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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 June 28, 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 
incorporation or organization)
    
    (I.R.S. Employer
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
June 28, 2008 and March 29, 2008
    
    
    3Consolidated Statement of Income for the quarters
ended June 28, 2008 and June 30, 2007
    
    
    4Consolidated Statement of Changes in Shareholders
Equity for the quarter ended June 28, 2008
    
    
    5Consolidated Statement of Cash Flows for the
quarters ended June 28, 2008 and June 30, 2007
    
    
    6Notes to Consolidated Financial Statements
    
    
    7Item 2. Managements Discussion and Analysis of
Financial Condition and Results of Operations
    
    
    11Item 3. Quantitative and Qualitative Disclosures About Market Risk
    
    
    15Item 4. Controls and Procedures
    
    
    15Part II. Other InformationItem 1. Legal Proceedings
    
    
    16Item 1A. Risk Factors
    
    
    16Item 6. Exhibits
    
    
    16Signatures
    
    
    17Exhibit Index
    
    
    18EX-31.1EX-31.2EX-32.1
  2




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Financial Statements
 MONRO MUFFLER BRAKE, INC.
 
 CONSOLIDATED BALANCE SHEET
 (Unaudited)June 28,
    
    
    March 29,2008
    
    
    2008(Dollars in thousands)AssetsCurrent assets:Cash and equivalents
    
    $
    2,217
    
    
    $
    2,108Trade receivables
    
    
    2,270
    
    
    
    2,116Inventories
    
    
    69,332
    
    
    
    66,183Deferred income tax asset
    
    
    3,781
    
    
    
    3,840Other current assets
    
    
    18,271
    
    
    
    18,626Total current assets
    
    
    95,871
    
    
    
    92,873Property, plant and equipment
    
    
    341,261
    
    
    
    338,970Less  Accumulated depreciation and amortization
    
    
    (159,043
    )
    
    
    (154,786
    )Net property, plant and equipment
    
    
    182,218
    
    
    
    184,184Goodwill
    
    
    71,650
    
    
    
    71,472Intangible assets and other noncurrent assets
    
    
    19,223
    
    
    
    18,764Long term deferred tax asset
    
    
    2,880
    
    
    
    3,176Total assets
    
    $
    371,842
    
    
    $
    370,469Liabilities and Shareholders EquityCurrent liabilities:Current portion of long-term debt
    
    $
    1,642
    
    
    $
    1,603Trade payables
    
    
    29,354
    
    
    
    27,257Federal and state income taxes payable
    
    
    5,334
    
    
    
    914Accrued payroll, payroll taxes and other payroll benefits
    
    
    11,925
    
    
    
    10,596Accrued insurance
    
    
    7,139
    
    
    
    6,356Warranty reserves
    
    
    4,196
    
    
    
    4,086Other current liabilities
    
    
    7,767
    
    
    
    7,499Total current liabilities
    
    
    67,357
    
    
    
    58,311Long-term debt
    
    
    107,176
    
    
    
    122,585Accrued rent expense
    
    
    6,754
    
    
    
    6,944Other long-term liabilities
    
    
    4,772
    
    
    
    4,729Long-term income taxes payable
    
    
    3,124
    
    
    
    3,052Total liabilities
    
    
    189,183
    
    
    
    195,621CommitmentsShareholders equity:Class C Convertible Preferred Stock, $1.50 par value, $.096 conversion value,
150,000 shares authorized; 65,000 shares issued and outstanding
    
    
    97
    
    
    
    97Common Stock, $.01 par value, 45,000,000 shares authorized; 21,833,829 and
21,683,859 shares issued at June 28, 2008 and March 29, 2008, respectively
    
    
    218
    
    
    
    217Treasury Stock, 3,322,392 shares, at cost
    
    
    (62,160
    )
    
    
    (62,160
    )Additional paid-in capital
    
    
    67,974
    
    
    
    66,756Accumulated other comprehensive loss
    
    
    (1,221
    )
    
    
    (1,182
    )Retained earnings
    
    
    177,751
    
    
    
    171,120Total shareholders equity
    
    
    182,659
    
    
    
    174,848Total liabilities and shareholders equity
    
    $
    371,842
    
    
    $
    370,469
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MONRO MUFFLER BRAKE, INC.
 
