UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934.
Date of Report (Date of Earliest Event Reported):
May 21, 2018
MONRO, INC.
(Exact name of registrant as specified in its charter)
New York | 0-19357 | 16-0838627 | ||
(State of Incorporation) | (Commission File Number) |
(I.R.S. Employer Identification No.) | ||
200 Holleder Parkway, Rochester, New York | 14615 | |||
(Address of Principal Executive Offices) | (Zip Code) |
Registrants telephone number, including area code (585) 647-6400
Not Applicable
(Former name or former address, if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
☐ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
☐ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
☐ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
☐ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
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. ☐
Item 2.02 | Results of Operations and Financial Condition |
On May 21, 2018, Monro, Inc. (the Company) issued a press release announcing its operating results for the fourth quarter and year-ended March 31, 2018. A copy of the press release is furnished herewith as Exhibit 99.1.
Item 7.01 | Regulation FD Disclosure |
On May 21, 2018, the Company posted an investor presentation to its website at http://www.monro.com/Corporate/Corporate-Investor-Info. A copy of the investor presentation, which was presented at the Companys previously announced Investor Day on May 21, 2018, is furnished herewith as Exhibit 99.2.
Item 8.01 | Voluntary Disclosure of Other Events |
The Company announced that its Board of Directors initiated an increased cash dividend for fiscal 2019 of $.80 and declared a cash dividend for the first quarter of fiscal 2019 of $.20 per share on the Companys outstanding shares of common stock. Further details are contained in the press release furnished as Exhibit 99.1.
The Company also confirmed that, in the fourth quarter of fiscal 2018, it completed a previously announced acquisition of seven stores in West Virginia, Virginia, Ohio and Kentucky. Further details of this acquisition are contained in the press release furnished as Exhibit 99.1.
Further, the Company announced today that it has completed the acquisition of Free Service Tire Company, Incorporated, which added twelve retail and commercial locations in Tennessee and four wholesale centers in Tennessee, Virginia and North Carolina. Further details of this acquisition are contained in the press release furnished as Exhibit 99.3.
The Company will hold its 2018 Annual Meeting of Shareholders on Tuesday, August 14, 2018 at 9:00 a.m. at the Hyatt Regency in Rochester, New York. The record date for the Annual Meeting is June 25, 2018.
Item 9.01 | Financial Statements and Exhibits |
(a) | Not applicable. |
(b) | Not applicable. |
(c) | The following is a list of exhibits furnished with this Current Report on Form 8-K: |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Company has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
MONRO, INC. | ||||||
(Registrant) | ||||||
May 21, 2018 | By: | /s/ Maureen E. Mulholland | ||||
Maureen E. Mulholland | ||||||
Senior Vice President General Counsel and Secretary |
Exhibit 99.1
CONTACT: | Brett Ponton |
Chief Executive Officer |
(585) 647-6400 |
Brian DAmbrosia |
Senior Vice President Finance |
Chief Financial Officer |
(585) 647-6400 |
Investors and Media: Effie Veres |
FTI Consulting |
(212) 850-5600 |
FOR IMMEDIATE RELEASE
MONRO, INC. ANNOUNCES FOURTH QUARTER
AND FISCAL 2018 FINANCIAL RESULTS
~ Fourth Quarter Diluted EPS of $.52 ~
~ Fiscal 2018 Sales Increase 10% to a Record $1.128 Billion ~
~ Completes Acquisition of 12 Tennessee-based Stores and Four Wholesale Centers, with
Expected Annualized Sales of $47 Million ~
~ Increases Quarterly Cash Dividend by 11% to $.20 per share ~
ROCHESTER, N.Y. May 21, 2018 Monro, Inc. (Nasdaq: MNRO), a leading provider of automotive undercar repair and tire services, today announced financial results for its fourth quarter and fiscal year ended March 31, 2018.
Fourth Quarter Results
Sales for the fourth quarter of fiscal 2018 increased 13.3% to $285.6 million, as compared to $252.0 million for the fourth quarter of fiscal 2017. Fiscal 2018 was a 53-week year with 368 selling days as compared to 361 selling days in fiscal 2017, and therefore included an extra week of sales in the fourth quarter. Comparable store sales increased 10.3% on a reported basis, and 2.4% when adjusted for days. Adjusted for days, comparable store sales increased approximately 5% for tires, 2% for both brakes and front end/shocks, and decreased approximately 2% for both maintenance services and alignments. In addition to the extra week of sales, the total sales increase for the fourth quarter of $33.6 million included an increase in sales from new stores of $13.8 million, including sales from recent acquisitions of $8.7 million.
Gross margin increased 70 basis points to 37.7% in the fourth quarter of fiscal 2018 from 37.0% in the prior year period, primarily due to leverage from higher comparable store sales. Total operating expenses increased by $4.2 million to $77.3 million, or 27.1% of sales, as compared to $73.1 million, or 29.0% of sales in the prior year period. The year-over-year dollar increase represents expenses from 32 net new stores, $1.0 million in management transition costs, as well as expenses related to the extra week.
Operating income was $30.4 million, or 10.7% of sales, as compared to $20.1 million, or 8.0% of sales in the prior year period. Interest expense was $6.3 million as compared to $5.5 million for the fourth quarter of fiscal 2017.
Income tax expense in the fourth quarter of fiscal 2018 was $6.8 million compared to $5.1 million in the prior year period. The enactment of the Tax Cuts and Jobs Act on December 22, 2017 resulted in an income tax benefit of $1.4 million, or $.04 per share. This benefit was comprised of $.02 per share related to the reduction of approximately 300 basis points in the Companys estimated annual effective tax rate during the fourth quarter of fiscal 2018, as well as $.02 per share related to revaluing our net deferred tax assets to reflect the new U.S. federal corporate income tax rate. This resulted in an effective tax rate of 27.9% in the fourth quarter of fiscal 2018, as compared to 34.4% in the prior year period.
Net income for the fourth quarter of fiscal 2018 was $17.5 million, as compared to $9.7 million in the same period of the prior year. Diluted earnings per share for the fourth quarter were $.52, including $.02 per share in management transition costs, $.04 per share of benefit related to the Tax Cuts and Jobs Act and $.10 of contribution from the extra week. This compares to diluted earnings per share of $.29 in the fourth quarter of fiscal 2017.
During the fourth quarter of fiscal 2018, the Company opened 15 and closed three company-operated locations, ending the quarter with 1,150 company-operated stores and 102 franchised locations.
We delivered solid fourth quarter results, driven by positive top line trends and strong execution across our business, as we launched a number of foundational tools designed to support our strategy. We exit the quarter with solid industry tailwinds, improving operating performance, a disciplined acquisition strategy and newly implemented initiatives to drive improvement across the organization. We believe we have a clear path for future growth and look forward to carrying this strong momentum through fiscal year 2019 and beyond, said Brett Ponton, President and Chief Executive Officer.
Ponton continued, As we enter fiscal 2019, we are excited about the significant opportunities that lie ahead of us. I am confident that our renewed focus on the customer and strong commitment to operational excellence will position us well to capitalize on favorable industry trends over the next few years and drive sustainable long-term value for our shareholders.
