FORM 10-Q

United States

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 24, 2011.

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 incorporation or organization)	(I.R.S. Employer Identification #)
200 Holleder Parkway, Rochester, New York	14615
(Address of principal executive offices)	(Zip code)

585-647-6400

(Registrant’s telephone number, including area code)

(Former name, former address and former fiscal year, if changed since last report)

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.     x  Yes    ¨  No

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).     x  Yes    ¨  No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer	x	Accelerated filer	¨
Non-accelerated filer	¨  (Do not check if a smaller reporting company)	Smaller reporting company	¨

Indicate by check mark whether the registrant is a Shell Company (as defined in Rule 12b-2 of the Exchange Act).    ¨  Yes    x  No

As of October 21, 2011, 30,810,217 shares of the Registrant’s Common Stock, par value $ .01 per share, were outstanding.

MONRO MUFFLER BRAKE, INC.

INDEX

		Page No.
Part I. Financial Information
Item 1. Financial Statements
	Consolidated Balance Sheets at September 24, 2011 and March 26, 2011		3
	Consolidated Statements of Income for the quarters and six months ended September 24, 2011 and September 25, 2010		4
	Consolidated Statement of Changes in Shareholders’ Equity for the six months ended September 24, 2011		5
	Consolidated Statements of Cash Flows for the six months ended September 24, 2011 and September 25, 2010		6
	Notes to Consolidated Financial Statements		7
Item  2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			11
Item 3. Quantitative and Qualitative Disclosures About Market Risk			14
Item 4. Controls and Procedures			14
Part II. Other Information
Item 1. Legal Proceedings			16
Item 6. Exhibits			16
Signatures			17
Exhibit Index			18

2

MONRO MUFFLER BRAKE, INC.

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

MONRO MUFFLER BRAKE, INC.

CONSOLIDATED BALANCE SHEETS

	(Unaudited)
	September 24, 2011			March 26, 2011
	(Dollars in thousands)
Assets
Current assets:
Cash and equivalents	$	2,728		$	2,670
Trade receivables		2,312			1,821
Federal and state income taxes receivable		318			—
Inventories		105,698			98,964
Deferred income tax asset		9,235			8,667
Other current assets		17,747			16,661
Total current assets		138,038			128,783
Property, plant and equipment		407,878			398,524
Less - Accumulated depreciation and amortization		(205,346	)		(197,928	)
Net property, plant and equipment		202,532			200,596
Goodwill		126,445			98,535
Intangible assets		14,597			13,506
Other non-current assets		14,715			10,420
Total assets	$	496,327		$	451,840
Liabilities and Shareholders’ Equity
Current liabilities:
Current portion of long-term debt	$	3,276		$	13,033
Trade payables		48,641			41,301
Federal and state income taxes payable		—			1,132
Accrued payroll, payroll taxes and other payroll benefits		13,367			16,825
Accrued insurance		21,961			21,095
Warranty reserves		6,694			6,496
Other current liabilities		10,196			9,558
Total current liabilities		104,135			109,440
Long-term debt		62,427			41,990
Accrued rent expense		6,371			6,476
Other long-term liabilities		4,597			4,617
Deferred income tax liability		5,412			4,353
Long-term income taxes payable		5,064			4,715
Total liabilities		188,006			171,591
Commitments
Shareholders’ equity:
Class C Convertible Preferred Stock, $1.50 par value, $.064 conversion value, 150,000 shares authorized; 32,500 shares issued and outstanding		49			49
Common Stock, $.01 par value, 45,000,000 shares authorized; 36,759,794 and 36,038,664 shares issued at September 24, 2011 and March 26, 2011, respectively		368			360
Treasury Stock, 5,967,991 and 5,577,984 shares at September 24, 2011 and March 26, 2011, respectively, at cost		(86,493	)		(72,317	)
Additional paid-in capital		116,896			99,871
Accumulated other comprehensive loss		(1,578	)		(1,578	)
Retained earnings		279,079			253,864
Total shareholders’ equity		308,321			280,249
Total liabilities and shareholders’ equity	$	496,327		$	451,840

The accompanying notes are an integral part of these financial statements.

3

MONRO MUFFLER BRAKE, INC.

