressed or implied in the forward-looking statements in this Quarterly Report on Form 10-Q due to various factors, including, but not limited to, those identified in Part I. Item 1A. “Risk Factors” and in Part II. Item 7. “Management's Discussion and Analysis of Financial Condition and Results of Operations” of our Annual Report on Form 10-K for the fiscal year ended December 31, 2022 (the “2022 10-K”) and in Part I. Item 2. “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of this Quarterly Report on Form 10-Q. These risks and uncertainties include, but are not limited to:
Given these and other risks and uncertainties applicable to us, you are cautioned not to place undue reliance on such forward-looking statements. The forward-looking statements included elsewhere in this Quarterly Report on Form 10-Q are not guarantees of future performance and our actual results of operations, financial condition and liquidity, and the development of the industry in which we operate, may differ materially from the forward-looking statements included elsewhere in this Quarterly Report on Form 10-Q. In addition, even if our results of operations, financial condition and liquidity, and events in the industry in which we operate, are consistent with the forward-looking statements included elsewhere in this Quarterly Report on Form 10-Q, they may not be predictive of results or developments in future periods.
Any forward-looking statement that we make in this Quarterly Report on Form 10-Q speaks only as of the date of such statement. Except as required by law, we do not undertake any obligation to update or revise, or to publicly announce any update or revision to, any of the forward-looking statements, whether as a result of new information, future events or otherwise, after the date of this Quarterly Report on Form 10-Q.
As used in this Quarterly Report on Form 10-Q, unless otherwise stated or the context requires otherwise, references to “Mister Car Wash,” “Mister,” the “Company,” “we,” “us,” and “our,” refer to Mister Car Wash, Inc. and its subsidiaries on a consolidated basis.
2
PART I—FINANCIAL INFORMATION
Item 1. Financial Statements.
Mister Car Wash, Inc.
Condensed Consolidated Balance Sheets
(Amounts in thousands, except share and per share data)
(Unaudited)
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As of |
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(Amounts in thousands, except share and per share data) |
March 31, 2023 |
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December 31, 2022 |
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Assets |
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Current assets: |
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Cash and cash equivalents |
$ |
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$ |
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Restricted cash |
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Accounts receivable, net |
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Other receivables |
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Inventory, net |
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Prepaid expenses and other current assets |
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Total current assets |
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Property and equipment, net |
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Operating lease right of use assets, net |
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Other intangible assets, net |
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Goodwill |
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Other assets |
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Total assets |
$ |
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$ |
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Liabilities and stockholders’ equity |
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Current liabilities: |
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Accounts payable |
$ |
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$ |
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Accrued payroll and related expenses |
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Other accrued expenses |
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Current maturities of operating lease liability |
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Current maturities of finance lease liability |
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Deferred revenue |
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Total current liabilities |
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Long-term portion of debt, net |
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Operating lease liability |
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Financing lease liability |
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Deferred tax liability |
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Other long-term liabilities |
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Total liabilities |
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Stockholders’ equity: |
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Common stock, $ |
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Additional paid-in capital |
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Retained earnings (Accumulated Deficit) |
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Total stockholders’ equity |
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Total liabilities and stockholders’ equity |
$ |
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$ |
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See accompanying notes to unaudited condensed consolidated financial statements.
3
Mister Car Wash, Inc.
Condensed Consolidated Statements of Operations and Comprehensive Income
(Amounts in thousands, except share and per share data)
(Unaudited)
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Three Months Ended March 31, |
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2023 |
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2022 |
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Net revenues |
$ |
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$ |
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Cost of labor and chemicals |
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Other store operating expenses |
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General and administrative |
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(Gain) loss on sale of assets |
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Total costs and expenses |
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Operating income |
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Other expense: |
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Interest expense, net |
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Total other expense |
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Income before taxes |
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Income tax provision |
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Net income |
$ |
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$ |
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Other comprehensive income, net of tax: |
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Gain on interest rate swap |
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Total comprehensive income |
$ |
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$ |
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Net income per share: |
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Basic |
$ |
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$ |
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Diluted |
$ |
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$ |
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Weighted-average common shares outstanding: |
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Basic |
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Diluted |
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See accompanying notes to unaudited condensed consolidated financial statements.
4
Mister Car Wash, Inc.
