Long Term Debt, Contingencies and Leases
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Discuss trends, financial position, ratios, etc. For example, it may be helpful to discuss inventory turnover when assessing inventory valuation risk.
Obtain the 2010 financial statements and notes (annual report or 10-K) for Monro Muffler Brake, Inc. (MNRO). Use Tenneco for a benchmark and comparison purposes. This means ratios must be completed for both companies (but a description of the company only needs to be done for Monro).
To assess a company's financial statements, think specifically about: (1) the types of underlying transactions and events that affect the company, (2) how well the financial accounting rules (i.e., GAAP) reflect those transactions and events, (3) the aggressiveness or conservatism of management's accounting choices, and (4) how the annual report helps you assess the company's risks, financial position, and profitability.
For each item below, provide an easy to read and understandable presentation of the facts for your company. There should be a brief description of the items (Monro) and computational analysis (ratios).
LONG-TERM DEBT, CONTINGENCIES AND LEASES:
? Description of long-term debt
? Major leasing activities (if any) and types of leases involved
? Business reasons for, and importance of leasing activities
? Other significant liabilities disclosed for contingencies, warranties or commitments and their importance
Things to consider: Description of debts, Debt Percentage, Operating leases vs Capital leases, Present Value of bonds and leases, etc.
Link for Munro 10K:
http://quote.morningstar.com/stock-filing/Annual-Report/2011/3/26/t.aspx?t=XNAS:MNRO&ft=10-K&d=494a5ad12f3cde1f4e477c4bd3c24f2b
Link for Tenneco 10K:
http://www.tenneco.com/media/annualreport/pdfs/Tenneco-2010-10-K.pdf.
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Introduction
Monro Muffler Brake, Inc operates in automotive repair industry and provides automotive undercar repair and tire services in US. Monro provides different products or services including tires and routine maintenance services. It provides a wide range of services on light trucks, vans for breaks, steering, passenger cars, etc. This paper discusses about the long-term debt, major leasing activities and importance of leasing activities for the business of Monro.
Long-term Debt
Long-term financing is related with financing with a maturity of more than five years. Primarily, long-term financing consists of bonds. Firms used long-term debt in order to finance long-lived assets such as construction projects, land and equipment (Shim and Siegel 2008). A firm's mix of all long-term funds is known as its capital structure. An ideal capital structure is which that maximizes the total value of company and at the same time minimizes its overall cost of capital.
Monro Company's long-term debt includes revolving credit facility of $10062, LIBOR based debt and mortgage note payable, non interest bearing, secured by warehouse and office land and also due in one installment in the year 2015 of $660 and obligations under capital leases at various interest rates, secured by certain equipment and store properties and due in installments through 2039 (Annual Report 2012).
Debt Percentage:
Monro has total long-term debt of $41990 in the year 2011 and $96,427 in the year 2010 (consolidated balance sheet). In the year 2011, total debt of company is approx 24% of the total liabilities and at the same time it was approx 46% of the total liabilities (Annual Report 2012). At the same time, Tenneco has total long-term debt of $1160 million and $1145 million in the year 2010 and 2009 respectively (Annual Report 2011). In the year 2010, company's total debt was 37% of total liabilities and at the same time, they were 41% of total liabilities in the fiscal year 2009. It shows that total long-term ...
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