Note 2 – Acquisitions

Monro’s acquisitions are strategic moves in our plan to fill in and expand our presence in existing and contiguous 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 the Company’s greenfield store growth strategy.

Subsequent Events

We have signed definitive asset purchase agreements to complete the acquisition of 12 retail/commercial tire and automotive repair stores located primarily within our existing markets. These transactions are expected to close during the second quarter of fiscal 2019 and are expected to be financed through our existing credit facility.

On July 15, 2018, we acquired one retail tire and automotive repair store located in Pennsylvania from Mayfair Tire & Service Center, Inc. This store operates under the Mr. Tire name. The acquisition was financed through our existing credit facility.

On July 8, 2018, we acquired eight retail tire and automotive repair stores in Missouri from Sawyer Tire, Inc. These stores operate under the Car-X name. The acquisition was financed through our existing credit facility.

Fiscal 2019

During the first quarter of fiscal 2019, we acquired the following businesses for an aggregate purchase price of $27.3 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.

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, favorable leases and a trade name.

We expensed all costs related to acquisitions in the quarter ended June 30, 2018. The total costs related to completed acquisitions were $.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.

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 excess of the net purchase price over net identifiable assets acquired was recorded as goodwill. The preliminary allocation of the aggregate purchase price as of June 30, 2018 was as follows:



	As of Acquisition Date
	(Dollars in thousands)
Trade receivables	$	1,834
Inventories		7,949
Other current assets		138
Property, plant and equipment		5,015
Intangible assets		8,677
Long-term deferred income tax assets		1,036
Total assets acquired		24,649
Warranty reserves		115
Other current liabilities		985
Long-term capital leases and financing obligations		6,320
Other long-term liabilities		189
Total liabilities assumed		7,609
Total net identifiable assets acquired	$	17,040
Total consideration transferred	$	27,313
Less: total net identifiable assets acquired		17,040
Goodwill	$	10,273

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	$	7,047		15 years
Favorable leases		1,230		10 years
Trade name		400		2 years
Total	$	8,677		14 years

Fiscal 2018

During the first quarter of fiscal 2018, we acquired the following businesses for an aggregate purchase price of $3.7 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 11, 2017, we acquired two retail tire and automotive repair stores located in Minnesota and Wisconsin from J & R Diversified, Inc. These stores operate under the Car-X name.

On June 11, 2017, we acquired one retail tire and automotive repair store located in Ohio from Michael N. McGroarty, Inc. This store operates under the Mr. Tire name.

On June 2, 2017, we acquired one retail tire and automotive repair store located in Connecticut from Tires Plus LLC. This store operates under the Monro name.

On May 21, 2017, we acquired one retail tire and automotive repair store located in Ohio from Bob Sumerel Tire Co., Inc. This store operates under the Mr. Tire name.

On April 23, 2017, we acquired one retail tire and automotive repair store located in Florida from Collier Automotive Group, Inc. This store operates under The Tire Choice name.

We expensed all costs related to acquisitions in the quarter ended June 24, 2017. The total costs related to completed acquisitions were immaterial for the quarter ended June 24, 2017. These costs are included in the Consolidated Statements of Comprehensive Income primarily under operating, selling, general and administrative expenses.

Sales for the fiscal 2018 acquired entities for the quarter ended June 24, 2017 totaled $.5 million for the period from acquisition date through June 24, 2017.

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	$	181
Other current assets		20
Property, plant and equipment		1,295
Intangible assets		436
Other non-current assets		7
Long-term deferred income tax assets		625
Total assets acquired		2,564
Warranty reserves		29
Other current liabilities		252
Long-term capital leases and financing obligations		2,482
Other long-term liabilities		22
Total liabilities assumed		2,785
Total net identifiable liabilities assumed	$	(221)
Total consideration transferred	$	3,728
Less: total net identifiable liabilities assumed		(221)
Goodwill	$	3,949

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
Favorable leases	$	270		10 years
Customer lists		166		7 years
Total	$	436		9 years

As a result of the updated purchase price allocations for the entities acquired during the fiscal year ended March 31, 2018, 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 include a decrease in inventories of $.1 million and a decrease in property, plant and equipment of $.2 million. The measurement period adjustments resulted in an increase of goodwill of $.3 million.

The measurement period adjustments were not material to the Consolidated Statement of Comprehensive Income for the quarter ended June 24, 2017.

We continue to refine the valuation data and estimates primarily related to inventory, road hazard warranty, intangible assets, real estate, and real property leases for fiscal 2018 acquisitions which closed subsequent to June 24, 2017 and the fiscal 2019 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.