NOTES TO
FINANCIAL STATEMENTS
NOTE 1 -
DESCRIPTION OF THE PLAN:
The following brief description of the Monro Muffler Brake, Inc. Profit Sharing Plan (the Plan) is
provided for general information purposes only. Participants should refer to the Plan documents for more complete information.
General
Monro, Inc. (formerly Monro Muffler Brake, Inc.) (the employer and Plan sponsor) (the Company or Monro)
voluntarily contributes funds to provide for retirement, termination, disability and death benefits of plan participants.
On
November 18, 1999, the Board of Directors approved amending the Plan to add a 401(k) salary deferral option. Prior to this amendment, participant fund balances consisted solely of employer-contributed Profit Sharing amounts adjusted for related
gains/losses. In connection with this amendment, a new trustee (the Trustee) and custodian were appointed by the Board of Directors. Plan assets are invested in funds designated by each participant. Participant contributions under the
401(k) salary deferral option began in March 2000. The legal effective date of the Plan amendment was March 1, 2000.
The Plan has been
restated in order to comply with various legislative amendments. The legal effective date of the most recent restatement is December 8, 2014. This restatement modified the eligibility age and contribution percentage limit, as well as various
other provisions of the Plan. In connection with this restatement, a new trustee and custodian were appointed by the Board of Directors.
Participation
Permanent employees of
Monro are eligible to become participants of the Plan upon hire. To participate, an employee must be 18 years of age. The Plan is subject to the provisions of the Employee Retirement Income Security Act of 1974 (ERISA).
Contributions
Participants may
contribute from 1% to 50% of their annual
pre-tax
compensation. Participants may also contribute amounts representing rollovers from other qualified plans. Contributions are subject to certain limitations as
required under the Internal Revenue Code. Participants who have attained age 50 or older during the plan year are eligible to make
catch-up
contributions.
Participants contributions may be matched (401(k) Matching Contributions) by the Company in an amount determined by the Board of
Directors of the Company. The Board has decided to match the amount of $.50 for every dollar contributed up to 4% of the participants
pre-tax
compensation for the years ended March 31, 2017 and
2016.
Participants must be scheduled to work 1,000 hours of service and be employed at the end of the Plan year in which they have made
contributions in order to be eligible to receive the employer match.
Additionally, the Company may contribute to the Plan an additional
amount, either in the form of a Profit Sharing Contribution, or in the form of an additional match on 401(k) participant contributions, based on the sole discretion of the Board of Directors. For the years ended March 31, 2017 and
2016, the Company did not make a Profit Sharing Contribution.
Profit Sharing Contributions are allocated by the custodian based
on the proportionate share of wages earned by each participant in relation to the total qualified wages for all participants in the Plan.
6
MONRO MUFFLER BRAKE, INC.
PROFIT SHARING PLAN
NOTES TO FINANCIAL STATEMENTS
Participants Accounts
Each participants account is credited with the participants contribution and (a) the Companys matching contribution, (b) an allocation of the Companys profit sharing
contribution, (c) Plan earnings and (d) charged with an allocation of administrative expenses. Plan earnings and administrative expense allocations are based on account balances, as defined. The benefit to which a participant is entitled
is the benefit that can be provided from the participants vested account.
Vesting
Participants are immediately vested in their own salary reduction contributions plus actual earnings thereon. Vesting in the Company 401(k) Matching
Contribution portion of their accounts, plus actual earnings thereon, is based on years of service as defined in the Plan. A participant vests 25% at the end of his/her second year of service, and an additional 25% each year thereafter.
Participants become 100% vested in the Companys Profit Sharing Contributions at the end of five years of service with 25%, 50% and 75% vesting in
years two, three and four, respectively.
Forfeited balances of terminated participants nonvested accounts are used to reduce future
Company contributions and to pay administrative expenses of the Plan. Forfeited accounts used to reduce company contributions and to pay administrative expenses amounted to approximately $31,000 and $117,000 for the years ended March 31, 2017
and 2016, respectively. At March 31, 2017 and 2016, remaining forfeitures available to offset future contributions were approximately $105,000 and $97,000, respectively.
