MONRO MUFFLER BRAKE INC - 10-K Annual Report

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SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-K

(MARK ONE)

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

For Fiscal Year Ended March 31, 1997

OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 (NO FEE REQUIRED)

Commission File Number 0-19357

MONRO MUFFLER BRAKE, INC.
(Exact name of registrant as specified in its charter)

New York 16-0838627
(State of incorporation) (I.R.S. Employer
Identification No.)

200 Holleder Parkway, Rochester, New York 14615
(Address of principal executive offices) (Zip code)

Registrant's telephone number, including area code (716) 647-6400
Securities registered pursuant to Section 12(b) of the Act:

NONE

Securities registered pursuant to Section 12(g) of the Act:
Common Stock, par value $.01 per share
(Title of Class)

Indicate by check mark if the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.

Yes X No
----- -------

Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ ]

As of June 2, 1997, the aggregate market value of voting stock held by
non-affiliates of the registrant was $108,655,190.

As of June 2, 1997, 7,475,040 shares of the registrant's Common Stock,
par value $.01 per share, were outstanding.

DOCUMENTS INCORPORATED BY REFERENCE:

Portions of the registrant's definitive proxy statement (to be filed
pursuant to Regulation 14A) for the 1997 Annual Meeting of Shareholders (the
"Proxy Statement") are incorporated by reference into Part III hereof.

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PART I
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ITEM 1. BUSINESS
- - ----------------

GENERAL

Monro Muffler Brake, Inc. ("Monro" or the "Company") is a chain of
company-operated stores providing automotive undercar repair services in the
United States. At March 31, 1997, Monro operated 313 stores in New York,
Pennsylvania, Ohio, Connecticut, Massachusetts, West Virginia, Virginia,
Maryland, Vermont, New Hampshire, New Jersey, North Carolina, South Carolina and
Indiana. The Company's stores typically are situated in high-visibility
locations in suburban areas and small towns. Monro serviced approximately
1,442,000 vehicles in fiscal 1997. *

The predecessor to the Company was founded by Charles J. August in 1957
as a Midas Muffler franchise in Rochester, New York, specializing in mufflers
and exhaust systems. In 1966, the Company discontinued its affiliation with
Midas Muffler, and began to diversify into a full line of undercar repair
services. An investor group led by Peter J. Solomon and Donald Glickman
purchased a controlling interest in the Company in July 1984. At that time,
Monro operated 59 stores, located primarily in upstate New York, with
approximately $21 million in sales in fiscal 1984. Since 1984, Monro has added
254 stores and expanded its marketing area to include thirteen additional
states. In 1987, Jack M. Gallagher succeeded Charles J. August as President and
Chief Executive Officer. On April 1, 1995, Lawrence C. Day, who has over 20
years of experience in the automotive parts and service industries and
previously served as Chief Operating Officer of the Company beginning in July
1993, succeeded Jack M. Gallagher as President and Chief Executive Officer.

The Company was incorporated in the State of New York in 1959. The
Company's principal executive offices are located at 200 Holleder Parkway,
Rochester, New York 14615, and its telephone number is (716) 647-6400.

Monro provides a full range of services on passenger cars, light trucks
and vans for mufflers and exhaust systems (estimated at 30% of fiscal 1997
sales); brakes (35%); and steering, drive train, suspension and wheel alignment
(19%). The Company also provides other products and services including tires and
state inspections (16%). Monro specializes in the repair and replacement of
parts which must be periodically replaced as they wear out. Normal wear on these
parts generally is not covered by new car warranties. The Company typically does
not perform under-the-hood repair services except for oil change services and a
heating and cooling system "flush and fill" service. The Company does not sell
parts or accessories to the do-it-yourself market.

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The Company has a wholly-owned subsidiary, Monro Service Corporation,
which is a Delaware corporation qualified to do business in the State of New
York. Monro Service Corporation holds all assets, rights, responsibilities and
liabilities associated with the Company's warehousing, purchasing, advertising,
accounting, office services, payroll, cash management and certain other
operations which are wholly performed within New York State. The Company
believes that this structure has enhanced and will continue to enhance
operational efficiency and provide cost savings.

* References herein to fiscal years are to the Company's fiscal years ending or
ended March 31 of each year (e.g., references to "fiscal 1997" are to the
Company's fiscal year ended March 31, 1997).

