m 1.
Financial Statements
MONRO, INC.
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
| June 27, | March 28, |
| 2020 | 2020 |
| (Dollars in thousands) |
| Assets |
| Current assets: |
| Cash and equivalents | $ | 147,174 | $ | 345,476 |
| Trade receivables | 13,415 | 14,510 |
| Federal and state income taxes receivable | 7,345 | 8,056 |
| Inventories | 176,530 | 187,441 |
| Other current assets | 36,792 | 40,537 |
| Total current assets | 381,256 | 596,020 |
| Property, plant and equipment | 692,618 | 682,932 |
| Less - Accumulated depreciation and amortization | ( 363,703 ) | ( 354,295 ) |
| Net property, plant and equipment | 328,915 | 328,637 |
| Finance lease and financing obligation assets, net | 253,956 | 196,575 |
| Operating lease assets, net | 206,252 | 199,729 |
| Goodwill | 671,831 | 671,843 |
| Intangible assets, net | 28,706 | 29,781 |
| Other non-current assets | 21,787 | 20,688 |
| Long-term deferred income tax assets | 6,139 | 6,184 |
| Total assets | $ | 1,898,842 | $ | 2,049,457 |
| Liabilities and Shareholders' Equity |
| Current liabilities: |
| Current portion of finance leases and financing obligations | $ | 33,744 | $ | 32,257 |
| Current portion of operating lease liabilities | 30,696 | 30,181 |
| Trade payables | 110,853 | 99,504 |
| Accrued payroll, payroll taxes and other payroll benefits | 17,873 | 14,429 |
| Accrued insurance | 42,461 | 43,387 |
| Deferred revenue | 12,281 | 13,129 |
| Other current liabilities | 33,868 | 22,049 |
| Total current liabilities | 281,776 | 254,936 |
| Long-term debt | 326,200 | 566,400 |
| Long-term finance leases and financing obligations | 350,212 | 298,373 |
| Long-term operating lease liabilities | 180,767 | 170,954 |
| Other long-term liabilities | 17,280 | 12,873 |
| Long-term deferred income tax liabilities | 10,461 | 10,069 |
| Long-term income taxes payable | 1,426 | 1,412 |
| Total liabilities | 1,168,122 | 1,315,017 |
| Commitments and contingencies |
| Shareholders' equity: |
| Class C Convertible Preferred Stock, $ 1.50 par value, $ 0.064 conversion value,‎ 150,000 shares authorized; 21,802 shares issued and outstanding | 33 | 33 |
| Common Stock, $ 0.01 par value, 65,000,000 shares authorized; 39,645,772 and‎ 39,644,228 shares issued at June 27, 2020 and March 28, 2020, respectively | 396 | 396 |
| Treasury Stock, 6,359,871 shares, at cost | ( 108,729 ) | ( 108,729 ) |
| Additional paid-in capital | 230,683 | 229,774 |
| Accumulated other comprehensive loss | ( 7,059 ) | ( 6,889 ) |
| Retained earnings | 615,396 | 619,855 |
| Total shareholders' equity | 730,720 | 734,440 |
| Total liabilities and shareholders' equity | $ | 1,898,842 | $ | 2,049,457 |

The accompanying notes are an integral part of these financial statements.
3
| Quarter Ended |
| June 27, | June 29, |
| 2020 | 2019 |
| (Dollars in thousands, ‎except per share data) |
| Sales | $ | 247,059 | $ | 317,063 |
| Cost of sales, including distribution and occupancy costs | 159,605 | 188,916 |
| Gross profit | 87,454 | 128,147 |
| Operating, selling, general and administrative expenses | 76,053 | 91,776 |
| Operating income | 11,401 | 36,371 |
| Interest expense, net of interest income | 7,385 | 7,157 |
| Other loss (income), net | 9 | ( 175 ) |
| Income before income taxes | 4,007 | 29,389 |
| Provision for income taxes | 1,020 | 6,783 |
| Net income | $ | 2,987 | $ | 22,606 |
| Other comprehensive loss: |
| Changes in pension, net of tax benefit | ( 170 ) | ( 89 ) |
| Other comprehensive loss | ( 170 ) | ( 89 ) |
| Comprehensive income | $ | 2,817 | $ | 22,517 |
| Earnings per common share: |
| Basic | $ | 0.09 | $ | 0.68 |
| Diluted | $ | 0.09 | $ | 0.67 |
| Weighted average number of common shares outstanding‎  used in computing earnings per share: |
| Basic | 33,285 | 33,183 |
| Diluted | 33,854 | 33,964 |

