Form 10-K
(MARK ONE)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE
SECURITIES EXCHANGE ACT OF 1934 (FEE REQUIRED)
For Fiscal Year Ended March 30, 2002
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
Commission File Number 0-19357
MONRO MUFFLER BRAKE, INC.
(Exact name of registrant as specified in its charter)
New York 16-0838627
(State of incorporation) (I.R.S. Employer Identification No.)
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200 Holleder Parkway, Rochester, New York 14615
(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code: (585) 647-6400
Securities registered pursuant to Section 12(b) of the Act:
NONE
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, par value $.01 per share
(Title of Class)
Indicate by check mark if the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes X No ____
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [ ]
As of June 1, 2002, the aggregate market value of voting stock held by non-affiliates of the registrant was $138,783,000.
As of June 1, 2002, 8,315,823 shares of the registrant's Common Stock, par value $.01 per share, were outstanding.
DOCUMENTS INCORPORATED BY REFERENCE:
Portions of the registrant's definitive proxy statement (to be filed pursuant to Regulation 14A) for the 2002 Annual Meeting of Shareholders (the "Proxy Statement") are incorporated by reference into Part III hereof.
Part I
-GENERAL
Monro Muffler Brake, Inc. ("Monro" or the "Company") is a chain of 514
Company-operated and 19 dealer-operated stores providing automotive undercar
repair services in the United States. At March 30, 2002, Monro operated Company
stores in New York, Pennsylvania, Ohio, Connecticut, Massachusetts, West
Virginia, Virginia, Maryland, Vermont, New Hampshire, New Jersey, North
Carolina, South Carolina, Indiana, Rhode Island and Delaware under the name
"Monro Muffler Brake & Service" and "Speedy Auto Service by Monro" (together,
the "Company Stores"). The Company's stores typically are situated in
high-visibility locations in suburban areas and small towns, as well as in major
metropolitan areas. The Company Stores serviced approximately 2,184,000 vehicles
in fiscal 2002. (References herein to fiscal years are to the Company's year
ended fiscal March [e.g., references to "fiscal 2002" are to the Company's
fiscal year ended March 30, 2002].)
The predecessor to the Company was founded by Charles J. August in 1957 as
a Midas Muffler franchise in Rochester, New York, specializing in mufflers and
exhaust systems. In 1966, the Company discontinued its affiliation with Midas
Muffler, and began to diversify into a full line of undercar repair services. An
investor group led by Peter J. Solomon and Donald Glickman purchased a
controlling interest in the Company in July 1984. At that time, Monro operated
59 stores, located primarily in upstate New York, with approximately $21 million
in sales in fiscal 1984. Since 1984, Monro has continued its growth and has
expanded its marketing area to include 16 additional states. Recent expansion
included the September 1998 acquisition of 189 company-owned and 14 franchised
Speedy stores, all located in the United States, from SMK Speedy International
Inc. of Toronto Canada, and the April 2002 acquisition of Kimmel Automotive,
Inc. (See additional discussion under "Expansion Strategy".)
In December 1998, the Company appointed Robert G. Gross as President and
Chief Executive Officer who began full-time responsibilities on January 1, 1999.
The Company was incorporated in the State of New York in 1959. The
Company's principal executive offices are located at 200 Holleder Parkway,
Rochester, New York 14615, and its telephone number is (585) 647-6400.
The Company provides a broad range of services on passenger cars, light
trucks and vans for mufflers and exhaust systems (estimated at 23% of fiscal
2002 sales); brakes (33%); and steering, drive train, suspension and wheel
alignment (16%). The Company also provides other products and services including
tires, scheduled maintenance and state inspections (28%). Monro specializes in
the repair and replacement of parts which must be periodically replaced as they
wear out. Normal wear on these parts generally is not covered by new car
warranties. The Company typically does not perform under-the-hood repair
services except for oil change services, a heating and cooling system "flush and
fill" service and some minor tune-up services. (See additional discussion under
"Operating Strategy.") The Company does not sell parts or accessories to the
do-it-yourself market.
The Company has two wholly-owned subsidiaries, Monro Service Corporation
and Monro Leasing, LLC, both of which are Delaware corporations qualified to do
business in the State of New York.
Monro Service Corporation holds all assets, rights, responsibilities and
liabilities associated with the Company's warehousing, purchasing, advertising,
accounting, office services, payroll, cash management and certain other
operations which are wholly performed within New York State. The Company
believes that this structure has enhanced, and will continue to enhance,
operational efficiency and provide cost savings.
Monro Leasing, LLC was established primarily to act as lessee in real
estate transactions for store locations. Currently, the sole member of the
entity is the Company.
-INDUSTRY OVERVIEW
According to industry reports, demand for automotive repair services,
including undercar repair services, has increased due to the general increase in
the number of vehicles registered, the growth in vehicle miles driven, the
increase in the average age of vehicles and the increased complexity of
vehicles, which makes it more difficult for a vehicle owner to perform
do-it-yourself repairs.
At the same time as demand for automotive repair services has grown, the
number of general repair outlets has decreased, principally because fewer gas
stations now perform repairs, and because there are fewer new car dealers. Monro
believes that these factors present opportunities for increased sales by the
Company, even though the number of specialized repair outlets (such as those
operated by the Company and its direct competitors) has increased to meet the
growth in demand.
-EXPANSION STRATEGY
Monro has experienced significant growth in recent years due to
acquisitions and, to a lesser extent, the opening of new stores. Management
believes that the continued growth in sales and profits of the Company is
dependent, in large part, upon its continued ability to open/acquire and operate
new stores on a profitable basis. In addition, overall profitability of the
Company could be reduced if new stores do not attain profitability.
Monro believes that there are expansion opportunities in new as well as
existing market areas which will result from a combination of constructing
stores on vacant land and acquiring existing store locations. The Company
believes that, as the industry consolidates due to the increasingly complex
nature of automotive repair and the expanded capital requirements for
state-of-the art equipment, there will be more opportunities for acquisitions of
existing businesses or store structures.
In that regard, effective April 1, 2002, the Company purchased all of the
outstanding common stock, as well as a
portion of the preferred stock, of Kimmel Automotive, Inc. ("Kimmel"), based in
Baltimore, Maryland. Kimmel Automotive operates 34 tire and automotive repair
stores in Maryland and Virginia, as well as Wholesale and Truck Tire Divisions
(including two commercial stores).
Although the 15 Kimmel Tire and Automotive Centers in Baltimore and 19
Tread Quarters stores in Virginia are in the same general markets in which Monro
competes, Monro and Kimmel are mainly situated in non-overlapping areas. There
are no plans to close any of the Kimmel stores, which will continue to operate
under the current brand names.
Additionally, in September 1998, the Company completed the acquisition of
189 company-operated and 14 franchised Speedy stores (the "Acquired Speedy
stores"), from SMK Speedy International Inc. of Toronto Canada. The Acquired
Speedy stores are located primarily in complementary areas in Monro's existing
markets in the Northeast, Mid-Atlantic and Midwest regions of the United States.
As of March 30, 2002, Monro had 514 Company-operated stores and 19 dealer
locations located in 17 states. The following table shows the growth in the
number of Company-operated stores over the last five fiscal years:
STORE OPENINGS AND CLOSINGS
YEAR ENDED FISCAL MARCH,
1998 1999 2000 2001 2002
-----------------------------------------------------------
Stores open at
beginning of year 313 350 524 512 511
Stores opened during
year 39 210(a) 13 4 4
Stores closed during
year (b) (2) (36) (25) (5) (1)
--- --- --- --- ---
Stores open at end of
year 350 524 512 511 514
=== === === === ===
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(a) Includes 189 Acquired Speedy stores.
(b) These stores were closed because they failed to achieve an acceptable level of profitability or because a new Monro store was opened in the same market at a more favorable location. Fiscal 1999 and 2000 closures primarily relate to underperforming or redundant Speedy locations.
The Company plans to open approximately five new stores in fiscal 2003, and
to continue to search for appropriate acquisition candidates. In future years,
should the Company find that there are not suitable acquisition candidates, it
would increase its new store (green field) openings.
The Company has developed a systematic method for selecting new store
locations and a targeted approach to marketing new stores. Key factors in market
and site selection include population, demographic characteristics, vehicle
population and the intensity of competition. These factors are evaluated through
the use of a proprietary computer model developed for the Company. The
characteristics of each potential site are compared by the model to the profiles
of existing stores, and the model then projects sales for that site. Monro
attempts to cluster stores in market areas in order to achieve economies of
scale in advertising, supervision and distribution costs. All new sites
presently under consideration are within Monro's established market areas.
As a result of extensive analysis of its historical and projected store
opening strategy, the Company has established major market profiles, as defined
by market awareness: mature, existing and new markets. Over the next several
years, the Company expects to build a greater percentage of stores in mature and
existing markets in order to capitalize on the Company's market presence and
consumer awareness. All four stores opened in fiscal 2002 were in mature or
existing markets.
The Company believes that management and operating improvements implemented
over the last several fiscal years will enhance its ability to sustain its
growth. The Company has a chain-wide computerized inventory control and
electronic point-of-sale (POS) management information system, which has
increased management's ability to monitor operations as the number of stores has
grown. Late in fiscal 2001, the Company installed a new Windows-based,
point-of-sale system in all of its stores. Being Windows-based, the system has
simplified training of new employees. Additionally, the system includes
electronic mail and electronic cataloging, which allows store managers to
electronically research the specific parts needed for the make and model of the
car being serviced. This enhanced system includes software which contains data
that mirrors the scheduled maintenance requirements in vehicle owners' manuals,
specifically by make, model, year and mileage for every automobile. Management
believes that this software facilitates the presentation and sale of Scheduled
Maintenance services to customers. Other enhancements include the streamlining
of estimating and other processes; graphic catalogs; a thermometer graphic which
guides store managers on the profitability of each job; and expanded monitoring
of price changes. This latter change requires more specificity on the reason for
a discount, which management believes will lead to reduced discounting.
Enhancements will continue to be made to the POS system annually which increase
efficiency, improve the quality and timeliness of store reporting and enable the
Company to better serve its customers.
The financing to open a new store location may be accomplished in one of
three ways: a store lease for the land and building (in which case, land and
building costs will be financed primarily by the lessor), a land lease with the
building constructed by the Company (with building costs paid by the Company),
or a land purchase with the building constructed by the Company. In all three
cases, each new store also will require approximately $138,000 for equipment
(including a point-of-sale system and a truck), and approximately $70,000 in
inventory. Because Monro generally does not extend credit to its customers,
stores generate almost no receivables and a new store's actual net working
capital investment is nominal. Total capital required to open a new store
ranges, on average (based upon the last five fiscal years' openings, excluding
the Acquired Speedy locations), from $273,000 to $920,000 depending on the
location and which of the three financing methods is used. In instances where
Monro acquires an existing business, it may pay additional amounts for
intangible assets such as customer lists, covenants not-to-compete and goodwill.
At March 30, 2002, the Company leased the land and/or the building at
approximately 78% of its store locations and owned the land and building at the
remaining locations. Monro's policy is to situate new stores in the best
locations, without regard to the form of ownership required to develop the
locations.
New stores, excluding acquired stores, have average sales of approximately
$360,000 in their first 12 months of operation, or $60,000 per bay.
-OPERATING STRATEGY
Monro's operating strategy is to provide its customers with dependable,
high-quality automotive service at a competitive price by emphasizing the
following key elements.
PRODUCTS AND SERVICES
All stores provide a full range of undercar repair services for brakes,
steering, mufflers and exhaust systems, drive train, suspension and wheel
alignment. These services apply to all makes and models of domestic and foreign
cars, light trucks and vans. In addition, all stores provide many of the routine
maintenance services (except engine diagnostic and major transmission repair)
which automobile manufacturers suggest or require in the vehicle owners'
manuals, and which fulfill manufacturers' requirements for new car warranty
compliance. At the end of fiscal 2001, the Company introduced "Scheduled
Maintenance" services in all of its stores whereby the aforementioned services
are formally packaged and offered to consumers based upon the year, make, model
and mileage of each specific vehicle. Management believes that the Company is
able to offer this service in a more convenient and cost competitive fashion
than auto dealers can provide.
Substantially all of the stores provide oil change services as well as tire
sales and installation. All stores perform a heating and cooling system "flush
and fill" service, a transmission "flush and fill" service, and belt and hose
installation. Additionally, all stores replace and service batteries, starters
and alternators. Stores in New York, West Virginia, New Hampshire, Pennsylvania,
North Carolina, Virginia and Vermont also perform annual state inspections.
Approximately 25% of the Company's stores also offer air conditioning services.
CUSTOMER SATISFACTION
The Company's vision of being the dominant Auto Service provider in the markets it serves is supported by a set of values displayed in each Company store emphasizing TRUST:
-- Total Customer Satisfaction
-- Respect, Recognize and Reward (employees who are committed to these values)
-- Unparalleled Quality and Integrity
-- Superior Value and
-- Teamwork
Additionally, each Company-operated store displays and operates under the following set of customer satisfaction principles: free inspection of brakes, shocks, front end and exhaust systems; item-by-item review with customers of problem areas; free written estimates; written guarantees; drive-in service without an appointment; fair and reasonable prices as advertised; and repairs by professionally trained undercar specialists, many of whom are Automotive Service Excellence (ASE) certified in brakes and suspension. (See additional discussion under "Store Operations: Quality Control and Warranties.")
COMPETITIVE PRICING, ADVERTISING AND
CO-BRANDING INITIATIVES
The Company seeks to set competitive prices for quality services and
products. The Company supports its pricing strategy by advertising through
direct mail coupon inserts and in-store promotional signage and displays. In
addition, the Company advertises through radio, yellow pages, newspapers and
electronic mail to increase consumer awareness of the services offered.
The Company employs co-branding initiatives to more quickly increase
consumer awareness in certain markets. The Company believes that, especially in
newer markets, customers may more readily be drawn into its stores because of
their familiarity with national brand names. Some of these initiatives have
included cross-promotional offers with professional sports teams, national fast
food chains and video rental stores, as well as with regional supermarkets.
Additionally, the Company introduced Bridgestone/Firestone tires into most of
its stores in the late 1990s and Goodyear tires in fiscal 2001, where it had
previously carried a private label tire. Through this initiative, the Company
believes that it attracts some brand-loyal tire customers who otherwise might
not have visited Monro. This gives the Company the opportunity to introduce
itself to this new customer, and sell other needed services.
CENTRALIZED CONTROL
Unlike many of its competitors, the Company operates, rather than franchises, all of its stores (except for the 19 dealer locations). Monro believes that direct operation of stores enhances its ability to compete by providing centralized control of such areas of operations as service quality, store appearance, promotional activity and pricing. A high level of technical competence is maintained throughout the Company as Monro requires, as a condition of employment, that employees participate in comprehensive training programs to keep pace with technology changes. Additionally, purchasing, distribution, merchandising, advertising, accounting and other store support functions are centralized in the Company's corporate headquarters in Rochester, New York, and are provided through the Company's subsidiary, Monro Service Corporation. The centralization of these functions results in efficiencies and gives management the ability to closely monitor and control costs.
COMPREHENSIVE TRAINING
The Company provides ongoing, comprehensive training to its store employees. Monro believes that such training provides a competitive advantage by enabling its technicians to provide quality service to its customers in all areas of
undercar repair. (See additional discussion under "Store Operations: Store Personnel and Training.")
-STORE OPERATIONS
STORE FORMAT
The typical format for a Monro repair store is a free-standing building of
approximately 4,500 square feet consisting of a sales area, six fully-equipped
service bays and a parts storage area, with a parking lot with space for
approximately 17 cars. Acquired Speedy stores average five bays per location
with approximately 4,200 square feet. Most service bays are equipped with
aboveground electric vehicle lifts. The typical Company store carries
approximately $70,000 of inventory and approximately 3,700 stock keeping units
("SKUs"). Generally, each store is located within 25 miles of a "key" store
which carries approximately 60% more inventory than a typical store, and serves
as a mini-distribution point for slower moving inventory for other stores in its
area.
The stores generally are situated in high-visibility locations in suburban
areas, major metropolitan areas or small towns and offer easy customer access.
The typical store is open from 7:30 a.m. to 7:00 p.m. on Monday through Friday
and from 7:30 a.m. to 5:00 p.m. on Saturday.
INVENTORY CONTROL AND MANAGEMENT
INFORMATION SYSTEM
All Monro and Acquired Speedy stores communicate daily with the central office and warehouse by a computerized inventory control and electronic POS management information system, which enables the Company to collect sales and operational data on a daily basis, to adjust store pricing to reflect local conditions and to control inventory on a near "real-time" basis. Additionally, each store has access, through the POS system, to the inventory carried by the seven stores nearest to it. Management believes that this feature improves customer satisfaction and store productivity by reducing the time required to locate out-of-stock parts.
QUALITY CONTROL AND WARRANTIES
To maintain quality control, the Company conducts audits to rate its
employees' telephone sales manner and the accuracy of pricing information given.
The Company has a customer survey program to monitor customer attitudes
toward service quality, friendliness, speed of service, and several other
factors for each store. This program includes monthly survey mailings to
customers of all stores. (Each mailing consists of approximately 30 surveys per
store.) Customer concerns are addressed via letter and personal follow-up by
field management.
The Company uses a "Double Check for Accuracy Program" as part of its
routine store procedures. This quality assurance program requires that a
technician and supervisory-level employee independently inspect a customer's
vehicle, diagnose and document the necessary repairs, and agree on an estimate
before presenting it to a customer. This process is formally documented on the
written estimate by store personnel.
The Company is an active member of the Motorist Assurance Program ("MAP").
MAP is an organization of automotive retailers, wholesalers and manufacturers
which was established as part of an industry-wide effort to address the ethics
and business practices of companies in the automotive repair industry.
Participating companies commit to improving consumer confidence and trust in the
automotive repair industry by adopting "Uniform Inspection Guidelines" and
"Standards of Service" established by MAP. These "Standards of Service" are
posted in Monro and Speedy stores and serve to provide consistent
recommendations to customers in the diagnosis and repair of a vehicle.
Monro offers limited warranties on substantially all of the products and
services that it provides. The Company believes that these warranties are
competitive with industry practices, and serve as a marketing tool to increase
repeat business at the stores.
All headquarters management personnel participate in the Company's
day-in-the-store program by working in a store under the direction of the store
manager, to better understand the latest developments at the store level, and
with the goal of improving support and service to the field.
STORE PERSONNEL AND TRAINING
The Company supervises store operations primarily through its Divisional
Vice Presidents who oversee Zone Managers who, in turn, oversee Market Managers.
The typical store is staffed by a Store Manager and four to six technicians, one
of whom serves as the Assistant Manager. All Store Managers receive a base
salary, and Assistant Managers receive hourly compensation. In addition, Store
Managers and Assistant Managers may receive other compensation based on their
store's customer relations, gross profit, labor cost controls, safety, sales
volume and other factors via a quarterly bonus based on performance in these
areas.
Monro believes that the ability to recruit and retain qualified technicians
is an important competitive factor in the automotive repair industry, which has
historically experienced a high turnover rate. Monro makes a concerted effort to
recruit individuals who will have a long-term commitment to the Company and
offers an hourly rate structure and additional compensation based on
productivity; a competitive benefits package including health, dental, life and
disability insurance; a 401(k)/profit-sharing plan; as well as the opportunity
to advance within the Company. Many of the Company's Managers and Market
Managers started with Monro or Speedy as technicians.
Many of the Company's new technicians join the Company in their early
twenties as trainees or apprentices. As they progress, they are promoted to
technician and eventually master technician, the latter requiring ASE
certification in both brakes and suspension. The Company offers a tool purchase
program through which trainee technicians can acquire their own set of tools.
The Company also will reimburse technicians for the cost of ASE certification
registration fees and test fees and encourages all technicians to become
certified by providing a higher hourly wage rate following their certification.
The Company's training department conducts in-house technical clinics for
store personnel and management training
programs for new Store Managers, and coordinates attendance at technical clinics
offered by the Company's vendors. Each Monro store maintains a library of 20 to
25 instructional videos. The Company issues technical bulletins to all stores on
innovative or complex repair processes, and maintains a centralized data base
for technical repair problems. In addition, the Company has established a
telephone technical hotline to provide assistance to store personnel in
resolving problems encountered while diagnosing and repairing vehicles. The help
line is available during all hours of store operation.
The Company has established Monro University to provide comprehensive
training and development of current and prospective Store Managers. Training is
accomplished through an intensive one-week instructional program at a separate
facility in Rochester, New York. Topics covered include sales training, customer
service, time management, human resources (counseling, recruiting, interviewing,
etc.), leadership, inventory control and financial management. The courses
employ a variety of instructional techniques including video taping, role
playing, and testing. Several of the courses are conducted by officers of the
Company, whose first priority is instilling the Company's culture, philosophies
and values into the individuals who hold these important positions. The one-week
class follows a field training segment which ranges from two to four weeks
depending upon the individual's level of experience. Monro management is closely
tracking the performance of the managers who have completed the class. On
average, the program has led to increased store profitability as well as longer
retention of the Store Managers.
-PURCHASING AND DISTRIBUTION
The Company, through its wholly-owned subsidiary Monro Service Corporation,
selects and purchases parts and supplies for all Company-operated stores on a
centralized basis through an automatic replenishment system. Although purchases
outside the centralized system ("outside purchases") are made when needed at the
store level, these purchases are low by industry standards, and accounted for
approximately 16% of all parts used in fiscal 2002.
The Company's ten largest vendors accounted for approximately 53% of its
parts purchases, with the largest vendor accounting for approximately 16% of
total purchases in fiscal 2002. The Company purchases parts from over 100
vendors. Management believes that the Company's relationships with vendors are
excellent and that alternative sources of supply exist, at comparable cost, for
substantially all parts used in the Company's business. The Company routinely
obtains bids from vendors to ensure it is receiving competitive pricing and
terms.
Most parts are shipped by vendors to the Company's warehouse facility in
Rochester, New York, and are distributed to stores through the Company-operated
tractor/trailer fleet. Most stores are replenished once every week from the
warehouse, and such replenishment fills, on the average, 94% of all items
ordered by the stores' automatic POS-driven replenishment system. The warehouse
stocks approximately 7,100 SKUs.
The Company has entered into various contracts with parts suppliers which
require it to buy up to 90% of its annual purchases of specific products
including brakes, exhaust, oil and ride control at market prices. The agreements
expire at various dates through February 2007. The Company believes these
agreements provide it with high quality, branded merchandise at preferred
pricing, along with strong marketing and training support.
-COMPETITION
The Company competes in the retail automotive service industry. This
industry is generally highly competitive and fragmented, and the number, size
and strength of competitors varies widely from region to region. The Company
believes that competition in this industry is based on customer service and
reputation, store location, name awareness and price. Monro's primary
competitors include national and regional undercar specialty and general
automotive service chains, both franchised and company-operated; car
dealerships; and, to a lesser extent, gas stations and independent garages.
Monro considers Midas, Inc. and Meineke Discount Mufflers Inc. to be direct
competitors. In most of the new markets that the Company has entered, at least
one competitor was already present. In identifying new markets, the Company
analyzes, among other factors, the intensity of competition. (See "Expansion
Strategy" and "Management's Discussion and Analysis of Financial Condition and
Results of Operations.")
-EMPLOYEES
As of March 30, 2002, Monro had 2,463 employees, of whom 2,288 were
employed in the field organization, 51 were employed at the warehouse and 124
were employed at the Company's corporate headquarters. Monro's employees are not
members of any union. The Company believes that its relations with its employees
are good.
-REGULATION
The Company stores new oil and recycled antifreeze, and generates and
handles used automotive oils, antifreeze and certain solvents, which are
disposed of by licensed third-party contractors. In certain states, as required,
the Company also recycles oil filters. Thus, the Company is subject to a number
of federal, state and local environmental laws including the Comprehensive
Environmental Response Compensation and Liability Act ("CERCLA"). In addition,
the United States Environmental Protection Agency (the "EPA"), under the
Resource Conservation and Recovery Act ("RCRA"), and various state and local
environmental protection agencies regulate the Company's handling and disposal
of waste. The EPA, under the Clean Air Act, also regulates the installation of
catalytic converters by the Company and all other repair stores by periodically
spot checking jobs, and has the power to fine businesses that use improper
procedures or materials. The EPA has the authority to impose sanctions,
including civil penalties up to $25,000 per violation (or up to $25,000 per day
for certain willful violations or failures to cooperate with authorities), for
violations of RCRA and the Clean Air Act.
The Company is subject to various laws and regulations concerning workplace
safety, zoning and other matters relating to its business. The Company believes
that it is in substantial compliance with all applicable environmental and other
laws and regulations, and that the cost of such compliance is not material to
the Company.
The Company is environmentally conscious, and takes advantage of recycling
opportunities both at its headquarters and at its stores. Cardboard, plastic
shrink wrap and parts' cores are returned to the warehouse by the stores on the
weekly stock truck. There, they are accumulated for sale to recycling companies
or returned to parts manufacturers for credit.
-SEASONALITY
Although the Company's business is not highly seasonal, customers do
require more undercar service during the period of March through October than
the period of November through February, when miles driven tend to be lower. As
a result, sales and profitability are lower during the latter period.
The Company, through Monro Service Corporation, owns its office/warehouse
facility of approximately 95,000 square feet, which is located on 12.7 acres of
land in Holleder Industrial Park, in Rochester, New York.
