-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Pg3EUdKQDfsuZX5vBc32mbev49gY/4fUA1qRS8A1e5duxhg0n/ENfT7l9/goEVFT Y2HRjvG85aKgf9lIvQoFsw== 0000950152-97-004838.txt : 19970703 0000950152-97-004838.hdr.sgml : 19970703 ACCESSION NUMBER: 0000950152-97-004838 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 7 CONFORMED PERIOD OF REPORT: 19970331 FILED AS OF DATE: 19970627 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: MONRO MUFFLER BRAKE INC CENTRAL INDEX KEY: 0000876427 STANDARD INDUSTRIAL CLASSIFICATION: 7500 IRS NUMBER: 160838627 STATE OF INCORPORATION: NY FISCAL YEAR END: 0331 FILING VALUES: FORM TYPE: 10-K SEC ACT: 1934 Act SEC FILE NUMBER: 000-19357 FILM NUMBER: 97631717 BUSINESS ADDRESS: STREET 1: 200 HOLLEDER PKWY CITY: ROCHESTER STATE: NY ZIP: 14615-3808 BUSINESS PHONE: 7166476100 10-K 1 MONRO MUFFLER BRAKE, INC. 10-K 1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-K (MARK ONE) [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 (FEE REQUIRED) For Fiscal Year Ended March 31, 1997 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED) Commission File Number 0-19357 MONRO MUFFLER BRAKE, INC. (Exact name of registrant as specified in its charter) New York 16-0838627 (State of incorporation) (I.R.S. Employer Identification No.) 200 Holleder Parkway, Rochester, New York 14615 (Address of principal executive offices) (Zip code) Registrant's telephone number, including area code (716) 647-6400 Securities registered pursuant to Section 12(b) of the Act: NONE Securities registered pursuant to Section 12(g) of the Act: Common Stock, par value $.01 per share (Title of Class) Indicate by check mark if the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No ----- ------- Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [ ] As of June 2, 1997, the aggregate market value of voting stock held by non-affiliates of the registrant was $108,655,190. As of June 2, 1997, 7,475,040 shares of the registrant's Common Stock, par value $.01 per share, were outstanding. DOCUMENTS INCORPORATED BY REFERENCE: Portions of the registrant's definitive proxy statement (to be filed pursuant to Regulation 14A) for the 1997 Annual Meeting of Shareholders (the "Proxy Statement") are incorporated by reference into Part III hereof. 2 PART I ------ ITEM 1. BUSINESS - - ---------------- GENERAL Monro Muffler Brake, Inc. ("Monro" or the "Company") is a chain of company-operated stores providing automotive undercar repair services in the United States. At March 31, 1997, Monro operated 313 stores in New York, Pennsylvania, Ohio, Connecticut, Massachusetts, West Virginia, Virginia, Maryland, Vermont, New Hampshire, New Jersey, North Carolina, South Carolina and Indiana. The Company's stores typically are situated in high-visibility locations in suburban areas and small towns. Monro serviced approximately 1,442,000 vehicles in fiscal 1997. * The predecessor to the Company was founded by Charles J. August in 1957 as a Midas Muffler franchise in Rochester, New York, specializing in mufflers and exhaust systems. In 1966, the Company discontinued its affiliation with Midas Muffler, and began to diversify into a full line of undercar repair services. An investor group led by Peter J. Solomon and Donald Glickman purchased a controlling interest in the Company in July 1984. At that time, Monro operated 59 stores, located primarily in upstate New York, with approximately $21 million in sales in fiscal 1984. Since 1984, Monro has added 254 stores and expanded its marketing area to include thirteen additional states. In 1987, Jack M. Gallagher succeeded Charles J. August as President and Chief Executive Officer. On April 1, 1995, Lawrence C. Day, who has over 20 years of experience in the automotive parts and service industries and previously served as Chief Operating Officer of the Company beginning in July 1993, succeeded Jack M. Gallagher as President and Chief Executive Officer. The Company was incorporated in the State of New York in 1959. The Company's principal executive offices are located at 200 Holleder Parkway, Rochester, New York 14615, and its telephone number is (716) 647-6400. Monro provides a full range of services on passenger cars, light trucks and vans for mufflers and exhaust systems (estimated at 30% of fiscal 1997 sales); brakes (35%); and steering, drive train, suspension and wheel alignment (19%). The Company also provides other products and services including tires and state inspections (16%). Monro specializes in the repair and replacement of parts which must be periodically replaced as they wear out. Normal wear on these parts generally is not covered by new car warranties. The Company typically does not perform under-the-hood repair services except for oil change services and a heating and cooling system "flush and fill" service. The Company does not sell parts or accessories to the do-it-yourself market. 2 3 The Company has a wholly-owned subsidiary, Monro Service Corporation, which is a Delaware corporation qualified to do business in the State of New York. Monro Service Corporation holds all assets, rights, responsibilities and liabilities associated with the Company's warehousing, purchasing, advertising, accounting, office services, payroll, cash management and certain other operations which are wholly performed within New York State. The Company believes that this structure has enhanced and will continue to enhance operational efficiency and provide cost savings. * References herein to fiscal years are to the Company's fiscal years ending or ended March 31 of each year (e.g., references to "fiscal 1997" are to the Company's fiscal year ended March 31, 1997). 3 4 INDUSTRY OVERVIEW According to industry reports, demand for automotive repair services, including undercar repair services, has increased due to the general increase in the number of vehicles registered, the growth in vehicle miles driven, the increase in the average age of vehicles and the increased complexity of vehicles, which makes it more difficult for a vehicle owner to perform do-it-yourself repairs. At the same time as demand for automotive repair services has grown, the Company believes that the number of general repair outlets has decreased, principally because fewer gas stations now perform repairs, and because there are fewer new car dealers. Monro believes that these factors present opportunities for increased sales by the Company, even though the number of specialized repair outlets (such as those operated by the Company and its direct competitors) has increased to meet the growth in demand. OPERATING STRATEGY Monro's operating strategy is to provide its customers with dependable, high-quality automotive service at a competitive price by emphasizing the following key elements. Complete Undercar Service All Monro stores provide a full range of undercar repair services for mufflers and exhaust systems, brakes, steering, drive train, suspension and wheel alignment. These services apply to all makes and models of domestic and foreign cars, light trucks and vans. In addition, Monro's stores provide many of the routine maintenance services (except engine tune-up and major transmission repair) which automobile manufacturers suggest or require in the vehicle owners' manuals, and which fulfill manufacturers' requirements for new car warranty compliance. Substantially all of the stores provide oil change services as well as tire sales and installation. All stores perform a heating and cooling system "flush and fill" service, and install belts and hoses. Stores in New York, West Virginia, New Hampshire, Pennsylvania, Virginia, Massachusetts and North Carolina also perform annual state inspections. Customer Satisfaction The Company has developed "The Monro Doctrine", a set of customer satisfaction principles, which is displayed in each store so that customers and employees will understand the Company's customer service philosophy. These principles are: free inspection of brakes, shocks, front end and exhaust systems; item-by-item review with customers of problem areas; free written estimates; written guarantees; drive-in service without an appointment; fair and reasonable prices as advertised; and repairs by professionally trained undercar specialists, many of whom are Automotive Service Excellence (ASE) certified in brakes and suspension. 4 5 Competitive Pricing, Advertising and Co-branding Initiatives The Company seeks to set competitive prices for quality services and products. The Company supports its pricing strategy by advertising through direct mail coupon inserts and in-store promotional signage and displays. In addition, the Company advertises through television, radio, yellow pages and newspapers to increase consumer awareness of the services offered. In fiscal 1997, the Company began testing co-branding initiatives to more quickly increase consumer awareness in certain markets. The Company believes that, especially in newer markets, customers may more readily be drawn into its stores because of their familiarity with national brand names. Some of these initiatives have included cross- promotional offers with national fast food chains, video rental stores and gasoline chains, as well as with regional supermarkets. Additionally, the Company introduced Bridgestone/Firestone tires into most of its stores in late fiscal 1997, where it had previously carried a private label tire. Through this initiative, the Company believes that it will attract some brand-loyal tire customers who otherwise might not have visited Monro. This will give the Company the opportunity to introduce itself to this new customer, and potentially sell other needed services. In fiscal 1997, the Company signed a joint venture agreement with Q-Lube, Inc., a subsidiary of Quaker State Corporation. The agreement calls for the two companies to jointly develop retail locations which offer both fast lube and undercar services. The centers will be located adjacent to either existing or newly-developed Monro stores. The Company believes the centers will create opportunities for cross-servicing between fast lube and undercar repair customers. Centralized Control Unlike many of its competitors, the Company owns and operates rather than franchises its stores. Monro believes that direct operation of all stores enhances its ability to compete by providing centralized control of such areas of operations as service quality, store appearance, promotional activity and pricing. A high level of technical competence is maintained throughout the Company as Monro requires, as a condition of employment, that employees participate in comprehensive training programs to keep pace with technology changes. Additionally, purchasing, distribution, merchandising, advertising, accounting and other store support functions are centralized in the Company's corporate headquarters in Rochester, New York, and are provided through the Company's subsidiary, Monro Service Corporation. The centralization of these functions results in efficiencies and gives management the ability to closely monitor and control costs. 5 6 Comprehensive Training The Company provides ongoing, comprehensive training to its store employees. Monro believes that such training provides a competitive advantage by enabling its technicians to provide quality service to its customers in all areas of undercar repair. EXPANSION STRATEGY Monro has experienced significant growth due to the opening of new stores and increases in comparable store sales. Management believes that the continued growth in sales and profits of the Company is dependent, in large part, upon its continued ability to open and operate new stores on a profitable basis. In addition, overall profitability of the Company could be reduced if new stores do not attain profitability. As of March 31, 1997, Monro operated 313 stores located in 14 states. The following table shows the growth in the number of stores over the last five fiscal years: STORE OPENINGS AND CLOSINGS
Year ended March 31, -------------------- 1993 1994 1995 1996 1997 ---- ---- ---- ---- ---- Stores open at beginning of year......... 161 184 202 232 274 Stores opened during year................ 23 20 30 43 40 Stores closed during year (a)............ 0 (2) 0 (1) (1) --- --- --- --- --- Stores open at end of year............... 184 202 232 274 313 === === === === === (a) These stores were closed because they failed to achieve an acceptable level of profitability or because a new Monro store was opened in the same market at a more favorable location.
Monro believes that there are expansion opportunities in new as well as existing market areas and expects to open a total of 40-50 stores in fiscal 1998. This expansion will result from a combination of constructing stores on vacant land and acquiring existing store locations. The Company believes that, as the industry consolidates due to the increasingly complex nature of automotive repair and the expanded capital requirements for state-of-the art equipment, there will be more opportunities for acquisitions of existing businesses or store structures. 6 7 The Company has developed a systematic method for selecting new store locations and a more targeted approach to marketing new stores. Key factors in market and site selection include population, demographic characteristics, vehicle population and the intensity of competition. These factors are evaluated through the use of a proprietary computer model developed for the Company. The characteristics of each potential site are compared by the model to the profiles of existing stores, and the model then projects sales for that site. Monro attempts to cluster stores in market areas in order to achieve economies of scale in advertising, supervision and distribution costs. All new sites presently under consideration are within or contiguous to Monro's established marketing areas. The Company believes that management and operating improvements implemented over the last several fiscal years will enhance its ability to sustain its growth. Monro has a chain-wide computerized inventory control and electronic point-of-sale (POS) management information system, which has increased management's ability to monitor operations as the number of stores has grown. The system includes electronic cataloging which allows store managers to electronically research the specific parts needed for the make and model of car being serviced. In fiscal 1997, the Company upgraded its electronic credit card processing and added electronic mail to its stores. Enhancements continue to be made to the system annually which increase efficiency, improve the quality and timeliness of store reporting and enable the Company to better serve its customers. The financing to open a new store location may be accomplished in one of three ways: a store lease for the land and building (in which case, land and building costs will be financed primarily by the lessor), a land lease with the building constructed by the Company (with building costs paid by the Company), or a land purchase with the building constructed by the Company. In all three cases, each new store also will require approximately $131,000 for equipment (including a point-of-sale system), and approximately $57,000 in inventory. Because Monro generally does not extend credit to its customers, stores generate almost no receivables and a new store's actual net working capital investment is nominal. Total capital required to open a new store ranges, on average (based upon the last three fiscal years' openings), from $242,000 to $843,000 depending on the location and which of the three financing methods is used. In instances where Monro acquires an existing business, it may pay additional amounts for intangible assets such as customer lists, covenants not-to-compete and goodwill. At March 31, 1997, Monro leased the land and/or the building at 69% of its store locations and owned the land and building at the remaining locations. Monro's policy is to situate new stores in the best locations, without regard to the form of ownership required to develop the locations. New stores have average sales of approximately $360,000 in their first twelve months of operation. 7 8 STORE OPERATIONS Store Format The typical format for a Monro repair store is a free-standing building of approximately 4,500 square feet consisting of a sales area, six fully-equipped service bays and a parts storage area, with a parking lot with space for approximately 17 cars. Most service bays are equipped with aboveground electric vehicle lifts. The typical store carries $57,000 of inventory and 2,800 stock keeping units ("SKUs"). Generally, each store is located within 35 miles of a "key" store which carries approximately 20% more inventory than a typical store and serves as a mini-distribution point for other stores in its area. The stores generally are situated in high-visibility locations in suburban areas or small towns and offer easy customer access. The typical store is open from 7:30 a.m. to 8:00 p.m. on Monday through Friday and from 7:30 a.m. to 5:00 p.m. on Saturday. In fiscal 1996, the Company opened its first "small town" concept store in Saranac Lake, New York. Eight additional stores were opened in fiscal 1997. The prototypical "small town" concept store is a four, five or six bay store located in a town with a population of 15,000 people or less. In the past, the Company generally did not enter this type of market because it could not support the typical six bay store. However, with few or no major competitors and a lower cost of entry, the small markets represent an attractive new growth avenue for the Company. Inventory Control and Management Information System All Monro stores are linked to the central office and warehouse by a computerized inventory control and electronic POS management information system, which enables the Company to collect sales and operational data on a daily basis, to adjust store pricing to reflect local conditions and to control inventory on a "real-time" basis. Additionally, each store has access through the POS system to the inventory carried by the seven stores nearest to it. Management believes that this feature improves customer satisfaction and store productivity by reducing the time required to locate out-of-stock parts. Quality Control and Warranties To maintain quality control, the Company conducts audits to rate its employees' telephone sales manner and the accuracy of pricing information given. All headquarters management personnel participate in the Company's day-in-the-store program by working in a store under the direction of the store manager, once every other month, to better understand the latest developments at the store level. 8 9 Customer comment cards, pre-addressed to the headquarters office, are available at each store for customers to comment on the Company's services. The Company's Chief Executive Officer personally reads and responds to these completed comment cards, and customer concerns are addressed via personal follow-up by field management. The Company has a customer survey program to monitor customer attitudes toward service quality, friendliness, speed of service, and several other factors for each store. This program includes four survey mailings per store annually. (Each mailing consists of approximately 100 surveys.) Completed surveys are read by the Chief Executive Officer, and at his direction, customer concerns are addressed via letter and personal follow-up by field management. The Company periodically solicits customer commentary via other methods. In April 1997, the Company began testing a program whereby a postcard-sized comment card is hung on every customer's rear view mirror after the car is serviced. The card is postage paid to facilitate the customers' responses, and asks several questions related to quality of service, personnel courtesy and whether or not the customer would return to Monro. Additionally, in fiscal 1994, the Company implemented its "Double Check for Accuracy Program." This quality assurance program requires that a technician and supervisory-level employee independently inspect a customer's vehicle, diagnose and document the necessary repairs, and agree on an estimate before presenting it to a customer. This process is formally documented on the written estimate by store personnel. The Company is an active member of the Motorist Assurance Program (MAP). MAP is an organization of automotive retailers, wholesalers and manufacturers which was established as part of an industry-wide effort to address the ethics and business practices of companies in the automotive repair industry. Participating companies are committed to improving consumer confidence and trust in the automotive repair industry by adopting "Uniform Inspection Guidelines" and "Standards of Service" established by MAP. These "Standards of Service" are posted in every Monro store and serve to provide consistent recommendations to customers in the diagnosis and repair of a vehicle. Monro offers limited warranties on substantially all of the products and services that it provides. The Company believes that these warranties are competitive with industry practices. Store Personnel and Training The Company supervises store operations primarily through its four district managers who oversee 29 regional managers. The typical store is staffed by a store manager and four to six technicians, one of whom serves as the assistant manager. 