##### Table of Contents



FORM 10-Q
 SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended December 27, 2008.
 OR
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the transition period from  to .
 Commission File No. 0-19357
 MONRO MUFFLER BRAKE, INC.
 
  New York
    
    16-0838627(State or other jurisdiction of
    
    (I.R.S. Employerincorporation or organization)
    
    Identification #)200 Holleder Parkway, Rochester, New York
    
    14615(Address of principal executive offices)
    
    (Zip code)
  
 (Registrants telephone number, including area code)
 
  þ o
  Large accelerated filer o
    
    Accelerated filer þ
    
    Non-accelerated filer   o
(Do not check if a smaller reporting company)
    
    Smaller reporting company o
 o þ




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##### 



INDEX
 Page No.Part I. Financial InformationItem 1. Financial StatementsConsolidated Balance Sheet at
December 27, 2008 and March 29, 2008
    
    
    3Consolidated Statement of Income for the quarters and nine
months ended December 27, 2008 and December 29, 2007
    
    
    4Consolidated Statement of Changes in Shareholders
Equity for the nine months ended December 27, 2008
    
    
    5Consolidated Statement of Cash Flows for the nine months
ended December 27, 2008 and December 29, 2007
    
    
    6Notes to Consolidated Financial Statements
    
    
    7Item 2. Managements Discussion and Analysis of
Financial Condition and Results of Operations
    
    
    13Item 3. Quantitative and Qualitative Disclosures About Market Risk
    
    
    18Item 4. Controls and Procedures
    
    
    18Part II. Other InformationItem 1. Legal Proceedings
    
    
    19Item 1A. Risk Factors
    
    
    19Item 6. Exhibits
    
    
    19Signatures
    
    
    20Exhibit Index
    
    
    21EX-31.1EX-31.2EX-32.1
  2




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##### Table of Contents



Financial Statements
 MONRO MUFFLER BRAKE, INC.
 
 CONSOLIDATED BALANCE SHEET
 (Unaudited)December 27,
    
    
    March 29,2008
    
    
    2008(Dollars in thousands)AssetsCurrent assets:Cash and equivalents
    
    $
    3,406
    
    
    $
    2,108Trade receivables
    
    
    2,232
    
    
    
    2,116Inventories
    
    
    69,619
    
    
    
    66,183Deferred income tax asset
    
    
    3,743
    
    
    
    3,840Other current assets
    
    
    19,194
    
    
    
    18,626Total current assets
    
    
    98,194
    
    
    
    92,873Property, plant and equipment
    
    
    348,668
    
    
    
    338,970Less  Accumulated depreciation and amortization
    
    
    (164,619
    )
    
    
    (154,786
    )Net property, plant and equipment
    
    
    184,049
    
    
    
    184,184Goodwill
    
    
    71,816
    
    
    
    71,472Intangible assets and other noncurrent assets
    
    
    18,387
    
    
    
    18,764Long term deferred tax asset
    
    
    799
    
    
    
    3,176Total assets
    
    $
    373,245
    
    
    $
    370,469Liabilities and Shareholders EquityCurrent liabilities:Current portion of long-term debt
    
    $
    1,616
    
    
    $
    1,603Trade payables
    
    
    34,868
    
    
    
    27,257Federal and state income taxes payable
    
    
    928
    
    
    
    914Accrued payroll, payroll taxes and other payroll benefits
    
    
    12,638
    
    
    
    10,596Accrued insurance
    
    
    8,520
    
    
    
    6,356Warranty reserves
    
    
    4,503
    
    
    
    4,086Other current liabilities
    
    
    8,962
    
    
    
    7,499Total current liabilities
    
    
    72,035
    
    
    
    58,311Long-term debt
    
    
    93,093
    
    
    
    122,585Accrued rent expense
    
    
    6,626
    
    
    
    6,944Other long-term liabilities
    
    
    4,358
    
    
    
    4,729Long-term income taxes payable
    
    
    3,395
    
    
    