In connection with the Speedy Acquisition in September 1998, the Company
financed most of the real estate formerly owned by SMK Speedy International Inc.
via a synthetic lease (off-balance sheet) agreement. This lease was part of a
$135 million secured credit facility from a syndication of lenders. (See
additional discussion under "Capital Resources and Liquidity.") Of the total
number of Company-operated Acquired Speedy locations, 23 buildings on
land-leased sites and 71 parcels of land and buildings on formerly owned
locations are currently leased under this arrangement. (There are also seven
closed Acquired Speedy stores which are financed under the synthetic lease.)
Of Monro's 514 Company-operated stores at March 30, 2002, 114 were owned,
289 were leased and for 111, the land only was leased, including stores under
the synthetic lease arrangement. In general, the Company leases store sites for
a ten-year period with several five-year renewal options. Giving effect to all
renewal options, over 81% of the operating leases (299 stores) expire after
2010. Certain of the leases provide for contingent rental payments if a
percentage of annual gross sales exceeds the base fixed rental amount. The
highest contingent percentage rent of any lease is 6.75%, and no such lease has
adversely affected profitability of the store subject thereto. Certain officers
and directors of the Company or members of their families are the lessors, or
have interests in entities that are the lessors, with respect to 40 of the
leases. No related party leases, other than renewals or modifications of leases
on existing stores, have been entered into since May 1989, and no new related
party leases are contemplated.
The office and warehouse facility and nine of the owned stores are subject
to mortgages held by commercial banks or private investors. As of March 30,
2002, the outstanding amount under the mortgage on the headquarters office and
warehouse facility was $2.0 million, and the aggregate outstanding amount under
the permanent mortgages on nine of the owned stores was $2.6 million. There was
also $.7 million outstanding under a mortgage held by the City of Rochester, New
York, secured by the land on which the headquarters office and warehouse is
located, and a term loan of $.1 million secured by the headquarters facility.
The Company is not a party or subject to any legal proceedings other than certain routine claims and lawsuits that arise in the normal course of its business. The Company does not believe that such routine claims or lawsuits, individually or in the aggregate, will have a material adverse effect on its financial condition or results of operations.
No matters were submitted to a vote of security holders during the fourth quarter of fiscal 2002.
Part II
-MARKET INFORMATION
The Common Stock is traded on the over-the-counter market and is quoted on
the NASDAQ National Market System under the symbol "MNRO". The following table
sets forth, for the Company's last two fiscal years, the range of high and low
sales prices on the NASDAQ National Market System for the Common Stock:
FISCAL 2002 FISCAL 2001
QUARTER ENDED HIGH LOW HIGH LOW
-------------------------------------------------------------
June $15.20 $10.35 $ 9.19 $7.75
September 14.37 11.10 11.25 8.63
December 14.89 11.00 11.06 8.94
March 17.75 13.00 11.00 8.94
-------------------------------------------------------------
|
-HOLDERS
At May 29, 2002, the Company's Common Stock was held by approximately 2,000
shareholders of record or through nominee or street name accounts with brokers.
-DIVIDENDS
While the Company has not paid any cash dividends on the Common Stock since
its inception, any future determination as to the payment of dividends will be
at the discretion of the Board of Directors and will depend on the Company's
financial condition, results of operations, capital requirements, compliance
with charter and contractual restrictions, and such other factors as the Board
of Directors deems relevant.
-EQUITY COMPENSATION PLAN INFORMATION
NUMBER OF
SECURITIES
REMAINING
NUMBER OF WEIGHTED- AVAILABLE FOR
SECURITIES TO BE AVERAGE EXERCISE FUTURE ISSUANCE
ISSUED UPON PRICE OF UNDER EQUITY
EXERCISE OF OUTSTANDING COMPENSATION PLANS
OUTSTANDING OPTIONS, (EXCLUDING
OPTIONS, WARRANTS WARRANTS AND SECURITIES REFLECTED
AND RIGHTS RIGHTS IN COLUMN (A))
(A) (B) (C)
---------------------------------------------------------------------------------------------------------------------------
Equity compensation plans approved by security holders 1,043,156 $10.34 499,689
Equity compensation plans not approved by security holders 0 0 0
--------- ------ --------
Total 1,043,156 $10.34 499,689
========= ====== ========
---------------------------------------------------------------------------------------------------------------------------
|
YEAR ENDED FISCAL MARCH,
2002 2001 2000 1999 1998
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
----------------------------------------------------------------------------------------------------------------------
INCOME STATEMENT DATA:
Sales..................................................... $224,853 $222,955 $223,605 $ 193,458 $154,294
Cost of sales, including distribution and occupancy
costs................................................... 133,042 133,196 134,169 115,117 87,510
-------- -------- -------- --------- --------
Gross profit.............................................. 91,811 89,759 89,436 78,341 66,784
Operating, selling, general and administrative expenses... 69,718 66,988 66,889 64,062 46,120
-------- -------- -------- --------- --------
Operating income.......................................... 22,093 22,771 22,547 14,279 20,664
Interest expense, net..................................... 3,731 5,768 6,831 5,600 3,829
Other expense, net........................................ 833 896 2,091 730 331
-------- -------- -------- --------- --------
Income before provision for income taxes.................. 17,529 16,107 13,625 7,949 16,504
Provision for income taxes................................ 6,295 6,411 5,418 3,203 6,650
-------- -------- -------- --------- --------
Net income................................................ $ 11,234 $ 9,696 $ 8,207 $ 4,746 $ 9,854
======== ======== ======== ========= ========
Earnings per share (a) Basic.............................. $ 1.37 $ 1.19 $ .99 $ .57 $ 1.19
======== ======== ======== ========= ========
Diluted............................ $ 1.24 $ 1.09 $ .92 $ .53 $ 1.09
======== ======== ======== ========= ========
Weighted average number of Common Stock and equivalents
(a) Basic.............................................. 8,195 8,182 8,305 8,317 8,256
======== ======== ======== ========= ========
Diluted............................................ 9,055 8,891 8,964 8,997 9,016
======== ======== ======== ========= ========
SELECTED OPERATING DATA (b):
Sales growth:
Total.................................................. 0.9% (0.3%) 15.6% 25.4% 9.3%
Comparable store (c)................................... 0.3% (1.4%) (1.6%) (1.3%) (0.2%)
Stores open at beginning of year.......................... 511 512 524 350 313
Stores open at end of year................................ 514 511 512 524 350
Capital expenditures...................................... $ 8,615 $ 11,045 $ 14,265 $ 23,310(d) $ 25,391
BALANCE SHEET DATA (AT PERIOD END):
Net working capital....................................... $ 14,136 $ 13,198 $ 11,876 $ 18,168 $ 13,517
Total assets.............................................. 189,299 194,852 196,025 202,934 159,088
Long-term debt............................................ 34,123 50,857 63,639 78,672 54,102
Shareholders' equity...................................... 109,784 97,810 88,775 80,951 76,558
|
(a) Earnings per share for each fiscal year was computed by dividing net income by the weighted average number of shares of Common Stock and Common Stock equivalents outstanding during the respective year. All share and per share information has been adjusted to give retroactive effect to the five percent stock dividend paid in June 1998.
(b) Includes Company-operated stores only - no dealer locations.
(c) Comparable store sales data are calculated based on the change in sales of only those stores open as of the beginning of the preceding fiscal year.
(d) Amount does not include the funding of the Speedy acquisition.
YEAR ENDED FISCAL MARCH,
2002 2001 2000
---------------------------------------------------------------------------------------------
Sales....................................................... 100.0% 100.0% 100.0%
Cost of sales, including distribution and occupancy costs... 59.2 59.7 60.0
----- ----- -----
Gross profit................................................ 40.8 40.3 40.0
Operating, selling, general and administrative expenses..... 31.0 30.1 29.9
----- ----- -----
Operating income............................................ 9.8 10.2 10.1
Interest expense, net....................................... 1.7 2.6 3.1
Other expense, net.......................................... 0.3 0.4 0.9
----- ----- -----
Income before provision for income taxes.................... 7.8 7.2 6.1
Provision for income taxes.................................. 2.8 2.9 2.4
----- ----- -----
Net income.................................................. 5.0% 4.3% 3.7%
===== ===== =====
---------------------------------------------------------------------------------------------
|
-FORWARD-LOOKING STATEMENTS
The statements contained in this Annual Report on Form 10-K which are not
historical facts, including (without limitation) in particular, statements made
in this Item and in "Item 1 -- Business," may contain forward-looking statements
that are subject to important factors that could cause actual results to differ
materially from those in the forward-looking statement, including (without
limitation) product demand; the effect of economic conditions; the impact of
competitive services, products and pricing; product development; parts supply
restraints or difficulties; industry regulation; the continued availability of
capital resources and financing and other risks set forth or incorporated herein
and in the Company's Securities and Exchange Commission filings. The Company
does not undertake to update any forward-looking statement that may be made from
time to time by or on behalf of the Company.
-CRITICAL ACCOUNTING POLICIES
Recently, the Securities and Exchange Commission (SEC) issued new advice
regarding disclosure of critical accounting policies. In response to this
advice, the Company has identified the accounting policies listed below that it
believes are most critical to the portrayal of the Company's financial condition
and results of operations, and that required management's most difficult,
subjective and complex judgments in estimating the effect of inherent
uncertainties. This section should be read in conjunction with Note 1 to the
consolidated financial statements which includes other significant accounting
policies.
REVENUE RECOGNITION
Sales are recorded upon completion of automotive undercar repair services provided to customers or upon the sale of incidental products and services to customers.
WARRANTY
The Company provides an accrual for estimated future warranty costs based upon the historical relationship of warranty costs to sales. Actual expenses have not materially differed from the accruals estimated in prior periods.
ADVERTISING
The Company expenses the production costs of advertising the first time the
advertising takes place, except for direct response advertising which is
capitalized and amortized over its expected period of future benefits.
Direct response advertising consists primarily of coupons for the Company's
services. The capitalized costs of this advertising are amortized over the
period of the coupon's validity, which ranges from six weeks to one year.
DERIVATIVE FINANCIAL INSTRUMENTS
Effective April 1, 2001, the Company adopted Statement of Financial Accounting Standards No. 133 ("SFAS 133") "Accounting for Derivative Instruments and Hedging Activities," as amended by Statement of Financial Accounting Standards No. 138 ("SFAS 138"),"Accounting for Certain Derivative Instruments and Certain Hedging Activities". SFAS 133/138 requires that all derivative instruments be recorded on the balance sheet at fair value. Changes in the fair value of derivatives are recorded each period in current earnings or other comprehensive income, depending on whether the derivative is designated as part of a hedge
transaction, and if it is, depending on the type of hedge transaction.
The notional amount of derivative financial instruments, which consisted
solely of interest rate swaps used to minimize the risk and/or costs associated
with changes in interest rates, was approximately $42 million at March 30, 2002.
At that date, swap maturities ranged from November 2002 through October 2005.
These swap contracts require the Company to pay fixed rates of interest ranging
from 5.21% to 7.15%, and receive variable rates of interest based on the 30 day
LIBOR rate (plus a spread of 80 basis points in the case of the 7.15% fixed rate
contract).
At March 30, 2002, the fair value of the contracts, net of tax, is recorded
as a component of other comprehensive income in the Statement of Changes in
Common Shareholders' Equity.
STOCK-BASED COMPENSATION
The Company measures stock-based compensation cost as the excess of the quoted market price of the Company's common stock at the grant date over the amount the employee must pay for the stock. The Company's policy generally is to grant stock options at fair market value at the date of grant.
-FISCAL 2002 AS COMPARED TO FISCAL 2001
Sales for fiscal 2002 increased $1.9 million, or 0.9% from fiscal 2001
sales. The increase was due to an increase of approximately $2.2 million from
stores opened since April 1, 2000, as well as a comparable store sales increase
of .3%. There were 306 selling days in fiscal year 2002 and 307 days in fiscal
year 2001. Adjusted for days, comparable store sales increased .6%.
During the year, four stores were opened and one was closed. At March 30,
2002, the Company had 514 stores in operation.
Management believes that the improvement in sales resulted from several
factors aimed at driving store traffic, including an increase in the number of
oil changes performed, an increase in scheduled maintenance services and an
increase in commercial/fleet business. Coupled with price increases in areas
such as shop supply and environmental fees, as well as in some product
categories, the Company was able to offset the continuing decline in exhaust
sales. The exhaust decline resulted, in part, from manufacturers' use of
non-corrosive stainless steel exhaust systems on almost all new cars (beginning
in the mid-1980s and completed in the mid-1990s) which has extended the life of
exhaust systems and resulted in declining exhaust sales.
The Company introduced "Scheduled Maintenance" services in all of its
stores late in the fourth quarter of fiscal 2001. These services are required by
vehicle manufacturers to comply with warranty schedules, and are offered by
Monro in a more convenient and cost competitive fashion than auto dealers can
provide. Management believes that these services, which are offered both in
bundled "packages" and individually, will continue to contribute positively to
comparable store sales in future years, and help mitigate the aforementioned
decline in exhaust which negatively impacted recent fiscal years.
Gross profit for fiscal 2002 was $91.8 million or 40.8% of sales, as
compared with $89.8 million or 40.3% of sales for fiscal 2001. The improvement
in gross profit as a percentage of sales is primarily attributable to a decline
in distribution and occupancy costs which are included in cost of sales. As
comparable store sales improve, the Company is able to better leverage these
costs, many of which are fixed.
In addition, the Company purposefully increased its spending in the
building maintenance area in FY01 to improve its stores, both structurally and
cosmetically. This expense was scaled back in FY02. In FY02, the Company also
reduced its accrual for real estate taxes for prior year taxes, which it
believes will never be paid, related to closed stores. Additionally, the Company
realized the benefits of warehouse process improvements including more efficient
distribution and increased backhauling, resulting in a reduction in this expense
line. Technician labor, which is included in cost of sales, also declined
slightly as compared to the prior year, due to improved productivity and
control.
These declines were partially offset by an increase in material costs,
primarily in the area of parts purchased outside the Company's normal
distribution system ("outside purchases"). Outside purchases increased as a
percent of sales due to the Company's foray into new services where it may not
always have the required parts in stock. Additionally, parts proliferation
continues to present challenges.
Material costs also increased due to a shift in mix from exhaust and
brakes, which carry lower material costs, to tires and maintenance services,
which carry higher material costs. In addition, the LIFO reserve increased for
the first time in several years due to an increase in the government indices for
auto parts and tires.
Operating, selling, general and administrative expenses for fiscal 2002
increased by $2.7 million to $69.7 million and, as a percentage of sales,
increased by 1.0% as compared to fiscal 2001. Three tenths of the increase, or
$727,000, is attributable to the compensation expense associated with the
vesting of performance-based stock options granted in December 1998 to the
Company's Chief Executive Officer. The options vested in the first quarter of
fiscal 2002 when the Company's stock traded at $13 for 20 consecutive trading
days. The balance of the increase is primarily due to increased depreciation
related to the new store point-of-sales systems installed in fiscal 2001,
increased store manager wages to improve the quality and retention of store
managers, and slightly less cooperative advertising credits earned in fiscal
2002 as compared to fiscal 2001.
Operating income in fiscal 2002 of $22.1 million, or 9.8% of sales,
decreased by $.7 million from the fiscal 2001 level of $22.8 million, due to the
factors discussed above.
Interest expense, net of interest income, decreased as a percent of sales
from 2.6% in fiscal 2001 to 1.7% in fiscal 2002. The weighted average interest
rate for the year ended March 30, 2002 was approximately 1.7% lower than the
rate of 9.5% for the year ended March 31, 2001. Additionally, the weighted
average debt outstanding for the year ended March 30, 2002 decreased by
approximately $14.5 million
from fiscal 2001, resulting in a decrease in expense between the two years.
The Company's effective tax rate was 35.9% of pre-tax income in fiscal 2002
and 39.8% in fiscal 2001. The Company recorded a one-time tax benefit of $.4
million in the quarter ended June 30, 2001, due to a reduction in the Company's
effective tax rate. There has been a reduction in the Company's overall
effective state income tax rate because of the Company's growth in lower-taxing
states, especially in connection with the fiscal year 1999 Speedy acquisition.
This one-time adjustment reduced the accrual for amounts provided in prior
fiscal years. Additionally, this state rate reduction continued throughout
fiscal year 2002, and accordingly, the Company reduced the provision for taxes
from 39.8% to 38.0% of pre-tax income for fiscal 2002.
Net income for fiscal 2002 increased by $1.5 million, or 15.9% of sales, as
compared to fiscal 2001, due to the factors discussed above.
-FISCAL 2001 AS COMPARED TO FISCAL 2000
Sales for fiscal 2001 decreased $.6 million, or .3% from fiscal 2000 sales.
The decrease was due to a loss of sales from closed stores of $1.1 million and a
comparable store sales decrease of 1.4%. These decreases were partially offset
by an increase of approximately $3.5 million from stores opened since April 1,
1999. There were 307 selling days in fiscal year 2001 and 309 days in fiscal
year 2000. Adjusted for days, comparable store sales decreased .8%.
During the year, four stores were opened and five were closed. At March 31,
2001, the Company had 511 stores in operation.
Management believes that the comparable store sales decrease resulted, in
part, from manufacturers' use of non-corrosive stainless steel exhaust systems
on almost all new cars (beginning in the mid-1980s and completed in the mid-
1990s) which has extended the life of exhaust systems and resulted in declining
exhaust sales. However, management believes that these declines were partially
offset by positive industry factors including an increase in the average age of
vehicles, a decrease in the number of service bays, an increase in the number of
registered vehicles, and a shift in the consumer mentality from "do-it-yourself"
to "do-it-for-me" caused by the increased complexity of cars and aging
population. Additionally, management believes that the Company's strategy of
product diversification and expanded manager training assisted in minimizing the
comparable store sales decline vis-a-vis its competitors.
In addition, management believes that comparable store sales have suffered
in recent years from a decline in vehicle population in the five-to-nine year
old segment. Although the number of registered vehicles has increased steadily
in recent years, the early 1990s recession in new car sales negatively impacted
this particular segment of the vehicle population. This segment represents the
prime repair age of vehicles and is the target market for the Company's
services. However, as a result of increased car sales in the mid-to-late 1990s,
the five-to-nine year old segment began to increase in calendar 2000.
Gross profit for fiscal 2001 was $89.8 million or 40.3% of sales, as
compared with $89.4 million or 40% of sales for fiscal 2000. The improvement in
gross profit as a percentage of sales is primarily attributable to a decrease in
technician labor costs as a percent of sales due to improved productivity and
control during the year ended March 31, 2001. However, this improvement was
partially offset by an increase in occupancy costs as a percent of sales
reflecting the impact of fixed costs (such as rent and depreciation) against a
decline in comparable store sales.
Operating, selling, general and administrative expenses for fiscal 2001
increased by $.1 million to $67.0 million and, as a percentage of sales,
increased by .2% as compared to fiscal 2000. Although spending was relatively
flat in this line item, there was pressure on certain expense lines which were
overcome through savings in others. More employees earned a bonus in fiscal 2001
than in fiscal 2000, increasing expense by $.4 million. Additionally, utilities
increased by approximately $.7 million over the prior year due to colder weather
and higher gas prices. Due to the hardening of the insurance market, the Company
also experienced an increase in insurance costs in the form of increased
deductibles - this in spite of a lower number and relatively flat dollar amount
of claims as compared to fiscal 2000.
These increases were offset, however, by strong cost control in other areas
such as health care costs and field operations support costs. Additionally,
there was an increase in cooperative advertising credits resulting from improved
purchasing agreements with the Company's major parts suppliers.
Operating income in fiscal 2001 of $22.8 million, or 10.2% of sales,
increased by $.2 million over the fiscal 2000 level of $22.5 million, due to the
factors discussed above.
Interest expense, net of interest income, decreased as a percent of sales
from 3.1% in fiscal 2000 to 2.6% in fiscal 2001. The weighted average interest
rate for the year ended March 31, 2001 was approximately .4% higher than the
rate of 9.1% for the year ended March 31, 2000. However, the weighted average
debt outstanding for the year ended March 31, 2001 decreased by approximately
$13.5 million from fiscal 2000, resulting in a decrease in expense between the
two years.
Other expense, net, at .4% of sales for the year ended March 31, 2001
decreased from .9% of sales for the year ended March 31, 2000. This decrease was
primarily due to less expense related to store closings.
The Company's effective tax rate was 39.8% of pre-tax income in both fiscal
2001 and fiscal 2000.
Net income for fiscal 2001 increased by $1.5 million, or 18.1% of sales, as
compared to fiscal 2000, due to the factors discussed above.
-CAPITAL RESOURCES AND LIQUIDITY
CAPITAL RESOURCES
The Company's primary capital requirements for fiscal 2002 were divided among the funding of its new store expansion program and the upgrading of facilities and systems in existing stores, totaling $8.6 million, as well as net
principal payments on long-term debt and capital leases of $16.6 million.
In both fiscal years 2002 and 2001, these capital requirements were
primarily met by cash flow from operations and through the use of a Revolving
Credit facility.
In December 1999, the Company's Board of Directors authorized a share
repurchase plan for up to 300,000 of the Company's common shares. In May 2000,
the Board of Directors approved an increase of 120,000 shares, bringing the
total authorization to 420,000 shares. During fiscal 2001 and 2000, the Company
purchased approximately 117,000 and 100,000 shares, respectively, at an
aggregate price of $1.0 and $.8 million, respectively. Purchases of the shares
may be made from time-to-time, depending upon market conditions.
In fiscal 2003, the Company intends to open approximately five new stores.
Total capital required to open a new store ranges, on average (based upon the
last three fiscal years' openings - excluding the Acquired Speedy stores), from
$273,000 to $920,000 depending on whether the store is leased, owned or land
leased. The Company also plans to continue to seek suitable acquisition
candidates. It financed the April 2002 acquisition of Kimmel Automotive, Inc.
primarily through borrowings under its existing bank revolving credit facility.
Management believes that the Company has sufficient resources available
(including cash and equivalents, cash flow from operations and bank financing)
to expand its business as currently planned for the next several years.
LIQUIDITY
Payments due by period under long-term debt, other financing instruments and commitments are as follows:
WITHIN 2 WITHIN 4
WITHIN TO TO AFTER
TOTAL 1 YEAR 3 YEARS 5 YEARS 5 YEARS
(DOLLARS IN THOUSANDS)
----------------------------------------------------------------------------------------------------------------------
Long-term debt, net of current portion...................... $ 30,680 $28,399 $ 1,603 $ 678
Capital lease commitments, net of current portion........... 3,443 821 733 1,889
Operating lease commitments, including synthetic lease...... 103,580 $16,731 50,885 15,841 20,123
-------- ------- ------- ------- -------
Total....................................................... $137,703 $16,731 $80,105 $18,177 $22,690
======== ======= ======= ======= =======
----------------------------------------------------------------------------------------------------------------------
|
Concurrent with the closing of the acquisition of 189 company-operated
Speedy stores in September 1998, the Company obtained a $135 million secured
credit facility from a syndication of lenders led by The Chase Manhattan Bank.
Approximately $55 million was borrowed under this facility to pay the all-cash
purchase price, including transaction expenses of approximately $4 million. In
addition, the Company refinanced approximately $35 million of indebtedness
through the new credit facility, with the balance of the facility available for
future working capital needs. More specifically, the new financing structure
consists of a $25 million term loan (of which approximately $9 million was
outstanding at March 30, 2002), a $75 million Revolving Credit facility (of
which approximately $26 million was outstanding at March 30, 2002), and
synthetic lease (off-balance sheet) financing for a significant portion of the
Speedy real estate, totaling $35 million (of which approximately $32 million was
outstanding at March 30, 2002). The loans bear interest at the prime rate or
other LIBOR-based rate options tied to the Company's financial performance. The
Company must also pay a facility fee on the unused portion of the commitment.
The credit facility has a five-year term. Interest only is payable monthly
on the Revolving Credit and synthetic lease borrowings throughout the term. In
addition to monthly interest payments, the $25 million term loan requires
quarterly principal payments which began September 30, 1999.
The term loan and Revolving Credit facility are secured by all accounts
receivable, inventory and other personal property. The Company has also entered
into a negative pledge agreement not to encumber any real property, with certain
permissible exceptions. The synthetic lease is secured by the real property to
which it relates.
Within the aforementioned $75 million Revolving Credit facility, the
Company has available a subfacility of $7 million for the purpose of issuing
standby letters of credit. The line requires fees aggregating 1.875% annually of
the face amount of each standby letter of credit, payable quarterly in arrears.
No letters of credit were outstanding under this line at March 30, 2002.
During fiscal 1995, the Company purchased 12.7 acres of land for $.7
million from the City of Rochester, New York, on which its office/warehouse
facility is located. The City has provided financing for 100 percent of the cost
of the land via a 20-year non-interest bearing mortgage, all due and payable in
2015.
To finance its office/warehouse building, the Company obtained permanent
mortgage financing consisting of a 10-year mortgage for $2.9 million and an
eight-year term loan in the amount of $.7 million. Both obligations require
monthly interest payments, and each may be converted from a floating rate to a
fixed rate loan before the last two years of their respective terms. The
mortgage requires equal monthly installments of principal based on a 20-year
amortization period, and the term loan requires constant monthly payments
of principal to fully amortize the debt over the eight-year term. The Company
entered into an interest rate swap agreement with a major financial institution
which effectively fixes the interest rate over the terms of the aforementioned
agreements at 7.15%.