9 10 All store managers receive a base salary, and assistant managers receive hourly compensation. In addition, all store managers and assistant managers receive other compensation based on their store's customer relations, gross profit, labor cost controls, safety, sales volume and other factors. All store managers and assistant managers are eligible for a quarterly bonus based on performance against these goals. Monro believes that the ability to recruit and retain qualified technicians is an important competitive factor in the automotive repair industry, which has historically experienced a high turnover rate. Monro makes a concerted effort to recruit individuals who will have a long-term commitment to the Company and offers an hourly rate structure and additional compensation based on productivity; a competitive benefits package, including health, life and disability insurance; profit-sharing and pension plans; as well as the opportunity to advance within the Company. Most of the Company's managers and regional managers started with Monro as technicians. Most of the Company's new technicians join the Company in their early twenties as trainees or apprentices. As they progress, they are promoted to technician and eventually master technician, the latter requiring ASE certification in both brakes and suspension. The Company offers a tool lease program through which trainee technicians can acquire their own set of tools. The Company also will reimburse technicians for the cost of ASE certification test fees and encourages all technicians to become certified by providing a higher hourly wage rate following their certification. The Company's training department conducts in-house technical clinics for store personnel and management training programs for new store managers, and coordinates attendance at technical clinics offered by the Company's vendors. Each store maintains a library of 20-25 instructional videos. The Company issues technical bulletins to all stores on innovative or complex repair processes, and maintains a centralized data base for technical repair problems. In addition, the Company has established a telephone technical hotline to provide assistance to store personnel in resolving problems encountered while diagnosing and repairing vehicles. The help line is available during all hours of store operation. The Company has established a "training store" concept in one of its regions. This involves a six-week comprehensive training program for a group of entry-level technicians which occurs in a fully functioning Monro store. The program is taught by a full-time training manager who is permanently assigned to the store, along with the store manager. In addition to providing a more focused training effort, this new training structure relieves the store managers and more experienced technicians of the initial training burden. The structure also contributes to more efficient and profitable store environments. Technicians completing this program are assigned to stores within the region. 10 11 Additionally, the Company trains apprentice technicians through a "buddy system" whereby the apprentice is assigned to work side-by-side with a master technician for approximately three weeks. The master technician receives a weekly stipend during the training period. He is also encouraged to mentor the apprentice technician after the apprentice is assigned to a store, and is rewarded with a bonus if the apprentice is still employed by the Company after 90, and then 180 days. Since most turnover occurs during the first 180 days of employment, management believes that this newly-instituted feature of the program will help to improve retention of these employees. PURCHASING AND DISTRIBUTION The Company, through its wholly-owned subsidiary Monro Service Corporation, selects and purchases parts and supplies for all stores on a centralized basis. Although purchases outside the centralized system are made when needed at the store level, these purchases only accounted for approximately 12% of all parts used in fiscal 1997. The Company's ten largest vendors accounted for approximately 53% of its parts purchases, with the largest vendor accounting for slightly over 12% of total purchases in fiscal 1997. The Company purchases parts from over 100 vendors and has no significant long-term contracts with any vendor. Management believes that the Company's relationships with vendors are excellent and that alternative sources of supply exist, at comparable cost, for substantially all parts used in the Company's business. The Company routinely obtains bids from vendors to ensure it is receiving competitive pricing and terms. Parts are shipped by vendors to the Company's warehouse facility in Rochester, New York, and are distributed to stores through the Company's owned and operated tractor/trailer fleet. Most stores are replenished once every week from the warehouse, and such replenishment fills, on the average, 97% of all items ordered by the stores' automatic POS-driven replenishment system. The warehouse stocks approximately 8,000 SKUs. COMPETITION The Company competes in the retail automotive service industry. This industry is generally highly competitive and fragmented, and the number, size and strength of competitors varies widely from region to region. The Company believes that competition in this industry is based on customer service and reputation, store location, name awareness and price. Monro's primary competitors include national and local undercar specialty chains, both franchised and company-operated; car dealerships; and, to a lesser extent, gas stations and independent garages. Monro considers Midas International Corp., Meineke Discount Mufflers Inc. and Speedy Muffler King Inc. to be direct competitors. In most of the new markets that the Company has entered, at least one competitor was already present. In identifying new markets, the Company analyzes, among other factors, the intensity of competition. See "Expansion Strategy." 11 12 EMPLOYEES As of March 31, 1997, Monro had 1,964 employees, of whom 1,824 were employed in the field organization, 44 were employed at the warehouse and 96 were employed at the Company's corporate headquarters. Monro's employees are not members of any union. The Company believes that its relations with its employees are good. REGULATION The Company stores new oil and generates and handles used automotive oils and certain solvents, which are disposed of by licensed third-party contractors. Thus, the Company is subject to a number of federal, state and local environmental laws including the Comprehensive Environmental Response Compensation and Liability Act ("CERCLA"). In addition, the United States Environmental Protection Agency (the "EPA"), under the Resource Conservation and Recovery Act ("RCRA"), and various state and local environmental protection agencies regulate the Company's handling and disposal of waste. The EPA, under the Clean Air Act, also regulates the installation of catalytic converters by the Company and all other repair stores by periodically spot checking jobs and has the power to fine businesses that use improper procedures or materials. The EPA has the authority to impose sanctions, including civil penalties up to $25,000 per violation (or up to $25,000 per day for certain willful violations or failures to cooperate with authorities), for violations of RCRA and the Clean Air Act. The Company is subject to various laws and regulations concerning workplace safety, zoning and other matters relating to its business. The Company believes that it is in substantial compliance with all applicable environmental and other laws and regulations, and that the cost of such compliance is not material to the Company. In 1992, two national chains with which the Company competes were the subject of investigations by consumer protection agencies and the Attorneys General of various states, including several states in which the Company does business. These occurrences caused a heightened awareness on the part of the automotive service industry of the need to make certain a properly informed consumer is making the decision on the auto service needs of his or her car. They have also precipitated the introduction of proposed legislation in various states where the Company operates which would further regulate the auto service industry. Throughout its 40-year history, the Company has believed that a satisfied customer is its best advertisement and continues to place strong emphasis on customer satisfaction. To date, none of this legislation has been enacted. The Company continues to monitor such proposed legislation and believes that because of its method of operation and strength of its systems, it will be in a strong position, relative to its competition, to comply with any legislation which may be enacted. The Company is environmentally conscious, and takes advantage of recycling opportunities both at its headquarters and at its stores. Cardboard, plastic shrink wrap and parts' cores are returned to the warehouse by the stores on the weekly stock truck. There, they are accumulated for sale to recycling companies or returned to parts manufacturers for credit. 12 13 SEASONALITY Although the Company's business is not highly seasonal, customers do require more undercar service during the period of March through October than the period of November through February, when miles driven tend to be lower. As a result, sales and profitability are lower during the latter period. ITEM 2. PROPERTIES The Company, through Monro Service Corporation, owns its office/warehouse facility of approximately 95,000 square feet, which is located on 12.7 acres of land in Holleder Industrial Park, in Rochester, New York. Of Monro's 313 stores at March 31, 1997, 97 were owned, 148 were leased and for 68, the land only was leased. In general, the Company leases store sites for a ten-year period with several five-year renewal options. Giving effect to all renewal options, over 90% of the non-capital leases (179 stores) expire after 2004. Certain of the leases provide for contingent rental payments if a percentage of annual gross sales exceeds the base fixed rental amount. The highest contingent percentage rent of any lease is 6.75%, and no such lease has adversely affected profitability of the store subject thereto. Certain officers and directors of the Company or members of their families are the lessors, or have interests in entities that are the lessors, with respect to 41 of the leases. No related party leases, other than renewals or modifications of leases on existing stores, have been entered into since May 1989, and no new related party leases are contemplated. The existing office and warehouse facility and 37 of the owned stores are subject to mortgages held by commercial banks or private investors. As of March 31, 1997, the outstanding amount under the mortgage on the headquarters office and warehouse facility was $2.8 million and the aggregate outstanding amount under the permanent mortgages on 37 of the owned stores was $11.0 million. There was also $.7 million outstanding under a mortgage held by the City of Rochester, New York, secured by the land on which the new headquarters office and warehouse is located, and a term loan of $.6 million secured by the existing headquarters facility. ITEM 3. LEGAL PROCEEDINGS The Company is not a party or subject to any legal proceedings other than certain routine claims and lawsuits that arise in the normal course of its business. The Company does not believe that such routine claims or lawsuits, individually or in the aggregate, will have a material adverse effect on its financial condition or results of operations. 13 14 ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS No matters were submitted to a vote of security holders during the fourth quarter of fiscal 1997. ITEM 4A. EXECUTIVE OFFICERS OF THE COMPANY AS OF JUNE 1, 1997 The following persons are the executive officers of the Company, having been elected by and serving at the discretion of the Board of Directors of the Company:
Name Age Position - - ---- --- -------- Lawrence C. Day 47 President and Chief Executive Officer G. Michael Cox 44 Executive Vice President - Store Operations John W. August 43 Sr. Vice President - Business Development Robert W. August 45 Sr. Vice President - Store Support, and Secretary Catherine D'Amico 41 Sr. Vice President - Finance, Chief Financial Officer and Treasurer Thomas J. Budreau 40 Vice President - Eastern Operations Michael C. Kucharski 37 Vice President - Central Operations
The following is a brief account of the business experience of each of the executive officers of the Company: Lawrence C. Day has been President and Chief Executive Officer since April 1995 and a director since July 1993. Mr. Day was Executive Vice President and Chief Operating Officer from July 1993 to April 1995. Prior to joining the Company, Mr. Day was Vice President of the Auto Express Division of Montgomery Ward & Co., Incorporated from December 1991 to June 1993, Field Director of the Auto Express Division of Montgomery Ward & Co., Incorporated from December 1989 to December 1991 and Vice President of Automotive Industries, Inc. from February 1989 to December 1989. From September 1976 to January 1989, Mr. Day held various management positions with Bridgestone/Firestone, Inc. G. Michael Cox has been Executive Vice President - Store Operations since March 1997 and Senior Vice President - Store Operations from January 1995 to March 1997. Prior to joining the Company, Mr. Cox was Director of Affiliated Dealer Operations for Bridgestone/Firestone, Inc. from 1993 to January 1995, Director of Corporate Accounts for Bridgestone/Firestone, Inc. from 1992 to 1993 and a Zone Manager for Bridgestone/Firestone, Inc. from 1990 to 1992. Mr. Cox held various other management positions for Bridgestone/Firestone, Inc. from 1976 to 1990. 14 15 John W. August has been Senior Vice President - Business Development since November 1994. Mr. August was Senior Vice President - Store Operations from May 1992 to November 1994, Vice President - Western Operations from August 1988 to May 1992, Vice President - Real Estate from June 1985 to August 1988, and has worked for Monro in various other capacities since 1972. Robert W. August has been Senior Vice President - Store Support since October 1996, Secretary since July 1984 and a director since June 1982. Mr. August was Senior Vice President - Marketing from May 1992 to October 1996, Vice President-Marketing from July 1989 to May 1992, Executive Vice President from 1984 to July 1989, and has worked for Monro in various other capacities since 1968. Catherine D'Amico has been Senior Vice President - Finance, Chief Financial Officer and Treasurer since August 1993. Ms. D'Amico, a certified public accountant, was previously a Senior Audit Manager with Price Waterhouse LLP in Rochester, New York and was affiliated with such firm from 1978 to 1993. Thomas J. Budreau has been Vice President - Eastern Operations since October 1995. Prior to joining the Company, Mr. Budreau was the National Auto Express Service Manager for Montgomery Ward & Co., Incorporated from March 1994 to October 1995. From November 1990 to March 1994, Mr. Budreau was a Regional Auto Express Manager and from March 1988 to November 1990, a District Manager for Montgomery Ward & Co., Incorporated. From 1975 to March 1988, Mr. Budreau held various other management positions with Montgomery Ward & Co., Incorporated. Michael C. Kucharski has been Vice President - Central Operations since May 1997. Mr. Kucharski was a District Manager from February 1996 to May 1997, a Regional Manager from January 1990 to February 1996 and has worked for Monro in various other capacities since 1987. From 1981 through 1987, Mr. Kucharski held management positions with various retail and other companies. 15 16 PART II ITEM 5. MARKET FOR THE COMPANY'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS Market Information The Common Stock is traded on the over-the-counter market and is quoted on the NASDAQ National Market System under the symbol "MNRO." The following table sets forth, for the Company's last two fiscal years, the range of high and low sales prices on the NASDAQ National Market System for the Common Stock:
FISCAL 1997 FISCAL 1996 ----------- ----------- QUARTER ENDED HIGH LOW HIGH LOW ------------------ ---- --- ---- --- June 30, 18 7/8 14 3/4 17 15/16 13 September 30, 21 3/4 17 1/4 15 13 9/16 December 31, 21 14 1/4 15 13 1/8 March 31, 19 15 1/2 15 1/2 12 1/8
Amounts in these tables have been adjusted to reflect the five percent stock dividends paid in August 1996 and August 1995. Holders At June 1, 1997, the Company's Common Stock was held by approximately 1,933 shareholders of record or through nominee or street name accounts with brokers. Dividends On May 14, 1997, the Company's Board of Directors declared a five percent stock dividend, payable August 4, 1997, to shareholders of record as of June 20, 1997. Information regarding the number of shares of Common Stock outstanding, as set forth in this Form 10-K, does not include any shares of Common Stock to be issued in connection with such dividend. While the Company has not paid any cash dividends on the Common Stock since its inception, any future determination as to the payment of dividends will be at the discretion of the Board of Directors and will depend on the Company's financial condition, results of operations, capital requirements, compliance with charter and contractual restrictions, and such other factors as the Board of Directors deems relevant. 16 17 ITEM 6. SELECTED FINANCIAL DATA The following table sets forth selected financial and operating data of the Company for each year in the five-year period ended March 31, 1997. The financial data and certain operating data have been derived from the Company's financial statements which have been examined by Price Waterhouse LLP, independent accountants. This data should be read in conjunction with the Financial Statements and related notes included under Item 8 of this report and in conjunction with other financial information included elsewhere in this Form 10-K.
YEAR ENDED MARCH 31, -------------------- 1997 1996 1995 1994 1993 ---- ---- ---- ---- ---- (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) INCOME STATEMENT DATA: Sales............................... $141,169 $117,104 $109,098 $93,620 $78,507 Cost of sales including distribution and occupancy costs............ 78,792 66,236 59,725 51,196 42,591 -------- ------- ------- ------- ------- Gross profit......................... 62,377 50,868 49,373 42,424 35,916 Operating, selling, general and administrative expenses............ 41,749 35,299 32,304 28,068 23,611 -------- ------ ------- ------- ------- Operating income..................... 20,628 15,569 17,069 14,356 12,305 Interest expense - net............... 3,224 2,637 1,939 2,080 2,074 Other expense (income) - net......... 475 330 22 107 (43) -------- -------- ------- ------- ------- Income before provision for income taxes 16,929 12,602 15,108 12,169 10,274 Provision for income taxes........... 6,738 4,988 6,024 4,818 4,120 -------- -------- ------- ------- ------- Net income........................... $ 10,191 $ 7,614 $ 9,084 $ 7,351 $ 6,154 ======== ======== ======= ======= ======= Earnings per share(a)................ $ 1.25 $ .94 $ 1.12 $ .91 $ .77 ======== ======== ======= ======= ======= Weighted average number of Common Stock shares and equivalents (a)......... 8,171 8,077 8,084 8,035 8,017 ======== ======== ======= ======= ======= SELECTED OPERATING DATA: Sales growth: Total.............................. 20.5% 7.3 % 16.5% 19.3% 11.5% Comparable store (b)............... 7.9% (3.9)% 6.1% 9.5% 2.9% Stores open at beginning of year..... 274 232 202 184 161 Stores open at end of year........... 313 274 232 202 184 Capital expenditures ................ $ 27,562 $ 25,581 $20,299 $14,374 $14,759 BALANCE SHEET DATA (AT PERIOD END): Net working capital.................. $ 9,579 $ 8,891 $ 6,863 $ 7,894 $ 8,140 Total assets......................... 146,267 120,055 93,042 77,042 63,507 Long-term debt....................... 54,864 45,459 28,749 24,326 22,599 Shareholders' equity................. 66,625 55,887 48,169 38,815 31,425 (a) Earnings per share for each fiscal year was computed by dividing net income by the weighted average number of shares of Common Stock and Common Stock equivalents outstanding during the respective year. All share and per share information has been adjusted to give retroactive effect to the five percent stock dividends paid in August 1996, August 1995 and in August 1994. (b) Comparable store sales data is calculated based on the change in sales of only those stores open as of the beginning of the preceding fiscal year.
