Company Performance - Monro Muffler Brake reported quarterly earnings of $0.21 per share, missing the Zacks Consensus Estimate of $0.34 per share, and showing an increase from $0.08 per share a year ago, resulting in an earnings surprise of -38.24% [1] - The company posted revenues of $310.08 million for the quarter ended March 2024, missing the Zacks Consensus Estimate by 4.99%, and a slight decrease from $310.84 million year-over-year [2] - Over the last four quarters, Monro has surpassed consensus EPS estimates only once and has not beaten consensus revenue estimates during the same period [2] Stock Performance - Monro shares have declined approximately 11.5% since the beginning of the year, contrasting with the S&P 500's gain of 11.3% [3] - The current consensus EPS estimate for the upcoming quarter is $0.37 on revenues of $333 million, and for the current fiscal year, it is $1.68 on revenues of $1.34 billion [7] Industry Outlook - The Consumer Services - Miscellaneous industry, to which Monro belongs, is currently ranked in the bottom 40% of over 250 Zacks industries, indicating potential challenges for stock performance [8] - Empirical research suggests a strong correlation between near-term stock movements and trends in earnings estimate revisions, which could impact Monro's stock performance [5][6]

Exhibit 99.1 200 Holleder Parkway, Rochester, New York 14615 CONTACT: Investors and Media: Felix Veksler Senior Director, Investor Relations ir@monro.com FOR IMMEDIATE RELEASE MONRO, INC. ANNOUNCES FOURTH QUARTER AND FISCAL 2024 FINANCIAL RESULTS ROCHESTER, N.Y. – May 23, 2024 – Monro, Inc. (Nasdaq: MNRO), a leading provider of automotive undercar repair and tire services, today announced financial results for its fourth quarter and fiscal year ended March 30, 2024. Fourth Quarter Results Sales for the four ...

Monro Muffler Brake (MNRO) shares soared 5.2% in the last trading session to close at $26.91. The move was backed by solid volume with far more shares changing hands than in a normal session. This compares to the stock's 15.2% loss over the past four weeks.While there is no specific news or development that could be attributed to yesterday's price surge, Monro’s focus on store improvements and strategic acquisitions is expected to aid the upcoming results. That's probably what has made investors optimistic ...

PART I. FINANCIAL INFORMATION [Item 1. Financial Statements (Unaudited)](index=3&type=section&id=Item%201.%20Financial%20Statements%20(Unaudited)) Monro, Inc.'s unaudited condensed consolidated financial statements detail financial position, performance, and cash movements [Consolidated Balance Sheets](index=3&type=section&id=Consolidated%20Balance%20Sheets) The Consolidated Balance Sheets detail the company's financial position, showing changes in assets, liabilities, and equity | Metric | December 23, 2023 (thousands) | March 25, 2023 (thousands) | | :-------------------------------- | :----------------------------- | :-------------------------- | | Cash and equivalents | $23,846 | $4,884 | | Total current assets | $271,694 | $258,467 | | Total assets | $1,733,097 | $1,776,877 | | Total current liabilities | $486,632 | $449,177 | | Total liabilities | $1,073,379 | $1,081,955 | | Total shareholders' equity | $659,718 | $694,922 | - Cash and equivalents significantly increased from **$4.884 million** to **$23.846 million** as of December 23, 2023[9](index=9&type=chunk) - Total assets decreased from **$1,776.877 million** to **$1,733.097 million**, while total liabilities slightly decreased from **$1,081.955 million** to **$1,073.379 million**[9](index=9&type=chunk) [Consolidated Statements of Income and Comprehensive Income](index=4&type=section&id=Consolidated%20Statements%20of%20Income%20and%20Comprehensive%20Income) Consolidated Statements of Income detail financial performance, showing decreased sales and net income for the period | Metric (thousands) | Three Months Ended Dec 23, 2023 | Three Months Ended Dec 24, 2022 | Nine Months Ended Dec 23, 2023 | Nine Months Ended Dec 24, 2022 | | :----------------- | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Sales | $317,653 | $335,193 | $966,712 | $1,014,546 | | Gross profit | $112,677 | $113,451 | $342,046 | $352,375 | | Operating income | $21,383 | $23,846 | $61,087 | $73,573 | | Net income | $12,170 | $13,034 | $33,871 | $38,639 | | Basic EPS | $0.38 | $0.41 | $1.06 | $1.18 | | Diluted EPS | $0.38 | $0.41 | $1.05 | $1.17 | - Sales decreased by **5.2%** for the three months and **4.7%** for the nine months ended December 23, 2023, compared to the prior year periods[11](index=11&type=chunk)[78](index=78&type=chunk) - Net income decreased by **6.6%** for the three months and **12.3%** for the nine months ended December 23, 2023, compared to the prior year periods[11](index=11&type=chunk) [Consolidated Statements of Changes in Shareholders' Equity](index=5&type=section&id=Consolidated%20Statements%20of%20Changes%20in%20Shareholders'%20Equity) Shareholders' Equity statements detail movements in net income, dividends, and share repurchases | Metric (thousands) | Nine Months Ended Dec 23, 2023 | Nine Months Ended Dec 24, 2022 | | :----------------- | :----------------------------- | :----------------------------- | | Net income | $33,871 | $38,639 | | Preferred dividends | $(804) | $(386) | | Common dividends | $(25,992) | $(27,096) | | Repurchase of stock | $(44,467) | $(96,919) | - The company repurchased **$44.467 million** of stock during the nine months ended December 23, 2023, a decrease from **$96.919 million** in the prior year[14](index=14&type=chunk) - Common dividends declared were **$0.84** per common share for both nine-month periods[15](index=15&type=chunk) [Consolidated Statements of Cash Flows](index=6&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) Consolidated Statements of Cash Flows summarize cash from operating, investing, and financing activities | Metric (thousands) | Nine Months Ended Dec 23, 2023 | Nine Months Ended Dec 24, 2022 | | :--------------------------------- | :----------------------------- | :----------------------------- | | Cash provided by operating activities | $130,463 | $171,191 | | Cash (used for) provided by investing activities | $(285) | $35,551 | | Cash used for financing activities | $(111,216) | $(201,691) | | Increase in cash and equivalents | $18,962 | $5,051 | | Cash and equivalents at end of period | $23,846 | $12,999 | - Cash provided by operating activities decreased to **$130.5 million** from **$171.2 million** in the prior year, primarily due to changes in operating assets and liabilities[117](index=117&type=chunk)[118](index=118&type=chunk) - Investing activities shifted from providing **$35.6 million** in cash to using **$0.3 million**, largely due to lower proceeds from divestitures[120](index=120&type=chunk)[121](index=121&type=chunk) - Cash used for financing activities decreased significantly from **$201.7 million** to **$111.2 million**, driven by lower principal payments on debt and reduced stock repurchases[122](index=122&type=chunk)[123](index=123&type=chunk) [Notes to Consolidated Financial Statements](index=8&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) The Notes to Consolidated Financial Statements provide detailed explanations and additional information on the figures presented in the financial statements [Note 1 – Description of Business and Basis of Presentation](index=8&type=section&id=Note%201%20%E2%80%93%20Description%20of%20Business%20and%20Basis%20of%20Presentation) Monro, Inc. operates 1,296 retail stores across 32 states, focusing on automotive repair and tire services as a single segment - Monro, Inc. operates **1,296** company-operated retail stores and **51** franchised locations in **32** states, focusing on automotive undercar repair and tire services[21](index=21&type=chunk) - The company's operations are organized and managed as one single segment[23](index=23&type=chunk) - Recent accounting guidance for supplier finance programs and contract assets/liabilities in business combinations was adopted in fiscal **2024**, with no material impact[27](index=27&type=chunk)[28](index=28&type=chunk) [Note 2 – Acquisitions and Divestitures](index=9&type=section&id=Note%202%20%E2%80%93%20Acquisitions%20and%20Divestitures) Monro acquired six retail stores and divested wholesale tire operations, receiving earnout payments with some outstanding - Monro acquired six retail tire and automotive repair stores in **2023** as part of its strategic expansion[38](index=38&type=chunk) - The divestiture of wholesale tire operations in June **2022** yielded **$62 million** at closing, with **$11.1 million** in earnout received in fiscal **2024** and **$20.2 million** outstanding[40](index=40&type=chunk) - A pre-tax gain of **$2.4 million** was recognized from the divestiture, which allows the company to focus on its core retail business[40](index=40&type=chunk)[42](index=42&type=chunk) [Note 3 – Earnings per Common Share](index=10&type=section&id=Note%203%20%E2%80%93%20Earnings%20per%20Common%20Share) Basic and diluted EPS calculations show a slight decrease for the three and nine months ended December 23, 2023 | Metric (thousands, except per share data) | Three Months Ended Dec 23, 2023 | Three Months Ended Dec 24, 2022 | Nine Months Ended Dec 23, 2023 | Nine Months Ended Dec 24, 2022 | | :---------------------------------------- | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Net income | $12,170 | $13,034 | $33,871 | $38,639 | | Less: Preferred stock dividends | $(337) | $(129) | $(804) | $(386) | | Income available to common shareholders | $11,833 | $12,905 | $33,067 | $38,253 | | Basic earnings per common share | $0.38 | $0.41 | $1.06 | $1.18 | | Diluted earnings per common share | $0.38 | $0.41 | $1.05 | $1.17 | - Diluted EPS for the three months ended December 23, 2023, was **$0.38**, down from **$0.41** in the prior year, and for the nine months was **$1.05**, down from **$1.17**[45](index=45&type=chunk) [Note 4 – Income Taxes](index=10&type=section&id=Note%204%20%E2%80%93%20Income%20Taxes) Effective income tax rates decreased due to state taxes, share-based awards, and absence of prior year divestiture impacts | Period | Effective Income Tax Rate | | :------------------------- | :------------------------ | | 3 Months Ended Dec 23, 2023 | 25.8% | | 9 Months Ended Dec 23, 2023 | 26.7% | | 3 Months Ended Dec 24, 2022 | 27.6% | | 9 Months Ended Dec 24, 2022 | 31.7% | - The effective income tax rate for the nine months ended December 24, 2022, was higher by **4.7%** due to discrete tax impacts from the wholesale tire operations divestiture and revaluation of deferred tax balances[46](index=46&type=chunk) [Note 5 – Fair Value](index=10&type=section&id=Note%205%20%E2%80%93%20Fair%20Value) Long-term debt's carrying amount approximated its fair value at **$94.0 million** due to its variable interest rate | Metric | December 23, 2023 (millions) | March 25, 2023 (millions) | | :------------- | :--------------------------- | :------------------------ | | Long-term debt | $94.0 | $105.0 | - The carrying value of long-term debt approximates its fair value due to its variable interest nature[47](index=47&type=chunk) [Note 6 – Cash Dividend](index=10&type=section&id=Note%206%20%E2%80%93%20Cash%20Dividend) Monro paid **$26.8 million** in cash dividends, with future dividends at Board discretion and subject to Credit Facility covenants | Metric (millions) | Nine Months Ended Dec 23, 2023 | | :---------------- | :----------------------------- | | Dividends paid | $26.8 | - The declaration of future dividends is at the discretion of the Board of Directors and depends on financial condition, results of operations, capital requirements, and compliance with Credit Facility covenants[48](index=48&type=chunk) [Note 7 – Revenues](index=11&type=section&id=Note%207%20%E2%80%93%20Revenues) Revenues primarily from automotive repair and tire sales, with deferred revenue from road hazard warranties recognized over time | Revenue Category (thousands) | Three Months Ended Dec 23, 2023 | Nine Months Ended Dec 23, 2023 | | :--------------------------- | :------------------------------ | :----------------------------- | | Tires | $161,116 | $467,069 | | Maintenance | $84,179 | $267,325 | | Brakes | $39,824 | $133,663 | | Steering | $24,490 | $78,851 | | Exhaust | $5,031 | $15,386 | | Franchise royalties | $3,013 | $4,418 | | Total | $317,653 | $966,712 | - Deferred revenue from road hazard warranty agreements was **$22.1 million** as of December 23, 2023, with **$5.1 million** expected to be recognized in the remainder of fiscal **2024**[53](index=53&type=chunk)[54](index=54&type=chunk) [Note 8 – Long-term Debt](index=11&type=section&id=Note%208%20%E2%80%93%20Long-term%20Debt) Monro's long-term debt includes a **$600 million** revolving Credit Facility, with **$94.0 million** outstanding and compliance with covenants - The Credit Facility is a five-year **$600 million** revolving credit facility, extended to November 10, 2027, with interest rates based on SOFR[56](index=56&type=chunk)[57](index=57&type=chunk)[59](index=59&type=chunk) | Metric | December 23, 2023 (millions) | | :------------------------- | :--------------------------- | | Outstanding under Credit Facility | $94.0 | | Available under Credit Facility | $475.9 | - The company was in compliance with all debt covenants, including an interest coverage ratio of at least **1.55** to **1** and an adjusted debt to EBITDAR ratio not exceeding **4.75** to **1**[61](index=61&type=chunk) [Note 9 – Commitments and Contingencies](index=12&type=section&id=Note%209%20%E2%80%93%20Commitments%20and%20Contingencies) Total commitments are **$718.3 million**, including debt and lease obligations, with potential adverse impact from legal proceedings | Commitment Type (thousands) | Total | Within 1 Year | | :-------------------------- | :----------- | :------------ | | Principal payments on long-term debt | $94,000 | $0 | | Finance lease commitments | $365,192 | $51,045 | | Operating lease commitments | $259,079 | $46,356 | | Total | $718,271 | $97,401 | - The company is involved in legal proceedings, and unfavorable rulings could have a material adverse impact on its financial position and results of operations[63](index=63&type=chunk) [Note 10 – Supplier Finance Program](index=12&type=section&id=Note%2010%20%E2%80%93%20Supplier%20Finance%20Program) Monro facilitates a voluntary supply chain financing program for suppliers, with **$168.4 million** in eligible outstanding obligations - Monro operates a voluntary supply chain financing program for suppliers to sell receivables to a financial institution[64](index=64&type=chunk) - The program is considered a trade payable program, not a borrowing arrangement[64](index=64&type=chunk) | Metric (millions) | December 23, 2023 | March 25, 2023 | December 24, 2022 | | :------------------------------------ | :---------------- | :------------- | :---------------- | | Outstanding supplier obligations eligible for advance payment | $168.4 | $167.3 | $133.9 | [Note 11 – Share Repurchase](index=13&type=section&id=Note%2011%20%E2%80%93%20Share%20Repurchase) Monro repurchased **1.54 million** common shares for **$44.0 million** under a board-authorized program, including excise tax | Metric (thousands, except per share data) | Three Months Ended Dec 23, 2022 | Nine Months Ended Dec 23, 2023 | | :---------------------------------------- | :------------------------------ | :----------------------------- | | Number of shares purchased | 1,543.6 | 1,543.6 | | Average price paid per share | $28.50 | $28.50 | | Total repurchased | $43,997 | $43,997 | - The share repurchase activity includes an excise tax of **$0.4 million** for the three and nine months ended December 23, 2023[67](index=67&type=chunk) [Note 12 – Equity Capital Structure Reclassification](index=13&type=section&id=Note%2012%20%E2%80%93%20Equity%20Capital%20Structure%20Reclassification) Monro reclassified Class C Convertible Preferred Stock and shareholders approved declassifying the Board of Directors - A reclassification agreement was made to eliminate Class C Convertible Preferred Stock, with an adjusted conversion rate of **61.275** common shares per preferred share[69](index=69&type=chunk)[70](index=70&type=chunk) - Shareholders approved an amendment to declassify the Board of Directors, transitioning to one-year terms for all directors starting from the **2025** annual meeting[71](index=71&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=14&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses financial condition, operations, liquidity, non-GAAP measures, and forward-looking statements [Recent Developments](index=14&type=section&id=Recent%20Developments) No material recent developments affected Monro's financial reporting during the quarter ended December 23, 2023 - No material recent developments occurred during the quarter ended December 23, 2023, that affected financial reporting[73](index=73&type=chunk) [Economic Conditions](index=14&type=section&id=Economic%20Conditions) U.S. economic conditions, including inflation and interest rates, may impact demand and increase costs for Monro - The U.S. economy faced higher inflation, constrained labor availability, and increased interest rates in fiscal **2023** and **2024**[74](index=74&type=chunk) - These economic conditions could lead to a slowdown or recession, potentially decreasing demand for products and services and increasing operational costs[74](index=74&type=chunk) [Financial Summary](index=14&type=section&id=Financial%20Summary) Third quarter diluted EPS was **$0.38**, with sales decreasing **5.2%** due to lower comparable store sales | Metric | Three Months Ended Dec 23, 2023 | Three Months Ended Dec 24, 2022 | Nine Months Ended Dec 23, 2023 | Nine Months Ended Dec 24, 2022 | | :--------------- | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Diluted EPS | $0.38 | $0.41 | $1.05 | $1.17 | | Adjusted diluted EPS | $0.39 | $0.43 | $1.11 | $1.27 | - Sales decreased **5.2%** for the three months ended December 23, 2023, primarily due to a **6.1%** decrease in comparable store sales[77](index=77&type=chunk) - Operating income was **$21.4 million**, a **10.3%** decrease from the prior year, and net income was **$12.2 million**[77](index=77&type=chunk) [Analysis of Results of Operations](index=15&type=section&id=Analysis%20of%20Results%20of%20Operations) Sales decreased due to lower comparable store sales, while gross profit percentage increased from tire mix and staffing | Metric (thousands) | Three Months Ended Dec 23, 2023 | Three Months Ended Dec 24, 2022 | Nine Months Ended Dec 23, 2023 | Nine Months Ended Dec 24, 2022 | | :----------------- | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Sales | $317,653 | $335,193 | $966,712 | $1,014,546 | | Gross profit | $112,677 | $113,451 | $342,046 | $352,375 | | Operating income | $21,383 | $23,846 | $61,087 | $73,573 | | Sales Percentage Change | Three Months Ended Dec 23, 2023 | Nine Months Ended Dec 23, 2023 | | :---------------------- | :------------------------------ | :----------------------------- | | Sales change | (5.2)% | (4.7)% | | Comparable store sales | (6.1)% | (2.7)% | | Closed store sales | (0.1)% | (2.6)% | | New store sales | 0.3% | 0.4% | | Franchise royalties | 0.7% | 0.2% | | Comparable Store Product Category Sales Change | Three Months Ended Dec 23, 2023 | | :--------------------------------------------- | :------------------------------ | | Tires | (9)% | | Maintenance service | (3)% | | Brakes | (1)% | | Alignment | (5)% | | Front end/shocks | (5)% | - Gross profit as a percentage of sales increased by **170** basis points for the three months and **70** basis points for the nine months ended December 23, 2023, driven by tire mix improvement and reduced technician labor costs[89](index=89&type=chunk)[90](index=90&type=chunk)[91](index=91&type=chunk) [OSG&A Expenses](index=17&type=section&id=OSG%26A%20Expenses) OSG&A expenses increased due to comparable/new store costs, optimization, and relocation, partially offset by other decreases | Metric (thousands) | Three Months Ended Dec 23, 2023 | Three Months Ended Dec 24, 2022 | Nine Months Ended Dec 23, 2023 | Nine Months Ended Dec 24, 2022 | | :----------------- | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | OSG&A Expenses | $91,294 | $89,605 | $280,959 | $278,802 | | Percentage of sales | 28.7% | 26.7% | 29.1% | 27.5% | - The increase in OSG&A expenses was driven by comparable and new store costs, back-office optimization, and corporate headquarters relocation, partially offset by decreases from closed stores and litigation reserve/settlement costs[93](index=93&type=chunk)[94](index=94&type=chunk) [Other Performance Factors](index=17&type=section&id=Other%20Performance%20Factors) Net interest expense decreased from lower debt, while the effective tax rate decreased due to the absence of prior divestiture impacts | Metric (millions) | Three Months Ended Dec 23, 2023 | Nine Months Ended Dec 23, 2023 | | :---------------- | :------------------------------ | :----------------------------- | | Net interest expense | $5.0 | $15.1 | - Weighted average debt outstanding decreased by approximately **$104 million** for the three months and **$121 million** for the nine months ended December 23, 2023, compared to prior year[95](index=95&type=chunk)[96](index=96&type=chunk) | Period | Effective Income Tax Rate | | :------------------------- | :------------------------ | | 3 Months Ended Dec 23, 2023 | 25.8% | | 9 Months Ended Dec 23, 2023 | 26.7% | | 3 Months Ended Dec 24, 2022 | 27.6% | | 9 Months Ended Dec 24, 2022 | 31.7% | [Non-GAAP Financial Measures](index=18&type=section&id=Non-GAAP%20Financial%20Measures) Monro uses adjusted net income and diluted EPS as non-GAAP measures, excluding non-recurring items for comparability | Metric (thousands) | Three Months Ended Dec 23, 2023 | Three Months Ended Dec 24, 2022 | Nine Months Ended Dec 23, 2023 | Nine Months Ended Dec 24, 2022 | | :----------------- | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Net income | $12,170 | $13,034 | $33,871 | $38,639 | | Adjusted net income | $12,546 | $13,603 | $35,726 | $41,811 | | Metric | Three Months Ended Dec 23, 2023 | Three Months Ended Dec 24, 2022 | Nine Months Ended Dec 23, 2023 | Nine Months Ended Dec 24, 2022 | | :--------------- | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Diluted EPS | $0.38 | $0.41 | $1.05 | $1.17 | | Adjusted diluted EPS | $0.39 | $0.43 | $1.11 | $1.27 | - Non-GAAP adjustments exclude items like costs related to shareholder matters, back-office optimization, corporate headquarters relocation, store closings, acquisition due diligence, litigation, management restructuring, and the net gain/loss on the sale of wholesale tire and distribution assets[98](index=98&type=chunk)[99](index=99&type=chunk) [Analysis of Financial Condition](index=19&type=section&id=Analysis%20of%20Financial%20Condition) Monro expects positive operating cash flow for growth and debt repayment, with a working capital deficit and liquidity from cash and Credit Facility - Monro's capital allocation strategy focuses on generating positive operating cash flow to support business operations, invest in acquisitions, pay down debt, return cash to shareholders via dividends, and repurchase common stock[106](index=106&type=chunk) - Expected capital expenditures for fiscal **2024** are **$30 million** to **$35 million**[108](index=108&type=chunk) | Metric (millions) | December 23, 2023 | March 25, 2023 | | :------------------------ | :---------------- | :------------- | | Working capital deficit | $214.9 | $190.7 | | Cash and equivalents | $23.8 | - | | Available Credit Facility | $475.9 | - | - The working capital deficit increased by **$24.2 million**, primarily due to an increase in accounts payable from the supply chain finance program[112](index=112&type=chunk) [Summary of Cash Flows](index=20&type=section&id=Summary%20of%20Cash%20Flows) Cash flows show **$130.5 million** from operations, **$0.3 million** used in investing, and **$111.2 million** used in financing | Metric (thousands) | Nine Months Ended Dec 23, 2023 | Nine Months Ended Dec 24, 2022 | | :--------------------------------- | :----------------------------- | :----------------------------- | | Cash provided by operating activities | $130,463 | $171,191 | | Cash (used for) provided by investing activities | $(285) | $35,551 | | Cash used for financing activities | $(111,216) | $(201,691) | | Increase in cash and equivalents | $18,962 | $5,051 | | Cash and equivalents at end of period | $23,846 | $12,999 | - Operating cash flow decreased due to changes in operating assets and liabilities, despite improvements from the supply chain finance program[117](index=117&type=chunk)[118](index=118&type=chunk) - Investing activities shifted to a net cash outflow, primarily due to capital expenditures partially offset by divestiture-related payments[120](index=120&type=chunk) - Financing cash outflow decreased significantly, driven by lower net payments on the Credit Facility and reduced stock repurchases[122](index=122&type=chunk)[123](index=123&type=chunk) [Critical Accounting Estimates](index=21&type=section&id=Critical%20Accounting%20Estimates) Monro's critical accounting estimates remain unchanged since the Form 10-K for fiscal year ended March 25, 2023 - There have been no material changes to the company's critical accounting estimates since the Form 10-K for the fiscal year ended March 25, 2023[125](index=125&type=chunk) [Recent Accounting Pronouncements](index=21&type=section&id=Recent%20Accounting%20Pronouncements) Impact of recent accounting standards on financial statements is discussed in Note 1 - Refer to Note 1 for a discussion of the impact of recently issued accounting standards[126](index=126&type=chunk) [Cautionary Note Regarding Forward-Looking Statements](index=21&type=section&id=Cautionary%20Note%20Regarding%20Forward-Looking%20Statements) This section provides a cautionary note on forward-looking statements, highlighting risks and uncertainties - The report contains forward-looking statements subject to risks and uncertainties that could cause actual results to differ materially[127](index=127&type=chunk) - Key risk factors include competitive services and pricing, economic conditions, automotive technology changes, dependence on third-party vendors, debt obligations, capital expenditures, sales, gross profit margin, OSG&A expenses, income tax liabilities, critical accounting policies, industry regulation, litigation, business interruptions, data security, acquisitions, growth plans, dividend payments, personnel, and climate change[128](index=128&type=chunk)[131](index=131&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=23&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) Monro faces market risk from interest rate changes on floating rate debt, with a **100** bps SOFR change impacting interest expense by **$0.9 million** - Monro is exposed to market risk from potential changes in interest rates, specifically on its floating rate debt[132](index=132&type=chunk) - A **100** basis point change in SOFR would result in approximately **$0.9 million** annual interest expense fluctuation based on the debt position at December 23, 2023[132](index=132&type=chunk) | Metric | December 23, 2023 (millions) | March 25, 2023 (millions) | | :------------- | :--------------------------- | :------------------------ | | Debt financing | $94.0 | $105.0 | [Item 4. Controls and Procedures](index=23&type=section&id=Item%204.