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SECURITIES AND EXCHANGE COMMISSION

Form 10-K

(Mark One)

þ	ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 (FEE REQUIRED)

For Fiscal Year Ended March 26, 2005

OR

o	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.

Registrant’s telephone number, including area code:

Securities registered pursuant to Section 12(b) of the Act:

Securities registered pursuant to Section 12(g) of the Act:

      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  þ  No  o

      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.     o

      Indicate by check mark whether the registrant is an accelerated filer (as defined in Exchange Act Rule 12b-2).  Yes  þ  No  o

      As of May 27, 2005, the aggregate market value of voting stock held by non-affiliates of the registrant was $315,970,000.

      As of May 27, 2005, 13,412,720 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 2005 Annual Meeting of Shareholders (the “Proxy Statement”) are incorporated by reference into Part III hereof.

PART I

General

      Monro Muffler Brake, Inc. (“Monro” or the “Company”) is a chain of 626 Company-operated stores and 16 dealer-operated stores providing automotive undercar repair and tire services in the United States. At March 26, 2005, 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, Delaware and Maine under the names “Monro Muffler Brake & Service”, “Speedy Auto Service by Monro”, “Tread Quarters Discount Tire” and “Mr. Tire” (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 3,095,000 vehicles in fiscal 2005. (References herein to fiscal years are to the Company’s year ended fiscal March [e.g., references to “fiscal 2005” are to the Company’s fiscal year ended March 26, 2005].)

      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 17 additional states.

      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 brakes (estimated at 26% of fiscal 2005 sales); mufflers and exhaust systems (13%); and steering, drive train, suspension and wheel alignment (15%). The Company also provides other products and services including tires (20%) and routine maintenance services including state inspections (26%). 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, various “flush and fill” services and some minor tune-up services. All of the Company’s stores provide the services described above. However, a growing number of the Company’s stores are more specialized in tire replacement and service and, accordingly, have a higher mix of sales in the tire category. These stores are described below as tire stores, whereas the majority of the Company’s stores are described as service stores. (See additional discussion under “Operating Strategy”.) The Company does not sell parts or accessories to the do-it-yourself market. The Company’s sales mix for fiscal 2005 and 2004 is as follows:

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      The Company has two active wholly-owned subsidiaries, Monro Service Corporation and Monro Leasing, LLC, both of which are Delaware companies 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 that are performed in New York State and Maryland. 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 and tire 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 significant expansion opportunities in new as well as existing market areas which will result from a combination of constructing stores on vacant land, opening full service Monro stores within host retailers’ service center locations (e.g. BJ’s Wholesale Clubs) 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 increasing opportunities for acquisitions of existing businesses or store structures, and to open stores in host retailers’ locations.

      In that regard, the Company has completed several acquisitions in recent years, as follows:

      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.

      Effective April 1, 2002, the Company completed the acquisition of Kimmel Automotive, Inc. (the “Kimmel Acquisition”). Kimmel operated 34 tire and automotive repair stores in Maryland and Virginia, as well as Wholesale and Truck Tire Divisions (including two commercial stores). In June 2002, Monro disposed of Kimmel’s Truck Tire Division, including its retread plant and two commercial stores. The Maryland stores now operate primarily under the Mr. Tire brand name while the Virginia stores continue to operate under the Tread Quarters brand name.

      In February 2003, Monro acquired ten company-operated tire and automotive repair store locations in the Charleston and Columbia, South Carolina markets from Frasier Tire Service, Inc. (the “Frasier Acquisition”). These stores now operate under the Tread Quarters brand name.

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      Effective March 1, 2004, the Company completed the acquisition of Mr. Tire stores (the “Mr. Tire Acquisition”) from Atlantic Automotive Corp., which added 26 retail tire and automotive repair stores in Maryland and Virginia, as well as a wholesale operation based in Baltimore, Maryland.

      With the Mr. Tire Acquisition, the Company has 51 stores in the Baltimore, Maryland area. To further solidify the Company’s leading position in this large metropolitan area, in the first quarter of fiscal 2005, the Company’s existing Speedy locations were converted to Monro branded stores and the Kimmel stores were converted to Monro and Mr. Tire branded stores. The Company believes that this initiative will increase brand awareness and raise visibility of its two dominant brands in the market. In connection with this re-branding effort, the Company closed one existing Kimmel store in fiscal 2005.

