0000950170-21-001407.txt : 20210813 0000950170-21-001407.hdr.sgml : 20210813 20210813060529 ACCESSION NUMBER: 0000950170-21-001407 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 89 CONFORMED PERIOD OF REPORT: 20210630 FILED AS OF DATE: 20210813 DATE AS OF CHANGE: 20210813 FILER: COMPANY DATA: COMPANY CONFORMED NAME: Mister Car Wash, Inc. CENTRAL INDEX KEY: 0001853513 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-AUTOMOTIVE REPAIR, SERVICES & PARKING [7500] IRS NUMBER: 000000000 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-40542 FILM NUMBER: 211169591 BUSINESS ADDRESS: STREET 1: 222 E. 5TH STREET CITY: TUCSON STATE: AZ ZIP: 85705 BUSINESS PHONE: 520-615-4000 MAIL ADDRESS: STREET 1: 222 E. 5TH STREET CITY: TUCSON STATE: AZ ZIP: 85705 10-Q 1 mcw-20210630.htm 10-Q 10-Q
false0001853513P5Y--12-31Q2P5Y0001853513us-gaap:RetainedEarningsMember2020-01-012020-03-310001853513us-gaap:RetainedEarningsMember2020-12-310001853513mcw:LongTermLiabilityMemberus-gaap:CashFlowHedgingMemberus-gaap:InterestRateSwapMember2021-06-300001853513mcw:FirstLienTermLoanMember2021-02-012021-02-280001853513us-gaap:PrincipalOwnerMemberus-gaap:GeneralAndAdministrativeExpenseMember2020-04-012020-06-300001853513us-gaap:FairValueInputsLevel3Member2021-06-300001853513mcw:OtherRevenueMember2020-01-012020-06-300001853513srt:MaximumMember2014-08-212014-08-210001853513us-gaap:LeaseholdImprovementsMember2020-12-310001853513us-gaap:PrincipalOwnerMemberus-gaap:GeneralAndAdministrativeExpenseMember2021-01-012021-06-300001853513us-gaap:AccumulatedOtherComprehensiveIncomeMember2020-01-012020-06-300001853513us-gaap:CommonStockMember2020-01-012020-03-310001853513us-gaap:RestrictedStockUnitsRSUMember2020-01-012020-06-300001853513us-gaap:BuildingAndBuildingImprovementsMember2021-06-300001853513us-gaap:OverAllotmentOptionMember2021-01-012021-06-300001853513mcw:TwoThousandAndFourteenPlanMember2021-01-012021-06-300001853513us-gaap:RestrictedStockUnitsRSUMember2020-01-012020-06-300001853513mcw:TwoThousandTwentyOneAcquisitionsMembersrt:RetailSiteMember2021-01-012021-06-300001853513us-gaap:AccumulatedOtherComprehensiveIncomeMember2020-06-300001853513us-gaap:TransferredOverTimeMember2020-01-012020-06-300001853513srt:MinimumMember2014-08-212014-08-210001853513mcw:SecondLienCreditAgreementMember2021-01-012021-03-310001853513us-gaap:PrincipalOwnerMemberus-gaap:GeneralAndAdministrativeExpenseMember2021-04-012021-06-300001853513srt:MinimumMember2021-06-3000018535132019-12-3100018535132020-06-300001853513us-gaap:TrademarksAndTradeNamesMember2021-06-300001853513us-gaap:SeniorNotesMembermcw:SecondLienCreditAgreementMember2021-06-300001853513mcw:SecondLienCreditAgreementMember2020-01-012020-12-310001853513us-gaap:FurnitureAndFixturesMember2020-12-310001853513us-gaap:AdditionalPaidInCapitalMember2020-03-310001853513us-gaap:CashFlowHedgingMemberus-gaap:InterestRateSwapMember2020-01-012020-06-300001853513mcw:TwoThousandTwentyOneAcquisitionsMember2021-01-012021-06-300001853513us-gaap:EmployeeStockOptionMember2020-04-012020-06-300001853513us-gaap:CashFlowHedgingMemberus-gaap:InterestRateSwapMember2021-04-012021-06-300001853513us-gaap:CashFlowHedgingMemberus-gaap:InterestRateSwapMember2021-01-012021-06-3000018535132021-03-310001853513mcw:DelayedDrawFacilityMember2020-03-012020-03-310001853513mcw:TimeVestingOptionsMember2020-04-012020-06-300001853513mcw:OtherAccruedExpensesMember2021-06-300001853513mcw:PerformanceVestingOptionsMember2020-01-012020-06-300001853513us-gaap:FairValueInputsLevel3Member2020-12-310001853513us-gaap:StandbyLettersOfCreditMember2021-06-300001853513us-gaap:InterestRateSwapMember2021-06-300001853513mcw:DelayedDrawFacilityMember2020-02-012020-02-290001853513mcw:CostOfLaborAndChemicalsMember2020-04-012020-06-300001853513mcw:TwoThousandTwentyOneAcquisitionsMemberstpr:FLsrt:RetailSiteMember2021-01-012021-06-300001853513mcw:TwoThousandAndTwentyOneEmployeeStockPurchasePlanMember2021-01-012021-06-300001853513mcw:TimeVestingOptionsMember2020-01-012020-06-300001853513mcw:TimeVestingOptionsMember2021-04-012021-06-300001853513us-gaap:RestrictedStockUnitsRSUMember2021-04-012021-06-300001853513us-gaap:IPOMember2021-06-300001853513us-gaap:PrincipalOwnerMemberus-gaap:GeneralAndAdministrativeExpenseMember2020-01-012020-06-300001853513us-gaap:TransferredOverTimeMember2020-04-012020-06-300001853513us-gaap:CommonStockMember2021-06-300001853513us-gaap:EmployeeStockOptionMember2021-04-012021-06-300001853513us-gaap:TransferredAtPointInTimeMember2020-04-012020-06-300001853513us-gaap:RestrictedStockUnitsRSUMember2021-06-300001853513us-gaap:CustomerRelationshipsMembermcw:TwoThousandTwentyOneAcquisitionsMember2021-06-3000018535132021-08-120001853513us-gaap:OtherCapitalizedPropertyPlantAndEquipmentMember2020-12-310001853513us-gaap:AdditionalPaidInCapitalMember2020-04-012020-06-300001853513mcw:TwoThousandTwentyAcquisitionsMemberstpr:FLsrt:RetailSiteMember2020-01-012020-01-310001853513us-gaap:FairValueInputsLevel3Memberus-gaap:InterestRateSwapMember2020-12-310001853513us-gaap:EmployeeStockOptionMember2020-01-012020-06-300001853513us-gaap:AccumulatedOtherComprehensiveIncomeMember2021-03-310001853513mcw:AccruedLiabilityMemberus-gaap:CashFlowHedgingMemberus-gaap:InterestRateSwapMember2020-12-310001853513us-gaap:OtherCapitalizedPropertyPlantAndEquipmentMember2021-06-300001853513us-gaap:EmployeeStockOptionMember2020-01-012020-06-300001853513us-gaap:RevolvingCreditFacilityMembersrt:MaximumMember2021-06-300001853513mcw:AccountReceivablesNetMember2021-06-300001853513us-gaap:AdditionalPaidInCapitalMember2020-01-012020-03-3100018535132020-01-012020-06-300001853513us-gaap:CommonStockMember2021-04-012021-06-300001853513us-gaap:GeneralAndAdministrativeExpenseMember2021-04-012021-06-300001853513us-gaap:NoncompeteAgreementsMember2021-06-300001853513mcw:OtherRevenueMember2020-04-012020-06-300001853513us-gaap:IPOMembermcw:TwoThousandAndTwentyOneIncentivePlanMember2021-01-012021-06-300001853513us-gaap:SeniorNotesMembermcw:FirstLienCreditAgreementMember2021-06-300001853513mcw:FirstLienTermLoanMember2021-01-012021-06-300001853513us-gaap:CustomerRelationshipsMember2021-01-012021-06-3000018535132021-06-012021-06-300001853513us-gaap:FairValueInputsLevel1Memberus-gaap:InterestRateSwapMember2021-06-300001853513mcw:TimeVestingOptionsMember2021-01-012021-06-300001853513mcw:TwoThousandAndTwentyOneIncentivePlanMember2021-06-300001853513us-gaap:CustomerRelationshipsMember2020-12-310001853513us-gaap:AccumulatedOtherComprehensiveIncomeMember2021-04-012021-06-300001853513mcw:TwoThousandAndFourteenPlanMember2021-06-250001853513us-gaap:TrademarksAndTradeNamesMember2020-12-310001853513us-gaap:GeneralAndAdministrativeExpenseMember2020-04-012020-06-300001853513mcw:SecondLienCreditAgreementMember2020-03-310001853513us-gaap:AdditionalPaidInCapitalMember2019-12-310001853513us-gaap:EmployeeStockOptionMember2021-01-012021-06-300001853513us-gaap:RetainedEarningsMember2021-04-012021-06-3000018535132021-01-012021-02-280001853513us-gaap:AdditionalPaidInCapitalMember2021-06-300001853513stpr:TXmcw:TwoThousandTwentyAcquisitionsMembersrt:RetailSiteMember2020-11-012020-11-300001853513us-gaap:RestrictedStockUnitsRSUMember2020-04-012020-06-300001853513stpr:WAmcw:TwoThousandTwentyAcquisitionsMembersrt:RetailSiteMember2020-09-012020-09-300001853513mcw:TwoThousandTwentyAcquisitionsMember2020-01-012020-12-3100018535132021-01-012021-03-310001853513us-gaap:EmployeeStockOptionMember2021-01-012021-06-300001853513srt:RetailSiteMember2021-01-012021-06-300001853513us-gaap:TransferredAtPointInTimeMember2021-04-012021-06-300001853513us-gaap:RevolvingCreditFacilityMember2021-06-012021-06-300001853513us-gaap:BuildingAndBuildingImprovementsMember2020-12-310001853513us-gaap:RevolvingCreditFacilityMember2021-01-012021-06-300001853513us-gaap:InterestRateSwapMember2020-12-310001853513us-gaap:AccumulatedOtherComprehensiveIncomeMember2020-12-310001853513us-gaap:NoncompeteAgreementsMembermcw:TwoThousandTwentyOneAcquisitionsMember2021-06-300001853513mcw:TwoThousandTwentyAcquisitionsMember2020-12-310001853513us-gaap:CommonStockMember2019-12-310001853513us-gaap:IPOMembermcw:PerformanceVestingOptionsMember2021-01-012021-06-300001853513srt:MinimumMember2020-12-3100018535132020-02-012020-02-290001853513us-gaap:RestrictedStockUnitsRSUMember2020-04-012020-06-300001853513mcw:AccruedLiabilityMemberus-gaap:CashFlowHedgingMemberus-gaap:InterestRateSwapMember2021-06-300001853513us-gaap:ConstructionInProgressMember2021-06-300001853513us-gaap:RevolvingCreditFacilityMembersrt:MinimumMember2021-06-300001853513mcw:AccountReceivablesNetMember2020-12-310001853513us-gaap:RetainedEarningsMember2019-12-310001853513us-gaap:LeaseholdImprovementsMember2021-06-3000018535132020-04-012020-06-300001853513us-gaap:OtherIntangibleAssetsMember2021-06-300001853513us-gaap:IPOMember2021-04-012021-06-300001853513us-gaap:FairValueInputsLevel2Memberus-gaap:InterestRateSwapMember2020-12-310001853513mcw:PerformanceVestingOptionsMember2020-12-310001853513mcw:OtherRevenueMember2021-01-012021-06-300001853513us-gaap:RetainedEarningsMember2020-04-012020-06-3000018535132020-12-310001853513us-gaap:TransferredAtPointInTimeMember2021-01-012021-06-300001853513us-gaap:SeniorNotesMembermcw:FirstLienCreditAgreementMember2020-12-310001853513mcw:TwoThousandTwentyAcquisitionsMemberstpr:FLsrt:RetailSiteMember2020-12-012020-12-310001853513us-gaap:RevolvingCreditFacilityMember2021-06-300001853513us-gaap:LineOfCreditMembermcw:FirstLienTermLoanMember2021-06-300001853513mcw:SecondLienCreditAgreementMember2021-01-012021-06-300001853513us-gaap:TransferredOverTimeMember2021-01-012021-06-300001853513us-gaap:CommonStockMember2020-06-3000018535132020-03-310001853513us-gaap:TransferredOverTimeMember2021-04-012021-06-300001853513mcw:LiborMarginMember2014-08-212014-08-210001853513us-gaap:NoncompeteAgreementsMember2020-12-310001853513us-gaap:RestrictedStockUnitsRSUMember2021-04-012021-06-300001853513us-gaap:CustomerRelationshipsMember2021-06-3000018535132020-01-012020-12-310001853513srt:MaximumMember2020-12-310001853513srt:MaximumMember2021-06-300001853513mcw:FinanceLeaseMember2021-06-3000018535132021-06-300001853513mcw:PerformanceVestingOptionsMember2021-06-300001853513mcw:PerformanceVestingOptionsMember2020-04-012020-06-300001853513us-gaap:RestrictedStockUnitsRSUMember2021-01-012021-06-300001853513mcw:PerformanceVestingOptionsMember2021-01-012021-06-300001853513us-gaap:EmployeeStockOptionMember2020-04-012020-06-300001853513mcw:TwoThousandAndTwentyOneEmployeeStockPurchasePlanMember2021-06-300001853513mcw:FinanceLeaseMember2020-12-310001853513us-gaap:CommonStockMember2021-03-310001853513us-gaap:EmployeeStockOptionMember2021-04-012021-06-300001853513mcw:OtherAccruedExpensesMember2020-12-310001853513us-gaap:CommonStockMember2020-03-310001853513mcw:TimeVestingOptionsMember2020-12-310001853513us-gaap:FairValueInputsLevel3Memberus-gaap:InterestRateSwapMember2021-06-300001853513us-gaap:RetainedEarningsMember2021-06-300001853513us-gaap:EurodollarMembersrt:MinimumMember2014-08-212014-08-210001853513us-gaap:RetainedEarningsMember2021-01-012021-03-310001853513us-gaap:LandMember2021-06-3000018535132020-01-012020-03-310001853513us-gaap:AdditionalPaidInCapitalMember2020-06-300001853513us-gaap:AdditionalPaidInCapitalMember2021-04-012021-06-300001853513us-gaap:AccumulatedOtherComprehensiveIncomeMember2021-06-300001853513us-gaap:TransferredAtPointInTimeMember2020-01-012020-06-300001853513us-gaap:LandMember2020-12-310001853513us-gaap:GeneralAndAdministrativeExpenseMember2020-01-012020-06-300001853513mcw:TimeVestingOptionsMember2021-06-300001853513us-gaap:RetainedEarningsMember2021-03-310001853513us-gaap:CommonStockMember2021-01-012021-03-310001853513us-gaap:StandbyLettersOfCreditMember2020-12-310001853513us-gaap:RevolvingCreditFacilityMember2020-12-310001853513us-gaap:DesignatedAsHedgingInstrumentMemberus-gaap:CashFlowHedgingMemberus-gaap:InterestRateSwapMember2020-05-310001853513mcw:CostOfLaborAndChemicalsMember2020-01-012020-06-300001853513mcw:CostOfLaborAndChemicalsMember2021-01-012021-06-300001853513us-gaap:ConstructionInProgressMember2020-12-3100018535132021-01-012021-06-300001853513mcw:PerformanceVestingOptionsMember2021-04-012021-06-300001853513us-gaap:AdditionalPaidInCapitalMember2021-03-310001853513mcw:OtherRevenueMember2021-04-012021-06-300001853513us-gaap:NoncompeteAgreementsMember2021-01-012021-06-300001853513us-gaap:IPOMember2021-01-012021-06-300001853513us-gaap:AdditionalPaidInCapitalMember2021-01-012021-03-310001853513us-gaap:SeniorNotesMemberus-gaap:PrincipalOwnerMember2021-06-300001853513us-gaap:CashFlowHedgingMemberus-gaap:InterestRateSwapMember2020-04-012020-06-300001853513us-gaap:AccumulatedOtherComprehensiveIncomeMember2021-01-012021-03-310001853513us-gaap:LondonInterbankOfferedRateLIBORMember2014-08-212014-08-210001853513us-gaap:FurnitureAndFixturesMember2021-06-300001853513us-gaap:RetainedEarningsMember2020-03-310001853513us-gaap:AdditionalPaidInCapitalMember2020-12-310001853513us-gaap:SeniorNotesMembermcw:SecondLienCreditAgreementMember2020-12-310001853513mcw:LongTermLiabilityMemberus-gaap:CashFlowHedgingMemberus-gaap:InterestRateSwapMember2020-12-310001853513us-gaap:RestrictedStockUnitsRSUMember2021-01-012021-06-300001853513us-gaap:MachineryAndEquipmentMember2021-06-300001853513us-gaap:GeneralAndAdministrativeExpenseMember2021-01-012021-06-300001853513us-gaap:FairValueInputsLevel1Memberus-gaap:InterestRateSwapMember2020-12-310001853513mcw:TwoThousandTwentyAcquisitionsMembersrt:RetailSiteMember2020-01-012020-12-3100018535132021-04-012021-06-300001853513us-gaap:StandbyLettersOfCreditMember2021-01-012021-06-300001853513us-gaap:OtherIntangibleAssetsMember2020-12-310001853513mcw:TwoThousandTwentyOneAcquisitionsMember2021-06-300001853513us-gaap:CommonStockMember2020-12-310001853513us-gaap:FairValueInputsLevel2Memberus-gaap:InterestRateSwapMember2021-06-300001853513us-gaap:MachineryAndEquipmentMember2020-12-310001853513us-gaap:PrincipalOwnerMemberus-gaap:GeneralAndAdministrativeExpenseMemberus-gaap:InvestmentAdvisoryManagementAndAdministrativeServiceMember2020-01-012020-12-310001853513us-gaap:CommonStockMember2020-04-012020-06-300001853513us-gaap:RetainedEarningsMember2020-06-300001853513mcw:CostOfLaborAndChemicalsMember2021-04-012021-06-30xbrli:pureiso4217:USDxbrli:sharesxbrli:sharesmcw:CarWashmcw:Statemcw:Transactionmcw:Leaseiso4217:USD