4
| Class C Convertible‎Preferred Stock | Common Stock | Treasury Stock | Additional‎Paid-in | Accumulated‎Other‎Comprehensive | Retained |
| Shares | Amount | Shares | Amount | Shares | Amount | Capital | Loss | Earnings | Total |
| Balance at March 30, 2019 | 22 | $ | 33 | 39,511 | $ | 395 | 6,360 | $ | ( 108,729 ) | $ | 220,173 | $ | ( 4,536 ) | $ | 592,174 | $ | 699,510 |
| Accounting change - cumulative effect | ( 582 ) | ( 582 ) |
| Adjusted balance | 22 | 33 | 39,511 | 395 | 6,360 | ( 108,729 ) | 220,173 | ( 4,536 ) | 591,592 | 698,928 |
| Net income | 22,606 | 22,606 |
| Other comprehensive loss: |
| Pension liability adjustment ‎ ($ 118 ) pre-tax | ( 89 ) | ( 89 ) |
| Cash dividends (1): | Preferred | ( 112 ) | ( 112 ) |
| Common | ( 7,305 ) | ( 7,305 ) |
| Dividend payable | ( 10 ) | ( 10 ) |
| Activity related to equity-based plans | 71 | 1 | 3,644 | 3,645 |
| Stock-based compensation | 925 | 925 |
| Balance at June 29, 2019 | 22 | $ | 33 | 39,582 | $ | 396 | 6,360 | $ | ( 108,729 ) | $ | 224,742 | $ | ( 4,625 ) | $ | 606,771 | $ | 718,588 |
| Balance at March 28, 2020 | 22 | $ | 33 | 39,645 | $ | 396 | 6,360 | $ | ( 108,729 ) | $ | 229,774 | $ | ( 6,889 ) | $ | 619,855 | $ | 734,440 |
| Net income | 2,987 | 2,987 |
| Other comprehensive loss: |
| Pension liability adjustment ‎ ($ 226 ) pre-tax | ( 170 ) | ( 170 ) |
| Cash dividends (1): | Preferred | ( 112 ) | ( 112 ) |
| Common | ( 7,323 ) | ( 7,323 ) |
| Dividend payable | ( 11 ) | ( 11 ) |
| Activity related to equity-based plans | 1 | — | 5 | 5 |
| Stock-based compensation | 904 | 904 |
| Balance at June 27, 2020 | 22 | $ | 33 | 39,646 | $ | 396 | 6,360 | $ | ( 108,729 ) | $ | 230,683 | $ | ( 7,059 ) | $ | 615,396 | $ | 730,720 |

5
| Quarter Ended |
| June 27, | June 29, |
| 2020 | 2019 |
| (Dollars in thousands) |
| Increase (Decrease) in Cash |
| Cash flows from operating activities: |
| Net income | $ | 2,987 | $ | 22,606 |
| Adjustments to reconcile net income to net cash provided by operating activities - |
| Depreciation and amortization | 18,410 | 14,839 |
| (Gain) loss on disposal of assets | ( 256 ) | 122 |
| Stock-based compensation expense | 904 | 925 |
| Net change in deferred income taxes | 494 | 2,223 |
| Change in operating assets and liabilities (excluding acquisitions): |
| Trade receivables | 1,095 | ( 2,763 ) |
| Inventories | 10,985 | 51 |
| Other current assets | 3,745 | ( 3,966 ) |
| Other non-current assets | 7,294 | 7,741 |
| Trade payables | 11,349 | 1,226 |
| Accrued expenses | 17,555 | 14,250 |
| Federal and state income taxes payable | 711 | 5,586 |
| Other long-term liabilities | ( 2,751 ) | ( 6,903 ) |
| Long-term income taxes payable | 14 | 3,450 |
| Total adjustments | 69,549 | 36,781 |
| Net cash provided by operating activities | 72,536 | 59,387 |
| Cash flows from investing activities: |
| Capital expenditures | ( 15,304 ) | ( 13,996 ) |
| Acquisitions, net of cash acquired | ( 200 ) | ( 54,720 ) |
| Proceeds from the disposal of assets | 7 | 103 |
| Other | 323 | 34 |
| Net cash used for investing activities | ( 15,174 ) | ( 68,579 ) |
| Cash flows from financing activities: |
| Proceeds from borrowings | — | 119,603 |
| Principal payments on long-term debt, finance leases and financing obligations | ( 247,364 ) | ( 103,257 ) |
| Exercise of stock options | 9 | 3,730 |
| Dividends paid | ( 7,435 ) | ( 7,417 ) |
| Deferred financing costs | ( 874 ) | ( 1,168 ) |
| Net cash (used for) provided by financing activities | ( 255,664 ) | 11,491 |
| (Decrease) increase in cash | ( 198,302 ) | 2,299 |
| Cash at beginning of period | 345,476 | 6,214 |
| Cash at end of period | $ | 147,174 | $ | 8,513 |
| Supplemental information: |
| Leased assets obtained in exchange for finance lease liabilities | $ | 64,216 | $ | 3,099 |
| Leased assets obtained in exchange for operating lease liabilities | 13,796 | 3,632 |

