Acquisitions

3 Months Ended

Jun. 29, 2019

Note 2 – Acquisitions

Monro’s acquisitions are strategic moves in our plan to fill in and expand our presence in existing and contiguous markets, expand in to new markets and leverage fixed operating costs such as distribution, advertising and administration. Acquisitions in this footnote include acquisitions of five or more locations as well as acquisitions of one to four locations that are part of our greenfield store growth strategy.

Subsequent Events

Subsequent to June 29, 2019, we signed definitive asset purchase agreements to complete the acquisition of eight retail tire and automotive repair stores located in Louisiana. These transactions are expected to close during the second quarter of fiscal 2020 and are expected to be financed through our existing credit facility.

Fiscal 2020

During the first quarter of fiscal 2020, we acquired the following businesses for an aggregate purchase price of $54.5 million. The acquisitions were financed through our existing credit facility. The results of operations for these acquisitions are included in our financial results from the respective acquisition dates.

On June 23, 2019, we acquired two retail tire and automotive repair stores located in California from BAW LLC. These stores operate under the Tire Choice name.

On May 19, 2019, we acquired 40 retail tire and automotive repair stores and one distribution center located in California from Certified Tire & Service Centers, Inc. These stores operate under the Tire Choice name.

On March 31, 2019, we acquired 12 retail tire and automotive repair stores located in Louisiana from Allied Discount Tire & Brake, Inc. These stores operate under the Tire Choice name.

These acquisitions resulted in goodwill related to, among other things, growth opportunities, synergies and economies of scale expected from combining these businesses with ours, as well as unidentifiable intangible assets. All of the goodwill is expected to be deductible for tax purposes. We have recorded finite-lived intangible assets at their estimated fair value related to customer lists.

We expensed all costs related to acquisitions in the quarter ended June 29, 2019. The total costs related to completed acquisitions were $0.5 million for the quarter ended June 29, 2019. These costs are included in the Consolidated Statements of Comprehensive Income primarily under operating, selling, general and administrative expenses.

Sales for the fiscal 2020 acquired entities for the quarter ended June 29, 2019 totaled $7.1 million for the period from acquisition date through June 29, 2019.

Supplemental pro forma information for the current or prior reporting periods has not been presented due to the impracticability of obtaining detailed, accurate or reliable data for the periods the acquired entities were not owned by Monro.

The preliminary fair values of identifiable assets acquired and liabilities assumed were based on preliminary valuations and estimates. The consideration transferred and net identifiable liabilities assumed were recorded as goodwill. The preliminary allocation of the aggregate purchase price as of June 29, 2019 was as follows:



	As of ‎Acquisition ‎Date
	(Dollars in ‎thousands)
Inventories	$	2,856
Other current assets		300
Property, plant and equipment		456
Finance lease and financing obligation assets, net		17,977
Operating lease assets, net		18,757
Intangible assets		1,523
Other non-current assets		103
Long-term deferred income tax assets		4,223
Total assets acquired		46,195
Current portion of long-term debt, finance leases and financing obligations		2,445
Current portion of operating lease liabilities		1,684
Deferred revenue		1,047
Other current liabilities		214
Long-term finance leases and financing obligations		30,720
Long-term operating lease liabilities		15,688
Other long-term liabilities		1,155
Total liabilities assumed		52,953
Total net identifiable liabilities assumed	$	(6,758)
Total consideration transferred	$	54,505
Less: total net identifiable liabilities assumed		(6,758)
Goodwill	$	61,263

The following are the intangible assets acquired and their respective fair values and weighted average useful lives:

Fiscal 2019

During the first quarter of fiscal 2019, we acquired the following businesses for an aggregate purchase price of $27.2 million. The acquisitions were financed through our existing credit facility. The results of operations for these acquisitions are included in our financial results from the respective acquisition dates.

On May 13, 2018, we acquired 12 retail/commercial tire and automotive repair stores and one retread facility located in Tennessee, as well as four wholesale locations in North Carolina, Tennessee and Virginia, from Free Service Tire Company, Incorporated. These locations operate under the Free Service Tire name.

On April 1, 2018, we acquired four retail tire and automotive repair stores located in Minnesota from Liberty Auto Group, Inc. These stores operate under the Car-X name.

We expensed all costs related to acquisitions in the quarter ended June 30, 2018. The total costs related to completed acquisitions were $0.2 million for the quarter ended June 30, 2018. These costs are included in the Consolidated Statements of Comprehensive Income primarily under operating, selling, general and administrative expenses.

Sales for the fiscal 2019 acquired entities for the quarter ended June 30, 2018 totaled $5.4 million for the period from acquisition date through June 30, 2018.

We have recorded the identifiable assets acquired and liabilities assumed at their fair values as of their respective acquisition dates (including any measurement period adjustments), with the remainder recorded as goodwill as follows:



	As of ‎Acquisition ‎Date
	(Dollars in ‎thousands)
Trade receivables	$	1,674
Inventories		7,594
Other current assets		192
Property, plant and equipment		2,342
Finance lease and financing obligation assets, net		2,893
Intangible assets		6,812
Long-term deferred income tax assets		1,051
Total assets acquired		22,558
Current portion of long-term debt, finance leases and financing obligations		557
Deferred revenue		115
Other current liabilities		419
Long-term finance leases and financing obligations		6,320
Other long-term liabilities		274
Total liabilities assumed		7,685
Total net identifiable assets acquired	$	14,873
Total consideration transferred	$	27,167
Less: total net identifiable assets acquired		14,873
Goodwill	$	12,294

The following are the intangible assets acquired and their respective fair values and weighted average useful lives:



	As of ‎Acquisition Date
	Dollars in ‎thousands		Weighted ‎Average ‎Useful Life
Customer lists	$	5,247		13 years
Favorable leases		1,165		10 years
Trade name		400		2 years
Total	$	6,812		12 years

As a result of the updated purchase price allocations for the entities acquired during the fiscal year ended March 30, 2019, certain of the fair value amounts previously estimated were adjusted during the measurement period. These measurement period adjustments resulted from updated valuation reports and appraisals received from our external valuation specialists, as well as revisions to internal estimates. The changes in estimates include a decrease in inventories of $0.3 million; an increase in other current assets of $0.1 million; an increase in property, plant and equipment of $0.1 million; a decrease in finance lease and financing obligation assets, net of $0.8 million; a decrease in intangible assets of $0.3 million; a decrease in long-term deferred income tax assets of $0.3 million; an increase in current portion of long-term debt, finance leases and financing obligations of $0.2 million and a decrease in long-term finance leases and financing obligations of $2.4 million. The measurement period adjustments resulted in a decrease of goodwill of $0.7 million.

The measurement period adjustments were not material to the Consolidated Statement of Comprehensive Income for the quarter ended June 29, 2019.

We continue to refine the valuation data and estimates primarily related to inventory, warranty reserves, intangible assets, real estate, and real property leases for fiscal 2019 acquisitions which closed subsequent to June 30, 2018 and the fiscal 2020 acquisitions, and expect to complete the valuations no later than the first anniversary date of the respective acquisition. We anticipate that adjustments will continue to be made to the fair values of identifiable assets acquired and liabilities assumed and those adjustments may or may not be material.

As of
‎Acquisition Date

Dollars in
‎thousands

Weighted
‎Average
‎Useful Life

Customer lists