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 ~~25, 2022~~24, 2023

¨ 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

____________________________________________________________

Monro, Inc.

(Exact name of registrant as specified in its charter)

____________________________________________________________


New York	16-0838627
(State or other jurisdiction of	(I.R.S. Employer
incorporation or organization)	Identification No.)

200 Holleder Parkway, Rochester, New York	14615
(Address of principal executive offices)	(Zip code)

Registrant’s telephone number, including area code: (585) 647-6400

_________________________________________

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading

Symbol(s)

Name of each exchange on which registered

Common Stock, par value $0.01 per share

MNRO

The Nasdaq Stock Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. x Yes ¨ No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). x Yes ¨ No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer x Accelerated filer ¨ Non-accelerated filer ¨ Smaller reporting company ¨ Emerging growth company ¨

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ¨ Yes x No

As of July ~~22, 2022, 32,197,220~~15, 2023, 31,418,008 shares of the registrant's common stock, $0.01 par value per share, were outstanding.

Table of Contents

TABLE OF CONTENTS


PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Consolidated Balance Sheets	3
Consolidated Statements of Income and Comprehensive Income	4
Consolidated Statements of Changes in Shareholders’ Equity	5
Consolidated Statements of Cash Flows	6
Notes to Consolidated Financial Statements	8
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations	1514
Item 3. Quantitative and Qualitative Disclosures About Market Risk	2322
Item 4. Controls and Procedures	2322
PART II. OTHER INFORMATION
Item 1. Legal Proceedings	24
~~Item 2. UnregisteredSales of Equity Securities and Use of Proceeds~~	2423
Item 6. Exhibits	2524
Signatures	2625

‎

Monro, Inc. Q1 ~~2023~~2024 Form 10-Q

Table of Contents

CONSOLIDATED FINANCIAL STATEMENTS

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

Consolidated Balance Sheets



(thousands, except footnotes) (unaudited)	June 25, 2022		March 26, 2022		June 24, 2023		March 25, 2023
Assets
Current assets
Cash and equivalents	$	30,648	$	7,948	$	15,316	$	4,884
Accounts receivable		11,850		14,797		14,120		13,294
Inventories		128,666		166,271		141,165		147,397
Other current assets		76,157		56,486		79,996		92,892
Total current assets		247,321		245,502		250,597		258,467
Property and equipment, net		307,932		315,193		300,097		304,989
Finance lease and financing obligation assets, net		253,259		268,406		207,056		217,174
Operating lease assets, net		209,875		213,588		208,562		211,101
Goodwill		730,293		776,714		736,435		736,457
Intangible assets, net		19,087		26,682		15,719		16,562
Other non-current assets		43,374		20,174		33,469		29,365
Long-term deferred income tax assets		4,591		5,153		2,082		2,762
Total assets	$	1,815,732	$	1,871,412	$	1,754,017	$	1,776,877
Liabilities and shareholders' equity
Current liabilities
Current portion of finance leases and financing obligations	$	41,213	$	42,092	$	39,948	$	39,982
Current portion of operating lease liabilities		34,624		34,692		38,142		37,520
Accounts payable		155,948		131,989		275,626		261,724
Federal and state income taxes payable		15,850		2,921		2,005		541
Accrued payroll, payroll taxes and other payroll benefits		24,344		18,540		23,247		15,951
Accrued insurance		51,251		49,391		53,405		47,741
Deferred revenue		14,500		14,153		15,456		15,422
Other current liabilities		32,084		28,186		32,848		30,296
Total current liabilities		369,814		321,964		480,677		449,177
Long-term debt		110,000		176,466		65,000		105,000
Long-term finance leases and financing obligations		339,775		357,475		281,933		295,281
Long-term operating lease liabilities		189,973		192,637		188,624		191,107
Other long-term liabilities		11,330		10,821		10,725		10,721
Long-term deferred income tax liabilities		24,552		28,560		31,679		30,460
Long-term income taxes payable		612		583		211		209
Total liabilities		1,046,056		1,088,506		1,058,849		1,081,955
Commitments and contingencies - Note 9
Shareholders' equity:
Class C Convertible Preferred stock		29		29		29		29
Common stock		399		399		400		400
Treasury stock		(125,945)		(108,729)		(205,648)		(205,648)
Additional paid-in capital		245,689		244,577		250,981		250,702
Accumulated other comprehensive loss		(4,593)		(4,494)		(4,021)		(4,115)
Retained earnings		654,097		651,124		653,427		653,554
Total shareholders' equity		769,676		782,906		695,168		694,922
Total liabilities and shareholders' equity	$	1,815,732	$	1,871,412	$	1,754,017	$	1,776,877

Class C Convertible Preferred stock Authorized 150,000 shares, $1.50 par value, $0.064 conversion value; 19,664 shares issued and outstanding

Common stock Authorized 65,000,000 shares, $0.01 par value; ~~39,920,441~~39,979,129 shares issued as of June ~~25, 2022~~24, 2023 and ~~39,906,561~~39,966,401 shares issued as of March ~~26, 2022~~25, 2023

Treasury stock ~~6,773,471~~8,561,121 shares as of June 24, 2023 and March 25, ~~2022 and 6,359,871 shares as of March 26, 2022,~~2023, at cost

See accompanying Notes to Consolidated Financial Statements.

Monro, Inc. Q1 ~~2023~~2024 Form 10-Q

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CONSOLIDATED FINANCIAL STATEMENTS

Consolidated Statements of Income and Comprehensive Income



	Three Months Ended				Three Months Ended
(thousands, except per share data) (unaudited)	June 25, 2022		June 26, 2021		June 24, 2023		June 25, 2022
Sales	$	349,535	$	341,818	$	326,968	$	349,535
Cost of sales, including distribution and occupancy costs		227,346		215,887		212,572		227,346
Gross profit		122,189		125,931		114,396		122,189
Operating, selling, general and administrative expenses		95,934		98,014		97,047		95,934
Operating income		26,255		27,917		17,349		26,255
Interest expense, net of interest income		5,658		6,941		5,208		5,658
Other income, net		(78)		(44)		(58)		(78)
Income before income taxes		20,675		21,020		12,199		20,675
Provision for income taxes		8,191		5,339		3,370		8,191
Net income	$	12,484	$	15,681	$	8,829	$	12,484
Other comprehensive loss
Other comprehensive income (loss)
Changes in pension, net of tax		(99)		(103)		94		(99)
Other comprehensive loss		(99)		(103)
Other comprehensive income (loss)						94		(99)
Comprehensive income	$	12,385	$	15,578	$	8,923	$	12,385
Earnings per share
Basic	$	0.37	$	0.46	$	0.28	$	0.37
Diluted	$	0.37	$	0.46	$	0.28	$	0.37
Weighted average common shares outstanding
Basic		33,483		33,498		31,415		33,483
Diluted		33,986		34,022		31,954		33,986

See accompanying Notes to Consolidated Financial Statements.

‎

Monro, Inc. Q1 ~~2023~~2024 Form 10-Q

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CONSOLIDATED FINANCIAL STATEMENTS

Consolidated Statements of Changes in Shareholders’ Equity



	Class C											Accumulated						Class C											Accumulated
	Convertible									Additional		Other						Convertible									Additional		Other
	Preferred Stock			Common Stock			Treasury Stock			Paid-In		Comprehensive		Retained		Total		Preferred Stock			Common Stock			Treasury Stock			Paid-In		Comprehensive		Retained		Total
(thousands) (unaudited)	Shares	Amount		Shares	Amount		Shares	Amount		Capital		Loss		Earnings		Equity		Shares	Amount		Shares	Amount		Shares	Amount		Capital		Loss		Earnings		Equity
Balance at March 27, 2021	20	$	29	39,848	$	398	6,360	$	(108,729)	$	238,244	$	(4,619)	$	624,361	$	749,684
Net income															15,681		15,681
Other comprehensive loss
Pension liability adjustment													(103)				(103)
Dividends declared
Preferred															(110)		(110)
Common															(8,042)		(8,042)
Dividend payable															(14)		(14)
Stock options and restricted stock				17		1					739						740
Stock-based compensation											755						755
Balance at June 26, 2021	20	$	29	39,865	$	399	6,360	$	(108,729)	$	239,738	$	(4,722)	$	631,876	$	758,591

Balance at March 26, 2022	20	$	29	39,907	$	399	6,360	$	(108,729)	$	244,577	$	(4,494)	$	651,124	$	782,906	20	$	29	39,907	$	399	6,360	$	(108,729)	$	244,577	$	(4,494)	$	651,124	$	782,906
Net income															12,484		12,484															12,484		12,484
Other comprehensive loss
Pension liability adjustment													(99)				(99)													(99)				(99)
Dividends declared
Preferred															(129)		(129)															(129)		(129)
Common															(9,337)		(9,337)															(9,337)		(9,337)
Dividend payable															(45)		(45)															(45)		(45)
Repurchase of stock							413		(17,216)								(17,216)							413		(17,216)								(17,216)
Stock options and restricted stock				13							(41)						(41)				13							(41)						(41)
Stock-based compensation											1,153						1,153											1,153						1,153
Balance at June 25, 2022	20	$	29	39,920	$	399	6,773	$	(125,945)	$	245,689	$	(4,593)	$	654,097	$	769,676	20	$	29	39,920	$	399	6,773	$	(125,945)	$	245,689	$	(4,593)	$	654,097	$	769,676

Balance at March 25, 2023																		20	$	29	39,966	$	400	8,561	$	(205,648)	$	250,702	$	(4,115)	$	653,554	$	694,922
Net income																																8,829		8,829
Other comprehensive income
Pension liability adjustment																														94				94
Dividends declared
Preferred																																(129)		(129)
Common																																(8,797)		(8,797)
Dividend payable																																(30)		(30)
Repurchase of stock																																		—
Stock options and restricted stock																					13							(260)						(260)
Stock-based compensation																												539						539
Balance at June 24, 2023																		20	$	29	39,979	$	400	8,561	$	(205,648)	$	250,981	$	(4,021)	$	653,427	$	695,168

We declared $0.28 ~~and $0.24~~ dividends per common share or equivalent for the three months ended June 24, 2023 and the three months ended June 25, ~~2022 and June 26, 2021, respectively.~~2022.

See accompanying Notes to Consolidated Financial Statements.