6
| “Quarter Ended Fiscal June 2020” | March 29, 2020 – June 27, 2020 (13 weeks) |
| “Quarter Ended Fiscal June 2019” | March 31, 2019 – June 29, 2019 (13 weeks) |

7
NOTE 2 – IMPACT OF THE COVID-19 PANDEMIC In response to the unprecedented and rapid spread of COVID-19 (coronavirus), many U.S. state governments, in states in which we operate, have taken preventative or protective actions, such as issuing stay-at-home restrictions and social distancing measures. State and local governments have ordered temporary closures of some businesses and numerous other businesses have temporarily closed voluntarily. Further, individuals’ ability to travel has been curtailed through mandated travel restrictions and may be further limited through additional voluntary or mandated closures of certain businesses. Substantially all Company-operated retail stores operated under a reduced schedule throughout the quarter to match lower demand. Given the uncertainties surrounding the impacts of the COVID-19 pandemic on our future financial condition, results of operations and cash flows, we have taken a number of actions in response to prevailing uncertain market conditions. In order to enhance our liquidity position, we took a precautionary measure and borrowed $ 350 million available to us under our Credit Facility in March 2020. We subsequently repaid $ 240 million of these borrowings during the quarter ended June 27, 2020. Additionally, we negotiated rent deferrals for a significant number of our stores, as well as other rent reductions. See additional discussion of these rent deferrals and reductions under Note 10. NOTE 3 – ACQUISITIONS Monro’s acquisitions are strategic moves in our plan to fill in and expand our presence in our existing and contiguous markets, expand into new markets and leverage fixed operating costs such as distribution, advertising and administration. Acquisitions in this footnote include acquisitions of five or more locations as well as acquisitions of one to four locations that are part of our greenfield store growth strategy. Fiscal 2020 During the first quarter of fiscal 2020, we acquired the following businesses for an aggregate purchase price of $ 54.1 million. The acquisitions were financed through our existing credit facility. The results of operations for these acquisitions are included in our financial results from the respective acquisition dates. On June 23, 2019 , we acquired two retail tire and automotive repair stores located in California from BAW LLC. These stores operate under the Tire Choice name. On May 19, 2019 , we acquired 40 retail tire and automotive repair stores and one distribution center located in California from Certified Tire & Service Centers, Inc. These stores operate under the Tire Choice name. On March 31, 2019 , we acquired 12 retail tire and automotive repair stores located in Louisiana from Allied Discount Tire & Brake, Inc. These stores operate under the Tire Choice name. These acquisitions resulted in goodwill related to, among other things, growth opportunities, synergies and economies of scale expected from combining these businesses with ours, as well as unidentifiable intangible assets. All of the goodwill is expected to be deductible for tax purposes. We have recorded finite-lived intangible assets at their estimated fair value related to customer lists. We expensed all costs related to acquisitions in the quarter ended June 29, 2019. The total costs related to completed acquisitions were $ 0.5 million for the quarter ended June 29, 2019. These costs are included in the Consolidated Statements of Comprehensive Income primarily under operating, selling, general and administrative expenses. Sales for the fiscal 2020 acquired entities for the quarter ended June 29, 2019 totaled $ 7.1 million for the period from acquisition date through June 29, 2019. 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.
8
| As of‎Acquisition‎Date |
| (Dollars in‎thousands) |
| Inventories | $ | 2,691 |
| Other current assets | 371 |
| Property, plant and equipment | 1,558 |
| Finance lease and financing obligation assets, net | 15,867 |
| Operating lease assets, net | 23,411 |
| Intangible assets | 1,598 |
| Other non-current assets | 103 |
| Long-term deferred income tax assets | 3,489 |
| Total assets acquired | 49,088 |
| Current portion of finance leases and financing obligations | 1,470 |
| Current portion of operating lease liabilities | 2,644 |
| Deferred revenue | 1,069 |
| Other current liabilities | 214 |
| Long-term finance leases and financing obligations | 20,750 |
| Long-term operating lease liabilities | 25,674 |
| Other long-term liabilities | 1,171 |
| Total liabilities assumed | 52,992 |
| Total net identifiable liabilities assumed | $ | ( 3,904 ) |
| Total consideration transferred | $ | 54,093 |
| Less: total net identifiable liabilities assumed | ( 3,904 ) |
| Goodwill | $ | 57,997 |
| As of‎Acquisition Date |
| Dollars in‎thousands | Weighted‎Average‎Useful Life |
| Customer lists | $ | 1,598 | 7 years |

