10q10k10q10k.net
MONRO, INC.

MONRO, INC.MNROEarnings & Financial Report

Nasdaq · Consumer Discretionary · Services-Automotive Repair, Services & Parking

Monro, Inc. is an automotive services company founded and headquartered in Rochester, New York, U.S. As of 2025, Monro has 1,260 locations making them the second-largest automotive services company in North America after Driven Brands by number of locations and by revenue.

What changed in MONRO, INC.'s 10-K — 2022 vs 2023

Top changes in MONRO, INC.'s 2023 10-K

299 paragraphs added · 302 removed · 49 edited across 6 sections

Item 1. Business

Business — how the company describes what it does

38 edited+16 added−147 removed29 unchanged
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.
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 the RCRA and the Clean Air Act.
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.
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. We believe 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.
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 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 prevention training, and people manager training.
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.
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 and store support center.
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.
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 and/or recycled by licensed third-party contractors.
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.
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.
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.
At March 25, 2023, we operated 1,299 retail tire and automotive repair stores and serviced approximately 5.0 million vehicles in fiscal 2023. Our retail tire and automotive repair stores operate primarily under the brands “Monro Auto Service and Tire Centers,” “Tire Choice Auto Service Centers,” “Mr.
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.
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 lower turnover rates in recent years.
Tire Auto Service Centers 320 Car-X Tire & Auto 66 Tire Warehouse Tires for Less 55 Ken Towery's Tire & Auto Care 34 Mountain View Tire & Auto Service 30 Tire Barn Warehouse 27 Free Service Tire & Auto Centers 10 Other (a) 34 Total 1,304 (a) Includes recently acquired stores to be converted to certain brands named above.
Tire Auto Service Centers 318 Car-X Tire & Auto 72 Tire Warehouse Tires for Less 55 Ken Towery's Tire & Auto Care 34 Mountain View Tire & Auto Service 30 Tire Barn Warehouse 27 Other (a) 44 Total 1,299 (a) Includes recently acquired stores to be converted to certain brands named above.
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.
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.
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.
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 serve as the basis for our safety training and protocols.
Monro, Inc. 2022 Form 10-K 7 Table of Contents 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 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.
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 strives to maintain an environmentally conscious corporate culture, demonstrated by our recycling policies at our offices and stores. In 2023, Monro recycled approximately 2.2 million gallons of oil and 3.3 million tires, as well as approximately 58,300 vehicle batteries and 343 tons of cardboard, all as part of our commitment to the environment.
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 Stores Monro Auto Service and Tire Centers 371 Tire Choice Auto Service Centers 357 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,” and “Tire Barn Warehouse”. Company-operated Store Brands as of March 25, 2023 Stores Monro Auto Service and Tire Centers 363 Tire Choice Auto Service Centers 356 Mr.
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.
Monro, Inc. 2023 Form 10-K 9 Table of Contents BUSINESS 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.
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.
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 25, 2023, Monro had two retread facilities and 76 Car-X franchised locations.
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.
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.
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.
Additionally, 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 our direct access to tire brands from ATD’s nationwide distribution network and express tire delivery program as well as other tire brands in our tire 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.
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.
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. During the last five years, we have completed 14 acquisitions, adding 199 locations and approximately $295 million in annualized revenue.
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.
Additionally, each store has access to the inventory carried by up to the 14 stores 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.
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.
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.
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.
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.
(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.
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 and commercial locations.
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.
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 25, 2023, we have stores in 32 states. In addition to our plan to continue to seek suitable acquisitions , we plan to add new greenfield stores.
Accordingly, we are subject to numerous federal, state, and local environmental laws including the Comprehensive Environmental Response Compensation and Liability Act.
In certain states, even where not 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.
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.
All new greenfield sites presently under consideration are within our established market areas. Monro, Inc. 2023 Form 10-K 6 Table of Contents BUSINESS Purchasing and Distribution We believe that our substantial buying power and our flexibility in making sourcing decisions contributes to our successful purchasing strategy.
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.
As of March 25, 2023, Monro had approximately 8,600 employees, of whom 8,260 were employed in the field organization, 310 were employed at our corporate headquarters, referred to as “store support center”, and 30 were employed in other offices. Monro's employees are not members of any union.
Monro, Inc. 2022 Form 10-K 9 Table of Contents BUSINESS Seasonality Although our business is not highly seasonal, customers do purchase more undercar service during the period of March through October than the period of November through February, when miles driven tend to be lower.
Seasonality Although our business is not highly seasonal, customers do purchase more undercar service during the period of March through October than the period of November through February, when miles driven tend to be lower. Sales of tires are more heavily weighted in the months of May through August, and October through December.
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.
We also select and purchase parts (including oil) 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 which allows us to control store inventory on a near real-time basis. National vendors ship most of our parts supply directly to our stores.
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.
Monro, Inc. 2023 Form 10-K 5 Table of Contents BUSINESS 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.
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 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.
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.
We purchase parts (including oil) and tires from approximately 80 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.
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.
Monro, Inc. 2023 Form 10-K 7 Table of Contents BUSINESS 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.
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.
Local vendor purchases are made when needed at the store level and accounted for approximately 28 percent of all parts and tires purchased in 2023. Our ten largest vendors accounted for approximately 95 percent of our total stocking purchases, with the largest vendor accounting for approximately 33 percent of total stocking purchases in 2023.
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.
Monro, Inc. 2023 Form 10-K 8 Table of Contents BUSINESS We also view training as a tool to foster inclusion and, through Monro University, we provide Unconscious Bias Diversity and Inclusion Awareness courses to all our teammates.
Monro, Inc. 2022 Form 10-K 12 Table of Contents 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.
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.
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.
We also entered into additional agreements with ATD, including a managed services agreement, under which ATD provides category management, ordering, dashboard, and inventory managed services to us, and an agreement relating to preferred data services provided to us by ATD. Our operations are organized and managed in one operating segment.
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 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.
Removed
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.
Added
(During 2023, we acquired one and closed two franchised locations.) In June 2022, we completed the divestiture of assets relating to our wholesale operations (seven locations) and internal tire distribution operations to American Tire Distributors, Inc. (“ATD”). For details regarding the divestiture, see Note 2 to our consolidated financial statements.
Removed
Monro, Inc. 2022 Form 10-K 5 Table of Contents BUSINESS Recent Developments 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.
Added
We will continue to invest in and execute strategic initiatives to improve our guests’ in-store experience. This includes leveraging our scale and the strength of our financial position to make critical investments in our business, our technicians and technology, allowing us to further execute on our operational excellence initiatives in 2023. • Provide consistent value .
Removed
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.
Added
We have rolled out several enhanced offerings, including a walk-in oil service option to provide hassle-free service, which is in addition to our existing online appointment system, and Good, Better, Best oil service package updates to give guests competitively priced options to meet their budgets.
Removed
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.
Added
We also offer combined tire and related service packages, including installation, alignment, and brake service packages, to better connect tire sales to service categories.
Removed
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.
Added
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.
Removed
Monro, Inc. 2022 Form 10-K 6 Table of Contents 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.
Added
We purchase most of the tires we sell to our guests through a distribution agreement under which ATD supplies and sells certain tires to our retail locations. ATD also provides tire category management, ordering and inventory management services to us.
Removed
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.
Added
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.
Removed
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.
Added
Workplace Safety We are committed to providing a safe and secure work environment and have specific safety programs focused on increasing consistency of policies and procedures across our stores.
Removed
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.
Added
Our safety standards and policies are based on Occupational Safety and Health Administration guidelines as well as the American National Standards Institute, and, during 2023, we implemented a national safety supplies program which will help ensure consistent standards of safety preparedness (such as eye wash stations and first aid kits) at every store should an incident occur.
Removed
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.
Added
During 2023, we identified a key area of focus in our stores: ergonomics (to reduce sprains and strains) and implemented an ergonomic training program to all store locations accordingly. Monro’s training programs are key to our strong safety culture. Training increases awareness and helps to reduce and eliminate workplace accidents and injuries.
Removed
Monro, Inc. 2022 Form 10-K 8 Table of Contents BUSINESS COVID-19 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.
Added
Cybersecurity To reduce the likelihood and severity of cyber intrusions, we have a cybersecurity program designed to protect and preserve the confidentiality, integrity and availability of data and systems, including oversight by the Board of Directors’ Audit Committee. Our security approach includes multiple layers of cybersecurity tools, processes, and systems.
Removed
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.
Added
This includes regular security testing for outside penetration, vulnerability assessment and routine monitoring of the security landscape and completing yearly Payment Card Industry audits. We also manage a 24/7 security operations center that monitors our security landscape by leveraging behavioral analytics, artificial intelligence, and extended detection and response services.
Removed
We also enacted numerous safety, social distancing, and cleaning measures designed to protect our teammates and guests during the COVID-19 pandemic.
Added
All teammates are subject to mandatory annual data security training requirements and receive frequent education and dissemination of security information throughout the year. Our current security position and policies as well as compliance efforts are intended to address evolving and changing cyber threats. See Part I , Item 1A. , “ Risk Factors ” for discussion of related risks.
Removed
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.
Added
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, as amended (the “Exchange Act”) 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.
Removed
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 Table of Contents RISK FACTORS Item 1A.
Added
Our filings with the SEC, including our reports and proxy statement, 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 25, 2023 is available and accessible at Monro's Investor Relations page at https://corporate.monro.com/investors under the Events and Presentations tab.
Removed
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.
Added
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. 2023 Form 10-K 10 Table of Contents RISK FACTORS
Removed
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.
Removed
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.
Removed
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.
Removed
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.
Removed
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.
Removed
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.
Removed
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.
Removed
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.
Removed
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.
Removed
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.