    3,052Total liabilities
    
    
    179,507
    
    
    
    195,621CommitmentsShareholders equity:Class C Convertible Preferred Stock, $1.50 par value, $.096 conversion value,
150,000 shares authorized; 32,500 and 65,000 shares issued and outstanding at
December 27, 2008 and March 29, 2008, respectively
    
    
    49
    
    
    
    97Common Stock, $.01 par value, 45,000,000 shares authorized; 22,934,919 and
21,683,859 shares issued at December 27, 2008 and March 29, 2008, respectively
    
    
    229
    
    
    
    217Treasury Stock, 3,580,829 and 3,322,392 shares at December 27, 2008 and March 29, 2008,
respectively, at cost
    
    
    (67,454
    )
    
    
    (62,160
    )Additional paid-in capital
    
    
    74,092
    
    
    
    66,756Accumulated other comprehensive loss
    
    
    (1,834
    )
    
    
    (1,182
    )Retained earnings
    
    
    188,656
    
    
    
    171,120Total shareholders equity
    
    
    193,738
    
    
    
    174,848Total liabilities and shareholders equity
    
    $
    373,245
    
    
    $
    370,469
  3




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##### Table of Contents



MONRO MUFFLER BRAKE, INC.
 
 CONSOLIDATED STATEMENT OF INCOME
 Quarter Ended
    
    
    Nine Months EndedFiscal December
    
    
    Fiscal December2008
    
    
    2007
    
    
    2008
    
    
    2007(Dollars in thousands, except per share data)Sales
    
    $
    118,680
    
    
    $
    112,514
    
    
    $
    358,961
    
    
    $
    332,178Cost of sales, including distribution and occupancy
costs
    
    
    73,465
    
    
    
    70,065
    
    
    
    212,456
    
    
    
    197,514Gross profit
    
    
    45,215
    
    
    
    42,449
    
    
    
    146,505
    
    
    
    134,664Operating, selling, general and administrative expenses
    
    
    35,694
    
    
    
    34,377
    
    
    
    109,332
    
    
    
    100,865Intangible amortization
    
    
    112
    
    
    
    149
    
    
    
    368
    
    
    
    413Gain on disposal of assets
    
    
    (510
    )
    
    
    (1,006
    )
    
    
    (828
    )
    
    
    (851
    )Total operating expenses
    
    
    35,296
    
    
    
    33,520
    
    
    
    108,872
    
    
    
    100,427Operating income
    
    
    9,919
    
    
    
    8,929
    
    
    
    37,633
    
    
    
    34,237Interest expense, net of interest income for
the quarter of $7 in 2008 and $6 in
2007, and year-to-date of $21 in 2008
and $22 in 2007
    
    
    1,536
    
    
    
    1,508
    
    
    
    4,648
    
    
    
    3,952Other income, net
    
    
    (99
    )
    
    
    (114
    )
    
    
    (360
    )
    
    
    (685
    )Income before provision for income taxes
    
    
    8,482
    
    
    
    7,535
    
    
    
    33,345
    
    
    
    30,970Provision for income taxes
    
    
    2,904
    
    
    
    2,233
    
    
    
    12,301
    
    
    
    10,985Net income
    
    $
    5,578
    
    
    $
    5,302
    
    
    $
    21,044
    
    
    $
    19,985Earnings per share:Basic
    
    $
    .29
    
    
    $
    .27
    
    
    $
    1.12
    
    
    $
    .97Diluted
    
    $
    .28
    
    
    $
    .25
    
    
    $
    1.05
    
    
    $
    .89
  4




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MONRO MUFFLER BRAKE, INC.
 
 CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS EQUITY
  (Dollars in thousands)
 AccumulatedAdditional
    
    
    OtherPreferred
    
    
    Common
    
    
    Treasury
    
    
    Paid-in
    
    
    Comprehensive
    
    
    RetainedStock
    
    
    Stock
    
    
    Stock
    
    
    Capital
    
    
    Loss
    
    
    Earnings
    
    
    TotalBalance at March 29, 2008
    
    $
    97
    
    
    $
    217
    
    
    $
    (62,160
    )
    
    $
    66,756
    
    
    $
    (1,182
    )
    
    $
    171,120
    
    
    $
    174,848Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    21,044
    
    
    
    21,044Other comprehensive loss:Unrealized loss on derivative contracts
(1)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (613
    )
    
    
    
    
    
    
    (613
    )Pension liability adjustment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (39
    )
    
    
    
    
    
    
    (39
    )Total comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    20,392Cash dividends:Preferred ($.18 per CSE)
(2)


    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (183
    )
    
    
    (183
    )Common ($.18 per share)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (3,325
    )
    
    
    (3,325
    )Conversion of Class C preferred stock
    
    
    (48
    )
    
    
    5
    
    
    
    
    
    
    
    43
    
    
    
    
    
    
    
    
    
    
    
    0Tax benefit from exercise of stock options
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,933
    
    
    
    
    
    
    
    
    
    
    
    2,933Exercise of stock options
    
    
    
    
    
    
    7
    
    
    
    (5,294
    )
    
    
    2,953
    
    
    
    
    
    
    
    
    
    
    
    (2,334
    )Stock option compensation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,407
    
    
    
    
    
    
    
    
    
    
    
    1,407Balance at December 27, 2008
    
    $
    49
    
    
    $
    229
    
    
    $
    (67,454
    )
    
    $
    74,092
    
    
    $
    (1,834
    )
    
    $
    188,656
    
    
    $
    193,738
 
 (1)
    
    Item is reported net of related taxes of $375.(2)
    
    CSE  Common stock equivalent  5




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MONRO MUFFLER BRAKE, INC.
 
 CONSOLIDATED STATEMENT OF CASH FLOWS
  Nine Months Ended Fiscal December2008
    
    
    2007(Dollars in thousands)Increase (Decrease) in CashCash flows from operating activities:Net income
    
    $
    21,044
    
    
    $
    19,985Adjustments to reconcile net income to net cash provided
by operating activities -Depreciation and amortization
    
    
    15,270
    
    
    
    14,903Gain on disposal of property, plant and equipment
    
    
    (828
    )
    
    
    (851
    )Stock-based compensation expense
    
    
    1,407
    
    
    
    1,445Excess tax benefits from share-based payment arrangements
    
    
    (3,173
    )
    
    
    (138
    )Net change in deferred income taxes
    
    
    2,780
    
    
    
    (149
    )Increase in trade receivables
    
    
    (116
    )
    
    
    (466
    )Increase in inventories
    
    
    (3,436
    )
    
    
    (3,799
    )Decrease in other current assets
    
    
    75
    
    
    
    3,434Decrease (increase) in other noncurrent assets
    
    
    27
    
    
    
    (1,873
    )Increase in trade payables
    
    
    7,343
    
    
    
    1,933Increase in accrued expenses
    
    
    3,017
    
    
    
    2,028Increase in federal and state income taxes payable
    
    
    2,947
    
    
    
    1,442Decrease in other long-term liabilities
    
    
    (1,500
    )
    
    
    (534
    )Increase (decrease) in long-term income taxes payable
    
    
    343
    
    
    
    (335
    )Total adjustments
    
    
    24,156
    
    
    
    17,040Net cash provided by operating activities
    
    
    45,200
    
    
    
    37,025Cash flows from investing activities:Capital expenditures
    
    
    (16,808
    )
    
    
    (12,939
    )Acquisitions, net of cash acquired
    
    
    72
    
    
    
    (16,841
    )Proceeds from the disposal of property, plant and equipment
    
    
    1,882
    
    
    
    927Net cash used for investing activities
    
    
    (14,854
    )
    
    
    (28,853
    )Cash flows from financing activities:Proceeds from borrowings
    
    
    85,585
    
    
    
    144,259Principal payments on long-term debt and capital
lease obligations
    
    
    (115,328
    )
    