9
| Quarter Ended |
| June 27, | June 29, |
| 2020 | 2019 |
| (Amounts in thousands, |
| except per share data) |
| Numerator for earnings per common share calculation: |
| Net income | $ | 2,987 | $ | 22,606 |
| Less: Preferred stock dividends | ( 112 ) | ( 112 ) |
| Income available to common shareholders | $ | 2,875 | $ | 22,494 |
| Denominator for earnings per common share calculation: |
| Weighted average common shares, basic | 33,285 | 33,183 |
| Effect of dilutive securities: |
| Preferred stock | 510 | 510 |
| Stock options | 31 | 231 |
| Restricted stock | 28 | 40 |
| Weighted average common shares, diluted | 33,854 | 33,964 |
| Basic earnings per common share: | $ | 0.09 | $ | 0.68 |
| Diluted earnings per common share: | $ | 0.09 | $ | 0.67 |

10
| Dollars in |
| thousands |
| Balance at March 28, 2020 | $ | 18,506 |
| Deferral of revenue | 3,169 |
| Deferral of revenue from acquisitions | — |
| Recognition of revenue | ( 4,643 ) |
| Balance at June 27, 2020 | $ | 17,032 |
| Quarter Ended |
| June 27, | June 29, |
| 2020 | 2019 |
| (Dollars in thousands) |
| Revenues: |
| Brakes | $ | 28,564 | $ | 46,776 |
| Exhaust | 4,432 | 6,953 |
| Steering | 18,468 | 26,232 |
| Tires | 137,270 | 154,065 |
| Maintenance | 57,620 | 82,174 |
| Other | 705 | 863 |
| Total | $ | 247,059 | $ | 317,063 |

11
| Within | 2 to | 4 to | After |
| Total | 1 Year | 3 Years | 5 Years | 5 Years |
| (Dollars in thousands) |
| Principal payments on long-term debt | $ | 326,200 | $ | 326,200 |
| Finance lease commitments/financing obligations (a) | 503,276 | $ | 52,009 | $ | 104,839 | 97,008 | $ | 249,420 |
| Operating lease commitments (a) | 243,829 | 36,422 | 66,101 | 53,192 | 88,114 |
| Accrued rent | 3,118 | 2,764 | 319 | 18 | 17 |
| Other liabilities | 1,733 | 800 | 933 | — | — |
| Total | $ | 1,078,156 | $ | 91,995 | $ | 172,192 | $ | 476,418 | $ | 337,551 |

12
Ite
m 2.
Management's Discussion and Analysis of Financial Condition and Results of Operations
Forward-Looking Statements
The statements contained in this Quarterly Report on Form 10-Q that are not historical facts, including (without limitation) statements made in this Management’s Discussion and Analysis of Financial Condition and Results of Operations, may contain statements of future expectations and other forward-looking statements made pursuant to the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995. When used in this Quarterly Report on Form 10-Q, the words “anticipates,” “believes,” “contemplates,” “expects,” “see,” “could,” “may,” “estimate,” “appear,” “intend,” “plans,” “potential,” “strategy,” “will” and variations thereof and similar expressions, are intended to identify forward-looking statements. Forward-looking statements are subject to risks, uncertainties and other important factors that could cause actual results to differ materially from those expressed. These factors include, but are not necessarily limited to, product demand, dependence on and competition within the primary markets in which Monro’s stores are located, the need for and costs associated with store renovations and other capital expenditures, the duration and impact of the COVID-19 pandemic and its impact on our customers, executive officers and employees, the effect of economic conditions, seasonality, the impact of weather conditions and natural disasters, the impact of competitive services and pricing, parts supply restraints or difficulties, our dependence on vendors, including foreign vendors, changes in U.S. or foreign trade policies, including the impacts of tariffs on products imported from China, industry regulation, risks relating to leverage and debt service (including sensitivity to fluctuations in interest rates), continued availability of capital resources and financing, advances in automotive technologies, disruption or unauthorized access to our computer systems, risks relating to protection of customer and employee personal data, business interruptions, risks relating to litigation, risks relating to integration of acquired businesses, including goodwill impairment and the risks set forth in this Quarterly Report on Form 10-Q and our Annual Report on Form 10-K for the fiscal year ended March 28, 2020. Except as required by law, we do not undertake and specifically disclaim any obligation to update any forward-looking statements to reflect the occurrence of anticipated or unanticipated events or circumstances after the date of such statements. References to fiscal 2021 and fiscal 2020 in this Management’s Discussion and Analysis of Financial Condition and Results of Operations refer to our fiscal years ending March 27, 2021 and March 28, 2020, respectively.
Impact of the COVID-19 Pandemic
In response to the unprecedented and rapid spread of COVID-19 (coronavirus), many U.S. state governments, in states in which we operate, have taken preventative or protective actions, such as issuing stay-at-home restrictions and social distancing measures. State and local governments have ordered temporary closures of some businesses and numerous other businesses have temporarily closed voluntarily. Further, individuals’ ability to travel has been curtailed through mandated travel restrictions and may be further limited through additional voluntary or mandated closures of certain businesses.
As a result, demand for automotive undercar repair and tire sales and services declined at a rapid pace and has remained depressed, which has had an unprecedented and materially adverse impact on our results of operations and business operations. Although demand improved during the quarter ended June 27, 2020, we experienced a significant decline in traffic throughout the quarter, as compared to the prior year, due to the COVID-19 pandemic. During the quarter in midst of the COVID-19 pandemic, comparable store sales decreased 25.8% from the same period in the prior year. (We define comparable store sales as sales for stores that have been opened or acquired at least one fiscal year prior to March 29, 2020.) Substantially all Company-operated retail stores operated under a reduced schedule throughout the quarter to match lower demand.
Given the uncertainties surrounding the impacts of the COVID-19 pandemic on our future financial condition, results of operations and cash flows, we have taken a number of actions in response to prevailing uncertain market conditions. In order to enhance our liquidity position, we took a precautionary measure and borrowed $350 million available to us under our credit facility in March 2020. We subsequently repaid $240 million of these borrowings during the quarter ended June 27, 2020. To improve our liquidity, we took the following measures during the first quarter of fiscal 2021 to reduce costs and improve cash flows: (i) suspended all non-critical capital expenditures, including the suspension of all capital expenditures related to our store rebrand and reimage initiatives; (ii) reduced store hours and store labor to align with reduced demand across our store locations; (iii) undertook significant reductions in operating expenses across the Company, including non-store compensation expense through the furlough of or other reduction to certain members of our non-store workforce; and (iv) paused any acquisitions activity until we are able to better understand the impact of the COVID-19 pandemic. Additionally, we negotiated rent deferrals for a significant number of our stores, as well as other rent reductions.
To protect our employees and customers, we have implemented strict cleaning and sanitation measures. In addition, we have provided face masks and other protective equipment, including sneeze guards installed at each sales counter, necessary to ensure the safety our employees and customers. We have also implemented various measures intended to reduce the spread of COVID-19 among our non-store workforce including working from home and encouraging employees to adhere to prevention measures recommended by the Centers for Disease Control and the World Health Organization. Since our non-store workforce is able to work remotely using various technology tools, we are able to maintain our operations and internal controls over financial reporting and disclosures.
13
| Fiscal Month Ended |
| April | May | June | July |
| Comparable store sales % (year-over-year decline) | (41) | % | (24) | % | (14) | % | (12) | % |
| Quarter Ended |
| June 27, | June 29, |
| 2020 (a) | 2019 (a) |
| Sales | 100.0 | % | 100.0 | % |
| Cost of sales, including distribution and occupancy costs | 64.6 | 59.6 |
| Gross profit | 35.4 | 40.4 |
| Operating, selling, general and administrative expenses | 30.8 | 28.9 |
| Operating income | 4.6 | 11.5 |
| Interest expense, net of interest income | 3.0 | 2.3 |
| Other income, net | — | (0.1) |
| Income before income taxes | 1.6 | 9.3 |
| Provision for income taxes | 0.4 | 2.1 |
| Net income | 1.2 | % | 7.1 | % |

