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Acquisitions and Divestitures | 6 Months Ended
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Sep. 24, 2022
Acquisitions And Divestitures [Abstract] |
Acquisitions And Divestitures | Note 2 – Acquisitions and Divestitures 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 advertising and administration. Acquisitions in this note generally 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 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 acquisition was financed through our Credit Facility, as defined in Note 8. The results of operations for this acquisition are included in our financial results from the acquisition date. 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 in the six months ended September 25, 2021. The total costs related to the completed acquisition were $0.1 million and $0.4 million for the three and six months ended September 25, 2021, respectively. These costs are included in the Consolidated Statements of Income and Comprehensive Income primarily under operating, selling, general and administrative (“OSG&A”) expenses. Sales related to the completed acquisition for the three and six months ended September 25, 2021 totaled $11.4 million and $19.4 million, respectively, for the period from acquisition date through September 25, 2021. 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 the acquisition as a business combination using the acquisition method of accounting and we finalized the purchase accounting related to the acquisition during the three months ended June 25, 2022. As a result of the updated purchase price allocation for the 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 September 24, 2022 and the Consolidated Statement of Income and Comprehensive Income for the six months ended September 24, 2022. 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.
2022 Acquisition-date Fair Values Assigned |  |  |
(thousands) |  |  |
Inventory |  | $ | 937
Other current assets |  |  | 217
Property and equipment |  |  | 2,939
Finance lease and financing obligation assets |  |  | 15,758
Operating lease assets |  |  | 17,545
Intangible assets |  |  | 2,211
Other non-current assets |  |  | 63
Long-term deferred income tax assets |  |  | 4,001
Total assets acquired |  |  | 43,671
Current portion of finance leases and financing obligations |  |  | 1,447
Current portion of operating lease liabilities |  |  | 1,698
Deferred revenue |  |  | 955
Other current liabilities |  |  | 208
Long-term finance leases and financing obligations |  |  | 21,957
Long-term operating lease liabilities |  |  | 22,447
Other long-term liabilities |  |  | 754
Total liabilities assumed |  |  | 49,466
Total net identifiable liabilities assumed |  | $ | (5,795)
Total consideration transferred |  | $ | 62,127
Less: total net identifiable liabilities assumed |  |  | (5,795)
Goodwill |  | $ | 67,922
The total consideration of $62.1 million is comprised of $61.0 million in cash and $1.1 million which is due upon finalization of certain lease assignment terms for one store location. We recorded $2.2 million amortizable intangible assets, including a customer list and a trade name, with a weighted-average amortizable period of approximately eight years. We have recorded acquired right-of-use 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 that closed subsequent to September 25, 2021 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. 2023 Divestitures On June 17, 2022, we completed the divestiture of assets relating to our wholesale tire operations (seven locations) and internal tire distribution operations to American Tire Distributors, Inc. (“ATD”). We received $62 million from ATD at the closing of the transaction, of which $5 million is currently being held in escrow. The remaining $40 million (“Earnout”) of the total consideration of $102 million will be paid quarterly over approximately two years based on our tire purchases from or through ATD pursuant to a distribution and fulfillment agreement with ATD. Under the distribution agreement, ATD agreed to supply and sell tires to retail locations we own. After ATD satisfies the Earnout payments, our company-owned retail stores will be required to purchase at least 90 percent of their forecasted requirements for certain passenger car tires, light truck replacement tires, and medium truck tires from or through ATD. Any tires that ATD is unable to supply or fulfill from those categories will be excluded from the calculation of our requirements for tires. The initial term of the distribution agreement is five years after the completion of the Earnout Period, with automatic 12-month renewal periods thereafter. The divestiture enables us to focus our resources on our core retail business operations. In connection with this transaction, we recognized a pre-tax gain of $2.4 million within OSG&A expenses. We also expensed $0.4 million of closing costs and costs associated with the closing of a related warehouse within OSG&A expenses, as finalized during the six months ended September 24, 2022. Additionally, during the three months ended September 24, 2022, we incurred $1.3 million in costs in connection with restructuring and elimination of certain executive management positions upon completion of the divestiture. The divestiture did not meet the criteria to be reported as discontinued operations in our consolidated financial statements as our decision to divest this business did not represent a strategic shift that will have a major effect on our operations and financial results. For additional information regarding discrete tax impacts because of the divestiture, see Note 4.

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