-----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, AGMelx5s0hkkpA9AnBEM+vpjUvlEKL6jJ9HG/XL7YZTIV2Taf5f3uHygnCiTWnjB rrCfr43w7kIbaAmqUZxGzw== 0000950152-01-505689.txt : 20020410 0000950152-01-505689.hdr.sgml : 20020410 ACCESSION NUMBER: 0000950152-01-505689 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20010929 FILED AS OF DATE: 20011113 FILER: COMPANY DATA: COMPANY CONFORMED NAME: MONRO MUFFLER BRAKE INC CENTRAL INDEX KEY: 0000876427 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-AUTOMOTIVE REPAIR, SERVICES & PARKING [7500] IRS NUMBER: 160838627 STATE OF INCORPORATION: NY FISCAL YEAR END: 0331 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-19357 FILM NUMBER: 1782131 BUSINESS ADDRESS: STREET 1: 200 HOLLEDER PKWY CITY: ROCHESTER STATE: NY ZIP: 14615-3808 BUSINESS PHONE: 7166476400 10-Q 1 l90988ae10-q.txt MONRO MUFFLER BRAKE, INC. 10-Q FORM 10-Q SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 [ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 29, 2001. ------------------ OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934. For the transition period from ______________ to ______________ Commission File No. 0-19357 ------- MONRO MUFFLER BRAKE, INC. - -------------------------------------------------------------------------------- (Exact name of registrant as specified in its charter) New York 16-0838627 -------------------------------------------------------------------------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification #) 200 Holleder Parkway, Rochester, New York 14615 -------------------------------------------------------------------------- (Address of principal executive offices) (Zip code) Registrant's telephone number, including area code 716-647-6400 ---------------------------- Indicate by check mark whether 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 ------------- ------------ As of October 26, 2001, 8,208,661 shares of the Registrant's Common Stock, par value $ .01 per share, were outstanding. MONRO MUFFLER BRAKE, INC. INDEX ----- Part I. Financial Information Page No. -------- Item 1. Financial Statements Consolidated Balance Sheet at September 29, 2001 and March 31, 2001 3 Consolidated Statement of Income for the quarter and six months ended September 29, 2001 and September 30, 2000 4 Consolidated Statement of Changes in Common Shareholders' Equity for the six months ended September 29, 2001 5 Consolidated Statement of Cash Flows for the six months ended September 29, 2001 and September 30, 2000 6 Notes to Consolidated Financial Statements 7 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 9 Part II. Other Information Item 4. Submission of Matters to a Vote of Security Holders 13 Item 6. Exhibits and Reports on Form 8-K 14 Signatures 15 Exhibit Index 16 -2- MONRO MUFFLER BRAKE, INC. CONSOLIDATED BALANCE SHEET (UNAUDITED)
September 29, March 31, 2001 2001 ---- ---- (Dollars in thousands) ASSETS Current assets: Cash and equivalents, including interest-bearing accounts of $1,379 at September 29, 2001 and $751 at March 31, 2001 $ 1,379 $ 751 Trade receivables 1,424 1,161 Inventories, at LIFO cost 43,433 41,071 Deferred income tax asset 899 899 Other current assets 7,932 5,885 --------- --------- Total current assets 55,067 49,767 --------- --------- Property, plant and equipment 212,906 209,420 Less - Accumulated depreciation and amortization (82,878) (77,934) --------- --------- Net property, plant and equipment 130,028 131,486 Other noncurrent assets 12,020 12,586 --------- --------- Total assets $ 197,115 $ 193,839 ========= ========= LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Current portion of long-term debt $ 8,190 $ 10,646 Trade payables 16,993 11,148 Federal and state income taxes payable 2,274 648 Accrued interest 367 477 Accrued payroll, payroll taxes and other payroll benefits 5,153 5,150 Accrued insurance 2,834 948 Accrued restructuring costs 400 400 Other current liabilities 7,248 7,152 --------- --------- Total current liabilities 43,459 36,569 Long-term debt 38,991 50,857 Other long-term liabilities 2,483 730 Accrued long-term restructuring costs 1,607 1,859 Deferred income tax liability 5,041 6,014 --------- --------- Total liabilities 91,581 96,029 --------- --------- Commitments Shareholders' equity: Class C Convertible