Fiscal Year Results
Net sales for fiscal 2018 increased 10.4% to a record $1.128 billion as compared to $1.022 billion for fiscal 2017. The total sales increase of $106.3 million for the fiscal year was due to an increase in sales from new stores of $96.2 million, including sales from recent acquisitions of $73.5 million, and a comparable store sales increase of 1.8% on a reported basis. Adjusted for days, comparable store sales decreased 0.1% as compared to a 4.3% decline in the prior year. Comparable store sales, adjusted for days, increased approximately 3% for brakes and 2% for front end/shocks, and decreased approximately 1% for tires and 2% for both maintenance services and alignments.
Gross margin declined 30 basis points to 38.6% for fiscal 2018 from 38.9% in the prior fiscal year, largely due to the impact of the sales mix from recent acquisitions partially offset by lower material costs as a percentage of sales.
Total operating expenses for fiscal 2018 were $308.3 million, or 27.3% of sales, as compared to $280.5 million, or 27.5% of sales, for the prior fiscal year. The dollar increase primarily represents expenses from 32 net new stores as compared to fiscal 2017. Operating income for fiscal 2018 was $127.3 million, or 11.3% of sales, as compared to $116.4 million, or 11.4% of sales in fiscal 2017. Interest expense was $24.3 million in fiscal 2018 as compared to $19.8 million in fiscal 2017.
Net income for fiscal 2018 was $63.9 million or $1.92 per diluted share, as compared to net income of $61.5 million, or $1.85 per diluted share in fiscal 2017. Diluted earnings per share for fiscal 2018 were at the high end of the Companys estimated range of $1.88 to $1.93, and included $.04 per share in litigation settlement costs, $.06 per share in management transition costs, and $.06 per share of expense related to the net impact of newly enacted tax legislation. Diluted earnings per share for fiscal 2018 also included $.10 of contribution from the 53rd week.
Acquisitions Update
The Company announced today that it has acquired 12 retail and commercial locations in Tennessee from Free Service Tire Company, filling in an existing market and expanding its footprint in the South. The Company also acquired four wholesale centers as part of the transaction, located in Tennessee, Virginia, and North Carolina, significantly increasing its tire purchasing and distribution efficiencies. These locations are expected to add approximately $47 million in annualized sales, representing a sales mix of 15% service and 85% tires. The acquisition is expected to be breakeven to diluted earnings per share in fiscal 2019.
In the fourth quarter, the Company also completed the previously announced acquisitions of seven stores in Ohio, Kentucky, West Virginia, and Virginia. These stores fill in existing markets and are expected to add approximately $7 million in annualized sales, representing a sales mix of 45% service and 55% tires. Acquisitions completed in fiscal 2018 represent a total of $20 million in annualized sales.
Cash Dividend Increased 11%
The Company also announced today that its Board of Directors has approved a $.02 increase in the Companys cash dividend for the first quarter of fiscal year 2019 to $.20, which translates to an annual rate of $.80 per share and represents an increase of $.08 per share or 11.1% as compared to the total dividends paid in fiscal 2018. The Company has increased its cash dividend 13 times during the 13 years since a cash dividend was first issued. The cash dividend is payable quarterly to shareholders of record on the Companys outstanding shares of common stock, including the shares of common stock to which the holders of the Companys Class C Convertible Preferred Stock are entitled. The dividend of $.20 per share for the first quarter of fiscal 2019 will be payable on June 14, 2018 to shareholders of record as of June 4, 2018.
Company Outlook and Investor Day Webcast
The Company will provide financial guidance for fiscal 2019 and beyond at its Investor Day, which will begin at 8:00 a.m. EDT today. The live audio webcast, including slide presentations, will be available to the public at the Investor Information section of the Companys website, located at www.monro.com. The event will include a question and answer session, during which onsite and webcast participants may submit questions. An archived copy of the webcast will be available at this website through June 21, 2018.
About Monro, Inc.
Headquartered in Rochester, New York, Monro is a chain of 1,166 company-operated stores, 98 franchised locations, nine wholesale locations and three retread facilities providing automotive undercar repair and tire sales and services. The Company operates in 27 states, serving the Mid-Atlantic and New England regions and portions of the Great Lakes, Midwest and Southeast. The predecessor to the Company was founded by Charles J. August in 1957 as a Midas Muffler franchise. In 1966, Monro began to diversify into a full line of undercar repair services. The Company has experienced significant growth in recent years through acquisitions and, to a lesser extent, the opening of newly constructed stores. The Company went public in 1991 and trades on the Nasdaq under the symbol MNRO.
The statements contained in this press release that are not historical facts 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. Forward-looking statements can be identified by such words and phrases as expected, estimate, guidance, outlook, anticipate, project, believe, could, may, intend, plan and other similar words or phrases. 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 the Companys stores are located, the need for and costs associated with store renovations and other capital expenditures, the effect of economic conditions, seasonality, the impact of competitive services and pricing, product development, parts supply restraints or difficulties, the impact of weather trends and natural disasters, industry regulation, risks relating to leverage and debt service (including sensitivity to fluctuations in interest rates),continued availability of capital resources and financing, risks relating to protection of customer and employee personal data, risks relating to litigation, risks related to the accuracy of the estimates and assumptions we used to reevaluate our net deferred tax assets or our estimate of the fourth quarter impact of the Tax Cuts and Jobs Act, risks relating to integration of acquired businesses and other factors set forth elsewhere herein and in the Companys Securities and Exchange Commission filings, including the Companys annual report on Form 10-K for the fiscal year ended March 25, 2017 and Form 10-K for the fiscal year ended March 31, 2018, which the Company expects to file with the Securities and Exchange Commission this month. Except as required by law, the Company does not undertake and specifically disclaims any obligation to update any forward-looking statement to reflect the occurrence of anticipated or unanticipated events or circumstances after the date of such statements.
MONRO, INC.
Financial Highlights
(Unaudited)
(Dollars and share counts in thousands)
Quarter Ended Fiscal March | ||||||||||||
2018 | 2017 | % Change | ||||||||||
Sales |
$ | 285,578 | $ | 252,011 | 13.3 | % | ||||||
Cost of sales, including distribution and occupancy costs |
177,815 | 158,787 | 12.0 | % | ||||||||
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Gross profit |
107,763 | 93,224 | 15.6 | % | ||||||||
Operating, selling, general and administrative expenses |
77,334 | 73,133 | 5.7 | % | ||||||||
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Operating income |
30,429 | 20,091 | 51.5 | % | ||||||||
Interest expense, net |
6,299 | 5,535 | 13.8 | % | ||||||||
Other (income) expense, net |
(117 | ) | (183 | ) | (36.1 | )% | ||||||
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Income before provision for income taxes |
24,247 | 14,739 | 64.5 | % | ||||||||
Provision for income taxes |
6,765 | 5,078 | 33.2 | % | ||||||||
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Net income |
$ | 17,482 | $ | 9,661 | 80.9 | % | ||||||
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Diluted earnings per share |
$ | .52 | $ | .29 | 79.3 | % | ||||||
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Weighted average number of diluted shares outstanding |
33,417 | 33,289 | ||||||||||
Number of stores open (at end of quarter) |
1,150 | 1,118 |
MONRO, INC.
