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.

Subsequent to December 24, 2022, we signed a definitive asset purchase agreement to complete the acquisition of five retail tire and automotive repair stores located in Iowa and Illinois. This transaction is expected to close during the fourth quarter of fiscal 2023 and is expected to be financed through our Credit Facility, as defined in Note 8.

On December 4, 2022, we acquired one retail tire and automotive repair store located in Wisconsin from Spinler’s Service Systems, Inc. for $0.4 million. This store operates under the Car-X name. The acquisition was financed through our Credit Facility. 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 three months ended December 24, 2022. These costs are included in the Consolidated Statements of Income and Comprehensive Income primarily under operating, selling, general and administrative (“OSG&A”) expenses and were not material to the Consolidated Statements of Income and Comprehensive Income for the three months and nine months ended December 24, 2022.

Sales related to the completed acquisition for the period from acquisition date through December 24, 2022 were not material to the Consolidated Statements of Income and Comprehensive Income for the three months and nine months ended December 24, 2022.

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 entity was not owned by Monro.

We accounted for the 2023 acquisition as a business combination using the acquisition method of accounting in accordance with the FASB ASC Topic 805, “Business Combinations.” The assets acquired 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 on preliminary valuations and estimates, and the excess of the consideration transferred over the net identifiable assets acquired was recorded as goodwill. The preliminary allocation of the consideration transferred was not material to the Consolidated Balance Sheet as of December 24, 2022.

We continue to refine the valuation data and estimates primarily related to inventory, property and equipment, intangible assets, real property leases, warranty reserves and certain liabilities for the 2023 acquisition 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.

2022

During the first nine months of fiscal 2022, we acquired the following businesses for an aggregate purchase price of $83.1 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 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 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 in the nine months ended December 25, 2021. The total costs related to the completed acquisitions were $0.2 million and $0.6 million for the three and nine months ended December 25, 2021, respectively. These costs are included in the Consolidated Statements of Income and Comprehensive Income primarily under OSG&A expenses.

Sales related to the completed acquisitions for the three and nine months ended December 25, 2021 totaled $13.7 million and $33.1 million, respectively, for the period from acquisition date through December 25, 2021.

We accounted for the 2022 acquisitions as a business combination using the acquisition method of accounting and we finalized the purchase accounting related to the 2022 acquisitions during fiscal 2023. As a result of the updated purchase price allocation for the acquisitions, 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 24, 2022 and the Consolidated Statements of Income and Comprehensive Income for the three months and nine months ended December 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	$	1,298
Other current assets		424
Property and equipment		3,612
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		4,814
Total assets acquired		64,736
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		1,026
Total liabilities assumed		68,815
Total net identifiable liabilities assumed	$	(4,079)
Total consideration transferred	$	83,087
Less: total net identifiable liabilities assumed		(4,079)
Goodwill	$	87,166

The total consideration of $83.1 million is comprised of $82.0 million in cash and $1.1 million which is due upon finalization of certain lease assignment terms for one store location.

We recorded $4.8 million amortizable intangible assets, including customer lists 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.

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, of which $4.3 million was received during the three months ended December 24, 2022. 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 expensed $0.4 million of closing costs and costs associated with the closing of a related warehouse within OSG&A expenses, as finalized in September 2022. We also 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.