Annual Report
Fiscal Year 2022
Focusing on
Operational
Excellence to Drive
Sustainable Growth
OUR COMPANY
Monro operates 1,304 Company-operated stores, 79 Car-X franchised locations, seven wholesale locations and three retread
facilities, providing automotive undercar repair and tire sales and services. The Company generated $1.4 billion in sales in fiscal
2022 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 17 acquisitions, adding 225 locations and approximately $314 million in annualized revenue.
During our nearly 66-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 24, 2022
2
FY 2022 Annual Report Monro, Inc. REPRESENTATIVE BRAND PORTFOLIO
WHAT WE OFFER
BY THE NUMBERS
FY 2022
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
1,304
Company-operated stores
32
States
79
Car-X Franchised locations
7
Wholesale locations
3
Retread facilities
3
FY 2022 Annual Report Monro, Inc. 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
FY 2022 Annual Report Monro, Inc. 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 2014:
Monro has grown over the years through
strategic acquisitions.
Expanded presence in attractive
Western region with a total of
1,306
1,283
1,263
122
Retail Stores*
1,150
1,197
1,118
2017 2018 2019 2020 2021 2022*
*As of June 20, 2022
35
Acquisitions
adding 443 locations and $643M revenue
(includes wholesale and retread locations)
10
New states entered
solidifying presence in our Southern
markets, expanding into the
Western region
Historical Acquisition Activity
Average acquisition size: 14 stores / ~$20 million
Annualized Sales Growth from Acquired Locations
Number of Locations Acquired During Fiscal Year
~$90M
80
~$150M
84
~$35M
20
~$35M
35
~$20M 28
~$120M
89
~$70M
43
~$70M
47
~$20M
17
2014
2015
2016
2017
2018
2019
2020
2021
2022
5
FY 2022 Annual Report Monro, Inc. FY2022 Highlights
5,000+
courses in Monro
University
30%
5-year reduction
goal of workers’
compensation
frequency claim rate
100%
5-year goal for
LED lights in
stores1
Recycled:
2.6 million
gallons of oil
3.4 million
tires
78,000
batteries
316
tons of cardboard
CORPORATE RESPONSIBILITY
During fiscal 2022, Monro’s Board of Directors and Senior Leadership Team continued to
make 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 our business over the long term.
Highlights and progress during fiscal 2022 included:
• Continued primary ESG oversight through the Board’s 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
training and recruiting initiatives.
• Making a positive impact in the communities where we live and work with a new
long-term strategy roadmap focused on economic and food security, education of
youth and family services, and veterans’ services.
• Being good stewards of the environment by including energy saving initiatives such
as LED lighting and energy efficient signage in stores.
For more information on Monro’s corporate responsibility initiatives
and fiscal 2022 highlights, please see our second annual Corporate
Responsibility Report, Monro.Forward Responsibly, located on the
Corporate Responsibility section of our website.
1Stores owned by Monro, Inc. for at least one fiscal year
6
FY 2022 Annual Report Monro, Inc.
Dear Fellow Shareholders
As I reflect upon my first year as Monro’s CEO, I’d like to thank all of Monro’s Teammates and customers for their contributions to our
Company’s growth and prosperity, and our shareholders for their continued support. Over the last year, I have enjoyed traveling to our
stores and getting an even better understanding of our business with the support of all our Teammates. Without question, this is an
exciting time to be part of Monro. The outstanding efforts of all of our Teammates and their unwavering dedication to our customers
were key to advancing our business goals in fiscal 2022. The heart of our mission is to be a best-in-class, service first organization
that prioritizes our customers and the communities we serve. Our go-forward plans will be deeply rooted in an operational focus on
staffing and scheduling our stores to meet our customers’ needs and training our people for productivity and success. Through our
scalable platform, executing disciplined acquisitions will continue to be a major part of our strategy. Importantly, we remain committed
to generating strong cash flow as the fuel for future growth as well as returning capital to our shareholders.
Delivering Sales Growth and Earnings Expansion
Through Our Critical Initiatives
We delivered double-digit comparable store sales growth in all of our regions and
categories and expanded earnings through our critical staffing, scheduling, and
training initiatives in fiscal 2022. We recruited, trained and deployed 650 new
technicians to our stores to meet robust customer demand for our products and
services.
Responsibility Driving Monro.Forward
Over the past year, we made good progress on an array of ESG initiatives
and recently published our second annual Corporate Responsibility Report
on the Corporate Responsibility section of our corporate website. Among our
accomplishments, we continued to invest in Teammate training and development,
advanced our diversity and inclusion efforts, created a long-term community
engagement strategy, and enhanced our data privacy and security practices to
help keep our Teammates’ and customers’ information safe. As our business
grows, so does our commitment to further integrating ESG factors into our
strategy and operations. I’m pleased to report that working collaboratively with
our Board of Directors, we established two specific ESG-related goals relating to
employee safety and energy efficiency. These goals are a tangible example of how
ESG factors are embedded in the everyday decisions we are making.
Enhancing the Strength of Our Solid Financial Position
During fiscal 2022, we remained focused on strengthening our solid financial
position and liquidity. The tremendous efforts of our team to drive variable
margin improvement and our disciplined cost control led to operating cash flow
generation of $174 million. We are firmly committed to driving strong cash flow
that will provide us with ample flexibility to continue implementing our strategic
growth initiatives, returning capital to shareholders and pursuing attractive
acquisition opportunities to deliver long-term value.
Expanding Geographic Presence in the Midwestern and
Western Regions
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
A Look Back at
Fiscal 2022
$1.36B
in sales
$174M
Significant cash
flow generation
Acquisitions
completed in
fiscal 2022
represent a total of
$73M
in annualized sales
$35M
Returned in cash to
shareholders through
dividends
7
FY 2022 Annual Report Monro, Inc. Midwestern and Western regions, with the acquisition of 36 stores in California and 11 in Iowa. Combined, these acquisitions
represent approximately $70 million in expected annualized sales. Over the last five years, Monro has successfully entered five
new states, adding 225 store locations and approximately $314 million in annualized revenue. Looking forward, we are excited
by our growth prospects in the Midwestern and Western regions and are well positioned to take advantage of the many attractive
consolidation opportunities in our fragmented industry, while also maintaining strong financial discipline. In addition, we plan on
continuing to evaluate the opening of selective greenfield locations to accelerate our growth in attractive markets.
Benefitting from Our Non-Core Wholesale Tire and Distribution Assets Divestiture
The divestiture of our non-core wholesale and tire distribution assets to American Tire Distributors (ATD) for an estimated $105
million and our entry into a supply relationship for tire distribution directly to our stores is expected to give us better availability of tires,
quicker delivery and better pricing. Our core strength as a business is to provide retail customers with superior automotive products
and services. Beyond the financial benefits, this transaction will allow us to focus all of our energies and resources on our Retail
operations. In addition, it is also expected to expand our category management initiatives and improve our working capital.
Sharing Our Results Through Capital Return to Our Shareholders
Utilizing the proceeds from the transaction with ATD, along with the excess cash that our Retail operations are expected to generate
will allow us to continue expanding our long-standing policy of sharing our results with our shareholders. Our Board of Directors
has approved an increase in our cash dividend for the first quarter of fiscal 2023. We have increased our cash dividend 17 times
during the 17 years since a cash dividend was first issued. In addition, our Board has authorized a share repurchase program for the
repurchase of up to $150 million of Monro’s common stock.
Driving Long-term Shareholder Value
In closing, fiscal 2022 was a fantastic year for Monro. The Company continued to accelerate its strategic growth initiatives,
strengthened its financial position, and returned $35 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 significant progress on our journey to transform this great organization during fiscal 2022, and I believe these
accomplishments will be instrumental to our success in unleashing Monro’s full potential in the coming year and beyond. As we head
into fiscal 2023, we remain encouraged by favorable industry tailwinds and robust consumer demand for our products and services.
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 16, 2022.
Sincerely,
Michael T. Broderick
President and Chief Executive Officer
Monro, Inc.
8
FY 2022 Annual Report Monro, Inc. 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 26, 2022
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
_________________________________________
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Common stock, par value $.01 per share
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 Accelerated filer Non-accelerated filer Smaller reporting company Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or
revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant 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 Act). Yes No
The aggregate market value of the voting and non-voting common stock 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 24, 2021, was $1,977,500,000.
As of May 13, 2022, 33,557,548 shares of registrant’s common stock, $0.01 par value per share, were outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrant’s definitive Proxy Statement for its 2022 Annual Meeting of Shareholders to be held hereafter are incorporated by reference into Part
III of this report.
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
[Reserved]
Item 5. Market for the Company's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
Item 6.
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 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections
PART III
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 IV
Item 15. Exhibits and Financial Statement Schedules
Item 16. Form 10-K Summary
Signatures
Page
3
4
5
11
18
19
20
20
21
21
22
31
32
59
59
59
59
60
60
60
60
60
61
63
64
Monro, Inc.
2022 Form 10-K
2
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,” “believe,” “contemplate,” “could,” “estimate,” “expect,” “intend,” “may,” “plan,”
“potential,” “see,” “seek,” “strategy,” “strive,” “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 and the Russian invasion of Ukraine on the economy, consumer
demand and spending levels, and labor shortages in our markets;
the impact of competitive services and pricing;
the effect of economic conditions, seasonality, and the impact of weather conditions and natural disasters on customer
demand;
advances in automotive technologies;
our dependence on third-party vendors for certain inventory;
the risks associated with vendor relationships and international trade, particularly imported goods such as those sourced from
China;
the impact of changes in U.S. trade relations and the ongoing trade dispute between the United States and China, and other
potential impediments to imports;
our ability to service our debt obligations, including our expected annual interest expense;
our cash needs, including our ability to fund our future capital expenditures and working capital requirements;
our anticipated sales, comparable store sales, gross profit margin, costs of goods sold (including product mix), operating,
selling, general and administrative (“OSG&A”) expenses and other fixed costs, and our ability to leverage those costs;
• management’s estimates and expectations as they relate to income tax liabilities, deferred income taxes, and uncertain tax
positions;
• management’s estimates associated with our critical accounting policies, including business combinations, insurance
liabilities, and valuations for our goodwill and indefinite-lived intangible assets impairment analyses;
•
•
•
•
•
•
•
•
•
•
•
the impact of industry regulation, including changes in labor laws;
potential outcomes related to pending or future litigation matters;
business interruptions;
risks relating to disruption or unauthorized access to our computer systems;
our failure to protect customer and employee personal data;
our ability to consummate the proposed transaction with American Tire Distributors, Inc. and our ability to realize the
expected benefits of the transaction;
risks relating to acquisitions and the integration of acquired businesses with ours;
our growth plans, including our plans to add, renovate, re-brand, expand, remodel, relocate, or close stores and any related
costs or charges, our leasing strategy for future expansion, and our ability to renew leases at existing store locations;
the impact of costs related to planned store closings or potential impairment of goodwill, intangible assets, and long-lived
assets;
expected dividend payments;
our ability to attract, motivate, and retain skilled field personnel and our key executives; and
Monro, Inc.
2022 Form 10-K
3
•
the potential impacts of climate change on our business.
Any of these factors, as well as such other factors as discussed in Part I, Item 1A., “Risk Factors” 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 “2022” or “fiscal 2022,”
“2021” or “fiscal 2021,” and “2020” or “fiscal 2020” relate to the years ended March 26, 2022, March 27, 2021, and March 28, 2020,
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 filings with the SEC are
also available on the SEC’s website at www.sec.gov.