Condensed Consolidated Statements of Cash Flows
(Amounts in thousands)
(Unaudited)
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Three Months Ended March 31, |
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2023 |
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2022 |
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Cash flows from operating activities: |
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Net income |
$ |
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$ |
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Adjustments to reconcile net income to net cash provided by operating activities: |
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Depreciation and amortization expense |
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Stock-based compensation expense |
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(Gain) loss on sale of assets, net |
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( |
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Amortization of debt issuance costs |
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Non-cash lease expense |
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Deferred income tax |
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Changes in assets and liabilities: |
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Accounts receivable, net |
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Other receivables |
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Inventory, net |
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( |
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Prepaid expenses and other current assets |
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Accounts payable |
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Accrued expenses |
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Deferred revenue |
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Operating lease liability |
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( |
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( |
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Other noncurrent assets and liabilities |
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( |
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Net cash provided by operating activities |
$ |
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$ |
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Cash flows from investing activities: |
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Purchases of property and equipment |
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( |
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( |
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Proceeds from sale of property and equipment |
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Net cash used in investing activities |
$ |
( |
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$ |
( |
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Cash flows from financing activities: |
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Proceeds from issuance of common stock under employee plans |
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Payments on debt borrowings |
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( |
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Principal payments on finance lease obligations |
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( |
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( |
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Net cash provided (used) by financing activities |
$ |
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$ |
( |
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Net change in cash and cash equivalents and restricted cash during period |
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Cash and cash equivalents and restricted cash at beginning of period |
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Cash and cash equivalents and restricted cash at end of period |
$ |
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$ |
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Supplemental disclosure of cash flow information: |
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Cash paid for interest |
$ |
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$ |
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Cash paid for income taxes |
$ |
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$ |
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Supplemental disclosure of non-cash investing and financing activities: |
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Property and equipment in accounts payable |
$ |
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$ |
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Property and equipment in other accrued expenses |
$ |
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$ |
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Stock option exercise proceeds in other receivables |
$ |
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$ |
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See accompanying notes to unaudited condensed consolidated financial statements.
5
Mister Car Wash, Inc.
Condensed Consolidated Statements of Stockholders’ Equity
(Amounts in thousands, except share and per share data)
(Unaudited)
Three Months Ended March 31, 2023
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Common Stock |
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Additional Paid-in Capital |
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Accumulated Other Comprehensive Income |
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Retained Earnings (Accumulated Deficit) |
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Stockholders’ Equity |
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Shares |
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Amount |
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Balance as of December 31, 2022 |
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$ |
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$ |
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$ |
— |
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$ |
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$ |
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Stock-based compensation expense |
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— |
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— |
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— |
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— |
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Vesting of restricted stock units |
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— |
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— |
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– |
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Exercise of stock options |
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— |
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— |
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Net income |
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— |
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— |
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— |
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— |
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Balance as of March 31, 2023 |
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$ |
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$ |
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$ |
- |
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$ |
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$ |
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Three Months Ended March 31, 2022
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Common Stock |
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Additional Paid-in Capital |
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Accumulated Other Comprehensive Income |
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Retained Earnings (Accumulated Deficit) |
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Stockholders’ Equity |
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Shares |
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Amount |
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Balance as of December 31, 2021 |
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$ |
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$ |
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$ |
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$ |
( |
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$ |
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Stock-based compensation expense |
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— |
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— |
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— |
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— |
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Exercise of stock options |
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— |
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— |
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Gain on interest rate swap |
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— |
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— |
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— |
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— |
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Net income |
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— |
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— |
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— |
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— |
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Balance as of March 31, 2022 |
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$ |
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$ |
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$ |
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$ |
( |
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$ |
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See accompanying notes to unaudited condensed consolidated financial statements.
6
Mister Car Wash, Inc.
Notes to Condensed Consolidated Financial Statements
(Dollar amounts in thousands, except per share data)
(Unaudited)
1. Nature of Business
Mister Car Wash, Inc., a Delaware corporation, together with its subsidiaries (collectively, the “Company”), is based in Tucson, Arizona and provider of conveyorized car wash services. We primarily operate Express Exterior Locations, which offers express exterior cleaning services along with free vacuum services, and interior cleaning services at select locations. As of
2. Summary of Significant Accounting Policies
The accompanying unaudited condensed consolidated financial statements as of March 31, 2023 and for the three months ended March 31, 2023 and 2022 have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”) for interim financial statements. Certain information and note disclosures normally included in financial statements prepared in accordance with U.S. GAAP have been condensed or omitted pursuant to such rules and regulations. These unaudited condensed consolidated financial statements should be read in conjunction with our audited consolidated financial statements and the notes thereto for the year ended December 31, 2022 included in the 2022 Form 10-K.
The unaudited condensed consolidated financial statements have been prepared on the same basis as the audited consolidated financial statements. In the opinion of management, the included disclosures are adequate, and the accompanying unaudited condensed consolidated financial statements contain all adjustments which are necessary for a fair presentation of our consolidated financial position as of March 31, 2023, consolidated results of operations and comprehensive income for the three months ended March 31, 2023 and 2022, and consolidated cash flows for the three months ended March 31, 2023 and 2022. Such adjustments are of a normal and recurring nature. The consolidated results of operations for the three months ended March 31, 2023 are not necessarily indicative of the consolidated results of operations that may be expected for the year ending December 31, 2023.
Principles of Consolidation
The accompanying unaudited condensed consolidated financial statements include the accounts of the Company. All material intercompany balances and transactions have been eliminated in consolidation.
