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:
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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 30, 2024, the registrant had
Table of Contents
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Page |
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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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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 |
24 |
Item 3. |
31 |
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Item 4. |
31 |
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PART II. |
OTHER INFORMATION |
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Item 1. |
32 |
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Item 1A. |
32 |
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Item 2. |
32 |
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Item 3. |
32 |
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Item 4. |
32 |
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Item 5. |
32 |
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Item 6. |
33 |
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34 |
1
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 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,” “should,” or "vision," or the negative thereof 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, 2023 (the “2023 Form 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. 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 indicative 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, 2024 |
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December 31, 2023 |
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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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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 long-term debt |
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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 |
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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
(Amounts in thousands, except share and per share data)
(Unaudited)
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Three Months Ended March 31, |
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2024 |
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2023 |
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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 on sale of assets |
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Total costs and expenses |
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Operating income |
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Other (income) expense: |
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Interest expense, net |
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Loss on extinguishment of debt |
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Other income |
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( |
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Total other expense, net |
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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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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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2024 |
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2023 |
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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 on sale of assets, net |
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Loss on extinguishment of debt |
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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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( |
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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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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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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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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 for repurchases of common stock |
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Proceeds from debt borrowings |
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Proceeds from revolving line of credit |
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Payments on debt borrowings |
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( |
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Payments on revolving line of credit |
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Payments of deferred financing costs |
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( |
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Principal payments on finance lease obligations |
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Net cash provided 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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Reconciliation of cash, cash equivalents, and restricted cash to the condensed consolidated balance sheets |
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Cash and cash equivalents |
$ |
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$ |
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Restricted cash, included in prepaid expenses and other current assets |
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Total cash, cash equivalents, and restricted cash |
$ |
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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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Payment of debt financing costs 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, 2024
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Common Stock |
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Additional Paid-in Capital |
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Retained Earnings |
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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, 2023 |
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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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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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Shares repurchased |
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( |
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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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Balance as of March 31, 2024 |
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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, 2023
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Common Stock |
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Additional Paid-in Capital |
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Retained Earnings |
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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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Stock-based compensation expense |
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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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— |
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Exercise of stock options |
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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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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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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 is a provider of conveyorized car wash services. We primarily operate Express Exterior Locations, which offer express exterior cleaning services along with free vacuum services, and interior cleaning services at select locations. As of
2. Summary of Significant Accounting Policies
Basis of Presentation
The accompanying unaudited condensed consolidated financial statements as of March 31, 2024 and for the three months ended March 31, 2024 and 2023 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, 2023 included in the 2023 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, 2024, consolidated results of operations for the three months ended March 31, 2024 and 2023, and consolidated cash flows for the three months ended March 31, 2024 and 2023. Such adjustments are of a normal and recurring nature. The consolidated results of operations for the three months ended March 31, 2024 are not necessarily indicative of the consolidated results of operations that may be expected for any other future interim or annual period.
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.
Reclassification
Within the unaudited condensed consolidated financial statements certain immaterial amounts have been reclassified to conform with current period presentation. We reclassified Restricted cash of $
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.
7
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, 2024 |
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December 31, 2023 |
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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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Employee retention credit receivable |
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Other |
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Total other receivables |
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Inventory, Net
Inventory consisted of the following for the periods presented:
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As of |
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March 31, 2024 |
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December 31, 2023 |
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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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( |
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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, 2024 and 2023.
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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2024 |
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2023 |
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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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8
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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2024 |
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2023 |
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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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$ |
|
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, |
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2024 |
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2023 |
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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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Employee Retention Credit
In response to the COVID-19 pandemic, the Employee Retention Credit (“ERC”), was established under the Coronavirus Aid, Relief, and Economic Security Act. The ERC is a refundable tax credit against certain employment taxes equal to 50% of the qualified wages an eligible employer paid to employees from March 13, 2020 to December 31, 2020. Companies who meet the eligibility requirements can claim the ERC on an original or adjusted employment tax return for a period within those dates.
In March 2024, the Company determined that it qualifies for $
9
Recently Adopted Accounting Pronouncements
There have been no new accounting standards issued which would require either disclosure or adoption in the current period.
