Monro, Inc. (NASDAQ:MNRO) Q2 2021 Earnings Conference Call October 28, 2020 8:30 AM ET Company Participants Maureen Mulholland - SVP, General Counsel & Secretary Robert Mellor - Chairman & Interim CEO Robert Rajkowski - SVP & COO Brian D'Ambrosia - EVP, Finance, CFO, Treasurer & Assistant Secretary Conference Call Participants Brian Nagel - Oppenheimer Jonathan Lamers - BMO Capital Markets Bret Jordan - Jefferies Nels Nelson - Stephens Inc. David Bellinger - Wolfe Research Stephanie Benjamin - Truist Securi ...

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ____________________________________________________________ FORM 10-Q ____________________________________________________________ (Mark One) x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 27, 2020. OR ¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _____________ to _ ...

??? January 1, 0000 ET Q1 2021 Earnings Conference Call July 29, 2020, 8:30 AM ET Company Participants Maureen Mulholland - Senior Vice President, General Counsel and Secretary Brett Ponton - President and CEO Brian D'Ambrosia - Chief Financial Officer Conference Call Participants Brian Nagel - Oppenheimer Jonathan Lamers - BMO Capital Markets Bret Jordan - Jefferies Rick Nelson - Stephens Stephanie Benjamin - SunTrust Scott Stember - CL King Operator Good morning, ladies and gentlemen. And welcome to Monro ...

PART I [Item 1. Business](index=3&type=section&id=Item%201.%20Business) Monro operates a large network of automotive repair and tire service stores across the US, focusing on a customer-centric growth strategy - Monro, Inc. operates **1,283 Company-operated stores**, **98 franchised locations**, eight wholesale locations, three retread facilities, and two dealer-operated stores across 32 states, specializing in automotive undercar repair and tire sales and services[14](index=14&type=chunk) - The average age of cars and light trucks in the U.S. rose to **11.8 years** in 2019, a favorable industry trend for automotive aftermarket services[25](index=25&type=chunk) - The **COVID-19 pandemic** led to an immediate and significant decline in traffic during the fourth quarter of fiscal 2020, impacting consumer demand despite the industry being classified as an essential business[31](index=31&type=chunk)[32](index=32&type=chunk) - The **Monro.Forward** strategic plan, initiated in October 2017, focuses on four key pillars: improving guest experience, enhancing customer-centric engagement, optimizing product/service offerings, and accelerating productivity and team engagement[33](index=33&type=chunk)[35](index=35&type=chunk) Sales Mix by Category (Fiscal Years 2020, 2019, 2018) | Category | FY20 | FY19 | FY18 | | :--------- | :--- | :--- | :--- | | Brakes | 13 % | 14 % | 13 % | | Exhaust | 2 % | 2 % | 2 % | | Steering | 8 % | 8 % | 8 % | | Tires | 51 % | 50 % | 50 % | | Maintenance | 26 % | 26 % | 27 % | | **Total** | **100 %** | **100 %** | **100 %** | [Item 1A. Risk Factors](index=16&type=section&id=Item%201A.%20Risk%20Factors) The company faces significant risks from the COVID-19 pandemic, industry competition, economic conditions, and trade policies - The **COVID-19 pandemic** has significantly and adversely impacted the business, leading to negative impacts on demand, potential supply chain disruptions, increased costs, and diversion of management's attention[101](index=101&type=chunk)[102](index=102&type=chunk)[104](index=104&type=chunk) - The automotive repair industry is **highly competitive and fragmented**, with competition based on customer service, reputation, location, name awareness, and price, potentially forcing price reductions[106](index=106&type=chunk) - The business is subject to **seasonality**, with lower profitability in slower sales months (e.g., November-February for undercar, January-April/September for tires) and winter months due to higher operating costs[107](index=107&type=chunk)[108](index=108&type=chunk)[109](index=109&type=chunk) - Changes in U.S. trade policies, including **import tariffs** on products like tires, could increase expenses and negatively affect profitability if cost increases cannot be passed on to customers[113](index=113&type=chunk)[114](index=114&type=chunk) - The company recorded an impairment of long-lived assets of **$2.3 million** for the year ended March 28, 2020, primarily due to the negative impact of the COVID-19 pandemic on forecasted store performance, and plans to close 36 underperforming stores in fiscal 2021, incurring **$4.3 million** in related impairment costs in fiscal 2020[133](index=133&type=chunk)[135](index=135&type=chunk) [Item 1B. Unresolved Staff Comments](index=22&type=section&id=Item%201B.%20Unresolved%20Staff%20Comments) There are no unresolved staff comments to report - No unresolved staff comments were reported[144](index=144&type=chunk) [Item 2. Properties](index=22&type=section&id=Item%202.