NOTE 2 – ACQUISITIONS

Monro’s acquisitions are strategic moves in our plan to fill in and expand our presence in our 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

On May 13, 2018, we acquired twelve retail 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, Inc. These locations operate under the Free Service Tire name. The acquisition was financed through our existing credit facility.

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. The acquisition was financed through our existing credit facility.

Fiscal 2018

During fiscal 2018, we acquired the following businesses for an aggregate purchase price of $22.6 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 March 4, 2018, we acquired seven retail tire and automotive repair stores located in Kentucky, Ohio, Virginia and West Virginia from Appalachian Tire Products, Inc. These stores operate under the Mr. Tire name.

On March 4, 2018, we acquired two retail tire and automotive repair stores located in Illinois from Mattoon Muffler, Inc. and Charleston Muffler, Inc. These stores operate under the Car-X name.

On March 4, 2018, we acquired one retail tire and automotive repair store located in Vermont from City Tire Co., Inc. This store operates under the TWC name.

On March 1, 2018, we acquired one retail tire and automotive repair store located in Illinois from Devenir Enterprises, Inc. This store operates under the Car-X name.

On January 14, 2018, we acquired three retail tire and automotive repair stores located in Pennsylvania from Valley Tire Co., Inc. These stores operate under the Mr. Tire name.

On December 17, 2017, we acquired one retail tire and automotive repair store located in Indiana from MLR, Incorporated. This store operates under the Car-X name.

On December 10, 2017, we acquired two retail tire and automotive repair stores located in Pennsylvania from TriGar Tire & Auto Service Center, LLC. One store operates under the Monro name and one store operates under the Mr. Tire name.

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.

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 favorable leases and customer lists.

We expensed all costs related to acquisitions during fiscal 2018. The total costs related to completed acquisitions were $.5 million for the year ended March 31, 2018. These costs are included in the Consolidated Statements of Comprehensive Income primarily under operating, selling, general and administrative expenses.

Sales and net income for the fiscal 2018 acquired locations totaled $14.8 million and $.1 million, respectively, for the period from acquisition date through March 31, 2018. The net income of $.1 million includes an allocation of certain traditional corporate related items, including vendor rebates, interest expense and the provision for 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.

The preliminary fair values of identifiable assets acquired and liabilities assumed were based on preliminary valuation data and estimates. The excess of the net purchase price over the net tangible and intangible assets acquired was recorded as goodwill. The preliminary allocation of the aggregate purchase price as of March 31, 2018 was as follows:



	As of Acquisition Date
	(Dollars in thousands)
Inventories	$	1,154
Other current assets		219
Property, plant and equipment		9,555
Intangible assets		4,359
Other non-current assets		7
Long-term deferred income tax assets		3,028
Total assets acquired		18,322
Other current liabilities		1,617
Long-term capital leases and financing obligations		13,707
Other long-term liabilities		209
Total liabilities assumed		15,533
Total net identifiable assets acquired	$	2,789
Total consideration transferred	$	22,614
Less: total net identifiable assets acquired		2,789
Goodwill	$	19,825

The following are the intangible assets acquired and their respective fair values and weighted average useful lives.



	As of Acquisition Date
			Weighted
	Dollars		Average
	in thousands		Useful Life
Favorable leases	$	2,934	10 years
Customer lists		1,425	7 years
Total	$	4,359	9 years

We continue to refine the valuation data and estimates related to inventory, intangible assets, real estate, real property leases and certain liabilities for the fiscal 2018 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.

Fiscal 2017

During fiscal 2017, we acquired the following businesses for an aggregate purchase price of $141.8 million. The acquisitions were financed through our existing credit facility. The results of operations for these acquisitions are included in Monro’s financial results from the respective acquisition dates.

On February 26, 2017, we acquired 16 retail tire and automotive repair stores located in Illinois and Iowa from Nona, Inc., a Car-X franchisee. These stores operate under the Car-X name.

On February 5, 2017, we acquired two retail tire and automotive repair stores located in North Carolina and Virginia from Thrifty Tire of Roxboro, LLC. These stores operate under the Mr. Tire name.

On October 16, 2016, we acquired one retail tire and automotive repair store located in Rhode Island from Hamel Tire Center, Inc. This store operates under the Monro name.

On October 2, 2016, we acquired three retail tire and automotive repair stores located in Ohio from Parkway D/C Enterprises, Inc. These stores operate under the Mr. Tire name.