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

 

FORM 10-Q

 

(Mark One)

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2021

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: 001-40542

 

Mister Car Wash, Inc.

(Exact name of registrant as specified in its charter)

 

 

Delaware

47-1393909

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer
Identification No.)

222 E 5th Street

Tucson, Arizona

85705

(Address of principal executive offices)

(Zip Code)

Registrant’s telephone number, including area code: (520) 615-4000

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class

 

Trading

Symbol(s)

 

Name of each exchange on which registered

Common stock, par value $0.01 per share

 

MCW

 

New York Stock Exchange

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.     Yes  ☐    No  ☒

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).     Yes  ☒    No  ☐

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.

 

Large accelerated filer

 

  

Accelerated filer

 

 

 

 

 

Non-accelerated filer

 

  

Smaller reporting company

 

 

 

 

 

 

 

 

Emerging growth company

 

 

 

 

 

 

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 August 12, 2021, the registrant had 296,072,999 shares of common stock, $0.01 par value per share, outstanding.

 

 

 


 

Table of Contents

 

Page

 

FORWARD-LOOKING STATEMENTS

2

 

RISK FACTOR SUMMARY

3

 

 

 

PART I.

FINANCIAL INFORMATION

Item 1.

Financial Statements (Unaudited)

 

Condensed Consolidated Balance Sheets

4

Condensed Consolidated Statements of Operations and Comprehensive Loss

5

Condensed Consolidated Statements of Stockholders' Equity (Deficit)

6

Condensed Consolidated Statements of Cash Flows

8

Notes to Unaudited Condensed Consolidated Financial Statements

9

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

23

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

36

Item 4.

Controls and Procedures

36

 

 

 

PART II.

OTHER INFORMATION

Item 1.

Legal Proceedings

37

Item 1A.

Risk Factors

37

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

53

Item 3.