%20Properties) Monro owns and leases numerous store, warehouse, and office facilities across its operating regions - Monro owns its primary office/warehouse facility (171,500 sq ft) in Rochester, New York, a second office/warehouse facility (28,000 sq ft) in Swanzey, New Hampshire, and one retread facility in North Carolina[145](index=145&type=chunk) - As of March 28, 2020, out of 1,283 Company-operated stores, **332 were owned**, **886 were leased**, and for 65 stores, only the land was leased[146](index=146&type=chunk) [Item 3. Legal Proceedings](index=22&type=section&id=Item%203.%20Legal%20Proceedings) The company is involved in various legal proceedings incidental to business, which are not expected to be materially adverse - Monro is a party to various claims and legal proceedings incidental to its business, but management does not believe they will have a material adverse effect on financial condition or results of operations[147](index=147&type=chunk) [Item 4. Mine Safety Disclosures](index=22&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to the company - Mine Safety Disclosures are not applicable to the registrant[148](index=148&type=chunk) PART II [Item 5. Market for the Company's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities](index=23&type=section&id=Item%205.%20Market%20for%20the%20Company's%20Common%20Equity%2C%20Related%20Stockholder%20Matters%20and%20Issuer%20Purchases%20of%20Equity%20Securities) The company's common stock trades on Nasdaq, with future dividends subject to Board discretion and credit facility restrictions - Monro's common stock is traded on the Nasdaq Stock Market under the symbol **'MNRO'**[151](index=151&type=chunk) - As of May 22, 2020, there were approximately **46 shareholders of record**[152](index=152&type=chunk) - Future dividends are at the discretion of the Board and subject to financial conditions and credit facility restrictions, allowing up to **$38.5 million** in aggregate dividends from June 30, 2020, to June 30, 2021[153](index=153&type=chunk) [Item 6. Selected Financial Data](index=24&type=section&id=Item%206.%20Selected%20Financial%20Data) This section presents a five-year summary of key financial and operating data from audited statements Selected Financial and Operating Data (Fiscal Years 2016-2020) | Metric | 2020 | 2019 | 2018 | 2017 | 2016 | | :------------------------------------ | :----------- | :----------- | :----------- | :----------- | :----------- | | **Income Statement Data (in thousands):** | | | | | | | Sales | $ 1,256,524 | $ 1,200,230 | $ 1,127,815 | $ 1,021,511 | $ 943,651 | | Gross profit | $ 476,658 | $ 465,228 | $ 435,574 | $ 396,889 | $ 385,703 | | Operating income | $ 101,702 | $ 126,743 | $ 127,296 | $ 116,384 | $ 120,589 | | Net income | $ 58,024 | $ 79,752 | $ 63,935 | $ 61,526 | $ 66,805 | | Earnings per share (Diluted) | $ 1.71 | $ 2.37 | $ 1.92 | $ 1.85 | $ 2.00 | | Cash dividends per share | $ 0.88 | $ 0.80 | $ 0.72 | $ 0.68 | $ 0.60 | | **Selected Operating Data:** | | | | | | | Total Sales growth | 4.7 % | 6.4 % | 10.4 % | 8.3 % | 5.5 % | | Comparable store sales | (2.3) % | 0.4 % | 1.8 % | (4.3) % | (0.1) % | | Company-operated stores (end of year) | 1,283 | 1,197 | 1,150 | 1,118 | 1,029 | | Capital expenditures (in thousands) | $ 55,918 | $ 44,468 | $ 39,122 | $ 34,640 | $ 36,834 | | **Balance Sheet Data (at period end, in thousands):** | | | | | | | Net working capital | $ 341,084 | $ 21,460 | $ 13,251 | $ 13,337 | $ 2,504 | | Total assets | $ 2,049,457 | $ 1,312,288 | $ 1,218,432 | $ 1,185,264 | $ 999,438 | | Long-term obligations | $ 1,035,727 | $ 375,771 | $ 375,288 | $ 395,503 | $ 269,045 | | Shareholders' equity | $ 734,440 | $ 699,510 | $ 628,476 | $ 581,254 | $ 536,195 | [Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=25&type=section&id=Item%207.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Fiscal 2020 sales grew 4.7% to $1.257 billion, but net income declined 27.2% due to pandemic impacts and rising costs - Sales for fiscal 2020 increased by **$56.3 million (4.7%)** to **$1.257 billion**, primarily due to $83.3 million from new stores (including $73.2 million from acquisitions), partially offset by a **2.3% decrease** in comparable store sales[184](index=184&type=chunk) - Gross profit for fiscal 2020 was **$476.7 million (37.9% of sales)**, down from 38.8% in fiscal 2019, mainly due to increased distribution, occupancy, and labor costs[187](index=187&type=chunk) - Operating income decreased by **19.8% to $101.7 million** in fiscal 2020, representing 8.1% of sales, down from 10.6% in fiscal 2019[190](index=190&type=chunk) - In response to COVID-19, Monro drew down the remaining **$350 million** from its **$600 million Revolving Credit Facility** in March 2020, resulting in **$566.4 million outstanding** and no