14
First Quarter Ended June 27, 2020 as Compared to First Quarter Ended June 29, 2019 Sales were $247.1 million for the quarter ended June 27, 2020 as compared with $317.1 million for the quarter ended June 29, 2019. The sales decrease of $70.0 million, or 22.1%, was due to a decrease in comparable store sales for the quarter ended June 27, 2020 of 25.8% as compared to the same period in the prior quarter. Additionally, there was a decrease in sales from closed stores amounting to $3.1 million in the quarter. Partially offsetting these decreases was an increase of $12.7 million related to new stores, of which $11.1 million came from fiscal 2020 acquisitions. There were 90 selling days in the quarter ended June 27, 2020 and in the quarter ended June 29, 2019. At June 27, 2020, we had 1,247 Company-operated stores in operation and 97 franchised locations as compared with 1,251 Company-operated stores in operation and 98 franchised locations at June 29, 2019. At March 28, 2020, we had 1,283 Company-operated stores in operation and 98 franchised locations. During the quarter ended June 27, 2020, we closed 36 Company-operated stores. Additionally, one franchised location was closed during the quarter ended June 27, 2020. Comparable store brakes, maintenance services, and tires category sales for the quarter ended June 27, 2020 decreased by approximately 41%, 35%, and 14%, respectively, from the prior year quarter. Additionally, alignment, front end/shocks, and exhaust category sales for the quarter ended June 27, 2020 decreased by approximately 32%, 36%, and 37%, respectively, on a comparable store basis as compared to the same period in the prior year. Comparable store sales were impacted by lower traffic resulting from the impact of the COVID-19 pandemic in our markets, partially offset by higher average ticket. Gross profit for the quarter ended June 27, 2020 was $87.5 million or 35.4% of sales as compared with $128.1 million or 40.4% of sales for the quarter ended June 29, 2019. The decrease in gross profit for the quarter ended June 27, 2020, as a percentage of sales, was due primarily to an increase in material costs, as a percentage of sales, as a result of a shift in sales mix to tires and lower vendor rebates due to slower inventory turns, as well as an increase in distribution and occupancy costs, as a percentage of sales, as we lost leverage on these largely fixed costs with lower overall comparable store sales. Partially offsetting these increases was a decrease in labor costs, which decreased from the prior year quarter as a percentage of sales, due to reductions to store staffing levels related to our store staffing optimization initiative during the COVID-19 pandemic. Operating expenses for the quarter ended June 27, 2020 were $76.1 million or 30.8% of sales as compared to $91.8 million or 28.9% of sales for the quarter ended June 29, 2019. The decrease of $15.7 million in operating expenses from the comparable period of the prior year is primarily due to decreased expenses as a result of focused cost control measures taken in response to the COVID-19 pandemic, including reducing store staffing to match lower demand and realigned marketing spend toward digital channels. The decrease in operating expenses from the comparable period of the prior year also reflect lower expenses from a net reduction of four stores compared to the prior year period. Partially offsetting these decreases was an increase in store closure costs of $2.5 million. Operating income for the quarter ended June 27, 2020 of approximately $11.4 million decreased by 68.7% as compared to operating income of approximately $36.4 million for the quarter ended June 29, 2019, and decreased as a percentage of sales from 11.5% to 4.6% for the reasons described above. Net interest expense for the quarter ended June 27, 2020 increased by approximately $0.2 million as compared to the same period in the prior year, and increased from 2.3% to 3.0% as a percentage of sales for the same periods. The weighted average debt outstanding for the quarter ended June 27, 2020 increased by approximately $486 million as compared to the quarter ended June 29, 2019. This increase is primarily related to an increase in debt outstanding under our Credit Facility that was borrowed in response to the COVID-19 pandemic in late fiscal 2020, as well as an increase in finance lease debt recorded in connection with the fiscal 2020 acquisitions and greenfield expansion, along with renegotiated leases. Partially offsetting these increases was a decrease in the weighted average interest rate of approximately 350 basis points from the prior year quarter due to a decrease in Credit Facility borrowing rates, as well as lower borrowing rates associated with new leases. Income before income taxes for the quarter ended June 27, 2020 of approximately $4.0 million decreased by 86.4% as compared to income before income taxes of approximately $29.4 million for the quarter ended June 29, 2019, and decreased as a percentage of sales from 9.3% to 1.6% for the reasons described above. For the quarter ended June 27, 2020, our effective income tax rate was 25.5% compared to 23.1% for the quarter ended June 29, 2019, as discrete items, primarily related to employee share-based compensation, resulted in a larger tax rate benefit in the prior year period. Net income for the quarter ended June 27, 2020 of $3.0 million decreased 86.8% from net income for the quarter ended June 29, 2019. Adjusted net income (a non-GAAP financial measure) was $5.1 million and $23.4 million for the quarters ended June 27, 2020 and June 29, 2019, respectively. Diluted EPS for the quarter ended June 27, 2020 of $0.09 decreased 86.6% as compared to diluted EPS of $0.67 for the quarter ended June 29, 2019. Adjusted diluted EPS (a non-GAAP financial measure) was $0.15 and $0.69 for the quarters ended June 27, 2020 and June 29, 2019, respectively. Please refer to the “Reconciliation of Non-GAAP Financial
15
| Reconciliation of Adjusted Net Income |
| Quarter Ended |
| June 27, | June 29, |
| 2020 | 2019 |
| (Dollars in thousands) |
| Net income | $ | 2,987 | $ | 22,606 |
| Store closing costs | 2,527 | — |
| Monro.Forward initiative costs | 182 | 538 |
| Acquisition due diligence and integration costs | 17 | 482 |
| Provision for income taxes on adjustments | (641) | (255) |
| Adjusted net income | $ | 5,072 | $ | 23,371 |
| Reconciliation of Adjusted Diluted EPS |
| Quarter Ended |
| June 27, | June 29, |
| 2020 (a) | 2019 |
| Diluted EPS | $ | 0.09 | $ | 0.67 |
| Store closing costs | 0.06 | — |
| Monro.Forward initiative costs | — | 0.01 |
| Acquisition due diligence and integration costs | — | 0.01 |
| Adjusted diluted EPS | $ | 0.15 | $ | 0.69 |