Recently Issued Accounting Pronouncements Not Yet Adopted
In December 2023, the FASB issued ASU No. 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, which focuses on the rate reconciliation and income taxes paid. ASU No. 2023-09 requires a public business entity (PBE) to disclose, on an annual basis, a tabular rate reconciliation using both percentages and currency amounts, broken out into specified categories with certain reconciling items further broken out by nature and jurisdiction to the extent those items exceed a specified threshold. In addition, all entities are required to disclose income taxes paid, net of refunds received disaggregated by federal, state/local, and foreign and by jurisdiction if the amount is at least 5% of total income tax payments, net of refunds received. For PBEs, the new standard is effective for annual periods beginning after December 15, 2024, with early adoption permitted. An entity may apply the amendments in this ASU prospectively by providing the revised disclosures for the period ending December 31, 2025 and continuing to provide the pre-ASU disclosures for the prior periods, or may apply the amendments retrospectively by providing the revised disclosures for all period presented. We expect this ASU to only impact our disclosures with no impacts to our consolidated financial statements.
In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures, which requires enhanced disclosures regarding significant segment expenses and other segment items for public entities on both an annual and interim basis. Specifically, the update requires that entities provide, during interim periods, all disclosures related to a reportable segment's profit or loss and assets that were previously required only on an annual basis. Additionally, this guidance necessitates the disclosure of the title and position of the Chief Operating Decision Maker ("CODM"). The new guidance does not modify how a public entity identifies its operating segments, aggregates them, or applies the quantitative thresholds to determine its reportable segments. This update is effective for fiscal years beginning after December 15, 2023, and interim periods within those fiscal years starting after December 15, 2024. This ASU must be applied retrospectively to all prior periods presented. Early adoption is permitted. We are currently evaluating the impact this ASU may have on our 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 |
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|||||
|
March 31, 2024 |
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December 31, 2023 |
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Land |
$ |
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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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|
( |
) |
Less: accumulated amortization - finance leases |
|
( |
) |
|
|
( |
) |
Property and equipment, net |
$ |
|
|
$ |
|
For the three months ended March 31, 2024 and 2023, depreciation expense was $
For the three months ended March 31, 2024 and 2023, amortization expense on finance leases was $
10
4. Other Intangible Assets, Net
Other intangibles assets, net consisted of the following as of the periods presented:
|
March 31, 2024 |
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|
December 31, 2023 |
|
||||||||||
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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 |
|
||||
Trade names and Trademarks |
$ |
|
|
$ |
|
|
$ |
|
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|
||||
CPC Unity System |
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Customer relationships |
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Covenants not to compete |
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|
||||
Other intangible assets, net |
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
For the three months ended March 31, 2024 and 2023, amortization expense associated with our finite-lived intangible assets was $
As of March 31, 2024, estimated future amortization expense was as follows:
Fiscal Year Ending: |
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2024 (remaining nine months) |
|
|
$ |
|
|
2025 |
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2026 |
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2027 |
|
|
|
|
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2028 |
|
|
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Thereafter |
|
|
|
|
|
Total estimated future amortization expense |
|
|
$ |
|
5. Goodwill
Goodwill consisted of the following for the periods presented:
|
As of |
|
|||||
|
March 31, 2024 |
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|
December 31, 2023 |
|
||
Balance at beginning of period |
$ |
|
|
$ |
|
||
Current period acquisitions |
|
|
|
|
|
||
Balance at end of period |
$ |
|
|
$ |
|
Goodwill is generally deductible for tax purposes, except for the portion related to purchase accounting step-up goodwill.
6. Other Accrued Expenses
Other accrued expenses consisted of the following for the periods presented:
11
|
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As of |
|
|||||
|
|
March 31, 2024 |
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|
December 31, 2023 |
|
||
Utilities |
|
$ |
|
|
$ |
|
||
Accrued other tax expense |
|
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Insurance expense |
|
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Greenfield development accruals |
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Other |
|
|
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|
||
Total other accrued expenses |
|
$ |
|
|
$ |
|
Greenfield development accruals represent an obligation to pay for invoices not yet received, primarily related to land and buildings and improvements, on properties which we have taken control of as of March 31, 2024 and December 31, 2023.