Financial Highlights
(Unaudited)
(Dollars and share counts in thousands)
Year Ended Fiscal March | ||||||||||||
2018 | 2017 | % Change | ||||||||||
Sales |
$ | 1,127,815 | $ | 1,021,511 | 10.4 | % | ||||||
Cost of sales, including distribution and occupancy costs |
692,241 | 624,622 | 10.8 | % | ||||||||
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Gross profit |
435,574 | 396,889 | 9.7 | % | ||||||||
Operating, selling, general and administrative expenses |
308,278 | 280,505 | 9.9 | % | ||||||||
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Operating income |
127,296 | 116,384 | 9.4 | % | ||||||||
Interest expense, net |
24,296 | 19,768 | 22.9 | % | ||||||||
Other income, net |
(454 | ) | (628 | ) | (27.8 | )% | ||||||
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Income before provision for income taxes |
103,454 | 97,244 | 6.4 | % | ||||||||
Provision for income taxes |
39,519 | 35,718 | 10.6 | % | ||||||||
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Net income |
$ | 63,935 | $ | 61,526 | 3.9 | % | ||||||
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Diluted earnings per common share |
$ | 1.92 | $ | 1.85 | 3.8 | % | ||||||
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Weighted average number of diluted shares outstanding |
33,341 | 33,301 |
MONRO, INC.
Financial Highlights
(Unaudited)
(Dollars in thousands)
March 31, | March 25, | |||||||
2018 | 2017 | |||||||
Assets |
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Cash |
$ | 1,909 | $ | 8,995 | ||||
Inventories |
152,367 | 142,604 | ||||||
Other current assets |
52,980 | 47,631 | ||||||
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Total current assets |
207,256 | 199,230 | ||||||
Property, plant and equipment, net |
416,669 | 394,634 | ||||||
Other non-current assets |
594,507 | 591,400 | ||||||
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Total assets |
$ | 1,218,432 | $ | 1,185,264 | ||||
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Liabilities and Shareholders Equity |
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Current liabilities |
$ | 194,005 | $ | 185,893 | ||||
Capital leases and financing obligations |
227,220 | 213,166 | ||||||
Other long-term debt |
148,068 | 182,337 | ||||||
Other long-term liabilities |
20,663 | 22,614 | ||||||
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Total liabilities |
589,956 | 604,010 | ||||||
Total shareholders equity |
628,476 | 581,254 | ||||||
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Total liabilities and shareholders equity |
$ | 1,218,432 | $ | 1,185,264 | ||||
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Monro, Inc. Investor Day May 21, 2018 Exhibit 99.2
Certain statements in this presentation, other than statements of historical fact, including estimates, projections, statements related to our business plans and operating results are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Monro has identified some of these forward-looking statements with words such as “anticipates,” “believes,” “expects,” “estimates,” “is likely,” “predicts,” “projects,” “forecasts,” “may,” “will,” “should,” and “intends” and the negative of these words or other comparable terminology. These forward-looking statements are based on Monro’s current expectations, estimates, projections and assumptions as of the date such statements are made, and are subject to risks and uncertainties that may cause results to differ materially from those expressed or implied in the forward-looking statements. Additional information regarding these risks and uncertainties are described in the Company’s filings with the Securities and Exchange Commission, including in the “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” sections of our most recently filed periodic reports on Forms 10-K and Form 10-Q, which are available on Monro’s website at http://www.Monro.com/Corporate/SEC-filings. Monro assumes no obligation to update or revise these forward-looking statements for any reason, even if new information becomes available in the future. This presentation contains references to Adjusted Earnings Per Share (EPS), which is a “non-GAAP financial measure” as this term is defined in Item 10(e) of Regulation S-K under the Securities Act of 1933 and the Securities Exchange Act of 1934 and Regulation G under the Securities Exchange Act of 1934. In accordance with these rules, Monro has reconciled this non-GAAP financial measure to its most directly comparable U.S. GAAP measure. Management views this non-GAAP financial measure as a way to assess comparability between periods. This non-GAAP financial measure is not intended to represent, and should not be considered more meaningful than, or as an alternative to, its most directly comparable GAAP measure. This non-GAAP financial measure may be different from similarly titled non-GAAP financial measures used by other companies. Safe Harbor Statement and Non-GAAP Measures
Today’s Presenters Brett Ponton President and Chief Executive Officer Deep auto industry and turnaround experience While serving as CEO and President of American Driveline Systems (AAMCO), was instrumental in the turnaround efforts at the Company and led the successful sale to a private equity buyer Drove improved revenues and profitability as President and CEO of Heartland Jiffy Lube, a private equity backed company Additional past experience includes Managing Director, Asia Pacific of Veyance Technologies and Vice President, Marketing of The Goodyear Tire Company and VP & GM for Goodyear Retail Division Brian D’Ambrosia Senior Vice President of Finance & Chief Financial Officer In-depth knowledge of accounting, financial planning, capital allocation and public company reporting Formerly Vice President, Finance; Corporate Controller; and Chief Accounting Officer for Monro, Inc. Additional past experience includes Regional Controller- Americas at Robbins & Myers, Controller at Birds Eye Foods, CFO at Rochester Sports Group and Audit Manager at Deloitte & Touche Name Title Relevant Experience
Today’s Presenters Evan Naylor Chief Operating Officer Broad experience driving operational excellence at various national retailers Developed and implemented enterprise-wide strategies at the corporate and field level, building high performing teams and driving P&L growth Previous experience includes Murphy USA, Target, Home Depot, and 13 years of service in the U.S. Army, achieving the rank of Major Deborah Brundage Senior Vice President of Marketing and Merchandising Strong global brand development, marketing and business leadership experience While serving as brand director at Proctor & Gamble, oversaw the successful launch of new brands, as well as the business acceleration of well-established brands Proven track record for developing marketing and merchandise strategies that create value and elevate brands Name Title Relevant Experience
Brett Ponton President & Chief Executive Officer
Agenda Presentations Company Overview Industry Trends Strategy Overview Financial Outlook Questions & Answers
Company Overview Dominant in the Northeastern U.S. and expanding in Southern and Western adjacent markets Fiscal 2018 sales of $1,127.8 million 1,166 company operated stores in 27 states and 98 franchised locations as of May 21, 2018 29 acquisitions in the past 6 fiscal years, adding 386 locations, $520 million in revenue and entry into 8 new states 9 wholesale locations and 3 retread facilities A Leading Chain of Independently Owned and Operated Tire and Auto Service Locations