17 18 ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following table sets forth income statement data of the Company expressed as a percentage of sales for the fiscal years indicated:
YEAR ENDED MARCH 31, -------------------- 1997 1996 1995 ---- ---- ---- Sales.................................................... 100.0% 100.0% 100.0% Cost of sales including distribution and occupancy costs. 55.8 56.6 54.7 ----- ----- ----- Gross profit............................................. 44.2 43.4 45.3 Operating, selling, general and administrative expenses.. 29.6 30.1 29.7 ----- ----- ----- Operating income......................................... 14.6 13.3 15.6 Interest expense - net................................... 2.3 2.2 1.8 Other expense - net...................................... 0.3 0.3 0.0 ---- ----- ----- Income before provision for income taxes................. 12.0 10.8 13.8 Provision for income taxes............................... 4.8 4.3 5.5 ---- ----- ----- Net income............................................... 7.2% 6.5% 8.3% ===== ====== ======
FORWARD-LOOKING STATEMENTS The statements contained in this Annual Report on Form 10-K which are not historical facts, including (without limitation) in particular, statements made in this Item and in "Item 1 - Business," may contain forward-looking statements that are subject to important factors that could cause actual results to differ materially from those in the forward-looking statement, including (without limitation) product demand, the effect of economic conditions, the impact of competitive services, products and pricing, product development, parts supply restraints or difficulties, industry regulation and the continued availability of capital resources and financing and other risks set forth or incorporated herein and in the Company's Securities and Exchange Commission filings. The Company does not undertake to update any forward-looking statement that may be made from time to time by or on behalf of the Company. FISCAL 1997 AS COMPARED TO FISCAL 1996 Sales for fiscal 1997 increased $24.1 million, or 20.5% over sales for fiscal 1996. The increase was due to a comparable store sales increase of 7.9% and an increase of approximately $16.3 million for stores opened since April 1, 1995. During the year, 40 stores were opened and one was closed. At March 31, 1997, the Company had 313 stores in operation. 18 19 Management believes that sales increases were driven, in part, by pent-up demand from previously deferred repairs, combined with a number of industry factors. These include an increase in the average age of vehicles, a decrease in the number of service bays, an increase in the number of registered vehicles, and a shift in the consumer mentality from "do-it-yourself" to "do-it-for-me" caused by the increased complexity of cars. Additionally, management believes that successful performance of its operating strategy, centered on owning and operating all of its stores, helped contribute to the sales increase. Company operated stores facilitate focused and consistent execution in key areas such as the Company's unwavering commitment to customer satisfaction, comprehensive training of service technicians and competitive pricing. Gross profit for fiscal 1997 was $62.4 million or 44.2% of sales, as compared with $50.9 million or 43.4% of sales for fiscal 1996. The improvement in gross profit as a percentage of sales is primarily due to increases in selling prices coupled with a reduction in certain material costs as a result of renegotiated pricing with various vendors. Operating, selling, general and administrative expenses for fiscal 1997 increased by $6.5 million to $41.7 million and, as a percentage of sales, decreased by .5% as compared to fiscal 1996. The increase in total dollars expended is primarily attributable to increased store supervision and increased store support expenses related to the Company's expansion. These expenses declined as a percentage of sales largely due to management's continued focus on discretionary spending and controlling costs. One area accounting for a more significant portion of the decrease as a percent of sales was an increase in the amount of cooperative advertising credits which the Company received during fiscal 1997 as compared to the previous year. Management was effective in improving various programs negotiated with vendors. Operating income in fiscal 1997 of $20.6 million, or 14.6% of sales increased by $5.1 million over the fiscal 1996 level of $15.6 million due to the factors discussed above. Interest expense, net of interest income, was unchanged as a percent of sales for fiscal 1997 as compared to fiscal 1996. While average debt outstanding for the year ended March 31, 1997 was up approximately $11.0 million over the year ended March 31, 1996, the weighted average interest rate declined by approximately 1.5 percentage points. Other expense, net, at .3% of sales for the year ended March 31, 1997 remained unchanged as percent of sales from the year ended March 31, 1996. This amount includes carrying costs for the Company's former warehouse facility which was sold in the fourth quarter of fiscal 1997. The Company's effective tax rate was 39.8% of pre-tax income in fiscal 1997 as compared to 39.6% for fiscal 1996. Net income for fiscal 1997 increased by $2.6 million or 33.8% over fiscal 1996, reflecting higher gross profit and lower operating expenses, partially offset by a higher effective tax rate. 19 20 FISCAL 1996 AS COMPARED TO FISCAL 1995 Sales for fiscal 1996 increased $8.0 million, or 7.3%, over sales for fiscal 1995. This increase was due to an increase of approximately $17.3 million for stores opened since April 1, 1995, partially offset by a comparable store sales decrease of 3.9%. During the year, 43 stores were opened and one was closed. At March 31, 1996, the Company had 274 stores in operation. Management believes that the comparable store sales decrease resulted from a slowdown in consumer spending for most of calendar 1995, caused by a general decline in economic conditions, particularly in the northeastern part of the country where most of the Company's stores are located. Gross profit for fiscal 1996 was $50.9 million or 43.4% of sales, as compared with $49.4 million or 45.3% of sales for fiscal 1995. The reduction in gross profit as a percent of sales was due, in part, to an increase in purchases at the store level of certain higher-cost parts. During periods of slower sales, store personnel more readily accept undercar repair work outside of the normal recurring services the store usually provides. This repair work often involves parts not stocked by the Company. In addition, labor costs increased as a percent of sales because, during periods of slower sales when technicians may not be fully productive, they will receive a minimum base level wage. Lastly, distribution and occupancy costs increased as a percent of sales for fiscal 1996 primarily due to an increase in the number of stores against a decrease in comparable store sales. Operating, selling, general and administrative expenses for fiscal 1996 increased by $3.0 million to $35.3 million and, as a percentage of sales, increased by .4% as compared to fiscal 1995. This increase in total dollars expended is due, among other things, to additional supervision and advertising expense in newly-added stores and regions, greater costs related to the Company's continuing investment in training, and additional store expenses related to the growth in the number of stores. Although expenses increased during fiscal 1996 as compared to fiscal 1995, the growth rate of these expenses (9.3%) was lower than the percentage increase in the number of stores (18.5%), due to ongoing, concerted efforts by management to control costs and to operate within budgetary constraints. Accounting for a large portion of the cost reductions were decreases in bonus and profit sharing expenses. Since the Company did not attain the minimum required percentage of targeted profit performance, employee bonus payments were significantly reduced and were eliminated for executive officers, and profit sharing contributions were eliminated. Operating income in fiscal 1996 of $15.6 million, or 13.3% of sales, decreased by $1.5 million from the fiscal 1995 level of $17.1 million due to the factors discussed above. Interest expense, net of interest income, increased as a percent of sales from 1.8% in fiscal 1995 to 2.2% in fiscal 1996 primarily due to increased borrowings. Average debt outstanding for the year ended March 31, 1996 was up approximately $9.7 million as compared to the year ended March 31, 1995. 20 21 Other expense, net, of $.3 million in fiscal 1996 represents costs incurred to move to the Company's new office/warehouse facility as well as carrying costs for the former warehouse facility through fiscal 1997. The Company's effective tax rate decreased to 39.6% of pre-tax income in fiscal 1996 from 39.9% in fiscal 1995 primarily due to reductions in state tax rates in two of the states in which the Company operates. Net income for fiscal 1996 decreased by $1.5 million or 16.2% compared to fiscal 1995 due to the factors discussed above. CAPITAL RESOURCES AND LIQUIDITY Capital Resources The Company's primary capital requirements for fiscal 1997 were the funding of its new store expansion program and the upgrading of facilities and systems in existing stores, totaling $28.3 million, and principal payments on long-term debt and capital leases of $49.5 million. In both fiscal years 1997 and 1996, these capital requirements were met by cash flow from operations and through the use of a Revolving Credit Facility. Additionally, in fiscal 1996, capital requirements were met through the use of interim and permanent mortgages. (See additional discussion under "Liquidity".) In fiscal 1998, the Company intends to open 40-50 new stores. Total capital required to open a new store ranges, on average (based upon the last three fiscal years' openings), from $242,000 to $843,000 depending on whether the store is leased, owned or land leased. Management believes that the Company has sufficient resources available (including cash and equivalents, cash flow from operations and bank financing) to expand its business as currently planned for the next several years. Liquidity At March 31, 1997, the Company had a $3.5 million line of credit for the purpose of issuing stand-by-letters of credit on an unsecured basis. The line requires fees aggregating .875% annually of the face amount of each stand-by-letter of credit, payable quarterly in advance. A total of $3.3 million of letters of credit were outstanding under this line at March 31, 1997. As of June 1, 1997, the Company had outstanding $3.7 million in principal amount of its 10.65% Senior Notes due 2000 (the "Senior Notes") with Massachusetts Mutual Life Insurance Company pursuant to a Senior Note Agreement. The fourth of six annual installments of principal of $1.8 million was paid on April l, 1997. 21 22 Through February 1996, the Company had a real estate line of credit of $25.0 million to be used for the placement of store mortgages. This line was terminated in fiscal 1996 at the Company's initiative and replaced by a new unsecured Revolving Credit facility with two banks. The Company must pay a facility fee of .125% annually on the unused portion of the facility. In March 1997, the Company received a commitment from the lenders to increase the amount available under the facility from $30 million to $50 million and extend the term to March 2000. The Company has available a line of credit of $7.5 million under a short-term borrowing agreement at the lower of the prime rate or other rate options available at the time of borrowing. There are no commitment fees associated with this line of credit. Based upon the Company's ability and intent to refinance the amount outstanding under the line of credit with its expanded Revolving Credit facility, the $1.8 million balance has been classified as long-term debt at March 31, 1997. Prior to the termination of the real estate line, the Company had utilized $13.2 million for permanent mortgages. Any mortgage may be converted from a floating rate to a fixed rate loan during the first five years of its seven-year term. Interest is payable monthly. Monthly installments of principal are required based on 20-year amortization periods. During fiscal 1995, the Company purchased 12.7 acres of land for $.7 million from the City of Rochester, New York, on which its new office/warehouse facility is located. The City has provided financing for 100 percent of the cost of the land via a 20-year non-interest bearing mortgage, all due and payable in 2014. To finance its new office/warehouse building, the Company obtained permanent mortgage financing consisting of a 10-year mortgage for $2.9 million and an eight-year term loan in the amount of $.7 million. Both obligations require monthly interest payments, and each may be converted from a floating rate to a fixed rate loan before the last two years of their respective terms. The mortgage requires equal monthly installments of principal based on a 20-year amortization period, and the term loan requires equal monthly payments of principal to fully amortize the debt over the eight-year term. The Company entered into an interest rate swap agreement with a major financial institution which effectively fixes the interest rate over the terms of the aforementioned agreements at 7.15%. The Company also obtained a commitment for a $.5 million term loan to finance equipment for the new office/warehouse building. The obligation requires equal monthly principal payments to fully amortize the debt over a five-year term. Interest is payable monthly, and the obligation may be converted from a floating rate to a fixed rate loan during the first three years. No amounts had been borrowed under this term loan as of March 31, 1997. 22 23 Certain of the Company's long-term debt agreements require, among other things, the maintenance of specified current ratios, interest and rent coverage ratios and amounts of tangible net worth, and also contain restrictions on dividend payments and capital expenditures. The Company is in compliance with these requirements at March 31, 1997, and does not believe that the covenants materially affect its business. As of March 31, 1997, the Company had cash and equivalents of $6.4 million. Inflation The Company does not believe its operations have been materially affected by inflation. The Company has been successful, in many cases, in mitigating the effects of merchandise cost increases principally through the use of volume discounts and alternative vendors. Financial Accounting Standards Statement of Position (SOP) 93-7, "Reporting on Advertising Costs," which provides guidance on financial reporting on advertising costs, was issued in December 1993. This Statement was adopted by the Company in fiscal 1996 and had an immaterial effect on the results of operations. Effective in fiscal 1997, the Company adopted the disclosure requirements of Statement of Financial Accounting Standards No. 123, "Accounting for Stock-Based Compensation". As permitted under SFAS 123, the Company will continue to measure stock-based compensation cost as the excess of the quoted market price of the Company's common stock at the grant date over the amount the employee must pay for the stock. Statement of Financial Accounting Standards No. 128 ("SFAS 128"), "Earnings Per Share", was issued in February 1997. This Statement establishes standards for computing and presenting earnings per share ("EPS"), and simplifies the standards previously found in APB Opinion No. 15 ("APB 15"). It replaces the presentation of primary EPS with a presentation of basic EPS, and also requires dual presentation of basic and diluted EPS on the face of the income statement for all entities with complex capital structures. The Company plans to adopt the Statement in fiscal 1998. The Company expects that basic EPS as calculated under SFAS 128 will not vary materially from primary EPS as calculated under APB 15 because of minimal option activity, nor vary materially from diluted EPS. 23 24 ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA Page Report of Independent Accountants................................... 25 Audited Financial Statements: Consolidated Balance Sheet at March 31, 1997 and 1996...... 26 Consolidated Statement of Income for the three years ended March 31, 1997.................................... 27 Consolidated Statement of Changes in Shareholders' Equity for the three years ended March 31, 1997.... 28 Consolidated Statement of Cash Flows for the three years ended March 31, 1997......................... 29 Notes to Consolidated Financial Statements.................. 30 Selected Quarterly Financial Information (Unaudited)................. 45 24 25 REPORT OF INDEPENDENT ACCOUNTANTS To the Board of Directors and Shareholders of Monro Muffler Brake, Inc. In our opinion, the consolidated financial statements listed in the accompanying index present fairly, in all material respects, the financial position of Monro Muffler Brake, Inc. and its subsidiary at March 31, 1997 and 1996, and the results of their operations and their cash flows for each of the three years in the period ended March 31, 1997, in conformity with generally accepted accounting principles. These financial statements are the responsibility of the Company's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these statements in accordance with generally accepted auditing standards which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for the opinion expressed above. PRICE WATERHOUSE LLP Rochester, New York May 19, 1997 25 26 MONRO MUFFLER BRAKE, INC. AND SUBSIDIARY CONSOLIDATED BALANCE SHEET ================================================================================
MARCH 31, 1997 1996 ---- ---- (DOLLARS IN THOUSANDS) ASSETS Current assets: Cash and equivalents, including interest-bearing accounts of $6,438 in 1997 and $5,280 in 1996 $ 6,438 $ 5,280 Trade receivables 1,128 1,230 Inventories 20,010 16,538 Federal and state income taxes receivable 296 18 Deferred income tax asset 1,790 1,275 Other current assets 2,935 2,206 --------- --------- Total current assets 32,597 26,547 --------- --------- Property, plant and equipment 151,906 126,248 Less - Accumulated depreciation and amortization (42,223) (35,969) --------- --------- Net property, plant and equipment 109,683 90,279 Other noncurrent assets 3,987 3,229 --------- ---------- Total assets $ 146,267 $ 120,055 ========= ========= LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Current portion of long-term debt $ 3,128 $ 3,165 Trade payables 8,728 6,870 Accrued interest 270 345 Accrued payroll, payroll taxes and other payroll benefits 4,260 2,836 Accrued insurance 2,110 1,579 Other current liabilities 4,522 2,861 --------- --------- Total current liabilities 23,018 17,656 Long-term debt 54,864 45,459 Deferred income tax liability 1,760 1,053 --------- --------- Total liabilities 79,642 64,168 --------- --------- Commitments Shareholders' equity: Class C Convertible Preferred Stock, $1.50 par value, $.239 and $.251 conversion value at March 31, 1997 and 1996, respectively; 150,000 shares authorized; 91,727 shares issued and outstanding in 1997 and 1996 138 138 Common Stock, $.01 par value, 15,000,000 shares authorized; 7,470,326 shares and 6,914,835 shares issued and outstanding in 1997 and 1996, respectively 75 69 Additional paid-in capital 22,190 17,061 Retained earnings 44,222 38,619 --------- --------- Total shareholders' equity 66,625 55,887 --------- --------- Total liabilities and shareholders' equity $ 146,267 $ 120,055 ========= =========
The accompanying notes are an integral part of these financial statements. 26 27 MONRO MUFFLER BRAKE, INC. AND SUBSIDIARY CONSOLIDATED STATEMENT OF INCOME ================================================================================
YEAR ENDED MARCH 31, -------------------- 1997 1996 1995 ---- ---- ---- (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) Sales $141,169 $117,104 $109,098 Cost of sales, including distribution and occupancy costs (a) 78,792 66,236 59,725 -------- -------- -------- Gross profit 62,377 50,868 49,373 Operating, selling, general and administrative expenses 41,749 35,299 32,304 -------- -------- -------- Operating income 20,628 15,569 17,069 Interest expense, net of interest income of $23 in 1997, $39 in 1996, and $157 in 1995 (a) 3,224 2,637 1,939 Other expense, net 475 330 22 -------- -------- -------- Income before provision for income taxes 16,929 12,602 15,108 Provision for income taxes 6,738 4,988 6,024 -------- -------- -------- Net income $ 10,191 $ 7,614 $ 9,084 ========= ========= ========= Earnings per share $ 1.25 $ .94 $ 1.12 ========= ========= ========= Weighted average number of shares of common stock and common stock equivalents used in computing earnings per share 8,171 8,077 8,084 ========= ========= ========= (a) Costs and expenses include charges for payments under operating and capital leases with affiliated parties totaling $1,828, $1,688, and $1,812 for the years ended March 31, 1997, 1996 and 1995, respectively.
