NOTE 10 – SHARE BASED COMPENSATION

We have a long-term incentive plan whereby eligible employees and non-employee directors may be granted non-qualified service condition stock options, non-qualified market condition stock options, restricted stock awards and restricted stock units. We grant stock-based awards to continue to attract and retain employees and to better align employees’ interests with those of our shareholders. Monro issues new shares of Common Stock upon the exercise of stock options. Total stock-based compensation expense included in cost of sales and selling, general and administrative expenses in Monro’s Consolidated Statements of Comprehensive Income for the fiscal years ended March 30, 2019, March 31, 2018 and March 25, 2017 was $4.0 million, $2.9 million and $2.5 million, respectively, and the related income tax benefit for each fiscal year was $1.0 million. As of March 30, 2019, the total unrecognized compensation expense related to all unvested stock-based awards was $5.9 million and is expected to be recognized over a weighted average period of approximately two years.

Monro currently grants stock option awards and restricted stock under the 2007 Incentive Stock Option Plan (the “2007 Plan”). The 2007 Plan was authorized by the Board of Directors in June 2007, initially reserving 873,000 shares (as retroactively adjusted for stock splits) of Common Stock for issuance to eligible employees and all non-employee directors. The 2007 Plan was approved by shareholders in August 2007 and was later amended and restated in August 2017. At March 30, 2019, there were a total of 5,001,620 shares authorized for grant under the 2007 Plan (as retroactively adjusted for stock splits), including the shares transferred from previous plans. There were 990,930 shares available for grant at March 30, 2019.

Non-Qualified Stock Options

Generally, employee options vest over a four year period, and have a duration of six to ten years. Outstanding options are exercisable for various periods through March 2025. Assumptions used to estimate compensation expense are determined as follows:

Expected life of an award is based on historical experience and on the terms and conditions of the stock awards granted to employees;

Expected volatility is measured using historical changes in the market price of Monro’s Common Stock;

Risk-free interest rate is equivalent to the implied yield on zero-coupon U.S. Treasury bonds with a remaining maturity equal to the expected term of the awards;

Forfeitures are based substantially on the history of cancellations of similar awards granted by Monro in prior years; and

Dividend yield is based on historical experience and expected future changes.

The fair values of the service condition options granted were estimated on the date of their grant using the Black-Scholes option-pricing model with the following weighted-average assumptions:



	Year Ended Fiscal March
	2019		2018		2017
Risk-free interest rate	2.81	%	1.78	%	1.20	%
Expected life, in years	4		4		4
Expected volatility	28.3	%	26.1	%	25.9	%
Expected dividend yield	1.24	%	1.49	%	1.10	%

In fiscal 2018, Monro granted 100,000 options with a market condition vesting and such market condition options granted were estimated on the date of their grant using the Monte Carlo option-pricing model with the following weighted-average assumptions:



	Year Ended Fiscal March
	2018
Risk-free interest rate	1.65	%
Expected life, in years	4
Expected volatility	29.4	%
Expected dividend yield	1.53	%

Monro did not grant any options with a market condition vesting in fiscal 2019.

The weighted average fair value of options granted during fiscal 2019, 2018 and 2017 was $15.44, $8.84 and $12.17, respectively. A summary of changes in outstanding stock options is as follows:



	Weighted
	Average
	Exercise		Options
	Price		Outstanding
At March 26, 2016	$	41.75	1,188,791
Granted	$	62.01	232,560
Exercised	$	31.61	(485,660)
Canceled	$	61.20	(39,347)
At March 25, 2017	$	51.67	896,344
Granted	$	48.12	546,080
Exercised	$	35.00	(170,354)
Canceled	$	60.87	(64,092)
At March 31, 2018	$	51.95	1,207,978
Granted	$	65.32	123,627
Exercised	$	50.75	(331,182)
Canceled	$	58.12	(125,518)
At March 30, 2019	$	55.45	874,905

The total shares exercisable at March 30, 2019, March 31, 2018 and March 25, 2017 were 405,245, 495,573 and 563,109, respectively. The weighted average exercise price of all shares exercisable at March 30, 2019 was $56.50.

The weighted average contractual term of all options outstanding at March 30, 2019 and March 31, 2018 was 3.9 years and 3.8 years, respectively. The aggregate intrinsic value of all options (the amount by which the market price of the stock on the date of exercise exceeded the exercise price of the option) outstanding at March 30, 2019 and March 31, 2018 was $26.6 million and $5.2 million, respectively.