 CONSOLIDATED STATEMENT OF INCOME
 Quarter Ended Fiscal June2008
    
    
    2007(Dollars in thousands,except per share data)Sales
    
    $
    120,369
    
    
    $
    107,622Cost of sales, including distribution and occupancy costs
    
    
    69,480
    
    
    
    60,945Gross profit
    
    
    50,889
    
    
    
    46,677Operating, selling, general and administrative expenses
    
    
    36,852
    
    
    
    32,684Intangible amortization
    
    
    123
    
    
    
    123(Gain) loss on disposal of assets
    
    
    (32
    )
    
    
    53Total operating expenses
    
    
    36,943
    
    
    
    32,860Operating income
    
    
    13,946
    
    
    
    13,817Interest expense, net of interest income for the quarter of $3
in 2008 and $9 in 2007
    
    
    1,519
    
    
    
    1,189Other income, net
    
    
    (72
    )
    
    
    (415
    )Income before provision for income taxes
    
    
    12,499
    
    
    
    13,043Provision for income taxes
    
    
    4,705
    
    
    
    4,861Net income
    
    $
    7,794
    
    
    $
    8,182Earnings per share:Basic
    
    $
    .42
    
    
    $
    .39Diluted
    
    $
    .39
    
    
    $
    .36
  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
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    7,794
    
    
    
    7,794Other comprehensive loss:Pension liability adjustment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (39
    )
    
    
    
    
    
    
    (39
    )Total comprehensive loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    7,755Cash dividends: Preferred ($.06 per CSE)
(1)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (61
    )
    
    
    (61
    )Common ($.06 per share)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,102
    )
    
    
    (1,102
    )Tax benefit from exercise of stock options
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    114
    
    
    
    
    
    
    
    
    
    
    
    114Exercise of stock options
    
    
    
    
    
    
    1
    
    
    
    
    
    
    
    697
    
    
    
    
    
    
    
    
    
    
    
    698Stock option compensation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    407
    
    
    
    
    
    
    
    
    
    
    
    407Balance at June 28, 2008
    
    $
    97
    
    
    $
    218
    
    
    $
    (62,160
    )
    
    $
    67,974
    
    
    $
    (1,221
    )
    
    $
    177,751
    
    
    $
    182,659
 
 (1)
    
    CSE  Common stock equivalent  5




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MONRO MUFFLER BRAKE, INC.
 
 CONSOLIDATED STATEMENT OF CASH FLOWS
 Quarter Ended Fiscal June2008
    
    
    2007(Dollars in thousands)Increase (Decrease) in CashCash flows from operating activities:Net income
    
    $
    7,794
    
    
    $
    8,182Adjustments to reconcile net income to net cash provided
by operating activities -Depreciation and amortization
    
    
    5,143
    
    
    
    4,799(Gain) loss on disposal of property, plant and equipment
    
    
    (32
    )
    
    
    53Stock-based compensation expense
    
    
    407
    
    
    
    99Excess tax benefits from share-based payment arrangements
    
    
    (57
    )
    
    
    (104
    )Net change in deferred income taxes
    
    
    286
    
    
    
    (98
    )Increase in trade receivables
    
    
    (154
    )
    
    
    (282
    )Increase in inventories
    
    
    (3,149
    )
    
    
    (1,403
    )Decrease in other current assets
    
    
    529
    
    
    
    4,232(Increase) decrease in intangible assets and other noncurrent assets
    
    
    (502
    )
    
    
    693Increase (decrease) in trade payables
    
    
    2,045
    
    
    
    (4,464
    )Increase (decrease) in accrued expenses
    
    
    2,481
    
    
    
    (1,185
    )Increase in federal and state income taxes payable
    
    
    4,534
    
    
    
    4,450Decrease in other long-term liabilities
    
    
    (208
    )
    
    
    (128
    )Increase in long-term income taxes payable
    
    
    72Total adjustments
    
    
    11,395
    
    
    
    6,662Net cash provided by operating activities
    
    
    19,189
    
    
    
    14,844Cash flows from investing activities:Capital expenditures
    
    
    (3,662
    )
    
    
    (3,485
    )Acquisition of ProCare, net of cash acquired
    
    
    
    
    
    
    (42
    )Proceeds from the disposal of property, plant and equipment
    
    
    374
    
    
    