availability[173](index=173&type=chunk)[206](index=206&type=chunk) - A First Amendment to the Credit Facility was entered into on June 11, 2020, eliminating the interest coverage ratio covenant, requiring **$275 million monthly liquidity**, and adjusting the maximum adjusted debt to EBITDAR ratio for flexibility through Q1 fiscal 2022[207](index=207&type=chunk)[208](index=208&type=chunk) - As of June 5, 2020, the company had **$384.2 million in cash on hand**, believing it has sufficient liquidity for at least the next 12 months[181](index=181&type=chunk)[211](index=211&type=chunk) - Critical accounting policies include Business Combinations (fair value estimates for ROU assets and intangible assets), Carrying Values of Goodwill and Long-Lived Assets (annual impairment tests, qualitative assessments), Self-Insurance Reserves (actuarial estimates for workers' compensation, general liability, and medical claims), and Income Taxes (deferred tax assets/liabilities, uncertain tax positions)[159](index=159&type=chunk)[160](index=160&type=chunk)[164](index=164&type=chunk)[165](index=165&type=chunk) - The COVID-19 pandemic caused an immediate and significant decline in traffic and sales during Q4 fiscal 2020, impacting revenue and leading to a **$2.3 million impairment** on certain long-lived assets[171](index=171&type=chunk)[174](index=174&type=chunk) - In response to COVID-19, Monro drew down **$350 million** from its Revolving Credit Facility, suspended non-critical capital expenditures, reduced store hours and labor, furloughed non-store workforce, and paused acquisition activity[173](index=173&type=chunk) - Sales increased by **4.7% to $1.257 billion** in fiscal 2020, driven by new stores and acquisitions, despite a **2.3% decrease** in comparable store sales[184](index=184&type=chunk) - Gross profit as a percentage of sales decreased from **38.8%** in fiscal 2019 to **37.9%** in fiscal 2020, primarily due to increased distribution, occupancy, and labor costs[187](index=187&type=chunk) - Operating expenses increased by **$36.5 million**, or 10.8%, in fiscal 2020, including **$6.6 million** in impairment charges and **$1.4 million** in Monro.Forward initiative costs[189](index=189&type=chunk) - Net income decreased by **27.2% to $58.0 million**, and diluted EPS decreased by **27.8% to $1.71** in fiscal 2020 compared to fiscal 2019[194](index=194&type=chunk) - Primary capital requirements for fiscal 2020 included **$104.4 million for acquisitions** and **$55.9 million for facility upgrades**, systems, and store expansion, funded by cash flow from operations and the Revolving Credit Facility[198](index=198&type=chunk) - The company plans to open **10 to 20 new greenfield stores** in fiscal 2021 but has suspended capital expenditures for store rebrand/reimage and paused acquisition activity due to COVID-19[199](index=199&type=chunk) - Monro entered a new five-year **$600 million Revolving Credit Facility** in April 2019, with **$566.4 million outstanding** and no availability as of March 28, 2020, after drawing down $350 million in response to COVID-19[203](index=203&type=chunk)[206](index=206&type=chunk) - A First Amendment to the Credit Facility in June 2020 amended financial covenants, including eliminating the interest coverage ratio, requiring **$275 million in monthly liquidity**, and adjusting the maximum adjusted debt to EBITDAR ratio[207](index=207&type=chunk)[208](index=208&type=chunk) Income Statement Data as Percentage of Sales (Fiscal Years 2020, 2019) | Metric | 2020 | 2019 | | :------------------------------------------ | :--- | :--- | | Sales | 100.0 % | 100.0 % | | Cost of sales, including distribution and occupancy costs | 62.1 % | 61.2 % | | Gross profit | 37.9 % | 38.8 % | | Operating, selling, general and administrative expenses | 29.8 % | 28.2 % | | Operating income | 8.1 % | 10.6 % | | Interest expense, net | 2.2 % | 2.3 % | | Other income, net | (0.1) % | (0.1) % | | Income before income taxes | 5.9 % | 8.4 % | | Provision for income taxes | 1.3 % | 1.7 % | | Net income | 4.6 % | 6.6 % | Net Income and EPS (Fiscal Years 2020, 2019) | Metric | FY2020 | FY2019 | | :-------------------- | :------- | :------- | | Net income | $58,024 | $79,752 | | Diluted EPS | $1.71 | $2.37 | | Adjusted diluted EPS | $2.00 | $2.40 | Comparable Store Sales Decline (Year-over-Year) during COVID-19 (March-June 2020) | Week Ended | Comparable Store Sales % (Year-over-Year Decline) | | :----------- | :-------------------------------------------------- | | March 21 | (31)% | | March 28 | (47)% | | April 4 | (51)% | | April 11 | (52)% | | April 18 | (42)% | | April 25 | (35)% | | May 2 | (34)% | | May 9 | (29)% | | May 16 | (28)% | | May 23 | (25)% | | May 30 | (23)% | | June 6 | (19)% | Supplemental Reconciliation of Adjusted Net Income (Fiscal Years 2020, 2019) | Metric | 2020 (in thousands) | 2019 (in