##### 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 September 26, 2009.
 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)
 (Former name, former address and former fiscal year, if changed since last report)
 þ o
 o o
  Large accelerated filer o
    
    Accelerated filer þ
    
    Non-accelerated filer o
    
    Smaller reporting company o(Do not check if a smaller reporting company)
 Indicate by check mark whether the registrant is a Shell Company
(as defined in Rule 12b-2 of the Exchange Act). o Yes
þ No




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##### 



INDEX
 Page No.Part I. Financial InformationItem 1. Financial StatementsConsolidated Balance Sheet at
September 26, 2009 and March 28, 2009
    
    
    3Consolidated Statement of Income for the quarters and six
months ended September 26, 2009 and September 27, 2008
    
    
    4Consolidated Statement of Changes in Shareholders
Equity for the six months ended September 26, 2009
    
    
    5Consolidated Statement of Cash Flows for the six months
ended September 26, 2009 and September 27, 2008
    
    
    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
    
    
    17Item 4. Controls and Procedures
    
    
    17Part II. Other InformationItem 1. Legal Proceedings
    
    
    18Item 1A. Risk Factors
    
    
    18Item 4. Submission of Matters to a Vote of Security Holders
    
    
    18Item 6. Exhibits
    
    
    18Signatures
    
    
    19Exhibit Index
    
    
    20Exhibit 31.1Exhibit 31.2Exhibit 32.1
   2




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##### Table of Contents



Item 1.
    
    Financial Statements
 MONRO
MUFFLER BRAKE, INC.
 
 CONSOLIDATED BALANCE SHEET
 (Unaudited)September 26,
    
    
    March 28,2009
    
    
    2009(Dollars in thousands)AssetsCurrent assets:Cash and equivalents
    
    $
    4,298
    
    
    $
    3,336Trade receivables
    
    
    2,303
    
    
    
    2,051Federal and state income tax receivable
    
    
    
    
    
    
    1,268Inventories
    
    
    78,136
    
    
    
    71,443Deferred income tax asset
    
    
    4,116
    
    
    
    4,076Other current assets
    
    
    22,544
    
    
    
    19,540Total current assets
    
    
    111,397
    
    
    
    101,714Property, plant and equipment
    
    
    360,935
    
    
    
    353,113Less  Accumulated depreciation and amortization
    
    
    (175,358
    )
    
    
    (168,052
    )Net property, plant and equipment
    
    
    185,577
    
    
    
    185,061Goodwill
    
    
    77,578
    
    
    
    71,816Intangible assets and other noncurrent assets
    
    
    17,625
    
    
    
    16,401Long term deferred tax asset
    
    
    1,766
    
    
    
    1,759Total assets
    
    $
    393,943
    
    
    $
    376,751Liabilities and Shareholders EquityCurrent liabilities:Current portion of long-term debt
    
    $
    1,659
    
    
    $
    1,696Trade payables
    
    
    37,569
    
    
    
    34,751Federal and state income taxes payable
    
    
    5,236Accrued payroll, payroll taxes and other payroll benefits
    
    
    12,678
    
    
    
    13,534Accrued insurance
    
    
    11,261
    
    
    
    9,495Warranty reserves
    
    
    5,181
    
    
    
    4,569Other current liabilities
    
    
    8,879
    
    
    
    7,280Total current liabilities
    
    
    82,463
    
    
    
    71,325Long-term debt
    
    
    82,667
    
    
    
    97,098Accrued rent expense
    
    
    6,583
    
    
    
    6,552Other long-term liabilities
    
    
    3,493
    
    
    
    4,350Long-term income taxes payable
    
    
    3,367
    
    
    
    3,135Total liabilities
    
    
    178,573
    
    
    
    182,460CommitmentsShareholders equity:Class C Convertible Preferred Stock, $1.50 par value, $.096 conversion value,
150,000 shares authorized; 32,500 shares issued and outstanding
    
    
    49
    
    
    
    49Common Stock, $.01 par value, 45,000,000 shares authorized; 23,271,559 and
22,999,313 shares issued at September 26, 2009 and March 28, 2009, respectively
    
