##### 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 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 
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)
 (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
(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 26, 2009 and March 28, 2009
    
    
    3Consolidated Statement of Income for the quarters and nine months ended December 26, 2009 and December 27, 2008
    
    
    4Consolidated Statement of Changes in Shareholders Equity for the nine months ended December 26, 2009
    
    
    5Consolidated Statement of Cash Flows for the nine months ended December 26, 2009 and December 27, 2008
    
    
    6Notes to Consolidated Financial Statements
    
    
    7Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    14Item 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 26,
    
    
    March 28,2009
    
    
    2009(Dollars in thousands)AssetsCurrent assets:Cash and equivalents
    
    $
    4,874
    
    
    $
    3,336Trade receivables
    
    
    2,109
    
    
    
    2,051Federal and state income tax receivable
    
    
    
    
    
    
    1,268Inventories
    
    
    85,931
    
    
    
    71,443Deferred income tax asset
    
    
    4,044
    
    
    
    4,076Other current assets
    
    
    20,440
    
    
    
    19,540Total current assets
    
    
    117,398
    
    
    
    101,714Property, plant and equipment
    
    
    383,892
    
    
    
    353,113Less  Accumulated depreciation and amortization
    
    
    (179,993
    )
    
    
    (168,052
    )Net property, plant and equipment
    
    
    203,899
    
    
    
    185,061Goodwill
    
    
    79,188
    
    
    
    71,816Intangible assets and other noncurrent assets
    
    
    21,229
    
    
    
    16,401Long term deferred tax asset
    
    
    
    
    
    
    1,759Total assets
    
    $
    421,714
    
    
    $
    376,751Liabilities and Shareholders EquityCurrent liabilities:Current portion of long-term debt
    
    $
    1,427
    
    
    $
    1,696Trade payables
    
    
    39,515
    
    
    
    34,751Federal and state income taxes payable
    
    
    2,694Accrued payroll, payroll taxes and other payroll benefits
    
    
    16,477
    
    
    
    13,534Accrued insurance
    
    
    12,317
    
    
    
    9,495Warranty reserves
    
    
    5,479
    
    
    
    4,569Other current liabilities
    
    
    13,150
    
    
    
    7,280Total current liabilities
    
    
    91,059
    
    
    
    71,325Long-term debt
    
    
    87,714
    
    
    
    97,098Accrued rent expense
    
    
    6,566
    
    
    
    6,552Other long-term liabilities
    
    
    4,096
    
    
    
    4,350Deferred income tax liability
    
    
    3,585Long-term income taxes payable
    
    
    3,513
    
    
    
    3,135Total liabilities
    
    
    196,533
    
    
    
    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; 23,524,529 and
22,999,313 shares issued at December 26, 2009 and March 28, 2009, respectively
    
    
    235
    
    
    
    230Treasury Stock, 3,682,429 and 3,580,829 shares at December 26, 2009 and March 28, 2009,
respectively, at cost
    
    
    (70,590
    )
    
    
    (67,454
    )Additional paid-in capital
    
    
    86,274
    
    
    
    74,443Accumulated other comprehensive loss
    
    
    (3,185
    )
    
    
    (3,485
    )Retained earnings
    
    
    212,398
    
    
    
    190,508Total shareholders equity
    
    
    225,181
    
    
    
    194,291Total liabilities and shareholders equity
    
    $
    421,714
    
    
    $
    376,751
   3




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##### Table of Contents



MONRO MUFFLER BRAKE, INC.
 
 CONSOLIDATED STATEMENT OF INCOME
  Quarter Ended
    
    
    Nine Months EndedFiscal December
    
    
    Fiscal December2009
    
    
    2008
    
    
    2009
    
    
    2008(Dollars in thousands, except per share data)Sales
    
    $
    152,729
    
    
    $
    118,680
    
    
    $
    417,408
    
    
    $
    358,961Cost of sales, including distribution and occupancy
costs
    
    
    94,171
    
    
    
    73,465
    
    
    
    243,588
    
    
    
    212,456Gross profit
    
    
    58,558
    
    
    
    45,215
    
    
    
    173,820
    
    
    
    146,505Operating, selling, general and administrative expenses
    
    
    43,531
    
    
    
    35,694
    
    
    
    123,836
    
    
    
    109,332Intangible amortization
    
    
    374
    
    
    
