Annual report pursuant to Section 13 and 15(d)

Leases

v3.22.1
Leases
12 Months Ended
Dec. 31, 2021
Leases [Abstract]  
Leases

12. Leases

The Company’s incremental borrowing rate for a lease is the rate of interest it expects to pay on a collateralized basis to borrow an amount equal to the lease payments under similar terms. To determine the incremental borrowing rates used to discount the lease payments, the Company estimated its synthetic credit rating and utilized market data for similarly situated companies.

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

 

 

 

 

 

As of

 

 

 

Classification

 

December 31, 2021

 

 

December 31, 2020

 

Assets

 

 

 

 

 

 

 

 

Operating

 

Operating right of use assets, net

 

$

718,533

 

 

$

681,538

 

Finance

 

Property and equipment, net

 

 

15,204

 

 

 

16,173

 

Total lease assets

 

 

 

$

733,737

 

 

$

697,711

 

 

 

 

 

 

 

 

 

 

Liabilities

 

 

 

 

 

 

 

 

Current

 

 

 

 

 

 

 

 

Operating

 

Current maturities of operating lease liability

 

$

37,345

 

 

$

33,485

 

Finance

 

Current maturities of finance lease liability

 

 

559

 

 

 

495

 

Long-term

 

 

 

 

 

 

 

 

Operating

 

Operating lease liability

 

 

717,552

 

 

 

685,479

 

Finance

 

Financing lease liability

 

 

15,359

 

 

 

15,917

 

Total lease liabilities

 

 

 

$

770,815

 

 

$

735,376

 

 

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

 

 

 

Year Ended December 31,

 

 

 

2021

 

 

2020

 

Operating lease expense(1)

 

$

79,420

 

 

$

78,261

 

Finance lease expense

 

 

 

 

 

 

Amortization of lease assets

 

 

970

 

 

 

324

 

Interest on lease liabilities

 

 

1,164

 

 

 

408

 

Short-term lease expense

 

 

50

 

 

 

23

 

Variable lease expense(2)

 

 

12,045

 

 

 

9,818

 

Total

 

$

93,649

 

 

$

88,834

 

(1)
Operating lease expense includes an immaterial amount of sublease income and is included in equipment and facilities and general and administrative on the consolidated statement of operating and comprehensive income (loss).
(2)
Variable lease costs consist primarily of property taxes, property insurance, and common area or other maintenance costs for the Company’s building leases.

The following includes supplemental information for the periods presented:

 

 

 

Year Ended December 31,

 

 

 

2021

 

 

2020

 

Operating cash flows from operating leases

 

$

80,831

 

 

$

76,012

 

Operating cash flows from finance leases

 

$

1,164

 

 

$

408

 

Financing cash flows from finance leases

 

$

495

 

 

$

223

 

 

 

 

 

 

 

 

Operating lease liabilities arising from obtaining ROU assets

 

$

72,944

 

 

$

37,996

 

Finance lease liabilities arising from obtaining ROU assets

 

$

-

 

 

$

15,597

 

 

 

 

 

 

 

 

Weighted-average remaining operating lease term

 

 

14.44

 

 

 

15.01

 

Weighted-average remaining finance lease term

 

 

17.30

 

 

 

18.17

 

 

 

 

 

 

 

 

Weighted-average operating lease discount rate

 

 

6.61

%

 

 

6.27

%

Weighted-average finance lease discount rate

 

 

7.33

%

 

 

7.33

%

 

As of December 31, 2021, lease obligation maturities were as follows:

 

Fiscal Year Ending:

 

Operating Leases

 

 

Finance Leases

 

2022

 

$

85,439

 

 

$

1,684

 

2023

 

 

85,029

 

 

 

1,716

 

2024

 

 

84,423

 

 

 

1,741

 

2025

 

 

84,082

 

 

 

1,766

 

2026

 

 

83,125

 

 

 

1,792

 

Thereafter

 

 

770,373

 

 

 

22,090

 

Total future minimum obligations

 

$

1,192,471

 

 

$

30,789

 

Less: Present value discount

 

 

(437,574

)

 

 

(14,871

)

Present value of net future minimum lease obligations

 

$

754,897

 

 

$

15,918

 

Less: current portion

 

 

(37,345

)

 

 

(559

)

Long-term obligations

 

$

717,552

 

 

$

15,359

 

 

Forward Starting Leases

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 2022 or in 2023 with initial lease terms of five to 20 years.

As of December 31, 2020, the Company entered into 10 leases that had not yet commenced related to build-to-suit arrangements for car wash locations. These leases commenced in 2021 or will commence in the remainder of 2022 with initial lease terms of five to 20 years.

Sale-leaseback Transactions

During the year ended December 31, 2021, the Company completed nine sale-leaseback transactions related to car wash locations with aggregate consideration of $96,584, resulting in net gains of $24,881, which is included in (gain) loss on sale of assets in the consolidated statements of operations and comprehensive income (loss). Contemporaneously with the closing of the sales, the Company entered into lease agreements for the properties for initial 15- to 20-year terms. For the sale-leaseback transactions consummated for the year ended December 31, 2021, the cumulative initial annual rents for the properties were approximately $5,702, subject to annual escalations. These leases are accounted for as operating leases.

During the year ended December 31, 2020, the Company completed seven sale-leaseback transactions related to car wash locations with aggregate consideration of $24,069, resulting in a net gain of $8,536, which is included in (gain) loss on sale of assets on the consolidated statement of operations and comprehensive income (loss). Contemporaneously with the closing of the sale, the Company entered into leases agreements for each of the properties for initial 20-year terms. The cumulative initial annual rent for the properties is approximately $1,432, subject to annual escalations. These leases are accounted for as operating leases.