    
    233
    
    
    
    230Treasury Stock, 3,590,429 and 3,580,829 shares at September 26, 2009 and March 28, 2009,
respectively, at cost
    
    
    (67,716
    )
    
    
    (67,454
    )Additional paid-in capital
    
    
    80,193
    
    
    
    74,443Accumulated other comprehensive loss
    
    
    (3,304
    )
    
    
    (3,485
    )Retained earnings
    
    
    205,915
    
    
    
    190,508Total shareholders equity
    
    
    215,370
    
    
    
    194,291Total liabilities and shareholders equity
    
    $
    393,943
    
    
    $
    376,751
   3




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##### Table of Contents



MONRO
MUFFLER BRAKE, INC.
 
 CONSOLIDATED STATEMENT OF INCOME
 Quarter Ended
    
    
    Six Months EndedFiscal September
    
    
    Fiscal September2009
    
    
    2008
    
    
    2009
    
    
    2008(Dollars in thousands, except per share data)Sales
    
    $
    136,634
    
    
    $
    119,912
    
    
    $
    264,679
    
    
    $
    240,281Cost of sales, including distribution and occupancy
costs
    
    
    77,781
    
    
    
    69,511
    
    
    
    149,417
    
    
    
    138,991Gross profit
    
    
    58,853
    
    
    
    50,401
    
    
    
    115,262
    
    
    
    101,290Operating, selling, general and administrative expenses
    
    
    41,148
    
    
    
    36,786
    
    
    
    80,306
    
    
    
    73,638Intangible amortization
    
    
    198
    
    
    
    133
    
    
    
    331
    
    
    
    256(Gain) loss on disposal of assets
    
    
    (20
    )
    
    
    (286
    )
    
    
    119
    
    
    
    (319
    )Total operating expenses
    
    
    41,326
    
    
    
    36,633
    
    
    
    80,756
    
    
    
    73,575Operating income
    
    
    17,527
    
    
    
    13,768
    
    
    
    34,506
    
    
    
    27,715Interest expense, net of interest income for
the quarter of $16 in 2009 and $10 in
2008, and year-to-date of $29 in 2009
and $13 in 2008
    
    
    1,442
    
    
    
    1,592
    
    
    
    3,338
    
    
    
    3,112Other income, net
    
    
    (75
    )
    
    
    (188
    )
    
    
    (117
    )
    
    
    (260
    )Income before provision for income taxes
    
    
    16,160
    
    
    
    12,364
    
    
    
    31,285
    
    
    
    24,863Provision for income taxes
    
    
    6,158
    
    
    
    4,692
    
    
    
    11,872
    
    
    
    9,397Net income
    
    $
    10,002
    
    
    $
    7,672
    
    
    $
    19,413
    
    
    $
    15,466Earnings per share:Basic
    
    $
    .51
    
    
    $
    .41
    
    
    $
    .99
    
    
    $
    .83Diluted
    
    $
    .49
    
    
    $
    .38
    
    
    $
    .95
    
    
    $
    .77
   4




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##### Table of Contents



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 28, 2009
    
    $
    49
    
    
    $
    230
    
    
    $
    (67,454
    )
    
    $
    74,443
    
    
    $
    (3,485
    )
    
    $
    190,508
    
    
    $
    194,291Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    19,413
    
    
    
    19,413Other comprehensive loss:Unrealized loss on derivatives
contracts ($292 pre-tax)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    181
    
    
    
    
    
    
    
    18119,594Cash dividends:Preferred
($.20 per CSE) (1)(2)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (102
    )
    
    
    (102
    )Common ($.20 per share) (2)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (3,904
    )
    
    
    (3,904
    )Tax benefit from exercise of stock options
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,596
    
    
    
    
    
    
    
    
    
    
    
    1,596Exercise of stock options
    
    
    
    
    
    
    3
    
    
    
    (262
    )
    
    
    2,970
    
    
    
    
    
    
    
    
    
    
    
    2,711Stock option compensation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,184
    