%20Controls%20and%20Procedures) Disclosure controls and procedures were effective, with no material changes in internal control over financial reporting - Disclosure controls and procedures were evaluated and deemed effective as of December 23, 2023[135](index=135&type=chunk) - No material changes in internal control over financial reporting occurred during the quarter ended December 23, 2023[136](index=136&type=chunk) PART II. OTHER INFORMATION [Item 1. Legal Proceedings](index=24&type=section&id=Item%201.%20Legal%20Proceedings) Monro is involved in legal proceedings, where unfavorable resolutions could materially impact financial condition and operations - Monro is a party to various legal proceedings incidental to its business[138](index=138&type=chunk) - Unfavorable rulings in legal matters could have a material adverse impact on the company's financial position and results of operations[138](index=138&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=24&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) Monro repurchased **1.54 million** shares for **$43.997 million** under a **$150 million** program, with **$9.150 million** remaining - The Board of Directors authorized a **$150 million** share repurchase program with no stated expiration[139](index=139&type=chunk) | Period | Total Number of Shares Purchased | Average Price Paid per Share | | :-------------------------------------- | :------------------------------- | :--------------------------- | | September 24, 2023 through October 21, 2023 | — | — | | October 22, 2023 through November 25, 2023 | 799,002 | $27.46 | | November 26, 2023 through December 23, 2023 | 744,565 | $29.63 | | Total | 1,543,567 | $28.50 | - As of December 23, 2023, **$9.150 million** remained available for repurchase under the program[140](index=140&type=chunk) [Item 6. Exhibits](index=25&type=section&id=Item%206.%20Exhibits) This section lists all exhibits filed with the Form 10-Q, including agreements, certifications, and XBRL data - Exhibits include a Supply Agreement, Amended and Restated Employment Agreements, Certifications under the Sarbanes-Oxley Act, and XBRL Instance Document and Taxonomy Extensions[142](index=142&type=chunk) [Signatures](index=26&type=section&id=Signatures) The report is duly signed by Monro, Inc.'s President and CEO, and EVP, CFO, and Treasurer on January 24, 2024 - The report was signed by Michael T. Broderick, President and Chief Executive Officer, and Brian J. D'Ambrosia, Executive Vice President – Finance, Chief Financial Officer and Treasurer, on January 24, 2024[148](index=148&type=chunk)

Financial Data and Key Metrics Changes - Sales decreased 5.2% year-over-year to $317.7 million in the third quarter, primarily due to lower tire unit sales [35] - Comparable store sales declined approximately 6% from the prior year period [31] - Net income was approximately $12.2 million compared to $13 million in the same period last year [3] - Diluted earnings per share was $0.38 compared to $0.41 for the same period last year, with adjusted diluted earnings per share at $0.39 compared to $0.43 in the third quarter of fiscal 2023 [37] Business Line Data and Key Metrics Changes - Tire units were down approximately 14%, while average ticket price increased by 5% [51][69] - Comparable store sales in the 300 small or underperforming stores were consistent with the overall comp in the quarter [31] - Gross margin increased 170 basis points compared to the prior year, primarily due to lower material costs and technician labor costs as a percentage of sales [56] Market Data and Key Metrics Changes - The tire market experienced a mid-single-digit decline in units across the industry [9] - Preliminary January month-to-date sales were down 6%, but comps accelerated materially in the last two weeks with the return of normal seasonal weather [32][42] Company Strategy and Development Direction - The company aims to improve sales, expand margins, and create cash while focusing on enhancing the customer experience and optimizing inventory [33][40] - Plans to deliver an improvement in diluted earnings per share this fiscal year despite consumer-related headwinds [30] - The company is focused on maintaining a balanced approach between tire and service categories with competitive pricing [33] Management's Comments on Operating Environment and Future Outlook - Management noted a tough macroeconomic environment with consumer deferrals of tire purchases impacting sales [51] - The company expects lower year-over-year full-year sales but anticipates improvements in gross margin through pricing actions and tire mix optimization [39] - Management expressed confidence in restoring gross margins back to pre-COVID levels with double-digit operating margins over the long term [55] Other Important Information - Total operating expenses were $91.3 million, or 28.7% of sales, compared to $89.6 million, or 26.7% of sales in the prior year period [36] - The company generated $130 million of cash from operations during the first nine months of fiscal 2024 [38] - Share repurchases amounted to approximately $44 million under the share repurchase program [59] Q&A Session Summary Question: Can you provide more detail on the labor cost reduction? - Management indicated that labor hours were reduced, contributing to a 40 basis points benefit, and emphasized the importance of managing non-productive payroll [10][65] Question: What are the trends in comparable store sales? - Management noted that the first half of January was challenging, but sales improved significantly in the second half due to favorable weather [41][42] Question: How did the underperforming stores perform? - Performance was variable, with one-third of the 300 underperforming stores being extremely successful, one-third meeting expectations, and one-third falling short [105]

[PART I. FINANCIAL INFORMATION](index=3&type=section&id=PART%20I.%20FINANCIAL%20INFORMATION) This section presents the company's unaudited consolidated financial statements, management's discussion and analysis, market risk disclosures, and internal controls [Item 1. Financial Statements (Unaudited)](index=3&type=section&id=Item%201.%20Financial%20Statements%20(Unaudited)) This section presents the unaudited consolidated financial statements, including balance sheets, income statements, equity changes, and cash flows, along with detailed notes on financial performance and position [Consolidated Balance Sheets](index=3&type=section&id=Consolidated%20Balance%20Sheets) This section provides a snapshot of the company's financial position, detailing assets, liabilities, and shareholders' equity at specific points in time Consolidated Balance Sheet Highlights (Millions USD) | Metric | September 23, 2023 | March 25, 2023 | Change | | :-------------------------------- | :------------------- | :------------- | :----- | | Cash and equivalents | $9.1M | $4.9M | +$4.2M | | Total current assets | $247.9M | $258.5M | -$10.6M | | Total assets | $1,726.8M | $1,776.9M | -$50.1M | | Total current liabilities | $472.4M | $449.2M | +$23.2M | | Long-term debt | $55.0M | $105.0M | -$50.0M | | Total liabilities | $1,026.6M | $1,082.0M | -$55.3M | | Total shareholders' equity | $700.1M | $694.9M | +$5.2M | [Consolidated Statements of Income and Comprehensive Income](index=4&type=section&id=Consolidated%20Statements%20of%20Income%20and%20Comprehensive%20Income) This section details the company's financial performance over specific periods, presenting revenues, expenses, and net income Consolidated Statements of Income Highlights (Millions USD, except per share data) | Metric | Three Months Ended Sep 23, 2023 | Three Months Ended Sep 24, 2022 | Six Months Ended Sep 23, 2023 | Six Months Ended Sep 24, 2022 | | :----------------------------------- | :------------------------------ | :------------------------------ | :---------------------------- | :---------------------------- | | Sales | $322.1M | $329.8M | $649.1M | $679.4M | | Gross profit | $115.0M | $116.7M | $229.4M | $238.9M | | Operating income | $22.4M | $23.5M | $39.7M | $49.7M | | Net income | $12.9M | $13.1M | $21.7M | $25.6M | | Basic EPS | $0.40 | $0.40 | $0.68 | $0.77 | | Diluted EPS | $0.40 | $0.40 | $0.68 | $0.77 | [Consolidated Statements of Changes in Shareholders' Equity](index=5&type=section&id=Consolidated%20Statements%20of%20Changes%20in%20Shareholders'%20Equity) This section outlines the changes in the company's shareholders' equity over a period, reflecting net income, dividends, and stock-based compensation Changes in Shareholders' Equity (Millions USD) | Metric | Balance at March 25, 2023 | Net Income (6 months) | Dividends Declared (6 months) | Stock-based Compensation (6 months) | Balance at September 23, 2023 | | :-------------------------- | :------------------------ | :-------------------- | :---------------------------- | :---------------------------------- | :---------------------------- | | Total Shareholders' Equity | $694.9M | $21.7M | $(18.1M) | $1.9M | $700.1M | - Common dividends declared for the six months ended September 23, 2023, totaled **$17.6 million**, with **$0.56 per common share**[15](index=15&type=chunk) [Consolidated Statements of Cash Flows](index=6&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) This section details the cash inflows and outflows from operating, investing, and financing activities, illustrating changes in the company's cash position Summary of Cash Flows (Millions USD) for Six Months Ended | Activity | September 23, 2023 | September 24, 2022 | | :-------------------------------- | :------------------- | :------------------- | | Cash provided by operating activities | $98.3M | $120.3M | | Cash (used for) provided by investing activities | $(6.7M) | $37.9M | | Cash used for financing activities | $(87.5M) | $(156.4M) | | Increase in cash and equivalents | $4.2M | $1.8M | | Cash and equivalents at end of period | $9.1M | $9.8M | [Notes to Consolidated Financial Statements](index=8&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) This section provides detailed explanations and additional information supporting the consolidated financial statements, clarifying accounting policies and significant transactions [Note 1 Description of Business and Basis of Presentation](index=8&type=section&id=Note%201%20Description%20of%20Business%20and%20Basis%20of%20Presentation) This note describes the company's core business operations, fiscal year definition, and the basis for presenting its financial statements - Monro, Inc. operates **1,298 company-operated retail stores** and **77 franchised locations** in 32 states, focusing on automotive undercar repair, tire replacement, and related services[21](index=21&type=chunk)[23](index=23&type=chunk) - The company's fiscal year is 52/53 weeks, ending on the last Saturday in March; fiscal year 2024 is a **53-week year**[26](index=26&type=chunk) - Assets related to the planned sale of the corporate headquarters were classified as held for sale as of September 23, 2023[34](index=34&type=chunk) [Note 2 Acquisitions and Divestitures](index=9&type=section&id=Note%202%20Acquisitions%20and%20Divestitures) This note details the company's recent strategic transactions, including retail store acquisitions and the divestiture of wholesale tire operations - Acquired **six retail tire and automotive repair stores** in 2023 to expand market presence[36](index=36&type=chunk) - Completed the divestiture of wholesale tire operations in June 2022 for a total consideration of **$102 million**, with **$7.3 million** of the **$40 million** earnout received during the first six months of fiscal 2024[38](index=38&type=chunk) - The divestiture allows the company to focus resources on its core retail business operations[38](index=38&type=chunk) [Note 3 Earnings per Common Share](index=10&type=section&id=Note%203%20Earnings%20per%20Common%20Share) This note provides a breakdown of net income available to common shareholders and the calculation of basic and diluted earnings per common share