Interest is payable monthly on the Mortgage Notes Payable which have
seven-year terms. Equal monthly installments of principal are required based on
20-year amortization periods.
The Company is a party to three additional interest rate swap agreements,
expiring in calendar years 2002 and 2003, with an aggregate notional amount of
$40.0 million. The purpose of these agreements is to limit the interest rate
exposure on the Company's floating rate debt. Fixed rates under these agreements
range from 5.21% to 6.25%.
Certain of the Company's long-term debt agreements require, among other
things, the maintenance of specified interest and rent coverage ratios and
amounts of tangible net worth. They also contain restrictions on dividend
payments. The Company is in compliance with these requirements at March 30,
2002. These agreements permit mortgages and specific lease financing
arrangements with other parties with certain limitations.
As of March 30, 2002, the Company had cash and equivalents of $.4 million.
-INFLATION
The Company does not believe its operations have been materially affected
by inflation. The Company has been successful, in many cases, in mitigating the
effects of merchandise cost increases principally through the use of volume
discounts and alternative vendors.
-FINANCIAL ACCOUNTING STANDARDS
On June 29, 2001, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards No. 141 ("SFAS 141"), "Business
Combinations", and No. 142 ("SFAS 142"), "Goodwill and Other Intangible Assets".
The provisions of SFAS 141 require the use of purchase accounting for all
business combinations and the separate allocation of purchase price to
intangible assets if specific criteria are met. The provisions of SFAS 142
provide that goodwill and intangible assets with indefinite useful lives should
not be amortized, but rather tested at least annually for impairment. Intangible
assets that have finite useful lives should continue to be amortized over their
estimated useful lives. SFAS 142 also provides specific guidance for testing
goodwill and intangible assets for impairment. The Company does not anticipate
that these standards will have a material impact on the Company's financial
position or results of operations. The provisions of SFAS No. 141 apply to all
business combinations initiated after June 30, 2001. The Company will adopt FAS
142 effective March 31, 2002.
In October 2001, the FASB issued Statement of Financial Accounting
Standards No. 144, "Accounting for the Impairment or Disposal of Long-Lived
Assets", which addresses financial accounting and reporting for the impairment
or disposal of long-lived assets. This standard harmonizes the accounting for
impaired assets and resolves some of the implementation issues of Statement of
Financial Accounting Standards No. 121 ("SFAS 121"), "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of". It
retains the fundamental provisions of SFAS 121 for (a) recognition and
measurement of the impairment of long-lived assets to be held and used and (b)
measurement of long-lived assets to be disposed of by sale. It also retains the
basic provisions for presenting discontinued operations in the income statement
but broadens the scope to include a component of an entity rather than a segment
of a business. The Company will adopt this standard effective March 31, 2002.
The Company does not expect this pronouncement to have a material impact on the
Company's financial position, results of operations or cash flows.
The Company is exposed to market risk from potential changes in interest
rates. The Company regularly evaluates these risks and has entered into four
interest rate swap agreements, expiring from 2002 to 2005, with an aggregate
notional amount of $42.1 million. The agreements limit the interest rate
exposure on the Company's floating rate debt via the exchange of fixed and
floating rate interest payments periodically over the life of the agreement
without the exchange of the underlying principal amounts. Fixed rates under
these agreements range from 5.21% to 7.15%.
At year end March 2002 and 2001, approximately 1% and 2% respectively, of
the Company's long-term debt, excluding capital leases, is at fixed interest
rates and therefore, the fair value is affected by changes in market interest
rates. Long-term debt, including current portion, had a carrying amount of $41.0
million and a fair value of $40.1 million as of March 30, 2002, as compared to a
carrying amount of $57.1 million and a fair value of $55.2 million as of March
31, 2001. The Company's cash flow exposure on floating rate debt, which is not
supported by interest rate swap agreements, would have resulted in interest
expense fluctuating approximately $.4 million for fiscal year ended March 30,
2002 and $.5 million for fiscal year ended March 31, 2001, given a 1% change in
LIBOR.
The Company believes the amount of risk and the use of derivative financial
instruments described above are not material to the Company's financial
condition or results of operations.
Financials
Page
Report of Independent Accountants........................... 15
Audited Financial Statements:
Consolidated Balance Sheet at March 30, 2002 and March
31, 2001.............................................. 16
Consolidated Statement of Income for the fiscal three
years ended March 30, 2002............................ 17
Consolidated Statement of Changes in Shareholders'
Equity for the fiscal three years ended March 30,
2002.................................................. 18
Consolidated Statement of Cash Flows for the fiscal
three years ended March 30, 2002...................... 19
Notes to Consolidated Financial Statements............. 20
Selected Quarterly Financial Information (Unaudited)........ 32
|
Accountants' Report
To the Board of Directors and
Shareholders of
Monro Muffler Brake, Inc.
In our opinion, the consolidated financial statements listed in the accompanying index present fairly, in all material respects, the financial position of Monro Muffler Brake, Inc. and its subsidiaries at March 30, 2002 and March 31, 2001, and the results of their operations and their cash flows for each of the fiscal three years in the period ended March 30, 2002, in conformity with accounting principles generally accepted in the United States of America. These financial statements are the responsibility of the Company's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these statements in accordance with auditing standards generally accepted in the United States of America, which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
/s/ PricewaterhouseCoopers LLP PRICEWATERHOUSECOOPERS LLP Rochester, New York May 14, 2002 |
Balance Sheet
MARCH 30, MARCH 31,
CONSOLIDATED 2002 2001
BALANCE SHEET (DOLLARS IN THOUSANDS)
Assets
Current assets:
Cash and equivalents, including interest-bearing
accounts of $442 in 2002 and $751 in 2001............. $ 442 $ 751
Trade receivables........................................ 1,226 1,161
Inventories.............................................. 44,821 41,071
Deferred income tax asset................................ 664 899
Other current assets..................................... 6,626 6,898
-------- --------
Total current assets........................... 53,779 50,780
-------- --------
Property, plant and equipment.............................. 208,768 209,420
Less -- Accumulated depreciation and amortization..... (81,557) (77,934)
-------- --------
Net property, plant and equipment.............. 127,211 131,486
Other noncurrent assets.................................... 8,309 12,586
-------- --------
Total assets................................... $189,299 $194,852
======== ========
-----------------------------------------------------------------------------------------------
Liabilities and
Shareholders' Equity
Current liabilities:
Current portion of long-term debt........................ $ 10,813 $ 10,646
Trade payables........................................... 12,739 11,148
Federal and state income taxes payable................... 608 648
Accrued interest......................................... 219 477
Accrued payroll, payroll taxes and other payroll
benefits.............................................. 5,326 5,150
Accrued insurance........................................ 986 948
Other current liabilities................................ 8,952 8,565
-------- --------
Total current liabilities...................... 39,643 37,582
Long-term debt............................................. 34,123 50,857
Other long-term liabilities................................ 3,078 2,589
Deferred income tax liability.............................. 2,671 6,014
-------- --------
Total liabilities.............................. 79,515 97,042
-------- --------
Commitments
Shareholders' equity:
Class C Convertible Preferred Stock, $1.50 par value,
$.216 conversion value; 150,000 shares authorized;
91,727 shares issued and outstanding.................. 138 138
Common Stock, $.01 par value, 15,000,000 shares
authorized; 8,435,324 shares issued at March 30, 2002;
8,373,678 shares issued at March 31, 2001............. 84 84
Treasury Stock, 216,800 shares at March 30, 2002 and
March 31, 2001, at cost............................... (1,831) (1,831)
Additional paid-in capital............................... 37,750 36,344
Other comprehensive income............................... (666)
Retained earnings........................................ 74,309 63,075
-------- --------
Total shareholders' equity..................... 109,784 97,810
-------- --------
Total liabilities and shareholders' equity..... $189,299 $194,852
======== ========
|
The accompanying notes are an integral part of these financial statements.
Income Statement
CONSOLIDATED
STATEMENT OF YEAR ENDED FISCAL MARCH,
INCOME 2002 2001 2000
(DOLLARS IN THOUSANDS, EXCEPT
PER SHARE DATA)
Sales..................................................... $224,853 $222,955 $223,605
Cost of sales, including distribution and occupancy
costs................................................... 133,042 133,196 134,169
-------- -------- --------
Gross profit.............................................. 91,811 89,759 89,436
Operating, selling, general and administrative expenses... 69,718 66,988 66,889
-------- -------- --------
Operating income.......................................... 22,093 22,771 22,547
Interest expense, net of interest income of $34 in 2002,
$95 in 2001 and $56 in 2000............................. 3,731 5,768 6,831
Other expense, net........................................ 833 896 2,091
-------- -------- --------
Income before provision for income taxes.................. 17,529 16,107 13,625
Provision for income taxes................................ 6,295 6,411 5,418
-------- -------- --------
Net income................................................ $ 11,234 $ 9,696 $ 8,207
======== ======== ========
Earnings per share:
Basic................................................ $ 1.37 $ 1.19 $ .99
======== ======== ========
Diluted.............................................. $ 1.24 $ 1.09 $ .92
======== ======== ========
Weighted average number of shares of Common Stock and
Common Stock equivalents used in computing earnings per
share:
Basic................................................ 8,195 8,182 8,305
======== ======== ========
Diluted.............................................. 9,055 8,891 8,964
======== ======== ========
|
The accompanying notes are an integral part of these financial statements.
Changes in Shareholders' Equity
CONSOLIDATED
STATEMENT OF CLASS C ACCUMULATED
CHANGES IN CONVERTIBLE ADDITIONAL OTHER
SHAREHOLDERS' PREFERRED COMMON TREASURY PAID-IN RETAINED COMPREHENSIVE
EQUITY STOCK STOCK STOCK CAPITAL EARNINGS INCOME TOTAL
(DOLLARS IN THOUSANDS)
Balance at March 31, 1999........... $138 $83 $35,873 $45,172 $(315) $ 80,951
Net income.......................... 8,207 8,207
Other comprehensive income(1):
Minimum pension liability
adjustment....................... 315 315
--------
Total comprehensive income........ 8,522
Note receivable from shareholder.... 105 105
Purchase of treasury shares......... $ (803) (803)
---- --- ------- ------- ------- ----- --------
Balance at March 31, 2000........... 138 83 (803) 35,978 53,379 0 88,775
Net income.......................... 9,696 9,696
Exercise of stock options........... 1 262 263
Note receivable from shareholder.... 104 104
Purchase of treasury shares......... (1,028) (1,028)
---- --- ------- ------- ------- ----- --------
Balance at March 31, 2001........... 138 84 (1,831) 36,344 63,075 0 97,810
Net income.......................... 11,234 11,234
Other comprehensive income:
FAS 133 adjustment(1).............. (666) (666)
--------
Total comprehensive income........ 10,568
Exercise of stock options........... 782 782
Note receivable from shareholder.... 105 105
Vesting of non-qualified stock
options........................... 519 519
---- --- ------- ------- ------- ----- --------
Balance at March 30, 2002........... $138 $84 $(1,831) $37,750 $74,309 $(666) $109,784
==== === ======= ======= ======= ===== ========
|
(1)Components of comprehensive income are reported net of related taxes of $210 and $440 in fiscal years 2000 and 2002, respectively.
The accompanying notes are an integral part of these financial statements.
Cash Flows
CONSOLIDATED
STATEMENT YEAR ENDED FISCAL MARCH,
OF CASH FLOWS 2002 2001 2000
(DOLLARS IN THOUSANDS)
INCREASE (DECREASE) IN CASH
Cash flows from operating activities:
Net income.............................................. $ 11,234 $ 9,696 $ 8,207
--------- -------- ---------
Adjustments to reconcile net income to net cash
provided by operating activities --
Depreciation and amortization...................... 12,834 12,963 13,058
Non-qualified stock option expense................. 727
Net change in deferred income taxes................ 606 2,725 1,736
Loss (gain) on disposal of property, plant and
equipment....................................... 204 (154) 59
(Increase) decrease in trade receivables........... (65) (181) 311
Increase in inventories............................ (3,750) (1,330) (1,042)
Decrease (increase) in other current assets........ 273 (1,406) (477)
Decrease in other noncurrent assets................ 273 947 104
Increase (decrease) in trade payables.............. 1,591 (460) 1,863
Increase (decrease) in accrued expenses............ 541 (192) (1,653)
(Decrease) increase in income taxes payable........ (40) (70) 1,808
Decrease in other long-term liabilities............ (415) (1,145) (1,393)
--------- -------- ---------
Total adjustments............................. 12,779 11,697 14,374
--------- -------- ---------
Net cash provided by operating activities..... 24,013 21,393 22,581
--------- -------- ---------
Cash flows from investing activities:
Capital expenditures.................................... (8,615) (11,045) (14,265)
Proceeds from the sale of property, plant and
equipment............................................ 78 1,113 2,235
--------- -------- ---------
Net cash used for investing activities........ (8,537) (9,932) (12,030)
--------- -------- ---------
Cash flows from financing activities:
Proceeds from borrowings................................ 116,374 77,050 121,067
Principal payments on long-term debt and capital lease
obligations.......................................... (132,941) (87,502) (135,907)
Purchase of common stock................................ (1,028) (803)
Exercise of stock options............................... 782 263
--------- -------- ---------
Net cash used for financing activities........ (15,785) (11,217) (15,643)
--------- -------- ---------
(Decrease) increase in cash............................... (309) 244 (5,092)
Cash at beginning of year................................. 751 507 5,599
--------- -------- ---------
Cash at end of year....................................... $ 442 $ 751 $ 507
========= ======== =========
|
The accompanying notes are an integral part of these financial statements.
Notes to Consolidated Financial Statements
-NOTE 1 -- SIGNIFICANT ACCOUNTING POLICIES
BACKGROUND
Monro Muffler Brake, Inc. and its wholly owned subsidiaries, Monro Service
Corporation and Monro Leasing, LLC (the "Company"), had 514 Company-operated and
19 dealer-operated automotive repair centers located primarily in the northeast
region of the United States as of March 30, 2002.
The accompanying consolidated financial statements have been prepared in
accordance with generally accepted accounting principles. The preparation of
financial statements in conformity with such principles requires the use of
estimates by management during the reporting period. Actual results could differ
from those estimates.
A description of the Company's major accounting policies follows.
FISCAL YEAR
During the fiscal year ended March 31, 2001, the Board of Directors of the
Company elected to change the Company's fiscal year end from March 31 to the
last Saturday in March. This change was effective with fiscal year 2002 which
began on April 1, 2001.
The following are the dates represented by each fiscal period:
"Year ended Fiscal March 2002": April 1, 2001 - March 30, 2002 (52 weeks)
"Year ended Fiscal March 2001": April 1, 2000 - March 31, 2001
CONSOLIDATION
The consolidated financial statements include the Company and its wholly owned subsidiaries, Monro Service Corporation and Monro Leasing, LLC, after the elimination of intercompany transactions and balances.
REVENUE RECOGNITION
Sales are recorded upon completion of automotive undercar repair services provided to customers or upon the sale of incidental products and services to customers.
COMPREHENSIVE INCOME
The Company adopted Statement of Financial Accounting Standards No. 133 ("SFAS 133"), "Accounting for Derivative Instruments and Hedging Activities", at the beginning of fiscal 2002. As it relates to the Company, comprehensive income is defined as net earnings as adjusted for minimum pension liability and SFAS 133 adjustment to equity, and is reported net of related taxes.
WARRANTY
The Company provides an accrual for estimated future warranty costs based upon the historical relationship of warranty costs to sales. Actual expenses have not materially differed from the accruals estimated in prior periods.
INVENTORIES
The Company's inventories consist of automotive parts and tires. Substantially all merchandise inventories are valued under the last-in, first-out (LIFO) method. Under the first-in, first-out (FIFO) method, these inventories would have been $252,000, $47,000 and $124,000 higher at March 30, 2002, March 31, 2001 and March 31, 2000, respectively. The FIFO value of inventory approximates the current replacement cost.
PROPERTY, PLANT AND EQUIPMENT
All property, plant and equipment are stated at cost. Depreciation of
property, plant and equipment is provided on the straight-line basis. Buildings
and improvements are depreciated over lives varying from 10 to 39 years;
machinery, fixtures and equipment over lives varying from 5 to 15 years; and
vehicles over lives varying from 5 to 8 years.
Certain leases have been capitalized and are classified on the balance
sheet as fixed assets. These assets are being amortized on a straight-line basis
over their estimated lives, which coincide with the terms of the leases (Note
3).
In accordance with Statement of Financial Accounting Standards No. 121
("SFAS 121"), "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to Be Disposed Of", the Company assesses all long-lived
assets, including property, plant and equipment, for impairment whenever events
or changes in circumstances indicate that the carrying amount of an asset may
not be recoverable.
In October 2001, the FASB issued Statement of Financial Accounting
Standards No. 144, "Accounting for the Impairment or Disposal of Long-Lived
Assets", which addresses financial accounting and reporting for the impairment
or disposal of long-lived assets. This standard harmonizes the accounting for
impaired assets and resolves some of the implementation issues of SFAS 121. It
retains the fundamental provisions of SFAS 121 for (a) recognition and
measurement of the impairment of long-lived assets to be held and used and (b)
measurement of long-lived assets to be disposed of by sale. It also retains the
basic provisions for presenting discontinued operations in the income statement
but broadens the scope to include a component of an entity rather than a segment
of a business. The Company will adopt this standard effective March 31, 2002.
The Company does not expect this pronouncement to have a material impact on the
Company's financial position, results of operations or cash flows.
INTANGIBLE ASSETS
For acquisitions completed on or before June 30, 2001, the excess of the cost over the fair value of net assets of purchased businesses is recorded as goodwill and is amortized on a straight-line basis over periods of 20 years or less. The cost of other acquired intangibles is amortized on a straight-line basis over their estimated useful lives. The Company continually evaluates the carrying value of goodwill and other intangible assets. Any impairments would be recognized when
Notes to Consolidated
Financial Statements
the expected future operating cash flows derived from such intangible assets is
less than their carrying value. Amortization expense associated with goodwill
totaled $529,000, $596,000 and $597,000 for the fiscal years ended March 2002,
2001 and 2000, respectively.
The Company has adopted Statement of Financial Accounting Standards No. 141
("SFAS No. 141"), "Business Combinations". All business combinations consummated
after July 1, 2001 will be accounted for in accordance with the new
pronouncements. Goodwill relating to acquisitions completed subsequent to June
30, 2001 is not amortized and is subject to impairment testing. In addition, in
accordance with Statement of Financial Accounting Standards No. 142 ("SFAS No.
142"), "Goodwill and Other Intangible Assets", effective March 31, 2002, the
Company will no longer be required to amortize goodwill and certain other
intangible assets relating to acquisitions completed prior to July 1, 2001. The
Company does not believe that these standards will have a material impact on the
Company's financial position or results of operations.
ADVERTISING
The Company expenses the production costs of advertising the first time the
advertising takes place, except for direct response advertising which is
capitalized and amortized over its expected period of future benefits.
Direct response advertising consists primarily of coupons for the Company's
services. The capitalized costs of this advertising are amortized over the
period of the coupon's validity, which ranges from six weeks to one year.
Prepaid advertising at fiscal year end March 2002 and 2001, and advertising
expense for the fiscal years ended March 2002, 2001 and 2000, were not material
to these financial statements.
STORE OPENING AND CLOSING COSTS
New store opening costs are charged to expense in the fiscal year when incurred. When the Company closes a store, the estimated unrecoverable costs, including the remaining lease obligation, are charged to expense.
DERIVATIVE FINANCIAL INSTRUMENTS
Effective April 1, 2001, the Company adopted SFAS 133, "Accounting for
Derivative Instruments and Hedging Activities", as amended by Statement of
Financial Accounting Standards No. 138 ("SFAS 138"),"Accounting for Certain
Derivative Instruments and Certain Hedging Activities". SFAS 133/138 requires
that all derivative instruments be recorded on the balance sheet at fair value.
Changes in the fair value of derivatives are recorded each period in current
earnings or other comprehensive income, depending on whether the derivative is
designated as part of a hedge transaction, and if it is, depending on the type
of hedge transaction.
The notional amount of derivative financial instruments, which consisted
solely of interest rate swaps used to minimize the risk and/or costs associated
with changes in interest rates, was approximately $42 million at March 30, 2002.
At that date, swap maturities ranged from November 2002 through October 2005.
These swap contracts require the Company to pay fixed rates of interest ranging
from 5.21% to 7.15%, and receive variable rates of interest based on the 30 day
LIBOR rate (plus a spread of 80 basis points in the case of the 7.15% fixed rate
contract).
At March 30, 2002, the fair value of the contracts, net of tax, is recorded
as a component of other comprehensive income in the Statement of Changes in
Shareholders' Equity.
TREASURY STOCK
In November 1999, the Board of Directors approved a share repurchase program initially authorizing the Company to purchase up to 300,000 shares of its common stock at market prices. In May 2000, the Board of Directors approved an increase of 120,000 shares, bringing the total authorization to 420,000 shares. The amount and timing of any purchase will depend upon a number of factors, including the price and availability of the Company's shares and general market conditions. The Company's purchases of common stock are recorded as "Treasury Stock" and result in a reduction of "Shareholders' Equity".
STOCK-BASED COMPENSATION
The Company measures stock-based compensation cost as the excess of the quoted market price of the Company's common stock at the grant date over the amount the employee must pay for the stock. The Company's policy generally is to grant stock options at fair market value at the date of grant.
STATEMENT OF CASH FLOWS
For purposes of the Statement of Cash Flows, the Company considers all highly liquid instruments with original maturities of three months or less to be cash equivalents.
RECLASSIFICATIONS
Certain amounts in the Consolidated Balance Sheet and the Consolidated Statement of Cash Flows have been reclassified to improve reporting and maintain comparability among the periods presented.
-NOTE 2 -- SUBSEQUENT EVENT: ACQUISITION OF KIMMEL AUTOMOTIVE, INC.
Effective April 1, 2002, the Company purchased all of the outstanding common stock, as well as a portion of the preferred stock, of Kimmel Automotive, Inc. ("Kimmel"), based in Baltimore, Maryland. Kimmel Automotive operates 34 tire and automotive repair stores in Maryland and Virginia, as well as Wholesale and Truck Tire Divisions (including two commercial stores). The purchase price for the assets of the company was approximately $6 million in cash, plus the assumption of approximately $5 million of liabilities. The acquisition was financed through the Company's existing bank credit facility.
Notes to Consolidated Financial Statements
The majority of Kimmel's non-voting preferred stock has been retained by its current holders.
Although the 15 Kimmel Tire and Automotive Centers in Baltimore and 19 Tread Quarters stores in Virginia are in the same general markets in which Monro competes, Monro and Kimmel are mainly situated in non-overlapping areas. There are no plans to close any of the Kimmel stores, which will continue to operate under the current brand names.
The Company may sell the Truck Tire division, which is profitable, if it is able to obtain an appropriate price.
-NOTE 3 -- PROPERTY, PLANT AND EQUIPMENT
The major classifications of property, plant and equipment are as follows:
MARCH 30, 2002 MARCH 31, 2001
OWNED LEASED TOTAL OWNED LEASED TOTAL
(DOLLARS IN THOUSANDS)
--------------------------------------------------------------------------------------------------------------------
Land............................................ $ 27,464 $ 27,464 $ 27,143 $ 27,143
Buildings and improvements...................... 92,877 $5,491 98,368 90,851 $6,950 97,801
Equipment, signage and fixtures................. 71,675 71,675 71,573 71,573
Vehicles........................................ 8,683 1,083 9,766 10,076 1,226 11,302
Construction-in-progress........................ 1,495 1,495 1,601 1,601
-------- ------ -------- -------- ------ --------
202,194 6,574 208,768 201,244 8,176 209,420
Less -- Accumulated depreciation and
amortization................................ 77,180 4,377 81,557 72,436 5,498 77,934
-------- ------ -------- -------- ------ --------
$125,014 $2,197 $127,211 $128,808 $2,678 $131,486
======== ====== ======== ======== ====== ========
--------------------------------------------------------------------------------------------------------------------
|
Interest costs capitalized aggregated $136,000 in 2002 and $343,000 in 2001.
Amortization expense recorded under capital leases totaled $562,000, $534,000 and $552,000 for the fiscal years ended March 2002, 2001 and 2000, respectively.
-NOTE 4 -- OTHER NONCURRENT ASSETS
Other noncurrent assets consist primarily of goodwill and other intangible assets. Accumulated amortization associated with noncurrent assets at March 30, 2002 and March 31, 2001 amounted to $4,057,000 and $3,542,000, respectively. Amortization expense totaled $695,000, $692,000 and $795,000 for the fiscal years ended March 2002, 2001 and 2000, respectively.
Notes to Consolidated Financial Statements
-NOTE 5 -- LONG-TERM DEBT
Long-term debt consists of the following:
MARCH 30, MARCH 31,
2002 2001
(DOLLARS IN THOUSANDS)
-------------------------------------------------------------------------------------------
Revolving Credit Facility................................... $26,100 $32,100
Term loan financing, LIBOR-based, due in installments
through fiscal year 2004 (a).............................. 9,419 17,500
Mortgage Notes Payable, LIBOR plus 1.0%, secured by store
properties, due in installments through 2003 (a).......... 2,554 4,182
Mortgage Note Payable, LIBOR plus .8%, secured by warehouse
and office building, due in installments through 2006
(a)....................................................... 2,014 2,162
Term loan financing, LIBOR plus .8%, secured by warehouse
and office building, due in installments through 2004
(a)....................................................... 147 239
Mortgage Note Payable, non-interest bearing, secured by
warehouse and office land, due in one installment in
2015...................................................... 660 660
Other notes, 7.75% to 8.0%, partially secured by store
equipment, due in installments through 2008............... 147 212
Obligations under capital leases at various interest rates,
secured by store properties and certain equipment, due in
installments through 2018................................. 3,895 4,448
------- -------
44,936 61,503
Less -- Current portion................................... 10,813 10,646
------- -------
$34,123 $50,857
======= =======
|
Concurrent with the closing of the acquisition of 189 company-operated
Speedy stores in September 1998, the Company obtained a $135 million secured
credit facility from a syndication of lenders led by The Chase Manhattan Bank.