      In fiscal 2005, the Company further expanded its presence in Maryland through the acquisition of certain assets of Donald B. Rice Tire Co., Inc. (the “Rice Acquisition”) and Henderson Holdings, Inc. (the “Henderson Acquisition”), which added five and ten retail tire and automotive repair stores in the Frederick and southern Maryland markets, respectively. Fourteen of these stores operate under the Mr. Tire brand name and one under the Tread Quarters brand name.

      During fiscal 2005, the Company opened 16 full-service, Monro branded stores within BJ’s Wholesale Clubs in New York (4), North Carolina (2), Pennsylvania (3), Massachusetts (3), New Jersey (1) and Maryland (3), bringing the total number of stores that the Company operates in BJ’s Wholesale Clubs to 30 at March 26, 2005.

      As of March 26, 2005, Monro had 626 Company-operated stores and 16 dealer locations located in 18 states. The following table shows the growth in the number of Company-operated stores over the last five fiscal years:

      The Company plans to open approximately 16 new stores in fiscal 2006, including 10 in BJ’s Wholesale Clubs, and to continue to search for appropriate acquisition candidates or opportunities to operate stores within host retailers’ locations. In future years, should the Company find that there are no suitable acquisition or retail partnership candidates, it might increase its new store (greenfield) 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. The characteristics of each potential site are compared to the

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      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 35 stores opened or acquired in fiscal 2005 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. The Company has customized the POS system to specific service and tire store requirements and deploys the appropriate version in each type of store. 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 feature which facilitates tire searches by size; direct mail support; appointment scheduling; customer service history; 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 in an effort to 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 $135,000 for equipment (including a POS system and a truck) and approximately $60,000 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 BJ’s locations and the acquired stores), from $300,000 to $1,000,000 depending on the location and which of the three financing methods is used. In general, tire stores are larger and have more service bays than Monro’s traditional service stores and, as a result, construction costs are at the high end of the range of new store construction costs. In instances where Monro acquires an existing business, it may pay additional amounts for intangible assets such as customer lists, covenants not-to-compete, trade names and goodwill.

      Total capital required to open a store within a BJ’s Wholesale Club is substantially less than opening a greenfield store.

      At March 26, 2005, the Company leased the land and/or the building at approximately 69% of its store locations and owned the land and building at the remaining locations. Monro’s policy is to situate new stores in the best locations, without regard to the form of ownership required to develop the locations.

      New stores, excluding acquired stores and BJ’s locations, 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.

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      All stores provide a full range of undercar repair services for brakes, steering, mufflers and exhaust systems, drive train, suspension and wheel alignment, as well as tire replacement and service. These services apply to all makes and models of domestic and foreign cars, light trucks and vans. The service stores provide significantly more exhaust service than tire stores, and tire stores provide substantially more tire services than service stores.

      All stores provide many of the routine maintenance services (except engine diagnostic), 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 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.

      Included in maintenance services are oil change services, heating and cooling system “flush and fill” service, belt installation, and a transmission “flush and fill” service. Additionally, all stores replace and service batteries, starters and alternators. Stores in New York, West Virginia, New Hampshire, Maryland, Rhode Island, New Jersey, Pennsylvania, North Carolina, Virginia and Vermont also perform annual state inspections. Approximately 34% of the Company’s stores also offer air conditioning services.

      The Company’s vision of being the dominant Auto Service provider in the markets it serves has been supported, since fiscal 2000, 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. (See additional discussion under “Store Operations: Quality Control and Warranties”.)

      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. As part of its BJ’s Wholesale Club program, the Company has implemented a series of co-branded initiatives to market the Company’s services to the large number of BJ’s Wholesale Club members where a new Monro store has opened within the BJ’s Wholesale Club service center.

      Unlike many of its competitors, the Company operates, rather than franchises, all of its stores (except for the 16 dealer locations). Monro believes that direct operation of stores enhances its ability to compete by providing

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      The Company provides ongoing, comprehensive training to its store employees. Monro believes that such training provides a competitive advantage by enabling its technicians to provide quality service to its customers in all areas of undercar repair and tire service. (See additional discussion under “Store Operations: Store Personnel and Training”.)