The accompanying notes are an integral part of these financial statements. 27 28 MONRO MUFFLER BRAKE, INC. AND SUBSIDIARY CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY ================================================================================
CLASS C CONVERTIBLE ADDITIONAL PREFERRED COMMON PAID-IN RETAINED STOCK STOCK CAPITAL EARNINGS TOTAL ----- ----- ------- -------- ----- (DOLLARS IN THOUSANDS) Balance at March 31, 1994 $138 $60 $ 5,381 $33,236 $38,815 Net income 9,084 9,084 Exercise of stock options 2 268 270 Stock dividend 3 5,310 (5,313) ------ ------ --------- ---------- ---------- Balance at March 31, 1995 138 65 10,959 37,007 48,169 Net income 7,614 7,614 Exercise of stock options 104 104 Stock dividend 4 5,998 (6,002) ------ ------ --------- ---------- ---------- Balance at March 31, 1996 138 69 17,061 38,619 55,887 Net income 10,191 10,191 Exercise of stock options 2 545 547 Stock dividend 4 4,584 (4,588) ------ ------ --------- ---------- ---------- Balance at March 31, 1997 $138 $75 $22,190 $44,222 $66,625 ====== ====== ======= ========== ==========
The accompanying notes are an integral part of these financial statements. 28 29 MONRO MUFFLER BRAKE, INC. AND SUBSIDIARY CONSOLIDATED STATEMENT OF CASH FLOWS ================================================================================
YEAR ENDED MARCH 31, -------------------- 1997 1996 1995 -------- -------- -------- (DOLLARS IN THOUSANDS) INCREASE (DECREASE) IN CASH Cash flows from operating activities: Net income $10,191 $ 7,614 $ 9,084 ------- ------- --------- Adjustments to reconcile net income to net cash provided by operating activities - Depreciation and amortization 8,099 6,762 5,492 Net change in deferred income taxes 192 (266) 152 Gain on disposal of property, plant and equipment (100) (1) Decrease (increase) in trade receivables 102 (174) (100) Increase in inventories (3,472) (2,721) (1,938) (Increase) decrease in other current assets (717) (373) 10 Increase in other noncurrent assets (63) (462) (48) Increase in trade payables 1,858 1,810 1,284 Increase in accrued expenses 3,541 270 918 Decrease (increase) in federal and state income taxes payable (278) 10 (177) -------- -------- -------- Total adjustments 9,162 4,855 5,593 -------- -------- -------- Net cash provided by operating activities 19,353 12,469 14,677 -------- -------- -------- Cash flows from investing activities: Proceeds from the sale of short-term investments 171 Capital expenditures (27,562) (25,581) (20,299) Proceeds from the sale of property, plant and equipment 97 68 Payment for purchase of miscellaneous acquisitions (2,416) -------- -------- -------- Net cash used for investing activities (27,465) (27,929) (20,128) -------- -------- -------- Cash flows from financing activities: Proceeds from the sale of common stock 547 104 270 Proceeds from borrowings 58,227 38,520 11,260 Principal payments on long-term debt and capital lease obligations (49,504) (22,739) (6,854) -------- -------- -------- Net cash provided by financing activities 9,270 15,885 4,676 -------- -------- -------- Increase (decrease) in cash 1,158 425 (775) Cash at beginning of year 5,280 4,855 5,630 -------- -------- -------- Cash at end of year $ 6,438 $ 5,280 $ 4,855 ======== ======== ========
The accompanying notes are an integral part of these financial statements. 29 30 MONRO MUFFLER BRAKE, INC. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ================================================================================ NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES BACKGROUND Monro Muffler Brake, Inc. and its wholly owned subsidiary, Monro Service Corporation (the "Company"), had 313 automotive repair centers operating primarily in the northeast region of the United States as of March 31, 1997. The Company experienced a change in control during 1984 which was accounted for as a purchase and required the recording of a new basis for assets and liabilities. The accompanying consolidated financial statements have been prepared in accordance with generally accepted accounting principles. The preparation of financial statements in conformity with such principles requires the use of estimates by management during the reporting period. Actual results could differ from those estimates. A description of the Company's major accounting policies follows. FISCAL YEAR The Company's fiscal year ends on March 31. CONSOLIDATION The consolidated financial statements include the Company and its wholly owned subsidiary, Monro Service Corporation, after the elimination of intercompany transactions and balances. REVENUE RECOGNITION Sales are recorded upon completion of automotive undercar repair services provided to customers or upon the sale of incidental products and services to customers. INVENTORIES The Company's inventories consist of automotive parts and tires. Substantially all merchandise inventories are valued under the last-in, first-out (LIFO) method. Under the first-in, first-out (FIFO) method, these inventories would have been $544,000, $647,000 and $556,000 higher at March 31, 1997, 1996 and 1995, respectively. The FIFO value of inventory approximates the current replacement cost. PROPERTY, PLANT AND EQUIPMENT All property, plant and equipment are stated at cost. For assets acquired in conjunction with the 1984 change in control referred to above, cost represents an allocation of the total purchase price to individual assets based on their estimated fair values at the date of acquisition. Depreciation of property, plant and equipment is provided on the straight-line basis. Buildings and improvements are depreciated over lives varying from 10 to 39 years; machinery, fixtures and equipment over lives varying from 5 to 15 years; and vehicles over lives varying from 5 to 7 years. Certain leases have been capitalized and are classified on the balance sheet as fixed assets. These assets are being amortized on a straight-line basis over their estimated lives, which coincide with the terms of the leases (Note 3). 30 31 MONRO MUFFLER BRAKE, INC. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ================================================================================ ADVERTISING The Company expenses the production costs of advertising the first time the advertising takes place, except for direct response advertising which is capitalized and amortized over its expected period of future benefits. Direct response advertising consists primarily of coupons for the Company's services. The capitalized costs of this advertising are amortized over the period of the coupon's validity. Advertising expense for the years ended March 31, 1997, 1996 and 1995 was not material to these financial statements. INTEREST RATE HEDGE AGREEMENTS The Company enters into interest rate hedge agreements which involve the exchange of fixed and floating rate interest payments periodically over the life of the agreement without the exchange of the underlying principal amounts. The differential to be paid or received is accrued as interest rates change and is recognized over the life of the agreements as an adjustment to interest expense. EARNINGS PER SHARE Earnings per share was computed by dividing net income by the weighted average number of shares of common stock and common stock equivalents outstanding during the respective year. Common stock equivalents consist of shares of common stock (i) issuable upon exercise of outstanding stock options and (ii) issuable upon conversion of the Class C convertible preferred stock (the "Class C preferred stock"). The weighted average number of shares for all periods presented in the accompanying financial statements has been adjusted for the five percent stock dividends paid in August 1996, August 1995 and in August 1994 (Note 8). STOCK-BASED COMPENSATION The Company measures stock-based compensation cost as the excess of the quoted market price of the Company's common stock at the grant date over the amount the employee must pay for the stock. The Company's policy is to generally grant stock options at fair market value at the date of grant. STATEMENT OF CASH FLOWS For purposes of the Statement of Cash Flows, the Company considers all highly liquid instruments with a maturity of three months or less to be cash equivalents. RECLASSIFICATIONS Certain amounts in the Consolidated Balance Sheet and the Consolidated Statement of Cash Flows have been reclassified to improve reporting and maintain comparability among the periods presented. NOTE 2 - ACQUISITIONS During fiscal 1996, the Company completed the acquisition of 14 existing automotive repair stores in five separate transactions totalling $2.8 million. The largest of the acquisitions was the purchase of the operating assets of seven Muffler Xpress stores located in North and South Carolina and Virginia for $1.2 million in September 1995. These acquisitions were accounted for as purchases and did not have a significant effect on the Company's consolidated financial statements. 31 32 MONRO MUFFLER BRAKE, INC. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ================================================================================ NOTE 3 - PROPERTY, PLANT AND EQUIPMENT The major classifications of property, plant and equipment are as follows:
MARCH 31, 1997 MARCH 31, 1996 -------------------------------------------- ------------------------------------ OWNED LEASED TOTAL OWNED LEASED TOTAL ----- ------ ----- ----- ------ ----- (DOLLARS IN THOUSANDS) Land $ 21,398 $ 21,398 $15,864 $15,864 Buildings and improvements 67,751 $6,838 74,589 54,517 $6,391 60,908 Equipment, signage and fixtures 43,773 82 43,855 37,831 82 37,913 Vehicles 6,527 385 6,912 5,905 222 6,127 Construction-in- progress 5,152 5,152 5,436 5,436 -------- ------ -------- ------- ------ ------- 144,601 7,305 151,906 119,553 6,695 126,248 Less - Accumulated depreciation and amortization 38,358 3,865 42,223 32,444 3,525 35,969 -------- ------ -------- ------- ------ ------- $106,243 $3,440 $109,683 $87,109 $3,170 $90,279 ======== ====== ======== ======= ====== =======
Interest costs capitalized aggregated $568,000 in 1997 and $617,000 in 1996. Amortization expense recorded under capital leases totaled $398,000, $360,000 and $326,000 for the years ended March 31, 1997, 1996 and 1995, respectively. NOTE 4 - OTHER NONCURRENT ASSETS Other noncurrent assets consist of the following:
MARCH 31, --------- 1997 1996 ---- ---- (DOLLARS IN THOUSANDS) Mortgage receivable $ 975 Deferred debt issuance costs 460 $ 578 Non-compete agreements 544 555 Investment in limited partnership 339 378 Goodwill 1,342 1,393 Other 327 325 ------ ----- $3,987 $3,229 ====== ======
Accumulated amortization associated with noncurrent assets at March 31, 1997 and 1996 amounted to $1,562,000 and $1,211,000, respectively. Goodwill is being amortized on a straight-line basis over periods ranging from 5 to 20 years. 32 33 MONRO MUFFLER BRAKE, INC. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ================================================================================ NOTE 5- LONG-TERM DEBT Long-term debt consists of the following:
MARCH 31, --------- 1997 1996 ---- ---- (DOLLARS IN THOUSANDS) Revolving Credit Facility $30,000 $19,790 Line of Credit 1,800 10.65% Senior Notes, due in installments through fiscal year 2000 5,500 7,333 Mortgage Notes Payable, LIBOR plus 1.0%, secured by store properties, due in installments through 2003 (a) 9,578 Mortgage Notes Payable, LIBOR plus 1.6%, secured by store properties, due in installments through 2001 (a) 4,466 Mortgage Notes Payable, LIBOR plus 1.35%, secured by store properties, due in installments through 2002 (a) 1,990 Mortgage Notes Payable, LIBOR plus 1.25%, secured by store properties, due in installments through 2003 (a) 3,683 Mortgage Note Payable, LIBOR plus .8%, secured by new warehouse and office building, due in installments through 2006 (a) 2,755 2,903 Term loan financing, LIBOR plus .8%, secured by new warehouse and office building, due in installments through 2004 (a) 609 702 Mortgage Note Payable, non-interest bearing, secured by new warehouse and office land, due in one installment in 2015 660 660 Other mortgages and notes, prime plus .75% to 10.5%, partially secured by store properties and equipment, due in installments through 2003 (a) 1,777 1,932 Obligations under capital leases, 6.0% to 16.8%, secured by store properties and certain equipment, due in installments through 2012 5,330 5,055 8.5% Mortgage Note Payable, secured by warehouse and office building, due in installments through 1997 162 ------------- ------------- 58,009 48,676 Less - Unamortized debt discount (b) 17 52 ------------- ------------- 57,992 48,624 Less - Current portion 3,128 3,165 ------------- ------------- $54,864 $45,459 ============= ============= (a) The prime rate at March 31, 1997 was 8.5%. The London Interbank Offered Rate (LIBOR) at March 31, 1997 was 5.69%. (b) The debt discount is the result of valuing the debt at fair market value as of the 1984 purchase date.
33 34 MONRO MUFFLER BRAKE, INC. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ================================================================================ At March 31, 1997, the Company has a $3.5 million line of credit for the purpose of issuing stand-by-letters of credit on an unsecured basis. The line requires fees aggregating .875% annually of the face amount of each stand-by-letter of credit, payable quarterly in advance. A total of $3.3 million of letters of credit were outstanding under this line at March 31, 1997. Through February 1996, the Company had a real estate line of credit of $25.0 million to be used for the placement of store mortgages. The real estate line of credit was terminated in fiscal 1996 at the Company's initiative and replaced by a new Revolving Credit Facility. Prior to the termination of the real estate line of credit, the Company had utilized $13.2 million for permanent mortgages. Any mortgage may be converted from a floating rate to a fixed rate loan during the first five years of its seven-year term. Interest is payable monthly. Equal monthly installments of principal are required based on 20-year amortization periods. During fiscal 1997, the Company completed the modification of its LIBOR based mortgages, reducing the various interest rates to LIBOR plus 1.0%. In February 1996, the Company finalized an unsecured Revolving Credit Agreement with two banks. Under the terms of the Agreement, the Company may borrow at the prime rate or at a LIBOR based rate which fluctuates quarterly dependent upon Company performance. The Company must pay a facility fee of .125% annually on the unused portion of the commitment. In March 1997, the Company received a commitment from the lenders to increase the amount available under the facility from $30 million to $50 million and extend the term to March 2000. Principal payments begin in April 2000 in equal monthly installments based on a five-year amortization period. The Company has available an unsecured line of credit of $7.5 million under a short-term borrowing agreement at the lower of the prime rate or other rate options available at the time of borrowing. There are no commitment fees associated with this line of credit. Based upon the Company's ability and intent to refinance the amount outstanding under the line of credit with its expanded Revolving Credit facility, the $1.8 million balance has been classified as long-term debt at March 31, 1997. During fiscal 1995, the Company purchased 12.7 acres of land for $.7 million from the City of Rochester, New York, on which its new office/warehouse facility is located. The City has provided financing for 100 percent of the cost of the land via a 20-year non-interest bearing mortgage, all due and payable in 2015. To finance its new office/warehouse building, the Company obtained permanent mortgage financing consisting of a 10-year mortgage for $2.9 million and an eight-year term loan in the amount of $.7 million. Both obligations require monthly interest payments, and each may be converted from a floating rate to a fixed rate loan before the last two years of their respective terms. The mortgage requires equal monthly installments of principal based on a 20-year amortization period, and the term loan requires constant monthly payments of principal to fully amortize the debt over the eight-year term. The Company entered into an interest rate swap agreement with a major financial institution which effectively fixes the interest rate over the terms of the aforementioned agreements at 7.15%. The Company also has obtained a commitment for a $.5 million term loan to finance equipment for the new office/warehouse building. The obligation requires equal monthly principal payments to fully amortize the debt over a five-year term. Interest is payable monthly at LIBOR plus .8%, and the obligation may be converted from a floating rate to a fixed rate loan during the first three years. No amounts had been borrowed under this term loan as of March 31, 1997. Certain of the Company's long-term debt agreements require, among other things, the maintenance of specified current ratios, interest and rent coverage ratios and amounts of tangible net worth, and also contain restrictions on dividend payments and capital expenditures. The Company is in compliance with these requirements at March 31, 1997. These agreements permit mortgages and specific financing lease arrangements with other parties with certain limitations. 34 35 MONRO MUFFLER BRAKE, INC. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ================================================================================ Aggregate debt maturities (excluding amortization of debt discount) over the next five years and thereafter are as follows:
CAPITAL LEASES -------------- AGGREGATE IMPUTED ALL OTHER YEAR ENDED MARCH 31, AMOUNT INTEREST DEBT TOTAL -------------------- ------ -------- ---- ----- (DOLLARS IN THOUSANDS) 1998 $1,202 $(855) $2,798 $ 3,145 1999 1,157 (803) 3,249 3,603 2000 1,132 (747) 3,928 4,313 2001 1,137 (680) 9,296 9,753 2002 1,096 (598) 8,374 8,872 Thereafter 5,843 (2554) 25,034 28,323 ------- Total $58,009 =======
NOTE 6 - FAIR VALUE OF FINANCIAL INSTRUMENTS Financial instruments consisted of the following:
MARCH 31, 1997 MARCH 31, 1996 -------------- -------------- CARRYING FAIR CARRYING FAIR AMOUNT VALUE AMOUNT VALUE ------ ----- ------ ----- (DOLLARS IN THOUSANDS) Cash and cash equivalents $ 6,438 $ 6,438 $ 5,280 $ 5,280 Long-term debt, including current portion $52,679 $52,298 $43,621 $43,768
The carrying amount of cash and cash equivalents approximates fair value because their maturity is generally less than one year in duration. Fair value of long-term debt was estimated using either quoted market prices for the same or similar issues, or the current rates offered to the Company for debt with similar maturities. 35 36 MONRO MUFFLER BRAKE, INC. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ================================================================================ NOTE 7 - INCOME TAXES The components of the provision (benefit) for income taxes are as follows:
YEAR ENDED MARCH 31, -------------------- 1997 1996 1995 ---- ---- ---- (DOLLARS IN THOUSANDS) Currently payable - Federal $ 5,418 $ 4,340 $ 4,760 State 1,128 908 1,148 ------- ------- ------- 6,546 5,248 5,908 Deferred - Federal 159 (219) 98 State 33 (41) 18 ------- ------- ------- 192 (260) 116 ------- ------- ------- Total $ 6,738 $ 4,988 $ 6,024 ======= ======= =======
Deferred tax (liabilities) assets are comprised of the following:
YEAR ENDED MARCH 31, -------------------- 1997 1996 1995 ---- ---- ---- (DOLLARS IN THOUSANDS) Property and equipment basis differences $(2,014) $(1,352) $(1,241) Prepaid expenses (397) (316) (365) Tax shelter investment (287) (263) (240) Installment sale (265) Other (79) (33) (82) ------- ------- ------- Gross deferred tax liabilities (3,042) (1,964) (1,928) ------- ------- ------- Capital leases 755 527 640 Insurance accruals 798 605 524 Inventory reserves 43 65 84 Vacation accrual 174 166 152 Warranty and other reserves 1,034 551 388 Other 268 272 96 ------- ------- ------- Gross deferred tax assets 3,072 2,186 1,884 ------- ------- ------- Net deferred tax asset (liability) $ 30 $ 222 $ (44) ======= ======= =======
The Company believes that it is more likely than not that the net deferred tax asset will be realized through taxable earnings or alternative tax strategies. 36 37 MONRO MUFFLER BRAKE, INC. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ================================================================================ A reconciliation between the U. S. federal statutory tax rate and the effective tax rate reflected in the accompanying financial statements is as follows:
YEAR ENDED MARCH 31, -------------------- 1997 1996 1995 ---- ---- ---- AMOUNT PERCENT AMOUNT PERCENT AMOUNT PERCENT ------ ------- ------ ------- ------ ------- (DOLLARS IN THOUSANDS) Federal income tax based on statutory tax rate applied to income before taxes $5,883 34.8 $4,311 34.2 $5,188 34.3 State income tax, net of federal income tax benefit 758 4.5 570 4.5 766 5.1 Other 97 .5 107 .9 70 .5 ====== ====== ====== ====== ====== ====== $6,738 39.8 $4,988 39.6 $6,024 39.9 ====== ====== ====== ====== ====== ======
NOTE 8 - CONVERTIBLE PREFERRED STOCK AND COMMON STOCK A summary of the changes in the number of shares of Class C preferred stock and common stock is as follows:
COMMON CLASS C STOCK CONVERTIBLE PREFERRED SHARES STOCK ------------ --------------------- Balance at March 31, 1995 6,531,230 91,727 Stock options exercised 57,116 Stock dividend 326,489 --------- ------ Balance at March 31, 1996 6,914,835 91,727 Stock options exercised 209,826 Stock dividend 345,665 --------- ------ Balance at March 31, 1997 7,470,326 91,727 ========= ======
On January 26, 1996, the Board of Directors declared a five percent stock dividend on the Company's common stock, paid August 5, 1996, to shareholders of record as of June 21, 1996. The Company also paid a five percent stock dividend on August 7, 1995, to shareholders of record as of June 23, 1995, and on August 1, 1994, to shareholders of record as of June 17, 1994. All share and per share information included in the accompanying financial statements and notes have been adjusted to give retroactive effect to these dividends. Additionally, in accordance with antidilution provisions of the Class C convertible preferred stock, the conversion value of the preferred stock was restated to $.239 per share. 37 38 MONRO MUFFLER BRAKE, INC. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ================================================================================ Holders of at least 60% of the Class C preferred stock must approve any action authorized by the holders of common stock. In addition, there are certain restrictions on the transferability of shares of Class C preferred stock. Under the 1984 and 1987 Incentive Stock Option Plans, 660,020 shares (as retroactively adjusted for the five percent stock dividends) of the common stock were reserved for issuance to officers and key employees. The 1989 Incentive Stock Option Plan authorized an additional 157,148 shares (as retroactively adjusted for the five percent stock dividends) for issuance. In January 1994 and May 1995, the Board of Directors authorized an additional 233,840 and 99,750 shares, respectively (as retroactively adjusted for the stock dividends), for issuance under the 1989 Plan. These amounts were approved by shareholders in August 1994 and August 1995, respectively. Generally, options vest with respect to 60% of the shares of common stock subject thereto three years after the date of grant. Options on 50% of the remaining shares vest on the fourth anniversary of the date of grant, and the balance vests on the fifth anniversary of the date of grant. The outstanding options have a duration of ten years and are exercisable through November 2006. A summary of changes in outstanding stock options (as retroactively adjusted for the five percent stock dividends) is as follows:
WEIGHTED AVERAGE EXERCISE AVAILABLE PRICE OUTSTANDING EXERCISABLE FOR GRANT --------- ----------- ----------- --------- AT MARCH 31, 1994 $3.74 793,659 633,785 214,771 Granted $16.90 22,050 (22,050) Became exercisable 48,922 Exercised $.87 (310,301) (310,301) Canceled $13.82 (231) 231 ------------ ------------ ----------- AT MARCH 31, 1995 $6.08 505,177 372,406 192,952 Authorized 99,750 Granted $14.49 166,320 (166,320) Became exercisable 21,934 Exercised $1.76 (59,972) (59,972) Canceled $13.98 (3,419) (1,621) 3,419 Rounding for stock dividend 9 1 ------------ ------------ ----------- AT MARCH 31, 1996 $8.76 608,115 332,747 129,802 Granted $15.43 112,609 (112,609) Became exercisable 51,633 Exercised $2.61 (209,826) (209,826) Canceled $14.90 (21,021) 21,021 Rounding for stock dividend (3) ------------ ------------ ----------- AT MARCH 31, 1997 $12.67 489,877 174,554 38,211 ============ ============ ===========
38 39 MONRO MUFFLER BRAKE, INC. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ================================================================================ The following table summarizes information about fixed stock options outstanding at March 31, 1997:
OPTIONS OUTSTANDING OPTIONS EXERCISABLE ---------------------- ----------------------- WEIGHTED WEIGHTED WEIGHTED AVERAGE AVERAGE AVERAGE RANGE OF SHARES REMAINING EXERCISE SHARES EXERCISE EXERCISE PRICES UNDER OPTION LIFE PRICE UNDER OPTION PRICE $ 1.00 - $10.00 87,957 2.55 $ 4.19 87,957 $ 4.19 $10.01 - $15.00 196,873 7.01 $13.06 77,566 $13.01 $15.01 - $19.75 205,047 8.73 $15.94 9,031 $16.09
In August 1994, subject to the approval of shareholders in August 1995, the Board of Directors authorized a non-employee directors' stock option plan. The plan initially reserves 60,637 shares of common stock (as retroactively adjusted for the five percent stock dividends), and provides for (i) the grant to each non-employee director as of August 1, 1994 of an option to purchase 2,756 shares of the Company's common stock (as retroactively adjusted for the five percent stock dividends) and (ii) the annual grant to each non-employee director of an option to purchase 2,756 shares (as retroactively adjusted for the five percent stock dividends) on the date of the annual meeting of shareholders beginning in 1995. The options expire ten years from the date of grant and have an exercise price equal to the fair market value of the Company's common stock on the date of grant. Options vest immediately upon issuance. A summary of changes in these stock options is as follows:
OPTION PRICE AVAILABLE PER SHARE OUTSTANDING EXERCISABLE FOR GRANT --------- ----------- ----------- --------- AT MARCH 31, 1994 -0- -0- -0- Authorized 60,637 Granted $15.59 19,294 19,294 (19,294) --------- --------- ------------ AT MARCH 31, 1995 $15.59 19,294 19,294 41,343 Granted $14.05 19,294 19,294 (19,294) --------- --------- ------------ AT MARCH 31, 1996 $14.05 - $15.59 38,588 38,588 22,049 Granted $18.75 19,294 19,294 (19,294) --------- --------- ------------ AT MARCH 31, 1997 $14.05 - $18.75 57,882 57,882 2,755 ========= ========= ============
In May 1997, the Board of Directors authorized an additional 200,000 shares for issuance under the 1989 Employees' Incentive Stock Option Plan and 65,000 shares under the 1994 Non-Employee Directors' Stock Option Plan, subject to the approval of shareholders in August 1997. Effective in fiscal 1997, the Company adopted the disclosure requirements of Statement of Financial Accounting Standards No. 123 (SFAS 123), "Accounting for Stock-Based Compensation." As permitted under SFAS 123, the Company will continue to measure stock-based compensation cost as the excess of the quoted market price of the Company's common stock at the grant date over the amount the employee must pay for the stock. 39 40 MONRO MUFFLER BRAKE, INC. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ================================================================================ SFAS 123 requires disclosure of pro forma net income and pro forma net income per share as if the fair value-based method had been applied in measuring compensation cost for the stock-based awards granted in fiscal years 1997 and 1996. Management believes that 1997 and 1996 pro forma amounts are not representative of the effects of stock-based awards on future pro forma net income and pro forma earnings per share because those pro forma amounts exclude the pro forma compensation expense related to unvested stock options granted before fiscal 1996. Reported and pro forma net income and earnings per share amounts are set forth below:
YEAR ENDED MARCH 31, -------------------- 1997 1996 ---- ---- (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) Net income As reported $ 10,191 $7,614 Pro forma 9,859 7,416 Earnings per share As reported $ 1.25 $ .94 Pro forma 1.21 .92
The weighted average fair value per option at the date of grant for options granted during fiscal 1997 and 1996 was $7.94 and $7.43, respectively. The fair values of the options granted were estimated on the date of their grant using the Black-Scholes option-pricing model based on the following weighted average assumptions:
YEAR ENDED MARCH 31, -------------------- 1997 1996 ---- ---- Risk free interest rate 6.24% 6.52% Expected life 9 years 9 years Expected volatility 26.0% 26.0% Expected dividend yield 0% 0% Forfeitures are recognized as they occur.