CONSOLIDATED STATEMENTS OF INCOME

(UNAUDITED)

	Quarter Ended Fiscal September						Six Months Ended Fiscal September
	2011			2010			2011			2010
	(Dollars in thousands,
	except per share data)
Sales	$	173,256		$	162,102		$	338,074		$	320,341
Cost of sales, including distribution and occupancy costs		101,942			95,736			195,949			187,976
Gross profit		71,314			66,366			142,125			132,365
Operating, selling, general and administrative expenses		45,850			43,138			90,332			86,199
Intangible amortization		411			296			771			591
(Gain) loss on disposal of assets		(138	)		231			(311	)		250
Total operating expenses		46,123			43,665			90,792			87,040
Operating income		25,191			22,701			51,333			45,325
Interest expense, net of interest income for the quarter of $3 in 2011 and $20 in 2010, and year-to-date of $5 in 2011 and $31 in 2010		1,332			1,208			2,456			2,679
Other income, net		(123	)		(73	)		(224	)		(140	)
Income before provision for income taxes		23,982			21,566			49,101			42,786
Provision for income taxes		8,865			8,242			18,542			16,251
Net income	$	15,117		$	13,324		$	30,559		$	26,535
Earnings per share:
Basic	$	.49		$	.44		$	1.00		$	.88
Diluted	$	.47		$	.42		$	.95		$	.84

The accompanying notes are an integral part of these financial statements.

4

MONRO MUFFLER BRAKE, INC.

CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITY

(UNAUDITED)

(Dollars in thousands)

	Preferred Stock		Common Stock		Treasury Stock			Additional Paid-in Capital		Accumulated Other Comprehensive Loss (3)			Retained Earnings			Total
Balance at March 26, 2011	$	49	$	360	$	(72,317	)	$	99,871	$	(1,578	)	$	253,864		$	280,249
Net income														30,559			30,559
Cash dividends: Preferred ($.17 per CSE)(1) (2)														(129	)		(129	)
Common ($.17 per share)(2)														(5,215	)		(5,215	)
Tax benefit from exercise of stock options									4,803								4,803
Exercise of stock options				8		(14,176	)		10,520								(3,648	)
Stock option compensation									1,702								1,702
Balance at September 24, 2011	$	49	$	368	$	(86,493	)	$	116,896	$	(1,578	)	$	279,079		$	308,321

(1) CSE – Common stock equivalent

(2) Represents first and second quarter fiscal year 2012 dividend payments of $.08 and $.09 per CSE paid on June 17, 2011 and September 16, 2011, respectively.

(3) The balance relates to the pension liability.

The accompanying notes are an integral part of these financial statements.

5

MONRO MUFFLER BRAKE, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

	Six Months Ended Fiscal September
	2011			2010
	(Dollars in thousands)
	Increase (Decrease) in Cash
Cash flows from operating activities:
Net income	$	30,559		$	26,535
Adjustments to reconcile net income to net cash provided by operating activities -
Depreciation and amortization		11,758			11,053
(Gain) loss on disposal of property, plant and equipment		(311	)		250
Stock-based compensation expense		1,702			1,560
Excess tax benefits from share-based payment arrangements		(198	)		(784	)
Net change in deferred income taxes		1,105			(930	)
Change in operating assets and liabilities:
Trade receivables		(331	)		331
Inventories		(4,443	)		(9,511	)
Other current assets		(586	)		(2,047	)
Intangible assets		(4,295	)		1,027
Other non-current assets		—			191
Trade payables		7,231			4,325
Accrued expenses		(7,444	)		(3,892	)
Federal and state income taxes payable		3,353			2,167
Other long-term liabilities		(234	)		197
Long-term income taxes payable		349			325
Total adjustments		7,656			4,262
Net cash provided by operating activities		38,215			30,797
Cash flows from investing activities:
Capital expenditures		(11,236	)		(6,600	)
Acquisitions, net of cash acquired		(32,533	)		(7,106	)
Proceeds from the disposal of property, plant and equipment		77			98
Net cash used for investing activities		(43,692	)		(13,608	)
Cash flows from financing activities:
Proceeds from borrowings		109,629			88,321
Principal payments on long-term debt and capital lease obligations		(100,785	)		(111,894	)
Exercise of stock options		1,837			2,470
Excess tax benefits from share-based payment arrangements		198			784
Dividends to shareholders		(5,344	)		(3,704	)
Net cash provided by (used for) financing activities		5,535			(24,023	)
Increase (decrease) in cash		58			(6,834	)
Cash at beginning of period		2,670			11,180
Cash at end of period	$	2,728		$	4,346

The accompanying notes are an integral part of these financial statements.

