ROCHESTER, N.Y.—Monro Muffler Brake Inc., which spent $47 million on acquisitions during the first half of fiscal 2015, is negotiating a larger debt facility to ensure that it can fund more and larger acquisitions going forward, Catherine D'Amico, executive vice president of finance, CFO and treasurer, told analysts during a recent conference.
Monro currently has access to more than $325 million in credit through a revolving credit facility of $250 million with a $75 million “accordion” feature, she said, with about $90 million of availability, not including the accordion.
“We are fully compliant with all of our debt covenants and have plenty of room under these covenants to add additional debt for acquisitions without any problem,” she said. “All of this as well as the flexibility built into our debt agreement continues to make it easy for us to get acquisitions done quickly.”
Ms. D'Amico's comments are salient considering Monro claims to have at least non-disclosure agreements signed with potential acquisition targets, varying in size from five to 40 outlets.
The $47 million spent on acquisitions covers the purchases of Kost Tire & Auto Service of New York, Windsor Tire/Mass Tire in Massachusetts and the Car-X Tire & Auto franchise business. The Kost Tire stores now carry Mr. Tire branding while the Massachusetts stores operate as Monro Brake & Tire locations.
These deals added 34 stores and an expected $31 million in added annual revenue, the company said, with a service/tires sales mix of 60/40.
Expanding the company's scope by acquisition helps raise Monro's purchasing power with vendors, according to President and CEO John Van Heel, as well as leverage distribution, advertising, field management and corporate overhead costs, all of which will help drive future operating margin expansion.
Monro also spent $20 million on capital expenditures, but didn't disclose on what.
Mr. Van Heel reminded the analysts that Monro's five-year growth strategy calls for 15-percent annual top line growth, comprising 10-percent growth through acquisitions, 3 percent from comparable store sales and 2 percent from greenfield stores.
Regarding the firm's second quarter—operating income up 17.9 percent on 8.1-percent higher sales—Mr. Van Heel said long-term trends remain favorable for Monro, with nearly 250 million vehicles on the road at an average age of 11.8 years old, a slowly declining population of service bays and consumers choosing “do it for me” service more frequently.
Mr. Van Heel specifically noted that vehicles 13 years old and older accounted for 28 percent of Monro's traffic during the first six months of the fiscal year.
“These vehicles produced average tickets similar to our overall average, demonstrating that consumers continue to invest in and maintain their vehicles even as they advance in age,” he said.