7. Income Taxes
The effective income tax rates on continuing operations for the three months ended March 31, 2024 and 2023 were
The year-to-date provision for income taxes for the three months ended March 31, 2024 included taxes on earnings at an anticipated annual effective tax rate of
The year-to-date provision for income taxes for the three months ended March 31, 2023 included taxes on earnings at an anticipated annual effective tax rate of
On August 9, 2022, the Creating Helpful Incentives to Produce Semiconductors (“CHIPS”) Act of 2022 was signed into law. The CHIPS Act is designed to boost domestic semiconductor manufacturing and encourage U.S. research activities. Also in 2022, the Inflation Reduction Act (“IRA”) of 2022 was signed into law. The IRA created a new book-minimum tax on certain large corporations and an excise tax on stock buybacks while also providing incentives to address climate change mitigation and clean energy, among other items. Most of these changes became effective for the 2023 tax year and after initial evaluation, and similar to the prior quarter, we do not currently expect these laws to have a material effect on the consolidated financial statements.
For the three months ended March 31, 2024 and 2023, we recorded $
8. Debt
Long-term debt consisted of the following as of the periods presented:
|
As of |
|
|||||
|
March 31, 2024 |
|
|
December 31, 2023 |
|
||
Credit agreement |
|
|
|
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|
||
First lien term loan |
$ |
|
|
$ |
|
||
Less: unamortized discount and debt issuance costs |
|
( |
) |
|
|
( |
) |
Less: current maturities of long-term debt |
|
( |
) |
|
|
|
|
First lien term loan, net |
|
|
|
|
|
||
|
|
|
|
|
|
||
Total long-term portion of debt, net |
$ |
|
|
$ |
|
12
As of March 31, 2024, annual maturities of debt were as follows:
Fiscal Year Ending: |
|
|
|
|
|
2024 (remaining nine months) |
|
|
$ |
|
|
2025 |
|
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2026 |
|
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2027 |
|
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|
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2028 |
|
|
|
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Thereafter |
|
|
|
|
|
Total maturities of debt |
|
|
$ |
|
As of March 31, 2024 and December 31, 2023, unamortized discount and debt issuance costs were $
For the three months ended March 31, 2024 and 2023, the amortization of debt issuance costs in interest expense, net in the condensed consolidated statements of operations was approximately $
Amended and Restated First Lien Credit Agreement
On August 21, 2014, we entered into a Credit Agreement (“Credit Agreement”) which was originally comprised of a term loan (“First Lien Term Loan”) and a revolving commitment (“Revolving Commitment”). The Credit Agreement was collateralized by substantially all personal property (including cash, inventory, property and equipment, and intangible assets), real property, and equity interests owned by us.
In May 2019, we entered into the Amended and Restated First Lien Credit Agreement (“Amended and Restated First Lien Credit Agreement”) which amended and restated the entirety of the Credit Agreement.
First Lien Term Loan
In December 2021, in connection with the Clean Streak Ventures acquisition, we entered into Amendment No. 3 to the Amended and Restated First Lien Credit Agreement, pursuant to which the previous First Lien Term Loan was increased by $
13
In December 2022, we entered into Amendment No. 4 to the Amended and Restated First Lien Credit Agreement with the lenders party thereto, and Jeffries Finance LLC, as administrative agent, to transition from LIBOR to Eurocurrency rate SOFR spread, whereas all revolver borrowings and term loan borrowings under the existing credit agreement will be SOFR based. All other terms governing this term loan facility remained substantially the same.
In March 2024, we entered into Amendment No. 5 to the Amended and Restated First Lien Credit Agreement with the lenders party thereto, and Bank of America, N.A. ("BofA") as the successor administrative agent and collateral agent. This amendment further modified the credit agreement by providing $
As of March 31, 2024 and December 31, 2023, the amount outstanding under the First Lien Term Loan was $
The Amended and Restated First Lien Credit Agreement requires us to maintain compliance with a First Lien Net Leverage Ratio. As of March 31, 2024, we were in compliance with the First Lien Net Leverage Ratio financial covenant of the Amended and Restated First Lien Credit Agreement.