… 121 more changes not shown on this page.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

0 edited+130 added−83 removed0 unchanged
Removed
Item 1A. “ Risk Factors ” above for further discussion of the risks that may impact our longer-term operational and financial performance.
Added
Item 1A. Risk Factors In addition to the risks discussed elsewhere in this annual report, the following are the important factors that could cause Monro’s actual results to differ materially from those projected in any forward-looking statements: Risks Related to our Business We operate in the highly competitive automotive repair industry.
Removed
Analysis of Results of Operations Summary of Operating Income Percent Change (thousands) 2022 2021 2022/2021 Sales $ 1,359,328 $ 1,125,721 20.8 % Cost of sales, including distribution and occupancy costs 877,492 730,526 20.1 Gross profit 481,836 395,195 21.9 Operating, selling, general and administrative expenses 380,538 322,957 17.8 Operating income $ 101,298 $ 72,238 40.2 % We have elected to omit discussion on the earliest of the three years covered by the consolidated financial statements presented.
Added
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.
Removed
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 .
Added
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, and independent garages.
Removed
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.
Added
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.
Removed
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.
Added
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.
Removed
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.
Added
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.
Removed
Monro, Inc. 2022 Form 10-K 23 Table of Contents MANAGEMENT’S DISCUSSION AND ANALYSIS Sales (thousands) 2022 2021 Sales $ 1,359,328 $ 1,125,721 Dollar change compared to prior year $ 233,607 Percentage change compared to prior year 20.8 % 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.
Added
If our customers must “trade down” in the price of products or services purchased to fit their budgets, in order to compete, we must be able to cost effectively supply that product or service without losing the customer’s business. We cannot assure that we, or any of our stores, will be able to compete effectively.
Removed
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.
Added
If we are unable to compete successfully in new and existing markets, we may not achieve our projected revenue and profitability targets. We are subject to cycles in the general economy and customers’ use of vehicles and seasonality, which may impact demand for our products and services. Our industry is influenced by the number of miles driven by automobile owners.
Removed
Sales Percentage Change 2022 Sales change 20.8 % Primary drivers of change in sales Comparable stores sales 15.2 % New store sales (a) 6.2 % Closed store sales (0.5) % (a) Sales from 2022 and 2021 acquisitions represented 6.0 percent of the changes between 2022 and 2021.
Added
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.
Removed
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.
Added
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 stay-at-home orders, an increase in certain workers working from home, and a resulting negative effect on the demand for our products and services.
Removed
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.
Added
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.
Removed
Comparable Store Product Category Sales Change 2022 2021 Tires 11 % (3) % Maintenance 16 % (19) % Brakes 29 % (24) % Alignment 26 % (13) % Front end/shocks 16 % (19) % Exhaust 14 % (18) % Sales by Product Category 2022 2021 Tires 53 % 55 % Maintenance 24 24 Brakes 13 11 Steering (a) 8 8 Exhaust 2 2 Total 100 % 100 % (a) Steering product category includes front end/shocks and alignment product category sales.
Added
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.
Removed
Change in Number of Stores 2022 Beginning store count 1,263 Opened (a) 48 Closed (7) Ending store count 1,304 (a) Includes 47 stores opened related to the 2022 acquisitions.
Added
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.
Removed
Monro, Inc. 2022 Form 10-K 24 Table of Contents MANAGEMENT’S DISCUSSION AND ANALYSIS Cost of Sales and Gross Profit Gross Profit (thousands) 2022 2021 Gross profit $ 481,836 $ 395,195 Percentage of sales 35.4 % 35.1 % Dollar change compared to prior year $ 86,641 Percentage change compared to prior year 21.9 % 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.
Added
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.
Removed
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.
Added
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. Changes in economic conditions that impact consumer spending could harm our business.
Removed
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.
Added
The automotive repair industry and our financial performance are sensitive to changes in overall economic conditions that impact consumer spending, including inflation, changes in interest rates and economic volatility.
Removed
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.
Added
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.
Removed
We expect to invest more in our teams in the coming year as we continue to build staffing to meet demand.
Added
Historic increases in inflation following the COVID-19 pandemic may cause consumers to be more sensitive to price changes and cause consumers to “trade down” in the price of products or services purchased or to delay or forgo vehicle maintenance entirely. Alternatively, during periods of good economic conditions, consumers may decide to purchase new vehicles rather than servicing their older vehicles.
Removed
Gross Profit as a Percentage of Sales Change 2022 Gross profit change 30 bps Drivers of change in gross profit as a percentage of sales Material costs 150 bps Distribution and occupancy costs 100 bps Technician labor costs (220) bps Operating, Selling, General and Administrative Expenses Operating, Selling, General and Administrative Expenses (thousands) 2022 2021 Operating, Selling, General and Administrative Expenses $ 380,538 $ 322,957 Percentage of sales 28.0 % 28.7 % Dollar change compared to prior year $ 57,581 Percentage change compared to prior year 17.8 % 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.
Added
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.
Removed
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.
Added
