UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

____________________________________________________________

FORM 10-Q

____________________________________________________________

(Mark One)

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

For the quarterly period ended September 24, 2022

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

For the transition period from _ to _

Commission File Number: 0-19357

____________________________________________________________

Monro, Inc.

(Exact name of registrant as specified in its charter)

____________________________________________________________

New York	16-0838627
(State or other jurisdiction of	(I.R.S. Employer
incorporation or organization)	Identification No.)
200 Holleder Parkway, Rochester, New York	14615
(Address of principal executive offices)	(Zip code)

Registrant’s telephone number, including area code: (585) 647-6400

_________________________________________

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading<br><br>Symbol(s)	Name of each exchange on which registered
Common Stock, par value $0.01 per share	MNRO	The Nasdaq Stock Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. x Yes ¨ No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). x Yes ¨ No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer x Accelerated filer ¨ Non-accelerated filer ¨ Smaller reporting company ¨ Emerging growth company ¨

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ¨ Yes x No

As of October 21, 2022, 31,455,472 shares of the registrant's common stock, $0.01 par value per share, were outstanding.

PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Consolidated Balance Sheets	3
Consolidated Statements of Income and Comprehensive Income	4
Consolidated Statements of Changes in Shareholders’ Equity	5
Consolidated Statements of Cash Flows	6
Notes to Consolidated Financial Statements	8
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations	15
Item 3. Quantitative and Qualitative Disclosures About Market Risk	24
Item 4. Controls and Procedures	24
PART II. OTHER INFORMATION
Item 1. Legal Proceedings	25
Item 2. UnregisteredSales of Equity Securities and Use of Proceeds	25
Item 6. Exhibits	26
Signatures	27

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Monro, Inc. Q2 2023 Form 10-Q	2

CONSOLIDATED FINANCIAL STATEMENTS

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

Consolidated Balance Sheets

(thousands, except footnotes) (unaudited)	September 24, 2022		March 26, 2022
Assets
Current assets
Cash and equivalents	$	9,794	$	7,948
Accounts receivable		12,603		14,797
Inventories		135,006		166,271
Other current assets		83,408		56,486
Total current assets		240,811		245,502
Property and equipment, net		307,585		315,193
Finance lease and financing obligation assets, net		236,734		268,406
Operating lease assets, net		213,715		213,588
Goodwill		730,253		776,714
Intangible assets, net		18,162		26,682
Other non-current assets		38,172		20,174
Long-term deferred income tax assets		3,637		5,153
Total assets	$	1,789,069	$	1,871,412
Liabilities and shareholders' equity
Current liabilities
Current portion of finance leases and financing obligations	$	40,433	$	42,092
Current portion of operating lease liabilities		35,557		34,692
Accounts payable		184,098		131,989
Federal and state income taxes payable		9,806		2,921
Accrued payroll, payroll taxes and other payroll benefits		14,971		18,540
Accrued insurance		52,017		49,391
Deferred revenue		14,812		14,153
Other current liabilities		33,467		28,186
Total current liabilities		385,161		321,964
Long-term debt		130,000		176,466
Long-term finance leases and financing obligations		320,102		357,475
Long-term operating lease liabilities		193,660		192,637
Other long-term liabilities		11,314		10,821
Long-term deferred income tax liabilities		26,415		28,560
Long-term income taxes payable		647		583
Total liabilities		1,067,299		1,088,506
Commitments and contingencies - Note 9
Shareholders' equity:
Class C Convertible Preferred stock		29		29
Common stock		400		399
Treasury stock		(179,944)		(108,729)
Additional paid-in capital		247,907		244,577
Accumulated other comprehensive loss		(4,692)		(4,494)
Retained earnings		658,070		651,124
Total shareholders' equity		721,770		782,906
Total liabilities and shareholders' equity	$	1,789,069	$	1,871,412

Class C Convertible Preferred stock Authorized 150,000 shares, $1.50 par value, $0.064 conversion value; 19,664 shares issued and outstanding

Common stock Authorized 65,000,000 shares, $0.01 par value; 39,957,223 shares issued as of September 24, 2022 and 39,906,561 shares issued as of March 26, 2022

Treasury stock 7,977,316 shares as of September 24, 2022 and 6,359,871 shares as of March 26, 2022, at cost

See accompanying Notes to Consolidated Financial Statements.

Monro, Inc. Q2 2023 Form 10-Q	3

CONSOLIDATED FINANCIAL STATEMENTS

Consolidated Statements of Income and Comprehensive Income

	Three Months Ended				Six Months Ended
(thousands, except per share data) (unaudited)	September 24, 2022		September 25, 2021		September 24, 2022		September 25, 2021
Sales	$	329,818	$	347,699	$	679,353	$	689,517
Cost of sales, including distribution and occupancy costs		213,083		217,016		440,429		432,903
Gross profit		116,735		130,683		238,924		256,614
Operating, selling, general and administrative expenses		93,262		96,205		189,197		194,219
Operating income		23,473		34,478		49,727		62,395
Interest expense, net of interest income		5,705		6,276		11,364		13,217
Other income, net		(98)		(50)		(178)		(93)
Income before income taxes		17,866		28,252		38,541		49,271
Provision for income taxes		4,745		7,267		12,936		12,605
Net income	$	13,121	$	20,985	$	25,605	$	36,666
Other comprehensive loss
Changes in pension, net of tax		(99)		(103)		(198)		(206)
Other comprehensive loss		(99)		(103)		(198)		(206)
Comprehensive income	$	13,022	$	20,882	$	25,407	$	36,460
Earnings per share
Basic	$	0.40	$	0.62	$	0.77	$	1.09
Diluted	$	0.40	$	0.62	$	0.77	$	1.08
Weighted average common shares outstanding
Basic		32,204		33,523		32,844		33,510
Diluted		32,729		34,027		33,349		34,026

See accompanying Notes to Consolidated Financial Statements.

‎

Monro, Inc. Q2 2023 Form 10-Q	4

CONSOLIDATED FINANCIAL STATEMENTS

Consolidated Statements of Changes in Shareholders’ Equity

	Class C											Accumulated
	Convertible									Additional		Other
	Preferred Stock			Common Stock			Treasury Stock			Paid-In		Comprehensive		Retained		Total
(thousands) (unaudited)	Shares	Amount		Shares	Amount		Shares	Amount		Capital		Loss		Earnings		Equity
Balance at June 26, 2021	20	$	29	39,865	$	399	6,360	$	(108,729)	$	239,738	$	(4,722)	$	631,876	$	758,591
Net income															20,985		20,985
Other comprehensive loss
Pension liability adjustment													(103)				(103)
Dividends declared
Preferred															(120)		(120)
Common															(8,719)		(8,719)
Dividend payable															(39)		(39)
Stock options and restricted stock				35		—					1,206						1,206
Stock-based compensation											1,117						1,117
Balance at September 25, 2021	20	$	29	39,900	$	399	6,360	$	(108,729)	$	242,061	$	(4,825)	$	643,983	$	772,918
Balance at June 25, 2022	20	$	29	39,920	$	399	6,773	$	(125,945)	$	245,689	$	(4,593)	$	654,097	$	769,676
Net income															13,121		13,121
Other comprehensive loss
Pension liability adjustment													(99)				(99)
Dividends declared
Preferred															(129)		(129)
Common															(8,967)		(8,967)
Dividend payable															(52)		(52)
Repurchase of stock							1,204		(53,999)								(53,999)
Stock options and restricted stock				37		1					327						328
Stock-based compensation											1,891						1,891
Balance at September 24, 2022	20	$	29	39,957	$	400	7,977	$	(179,944)	$	247,907	$	(4,692)	$	658,070	$	721,770
Balance at March 27, 2021	20	$	29	39,848	$	398	6,360	$	(108,729)	$	238,244	$	(4,619)	$	624,361	$	749,684
Net income															36,666		36,666
Other comprehensive loss
Pension liability adjustment													(206)				(206)
Dividends declared
Preferred															(230)		(230)
Common															(16,761)		(16,761)
Dividend payable															(53)		(53)
Stock options and restricted stock				52		1					1,945						1,946
Stock-based compensation											1,872						1,872
Balance at September 25, 2021	20	$	29	39,900	$	399	6,360	$	(108,729)	$	242,061	$	(4,825)	$	643,983	$	772,918
Balance at March 26, 2022	20	$	29	39,907	$	399	6,360	$	(108,729)	$	244,577	$	(4,494)	$	651,124	$	782,906
Net income															25,605		25,605
Other comprehensive loss
Pension liability adjustment													(198)				(198)
Dividends declared
Preferred															(258)		(258)
Common															(18,304)		(18,304)
Dividend payable															(97)		(97)
Repurchase of stock							1,617		(71,215)								(71,215)
Stock options and restricted stock				50		1					286						287
Stock-based compensation											3,044						3,044
Balance at September 24, 2022	20	$	29	39,957	$	400	7,977	$	(179,944)	$	247,907	$	(4,692)	$	658,070	$	721,770

We declared $0.28 and $0.26 dividends per common share or equivalent for the three months ended September 24, 2022 and September 25, 2021, respectively, and $0.56 and $0.50 dividends per common share or equivalent for the six months ended September 24, 2022 and September 25, 2021, respectively.

