UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
CURRENT REPORT
Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934.
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(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):
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Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
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Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
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Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
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Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Securities registered pursuant to Section 12(b) of the Act:
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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 October 24, 2019, Monro, Inc. (the “Company”) issued a press release announcing its financial results for the second quarter-ended September 28, 2019, as well as a revised fiscal 2020 sales range, comparable store sales guidance and diluted earnings per share. A copy of the press release is furnished herewith as Exhibit 99.1 to this Current Report on Form 8-K.
| Item 8.01 | Voluntary Disclosure of Other Events |
The Company also announced that it has signed definitive agreements to acquire 27 stores in California, Nevada, and Idaho and completed acquisitions of eight stores in Louisiana. Further details of these acquisitions are contained in the press release furnished as Exhibit 99.1.
| Item 9.01 | Financial Statements and Exhibits |
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Not applicable. | |
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Not applicable. | |
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Not applicable. | |
| (d) |
The following is a list of exhibits furnished with this Current Report on Form 8-K: | |
| Exhibit |
Description | |
| 99.1 |
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| 104 |
Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101) |
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) | ||||||
| October 28, 2019 |
By: |
/s/ Maureen E. Mulholland | ||||
| Maureen E. Mulholland, | ||||||
| Senior Vice President – General Counsel and Secretary | ||||||
Exhibit 99.1
| CONTACT: | Kim Rudd | |||
| Executive Assistant |
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| (585) 784-3324 |
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| Investors and Media: Melanie Dambre / Jamie Baird |
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| FTI Consulting |
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| (212) 850-5600 |
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FOR IMMEDIATE RELEASE
MONRO, INC. ANNOUNCES SECOND QUARTER FISCAL 2020 FINANCIAL RESULTS
~ Delivers Second Quarter Sales Increase of 5.5% to a Record $324.1 Million ~
~ Signs Definitive Agreements to Acquire 27 Stores in California, Nevada, and Idaho and Completes
Acquisitions of Eight Stores in Lousiana, Bringing Expected Annualized Sales from Fiscal 2020 Acquisitions to
$120 Million ~
~ Updates Fiscal 2020 Comparable Store Sales and EPS Guidance ~
ROCHESTER, N.Y. – October 24, 2019 – Monro, Inc. (Nasdaq: MNRO), a leading provider of automotive undercar repair and tire services, today announced financial results for its second quarter ended September 28, 2019.
Second Quarter Results
Sales for the second quarter of the fiscal year ending March 28, 2020 (“fiscal 2020”) increased 5.5% to $324.1 million, as compared to $307.1 million for the second quarter of the fiscal year ended March 30, 2019 (“fiscal 2019”). The total sales increase for the second quarter of $17.0 million was driven by sales from new stores of $17.5 million, including sales from recent acquisitions of $14.2 million. Comparable store sales were flat in the quarter, reflecting a 1% increase for brakes and maintenance services, flat for tires and front end/shocks, and a decrease of 1% for alignments.
Gross margin decreased 140 basis points to 37.7% in the second quarter of fiscal 2020 from 39.1% in the prior year period, primarily due to higher material costs as a percentage of sales in the tire category, higher labor costs and the impact of recent acquisitions. Total operating expenses increased $3.3 million to $88.7 million, or 27.4% of sales, as compared to $85.4 million, or 27.8% of sales in the prior year period. Operating expenses for the second quarter of fiscal 2020 included expenses from 84 net new stores compared to the prior year period.
Operating income for the second quarter of fiscal 2020 was $33.4 million, or 10.3% of sales, as compared to $34.5 million, or 11.2% of sales in the prior year period. Interest expense was $7.0 million for the second quarter of fiscal 2020, as compared to $6.8 million for the second quarter of fiscal 2019.
Net income for the second quarter of fiscal 2020 was $20.3 million, as compared to $21.8 million in the same period of the prior year. Diluted earnings per share for the second quarter of fiscal 2020 were $.60, compared to diluted earnings per share of $.65 in the second quarter of fiscal 2019, which included $.02 per share in one-time costs related to Monro.Forward investments. Net income for the second quarter of fiscal 2020 reflects an effective tax rate of 23.6%, as compared to 22.2% in the prior year period.
During the second quarter of fiscal 2020, the Company added 13 company-operated stores and closed two, ending the quarter with 1,262 company-operated stores and 98 franchised locations.
“We are disappointed in our second quarter results, which were significantly impacted by gross margin pressures related to higher than expected tire and labor costs. However, we believe the second quarter represents a low watermark for us this year, as we quickly took action to rectify our margin pressures in the near-term and are implementing initiatives to drive margin expansion moving forward. As a result of our performance this quarter we are lowering our full-year guidance ranges, but we remain confident our transformation is creating a sustainable platform for long-term value creation,” said Brett Ponton, President and Chief Executive Officer.