NOTE 9 - OPERATING LEASES AND OTHER COMMITMENTS The Company leases retail facilities and computer equipment under noncancellable lease agreements which expire at various dates through fiscal year 2013. In addition to stated minimum payments, certain real estate leases have provisions for contingent rentals when retail sales exceed specified levels. Generally, the leases provide for renewal for various periods at stipulated rates. Most of the facilities' leases require payment of property taxes, insurance and maintenance costs in addition to rental payments, and several provide an option to purchase the property at the end of the lease term. 40 41 MONRO MUFFLER BRAKE, INC. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ================================================================================ Future minimum payments required under noncancellable leases are as follows:
YEAR ENDED MARCH 31, AMOUNT - - -------------------- --------------------- (DOLLARS IN THOUSANDS) 1998 $ 7,194 1999 7,308 2000 7,266 2001 6,810 2002 5,851 Thereafter 24,310 ---------- Total $ 58,739 ==========
Rent expense under operating leases totaled $6,965,000, $5,500,000 and $4,681,000 in 1997, 1996 and 1995, respectively, including contingent rentals of $649,000, $511,000 and $587,000 in each respective year. The Company has an employment agreement with its Chief Executive Officer. The agreement has a two-year base term and continues year to year until terminated by the Executive or the Company. The agreement includes a covenant against competition with the Company for two years after termination, and provides the Executive two years' salary and certain additional rights in the event of a termination without cause (as defined), or a termination in the event of a change in control (as defined). NOTE 10 - EMPLOYEE RETIREMENT AND PROFIT SHARING PLANS The Company has a noncontributory defined benefit plan covering most employees. Coverage under the plan begins after completing one year of service and attainment of age twenty-one. Benefits are based primarily on years of service and employees' pay near retirement. The Company's funding policy is consistent with the funding requirements of Federal law and regulations. Plan assets are invested in fixed income funds. The plan's funded status was as follows:
MARCH 31, ---------- 1997 1996 ---- ---- (DOLLARS IN THOUSANDS) Actuarial present value of benefit obligation: Vested benefit obligation $(3,382) $(3,177) ======== ======== Accumulated benefit obligation $(3,590) $(3,322) ======== ======== Projected benefit obligation $(4,325) $(4,103) Plan assets at fair value 3,566 3,370 -------- ------- Projected benefit obligation in excess of plan assets (759) (733) Unrecognized net loss 622 766 Unrecognized prior service cost 24 27 Unrecognized net transition asset (146) (175) -------- ------- Pension liability at March 31 $ (259) $ (115) ========= =======
41 42 MONRO MUFFLER BRAKE, INC. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ================================================================================ Pension cost included the following components:
YEAR ENDED MARCH 31, -------------------- 1997 1996 1995 ---- ---- ---- (DOLLARS IN THOUSANDS) Service cost - benefits earned during the period $ 259 $ 230 $ 215 Interest cost on projected benefit obligation 293 277 248 Return on plan assets (271) (227) (159) Amortization of net transition asset 4 14 (13) -------- ------- ------- Net pension cost $ 285 $ 294 $ 291 ======= ======= =======
The projected benefit obligation at March 31, 1997 and 1996 assumed discount rates of 7.5%. Increase in future compensation levels was assumed to be 5% in 1997 and 1996. The assumed long-term rate of return on plan assets at March 31, 1997 and 1996 was 8%. The unrecognized transition asset is being amortized over fifteen years beginning April 1, 1988. The unrecognized prior service cost is being amortized over fifteen years beginning April 1, 1990. The Company also has a profit sharing plan which covers full-time employees who meet the age and service requirements of the plan. The annual contribution to the plan is at the discretion of the Compensation and Benefits Committee of the Board of Directors and, before annual forfeitures which reduce the annual contribution, totaled $500,000 and $475,000 for the years ended March 31, 1997 and 1995, respectively. No contribution was made for the year ended March 31, 1996. The Company's management bonus plan provides for the payment of annual cash bonus awards to participating employees, as selected by the Board of Directors, based primarily on the Company's attaining pre-tax income targets established by the Board of Directors. Charges to expense applicable to the management bonus plan totaled $779,000, $104,000 and $764,000 for the years ended March 31, 1997, 1996 and 1995 respectively. Because the Company did not attain a minimum required percentage of targeted profit performance in fiscal 1996, 1996 expense does not include any bonus amounts for executive officers. NOTE 11 - RELATED PARTY TRANSACTIONS Certain (a) principal shareholders/directors of the Company, (b) partnerships in which such persons have interests or (c) trusts of which members of their families are beneficiaries are lessors of certain facilities to the Company. Payments under such operating and capital leases amounted to $1,828,000, $1,688,000 and $1,812,000 for the years ended March 31, 1997, 1996 and 1995, respectively. Amounts payable under these lease agreements totaled $88,000 and $79,000, respectively, at March 31, 1997 and 1996. No related party leases, other than renewals or modifications of leases on existing stores, have been entered into since May 1989 and no new leases are contemplated. Effective July 1991, the Company entered into a management agreement with an investment banking firm associated with a principal shareholder/director of the Company to provide financial advice. The agreement provides for an annual fee of $160,000, plus reimbursement of out-of-pocket expenses. During fiscal 1997, 1996 and 1995, the Company incurred fees of $160,000 annually under this agreement. In addition, this investment banking firm, from time to time, provides additional investment banking services to the Company for customary fees. 42 43 MONRO MUFFLER BRAKE, INC. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ================================================================================ NOTE 12 - SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION The following transactions represent noncash investing and financing activities during the periods indicated: YEAR ENDED MARCH 31, 1997 In connection with the declaration of a five percent stock dividend (Note 8), the Company increased common stock and additional paid-in capital by $4,000 and $4,584,000, respectively, and decreased retained earnings by $4,588,000. Capital lease obligations of $722,000 were incurred under various lease agreements. In connection with the sale of its former headquarters building, the Company reduced fixed assets and increased other assets (mortgage receivable) by $989,000. In connection with the termination of a capital lease, the Company reduced debt and fixed assets by $112,000. YEAR ENDED MARCH 31, 1996 In connection with the declaration of a five percent stock dividend (Note 8), the Company increased common stock and additional paid-in capital by $4,000 and $5,998,000, respectively, and decreased retained earnings by $6,002,000. Capital lease obligations of $772,000 were incurred under various lease agreements. In connection with the acquisition of several automotive repair stores, liabilities were assumed as follows:
(DOLLARS IN THOUSANDS) Fair value of assets acquired $2,835 Cash paid 2,416 ----------- Liabilities assumed $ 419 ===========
YEAR ENDED MARCH 31, 1995 In connection with the declaration of a five percent stock dividend (Note 8), the Company increased common stock and additional paid-in capital by $3,000 and $5,310,000, respectively, and decreased retained earnings by $5,313,000. A capital lease obligation of $35,000 was incurred under a lease agreement.
YEAR ENDED MARCH 31, -------------------- 1997 1996 1995 ---- ---- ---- (DOLLARS IN THOUSANDS) Cash paid during the year: Interest, net $3,867 $3,205 $2,447 Income taxes, net $6,823 $5,244 $6,049
43 44 MONRO MUFFLER BRAKE, INC. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ================================================================================ NOTE 13 - SUBSEQUENT EVENT On May 14, 1997, the Board of Directors declared a five percent stock dividend, payable August 4, 1997, to common stockholders of record as of June 20, 1997. Shares of common or preferred stock included in the accompanying financial statements and notes have not been adjusted to reflect this dividend. --- NOTE 14 - NEW ACCOUNTING STANDARDS Statement of Financial Accounting Standards No. 128 ("SFAS 128"), "Earnings Per Share", was issued in February 1997. This Statement establishes standards for computing and presenting earnings per share ("EPS"), and simplifies the standards previously found in APB Opinion No. 15 ("APB 15"). It replaces the presentation of primary EPS with a presentation of basic EPS, and also requires dual presentation of basic and diluted EPS on the face of the income statement for all entities with complex capital structures. The Company plans to adopt the Statement in fiscal 1998. The Company expects that basic EPS as calculated under SFAS 128 will not vary materially from primary EPS as calculated under APB 15 because of minimal option activity, nor vary materially from diluted EPS. 44 45 SELECTED QUARTERLY FINANCIAL INFORMATION (UNAUDITED) The following table sets forth income statement data by quarter for the fiscal years ended March 31, 1997 and 1996.
QUARTER ENDED ------------- JUNE 30, SEPT.30, DEC.31, MARCH 31, 1996 1996 1996 1997 ---- ---- ---- ---- (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) Sales.....................................$37,745 $37,799 $33,560 $32,065 Cost of sales including distribution and occupancy costs..................... 20,666 20,291 19,867 17,968 ------- ------- ------- ------- Gross profit.............................. 17,079 17,508 13,693 14,097 Operating, selling, general and administrative expenses............. 10,645 10,386 9,978 10,740 ------- ------- ------- ------- Operating income.......................... 6,434 7,122 3,715 3,357 Interest expense - net.................... 814 851 837 722 Other expense............................. 16 55 205 199 ------- ------- ------- ------- Income before provision for income taxes.. 5,604 6,216 2,673 2,436 Provision for income taxes................ 2,225 2,474 1,064 975 ------- ------- ------- ------- Net income................................$ 3,379 $ 3,742 $ 1,609 $ 1,461 ======= ======= ======= ======= Earnings per share (b)....................$ .42 $ .46 $ .20 $ .18 ======= ======= ======= ======= Weighted number of Common Stock shares and equivalents (a) (b).......... 8,133 8,210 8,158 8,182 ======= ======= ======= ======= 1995 1995 1995 1996 ---- ---- ---- ---- (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) Sales.....................................$28,945 $31,217 $28,190 $28,752 Cost of sales including distribution and occupancy costs..................... 15,865 17,004 16,995 16,372 ------- ------- ------- ------- Gross profit.............................. 13,080 14,213 11,195 12,380 Operating, selling, general and administrative expenses............. 8,863 8,528 8,709 9,199 ------- ------- ------- ------- Operating income.......................... 4,217 5,685 2,486 3,181 Interest expense - net.................... 666 573 544 854 Other expense............................. 129 5 3 193 ------- ------- ------- ------- Income before provision for income taxes.. 3,422 5,107 1,939 2,134 Provision for income taxes................ 1,347 2,043 745 853 ------- ------- ------- ------- Net income................................$ 2,075 $ 3,064 $ 1,194 $ 1,281 ======= ======= ======= ======= Earnings per share (b)....................$ .26 $ .38 $ .15 $ .16 ======= ======= ======= ======= Weighted number of Common Stock shares and equivalents (a) (b).......... 8,090 8,074 8,072 8,073 ======= ======= ======= ======= (a) Earnings per share for each period was computed by dividing net income by the weighted average number of shares of Common Stock and Common Stock equivalents outstanding during the respective quarters. (b) All share and per share information has been adjusted to give retroactive effect to the five percent stock dividends paid in August 1996, August 1995 and in August 1994.
45 46 ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND - - ------- --------------------------------------------------------------- FINANCIAL DISCLOSURE -------------------- None. PART III -------- ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY - - -------- ----------------------------------------------- Information concerning the directors of the Company is incorporated herein by reference to the section captioned "Election of Directors" in the Proxy Statement. Information concerning the executive officers of the Company is set forth in Item 4A of Part I hereof. Information concerning required Section 16(a) disclosure is incorporated herein by reference to the section captioned "Compliance with Section 16(a) of the Exchange Act" in the Proxy Statement. ITEM 11. EXECUTIVE COMPENSATION - - -------- ---------------------- Information concerning executive compensation is incorporated herein by reference to the section captioned "Executive Compensation" in the Proxy Statement. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS - - -------- ----------------------------------------------- AND MANAGEMENT - - -------------- Information concerning security ownership of certain beneficial owners and management is incorporated herein by reference to the sections captioned "Principal Shareholders" and "Election of Directors" in the Proxy Statement. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS - - -------- ---------------------------------------------- Information concerning certain relationships and related transactions is incorporated herein by reference to the sections captioned "Compensation Committee Interlocks and Insider Participation" and "Certain Transactions" in the Proxy Statement. 46 47 PART IV ------- ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K - - -------- ---------------------------------------------------------------- FINANCIAL STATEMENTS -------------------- Reference is made to Item 8 of Part II hereof. FINANCIAL STATEMENT SCHEDULES ----------------------------- Schedules have been omitted because they are inapplicable, not required, or the information is included elsewhere in the Financial Statements or the notes thereto. EXHIBITS -------- Reference is made to the Index to Exhibits accompanying this Form 10-K as filed with the Securities and Exchange Commission. The Company will furnish to any shareholder, upon written request, any exhibit listed in such Index to Exhibits upon payment by such shareholder of the Company's reasonable expenses in furnishing any such exhibit. REPORTS ON FORM 8-K ------------------- No reports on Form 8-K were filed during the last quarter of fiscal 1997. 47 48 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. MONRO MUFFLER BRAKE, INC. (Registrant) By /S/ LAWRENCE C. DAY ------------------------------------------- Lawrence C. Day President and Chief Executive Officer Date: June 27, 1997 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities indicated as of June 27, 1997. SIGNATURE TITLE /S/ CATHERINE D'AMICO Senior Vice President-Finance, Chief - - ----------------------- Financial Officer and Treasurer Catherine D'Amico (Principal Financial and Accounting Officer) Burton S. August* Director Charles J. August* Director Robert W. August* Director Frederick M. Danziger* Director Jack M. Gallagher* Director Donald Glickman* Director Peter J. Solomon* Director Lionel B. Spiro* Director W. Gary Wood* Director *By /S/ LAWRENCE C. DAY ----------------------------------------- Lawrence C. Day Chief Executive Officer, Director and as Attorney-in-Fact 48 49 INDEX TO EXHIBITS he following is a list of all exhibits filed herewith or incorporated ce herein: EXHIBIT NO. PAGE DOCUMENT - - ----------- ---- -------- 3.01* Restated Certificate of Incorporation of the Company, dated July 23, 1991, with Certificate of Amendment, dated November 1, 1991. (1992 Form 10-K, Exhibit No. 3.01) 3.02* Restated By-Laws of the Company, dated July 23, 1991. (Amendment No. 1, Exhibit No. 3.04) 4.01* Revolving Credit Agreement, dated February 7, 1996, among Monro Muffler Brake, Inc., as borrower, and The Chase Manhattan Bank, N.A. and Fleet Bank as lenders, and The Chase Manhattan Bank, N.A. as agent. (1996 Form 10-K, Exhibit No. 4.01) 4.02* Senior Note Agreement, dated March 1, 1989, between the Company and Massachusetts Mutual Life Insurance Company. (Form S-1, Exhibit No. 4.02) 4.02a* Amendment No. 1, dated June 17, 1991, to Senior Note Agreement, between the Company and Massachusetts Mutual Life Insurance Company. (Amendment No. 1, Exhibit No. 4.02a) 4.03* 10.65% Senior Notes Due April 1, 1999, dated March 22, 1989, issued by the Company to Massachusetts Mutual Life Insurance Company. (Form S-1, Exhibit No. 4.03) 4.04* Form of 10% Subordinated Promissory Note, dated July 12, 1984, issued by the Company to Charles J. August, Robert W. August, John W. August, Burton Stuart August and Waldemar Bachman. No amounts were outstanding as of March 31, 1995. (Form S-1, Exhibit No. 4.07) 4.05* Unsecured Line of Credit, Commitment Letter, dated October 5, 1995, between the Company and The Chase Manhattan Bank, N.A. (September 1995 Form 10-Q, Exhibit No. 4.01) 4.06* Offering Line of Credit for Standby Letters of Credit, Commitment Letter, dated October 5, 1995, between the Company and The Chase Manhattan Bank, N.A. (September 1995 Form 10-Q, Exhibit No. 4.02) 4.07* Real Estate Line of Credit, Commitment Letter, dated January 13, 1995, between the Company and The Chase Manhattan Bank, N.A. (December 1994 Form 10-Q, Exhibit No. 4.01) 4.08* Commitment Letter for new headquarters facility, dated January 13, 1995, between the Company and The Chase Manhattan Bank, N.A. (December 1994 Form 10-Q, Exhibit No. 4.04) 49 50 EXHIBIT NO. PAGE DOCUMENT - - ----------- ---- -------- 10.01* 1984 Employees' Incentive Stock Option Plan, as amended through December 23, 1992. (Form S-8, Exhibit No. 4-1)** 10.02* 1987 Employees' Incentive Stock Option Plan, as amended through December 23, 1992. (Form S-8, Exhibit No. 4-2)** 10.03* 1989 Employees' Incentive Stock Option Plan, as amended through December 23, 1992. (Form S-8, Exhibit No. 4-3)** 10.03a* Amendment, dated as of January 25, 1994, to 1989 Employees' Incentive Stock Option Plan. (1994 Form 10-K, Exhibit No. 10.03a)** 10.03b* Amendment, dated as of May 17, 1995 to the 1989 Employees' Incentive Stock Option Plan (1995 Form 10-K, Exhibit No. 10.03)** 10.03c 58 Amendment, dated as of May 14, 1997 to the 1989 Employees' Incentive Stock Option Plan (1997 Form 10-K, Exhibit No. 10.03c)** 10.04* Retirement Plan of the Company, as amended and restated effective as of April 1, 1989. (September 1993 Form 10-Q, Exhibit No. 10)** 10.05* Profit Sharing Plan, amended and restated as of April 1, 1993. (1995 Form 10-K, Exhibit No. 10.05)** 10.06* Mortgage and Security Agreement, dated September 1, 1987, between the Company and The Chase Lincoln First Bank, N.A., with Mortgage Note, dated September 21, 1987, and Conditional Assignment of Leases and Rents, dated September 1, 1987, with respect to Shop No. 87. (Form S-1, Exhibit No. 10.07) 10.07* Bond and Mortgage, dated April 9, 1986, among the Company, Gerald Levin and Eleanor B. Levin, and Frank A. Cancelino and Jemma A. Cancelino, with respect to Shop No. 75. (Form S-1, Exhibit No. 10.08) 10.08* Mortgage, dated July 31, 1987, between the Company and Central Trust Company, with Mortgage Note, dated July 31, 1987, with respect to Shop No. 82. (Form S-1, Exhibit No. 10.09) 10.08a* Amendment, dated June 17, 1991, to Mortgage with respect to Shop No. 82, between the Company and Central Trust Company. (Amendment No. 1, Exhibit No. 10.09a) 10.09* Mortgage and Security Agreement, dated September 21, 1987 between the Company and Chase Lincoln First Bank, N.A., with Mortgage Note, dated September 21, 1987, and Conditional Assignment of Leases and Rents, dated September 1, 1987, with respect to Shop No. 78. (Form S-1, Exhibit No. 10.10) 10.10* Mortgage and Security Agreement, dated September 1, 1987, between the Company and Chase Lincoln First Bank, N.A., with Mortgage Note, dated September 1, 1987, and Conditional Assignment of Leases and Rents, dated September 1, 1987, with respect to Shop No. 86. (Form S-1, Exhibit No. 10.11) 50 51 EXHIBIT NO. PAGE DOCUMENT - - ----------- ---- -------- 10.11* Mortgage and Security Agreement, dated December 1, 1987, between the Company and Chase Lincoln First Bank, N.A., with Mortgage Note, dated December 28, 1987, and Conditional Assignment of Leases and Rents, dated December 1, 1987, with respect to Shop No. 90. (Form S-1, Exhibit No. 10.12) 10.12* Mortgage and Security Agreement, dated August 1, 1988, between the Company and Chase Lincoln First Bank, N.A., with Mortgage Note, dated August 9, 1988, and Conditional Assignment of Leases and Rents, dated August 1, 1988, with respect to Shop No. 120. (Form S-1, Exhibit No. 10.13) 10.13* Mortgage and Security Agreement, dated August 1, 1988, between the Company and Chase Lincoln First Bank, N.A., with Mortgage Note, dated August 9, 1988, and Conditional Assignment of Leases and Rents, dated August 1, 1988, with respect to Shop No. 124. (Form S-1, Exhibit No. 10.14) 10.14* Mortgage and Security Agreement, dated August 1, 1988, between the Company and Chase Lincoln First Bank, N.A., with Mortgage Note, dated August 9, 1988, and Conditional Assignment of Leases and Rents, dated August 1, 1988, with respect to Shop No. 125. (Form S-1, Exhibit No. 10.15) 10.15* Mortgage, dated January 1, 1983, among the Company, Lincoln First Bank, N.A., Mary C. Vasile, David A. Vasile, Marie J. Vasile, Vincenza Vasile, Anthony G. Cashette, Joseph A. Fischette and Lillian Lobene, with Mortgage Note, dated January 1, 1983, and Assignment of Mortgage, dated December 3, 1984, by Lillian Lobene to Leo and Matilda Iaia, with respect to the Company's former headquarters offices and warehouse facilities. No amounts were outstanding as of March 31, 1997. (Form S-1, Exhibit No. 10.16) 10.15a* Modification and Extension Agreement, dated January 28, 1993, among the Company, The Chase Manhattan Bank, N.A. (formerly Lincoln First Bank, N.A.), Mary C. Vasile, David A. Vasile, Robert Oppenheimer, Vincenza Vasile, Anthony G. Cashette, Joseph A. Fischette and Leo and Matilda Iaia, with respect to the Company's former headquarters offices and warehouse facilities. No amounts were outstanding as of March 31, 1997. (1993 Form 10-K, Exhibit No. 10.15a) 10.16* Modification and Extension Agreement, dated August 12, 1991, between AA & L Associates, L.P. and the Company, with respect to Shop No. 1. (1992 Form 10-K, Exhibit No. 10.18) 10.17* Sublease, dated June 1, 1980, among August, August and Lane Co-venture and the Company, with Amendment of Lease, dated July 11, 1984, and assigned by August, August and Lane Co-venture to AA & L Associates, L.P., effective January 2, 1996 with respect to Shop No. 3. (Form S-1, Exhibit No. 10.19) 51 52 EXHIBIT NO. PAGE DOCUMENT - - ---------- ---- -------- 10.18* Lease, dated March 8, 1972, among Charles J. August, Burton S. August and Sheldon A. Lane and the Company, with Amendment of Lease, dated July 11, 1984, with respect to Shop No. 7. (Form S-1, Exhibit No. 10.20) 10.18a* Confirmation of Assignment of Lease, dated December 31, 1991, among Charles J. August, Burton S. August and Sheldon A. Lane and Stoneridge 7 Realty Partnership, with respect to Shop No. 7. (1992 Form 10-K, Exhibit No. 10.20a) 10.19* Lease, effective December 1, 1985, among Chase Lincoln First Bank, N.A. and Burton S. August, as Trustees and the Company, with Assignment of Lease, dated June 7, 1991, among Chase Lincoln First Bank, N.A. and Burton S. August, as Trustees, and August, Eastwood & August, with respect to Shop No. 8. (Form S-1, Exhibit No. 10.21) 10.20* Lease, dated February 10, 1972, among Charles J. August, Burton S. August and Sheldon A. Lane and the Company as amended July 11, 1984 and assigned to Lane, August, August Trust on June 7, 1991, and assigned to Lane, August, August LLC effective January 2, 1996, with respect to Shop No. 9. (Form S-1, Exhibit No. 10.22) 10.21* Lease, dated May 1, 1973, among Charles J. August, Burton S. August and Sheldon A. Lane and the Company, with Amendment of Lease, dated July 11, 1984, and Assignment of Lease, dated June 7, 1991, among Charles J. August, Burton S. August and Sheldon A. Lane and 35 Howard Road Joint Venture, with respect to Shop No. 10. (Form S-1, Exhibit No. 10.23) 10.22* Lease, dated May 7, 1973, among Charles J. August, Burton S. August and Sheldon A. Lane and the Company, with Amendment of Lease, dated July 11, 1984, and assigned by Mssrs. August, August and Lane to AA & L Associates, L.P., effective January 2, 1996, with respect to Shop No. 12. (Form S-1, Exhibit No. 10.24) 10.23* Lease, dated July 25, 1974, among Charles J. August, Burton S. August and Sheldon A. Lane and the Company, with Amendment of Lease, dated July 11, 1984, and Assignment of Lease, dated June 7, 1991, among Charles J. August, Burton S. August and Sheldon A. Lane and AA & L Associates, L. P., with respect to Shop No. 14. (Form S-1, Exhibit No. 10.25) 10.24* Lease, effective April 1, 1975, among Charles J. August, Burton S. August and Sheldon A. Lane and the Company, with Amendment of Lease, dated July 11, 1984, and Assignment of Lease, dated June 7, 1991, among Charles J. August, Burton S. August and Sheldon A. Lane and Lane, August, August Trust and assigned by Lane, August, August Trust to Lane, August, August LLC, effective January 2, 1996, with respect to Shop No. 15. (Form S-1, Exhibit No. 10.26) 10.25* Lease, dated as of September 25, 1991, among Charles J. August, Burton S. August and Sheldon A. Lane and the Company, with respect to Shop No. 17. (1992 Form 10-K, Exhibit No. 10.27) 52 53 EXHIBIT NO. PAGE DOCUMENT - - ---------- ---- -------- 10.26* Lease, effective May 1, 1979, among Charles J. August, Burton S. August and Sheldon A. Lane and the Company, with Amendment of Lease, dated July 11, 1984, and Assignment of Lease, dated June 7, 1991, among Charles J. August, Burton S. August and Sheldon A. Lane and AA & L Associates, L.P., with respect to Shop No. 23. (Form S-1, Exhibit No. 10.28) 10.27* Lease, effective May 1, 1980, among Charles J. August, Burton S. August and Sheldon A. Lane and the Company, with Amendment of Lease, dated July 11, 1984, and Assignment of Lease, dated June 7, 1991, among Charles J. August, Burton S. August and Sheldon A. Lane and AA & L Associates, L.P., with respect to Shop No. 25. (Form S-1, Exhibit No. 10.29) 10.28* Lease, effective March 1, 1980, among Charles J. August, Burton S. August and Sheldon A. Lane and the Company, with Amendment of Lease, dated July 11, 1984, and Assignment of Lease, dated June 7, 1991, among Charles J. August, Burton S. August and Sheldon A. Lane and AA & L Associates, L.P., with respect to Shop No. 27. (Form S-1, Exhibit No. 10.30) 10.29* Lease, effective July 1, 1980, among Charles J. August, Burton S. August and Sheldon A. Lane and the Company, with Amendment of Lease, dated July 11, 1984, and Assignment of Lease, dated June 7, 1991, among Charles J. August, Burton S. August and Sheldon A. Lane and AA & L Associates, L.P., with respect to Shop No. 28. (Form S-1, Exhibit No. 10.31) 10.30* Lease, effective November 1, 1980, among Charles J. August, Burton S. August and Sheldon A. Lane and the Company, with Amendment of Lease, dated July 11, 1984, and Assignment of Lease, dated June 7, 1991, among Charles J. August, Burton S. August and Sheldon A. Lane and AA & L Associates, L.P., with respect to Shop No. 29. (Form S-1, Exhibit No. 10.32) 10.31* Lease, effective August 1, 1983, among Charles J. August, Burton S. August and Sheldon A. Lane and the Company, with Amendment of Lease, dated July 11, 1984, and Assignment of Lease, dated June 7, 1991, among Charles J. August, Burton S. August and Sheldon A. Lane and AA & L Associates, L.P., with respect to Shop No. 30. (Form S-1, Exhibit No. 10.33) 10.32* Lease, effective December 1, 1981, among Charles J. August, Burton S. August and Sheldon A. Lane and the Company, with Amendment of Lease, dated July 11, 1984, and assigned by Mssrs. August, August and Lane to August, August and Lane of Rochester, LLC, effective January 2, 1996, with respect to Shop No. 31. (Form S-1, Exhibit No. 10.34) 10.33* Modification and Extension Agreement, dated August 12, 1991, among Charles J. August, Burton S. August and Sheldon A. Lane and the Company, and assigned by Mssrs. August, August and Lane to August, August and Lane of Rochester, LLC, effective January 2, 1996, with respect to Shop No. 33. (1992 Form 10-K, Exhibit No. 10.35) 53 54 EXHIBIT NO. PAGE DOCUMENT - - ---------- ---- -------- 10.34* Lease, effective December 1, 1981, among Charles J. August, Burton S. August and Sheldon A. Lane and the Company, with Amendment of Lease, dated July 11, 1984, and assigned by Mssrs. August, August and Lane to August, August and Lane of Rochester, LLC, effective January 2, 1996, with respect to Shop No. 34. (Form S-1, Exhibit No. 10.36) 10.35* Lease, dated April 10, 1984, among Charles J. August, Burton S. August and Sheldon A. Lane and the Company, with Amendment of Lease, dated July 11, 1984, and Assignment of Lease, dated June 7, 1991, among Charles J. August, Burton S. August and Sheldon A. Lane and AA & L Associates, L.P., with respect to Shop No. 35. (Form S-1, Exhibit No. 10.37) 10.36* Lease, effective October 1, 1983, among Charles J. August, Burton S. August and Sheldon A. Lane and the Company, with Amendment of Lease, dated July 11, 1984, with respect to Shop No. 36. (Form S-1, Exhibit No. 10.38) 10.36a* Assignment of Lease, dated October 1, 1991, among Charles J. August, Burton S. August and Sheldon A. Lane and AA & L Associates, L.P., with respect to Shop No. 36. (1992 Form 10-K, Exhibit No. 10.38a) 10.37* Lease, effective July 1, 1983, among Charles J. August, Burton S. August and Sheldon A. Lane and the Company, with Amendment of Lease, dated July 11, 1984, and Assignment of Lease, dated June 7, 1991, among Charles J. August, Burton S. August and Sheldon A. Lane and AA & L Associates, L.P., with respect to Shop No. 43. (Form S-1, Exhibit No. 10.39) 10.38* Lease, dated as of February 1, 1983, among Charles J. August, Burton S. August and Sheldon A. Lane and the Company, with Amendment of Lease, dated July 11, 1984, and assigned by Mssrs. August, August and Lane to AA & L Associates, L.P., effective January 2, 1996, with respect to Shop No. 44. (Form S-1, Exhibit No. 10.40) 10.39* Sublease, dated as of May 1, 1979, among Charles J. August, Burton S. August and Sheldon A. Lane and the Company, with Amendment of Lease, dated July 11, 1984, and Assignment of Lease, dated June 7, 1991, among Charles J. August, Burton S. August and Sheldon A. Lane and AA & L Associates, L.P., with respect to Shop No. 45. (Form S-1, Exhibit No. 10.41) 10.40* Lease, effective October 1, 1985, among Charles J. August, Burton S. August and Sheldon A. Lane and the Company, with Amendment of Lease, dated as of July 11, 1984, and Assignment of Lease, dated June 7, 1991, among Burton S. August, as Trustee, and Lane, August, August Trust, and assigned by Lane, August, August Trust to Lane, August, August LLC, effective January 2, 1996, with respect to Shop No. 48. (Form S-1, Exhibit No. 10.42) 10.41* Lease, dated as of January 1, 1984, among Charles J. August, Burton S. August and Sheldon A. Lane and the Company, with Amendment of Lease, dated July 11, 1984, and assigned by Mssrs. August, August and Lane to AA & L Associates, L.P., effective January 2, 1996, with respect to Shop No. 49. (Form S-1, Exhibit No. 10.43) 54 55 EXHIBIT NO. PAGE DOCUMENT - - ---------- ---- -------- 10.42* Lease, dated July 1, 1982, among Charles J. August, Burton S. August and Sheldon A. Lane and the Company, with Amendment of Lease, dated July 11, 1984, and assigned by Mssrs. August, August and Lane to AA & L Associates, L.P., effective January 2, 1996, with respect to Shop No. 51. (Form S-1, Exhibit No. 10.44) 10.43* Lease, dated July 1, 1982, among Charles J. August, Burton S. August and Sheldon A. Lane and the Company, with Amendment of Lease, dated July 11, 1984, with respect to Shop No. 52. (Form S-1, Exhibit No. 10.45) 10.44* Lease, dated May 1, 1979, among Charles J. August, Burton S. August and Sheldon A. Lane and the Company, with Amendment of Lease, dated July 11, 1984, and Assignment of Lease, dated June 7, 1991, among Charles J. August, Burton S. August and Sheldon A. Lane and AA & L Associates, L.P., with respect to Shop No. 53. (Form S-1, Exhibit No. 10.46) 10.45* Lease, dated July 1, 1982, among Charles J. August, Burton S. August and Sheldon A. Lane and the Company, with Amendment of Lease, dated July 11, 1984, with respect to Shop No. 54. (Form S-1, Exhibit No. 10.47) 10.46* Lease, effective September 1, 1983, among Charles J. August, Burton S. August and Sheldon A. Lane and the Company, with Amendment of Lease, dated July 11, 1984, and Assignment of Lease, dated June 7, 1991, among Charles J. August, Burton S. August and Sheldon A. Lane and AA & L Associates, L.P., with respect to Shop No. 55. (Form S-1, Exhibit No. 10.48) 10.47* Lease, dated as of July 1, 1984, among Charles J. August, Burton S. August and Sheldon A. Lane and the Company, with Amendment of Lease, dated July 11, 1984, and Assignment of Lease, dated June 7, 1991, among Charles J. August, Burton S. August and Sheldon A. Lane and AA & L Associates, L.P., with respect to Shop No. 57. (Form S-1, Exhibit No. 10.49) 10.48* Lease, dated July 1, 1982, among Charles J. August, Burton S. August and Sheldon A. Lane and the Company, with Amendment of Lease, dated July 11, 1984, with respect to Shop No. 58. (Form S-1, Exhibit No. 10.50) 10.49* Modification and Extension Agreement, dated August 12, 1991, between AA & L Associates, L.P. and the Company, with respect to Shop No. 60. (1992 Form 10-K, Exhibit No. 10.51) 10.50* Lease, signed October 22, 1986, between the Company and Conifer Johnstown Associates, with respect to Shop No. 63. (Form S-1, Exhibit No. 10.52) 10.51* Lease, effective October 20, 1986, between the Company and Conifer Wappingers Falls Associates, with respect to Shop No. 79. (Form