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INDUSTRY OVERVIEW

According to industry reports, demand for automotive repair services,
including undercar repair services, has increased due to the general increase in
the number of vehicles registered, the growth in vehicle miles driven, the
increase in the average age of vehicles and the increased complexity of
vehicles, which makes it more difficult for a vehicle owner to perform
do-it-yourself repairs.

At the same time as demand for automotive repair services has grown,
the Company believes that the number of general repair outlets has decreased,
principally because fewer gas stations now perform repairs, and because there
are fewer new car dealers. Monro believes that these factors present
opportunities for increased sales by the Company, even though the number of
specialized repair outlets (such as those operated by the Company and its direct
competitors) has increased to meet the growth in demand.

OPERATING STRATEGY

Monro's operating strategy is to provide its customers with dependable,
high-quality automotive service at a competitive price by emphasizing the
following key elements.

Complete Undercar Service

All Monro stores provide a full range of undercar repair services for
mufflers and exhaust systems, brakes, steering, drive train, suspension
and wheel alignment. These services apply to all makes and models of
domestic and foreign cars, light trucks and vans. In addition, Monro's
stores provide many of the routine maintenance services (except engine
tune-up and major transmission repair) which automobile manufacturers
suggest or require in the vehicle owners' manuals, and which fulfill
manufacturers' requirements for new car warranty compliance.
Substantially all of the stores provide oil change services as well as
tire sales and installation. All stores perform a heating and cooling
system "flush and fill" service, and install belts and hoses. Stores in
New York, West Virginia, New Hampshire, Pennsylvania, Virginia,
Massachusetts and North Carolina also perform annual state inspections.

Customer Satisfaction

The Company has developed "The Monro Doctrine", a set of customer
satisfaction principles, which is displayed in each store so that
customers and employees will understand the Company's customer service
philosophy. These principles are: free inspection of brakes, shocks,
front end and exhaust systems; item-by-item review with customers of
problem areas; free written estimates; written guarantees; drive-in
service without an appointment; fair and reasonable prices as
advertised; and repairs by professionally trained undercar specialists,
many of whom are Automotive Service Excellence (ASE) certified in
brakes and suspension.

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Competitive Pricing, Advertising and Co-branding Initiatives

The Company seeks to set competitive prices for quality services and products.
The Company supports its pricing strategy by advertising through direct mail
coupon inserts and in-store promotional signage and displays. In addition, the
Company advertises through television, radio, yellow pages and newspapers to
increase consumer awareness of the services offered.

In fiscal 1997, the Company began testing co-branding initiatives to more
quickly increase consumer awareness in certain markets. The Company believes
that, especially in newer markets, customers may more readily be drawn into its
stores because of their familiarity with national brand names. Some of these
initiatives have included cross- promotional offers with national fast food
chains, video rental stores and gasoline chains, as well as with regional
supermarkets. Additionally, the Company introduced Bridgestone/Firestone tires
into most of its stores in late fiscal 1997, where it had previously carried a
private label tire. Through this initiative, the Company believes that it will
attract some brand-loyal tire customers who otherwise might not have visited
Monro. This will give the Company the opportunity to introduce itself to this
new customer, and potentially sell other needed services.

In fiscal 1997, the Company signed a joint venture agreement with Q-Lube, Inc.,
a subsidiary of Quaker State Corporation. The agreement calls for the two
companies to jointly develop retail locations which offer both fast lube and
undercar services. The centers will be located adjacent to either existing or
newly-developed Monro stores. The Company believes the centers will create
opportunities for cross-servicing between fast lube and undercar repair
customers.

Centralized Control

Unlike many of its competitors, the Company owns and operates rather than
franchises its stores. Monro believes that direct operation of all stores
enhances its ability to compete by providing centralized control of such areas
of operations as service quality, store appearance, promotional activity and
pricing. A high level of technical competence is maintained throughout the
Company as Monro requires, as a condition of employment, that employees
participate in comprehensive training programs to keep pace with technology
changes. Additionally, purchasing, distribution, merchandising, advertising,
accounting and other store support functions are centralized in the Company's
corporate headquarters in Rochester, New York, and are provided through the
Company's subsidiary, Monro Service Corporation. The centralization of these
functions results in efficiencies and gives management the ability to closely
monitor and control costs.

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Comprehensive Training

The Company provides ongoing, comprehensive training to its store
employees. Monro believes that such training provides a competitive
advantage by enabling its technicians to provide quality service to its
customers in all areas of undercar repair.