Defaults Upon Senior Securities

53

Item 4.

Mine Safety Disclosures

53

Item 5.

Other Information

53

Item 6.

Exhibits

54

 

 

Signatures

55

 

i


 

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 (the “Securities Act”) and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”).  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,” “vision,” or “should,” or the negative thereof or other variations thereon or comparable terminology. Forward-looking statements include those we make regarding the following matters:

 

 

 

developments involving our competitors and our industry;

 

 

 

our ability to attract new customers, retain existing customers and maintain or grow the number of our Unlimited Wash Club ("UWC") members;

 

 

 

potential future impacts of the COVID-19 pandemic, including from variants thereof;

 

 

 

expectations regarding our industry;

 

 

 

our ability to maintain comparable store sales growth;

 

 

 

our ability to continue to identify and open greenfield locations;

 

 

 

our estimates of greenfield location expansions and our whitespace opportunity;

 

 

 

our ability to continue to identify suitable acquisition targets and consummate such acquisitions on attractive terms;

 

 

 

our ability to attract and retain a qualified management team and other team members while controlling our labor costs;

 

 

 

the impact of our debt and lease obligations on our ability to raise additional capital to fund our operations and maintain flexibility in operating our business;

 

 

 

our reliance on and relationships with third-party suppliers;

 

 

 

our ability to maintain security and prevent unauthorized access to electronic and other confidential information;

 

 

 

our ability to respond to risks associated with existing and future payment options;

 

 

 

our ability to maintain and enhance a strong brand image;

 

 

 

our ability to maintain adequate insurance coverage;

 

 

 

our status as a “controlled company” and Leonard Green & Partners, L.P.’s ("LGP") control of us as a public company;

 

 

 

the impact of evolving governmental laws and regulations and the outcomes of legal proceedings; and

 

 

 

the effects of potential changes to U.S. regulations and policies on our business.

The preceding list is not intended to be an exhaustive list of all of our forward-looking statements. We have based these forward-looking statements on our current expectations, assumptions, estimates and projections. While we believe these expectations, assumptions, estimates and projections are reasonable, such forward-looking statements are only predictions and involve known and unknown risks and uncertainties, many of which are beyond our control. These and other important factors, including those discussed in this Quarterly Report on Form 10-Q in Part I., Item 2. “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and Part II, Item IA. “Risk Factors,” may cause our actual results, performance or achievements to differ materially from any future results, performance or achievements expressed or implied by these forward-looking statements. Furthermore, the potential impact of the pandemic related to COVID-19 and variants thereof on our business operations and financial results and on the world economy as a whole may heighten the risks and uncertainties that affect our forward-looking statements described above. Given these risks and uncertainties, you are cautioned not to place undue reliance on such forward-looking statements. The forward-looking statements included elsewhere in this Quarterly Report on Form 10-Q are not guarantees of future performance and our actual results of operations, financial condition and liquidity, and the development of the industry in which we operate, may differ materially from the forward-looking statements included elsewhere in this Quarterly Report on Form 10-Q. 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 predictive 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. 

 

2


 

 

RISK FACTOR SUMMARY

Our business is subject to numerous risks and uncertainties, including those described in Part II. Item 1A. “Risk Factors” in this Quarterly Report on Form 10-Q. You should carefully consider these risks and uncertainties when investing in our common stock. Some of the principal risks and uncertainties include the following.

 

 

 

Increased competition in the car wash industry may impact our future growth.

 

 

 

We may be unable to sustain or increase demand for our UWC subscription program, which could adversely affect our business, financial condition and results of operations and rate of growth.

 

 

 

If we fail to open and operate new locations in a timely and cost-effective manner or fail to successfully enter new markets, our financial performance could be materially and adversely affected.

 

 

 

The ongoing pandemic related to COVID-19 and its variants has materially and adversely affected our business, financial condition and results of operations and may continue to do so.

 

 

 

We may not be able to successfully implement our growth strategies on a timely basis or at all.

 

 

 

If we are unable to identify attractive acquisition targets and acquire them at attractive prices, we may be unsuccessful in growing our business.

 

 

 

We are subject to a number of risks and regulations related to credit card and debit card payments we accept.

 

 

 

An overall decline in the health of the economy and other factors impacting consumer spending, such as natural disasters and fluctuations in inflation may affect consumer purchases, reduce demand for our services and materially and adversely affect our business, results of operations and financial condition.

 

 

 

Changes in labor and chemical costs, other operating costs, interest rates and inflation could materially and adversely affect our results of operations.

 

 

 

Our indebtedness could adversely affect our financial health and competitive position.

 

 

 

The terms of our credit facilities impose certain operating and financial restrictions on us that may impair our ability to adapt to changing competitive or economic conditions.

 

 

 

Our business is subject to various laws and regulations and changes in such laws and regulations, or failure to comply with existing or future laws and regulations, could adversely affect our business.

 

 

 

Our locations are subject to certain environmental laws and regulations.

 

 

 

We are subject to data security and privacy risks that could negatively impact our results of operations or reputation.

 

 

 

We may be unable to adequately protect, and we may incur significant costs in enforcing or defending, our intellectual property and other proprietary rights.