Ponton continued, “Positively, we substantially completed the re-image of approximately 120 stores across a number of markets, representing a significant step forward in our store refresh program. This initiative is a critical component of our Monro.Forward strategy as it underpins our ability to drive sustainable growth, as evidenced by the double-digit increase in comparable store sales our pilot stores have generated following the completion of their re-image. While the disruption at the stores being re-imaged this quarter was more than anticipated, we believe the larger base of refreshed stores will be instrumental in driving comparable store sales improvement as we progress through the remainder of fiscal 2020 and beyond. In addition, we remain committed to executing on attractive acquisition opportunities, as evidenced by our continued expansion into the West Coast region.”
First Six Months Results
For the current six-month period, sales increased 6.3% to $641.2 million from $602.9 million in the same period of the prior year. Comparable store sales increased 0.4% compared to 2.5% in the prior year period. Gross margin for the six-month period was 39.0% of sales, compared to 39.3% in the prior year period. Operating income was 10.9% of sales, compared to 11.2% in the prior year period. Net income for the first six months of fiscal 2020 was $42.9 million, or $1.26 per diluted share, as compared to $42.4 million, or $1.26 per diluted share in the comparable period of fiscal 2019.
Acquisitions Update
The Company announced today that it has signed a definitive agreement to acquire 18 stores, including 14 in Nevada and four in Idaho, both of which are new states for Monro. These locations are expected to add approximately $20 million in annualized sales, representing a sales mix of 75% service and 25% tires.
Additionally, the Company announced today that it has signed definitive agreements to acquire nine stores in California, expanding our presence in a recently entered state. These locations are expected to add approximately $25 million in annualized sales, representing a sales mix of 55% service and 45% tires.
These acquisitions further expand the Company’s geographic footprint into the West Coast region and are expected to close in the third quarter of fiscal 2020. They are expected to be breakeven to diluted earnings per share in fiscal 2020.
The Company also completed the previously announced acquisitions of eight stores in Louisiana during the second quarter of fiscal 2020, expanding our presence in a recently entered market. These locations are expected to add approximately $12 million in annualized sales, representing a sales mix of 50% service and 50% tires. These acquisitions are expected to be breakeven to diluted earnings per share in fiscal 2020.
On a combined basis, acquisitions completed and announced in fiscal 2020 represent an expected total of $120 million in annualized sales.
Company Outlook
Based on current sales, business and economic trends, and recently announced and completed acquisitions, the Company now anticipates fiscal 2020 sales to be in the range of $1.295 billion to $1.315 billion, an increase of 7.9% to 9.6% as compared to fiscal 2019 sales, versus the previous range of $1.285 billion to $1.315 billion. In light of comparable store sales trends during the second quarter, guidance for fiscal 2020 comparable store sales has been revised to an anticipated increase of 1% to 2%, compared to the previous guidance of an increase of 1% to 3%. The revised guidance assumes improving comparable store sales growth in the second half of the year, as initially contemplated in the full-year guidance provided on July 25, 2019.
To reflect the impact of our second quarter performance, the Company now anticipates its fiscal 2020 diluted earnings per share to be in the range of $2.45 to $2.55, compared to the previous range of $2.55 to $2.75. This guidance compares to diluted earnings per share of $2.37 in fiscal 2019. At the midpoint, this guidance implies diluted earnings per share of $1.24 in the second half of fiscal 2020, an increase of 11.7% as compared to the second half of fiscal 2019. The diluted earnings per share guidance is based on 34.0 million diluted weighted average shares outstanding.
Earnings Conference Call and Webcast
The Company will host a conference call and audio webcast on Thursday, October 24, 2019 at 8:30 a.m. Eastern Time. The conference call may be accessed by dialing 1-877-425-9470 and using the required passcode 13695216. A replay will be available approximately two hours after the recording through Thursday, November 7, 2019 and can be accessed by dialing 1-844-512-2921 and using the required pass code of 13695216. The live conference call and replay can also be accessed via audio webcast at the Investors section of the Company’s website, located at corporate.monro.com. An archive will be available at this website through November 7, 2019.
About Monro, Inc.