    
    (98,804
    )Purchase of common stock
    
    
    
    
    
    
    (51,547
    )Exercise of stock options
    
    
    1,030
    
    
    
    1,498Excess tax benefits from share-based payment arrangements
    
    
    3,173
    
    
    
    138Dividends to shareholders
    
    
    (3,508
    )
    
    
    (3,650
    )Net cash used for financing activities
    
    
    (29,048
    )
    
    
    (8,106
    )Increase in cash
    
    
    1,298
    
    
    
    66Cash at beginning of period
    
    
    2,108
    
    
    
    965Cash at end of period
    
    $
    3,406
    
    
    $
    1,031
  6




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Note 1  Condensed Consolidated Financial Statements
    Quarter Ended Fiscal December 2008:
    
    September 28, 2008  December 27, 2008 (13 weeks)Quarter Ended Fiscal December 2007:
    
    September 30, 2007  December 29, 2007 (13 weeks)Nine Months Ended Fiscal December 2008:
    
    March 30, 2008  December 27, 2008 (39 weeks)Nine Months Ended Fiscal December 2007:
    
    April 1, 2007  December 29, 2007 (39 weeks)
  Note 2  Acquisitions
   Note 3  Earnings Per Share
  7




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Quarter Ended
    
    
    Nine Months EndedFiscal December
    
    
    Fiscal December2008
    
    
    2007
    
    
    2008
    
    
    2007(Dollars in thousands, except per share data)Numerator for earnings per common share calculation:Net Income
    
    $
    5,578
    
    
    $
    5,302
    
    
    $
    21,044
    
    
    $
    19,985Less: Preferred stock dividends
    
    
    61
    
    
    
    61
    
    
    
    183
    
    
    
    169Income available to common stockholders
    
    $
    5,517
    
    
    $
    5,241
    
    
    $
    20,861
    
    
    $
    19,816Denominator for earnings per common share
calculation:Weighted average common shares, basic
    
    
    19,040
    
    
    
    19,718
    
    
    
    18,653
    
    
    
    20,509Effect of dilutive securities:Preferred Stock
    
    
    713
    
    
    
    1,014
    
    
    
    913
    
    
    
    1,014Stock options
    
    
    342
    
    
    
    821
    
    
    
    496
    
    
    
    894Weighted average number of common shares, diluted
    
    
    20,095
    
    
    
    21,553
    
    
    
    20,062
    
    
    
    22,417Basic Earnings per common share:
    
    $
    .29
    
    
    $
    .27
    
    
    $
    1.12
    
    
    $
    .97Diluted Earnings per common share:
    
    $
    .28
    
    
    $
    .25
    
    
    $
    1.05
    
    
    $
    .89
  Note 4  Income Taxes
     8




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Note 5  Derivative Financial Instruments
      Note 6  Fair Value Measurements
  Level 1.
    
    Observable inputs such as quoted prices in active markets;Level 2.
    
    Inputs, other than the quoted prices in active markets, that are observable either
directly or indirectly; andLevel 3.
    
    Unobservable inputs in which there is little or no market data, which require the
reporting entity to develop its own assumptions.
  a.)
    
    Market approach. Prices and other relevant information generated by market
transactions involving identical or comparable assets or liabilities.b.)
    
    Cost approach. Amount that would be required to replace the service capacity of
an asset (replacement cost).c.)
    
    Income approach. Techniques to convert future amounts to a single present amount
based on market expectations (including present value techniques, option-pricing and
excess earnings models).
 