    44Net cash used for investing activities
    
    
    (3,288
    )
    
    
    (3,483
    )Cash flows from financing activities:Proceeds from borrowings
    
    
    28,073
    
    
    
    23,870Principal payments on long-term debt and capital
lease obligations
    
    
    (43,457
    )
    
    
    (30,701
    )Purchase of common stock
    
    
    
    
    
    
    (4,035
    )Exercise of stock options
    
    
    698
    
    
    
    438Excess tax benefits from share-based payment arrangements
    
    
    57
    
    
    
    104Dividends to shareholders
    
    
    (1,163
    )
    
    
    (1,028
    )Net cash used for financing activities
    
    
    (15,792
    )
    
    
    (11,352
    )Increase in cash
    
    
    109
    
    
    
    9Cash at beginning of period
    
    
    2,108
    
    
    
    965Cash at end of period
    
    $
    2,217
    
    
    $
    974
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Note 1  Condensed Consolidated Financial Statements
    
   Note 2  Acquisitions
   Note 3  Earnings Per Share
  7




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Quarter EndedFiscal June2008
    
    
    2007(Dollars in thousands,except per share data)Numerator for earnings per common share calculation:Net Income
    
    $
    7,794
    
    
    $
    8,182Less: Preferred stock dividends
    
    
    (61
    )
    
    
    (47
    )Income available to common stockholders
    
    $
    7,733
    
    
    $
    8,135Denominator for earnings per common share calculation:Weighted average common shares, basic
    
    
    18,387
    
    
    
    20,952Effect of dilutive securities:Preferred Stock
    
    
    1,013
    
    
    
    1,013Stock options
    
    
    705
    
    
    
    945Weighted average number of common shares, diluted
    
    
    20,105
    
    
    
    22,910Basic Earnings per common share:
    
    $
    .42
    
    
    $
    .39Diluted Earnings per common share:
    
    $
    .39
    
    
    $
    .36
  Note 4  Income Taxes
     8




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Note 5  Supplemental Disclosure of Cash Flow Information
        Note 6  Stock Split
  Note 7  Cash Dividend
   Note 8  Litigation
   9




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Note 9  Other Items
  10




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Managements Discussion and Analysis of Financial Condition and Results of Operations
 Results of Operations
   Quarter Ended Fiscal June2008
    
    2007Sales
    
    
    100.0
    %
    
    
    100.0
    %Cost of sales, including distribution
and occupancy costs
    
    
    57.7
    
    
    
    56.6Gross profit
    
    
    42.3
    
    
    
    43.4Operating, selling, general and
administrative expenses
    
    
    30.6
    
    
    
    30.4Intangible amortization
    
    
    .1
    
    
    
    .1(Gain) loss on disposal of assets
    
    
    0
    
    
    
    0Total operating expenses
    
    
    30.7
    
    
    
    30.5Operating income
    
    
    11.6
    
    
    
    12.9Interest expense  net
    
    
    1.3
    
    
    
    1.1Other income   net
    
    
    (.1
    )
    
    
    (.3
    )Income before provision for income taxes
    
    
    10.4
    
    
    
    12.1Provision for income taxes
    
    
    3.9
    
    
    
    4.5Net income
    
    
    6.5
    %
    
    
    7.6
    %
 First Quarter Ended June 28, 2008 Compared To First Quarter Ended June 30, 2007
  11




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12




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Interim Period Reporting
  Capital Resources and Liquidity
 Capital Resources
  Liquidity
    13




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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.
  14




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Quantitative and Qualitative Disclosures About Market Risk
  
 Controls and Procedures
 Disclosure controls and procedures
   Changes in internal controls
  15




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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
 16




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MONRO MUFFLER BRAKE, INC.DATE: August 7, 2008
    By
    /s/ Robert G. GrossRobert G. GrossChief Executive Officer and Chairman of the BoardDATE: August 7, 2008
    By
    /s/ Catherine D'AmicoCatherine DAmicoExecutive Vice President-Finance, Treasurer
and Chief Financial Officer 17




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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
    
    
    1931.2
    
    Certification of Catherine DAmico pursuant to Section
302 of the Sarbanes-Oxley Act of 2002
    
    
    2032.1
    
    Certification pursuant to 18 U.S.C. Section 1350,
as adopted pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002
    
    
    21
 18