Acquisitions

12 Months Ended

Mar. 26, 2022

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.

2022

During 2022, we acquired the following businesses for an aggregate purchase price of $83.1 million. The acquisitions were financed through our Credit Facility, as defined in Note 7. The results of operations for these acquisitions are included in our financial results from the respective acquisition dates.

On December 5, 2021, we acquired 11 retail tire and automotive repair stores operating as Car-X franchise locations in Iowa from KR Jones Enterprises, Inc. These stores will operate under the Car-X name.

On November 14, 2021, we acquired three retail tire and automotive repair stores located in California from Bud’s Tire and Wheel, Inc. These stores will operate under the Tire Choice name.

On November 14, 2021, we acquired two retail tire and automotive repair stores located in California from Eagle Auto & Tire, Inc. These stores will operate under the Mountain View Tire & Service name.

On November 14, 2021, we acquired one retail tire and automotive repair store located in California from Golden Reflections. This store will operate under the Mountain View Tire & Service name.

On April 25, 2021, we acquired 30 retail tire and automotive repair stores located in California from Mountain View Tire & Service, Inc. These stores operate under the Mountain View Tire & Service name.

The acquisitions resulted in goodwill related to, among other things, growth opportunities, synergies and economies of scale expected from combining the businesses with ours, as well as unidentifiable intangible assets. All of the goodwill is expected to be deductible for tax purposes.

We expensed all costs related to the acquisitions during 2022. The total costs related to the completed acquisitions were $0.7 million and these costs are included in the Consolidated Statement of Income and Comprehensive Income primarily under OSG&A expenses.

Sales and net income related to the completed acquisitions totaled $51.7 million and $3.4 million, respectively for the period from acquisition date through March 26, 2022. The net income of $3.4 million includes an allocation of certain traditional corporate related items, including vendor rebates, interest expense, and income taxes.

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.

We accounted for each 2022 acquisition as a business combination using the acquisition method of accounting in accordance with the FASB ASC Topic 805, “Business Combinations.” The acquired assets and liabilities assumed were recorded at their acquisition-date fair values and were consolidated with those of the Company as of the acquisition date. The acquisition-date fair values were assigned based on preliminary valuations and estimates, and the consideration transferred and net liabilities assumed were recorded as goodwill.



2022 Acquisition-date Fair Values Assigned
(thousands)
Inventories	$	1,298
Other current assets		424
Property and equipment		3,536
Finance lease and financing obligation assets		19,228
Operating lease assets		30,461
Intangible assets		4,820
Other non-current assets		79
Long-term deferred income tax assets		4,818
Total assets acquired		64,664
Current portion of finance leases and financing obligations		1,832
Current portion of operating lease liabilities		3,058
Deferred revenue		1,261
Other current liabilities		273
Long-term finance leases and financing obligations		26,061
Long-term operating lease liabilities		35,304
Other long-term liabilities		1,043
Total liabilities assumed		68,832
Total net identifiable liabilities assumed	$	(4,168)
Total consideration transferred	$	83,109
Less: total net identifiable liabilities assumed		(4,168)
Goodwill	$	87,277

The total consideration of $83.1 million is comprised of $81.7 million in cash and $1.4 million of payables to certain sellers, of which $1.1 million is due upon finalization of certain lease assignment terms for one store location.

We have recorded $4.8 million to amortizable intangible assets, including customer lists, a trade name, and reacquired franchise rights, with a weighted average amortizable period of approximately eight years. We have recorded acquired ROU assets at the present value of remaining lease payments adjusted to reflect favorable or unfavorable market terms of the lease.

We continue to refine the valuation data and estimates primarily related to inventory, warranty reserves, intangible assets, real property leases, and certain liabilities for the 2022 acquisitions 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.

2021

On December 6, 2020, we acquired 17 retail tire and automotive repair stores located in California from Fred Allen Enterprises, Inc. for $17.1 million. These stores will operate under the Tire Choice name. The acquisition was financed through our Credit Facility. The results of operation 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 expensed all costs related to the acquisition during 2021. The total costs related to the completed acquisition were $0.3 million and these costs are included in the Consolidated Statement of Income and Comprehensive Income primarily under OSG&A expense.

Sales and net income related to the 2021 acquisition totaled $5.8 million and $0.1 million, respectively, for the period from acquisition date through March 27, 2021. The net income of $0.1 million includes an allocation of certain traditional corporate related items, including vendor rebates, interest expense, and the benefit from income taxes.

We accounted for the 2021 acquisition as a business combination using the acquisition method of accounting and we finalized the purchase accounting related to the 2021 acquisition during 2022. As a result of the updated purchase price allocation for the 2021 acquisition, 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 March 26, 2022 and March 27, 2021 and the Consolidated Statement of Income and Comprehensive Income for 2022 and 2021.

The acquired assets and liabilities assumed were recorded at their assigned acquisition-date fair values and were consolidated with those of the Company as of the acquisition date. The consideration transferred and net liabilities assumed were recorded as goodwill.



2021 Acquisition-date Fair Values Assigned
(thousands)
Inventory	$	1,017
Other current assets		172
Property and equipment		796
Finance lease and financing obligation assets		5,089
Operating lease assets		8,980
Intangible asset		418
Other non-current assets		1,336
Long-term deferred income tax assets		31
Total assets acquired		17,839
Current portion of finance leases and financing obligations		748
Current portion of operating lease liabilities		976
Deferred revenue		697
Other current liabilities		4
Long-term finance leases and financing obligations		7,911
Long-term operating lease liabilities		7,433
Other long-term liabilities		548
Total liabilities assumed		18,317
Total net identifiable liabilities assumed	$	(478)
Total consideration transferred	$	17,112
Less: total net identifiable liabilities assumed		(478)
Goodwill	$	17,590

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 have recorded acquired ROU assets at the present value of remaining lease payments adjusted to reflect favorable or unfavorable market terms of the lease.

During 2022, we paid $0.8 million to the seller of the 2021 acquisition as the lease assignment for one store location was finalized during the year.