‎

Monro, Inc. Q1 ~~2023~~2024 Form 10-Q

Table of Contents

CONSOLIDATED FINANCIAL STATEMENTS

Consolidated Statements of Cash Flows



	Three Months Ended				Three Months Ended
(thousands) (unaudited)	June 25, 2022		June 26, 2021		June 24, 2023		June 25, 2022
Operating activities
Net income	$	12,484	$	15,681	$	8,829	$	12,484
Adjustments to reconcile net income to cash provided by operating activities:
Depreciation and amortization		20,100		20,278		18,390		20,100
Share-based compensation expense		1,153		755		539		1,153
Loss (gain) on disposal of assets		377		(168)
(Gain) loss on disposal of assets						(896)		377
Gain on divestiture		(2,394)		—		—		(2,394)
Deferred income tax expense		(3,409)		2,931		1,866		(3,409)
Change in operating assets and liabilities (excluding acquisitions)
Accounts receivable		(1,038)		(98)		(826)		(1,038)
Inventories		184		(4,110)		6,334		184
Other current assets		(31)		(4,853)		13,990		(31)
Other non-current assets		9,256		7,950		129		9,256
Accounts payable		23,959		9,000		13,902		23,959
Accrued expenses		11,626		15,648		17,306		11,626
Federal and state income taxes payable		12,929		7,759		1,464		12,929
Other long-term liabilities		(8,020)		(8,114)		(9,298)		(8,020)
Long-term income taxes payable		29		55		2		29
Cash provided by operating activities		77,205		62,714		71,731		77,205
Investing activities
Capital expenditures		(8,213)		(5,199)		(7,680)		(8,213)
Acquisitions, net of cash acquired		(241)		(62,059)		—		(241)
Proceeds from divestiture		56,586		—		—		56,586
Deferred proceeds received from divestiture						3,942		—
Proceeds from the disposal of assets		724		429		1,108		724
Other		—		67
Cash provided by (used for) investing activities		48,856		(66,762)
Cash (used for) provided by investing activities						(2,630)		48,856
Financing activities
Proceeds from borrowings		43,909		77,000		16,754		43,909
Principal payments on long-term debt, finance leases and financing obligations		(120,588)		(78,661)		(66,514)		(120,588)
Repurchase of stock		(17,216)		—		—		(17,216)
Exercise of stock options		—		779		17		—
Dividends paid		(9,466)		(8,152)		(8,926)		(9,466)
Cash used for financing activities		(103,361)		(9,034)		(58,669)		(103,361)
Increase (decrease) in cash and equivalents		22,700		(13,082)
Increase in cash and equivalents						10,432		22,700
Cash and equivalents at beginning of period		7,948		29,960		4,884		7,948
Cash and equivalents at end of period	$	30,648	$	16,878	$	15,316	$	30,648
Supplemental information
Leased assets (reduced) obtained in exchange for (reduced) new finance lease liabilities	$	(989)	$	6,599	$	(2,158)	$	(989)
Leased assets obtained in exchange for new operating lease liabilities	$	7,878	$	1,382	$	6,436	$	7,878

See accompanying Notes to Consolidated Financial Statements.

Monro, Inc. Q1 ~~2023~~2024 Form 10-Q

Table of Contents

INDEX TO NOTES




Notes to Consolidated Financial Statements (unaudited)
Note 1 Description of Business and Basis of Presentation	8
Note 2 Acquisitions and Divestitures	9
Note 3 Earnings per Common Share	1110
Note 4 Income Taxes	1110
Note 5 Fair Value	1110
Note 6 Cash Dividend	1110
Note 7 Revenues	1211
Note 8 Long-term Debt	1211
Note 9 Commitments and Contingencies	1312
Note 10 Supplier Finance Program	13
Note 11 Share Repurchase	1413

Monro, Inc. Q1 ~~2023~~2024 Form 10-Q

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CONSOLIDATED FINANCIAL STATEMENTS

NOTES

Note 1 – Description of Business and Basis of Presentation

Description of business

Monro, Inc. and its direct and indirect subsidiaries (together, “Monro”, the “Company”, “we”, “us”, or “our”), are engaged principally in providing automotive undercar repair and tire replacement sales and tire related services in the United States. Monro had ~~1,303~~1,299 Company-operated retail stores located in 32 states and 8076 franchised locations as of June ~~25, 2022.~~24, 2023.

A certain number of our retail locations also service commercial customers. Our locations that serve commercial customers generally operate consistently with our other retail locations, except that the sales mix for these locations includes a higher number of commercial tires.

Monro’s operations are organized and managed as 1one single segment designed to offer to our customers replacement tires and tire related services, automotive undercar repair services as well as a broad range of routine maintenance services, primarily on passenger cars, light trucks and vans. We also provide other products and services for brakes; mufflers and exhaust systems; and steering, drive train, suspension and wheel alignment.

Basis of presentation

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with the rules and regulations of the Securities and Exchange Commission (“SEC”) applicable to interim financial statements. While these statements reflect all adjustments (consisting of items of a normal recurring nature) that are, in the opinion of management, necessary for a fair statement of the results of the interim period, they do not include all of the information and footnotes required by United States generally accepted accounting principles (“~~U.S.~~ GAAP”) for complete financial statement presentation. The consolidated financial statements should be read in conjunction with the financial statement disclosures in our Form 10-K for the fiscal year ended March ~~26, 2022.~~25, 2023.

We use the same significant accounting policies in preparing quarterly and annual financial statements. For a description of our significant accounting policies followed in the preparation of the financial statements, see Note 1 of our Form 10-K for the fiscal year ended March ~~26, 2022.~~25, 2023.

Due to the seasonal nature of our business, quarterly operating results and cash flows are not necessarily indicative of the results that may be expected for other interim periods or the full year.

Fiscal year

We operate on a 52/53 week fiscal year ending on the last Saturday in March. Fiscal ~~years~~year 2024 covers 53 weeks and fiscal year 2023 ~~and 2022 each contain~~covers 52 weeks. Unless specifically indicated otherwise, any references to “2024” or “fiscal 2024” and “2023” or “fiscal 2023” ~~and “2022” or “fiscal 2022”~~ relate to the years ending March ~~25, 2023~~30, 2024 and March ~~26, 2022,~~25, 2023, respectively.

Recent accounting pronouncements

In ~~October 2021,~~September 2022, the Financial Accounting Standards Board (“FASB”) issued new accounting guidance which requires certain disclosure for supplier finance programs used in connection with the purchase of goods and services. We adopted this guidance during the first quarter of fiscal 2024, other than the roll forward information disclosure which we expect to adopt during the first quarter of the fiscal year ended March 29, 2025. The adoption of this guidance did not have a material impact on our consolidated financial statements.

In October 2021, the FASB issued new accounting guidance which requires an acquiring entity to recognize and measure contract assets and contract liabilities acquired in a business combination as if they entered into the original contract at the same time and same date as the acquiree. ~~This~~We adopted this guidance ~~is effective for~~during the first quarter of fiscal ~~years and interim periods within those years beginning after December 15, 2022. Early~~2024. The adoption ~~is permitted. We are currently evaluating the~~of this guidance did not have a material impact ~~of adopting this guidance.~~on our consolidated financial statements.

Other recent authoritative guidance issued by the FASB (including technical corrections to the Accounting Standards ~~Codification)~~Codification (“ASC”)) and the SEC did not or are not expected to have a material effect on our consolidated financial statements.

~~Working capital management~~

As part of our ongoing efforts to manage our working capital and improve our cash flow, we work with suppliers to optimize our purchasing terms and conditions, including extending payment terms. We also facilitate a voluntary supply chain financing program to provide some of our suppliers with the opportunity to sell receivables due from us (our accounts payable) to a participating financial institution at the sole discretion of both the supplier and the financial institution. Should a supplier choose to participate in the program, it will receive payment from the financial institution in advance of agreed payment terms; our responsibility is limited to

Monro, Inc. Q1 ~~2023~~2024 Form 10-Q

Table of Contents

CONSOLIDATED FINANCIAL STATEMENTS

NOTES

making payments to the respective financial institution on the terms originally negotiated with our supplier. We have concluded that the program is a trade payable program and not indicative of a borrowing arrangement.

Supplemental information

Property and equipment, net: Property and equipment balances are shown on the Consolidated Balance Sheets net of accumulated depreciation of ~~$411.8~~$434.0 million and ~~$414.2~~$426.7 million as of June ~~25, 2022~~24, 2023 and March ~~26, 2022,~~25, 2023, respectively.

Note 2 – Acquisitions and Divestitures

Acquisitions

Monro’s acquisitions are strategic moves in our plan to fill in and expand our presence in our existing and contiguous markets, expand into new markets and leverage fixed operating costs such as distribution, advertising, and administration. ~~Acquisitions in this note generally include acquisitions of 5 or more locations as well as acquisitions of 1 to 4 locations that are part of our greenfield store growth strategy.~~

~~2022~~

~~On April 25, 2021,~~During 2023, we acquired 30six retail tire and automotive repair stores located in California from Mountain View Tire & Service, Inc. These stores operate under the Mountain View Tire & Service name. The acquisition was financed through our Credit Facility, as defined instores. ~~Note 8. The results of operations for this acquisition are included in our financial results from the acquisition date.~~

The acquisition resulted in goodwill related to, among other things, growth opportunities, synergies and economies of scale expected from combining the business with ours, as well as unidentifiable intangible assets. All of the goodwill is expected to be deductible for tax purposes.

We expensed all costs related to the acquisition in the three months ended June 26, 2021. The total costs related to the completed acquisition were $0.3 million and these costs are included in the Consolidated Statements of Income and Comprehensive Income primarily under operating, selling, general and administrative (“OSG&A”) expenses.

~~Sales related to the completed acquisition totaled $7.9 million for the period from acquisition date through June 26, 2021.~~

Supplemental pro forma information for the current or prior reporting periods has not been presented due to the impracticability of obtaining detailed, accurate or reliable data for the periods the acquired entities were not owned by Monro.

We accounted for the ~~2022 acquisition~~2023 acquisitions as a business ~~combination~~combinations using the acquisition method of accounting ~~and we finalized~~in accordance with the ~~purchase accounting related to the 2022 acquisition during 2023. As a result~~FASB ASC Topic 805, “Business Combinations.” See Note 2 of ~~the updated purchase price allocation~~our Form 10-K for the 2022 acquisition, certain of the fair value amounts previously estimated were adjusted during the measurement period. These measurement period adjustments resulted from updated valuation reports and appraisals received from our external valuation specialists, as well as revisions to internal estimates. The measurement period adjustments were not material to the Consolidated Balance Sheet as of Junefiscal year ended March 25, ~~2022 and the Consolidated Statement of Income and Comprehensive Income~~2023 for ~~the three months ended June 25, 2022.~~

The acquired assets and liabilities assumed were recorded at their assigned acquisition-date fair values and were consolidated with those of the Company as of the acquisition date. The consideration transferred and net liabilities assumed were recorded as goodwill.

