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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

 

FORM 10-Q

 

(Mark One)

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2023

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: 001-40542

 

Mister Car Wash, Inc.

(Exact name of registrant as specified in its charter)

 

 

Delaware

47-1393909

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer
Identification No.)

222 E. 5th Street

Tucson, Arizona

85705

(Address of principal executive offices)

(Zip Code)

Registrant’s telephone number, including area code: (520) 615-4000

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class

 

Trading

Symbol(s)

 

Name of each exchange on which registered

Common stock, par value $0.01 per share

 

MCW

 

New York Stock Exchange

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. Yes ☒ No ☐

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). Yes ☒ No ☐

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.

 

Large accelerated filer

Accelerated filer

 

 

 

 

Non-accelerated filer

Smaller reporting company

 

 

 

 

 

 

 

Emerging growth company

 

 

 

 

 

 

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 308,519,147 shares of common stock, $0.01 par value per share, outstanding.

 

 

 

 


 

Table of Contents

 

Page

 

FORWARD-LOOKING STATEMENTS

2

 

 

 

PART I.

FINANCIAL INFORMATION

Item 1.

Financial Statements (Unaudited)

 

Condensed Consolidated Balance Sheets

3

Condensed Consolidated Statements of Operations and Comprehensive Income

4

 

Condensed Consolidated Statements of Cash Flows

5

Condensed Consolidated Statements of Stockholders' Equity

6

Notes to Condensed Consolidated Financial Statements

7

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

20

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

27

Item 4.

Controls and Procedures

27

 

 

 

PART II.

OTHER INFORMATION

Item 1.

Legal Proceedings

28

Item 1A.

Risk Factors

28

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

28

Item 3.

Defaults Upon Senior Securities

28

Item 4.

Mine Safety Disclosures

28

Item 5.

Other Information

28

Item 6.

Exhibits

29

 

 

Signatures

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:

An overall decline in the health of the economy and other factors impacting consumer spending, such as natural disasters, the occurrence of a recession, growing inflation and worsening in economic conditions may affect consumer purchases and reduce demand for our services.
Our ability to attract new customers, retain existing customers and maintain or grow the number of Unlimited Wash Club ® (“UWC”) Members.
If we fail to acquire, open and operate new locations in a timely and cost-effective manner and enter into new markets our financial performance could be materially and adversely affected.
We may not be able to successfully implement our growth strategies on a timely basis or at all.
We are subject to a number of risks and regulations related to credit card and debit card payments we accept.
Supply chain disruption and other increased operating costs could materially and adversely affect our results of operations.
Our locations may experience difficulty hiring and retaining key or sufficient qualified personnel or increases in labor costs.
We lease or sublease the land and buildings where a number of our locations are situated, which could expose us to possible liabilities and losses.
Our indebtedness could adversely affect our financial health and competitive position.
Our business is subject to various laws and regulations and changes in such laws and regulations, or failure to comply with existing or future laws and regulations, could adversely affect our business.
Our locations are subject to certain environmental laws and regulations.
We are subject to data security and privacy risks that could negatively impact our results of operations or reputation.
We may be unable to adequately protect, and we may incur significant costs in enforcing or defending, our intellectual property and other proprietary rights.
Our stock price may be volatile or may decline regardless of our operating performance, resulting in substantial losses for investors purchasing shares of our common stock.

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)

 

 

As of

 

 (Amounts in thousands, except share and per share data)

March 31, 2023

 

 

December 31, 2022

 

Assets

 

 

 

 

 

Current assets:

 

 

 

 

 

Cash and cash equivalents

$

69,903

 

 

$

65,152

 

Restricted cash

 

70

 

 

 

70

 

Accounts receivable, net

 

933

 

 

 

3,941

 

Other receivables

 

14,116

 

 

 

15,182

 

Inventory, net

 

8,228

 

 

 

9,174

 

Prepaid expenses and other current assets

 

10,767

 

 

 

12,618

 

Total current assets

 

104,017

 

 

 

106,137

 

 

 

 

 

 

 

Property and equipment, net

 

596,695

 

 

 

560,874

 

Operating lease right of use assets, net

 

776,496

 

 

 

776,689

 

Other intangible assets, net

 

122,122

 

 

 

123,615

 

Goodwill

 

1,109,815

 

 

 

1,109,815

 

Other assets

 

8,190

 

 

 

9,102

 

Total assets

$

2,717,335

 