6

MONRO MUFFLER BRAKE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 1 – Condensed Consolidated Financial Statements

The consolidated balance sheets as of September 24, 2011 and March 26, 2011, the consolidated statements of income for the quarters and six months ended September 24, 2011 and September 25, 2010, the consolidated statements of cash flows for the six months ended September 24, 2011 and September 25, 2010 and the consolidated statement of changes in shareholders’ equity for the six months ended September 24, 2011, include Monro Muffler Brake, Inc. and its wholly-owned subsidiary, Monro Service Corporation (collectively, the “Company”). These unaudited condensed consolidated financial statements have been prepared by the Company. In the opinion of management, all known adjustments (consisting of normal recurring accruals or adjustments) have been made to fairly state the financial position, results of operations and cash flows for the unaudited periods presented.

Certain information and footnote disclosures normally included in annual financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted. These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended March 26, 2011. The results of operations for the interim periods being reported on herein are not necessarily indicative of the operating results for the full year.

The Company reports its results on a 52/53 week fiscal year with the fiscal year ending on the last Saturday in March of each year. The following are the dates represented by each fiscal period reported in these condensed financial statements:

“Quarter Ended Fiscal September 2011”:	June 26, 2011 – September 24, 2011 (13 weeks)
“Quarter Ended Fiscal September 2010”:	June 27, 2010 – September 25, 2010 (13 weeks)
“Six Months Ended Fiscal September 2011”:	March 27, 2011 – September 24, 2011 (26 weeks)
“Six Months Ended Fiscal September 2010”:	March 28, 2010 – September 25, 2010 (26 weeks)

Fiscal year 2012, ending March 31, 2012, is a 53 week year.

During the second quarter of fiscal year 2012, the Company completed the purchase price allocation for Courthouse Tire. Some of the amounts previously estimated have changed during the measurement period. The significant changes in estimates included an increase in property, plant and equipment, deferred income tax asset, goodwill, intangible assets and long-term debt of $1.3 million, $.4 million, $.3 million, $.3 million and $2.3 million, respectively. The measurement period adjustments represent updates made to the purchase price allocation based on revisions to valuations estimates subsequent to the quarter of acquisition and initial accounting. There were no significant adjustments to the Company’s Consolidated Statement of Income in any quarter since the time of acquisition.

Certain reclassifications have been made to the prior year’s consolidated financial statements to conform to the current year’s presentation.

Note 2 – Acquisitions

The Company’s acquisitions are strategic moves in its plan to fill in and expand its presence in its existing and contiguous markets, and leverage fixed operating costs such as distribution and advertising.

In the first quarter of fiscal year 2012, the Company acquired 24 retail tire and automotive repair stores located in Pennsylvania and New Jersey from Vespia Tire Centers, Inc. These stores produced approximately $36 million in net sales in 2010 based on unaudited pre-acquisition historical information provided by Vespia Tire Centers, Inc. The acquisition was financed through the Company’s existing credit facility. The results of operations of these acquired stores are included in the Company’s results from June 5, 2011.

Subsequent Event

In September 2011, the Company signed a definitive asset purchase agreement to acquire seven retail tire stores located in Ohio and Pennsylvania from Terry’s Tire Town, Inc. These stores produced approximately $9 million in net sales in 2010 based on unaudited, pre-acquisition historical information provided by Terry’s Tire Town, Inc. The transaction closed on October 9, 2011. These stores will operate under the Mr. Tire brand name. The acquisition was financed through the Company’s existing credit facility.

7

MONRO MUFFLER BRAKE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 3 – Earnings Per Share

Basic earnings per common share (EPS) amounts are computed by dividing Income available to common shareholders after the deduction of preferred stock dividends by the average number of common shares outstanding. Diluted EPS amounts assume the issuance of common stock for all potentially dilutive equivalent securities outstanding.

The following is a reconciliation of basic and diluted EPS for the respective periods:

	Quarter Ended Fiscal September						Six Months Ended Fiscal September
	2011			2010			2011			2010
	(Dollars in thousands, except per share data)
Numerator for earnings per common share calculation:
Net Income	$	15,117		$	13,324		$	30,559		$	26,535
Preferred stock dividends		(68	)		(45	)		(129	)		(91	)
Income available to common shareholders	$	15,049		$	13,279		$	30,430		$	26,444
Denominator for earnings per common share calculation:
Weighted average common shares, basic		30,656			30,124			30,576			30,058
Effect of dilutive securities:
Preferred stock		760			760			760			760
Stock options		857			832			965			826
Weighted average number of common shares, diluted		32,273			31,716			32,301			31,644
Basic Earnings per common share:	$	.49		$	.44		$	1.00		$	.88
Diluted Earnings per common share:	$	.47		$	.42		$	.95		$	.84

The computation of diluted EPS excludes the effect of the assumed exercise of approximately 686,000 and 687,000 stock options respectively, for the three and six months ended fiscal September 24, 2011, and 270,000 and 272,000 stock options respectively, for the three and six months ended September 25, 2010. Such amounts were excluded as the exercise prices of these stock options were greater than the average market value of the Company’s common stock for those periods, resulting in an anti-dilutive effect on diluted EPS.

