NOTE 2 – ACQUISITIONS

Monro’s acquisitions are strategic moves in our plan to fill in and expand our presence in our existing and contiguous markets, and leverage fixed operating costs such as distribution and advertising.

Subsequent Events

On May 1, 2016, we acquired 29 retail/commercial tire and automotive repair stores and one retread plant located in Florida from McGee Tire Stores, Inc. These stores will operate primarily under The Tire Choice name. The acquisition was financed through our existing credit facility.

Fiscal 2016

During fiscal 2016, we acquired the following businesses for an aggregate purchase price of $51.1 million. The acquisitions were financed through our existing credit facility. The results of operations for these acquisitions are included in Monro’s financial results from the respective acquisition dates.

During fiscal 2016, we acquired three retail tire and automotive repair stores located in Illinois and Indiana from two former Car-X franchisees. These stores operate under the Car-X name.

On January 31, 2016, we acquired one retail tire and automotive repair store located in Georgia from Marietta Tire & Service, Inc. This store operates under the Mr. Tire name.

On December 13, 2015, we acquired four retail tire and automotive repair stores located in Wisconsin from McMar, Inc., a former Car-X franchisee. These stores operate under the Car-X name.

On December 13, 2015, we acquired one retail tire and automotive repair store located in Florida from Host Tires of Lakeland, Inc. This store operates under The Tire Choice name.

On August 16, 2015, we acquired 27 retail tire and automotive repair stores located in New York and Pennsylvania from Kost Tire. These stores operate under the Mr. Tire name.

On July 12, 2015, we acquired four retail tire and automotive repair stores located in Massachusetts from Windsor Tire Co., Inc. These stores operate under the Monro Brake & Tire name.

On April 25, 2015, we acquired the Car-X Brand, as well as the franchise rights for 146 auto service centers from Car-X Associates Corp., a subsidiary of Tuffy Associates Corp. At the time of acquisition, the Car-X stores were owned and operated by 32 independent Car-X franchisees in Illinois, Indiana, Iowa, Kentucky, Minnesota, Missouri, Ohio, Tennessee, Texas and Wisconsin. The franchise locations operate under the Car-X name. Monro operates as the franchisor through a standard royalty agreement, while Car-X remains a separate and independent brand and business through Car-X, LLC, Monro’s wholly-owned subsidiary, with franchise operations based in Illinois.

These acquisitions resulted in goodwill related to, among other things, growth opportunities, synergies and economies of scale expected from combining these businesses with ours, and 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 relationships, trade name, franchise agreements and favorable leases.

We expensed all costs related to acquisitions during fiscal 2016. The total costs related to completed acquisitions were $.7 million for the year ended March 26, 2016. These costs are included in the Consolidated Statements of Comprehensive Income primarily under operating, selling, general and administrative expenses.

Sales, including franchise royalty income, and net income for the fiscal 2016 acquired entities totaled $24.8 million and approximately $1.4 million, respectively, for the period from acquisition date through March 26, 2016.

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 valuation data and estimates. The excess of the net purchase price over the net tangible and intangible assets acquired was recorded as goodwill. The preliminary allocation of the aggregate purchase price as of March 26, 2016 was as follows:



	As of Acquisition Date
	(Dollars in thousands)
Trade receivables	$	263
Inventories		922
Other current assets		502
Property, plant and equipment		11,177
Intangible assets		11,270
Other non-current assets		24
Long-term deferred income tax assets		5,465
Total assets acquired		29,623
Warranty reserves		162
Other current liabilities		1,617
Long-term capital leases and financing obligations		22,142
Other long-term liabilities		845
Total liabilities assumed		24,766
Total net identifiable assets acquired	$	4,857
Total consideration transferred	$	51,104
Less: total net identifiable assets acquired		4,857
Goodwill	$	46,247

The total consideration of $51.1 million is comprised of $45.1 million in cash, and a $6.0 million payable to a seller. The payable is being liquidated via equal monthly payments through August 2022.

