MONRO INC

Previous wording

On July 3, 2024, we completed the sale of our corporate headquarters. We received proceeds of approximately $9.1 million and will record an immaterial net gain in the second quarter of fiscal 2025. See additional discussion in Note 1 to our consolidated financial statements.

Current wording

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

Previous wording

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

Current wording

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

Previous wording

First quarter 2025 included the following notable items:

Current wording

Second quarter 2025 included the following notable items:

Previous wording

Diluted earnings per common share (“EPS”) were $0.19.

Current wording

Diluted earnings per common share (“EPS”) were $0.18.

Previous wording

Adjusted diluted EPS, a non-GAAP measure, were $0.22.

Current wording

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

Previous wording

Sales decreased 10.3 percent, due to lower overall comparable store sales resulting from lower store traffic.

Current wording

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

Previous wording

Operating income of $13.2 million was 23.6 percent lower than the comparable prior-year period.

Current wording

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

Previous wording

Adjusted net income, a non-GAAP measure, was $6.9 million.

Current wording

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

Previous wording

Adjusted net income and adjusted diluted EPS, each of which is a measure not derived in accordance with GAAP, exclude the impact of certain items. Management believes that adjusted net income and adjusted diluted EPS are useful in providing period-to-period comparisons of the results of our operations by excluding certain non-recurring items, such as costs related to shareholder matters from our equity capital structure recapitalization, transition costs related to back-office optimization, store impairment charges, corporate headquarters relocation costs and items related to store closings. Reconciliations of these non-GAAP financial measures to GAAP measures are provided beginning onpage 17 under “Non-GAAP Financial Measures.”

Current wording

Adjusted net income and adjusted diluted EPS, each of which is a measure not derived in accordance with GAAP, exclude the impact of certain items. Management believes that adjusted net income and adjusted diluted EPS are useful in providing period-to-period comparisons of the results of our operations by excluding certain non-recurring items, such as costs related to closed store impairment charges, store closing costs, transition costs related to back-office optimization, shareholder matters from our equity capital structure recapitalization, and a gain on sale of corporate headquarters net of closing and relocation costs. Reconciliations of these non-GAAP financial measures to GAAP measures are provided beginning onpage 17 under “Non-GAAP Financial Measures.”

Previous wording

Sales include automotive undercar repair, tire replacement and tire related service sales, net of discounts, returns, etc., and revenue from the sale of warranty agreements and commissions earned from the delivery of tires. See Note 7 to our consolidated financial statements for further information. We use comparable store sales to evaluate the performance of our existing stores by measuring the change in sales for a period over the comparable, prior-year period of equivalent length. There were 90 selling days in the three months ended June 29, 2024 and in the three months ended June 24, 2023.

Current wording

Sales include automotive undercar repair, tire replacement and tire related service sales, net of discounts, returns, etc., and revenue from the sale of warranty agreements and commissions earned from the delivery of tires. See Note 7 to our consolidated financial statements for further information. We use comparable store sales to evaluate the performance of our existing stores by measuring the change in sales for a period over the comparable, prior-year period of equivalent length. There were 91 selling days in the three months ended September 28, 2024 and in the three months ended September 23, 2023, and 181 selling days in the six months ended September 28, 2024 and in the six months ended September 23, 2023.

Previous wording

The sales decrease was primarily due to adecrease in comparable store sales resulting from lower store traffic. The decrease in comparable store sales is primarily driven by a strained low-to-middle income consumer that disproportionately traded-down to tires at opening price points as the industry worked to clear-through an oversupply of lower-margin tires. This put pressure on overall tire units industry-wide across all regions of the country, leading to weaker store traffic, which was not supportive to sales of our higher-margin service categories. The following table shows the primary drivers of the change in sales for the three months ended June 29, 2024, as compared to the same period ended June 24, 2023.

Current wording

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

Previous wording

Broad-based inflationary pressures impacting consumers partly led to lower demand in tires and our higher-margin service categories during the three months ended June 29, 2024, as compared to the same period ended June 24, 2023. We expect the inflationary environment to continue to impact our customers throughout the remainder of fiscal 2025.

Current wording

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

Previous wording

Gross profit, as a percentage of sales, increased 220 basis points (“bps”) for the three months ended June 29, 2024 as compared to the prior year comparable period. Technician labor costs, as a percentage of sales, decreased due primarily to improvements in labor productivity and efficiency. Retail material costs, as a percentage of sales, decreased due primarily to improved margins in our service categories. Partially offsetting these cost decreases was an increase in retail occupancy costs, as a percentage of sales, as we lost leverage on these largely fixed costs with lower overall comparable store sales.