Note 4 – Income Taxes

In the normal course of business, the Company provides for uncertain tax positions and the related interest and penalties, and adjusts its unrecognized tax benefits and accrued interest and penalties accordingly. The total amount of unrecognized tax benefits were $6.3 million and $6.0 million, respectively at September 24, 2011 and March 26, 2011, the majority of which, if recognized, would affect the effective tax rate. As of September 24, 2011, the Company had approximately $1.1 million of interest and penalties accrued related to unrecognized tax benefits.

The Company is currently under audit by certain state tax jurisdictions for the fiscal 2001 to 2010 tax years. It is possible that the examination phase of the audits for these years may conclude in the next 12 months, and that the related unrecognized tax benefits for tax positions taken regarding previously filed tax returns may change from those recorded as liabilities for uncertain tax positions in the Company’s financial statements as of September 24, 2011. However, based on the status of the examinations, it is not possible to estimate the effect of any amount of such change to previously recorded uncertain tax positions.

The Company files U.S. federal income tax returns and income tax returns in various state jurisdictions. The Company’s fiscal 2009 U.S. federal tax year and various state tax years remain subject to income tax examinations by tax authorities.

8

MONRO MUFFLER BRAKE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 5 – Supplemental Disclosure of Cash Flow Information

The following transactions represent non-cash investing and financing activities during the periods indicated:

Six Months Ended September 24, 2011:

In connection with the fiscal year 2012 acquisition (Note 2), liabilities were assumed as follows:

Fair value of assets acquired	$	5,739,000
Goodwill acquired		27,589,000
Cash paid, net of cash acquired		(32,533,000	)
Liabilities assumed	$	795,000

In connection with the completion of purchase price accounting (Note 1), the Company increased property, plant and equipment, deferred income tax asset, goodwill, intangible assets and long-term debt by $1,331,000, $381,000, $325,000, $297,000 and $2,334,000, respectively.

In connection with the exercise of stock options and the satisfaction of tax withholding obligations by the Company’s Chief Executive Officer and another member of the Company’s Board of Directors, the Company increased current liabilities, Common Stock, paid-in capital and treasury stock by $5,485,000, $6,000, $8,685,000 and $14,176,000, respectively.

In connection with the accounting for income tax benefits related to the exercise of stock options, the Company decreased current liabilities and increased paid-in capital by $4,803,000.

Six Months Ended September 25, 2010:

In connection with the fiscal year 2011 acquisitions, liabilities were assumed as follows:

Fair value of assets acquired	$	1,200,000
Goodwill acquired		6,268,000
Cash paid, net of cash acquired		(7,106,000	)
Liabilities assumed	$	362,000

In connection with the accounting for income tax benefits related to the exercise of stock options, the Company decreased current liabilities and increased paid-in capital by $2,106,000.

Note 6 – Cash Dividend

In May 2011, the Company’s Board of Directors declared its intention to pay a regular quarterly cash dividend during fiscal year 2012 of $.08 per common share or common share equivalent to be paid beginning with the first quarter of fiscal year 2012. In July 2011, the Company’s Board of Directors declared its intention to pay a regular quarterly cash dividend during the remainder of fiscal year 2012 of $.09 per common share or common share equivalent. However, the declaration of and any determination as to the payment of future 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 credit facility restrictions, and such other factors as the Board of Directors deems relevant.

9

MONRO MUFFLER BRAKE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 7 – Debt

In June 2011, the Company entered into a five-year $175 million revolving Credit Facility agreement with seven banks. The Credit Facility amends and restates, in its entirety, the Credit Facility agreement previously entered into by the Company as of July 2005 and amended from time to time. The Credit Facility also provides an accordion feature permitting the Company to request an increase in availability of up to an additional $75 million. The Company was in compliance with all debt covenants at September 24, 2011.

Within the Credit Facility, the Company has available a sub-facility of $40 million for the purpose of issuing standby letters of credit.