Approximately $55 million was borrowed under this facility to pay the all-cash
purchase price, including transaction expenses of approximately $4 million. In
addition, the Company refinanced approximately $35 million of indebtedness
through the new credit facility, with the balance of the facility available for
future working capital needs. More specifically, the new financing structure
consists of a $25 million term loan (of which approximately $9 million was
outstanding at March 30, 2002), a $75 million Revolving Credit facility (of
which approximately $26 million was outstanding at March 30, 2002), and
synthetic lease (off-balance sheet) financing for a significant portion of the
Speedy real estate, totaling $35 million (of which approximately $32 million was
outstanding at March 30, 2002). The loans bear interest at the prime rate or
other LIBOR-based rate options tied to the Company's financial performance. The
Company must also pay a facility fee on the unused portion of the commitment.
The credit facility has a five-year term. Interest only is payable monthly
on the Revolving Credit and synthetic lease borrowings throughout the term. In
addition to monthly interest payments, the $25 million term loan requires
quarterly principal payments which began September 30, 1999.
The term loan and Revolving Credit facility are secured by all accounts
receivable, inventory and other personal property. The Company has also entered
into a negative pledge agreement not to encumber any real property, with certain
permissible exceptions. The synthetic lease is secured by the real property to
which it relates.
Within the aforementioned $75 million Revolving Credit facility, the
Company has available a subfacility of $7 million for the purpose of issuing
standby letters of credit. The line requires fees aggregating 1.875% annually of
the face amount of each standby letter of credit, payable quarterly in arrears.
No letters of credit were outstanding under this line at March 30, 2002.
During fiscal 1995, the Company purchased 12.7 acres of land for $.7
million from the City of Rochester, New York, on which its office/warehouse
facility is located. The City has provided financing for 100 percent of the cost
of the land via a 20-year non-interest bearing mortgage, all due and payable in
2015.
To finance its office/warehouse building, the Company obtained permanent
mortgage financing consisting of a 10-
Notes to Consolidated
Financial Statements
year mortgage for $2.9 million and an eight-year term loan in the amount of $.7
million. Both obligations require monthly interest payments, and each may be
converted from a floating rate to a fixed rate loan before the last two years of
their respective terms. The mortgage requires equal monthly installments of
principal based on a 20-year amortization period, and the term loan requires
constant monthly payments of principal to fully amortize the debt over the
eight-year term. The Company entered into an interest rate swap agreement with a
major financial institution which effectively fixes the interest rate over the
terms of the aforementioned agreements at 7.15%.
Interest is payable monthly on the Mortgage Notes Payable which have seven
year terms. Equal monthly installments of principal are required based on
20-year amortization periods.
The Company is a party to three additional interest rate swap agreements,
expiring in calendar years 2002 and 2003, with an aggregate notional amount of
$40.0 million. The purpose of these agreements is to limit the interest rate
exposure on the Company's floating rate debt. Fixed rates under these agreements
range from 5.21% to 6.25%.
Certain of the Company's long-term debt agreements require, among other
things, the maintenance of specified interest and rent coverage ratios and
amounts of tangible net worth. They also contain restrictions on dividend
payments. The Company is in compliance with these requirements at March 30,
2002. These agreements permit mortgages and specific lease financing
arrangements with other parties with certain limitations.
Aggregate debt maturities over the next five years and thereafter are as follows:
CAPITAL LEASES ALL
AGGREGATE IMPUTED OTHER
AMOUNT INTEREST DEBT TOTAL
YEAR ENDED MARCH, (DOLLARS IN THOUSANDS)
-----------------------------------------------------------------------------------------------------------------
2003.................................................. $1,016 $(564) $10,361 $10,813
2004.................................................. 926 (522) 28,235 28,639
2005.................................................. 887 (470) 164 581
2006.................................................. 764 (419) 1,585 1,930
2007.................................................. 747 (359) 18 406
Thereafter............................................ 2,640 (751) 678 2,567
-------
Total $44,936
=======
-----------------------------------------------------------------------------------------------------------------
|
The interest amounts and balloon payment due under the synthetic lease financing are treated as operating rent commitments, and are excluded from this table of aggregate debt maturities (Note 10).
-NOTE 6 -- FAIR VALUE OF FINANCIAL INSTRUMENTS
Financial instruments consist of the following:
MARCH 30, 2002 MARCH 31, 2001
NOTIONAL CARRYING FAIR NOTIONAL CARRYING FAIR
AMOUNT AMOUNT VALUE AMOUNT AMOUNT VALUE
(DOLLARS IN THOUSANDS)
------------------------------------------------------------------------------------------------------------------------
LIABILITIES
Long-term debt, including current
portion................................. $41,041 $40,127 $57,055 $55,168
DERIVATIVE INSTRUMENTS
Interest rate swap agreements (a)......... $42,099 $42,333
|
(a) These agreements are intended to manage exposure to interest rate risks associated with both long-term (on-balance sheet) debt and synthetic leases (off-balance sheet).
The fair value of cash and cash equivalents, accounts receivable and accounts payable approximated book value at March 30, 2002 and March 31, 2001 because their maturity is generally less than one year in duration. The fair value of long-term debt was
Notes to Consolidated Financial Statements
estimated based on discounted cash flow analyses using either quoted market prices for the same or similar issues, or the current interest rates offered to the Company for debt with similar maturities.
While it is not the Company's intention to terminate its derivative financial instruments, fair values were estimated, based on market rates or quotes from brokers, which represented the amounts that the Company would receive or pay if the instruments were terminated at the balance sheet dates. These fair values indicated that the termination of interest rate swaps would have resulted in a $1.1 million loss and a $.6 million loss as of March 30, 2002 and March 31, 2001, respectively.
-NOTE 7 -- INCOME TAXES
The components of the provision for income taxes are as follows:
YEAR ENDED FISCAL MARCH,
2002 2001 2000
(DOLLARS IN THOUSANDS)
-------------------------------------------------------------------------------------------------
Currently payable --
Federal................................................... $4,891 $3,092 $2,920
State..................................................... 798 594 762
------ ------ ------
5,689 3,686 3,682
------ ------ ------
Deferred --
Federal................................................... 746 2,322 1,392
State..................................................... (140) 403 344
------ ------ ------
606 2,725 1,736
------ ------ ------
Total.............................................. $6,295 $6,411 $5,418
====== ====== ======
-------------------------------------------------------------------------------------------------
|
Deferred tax (liabilities) assets consist of the following:
MARCH 30, MARCH 31, MARCH 31,
2002 2001 2000
(DOLLARS IN THOUSANDS)
-------------------------------------------------------------------------------------------------
Property and equipment basis differences.................... $(4,981) $(4,472) $(2,858)
Prepaid expenses............................................ (582) (360) (371)
Partnership investment...................................... (280) (304) (316)
Goodwill.................................................... (1,153) (793)
Capital leases.............................................. (600) (362)
Pension..................................................... (716) (507) (192)
Other....................................................... (133) (134) (139)
------- ------- -------
Gross deferred tax liabilities..................... (7,292) (7,292) (4,669)
------- ------- -------
Deferred compensation....................................... 276
Derivative financial instruments............................ 440
Net operating losses........................................ 380 240 37
Goodwill.................................................... 2,079
Capital leases.............................................. 165
Insurance accruals.......................................... 502 505 715
Vacation accrual............................................ 340 307 306
Warranty and other reserves................................. 673 597 649
Other....................................................... 595 528 407
------- ------- -------
Gross deferred tax assets.......................... 5,285 2,177 2,279
------- ------- -------
Net deferred tax liability......................... $(2,007) $(5,115) $(2,390)
======= ======= =======
-------------------------------------------------------------------------------------------------
|
The Company has $6.5 million of net operating loss carryforwards available as of March 30, 2002. The carryforwards expire in varying amounts from 2004 through 2021.
Notes to Consolidated
Financial Statements
A reconciliation between the U. S. Federal statutory tax rate and the effective tax rate reflected in the accompanying financial statements is as follows:
YEAR ENDED FISCAL MARCH,
2002 2001 2000
AMOUNT PERCENT AMOUNT PERCENT AMOUNT PERCENT
(DOLLARS IN THOUSANDS)
-----------------------------------------------------------------------------------------------------------------------------
Federal income tax based on statutory tax rate
applied to income before taxes.............. $6,111 34.9 $5,571 34.6 $4,669 34.3
State income tax, net of federal income tax
benefit..................................... 428 2.4 759 4.7 671 4.9
Other......................................... (244) (1.4) 81 .5 78 .6
------ ---- ------ ---- ------ ----
$6,295 35.9 $6,411 39.8 $5,418 39.8
====== ==== ====== ==== ====== ====
-----------------------------------------------------------------------------------------------------------------------------
|
-NOTE 8 -- CONVERTIBLE PREFERRED STOCK AND COMMON STOCK
A summary of the changes in the number of shares of Class C preferred stock and common stock is as follows:
COMMON CLASS C TREASURY
STOCK SHARES CONVERTIBLE PREFERRED STOCK
ISSUED STOCK SHARES ISSUED SHARES
-----------------------------------------------------------------------------------------------------------------
Balance at March 31, 1999................................... 8,321,701 91,727
Purchase of treasury shares................................. 100,100
--------- ------ -------
Balance at March 31, 2000................................... 8,321,701 91,727 100,100
Stock options exercised..................................... 51,977
Purchase of treasury shares................................. 116,700
--------- ------ -------
Balance at March 31, 2001................................... 8,373,678 91,727 216,800
Stock options exercised..................................... 61,646
--------- ------ -------
Balance at March 30, 2002................................... 8,435,324 91,727 216,800
========= ====== =======
-----------------------------------------------------------------------------------------------------------------
|
Holders of at least 60% of the Class C preferred stock must approve any
action authorized by the holders of common stock. In addition, there are certain
restrictions on the transferability of shares of Class C preferred stock. The
conversion value of the Class C convertible preferred stock is $.216 per share.
Under the 1984 and 1987 Incentive Stock Option Plans, 727,672 shares (as
retroactively adjusted for stock dividends) of the common stock were reserved
for issuance to officers and key employees. The 1989 Incentive Stock Option Plan
authorized an additional 173,255 shares (as retroactively adjusted for stock
dividends) for issuance.
In January 1994, May 1995 and May 1997, the Board of Directors authorized
an additional 257,809, 109,974 and 210,000 shares, respectively (as
retroactively adjusted for stock dividends), for issuance under the 1989 Plan.
These amounts were approved by shareholders in August 1994, August 1995 and
August 1997, respectively.
In November 1998, the Board of Directors authorized the 1998 Incentive
Stock Option Plan, reserving 750,000 shares of common stock for issuance to
officers and key employees. The Plan was approved by shareholders in August
1999.
Generally, options vest within the first five years of their term, and have
a duration of ten years. Outstanding options are exercisable for various periods
through March 2012.
Notes to Consolidated Financial Statements
A summary of changes in outstanding stock options (as retroactively adjusted for stock dividends) is as follows:
AVAILABLE
WEIGHTED AVERAGE FOR
EXERCISE PRICE OUTSTANDING EXERCISABLE GRANT
---------------------------------------------------------------------------------------------------------------------
At March 31, 1999.................................... $10.26 906,577 213,314 549,789
Granted.............................................. $ 8.11 30,000 (30,000)
Became exercisable................................... 161,069
Canceled............................................. $13.79 (96,452) (31,434) 96,452
------- ------- --------
At March 31, 2000.................................... $ 9.78 840,125 342,949 616,241
Granted.............................................. $ 8.15 94,250 (94,250)
Became exercisable................................... 106,484
Exercised............................................ $ 5.05 (51,977) (51,977)
Canceled............................................. $11.00 (22,594) (11,096) 22,594
------- ------- --------
At March 31, 2001.................................... $10.03 859,804 386,360 544,585
Granted.............................................. $11.53 114,150 (114,150)
Became exercisable................................... 206,676
Exercised............................................ $11.92 (61,646) (61,646)
Canceled............................................. $11.28 (39,328) (12,238) 39,328
------- ------- --------
At March 30, 2002.................................... $ 9.87 872,980 519,152 469,763
======= ======= ========
---------------------------------------------------------------------------------------------------------------------
|
The following table summarizes information about fixed stock options outstanding at March 30, 2002:
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
WEIGHTED WEIGHTED WEIGHTED
AVERAGE AVERAGE AVERAGE
RANGE OF SHARES REMAINING EXERCISE SHARES EXERCISE
EXERCISE PRICES UNDER OPTION LIFE PRICE UNDER OPTION PRICE
-------------------------------------------------------------------------------
$ 6.31-$10.00 545,475 6.95 $ 7.89 313,217 $ 7.85
$10.01-$15.00 272,956 6.54 $12.58 164,396 $13.23
$15.01-$17.58 54,549 5.85 $16.01 41,539 $16.05
-------------------------------------------------------------------------------
|
In August 1994, the Board of Directors authorized a non-employee directors'
stock option plan which was approved by shareholders in August 1995. The Plan
initially reserved 66,852 shares of common stock (as retroactively adjusted for
stock dividends), and provides for (i) the grant to each non-employee director
as of August 1, 1994 of an option to purchase 3,039 shares of the Company's
common stock (as retroactively adjusted for stock dividends) and (ii) the annual
grant to each non-employee director of an option to purchase 3,039 shares (as
retroactively adjusted for stock dividends) on the date of the annual meeting of
shareholders beginning in 1995. The options expire ten years from the date of
grant and have an exercise price equal to the fair market value of the Company's
common stock on the date of grant. Options vest immediately upon issuance.
In May 1997 and May 1999, the Board of Directors authorized an additional
68,250 and 65,000 shares, respectively (as retroactively adjusted for stock
dividends) for issuance under the Plan. These amounts were approved by
shareholders in August 1997 and August 1999, respectively.
Notes to Consolidated
Financial Statements
A summary of changes in these stock options is as follows:
OPTION PRICE AVAILABLE
PER SHARE OUTSTANDING EXERCISABLE FOR GRANT
-----------------------------------------------------------------------------------------
At March 31, 1999................. $12.63-$17.01 106,357 106,357 28,745
Authorized........................ 65,000
Granted........................... $ 7.50 21,273 21,273 (21,273)
------- ------- -------
At March 31, 2000................. $ 7.50-$17.01 127,630 127,630 72,472
Granted........................... $ 9.38 21,273 21,273 (21,273)
------- ------- -------
At March 31, 2001................. $ 7.50-$17.01 148,903 148,903 51,199
Granted........................... $ 12.85 21,273 21,273 (21,273)
------- ------- -------
At March 30, 2002................. $ 7.50-$17.01 170,176 170,176 29,926
======= ======= =======
-----------------------------------------------------------------------------------------
|
As permitted under Statement of Financial Accounting Standards No. 123
("SFAS 123"), "Accounting for Stock-Based Compensation", the Company measures
stock-based compensation cost as the excess of the quoted market price of the
Company's common stock at the grant date over the amount the employee must pay
for the stock. However, SFAS 123 requires disclosure of pro forma net income and
pro forma net income per share as if the fair value-based method had been
applied in measuring compensation cost for the stock-based awards granted
subsequent to fiscal year 1995. Management believes that 2000 pro forma amounts
are not representative of the effects of stock-based awards on future pro forma
net income and pro forma earnings per share because those pro forma amounts
exclude the pro forma compensation expense related to unvested stock options
granted before fiscal 1996.
Reported and pro forma net income and earnings per share amounts are set
forth below:
YEAR ENDED FISCAL MARCH,
2002 2001 2000
(DOLLARS IN THOUSANDS,
EXCEPT PER SHARE DATA)
--------------------------------------------------------
Net income
As reported................ $11,234 $9,696 $8,207
Pro forma.................. 10,805 9,132 7,518
Earnings per share - diluted
As reported................ $ 1.24 $ 1.09 $ .92
Pro forma.................. $ 1.15 $ 1.01 $ .84
--------------------------------------------------------
|
The weighted average fair value per option at the date of grant for options
granted during fiscal 2002, 2001 and 2000 was $5.87, $4.36 and $4.30,
respectively.
The fair values of the options granted were estimated on the date of their
grant using the Black-Scholes option-pricing model based on the following
weighted average assumptions:
YEAR ENDED FISCAL MARCH,
2002 2001 2000
----------------------------------------------------------
Risk free interest rate...... 5.25% 6.02% 6.29%
Expected life................ 9 years 9 years 9 years
Expected volatility.......... 29.6% 29.7% 30.0%
Expected dividend yield...... 0% 0% 0%
----------------------------------------------------------
|
Forfeitures are recognized as they occur.
Notes to Consolidated
Financial Statements
-NOTE 9 -- EARNINGS PER COMMON SHARE
The following is a reconciliation of basic and diluted earnings per common share for the respective years:
YEAR ENDED FISCAL MARCH,
2002 2001 2000
(AMOUNTS IN THOUSANDS, EXCEPT
PER SHARE DATA)
--------------------------------------------------------
Numerator for
earnings per common
share calculation:
Net income......... $11,234 $9,696 $8,207
======= ====== ======
Denominator for
earnings per common
share calculation:
Weighted average
common shares,
basic............ 8,195 8,182 8,305
Effect of dilutive
securities:
Preferred
stock.......... 636 636 636
Stock options.... 224 73 23
------- ------ ------
Weighted average
common shares,
diluted.......... 9,055 8,891 8,964
======= ====== ======
Basic earnings per
common share:...... $ 1.37 $ 1.19 $ .99
======= ====== ======
Diluted earnings per
common share:...... $ 1.24 $ 1.09 $ .92
======= ====== ======
--------------------------------------------------------
|
The computation of diluted earnings per common share for fiscal years 2002, 2001 and 2000 excludes the effect of assumed exercise of approximately 100,000, 400,000 and 700,000 stock options, respectively, as the exercise price of these options was greater than their average market value, resulting in an anti-dilutive effect on diluted earnings per share.
-NOTE 10 -- OPERATING LEASES AND OTHER COMMITMENTS
The Company leases retail facilities and store equipment under
noncancellable lease agreements which expire at various dates through fiscal
year 2017. In addition to stated minimum payments, certain real estate leases
have provisions for contingent rentals when retail sales exceed specified
levels. Generally, the leases provide for renewal for various periods at
stipulated rates. Most of the facilities' leases require payment of property
taxes, insurance and maintenance costs in addition to rental payments, and
several provide an option to purchase the property at the end of the lease term.
In recent years, the Company has entered into agreements for the
sale/leaseback of certain stores, and into agreements for the sale/leaseback of
store equipment. The Company has lease renewal options under the real estate
agreements at projected future fair market values, and has both purchase and
renewal options under the equipment lease agreements. Realized gains are
deferred and are credited to income as rent expense adjustments over the lease
terms.
Future minimum payments required under noncancellable leases are as
follows:
YEAR ENDED SYNTHETIC LESS-SUBLEASE
FISCAL LEASE OTHER INCOME TOTAL
MARCH, (DOLLARS IN THOUSANDS)
---------------------------------------------------------------------
2003................. $ 2,214 $14,517 $ (667) $ 16,064
2004................. 27,452 12,579 (561) 39,470
2005................. 10,854 (491) 10,363
2006................. 8,841 (381) 8,460
2007................. 7,000 (150) 6,850
Thereafter........... 20,123 (367) 19,756
------- ------- ------- --------
Total............ $29,666 $73,914 $(2,617) $100,963
======= ======= ======= ========
---------------------------------------------------------------------
|
Rent expense under operating leases, net of sublease income, totaled
$16,465,000, $16,444,000 and $16,406,000 in 2002, 2001 and 2000, respectively,
including contingent rentals of $307,000, $347,000 and $428,000 in each
respective year. Sublease income totaled $603,000, $657,000 and $704,000,
respectively, in 2002, 2001 and 2000.
Future minimum lease commitments include amounts payable under the
synthetic lease agreement structured to finance most of the real estate in the
Speedy acquisition (Note 5). Should the Company or the lessor choose not to
renew the lease at the end of its initial five year term, the Company may buy
all of the properties (including closed stores) for their original acquisition
cost of $32.4 million. Alternatively, the properties will be sold, and the
Company has guaranteed a residual value of 81.5% of the acquisition cost. Of the
$27.5 million commitment for fiscal year 2004, approximately $26.4 million
represents the minimum principal amount (i.e. the guaranteed residual) due on
September 15, 2003, should the synthetic lease not be renewed. Renewal options
provide for one five-year renewal term and 30 additional renewal terms of one
year each. Renewals, however, are dependent upon the renegotiation or renewal of
the Company's secured credit facility (Note 5).
The Company has entered into various contracts with parts suppliers which
require it to buy up to 90% of its annual purchases of specific products
including brakes, exhaust, oil and ride control at market prices. The agreements
expire at various dates through February 2007. The Company believes these
agreements provide it with high quality, branded merchandise at preferred
pricing, along with strong marketing and training support.
Notes to Consolidated
Financial Statements
-NOTE 11 -- EMPLOYEE RETIREMENT AND PROFIT SHARING PLANS
The Company has a noncontributory defined benefit plan that provides
benefits to certain full-time employees who were employed with the Company prior
to April 2, 1998. The Company's Board of Directors approved a plan whereby the
benefits of the defined benefit plan would be frozen and the plan would be
closed to new participants as of that date. Prior to this amendment, coverage
under the plan began after completing one year of service and attainment of age
21. Benefits were based primarily on years of service and employees' pay near
retirement. The Company's funding policy is consistent with the funding
requirements of Federal law and regulations. Plan assets are invested in fixed
income funds.
The funded status of the plan is set forth below:
YEAR ENDED
FISCAL MARCH,
2002 2001
(DOLLARS IN
THOUSANDS)
--------------------------------------------------------
Change in Plan Assets:
Fair value of plan assets at beginning
of year............................. $6,201 $5,289
Actual return on plan assets.......... 159 874
Employer contribution................. 417 631
Benefits paid......................... (431) (593)
------ ------
Fair value of plan assets at end of
year................................ 6,346 6,201
------ ------
Change in Benefit Obligation:
Benefit obligation at beginning of
year................................ 5,967 5,139
Interest cost......................... 432 417
Actuarial loss........................ 340 1,004
Benefits paid......................... (431) (593)
------ ------
Benefit obligation at end of year..... 6,308 5,967
------ ------
Funded status of plan................. 38 234
Unrecognized net loss................. 1,522 900
Unrecognized net transition asset..... (29)
------ ------
Pension asset at year end March....... $1,560 $1,105
====== ======
--------------------------------------------------------
|
Pension cost included the following components:
--------------------------------------------------------
YEAR ENDED FISCAL MARCH,
2002 2001 2000
(DOLLARS IN THOUSANDS)
--------------------------------------------------------
Interest cost on projected
benefit obligation.......... $432 $417 $415
Expected return on plan
assets...................... (492) (401) (395)
Service cost - benefits earned
during the period........... 280
Amortization of net transition
asset....................... (29) (29) (29)
Amortization of prior service
cost........................ 3
Recognized actuarial loss..... 51 50 42
Curtailment................... 16
---- ---- ----
Net pension cost.............. $(38) $ 37 $332
==== ==== ====
--------------------------------------------------------
|
The projected benefit obligation at March 30, 2002 and March 31, 2001
assumed discount rates of 7.25% and 7.5%, respectively. Increase in future
compensation levels was assumed to be 4% in 2000. The assumed long-term rate of
return on plan assets at March 30, 2002 and March 31, 2001 was 8%.
The unrecognized transition asset is being amortized over 15 years
beginning April 1, 1988.
The Company has a 401(k)/profit sharing plan which covers full-time
employees who meet the age and service requirements of the plan. The 401(k)
salary deferral option was added to the plan during fiscal 2000. The first
employee deferral occurred in March 2000. The Company makes matching
contributions consistent with the provisions of the plan. The Company's matching
contributions for fiscal 2002, 2001 and 2000 amounted to approximately $403,000,
$467,000 and $41,000, respectively. The Company may also make annual profit
sharing contributions to the plan at the discretion of the Compensation and
Benefits Committee of the Board of Directors. For the year ended March 31, 2000,
the Company contributed $80,000 inclusive of forfeitures.
The Company's management bonus plan provides for the payment of annual cash
bonus awards to participating employees, as selected by the Board of Directors,
based primarily on the Company's attaining pre-tax income targets established by
the Board of Directors. Charges to expense applicable to the management bonus
plan totaled $797,000, $642,000 and $207,000 for the fiscal years ended March
2002, 2001 and 2000, respectively. Because the Company did not attain a minimum
required percentage of targeted profit performance in fiscal 2000, expense for
that year does not include any bonus amounts related to profit performance for
executive officers.