 

$

2,686,232

 

 

 

 

 

 

 

Liabilities and stockholders’ equity

 

 

 

 

 

Current liabilities:

 

 

 

 

 

Accounts payable

$

30,379

 

 

$

25,649

 

Accrued payroll and related expenses

 

20,036

 

 

 

17,218

 

Other accrued expenses

 

30,730

 

 

 

41,196

 

Current maturities of operating lease liability

 

41,279

 

 

 

40,367

 

Current maturities of finance lease liability

 

687

 

 

 

668

 

Deferred revenue

 

30,509

 

 

 

29,395

 

Total current liabilities

 

153,620

 

 

 

154,493

 

 

 

 

 

 

 

Long-term portion of debt, net

 

896,223

 

 

 

895,830

 

Operating lease liability

 

758,752

 

 

 

759,775

 

Financing lease liability

 

14,599

 

 

 

14,779

 

Deferred tax liability

 

58,823

 

 

 

53,395

 

Other long-term liabilities

 

6,577

 

 

 

6,832

 

Total liabilities

 

1,888,594

 

 

 

1,885,104

 

 

 

 

 

 

 

Stockholders’ equity:

 

 

 

 

 

Common stock, $0.01 par value, 1,000,000,000 shares authorized,
   
308,101,847 and 306,626,530 shares outstanding as of
   March 31, 2023 and December 31, 2022, respectively

 

3,087

 

 

 

3,072

 

Additional paid-in capital

 

790,041

 

 

 

783,579

 

Retained earnings (Accumulated Deficit)

 

35,613

 

 

 

14,477

 

Total stockholders’ equity

 

828,741

 

 

 

801,128

 

Total liabilities and stockholders’ equity

$

2,717,335

 

 

$

2,686,232

 

 

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)

 

 

Three Months Ended March 31,

 

 

2023

 

 

2022

 

Net revenues

$

225,960

 

 

$

219,419

 

Cost of labor and chemicals

 

66,792

 

 

 

65,538

 

Other store operating expenses

 

89,466

 

 

 

77,801

 

General and administrative

 

24,183

 

 

 

23,687

 

(Gain) loss on sale of assets

 

(63

)

 

 

459

 

Total costs and expenses

 

180,378

 

 

 

167,485

 

   Operating income

 

45,582

 

 

 

51,934

 

 

 

 

 

 

 

Other expense:

 

 

 

 

 

Interest expense, net

 

17,748

 

 

 

8,166

 

Total other expense

 

17,748

 

 

 

8,166

 

Income before taxes

 

27,834

 

 

 

43,768

 

Income tax provision

 

6,698

 

 

 

8,280

 

Net income

$

21,136

 

 

$

35,488

 

 

 

 

 

 

 

Other comprehensive income, net of tax:

 

 

 

 

 

Gain on interest rate swap

 

-

 

 

 

1,869

 

Total comprehensive income

$

21,136

 

 

$

37,357

 

 

 

 

 

 

 

Net income per share:

 

 

 

 

 

     Basic

$

0.07

 

 

$

0.12

 

     Diluted

$

0.06

 

 

$

0.11

 

Weighted-average common shares outstanding:

 

 

 

 

 

     Basic

 

307,291,909

 

 

 

300,931,453

 

     Diluted

 

327,608,266

 

 

 

329,172,437

 

 

See accompanying notes to unaudited condensed consolidated financial statements.

 

4


 

Mister Car Wash, Inc.

Condensed Consolidated Statements of Cash Flows

(Amounts in thousands)

(Unaudited)

 

 

Three Months Ended March 31,

 

 

2023

 

 

2022

 

Cash flows from operating activities:

 

 

 

 

 

Net income

$

21,136

 

 

$

35,488

 

Adjustments to reconcile net income to net cash provided by operating activities:

 

 

 

 

 

Depreciation and amortization expense

 

17,307

 

 

 

14,945

 

Stock-based compensation expense

 

5,361

 

 

 

5,519

 

(Gain) loss on sale of assets, net

 

(63

)

 

 

459

 

Amortization of debt issuance costs

 

419

 

 

 

419

 

Non-cash lease expense

 

10,739

 

 

 

9,606

 

Deferred income tax

 

5,428

 

 

 

5,018

 

Changes in assets and liabilities:

 

 

 

 

 

Accounts receivable, net

 

3,009

 

 

 

146

 

Other receivables

 

1,128

 

 