Earnings per Common Share (Millions USD, except per share data) | Metric | Three Months Ended Sep 23, 2023 | Three Months Ended Sep 24, 2022 | Six Months Ended Sep 23, 2023 | Six Months Ended Sep 24, 2022 | | :----------------------------------- | :------------------------------ | :------------------------------ | :---------------------------- | :---------------------------- | | Net income | $12.9M | $13.1M | $21.7M | $25.6M | | Less: Preferred stock dividends | $(0.3M) | $(0.1M) | $(0.5M) | $(0.3M) | | Income available to common shareholders | $12.5M | $13.0M | $21.2M | $25.3M | | Basic earnings per common share | $0.40 | $0.40 | $0.68 | $0.77 | | Diluted earnings per common share | $0.40 | $0.40 | $0.68 | $0.77 | [Note 4 Income Taxes](index=10&type=section&id=Note%204%20Income%20Taxes) This note explains the company's effective income tax rates and the factors influencing their fluctuations between periods Effective Income Tax Rate | Period | September 23, 2023 | September 24, 2022 | | :------------------- | :------------------- | :------------------- | | Three Months Ended | 26.8% | 26.6% | | Six Months Ended | 27.1% | 33.6% | - The effective income tax rate for the six months ended September 24, 2022, was **higher by 6.9%** due to discrete tax impacts from the divestiture of wholesale tire operations and revaluation of deferred tax balances[43](index=43&type=chunk) [Note 5 Fair Value](index=10&type=section&id=Note%205%20Fair%20Value) This note discusses the fair value measurements of the company's financial instruments, particularly long-term debt Long-term Debt Fair Value (Millions USD) | Date | Carrying Amount | Fair Value | | :----------------- | :-------------- | :--------- | | September 23, 2023 | $55.0M | $55.0M | | March 25, 2023 | $105.0M | $105.0M | - The fair value of long-term debt approximates its carrying amount due to its variable interest rate nature[44](index=44&type=chunk) [Note 6 Cash Dividend](index=10&type=section&id=Note%206%20Cash%20Dividend) This note details the cash dividends paid and the factors influencing future dividend declarations - Paid **$17.9 million** in dividends during the six months ended September 23, 2023[45](index=45&type=chunk) - Future dividends are at the discretion of the Board of Directors and depend on financial condition, results of operations, capital requirements, and compliance with credit facility covenants[45](index=45&type=chunk) [Note 7 Revenues](index=11&type=section&id=Note%207%20Revenues) This note provides a breakdown of the company's revenue streams by category and details deferred revenue balances - Automotive undercar repair, tire replacement sales, and tire-related services constitute the vast majority of revenues[47](index=47&type=chunk) Revenues by Category (Millions USD) for Six Months Ended | Category | September 23, 2023 | September 24, 2022 | | :--------------- | :------------------- | :------------------- | | Tires | $306.0M | $331.0M | | Maintenance | $183.1M | $180.9M | | Brakes | $93.8M | $96.2M | | Steering | $54.4M | $57.6M | | Exhaust | $10.4M | $12.2M | | Other | $1.4M | $1.5M | | **Total** | **$649.1M** | **$679.4M** | Deferred Revenue (Millions USD) | Date | Balance | | :----------------- | :-------- | | September 23, 2023 | $22.2M | | March 25, 2023 | $22.4M | [Note 8 Long-term Debt](index=11&type=section&id=Note%208%20Long-term%20Debt) This note details the company's revolving Credit Facility, outstanding balances, and compliance with debt covenants - The company has a **$600 million** revolving Credit Facility, extended to November 10, 2027, with interest based on SOFR + 0.10%[52](index=52&type=chunk)[57](index=57&type=chunk) - As of September 23, 2023, **$55.0 million** was outstanding under the Credit Facility, with **$514.9 million** available[59](index=59&type=chunk) - The company was in compliance with all debt covenants as of September 23, 2023[59](index=59&type=chunk) [Note 9 Commitments and Contingencies](index=12&type=section&id=Note%209%20Commitments%20and%20Contingencies) This note outlines the company's contractual obligations, including debt, lease commitments, and potential impacts from legal proceedings Commitments Due by Period (Millions USD) | Commitment Type | Total | Within 1 Year | 2 to 3 Years | 4 to 5 Years | After 5 Years | | :------------------------------------ | :-------- | :------------ | :----------- | :----------- | :------------ | | Principal payments on long-term debt | $55.0M | $0 | $0 | $55.0M | $0 | | Finance lease commitments/obligations | $379.1M | $52.2M | $95.2M | $83.2M | $148.6M | | Operating lease commitments | $257.0M | $45.6M | $80.0M | $58.7M | $72.7M | | **Total** | **$691.1M** | **$97.8M** | **$175.2M** | **$197.0M** | **$221.2M** | - The company is a party to various legal proceedings, and unfavorable rulings could have a material adverse impact on its financial position and results of operations[61](index=61&type=chunk) [Note 10 Supplier Finance Program](index=12&type=section&id=Note%2010%20Supplier%20Finance%20Program) This note describes the company's voluntary supply chain financing program and the outstanding obligations eligible for advance payment - The company facilitates a voluntary supply chain financing program, allowing suppliers to sell receivables to a financial institution, which is classified as a trade payable program[62](index=62&type=chunk)[64](index=64&type=chunk) Outstanding Supplier Obligations Eligible for Advance Payment (Millions USD) | Date | Amount | | :----------------- | :-------- | | September 23, 2023 | $187.9M | | March 25, 2023 | $167.3M | | September 24, 2022 | $86.9M | [Note 11 Share Repurchase](index=13&type=section&id=Note%2011%20Share%20Repurchase) This note summarizes the company's share repurchase activities, including the number of shares and total value repurchased Share Repurchase Activity (Millions USD, except per share data) | Period | Number of Shares Purchased | Average Price Paid Per Share | Total Repurchased | | :-------------------------------- | :------------------------- | :--------------------------- | :---------------- | | Six Months Ended Sep 23, 2023 | — | $— | $— | | Six Months Ended Sep 24, 2022 | 1,617.4 | $44.00 | $71.2M | [Note 12 Equity Capital Structure Reclassification](index=13&type=section&id=Note%2012%20Equity%20Capital%20Structure%20Reclassification) This note details the approved amendments to reclassify the equity capital structure, including the conversion of preferred stock and declassification of the Board of Directors - Shareholders approved amendments to reclassify the equity capital structure, eliminating Class C Convertible Preferred Stock through mandatory conversion by August 15, 2026[69](index=69&type=chunk) - The conversion rate for Class C Preferred Stock was adjusted from **23.389 to 61.275 common shares** per preferred share[69](index=69&type=chunk) - The Board of Directors will be declassified, with all directors elected for one-year terms starting from the 2025 annual meeting[70](index=70&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=14&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides management's perspective on the company's financial performance and condition, highlighting recent developments, economic impacts, and operational results [Recent Developments](index=14&type=section&id=Recent%20Developments) This section highlights key recent events impacting the company, including the planned sale of its corporate headquarters and equity reclassification - Announced the planned sale and relocation of its corporate headquarters, incurring related costs during Q2[73](index=73&type=chunk) - Shareholders approved amendments to reclassify the equity capital structure, including mandatory conversion of Class C Preferred Stock at an adjusted rate and declassification of the Board of Directors[74](index=74&type=chunk) [Economic Conditions](index=14&type=section&id=Economic%20Conditions) This section discusses the prevailing macroeconomic environment, including inflation, labor availability, and interest rates, and their potential impact on the company - The U.S. economy is experiencing higher inflation, constrained labor availability, increasing labor costs, and rising interest rates[75](index=75&type=chunk) - These conditions may lead to an economic slowdown or recession, potentially increasing costs and/or impacting revenues[75](index=75&type=chunk) [Financial Summary](index=14&type=section&id=Financial%20Summary) This section provides a concise overview of the company's key financial performance metrics for the quarter, including sales, income, and EPS Q2 2024 Financial Highlights | Metric | Value | Change YoY | | :-------------------- | :------ | :--------- | | Diluted EPS | $0.40 | 0.0% | | Adjusted Diluted EPS | $0.41 | (4.7)% | | Sales | $322.1M | (2.3)% | | Operating Income | $22.4M | (4.8)% | | Net Income | $12.9M | (1.9)% | - Sales decreased due to lower overall comparable store sales, primarily from reduced store traffic[76](index=76&type=chunk) - Adjusted diluted EPS, a non-GAAP measure, excludes non-recurring items for better period-to-period comparability[77](index=77&type=chunk)[98](index=98&type=chunk) [Analysis of Results of Operations](index=15&type=section&id=Analysis%20of%20Results%20of%20Operations) This section provides a detailed analysis of the company's sales, cost of sales, gross profit, and operating expenses, explaining period-over-period changes [Sales](index=15&type=section&id=Sales) This section analyzes the company's sales performance, including total sales and the primary drivers of change such as comparable store sales Sales Performance (Millions USD) | Period | Sales | % Change YoY | | :-------------------------------- | :---------------- | :----------- | | Three Months Ended Sep 23, 2023 | $322.1M | (2.3)% | | Six Months Ended Sep 23, 2023 | $649.1M | (4.5)% | Primary Drivers of Sales Change (%) | Driver | Three Months Ended Sep 23, 2023 | Six Months Ended Sep 23, 2023 | | :-------------------- | :------------------------------ | :---------------------------- | | Comparable store sales | (2.3)% | (0.9)% | | Closed store sales | (0.4)% | (4.0)% | | New store sales | 0.4% | 0.4% | - Broad-based inflationary pressures led to lower demand in tires and higher-margin service categories[85](index=85&type=chunk) [Cost of Sales and Gross Profit](index=16&type=section&id=Cost%20of%20Sales%20and%20Gross%20Profit) This section examines the company's cost of sales and gross profit, detailing the factors influencing gross profit margins Gross Profit Performance (Millions USD) | Period | Gross Profit | Percentage of Sales | % Change YoY | | :-------------------------------- | :----------- | :------------------ | :----------- | | Three Months Ended Sep 23, 2023 | $115.0M | 35.7% | (1.5)% | | Six Months Ended Sep 23, 2023 | $229.4M | 35.3% | (4.0)% | Gross Profit as a Percentage of Sales Change (bps) | Driver | Three Months Ended Sep 23, 2023 | Six Months Ended Sep 23, 2023 | | :------------------------------------ | :------------------------------ | :---------------------------- | | Retail material costs | 120 bps | (10) bps | | Technician labor costs | (30) bps | (50) bps | | Retail distribution and occupancy costs | (60) bps | (20) bps | | Impact from the sale of wholesale operations | - bps | 90 bps | [OSG&A Expenses](index=17&type=section&id=OSG%26A%20Expenses) This section analyzes the company's operating, selling, general, and administrative expenses, highlighting the drivers of changes OSG&A Expenses (Millions USD) | Period | OSG&A Expenses | Percentage of Sales | % Change YoY | | :-------------------------------- | :------------- | :------------------ | :----------- | | Three Months Ended Sep 23, 2023 | $92.6M | 28.8% | (0.7)% | | Six Months Ended Sep 23, 2023 | $189.7M | 29.2% | 0.2% | - The decrease in OSG&A expenses for the three months was partially due to lower management restructuring costs and expenses from closed stores, offset by increases from shareholder matters, back-office optimization, and corporate headquarters relocation[92](index=92&type=chunk)[93](index=93&type=chunk) [Other Performance Factors](index=17&type=section&id=Other%20Performance%20Factors) This section reviews additional factors impacting financial performance, including net interest expense and provision for income taxes [Net Interest Expense](index=17&type=section&id=Net%20Interest%20Expense) This section analyzes the company's net interest expense, considering changes in debt outstanding and interest rates Net Interest Expense (Millions USD) | Period | Net Interest Expense | % of Sales | | :-------------------------------- | :------------------- | :--------- | | Three Months Ended Sep 23, 2023 | $4.8M | 1.5% | | Six Months Ended Sep 23, 2023 | $10.0M | 1.5% | - Net interest expense decreased due to a reduction in weighted average debt outstanding (approx. **$122M** for 3 months, **$130M** for 6 months), despite an increase in weighted average interest rates (approx. **80-90 bps**)[94](index=94&type=chunk)[95](index=95&type=chunk) [Provision for Income Taxes](index=18&type=section&id=Provision%20for%20Income%20Taxes) This section details the company's effective income tax rates and the specific