EXPANSION STRATEGY

Monro has experienced significant growth due to the opening of new
stores and increases in comparable store sales. Management believes that the
continued growth in sales and profits of the Company is dependent, in large
part, upon its continued ability to open and operate new stores on a profitable
basis. In addition, overall profitability of the Company could be reduced if new
stores do not attain profitability.

As of March 31, 1997, Monro operated 313 stores located in 14 states.
The following table shows the growth in the number of stores over the last five
fiscal years:

STORE OPENINGS AND CLOSINGS

Year ended March 31,
--------------------
1993 1994 1995 1996 1997
---- ---- ---- ---- ----

Stores open at beginning of year......... 161 184 202 232 274

Stores opened during year................ 23 20 30 43 40

Stores closed during year (a)............ 0 (2) 0 (1) (1)
--- --- --- --- ---

Stores open at end of year............... 184 202 232 274 313
=== === === === ===

(a) These stores were closed because they failed to achieve an
acceptable level of profitability or because a new Monro store was opened in the
same market at a more favorable location.

Monro believes that there are expansion opportunities in new as well as
existing market areas and expects to open a total of 40-50 stores in fiscal
1998. This expansion will result from a combination of constructing stores on
vacant land and acquiring existing store locations. The Company believes that,
as the industry consolidates due to the increasingly complex nature of
automotive repair and the expanded capital requirements for state-of-the art
equipment, there will be more opportunities for acquisitions of existing
businesses or store structures.

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The Company has developed a systematic method for selecting new store
locations and a more targeted approach to marketing new stores. Key factors in
market and site selection include population, demographic characteristics,
vehicle population and the intensity of competition. These factors are evaluated
through the use of a proprietary computer model developed for the Company. The
characteristics of each potential site are compared by the model to the profiles
of existing stores, and the model then projects sales for that site. Monro
attempts to cluster stores in market areas in order to achieve economies of
scale in advertising, supervision and distribution costs. All new sites
presently under consideration are within or contiguous to Monro's established
marketing areas.

The Company believes that management and operating improvements
implemented over the last several fiscal years will enhance its ability to
sustain its growth. Monro has a chain-wide computerized inventory control and
electronic point-of-sale (POS) management information system, which has
increased management's ability to monitor operations as the number of stores has
grown. The system includes electronic cataloging which allows store managers to
electronically research the specific parts needed for the make and model of car
being serviced. In fiscal 1997, the Company upgraded its electronic credit card
processing and added electronic mail to its stores. Enhancements continue to be
made to the system annually which increase efficiency, improve the quality and
timeliness of store reporting and enable the Company to better serve its
customers.

The financing to open a new store location may be accomplished in one
of three ways: a store lease for the land and building (in which case, land and
building costs will be financed primarily by the lessor), a land lease with the
building constructed by the Company (with building costs paid by the Company),
or a land purchase with the building constructed by the Company. In all three
cases, each new store also will require approximately $131,000 for equipment
(including a point-of-sale system), and approximately $57,000 in inventory.
Because Monro generally does not extend credit to its customers, stores generate
almost no receivables and a new store's actual net working capital investment is
nominal. Total capital required to open a new store ranges, on average (based
upon the last three fiscal years' openings), from $242,000 to $843,000 depending
on the location and which of the three financing methods is used. In instances
where Monro acquires an existing business, it may pay additional amounts for
intangible assets such as customer lists, covenants not-to-compete and goodwill.

At March 31, 1997, Monro leased the land and/or the building at 69% of
its store locations and owned the land and building at the remaining locations.
Monro's policy is to situate new stores in the best locations, without regard to
the form of ownership required to develop the locations.

New stores have average sales of approximately $360,000 in their first
twelve months of operation.

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STORE OPERATIONS

Store Format

The typical format for a Monro repair store is a free-standing building
of approximately 4,500 square feet consisting of a sales area, six
fully-equipped service bays and a parts storage area, with a parking
lot with space for approximately 17 cars. Most service bays are
equipped with aboveground electric vehicle lifts. The typical store
carries $57,000 of inventory and 2,800 stock keeping units ("SKUs").
Generally, each store is located within 35 miles of a "key" store which
carries approximately 20% more inventory than a typical store and
serves as a mini-distribution point for other stores in its area.

The stores generally are situated in high-visibility locations in
suburban areas or small towns and offer easy customer access. The
typical store is open from 7:30 a.m. to 8:00 p.m. on Monday through
Friday and from 7:30 a.m. to 5:00 p.m. on Saturday.