Our investor presentation regarding the financial results for the fiscal year ended March 26, 2022 is available and accessible at
Monro's Investor Relations page at https://corporate.monro.com/investors under the Events and Presentations tab. 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.
Monro, Inc.
2022 Form 10-K
4
Item 1. Business
General
BUSINESS
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, and 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 26, 2022, we
operated 1,304 retail tire and automotive repair stores and serviced approximately 5.2 million vehicles in fiscal 2022.
Our retail tire and automotive repair stores operate primarily under the brands “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,” “Mountain View Tire & Auto Service,” “Tire Barn Warehouse,” and “Free Service Tire & Auto Centers.”
Company-operated Store Brands as of March 26, 2022
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
Mountain View Tire & Auto Service
Tire Barn Warehouse
Free Service Tire & Auto Centers
Other (a)
Total
Stores
371
357
320
66
55
34
30
27
10
34
1,304
(a) Includes recently acquired stores to be converted to certain brands named above.
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 26, 2022, 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 79 Car-X franchised
locations as of March 26, 2022. (During 2022, we acquired 11 and closed five franchised locations.)
Our operations are organized and managed in one operating segment. The internal management financial reporting that is the basis for
evaluation 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.
Monro, Inc.
2022 Form 10-K
5
Recent Developments
BUSINESS
In May 2022, we entered into an agreement with American Tire Distributors, Inc. to sell our wholesale tire operations and internal tire
distribution operations for approximately $105 million in the aggregate. Of the $105 million purchase price, $65 million is expected to
be paid at the expected closing date during the first quarter of our fiscal year ending March 25, 2023 (“fiscal 2023”) and the remaining
$40 million is expected to be paid as earnout payments after the closing. The earnout payments will be earned, on a per-tire basis,
based on tires we will buy from American Tire Distributors pursuant to a distribution agreement that we expect to enter with
American Tire Distributors at the closing date of the sale of assets.
We expect to enter into additional agreements with American Tire Distributors at or prior to the closing date, including (1) a
distribution agreement, in which American Tire Distributors will agree to supply and sell tires to our retail locations; (2) a managed
services agreement, in which American Tire Distributors will provide category management, ordering, dashboard, and inventory
management services to us; and (3) an agreement relating to preferred data services to be provided to us by American Tire
Distributors.
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:
• Exceed guest expectations. We will continue to invest in and execute strategic initiatives to improve our guests’ in-store
experience. This included significant investment in technician headcount and compensation in 2022.
• 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 brand websites 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 brand websites better position us to address our customers’ needs. These websites, aligned with our primary brand
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.
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 can 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 work with our management team to ensure we
capitalize on the momentum in the market.
During the last five years, we have completed 17 acquisitions, adding 225 locations and approximately $314 million in annualized
revenue. Additionally, during this time, we have entered five states, solidifying our presence in existing markets as well as expanding
into the Western region. As of March 26, 2022, we have stores in 32 states.
Monro, Inc.
2022 Form 10-K
6
BUSINESS
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 near a Monro location to identify high value lookalike customers and market directly
to them. We attempt to cluster stores in market areas to achieve economies of scale in advertising, supervision, and distribution costs.
All new greenfield sites presently under consideration are within our established market areas.
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, inflation, and supply chain disruptions.
Until we close the proposed transaction with American Tire Distributors, 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 daily. 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. Local vendor purchases are made when
needed at the store level and accounted for approximately 24 percent of all parts and tires purchased in 2022.
Our ten largest vendors accounted for approximately 83 percent of our total stocking purchases, with the largest vendor accounting for
approximately 25 percent of total stocking purchases in 2022. In 2022, Monro imported approximately 11 percent of our parts
(excluding batteries, oil, and supplies) and tire purchases. We purchase parts, oil, and tires from approximately 100 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.
Most of our parts supply is distributed to our stores through our network of distribution centers, and vendors ship most of our tires
supply directly to our stores. Stores are generally replenished at least monthly, and such replenishment fills, on average, 99 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 26, 2022, Monro had approximately 8,750 employees, of whom 8,170 were employed in the field organization, 230 were
employed at the distribution centers, 300 were employed at our corporate headquarters, referred to as store support center, and 50 were
employed in other offices. Monro's employees are not members of any union.
Teammate Retention
We believe that effective human capital management includes preventing situations of understaffing or excessive overtime, teammate
burnout or poor work life balance. For this reason, through our continued investment in store staffing to allow for more available
workers as well as an increase in scheduling flexibility, we aim to grow teammate satisfaction.
In addition to enhancing the resources available to support our teammates, we have made improvements to our scheduling system
which allows teammates to have longer visibility into their schedules and plan for occasions that require an absence.
Monro, Inc.
2022 Form 10-K
7
BUSINESS
We also 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 conduct a broad review of talent throughout our organization.
Our continuous efforts to build out our human capital strategy are reflected in our turnover rates in 2022 and 2021, each of which are
lower than 2015 - 2020.
In recent years, we have expanded our online training program, Monro University, to be a comprehensive, company-wide training
program not only focused on the technical and operational excellence training that technicians need to effectively serve our customers
today and prepare them to handle future requirements, but also committed to developing leadership and excellence at all levels within
our Company through 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.
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.
Our teammates are compensated in a fair manner which increases along with productivity. Our store compensation plan also
streamlines bonus programs, creating consistency and increasing human capital productivity across our stores.
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’ mental, emotional, and physical well-being.
One of the ways we embrace our teammates’ well-being is through the administration of our own Teammate Assistance Fund, a third-
party 501(c)(3) organization available for all our teammates. Launched in March 2022, the fund provides an opportunity for all
teammates to take care of each other through tax-deductible payroll and other one-time contributions. Through donations from Monro
and contributions from our teammates, Board members and others, the Teammate Assistance Fund provides timely financial
assistance to teammates impacted by financially devastating circumstances beyond their control and their means.
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.
Monro, Inc.
2022 Form 10-K
8
COVID-19
BUSINESS
As the COVID-19 pandemic continues to disrupt how we live and do business, our top priority remains the safety and wellness of our
teammates and guests, while keeping our stores open wherever we can. Since the start of the COVID-19 pandemic in 2020, we have
continued to take significant actions to ensure the safety of our teammates and guests, including implementing safe working protocols
for store teams; developing work-from-home plans for non-store teammates; assessing appropriate return-to-office protocols; and
providing timely and transparent communications to teammates and key stakeholders. We also enacted numerous safety, social
distancing, and cleaning measures designed to protect our teammates and guests during the COVID-19 pandemic.
Diversity, Equity, and Inclusion
Diversity is one of our core values, and we believe that a workplace in which diverse backgrounds, experiences and ways of thinking
are embraced and valued increases productivity and promotes awareness of our guests’ and communities’ unique needs. Our
commitment is to have a workforce and leadership team that closely resembles our growing group of loyal customers we are working
hard to attract and retain. 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 have added resources to our recruitment team to implement hiring initiatives aimed at reaching diverse groups and expanded 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 $37,500 per violation (or approximately
$37,500 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 2022, Monro recycled approximately 2.6 million gallons of oil and 3.4 million tires, as well as
approximately 78,000 vehicle batteries and 316 tons of cardboard, all as part of our commitment to the environment.
Monro, Inc.
2022 Form 10-K
9
Seasonality
BUSINESS
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 because 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 have resulted in temporary changes in the seasonal fluctuations of our business.
Monro, Inc.
2022 Form 10-K
10
Item 1A. Risk Factors
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.
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. Any resurgence of the COVID-19 pandemic may
reduce levels of leisure travel, which would reduce the demand for our products and services. Additionally, given the continuing
uncertainty during the pandemic, we may have to pause store acquisitions and rebrand and reimage initiatives to mitigate the effects of
the pandemic or conserve capital, as we did during fiscal 2021.
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, including shipping backlogs delaying our receipt of products. We may also incur costs or experience
further disruption to comply with new or changing regulations in response to the pandemic. As we prioritize health and safety matters
for our employees and customers, 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 have encountered labor inefficiencies as we adjust to new operating models to adapt to operating during the pandemic, particularly
in the highly competitive market for labor as pandemic restrictions ease. We may be unable to replace employees as quickly as we
need to fill positions in our stores, and we have experienced more difficulty in hiring skilled technicians than pre-pandemic. As
pandemic restrictions continue to ease, 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.
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, including as a result of the Russian invasion of
Ukraine; global economic conditions and levels of economic growth; and the pace of recovery, particularly in our markets, as
the COVID-19 pandemic subsides or pandemic restrictions ease. The pandemic could cause us to experience impairment of our
goodwill and other financial assets, 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.
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, have access to more developed distribution networks, 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.
Monro, Inc.
2022 Form 10-K
11
RISK FACTORS
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, trends toward remote work and fluctuations in the
general economy. For example, because of the COVID-19 pandemic, there was 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 and a negative effect on the demand
for our products and services. When the retail cost of gasoline increases, such as after the Russian invasion of Ukraine and the
imposition of economic sanctions on Russia and companies affiliated with the Russian government, 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 because 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 most 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.
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 inflation, economic volatility resulting from the COVID-19 pandemic and the war in Ukraine. 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. Historic increases in inflation following
the COVID-19 pandemic may cause consumers to be more sensitive to price changes and cause consumers to delay or forgo vehicle
maintenance. 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.
We depend on our relationships with our vendors for certain inventory.
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.
Monro, Inc.
2022 Form 10-K
12
RISK FACTORS
We entered into various contracts with parts suppliers that require us to buy from them (at market competitive prices) up to 100
percent of our annual purchases of specific products. These agreements expire at various dates.
If the transaction with American Tire Distributors closes, we will rely on American Tire Distributors for most of the tires we sell to
our customers. If this supplier were to experience shortages and we are unable to purchase our desired volume of tires, our tire sales
and ability to service our customers could suffer considerably.
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.
Our business may be negatively affected by the risks associated with vendor relationships and international trade.
We depend on several 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 or the war in
Ukraine;
• 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.
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.
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 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.
Monro, Inc.
2022 Form 10-K
13
RISK FACTORS
As of March 26, 2022, there was $176.5 million outstanding under the Credit Facility. Any 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 because 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 because of federal, state, and local mandated increases in the minimum
wage, inflation, and demand for workers in the current labor market. Our vendors are also subject to these factors, 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.
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. The damages sought against us in some of these
litigation proceedings could be substantial. 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.
Monro, Inc.
2022 Form 10-K
14
RISK FACTORS
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 because of circumstances out of our control, including war, acts of terrorism, global
health crises, extreme weather conditions, including extreme weather events caused by climate change, 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, the increased number of our employees who are working remotely, and cyber-attacks related to the Russian invasion of
Ukraine. 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.
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 because 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
The proposed transaction with American Tire Distributors may not be consummated, and even if consummated, may not be
successful.
There can be no assurance that the proposed transaction with American Tire Distributors will be consummated. The transaction is
subject to the satisfaction or waiver of specific closing conditions, including the expiration or termination of the Hart-Scott-Rodino
waiting period, receipt of a waiver from the Company’s credit facility lenders and other customary closing conditions. The failure to
satisfy all of the required conditions could delay the completion of the transaction for a significant period of time or prevent them from
occurring at all. There can be no assurance that these and other conditions to closing will be satisfied in a timely manner or at all. We
are also subject to restrictions on our business while the transaction is pending, including by conducting the business only in the
Monro, Inc.