Revolving Commitment
In May 2019, as a part of the Amended and Restated First Lien Credit Agreement, the Revolving Commitment was increased from $
In June 2021, we entered into Amendment No. 2 to our Amended and Restated First Lien Credit Agreement that (i) increased the maximum available borrowing capacity under the Revolving Commitment from $
In March 2024, we entered into Amendment No. 5 to our Amended and Restated First Lien Credit Agreement that consists of $
As of March 31, 2024 and December 31, 2023, there were
The maximum available borrowing capacity under the Revolving Commitments is reduced by outstanding letters of credit under the Revolving Commitments. As of March 31, 2024 and December 31, 2023, the available borrowing capacity under the Revolving Commitments was $
In addition, an unused commitment fee based on our First Lien Net Leverage Ratio is payable on the average of the unused borrowing capacity under the Revolving Commitments. As of March 31, 2024 and December 31, 2023, the unused commitment fee was
Standby Letters of Credit
14
As of March 31, 2024, we have a letter of credit sublimit of $
9. Fair Value Measurements
The following table presents financial liabilities which are measured at fair value on a recurring basis as of March 31, 2024:
|
Fair Value Measurements |
|
|||||||||||||
|
Total |
|
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
||||
Assets: |
|
|
|
|
|
|
|
|
|
|
|
||||
Deferred compensation plan |
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Liabilities: |
|
|
|
|
|
|
|
|
|
|
|
||||
Deferred compensation plan |
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Contingent Consideration |
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
The following table presents financial liabilities which are measured at fair value on a recurring basis as of December 31, 2023:
|
Fair Value Measurements |
|
|||||||||||||
|
Total |
|
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
||||
Assets: |
|
|
|
|
|
|
|
|
|
|
|
||||
Deferred compensation plan |
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Liabilities: |
|
|
|
|
|
|
|
|
|
|
|
||||
Deferred compensation plan |
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Contingent Consideration |
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
We measure the fair value of our financial assets and liabilities using the highest level of inputs that are available as of the measurement date. The carrying amounts of cash, accounts receivable, and accounts payable approximate their fair value due to the immediate or short-term maturity of these financial instruments.
We maintain a deferred compensation plan for a select group of our highly compensated employees, in which certain of our executive officers participate in.
As of March 31, 2
As of March 31, 2024 and December 31, 2023, we held
We recognized a Level 3 contingent consideration liability in connection with the Downtowner Car Wash acquisition in December 2021. We measured its contingent consideration liability using Level 3 unobservable inputs. The contingent consideration liability is associated with the achievement of certain targets and is estimated at each balance sheet date by considering among other factors, results of completed periods and our most recent financial projection for future periods subject to earn-out payments. There are two components to the contingent consideration: a payment when we obtained the certificate of occupancy for the car wash and opened it to the public in 2023 and an annual payment
15
based on certain financial metrics of the acquired business. A change in the forecasted revenue or projected opening dates could result in a significantly lower or higher fair value measurement. We determined that there were
During the three months ended March 31, 2
10. Leases
Balance sheet information related to leases consisted of the following for the periods presented:
|
|
|
|
As of |
|
|||||
|
|
Classification |
|
March 31, 2024 |
|
|
December 31, 2023 |
|
||
Assets |
|
|
|
|
|
|
|
|
||
Operating |
|
Operating right of use assets, net |
|
$ |
|
|
$ |
|
||
Finance |
|
|
|
|
|
|
|
|||
Total lease assets |
|
|
|
$ |
|
|
$ |
|
||
|
|
|
|
|
|
|
|
|
||
Liabilities |
|
|
|
|
|
|
|
|
||
Current |
|
|
|
|
|
|
|
|
||
Operating |
|
Current maturities of operating lease liability |
|
$ |
|
|
$ |
|
||
Finance |
|
Current maturities of finance lease liability |
|
|
|
|
|
|
||
Long-term |
|
|
|
|
|
|
|
|
||
Operating |
|
Operating lease liability |
|
|
|
|
|
|
||
Finance |
|
Financing lease liability |
|
|
|
|
|
|
||
Total lease liabilities |
|
|
|
$ |
|
|
$ |
|
Components of total lease cost, net, consisted of the following for the periods presented:
|
|
Three Months Ended March 31, |
|
|||||
|
|
2024 |
|
|
2023 |
|
||
|
|
|
|
|
|
|
||
Operating lease expense(a) |
|
$ |
|
|
$ |
|
||
Finance lease expense |
|
|
|
|
|
|
||
Amortization of lease assets |
|
|
|
|
|
|
||
Interest on lease liabilities |
|
|
|
|
|
|
||
Short-term lease expense |
|
|
|
|
|
|
||
Variable lease expense(b) |
|
|