See accompanying Notes to Consolidated Financial Statements.

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Monro, Inc. Q2 2023 Form 10-Q	5

CONSOLIDATED FINANCIAL STATEMENTS

Consolidated Statements of Cash Flows

	Six Months Ended
(thousands) (unaudited)	September 24, 2022		September 25, 2021
Operating activities
Net income	$	25,605	$	36,666
Adjustments to reconcile net income to cash provided by operating activities:
Depreciation and amortization		39,360		40,257
Share-based compensation expense		3,044		1,872
Gain on disposal of assets		(1,185)		(281)
Gain on divestiture		(2,394)		—
Deferred income tax expense		(564)		7,230
Change in operating assets and liabilities (excluding acquisitions and divestitures)
Accounts receivable		(1,791)		(657)
Inventories		(6,078)		(1,680)
Other current assets		(1,392)		(4,470)
Other non-current assets		18,343		16,253
Accounts payable		52,109		8,770
Accrued expenses		5,426		5,712
Federal and state income taxes payable		6,885		8,631
Other long-term liabilities		(17,143)		(16,108)
Long-term income taxes payable		64		123
Cash provided by operating activities		120,289		102,318
Investing activities
Capital expenditures		(19,583)		(10,045)
Acquisitions, net of cash acquired		(311)		(62,270)
Proceeds from divestiture		56,586		—
Proceeds from the disposal of assets		1,225		1,022
Other		—		84
Cash provided by (used for) investing activities		37,917		(71,209)
Financing activities
Proceeds from borrowings		102,176		97,066
Principal payments on long-term debt, finance leases and financing obligations		(168,759)		(136,486)
Repurchase of stock		(71,215)		—
Exercise of stock options		—		1,985
Dividends paid		(18,562)		(16,991)
Cash used for financing activities		(156,360)		(54,426)
Increase (decrease) in cash and equivalents		1,846		(23,317)
Cash and equivalents at beginning of period		7,948		29,960
Cash and equivalents at end of period	$	9,794	$	6,643
Supplemental information
Leased assets (reduced) obtained in exchange for (reduced) new finance lease liabilities	$	(9,348)	$	3,573
Leased assets obtained in exchange for new operating lease liabilities	$	20,179	$	3,977

See accompanying Notes to Consolidated Financial Statements.

Monro, Inc. Q2 2023 Form 10-Q	6

INDEX TO NOTES

Notes to Consolidated Financial Statements (unaudited)
Note 1 Description of Business and Basis of Presentation	8
Note 2 Acquisitions and Divestitures	9
Note 3 Earnings per Common Share	11
Note 4 Income Taxes	11
Note 5 Fair Value	11
Note 6 Cash Dividend	11
Note 7 Revenues	12
Note 8 Long-term Debt	12
Note 9 Commitments and Contingencies	13
Note 10 Share Repurchase	14
Monro, Inc. Q2 2023 Form 10-Q	7
---	---

CONSOLIDATED FINANCIAL STATEMENTS

NOTES

Note 1 – Description of Business and Basis of Presentation

Description of business

Monro, Inc. and its direct and indirect subsidiaries (together, “Monro”, the “Company”, “we”, “us”, or “our”), are engaged principally in providing automotive undercar repair and tire replacement sales and tire related services in the United States. Monro had 1,297 Company-operated retail stores located in 32 states and 80 franchised locations as of September 24, 2022.

A certain number of our retail locations also service commercial customers. Our locations that serve commercial customers generally operate consistently with our other retail locations, except that the sales mix for these locations includes a higher number of commercial tires.

Monro’s operations are organized and managed as one single segment designed to offer to our customers replacement tires and tire related services, automotive undercar repair services as well as a broad range of routine maintenance services, primarily on passenger cars, light trucks and vans. We also provide other products and services for brakes; mufflers and exhaust systems; and steering, drive train, suspension and wheel alignment.

Basis of presentation

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with the rules and regulations of the Securities and Exchange Commission (“SEC”) applicable to interim financial statements. While these statements reflect all adjustments (consisting of items of a normal recurring nature) that are, in the opinion of management, necessary for a fair statement of the results of the interim period, they do not include all of the information and footnotes required by United States generally accepted accounting principles (“U.S. GAAP”) for complete financial statement presentation. The consolidated financial statements should be read in conjunction with the financial statement disclosures in our Form 10-K for the fiscal year ended March 26, 2022.

We use the same significant accounting policies in preparing quarterly and annual financial statements. For a description of our significant accounting policies followed in the preparation of the financial statements, see Note 1 of our Form 10-K for the fiscal year ended March 26, 2022.

Due to the seasonal nature of our business, quarterly operating results and cash flows are not necessarily indicative of the results that may be expected for other interim periods or the full year.

Fiscal year

We operate on a 52/53 week fiscal year ending on the last Saturday in March. Fiscal years 2023 and 2022 each contain 52 weeks. Unless specifically indicated otherwise, any references to “2023” or “fiscal 2023” and “2022” or “fiscal 2022” relate to the years ending March 25, 2023 and March 26, 2022, respectively.

Recent accounting pronouncements

In September 2022, the Financial Accounting Standards Board (“FASB”) issued new accounting guidance which requires certain disclosure requirements for supplier finance programs used in connection with the purchase of goods and services. This guidance is effective for fiscal years and interim periods within those years beginning after December 15, 2022. Early adoption is permitted. We are currently evaluating the impact of adopting this guidance.

In October 2021, the FASB issued new accounting guidance which requires an acquiring entity to recognize and measure contract assets and contract liabilities acquired in a business combination as if they entered into the original contract at the same time and same date as the acquiree. This guidance is effective for fiscal years and interim periods within those years beginning after December 15, 2022. Early adoption is permitted. We are currently evaluating the impact of adopting this guidance.

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

Working capital management

As part of our ongoing efforts to manage our working capital and improve our cash flow, we work with suppliers to optimize our purchasing terms and conditions, including extending payment terms. We also facilitate a voluntary supply chain financing program to

Monro, Inc. Q2 2023 Form 10-Q	8

CONSOLIDATED FINANCIAL STATEMENTS

NOTES

provide our suppliers with the opportunity to sell receivables due from us (our accounts payable) to a participating financial institution at the sole discretion of both the supplier and the financial institution. Should a supplier choose to participate in the program, it may receive payment from the financial institution in advance of agreed payment terms; our responsibility is limited to making payments to the respective financial institution on the terms originally negotiated with our supplier. We have concluded that the program is a trade payable program and not indicative of a borrowing arrangement.

Supplemental information

Property and equipment, net: Property and equipment balances are shown on the Consolidated Balance Sheets net of accumulated depreciation of $417.2 million and $414.2 million as of September 24, 2022 and March 26, 2022, respectively.

Note 2 – Acquisitions and Divestitures

Acquisitions

Monro’s acquisitions are strategic moves in our plan to fill in and expand our presence in our existing and contiguous markets, expand into new markets and leverage fixed operating costs such as advertising and administration. Acquisitions in this note generally include acquisitions of five or more locations as well as acquisitions of one to four locations that are part of our greenfield store growth strategy.

2022

On April 25, 2021, we acquired 30 retail tire and automotive repair stores located in California from Mountain View Tire & Service, Inc. These stores operate under the Mountain View Tire & Service name. The acquisition was financed through our Credit Facility, as defined in Note 8. The results of operations for this acquisition are included in our financial results from the acquisition date.

The acquisition resulted in goodwill related to, among other things, growth opportunities, synergies and economies of scale expected from combining the business with ours, as well as unidentifiable intangible assets. All of the goodwill is expected to be deductible for tax purposes.

