Acquisitions

9 Months Ended

Dec. 26, 2020

NOTE 3 – ACQUISITIONS

Monro’s acquisitions are strategic moves in our plan to fill in and expand our presence in our existing and contiguous markets, expand into 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.

Fiscal 2021

On December 6, 2020, we acquired 17 retail tire and automotive repair stores located in California from Fred Allen Enterprises, Inc. for $17.4 million. These stores will operate under the Tire Choice name. The acquisition was financed through our Credit Facility. The results of operations for the acquisition are included in our financial results from the acquisition date.

Prior to this acquisition, our acquisition activity was paused due to the impact of the COVID-19 pandemic.

The acquisition resulted in goodwill related to, among other things, growth opportunities, synergies and economies of scale expected from combining the business with ours, as well as unidentifiable intangible assets. All of the goodwill is expected to be deductible for tax purposes. We have recorded a customer list intangible asset with a useful life of seven years at its estimated fair value of approximately $0.4 million.

We expensed all costs related to the acquisition in the quarter ended December 26, 2020. The total costs related to the completed acquisition were $0.1 million and these costs are included in the Consolidated Statements of Income and Comprehensive Income primarily under operating, selling, general and administrative expenses.

Sales related to the completed acquisition totaled $0.9 million for the period from acquisition date through December 26, 2020.

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 purchase price as of December 26, 2020, with respect to the acquisition during the quarter, was as follows:



	As of ‎Acquisition ‎Date
	(Dollars in ‎thousands)
Inventory	$	1,220
Other current assets		149
Property, plant and equipment		683
Finance lease and financing obligation assets, net		4,328
Operating lease assets, net		9,531
Intangible asset		418
Other non-current assets		31
Long-term deferred income tax assets		1,371
Total assets acquired		17,731
Current portion of finance leases and financing obligations		657
Current portion of operating lease liabilities		1,067
Deferred revenue		697
Other current liabilities		4
Long-term finance leases and financing obligations		7,361
Long-term operating lease liabilities		7,984
Other long-term liabilities		536
Total liabilities assumed		18,306
Total net identifiable liabilities assumed	$	(575)
Total consideration transferred	$	17,426
Less: total net identifiable liabilities assumed		(575)
Goodwill	$	18,001

Fiscal 2020

During the first nine months of fiscal 2020, we acquired the following businesses for an aggregate purchase price of $103.7 million. The acquisitions were financed through our Credit Facility. The results of operations for these acquisitions are included in our financial results from the respective acquisition dates.

On November 17, 2019, we acquired 18 retail tire and automotive repair stores located in Nevada and Idaho from Nevada Tire Holdings, LLC and Idaho Tire Holdings, LLC. These stores operate under the Tire Choice name.

On October 27, 2019, we acquired six retail tire and automotive repair stores located in California from S&S Unlimited, Inc. These stores will operate under the Tire Choice name.

On October 27, 2019, we acquired three retail tire and automotive repair stores located in California from Lloyd’s Tire Service, Inc. These stores will operate under the Tire Choice name.

On August 25, 2019, we acquired one retail tire and automotive repair store located in Louisiana from Atlas Tire Center, Inc. This store operates under the Tire Choice name.

On August 25, 2019, we acquired two retail tire and automotive repair stores located in Louisiana from LRZ3 Auto, LLC. These stores operate under the Tire Choice name.

On August 25, 2019, we acquired one retail tire and automotive repair store located in Louisiana from T-Boy’s Tire and Automotive, LLC. This store operates under the Tire Choice name.

On August 25, 2019, we acquired two retail tire and automotive repair stores located in Louisiana from Twin Tire & Auto Care, Inc. These stores operate under the Tire Choice name.

On August 25, 2019, we acquired one retail tire and automotive repair store located in Louisiana from Twin Tire & Auto Care Team, Inc. This store operates under the Tire Choice name.

On August 25, 2019, we acquired one retail tire and automotive repair store located in Louisiana from Scotty’s Tire & Automotive, Inc. This store operates under the Tire Choice name.

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 nine months ended December 28, 2019. The total costs related to completed acquisitions were $0.4 million and $1.2 million for the quarter and nine months ended December 28, 2019, respectively. These costs are included in the Consolidated Statements of Income and Comprehensive Income primarily under operating, selling, general and administrative expenses.

Sales for the fiscal 2020 acquired entities for the quarter and nine months ended December 28, 2019 totaled $18.5 million and $38.7 million, respectively, for the period from acquisition date through December 28, 2019.

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 consideration transferred and net identifiable liabilities assumed recorded as goodwill as follows:



	As of ‎Acquisition ‎Date
	(Dollars in ‎thousands)
Inventories	$	4,433
Other current assets		706
Property, plant and equipment		2,405
Finance lease and financing obligation assets, net		29,147
Operating lease assets, net		42,680
Intangible assets		2,847
Other non-current assets		375
Long-term deferred income tax assets		4,870
Total assets acquired		87,463
Current portion of finance leases and financing obligations		2,672
Current portion of operating lease liabilities		4,416
Deferred revenue		1,618
Other current liabilities		358
Long-term finance leases and financing obligations		36,225
Long-term operating lease liabilities		43,668
Other long-term liabilities		1,747
Total liabilities assumed		90,704
Total net identifiable liabilities assumed	$	(3,241)
Total consideration transferred	$	103,692
Less: total net identifiable liabilities assumed		(3,241)
Goodwill	$	106,933

The following are the intangible assets acquired and their respective fair value and weighted average useful life:

As a result of the updated purchase price allocations for the entities acquired during the fiscal year ended March 28, 2020, 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 measurement period adjustments were not material to the Consolidated Balance Sheet as of December 26, 2020 and the Consolidated Statements of Income and Comprehensive Income for the quarter and nine months ended December 26, 2020.

We continue to refine the valuation data and estimates primarily related to inventory, warranty reserves, intangible assets and real property leases for the fiscal 2021 acquisition which closed during the quarter ended December 26, 2020, and expect to complete the valuations no later than the first anniversary date of the 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