In fiscal 1996, the Company opened its first "small town" concept store
in Saranac Lake, New York. Eight additional stores were opened in
fiscal 1997. The prototypical "small town" concept store is a four,
five or six bay store located in a town with a population of 15,000
people or less. In the past, the Company generally did not enter this
type of market because it could not support the typical six bay store.
However, with few or no major competitors and a lower cost of entry,
the small markets represent an attractive new growth avenue for the
Company.

Inventory Control and Management Information System

All Monro stores are linked to the central office and warehouse by a
computerized inventory control and electronic POS management
information system, which enables the Company to collect sales and
operational data on a daily basis, to adjust store pricing to reflect
local conditions and to control inventory on a "real-time" basis.
Additionally, each store has access through the POS system to the
inventory carried by the seven stores nearest to it. Management
believes that this feature improves customer satisfaction and store
productivity by reducing the time required to locate out-of-stock
parts.

Quality Control and Warranties

To maintain quality control, the Company conducts audits to rate its
employees' telephone sales manner and the accuracy of pricing
information given. All headquarters management personnel participate in
the Company's day-in-the-store program by working in a store under the
direction of the store manager, once every other month, to better
understand the latest developments at the store level.

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Customer comment cards, pre-addressed to the headquarters office, are
available at each store for customers to comment on the Company's
services. The Company's Chief Executive Officer personally reads and
responds to these completed comment cards, and customer concerns are
addressed via personal follow-up by field management.

The Company has a customer survey program to monitor customer attitudes
toward service quality, friendliness, speed of service, and several
other factors for each store. This program includes four survey
mailings per store annually. (Each mailing consists of approximately
100 surveys.) Completed surveys are read by the Chief Executive
Officer, and at his direction, customer concerns are addressed via
letter and personal follow-up by field management.

The Company periodically solicits customer commentary via other
methods. In April 1997, the Company began testing a program whereby a
postcard-sized comment card is hung on every customer's rear view
mirror after the car is serviced. The card is postage paid to
facilitate the customers' responses, and asks several questions related
to quality of service, personnel courtesy and whether or not the
customer would return to Monro.

Additionally, in fiscal 1994, the Company implemented its "Double Check
for Accuracy Program." This quality assurance program requires that a
technician and supervisory-level employee independently inspect a
customer's vehicle, diagnose and document the necessary repairs, and
agree on an estimate before presenting it to a customer. This process
is formally documented on the written estimate by store personnel.

The Company is an active member of the Motorist Assurance Program
(MAP). MAP is an organization of automotive retailers, wholesalers and
manufacturers which was established as part of an industry-wide effort
to address the ethics and business practices of companies in the
automotive repair industry. Participating companies are committed to
improving consumer confidence and trust in the automotive repair
industry by adopting "Uniform Inspection Guidelines" and "Standards of
Service" established by MAP. These "Standards of Service" are posted in
every Monro store and serve to provide consistent recommendations to
customers in the diagnosis and repair of a vehicle.

Monro offers limited warranties on substantially all of the products
and services that it provides. The Company believes that these
warranties are competitive with industry practices.

Store Personnel and Training

The Company supervises store operations primarily through its four
district managers who oversee 29 regional managers. The typical store
is staffed by a store manager and four to six technicians, one of whom
serves as the assistant manager.

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All store managers receive a base salary, and assistant managers
receive hourly compensation. In addition, all store managers and
assistant managers receive other compensation based on their store's
customer relations, gross profit, labor cost controls, safety, sales
volume and other factors. All store managers and assistant managers are
eligible for a quarterly bonus based on performance against these
goals.

Monro believes that the ability to recruit and retain qualified
technicians is an important competitive factor in the automotive repair
industry, which has historically experienced a high turnover rate.
Monro makes a concerted effort to recruit individuals who will have a
long-term commitment to the Company and offers an hourly rate structure
and additional compensation based on productivity; a competitive
benefits package, including health, life and disability insurance;
profit-sharing and pension plans; as well as the opportunity to advance
within the Company. Most of the Company's managers and regional
managers started with Monro as technicians.

Most of the Company's new technicians join the Company in their early
twenties as trainees or apprentices. As they progress, they are
promoted to technician and eventually master technician, the latter
requiring ASE certification in both brakes and suspension. The Company
offers a tool lease program through which trainee technicians can
acquire their own set of tools. The Company also will reimburse
technicians for the cost of ASE certification test fees and encourages
all technicians to become certified by providing a higher hourly wage
rate following their certification.