16
| Within | 2 to | 4 to | After |
| Total | 1 Year | 3 Years | 5 Years | 5 Years |
| (Dollars in thousands) |
| Principal payments on long-term debt | $ | 326,200 | $ | 326,200 |
| Finance lease commitments/financing obligations (a) | 503,276 | $ | 52,009 | $ | 104,839 | 97,008 | $ | 249,420 |
| Operating lease commitments (a) | 243,829 | 36,422 | 66,101 | 53,192 | 88,114 |
| Accrued rent | 3,118 | 2,764 | 319 | 18 | 17 |
| Other liabilities | 1,733 | 800 | 933 | — | — |
| Total | $ | 1,078,156 | $ | 91,995 | $ | 172,192 | $ | 476,418 | $ | 337,551 |

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agreement. Additionally, the Credit Facility is not secured by our real property, although we have agreed not to encumber our real property, with certain permissible exceptions. On June 11, 2020, we entered into a First Amendment to the Credit Facility (the “First Amendment”), which, among other things, amends the terms of certain of the financial and restrictive covenants in the credit agreement to provide us with additional flexibility to operate our business through the first quarter of fiscal 2022. Except as amended by the First Amendment, the remaining terms of the credit agreement remain in full force and effect. Specifically, from June 11, 2020 to June 26, 2021, the First Amendment (1) eliminates the covenant for us to maintain an interest coverage ratio above 1.55x; (2) requires us to maintain liquidity of $275 million as of the end of each fiscal month; and (3) adjusts the ratio of maximum adjusted debt to EBITDAR. The ratio of maximum adjusted debt to EBITDAR will vary by quarter as follows: (a) 5.50x in the first quarter of fiscal 2021; (b) 6.00x in the second quarter of fiscal 2021; (c) 6.25x in the third quarter of fiscal 2021; (d) 5.50x in the fourth quarter of fiscal 2021; (e) 5.00x in the first quarter of fiscal 2022; and (f) thereafter, returning to 4.75x. For the period from June 30, 2020 to June 30, 2021, we are permitted under the First Amendment to acquire stores or other businesses up to $100 million in the aggregate, as long as, on a pro forma basis after taking the acquisition into account, we would comply with the financial covenants and other restrictions in the First Amendment. In addition, from June 30, 2020 to June 30, 2021, we may declare, make or pay any dividend or distribution up to $38.5 million in the aggregate, if we are in compliance with the financial covenants and other restrictions in the First Amendment and Credit Facility. The First Amendment will permanently amend the interest rate charged on borrowings to be based on the greater of adjusted one-month LIBOR or 0.75% and also added two levels of interest rate pricing applicable during the covenant relief period in the event the ratio of adjusted debt to EBITDAR is higher than 5.00x. During the covenant relief period, the minimum interest rate spread charged on borrowings will be 225 basis points over LIBOR. We were in compliance with all debt covenants at June 27, 2020. We believe that we can fulfill our commitments and working capital needs utilizing our cash flow from operations and, if necessary, cash on hand and/or bank financing for at least the next 12 months and the foreseeable future. In addition, we have financed certain store properties with finance leases/financing obligations, which amounted to $384.0 million at June 27, 2020 and are due in installments through March 2049. 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 June 27, 2020 and the expected impact on the Consolidated Financial Statements for future periods.
Item 3.
Quantitative and Qualitative Disclosures about Market Risk
We are exposed to market risk from potential changes in interest rates. As of June 27, 2020, excluding finance leases and financing obligations, we had no debt financing at fixed interest rates, of 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 $3.3 million based upon our debt position at June 27, 2020 and approximately $5.7 million based upon our debt position at March 28, 2020, respectively, given a change in LIBOR of 100 basis points.
Debt financing had a carrying amount that approximates a fair value of $326.2 million as of June 27, 2020, as compared to a carrying amount and a fair value of $566.4 million as of March 28, 2020.
Item 4.
Controls and Procedures
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 Securities and Exchange Commission pursuant to the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’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.
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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 June 27, 2020 that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.‎
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MONRO, INC.PART II – OTHER INFORMATION Ite
m 1.
Legal Proceedings
We are not a party or subject to any legal proceedings other than certain claims and lawsuits that arise in the normal course of our business. We do not believe that such claims or lawsuits, individually or in the aggregate, will have a material adverse effect on our financial condition or results of operations.
Item 1A.
Risk Factors
Except as stated below, there have been no material changes from the risk factors previously disclosed in Part I – Item 1A of the Company’s Form 10-K for the fiscal year ended March 28, 2020.
Matters related to the COVID-19 pandemic have and will continue to significantly and adversely impact our business, financial position, results of operations and cash flows.
