Annual Report
Fiscal Year 2021
Continuing to Drive
Monro.Forward During
a Dynamic Year
Monro, Inc.
FY 2021 Annual Report
1
OUR COMPANY
Monro operates 1,263 Company-operated stores, 96 franchised locations, seven wholesale locations and three retread facilities,
providing automotive undercar repair and tire sales and services. The Company generated $1.1 billion in sales in fiscal 2021 and
continues to expand its national presence through strategic acquisitions and the opening of newly constructed stores.
The Company operates in 32 states nation-wide with a strong presence in the Northeast, Great Lakes and Mid-Atlantic regions and
a growing presence in the Southern and Western markets. With a focus on sustainable growth, during the last five years, we have
completed 19 acquisitions, adding 262 locations and approximately $411 million in annualized revenue.
During our nearly 65-year history, Monro has transformed from an exhaust-focus to a larger offering of auto repair, and tire sales and
service, adapting our business to stay relevant. Now, as we again face industry change, we are preparing our workforce to service the next
generation of vehicles which will be focused on electric and battery components.
Map as of May 10, 2021
Monro, Inc.
FY 2021 Annual Report
2
REPRESENTATIVE BRAND PORTFOLIO
WHAT WE OFFER
FY 2021 BY
THE NUMBERS
One of the nation’s leading automotive
service and tire providers, delivering
best-in-class auto care to communities
across the country, from oil changes,
tires and parts installation, to the most
complex vehicle repairs
Professionalism and high-quality service
customers expect from a national retailer,
with the convenience and trust of a
neighborhood garage
Highly-trained Teammates and certified
technicians bring together hands-
on experience and state-of-the-art
technology to diagnose and address
automotive needs every day to get
customers back on the road safely
1,263
Company-operated stores
32
States
96
Franchised locations
7
Wholesale locations
3
Retread facilities
Monro, Inc.
FY 2021 Annual Report
3
OUR VISION
To be America’s leading auto and tire service centers, trusted by consumers as the best place in their
neighborhoods for quality automotive service and tires. We do this by exceeding our guests’ expectations
with consistent value provided by a committed, knowledgeable organization of friendly and professional
Teammates.
OUR VALUES
At Monro, our core values serve as the foundation of our decision-making, with health, safety, environmental
and social responsibility considerations playing an important role in our strategic planning. We are committed
to responsible business practices and continuous improvement of our operations and our relationships with our
employees, investors, customers, vendors, suppliers and the communities we serve in order to build long-term
sustainable value.
LEADERSHIP
Having a vision and
the courage to shape
a better future.
INTEGRITY
We are open,
honest and
trustworthy in all
our actions.
OWNERSHIP
A culture
that instills
accountability and
empowerment.
QUALITY
What we do, we
do well.
DIVERSITY
We represent the
communities and
guests we serve.
COLLABORATION
Teamwork brings
out our best.
URGENCY
We cherish the
truth, initiative and
winning.
SHAREHOLDER VALUE
A balanced horizon
and steward of our
people and capital.
4
Monro, Inc.
FY 2021 Annual Report
OUR MONRO.FORWARD STRATEGY
In fiscal 2021, despite the challenges faced, we made important progress on our strategic initiatives to
transform our business into a scalable platform for sustainable growth and long-term shareholder value
creation.
Improve Customer
Experience
• Online reputation management
• Consistent in-store experience
• Consistent store appearance
Optimize Product and
Service Offering
• Redefined selling approach
• Optimized tire assortment
Scalable platform
to drive sustainable
growth
Enhance Customer-
Centric Engagement
• Customer retention
• Customer acquisition
• Omnichannel
Accelerate Productivity
& Team Engagement
• Optimized store staffing model
• Clearly defined career path and
enhanced training program
• Aligned compensation
Monro, Inc.
FY 2021 Annual Report
5
OUR PROVEN M&A TRACK RECORD
Monro’s disciplined acquisition approach has delivered significant growth over the years and remains a
cornerstone of the Company’s strategy.
Number of Retail Stores
Geographic Presence
Since 2013:
Monro has grown over the years through
strategic acquisitions.
Expanded presence in attractive
Western region with a total of
1,283 1,291
116
Retail Stores*
1,197
1,150
1,118
1,029
2016 2017 2018 2019 2020 2021*
* As of June 28, 2021
40
Acquisitions
adding 535 locations and $730M revenue
(includes wholesale and retread locations)
13
New states entered
solidifying presence in our Southern
markets, expanding into the Western
region
Historical Acquisition Activity
Average acquisition size: 13 stores / ~$20 million
Annualized Sales Growth from Acquired Locations
Number of Locations Acquired During Fiscal Year
~$190M
139
~$90M
80
~$150M
84
~$35M
20
~$35M 35
~$20M
28
~$120M
89
~$70M
43
~$20M 17
2013
2014
2015
2016
2017
2018
2019
2020
2021
6
Monro, Inc.
FY 2021 Annual Report
FY2021 Highlights
CORPORATE RESPONSIBILITY
3,400+
courses in
Monro University
Despite the disruptions during fiscal 2021, Monro’s Board of Directors and
Senior Leadership Team continued to make significant progress on our corporate
responsibility initiatives and in driving Monro.Forward, responsibly. Monro’s corporate
responsibility strategy is an important lens through which we identify Environmental,
Social and Governance (ESG) risks and opportunities that could meaningfully impact
1.6 million
meals served
TO
our business over the long term.
Highlights and progress during fiscal 2021 included:
60%
of our stores
fitted with energy
efficient lighting
Recycled:
2.5 million
gallons of oil
3.3 million
tires
73,000
batteries
316
tons of
cardboard
• Strengthening the Board of Directors’ ESG oversight through delegation of
primary oversight to our re-named Nominating and Corporate Responsibility
Committee.
• Enhancing Teammate engagement and prioritizing safety by conducting more
robust and structured trainings and a commitment to offer Teammates clearly defined
career paths, which have resulted in the lowest turnover rates in more than five years.
• Fostering diversity, equity and inclusion at all levels of the Company through our
Teammate Resource Group and our training and recruiting initiatives.
• Making a positive impact in the communities where our Teammates work and live
by volunteering and investing in more social programs that align with our mission and
vision, which include providing access to basic needs for individuals and families.
• Being good stewards of the environment by including energy saving initiatives such
as LED lighting and energy efficient signage in our store refreshment plan.
For more information on Monro’s corporate responsibility initiatives
and fiscal 2021 highlights, please see our inaugural Corporate
Responsibility Report, Monro.Forward Responsibly, located on the
Corporate Responsibility section of our website.
Monro, Inc.
FY 2021 Annual Report
7
Dear Fellow Shareholders
Since I joined Monro in April, I have spent much of my time traveling to our stores, getting to know our Teammates and
understanding our customers’ vehicle needs. I can unequivocally say that this is a tremendous time to be part of Monro. The depth
of talent across the organization and the guidance of our strong senior leadership team were instrumental in driving the business
forward in fiscal 2021. As a leading front-line service organization, our go-forward plan will be grounded in our commitment to
our customers and Teammates with a renewed focus on in-store execution. With a scalable platform, Monro is also uniquely
positioned to continue to grow through strategic acquisitions and investments in greenfield locations. Importantly, we remain
steadfast on driving strong cash flow to fuel future growth.
Keeping Customers on the Road During an
Unprecedented Year
While we experienced an unprecedented year, as an essential business, Monro
continued to operate throughout the COVID-19 pandemic to keep America’s
frontline workers on the road. Our team quickly adjusted our operations to
ensure the health and safety of our customers and Teammates across all facets
of our business. Although many aspects of the pandemic were beyond our
control, we never lost sight of our key strategic priorities and accelerated our
Monro.Forward initiatives so that we could emerge from the pandemic stronger
than before.
Accelerating Monro.Forward Initiatives
We continued to advance our Monro.Forward
initiatives, centered around our commitment
to operational excellence as a best-in-class
service organization. Throughout fiscal 2021, we successfully transformed
approximately 150 stores through our rebranding and reimaging initiative, as
well as completed the rollout of our digital phone system and other in-store
technological improvements. With the full support of our Board of Directors, we
will continue Monro’s growth and transformation strategy and focus on bringing
our Monro.Forward initiatives to life in every store for every customer and for
every Teammate.
Advancing Monro.Forward Responsibly
Over the past year, Monro’s leadership team has made significant progress
in formalizing and advancing our corporate responsibility initiatives and
transparency. Under the leadership of our Executive Vice President - Chief Legal
Officer, Maureen Mulholland, Monro recently published our inaugural Corporate
Responsibility Report on the Corporate Responsibility section of our corporate
website. In alignment with our Company core values, our corporate responsibility
strategy focuses on integrating Environmental, Social and Governance (ESG)
factors into long-term decision making and strategy. This includes fostering
diversity, equity, and inclusion; enhancing Teammate engagement; making a
positive impact within the communities where we live and operate and being good
stewards of the environment. I recognize that our ESG journey is ongoing and am
committed and excited to work with our senior leaders to build on the great work
that has already been done to continue to drive Monro.Forward responsibly.
A Look Back at
Fiscal 2021
$1.126B
in sales
$185M
Generated record
cash flow
Acquisitions
completed and
announced in fiscal
2021 represent a
total of
$65M
in annualized sales
~150
Stores transformed
in key markets
$30M
Returned in cash
to shareholders
through dividends
8
Monro, Inc.
FY 2021 Annual Report
Enhancing Financial Position
During fiscal 2021, we also focused on strengthening our financial position and bolstering our liquidity. The remarkable efforts of our
team to drive variable margin improvement and targeted fixed cost reductions led to record operating cash flow of $185 million. Our
steadfast commitment to driving strong cash flow gives us ample flexibility to continue implementing our strategic growth initiatives as
well as pursuing attractive acquisition opportunities to deliver long-term value for our shareholders.
Expanding Geographic Presence in the Western Region
Strategic acquisitions remain a key pillar of Monro’s growth strategy. Over the past year, we continued to expand our geographic
presence in the dynamic Western region, with the acquisition of 17 stores in Southern California, and most recently 30 Mountain
View Tire & Service stores in the Los Angeles area. Combined, these acquisitions represent approximately $65 million in expected
annualized sales. Over the last five years, Monro has successfully entered seven new states, adding 262 store locations and
approximately $411 million in annualized revenue. Looking forward, we are excited by our growth prospects in the Western region
and are well positioned to take advantage of the many attractive consolidation opportunities in our fragmented industry. In addition,
we plan on strategically opening greenfield locations to accelerate our growth in attractive markets.
Driving Long-term Shareholder Value
In closing, fiscal 2021 was an unprecedented year for Monro. The Company continued to accelerate its strategic growth initiatives,
strengthened its financial position, and returned $30 million to shareholders. I am confident in our path forward and believe our strong
focus on operational execution will drive long-term value for our shareholders.
Looking Ahead
Monro has made remarkable progress in our transformation journey during fiscal 2021, and I believe these accomplishments will
be instrumental to our success in the coming year and beyond. As we head into fiscal 2022, we are encouraged by the pace of the
economic recovery and are seeing more customers take to the road. We have a strong foundation to build upon and an exceptional
team in place ensuring that we capitalize on the opportunities ahead. The continued dedication of our valued Teammates and our
strong commitment to providing a five-star customer experience will remain critical to our success.
On behalf of the Board of Directors and the Senior Leadership Team, I would like to thank you for your continued support of Monro. I
look forward to speaking with you at our annual meeting on August 17, 2021.
Sincerely,
Michael T. Broderick
President and Chief Executive Officer
Monro, Inc.
Monro, Inc.
FY 2021 Annual Report
9
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_________________________________________
FORM 10-K
_________________________________________
(Mark One)
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended March 27, 2021
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
(State or other jurisdiction
of incorporation or organization)
200 Holleder Parkway,
Rochester, New York
(Address of principal executive offices)
16-0838627
(I.R.S. Employer
Identification No.)
14615
(Zip Code)
Registrant’s telephone number, including area code: (585) 647-6400
_________________________________________
Title of each class
Common Stock, par value $.01 per share
Securities registered pursuant to Section 12(b) of the Act:
Trading
Symbol(s)
MNRO
Name of each exchange on which registered
The Nasdaq Stock Market
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. YES
NO
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act. YES
NO
Securities registered pursuant to Section 12(g) of the Act: None
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. 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).
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
Non-Accelerated Filer
Emerging Growth Company
Accelerated Filer
Smaller Reporting 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 has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control
over financial reporting under Section 404(b) of the Sarbanes Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued
its audit report.
Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). YES
NO
The aggregate market value of the voting and non-voting common equity held by non-affiliates of the Registrant, based on the closing price of the shares of
common stock on The Nasdaq Stock Market on September 25, 2020 was $1,331,800,000.
The number of shares of Registrant’s Common Stock outstanding as of May 21, 2021 was 33,492,878.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrant’s definitive Proxy Statement for its 2021 Annual Meeting of Shareholders to be held hereafter are incorporated by reference into Part
III of this report.
Table of Contents
TABLE OF CONTENTS
PART I
Cautionary Note Regarding Forward-Looking Statements
Available Information
Item 1. Business
Item 1A. Risk Factors
Item 1B. Unresolved Staff Comments
Item 2. Properties
Item 3. Legal Proceedings
Item 4. Mine Safety Disclosures
PART II
Item 5. Market for the Company's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
Item 6. Selected Financial Data
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations
Item 7A. Quantitative and Qualitative Disclosures about Market Risk
Item 8. Financial Statements and Supplementary Data
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
Item 9A. Controls and Procedures
Item 9B. Other Information
Item 10. Directors, Executive Officers and Corporate Governance
Item 11. Executive Compensation
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
Item 13. Certain Relationships and Related Transactions, and Director Independence
Item 14. Principal Accountant Fees and Services
PART III
PART IV
Item 15. Exhibits and Financial Statement Schedules
Item 16. Form 10-K Summary
Signatures
Page
3
4
5
10
16
17
17
17
18
18
19
28
29
57
57
57
58
58
58
58
58
59
61
62
2
Monro, Inc.
2021 Form 10-K
Table of Contents
Cautionary Note Regarding Forward-Looking Statements
PART I
This Annual Report on Form 10-K 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,” “appear,” “believe,” “contemplate,” “could,” “estimate,” “expect,” “intend,” “may,” “plan,” “potential,”
“see,” “strategy,” “vision,” “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
novel strain of coronavirus (“COVID-19”) pandemic on the economy, consumer spending levels, and unemployment in our
markets;
the uncertainty of the impact of the COVID-19 pandemic and public health measures on our business and results of operations,
including uncertainties surrounding possible disruptions in our supply chain or sources of supply, the physical and financial
health of our customers, the effectiveness and duration of government assistance programs to individuals, households and
businesses to support consumer spending, levels of traffic in our stores, changes in customer demand for our services, and
increased expenses for higher wages and compensation paid to employees and the cost of personal protective equipment and
additional cleaning supplies and protocols for the safety of our employees;
our expectations regarding cost increases in the future, including costs relating to our COVID-19 response initiatives, increases
in the minimum wage by states and localities, potential federal minimum wage legislation, increases in distribution and fuel
costs and potential new legal requirements to provide increased pay for employees who work during pandemic restrictions;
the effect of economic conditions, seasonality and the impact of weather conditions and natural disasters on customer demand;
the dependence on and our expectation regarding competition within the primary markets in which our stores are located;
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 competitive services and pricing;
the reliability of, and cost associated with, our sources of parts supply, particularly imported goods such as those sourced from
China;
the impact of trade relations and the ongoing trade dispute between the United States and China, including the actual and
potential effect of Section 301 tariffs on Chinese goods imposed by the United States Trade Representative, uncertainties
surrounding the policies of the new presidential administration, and other potential impediments to imports;
the impact of industry regulation;
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), operating,
selling, general and administrative expenses and other fixed costs, and our ability to leverage those costs;
advances in automotive technologies;
risks relating to disruption or unauthorized access to our computer systems;
our failure to protect customer and employee personal data;
business interruptions;
potential outcomes related to pending or future litigation matters;
risks relating to acquisitions and the integration of acquired businesses with ours;
the effect of changes in labor laws, and the effect of the Fair Labor Standards Act as it relates to the qualification of our
managers for exempt status, minimum wage and health care law;
Monro, Inc.
2021 Form 10-K
3
Table of Contents
•
our assessment of the materiality and impact on our business of recent accounting pronouncements adopted by the Financial
Accounting Standards Board (“FASB”);
• management’s estimates and expectations as they relate to income tax liabilities, deferred income taxes and uncertain tax
positions; and
• management’s estimates associated with our critical accounting policies, including business combinations, self-insurance
liabilities and valuations for our goodwill and indefinite-lived intangible assets impairment analyses.
Any of these factors, as well as such other factors as discussed in Part I, Item 1A., “Risk Factors” and throughout Part II, Item 7.,
“Management’s Discussion and Analysis of Financial Condition and Results of Operations” of this Annual Report on Form 10-K (“Form
10-K”), as well as in our periodic filings with the Securities and Exchange Commission (the “SEC”), could cause our actual results to
differ materially from our anticipated results. The information provided in this Form 10-K 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 Form 10-K 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-K to reflect events or circumstances after such date, or to reflect the occurrence of unanticipated events.
Introductory Note
Unless otherwise stated, references to “we,” “our,” “us,” “Monro” or the “Company” generally refer to Monro, Inc. and its direct and
indirect subsidiaries on a consolidated basis. Unless specifically indicated otherwise, any references to “2021” or “fiscal 2021,” “2020”
or “fiscal 2020,” and “2019” or “fiscal 2019” relate to the years ended March 27, 2021, March 28, 2020 and March 30, 2019, respectively.
Available Information
Our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to those reports filed
or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 are available free of charge on our website at
www.monro.com as soon as reasonably practicable after electronic filing of such reports with the SEC.
Our investor presentation regarding the financial results for the fiscal year ended March 27, 2021 is available and accessible at Monro's
Investor Relations page at https://corporate.monro.com/investors. Information available on our website is not a part of, and is not
incorporated into, this Form 10-K. We intend to make future investor presentations available exclusively through our Investor Relations
page.
4
Monro, Inc.
2021 Form 10-K
Table of Contents
Item 1. Business
General
We are a leading nation-wide operator of retail tire and automotive repair stores in the United States. We offer to our customers,
referred to as “guests”, 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.
We believe the convenience and value we offer are key factors in serving and growing our base of customers. At March 27, 2021, we
operated 1,263 retail tire and automotive repair stores and serviced approximately 4.8 million vehicles in fiscal 2021.
Our retail tire and automotive repair stores operate primarily under the names “Monro Auto Service and Tire Centers,” “Tire Choice
Auto Service Centers,” “Mr. Tire Auto Service Centers,” “Car-X Tire & Auto,” “Tire Warehouse Tires for Less,” “Ken Towery’s Tire
& Auto Care,” “Tire Barn Warehouse,” and “Free Service Tire & Auto Centers.”
Company-operated Store Brands as of March 27, 2021
Monro Auto Service and Tire Centers
Tire Choice Auto Service Centers
Mr. Tire Auto Service Centers
Car-X Tire & Auto
Tire Warehouse Tires for Less
Ken Towery's Tire & Auto Care
Tire Barn Warehouse
Free Service Tire & Auto Centers
Other (a)
Total
Stores
375
358
321
57
55
34
27
10
26
1,263
(a) Recent 2021 and 2020 acquisition stores to be converted to Tire Choice Auto Service Centers brand.
The typical format for a Monro store is a free-standing building consisting of a sales area, fully-equipped service bays and a parts/tires
storage area. Most service bays are equipped with above-ground electric vehicle lifts. Generally, each store is located within 25 miles
of a “key” store which carries approximately double the inventory of a typical store and serves as a mini-distribution point for slower
moving inventory for other stores in its area. Individual store sizes, number of bays and stocking levels vary greatly and are dependent
primarily on the availability of suitable store locations, population, demographics and intensity of competition among other factors.
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.
As of March 27, 2021, Monro had seven wholesale locations and three retread facilities. The wholesale locations, in most cases, sell
tires to customers for resale, although these tire sales do not include installation or other tire related services. The retread facilities re-
manufacture tires through the replacement of tread on worn tires that are later sold to customers. Monro also had 95 Car-X franchised
locations as of March 27, 2021. (Two franchised locations were closed during 2021.)
Our operations are organized and managed in one operating segment. The internal management financial reporting that is the basis for
evaluation in order to assess performance and allocate resources by our chief operating decision maker consists of consolidated data
that includes the results of our retail, commercial and wholesale locations. As such, our one operating segment reflects how our
operations are managed, how resources are allocated, how operating performance is evaluated by senior management and the structure
of our internal financial reporting.
Monro incorporated in New York in 1959. We maintain our corporate headquarters in Rochester, New York.
Business Strategy
Our vision is to be America’s leading auto and tire service center, trusted by consumers as the best place in their neighborhoods for
quality automotive service and tires. We believe that success in this vision will position Monro to deliver consistent and sustainable
organic growth as well as lead to strong, long-term financial performance. Specifically, we are committed to seeing this vision
executed across all aspects of the business, through the following actions:
Monro, Inc.
2021 Form 10-K
5
Table of Contents
• Exceed guest expectations. We will continue to invest in and execute strategic initiatives to improve our guests’ in-store
experience. This ranges from modernized store infrastructure through rebranding and reimaging investments, new tire pricing
and category management technology to match customer demand and building an omni-channel presence.
• Provide consistent value. We intend to be able to offer better value than new car dealers to more price-sensitive consumers.
Vehicles generally need more service and repairs as they advance in age. However, as consumers’ vehicles age, the
consumers’ willingness to pay higher prices decreases. Monro’s service menu is focused on items that are purchased
frequently, like oil changes and other scheduled services, along with higher value services like tires, brakes and other
undercar services. Our tire pricing and category management system allows us to dynamically track demand trends and make
rapid adjustments to optimize our tire assortment by leveraging the breadth of our tire brand portfolio to offer the right tires at
what we believe are the right price points.
• Build a committed, knowledgeable organization of friendly and professional teammates. We will continue to invest in
technology and training to accelerate productivity and team engagement. This includes our data-driven cloud-based store
staffing and scheduling software that re-balances our store technician labor to meet customer demand as well as utilizing
Monro University, an extensive cloud-based learning curriculum, to provide our employees, referred to as “teammates,” with
the technical training needed to effectively serve our customers today and into the future.
We are committed to building an omni-channel presence through our primary retail websites in order to create a seamless buying
experience for our customers. With responsive optimized design for mobile users, a streamlined tire search and improved content and
functionality, our retail websites better position us to address our customers’ needs. These websites, aligned with our primary retail
names, help customers search for store locations, access coupons, make service appointments, shop for tires and access information on
our services and products, as well as car care tips. Importantly, they better showcase the solutions we provide to our customers,
including our Good, Better, Best product and service packages.
