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 our greenfield store growth strategy.

Subsequent Events

Subsequent to September 29, 2018, we signed definitive asset purchase agreements to complete the acquisition of 15 retail tire and automotive repair stores located primarily within our existing markets. These transactions are expected to close during the third and fourth quarters of fiscal 2019 and are expected to be financed through our existing credit facility.

On November 4, 2018, we acquired five retail tire and automotive repair stores located in Ohio from Jeff Pohlman Tire & Auto Service, Inc. These stores operate under the Car-X and Mr. Tire names. The acquisition was financed through our existing credit facility.

On October 14, 2018, we acquired one retail tire and automotive repair store located in Illinois from Quality Tire and Auto, Inc. This store operates under the Car-X name. The acquisition was financed through our existing credit facility.

Fiscal 2019

During the first six months of fiscal 2019, we acquired the following businesses for an aggregate purchase price of $38.7 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 September 23, 2018, we acquired one retail tire and automotive repair store located in South Carolina from Walton’s Automotive, LLC. This store operates under the Treadquarters name.

On September 16, 2018, we acquired one retail tire and automotive repair store located in Illinois from C&R Auto Service, Inc. This store operates under the Car-X name.

On September 9, 2018, we acquired four retail tire and automotive repair stores in Arkansas and Tennessee from Steele-Guiltner, Inc. These stores operate under the Car-X name.

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.

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.

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 six months ended September 29, 2018. The total costs related to completed acquisitions were $.1 million and $.3 million for the quarter and six months ended September 29, 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 and six months ended September 29, 2018 totaled $13.3 million and $18.7 million, respectively, for the period from acquisition date through September 29, 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 September 29, 2018 was as follows:



	As of Acquisition Date
	(Dollars in thousands)
Trade receivables	$	1,674
Inventories		8,417
Other current assets		195
Property, plant and equipment		9,352
Intangible assets		7,510
Other non-current assets		17
Long-term deferred income tax assets		1,127
Total assets acquired		28,292
Warranty reserves		270
Other current liabilities		1,064
Long-term capital leases and financing obligations		6,320
Other long-term liabilities		421
Total liabilities assumed		8,075
Total net identifiable assets acquired	$	20,217
Total consideration transferred	$	38,729
Less: total net identifiable assets acquired		20,217
Goodwill	$	18,512

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	$	5,599		13 years
Favorable leases		1,511		10 years
Trade name		400		2 years
Total	$	7,510		12 years

Fiscal 2018

During the first six months of fiscal 2018, we acquired the following businesses for an aggregate purchase price of $14.0 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 August 13, 2017, we acquired eight retail tire and automotive repair stores located in Indiana and Illinois from Auto MD, LLC. These stores operate under the Car-X name.

On July 30, 2017, we acquired 13 retail tire and automotive repair stores in Michigan, 12 of which were operating as Speedy Auto Service and Tire dealer locations, from UVR, Inc. One of the acquired stores was not opened by Monro. These stores operate under the Monro name.

On July 9, 2017, we acquired one retail tire and automotive repair store located in North Carolina from Norman Young Tires, Inc. This store operates under the Treadquarters name.

On June 25, 2017, we acquired one retail tire and automotive repair store located in Illinois from D&S Pulaski, LLC. This store operates under the Car-X name.

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 six months ended September 23, 2017. The total costs related to completed acquisitions were $.2 million and $.3 million for the quarter and six months ended September 23, 2017, respectively. 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 and six months ended September 23, 2017 totaled $3.1 million and $3.6 million, respectively, for the period from acquisition date through September 23, 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	$	455
Other current assets		139
Property, plant and equipment		5,941
Intangible assets		3,117
Other non-current assets		7
Long-term deferred income tax assets		2,429
Total assets acquired		12,088
Warranty reserves		49
Other current liabilities		1,060
Long-term capital leases and financing obligations		9,993
Other long-term liabilities		116
Total liabilities assumed		11,218
Total net identifiable assets assumed	$	870
Total consideration transferred	$	14,042
Less: total net identifiable assets assumed		870
Goodwill	$	13,172

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	$	2,133		10 years
Customer lists		984		7 years
Total	$	3,117		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 and six months ended September 29, 2018.

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 September 23, 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.