    
    
    
    
    
    
    
    
    
    
    1,184Balance at September 26, 2009
    
    $
    49
    
    
    $
    233
    
    
    $
    (67,716
    )
    
    $
    80,193
    
    
    $
    (3,304
    )
    
    $
    205,915
    
    
    $
    215,370
 (1)
    
    CSE  Common stock equivalent(2)
    
    Includes fourth quarter fiscal 2009 dividend payment of $.06 per CSE paid May 4, 2009 and
first and second quarter fiscal 2010
dividend payments of $.07 per CSE paid June 19, 2009 and September 21, 2009, respectively.   5




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##### Table of Contents



MONRO
MUFFLER BRAKE, INC.
 
 CONSOLIDATED STATEMENT OF CASH FLOWS
 Quarter Ended FiscalSeptember2009
    
    
    2008(Dollars in thousands)Increase (Decrease) in CashCash flows from operating activities:Net income
    
    $
    19,413
    
    
    $
    15,466Adjustments to reconcile net income to net cash provided
by operating activities Depreciation and amortization
    
    
    10,606
    
    
    
    10,216Loss (gain) on disposal of property, plant and equipment
    
    
    119
    
    
    
    (319
    )Stock-based compensation expense
    
    
    1,184
    
    
    
    1,050Excess tax benefits from share-based payment arrangements
    
    
    (1,020
    )
    
    
    (126
    )Net change in deferred income taxes
    
    
    105
    
    
    
    614Increase in trade receivables
    
    
    (252
    )
    
    
    (213
    )Increase in inventories
    
    
    (4,332
    )
    
    
    (3,771
    )Increase in other current assets
    
    
    (1,825
    )
    
    
    (668
    )Decrease (increase) in intangible assets and other noncurrent assets
    
    
    1,367
    
    
    
    (684
    )Increase in trade payables
    
    
    2,721
    
    
    
    1,611(Decrease) increase in accrued expenses
    
    
    (951
    )
    
    
    4,061Increase in federal and state income taxes payable
    
    
    8,316
    
    
    
    4,550Increase (decrease) in other long-term liabilities
    
    
    37
    
    
    
    (1,333
    )Increase in long-term income taxes payable
    
    
    29
    
    
    
    172Total adjustments
    
    
    16,104
    
    
    
    15,160Net cash provided by operating activities
    
    
    35,517
    
    
    
    30,626Cash flows from investing activities:Capital expenditures
    
    
    (8,223
    )
    
    
    (7,106
    )Acquisition of Valley Forge, net of cash acquired
    
    
    
    
    
    
    72Acquisition of Midwest Tire, net of cash acquired
    
    
    (2,010
    )Acquisition of Autotire, net of cash acquired
    
    
    (7,348
    )Proceeds from the disposal of property, plant and equipment
    
    
    464
    
    
    
    1,156Net cash used for investing activities
    
    
    (17,117
    )
    
    
    (5,878
    )Cash flows from financing activities:Proceeds from borrowings
    
    
    65,251
    
    
    
    56,859Principal payments on long-term debt and capital
lease obligations
    
    
    (82,414
    )
    
    
    (80,838
    )Exercise of stock options
    
    
    2,711
    
    
    
    1,009Excess tax benefits from share-based payment arrangements
    
    
    1,020
    
    
    
    126Dividends to shareholders
    
    
    (4,006
    )
    
    
    (2,335
    )Net cash used for financing activities
    
    
    (17,438
    )
    
    
    (25,179
    )Increase in cash
    
    
    962
    
    
    
    (431
    )Cash at beginning of period
    
    
    3,336
    
    
    
    2,108Cash at end of period
    
    $
    4,298
    
    
    $
    1,677
   6




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##### Table of Contents



Note 1  Condensed Consolidated Financial Statements
    Quarter Ended Fiscal September 2009:
    
    June 28, 2009  September 26, 2009 (13 weeks)Quarter Ended Fiscal September 2008:
    
    June 29, 2008  September 27, 2008 (13 weeks)Six Months Ended Fiscal September 2009:
    