Specific terms of the Credit Facility permit the payment of cash dividends not to exceed 50% of the prior year’s net income and increase and liberalize certain thresholds, while the net worth financial covenant existent under the 2005 Credit Facility has been removed. Other terms of the Credit Facility are generally consistent with the 2005 Credit Facility including requiring the maintenance of specified interest and rent coverage ratios and permitting mortgages and specific lease financing arrangements with other parties with certain limitations.

10

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The statements contained in this Form 10-Q that 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 made pursuant to the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are subject to risks, uncertainties and other important factors that could cause actual results to differ materially from those expressed. These factors include, but are not necessarily limited to, the effect of economic conditions, product demand, dependence on and competition within the primary markets in which the Company’s stores are located, the need for and costs associated with store renovations and other capital expenditures, the impact of competitive services and pricing, product development, parts supply restraints or difficulties, industry regulation, risks relating to leverage and debt service (including sensitivity to fluctuations in interest rates), continued availability of capital resources and financing, risks relating to integration of acquired businesses, the availability of vendor rebates and other factors set forth or incorporated elsewhere herein and in the Company’s other Securities and Exchange Commission filings. Except as required by law, 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.

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:

	Quarter Ended Fiscal September						Six Months Ended Fiscal September
	2011			2010			2011			2010
Sales		100.0	%		100.0	%		100.0	%		100.0	%
Cost of sales, including distribution and occupancy costs		58.8			59.1			58.0			58.7
Gross profit		41.2			40.9			42.0			41.3
Operating, selling, general and administrative expenses		26.5			26.6			26.7			26.9
Intangible amortization		0.2			0.2			0.2			0.2
(Gain) loss on disposal of assets		(0.1	)		0.1			(0.1	)		0.1
Total operating expenses		26.6			26.9			26.9			27.2
Operating income		14.5			14.0			15.2			14.1
Interest expense - net		0.8			0.7			0.7			0.8
Other income - net		(0.1	)		0.0			(0.1	)		0.0
Income before provision for income taxes		13.8			13.3			14.5			13.4
Provision for income taxes		5.1			5.1			5.5			5.1
Net income		8.7	%		8.2	%		9.0	%		8.3	%

Second Quarter and Six Months Ended September 24, 2011 Compared To Second Quarter and Six Months Ended September 25, 2010

Sales were $173.3 million for the quarter ended September 24, 2011 as compared with $162.1 million in the quarter ended September 25, 2010. The sales increase of $11.2 million or 6.9%, was due primarily to an increase of $10.7 million related to new stores. Partially offsetting this was a comparable store sales decrease of .8% and a decrease in sales from closed stores amounting to $1.1 million. There were 91 selling days in the quarter ended September 24, 2011 and in the quarter ended September 25, 2010.

11

As occurred in previous years, during the quarter ended September 24, 2011, the Company completed the bulk sale of approximately $2.9 million of slower moving inventory to Icon International, a barter company, in exchange for barter credits. The barter transactions for the quarter ended September 24, 2011 decreased gross profit and operating expenses by .2% and .4% of sales, respectively, as compared to the quarter ended September 25, 2010.

Sales were $338.1 million for the six months ended September 24, 2011 as compared with $320.3 million in the six months ended September 25, 2010. The sales increase of $17.8 million or 5.5%, was due primarily to an increase of $14.7 million related to new stores. Additionally, comparable store sales increased by .7%. Partially offsetting this sales increase was a decrease in sales from closed stores amounting to $2.1 million.

At September 24, 2011, the Company had 802 company-operated stores and three franchised locations compared with 783 company-operated stores and three franchised locations at September 25, 2010. During the quarter ended September 24, 2011, the Company added two stores and closed two stores.

Management believes that the decline in comparable store sales resulted mainly from the continued weak U.S. economy. With the continuation of higher gasoline prices and lack of consumer confidence, management believes that customers are continuing to defer tire purchases and service repairs, especially on higher ticket items. As evidence, tire sales, which have increased every year on a comparable store basis during the past three years, were relatively flat for the second quarter of fiscal year 2012 as compared to the prior year quarter. This was a result of a decrease in tire units sold offset by an increase in selling prices passed along to the consumer. The Company, like most all other tire retailers, has experienced a decline in the sale of tire units, which is believed to be attributable to consumer resistance to steeply rising prices. Related categories such as alignment sales declined this quarter as well. The Company did have comparable store exhaust and brake sales increases during the quarter ended September 2011, supporting management’s belief that consumers are keeping their cars longer and repairing them instead of trading them in for new cars. While it appears that repairs and tire purchases are being deferred, most can only be deferred for a period of time due to safety issues. When customers do come in to have their vehicles repaired, it is management’s belief that they spend more on average because the problem with their vehicle has worsened due to additional wear.

