MONRO MUFFLER BRAKE INC - 10-K Annual Report

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Form 10-K

SECURITIES AND EXCHANGE COMMISSION
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WASHINGTON, D.C. 20549

(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 30, 2002

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: (585) 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 1, 2002, the aggregate market value of voting stock held by
non-affiliates of the registrant was $138,783,000.

As of June 1, 2002, 8,315,823 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 2002 Annual Meeting of Shareholders (the "Proxy
Statement") are incorporated by reference into Part III hereof.

Part I

ITEM 1. BUSINESS
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- -GENERAL
Monro Muffler Brake, Inc. ("Monro" or the "Company") is a chain of 514
Company-operated and 19 dealer-operated stores providing automotive undercar
repair services in the United States. At March 30, 2002, Monro operated Company
stores in New York, Pennsylvania, Ohio, Connecticut, Massachusetts, West
Virginia, Virginia, Maryland, Vermont, New Hampshire, New Jersey, North
Carolina, South Carolina, Indiana, Rhode Island and Delaware under the name
"Monro Muffler Brake & Service" and "Speedy Auto Service by Monro" (together,
the "Company Stores"). The Company's stores typically are situated in
high-visibility locations in suburban areas and small towns, as well as in major
metropolitan areas. The Company Stores serviced approximately 2,184,000 vehicles
in fiscal 2002. (References herein to fiscal years are to the Company's year
ended fiscal March [e.g., references to "fiscal 2002" are to the Company's
fiscal year ended March 30, 2002].)
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 continued its growth and has
expanded its marketing area to include 16 additional states. Recent expansion
included the September 1998 acquisition of 189 company-owned and 14 franchised
Speedy stores, all located in the United States, from SMK Speedy International
Inc. of Toronto Canada, and the April 2002 acquisition of Kimmel Automotive,
Inc. (See additional discussion under "Expansion Strategy".)
In December 1998, the Company appointed Robert G. Gross as President and
Chief Executive Officer who began full-time responsibilities on January 1, 1999.
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 (585) 647-6400.
The Company provides a broad range of services on passenger cars, light
trucks and vans for mufflers and exhaust systems (estimated at 23% of fiscal
2002 sales); brakes (33%); and steering, drive train, suspension and wheel
alignment (16%). The Company also provides other products and services including
tires, scheduled maintenance and state inspections (28%). 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, a heating and cooling system "flush and
fill" service and some minor tune-up services. (See additional discussion under
"Operating Strategy.") The Company does not sell parts or accessories to the
do-it-yourself market.
The Company has two wholly-owned subsidiaries, Monro Service Corporation
and Monro Leasing, LLC, both of which are Delaware corporations 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.
Monro Leasing, LLC was established primarily to act as lessee in real
estate transactions for store locations. Currently, the sole member of the
entity is the Company.

- -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
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.

- -EXPANSION STRATEGY
Monro has experienced significant growth in recent years due to
acquisitions and, to a lesser extent, the opening of new stores. Management
believes that the continued growth in sales and profits of the Company is
dependent, in large part, upon its continued ability to open/acquire 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.
Monro believes that there are expansion opportunities in new as well as
existing market areas which 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.
In that regard, effective April 1, 2002, the Company purchased all of the
outstanding common stock, as well as a

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portion of the preferred stock, of Kimmel Automotive, Inc. ("Kimmel"), based in
Baltimore, Maryland. Kimmel Automotive operates 34 tire and automotive repair
stores in Maryland and Virginia, as well as Wholesale and Truck Tire Divisions
(including two commercial stores).
Although the 15 Kimmel Tire and Automotive Centers in Baltimore and 19
Tread Quarters stores in Virginia are in the same general markets in which Monro
competes, Monro and Kimmel are mainly situated in non-overlapping areas. There
are no plans to close any of the Kimmel stores, which will continue to operate
under the current brand names.
Additionally, in September 1998, the Company completed the acquisition of
189 company-operated and 14 franchised Speedy stores (the "Acquired Speedy
stores"), from SMK Speedy International Inc. of Toronto Canada. The Acquired
Speedy stores are located primarily in complementary areas in Monro's existing
markets in the Northeast, Mid-Atlantic and Midwest regions of the United States.
As of March 30, 2002, Monro had 514 Company-operated stores and 19 dealer
locations located in 17 states. The following table shows the growth in the
number of Company-operated stores over the last five fiscal years:

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STORE OPENINGS AND CLOSINGS

(a) Includes 189 Acquired Speedy stores.

(b) 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. Fiscal 1999 and 2000 closures primarily relate
to underperforming or redundant Speedy locations.

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The Company plans to open approximately five new stores in fiscal 2003, and
to continue to search for appropriate acquisition candidates. In future years,
should the Company find that there are not suitable acquisition candidates, it
would increase its new store (green field) openings.
The Company has developed a systematic method for selecting new store
locations and a 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 Monro's established market areas.
As a result of extensive analysis of its historical and projected store
opening strategy, the Company has established major market profiles, as defined
by market awareness: mature, existing and new markets. Over the next several
years, the Company expects to build a greater percentage of stores in mature and
existing markets in order to capitalize on the Company's market presence and
consumer awareness. All four stores opened in fiscal 2002 were in mature or
existing markets.
The Company believes that management and operating improvements implemented
over the last several fiscal years will enhance its ability to sustain its
growth. The Company 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. Late in fiscal 2001, the Company installed a new Windows-based,
point-of-sale system in all of its stores. Being Windows-based, the system has
simplified training of new employees. Additionally, the system includes
electronic mail and electronic cataloging, which allows store managers to
electronically research the specific parts needed for the make and model of the
car being serviced. This enhanced system includes software which contains data
that mirrors the scheduled maintenance requirements in vehicle owners' manuals,
specifically by make, model, year and mileage for every automobile. Management
believes that this software facilitates the presentation and sale of Scheduled
Maintenance services to customers. Other enhancements include the streamlining
of estimating and other processes; graphic catalogs; a thermometer graphic which
guides store managers on the profitability of each job; and expanded monitoring
of price changes. This latter change requires more specificity on the reason for
a discount, which management believes will lead to reduced discounting.
Enhancements will continue to be made to the POS 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 $138,000 for equipment
(including a point-of-sale system and a truck), and approximately $70,000 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 five fiscal years' openings, excluding
the Acquired Speedy locations), from $273,000 to $920,000 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.

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At March 30, 2002, the Company leased the land and/or the building at
approximately 78% 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, excluding acquired stores, have average sales of approximately
$360,000 in their first 12 months of operation, or $60,000 per bay.

- -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.

PRODUCTS AND SERVICES

All stores provide a full range of undercar repair services for brakes,
steering, mufflers and exhaust systems, 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, all stores provide many of the routine
maintenance services (except engine diagnostic 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. At the end of fiscal 2001, the Company introduced "Scheduled
Maintenance" services in all of its stores whereby the aforementioned services
are formally packaged and offered to consumers based upon the year, make, model
and mileage of each specific vehicle. Management believes that the Company is
able to offer this service in a more convenient and cost competitive fashion
than auto dealers can provide.
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, a transmission "flush and fill" service, and belt and hose
installation. Additionally, all stores replace and service batteries, starters
and alternators. Stores in New York, West Virginia, New Hampshire, Pennsylvania,
North Carolina, Virginia and Vermont also perform annual state inspections.
Approximately 25% of the Company's stores also offer air conditioning services.

CUSTOMER SATISFACTION

The Company's vision of being the dominant Auto Service provider in the
markets it serves is supported by a set of values displayed in each Company
store emphasizing TRUST:

-- Total Customer Satisfaction

-- Respect, Recognize and Reward (employees who are committed to these
values)

-- Unparalleled Quality and Integrity

-- Superior Value and

-- Teamwork

Additionally, each Company-operated store displays and operates under the
following set of customer satisfaction principles: 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. (See additional discussion
under "Store Operations: Quality Control and Warranties.")

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 radio, yellow pages, newspapers and
electronic mail to increase consumer awareness of the services offered.
The Company employs 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 professional sports teams, national fast
food chains and video rental stores, as well as with regional supermarkets.
Additionally, the Company introduced Bridgestone/Firestone tires into most of
its stores in the late 1990s and Goodyear tires in fiscal 2001, where it had
previously carried a private label tire. Through this initiative, the Company
believes that it attracts some brand-loyal tire customers who otherwise might
not have visited Monro. This gives the Company the opportunity to introduce
itself to this new customer, and sell other needed services.

CENTRALIZED CONTROL

Unlike many of its competitors, the Company operates, rather than
franchises, all of its stores (except for the 19 dealer locations). Monro
believes that direct operation of 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.

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

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undercar repair. (See additional discussion under "Store Operations: Store
Personnel and Training.")

- -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. Acquired Speedy stores average five bays per location
with approximately 4,200 square feet. Most service bays are equipped with
aboveground electric vehicle lifts. The typical Company store carries
approximately $70,000 of inventory and approximately 3,700 stock keeping units
("SKUs"). Generally, each store is located within 25 miles of a "key" store
which carries approximately 60% more inventory than a typical store, and serves
as a mini-distribution point for slower moving inventory for other stores in its
area.
The stores generally are situated in high-visibility locations in suburban
areas, major metropolitan areas or small towns and offer easy customer access.
The typical store is open from 7:30 a.m. to 7:00 p.m. on Monday through Friday
and from 7:30 a.m. to 5:00 p.m. on Saturday.

INVENTORY CONTROL AND MANAGEMENT
INFORMATION SYSTEM

All Monro and Acquired Speedy stores communicate daily with 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 near "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.
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 monthly survey mailings to
customers of all stores. (Each mailing consists of approximately 30 surveys per
store.) Customer concerns are addressed via letter and personal follow-up by
field management.
The Company uses a "Double Check for Accuracy Program" as part of its
routine store procedures. 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 commit 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 Monro and Speedy stores 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, and serve as a marketing tool to increase
repeat business at the stores.
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, to better understand the latest developments at the store level, and
with the goal of improving support and service to the field.