~~Monro, Inc.~~ ~~Q1 2023 Form 10-Q~~

~~Table of Contents~~

~~CONSOLIDATED FINANCIAL STATEMENTS~~

~~NOTES~~



~~2022 Acquisition-date Fair Values Assigned~~
~~(thousands)~~
~~Inventory~~	$	~~937~~
~~Other current assets~~		~~217~~
~~Property and equipment~~		~~2,939~~
~~Finance lease and financing obligation assets~~		~~15,758~~
~~Operating lease assets~~		~~17,545~~
~~Intangible assets~~		~~2,211~~
~~Other non-current assets~~		63
~~Long-term deferred income tax assets~~		~~4,001~~
~~Total assets acquired~~		~~43,671~~
~~Current portion of finance leases and financing obligations~~		~~1,447~~
~~Current portion of operating lease liabilities~~		~~1,698~~
~~Deferred revenue~~		~~955~~
~~Other current liabilities~~		~~208~~
~~Long-term finance leases and financing obligations~~		~~21,957~~
~~Long-term operating lease liabilities~~		~~22,447~~
~~Other long-term liabilities~~		~~754~~
~~Total liabilities assumed~~		~~49,466~~
~~Total net identifiable liabilities assumed~~	$	~~(5,795)~~
~~Total consideration transferred~~	$	~~62,127~~
~~Less: total net identifiable liabilities assumed~~		~~(5,795)~~
~~Goodwill~~	$	~~67,922~~

~~The total consideration of $62.1 million is comprised of $61.0 million in cash and $1.1 million which is due upon finalization of certain lease assignment terms for one store location.~~

We recorded $2.2 million amortizable intangible assets, including a customer list and a trade name, with a weighted-average amortizable period of approximately eight years. We have recorded acquired right-of-use assets at the present value of remaining lease payments adjusted to reflect favorable or unfavorable market terms of the lease.additional information.

We continue to refine the valuation data and estimates primarily related to inventory, warranty reserves, intangible assets, real property leases, and certain liabilities for the ~~2022~~2023 acquisitions ~~that closed subsequent to June 26, 2021~~ and expect to complete the valuations no later than the first anniversary date of the acquisition. We anticipate that adjustments will continue to be made to the fair values of identifiable assets acquired and liabilities ~~assumed, and those adjustments may or may not be material.~~assumed.

~~Divestitures~~Divestiture

On June 17, 2022, we completed the divestiture of assets relating to our wholesale tire operations (7(seven locations) and internal tire distribution operations to American Tire Distributors, Inc. (“ATD”). We received $62 million from ATD at the closing of the transaction, of which $5 million is currently being held in escrow. The remaining $40 million (“Earnout”) of the total consideration of $102 million will be paid quarterly over approximately two years based on our tire purchases from or through ATD pursuant to a distribution and fulfillment agreement with ATD. We received $3.9 million of the Earnout during the first quarter of fiscal 2024 and $27.4 million of the Earnout is outstanding as of June 24, 2023. Under ~~the~~a distribution agreement between us and ATD, ATD agreed to supply and sell tires to retail locations we own. After ATD satisfies the Earnout payments, our company-owned retail stores will be required to purchase at least 90 percent of their forecasted requirements for certain passenger car tires, light truck replacement tires, and medium truck tires from or through ATD. Any tires that ATD is unable to supply or fulfill from those categories will be excluded from the calculation of our requirements for tires. The initial term of the distribution agreement is five years after the completion of the Earnout Period, with automatic 12-month renewal periods thereafter. The divestiture enables us to focus our resources on our core retail business operations. In connection with this transaction, we recognized a pre-tax gain of $2.4 million within OSG&A ~~expenses.~~expenses that was recorded during the three months ended June 24, 2023. We also expensed $1.2 million of closing costs and costs associated with the closing of a related warehouse within OSG&A ~~expenses.~~expenses during the three months ended June 24, 2023. We finalized the impact of these associated closing costs in addition to the subsequent gain on the sale of related warehouses, as well as costs in connection with restructuring and elimination of certain management positions upon completion of the divestiture, during the remainder of fiscal 2023. See Note 2 of our Form 10-K for the fiscal year ended March 25, 2023 for additional information. The divestiture did not meet the criteria to be reported as discontinued operations in our consolidated financial statements as our decision to divest this business did not represent a strategic shift that will have a major effect on our operations and financial results. For additional information regarding discrete tax impacts because of the divestiture, see Note 4.

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CONSOLIDATED FINANCIAL STATEMENTS

NOTES

Note 3 – Earnings per Common Share

Basic earnings per common share amounts are calculated by dividing income available to common shareholders, after deducting preferred stock dividends, by the weighted average number of shares of common stock outstanding. Diluted earnings per common share amounts are calculated by dividing net income by the weighted average number of shares of common stock outstanding adjusted to give effect to potentially dilutive securities.



Earnings per Common Share	Three Months Ended				Three Months Ended
(thousands, except per share data)	June 25, 2022		June 26, 2021		June 24, 2023		June 25, 2022
Numerator for earnings per common share calculation:
Net income	$	12,484	$	15,681	$	8,829	$	12,484
Less: Preferred stock dividends		(129)		(110)		(129)		(129)
Income available to common shareholders	$	12,355	$	15,571	$	8,700	$	12,355
Denominator for earnings per common share calculation:
Weighted average common shares - basic		33,483		33,498		31,415		33,483
Effect of dilutive securities:
Preferred stock		460		460		460		460
Stock based awards		43		64
Stock options						1		—
Restricted stock						78		43
Weighted average common shares - diluted		33,986		34,022		31,954		33,986

Basic earnings per common share	$	0.37	$	0.46	$	0.28	$	0.37
Diluted earnings per common share	$	0.37	$	0.46	$	0.28	$	0.37

Weighted average common share equivalents that have an anti-dilutive impact are excluded from the computation of diluted earnings per share.

Note 4 – Income Taxes

For the three months ended June ~~25, 2022,~~24, 2023, our effective income tax rate was ~~39.6~~27.6 percent, compared to ~~25.4~~39.6 percent for the three months ended June ~~26, 2021.~~25, 2022. Our effective income tax rate for the three months ended June 25, 2022 was higher by 12.8 percent because of discrete tax impacts from the divestiture of assets relating to our wholesale tire operations and internal tire distribution operations as well as the revaluation of deferred tax balances due to changes in the mix of pre-tax income in various U.S. state jurisdictions because of the divestiture. Our effective income tax rate for the three months ended June 24, 2023 and June 25, 2022 was ~~also~~ higher by 1.1 percent and 0.8 percent, respectively, due to the discrete tax impact related to share-based awards.

Note 5 – Fair Value

Long-term debt had a carrying amount that approximates a fair value of ~~$110.0~~$65.0 million as of June ~~25, 2022,~~24, 2023, as compared to a carrying amount and a fair value of ~~$176.5~~$105.0 million as of March ~~26, 2022.~~25, 2023. The carrying value of our debt approximated its fair value due to the variable interest nature of the debt.

Note 6 – Cash Dividend

We paid dividends of ~~$9.5~~$8.9 million during the three months ended June ~~25, 2022.~~24, 2023. The declaration ~~and payment~~ of future dividends will be at the discretion of the Board of Directors and will depend on our financial condition, results of operations, capital requirements, compliance with charter and ~~Credit Facility~~contractual restrictions, and such other factors as the Board of Directors deems relevant. Under our Credit Facility, there are no restrictions on our ability to declare dividends as long as we are in compliance with the covenants in the Credit Facility. For additional information regarding our Credit Facility, see Note 8.

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CONSOLIDATED FINANCIAL STATEMENTS

NOTES

Note 7 – Revenues

Automotive undercar repair, tire replacement sales and tire related services represent the vast majority of our revenues. We also earn revenue from the sale of tire road hazard warranty agreements as well as commissions earned from the delivery of tires on behalf of certain tire vendors.

Revenue from automotive undercar repair, tire replacement sales and tire related services is recognized at the time the customers take possession of their vehicle or merchandise. For sales to certain customers that are financed through the offering of credit on account, payment terms are established for customers based on our pre-established credit requirements. Payment terms may vary depending on the customer and generally are 30 days. Based on the nature of receivables, no significant financing components exist. Sales are recorded net of discounts, sales incentives and rebates, sales taxes and estimated returns and allowances. We estimate the reduction to sales and cost of sales for returns based on current sales levels and our historical return experience. Such amounts are immaterial to our consolidated financial statements.



Revenues	Three Months Ended				Three Months Ended
(thousands)	June 25, 2022		June 26, 2021		June 24, 2023		June 25, 2022
Tires ^(a)	$	173,064	$	176,229	$	152,128	$	173,064
Maintenance		90,292		84,459		92,913		90,292
Brakes		49,155		45,975		47,598		49,155
Steering		29,981		28,266		28,363		29,981
Exhaust		6,275		5,789		5,216		6,275
Other		768		1,100		750		768
Total	$	349,535	$	341,818	$	326,968	$	349,535

(a) Includes the sale of tire road hazard warranty agreements and tire delivery commissions.

Revenue from the sale of tire road hazard warranty agreements is initially deferred and is recognized over the contract period as costs are expected to be incurred in performing such services, typically 21 to 36 months. The deferred revenue balances at June ~~25, 2022~~24, 2023 and March ~~26, 2022~~25, 2023 were ~~$21.1~~$22.3 million and ~~$20.6~~$22.4 million, respectively, of which ~~$14.5~~$15.5 million and ~~$14.2~~$15.4 million, respectively, are reported in Deferred revenue and ~~$6.6~~$6.8 million and ~~$6.4~~$7.0 million, respectively, are reported in Other long-term liabilities in our Consolidated Balance Sheets.



Changes in Deferred Revenue
(thousands)
Balance at March ~~26, 2022~~25, 2023	$	~~20,632~~22,354
Deferral of revenue		~~5,665~~5,529
Recognition of revenue		~~(5,184)~~(5,571)
Balance at June ~~25, 2022~~24, 2023	$	~~21,113~~22,312

As of June ~~25, 2022~~24, 2023, we expect to recognize ~~$12.0~~$12.8 million of deferred revenue related to road hazard warranty agreements in the remainder of fiscal ~~2023, $7.2~~2024, $7.6 million of deferred revenue during our fiscal year ending March ~~31, 2024~~29, 2025, and $1.9 million of deferred revenue ~~thereafter.~~thereafter.