    March 29, 2009  September 26, 2009 (26 weeks)Six Months Ended Fiscal September 2008:
    
    March 30, 2008  September 27, 2008 (26 weeks)
  Note 2  Acquisitions
       7




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##### Table of Contents



As of September 26, 2009(Dollars in thousands)Other current assets
    
    $
    2,496Intangible assets
    
    
    2,911Other noncurrent assets
    
    
    1,434Current liabilities
    
    
    (3,005
    )Long-term liabilities
    
    
    (237
    )Total net identifiable assets acquired
    
    $
    3,599Total consideration transferred
    
    $
    9,361Less: total net identifiable assets acquired
    
    
    3,599Goodwill
    
    $
    5,762
  Note 3  Earnings Per Share
   Quarter Ended
    
    
    Six Months EndedFiscal September
    
    
    Fiscal September2009
    
    
    2008
    
    
    2009
    
    
    2008(Dollars in thousands, except per share data)Numerator for earnings per common share calculation:Net Income
    
    $
    10,002
    
    
    $
    7,672
    
    
    $
    19,413
    
    
    $
    15,466Less: Preferred stock dividends
    
    
    35
    
    
    
    61
    
    
    
    102
    
    
    
    122Income available to common stockholders
    
    $
    9,967
    
    
    $
    7,611
    
    
    $
    19,311
    
    
    $
    15,344Denominator for earnings per common share calculation:Weighted average common shares, basic
    
    
    19,568
    
    
    
    18,531
    
    
    
    19,504
    
    
    
    18,459Effect of dilutive securities:Preferred Stock
    
    
    507
    
    
    
    1,014
    
    
    
    507
    
    
    
    1,014Stock options
    
    
    471
    
    
    
    685
    
    
    
    476
    
    
    
    686Weighted average number of common shares, diluted
    
    
    20,546
    
    
    
    20,230
    
    
    
    20,487
    
    
    
    20,159Basic Earnings per common share:
    
    $
    .51
    
    
    $
    .41
    
    
    $
    .99
    
    
    $
    .83Diluted Earnings per common share:
    
    $
    .49
    
    
    $
    .38
    
    
    $
    .95
    
    
    $
    .77
  8




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##### Table of Contents



Note 4  Income Taxes
    Note 5  Derivative Financial Instruments
       9




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##### Table of Contents



September 26, 2009NotionalAmount ofUnderlying
    
    
    Fixed Rate
    
    
    Year ofInterest Rate Swaps
    
    Debt
    
    
    Received
    
    
    Transaction
    
    
    Maturity
    
    
    Fair Value(Dollars in thousands)Swaps associated with:1 month U.S. LIBOR
    
    $
    10,000
    
    
    
    3.29
    %
    
    
    2008
    
    
    
    2010
    
    
    $
    (240
    )1 month U.S. LIBOR
    
    
    10,000
    
    
    
    3.27
    %
    
    
    2008
    
    
    
    2010
    
    
    
    (239
    )1 month U.S. LIBOR
    
    
    10,000
    
    
    
    3.27
    %
    
    
    2008
    
    
    
    2010
    
    
    
    (238
    )$
    30,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    (717
    )
  Liability Derivatives as of September 26, 2009Balance Sheet Location
    
    
    Fair Value(Dollars in thousands)Interest rate contracts designated as hedging instruments under SFAS 133
    
    Other current liabilities
    
    $
    717
  Note 6  Fair Value of Financial Instruments
  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.
  10




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##### Table of Contents



Significant Other Observable 
Inputs (Level 2)Amount(Dollars in thousands)LiabilitiesDerivatives
    
    $
    717
 Note 7  Supplemental Disclosure of Cash Flow Information
    Fair value of assets acquired
    
    $
    6,838,000Goodwill acquired
    
    
    5,762,000Cash paid, net of cash acquired
    
    
    (9,358,000
    )Liabilities assumed
    
    $
    3,242,000
           11




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##### Table of Contents



Note 8  Cash Dividend
  Note 9  Litigation
   Note 10  Commitment
  Note 11  Subsequent Event
   12




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##### Table of Contents



Item 2.
    