Store Operations

      The typical format for a Monro repair store is a free-standing building consisting of a sales area, fully-equipped service bays and a parts storage area. In BJ’s locations, the Company and BJ’s both operate counters in the sales area, while the Company operates the service bay area. Most service bays are equipped with above-ground electric vehicle lifts. Generally, each store is located within 25 miles of a “key” store which carries approximately 75% more inventory than a typical store and serves as a mini-distribution point for slower moving inventory for other stores in its area. Individual store sizes, number of bays and stocking levels vary greatly, even within the service and tire stores, and are dependent primarily on the availability of suitable store locations, population, demographics and intensity of competition among other factors (See additional discussion under “Store Additions and Closings”). A summary of average store data for service and tire stores is presented below:

      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. The majority of the Company’s Mr. Tire locations are also open Sundays from 9:00 a.m. to 5:00 p.m.

      All Company stores communicate daily with the central office and warehouse by computerized inventory control and electronic POS management information systems, which enable 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.

      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 a monthly telephone

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      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 (or in certain cases, another technician in tire stores) 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 Communication Standards” established by MAP. These “UICS” are available in the Company’s 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.

      The Company supervises store operations primarily through its Divisional Vice Presidents who oversee Zone Managers who, in turn, oversee Market Managers. The typical service store is staffed by a Store Manager and four to six technicians, one of whom serves as the Assistant Manager. The typical tire store is staffed by a Store Manager, an Assistant Manager and/or Service Manager, and four to eight technicians. Larger volume tire stores may also have one or two sales people. The higher staffing level at many tire stores is necessary to support their higher sales volume. 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 monthly or 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 the Company 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 programs for new Store Managers, and coordinates attendance at sales and technical clinics offered by the Company’s vendors. Each service 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.

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      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 for new managers 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 2005.

      The Company’s ten largest vendors accounted for approximately 57% of its parts and tire purchases, with the largest vendor accounting for approximately 16% of total purchases in fiscal 2005. The Company purchases parts and tires 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 primary warehouse facility in Rochester, New York, and are distributed to stores through the Company-operated tractor/trailer fleet. Stores are replenished either on a weekly or bi-weekly basis from this warehouse, and such replenishment fills, on the average, 96% of all items ordered by the stores’ automatic POS-driven replenishment system. The Rochester warehouse stocks approximately 6,800 SKUs. As planned, during fiscal 2005, the Company consolidated its Baltimore, Maryland warehouse operations into a location that services the 54 tire stores in Maryland. The Company also operates a warehouse in Virginia that services the tire stores in that market. These warehouses carry, on average, 3,400 and 1,600 SKUs, respectively.

      The Company has entered into various contracts with parts and tire suppliers, certain of which require the Company to buy up to 100% of its annual purchases of specific products including brakes, exhaust, oil and ride control at market prices. These agreements expire at various dates through March 2010. 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, tire 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”.)

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Employees

      As of March 26, 2005, Monro had 3,634 employees, of whom 3,398 were employed in the field organization, 75 were employed at the warehouses, 142 were employed at the Company’s corporate headquarters and 19 were employed in its Baltimore office. 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/or handles used tires and 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.

      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 purchase 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 typically lower during the latter period. In the tire stores, the better sales months are typically May through August, and October through December. The slowest months are typically January through April and September.

Company Information and SEC Filings

      The Company maintains a website at www.monro.com and makes its annual, quarterly and periodic Securities and Exchange Commission (“SEC”) filings available through the Investor Information section of that website. The Company’s SEC filings are available through this website free of charge, via a direct link to the SEC website at www.sec.gov. The Company’s filings with the SEC are also available to the public at the SEC Public Reference Room at 450 Fifth Street, N.W., Washington, D.C. 20549 or by calling the SEC at 1-800-SEC-0330.

      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 Technology 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, which was subsequently refinanced as a revolving credit loan. (See additional discussion under “Capital Resources and Liquidity”). Of the total number of Company-operated Acquired Speedy locations, 18 buildings on land-leased sites and 68 parcels of land and buildings on formerly owned locations were leased under this arrangement. In

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      Of Monro’s 626 Company-operated stores at March 26, 2005, 191 were owned, 300 were leased and for 135, the land only was leased. In general, the Company leases store sites for a ten-year period with several five-year renewal options. Giving effect to all renewal options, approximately 53% of the operating leases (215 stores) expire after 2015. 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 46 of the leases. No related party leases, other than renewals or modifications of leases on existing stores and the six assumed as part of the Mr. Tire acquisition, have been entered into since May 1989, and no new related party leases are contemplated.

      The Rochester, New York office and warehouse facility are subject to mortgages held by a commercial bank and private investors. As of March 26, 2005, the outstanding amount under the mortgage on the headquarters office and warehouse facility was $1.6 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.