Notes to Consolidated Financial Statements
-NOTE 12 -- RELATED PARTY TRANSACTIONS
In December 1998, the Company loaned $523,000 to its newly-appointed Chief
Executive Officer to purchase 75,000 shares of the Company's common stock at the
then fair market value. (This loan was made subsequent to the Executive's
purchase of 25,000 shares using his own funds.) The loan, which bears an
interest rate of 5.5% per annum, matures on December 1, 2003, and requires five
equal annual installments of principal beginning on the first anniversary of the
loan. If the Executive is employed with the Company when a principal payment is
due, that installment will be forgiven by the Company. All interest is due on
the fifth anniversary of the loan, and shall also be forgiven if the Executive
is employed with the Company at that time. The loan is secured by the common
stock.
Certain (a) principal shareholders/directors of the Company, (b)
partnerships in which such persons have interests or (c) trusts of which members
of their families are beneficiaries are lessors of certain facilities to the
Company. Payments under such operating and capital leases amounted to
$1,643,000, $1,694,000 and $1,713,000 for the fiscal years ended March 2002,
2001 and 2000, respectively. Amounts payable under these lease agreements
totaled $34,000 and $39,000, respectively, at March 30, 2002 and March 31, 2001.
No related party leases, other than renewals or modifications of leases on
existing stores, have been entered into since May 1989, and no new leases are
contemplated.
The Company has a management agreement with an investment banking firm
associated with a principal shareholder/director of the Company to provide
financial advice. The agreement provides for an annual fee of $160,000, plus
reimbursement of out-of-pocket expenses. During fiscal 2002, 2001 and 2000, the
Company incurred fees of $160,000 annually under this agreement. In addition,
this investment banking firm, from time to time, provides additional investment
banking services to the Company for customary fees.
Approximately half of all payments made to the investment banking firm are
paid to another principal shareholder/director of the Company.
-NOTE 13 -- SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
The following transactions represent noncash investing and financing activities during the periods indicated:
YEAR ENDED MARCH 30, 2002
Capital lease obligations of $80,000 where incurred under various
agreements.
In connection with the sale of assets, the Company reduced fixed assets and
other current liabilities by $231,000 and $158,000, respectively, and increased
other current assets by $73,000.
In connection with recording the value of the Company's swap contracts,
other comprehensive income decreased by $666,000, other current liabilities
increased by $152,000, other long-term liabilities increased by $954,000 and the
deferred income tax liability was reduced by $440,000.
YEAR ENDED MARCH 31, 2001
In connection with the termination of capital leases, the Company reduced
debt and fixed assets by $141,000 and $75,000, respectively, and recorded a gain
of $67,000.
In connection with the sale of assets, the Company reduced fixed assets and
other current liabilities costs by $645,000 and $433,000, respectively, and
increased other current assets by $212,000.
YEAR ENDED MARCH 31, 2000
Capital lease obligations of $85,000 were incurred under various lease
agreements.
In connection with the termination of a capital lease, the Company reduced
debt and fixed assets by $331,000 and $196,000, respectively, and recorded a
gain of $135,000.
In connection with the sale of assets, the Company reduced fixed assets and
accrued long-term restructuring costs by $1,382,000 and $329,000, respectively,
and increased other current assets and other non-current assets by $58,000 and
$995,000, respectively.
--------------------------------------------------------
YEAR ENDED FISCAL MARCH,
2002 2001 2000
(DOLLARS IN THOUSANDS)
--------------------------------------------------------
Cash paid during the year:
Interest, net $3,436 $5,519 $6,728
Income taxes, net $5,645 $3,755 $2,084
--------------------------------------------------------
|
-NOTE 14 -- LITIGATION
The Company and its subsidiaries are involved in legal proceedings, claims and litigation arising in the ordinary course of business. In management's opinion, the outcome of such current legal proceedings is not expected to have a material effect on future operating results or on the Company's consolidated financial position.
Quarterly
Financial Information
The following table sets forth income statement data by quarter for the fiscal years ended March 2002 and 2001.
--------------------------------------------------------------------------------------------------------------------
FISCAL QUARTER ENDED
JUNE SEPT. DEC. MARCH
2001 2001 2001 2002
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
--------------------------------------------------------------------------------------------------------------------
Sales....................................................... $61,393 $60,477 $52,443 $50,540
Cost of sales............................................... 34,238 34,908 32,589 31,307
------- ------- ------- -------
Gross profit................................................ 27,155 25,569 19,854 19,233
Operating, selling, general and administrative expenses..... 20,179 18,546 16,068 14,925
------- ------- ------- -------
Operating income............................................ 6,976 7,023 3,786 4,308
Interest expense, net....................................... 1,158 960 835 778
Other expense, net.......................................... 190 110 78 455
------- ------- ------- -------
Income before provision for income taxes.................... 5,628 5,953 2,873 3,075
Provision for income taxes.................................. 1,775 2,260 1,092 1,168
------- ------- ------- -------
Net income.................................................. $ 3,853 $ 3,693 $ 1,781 $ 1,907
======= ======= ======= =======
Basic earnings per share.................................... $ .47 $ .45 $ .22 $ .23
======= ======= ======= =======
Diluted earnings per share (a).............................. $ .43 $ .41 $ .20 $ .21
======= ======= ======= =======
Weighted average number of shares of Common Stock and Common
Stock equivalents used in computing earnings per
share: Basic........................................... 8,159 8,196 8,209 8,216
Diluted......................................... 8,985 9,040 9,043 9,168
2000 2000 2000 2001
--------------------------------------------------------------------------------------------------------------------
Sales....................................................... $60,693 $60,398 $51,792 $50,072
Cost of sales............................................... 34,826 35,273 31,952 31,145
------- ------- ------- -------
Gross profit................................................ 25,867 25,125 19,840 18,927
Operating, selling, general and administrative expenses..... 18,437 17,675 15,930 14,946
------- ------- ------- -------
Operating income............................................ 7,430 7,450 3,910 3,981
Interest expense, net....................................... 1,600 1,525 1,399 1,244
Other expense, net.......................................... 105 157 239 395
------- ------- ------- -------
Income before provision for income taxes.................... 5,725 5,768 2,272 2,342
Provision for income taxes.................................. 2,278 2,296 904 933
------- ------- ------- -------
Net income.................................................. $ 3,447 $ 3,472 $ 1,368 $ 1,409
======= ======= ======= =======
Basic earnings per share.................................... $ .42 $ .42 $ .17 $ .17
======= ======= ======= =======
Diluted earnings per share (a).............................. $ .39 $ .39 $ .15 $ .16
======= ======= ======= =======
Weighted average number of shares of Common Stock and Common
Stock equivalents used in computing earnings per
share: Basic........................................... 8,203 8,197 8,177 8,151
Diluted......................................... 8,882 8,930 8,884 8,865
|
(a) Earnings per share for each period was computed by dividing net income by the weighted average number of shares of Common Stock and Common Stock equivalents outstanding during the respective quarters.
None.
Part III
Part IV
-FINANCIAL STATEMENTS
Reference is made to Item 8 of Part II hereof.
-FINANCIAL STATEMENT SCHEDULES
Schedules have been omitted because they are inapplicable, not required, or
the information is included elsewhere in the Financial Statements or the notes
thereto.
-EXHIBITS
Reference is made to the Index to Exhibits accompanying this Form 10-K as
filed with the Securities and Exchange Commission. The Company will furnish to
any shareholder, upon written request, any exhibit listed in such Index to
Exhibits upon payment by such shareholder of the Company's reasonable expenses
in furnishing any such exhibit.
-REPORTS ON FORM 8-K
No reports on Form 8-K were filed during the last quarter of fiscal 2002.
Signatures
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
MONRO MUFFLER BRAKE, INC.
(Registrant)
By /s/ Robert G. Gross
----------------------------------------------------------
Robert G. Gross
President and Chief Executive Officer
Date: June 26, 2002
|
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities indicated as of June 18, 2002.
SIGNATURE TITLE /s/ Catherine D'Amico Executive Vice President-Finance, Chief --------------------------------- Financial Officer and Treasurer Catherine D'Amico (Principal Financial and Accounting Officer) Burton S. August* Director Robert W. August* Director Frederick M. Danziger* Director Donald Glickman* Director Peter J. Solomon* Director Lionel B. Spiro* Director Francis R. Strawbridge* Director W. Gary Wood* Director |
*By /s/ Robert G. Gross
-----------------------------------------------------------
Robert G. Gross
Chief Executive Officer,
Director and as Attorney-in-Fact
|
INDEX TO EXHIBITS
The following is a list of all exhibits filed herewith or incorporated by reference herein:
Exhibit No. Document
----------- --------
3.01* Restated Certificate of Incorporation of the Company, dated July 23, 1991,
with Certificate of Amendment, dated November 1, 1991. (1992 Form 10-K,
Exhibit No. 3.01)
3.02* Restated By-Laws of the Company, dated July 23, 1991. (Amendment No. 1,
Exhibit No. 3.04)
10.02* Non-Employee Directors' Stock Option Plan. (March 2001 Form S-8, Exhibit No.
4.1)**
10.02a* Amendment, dated as of May 12, 1997, to the Non-Employee Directors' Stock Option
Plan. (March 2001 Form S-8, Exhibit No. 4.2)**
10.02b* Amendment, dated as of May 18, 1999, to the Non-Employee Directors' Stock Option
Plan. (March 2001 Form S-8, Exhibit No. 4.3)**
10.02c Amendment, dated as of August 2, 1999, to the Non-Employee Directors' Stock
Option Plan.**
10.02d Amendment, dated as of June 12, 2002, to the Non-Employee Directors' Stock
Option Plan.**
10.03* 1989 Employees' Incentive Stock Option Plan, as amended through December 23,
1992. (December 1992 Form S-8, Exhibit No. 4.3)**
10.03a* Amendment, dated as of January 25, 1994, to the 1989 Employees' Incentive Stock
Option Plan. (1994 Form 10-K, Exhibit No. 10.03a and March 2001 Form S-8,
Exhibit No. 4.2)**
10.03b* Amendment, dated as of May 17, 1995, to the 1989 Employees' Incentive Stock Option
Plan. (1995 Form 10-K, Exhibit No. 10.03b and March 2001 Form S-8, Exhibit
No. 4.3) **
10.03c* Amendment, dated as of May 12, 1997, to the 1989 Employees' Incentive Stock Option
Plan. (1997 Form 10-K, Exhibit No. 10.03c and March 2001 Form S-8, Exhibit
No. 4.4)**
10.03d* Amendment, dated as of January 29, 1998, to the 1989 Employees' Incentive Stock
Option Plan. (1998 Form 10-K, Exhibit No. 10.03d)**
10.04* Retirement Plan of the Company, as amended and restated effective as of
April 1, 1989. (September 1993 Form 10-Q, Exhibit No. 10)**
10.04a* Amendment, dated as of August 2, 1999, to the Retirement Plan of the
Company, as amended and restated effective as of April 1, 1989. (June 2001
Form 10-Q, Exhibit No. 10.04a)**
10.05* Profit Sharing Plan, amended and restated as of April 1, 1993. (1995 Form
10-K, Exhibit No. 10.05) **
|
Exhibit No. Document
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10.05a* Amendment, dated as of March 1, 2000, to the Profit Sharing Plan. (June 2001 Form
S-8, Exhibit No. 4)**
10.06* Amended and Restated Employment Agreement, dated February 16, 1999, by and
between the Company and Robert G. Gross. (December 1998 Form 10-Q, Exhibit
No. 10.1)**
10.06a Amendment, dated as of June 5, 2002, to the Amended and Restated Employment
Agreement, dated February 16, 1999, by and between the Company and Robert G.
Gross.**
10.07* Amended and Restated Secured Loan Agreement, dated February 16, 1999, by and
between the Company and Robert G. Gross. (December 1998 Form 10-Q, Exhibit
No. 10.2)**
10.08* 1998 Stock Option Plan, effective November 18, 1998. (December 1998 Form
10-Q, Exhibit No. 10.3 and March 2001 Form S-8, Exhibit No. 4)**
10.09* Credit Agreement, dated as of September 15, 1998, by and among the Company,
The Chase Manhattan Bank, as agent, and certain lenders party thereto.
(September 1998 Form 10-Q, Exhibit No. 10.1)
10.09a* Amendment to "Credit Agreement" dated as of May 31, 1999, by and among the Company,
The Chase Manhattan Bank, as agent, and certain lenders party thereto.
(September 1999 Form 10-Q, Exhibit No. 10.01)
10.10* Credit Agreement, dated as of September 15, 1998, executed by and among
Brazos Automotive Properties, L.P., The Chase Manhattan Bank, and certain
lenders party thereto. (September 1998 Form 10-Q, Exhibit No. 10.2)
10.11* Residual Guaranty, dated as of September 15, 1998, between the Company and
The Chase Manhattan Bank. (September 1998 Form 10-Q, Exhibit No. 10.3)
10.12* Agreement for Facilities Lease, dated as of September 15, 1998, between
Brazos Automotive Properties, L.P. and Monro Leasing LLC. (September 1998
Form 10-Q, Exhibit No. 10.4)
10.13* Facilities Lease Agreement, dated as of September 15, 1998, between Brazos
Automotive Properties, L.P. and Monro Leasing LLC. (September 1998 Form
10-Q, Exhibit No. 10.5)
10.14* Agreement for Ground Lease, dated as of September 15, 1998, between Brazos
Automotive Properties, L.P. and Monro Leasing LLC. (September 1998 Form 10-Q,
Exhibit No. 10.6)
10.15* Ground Lease Agreement, dated as of September 15, 1998, between Brazos
Automotive Properties, L.P. and Monro Leasing LLC. (September 1998 Form 10-Q,
Exhibit No. 10.7)
10.16* Guaranty, dated as of September 15, 1998, between the Company and Brazos
Automotive Properties, L.P. (September 1998 Form 10-Q, Exhibit No. 10.8)
|
Exhibit No. Document
----------- --------
10.17* Agreement of Sublease, dated as of September 15, 1998, by and among Monro
Leasing LLC, the Company and Brazos Automotive Properties, L.P. (September
1998 Form 10-Q, Exhibit No. 10.9)
10.18* Modification and Extension Agreement, dated August 12, 1991, between AA & L
Associates, L.P. and the Company, with respect to Store No. 1. (1992 Form
10-K, Exhibit No. 10.18)
10.19* Sublease, dated June 1, 1980, among August, August and Lane Co-venture and
the Company, with Amendment of Lease, dated July 11, 1984, and assigned by
August, August and Lane Co-venture to AA & L Associates, L.P., effective
January 2, 1996, with respect to Store No. 3. (Form S-1, Exhibit No. 10.19)
10.19a* Assignment of Lease, effective January 2, 1996, among August, August and Lane
Co-venture and AA & L Associates, L.P. and August, August and Lane of
Rochester LLC, with respect to Store Nos. 3, 12, 17, 44, 49, 51, 52, 54, 58,
31, 33 and 34. (1999 Form 10-K, Exhibit No. 10.19a)
10.20* Lease, dated March 8, 1972, among Charles J. August, Burton S. August and
Sheldon A. Lane and the Company, with Amendment of Lease, dated July 11,
1984, with respect to Store No. 7. (Form S-1, Exhibit No. 10.20)
10.20a* Confirmation of Assignment of Lease, dated December 31, 1991, among Charles J.
August, Burton S. August and Sheldon A. Lane and Stoneridge 7 Realty
Partnership, with respect to Store No. 7. (1992 Form 10-K, Exhibit No.
10.20a)
10.21* Lease, effective December 1, 1985, among Chase Lincoln First Bank, N.A. and
Burton S. August, as Trustees and the Company, with Assignment of Lease,
dated June 7, 1991, among Chase Lincoln First Bank, N.A. and Burton S.
August, as Trustees, and August, Eastwood & August, with respect to Store
No. 8. (Form S-1, Exhibit No. 10.21)
10.22* Lease, dated February 10, 1972, among Charles J. August, Burton S. August
and Sheldon A. Lane and the Company as amended July 11, 1984 and assigned to
Lane, August, August Trust on June 7, 1991, and assigned to Lane, August,
August LLC effective January 2, 1996, with respect to Store No. 9. (Form
S-1, Exhibit No. 10.22)
10.22a* Modification and Extension Agreement, dated November 19, 1998, between AA & L
Associates, L.P., and the Company, with respect to Store No. 9. (1999 Form
10-K, Exhibit No. 10.22a)
10.23* Lease, dated May 1, 1973, among Charles J. August, Burton S. August and
Sheldon A. Lane and the Company, with Amendment of Lease, dated July 11,
1984, and Assignment of Lease, dated June 7, 1991, among Charles J. August,
Burton S. August and Sheldon A. Lane and 35 Howard Road Joint Venture, with
respect to Store No. 10. (Form S-1, Exhibit No. 10.23)
10.24* Lease, dated May 7, 1973, among Charles J. August, Burton S. August and
Sheldon A. Lane and the Company, with Amendment of Lease, dated July 11,
1984, and assigned by Mssrs. August, August and Lane to AA & L Associates,
L.P., effective January 2, 1996, with respect to Store No. 12. (Form S-1,
Exhibit No. 10.24)
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Exhibit No. Document
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10.25* Lease, dated July 25, 1974, among Charles J. August, Burton S. August and
Sheldon A. Lane and the Company, with Amendment of Lease, dated July 11,
1984, and Assignment of Lease, dated June 7, 1991, among Charles J. August,
Burton S. August and Sheldon A. Lane and AA & L Associates, L.P., with
respect to Store No. 14. (Form S-1, Exhibit No. 10.25)
10.26* Lease, effective April 1, 1975, among Charles J. August, Burton S. August
and Sheldon A. Lane and the Company, with Amendment of Lease, dated July 11,
1984, and Assignment of Lease, dated June 7, 1991, among Charles J. August,
Burton S. August and Sheldon A. Lane and Lane, August, August Trust and
assigned by Lane, August, August Trust to Lane, August, August LLC,
effective January 2, 1996, with respect to Store No. 15. (Form S-1, Exhibit
No. 10.26)
10.26a* Modification and Extension Agreement, dated November 19, 1998, between AA &
L Associates, L.P., and the Company, with respect to Store No. 15. (1999
Form 10-K, Exhibit No. 10.26a)
10.27* Lease, dated as of September 25, 1991, among Charles J. August, Burton S.
August and Sheldon A. Lane and the Company, and assigned by August, August
and Lane Co-venture to AA & L Associates, L.P., effective January 2, 1996,
with respect to Store No. 17. (1992 Form 10-K, Exhibit No. 10.27)
10.28* Lease, effective May 1, 1979, among Charles J. August, Burton S. August and
Sheldon A. Lane and the Company, with Amendment of Lease, dated July 11,
1984, and Assignment of Lease, dated June 7, 1991, among Charles J. August,
Burton S. August and Sheldon A. Lane and AA & L Associates, L.P., with
respect to Store No. 23. (Form S-1, Exhibit No. 10.28)
10.29* Lease, effective May 1, 1980, among Charles J. August, Burton S. August and
Sheldon A. Lane and the Company, with Amendment of Lease, dated July 11,
1984, and Assignment of Lease, dated June 7, 1991, among Charles J. August,
Burton S. August and Sheldon A. Lane and AA & L Associates, L.P., with
respect to Store No. 25. (Form S-1, Exhibit No. 10.29)
10.31* Lease, effective July 1, 1980, among Charles J. August, Burton S. August and
Sheldon A. Lane and the Company, with Amendment of Lease, dated July 11,
1984, and Assignment of Lease, dated June 7, 1991, among Charles J. August,
Burton S. August and Sheldon A. Lane and AA & L Associates, L.P., with
respect to Store No. 28. (Form S-1, Exhibit No. 10.31)
10.32* Lease, effective November 1, 1980, among Charles J. August, Burton S. August
and Sheldon A. Lane and the Company, with Amendment of Lease, dated July 11,
1984, and Assignment of Lease, dated June 7, 1991, among Charles J. August,
Burton S. August and Sheldon A. Lane and AA & L Associates, L.P., with
respect to Store No. 29. (Form S-1, Exhibit No. 10.32)
10.33* Lease, effective August 1, 1983, among Charles J. August, Burton S. August
and Sheldon A. Lane and the Company, with Amendment of Lease, dated July 11,
1984, and Assignment of Lease, dated June 7, 1991, among Charles J. August,
Burton S. August and Sheldon A. Lane and AA & L Associates, L.P., with
respect to Store No. 30. (Form S-1, Exhibit No. 10.33)
10.33a* Modification and Extension Agreement, dated February 25, 1998, between AA &
L Associates, L.P., and the Company, with respect to Store Nos. 30, 36 and
43. (1999 Form 10-K, Exhibit No. 10.33a)
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Exhibit No. Document
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10.34* Lease, effective March 1, 1997, between August, August and Lane of
Rochester, LLC, and the Company, dated March 3, 1997, with respect to Store
No. 31. (1999 Form 10-K, Exhibit No. 10.34)
10.35* Modification and Extension Agreement, dated August 12, 1991, among Charles
J. August, Burton S. August and Sheldon A. Lane and the Company, and
assigned by Mssrs. August, August and Lane to August, August and Lane of
Rochester, LLC, effective January 2, 1996, with respect to Store No. 33.
(1992 Form 10-K, Exhibit No. 10.35)
10.36* Lease, effective December 1, 1981, among Charles J. August, Burton S. August
and Sheldon A. Lane and the Company, with Amendment of Lease, dated July 11,
1984, and assigned by Mssrs. August, August and Lane to August, August and
Lane of Rochester, LLC, effective January 2, 1996, with respect to Store No.
34. (Form S-1, Exhibit No. 10.36)
10.37* Lease, dated April 10, 1984, among Charles J. August, Burton S. August and
Sheldon A. Lane and the Company, with Amendment of Lease, dated July 11,
1984, and Assignment of Lease, dated June 7, 1991, among Charles J. August,
Burton S. August and Sheldon A. Lane and AA & L Associates, L.P., with
respect to Store No. 35. (Form S-1, Exhibit No. 10.37)
10.38* Lease, effective October 1, 1983, among Charles J. August, Burton S. August
and Sheldon A. Lane and the Company, with Amendment of Lease, dated July 11,
1984, with respect to Store No. 36. (Form S-1, Exhibit No. 10.38)
10.38a* Assignment of Lease, dated October 1, 1991, among Charles J. August, Burton S.
August and Sheldon A. Lane and AA & L Associates, L.P., with respect to
Store No. 36. (1992 Form 10-K, Exhibit No. 10.38a)
10.39* Lease, effective July 1, 1983, among Charles J. August, Burton S. August and
Sheldon A. Lane and the Company, with Amendment of Lease, dated July 11,
1984, and Assignment of Lease, dated June 7, 1991, among Charles J. August,
Burton S. August and Sheldon A. Lane and AA & L Associates, L.P., with
respect to Store No. 43. (Form S-1, Exhibit No. 10.39)
10.40* Lease, dated as of February 1, 1983, among Charles J. August, Burton S.
August and Sheldon A. Lane and the Company, with Amendment of Lease, dated
July 11, 1984, and assigned by Mssrs. August, August and Lane to AA & L
Associates, L.P., effective January 2, 1996, with respect to Store No. 44.
(Form S-1, Exhibit No. 10.40)
10.41* Sublease, dated as of May 1, 1979, among Charles J. August, Burton S. August
and Sheldon A. Lane and the Company, with Amendment of Lease, dated July 11,
1984, and Assignment of Lease, dated June 7, 1991, among Charles J. August,
Burton S. August and Sheldon A. Lane and AA & L Associates, L.P., with
respect to Store No. 45. (Form S-1, Exhibit No. 10.41)
10.42* Lease, effective October 1, 1985, among Charles J. August, Burton S. August
and Sheldon A. Lane and the Company, with Amendment of Lease, dated as of
July 11, 1984, and Assignment of Lease, dated June 7, 1991, among Burton S.
August, as Trustee, and Lane, August, August Trust, and assigned by Lane,
August, August Trust to Lane, August, August LLC, effective January 2, 1996,
with respect to Store No. 48. (Form S-1, Exhibit No. 10.42)
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Exhibit No. Document
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10.42a* Extension Agreement, effective October 1, 2001, among the Company and Burton S.
August, as Trustee, and Lane, August, August Trust, and assigned by Lane,
August, August Trust to Lane, August, August LLC, with respect to Store No.
48. (2001 Form 10-K, Exhibit No. 10.42a)
10.43* Lease, dated as of January 1, 1984, among Charles J. August, Burton S.
August and Sheldon A. Lane and the Company, with Amendment of Lease, dated
July 11, 1984, and assigned by Mssrs. August, August and Lane to AA & L
Associates, L.P., effective January 2, 1996, with respect to Store No. 49.
(Form S-1, Exhibit No. 10.43)
10.44* Lease, dated July 1, 1982, among Charles J. August, Burton S. August and
Sheldon A. Lane and the Company, with Amendment of Lease, dated July 11,
1984, and assigned by Mssrs. August, August and Lane to AA & L Associates,
L.P., effective January 2, 1996, with respect to Store No. 51. (Form S-1,
Exhibit No. 10.44)
10.44a Extension Agreement, effective December 19, 2001, between AA & L Associates,
L.P. and the Company, with respect to Store No. 51.
10.45* Lease, dated July 1, 1982, among Charles J. August, Burton S. August and
Sheldon A. Lane and the Company, with Amendment of Lease, dated July 11,
1984, and assigned by August, August and Lane Co-venture to AA & L
Associates, L.P., effective January 2, 1996, with respect to Store No. 52.
(Form S-1, Exhibit No. 10.45)
10.45a Extension Agreement, effective December 19, 2001, between AA & L Associates,
L.P. and the Company, with respect to Store No. 52.