Notes Receivable from Participants
Participants may borrow from their 401(k) account in
various amounts as specified by the Plan. Notes receivable must be a minimum of $1,000 up to a maximum equal to the lesser of $50,000 or 50% of their vested account balances. The terms for notes receivable range from one to five years, or up to ten
years for the purchase of a primary residence. The notes receivable are secured by the balance in the participants account and bear interest at a rate commensurate with local prevailing rates as determined by the Benefits Committee. Principal
and interest are paid ratably through payroll deductions. Notes receivable of approximately $784,000 and $749,000 were granted during the years ended March 31, 2017 and 2016, respectively. Interest income is recorded on the accrual basis.
Related fees are recorded as administrative expenses and are charged directly to the participants accounts when they are incurred. No allowance for credit losses has been recorded as of March 31, 2017 or 2016. Delinquent notes receivable
are reclassified as distributions based upon the terms of the plan document.
Payment of Benefits
A participant may commence payment of benefits upon termination of employment, attainment of age 59
1
/
2
, or becoming disabled. A participant may elect to receive benefits in the form of a
lump-sum
distribution or installment payments over time.
Administration
The
Monro Benefits Committee is solely responsible for the general administration of the Plan and carrying out the Plan provisions. The Benefits Committee determines the appropriateness of the Plans investment offerings, monitors investment
performance and reports to the Companys Board of Directors. The Company reserves the right, by action of the Board of Directors, to discontinue contributions and terminate the Plan at any time. In the event of a termination of the Plan, each
participant shall immediately become fully vested. Since December 2014, the trustee, custodian and recordkeeper of the Plan is Wells Fargo Bank, N.A. (Wells Fargo).
7
MONRO MUFFLER BRAKE, INC.
PROFIT SHARING PLAN
NOTES TO FINANCIAL STATEMENTS
Administrative Expenses
Plan expenses are primarily paid by the Plan. Expenses related to the administration of notes receivable from participants are charged directly to the participants account and are included in
administrative expenses. Investment related expenses are included in net appreciation or depreciation in fair value of investments.
NOTE 2
- SIGNIFICANT ACCOUNTING POLICIES:
Basis of Accounting
The financial statements of the Plan have been prepared using the accrual basis of accounting in conformity with accounting principles generally accepted in the United States of America.
Investment Valuation and Income Recognition
Investments are reported at fair value. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the
measurement date. The Plans Benefit Committee determines the Plans valuation policies utilizing information provided by the investment advisors and trustees. See Note 5 for discussion of fair value measurements.
The Plan presents, in the Statement of Changes in Net Assets, the net appreciation or depreciation in the fair value of its investments, which consists
of the realized gains or losses and the unrealized appreciation or depreciation of those investments.
Purchases and sales of securities are
recorded on a trade-date basis. Interest income is recorded on the accrual basis. Dividends are recorded on the
ex-dividend
date.
Use of Estimates
The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of net assets available for benefits and changes therein. Actual results could differ from those
estimates.
Risks and Uncertainties
Investment securities are exposed to various risks, such as interest rate and market risks. Due to the level of risk associated with certain investments and the level of uncertainty related to changes in
the value of investments, it is at least reasonably possible that changes in risk in the near term would materially affect participants account balances and the amount reported in the Statement of Net Assets Available for Benefits and the
Statement of Changes in Net Assets Available for Benefits.
Benefit Payments
Benefits are recorded when paid.
Recently Issued Accounting Pronouncements
Recent accounting pronouncements issued by the FASB (including technical corrections to the FASBs Accounting Standards Codification), and the
American Institute of Certified Public Accountants did not, or are not, expected to have a material effect on the Plans financial statements.
8
MONRO MUFFLER BRAKE, INC.
PROFIT SHARING PLAN
NOTES TO FINANCIAL STATEMENTS
NOTE 3 -
PARTY-IN-INTEREST
TRANSACTIONS:
Plan investments are
shares of registered investment companies and common collective trusts managed by Wells Fargo. Wells Fargo is also the third party administrator. Therefore, these transactions qualify as
party-in-interest.