Gross profit for the quarter ended September 24, 2011 was $71.3 million or 41.2% of sales as compared with $66.4 million or 40.9% of sales for the quarter ended September 25, 2010. The increase in gross profit for the quarter ended September 24, 2011, as a percentage of sales, is due to several factors.

Distribution and occupancy costs decreased as a percentage of sales from the prior year as the Company, with higher overall sales, was able to better leverage these largely fixed costs.

Labor costs decreased as a percentage of sales as compared to the prior year, mainly due to better control of payroll and improved labor efficiency as measured by sales per man hour.

Total material costs, including outside purchases, increased as a percentage of sales as compared to the prior year, largely due to cost increases primarily in oil and tires. Selling price increases during this and the first quarter of fiscal year 2012 helped to partially offset the margin pressure.

Gross profit for the six months ended September 24, 2011 was $142.1 million, or 42.0% of sales, compared with $132.4 million or 41.3% of sales for the six months ended September 25, 2010. The year-to-date improvement in gross profit is largely due to leveraging of fixed distribution and occupancy costs against improved sales this year, as well as decreased labor costs.

Operating expenses for the quarter ended September 24, 2011 were $46.1 million or 26.6% of sales as compared with $43.7 million or 26.9% of sales for the quarter ended September 25, 2010. Direct store expenses related to the fiscal year 2011 and fiscal year 2012 acquired stores increased operating expenses by $2.4 million for the quarter ended September 24, 2011, demonstrating that, on a comparable store basis, the Company experienced leverage in this line through focused cost control on lower sales.

For the six months ended September 24, 2011, operating expenses increased by $3.8 million to $90.8 million from the comparable period of the prior year and were 26.9% of sales compared to 27.2%.

Operating income for the quarter ended September 24, 2011 of approximately $25.2 million increased by 11.0% as compared to operating income of approximately $22.7 million for the quarter ended September 25, 2010, and increased as a percentage of sales from 14.0% to 14.5%.

Operating income for the six months ended September 24, 2011 of approximately $51.3 million increased by 13.3% as compared to operating income of approximately $45.3 million for the six months ended September 25, 2010, and increased as a percentage of sales from 14.1% for the six months ended September 25, 2010 to 15.2% for the six months ended September 24, 2011.

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Net interest expense for the quarter ended September 24, 2011 increased by approximately $.1 million as compared to the same period in the prior year, and increased from .7% to .8% as a percentage of sales for the same periods. The weighted average debt outstanding for the quarter ended September 24, 2011 decreased by approximately $8 million as compared to the quarter ended September 25, 2010, primarily related to a decrease in debt outstanding under the Company’s revolving credit facility agreement. This was offset by an increase in the weighted average interest rate of approximately 140 basis points from the prior year due to a shift to a larger percentage of debt (capital leases vs. revolver) outstanding at a higher rate. Additionally, amortization of financing fees over the lower outstanding revolving credit balance for the quarter is causing an increase in the weighted average rate.

Net interest expense for the six months ended September 24, 2011 decreased by approximately $.2 million as compared to the same period in the prior year, and decreased .1% as a percentage of sales for the same periods. Weighted average debt decreased by approximately $23 million and the weighted average interest rate increased by approximately 160 basis points as compared to the same period of the prior year.

The effective tax rate for the quarter ended September 24, 2011 and September 25, 2010 was 37.0% and 38.2%, respectively, of pre-tax income. The difference in rate relates, in part, to the recording of federal income tax credits. In addition, the rate may fluctuate from period to period due to the accounting for uncertain tax benefits.

The effective tax rate for the six months ended September 24, 2011 and September 25, 2010 was 37.8% and 38.0%, respectively, of pre-tax income.

Net income for the quarter ended September 24, 2011 of $15.1 million increased 13.5% from net income for the quarter ended September 25, 2010. Earnings per share on a diluted basis for the quarter ended September 24, 2011 of $.47 increased 11.9%.

For the six months ended September 24, 2011, net income of $30.6 million increased 15.2% and diluted earnings per share increased 13.1%.

