Annual report pursuant to Section 13 and 15(d)

Business Combinations

v3.22.4
Business Combinations
12 Months Ended
Dec. 31, 2022
Business Combinations [Abstract]  
Business Combinations

16. Business Combinations

From time to time, the Company may pursue acquisitions of conveyorized car washes that either strategically fit with the Company’s business or expand the Company’s presence in new and attractive markets.

The Company accounts for business combinations under the acquisition method of accounting. The assets acquired, and liabilities assumed in connection with business acquisitions are recorded at the date of acquisition at their estimated fair values, with any excess of the purchase price over the estimated fair values of the net assets acquired and intangible assets assigned, recorded as goodwill. Significant judgment is required in estimating the fair value of assets acquired and liabilities assumed and in assigning their respective useful lives. Accordingly, the Company may engage third-party valuation specialists to assist in these determinations. The fair value estimates are based on available historical information and on future expectations and assumptions deemed reasonable by management; but are inherently uncertain.

The consolidated financial statements reflect the operations of an acquired business starting from the effective date of the acquisition. The Company expensed $647, $2,383 and $545 of acquisition-related costs for the years ended December 31, 2022, 2021 and 2020, respectively. These acquisition-related costs are expensed as incurred and are included in general and administrative expenses in the accompanying consolidated statements of operations and comprehensive income (loss).

For the years ended December 31, 2022 and 2021, the amount of acquired goodwill that is not deductible for income tax purposes is $1,078 and $81,365, respectively. The goodwill recognized in 2022 and 2021 is primarily attributable to the expected synergies to be achieved from the business combinations.

2022 Acquisitions

For the year ended December 31, 2022, the Company acquired the assets and liabilities of 11 conveyorized car washes in four acquisitions for total consideration of approximately $98,548, which was paid in cash. These acquisitions resulted in the preliminary recognition of $57,856 of goodwill, $37,174 of property and equipment, $1,540 of intangible assets related to covenant not to compete, $1,978 of other assets and liabilities. Adjustments related to 2022 acquisitions were not material in the current year.

The weighted-average amortization period for the acquired covenants not to compete is 5.0 years.

The acquisitions were located in the following markets:

 

Location (Seller)

 

Number of Washes

 

Month Acquired

Georgia (Bamboo Carwash)

 

1

 

April

California (Speedwash)

 

4

 

April

Minnesota (Top Wash)

 

3

 

August

California (Rapid Xpress)

 

3

 

December

 

Unaudited Supplemental Pro Forma Information

The following table presents unaudited supplemental pro forma information for the periods presented as if the business combinations had occurred on January 1, 2021:

 

 

 

Year Ended December 31,

 

 

 

2022

 

 

2021

 

Net revenues

 

$

17,050

 

 

$

18,310

 

Net income

 

$

3,856

 

 

$

6,478

 

 

The pro forma results presented above primarily include amortization charges for acquired intangible assets, depreciation adjustments for property and equipment that has been revalued, adjustments for certain acquisition-related charges, and the related tax effects. The pro forma information is presented for information purposes only and is not indicative of the results of operations that would have been achieved if the acquisitions had taken place at such time.

For the year ended December 31, 2022, the revenues and earnings of the acquisitions reflected in the accompanying consolidated statements of operations and comprehensive income (loss) were $7,709 and $(89), respectively.

2021 Acquisitions

For the year ended December 31, 2021, the Company acquired the assets and liabilities of 37 conveyorized car washes in five acquisitions for total consideration of approximately $524,839, which was paid in cash. These acquisitions resulted in the preliminary recognition of $323,477 of goodwill, $202,708 of property and equipment, $4,300 of intangible assets related to customer relationships, $3,970 of intangible assets related to covenants not to compete, and $9,665 of net liabilities. In connection with the Downtowner Car Wash acquisition, the Company recognized a contingent consideration liability of $5,750. See Note 10 Fair Value Measurements for additional information regarding the contingent consideration liability. During the year ended December 31, 2022, as a result of receiving $11,845 in escrow funds associated with an acquired location that did not receive zoning permits as required under the purchase agreement, the Company recorded an adjustment during the measurement period to its Clean Streak Ventures LLC purchase price allocation which reduced goodwill by $10,670 and land by $1,175. Additional adjustments related to 2021 acquisitions were not material in the current year.

The weighted-average amortization periods for the acquired customer relationships and covenants not to compete are 7.0 years and 5.0 years, respectively.

The acquisitions were located in the following markets:

 

Location (Seller)

 

Number of Washes

 

Month Acquired

Florida (Superwash Express)

 

5

 

June

Texas (Super Suds Car Wash)

 

1

 

July

Texas (Daddy O's Car Wash)

 

3

 

November

Florida (Downtowner Car Wash)

 

5

 

December

Florida (Clean Streak Ventures LLC)

 

23

 

December

 

Unaudited Supplemental Pro Forma Information

The following table presents unaudited supplemental pro forma information for the periods presented as if the business combinations had occurred on January 1, 2020:

 

 

Year Ended December 31,

 

 

 

2021

 

 

2020

 

Net revenues

 

$

67,667

 

 

$

41,343

 

Net income

 

$

18,423

 

 

$

13,178

 

The pro forma results presented above primarily include amortization charges for acquired intangible assets, depreciation adjustments for property and equipment that has been revalued, adjustments for certain acquisition-related charges, and the related tax effects. The pro forma information is presented for information purposes only and is not indicative of the results of operations that would have been achieved if the acquisitions had taken place at such time.

For the year ended December 31, 2021 the revenues and earnings of the acquisitions reflected in the accompanying consolidated statements of operations and comprehensive income (loss) were $8,283 and $1,847, respectively.

2020 Acquisitions

For the year end December 31, 2020, the Company acquired the assets and liabilities of ten conveyorized car washes in four separate acquisitions for total consideration of approximately $33,584, which was paid in cash. These acquisitions resulted in the recognition of $21,467 of goodwill, $9,463 of property and equipment, $830 of intangible assets related to covenants not to compete, and $1,824 in other assets and liabilities.
 

The acquisitions were located in the following markets:

 

Location (Seller)

 

Number of Washes

 

Month Acquired

Florida (Love)

 

1

 

January

Washington (Bush)

 

7

 

September

Texas (Soapbox Express)

 

1

 

November

Florida (Avatar)

 

1

 

December