The weighted average contractual term of all options exercisable at March 30, 2019 and March 31, 2018 was 3.2 years and 2.0 years, respectively. The aggregate intrinsic value of all options exercisable at March 30, 2019 and March 31, 2018 was $12.2 million and $2.2 million, respectively.

A summary of the status of and changes in non-vested stock options granted is as follows:



		Weighted
		Average
		Grant-Date
		Fair Value
	Options	(per Option)
Non-vested at March 26, 2016	399,369	$	11.26
Granted	232,560	$	12.17
Vested	(266,112)	$	10.48
Canceled	(32,582)	$	12.79
Non-vested at March 25, 2017	333,235	$	12.37
Granted	546,080	$	8.84
Vested	(119,445)	$	12.04
Canceled	(47,465)	$	12.53
Non-vested at March 31, 2018	712,405	$	9.72
Granted	123,627	$	15.44
Vested	(314,054)	$	8.94
Canceled	(52,318)	$	12.30
Non-vested at March 30, 2019	469,660	$	11.46

The following table summarizes information about stock options outstanding at March 30, 2019:



	Options Outstanding				Options Exercisable
		Weighted	Weighted			Weighted
		Average	Average		Shares	Average
Range of	Shares	Remaining	Exercise		Under	Exercise
Exercise Prices	Under Option	Life	Price		Option	Price
$18.05 - $46.99	16,832	1.77	$	43.41	11,582	$	42.74
$47.00 - $48.28	333,437	4.37	$	47.26	106,556	$	47.22
$48.29 - $60.97	230,118	3.18	$	54.69	118,432	$	54.67
$60.98 - $85.16	294,518	3.96	$	66.01	168,675	$	64.60

During the fiscal years ended March 30, 2019, March 31, 2018 and March 25, 2017, the fair value of awards vested under Monro’s stock plans was $2.8 million, $1.4 million and $2.8 million, respectively.

The aggregate intrinsic value is based on Monro’s closing stock price of $86.52, $53.60 and $52.15 as of the last trading day of the periods ended March 30, 2019, March 31, 2018 and March 25, 2017, respectively. The aggregate intrinsic value of options exercised during the fiscal years ended March 30, 2019, March 31, 2018 and March 25, 2017 was $7.4 million, $2.8 million and $13.3 million, respectively.

Cash received from option exercises under all stock option plans was $14.6 million, $4.8 million and $3.5 million for the fiscal years ended March 30, 2019, March 31, 2018 and March 25, 2017, respectively. The actual tax benefit realized for the tax deductions from option exercises was $1.0 million, $.5 million and $3.5 million for the fiscal years ended March 30, 2019, March 31, 2018 and March 25, 2017, respectively.

Restricted Stock

Monro issues restricted stock to certain members of senior management as well as non-employee directors of the Company. Restricted stock units represent shares issued upon vesting in the future whereas restricted stock awards represent shares issued upon grant that are restricted. The fair value for restricted stock units and restricted stock awards is calculated based on the stock price on the date of grant. Restricted stock units do not have voting rights but earn dividends during the vesting period. The recipients of the restricted stock awards have voting rights and earn dividends during the vesting period. The dividends are paid to the recipient at the time the restricted stock becomes vested. If the recipient leaves Monro prior to the vesting date for any reason, the shares of restricted stock and the dividends accrued on those shares will be forfeited and returned to Monro. The restricted stock units and awards vest equally over three or four years. In fiscal 2019, the Company issued a limited number of restricted stock units to members of senior management which may vest upon the achievement of a three-year average return on invested capital target.

The following table summarizes restricted stock activity for the year ended March 30, 2019:



	Shares	Weighted-Average Grant-Date Fair Value per Share		Weighted Average Remaining Vesting Period (in years)
Non-vested as of March 31, 2018	61,875	$	47.59
Granted	17,572	$	67.80
Vested	(20,386)	$	47.53
Forfeited	(835)	$	57.45
Non-vested as of March 30, 2019	58,226	$	53.57	1.69

The aggregate intrinsic value is based on Monro’s closing stock price of $86.52 and $53.60 as of the last trading day of the periods ended March 30, 2019 and March 31, 2018, respectively. The aggregate intrinsic value of non-vested restricted stock as of March 30, 2019 and March 31, 2018 was $5.0 million and $3.3 million, respectively.