      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.

      No matters were submitted to a vote of security holders during the fourth quarter of fiscal 2005.

PART II

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 adjusted, as appropriate, for the Company’s October 2003 three-for-two stock split:

Holders

      At June 3, 2005, the Company’s Common Stock was held by approximately 2,500 shareholders of record or through nominee or street name accounts with brokers.

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Dividends

      On September 16, 2003, the Company’s Board of Directors declared a three-for-two stock split in the form of a 50% stock dividend payable to shareholders of record on October 21, 2003. Information regarding the number of shares of Common Stock outstanding and market prices of the Common Stock, as set forth in this Form 10-K, reflect the impact of this stock split.

      While the Company has not paid any cash dividends on the Common Stock since its inception, in May 2005 the Company’s Board of Directors declared a regular quarterly cash dividend of $0.05 per share to be paid beginning with the first quarter of fiscal 2006. However, the declaration of and any determination as to the payment of future dividends will be at the discretion of the Board of Directors and will depend on the Company’s financial condition, results of operations, capital requirements, compliance with charter and contractual restrictions, and such other factors as the Board of Directors deems relevant. The Company has received a waiver of applicable loan covenants with regard to the payment of cash dividends during fiscal 2006. Beyond fiscal 2006, the Company would require further waiver of these covenants to pay cash dividends.

      The following table sets forth selected financial and operating data of the Company for each year in the five-year period ended March 26, 2005. The financial data and certain operating data have been derived from the Company’s audited financial statements. 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.

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      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 that are not historical facts, including (without limitation) statements made in this Item and in “Item 1 — Business”, may contain statements of future expectations and other forward-looking statements made pursuant to the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are subject to risks, uncertainties and other important factors that could cause actual results to differ materially from those expressed. These factors include, but are not necessarily limited to, product demand, dependence on and competition within the primary markets in which the Company’s stores are located, the need for and costs associated with store renovations and other capital expenditures, the effect of economic conditions, the impact of competitive services and pricing, product development, parts supply restraints or difficulties, industry regulation, risks relating to leverage and debt service (including sensitivity to fluctuations in interest rates), continued availability of capital resources and financing, risks relating to integration of acquired businesses and other factors set forth or incorporated elsewhere herein and

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Recent Developments

      During the fourth quarter of fiscal 2005, the Company conducted a review of its lease accounting practices. As a result of the review, the Company revised its lease accounting policies to comply with generally accepted accounting principles.

      Historically, the Company followed a practice in which it computed straight-line rent expense for the current term of the lease only, while depreciating buildings and leasehold improvements over longer periods. The Company has revised its lease accounting policies to recognize rent expense, including rent escalations, on a straight-line basis over the reasonably assured lease term, as defined in Statement of Financial Accounting Standards No. 98, “Accounting for Leases.” Additionally, the Company modified its accounting to depreciate buildings and leasehold improvements over the shorter of their estimated useful life or the reasonably assured lease term.

      As a result of this accounting revision, the Company restated its financial statements for prior periods. The impact of the restatement on periods prior to 2003 has been reflected as a reduction of retained earnings of $4.0 million as of March 30, 2002. The effect of the restatement on fiscal years 2003 and 2004 was to increase rent and depreciation expense reported in cost of sales by $0.6 million and $0.8 million, respectively and to reduce net income by $0.4 million in fiscal 2003 and $0.5 million in fiscal 2004 from the amounts previously reported. See Note 2 to the consolidated financial statements for further discussion of this accounting revision.

Critical Accounting Policies

      The Company believes that the accounting policies listed below are those that 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.

      The Company evaluates whether inventory is stated at the lower of cost or market based on historical experience with the carrying value and life of inventory. The assumptions used in this evaluation are based on current market conditions and the Company believes inventory is stated at the lower of cost or market in the consolidated financial statements. In addition, historically the Company has been able to return excess items to vendors for credit. Future changes by vendors in their policies or willingness to accept returns of excess inventory could require a revision in the estimates.

      Goodwill represents the amount paid in consideration for an acquisition in excess of the net assets acquired. In accordance with Statement of Financial Accounting Standards No. 142 (“SFAS 142”), “Goodwill and Other Intangible Assets”, the Company does not amortize goodwill for acquisitions made after June 30, 2001. For acquisitions prior to that date, the Company continued to amortize goodwill only through the end of fiscal 2002. The Company conducts tests for impairment of goodwill annually or more frequently if circumstances indicate that the asset might be impaired. These impairment tests include management estimates of future cash flows that are dependent upon subjective assumptions regarding future operating results including growth rates, discount rates, capital requirements and other factors that impact the estimated fair value. An impairment loss is recognized to the extent that an asset’s carrying amount exceeds its fair value.