S-1, Exhibit No. 10.53) 55 56 EXHIBIT NO. PAGE DOCUMENT - - ---------- ---- -------- 10.52* Lease, dated January 25, 1988, between the Company and Conifer Northeast Associates, with Letter Agreement, dated February 3, 1988, amending Lease and Amendment Agreement, dated January 6, 1989, with respect to Shop No. 107. (Form S-1, Exhibit No. 10.54) 10.53* Lease, dated March 16, 1988, between the Company and Conifer Northeast Associates, with Letter Agreement, dated February 3, 1988, amending Lease and Amendment Agreement, dated January 6, 1989, with respect to Shop. No. 109. (Form S-1, Exhibit No. 10.55) 10.54* Lease, dated February 11, 1988, between the Company and Conifer Northeast Associates, with Letter Agreement, dated February 3, 1988, amending Lease and Amendment Agreement, dated January 6, 1989, and Non-disturbance and Attornment Agreement, dated February 11, 1988, between the Company and Central Trust Company, with respect to Shop No. 114. (Form S-1, Exhibit No. 10.56) 10.55* Purchase Agreement, dated December 1, 1987, between the Company and Conifer Northeast Associates, with Lease, dated February 25, 1988, between the Company and Conifer Northeast Associates, Letter Agreement, dated February 3, 1988, amending Lease, Amendment Agreement, dated January 6, 1989, and Non-Disturbance and Attornment Agreement, dated February 25, 1988, between the Company and Central Trust Company, with respect to Shop No. 116. (Form S-1, Exhibit No. 10.57) 10.56* Lease, dated May 12, 1989, between the Company and Conifer Penfield Associates (as successor to Conifer Development, Inc.), with respect to Shop No. 132. (Form S-1, Exhibit No. 10.58) 10.57* Modification and Extension Agreement, dated November 1, 1993, between A A & L Associates, L.P. and the Company, with respect to Shop Nos. 1, 23, 25, 27, 28, 29, 35, 53, 57 and 60. (1994 Form 10-K, Exhibit No. 10.57) 10.58* Form of Mortgage and Security Agreement, between the Company and The Chase Manhattan Bank, N.A., with Form of Mortgage Note and Form of Conditional Assignment of Leases and Rents, in connection with each of fifteen mortgages on Shop Nos. 137, 140, 143, 146, 162, 164, 168, 169, 172, 177, 179, 184, 185, 186 and 191 entered into since the filing of the 1992 Form 10-K. (1993 Form 10-K, Exhibit No. 10.57) 10.59* Form of Mortgage and Security Agreement, between the Company and The Chase Manhattan Bank, N.A., with Form of Mortgage Note and Form of Conditional Assignment of Leases and Rents, in connection with each of five mortgages on Shop Nos. 160, 183, 190, 192 and 193 entered into since the filing of the 1993 Form 10-K. (1994 Form 10-K, Exhibit No. 10.59) 10.60* Mortgage Agreement, dated September 28, 1994, between the Company and the the City of Rochester, New York. (1995 Form 10-K, Exhibit No. 10.60) 10.61* Lease Agreement, dated October 11, 1994, between the Company and the City of Rochester, New York. (1995 Form 10-K, Exhibit 10.61) 56 57 EXHIBIT NO. PAGE DOCUMENT - - ---------- ---- -------- 10.62* Mortgage Notes, Collateral Security Mortgage and Security Agreement, Indemnification Agreement and Guarantee, dated September 22, 1995 between Monro Service Corporation, County of Monroe Industrial Development Agency, the Company and The Chase Manhattan Bank, N.A. (September 1995 Form 10-Q, Exhibit No. 10.02) 10.63* Form of Mortgage and Security Agreement, between the Company and The Chase Manhattan Bank, N.A., with Form of Mortgage Note and Form of Conditional Assignment of Leases and Rents, in connection with each of nine mortgages on Store Nos. 205, 207, 210, 213, 216, 226, 229, 230 and 236 entered into September 14, 1995. (September 1995 Form 10-Q, Exhibit No. 10.01) 10.64* Amendment to Lease Agreement, dated September 19, 1995 between the Company and the County of Monroe Industrial Development Agency. (September 1995 Form 10-Q, Exhibit No. 10.00) 10.65* Employment Agreement dated February 18, 1995, between the Company and Jack M. Gallagher. (1995 Form 10-K, Exhibit No. 10.62)** 10.66* Asset Purchase Agreement by and between Monro Muffler Brake, Inc. as the buyer and Xpress Automotive Group, Inc. as the seller, as entered into July 25, 1995. (September 1995 Form 10-Q, Exhibit No. 10.03) 10.67 59 Employment Agreement dated February 26, 1997, between the Company and Lawrence C. Day. (1997 Form 10-K, Exhibit No. 10.67)** 10.68* Mortgage Modification Agreement, dated October 11, 1996 between the Company and Chase Manhattan Bank, N.A., in connection with each of 33 mortgages for Store Nos. 78, 86, 87, 90, 137, 140, 143, 146, 160, 162, 164, 168, 169, 172, 177, 179, 183, 184, 185, 186, 190, 191, 192, 193, 205, 207, 210, 213, 216, 226, 229, 230 and 236. (September 1996 Form 10-Q, Exhibit No. 10) 10.69* Purchase Agreement between Walker Manufacturing Company, a division of Tenneco Automotive and Monro Muffler Brake, Inc. dated as of November 5, 1996. (December 1996 Form 10-Q, Exhibit 10.1) 11.01 71 Computation of Per Share Earnings. 21.01 72 Subsidiaries of the Company. 23.01 73 Consent of Price Waterhouse. 24.01 74 Powers of Attorney. 57 58 * An asterisk "*" following an exhibit number indicates that the exhibit is incorporated herein by reference to an exhibit to one of the following documents: (1) the Company's Registration Statement on Form S-1 (Registration No. 33-41290), filed with the Securities and Exchange Commission on June 19, 1991 ("Form S-1"); (2) Amendment No. 1 thereto, filed July 22, 1991 ("Amendment No. 1"); (3) the Company's Annual Report on Form 10-K for the fiscal year ended March 31, 1992 ("1992 Form 10-K"); the Company's Registration Statement on Form S-8, filed with the Securities and Exchange Commission on December 24, 1992 ("Form S-8"); (5) the Company's Annual Report on Form 10-K for the fiscal year ended March 31, 1993 ("1993 Form 10-K"); (6) the Company's Quarterly Report on Form 10-Q for the fiscal quarter ended September 30, 1993 ("September 1993 Form 10-Q"); (7) the Company's Quarterly Report on Form 10-Q for the fiscal quarter ended December 31, 1994 ("December 1994 Form 10-Q"); (8) the Company's Annual Report on Form 10-K for the fiscal year ended March 31, 1994 ("1994 Form 10-K"); (9) the Company's Annual Report on Form 10-K for the fiscal year ended March 31, 1995 ("1995 Form 10-K"); (10) the Company's Quarterly Report on Form 10-Q for the fiscal quarter ended September 30, 1995 ("September 1995 Form 10-Q"); (11) the Company's Quarterly Report on Form 10-Q for the fiscal quarter ended September 30, 1996 ("September 1996 Form 10-Q"); (12) the Company's Quarterly Report on Form 10-Q for the fiscal quarter ended December 31, 1996 ("the December 1996 Form 10-Q") or (13) the Company's Annual Report on Form 10-K for the fiscal year ended March 31, 1996 ("1996 Form 10-K"). The appropriate document and exhibit number are indicated in parentheses. ** Management contract or compensatory plan or arrangement required to be filed as an exhibit to this Form 10-K pursuant to Item 14(c) hereof. 58 EX-10.67 2 EXHIBIT 10.67 1 Exhibit 10-67 EMPLOYMENT AGREEMENT AGREEMENT made by between MONRO MUFFLER BRAKE, INC., 200 Holleder Parkway, Rochester, New York 14615 (the "Company") and Lawrence C. Day, residing at 11 Crownwood Circle, Pittsford, New York 14534 ("Employee"). 1. DEFINITIONS. The following definitions shall be applicable to this Agreement. (a) "ACQUIRING ENTITY" shall mean any entity, whether a corporation, partnership, joint venture, etc., that, as a result of a Change In Control, either directly or indirectly has effective control over the business plans, direction and operations of the Company. This term shall also include any subsidiaries or related entities over which the Acquiring Entity has control, and shall also include any entity that, within one year following a Change In Control of the Company, acquires control over the entity that acquired control of the Company. (b) "CHANGE IN CONTROL" shall mean a change in control of the Company of a nature that would be required to be reported in response to Item 6(e) of Schedule 14A of Regulation 14A promulgated under the Securities Exchange of 1934 as in effect on the date of this Agreement or, if in the future Item 6(e) is no longer in effect, any regulations issued by the Securities and Exchange Commission pursuant to the Securities Exchange Act of 1934 which serve similar purposes; provided that, without limitation, a Change In Control shall be deemed to have occurred if and when: (x) any "person" (as such term is used in Sections 13(d) and 14(d)(2) of the Securities Exchange Act of 1934), other than Employee, becomes a beneficial owner, directly or indirectly, of securities of the Company representing a majority of the combined voting power of the Company's then outstanding securities (excluding, however, the transfer of any shares beneficially owned by Employee); or (y) individuals who were members of the Board of Directors of the Company immediately prior to meeting of the shareholders of the Company involving a contest for the election of Directors shall not constitute a majority of the Board of Directors following such election. The effective date of any such Change in Control shall be the closing of the transaction that results in the Change in Control. The terms of this subparagraph shall also apply to any change in control of any entity that acquires control of an Acquisition Entity within one year following the acquisition by the Acquiring Entity of control of the Company. (c) "EVENT OF TERMINATION" shall mean the termination of Employee's employment, whether due to a Termination For Cause, a Termination Upon Death or Disability, a Termination Without Cause, a Change In 60 2 Control, or a Voluntary Termination of Employment by Employee, such that Employee is no longer employed by the Company. (d) "TERMINATION FOR CAUSE" shall mean that the Company, in its sole discretion, by delivery of written notice at any time, terminates Employee's employment due to Employee's dishonesty, willful misconduct, breach of a fiduciary duty involving personal profit, intentional failure to perform stated duties, or follow the lawful and proper directives of the Board of Directors, willful violation of any law, rule, regulation or final cease and desist order (the penalty for which constitutes a felony under applicable law); or any breach of Paragraph 9 of this Agreement. The notice referred to in the previous sentence shall have attached a copy of a resolution or consent in lieu of a resolution duly adopted by the Board of Directors which shall set forth the grounds for termination in reasonable detail. Termination for Cause shall not include intentional failure to perform stated duties or failure to follow the lawful and proper directives of the Board of Directors unless the Employee has been given written notice of his failure by the Board of Directors, and he has not cured the failure within 30 days of his receipt of the written notice. (e) "TERMINATION UPON DEATH OR DISABILITY" shall mean that the Company terminates the Employee's employment due to the Employee's death or disability. For purposes of this Agreement "disability" shall mean that the Employee shall become ill, mentally or physically disabled, or otherwise incapacitated, so as to be unable to substantially perform his services hereunder, even with reasonable accommodation, for (i) a period of three (3) consecutive months, or (ii) for shorter periods aggregating three (3) months during any twelve (12) month period. (f) "TERMINATION WITHOUT CAUSE" shall mean that the Company, in its sole discretion, terminates Employee's employment for any reason that would not constitute a Termination For Cause, Termination Upon Death or Disability, result from any Change in Control, or constitute a Voluntary Termination of Employment by Employee. (g) "VOLUNTARY TERMINATION OF EMPLOYMENT BY EMPLOYEE" shall mean that Employee, voluntarily leaves his employment with the Company under circumstances not involving a Termination Without Cause, a Termination For Cause, Termination Upon Death or Disability or a Change In Control. 2. EMPLOYMENT. The Company hereby employs Employee and Employee hereby accepts employment with the Company upon the terms and conditions hereinafter set forth. Employee shall serve as the 61 3 President and Chief Executive Officer of the Company responsible for the overall business and strategic planning, management and operations of the Company. Employee shall perform the customary duties of such positions and such other commensurate duties as may be assigned from time to time by the Company's Board of Directors. Employee agrees to abide by the reasonable rules, regulations, instructions, personnel practices, employment manuals and policies of the Company, as they may exist or be modified from time to time by the Company. Employee shall devote his entire business time and attention and best efforts to the business of the Company. Employee shall perform his duties in a diligent, effective and loyal manner. Under no circumstances shall Employee take any action contrary to the best interests of the Company. 3. COMPENSATION. Employee shall be compensated by the Company for all services to be rendered pursuant to this Agreement as follows: (a) The Company shall pay Employee a base salary ("Salary") at the rate of $225,000 per year payable in accordance with the normal payroll practices of the Company applicable to its executive officers. The Company shall review Employee's Salary at least annually. (b) The Company shall also pay Employee annual performance-based bonuses and non-cash compensation such as stock options and other incentive awards as may be determined, if any, pursuant to financial and other performance goals established in advance by the Compensation Committee of the Company's Board of Directors. 4. BENEFITS. Employee shall also be entitled to receive the following benefits: (a) Four (4) weeks of paid vacation per year or such greater period as may be approved from time to time by the Company's Board of Directors. (b) Paid holidays as customarily provided to the Company's other comparable employees. (c) Life insurance in the face amount of $900,000.00. (d) Medical and dental insurance coverage as provided by the Company to its other comparable employees. (e) A suitable automobile for use in connection with the Company's business. (f) Coverage in accordance with their terms of any pension, profit-sharing or retirement plans now existing or hereafter established by the Company and made generally available for comparable employees. 62 4 (g) Reimbursement for all reasonable expenses incurred by Employee during the term of this Agreement for advancing the Company's business in accordance with Company policies upon Employee's presentation, from time to time, of an itemized account and evidence and explanation reasonably satisfactory to the Company of such expenses. (h) Such other benefits as the Company may, from time to time, provide to its other executive level officers. 5. TERM. This Agreement shall be effective for a period of two years from the execution date hereof and continue year to year, unless terminated by one of the parties hereto (the "Term"). 6. TERMINATION OF EMPLOYMENT FOR CAUSE OR UPON DEATH OR DISABILITY. In the event that Employee's employment is Terminated For Cause, or Terminated Upon Death or Disability he shall not be entitled to receive any further payments hereunder. Under these circumstances, Employee shall only be entitled to receive his accrued but unpaid Salary and any other nonforfeitable compensation and benefits accrued as of the effective date of such Event of Termination. 7. VOLUNTARY TERMINATION OF EMPLOYMENT BY EMPLOYEE. In the event of a Voluntary Termination of Employment by Employee, he shall not be entitled to receive any further payments hereunder. Under such circumstances, Employee shall only be entitled to receive his accrued but unpaid Salary and any other nonforfeitable compensation and benefits accrued as of the effective date of such Event of Termination. 8. TERMINATION OF EMPLOYEE'S EMPLOYMENT IN THE EVENT OF A CHANGE IN CONTROL. If, as a condition precedent to, as a result of, or within one year following, a Change In Control of the Company (i) Employee's employment with the Company is terminated by the Company or the Acquiring Entity for any reason other than a Termination for Cause; or (ii) Employee resigns his employment with the Company or with the Acquiring Entity upon the occurrence of either of the following events: (a) A significant change in the nature of scope of Employee's employment duties or authority or a reduction in Employee's total compensation as the same existed immediately prior to the Change In Control; or (b) As a result of the Change In Control of the Company and any change in circumstances thereafter significantly affecting his position, Employee is unable to exercise the authority, power, functions as duties that he had so exercised immediately prior to such Change In Control, then termination of Employee's employment shall be a Termination in the Event of a Change In Control. 63 5 9. (a) NON-DISCLOSURE. Employee will not, during the period of Employee's employment with the Company or at any time thereafter, regardless of the reason for the cessation of Employee's employment: (i) use any Confidential Information for Employee's own benefit or for the benefit of any person or entity other than the Company; (ii) disclose to any person or entity any Confidential Information; or (iii) remove from the Company's premises or make copies of any Confidential Information, in any form; except, in each case, as may be required within the scope of Employee's duties during Employee's employment by the Company. Upon termination of Employee's employment, or at any such time as the Company may request, Employee will deliver to the Company all copies in Employee's possession of any Confidential Information, in any form. Employee will not at any time assert any rights as against the Company in or with respect to any Confidential Information. For purposes of this Agreement, "Confidential Information" means any and all technical, research, operational, manufacturing, marketing, sales and financial information, customer lists and trade secrets of the Company or of any vendor, supplier, distributor or customer of the Company, regardless of how acquired or developed by the Company or any such vendor, supplier, distributor or customer, concerning any of their respective businesses. Confidential Information does not include information, knowledge or data which Employee can prove was in Employee's possession prior to the commencement of Employee's employment with the Company or information, knowledge or data which was or is in the public domain by reason other than the wrongful acts of Employee. (b) NON-COMPETITION. Employee will not, during the period of Employee's employment with the Company, and for a period of two (2) years after the termination of Employee's employment with the Company for any reason, directly or indirectly, on Employee's behalf or on behalf of any other person or entity, in any way, whether as an individual proprietor, partner, stockholder, officer, employee, consultant, director, joint venturer, investor, lender (other than as an employee of a bank or other financial institution) or in any other capacity with any entity materially engaged in the business of the Company, compete within the territory served, or contemplated to be entered, by Company on the date of such termination with the business of the Company; provided, however, that in the event of a Voluntary Termination of Employment by Employee, Employee shall remain so restricted for a period of two (2) years after the expiration of the Term. Nothing contained herein shall be construed as preventing the Employee from owning beneficially or of record not more than five percent (5%) of the outstanding equity 64 6 security of any entity whose equity securities are registered under the Securities Act of 1933, as amended, or are listed for trading on any recognizable United States or foreign stock exchange or market. The business of the Company shall be defined to include the undercar service and repair of automobile and light truck brake, exhaust and suspension systems, and related activities. (c) NON-SOLICITATION OF EMPLOYEES. Employee will not, during the period of Employee's employment with the Company, and for a period of two (2) years after the termination of Employee's employment with the Company for any reason, directly or indirectly, recruit, solicit or otherwise induce or attempt to induce any employees of the Company to leave the employment of the Company, nor hire any such employee at any enterprise with which employee is then affiliated; provided, however, that in the event of a Voluntary Termination of Employment by Employee, Employee shall remain so restricted for a period of two (2) years after the expiration of the Term. (d) ENFORCEABILITY OF PROVISIONS. If any restriction set forth in this Paragraph 9 is found by any court of competent jurisdiction to be unenforceable because it extends for too long a period of time or over too great a range of activities or in too broad a geographic area, it shall be interpreted to extend only over the maximum period of time, range of activities or geographic area as to which it may be enforceable, it being understood and agreed that by the execution of this Agreement, the parties hereto regard the restrictions herein as reasonable and compatible with their respective rights. (e) As reasonable compensation for his agreement to and compliance with covenants contained in this Paragraph 9, except as provided below, the Employee shall receive an amount equal to his then current salary and benefits in effect immediately prior to the termination of his employment in each of the two years following the termination of his employment; provided, however, that in the event of Termination For Cause, a Termination Upon Death or Disability, or a Voluntary Termination of Employment by Employee, no additional compensation shall be payable pursuant to this Paragraph 9(e), but the Employee shall continue to be bound by the provisions of this Paragraph 9; provided, further, that if the Employee violates the covenants contained in this Paragraph 9, Employee shall repay to the Company all amounts previously paid to him pursuant to this Paragraph 9. 