Monro, Inc. 2023 Form 10-K 11 Table of Contents RISK FACTORS Adoption of electric vehicle technology may adversely affect the demand for our services. 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.
Removed
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).
Added
The adoption of electric vehicles may accelerate in coming years because of tax incentives and other legislative action, such as proposed legislation in multiple states to prohibit the sale or disincentivize the purchase of new gas-powered vehicles by 2035. An increase in the proportion of electric vehicles sold could decrease our service-related revenue.
Removed
Partially offsetting these increases were lower expenses for 2022 from seven stores closed compared to the prior year.
Added
As the proportion of electric vehicles on the road increases, we expect the demand for transmission and exhaust services and oil changes will decrease. Although we may experience an increase in demand for other services, there can be no assurance that the demand will be sufficient to maintain our historical sales performance.
Removed
OSG&A Expenses Change (thousands) 2022 OSG&A expenses change $ 57,581 Drivers of change in OSG&A expenses Increase from comparable stores $ 38,600 Increase from new stores $ 18,271 Increase in litigation settlement costs $ 4,009 Decrease from closed stores $ (3,299) Monro, Inc. 2022 Form 10-K 25 Table of Contents 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.
Added
Even when electric vehicles need repairs, given the cost to replace some battery-related components, an electric vehicle owner’s insurance provider may not approve the cost to repair the vehicle. If drivers must replace their vehicles instead of servicing older vehicles, demand for our services would decrease. Our business is affected by advances in automotive technology.
Removed
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.
Added
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.
Removed
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.
Added
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.
Removed
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.
Added
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.
Removed
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.
Added
In addition, advances in automotive technology continue to require us to incur additional costs to update our diagnostic capabilities and technical training programs.
Removed
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.
Added
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. We depend on our relationships with our vendors for certain inventory.
Removed
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.
Added
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.
Removed
Adjusted net income is summarized as follows: Reconciliation of Adjusted Net Income (thousands) 2022 2021 Net income $ 61,568 $ 34,319 Store impairment charge 759 144 Store closing costs (437) 2,738 Monro.Forward initiative costs 689 2,243 Acquisition due diligence and integration costs 1,249 260 Management transition costs 59 614 Litigation settlement costs 3,759 (250) Provision for income taxes on pre-tax adjustments (1,465) (1,351) Income tax benefit related to net operating loss carryback (3,119) — Adjusted net income $ 63,062 $ 38,717 Monro, Inc. 2022 Form 10-K 26 Table of Contents MANAGEMENT’S DISCUSSION AND ANALYSIS Adjusted diluted EPS is summarized as follows: Reconciliation of Adjusted Diluted EPS 2022 2021 Diluted EPS $ 1.81 $ 1.01 Store impairment charge (a) 0.02 0.00 Store closing costs (0.01) 0.06 Monro.Forward initiative costs 0.02 0.05 Acquisition due diligence and integration costs 0.03 0.01 Management transition costs (a) 0.00 0.01 Litigation settlement costs 0.08 (0.01) Income tax benefit related to net operating loss carryback (0.09) — Adjusted diluted EPS $ 1.85 $ 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.
Added
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.
Removed
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.
Added
For example, under the distribution agreement with American Tire Distributors, we rely on American Tire Distributors for most of certain passenger car tires, light truck replacement tires, and medium truck tires that we sell to our customers.
Removed
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.
Added
Our company-owned stores must purchase a t least 90% of their forecasted requirements for these tires from or through American Tire Distributors , subject to some exceptions.
Removed
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.
Added
If this supplier were to experience shortages and we are unable to purchase our desired volume of tires on the same or better terms, or at all, our sales and ability to service our customers could suffer considerably.
Removed
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.
Added
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.
Removed
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.
Added
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.
Removed
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.
Added
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.
Removed
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.
Added
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.
Removed
The timing and nature of these obligations are expected to have an impact on our liquidity and capital requirements in future periods.
Added
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; Monro, Inc. 2023 Form 10-K 12 Table of Contents RISK FACTORS  transportation delays and interruptions, including those occurring as a result of geopolitical events, like the war in Ukraine, or public health emergencies;  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.
Removed
Monro, Inc. 2022 Form 10-K 27 Table of Contents MANAGEMENT’S DISCUSSION AND ANALYSIS Contractual Obligations Commitments Due by Period Within 2 to 4 to After (thousands) Total 1 Year 3 Years 5 Years 5 Years Principal payments on long-term debt $ 176,466 $ 176,466 Finance lease commitments/financing obligations (a) 499,808 $ 58,875 113,173 $ 101,901 $ 225,859 Operating lease commitments (a) 260,843 40,933 74,419 60,043 85,448 Accrued rent 815 720 36 25 34 Other liabilities 333 333 — — — Total $ 938,265 $ 100,861 $ 364,094 $ 161,969 $ 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.
Added
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.
Removed
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.
Added
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.

