Mister Car Wash Quarterly report pursuant to Section 13 or 15(d)

Quarterly report pursuant to Section 13 or 15(d)

Leases

Leases

3 Months Ended

Mar. 31, 2022

Leases [Abstract]

Leases

11. Leases

Balance sheet information related to leases consisted of the following for the periods presented:


		As of
	Classification	March 31, 2022		December 31, 2021
Assets
Operating	Operating lease right of use assets, net	$	716,745	$	718,533
Finance	Property and equipment, net		14,961		15,204
Total lease assets		$	731,706	$	733,737

Liabilities
Current
Operating	Current maturities of operating lease liability	$	37,889	$	37,345
Finance	Current maturities of finance lease liability		577		559
Long-term
Operating	Operating lease liability		714,098		717,552
Finance	Financing lease liability		15,206		15,359
Total lease liabilities		$	767,770	$	770,815

Components of total lease cost, net, consisted of the following for the periods presented:


	Three Months Ended March 31,
	2022		2021

Operating lease expense(1)	$	21,204	$	19,125
Finance lease expense
Amortization of lease assets		242		242
Interest on lease liabilities		285		294
Short-term lease expense		8		4
Variable lease expense(2)		5,141		3,924
Total	$	26,880	$	23,589

(1)

Operating lease expense includes an immaterial amount of sublease income and is included in other store operating expenses and general and administrative expenses in the accompanying unaudited condensed consolidated statements of operations and comprehensive income.

(2)

Variable lease costs consist of property taxes, property insurance, and common area or other maintenance costs for the Company’s leases of land and buildings and is included in other store operating expenses in the accompanying unaudited condensed consolidated statements of operations and comprehensive income.

The following includes supplemental information for the periods presented:


	Three Months Ended March 31,
	2022			2021
Operating cash flows from operating leases	$	21,461		$	19,527
Operating cash flows from finance leases	$	285		$	294
Financing cash flows from finance leases	$	134		$	119

Operating lease liabilities arising from obtaining ROU assets	$	7,818		$	9,357
Finance lease liabilities arising from obtaining ROU assets	$	-		$	-

Weighted-average remaining operating lease term		14.27			14.87
Weighted-average remaining finance lease term		17.08			17.95

Weighted-average operating lease discount rate		6.66	%		6.26	%
Weighted-average finance lease discount rate		7.33	%		7.33	%

As of March 31, 2022, lease obligation maturities were as follows:


Fiscal Year Ending:	Operating Leases			Finance Leases
2022 (remaining nine months)	$	64,609		$	1,264
2023		85,778			1,716
2024		85,212			1,741
2025		84,883			1,766
2026		83,877			1,792
Thereafter		781,873			22,090
Total future minimum obligations	$	1,186,232		$	30,369
Less: Present value discount		(434,245	)		(14,586	)
Present value of net future minimum lease obligations	$	751,987		$	15,783
Less: current portion		(37,889	)		(577	)
Long-term obligations	$	714,098		$	15,206

Forward-Starting Leases

As of March 31, 2022, the Company entered into six leases that had not yet commenced related to build-to-suit arrangements for car wash locations. These leases will commence in the remainder of 2022, or in 2023 or 2024 with initial lease terms of 15 to 20 years.

As of December 31, 2021, the Company entered into eight leases that had not yet commenced related to build-to-suit arrangements for car wash locations. These leases will commence in the remainder of 2022 or in 2023 with initial lease terms of five to 20 years.

Sale-Leaseback Transactions

During the three months ended March 31, 2022, the Company did not complete any sale-leaseback transactions.

During the three months ended March 31, 2021, the Company completed one sale-leaseback transaction related to a car wash location for $3,667, resulting in a net loss of $270, which was included in loss on sale of assets in the accompanying unaudited condensed

consolidated statements of operations and comprehensive income. Contemporaneously with the closing of this sale, the Company entered into a lease agreement for the land and buildings for an initial 20-year term. For the sale-leaseback transaction consummated in the three months ended March 31, 2021, the cumulative initial annual rent is approximately $228, subject to annual escalations. This lease is accounted for as an operating lease.