Preferred Stock, $1.50 par value, $.216 conversion value; 150,000 shares authorized; 91,727 shares issued and outstanding 138 138 Common Stock, $.01 par value, 15,000,000 shares authorized; 8,425,461 shares issued at September 29, 2001; 8,373,678 shares issued at March 31, 2001 84 84 Treasury Stock, 216,800 shares at September 29, 2001 and March 31, 2001, at cost (1,831) (1,831) Additional paid-in capital 37,554 36,344 Other comprehensive income (1,032) Retained earnings 70,621 63,075 --------- --------- Total shareholders' equity 105,534 97,810 --------- --------- Total liabilities and shareholders' equity $ 197,115 $ 193,839 ========= =========
These financial statements should be read in conjunction with the financial statements and notes thereto included in the Annual Report on Form 10-K (File No. 0-19357), filed by the Company with the Securities and Exchange Commission on June 28, 2001. - 3 - MONRO MUFFLER BRAKE, INC. CONSOLIDATED STATEMENT OF INCOME (UNAUDITED)
FOR THE QUARTER ENDED FOR THE SIX MONTHS ENDED FISCAL SEPTEMBER FISCAL SEPTEMBER 2001 2000 2001 2000 ---- ---- ---- ---- (13 WEEKS) (a) (26 WEEKS) (a) (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) Sales $ 60,477 $ 60,398 $121,870 $121,091 Cost of sales, including distribution and occupancy costs 34,908 35,273 69,146 70,099 -------- -------- -------- -------- Gross profit 25,569 25,125 52,724 50,992 Operating, selling, general and administrative expenses 18,546 17,675 38,725 36,112 -------- -------- -------- -------- Operating income 7,023 7,450 13,999 14,880 Interest expense, net of interest income for the quarter of $6 in 2001 and $10 in 2000, and year-to-date of $14 in 2001 and $52 in 2000 960 1,525 2,118 3,125 Other expense, net 110 157 300 262 -------- -------- -------- -------- Income before provision for income taxes 5,953 5,768 11,581 11,493 Provision for income taxes 2,260 2,296 4,035 4,574 -------- -------- -------- -------- Net income $ 3,693 $ 3,472 $ 7,546 $ 6,919 ======== ======== ======== ======== Earnings per share: Basic $ .45 $ .42 $ .92 $ .84 ======== ======== ======== ======== Diluted $ .41 $ .39 $ .84 $ .78 ======== ======== ======== ======== Weighted average number of shares of common stock and common stock equivalents used in computing earnings per share: Basic 8,196 8,197 8,177 8,200 ======== ======== ======== ======== Diluted 9,040 8,930 9,010 8,906 ======== ======== ======== ========
(a) See Note 1 to these financial statements. These financial statements should be read in conjunction with the financial statements and notes thereto included in the Annual Report on Form 10-K (File No. 0-19357), filed by the Company with the Securities and Exchange Commission on June 28, 2001. - 4 - MONRO MUFFLER BRAKE, INC. CONSOLIDATED STATEMENT OF CHANGES IN COMMON STOCKHOLDERS' EQUITY (UNAUDITED) (DOLLARS IN THOUSANDS)
Less: Note Net Accumulated Additional Receivable Additional Other Preferred Common Treasury Paid-in From Paid-in Retained Compensation Stock Stock Stock Capital Shareholder Capital Earnings Income Total ----- ----- ----- ------- ----------- ------- -------- ------ ----- Balance at March 31, 2001 $138 $84 $(1,831) $36,632 $(288) $36,344 $63,075 $ 97,810 Other comprehensive income: Cumulative effect at April $(352) (352) 1, 2001 Net income 7,546 7,546 Other comprehensive income: SFAS No. 133 adjustment for the six months ended September 29, 2001 (680) (680) -------- Total comprehensive income 6,866 Exercise of stock options 638 638 638 Vesting of non-qualilfied stock 519 519 519 options Note receivable from shareholder 53 53 53 ------- ------- ------- ------- -------- ------- ------- ------- -------- Balance at September 29, 2001 $138 $84 $(1,831) $37,789 $(235) $37,554 $70,621 $(1,032) $105,534 ======= ======= ======= ======= ======== ======= ======= ======= ========
These financial statements should be read in conjunction with the financial statements and notes thereto included in the Annual Report on Form 10-K (File No. 0-19357), filed by the Company with the Securities and Exchange Commission on June 28, 2001. - 5 - MONRO MUFFLER BRAKE, INC. CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED)
For the Six Months Ended Fiscal September ---------------------- 2001 2000 ---- ---- (Dollars in thousands) Increase (Decrease) in Cash Cash flows from operating activities: Net income $ 7,546 $ 6,919 ---------- ---------- Adjustments to reconcile net income to net cash provided by operating activities - Depreciation and amortization 6,342 6,531 Non-qualified stock option expense 727 Net change in deferred income taxes (291) Gain on disposal of property, plant and equipment (71) (114) Increase in trade receivables (263) (372) Increase in inventories (2,362) (496) Increase in other current assets (2,047) (1,908) Decrease in other noncurrent assets 276 441 Increase in trade payables 5,845 4,616 Increase in accrued expenses 1,917 179 Increase in federal and state income taxes payable 1,626 2,428 Decrease in other long-term liabilities (293) (701) ---------- ---------- Total adjustments 11,406 10,604 ---------- ---------- Net cash provided by operating activities 18,952 17,523 ---------- ---------- Cash flows from investing activities: Capital expenditures (4,709) (5,139) Proceeds from the disposal of property, plant and equipment 69 669 ---------- ---------- Net cash used for investing activities (4,640) (4,470) ---------- ---------- Cash flows from financing activities: Proceeds from borrowings 52,500 46,700 Principal payments on long-term debt and capital lease obligations (66,822) (58,680) Exercise of stock options 638 50 Repurchase of common stock (208) ---------- ---------- Net cash used for financing activities (13,684) (12,138) ---------- ---------- Increase in cash 628 915 Cash at beginning of period 751 507 ---------- ---------- Cash at end of period $ 1,379 $ 1,422 ========== ==========
These financial statements should be read in conjunction with the financial statements and notes thereto included in the Annual Report on Form 10-K (File No. 0-19357), filed by the Company with the Securities and Exchange Commission on June 28, 2001. - 6 - MONRO MUFFLER BRAKE, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Note 1 - Change in Fiscal Year - ------------------------------ During the fiscal year ended March 31, 2001, the Board of Directors of the Company elected to change the Company's fiscal year end from March 31 to the last Saturday in March. This change was effective with fiscal year 2002 which began on April 1, 2001. The following are the dates represented by each fiscal period: "Quarter Ended Fiscal September 2001": July 1, 2001 - September 29, 2001 (13 weeks) "Quarter Ended Fiscal September 2000": July 1, 2000 - September 30, 2000 "Six Months Ended Fiscal September 2001": April 1, 2001 - September 29, 2001 (26 weeks) "Six Months Ended Fiscal September 2000": April 1, 2000 - September 30, 2000 Note 2 - Derivative Financial Instruments - ----------------------------------------- On June 17, 1998, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 133 ("SFAS 133"), "Accounting for Derivative Instruments and Hedging Activities" effective for fiscal years beginning after June 15, 2000. This statement standardizes the accounting for derivatives and hedging activities and requires that all derivatives be recognized in the statement of financial position as either assets or liabilities at fair value. Changes in the fair value of derivatives that do not meet the hedge accounting criteria are to be reported in earnings. The Company adopted this standard effective April 1, 2001. The adoption of SFAS No. 133 did not materially affect the Company's results of operations or financial position. The notional amount of derivative financial instruments, which consisted solely of interest rate swaps used to minimize the risk and/or costs associated with changes in interest rates, was approximately $42 million at September 29, 2001. At that date, swap maturities ranged from November 2002 through October 2005. These swap contracts require the Company to pay fixed-rates of interest ranging from 5.21% to 7.15%, and receive variable-rates of interest based on the 30 day LIBOR rate (plus a spread of 80 basis points in the case of the 7.15% fixed rate contract). At September 29, 2001, the fair value of the contracts, net of taxes, is recorded as a component of other comprehensive income in the Statement of Changes in Common Shareholders' Equity. Note 3 - Stock Repurchase - ------------------------- In November 1999, the Board of Directors approved a share repurchase program initially authorizing the Company to purchase up to 300,000 shares of its common stock at market prices. In May 2000, the Board of Directors approved an increase of 120,000 shares, bringing the total authorization to 420,000 shares. The amount and timing of any purchase will depend upon a number of factors, including the price and availability of the Company's shares and general market conditions. The Company's purchases of common stock are recorded as "Treasury Stock" and result in a reduction of "Shareholders' equity". At September 29, 2001, the Company had repurchased 216,800 shares under such program. Note 4 - 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 $107,000 and $47,000 higher at September 29, 2001 and March 31, 2001, respectively. The FIFO value of inventory approximates the current replacement cost. - 7 - MONRO MUFFLER BRAKE, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Note 5 - Cash and Equivalents - ----------------------------- The Company's policy is to invest cash in excess of operating requirements in income producing investments. Cash equivalents of $1,379,000 at September 29, 2001 and $751,000 at March 31, 2001 include money market accounts which have maturities of three months or less. Note 6 - Supplemental Disclosure of Cash Flow Information - --------------------------------------------------------- Debt borrowings and repayments shown in the Consolidated Statement of Cash Flows represent gross borrowings and gross repayments during the period. Under its Revolving Credit Facility, the Company either borrows or repays debt daily depending on its cash needs. The following transactions represent noncash investing and financing activities during the periods indicated: SIX MONTHS ENDED SEPTEMBER 29, 2001: In connection with the sale or disposal of assets, the Company reduced fixed assets by $6,000 and decreased other current liabilities by $6,000. In connection with performance-based executive compensation, the Company recognized compensation expense of $727,000, increased other long-term liabilities by $208,000 and increased additional paid-in capital by $519,000. In connection with recording the value of the Company's swap contracts, other comprehensive income decreased by $1,032,000, other long-term liabilities increased by $1,714,000 and the deferred income tax liability was reduced by $682,000. SIX MONTHS ENDED SEPTEMBER 30, 2000: In connection with the sale or disposal of assets, the Company reduced fixed assets by $126,000 and decreased other current liabilities by $126,000. CASH PAID DURING THE PERIOD: 2001 2000 ---- ---- Interest, net $2,096,000 $2,930,000 Income taxes 2,700,000 2,145,000 Note 7 - Reclassifications - -------------------------- Certain amounts in the Consolidated Statement of Cash Flows have been reclassified to improve reporting and maintain comparability among the periods presented. Note 8 - Other - -------------- These financial statements should be read in conjunction with the financial statements and notes thereto included in the Annual Report on Form 10-K (File No. 0-19357), filed by the Company with the Securities and Exchange Commission on June 28, 2001. - 8 - MONRO MUFFLER BRAKE, INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The statements contained in this Form 10-Q which are not historical facts, including (without limitation) statements made in the Management's Discussion and Analysis of Financial Condition and Results of Operations, may contain statements of future expectations and other forward-looking statements that are subject to important factors that could cause actual results to differ materially from those in the forward-looking statements, including (without limitation) product demand, the effect of economic conditions, the impact of competitive services and pricing, product development, parts supply restraints or difficulties, industry regulation, the continued availability of capital resources and financing and other risks set forth or incorporated elsewhere herein and in the Company's Securities and Exchange Commission filings. RESULTS OF OPERATIONS The following table sets forth income statement data of Monro Muffler Brake, Inc. ("Monro" or the "Company") expressed as a percentage of sales for the fiscal periods indicated.
FOR THE QUARTER ENDED FOR THE SIX MONTHS ENDED FISCAL SEPTEMBER FISCAL SEPTEMBER ---------------- ---------------- 2001 2000 2001 2000 ---- ---- ---- ---- Sales ........................................ 100.0% 100.0% 100.0% 100.0% Cost of sales, including distribution and occupancy costs ......................... 57.8 58.4 56.7 57.9 ------- ------- ------- ------- Gross profit ................................. 42.2 41.6 43.3 42.1 Operating, selling, general and administrative expenses ..................... 30.7 29.3 31.8 29.8 ------- ------- ------- ------- Operating income ............................. 11.6 12.3 11.5 12.3 Interest expense - net ....................... 1.6 2.5 1.7 2.6 Other expenses - net ......................... .2 .3 .3 .2 ------- ------- ------- ------- Income before provision for income taxes ..... 9.8 9.5 9.5 9.5 Provision for income taxes ................... 3.7 3.8 3.3 3.8 ------- ------- ------- ------- Net income ................................... 6.1% 5.7% 6.2% 5.7% ======= ======= ======= =======
- 9 - SECOND QUARTER AND SIX MONTHS ENDED SEPTEMBER 29, 2001 COMPARED TO SECOND QUARTER AND SIX MONTHS ENDED SEPTEMBER 30, 2000 Sales were $60.5 million for the quarter ended September 29, 2001 compared with $60.4 million in the quarter ended September 30, 2000. The sales increase of $.1 million, or .1%, was due to an increase of $.7 million related to new stores, largely offset by a decrease in comparable store sales of .7%, and a decrease in sales related to stores closed during fiscal 2001 and 2002 of approximately $.2 million. The decrease in comparable store sales was due to one less selling day during the quarter ended September 29, 2001 as compared to the same quarter of last year. Adjusting for this one less selling day, comparable store sales increased .7% over last year. Sales for the six months ended September 29, 2001 were $121.9 million as compared to $121.1 million for the comparable period in the prior year. The sales increase of $.8 million, or .6%, was due to an increase in sales from new stores of $1.5 million, partially offset by a decrease of $.7 million in sales from stores closed in fiscal years 2001 and 2002. Comparable store sales were flat with one less selling day. When adjusted for days, comparable store sales increased .6%. Gross profit for the quarter ended September 29, 2001 was $25.6 million or 42.2% as compared with $25.1 million or 41.6% of sales for the quarter ended September 30, 2000. Gross profit for the six months ended September 29, 2001 was $52.7 million, or 43.3% of sales, compared to $51.0 million or 42.1% of sales for the six months ended September 30, 2000. The increase in gross profit for the quarter ended September 29, 2001 as a percentage of sales is primarily due to a decrease in material costs as a result of a shift in mix, as well as selling price increases during the quarter. Additionally, there was a slight decrease in distribution and occupancy costs as compared to the prior year. Operating, selling, general and administrative ("SG&A") expenses for the quarter ended September 29, 2001 increased by $.9 million to $18.5 million from the quarter ended September 30, 2000, and were 30.7% of sales as compared to 29.3% in the prior year quarter. For the six months ended September 29, 2001, these expenses increased by $2.6 million to $38.7 million from the comparable period of the prior year, and were 31.8% of sales compared to 29.8%. The increase in expense for the quarter ended September 29, 2001 was primarily attributable to the timing of the recognition of insurance expense. Additionally, there were increases in depreciation expense related to the new Point of Sale system installed in fiscal 2001, as well as increases in advertising and manager payroll expense. These increases were partially offset by an increase in cooperative advertising credits as compared to the prior year, as well as a decrease in health insurance claims. Year-to-date, SG&A expenses also increased due to the recognition of $.7 million of expense related to performance-based options granted to the Company's Chief Executive Officer in December 1998. Operating income for the quarter ended September 29, 2001 of approximately $7.0 million decreased 5.7% as compared to operating income for the quarter ended September 30, 2000, and decreased as a percentage of sales from 12.3% to 11.6% for the same periods. On a year-to-date basis, operating income decreased approximately $.9 million or 5.9% from the same prior year period, and decreased as a percentage of sales from 12.3% to 11.5%. Net interest expense for the quarter ended September 29, 2001 decreased by approximately $.6 million compared to the comparable period in the prior year, and decreased from 2.5% to 1.6% as a percentage of sales for the same period. Net interest expense for the six months ended September 29, 2001 decreased by approximately $1.0 million compared to the same