      The Company evaluates the carrying values of its long-lived assets to be held and used in the business by reviewing undiscounted cash flows by operating unit. Such evaluations are performed whenever events and circumstances indicate that the carrying amount of an asset may not be recoverable. In such instances, the

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      The Company is largely self-insured with respect to workers compensation, general liability and employee medical claims. In order to reduce its risk and better manage its overall loss exposure, the Company purchases stop-loss insurance that covers individual claims in excess of the deductible amounts. The Company maintains an accrual for the estimated cost to settle open claims as well as an estimate of the cost of claims that have been incurred but not reported. These estimates take into consideration the historical average claim volume, the average cost for settled claims, current trends in claim costs, changes in the Company’s business and workforce, and general economic factors. These accruals are reviewed on a quarterly basis, or more frequently if factors dictate a more frequent review is warranted.

      The Company provides an accrual for estimated future warranty costs based upon the historical relationship of warranty costs to sales, except for tire road hazard warranties which are accounted for in accordance with Financial Accounting Standards Board (“FASB”) Technical Bulletin 90-1. The warranty reserve and warranty expense related to all product warranties at and for the fiscal years ended March 2005 and 2004 were not material to the Company’s financial position or results of operations.

Fiscal 2005 as Compared to Fiscal 2004

      Sales for fiscal 2005 increased $58.0 million, or 20.7% to $337.4 million as compared to $279.5 million in fiscal 2004. The increase was due to an increase of approximately $54.0 million from stores added since March 29, 2003, of which the acquired Mr. Tire stores accounted for $45.7 million. Comparable store sales increased 2.0%. There were 307 selling days in fiscal year 2005 compared to 306 selling days in fiscal year 2004.

      During the year, 35 stores were added and four were closed. At March 26, 2005, the Company had 626 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 and an increase in scheduled maintenance services. Price increases in several product categories also contributed to the sales improvement.

      The Company introduced “Scheduled Maintenance” services in all of its stores late in 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 have helped to mitigate the decline in exhaust which negatively impacted recent fiscal years. The exhaust decline resulted primarily from manufacturers’ use of non-corrosive stainless steel exhaust systems on most new cars beginning in the mid-1980s and completed in the mid-1990s.

      Additionally, the Company continued to reward store employees with pay programs focused on high customer service scores. Management believes that, in spite of the sluggish economic environment, it is continuing to build the trust of its customers, through quality, integrity and fair pricing, and is gaining an advantage over some of its competitors.

      Gross profit for fiscal 2005 was $136.8 million or 40.5% of sales, as compared with $114.0 million or 40.8% of sales for fiscal 2004. The decrease in gross profit as a percentage of sales is primarily attributable to an increase in material costs due to a shift in mix to the lower margin categories of tires and maintenance services. Included in the maintenance categories are oil changes which increased approximately 12% on a comparable store basis over the prior year. The Company promoted oil changes to drive traffic during the year, by slightly lowering the selling price in the second half of fiscal 2005, while experiencing an increase in the cost of oil. This had the effect of lowering margin in the maintenance category as compared to the prior year. Additionally,

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      However, price increases, as well as the recognition of vendor rebates against cost of goods in concert with inventory turns in accordance with EITF 02-16, helped to partially offset the aforementioned margin pressures.

      Partially offsetting these increases were decreases in technician labor and occupancy costs, which are included in cost of sales. Technician labor costs decreased due to better operational control and improved productivity. Additionally, the increase in tire sales, which carry lower labor costs as compared to other service categories, helped to decrease labor costs as a percent of sales in fiscal 2005 as compared to fiscal 2004.

      Distribution and occupancy costs as a percentage of sales in fiscal 2005 also decreased as compared to fiscal 2004, as the Company, with improved sales, was able to leverage these largely fixed costs.

      Without Mr. Tire’s results, gross profit increased from 40.9% last year to 41.3% this year, partially due to a reduction in total material costs, as well as through increased leveraging of distribution and occupancy costs.

      The improvement in material costs apart from the acquired Mr. Tire stores, was due primarily to a reduction in outside purchases. The Company has continued to add inventory to its stores and warehouses in fiscal 2005 in a concerted effort to reduce outbuys.