Use of Estimates
The preparation of the unaudited condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements. Estimates also affect the reported amounts of revenue and expenses during the periods reported. Some of the significant estimates that we have made pertain to the determination of deferred tax assets and liabilities; estimates utilized to determine the fair value of assets acquired and liabilities assumed in business combinations and the related goodwill and intangibles; and certain assumptions used related to the evaluation of goodwill, intangibles, and property and equipment asset impairment. Actual results could differ from those estimates.
Accounts Receivable, Net
Accounts receivable are presented net of an allowance for doubtful accounts of $
Other Receivables
Other receivables consisted of the following for the periods presented:
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As of |
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March 31, 2023 |
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December 31, 2022 |
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Payroll tax withholding and exercise proceeds receivable |
$ |
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$ |
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Construction receivable |
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Income tax receivable |
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Insurance receivable |
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Other |
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Total other receivables |
$ |
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$ |
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Inventory, Net
7
Inventory consisted of the following for the periods presented:
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As of |
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March 31, 2023 |
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December 31, 2022 |
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Chemical washing solutions |
$ |
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$ |
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Reserve for obsolescence |
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( | ) |
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( | ) |
Total inventory, net |
$ |
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$ |
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The activity in the reserve for obsolescence was immaterial for the three months ended March 31, 2023 and 2022.
Revenue Recognition
The following table summarizes the composition of our net revenues for the periods presented:
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Three Months Ended March 31, |
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2023 |
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2022 |
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Recognized over time |
$ |
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$ |
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Recognized at a point in time |
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Other revenue |
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Net revenues |
$ |
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$ |
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Net Income Per Share
Basic net income per share is computed by dividing net income by the weighted-average number of common shares outstanding for the period. Diluted net income per share is computed by dividing net income by the weighted-average shares outstanding for the period and includes the dilutive impact of potential new shares issuable upon vesting and exercise of stock options, vesting of restricted stock units, and stock purchase rights granted under an employee stock purchase plan. Potentially dilutive securities are excluded from the computation of diluted net income per share if their effect is antidilutive.
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Three Months Ended March 31, |
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2023 |
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2022 |
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Numerator: |
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Net income |
$ |
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$ |
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Denominator: |
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Weighted-average common shares outstanding - basic |
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Effect of potentially dilutive securities: |
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Stock options |
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Restricted stock units |
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Employee stock purchase plan |
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Weighted-average common shares outstanding - diluted |
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Net income per share - basic |
$ |
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$ |
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Net income per share - diluted |
$ |
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$ |
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The following potentially dilutive shares were excluded from the computation of diluted net income per share for the periods presented because including them would have been antidilutive:
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Three Months Ended March 31, |
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2023 |
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2022 |
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Stock options |
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Restricted stock units |
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Employee stock purchase plan |
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Recently Adopted Accounting Pronouncements
In June 2016, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (“ASU No. 2016-13”), which replaces the existing incurred loss impairment model with an expected credit loss model and requires a financial asset measured at amortized cost to be presented at the net amount expected to be collected. We adopted the new standard on January 1, 2023 and was
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applied prospectively. We reviewed our business processes and controls to support the recognition and disclosure as required under the new standard. The adoption of this new standard did not have a material impact on our unaudited condensed consolidated financial statements.
In October 2021, the FASB issued ASU No. 2021-08, Business Combinations (Topic 805) – Accounting for Contract Assets and Contract Liabilities from Contracts with Customers (“ASU No. 2021-08”). The guidance improves the accounting for acquired revenue contracts with customers in a business combination by addressing diversity in practice and certain inconsistencies in application. This update requires that an acquirer recognize and measure contract assets and contract liabilities acquired in a business combination in accordance with ASC Topic 606 as if it had originated the contracts. This update was effective for us as of January 1, 2023, and the adoption of this new standard did not have a material impact on our condensed consolidated financial statements and related disclosures.
3. Property and Equipment, Net
Property and equipment, net consisted of the following for the periods presented:
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As of |
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March 31, 2023 |
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December 31, 2022 |
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Land |
$ |
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$ |
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Buildings and improvements |
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Finance leases |
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Leasehold improvements |
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Vehicles and equipment |
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Furniture, fixtures and equipment |
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Construction in progress |
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Property and equipment, gross |
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Less: accumulated depreciation |
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( |
) |
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( |
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Less: accumulated amortization - finance leases |
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( |
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Property and equipment, net |
$ |
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$ |
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For the three months ended March 31, 2023 and 2022, depreciation expense was $
For the three months ended March 31, 2023 and 2022, amortization expense on finance leases was $
4. Other Intangible Assets, Net
Other intangibles assets, net consisted of the following as of the periods presented:
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March 31, 2023 |
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December 31, 2022 |
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Gross Carrying Amount |
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Accumulated Amortization |
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Gross Carrying Amount |
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Accumulated Amortization |
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Trade names and Trademarks |
$ |
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$ |
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$ |
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CPC Unity System |
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