 

10,108

 

Inventory, net

 

946

 

 

 

(665

)

Prepaid expenses and other current assets

 

1,850

 

 

 

901

 

Accounts payable

 

2,553

 

 

 

5,679

 

Accrued expenses

 

5,155

 

 

 

3,635

 

Deferred revenue

 

1,114

 

 

 

648

 

Operating lease liability

 

(9,696

)

 

 

(9,094

)

Other noncurrent assets and liabilities

 

631

 

 

 

(1,268

)

Net cash provided by operating activities

$

67,017

 

 

$

81,544

 

 

 

 

 

 

 

Cash flows from investing activities:

 

 

 

 

 

Purchases of property and equipment

 

(72,059

)

 

 

(30,015

)

Proceeds from sale of property and equipment

 

8,899

 

 

 

1

 

Net cash used in investing activities

$

(63,160

)

 

$

(30,014

)

 

 

 

 

 

 

Cash flows from financing activities:

 

 

 

 

 

Proceeds from issuance of common stock under employee plans

 

1,055

 

 

 

1,281

 

Payments on debt borrowings

 

-

 

 

 

(2,100

)

Principal payments on finance lease obligations

 

(161

)

 

 

(134

)

Net cash provided (used) by financing activities

$

894

 

 

$

(953

)

 

 

 

 

 

 

Net change in cash and cash equivalents and restricted cash during period

 

4,751

 

 

 

50,577

 

Cash and cash equivalents and restricted cash at beginning of period

 

65,222

 

 

 

19,858

 

Cash and cash equivalents and restricted cash at end of period

$

69,973

 

 

$

70,435

 

 

 

 

 

 

 

Supplemental disclosure of cash flow information:

 

 

 

 

 

Cash paid for interest

$

11,697

 

 

$

7,821

 

Cash paid for income taxes

$

151

 

 

$

-

 

 

 

 

 

 

 

Supplemental disclosure of non-cash investing and financing activities:

 

 

 

 

 

Property and equipment in accounts payable

$

11,993

 

 

$

18,123

 

Property and equipment in other accrued expenses

$

5,969

 

 

$

-

 

Stock option exercise proceeds in other receivables

$

61

 

 

$

45

 

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

 

Common Stock

 

 

Additional Paid-in Capital

 

 

Accumulated Other Comprehensive Income

 

 

Retained Earnings (Accumulated Deficit)

 

 

Stockholders’ Equity

 

 

Shares

 

 

Amount

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance as of December 31, 2022

 

306,626,530

 

 

$

3,072

 

 

$

783,579

 

 

$

 

 

$

14,477

 

 

$

801,128

 

Stock-based compensation expense

 

 

 

 

 

 

 

5,361

 

 

 

 

 

 

 

 

 

5,361

 

Vesting of restricted stock units

 

4,296

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Exercise of stock options

 

1,471,021

 

 

 

15

 

 

 

1,101

 

 

 

 

 

 

 

 

 

1,116

 

Net income

 

 

 

 

 

 

 

 

 

 

 

 

 

21,136

 

 

 

21,136

 

Balance as of March 31, 2023

 

308,101,847

 

 

$

3,087

 

 

$

790,041

 

 

$

-

 

 

$

35,613

 

 

$

828,741

 

 

 

 

 

Three Months Ended March 31, 2022

 

Common Stock

 

 

Additional Paid-in Capital

 

 

Accumulated Other Comprehensive Income

 

 

Retained Earnings (Accumulated Deficit)

 

 

Stockholders’ Equity

 

 

Shares

 

 

Amount

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance as of December 31, 2021

 

300,120,451

 

 

$

3,007

 

 

$

752,343

 

 

$

225

 

 

$

(98,423

)

 

$

657,152

 

Stock-based compensation expense

 

 

 

 

 

 

 

5,519

 

 

 

 

 

 

 

 

 

5,519

 

Exercise of stock options

 

1,486,727

 

 

 

15

 

 

 

1,311

 

 

 

 

 

 

 

 

 

1,326

 

Gain on interest rate swap

 

 

 

 

 

 

 

 

 

 

1,869

 

 

 

 

 

 

1,869

 

Net income

 

 

 

 

 

 

 

 

 

 

 

 

 

35,488

 

 

 

35,488

 

Balance as of March 31, 2022

 

301,607,178

 

 

$

3,022

 

 

$

759,173

 

 

$

2,094

 

 

$

(62,935

)

 

$

701,354

 

 

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 March 31, 2023, we operated 439 car washes in 21 states.