STORE PERSONNEL AND TRAINING

The Company supervises store operations primarily through its Divisional
Vice Presidents who oversee Zone Managers who, in turn, oversee Market Managers.
The typical store is staffed by a Store Manager and four to six technicians, one
of whom serves as the Assistant Manager. All Store Managers receive a base
salary, and Assistant Managers receive hourly compensation. In addition, Store
Managers and Assistant Managers may receive other compensation based on their
store's customer relations, gross profit, labor cost controls, safety, sales
volume and other factors via a quarterly bonus based on performance in these
areas.
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, dental, life and
disability insurance; a 401(k)/profit-sharing plan; as well as the opportunity
to advance within the Company. Many of the Company's Managers and Market
Managers started with Monro or Speedy as technicians.
Many 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 purchase
program through which trainee technicians can acquire their own set of tools.
The Company also will reimburse technicians for the cost of ASE certification
registration fees and 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

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programs for new Store Managers, and coordinates attendance at technical clinics
offered by the Company's vendors. Each Monro store maintains a library of 20 to
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 Monro University to provide comprehensive
training and development of current and prospective Store Managers. Training is
accomplished through an intensive one-week instructional program at a separate
facility in Rochester, New York. Topics covered include sales training, customer
service, time management, human resources (counseling, recruiting, interviewing,
etc.), leadership, inventory control and financial management. The courses
employ a variety of instructional techniques including video taping, role
playing, and testing. Several of the courses are conducted by officers of the
Company, whose first priority is instilling the Company's culture, philosophies
and values into the individuals who hold these important positions. The one-week
class follows a field training segment which ranges from two to four weeks
depending upon the individual's level of experience. Monro management is closely
tracking the performance of the managers who have completed the class. On
average, the program has led to increased store profitability as well as longer
retention of the Store Managers.

- -PURCHASING AND DISTRIBUTION
The Company, through its wholly-owned subsidiary Monro Service Corporation,
selects and purchases parts and supplies for all Company-operated stores on a
centralized basis through an automatic replenishment system. Although purchases
outside the centralized system ("outside purchases") are made when needed at the
store level, these purchases are low by industry standards, and accounted for
approximately 16% of all parts used in fiscal 2002.
The Company's ten largest vendors accounted for approximately 53% of its
parts purchases, with the largest vendor accounting for approximately 16% of
total purchases in fiscal 2002. The Company purchases parts from over 100
vendors. 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.
Most parts are shipped by vendors to the Company's warehouse facility in
Rochester, New York, and are distributed to stores through the Company-operated
tractor/trailer fleet. Most stores are replenished once every week from the
warehouse, and such replenishment fills, on the average, 94% of all items
ordered by the stores' automatic POS-driven replenishment system. The warehouse
stocks approximately 7,100 SKUs.
The Company has entered into various contracts with parts suppliers which
require it to buy up to 90% of its annual purchases of specific products
including brakes, exhaust, oil and ride control at market prices. The agreements
expire at various dates through February 2007. The Company believes these
agreements provide it with high quality, branded merchandise at preferred
pricing, along with strong marketing and training support.

- -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 regional undercar specialty and general
automotive service chains, both franchised and company-operated; car
dealerships; and, to a lesser extent, gas stations and independent garages.
Monro considers Midas, Inc. and Meineke Discount Mufflers 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" and "Management's Discussion and Analysis of Financial Condition and
Results of Operations.")

- -EMPLOYEES
As of March 30, 2002, Monro had 2,463 employees, of whom 2,288 were
employed in the field organization, 51 were employed at the warehouse and 124
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 recycled antifreeze, and generates and
handles used automotive oils, antifreeze and certain solvents, which are
disposed of by licensed third-party contractors. In certain states, as required,
the Company also recycles oil filters. 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.

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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.
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.

- -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
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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.
In connection with the Speedy Acquisition in September 1998, the Company
financed most of the real estate formerly owned by SMK Speedy International Inc.
via a synthetic lease (off-balance sheet) agreement. This lease was part of a
$135 million secured credit facility from a syndication of lenders. (See
additional discussion under "Capital Resources and Liquidity.") Of the total
number of Company-operated Acquired Speedy locations, 23 buildings on
land-leased sites and 71 parcels of land and buildings on formerly owned
locations are currently leased under this arrangement. (There are also seven
closed Acquired Speedy stores which are financed under the synthetic lease.)
Of Monro's 514 Company-operated stores at March 30, 2002, 114 were owned,
289 were leased and for 111, the land only was leased, including stores under
the synthetic lease arrangement. 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 81% of the operating leases (299 stores) expire after
2010. 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 40 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 office and warehouse facility and nine of the owned stores are subject
to mortgages held by commercial banks or private investors. As of March 30,
2002, the outstanding amount under the mortgage on the headquarters office and
warehouse facility was $2.0 million, and the aggregate outstanding amount under
the permanent mortgages on nine of the owned stores was $2.6 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 headquarters office and warehouse is
located, and a term loan of $.1 million secured by the 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.

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 2002.

-------------------------------------------

6

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:

- ----------------------------------------------------------------

- -HOLDERS
At May 29, 2002, the Company's Common Stock was held by approximately 2,000
shareholders of record or through nominee or street name accounts with brokers.

- -DIVIDENDS
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.

- -EQUITY COMPENSATION PLAN INFORMATION

- --------------------------------------------------------------------------------

-------------------------------------------

7

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 30, 2002. The
financial data and certain operating data have been derived from the Company's
financial statements which have been examined by PricewaterhouseCoopers 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.

- --------------------------------------------------------------------------------

(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 dividend paid in June 1998.

(b) Includes Company-operated stores only - no dealer locations.

(c) Comparable store sales data are calculated based on the change in sales of
only those stores open as of the beginning of the preceding fiscal year.

(d) Amount does not include the funding of the Speedy acquisition.

- --------------------------------------------------------------------------------

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8

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:

- --------------------------------------------------------------------------------

- -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; 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.

- -CRITICAL ACCOUNTING POLICIES
Recently, the Securities and Exchange Commission (SEC) issued new advice
regarding disclosure of critical accounting policies. In response to this
advice, the Company has identified the accounting policies listed below that it
believes are most critical to the portrayal of the Company's financial condition
and results of operations, and that required management's most difficult,
subjective and complex judgments in estimating the effect of inherent
uncertainties. This section should be read in conjunction with Note 1 to the
consolidated financial statements which includes other significant accounting
policies.

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.

WARRANTY

The Company provides an accrual for estimated future warranty costs based
upon the historical relationship of warranty costs to sales. Actual expenses
have not materially differed from the accruals estimated in prior periods.

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, which ranges from six weeks to one year.

DERIVATIVE FINANCIAL INSTRUMENTS

Effective April 1, 2001, the Company adopted Statement of Financial
Accounting Standards No. 133 ("SFAS 133") "Accounting for Derivative Instruments
and Hedging Activities," as amended by Statement of Financial Accounting
Standards No. 138 ("SFAS 138"),"Accounting for Certain Derivative Instruments
and Certain Hedging Activities". SFAS 133/138 requires that all derivative
instruments be recorded on the balance sheet at fair value. Changes in the fair
value of derivatives are recorded each period in current earnings or other
comprehensive income, depending on whether the derivative is designated as part
of a hedge

-------------------------------------------

9

transaction, and if it is, depending on the type of hedge transaction.
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 March 30, 2002.
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 March 30, 2002, the fair value of the contracts, net of tax, is recorded
as a component of other comprehensive income in the Statement of Changes in
Common Shareholders' Equity.

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 generally is to
grant stock options at fair market value at the date of grant.