Fees paid by the Plan for professional expenses amounted to $122,689 and $187,234 for the years ended March 31, 2017 and 2016, respectively. The Plan also invests in Monro Muffler
Brake, Inc. Stock Fund. Monro is the plan sponsor, and therefore, these transactions qualify as
party-in-interest.
Investment (loss) income from investments sponsored by
Monro amounted to ($780,415) and $291,832 for the years ended March 31, 2017 and 2016, respectively. Investment gain from investments sponsored by our third party administrators and notes receivable amounted to $792,523 and $165,120 for the
years ended March 31, 2017 and 2016, respectively.
NOTE 4 - FEDERAL INCOME TAX STATUS:
The Plan uses a volume submitter plan document of Wells Fargo Bank, N.A. Defined Contribution Volume Submitter Plan and Trust. The volume
submitter plan document has obtained an opinion letter from the Internal Revenue Service (IRS), which states that the volume submitter document satisfies the applicable provisions of the Internal Revenue Code. The Plan has not received a
determination letter from the IRS; however the Plan administrator and the Plans counsel believe that the Plan is designed, and is currently being operated, in compliance with the applicable requirements of the Internal Revenue Code and,
therefore, believe that the Plan is qualified and the related trust is
tax-exempt.
Additionally,
Generally Accepted Accounting Principles requires Plan management to evaluate the tax positions taken by the Plan and recognize a tax liability if the organization has taken an uncertain tax position that is more likely than not would not be
sustained upon examination by the IRS. The Plan administrator has analyzed the tax positions taken by the Plan, and has concluded that as of March 31, 2017 and 2016, there are no uncertain tax positions taken or expected to be taken that would
require recognition of a liability or disclosure in the financial statements.
9
MONRO MUFFLER BRAKE, INC.
PROFIT SHARING PLAN
NOTES TO FINANCIAL STATEMENTS
NOTE 5 - FAIR VALUE OF FINANCIAL INSTRUMENTS:
The accounting standards related to fair value measurements include a hierarchy for information and valuations used in measuring fair value that is broken
down into three levels based on reliability, as follows:
|
|
|
Level 1 valuations are based on quoted prices in active markets for identical instruments that the Plan has the ability to access.
|
|
|
|
Level 2 valuations are based on quoted prices for similar, but not identical, instruments in active markets; quoted prices for identical or
similar instruments in markets that are not active; or other significant observable inputs besides quoted prices.
|
|
|
|
Level 3 valuations are based on information that is unobservable and significant to the overall fair value measurement.
|
A financial instruments categorization within the fair value hierarchy is based on the lowest level of input that is
significant to the fair value measurement. Valuation techniques maximize the use of relevant observable inputs and minimize the use of unobservable inputs.
Following is a description of the valuation methodologies used for assets measured at fair value. There have been no changes in the methodologies used at March 31, 2017 and 2016.
Cash and Cash Equivalents: Cash and cash equivalents are valued at cost, which approximates fair value.
Employer Securities: These investments consist of common stock valued at the closing price reported on the active market on which the individual
securities are traded.
Shares of Registered Investment Companies: Valued at the daily closing price as reported by the fund. Shares of
registered investment options held by the Plan are
open-end
mutual funds that are registered with the U.S. Securities and Exchange Commission. These funds are required to publish daily net asset value (NAV)
and to transact at that price. The shares of registered investment companies held by the Plan are deemed to be actively traded.
Common
Collective Trust: Comprised of fully benefit-responsive investment contracts issued by insurance companies, banks and other financial institutions. The net asset value is used as a practical expedient to estimate fair value. This practical expedient
would not be used if it is determined to be probable that the fund will sell the investment for an amount different from the reported NAV. Participant transactions (purchases and sales) may occur daily.
10
MONRO MUFFLER BRAKE, INC.