… 133 more changes not shown on this page.

Item 2. Properties

Properties — owned and leased real estate

3 edited+0 added−1 removed0 unchanged
Properties Company-operated Stores as of March 26, 2022 Stores Company-operated Stores as of March 26, 2022 Stores Arkansas 2 Minnesota 9 California 104 Missouri 26 Connecticut 35 Nevada 14 Delaware 6 New Hampshire 29 Florida 107 New Jersey 43 Georgia 13 New York 144 Idaho 4 North Carolina 56 Illinois 33 Ohio 142 Indiana 39 Pennsylvania 127 Iowa 14 Rhode Island 11 Kentucky 33 South Carolina 18 Louisiana 18 Tennessee 17 Maine 18 Vermont 7 Maryland 70 Virginia 70 Massachusetts 40 West Virginia 9 Michigan 31 Wisconsin 15 Total 1,304 Company-operated Stores and Other Properties as of March 26, 2022 Distribution Retread Stores Centers Facilities Owned 329 2 1 Leased 914 9 2 Owned buildings on leased land 61 — — Total 1,304 11 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.
Properties Company-operated Stores as of March 25, 2023 Stores Company-operated Stores as of March 25, 2023 Stores Arkansas 2 Minnesota 9 California 103 Missouri 26 Connecticut 35 Nevada 14 Delaware 7 New Hampshire 29 Florida 106 New Jersey 43 Georgia 13 New York 144 Idaho 4 North Carolina 56 Illinois 34 Ohio 140 Indiana 38 Pennsylvania 127 Iowa 18 Rhode Island 11 Kentucky 33 South Carolina 15 Louisiana 20 Tennessee 17 Maine 18 Vermont 7 Maryland 70 Virginia 69 Massachusetts 40 West Virginia 9 Michigan 31 Wisconsin 11 Total 1,299 Company-operated Stores and Other Properties as of March 25, 2023 Stores Owned 330 Leased 908 Owned buildings on leased land 61 Total 1,299 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.
Monro, Inc. 2022 Form 10-K 19 Table of Contents LEGAL PROCEEDINGS & MINE SAFETY DISCLOSURES
We also lease two retread facilities located in Florida and Tennessee. Monro, Inc. 2023 Form 10-K 19 Table of Contents LEGAL PROCEEDINGS & MINE SAFETY DISCLOSURES
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.
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 store leases (590 stores) expire after March 2033. We own our corporate headquarters building located in Rochester, New York, and we lease and own additional office space elsewhere in the U.S.
Removed
The highest contingent percentage rent of any lease is 7.5 percent, and no such lease has adversely affected profitability of the store subject thereto. Our seven wholesale locations are situated within distribution centers that are leased. We own our corporate headquarters building located in Rochester, New York, and we lease and own additional office space elsewhere in the U.S.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