The spread of COVID-19 has created a global public health crisis that has resulted in widespread volatility and deteriorations in household, business, economic and market conditions. We have experienced negative impacts to demand for our products and services from the COVID-19 pandemic, which has and will continue to adversely affect our results of operations, and we are continuing to experience significant disruption to our normal business operations and planned implementation of certain strategic initiatives.
Our business will continue to be affected by the broader economic effects from the COVID-19 pandemic and related regulatory and individual actions, including customer demand for our products and services. Because more people in the United States are working from home, those workers will likely drive less often, and are less likely to require our services or will require our services less often. If this trend continues, we may see a permanent decline in demand for our services. Although travel by car may replace air travel as the preferred means of transportation because of fear of the spread of COVID-19, the recessionary economic environment resulting from the COVID-19 pandemic may reduce levels of leisure travel, which would reduce the demand for our products and services. We anticipate disruption to the demand for our products and services throughout the course of the pandemic. For example, in the first quarter of fiscal 2021, we experienced significant declines in comparable store sales compared to the first quarter of fiscal 2020 due to lower store traffic and reduced store hours as a result of our, individuals’, and governmental responses to the COVID-19 pandemic. Additionally, our growth strategy was impacted by the pandemic, as we paused all store acquisition, rebrand, and reimage initiatives during the first quarter of fiscal 2021 in order to focus our efforts on determining the full impact of the COVID-19 pandemic on our business.
While we have so far been able to source required products at reasonable cost, the pandemic may also affect our supply chain in ways that are beyond our control. We may also incur costs or experience further disruption to comply with new or changing regulations in response to the pandemic.
In addition, our continuing response to the pandemic could divert management’s attention from our key strategic priorities, increase costs as we prioritize health and safety matters for our teammates and customers, cause us to reduce, delay, alter or abandon initiatives that may otherwise increase our long-term value, increase vulnerability to information technology or cybersecurity related risks as certain of our teammates work remotely and otherwise continue to disrupt our business operations. For example, we have and expect to continue to incur additional costs and investments in supplies necessary to keep our teams and customers safe, such as face masks, hand sanitizer and cleaning supplies. We expect to encounter labor inefficiencies as we adjust to new protocols and operating models to adapt to operating during the pandemic while experiencing what we believe will be an increase in sales activity from the first quarter of fiscal 2021. Those labor inefficiencies may include difficulty in hiring employees if enhanced unemployment benefits are signed into law. As our teammates return to more normalized store hours, there will also be increased risks to the health and safety of our employees and customers, particularly if there were to be one or more clusters of COVID-19 cases occurring at any of our stores or our corporate headquarters. We may also be subject to enhanced legal risks, including potential litigation related to the COVID-19 pandemic.
The overall magnitude of the COVID-19 pandemic, including the extent of its direct and indirect impact on our business, financial position, results of operations or liquidity is inherently uncertain due to the rapid development and fluidity of the situation. Further, the ultimate impact of the COVID-19 pandemic depends on many factors that are not within our control, including, but not limited to: governmental, business and individuals' actions that have been and continue to be taken in response to the COVID-19 pandemic; the severity and duration of outbreaks of the virus; the impact of the COVID-19 pandemic and actions taken in response on global and regional economies, travel, and economic activity; the availability of federal, state, local or non-U.S. funding programs; general economic uncertainty in key global markets and financial market volatility; global economic conditions and levels of economic growth; and the pace of recovery, particularly in our markets, when the COVID-19 pandemic subsides.
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We are unable to estimate the impact of the COVID-19 pandemic with certainty on our business and operations at this time. The pandemic could cause us to experience impairment of our goodwill and other financial assets, further reduce demand for our products and services and other adverse impacts on our financial position, results of operations and cash flows. Sustained adverse effects may also prevent us from satisfying financial covenants in our credit agreement or result in downgrades in our credit ratings. Ite
m 6.
Exhibits
| Exhibit Index |
| 10.22a – Amendment No. 1 to Amended and Restated Credit Agreement, dated as of June 11, 2020 (June 2020 Form 8-K, Exhibit No. 22a). |
| 31.1 – Certification of Brett T. Ponton 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) |