 

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 $47 and $76 as of March 31, 2023 and December 31, 2022, respectively. The activity in the allowance for doubtful accounts was immaterial for the three months ended March 31, 2023 and 2022.

Other Receivables

Other receivables consisted of the following for the periods presented:

 

As of

 

 

March 31, 2023

 

 

December 31, 2022

 

Payroll tax withholding and exercise proceeds receivable

$

85

 

 

$

273

 

Construction receivable

 

6,462

 

 

 

6,199

 

Income tax receivable

 

3,353

 

 

 

4,387

 

Insurance receivable

 

1,759

 

 

 

2,627

 

Other

 

2,457

 

 

 

1,696

 

    Total other receivables

$

14,116

 

 

$

15,182

 

Inventory, Net

7


 

Inventory consisted of the following for the periods presented:

 

As of

 

 

March 31, 2023

 

 

December 31, 2022

 

Chemical washing solutions

$

8,391

 

 

$

9,357

 

Reserve for obsolescence

 

(163

)

 

 

(183

)

    Total inventory, net

$

8,228

 

 

$

9,174

 

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:

 

 

Three Months Ended March 31,

 

 

2023

 

 

2022

 

Recognized over time

$

156,891

 

 

$

140,874

 

Recognized at a point in time

 

68,970

 

 

 

78,008

 

Other revenue

 

99

 

 

 

537

 

    Net revenues

$

225,960

 

 

$

219,419

 

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. Reconciliations of the numerators and denominators of the basic and diluted net income per share calculations for the periods presented are as follows:

 

 

Three Months Ended March 31,

 

 

2023

 

 

2022

 

Numerator:

 

 

 

 

 

Net income

$

21,136

 

 

$

35,488

 

 

 

 

 

 

 

Denominator:

 

 

 

 

 

   Weighted-average common shares outstanding - basic

 

307,291,909

 

 

 

300,931,453

 

   Effect of potentially dilutive securities:

 

 

 

 

 

       Stock options

 

19,798,577

 

 

 

27,010,017

 

       Restricted stock units

 

498,213

 

 

 

1,230,967

 

       Employee stock purchase plan

 

19,567

 

 

 

-

 

   Weighted-average common shares outstanding - diluted

 

327,608,266

 

 

 

329,172,437

 

 

 

 

 

 

 

Net income per share - basic

$

0.07

 

 

$

0.12

 

Net income per share - diluted

$

0.06

 

 

$

0.11

 

 

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:

 

 

Three Months Ended March 31,

 

2023

 

 

2022

 

Stock options

 

2,677,756

 

 

 

2,041,141

 

Restricted stock units

 

356,400

 

 

 

-

 

Employee stock purchase plan

 

3,619

 

 

 

-

 

 

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

8


 

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:

 

 

As of

 

 

March 31, 2023

 

 

December 31, 2022

 

Land

$

100,090

 

 

$

94,594

 

Buildings and improvements

 

204,617

 

 

 

189,998

 

Finance leases

 

16,604

 

 

 

16,604

 

Leasehold improvements

 

118,952

 

 

 

115,811

 

Vehicles and equipment

 

236,175

 

 

 

229,453

 

Furniture, fixtures and equipment

 

90,567

 

 

 

86,613

 

Construction in progress

 

68,061

 

 

 

53,373

 

Property and equipment, gross

 

835,066

 

 

 

786,446

 

Less: accumulated depreciation

 

(235,836

)

 

 

(223,288

)

Less: accumulated amortization - finance leases

 

(2,535

)

 

 

(2,284

)

Property and equipment, net

$

596,695

 

 

$

560,874

 

For the three months ended March 31, 2023 and 2022, depreciation expense was $15,379 and $12,934, respectively.

For the three months ended March 31, 2023 and 2022, amortization expense on finance leases was $251 and $242, respectively.

4. Other Intangible Assets, Net

Other intangibles assets, net consisted of the following as of the periods presented:

 

 

March 31, 2023

 

 

December 31, 2022

 

 

Gross Carrying Amount

 

 

Accumulated Amortization

 

 

Gross Carrying Amount

 

 

Accumulated Amortization

 

Trade names and Trademarks

$

107,200

 

 

$

200

 

 

$

107,200

 

 

 

200

 

CPC Unity System

 

42,900