Under various arrangements, we receive from certain tire vendors a delivery commission and reimbursement for the cost of the tire that we may deliver to customers on behalf of the tire vendor. The commission we earn from these transactions is as an agent and the net amount retained is recorded as sales.

Note 8 – Long-term Debt

Credit Facility

In April 2019, we entered into a ~~new~~ five year $600 million revolving credit facility agreement with 8eight banks (the “Credit Facility”). Interest only is payable monthly throughout the Credit Facility’s term. The borrowing capacity for the Credit Facility of $600 million includes an accordion feature permitting us to request an increase in availability of up to an additional $250 million. The Credit Facility initially bore interest at 75 to 200 basis points over the London Interbank Offered Rate (“LIBOR”) (or replacement index) or at the prime rate, depending on the type of borrowing and the rates then in effect.

On June 11, 2020, we entered into a First Amendment to the Credit Facility (the “First Amendment”), which, among other things, amended the terms of certain of the financial and restrictive covenants in the credit agreement through the first quarter of the fiscal year ended March 26, 2022 to provide us with additional flexibility to operate our business. The First Amendment amended the

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CONSOLIDATED FINANCIAL STATEMENTS

NOTES

interest rate charged on borrowings to be based on the greater of adjusted one-month LIBOR or 0.75 percent. For the period from June 30, 2020 to June 30, 2021, the minimum interest rate spread charged on borrowings was 225 basis points over LIBOR. Additionally, during the same

~~Monro, Inc.~~ ~~Q1 2023 Form 10-Q~~

~~Table of Contents~~

~~CONSOLIDATED FINANCIAL STATEMENTS~~

~~NOTES~~

period, we were permitted to declare, make or pay any dividend or distribution up to $38.5 million in the aggregate and the acquisition of stores or other businesses up to $100 million in the aggregate ~~were permitted~~ if we were in compliance with the financial covenants and other restrictions in the First Amendment and Credit Facility. As of July 1, 2021, the ability of our Board of Directors to declare, make or pay any dividend or distribution and our ability to acquire stores or other businesses is no longer restricted by the terms of the Credit Facility, as amended by the First Amendment. The Credit Facility requires fees payable quarterly throughout the term between 0.125 percent and 0.35 percent of the amount of the average net availability under the Credit Facility during the preceding quarter.

On October 5, 2021, we entered into a Second Amendment to the Credit Facility (the “Second Amendment”). The Second Amendment ~~which among other things, amends certain of the financial terms in the Credit Agreement, as amended by the First Amendment. Specifically, the First Amendment had~~ amended the interest rate charged on borrowings ~~to be based on the greater of adjusted one-month LIBOR or 0.75 percent. The Second Amendment amended the interest rate~~ to be based on the greater of adjusted one-month LIBOR or 0.00 percent. In addition, the Second Amendment updated certain provisions regarding a successor interest rate to LIBOR.

On November 10, 2022, we entered into a Third Amendment to the Credit Facility (the “Third Amendment”). The Third Amendment, among other things, extended the term of the Credit Facility to November 10, 2027 and amended certain of the financial terms in the Credit Agreement, as amended by the Second Amendment. The Third Amendment amended the interest rate charged on borrowings to be based on 0.10 percent over the Secured Overnight Financing Rate (“SOFR”), replacing the previously used LIBOR. In addition, one additional bank was added to the bank syndicate for a total of nine banks now within the syndicate. Except as amended by the First Amendment, Second Amendment and ~~Second~~Third Amendment, the remaining terms of the credit agreement remain in full force and effect.

Within the Credit Facility, we have a sub-facility of $80 million available for the purpose of issuing standby letters of credit. The sub-facility requires fees aggregating 87.5 to 212.5 basis points annually of the face amount of each standby letter of credit, payable quarterly in arrears. There was a ~~$29.6~~$30.1 million outstanding letter of credit at June ~~25, 2022.~~24, 2023.

~~There was $110.0 million outstanding and $460.4 million available~~We are required to maintain an interest coverage ratio, as defined in the Credit Facility, of at least 1.55 to 1. In addition, our ratio of adjusted debt to EBITDAR, as defined in the Credit Facility, cannot exceed 4.75 to 1, subject to certain exceptions under the Credit ~~Facility at June 25, 2022.~~Facility.

We were in compliance with all debt covenants at June ~~25, 2022.~~24, 2023.

There was $65.0 million outstanding and $504.9 million available under the Credit Facility at June 24, 2023.

Note 9 – Commitments and Contingencies

Commitments



Commitments Due by Period				Within		2 to		4 to		After				Within		2 to		4 to		After
(thousands)		Total		1 Year		3 Years		5 Years		5 Years		Total		1 Year		3 Years		5 Years		5 Years
Principal payments on long-term debt	$	110,000			$	110,000					$	65,000					$	65,000
Finance lease commitments/financing obligations ^(a)		475,700	$	57,188		108,474	$	98,145	$	211,893		395,742	$	53,203	$	97,552		86,965	$	158,022
Operating lease commitments ^(a)		257,953		40,764		74,930		60,267		81,992		261,872		45,216		79,985		60,015		76,656
Accrued rent		764		674		34		25		31
Other liabilities		92		92		—		—		—
Total	$	844,509	$	98,718	$	293,438	$	158,437	$	293,916	$	722,614	$	98,419	$	177,537	$	211,980	$	234,678

(a)Finance and operating lease commitments represent future undiscounted lease payments and include ~~$98.5~~$83.1 million and ~~$63.6~~$53.2 million, respectively, related to options to extend lease terms that are reasonably certain of being exercised.

Contingencies

We are currently a party to various claims and legal proceedings incidental to the conduct of our business. If management believes that a loss arising from any of these matters is probable and can reasonably be estimated, we will record the amount of the loss, or the minimum estimated liability when the loss is estimated using a range, and no point within the range is more probable than another. As additional information becomes available, any potential liability related to these matters is assessed and the estimates are revised, if necessary. Litigation is subject to inherent uncertainties, and unfavorable rulings could occur and may include monetary damages. If an unfavorable ruling were to occur, there exists the possibility of a material adverse impact on the financial position and results of operations of the period in which any such ruling occurs, or in future periods.

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NOTES

Note 10 – Supplier Finance Program

We facilitate a voluntary supply chain financing program to provide our suppliers with the opportunity to sell receivables due from us (our accounts payable) to a participating financial institution at the sole discretion of both the supplier and the financial institution. Should a supplier choose to participate in the program, it may receive payment from the financial institution in advance of agreed payment terms; our responsibility is limited to making payments to the respective financial institution on the terms originally negotiated with our supplier, which are generally for a term of 360 days. We have concluded that the program is a trade payable program and not indicative of a borrowing arrangement.

Our outstanding supplier obligations eligible for advance payment under the program totaled $194.9 million, $167.3 million, and $42.3 million as of June 24, 2023, March 25, 2023, and June 25, 2022, respectively, and are included within Accounts Payable on our Consolidated Balance Sheets. Our outstanding supplier obligations do not represent actual receivables sold by our suppliers to the financial institutions, which may be lower.

Note 1011 – Share Repurchase

On May 19, 2022, our Board of Directors authorized a share repurchase program for the repurchase of up to $150 million of shares of our common stock. The Board of Directors did not specify a date upon which the authorization will expire. Shares repurchased under this authorization will become treasury shares.

We periodically ~~repurchased~~repurchase shares of our common stock under ~~the~~a board-authorized repurchase program through open market transactions. We did not repurchase any of our shares during the three months ended June 24, 2023.


Share Repurchase Activity	Three Months Ended
(thousands, except per share data)	June 24, 2023		June 25, 2022
Number of shares purchased		—		413.6
Average price paid per share	$	—	$	41.60
Total repurchased	$	—	$	17,216

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MANAGEMENT’S DISCUSSION AND ANALYSIS

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

Recent Developments

On ~~June 17, 2022,~~May 12, 2023, we ~~completed~~entered into a reclassification agreement (the “Reclassification Agreement”) with the ~~sale~~holders (the “Class C Holders”) of ~~assets relating~~our Class C Convertible Preferred Stock (the “Class C Preferred Stock”) in support of our plan to reclassify our equity capital structure to eliminate the Class C Preferred Stock, subject to shareholder approval.

The Reclassification Agreement provides that, subject to the satisfaction of certain conditions, we will file amendments to our ~~wholesale tire operations (seven locations) and internal tire distribution operations~~certificate of incorporation (the “Certificate of Incorporation”) to ~~American Tire Distributors, Inc. (“ATD”). We expect~~create a mandatory conversion of any outstanding shares of Class C Preferred Stock prior to ~~receive total consideration~~an agreed sunset date. For a description of ~~$102 million, consisting~~the sunset date, see the Form 8-K filed on May 18, 2023. In exchange for this sunset of ~~$62 million paid by ATD at closing,~~the Class C Preferred Stock, the conversion rate of ~~which $5 million is currently being held in escrow, and the remaining $40 million~~Class C Preferred Stock will be ~~paid quarterly over approximately two years based on~~adjusted so that each share of Class C Preferred Stock will convert into 61.275 shares of common stock (the “adjusted conversion rate”), an increase from the current conversion rate of 23.389 shares of common stock for each share of Class C Preferred Stock under the Certificate of Incorporation. At the end of the sunset period, all shares of Class C Preferred Stock remaining outstanding will be automatically converted into shares of common stock at the adjusted conversion rate. The Reclassification Agreement also provides that, during the sunset period, the Class C Holders will have the right to appoint one member of the board of directors. This designee is expected to be Peter J. Solomon, who is one of the Company’s current directors and one of the Class C Holders.

Economic Conditions

The United States economy has experienced higher inflation during fiscal 2023 and into fiscal 2024 and there are market expectations that inflation may remain at elevated levels for a sustained period. In addition, labor availability has continued to be constrained and market labor costs have continued to increase. The U.S. Federal Reserve Board also has increased interest rates during fiscal 2023 and into fiscal 2024 and additional interest rate increases may occur in the coming months. These conditions may give rise to an economic slowdown, and perhaps a recession, and could further increase our ~~tire purchases from~~ costs and/or ~~through ATD pursuant~~impact our revenues. It is unclear whether the current economic conditions and government responses to ~~a distribution~~these conditions, including inflation, and ~~fulfillment agreement. For details regarding~~increasing interest rates will result in an economic slowdown or recession in the ~~sale, see~~ ~~Note 2~~ toUnited States. If that occurs, demand for our ~~consolidated~~products and services may decline, possibly significantly, which may significantly and adversely impact our business, results of operations and financial ~~statements.~~position.

Financial Summary

First quarter ~~2023~~2024 included the following notable items:

Diluted earnings per common share (“EPS”) were ~~$0.37.~~$0.28.