 

 

 

Because LGP owns a significant percentage of our common stock, it may control all major corporate decisions and its interests may conflict with your interests as an owner of our common stock and our interests.

 

 

 

Our stock price may be volatile or may decline regardless of our operating performance, resulting in substantial losses for investors purchasing shares.

  

 

3


 

 

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements.

 

Mister Car Wash, Inc. and Subsidiaries (f/k/a Hotshine Holdings, Inc.)

Condensed Consolidated Balance Sheets

(Amounts in thousands, except share and per share data)

(Unaudited)

 

 

As of

 

 

June 30, 2021

 

 

December 31, 2020

 

Assets

 

 

 

 

 

Current assets:

 

 

 

 

 

Cash and cash equivalents

$

154,972

 

 

$

114,647

 

Restricted cash

 

3,368

 

 

 

3,227

 

Accounts receivable, net

 

7,813

 

 

 

4,613

 

Inventory

 

6,407

 

 

 

6,415

 

Prepaid expenses and other current assets

 

8,843

 

 

 

6,068

 

Total current assets

 

181,403

 

 

 

134,970

 

 

 

 

 

 

 

Property and equipment, net

 

279,605

 

 

 

263,034

 

Operating lease right of use assets, net

 

696,134

 

 

 

681,538

 

Other intangible assets, net

 

125,642

 

 

 

127,019

 

Goodwill

 

755,524

 

 

 

737,415

 

Other assets

 

5,224

 

 

 

4,477

 

Total assets

$

2,043,532

 

 

$

1,948,453

 

 

 

 

 

 

 

Liabilities and stockholders’ equity

 

 

 

 

 

Current liabilities:

 

 

 

 

 

Accounts payable

$

24,160

 

 

$

24,374

 

Accrued payroll and related expenses

 

20,069

 

 

 

11,424

 

Other accrued expenses

 

23,116

 

 

 

20,264

 

Current maturities of debt

 

8,400

 

 

 

8,400

 

Current maturities of operating lease liability

 

35,545

 

 

 

33,485

 

Current maturities of finance lease liability

 

526

 

 

 

495

 

Deferred revenue

 

26,495

 

 

 

24,505

 

Total current liabilities

 

138,311

 

 

 

122,947

 

 

 

 

 

 

 

Long-term portion of debt, net

 

603,649

 

 

 

1,054,820

 

Operating lease liability

 

698,751

 

 

 

685,479

 

Financing lease liability

 

15,647

 

 

 

15,917

 

Long-term deferred tax liability

 

7,397

 

 

 

46,082

 

Other long-term liabilities

 

5,760

 

 

 

6,558

 

Total liabilities

 

1,469,515

 

 

 

1,931,803

 

 

 

 

 

 

 

Commitments and contingencies (Note 15)

 

 

 

 

 

 

 

 

 

 

 

Stockholders’ equity:

 

 

 

 

 

Common stock, $0.01 par value, 1,000,000,000 shares authorized, 296,062,478 and 261,907,622 shares outstanding as of June 30, 2021 and December 31, 2020, respectively

 

2,967

 

 

 

2,622

 

Additional paid-in capital

 

733,914

 

 

 

91,523

 

Accumulated other comprehensive loss

 

(770

)

 

 

(1,117

)

Accumulated deficit

 

(162,094

)

 

 

(76,378

)

Total stockholders’ equity

 

574,017

 

 

 

16,650

 

Total liabilities and stockholders’ equity

$

2,043,532

 

 

$

1,948,453

 

 

See accompanying notes to unaudited condensed consolidated financial statements.

4


 

Mister Car Wash, Inc. and Subsidiaries (f/k/a Hotshine Holdings, Inc.)

Condensed Consolidated Statements of Operations and Comprehensive Loss

(Amounts in thousands, except share and per share data)

(Unaudited)

 

 

Three Months Ended June 30,

 

 

Six Months Ended June 30,

 

 

2021

 

 

2020

 

 

2021

 

 

2020

 

Revenues, net

$

197,080

 

 

$

101,856

 

 

$

372,588

 

 

$

257,108

 

Cost of labor and chemicals

 

87,864

 

 

 

34,059

 

 

 

139,613

 

 

 

91,629

 

Other store operating expenses

 

65,363

 

 

 

49,752

 

 

 

126,446

 

 

 

108,225

 

General and administrative

 

188,896

 

 

 

13,634

 

 

 

203,857

 

 

 

26,593

 

(Gain) loss on sale of assets

 

(7,097

)

 

 

167

 

 

 

(6,307

)

 

 

510

 

Total costs and expenses

 

335,026

 

 

 

97,612

 

 

 

463,609

 

 

 

226,957

 

   Operating (loss) income

 

(137,946

)

 

 

4,244

 

 

 

(91,021

)

 

 

30,151

 

 

 

 

 

 

 

 

 

 

 

 

 

Other expense:

 

 

 

 

 

 

 

 

 

 

 

Interest expense, net

 

13,740

 

 

 

16,229

 

 

 

27,699

 

 

 

33,424

 

Loss on extinguishment of debt

 

3,183

 

 

 

-

 

 

 

3,183

 