 9




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Note 7  Supplemental Disclosure of Cash Flow Information
            Fair value of assets acquired
    
    $
    2,995,000Goodwill recorded
    
    
    14,692,000Cash paid in FY08, net of cash acquired
    
    
    (16,841,000
    )Liabilities assumed
    
    $
    846,000
  10




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Note 8  Stock Split
  Note 9  Cash Dividend
  Note 10  Litigation
   Note 11  Commitment
  Note 12  Preferred Stock Conversion
  Note 13  Treasury Stock Transaction
  11




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Note 14  Subsequent Event
  12




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Managements Discussion and Analysis of Financial Condition and Results of
Operations
 Results of Operations
   Quarter Ended
    
    Nine Months EndedFiscal December
    
    Fiscal December2008
    
    2007
    
    2008
    
    2007Sales
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %Cost of sales, including distribution
and occupancy costs
    
    
    61.9
    
    
    
    62.3
    
    
    
    59.2
    
    
    
    59.5Gross profit
    
    
    38.1
    
    
    
    37.7
    
    
    
    40.8
    
    
    
    40.5Operating, selling, general and
administrative expenses
    
    
    30.1
    
    
    
    30.6
    
    
    
    30.5
    
    
    
    30.4Intangible amortization
    
    
    .1
    
    
    
    .1
    
    
    
    .1
    
    
    
    .1Gain on disposal of assets
    
    
    (.4
    )
    
    
    (.9
    )
    
    
    (.2
    )
    
    
    (.3
    )Total operating expenses
    
    
    29.7
    
    
    
    29.8
    
    
    
    30.3
    
    
    
    30.2Operating income
    
    
    8.4
    
    
    
    7.9
    
    
    
    10.5
    
    
    
    10.3Interest expense  net
    
    
    1.3
    
    
    
    1.3
    
    
    
    1.3
    
    
    
    1.2Other income  net
    
    
    (.1
    )
    
    
    (.1
    )
    
    
    (.1
    )
    
    
    (.2
    )Income before provision for income taxes
    
    
    7.1
    
    
    
    6.7
    
    
    
    9.3
    
    
    
    9.3Provision for income taxes
    
    
    2.4
    
    
    
    2.0
    
    
    
    3.4
    
    
    
    3.3Net income
    
    
    4.7
    %
    
    
    4.7
    %
    
    
    5.9
    %
    
    
    6.0
    %
 Third Quarter and Nine Months Ended December 27, 2008 Compared To Third Quarter and Nine Months
Ended December 29, 2007
  13




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14




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15




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##### Table of Contents



Interim Period Reporting
  Capital Resources and Liquidity
 Capital Resources
  Liquidity
       16




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Recent Accounting Pronouncements
    
    
    Statement of Financial Accounting Standards No. 141 (revised 2007) (SFAS 141(R)), Business Combinations; and
    
    Statement of Financial Accounting Standards No. 160 (SFAS 160), Noncontrolling Interests in Consolidated
Financial Statements  an amendment of ARB No. 51.
    17




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Quantitative and Qualitative Disclosures About Market Risk
    
 Controls and Procedures
 Disclosure controls and procedures
   Changes in internal controls
  18




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Legal Proceedings
   
 Risk Factors
  
 Exhibits
  31.1
    
     Certification of Robert G. Gross pursuant to Section 302 of the Sarbanes 
Oxley Act of 200231.2
    
     Certification of Catherine DAmico pursuant to Section 302 of the Sarbanes 
Oxley Act of 200232.1
    
     Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to
Section 906 of the Sarbanes  Oxley Act of 2002
 19




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##### Table of Contents



MONRO MUFFLER BRAKE, INC.DATE: February 5, 2009
    By:
    /s/ Robert G. GrossRobert G. GrossChief Executive Officer and Chairman of the BoardDATE: February 5, 2009
    By:
    /s/ Catherine DAmicoCatherine DAmicoExecutive Vice President-Finance, Treasurer
and Chief Financial Officer 20




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EXHIBIT INDEX
 Exhibit No.
    
    Description
    
    Page No.31.1
    
    Certification of Robert G. Gross pursuant to Section
302 of the Sarbanes-Oxley Act of 2002
    
    
    2231.2
    
    Certification of Catherine DAmico pursuant to Section
302 of the Sarbanes-Oxley Act of 2002
    
    
    2332.1
    
    Certification pursuant to 18 U.S.C. Section 1350,
as adopted pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002
    
    
    24
 21