thousands) | | :------------------------------------------ | :------------------ | :------------------ | | Net income | $58,024 | $79,752 | | Store impairment charge | $6,579 | — | | Monro.Forward initiative costs | $3,976 | $2,543 | | Acquisition due diligence and integration costs | $1,363 | $740 | | Headquarters expansion costs | $346 | — | | Litigation settlement costs | $250 | — | | Corporate and field management realignment costs | — | $350 | | Provision for income taxes on adjustments | ($3,023) | ($869) | | One-time income tax benefit | — | ($2,050) | | **Adjusted net income** | **$67,515** | **$80,466** | Reconciliation of Adjusted Diluted EPS (Fiscal Years 2020, 2019) | Metric | 2020 | 2019 | | :------------------------------------------ | :--- | :--- | | Diluted EPS | $1.71 | $2.37 | | Store impairment charge | $0.15 | — | | Monro.Forward initiative costs | $0.09 | $0.06 | | Acquisition due diligence and integration costs | $0.03 | $0.02 | | Headquarters expansion costs | $0.01 | — | | Litigation settlement costs | $0.01 | — | | Corporate and field management realignment costs | — | $0.01 | | One-time income tax benefit | — | ($0.06) | | **Adjusted diluted EPS** | **$2.00** | **$2.40** | Contractual Obligations (as of March 28, 2020, in thousands) | Obligation Type | Total | Within 1 Year | 2 to 3 Years | 4 to 5 Years | After 5 Years | | :------------------------------------ | :---------- | :------------ | :----------- | :----------- | :------------ | | Principal payments on long-term debt | $566,400 | — | — | $566,400 | — | | Finance lease commitments/obligations | $461,187 | $52,480 | $105,877 | $87,866 | $214,964 | | Operating lease commitments | $238,622 | $36,590 | $62,574 | $46,226 | $93,232 | | Other liabilities | $1,933 | $800 | $1,133 | — | — | | **Total** | **$1,268,142** | **$89,870** | **$169,584** | **$700,492** | **$308,196** | [Item 7A. Quantitative and Qualitative Disclosures about Market Risk](index=32&type=section&id=Item%207A.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) The company's primary market risk is interest rate fluctuation on its floating-rate debt - Monro's cash flow exposure on floating rate debt would result in annual interest expense fluctuations of approximately **$5.7 million** for every 100 basis point change in LIBOR, based on the debt position as of March 28, 2020[215](index=215&type=chunk) - Debt financing had a carrying amount and fair value of **$566.4 million** as of March 28, 2020, a significant increase from **$137.7 million** as of March 30, 2019[216](index=216&type=chunk) Item 8. Financial Statements and Supplementary Data [Report of Independent Registered Public Accounting Firm](index=34&type=section&id=Report%20of%20Independent%20Registered%20Public%20Accounting%20Firm) PwC issued an unqualified opinion on the financial statements and internal controls, noting a change in lease accounting - PricewaterhouseCoopers LLP issued an **unqualified opinion** on Monro's consolidated financial statements and the effectiveness of its internal control over financial reporting as of March 28, 2020[222](index=222&type=chunk) - The company changed its accounting for leases in the year ended March 28, 2020, as discussed in Note 1 to the consolidated financial statements[223](index=223&type=chunk) - The **valuation of acquired Right of Use assets** was identified as a critical audit matter due to significant management judgment in estimating market terms and the high degree of auditor judgment and specialized skill required[230](index=230&type=chunk)[231](index=231&type=chunk) [Audited Financial Statements](index=36&type=section&id=Audited%20Financial%20Statements) This section includes the consolidated balance sheets, income statements, equity changes, and cash flows with accompanying notes - Monro adopted new accounting guidance for leases (ASC 842) as of March 31, 2019, using the modified retrospective approach, resulting in a **$165.3 million increase to total assets** and a **$165.9 million increase to total liabilities**[249](index=249&type=chunk)[251](index=251&type=chunk) - A long-lived assets impairment charge totaling **$6.6 million** was recorded in Q4 fiscal 2020, including **$4.3 million** related to 36 stores expected to close in fiscal 2021, due to operating performance and COVID-19 impact[263](index=263&type=chunk) - Goodwill and intangible assets are subject to annual impairment tests; a qualitative assessment in Q3 fiscal 2020 and further review due to COVID-19 indicated **no impairment of goodwill or intangible assets** as of March 28, 2020[271](index=271&type=chunk)[272](index=272&type=chunk)[273](index=273&type=chunk) - During fiscal 2020, Monro acquired businesses for an aggregate purchase price of **$103.6 million**, adding 88 retail tire and automotive repair stores, primarily in Nevada, Idaho, California, and