10.46* Lease, dated May 1, 1979, among Charles J. August, Burton S. August and
Sheldon A. Lane and the Company, with Amendment of Lease, dated July 11,
1984, and Assignment of Lease, dated June 7, 1991, among Charles J. August,
Burton S. August and Sheldon A. Lane and AA & L Associates, L.P., with
respect to Store No. 53. (Form S-1, Exhibit No. 10.46)
10.47* Lease, dated July 1, 1982, among Charles J. August, Burton S. August and
Sheldon A. Lane and the Company, with Amendment of Lease, dated July 11,
1984, and assigned by August, August and Lane Co-venture to AA & L
Associates, L.P., effective January 2, 1996, with respect to Store No. 54.
(Form S-1, Exhibit No. 10.47)
10.47a* Modification Agreement, effective January 1988, among Charles J. August,
Burton S. August and Sheldon A. Lane, and the Company, with respect to Store
No. 54. (1999 Form 10-K, Exhibit No. 10.47a)
10.47b Extension Agreement, effective December 19, 2001, between AA & L Associates,
L.P. and the Company, with respect to Store No. 54.
10.48* Lease, effective September 1, 1983, among Charles J. August, Burton S.
August and Sheldon A. Lane and the Company, with Amendment of Lease, dated
July 11, 1984, and Assignment of Lease, dated June 7, 1991, among Charles J.
August, Burton S. August and Sheldon A. Lane and AA & L Associates, L.P.,
with respect to Store No. 55. (Form S-1, Exhibit No. 10.48)
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Exhibit No. Document
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10.49* Lease, dated as of July 1, 1984, among Charles J. August, Burton S. August
and Sheldon A. Lane and the Company, with Amendment of Lease, dated July 11,
1984, and Assignment of Lease, dated June 7, 1991, among Charles J. August,
Burton S. August and Sheldon A. Lane and AA & L Associates, L.P., with
respect to Store No. 57. (Form S-1, Exhibit No. 10.49)
10.49a* Modification and Extension Agreement, dated September 15, 1999, between AA & L
Associates, L.P. and the Company, with respect to Store No. 57. (2000 Form
10-K, Exhibit No. 10.49a)
10.50* Lease, dated July 1, 1982, among Charles J. August, Burton S. August and
Sheldon A. Lane and the Company, with Amendment of Lease, dated July 11,
1984, and assigned by August, August and Lane Co-venture to AA & L
Associates, L.P., effective January 2, 1996, with respect to Store No. 58.
(Form S-1, Exhibit No. 10.50)
10.50a* Modification and Extension Agreement, dated August 12, 1991, between AA & L
Associates, L.P. and the Company, with respect to Store No. 60. (1992 Form
10-K, Exhibit No. 10.51)
10.51 Modification and Extension Agreement, dated November 28, 2001, between AA &
L Associates, L.P. and the Company, with respect to Store No. 58.
10.51a Extension Agreement, effective December 19, 2001, between AA & L Associates,
L.P. and the Company, with respect to Store No. 58.
10.52* Lease, signed October 22, 1986, between the Company and Conifer Johnstown
Associates, with respect to Store No. 63. (Form S-1, Exhibit No. 10.52)
10.52a* Lease Addendum, effective February 18, 1996, between Conifer Johnstown
Associates and the Company, with respect to Store No. 63. (1999 Form 10-K,
Exhibit No. 10.52a)
10.54* Lease, dated January 25, 1988, between the Company and Conifer Northeast
Associates, with Letter Agreement, dated February 3, 1988, amending Lease;
and Amendment Agreement, dated January 6, 1989, with respect to Store No.
107. (Form S-1, Exhibit No. 10.54)
10.54a* Lease Addendum, effective February 18, 1996, between Conifer Northeast
Associates and the Company, with respect to Store No. 107. (1999 Form 10-K,
Exhibit No. 10.54a)
10.55* Lease, dated March 16, 1988, between the Company and Conifer Northeast
Associates, with Letter Agreement, dated February 3, 1988, amending Lease;
and Amendment Agreement, dated January 6, 1989, with respect to Store No.
109. (Form S-1, Exhibit No. 10.55)
10.55a* Lease Addendum, effective February 18, 1996, between Conifer Northeast
Associates and the Company, with respect to Store No. 109. (1999 Form 10-K,
Exhibit No. 10.55a)
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Exhibit No. Document
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10.56* Lease, dated February 11, 1988, between the Company and Conifer Northeast
Associates, with Letter Agreement, dated February 3, 1988, amending Lease;
and Amendment Agreement, dated January 6, 1989, and Non-Disturbance and
Attornment Agreement, dated February 11, 1988, between the Company and
Central Trust Company, with respect to Store No. 114. (Form S-1, Exhibit
No. 10.56)
10.56a* Lease Addendum, effective February 18, 1996, between Conifer Northeast
Associates and the Company, with respect to Store No. 114. (1999 Form 10-K,
Exhibit No. 10.56a)
10.57* Purchase Agreement, dated December 1, 1987, between the Company and Conifer
Northeast Associates, with Lease, dated February 25, 1988, between the
Company and Conifer Northeast Associates, with Letter Agreement, dated
February 3, 1988, amending Lease; and Amendment Agreement, dated January 6,
1989; and Non-Disturbance and Attornment Agreement, dated February 25, 1988,
between the Company and Central Trust Company, with respect to Store No.
116. (Form S-1, Exhibit No. 10.57)
10.57a* Lease Addendum, effective February 18, 1996, between Conifer Northeast
Associates and the Company, with respect to Store No. 116. (1999 Form 10-K,
Exhibit No. 10.57a)
10.58* Lease, dated May 12, 1989, between the Company and Conifer Penfield
Associates (as successor to Conifer Development, Inc.), with respect to
Store No. 132. (Form S-1, Exhibit No. 10.58)
10.58a* Amendment Agreement, dated June 30, 1993, between Conifer Penfield
Associates, L.P. and the Company, with respect to Store No. 132. (1999 Form
10-K, Exhibit No. 10.58a)
10.59* Modification and Extension Agreement, dated November 1, 1993, between AA &
L Associates, L.P. and the Company, with respect to Store Nos. 1, 23, 25,
27, 28, 29, 35, 53, 57 and 60. (1994 Form 10-K, Exhibit No. 10.57)
10.62* Mortgage Agreement, dated September 28, 1994, between the Company and the
City of Rochester, New York. (1995 Form 10-K, Exhibit No. 10.60)
10.63* Lease Agreement, dated October 11, 1994, between the Company and the City of
Rochester, New York. (1995 Form 10-K, Exhibit No. 10.61)
10.64* Mortgage Notes, Collateral Security Mortgage and Security Agreement,
Indemnification Agreement and Guarantee, dated September 22, 1995, between
Monro Service Corporation, County of Monroe Industrial Development Agency,
the Company and The Chase Manhattan Bank, N.A. (September 1995 Form 10-Q,
Exhibit No. 10.02)
10.65* Form of Mortgage and Security Agreement, between the Company and The Chase
Manhattan Bank, N.A., with Form of Mortgage Note and Form of Conditional
Assignment of Leases and Rents, in connection with each of nine mortgages on
Store Nos. 205, 207, 210, 213, 216, 226, 229, 230 and 236 entered into
September 14, 1995. (September 1995 Form 10-Q, Exhibit No. 10.01)
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Exhibit No. Document
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10.66* Amendment to Lease Agreement, dated September 19, 1995, between the Company
and the County of Monroe Industrial Development Agency. (September 1995 Form
10-Q, Exhibit No. 10.00)
10.67* Employment Agreement dated February 18, 1998, between the Company and Jack
M. Gallagher. (1998 Form 10-K, Exhibit No. 10.65)**
10.68* Employment Agreement dated December 1, 2000, between the Company and
Catherine D'Amico. (2001 Form 10-K, Exhibit No. 10.68)**
10.69* Mortgage Modification Agreement, dated October 11, 1996, between the Company
and The Chase Manhattan Bank, N.A., in connection with each of 14 mortgages
for Store Nos. 160, 183, 190, 192, 193, 205, 207, 210, 213, 216, 226, 229,
230 and 236. (September 1996 Form 10-Q, Exhibit No. 10)
10.70* Purchase Agreement between Walker Manufacturing Company, a division of
Tenneco Automotive, and the Company, dated as of June 29, 1999. (2000 Form
10-K, Exhibit No. 10.70)
10.71* Asset Purchase Agreement by and among Speedy Muffler King Inc., Bloor
Automotive Inc., Speedy Car-X Inc., Speedy (U.S.A.) Inc., Speedy Holding
Corp. and the Company, dated as of April 13, 1998. (April 1998 Form 8-K,
Exhibit 10.1)
10.71a* Amendment No. 2 to the Asset Purchase Agreement by and among Speedy Muffler King
Inc., Bloor Automotive Inc., Speedy Car-X Inc., Speedy (U.S.A.) Inc., Speedy
Holding Corp. and the Company, dated August 31, 1998. (September 1998 Form
8-K, Exhibit No. 10.1)
10.72* Form of Agreement - "Purchase Agreement and Escrow Instructions" between
Realty Income Corporation - buyer and the Company - seller, dated November
12, 1997. (1998 Form 10-K, Exhibit No. 10.70)
10.73* "Purchase Agreement and Escrow Instructions" between Realty Income
Corporation - buyer and the Company - seller, dated March 31, 1999. (1999
Form 10-K, Exhibit No. 10.73)
10.73a* Amendment to "Purchase Agreement and Escrow Instructions" between Realty Income
Corporation - buyer and the Company - seller, dated May 6, 1999, with
respect to Store Nos. 372 and 368. (1999 Form 10-K, Exhibit No. 10.73a)
10.74* "Minimum Purchase and Preferred Supplier Agreement" between Honeywell
International Inc., on behalf of its Friction Materials business and Monro
Service Corporation, dated January 13, 2000. (2000 Form 10-K, Exhibit No.
10.74)
10.74a "Agreement Extension Amendment" between Honeywell International Inc. on
behalf of its Friction Materials business and Monro Service Corporation,
effective July 1, 2001.
10.75 Purchase Agreement between Phillips Petroleum Company (on behalf of Kendall
Motor Oil) and Monro Muffler Brake, Inc., dated February 18, 2002.
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Exhibit No. Document
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10.75a Amendment to Purchase Agreement between Phillips Petroleum Company (on
behalf of Kendall Motor Oil) and Monro Muffler Brake, Inc., dated
March 15, 2002
10.76 "Tenneco Automotive Ride Control Products Supply Agreement" between Tenneco
Automotive Operating Company Inc. and Monro Service Corporation, effective
July 1, 2001.
10.77 Management Incentive Compensation Plan, effective as of June 1, 2002.**
21.01 Subsidiaries of the Company.
23.01 Consent of PricewaterhouseCoopers LLP.
24.01 Powers of Attorney.
** Management contract or compensatory plan or arrangement required to be filed
as an exhibit to this Form 10-K pursuant to Item 14(c) hereof.
* An asterisk "*" following an exhibit number indicates that the exhibit is
incorporated herein by reference to an exhibit to one of the following
documents: (1) the Company's Registration Statement on Form S-1
(Registration No. 33-41290), filed with the Securities and Exchange
Commission on June 19, 1991 ("Form S-1"); (2) Amendment No. 1 thereto, filed
July 22, 1991 ("Amendment No. 1"); (3) the Company's Annual Report on Form
10-K for the fiscal year ended March 31, 1992 ("1992 Form 10-K"); (4) the
Company's Registration Statement on Form S-8, filed with the Securities and
Exchange Commission on December 24, 1992 ("December 1992 Form S-8"); (5) the
Company's Quarterly Report on Form 10-Q for the fiscal quarter ended
September 30, 1993 ("September 1993 Form 10-Q"); (6) the Company's Annual
Report on Form 10-K for the fiscal year ended March 31, 1994 ("1994 Form
10-K"); (7) the Company's Annual Report on Form 10-K for the fiscal year
ended March 31, 1995 ("1995 Form 10-K"); (8) the Company's Quarterly Report
on Form 10-Q for the fiscal quarter ended September 30, 1995 ("September
1995 Form 10-Q"); (9) the Company's Quarterly Report on Form 10-Q for the
fiscal quarter ended September 30, 1996 ("September 1996 Form 10-Q"); (10)
the Company's Annual Report on Form 10-K for the fiscal year ended March 31,
1997 ("1997 Form 10-K"); (11) the Company's Current Report on Form 8-K filed
on April 28, 1998 ("April 1998 Form 8-K"); (12) the Company's Quarterly
Report on Form 10-Q for the fiscal quarter ended December 31, 1998
("December 1998 Form 10-Q"); (13) the Company's Annual Report on Form 10-K
for the fiscal year ended March 31, 1998 ("1998 Form 10-K"); (14) the
Company's Current Report on Form 8-K filed on September 23, 1998 ("September
1998 Form 8-K"); (15) the Company's Quarterly Report on Form 10-Q for the
fiscal quarter ended September 30, 1998 ("September 1998 Form 10-Q"); (16)
the Company's Annual Report on Form 10-K for the fiscal year ended March 31,
1999 ("1999 Form 10-K"); (17) the Company's Quarterly Report on Form 10-Q
for the fiscal quarter ended September 30, 1999 ("September 1999 Form
10-Q"); (18) the Company's Annual Report on Form 10-K for the fiscal year
ended March 31, 2000 ("2000 Form 10-K"); (19) the Company's Registration
Statement on Form S-8, filed with the Securities and Exchange Commission on
April 7, 2000 ("April 2000 Form S-8"); (20) the Company's Registration
Statements on Forms S-8, filed with the Securities and Exchange Commission
on March 22, 2001 (each a "March 2001 Form S-8"); (21) the Company's
Registration Statement on Form S-8, filed with the Securities and Exchange
Commission on June 26, 2001 ("June 2001 Form S-8"); or (22) the Company's
Quarterly Report on Form 10-Q for the fiscal quarter ended June 30, 2001
("June 2001 Form 10-Q"). The appropriate document and exhibit number are
indicated in parentheses.
|
EXHIBIT 10.02c
AMENDMENT NO. 3 to the Monro Muffler Brake, Inc. Non-Employee Directors' Stock Option Plan, dated as of this 2nd day of August, 1999.
WHEREAS, Monro Muffler Brake, Inc. (the "Company") has a Non-Employee Directors' Stock Option Plan (the "Plan") in place to secure for the Company, the benefits of the incentive inherent in increased common stock ownership by members of the Company's Board of Directors (the "Board") who are not also employees of the Company or any of its subsidiaries; and
WHEREAS, the Company desires to amend the Plan to reflect certain changes in the rules promulgated pursuant to Section 16 of the Securities Exchange Act of 1934, as amended, and clarify the ability of the Committee and the Board to amend the Plan.
NOW, therefore, the Company amends the Plan as follows:
1. Section 6 of the Plan is hereby amended by deleting the following
sentences: "It is intended that the Plan will constitute a "formula
plan" within the meaning of Rule 16b-3 under the Exchange Act. The
provisions of the Plan and of any Option agreement made pursuant to the
Plan will be interpreted and applied accordingly."; and adding "Subject
to Section 7 hereof," to the beginning of the second paragraph of
Section 6 of the Plan."
2. Section 7 of the Plan is hereby amended and restated in its entirety as follows:
"7. TERMINATION AND AMENDMENT. At any time the Committee may
suspend or terminate this Plan and make such additions or
amendments as it deems advisable; PROVIDED, that such
additions or amendments are made in compliance with Rule 16b-3
of the Exchange Act (as such rule may be amended from time to
time); and PROVIDED, FURTHER, that any amendment that would
(i) materially increase the aggregate number of shares which
may be issued the Plan, (ii) materially increase the benefits
accruing to Non-Employee Directors under the Plan, or (iii)
materially modify the requirements as to eligibility for
participation in the Plan, shall be subject to the approval of
the Company's shareholders, except that any such increase or
modification that may result from adjustments authorized by
Article 5(e) hereof shall not require such shareholder
approval. No Options shall be granted hereunder after August
1, 2004. Notwithstanding any termination (other than pursuant
to paragraph 5(a) above), the terms of the Plan shall continue
to apply to Options granted prior to any such termination."
3. GOVERNING LAW
The Plan and this Amendment shall be governed in all respects by the laws of the State of New York.
EXHIBIT 10.02d
AMENDMENT NO. 4 to the Monro Muffler Brake, Inc. Non-Employee Directors' Stock Option Plan, dated as of this 12th day of June, 2002.
WHEREAS, Monro Muffler Brake, Inc. (the "Company") maintains the Monro Muffler Brake, Inc. Non-Employee Directors' Stock Option Plan (the "Plan") to secure for the Company the benefits of the incentive inherent in increased common stock ownership by members of the Company's Board of Directors (the "Board") who are not also employees of the Company or any of its subsidiaries;
WHEREAS, pursuant to section 7 of the Plan, the Stock Option Committee of the Board of Directors of the Company (the "Committee") may amend the Plan as it deems advisable, provided that such amendments of the Plan are made in compliance with Rule 16b-3 of the Securities Exchange Act of 1934, as amended;
WHEREAS, pursuant to section 7 of the Plan, amendments that materially increase the benefits accruing to Non-Employee Directors under the Plan are subject to the approval of the Company's shareholders; and
WHEREAS, the Committee desires to amend the Plan to permit participants to exercise their options following retirement until the termination of such option.
NOW, THEREFORE, pursuant to and in exercise of the authority retained by the Committee under Section 7 of the Plan, subject to ratification by the shareholders of the Company, the Plan is hereby amended, effective June 12, 2002, to provide as follows:
1. Section 5(b) of the Plan is hereby amended to read as follows:
"TERMINATION OF TERM OF DIRECTORSHIP. Any Option shall be exercisable only during the holder's term as a director of the Company, except that an Option may be exercisable after (i) the death or disability, as defined in Section 22(e)(3) of the Internal Revenue Code of 1986, as amended (the "Code") ("Disability"), of a holder while a director of the Company at any time until the earlier to occur of (A) the one year anniversary of the date of death or Disability and (B) the termination of such Option pursuant to paragraph 4(d) above; and (ii) the retirement from the Board at the age of 65 or thereafter ("Retirement") of a holder while a director of the Company until the termination of such Option pursuant to paragraph 4(d) above."
2. The Plan, except as otherwise set forth herein, shall remain in full force and effect in all other respects.
IN WITNESS WHEREOF, the Company has caused this Amendment to be executed, to be effective as of the day and year first written above.
MONRO MUFFLER BRAKE, INC.
STOCK OPTION COMMITTEE
/s/ Frederick M. Danziger ----------------------------------------------------------- Frederick M. Danziger /s/ Lionel B. Spiro ----------------------------------------------------------- Lionel B. Spiro |
EXHIBIT 10.06a
AMENDMENT
TO THE
AMENDED EMPLOYMENT AGREEMENT
BY AND BETWEEN
MONRO MUFFLER BRAKE, INC.
AND
ROBERT G. GROSS
WHEREAS, Monro Muffler Brake, Inc. (the "Company") and Robert Gross (the "Executive") entered into an amended and restated employment agreement, dated as of February 16, 1999 (the "Agreement"), pursuant to which Executive agreed to serve as President and Chief Executive Officer of the Company;
WHEREAS, under Section 9.3 of the Agreement, the Agreement may be amended by a written instrument signed by the Executive and the Company;
WHEREAS, Section 3.7(c) of the Agreement generally provides that the Company shall pay the Executive an amount equal to the net Federal income tax benefit to the Company from the Executive's exercise of certain non-qualified stock options granted to the Executive pursuant to the Agreement; and
WHEREAS, the Company and the Executive wish to cancel Section 3.7(c), and any obligations of the parties thereunder, from the Agreement.
NOW THEREFORE, pursuant to Section 9.3 of the Agreement, the Agreement is hereby amended as follows:
1. Section 3.7(c) of the Agreement is hereby deleted in its entirety.
2. This Amendment may be executed in two counterparts, each of which shall be deemed an original but both of which together shall constitute one and the same instrument.
3. The Agreement, except as otherwise set forth herein, shall remain in full force and effect in all other respects.
IN WITNESS WHEREOF, the parties have executed this Amendment as of June 5, 2002.
MONRO MUFFLER BRAKE, INC.
By: /s/ Robert W. August
----------------------------
Name: Robert W. August
----------------------------
Title: Secretary
----------------------------
|
EXECUTIVE
/s/ Robert G. Gross ----------------------------------- Robert G. Gross |
EXHIBIT 10.44a
December 19, 2001
Mr. Burt August
AA&L Associates
c/o Monro Muffler/Brake
200 Holleder Parkway
Rochester, NY 14615
RE: Agreement between AA&L Associates, L.P. (Landlord) and Monro Muffler/ Brake, Inc. (Tenant) for premises situate at 2955-2971 Main Street, Buffalo, NY [MMB #51]
Dear Burt:
Per our conversation, please be informed that Monro Muffler/Brake, Inc. and AA&L Associates are interested in formalizing an agreement providing for a five year option period to extend said term beyond its current expiration date of June 30, 2007. The rent for said renewal period shall be $3,465.00 per month.
Tenant shall provide to Landlord six (6) months written notice of its intent to exercise said renewal option. The option period, if exercised, shall run from July 1, 2007 through June 30, 2012.
If this meets with your approval, please sign both copies and return one copy to my attention.
If you have any questions relative to this matter, please do not hesitate to contact me at 647-6400 ext. 384.
Yours truly,
Thomas M. Aspenleiter
VP Real Estate
TMA:mc
As evidenced by my signature, I agree to the above terms and conditions.
/s/ Burt August ------------------------------------ ----------------- Burt August Sr. Date |
EXHIBIT 10.45a
December 19, 2001
Mr. Burt August
AA&L Associates
c/o Monro Muffler/Brake
200 Holleder Parkway
Rochester, NY 14615
RE: Agreement between AA&L Associates, L.P. (Landlord) and Monro Muffler/ Brake, Inc. (Tenant) for premises situate at 2375 Harlem Road, Cheektowaga, NY [MMB #52]
Dear Burt:
Per our conversation, please be informed that Monro Muffler/Brake, Inc. and AA&L Associates are interested in formalizing an agreement providing for a five year option period to extend said term beyond its current expiration date of June 30, 2007. The rent for said renewal period shall be $5,445.00 per month.
Tenant shall provide to Landlord six (6) months written notice of its intent to exercise said renewal option. The option period, if exercised, shall run from July 1, 2007 through June 30, 2012.
If this meets with your approval, please sign both copies and return one copy to my attention.
If you have any questions relative to this matter, please do not hesitate to contact me at 647-6400 ext. 384.
Yours truly,
Thomas M. Aspenleiter
VP Real Estate
TMA:mc
As evidenced by my signature, I agree to the above terms and conditions.
/s/ Burt August ---------------------------- ----------------- Burt August Sr. Date |
EXHIBIT 10.47b
December 19, 2001
Mr. Burt August
AA&L Associates
c/o Monro Muffler/Brake
200 Holleder Parkway
Rochester, NY 14615
RE: Agreement between AA&L Associates, L.P. (Landlord) and Monro Muffler/ Brake, Inc. (Tenant) for premises situate at 7894 Pine Avenue, Niagara Falls, NY [MMB #54]
Dear Burt:
Per our conversation, please be informed that Monro Muffler/Brake, Inc. and AA&L Associates are interested in formalizing an agreement providing for a five year option period to extend said term beyond its current expiration date of June 30, 2007. The rent for said renewal period shall be $2,062.00 per month.
Tenant shall provide to Landlord six (6) months written notice of its intent to exercise said renewal option. The option period, if exercised, shall run from July 1, 2007 through June 30, 2012.
If this meets with your approval, please sign both copies and return one copy to my attention.
If you have any questions relative to this matter, please do not hesitate to contact me at 647-6400 ext. 384.
Yours truly,
Thomas M. Aspenleiter
VP Real Estate
TMA:mc
As evidenced by my signature, I agree to the above terms and conditions.
/s/ Burt August ------------------------------------------- ----------------- Burt August Sr. Date |
Exhibit 10.51
November 28, 2001
Mr. Burton S. August
AA&L Associates, L.P.
c/o Monro Muffler/Brake
200 Holleder Parkway
Rochester, NY 14615
RE: Agreement between AA&L Associates, L.P. (Landlord) and Monro Muffler/ Brake, Inc. (Tenant) for premises situate at 3384 Delaware Avenue, Buffalo, NY [MMB #58]
Dear Burt:
Please accept this letter as Monro Muffler/Brake, Inc.'s official notification of our intent to renew said lease agreement for the final five-year renewal period commencing on July 1, 2002 and expiring June 30, 2007. The rent for said renewal period shall be $3,300.00 per month.
Burt, I would like to sit down with you to discuss additional renewal options for Monro since there are no options available past June 30, 2007.
Yours truly,
Thomas M. Aspenleiter
VP Real Estate
TMA:mc
EXHIBIT 10.51a
December 19, 2001
Mr. Burt August
AA&L Associates
c/o Monro Muffler/Brake
200 Holleder Parkway
Rochester, NY 14615
RE: Agreement between AA&L Associates, L.P. (Landlord) and Monro Muffler/ Brake, Inc. (Tenant) for premises situate at 3384 Delaware Avenue, Buffalo, NY [MMB #58]
Dear Burt:
Per our conversation, please be informed that Monro Muffler/Brake, Inc. and AA&L Associates are interested in formalizing an agreement providing for a five year option period to extend said term beyond its current expiration date of June 30, 2007. The rent for said renewal period shall be $3,300.00 per month.