A Strong Brand Portfolio 10 well-known regional brands underneath Monro’s corporate umbrella Operating two store formats in key markets Service stores – 547 stores 80% maintenance services, 20% tires $600,000 a year in sales per store Tire stores - 619 stores (excluding wholesale) 60% tires, 40% service $1.2 million a year in sales per store 9 wholesale locations and 3 retread facilities Multiple Store Brand Strategy Driving Increased Store Density Brand Portfolio Service Tire
A Unique Operating Model Monro Has a Diversified Supply Chain, Sourcing High Quality, Low Cost Parts Direct and a Strong Portfolio of Tire Brands TIRES PARTS Secondary parts distribution: The following types of parts are sourced from various cities in China: Brake Rotors and Pads Filters Steering and Suspension Wipers Belts
A Favorable Industry Backdrop Favorable Industry Backdrop for Automotive Services with the Vehicles in Operation Expected to Grow Significantly Over the Next Five Years U.S. Annual Light Vehicle Sales (in Millions) Total Miles Traveled in U.S. Source: FRED Economic data, Light weight Vehicle Sales: Autos and Light Trucks, Dec 2017 Source: Lang, IHS Markit, 2018. 2018 – 2022 are estimated figures U.S. Light Vehicles in Operation (VIO) (in Millions) Source: FRED Economic data, Moving 12-Month Total Vehicle Miles Traveled Growing total vehicle population from U.S. auto sales 270+ million vehicles on the road Increasing age of vehicles (average of ~12 years) Total annual miles driven up ~1.3% y/y Decreasing number of service outlets and bays Increasing complexity of vehicles Favorable demographics Key Highlights (in Millions)
A Favorable Industry Backdrop Vehicles in Operation – 0 to 5 Years Vehicles in Operation – 6 to 12 Years Monro is Well-Positioned to Capitalize on Positive Industry Trends, with Our Sweet Spot Experiencing the Fastest Growth in Vehicles in Operation Strong growth in new vehicles (0-5 years) over the past 5 years is creating a significant tailwind for the 6-12 year old vehicle cohort for the next five years 6-12 year cohort expected to grow the fastest at +3.9% CAGR over the next five years Monro’s targeted market segment is the 6-12 year cohort Vehicles in Operation – 13+ Years +4.27% CAGR +1.47% CAGR Source for all data: Lang, IHS Markit, 2018 Key Highlights
A Favorable Industry Backdrop Monro Operates in the $230 Billion Do-It-For-Me* Segment of $287 Billion U.S. Automotive Aftermarket Industry Automotive Aftermarket DIFM vs. DIY Sales (in Millions) Source: Autocare Association Factbook 2008 % (outlets) 2016 % (outlets) CAGR Dealers 20,770 15.6% 16,680 12.7% (2.7%) General Repair Garages 76,564 57.4% 80,071 61.1% 0.6% Tire Dealers 18,596 14.0% 19,822 15.1% 0.8% Specialty Repair 9,674 7.3% 7,040 5.4% (3.9%) Oil Change/Lube 7,649 5.7% 7,437 5.7% (0.4%) Total 133,253 100% 131,050 100% Source: Autocare Association Factbook DIFM continues to gain share from DIY segment Vehicle complexity continues to drive shift to DIFM from DIY Future technology advances expected to accelerate shift to DIFM DIFM vs. DIY Trends Fewer outlets/bays to work on more vehicles in operation in the U.S. Industry still highly fragmented, with significant opportunities for further consolidation Key Highlights * Includes Replacement Tire Segment
VEHICLE AGE 0-2 YEARS 3-5 YEARS 6-12 YEARS 13-15 YEARS 15+ YEARS Services Required Warranty Work Placeholder Oil Changes Scheduled Maintenance Tires (and related) Brakes Shocks and Struts Exhaust Transmission Engine Drivers of Consumer Behavior Honor Warranty Quality Price/Value Price/Value Price/Value Quality Price/Value Quality Quality Quality Convenience Convenience Convenience Convenience Full Service Full Service Full Service Full Service Service All Makes/Models Service All Makes/Models Service All Makes/Models Service All Makes/Models Auto Service Industry Dynamics Monro’s Sweet Spot Monro’s Value Proposition is Most Compelling with Consumers Who Own Vehicles Aged 4-15 Years Old with Our Sweet Spot at 6-12 Years
Industry Trends and Aftermarket Sweet Spot Vehicles in Monro’s Sweet Spot of 6-12 Years Represent 45% of Vehicles Serviced Monro vs. Industry % of Total Vehicles in Operation % in Cohort Monro vs. Vehicles in Operation Source: Lang, IHS Markit, Monro Analysis, 2018 Yrs
Tire Replacement and TPMS Systems Wheel Alignment Electric Regenerative Brake Systems Shocks and Struts Steering and Suspension HV Battery Pack Cooling/Heating HV Battery Pack Service Vehicle Needs Will Evolve with Technology Hybrid Vehicles generally require the same level of maintenance and repair services as traditional Internal Combustion Engines (ICE) Electric Vehicles (EV) require new types of products and services to maintain batteries, electric and data systems, as well as enable charging Tire Replacement and TPMS Systems Wheel Alignment Scheduled Maintenance Oil Changes Air and Cabin Air Filters Transmission Fluids Brakes and Fluid Services Shocks and Struts Steering and Suspension Battery and Electrical Service Vehicles in Operation (2030F) by Engine Type Hybrid ICE EV Tire Replacement and TPMS Systems Wheel Alignment Scheduled Maintenance Oil Changes Air and Cabin Air Filters Transmission Fluids Brakes and Fluid Services Shocks and Struts Steering and Suspension Battery Service Monro is Well Positioned to Capitalize on Any Future Shifts in Vehicle Technology Source: Lang, IHS Markit, Bloomberg, Internal estimates, 2018
Key Takeaways Vehicle Population (VIO) Age Cohort Vehicle Complexity + DIFM Fewer Outlets Market Fragmentation 6-12 year cohort expected to grow the fastest Expected to grow significantly over the next 5 years Significant opportunities for further consolidation Accelerated shift to DIFM from DIY Fewer players to work on more vehicles in operation Positive Industry Trends
Gaining Momentum: Launch of Foundational Tools Business Intelligence and KPI Dashboards Provides management with greater visibility at all levels Identify strengths/opportunities by key metric Allows management to prioritize time and attention Cloud-based Store Audit Process Standardize store review process across all districts and stores 5 key areas assessed during store visits ranging from store appearance to operational performance (135 points reviewed) Data based evaluation leveraging KPI’s and customer feedback Measure progress of future strategic initiatives Customer Satisfaction & Online Review Management Real-time visibility of all online reviews for Monro company wide Insights into satisfaction/dissatisfaction with customers Provides great coaching opportunities to change store behavior to lead to higher satisfaction Monro Has Made Investments in Technology and Data-Driven Analytics to Support its Strategic Initiatives
Gaining Momentum: Solid 4QFY18 Results Comparable store sales increased by 2.4% adjusting for an extra week in March FY 2018 Sales from new stores totaled $13.8M, including sales from recent acquisitions of $8.7M Normalized Winter Weather and the Launch of Strategic Initiatives Has Contributed to Momentum in Operating Performance Exiting FY18 2-Year Stacked Comps Trend Improvement** Y/Y Comps Trend Improvement Brakes: 2% Front End/Shocks: 2% Alignments: -2% Maintenance: -2% Tires: 5% 4QFY18 Key Highlights* 4QFY18 Key Highlights (MTD) (MTD) *Results have been adjusted for the extra selling week **2-Year Stack Comps represent the sum of the prior year and current year period comparable store sales performance