- -FISCAL 2002 AS COMPARED TO FISCAL 2001
Sales for fiscal 2002 increased $1.9 million, or 0.9% from fiscal 2001
sales. The increase was due to an increase of approximately $2.2 million from
stores opened since April 1, 2000, as well as a comparable store sales increase
of .3%. There were 306 selling days in fiscal year 2002 and 307 days in fiscal
year 2001. Adjusted for days, comparable store sales increased .6%.
During the year, four stores were opened and one was closed. At March 30,
2002, the Company had 514 stores in operation.
Management believes that the improvement in sales resulted from several
factors aimed at driving store traffic, including an increase in the number of
oil changes performed, an increase in scheduled maintenance services and an
increase in commercial/fleet business. Coupled with price increases in areas
such as shop supply and environmental fees, as well as in some product
categories, the Company was able to offset the continuing decline in exhaust
sales. The exhaust decline resulted, in part, from manufacturers' use of
non-corrosive stainless steel exhaust systems on almost all new cars (beginning
in the mid-1980s and completed in the mid-1990s) which has extended the life of
exhaust systems and resulted in declining exhaust sales.
The Company introduced "Scheduled Maintenance" services in all of its
stores late in the fourth quarter of fiscal 2001. These services are required by
vehicle manufacturers to comply with warranty schedules, and are offered by
Monro in a more convenient and cost competitive fashion than auto dealers can
provide. Management believes that these services, which are offered both in
bundled "packages" and individually, will continue to contribute positively to
comparable store sales in future years, and help mitigate the aforementioned
decline in exhaust which negatively impacted recent fiscal years.
Gross profit for fiscal 2002 was $91.8 million or 40.8% of sales, as
compared with $89.8 million or 40.3% of sales for fiscal 2001. The improvement
in gross profit as a percentage of sales is primarily attributable to a decline
in distribution and occupancy costs which are included in cost of sales. As
comparable store sales improve, the Company is able to better leverage these
costs, many of which are fixed.
In addition, the Company purposefully increased its spending in the
building maintenance area in FY01 to improve its stores, both structurally and
cosmetically. This expense was scaled back in FY02. In FY02, the Company also
reduced its accrual for real estate taxes for prior year taxes, which it
believes will never be paid, related to closed stores. Additionally, the Company
realized the benefits of warehouse process improvements including more efficient
distribution and increased backhauling, resulting in a reduction in this expense
line. Technician labor, which is included in cost of sales, also declined
slightly as compared to the prior year, due to improved productivity and
control.
These declines were partially offset by an increase in material costs,
primarily in the area of parts purchased outside the Company's normal
distribution system ("outside purchases"). Outside purchases increased as a
percent of sales due to the Company's foray into new services where it may not
always have the required parts in stock. Additionally, parts proliferation
continues to present challenges.
Material costs also increased due to a shift in mix from exhaust and
brakes, which carry lower material costs, to tires and maintenance services,
which carry higher material costs. In addition, the LIFO reserve increased for
the first time in several years due to an increase in the government indices for
auto parts and tires.
Operating, selling, general and administrative expenses for fiscal 2002
increased by $2.7 million to $69.7 million and, as a percentage of sales,
increased by 1.0% as compared to fiscal 2001. Three tenths of the increase, or
$727,000, is attributable to the compensation expense associated with the
vesting of performance-based stock options granted in December 1998 to the
Company's Chief Executive Officer. The options vested in the first quarter of
fiscal 2002 when the Company's stock traded at $13 for 20 consecutive trading
days. The balance of the increase is primarily due to increased depreciation
related to the new store point-of-sales systems installed in fiscal 2001,
increased store manager wages to improve the quality and retention of store
managers, and slightly less cooperative advertising credits earned in fiscal
2002 as compared to fiscal 2001.
Operating income in fiscal 2002 of $22.1 million, or 9.8% of sales,
decreased by $.7 million from the fiscal 2001 level of $22.8 million, due to the
factors discussed above.
Interest expense, net of interest income, decreased as a percent of sales
from 2.6% in fiscal 2001 to 1.7% in fiscal 2002. The weighted average interest
rate for the year ended March 30, 2002 was approximately 1.7% lower than the
rate of 9.5% for the year ended March 31, 2001. Additionally, the weighted
average debt outstanding for the year ended March 30, 2002 decreased by
approximately $14.5 million

-------------------------------------------

10

from fiscal 2001, resulting in a decrease in expense between the two years.
The Company's effective tax rate was 35.9% of pre-tax income in fiscal 2002
and 39.8% in fiscal 2001. The Company recorded a one-time tax benefit of $.4
million in the quarter ended June 30, 2001, 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 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, this state rate reduction continued throughout
fiscal year 2002, and accordingly, the Company reduced the provision for taxes
from 39.8% to 38.0% of pre-tax income for fiscal 2002.
Net income for fiscal 2002 increased by $1.5 million, or 15.9% of sales, as
compared to fiscal 2001, due to the factors discussed above.

- -FISCAL 2001 AS COMPARED TO FISCAL 2000
Sales for fiscal 2001 decreased $.6 million, or .3% from fiscal 2000 sales.
The decrease was due to a loss of sales from closed stores of $1.1 million and a
comparable store sales decrease of 1.4%. These decreases were partially offset
by an increase of approximately $3.5 million from stores opened since April 1,
1999. There were 307 selling days in fiscal year 2001 and 309 days in fiscal
year 2000. Adjusted for days, comparable store sales decreased .8%.
During the year, four stores were opened and five were closed. At March 31,
2001, the Company had 511 stores in operation.
Management believes that the comparable store sales decrease resulted, in
part, from manufacturers' use of non-corrosive stainless steel exhaust systems
on almost all new cars (beginning in the mid-1980s and completed in the mid-
1990s) which has extended the life of exhaust systems and resulted in declining
exhaust sales. However, management believes that these declines were partially
offset by positive industry factors including 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 and aging
population. Additionally, management believes that the Company's strategy of
product diversification and expanded manager training assisted in minimizing the
comparable store sales decline vis-a-vis its competitors.
In addition, management believes that comparable store sales have suffered
in recent years from a decline in vehicle population in the five-to-nine year
old segment. Although the number of registered vehicles has increased steadily
in recent years, the early 1990s recession in new car sales negatively impacted
this particular segment of the vehicle population. This segment represents the
prime repair age of vehicles and is the target market for the Company's
services. However, as a result of increased car sales in the mid-to-late 1990s,
the five-to-nine year old segment began to increase in calendar 2000.
Gross profit for fiscal 2001 was $89.8 million or 40.3% of sales, as
compared with $89.4 million or 40% of sales for fiscal 2000. The improvement in
gross profit as a percentage of sales is primarily attributable to a decrease in
technician labor costs as a percent of sales due to improved productivity and
control during the year ended March 31, 2001. However, this improvement was
partially offset by an increase in occupancy costs as a percent of sales
reflecting the impact of fixed costs (such as rent and depreciation) against a
decline in comparable store sales.
Operating, selling, general and administrative expenses for fiscal 2001
increased by $.1 million to $67.0 million and, as a percentage of sales,
increased by .2% as compared to fiscal 2000. Although spending was relatively
flat in this line item, there was pressure on certain expense lines which were
overcome through savings in others. More employees earned a bonus in fiscal 2001
than in fiscal 2000, increasing expense by $.4 million. Additionally, utilities
increased by approximately $.7 million over the prior year due to colder weather
and higher gas prices. Due to the hardening of the insurance market, the Company
also experienced an increase in insurance costs in the form of increased
deductibles - this in spite of a lower number and relatively flat dollar amount
of claims as compared to fiscal 2000.
These increases were offset, however, by strong cost control in other areas
such as health care costs and field operations support costs. Additionally,
there was an increase in cooperative advertising credits resulting from improved
purchasing agreements with the Company's major parts suppliers.
Operating income in fiscal 2001 of $22.8 million, or 10.2% of sales,
increased by $.2 million over the fiscal 2000 level of $22.5 million, due to the
factors discussed above.
Interest expense, net of interest income, decreased as a percent of sales
from 3.1% in fiscal 2000 to 2.6% in fiscal 2001. The weighted average interest
rate for the year ended March 31, 2001 was approximately .4% higher than the
rate of 9.1% for the year ended March 31, 2000. However, the weighted average
debt outstanding for the year ended March 31, 2001 decreased by approximately
$13.5 million from fiscal 2000, resulting in a decrease in expense between the
two years.
Other expense, net, at .4% of sales for the year ended March 31, 2001
decreased from .9% of sales for the year ended March 31, 2000. This decrease was
primarily due to less expense related to store closings.
The Company's effective tax rate was 39.8% of pre-tax income in both fiscal
2001 and fiscal 2000.
Net income for fiscal 2001 increased by $1.5 million, or 18.1% of sales, as
compared to fiscal 2000, due to the factors discussed above.

- -CAPITAL RESOURCES AND LIQUIDITY

CAPITAL RESOURCES

The Company's primary capital requirements for fiscal 2002 were divided
among the funding of its new store expansion program and the upgrading of
facilities and systems in existing stores, totaling $8.6 million, as well as net

-------------------------------------------

11

principal payments on long-term debt and capital leases of $16.6 million.
In both fiscal years 2002 and 2001, these capital requirements were
primarily met by cash flow from operations and through the use of a Revolving
Credit facility.
In December 1999, the Company's Board of Directors authorized a share
repurchase plan for up to 300,000 of the Company's common shares. In May 2000,
the Board of Directors approved an increase of 120,000 shares, bringing the
total authorization to 420,000 shares. During fiscal 2001 and 2000, the Company
purchased approximately 117,000 and 100,000 shares, respectively, at an
aggregate price of $1.0 and $.8 million, respectively. Purchases of the shares
may be made from time-to-time, depending upon market conditions.
In fiscal 2003, the Company intends to open approximately five new stores.
Total capital required to open a new store ranges, on average (based upon the
last three fiscal years' openings - excluding the Acquired Speedy stores), from
$273,000 to $920,000 depending on whether the store is leased, owned or land
leased. The Company also plans to continue to seek suitable acquisition
candidates. It financed the April 2002 acquisition of Kimmel Automotive, Inc.
primarily through borrowings under its existing bank revolving credit facility.
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

Payments due by period under long-term debt, other financing instruments and
commitments are as follows:

- --------------------------------------------------------------------------------

Concurrent with the closing of the acquisition of 189 company-operated
Speedy stores in September 1998, the Company obtained a $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 $9 million was
outstanding at March 30, 2002), a $75 million Revolving Credit facility (of
which approximately $26 million was outstanding at March 30, 2002), and
synthetic lease (off-balance sheet) financing for a significant portion of the
Speedy real estate, totaling $35 million (of which approximately $32 million was
outstanding at March 30, 2002). The loans bear interest at the prime rate or
other 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 which began September 30, 1999.
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.
Within the aforementioned $75 million Revolving Credit facility, the
Company has available a subfacility of $7 million for the purpose of issuing
standby letters of credit. The line requires fees aggregating 1.875% annually of
the face amount of each standby letter of credit, payable quarterly in arrears.
No letters of credit were outstanding under this line at March 30, 2002.
During fiscal 1995, the Company purchased 12.7 acres of land for $.7
million from the City of Rochester, New York, on which its 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 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