4 edited+5 added−1 removed1 unchanged
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 .
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 2023, 2022, and 2021 are disclosed in our Consolidated Statements of Changes in Shareholders’ Equity .
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.
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 6 to the Company’s consolidated financial statements.
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.
The graph assumes the investment of $100 in Monro common stock, the S&P SmallCap 600 Index, the S&P Composite 1500 Specialty Retail Index, the S&P 500 Other Specialty Retail Index, and the S&P 500 Industrials Index and reinvestment of all dividends.
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.
Item 5. Market for the Company's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Market Information Our common stock is listed on the Nasdaq Stock Market under the symbol "MNRO". We are authorized to issue up to 65,000,000 shares of common stock, par value $0.01, and up to 150,000 shares of preferred stock, par value $1.50.
Removed
Stock Performance Graph Fiscal Years Ended March 2016 2018 2019 2020 2021 2022 Monro, Inc. $ 100.00 $ 104.35 $ 170.41 $ 87.45 $ 133.48 $ 91.67 S&P Industrials Index 100.00 113.95 117.64 94.73 160.67 170.54 S&P Specialty Stores Index 100.00 86.40 126.08 101.39 164.64 190.36 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.
Added
Share Repurchase Activity On May 19, 2022, our Board of Directors authorized a share repurchase program for the repurchase of up to $150 million of shares of our common stock with no stated expiration. Under the program, we have repurchased 2.2 million shares of common stock at an average price of $44.00, for a total investment of $96.9 million.
Added
As of March 25, 2023, the dollar value of shares that may yet be purchased under the program is $53.1 million. We did not repurchase shares under this program during the three months ended March 25, 2023. Holders of Record As of May 12, 2023, our common stock was held by approximately 45 shareholders of record.
Added
Monro, Inc. 2023 Form 10-K 21 Table of Contents OTHER INFORMATION Stock Performance Graph Fiscal Years Ended March 2018 2019 2020 2021 2022 2023 Monro, Inc. $ 100.00 $ 163.30 $ 83.80 $ 127.91 $ 87.85 $ 100.24 New Indexes: S&P SmallCap 600 Index 100.00 101.57 75.27 147.02 148.83 135.71 S&P Composite 1500 Specialty Retail Index 100.00 119.25 100.65 191.44 191.58 201.01 Former Indexes: S&P 500 Other Specialty Retail Index 100.00 145.93 117.35 190.56 220.33 242.65 S&P 500 Industrials Index 100.00 103.23 83.13 141.00 149.66 149.91 The graph above compares the cumulative total shareholder return on our common stock for the last five fiscal years ended March with the cumulative return on (i) the S&P SmallCap 600 Index, (ii) the S&P Composite 1500 Specialty Retail Index, (iii) the S&P 500 Other Specialty Retail Index, and (iv) the S&P 500 Industrials Index.
Added
We have elected to replace the S&P 500 Other Specialty Retail and S&P 500 Industrials indexes with the S&P SmallCap 600 and S&P Composite 1500 Specialty Retail indexes because we are included in the S&P SmallCap 600 Index and the S&P Composite 1500 Specialty Retail Index aligns better with our industry and business focus than the former indexes.
Added
In this transition year, in accordance with Item 201(e) of the Regulations S-K, the stock performance graph above includes the two new indexes and the two former indexes used in the immediately preceding year.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

