NOTE 2—ACQUISITIONS

During the third quarter of 2013, the Company paid $10.7 million to purchase 18 Service & Tire Centers located in Southern California from AKH Company, Inc., which had operated under the name Discount Tire Centers. This acquisition was financed using cash on hand. Collectively, the acquired stores produced approximately $26.1 million in sales annually based on unaudited pre-acquisition historical information. Revenues attributable to the acquired stores are currently immaterial to date. The results of operations of these acquired stores are included in the Company's results of operations as of the date of acquisition.

The Company expensed all costs related to this acquisition during Fiscal 2013. The total costs related to this acquisition were immaterial and are included in the consolidated statement of operations within selling, general and administrative expenses.

The Company has recorded its initial accounting for this acquisition in accordance with accounting guidance on business combinations. The purchase price of the acquisition was preliminarily allocated to tangible assets of approximately $0.8 million and $0.1 million in intangible assets, with the remaining $9.9 million recorded as goodwill. The goodwill was primarily related to growth opportunities and assembled workforces, and is deductible for tax purposes. The Company expects to finalize its purchase price allocation by the end of the 2^nd quarter of fiscal 2014. The Company believes that any subsequent adjustments to the purchase price allocation will not be material.

As the acquisition was immaterial to the Company's operating results for year ended February 1, 2014, pro forma results of operations are not disclosed.

During fiscal 2011, the Company made three separate acquisitions. The Company acquired the assets related to seven service and tire centers located in the Seattle-Tacoma area, the assets related to seven service and tire centers located in the Houston, Texas area and all outstanding shares of capital stock of Tire Stores Group Holding Corporation which operated an 85-store chain in Florida, Georgia and Alabama under the name Big 10. Collectively, the acquired stores produced approximately $94.7 million (unaudited) in sales annually based on pre-acquisition historical information. The total purchase price of these stores was approximately $42.6 million in cash and the assumption of certain liabilities. The acquisitions were financed through cash flows provided by operations. The results of operations of these acquired stores are included in the Company's results from their respective acquisition dates.

The Company has recorded its 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 assembled workforces. A portion 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 trade names, favorable and unfavorable leases.

The Company expensed all costs related to these acquisitions during fiscal 2011. The total costs related to these acquisitions were $1.5 million and are included in the consolidated statement of operations within selling, general and administrative expenses.

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

(dollar amounts in thousands)	As of Acquisition Dates

Current assets	$	11,421
Intangible assets		950
Other non-current assets		9,149
Current liabilities		(13,817	)
Long-term liabilities		(9,458	)


Total net identifiable assets acquired	$	(1,755	)




Total consideration transferred, net of cash acquired	$	42,614
Less: total net identifiable assets acquired		(1,755	)


Goodwill	$	44,369

Intangible assets consist of trade names ($0.6 million) and favorable leases ($0.3 million). Long-term liabilities include unfavorable leases ($9.1 million). The trade names are being amortized over their estimated useful life of 3 years. The favorable and unfavorable lease intangible assets and liabilities are being amortized to rent expense over their respective lease terms, ranging from 2 to 16 years. Amortization expense for the favorable and unfavorable leases over the next four years is approximately $0.6 million per year. Deferred tax assets in the amount of $6.8 million are primarily recorded in other non-current liabilities.

Sales for the fiscal 2011 acquired stores totaled $63.9 million from acquisition date through January 28, 2012. The net loss for the acquired stores for the period from acquisition date through January 28, 2012 was $2.0 million, excluding transition related expenses.

As the acquisitions (including Big 10) were immaterial to the operating results both individually and in aggregate for the fifty-two week periods ended January 28, 2012 and January 29, 2011, pro forma results for the fifty-two week period ended January 28, 2012 are not presented.

In 2011, the Company recorded a reduction to the contingent consideration of $0.7 million related to one of the Company's acquisitions. The reversal of contingent consideration was recorded to selling, general and administrative expenses in the consolidated statements of operations.