-------------------------------------------

12

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%.
Interest is payable monthly on the Mortgage Notes Payable which have
seven-year terms. Equal monthly installments of principal are required based on
20-year amortization periods.
The Company is a party to three additional interest rate swap agreements,
expiring in calendar years 2002 and 2003, with an aggregate notional amount of
$40.0 million. The purpose of these agreements is to limit the interest rate
exposure on the Company's floating rate debt. Fixed rates under these agreements
range from 5.21% to 6.25%.
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 dividend
payments. The Company is in compliance with these requirements at March 30,
2002. These agreements permit mortgages and specific lease financing
arrangements with other parties with certain limitations.
As of March 30, 2002, the Company had cash and equivalents of $.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
On June 29, 2001, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards No. 141 ("SFAS 141"), "Business
Combinations", and No. 142 ("SFAS 142"), "Goodwill and Other Intangible Assets".
The provisions of SFAS 141 require the use of purchase accounting for all
business combinations and the separate allocation of purchase price to
intangible assets if specific criteria are met. The provisions of SFAS 142
provide that goodwill and intangible assets with indefinite useful lives should
not be amortized, but rather tested at least annually for impairment. Intangible
assets that have finite useful lives should continue to be amortized over their
estimated useful lives. SFAS 142 also provides specific guidance for testing
goodwill and intangible assets for impairment. The Company does not anticipate
that these standards will have a material impact on the Company's financial
position or results of operations. The provisions of SFAS No. 141 apply to all
business combinations initiated after June 30, 2001. The Company will adopt FAS
142 effective March 31, 2002.
In October 2001, the FASB issued Statement of Financial Accounting
Standards No. 144, "Accounting for the Impairment or Disposal of Long-Lived
Assets", which addresses financial accounting and reporting for the impairment
or disposal of long-lived assets. This standard harmonizes the accounting for
impaired assets and resolves some of the implementation issues of Statement of
Financial Accounting Standards No. 121 ("SFAS 121"), "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of". It
retains the fundamental provisions of SFAS 121 for (a) recognition and
measurement of the impairment of long-lived assets to be held and used and (b)
measurement of long-lived assets to be disposed of by sale. It also retains the
basic provisions for presenting discontinued operations in the income statement
but broadens the scope to include a component of an entity rather than a segment
of a business. The Company will adopt this standard effective March 31, 2002.
The Company does not expect this pronouncement to have a material impact on the
Company's financial position, results of operations or cash flows.

ITEM 7a. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
- --------------------------------------------------------------------------------

The Company is exposed to market risk from potential changes in interest
rates. The Company regularly evaluates these risks and has entered into four
interest rate swap agreements, expiring from 2002 to 2005, with an aggregate
notional amount of $42.1 million. The agreements limit the interest rate
exposure on the Company's floating rate debt via the exchange of fixed and
floating rate interest payments periodically over the life of the agreement
without the exchange of the underlying principal amounts. Fixed rates under
these agreements range from 5.21% to 7.15%.
At year end March 2002 and 2001, approximately 1% and 2% respectively, of
the Company's long-term debt, excluding capital leases, is at fixed interest
rates and therefore, the fair value is affected by changes in market interest
rates. Long-term debt, including current portion, had a carrying amount of $41.0
million and a fair value of $40.1 million as of March 30, 2002, as compared to a
carrying amount of $57.1 million and a fair value of $55.2 million as of March
31, 2001. The Company's cash flow exposure on floating rate debt, which is not
supported by interest rate swap agreements, would have resulted in interest
expense fluctuating approximately $.4 million for fiscal year ended March 30,
2002 and $.5 million for fiscal year ended March 31, 2001, given a 1% change in
LIBOR.
The Company believes the amount of risk and the use of derivative financial
instruments described above are not material to the Company's financial
condition or results of operations.

-------------------------------------------

13

Financials

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
- --------------------------------------------------------------------------------

-------------------------------------------

14

Accountants' Report

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 subsidiaries at March 30, 2002 and
March 31, 2001, and the results of their operations and their cash flows for
each of the fiscal three years in the period ended March 30, 2002, in conformity
with accounting principles generally accepted in the United States of America.
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
auditing standards generally accepted in the United States of America, 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 our opinion.

/s/ PricewaterhouseCoopers LLP
PRICEWATERHOUSECOOPERS LLP
Rochester, New York
May 14, 2002

-------------------------------------------

15

Balance Sheet

MONRO MUFFLER BRAKE, INC. AND SUBSIDIARIES
- --------------------------------------------------------------------------------

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

-------------------------------------------
16

Income Statement

MONRO MUFFLER BRAKE, INC. AND SUBSIDIARIES
- --------------------------------------------------------------------------------

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

-------------------------------------------
17

Changes in
Shareholders' Equity

MONRO MUFFLER BRAKE, INC. AND SUBSIDIARIES
- --------------------------------------------------------------------------------

(1)Components of comprehensive income are reported net of related taxes of $210
and $440 in fiscal years 2000 and 2002, respectively.

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

-------------------------------------------

18

Cash Flows

MONRO MUFFLER BRAKE, INC. AND SUBSIDIARIES
- --------------------------------------------------------------------------------

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

-------------------------------------------

19

Notes to Consolidated
Financial Statements

MONRO MUFFLER BRAKE, INC. AND SUBSIDIARIES
- --------------------------------------------------------------------------------

- -NOTE 1 -- SIGNIFICANT ACCOUNTING POLICIES

BACKGROUND

Monro Muffler Brake, Inc. and its wholly owned subsidiaries, Monro Service
Corporation and Monro Leasing, LLC (the "Company"), had 514 Company-operated and
19 dealer-operated automotive repair centers located primarily in the northeast
region of the United States as of March 30, 2002.
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

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:
"Year ended Fiscal March 2002": April 1, 2001 - March 30, 2002 (52 weeks)
"Year ended Fiscal March 2001": April 1, 2000 - March 31, 2001

CONSOLIDATION

The consolidated financial statements include the Company and its wholly
owned subsidiaries, Monro Service Corporation and Monro Leasing, LLC, 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.

COMPREHENSIVE INCOME

The Company adopted Statement of Financial Accounting Standards No. 133
("SFAS 133"), "Accounting for Derivative Instruments and Hedging Activities", at
the beginning of fiscal 2002. As it relates to the Company, comprehensive income
is defined as net earnings as adjusted for minimum pension liability and SFAS
133 adjustment to equity, and is reported net of related taxes.

WARRANTY

The Company provides an accrual for estimated future warranty costs based
upon the historical relationship of warranty costs to sales. Actual expenses
have not materially differed from the accruals estimated in prior periods.

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 $252,000, $47,000 and $124,000 higher at March 30,
2002, March 31, 2001 and March 31, 2000, respectively. The FIFO value of
inventory approximates the current replacement cost.

PROPERTY, PLANT AND EQUIPMENT

All property, plant and equipment are stated at cost. 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 8 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).
In accordance with Statement of Financial Accounting Standards No. 121
("SFAS 121"), "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to Be Disposed Of", the Company assesses all long-lived
assets, including property, plant and equipment, for impairment whenever events
or changes in circumstances indicate that the carrying amount of an asset may
not be recoverable.
In October 2001, the FASB issued Statement of Financial Accounting
Standards No. 144, "Accounting for the Impairment or Disposal of Long-Lived
Assets", which addresses financial accounting and reporting for the impairment
or disposal of long-lived assets. This standard harmonizes the accounting for
impaired assets and resolves some of the implementation issues of SFAS 121. It
retains the fundamental provisions of SFAS 121 for (a) recognition and
measurement of the impairment of long-lived assets to be held and used and (b)
measurement of long-lived assets to be disposed of by sale. It also retains the
basic provisions for presenting discontinued operations in the income statement
but broadens the scope to include a component of an entity rather than a segment
of a business. The Company will adopt this standard effective March 31, 2002.
The Company does not expect this pronouncement to have a material impact on the
Company's financial position, results of operations or cash flows.

INTANGIBLE ASSETS

For acquisitions completed on or before June 30, 2001, the excess of the
cost over the fair value of net assets of purchased businesses is recorded as
goodwill and is amortized on a straight-line basis over periods of 20 years or
less. The cost of other acquired intangibles is amortized on a straight-line
basis over their estimated useful lives. The Company continually evaluates the
carrying value of goodwill and other intangible assets. Any impairments would be
recognized when

-------------------------------------------
20

Notes to Consolidated

Financial Statements

MONRO MUFFLER BRAKE, INC. AND SUBSIDIARIES
- --------------------------------------------------------------------------------

the expected future operating cash flows derived from such intangible assets is
less than their carrying value. Amortization expense associated with goodwill
totaled $529,000, $596,000 and $597,000 for the fiscal years ended March 2002,
2001 and 2000, respectively.
The Company has adopted Statement of Financial Accounting Standards No. 141
("SFAS No. 141"), "Business Combinations". All business combinations consummated
after July 1, 2001 will be accounted for in accordance with the new
pronouncements. Goodwill relating to acquisitions completed subsequent to June
30, 2001 is not amortized and is subject to impairment testing. In addition, in
accordance with Statement of Financial Accounting Standards No. 142 ("SFAS No.
142"), "Goodwill and Other Intangible Assets", effective March 31, 2002, the
Company will no longer be required to amortize goodwill and certain other
intangible assets relating to acquisitions completed prior to July 1, 2001. The
Company does not believe that these standards will have a material impact on the
Company's financial position or results of operations.

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, which ranges from six weeks to one year.
Prepaid advertising at fiscal year end March 2002 and 2001, and advertising
expense for the fiscal years ended March 2002, 2001 and 2000, were not material
to these financial statements.

STORE OPENING AND CLOSING COSTS

New store opening costs are charged to expense in the fiscal year when
incurred. When the Company closes a store, the estimated unrecoverable costs,
including the remaining lease obligation, are charged to expense.

DERIVATIVE FINANCIAL INSTRUMENTS

Effective April 1, 2001, the Company adopted SFAS 133, "Accounting for
Derivative Instruments and Hedging Activities", as amended by Statement of
Financial Accounting Standards No. 138 ("SFAS 138"),"Accounting for Certain
Derivative Instruments and Certain Hedging Activities". SFAS 133/138 requires
that all derivative instruments be recorded on the balance sheet at fair value.
Changes in the fair value of derivatives are recorded each period in current
earnings or other comprehensive income, depending on whether the derivative is
designated as part of a hedge transaction, and if it is, depending on the type
of hedge transaction.
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 March 30, 2002.
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 March 30, 2002, the fair value of the contracts, net of tax, is recorded
as a component of other comprehensive income in the Statement of Changes in
Shareholders' Equity.