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



	As of Acquisition Date
			Weighted
	Dollars		Average
	in thousands		Useful Life
Franchise agreements	$	7,200	18 years
Trade name		2,100	15 years
Favorable leases		1,281	15 years
Customer lists		689	7 years
Total	$	11,270	16 years

We continue to refine the valuation data and estimates related to road hazard warranty, intangible assets, real estate and real property leases for the fiscal 2016 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.

Fiscal 2015

During fiscal 2015, we acquired the following businesses for an aggregate purchase price of $87.5 million. The acquisitions were financed through our existing credit facility. The results of operations for these acquisitions are included in Monro’s financial results from the respective acquisition dates.

On March 1, 2015, we acquired eight retail tire and automotive repair stores located in Florida from Martino Tire Stores. These stores operate under The Tire Choice name.

On December 7, 2014, we acquired nine retail tire and automotive repair stores located in Florida from Gold Coast Tire & Auto Centers. These stores operate under The Tire Choice name.

During July and December 2014 and March 2015, we acquired five retail tire and automotive repair stores located in New York, Georgia and New Jersey through five separate transactions. These stores operate under the Mr. Tire name.

On September 28, 2014, we acquired nine retail tire and automotive repair stores located in Georgia from Wood & Fullerton Stores, LLC. These stores operate under the Mr. Tire name.

On August 8, 2014, we acquired 35 retail tire and automotive repair stores located in Florida from Hennelly Tire & Auto, Inc. These stores operate under The Tire Choice name.

On June 15, 2014, we acquired ten and nine retail tire and automotive repair stores located in Michigan from Lentz U.S.A. Service Centers, Inc. and Kan Rock Tire Company, Inc., respectively. Two of the acquired stores were never opened. These stores operate under the Monro Brake & Tire name.

On April 13, 2014, we acquired two retail tire and automotive repair stores located in New Hampshire from Bald Tire & Auto, Inc. These stores were previously Tire Warehouse franchise locations and continue to operate under the Tire Warehouse name.

We expensed all costs related to acquisitions during fiscal 2015. The total costs related to completed acquisitions were $1.1 million for the year ended March 28, 2015. These costs are included in the Consolidated Statements of Comprehensive Income primarily under operating, selling, general and administrative expenses.

Sales and net income for the fiscal 2015 acquired entities totaled $52.2 million and approximately $.5 million, respectively, for the period from acquisition date through March 28, 2015.

We finalized the purchase accounting relative to the fiscal 2015 acquisitions during fiscal 2016. As a result of the final purchase price allocations, certain of the fair value amounts previously estimated were adjusted during the measurement period. These measurement period adjustments related to updated valuation reports and appraisals received from our external valuation specialists, as well as revisions to internal estimates. The changes in estimates recorded in fiscal 2016 include an increase in property, plant and equipment of $4.1 million; a decrease in intangible assets of $.6 million; an increase in the long-term deferred income tax assets of $2.3 million; an increase in other current assets of $.4 million; an increase in the current portion of capital leases and financing obligations of $.8 million; an increase in long-term capital leases and financing obligations of $9.5 million; and an increase in other liabilities of $.2 million. The measurement period adjustments resulted in an increase to goodwill of $4.3 million.

These adjustments were not material to the Consolidated Statements of Comprehensive Income for the years ended March 26, 2016 and March 28, 2015.

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)
Inventories	$	5,588
Other current assets		567
Property, plant and equipment		35,355
Intangible assets		8,608
Other non-current assets		129
Long-term deferred income tax assets		17,649
Total assets acquired		67,896
Warranty reserves		990
Other current liabilities		3,719
Long-term capital leases and financing obligations		57,292
Other long-term liabilities		1,703
Total liabilities assumed		63,704
Total net identifiable assets acquired	$	4,192
Total consideration transferred	$	87,451
Plus: gain on bargain purchase		383
Less: total net identifiable assets acquired		4,192
Goodwill	$	83,642

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



	As of Acquisition Date
			Weighted
	Dollars		Average
	in thousands		Useful Life
Trade name	$	1,900	10 years
Favorable leases		4,482	14 years
Customer lists		2,226	7 years
Total	$	8,608	11 years