Adjusted diluted EPS, a non-GAAP measure, were ~~$0.42.~~$0.31.

Sales ~~increased 2.3~~decreased 6.5 percent, ~~driven primarily by an increase~~due to lower overall tire sales because of the sale of our wholesale tire operations in ~~new store sales.~~June 2022.

Comparable store sales increased ~~0.4~~0.5 percent, ~~from the comparable prior-year period, primarily due to~~including an ~~increase in comparable store sales at our retail locations of 2.8 percent driven by a 15~~approximately one percent comparable store sales increase in approximately 300 of our small or underperforming ~~locations.~~stores.

Operating income of ~~$26.3~~$17.3 million was ~~6.0~~33.9 percent lower than the comparable prior-year period, driven primarily by a decrease in gross profit.

Net income was ~~$12.5~~$8.8 million.

Adjusted net income, a non-GAAP measure, was ~~$14.3~~$9.9 million.


Earnings Per Common Share	Three Months Ended						Three Months Ended
	June 25, 2022		June 26, 2021		Change		June 24, 2023		June 25, 2022		Change
Diluted EPS	$	0.37	$	0.46	(19.6)	%	$	0.28	$	0.37	(24.3)	%
Adjustments		0.05		0.09				0.03		0.05
Adjusted diluted EPS	$	0.42	$	0.55	(23.6)	%	$	0.31	$	0.42	(26.2)	%

Adjusted net income and adjusted diluted EPS, each of which is a measure not derived in accordance with ~~U.S.~~ GAAP, exclude the impact of certain items. Management believes that adjusted net income and adjusted diluted EPS are useful in providing period-to-period comparisons of the results of our operations by excluding certain non-recurring items, such as costs related to shareholder matters from our planned equity capital structure recapitalization, transition costs related to back-office optimization, and items related to store closings, as well as ~~Monro.Forward or~~ acquisition initiatives. Reconciliations of these non-GAAP financial measures to GAAP measures are provided beginning on page 1817 under “Non-GAAP Financial Measures.”

We define comparable store sales as sales for locations that have been opened or owned at least one full fiscal year. We believe this period is generally required for new store sales levels to begin to normalize. Management uses comparable store sales to assess the

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MANAGEMENT’S DISCUSSION AND ANALYSIS

operating performance of the Company’s stores and believes the metric is useful to investors because our overall results are dependent upon the results of our stores. Comparable sales measures vary across the retail industry. Therefore, our comparable store sales calculation is not necessarily comparable to similarly titled measures reported by other companies.

Analysis of Results of Operations



Summary of Operating Income	Three Months Ended						Three Months Ended
(thousands)	June 25, 2022		June 26, 2021		Change		June 24, 2023		June 25, 2022		Change
Sales	$	349,535	$	341,818	2.3	%	$	326,968	$	349,535	(6.5)	%
Cost of sales, including distribution and occupancy costs		227,346		215,887	5.3			212,572		227,346	(6.5)
Gross profit		122,189		125,931	(3.0)			114,396		122,189	(6.4)
Operating, selling, general and administrative expenses		95,934		98,014	(2.1)			97,047		95,934	1.2
Operating income	$	26,255	$	27,917	(6.0)	%	$	17,349	$	26,255	(33.9)	%

Sales

Sales include automotive undercar repair, tire replacement and tire related service sales, net of discounts, returns, etc., and revenue from the sale of warranty agreements and commissions earned from the delivery of tires. See Note 7 to our consolidated financial statements for further information. We use comparable store sales to evaluate the performance of our existing stores by measuring the change in sales for a period over the comparable, prior-year period of equivalent length. There were 90 selling days in the three months ended June ~~25, 2022~~24, 2023 and in the three months ended June ~~26, 2021.~~

~~Monro, Inc.~~ ~~Q1 2023 Form 10-Q~~

~~Table of Contents~~

~~MANAGEMENT’S DISCUSSION AND ANALYSIS~~

25, 2022.

Sales growth – from both comparable store sales and new stores – represents an important driver of our long-term profitability. We expect that comparable store sales growth will significantly impact our total sales growth. We believe that our ability to successfully differentiate our customers’, often referred to as “guests”, experience through a careful combination of merchandise assortment, price strategy, convenience, and other factors will, over the long-term, drive both increasing guest traffic and the average ticket amount spent.



Sales	Three Months Ended					Three Months Ended
(thousands)	June 25, 2022			June 26, 2021		June 24, 2023			June 25, 2022
Sales	$	349,535		$	341,818	$	326,968		$	349,535
Dollar change compared to prior year	$	7,717				$	(22,567)
Percentage change compared to prior year		2.3	%				(6.5)	%

The sales ~~increase~~decrease was ~~primarily~~ due to ~~an increase~~a decrease in sales from ~~new stores. Additionally, there~~closed stores, driven by the sale of our wholesale tire operations in June 2022. The decrease in sales during the three months ended June 24, 2023 from the prior year comparable period for the wholesale locations were approximately $23.9 million. This was partially offset by an increase in comparable store sales from an increase in average ticket ~~amount. Partially offsetting these increases was~~amount across product categories and price points, including a ~~decrease~~comparable store sales increase in approximately 300 of our small or underperforming stores, and an increase in sales from ~~closed~~new stores. The following table shows the primary drivers of the change in sales ~~between~~for the three months ended June ~~25, 2022 and~~24, 2023, as compared to the ~~three months~~same period ended June ~~26, 2021.~~25, 2022.



Sales Percentage Change	Three Months Ended
		June ~~25, 2022~~24, 2023
Sales change		~~2.3~~ (6.5)	%
Primary drivers of change in sales
~~New~~Closed store sales ^(a)		~~3.3~~ (7.4)	%
Comparable store sales ^(b)		~~0.4~~0.5	%
~~Closed~~New store sales ^(c)		~~(1.3)~~0.5	%

(a)~~Sales~~The change in closed stores is primarily due to sales from the ~~2022 acquisitions represent the change between the three months ended June 25, 2022 and the three months ended June 26, 2021.~~wholesale locations sold to American Tire Distributors (“ATD”).

(b)~~Comparable~~On a comparable store sales basis, comparable store sales at our retail locations increased by ~~2.8 percent, driven by a 15 percent comparable store sales increase in approximately 300 small or underperforming retail locations.~~0.8 percent.

(c)Sales from the ~~wholesale locations sold to ATD~~fiscal 2023 acquisitions primarily represent the ~~change between the three months ended June 25, 2022 and the three months ended June 26, 2021.~~change.

Broad-based inflationary pressures impacting consumers ~~including higher fuel prices and the negative impact on miles driven,~~ partly led to lower demand in some of our key service categories during the three months ended June 24, 2023 and June 25, ~~2022.~~2022, respectively. We expect the inflationary environment to continue to impact our customers throughout the remainder of ~~2023.~~

Comparable Store Product Category Sales Change
Three Months Ended
June 25, 2022
June 26, 2021
Tires ^(a)
(0)
%
25
%
Maintenance service
1
%
42
%
Brakes
2
%
57
%
Alignment
(2)
%
54
%
Front end/shocks
5
%
40
%
Exhaust
5
%
35
%

~~(a)Comparable store tire sales increased five percent at our retail locations.~~

For the three months ended June 26, 2021, the comparable store sales increase across all product categories reflect higher traffic and higher average ticket sales compared to the prior period in which the coronavirus (“COVID-19”) pandemic had a more volatile impact on demand.

Sales by Product Category
Three Months Ended
June 25, 2022
June 26, 2021
Tires
50
%
52
%
Maintenance service
26
25
Brakes
14
14
Steering ^(a)
9
8
Exhaust
1
1
Total
100
%
100
%

~~(a)Steering product category includes front end/shocks and alignment product category sales.~~

fiscal 2024.

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Change in Number of Company-Operated Retail Stores
Three Months Ended
June 25, 2022
June 26, 2021
Beginning store count
1,304
1,263
Opened ^(a)
3
30
Closed
(4)
(2)
Ending store count
1,303
1,291


Comparable Store Product Category Sales Change	Three Months Ended
	June 24, 2023		June 25, 2022
Tires	1	%	(0)	%
Maintenance service	3	%	1	%
Brakes	(2)	%	2	%
Alignment	(2)	%	(2)	%
Front end/shocks	(9)	%	5	%



Sales by Product Category	Three Months Ended
	June 24, 2023		June 25, 2022
Tires	47	%	50	%
Maintenance service	29		26
Brakes	15		14
Steering ^(a)	8		9
Other	1		1
Total	100	%	100	%

(a) ~~The stores opened in the three months ended June 26, 2021 relate to stores acquired from the 2022 acquisition.~~Steering product category includes front end/shocks and alignment product category sales.



Change in Number of Company-Operated Retail Stores	Three Months Ended
	June 24, 2023	June 25, 2022
Beginning store count	1,299	1,304
Opened	—	3
Closed	—	(4)
Ending store count	1,299	1,303

Cost of Sales and Gross Profit


Gross Profit	Three Months Ended						Three Months Ended
(thousands)	June 25, 2022			June 26, 2021			June 24, 2023			June 25, 2022
Gross profit	$	122,189		$	125,931		$	114,396		$	122,189
Percentage of sales		35.0	%		36.8	%		35.0	%		35.0	%
Dollar change compared to prior year	$	(3,742)					$	(7,793)
Percentage change compared to prior year		(3.0)	%					(6.4)	%

The decrease in gross profit, as a percentage of sales, of 180 basis points (“bps”) from the comparable prior-year period was primarily due to an increase in technician labor costs, which increased as a percentage of sales, as we made an incremental investment in technician labor costs to support current and future sales growth. We do not expect further significant incremental investment in technician headcount. The decrease in grossGross profit, as a percentage of sales, was ~~also partially~~relatively flat for the three months ended June 24, 2023, as compared to the prior year comparable period. Retail material costs, as a percentage of sales, increased due to ~~an increase~~the inflationary impact on material costs. Additionally, technician labor costs, as a percentage of sales, increased due to the impact from wage inflation and incremental investment in technician labor costs. Offsetting these increases was the impact from our wholesale operations which were sold during June 2022. Additionally, there was a decrease in distribution and occupancy costs, as a percentage of sales, as we ~~lost~~gained leverage on these largely fixed costs with ~~lower~~higher overall comparable store sales growth. Partially offsetting these increases was a decrease in material costs, as a percentage of sales, as a result of higher selling prices and a shift in sales mix from tires to our higher margin service categories.sales.