2022 Form 10-K
15
RISK FACTORS
ordinary course and conferring with American Tire Distributors regarding any material matters relating to the business. These
restrictions may prevent us from pursuing attractive business opportunities or responding effectively to competitive pressures and
industry developments that may arise prior to the completion of the pending transaction or otherwise adversely affect our ability to
execute on our business strategy, which could adversely affect our business or financial condition. Our failure to consummate the
transaction could result in negative publicity and a negative impression of our company. Further, any disruptions to our business
resulting from the proposed transaction, including any adverse changes in our relationships with our employees and customers, could
continue or accelerate in the event that the transaction is not completed. Also, we have incurred, and will continue to incur, significant
costs, expenses and fees for professional services and other transaction costs in connection with the proposed transaction. Many of
these fees and costs will be payable by us even if the proposed transaction is not completed and may relate to activities that we would
not have undertaken in the absence of the transactions contemplated by the agreement with American Tire Distributors. Even if we
complete the transaction with American Tire Distributors, we may not realize the expected benefits of the transaction. In changing the
distribution system we have relied on in the past, we may disrupt our operations and cause delays in sourcing products for our
customer or in completing services for them. While we believe we will experience cost savings because of this transaction, we may
never realize those savings. Any of these risks could materially and adversely impact our ongoing business, financial condition,
financial results, and stock price.
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. 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, 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 fair value of assets acquired and liabilities assumed. We have significantly
increased our goodwill because 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, because 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.
Monro, Inc.
2022 Form 10-K
16
RISK FACTORS
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
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.
Risks Related to Our Common Stock
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.
The multi-class structure of our capital stock has the effect of concentrating power with holders of our Class C Convertible
Preferred Stock, which severely limits the ability of our common shareholders to influence or direct the outcome of matters
submitted to our shareholders for approval.
At least 60% of the shares of Class C Convertible Preferred Stock (the “Class C Preferred”) must vote as a separate class or
unanimously consent to effect or validate any action taken by our common shareholders. Therefore, the Class C Preferred holders
have an effective veto over all matters put to a vote of our common stock and could use that veto power to block any matter that the
holders of common stock may approve. As of March 26, 2022, Peter J. Solomon, one of our directors, and members of his family
beneficially own all of the outstanding shares of Class C Preferred. As a result, for the foreseeable future and unless the shares of
Class C Preferred are converted into common stock, Mr. Solomon will be able to control matters requiring approval by our
shareholders, including the election of members of our board of directors, the adoption of amendments to our certificate of
incorporation, and the approval of any merger, consolidation, sale of all or substantially all of our assets or other major corporate
transaction. Mr. Solomon may have interests that differ from our common shareholders and may vote in a way with which our other
shareholders disagree or adverse to our shareholders’ interests. The concentration of voting control will limit or preclude our common
shareholders’ ability to influence corporate matters for the foreseeable future and could have the effect of delaying, preventing, or
deterring a change in control of our company, could deprive holders of our common stock of an opportunity to receive a premium for
their shares as part of a sale of our company and could negatively affect the market price of our common stock. In addition, this
concentration of voting power may prevent or discourage unsolicited acquisition proposals or offers for our capital stock that our other
shareholders or the Board of Directors may feel are in our best interest.
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.
General Risk Factors
We rely on an adequate supply of skilled field personnel.
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, a challenge that has been
highlighted by the tight labor market following the easing of pandemic restrictions. 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 because 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
Monro, Inc.
2022 Form 10-K
17
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.
RISK FACTORS
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.
We are subject to the short- and long-term risks of climate change.
In the short term, extreme weather conditions resulting from climate change could result in store closures, make it difficult for our
teammates and customers to travel to our stores, and negatively impact customers’ disposable income, thereby reducing our sales. If
we continually experience unseasonable weather, our forecasts of predicting customer behavior may prove incorrect and cause us to
inefficiently allocate our resources, which could adversely impact our results of operations. In the long term, we are subject to the risk
that our stores are physically located in areas that could be threatened by heat and extreme weather events that make those areas
uninhabitable. We are also subject to transition risks, such as changes in energy prices, which could cause more customers to reduce
overall miles driven, increase reliance on public transportation or ride sharing, or drive electric or alternative fuel vehicles, any of
which could harm our profitability; prolonged climate-related events affecting macroeconomic conditions with related effects on
consumer spending and confidence; stakeholder perception of our engagement in climate-related policies; and new regulatory
requirements resulting in higher compliance risk and operational costs. The realization of any of these short- or long-term risks could
materially adversely affect our financial condition.
Item 1B. Unresolved Staff Comments
None.
Monro, Inc.
2022 Form 10-K
18
Item 2. Properties
Company-operated Stores as of March 26, 2022
Arkansas
California
Connecticut
Delaware
Florida
Georgia
Idaho
Illinois
Indiana
Iowa
Kentucky
Louisiana
Maine
Maryland
Massachusetts
Michigan
PROPERTIES
Stores Company-operated Stores as of March 26, 2022
2 Minnesota
104 Missouri
35 Nevada
6 New Hampshire
107 New Jersey
13 New York
4 North Carolina
33 Ohio
39 Pennsylvania
14 Rhode Island
33 South Carolina
18 Tennessee
18 Vermont
70 Virginia
40 West Virginia
31 Wisconsin
Total
Stores
9
26
14
29
43
144
56
142
127
11
18
17
7
70
9
15
1,304
Company-operated Stores and Other Properties as of March 26, 2022
Owned
Leased
Owned buildings on leased land
Total
Distribution
Centers
2
9
—
11
Stores
329
914
61
1,304
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 61 percent of the leases (599 stores) expire after March 2032. 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.
Monro, Inc.
2022 Form 10-K
19
Item 3. Legal Proceedings
LEGAL PROCEEDINGS & MINE SAFETY DISCLOSURES
From time to time we are a party to or otherwise involved in legal proceedings arising out of the normal course of business. We do not
believe that such claims or lawsuits, individually or in the aggregate, will have a material adverse effect on our financial condition or
results of operations. 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 us and our financial condition and results of operations.
Item 4. Mine Safety Disclosures
Not applicable.
Monro, Inc.
2022 Form 10-K
20
OTHER INFORMATION
PART II
Item 5. Market for the Company's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
Market Information
Our common stock, par value $.01 per share, is traded on the Nasdaq Stock Market under the symbol "MNRO".
Holders of Record
As of May 13, 2022, our common stock was held by approximately 44 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
Dividends declared per share for 2022, 2021, and 2020 are disclosed in our Consolidated Statements of Changes in Shareholders’
Equity. The declaration of future dividends will be at the discretion of the Board of Directors and will depend on our financial
condition, results of operations, capital requirements, compliance with charter and contractual restrictions, and such other factors as
the Board of Directors deems relevant. We currently expect that comparable dividends will continue to be declared in the future.
Under our Credit Facility, there are no restrictions on our ability to declare dividends as long as we are in compliance with the
covenants in the Credit Facility. For additional information regarding our Credit Facility, see Note 7 to the Company’s consolidated
financial statements.
Stock Performance Graph
Monro, Inc.
S&P Industrials Index
S&P Specialty Stores Index
$
2016
100.00 $
100.00
100.00
2018
104.35 $
113.95
86.40
2019
170.41 $
117.64
126.08
2020
87.45 $
94.73
101.39
2021
133.48 $
160.67
164.64
2022
91.67
170.54
190.36
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. [Reserved]
Monro, Inc.
2022 Form 10-K
21
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations
MANAGEMENT’S DISCUSSION AND ANALYSIS
Executive Overview
We continue 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 investment strategy focused on improving guest experience, enhancing customer-centric
engagement, optimizing product and service offerings, and accelerating productivity and team engagement, as well as our growth
strategy, including executing on accretive acquisition opportunities. During 2022, we:
Invested significantly in our team, including incremental investment in our technician labor.
•
• Transformed 53 stores through rebranding and reimaging.
• Acquired 47 stores through acquisition.
Recent Developments
In May 2022, we entered into an agreement with American Tire Distributors, Inc. to sell to our wholesale tire operations and internal
tire distribution operations for approximately $105 million in the aggregate. Of the $105 million purchase price, $65 million is
expected to be paid at the expected closing date during the first quarter of fiscal 2023 and the remaining $40 million is expected to be
paid as earnout payments after the closing. The earnout payments will be earned, on a per-tire basis, based on tires we will buy from
American Tire Distributors pursuant to a distribution agreement that we expect to enter with American Tire Distributors at the closing
date of the sale of assets.
We expect to enter into additional agreements with American Tire Distributors at or prior to the closing date, including (1) a
distribution agreement, in which American Tire Distributors will agree to supply and sell tires to our retail locations; (2) a managed
services agreement, in which American Tire Distributors will provide category management, ordering, dashboard, and inventory
management services to us; and (3) an agreement relating to preferred data services to be provided to us by American Tire
Distributors.
Financial Summary
2022 included the following notable items:
• Diluted earnings per common share (“EPS”) were $1.81.
• Adjusted diluted EPS, a non-GAAP measure, were $1.85.
• Sales increased 20.8 percent, driven by an increase in comparable store sales.
• Comparable store sales increased 15.2 percent from the prior year, driven primarily by an increase in average ticket amount
and guest traffic.
• Operating income of $101.3 million was 40.2 percent higher than the prior year.
• Net income was $61.6 million.
• Adjusted net income, a non-GAAP measure, was $63.1 million.
Earnings Per Common Share
Diluted EPS
Adjustments
Adjusted diluted EPS
Note: Amounts may not foot due to rounding.
$
$
2022
1.81 $
0.05
1.85 $
Percent Change
2022/2021
79.2 %
62.3 %
2021
1.01
0.12
1.14
Adjusted net income and adjusted diluted EPS, each of which is 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 net income and
adjusted diluted EPS are useful in providing period-to-period comparisons of the results of our operations by excluding certain non-
recurring items and items related to store impairment charges and closings, as well as Monro.Forward or acquisition initiatives.
Reconciliations of these non-GAAP financial measures to GAAP measures are provided beginning on page 26 under “Non-GAAP
Financial Measures.”
We define comparable store sales as sales for locations that have been opened or owned at least one full fiscal year. We believe this
period is generally required for new store sales levels to begin to normalize. Management uses comparable store sales to assess the
operating performance of the Company’s stores and believes the metric is useful to investors because our overall results are dependent
22
Monro, Inc.
2022 Form 10-K
upon the results of our stores. Comparable sales measures vary across the retail industry. Therefore, our comparable store sales
calculation is not necessarily comparable to similarly titled measures reported by other companies.
MANAGEMENT’S DISCUSSION AND ANALYSIS
Impact of COVID-19
The full impact of the COVID-19 pandemic will depend on factors such as the length of time of the pandemic; how federal, state, and
local governments are responding; the efficacy and distribution of the COVID-19 vaccines; the longer-term impact of the pandemic on
the economy and consumer behavior; and the effect on our guests, teammates, vendors, and other partners.
During this time, we are focused on protecting the health and safety of our teammates and guests, while seeking to continue operating
our business responsibly.
Although vaccine distribution has increased and more businesses are operating at levels similar to pre-pandemic capacity, we have
experienced labor inefficiencies and a shortage of teammates in some of our store locations. If we are unable to fill enough teammate
positions, we may be unable to earn as much revenue as if we were fully staffed. We have had to pay more for labor because our
teammates continue working overtime to meet the surge in demand, which, along with an incremental investment we made in
technician labor costs to support current and future sales growth amidst improving consumer demand trends, increased our technician
labor costs as a percentage of sales and may decrease our gross profit and net income if not offset by other factors. Although we are
experiencing unprecedented challenges during this pandemic, we continue our focus to remain as efficient as possible while still
offering safe and high-quality service to our guests.