We expensed all costs related to the acquisition in the six months ended September 25, 2021. The total costs related to the completed acquisition were $0.1 million and $0.4 million for the three and six months ended September 25, 2021, respectively. These costs are included in the Consolidated Statements of Income and Comprehensive Income primarily under operating, selling, general and administrative (“OSG&A”) expenses.

Sales related to the completed acquisition for the three and six months ended September 25, 2021 totaled $11.4 million and $19.4 million, respectively, for the period from acquisition date through September 25, 2021.

Supplemental pro forma information for the current or prior reporting periods has not been presented due to the impracticability of obtaining detailed, accurate or reliable data for the periods the acquired entities were not owned by Monro.

We accounted for the acquisition as a business combination using the acquisition method of accounting and we finalized the purchase accounting related to the acquisition during the three months ended June 25, 2022. As a result of the updated purchase price allocation for the acquisition, certain of the fair value amounts previously estimated were adjusted during the measurement period. These measurement period adjustments resulted from updated valuation reports and appraisals received from our external valuation specialists, as well as revisions to internal estimates. The measurement period adjustments were not material to the Consolidated Balance Sheet as of September 24, 2022 and the Consolidated Statement of Income and Comprehensive Income for the six months ended September 24, 2022.

The acquired assets and liabilities assumed were recorded at their assigned acquisition-date fair values and were consolidated with those of the Company as of the acquisition date. The consideration transferred and net liabilities assumed were recorded as goodwill.

Monro, Inc. Q2 2023 Form 10-Q	9

CONSOLIDATED FINANCIAL STATEMENTS

NOTES

2022 Acquisition-date Fair Values Assigned
(thousands)
Inventory	$	937
Other current assets		217
Property and equipment		2,939
Finance lease and financing obligation assets		15,758
Operating lease assets		17,545
Intangible assets		2,211
Other non-current assets		63
Long-term deferred income tax assets		4,001
Total assets acquired		43,671
Current portion of finance leases and financing obligations		1,447
Current portion of operating lease liabilities		1,698
Deferred revenue		955
Other current liabilities		208
Long-term finance leases and financing obligations		21,957
Long-term operating lease liabilities		22,447
Other long-term liabilities		754
Total liabilities assumed		49,466
Total net identifiable liabilities assumed	$	(5,795)
Total consideration transferred	$	62,127
Less: total net identifiable liabilities assumed		(5,795)
Goodwill	$	67,922

The total consideration of $62.1 million is comprised of $61.0 million in cash and $1.1 million which is due upon finalization of certain lease assignment terms for one store location.

We recorded $2.2 million amortizable intangible assets, including a customer list and a trade name, with a weighted-average amortizable period of approximately eight years. We have recorded acquired right-of-use assets at the present value of remaining lease payments adjusted to reflect favorable or unfavorable market terms of the lease.

We continue to refine the valuation data and estimates primarily related to inventory, warranty reserves, intangible assets, real property leases, and certain liabilities for the 2022 acquisitions that closed subsequent to September 25, 2021 and expect to complete the valuations no later than the first anniversary date of the acquisition. We anticipate that adjustments will continue to be made to the fair values of identifiable assets acquired and liabilities assumed, and those adjustments may or may not be material.

2023

Divestitures

On June 17, 2022, we completed the divestiture of assets relating to our wholesale tire operations (seven locations) and internal tire distribution operations to American Tire Distributors, Inc. (“ATD”). We received $62 million from ATD at the closing of the transaction, of which $5 million is currently being held in escrow. The remaining $40 million (“Earnout”) of the total consideration of $102 million will be paid quarterly over approximately two years based on our tire purchases from or through ATD pursuant to a distribution and fulfillment agreement with ATD. Under the distribution agreement, ATD agreed to supply and sell tires to retail locations we own. After ATD satisfies the Earnout payments, our company-owned retail stores will be required to purchase at least 90 percent of their forecasted requirements for certain passenger car tires, light truck replacement tires, and medium truck tires from or through ATD. Any tires that ATD is unable to supply or fulfill from those categories will be excluded from the calculation of our requirements for tires. The initial term of the distribution agreement is five years after the completion of the Earnout Period, with automatic 12-month renewal periods thereafter. The divestiture enables us to focus our resources on our core retail business operations. In connection with this transaction, we recognized a pre-tax gain of $2.4 million within OSG&A expenses. We also expensed $0.4 million of closing costs and costs associated with the closing of a related warehouse within OSG&A expenses, as finalized during the six months ended September 24, 2022. Additionally, during the three months ended September 24, 2022, we incurred $1.3 million in costs in connection with restructuring and elimination of certain executive management positions upon completion of the divestiture. The divestiture did not meet the criteria to be reported as discontinued operations in our consolidated financial statements as our decision to divest this business did not represent a strategic shift that will have a major effect on our operations and financial results. For additional information regarding discrete tax impacts because of the divestiture, see Note 4.

Monro, Inc. Q2 2023 Form 10-Q	10

CONSOLIDATED FINANCIAL STATEMENTS

NOTES

Note 3 – Earnings per Common Share

Basic earnings per common share amounts are calculated by dividing income available to common shareholders, after deducting preferred stock dividends, by the weighted average number of shares of common stock outstanding. Diluted earnings per common share amounts are calculated by dividing net income by the weighted average number of shares of common stock outstanding adjusted to give effect to potentially dilutive securities.

Earnings per Common Share	Three Months Ended				Six Months Ended
(thousands, except per share data)	September 24, 2022		September 25, 2021		September 24, 2022		September 25, 2021
Numerator for earnings per common share calculation:
Net income	$	13,121	$	20,985	$	25,605	$	36,666
Less: Preferred stock dividends		(129)		(120)		(258)		(230)
Income available to common shareholders	$	12,992	$	20,865	$	25,347	$	36,436
Denominator for earnings per common share calculation:
Weighted average common shares - basic		32,204		33,523		32,844		33,510
Effect of dilutive securities:
Preferred stock		460		460		460		460
Stock based awards		65		44		45		56
Weighted average common shares - diluted		32,729		34,027		33,349		34,026
Basic earnings per common share	$	0.40	$	0.62	$	0.77	$	1.09
Diluted earnings per common share	$	0.40	$	0.62	$	0.77	$	1.08

Weighted average common share equivalents that have an anti-dilutive impact are excluded from the computation of diluted earnings per share.

Note 4 – Income Taxes

For the three months and six months ended September 24, 2022, our effective income tax rate was 26.6 percent and 33.6 percent, respectively, compared to 25.7 percent and 25.6 percent for the three months and six months ended September 25, 2021, respectively. Our effective income tax rate for the six months ended September 24, 2022 was higher by 6.9 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. Our effective income tax rate for the three months and six months ended September 24, 2022 was higher by 0.5 percent and 0.7 percent, respectively, due to the discrete tax impact related to share-based awards.

Note 5 – Fair Value

Long-term debt had a carrying amount that approximates a fair value of $130.0 million as of September 24, 2022, as compared to a carrying amount and a fair value of $176.5 million as of March 26, 2022. The carrying value of our debt approximated its fair value due to the variable interest nature of the debt.

Note 6 – Cash Dividend

We paid dividends of $18.6 million during the six months ended September 24, 2022. The declaration and payment of future dividends will be at the discretion of the Board of Directors and will depend on our financial condition, results of operations, capital requirements, compliance with charter and Credit Facility restrictions, and such other factors as the Board of Directors deems relevant. 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 8.

Monro, Inc. Q2 2023 Form 10-Q	11

CONSOLIDATED FINANCIAL STATEMENTS

NOTES

Note 7 – Revenues

Automotive undercar repair, tire replacement sales and tire related services represent the vast majority of our revenues. We also earn revenue from the sale of tire road hazard warranty agreements as well as commissions earned from the delivery of tires on behalf of certain tire vendors.

Revenue from automotive undercar repair, tire replacement sales and tire related services is recognized at the time the customers take possession of their vehicle or merchandise. For sales to certain customers that are financed through the offering of credit on account, payment terms are established for customers based on our pre-established credit requirements. Payment terms may vary depending on the customer and generally are 30 days. Based on the nature of receivables, no significant financing components exist. Sales are recorded net of discounts, sales incentives and rebates, sales taxes and estimated returns and allowances. We estimate the reduction to sales and cost of sales for returns based on current sales levels and our historical return experience. Such amounts are immaterial to our consolidated financial statements.