Gross Profit as a Percentage of Sales Change	Three Months Ended
		June ~~25, 2022~~24, 2023
Gross profit change		~~(180)~~-	bps
Primary drivers of change in gross profit as a percentage of sales
~~Technician labor~~Retail material costs		~~(200)~~(150)	bps
~~Distribution and occupancy~~Technician labor costs		~~(60)~~(70)	bps
~~Material~~Retail distribution and occupancy costs		7010	bps
Impact from the sale of wholesale operations		210	bps

OSG&A Expenses



OSG&A Expenses	Three Months Ended						Three Months Ended
(thousands)	June 25, 2022			June 26, 2021			June 24, 2023			June 25, 2022
OSG&A Expenses	$	95,934		$	98,014		$	97,047		$	95,934
Percentage of sales		27.4	%		28.7	%		29.7	%		27.4	%
Dollar change compared to prior year	$	(2,080)					$	1,113
Percentage change compared to prior year		(2.1)	%					1.2	%

The decrease of $2.1 million in OSG&A expenses for the three months ended June 25, 2022 from the comparable prior-year period is primarily due to a decrease in litigation settlement costs. The decrease in OSG&A expenses for the three months ended June 25, 2022 was also due to the gain on the sale of our wholesale tire and tire distribution assets, net of closing costs and costs associated with the closing of a related warehouse, as well as lower expenses from nine stores closed compared to the comparable prior-year period. Partially offsetting these decreases were increased expenses from 21 new stores and a full three months of expenses from stores acquired during the three months ended June 26, 2021. Additionally, during the three months ended June 25, 2022, OSG&A expenses from comparable stores increased from the comparable prior-year period. However, we gained leverage with higher overall comparable store sales, which resulted in the decrease in OSG&A expenses, as a percentage of sales, from the prior year, on a comparable store basis.

Monro, Inc. Q1 ~~2023~~2024 Form 10-Q

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MANAGEMENT’S DISCUSSION AND ANALYSIS

The increase of $1.1 million in OSG&A expenses for the three months ended June 24, 2023 from the comparable prior year period is partially due to an increase in costs related to shareholder matters from our planned equity capital structure recapitalization and transition costs related to back-office optimization, as well as an increase in expenses from new stores. The increase in OSG&A expenses for the three months ended June 24, 2023 is also partially due to the gain on the sale of our wholesale tire locations and distribution assets, net of closing costs and costs associated with the closing of a related warehouse related to our divestiture during the comparable prior year period. Partially offsetting these increases were lower expenses from closed stores as well as decreased expenses from comparable stores.



OSG&A Expenses Change	Three Months Ended
(thousands)		June ~~25, 2022~~24, 2023
OSG&A expenses change		$	~~(2,080)~~1,113
Drivers of change in OSG&A expenses
~~Decrease in litigation settlement costs~~Increase from net gain on sale of wholesale tire locations, distribution assets and related warehouse		$	~~(3,920)~~1,180
~~Decrease~~Increase from ~~gain on sale of wholesale tire and tire distribution assets, net~~costs related to shareholder matters		$	~~(1,180)~~836
Increase from transition costs related to back-office optimization		$	544
Increase from new stores		$	335
Decrease from closed stores		$	~~(512)~~(1,457)
~~Increase from new stores~~		$	~~3,187~~
~~Increase~~Decrease from comparable stores		$	~~345~~ (325)

Other Performance Factors

Net Interest Expense

Net interest expense of ~~$5.7~~$5.2 million for the three months ended June ~~25, 2022~~24, 2023 decreased ~~$1.3~~$0.5 million as compared to the prior year period, and ~~decreased~~remained relatively flat as a percentage of sales ~~from 2.0 percent to~~at 1.6 percent. Weighted average debt outstanding for the three months ended June ~~25, 2022~~24, 2023 decreased by approximately ~~$56~~$148 million as compared to the three months ended June ~~26, 2021.~~25, 2022. This decrease is primarily related to a decrease in debt outstanding under the Credit Facility. The weighted average interest rate ~~decreased~~increased approximately 50100 basis points from the prior year comparable quarter due primarily to ~~a decrease~~an increase in the Credit ~~Facility~~Facility’s floating borrowing rates.

Provision for Income Taxes

Our effective income tax rate for the three months ended June ~~25, 2022,~~24, 2023 was 27.6 percent, compared to 39.6 percent ~~compared with 25.4 percent in~~for the ~~comparable prior-year period.~~ three months ended June 25, 2022. Our effective income tax rate for the three months ended June 25, 2022 was higher by 12.8 percent because of discrete tax impacts from the ~~sale~~divestiture of assets relating to our wholesale tire operations and internal tire distribution operations as well as the revaluation of deferred tax balances due to changes in the mix of pre-tax income in various U.S. state jurisdictions because of the ~~sale.~~divestiture. Our effective income tax rate for the three months ended June 24, 2023 and June 25, 2022 was ~~also~~ higher by 1.1 percent and 0.8 percent, respectively, due to the discrete tax impact related to share-based awards.

Non-GAAP Financial Measures

In addition to reporting net income and diluted EPS, which are GAAP measures, this Form 10-Q includes adjusted net income and adjusted diluted EPS, which are non-GAAP financial measures. We have included reconciliations to adjusted net income and adjusted diluted EPS from our most directly comparable GAAP measures, net income and diluted EPS, below. Management views these non-GAAP financial measures as indicators to better assess comparability between periods because management believes these non-GAAP financial measures reflect our core business operations while excluding certain non-recurring items, such as costs related to shareholder matters from our planned equity capital structure recapitalization, transition costs related to back-office optimization, and items related to store closings, as well as ~~Monro.Forward or~~ acquisition initiatives.

These non-GAAP financial measures are not intended to represent, and should not be considered more meaningful than, or as an alternative to, their most directly comparable GAAP measures. These non-GAAP financial measures may be different from similarly titled non-GAAP financial measures used by other companies.

~~Adjusted net income is summarized as follows:~~

Reconciliation of Adjusted Net Income
Three Months Ended
(thousands)
June 25, 2022
June 26, 2021
Net income
$
12,484
$
15,681
Gain on sale of wholesale tire and tire distribution assets, net ^(a)
(1,180)
—
Store closing costs
(4)
(272)
Monro.Forward initiative costs
23
103
Acquisition due diligence and integration costs
(10)
310
Management transition costs
—
59
Litigation settlement costs
—
3,920
Provision for income taxes on pre-tax adjustments
293
(997)
Certain discrete tax items ^(b)
2,644
—
Adjusted net income
$
14,250
$
18,804

~~(a)Amount includes gain on sale, net of closing costs and costs associated with the closing of a related warehouse.~~

~~(b)~~Certain discrete items related to the sale of our wholesale tire and tire distribution assets as well as the revaluation of deferred tax balances due to changes in the mix of pre-tax income in various U.S. state jurisdictions because of the sale.

Monro, Inc. Q1 ~~2023~~2024 Form 10-Q

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MANAGEMENT’S DISCUSSION AND ANALYSIS

Adjusted net income is summarized as follows:


Reconciliation of Adjusted Net Income	Three Months Ended
(thousands)	June 24, 2023		June 25, 2022
Net income	$	8,829	$	12,484
Net gain on sale of wholesale tire and distribution assets ^(a)		—		(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 ^(b)		—		2,644
Adjusted net income	$	9,902	$	14,250

(a)Amount includes gain on sale of a related warehouse, net of associated closing costs.

(b)Certain discrete tax items related to the sale of our wholesale tire locations and distribution assets as well as the revaluation of deferred tax balances due to changes in the mix of pre-tax income in various U.S. state jurisdictions because of the sale.

In the Reconciliation of Adjusted Net Income, we determined the Provision for income taxes on pre-tax adjustments by calculating our estimated annual effective income tax rate on pre-tax income before giving effect to any discrete tax items and applying it to the pre-tax adjustments.

Adjusted diluted EPS is summarized as follows:


Reconciliation of Adjusted Diluted EPS	Three Months Ended				Three Months Ended
	June 25, 2022		June 26, 2021		June 24, 2023		June 25, 2022
Diluted EPS	$	0.37	$	0.46	$	0.28	$	0.37
Gain on sale of wholesale tire and tire distribution assets, net		(0.03)		—
Net gain on sale of wholesale tire and distribution assets						—		(0.03)
Store closing costs ^(c)(a)		0.00		(0.01)		0.00		(0.00)
Monro.Forward initiative costs ^(c)(a)		0.00		0.00		—		0.00
Acquisition due diligence and integration costs ^(c)(a)		(0.00)		0.01		0.00		(0.00)
Management transition costs^(c)		—		0.00
Litigation settlement costs		—		0.09
Costs related to shareholder matters						0.02		—
Transition costs related to back-office optimization						0.01		—
Certain discrete tax items		0.08		—		—		0.08
Adjusted diluted EPS	$	0.42	$	0.55	$	0.31	$	0.42

~~(c)~~(a) Amounts, in the periods presented, may be too minor in amount, net of the impact from income taxes, to have an impact on the calculation of adjusted diluted EPS.

The ~~pre-tax adjustments to diluted EPS reflect estimated annual effective income~~certain discrete tax ~~rates on pre-tax income before giving effect to discrete~~ items ~~of 25.0 percent and 24.2 percent~~ for the three months ended June 25, 2022 are tax affected. The other adjustments to diluted EPS reflect estimated annual effective income tax rates of 25.1 percent and 25.0 percent for the three months ended June 24, 2023 and June ~~26, 2021,~~25, 2022, respectively. ~~See~~These estimated annual effective income tax rates exclude the ~~pre-tax~~income tax impacts from share-based compensation and for the three months ended June 25, 2022 exclude certain discrete tax items. See adjustments from the Reconciliation of Adjusted Net Income table above for pre-tax amounts.

Analysis of Financial Condition

Liquidity and Capital Resources

Capital Allocation

We expect to continue to generate positive operating cash flow as we have done in each of the last three fiscal years. The cash we generate from our operations will allow us to continue to support business operations as well as invest in attractive acquisition opportunities intended to drive long-term sustainable growth, pay down debt, return cash to our shareholders through our dividend program and repurchase shares of our common stock under our common stock repurchase program.

In addition, because we believe a large portion of our future expenditures will be to fund our growth, through acquisition of retail stores and/or opening greenfield stores, we continually evaluate our cash needs and may decide it is best to fund the growth of our business through borrowings on our Credit Facility. Conversely, we may also periodically determine that it is in our best interests to voluntarily repay certain indebtedness early.