While we expect many teammates to return to our offices in the future, the timing of such a return could be affected by resurgences of
COVID-19 in areas where our offices are located. When we return to our offices, we expect many teammates to continue to work in a
hybrid of in-person and remote work. These changes to our operations going forward may present additional challenges and increased
costs to ensure our offices are safe and functional for hybrid work that enable effective collaboration of both in-person and remote
teammates.
Given the level of volatility and uncertainty surrounding the future impact of COVID-19, we cannot estimate with certainty the long-
term impacts of the COVID-19 pandemic on our business, financial condition, results of operations, and cash flows. 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.
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
$
$
2022
1,359,328 $
877,492
481,836
380,538
101,298 $
2021
1,125,721
730,526
395,195
322,957
72,238
Percent Change
2022/2021
20.8 %
20.1
21.9
17.8
40.2 %
We have elected to omit discussion on the earliest of the three years covered by the consolidated financial statements presented. The
discussion of our fiscal 2021 performance compared to our fiscal 2020 performance and our financial condition as of March 27, 2021
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 27, 2021, filed on May 26, 2021.
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 additional 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 2022 and 2021.
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, and other factors
will, over the long-term, drive both increasing guest traffic and the average ticket amount spent.
Monro, Inc.
2022 Form 10-K
23
MANAGEMENT’S DISCUSSION AND ANALYSIS
Sales
(thousands)
Sales
Dollar change compared to prior year
Percentage change compared to prior year
$
$
2022
1,359,328
233,607
$
20.8 %
2021
1,125,721
The sales increase was primarily due to an increase in comparable store sales from an increase in average ticket amount and guest
traffic as comparable store sales growth increased across our product categories with higher growth in our tires, maintenance, and
brakes categories. Additionally, there was an increase in sales from new stores. Partially offsetting these increases was a decrease in
sales from closed stores. The following table shows the drivers of the change in sales between 2022 and 2021.
Sales Percentage Change
Sales change
Primary drivers of change in sales
Comparable stores sales
New store sales (a)
Closed store sales
2022
20.8 %
15.2 %
6.2 %
(0.5) %
(a) Sales from 2022 and 2021 acquisitions represented 6.0 percent of the changes between 2022 and 2021.
As the COVID-19 pandemic has evolved, demand for automotive undercar repair services as well as replacement tires and tire related
services continues to be volatile. During 2022, comparable store sales growth increased across our product categories with higher
growth in our higher-margin brakes, alignment, and maintenance categories, as well as our tire category, each of which had
experienced declines during 2021.
Comparable Store Product Category Sales Change
Tires
Maintenance
Brakes
Alignment
Front end/shocks
Exhaust
Sales by Product Category
Tires
Maintenance
Brakes
Steering (a)
Exhaust
Total
(a) Steering product category includes front end/shocks and alignment product category sales.
Change in Number of Stores
Beginning store count
Opened (a)
Closed
Ending store count
(a) Includes 47 stores opened related to the 2022 acquisitions.
2022
11 %
16 %
29 %
26 %
16 %
14 %
2022
53 %
24
13
8
2
100 %
2021
(3) %
(19) %
(24) %
(13) %
(19) %
(18) %
2021
55 %
24
11
8
2
100 %
2022
1,263
48
(7)
1,304
Monro, Inc.
2022 Form 10-K
24
MANAGEMENT’S DISCUSSION AND ANALYSIS
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
$
$
2022
481,836
$
35.4 %
86,641
21.9 %
2021
395,195
35.1 %
The increase in gross profit, as a percentage of sales, of 30 basis points (“bps”) for 2022, as compared to the prior year, was primarily
due to a decrease in material costs, as a percentage of sales, because of a shift in sales mix from tires to our higher margin service
categories. Additionally, through the use of our tire category and management pricing tool, we expanded our gross profit per tire from
the prior year. We anticipate that expected inflationary impacts of higher material costs in the coming year will be offset by higher
selling prices. The increase in gross profit, as a percentage of sales, was also partially due to a decrease in distribution and occupancy
costs, as a percentage of sales, as we gained leverage on these largely fixed costs with higher overall comparable store sales. Partially
offsetting these decreases was an increase in technician labor costs, which increased as a percentage of sales, as we made an
incremental investment in technician labor to support current and future sales growth amidst improving consumer demand trends for
our product and service categories and competitive pressure in the labor market for technicians. We expect to invest more in our teams
in the coming year as we continue to build staffing to meet demand.
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
2022
30 bps
150 bps
100 bps
(220) bps
$
$
2022
380,538
$
28.0 %
57,581
17.8 %
2021
322,957
28.7 %
The increase of $57.6 million in operating, selling, general and administrative (“OSG&A”) expenses from the prior year is primarily
due to increased expenses from comparable stores, mainly store management compensation and operating expenses needed to match
demand. However, we gained leverage with higher overall comparable store sales, which resulted in the decrease in OSG&A
expenses, as a percentage of sales, from the prior year. The increase in OSG&A expenses for 2022 was also partially due to increased
expenses from 48 new stores, as well as an increase in litigation settlement costs (mainly related to the Cerini matter described in Note
15 to the Company’s consolidated financial statements). Partially offsetting these increases were lower expenses for 2022 from seven
stores closed compared to the prior year.
OSG&A Expenses Change
(thousands)
OSG&A expenses change
Drivers of change in OSG&A expenses
Increase from comparable stores
Increase from new stores
Increase in litigation settlement costs
Decrease from closed stores
$
$
$
$
$
2022
57,581
38,600
18,271
4,009
(3,299)
25
Monro, Inc.
2022 Form 10-K
MANAGEMENT’S DISCUSSION AND ANALYSIS
Other Performance Factors
Net Interest Expense
Net interest expense of $24.6 million for 2022 decreased $3.6 million as compared to the prior year and decreased as a percentage of
sales from 2.5 percent to 1.8 percent. Weighted average debt outstanding for 2022 decreased by approximately $100 million as
compared to 2021. This decrease is primarily related to a decrease in debt outstanding under our Credit Facility. Partially offsetting
this decrease was an increase in finance lease debt recorded in connection with the 2022 acquisitions. The weighted average interest
rate increased approximately 10 basis points from the prior year.
Provision for Income Taxes
Our effective income tax rate was 20.3 percent for 2022 compared to 22.3 percent for 2021. The effective tax rate for 2022 and 2021
reflects an income tax benefit of $3.1 million and $0.5 million, respectively, due to the difference in statutory tax rates from a loss
year to years in which such net operating loss may be carried back. See Note 9 to the Company’s consolidated financial statements for
additional information.
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
impairment charges and 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 settlement costs
Provision for income taxes on pre-tax adjustments
Income tax benefit related to net operating loss carryback
Adjusted net income
$
$
2022
61,568 $
759
(437)
689
1,249
59
3,759
(1,465)
(3,119)
63,062 $
2021
34,319
144
2,738
2,243
260
614
(250)
(1,351)
—
38,717
Monro, Inc.
2022 Form 10-K
26
MANAGEMENT’S DISCUSSION AND ANALYSIS
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 (a)
Litigation settlement costs
Income tax benefit related to net operating loss carryback
Adjusted diluted EPS
$
$
2022
1.81 $
0.02
(0.01)
0.02
0.03
0.00
0.08
(0.09)
1.85 $
2021
1.01
0.00
0.06
0.05
0.01
0.01
(0.01)
—
1.14
(a) Amounts, in the periods presented, may be too minor in amount, net of the impact from income taxes, to have an impact on the calculation of
adjusted diluted EPS.
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 income tax benefit related to net operating loss carryback adjustment to each of net income and diluted EPS is tax affected and
reflects the difference in statutory tax rates from a loss year to years in which such net operating loss may be carried back, as finalized
in 2022. The other adjustments to diluted EPS reflect adjusted effective tax rates of 24.1 percent and 23.5 percent for 2022 and 2021,
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.
Analysis of Financial Condition
Liquidity and Capital Resources
Capital Allocation
We expect to continue to generate positive operating cash flow as we have done in each of the last three fiscal years. The cash we
generate from our operations will allow us to continue to support business operations, including planned investment in additional
staffing, invest in attractive acquisition opportunities intended to drive long-term sustainable growth, pay down debt, return cash to
our shareholders through our dividend program and repurchase shares of our common stock under our common stock repurchase
program.
In addition, because we believe a large portion of our future expenditures will be to fund our growth, through acquisition of retail
stores and/or opening greenfield stores, we continually evaluate our cash needs and may decide it is best to fund the growth of our
business through borrowings on our Credit Facility. Conversely, we may also periodically determine that it is in our best interests to
voluntarily repay certain indebtedness early.
Material Cash Requirements
We enter into contractual obligations in the ordinary course of business that may require future cash payments. Such obligations
include, but are not limited to, debt service, leasing arrangements, and other liabilities. The timing and nature of these obligations are
expected to have an impact on our liquidity and capital requirements in future periods.
Monro, Inc.
2022 Form 10-K
27
Contractual Obligations
MANAGEMENT’S DISCUSSION AND ANALYSIS
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
176,466
499,808 $
260,843
815
333
938,265 $
Within
1 Year
$
58,875
40,933
720
333
100,861 $
2 to
3 Years
176,466
113,173 $
74,419
36
—
364,094 $
$
$
4 to
5 Years
After
5 Years
101,901 $
60,043
25
—
161,969 $
225,859
85,448
34
—
311,341
(a) Finance and operating lease commitments represent future undiscounted lease payments and include $103.5 million and $65.4 million,
respectively, related to options to extend lease terms that are reasonably certain of being exercised.
Sources and Conditions of Liquidity
Our sources to fund our material cash requirements are predominantly cash from operations, availability under our Credit Facility, and
cash and equivalents on hand.
Summary of Cash Flows
The following table presents a summary of our cash flows from operating, investing, and financing activities.
Summary of Cash Flows
(thousands)
Cash provided by operating activities
Cash used for investing activities
Cash used for financing activities
Decrease in cash and equivalents
Cash and equivalents at beginning of period
Cash and equivalents at end of period
Cash provided by operating activities
$
$
2022
173,759 $
(109,801)
(85,970)
(22,012)
29,960
7,948 $
2021
184,905
(66,260)
(434,161)
(315,516)
345,476
29,960
For 2022, cash provided by operating activities was $173.8 million, which consisted of net income of $61.6 million, adjusted by non-
cash charges of $99.3 million and by a change in operating assets and liabilities of $12.8 million. The non-cash charges were largely
driven by $81.2 million of depreciation and amortization. The change in operating assets and liabilities was largely due to our federal
and state income taxes payable being a source of cash of $13.8 million due primarily to an income tax refund that was received.
For 2021, cash provided by operating activities was $184.9 million, which consisted of net income of $34.3 million, adjusted by non-
cash charges of $90.2 million and by a change in operating assets and liabilities of $60.4 million. The non-cash charges were largely
driven by $77.3 million of depreciation and amortization. The change in operating assets and liabilities was primarily due to accounts
payable and accrued liabilities, net of vendor rebate receivables, being a source of cash of $37.2 million driven by timing of payments,
as well as our inventory balance being a source of cash of $26.6 million due to decreased inventory purchases to adjust to lower
demand.
Cash used for investing activities
For 2022, cash used for investing activities was $109.8 million. This was primarily due to cash used for acquisitions and capital
expenditures, including property and equipment, of $83.3 million and $27.8 million, respectively. Included in the $83.3 million used
for acquisitions was $0.8 million paid to the seller of the 2021 acquisition as the lease assignment for one store location was finalized
during the period.
For 2021, cash used for investing activities was $66.3 million. This was primarily due to cash used for capital expenditures, including
property and equipment, and acquisitions of $51.7 million and $17.2 million, respectively.
Monro, Inc.
2022 Form 10-K
28
Cash used for financing activities
MANAGEMENT’S DISCUSSION AND ANALYSIS
For 2022, cash used for financing activities was $86.0 million which was primarily due to payment of finance lease principal and
dividends of $39.4 million and $34.7 million, respectively, as well as payment on our Credit Facility, net of amounts borrowed during
the period, of $13.5 million.
For 2021, cash used for financing activities was $434.2 million which was primarily due to payment of amounts previously borrowed
on our Credit Facility and finance lease principal of $376.4 million and $33.4 million, respectively, as well as payment of dividends of
$29.8 million.
Credit Facility
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 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 was 225 basis points over LIBOR. Additionally, during the same period, we
were permitted to declare, make, or pay any dividend or distribution up to $38.5 million in the aggregate and the acquisition of stores
or other businesses up to $100 million in the aggregate were permitted if we were in compliance with the financial covenants and
other restrictions in the First Amendment and Credit Facility. As of July 1, 2021, the ability of our Board of Directors to declare,
make, or pay any dividend or distribution and our ability to acquire stores or other businesses is no longer restricted by the terms of
the Credit Facility, as amended by the First Amendment. The Credit Facility requires fees payable quarterly throughout the term
between 0.125 percent and 0.35 percent of the amount of the average net availability under the Credit Facility during the preceding
quarter.
On October 5, 2021, we entered into a Second Amendment to the Credit Facility (the “Second Amendment”). The Second
Amendment, which among other things, amends certain of the financial terms in the Credit Agreement, as amended by the First
Amendment. Specifically, the First Amendment had amended the interest rate charged on borrowings to be based on the greater of
adjusted one-month LIBOR or 0.75 percent. The Second Amendment amends the interest rate to be based on the greater of adjusted
one-month LIBOR or 0.00 percent. In addition, the Second Amendment updates certain provisions regarding a successor interest rate
to LIBOR. Except as amended by the First Amendment and Second Amendment, the remaining terms of the credit agreement remain
in full force and effect.
Within the Credit Facility, we have a sub-facility of $80 million available for the purpose of issuing standby letters of credit. The sub-
facility requires fees aggregating 87.5 to 212.5 basis points annually of the face amount of each standby letter of credit, payable
quarterly in arrears. There was a $29.6 million outstanding letter of credit at March 26, 2022.
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.
We were in compliance with all debt covenants at March 26, 2022.
As of May 13, 2022, we had approximately $11.3 million in cash on hand. In addition, we had $430.4 million available under the
Credit Facility as of May 13, 2022.
We believe that our sources of liquidity, namely cash flow from operations, availability under our Credit Facility, and cash and
equivalents on hand, will continue to be adequate to meet our contractual obligations, working capital and capital expenditure needs,
finance acquisitions, fund debt maturities, pay dividends and repurchase our common stock for at least the next 12 months and the
foreseeable future.
Critical Accounting Estimates
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 estimates
Monro, Inc.
2022 Form 10-K
29
listed below are those that are most critical to the portrayal of our financial condition and results of operations, and that require
management’s most difficult, subjective, and complex judgments in estimating the effect of inherent uncertainties.
MANAGEMENT’S DISCUSSION AND ANALYSIS
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, customer relationships,
and reacquired franchise rights. 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. Reacquired
franchise rights are valued using the excess earnings method under an income approach. 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.
Carrying Values of Long-Lived Assets
We assess potential impairments to our long-lived assets, which include property and equipment and 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 if future cash flows do not meet expectations.
Insurance Reserves
We maintain a high retention deductible plan with respect to workers’ compensation and general liability insurance claims (except for
in Ohio in which we are self-insured) and are otherwise self-insured for employee medical insurance claims. To reduce our risk and
better manage our overall loss exposure, we purchase stop-loss insurance that covers individual claims more than 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 several 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 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.
Monro, Inc.
2022 Form 10-K
30
MANAGEMENT’S DISCUSSION AND ANALYSIS
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 we determine is more likely than not of being realized upon settlement. We use significant judgment and
estimates in evaluating our tax positions. Due to the complexity of some of these uncertain tax positions, 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. Income taxes are described further in Note 9 to the consolidated financial statements.
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 26, 2022 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 26, 2022, 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 $1.8 million,
based upon our debt position as of March 26, 2022, given a change in LIBOR of 100 basis points.
Debt financing had a carrying amount and a fair value of $176.5 million as of March 26, 2022, as compared to a carrying amount and
a fair value of $190.0 million as of March 27, 2021.
Monro, Inc.
2022 Form 10-K
31
Item 8. Financial Statements and Supplementary Data
FINANCIAL STATEMENTS
INDEX
Report on Management’s Assessment on Internal Control Over Financial Reporting
Report of Independent Registered Public Accounting Firm (PCAOB ID 238)
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
33
34
36
37
38
39
40
40
44
45
47
48
48
49
49
50
52
52
54
54
55
58
58
Monro, Inc.
2022 Form 10-K
32
FINANCIAL STATEMENTS
REPORTS
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 26, 2022. 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 26, 2022.
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 26, 2022, 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 23, 2022
/s/ Brian J. D’Ambrosia
Brian J. D’Ambrosia
Chief Financial Officer
(Principal Financial Officer)
Monro, Inc.
2022 Form 10-K
33
FINANCIAL STATEMENTS
REPORTS
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 26,
2022 and March 27, 2021, 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 26, 2022, 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 26, 2022, 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 26, 2022 and March 27, 2021, and the results of its operations and its cash flows for each of the three years
in the period ended March 26, 2022 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 26,
2022, 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.
2022 Form 10-K
34
FINANCIAL STATEMENTS
REPORTS
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 Certain Acquired Right of Use Assets
As described in Note 3 to the consolidated financial statements, the Company recorded $19 million of finance lease and financing
obligation assets, net and $30 million of operating lease assets, net (collectively “right of use assets”) relating to business
combinations completed during the year ended March 26, 2022. 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. As disclosed by management,
significant judgment is required in estimating the fair value of the right of use assets. Favorable or unfavorable market terms used to
value the acquired right of use assets are estimated based on comparable market data.
The principal considerations for our determination that performing procedures relating to the valuation of certain acquired right of use
assets is a critical audit matter are the significant judgment by management in estimating the fair value of certain of the right of use
assets, using the favorable or unfavorable market terms and the comparable market data. 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 certain
acquired right of use assets and the comparable market data. 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 and the
comparable market data. These procedures also included, among others, reading the purchase agreements; and for certain acquired
right of use assets; (i) testing management’s process for estimating the value of the acquired right of use assets; and (ii) 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 for certain
acquired right of use assets.
/s/ PricewaterhouseCoopers LLP
Rochester, New York
May 23, 2022
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.
Monro, Inc.
2022 Form 10-K
35
FINANCIAL STATEMENTS
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
Federal and state income taxes 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 26, 2022 March 27, 2021
$
$
$
$
7,948 $
14,797
—
166,271
56,486
245,502
315,193
268,406
213,588
776,714
26,682
20,174
5,153
1,871,412 $
42,092 $
34,692
131,989
2,921
18,540
49,391
14,153
28,186
321,964
176,466
357,475
192,637
10,821
28,560
583
1,088,506
29
399
(108,729)
244,577
(4,494)
651,124
782,906
1,871,412 $
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
Class C Convertible Preferred stock Authorized 150,000 shares, $1.50 par value, $0.064 conversion value: 19,664 shares issued and outstanding
Common stock Authorized 65,000,000 shares, $0.01 par value; 39,906,561 shares issued as of March 26, 2022 and 39,848,093 shares issued at March 27, 2021
Treasury stock 6,359,871 shares, at cost
See accompanying Notes to Consolidated Financial Statements.
Monro, Inc.
2022 Form 10-K
36
Consolidated Statements of Income and Comprehensive Income
FINANCIAL STATEMENTS
(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
Income before income taxes
Provision for income taxes
Net income
Other comprehensive income (loss)
Changes in pension, net
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.
$
$
$
$
$
2022
1,359,328 $
877,492
481,836
380,538
101,298
24,631
(618)
77,285
15,717
61,568 $
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
125
125
61,693 $
2,270
2,270
36,589 $
(2,353)
(2,353)
55,671
1.82 $
1.81 $
1.02 $
1.01 $
1.73
1.71
33,527
34,038
33,329
33,876
33,246
33,953
Monro, Inc.
2022 Form 10-K
37
Consolidated Statements of Changes in Shareholders’ Equity
Class C
Convertible
FINANCIAL STATEMENTS
(thousands)
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 income
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
Net income
Other comprehensive income
Pension liability adjustment
Dividends declared
Preferred
Common
Dividend payable
Stock options and restricted stock
Share-based compensation
Balance at March 26, 2022
Preferred Stock
Shares
Common Stock
Treasury Stock
Amount Shares
Amount Shares
Additional
Paid-In
Amount Capital
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 $
Accumulated
Other
Comprehensive Retained
Earnings
Loss
(4,536) $ 592,174 $
Total
Equity
699,510
(582)
58,024
(582)
58,024
(2,353)
(2,353)
(46)
(449)
(449)
(29,266) (29,266)
(46)
5,789
3,813
734,440
34,319
(6,889) $ 619,855 $
34,319
2,270
2,270
(438)
(438)
(29,344) (29,344)
(31)
(31)
(2)
(4)
50
153
1
1
3
6,076
2,391
20 $
29 39,848 $
398 6,360 $ (108,729) $ 238,244 $
—
6,077
2,391
749,684
61,568
125
(4,619) $ 624,361 $
61,568
125
59
1
2,003
4,330
20 $
29 39,907 $
399 6,360 $ (108,729) $ 244,577 $
(131)
(469)
(469)
(34,205) (34,205)
(131)
2,004
4,330
782,906
(4,494) $ 651,124 $
We declared $1.02, $0.88 and $0.88 dividends per common share or equivalent for the years ended March 26, 2022, March 27, 2021 and March 28, 2020, respectively.
See accompanying Notes to Consolidated Financial Statements.
Monro, Inc.
2022 Form 10-K
38
Consolidated Statements of Cash Flows
FINANCIAL STATEMENTS
(thousands)
Operating activities
Net income
Adjustments to reconcile net income to cash provided by operating activities:
Depreciation and amortization
Share-based compensation expense
Gain 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 payable
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, finance leases and financing obligations
Exercise of stock options
Dividends paid
Deferred financing costs
Cash (used for) provided by financing activities
(Decrease) increase in cash and equivalents
Cash and equivalents at beginning of period
Cash and equivalents at end of period
Supplemental information
Interest paid, net
Income taxes paid, net of (refund)
Leased assets obtained in exchange for new finance lease liabilities
Leased assets obtained in exchange for new operating lease liabilities
$
$
$
2022
2021
2020
61,568 $
34,319 $
58,024
81,169
4,330
(932)
759
14,019
527
(2,390)
(6,679)
31,115
19,611
(3,984)
13,765
(38,674)
(445)
173,759
(27,830)
(83,333)
1,240
122
(109,801)
166,276
(219,219)
2,144
(34,674)
(497)
(85,970)
(22,012)
29,960
7,948 $
77,304
2,391
(491)
144
10,854
(814)
26,570
(7,406)
33,303
12,874
21,355
(2,788)
(22,326)
(384)
184,905
(51,725)
(17,154)
659
1,960
(66,260)
—
(409,783)
6,278
(29,782)
(874)
(434,161)
(315,516)
345,476
29,960 $
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
(55,918)
(104,436)
967
576
(158,811)
814,181
(412,725)
6,171
(29,715)
(1,168)
376,744
339,262
6,214
345,476
24,312 $
(11,611)
8,833
12,401
26,376 $
2,334
104,165
24,409
27,250
12,745
64,393
6,980
See accompanying Notes to Consolidated Financial Statements.
Monro, Inc.
2022 Form 10-K
39
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 1,304
Company-operated retail stores located in 32 states and 79 Car-X franchised locations as of March 26, 2022.
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 26, 2022, 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’s operations are organized and managed in one operating segment. The internal management financial reporting that is the
basis for evaluation 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 2022, 2021 and 2020 each contained 52
weeks. Unless specifically indicated otherwise, any references to “2022” or “fiscal 2022,” “2021” or “fiscal 2021,” and “2020” or
“fiscal 2020” relate to the years ended March 26, 2022, March 27, 2021, and March 28, 2020, respectively.
Misclassification
We identified a misclassification related to certain operating lease activity between changes in other current assets and other non-
current assets on our Consolidated Statement of Cash Flows for 2021. The impact of the correction of the misclassification to the
Consolidated Statement of Cash Flows for 2021 was a decrease to changes in other current assets of $30.0 million and an offsetting
increase to changes in other non-current assets. Cash provided by operating activities was unchanged. There was no impact to our
Consolidated Balance Sheet, Consolidated Statement of Income and Comprehensive Income, or Consolidated Statement of Changes in
Shareholders’ Equity for 2021. We evaluated the misclassification both quantitatively and qualitatively and determined the correction
of this misclassification to be immaterial to all prior consolidated financial statements taken as a whole.
Recent accounting pronouncements
In December 2019, the Financial Accounting Standards Board (“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. We adopted this guidance during
the first quarter of fiscal 2022. The adoption of this guidance did not have a material impact on our consolidated financial statements.
Monro, Inc.
2022 Form 10-K
40
FINANCIAL STATEMENTS
NOTES
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.
Inventories
Our inventories, which consist of automotive parts and oil as well as tires, are valued at the lower of weighted average cost and net
realizable value.
Property and equipment, net
Property and equipment, net is stated at historical cost less accumulated depreciation. Property and equipment are 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 operating, selling, general and
administrative (“OSG&A”) expense 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)
5 - 39
3 - 15
5 - 10
We assess potential impairments to our long-lived assets, which include property and equipment and 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 if future cash flows do not meet expectations.
No material impairment charges were recorded during 2022 or 2021.
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.
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.
Monro, Inc.
2022 Form 10-K
41
FINANCIAL STATEMENTS
NOTES
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 most 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 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 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.
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 2022, we determined
that it is not more likely than not that the fair value is less than the carrying value. No impairment was recorded in 2022, 2021 and
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 26, 2022,
we concluded that the carrying values of our intangible assets were not impaired. No impairment was recorded in 2021 or 2020.
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.
Insurance reserves
We maintain a high retention deductible plan with respect to workers’ compensation and general liability insurance claims (except for
in Ohio in which we are self-insured) and are otherwise self-insured for employee medical claims. To reduce our risk and better
manage our overall loss exposure, we purchase stop-loss insurance that covers individual claims more than 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,
Monro, Inc.
2022 Form 10-K
42
FINANCIAL STATEMENTS
NOTES
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.
Warranty
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 2022, 2021, and 2020 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 because 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 paid these deposits in full during fiscal 2022 prior to their applicable due dates.
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.
Monro, Inc.
2022 Form 10-K
43
FINANCIAL STATEMENTS
NOTES
Black-Scholes Valuation Model Assumptions
(weighted average)
Risk-free interest rate (a)
Expected term (years) (b)
Expected volatility (c)
Dividend yield (d)
2022
0.61 %
4
34.9 %
1.78 %
2021
0.27 %
4
33.3 %
1.60 %
2020
1.85 %
4
30.4 %
1.12 %
(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.
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.
Earnings per common share
Basic earnings per common share amounts are calculated by dividing income available to common shareholders, after deducting
preferred stock dividends, by the weighted average number of shares of common stock outstanding. Diluted earnings per common
share amounts are calculated by dividing net income by the weighted average number of shares of common stock outstanding adjusted
to give effect to potentially dilutive securities.
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 26, 2022 and March 27, 2021 was 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. Most 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
The COVID-19 pandemic has been a highly disruptive economic and societal event that has affected our business and has a significant
impact on consumer behavior. To date, our retail stores, wholesale locations, and other facilities have remained open as an essential
business. To serve our customers while also providing for the safety of employees, we have adapted certain aspects of the business.
Throughout the pandemic, we have monitored the rapidly evolving situation and will continue to adapt our operations to (i) address
federal, state, and local standards, (ii) meet the demand of customers, and (iii) implement standards that we believe to be in the best
interests of the safety and well-being of our employees and customers.
Monro, Inc.
2022 Form 10-K
44
FINANCIAL STATEMENTS
NOTES
The full impact of the COVID-19 pandemic will depend on factors such as the length of time of the pandemic; how federal, state, and
local governments are responding; the efficacy of the COVID-19 vaccines; the longer-term impact of the pandemic on the economy
and consumer behavior; and the effect on our customers, employees, vendors, and other partners.
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.
2022
During 2022, we acquired the following businesses for an aggregate purchase price of $83.1 million. The acquisitions were financed
through our Credit Facility, as defined in Note 7. The results of operations for these acquisitions are included in our financial results
from the respective acquisition dates.
• On December 5, 2021, we acquired 11 retail tire and automotive repair stores operating as Car-X franchise locations in Iowa
from KR Jones Enterprises, Inc. These stores will operate under the Car-X name.
• On November 14, 2021, we acquired three retail tire and automotive repair stores located in California from Bud’s Tire and
Wheel, Inc. These stores will operate under the Tire Choice name.
• On November 14, 2021, we acquired two retail tire and automotive repair stores located in California from Eagle Auto & Tire,
Inc. These stores will operate under the Mountain View Tire & Service name.
• On November 14, 2021, we acquired one retail tire and automotive repair store located in California from Golden Reflections.
This store will operate under the Mountain View Tire & Service name.
• On April 25, 2021, we acquired 30 retail tire and automotive repair stores located in California from Mountain View Tire &
Service, Inc. These stores operate under the Mountain View Tire & Service name.
The acquisitions resulted in goodwill related to, among other things, growth opportunities, synergies and economies of scale expected
from combining the businesses with ours, as well as unidentifiable intangible assets. All of the goodwill is expected to be deductible
for tax purposes.
We expensed all costs related to the acquisitions during 2022. The total costs related to the completed acquisitions were $0.7 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 acquisitions totaled $51.7 million and $3.4 million, respectively for the period from
acquisition date through March 26, 2022. The net income of $3.4 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 entities were not owned by Monro.
We accounted for each 2022 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.
Monro, Inc.
2022 Form 10-K
45
FINANCIAL STATEMENTS
NOTES
2022 Acquisition-date Fair Values Assigned
(thousands)
Inventories
Other current assets
Property and equipment
Finance lease and financing obligation assets
Operating lease assets
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
$
$
$
$
1,298
424
3,536
19,228
30,461
4,820
79
4,818
64,664
1,832
3,058
1,261
273
26,061
35,304
1,043
68,832
(4,168)
83,109
(4,168)
87,277
The total consideration of $83.1 million is comprised of $81.7 million in cash and $1.4 million of payables to certain sellers, of which
$1.1 million is due upon finalization of certain lease assignment terms for one store location.
We have recorded $4.8 million to amortizable intangible assets, including customer lists, a trade name, and reacquired franchise
rights, with a weighted average amortizable period of approximately eight years. 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 continue to refine the valuation data and estimates primarily related to inventory, warranty reserves, intangible assets, real
property leases, and certain liabilities for the 2022 acquisitions 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.
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 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 expense.
Sales and net income related to the 2021 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 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 entity was not owned by Monro.
Monro, Inc.
2022 Form 10-K
46
FINANCIAL STATEMENTS
NOTES
We accounted for the 2021 acquisition as a business combination using the acquisition method of accounting and we finalized the
purchase accounting related to the 2021 acquisition during 2022. As a result of the updated purchase price allocation for the 2021
acquisition, certain of the fair value amounts previously estimated were adjusted during the measurement period. These measurement
period adjustments resulted from updated valuation reports and appraisals received from our external valuation specialists, as well as
revisions to internal estimates. The measurement period adjustments were not material to the Consolidated Balance Sheet as of March
26, 2022 and March 27, 2021 and the Consolidated Statement of Income and Comprehensive Income for 2022 and 2021.
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.
2021 Acquisition-date Fair Values Assigned
(thousands)
Inventory
Other current assets
Property and equipment
Finance lease and financing obligation assets
Operating lease assets
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
$
$
$
$
1,017
172
796
5,089
8,980
418
1,336
31
17,839
748
976
697
4
7,911
7,433
548
18,317
(478)
17,112
(478)
17,590
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.
During 2022, we paid $0.8 million to the seller of the 2021 acquisition as the lease assignment for one store location was finalized
during the year.
Note 4 – Other Current Assets
Other Current Assets
(thousands)
Prepaid assets
Vendor rebates receivable
Other
Total
March 26, 2022
22,517 $
17,932
16,037
56,486 $
March 27, 2021
17,068
15,068
15,979
48,115
$
$
Monro, Inc.
2022 Form 10-K
47
FINANCIAL STATEMENTS
NOTES
Note 5 – Property and Equipment
The major classifications of property 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 26, 2022
$
$
84,050 $
297,313
300,792
38,553
8,662
729,370
414,177
315,193 $
March 27, 2021
84,485
289,328
291,179
37,684
7,073
709,749
382,686
327,063
Depreciation expense totaled $42.7 million, $42.9 million, and $39.2 million for 2022, 2021, and 2020, respectively.
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 and reacquired rights
Other intangible assets
Total
Estimated Weighted Average Useful Lives
Customer lists
Trade names
Franchise agreements and reacquired rights
Other intangible assets
$
$
2022
689,524 $
87,277
(87)
776,714 $
2021
671,843
17,677
4
689,524
March 26, 2022
Gross Accumulated
March 27, 2021
Gross Accumulated
Carrying Amount Amortization Carrying Amount Amortization
21,932
10,321
3,231
50
35,534
24,406 $
11,436
3,848
50
39,740 $
38,090 $
19,482
8,800
50
36,000 $
18,452
7,100
50
61,602 $
66,422 $
$
$
Amortization expense was $4.2 million, $4.1 million, and $4.8 million for 2022, 2021, and 2020, respectively.
Estimated Future Amortization Expense
(thousands)
2023
2024
2025
2026
2027
$
Life (Years)
10
15
12
20
Amortization
4,197
3,837
3,480
3,260
2,910
Monro, Inc.
2022 Form 10-K
48
FINANCIAL STATEMENTS
NOTES
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 bore interest at 75 to 200 basis points over the London Interbank Offered Rate (“LIBOR”) (or replacement index) or at
the prime rate, depending on the type of borrowing and the rates then in effect.
On June 11, 2020, we entered into a First Amendment to the Credit Facility (the “First Amendment”), which, among other things,
amended the terms of certain of the financial and restrictive covenants in the credit agreement through the first quarter of 2022 to
provide us with additional flexibility to operate our business. The First Amendment 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 was 225 basis points over LIBOR. Additionally, during the same period, we
were permitted to declare, make, or pay any dividend or distribution up to $38.5 million in the aggregate and the acquisition of stores
or other businesses up to $100 million in the aggregate were permitted if we are in compliance with the financial covenants and other
restrictions in the First Amendment and Credit Facility. As of July 1, 2021, the ability of our Board of Directors to declare, make, or
pay any dividend or distribution and our ability to acquire stores or other businesses is no longer restricted by the terms of the Credit
Facility, as amended by the First Amendment. The Credit Facility requires fees payable quarterly throughout the term between 0.125
percent and 0.35 percent of the amount of the average net availability under the Credit Facility during the preceding quarter.
On October 5, 2021, we entered into a Second Amendment to the Credit Facility (the “Second Amendment”). The Second
Amendment, which among other things, amends certain of the financial terms in the Credit Agreement, as amended by the First
Amendment. Specifically, the First Amendment had amended the interest rate charged on borrowings to be based on the greater of
adjusted one-month LIBOR or 0.75 percent. The Second Amendment amends the interest rate to be based on the greater of adjusted
one-month LIBOR or 0.00 percent. In addition, the Second Amendment updates certain provisions regarding a successor interest rate
to LIBOR. Except as amended by the First Amendment and Second Amendment, the remaining terms of the credit agreement remain
in full force and effect.
At March 26, 2022 and March 27, 2021, the interest rate spread paid by the Company was 125 basis points and 225 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 $29.6 million outstanding letter of credit at March 26, 2022.
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 $176.5 million outstanding and $393.9 million available under the Credit Facility as of March 26, 2022.
We were in compliance with all debt covenants as of March 26, 2022.
Long-term debt had a carrying amount and a fair value of $176.5 million as of March 26, 2022, as compared to a carrying amount and
a fair value of $190.0 million as of March 27, 2021. 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 most 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.
Monro, Inc.
2022 Form 10-K
49
FINANCIAL STATEMENTS
NOTES
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)
Tires (a)
Maintenance
Brakes
Steering
Exhaust
Other
Total
$
2022
716,325 $
330,732
174,854
109,793
24,398
3,226
2020
634,513
324,494
169,138
100,230
25,058
3,091
$ 1,359,328 $ 1,125,721 $ 1,256,524
2021
617,815 $
269,337
130,179
85,290
20,201
2,899
(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, typically 21 to 36 months. The deferred revenue balances at March 26, 2022 and March 27, 2021 were
$20.6 million and $16.7 million, respectively, of which $14.2 million and $12.0 million, respectively, are reported in Deferred revenue
and $6.4 million and $4.7 million, respectively, are reported in Other long-term liabilities in our Consolidated Balance Sheets.
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
2022
16,712 $
21,047
2,156
(19,283)
20,632 $
2021
18,506
14,958
1,225
(17,977)
16,712
$
$
We expect to recognize $14.2 million of deferred revenue related to road hazard warranty agreements during our fiscal year ending
March 25, 2023 and $6.4 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
2022
2021
$
$
256 $
1,442
1,698
12,602
1,417
14,019
15,717 $
(1,809) $
827
(982)
10,169
685
10,854
9,872 $
Monro, Inc.
2022 Form 10-K
2020
2,783
1,994
4,777
11,397
76
11,473
16,250
50
FINANCIAL STATEMENTS
NOTES
Income Tax Rate Reconciliation
Expected U.S. federal income taxes at statutory rate
State income taxes, net of federal tax benefit
Tax adjustments (a)
Other
Effective tax rate
2022
21.0 %
3.0
(4.0)
0.3
20.3 %
2021
21.0 %
2.9
(1.1)
(0.5)
22.3 %
2020
21.0 %
1.9
—
(1.0)
21.9 %
(a) Adjustments reflect benefit due to differences in statutory tax rates from a loss year to years in which such net operating loss may
be carried back.
As provided under the CARES Act, a taxpayer must carry net operating losses generated in certain tax years to the earliest tax year in
the five-year carryback period. However, these net operating losses are not subject to the 80% of income limitation if they are
exhausted during the five-year carryback. Under this provision, Monro has carried back a net operating loss generated in fiscal 2021 to
carryback years within the five-year carryback period with a 35% U.S. federal statutory tax rate.
Net Deferred Tax Asset/(Liability)
(thousands)
Gross deferred tax assets:
Lease liabilities
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
March 26, 2022
March 27, 2021
$
$
187,559 $
26,382
213,941
(147,764)
(66,153)
(22,251)
(1,180)
(237,348)
(23,407) $
186,168
26,723
212,891
(148,496)
(56,623)
(21,032)
(910)
(227,061)
(14,170)
We have $8.7 million of state net operating loss carryforwards available as of March 26, 2022. The state net operating loss
carryforwards expire in varying amounts through 2042.
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 26, 2022, we concluded, based on the weight of
all available positive and negative evidence, that all 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
2022
5,035 $
1,271
49
—
—
(1,349)
5,006 $
2021
5,212 $
915
—
—
—
(1,092)
5,035 $
2020
6,424
644
—
(30)
—
(1,826)
5,212
$
$
The total amount of unrecognized tax benefits was $5.0 million, $5.0 million, and $5.2 million at March 26, 2022, March 27, 2021,
and March 28, 2020, 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 $0.1 million and $0.2 million of
interest and penalties associated with uncertain tax benefits accrued as of March 26, 2022 and March 27, 2021, respectively.
We file U.S. federal income tax returns and income tax returns in certain state jurisdictions. Our U.S. federal 2019 – 2021 and various
state tax years remain subject to income tax examinations by tax authorities.
Monro, Inc.
2022 Form 10-K
51
Note 10 – Stock Ownership
FINANCIAL STATEMENTS
NOTES
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 as of March 26, 2022 and March 27, 2021.
Note 11 – Share-based Compensation
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 2022, 2021, and 2020 was $4.3 million, $2.4 million, and $3.8 million, respectively, and the related
income tax benefit for each year was $1.0 million, $0.6 million, and $0.9 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 26, 2022, there were a total of 5,001,620 shares and 839,842 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 2028.
Stock Option Activity
Outstanding as of March 27, 2021
Granted
Exercised
Canceled
Outstanding as of March 26, 2022
Vested and exercisable as of March 26, 2022
Stock
Options
513,867 $
170,022
(85,160)
(68,125)
530,604 $
254,528 $
Exercise Price
61.75
58.40
57.84
63.11
61.13
62.17
Weighted average
Weighted average Remaining Contractual
Term (years)
Aggregate
Intrinsic
Value (a)
3.36 $
1.93 $
6,079
880
(a) Total shares valued at the market price of the underlying stock as of March 26, 2022 less the exercise price.
As of March 26, 2022, the total unrecognized compensation expense related to unvested stock option awards was $3.2 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 2022, 2021, and 2020 was $13.96, $12.53, and $18.92, respectively. The total fair value of stock options
vested during 2022, 2021, and 2020 was $1.0 million, $2.0 million, and $2.0 million, respectively.
Stock Option Exercises
(millions)
Total intrinsic value of stock options exercised
Cash received for exercise price
Income tax benefit
$
2022
0.5
2.1
—
$
2021
1.5
6.3
—
$
2020
2.9
6.2
0.4
Monro, Inc.
2022 Form 10-K
52
FINANCIAL STATEMENTS
NOTES
Options Outstanding
Options Exercisable
Weighted
average
Remaining
Shares
Outstanding Contractual
at 3/26/2022 Term (years)
Weighted
Shares
average
Exercise Exercisable Contractual
Price at 3/26/2022 Term (years)
Weighted
average
Remaining
132,309
169,527
107,556
121,212
2.96 $
4.97
2.24
2.56
51.15
57.66
63.99
74.33
78,057
14,295
83,403
78,773
1.95 $
3.50 $
1.40 $
2.19 $
Weighted
average
Exercise
Price
49.52
56.88
64.61
73.10
Stock Options Outstanding
and Exercisable
Range of Exercise Prices
$40.71 - $56.71
$56.72 - $58.00
$58.01 - $66.30
$66.31 - $87.17
Restricted Stock
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.
During 2022, 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.
In 2020 and again in 2022, 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.
Non-vested Restricted Stock Activity
Outstanding as of March 27, 2021
Granted
Vested
Forfeited
Outstanding as of March 26, 2022
Restricted Stock
Shares
51,713 $
126,731
(18,059)
(7,329)
153,056 $
Weighted average
Grant-date
Fair Value per Share
61.24
58.06
63.32
61.00
58.38
As of March 26, 2022, the total unrecognized compensation expense related to unvested restricted stock shares was $5.2 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 2022, 2021, and 2020 was $58.06, $52.75, and $75.33, respectively. The total fair value
of restricted stock shares vested during 2022, 2021, and 2020 was $1.0 million, $1.4 million, and $1.8 million, respectively.
Monro, Inc.
2022 Form 10-K
53
FINANCIAL STATEMENTS
NOTES
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
2022
2021
2020
$
$
61,568 $
(469)
61,099 $
34,319 $
(438)
33,881 $
58,024
(449)
57,575
33,527
33,329
33,246
460
12
39
34,038
503
26
18
33,876
$
$
1.82 $
1.81 $
1.02 $
1.01 $
510
167
30
33,953
1.73
1.71
The computation of diluted earnings per common share for 2022, 2021, and 2020 excludes the effect of the assumed exercise of
approximately 460,000, 456,000, and 177,000 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.
Note 13 – Leases
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
36 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 26, 2022 and March 27, 2021, net assets of $4.3 million and $4.4 million,
respectively, and liabilities of $6.9 million and $7.2 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
2022
38,947 $
2021
35,998 $
2020
38,525
$
34,369
18,346
1,425
(102)
92,985 $
30,428
18,344
321
(95)
84,996 $
21,033
21,330
2,194
(166)
82,916
$
Monro, Inc.
2022 Form 10-K
54
FINANCIAL STATEMENTS
NOTES
Maturity of Lease Liabilities
(thousands)
2023
2024
2025
2026
2027
Thereafter
Total undiscounted lease obligations
Less: imputed interest
Present value of lease obligations
Operating Leases (a)
40,933 $
38,866
35,553
32,136
27,907
85,448
260,843 $
(33,514)
227,329 $
Finance Leases and
Financing Obligations (b)
58,875
58,127
55,046
52,413
49,488
225,859
499,808
(100,241)
399,567
$
$
$
(a) Operating lease obligations include $65.4 million related to options to extend operating leases that are reasonably certain of being exercised.
(b) Finance lease payments include $103.5 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
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
2022
8.2
9.7
2021
8.6
10.3
3.05 %
5.77 %
2.96 %
6.20 %
2022
2021
2020
$
39,426 $
18,400
39,408
34,931 $
18,602
33,032
36,808
21,340
27,212
We have a defined benefit pension plan covering employees who met eligibility requirements. This plan is closed to new participants.
Eligibility and the level of benefits under the plan were 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 2022 and 2021.
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 26, 2022 and March 27, 2021, respectively.
Underfunded Status
(thousands)
Projected benefit obligations
Fair value of plan assets
Underfunded status
Contributions and Estimated Future Benefit Payment
$
$
2022
20,826 $
20,464
(362) $
2021
22,096
21,666
(430)
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 our fiscal year ending March 25, 2023 (“fiscal 2023”) to the plan.
However, depending on investment performance and plan funded status, we may elect to make a contribution.
Monro, Inc.
2022 Form 10-K
55
Estimated Future Benefit Payments
(thousands)
2023
2024
2025
2026
2027
2028 - 2032
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
Assumptions
FINANCIAL STATEMENTS
NOTES
$
Pension Benefits
1,107
1,125
1,154
1,200
1,234
6,464
$
$
2022
638 $
(1,041)
501
98 $
2021
692 $
(1,162)
892
422 $
2020
752
(1,423)
455
(216)
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
2022
3.01 %
5.00 %
2022
3.58 %
2021
3.34 %
6.50 %
2021
3.01 %
2020
3.72 %
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 (gain) loss
Benefits paid
Benefit obligation at end of year (a)
$
$
2022
22,096 $
638
(1,211)
(697)
20,826 $
2021
21,646
692
391
(633)
22,096
(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 (loss) return on plan assets
Benefits paid
Fair value of plan assets at end of year
$
$
2022
21,666 $
(505)
(697)
20,464 $
2021
18,611
3,688
(633)
21,666
Our asset allocation strategy is to conservatively manage the assets 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.
Monro, Inc.
2022 Form 10-K
56
FINANCIAL STATEMENTS
NOTES
Asset Category
Cash and cash equivalents
Fixed income
Equity securities
Total
Current Targeted
Allocation
Actual Allocation
2022
50.0 %
50.0 %
100.0 %
0.8 %
62.6 %
36.6 %
100.0 %
2021
53.3 %
24.7 %
22.0 %
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.
Fair Value Measurements
(thousands)
Cash equivalents
Equity securities:
U.S. companies
International companies
Fixed income:
U.S. corporate bonds
Total plan assets
Pricing Category (a)
March 26, 2022
Level 1 $
Level 1
Level 1
Level 2
$
Fair Value at
158 $
March 27, 2021
11,542
5,421
2,063
12,822
20,464 $
3,372
1,391
5,361
21,666
(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) $4,494 and $4,619, net of tax, at the end of 2022 and 2021, respectively.
Amounts included in Comprehensive Income
Amounts in Other Comprehensive Income (Loss)
(thousands)
Net actuarial income (loss)
Amounts in Other Comprehensive Income (Loss) (a)
$
$
2022
5,981 $
5,981 $
2021
6,147
6,147
$
$
2022
166 $
166 $
2021
3,027 $
3,027 $
2020
(3,117)
(3,117)
(a) $125, $2,270, and ($2,353), net of tax, during 2022, 2021, and 2020, respectively.
Defined Contribution Plan
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 $2.0 million, $1.6 million, and $1.7 million for
2022, 2021, and 2020, 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 an executive deferred compensation plan (the “Executive Deferred Compensation Plan”) for a broad
management group whose participation in our 401(k) plan is limited by statute or regulation. The Executive 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 Executive 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 Executive
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 based on an interest rate or other formula as determined by Monro’s
Monro, Inc.
2022 Form 10-K
57
Compensation Committee. The total liability recorded in our financial statements at March 26, 2022 and March 27, 2021 related to the
Executive Deferred Compensation Plan was approximately $1.8 million and $2.1 million, respectively.
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
176,466
499,808 $
260,843
815
333
938,265 $
Within
1 Year
$
58,875
40,933
720
333
100,861 $
2 to
3 Years
176,466
113,173 $
74,419
36
—
364,094 $
$
$
4 to
5 Years
After
5 Years
101,901 $
60,043
25
—
161,969 $
225,859
85,448
34
—
311,341
(a) Finance and operating lease commitments represent future undiscounted lease payments and include $103.5 million and $65.4 million,
respectively, related to options to extend lease terms that are reasonably certain of being exercised.
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.
An action was filed against us on June 12, 2020 in the U.S. District Court for the Western District of Pennsylvania by Mark
Cerini. The plaintiff, who is a former service store manager, sought certification to represent similarly situated store managers in a
nationwide collective action for unpaid overtime wages, damages, and attorneys’ fees. Plaintiff alleged violations of the Fair Labor
Standards Act and various state laws relating to, among other things, overtime, and unpaid wages. The parties entered into a settlement
agreement to resolve this matter that was approved by the court. We included the settlement amount of $3.8 million in OSG&A
expenses in our Consolidated Statement of Income and Comprehensive Income during 2022. We paid this settlement in 2022 and do
not expect to incur additional expenses with respect to the settlement.
Note 16 – Subsequent Events
In May 2022, Monro’s Board of Directors declared a cash dividend of $0.28 per common share or common share equivalent to be paid
to shareholders of record as of June 6, 2022. The dividend will be paid on June 20, 2022.
In May 2022, our Board of Directors authorized the repurchase of up to $150 million of our common stock. The Board of Directors
did not specify a date upon which the authorization will expire. Shares may be repurchased through the open market or privately
negotiated transactions. Shares repurchased under this authorization will become treasury shares.
In May 2022, we entered into an agreement with American Tire Distributors, Inc. to sell our wholesale tire operations and internal tire
distribution operations for approximately $105 million in the aggregate. Of the $105 million purchase price, $65 million is expected to
be paid at the expected closing date during the first quarter of fiscal 2023 and the remaining $40 million is expected to be paid as
earnout payments after the closing. The earnout payments will be earned, on a per-tire basis, based on tires we will buy from
American Tire Distributors pursuant to a distribution agreement that we expect to enter with American Tire Distributors at the closing
date of the sale of assets. Based on the carrying value of the disposal assets, we do not expect to incur a significant loss on the
transaction.
Monro, Inc.
2022 Form 10-K
58
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
SUPPLEMENTAL INFORMATION
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 26, 2022, 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 26, 2022, the end of our fiscal year. The effectiveness of Monro’s internal control over financial reporting
as of March 26, 2022 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 26, 2022. 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 26, 2022, that
materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.
Item 9B. Other Information
In December 2021, the Company amended and restated the Monro, Inc. Deferred Compensation Plan effective as of December 31,
2021. As of the effective date, the Deferred Compensation Plan is closed to new contributions and no new employees will be eligible
to participate in the plan. Additionally, the Company established the Monro, Inc. Executive Deferred Compensation Plan effective
January 1, 2022.
In October 2021, the Company amended and restated the Monro, Inc. 401(k) Plan to change its plan year and limitation year to ending
every December 31.
Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections
Not applicable.
Monro, Inc.
2022 Form 10-K
59
SUPPLEMENTAL INFORMATION
PART III
Certain information required by Part III is incorporated by reference from Monro’s Definitive Proxy Statement for its 2022 Annual
Meeting of Shareholders to be held on August 16, 2022 (“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 Investors – Corporate Governance 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 26, 2022 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
Monro, Inc.
2022 Form 10-K
60
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 26, 2022 and March 27, 2021
o Consolidated Statements of Income and Comprehensive Income for the Years Ended March 26, 2022, March 27, 2021, and
March 28, 2020
o Consolidated Statements of Changes in Shareholders’ Equity for the Years Ended March 26, 2022, March 27, 2021, and
March 28, 2020
o Consolidated Statements of Cash Flows for the Years Ended March 26, 2022, March 27, 2021, and March 28, 2020
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.
2022 Form 10-K
61
(b) Exhibits
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
10.02a
10.02b
10.03
10.04
10.04a
10.04b
10.04c
10.05
10.05a
10.06
10.1
10.19
10.20
10.21
10.22
10.22a
SUPPLEMENTAL INFORMATION
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)*
Form of Restricted Stock Unit Award Agreement under Amended and Restated 2007 Stock Incentive Plan.*
Form of Performance Stock Unit Award Agreement under Amended and Restated 2007 Stock Incentive Plan.*
Monro, Inc. Deferred Compensation Plan, dated January 1, 2005, and last amended and restated as of December
31, 2021.*
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)*
Monro, Inc. Executive Deferred Compensation Plan, dated December 9, 2021 and effective as of January 1,
2022.*
Asset Purchase Agreement, among American Tire Distributors, Inc., Monro, Inc. and Monro Service Corporation,
dated as of May 13, 2022 (May Form 8-K, Exhibit 10.1)**
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)
Monro, Inc.
2022 Form 10-K
62
Exhibit No.
Documentt
SUPPLEMENTAL INFORMATION
10.22b
10.60
10.61
10.67
10.68
10.69
10.71
10.72
10.73†
10.77
21.01
23.01
24.01
31.1
31.2
32.1
101.INS
101.LAB
101.PRE
101.SCH
101.DEF
101.CAL
104
Amendment No.2 to Amended and Restated Credit Agreement, dated as of October 5, 2021 (October 2021 Form
8-K, Exhibit No. 10.22b)
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)*
Letter Agreement, effective September 30, 2019, between the Company and Robert Rajkowski. (September 2019
Form 10-Q, Exhibit No. 10.69)*
Employment Agreement by and between the Company and Michael T. Broderick, dated March 12, 2021. (2021
Form 10-K, Exhibit 10.71)*
Employment Agreement by and between the Company and Matt Henson, dated July 6, 2021 (June 2021 Form 10-
Q, Exhibit 10.72)*
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)*
Subsidiaries of the Company.
Consent of PricewaterhouseCoopers LLP.
Powers of Attorney.
Certification of Michael T. Broderick, President and Chief Executive Officer.
Certification of Brian J. D’Ambrosia, Executive Vice President – Finance and Chief Financial Officer.
Certification Pursuant to 18 U.S.C. Section 1350 (Section 906 of the Sarbanes-Oxley Act of 2002).
XBRL Instance Document
XBRL Taxonomy Extension Label Linkbase
XBRL Taxonomy Extension Presentation Linkbase
XBRL Taxonomy Extension Schema Linkbase
XBRL Taxonomy Extension Definition Linkbase
XBRL Taxonomy Extension Calculation Linkbase
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.
Schedules and similar attachments have been omitted pursuant to Item 601(a)(5) of Regulation S-K of the Securities Act of
1933, as amended. The Company will furnish a copy of any omitted schedule or similar attachment to the Securities and
Exchange Commission upon request.
Item 16. Form 10-K Summary
None.
Monro, Inc.
2022 Form 10-K
63
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 23, 2022
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 23, 2022
May 23, 2022
Chairman of the Board, Director
May 23, 2022
Director
Director
Director
Director
Director
Director
Director
May 23, 2022
May 23, 2022
May 23, 2022
May 23, 2022
May 23, 2022
May 23, 2022
May 23, 2022
* By: /s/ Michael T. Broderick
Michael T. Broderick, as Attorney-in-Fact
Monro, Inc.
2022 Form 10-K
64
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Board of Directors
John L. Auerbach (1)
Chief Executive Officer
Uovo Art, LLC
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) (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
Matt Henson
Chief Human Resources Officer
Brian J. D’Ambrosia
Executive Vice President –
Chief Financial Officer
Maureen E. Mulholland
Executive Vice President –
Chief Legal Officer and Secretary
Robert J. Rajkowski
Executive Vice President –
Chief Operating Officer
Nicholas Hawryschuk
Vice President – Finance
Shareholder Information
Corporate Offices
200 Holleder Parkway
Rochester, New York 14615
585-647-6400
Annual Meeting
August 16, 2022
www.virtualshareholdermeeting.com/
MNRO2022
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 26, 2022,
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
9
FY 2022 Annual Report Monro, Inc.
Focusing on
Operational Excellence
to Drive Sustainable
Growth
Monro, Inc.
200 Holleder Pkwy
Rochester, NY 14615
www.corporate.monro.com