TREASURY STOCK

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".

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 generally is to
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 original maturities 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 -- SUBSEQUENT EVENT: ACQUISITION OF KIMMEL AUTOMOTIVE, INC.

Effective April 1, 2002, the Company purchased all of the outstanding
common stock, as well as a portion of the preferred stock, of Kimmel Automotive,
Inc. ("Kimmel"), based in Baltimore, Maryland. Kimmel Automotive operates 34
tire and automotive repair stores in Maryland and Virginia, as well as Wholesale
and Truck Tire Divisions (including two commercial stores). The purchase price
for the assets of the company was approximately $6 million in cash, plus the
assumption of approximately $5 million of liabilities. The acquisition was
financed through the Company's existing bank credit facility.

-------------------------------------------
21

Notes to Consolidated
Financial Statements

MONRO MUFFLER BRAKE, INC. AND SUBSIDIARIES
- --------------------------------------------------------------------------------

The majority of Kimmel's non-voting preferred stock has been retained by
its current holders.

Although the 15 Kimmel Tire and Automotive Centers in Baltimore and 19
Tread Quarters stores in Virginia are in the same general markets in which Monro
competes, Monro and Kimmel are mainly situated in non-overlapping areas. There
are no plans to close any of the Kimmel stores, which will continue to operate
under the current brand names.

The Company may sell the Truck Tire division, which is profitable, if it is
able to obtain an appropriate price.

- -NOTE 3 -- PROPERTY, PLANT AND EQUIPMENT

The major classifications of property, plant and equipment are as follows:

- --------------------------------------------------------------------------------

Interest costs capitalized aggregated $136,000 in 2002 and $343,000 in
2001.

Amortization expense recorded under capital leases totaled $562,000,
$534,000 and $552,000 for the fiscal years ended March 2002, 2001 and 2000,
respectively.

- --------------------------------------------------------------------------------

- -NOTE 4 -- OTHER NONCURRENT ASSETS

Other noncurrent assets consist primarily of goodwill and other intangible
assets. Accumulated amortization associated with noncurrent assets at March 30,
2002 and March 31, 2001 amounted to $4,057,000 and $3,542,000, respectively.
Amortization expense totaled $695,000, $692,000 and $795,000 for the fiscal
years ended March 2002, 2001 and 2000, respectively.

-------------------------------------------

22

Notes to Consolidated
Financial Statements

MONRO MUFFLER BRAKE, INC. AND SUBSIDIARIES
- --------------------------------------------------------------------------------

- -NOTE 5 -- LONG-TERM DEBT

Long-term debt consists of the following:

- --------------------------------------------------------------------------------

(a) The prime rate at March 30, 2002 was 4.75%. The London Interbank Offered
Rate (LIBOR) at March 30, 2002 was 1.88%.
- --------------------------------------------------------------------------------

Concurrent with the closing of the acquisition of 189 company-operated
Speedy stores in September 1998, the Company obtained a $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 $9 million was
outstanding at March 30, 2002), a $75 million Revolving Credit facility (of
which approximately $26 million was outstanding at March 30, 2002), and
synthetic lease (off-balance sheet) financing for a significant portion of the
Speedy real estate, totaling $35 million (of which approximately $32 million was
outstanding at March 30, 2002). The loans bear interest at the prime rate or
other 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 which began September 30, 1999.
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.
Within the aforementioned $75 million Revolving Credit facility, the
Company has available a subfacility of $7 million for the purpose of issuing
standby letters of credit. The line requires fees aggregating 1.875% annually of
the face amount of each standby letter of credit, payable quarterly in arrears.
No letters of credit were outstanding under this line at March 30, 2002.
During fiscal 1995, the Company purchased 12.7 acres of land for $.7
million from the City of Rochester, New York, on which its 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 office/warehouse building, the Company obtained permanent
mortgage financing consisting of a 10-

-------------------------------------------

23

Notes to Consolidated

Financial Statements

MONRO MUFFLER BRAKE, INC. AND SUBSIDIARIES
- --------------------------------------------------------------------------------

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%.
Interest is payable monthly on the Mortgage Notes Payable which have seven
year terms. Equal monthly installments of principal are required based on
20-year amortization periods.
The Company is a party to three additional interest rate swap agreements,
expiring in calendar years 2002 and 2003, with an aggregate notional amount of
$40.0 million. The purpose of these agreements is to limit the interest rate
exposure on the Company's floating rate debt. Fixed rates under these agreements
range from 5.21% to 6.25%.
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 dividend
payments. The Company is in compliance with these requirements at March 30,
2002. These agreements permit mortgages and specific lease financing
arrangements with other parties with certain limitations.

Aggregate debt maturities over the next five years and thereafter are as
follows:

- --------------------------------------------------------------------------------

The interest amounts and balloon payment due under the synthetic lease
financing are treated as operating rent commitments, and are excluded from this
table of aggregate debt maturities (Note 10).

- --------------------------------------------------------------------------------

- -NOTE 6 -- FAIR VALUE OF FINANCIAL INSTRUMENTS

Financial instruments consist of the following:

- --------------------------------------------------------------------------------

(a) These agreements are intended to manage exposure to interest rate risks
associated with both long-term (on-balance sheet) debt and synthetic leases
(off-balance sheet).

- --------------------------------------------------------------------------------

The fair value of cash and cash equivalents, accounts receivable and
accounts payable approximated book value at March 30, 2002 and March 31, 2001
because their maturity is generally less than one year in duration. The fair
value of long-term debt was

-------------------------------------------

24

Notes to Consolidated
Financial Statements

MONRO MUFFLER BRAKE, INC. AND SUBSIDIARIES
- --------------------------------------------------------------------------------

estimated based on discounted cash flow analyses using either quoted market
prices for the same or similar issues, or the current interest rates offered to
the Company for debt with similar maturities.

While it is not the Company's intention to terminate its derivative
financial instruments, fair values were estimated, based on market rates or
quotes from brokers, which represented the amounts that the Company would
receive or pay if the instruments were terminated at the balance sheet dates.
These fair values indicated that the termination of interest rate swaps would
have resulted in a $1.1 million loss and a $.6 million loss as of March 30, 2002
and March 31, 2001, respectively.

- --------------------------------------------------------------------------------

- -NOTE 7 -- INCOME TAXES

The components of the provision for income taxes are as follows:

- --------------------------------------------------------------------------------

Deferred tax (liabilities) assets consist of the following:

- --------------------------------------------------------------------------------

The Company has $6.5 million of net operating loss carryforwards available
as of March 30, 2002. The carryforwards expire in varying amounts from 2004
through 2021.

-------------------------------------------
25

Notes to Consolidated

Financial Statements

MONRO MUFFLER BRAKE, INC. AND SUBSIDIARIES
- --------------------------------------------------------------------------------

A reconciliation between the U. S. Federal statutory tax rate and the effective
tax rate reflected in the accompanying financial statements is as follows:

- --------------------------------------------------------------------------------

- -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:

- --------------------------------------------------------------------------------

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. The
conversion value of the Class C convertible preferred stock is $.216 per share.
Under the 1984 and 1987 Incentive Stock Option Plans, 727,672 shares (as
retroactively adjusted for stock dividends) of the common stock were reserved
for issuance to officers and key employees. The 1989 Incentive Stock Option Plan
authorized an additional 173,255 shares (as retroactively adjusted for stock
dividends) for issuance.
In January 1994, May 1995 and May 1997, the Board of Directors authorized
an additional 257,809, 109,974 and 210,000 shares, respectively (as
retroactively adjusted for stock dividends), for issuance under the 1989 Plan.
These amounts were approved by shareholders in August 1994, August 1995 and
August 1997, respectively.
In November 1998, the Board of Directors authorized the 1998 Incentive
Stock Option Plan, reserving 750,000 shares of common stock for issuance to
officers and key employees. The Plan was approved by shareholders in August
1999.
Generally, options vest within the first five years of their term, and have
a duration of ten years. Outstanding options are exercisable for various periods
through March 2012.

-------------------------------------------

26

Notes to Consolidated
Financial Statements

MONRO MUFFLER BRAKE, INC. AND SUBSIDIARIES
- --------------------------------------------------------------------------------

A summary of changes in outstanding stock options (as retroactively adjusted for
stock dividends) is as follows:

- --------------------------------------------------------------------------------

The following table summarizes information about fixed stock options outstanding
at March 30, 2002:

- --------------------------------------------------------------------------------

In August 1994, the Board of Directors authorized a non-employee directors'
stock option plan which was approved by shareholders in August 1995. The Plan
initially reserved 66,852 shares of common stock (as retroactively adjusted for
stock dividends), and provides for (i) the grant to each non-employee director
as of August 1, 1994 of an option to purchase 3,039 shares of the Company's
common stock (as retroactively adjusted for stock dividends) and (ii) the annual
grant to each non-employee director of an option to purchase 3,039 shares (as
retroactively adjusted for 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.
In May 1997 and May 1999, the Board of Directors authorized an additional
68,250 and 65,000 shares, respectively (as retroactively adjusted for stock
dividends) for issuance under the Plan. These amounts were approved by
shareholders in August 1997 and August 1999, respectively.

-------------------------------------------

27

Notes to Consolidated

Financial Statements

MONRO MUFFLER BRAKE, INC. AND SUBSIDIARIES
- --------------------------------------------------------------------------------

A summary of changes in these stock options is as follows:

- --------------------------------------------------------------------------------

As permitted under Statement of Financial Accounting Standards No. 123
("SFAS 123"), "Accounting for 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. However, 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
subsequent to fiscal year 1995. Management believes that 2000 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:

- ----------------------------------------------------------------

The weighted average fair value per option at the date of grant for options
granted during fiscal 2002, 2001 and 2000 was $5.87, $4.36 and $4.30,
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:

- ----------------------------------------------------------------

Forfeitures are recognized as they occur.