Revenues	Three Months Ended				Six Months Ended
(thousands)	September 24, 2022		September 25, 2021		September 24, 2022		September 25, 2021
Tires ^(a)^	$	157,905	$	178,080	$	330,969	$	354,309
Maintenance		90,622		85,971		180,914		170,430
Brakes		47,062		48,173		96,217		94,148
Steering		27,613		28,086		57,594		56,352
Exhaust		5,921		6,581		12,196		12,370
Other		695		808		1,463		1,908
Total	$	329,818	$	347,699	$	679,353	$	689,517

(a) Includes the sale of tire road hazard warranty agreements and tire delivery commissions.

Revenue from the sale of tire road hazard warranty agreements is initially deferred and is recognized over the contract period as costs are expected to be incurred in performing such services, typically 21 to 36 months. The deferred revenue balances at September 24, 2022 and March 26, 2022 were $21.5 million and $20.6 million, respectively, of which $14.8 million and $14.2 million, respectively, are reported in Deferred revenue and $6.7 million and $6.4 million, respectively, are reported in Other long-term liabilities in our Consolidated Balance Sheets.

Changes in Deferred Revenue
(thousands)
Balance at March 26, 2022	$	20,632
Deferral of revenue		11,355
Recognition of revenue		(10,464)
Balance at September 24, 2022	$	21,523

As of September 24, 2022, we expect to recognize $8.9 million of deferred revenue related to road hazard warranty agreements in the remainder of fiscal

2023

, $9.5 million of deferred revenue during our fiscal year ending March 30, 2024, and $3.1 million of deferred revenue thereafter.

Under various arrangements, we receive from certain tire vendors a delivery commission and reimbursement for the cost of the tire that we may deliver to customers on behalf of the tire vendor. The commission we earn from these transactions is as an agent and the net amount retained is recorded as sales.

Note 8 – Long-term Debt

In April 2019, we entered into a new five year $600 million revolving credit facility agreement with eight banks (the “Credit Facility”). Interest only is payable monthly throughout the Credit Facility’s term. The borrowing capacity for the Credit Facility of $600 million includes an accordion feature permitting us to request an increase in availability of up to an additional $250 million. The Credit Facility initially bore interest at 75 to 200 basis points over the London Interbank Offered Rate (“LIBOR”) (or replacement index) or at the prime rate, depending on the type of borrowing and the rates then in effect.

On June 11, 2020, we entered into a First Amendment to the Credit Facility (the “First Amendment”), which, among other things, amended the terms of certain of the financial and restrictive covenants in the credit agreement through the first quarter of fiscal 2022 to provide us with additional flexibility to operate our business. The First Amendment amended the interest rate charged on borrowings to be based on the greater of adjusted one-month LIBOR or 0.75 percent. For the period from June 30, 2020 to June 30, 2021, the minimum interest rate spread charged on borrowings was 225 basis points over LIBOR. Additionally, during the same

Monro, Inc. Q2 2023 Form 10-Q	12

CONSOLIDATED FINANCIAL STATEMENTS

NOTES

period, we were permitted to declare, make or pay any dividend or distribution up to $38.5 million in the aggregate and the acquisition of stores or other businesses up to $100 million in the aggregate were permitted if we were in compliance with the financial covenants and other restrictions in the First Amendment and Credit Facility. As of July 1, 2021, the ability of our Board of Directors to declare, make or pay any dividend or distribution and our ability to acquire stores or other businesses is no longer restricted by the terms of the Credit Facility, as amended by the First Amendment. The Credit Facility requires fees payable quarterly throughout the term between 0.125 percent and 0.35 percent of the amount of the average net availability under the Credit Facility during the preceding quarter.

On October 5, 2021, we entered into a Second Amendment to the Credit Facility (the “Second Amendment”). The Second Amendment, which among other things, amends certain of the financial terms in the Credit Agreement, as amended by the First Amendment. Specifically, the First Amendment had amended the interest rate charged on borrowings to be based on the greater of adjusted one-month LIBOR or 0.75 percent. The Second Amendment amended the interest rate to be based on the greater of adjusted one-month LIBOR or 0.00 percent. In addition, the Second Amendment updated certain provisions regarding a successor interest rate to LIBOR. Except as amended by the First Amendment and Second Amendment, the remaining terms of the credit agreement remain in full force and effect.

Within the Credit Facility, we have a sub-facility of $80 million available for the purpose of issuing standby letters of credit. The sub-facility requires fees aggregating 87.5 to 212.5 basis points annually of the face amount of each standby letter of credit, payable quarterly in arrears. There was a $29.6 million outstanding letter of credit at September 24, 2022.

There was $130.0 million outstanding and $440.4 million available under the Credit Facility at September 24, 2022.

We were in compliance with all debt covenants at September 24, 2022.

Note 9 – Commitments and Contingencies

Commitments

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	$	130,000			$	130,000
Finance lease commitments/financing obligations ^(a)^		450,199	$	55,672		104,877	$	93,858	$	195,792
Operating lease commitments ^(a)^		263,732		42,132		77,216		60,971		83,413
Accrued rent		455		370		32		25		28
Total	$	844,386	$	98,174	$	312,125	$	154,854	$	279,233

(a)Finance and operating lease commitments represent future undiscounted lease payments and include $96.2 million and $63.4 million, respectively, related to options to extend lease terms that are reasonably certain of being exercised.

Contingencies

We are currently a party to various claims and legal proceedings incidental to the conduct of our business. If management believes that a loss arising from any of these matters is probable and can reasonably be estimated, we will record the amount of the loss, or the minimum estimated liability when the loss is estimated using a range, and no point within the range is more probable than another. As additional information becomes available, any potential liability related to these matters is assessed and the estimates are revised, if necessary. Litigation is subject to inherent uncertainties, and unfavorable rulings could occur and may include monetary damages. If an unfavorable ruling were to occur, there exists the possibility of a material adverse impact on the financial position and results of operations of the period in which any such ruling occurs, or in future periods.

Monro, Inc. Q2 2023 Form 10-Q	13

CONSOLIDATED FINANCIAL STATEMENTS

NOTES

Note 10 – Share Repurchase

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. The Board of Directors did not specify a date upon which the authorization will expire. Shares repurchased under this authorization will become treasury shares.

We periodically repurchased shares of our common stock under the repurchase program through open market transactions.

Share Repurchase Activity	Three Months Ended		Six Months Ended
(thousands, except per share data)	September 24, 2022		September 24, 2022
Number of shares purchased		1,203.8		1,617.4
Average price paid per share	$	44.82	$	44.00
Total repurchased	$	53,962	$	71,166

On August 16, 2022, the Inflation Reduction Act of 2022 (“IRA”) was enacted into law. The IRA includes a one percent excise tax on stock repurchase. The new excise tax equals one percent of the fair market value of the stock repurchased, less the fair market value of stock issued, during the tax year. The excise tax applies to repurchases of stock after December 31, 2022.

Monro, Inc. Q2 2023 Form 10-Q	14

MANAGEMENT’S DISCUSSION AND ANALYSIS

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

Economic Conditions

The United States economy experienced high inflation during the first half of fiscal 2023 and there are market expectations that inflation may remain at elevated levels for a sustained period. In addition, labor availability has continued to be constrained and market labor costs have continued to increase. The U.S. Federal Reserve Board also increased interest rates during fiscal 2023 with additional rate increases expected in the coming months. These conditions may give rise to an economic slowdown, and perhaps a recession, and could further increase our costs and/or impact our revenues. It is unclear whether the current economic conditions and government responses to these conditions, including inflation, and increasing interest rates will result in an economic slowdown or recession in the United States. If that occurs, demand for our products and services may decline, possibly significantly, which may significantly and adversely impact our business, results of operations and financial position.

Recent Divestiture

On June 17, 2022, we completed the sale of assets relating to our wholesale tire operations (seven locations) and internal tire distribution operations to American Tire Distributors, Inc. (“ATD”). We expect to receive total consideration of $102 million, consisting of $62 million paid by ATD at closing, of which $5 million is currently being held in escrow, and the remaining $40 million will be paid quarterly over approximately two years based on our tire purchases from or through ATD pursuant to a distribution and fulfillment agreement. For details regarding the sale, see Note 2 to our consolidated financial statements. In the three months ended September 24, 2022, we experienced lower top-line sales due to the sale of our wholesale tire operations to ATD and we incurred $1.3 million in costs in connection with restructuring and elimination of certain executive management positions upon completion of the divestiture.

Financial Summary

Second quarter 2023 included the following notable items:

Diluted earnings per common share (“EPS”) were $0.40.

Adjusted diluted EPS, a non-GAAP measure, were $0.43.