1 edited+99 added−21 removed0 unchanged
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.
The decrease in gross profit, as a percentage of sales, was also partially due to an increase in technician labor costs, as a percentage of sales, as we have continued our incremental investment in technician labor costs during fiscal 2023 to support current and future sales growth. We do not expect further significant incremental investment in technician headcount.
Removed
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations Executive Overview We continue to make strategic investments to support our operating and financial model designed to drive sustainable sales and profit growth.
Added
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 26, 2022, filed on May 23, 2022.
Removed
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.
Added
Sales Sales include automotive undercar repair, tire replacement and tire related service sales, net of discounts, returns, etc., and revenue from the sale of warranty agreements and commissions earned from the delivery of tires. See Note 7 to the Company’s consolidated financial statements for additional information.
Removed
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.
Added
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 2023 and 2022. Sales growth – from both comparable store sales and new stores – represents an important driver of our long-term profitability.
Removed
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.
Added
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 strategy, convenience, and other factors will, over the long-term, drive both increasing guest traffic and the average ticket amount spent.
Removed
Of the $105 million purchase price, $65 million is exp ected 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.
Added
Monro, Inc. 2023 Form 10-K 24 Table of Contents MANAGEMENT’S DISCUSSION AND ANALYSIS Sales (thousands) 2023 2022 Sales $ 1,325,382 $ 1,359,328 Dollar change compared to prior year $ (33,946) Percentage change compared to prior year (2.5) % The sales decrease was due to a decrease in sales from closed stores, driven by the sale of our wholesale tire operations in the first quarter of 2023.
Removed
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.
Added
The decrease in sales in 2023 from the prior year for the wholesale locations was approximately $90.6 million.
Removed
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.
Added
This was partially offset by an increase in comparable store sales from an increase in average ticket amount across product categories and price points, primarily due to a comparable store sales increase in approximately 300 of our small or underperforming stores, and an increase in sales from new stores.
Removed
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.
Added
The following table shows the primary drivers of the change in sales between 2023 and 2022.
Removed
Earnings Per Common Share Percent Change 2022 2021 2022/2021 Diluted EPS $ 1.81 $ 1.01 79.2 % Adjustments 0.05 0.12 Adjusted diluted EPS $ 1.85 $ 1.14 62.3 % Note: Amounts may not foot due to rounding.
Added
Sales Percentage Change 2023 Sales change (2.5) % Primary drivers of change in sales Closed store sales (a) (7.0) % Comparable stores sales (b)(c) 2.5 % New store sales (d) 2.0 % (a) The change in closed store sales is primarily due to sales from the wholesale locations sold to ATD.
Removed
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.
Added
(b) On a comparable store sales basis, comparable store sales increased by 2.8 percent. (c) On a comparable store sales basis, comparable store sales at our retail locations increased by 3.5 percent. (d) Sales from the fiscal 2023 acquisitions and fiscal 2022 acquisitions represent the change.
Removed
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.
Added
Broad-based inflationary pressures impacting consumers, including higher fuel prices and the negative impact on miles driven, partly led to lower demand in some of our key service categories during fiscal 2023. We expect the inflationary environment to continue to impact our customers in fiscal 2024.
Removed
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.
Added
Comparable Store Product Category Sales Change 2023 2022 Tires (a) 5 % 11 % Maintenance 5 % 16 % Brakes (1) % 29 % Alignment (4) % 26 % Front end/shocks (2) % 16 % Exhaust (6) % 14 % (a) Comparable store tire sales increased six percent at our retail locations during 2023.
Removed
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 Monro, Inc. 2022 Form 10-K 22 Table of Contents MANAGEMENT’S DISCUSSION AND ANALYSIS upon the results of our stores. Comparable sales measures vary across the retail industry.
Added
For 2022, the comparable store sales increase across all product categories reflect higher traffic and higher average ticket sales compared to the prior period in which the COVID-19 pandemic had a more volatile impact on demand.
Removed
Therefore, our comparable store sales calculation is not necessarily comparable to similarly titled measures reported by other companies.
Added
Sales by Product Category 2023 2022 Tires 50 % 53 % Maintenance 27 24 Brakes 14 13 Steering (a) 8 8 Exhaust 1 2 Total 100 % 100 % (a) Steering product category includes front end/shocks and alignment product category sales.
Removed
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.
Added
Change in Number of Stores 2023 Beginning store count 1,304 Opened (a) 11 Closed (16) Ending store count 1,299 (a) Includes six stores opened related to the 2023 acquisitions.
Removed
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.
Added
Monro, Inc. 2023 Form 10-K 25 Table of Contents MANAGEMENT’S DISCUSSION AND ANALYSIS Cost of Sales and Gross Profit Gross Profit (thousands) 2023 2022 Gross profit $ 456,175 $ 481,836 Percentage of sales 34.4 % 35.4 % Dollar change compared to prior year $ (25,661) Percentage change compared to prior year (5.3) % The decrease in gross profit, as a percentage of sales, of 100 basis points (“bps”) for 2023 as compared to the prior year was primarily due to an increase in retail material costs, which increased as a percentage of sales, mainly a result of a shift to a higher mix of tire sales at our retail locations and customers trading down to opening price point tires.
Removed
If we are unable to fill enough teammate positions, we may be unable to earn as much revenue as if we were fully staffed.
Added
Partially offsetting these increases was the impact from our wholesale operations which were sold during the first three months of fiscal 2023. Additionally, there was 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.
Removed
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.