      Operating, selling, general and administrative expenses for fiscal 2005 increased by $17.7 million to $102.4 million and, as a percentage of sales, remained flat as compared to fiscal 2004. The increase in expenditures is primarily due to the store direct costs associated with 35 new stores, as well as increased store manager wages to improve the quality and retention of this highly important position for the Company, increased insurance costs, increased expense to comply with Sarbanes-Oxley requirements and increased utility costs.

      Operating income in fiscal 2005 of $34.4 million, or 10.2% of sales, increased by $5.1 million from the fiscal 2004 level of $29.3 million, due to the factors discussed above.

      Interest expense, net of interest income, decreased as a percent of sales from .9% in fiscal 2004 to .8% in fiscal 2005. The weighted average debt outstanding for the year ended March 26, 2005 increased by approximately $7.4 million from fiscal 2004. Largely offsetting this increase was a decrease in the weighted average interest rate for the year ended March 26, 2005 of approximately .9% from the rate of 5.5% for the year ended March 27, 2004, resulting in a slight decrease in expense between the two years.

      Other expense, net, for fiscal 2005 was $.5 million, consisting of $.8 million in amortization expense partially offset by $.3 million of gains on sale of fixed assets and miscellaneous income. In fiscal 2004, the Company reported other expense, net, of $.1 million, consisting of amortization expense of $.3 million offset by gains on sale of fixed assets and miscellaneous income of $.2 million.

      The Company’s effective tax rate was 37.4% and 38% of pre-tax income in fiscal 2005 and 2004, respectively.

      Net income for fiscal 2005 increased by $3.1 million, or 18.9%, to $19.7 million as compared to $16.5 million in fiscal 2004, due to the factors discussed.

Fiscal 2004 as Compared to Fiscal 2003

      Sales for fiscal 2004 increased $21.4 million, or 8.3% to $279.5 million as compared to $258.0 million in fiscal 2003. The increase was due to an increase of approximately $10.9 million from stores added since March 31, 2002, of which the acquired Mr. Tire stores accounted for $3.5 million. Comparable store sales increased 4.7%. There were 306 selling days in fiscal years 2004 and 2003.

      During the year, 40 stores were added and five were closed. At March 27, 2004, the Company had 595 stores and 10 kiosk locations 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. Price increases in areas such as shop supply and

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      Gross profit for fiscal 2004 was $114.0 million or 40.8% of sales, as compared with $105.0 million or 40.7% of sales for fiscal 2003. The improvement in gross profit as a percentage of sales is primarily attributable to a decline in technician labor costs as well as distribution and occupancy costs which are included in cost of sales. Technician labor costs decreased due to better operational control and improved productivity, as measured by sales per man hour. Since the Company began formally tracking this statistic over the last seven years, productivity has increased every year, and since fiscal 1998, is up 32%.

      The decrease in distribution and occupancy costs as a percentage of sales is largely due to the buyout of the synthetic lease properties which occurred on June 27, 2003. As a result of this transaction, approximately $.8 million of expense, which formerly was recorded as rent expense and included in cost of sales, was recorded as interest expense during the year. There was also an additional $1.0 million of expense recorded as rent in the prior year which did not recur in FY04 due to: a) the buyout of several synthetic lease properties in March 2003 and b) a reduction in interest rates in FY04. The interest rate reduction occurred with the expiration of swap agreements mid-year. Additionally, there was a reduction in the spread over LIBOR which the Company pays, resulting from the Company’s improved financial performance, as well as the elimination of the synthetic lease lessor. This reduction was partially offset by approximately $.4 million of additional depreciation recognized during the year, now that the related properties are recorded on the Company’s balance sheet. Additionally, with strong comparable store sales, the Company was able to obtain some leverage in occupancy costs which are largely fixed expenses.

      These decreases were partially offset by an increase in material usage partially related to a shift in mix, which includes a greater percentage of higher-cost tire sales, an increase in oil costs and an increase in parts purchased outside of the Company’s normal distribution system (“outside purchases”). These parts carry much higher costs than parts which the Company purchases directly from manufacturers and distributes through its central distribution system. Due to parts proliferation and the Company’s expansion into more services, having the correct mix of inventory in the stores is a challenge that the Company works very hard to master in order to control its cost of sales. While the Company, which purchases approximately 17% of parts outside its normal distribution system, has performed better than many of its competitors, which experience upwards of 50% outside purchases, it is not satisfied with these results and remains focused on reducing outside purchases from current levels.