period in the prior year, and decreased from 2.6% to 1.7% as a percentage of sales for the same period. The weighted average interest rate for the quarter ended September 29, 2001 was approximately 170 basis points lower than the rate for the quarter ended September 30, 2000. Additionally, the weighted average debt outstanding decreased by approximately $14 million, resulting in a decrease in expense between the two quarters. The effective tax rate for the quarter ended September 29, 2001 was 38.0% of pre-tax income as compared to 39.8% for the quarter ended September 30, 2000. The Company recorded a one-time tax benefit of $.4 million in the quarter ended June 30, 2001, which reduced the tax rate by 640 basis points from the prior year quarter, due to a reduction in the Company's effective tax rate. There has been a reduction in the Company's overall effective state income tax - 10 - rate because of the Company's growth in lower-taxing states, especially in connection with the fiscal year 1999 Speedy acquisition. This one-time adjustment reduced the accrual for amounts provided in prior fiscal years. Additionally, the Company expects this state rate reduction to continue for the entire fiscal year 2002, and accordingly, has reduced the provision for taxes from 39.8% to 38.0% of pre-tax income for fiscal 2002. Net income for the quarter ended September 29, 2001 of $3.7 million increased 6.4% from net income for the quarter ended September 30, 2000. For the six months ended September 29, 2001, net income of $7.5 million increased 9.1%, due to the factors discussed above. Earnings per share for the quarter and six months ended September 29, 2001 increased 5.1% and 7.7%, respectively. Interim Period Reporting The data included in this report are unaudited and are subject to year-end adjustments; however, in the opinion of management, all known adjustments (which consist only of normal recurring adjustments) have been made to present fairly the Company's operating results and financial position for the unaudited periods. The results for interim periods are not necessarily indicative of results to be expected for the fiscal year. CAPITAL RESOURCES AND LIQUIDITY Capital Resources In fiscal year 2002, the Company's primary capital requirements have been the funding of its new store expansion program and the upgrading of facilities and systems in existing stores. For the six months ended September 29, 2001, the Company spent approximately $4.7 million for equipment and new store construction. Funds were provided primarily by cash flow from operations. Management believes that the Company has sufficient resources available (including cash and equivalents, net cash flow from operations and bank financing) to expand its business as currently planned for the next several years. Liquidity Concurrent with the closing of the Speedy acquisition in September 1998, the Company obtained a new $135 million secured credit facility from a syndication of lenders led by The Chase Manhattan Bank. Approximately $55 million was borrowed under this Facility to pay the all-cash purchase price, including transaction expenses of approximately $4 million. In addition, the Company refinanced approximately $35 million of indebtedness through the new Credit Facility, with the balance of the Facility available for future working capital needs. More specifically, the new financing structure consists of a $25 million term loan (of which approximately $11.3 million was outstanding at September 29, 2001), a $75 million Revolving credit facility (of which approximately $24.6 million was outstanding at September 29, 2001), and synthetic lease (off-balance sheet) financing for a significant portion of the Speedy real estate, totaling $35 million (of which approximately $32.4 million was outstanding at September 29, 2001). The loans bear interest at the prime rate or LIBOR-based rate options tied to the Company's financial performance. The Company must also pay a facility fee on the unused portion of the commitment. The Credit Facility has a five-year term. Interest only is payable monthly on the Revolving credit and synthetic lease borrowings throughout the term. In addition to monthly interest payments, the $25 million term loan requires quarterly principal payments. Principal payments totalling $13.7 million have been paid through September 29, 2001. The term loan and Revolving credit facility are secured by all accounts receivable, inventory and other personal property. The Company has also entered into a negative pledge agreement not to encumber any real property, with certain permissible exceptions. The synthetic lease is secured by the real property to which it relates. Certain of the Company's stores are financed by mortgages currently bearing interest at LIBOR plus 100 basis points. - 11 - The Company has financed its office/warehouse facility via a 10 year mortgage with a current balance of $2.1 million, amortizable over 20 years, and an eight year term loan with a balance of $.2 million. Certain of the Company's long-term debt agreements require, among other things, the maintenance of specified interest and rent coverage ratios and amounts of tangible net worth. They also contain restrictions on cash dividend payments. 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. FINANCIAL ACCOUNTING STANDARDS On June 29, 2001, the Financial Accounting Standards Board issued Statements of Financial Accounting Standards No. 141 and 142 ("SFAS 141 and SFAS 142"), "Business Combinations" and "Goodwill and Other Intangible Assets", respectively. SFAS 141 is effective immediately and SFAS 142 is effective for fiscal years beginning after December 15, 2001. The Company plans to adopt SFAS No. 142 effective April 1, 2002. The adoption of SFAS Nos. 141 and 142 is not expected to materially affect the Company's results of operations or financial position. - 12 - MONRO MUFFLER BRAKE, INC. PART II - OTHER INFORMATION Item 4. Submission of Matters to a Vote of Security Holders --------------------------------------------------- The 2001 Annual Meeting of Shareholders of the Company (the "2001 Meeting") was held on August 6, 2001. At the 2001 Meeting, the Company's common shareholders elected management's nominees, Charles J. August, Frederick M. Danziger, Jack M. Gallagher, Robert G. Gross and Peter J. Solomon to Class 2 of the Board of Directors, to serve until the election and qualification of their respective successors at the 2003 Annual Meeting of Shareholders. Such nominees for director received the following votes:
Name Votes For Votes Withheld ---- --------- -------------- Charles J. August 7,396,574 71,079 Frederick M. Danziger 7,433,338 34,315 Jack M. Gallagher 7,398,338 69,315 Robert G. Gross 7,117,865 349,788 Peter J. Solomon 7,240,380 227,273
As required under the Company's Certificate of Incorporation, such election of directors and other matters were confirmed by the holders of all 91,727 outstanding shares of the Company's Class C Convertible Preferred Stock, par value $1.50 per share, by written consent dated as of August 6, 2001. In addition, Burton S. August, Robert W. August, Donald Glickman, Lionel B. Spiro and W. Gary Wood will continue as Class 1 directors until the election and qualification of their respective successors at the 2002 Annual Meeting of Shareholders. Also approved by the following votes were: (I) a proposal to ratify the re-appointment of PricewaterhouseCoopers LLP as the independent auditors of the Company for the fiscal year ending March 31, 2002 (7,464,446 shares in favor, 1,333 shares against, 1,874 shares abstaining and zero broker non-votes). - 13 - Item 6. Exhibits and Reports on Form 8-K --------------------------------- a. Exhibits 11 - Statement of Computation of Per Share Earnings. b. Reports on Form 8-K No reports on Form 8-K were filed during the quarter ended September 29, 2001. - 14 - SIGNATURES Pursuant to the requirements 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. DATE: November 13, 2001 By /s/ Robert G. Gross ----------------------------------- Robert G. Gross President and Chief Executive Officer DATE: November 13, 2001 By /s/ Catherine D'Amico ----------------------------------- Catherine D'Amico Senior Vice President-Finance, Treasurer and Chief Financial Officer - 15 - EXHIBIT INDEX Exhibit No. Description Page No. ----------- ----------- -------- 11 Statement of computation of per share earnings 17 - 16 - EX-11 3 l90988aex11.txt EXHIBIT 11 MONRO MUFFLER BRAKE, INC. Exhibit 11 STATEMENT OF COMPUTATION OF PER SHARE EARNINGS Earnings per share for each period was computed by dividing net income for such period by the weighted average number of shares of Common Stock and common stock equivalents outstanding during such period.
FOR THE QUARTER ENDED FOR THE SIX MONTHS ENDED FISCAL SEPTEMBER FISCAL SEPTEMBER 2001 2000 2001 2000 ---- ---- ---- ---- (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) DILUTED EARNINGS Net Income $ 3,693 $ 3,472 $ 7,546 $ 6,919 ========= ========= ========= ========= SHARES Weighted average number of common shares 8,412 8,323 8,394 8,322 Treasury Stock (217) (126) (217) (122) Assuming conversion of Class C Convertible Preferred Stock 636 636 636 636 Dilutive effect of outstanding options 209 97 197 70 --------- --------- --------- --------- Total common and common equivalent shares 9,040 8,930 9,010 8,906 ========= ========= ========= ========= DILUTED EARNINGS PER SHARE $ .41 $ .39 $ .84 $ .78 ========= ========= ========= ========= BASIC EARNINGS Net Income $ 3,693 $ 3,472 $ 7,546 $ 6,919 ========= ========= ========= ========= SHARES Weighted average number of common shares 8,196 8,197 8,177 8,200 ========= ========= ========= ========= BASIC EARNINGS PER SHARE $ .45 $ .42 $ .92 $ .84 ========= ========= ========= =========
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