‎
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| MONRO, INC. |
| DATE: August 6, 2020 | By: | /s/ Brett T. Ponton |
| Brett T. Ponton |
| Chief Executive Officer and President ‎(Principal Executive Officer) |
| DATE: August 6, 2020 | By: | /s/ Brian J. D’Ambrosia |
| Brian J. D’Ambrosia |
| Executive Vice President-Finance, Chief Financial Officer and |
| Treasurer(Principal Financial Officer and Principal Accounting Officer) |

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Question: What is the change in earnings per share (diluted) if all the money from total consideration transferred was used to buy shares at the current market price of $30 per share? (in thousands)

Solution:
def solution():
     #Define variables name and value
    total_net_identifiable_liabilities_assumed = -3904
    total_consideration_transferred = 54093
    net_income_2020 = 2987
    preferred_stock_dividends_2020 = -112
    weighted_average_common_shares_diluted_2020 = 33854
    diluted_earnings_per_common_share_2020 = 0.09

    # Price per share
    price_per_share = 30

    #Do math calculation to get the answer
    # Calculate obtained shares
    obtained_shares = total_consideration_transferred // price_per_share

    # Recalculate weighted average common shares, diluted
    new_weighted_average_common_shares_diluted = weighted_average_common_shares_diluted_2020 + obtained_shares

    # Recalculate earnings per share
    income_available_to_common_shareholders = net_income_2020 - preferred_stock_dividends_2020
    new_diluted_earnings_per_common_share = income_available_to_common_shareholders / new_weighted_average_common_shares_diluted
    return new_diluted_earnings_per_common_share


Answer: 0.08691140589505567