-------------------------------------------

28

Notes to Consolidated

Financial Statements

MONRO MUFFLER BRAKE, INC. AND SUBSIDIARIES
- --------------------------------------------------------------------------------

- -NOTE 9 -- EARNINGS PER COMMON SHARE

The following is a reconciliation of basic and diluted earnings per common
share for the respective years:

- ----------------------------------------------------------------

The computation of diluted earnings per common share for fiscal years 2002,
2001 and 2000 excludes the effect of assumed exercise of approximately 100,000,
400,000 and 700,000 stock options, respectively, as the exercise price of these
options was greater than their average market value, resulting in an
anti-dilutive effect on diluted earnings per share.

- -NOTE 10 -- OPERATING LEASES AND OTHER COMMITMENTS

The Company leases retail facilities and store equipment under
noncancellable lease agreements which expire at various dates through fiscal
year 2017. 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.
In recent years, the Company has entered into agreements for the
sale/leaseback of certain stores, and into agreements for the sale/leaseback of
store equipment. The Company has lease renewal options under the real estate
agreements at projected future fair market values, and has both purchase and
renewal options under the equipment lease agreements. Realized gains are
deferred and are credited to income as rent expense adjustments over the lease
terms.
Future minimum payments required under noncancellable leases are as
follows:

- ----------------------------------------------------------------

Rent expense under operating leases, net of sublease income, totaled
$16,465,000, $16,444,000 and $16,406,000 in 2002, 2001 and 2000, respectively,
including contingent rentals of $307,000, $347,000 and $428,000 in each
respective year. Sublease income totaled $603,000, $657,000 and $704,000,
respectively, in 2002, 2001 and 2000.
Future minimum lease commitments include amounts payable under the
synthetic lease agreement structured to finance most of the real estate in the
Speedy acquisition (Note 5). Should the Company or the lessor choose not to
renew the lease at the end of its initial five year term, the Company may buy
all of the properties (including closed stores) for their original acquisition
cost of $32.4 million. Alternatively, the properties will be sold, and the
Company has guaranteed a residual value of 81.5% of the acquisition cost. Of the
$27.5 million commitment for fiscal year 2004, approximately $26.4 million
represents the minimum principal amount (i.e. the guaranteed residual) due on
September 15, 2003, should the synthetic lease not be renewed. Renewal options
provide for one five-year renewal term and 30 additional renewal terms of one
year each. Renewals, however, are dependent upon the renegotiation or renewal of
the Company's secured credit facility (Note 5).
The Company has entered into various contracts with parts suppliers which
require it to buy up to 90% of its annual purchases of specific products
including brakes, exhaust, oil and ride control at market prices. The agreements
expire at various dates through February 2007. The Company believes these
agreements provide it with high quality, branded merchandise at preferred
pricing, along with strong marketing and training support.

-------------------------------------------

29

Notes to Consolidated

Financial Statements

MONRO MUFFLER BRAKE, INC. AND SUBSIDIARIES
- --------------------------------------------------------------------------------

- -NOTE 11 -- EMPLOYEE RETIREMENT AND PROFIT SHARING PLANS

The Company has a noncontributory defined benefit plan that provides
benefits to certain full-time employees who were employed with the Company prior
to April 2, 1998. The Company's Board of Directors approved a plan whereby the
benefits of the defined benefit plan would be frozen and the plan would be
closed to new participants as of that date. Prior to this amendment, coverage
under the plan began after completing one year of service and attainment of age
21. Benefits were 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 funded status of the plan is set forth below:

- ----------------------------------------------------------------

Pension cost included the following components:

The projected benefit obligation at March 30, 2002 and March 31, 2001
assumed discount rates of 7.25% and 7.5%, respectively. Increase in future
compensation levels was assumed to be 4% in 2000. The assumed long-term rate of
return on plan assets at March 30, 2002 and March 31, 2001 was 8%.
The unrecognized transition asset is being amortized over 15 years
beginning April 1, 1988.
The Company has a 401(k)/profit sharing plan which covers full-time
employees who meet the age and service requirements of the plan. The 401(k)
salary deferral option was added to the plan during fiscal 2000. The first
employee deferral occurred in March 2000. The Company makes matching
contributions consistent with the provisions of the plan. The Company's matching
contributions for fiscal 2002, 2001 and 2000 amounted to approximately $403,000,
$467,000 and $41,000, respectively. The Company may also make annual profit
sharing contributions to the plan at the discretion of the Compensation and
Benefits Committee of the Board of Directors. For the year ended March 31, 2000,
the Company contributed $80,000 inclusive of forfeitures.
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 $797,000, $642,000 and $207,000 for the fiscal years ended March
2002, 2001 and 2000, respectively. Because the Company did not attain a minimum
required percentage of targeted profit performance in fiscal 2000, expense for
that year does not include any bonus amounts related to profit performance for
executive officers.

-------------------------------------------

30

Notes to Consolidated
Financial Statements

MONRO MUFFLER BRAKE, INC. AND SUBSIDIARIES
- --------------------------------------------------------------------------------

- -NOTE 12 -- RELATED PARTY TRANSACTIONS

In December 1998, the Company loaned $523,000 to its newly-appointed Chief
Executive Officer to purchase 75,000 shares of the Company's common stock at the
then fair market value. (This loan was made subsequent to the Executive's
purchase of 25,000 shares using his own funds.) The loan, which bears an
interest rate of 5.5% per annum, matures on December 1, 2003, and requires five
equal annual installments of principal beginning on the first anniversary of the
loan. If the Executive is employed with the Company when a principal payment is
due, that installment will be forgiven by the Company. All interest is due on
the fifth anniversary of the loan, and shall also be forgiven if the Executive
is employed with the Company at that time. The loan is secured by the common
stock.
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
$1,643,000, $1,694,000 and $1,713,000 for the fiscal years ended March 2002,
2001 and 2000, respectively. Amounts payable under these lease agreements
totaled $34,000 and $39,000, respectively, at March 30, 2002 and March 31, 2001.
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.
The Company has 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 2002, 2001 and 2000, 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.
Approximately half of all payments made to the investment banking firm are
paid to another principal shareholder/director of the Company.

- -NOTE 13 -- SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION

The following transactions represent noncash investing and financing
activities during the periods indicated:

YEAR ENDED MARCH 30, 2002

Capital lease obligations of $80,000 where incurred under various
agreements.
In connection with the sale of assets, the Company reduced fixed assets and
other current liabilities by $231,000 and $158,000, respectively, and increased
other current assets by $73,000.
In connection with recording the value of the Company's swap contracts,
other comprehensive income decreased by $666,000, other current liabilities
increased by $152,000, other long-term liabilities increased by $954,000 and the
deferred income tax liability was reduced by $440,000.

YEAR ENDED MARCH 31, 2001

In connection with the termination of capital leases, the Company reduced
debt and fixed assets by $141,000 and $75,000, respectively, and recorded a gain
of $67,000.
In connection with the sale of assets, the Company reduced fixed assets and
other current liabilities costs by $645,000 and $433,000, respectively, and
increased other current assets by $212,000.

YEAR ENDED MARCH 31, 2000

Capital lease obligations of $85,000 were incurred under various lease
agreements.
In connection with the termination of a capital lease, the Company reduced
debt and fixed assets by $331,000 and $196,000, respectively, and recorded a
gain of $135,000.
In connection with the sale of assets, the Company reduced fixed assets and
accrued long-term restructuring costs by $1,382,000 and $329,000, respectively,
and increased other current assets and other non-current assets by $58,000 and
$995,000, respectively.

- -NOTE 14 -- LITIGATION

The Company and its subsidiaries are involved in legal proceedings, claims
and litigation arising in the ordinary course of business. In management's
opinion, the outcome of such current legal proceedings is not expected to have a
material effect on future operating results or on the Company's consolidated
financial position.

-------------------------------------------

31

Quarterly

Financial Information

SELECTED QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
- --------------------------------------------------------------------------------

The following table sets forth income statement data by quarter for the fiscal
years ended March 2002 and 2001.

(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.

- --------------------------------------------------------------------------------

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
- --------------------------------------------------------------------------------

None.

-------------------------------------------

32

Part III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY
- --------------------------------------------------------------------------------
Information concerning the directors and executive officers of the Company
is incorporated herein by reference to the section captioned "Election of
Directors" and "Executive Officers", respectively, in the Proxy Statement.
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
"Security Ownership of Principal Shareholders, Directors and Executive Officers"
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.

-------------------------------------------

33

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 2002.

-------------------------------------------

34

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/ Robert G. Gross
----------------------------------------------------------
Robert G. Gross
President and Chief Executive Officer

Date: June 26, 2002

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 18, 2002.