Monro, Inc. Q1 2024 Form 10-Q

~~Material~~

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MANAGEMENT’S DISCUSSION AND ANALYSIS

Future Cash Requirements

We currently expect our capital expenditures to support our projects, including upgrading our facilities and systems, to be ~~$40~~$35 million to ~~$50~~$45 million in the aggregate in ~~2023.~~2024. Additionally, we have contractual finance lease and operating lease commitments with landlords through October 2040 for ~~$571.6~~$521.4 million in lease payments, of which ~~$97.2~~$97.7 million is due within one year. For details regarding these lease commitments, see Note 9 to our consolidated financial statements.

As of June ~~25, 2022,~~24, 2023, we had ~~$110.0~~$65.0 million outstanding under the Credit Facility, none of which is due in the succeeding 12 months. For details regarding our indebtedness that is due, see Note 8 to our consolidated financial statements.

Dividends

We paid cash dividends of $0.28 per share totaling $8.9 million and $9.5 million ~~($0.28 per share)~~in both the three months ended June 24, 2023 and June 25, 2022, respectively. We have paid dividends quarterly since fiscal 2006 and it is our intent to continue to do so in the future.

Share Repurchases

We did not repurchase any shares during the three months ended June ~~25, 2022. For details regarding our cash dividend, see~~ ~~Note 6~~ ~~to our consolidated financial statements.~~

~~We returned $17.2 million to shareholders through share repurchases during the three months ended June 25, 2022.~~24, 2023. For details regarding our share repurchase program, see ~~Part II~~, ~~Item 2, “Unregistered Sales of Equity Securities and Use of Proceeds” of this report and~~ Note 1011 to our consolidated financial statements.

Working Capital Management

As of June 24, 2023, we had a working capital deficit of $230.1 million, an increase from $39.4 million as of March 25, 2023. The increase was primarily driven by an increase in accounts payable as a result of certain suppliers that participate in our supply chain finance program. We ~~work with suppliers~~have agreed to ~~optimize~~contractual payment terms and conditions ~~on accounts payable to enhance timing of working capital and cash flows.~~with our suppliers. As part of ~~these efforts,~~our working capital management, we facilitate a voluntary supply chain finance program to provide our suppliers with the opportunity to sell

~~Monro, Inc.~~ ~~Q1 2023 Form 10-Q~~

~~Table of Contents~~

~~MANAGEMENT’S DISCUSSION AND ANALYSIS~~

receivables due from Monro to a participating financial institution. For details regarding our supply chain finance program, see Note 110 to our consolidated financial statements.

Sources and Conditions of Liquidity

Our sources to fund our material cash requirements are predominantly cash from operations, availability under our Credit Facility, and cash and equivalents on hand.

As of June ~~25, 2022,~~24, 2023, we had ~~$30.6~~$15.3 million of cash and equivalents. In addition, we had ~~$460.4~~$504.9 million available under the Credit Facility as of June ~~25, 2022.~~24, 2023.

We believe that our current sources of funds will provide us with adequate liquidity during the 12-month period following June ~~25, 2022,~~24, 2023, as well as in the long-term.

Summary of Cash Flows

The following table presents a summary of our cash flows from operating, investing, and financing activities.


Summary of Cash Flows	Three Months Ended				Three Months Ended
(thousands)	June 25, 2022		June 26, 2021		June 24, 2023		June 25, 2022
Cash provided by operating activities	$	77,205	$	62,714	$	71,731	$	77,205
Cash provided by (used for) investing activities		48,856		(66,762)
Cash (used for) provided by investing activities						(2,630)		48,856
Cash used for financing activities		(103,361)		(9,034)		(58,669)		(103,361)
Increase (decrease) in cash and equivalents		22,700		(13,082)
Increase in cash and equivalents						10,432		22,700
Cash and equivalents at beginning of period		7,948		29,960		4,884		7,948
Cash and equivalents at end of period	$	30,648	$	16,878	$	15,316	$	30,648

Monro, Inc. Q1 2024 Form 10-Q

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MANAGEMENT’S DISCUSSION AND ANALYSIS

Cash provided by operating activities

For the three months ended June 24, 2023, cash provided by operating activities was $71.7 million, which consisted of net income of $8.8 million, adjusted by non-cash charges of $19.9 million and by a change in operating assets and liabilities of $43.0 million. The non-cash charges were largely driven by $18.4 million of depreciation and amortization. The change in operating assets and liabilities was primarily due to our supply chain finance program being a source of cash as we improved our cash flow by $24.5 million. Additionally, the change in operating assets and liabilities was also partially due to accounts payable and accrued liabilities, net of vendor rebate receivables, being a source of cash of $12.3 million driven by timing of payments as well as our inventory balance being a source of cash of $6.3 million due to decreased inventory purchases.

For the three months ended June 25, 2022, cash provided by operating activities was $77.2 million, which consisted of net income of $12.5 million, adjusted by non-cash charges of $15.8 million and by a change in operating assets and liabilities of $48.9 million. The non-cash charges were largely driven by $20.1 million of depreciation and amortization, partially offset by deferred income taxes of $3.4 million. The change in operating assets and liabilities was primarily due to accounts payable and accrued liabilities, net of vendor rebate receivables, being a source of cash of $33.7 million driven by timing of payments as well as our supply chain finance program being a source of cash as we improved our cash flow by $16.2 million.

Cash used for / provided by investing activities

For the three months ended June ~~26, 2021~~24, 2023, cash ~~provided by operating~~used for investing activities was ~~$62.7 million, which consisted of net income of $15.7 million, adjusted by non-cash charges of $23.8 million and by a change in operating assets and liabilities of $23.2~~$2.6 million. ~~The non-cash charges were largely driven by $20.3 million of depreciation and amortization. The change in operating assets and liabilities~~This was primarily due to ~~accounts payable~~cash used for capital expenditures, including property and ~~accrued liabilities, net~~equipment, of ~~vendor rebate receivables, being a source of cash of $19.8~~$7.7 million, driven by timing of payments, as well as our federal and state income taxes receivable being a source of cash of $7.8 million due largely to an income tax refund that was received. These sources of cash were partially offset by ~~our inventory balance being a use of~~ cash ~~of $4.1 million due to increased inventory purchases to meet higher demand.~~

~~Cash~~ provided by ~~/ used for investing activities~~the sale of our wholesale tire locations and distribution assets and the disposal of property and equipment of $3.9 million and $1.1 million, respectively.

For the three months ended June 25, 2022, cash provided by investing activities was $48.9 million. This was primarily due to cash from the sale of our wholesale tire and tire distribution assets for $56.6 million, partially offset by cash used for capital expenditures, including property and equipment, of $8.2 million.

Cash used for financing activities

For the three months ended June ~~26, 2021~~24, 2023, cash used for ~~investing~~financing activities was ~~$66.8 million. This~~$58.7 million which was primarily due to ~~cash used for acquisitions~~payment on our Credit Facility, net of amounts borrowed during the period, of $40.0 million, as well as payment of finance lease principal and ~~capital expenditures, including property and equipment,~~dividends of ~~$62.1~~$9.8 million and ~~$5.2~~$8.9 million, respectively. ~~Included in the $62.1 million used for acquisitions was $0.8 million paid to the seller of the 2021 acquisition as the lease assignment for one store location was finalized during the period.~~

~~Cash used for financing activities~~

For the three months ended June 25, 2022, cash used for financing activities was $103.4 million which was primarily due to payment on our Credit Facility, net of amounts borrowed during the period, of $66.5 million, as well as payment of finance lease principal and dividends of $10.2 million and $9.5 million, respectively. Also, we used $17.2 million to repurchase common stock during the period.

~~Monro, Inc.~~ ~~Q1 2023 Form 10-Q~~

~~Table of Contents~~

~~MANAGEMENT’S DISCUSSION AND ANALYSIS~~

For the three months ended June 26, 2021 cash used for financing activities was $9.0 million which was primarily due to payment of finance lease principal and dividends of $9.7 million and $8.2 million, respectively, partially offset by net borrowing under our Credit Facility of $8.0 million.

Critical Accounting Estimates

The consolidated financial statements are prepared in accordance with GAAP. The preparation of the consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, costs and expenses, and related disclosures. We base our estimates on historical experience, as appropriate, and on various other assumptions that we believe to be reasonable under the circumstances. Changes in the accounting estimates are reasonably likely to occur from period to period. Accordingly, actual results could differ significantly from the estimates made by management. We evaluate our estimates and assumptions on an ongoing basis. To the extent that there are material differences between these estimates and actual results, our future financial statement presentation, financial condition, results of operations, and cash flows may be affected.

For a description of our critical accounting estimates, refer to Part II, Item 7.7., “Management's Discussion and Analysis of Financial Condition and Results of Operations” of our Form 10-K for the fiscal year ended March ~~26, 2022.~~25, 2023. There have been no material changes to our critical accounting estimates since our Form 10-K for the year ended March ~~26, 2022.~~25, 2023.

Recent Accounting Pronouncements

See “Recent Accounting Pronouncements” in Note 1 to our consolidated financial statements for a discussion of the impact of recently issued accounting standards on our consolidated financial statements as of June ~~25, 2022~~24, 2023 and the expected impact on the consolidated financial statements for future periods.