Appalachian Tire Acquisition Completed previously announced Appalachian Tire acquisition in the fourth quarter 7 retail locations in 4 states Filling in the existing markets of Ohio, Kentucky, West Virginia and Virginia $7M in annualized revenue Sales mix of 45% service and 55% tires Free Service Acquisition Recently completed acquisition of Free Service 12 retail/commercial locations, 4 wholesale locations and 1 retread facility Filling in the existing market of Tennessee Expanding footprint in the South $47M in annualized revenue Sales mix of 15% service and 85% tires Gross Margin Impact Wholesale locations acquired as part of the Free Service acquisition operate at a lower gross margin, primarily due to a higher sales mix of tires without installation Gaining Momentum: Recent Acquisitions Monro Continues to Identify and Execute Highly Accretive Bolt-On Acquisitions Consistent with its M&A Strategy
The Monro.Forward Strategy Improve Customer Experience Optimize Product & Service Offering Investments in Technology and Data-Driven Analytics to Support Strategic Initiatives Accelerate Productivity & Team Engagement Enhance Customer-Centric Engagement Scalable Platform to Drive Sustainable Growth
Driving Long-Term Sustainable Growth Enhance Customer-Centric Engagement Customer retention Customer acquisition Omnichannel Accelerate Productivity & Team Engagement Optimized store staffing model Clearly defined career path and enhanced training program Aligned compensation Improve Customer Experience Online reputation management Consistent in-store experience Consistent store appearance Scalable Platform to Drive Sustainable Growth Investments in Technology and Data-Driven Analytics to Support Strategic Initiatives Optimize Product & Service Offering Redefined selling approach Optimized tire assortment
Improve Customer Experience Improve SEO and local listing management Effectively build and manage online presence Online Reputation Management Deliver a best-in-class experience to all customers Provide clear product choices and quality service to customers Consistent In-Store Experience Modernize store layout Establish clear standards for retail banners Consistent Store Appearance
97% of consumers read online reviews for local businesses in 2017 Reviews are an important ranking factor in local and voice search 85% of people trust online reviews as much as a personal recommendation, leading to customer confidence in conversion Fulfilling our improved customer experience in-store will foster positive online brand reviews, driving increased traffic Importance of Online Reviews Online Star Rating is Our Best “Leading Indicator” for Future Store Traffic Counts
Soliciting Customer Feedback to Improve In-Store Execution Leveraging Technology to Solicit Feedback from Customers: Over 50,000 Surveys & Reviews Completed from January through April Seeking experience feedback from all customers Survey assesses customer’s experience across all major “touchpoints” Customer feedback shared with stores via the dashboard Data leveraged to provide coaching and direction to stores
Customer satisfaction and online reputation pilot program launched in January Two regions were early adopters representing 185 stores One region in service format One region in tire format Launched program in scale across all stores in late February Results: 5x increase in number of online reviews All-time average company star rating across online review sites (Google, Facebook, etc.) has increased from 3.6 to 4.1 stars Focus on the In-Store Experience is Having Significant Impact on Company Online Reviews and “Star Ratings” Improved Online Reputation Total Company Online Reviews and Ratings Number of Reviews Average online star rating
Case Study – Pilot Program Across 185 Stores Online Reviews and Ratings average online star rating Pilot Program Launched in January in Two Regions and Two Store Formats Showing Impressive Results Online Search Traffic (SEO) Powered by Comp Sales % Change Customer Actions Taken Online Click on call to store Click on directions to store Click on link to website Traffic up 4% in May YTD
In-Store Operational Excellence Delivering a High-Quality and Consistent Experience to Our Customers REVIEW COURTESY INSPECTION 5 FIRST IMPRESSION 1 MEET AND GREET 2 CHECK-IN 3 START INITIAL WORK ON VEHICLE PERFORM INSPECTION 4 CHECK-OUT 8 REVIEW SCHEDULED MAINTENANCE 6 7 ESTIMATE / ADDITIONAL WORK LAST IMPRESSION / REVIEW 9 Setting Brand Standards For How We Operate “Remarkable” experience to our customers Information/options conveyed clearly and professionally Provide customers with options and choices for services Quality service – right first time, on time, every time Teammate standards Store Management – The Monro Way Delivering a Five-Star Experience
Store Re-Image Options Modernized Store Layout Setting Brand Standards for All Retail Stores Across All Markets Brand consistency Consistent promotional strategy Clear merchandising strategy Point of purchase strategy Setting Brand Standards For How We Look 1 2 3 4 5 Refresh Light: Cosmetic upgrades only Refresh: “Refresh Light,” plus additional scope Renovation Light: Includes both cosmetic upgrades as well as renovation work to the outside Renovation: “Renovation Light,” plus additional exterior and waiting room upgrades Renovation Plus: “Renovation,” plus additional upgrades to store appearance in areas where we have strong demographics Delivering a Five-Star Experience
Modernized Store Layout Driving Consistency in Our Store Appearance and Store Layout Across Our Markets and Store Formats
Key Takeaways Strong momentum as we exit Fiscal 2018 Foundational technologies in place to support strategic initiatives Focus on delivering a consistent best-in-class experience to all customers Pilot program for online reputation management showing impressive results Monro.Forward strategy creates a scalable platform for sustainable growth
Deborah Brundage Senior Vice President of Marketing & Merchandising
Driving Long-Term Sustainable Growth Improve Customer Experience Online reputation management Consistent in-store experience Consistent store appearance Investments in Technology and Data-Driven Analytics to Support Strategic Initiatives Scalable Platform to Drive Sustainable Growth Enhance Customer-Centric Engagement Customer retention Customer acquisition Omnichannel Accelerate Productivity & Team Engagement Optimized store staffing model Clearly defined career path and enhanced training program Aligned compensation Optimize Product & Service Offering Redefined selling approach Optimized tire assortment
Focus marketing spend to higher ROI channels Launch direct marketing via new analytic-based CRM platform Enhance private label credit card offering Use analytics to optimize digital efforts Leverage market segmentation and demographic information to facilitate direct marketing to target customers Upgrade website with mobile-capable architecture Launch e-commerce capability for online tire purchases and installations in- store Leverage preferred tire installer agreements to drive traffic Enhance Customer-Centric Engagement Customer Retention Customer Acquisition Omnichannel
Customer Retention & Acquisition Focus Our Marketing Mix on Higher ROI Channels Marketing to Retain Customers CRM is our #1 tool to retain current customers Build long-term, 1-to-1 customer relationships Leverage analytics to be more productive with marketing dollars by using data-driven insights to deliver the right message at the right time Leverage private label credit card – “Drive Card” Marketing to Acquire New Customers Focus on high ROI marketing channel Significant shift to digital as 60% of web traffic is mobile Improve relevancy with younger consumers, capturing customers sooner in the life cycle Leverage traditional channels in markets where it makes sense Marketing Mix Focus from FY17 to FY19
