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Acquisitions

12 Months Ended

Mar. 31, 2012

NOTE 2 — ACQUISITIONS

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

Subsequent Events

The Company has signed a definitive asset purchase agreement to complete the acquisition of 18 retail tire and automotive repair stores located in North Carolina from Colony Tire Corporation (“Colony”) on June 2, 2012. These stores produced approximately $25 million in net sales for their previous full fiscal year based on unaudited pre-acquisition historical information.

On April 1, 2012, the Company acquired 20 retail tire and automotive repair stores located in Virginia from Kramer Tire Co. (“Kramer”). These stores produced approximately $25 million in net sales for their previous full fiscal year based on audited pre-acquisition historical information. As part of the Kramer acquisition, two heavy truck tire and truck repair stores, two wholesale operations and a retread facility also located in Virginia were acquired. These retail tire and automotive repair stores will operate primarily under the Tread Quarters name. The acquisition was financed through the Company’s existing bank facility. The non-retail facilities and the two heavy truck tire and truck repair stores were disposed of subsequent to year end.

The total purchase price of these acquisitions is approximately $50 million.

Fiscal 2012

In the third quarter of fiscal year 2012, the Company acquired eight retail tire stores located in Ohio, Pennsylvania and Maine through two acquisitions. Collectively, these stores produced approximately $11 million in net sales for their previous full fiscal year based on unaudited, pre-acquisition historical information. These acquisitions were financed through the Company’s existing credit facility. The results of operations for these acquired stores are included in the Company’s financial results from their respective acquisition dates.

In the first quarter of fiscal year 2012, the Company acquired 24 retail tire and automotive repair stores located in Pennsylvania and New Jersey from Vespia Tire Centers, Inc. These stores produced approximately $36 million in net sales for their previous full fiscal year based on unaudited pre-acquisition historical information provided by Vespia Tire Centers, Inc. The acquisition was financed through the Company’s existing credit facility. The results of operations of these acquired stores are included in the Company’s financial results from June 5, 2011.

The Company has recorded its initial accounting for these acquisitions in accordance with accounting guidance on business combinations. The acquisitions resulted in goodwill related to, among other things, growth opportunities and unidentified intangible assets. All of the goodwill is expected to be deductible for tax purposes. The Company has recorded finite-lived intangible assets at their estimated fair value related to customer relationships and favorable leases.

The purchase price allocation remains preliminary for some of the acquired stores due to the finalization of the valuation of some intangible assets, real estate and real property leases. The Company believes that this will be finalized in the third quarter of fiscal 2013 and that any adjustments to the purchase price allocation will not be material.

In accordance with accounting guidance on business combinations, the Company expensed all costs related to these acquisitions during fiscal 2012. The total costs related to these acquisitions were not material to the Consolidated Statement of Income. These costs are included in the Consolidated Statement of Income primarily under operating, selling, general and administrative expenses.

Sales and net income for the fiscal 2012 acquired entities totaled $31.3 million and $1.0 million, respectively for the period from acquisition date through March 31, 2012.

Fiscal 2011

During the year, the Company acquired 10 retail tire and automotive repair stores (including a former Tire Warehouse franchisee and an adjacent automotive repair store) located in Maine, Pennsylvania and Virginia through three acquisition transactions. Collectively, these fiscal 2011 acquisition stores produced approximately $16.3 million in sales annually based on unaudited pre-acquisition historical information. The total purchase price of these stores was approximately $10.2 million in cash and the assumption of certain liabilities. The acquisitions were financed through the Company’s existing bank facility and cash flow from operations. The results of operations of these acquired stores are included in the Company’s results from their respective acquisition dates. Eight of the fiscal 2011 acquisition stores operate as retail tire and automotive repair stores under the Mr. Tire brand name and the former Tire Warehouse franchisee and adjacent automotive repair store operate under the Tire Warehouse and Monro brand name, respectively.

In accordance with accounting guidance on business combinations, the Company expensed all costs related to these acquisitions during fiscal 2011. The total costs related to these acquisitions were not material to the Consolidated Statement of Income. These costs are included in the Consolidated Statement of Income primarily under operating, selling, general and administrative expenses.

The purchase price of the acquisitions have been allocated to the net tangible and intangible assets acquired, with the remainder recorded as goodwill on the basis of estimated fair values, as follows:


	Final
	(Dollars in thousands)
Other current assets	$	685
Intangible assets		1,777
Other noncurrent assets		2,164
Current liabilities		(571	)
Long-term liabilities		(2,355	)

Total net identifiable assets acquired	$	1,700

Total consideration transferred	$	10,194
Less: total net identifiable assets acquired		1,700

Goodwill	$	8,494

Intangible assets consist of customer lists ($648,000), a non-compete agreement ($345,000), a refuse disposal agreement ($130,000) and favorable leases ($654,000). Customer lists, the non-compete agreement and the refuse disposal agreement are being amortized over their estimated useful lives. The weighted average useful lives are approximately four, four and five years, respectively. Favorable lease intangible assets are being amortized over their respective lease terms, ranging from five to 20 years. The weighted average useful life of all intangible assets is approximately seven years.

The allocation above was finalized during fiscal 2012. The resulting adjustments were not material to the consolidated financial statements.

Sales and net income for the fiscal 2011 acquired entities totaled $10.3 million and $.6 million, respectively for the period from acquisition date through March 26, 2011.