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

Quarterly report pursuant to Section 13 or 15(d)

Leases

Leases

6 Months Ended

Jun. 30, 2024

Leases [Abstract]

Leases

10. Leases

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


		As of
	Classification	June 30, 2024		December 31, 2023
Assets
Operating	Operating right of use assets, net	$	844,564	$	833,547
Finance	Property and equipment, net		12,813		13,315
Total lease assets		$	857,377	$	846,862

Liabilities
Current
Operating	Current maturities of operating lease liability	$	46,091	$	43,979
Finance	Current maturities of finance lease liability		787		746
Long-term
Operating	Operating lease liability		814,905		809,409
Finance	Financing lease liability		13,630		14,033
Total lease liabilities		$	875,413	$	868,167

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


	Three Months Ended June 30,				Six Months Ended June 30,
	2024		2023		2024		2023

Operating lease expense (a)	$	27,659	$	25,308	$	54,871	$	49,319
Finance lease expense
Amortization of lease assets		251		251		502		502
Interest on lease liabilities		260		273		524		549
Short-term lease expense		52		12		103		26
Variable lease expense (b)		2,756		2,113		10,020		8,816
Total	$	30,978	$	27,957	$	66,020	$	59,212

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 condensed consolidated statements of operations.

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

The following includes supplemental information for the periods presented:


	Three Months Ended June 30,						Six Months Ended June 30,
	2024			2023			2024			2023
Operating cash flows from operating leases	$	26,843		$	24,934		$	53,360		$	48,700
Operating cash flows from finance leases	$	260		$	273		$	524		$	549
Financing cash flows from finance leases	$	182		$	163		$	362		$	324

Operating lease ROU assets obtained in exchange for lease liabilities	$	20,237		$	48,528		$	34,947		$	59,055

Weighted-average remaining operating lease term		13.67			14.06			13.67			14.06
Weighted-average remaining finance lease term		15.19			15.97			15.19			15.97

Weighted-average operating lease discount rate		8.09	%		7.83	%		8.09	%		7.83	%
Weighted-average finance lease discount rate		7.33	%		7.33	%		7.33	%		7.33	%

As of June 30, 2024, lease obligation maturities were as follows:


Fiscal Year Ending:	Operating Leases			Finance Leases
2024 (remaining six months)	$	54,524		$	893
2025		110,109			1,787
2026		109,145			1,792
2027		105,372			1,819
2028		99,258			1,846
Thereafter		987,259			18,425
Total future minimum obligations	$	1,465,667		$	26,562
Less: Present value discount		(604,671	)		(12,145	)
Present value of net future minimum lease obligations	$	860,996		$	14,417
Less: current portion		(46,091	)		(787	)
Long-term obligations	$	814,905		$	13,630

Forward-Starting Leases

As of June 30, 2024, we entered into 12 leases that had not yet commenced related to build-to-suit arrangements for car wash locations. These leases will commence in years 2024 through 2026 with initial lease terms of 15 to 20 years.

As of December 31, 2023, we entered into 14 leases that had not yet commenced related to build-to-suit arrangements for car wash locations. These leases will commence in years 2024 through 2026 with initial lease terms of 15 to 20 years.

Sale-Leaseback Transactions

During the three months ended June 30, 2024 and 2023, we completed three and 10 sale-leaseback transactions related to car wash locations, respectively, with aggregate consideration of $13,845 and $80,042, respectively, resulting in a net loss of $2,658 and a net gain of $4,896, respectively, which are included in (gain) loss on sale of assets in the accompanying condensed consolidated statements of operations. Contemporaneously with the closing of the sales, we entered into lease agreements for the properties for initial 20-year terms. For the sale-leaseback transactions consummated in the three months ended June 30, 2024 and 2023, the cumulative initial annual rent for the properties was approximately $881 and $5,028, respectively, subject to annual escalations. These leases are accounted for as operating leases.

During the six months ended June 30, 2024 and 2023, we completed four and 12 sale-leaseback transactions related to car wash locations, respectively, with aggregate consideration of $18,745 and $89,255, respectively, resulting in a net loss of $961 and a net gain of $5,226, respectively, which are included in (gain) loss on sale of assets in the accompanying condensed consolidated statements of operations. Contemporaneously with the closing of the sales, we entered into lease agreements for the properties for initial 20-year terms. For the sale-leaseback transactions consummated in the six months ended June 30, 2024 and 2023, the cumulative initial annual rent for the properties was approximately $1,187 and $5,587, respectively, subject to annual escalations. These leases are accounted for as operating leases.