*By /s/ Robert G. Gross
-----------------------------------------------------------
Robert G. Gross
Chief Executive Officer,
Director and as Attorney-in-Fact

-------------------------------------------

35

INDEX TO EXHIBITS

The following is a list of all exhibits filed herewith or incorporated by
reference herein:

Exhibit No. 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)

10.02* Non-Employee Directors' Stock Option Plan. (March 2001 Form S-8, Exhibit No.
4.1)**

10.02a* Amendment, dated as of May 12, 1997, to the Non-Employee Directors' Stock Option
Plan. (March 2001 Form S-8, Exhibit No. 4.2)**

10.02b* Amendment, dated as of May 18, 1999, to the Non-Employee Directors' Stock Option
Plan. (March 2001 Form S-8, Exhibit No. 4.3)**

10.02c Amendment, dated as of August 2, 1999, to the Non-Employee Directors' Stock
Option Plan.**

10.02d Amendment, dated as of June 12, 2002, to the Non-Employee Directors' Stock
Option Plan.**

10.03* 1989 Employees' Incentive Stock Option Plan, as amended through December 23,
1992. (December 1992 Form S-8, Exhibit No. 4.3)**

10.03a* Amendment, dated as of January 25, 1994, to the 1989 Employees' Incentive Stock
Option Plan. (1994 Form 10-K, Exhibit No. 10.03a and March 2001 Form S-8,
Exhibit No. 4.2)**

10.03b* Amendment, dated as of May 17, 1995, to the 1989 Employees' Incentive Stock Option
Plan. (1995 Form 10-K, Exhibit No. 10.03b and March 2001 Form S-8, Exhibit
No. 4.3) **

10.03c* Amendment, dated as of May 12, 1997, to the 1989 Employees' Incentive Stock Option
Plan. (1997 Form 10-K, Exhibit No. 10.03c and March 2001 Form S-8, Exhibit
No. 4.4)**

10.03d* Amendment, dated as of January 29, 1998, to the 1989 Employees' Incentive Stock
Option Plan. (1998 Form 10-K, Exhibit No. 10.03d)**

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)**

10.04a* Amendment, dated as of August 2, 1999, to the Retirement Plan of the
Company, as amended and restated effective as of April 1, 1989. (June 2001
Form 10-Q, Exhibit No. 10.04a)**

10.05* Profit Sharing Plan, amended and restated as of April 1, 1993. (1995 Form
10-K, Exhibit No. 10.05) **

Exhibit No. Document
- ----------- --------

10.05a* Amendment, dated as of March 1, 2000, to the Profit Sharing Plan. (June 2001 Form
S-8, Exhibit No. 4)**

10.06* Amended and Restated Employment Agreement, dated February 16, 1999, by and
between the Company and Robert G. Gross. (December 1998 Form 10-Q, Exhibit
No. 10.1)**

10.06a Amendment, dated as of June 5, 2002, to the Amended and Restated Employment
Agreement, dated February 16, 1999, by and between the Company and Robert G.
Gross.**

10.07* Amended and Restated Secured Loan Agreement, dated February 16, 1999, by and
between the Company and Robert G. Gross. (December 1998 Form 10-Q, Exhibit
No. 10.2)**

10.08* 1998 Stock Option Plan, effective November 18, 1998. (December 1998 Form
10-Q, Exhibit No. 10.3 and March 2001 Form S-8, Exhibit No. 4)**

10.09* Credit Agreement, dated as of September 15, 1998, by and among the Company,
The Chase Manhattan Bank, as agent, and certain lenders party thereto.
(September 1998 Form 10-Q, Exhibit No. 10.1)

10.09a* Amendment to "Credit Agreement" dated as of May 31, 1999, by and among the Company,
The Chase Manhattan Bank, as agent, and certain lenders party thereto.
(September 1999 Form 10-Q, Exhibit No. 10.01)

10.10* Credit Agreement, dated as of September 15, 1998, executed by and among
Brazos Automotive Properties, L.P., The Chase Manhattan Bank, and certain
lenders party thereto. (September 1998 Form 10-Q, Exhibit No. 10.2)

10.11* Residual Guaranty, dated as of September 15, 1998, between the Company and
The Chase Manhattan Bank. (September 1998 Form 10-Q, Exhibit No. 10.3)

10.12* Agreement for Facilities Lease, dated as of September 15, 1998, between
Brazos Automotive Properties, L.P. and Monro Leasing LLC. (September 1998
Form 10-Q, Exhibit No. 10.4)

10.13* Facilities Lease Agreement, dated as of September 15, 1998, between Brazos
Automotive Properties, L.P. and Monro Leasing LLC. (September 1998 Form
10-Q, Exhibit No. 10.5)

10.14* Agreement for Ground Lease, dated as of September 15, 1998, between Brazos
Automotive Properties, L.P. and Monro Leasing LLC. (September 1998 Form 10-Q,
Exhibit No. 10.6)

10.15* Ground Lease Agreement, dated as of September 15, 1998, between Brazos
Automotive Properties, L.P. and Monro Leasing LLC. (September 1998 Form 10-Q,
Exhibit No. 10.7)

10.16* Guaranty, dated as of September 15, 1998, between the Company and Brazos
Automotive Properties, L.P. (September 1998 Form 10-Q, Exhibit No. 10.8)

2

Exhibit No. Document
- ----------- --------

10.17* Agreement of Sublease, dated as of September 15, 1998, by and among Monro
Leasing LLC, the Company and Brazos Automotive Properties, L.P. (September
1998 Form 10-Q, Exhibit No. 10.9)

10.18* Modification and Extension Agreement, dated August 12, 1991, between AA & L
Associates, L.P. and the Company, with respect to Store No. 1. (1992 Form
10-K, Exhibit No. 10.18)

10.19* 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 Store No. 3. (Form S-1, Exhibit No. 10.19)

10.19a* Assignment of Lease, effective January 2, 1996, among August, August and Lane
Co-venture and AA & L Associates, L.P. and August, August and Lane of
Rochester LLC, with respect to Store Nos. 3, 12, 17, 44, 49, 51, 52, 54, 58,
31, 33 and 34. (1999 Form 10-K, Exhibit No. 10.19a)

10.20* 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 Store No. 7. (Form S-1, Exhibit No. 10.20)

10.20a* 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 Store No. 7. (1992 Form 10-K, Exhibit No.
10.20a)

10.21* 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 Store
No. 8. (Form S-1, Exhibit No. 10.21)

10.22* 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 Store No. 9. (Form
S-1, Exhibit No. 10.22)

10.22a* Modification and Extension Agreement, dated November 19, 1998, between AA & L
Associates, L.P., and the Company, with respect to Store No. 9. (1999 Form
10-K, Exhibit No. 10.22a)

10.23* 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 Store No. 10. (Form S-1, Exhibit No. 10.23)

10.24* 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 Store No. 12. (Form S-1,
Exhibit No. 10.24)

3

Exhibit No. Document
- ----------- --------

10.25* 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 Store No. 14. (Form S-1, Exhibit No. 10.25)

10.26* 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 Store No. 15. (Form S-1, Exhibit
No. 10.26)

10.26a* Modification and Extension Agreement, dated November 19, 1998, between AA &
L Associates, L.P., and the Company, with respect to Store No. 15. (1999
Form 10-K, Exhibit No. 10.26a)

10.27* Lease, dated as of September 25, 1991, among Charles J. August, Burton S.
August and Sheldon A. Lane and the Company, and assigned by August, August
and Lane Co-venture to AA & L Associates, L.P., effective January 2, 1996,
with respect to Store No. 17. (1992 Form 10-K, Exhibit No. 10.27)

10.28* 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 Store No. 23. (Form S-1, Exhibit No. 10.28)

10.29* 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 Store No. 25. (Form S-1, Exhibit No. 10.29)

10.31* 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 Store No. 28. (Form S-1, Exhibit No. 10.31)

10.32* 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 Store No. 29. (Form S-1, Exhibit No. 10.32)

10.33* 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 Store No. 30. (Form S-1, Exhibit No. 10.33)

10.33a* Modification and Extension Agreement, dated February 25, 1998, between AA &
L Associates, L.P., and the Company, with respect to Store Nos. 30, 36 and
43. (1999 Form 10-K, Exhibit No. 10.33a)

4

Exhibit No. Document
- ----------- --------

10.34* Lease, effective March 1, 1997, between August, August and Lane of
Rochester, LLC, and the Company, dated March 3, 1997, with respect to Store
No. 31. (1999 Form 10-K, Exhibit No. 10.34)

10.35* 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 Store No. 33.
(1992 Form 10-K, Exhibit No. 10.35)

10.36* 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 Store No.
34. (Form S-1, Exhibit No. 10.36)

10.37* 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 Store No. 35. (Form S-1, Exhibit No. 10.37)

10.38* 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 Store No. 36. (Form S-1, Exhibit No. 10.38)

10.38a* 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
Store No. 36. (1992 Form 10-K, Exhibit No. 10.38a)

10.39* 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 Store No. 43. (Form S-1, Exhibit No. 10.39)

10.40* 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 Store No. 44.
(Form S-1, Exhibit No. 10.40)

10.41* 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 Store No. 45. (Form S-1, Exhibit No. 10.41)

10.42* 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 Store No. 48. (Form S-1, Exhibit No. 10.42)

5

Exhibit No. Document
- ----------- --------

10.42a* Extension Agreement, effective October 1, 2001, among the Company and Burton S.
August, as Trustee, and Lane, August, August Trust, and assigned by Lane,
August, August Trust to Lane, August, August LLC, with respect to Store No.
48. (2001 Form 10-K, Exhibit No. 10.42a)

10.43* 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 Store No. 49.
(Form S-1, Exhibit No. 10.43)

10.44* 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 Store No. 51. (Form S-1,
Exhibit No. 10.44)

10.44a Extension Agreement, effective December 19, 2001, between AA & L Associates,
L.P. and the Company, with respect to Store No. 51.

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, and assigned by August, August and Lane Co-venture to AA & L
Associates, L.P., effective January 2, 1996, with respect to Store No. 52.
(Form S-1, Exhibit No. 10.45)

10.45a Extension Agreement, effective December 19, 2001, between AA & L Associates,
L.P. and the Company, with respect to Store No. 52.

10.46* 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 Store No. 53. (Form S-1, Exhibit No. 10.46)

10.47* 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 August, August and Lane Co-venture to AA & L
Associates, L.P., effective January 2, 1996, with respect to Store No. 54.
(Form S-1, Exhibit No. 10.47)

10.47a* Modification Agreement, effective January 1988, among Charles J. August,
Burton S. August and Sheldon A. Lane, and the Company, with respect to Store
No. 54. (1999 Form 10-K, Exhibit No. 10.47a)

10.47b Extension Agreement, effective December 19, 2001, between AA & L Associates,
L.P. and the Company, with respect to Store No. 54.