factors influencing their period-over-period changes Effective Income Tax Rate | Period | September 23, 2023 | September 24, 2022 | | :------------------- | :------------------- | :------------------- | | Three Months Ended | 26.8% | 26.6% | | Six Months Ended | 27.1% | 33.6% | - The six-month effective tax rate for the prior year was **6.9% higher** due to discrete tax impacts from the wholesale tire operations divestiture and deferred tax revaluation[97](index=97&type=chunk) [Non-GAAP Financial Measures](index=18&type=section&id=Non-GAAP%20Financial%20Measures) This section defines and reconciles non-GAAP financial measures, such as adjusted net income and adjusted diluted EPS, used for comparability - Adjusted net income and adjusted diluted EPS are non-GAAP measures used to assess comparability by excluding non-recurring items such as shareholder matters, back-office optimization, corporate headquarters relocation, and store closing costs[98](index=98&type=chunk) Adjusted Net Income (Millions USD) | Period | September 23, 2023 | September 24, 2022 | | :-------------------------------- | :------------------- | :------------------- | | Three Months Ended | $13.3M | $14.0M | | Six Months Ended | $23.2M | $28.2M | Adjusted Diluted EPS | Period | September 23, 2023 | September 24, 2022 | | :-------------------------------- | :------------------- | :------------------- | | Three Months Ended | $0.41 | $0.43 | | Six Months Ended | $0.72 | $0.85 | [Analysis of Financial Condition](index=19&type=section&id=Analysis%20of%20Financial%20Condition) This section analyzes the company's financial health, focusing on liquidity, capital resources, and working capital management [Liquidity and Capital Resources](index=19&type=section&id=Liquidity%20and%20Capital%20Resources) This section discusses the company's ability to meet its short-term and long-term financial obligations, including capital allocation strategies and future cash requirements [Capital Allocation](index=19&type=section&id=Capital%20Allocation) This section outlines the company's strategy for deploying capital, including funding operations, acquisitions, debt reduction, and shareholder returns - The company expects to generate positive operating cash flow to fund operations, strategic acquisitions, greenfield stores, debt reduction, and shareholder returns (dividends and share repurchases)[104](index=104&type=chunk) [Future Cash Requirements](index=19&type=section&id=Future%20Cash%20Requirements) This section details the company's anticipated capital expenditures, contractual lease commitments, and long-term debt obligations - Projected capital expenditures for fiscal 2024 are **$35 million to $45 million**[106](index=106&type=chunk) - Contractual finance and operating lease commitments total **$503.1 million**, with **$97.0 million** due within one year[106](index=106&type=chunk) - Long-term debt of **$55.0 million** is outstanding, with no amounts due in the succeeding 12 months[107](index=107&type=chunk) [Dividends](index=19&type=section&id=Dividends) This section reports on cash dividends paid and the company's intention to continue its quarterly dividend practice Cash Dividends Paid (Millions USD) | Period | Per Share | Total | | :-------------------------------- | :-------- | :---------------- | | Three Months Ended Sep 23, 2023 | $0.28 | $8.9M | | Six Months Ended Sep 23, 2023 | $0.56 | $17.9M | - The company has paid quarterly dividends since fiscal 2006 and intends to continue this practice[108](index=108&type=chunk) [Share Repurchases](index=20&type=section&id=Share%20Repurchases) This section provides an update on the company's share repurchase activities during the reporting period - No shares were repurchased during the six months ended September 23, 2023[110](index=110&type=chunk) [Working Capital Management](index=20&type=section&id=Working%20Capital%20Management) This section analyzes the company's working capital position, including the deficit and factors influencing its changes Working Capital Deficit (Millions USD) | Date | Amount | | :----------------- | :-------- | | September 23, 2023 | $(224.5M) | | March 25, 2023 | $(190.7M) | - The increase in working capital deficit was primarily driven by an increase in accounts payable due to the supply chain finance program[111](index=111&type=chunk) [Sources and Conditions of Liquidity](index=20&type=section&id=Sources%20and%20Conditions%20of%20Liquidity) This section identifies the company's primary sources of liquidity and management's assessment of its adequacy for future needs - Primary liquidity sources are cash from operations, availability under the Credit Facility, and cash and equivalents on hand[112](index=112&type=chunk) Liquidity Position (Millions USD) | Metric | September 23, 2023 | | :-------------------------- | :------------------- | | Cash and equivalents | $9.1M | | Available under Credit Facility | $514.9M | - Management believes current sources of funds will provide adequate liquidity for both the short-term (12 months) and long-term[113](index=113&type=chunk) [Summary of Cash Flows](index=20&type=section&id=Summary%20of%20Cash%20Flows) This section provides a summary of cash flows from operating, investing, and financing activities, explaining the key drivers of changes [Cash provided by operating activities](index=20&type=section&id=Cash%20provided%20by%20operating%20activities) This section details the cash generated from the company's core operations and the factors influencing its period-over-period changes Cash Provided by Operating Activities (Millions USD) for Six Months Ended | Period | Amount | | :------------------- | :-------- | | September 23, 2023 | $98.3M | | September 24, 2022 | $120.3M | - The decrease in cash from operations was influenced by net income, non-cash charges (depreciation, deferred tax expense), and changes in operating assets and liabilities, with the supply chain finance program being a source of cash[116](index=116&type=chunk) [Cash used for / provided by investing activities](index=21&type=section&id=Cash%20used%20for%20%2F%20provided%20by%20investing%20activities) This section explains the cash flows related to the acquisition and disposal of long-term assets and strategic investments Cash (Used for) Provided by Investing Activities (Millions USD) for Six Months Ended | Period | Amount | | :------------------- | :-------- | | September 23, 2023 | $(6.7M) | | September 24, 2022 | $37.9M | - The shift from cash provided to cash used was primarily due to capital expenditures (**$15.7M**) in the current period, compared to significant proceeds from the wholesale tire operations divestiture (**$56.6M**) in the prior year[119](index=119&type=chunk)[120](index=120&type=chunk) [Cash used for financing activities](index=21&type=section&id=Cash%20used%20for%20financing%20activities) This section details cash flows related to debt, equity, and dividend payments, reflecting the company's capital structure management Cash Used for Financing Activities (Millions USD) for Six Months Ended | Period | Amount | | :------------------- | :-------- | | September 23, 2023 | $(87.5M) | | September 24, 2022 | $(156.4M) | - The decrease in cash used for financing was mainly due to no share repurchases in the current period (vs. **$71.2M** in prior year), alongside payments on the Credit Facility, finance lease principal, and dividends[121](index=121&type=chunk)[122](index=122&type=chunk) [Critical Accounting Estimates](index=21&type=section&id=Critical%20Accounting%20Estimates) This section highlights the significant accounting estimates and assumptions made by management that are crucial to the financial statements - The financial statements rely on management's estimates and assumptions, which are continuously evaluated[123](index=123&type=chunk) - No material changes to critical accounting estimates have occurred since the fiscal year ended March 25, 2023[124](index=124&type=chunk) [Recent Accounting Pronouncements](index=21&type=section&id=Recent%20Accounting%20Pronouncements) This section refers to Note 1 for a discussion on the impact of recently issued accounting standards on the consolidated financial statements - Refer to Note 1 for a discussion of the impact of recently issued accounting standards on the consolidated financial statements[125](index=125&type=chunk) [Cautionary Note Regarding Forward-Looking Statements](index=21&type=section&id=Cautionary%20Note%20Regarding%20Forward-Looking%20Statements) This section advises that the report contains forward-looking statements subject to risks and uncertainties, and the company does not commit to updating them - The report contains forward-looking statements subject to various risks and uncertainties, including economic conditions, competition, technological advancements, and operational costs, that could cause actual results to differ materially[126](index=126&type=chunk)[127](index=127&type=chunk)[130](index=130&type=chunk) - The company does not undertake any obligation to update these forward-looking statements after the report date[129](index=129&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=23&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company is exposed to market risk primarily from potential changes in interest rates on its floating-rate debt. A 100 basis point change in the Secured Overnight Financing Rate (SOFR) would result in an approximate $0.6 million annual fluctuation in interest expense based on the debt position as of September 23, 2023 - The company's market risk exposure stems from potential changes in interest rates on its floating-rate debt[131](index=131&type=chunk) - A **100 basis point** change in SOFR would lead to an approximate **$0.6 million** annual interest expense fluctuation based on the **$55.0 million** debt outstanding at September 23, 2023[131](index=131&type=chunk)[132](index=132&type=chunk) [Item 4. Controls and Procedures](index=23&type=section&id=Item%204.%20Controls%20and%20Procedures) The company maintains effective disclosure controls and procedures, which were evaluated by the Chief Executive Officer and Chief Financial Officer as effective as of September 23, 2023. No material changes in internal control over financial reporting occurred during the quarter - Disclosure controls and procedures are designed to ensure timely and accurate reporting to the SEC[133](index=133&type=chunk) - The Chief Executive Officer and Chief Financial Officer concluded that disclosure controls and procedures were effective as of September 23, 2023[134](index=134&type=chunk) - There were no material changes in internal control over financial reporting during the quarter ended September 23, 2023[135](index=135&type=chunk) [PART II. OTHER INFORMATION](index=24&type=section&id=PART%20II.%20OTHER%20INFORMATION) This section includes information on legal proceedings, a list of exhibits filed with the report, and the official signatures of the company's authorized officers [Item 1. Legal Proceedings](index=24&type=section&id=Item%201.%20Legal%20Proceedings) The company is involved in various legal proceedings arising from its normal course of business. While these matters are subject to inherent uncertainties, an unfavorable resolution could potentially have a material adverse impact on the company's financial condition and results of operations - The company is a party to various legal proceedings incidental to the conduct of its business[138](index=138&type=chunk) - An unfavorable resolution of these legal matters could have a material adverse impact on the company's financial position and results of operations[138](index=138&type=chunk) [Item 6. Exhibits](index=25&type=section&id=Item%206.%20Exhibits) This section lists the exhibits filed with the Form 10-Q, including amendments to the Restated Certificate of Incorporation, an amendment to an employment agreement, and certifications required by the Sarbanes-Oxley Act - Exhibits include Certificate of Amendment of the Restated Certificate of Incorporation, Amendment to Employment Agreement, and Certifications pursuant to Sections 302 and 906 of the Sarbanes-Oxley Act of 2002[140](index=140&type=chunk) [Signatures](index=26&type=section&id=Signatures) The report is duly signed on October 25, 2023, by Michael T. Broderick, President and Chief Executive Officer, and Brian J. D'Ambrosia, Executive Vice President – Finance, Chief Financial Officer and Treasurer, as authorized representatives of Monro, Inc. - The report was signed on **October 25, 2023**[145](index=145&type=chunk) - Signatories include **Michael T. Broderick** (President and CEO) and **Brian J. D'Ambrosia** (EVP – Finance, CFO and Treasurer)[145](index=145&type=chunk)

MONRO MONRO TIRECHONE MR.TIRE 华영WVERVE @ TREWAREHOUSE THAM CAR 2 In addition to including references to diluted earnings per share ("EPS"), which is a generally accepted accounting principles ("GAAP") measure, this presentation includes references to adjusted diluted earnings per share, which is a nonGAAP financial measure. Monro has included a reconciliation from adjusted diluted EPS to its most directly comparable GAAP measure, diluted EPS in Slide 8. Management views this non-GAAP financial measure as a ...