Monro, Inc. Q1 2024 Form 10-Q

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MANAGEMENT’S DISCUSSION AND ANALYSIS

Cautionary Note Regarding Forward-Looking Statements

This Quarterly Report on Form 10-Q contains “forward-looking statements” as that term is used in the Private Securities Litigation Reform Act of 1995. Forward-looking statements can be identified by the fact that they address future events, developments, and results and do not relate strictly to historical facts. Any statements contained herein that are not statements of historical fact may be deemed to be forward-looking statements. Forward-looking statements include, without limitation, statements preceded by, followed by, or including words such as “anticipate,” “believe,” “could,” “design,” “estimate,” “expect,” “intend,” “invest,” “may,” “plan,” “potential,” “strategy,” “will,” “would” and variations thereof and similar expressions. Forward-looking statements are subject to risks, uncertainties, and other important factors that could cause actual results to differ materially from those expressed. For example, our forward-looking statements include, without limitation, statements regarding:

•the potential effect of general business or economic conditions on our business, including the direct and indirect effects of the COVID-19 pandemic and the Russian invasion of Ukraine on the economy, consumer demand and spending levels, and labor shortages in our markets;

•~~the impact of competitive services and pricing;~~

•~~the effect of economic conditions, seasonality, and the impact of weather conditions and natural disasters on customer demand;~~

•~~advances in automotive technologies;~~

•~~our dependence on third-party vendors for certain inventory;~~

•~~the risks associated with vendor relationships and international trade, particularly imported goods such as those sourced from China;~~

•~~the impact of changes in U.S. trade relations and the ongoing trade dispute between the United States and China, and other potential impediments to imports;~~

•~~our ability to service our debt obligations, including our expected annual interest expense;~~

•~~our cash needs, including our ability to fund our future capital expenditures and working capital requirements;~~

•~~our anticipated sales, comparable store sales, gross profit margin, costs of goods sold (including product mix), OSG&A expenses and other fixed costs, and our ability to leverage those costs;~~

•~~management’s estimates and expectations as they relate to income tax liabilities, deferred income taxes, and uncertain tax positions;~~


	~~Monro, Inc.~~
l~~Q1 2023 Form 10-Q~~	21the impact of competitive services and pricing;
l	the effect of economic conditions, seasonality, and the impact of weather conditions and natural disasters on customer demand;
l	advances in automotive technologies including adoption of electronic vehicle technology;
l	our dependence on third-party vendors for certain inventory;
l	the risks associated with vendor relationships and international trade, particularly imported goods such as those sourced from China;
l	the impact of changes in U.S. trade relations and the ongoing trade dispute between the United States and China, and other potential impediments to imports;
l	our ability to service our debt obligations, including our expected annual interest expense;
l	our cash needs, including our ability to fund our future capital expenditures and working capital requirements;
l	our anticipated sales, comparable store sales, gross profit margin, costs of goods sold (including product mix), OSG&A expenses and other fixed costs, and our ability to leverage those costs;
l	management’s estimates and expectations as they relate to income tax liabilities, deferred income taxes, and uncertain tax positions;
l	management’s estimates associated with our critical accounting policies, including business combinations, insurance liabilities, and valuations for our long-lived assets impairment analyses;
l	the impact of industry regulation, including changes in environmental, consumer protection, and labor laws;
l	potential outcomes related to pending or future litigation matters;
l	business interruptions;
l	risks relating to disruption or unauthorized access to our computer systems;
l	our failure to protect customer and employee personal data;
l	risks relating to acquisitions and the integration of acquired businesses with ours;
l	our growth plans, including our plans to add, renovate, re-brand, expand, remodel, relocate, or close stores and any related costs or charges, our leasing strategy for future expansion, and our ability to renew leases at existing store locations;
l	the impact of costs related to planned store closings or potential impairment of goodwill, other intangible assets, and long-lived assets;
l	expected dividend payments;
l	our ability to attract, motivate, and retain skilled field personnel and our key executives; and
l	the potential impacts of climate change on our business.

~~Table of Contents~~

~~MANAGEMENT’S DISCUSSION AND ANALYSIS~~

•management’s estimates associated with our critical accounting policies, including business combinations, insurance liabilities, and valuations for our goodwill and indefinite-lived intangible assets impairment analyses;

•~~the impact of industry regulation, including changes in labor laws;~~

•~~potential outcomes related to pending or future litigation matters;~~

•~~business interruptions;~~

•~~risks relating to disruption or unauthorized access to our computer systems;~~

•~~our failure to protect customer and employee personal data;~~

•~~our ability to realize the expected benefits of the transaction with American Tire Distributors, Inc.;~~

•~~risks relating to acquisitions and the integration of acquired businesses with ours;~~

•our growth plans, including our plans to add, renovate, re-brand, expand, remodel, relocate, or close stores and any related costs or charges, our leasing strategy for future expansion, and our ability to renew leases at existing store locations;

•~~the impact of costs related to planned store closings or potential impairment of goodwill, intangible assets, and long-lived assets;~~

•~~expected dividend payments;~~

•~~our ability to attract, motivate, and retain skilled field personnel and our key executives; and~~

•~~the potential impacts of climate change on our business.~~

Any of these factors, as well as such other factors as discussed in Part I, Item 1A., “Risk Factors” of our Form 10-K for the fiscal year ended March ~~26, 2022,~~25, 2023, as well as in our periodic filings with the SEC, could cause our actual results to differ materially from our anticipated results. The information provided in this report is based upon the facts and circumstances known as of the date of this report, and any forward-looking statements made by us in this report speak only as of the date on which they are made. Except as required by law, we undertake no obligation to update these forward-looking statements after the date of this Form 10-Q to reflect events or circumstances after such date, or to reflect the occurrence of unanticipated events.

Monro, Inc. Q1 ~~2023~~2024 Form 10-Q

2221

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DISCLOSURES ABOUT MARKET RISK & CONTROLS AND PROCEDURES

Item 3. Quantitative and Qualitative Disclosures about Market Risk

We are exposed to market risk from potential changes in interest rates. As of June ~~25, 2022,~~24, 2023, excluding finance leases and financing obligations, we had no debt financing at fixed interest rates, for which the fair value would be affected by changes in market interest rates. Our cash flow exposure on floating rate debt would result in annual interest expense fluctuations of approximately $0.7 million based upon our debt position at June 24, 2023 and approximately $1.1 million based upon our debt position at ~~June~~March 25, ~~2022 and approximately $1.8 million based upon our debt position at March 26, 2022,~~2023, given a change in ~~LIBOR (or replacement index)~~SOFR of 100 basis points.

Debt financing had a carrying amount that approximates a fair value of ~~$110.0~~$65.0 million as of June ~~25, 2022,~~24, 2023, as compared to a carrying amount and a fair value of ~~$176.5~~$105.0 million as of March ~~26, 2022.~~25, 2023.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in reports that we file or submit to the SEC pursuant to the Securities Exchange Act of 1934, as amended (the “Exchange Act”), is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

In conjunction with the close of each fiscal quarter and under the supervision of our Chief Executive Officer (our principal executive officer) and Chief Financial Officer (our principal financial officer), we conduct an update, a review and an evaluation of the effectiveness of our disclosure controls and procedures. It is the conclusion of our Chief Executive Officer and Chief Financial Officer, based upon an evaluation completed as of the end of the most recent fiscal quarter reported on herein, that our disclosure controls and procedures were effective.

Changes in Internal Controls Over Financial Reporting

There were no changes in our internal control over financial reporting during the quarter ended June ~~25, 2022~~24, 2023 that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Monro, Inc. Q1 ~~2023~~2024 Form 10-Q

2322

Table of Contents

SUPPLEMENTAL INFORMATION

PART II – OTHER INFORMATION

Item 1. Legal Proceedings

From time to time we are a party to or otherwise involved in legal proceedings arising out of the normal course of business. Legal matters are subject to inherent uncertainties and there exists the possibility that the ultimate resolution of one or more of these matters could have a material adverse impact on the Company, its financial condition and results of operations.

~~Item 2.~~ ~~Unregistered Sales of Equity Securities and Use of Proceeds~~

On May 19, 2022, our Board of Directors authorized a share repurchase program for the repurchase of up to $150 million of shares of our common stock with no stated expiration. Under the program, we have repurchased 413.6 thousand shares of common stock at an average price of $41.60, for a total investment of $17.2 million. The table below presents information with respect to Monro common stock purchases made during the three months ended June 25, 2022, by Monro or any “affiliated purchaser” of Monro, as defined in Rule 10b-18(a)(3) under the Exchange Act.

Share Repurchase Activity
Dollar Value of
Average
Total Number of
Shares that May
Total Number
Price
Shares Purchased
Yet Be Purchased
of Shares
Paid per
as Part of Publicly
Under Publicly
Period
Purchased
Share
Announced Programs
Announced Programs
March 27, 2022 through April 23, 2022
—
—
—
—
April 24, 2022 through May 28, 2022
212,400
$
41.88
212,400
$
141,104,569
May 29, 2022 through June 25, 2022
201,200
41.30
201,200
132,795,753
Total
413,600
$
41.60
413,600
$
132,795,753

Monro, Inc. Q1 ~~2023~~2024 Form 10-Q

2423

Table of Contents

EXHIBITS

Item 6. Exhibits

Exhibit Index

~~10.1~~10.07 – ~~Asset Purchase~~Reclassification Agreement, ~~among American Tire Distributors, Inc., Monro, Inc., and Monro Service Corporation,~~ dated as of May ~~13, 2022~~12, 2023, by and among Monro, Inc. and the Holders of Class C Convertible Preferred Stock Named Therein (May ~~2022~~2023 Form 8-K, Exhibit ~~10.1)~~No. 10.07).**

~~10.74 – Distribution and Fulfillment Agreement by and between Monro, Inc. and American Tire Distributors, Inc., dated June 17, 2022~~**

31.1 – Certification of Michael T. Broderick pursuant to Section 302 of the Sarbanes – Oxley Act of 2002

31.2 – Certification of Brian J. D’Ambrosia pursuant to Section 302 of the Sarbanes – Oxley Act of 2002

32.1 – Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes – Oxley Act of 2002

101.INS - XBRL Instance Document

101.LAB - XBRL Taxonomy Extension Label Linkbase

101.PRE - XBRL Taxonomy Extension Presentation Linkbase

101.SCH - XBRL Taxonomy Extension Schema Linkbase

101.DEF - XBRL Taxonomy Extension Definition Linkbase

101.CAL - XBRL Taxonomy Extension Calculation Linkbase

104 - Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101)

** Schedules and similar attachments have been omitted pursuant to Item 601(a)(5) of Regulation ~~S-K.~~S-K of the Securities Act of 1933, as amended. The Company will furnish a copy of any omitted schedule or similar attachment to the Securities and Exchange Commission upon request.

Monro, Inc. Q1 ~~2023~~2024 Form 10-Q

2524

Table of Contents

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


	MONRO, INC.

DATE: ~~August 1, 2022~~July 26, 2023	By:	/s/ Michael T. Broderick
		Michael T. Broderick
		President and Chief Executive Officer ‎(Principal Executive Officer)

DATE: ~~August 1, 2022~~July 26, 2023	By:	/s/ Brian J. D’Ambrosia
		Brian J. D’Ambrosia
		Executive Vice President – Finance, Chief Financial Officer and
		Treasurer (Principal Financial Officer and Principal Accounting Officer)

Monro, Inc. ~~Q3 2022~~Q1 2024 Form 10-Q

2625


Share Repurchase Activity						Dollar Value of
		Average		Total Number of		Shares that May
	Total Number	Price		Shares Purchased		Yet Be Purchased
	of Shares	Paid per		as Part of Publicly		Under Publicly
Period	Purchased	Share		Announced Programs		Announced Programs
March 27, 2022 through April 23, 2022	—		—		—		—
April 24, 2022 through May 28, 2022	212,400	$	41.88		212,400	$	141,104,569
May 29, 2022 through June 25, 2022	201,200		41.30		201,200		132,795,753
Total	413,600	$	41.60		413,600	$	132,795,753