To minimize the impact of the COVID-19 pandemic on our business, we modified our plans for some of our strategic initiatives,
including temporarily suspending all reimaging and rebranding investments related to our store transformation program during the
first three months of fiscal 2021. With sales improvement throughout the year, we resumed these investments and completed the store
transformation of 147 stores in fiscal 2021. To date, we have completed the transformation of 366 stores.
Growth Strategy
Executing on accretive acquisition opportunities remains a key element of our growth strategy. We have a robust pipeline and believe
the fragmentation of our industry allows for many opportunities for consolidation. Using consumer demographic analytics, we believe
we are able to better identify targets that operate in the markets with favorable demographics and customer trends, allowing us to enter
regions from which we are poised to benefit most. Additionally, to ensure we are capitalizing on these opportunities, we have added
talent and an organizational structure to our mergers and acquisitions team, who will work with our management team to ensure we
capitalize on the momentum in the market.
During the last five years, we have completed 19 acquisitions, adding 262 locations and approximately $411 million in annualized
revenue. Additionally, during this time, we have entered seven states, solidifying our presence in the Southern markets as well as
expanding into the Western region. As of March 27, 2021, we have stores in 32 states.
Although acquisition activity was temporarily paused in response to the COVID-19 pandemic during the first six months of fiscal
2021, we continued to evaluate potential acquisition candidates that we believe would fit our growth strategy while maintaining
financial discipline, and we acquired 17 retail tire and automotive repair stores located in California during December 2020.
Subsequent to March 27, 2021, we acquired 30 retail tire and automotive repair stores located in California from Mountain View Tire
& Service, Inc. on April 25, 2021.
In addition to our plan to continue to seek suitable acquisitions, we plan to add new greenfield stores. Greenfield stores include new
construction as well as the acquisition of one to four store operations.
Key factors in market and site selection for selecting new greenfield store locations include population, demographic characteristics,
vehicle population and the intensity of competition. We partner with a customer analytics firm to provide market segmentation and
demographic data specific to a geographic area in close proximity to a Monro location to identify high value lookalike customers and
market directly to them. We attempt to cluster stores in market areas in order to achieve economies of scale in advertising, supervision
and distribution costs. All new greenfield sites presently under consideration are within our established market areas.
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Purchasing and Distribution
We believe that our substantial buying power and our flexibility in making sourcing decisions contributes to our successful purchasing
strategy. We also believe our ability to negotiate with our vendor partners allows us to ensure we are receiving competitive pricing and
terms as well as minimize the margin impact of economic pressures such as tariffs.
We select and purchase tires, parts and supplies for all Company-operated stores on a centralized basis through an automatic
replenishment system based on operational data we collect from stores on a daily basis. This allows us to control store inventory on a
near real-time basis. Additionally, each store has access to the inventory carried by up to the 14 stores or distribution center nearest to
it. Management believes that this feature improves customer satisfaction and store productivity by reducing the time required to locate
out-of-stock parts and tires. It also improves profitability because it reduces the amount of inventory which must be purchased outside
Monro from local vendors. Purchases outside Monro are made when needed at the store level and accounted for approximately 18
percent of all parts and tires used in 2021.
Our ten largest vendors accounted for approximately 73 percent of our total stocking purchases, with the largest vendor accounting for
approximately 24 percent of total stocking purchases in 2021. In 2021, Monro imported approximately 26 percent of our parts
(excluding batteries, oil and supplies) and tire purchases. We purchase parts, oil and tires from 98 vendors. Management believes that
our relationships with vendors are excellent and that alternative sources of supply exist, at comparable cost, for substantially all parts
used in our business.
We enter into contracts with certain parts and tire suppliers, some of which require us to buy (at market competitive prices) up to 100
percent of our annual purchases of specific products. These agreements expire at various dates. We believe these agreements provide
us with high quality, branded merchandise at preferred pricing, along with strong marketing and training support.
The majority of our parts supply is distributed to our stores through our network of distribution centers, and vendors ship the majority
of our tires supply directly to our stores. Stores are generally replenished at least bi-weekly, and such replenishment fills, on average,
96 percent of all items ordered by the automatic replenishment system. Monro operates eleven distribution centers in California,
Kentucky, Maryland, New Hampshire, New York, North Carolina, South Carolina and Tennessee.
Human Capital
At Monro, our business success is built upon our dedicated, passionate and diverse teammates who work and live in the communities
we serve. We are committed to providing a safe, healthy, inclusive and supportive work environment where teammates embrace our
core value of collaboration, feel empowered and are motivated to have enriching and successful careers. We seek to be an employer of
choice to attract and retain top talent. To that end, we strive to provide an engaging work experience that excites and motivates our
teammates to deliver their best every day as well as provides opportunities for learning and growth, to ensure our team is always the
best in the business.
As of March 27, 2021, Monro had approximately 7,800 employees, of whom 7,270 were employed in the field organization, 210 were
employed at the distribution centers, 260 were employed at our corporate headquarters, referred to as store support center, and 60 were
employed in other offices. Monro's employees are not members of any union. Due to the impact of the COVID-19 pandemic, we
reduced our workforce through furlough or other reduction. With sales improvement, we adjusted our workforce to meet demand.
Teammate Retention
We understand that our teammates will benefit from a clear path to advancement and from investments in their continuous learning to
allow them to achieve their personal development needs and career growth. To that end, we invest in training and development
programs at all levels within the Company. We also leverage annual processes that support individual performance planning,
individual professional development planning and a broad review of talent throughout our organization. Our continuous efforts are
reflected in our turnover rates, which are our lowest since 2015.
During fiscal 2020 our online training platform, Monro University, was initially focused on the technical and operational excellence
training that technicians need to effectively serve our customers today and prepare them to handle future requirements. We have since
expanded the platform across a wide variety of topics accessible to our teammates in our stores, distribution centers and store support
center.
New technician development has been an area of particular focus for Monro to increase productivity and retention and make it easier
for technicians to overcome barriers of joining the industry. One way we do this is by offering a tool purchase program through which
trainee technicians can acquire their own set of tools. We also provide Automotive Service Excellence (“ASE”) certification in eight
different categories as technicians advance in their careers.
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Store and operations managers also have courses available through Monro University that are supplemented with live and on-line
vendor training courses. Management training covers topics including safety, customer service, human resources, leadership and
scheduling, and is delivered on a regular basis. We believe that involving operations management in the development and delivery of
these sessions results in more relevant and actionable training for store managers, helping improve staff retention as well as overall
performance.
Monro University also provides targeted training for corporate management and staff, including diversity training, harassment training
and people manager training.
We also foster development through annual reviews at which time employees can discuss with their manager goals for aligning their
own development with our business objectives.
The compensation for our teammates is tied to, and increases with, increased productivity. Our store compensation plan also
streamlines bonus programs, creating consistency and providing us the ability to use human capital more productively across our
stores.
In fiscal 2022, we will provide all teammates with an engagement and satisfaction survey, and intend to use those results to inform
further strategy and goal-setting.
In addition to providing ongoing learning and development opportunities, ensuring our teammates feel supported is also important in
teammate retention. Besides standard employee benefits we offer a confidential Employee Assistance Program with 24/7 support,
financial counseling, estate planning, and online resources for parents whose children struggle with developmental disabilities, as well
as other services aimed at enhancing our teammates’ well-being.
Workplace Safety
We are committed to providing a safe and secure work environment and have specific safety programs. To identify elevated safety-
related risk areas more effectively, we have increased our focus on data gathering, tracking and analysis. With greater insight into real-
time data, we can prioritize focus on areas that present the biggest potential hazards to our teammates and identify process
improvements. Another important component of our risk analysis is conducting formal and thorough investigations into safety-related
incidents. Investigations are analyzed by our Vice President of Risk and Safety as well as our Risk Management Team to determine a
root cause, and pro-active plans are in place to improve safety related patterns that emerge, determining the next steps to address these
patterns.
Monro’s training programs are key to our strong safety culture. Training increases awareness and helps to reduce and eliminate
workplace accidents and injuries. Our Monro University platform has allowed us to conduct more robust and structured trainings
based on a teammates’ job position, and Monro’s safety manuals are available at every workstation within our stores and distribution
centers and serve as the basis for our safety training and protocols.
COVID-19
Given the significant impact of the COVID-19 pandemic, the end of fiscal 2020 and all of fiscal 2021 presented a unique set of
challenges. In February 2020, we formed a COVID-19 Crisis Committee comprised of members of management that has been leading
and coordinating the Company’s overall response. This team leads efforts to develop and monitor mitigation and business continuity
plans; track all relevant state and local government guidelines, directives and regulations; develop work-from-home plans for non-
store teammates; implement safe working protocols for store teams; assess appropriate return-to-office protocols; and provide timely
and transparent communications to teammates and key stakeholders. We also incurred additional costs in procuring and distributing
the supplies necessary to keep our teammates safe, such as cleaning supplies, face masks and other protective equipment, including
sneeze guards installed at each sales counter, as well as investments in technology to allow our teammates to work remotely.
Diversity, Equity and Inclusion
Diversity is one of our core values and we are committed to driving diversity, equity and inclusion across our Company. This
commitment will continue to be supported by training and awareness programs as well as focused efforts to recruit, retain, develop
and promote a diverse workforce. Our Code of Ethics lays out a zero-tolerance policy for discrimination or harassment behavior.
We are taking action to increase the focus on our diversity efforts and are committed to making continuous progress. In 2020, we
formed a Team Resource Group (“TRG”), comprised of a cross-functional coalition of teammates to educate and provide resources
and training to help Monro build and maintain an inclusive culture where every teammate feels they belong, can contribute and are
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able to reach their full potential. A Diversity, Equity & Inclusion (“DE&I”) expert consultant and the TRG have also been working
with the Senior Leadership Team to assist in the formulation of an official DE&I strategy which will include goals and a long-term
plan.
We have also added resources to our recruitment team to help launch new hiring initiatives aimed at reaching diverse groups and are
also expanding the recruitment platforms we use to broaden our pool of candidates.
We also view training as a tool to foster inclusion and, through Monro University, we provide Unconscious Bias Diversity and
Inclusion Awareness courses to our teammates.
Competition
Our segment of the retail industry is fragmented and highly competitive, and the number, size and strength of competitors vary widely
from region to region. We operate in the automotive repair service and tire industry, which is currently and is expected to continue to
be highly competitive with respect to price, store location, name awareness and customer service. Monro's primary competitors
include national and regional undercar, tire specialty and general automotive service chains, both franchised and company-operated;
car dealerships, mass merchandisers’ operating service centers; and, to a lesser extent, gas stations, independent garages and Internet
tire sellers. Monro considers TBC Corporation (operating primarily under the NTB, Midas and Tire Kingdom brands), Firestone
Complete Auto Care service stores, The Pep Boys – Manny, Moe and Jack service stores, Meineke, and Mavis Discount Tire to be
direct competitors.
Regulation
We maintain programs to facilitate compliance with various federal, state and local laws and governmental regulations relating to the
operation of our business, including, among other things, those regarding employment and labor practices, workplace safety, building
and zoning requirements, the handling, storage and disposal of hazardous substances contained in the products that we sell and use in
our service bays, the recycling of batteries, tires and used lubricants, and the ownership and operation of real property. We believe that
we are in compliance with these applicable laws and regulations, and our related compliance costs are not material.
Monro stores new oil and recycled antifreeze and generates and/or handles used tires and automotive oils, antifreeze and certain
solvents, which are disposed of by licensed third-party contractors. In certain states, as required, we also recycle oil filters.
Accordingly, we are subject to numerous federal, state and local environmental laws including the Comprehensive Environmental
Response Compensation and Liability Act. In addition, the United States Environmental Protection Agency (the "EPA"), under the
Resource Conservation and Recovery Act ("RCRA"), as well as various state and local environmental protection agencies, regulate
our handling and disposal of certain waste products and other materials. The EPA, under the Clean Air Act, also regulates the
installation of catalytic converters, engines and equipment sold or distributed in the United States by periodically spot checking repair
jobs, and may impose sanctions, including but not limited to civil penalties of approximately $45,000 per violation (or approximately
$45,000 per day for certain willful violations or failures to cooperate with authorities), for violations of RCRA and the Clean Air Act.
Monro strives to maintain an environmentally conscious corporate culture, demonstrated by our recycling policies at our offices,
distribution centers and stores. In 2021, Monro recycled approximately 2.5 million gallons of oil and 3.3 million tires, as well as
approximately 73,000 vehicle batteries and 316 tons of cardboard, all as part of our commitment to the environment.
Seasonality
Although our business is not highly seasonal, customers do purchase more undercar service during the period of March through
October than the period of November through February, when miles driven tend to be lower. Sales of tires are more heavily weighted
in the months of May through August, and October through December. The slowest months are typically January through April and
September. As a result, profitability is typically lower during slower sales months, or months where mix is more heavily weighted
toward tires, which is a lower margin category.
Sales can also be volatile in areas in which we operate as a result of warmer weather in winter months, which typically causes a
decline in tire sales, or severe weather, which can result in store closures.
Given our use of a fiscal calendar, there may be some fluctuations between quarters due to holiday shifts in the calendar year and the
number of days in a particular fiscal quarter or year. In addition, the COVID-19 outbreak has had an impact on consumer behaviors
and customer traffic that may result in temporary changes in the seasonal fluctuations of our business.
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2021 Form 10-K
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Item 1A. Risk Factors
In addition to the risks discussed elsewhere in this annual report, the following are the important factors that could cause Monro’s
actual results to differ materially from those projected in any forward looking statements:
Risks Related to our Business
Matters related to the COVID-19 pandemic have and will continue to significantly and adversely impact our business, financial
position, results of operations and cash flows.
The spread of COVID-19 has created a global public health crisis that has resulted in widespread volatility and deteriorations in
household, business, economic and market conditions. We have experienced negative impacts to demand for our products and services
from the COVID-19 pandemic, which has and will continue to adversely affect our results of operations, and we are continuing to
experience significant disruption to our normal business operations and may experience further disruption to our planned
implementation of certain strategic initiatives.
Our business will continue to be affected by the broader economic effects from the COVID-19 pandemic and related regulatory and
individual actions, including customer demand for our products and services. Because more people in the United States are working
from home, those workers will likely drive less often, and are less likely to require our services or will require our services less often.
If this trend continues, we may see a permanent decline in demand for our services. Although travel by car may replace air travel as
the preferred means of transportation because of fear of the spread of COVID-19, the recessionary economic environment resulting
from the COVID-19 pandemic may reduce levels of leisure travel, which would reduce the demand for our products and services. We
anticipate disruption to the demand for our products and services throughout the course of the pandemic. For example, in fiscal 2021,
we experienced significant declines in comparable store sales compared to 2020 due to lower store traffic and reduced store hours as a
result of our, individuals’, and governmental responses to the COVID-19 pandemic. Additionally, our growth strategy was impacted
by the pandemic, as we paused all store acquisition, rebrand, and reimage initiatives during the first quarter of fiscal 2021 in order to
focus our efforts on determining the full impact of the COVID-19 pandemic on our business before restarting them later in fiscal 2021.
Given the continuing uncertainty during the pandemic, we may have to pause these initiatives again if necessary to mitigate the effects
of the pandemic.
While we have so far been able to source required products at reasonable cost, the pandemic may also affect our supply chain in ways
that are beyond our control. We may also incur costs or experience further disruption to comply with new or changing regulations in
response to the pandemic.
In addition, our continuing response to the pandemic could divert management’s attention from our key strategic priorities, increase
costs as we prioritize health and safety matters for our employees and customers, cause us to reduce, delay, alter or abandon initiatives
that may otherwise increase our long-term value, increase vulnerability to information technology or cybersecurity related risks as
certain of our employees work remotely and otherwise continue to disrupt our business operations. For example, we have and expect
to continue to incur additional costs and investments in supplies necessary to keep our employees and customers safe, such as face
masks, hand sanitizer and cleaning supplies. We expect to encounter labor inefficiencies as we adjust to new operating models to
adapt to operating during the pandemic while experiencing what we believe will be an increase in sales activity from 2021. Those
labor inefficiencies may include difficulty in hiring employees if enhanced unemployment benefits are signed into law. As our
employees return to more normalized store hours, there will also be increased risks to the health and safety of our employees and
customers, particularly if there were to be one or more clusters of COVID-19 cases occurring at any of our stores or our corporate
headquarters. We may also be subject to enhanced legal risks, including potential litigation related to the COVID-19 pandemic.
The overall magnitude of the COVID-19 pandemic, including the extent of its direct and indirect impact on our business, financial
position, results of operations or liquidity is inherently uncertain due to the fluidity of the situation. Further, the ultimate impact of
the COVID-19 pandemic depends on many factors that are not within our control, including, but not limited to: governmental,
business and individuals' actions that have been and continue to be taken in response to the COVID-19 pandemic; the severity and
duration of outbreaks of the virus; the effectiveness of vaccines; the impact of the COVID-19 pandemic and actions taken in response
on global and regional economies, travel, and economic activity; the availability of federal, state, local or non-U.S. funding programs;
general economic uncertainty in key global markets and financial market volatility; global economic conditions and levels of
economic growth; and the pace of recovery, particularly in our markets, when the COVID-19 pandemic subsides.
We are unable to estimate the impact of the COVID-19 pandemic with certainty on our business and operations at this time. The
pandemic could cause us to experience impairment of our goodwill and other financial assets, further reduce demand for our products
and services and other adverse impacts on our financial position, results of operations and cash flows. Sustained adverse effects may
also prevent us from satisfying financial covenants in our credit agreement, which would prevent us from paying dividends, or result
in downgrades in our credit ratings.
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We operate in the highly competitive automotive repair industry.
The automotive repair industry in which we operate is generally highly competitive and fragmented, and the number, size and strength
of our competitors vary widely from region to region. We believe that competition in the industry is based primarily on customer
service, reputation, store location, name awareness and price. Our primary competitors include national and regional undercar, tire
specialty and general automotive service chains, both franchised and company-operated, car dealerships, mass merchandisers
operating service centers and, to a lesser extent, gas stations, independent garages and Internet tire sellers. Some of our competitors
have greater financial resources, are more geographically diverse and have better name recognition than we do, which might place us
at a competitive disadvantage to those competitors. Because we seek to offer competitive prices, if our competitors reduce prices, we
may be forced to reduce our prices, which could have a material adverse effect on our business, financial condition and results of
operations. Further, our success within this industry also depends upon our ability to respond in a timely manner to changes in
customer demands for both products and services. We cannot assure that we, or any of our stores, will be able to compete effectively.
If we are unable to compete successfully in new and existing markets, we may not achieve our projected revenue and profitability
targets.
We are subject to cycles in the general economy and customers’ use of vehicles and seasonality, which may impact demand for our
products and services.
Our industry is influenced by the number of miles driven by automobile owners. Factors that may cause the number of miles driven by
automobile owners to decrease include the weather, travel patterns, gas prices and fluctuations in the general economy. For example,
as a result of the COVID-19 pandemic, there has been a marked decrease in the number of miles driven by automobile owners due to
the various stay-at-home orders across the regions in which we operate. As a result of this reduction in the number of miles driven by
automobile owners, there has been a negative effect on the demand for our products and services. As another example, when the retail
cost of gasoline increases, the number of miles driven by automobile owners may decrease, which could result in less frequent service
intervals and fewer repairs. The number of vehicle miles driven may also decrease if consumers begin to rely more heavily on mass
transportation.
Sales can decline in areas in which we operate as a result of warmer weather in winter months or severe weather, which can result in
store closures. Although our business is not highly seasonal, our customers typically purchase more undercar services during the
period of March through October than the period of November through February, when miles driven tend to be lower. Further,
customers may defer or forego vehicle maintenance at any time during periods of inclement weather. Sales of tires are more heavily
weighted in the months of May through August, and October through December. The slowest months are typically January through
April and September. As a result, profitability is typically lower during slower sales months or months where mix is more heavily
weighted toward tires, which is a lower margin category.
Any continued significant reduction in the number of miles driven by automobile owners will have a material adverse effect on our
business and results of operations.
Our business is affected by advances in automotive technology.
The demand for our products and services could be adversely affected by continuing developments in automotive technology.
Automotive manufacturers are producing cars that last longer and require service and maintenance at less frequent intervals in certain
cases. Quality improvement of manufacturers’ original equipment parts has in the past reduced, and may in the future reduce, demand
for our products and services, adversely affecting our sales. For example, manufacturers’ use of stainless steel exhaust components has
significantly increased the life of those parts, thereby decreasing the demand for exhaust repairs and replacements. Longer and more
comprehensive warranty or service programs offered by automobile manufacturers and other third parties also could adversely affect
the demand for our products and services. We believe that a majority of new automobile owners have their cars serviced by a dealer
during the period that the car is under warranty.
Advances in electric vehicle technology and production may adversely affect the demand for our services because electric vehicles do
not have traditional engines, transmissions, and certain related parts. An increase in the proportion of electric vehicles sold could
decrease our service-related revenue. In addition, advances in automotive technology continue to require us to incur additional costs to
update our diagnostic capabilities and technical training programs. Changes in vehicle and powertrain technology and advances in
accident avoidance technology, electric vehicles, autonomous vehicles and mobility could have a negative effect on our business,
results of operations or investors’ perception of our business, any of which could have an adverse effect upon the price of our common
stock.
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Changes in economic conditions that impact consumer spending could harm our business.
The automotive repair industry and our financial performance are sensitive to changes in overall economic conditions that impact
consumer spending, including the economic volatility resulting from the COVID-19 pandemic. Future economic conditions affecting
consumer income such as employment levels, business conditions, interest rates, inflation and tax rates could reduce consumer
spending or cause consumers to shift their spending to other products. During periods of good economic conditions, consumers may
decide to purchase new vehicles rather than servicing their older vehicles. In addition, if automobile manufacturers offer lower pricing
on new or leased cars, more consumers may purchase or lease new vehicles rather than servicing older vehicles. A general reduction
in the level of consumer spending or shifts in consumer spending to other services could have a material adverse effect on our growth,
sales and profitability.
Changes in the U.S. trade environment, including the imposition of import tariffs, could adversely affect our consolidated results
of operations and cash flows.
In recent years, trade tensions between the U.S. government and China have increased as the U.S. government has implemented and
proposed tariffs and the Chinese government proposed retaliatory tariffs. Although we have no foreign operations and do not
manufacture any products, tariffs imposed on products that we sell, such as tires, may cause our expenses to increase, which could
adversely affect our profitability unless we are able to raise our prices for these products. If we increase the price of products impacted
by tariffs, our service offerings may become less attractive relative to services offered by our competitors or cause our customers to
delay needed maintenance. Given the uncertainty regarding the scope and duration of these trade actions by the U.S. or other
countries, the impact of these trade actions on our operations or results remains uncertain. However, the tariffs, along with any
additional tariffs or retaliatory trade restrictions implemented by other countries, could adversely affect the operating profits of our
business, which could have an adverse effect on our consolidated results of operations and cash flows.
We depend on our relationships with our vendors, including foreign sources, for certain inventory. Our business may be negatively
affected by the risks associated with such relationships and international trade.
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 have 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.
We believe that alternative sources exist for most of the products we sell or use at our stores, and we would not expect the loss of any
one supplier to 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.
In addition, we depend on a number of products (e.g. brake parts, tires, oil filters) produced in foreign markets. Any changes in U.S.
trade policies, or uncertainty with respect to the future of U.S. trade policies, resulting in increased costs which we are not able to
offset with pricing increases of our own could adversely affect our financial performance.
We also face other risks associated with the delivery of inventory originating outside the United States, including:
• potential economic and political instability in countries where our suppliers are located;
•
•
increases in shipping costs;
transportation delays and interruptions, including those occurring as a result of the COVID-19 pandemic;
• compliance with the United States Foreign Corrupt Practices Act, which generally prohibits U.S. companies from
engaging in bribery or making other prohibited payments to foreign officials; and
• significant fluctuations in exchange rates between the U.S. dollar and foreign currencies.
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If we are unable to generate sufficient cash flows from our operations, our liquidity will suffer and we may be unable to satisfy our
obligations.
We currently rely on cash flow from operations and our $600 million revolving credit facility with eight banks (the “Credit Facility”)
to fund our business. Amounts outstanding on the Credit Facility are reported as debt on our balance sheet. While we believe that we
have the ability to sufficiently fund our planned operations and capital expenditures for the foreseeable future, various risks to our
business could result in circumstances that would materially affect our liquidity. For example, cash flows from our operations could be
affected by changes in consumer spending habits, the failure to maintain favorable vendor payment terms or our inability to
successfully implement sales growth initiatives, among other factors. We may be unsuccessful in securing alternative financing when
needed on terms that we consider acceptable.
On March 27, 2020, we borrowed $350 million available under the Credit Facility in order to enhance liquidity and financial
flexibility given the uncertain market conditions caused by the COVID-19 pandemic. We subsequently repaid the $350 million
previously borrowed during 2021 and there is $190.0 million outstanding under the Credit Facility as of March 27, 2021. A significant
increase in our leverage could have the following risks:
• our ability to obtain additional financing for working capital, capital expenditures, store renovations, acquisitions or
general corporate purposes may be impaired in the future;
• our failure to comply with the financial and other restrictive covenants governing our debt, which, among other things,
require us to comply with certain financial ratios and limit our ability to incur additional debt and sell assets, could result
in an event of default that, if not cured or waived, could have a material adverse effect on our business, financial condition
and results of operations; and
• our exposure to certain financial market risks, including fluctuations in interest rates associated with bank borrowings
could become more significant.
Although we believe that we will remain in compliance with our debt covenants, if we are not able to do so our lenders may restrict
our ability to draw on our Credit Facility, which could have a negative impact on our operations, ability to pay dividends, and growth
potential, including our ability to complete acquisitions.
Legal, Regulatory and Technological Risks
Our industry is subject to environmental, consumer protection and other regulation.
We are subject to various federal, state and local environmental laws, building and zoning requirements, employment and labor laws
and other governmental regulations regarding the operation of our business. For example, we are subject to rules governing the
handling, storage and disposal of hazardous substances contained in some of the products such as motor oil that we sell and use at our
stores, the recycling of batteries, tires and used lubricants, and the ownership and operation of real property. These laws and
regulations can impose fines and criminal sanctions for violations as well as require the installation of pollution control equipment or
operational changes to decrease the likelihood of accidental hazardous substance releases. Accordingly, we could become subject to
material liabilities relating to the investigation and cleanup of contaminated properties, and to claims alleging personal injury or
property damage as a result of exposure to, or release of, hazardous substances. In addition, stricter interpretation of existing laws and
regulations, new laws and regulations, the discovery of previously unknown contamination or the imposition of new or increased
requirements could require us to incur costs or become the basis of new or increased liabilities that could have a material adverse
effect on our business, financial condition and results of operations.
National automotive repair chains have also been the subject of investigations and reports by consumer protection agencies and the
Attorneys General of various states. Publicity in connection with these kinds of investigations could have an adverse effect on our
sales and, consequently, our business, financial condition and results of operations. State and local governments have also enacted
numerous consumer protection laws with which we must comply.
The costs of operating our stores may increase if there are changes in laws governing minimum hourly wages, working conditions,
overtime, workers’ compensation and health insurance rates, unemployment tax rates or other laws and regulations. We have
experienced and expect further increases in payroll expenses as a result of federal, state and local mandated increases in the minimum
wage. In addition, our vendors may be affected by higher minimum wage standards, which may increase the prices we pay for their
products. A material increase in these costs that we were unable to offset by increasing our prices or by other means could have a
material adverse effect on our business, financial condition and results of operations.
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We are involved in litigation from time to time arising from the operation of our business and, as such, we could incur substantial
judgments, fines, legal fees or other costs.
We are sometimes the subject of complaints or litigation from customers, employees or other third parties for various actions. From
time to time, we are involved in litigation involving claims related to, among other things, breach of contract, negligence, tortious
conduct and employment and labor law matters, including payment of wages. We may also face claims related to the COVID-19
pandemic, including claims from employees or customers who contract COVID-19 at our stores or offices. The damages sought
against us in some of these litigation proceedings could be substantial.
As disclosed in Part I, Item 3, “Legal Proceedings,” an action has been brought against us by an individual seeking to represent a
putative class of store managers for unpaid overtime wages, damages and attorneys’ fees under the Fair Labor Standards Act and class
certification under Pennsylvania law for alleged violations of state wage payment laws. Plaintiff alleges that improper deductions were
made from store managers’ pay. If we settle these claims or the action is not resolved in our favor, we may suffer reputational damage
and incur legal costs, settlements or judgments that exceed the amounts covered by our existing insurance policies. We can provide no
assurances that our insurer will insure the legal costs, settlements or judgements we incur in excess of our deductible. If we are
unsuccessful in defending ourselves from these claims or if our insurer does not insure us against legal costs we incur in excess of our
deductible, the result may materially adversely affect our business, results of operations and financial condition.
Although we maintain liability insurance for some litigation claims, if one or more of the claims were to greatly exceed our insurance
coverage limits or if our insurance policies do not cover a claim, this could have a material adverse effect on our business, financial
condition, results of operations and cash flows.
Business interruptions may negatively impact our store operations, availability of products and/or the operability of our computer
systems, which may have a material negative effect on our business and results of operations. A breach of our computer systems
could damage our reputation and have a material adverse effect on our business and results of operations.
If any of our locations in a particular region are unexpectedly closed permanently or for a period of time, it could have a negative
impact on our business. Such closures could occur as a result of circumstances out of our control, including war, acts of terrorism,
global health crises, extreme weather conditions and other natural disasters. Further, if our ability to obtain products and merchandise
for use in our stores is impeded, it could have a negative impact on our business. Factors that could negatively affect our ability to
obtain products and merchandise include the sudden inability to import goods into the United States for any reason and the curtailment
or delay of commercial transportation. While we do maintain business interruption insurance, there is no guarantee that we will be
able to use such insurance for any particular location closure or other interruption in operations.
Additionally, given the number of individual transactions we process each year, it is critical that we maintain uninterrupted operation
of our computer and communications hardware and software systems. Our systems could be subject to damage or interruption from
power outages, computer and telecommunications failures, computer viruses, security breaches, including breaches of our transaction
processing or other systems that result in the compromise of confidential customer data, catastrophic events such as fires, tornadoes
and hurricanes, and usage errors by our employees. If our systems are breached, damaged or cease to function properly, we may have
to make a significant investment to fix or replace them, we may suffer interruptions in our operations in the interim, we may face
costly litigation, and our reputation with our customers may be harmed. The risk of disruption is increased in periods where complex
and significant systems changes are undertaken. Any material interruption in our computer operations may have a material adverse
effect on our business or results of operations.
If we experience a data security breach and confidential customer or employee information is disclosed, we may be subject to
penalties and experience negative publicity, which could affect our customer relationships and have a material adverse effect on
our business. We may incur increasing costs in an effort to minimize these cyber security risks.
The nature of our business involves the receipt and storage of personally identifiable data of our customers and employees. This type
of data is subject to legislation and regulation in various jurisdictions. We have been subject to cyber-attacks in the past and we may
suffer data security breaches arising from future attacks. We may currently be at a higher risk of a security breach due to the COVID-
19 pandemic and the increased number of our employees who are working remotely. Data security breaches suffered by well-known
companies and institutions have attracted a substantial amount of media attention, prompting state and federal legislative proposals
addressing data privacy and security. We may become exposed to potential liabilities with respect to the data that we collect, manage
and process, and may incur legal costs if our information security policies and procedures are not effective or if we are required to
defend our methods of collection, processing and storage of personal data. Future investigations, lawsuits or adverse publicity relating
to our methods of handling personal data could adversely affect our business, results of operations, financial condition and cash flows
due to the costs and negative market reaction relating to such developments.
14
Monro, Inc.
2021 Form 10-K
Table of Contents
We may not have the resources or technical expertise to anticipate or prevent rapidly evolving types of cyber-attacks. Attacks have
been targeted at us, our customers, or others who have entrusted us with information. Actual or anticipated attacks will cause us to
incur increased costs, including costs to hire additional personnel, purchase additional protection technologies, train employees, and
engage third-party experts and consultants. In addition, data and security breaches can also occur as a result of non-technical issues,
including breach by us or by persons with whom we have commercial relationships that result in the unauthorized release of personal
or confidential information. Any compromise or breach of our security could result in violation of applicable privacy and other laws,
significant legal and financial exposure, and a loss of confidence in our security measures, which could have a material adverse effect
on our results of operations and our reputation.
Risks Related to our Strategic Initiatives
We may not be successful in integrating new and acquired stores.
Management believes that our continued growth in sales and profit is dependent, in large part, upon our ability to operate new stores
that we open or acquire on a profitable basis. In order to do so, we must find reasonably priced new store locations and acquisition
candidates that meet our criteria and we must integrate any new stores (opened or acquired) into our system. Our growth and
profitability could be adversely affected if we are unable to open or acquire new stores or if new or existing stores do not operate at a
sufficient level of profitability. In addition, our profitability could be adversely affected if we fail to retain key personnel from
acquired stores or assume unanticipated liabilities of acquired businesses. To the extent we acquire stores or expand into new
geographic regions, we must anticipate the needs of customers and the vehicle population in those regions, which may differ from our
existing customers and the vehicle populations we serve, while integrating the stores in the new geographic region into our existing
network of stores. If new stores do not achieve expected levels of profitability or we are unable to integrate stores in new geographic
regions into our business, our ability to remain in compliance with our debt covenants or to make required payments under our credit
facility may be adversely impacted.
If our capital investments in remodeling existing or acquired stores, building new stores, and improving technology do not achieve
appropriate returns, our competitive position, financial condition and results of operations could be adversely affected.
Our business depends, in part, on our ability to remodel existing or acquired stores and build new stores in a manner that achieves
appropriate returns on our capital investment. Pursuing the wrong remodel or new store opportunities and any delays, cost increases,
disruptions or other uncertainties related to those opportunities could adversely affect our results of operations.
We are currently making, and expect to continue to make, significant investments in technology to improve customer experience and
certain management systems. The effectiveness of these investments can be less predictable than remodeling stores, and might not
provide the anticipated benefits or desired rates of return.
Pursuing the wrong investment opportunities, making an investment commitment significantly above or below our needs, or failing to
effectively incorporate acquired businesses into our business could result in the loss of our competitive position and adversely affect
our financial condition or results of operations.
Any impairment of goodwill, other intangible assets or long-lived assets could negatively impact our results of operations.
Our goodwill is subject to an impairment test on an annual basis. Goodwill, other intangible assets and long-lived assets are also tested
whenever events and circumstances indicate that goodwill, other intangible assets and/or long-lived assets may be impaired. Any
excess goodwill resulting from the impairment test must be written off in the period of determination. Intangible assets (other than
goodwill and indefinite-lived intangible assets) and other long-lived assets are generally amortized or depreciated over the useful life
of such assets. In addition, from time to time, we may acquire or make an investment in a business that will require us to record
goodwill based on the purchase price and the value of the acquired tangible and intangible assets. We have significantly increased our
goodwill as a result of our acquisitions. We may subsequently experience unforeseen issues with the businesses we acquire, which
may adversely affect the anticipated returns of the business or value of the intangible assets and trigger an evaluation of recoverability
of the recorded goodwill and intangible assets. Future determinations of significant write-offs of goodwill, intangible assets or other
long-lived assets, as a result of an impairment test or any accelerated amortization or depreciation of other intangible assets or other
long-lived assets, including those caused by the impact of the COVID-19 pandemic, could have a material negative impact on our
results of operations and financial condition.
Planned store closings have resulted in acceleration of costs and future store closings could result in additional costs.
From time to time, in the ordinary course of our business, we close certain stores, generally based on considerations of store
profitability, competition, strategic factors and other considerations. The economic impact of the COVID-19 pandemic may require us
Monro, Inc.
2021 Form 10-K
15
Table of Contents
to close certain stores either temporarily or permanently. Closing a store could subject us to costs including the write-down of
leasehold improvements, equipment, furniture and fixtures. In addition, we could remain liable for future lease obligations.
General Risk Factors
We may not pay or may reduce the dividends on our common stock.
Holders of our common stock are only entitled to receive such dividends as our Board of Directors may declare out of funds legally
available for such payments. Although we have historically declared cash dividends on our common stock, we are not required to do
so and may reduce or eliminate our common stock dividend in the future. This could adversely affect the market price of our common
stock.
We rely on an adequate supply of skilled field personnel.
In order to continue to provide high quality services, we require an adequate supply of skilled field managers and technicians. Trained
and experienced automotive field personnel are in high demand, and may be in short supply in some areas. We cannot assure that we
will be able to attract, motivate and maintain an adequate skilled workforce necessary to operate our existing and future stores
efficiently, or that labor expenses will not increase as a result of a shortage in the supply of skilled field personnel, thereby adversely
impacting our financial performance. While the automotive repair industry generally operates with high field employee turnover, any
material increases in employee turnover rates in our stores, inability to recruit new employees or any widespread employee
dissatisfaction could also have a material adverse effect on our business, financial condition and results of operations.
We depend on the services of our key executives.
Our senior executives are important to our success because they have been instrumental in setting our strategic direction, operating our
business, identifying, recruiting and training key personnel, identifying expansion opportunities and arranging necessary financing.
Losing the services of any of these individuals could adversely affect our business until a suitable replacement is found. It may be
difficult to replace them quickly with executives of comparable experience and capabilities. Although we have employment
agreements with certain of our executives, we cannot prevent them from terminating their employment with us. To the extent we have
turnover within our management team, we may have to spend more time and resources training new members of management and
integrating them in our company. The loss of service of any one of our key executives would likely cause a disruption in our business
plans and may adversely impact our results of operations.
We have had significant changes in executive leadership, and more changes could occur. Changes to strategic or operating goals,
which can occur with the appointment of new executives, can create uncertainty, and may ultimately be unsuccessful. In addition,
executive leadership transition periods, including adding new personnel, could be difficult as new executives gain an understanding of
our business and strategy. Difficulty integrating new executives, or the loss of key individuals could limit our ability to successfully
execute our business strategy and could have an adverse effect on our overall financial condition.
The market price of our common stock may be volatile and could expose us to shareholder action including securities class action
litigation.
The stock market and the price of our common stock may be subject to wide fluctuations based upon general economic and market
conditions. Downturns in the stock market may cause the price of our common stock to decline. The market price of our stock may
also be affected by our ability to meet analysts’ expectations. Failure to meet such expectations, even slightly, could have an adverse
effect on the price of our common stock. In the past, following periods of volatility in the market price of a company’s securities,
shareholder action including securities class action litigation has often been instituted against such a company. If similar litigation
were instituted against us, it could result in substantial costs and a diversion of our management’s attention and resources, which could
have an adverse effect on our business.
Item 1B. Unresolved Staff Comments
None.
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2021 Form 10-K
Table of Contents
Item 2. Properties
Company-operated Stores as of March 27, 2021
Arkansas
California
Connecticut
Delaware
Florida
Georgia
Idaho
Illinois
Indiana
Iowa
Kentucky
Louisiana
Maine
Maryland
Massachusetts
Michigan
Stores Company-operated Stores as of March 27, 2021
2 Minnesota
68 Missouri
36 Nevada
6 New Hampshire
107 New Jersey
13 New York
4 North Carolina
33 Ohio
39 Pennsylvania
3 Rhode Island
33 South Carolina
17 Tennessee
18 Vermont
70 Virginia
40 West Virginia
31 Wisconsin
Total
Stores
9
26
14
29
44
145
56
142
130
11
18
17
7
70
10
15
1,263
Company-operated Stores and Other Properties as of March 27, 2021
Owned
Leased
Owned buildings on leased land
Total
Distribution
Centers
2
9
—
11
Stores
329
871
63
1,263
Retread
Facilities
1
2
—
3
Our policy is to situate new Company-operated stores in the best locations, without regard to the form of ownership required to
develop the locations. In general, we lease store sites for a ten-year period with several renewal options (up to ten years). Giving effect
to all renewal options, approximately 63 percent of the leases (587 stores) expire after March 2031. Certain leases provide for
contingent rental payments if a percentage of annual gross sales exceed the base fixed rental amount. The highest contingent
percentage rent of any lease is 7.5 percent, and no such lease has adversely affected profitability of the store subject thereto.
Our seven wholesale locations are situated within distribution centers that are leased.
We own our corporate headquarters building located in Rochester, New York, and we lease and own additional office space elsewhere
in the U.S.
Item 3. 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.
On June 12, 2020, former service store manager Mark Cerini filed suit in the U.S. District Court for the Western District of
Pennsylvania. The Plaintiff is seeking nationwide collective action certification to represent similarly-situated store managers for
unpaid overtime wages, damages and attorneys’ fees under the Fair Labor Standards Act and class certification under Pennsylvania
law for alleged violations of state wage payment laws. Plaintiff alleges that improper deductions were made from store managers’
pay. We dispute and believe we have meritorious defenses against these claims and plan to vigorously defend ourselves.
Item 4. Mine Safety Disclosures
Not applicable.
Monro, Inc.
2021 Form 10-K
17
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PART II
Item 5. Market for the Company's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
Market Information
Monro’s common stock, par value $.01 per share, (the “Common Stock”) is traded on the Nasdaq Stock Market under the symbol
"MNRO".
Holders of Record
At May 14, 2021, Monro’s Common Stock was held by approximately 43 shareholders of record. This figure does not include an
estimate of the indeterminate number of beneficial holders whose shares may be held of record by brokerage firms and clearing
agencies.
Dividends
The declaration of and determination as to the 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 contractual restrictions, and
such other factors as the Board of Directors deems relevant. We currently expect that comparable cash dividends will continue to be
paid in the future. Under our Credit Facility, we may declare, make or pay any dividend or distribution up to $38.5 million in the
aggregate for the period from June 30, 2020 to June 30, 2021 if we are in compliance with the financial covenants and other
restrictions in the Credit Facility, as amended. For additional information regarding our Credit Facility, see Note 7 to the Company’s
consolidated financial statements.
Monro, Inc.
S&P Industrials Index
S&P Specialty Stores Index
$
2016
100.00 $
100.00
100.00
2017
73.76 $
118.38
98.60
2018
76.97 $
134.89
85.19
2019
125.70 $
139.25
124.31
2020
64.51 $
112.14
99.97
2021
98.46
190.20
162.33
Fiscal Years Ended March
The graph above compares the cumulative total shareholder return on our common stock for the last five fiscal years ended March
with (1) the cumulative return on the S&P Industrials Index and (2) the cumulative return on the S&P Specialty Stores Index. The
graph assumes the investment of $100 in Monro common stock, the S&P Industrials Index and the S&P Specialty Stores Index, and
reinvestment of all dividends.
Item 6. Selected Financial Data
Not applicable.
18
Monro, Inc.
2021 Form 10-K
Table of Contents
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations
Executive Overview
While our business was materially affected by the COVID-19 pandemic, resulting in significantly lower sales and profits in 2021, we
continued to make strategic investments to support our operating and financial model designed to drive sustainable sales and profit
growth. We have done this through our Monro.Forward investment strategy focused on the following four key pillars:
Improve Guest Experience
• We transformed 147 stores through rebranding and reimaging investments during 2021.
• We made significant investments in the health and safety of our teammates and guests.
Enhance Customer-Centric Engagement
• We completed the installation of our store digital phone and customer communication system in 2021.
• We realigned our marketing spend toward higher return-on-investment (“ROI”) digital channel during 2021.
Optimizing Product and Service Offering
• We completed the rollout of our tire pricing and category management technology in 2021.
Accelerating Productivity and Team Engagement
• We completed the rollout of our technology-based labor model, with data-driven cloud based store staffing and scheduling
software, during 2021.
• We leveraged Monro University to facilitate onboarding and training required of new teammates in order to reach full
productivity.
Growth through Acquisitions
In addition to our Monro.Forward investment strategy, executing on strategically located acquisitions with attractive valuations
remains a key element of our growth strategy in support of our operating and financial model. We are committed to executing on
attractive opportunities in our highly fragmented industry and are actively evaluating acquisition targets. We have continued to
capitalize on a robust acquisition pipeline as we acquired 17 stores in 2021 and, subsequent to March 27, 2021, we completed the
acquisition of 30 stores on April 25, 2021.
Financial Summary
2021 included the following notable items:
• Diluted earnings per common share (“EPS”) were $1.01.
• Adjusted diluted EPS, a non-GAAP measure, were $1.14.
• Sales decreased 10.4 percent, driven by a decrease in comparable store sales.
• Comparable store sales decreased 11.1 percent, driven primarily by a decline in guest traffic, partially offset by an increase
in average ticket amount spent.
• Operating income of $72.2 million was 29.0 percent lower than the prior year.
• Net income was $34.3 million.
• Adjusted net income, a non-GAAP measure, was $38.7 million.
• Operating cash flow of $184.9 million was 52.3 percent higher than the prior year.
Earnings Per Common Share
Diluted EPS
Adjustments
Adjusted diluted EPS
Note: Amounts may not foot due to rounding.
$
$
2021
1.01 $
0.12
1.14 $
Monro, Inc.
2021 Form 10-K
Percent Change
2021/2020
2020
1.71
0.29
2.00
(40.9) %
(43.0) %
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Adjusted diluted EPS and adjusted net income, each of which are a measure not derived in accordance with generally accepted
accounting principles in the U.S. (“GAAP”), exclude the impact of certain items. Management believes that adjusted diluted EPS and
adjusted net income are useful in providing period-to-period comparisons of the results of our operations by excluding certain non-
recurring items and items related to our Monro.Forward or acquisition initiatives. Reconciliations of these non-GAAP financial
measures to GAAP measures are provided beginning on page 24 under “Non-GAAP Financial Measures.”
We define comparable store sales, or same store sales, as sales for stores 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.
Recent Development and Trends
Our Company-operated stores have experienced improvement in sales to date from the low point during April 2020. The following
table presents fiscal monthly information about our recent comparable store sales trends. There is no assurance that these trends will
continue.
Comparable Store Sales
(Year-over-Year)
Increase/(decrease)
May
Jun.
Jul.
Aug.
Sep.
Oct.
Nov.
Dec.
Jan.
Feb.
Mar.
Apr.
2021
2022
Apr.
(41)%
(24)%
(14)%
(12)%
(13)%
(8)%
(12)%
(18)%
(6)%
3%
(2)%
32%
76%
As we move through this transition and anticipate comparable store sales trends to improve, we expect to incur some labor
inefficiencies as we adjust to new operating models and federal and local health and safety protocols with a goal to remain as efficient
as possible while still offering safe and high quality service to our guests. Those labor inefficiencies may include difficulty in hiring
employees required to maintain store staffing levels needed to meet demand. We will also incur additional costs and investments in
supplies necessary to keep our teams and guests safe, such as face masks, hand sanitizer and cleaning supplies, which are all expected
to be ongoing costs for the duration of the COVID-19 pandemic and recovery period.
Given the level of volatility and uncertainty surrounding the future impact of COVID-19, we cannot estimate with certainty the long-
term impacts of COVID-19 on our business, financial condition, results of operations, or cash flows in the future. Please see the risks
set forth in Part I, Item 1A. “Risk Factors” above for further discussion of the risks that may impact our longer-term operational and
financial performance.
Impact of COVID-19
In response to the unprecedented and rapid spread of COVID-19, many U.S. state governments, in states in which we operate, enacted
stay-at-home restrictions and social distancing measures during fiscal 2021. State and local governments ordered restrictions on the
operations of certain businesses, including temporary closures of some businesses, and numerous other businesses temporarily closed
voluntarily or transitioned their workforces to working remotely. Further, individuals’ ability to travel was curtailed through mandated
travel restrictions throughout the year.
As a result, demand for automotive undercar repair services as well as replacement tires and tire related services declined at a rapid
pace and has remained below normal levels, which has had an unprecedented and materially adverse impact on our results of
operations and business operations. Although demand improved in 2021 from the low point during April 2020, we experienced a
significant decline in guest traffic throughout the year, as compared to the prior year, which we believe is due to the COVID-19
pandemic. During 2021, comparable store sales decreased 11.1 percent from the prior year. As an essential business, our stores and
distribution centers remained open during the pandemic, however, substantially all Company-operated retail stores operated under a
reduced schedule throughout the year to match lower demand. We continue to address the ongoing business challenges and shifting
economic dynamics as the COVID-19 pandemic and recovery efforts have continued to evolve.
Despite the challenges, some positive signs have begun to emerge. Since the low point during April 2020, we have experienced
improvement in sales driven by improvement in store traffic. However, there can be no assurance as to the time required to fully
recover operations and sales to pre-pandemic levels or if we will reach those levels again.
Liquidity
Given the uncertainties surrounding the impacts of the COVID-19 pandemic on our future financial condition, results of operations
and cash flows, we have taken a number of actions in response to prevailing uncertain market conditions. In order to enhance our
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2021 Form 10-K
Table of Contents
liquidity position, we took a precautionary measure and borrowed $350 million available to us under our credit facility in March 2020.
We subsequently repaid the $350 million previously borrowed during 2021. To improve our liquidity, we took the following measures
during 2021 to reduce costs and improve cash flows: (i) reduced store hours and store labor to align with reduced demand across our
store locations; (ii) undertook significant reductions in operating expenses across the Company, including compensation expense
through the continued furlough of or other reduction to certain members of our workforce as well as advertising expense through
realigned marketing spend toward digital channels; and (iii) negotiated rent deferrals for a significant number of our stores, as well as
other rent reductions. Although acquisition activity was paused during the first six months of fiscal 2021, we continued to evaluate
potential acquisition candidates that we believe would fit our growth strategy while maintaining financial discipline. We acquired 17
retail tire and automotive repair stores located in California in December 2020 and financed the acquisition through our Credit
Facility. Additionally, with sales improvement throughout 2021, we resumed our rebrand and reimage initiatives and have
substantially completed the transformation of 147 stores during the year, after pausing these initiatives during the first three months of
fiscal 2021.
Enhanced Safety Standards
As the COVID-19 pandemic has continued to evolve, our priority has been and continues to be, the health and safety of our teammates
and guests. To protect our teammates and guests, we have implemented strict cleaning and sanitation measures. In addition, we have
provided face masks and other protective equipment, including sneeze guards installed at each sales counter, necessary to ensure the
safety of our teammates and guests. We have also implemented various measures intended to reduce the spread of COVID-19 among
our non-store workforce including working from home and encouraging teammates to adhere to prevention measures recommended
by the Centers for Disease Control and the World Health Organization. Since our non-store workforce is able to work remotely using
various technology tools, we are able to maintain our operations and internal controls over financial reporting and disclosures.
Analysis of Results of Operations
Summary of Operating Income
(thousands)
Sales
Cost of sales, including distribution and occupancy costs
Gross profit
Operating, selling, general and administrative expenses
Operating income
2021
1,125,721 $
730,526
395,195
322,957
72,238 $
$
$
2020
1,256,524
779,866
476,658
374,956
101,702
Percent Change
2021/2020
(10.4) %
(6.3)
(17.1)
(13.9)
(29.0) %
We have elected to omit discussion on the earliest of the three years covered by the consolidated financial statements presented. The
discussion of the fiscal year ended March 30, 2019 is incorporated herein by reference to Part II, Item 7., “Management’s Discussion
and Analysis of Financial Condition and Results of Operations” located in our Form 10-K for the fiscal year ended March 28, 2020,
filed on June 12, 2020.
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 8 to the Company’s 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 361 selling days in
both 2021 and 2020. Comparable sales measures vary across the retail industry. As a result, our comparable sales calculation is not
necessarily comparable to similarly titled measures reported by other companies.
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 guests’ experience through a careful combination of merchandise assortment, price, convenience, guest experience, and
other factors will over the long-term drive both increasing guest traffic and the average ticket amount spent.
Sales
(thousands)
Sales
Dollar change compared to prior year
Percentage change compared to prior year
$
$
2021
1,125,721
(130,803)
$
(10.4) %
Monro, Inc.
2021 Form 10-K
2020
1,256,524
21
Table of Contents
The sales decrease was primarily due to a decrease in comparable store sales from a substantial decrease in traffic as a result of the
COVID-19 pandemic, partially offset by new store sales. Additionally, there was a decrease in sales from closed stores. The following
table shows the drivers of the change in sales between 2020 and 2021.
Sales Percentage Change
Sales change
Primary drivers of change in sales
Comparable stores sales
New store sales (a)
Closed store sales
2021
(10.4) %
(11.1) %
2.3 %
(1.8) %
(a) Sales from 2021 and 2020 acquisitions represented 2.0 percent of the changes between 2020 and 2021.
As a result of the impact of the unprecedented and rapid spread of COVID-19, demand for automotive undercar repair services as well
as replacement tires and tire related services declined at a rapid pace and has remained below normal levels. During 2021,
substantially all Company-operated retail stores operated under a reduced schedule for a majority of the year to match lower demand.
Although demand improved in 2021 from the low point during April 2020, we experienced a significant decline in guest traffic
throughout the year, as compared to the prior year, which we believe is due to the COVID-19 pandemic. Comparable store sales were
impacted by lower guest traffic, offset by higher average ticket amount spent.
During 2021, the completed rollout of our tire category management and pricing tool contributed to outperformance in our largest
product category, as compared to the prior year, as shown below:
Sales by Product Category
Brakes
Exhaust
Steering
Tires
Maintenance
Total
2021
11 %
2
8
55
24
100 %
2020
13 %
2
8
51
26
100 %
Comparable store front end/shocks and maintenance services category sales for 2021 both decreased by approximately 19 percent
from the prior year. Additionally, brakes and alignment category sales decreased by approximately 24 percent and 13 percent,
respectively, on a comparable store basis as compared to the prior year. Comparable store tire category sales for 2021 decreased by
approximately 3 percent from the prior year.
Change in Number of Stores
Beginning store count
Opened (a)
Closed (b)
Ending store count
2021
1,283
22
(42)
1,263
(a) Includes 17 stores opened related to the 2021 acquisition as well as one store from the 2020 acquisitions that was opened upon completion of
store construction.
(b) Includes four stores temporarily closed due to storm damage.
Cost of Sales and Gross Profit
Gross Profit
(thousands)
Gross profit
Percentage of sales
Dollar change compared to prior year
Percentage change compared to prior year
$
$
2021
395,195
$
35.1 %
(81,463)
(17.1) %
2020
476,658
37.9 %
The decrease in gross profit, as a percentage of sales, was primarily due to an increase in material costs, as a percentage of sales, as a
result of a shift in sales mix to tires. However, we expanded our gross profit per tire from the prior year with the completed rollout of
21
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2021 Form 10-K
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our tire category management and pricing tool. The decrease in gross profit, as a percentage of sales, was also partially due to an
increase in distribution and occupancy costs, as a percentage of sales. Although we were able to reduce these largely fixed costs
through rent concessions from landlords, we lost leverage on these costs with lower overall comparable store sales. Partially offsetting
these increases was a decrease in technician labor costs, which decreased as a percentage of sales, due to improved labor productivity.
Gross Profit as a Percentage of Sales Change
Gross profit change
Drivers of change in gross profit as a percentage of sales
Material costs
Distribution and occupancy costs
Technician labor costs
Operating, Selling, General and Administrative Expenses
Operating, Selling, General and Administrative Expenses
(thousands)
Operating, Selling, General and Administrative Expenses
Percentage of sales
Dollar change compared to prior year
Percentage change compared to prior year
2021
(2.8) %
(2.6) %
(1.1) %
0.9 %
$
$
2021
322,957
$
28.7 %
(51,999)
(13.9) %
2020
374,956
29.8 %
The decrease of $52.0 million in operating, selling, general and administrative (“OSG&A”) expenses from the prior year is primarily
due to decreased expenses from comparable stores mainly as a result of focused cost reduction against lower overall comparable stores
sales, including actively managing our store management staffing levels to match demand and realigning marketing spend toward digital
channels, as well as a $6.4 million reduction in impairment charge. The decrease in OSG&A expenses from the prior year also reflects
lower expenses from 42 closed stores compared to the prior year. Partially offsetting these decreases was an increase in expenses from
new stores.
OSG&A Expenses Change
(thousands)
OSG&A expenses change
Drivers of change in OSG&A expenses
Reduction from comparable stores
Reduction in impairment charge
Reduction from closed stores
Increase from new stores
Other Performance Factors
Net Interest Expense
$
$
$
$
$
2021
(51,999)
(41,634)
(6,435)
(6,826)
2,896
Net interest expense of $28.2 million for 2021 remained relatively flat as compared to the prior year, and increased as a percentage of
sales from 2.2 percent to 2.5 percent. Weighted average debt outstanding for 2021 increased by approximately $219 million as
compared to 2020. This increase is primarily related to an increase in debt outstanding under our Credit Facility that was borrowed in
response to the COVID-19 pandemic in late 2020, as well as an increase in finance lease debt recorded in connection with the 2021
and 2020 acquisitions and greenfield expansion, along with renegotiated leases. Partially offsetting these increases was a decrease in
the weighted average interest rate of approximately 190 basis points from the prior year due to lower borrowing rates associated with
new leases as well as a decrease in Credit Facility borrowing rates.
Provision for Income Taxes
Our 2021 effective income tax rate was 22.3 percent compared to 21.9 percent for 2020, as discrete items, primarily related to
employee share-based compensation, resulted in a larger tax rate benefit in the prior year period. The effective tax rate for 2021
reflects an income tax benefit of $0.5 million due to the difference in statutory tax rates from loss years to years in which such net
operating losses may be carried back.
Note 9 to the Company’s consolidated financial statements provides additional information.
Monro, Inc.
2021 Form 10-K
23
Table of Contents
Non-GAAP Financial Measures
In addition to reporting net income and diluted EPS, which are GAAP measures, this Form 10-K 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 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
(thousands)
Net income
Store impairment charge
Store closing costs
Monro.Forward initiative costs
Acquisition due diligence and integration costs
Management transition costs
Litigation reserve
Headquarters expansion costs
Provision for income taxes on adjustments
Adjusted net income
Adjusted diluted EPS is summarized as follows:
Reconciliation of Adjusted Diluted EPS
Diluted EPS
Store impairment charge (a)
Store closing costs
Monro.Forward initiative costs
Acquisition due diligence and integration costs
Management transition costs
Litigation reserve
Headquarters expansion costs
Adjusted diluted EPS
$
$
$
$
2021
34,319 $
144
2,738
2,243
260
614
(250)
—
(1,351)
38,717 $
2021
1.01 $
—
0.06
0.05
0.01
0.01
(0.01)
—
1.14 $
2020
58,024
6,579
—
3,976
1,363
—
250
346
(3,023)
67,515
2020
1.71
0.15
—
0.09
0.03
—
0.01
0.01
2.00
(a) For 2021, store impairment charge is too minor in amount, net of the impact from income taxes, to have an impact on the calculation of adjusted
diluted EPS.
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
by +/- $0.01 due to rounding.
The adjustments to diluted EPS reflect adjusted effective tax rates of 23.5 percent and 24.2 percent for 2021 and 2020, respectively.
These adjusted effective tax rates exclude the income tax impacts from share-based compensation and differences in statutory tax rates
for net operating loss carrybacks. See adjustments from the Reconciliation of Adjusted Net Income table above for pre-tax amounts.
24
Monro, Inc.
2021 Form 10-K
Table of Contents
Analysis of Financial Condition
Capital Resources, Contractual Obligations and Liquidity
Capital Resources
Our primary capital requirements for 2021 were divided among the funding of acquisitions for $17.2 million, as well as the upgrading
of facilities and systems and the funding of our store transformation program totaling $51.7 million. In 2020, our primary capital
requirements were divided among the funding of acquisitions for $104.4 million, as well as the upgrading of facilities and systems and
the funding of our store transformation program totaling $55.9 million. In both 2021 and 2020, capital requirements were primarily
met by cash flow from operations and from our Credit Facility.
We paid dividends of $29.8 million in 2021. In May 2021, Monro’s Board of Directors declared a cash dividend of $0.24 per share or
share equivalent to be paid to shareholders of record as of June 7, 2021. The dividend will be paid on June 21, 2021.
The acquisition subsequent to March 27, 2021 was financed through our existing credit facility. See Note 3 to the Company’s
consolidated financial statements.
Through rebranding and reimaging investments, we have completed the transformation of 366 stores since the launch of the current
program in 2019.
We continue to evaluate potential acquisition targets that we believe would fit our growth strategy while maintaining financial
discipline. We believe we have sufficient resources available (including cash flow from operations and, if necessary, cash on hand
and/or bank financing) to expand our business as currently planned for the next twelve months.
Contractual Obligations
Commitments Due by Period
(thousands)
Principal payments on long-term debt
Finance lease commitments/financing obligations (a)
Operating lease commitments (a)
Accrued rent
Other liabilities
Total
Total
190,000
516,579 $
239,546
1,807
1,133
949,065 $
$
$
Within
1 Year
55,389 $
36,451
1,563
800
94,203 $
2 to
3 Years
$
109,892
66,066
132
333
176,423 $
4 to
5 Years
190,000
100,486 $
53,575
42
—
344,103 $
After
5 Years
250,812
83,454
70
—
334,336
(a) Finance and operating lease commitments represent future undiscounted lease payments and include $108.4 million and $61.0 million,
respectively, related to options to extend lease terms that are reasonably certain of being exercised.
During 2021, we negotiated rent deferrals, with repayment at later dates, for a significant number of our store leases. These
concessions provide a deferral of rent payments with no substantive changes to the original contract. Consistent with updated guidance
from the FASB in April 2020, we have elected to treat the rent deferrals as accrued liabilities. The accrued rent reflected in the table
above includes $0.8 million related to rent deferrals due primarily in the first and second quarter of 2022 and $1.0 million due to
timing of other lease related expenses. We will continue to recognize expense during the deferral periods.
In addition, during 2021, we negotiated rent reductions with certain landlords on approximately 23 percent of our lease contracts in
exchange for extending our current lease term. As these agreements represent substantive changes to our contractual obligations, the
leases were remeasured. As a result, finance lease and financing obligation assets, net and finance leases and financing obligations
were increased by $67.7 million and $64.0 million, respectively, and operating lease assets, net and operating lease liabilities were
increased by $16.2 million and $20.0 million, respectively. The negotiated terms were generally consistent with terms of typical
renewal agreements.
Liquidity
Interest only is payable monthly throughout the term of our Credit Facility. 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.
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 2022 to
provide us with additional flexibility to operate our business. The First Amendment permanently amended the interest rate charged on
Monro, Inc.
2021 Form 10-K
25
Table of Contents
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 will be 225 basis points over LIBOR. Additionally, during the same
period, we may 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 are permitted if we are in compliance with the financial covenants and other
restrictions in the First Amendment and Credit Facility. 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. Except as amended by the First 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 line
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 $33.6 million outstanding letter of credit at March 27, 2021.
Mortgages and specific lease financing arrangements with other parties (with certain limitations) are permitted under the Credit
Facility. Other specific terms and the maintenance of specified ratios are generally consistent with our prior financing agreement.
Additionally, the Credit Facility is not secured by our real property, although we have agreed not to encumber our real property, with
certain permissible exceptions.
In order to enhance our liquidity position during the COVID-19 pandemic, we took a precautionary measure and borrowed
$350 million available to us under our Credit Facility in March 2020, which we subsequently repaid in 2021. There was $190.0
million outstanding and $376.4 million available under the Credit Facility at March 27, 2021.
We were in compliance with all debt covenants at March 27, 2021.
As of May 21, 2021, we had approximately $18.0 million in cash on hand. We believe that we can fulfill our commitments and
working capital needs utilizing our cash flow from operations and, if necessary, cash on hand and/or bank financing for at least the
next 12 months and the foreseeable future.
Off Balance Sheet Arrangements
We do not have any material off-balance sheet arrangements at March 27, 2021.
Critical Accounting Policies
Our consolidated financial statements are prepared in accordance with GAAP, which requires us to make estimates and apply
judgments that affect the reported amounts. In Note 1 to the Company’s consolidated financial statements, we describe the significant
accounting policies used in preparing the consolidated financial statements. Our management believes that the accounting policies
listed below are those that are most critical to the portrayal of our financial condition and results of operations, and that required
management’s most difficult, subjective and complex judgments in estimating the effect of inherent uncertainties.
Business Combinations
We use the acquisition method in accounting for acquired businesses. Under the acquisition method, our financial statements reflect
the operations of an acquired business starting from the completion of the acquisition. The assets acquired and liabilities assumed are
recorded at their respective estimated fair values at the date of the acquisition. Any excess of the purchase price over the estimated fair
values of the identifiable net assets acquired is recorded as goodwill. Significant judgment is often required in estimating the fair value
of assets acquired, particularly the right of use (“ROU”) assets and intangible assets, including trade names and customer
relationships. ROU assets are recorded at the present value of remaining lease payments adjusted to reflect favorable or unfavorable
market terms of the lease. As a result, in the case of significant acquisitions, we normally obtain the assistance of a third-party
valuation specialist in estimating the value of the ROU assets as well as intangible assets. The fair value measurements are based on
available historical information and on expectations and assumptions about the future, considering the perspective of marketplace
participants. Favorable or unfavorable market terms used to value the ROU assets are estimated based on comparable market
data. Fair values of acquired trade names are estimated using an income approach, specifically the relief-from-royalty method.
Customer relationships are valued using the cost approach or an income approach such as the excess earnings method. Assumptions
utilized in the determination of fair value include forecasted sales, discount rates, royalty rates (trade names) and customer attrition
rates (customer relationships). While we believe the expectations and assumptions about the future are reasonable, they are inherently
uncertain. Unanticipated market or macroeconomic events and circumstances, like the COVID-19 pandemic, may occur, which could
affect the accuracy or validity of the estimates and assumptions.
26
Monro, Inc.
2021 Form 10-K
Table of Contents
Carrying Values of Goodwill and Long-Lived Assets
We have a history of growth through acquisitions. Assets and liabilities of acquired businesses are recorded at their estimated fair
values as of the date of acquisition. Goodwill represents consideration paid in excess of fair values assigned to the underlying net
assets of acquired businesses. The carrying value of goodwill is subject to an annual impairment test, which we perform in the third
quarter of the fiscal year. Impairment tests may also be triggered by any significant events or changes in circumstances affecting our
business.
We have one reporting unit which encompasses all operations including new acquisitions. In performing our annual goodwill
impairment test, we perform a qualitative assessment to determine if it is more likely than not that the fair value is less than the
carrying value of goodwill. The qualitative assessment includes a review of business changes, economic outlook, financial trends and
forecasts, growth rates, industry data, market capitalization and other relevant qualitative factors. If the qualitative factors indicate a
potential impairment, we compare the fair value of our reporting unit to the carrying value of our reporting unit. If the fair value is less
than its carrying value, an impairment charge is recognized in an amount equal to that excess. The loss recognized cannot exceed the
carrying amount of goodwill. We believe there is little risk of impairment of our goodwill.
Our intangible assets primarily represent allocations of purchase price to identifiable intangible assets of acquired businesses and are
amortized over their estimated useful lives. All intangibles and other long-lived assets, which include property and equipment as well
as ROU assets, are reviewed whenever events or changes in circumstances indicate that an impairment may exist. If such indicators
are present, it is determined whether the sum of the estimated undiscounted future cash flows attributable to such assets is less than
their carrying values.
A deterioration of macroeconomic conditions may not only negatively impact the estimated operating cash flows used in our cash
flow models, but may also negatively impact other assumptions used in our analyses, including, but not limited to, the estimated cost
of capital and/or discount rates. Additionally, we are required to ensure that assumptions used to determine fair value in our analyses
are consistent with the assumptions a hypothetical marketplace participant would use. As a result, the cost of capital and/or discount
rates used in our analyses may increase or decrease based on market conditions and trends, regardless of whether our actual cost of
capital has changed. Therefore, we may recognize an impairment of an intangible asset or assets even though realized actual cash
flows are approximately equal to or greater than our previously forecasted amounts.
Self-Insurance Reserves
We are largely self-insured with respect to workers’ compensation, general liability and employee medical claims. In order to reduce
our risk and better manage our overall loss exposure, we purchase stop-loss insurance that covers individual claims in excess of the
deductible amounts, and caps total losses in a fiscal year. We maintain an accrual for the estimated cost to settle open claims as well as
an estimate of the cost of claims that have been incurred but not reported. These estimates take into consideration the historical
average claim volume, the average cost for settled claims, current trends in claim costs, changes in our business and workforce, and
general economic factors. These accruals are reviewed on a quarterly basis. For more complex reserve calculations, such as workers’
compensation, we periodically use the services of an actuary to assist in determining the required reserve for open claims.
Income Taxes
We estimate our provision for income taxes, deferred tax assets and liabilities, income taxes payable and unrecognized tax benefit
liabilities based on a number of factors including, but not limited to, historical pre-tax operating income, future estimates of pre-tax
operating income, tax planning strategies, differences between tax laws and accounting rules of various items of income and expense,
statutory tax rates and credits, uncertain tax positions and valuation allowances. We use significant judgment and estimates in
evaluating our tax positions.
We record deferred tax assets and liabilities based upon the expected future tax outcome of differences between tax laws and
accounting rules of various items of income and expense recognized in our results of operations using enacted tax rates in effect for
the year in which the future tax outcome is expected. We evaluate our ability to realize the tax benefits associated with deferred tax
assets and establish valuation allowances when we believe it is more likely than not that some portion of our deferred tax assets will
not be realized.
We file U.S. federal income tax returns and income tax returns in various state jurisdictions. Monro’s 2020, 2019 and 2018 U.S.
federal tax years and various state tax years remain subject to income tax examinations by tax authorities. We establish tax liabilities
in accordance with the accounting guidance on income taxes. Under the accounting guidance, we measure and recognize the tax
benefit from an uncertain tax position taken or expected to be taken on an income tax return based on the largest benefit that is more
likely than not of being realized upon settlement. An uncertain income tax position will not be recognized in the financial statements
unless it is more likely than not to be sustained. We adjust these tax liabilities for unrecognized tax benefits, as well as the related
Monro, Inc.
2021 Form 10-K
27
Table of Contents
interest and penalties, based on the latest facts and circumstances, including recently published rulings, court cases and outcomes of
tax audits. Due to the complexity of some of these uncertainties, the ultimate resolution may result in an actual tax liability that differs
from our estimated tax liabilities for unrecognized tax benefits and our effective tax rate may be materially impacted. While it is often
difficult to predict the final outcome of, the timing of, or the tax treatment of any particular uncertain tax position, we believe that our
tax balances reflect the more likely than not outcome of known tax contingencies.
Accounting Standards
See “Recent Accounting Pronouncements” in Note 1 to the Company’s consolidated financial statements for a discussion of the
impact of recently issued accounting standards on our consolidated financial statements as of March 27, 2021 and for the year then
ended, as well as the expected impact on the consolidated financial statements for future periods.
Item 7A. Quantitative and Qualitative Disclosures about Market Risk
We are exposed to market risk from potential changes in interest rates. As of March 27, 2021, 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 $1.9 million,
based upon our debt position as of March 27, 2021, given a change in LIBOR of 100 basis points.
Debt financing had a carrying amount and a fair value of $190.0 million as of March 27, 2021, as compared to a carrying amount and
a fair value of $566.4 million as of March 28, 2020.
28
Monro, Inc.
2021 Form 10-K
Table of Contents
Item 8. Financial Statements and Supplementary Data
Report on Management’s Assessment on Internal Control Over Financial Reporting
Report of Independent Registered Public Accounting Firm
Audited Financial Statements:
Consolidated Balance Sheets
Consolidated Statements of Income and Comprehensive Income
Consolidated Statements of Changes in Shareholders' Equity
Consolidated Statements of Cash Flows
Notes to Consolidated Financial Statements
Note 1 Description of Business, Basis of Presentation and Summary of Significant Accounting Policies
Note 2 Impact of the COVID-19 Pandemic
Note 3 Acquisitions
Note 4 Other Current Assets
Note 5 Property and Equipment
Note 6 Goodwill and Intangible Assets
Note 7 Long-term Debt
Note 8 Revenue
Note 9 Income Taxes
Note 10 Stock Ownership
Note 11 Share-based Compensation
Note 12 Earnings Per Share
Note 13 Leases
Note 14 Defined Benefit and Defined Contribution Plans
Note 15 Commitments and Contingencies
Note 16 Subsequent Events
Page
30
31
33
34
35
36
37
37
41
42
45
45
46
46
47
48
49
50
51
52
53
56
56
Monro, Inc.
2021 Form 10-K
29
Table of Contents
Report on Management’s Assessment of Internal Control Over Financial Reporting
Management of Monro, Inc. (the “Company”) is responsible for establishing and maintaining adequate internal control over financial
reporting as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934, as amended. The
Company’s internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial
reporting and the preparation of the financial statements for external purposes in accordance with generally accepted accounting
principles.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections
of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in
conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Management assessed the effectiveness of the Company’s internal control over financial reporting as of March 27, 2021. In making this
assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission in
Internal Control - Integrated Framework (2013). Based on our assessment, management determined that the Company maintained
effective internal control over financial reporting as of March 27, 2021.
The Company’s independent registered public accounting firm, PricewaterhouseCoopers LLP, is appointed by the Company’s Audit
Committee. PricewaterhouseCoopers LLP has audited the consolidated financial statements included in this Annual Report on Form 10-
K and the effectiveness of the Company’s internal control over financial reporting as of March 27, 2021, and as a part of their integrated
audit, has issued their report, included herein, on the effectiveness of the Company’s internal control over financial reporting.
/s/ Michael T. Broderick
Michael T. Broderick
Chief Executive Officer
(Principal Executive Officer)
May 26, 2021
/s/ Brian J. D’Ambrosia
Brian J. D’Ambrosia
Chief Financial Officer
(Principal Financial Officer)
30
Monro, Inc.
2021 Form 10-K
Table of Contents
Report of Independent Registered Public Accounting Firm
To the Board of Directors and Shareholders of Monro, Inc.
Opinions on the Financial Statements and Internal Control over Financial Reporting
We have audited the accompanying consolidated balance sheets of Monro, Inc. and its subsidiaries (the “Company”) as of March 27,
2021 and March 28, 2020, and the related consolidated statements of income and comprehensive income, of changes in shareholders’
equity and of cash flows for each of the three years in the period ended March 27, 2021, including the related notes (collectively
referred to as the “consolidated financial statements”). We also have audited the Company's internal control over financial reporting
as of March 27, 2021, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of
Sponsoring Organizations of the Treadway Commission (COSO).
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of
the Company as of March 27, 2021 and March 28, 2020, and the results of its operations and its cash flows for each of the three years
in the period ended March 27, 2021 in conformity with accounting principles generally accepted in the United States of America.
Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of March
27, 2021, based on criteria established in Internal Control - Integrated Framework (2013) issued by the COSO.
Change in Accounting Principle
As discussed in Note 1 to the consolidated financial statements, the Company changed the manner in which it accounts for leases at
the beginning of the year ended March 28, 2020.
Basis for Opinions
The Company's management is responsible for these consolidated financial statements, for maintaining effective internal control over
financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the
accompanying Report on Management’s Assessment of Internal Control Over Financial Reporting. Our responsibility is to express
opinions on the Company’s consolidated financial statements and on the Company's internal control over financial reporting based on
our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States)
(PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the
applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the
audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether
due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects.
Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the
consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such
procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial
statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well
as evaluating the overall presentation of the consolidated financial statements. Our audit of internal control over financial reporting
included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and
testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included
performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable
basis for our opinions.
Definition and Limitations of Internal Control over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of
financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting
principles. A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the
maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the
company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in
accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in
accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding
prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect
on the financial statements.
Monro, Inc.
2021 Form 10-K
31
Table of Contents
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections
of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in
conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Critical Audit Matters
The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements
that was communicated or required to be communicated to the audit committee and that (i) relates to accounts or disclosures that are
material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments. The
communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a
whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or
on the accounts or disclosures to which it relates.
Valuation of Acquired Right of Use Assets
As described in Note 3 to the consolidated financial statements, the Company recorded $5 million of finance lease and financing
obligation assets, net and $9 million of operating lease assets, net (collectively “right of use assets”) relating to a business combination
completed during the year ended March 27, 2021. The right of use assets acquired are recorded at the present value of remaining lease
payments adjusted to reflect favorable or unfavorable market terms of the lease. Management applied significant judgment in
estimating the favorable or unfavorable market terms used to value the acquired right of use assets, which is estimated based on
comparable market data.
The principal considerations for our determination that performing procedures relating to the valuation of acquired right of use assets
is a critical audit matter are the significant judgment by management in estimating the favorable or unfavorable market terms used to
value the acquired right of use assets and the comparable market data assumption. This in turn led to a high degree of auditor
judgment, effort, and subjectivity in performing procedures related to the favorable or unfavorable market terms used to value the
acquired right of use assets and the comparable market data assumption. In addition, the audit effort involved the use of professionals
with specialized skill and knowledge.
Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion
on the consolidated financial statements. These procedures included testing the effectiveness of controls over the estimation of the
value of the acquired right of use assets, including controls over the estimate of favorable or unfavorable market terms. These
procedures also included, among others, (i) reading the purchase agreement; (ii) testing management’s process for estimating the value
of the acquired right of use assets; and (iii) evaluating the appropriateness of the valuation method and testing the completeness and
accuracy of the underlying data. Professionals with specialized skill and knowledge were used to assist in evaluating the
reasonableness of the comparable market data assumption.
/s/ PricewaterhouseCoopers LLP
Rochester, New York
May 26, 2021
We have served as the Company’s auditor since at least 1984. We have not been able to determine the specific year we began serving
as auditor of the Company.
32
Monro, Inc.
2021 Form 10-K
CONSOLIDATED FINANCIAL STATEMENTS
Table of Contents
Consolidated Balance Sheets
(thousands, except footnotes)
Assets
Current assets
Cash and equivalents
Accounts receivable
Federal and state income taxes receivable
Inventories
Other current assets
Total current assets
Property and equipment, net
Finance lease and financing obligation assets, net
Operating lease assets, net
Goodwill
Intangible assets, net
Other non-current assets
Long-term deferred income tax assets
Total assets
Liabilities and shareholders' equity
Current liabilities
Current portion of finance leases and financing obligations
Current portion of operating lease liabilities
Accounts payable
Accrued payroll, payroll taxes and other payroll benefits
Accrued insurance
Deferred revenue
Other current liabilities
Total current liabilities
Long-term debt
Long-term finance leases and financing obligations
Long-term operating lease liabilities
Other long-term liabilities
Long-term deferred income tax liabilities
Long-term income taxes payable
Total liabilities
Commitments and contingencies – Note 15
Shareholders' equity
Class C Convertible Preferred Stock
Common Stock
Treasury Stock
Additional paid-in capital
Accumulated other comprehensive loss
Retained earnings
Total shareholders' equity
Total liabilities and shareholders' equity
March 27, 2021 March 28, 2020
$
$
$
$
29,960 $
15,324
10,844
162,282
48,115
266,525
327,063
275,360
203,329
689,524
26,068
18,332
5,613
1,811,814 $
37,803 $
30,903
112,378
20,842
49,681
11,956
27,053
290,616
190,000
366,330
177,724
16,649
19,783
1,028
1,062,130
29
398
(108,729)
238,244
(4,619)
624,361
749,684
1,811,814 $
345,476
14,510
8,056
187,441
40,537
596,020
328,637
196,575
199,729
671,843
29,781
20,688
6,184
2,049,457
32,257
30,181
99,504
14,429
43,387
13,129
22,049
254,936
566,400
298,373
170,954
12,873
10,069
1,412
1,315,017
33
396
(108,729)
229,774
(6,889)
619,855
734,440
2,049,457
Class C Convertible Preferred Stock Authorized 150,000 shares, $1.50 par value, $0.064 conversion value: 19,664 shares issued and outstanding at March 27, 2021;
21,802 shares issued and outstanding at March 28, 2020
Common Stock Authorized 65,000,000 shares, $0.01 par value; 39,848,093 shares issued as of March 27, 2021; 39,644,228 shares issued at March 28, 2020
Treasury Stock 6,359,871 shares, at cost
See accompanying Notes to Consolidated Financial Statements.
Monro, Inc.
2021 Form 10-K
33
Table of Contents
CONSOLIDATED FINANCIAL STATEMENTS
Consolidated Statements of Income and Comprehensive Income
(thousands, except per share data)
Sales
Cost of sales, including distribution and occupancy costs
Gross profit
Operating, selling, general and administrative expenses
Operating income
Interest expense, net of interest income
Other income, net of other loss
Income before income taxes
Provision for income taxes
Net income
Other comprehensive income (loss)
Changes in pension, net of tax provision (benefit)
Other comprehensive income (loss)
Comprehensive income
Earnings per share
Basic
Diluted
Weighted average common shares outstanding
Basic
Diluted
See accompanying Notes to Consolidated Financial Statements.
$
$
$
$
$
2021
1,125,721 $
730,526
395,195
322,957
72,238
28,235
(188)
44,191
9,872
34,319 $
2020
1,256,524 $
779,866
476,658
374,956
101,702
28,213
(785)
74,274
16,250
58,024 $
2019
1,200,230
735,002
465,228
338,485
126,743
27,013
(630)
100,360
20,608
79,752
2,270
2,270
36,589 $
(2,353)
(2,353)
55,671 $
(288)
(288)
79,464
1.02 $
1.01 $
1.73 $
1.71 $
2.41
2.37
33,329
33,876
33,246
33,953
32,980
33,675
34
Monro, Inc.
2021 Form 10-K
Table of Contents
CONSOLIDATED FINANCIAL STATEMENTS
Consolidated Statements of Changes in Shareholders’ Equity
(thousands)
Balance at March 31, 2018
Net income
Other comprehensive loss
Pension liability adjustment
Dividends declared
Preferred
Common
Dividend payable
Stock options and restricted stock (a)
Share-based compensation
Balance at March 30, 2019
Cumulative effect of accounting change
Net income
Other comprehensive loss
Pension liability adjustment
Dividends declared
Preferred
Common
Dividend payable
Stock options and restricted stock
Share-based compensation
Balance at March 28, 2020
Net income
Other comprehensive loss
Pension liability adjustment
Dividends declared
Preferred
Common
Dividend payable
Conversion of Class C Preferred Stock
Stock options and restricted stock
Share-based compensation
Balance at March 27, 2021
(a)
Class C Convertible
Additional Accumulated Other
Preferred Stock Common Stock
Shares Amount Shares Amount Shares
Treasury Stock
Amount
Paid-In
Capital
22 $
33 39,166 $ 392 6,330 $ (106,563) $ 199,576 $
Total
Comprehensive Retained
Equity
Earnings
Loss
(4,248) $ 539,286 $ 628,476
79,752 79,752
(288)
(288)
345
3
30
(2,166) 16,575
4,022
22 $
33 39,511 $ 395 6,360 $ (108,729) $ 220,173 $
134
1
5,788
3,813
22 $
33 39,645 $ 396 6,360 $ (108,729) $ 229,774 $
(2)
(4)
50
153
1
1
3
6,076
2,391
20 $
29 39,848 $ 398 6,360 $ (108,729) $ 238,244 $
(50)
(408)
(408)
(26,406) (26,406)
(50)
14,412
4,022
(4,536) $ 592,174 $ 699,510
(582)
58,024 58,024
(582)
(2,353)
(2,353)
(46)
(449)
(449)
(29,266) (29,266)
(46)
5,789
3,813
(6,889) $ 619,855 $ 734,440
34,319 34,319
2,270
2,270
(31)
(438)
(438)
(29,344) (29,344)
(31)
-
6,077
2,391
(4,619) $ 624,361 $ 749,684
Includes the receipt of treasury stock in connection with the exercise of stock options and to partially satisfy tax withholding obligations.
We declared $0.88, $0.88 and $0.80 dividends per common share or equivalent for the years ended March 27, 2021, March 28, 2020 and March 30, 2019, respectively.
See accompanying Notes to Consolidated Financial Statements.
Monro, Inc.
2021 Form 10-K
35
Table of Contents
Consolidated Statements of Cash Flows
CONSOLIDATED FINANCIAL STATEMENTS
(thousands)
Operating activities:
Net income
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization
Share-based compensation expense
(Gain) loss on disposal of assets
Impairment of long-lived assets
Deferred income tax expense
Change in operating assets and liabilities (excluding acquisitions)
Accounts receivable
Inventories
Other current assets
Other non-current assets
Accounts payable
Accrued expenses
Federal and state income taxes receivable
Other long-term liabilities
Long-term income taxes payable
Cash provided by operating activities
Investing activities
Capital expenditures
Acquisitions, net of cash acquired
Proceeds from the disposal of assets
Other
Cash used for investing activities
Financing activities:
Proceeds from borrowings
Principal payments on long-term debt, capital leases and financing obligations
Exercise of stock options
Dividends paid
Deferred financing costs
Cash (used for) provided by financing activities
Net (decrease) increase in cash
Cash at beginning of year
Cash at end of year
Supplemental information:
Interest paid, net
Income taxes
Leased assets obtained in exchange for new finance lease liabilities
Leased assets obtained in exchange for new operating lease liabilities
See accompanying Notes to Consolidated Financial Statements.
2021
2020
2019
$
34,319 $
58,024 $
79,752
77,304
2,391
(491)
144
10,854
(814)
26,570
22,566
3,331
12,874
21,355
(2,788)
(22,326)
(384)
184,905
64,986
3,813
(257)
6,579
11,473
107
(11,841)
5,379
24,968
(4,090)
(3,871)
(2,470)
(31,100)
(371)
121,329
(51,725)
(17,154)
659
1,960
(66,260)
(55,918)
(104,436)
967
576
(158,811)
—
(409,783)
6,278
(29,782)
(874)
(434,161)
(315,516)
345,476
29,960 $
814,181
(412,725)
6,171
(29,715)
(1,168)
376,744
339,262
6,214
345,476 $
55,531
4,022
56
—
12,517
(1,361)
(9,126)
(514)
(427)
19,037
(3,019)
(1,401)
(1,967)
(209)
152,891
(44,468)
(62,427)
723
289
(105,883)
433,460
(463,989)
14,640
(26,814)
—
(42,703)
4,305
1,909
6,214
26,376 $
2,334
104,165
24,409
27,250 $
12,745
64,393
6,980
25,422
9,680
14,632
—
$
$
36
Monro, Inc.
2021 Form 10-K
Table of Contents
CONSOLIDATED FINANCIAL STATEMENTS
NOTES
Note 1 – Description of Business, Basis of Presentation and Summary of Significant Accounting Policies
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 1,263
Company-operated stores, 96 franchised locations, seven wholesale locations and three retread facilities located in 32 states as of
March 27, 2021.
Monro’s operations are organized and managed in one operating segment. The internal management financial reporting that is the
basis for evaluation in order to assess performance and allocate resources by our chief operating decision maker consists of
consolidated data that includes the results of our retail, commercial and wholesale locations. As such, our one operating segment
reflects how our operations are managed, how resources are allocated, how operating performance is evaluated by senior management
and the structure of our internal financial reporting.
Basis of presentation
Principles of consolidation
The consolidated financial statements include the accounts of Monro, Inc. and its direct and indirect subsidiaries. All intercompany
accounts and transactions have been eliminated in consolidation.
Management’s use of estimates
The consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United
States of America. The preparation of financial statements in conformity with such principles requires the use of estimates by
management during the reporting period. Actual results could differ from those estimates.
Fiscal year
We operate on a 52/53 week fiscal year ending on the last Saturday in March. Fiscal years 2021 and 2020 each contained 52 weeks and
fiscal year 2019 contained 53 weeks. Unless specifically indicated otherwise, any references to “2021” or “fiscal 2021,” “2020” or
“fiscal 2020,” and “2019” or “fiscal 2019” relate to the years ended March 27, 2021, March 28, 2020 and March 30, 2019, respectively.
Recent accounting pronouncements
In August 2018, the Financial Accounting Standards Board (“FASB”) issued new accounting guidance which eliminates, adds and
modifies certain disclosure requirements for fair value measurements. This guidance is effective for fiscal years and interim periods
within those years beginning after December 15, 2019. Early adoption is permitted. We adopted this guidance during the first quarter
of 2021. The adoption of this guidance did not have a material impact on our consolidated financial statements.
In December 2019, the FASB issued new accounting guidance intended to simplify the accounting for income taxes. The new
guidance removes certain exceptions to the general principles in Accounting Standards Codification (“ASC”) Topic 740, “Income
Taxes,” and amends existing guidance to improve consistent application. This guidance is effective for fiscal years and interim periods
within those years beginning after December 15, 2020. Early adoption is permitted. The adoption of this guidance is not expected to
have a material impact on our consolidated financial statements.
Other recent authoritative guidance issued by the FASB (including technical corrections to the ASC) and the Securities and Exchange
Commission (“SEC”) did not, or are not expected to have a material effect on Monro’s consolidated financial statements.
Summary of significant accounting policies
Cash and cash equivalents
Cash consists primarily of cash on hand and deposits with banks. Cash equivalents include highly liquid investments with an original
maturity of three months or less from the time of purchase. Cash equivalents also include amounts due from third-party financial
institutions for credit and debit card transactions. These receivables typically settle in three days or less.
Monro, Inc.
2021 Form 10-K
37
Table of Contents
Inventories
CONSOLIDATED FINANCIAL STATEMENTS
NOTES
Our inventories, which consist of automotive parts and oil as well as tires, are valued at the lower of weighted average cost or net
realizable value.
Property and equipment, net
Property and equipment, net is stated at historical cost less accumulated depreciation. Property and equipment is depreciated using the
straight-line method over estimated useful lives. Leasehold improvements are depreciated over the shorter of their estimated useful
lives or the related lease terms. When assets are disposed of, the resulting gain or loss is recognized in other income, net of other loss
on the Consolidated Statement of Income and Comprehensive Income. Expenditures for maintenance and repairs are expensed as
incurred.
Estimated Useful Lives
Buildings and improvements
Equipment, signage and fixtures
Vehicles
Valuation of long-lived assets
Life (Years)
10 - 39
3 - 15
5 - 10
We assess potential impairments to our long-lived assets, which include property and equipment and operating right-of-use (“ROU”)
assets, whenever events or circumstances indicate that the carrying value of an asset may not be recoverable. Long-lived assets are
grouped and evaluated for impairment at the lowest level for which there are identifiable cash flows that are independent of the cash
flows of other groups of assets. If it is determined that the carrying amounts of such long-lived assets are not recoverable, the assets
are written down to their estimated fair values. Fair value of the assets is determined based on the highest and best use of the asset
group, considering external market participant assumptions. Since the determination of future cash flows is an estimate of future
performance, there may be future impairments in the event that future cash flows do not meet expectations.
During 2020, we evaluated certain stores having indicators of impairment based on operating performance and taking into
consideration the negative impact of the novel coronavirus strain (“COVID-19”) pandemic on forecasted store performance. Based on
the estimate of future recoverable cash flows, we recorded an impairment charge totaling $6.6 million of which $4.3 million was
related to 36 stores that closed in 2021. As part of the impairment charge, we wrote off $4.4 million of operating lease ROU assets,
$0.6 million of finance lease ROU assets and $1.6 million of leasehold improvements and equipment.
No material impairment charges were recorded during 2021 or 2019.
Leases
We determine if an arrangement is or contains a lease at inception. We record ROU assets and lease obligations for our finance and
operating leases, which are initially based on the discounted future minimum lease payments over the term of the lease. As the rate
implicit in our leases is not easily determinable, our applicable incremental borrowing rate is used in calculating the present value of
the lease payments. We estimate our incremental borrowing rate considering the market rates of our outstanding borrowings and
comparisons to comparable borrowings of similar terms.
Lease term is defined as the non-cancelable period of the lease plus any option to extend the lease when it is reasonably certain that it
will be exercised. For leases with an initial term of 12 months or less, no ROU assets or lease obligations are recorded on the balance
sheet and we recognize short-term lease expense for these leases on a straight-line basis over the lease term.
Certain of our lease agreements include rental payments based on a percentage of retail sales over specified levels and others include
rental payments adjusted periodically for inflation. Our lease agreements do not contain any material residual value guarantees or
material restrictive covenants. For the majority of all classes of underlying assets, we have elected to separate lease from non-lease
components. We have elected to combine lease and non-lease components for certain classes of equipment. We generally sublease
excess space to third parties.
Operating lease expense is recognized on a straight-line basis over the lease term and is included in cost of sales, including distribution
and occupancy costs (“cost of sales”) or operating, selling, general and administrative (“OSG&A”) expense. Amortization expense for
finance leases is recognized on a straight-line basis over the lease term and is included in cost of sales or OSG&A expense. Interest
38
Monro, Inc.
2021 Form 10-K
Table of Contents
CONSOLIDATED FINANCIAL STATEMENTS
NOTES
expense for finance leases is recognized using the effective interest method, and is included in interest expense, net of interest income.
Variable payments, short-term rentals and payments associated with non-lease components are expensed as incurred.
Effective March 31, 2019, we adopted using the modified retrospective approach an accounting standards update with new guidance
related to leases. The adoption of this guidance resulted in a $165.3 million increase to total assets, a $165.9 million increase to total
liabilities and a $0.6 million decrease in shareholder’s equity as of March 31, 2019. Periods prior to fiscal 2020 have not been restated
for the adoption of this standard update.
Goodwill and intangible assets
We have a history of growth through acquisitions. Assets and liabilities of acquired businesses are recorded at their estimated fair
values as of the date of acquisition. Goodwill represents costs in excess of fair values assigned to the underlying net assets of acquired
businesses. The carrying value of goodwill is subject to an annual impairment test, which we perform in the third quarter of the fiscal
year. Impairment tests may also be triggered by any significant events or changes in circumstances affecting our business.
We have one reporting unit which encompasses all operations including new acquisitions. In performing our annual goodwill
impairment test, we perform a qualitative assessment to determine if it is more likely than not that the fair value is less than the
carrying value of goodwill. The qualitative assessment includes a review of business changes, economic outlook, financial trends and
forecasts, growth rates, industry data, market capitalization and other relevant qualitative factors. If the qualitative factors indicate a
potential impairment, we compare the fair value of our reporting unit to the carrying value of our reporting unit. If the fair value is less
than its carrying value, an impairment charge is recognized in an amount equal to that excess. The loss recognized cannot exceed the
carrying amount of goodwill. As a result of our annual qualitative assessment performed in the third quarter of 2021, we determined
that it is not more likely than not that the fair value is less than the carrying value.
Subsequent to our prior year assessment performed in the third quarter of 2020, and due to developments associated with the COVID-
19 pandemic, we considered our business performance expectations, as well as our share price as of 2020 year end in relation to the
share price when the annual qualitative assessment was performed in the third quarter of 2020. Based on our analysis, we concluded
that the events and circumstances related to the COVID-19 pandemic did not indicate an impairment of goodwill was more likely than
not as of March 28, 2020.
Our intangible assets primarily represent allocations of purchase price to identifiable intangible assets of acquired businesses and are
amortized over their estimated useful lives. All intangible assets are evaluated for impairment whenever events or changes in
circumstances indicate that an impairment may exist. If such indicators are present, it is determined whether the sum of the estimated
undiscounted future cash flows attributable to such assets is less than their carrying values. Based on our review as of March 27, 2021,
we concluded that the carrying values of our intangible assets were not impaired. No impairment was recorded in 2021, 2020 or 2019.
A deterioration of macroeconomic conditions may not only negatively impact the estimated operating cash flows used in our cash
flow models, but may also negatively impact other assumptions used in our analyses, including, but not limited to, the estimated cost
of capital and/or discount rates. Additionally, we are required to ensure that assumptions used to determine fair value in our analyses
are consistent with the assumptions a hypothetical marketplace participant would use. As a result, the cost of capital and/or discount
rates used in our analyses may increase or decrease based on market conditions and trends, regardless of whether our actual cost of
capital has changed. Therefore, we may recognize an impairment of an intangible asset or assets even though realized actual cash
flows are approximately equal to or greater than our previously forecasted amounts.
Self-insurance reserves
We are largely self-insured with respect to workers’ compensation, general liability and employee medical claims. In order to reduce
our risk and better manage our overall loss exposure, we purchase stop-loss insurance that covers individual claims in excess of the
deductible amounts, and caps total losses in a fiscal year. We maintain an accrual for the estimated cost to settle open claims as well as
an estimate of the cost of claims that have been incurred but not reported. These estimates take into consideration the historical
average claim volume, the average cost for settled claims, current trends in claim costs, changes in our business and workforce, and
general economic factors. These accruals are reviewed on a quarterly basis, or more frequently if factors dictate a more frequent
review is warranted. For more complex reserve calculations, such as workers’ compensation, we periodically use the services of an
actuary to assist in determining the required reserve for open claims.
Monro, Inc.
2021 Form 10-K
39
Table of Contents
Warranty
CONSOLIDATED FINANCIAL STATEMENTS
NOTES
We provide an accrual for estimated future warranty costs for parts that we install based upon the historical relationship of warranty
costs to sales. Warranty expense related to all product warranties for the fiscal years ended March 2021, 2020 and 2019 was not
material to our financial position or results of operations. See Note 8 for additional information on tire road hazard warranty
agreements.
Comprehensive income
As it relates to Monro, comprehensive income is defined as net income as adjusted for pension liability adjustments and is reported net
of related taxes in the Consolidated Statements of Income and Comprehensive Income and in the Consolidated Statements of Changes
in Shareholders’ Equity.
Income taxes
We account for income taxes pursuant to the asset and liability method which requires the recognition of deferred tax assets and
liabilities related to the expected future tax consequences arising from temporary differences between the carrying amounts and tax
bases of assets and liabilities based on enacted statutory tax rates applicable to the periods in which the temporary differences are
expected to reverse. Any effects of changes in income tax rates or laws are included in income tax expense in the period of enactment.
A valuation allowance is recognized if we determine it is more likely than not that all or a portion of a deferred tax asset will not be
recognized. In making such determination, the Company considers all available evidence, including scheduled reversals of deferred
tax liabilities, projected future taxable income, tax planning strategies and recent and expected future results of operation. Monro
recognizes a tax benefit from an uncertain tax position in the financial statements only when it is more likely than not that the position
will be sustained upon examination, including resolution of any related appeals or litigation processes, based on the technical merits
and a consideration of the relevant taxing authority's administrative practices and precedents.
On March 27, 2020, the U.S. government enacted the Coronavirus Aid, Relief and Economic Security Act (“CARES Act”) to provide
certain relief as a result of the COVID-19 pandemic. The CARES Act provides tax relief, along with other stimulus measures,
including an employer deferral of the deposit of the employer’s share of social security taxes during the period beginning March 27,
2020 and ending December 31, 2020. We deferred the employer paid portion of social security taxes as permitted by the CARES Act
during fiscal 2021 and may continue to defer payment prior to the applicable date the deposits must be paid.
Treasury stock
Treasury stock is accounted for using the par value method.
Share-based compensation
We provide share-based compensation through non-qualified stock options, restricted stock awards and restricted stock units. We
measure compensation cost arising from the grant of share-based payments to an employee at fair value, and recognize such cost in
income over the period during which the employee is required to provide service in exchange for the award, usually the vesting
period. The fair value of each option award is estimated on the date of grant primarily using the Black-Scholes option valuation
model. The assumptions used to estimate fair value require judgment and are subject to change in the future due to factors such as
employee exercise behavior, stock price trends, and changes to type or provisions of share-based awards. Any material change in one
or more of these assumptions could have an impact on the estimated fair value of a future award.
Black-Scholes Valuation Model Assumptions
(weighted-average)
Risk-free interest rate (a)
Expected term (years) (b)
Expected volatility (c)
Dividend yield (d)
2021
0.27 %
4
33.3 %
1.60 %
2020
1.85 %
4
30.4 %
1.12 %
2019
2.81 %
4
28.3 %
1.24 %
(a) Risk-free interest rates are yields for zero coupon U.S. Treasury notes maturing approximately at the end of the expected option term.
(b) Expected term is based on historical exercise behavior and on the terms and conditions of the stock option award.
(c) Expected volatility is based on a combination of historical volatility, using Monro stock prices over a period equal to the expected term, and
implied market volatility.
(d) Dividend yield is based on historical dividend experience and expected future changes, if any.
40
Monro, Inc.
2021 Form 10-K
Table of Contents
CONSOLIDATED FINANCIAL STATEMENTS
NOTES
The fair value of restricted stock awards and restricted stock units (collectively “restricted stock”) is determined based on the stock
price at the date of grant.
We are required to estimate forfeitures and only record compensation costs for those awards that are expected to vest. The
assumptions for forfeitures were determined based on type of award and historical experience. Forfeiture assumptions are adjusted at
the point in time a significant change is identified, with any adjustment recorded in the period of change, and the final adjustment at
the end of the requisite service period to equal actual forfeitures.
We recognize compensation expense related to stock options and restricted stock using the straight-line approach. Option awards and
restricted stock generally vest equally over the service period established in the award, typically three years or four years. In 2020 and
2019, the Company issued a limited number of restricted stock units to members of senior management which may vest upon the
achievement of a three year average return on invested capital target.
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 and common stock
equivalents outstanding. Common stock equivalents represent shares issuable upon the assumed exercise of common stock options
outstanding.
Advertising
The cost of advertising is generally expensed at the first time the advertising takes place, except for direct response advertising which
is capitalized and amortized over its expected period of future benefit.
Direct response advertising consists primarily of coupons for Monro’s services. The capitalized costs of this advertising are amortized
over the period of the coupon’s validity, which is typically two months.
Prepaid advertising at March 27, 2021 and March 28, 2020, and advertising expense for 2021, 2020 and 2019, were not material to
these financial statements.
Vendor rebates
We receive vendor support in the form of allowances through a variety of vendor-sponsored programs, such as volume rebates,
promotions, and advertising allowances, referred to as “vendor rebates”. Vendor rebates are recorded as a reduction of cost of sales.
We establish a receivable for vendor rebates that are earned but not yet received. Based on purchase data and the terms of the
applicable vendor-sponsored programs, we estimate the amount earned. The majority of the year-end vendor rebates receivable is
collected within the following first quarter. See Note 4 for additional information.
Note 2 – Impact of the COVID-19 Pandemic
In response to the unprecedented and rapid spread of COVID-19, many U.S. state governments, in states in which we operate, enacted
stay-at-home restrictions and social distancing measures during fiscal 2021. State and local governments ordered restrictions on the
operations of certain businesses, including temporary closures of some businesses, and numerous other businesses temporarily closed
voluntarily or transitioned their workforces to working remotely.
Further, individuals’ ability to travel was curtailed through mandated travel restrictions. Throughout 2021, store traffic changed
significantly and unpredictably in reaction to the COVID-19 pandemic. Substantially all Company-operated retail stores operated
under a reduced schedule throughout the year to match demand.
Given the uncertainties surrounding the impacts of the COVID-19 pandemic on our future financial condition, results of operations
and cash flows, we have taken a number of actions in response to prevailing uncertain market conditions. In order to enhance our
liquidity position, we took a precautionary measure and borrowed $350 million available to us under our Credit Facility (as defined in
Note 7 below) in March 2020. We subsequently repaid the $350 million previously borrowed in March 2020 during 2021.
Monro, Inc.
2021 Form 10-K
41
Table of Contents
CONSOLIDATED FINANCIAL STATEMENTS
NOTES
Additionally, we negotiated rent deferrals for a significant number of our stores, as well as other rent reductions. See additional
discussion of these rent deferrals and reductions in Note 15.
Note 3 – 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 footnote
include acquisitions of five or more locations as well as acquisitions of one to four locations that are part of our greenfield store
growth strategy.
Subsequent Event
On April 25, 2021, we acquired 30 retail tire and automotive repair stores located in California from Mountain View Tire & Service,
Inc. These stores will operate under the Mountain View Tire & Service name. The acquisition was financed through our Credit
Facility.
2021
On December 6, 2020, we acquired 17 retail tire and automotive repair stores located in California from Fred Allen Enterprises, Inc.
for $17.1 million. These stores will operate under the Tire Choice name. The acquisition was financed through our Credit Facility. The
results of operation for the acquisition are included in our financial results from the acquisition date.
Prior to this acquisition, our acquisition activity was paused due to the impact of the COVID-19 pandemic.
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 have recorded a customer list intangible asset with a useful life of seven years at its estimated fair value of
approximately $0.4 million. We have recorded acquired ROU assets at the present value of remaining lease payments adjusted to
reflect favorable or unfavorable market terms of the lease.
We expensed all costs related to the acquisition during 2021. The total costs related to the completed acquisition were $0.3 million and
these costs are included in the Consolidated Statement of Income and Comprehensive Income primarily under OSG&A expenses.
Sales and net income related to the completed acquisition totaled $5.8 million and $0.1 million, respectively for the period from
acquisition date through March 27, 2021. The net income of $0.1 million includes an allocation of certain traditional corporate related
items, including vendor rebates, interest expense and income taxes.
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 entity was not owned by Monro.
We accounted for the acquisition as a business combination using the acquisition method of accounting in accordance with the FASB
ASC Topic 805, “Business Combinations.” The acquired assets and liabilities assumed were recorded at their acquisition-date fair
values and were consolidated with those of the Company as of the acquisition date. The acquisition-date fair values were assigned
based on preliminary valuations and estimates, and the consideration transferred and net liabilities assumed were recorded as
goodwill.
42
Monro, Inc.
2021 Form 10-K
Table of Contents
CONSOLIDATED FINANCIAL STATEMENTS
NOTES
2021 Acquisition-date Fair Values Assigned
(thousands)
Inventory
Other current assets
Property and equipment
Finance lease and financing obligation assets, net
Operating lease assets, net
Intangible asset
Other non-current assets
Long-term deferred income tax assets
Total assets acquired
Current portion of finance leases and financing obligations
Current portion of operating lease liabilities
Deferred revenue
Other current liabilities
Long-term finance leases and financing obligations
Long-term operating lease liabilities
Other long-term liabilities
Total liabilities assumed
Total net identifiable liabilities assumed
Total consideration transferred
Less: total net identifiable liabilities assumed
Goodwill
$
$
$
$
1,046
172
674
5,089
8,980
418
30
1,331
17,740
748
976
697
4
7,911
7,433
536
18,305
(565)
17,112
(565)
17,677
The total consideration of $17.1 million is comprised of $16.3 million in cash, and a $0.8 million payable to the seller. The payable is
due upon finalization of a lease assignment for one store location.
We continue to refine the valuation data and estimates primarily related to inventory, warranty reserves, intangible assets and real
property leases and certain liabilities for the 2021 acquisition 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.
2020
During 2020, we acquired the following businesses for an aggregate purchase price of $103.7 million. The acquisitions were financed
through our Credit Facility. The results of operations for these acquisitions are included in our financial results from the respective
acquisition dates.
• On November 17, 2019, we acquired 18 retail tire and automotive repair stores located in Nevada and Idaho from
Nevada Tire Holdings, LLC and Idaho Tire Holdings, LLC. These stores operate under the Tire Choice name.
• On October 27, 2019, we acquired six retail tire and automotive repair stores located in California from S & S Unlimited,
Inc. Once converted, expected in fiscal 2022, these stores will operate under the Tire Choice name.
• On October 27, 2019, we acquired three retail tire and automotive repair stores located in California from Lloyd’s Tire
Service, Inc. Once converted, expected in fiscal 2022, these stores will operate under the Tire Choice name.
• On August 25, 2019, we acquired one retail tire and automotive repair store located in Louisiana from Atlas Tire Center,
Inc. This store operates under the Tire Choice name.
• On August 25, 2019, we acquired two retail tire and automotive repair stores located in Louisiana from LRZ3 Auto,
LLC. These stores operate under the Tire Choice name.
• On August 25, 2019, we acquired one retail tire and automotive repair store located in Louisiana from T-Boy's Tire and
Automotive, LLC. This store operates under the Tire Choice name.
Monro, Inc.
2021 Form 10-K
43
Table of Contents
CONSOLIDATED FINANCIAL STATEMENTS
NOTES
• On August 25, 2019, we acquired two retail tire and automotive repair stores located in Louisiana from Twin Tire &
Auto Care, Inc. These stores operate under the Tire Choice name.
• On August 25, 2019, we acquired one retail tire and automotive repair store located in Louisiana from Twin Tire & Auto
Care Team, Inc. This store operates under the Tire Choice name.
• On August 25, 2019, we acquired one retail tire and automotive repair store located in Louisiana from Scotty's Tire &
Automotive, Inc. This store operates under the Tire Choice name.
• On June 23, 2019, we acquired two retail tire and automotive repair stores located in California from BAW LLC. These
stores operate under the Tire Choice name.
• On May 19, 2019, we acquired 40 retail tire and automotive repair stores and one distribution center located in California
from Certified Tire & Service Centers, Inc. These stores operate under the Tire Choice name.
• On March 31, 2019, we acquired 12 retail tire and automotive repair stores located in Louisiana from Allied Discount
Tire & Brake, Inc. These stores operate under the Tire Choice name.
These acquisitions resulted in goodwill related to, among other things, growth opportunities, synergies and economies of scale
expected from combining these businesses with ours, as well as unidentifiable intangible assets. All of the goodwill is expected to be
deductible for tax purposes. We have recorded certain customer list intangible assets with an average useful life of seven years at their
total estimated fair value of approximately $2.8 million. We have recorded acquired ROU assets at the present value of remaining
lease payments adjusted to reflect favorable or unfavorable market terms of the lease.
We expensed all costs related to these acquisitions during 2020. The total costs related to the completed acquisitions were $1.4 million
for the year ended March 28, 2020. These costs are included in the Consolidated Statement of Income and Comprehensive Income
primarily under OSG&A expense.
Sales and net loss for the 2020 acquired locations totaled $59.3 million and ($3.9) million, respectively, for the period from acquisition
date through March 28, 2020. The net loss of ($3.9) million includes an allocation of certain traditional corporate related items,
including vendor rebates, interest expense and the benefit from income taxes.
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 each 2020 acquisition as a business combination using the acquisition method of accounting and we finalized the
purchase accounting related to the 2020 acquisitions during 2021. As a result of the final purchase accounting, 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 March 27, 2021 and March 28, 2020 and
the Consolidated Statement of Income and Comprehensive Income for 2021 and 2020.
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.
44
Monro, Inc.
2021 Form 10-K
Table of Contents
CONSOLIDATED FINANCIAL STATEMENTS
NOTES
2020 Acquisition-date Fair Values Assigned
(thousands)
Inventories
Other current assets
Property and equipment
Finance lease and financing obligation assets, net
Operating lease assets, net
Intangible assets
Other non-current assets
Long-term deferred income tax assets
Total assets acquired
Current portion of finance leases and financing obligations
Current portion of operating lease liabilities
Deferred revenue
Other current liabilities
Long-term finance leases and financing obligations
Long-term operating lease liabilities
Other long-term liabilities
Total liabilities assumed
Total net identifiable liabilities assumed
Total consideration transferred
Less: total net identifiable liabilities assumed
Goodwill
Note 4 – Other Current Assets
Other Current Assets
(thousands)
Vendor rebates receivable
Other
Total
Note 5 – Property and Equipment
$
$
$
$
4,433
706
2,405
29,147
42,680
2,847
374
4,870
87,462
2,672
4,416
1,618
358
36,225
43,668
1,747
90,704
(3,242)
103,692
(3,242)
106,934
March 27, 2021
15,068 $
33,047
48,115 $
March 28, 2020
16,232
24,305
40,537
$
$
The major classifications of property, plant and equipment are as follows:
Property and Equipment
(thousands)
Land
Buildings and improvements
Equipment, signage and fixtures
Vehicles
Construction-in-progress
Property and equipment
Less - Accumulated depreciation
Property and equipment, net
March 27, 2021
$
$
84,485 $
289,328
291,179
37,684
7,073
709,749
382,686
327,063 $
March 28, 2020
84,765
272,724
278,324
38,356
8,763
682,932
354,295
328,637
Depreciation expense totaled $42.9 million, $39.2 million and $35.5 million for 2021, 2020 and 2019, respectively.
Monro, Inc.
2021 Form 10-K
45
Table of Contents
CONSOLIDATED FINANCIAL STATEMENTS
NOTES
Note 6 – Goodwill and Intangible Assets
Reconciliation of Changes in Goodwill
(thousands)
Balance at beginning of period
Current fiscal year acquisitions
Adjustments to prior fiscal year acquisitions
Balance at end of period
Intangible Assets
(thousands)
Customer lists
Trade names
Franchise agreements
Other intangible assets
Total
Estimated Weighted Average Useful Lives
Customer lists
Trade names
Franchise agreements
Other intangible assets
$
$
2021
671,843 $
17,677
4
689,524 $
2020
565,503
106,930
(590)
671,843
$
$
Gross
Carrying
Amount
36,000 $
18,452
7,100
50
61,602 $
March 27, 2021
Accumulated
Amortization
21,932 $
10,321
3,231
50
35,534 $
Gross
Carrying
Amount
42,511 $
21,252
7,220
590
71,573 $
March 28, 2020
Accumulated
Amortization
26,333
12,072
2,805
582
41,792
Life (Years)
10
15
13
20
Amortization
3,838
3,583
3,223
2,866
2,646
Amortization expense was $4.1 million, $4.8 million and $5.3 million for 2021, 2020 and 2019, respectively.
Estimated Future Amortization Expense
(thousands)
2022
2023
2024
2025
2026
Note 7 – Long-term Debt
Credit Facility
$
In April 2019, we entered into a new five year $600 million revolving credit facility agreement with eight 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 bears interest at 75 to 200 basis points over 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 2022 to
provide us with additional flexibility to operate our business. The First Amendment permanently amended the 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 will be 225 basis points over LIBOR. Additionally, during the same
period, we may 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 are permitted if we are in compliance with the financial covenants and other
restrictions in the First Amendment and Credit Facility. 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. Except as amended by the First Amendment, the remaining terms of the credit agreement remain in full force and effect.
46
Monro, Inc.
2021 Form 10-K
Table of Contents
CONSOLIDATED FINANCIAL STATEMENTS
NOTES
At March 27, 2021 and March 28, 2020, the interest rate spread paid by the Company was 225 basis points and 100 basis points over
LIBOR, respectively.
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 $33.6 million outstanding letter of credit at March 27, 2021.
Mortgages and specific lease financing arrangements with other parties (with certain limitations) are permitted under the Credit
Facility. Other specific terms and the maintenance of specified ratios are generally consistent with our prior financing agreement that
was replaced with the new agreement entered into in April 2019. Additionally, the Credit Facility is not secured by our real property,
although we have agreed not to encumber our real property, with certain permissible exceptions.
There was $190.0 million outstanding and $376.4 million available under the Credit Facility at March 27, 2021.
We were in compliance with all debt covenants at March 27, 2021.
Long-term debt had a carrying amount and a fair value of $190.0 million as of March 27, 2021, as compared to a carrying amount and
a fair value of $566.4 million as of March 28, 2020. The carrying value of our debt approximated its fair value due to the variable
interest nature of the debt.
Note 8 – Revenue
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 vary depending on the
customer and generally range from 15 to 45 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
(thousands)
Brakes
Exhaust
Steering
Tires (a)
Maintenance
Other
Total
$
2021
130,179 $
20,201
85,290
617,815
269,337
2,899
2019
162,709
28,713
95,711
601,295
308,668
3,134
$ 1,125,721 $ 1,256,524 $ 1,200,230
2020
169,138 $
25,058
100,230
634,513
324,494
3,091
(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 March 27, 2021
and March 28, 2020 were $16.7 million and $18.5 million, respectively, of which $12.0 million and $13.1 million, respectively, are
reported in Deferred revenue and $4.7 million and $5.4 million, respectively, are reported in Other long-term liabilities in our
Consolidated Balance Sheets.
Monro, Inc.
2021 Form 10-K
47
CONSOLIDATED FINANCIAL STATEMENTS
NOTES
Table of Contents
Changes in Deferred Revenue
(thousands)
Balance at beginning of period
Deferral of revenue
Deferral of revenue from acquisitions
Recognition of revenue
Balance at end of period
2021
18,506 $
14,958
1,225
(17,977)
16,712 $
2020
17,150
17,466
2,916
(19,026)
18,506
$
$
We expect to recognize $12.0 million of deferred revenue related to road hazard warranty agreements during our fiscal year ending
March 26, 2022, and $4.7 million of such 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 9 – Income Taxes
Provision for Income Taxes
(thousands)
Current:
Federal
State
Total current
Deferred:
Federal
State
Total deferred
Total provision
Income Tax Rate Reconciliation
Expected U.S. federal income taxes at statutory rate
State income taxes, net of federal tax benefit
Tax settlements and adjustments (a)
Other
Effective tax rate
2021
2020
2019
$
$
(1,809) $
827
(982)
10,169
685
10,854
9,872 $
2,783 $
1,994
4,777
11,397
76
11,473
16,250 $
5,682
2,409
8,091
11,563
954
12,517
20,608
2021
21.0 %
2.9
(1.1)
(0.5)
22.3 %
2020
21.0 %
1.9
—
(1.0)
21.9 %
2019
21.0 %
2.8
(1.9)
(1.4)
20.5 %
(a) For 2021, adjustments reflect benefit due to differences in statutory tax rates from loss years to years in which net operating losses
may be carried back. For 2019, settlements reflect benefit from Internal Revenue Service’s examination of our 2016 and 2017 tax
returns.
48
Monro, Inc.
2021 Form 10-K
Table of Contents
Net Deferred Tax Asset/(Liability)
(thousands)
Gross deferred tax assets:
Lease liabilities
Insurance reserves
Other
Total gross deferred tax assets
Gross deferred tax liabilities:
Leased assets
Goodwill
Property and equipment
Other
Total deferred tax liabilities
Total net deferred tax liability
CONSOLIDATED FINANCIAL STATEMENTS
NOTES
March 27, 2021
March 28, 2020
$
$
186,168 $
11,441
15,282
212,891
(148,496)
(56,623)
(21,032)
(910)
(227,061)
(14,170) $
169,366
10,192
14,765
194,323
(131,484)
(47,204)
(18,232)
(1,288)
(198,208)
(3,885)
We have $7.5 million of state net operating loss carryforwards and $3.5 million of federal net operating loss carrybacks available as of
March 27, 2021. The state net operating loss carryforwards expire in varying amounts through 2041. The federal net operating loss
may be carried back to 2016, as permitted under the CARES Act.
We evaluate the realizability of our deferred tax assets on a quarterly basis and establish valuation allowances when it is more likely
than not that all or a portion of a deferred tax asset may not be realized. As of March 27, 2021, we concluded, based on the weight of
all available positive and negative evidence, that all of our deferred tax assets are more likely than not to be realized.
Changes in Liability for Unrecognized Tax Benefits
(thousands)
Balance at beginning of period
Additions based on tax positions related to the current year
Additions for tax positions of prior years
Reductions for tax positions of prior years
Settlements
Lapse in statutes of limitation
Balance at end of period
2021
5,212 $
915
—
—
—
(1,092)
5,035 $
2020
6,424 $
644
—
(30)
—
(1,826)
5,212 $
2019
6,209
1,178
166
(6)
—
(1,123)
6,424
$
$
The total amount of unrecognized tax benefits was $5.0 million, $5.2 million and $6.4 million at March 27, 2021, March 28, 2020 and
March 30, 2019, respectively, the majority of which, if recognized, would affect the effective tax rate.
In the normal course of business, Monro provides for uncertain tax positions and the related interest and penalties, and adjusts its
unrecognized tax benefits and accrued interest and penalties and, accordingly, we had approximately $0.2 million and $0.3 million of
interest and penalties associated with uncertain tax benefits accrued as of March 27, 2021 and March 28, 2020, respectively.
We file U.S. federal income tax returns and income tax returns in various state jurisdictions. Monro’s fiscal 2020, 2019 and 2018 U.S.
federal tax year and various state tax years remain subject to income tax examinations by tax authorities.
Note 10 – Stock Ownership
Holders of at least 60 percent of the Class C preferred stock must approve any action authorized by the holders of Common Stock. In
addition, there are certain restrictions on the transferability of shares of Class C preferred stock. In the event of a liquidation,
dissolution or winding-up of Monro, the holders of the Class C preferred stock would be entitled to receive $1.50 per share out of the
assets of Monro before any amount would be paid to holders of Common Stock. The conversion value of the Class C convertible
preferred stock was $0.064 per share at March 27, 2021 and March 28, 2020.
Monro, Inc.
2021 Form 10-K
49
Table of Contents
Note 11 – Share-based Compensation
CONSOLIDATED FINANCIAL STATEMENTS
NOTES
We maintain a long-term incentive plan whereby eligible employees and non-employee directors may be granted non-qualified service
condition stock options, non-qualified market condition stock options, restricted stock awards and restricted stock units. We grant
share-based awards to continue to attract and retain employees and to better align employees’ interests with those of our shareholders.
Monro issues new shares of Common Stock upon the exercise of stock options.
Share-based compensation expense included in cost of sales and OSG&A expense in Monro’s Consolidated Statements of Income and
Comprehensive Income for 2021, 2020 and 2019 was $2.4 million, $3.8 million and $4.0 million, respectively, and the related income
tax benefit for each year was $0.6 million, $0.9 million and $1.0 million, respectively.
Monro currently grants stock option awards and restricted stock under the 2007 Incentive Stock Option Plan (the “2007 Plan”), as
amended and restated effective August 2017. At March 27, 2021, there were a total of 5,001,620 shares and 1,064,945 shares that
were authorized and available for grant under the 2007 Plan, respectively.
Non-Qualified Stock Options
Generally, employee options vest over a four year period, and have a duration of six years. Outstanding options are exercisable for
various periods through March 2027.
Stock Option Activity
Outstanding as of March 28, 2020
Granted
Exercised
Canceled
Outstanding as of March 27, 2021
Vested and exercisable as of March 27, 2021
Stock
Options
802,766 $
166,193
(130,998)
(324,094)
513,867 $
286,549 $
Weighted-average
Exercise Price
58.55
55.29
47.93
56.14
61.75
61.30
Weighted-average
Remaining
Contractual
Term (years)
Aggregate
Intrinsic
Value (a)
3.12 $
1.93 $
3,483,001
1,805,603
(a) Total shares valued at the market price of the underlying stock as of March 27, 2021 less the exercise price.
As of March 27, 2021, the total unrecognized compensation expense related to unvested stock option awards was $2.7 million, which
is expected to be recognized over a weighted average period of approximately three years. The weighted-average grant date fair value
of options granted during 2021, 2020 and 2019 was $12.53, $18.92 and $15.44, respectively. The total fair value of stock options
vested during 2021, 2020 and 2019 was $2.0 million, $2.0 million and $2.8 million, respectively.
Stock Option Exercises
(millions)
Total intrinsic value of stock options exercised
Cash received for exercise price
Income tax benefit
$
$
2021
1.5
6.3
—
$
2020
2.9
6.2
0.4
2019
7.4
14.6
1.0
Stock Options Outstanding
and Exercisable
Options Outstanding
Weighted-
Options Exercisable
Weighted-
Range of Exercise Prices
$40.71 - $55.15
$55.16 - $57.78
$57.79 - $66.90
$66.91 - $87.17
50
Shares
Remaining
Outstanding Contractual
at 3/27/2021 Term (years)
average Weighted-
Remaining
Shares
average
Exercise Exercisable Contractual
Price at 3/27/2021 Term (years)
129,817
131,696
134,126
118,228
3.77 $
2.93
2.36
3.49
50.86
56.97
64.38
76.04
53,993
66,393
113,151
53,012
Monro, Inc.
2021 Form 10-K
average Weighted-
average
Exercise
Price
47.88
57.28
64.37
73.44
2.35 $
0.86 $
2.03 $
2.62 $
Table of Contents
Restricted Stock
CONSOLIDATED FINANCIAL STATEMENTS
NOTES
Monro issues restricted stock to certain members of senior management as well as non-employee directors of the Company. Restricted
stock units represent shares issued upon vesting in the future whereas restricted stock awards represent shares issued upon grant that
are restricted. The fair value for restricted stock units and restricted stock awards is calculated based on the stock price on the date of
grant. Restricted stock units do not have voting rights but earn dividends during the vesting period. The recipients of the restricted
stock awards have voting rights and earn dividends during the vesting period. The dividends are paid to the recipient at the time the
restricted stock becomes vested. If the recipient leaves Monro prior to the vesting date for any reason, the shares of restricted stock
and the dividends accrued on those shares will be forfeited and returned to Monro. The restricted stock units and awards vest equally
over three years or four years. In 2020 and 2019, the Company issued a limited number of restricted stock units to members of senior
management which may vest upon the achievement of a three year average return on invested capital target.
Subsequent to fiscal 2021, the Company granted 40,000 restricted stock units in connection with the appointment of its new President
and Chief Executive Officer effective April 5, 2021. The restricted stock units will vest upon time or the Company’s common stock
price meeting certain market conditions between April 2021 and December 2023.
Non-vested Restricted Stock Activity
Outstanding as of March 28, 2020
Granted
Vested
Forfeited
Outstanding as of March 27, 2021
Restricted Stock
Shares
55,730 $
35,019
(26,333)
(12,703)
51,713 $
Weighted-average
Grant-date
Fair Value per Share
64.96
52.75
56.52
63.90
61.24
As of March 27, 2021, the total unrecognized compensation expense related to unvested restricted stock shares was $1.4 million,
which is expected to be recognized over a weighted average period of approximately two years. The weighted-average grant date fair
value of restricted stock shares granted during 2021, 2020 and 2019 was $52.75, $75.33 and $67.80, respectively. The total fair value
of restricted stock shares vested during 2021, 2020 and 2019 was $1.4 million, $1.8 million and $1.0 million, respectively.
Note 12 – Earnings per Common Share
Earnings per Common Share
(thousands, except per share data)
Numerator for earnings per common share calculation:
Net income
Less: Preferred stock dividends
Income available to common stockholders
Denominator for earnings per common share calculation:
Weighted average common shares - basic
Effect of dilutive securities:
Preferred stock
Stock options
Restricted stock
Weighted average common shares - diluted
Basic earnings per common share
Diluted earnings per common share
2021
2020
2019
$
$
34,319 $
(438)
33,881 $
58,024 $
(449)
57,575 $
79,752
(408)
79,344
33,329
33,246
32,980
503
26
18
33,876
510
167
30
33,953
510
154
31
33,675
$
$
1.02 $
1.01 $
1.73 $
1.71 $
2.41
2.37
The computation of diluted earnings per common share for 2021, 2020 and 2019 excludes the effect of assumed exercise of
approximately 456,000, 177,000 and 146,000 of stock options, respectively, as the exercise price of these options was greater than the
average market value of our common stock for those periods, resulting in an anti-dilutive effect on diluted earnings per common share.
Monro, Inc.
2021 Form 10-K
51
Table of Contents
Note 13 – Leases
CONSOLIDATED FINANCIAL STATEMENTS
NOTES
We lease certain retail stores, distribution centers, office space and land as well as service contracts that are considered leases.
Our leases have remaining lease terms, including renewals reasonably certain to be exercised, of less than one year to approximately
37 years. Most of our leases include one or more options to extend the lease, for periods ranging from three years to 25 years or more.
Historical failed sale leasebacks that were assumed through acquisitions and do not qualify for sale leaseback accounting continue to
be accounted for as financing obligations. As of March 27, 2021 and March 28, 2020, net assets of $4.4 million and $4.5 million,
respectively, and liabilities of $7.2 million and $7.5 million, respectively, due to failed sale leaseback arrangements were included
with finance lease assets and liabilities, respectively, on the Consolidated Balance Sheets.
Lease Cost
(thousands)
Operating lease cost
Finance lease/financing obligations cost:
Amortization of leased assets
Interest on lease liabilities
Short term and variable lease cost
Sublease income
Total lease cost
2021
35,998 $
2020
38,525
$
30,428
18,344
321
(95)
84,996 $
21,033
21,330
2,194
(166)
82,916
$
As reported under the previous accounting standard, net rental expense and amortization of finance lease assets was $38.0 million and
$14.7 million, respectively, for 2019.
Maturity of Lease Liabilities
(thousands)
2022
2023
2024
2025
2026
Thereafter
Total undiscounted lease obligations
Less: imputed interest
Present value of lease obligations
Operating Leases (a)
36,451 $
34,381
31,685
28,414
25,161
83,454
239,546 $
(30,919)
208,627 $
Finance Leases and
Financing Obligations (b)
55,389
55,487
54,405
51,494
48,992
250,812
516,579
(112,446)
404,133
$
$
$
(a) Operating lease obligations include $61.0 million related to options to extend operating leases that are reasonably certain of being exercised.
(b) Finance lease payments include $108.4 million related to options to extend finance leases that are reasonably certain of being exercised.
Total lease payments exclude $2.4 million of legally binding minimum lease payments for leases signed but not yet commenced.
Lease Term and Discount Rate
Weighted average remaining lease term (years)
Operating leases
Finance leases and financing obligations
Weighted average discount rate
Operating leases
Finance leases and financing obligations
2021
8.6
10.3
2020
9.4
9.9
2.96 %
6.20 %
3.51 %
8.73 %
52
Monro, Inc.
2021 Form 10-K
Table of Contents
CONSOLIDATED FINANCIAL STATEMENTS
NOTES
Other Information
(thousands)
Cash paid for amounts included in measurement of lease obligations:
Operating cash flows from operating leases
Operating cash flows from finance leases and financing obligations
Financing cash flows from finance leases and financing obligations
0
Note 14 – Defined Benefit and Defined Contribution Plans
Defined Benefit Plan
$
2021
34,931 $
18,602
33,032
2020
36,808
21,340
27,212
We have a defined benefit pension plan covering employees who meet eligibility requirements. This plan is closed to new participants.
Eligibility and the level of benefits under the plan are primarily dependent on date of hire, age, length of service and compensation.
The funding policy for our plan is consistent with the funding requirements of U.S. federal law and regulations. The measurement date
used to determine the pension plan measurements disclosed herein is March 31 for both 2021 and 2020.
The underfunded status of Monro’s defined benefit plan is recognized as an Other long-term liability in the Consolidated Balance
Sheets as of March 27, 2021 and March 28, 2020, respectively.
Underfunded Status
(thousands)
Projected benefit obligations
Fair value of plan assets
Underfunded status
Contributions and Estimated Future Benefit Payment
2021
22,096 $
21,666
(430) $
2020
21,646
18,611
(3,035)
$
$
Our obligations to plan participants can be met over time through a combination of company contributions to these plans and earnings
on plan assets. There are no required or expected contributions in fiscal 2022 to the plan. However, depending on investment
performance and plan funded status, we may elect to make a contribution.
Estimated Future Benefit Payments
(thousands)
2022
2023
2024
2025
2026
2027 - 2031
Cost of Plans
Net Pension Benefits Expense (Income)
(thousands)
Interest cost on projected benefit obligation
Expected return on plan assets
Amortization of unrecognized actuarial loss
Total
$
Pension Benefits
1,065
1,098
1,114
1,147
1,188
6,322
$
$
2021
692 $
(1,162)
892
422 $
2020
752 $
(1,423)
455
(216) $
2019
781
(1,409)
403
(225)
Monro, Inc.
2021 Form 10-K
53
Table of Contents
Assumptions
CONSOLIDATED FINANCIAL STATEMENTS
NOTES
Benefit Obligation Weighted Average Assumption
Discount rate
Net Periodic Benefit Expense Weighted Average Assumptions
Discount rate
Expected long-term rate of return on plan assets
2021
3.34 %
6.50 %
2021
3.01 %
2020
3.72 %
7.00 %
2020
3.34 %
2019
3.89 %
7.00 %
Our expected long-term rate of return on plan assets assumption is based upon historical returns and the future expectations for returns
for each asset class, as well as the target asset allocation of the pension portfolio.
Benefit Obligation
Change in Projected Benefit Obligation
(thousands)
Benefit obligation at beginning of year
Interest cost
Actuarial loss
Benefits paid
Benefit obligation at end of year (a)
$
$
2021
21,646 $
692
391
(633)
22,096 $
2020
20,972
752
642
(720)
21,646
(a) Accumulated benefit obligation-the present value of benefits earned to date assuming no future salary growth-is materially consistent with the
projected benefit obligation in each period presented.
Plan Assets
Change in Plan Assets
(thousands)
Fair value of plan assets at beginning of year
Actual return (loss) on plan assets
Benefits paid
Fair value of plan assets at end of year
$
$
2021
18,611 $
3,688
(633)
21,666 $
2020
20,838
(1,507)
(720)
18,611
Our asset allocation strategy is to conservatively manage the assets in order to meet the plan’s long-term obligations while maintaining
sufficient liquidity to pay current benefits. This is achieved by holding equity investments while investing a portion of assets in long
duration bonds to match the long-term nature of the liabilities.
Asset Category
Cash and cash equivalents
Fixed income
Equity securities
Total
Current Targeted
Allocation
50.0 %
50.0 %
100.0 %
Actual Allocation
2021
53.3 %
24.7 %
22.0 %
100.0 %
2020
4.1 %
37.9 %
58.0 %
100.0 %
The allocation of assets as of March 2021 was weighted heavier in cash and cash equivalents as the Plan’s assets were transferred
from its previous custodian to a new custodian late in 2021 by the Plan’s new asset manager. As such, cash and cash equivalent assets
were being reinvested into new assets in accordance with our asset allocation strategy late in fiscal 2021 and into 2022.
54
Monro, Inc.
2021 Form 10-K
Table of Contents
Fair Value Measurements
(thousands)
Cash equivalents
Equity securities:
U.S. companies
U.S. companies
International companies
Fixed income:
U.S. corporate bonds
International bonds
Total plan assets
CONSOLIDATED FINANCIAL STATEMENTS
NOTES
Fair Value at
Pricing Category (a)
March 27, 2021
11,542 $
March 28, 2020
761
Level 1 $
Level 1
Level 2
Level 1
Level 2
Level 2
$
3,372
—
1,391
5,361
—
21,666 $
7,383
283
3,137
6,686
361
18,611
(a) Fair value measurements are reported in one of three levels based on the lowest level of significant input used: Level 1 (unadjusted quoted prices
in active markets); Level 2 (observable market inputs, other than quoted prices included in Level 1); and Level 3 (unobservable inputs that
cannot be corroborated by observable market data).
Amounts included in Shareholders’ Equity
Amounts in Accumulated Other Comprehensive Loss
(thousands)
Unamortized net actuarial loss
Amounts in Accumulated Other Comprehensive Loss (a)
(a) $4,619 and $6,889, net of tax, at the end of 2021 and 2020, respectively.
Amounts included in Comprehensive Income
Amounts in Other Comprehensive Income (Loss)
(thousands)
Net actuarial income (loss)
Amounts in Other Comprehensive Income (Loss) (a)
(a) $2,270, ($2,353) and ($288), net of tax, during 2021, 2020 and 2019, respectively.
Defined Contribution Plan
$
$
2021
6,147 $
6,147 $
2020
9,174
9,174
$
$
2021
3,027 $
3,027 $
2020
(3,117) $
(3,117) $
2019
(382)
(382)
Our employees are eligible to participate in a defined contribution 401(k) plan that covers full-time employees who meet the age and
service requirements of the plan. The plan is funded by employee and employer contributions. We match 50 percent of the first 6
percent of employee contributions. Employer contributions totaled approximately $1.6 million, $1.7 million and $1.4 million for 2021,
2020 and 2019, respectively. We may also make annual profit sharing contributions to the plan at the discretion of Monro’s
Compensation Committee of the Board of Directors.
In addition, we maintain a deferred compensation plan (the “Deferred Compensation Plan”) for a broad management group whose
participation in our 401(k) plan is limited by statute or regulation. The Deferred Compensation Plan permits participants to defer all or
any portion of the compensation that would otherwise be payable to them for the calendar year. We credit to the participants’ accounts
such amounts as would have been contributed to Monro’s 401(k) plan but for the limitations that are imposed by statute or regulation.
The Deferred Compensation Plan is an unfunded arrangement and the participants or their beneficiaries have an unsecured claim
against the general assets of Monro to the extent of their Deferred Compensation Plan benefits. We maintain accounts to reflect the
amounts owed to each participant. At least annually, the accounts are credited with earnings or losses calculated on the basis of an
interest rate or other formula as determined by Monro’s Compensation Committee. The total liability recorded in our financial
statements at March 27, 2021 and March 28, 2020 related to the Deferred Compensation Plan was approximately $2.1 million and
$2.2 million, respectively.
Monro, Inc.
2021 Form 10-K
55
Table of Contents
CONSOLIDATED FINANCIAL STATEMENTS
NOTES
Note 15 – Commitments and Contingencies
Commitments
Commitments Due by Period
(thousands)
Principal payments on long-term debt
Finance lease commitments/financing obligations (a)
Operating lease commitments (a)
Accrued rent
Other liabilities
Total
Total
190,000
516,579 $
239,546
1,807
1,133
949,065 $
$
$
Within
1 Year
55,389 $
36,451
1,563
800
94,203 $
2 to
3 Years
$
109,892
66,066
132
333
176,423 $
4 to
5 Years
190,000
100,486 $
53,575
42
—
344,103 $
After
5 Years
250,812
83,454
70
—
334,336
(a) Finance and operating lease commitments represent future undiscounted lease payments and include $108.4 million and $61.0 million,
respectively, related to options to extend lease terms that are reasonably certain of being exercised.
During 2021, we negotiated rent deferrals, with repayment at later dates, for a significant number of our store leases. These
concessions provide a deferral of rent payments with no substantive changes to the original contract. Consistent with updated guidance
from the FASB in April 2020, we have elected to treat the rent deferrals as accrued liabilities. The accrued rent reflected in the table
above includes $0.8 million related to rent deferrals due primarily in the first and second quarter of 2022 and $1.0 million due to
timing of other lease related expenses. We will continue to recognize expense during the deferral periods.
In addition, during 2021, we negotiated rent reductions with certain landlords on approximately 23 percent of our lease contracts in
exchange for extending our current lease term. As these agreements represent substantive changes to our contractual obligations, the
leases were remeasured. As a result, finance lease and financing obligation assets, net and finance leases and financing obligations
were increased by $67.7 million and $64.0 million, respectively, and operating lease assets, net and operating lease liabilities were
increased by $16.2 million and $20.0 million, respectively. The negotiated terms were generally consistent with terms of normal
renewal agreements.
We believe that we can fulfill our commitments utilizing our cash flow from operations and, if necessary, cash on hand and/or bank
financing.
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.
As disclosed in Part I, Item 3, “Legal Proceedings,” an action has been brought against us by an individual seeking to represent a
putative class of store managers for unpaid overtime wages, damages and attorneys’ fees under the Fair Labor Standards Act and class
certification under Pennsylvania law for alleged violations of state wage payment laws. Plaintiff alleges that improper deductions were
made from store managers’ pay.
Note 16 – Subsequent Events
On April 5, 2021, Michael T. Broderick joined Monro as President and Chief Executive Officer. See Note 11 for a discussion of
restricted stock units granted subsequent to March 27, 2021.
In May 2021, Monro’s Board of Directors declared a cash dividend of $0.24 per share or share equivalent to be paid to shareholders of
record as of June 7, 2021. The dividend will be paid on June 21, 2021.
See Note 3 for a discussion of an acquisition subsequent to March 27, 2021.
56
Monro, Inc.
2021 Form 10-K
Table of Contents
SUPPLEMENTAL INFORMATION
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
None.
Item 9A. Controls and Procedures
Disclosure Controls and Procedures
Disclosure controls and procedures are designed with the objective of ensuring that information required to be disclosed in the
Company’s reports filed under the Exchange Act, such as this report, is recorded, processed, summarized, and reported within the time
periods specified in the SEC’s rules and forms. Disclosure controls and procedures are also designed with the objective of ensuring that
such information is accumulated and communicated to the Company’s management, including the Company’s principal executive
officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosure.
Conclusion Regarding the Effectiveness of Disclosure Controls and Procedures
As of the end of the period covered by this report, the Company carried out an evaluation, under the supervision and with the participation
of the Company’s principal executive officer and principal financial officer, of the effectiveness of disclosure controls and procedures
as defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act. Based on such evaluation, the Company’s principal executive officer
and principal financial officer have concluded that as of March 27, 2021, the end of the period covered by this report, the Company’s
disclosure controls and procedures were effective.
Internal Control Over Financial Reporting
Management is responsible for establishing and maintaining adequate internal control over financial reporting. Monro’s internal control
over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the
preparation of financial statements for external reporting purposes in accordance with accounting principles generally accepted in the
United States of America. Management conducted an evaluation of the effectiveness of internal control over financial reporting based
on the framework in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the
Treadway Commission. Based on this evaluation, management concluded that Monro’s internal control over financial reporting was
effective as of March 27, 2021, the end of our fiscal year. The effectiveness of Monro’s internal control over financial reporting as of
March 27, 2021 has been audited by PricewaterhouseCoopers LLP, an independent registered public accounting firm, as stated in their
report which appears herein. For the Report on Management’s Assessment of Internal Control Over Financial Reporting and the Report
of Independent Registered Public Accounting Firm, see Part II, Item 8, “Financial Statements and Supplementary Data”.
Changes in Internal Control Over Financial Reporting
The Company also carried out an evaluation of the internal control over financial reporting to determine whether any changes occurred
during the fiscal quarter ended March 27, 2021. Based on such evaluation, there have been no changes in the Company’s internal control
over financial reporting that occurred during the Company’s most recently completed fiscal quarter ended March 27, 2021, that
materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.
Item 9B. Other Information
In March 2021, the Company changed benefit plan administrators for the Monro, Inc. 401(k) Plan, and from March 25 to April 14,
2021, plan participants were temporarily unable to move money between funds, change the funds in which the participant invests, or
request withdrawals or distributions. Beginning February 25, 2021, the Company’s officers and directors were also prohibited from
transacting in the Company’s common stock pursuant to our Insider Trading Policy.
On January 22, 2021, Donna G. Maxwell resigned from her position as Senior Vice President – Chief Human Resource Officer.
Monro, Inc.
2021 Form 10-K
57
Table of Contents
SUPPLEMENTAL INFORMATION
PART III
Certain information required by Part III is incorporated by reference from Monro’s Definitive Proxy Statement for its 2021 Annual
Meeting of Shareholders to be held on August 17, 2021 (“Proxy Statement”).
Item 10. Directors, Executive Officers and Corporate Governance
The following sections of the Proxy Statement are incorporated herein by reference:
• Proposal No. 1 – Election of Directors
• Corporate Governance Practices and Policies
• Our Executive Officers
• Delinquent Section 16(a) Reports
Monro’s directors and executive officers are subject to the provisions of Monro’s Code of Ethics for All Board Members, Executive
Officers and Management Teammates (the “Code”), which is available in the Investor Information section of Monro’s website,
https://corporate.monro.com/investors. Changes to the Code and any waivers are also posted on Monro’s website in the Investor
Information section.
Item 11. Executive Compensation
The following sections of the Proxy Statement are incorporated herein by reference:
• Proposal No. 2 – Advisory Vote to Approve Executive Compensation
• Executive Compensation
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
The following sections of the Proxy Statement are incorporated herein by reference:
• Security Ownership of Certified Beneficial Owners and Management
Information concerning Monro’s shares authorized for issuance under its equity-based compensation plans at March 27, 2021 is
incorporated herein by reference to the section captioned “Executive Compensation – Equity Compensation Plan Information” in the
Proxy Statement.
Item 13. Certain Relationships and Related Transactions, and Director Independence
The following sub-sections within the Corporate Governance Practices and Policies section of the Proxy Statement are incorporated
herein by reference:
• Board and Committee Independence
• Certain Relationships and Related Party Transactions
Item 14. Principal Accountant Fees and Services
The following sections of the Proxy Statement are incorporated herein by reference:
• Proposal No. 3 – Ratification of Appointment of Independent Registered Public Accounting Firm
58
Monro, Inc.
2021 Form 10-K
Table of Contents
SUPPLEMENTAL INFORMATION
PART IV
Item 15. Exhibits and Financial Statement Schedules
The following information required under this item is filed as part of this report:
(a) Financial Statements
o Consolidated Balance Sheets as of March 27, 2021 and March 28, 2020
o Consolidated Statements of Income and Comprehensive Income for the Years Ended March 27, 2021, March 28, 2020 and
March 30, 2019
o Consolidated Statements of Changes in Shareholders’ Equity for the Years Ended March 27, 2021, March 28, 2020 and
March 30, 2019
o Consolidated Statements of Cash Flows for the Years Ended March 27, 2021, March 28, 2020 and March 30, 2019
o Notes to Consolidated Financial Statements
o Report of Independent Registered Public Accounting Firm
Financial Statement Schedules
None.
Other schedules have not been included either because they are not applicable or because the information is included elsewhere in this
Report.
Monro, Inc.
2021 Form 10-K
59
Table of Contents
(b) Exhibits
SUPPLEMENTAL INFORMATION
Exhibit No.
3.01
3.01a
3.01b
3.01c
3.01d
3.01e
3.02
4.01
10.01
10.01a
10.01b
10.01c
10.01d
10.01e
10.01f
10.02
10.03
10.04
10.04a
10.04b
10.04c
10.05
10.05a
10.19
10.20
10.21
10.22
10.22a
10.60
10.61
10.67
10.68
60
Document
Restated Certificate of Incorporation of the Company, dated July 23, 1991, with Certificate of Amendment, dated
November 1, 1991. (Filed in paper form as SEC File No: 0-19357, 1992 Form 10-K, Exhibit No. 3.01)
Certificate of Change of the Certificate of Incorporation of the Company, dated January 26, 1996. (August 2004 Form
S-3, Exhibit No. 4.1(b))
Certificate of Amendment to Restated Certificate of Incorporation, dated April 15, 2004. (August 2004 Form S-3,
Exhibit No. 4.1(c))
Certificate of Amendment to Restated Certificate of Incorporation, dated October 10, 2007. (2008 Form 10-K,
Exhibit No. 3.01c)
Certificate of Amendment to Restated Certificate of Incorporation, dated August 1, 2012. (2013 Form 10-K,
Exhibit No. 3.01d)
Certificate of Amendment to Restated Certificate of Incorporation, dated August 15, 2017. (August 2017 Form 8-K,
Exhibit No. 3.01e)
Amended and Restated By-Laws of the Company, dated May 13, 2021. (May 2021 Form 8-K, Exhibit No. 3.02)
Description of Registrant’s Securities (2019 Form 10-K, Exhibit No. 4.01)
2007 Stock Incentive Plan, effective as of June 29, 2007. (May 2008 Form S-8, Exhibit No. 4)*
Amendment No. 1 to the 2007 Stock Incentive Plan, dated August 9, 2007. (May 2008 Form S-8, Exhibit No. 4.1)*
Amendment No. 2 to the 2007 Stock Incentive Plan, dated September 27, 2007. (May 2008 Form S-8, Exhibit No. 4.2)*
Amendment No. 3 to the 2007 Stock Incentive Plan, dated August 10, 2010. (August 2010 Form 8-K, Exhibit No. 10.1)*
Amendment No. 4 to the 2007 Stock Incentive Plan, dated May 16, 2012. (2012 Form 10-K, Exhibit No. 10.01d)*
Amendment No. 5 to the 2007 Stock Incentive Plan, dated June 28, 2013. (2013 Proxy, Exhibit A)*
Amendment No. 6 to the 2007 Stock Incentive Plan, dated June 28, 2013. (2014 Form 10-K, Exhibit No. 10.01f)*
Amended and Restated 2007 Stock Incentive Plan, dated effective August 15, 2017. (2017 Proxy, Exhibit A)*
Monro Muffler Brake, Inc. Deferred Compensation Plan, dated January 1, 2005, and last amended and restated as of
January 1, 2015. (2015 Form 10-K, Exhibit No. 10.03)*
Monro Muffler Brake, Inc. Retirement Plan, adopted February 1, 1972, and last amended and restated as of April 1,
2013. (2014 Form 10-K, Exhibit No. 10.04)*
Amendment No. 1 to April 1, 2013 Restatement to Monro Muffler Brake, Inc. Retirement Plan, dated as of October 27,
2014 and effective as of June 26, 2013. (December 2015 Form 10-Q, Exhibit No. 10.04a)*
Amendment No. 2 to April 1, 2013 Restatement to Monro Muffler Brake, Inc. Retirement Plan, dated as of
December 10, 2015 and effective as of April 1, 2015. (December 2015 Form 10-Q, Exhibit No. 10.04b)*
Amendment No. 3 to April 1, 2013 Restatement to Monro Muffler Brake, Inc. Retirement Plan, dated as of January 30,
2017 and effective as of April 1, 2016. (2017 Form 10-K, Exhibit No. 10.04c)*
Monro Muffler Brake, Inc. Profit Sharing Plan, adopted May 1, 1960, and last amended and restated as of December 8,
2014. (2015 Form 10-K, Exhibit No. 10.05)*
First Amendment to December 8, 2014 Restatement to the Monro Muffler Brake, Inc. Profit Sharing Plan, dated
December 10, 2015 and effective as of April 1, 2015. (December 2015 Form 10-Q, Exhibit No. 10.05a)*
Security Agreement, dated as of January 25, 2016, by and among the Company, Monro Service Corporation, Car-X,
LLC and Citizens Bank, N.A., as Administrative Agent for the lenders party to the Credit Agreement. (December 2015
Form 10-Q, Exhibit No. 10.19)
Guaranty, dated as of January 25, 2016, of Car-X, LLC and Monro Service Corporation. (December 2015 Form 10-Q,
Exhibit No. 10.20)
Negative Pledge Agreement, dated as of January 25, 2016, by and among the Company, Monro Service Corporation,
Car-X, LLC and Citizens Bank, N.A., as Administrative Agent for the lenders party to the Credit Agreement. (December
2015 Form 10-Q, Exhibit No. 10.21)
Amended Credit Agreement, dated as of April 25, 2019 (April 2019 Form 8-K, Exhibit No. 10.22)
Amendment No.1 to Amended and Restated Credit Agreement, dated as of June 11, 2020 (June 2020 Form 8-K, Exhibit
No. 10.22a)
Lease Agreement, dated as of November 1, 2011, between Monro Service Corporation and the County of Monroe
Industrial Development Agency. (2012 Form 10-K, Exhibit No. 10.60)
Leaseback Agreement, dated November 1, 2011, between the County of Monroe Industrial Development Agency and
Monro Service Corporation. (2012 Form 10-K, Exhibit No. 10.61)
Letter agreement, effective April 15, 2021, between the Company and Maureen Mulholland. (April 2021 Form 8-K,
Exhibit No. 10.67)*
Employment Agreement by and between the Company and Brian J. D’Ambrosia, dated December 21, 2020. (December
2020 Form 8-K, Exhibit No. 10.67)*
Monro, Inc.
2021 Form 10-K
Table of Contents
SUPPLEMENTAL INFORMATION
Exhibit No. Document
10.70
10.69
10.77
10.71
10.73†
Letter Agreement, effective September 30, 2019, between the Company and Robert Rajkowski. (September 2019 Form
10-Q, Exhibit No. 10.69)*
Employment Agreement, dated June 28, 2017 and effective August 1, 2017, between the Company and Brett T. Ponton.
(June 2017 Form 10-Q, Exhibit No. 10.70)*
Employment Agreement by and between the Company and Michael T. Broderick, dated March 12, 2021.*
Supply Agreement, dated as of November 4, 2020, between Monro Service Corporation, MNRO Service Holdings, LLC
and Valvoline LLC. (November 2020 Form 10-Q, Exhibit No. 10.73)
Monro Muffler Brake, Inc. Management Incentive Compensation Plan, effective as of June 1, 2002. (2002 Form 10-K,
Exhibit No. 10.77)*
21.01
Subsidiaries of the Company.
23.01
Consent of PricewaterhouseCoopers LLP.
24.01
Powers of Attorney.
31.1
Certification of Michael T. Broderick, President and Chief Executive Officer.
31.2
Certification of Brian J. D’Ambrosia, Executive Vice President – Finance and Chief Financial Officer.
32.1
Certification Pursuant to 18 U.S.C. Section 1350 (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
XBRL Taxonomy Extension Definition Linkbase
101.DEF
101.CAL XBRL Taxonomy Extension Calculation Linkbase
104
Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101)
* Management contract or compensatory plan or arrangement.
†
Certain portions of this exhibit have been omitted (indicated by asterisks) pursuant to Item 601(b) of Regulation S-K of the
Securities Act of 1933, as amended, because such omitted information is (i) not material and (ii) would be competitively
harmful if publicly disclosed.
Item 16. Form 10-K Summary
None.
Monro, Inc.
2021 Form 10-K
61
Table of Contents
SUPPLEMENTAL INFORMATION
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
By: /s/ Michael T. Broderick
Michael T. Broderick
Chief Executive Officer and President
Date: May 26, 2021
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following
persons on behalf of the registrant and in the capacities and on the date indicated.
Signature
Title
/s/ Michael T. Broderick
Michael T. Broderick
/s/ Brian J. D’Ambrosia
Brian J. D’Ambrosia
/s/ Robert E. Mellor*
Robert E. Mellor
/s/ John L. Auerbach*
John L. Auerbach
/s/ Frederick M. Danziger*
Frederick M. Danziger
/s/ Donald Glickman*
Donald Glickman
/s/ Lindsay N. Hyde*
Lindsay N. Hyde
/s/ Leah C. Johnson*
Leah C. Johnson
/s/ Stephen C. McCluski*
Stephen C. McCluski
/s/ Peter J. Solomon*
Peter J. Solomon
President and Chief Executive Officer
(Principal Executive Officer)
Executive Vice President – Finance,
Chief Financial Officer and Treasurer
(Principal Financial Officer and
Principal Accounting Officer)
Date
May 26, 2021
May 26, 2021
Chairman of the Board, Director
May 26, 2021
Director
Director
Director
Director
Director
Director
Director
May 26, 2021
May 26, 2021
May 26, 2021
May 26, 2021
May 26, 2021
May 26, 2021
May 26, 2021
* By: /s/ Michael T. Broderick
Michael T. Broderick, as Attorney-in-Fact
62
Monro, Inc.
2021 Form 10-K
Board of Directors
John L. Auerbach (1)
Partner
Auerbach Advisers
Lindsay N. Hyde (3) (4)
Entrepreneur In Residence
Moderne Ventures
Michael T. Broderick (2)
President and Chief Executive Officer
Monro, Inc.
Frederick M. Danziger (1) (3) (4)
Director
INDUS Realty Trust, Inc
Stephen C. McCluski (1) (3) (4) (5)
Chief Financial Officer – retired
Bausch & Lomb Incorporated
Peter J. Solomon (2) (5)
Chairman
PJ Solomon, L.P.
Donald Glickman (2) (5)
Member
J.F. Lehman & Company
Robert E. Mellor (1) (2) (3) (4) (6)
Chairman and Chief Executive
Officer – retired
Building Materials Holding Corporation
Leah C. Johnson
Chief Comms. and Marketing Officer
Lincoln Center for the Performing Arts
(1) Member of Compensation Committee (2) Member of Executive Committee (3) Member of Audit Committee (4) Member of Nominating and Corporate Responsibility Committee (5) Member of
Finance Committee (6) Chairman of the Board
Company Executive Officers
Michael T. Broderick
President and Chief Executive Officer
Brian J. D’Ambrosia
Executive Vice President –
Chief Financial Officer
Maureen E. Mulholland
Executive Vice President –
Chief Legal Officer and Secretary
Nicholas Hawryschuk
Vice President –
Finance
Robert J. Rajkowski
Executive Vice President –
Chief Operating Officer
Shareholder Information
Corporate Offices
200 Holleder Parkway
Rochester, New York 14615
585-647-6400
Annual Meeting
August 17, 2021
www.virtualshareholdermeeting.com/
MNRO2021
Legal Counsel
Gibson, Dunn & Crutcher, LLP
New York, New York 10166-0193
Harter, Secrest & Emery, LLP
Rochester, New York 14604
Certified Public Accountants
PricewaterhouseCoopers LLP
Rochester, New York 14604
Common Stock
Monro’s common stock is quoted on the
NASDAQ National Market System under
the symbol “MNRO”
Form 10-K
Shareholders may obtain a copy of
our Annual Report on Form 10-K for
the fiscal year ended March 27, 2021,
by going to the Investor Information
page at www.corporate.monro.com.
Shareholders may also request a copy
of our annual report by submitting
an electronic request at the Investor
Information page at www.corporate.
monro.com, by calling Kimberly Rudd at
585-784-3324, or by sending a written
request to:
Monro, Inc.
200 Holleder Parkway
Rochester, New York 14615
Attention: Secretary
Monro, Inc.
FY 2021 Annual Report
Continuing to Drive
Monro.Forward During
a Dynamic Year
Monro, Inc.
Monro, Inc.
200 Holleder Pkwy
Rochester, NY 14615
www.corporate.monro.com
FY 2021 Annual Report
11