Financial Data and Key Metrics Changes - Sales decreased by 2.3% year-over-year to $322.1 million in the second quarter, primarily due to lower tire unit sales [25] - Comparable store sales decreased by 2.3%, while sales from new stores increased by approximately $1.2 million [25] - Operating income for the second quarter declined to $22.4 million or 6.9% of sales, compared to $23.5 million or 7.1% of sales in the prior year [26] - Net income was approximately $12.9 million, compared to $13.1 million in the same period last year, with diluted earnings per share remaining at $0.40 [27] - Gross margin increased by 30 basis points compared to the prior year, primarily due to lower material costs as a percentage of sales [13] Business Line Data and Key Metrics Changes - Tire units were down approximately 10%, but the company optimized its assortment for improved tire profitability [10] - Comparable store sales for fiscal October were down approximately 5% [11] - The company maintained its tire market share in higher margin tiers despite a higher proportion of lower margin opening price point tires in overall industry unit sales [10] Market Data and Key Metrics Changes - The company experienced an industry-wide slowdown in tire unit sales, particularly in regions where most of its store footprint is concentrated [21][107] - Traffic was down mid-single digits, while ticket size was up low single digits [38] Company Strategy and Development Direction - The company aims to restore gross margins back to pre-COVID levels with double-digit operating margins over the longer term [12] - Focus on maintaining a balanced approach between tire and service categories with competitive pricing to drive store traffic [11] - Plans to drive year-over-year improvements in gross margin through pricing actions and productivity improvements [16] Management's Comments on Operating Environment and Future Outlook - Management acknowledged challenges posed by persistent inflationary pressures affecting consumer purchases of higher ticket items [8] - The company is confident in its ability to deliver improved earnings despite a choppy consumer environment [23] - Management expects to see an improvement in consumer dynamics, particularly with the potential for weather events to drive customer traffic [75] Other Important Information - The company generated $98 million of cash from operations during the first half of fiscal 2024, including $36 million in working capital reductions [15] - Capital expenditures are expected to be approximately $35 million to $45 million in fiscal 2024 [29] Q&A Session Summary Question: Guidance on comparable sales growth in fiscal 2024 - Management expects improvement in comparable store sales growth, factoring in an extra week of sales in the fiscal fourth quarter [47] Question: Details on car count, ticket versus traffic - Management noted that traffic was down, but ticket size was up, indicating a shift in consumer behavior [52] Question: Consumer pressures and internal strategies - Management emphasized the importance of maintaining a profitable assortment and managing labor costs effectively [60] Question: Market share in higher margin tiers - Management confirmed retention of market share in higher margin tiers while being cautious about lower-end tiers due to price competition [65] Question: Cash flow and uses of cash - Management discussed the balance between debt reduction and share repurchase as part of their capital priorities [67]

PART I. FINANCIAL INFORMATION [Item 1. Financial Statements (Unaudited)](index=3&type=section&id=Item%201.%20Financial%20Statements%20(Unaudited)) Monro, Inc.'s unaudited consolidated financial statements for Q1 fiscal 2024 detail balance sheets, income, equity, and cash flows, showing declines in key performance metrics [Consolidated Balance Sheets](index=3&type=section&id=Consolidated%20Balance%20Sheets) The consolidated balance sheets provide a snapshot of Monro, Inc.'s financial position at June 24, 2023, highlighting asset and liability changes Consolidated Balance Sheet Highlights (thousands) | Metric | June 24, 2023 | March 25, 2023 | Change (k) | Change (%) | | :----------------------------------- | :------------ | :------------- | :--------- | :--------- | | Cash and equivalents | $15,316 | $4,884 | $10,432 | 213.6% | | Total current assets | $250,597 | $258,467 | $(7,870) | (3.0)% | | Total assets | $1,754,017 | $1,776,877 | $(22,860) | (1.3)% | | Total current liabilities | $480,677 | $449,177 | $31,500 | 7.0% | | Total liabilities | $1,058,849 | $1,081,955 | $(23,106) | (2.1)% | | Total shareholders' equity | $695,168 | $694,922 | $246 | 0.0% | [Consolidated Statements of Income and Comprehensive Income](index=4&type=section&id=Consolidated%20Statements%20of%20Income%20and%20Comprehensive%20Income) This section details Monro, Inc.'s income and comprehensive income for Q1 fiscal 2024, showing a decline in sales and profitability Consolidated Statements of Income Highlights (Three Months Ended, thousands, except per share data) | Metric | June 24, 2023 | June 25, 2022 | Change (k) | Change (%) | | :------------------------------------ | :------------ | :------------ | :--------- | :--------- | | Sales | $326,968 | $349,535 | $(22,567) | (6.5)% | | Gross profit | $114,396 | $122,189 | $(7,793) | (6.4)% | | Operating income | $17,349 | $26,255 | $(8,906) | (33.9)% | | Net income | $8,829 | $12,484 | $(3,655) | (29.3)% | | Basic EPS | $0.28 | $0.37 | $(0.09) | (24.3)% | | Diluted EPS | $0.28 | $0.37 | $(0.09) | (24.3)% | [Consolidated Statements of Changes in Shareholders' Equity](index=5&type=section&id=Consolidated%20Statements%20of%20Changes%20in%20Shareholders'%20Equity) This statement outlines changes in Monro, Inc.'s shareholders' equity for Q1 fiscal 2024, including net income, dividends, and stock-based compensation Shareholders' Equity Changes (Three Months Ended June 24, 2023, thousands) | Metric | Balance at March 25, 2023 | Net Income | Other Comprehensive Income | Dividends Declared (Preferred) | Dividends Declared (Common) | Stock Options and Restricted Stock | Stock-based Compensation | Balance at June 24, 2023 | | :----------------------- | :------------------------ | :--------- | :------------------------- | :----------------------------- | :-------------------------- | :--------------------------------- | :----------------------- | :----------------------- | | Total Shareholders' Equity | $694,922 | $8,829 | $94 | $(129) | $(8,797) | $(260) | $539 | $695,168 | - No stock repurchases occurred during the three months ended June 24, 2023, compared to **$17,216 thousand** in the prior year period[15](index=15&type=chunk) [Consolidated Statements of Cash Flows](index=6&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) The cash flow statement details Monro, Inc.'s operating, investing, and financing activities for Q1 fiscal 2024, showing an increase in cash and equivalents Consolidated Statements of Cash Flows Highlights (Three Months Ended, thousands) | Activity | June 24, 2023 | June 25, 2022 | Change (k) | Change (%) | | :-------------------------------- | :------------ | :------------ | :--------- | :--------- | | Cash provided by operating activities | $71,731 | $77,205 | $(5,474) | (7.1)% | | Cash (used for) provided by investing activities | $(2,630) | $48,856 | $(51,486) | (105.4)% | | Cash used for financing activities | $(58,669) | $(103,361) | $44,692 | (43.3)% | | Increase in cash and equivalents | $10,432 | $22,700 | $(12,268) | (54.0)% | | Cash and equivalents at end of period | $15,316 | $30,648 | $(15,332) | (50.0)% | [Notes to Consolidated Financial Statements](index=8&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) These notes provide detailed explanations and additional information supporting the consolidated financial statements for Monro, Inc [Note 1 Description of Business and Basis of Presentation](index=8&type=section&id=Note%201%20Description%20of%20Business%20and%20Basis%20of%20Presentation) This note describes Monro, Inc.'s business operations, store network, and the basis for presenting its unaudited financial statements - Monro, Inc. provides automotive undercar repair, tire replacement sales, and tire-related services across the United States[22](index=22&type=chunk) - As of June 24, 2023, the company operated **1,299 retail stores** and **76 franchised locations** in **32 states**[22](index=22&type=chunk) - The company manages its operations as a single segment, offering replacement tires, undercar repair, and routine maintenance services[24](index=24&type=chunk) - Quarterly operating results and cash flows are subject to seasonality and may not indicate full-year performance[26](index=26&type=chunk) [Note 2 Acquisitions and Divestitures](index=9&type=section&id=Note%202%20Acquisitions%20and%20Divestitures) This note details Monro, Inc.'s acquisition of retail stores and the divestiture of its wholesale tire operations during the fiscal year - During 2023, Monro acquired **six retail tire and automotive repair stores** to expand its market presence[33](index=33&type=chunk)[34](index=34&type=chunk) - On June 17, 2022, the company divested its wholesale tire operations (**seven locations**) for **$102 million** to American Tire Distributors, Inc[36](index=36&type=chunk) - Monro received **$62 million** at closing and **$3.9 million** of the **$40 million** earnout in Q1 fiscal 2024, with **$27.4 million** still outstanding[36](index=36&type=chunk) - The divestiture enables Monro to concentrate resources on its core retail business operations[36](index=36&type=chunk) [Note 3 Earnings per Common Share](index=10&type=section&id=Note%203%20Earnings%20per%20Common%20Share) This note presents the calculation of basic and diluted earnings per common share for Monro, Inc. for the reported periods Earnings per Common Share (Three Months Ended, thousands, except per share data) | Metric | June 24, 2023 | June 25, 2022 | | :-------------------------------- | :------------ | :------------ | | Net income | $8,829 | $12,484 | | Less: Preferred stock dividends | $(129) | $(129) | | Income available to common shareholders | $8,700 | $12,355 | | Weighted average common shares - basic | 31,415 | 33,483 | | Weighted average common shares - diluted | 31,954 | 33,986 | | Basic earnings per common share | $0.28 | $0.37 | | Diluted earnings per common share | $0.28 | $0.37 | [Note 4 Income Taxes](index=10&type=section&id=Note%204%20Income%20Taxes) This note details Monro, Inc.'s effective income tax rates and the factors influencing them for the reported periods Effective Income Tax Rate (Three Months Ended) | Period | Effective Income Tax Rate | | :----- | :------------------------ | | June 24, 2023 | 27.6% | | June 25, 2022 | 39.6% | - The higher effective tax rate in Q1 2023 resulted from discrete tax impacts of the wholesale tire divestiture and deferred tax revaluation[41](index=41&type=chunk) [Note 5 Fair Value](index=10&type=section&id=Note%205%20Fair%20Value) This note provides information on the fair value of Monro, Inc.'s financial instruments, specifically long-term debt Long-term Debt Carrying Amount and Fair Value (thousands) | Date | Carrying Amount | Fair Value | | :----------- | :-------------- | :--------- | | June 24, 2023 | $65,000 | $65,000 | | March 25, 2023 | $105,000 | $105,000 | - The carrying value of long-term debt approximated its fair value due to its variable interest rate nature[42](index=42&type=chunk) [Note 6 Cash Dividend](index=10&type=section&id=Note%206%20Cash%20Dividend) This note outlines the cash dividends declared and paid by Monro, Inc. for common and preferred stock Cash Dividends Paid (Three Months Ended) | Period | Dividends Paid (thousands) | | :----- | :------------------------- | | June 24, 2023 | $8,926 | | June 25, 2022 | $9,466 | - Dividends of **$0.28 per common share** were declared for both Q1 2024 and Q1 2023[15](index=15&type=chunk) - Future dividend declarations are at the Board's discretion, contingent on financial condition, results, capital needs, and compliance[43](index=43&type=chunk) [Note 7 Revenues](index=11&type=section&id=Note%207%20Revenues) This note details Monro, Inc.'s revenue breakdown by product category and changes in deferred revenue - Automotive undercar repair, tire replacement sales, and tire-related services comprise the majority of revenues[45](index=45&type=chunk) Revenues by Product Category (Three Months Ended, thousands) | Category | June 24, 2023 | June 25, 2022 | Change (k) | Change (%) | | :--------- | :------------ | :------------ | :--------- | :--------- | | Tires | $152,128 | $173,064 | $(20,936) | (12.1)% | | Maintenance | $92,913 | $90,292 | $2,621 | 2.9% | | Brakes | $47,598 | $49,155 | $(1,557) | (3.2)% | | Steering | $28,363 | $29,981 | $(1,618) | (5.4)% | | Exhaust | $5,216 | $6,275 | $(1,059) | (16.9)% | | Other | $750 | $768 | $(18) | (2.3)% | | Total | $326,968 | $349,535 | $(22,567) | (6.5)% | Deferred Revenue (thousands) | Metric | Amount | | :---------------------- | :----- | | Balance at March 25, 2023 | $22,354 | | Deferral of revenue | $5,529 | | Recognition of revenue | $(5,571) | | Balance at June 24, 2023 | $22,312 | [Note 8 Long-term Debt](index=11&type=section&id=Note%208%20Long-term%20Debt) This note describes Monro, Inc.'s revolving credit facility, its terms, and compliance with debt covenants - Monro maintains a **$600 million** revolving credit facility, extended to **November 10, 2027**, through a Third Amendment[51](index=51&type=chunk)[56](index=56&type=chunk) - Borrowing interest rates are now based on **0.10 percent over SOFR**, replacing LIBOR[56](index=56&type=chunk) Credit Facility Status (thousands) | Metric | June 24, 2023 | | :----------------------- | :------------ | | Outstanding under Credit Facility | $65,000 | | Available under Credit Facility | $504,900 | - The company complied with all debt covenants as of June 24, 2023[58](index=58&type=chunk) [Note 9 Commitments and Contingencies](index=12&type=section&id=Note%209%20Commitments%20and%20Contingencies) This note outlines Monro, Inc.'s contractual commitments and potential impacts from legal proceedings Commitments Due by Period (thousands) | Commitment Type | Total | Within 1 Year | 2 to 3 Years | 4 to 5 Years | After 5 Years | | :------------------------------------ | :------ | :------------ | :----------- | :----------- | :------------ | | Principal payments on long-term debt | $65,000 | $0 | $65,000 | $0 | $0 | | Finance lease commitments/financing obligations | $395,742 | $53,203 | $97,552 | $86,965 | $158,022 | | Operating lease commitments | $261,872 | $45,216 | $79,985 | $60,015 | $76,656 | | Total | $722,614 | $98,419 | $177,537 | $146,980 | $234,678 | - Various legal proceedings could result in unfavorable rulings, materially impacting financial position and results[60](index=60&type=chunk) [Note 10 Supplier Finance Program](index=13&type=section&id=Note%2010%20Supplier%20Finance%20Program) This note describes Monro, Inc.'s voluntary supply chain financing program and outstanding supplier obligations - Monro facilitates a voluntary supply chain financing program, enabling suppliers to sell company receivables to a financial institution[62](index=62&type=chunk) Outstanding Supplier Obligations Eligible for Advance Payment (thousands) | Date | Amount | | :----------- | :----- | | June 24, 2023 | $194,900 | | March 25, 2023 | $167,300 | | June 25, 2022 | $42,300 | - The program is classified as a trade payable program, not a borrowing arrangement[62](index=62&type=chunk) [Note 11 Share Repurchase](index=13&type=section&id=Note%2011%20Share%20Repurchase) This note details Monro, Inc.'s share repurchase activity for the reported periods, showing no repurchases in Q1 fiscal 2024 Share Repurchase Activity (Three Months Ended, thousands, except per share data) | Metric | June 24, 2023 | June 25, 2022 | | :---------------------- | :------------ | :------------ | | Number of shares purchased | — | 413.6 | | Average price paid per share | $— | $41.60 | | Total repurchased | $— | $17,216 | - Monro did not repurchase any common stock shares during the three months ended June 24, 2023[64](index=64&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=14&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses Monro, Inc.'s Q1 fiscal 2024 financial performance, highlighting decreased sales and profitability due to divestiture, alongside a slight comparable store sales increase [Recent Developments](index=14&type=section&id=Recent%20Developments) This section outlines recent corporate actions, including a reclassification agreement for Class C Convertible Preferred Stock - On May 12, 2023, Monro entered a Reclassification Agreement to eliminate Class C Convertible Preferred Stock, pending shareholder approval[67](index=67&type=chunk) - The agreement adjusts Class C Preferred Stock conversion to **61.275 common shares** per preferred share, up from 23.389[68](index=68&type=chunk) - Class C Holders retain the right to appoint one board member during the preferred stock's sunset period[68](index=68&type=chunk) [Economic Conditions](index=14&type=section&id=Economic%20Conditions) This section discusses the impact of current economic conditions, including inflation, labor costs, and rising interest rates, on the company - The U.S. economy faces high inflation, constrained labor availability with rising costs, and increasing interest rates[69](index=69&type=chunk) - These conditions could lead to an economic slowdown or recession, potentially increasing costs and impacting revenues[69](index=69&type=chunk) [Financial Summary](index=14&type=section&id=Financial%20Summary) This summary provides key financial highlights for Monro, Inc.'s Q1 fiscal 2024, including EPS, sales, and net income Key Financial Highlights (Three Months Ended, except per share data) | Metric | June 24, 2023 | June 25, 2022 | Change (%) | | :-------------------- | :------------ | :------------ | :--------- | | Diluted EPS | $0.28 | $0.37 | (24.3)% | | Adjusted diluted EPS | $0.31 | $0.42 | (26.2)% | | Sales decrease | 6.5% | - | - | | Comparable store sales increase | 0.5% | - | - | | Operating income | $17.3 million | $26.255 million | (33.9)% | | Net income | $8.8 million | $12.484 million | (29.3)% | | Adjusted net income | $9.9 million | $14.250 million | (30.5)% | - Sales decreased primarily due to the June 2022 sale of wholesale tire operations[71](index=71&type=chunk) - Comparable store sales increased by **0.5%**, including a **one percent** increase in approximately **300 small or underperforming stores**[71](index=71&type=chunk) [Analysis of Results of Operations](index=15&type=section&id=Analysis%20of%20Results%20of%20Operations) This section provides a detailed analysis of Monro, Inc.'s operational results, including sales, cost of sales, gross profit, and OSG&A expenses [Sales](index=15&type=section&id=Sales) This section analyzes Monro, Inc.'s sales performance, detailing overall changes and comparable store sales drivers Sales Performance (Three Months Ended, thousands) | Metric | June 24, 2023 | June 25, 2022 | Dollar Change | Percentage Change | | :----- | :------------ | :------------ | :------------ | :---------------- | | Sales | $326,968 | $349,535 | $(22,567) | (6.5)% | Primary Drivers of Sales Change (Three Months Ended June 24, 2023) | Driver | Sales Percentage Change | | :-------------------- | :---------------------- | | Closed store sales | (7.4)% | | Comparable store sales | 0.5% | | New store sales | 0.5% | - The sales decrease was primarily due to approximately **$23.9 million** from the June 2022 wholesale tire operations sale[77](index=77&type=chunk) - Comparable store sales increased due to higher average ticket amounts across product categories and price points[77](index=77&type=chunk) Comparable Store Product Category Sales Change (Three Months Ended June 24, 2023) | Product Category | Change (%) | | :----------------- | :--------- | | Tires | 1% | | Maintenance service | 3% | | Brakes | (2)% | | Alignment | (2)% | | Front end/shocks | (9)% | [Cost of Sales and Gross Profit](index=16&type=section&id=Cost%20of%20Sales%20and%20Gross%20Profit) This section examines Monro, Inc.'s cost of sales and gross profit performance, including factors influencing gross profit margin Gross Profit Performance (Three Months Ended, thousands) | Metric | June 24, 2023 | June 25, 2022 | Dollar Change | Percentage Change | | :-------------------- | :------------ | :------------ | :------------ | :---------------- | | Gross profit | $114,396 | $122,189 | $(7,793) | (6.4)% | | Percentage of sales | 35.0% | 35.0% | - | 0.0% | - Gross profit as a percentage of sales remained relatively flat year-over-year[84](index=84&type=chunk) Primary Drivers of Gross Profit as a Percentage of Sales Change (Three Months Ended June 24, 2023) | Driver | Basis Point Change | | :------------------------------------------ | :----------------- | | Retail material costs | (150) bps | | Technician labor costs | (70) bps | | Retail distribution and occupancy costs | 10 bps | | Impact from the sale of wholesale operations | 210 bps | [OSG&A Expenses](index=16&type=section&id=OSG%26A%20Expenses) This section analyzes Monro, Inc.'s operating, selling, general, and administrative expenses and their drivers for the reported period OSG&A Expenses Performance (Three Months Ended, thousands) | Metric | June 24, 2023 | June 25, 2022 | Dollar Change | Percentage Change | | :---------------- | :------------ | :------------ | :------------ | :---------------- | | OSG&A Expenses | $97,047 | $95,934 | $1,113 | 1.2% | | Percentage of sales | 29.7% | 27.4% | - | 2.3% | Drivers of OSG&A Expenses Change (Three Months Ended June 24, 2023, thousands) | Driver | Change (k) | | :---------------------------------------------------------------- | :--------- | | Increase from net gain on sale of wholesale tire locations, distribution assets and related warehouse | $1,180 | | Increase from costs related to shareholder matters | $836 | | Increase from transition costs related to back-office optimization | $544 | | Increase from new stores | $335 | | Decrease from closed stores | $(1,457) | | Decrease from comparable stores | $(325) | [Other Performance Factors](index=17&type=section&id=Other%20Performance%20Factors) This section covers additional factors impacting Monro, Inc.'s financial performance, including net interest expense and income taxes [Net Interest Expense](index=17&type=section&id=Net%20Interest%20Expense) This section details Monro, Inc.'s net interest expense, highlighting the impact of debt levels and interest rates Net Interest Expense (Three Months Ended, thousands) | Metric | June 24, 2023 | June 25, 2022 | Change (k) | | :------------------------ | :------------ | :------------ | :--------- | | Net interest expense | $5,208 | $5,658 | $(450) | - Net interest expense decreased by **$0.5 million** due to a **$148 million** decrease in weighted average debt outstanding[89](index=89&type=chunk) - The weighted average interest rate increased by approximately **100 basis points** due to rising floating borrowing rates[89](index=89&type=chunk) [Provision for Income Taxes](index=17&type=section&id=Provision%20for%20Income%20Taxes) This section explains Monro, Inc.'s provision for income taxes and the factors influencing its effective tax rate Effective Income Tax Rate (Three Months Ended) | Period | Effective Income Tax Rate | | :----- | :------------------------ | | June 24, 2023 | 27.6% | | June 25, 2022 | 39.6% | - The higher effective tax rate in Q1 2023 resulted primarily from discrete tax impacts of the wholesale tire divestiture and deferred tax revaluation[90](index=90&type=chunk) [Non-GAAP Financial Measures](index=17&type=section&id=Non-GAAP%20Financial%20Measures) This section presents Monro, Inc.'s non-GAAP financial measures, including adjusted net income and adjusted diluted EPS, for enhanced comparability - Monro provides adjusted net income and diluted EPS as non-GAAP measures to enhance period-to-period comparability by excluding non-recurring items[91](index=91&type=chunk) Reconciliation of Adjusted Net Income (Three Months Ended, thousands) | Metric | June 24, 2023 | June 25, 2022 | | :------------------------------------------------ | :------------ | :------------ | | Net income | $8,829 | $12,484 | | Net gain on sale of wholesale tire