The Company's training department conducts in-house technical clinics
for store personnel and management training programs for new store
managers, and coordinates attendance at technical clinics offered by
the Company's vendors. Each store maintains a library of 20-25
instructional videos. The Company issues technical bulletins to all
stores on innovative or complex repair processes, and maintains a
centralized data base for technical repair problems. In addition, the
Company has established a telephone technical hotline to provide
assistance to store personnel in resolving problems encountered while
diagnosing and repairing vehicles. The help line is available during
all hours of store operation.

The Company has established a "training store" concept in one of its
regions. This involves a six-week comprehensive training program for a
group of entry-level technicians which occurs in a fully functioning
Monro store. The program is taught by a full-time training manager who
is permanently assigned to the store, along with the store manager. In
addition to providing a more focused training effort, this new training
structure relieves the store managers and more experienced technicians
of the initial training burden. The structure also contributes to more
efficient and profitable store environments. Technicians completing
this program are assigned to stores within the region.

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Additionally, the Company trains apprentice technicians through a
"buddy system" whereby the apprentice is assigned to work side-by-side
with a master technician for approximately three weeks. The master
technician receives a weekly stipend during the training period. He is
also encouraged to mentor the apprentice technician after the
apprentice is assigned to a store, and is rewarded with a bonus if the
apprentice is still employed by the Company after 90, and then 180
days. Since most turnover occurs during the first 180 days of
employment, management believes that this newly-instituted feature of
the program will help to improve retention of these employees.

PURCHASING AND DISTRIBUTION

The Company, through its wholly-owned subsidiary Monro Service
Corporation, selects and purchases parts and supplies for all stores on a
centralized basis. Although purchases outside the centralized system are made
when needed at the store level, these purchases only accounted for
approximately 12% of all parts used in fiscal 1997.

The Company's ten largest vendors accounted for approximately 53% of
its parts purchases, with the largest vendor accounting for slightly over 12% of
total purchases in fiscal 1997. The Company purchases parts from over 100
vendors and has no significant long-term contracts with any vendor. Management
believes that the Company's relationships with vendors are excellent and that
alternative sources of supply exist, at comparable cost, for substantially all
parts used in the Company's business. The Company routinely obtains bids from
vendors to ensure it is receiving competitive pricing and terms.

Parts are shipped by vendors to the Company's warehouse facility in
Rochester, New York, and are distributed to stores through the Company's owned
and operated tractor/trailer fleet. Most stores are replenished once every week
from the warehouse, and such replenishment fills, on the average, 97% of all
items ordered by the stores' automatic POS-driven replenishment system. The
warehouse stocks approximately 8,000 SKUs.

COMPETITION

The Company competes in the retail automotive service industry. This
industry is generally highly competitive and fragmented, and the number, size
and strength of competitors varies widely from region to region. The Company
believes that competition in this industry is based on customer service and
reputation, store location, name awareness and price. Monro's primary
competitors include national and local undercar specialty chains, both
franchised and company-operated; car dealerships; and, to a lesser extent, gas
stations and independent garages. Monro considers Midas International Corp.,
Meineke Discount Mufflers Inc. and Speedy Muffler King Inc. to be direct
competitors. In most of the new markets that the Company has entered, at least
one competitor was already present. In identifying new markets, the Company
analyzes, among other factors, the intensity of competition. See "Expansion
Strategy."

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EMPLOYEES

As of March 31, 1997, Monro had 1,964 employees, of whom 1,824 were
employed in the field organization, 44 were employed at the warehouse and 96
were employed at the Company's corporate headquarters. Monro's employees are not
members of any union. The Company believes that its relations with its
employees are good.

REGULATION

The Company stores new oil and generates and handles used automotive
oils and certain solvents, which are disposed of by licensed third-party
contractors. Thus, the Company is subject to a number of federal, state and
local environmental laws including the Comprehensive Environmental Response
Compensation and Liability Act ("CERCLA"). In addition, the United States
Environmental Protection Agency (the "EPA"), under the Resource Conservation and
Recovery Act ("RCRA"), and various state and local environmental protection
agencies regulate the Company's handling and disposal of waste. The EPA, under
the Clean Air Act, also regulates the installation of catalytic converters by
the Company and all other repair stores by periodically spot checking jobs and
has the power to fine businesses that use improper procedures or materials. The
EPA has the authority to impose sanctions, including civil penalties up to
$25,000 per violation (or up to $25,000 per day for certain willful violations
or failures to cooperate with authorities), for violations of RCRA and the Clean
Air Act. The Company is subject to various laws and regulations concerning
workplace safety, zoning and other matters relating to its business. The Company
believes that it is in substantial compliance with all applicable environmental
and other laws and regulations, and that the cost of such compliance is not
material to the Company.