On September 19, 2016, we acquired one retail tire and automotive repair store located in Florida from Florida Tire Service, LLC. This store operates under The Tire Choice name.

On September 18, 2016, we acquired two retail tire and automotive repair stores located in Michigan from Davco Development Company and Ricketts, Inc. These stores operate under the Monro name.

On September 11, 2016, we acquired 26 retail tire and automotive repair stores and one retread facility located in North Carolina, as well as four wholesale locations in North Carolina, South Carolina and Tennessee, from Clark Tire & Auto, Inc. These stores operate under the Mr. Tire name. The wholesale locations and retread facility operate under the Tires Now name.

On July 18, 2016, we acquired one retail tire and automotive repair store located in Indiana from NTI, LLC. This store operates under the Car-X name.

On July 17, 2016, we acquired one retail tire and automotive repair store located in Georgia from Kwik-Fit Tire & Service. This store operates under the Mr. Tire name.

On July 10, 2016, we acquired four retail tire and automotive repair stores located in Minnesota from Task Holdings, Inc. and Autopar, Inc. These stores operate under the Car-X name.

On June 26, 2016, we acquired one retail tire and automotive repair store located in Michigan from Harlow Tire Company. This store operates under the Monro name.

On June 19, 2016, we acquired two retail tire and automotive repair stores located in New Hampshire from Express Tire Centers, LLC. These stores operate under the Tire Warehouse name.

On May 8, 2016, we acquired one retail tire and automotive repair store located in Florida from Pioneer Tire Pros. This store operates under The Tire Choice name.

On May 1, 2016, we acquired 29 retail tire and automotive repair stores and one retread facility located in Florida from McGee Tire Stores, Inc. These stores operate primarily under The Tire Choice name. The retread facility operates under the McGee Tire 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, and 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 trade names.

We expensed all costs related to acquisitions during fiscal 2017. The total costs related to completed acquisitions were $1.0 million for the year ended March 25, 2017. These costs are included in the Consolidated Statements of Comprehensive Income primarily under operating, selling, general and administrative expenses.

Sales and net loss for the fiscal 2017 acquired locations totaled $104.9 million and approximately ($1.0) million, respectively, for the period from acquisition date through March 25, 2017. The net loss includes an allocation of certain traditional corporate related items, including vendor rebates, interest expense and the provision for income taxes.

We finalized the purchase accounting relative to the fiscal 2017 acquisitions during fiscal 2018. As a result of the final purchase price allocations, 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 recorded in fiscal 2018 include an increase in property, plant and equipment of $1.4 million; a decrease in intangible assets of $2.2 million; a decrease in long-term deferred income tax assets of $.3 million; a decrease in other current liabilities of $.1 million; an increase in long-term capital leases and financing obligations of $.2 million; and an increase in total other liabilities of $.1 million. The measurement period adjustments resulted in an increase to goodwill of $1.3 million.

These adjustments were not material to the Consolidated Statements of Comprehensive Income for the fiscal years ended March 31, 2018 and March 25, 2017.

We have recorded the identifiable assets acquired and liabilities assumed at their values as of their respective acquisition dates (including any measurement prior adjustments), with the remainder recorded as goodwill as follows:



	As of Acquisition Date
	(Dollars in thousands)
Trade receivables	$	7,005
Inventories		18,350
Other current assets		431
Property, plant and equipment		33,392
Intangible assets		19,233
Other non-current assets		174
Long-term deferred income tax assets		9,054
Total assets acquired		87,639
Warranty reserves		561
Other current liabilities		3,772
Long-term capital leases and financing obligations		41,215
Other long-term liabilities		1,228
Total liabilities assumed		46,776
Total net identifiable assets acquired	$	40,863
Total consideration transferred	$	141,832
Plus: gain on bargain purchase		13
Less: total net identifiable assets acquired		40,863
Goodwill	$	100,982

The total consideration of $141.8 million is comprised of $141.7 million in cash, and a $.1 million payable to the sellers of certain acquired businesses. The payable is being liquidated via equal monthly payments through September 2019.

The following are the intangible assets acquired and their respective fair values and weighted average useful lives.



	As of Acquisition Date
			Weighted
	Dollars		Average
	in thousands		Useful Life
Customer lists	$	9,917	13 years
Favorable leases		6,361	14 years
Trade names		2,955	17 years
Total	$	19,233	14 years