Current wording

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

Previous wording

The decrease of $1.1 million in operating, selling, general and administrative (“OSG&A”) expenses for the three months ended June 29, 2024, from the comparable prior year period is primarily due to a decrease in OSG&A expenses from comparable and closed stores as well as a decrease in costs related to shareholder matters from our equity capital structure recapitalization incurred during the comparable period. Partially offsetting these decreases were increases in costs related to closed store impairment charges. The following table shows the impact of these costs on the change in OSG&A expenses for the three months ended June 29, 2024, as compared to the three months ended June 24, 2023.

Current wording

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

Previous wording

Net interest expense of $5.1 million for the three months ended June 29, 2024 decreased $0.1 million as compared to the prior year period, and increased as a percentage of sales from 1.6 percent to 1.8 percent. Weighted average debt outstanding for the three months ended June 29, 2024 decreased by approximately $22.0 million as compared to the three months ended June 24, 2023. This decrease is primarily related to lower finance lease debt related to our stores, partially offset by an increase in debt outstanding under the Credit Facility. The weighted average interest rate increased approximately 20 basis points from the prior year comparable quarter due to an increase in the Credit Facility’s floating borrowing rates.

Current wording

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

Previous wording

Our effective income tax rate for the three months ended June 29, 2024 was 28.5 percent, compared with 27.6 percent for the three months ended June 24, 2023. The difference from the statutory rate is primarily due to state taxes and the discrete tax impact related to share-based awards.

Current wording

Our effective income tax rate for the three months and six months ended September 28, 2024 was 30.9 percent and 29.7 percent, respectively, compared with 26.8 percent and 27.1 percent in the comparable prior-year periods. The difference from the statutory rate is primarily due to state taxes and the discrete tax impact related to share-based awards.

Previous wording

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

Current wording

In addition to reporting net income and diluted EPS, which are GAAP measures, this Form 10-Q includes adjusted net income and adjusted diluted EPS, which are non-GAAP financial measures. We have included reconciliations to adjusted net income and adjusted diluted EPS from our most directly comparable GAAP measures, net income and diluted EPS, below. Management views these non-GAAP financial measures as indicators to better assess comparability between periods because management believes these non-GAAP financial measures reflect our core business operations while excluding certain non-recurring items, such as costs related to closed store impairment charges, store closing costs, transition costs related to back-office optimization, shareholder matters from our equity capital structure recapitalization, and a gain on sale of corporate headquarters net of closing and relocation costs.

Previous wording

The other adjustments to diluted EPS reflect estimated annual effective income tax rates of 27.2 percent and 25.1 percent for the three months ended June 29, 2024 and June 24, 2023, respectively. These estimated annual effective income tax rates exclude the income tax impacts from share-based compensation. See adjustments from the Reconciliation of Adjusted Net Income table above for pre-tax amounts.

Current wording

The other adjustments to diluted EPS reflect estimated annual effective income tax rates of 27.3 percent and 25.8 percent for the three months ended September 28, 2024 and September 23, 2023, respectively and 27.1 percent and 25.3 percent for the six months ended September 28, 2024 and September 23, 2023, respectively. These estimated annual effective income tax rates exclude the income tax impacts from share-based compensation. See adjustments from the Reconciliation of Adjusted Net Income table above for pre-tax amounts.

Previous wording

We currently expect our capital expenditures to support our projects, including upgrading our facilities and systems, to be $25 million to $35 million in the aggregate in fiscal 2025. Additionally, we have contractual finance lease and operating lease commitments with landlords through October 2040 for $488.0 million in lease payments, of which $95.8 million is due within one year. For details regarding these lease commitments, see Note 9 to our consolidated financial statements.

Current wording

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

Previous wording

As of June 29, 2024, we had $112.0 million outstanding under the Credit Facility, none of which is due in the succeeding 12 months. For details regarding our indebtedness that is due, see Note 8 to our consolidated financial statements.

Current wording

As of September 28, 2024, we had $62.0 million outstanding under the Credit Facility, none of which is due in the succeeding 12 months. For details regarding our indebtedness that is due, see Note 8 to our consolidated financial statements.