Sales decreased 5.1 percent, due to lower overall tire sales because of the sale of our wholesale tire operations.

Comparable store sales increased 1.3 percent, driven primarily by an approximately 10 percent comparable store sales increase in approximately 300 of our small or underperforming stores.

Operating income of $23.5 million was 31.9 percent lower than the comparable prior-year period, driven primarily by a decrease in gross profit.

Net income was $13.1 million.

Adjusted net income, a non-GAAP measure, was $14.0 million.

Earnings Per Common Share	Three Months Ended						Six Months Ended
	September 24, 2022		September 25, 2021		Change		September 24, 2022		September 25, 2021		Change
Diluted EPS	$	0.40	$	0.62	(35.5)	%	$	0.77	$	1.08	(28.7)	%
Adjustments		0.03		0.00				0.08		0.09
Adjusted diluted EPS	$	0.43	$	0.62	(30.6)	%	$	0.85	$	1.17	(27.4)	%

Adjusted net income and adjusted diluted EPS, each of which is a measure not derived in accordance with U.S. GAAP, exclude the impact of certain items. Management believes that adjusted net income and adjusted diluted EPS are useful in providing period-to-period comparisons of the results of our operations by excluding certain non-recurring items and items related to store closings as well as Monro.Forward or acquisition initiatives. Reconciliations of these non-GAAP financial measures to GAAP measures are provided beginning on page 19 under “Non-GAAP Financial Measures.”

We define comparable store sales as sales for locations that have been opened or owned at least one full fiscal year. We believe this period is generally required for new store sales levels to begin to normalize. Management uses comparable store sales to assess the operating performance of the Company’s stores and believes the metric is useful to investors because our overall results are dependent upon the results of our stores. Comparable sales measures vary across the retail industry. Therefore, our comparable store sales calculation is not necessarily comparable to similarly titled measures reported by other companies.

Monro, Inc. Q2 2023 Form 10-Q	15

MANAGEMENT’S DISCUSSION AND ANALYSIS

Analysis of Results of Operations

Summary of Operating Income	Three Months Ended						Six Months Ended
(thousands)	September 24, 2022		September 25, 2021		Change		September 24, 2022		September 25, 2021		Change
Sales	$	329,818	$	347,699	(5.1)	%	$	679,353	$	689,517	(1.5)	%
Cost of sales, including distribution and occupancy costs		213,083		217,016	(1.8)			440,429		432,903	1.7
Gross profit		116,735		130,683	(10.7)			238,924		256,614	(6.9)
Operating, selling, general and administrative expenses		93,262		96,205	(3.1)			189,197		194,219	(2.6)
Operating income	$	23,473	$	34,478	(31.9)	%	$	49,727	$	62,395	(20.3)	%

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 our consolidated financial statements for further information. We use comparable store sales to evaluate the performance of our existing stores by measuring the change in sales for a period over the comparable, prior-year period of equivalent length. There were 91 selling days in the three months ended September 24, 2022 and in the three months ended September 25, 2021, and 181 selling days in the six months ended September 24, 2022 and in the six months ended September 25, 2021.

Sales growth – from both comparable store sales and new stores – represents an important driver of our long-term profitability. We expect that comparable store sales growth will significantly impact our total sales growth. We believe that our ability to successfully differentiate our customers’, often referred to as “guests”, experience through a careful combination of merchandise assortment, price strategy, convenience, and other factors will, over the long-term, drive both increasing guest traffic and the average ticket amount spent.

Sales	Three Months Ended					Six Months Ended
(thousands)	September 24, 2022			September 25, 2021		September 24, 2022			September 25, 2021
Sales	$	329,818		$	347,699	$	679,353		$	689,517
Dollar change compared to prior year	$	(17,881)				$	(10,164)
Percentage change compared to prior year		(5.1)	%				(1.5)	%

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 fiscal 2023. Sales for the wholesale locations were approximately $28.7 million in the three months ended September 25, 2021. This was partially offset by an increase in sales from new stores and an increase in comparable store sales from an increase in average ticket amount. The following table shows the primary drivers of the change in sales for each of the three months and six months ended September 24, 2022, as compared to the same periods ended September 25, 2021.

Sales Percentage Change	Three Months Ended			Six Months Ended
	September 24, 2022			September 24, 2022
Sales change		(5.1)	%		(1.5)	%
Primary drivers of change in sales
Closed store sales ^(a)^		(8.5)	%		(4.9)	%
New store sales ^(b)^		2.3	%		2.8	%
Comparable store sales ^(c)^		1.3	%		0.8	%

(a)Sales from the wholesale locations sold to ATD constitute most of the change between the three months ended September 24, 2022 and September 25, 2021 and the six months ended September 24, 2022 and September 25, 2021.

(b)Sales from the fiscal 2022 acquisitions represent the change between the three months ended September 24, 2022 and September 25, 2021 and the six months ended September 24, 2022 and September 25, 2021.

(c)Comparable store sales at our retail locations increased by 2.0 percent for the six months ended September 24, 2022.

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 the three and six months ended September 24, 2022. We expect the inflationary environment to continue to impact our customers throughout the remainder of fiscal 2023.

Monro, Inc. Q2 2023 Form 10-Q	16

MANAGEMENT’S DISCUSSION AND ANALYSIS

Comparable Store Product Category Sales Change	Three Months Ended				Six Months Ended
	September 24, 2022		September 25, 2021		September 24, 2022		September 25, 2021
Tires ^(a)^	6	%	10	%	3	%	17	%
Maintenance service	1	%	15	%	1	%	27	%
Brakes	(5)	%	33	%	(2)	%	44	%
Alignment	(8)	%	31	%	(5)	%	42	%
Front end/shocks	(5)	%	16	%	(0)	%	27	%
Exhaust	(11)	%	9	%	(3)	%	20	%

(a)Comparable store tire sales increased five percent at our retail locations during the six months ended September 24, 2022.

For the three and six months ended September 25, 2021, 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 coronavirus (“COVID-19”) pandemic had a more volatile impact on demand.

Sales by Product Category	Three Months Ended				Six Months Ended
	September 24, 2022		September 25, 2021		September 24, 2022		September 25, 2021
Tires	48	%	51	%	49	%	52	%
Maintenance service	28		25		27		25
Brakes	15		14		14		14
Steering ^(a)^	8		8		9		8
Exhaust	1		2		1		1
Total	100	%	100	%	100	%	100	%

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

Change in Number of Company-Operated Retail Stores	Three Months Ended		Six Months Ended
	September 24, 2022	September 25, 2021	September 24, 2022	September 25, 2021
Beginning store count	1,303	1,291	1,304	1,263
Opened ^(a)^	—	—	3	30
Closed	(6)	(3)	(10)	(5)
Ending store count	1,297	1,288	1,297	1,288

(a) The stores opened in the six months ended September 25, 2021 relate to stores acquired from the fiscal 2022 acquisition.

Cost of Sales and Gross Profit

Gross Profit	Three Months Ended						Six Months Ended
(thousands)	September 24, 2022			September 25, 2021			September 24, 2022			September 25, 2021
Gross profit	$	116,735		$	130,683		$	238,924		$	256,614
Percentage of sales		35.4	%		37.6	%		35.2	%		37.2	%
Dollar change compared to prior year	$	(13,948)					$	(17,690)
Percentage change compared to prior year		(10.7)	%					(6.9)	%

The decrease in gross profit, as a percentage of sales, of 220 and 200 basis points (“bps”) for the three and six months ended September 24, 2022, respectively, as compared to the prior year comparable period were primarily due to an increase in retail material costs, which increased as a percentage of sales, as a result of a shift to a higher mix of tire sales at our retail locations and because we intentionally did not pass through in price increases the inflationary impact on material costs to a consumer already impacted by inflationary conditions. 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 made an incremental investment in technician labor costs during the last 12 months to support current and future sales growth. We do not expect further significant incremental investment in technician headcount. Partially offsetting these increases was the impact from our wholesale operations which were sold during the first three months of fiscal 2023.