      Operating, selling, general and administrative expenses for fiscal 2004 increased by $3.7 million to $84.7 million and, as a percentage of sales, decreased by 1.1% as compared to fiscal 2003. The increase in expenditures is primarily due to increased store manager wages to improve the quality and retention of this highly important position for the Company, increased workers compensation costs, increased expense to comply with Sarbanes-Oxley requirements and increased utility costs. These increases were partially offset by a planned reduction in advertising expense as the Company shifted dollars from more expensive radio, newspaper and electronic advertising to the more efficient and cost-effective direct mail marketing. Additionally, there was a $1.6 million charge in FY03 for the vesting of performance-based options for the Company’s Chief Executive Officer which did not recur in FY04. There was also a reduction in fiscal 2004 expense for field management.

      Operating income in fiscal 2004 of $29.3 million, or 10.5% of sales, increased by $5.4 million from the fiscal 2003 level of $23.9 million, due to the factors discussed above.

      Interest expense, net of interest income, decreased as a percent of sales from 1.0% in fiscal 2003 to .9% in fiscal 2004. The weighted average debt outstanding for the year ended March 27, 2004 increased by approximately $9.2 million from fiscal 2003. Largely offsetting this increase was a decrease in the weighted average interest rate for the year ended March 27, 2004 of approximately 1.3% from the rate of 6.8% for the year ended March 29, 2003, resulting in a slight increase in expense between the two years.

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      Other expense, net, for fiscal 2004 was $.1 million, consisting of $.3 million in amortization expense partially offset by $.2 million of gains on sale of fixed assets and miscellaneous income. In fiscal 2003 the Company reported other income, net, of $.2 million, consisting of amortization expense of $.3 million offset by gains on sale of fixed assets and miscellaneous income of $.5 million.

      The Company’s effective tax rate was 38% of pre-tax income in fiscal 2004 and 2003.

      Net income for fiscal 2004 increased by $3.2 million, or 23.9%, to $16.5 million as compared to $13.3 million in fiscal 2003, due to the factors discussed.

Capital Resources and Liquidity

      The Company’s primary capital requirements for fiscal 2005 were divided among the funding of the Henderson and Rice Acquisitions for $4.5 million, the Company’s store expansion program and the upgrading of facilities and systems in existing stores, totaling $18.6 million. In fiscal 2004, the Company’s primary capital requirements were divided among the Mr. Tire Acquisition in March 2004 for $25.5 million, and the Company’s store expansion program and the upgrading of facilities and systems in existing stores totaling $14.3 million.

      In both fiscal years 2005 and 2004, these capital requirements were primarily met by cash flow from operations and, additionally, in fiscal 2004, through the use of the Company’s Revolving Credit facility.

      In fiscal 2006, the Company intends to open approximately 16 new stores, of which 10 are expected to be stores located within BJ’s Wholesale Clubs. Total capital required to open a new store ranges, on average (based upon the last five fiscal years’ openings — excluding the acquired stores and BJ’s locations), from $300,000 to $1,000,000 depending on whether the store is leased, owned or land leased. Total capital required to open a store within a BJ’s Wholesale Club is substantially less than for a greenfield store.

      The Company also plans to continue to seek suitable acquisition candidates. Management believes that the Company has sufficient resources available (including cash flow from operations and bank financing) to expand its business as currently planned for the next several years.

      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 secured credit facility from a syndication of lenders led by The Chase Manhattan Bank. The financing structure consisted of a $25 million term loan and a $75 million Revolving Credit facility. Additionally, there was synthetic lease (off-balance sheet) financing for a significant portion of the Speedy real estate, totaling $35 million.

      In March 2003, the Company repaid the outstanding balance under its then existing term loan ($1.9 million) and renewed its credit facility agreement. The amended financing arrangement consists of an $83.4 million Revolving Credit facility (of which approximately $19.4 million was outstanding at March 26, 2005), and a non-amortizing credit loan (formerly synthetic lease financing) totaling $26.6 million (all of which was outstanding at March 26, 2005).

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      The Revolving Credit portion of the facility has a three-year term expiring in September 2006. On June 27, 2003, the Company purchased the entity holding title to the properties and debt under the synthetic lease (see Note 3) and, accordingly, consolidated both the assets and debt related to such lease on its balance sheet from that date. In accordance with the Company’s credit facility agreement, the synthetic lease was converted to a three-year, non-amortizing revolving credit loan, also expiring in September 2006.