Previous wording

We paid cash dividends of $0.28 per share totaling $8.7 million and $8.9 million for the three months ended June 29, 2024 and June 24, 2023, respectively.

Current wording

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

Previous wording

As of June 29, 2024, we had a working capital deficit of $190.6 million, a decrease of $11.3 million from a deficit of $201.9 million as of March 30, 2024. The overall working capital deficit is a result of our supply chain finance program. We have agreed to contractual payment terms and conditions with our suppliers. As part of our working capital management, we facilitate a voluntary supply chain finance program to provide our suppliers with the opportunity to sell receivables due from Monro to a participating financial institution. For details regarding our supply chain finance program, see Note 10 to our consolidated financial statements.

Current wording

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

Previous wording

As of June 29, 2024, we had $18.7 million of cash and equivalents. In addition, we had $457.9 million available under the Credit Facility as of June 29, 2024.

Current wording

As of September 28, 2024, we had $20.9 million of cash and equivalents. In addition, we had $507.9 million available under the Credit Facility as of September 28, 2024.

Previous wording

For the three months ended June 29, 2024, cash provided by operating activities was $25.6 million, which consisted of net income of $5.9 million, increased by non-cash adjustments of $20.9 million, offset by a net change in operating assets and liabilities of $1.1 million. The non-cash charges were largely driven by $17.8 million of depreciation and amortization, as well as $1.6 million in deferred income tax expense. The change in operating assets and liabilities was driven by timing of payments, primarily due to accrued expenses and other current assets being a use of cash of $21.2 million, as well as our inventory balance being a use of cash of $8.1 million. These uses of cash were partially offset by our supply chain finance program being a source of cash as we improved our cash flow by $28.3 million.

Current wording

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

Previous wording

For the three months ended June 24, 2023, cash provided by operating activities was $71.7 million, which consisted of net income of $8.8 million, increased by non-cash adjustments of $19.9 million and a net change in operating assets and liabilities of $43.0 million. The non-cash charges were largely driven by $18.4 million of depreciation and amortization, as well as $1.9 million in deferred income tax expense. The change in operating assets and liabilities was primarily due to our supply chain finance program being a source of cash as we improved our cash flow by $24.5 million. Additionally, the change in operating assets and liabilities was driven by timing of payments partially due to accounts payable and accrued liabilities, net of vendor rebate receivables, being a source of cash of $12.3 million, as well as our inventory balance being a source of cash of $6.3 million.

Current wording

expense. The change in operating assets and liabilities was primarily due to our supply chain finance program being a source of cash as we improved our cash flow by $28.6 million. Additionally, the change in operating assets and liabilities was also partially due to accounts payable and accrued liabilities, net of vendor rebate receivables, being a source of cash of $6.9 million driven by timing of payments.

Previous wording

For the three months ended June 29, 2024, cash used for investing activities was $4.2 million. This was primarily due to cash used for capital expenditures, including property and equipment, of $8.9 million, partially offset by subsequent proceeds from the sale of our wholesale tire locations and distribution assets and proceeds from the disposal of property and equipment of $4.4 million and $0.3 million, respectively.

Current wording

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

Previous wording

For the three months ended June 24, 2023, cash used for investing activities was $2.6 million. This was primarily due to cash used for capital expenditures, including property and equipment, of $7.7 million, partially offset by cash provided by subsequent proceeds from the sale of our wholesale tire locations and distribution assets and proceeds from the disposal of property and equipment of $3.9 million and $1.1 million, respectively.

Current wording

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

Previous wording

For the three months ended June 24, 2023, cash used for financing activities was $58.7 million. This was primarily due to payment on our Credit Facility, net of amounts borrowed during the period, of $40.0 million, as well as payment of finance lease principal and dividends of $9.8 million and $8.9 million, respectively.

Current wording

For the six months ended September 28, 2024, cash used for financing activities was $78.5 million, which was primarily due to payment on our Credit Facility, net of amounts borrowed during the period, of $40.0 million, as well as payment of finance lease principal and dividends of $20.0 million and $17.4 million, respectively.

Previous wording

For the three months ended June 29, 2024, cash used for financing activities was $9.3 million. This was primarily due to payment of finance lease principal and dividends of $9.9 million and $8.7 million, respectively, as well as deferred financing costs of $0.7 million. These were offset by amounts borrowed on our Credit Facility, net of payments made during the period, of $10.0 million.

Current wording

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

Previous wording

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

Current wording

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