Customer Retention Efforts: CRM Leveraging Analytics to Shift from “Product Focused” Marketing to 1-to-1 Customer Marketing 1 2 3 Improved In-Store Customer Experience Quality, professional service Information/options clearly conveyed Quality of work Better Customer Data and Insights Leverage what we know about customer vehicles, buying habits and OEM maintenance tables Odometer reading and driving habits Right Message for the Right Service at the Right Time Through the Right Channel Scheduled maintenance recommendation Predictive services based on mileage Right offers based on services needed
Generate Traffic Leverage unique offers like “free financing for up to 6 months” 120K accounts opened since January 2017 launch, with 60% approval rate Accelerate Conversion Improved in-store conversion via attachment Allows for higher ticket item purchases right when needed Drive Retention Total sales reached $69M in first year On average, Drive Card holders spend about 2X more than the average Monro customer Ability to communicate unique offers to cardholders via CRM Customer Retention: Private Label “Drive Card” Opportunity to Leverage Private Label “Drive Card” to Improve Loyalty and In-Store Conversion
Drive New Customer Acquisitions With a Digital Focus Through Search, Social Media Efforts and Customer Targeting Prioritize Search Strategy Improved ratings lead to improved SEO and SEM Online Google SEO/Actions increased as online ratings improved with launch of new in-store experience initiative Continue to refine development of high performing search terms by DMA Assist in developing market level store build out strategies Identify and Target High Value Customers Leverage consumer segmentation and demographic analytics to identify high value “look-a-likes” New targets based on store proximity Create Social Presence Continue to grow and utilize current social media channels to drive traffic and promote key offerings Leverage strong teammate relationships with community to support local initiatives New Customer Acquisition Strategy 15-minute drive time around a Monro store Customer households (1 dot = 1 customer household) Best types of households for Monro *Example only Leverage Analytics to Identify High Value Customers* % Increase in Online Customer Actions in FY18 Powered by
Modernized Website Upgrade website to mobile capable architecture Design Better Online Tire Shopping Experience Create more choices for customer with ‘Good, Better, Best’ options Maximize ticket and drive higher conversion Omnichannel Approach Allows customer to view and purchase tires online Leverage 1,166 brick and mortar locations Multi-branded tires in inventory Appointments for in-store installation can be made seamlessly Leverage app for push notifications with recommendations Drive conversion once in-store for additional services recommended Engage with customers where they are on social channels Developing an Omnichannel Presence Buy On-Line and Install at Store: Creating a Seamless Buying Experience for Our Customers
Online Tire Retailers Installation Strategy Preferred Installer Agreements with Multiple Online Tire Sellers are a Profitable Traffic Driver for Monro Profitable installations with an average ticket of $120, vs. corporate average of $165 50% of these customers are new to Monro Retention in-line with corporate average Install Tire Inspect Vehicle Offer Add-On Services Add Customer to CRM System Build Long-Term Customer Relationship Integrate with multiple third-party online tire sellers Online Tire Sales Penetration An estimated 7% of the replacement tires in the US are sold online in 2017, representing approximately 17M tires* *Source: Modern Tire Dealer, March 2018
Q2 FY19 Q3 FY19 Q4 FY19 Q2 FY20 Q3 FY20 Q4 FY20 Q4 FY18 FY20 FY19 FY21 Key Takeaways Data-driven “new customer” marketing Monro omnichannel & e-commerce Enhance Customer-Centric Engagement Data-driven CRM New website Increase customer retention by delivering the right message for the right service at the right time Drive new customer acquisition by targeting high value consumers Invest in marketing channels with the highest return to meet consumers where they are Create seamless omnichannel experience for our customers to buy tires online and install in-store Continue supporting online retailers as their preferred installer to drive traffic in-store
Evan Naylor Chief Operating Officer
Driving Long-Term Sustainable Growth Improve Customer Experience Online reputation management Consistent in-store experience Consistent store appearance Investments in Technology and Data-Driven Analytics to Support Strategic Initiatives Scalable Platform to Drive Sustainable Growth Enhance Customer-Centric Engagement Customer retention Customer acquisition Omnichannel Accelerate Productivity & Team Engagement Optimized store staffing model Clearly defined career path and enhanced training program Aligned compensation Optimize Product & Service Offering Redefined selling approach Optimized tire assortment
Improve tire sales strategy to offer the right tires at the right price Leverage data to optimize inventory assortment Simplify invoices and inspection forms Clearly defined ‘Good, Better, Best’ product options Educate customers on new tire installation, brake and oil change service options Optimize Product & Service Offering Optimized Tire Assortment Redefined Selling Approach
Simplified Customer Inspection Forms New Customer Inspection Forms to Improve Technician Execution and Simplify Communication with Customers New Courtesy Inspection Form Color coding on critical safety systems easy to understand Utilizes M.A.P. reason coding, eliminating jargon Customer leaves with a clear understanding of the complete condition of their vehicle in concise language Customer-Focused Scheduled Maintenance Dealer-quality service and experience Dealer-quality maintenance for significantly less than OEM Just-in-time scheduled maintenance reminders Vehicle and manufacturer specific scheduled needs and services Electronic Courtesy Inspection Improved speed, accuracy, execution and quality Real-time customer communication in their preferred method Targets technology driven millennial demographic Future Present Past In-Store Customer Vehicle Courtesy Inspection Forms
Clearly Defined Merchandising Strategy with ‘Good, Better, Best’ Options ‘Good, Better, Best’ Service Packages Provides more options for consumers to choose from Simplifies the customer education and in-store selling process Provides opportunities for trade up and increased attachment New Tire Installation Packages Monro historically included the installation price with the tire price Vast majority of industry unbundles tire from installation Monro changed pricing approach on-line in 4QFY18 Introduced better / best tire installation packages Focus on Improving In-Store Conversion
$399.99 $199.99 $129.99 Improved Tire Sales Strategy Tires represent 50% of sales Ensure we are offering the right tires and the right price points is paramount Optimize Tire Mix Through Clearly Defined ‘Good, Better, Best’ Options Use data to develop product screens which align to the consumer demographics around our stores Align inventory assortment to “sizes” that fit the vehicle population surrounding our stores Provide our store teams with the right sales tools and visual merchandising to educate consumers across ‘Good, Better, Best’ options Launch across our store base in Q4 FY2019 50%
Driving Long-Term Sustainable Growth Improve Customer Experience Online reputation management Consistent in-store experience Consistent store appearance Investments in Technology and Data-Driven Analytics to Support Strategic Initiatives Scalable Platform to Drive Sustainable Growth Enhance Customer-Centric Engagement Customer retention Customer acquisition Omnichannel Accelerate Productivity & Team Engagement Optimized store staffing model Clearly defined career path and enhanced training program Aligned compensation Optimize Product & Service Offering Redefined selling approach Optimized tire assortment