    Managements Discussion and Analysis of Financial Condition and Results of
Operations
 Results of Operations
   Quarter Ended
    
    
    Six Months EndedFiscal September
    
    
    Fiscal September2009
    
    
    2008
    
    
    2009
    
    
    2008Sales
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %Cost of sales, including distribution
and occupancy costs
    
    
    56.9
    
    
    
    58.0
    
    
    
    56.5
    
    
    
    57.8Gross profit
    
    
    43.1
    
    
    
    42.0
    
    
    
    43.5
    
    
    
    42.2Operating, selling, general and
administrative expenses
    
    
    30.1
    
    
    
    30.7
    
    
    
    30.3
    
    
    
    30.6Intangible amortization
    
    
    .1
    
    
    
    .1
    
    
    
    .1
    
    
    
    .1(Gain) loss on disposal of assets
    
    
    
    
    
    
    (.2
    )
    
    
    
    
    
    
    (.1
    )Total operating expenses
    
    
    30.2
    
    
    
    30.5
    
    
    
    30.5
    
    
    
    30.6Operating income
    
    
    12.8
    
    
    
    11.5
    
    
    
    13.0
    
    
    
    11.5Interest expense  net
    
    
    1.1
    
    
    
    1.3
    
    
    
    1.3
    
    
    
    1.3Other income  net
    
    
    (.1
    )
    
    
    (.2
    )
    
    
    
    
    
    
    (.1
    )Income before provision for income taxes
    
    
    11.8
    
    
    
    10.3
    
    
    
    11.8
    
    
    
    10.3Provision for income taxes
    
    
    4.5
    
    
    
    3.9
    
    
    
    4.5
    
    
    
    3.9Net income
    
    
    7.3
    %
    
    
    6.4
    %
    
    
    7.3
    %
    
    
    6.4
    %
 Second Quarter and Six Months Ended September 26, 2009 Compared To Second Quarter and Six Months
Ended September 27, 2008
   13




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14




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##### Table of Contents



Interim Period Reporting
   15




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##### Table of Contents



Capital Resources and Liquidity
 Capital Resources
  Liquidity
       Recent Accounting Pronouncements
 Fair Value Measurements
   16




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##### Table of Contents



Business
Combinations and Noncontrolling Interests in Consolidated Financial Statements
  Employers Disclosures About Postretirement Benefit Plan Assets
  
 Item 3.
    
    Quantitative and Qualitative Disclosures About Market Risk
    
 Item 4.
    
    Controls and Procedures
 Disclosure controls and procedures
   Changes in internal controls
   17




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##### Table of Contents



Item 1.
    
    Legal Proceedings
   
 Item 1A.
    
    Risk Factors
  
 Item 4.
    
    Submission of Matters to a Vote of Security Holders
  Name
    
    Votes For
    
    
    Votes WithheldFrederick M. Danziger
    
    
    17,620,138
    
    
    
    433,067Robert G. Gross
    
    
    16,182,139
    
    
    
    1,871,066Peter J. Solomon
    
    
    16,173,679
    
    
    
    1,879,526Francis R. Strawbridge
    
    
    17,782,185
    
    
    
    271,020
    
 Item 6.
    
    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
  18




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##### Table of Contents



MONRO MUFFLER BRAKE, INC.DATE: November 5, 2009
    By:
    /s/ Robert G. GrossRobert G. GrossChief Executive Officer and Chairman of the BoardDATE: November 5, 2009
    By:
    /s/ Catherine DAmicoCatherine DAmicoExecutive Vice President-Finance, 
Treasurer
and Chief Financial Officer  19




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##### Table of Contents



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
    
    
    2131.2
    
    
    Certification of Catherine DAmico pursuant to Section
302 of the Sarbanes-Oxley Act of 2002
    
    
    2232.1
    
    
    Certification pursuant to 18 U.S.C. Section 1350,
as adopted pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002
    
    
    23
  20