In 1992, two national chains with which the Company competes were the
subject of investigations by consumer protection agencies and the Attorneys
General of various states, including several states in which the Company does
business. These occurrences caused a heightened awareness on the part of the
automotive service industry of the need to make certain a properly informed
consumer is making the decision on the auto service needs of his or her car.
They have also precipitated the introduction of proposed legislation in various
states where the Company operates which would further regulate the auto service
industry. Throughout its 40-year history, the Company has believed that a
satisfied customer is its best advertisement and continues to place strong
emphasis on customer satisfaction. To date, none of this legislation has been
enacted. The Company continues to monitor such proposed legislation and believes
that because of its method of operation and strength of its systems, it will be
in a strong position, relative to its competition, to comply with any
legislation which may be enacted.

The Company is environmentally conscious, and takes advantage of
recycling opportunities both at its headquarters and at its stores. Cardboard,
plastic shrink wrap and parts' cores are returned to the warehouse by the stores
on the weekly stock truck. There, they are accumulated for sale to recycling
companies or returned to parts manufacturers for credit.

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SEASONALITY

Although the Company's business is not highly seasonal, customers do
require more undercar service during the period of March through October than
the period of November through February, when miles driven tend to be lower. As
a result, sales and profitability are lower during the latter period.

ITEM 2. PROPERTIES

The Company, through Monro Service Corporation, owns its
office/warehouse facility of approximately 95,000 square feet, which is located
on 12.7 acres of land in Holleder Industrial Park, in Rochester, New York.

Of Monro's 313 stores at March 31, 1997, 97 were owned, 148 were leased
and for 68, the land only was leased. In general, the Company leases store sites
for a ten-year period with several five-year renewal options. Giving effect to
all renewal options, over 90% of the non-capital leases (179 stores) expire
after 2004. Certain of the leases provide for contingent rental payments if a
percentage of annual gross sales exceeds the base fixed rental amount. The
highest contingent percentage rent of any lease is 6.75%, and no such lease has
adversely affected profitability of the store subject thereto. Certain officers
and directors of the Company or members of their families are the lessors, or
have interests in entities that are the lessors, with respect to 41 of the
leases. No related party leases, other than renewals or modifications of leases
on existing stores, have been entered into since May 1989, and no new related
party leases are contemplated.

The existing office and warehouse facility and 37 of the owned stores
are subject to mortgages held by commercial banks or private investors. As of
March 31, 1997, the outstanding amount under the mortgage on the headquarters
office and warehouse facility was $2.8 million and the aggregate outstanding
amount under the permanent mortgages on 37 of the owned stores was $11.0
million. There was also $.7 million outstanding under a mortgage held by the
City of Rochester, New York, secured by the land on which the new headquarters
office and warehouse is located, and a term loan of $.6 million secured by the
existing headquarters facility.

ITEM 3. LEGAL PROCEEDINGS

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

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ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

No matters were submitted to a vote of security holders during the
fourth quarter of fiscal 1997.

ITEM 4A. EXECUTIVE OFFICERS OF THE COMPANY AS OF JUNE 1, 1997

The following persons are the executive officers of the Company, having
been elected by and serving at the discretion of the Board of Directors of the
Company:

Name Age Position
- - ---- --- --------

Lawrence C. Day 47 President and Chief Executive Officer

G. Michael Cox 44 Executive Vice President - Store Operations

John W. August 43 Sr. Vice President - Business Development

Robert W. August 45 Sr. Vice President - Store Support, and Secretary

Catherine D'Amico 41 Sr. Vice President - Finance, Chief Financial
Officer and Treasurer

Thomas J. Budreau 40 Vice President - Eastern Operations

Michael C. Kucharski 37 Vice President - Central Operations

The following is a brief account of the business experience of each of
the executive officers of the Company:

Lawrence C. Day has been President and Chief Executive Officer since
April 1995 and a director since July 1993. Mr. Day was Executive Vice President
and Chief Operating Officer from July 1993 to April 1995. Prior to joining the
Company, Mr. Day was Vice President of the Auto Express Division of Montgomery
Ward & Co., Incorporated from December 1991 to June 1993, Field Director of the
Auto Express Division of Montgomery Ward & Co., Incorporated from December 1989
to December 1991 and Vice President of Automotive Industries, Inc. from February
1989 to December 1989. From September 1976 to January 1989, Mr. Day held various
management positions with Bridgestone/Firestone, Inc.