and distribution assets | — | $(1,180) | | Store closing costs | $47 | $(4) | | Monro.Forward initiative costs | — | $23 | | Acquisition due diligence and integration costs | $5 | $(10) | | Costs related to shareholder matters | $836 | — | | Transition costs related to back-office optimization | $544 | — | | Provision for income taxes on pre-tax adjustments | $(359) | $293 | | Certain discrete tax items | — | $2,644 | | Adjusted net income | $9,902 | $14,250 | Reconciliation of Adjusted Diluted EPS (Three Months Ended) | Metric | June 24, 2023 | June 25, 2022 | | :------------------------------------------------ | :------------ | :------------ | | Diluted EPS | $0.28 | $0.37 | | Net gain on sale of wholesale tire and distribution assets | — | $(0.03) | | Store closing costs | $0.00 | $(0.00) | | Monro.Forward initiative costs | — | $0.00 | | Acquisition due diligence and integration costs | $0.00 | $(0.00) | | Costs related to shareholder matters | $0.02 | — | | Transition costs related to back-office optimization | $0.01 | — | | Certain discrete tax items | — | $0.08 | | Adjusted diluted EPS | $0.31 | $0.42 | [Analysis of Financial Condition](index=18&type=section&id=Analysis%20of%20Financial%20Condition) This section analyzes Monro, Inc.'s financial condition, focusing on liquidity, capital resources, and working capital management [Liquidity and Capital Resources](index=18&type=section&id=Liquidity%20and%20Capital%20Resources) This section discusses Monro, Inc.'s expected sources and uses of liquidity and capital to fund operations and strategic initiatives - Monro anticipates generating positive operating cash flow to fund operations, strategic acquisitions, debt reduction, and shareholder returns[98](index=98&type=chunk) - The company may utilize its Credit Facility to fund growth or for early debt repayment[99](index=99&type=chunk) [Future Cash Requirements](index=19&type=section&id=Future%20Cash%20Requirements) This section outlines Monro, Inc.'s projected capital expenditures and contractual commitments for future periods - Projected capital expenditures for fiscal 2024 range from **$35 million to $45 million**[101](index=101&type=chunk) Contractual Commitments (thousands) | Commitment Type | Total | Due within 1 year | | :------------------------------------ | :------ | :---------------- | | Finance lease and operating lease commitments | $521,400 | $97,700 | - As of June 24, 2023, **$65.0 million** was outstanding under the Credit Facility, with no amounts due within the next 12 months[102](index=102&type=chunk) [Dividends](index=19&type=section&id=Dividends) This section reports on Monro, Inc.'s cash dividends paid and its intention to continue quarterly dividend payments Cash Dividends Paid (Three Months Ended) | Period | Dividends Paid (thousands) | | :----- | :------------------------- | | June 24, 2023 | $8,900 | | June 25, 2022 | $9,500 | - The company paid **$0.28 per share** in dividends for Q1 2024 and plans to continue quarterly dividend payments[103](index=103&type=chunk) [Share Repurchases](index=19&type=section&id=Share%20Repurchases) This section details Monro, Inc.'s share repurchase activity, noting no repurchases during Q1 fiscal 2024 - No shares were repurchased during the three months ended June 24, 2023[104](index=104&type=chunk) [Working Capital Management](index=19&type=section&id=Working%20Capital%20Management) This section discusses Monro, Inc.'s working capital position and the factors influencing its deficit Working Capital Deficit (thousands) | Date | Working Capital Deficit | | :----------- | :---------------------- | | June 24, 2023 | $(230,100) | | March 25, 2023 | $(39,400) | - The increased working capital deficit was primarily driven by higher accounts payable due to the supply chain finance program[105](index=105&type=chunk) [Sources and Conditions of Liquidity](index=19&type=section&id=Sources%20and%20Conditions%20of%20Liquidity) This section identifies Monro, Inc.'s primary liquidity sources and assesses their adequacy for future needs - Primary liquidity sources include cash from operations, Credit Facility availability, and cash and equivalents on hand[106](index=106&type=chunk) Liquidity Position (June 24, 2023, thousands) | Metric | Amount | | :------------------------ | :----- | | Cash and equivalents | $15,300 | | Available under Credit Facility | $504,900 | - Management believes current fund sources will provide adequate short-term and long-term liquidity[107](index=107&type=chunk) [Summary of Cash Flows](index=19&type=section&id=Summary%20of%20Cash%20Flows) This section summarizes Monro, Inc.'s cash flows from operating, investing, and financing activities for the reported periods Summary of Cash Flows (Three Months Ended, thousands) | Activity | June 24, 2023 | June 25, 2022 | | :-------------------------------- | :------------ | :------------ | | Cash provided by operating activities | $71,731 | $77,205 | | Cash (used for) provided by investing activities | $(2,630) | $48,856 | | Cash used for financing activities | $(58,669) | $(103,361) | | Increase in cash and equivalents | $10,432 | $22,700 | | Cash and equivalents at end of period | $15,316 | $30,648 | - Cash provided by operating activities in Q1 2024 was **$71.7 million**, including a **$24.5 million** improvement from the supply chain finance program[110](index=110&type=chunk) - Cash used for investing activities in Q1 2024 was **$2.6 million**, primarily for capital expenditures, a shift from prior year's cash provided by divestiture proceeds[112](index=112&type=chunk)[113](index=113&type=chunk) - Cash used for financing activities in Q1 2024 was **$58.7 million**, primarily for Credit Facility payments, finance lease principal, and dividends[114](index=114&type=chunk) [Critical Accounting Estimates](index=20&type=section&id=Critical%20Accounting%20Estimates) This section highlights the significant accounting estimates and assumptions made by management in preparing Monro, Inc.'s financial statements - Financial statement preparation requires management to make estimates and assumptions affecting reported amounts[116](index=116&type=chunk) - No material changes to critical accounting estimates occurred since the Form 10-K for the fiscal year ended March 25, 2023[117](index=117&type=chunk) [Recent Accounting Pronouncements](index=20&type=section&id=Recent%20Accounting%20Pronouncements) This section discusses Monro, Inc.'s adoption of new FASB guidance and its impact on the consolidated financial statements - Monro adopted new FASB guidance on supplier finance programs and business combinations during Q1 fiscal 2024[28](index=28&type=chunk)[29](index=29&type=chunk)[118](index=118&type=chunk) - The adoption of this guidance did not materially impact the consolidated financial statements[28](index=28&type=chunk)[29](index=29&type=chunk) [Cautionary Note Regarding Forward-Looking Statements](index=21&type=section&id=Cautionary%20Note%20Regarding%20Forward-Looking%20Statements) This section advises that the report contains forward-looking statements subject to risks and uncertainties that could cause actual results to differ materially - The report contains forward-looking statements subject to risks, uncertainties, and factors that could cause actual results to differ materially[120](index=120&type=chunk) - Key risk factors include competitive services, economic conditions, seasonality, automotive technologies, vendor dependence, debt, capital expenditures, sales, gross profit margin, OSG&A, income tax, accounting policies, regulation, litigation, business interruptions, data security, acquisitions, growth, dividends, personnel, and climate change[122](index=122&type=chunk) - Information is based on facts known as of the report date, with no obligation to update these statements[121](index=121&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=22&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) Monro, Inc. is exposed to market risk primarily from potential changes in interest rates on its floating-rate debt. A 100 basis point change in SOFR would result in an approximate $0.7 million annual interest expense fluctuation based on the debt position as of June 24, 2023 - The company's market risk exposure arises from potential interest rate changes on its floating-rate debt[123](index=123&type=chunk) - A **100 basis point** change in SOFR would result in approximately **$0.7 million** annual interest expense fluctuation based on the June 24, 2023 debt position[123](index=123&type=chunk) Long-term Debt Carrying Amount and Fair Value (thousands) | Date | Carrying Amount | Fair Value | | :----------- | :-------------- | :--------- | | June 24, 2023 | $65,000 | $65,000 | | March 25, 2023 | $105,000 | $105,000 | [Item 4. Controls and Procedures](index=22&type=section&id=Item%204.%20Controls%20and%20Procedures) Monro's management, including the CEO and CFO, evaluated the effectiveness of the company's disclosure controls and procedures as of June 24, 2023, and concluded they were effective. No material changes in internal control over financial reporting occurred during the quarter [Evaluation of Disclosure Controls and Procedures](index=22&type=section&id=Evaluation%20of%20Disclosure%20Controls%20and%20Procedures) Management, including the CEO and CFO, assessed the effectiveness of Monro, Inc.'s disclosure controls and procedures - The CEO and CFO concluded that the company's disclosure controls and procedures were effective as of June 24, 2023[126](index=126&type=chunk) [Changes in Internal Controls Over Financial Reporting](index=22&type=section&id=Changes%20in%20Internal%20Controls%20Over%20Financial%20Reporting) This section confirms no material changes in Monro, Inc.'s internal control over financial reporting during the quarter - No material changes in internal control over financial reporting occurred during the quarter ended June 24, 2023[127](index=127&type=chunk) PART II. OTHER INFORMATION [Item 1. Legal Proceedings](index=23&type=section&id=Item%201.%20Legal%20Proceedings) Monro, Inc. is involved in various legal proceedings arising from its normal course of business. While these matters are subject to inherent uncertainties, an unfavorable resolution could potentially have a material adverse impact on the company's financial condition and results of operations - Monro is involved in various claims and legal proceedings incidental to its business operations[129](index=129&type=chunk) - Unfavorable rulings in legal matters could materially impact the company's financial position and results of operations[129](index=129&type=chunk) [Item 6. Exhibits](index=24&type=section&id=Item%206.%20Exhibits) This section lists the exhibits filed with the Form 10-Q, including the Reclassification Agreement, certifications from the CEO and CFO, and various XBRL interactive data files, which provide supporting documentation for the report - Key exhibits include the Reclassification Agreement (Exhibit 10.07), CEO and CFO Certifications (Exhibits 31.1, 31.2, 32.1), and XBRL interactive data files (Exhibits 101.INS, 101.LAB, 101.PRE, 101.SCH, 101.DEF, 101.CAL, 104)[131](index=131&type=chunk) [Signatures](index=25&type=section&id=Signatures) The Form 10-Q report was officially signed on July 26, 2023, by Michael T. Broderick, President and Chief Executive Officer, and Brian J. D'Ambrosia, Executive Vice President – Finance, Chief Financial Officer and Treasurer, affirming its submission to the SEC - The report was signed on **July 26, 2023**[135](index=135&type=chunk) - Signatories include Michael T. Broderick, President and CEO, and Brian J. D'Ambrosia, EVP – Finance, CFO, and Treasurer[135](index=135&type=chunk)

Monro, Inc. (NASDAQ:MNRO) Q1 2024 Earnings Conference Call July 26, 2023 8:30 AM ET Company Participants Felix Veksler ??? Senior Director-Investor Relations Michael Broderick ??? President and Chief Executive Officer Brian D???Ambrosia ??? Executive Vice President and Chief Financial Officer Conference Call Participants Brian Nagel ??? Oppenheimer Daniel Imbro ??? Stephens Bret Jordan ??? Jefferies Operator Good morning, ladies and gentlemen, and welcome to Monro Inc.???s Earnings Conference Call for the F ...