Added
Gross Profit as a Percentage of Sales Change 2023 Gross profit change (100) bps Drivers of change in gross profit as a percentage of sales Retail material costs (200) bps Technician labor costs (130) bps Retail distribution and occupancy costs 20 bps Impact from sale of wholesale operations 210 bps Operating, Selling, General and Administrative Expenses Operating, Selling, General and Administrative Expenses (thousands) 2023 2022 Operating, Selling, General and Administrative Expenses $ 376,425 $ 380,538 Percentage of sales 28.4 % 28.0 % Dollar change compared to prior year $ (4,113) Percentage change compared to prior year (1.1) % The decrease of $4.1 million in operating, selling, general and administrative (“OSG&A”) expenses from the prior year is primarily due to lower expenses from 16 retail stores closed and our wholesale tire locations that were sold as well as decreased expenses from comparable stores mainly a result of cost control.
Removed
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.
Added
The decrease in OSG&A expenses is also partially due to the gain on the sale of our wholesale tire locations and tire distribution assets, as well as the gain on the sale of related warehouses, net of associated closing costs, and a decrease in litigation reserve/settlement costs.
Removed
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.
Added
Partially offsetting these decreases were increased expenses from 11 new stores, a full year of expenses for stores acquired in 2022, an increase in costs incurred in connection with restructuring and elimination of certain executive management positions upon completion of the divestiture to ATD, and an increase in costs related to shareholder matters.
Removed
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 ,
Added
OSG&A Expenses Change (thousands) 2023 OSG&A expenses change $ (4,113) Drivers of change in OSG&A expenses Decrease from closed retail stores and wholesale tire locations sold $ (4,873) Decrease from comparable stores $ (3,829) Decrease from gain on sale of wholesale tire locations, tire distribution assets and related warehouses, net $ (3,496) Decrease in litigation reserve/settlement costs $ (1,759) Increase from new stores $ 7,274 Increase in management restructuring costs $ 1,338 Increase in costs related to shareholder matters $ 1,232 Monro, Inc. 2023 Form 10-K 26 Table of Contents MANAGEMENT’S DISCUSSION AND ANALYSIS Other Performance Factors Net Interest Expense Net interest expense of $23.2 million for 2023 decreased $1.5 million as compared to the prior year and decreased as a percentage of sales from 1.8 percent to 1.7 percent.
Added
Weighted average debt outstanding for 2023 decreased by approximately $98 million as compared to 2022. This decrease is primarily related to a decrease in debt outstanding under our Credit Facility. The weighted average interest rate increased approximately 50 basis points from the prior year due primarily to an increase in the Credit Facility’s floating borrowing rates.
Added
Provision for Income Taxes Our effective income tax rate was 31.7 percent for 2023 compared to 20.3 percent for 2022.
Added
The effective income tax rate for 2023 was higher by 5.3 percent because of discrete tax impacts from the divestiture of assets relating to our wholesale tire operations and internal tire distribution operations as well as the revaluation of deferred tax balances due to changes in the mix of pre-tax income in various U.S. state jurisdictions because of the divestiture.
Added
Our effective income tax rate for 2022 was lower by 4.0 percent due to the difference in statutory tax rates from a loss year to years in which such net operating loss may be carried back.
Added
Additionally, the increase in our effective income tax rate for 2023 over the prior year was also due to other state income tax impacts from the divestiture. See Note 8 to the Company’s consolidated financial statements for additional information.
Added
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.
Added
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, litigation reserves/settlement costs, and items related to store impairment charges and closings, as well as Monro.Forward or acquisition initiatives.
Added
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.
Added
Adjusted net income is summarized as follows: Reconciliation of Adjusted Net Income (thousands) 2023 2022 Net income $ 39,048 $ 61,568 Store impairment charge 982 759 Gain on sale of wholesale tire and distribution assets (a) (3,496) — Store closing costs 515 (437) Monro.Forward initiative costs 260 689 Acquisition due diligence and integration costs 31 1,249 Litigation reserve/settlement costs 2,000 3,759 Management restructuring/transition costs (b) 1,338 59 Costs related to shareholder matters 1,232 — Transition costs related to back-office optimization 361 — Provision for income taxes on pre-tax adjustments (825) (1,465) Income tax benefit related to net operating loss carryback (c) — (3,119) Certain discrete tax items (d) 3,034 — Adjusted net income $ 44,480 $ 63,062 (a) Amount includes the gain on sale of related warehouse, net of associated closing costs.
Added
(b) Costs incurred in fiscal 2023 in connection with restructuring and elimination of certain management positions upon completion of our sale of wholesale tire locations and distribution assets.
Added
(c) Income tax benefit related to net operating loss carryback adjustment that reflects the difference in statutory tax rates from a loss year to years in which such net operating loss may be carried back.
Added
(d) Certain discrete tax items related to the sale of our wholesale tire locations and tire distribution assets as well as the revaluation of deferred tax balances due to changes in the mix of pre-tax income in various U.S. state jurisdictions because of the sale.
Added
Monro, Inc. 2023 Form 10-K 27 Table of Contents MANAGEMENT’S DISCUSSION AND ANALYSIS Adjusted diluted EPS is summarized as follows: Reconciliation of Adjusted Diluted EPS 2023 2022 Diluted EPS $ 1.20 $ 1.81 Store impairment charge 0.02 0.02 Gain on sale of wholesale tire and distribution assets (0.08) — Store closing costs 0.01 (0.01) Monro.Forward initiative costs 0.01 0.02 Acquisition due diligence and integration costs (a) 0.00 0.03 Litigation reserve/settlement costs 0.05 0.08 Management restructuring/transition costs (a) 0.03 0.00 Costs related to shareholder matters 0.03 — Transition costs related to back-office optimization 0.01 — Income tax benefit related to net operating loss carryback — 0.09 Certain discrete tax items 0.09 — Adjusted diluted EPS $ 1.36 $ 1.85 (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.
Added