    112
    
    
    
    705
    
    
    
    368Loss (gain) on disposal of assets
    
    
    402
    
    
    
    (510
    )
    
    
    522
    
    
    
    (828
    )Total operating expenses
    
    
    44,307
    
    
    
    35,296
    
    
    
    125,063
    
    
    
    108,872Operating income
    
    
    14,251
    
    
    
    9,919
    
    
    
    48,757
    
    
    
    37,633Interest expense, net of interest income for
the quarter of $17 in 2009 and $7 in
2008, and year-to-date of $45 in 2009
and $21 in 2008
    
    
    998
    
    
    
    1,536
    
    
    
    4,337
    
    
    
    4,648Other income, net
    
    
    (71
    )
    
    
    (99
    )
    
    
    (189
    )
    
    
    (360
    )Income before provision for income taxes
    
    
    13,324
    
    
    
    8,482
    
    
    
    44,609
    
    
    
    33,345Provision for income taxes
    
    
    5,417
    
    
    
    2,904
    
    
    
    17,289
    
    
    
    12,301Net income
    
    $
    7,907
    
    
    $
    5,578
    
    
    $
    27,320
    
    
    $
    21,044Earnings per share:Basic
    
    $
    .40
    
    
    $
    .29
    
    
    $
    1.39
    
    
    $
    1.12Diluted
    
    $
    .38
    
    
    $
    .28
    
    
    $
    1.33
    
    
    $
    1.05
   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
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    27,320
    
    
    
    27,320Other comprehensive income:Unrealized gain on derivatives
contracts ($484 pre-tax)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    300
    
    
    
    
    
    
    
    30027,620Cash dividends: Preferred ($.27 per CSE) (1)
(2)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (137
    )
    
    
    (137
    )Common ($.27 per share) (2)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (5,293
    )
    
    
    (5,293
    )Tax benefit from exercise of stock options
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,894
    
    
    
    
    
    
    
    
    
    
    
    2,894Exercise of stock options
    
    
    
    
    
    
    5
    
    
    
    (3,136
    )
    
    
    7,344
    
    
    
    
    
    
    
    
    
    
    
    4,213Stock option compensation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,593
    
    
    
    
    
    
    
    
    
    
    
    1,593Balance at December 26, 2009
    
    $
    49
    
    
    $
    235
    
    
    $
    (70,590
    )
    
    $
    86,274
    
    
    $
    (3,185
    )
    
    $
    212,398
    
    
    $
    225,181
 (1)
    
    CSE  Common stock equivalent(2)
    
    Includes fourth quarter fiscal 2009 dividend payment of $.06 per CSE paid May 4, 2009;
first and second quarter fiscal 2010 dividend payments of $.07 per CSE paid June 19, 2009 and
September 21, 2009, respectively; and third quarter fiscal 2010 payment of $.07 per CSE declared on
December 7, 2009 and paid on December 29, 2009.   5




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MONRO MUFFLER BRAKE, INC.
 
 CONSOLIDATED STATEMENT OF CASH FLOWS
  Nine Months EndedFiscal December2009
    
    
    2008(Dollars in thousands)Increase (Decrease) in CashCash flows from operating activities:Net income
    
    $
    27,320
    
    
    $
    21,044Adjustments to reconcile net income to net cash provided
by operating activities Depreciation and amortization
    
    
    16,423
    
    
    
    15,270Loss (gain) on disposal of property, plant and equipment
    
    
    522
    
    
    
    (828
    )Stock-based compensation expense
    
    
    1,593
    
    
    
    1,407Excess tax benefits from share-based payment arrangements
    
    
    (1,810
    )
    
    
    (3,173
    )Net change in deferred income taxes
    
    
    5,722
    
    
    
    2,780Decrease (increase) in trade receivables
    
    
    486
    
    
    
    (116
    )Decrease (increase) in inventories
    
    
    637
    
    
    
    (3,436
    )Decrease in other current assets
    
    
    421
    
    
    
    75Decrease in intangible assets and other noncurrent assets
    
    
    1,977
    
    
    
    27Increase in trade payables
    
    
    4,678
    
    
    
    7,343Increase in accrued expenses
    
    
    6,734
    
    
    
    3,017Increase in federal and state income taxes payable
    
    
    7,056
    
    
    
    2,947Increase (decrease) in other long-term liabilities
    
    
    213
    
    
    
    (1,500
    )Increase in long-term income taxes payable
    
    
    352
    
    
    
    343Total adjustments
    
    
    45,004
    
    
    
    24,156Net cash provided by operating activities
    
    
    72,324
    
    
    
    45,200Cash flows from investing activities:Capital expenditures
    
    
    (16,207
    )
    
    
    (16,808
    )Acquisition, net of cash acquired
    
    
    
    
    
    
    72Acquisition of Tire Warehouse, net of cash acquired
    
    
    (32,919
    )Acquisition of Autotire, net of cash acquired
    
    
    (7,347
    )Acquisition of Midwest Tire, net of cash acquired
    
    
    (2,010
    )Acquisition of Cheshire Tire, net of cash acquired
    
    
    (1,925
    )Proceeds from the disposal of property, plant and equipment
    
    
    555
    
    
    
    1,882Net cash used for investing activities
    
    
    (59,853
    )
    
    
    (14,854
    )Cash flows from financing activities:Proceeds from borrowings
    
    
    128,665
    
    
    
    85,585Principal payments on long-term debt and capital
lease obligations
    
    
    (140,983
    )
    
    
    (115,328
    )Exercise of stock options
    
    
    5,005
    
    
    
    1,030Excess tax benefits from share-based payment arrangements
    
    
    1,810
    
    
    
    3,173Dividends to shareholders
    
    
    (5,430
    )
    
    
    (3,508
    )Net cash used for financing activities
    
    
    (10,933
    )
    
    
    (29,048
    )Increase in cash
    
    
    1,538
    
    
    
    1,298Cash at beginning of period
    
    
    3,336
    
    
    
    2,108Cash at end of period
    
    $
    4,874
    
    
    $
    3,406
   6




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##### Table of Contents



Note 1  Condensed Consolidated Financial Statements
    Quarter Ended Fiscal December 2009:
    
    September 27, 2009  December 26, 2009 (13 weeks)Quarter Ended Fiscal December 2008:
    
    September 28, 2008  December 27, 2008 (13 weeks)Nine Months Ended Fiscal December 2009:
    
    March 29, 2009  December 26, 2009 (39 weeks)Nine Months Ended Fiscal December 2008:
    
    March 30, 2008  December 27, 2008 (39 weeks)
  Note 2  Acquisitions
      7




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##### Table of Contents



As of Acquisition Date(Dollars in thousands)Other current assets
    
    $
    17,059Intangible assets
    
    
    7,373Other noncurrent assets
    
    
    17,970Current liabilities
    
    
    (3,742
    )Long-term liabilities
    
    
    (714
    )Total net identifiable assets acquired
    
    $
    37,946Total consideration transferred
    
    $
    45,318Less: total net identifiable assets acquired
    
    
    37,946Goodwill
    
    $
    7,372
    Note 3  Earnings Per Share
   8




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Quarter Ended
    
    
    Nine Months EndedFiscal December
    
    
    Fiscal December2009
    
    
    2008
    
    
    2009
    
    
    2008(Dollars in thousands, except per share data)Numerator for earnings per common share calculation:Net Income
    
    $
    7,907
    
    
    $
    5,578
    
    
    $
    27,320
    
    
    $
    21,044Less: Preferred stock dividends
    
    
    35
    
    
    
    61
    
    
    
    137
    
    
    
    183Income available to common stockholders
    
    $
    7,872
    
    
    $
    5,517
    
    
    $
    27,183
    
    
    $
    20,861Denominator for earnings per common share
calculation:Weighted average common shares, basic
    
    
    19,766
    
    
    
    19,040
    
    
    
    19,594
    
    
    
    18,653Effect of dilutive securities:Preferred Stock
    
    
    507
    
    
    
    713
    
    
    
    507
    
    
    
    913Stock options
    
    
    506
    
    
    
    342
    
    
    
    475
    
    
    
    496Weighted average number of common shares, diluted
    
    
    20,779
    
    
    
    20,095
    
    
    
    20,576
    
    
    
    20,062Basic Earnings per common share:
    
    $
    .40
    
    
    $
    .29
    
    
    $
    1.39
    
    
    $
    1.12Diluted Earnings per common share:
    
    $
    .38
    
    
    $
    .28
    
    
    $
    1.33
    
    
    $
    1.05
  Note 4  Income Taxes
      9




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Note 5  Derivative Financial Instruments
        December 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
    
    
    $
    (176
    )1 month U.S. LIBOR
    
    
    10,000
    
    
    
    3.27
    %
    
    
    2008
    
    
    
    2010
    
    
    
    (175
    )1 month U.S. LIBOR
    
    
    10,000
    
    
    
    3.27
    %
    
    
    2008
    
    
    
    2010
    
    
    
    (174
    )$
    30,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    (525
    )
  Liability Derivatives as of December 26, 2009Balance Sheet Location
    
    
    Fair Value(Dollars in thousands)Interest rate contracts designated as hedging instruments under accounting
guidance on derivative instruments and hedging activities
    
    Other current liabilities
    
    $
    525
  10




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##### Table of Contents



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; and
 Level 3.
    
    Unobservable inputs in which there is little or no market data, which require the
reporting entity to develop its own assumptions.
  Significant Other ObservableInputs (Level 2)Amount(Dollars in thousands)LiabilitiesDerivatives
    
    $
    525
  11




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##### Table of Contents



Note 7  Supplemental Disclosure of Cash Flow Information
    Fair value of assets acquired
    
    $
    41,286,000Goodwill acquired
    
    
    7,372,000Cash paid, net of cash acquired
    
    
    (44,201,000
    )Liabilities assumed
    
    $
    4,457,000
               12




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##### Table of Contents



Note 8  Cash Dividend
  Note 9  Litigation
   Note 10  Commitment
   13




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##### Table of Contents



Managements Discussion and Analysis of Financial Condition and Results of
Operations
 Results of Operations
   Quarter Ended
    
    
    Nine Months EndedFiscal December
    
    
    Fiscal December2009
    
    
    2008
    
    
    2009
    
    
    2008Sales
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %Cost of sales, including distribution
and occupancy costs
    
    
    61.7
    
    
    
    61.9
    
    
    
    58.4
    
    
    
    59.2Gross profit
    
    
    38.3
    
    
    
    38.1
    
    
    
    41.6
    
    
    
    40.8Operating, selling, general and
administrative expenses
    
    
    28.5
    
    
    
    30.1
    
    
    
    29.7
    
    
    
    30.5Intangible amortization
    
    
    .2
    
    
    
    .1
    
    
    
    .2
    
    
    
    .1Loss (gain) on disposal of assets
    
    
    .3
    
    
    
    (.4
    )
    
    
    .1
    
    
    
    (.2
    )Total operating expenses
    
    
    29.0
    
    
    
    29.7
    
    
    
    30.0
    
    
    
    30.3Operating income
    
    
    9.3
    
    
    
    8.4
    
    
    
    11.7
    
    
    
    10.5Interest expense  net
    
    
    .7
    
    
    
    1.3
    
    
    
    1.0
    
    
    
    1.3Other income  net
    
    
    
    
    
    
    (.1
    )
    
    
    
    
    
    
    (.1
    )Income before provision for income taxes
    
    
    8.7
    
    
    
    7.1
    
    
    
    10.7
    
    
    
    9.3Provision for income taxes
    
    
    3.6
    
    
    
    2.4
    
    
    
    4.1
    
    
    
    3.4Net income
    
    
    5.2
    %
    
    
    4.7
    %
    
    
    6.5
    %
    
    
    5.9
    %
  14




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Third Quarter and Nine Months Ended December 26, 2009 Compared To Third Quarter and Nine Months
Ended December 27, 2008
               15




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16




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##### Table of Contents



Interim Period Reporting
  Capital Resources and Liquidity
 Capital Resources
  Liquidity
      Recent Accounting Pronouncements
 Business Combinations and Noncontrolling Interests in Consolidated Financial Statements
   17




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Employers Disclosures About Postretirement Benefit Plan Assets
  
 Quantitative and Qualitative Disclosures About Market Risk
    
 Controls and Procedures
 Disclosure controls and procedures
   Changes in internal controls
   18




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##### Table of Contents



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 4, 2010
    
    By
    
    /s/ Robert G. Gross

Robert G. GrossChief Executive Officer and Chairman of the BoardDATE: February 4, 2010
    
    By
    
    /s/ Catherine DAmico

Catherine DAmicoExecutive Vice President-Finance, Treasurerand Chief Financial Officer
  20




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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
  21