Capital Resources and Liquidity

Capital Resources

The Company’s primary capital requirements in fiscal year 2012 are the upgrading of facilities and systems, including an approximate $4.0 million expansion of the Rochester, New York office and warehouse facility, and the funding of its store expansion program, including potential acquisitions of existing store chains. For the six months ended September 24, 2011, the Company’s primary capital requirements were divided between the funding of capital expenditures related to existing and greenfield stores totaling $11.2 million, and the funding of the Vespia acquisition totaling $32.5 million. Funds were provided primarily by cash flow from operations and from the Company’s revolving credit facility.

The Company paid dividends of $5.3 million during the six months ended September 24, 2011. In May 2011, the Company’s Board of Directors declared its intention to pay a regular quarterly cash dividend of $.08 per common share or common share equivalent beginning with the first quarter of fiscal year 2012. In July 2011, the Company’s Board of Directors declared its intention to pay a regular quarterly cash dividend of $.09 per common share or common share equivalent beginning with the second quarter of fiscal year 2012. However, the declaration of and any determination as to the payment of future 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 credit facility restrictions, and such other factors as the Board of Directors deems relevant.

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 twelve months.

Liquidity

In June 2011, the Company entered into a five-year $175 million revolving Credit Facility agreement with seven banks. The Credit Facility amends and restates, in its entirety, the Credit Facility agreement previously entered into by the Company as of July 2005 and amended from time to time. The Credit Facility also provides an accordion feature permitting the Company to request an increase in availability of up to an additional $75 million. There was $20.7 million outstanding at September 24, 2011. The Company was in compliance with all debt covenants at September 24, 2011.

Within the Credit Facility, the Company has available a sub-facility of $40 million for the purpose of issuing standby letters of credit. There were $18.3 million in outstanding letters of credit at September 24, 2011.

The net availability under the Credit Facility at September 24, 2011 was $136 million.

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Specific terms of the Credit Facility permit the payment of cash dividends not to exceed 50% of the prior year’s net income and increase and liberalize certain thresholds, while the net worth financial covenant existent under the 2005 Credit Facility has been removed. Other terms of the Credit Facility are generally consistent with the 2005 Credit Facility including requiring the maintenance of specified interest and rent coverage ratios and permitting mortgages and specific lease financing arrangements with other parties with certain limitations.

The Company has financed certain store properties and equipment with capital leases, which amount to $44.4 million at September 24, 2011 and are due in installments through 2039.

Recent Accounting Pronouncements

In December 2010, the Financial Accounting Standards Board issued new accounting guidance on when to perform Step 2 of the goodwill impairment test for reporting units with zero or negative carrying amounts. The guidance requires reporting entities with zero or negative carrying amounts of goodwill to perform Step 2 of the goodwill impairment test if it is more likely than not that a goodwill impairment exists. This guidance is effective for impairment tests performed during an entity’s fiscal year, and interim periods within those years, beginning after December 15, 2010 (March 27, 2011 for the Company). The adoption of this guidance in the first quarter of fiscal year 2012 had no impact on the Company’s Consolidated Financial Statements.

In December 2010, the Financial Accounting Standards Board issued new accounting guidance on disclosures of supplementary pro forma information for business combinations. The guidance requires reporting entities that present comparative financial statements to present the pro forma disclosures as if the business combination occurred at the beginning of the prior annual period. The guidance also expands the supplementary pro forma disclosures to include additional disclosures describing the nature and amount of material, nonrecurring pro forma adjustments. This guidance is effective for business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after December 15, 2010 (March 27, 2011 for the Company). The adoption of this guidance in the first quarter of fiscal year 2012 did not have an impact on the Company’s Consolidated Financial Statements.

In June 2011, the Financial Accounting Standards Board issued new accounting guidance that revises the manner in which entities present comprehensive income in their financial statements. The guidance removes the presentation options in previously issued accounting guidance on comprehensive income, and requires entities to report components of comprehensive income in either (1) a continuous statement of comprehensive income or (2) two separate but consecutive statements. The guidance does not change the items that must be reported in other comprehensive income. This guidance is effective for fiscal years and interim reporting periods within those years beginning after December 15, 2011. This guidance requires new disclosures only, and will have no impact on the Company’s Consolidated Financial Statements.