Louisiana[289](index=289&type=chunk)[290](index=290&type=chunk) - Fiscal 2020 acquisitions resulted in **$106.9 million in goodwill** and **$2.8 million** in finite-lived intangible assets (customer lists)[291](index=291&type=chunk)[295](index=295&type=chunk) - Sales and net loss for fiscal 2020 acquired locations totaled **$59.3 million** and **($3.9) million**, respectively, from acquisition date through March 28, 2020[293](index=293&type=chunk) - During fiscal 2019, Monro acquired businesses for an aggregate purchase price of **$61.7 million**, adding 51 retail/commercial tire and automotive repair stores and one retread facility[296](index=296&type=chunk)[300](index=300&type=chunk) - Depreciation expense totaled **$39.2 million** in fiscal 2020, up from **$35.5 million** in fiscal 2019 and **$32.3 million** in fiscal 2018[304](index=304&type=chunk) - Amortization of intangible assets (excluding favorable leases) totaled **$4.8 million** in fiscal 2020, compared to **$5.3 million** in fiscal 2019[306](index=306&type=chunk) - Monro drew down the remaining **$350 million** from its **$600 million Revolving Credit Facility** in March 2020 to enhance liquidity due to COVID-19, resulting in **$566.4 million outstanding** and no availability at March 28, 2020[312](index=312&type=chunk) - A First Amendment to the Credit Facility on June 11, 2020, provided covenant relief, including eliminating the interest coverage ratio, requiring **$275 million in monthly liquidity**, and adjusting the maximum adjusted debt to EBITDAR ratio[313](index=313&type=chunk)[314](index=314&type=chunk) - Revenue from automotive undercar repair, tire sales, and services is recognized when customers take possession of their vehicle or merchandise[319](index=319&type=chunk) - Deferred revenue from tire road hazard warranty agreements totaled **$18.5 million** at March 28, 2020, recognized over the contract period (typically 21-36 months)[320](index=320&type=chunk) - The CARES Act, enacted March 27, 2020, impacted Monro's tax code, leading to an estimated **$17 million** in additional allowable depreciation for certain improvement property[326](index=326&type=chunk) - The effective income tax rate was **21.9%** in fiscal 2020, compared to **20.5%** in fiscal 2019[193](index=193&type=chunk)[328](index=328&type=chunk) - Holders of Class C preferred stock have significant voting power (**60% approval** for certain actions) and a liquidation preference of **$1.50 per share**[334](index=334&type=chunk) - Total stock-based compensation expense was **$3.8 million** in fiscal 2020, with **$5.0 million** in unrecognized compensation expense expected to be recognized over approximately two years[336](index=336&type=chunk) - The company grants non-qualified stock options, restricted stock awards, and restricted stock units under the 2007 Incentive Stock Option Plan, with **929,360 shares available for grant** at March 28, 2020[336](index=336&type=chunk)[337](index=337&type=chunk) - The adoption of new lease accounting guidance (ASC 842) resulted in a **$165.3 million increase to total assets** and a **$165.9 million increase to total liabilities** as of March 31, 2019[251](index=251&type=chunk) - Monro sponsors a noncontributory defined benefit pension plan, which was underfunded by **$3.0 million** as of March 28, 2020[353](index=353&type=chunk) - The company's 401(k)/Profit Sharing Plan incurred matching contributions of approximately **$1.7 million** in fiscal 2020[359](index=359&type=chunk) - A deferred compensation plan for select management had a total liability of approximately **$2.2 million** at March 28, 2020[360](index=360&type=chunk) - Monro is involved in various legal proceedings, but management believes the ultimate outcome will not have a material adverse effect on its financial position, results of operations, or cash flows[365](index=365&type=chunk) - In May 2020, Monro's Board declared a cash dividend of **$0.22 per share**, payable on June 22, 2020[366](index=366&type=chunk) - On June 11, 2020, a First Amendment to the credit agreement was executed, modifying financial covenants and permitting dividends and acquisitions under specific terms through Q1 fiscal 2022[367](index=367&type=chunk) - A material impairment charge totaling **$6.6 million** was recorded during the fourth quarter of fiscal 2020[370](index=370&type=chunk) Consolidated Balance Sheet Highlights (as of March 28, 2020 and March 30, 2019, in thousands) | Asset/Liability/Equity | March 28, 2020 | March 30, 2019 | | :-------------------------------------------------- | :------------- | :------------- | | Cash and equivalents | $345,476 | $6,214 | | Total current assets | $596,020 | $239,907 | | Property, plant and equipment, net | $328,637 | $312,552 | | Finance lease and financing obligation assets, net | $196,575 | $128,029 | | Operating lease assets, net | $199,729 | — | | Goodwill | $671,843 | $565,503 | | Total assets | $2,049,457 | $1,312,288 | | Total current liabilities | $254,936 | $218,447 | | Long-term debt | $566,400 | $137,682 | | Long-term finance leases and financing obligations | $298,373 | $238,089 | | Long-term operating lease liabilities | $170,954 | — | | Total liabilities | $1,315,017 | $612,778 | | Total shareholders' equity | $734,440 | $699,510 | Consolidated Statements of Comprehensive Income Highlights (Fiscal Years 2020, 2019, 2018, in thousands) | Metric | 2020 | 2019 | 2018 | | :------------------------------------------ | :----------- | :----------- | :----------- | | Sales | $1,256,524 | $1,200,230 | $1,127,815 | | Gross profit | $476,658 | $465,228 | $435,574 | | Operating income | $101,702 | $126,743 | $127,296 | | Income before income taxes | $74,274 | $100,360 | $103,454 | | Provision for income taxes | $16,250 | $20,608 | $39,519 | | Net income | $58,024 | $79,752 | $63,935 | | Comprehensive income | $55,671 | $79,464 | $63,545 | | Basic earnings per share | $1.73 | $2.41 | $1.94 | | Diluted earnings per share | $1.71 | $2.37 | $1.92 | Shareholders' Equity Changes (Fiscal Years 2018-2020, in thousands) | Metric | March 25, 2017 | March 31, 2018 | March 30, 2019 | March 28, 2020 | | :-------------------------------- | :------------- | :------------- | :------------- | :------------- | | Total Shareholders' Equity | $581,254 | $628,476 | $699,510 | $734,440 | | Net income | | $63,935 | $79,752 | $58,024 | | Dividends (Common) | | ($23,601) | ($26,406) | ($29,266) | | Stock-based compensation | | $2,858 | $4,022 | $3,813 | | Accounting change - cumulative effect | | | | ($582) | Consolidated Statements of Cash Flows Highlights (Fiscal Years 2020, 2019, 2018, in thousands) | Cash Flow Activity | 2020 | 2019 | 2018 | | :------------------------------------------ | :----------- | :----------- | :----------- | | Net cash provided by operating activities | $121,329 | $152,891 | $121,235 | | Net cash used for investing activities | ($158,811) | ($105,883) | ($58,490) | | Net cash provided by (used for) financing activities | $376,744 | ($42,703) | ($69,831) | | Increase (decrease) in cash | $339,262 | $4,305 | ($7,086) | | Cash at end of year | $345,476 | $6,214 | $1,909 | | Capital expenditures | ($55,918) | ($44,468) | ($39,122) | | Acquisitions, net of cash acquired | ($104,436) | ($62,427) | ($23,439) | | Proceeds from borrowings | $814,181 | $433,460 | $344,843 | | Principal payments on long-term debt, etc. | ($412,725) | ($463,989) | ($395,521) | Composition of Other Current Assets (Fiscal Years 2020, 2019, in thousands) | Asset | 2020 | 2019 | | :-------------------- | :------- | :------- | | Vendor rebates receivable | $16,232 | $14,169 | | Other | $24,305 | $28,283 | | **Total** | **$40,537** | **$42,452** | Major Classifications of Property, Plant and Equipment (Fiscal Years 2020, 2019, in thousands) | Classification | 2020 | 2019 | | :-------------------------------- | :----------- | :----------- | | Land | $84,765 | $85,623 | | Buildings and improvements | $272,724 | $251,431 | | Equipment, signage and fixtures | $278,324 | $256,411 | | Vehicles | $38,356 | $36,393 | | Construction-in-progress | $8,763 | $10,563 | | Property, plant and equipment | $682,932 | $640,421 | | Less - Accumulated depreciation | ($354,295) | ($327,869) | | **Property, plant and equipment, net** | **$328,637** | **$312,552** | Changes in Goodwill (Fiscal Years 2019-2020, in thousands) | Metric | Amount | | :-------------------------------- | :------- | | Balance at March 31, 2018 | $522,892 | | Fiscal 2019 acquisitions | $42,124 | | Adjustments to fiscal 2018 purchase accounting | $487 | | Balance at March 30, 2019 | $565,503 | | Fiscal 2020 acquisitions | $106,930 | | Adjustments to fiscal 2019 purchase accounting | ($590) | | **Balance at March 28, 2020** | **$671,843** | Composition of Other Intangible Assets (Fiscal Years 2020, 2019, in thousands) | Intangible Asset | 2020 Gross Carrying Amount | 2020 Accumulated Amortization | 2019 Gross Carrying Amount | 2019 Accumulated Amortization | | :----------------------- | :------------------------- | :---------------------------- | :------------------------- | :---------------------------- | | Customer lists | $42,511 | $26,333 | $39,710 | $23,258 | | Favorable leases | — | — | $30,315 | $11,049 | | Trade names | $21,252 | $12,072 | $21,252 | $10,851 | | Franchise agreements | $7,220 | $2,805 | $7,220 | $2,259 | | Other intangible assets | $590 | $582 | $590 | $563 | | **Total intangible assets** | **$71,573** | **$41,792** | **$99,087** | **$47,980** | Long-Term Debt (as of March 28, 2020 and March 30, 2019, in thousands) | Debt Type | March 28, 2020 | March 30, 2019 | | :-------------------------- | :------------- | :------------- | | Revolving Credit Facility | $566,400 | $137,682 | | Note payable | — | $40 | | **Long-term debt** | **$566,400** | **$137,682** | Disaggregated Revenue by Product Group (Fiscal Years 2020, 2019, 2018, in thousands) | Product Group | 2020 | 2019 | 2018 | | :-------------- | :----------- | :----------- | :----------- | | Brakes | $169,138 | $162,709 | $146,082 | | Exhaust | $25,058 | $28,713 | $26,969 | | Steering | $100,230 | $95,711 | $94,391 | | Tires | $634,513 | $601,295 | $560,398 | | Maintenance | $324,494 | $308,668 | $296,658 | | Other | $3,091 | $3,134 | $3,317 | | **Total** | **$1,256,524** | **$1,200,230** | **$1,127,815** | Components of Provision for Income Taxes (Fiscal Years 2020, 2019, 2018, in thousands) | Component | 2020 | 2019 | 2018 | | :---------- | :------- | :------- | :------- | | Current | $4,777 | $8,091 | $24,034 | | Deferred | $11,473 | $12,517 | $15,485 | | **Total** | **$16,250** | **$20,608** | **$39,519** | Net Deferred Tax (Liabilities) Assets (as of March 28, 2020 and March 30, 2019, in thousands) | Category | March 28, 2020 | March 30, 2019 | | :-------------------------- | :------------- | :------------- | | Total deferred tax liabilities | ($198,208) | ($113,970) | | Total deferred tax assets | $194,323 | $116,136 | | **Net deferred tax (liabilities) assets** | **($3,885)** | **$2,166** | Stock Options Outstanding (as of March 28, 2020) | Range of Exercise Prices | Shares Under Option | Weighted Average Remaining Life (years) | Weighted Average Exercise Price | | :----------------------- | :------------------ | :-------------------------------------- | :------------------------------ | | $43.99 - $46.99 | 5,500 | 3.62 | $44.82 | | $47.00 - $48.28 | 328,043 | 3.37 | $47.25 | | $48.29 - $64.99 | 168,316 | 1.95 | $57.77 | | $65.00 - $88.63 | 300,907 | 4.20 | $71.56 | | **Total** | **802,766** | **3.4** | **$58.55** | Earnings Per Common Share Reconciliation (Fiscal Years 2020, 2019, 2018, in thousands, except per share data) | Metric | 2020 | 2019 | 2018 | | :------------------------------------------ | :------- | :------- | :------- | | Income available to common stockholders | $57,575 | $79,344 | $63,567 | | Weighted average common shares, basic | 33,246 | 32,980 | 32,767 | | Weighted average common shares, diluted | 33,953 | 33,675 | 33,341 | | **Basic earnings per common share** | **$1.73** | **$2.41** | **$1.94** | | **Diluted earnings per common share** | **$1.71** | **$2.37** | **$1.92** | Lease Cost Components (Fiscal Year Ended March 28, 2020, in thousands) | Component | Amount | | :-------------------------------- | :------- | | Operating lease cost | $38,525 | | Finance lease/financing obligations cost (Amortization) | $21,033 | | Finance lease/financing obligations cost (Interest) | $21,330 | | Short term and variable lease cost | $2,194 | | Sublease income | ($166) | | **Total lease cost** | **$82,916** | Future Maturities of Lease Liabilities (as of March 28, 2020, in thousands) | Year | Operating Leases | Finance Leases and Financing Obligations | | :--- | :--------------- | :------------------------------------- | | 2021 | $36,590 | $52,480 | | 2022 | $33,321 | $52,270 | | 2023 | $29,253 | $53,607 | | 2024 | $24,778 | $45,794 | | 2025 | $21,448 | $42,072 | | Thereafter | $93,232 | $214,964 | | **Total undiscounted lease obligations** | **$238,622** | **$461,187** | | Less: imputed interest | ($37,487) | ($130,557) | | **Net lease obligation** | **$201,135** | **$330,630** | Contractual Obligations (as of March 28, 2020, in thousands) | Obligation Type | Total | Within 1 Year | 2 to 3 Years | 4 to 5 Years | After 5 Years | | :------------------------------------ | :---------- | :------------ | :----------- | :----------- | :------------ | | Principal payments on long-term debt | $566,400 | — | — | $566,400 | — | | Finance lease commitments/obligations | $461,187 | $52,480 | $105,877 | $87,866 | $214,964 | | Operating lease commitments | $238,622 | $36,590 | $62,574 | $46,226 | $93,232 | | Other liabilities | $1,933 | $800 | $1,133 | — | — | | **Total** | **$1,268,142** | **$89,870** | **$169,584** | **$700,492** | **$308,196** | Selected Quarterly Financial Information (Fiscal Year Ended March 2020, in thousands, except per share data) | Metric | June 2019 | Sept. 2019 | Dec. 2019 | March 2020 | | :------------------------------------------ | :---------- | :---------- | :---------- | :---------- | | Sales | $317,063 | $324,113 | $329,281 | $286,066 | | Gross profit | $128,147 | $122,073 | $124,352 | $102,087 | | Operating income | $36,371 | $33,357 | $31,571 | $404 | | Net income (loss) | $22,606 | $20,314 | $18,880 | ($3,776) | | Diluted earnings (loss) per share | $0.67 | $0.60 | $0.56 | ($0.12) | PART III [Item 10. Directors, Executive Officers and Corporate Governance](index=67&type=section&id=Item%2010.