Gross Profit as a Percentage of Sales Change	Three Months Ended
		September 24, 2022		September 24, 2022
Gross profit change		(220)	bps	(200)	bps
Primary drivers of change in gross profit as a percentage of sales
Retail material costs		(380)	bps	(260)	bps
Technician labor costs		(100)	bps	(130)	bps
Retail distribution and occupancy costs		-	bps	-	bps
Impact from sale of wholesale operations		270	bps	200	bps
Monro, Inc. Q2 2023 Form 10-Q	17
---	---

MANAGEMENT’S DISCUSSION AND ANALYSIS

OSG&A Expenses

OSG&A Expenses	Three Months Ended						Six Months Ended
(thousands)	September 24, 2022			September 25, 2021			September 24, 2022			September 25, 2021
OSG&A Expenses	$	93,262		$	96,205		$	189,197		$	194,219
Percentage of sales		28.3	%		27.7	%		27.8	%		28.2	%
Dollar change compared to prior year	$	(2,943)					$	(5,022)
Percentage change compared to prior year		(3.1)	%					(2.6)	%

The decrease of $2.9 million and $5.0 million in OSG&A expenses for the three months and six months ended September 24, 2022, respectively, from the comparable prior year period is primarily due to decreased expenses from comparable stores mainly a result of cost control during the three months ended September 24, 2022. The decrease in OSG&A expenses for the three months and six months ended September 24, 2022 is also partially due to the gain on the sale of our wholesale tire locations and tire distribution assets, net of closing costs and costs associated with the closing of a related warehouse that were finalized during the three months ended September 24, 2022, as well as lower expenses from 12 retail stores closed and our wholesale tire locations that were sold, as compared to the prior year comparable period, and for the six months ended September 24, 2022, a decrease in litigation settlement costs. Partially offsetting these decreases were increased expenses for the three months and six months ended September 24, 2022 from 21 new stores as well as an increase in executive management restructuring costs incurred upon completion of the sale of our wholesale tire and tire distribution assets and an increase in costs related to shareholder matters.

OSG&A Expenses Change	Three Months Ended		Six Months Ended
(thousands)	September 24, 2022		September 24, 2022
OSG&A expenses change	$	(2,943)	$	(5,022)
Drivers of change in OSG&A expenses
Decrease from comparable stores	$	(4,507)	$	(4,120)
Decrease in litigation settlement costs	$	-	$	(3,920)
Decrease from gain on sale of wholesale tire locations and tire distribution assets, net	$	(788)	$	(1,968)
Decrease from closed retail stores and wholesale tire locations sold	$	(1,257)	$	(1,810)
Increase from new stores	$	1,954	$	5,141
Increase in management restructuring costs	$	1,338	$	1,338
Increase in costs related to shareholder matters	$	317	$	317

Other Performance Factors

Net Interest Expense

Net interest expense of $5.7 million for the three months ended September 24, 2022 decreased $0.6 million as compared to the prior year period, and decreased as a percentage of sales from 1.8 percent to 1.7 percent. Weighted average debt outstanding for the three months ended September 24, 2022 decreased by approximately $93 million as compared to the three months ended September 25, 2021. This decrease is primarily related to a decrease in debt outstanding under the Credit Facility. The weighted average interest rate increased approximately 30 basis points from the prior year quarter due primarily to an increase in Credit Facility borrowing rates.

Net interest expense for the six months ended September 24, 2022 decreased $1.9 million as compared to the same period in the prior year, and decreased from 1.9 percent to 1.7 percent as a percentage of sales for the same periods. Weighted average debt outstanding decreased by approximately $78 million and the weighted average interest rate was relatively flat as compared to the same period of the prior year.

Provision for Income Taxes

Our effective income tax rate for the three months and six months ended September 24, 2022 was 26.6 percent and 33.6 percent, respectively, compared with 25.7 percent and 25.6 percent in the comparable prior-year periods. Our effective income tax rate for the six months ended September 24, 2022 was higher by 6.9 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. Our effective income tax rate for the three months and six months ended September 24, 2022 was higher by 0.5 percent and 0.7 percent, respectively, due to the discrete tax impact related to share-based awards.

Monro, Inc. Q2 2023 Form 10-Q	18

MANAGEMENT’S DISCUSSION AND ANALYSIS

Non-GAAP Financial Measures

In addition to reporting net income and diluted EPS, which are GAAP measures, this Form 10-Q includes adjusted net income and adjusted diluted EPS, which are non-GAAP financial measures. We have included reconciliations to adjusted net income and adjusted diluted EPS from our most directly comparable GAAP measures, net income and diluted EPS, below. Management views these non-GAAP financial measures as indicators to better assess comparability between periods because management believes these non-GAAP financial measures reflect our core business operations while excluding certain non-recurring items and items related to store closings as well as Monro.Forward or acquisition initiatives.

These non-GAAP financial measures are not intended to represent, and should not be considered more meaningful than, or as an alternative to, their most directly comparable GAAP measures. These non-GAAP financial measures may be different from similarly titled non-GAAP financial measures used by other companies.

Adjusted net income is summarized as follows:

Reconciliation of Adjusted Net Income	Three Months Ended				Six Months Ended
(thousands)	September 24, 2022		September 25, 2021		September 24, 2022		September 25, 2021
Net income	$	13,121	$	20,985	$	25,605	$	36,666
Gain on sale of wholesale tire locations and tire distribution assets, net ^(a)^		(788)		—		(1,968)		—
Store closing costs		230		(158)		226		(430)
Monro.Forward initiative costs		19		48		42		151
Acquisition due diligence and integration costs		1		110		(9)		420
Litigation settlement costs		—		—		—		3,920
Management restructuring/transition costs ^(b)^		1,338		—		1,338		59
Costs related to shareholder matters		317		—		317		—
Provision for income taxes on pre-tax adjustments		(280)		—		13		(997)
Certain discrete tax items ^(c)^		—		—		2,644		—
Adjusted net income	$	13,958	$	20,985	$	28,208	$	39,789

(a)Amount includes gain on sale, net of closing costs and costs associated with the closing of a related warehouse.

(b)Costs incurred in 2023 in connection with restructuring and elimination of certain executive management positions upon completion of our sale of wholesale tire locations and tire distribution assets.

(c)Certain discrete 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.

In the Reconciliation of Adjusted Net Income, we determined the Provision for income taxes on pre-tax adjustments by calculating our estimated annual effective income tax rate on pre-tax income before giving effect to any discrete tax items and applying it to the pre-tax adjustments.

Adjusted diluted EPS is summarized as follows:

Reconciliation of Adjusted Diluted EPS	Three Months Ended				Six Months Ended
	September 24, 2022		September 25, 2021		September 24, 2022		September 25, 2021
Diluted EPS	$	0.40	$	0.62	$	0.77	$	1.08
Gain on sale of wholesale tire locations and tire distribution assets, net		(0.02)		—		(0.05)		—
Store closing costs ^(d)^		0.01		(0.00)		0.01		(0.01)
Monro.Forward initiative costs ^(d)^		0.00		0.00		0.00		0.00
Acquisition due diligence and integration costs ^(d)^		0.00		0.00		0.00		0.01
Litigation settlement costs		—		—		—		0.09
Management restructuring/transition costs ^(d)^		0.03		—		0.03		0.00
Costs related to shareholder matters		0.01		—		0.01		—
Certain discrete tax items		—		—		0.08		—
Adjusted diluted EPS	$	0.43	$	0.62	$	0.85	$	1.17

(d)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.

The pre-tax adjustments to diluted EPS reflect estimated annual effective income tax rates on pre-tax income before giving effect to discrete items of 25.1 percent and 24.3 percent for the three months ended September 24, 2022 and September 25, 2021, respectively, and 25.0 percent and 24.2 percent for the six months ended September 24, 2022 and September 25, 2021, respectively. See the pre-tax adjustments from the Reconciliation of Adjusted Net Income table above for pre-tax amounts.

Monro, Inc. Q2 2023 Form 10-Q	19

MANAGEMENT’S DISCUSSION AND ANALYSIS

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 the last three fiscal years. The cash we generate from our operations will allow us to continue to support business operations as well as invest in attractive acquisition opportunities intended to drive long-term sustainable growth, pay down debt, return cash to our shareholders through our dividend program and repurchase shares of our common stock under our common stock repurchase program.

In addition, because we believe a large portion of our future expenditures will be to fund our growth, through acquisition of retail stores and/or opening greenfield stores, we continually evaluate our cash needs and may decide it is best to fund the growth of our business through borrowings on our Credit Facility. Conversely, we may also periodically determine that it is in our best interests to voluntarily repay certain indebtedness early.

Material Cash Requirements

We currently expect our capital expenditures to support our projects, including upgrading our facilities and systems, to be $40 million to $50 million in the aggregate in 2023. Additionally, we have contractual finance lease and operating lease commitments with landlords through October 2040 for $554.4 million in lease payments, of which $96.6 million is due within one year. For details regarding these lease commitments, see Note 9 to our consolidated financial statements.

