##### 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 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 
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
  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




---



##### 



INDEX
 Page No.Part I. Financial InformationItem 1. Financial StatementsConsolidated Balance Sheet at
September 27, 2008 and March 29, 2008
    
    
    3Consolidated Statement of Income for the quarters and six
months ended September 27, 2008 and September 29, 2007
    
    
    4Consolidated Statement of Changes in Shareholders
Equity for the six months ended September 27, 2008
    
    
    5Consolidated Statement of Cash Flows for the six months
ended September 27, 2008 and September 29, 2007
    
    
    6Notes to Consolidated Financial Statements
    
    
    7Item 2. Managements Discussion and Analysis of
Financial Condition and Results of Operations
    
    
    12Item 3. Quantitative and Qualitative Disclosures About Market Risk
    
    
    16Item 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
    
    
    20EX-31.1EX-31.2EX-32.1
  2




---



##### Table of Contents



Financial Statements
 MONRO MUFFLER BRAKE, INC.
 
 CONSOLIDATED BALANCE SHEET
 (Unaudited)September 27,
    
    
    March 29,2008
    
    
    2008(Dollars in thousands)AssetsCurrent assets:Cash and equivalents
    
    $
    1,677
    
    
    $
    2,108Trade receivables
    
    
    2,329
    
    
    
    2,116Inventories
    
    
    69,954
    
    
    
    66,183Deferred income tax asset
    
    
    3,781
    
    
    
    3,840Other current assets
    
    
    19,484
    
    
    
    18,626Total current assets
    
    
    97,225
    
    
    
    92,873Property, plant and equipment
    
    
    342,641
    
    
    
    338,970Less  Accumulated depreciation and amortization
    
    
    (161,730
    )
    
    
    (154,786
    )Net property, plant and equipment
    
    
    180,911
    
    
    
    184,184Goodwill
    
    
    71,592
    
    
    
    71,472Intangible assets and other noncurrent assets
    
    
    19,272
    
    
    
    18,764Long term deferred tax asset
    
    
    2,563
    
    
    
    3,176Total assets
    
    $
    371,563
    
    
    $
    370,469Liabilities and Shareholders EquityCurrent liabilities:Current portion of long-term debt
    
    $
    1,434
    
    
    $
    1,603Trade payables
    
    
    29,076
    
    
    
    27,257Federal and state income taxes payable
    
    
    5,229
    
    
    
    914Accrued payroll, payroll taxes and other payroll benefits
    
    
    10,701
    
    
    
    10,596Accrued insurance
    
    
    8,393
    
    
    
    6,356Warranty reserves
    
    
    4,332
    
    
    
    4,086Other current liabilities
    
    
    9,404
    
    
    
    7,499Total current liabilities
    
    
    68,569
    
    
    
    58,311Long-term debt
    
    
    99,250
    
    
    
    122,585Accrued rent expense
    
    
    6,698
    
    
    
    6,944Other long-term liabilities
    
    
    3,607
    
    
    
    4,729Long-term income taxes payable
    
    
    3,224
    
    
    
    3,052Total liabilities
    
    
    181,348
    
    
    
    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; 21,870,214 and
21,683,859 shares issued at September 27, 2008 and March 29, 2008, respectively
    
    
    219
    
    
    
    217Treasury Stock, 3,322,392 shares, at cost
    
    
    (62,160
    )
    
    
    (62,160
    )Additional paid-in capital
    
    
    69,048
    
    
    
    66,756Accumulated other comprehensive loss
    
    
    (1,240
    )
    
    
    (1,182
    )Retained earnings
    
    
    184,251
    
    
    
    171,120Total shareholders equity
    
    
    190,215
    
    
    
    174,848Total liabilities and shareholders equity
    
    $
    371,563
    
    
    $
    370,469
  3




---



##### Table of Contents



MONRO MUFFLER BRAKE, INC.
 
 CONSOLIDATED STATEMENT OF INCOME
  Quarter Ended
    
    
    Six Months EndedFiscal September
    
    
    Fiscal September2008
    
    
    2007
    
    
    2008
    
    
    2007(Dollars in thousands, except per share data)Sales
    
    $
    119,912
    
    
    $
    112,043
    
    
    $
    240,281
    
    
    $
    219,664Cost of sales, including distribution and occupancy
costs
    
    
    69,511
    
    
    
    66,505
    
    
    
    138,991
    
    
    
    127,449Gross profit
    
    
    50,401
    
    
    
    45,538
    
    
    
    101,290
    
    
    
    92,215Operating, selling, general and administrative expenses
    
    
    36,786
    
    
    
    33,805
    
    
    
    73,638
    
    
    
    66,489Intangible amortization
    
    
    133
    
    
    
    141
    
    
    
    256
    
    
    
    263(Gain) loss on disposal of assets
    
    
    (286
    )
    
    
    101
    
    
    
    (319
    )
    
    
    155Total operating expenses
    
    
    36,633
    
    
    
    34,047
    
    
    
    73,575
    
    
    
    66,907Operating income
    
    
    13,768
    
    
    
    11,491
    
    
    
    27,715
    
    
    
    25,308Interest expense, net of interest income for
the quarter of $10 in 2008 and $7 in
2007, and year-to-date of $13 in 2008
and $16 in 2007
    
    
    1,592
    
    
    
    1,255
    
    
    
    3,112
    
    
    
    2,444Other income, net
    
    
    (188
    )
    
    
    (155
    )
    
    
    (260
    )
    
    
    (571
    )Income before provision for income taxes
    
    
    12,364
    
    
    
    10,391
    
    
    
    24,863
    
    
    
    23,435Provision for income taxes
    
    
    4,692
    
    
    
    3,890
    
    
    
    9,397
    
    
    
    8,751Net income
    
    $
    7,672
    
    
    $
    6,501
    
    
    $
    15,466
    
    
    $
    14,684Earnings per share:Basic
    
    $
    .41
    
    
    $
    .31
    
    
    $
    .83
    
    
    $
    .70Diluted
    
    $
    .38
    
    
    $
    .29
    
    
    $
    .77
    
    
    $
    .64
  4




---



##### 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 29, 2008
    
    $
    97
    
    
    $
    217
    
    
    $
    (62,160
    )
    
    $
    66,756
    
    
    $
    (1,182
    )
    
    $
    171,120
    
    
    $
    174,848Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    15,466
    
    
    
    15,466Other comprehensive loss:SFAS No. 133 adjustment (1)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (19
    )
    
    
    
    
    
    
    (19
    )Pension liability adjustment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (39
    )
    
    
    
    
    
    
    (39
    )Total comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    15,408Cash dividends: Preferred ($.12
per CSE)
(2)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (122
    )
    
    
    (122
    )Common ($.12 per share)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,213
    )
    
    
    (2,213
    )Tax benefit from exercise of stock options
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    235
    
    
    
    
    
    
    
    
    
    
    
    235Exercise of stock options
    
    
    
    
    
    
    2
    
    
    
    
    
    
    
    1,007
    
    
    
    
    
    
    
    
    
    
    
    1,009Stock option compensation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,050
    
    
    
    
    
    
    
    
    
    
    
    1,050Balance at September 27, 2008
    
    $
    97
    
    
    $
    219
    
    
    $
    (62,160
    )
    
    $
    69,048
    
    
    $
    (1,240
    )
    
    $
    184,251
    
    
    $
    190,215
 
 (1)
    
    Item is reported net of related taxes of $11.(2)
    
    CSE  Common stock equivalent  5




---



##### Table of Contents



MONRO MUFFLER BRAKE, INC.
 
 CONSOLIDATED STATEMENT OF CASH FLOWS
  Six Months Ended FiscalSeptember2008
    
    
    2007(Dollars in thousands)Increase (Decrease) in CashCash flows from operating activities:Net income
    
    $
    15,466
    
    
    $
    14,684Adjustments to reconcile net income to net cash provided
by operating activities -Depreciation and amortization
    
    
    10,216
    
    
    
    9,785(Gain) loss on disposal of property, plant and equipment
    
    
    (319
    )
    
    
    155Stock-based compensation expense
    
    
    1,050
    
    
    
    593Excess tax benefits from share-based payment arrangements
    
    
    (126
    )
    
    
    (117
    )Net change in deferred income taxes
    
    
    614
    
    
    
    (171
    )Increase in trade receivables
    
    
    (213
    )
    
    
    (471
    )Increase in inventories
    
    
    (3,771
    )
    
    
    (3,172
    )(Increase) decrease in other current assets
    
    
    (668
    )
    
    
    1,458(Increase) decrease in other noncurrent assets
    
    
    (684
    )
    
    
    630Increase in trade payables
    
    
    1,611
    
    
    
    3,892Increase in accrued expenses
    
    
    4,061
    
    
    
    1,213Increase in federal and state income taxes payable
    
    
    4,550
    
    
    
    518Decrease in other long-term liabilities
    
    
    (1,333
    )
    
    
    (465
    )Increase in long-term income taxes payable
    
    
    172Total adjustments
    
    
    15,160
    
    
    
    13,848Net cash provided by operating activities
    
    
    30,626
    
    
    
    28,532Cash flows from investing activities:Capital expenditures
    
    
    (7,106
    )
    
    
    (7,562
    )Acquisition of ProCare, net of cash acquired
    
    
    
    
    
    
    (41
    )Acquisition of Craven, net of cash acquired
    
    
    
    
    
    
    (12,363
    )Acquisition of Valley Forge, net of cash acquired
    
    
    72
    
    
    
    (4,470
    )Proceeds from the disposal of property, plant and equipment
    
    
    1,156
    
    
    
    70Net cash used for investing activities
    
    
    (5,878
    )
    
    
    (24,366
    )Cash flows from financing activities:Proceeds from borrowings
    
    
    56,859
    
    
    
    77,202Principal payments on long-term debt and capital
lease obligations
    
    
    (80,838
    )
    
    
    (69,741
    )Purchase of common stock
    
    
    
    
    
    
    (10,625
    )Exercise of stock options
    
    
    1,009
    
    
    
    1,357Excess tax benefits from share-based payment arrangements
    
    
    126
    
    
    
    117Dividends to shareholders
    
    
    (2,335
    )
    
    
    (2,346
    )Net cash used for financing activities
    
    
    (25,179
    )
    
    
    (4,036
    )(Decrease) increase in cash
    
    
    (431
    )
    
    
    130Cash at beginning of period
    
    
    2,108
    
    
    
    965Cash at end of period
    
    $
    1,677
    
    
    $
    1,095
  6




---



##### Table of Contents



Note 1  Condensed Consolidated Financial Statements
    Quarter Ended Fiscal September 2008:
    
    June 29, 2008  September 27, 2008 (13 weeks)Quarter Ended Fiscal September 2007:
    
    July 1, 2007  September 29, 2007 (13 weeks)Six Months Ended Fiscal September 2008:
    
    March 30, 2008  September 27, 2008 (26 weeks)Six Months Ended Fiscal September 2007:
    
    April 1, 2007  September 29, 2007 (26 weeks)
  Note 2  Acquisitions
   Note 3  Earnings Per Share
  7




---



##### Table of Contents



Quarter Ended
    
    
    Six Months EndedFiscal September
    
    
    Fiscal September2008
    
    
    2007
    
    
    2008
    
    
    2007(Dollars in thousands, except per share data)Numerator for earnings per common share calculation:Net Income
    
    $
    7,672
    
    
    $
    6,501
    
    
    $
    15,466
    
    
    $
    14,684Less: Preferred stock dividends
    
    
    61
    
    
    
    61
    
    
    
    122
    
    
    
    108Income available to common stockholders
    
    $
    7,611
    
    
    $
    6,440
    
    
    $
    15,344
    
    
    $
    14,576Denominator for earnings per common share
calculation:Weighted average common shares, basic
    
    
    18,531
    
    
    
    20,866
    
    
    
    18,459
    
    
    
    20,905Effect of dilutive securities:Preferred Stock
    
    
    1,014
    
    
    
    1,014
    
    
    
    1,014
    
    
    
    1,014Stock options
    
    
    685
    
    
    
    911
    
    
    
    686
    
    
    
    935Weighted average number of common shares, diluted
    
    
    20,230
    
    
    
    22,791
    
    
    
    20,159
    
    
    
    22,854Basic Earnings per common share:
    
    $
    .41
    
    
    $
    .31
    
    
    $
    .83
    
    
    $
    .70Diluted Earnings per common share:
    
    $
    .38
    
    
    $
    .29
    
    
    $
    .77
    
    
    $
    .64
  Note 4  Income Taxes
     8




---



##### Table of Contents



Note 5  Derivative Financial Instruments
      Note 6  Fair Value Measurements
      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




---



##### Table of Contents



Interest rate swapsOther long-term liabilities
    
    $
    30,000
 Note 7  Supplemental Disclosure of Cash Flow Information
           Fair value of assets acquired
    
    $
    2,987,000Goodwill recorded
    
    
    14,222,000Cash paid in FY08, net of cash acquired
    
    
    (16,833,000
    )Liabilities assumed
    
    $
    376,000
    10




---



##### Table of Contents



Note 8  Stock Split
  Note 9  Cash Dividend
  Note 10  Litigation
   Note 11  Other Items
  Note 12  Commitment
  Note 13  Subsequent Event
  11




---



##### Table of Contents



Managements Discussion and Analysis of Financial Condition and Results of
Operations
 Results of Operations
   Quarter Ended
    
    Six Months EndedFiscal September
    
    Fiscal September2008
    
    2007
    
    2008
    
    2007Sales
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %Cost of sales, including distribution
and occupancy costs
    
    
    58.0
    
    
    
    59.4
    
    
    
    57.8
    
    
    
    58.0Gross profit
    
    
    42.0
    
    
    
    40.6
    
    
    
    42.2
    
    
    
    42.0Operating, selling, general and
administrative expenses
    
    
    30.7
    
    
    
    30.1
    
    
    
    30.6
    
    
    
    30.2Intangible amortization
    
    
    .1
    
    
    
    .1
    
    
    
    .1
    
    
    
    .1(Gain) loss on disposal of assets
    
    
    (.2
    )
    
    
    .1
    
    
    
    (.1
    )
    
    
    .1Total operating expenses
    
    
    30.5
    
    
    
    30.4
    
    
    
    30.6
    
    
    
    30.5Operating income
    
    
    11.5
    
    
    
    10.3
    
    
    
    11.5
    
    
    
    11.5Interest expense  net
    
    
    1.3
    
    
    
    1.1
    
    
    
    1.3
    
    
    
    1.1Other income  net
    
    
    (.2
    )
    
    
    (.1
    )
    
    
    (.1
    )
    
    
    (.3
    )Income before provision for income taxes
    
    
    10.3
    
    
    
    9.3
    
    
    
    10.3
    
    
    
    10.7Provision for income taxes
    
    
    3.9
    
    
    
    3.5
    
    
    
    3.9
    
    
    
    4.0Net income
    
    
    6.4
    %
    
    
    5.8
    %
    
    
    6.4
    %
    
    
    6.7
    %
 Second Quarter and Six Months Ended September 27, 2008 Compared To Second Quarter and Six Months
Ended September 29, 2007
  12




---



##### Table of Contents



13




---



##### Table of Contents



Interim Period Reporting
  14




---



##### Table of Contents



Capital Resources and Liquidity
 Capital Resources
  Liquidity
        Recent Accounting Pronouncements
  15




---



##### Table of Contents




    
    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.
    
 Quantitative and Qualitative Disclosures About Market Risk
   16




---



##### Table of Contents



Controls and Procedures
 Disclosure controls and procedures
   Changes in internal controls
  17




---



##### Table of Contents



Legal Proceedings
   
 Risk Factors
  
 Submission of Matters to a Vote of Security Holders
  Name
    
    Votes For
    
    Votes WithheldRichard A. Berenson
    
    
    16,751,567
    
    
    
    394,719Donald Glickman
    
    
    15,884,778
    
    
    
    1,261,508Lionel B. Spiro
    
    
    16,715,216
    
    
    
    431,070Elizabeth A. Wolszon
    
    
    15,102,046
    
    
    
    2,044,240
   
 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




---



##### Table of Contents



MONRO MUFFLER BRAKE, INC.DATE: November 4, 2008
    
By
    /s/ Robert G. Gross
Robert
G. Gross
Chief Executive Officer and Chairman of the BoardDATE: November 4, 2008
    
By
    /s/ Catherine DAmico
Catherine
DAmico
Executive Vice President-Finance, Treasurer
and Chief Financial Officer
 19




---



##### 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