Tenant shall provide to Landlord six (6) months written notice of its intent to exercise said renewal option. The option period, if exercised, shall run from July 1, 2007 through June 30, 2012.
If this meets with your approval, please sign both copies and return one copy to my attention.
If you have any questions relative to this matter, please do not hesitate to contact me at 647-6400 ext. 384.
Yours truly,
Thomas M. Aspenleiter
VP Real Estate
TMA:mc
As evidenced by my signature, I agree to the above terms and conditions.
/s/ Burt August -------------------------------------------- ----------------- Burt August Sr. Date |
EXHIBIT 10.74a
MONRO SERVICE CORPORATION/HONEYWELL FRICTION MATERIAL
AGREEMENT EXTENSION AMENDMENT
OCTOBER 4, 2001
This is an Amendment ("Amendment") to the MINIMUM PURCHASE AND PREFERRED SUPPLY AGREEMENT ("Agreement"), dated January 13, 2000, between Honeywell International Inc., on behalf of its Friction Materials business ("HFM"), AND Monro Service Corporation ("Monro"). Capitalized terms used in this Amendment will have the same meaning given those terms in the Agreement.
1. All provisions of the Agreement remain in full force and effect; provided that the term of the Agreement set forth in section 2 of the Agreement is extended until January 31, 2005. Monro and HFM agree that HFM may audit Monro's brake product purchases to monitor its compliance with the requirement to purchase 90% of its Products from HFM during the term of the Agreement and this Amendment.
2. Monro will be eligible, effective July 1, 2001, for additional and incremental promotional discounts as follows:
- 1.5% Line Incentive discount on Bendix Premium brand only.
This incentive is an `off invoice' discount.
- Group Volume rebate paid quarterly on Bendix Premium brand
net shipments and Bendix Global drum and rotor brand net
promotional shipments that matches the percent earned by
the Group Monro is affiliated with at the end of each
quarter. HFM will take the dollars earned and provide
Monro with a modified calculation that will allow Monro to
spread the rebate across all three Product lines. (Bendix
Premium, Bendix Global and StopRite). Actual dollars
earned is still based solely on Bendix Premium and Bendix
Global volume. The dollars and percentages will change
quarterly and HFM will notify Monro within 45 days of the
change from quarter to quarter.
- The Group Volume rebate will be paid within 45 days of the
end of the quarter in the form of a credit memo direct to
Monro.
3. All other discounts and promotional funding specifically enumerated in the Agreement remain in place.
- Such discounts will continue to be taken as negotiated in the Agreement.
4. *
Any eligible price increase will be accepted by Monro provided the order fill ratio on the associated product line has been maintained at or above 91% for the 90 days prior to the effective date of the price increase. Monro must provide HFM with a current 12 month rolling forecast to ensure HFM can maintain at or above 91% order fill. Monro's actual volume cannot vary from the forecast by plus or minus 10% in order for the above 91% order fill requirement to be enforced.
If HFM did not maintain 91% order fill and Monro's forecast was within 10% of actual volume, Monro will accept the price action as soon as HFM provides 91% order fill for 90 days. If at anytime during that period Monro's forecast varies by 10% or more, the price action will immediately be accepted.
5. HFM will establish a cooperative advertising allowance for each Bendix Global drum and rotor equal to the difference between Monro's 7/1/01 quoted invoice price and the applicable 7/1/01 Bendix Global Tan sheet price. Within 45 days after the end of each quarter, HFM shall issue Monro a cooperative advertising credit equal to the net quantity purchased for each Bendix Global drum and rotor multiplied by the applicable cooperative advertising allowance.
The initial credit will be for the 5/1/01 through 9/30/01 time period.
Monro's initial quoted invoice price for each drum and rotor added after 7/1/01 will be the initial Bendix Global Tan sheet price increased by a percentage equal to the difference between Monro's weighted average 7/1/01 quoted invoice price and the weighted average 7/1/01 Bendix Global Tan sheet price.
The cooperative advertising allowance for all drums and rotors added after 7/1/01 will be the difference between their initial Bendix Global Tan sheet price and Monro's initial quoted invoice price.
Once established, the cooperative advertising allowance for any drum or rotor will not be decreased.
Should HFM decrease the Bendix Global Tan sheet price of any drum or rotor, the applicable cooperative advertising allowance or allowances shall be increased by a like amount and Monro's quoted invoice pricing will remain unchanged.
6. HFM and Monro will institute a `production' ordering process to begin no later than December 1, 2001, whereby:
- Monro will place a `production' order for A-type friction
on a mutually agreed to schedule, for delivery receipt six
(6) weeks from order date.
7. Shipments will be loaded to ensure safe and secure transport, and will be accompanied with bills of lading and packing slips that correctly correspond to the shipment.
8. In the event that Monro is acquired, either directly or indirectly, through the sale of assets, merger, or otherwise, Monro, or its successor(s) may terminate this Agreement upon 60 days written notice. If such change of Monro ownership occurs on or before January 31, 2003; Monro will make payment to HFM at the end of the 60 day written notice in an amount as follows: If change occurs prior to 2/1/02 payment in the amount of $333,333.00 U.S.; if change occurs between 2/1/02 and 1/31/03 payment in the amount of $166,667.00 U.S. If such change of control should occur on, or after February 1, 2003, Monro will be assessed no penalty for termination of this Agreement or applicable addendum.
9. In the event of change of control of HFM, Monro has the right to look for a new supplier after six months if the successor fails to maintain all terms of the Agreement dated 1/13/2000 and this Amendment -- including line fill and quality.
9.a. In the event that a change of control of Honeywell Friction Materials shall result in a party, person or corporate entity controlling a majority share of HFM and such party, person or corporate entity shall be a citizen of, or based in, a country which is, or becomes, listed on the United States of America's Department of State's Office of Defense Trade Control's Embargo Reference Chart, Monro shall have the immediate right to terminate this agreement without any prior notification. If such termination occurs prior to January 31, 2002, Monro shall pay a penalty of $333,333.00. If termination occurs between February 1, 2002 and January 31, 2003, Monro shall pay a penalty of $166,667.00. Such penalty payment(s) shall be remitted to HFM within 60 days of termination of this Agreement.
10. In the event that HFM, in its discretion, substantially alters a product's manufacturing process, or purchases from a third party a product which is substantially different in terms of lesser quality (based upon independent testing), or decides to cancel production or sale of StopRite, RoadTuff or Bendix Global brand product, Monro shall have the right to seek alternate sourcing opportunities which may result in a reduction of annual purchases of HFM product. Nothing in this section would negate section 5 of the original agreement dated January 13, 2000.
11. HFM shall continue purchasing privileges of mid-grade friction material to Monro's designated primary `loaded caliper' vendor, at similarly competitive pricing, for the extended period of this Agreement. If Monro changes `loaded caliper' vendors from Autoline, HFM reserves the right to determine if the proposed new vendor meets HFMs customer requirements.
Monro Service Corporation Honeywell International Inc., on
behalf of its Friction Materials
business
/s/ Robert W. August /s/ Tony Stone
------------------------------------ -----------------------------------
Signed Signed
Robert W. August Tony Stone
------------------------------------ -----------------------------------
Name Name
Senior Vice President - Finance Vice President/General Manager
------------------------------------ -----------------------------------
Title Title
------------------------------------ -----------------------------------
Date Date
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* This information has been left out for confidentiality reasons.
EXHIBIT 10.75
MONRO MUFFLER/BRAKE, INC.
Kendall Motor Oil Purchase Agreement
Effective February 18, 2002
Beginning Monday, February 18, 2002 and extending through February 17, 2007, following are the terms of the agreement between Monro Muffler/Brake, Inc. and Phillips Petroleum Company (Kendall Motor Oil).
A. Purchasing Agreement
Kendall Motor Oil (`Kendall") will be the exclusive supplier of passenger car and heavy duty lubricants as well as ancillary lubricant products (Transmission Fluids, Greases, Gear Lubricants, et al.) to Monro Muffler/Brake, Inc. ("Monro") during the contract term, February 18, 2002 through February 17, 2007.
B. Pricing
1. Effective the date of this agreement, pricing is reflected per the attached schedule (See Schedule A).
2. Pricing is firm through December 31, 2002. After this date, prices are subject to change based on marketplace movement of branded lubricant products.
3. Price adjustments will be preceded by sixty (60) days written notice.
C. Business Development
*
D. Advertising Allowance
1. An Advertising Allowance of $.25 per gallon will be paid quarterly based on documented and reported purchase volumes.
2. To qualify for this allowance, Monro must agree to participate in two Kendall national consumer promotions annually and must be featured through documented print or electronic media advertising using the approved Kendall logo, product identification and logo.
E. Lubricant Dispensing Equipment
1. Kendall will loan to Monro lubricant dispensing equipment for each service location at the rate of $1 of equipment for each projected gallon of product purchased annually (based on Year 1 anticipated purchases), by location, in accordance with the guidelines of the Kendall Equipment Lease Program (tanks, pumps, reels and meters).
2. Kendall will, during the term of this agreement and at its cost and expense, provide ordinary and necessary repair and maintenance for the equipment and will maintain it in good working condition through the approved equipment repair facility(s) for the subject equipment repair and maintenance. When necessary, Kendall will replace worn equipment with new equipment.
3. Kendall will, during the term of this agreement at its cost and expense, provide supplemental equipment to Monro based on a pre-established and agreed upon budget and guidelines (one unit per location unless otherwise mutually approved by Monro and Kendall), as follows:
a. Used Oil Disposal Tank
b. Self Evacuation Oil Drain
4. Equipment Depreciation
a. The original cost of the lubricant dispensing equipment is depreciated, on a straight- line basis, over five (5) years. At the end of the five-year period, the equipment value will become and remain $1.
F. Marketing Support
1. Grand Opening Allowance: During the term of this agreement, for each new store opening by Monro, Kendall will pay Monro $800 per location. To qualify for this allowance, Kendall must be included in the grand opening advertising (in print using the approved Kendall logo and tag line).
2. *
3. *
4. Kendall will supply Monro with the following promotional materials at no cost to Monro:
a. Kendall/Monro-imprinted Floor Mats
b. Kendall/Monro-imprinted Static Cling Window Stickers
c. Kendall Ecology Drums
d. Kendall Curb Signs
e. Other marketing and point of sale material which support mutual
branding strategies
Quantities of these items are determined by the annual volume purchased by Monro during each calendar year.
5. MotorSports
Refer to Schedule B for details.
H. Annual Volume Incentive
1. *
2. *
I. Separation
If this agreement is terminated for any reason other than breach by Kendall, the following conditions will apply:
1. Monro will pay a termination penalty of $12,500 for every full month remaining until February 17, 2007. Such amount will be payable within thirty (30) days of the cancellation of this agreement.
2. Reimbursement for the lubricant dispensing equipment will be determined by:
a. The remaining value of the existing equipment and installation will be determined based on a five-year, straight line depreciation schedule from the original date of installation and would become payable within thirty (30) days of cancellation.
b. All new equipment and installation during the term of this agreement will be depreciated on a five-year, straight line depreciation schedule from the date of installation, and remaining value of said equipment will be payable within thirty (30) days of cancellation.
3. Sixty (60) days notification of the cancellation is required.
J. Change in Ownership
In the event that Monro is acquired, either directly or indirectly, through the sale of assets, merger, or otherwise, Monro or its successor(s) may terminate this Agreement upon 60 days written notice. In the event such termination shall take place, Monro agrees to pay Kendall, at the end of the sixty (60) days, $12,500 per complete month remaining until February 17, 2007. Monro also agrees to pay the unamortized value of the lubricant dispensing equipment as outlined in Sections I.2.a and I.2.b.
In the event that a change of control of Kendall shall result in a party, person or corporate entity controlling a majority share of Kendall and such party, person or corporate entity shall be a citizen of, or based in, a country which is, or becomes, listed on the United States of America's Department of Defense Trade Control's Embargo Reference Chart, Monro shall have the immediate right to terminate this agreement without any prior notification or penalty.
PHILLIPS PETROLEUM COMPANY MONRO MUFFLER/BRAKE, INC.
(Kendall Motor Oil, Lubricants
Division)
By: /s/ Susan Tate By: /s/ Robert W. August
-------------------------- ----------------------------------
Title: Manager, Sales Title: Sr. Vice President - Store Support
-------------------------- ----------------------------------
Date: April 9, 2002 Date: April 5, 2002
-------------------------- ----------------------------------
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* This information has been left out for confidentiality reasons.
Exhibit 10.75a
MONRO MUFFLER/BRAKE, INC.
Kendall Motor Oil Purchase Agreement
March 15, 2002
Paragraph F.1 of the agreement dated February 18, 2002 as follows is amended to include F.1.a as follows:
F.1.a. The exclusivity provision of paragraph A and new store promotional
provision of paragraph F.1 do not apply to any Monro acquisition of 10
or more locations. In the case of any such acquisition, Monro reserves
the right to continue pre-exisiting non-Kendall supply agreement(s)
and/or seek additional promotional support from Kendall.
|
PHILLIPS PETROLEUM COMPANY MONRO MUFFLER/BRAKE, INC.
(Kendall Motor Oil, Lubricants
Division)
By: /s/ Susan Tate By: /s/ Robert W. August
-------------------------- ----------------------------------
Title: Manager, Sales Title: Sr. Vice President - Store Support
-------------------------- ----------------------------------
Date: April 9, 2002 Date: April 5, 2002
-------------------------- ----------------------------------
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EXHIBIT 10.76
TENNECO AUTOMOTIVE RIDE CONTROL PRODUCTS SUPPLY AGREEMENT
THIS AGREEMENT, effective as of July 1, 2001, is by and between Monro Service Corp., a Delaware corporation ("Monro"), and Tenneco Automotive Operating Company Inc., a Delaware corporation ("Tenneco"). Tenneco and Monro may be referred to herein collectively as "Parties."
RECITALS
Whereas Tenneco is in the business of, among other things, manufacturing and selling automotive ride control products, including shock absorbers, struts and other similar products; and
Whereas Monro is in the business of owning and operating a chain of stores that sells and installs automobile parts and accessories, including ride control products; and
Whereas the Parties have agreed that Tenneco shall supply and Monro shall purchase ride control products (as listed in the attached price sheets) subject to and upon the terms and conditions as set forth herein.
NOW, THEREFORE, in consideration of the foregoing, the mutual promises set forth herein, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties, intending to be legally bound, agree as follows:
A. TERM OF AGREEMENT
This Agreement will begin on July 1, 2001 and end on December 31, 2004, unless earlier terminated as provided herein. This Agreement shall be automatically renewed for one year periods thereafter unless at least 90 days prior to the end of the then current
term or renewal thereof, written notice of nonrenewal is given by one Party to the other Party.
B. SCOPE OF AGREEMENT
During the term of this Agreement and pursuant to its terms and
conditions, Tenneco shall sell certain ride control products to Monro, and Monro
shall purchase from Tenneco ride control products of the type which are
identified on ATTACHMENT A, (referred to collectively herein as "Ride Control
Products"). Monro shall purchase from Tenneco, and Tenneco shall sell to Monro,
100% of Monro's requirements during the term of this Agreement for products of
the type listed in ATTACHMENT A, unless Tenneco is unable to fulfill its
obligation to fill orders pursuant to SECTION K of this Agreement. Attachment A:
Ride Control Products Listing and Current Blue Sheet, Dated 7/1/2000
If, during the term of this Agreement, Monro acquires a chain of 50 or more locations which did not previously sell Tenneco Automotive Ride Control Products, Monro will not be obligated under this Agreement to purchase Ride Control Products for these locations.
C. DEFINITIONS
For purposes of this Agreement, "Net Purchases" shall mean invoice price less all discounts, including, but not limited, to functional and volume discounts, credits and returns (including, but not limited, to special order returns and annual stock adjustments).
D. PRICING
1. INITIAL PRICING. The attached pricing schedule reflects current pricing as of July 1, 2000. This pricing will remain in effect until March 1, 2002.
2. PRICING DISCOUNTS. Monro will be given an additional 2% discount off of invoice pricing for each skid quantity Monro purchases of the Ride Control Products that are separately identified in Attachment A.
3. PRICE ADJUSTMENTS. After March 1, 2002, Tenneco will provide 60 days written notice to Monro of any price increase to its Blue Sheet prices for Ride Control Products set forth on Attachment A, after which those prices will go into effect for Ride Control Products sold to Monro. Monro agrees to accept and pay any changes Tenneco makes to its prices that are offered generally in the industry through its Blue Sheet as described above, provided: such prices remain competitive with prices at which comparable products are sold by other major suppliers; Tenneco makes only one pricing change for Monro per calendar year after March 1, 2001; and such annual pricing change does not exceed 3% of the prior year's price for Ride Control Products or the increase in the Consumer Price Index for the last twelve completed calendar months, whichever is lower.
4. SENSA-TRAC PURCHASE OPPORTUNITY *
E. CREDIT TERMS; PAYMENTS
1. TERMS. Payments by Monro are due net 60 days after the first day of the billing month following tender of Ride Control Products to Monro in accordance with this Agreement. Monro will receive a 2% cash discount from the invoiced price if it makes payment in full by the 2nd 15th of the month following the end of the billing month the Ride Control Products was tendered.
2. CREDIT SALES. Any time Tenneco determines that there has been an adverse change in Monro's credit status, Monro has exceeded its normal credit limits, or Monro has delayed payment beyond Tenneco's stated credit terms, Tenneco reserves the right to
suspend shipment, require payment COD or by cash in advance, establish a reserve, require Monro to post a letter of credit, or require Monro to take other measures to assure Tenneco of payment for purchases of Ride Control Products. Should Tenneco exercise any of it's rights under this Credit Sales section, Monro may immediately terminate this agreement.
F. FREIGHT POLICY
1. TIMING. Orders for Ride Control Products ("Purchase Orders") may only be transmitted in writing (including fax) or Electronic Data Interface ("EDI"). Purchase Orders must be placed at least 7 calendar days in advance of the date by which Tenneco is to tender product to Monro. Risk of loss of Ride Control Products shall pass to Monro when they are duly tendered at Tenneco's facility so as to enable Monro or its carrier to take possession of the Ride Control Products. Should Monro be unable to recover it's cost for any product lost or damaged while in possession of a carrier hired by Tenneco, Tenneco shall reimburse Monro for any costs that were not recovered.
2. TRANSPORTATION. Ride Control Products ordered by Monro will be prepared for shipment in trailer load quantities only and will be available for pick up at Tenneco's Harrisonburg facility. Monro will receive a credit in the amount equal to the freight costs Tenneco would have incurred if it picks up any order itself.
G. WARRANTY
1. WARRANTY TO MONRO. Tenneco warrants to Monro that the Ride Control Products sold to Monro are free from defects in material and workmanship for a period of ninety days from date of installation. This does not cover Ride Control products that are improperly installed or misused (including erroneous applications or misapplications of any Ride Control Product), and does not cover labor costs or consequential damages.
2. DISCLAIMER OF ALL WARRANTIES. EXCEPT AS EXPRESSLY PROVIDED IN THIS AGREEMENT, NEITHER TENNECO NOR ITS AFFILIATES MAKE ANY REPRESENTATIONS, WARRANTIES OR GUARANTIES, EXPRESS OR IMPLIED, WITH RESPECT TO ANY RIDE CONTROL PRODUCTS PROVIDED BY TENNECO TO MONRO PURSUANT TO THIS AGREEMENT.
H. SPECIAL FUNDS
1. MARKETING FUND. On an annual basis, Tenneco will accrue a fund, to be known as the Marketing Fund, equal to 8% of Monro's annual net purchases of Ride Control Products purchased. Funds from the Marketing Fund shall be made available to Monro only for purposes of marketing, advertising and promoting Ride Control Products. Tenneco, in its sole discretion, shall have the right to finally approve or disapprove of the marketing, advertising and promotional programs and materials for which Monro can use proceeds from the Marketing Fund, and no funds from the Marketing Fund shall be spent by Monro without the approval of Tenneco, which approval shall not be unreasonably withheld.
2. GROWTH INCENTIVE FUND. On an annual basis, Tenneco shall grant Monro an annual credit in the amount of 1% of that year's net purchases of Ride Control Products if such year's purchases of Ride Control Products exceeds the prior year's net purchases of Ride Control Products by 10%, measured over the calendar year. If a year's net purchases of Ride Control Products exceeds the prior year's net purchase by at least 15%, Monro shall receive a credit in the amount of 2% of that year's net purchases of Ride Control Products. If a year's net purchases of Ride Control Products exceeds the prior year's net purchase by at least 20%, Monro shall receive a credit in the amount of 3% of that year's net purchases of Ride Control Products. This credit, if any, shall be
calculated for each calendar year of the Agreement, and shall be issued to Monro at the end of the first quarter of the year following the year for which the credit was calculated.
3. ADVERTISING FUNDS. *
I. MANPOWER
Monro's account will be managed and coordinated through Tenneco Automotive National Account Sales.
J. RETURNS
1. OBSOLESCENCE. For Ride Control Products which are returned to Tenneco prior to sale to the consumer that are obsolete because they have been removed from the then-current Tenneco catalog, Tenneco will issue Monro a credit, in an amount equal to Monro's current purchase price for such obsolete Ride Control Products. Said credit shall be issued within 60 days of the date the product was returned AND Monro will pay all freight charges for the return of such Ride Control Products to Tenneco.
2. OTHER RETURNS. All other annual returns of non-defective Ride Control Products to Tenneco by Monro shall not exceed 3% of the amount of the prior year's purchases. Tenneco shall credit Monro for such returns in the amount of Monro's actual purchase price for such returned products. Any returns in excess of the 3% limit must be negotiated and approved by the Tenneco Account Executive and will be subject to handling charges to be paid by Monro of up to 20% of the amount of the return. No Ride Control Products identified by the Popularity Code of A or B from the Tenneco Automotive Buyer's Guide or Blue Sheet (or other price sheet) may be returned.
3. SENSA-TRAC PRODUCTS. Monro agrees to purchase Ride Control Products identified by the Sensa-Trac brand, and it will sell out its existing inventory of private
brand ride control products, with the exception of 20,000, 88,000, and 85,000 series products.
K. PERFORMANCE
Monro shall be entitled to a credit in the amount shown, measured against quarterly net purchases of Sensa-Trac products, only if Tenneco's order fill performance falls within the following categories of fill rates for Sensa-Trac products, as measured on a quarterly basis:
ORDER FILL PERFORMANCE CREDIT
-----------------------------------------------------------
Greater than 93.9% 0%
93.9% - 93% 1%
92.9% - 90% 2%
Less than 90% 2.5%
L. MASTER AGREEMENT
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From and after the date hereof, this Agreement shall serve as the master agreement between the parties and, as such, sets forth all of the terms and conditions concerning, and shall govern the purchase by Monro, by whatever means, of all Ride Control Products from Tenneco. A Purchase Order may be used in conjunction with this Agreement to specify specific product ordered, quantity, delivery timing, and destination; however, the printed terms and conditions on any Purchase Order cannot vary or contradict the terms and provisions of this Agreement. Oral placement of orders will not be allowed.
M. NEW STORE SUPPORT
Tenneco will grant a credit to Monro in the amount of $500 for any new store opened by Monro in the United States. This credit will be given at the end of the first
quarter of the year following the opening of a new store. Such support will not apply to stores obtained through acquisition that stocked Tenneco ride control products immediately prior to said acquisition.
The maximum amount of credit to be given per year by Tenneco for the opening of new stores shall not exceed the total of $500 multiplied by the following number of new stores for each of the listed years:
2001 : 20 2002 : 30 2003 : 30 2004 : 30
N. TERMINATION
1. WITH CAUSE/FAILURE TO CURE BREACH. Either Party hereto may
terminate this Agreement if the other Party fails to keep, observe or perform
any material covenant or agreement appearing in this Agreement, provided that:
(i) a 60 day notice and opportunity to cure has been given with respect to such
failure; (ii) the failure has not been cured within the 60 day cure period; and
(iii) such failure continues for 7 days after a second written notice thereof is
received by the Party failing to perform.
2. BANKRUPTCY. Either Party hereto may terminate this Agreement if the other Party:
i. is adjudicated an involuntary bankrupt, or a decree or order approving a petition or answer filed against such Party asking for reorganization under the Federal bankruptcy laws as now or hereafter amended, or under the laws of any state, shall be entered, or if a petition for involuntary bankruptcy has been filed against the other Party and such petition (and the preceding arising therefrom, if any) has not been dismissed within thirty (30) days of the filing;
ii. files or admits to the jurisdiction of the court and the material allegations contained in any petition pursuant, or purporting to be pursuant, to the Federal Bankruptcy laws as now or hereafter amended, or such party shall institute any proceeding for any relief under any bankruptcy or insolvency law or any law relating to the relief of debtors, readjustment of indebtedness, reorganization, arrangements, composition or extension; or
iii. makes any assignment for the benefit of creditors or applies for consent to the appointment of a receiver for itself or any of its property.
3. CHANGE OF CONTROL.
i. If Monro is acquired, either directly or indirectly, through sale of assets, merger, or otherwise, Monro or its successor may terminate this Agreement upon 60 days written notice and payment to Tenneco at the end of that 60 days of $25,000 per complete month remaining until December 31, 2004.
ii. In the event that controlling interest in Tenneco Automotive is acquired by a party, person or corporate entity that is or subsequently becomes a citizen of, or based in, a country which is or subsequently becomes listed on the United States of America's Department of State's
Office of Defense Trade Control's Embargo Reference Chart, Monro shall have the right to terminate this agreement without notice or penalty.