%20Directors%2C%20Executive%20Officers%20and%20Corporate%20Governance) Information on directors, officers, and governance policies is incorporated by reference from the company's proxy statement - Information concerning directors, executive officers, and corporate governance is incorporated by reference from the Proxy Statement[381](index=381&type=chunk)[382](index=382&type=chunk) - Monro's Code of Ethics for All Board Members, Executive Officers and Management Teammates is available on its website[383](index=383&type=chunk) [Item 11. Executive Compensation](index=67&type=section&id=Item%2011.%20Executive%20Compensation) Details on executive compensation are incorporated by reference from the company's proxy statement - Information concerning executive compensation is incorporated by reference to the Proxy Statement[384](index=384&type=chunk) [Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters](index=67&type=section&id=Item%2012.%20Security%20Ownership%20of%20Certain%20Beneficial%20Owners%20and%20Management%20and%20Related%20Stockholder%20Matters) Information on security ownership and equity compensation plans is incorporated by reference from the company's proxy statement - Information concerning security ownership of certain beneficial owners and management, and equity compensation plan information, is incorporated by reference from the Proxy Statement[385](index=385&type=chunk)[386](index=386&type=chunk) [Item 13. Certain Relationships and Related Transactions and Director Independence](index=67&type=section&id=Item%2013.%20Certain%20Relationships%20and%20Related%20Transactions%20and%20Director%20Independence) Information on related party transactions and director independence is incorporated by reference from the company's proxy statement - Information concerning certain relationships and related transactions and director independence is incorporated by reference from the Proxy Statement[387](index=387&type=chunk) [Item 14. Principal Accountant Fees and Services](index=67&type=section&id=Item%2014.%20Principal%20Accountant%20Fees%20and%20Services) Information regarding principal accountant fees and services is incorporated by reference from the company's proxy statement - Information concerning principal accountant fees and services is incorporated by reference from the Proxy Statement[388](index=388&type=chunk) PART IV [Item 15. Exhibits and Financial Statement Schedules](index=68&type=section&id=Item%2015.%20Exhibits%20and%20Financial%20Statement%20Schedules) This section lists all exhibits filed with the Form 10-K, while financial statement schedules have been omitted - Financial statements are referenced from Item 8 of Part II[391](index=391&type=chunk) - Financial statement schedules have been omitted because they are inapplicable, not required, or the information is included elsewhere[392](index=392&type=chunk) - A comprehensive index to exhibits is provided, detailing various corporate and contractual documents[396](index=396&type=chunk) [Item 16. Form 10-K Summary](index=70&type=section&id=Item%2016.%20Form%2010-K%20Summary) The company has not provided a summary for its Form 10-K - No Form 10-K Summary is provided[398](index=398&type=chunk)

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ____________________________________________________________ FORM 10-Q ____________________________________________________________ (Mark One) x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended December 28, 2019. OR ¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _____________ ...

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ____________________________________________________________ FORM 10-Q ____________________________________________________________ (Mark One) x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 28, 2019. OR ¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _____________ ...

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ____________________________________________________________ FORM 10-Q ____________________________________________________________ (Mark One) x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 29, 2019. OR ¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _____________ to _ ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 _________________________________________ FORM 10-K _________________________________________ (Mark One) ☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended March 30, 2019 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM ______ TO ______ Commission File Number 0-19357 __________________________________ ...

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ____________________________________________________________ FORM 10-Q ____________________________________________________________ (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended December 29, 2018. OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _____________ ...