      The loans bear interest at the prime rate or other LIBOR-based rate options tied to the Company’s financial performance. Interest only is payable monthly on the Revolving Credit facility and credit loan throughout the term. The Company must also pay a facility fee on the unused portion of the commitment.

      The Revolving Credit facility is 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 or equipment, with certain permissible exceptions. The non-amortizing credit loan is secured by the real property to which it relates.

      Within the aforementioned $83.4 million Revolving Credit facility, the Company has available a sub-facility of $10 million for the purpose of issuing standby letters of credit. The line requires fees aggregating 1.375% annually of the face amount of each standby letter of credit, payable quarterly in arrears. There were $9.3 million in outstanding letters of credit under this line at March 26, 2005.

      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% 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 in fiscal 1996 consisting of a 10-year mortgage for $2.9 million and an eight-year term loan in the amount of $.7 million. The mortgage requires monthly interest payments, and equal monthly installments of principal based on a 20-year amortization period. The Company entered into an interest rate swap agreement with a major financial institution which effectively fixed the interest rate over the terms of the aforementioned agreements at 7.15%. The term loan was repaid in full in fiscal 2004.

      In addition, the Company has financed certain store properties and equipment with capital leases, which amount to $9.2 million at March 26, 2005 and are due in installments through 2023.

      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 26, 2005. These agreements permit mortgages and specific lease financing arrangements with other parties with certain limitations. In addition, the Company has received a waiver of applicable loan covenants allowing it to pay cash dividends during fiscal 2006.

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

      See “Recent Accounting Pronouncements” in Note 1 to the consolidated financial statements for a discussion of the impact of recently issued accounting standards on the Company’s consolidated financial statements as of March 26, 2005, for the year then ended, as well as the expected impact on the Company’s consolidated financial statements for future periods.

      The Company is exposed to market risk from potential changes in interest rates. At year end March 2005 and 2004, approximately 2% of the Company’s long-term debt, excluding capital leases, was at fixed interest

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      The Company regularly evaluates these risks and has entered into an interest rate swap agreement, expiring in 2005, with a notional amount of $1.5 million. The agreement limits the interest rate exposure on the Company’s floating rate debt, related specifically to the mortgage on its office and warehouse facility in Rochester, New York, via the exchange of fixed and floating rate interest payments periodically over the life of the agreement without the exchange of the underlying principal amount. The fixed rate paid by the Company under this agreement is 7.15%. 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.

      Long-term debt, including current portion, had a carrying amount of $48.2 million and a fair value of $47.9 million as of March 26, 2005, as compared to a carrying amount of $66.3 million and a fair value of $66.0 million as of March 27, 2004.

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders of Monro Muffler Brake, Inc.:

      We have completed an integrated audit of Monro Muffler Brake, Inc.’s 2005 consolidated financial statements and of its internal control over financial reporting as of March 26, 2005 and audits of its 2004 and 2003 consolidated financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Our opinions, based on our audits, are presented below.

Consolidated Financial Statements and Financial Statement Schedule

      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 26, 2005 and 2004, and the results of their operations and their cash flows for each of the three years in the period ended March 26, 2005 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 the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit of financial statements 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.

      As discussed in Note 2, the Company’s consolidated financial statements for the years ended March 27, 2004 and March 29, 2003 have been restated.

Internal Control over Financial Reporting

      Also, in our opinion, management’s assessment, included in Management’s Report on Internal Control Over Financial Reporting appearing under Item 9A, that the Company maintained effective internal control over financial reporting as of March 26, 2005 based on criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO), is fairly stated, in all material respects, based on those criteria. Furthermore, in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of March 26, 2005, based on criteria established in Internal Control — Integrated Framework issued by the COSO. The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting. Our responsibility is to express opinions on management’s assessment and on the effectiveness of the Company’s internal control over financial reporting based on our audit. We conducted our audit of internal control over financial reporting in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. An audit of internal control over financial reporting includes obtaining an understanding of internal control over financial reporting, evaluating management’s assessment, testing and evaluating the design and operating effectiveness of internal control, and performing such other procedures as we consider necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinions.

      A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made

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      Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

PricewaterhouseCoopers LLP

Rochester, New York

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MONRO MUFFLER BRAKE, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEET

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

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MONRO MUFFLER BRAKE, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF INCOME

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

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MONRO MUFFLER BRAKE, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITY