Monro Muffler Brake Inc.

10/30/2024 | Press release | Distributed by Public on 10/30/2024 05:26

Quarterly Report for Quarter Ending September 28, 2024 (Form 10-Q)

mnro-20240928x10q

Table of Contents

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

____________________________________________________________

FORM 10-Q

____________________________________________________________

(Mark One)

xQUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 28, 2024

OR

¨TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _____________ to _____________

Commission File Number: 0-19357

____________________________________________________________

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.)

295 Woodcliff Drive, Suite 202, Fairport, New York

14450

(Address of principal executive offices)

(Zip code)

Registrant's telephone number, including area code:1 (800) 876-6676

_________________________________________

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 xAccelerated 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 October 18, 2024, 29,949,383shares 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

ConsolidatedStatements of Income and Comprehensive Income

4

ConsolidatedStatements of Changes in Shareholders' Equity

5

ConsolidatedStatements of Cash Flows

6

Notesto Consolidated Financial Statements

8

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

14

Item 3. Quantitative and Qualitative Disclosures About Market Risk

22

Item 4. Controls and Procedures

22

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

23

Item 1A. Risk Factors

23

Item 6. Exhibits

24

Signatures

25


‎

Monro, Inc. Q2 2025 Form 10-Q

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Table of Contents

CONSOLIDATED FINANCIAL STATEMENTS

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

Consolidated Balance Sheets

(thousands, except footnotes) (unaudited)

September 28, 2024

March 30, 2024

Assets

Current assets

Cash and equivalents

$

20,859

$

6,561

Accounts receivable

13,119

11,738

Federal and state income taxes receivable

1,556

-

Inventory

161,983

154,085

Other current assets

69,321

80,905

Total current assets

266,838

253,289

Property and equipment, net

272,523

280,154

Finance lease and financing obligation assets, net

178,789

180,803

Operating lease assets, net

195,300

202,718

Goodwill

736,435

736,435

Intangible assets, net

11,778

13,298

Assets held for sale

1,078

6,961

Other non-current assets

18,559

19,156

Total assets

$

1,681,300

$

1,692,814

Liabilities and shareholders' equity

Current liabilities

Current portion of finance leases and financing obligations

$

39,179

$

38,233

Current portion of operating lease liabilities

39,757

39,442

Accounts payable

298,923

251,940

Federal and state income taxes payable

-

880

Accrued payroll, payroll taxes and other payroll benefits

20,042

21,205

Accrued insurance

59,147

55,547

Deferred revenue

14,823

15,155

Other current liabilities

29,695

32,754

Total current liabilities

501,566

455,156

Long-term debt

62,000

102,000

Long-term finance leases and financing obligations

241,203

249,484

Long-term operating lease liabilities

173,734

181,852

Other long-term liabilities

10,462

10,553

Long-term deferred income tax liabilities

40,364

36,962

Long-term income taxes payable

32

32

Total liabilities

1,029,361

1,036,039

Commitments and contingencies - Note 9

Shareholders' equity:

Class C Convertible Preferred stock

29

29

Common stock

401

400

Treasury stock

(250,111)

(250,115)

Additional paid-in capital

255,715

254,484

Accumulated other comprehensive loss

(3,383)

(3,451)

Retained earnings

649,288

655,428

Total shareholders' equity

651,939

656,775

Total liabilities and shareholders' equity

$

1,681,300

$

1,692,814

Class C Convertible Preferred stockAuthorized 150,000shares, $1.50par value, one preferred stock share to 61.275common stock shares conversion value, 19,664shares issued and outstanding as of September 28, 2024 and March 30, 2024

Common stockAuthorized 65,000,000shares, $0.01par value; 40,054,071shares issued as of September 28, 2024 and 40,017,264shares issued as of March 30, 2024

Treasury stock 10,104,688shares as of September 28, 2024 and March 30, 2024, at cost

See accompanying Notes to Consolidated Financial Statements.

Monro, Inc. Q2 2025 Form 10-Q

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Table of Contents

CONSOLIDATED FINANCIAL STATEMENTS

Consolidated Statements of Income and Comprehensive Income

Three Months Ended

Six Months Ended

(thousands, except per share data) (unaudited)

September 28, 2024

September 23, 2023

September 28, 2024

September 23, 2023

Sales

$

301,391

$

322,091

$

594,573

$

649,059

Cost of sales, including occupancy costs

195,014

207,118

379,010

419,691

Gross profit

106,377

114,973

215,563

229,368

Operating, selling, general and administrative expenses

93,175

92,618

189,114

189,664

Operating income

13,202

22,355

26,449

39,704

Interest expense, net of interest income

5,136

4,801

10,279

10,009

Other income, net

(110)

(34)

(201)

(92)

Income before income taxes

8,176

17,588

16,371

29,787

Provision for income taxes

2,529

4,716

4,861

8,086

Net income

$

5,647

$

12,872

$

11,510

$

21,701

Other comprehensive income

Changes in pension, net of tax

34

93

68

187

Other comprehensive income

34

93

68

187

Comprehensive income

$

5,681

$

12,965

$

11,578

$

21,888

Earnings per share

Basic

$

0.18

$

0.40

$

0.37

$

0.68

Diluted

$

0.18

$

0.40

$

0.37

$

0.68

Weighted average common shares outstanding

Basic

29,934

31,434

29,925

31,427

Diluted

31,224

32,272

31,201

32,112

See accompanying Notes to Consolidated Financial Statements.


‎

Monro, Inc. Q2 2025 Form 10-Q

4

Table of Contents

CONSOLIDATED FINANCIAL STATEMENTS

Consolidated Statements of Changes in Shareholders' Equity

Class C

Accumulated

Convertible

Additional

Other

Preferred Stock

Common Stock

Treasury Stock

Paid-In

Comprehensive

Retained

Total

(thousands) (unaudited)

Shares

Amount

Shares

Amount

Shares

Amount

Capital

Loss

Earnings

Equity

Balance at June 24, 2023

20

$

29

39,979

$

400

8,561

$

(205,648)

$

250,981

$

(4,021)

$

653,427

$

695,168

Net income

12,872

12,872

Other comprehensive income

Pension liability adjustment

93

93

Dividends declared

Preferred

(337)

(337)

Common

(8,804)

(8,804)

Dividend payable

(80)

(80)

Stock options and restricted stock

27

(153)

(153)

Stock-based compensation

1,384

1,384

Balance at September 23, 2023

20

$

29

40,006

$

400

8,561

$

(205,648)

$

252,212

$

(3,928)

$

657,078

$

700,143

Balance at June 29, 2024

20

$

29

40,026

$

400

10,105

$

(250,111)

$

255,039

$

(3,417)

$

652,481

$

654,421

Net income

5,647

5,647

Other comprehensive income

Pension liability adjustment

34

34

Dividends declared

Preferred

(337)

(337)

Common

(8,387)

(8,387)

Dividend payable

(116)

(116)

Stock options and restricted stock

28

1

(156)

(155)

Stock-based compensation

832

832

Balance at September 28, 2024

20

$

29

40,054

$

401

10,105

$

(250,111)

$

255,715

$

(3,383)

$

649,288

$

651,939

Balance at March 25, 2023

20

$

29

39,966

$

400

8,561

$

(205,648)

$

250,702

$

(4,115)

$

653,554

$

694,922

Net income

21,701

21,701

Other comprehensive income

Pension liability adjustment

187

187

Dividends declared

Preferred

(466)

(466)

Common

(17,601)

(17,601)

Dividend payable

(110)

(110)

Stock options and restricted stock

40

(413)

(413)

Stock-based compensation

1,923

1,923

Balance at September 23, 2023

20

$

29

40,006

$

400

8,561

$

(205,648)

$

252,212

$

(3,928)

$

657,078

$

700,143

Balance at March 30, 2024

20

$

29

40,017

$

400

10,105

$

(250,115)

$

254,484

$

(3,451)

$

655,428

$

656,775

Net income

11,510

11,510

Other comprehensive income

Pension liability adjustment

68

68

Dividends declared

Preferred

(675)

(675)

Common

(16,762)

(16,762)

Dividend payable

(213)

(213)

Stock options and restricted stock

37

1

4

(266)

(261)

Stock-based compensation

1,497

1,497

Balance at September 28, 2024

20

$

29

40,054

$

401

10,105

$

(250,111)

$

255,715

$

(3,383)

$

649,288

$

651,939

We declared $0.28dividends per common share or equivalent for the three months ended September 28, 2024 and the three months ended September 23, 2023, and $0.56per common share or equivalent for the six months ended September 28, 2024 and September 23, 2023.

See accompanying Notes to Consolidated Financial Statements.


‎

Monro, Inc. Q2 2025 Form 10-Q

5

Table of Contents

CONSOLIDATED FINANCIAL STATEMENTS

Consolidated Statements of Cash Flows

Six Months Ended

(thousands) (unaudited)

September 28, 2024

September 23, 2023

Operating activities

Net income

$

11,510

$

21,701

Adjustments to reconcile net income to cash provided by operating activities:

Depreciation and amortization

35,238

36,535

Share-based compensation expense

1,497

1,923

Gain on disposal of assets

(2,702)

(1,401)

Impairment of long-lived assets

1,551

-

Deferred income tax expense

3,378

5,699

Change in operating assets and liabilities

Accounts receivable

(1,381)

(1,002)

Inventory

(7,728)

894

Other current assets

3,084

9,772

Other non-current assets

19,824

17,211

Accounts payable

46,983

18,626

Accrued expenses

(952)

7,980

Federal and state income taxes payable

(2,436)

(561)

Other long-term liabilities

(19,669)

(19,070)

Cash provided by operating activities

88,197

98,307

Investing activities

Capital expenditures

(13,797)

(15,705)

Deferred proceeds received from divestiture

8,521

7,311

Proceeds from the disposal of assets

9,914

1,727

Cash provided by (used for) investing activities

4,638

(6,667)

Financing activities

Proceeds from borrowings

94,829

39,263

Principal payments on long-term debt, finance leases and financing obligations

(154,839)

(108,893)

Dividends paid

(17,437)

(17,858)

Excise tax on repurchase of stock paid

(420)

-

Deferred financing costs

(670)

-

Exercise of stock options

-

17

Cash used for financing activities

(78,537)

(87,471)

Increase in cash and equivalents

14,298

4,169

Cash and equivalents at beginning of period

6,561

4,884

Cash and equivalents at end of period

$

20,859

$

9,053

Supplemental information

Leased assets obtained (reduced) in exchange for new (reduced) finance lease liabilities

$

13,256

$

(4,283)

Leased assets obtained in exchange for new operating lease liabilities

$

12,264

$

11,149

See accompanying Notes to Consolidated Financial Statements.

Monro, Inc. Q2 2025 Form 10-Q

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Table of Contents

INDEX TO NOTES

Notes to Consolidated Financial Statements (unaudited)

Note 1 Description of Business and Basis of Presentation

8

Note 2 Divestiture

9

Note 3 Earnings per Common Share

10

Note 4 Income Taxes

10

Note 5 Fair Value

10

Note 6 Cash Dividend

10

Note 7 Revenues

11

Note 8 Long-term Debt

11

Note 9 Commitments and Contingencies

12

Note 10 Supplier Finance Program

13

Note 11 Equity Capital Structure Reclassification

13

Monro, Inc. Q2 2025 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 1,272Company-operated retail stores located in 32states and 49Car-X franchised locations as of September 28, 2024.

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 onesingle 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 ("GAAP") for complete financial statement presentation. The consolidated financial statements should be read in conjunction with the financial statement disclosures in our Form 10-Kfor the fiscal year ended March 30, 2024.

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 1of our Form 10-Kfor the fiscal year ended March 30, 2024.

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 52/53week fiscal year ending on the last Saturday in March. Fiscal year 2025 covers 52weeks and fiscal year 2024 covered 53weeks. Unless specifically indicated otherwise, any references to "2025" or "fiscal 2025" and "2024" or "fiscal 2024" relate to the years ending March 29, 2025 and March 30, 2024, respectively.

Recent accounting pronouncements

In September 2022, the Financial Accounting Standards Board ("FASB") issued new accounting guidance which requires buyers in a supplier finance program to disclose sufficient qualitative and quantitative information about the program to allow a reader of the financial statements to understand the program's nature, activity during the period, changes from period to period and the program's potential magnitude. We retrospectively adopted this guidance during the first quarter of fiscal 2024, other than the roll forward information disclosure, which the Company will adopt with our fiscal 2025 annual filing. The adoption of this guidance does not have a material impact on our consolidated financial statements.

In November 2023, the FASB issued new accounting guidance which requires expanding disclosure of significant segment expenses that are regularly provided to the chief operating decision maker and included within each reported measure of segment profit or loss, an amount and description of its composition for other segment items, and interim disclosures of a reportable segment's profit or loss and assets. This ASU is effective for annual periods beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. Early adoption of this guidance is permitted. We are currently evaluating the impact of adopting this guidance.

In December 2023, the FASB issued new accounting guidance which requires income tax disclosure updates, primarily by requiring specific categories and greater disaggregation within the rate reconciliation and disaggregation of income taxes paid by jurisdiction.

Monro, Inc. Q2 2025 Form 10-Q

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CONSOLIDATED FINANCIAL STATEMENTS

NOTES

This guidance is effective for fiscal years beginning after December 15, 2024. Early adoption of this guidance is permitted. We are currently evaluating the impact of adopting this guidance.

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

Supplemental information

Property and equipment, net: Property and equipment balances are shown on the Consolidated Balance Sheets net of accumulated depreciation of $427.9million and $444.9million as of September 28, 2024 and March 30, 2024, respectively.

Allowances for credit losses: The allowances for credit losses are maintained at levels that are considered adequate to cover expected credit losses over the remaining contractual life of the receivables using historical loss experience, asset specific risk characteristics, current conditions, as well as reasonable and supportable forecasts. Management performs detailed reviews of its receivables on a monthly basis, in order to assess the adequacy of the allowances and to determine if any impairment has occurred. A receivable generally has credit losses when it is expected that all amounts related to the receivable will not be collected according to the contractual terms of the agreement.

Assets held for sale

We classify long-lived assets to be sold as held for sale in the period in which all of the required criteria are met. We initially measure a long-lived asset that is classified as held for sale at the lower of its carrying value or fair value less any costs to sell. Any loss resulting from this measurement is recognized in the period in which the held-for-sale criteria are met. Conversely, gains are not recognized on the sale of a long-lived asset until the date of sale. Upon determining that a long-lived asset meets the criteria to be classified as held for sale, we cease depreciation and report long-lived assets, if material, as Assets held for sale in our Consolidated Balance Sheets.

On June 1, 2023, we announced the planned sale of our corporate headquarters at 200 Holleder Parkway in Rochester, New York and our plan to relocate our corporate headquarters to another location in the greater Rochester area. We determined that the related assets met the criteria to be classified as held for sale as of March 30, 2024.

On July 3, 2024, we completed the sale of our corporate headquarters. We received net proceeds of approximately $9.1million and recorded a net gain of approximately $2.8million in operating, selling, general and administrative expenses in our Consolidated Statements of Income and Comprehensive Income in the second quarter of fiscal 2025.

Note 2 - Divestiture

On June 17, 2022, we completed the divestiture of assets relating to our wholesale tire operations (sevenlocations) and internal tire distribution operations to American Tire Distributors, Inc. ("ATD"). We received $62million from ATD at the closing of the transaction, of which $5million was held in escrow and subsequently paid in December 2023. The remaining $40million ("Earnout") of the total consideration of $102million is being paid quarterly over approximately three yearsand is based on our tire purchases from or through ATD pursuant to a distribution and fulfillment agreement with ATD. We received $8.5million of the Earnout during the first six months of fiscal 2025, and the remaining $6.8million of the Earnout outstanding is recorded in Other current assets in our Consolidated Balance sheets as of September 28, 2024. On October 23, 2024, ATD filed for bankruptcy protection in the U.S. Bankruptcy Court for the District of Delaware. The company evaluated the allowance for expected credit losses and determined the allowance was not required for the quarters ended September 28, 2024 and September 23, 2023. Under 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 90percent 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 yearsafter the completion of the Earnout Period, with automatic 12-month renewal periods thereafter. See Note 2of our Form 10-Kfor the fiscal year ended March 30, 2024 for additional information.

Monro, Inc. Q2 2025 Form 10-Q

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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 deductingpreferred 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

Six Months Ended

(thousands, except per share data)

September 28, 2024

September 23, 2023

September 28, 2024

September 23, 2023

Numerator for earnings per common share calculation:

Net income

$

5,647

$

12,872

$

11,510

$

21,701

Less: Preferred stock dividends

(337)

(337)

(675)

(466)

Income available to common shareholders

$

5,310

$

12,535

$

10,835

$

21,235

Denominator for earnings per common share calculation:

Weighted average common shares - basic

29,934

31,434

29,925

31,427

Effect of dilutive securities:

Preferred stock

1,205

779

1,205

620

Stock options

-

1

-

1

Restricted stock

85

58

71

64

Weighted average common shares - diluted

31,224

32,272

31,201

32,112

Basic earnings per common share

$

0.18

$

0.40

$

0.37

$

0.68

Diluted earnings per common share

$

0.18

$

0.40

$

0.37

$

0.68

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 and six months ended September 28, 2024, our effective income tax rate was 30.9percent and 29.7percent, respectively, compared to 26.8percent and 27.1percent for the three months and six months ended September 23, 2023, respectively. The difference from the statutory rate is primarily due to state taxes and 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 $62.0million as of September 28, 2024, as compared to a carrying amount and a fair value of $102.0million as of March 30, 2024. 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 $17.4million during the six months ended September 28, 2024. The declaration 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 contractual restrictions, and such other factors as the Board of Directors deems relevant. Our Credit Facility contains covenants that may limit, subject to certain exemptions, our ability to declare dividends and other distributions. For additional information regarding our Credit Facility, see Note 8.

Monro, Inc. Q2 2025 Form 10-Q

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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, commissions earned from the delivery of tires on behalf of certain tire vendors, as well as franchise royalties.

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 30days. 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

Six Months Ended

(thousands)

September 28, 2024

September 23, 2023

September 28, 2024

September 23, 2023

Tires (a)

$

141,514

$

148,356

$

276,927

$

296,246

Maintenance

83,075

90,233

166,135

183,146

Brakes

40,643

46,241

81,880

93,839

Steering

24,981

25,998

49,840

54,361

Batteries

6,285

5,469

10,087

9,707

Exhaust

4,513

5,139

8,900

10,355

Franchise royalties

380

655

804

1,405

Total

$

301,391

$

322,091

$

594,573

$

649,059

(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 21to 36months. The deferred revenue balances at September 28, 2024 and March 30, 2024 were $21.2million and $21.7million, respectively, of which $14.8million and $15.2million, respectively, are reported in Deferred revenue and $6.4million and $6.5million, respectively, are reported in Other long-term liabilities in our Consolidated Balance Sheets.

Changes in Deferred Revenue

(thousands)

Balance at March 30, 2024

$

21,687

Deferral of revenue

10,420

Recognition of revenue

(10,914)

Balance at September 28, 2024

$

21,193

As of September 28, 2024, we expect to recognize $9.0million of deferred revenue related to road hazard warranty agreements in the remainder of fiscal 2025, $9.3million of deferred revenue during our fiscal year ending March 28, 2026, and $2.9million of deferred revenue 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 five-year$600million revolving credit facility agreement with eightbanks (the "Credit Facility") that includes an accordion feature permitting us to request an increase in availability of up to an additional $250million. In November 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 Facility. The Third Amendment amended the interest rate charged on borrowings to be based on 0.10percent over the Secured Overnight Financing Rate ("SOFR"), replacing the previously used LIBOR. In addition, oneadditional bank was added to the bank syndicate for a total of ninebanks now within the syndicate. See Note 6of our Form 10-Kfor the fiscal year ended March 30, 2024 for additional information.

Monro, Inc. Q2 2025 Form 10-Q

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CONSOLIDATED FINANCIAL STATEMENTS

NOTES

We are required to maintain an interest coverage ratio, as defined in the Credit Facility, of at least 1.55to 1. In addition, our ratio of adjusted debt to EBITDAR, as defined in the Credit Facility, cannot exceed 4.75to 1, subject to certain exceptions under the Credit Facility.

On May 23, 2024, we entered into an amendment (the "Fourth Amendment") to our Credit Facility. The Fourth Amendment amends the terms of certain of the financial and restrictive covenants in the Credit Facility to provide us with additional flexibility to operate our business from the first quarter of fiscal 2025 through the fourth quarter of fiscal 2026 (the "Covenant Relief Period"). We may voluntarily exit the Covenant Relief Period at any time, which would revert the terms of the Credit Facility to the terms existing before the Fourth Amendment, with the exception of the modified definition of "EBITDAR," described below.

During the Covenant Relief Period, the minimum interest coverage ratio will be reduced from 1.55x to 1.00x to: (a) 1.25x to 1.00x from the first quarter of fiscal 2025 through the first quarter of fiscal 2026; (b) 1.35x to 1.00x from the second quarter of fiscal 2026 through the fourth quarter of fiscal 2026; and (c) 1.55x to 1.00x for the first quarter of fiscal 2027 and thereafter. During the Covenant Relief Period, the maximum ratio of adjusted debt to EBITDAR remains at 4.75x to 1.00x, except that, if we completed a qualified acquisition during the Covenant Relief Period, the maximum ratio would increase to 5.00x to 1.00x for a certain 12-month period after the qualified acquisition. In addition, the Fourth Amendment modifies the definition of "EBITDAR" to permit add-backs relating to expenses, and restrict add-backs related to gains, associated with store closures of (a) all non-cash items and (b) cash items up to 20% of EBITDA from the first quarter of fiscal 2025 through the fourth quarter of fiscal 2026 and up to 15% of EBITDA from the first quarter of fiscal 2027 and thereafter.

During the Covenant Relief Period, the interest rate spread charged on borrowings increases by 25basis points.

During the Covenant Relief Period, the restrictions on our ability to declare dividends were modified to reduce the cushion inside the threshold required for us to be able to declare dividends without restriction from 0.50x to 0.25x. In addition, during the Covenant Relief Period, we must have minimum liquidity of at least $400million to declare dividends. We are prohibited from repurchasing our securities during the Covenant Relief Period if there are outstanding amounts under the Credit Facility immediately before or after giving effect to the repurchase. During the Covenant Relief Period, we may acquire stores or other businesses as long as we have minimum liquidity of at least $400million after completing the acquisition.

We were in compliance with all debt covenants at September 28, 2024.

Except as amended by the First Amendment, Second Amendment, Third Amendment and Fourth Amendment, the remaining terms of the Credit Facility remain in full force and effect.

Within the Credit Facility, we have a sub-facility of $80million available for the purpose of issuing standby letters of credit. The sub-facility requires fees aggregating 87.5to 212.5basis points annually of the face amount of each standby letter of credit, payable quarterly in arrears. There was a $30.1million outstanding letter of credit at September 28, 2024.

There was $62.0million outstanding and $507.9million available under the Credit Facility at September 28, 2024.

Note 9 - Commitments and Contingencies

Commitments

Commitments Due by Period

Within

Within 2 to

Within 4 to

After

(thousands)

Total

1 Year

3 Years

5 Years

5 Years

Principal payments on long-term debt

$

62,000

-

-

$

62,000

-

Finance lease commitments/financing obligations (a)

341,005

$

50,374

$

92,114

73,252

$

125,265

Operating lease commitments (a)

247,548

47,242

82,584

53,894

63,828

Total

$

650,553

$

97,616

$

174,698

$

189,146

$

189,093

(a)Finance and operating lease commitments represent future undiscounted lease payments and include $66.2million and $44.7million, 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.

Monro, Inc. Q2 2025 Form 10-Q

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CONSOLIDATED FINANCIAL STATEMENTS

NOTES

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.

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 360days. 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 $234.7million, $167.2million, and $187.9million as of September 28, 2024, March 30, 2024, and September 23, 2023, 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 11 - Equity Capital Structure Reclassification

On May 12, 2023, we entered into a reclassification agreement (the "Reclassification Agreement") with the holders (the "Class C Holders") of our Class C Convertible Preferred Stock (the "Class C Preferred Stock") to reclassify our equity capital structure to eliminate the Class C Preferred Stock.

Under the Reclassification Agreement, after receiving shareholder approval on August 15, 2023, we filed amendments to our certificate of incorporation (the "Certificate of Incorporation") to create a mandatory conversion of any outstanding shares of Class C Preferred Stock prior to an agreed sunset date of the earliest of (i) August 15, 2026; (ii) the first business day immediately prior to the record date established for the determination of the shareholders of the Company entitled to vote at the Company's 2026 annual meeting of shareholders; and (iii) the date on which the Class C Holders, in the aggregate, cease to beneficially own at least 50% of all shares of the Class C Preferred Stock issued and outstanding as of May 12, 2023. In exchange for this sunset of the Class C Preferred Stock, the conversion rate of Class C Preferred Stock was adjusted so that each share of Class C Preferred Stock will convert into 61.275shares of common stock (the "adjusted conversion rate"), an increase from the prior conversion rate of 23.389shares 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. In addition, the liquidation preference for the Class C Preferred Stock was amended to provide that, upon a liquidation event, each holder of Class C Preferred Stock would be entitled to receive, for each share of Class C Preferred Stock held by the holder upon a liquidation, dissolution, or winding up of the affairs of the Company, an amount equal to the greater of $1.50per share and the amount the holder would have received had each share of Class C Preferred Stock been converted to shares of common stock immediately prior to the liquidation, dissolution, or winding up. There was noClass C Preferred Stock converted during fiscal 2025 or 2024. The Reclassification Agreement also provides that, during the sunset period, the Class C Holders will have the right to appoint onemember 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.

We have determined the amendments to the Class C Preferred Stock, because of the Reclassification Agreement, should be accounted for as a modification.

Monro, Inc. Q2 2025 Form 10-Q

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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 July 3, 2024, we completed the sale of our corporate headquarters. We received net proceeds of approximately $9.1 million and recorded a net gain of approximately $2.8 million. See additional discussion in Note 1to our consolidated financial statements.

On October 23, 2024, American Tire Distributors, Inc. ("ATD"), one of our vendors for tires, filed for bankruptcy protection in the U.S. Bankruptcy Court for the District of Delaware. While ATD has proposed restructuring its business with the support of its lenders, uncertainty exists about how our distribution and fulfillment agreement with ATD will be treated in the proceeding and whether and when we will receive the remaining $6.8 million in earnout payments from our divesture of assets to ATD. We intend to seek the remaining earnout payments and future performance under the distribution agreement with ATD so that we will be able to continue to provide high-quality service to our guests.

Economic Conditions

The United States economy has experienced higher inflation during fiscal 2024 and into fiscal 2025 and there are market expectations that consumer prices 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. These conditions may give rise to an economic slowdown, and perhaps a recession, and could further increase our costs and/or impact our revenues. It is unclear whether the current economic conditions and government responses to these conditions, including inflation, changing interest rates, and geopolitical uncertainty, will result in an economic slowdown or recession in the United States. If that occurs, demand for our products and services may further decline, possibly significantly, which may significantly and adversely impact our business, results of operations and financial position.

Financial Summary

Second quarter 2025 included the following notable items:

Diluted earnings per common share ("EPS") were $0.18.

Adjusted diluted EPS, a non-GAAP measure, were $0.17.

Sales decreased 6.4 percent, due to lower overall comparable store sales resulting from lower store traffic.

Comparable store sales decreased 5.8 percent.

Operating income of $13.2 million was 40.9 percent lower than the comparable prior-year period.

Net income was $5.6 million.

Adjusted net income, a non-GAAP measure, was $5.2 million.

Earnings Per Common Share

Three Months Ended

Six Months Ended

September 28, 2024

September 23, 2023

Change

September 28, 2024

September 23, 2023

Change

Diluted EPS

$

0.18

$

0.40

(55.0)

%

$

0.37

$

0.68

(45.6)

%

Adjustments

(0.02)

0.01

0.02

0.04

Adjusted diluted EPS

$

0.17

$

0.41

(58.5)

%

$

0.39

$

0.72

(45.8)

%

Note: Amounts may not foot due to rounding.

Adjusted net income and adjusted diluted EPS, each of which is a measure not derived in accordance with 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 closed store impairment charges, store closing costs, transition costs related to back-office optimization, shareholder matters from our equity capital structure recapitalization, and a gain on sale of corporate headquarters net of closing and relocation costs. Reconciliations of these non-GAAP financial measures to GAAP measures are provided beginning on page 17under "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 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.

Monro, Inc. Q2 2025 Form 10-Q

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MANAGEMENT'S DISCUSSION AND ANALYSIS

Analysis of Results of Operations

Summary of Operating Income

Three Months Ended

Six Months Ended

(thousands)

September 28, 2024

September 23, 2023

Change

September 28, 2024

September 23, 2023

Change

Sales

$

301,391

$

322,091

(6.4)

%

$

594,573

$

649,059

(8.4)

%

Cost of sales, including occupancy costs

195,014

207,118

(5.8)

379,010

419,691

(9.7)

Gross profit

106,377

114,973

(7.5)

215,563

229,368

(6.0)

Operating, selling, general and administrative expenses

93,175

92,618

0.6

189,114

189,664

(0.3)

Operating income

$

13,202

$

22,355

(40.9)

%

$

26,449

$

39,704

(33.4)

%

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 7to 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 91 selling days in the three months ended September 28, 2024 and in the three months ended September 23, 2023, and 181 selling days in the six months ended September 28, 2024 and in the six months ended September 23, 2023.

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

Six Months Ended

(thousands)

September 28, 2024

September 23, 2023

September 28, 2024

September 23, 2023

Sales

$

301,391

$

322,091

$

594,573

$

649,059

Dollar change compared to prior year

$

(20,700)

$

(54,486)

Percentage change compared to prior year

(6.4)

%

(8.4)

%

The sales decrease was primarily due to a decrease in comparable store sales resulting from lower store traffic. An increase in battery sales of 20% and 8% in the three months and six months ended September 28, 2024, respectively, slightly offsets the decrease in sales. The following table shows the primary drivers of the change in sales for the three months and six months ended September 28, 2024, as compared to the same period ended September 23, 2023.

Sales Percentage Change

Three Months Ended

Six Months Ended

September 28, 2024

September 28, 2024

Sales change

(6.4)

%

(8.4)

%

Primary drivers of change in sales

Comparable store sales

(5.8)

%

(7.8)

%

Closed store sales

(0.6)

%

(0.6)

%

Broad-based economic pressures impacting consumers partly led to lower demand in tires and our higher-margin service categories during the three months and six months ended September 28, 2024. We expect the economic environment to continue to impact our customers throughout the remainder of fiscal 2025.

Comparable Store Product Category Sales Change

Three Months Ended

Six Months Ended

September 28, 2024

September 23, 2023

September 28, 2024

September 23, 2023

Batteries

20

%

12

%

8

%

15

%

Alignment

(0)

%

(4)

%

(5)

%

(3)

%

Tires

(4)

%

(4)

%

(6)

%

(1)

%

Front end/shocks

(5)

%

(5)

%

(10)

%

(7)

%

Maintenance service

(7)

%

(0)

%

(8)

%

2

%

Brakes

(12)

%

(3)

%

(12)

%

(3)

%

Monro, Inc. Q2 2025 Form 10-Q

15

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MANAGEMENT'S DISCUSSION AND ANALYSIS

Sales by Product Category

Three Months Ended

Six Months Ended

September 28, 2024

September 23, 2023

September 28, 2024

September 23, 2023

Tires

47

%

46

%

46

%

45

%

Maintenance service

28

28

28

28

Brakes

14

14

14

15

Steering (a)

8

8

8

8

Batteries

2

2

2

2

Other

1

2

2

2

Total

100

%

100

%

100

%

100

%

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

Change in Number of Company-Operated Retail Stores

Three Months Ended

Six Months Ended

September 28, 2024

September 23, 2023

September 28, 2024

September 23, 2023

Beginning store count

1,284

1,299

1,288

1,299

Closed

(12)

(1)

(16)

(1)

Ending store count

1,272

1,298

1,272

1,298

Cost of Sales and Gross Profit

Gross Profit

Three Months Ended

Six Months Ended

(thousands)

September 28, 2024

September 23, 2023

September 28, 2024

September 23, 2023

Gross profit

$

106,377

$

114,973

$

215,563

$

229,368

Percentage of sales

35.3

%

35.7

%

36.3

%

35.3

%

Dollar change compared to prior year

$

(8,596)

$

(13,805)

Percentage change compared to prior year

(7.5)

%

(6.0)

%

Gross profit, as a percentage of sales, decreased 40 basis points ("bps") for the three months ended September 28, 2024, as compared to the prior year comparable period. Material costs increased, as a percentage of sales, due primarily to mix within tires. Occupancy costs increased, as a percentage of sales, as we lost leverage on these largely fixed costs with lower overall comparable store sales. Partially offsetting this was a decrease in technician labor costs, as a percentage of sales, due primarily to improvements in labor productivity and efficiency. Gross profit, as a percentage of sales, increased 100 basis points for the six months ended September 28, 2024, as compared to the prior year comparable period. The increase in gross profit, as a percentage of sales, was primarily due to improvements in labor productivity and efficiency, partially offset by the increase in occupancy costs as we lost leverage on these largely fixed costs.

Gross Profit as a Percentage of Sales Change

Three Months Ended

Six Months Ended

September 28, 2024

September 28, 2024

Gross profit change

(40)

bps

100

bps

Primary drivers of change in gross profit as a percentage of sales

Material costs

(110)

bps

-

bps

Occupancy costs

(60)

bps

(90)

bps

Technician labor costs

130

bps

190

bps

OSG&A Expenses

OSG&A Expenses

Three Months Ended

Six Months Ended

(thousands)

September 28, 2024

September 23, 2023

September 28, 2024

September 23, 2023

OSG&A Expenses

$

93,175

$

92,618

$

189,114

$

189,664

Percentage of sales

30.9

%

28.8

%

31.8

%

29.2

%

Dollar change compared to prior year

$

557

$

(550)

Percentage change compared to prior year

0.6

%

(0.3)

%

The increase of $.6 million in operating, selling, general and administrative ("OSG&A") expenses for the three months ended September 28, 2024, from the comparable prior year period is due to an increase in OSG&A expenses from store advertising costs, closed store impairment charges, comparable stores, transition costs related to back-office optimization, as well as costs from new stores and other non-recurring costs. Partially offsetting these increases was the net gain on the sale of the corporate headquarters, as well as a decrease in costs from closed stores and decreased costs related to shareholder matters from our equity capital structure recapitalization incurred during the comparable period. The following table shows the impact of these costs on the change in OSG&A expenses for the three months and six months ended September 28, 2024, as compared to the same periods ended September 23, 2023.

Monro, Inc. Q2 2025 Form 10-Q

16

Table of Contents

MANAGEMENT'S DISCUSSION AND ANALYSIS

OSG&A Expenses Change

Three Months Ended

Six Months Ended

(thousands)

September 28, 2024

September 28, 2024

OSG&A expenses change

$

557

$

(550)

Drivers of change in OSG&A expenses

Increase in store advertising costs

$

1,421

$

2,947

Increase in store impairment charges

$

1,031

$

1,551

Increase from other non-recurring costs, net

$

894

$

995

Increase (decrease) from comparable stores

$

673

$

(1,442)

Increase from transition costs related to back-office optimization

$

456

$

509

Increase from new stores

$

45

$

98

Decrease from costs related to shareholder matters

$

(439)

$

(1,275)

Decrease from closed stores

$

(700)

$

(1,234)

Decrease from net gain on sale of corporate headquarters

$

(2,824)

$

(2,699)

Other Performance Factors

Net Interest Expense

Net interest expense of $5.1 million for the three months ended September 28, 2024 increased $0.3 million as compared to the prior year period, and increased as a percentage of sales from 1.5 percent to 1.7 percent. Weighted average debt outstanding for the three months ended September 28, 2024 decreased by approximately $21.3 million as compared to the three months ended September 23, 2023. This decrease is primarily related to lower finance lease debt related to our stores, partially offset by an increase in debt outstanding under the Credit Facility. The weighted average interest rate increased approximately 60 basis points as compared to the same period of the prior year.

Net interest expense of $10.3 million for the six months ended September 28, 2024 increased $0.3 million compared to the prior year period, and increased as a percentage of sales from 1.5 percent to 1.7 percent. Weighted average debt outstanding for the six months ended September 28, 2024 decreased by approximately $21.9 million and the weighted average interest rate increased approximately 40 basis points as compared to the same period of the prior year.

Provision for Income Taxes

Our effective income tax rate for the three months and six months ended September 28, 2024 was 30.9 percent and 29.7 percent, respectively, compared with 26.8 percent and 27.1 percent in the comparable prior-year periods. The difference from the statutory rate is primarily due to state taxes and 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 closed store impairment charges, store closing costs, transition costs related to back-office optimization, shareholder matters from our equity capital structure recapitalization, and a gain on sale of corporate headquarters net of closing and relocation costs.

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.

Monro, Inc. Q2 2025 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

Six Months Ended

(thousands)

September 28, 2024

September 23, 2023

September 28, 2024

September 23, 2023

Net income

$

5,647

$

12,872

$

11,510

$

21,701

Store impairment charges

1,031

-

1,551

-

Transition costs related to back-office optimization

553

97

1,150

641

Store closing costs

531

(43)

712

4

Costs related to shareholder matters

-

439

-

1,275

Acquisition due diligence and integration costs

-

-

-

5

Net gain on sale of corporate headquarters(a)

(2,764)

60

(2,639)

60

Provision for income taxes on pre-tax adjustments

177

(143)

(210)

(502)

Adjusted net income

$

5,175

$

13,282

$

12,074

$

23,184

(a) Amount includes the gain on sale of the corporate headquarters building net of closing and relocation costs.

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

Six Months Ended

September 28, 2024

September 23, 2023

September 28, 2024

September 23, 2023

Diluted EPS

$

0.18

$

0.40

$

0.37

$

0.68

Store impairment charges

0.02

-

0.04

-

Transition costs related to back-office optimization (a)

0.01

0.00

0.03

0.01

Store closing costs (a)

0.01

(0.00)

0.02

0.00

Costs related to shareholder matters

-

0.01

-

0.03

Acquisition due diligence and integration costs (a)

-

-

-

0.00

Net gain on sale of corporate headquarters(a) (b)

(0.06)

0.00

(0.06)

0.00

Adjusted diluted EPS

$

0.17

$

0.41

$

0.39

$

0.72

(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.

(b) Amount includes the gain on sale of the corporate headquarters building net of closing and relocation costs.

Note: The calculation of the impact of non-GAAP adjustments on diluted EPS is performed on each line independently. The table may not add down +/- $0.01 due to rounding.

The other adjustments to diluted EPS reflect estimated annual effective income tax rates of 27.3 percent and 25.8 percent for the three months ended September 28, 2024 and September 23, 2023, respectively and 27.1 percent and 25.3 percent for the six months ended September 28, 2024 and September 23, 2023, respectively. These estimated annual effective income tax rates exclude the income tax impacts from share-based compensation. 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 opportunities intended to drive long-term sustainable growth, pay down debt, and return cash to our shareholders through our dividend 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.

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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 $25 million to $35 million in the aggregate in fiscal 2025. Additionally, we have contractual finance lease and operating lease commitments with landlords through October 2040 for $477.4 million in lease payments, of which $96.6 million is due within one year. For details regarding these lease commitments, see Note 9to our consolidated financial statements.

As of September 28, 2024, we had $62.0 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 8to our consolidated financial statements.

Dividends

We paid cash dividends of $0.28 per share totaling $8.7 million and $8.9 million for the three months ended September 28, 2024 and September 23, 2023, respectively, and $0.56 per share totaling $17.4 million and $17.9 million for the six months ended September 28, 2024 and September 23, 2023, respectively.

Working Capital Management

As of September 28, 2024, we had a working capital deficit of $234.7 million, an increase of $32.8 million from a deficit of $201.9 million as of March 30, 2024. The overall working capital deficit is a result of our supply chain finance program. We have agreed to contractual payment terms and conditions with our suppliers. As part of our working capital management, we facilitate a voluntary supply chain finance program to provide our suppliers with the opportunity to sell receivables due from Monro to a participating financial institution. For details regarding our supply chain finance program, see Note 10to 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 September 28, 2024, we had $20.9 million of cash and equivalents. In addition, we had $507.9 million available under the Credit Facility as of September 28, 2024.

We believe that our current sources of funds will provide us with adequate liquidity during the 12-month period following September 28, 2024, 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

Six Months Ended

(thousands)

September 28, 2024

September 23, 2023

Cash provided by operating activities

$

88,197

$

98,307

Cash provided by (used for) investing activities

4,638

(6,667)

Cash used for financing activities

(78,537)

(87,471)

Increase in cash and equivalents

14,298

4,169

Cash and equivalents at beginning of period

6,561

4,884

Cash and equivalents at end of period

$

20,859

$

9,053

Cash provided by operating activities

For the six months ended September 28, 2024, cash provided by operating activities was $88.2 million, which consisted of net income of $11.5 million, increased by non-cash adjustments of $39.0 million and net change in operating assets and liabilities of $37.7 million. The non-cash charges were largely driven by $35.2 million of depreciation and amortization, as well as $3.4 million in deferred income tax expense. 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 $67.5 million. This was partially offset byaccrued expenses and other current assets being a use of cash of $17.0 million, as well as our inventory balance being a use of cash of $7.7 million.

For the six months ended September 24, 2023, cash provided by operating activities was $98.3 million, which consisted of net income of $21.7 million, adjusted by non-cash charges of $42.8 million and by a change in operating assets and liabilities of $33.9 million. The non-cash charges were largely driven by $36.5 million of depreciation and amortization, as well as $5.7 million in deferred income tax

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expense. 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 $28.6 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 $6.9 million driven by timing of payments.

Cash used for investing activities

For the six months ended September 28, 2024, cash provided by investing activities was $4.6 million. This was primarily due to cash provided by payments from the disposal of property and equipment, including the proceeds related to the sale of our corporate headquarters, for $9.9 million, and cash provided by the earnout payment from the sale of our wholesale tire locations and distribution assets of $8.5 million. This was partially offset by cash used for capital expenditures, including property and equipment, of $13.8 million.

For the six months ended September 23, 2023, cash used for investing activities was $6.7 million. This was primarily due to cash used for capital expenditures, including property and equipment, of $15.7 million, partially offset by cash provided by the earnout payment from the sale of our wholesale tire locations and distribution assets and the disposal of property and equipment of $7.3 million and $1.7 million, respectively.

Cash used for financing activities

For the six months ended September 28, 2024, cash used for financing activities was $78.5 million,which was primarily due to 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 dividends of $20.0 million and $17.4 million, respectively.

For the six months ended September 23, 2023, cash used for financing activities was $87.5 million, which was primarily due to payment on our Credit Facility, net of amounts borrowed during the period, of $50.0 million, as well as payment of finance lease principal and dividends of $19.6 million and $17.9 million, respectively.

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., "Management's Discussion and Analysis of Financial Condition and Results of Operations" of our Form 10-Kfor the fiscal year ended March 30, 2024. There have been no material changes to our critical accounting estimates since our Form 10-K for the year ended March 30, 2024.

Recent Accounting Pronouncements

See "Recent Accounting Pronouncements" in Note 1to our consolidated financial statements for a discussion of the impact of recently issued accounting standards on our consolidated financial statements as of September 28, 2024 and the expected impact on the consolidated financial statements for future periods.

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," "can," "could," "estimate," "expect," "intend," "may," "plan," "potential," "seek," "should," "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:

l

the impact of competitive services and pricing;

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l

the effect of economic conditions and geopolitical uncertainty, 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 and the possibility that vendors, such as ATD, will be unable to perform under our agreements with those vendors;

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, and to comply with the debt covenants of our Credit Facility;

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 protect our brands and our reputation;

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.

Any of these factors, as well as such other factors as discussed in Part I, Item 1A., "Risk Factors" of our Form 10-Kfor the fiscal year ended March 30, 2024, 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.

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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 September 28, 2024, 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 $0.6 million based upon our debt position at September 28, 2024 and approximately $1.0 million based upon our debt position at March 30, 2024, given a change in SOFR of 100 basis points.

Debt financing had a carrying amount that approximates a fair value of $62.0 million as of September 28, 2024, as compared to a carrying amount and a fair value of $102.0 million as of March 30, 2024.

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, summarizedand 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 internalcontrol over financial reporting during the quarter ended September 28, 2024that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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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 1A. Risk Factors

Except as stated below, there have been no material changes from the risk factors previously disclosed in Part I, Item 1A., "Risk Factors" of our Form 10-Kfor the fiscal year ended March 30, 2024.

We depend on our relationships with our vendors for certain inventory and those vendors may be unable to perform under our existing agreements with them.

We depend on close relationships with our vendors for parts, tires and supplies and for our ability to purchase products at competitive prices and terms. Our ability to purchase at competitive prices and terms results from the volume of our purchases from these vendors. We entered into various contracts with parts suppliers that require us to buy from them (at market competitive prices) up to 100 percent of our annual purchases of specific products. These agreements expire at various dates.

For example, under the distribution agreement with ATD, we rely on ATD for most of certain passenger car tires, light truck replacement tires, and medium truck tires that we sell to our customers. Under the distribution agreement with ATD, our company-owned stores must purchase at least 90% of their forecasted requirements for these tires from or through ATD, subject to some exceptions. In addition, under the agreement governing the divestiture of our assets to ATD, ATD was obligated to make earnout payments to us totaling $40.0 million, of which $6.8 million remains outstanding. On October 23, 2024, ATD filed for bankruptcy protection. There can be no assurance that ATD will continue to perform under the distribution agreement or under the divestiture agreement, which could result in our inability to collect the remaining $6.8 million of earnout payments. If ATD is unable to supply our requirements for tires due to its bankruptcy or for other reasons and we are unable to purchase our desired volume of tires on the same or better terms as in the distribution agreement, or at all, our sales and ability to service our customers could suffer considerably if we are unable to find an alternative vendor of tires on similar terms.

While we may be able to identify alternative sources for most of the products we sell or use at our stores, the loss of a major supplier like ATD or the loss of a combination of suppliers could have a material adverse effect on our business, financial condition, or results of operations. If any of our suppliers do not perform adequately or otherwise fail to distribute parts or other supplies to our stores, our inability to replace the suppliers in a timely manner and on acceptable terms could increase our costs and could cause shortages or interruptions that could have a material adverse effect on our business, financial condition, and results of operations.

Because we purchase products such as oil and tires, which are subject to cost variations related to commodity costs, if we cannot pass along cost increases, our profitability would be negatively impacted.

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EXHIBITS

Item 6.Exhibits

Exhibit Index

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)

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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: October 30, 2024

By:

/s/ Michael T. Broderick

Michael T. Broderick

President and Chief Executive Officer
‎(Principal Executive Officer)

DATE: October 30, 2024

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)

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