As of September 24, 2022, we had $130.0 million outstanding under the Credit Facility, none of which is due in the succeeding 12 months. For details regarding our indebtedness that is due, see Note 8 to our consolidated financial statements.

We paid cash dividends totaling $18.6 million ($0.56 per share) during the six months ended September 24, 2022. For details regarding our cash dividend, see Note 6 to our consolidated financial statements.

We returned $71.2 million to shareholders through share repurchases during the six months ended September 24, 2022. For details regarding our share repurchase program, see

Part II

Item 2

, “Unregistered Sales of Equity Securities and Use of Proceeds” of this report and Note 10 to our consolidated financial statements.

Working Capital Management

We work with suppliers to optimize payment terms and conditions on accounts payable to enhance timing of working capital and cash flows. As part of these efforts, we facilitate a voluntary supply chain finance program to provide 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.

Sources and Conditions of Liquidity

Our sources to fund our material cash requirements are predominantly cash from operations, availability under our Credit Facility, and cash and equivalents on hand.

As of September 24, 2022, we had $9.8 million of cash and equivalents. In addition, we had $440.4 million available under the Credit Facility as of September 24, 2022.

We believe that our current sources of funds will provide us with adequate liquidity during the 12-month period following September 24, 2022, as well as in the long-term.

Monro, Inc. Q2 2023 Form 10-Q	20

MANAGEMENT’S DISCUSSION AND ANALYSIS

Summary of Cash Flows

The following table presents a summary of our cash flows from operating, investing and financing activities.

Summary of Cash Flows	Six Months Ended
(thousands)	September 24, 2022		September 25, 2021
Cash provided by operating activities	$	120,289	$	102,318
Cash provided by (used for) investing activities		37,917		(71,209)
Cash used for financing activities		(156,360)		(54,426)
Increase (decrease) in cash and equivalents		1,846		(23,317)
Cash and equivalents at beginning of period		7,948		29,960
Cash and equivalents at end of period	$	9,794	$	6,643

Cash provided by operating activities

For the six months ended September 24, 2022, cash provided by operating activities was $120.3 million, which consisted of net income of $25.6 million, adjusted by non-cash charges of $38.3 million and by a change in operating assets and liabilities of $56.4 million. The non-cash charges were largely driven by $39.4 million of depreciation and amortization. The change in operating assets and liabilities was primarily due to accounts payable and accrued liabilities, net of vendor rebate receivables, being a source of cash of $16.6 million driven by timing of payments as well as our supply chain finance program being a source of cash as we improved our cash flow by $48.2 million. These sources of cash were partially offset by our inventory balance being a use of cash of $6.1 million due to increased inventory purchases

For the six months ended September 25, 2021, cash provided by operating activities was $102.3 million, which consisted of net income of $36.7 million, adjusted by non-cash charges of $49.1 million and by a change in operating assets and liabilities of $16.5 million. The non-cash charges were largely driven by $40.3 million of depreciation and amortization. The change in operating assets and liabilities was primarily due to accounts payable and accrued liabilities, net of vendor rebate receivables, being a source of cash of $10.4 million driven by timing of payments, as well as our federal and state income taxes receivable being a source of cash of $8.6 million due largely to an income tax refund that was received. These sources of cash were partially offset by our inventory balance being a use of cash of $1.7 million due to increased inventory purchases.

Cash provided by / used for investing activities

For the six months ended September 24, 2022, cash provided by investing activities was $37.9 million. This was primarily due to cash from the sale of our wholesale tire locations and tire distribution assets for $56.6 million, partially offset by cash used for capital expenditures, including property and equipment, of $19.6 million.

For the six months ended September 25, 2021, cash used for investing activities was $71.2 million. This was primarily due to cash used for acquisitions and capital expenditures, including property and equipment, of $62.3 million and $10.0 million, respectively. Included in the $62.3 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.

Cash used for financing activities

For the six months ended September 24, 2022, cash used for financing activities was $156.4 million which was primarily due to payment on our Credit Facility, net of amounts borrowed during the period, of $46.4 million, as well as payment of finance lease principal and dividends of $20.1 million and $18.6 million, respectively. Also, we used $71.2 million to repurchase common stock during the period.

For the six months ended September 25, 2021, cash used for financing activities was $54.4 million which was due to payment of the Credit Facility, net of amounts borrowed during the period, finance lease principal of $20.0 million and $19.4 million, respectively, as well as payment of dividends of $17.0 million.

Critical Accounting Estimates

The consolidated financial statements are prepared in accordance with GAAP. The preparation of the consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, costs and expenses, and related disclosures. We base our estimates on historical experience, as appropriate, and on various other assumptions that we believe to be reasonable under the circumstances. Changes in the accounting estimates are reasonably likely to occur from period to period. Accordingly, actual results could differ significantly from the estimates made by management. We evaluate our

Monro, Inc. Q2 2023 Form 10-Q	21

MANAGEMENT’S DISCUSSION AND ANALYSIS

estimates and assumptions on an ongoing basis. To the extent that there are material differences between these estimates and actual results, our future financial statement presentation, financial condition, results of operations, and cash flows may be affected.

For a description of our critical accounting estimates, refer to

Part II

Item 7.

, “Management's Discussion and Analysis of Financial Condition and Results of Operations” of our Form 10-K for the fiscal year ended March 26, 2022. There have been no material changes to our critical accounting estimates since our Form 10-K for the year ended March 26, 2022.

Recent Accounting Pronouncements

See “Recent Accounting Pronouncements” in Note 1 to our consolidated financial statements for a discussion of the impact of recently issued accounting standards on our consolidated financial statements as of September 24, 2022 and the expected impact on the consolidated financial statements for future periods.

Cautionary Note Regarding Forward-Looking Statements

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

•the potential effect of general business or economic conditions on our business, including the direct and indirect effects of the COVID-19 pandemic and the Russian invasion of Ukraine on the economy, inflation, consumer demand and spending levels, and labor shortages in our markets;

•the impact of competitive services and pricing;

•the effect of economic conditions, seasonality, and the impact of weather conditions and natural disasters on customer demand;

•advances in automotive technologies;

•our dependence on third-party vendors for certain inventory;

•the risks associated with vendor relationships and international trade, particularly imported goods such as those sourced from China;

•the impact of changes in U.S. trade relations and the ongoing trade dispute between the United States and China, and other potential impediments to imports;

•our ability to service our debt obligations, including our expected annual interest expense;

•our cash needs, including our ability to fund our future capital expenditures and working capital requirements;

•our anticipated sales, comparable store sales, gross profit margin, costs of goods sold (including product mix), OSG&A expenses and other fixed costs, and our ability to leverage those costs;

•management’s estimates and expectations as they relate to income tax liabilities, deferred income taxes, and uncertain tax positions;

•management’s estimates associated with our critical accounting policies, including business combinations, insurance liabilities, and valuations for our goodwill and indefinite-lived intangible assets impairment analyses;

•the impact of industry regulation, including changes in labor laws;

•potential outcomes related to pending or future litigation matters;

•business interruptions;

•risks relating to disruption or unauthorized access to our computer systems;

•our failure to protect customer and employee personal data;

•our ability to realize the expected benefits of the transaction with American Tire Distributors, Inc.;

•risks relating to acquisitions and the integration of acquired businesses with ours;

Monro, Inc. Q2 2023 Form 10-Q	22

MANAGEMENT’S DISCUSSION AND ANALYSIS

•our growth plans, including our plans to add, renovate, re-brand, expand, remodel, relocate, or close stores and any related costs or charges, our leasing strategy for future expansion, and our ability to renew leases at existing store locations;

•the impact of costs related to planned store closings or potential impairment of goodwill, intangible assets, and long-lived assets;

•expected dividend payments;

•our ability to attract, motivate, and retain skilled field personnel and our key executives; and

•the potential impacts of climate change on our business.

Any of these factors, as well as such other factors as discussed in

Part I

Item 1A.

, “Risk Factors” of our Form 10-K for the fiscal year ended March 26, 2022, as well as in our periodic filings with the SEC, could cause our actual results to differ materially from our anticipated results. The information provided in this report is based upon the facts and circumstances known as of the date of this report, and any forward-looking statements made by us in this report speak only as of the date on which they are made. Except as required by law, we undertake no obligation to update these forward-looking statements after the date of this Form 10-Q to reflect events or circumstances after such date, or to reflect the occurrence of unanticipated events.