Accelerate Productivity & Team Engagement Align store compensation model with performance Incentives grow as sales, profits and customer experience improve Aligned Compensation Achieve the right balance of labor and technical abilities across our stores Implement data-driven store scheduling software Optimized Store Staffing Model Attract, train and retain talented technicians and managers Develop a comprehensive learning management system: Monro University Clearly Defined Career Path and Enhanced Training Program
Implement Data-Driven Scheduling Previous staffing was on paper and determined based on a store’s gross sales New cloud-based system to simplify and optimize store scheduling process New model uses key labor drivers to determine staffing complement by store Customer count, sales by category, labor cost by service Schedules created based on peak customer traffic Mobile app helps teammates optimize hours and earnings by accessing open shifts across a market – leverage density of market to use labor productively Data-Driven Staffing and Scheduling Leverage Technology to Simplify and Optimize Store Staffing and Scheduling Optimize Staffing Model Align management headcount to the sales volume and growth potential of the store Right-size technician skill-level based on the sales mix of each store Leverage part-time and full-time teammates to improve flexibility
Clearly Defined Career Path and Enhanced Training Program Build Framework to Attract, Develop and Retain Talent Attract the Right Talent Build the best team in the auto aftermarket industry Teammates to see Monro as an opportunity for a career Develop Our Teams Defined career paths for store managers and technicians Robust cloud-based Monro University curriculum and learning management system Improve technician capability and productivity Ensure team trained to handle future technician requirements Retain Our Best People Optimize scheduling through electronic, cloud-based system Provide opportunity to grow personally and professionally Enhanced “Annual Review” framework
New Compensation Model Connects Incentives with Performance Store Compensation Model Aligned with Performance Previous compensation model focused solely on profitability New compensation model is based on broader metrics Same Store Sales Growth (monthly) Profitability Growth (monthly) Customer Experience (quarterly) Reward outstanding performance with enhanced earnings opportunities for exceptional results Store bonus plans are now consistent across all Monro stores
Q2 FY19 Q3 FY19 Q4 FY19 Q2 FY20 Q3 FY20 Q4 FY20 Q4 FY18 FY20 FY19 FY21 Key Takeaways New store comp plans Monro University (includes career path, LMS) Store staffing & scheduling system Optimize Product & Service Offering Accelerate Productivity & Team Engagement New in-store sales packages Tire category management Drive improved in-store experience through optimized merchandise strategy Increased conversion and average ticket through clear customer communication Develop a comprehensive learning management system and offer a clear path for career advancement to effectively attract, develop and retain talent Data-driven model to efficiently and effectively staff and schedule our stores
Brian D’Ambrosia Senior Vice President of Finance & Chief Financial Officer
Driving Long-Term Sustainable Growth Optimize Product & Service Offering Redefined selling approach Optimized tire assortment Improve Customer Experience Online reputation management Consistent in-store experience Consistent store appearance Investments in Technology and Data-Driven Analytics to Support Strategic Initiatives Scalable Platform to Drive Sustainable Growth Enhance Customer-Centric Engagement Customer retention Customer acquisition Omnichannel Accelerate Productivity & Team Engagement Optimized store staffing model Clearly defined career path and enhanced training program Aligned compensation
Scalable Platform to Drive Sustainable Growth Continue to increase store density in our 27 states Expand geographically into attractive markets On average, acquisitions represent the opportunity for 10% annual sales growth Acquisition growth drives scale and operating margin expansion, strengthening competitive advantages Same Store Sales Growth Through Monro.Forward, drive higher customer retention and acquisition rates Acquisitions Create value through profitable acquisitions Greenfield Expansion Continue new store openings in existing markets ~20 to 40 stores per year A Scalable Business Model with Multiple Avenues for Growth
A Proven M&A Strategy Monro’s Acquisition Strategy Has Delivered Significant Growth Over the Years Historical Acquisition Activity Average Acquisition Size FY13 FY14 FY15 FY16 FY17 FY18 Number of locations 139 stores 20 stores 80 stores 35 stores and 134 franchise locations 78 stores, 4 wholesale locations and 2 retread facilities 28 stores 14 Stores Annualized Sales growth ~$190 million ~$35 million ~$90 million ~$35 million ~$150 million $20 million ~$20 million A Proven Track Record 45 acquisitions in the last 16 fiscal years, encompassing 681 locations and $900 million of revenue 29 acquisitions in the past 6 fiscal years, adding 386 locations and $520 million in revenue Entered 8 new states, expanding our presence in the Southern and Western markets
Data-Driven Go-Forward M&A Strategy Top 10 National Chain Market Share Significant Consolidation Opportunity Tire and Auto Service remains a highly fragmented industry Leverage consumer demographic analytics to target and score favorable markets Assist in portfolio management and retail banner decisions Execute and build upon our robust acquisition pipeline Capitalizing on the Market Added talent to the support M&A-focused team Driving faster, higher ROI acquisitions as we implement our Monro.Forward strategy Efficient Acquisition Identification and Integration Using an Analytical Approach
Growing Shareholder Value Through Monro.Forward Accelerate same store sales growth Drive operating margin expansion Achieve significant earnings growth Three-Year Organic Growth Targets Drive earnings growth through same store sales improvement Focus capital investments on supporting strategic initiatives Fiscal Year 2019 Outlook Maintain disciplined capital allocation as we execute strategic initiatives Disciplined Capital Allocation Reported results in-line with Company expectations Solid Fiscal Year 2018 Results
Solid Fourth Quarter Performance and FY18 Results In-Line with Expectations Solid Full Year Fiscal 2018 Results 4QFY18 4QFY17 Δ FY18 FY17 Δ FY18 Guidance Sales (millions) $285.6 $252.0 13.3% $1,127.8 $1,021.5 10.4% $1,120 - $1,135 Same Store Sales (on a 52-week basis) 2.4% -8.0% 1,040 bps -0.1% -4.3% 420 bps -0.5% to +0.5% Operating Margin 10.7% 8.0% 270 bps 11.3% 11.4% -10 bps flat y/y GAAP EPS $.52 $.29 79.3% $1.92 $1.85 3.8% $1.88 - $1.93 Q3 Litigation Settlement Cost $.04 $.04 Management Transition Costs $.02 $.06 $.05 Net Tax Reform (Benefit) / Expense ($.04) $.06 $.08 FY18 Extra Week ($.10) ($.10) ($.10) Adjusted EPS $.40 $1.98 $1.95 - $2.00