 

 

1,918

 

Total other expense

 

16,923

 

 

 

16,229

 

 

 

30,882

 

 

 

35,342

 

Loss before taxes

 

(154,869

)

 

 

(11,985

)

 

 

(121,903

)

 

 

(5,191

)

Income tax benefit

 

(44,569

)

 

 

(3,231

)

 

 

(36,187

)

 

 

(5,297

)

Net (loss) income

$

(110,300

)

 

$

(8,754

)

 

$

(85,716

)

 

$

106

 

 

 

 

 

 

 

 

 

 

 

 

 

Other comprehensive loss, net of tax:

 

 

 

 

 

 

 

 

 

 

 

Gain (loss) on interest rate swap

 

28

 

 

 

(901

)

 

 

347

 

 

 

(901

)

Total comprehensive loss

$

(110,272

)

 

$

(9,655

)

 

$

(85,369

)

 

$

(795

)

 

 

 

 

 

 

 

 

 

 

 

 

Net (loss) income per share:

 

 

 

 

 

 

 

 

 

 

 

     Basic

$

(0.42

)

 

$

(0.03

)

 

$

(0.33

)

 

$

0.00

 

     Diluted

$

(0.42

)

 

$

(0.03

)

 

$

(0.33

)

 

$

0.00

 

Weighted-average common shares outstanding:

 

 

 

 

 

 

 

 

 

 

 

     Basic

 

264,274,968

 

 

 

261,742,515

 

 

 

263,218,870

 

 

 

261,744,966

 

     Diluted

 

264,274,968

 

 

 

261,742,515

 

 

 

263,218,870

 

 

 

273,935,572

 

 

See accompanying notes to unaudited condensed consolidated financial statements.

 

5


 

Mister Car Wash, Inc. and Subsidiaries (f/k/a Hotshine Holdings, Inc.)

Condensed Consolidated Statements of Stockholders’ Equity (Deficit)

(Amounts in thousands, except share and per share data)

(Unaudited)

 

 

Common Stock

 

 

Additional Paid-in Capital

 

 

Accumulated Other Comprehensive Loss

 

 

Accumulated Deficit

 

 

Stockholders’ Equity (Deficit)

 

 

Shares

 

 

Amount

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance as of December 31, 2020

 

261,907,622

 

 

$

2,622

 

 

$

91,523

 

 

$

(1,117

)

 

$

(76,378

)

 

$

16,650

 

Stock-based compensation expense

 

-

 

 

 

-

 

 

 

310

 

 

 

-

 

 

 

-

 

 

 

310

 

Exercise of stock options

 

688,430

 

 

 

7

 

 

 

260

 

 

 

-

 

 

 

-

 

 

 

267

 

Shares repurchased

 

(180,681

)

 

 

-

 

 

 

(534

)

 

 

-

 

 

 

-

 

 

 

(534

)

Gain on interest rate swap

 

-

 

 

 

-

 

 

 

-

 

 

 

319

 

 

 

-

 

 

 

319

 

Net income

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

24,584

 

 

 

24,584

 

Balance as of March 31, 2021

 

262,415,371

 

 

$

2,629

 

 

$

91,559

 

 

$

(798

)

 

$

(51,794

)

 

$

41,596

 

Issuance of common stock pursuant to initial public
    offering, net of issuance costs of $
29,194

 

31,250,000

 

 

 

313

 

 

 

439,243

 

 

 

-

 

 

 

-

 

 

 

439,556

 

Stock-based compensation expense

 

-

 

 

 

-

 

 

 

203,231

 

 

 

-

 

 

 

-

 

 

 

203,231

 

Vesting of restricted stock units

 

7,680

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

Exercise of stock options

 

2,516,784

 

 

 

25

 

 

 

1,597

 

 

 

-

 

 

 

-

 

 

 

1,622

 

Shares repurchased

 

(127,357

)

 

 

-

 

 

 

(1,716

)

 

 

-

 

 

 

-

 

 

 

(1,716

)

Gain on interest rate swap

 

-

 

 

 

-

 

 

 

-

 

 

 

28

 

 

 

-

 

 

 

28

 

Net loss

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(110,300

)

 

 

(110,300

)

Balance as of June 30, 2021

 

296,062,478

 

 

$

2,967

 

 

$

733,914

 

 

$

(770

)

 

$

(162,094

)

 

$

574,017

 

 

See accompanying notes to unaudited condensed consolidated financial statements.

 

6


 

Mister Car Wash, Inc. and Subsidiaries (f/k/a Hotshine Holdings, Inc.)