10. TERMINATION PAYMENTS. In the event of a Termination Without Cause or a Termination in the Event of a Change in Control then Employee shall also be entitled to the following payments and benefits: On the effective date of either such Event of Termination, all stock options that shall have been granted to Employee 65 7 through such date under any stock option plans of the Company or otherwise shall be deemed fully vested and exercisable on such date and for a period of one year following such date, all in accordance with the other terms of any such plan or grant. 11. PAYMENT LIMITATION. (a) Anything in this Agreement to the contrary notwithstanding, if the benefits payable pursuant to this Agreement, either alone or together with other payments which the Employee has the right to receive either directly or indirectly from the Company, would constitute a parachute payment (the "Parachute Payment") under Section 280G(b)(2)(A) of the Internal Revenue Code of 1986, as amended, the Employee hereby agrees that the benefits payable pursuant to this Agreement shall be reduced (but not below zero) by the amount necessary to prevent any such payments to the Employee from constituting Parachute Payment. (b) All determinations required to be made under this Paragraph 11, including whether a Parachute Payment would result under this Agreement, the amount of any reduction pursuant to Paragraph 11(a), and the assumptions to be utilized in arriving at such determinations, shall be made by the independent accountants then auditing the Company's financial statements (the "Accounting Firm") which shall provide detailed supporting calculations both to the Company and the Employee at such time as is requested by the Company. (c) For purposes of this Paragraph 11, no portion of any benefits the receipt or enjoyment of which the Employee shall have effectively waived in writing prior to his right to receive them shall be taken into account for purposes of calculating whether or not a Parachute Payment has or will occur. (d) In the event that pursuant to this Paragraph 11 there must be a reduction in the benefits the Employee is to receive from the Company, the Employee shall have the discretion to decide which of his benefits shall be reduced and by what amounts (each a "Reduction"), so long as the total dollar amount of all Reductions results in the non-occurrence of a Parachute Payment and the dollar amount assigned to each Reduction is consistent with the Accounting Firm's calculations as provided for in Paragraph 11(b) hereof. 12. GENERAL TERMS. (a) BINDING EFFECT. This Agreement shall be binding upon and inure to the benefit of the parties hereto, their personal representatives, successors and assigns. (b) ASSIGNMENT. This Agreement may not be assigned, in whole or in part, by any party hereto without the prior written consent of all other parties, except to an Acquiring Entity in connection with a Change in Control. 66 8 (c) ENTIRE AGREEMENT. This Agreement contains the entire understanding between or among the parties hereto and supersedes any prior understanding, memoranda or other written or oral agreements between or among any of them respecting the within subject matter. There are no representations, agreements, arrangements or understandings, oral or written, between or among any of the parties relating to the subject matter of this Agreement which are not fully expressed herein. (d) MODIFICATIONS; WAIVER. No modification or waiver of this Agreement or any part hereof shall be effective unless in writing and signed by the party or parties sought to be charged therewith. No waiver of any breach or condition of this Agreement shall be deemed to be a waiver of any other or subsequent breach or condition, whether of like or different nature. No waiver of any breach or condition of this Agreement by or with respect to any party hereto shall be deemed to be a waiver of the same breach or condition with respect to any other party hereto. No course of dealing between or among any of the parties hereto will be deemed effective to modify, amend or discharge any part of this Agreement or the rights or obligations of any party hereunder. (e) NO THIRD PARTY BENEFICIARY. None of the provisions of this Agreement shall be for the benefit of, or enforceable by, any person or entity not a party hereto. (f) PARTIAL INVALIDITY. In addition to the provisions of Paragraph 9(d) hereof, if any provision of this Agreement shall be held invalid or unenforceable by competent authority, such provision shall be construed so as to be limited or reduced to be enforceable to the maximum extent compatible with the law as it shall then appear. The total invalidity or unenforceability of any particular provision of this Agreement shall not affect the other provisions hereof and this Agreement shall be construed in all respects as if such invalid or unenforceable provision were omitted. (g) NOTICES. Any notice or other communication required or permitted under this Agreement shall be in writing and shall be deemed to have been duly given (i) upon hand delivery, or (ii) on the third day following delivery to the U.S. Postal Service as certified or registered mail, return receipt requested and postage prepaid, or (iii) on the first day following delivery to a nationally recognized United States overnight courier service, fee prepaid, return receipt or other confirmation of delivery requested, or (iv) when telecopied or sent by facsimile transmission if an additional notice is also given under (i), (ii) or (iii) above within three days thereafter. Any such notice or communication shall be delivered or directed to a party at its address set forth above or at such other 67 9 address as may be designated by a party in a notice given to all other parties hereto in accordance with the provisions of this paragraph. (h) GOVERNING LAW. This Agreement shall be governed by, and construed in accordance with, the laws of the State of New York pertaining to contracts made and to be wholly performed within such state, without taking into account conflicts of laws principles. (i) JURISDICTION AND VENUE. In the event that any legal proceedings are commenced in any court with respect to any matter arising under this Agreement, the parties hereto specifically consent and agree that: (i) the courts of the State of New York and/or the United States Federal Courts located in the State of New York shall have jurisdiction over each of the parties hereto and over the subject matter of any such proceedings; and (ii) the venue of any such action shall be Monroe County, New York and/or the United States District Court for the Western District of New York. (j) INJUNCTIVE RELIEF. In the event of a breach or threatened breach of any of the terms of this Agreement, the Company shall be entitled to an injunction restraining Employee from committing any breach of this Agreement without showing or proving any actual damages and without diminishing any other right or remedy which the Company may have at law or in equity to enforce the provisions of this Agreement. Employee waives any right he may have to require the Company to post a bond or other security with respect to obtaining or continuing any injunction or temporary restraining order, releases the Company and its officers and directors from and waives any claim for damages against them which Employee may have with respect to the Company's obtaining any injunction or restraining order pursuant to this Agreement. (k) SURVIVAL. The Proprietary Information provisions of Paragraph 9 shall indefinitely survive the term of this Agreement, and the provisions of this Paragraph 12 shall survive the term of this Agreement with respect to any dispute which may arise out of this Agreement. (l) HEADINGS. The headings contained in this Agreement are inserted for convenience only and do not constitute a part of this Agreement. (m) FAIR MEANING. This Agreement shall be construed according to its fair meaning, the language used shall be deemed the language chosen by the parties hereto to express their mutual intent, and no presumption or rule of strict construction will be applied against any party hereto. 68 10 (n) GENDER. Whenever the context may require, any pronoun used herein shall include the corresponding masculine, feminine or neuter forms and the singular of nouns, pronouns and verbs shall include the plural and vice versa. (o) COUNTERPARTS. This Agreement may be executed in several counterparts, each of which shall be deemed an original, and all of said counterparts together shall constitute but one and the same instrument. (p) REMEDIES. All rights and remedies of the Company or Employee, whether provided for herein or by operation of law, are cumulative and may be exercised singularly or concurrently, and the exercise of any such remedy shall not be deemed an election of remedies so as to preclude the election of any other remedy. 69 11 IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as of February, 1997. COMPANY: MONRO MUFFLER BRAKE, INC. By: /s/ ROBERT W. AUGUST ---------------------------- Title: SECRETARY ------------------------- EMPLOYEE: /s/ LAWRENCE C. DAY ------------------------------- Lawrence C. Day 70 EX-11.01 3 EXHIBIT 11.01 1 MONRO MUFFLER BRAKE, INC. & SUBSIDIARY Exhibit 11.01 COMPUTATION OF PER SHARE EARNINGS - - -------------------------------------------------------------------------------- Net income per share was computed by dividing net income by the weighted average number of common and common equivalent shares outstanding.
YEAR ENDED MARCH 31, 1997 1996 1995 ---- ---- ---- (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) EARNINGS Net income available to common shares $10,191 $7,614 $9,084 ======= ====== ====== SHARES Weighted average number of common shares 7,426 7,210 7,082 Assuming conversion of Class C Convertible Preferred Stock 576 576 576 Dilutive effect of outstanding options 169 291 426 ------- ------ ------ Total common and common equivalent shares 8,171 8,077 8,084 ======= ====== ====== EARNINGS PER SHARE $ 1.25 $ .94 $ 1.12 ======= ====== ======
71 EX-21.1 4 EXHIBIT 21.1 1 Exhibit 21.01 SUBSIDIARIES OF THE COMPANY --------------------------- Monro Service Corporation 72 EX-23.1 5 EXHIBIT 23.1 1 Exhibit 23.01 CONSENT OF INDEPENDENT ACCOUNTANTS We hereby consent to the incorporation by reference in the Prospectus constituting part of the Registration Statement on Form S-8 (File No. 33-56458) of Monro Muffler Brake, Inc. of our report dated May 19, 1997, appearing in Item 8 of the Monro Muffler Brake, Inc. Annual Report on Form 10-K for the year ended March 31, 1997. PRICE WATERHOUSE LLP Rochester, New York June 27, 1997 73 EX-24.1 6 EXHIBIT 24.1 1 Exhibit 24.01 POWER OF ATTORNEY KNOW ALL PERSONS BY THESE PRESENTS, that the undersigned, a director of Monro Muffler Brake, Inc., a New York corporation (the "Corporation"), constitutes and appoints LAWRENCE C. DAY to be his true and lawful attorney-in-fact and agent, with full powers of substitution and resubstitution, for and in the name, place and stead of the undersigned, in any and all capacities in connection with the filing of the Annual Report of Form 10-K of the Corporation for the fiscal year ended March 31, 1997 (the "Form 10-K") with the Securities and Exchange Commission, to sign the Form 10-K and any and all amendments related thereto and to file the same, with any exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorney-in-fact and agent, or his substitutes, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully for all intents and purposes as the undersigned might or could do in person, hereby ratifying and confirming all that said attorney-in-fact and agent, or his substitutes, may lawfully do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, this power of attorney has been signed by the following director on June 21, 1997. /s/ Jack M. Gallagher ------------------------------ Jack M. Gallagher 74 2 POWER OF ATTORNEY KNOW ALL PERSONS BY THESE PRESENTS, that the undersigned, a director of Monro Muffler Brake, Inc., a New York corporation (the "Corporation"), constitutes and appoints LAWRENCE C. DAY to be his true and lawful attorney-in-fact and agent, with full powers of substitution and resubstitution, for and in the name, place and stead of the undersigned, in any and all capacities in connection with the filing of the Annual Report of Form 10-K of the Corporation for the fiscal year ended March 31, 1997 (the "Form 10-K") with the Securities and Exchange Commission, to sign the Form 10-K and any and all amendments related thereto and to file the same, with any exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorney-in-fact and agent, or his substitutes, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully for all intents and purposes as the undersigned might or could do in person, hereby ratifying and confirming all that said attorney-in-fact and agent, or his substitutes, may lawfully do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, this power of attorney has been signed by the following director on June 23, 1997. /s/ Robert W. August ------------------------------ Robert W. August 75 3 POWER OF ATTORNEY KNOW ALL PERSONS BY THESE PRESENTS, that the undersigned, a director of Monro Muffler Brake, Inc., a New York corporation (the "Corporation"), constitutes and appoints LAWRENCE C. DAY to be his true and lawful attorney-in-fact and agent, with full powers of substitution and resubstitution, for and in the name, place and stead of the undersigned, in any and all capacities in connection with the filing of the Annual Report of Form 10-K of the Corporation for the fiscal year ended March 31, 1997 (the "Form 10-K") with the Securities and Exchange Commission, to sign the Form 10-K and any and all amendments related thereto and to file the same, with any exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorney-in-fact and agent, or his substitutes, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully for all intents and purposes as the undersigned might or could do in person, hereby ratifying and confirming all that said attorney-in-fact and agent, or his substitutes, may lawfully do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, this power of attorney has been signed by the following director on June 23, 1997. /s/ Frederick M. Danziger ------------------------------ Frederick M. Danziger 76 4 POWER OF ATTORNEY KNOW ALL PERSONS BY THESE PRESENTS, that the undersigned, a director of Monro Muffler Brake, Inc., a New York corporation (the "Corporation"), constitutes and appoints LAWRENCE C. DAY to be his true and lawful attorney-in-fact and agent, with full powers of substitution and resubstitution, for and in the name, place and stead of the undersigned, in any and all capacities in connection with the filing of the Annual Report of Form 10-K of the Corporation for the fiscal year ended March 31, 1997 (the "Form 10-K") with the Securities and Exchange Commission, to sign the Form 10-K and any and all amendments related thereto and to file the same, with any exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorney-in-fact and agent, or his substitutes, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully for all intents and purposes as the undersigned might or could do in person, hereby ratifying and confirming all that said attorney-in-fact and agent, or his substitutes, may lawfully do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, this power of attorney has been signed by the following director on June 23, 1997. /s/ Peter J. Solomon ------------------------------ Peter J. Solomon 77 5 POWER OF ATTORNEY KNOW ALL PERSONS BY THESE PRESENTS, that the undersigned, a director of Monro Muffler Brake, Inc., a New York corporation (the "Corporation"), constitutes and appoints LAWRENCE C. DAY to be his true and lawful attorney-in-fact and agent, with full powers of substitution and resubstitution, for and in the name, place and stead of the undersigned, in any and all capacities in connection with the filing of the Annual Report of Form 10-K of the Corporation for the fiscal year ended March 31, 1997 (the "Form 10-K") with the Securities and Exchange Commission, to sign the Form 10-K and any and all amendments related thereto and to file the same, with any exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorney-in-fact and agent, or his substitutes, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully for all intents and purposes as the undersigned might or could do in person, hereby ratifying and confirming all that said attorney-in-fact and agent, or his substitutes, may lawfully do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, this power of attorney has been signed by the following director on June 23, 1997. /s/ Donald Glickman ------------------------------ Donald Glickman 78 6 POWER OF ATTORNEY KNOW ALL PERSONS BY THESE PRESENTS, that the undersigned, a director of Monro Muffler Brake, Inc., a New York corporation (the "Corporation"), constitutes and appoints LAWRENCE C. DAY to be his true and lawful attorney-in-fact and agent, with full powers of substitution and resubstitution, for and in the name, place and stead of the undersigned, in any and all capacities in connection with the filing of the Annual Report of Form 10-K of the Corporation for the fiscal year ended March 31, 1997 (the "Form 10-K") with the Securities and Exchange Commission, to sign the Form 10-K and any and all amendments related thereto and to file the same, with any exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorney-in-fact and agent, or his substitutes, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully for all intents and purposes as the undersigned might or could do in person, hereby ratifying and confirming all that said attorney-in-fact and agent, or his substitutes, may lawfully do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, this power of attorney has been signed by the following director on June 23, 1997. /s/ Lionel B. Spiro ------------------------------ Lionel B. Spiro 79 7 POWER OF ATTORNEY KNOW ALL PERSONS BY THESE PRESENTS, that the undersigned, a director of Monro Muffler Brake, Inc., a New York corporation (the "Corporation"), constitutes and appoints LAWRENCE C. DAY to be his true and lawful attorney-in-fact and agent, with full powers of substitution and resubstitution, for and in the name, place and stead of the undersigned, in any and all capacities in connection with the filing of the Annual Report of Form 10-K of the Corporation for the fiscal year ended March 31, 1997 (the "Form 10-K") with the Securities and Exchange Commission, to sign the Form 10-K and any and all amendments related thereto and to file the same, with any exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorney-in-fact and agent, or his substitutes, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully for all intents and purposes as the undersigned might or could do in person, hereby ratifying and confirming all that said attorney-in-fact and agent, or his substitutes, may lawfully do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, this power of attorney has been signed by the following director on June 20, 1997. /s/ Burton S. August ------------------------------ Burton S. August 80 8 POWER OF ATTORNEY KNOW ALL PERSONS BY THESE PRESENTS, that the undersigned, a director of Monro Muffler Brake, Inc., a New York corporation (the "Corporation"), constitutes and appoints LAWRENCE C. DAY to be his true and lawful attorney-in-fact and agent, with full powers of substitution and resubstitution, for and in the name, place and stead of the undersigned, in any and all capacities in connection with the filing of the Annual Report of Form 10-K of the Corporation for the fiscal year ended March 31, 1997 (the "Form 10-K") with the Securities and Exchange Commission, to sign the Form 10-K and any and all amendments related thereto and to file the same, with any exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorney-in-fact and agent, or his substitutes, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully for all intents and purposes as the undersigned might or could do in person, hereby ratifying and confirming all that said attorney-in-fact and agent, or his substitutes, may lawfully do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, this power of attorney has been signed by the following director on June 20, 1997. /s/ Charles J. August ------------------------------ Charles J. August 81 9 POWER OF ATTORNEY KNOW ALL PERSONS BY THESE PRESENTS, that the undersigned, a director of Monro Muffler Brake, Inc., a New York corporation (the "Corporation"), constitutes and appoints LAWRENCE C. DAY to be his true and lawful attorney-in-fact and agent, with full powers of substitution and resubstitution, for and in the name, place and stead of the undersigned, in any and all capacities in connection with the filing of the Annual Report of Form 10-K of the Corporation for the fiscal year ended March 31, 1997 (the "Form 10-K") with the Securities and Exchange Commission, to sign the Form 10-K and any and all amendments related thereto and to file the same, with any exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorney-in-fact and agent, or his substitutes, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully for all intents and purposes as the undersigned might or could do in person, hereby ratifying and confirming all that said attorney-in-fact and agent, or his substitutes, may lawfully do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, this power of attorney has been signed by the following director on June 20, 1997. /s/ W. Gary Wood ------------------------------ W. Gary Wood 82 EX-27 7 EXHIBIT 27
5 1,000 YEAR MAR-31-1997 APR-01-1996 MAR-31-1997 6,438 0 1,128 0 20,010 32,597 151,906 42,223 146,267 23,018 54,864 75 0 138 66,412 146,267 141,169 141,169 78,792 41,749 475 0 3,224 16,929 6,738 10,191 0 0 0 10,191 1.25 1.25
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