Fiscal 2019 Outlook FY19 FY18 Δ Sales (millions) $1,170 to $1,200 $1,128 3.7% to 6.4% Same Store Sales (on a 52-week basis) +1% to +3% -0.1% 110 bps to 310 bps GAAP EPS $2.30 to $2.40 $1.92 20% to 25% Delivering Growth Today While Investing for Tomorrow Operating Margin Assumes operating margin of 11.1% at midpoint of FY19 sales guidance (11.4% excluding Free Service) Expect stable tire and oil costs year-over-year Expect to generate earnings increase on a comparable store sales increase above 1.0% Tax Savings Estimate ~$.40 tax benefit from newly enacted tax legislation Tax rate expected to be reduced from ~37% to ~24% in FY19 Reinvestment of Tax Savings Reinvestment of ~30%, or ~$.13, to support Monro.Forward strategy ($.11 of recurring expenses and $.02 of one-time items in FY19): Improve Customer Experience – (~$.04) Enhance Customer Engagement – (~$.01) Accelerate Productivity & Team Engagement – (~$.08) Additional Guidance Assumptions (at the midpoint) Interest expense of $29 million Depreciation and amortization of $54 million EBITDA of approximately $186 million 33.4 million weighted average number of diluted shares outstanding Stores and Weeks Guidance includes recent Free Service acquisition and excludes any additional potential acquisitions Guidance includes eight ground-up greenfield store openings in FY19 FY19 represents a 52 week year compared to 53 weeks for FY18
Fiscal 2019 Outlook – EPS Bridge Note: Guidance bridge based on midpoint of FY19 EPS guidance *FY18 adjusted EPS is reconciled to its most directly comparable U.S. GAAP measure (GAAP EPS) on slide 59 *
Fiscal 2019 Outlook – Capital Investment Incremental Capital Spending Focused Primarily on Store Refresh Pilot and Early Rollout Second Half of FY19 Store Refresh Initiative Appropriate level of investment driven by store age, size and market demographics 30 store pilot expected to start in Q3 FY19 Capital Investment Area (Capital Spending by Area, $ in Million) $39.1 $47.0
Three-Year Organic Growth Financial Targets Accelerating Same Store Sales Growth Drives Operating Leverage and Double Digit Earnings Growth Accelerate from 2% to above 4% Same Store Sales Growth Return to 12%+ Operating Margin Operating Margin Expansion Deliver Consistent 10% - 15% Earnings Growth Earnings Per Share Growth Note: Financial targets exclude any future potential acquisitions
Three-Year Organic Growth Financial Targets Building Momentum through Fiscal Year 2021 SSS Improvement Operating Margin Expansion Expect performance to ramp as we move towards FY 2021, with momentum building as we implement our initiatives Executing on Monro.Forward strategy to drive accelerated same store sales growth over the next three years Accelerated top line growth to drive operating leverage and operating margin improvement, while supporting Monro.Forward investment
Disciplined Capital Allocation Executing on Growth Strategy While Maintaining a Disciplined Approach to Capital Allocation Investments in the Business ~$75M of incremental capital expenditures over the next 5 years to invest in store re-image and technology Return Cash to Shareholders Thirteen dividend increases in thirteen years, since initiated Currently $.20 per share quarterly, an increase of 11% from fiscal 2018 M&A Opportunities On average, highly accretive bolt-on acquisitions represent a 10% annual sales growth opportunity, and an additional 12% - 17% earnings growth by year three Utilize Strong Balance Sheet Current debt availability of $405M Debt to EBITDA ratio as of March 2018 of 2.2x provides significant flexibility to fund M&A strategy
Key Takeaways Drive a strong, scalable platform for growth through Monro.Forward Capitalize on fragmented market through disciplined acquisition strategy Maintain disciplined approach to capital allocation Achieve compelling long-term financial targets
Brett Ponton President & Chief Executive Officer
Q2 FY19 Q3 FY19 Q4 FY19 Q2 FY20 Q3 FY20 Q4 FY20 Q4 FY18 FY20 FY19 FY21 Monro.Forward Strategic Initiatives Pilot store refresh & operational excellence New store comp plans Monro University (includes career path, LMS) Technology based in-store experience Data-driven “new customer” marketing Monro omnichannel & e-commerce Store staffing & scheduling system Improve Customer Experience Enhance Customer-Centric Engagement Optimize Product & Service Offering Accelerate Productivity & Team Engagement Foundational technology & tools New in-store sales packages Scheduled maintenance in-store selling Data-driven CRM New website Tire category management Scale store refresh & operational excellence
Final Takeaways Leverage strong foundation and favorable industry backdrop Support strategic initiatives through investments in technology Drive operational excellence to increase overall customer lifetime value Capitalize on industry fragmentation and execute acquisition strategy Create scalable platform with multiple avenues for growth Continue to deliver strong shareholder returns
Questions & Answers
Exhibit 99.3
NEWS RELEASE
May 21, 2018
CONTACT: | Brett Ponton |
Chief Executive Officer
(585) 647-6400
Brian DAmbrosia
Senior Vice President Finance
Chief Financial Officer
(585) 647-6400
Investors and Media: Effie Veres
FTI Consulting
(212) 850-5600
MONRO, INC. ACQUIRES FREE SERVICE TIRE
Acquisition Expands Monros Presence in Tennessee, North Carolina, and Virginia,
Adding $47 Million in Annualized Sales
ROCHESTER, N.Y. May 21, 2018 Monro, Inc. (Nasdaq: MNRO), a leading provider of automotive undercar repair and tire services, today announced that it has acquired Johnson City, Tennessee-based Free Service Tire Company.
The asset acquisition includes Free Service Tires 12 retail and commercial stores, four wholesale distribution centers and one retread facility, adding to Monros more than 130 existing retail, commercial and wholesale locations in Tennessee, North Carolina, and Virginia. Monro will continue to operate all Free Service Tire locations and retain store-level, wholesale and retread associates.
This acquisition expands our footprint in the South, while providing Monro with an even stronger platform for further growth in these markets, said Brett Ponton, President and Chief Executive Officer of Monro. Equally important, we are extremely pleased to welcome these outstanding teammates and locations to our company, and look forward to working with the entire Free Service Tire team.
Lewis Wexler, Jr., Free Service Tires President stated, We are incredibly excited to join the Monro team to continue Free Service Tires 99-year history of success into the future. We have been approached by many companies over the years, but it wasnt until Monro came along that we found the right fit for our customers, our employees and our company. Monro has a tradition and business model much like ours, and I am confident that Free Service Tires tradition of outstanding customer service will continue under Monros ownership.
The transaction closed on May 13, 2018, and is expected to add approximately $47 million in annualized sales, representing a sales mix of 15% service and 85% tires.
About Monro, Inc.
Headquartered in Rochester, New York, Monro is a chain of 1,166 company-operated stores, 98 franchised locations, nine wholesale locations and three retread facilities providing automotive undercar repair and tire sales and services. The Company operates in 27 states, serving the Mid-Atlantic and New England regions and portions of the Great Lakes, Midwest and Southeast. The predecessor to the Company was founded by Charles J. August in 1957 as a Midas Muffler franchise. In 1966, Monro began to diversify into a full line of undercar repair services. The Company has experienced significant growth in recent years through acquisitions and, to a lesser extent, the opening of newly constructed stores. The Company went public in 1991 and trades on the Nasdaq under the symbol MNRO.
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