Condensed Consolidated Statements of Stockholders’ Equity (Deficit)

(Amounts in thousands, except share and per share data)

(Unaudited)

 

 

Common Stock

 

 

Additional Paid-in Capital

 

 

Accumulated Other Comprehensive Loss

 

 

Accumulated Deficit

 

 

Stockholders’ Equity (Deficit)

 

 

Shares

 

 

Amount

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance as of December 31, 2019

 

261,749,196

 

 

$

2,620

 

 

$

90,358

 

 

$

-

 

 

$

(156,580

)

 

$

(63,602

)

Adoption of new accounting standards, net of tax

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

19,798

 

 

 

19,798

 

Stock-based compensation expense

 

-

 

 

 

-

 

 

 

387

 

 

 

-

 

 

 

-

 

 

 

387

 

Shares repurchased

 

(4,624

)

 

 

-

 

 

 

(324

)

 

 

-

 

 

 

-

 

 

 

(324

)

Net income

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

8,860

 

 

 

8,860

 

Balance as of March 31, 2020

 

261,744,572

 

 

$

2,620

 

 

$

90,421

 

 

$

-

 

 

$

(127,922

)

 

$

(34,881

)

Stock-based compensation expense

 

-

 

 

 

-

 

 

 

398

 

 

 

-

 

 

 

-

 

 

 

398

 

Shares repurchased

 

(2,400

)

 

 

-

 

 

 

(5

)

 

 

-

 

 

 

-

 

 

 

(5

)

Loss on interest rate swap

 

-

 

 

 

-

 

 

 

-

 

 

 

(901

)

 

 

-

 

 

 

(901

)

Net loss

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(8,754

)

 

 

(8,754

)

Balance as of June 30, 2020

 

261,742,172

 

 

$

2,620

 

 

$

90,814

 

 

$

(901

)

 

$

(136,676

)

 

$

(44,143

)

 

See accompanying notes to unaudited condensed consolidated financial statements.

 

7


 

Mister Car Wash, Inc. and Subsidiaries (f/k/a Hotshine Holdings, Inc.)

Condensed Consolidated Statements of Cash Flows

(Amounts in thousands)

(Unaudited)

 

 

Six Months Ended June 30,

 

 

2021

 

 

2020

 

Cash flows from operating activities:

 

 

 

 

 

Net (loss) income

$

(85,716

)

 

$

106

 

Adjustments to reconcile net (loss) income to net cash provided by operating activities:

 

 

 

 

 

Depreciation and amortization expense

 

23,550

 

 

 

22,097

 

Stock-based compensation expense

 

203,541

 

 

 

785

 

(Gain) loss on disposal of property and equipment

 

(6,307

)

 

 

510

 

Loss on extinguishment of debt

 

3,183

 

 

 

1,918

 

Amortization of deferred financing costs

 

698

 

 

 

827

 

Non-cash lease expense

 

17,182

 

 

 

17,026

 

Deferred income tax

 

(38,440

)

 

 

4,085

 

Changes in assets and liabilities:

 

 

 

 

 

Accounts receivable

 

(3,201

)

 

 

242

 

Inventory

 

41

 

 

 

1,113

 

Prepaid expenses and other current assets

 

(2,776

)

 

 

270

 

Accounts payable

 

14,926

 

 

 

(2,348

)

Accrued expenses

 

8,614

 

 

 

21,751

 

Deferred revenue

 

1,838

 

 

 

(289

)

Operating lease liability

 

(16,446

)

 

 

(14,021

)

Other noncurrent assets and liabilities

 

(1,012

)

 

 

(219

)

Net cash provided by operating activities

$

119,675

 

 

$

53,853

 

 

 

 

 

 

 

Cash flows from investing activities:

 

 

 

 

 

Purchases of property and equipment

 

(44,194

)

 

 

(27,405

)

Acquisition of car wash operations, net of cash acquired

 

(44,652

)

 

 

(5,991

)

Proceeds from sale of property and equipment

 

22,201

 

 

 

3,893

 

Net cash used in investing activities

$

(66,645

)

 

$

(29,503

)

 

 

 

 

 

 

Cash flows from financing activities:

 

 

 

 

 

Proceeds from issuance of common stock pursuant to initial public offering

 

468,750

 

 

 

-

 

Proceeds from exercise of stock options

 

121

 

 

 

-

 

Payments for repurchases of common stock

 

(308

)

 

 

(329

)

Proceeds from secondary offering for employee tax withholdings

 

14,874

 

 

 

-

 

Tax withholdings paid on behalf of employees for secondary offering

 

(14,874

)

 

 

-

 

Proceeds from debt borrowings

 

-

 

 

 

45,625

 

Proceeds from revolving line of credit

 

-

 

 

 

111,681

 

Payments on debt borrowings

 

(454,872

)

 

 

(4,200

)

Payments on revolving line of credit

 

-

 

 

 

(125,681

)

Payments of debt extinguishment costs

 

(28

)

 

 

-

 

Payments of deferred financing costs

 

(226

)

 

 

-

 

Principal payments on finance lease obligations

 

(240

)

 

 

(61

)

Payments of issuance costs pursuant to initial public offering

 

(25,761

)

 

 

-

 

Net cash (used in) provided by financing activities

$

(12,564

)

 

$

27,035

 

 

 

 

 

 

 

Net change in cash and cash equivalents, and restricted cash during period

 

40,466

 

 

 

51,385

 

Cash and cash equivalents, and restricted cash at beginning of period

 

117,874

 

 

 

6,705

 

Cash and cash equivalents, and restricted cash at end of period

$

158,340

 

 

$

58,090

 

 

 

 

 

 

 

Supplemental disclosure of cash flow information:

 

 

 

 

 

Cash paid for interest

$