O. TRADEMARKS
Monro recognizes that Tenneco is the owner of valuable rights to distinctive trade names, trademarks and service marks, including but not limited to, the Monroe(R), Sensa-Trac(R), Monroe Reflex(TM) and Rancho(R) names and logos to be used in connection with Ride Control Products (collectively thE "Tenneco Licensed Property"). Tenneco grants to Monro, and Monro accepts, a non-exclusive right to promote, sell and advertise using the Tenneco Licensed Property, subject to the terms, conditions, standards and specifications stated herein, for the term of this Agreement, with regard to Ride Control Products sold to Monro. Monro shall have no license or right to use, and shall not use, in any manner, and/or advertise, promote, market, distribute and/or sell, any other products, service or business anywhere throughout the world, in connection with any of the Tenneco Licensed Property and/or confusingly similar designations, and all rights to the Tenneco Licensed Property not expressly granted herein are retained by Tenneco.
Monro acknowledges, represents, warrants and agrees that: (i) Monro will take no action, directly or indirectly, or by acts of omission, do anything inconsistent with, and/or which might otherwise interfere with and/or impair, the validity, value and goodwill of the Tenneco Licensed Property ; (ii) Monro will not contest before any court, adjudicative tribunal, person or body, and arbiter or mediator, any federal, state, provincial, local or other governmental agency, office, body or unit, and/or in any legal or dispute resolution proceeding whatsoever, either (a) the validity of any trademark,
copyright, or other proprietary rights in the Tenneco Licensed Property; or (b)
Tenneco's ownership of such rights in the Tenneco Licensed Property; (iii) Monro
shall not seek to register or record anywhere throughout the world any of the
Tenneco Licensed Property and any mark or designation confusingly similar to any
of the Tenneco Licensed Property as Monro's own trademark(s), service mark(s),
trade or fictitious name(s), designation of doing business, copyright, or other
property of any kind or nature; (iv) Monro shall not use any of the Tenneco
Licensed Property in any manner, and/or on or in connection with any product,
service, or business, except as expressly licensed and authorized herein; and
(v) any and all authorized use of the Tenneco Licensed Property by Monro under
this Agreement inures solely to the benefit of Tenneco and its ownership of the
Tenneco Licensed Property, and Monro shall neither acquire nor assert any legal
and/or beneficial ownership interests whatsoever in the Tenneco Licensed
Property by virtue of the licensed use of the Tenneco Licensed Property. Monro
agrees to assist Tenneco in the procurement of any protection of the Tenneco
Licensed Property for Ride Control Products, including but not limited to
trademark registration of the Tenneco Licensed Property or protection of the
same against third parties; provided, however, that Tenneco shall bear the
expense of any costs for registration of any of the Tenneco Licensed Property.
Monro agrees to assist Tenneco, at Tenneco's request, to enforce any of
Tenneco's rights in the Tenneco Licensed Property relative to Ride Control
Products, and Tenneco, in its sole discretion, may commence and prosecute any
such claims or suits in its own name.
P. CONFIDENTIALITY
Both Parties acknowledge that, by the very nature of the services to be performed under this Agreement, each Party may become aware of confidential information and
trade secrets of the other Party (whether or not it is labeled as such), including, but not limited to, price lists, customer lists, strategy, and the terms and conditions of this Agreement ("Confidential Information"). Each Party agrees that it shall use Confidential Information of the other Party solely to accomplish its obligations under this Agreement and for no other purpose. Each Party shall in no manner reveal or disseminate Confidential Information obtained from the other Party to any third party. Except to the extent required by court order, Monro shall treat the pricing and other terms and conditions of this Agreement on a confidential basis and shall not disclose them to any other person or entity without the express written consent of Tenneco.
Q. FORCE MAJEURE
Neither of the Parties shall be responsible for failure or delay in delivery of any Ride Control Products or performance of other obligations under this Agreement, including, but not limited, to the Order Fill Performance Requirements of SECTION K, if caused by an act of God or public enemy, war, government acts or regulations, fire, flood, embargo, quarantine, epidemic, labor stoppages beyond its reasonable control, accident, unusually severe weather or other cause similar or dissimilar to the foregoing beyond its reasonable control.
R. MISCELLANEOUS
1. TAXES. The prices set forth herein or in any Purchase Order for the Ride Control Products shall include all applicable federal, state and local taxes, if any. If any tax is thereafter refunded to Tenneco, then Tenneco shall promptly pay to Monro the amount of such refund.
2. RIGHTS NOT EXCLUSIVE. The exercise by Monro or Tenneco of any right or remedy herein provided shall be without prejudice to the exercise of any other right or remedy provided herein or by law or in equity.
3. WAIVER. The failure of either party to insist upon the observance or performance by Tenneco of any of the terms and conditions of the Agreement, if any, shall not be deemed a Waiver of any such term or condition and the same shall continue in force.
4. NO CONSEQUENTIAL, INCIDENTAL OR SPECIAL DAMAGES. In no event shall any Party be liable to another Party for any consequential, incidental or special damages suffered by any other Party arising out of this Agreement, whether resulting from negligence of a Party or otherwise.
5. ENTIRE AGREEMENT. This Agreement and any electronic Tenneco interface agreement shall constitute the entire agreement between Tenneco and Monro with respect to the sale and purchase of Ride Control Products, shall supersede all prior written and verbal discussions and agreements, and shall take precedence over any contrary or conflicting language on any Purchase Order of Monro. This Agreement may be amended or modified only by a written instrument signed by each of the Parties hereto.
6. ATTORNEYS' FEES. In the event of any litigation or other proceeding concerning this Agreement, the unsuccessful party shall pay all actual attorneys' fees, costs and expenses, including court costs, incurred by the prevailing party.
7. ASSIGNMENT. Each Party's obligations to the other Party are of a personal nature and are not assignable without the prior written consent of the other Party. Notwithstanding the previous sentence, either party may assign this Agreement to an
affiliate or successor, or to the acquirer of substantially all of it's business, whether by sale of assets, merger, or otherwise, without the approval or consent of the other party.
8. GOVERNING LAW. This Agreement shall be governed by and construed in accordance with the laws of the State of Illinois without giving effect to the choice of law principles of Illinois. The Parties agree that the courts of the State of Illinois, Lake County, and the United States District Court for the Northern District of Illinois shall have jurisdiction to hear and determine any claims or disputes pertaining directly or indirectly to this Agreement or otherwise between the Parties. Tenneco and Monro expressly submit and consent in advance to such jurisdiction in any action or proceeding in such court, and agree that venue will be proper in such courts for all such matters. If any action or proceeding is brought by one Party against the other Party hereunder and that Party is not otherwise subject to service of the process in the State of Illinois, each Party agrees to and does hereby irrevocably appoint the Secretary of the State of Illinois as its agent for the acceptance of service of process therein, and a copy of such process shall be mailed by the Party bringing the action to the other Party at the other Party's last known address.
9. SEVERABILITY. If any provision of this Agreement is determined to be invalid or unenforceable, in whole or in part, by a court of competent jurisdiction, the remaining provisions, and any partially invalid or partially unenforceable provisions, to the extent valid and enforceable, shall nevertheless be binding and enforceable.
10. NOTICES. Any notice which either party may desire to give the other with
respect to this Agreement shall be in writing, and by overnight courier, or by certified mail, return receipt requested, and addressed as follows:
Tenneco Automotive
500 North Field Drive
Lake Forest, IL 60045
Attn.: Executive Director, North American
Aftermarket
with a copy to:
Tenneco Automotive
500 North Field Drive
Lake Forest, IL 60045
Attn.: General Counsel
Monro Service Corp.
200 Holleder Parkway
Rochester, NY 14615-3808
Attn.: Vice President, Merchandising
11. CONFLICT. In the event of a conflict between the terms and provisions hereof and the terms and provisions of any Attachment hereto, the terms and provisions of this Agreement shall control.
12. SURVIVAL. The provisions of SECTIONS G, O, P, and Q shall survive the termination or expiration of the term hereof.
By way of signature below, by the representatives of Tenneco and Monro, both parties agree to the terms and conditions contained herein.
Richard Scovner Robert W. August ------------------------------------- ------------------------------------- Signature: Signature: Regional Manager Sr. Vice President - Store Support ------------------------------------- ------------------------------------- Title: Title: ------------------------------------- ------------------------------------- Dated: Dated: Tenneco Automotive Operating Company Inc. Monro Service Corp. |
* This information has been left out for confidentiality reasons.
LIST OF ATTACHMENTS
Attachment A Ride Control Products Listing and Current
Blue Sheet dated March 1, 2000.
EXHIBIT 10.77
MONRO MUFFLER BRAKE, INC.
MANAGEMENT INCENTIVE COMPENSATION PLAN
ARTICLE 1. ESTABLISHMENT, OBJECTIVES, AND DURATION
1.1. ESTABLISHMENT OF THE PLAN. Monro Muffler Brake, Inc., a New York corporation (the "Company"), hereby establishes an incentive compensation plan to be known as the "Monro Muffler Brake, Inc. Management Incentive Compensation Plan" (the "Plan"), as set forth in this document. The Plan permits the grant of Incentive Awards to certain executives of the Company.
Subject to approval by the Company's shareholders, the Plan shall become effective as of June 1, 2002 (the "Effective Date"), and shall remain in effect as provided in Section 1.3 hereof.
1.2. PURPOSE OF THE PLAN. The Plan is intended to allow for the grant to certain executives of the Company of Incentive Awards that comply with the requirements of Code Section 162(m).
1.3. DURATION OF THE PLAN. The Plan shall commence on the Effective Date, as described in Section 1.1 hereof, and shall remain in effect, subject to the right of the Board of Directors to amend the Plan at any time pursuant to Article 9 hereof, until terminated by the Board of Directors in accordance with Article 9.
ARTICLE 2. DEFINITIONS
Whenever used in the Plan, the following terms shall have the meanings set forth below, and when the meaning is intended, the initial letter of the word shall be capitalized:
2.1. "AFFILIATE" shall have the meaning ascribed to such term in Rule 12b-2 of the General Rules and Regulations of the Exchange Act.
2.2. "BASE AMOUNT" shall have the meaning ascribed thereto in Section 5.2(b) hereof.
2.3. "BASE SALARY PERCENTAGE" shall have the meaning ascribed thereto in
Section 5.2(c) hereof.
2.4. "BENEFICIAL OWNER" shall have the meaning ascribed to such term in Rule 13d-3 of the General Rules and Regulations under the Exchange Act.
2.5. "BOARD" or "BOARD OF DIRECTORS" means the Board of Directors of the Company.
2.6. "CODE" means the Internal Revenue Code of 1986, as amended from time to time, or any successor thereto.
2.7. "COMMITTEE" means the Compensation Committee of the Board of Directors, or any other duly established committee or subcommittee appointed by the Board to administer Incentive Awards under the Plan, consisting solely of two or more outside Directors, as defined under Section 162(m) of the Code (and the Treasury Regulations promulgated thereunder). Except as permitted by Rule 16b-3 of the
Exchange Act and by Section 162(m) of the Code (and the Treasury Regulations promulgated thereunder), no member of the Board may serve on the Committee if such member: (i) is a current employee of the Company; (ii) is a former employee of the Company who is currently receiving compensation for prior services (other than benefits under a tax-qualified retirement plan) during the tax year; (iii) has been an officer of the Company; or (iv) receives remuneration, either directly or indirectly, in any capacity other than as a Director.
2.8. "COMPANY" means Monro Muffler Brake, Inc., a New York corporation, including any and all Subsidiaries and Affiliates, and any successor thereto as provided in Article 12 herein.
2.9. "COVERED EMPLOYEE" shall mean any Participant who is designated by the Committee, prior to the Determination Date (defined below), to be a "covered employee" within the meaning of Section 162(m) of the Code.
2.10. "DIRECTOR" means any individual who is a member of the Board of Directors of the Company or any Subsidiary or Affiliate.
2.11. "EFFECTIVE DATE" shall have the meaning ascribed to such term in
Section 1.1 hereof.
2.12. "EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended from time to time, or any successor act thereto.
2.13. "EXECUTIVE OFFICER" means any executive officer of the Company.
2.14. "INCENTIVE AWARD" means an award granted to a Participant, as described in Article 5 herein.
2.15. "PARTICIPANT" means an Executive Officer who has been selected to receive an Incentive Award or who has outstanding an Incentive Award granted under the Plan.
2.16. "PERSON" shall have the meaning ascribed to such term in Section 3(a)(9) of the Exchange Act and used in Sections 13(d) and 14(d) thereof, including a "group" as defined in Section 13(d) thereof.
2.17. "PLAN YEAR" shall mean the Company's fiscal year, unless otherwise designated by the Company.
2.18. "SUBSIDIARY" means any corporation, partnership, joint venture, or other entity in which the Company has a majority voting interest.
2.19. "TARGET" shall have the meaning ascribed thereto in Section 5(a) hereof.
ARTICLE 3. ADMINISTRATION
3.1. GENERAL. The Plan shall be administered by the Committee. The members of the Committee (i) shall be appointed from time to time by, and shall serve at the discretion of, the Board of Directors and (ii) shall satisfy the requirements for membership on the Committee set forth in Section 2.7 hereof. The Committee shall have the authority to delegate ministerial duties to officers or Directors of the Company.
3.2. AUTHORITY OF THE COMMITTEE. Except as limited by law or by the Certificate of Incorporation or Bylaws of the Company, and subject to the provisions herein, the Committee shall have full power to select Executive Officers who shall participate in the Plan; determine the size and type of Incentive Awards; determine the terms and conditions of Incentive Awards in a manner consistent with the Plan; construe and interpret the Plan and any agreement or instrument entered into under the Plan; establish, amend, or waive rules and regulations for the Plan's administration; and (subject to the provisions of Article 9 herein) amend the terms and conditions of any outstanding Incentive Award as provided in the Plan. Further, the Committee shall make all other determinations which may be necessary or advisable for the administration of the Plan.
3.3. DECISIONS BINDING. All determinations and decisions made by the Committee pursuant to the provisions of the Plan and all related orders and resolutions of the Committee shall be final, conclusive and binding on all persons, including the Company, its shareholders, Directors, Executive Officers, Participants, and their estates and beneficiaries.
ARTICLE 4. ELIGIBILITY AND PARTICIPATION
4.1. ELIGIBILITY AND PARTICIPATION. Only Executive Officers are eligible to participate in the Plan. The Committee shall designate Executive Officers to receive Incentive Awards under the Plan.
4.2. PARTIAL YEAR PARTICIPATION/CHANGE IN STATUS. Subject to the provisions of the Plan, in the event an Executive Officer becomes eligible to participate in the Plan or has a change in status which makes such individual eligible for participation or changes his or her eligibility in any way after the commencement of a Plan Year, the Committee may, in its discretion, allow such individual to receive Incentive Awards under the Plan on such terms as it so designates.
ARTICLE 5. INCENTIVE AWARDS
5.1. GRANT OF INCENTIVE AWARDS. Subject to the terms of the Plan, the Committee may designate Executive Officers of the Company to receive Incentive Awards under the Plan.
5.2. DETERMINATION OF TARGET, BASE AMOUNT, AND BASE SALARY PERCENTAGE. Within ninety (90) days of the commencement of the Plan Year (the "Determination Date"), the Committee shall select the Participants for the Plan Year and adopt in writing, with respect to each Participant, each of the following:
(a) a Target which shall be equal to a desired level for such Plan Year of income before provision for taxes (the "Financial Goal"), in each case determined in accordance with generally accepted accounting principles (subject to modifications approved by the Committee) consistently applied for the Company on a consolidated basis; PROVIDED, HOWEVER, that, with respect to Participants who are employees of any of the Company's divisions, the Financial Goals may be based on divisional rather than consolidated results, or a combination of the two;
(b) a Base Amount, with respect to each Target, based upon the Financial Goal, representing a minimum amount which, if not exceeded, would result in no amounts being payable to the Participant hereunder; and
(c) a Base Salary Percentage, representing the percentage of the Participant's base salary (as of the Determination Date) which shall be payable as an Incentive Award in the event that 100% or more of the Participant's Target is achieved.
The Committee shall also determine on each Determination Date for each Participant a mathematical formula or matrix which shall indicate the extent to which Incentive Awards will be made if the Base Amount is exceeded, including if the Target is attained or exceeded, and the Committee may also determine on any Determination Date alternative formulas or matrices to account for potential or anticipated significant transactions or events during such Plan Year.
5.3. DETERMINATION OF INCENTIVE AWARDS. As soon as practicable after the close of each Plan Year in which any Participant is participating in the Plan, the Committee shall determine with respect to each Participant whether and the extent to which the applicable Base Amount is exceeded, including the extent to which, if any, the Target was attained or exceeded. Each Participant's Incentive Award, if any, for such Plan Year shall be determined in accordance with the mathematical formula or matrix determined pursuant to Section 5.2, as reduced in the sole discretion of the Committee, and subject to the limitations set forth in Section 5.7 hereof. The Committee shall certify in writing to the Board of Directors the amounts of such Incentive Awards and whether each material term of the Plan relating to such Incentive Awards has been satisfied. In no event may a Participant's bonus be increased as a result of a reduction of any other Participant's bonus. In reducing a Participant's Incentive Award, the Committee may consider any such factors it determines applicable.
5.4. PAYMENT OF INCENTIVE AWARDS. Payment of Incentive Awards shall be made in such form and at such time or times as designated by the Committee.
5.5. PARTIAL AWARDS. In the event a Participant ceases employment because of death or disability prior to the date which the Committee determines Incentive Awards under the Plan for any Plan Year, the Committee may, but need not, provide for the partial or full payment of an Incentive Award for the year of termination and any Incentive Award from any prior Plan Year which has not yet been paid out. Unless otherwise specified by the Committee, Participants who terminate employment for reasons other than death or disability prior to the date the Committee determines the Incentive Awards under the Plan will not be eligible to receive an Incentive Award for the year of termination or any payout of any Incentive Awards from a prior Plan Year which has not yet been paid out.
5.6. NONTRANSFERABILITY. Except as otherwise provided by the Committee, Incentive Awards may not be sold, transferred, pledged, assigned or otherwise alienated or hypothecated, other than by will or by the laws of descent and distribution. Further, except as otherwise provided by the Committee, a Participant's rights under the Plan shall be exercisable during the Participant's lifetime only by the Participant or the Participant's legal representative.
5.7. LIMITATIONS WITH RESPECT TO AWARDS. In no event shall any individual Covered Employee receive an Incentive Award in excess of $2,000,000 for any Plan Year.
ARTICLE 6. BENEFICIARY DESIGNATION
Each Participant under the Plan may, from time to time, name any beneficiary or beneficiaries (who may be named contingently or successively) to whom any benefit under the Plan is to be paid in case of his or her death before he or she receives any or all of such benefit. Each such designation shall revoke all prior designations by the same Participant, shall be in a
form prescribed by the Company, and will be effective only when filed by the Participant in writing with the Company during the Participant's lifetime. In the absence of any such designation, or if the designated beneficiary dies prior to the payment of any Incentive Award, benefits remaining unpaid at the Participant's death shall be paid to the Participant's estate.
ARTICLE 7. DEFERRALS
The Committee may permit or require a Participant to defer such Participant's receipt of the payment of cash that would otherwise be due to such Participant by virtue of the satisfaction of any requirements or goals with respect to Incentive Awards. If any such deferral election is required or permitted, the Committee shall, in its sole discretion, establish rules and procedures for such payment deferrals consistent with preserving the deductibility of Incentive Awards under Section 162(m) of the Code.
ARTICLE 8. RIGHTS OF EXECUTIVE OFFICERS
8.1. EMPLOYMENT. Nothing in the Plan shall interfere with or limit in any way the right of the Company to terminate any Participant's employment at any time, nor confer upon any Participant any right to continue in the employ of the Company.
8.2. PARTICIPATION. No Executive Officer shall have the right to be selected to receive an Incentive Award under this Plan, or, having been so selected, to be selected to receive a future Incentive Award.
ARTICLE 9. AMENDMENT, MODIFICATION, AND TERMINATION
9.1. AMENDMENT, MODIFICATION, AND TERMINATION. Subject to the terms of the Plan, the Committee may at any time and from time to time, alter, amend, suspend or terminate the Plan in whole or in part; provided, however, unless the Committee specifically provides otherwise, any revision or amendment that would cause the Plan to fail to comply with any requirement of applicable law, regulation, or rule, if such amendment were not approved by the Company's shareholders, shall not be effective unless and until such approval of shareholders of the Company is obtained.
9.2. AWARDS PREVIOUSLY GRANTED. Notwithstanding any other provision of the Plan to the contrary, no termination, amendment, or modification of the Plan shall adversely affect in any material way any Incentive Award previously granted under the Plan, without the written consent of the Participant holding such Incentive Award.
ARTICLE 10. WITHHOLDING
The Company shall have the power and the right to deduct or withhold, or require a Participant to remit to the Company, an amount sufficient to satisfy federal, state, and local taxes, domestic or foreign, required by law or regulation to be withheld with respect to any taxable event arising as a result of this Plan.
ARTICLE 11. INDEMNIFICATION
Each person who is or shall have been a member of the Committee, or of the Board, shall be indemnified and held harmless by the Company against and from any loss, cost, liability, or expense that may be imposed upon or reasonably incurred by him or her in connection with or
resulting from any claim, action, suit, or proceeding to which he or she may be a party or in which he or she may be involved by reason of any action taken or failure to act under the Plan and against and from any and all amounts paid by him or her in settlement thereof with the Company's approval, or paid by him or her in satisfaction of any judgment in any such action, suit, or proceeding against him or her, provided he or she shall give the Company an opportunity, at its own expense, to handle and defend the same before he or she undertakes to handle or defend it on his or her own behalf. The foregoing right of indemnification shall not be exclusive of any other rights of indemnification to which such persons may be entitled under the Company's Articles of Incorporation or Bylaws, as a matter of law, or otherwise, or any power that the Company may have to indemnify them or hold them harmless.
ARTICLE 12. SUCCESSORS
All obligations of the Company under the Plan with respect to Incentive Awards granted hereunder shall be binding on any successor to the Company, whether the existence of such successor is the result of a direct or indirect purchase, merger, consolidation, or otherwise, of all or substantially all of the business and/or assets of the Company.
ARTICLE 13. LEGAL CONSTRUCTION
13.1. GENDER AND NUMBER. Except where otherwise indicated by the context, any masculine term used herein also shall include the feminine; the plural shall include the singular and the singular shall include the plural.
13.2. SEVERABILITY. In the event any provision of the Plan shall be held illegal or invalid for any reason, the illegality or invalidity shall not affect the remaining parts of the Plan, and the Plan shall be construed and enforced as if the illegal or invalid provision had not been included and had been replaced by a provision that is legal and valid and that comes closest to expressing the intention of such illegal or invalid provision. If any provision of this Plan would cause any Incentive Award not to constitute performance-based compensation under Section 162(m)(4)(C) of the Code, the Committee shall have discretion to sever that provision from this Plan and, thereupon, such provision shall not be deemed to be a part of this Plan.
13.3. REQUIREMENTS OF LAW. The granting of Incentive Awards under the Plan shall be subject to all applicable laws, rules, and regulations, and to such approvals by any governmental agencies or national securities exchanges as may be required.
13.4. GOVERNING LAW. To the extent not preempted by federal law, the Plan, and all agreements hereunder, shall be construed in accordance with and governed by the laws of the State of New York.
EXHIBIT 21.01
Monro Service Corporation
Monro Leasing, LLC
Kimmel Automotive, Inc.
EXHIBIT 23.01
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Registration Statement on Form S-8 (File No. 33-56458, 333-34290, 333-57438, 333-57432, 333-57450) of Monro Muffler Brake, Inc. of our report dated May 14, 2002, appearing in Item 8 of the Monro Muffler Brake, Inc. Annual Report on Form 10-K for the year ended March 30, 2002.
PRICEWATERHOUSECOOPERS LLP
Rochester, New York
June 24, 2002
EXHIBIT 24.01
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that the undersigned, a director of Monro Muffler Brake, Inc., a New York corporation (the "Corporation"), constitutes and appoints ROBERT G. GROSS to be his true and lawful attorney-in-fact and agent, with full powers of substitution and resubstitution, for and in the name, place and stead of the undersigned, in any and all capacities in connection with the filing of the Annual Report of Form 10-K of the Corporation for the fiscal year ended March 30, 2002 (the "Form 10-K") with the Securities and Exchange Commission, to sign the Form 10-K and any and all amendments related thereto and to file the same, with any exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorney-in-fact and agent, or his substitutes, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully for all intents and purposes as the undersigned might or could do in person, hereby ratifying and confirming all that said attorney-in-fact and agent, or his substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, this power of attorney has been signed by the following director on June 18, 2002.
/s/ Burton S. August ------------------------------------ Burton S. August /s/ Robert W. August ------------------------------------ Robert W. August /s/ Frederick M. Danziger ------------------------------------ Frederick M. Danziger /s/ Donald Glickman ------------------------------------ Donald Glickman /s/ Peter J. Solomon ------------------------------------ Peter J. Solomon /s/ Lionel B. Spiro ------------------------------------ Lionel B. Spiro /s/ Francis R. Strawbridge ------------------------------------ Francis R. Strawbridge /s/ W. Gary Wood ------------------------------------ W. Gary Wood |