In September 2011, the Financial Accounting Standards Board issued updated guidance on the periodic testing of goodwill for impairment. This guidance will allow companies to assess qualitative factors to determine if it is more-likely-than-not that goodwill might be impaired and whether it is necessary to perform the two-step goodwill impairment test required under current accounting standards. This guidance is applicable for fiscal years beginning after December 15, 2011, with early adoption permitted. The adoption of this guidance is not expected to have a material effect on the Company’s Consolidated Financial Statements.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

The Company is exposed to market risk from potential changes in interest rates. At September 24, 2011 and March 26, 2011, approximately 3% and 6%, respectively, of the Company’s debt financing, excluding capital leases, was at fixed interest rates and therefore, the fair value is affected by changes in market interest rates. The Company’s cash flow exposure on floating rate debt would result in interest expense fluctuating approximately $.2 million based upon the Company’s debt position at the quarter ended September 24, 2011, and $.1 million for the fiscal year ended March 26, 2011, given a 1% change in LIBOR.

Item 4. Controls and Procedures

Disclosure controls and procedures

The Company maintains disclosure controls and procedures that are designed to ensure that information required to be disclosed in reports that the Company files or submits pursuant to the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s (SEC) rules and forms, and that such information is accumulated and communicated to the Company’s management, including its Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

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In conjunction with the close of each fiscal quarter and under the supervision of the Chief Executive Officer and Chief Financial Officer, the Company conducts an update, a review and an evaluation of the effectiveness of the Company’s disclosure controls and procedures. It is the conclusion of the Company’s Chief Executive Officer and Chief Financial Officer, based upon an evaluation completed as of the end of the most recent fiscal quarter reported on herein, that the Company’s disclosure controls and procedures were effective.

Changes in internal controls

There were no changes in the Company’s internal control over financial reporting during the quarter ended September 24, 2011 that materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

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MONRO MUFFLER BRAKE, INC.

PART II - OTHER INFORMATION

Item 1. Legal Proceedings

The Company is not a party or subject to any legal proceedings other than certain claims and lawsuits that arise in the normal course of its business. The Company does not believe that such claims or lawsuits, individually or in the aggregate, will have a material adverse effect on its financial condition or results of operations.

Item 6. Exhibits

Exhibits

10.11 – Credit Agreement, dated as of June 13, 2011, by and among the Company, RBS Citizens, N.A., as Administrative Agent, and certain lenders party thereto. (Previously filed as Exhibit 10.11 to the Form 8-K filed on June 16, 2011.)

31.1 – Certification of Robert G. Gross pursuant to Section 302 of the Sarbanes – Oxley Act of 2002

31.2 – Certification of Catherine D’Amico pursuant to Section 302 of the Sarbanes – Oxley Act of 2002

32.1 – Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes – Oxley Act of 2002

101.CAL* - XBRL Taxonomy Extension Calculation Linkbase

101.INS* - XBRL Instance Document

101.LAB* - XBRL Taxonomy Extension Label Linkbase

101.PRE* - XBRL Taxonomy Extension Presentation Linkbase

101.SCH* - XBRL Taxonomy Extension Schema Linkbase

101.DEF* - XBRL Taxonomy Extension Definition Linkbase

* Pursuant to Rule 406T of Regulation S-T, these interactive data files are deemed not filed or part of a registration statement of prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933 or deemed filed for purpose of Section 18 of the Securities Exchange Act of 1934 and otherwise are not subject to liability under those sections.

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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 3, 2011	By	/s/ Robert G. Gross
		Robert G. Gross
		Chief Executive Officer and Chairman of the Board
DATE: November 3, 2011	By	/s/ Catherine D’Amico
		Catherine D’Amico
		Executive Vice President-Finance, Treasurer
		and Chief Financial Officer

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EXHIBIT INDEX

Exhibit No.	Description	Page No.
31.1	Certification of Robert G. Gross pursuant to Section 302 of the Sarbanes-Oxley Act of 2002		19
31.2	Certification of Catherine D’Amico pursuant to Section 302 of the Sarbanes-Oxley Act of 2002		20
32.1	Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002		21
101.CAL*	XBRL Taxonomy Extension Calculation Linkbase
101.INS*	XBRL Instance Document
101.LAB*	XBRL Taxonomy Extension Label Linkbase
101.PRE*	XBRL Taxonomy Extension Presentation Linkbase
101.SCH*	XBRL Taxonomy Extension Schema Linkbase
101.DEF*	XBRL Taxonomy Extension Definition Linkbase

* Pursuant to Rule 406T of Regulation S-T, these interactive data files are deemed not filed or part of a registration statement of prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933 or deemed filed for purpose of Section 18 of the Securities Exchange Act of 1934 and otherwise are not subject to liability under those sections.

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