G. Michael Cox has been Executive Vice President - Store Operations
since March 1997 and Senior Vice President - Store Operations from January 1995
to March 1997. Prior to joining the Company, Mr. Cox was Director of Affiliated
Dealer Operations for Bridgestone/Firestone, Inc. from 1993 to January 1995,
Director of Corporate Accounts for Bridgestone/Firestone, Inc. from 1992 to 1993
and a Zone Manager for Bridgestone/Firestone, Inc. from 1990 to 1992. Mr. Cox
held various other management positions for Bridgestone/Firestone, Inc. from
1976 to 1990.

14
15

John W. August has been Senior Vice President - Business Development
since November 1994. Mr. August was Senior Vice President - Store Operations
from May 1992 to November 1994, Vice President - Western Operations from August
1988 to May 1992, Vice President - Real Estate from June 1985 to August 1988,
and has worked for Monro in various other capacities since 1972.

Robert W. August has been Senior Vice President - Store Support since
October 1996, Secretary since July 1984 and a director since June 1982. Mr.
August was Senior Vice President - Marketing from May 1992 to October 1996, Vice
President-Marketing from July 1989 to May 1992, Executive Vice President from
1984 to July 1989, and has worked for Monro in various other capacities since
1968.

Catherine D'Amico has been Senior Vice President - Finance, Chief
Financial Officer and Treasurer since August 1993. Ms. D'Amico, a certified
public accountant, was previously a Senior Audit Manager with Price Waterhouse
LLP in Rochester, New York and was affiliated with such firm from 1978 to 1993.

Thomas J. Budreau has been Vice President - Eastern Operations since
October 1995. Prior to joining the Company, Mr. Budreau was the National Auto
Express Service Manager for Montgomery Ward & Co., Incorporated from March 1994
to October 1995. From November 1990 to March 1994, Mr. Budreau was a Regional
Auto Express Manager and from March 1988 to November 1990, a District Manager
for Montgomery Ward & Co., Incorporated. From 1975 to March 1988, Mr. Budreau
held various other management positions with Montgomery Ward & Co.,
Incorporated.

Michael C. Kucharski has been Vice President - Central Operations since
May 1997. Mr. Kucharski was a District Manager from February 1996 to May 1997, a
Regional Manager from January 1990 to February 1996 and has worked for Monro in
various other capacities since 1987. From 1981 through 1987, Mr. Kucharski held
management positions with various retail and other companies.

15
16

PART II

ITEM 5. MARKET FOR THE COMPANY'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS

Market Information

The Common Stock is traded on the over-the-counter market and is quoted
on the NASDAQ National Market System under the symbol "MNRO." The
following table sets forth, for the Company's last two fiscal years,
the range of high and low sales prices on the NASDAQ National Market
System for the Common Stock:

FISCAL 1997 FISCAL 1996
----------- -----------

QUARTER ENDED HIGH LOW HIGH LOW
------------------ ---- --- ---- ---

June 30, 18 7/8 14 3/4 17 15/16 13
September 30, 21 3/4 17 1/4 15 13 9/16
December 31, 21 14 1/4 15 13 1/8
March 31, 19 15 1/2 15 1/2 12 1/8

Amounts in these tables have been adjusted to reflect the five percent
stock dividends paid in August 1996 and August 1995.

Holders

At June 1, 1997, the Company's Common Stock was held by approximately
1,933 shareholders of record or through nominee or street name accounts
with brokers.

Dividends

On May 14, 1997, the Company's Board of Directors declared a five
percent stock dividend, payable August 4, 1997, to shareholders of
record as of June 20, 1997. Information regarding the number of shares
of Common Stock outstanding, as set forth in this Form 10-K, does not
include any shares of Common Stock to be issued in connection with such
dividend.

While the Company has not paid any cash dividends on the Common Stock
since its inception, any future determination as to the payment of
dividends will be at the discretion of the Board of Directors and will
depend on the Company's financial condition, results of operations,
capital requirements, compliance with charter and contractual
restrictions, and such other factors as the Board of Directors deems
relevant.

16
17

ITEM 6. SELECTED FINANCIAL DATA

The following table sets forth selected financial and operating data of the
Company for each year in the five-year period ended March 31, 1997. The
financial data and certain operating data have been derived from the Company's
financial statements which have been examined by Price Waterhouse LLP,
independent accountants. This data should be read in conjunction with the
Financial Statements and related notes included under Item 8 of this report and
in conjunction with other financial information included elsewhere in this Form
10-K.