Headquartered in Rochester, New York, Monro is a chain of 1,262 Company-operated stores, 98 franchised locations, eight wholesale locations and three retread facilities providing automotive undercar repair and tire sales and services. The Company operates in 30 states, serving the Mid-Atlantic and New England regions and portions of the Great Lakes, Midwest, Southeast and West Coast. 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 Stock Market 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 Company’s stores are located, the need for and costs associated with store renovations and other capital expenditures, the effect of economic conditions, changes in the U.S. trade environment, including the impact of tariffs on products imported from China, 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 relating to integration of acquired businesses and other factors set forth elsewhere herein and in the Company’s Securities and Exchange Commission filings, including the Company’s annual report on Form 10-K for the fiscal year ended March 30, 2019. 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 September |
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| 2019 | 2018 | % Change | ||||||||||
| Sales |
$ | 324,113 | $ | 307,105 | 5.5 | % | ||||||
| Cost of sales, including distribution and occupancy costs |
202,040 | 187,157 | 8.0 | % | ||||||||
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| Gross profit |
122,073 | 119,948 | 1.8 | % | ||||||||
| Operating, selling, general and administrative expenses |
88,716 | 85,440 | 3.8 | % | ||||||||
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| Operating income |
33,357 | 34,508 | (3.3 | )% | ||||||||
| Interest expense, net |
6,961 | 6,803 | 2.3 | % | ||||||||
| Other income, net |
(207 | ) | (261 | ) | (20.7 | )% | ||||||
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| Income before provision for income taxes |
26,603 | 27,966 | (4.9 | )% | ||||||||
| Provision for income taxes |
6,289 | 6,205 | 1.3 | % | ||||||||
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| Net income |
$ | 20,314 | $ | 21,761 | (6.6 | )% | ||||||
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| Diluted earnings per share |
$ | .60 | $ | .65 | (7.7 | )% | ||||||
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| Weighted average number of diluted shares outstanding |
33,979 | 33,640 | ||||||||||
| Number of stores open (at end of quarter) |
1,262 | 1,178 | ||||||||||
MONRO, INC.
Financial Highlights
(Unaudited)
(Dollars and share counts in thousands)
| Six Months Ended Fiscal September |
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| 2019 | 2018 | % Change | ||||||||||
| Sales |
$ | 641,177 | $ | 602,916 | 6.3 | % | ||||||
| Cost of sales, including distribution and occupancy costs |
390,957 | 365,731 | 6.9 | % | ||||||||
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| Gross profit |
250,220 | 237,185 | 5.5 | % | ||||||||
| Operating, selling, general and administrative expenses |
180,493 | 169,605 | 6.4 | % | ||||||||
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| Operating income |
69,727 | 67,580 | 3.2 | % | ||||||||
| Interest expense, net |
14,117 | 13,383 | 5.5 | % | ||||||||
| Other income, net |
(382 | ) | (488 | ) | (21.7 | )% | ||||||
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| Income before provision for income taxes |
55,992 | 54,685 | 2.4 | % | ||||||||
| Provision for income taxes |
13,072 | 12,280 | 6.5 | % | ||||||||
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| Net income |
$ | 42,920 | $ | 42,405 | 1.2 | % | ||||||
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| Diluted earnings per share |
$ | 1.26 | $ | 1.26 | 0.0 | % | ||||||
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| Weighted average number of diluted shares outstanding |
33,971 | 33,546 | ||||||||||
MONRO, INC.
Financial Highlights
(Unaudited)
(Dollars in thousands)
| September 28, 2019 |
March 30, 2019 |
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| Current Assets |
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| Cash |
$ | 6,050 | $ | 6,214 | ||||
| Inventories |
170,804 | 171,038 | ||||||
| Other current assets |
72,786 | 62,655 | ||||||
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| Total current assets |
249,640 | 239,907 | ||||||
| Property, plant and equipment, net |
315,466 | 312,552 | ||||||
| Operating lease assets, net |
204,048 | — | ||||||
| Finance lease and financing obligations assets, net |
161,875 | 128,029 | ||||||
| Other non-current assets |
689,023 | 631,800 | ||||||
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| Total assets |
$ | 1,620,052 | $ | 1,312,288 | ||||
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| Liabilities and Shareholders’ Equity |
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| Current liabilities |
$ | 261,744 | $ | 218,447 | ||||
| Finance leases and financing obligations |
268,912 | 238,089 | ||||||
| Other long-term debt |
168,912 | 137,682 | ||||||
| Operating lease liabilities |
167,905 | — | ||||||
| Other long-term liabilities |
19,003 | 18,560 | ||||||
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| Total liabilities |
886,476 | 612,778 | ||||||
| Total shareholders’ equity |
733,576 | 699,510 | ||||||
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| Total liabilities and shareholders’ equity |
$ | 1,620,052 | $ | 1,312,288 | ||||
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Document and Entity Information |
Oct. 24, 2019 |
|---|---|
| Cover [Abstract] | |
| Entity Address, State or Province | NY |
| Amendment Flag | false |
| Entity Central Index Key | 0000876427 |
| Document Type | 8-K |
| Document Period End Date | Oct. 24, 2019 |
| Entity Registrant Name | MONRO, INC. |
| Entity Incorporation State Country Code | NY |
| Entity File Number | 0-19357 |
| Entity Tax Identification Number | 16-0838627 |
| Entity Address, Address Line One | 200 Holleder Parkway |
| Entity Address, City or Town | Rochester |
| Entity Address, Postal Zip Code | 14615 |
| City Area Code | (585) |
| Local Phone Number | 647-6400 |
| Written Communications | false |
| Soliciting Material | false |
| Pre Commencement Tender Offer | false |
| Pre Commencement Issuer Tender Offer | false |
| Security 12b Title | Common Stock, par value $.01 per share |
| Trading Symbol | MNRO |
| Security Exchange Name | NASDAQ |
| Entity Emerging Growth Company | false |