10.48* 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 Store No. 55. (Form S-1, Exhibit No. 10.48)

6

Exhibit No. Document
- ----------- --------

10.49* 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 Store No. 57. (Form S-1, Exhibit No. 10.49)

10.49a* Modification and Extension Agreement, dated September 15, 1999, between AA & L
Associates, L.P. and the Company, with respect to Store No. 57. (2000 Form
10-K, Exhibit No. 10.49a)

10.50* 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 August, August and Lane Co-venture to AA & L
Associates, L.P., effective January 2, 1996, with respect to Store No. 58.
(Form S-1, Exhibit No. 10.50)

10.50a* Modification and Extension Agreement, dated August 12, 1991, between AA & L
Associates, L.P. and the Company, with respect to Store No. 60. (1992 Form
10-K, Exhibit No. 10.51)

10.51 Modification and Extension Agreement, dated November 28, 2001, between AA &
L Associates, L.P. and the Company, with respect to Store No. 58.

10.51a Extension Agreement, effective December 19, 2001, between AA & L Associates,
L.P. and the Company, with respect to Store No. 58.

10.52* Lease, signed October 22, 1986, between the Company and Conifer Johnstown
Associates, with respect to Store No. 63. (Form S-1, Exhibit No. 10.52)

10.52a* Lease Addendum, effective February 18, 1996, between Conifer Johnstown
Associates and the Company, with respect to Store No. 63. (1999 Form 10-K,
Exhibit No. 10.52a)

10.54* 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 Store No.
107. (Form S-1, Exhibit No. 10.54)

10.54a* Lease Addendum, effective February 18, 1996, between Conifer Northeast
Associates and the Company, with respect to Store No. 107. (1999 Form 10-K,
Exhibit No. 10.54a)

10.55* 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 Store No.
109. (Form S-1, Exhibit No. 10.55)

10.55a* Lease Addendum, effective February 18, 1996, between Conifer Northeast
Associates and the Company, with respect to Store No. 109. (1999 Form 10-K,
Exhibit No. 10.55a)

7

Exhibit No. Document
- ----------- --------

10.56* 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 Store No. 114. (Form S-1, Exhibit
No. 10.56)

10.56a* Lease Addendum, effective February 18, 1996, between Conifer Northeast
Associates and the Company, with respect to Store No. 114. (1999 Form 10-K,
Exhibit No. 10.56a)

10.57* 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, with Letter Agreement, dated
February 3, 1988, amending Lease; and 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 Store No.
116. (Form S-1, Exhibit No. 10.57)

10.57a* Lease Addendum, effective February 18, 1996, between Conifer Northeast
Associates and the Company, with respect to Store No. 116. (1999 Form 10-K,
Exhibit No. 10.57a)

10.58* Lease, dated May 12, 1989, between the Company and Conifer Penfield
Associates (as successor to Conifer Development, Inc.), with respect to
Store No. 132. (Form S-1, Exhibit No. 10.58)

10.58a* Amendment Agreement, dated June 30, 1993, between Conifer Penfield
Associates, L.P. and the Company, with respect to Store No. 132. (1999 Form
10-K, Exhibit No. 10.58a)

10.59* Modification and Extension Agreement, dated November 1, 1993, between AA &
L Associates, L.P. and the Company, with respect to Store Nos. 1, 23, 25,
27, 28, 29, 35, 53, 57 and 60. (1994 Form 10-K, Exhibit No. 10.57)

10.62* Mortgage Agreement, dated September 28, 1994, between the Company and the
City of Rochester, New York. (1995 Form 10-K, Exhibit No. 10.60)

10.63* Lease Agreement, dated October 11, 1994, between the Company and the City of
Rochester, New York. (1995 Form 10-K, Exhibit No. 10.61)

10.64* 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)

10.65* 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)

8

Exhibit No. Document
- ----------- --------

10.66* 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)

10.67* Employment Agreement dated February 18, 1998, between the Company and Jack
M. Gallagher. (1998 Form 10-K, Exhibit No. 10.65)**

10.68* Employment Agreement dated December 1, 2000, between the Company and
Catherine D'Amico. (2001 Form 10-K, Exhibit No. 10.68)**

10.69* Mortgage Modification Agreement, dated October 11, 1996, between the Company
and The Chase Manhattan Bank, N.A., in connection with each of 14 mortgages
for Store Nos. 160, 183, 190, 192, 193, 205, 207, 210, 213, 216, 226, 229,
230 and 236. (September 1996 Form 10-Q, Exhibit No. 10)

10.70* Purchase Agreement between Walker Manufacturing Company, a division of
Tenneco Automotive, and the Company, dated as of June 29, 1999. (2000 Form
10-K, Exhibit No. 10.70)

10.71* Asset Purchase Agreement by and among Speedy Muffler King Inc., Bloor
Automotive Inc., Speedy Car-X Inc., Speedy (U.S.A.) Inc., Speedy Holding
Corp. and the Company, dated as of April 13, 1998. (April 1998 Form 8-K,
Exhibit 10.1)

10.71a* Amendment No. 2 to the Asset Purchase Agreement by and among Speedy Muffler King
Inc., Bloor Automotive Inc., Speedy Car-X Inc., Speedy (U.S.A.) Inc., Speedy
Holding Corp. and the Company, dated August 31, 1998. (September 1998 Form
8-K, Exhibit No. 10.1)

10.72* Form of Agreement - "Purchase Agreement and Escrow Instructions" between
Realty Income Corporation - buyer and the Company - seller, dated November
12, 1997. (1998 Form 10-K, Exhibit No. 10.70)

10.73* "Purchase Agreement and Escrow Instructions" between Realty Income
Corporation - buyer and the Company - seller, dated March 31, 1999. (1999
Form 10-K, Exhibit No. 10.73)

10.73a* Amendment to "Purchase Agreement and Escrow Instructions" between Realty Income
Corporation - buyer and the Company - seller, dated May 6, 1999, with
respect to Store Nos. 372 and 368. (1999 Form 10-K, Exhibit No. 10.73a)

10.74* "Minimum Purchase and Preferred Supplier Agreement" between Honeywell
International Inc., on behalf of its Friction Materials business and Monro
Service Corporation, dated January 13, 2000. (2000 Form 10-K, Exhibit No.
10.74)

10.74a "Agreement Extension Amendment" between Honeywell International Inc. on
behalf of its Friction Materials business and Monro Service Corporation,
effective July 1, 2001.

10.75 Purchase Agreement between Phillips Petroleum Company (on behalf of Kendall
Motor Oil) and Monro Muffler Brake, Inc., dated February 18, 2002.

9

Exhibit No. Document
- ----------- --------

10.75a Amendment to Purchase Agreement between Phillips Petroleum Company (on
behalf of Kendall Motor Oil) and Monro Muffler Brake, Inc., dated
March 15, 2002

10.76 "Tenneco Automotive Ride Control Products Supply Agreement" between Tenneco
Automotive Operating Company Inc. and Monro Service Corporation, effective
July 1, 2001.

10.77 Management Incentive Compensation Plan, effective as of June 1, 2002.**

21.01 Subsidiaries of the Company.

23.01 Consent of PricewaterhouseCoopers LLP.

24.01 Powers of Attorney.

** 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.

* 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"); (4) the
Company's Registration Statement on Form S-8, filed with the Securities and
Exchange Commission on December 24, 1992 ("December 1992 Form S-8"); (5) the
Company's Quarterly Report on Form 10-Q for the fiscal quarter ended
September 30, 1993 ("September 1993 Form 10-Q"); (6) the Company's Annual
Report on Form 10-K for the fiscal year ended March 31, 1994 ("1994 Form
10-K"); (7) the Company's Annual Report on Form 10-K for the fiscal year
ended March 31, 1995 ("1995 Form 10-K"); (8) the Company's Quarterly Report
on Form 10-Q for the fiscal quarter ended September 30, 1995 ("September
1995 Form 10-Q"); (9) the Company's Quarterly Report on Form 10-Q for the
fiscal quarter ended September 30, 1996 ("September 1996 Form 10-Q"); (10)
the Company's Annual Report on Form 10-K for the fiscal year ended March 31,
1997 ("1997 Form 10-K"); (11) the Company's Current Report on Form 8-K filed
on April 28, 1998 ("April 1998 Form 8-K"); (12) the Company's Quarterly
Report on Form 10-Q for the fiscal quarter ended December 31, 1998
("December 1998 Form 10-Q"); (13) the Company's Annual Report on Form 10-K
for the fiscal year ended March 31, 1998 ("1998 Form 10-K"); (14) the
Company's Current Report on Form 8-K filed on September 23, 1998 ("September
1998 Form 8-K"); (15) the Company's Quarterly Report on Form 10-Q for the
fiscal quarter ended September 30, 1998 ("September 1998 Form 10-Q"); (16)
the Company's Annual Report on Form 10-K for the fiscal year ended March 31,
1999 ("1999 Form 10-K"); (17) the Company's Quarterly Report on Form 10-Q
for the fiscal quarter ended September 30, 1999 ("September 1999 Form
10-Q"); (18) the Company's Annual Report on Form 10-K for the fiscal year
ended March 31, 2000 ("2000 Form 10-K"); (19) the Company's Registration
Statement on Form S-8, filed with the Securities and Exchange Commission on
April 7, 2000 ("April 2000 Form S-8"); (20) the Company's Registration
Statements on Forms S-8, filed with the Securities and Exchange Commission
on March 22, 2001 (each a "March 2001 Form S-8"); (21) the Company's
Registration Statement on Form S-8, filed with the Securities and Exchange
Commission on June 26, 2001 ("June 2001 Form S-8"); or (22) the Company's
Quarterly Report on Form 10-Q for the fiscal quarter ended June 30, 2001
("June 2001 Form 10-Q"). The appropriate document and exhibit number are
indicated in parentheses.

10