Monro, Inc. Q2 2023 Form 10-Q	23

DISCLOSURES ABOUT MARKET RISK & CONTROLS AND PROCEDURES

Item 3. Quantitative and Qualitative Disclosures about Market Risk

We are exposed to market risk from potential changes in interest rates. As of September 24, 2022, excluding finance leases and financing obligations, we had no debt financing at fixed interest rates, for which the fair value would be affected by changes in market interest rates. Our cash flow exposure on floating rate debt would result in annual interest expense fluctuations of approximately $1.3 million based upon our debt position at September 24, 2022 and approximately $1.8 million based upon our debt position at March 26, 2022, given a change in LIBOR (or replacement index) of 100 basis points.

Debt financing had a carrying amount that approximates a fair value of $130.0 million as of September 24, 2022, as compared to a carrying amount and a fair value of $176.5 million as of March 26, 2022.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in reports that we file or submit to the SEC pursuant to the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

In conjunction with the close of each fiscal quarter and under the supervision of our Chief Executive Officer (our principal executive officer) and Chief Financial Officer (our principal financial officer), we conduct an update, a review and an evaluation of the effectiveness of our disclosure controls and procedures. It is the conclusion of our Chief Executive Officer and Chief Financial Officer, based upon an evaluation completed as of the end of the most recent fiscal quarter reported on herein, that our disclosure controls and procedures were effective.

Changes in Internal Controls Over Financial Reporting

There were no changes in our internal control over financial reporting during the quarter ended September 24, 2022 that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Monro, Inc. Q2 2023 Form 10-Q	24

SUPPLEMENTAL INFORMATION

PART II – OTHER INFORMATION

Item 1. Legal Proceedings

From time to time we are a party to or otherwise involved in legal proceedings arising out of the normal course of business. Legal matters are subject to inherent uncertainties and there exists the possibility that the ultimate resolution of one or more of these matters could have a material adverse impact on the Company, its financial condition and results of operations.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

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 1.6 million shares of common stock at an average price of $44.00, for a total investment of $71.2 million. The table below presents information with respect to Monro common stock purchases made during the three months ended September 24, 2022, by Monro or any “affiliated purchaser” of Monro, as defined in Rule 10b-18(a)(3) under the Exchange Act.

Share Repurchase Activity						Dollar Value of
		Average		Total Number of		Shares that May
	Total Number	Price		Shares Purchased		Yet Be Purchased
	of Shares	Paid per		as Part of Publicly		Under Publicly
Period	Purchased	Share		Announced Programs		Announced Programs
June 26, 2022 through July 23, 2022	950,672	$	44.32		950,672	$	90,661,107
July 24, 2022 through August 27, 2022	205,906		47.35		205,906		80,912,200
August 28, 2022 through September 24, 2022	47,267		43.96		47,267		78,833,623
Total	1,203,845	$	44.82		1,203,845	$	78,833,623
Monro, Inc. Q2 2023 Form 10-Q	25
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EXHIBITS

Item 6. Exhibits

Exhibit Index
31.1 – Certification of Michael T. Broderick pursuant to Section 302 of the Sarbanes – Oxley Act of 2002
31.2 – Certification of Brian J. D’Ambrosia pursuant to Section 302 of the Sarbanes – Oxley Act of 2002
32.1 – Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes – Oxley Act of 2002
101.INS - XBRL Instance Document
101.LAB - XBRL Taxonomy Extension Label Linkbase
101.PRE - XBRL Taxonomy Extension Presentation Linkbase
101.SCH - XBRL Taxonomy Extension Schema Linkbase
101.DEF - XBRL Taxonomy Extension Definition Linkbase
101.CAL - XBRL Taxonomy Extension Calculation Linkbase
104 - Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101)
Monro, Inc. Q2 2023 Form 10-Q	26
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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	MONRO, INC.
DATE: October 31, 2022	By:	/s/ Michael T. Broderick
		Michael T. Broderick
		President and Chief Executive Officer <br>‎(Principal Executive Officer)
DATE: October 31, 2022	By:	/s/ Brian J. D’Ambrosia
		Brian J. D’Ambrosia
		Executive Vice President – Finance, Chief Financial Officer and
		Treasurer<br><br>(Principal Financial Officer and Principal Accounting Officer)
Monro, Inc. Q2 2022 Form 10-Q	27
---	---

		Exhibit 311

Exhibit 31.1

CERTIFICATION

I, Michael T. Broderick, certify that: | 1. | I have reviewed this Quarterly Report on Form 10-Q of Monro, Inc.; | | --- | --- | | 2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; | | --- | --- | | 3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; | | --- | --- | | 4. | The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: | | --- | --- | (a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and | 5. | The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): | | --- | --- | (a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: October 31, 2022

| | | | --- | --- | | | /s/ Michael T. Broderick | | | Michael T. Broderick | | | Chief Executive Officer (Principal Executive Officer) |

		Exhibit 312

Exhibit 31.2

CERTIFICATION

I, Brian J. D’Ambrosia, certify that: | 1. | I have reviewed this Quarterly Report on Form 10-Q of Monro, Inc.; | | --- | --- | | 2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; | | --- | --- | | 3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; | | --- | --- | | 4. | The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: | | --- | --- | (a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: October 31, 2022

| | | | --- | --- | | | /s/ Brian J. D’Ambrosia | | | Brian J. D’Ambrosia | | | Executive Vice President – Finance, Treasurer and | | | Chief Financial Officer (Principal Financial Officer) |

		Exhibit 321

Exhibit 32.1

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350

(SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002)

Pursuant to, and solely for purposes of, 18 U.S.C. Section 1350 (Section 906 of the Sarbanes-Oxley Act of 2002), each of the undersigned hereby certifies in the capacity and on the date indicated below that:

1. The Quarterly Report of Monro, Inc. ("Monro") on Form 10-Q for the period ended September 24, 2022 as filed with the Securities and Exchange Commission on the date hereof (the "Report") fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of Monro.

| | | | --- | --- | | /s/ Michael T. Broderick | Dated: October 31, 2022 | | Michael T. Broderick | | | Chief Executive Officer (Principal Executive Officer) | | | | | | /s/ Brian J. D’Ambrosia | Dated: October 31, 2022 | | Brian J. D’Ambrosia | | | Executive Vice President – Finance, Treasurer and | | | Chief Financial Officer (Principal Financial Officer) | |

10-Q

Table of Contents

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

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

For the quarterly period ended September 24, 2022

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

For the transition period from _____________ to _____________

Commission File Number: 0-19357

Monro, Inc.

Registrant’s telephone number, including area code: (585) 647-6400

Securities registered pursuant to Section 12(b) of the Act:

Table of Contents

TABLE OF CONTENTS

Table of Contents

CONSOLIDATED FINANCIAL STATEMENTS

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

Consolidated Balance Sheets

Table of Contents

CONSOLIDATED FINANCIAL STATEMENTS

Consolidated Statements of Income and Comprehensive Income

Table of Contents

CONSOLIDATED FINANCIAL STATEMENTS

Consolidated Statements of Changes in Shareholders’ Equity

Table of Contents

CONSOLIDATED FINANCIAL STATEMENTS

Consolidated Statements of Cash Flows

Table of Contents

INDEX TO NOTES

Table of Contents

CONSOLIDATED FINANCIAL STATEMENTS

NOTES

Note 1 – Description of Business and Basis of Presentation

Description of business

Basis of presentation

Fiscal year

Recent accounting pronouncements

Working capital management

Table of Contents

CONSOLIDATED FINANCIAL STATEMENTS

NOTES

Supplemental information

Note 2 – Acquisitions and Divestitures

Acquisitions

2022

Table of Contents

CONSOLIDATED FINANCIAL STATEMENTS

NOTES

2023

Divestitures

Table of Contents

CONSOLIDATED FINANCIAL STATEMENTS

NOTES

Note 3 – Earnings per Common Share

Note 4 – Income Taxes

Note 5 – Fair Value

Note 6 – Cash Dividend

Table of Contents

CONSOLIDATED FINANCIAL STATEMENTS

NOTES

Note 7 – Revenues

2023

Note 8 – Long-term Debt

Table of Contents

CONSOLIDATED FINANCIAL STATEMENTS

NOTES

Note 9 – Commitments and Contingencies

Commitments

Contingencies

Table of Contents

CONSOLIDATED FINANCIAL STATEMENTS

NOTES

Note 10 – Share Repurchase

Table of Contents

MANAGEMENT’S DISCUSSION AND ANALYSIS

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

Economic Conditions

For the transition period from _ to _