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.
Added
The certain discrete tax items for 2023 and income tax benefit related to net operating loss carryback adjustment for 2022 to each of net income and diluted EPS are tax affected . The other adjustments to diluted EPS reflect adjusted effective tax rates of 25.6 percent and 24.1 percent for 2023 and 2022, respectively.
Added
These adjusted effective tax rates exclude the income tax impacts from share-based compensation and for 2023 and 2022 exclude certain discrete tax items and differences in statutory tax rates for net operating loss carrybacks, respectively. See adjustments from the Reconciliation of Adjusted Net Income table above for pre-tax amounts.
Added
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.
Added
The cash we generate from our operations will allow us to continue to support business operations as well as invest in attractive acquisition opportunities intended to drive long-term sustainable growth, pay down debt, return cash to our shareholders through our dividend program and repurchase shares of our common stock under our common stock repurchase program.
Added
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.
Added
Conversely, we may also periodically determine that it is in our best interests to voluntarily repay certain indebtedness early. Dividends We paid cash dividends totaling $36.4 million ($1.12 per share) in 2023 and $34.7 million ($1.02 per share) in 2022, a per share increase of 10 percent.
Added
We have paid dividends annually since fiscal 2006 and it is our intent to continue to do so in the future. Share Repurchases We returned $96.9 million to shareholders through share repurchases during fiscal 2023.
Added
For details regarding our share repurchase program, see Part II , Item 5 , “ Market for the Company's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities ” of this report and Note 15 to our consolidated financial statements.
Added
Monro, Inc. 2023 Form 10-K 28 Table of Contents MANAGEMENT’S DISCUSSION AND ANALYSIS Working Capital Management As of March 25, 2023, we had a working capital deficit of $190.7 million, an increase from $76.5 million as of March 26, 2022.
Added
The increase was driven by an increase in accounts payable as a result of certain of our suppliers that participate in our supply chain finance program. We have agreed to contractual payment terms and conditions with our suppliers.
Added
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 1 to our consolidated financial statements.
Added
Future 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 and leasing arrangements. The timing and nature of these obligations are expected to have an impact on our liquidity and capital requirements in future periods.
Added
Contractual Obligations Commitments Due by Period Within 2 to 4 to After (thousands) Total 1 Year 3 Years 5 Years 5 Years Principal payments on long-term debt $ 105,000 $ 105,000 Finance lease commitments/financing obligations (a) 415,296 $ 53,981 $ 99,984 90,489 $ 170,842 Operating lease commitments (a) 263,664 44,461 79,315 60,875 79,013 Total $ 783,960 $ 98,442 $ 179,299 $ 256,364 $ 249,855 (a) Finance and operating lease commitments represent future undiscounted lease payments and include $88.5 million and $57.6 million, respectively, related to options to extend lease terms that are reasonably certain of being exercised.
Added
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.
Added
Summary of Cash Flows (thousands) 2023 2022 Cash provided by operating activities $ 215,016 $ 173,759 Cash provided by (used for) investing activities 26,546 (109,801) Cash used for financing activities (244,626) (85,970) Decrease in cash and equivalents (3,064) (22,012) Cash and equivalents at beginning of period 7,948 29,960 Cash and equivalents at end of period $ 4,884 $ 7,948 Cash provided by operating activities For 2023, cash provided by operating activities was $215.0 million, which consisted of net income of $39.0 million, adjusted by non-cash charges of $80.9 million and by a change in operating assets and liabilities of $95.1 million.
Added
The non-cash charges were largely driven by $77.0 million of depreciation and amortization. The change in operating assets and liabilities was largely due to our supply chain finance program being a source of cash as we improved our cash flow by $120.5 million.
Added
This source of cash was partially offset by our inventory balance being a use of cash of $18.2 million as well as our federal and state income taxes payable being a use of cash of $2.4 million.
Added
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.
Added
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.
Added
Monro, Inc. 2023 Form 10-K 29 Table of Contents MANAGEMENT’S DISCUSSION AND ANALYSIS Cash provided by / used for investing activities For 2023, cash provided by investing activities was $26.5 million.
Added
This was primarily due to cash from the sale of our wholesale tire locations and distribution assets and from other property and equipment for $65.3 million and $7.2 million, respectively, partially offset by cash used for capital expenditures, including property and equipment, and acquisitions of $39.0 million and $6.7 million, respectively.
Added
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.
Added
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.

… 41 more changes not shown on this page.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

3 edited+0 added−0 removed0 unchanged
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.
Item 7A. Quantitative and Qualitative Disclosures about Market Risk We are exposed to market risk from potential changes in interest rates. As of March 25, 2023, excluding finance leases and financing obligations, we had no debt financing at fixed interest rates, for which the fair value would be affected by changes in market interest rates.
Our cash flow exposure on floating rate debt would result in annual interest expense fluctuations of approximately $1.8 million, based upon our debt position as of March 26, 2022, given a change in LIBOR of 100 basis points.
Our cash flow exposure on floating rate debt would result in annual interest expense fluctuations of approximately $1.1 million, based upon our debt position as of March 25, 2023, given a change in SOFR 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 Table of Contents FINANCIAL STATEMENTS INDEX
Debt financing had a carrying amount and a fair value of $105.0 million as of March 25, 2023, as compared to a carrying amount and a fair value of $176.5 million as of March 26, 2022. Monro, Inc. 2023 Form 10-K 32 Table of Contents FINANCIAL STATEMENTS INDEX

Other MNRO 10-K year-over-year comparisons