PROFIT SHARING PLAN
NOTES TO FINANCIAL STATEMENTS
The following tables set forth the Plans financial instruments measured at fair value as of
March 31, 2017 and 2016.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value Measurements at Reporting Date Using
|
|
Description
|
|
Total as of
March 31, 2017
|
|
|
Quoted
Prices in
Active
Markets for
Identical
Assets
(Level
1)
|
|
|
Significant Other
Observable
Inputs
(Level 2)
|
|
|
Unobservable
Inputs
(Level
3)
|
|
|
|
|
|
|
Financial Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
Shares of registered investment companies
|
|
|
38,118,533
|
|
|
|
38,118,533
|
|
|
|
|
|
|
|
|
|
Employer securities
|
|
|
2,194,605
|
|
|
|
2,194,605
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets in the fair value hierarchy
|
|
|
40,313,138
|
|
|
$
|
40,313,138
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common collective trusts (a)
|
|
|
6,713,435
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investments at fair value
|
|
$
|
47,026,573
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value Measurements at Reporting Date Using
|
|
Description
|
|
Total as of
March 31, 2016
|
|
|
Quoted
Prices in
Active
Markets for
Identical
Assets
(Level
1)
|
|
|
Significant Other
Observable
Inputs
(Level 2)
|
|
|
Unobservable
Inputs
(Level
3)
|
|
Financial Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
136
|
|
|
$
|
136
|
|
|
|
|
|
|
|
|
|
Shares of registered investment companies
|
|
|
33,501,171
|
|
|
|
33,501,171
|
|
|
|
|
|
|
|
|
|
Employer securities
|
|
|
3,150,063
|
|
|
|
3,150,063
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets in the fair value hierarchy
|
|
|
36,651,370
|
|
|
$
|
36,651,370
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common collective trusts (a)
|
|
|
5,847,161
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investments at fair value
|
|
$
|
42,498,531
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a)
|
In accordance with Subtopic
820-10,
certain investments that were measured at net asset value per share (or its equivalent) have
not been classified in the fair value hierarchy. The fair value amounts presented in these tables are intended to permit reconciliation of the fair value hierarchy to the line items presented in the statement of net assets available for benefits.
|
11
MONRO MUFFLER BRAKE, INC.
PROFIT SHARING PLAN
NOTES TO FINANCIAL STATEMENTS
The following table summarizes investments measured at fair value utilizing NAV as the practical
expedient as of March 31, 2017 and 2016.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment
|
|
March 31,
2017
Fair
Value
|
|
|
Unfunded
Commitment
|
|
|
Redemption
Frequency
|
|
|
Redemption
Notice Period
|
|
Common Collective Trusts:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Wells Fargo Stable Value Fund
|
|
$
|
2,001,017
|
|
|
|
N/A
|
|
|
|
Daily
|
|
|
|
12 months
|
|
Wells Fargo/Blackrock Common Collective Trusts
|
|
|
4,712,418
|
|
|
|
N/A
|
|
|
|
Daily
|
|
|
|
N/A
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment
|
|
March 31,
2016
Fair
Value
|
|
|
Unfunded
Commitment
|
|
|
Redemption
Frequency
|
|
|
Redemption
Notice Period
|
|
Common Collective Trusts:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Wells Fargo Stable Value Fund
|
|
$
|
1,727,087
|
|
|
|
N/A
|
|
|
|
Daily
|
|
|
|
12 months
|
|
Wells Fargo/Blackrock Common Collective Trusts
|
|
|
4,120,074
|
|
|
|
N/A
|
|
|
|
Daily
|
|
|
|
N/A
|
|
NOTE 6 - RECONCILIATION OF FINANCIAL STATEMENTS TO FORM 5500:
|
|
|
|
|
|
|
|
|
|
|
March 31,
|
|
|
|
2017
|
|
|
2016
|
|
Net assets available for benefits per the financial statements
|
|
$
|
48,924,870
|
|
|
$
|
44,170,771
|
|
Differences in:
|
|
|
|
|
|
|
|
|
Investments
|
|
|
1,357,456
|
|
|
|
1,347,177
|
|
Notes receivable from participants
|
|
|
(1,357,456
|
)
|
|
|
(1,347,177
|
)
|
|
|
|
|
|
|
|
|
|
Net assets available for benefits per the Form 5500
|
|
$
|
48,924,870
|
|
|
$
|
44,170,771
|
|
|
|
|
|
|
|
|
|
|
12