YEAR ENDED MARCH 31,
--------------------
1997 1996 1995 1994 1993
---- ---- ---- ---- ----
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
INCOME STATEMENT DATA:

Sales............................... $141,169 $117,104 $109,098 $93,620 $78,507
Cost of sales including distribution
and occupancy costs............ 78,792 66,236 59,725 51,196 42,591
-------- ------- ------- ------- -------
Gross profit......................... 62,377 50,868 49,373 42,424 35,916
Operating, selling, general and
administrative expenses............ 41,749 35,299 32,304 28,068 23,611
-------- ------ ------- ------- -------
Operating income..................... 20,628 15,569 17,069 14,356 12,305
Interest expense - net............... 3,224 2,637 1,939 2,080 2,074
Other expense (income) - net......... 475 330 22 107 (43)
-------- -------- ------- ------- -------
Income before provision for income taxes 16,929 12,602 15,108 12,169 10,274
Provision for income taxes........... 6,738 4,988 6,024 4,818 4,120
-------- -------- ------- ------- -------
Net income........................... $ 10,191 $ 7,614 $ 9,084 $ 7,351 $ 6,154
======== ======== ======= ======= =======
Earnings per share(a)................ $ 1.25 $ .94 $ 1.12 $ .91 $ .77
======== ======== ======= ======= =======
Weighted average number of Common Stock
shares and equivalents (a)......... 8,171 8,077 8,084 8,035 8,017
======== ======== ======= ======= =======

SELECTED OPERATING DATA:

Sales growth:
Total.............................. 20.5% 7.3 % 16.5% 19.3% 11.5%
Comparable store (b)............... 7.9% (3.9)% 6.1% 9.5% 2.9%
Stores open at beginning of year..... 274 232 202 184 161
Stores open at end of year........... 313 274 232 202 184
Capital expenditures ................ $ 27,562 $ 25,581 $20,299 $14,374 $14,759

BALANCE SHEET DATA (AT PERIOD END):

Net working capital.................. $ 9,579 $ 8,891 $ 6,863 $ 7,894 $ 8,140
Total assets......................... 146,267 120,055 93,042 77,042 63,507
Long-term debt....................... 54,864 45,459 28,749 24,326 22,599
Shareholders' equity................. 66,625 55,887 48,169 38,815 31,425

(a) Earnings per share for each fiscal year was computed by dividing net
income by the weighted average number of shares of Common Stock and Common
Stock equivalents outstanding during the respective year. All share and
per share information has been adjusted to give retroactive effect to the
five percent stock dividends paid in August 1996, August 1995 and in
August 1994.

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

17
18

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS

The following table sets forth income statement data of the Company expressed as
a percentage of sales for the fiscal years indicated:

YEAR ENDED MARCH 31,
--------------------
1997 1996 1995
---- ---- ----

Sales.................................................... 100.0% 100.0% 100.0%
Cost of sales including distribution and occupancy costs. 55.8 56.6 54.7
----- ----- -----
Gross profit............................................. 44.2 43.4 45.3
Operating, selling, general and administrative expenses.. 29.6 30.1 29.7
----- ----- -----
Operating income......................................... 14.6 13.3 15.6
Interest expense - net................................... 2.3 2.2 1.8
Other expense - net...................................... 0.3 0.3 0.0
---- ----- -----
Income before provision for income taxes................. 12.0 10.8 13.8
Provision for income taxes............................... 4.8 4.3 5.5
---- ----- -----
Net income............................................... 7.2% 6.5% 8.3%
===== ====== ======

FORWARD-LOOKING STATEMENTS

The statements contained in this Annual Report on Form 10-K which are
not historical facts, including (without limitation) in particular, statements
made in this Item and in "Item 1 - Business," may contain forward-looking
statements that are subject to important factors that could cause actual results
to differ materially from those in the forward-looking statement, including
(without limitation) product demand, the effect of economic conditions, the
impact of competitive services, products and pricing, product development, parts
supply restraints or difficulties, industry regulation and the continued
availability of capital resources and financing and other risks set forth or
incorporated herein and in the Company's Securities and Exchange Commission
filings. The Company does not undertake to update any forward-looking statement
that may be made from time to time by or on behalf of the Company.

FISCAL 1997 AS COMPARED TO FISCAL 1996

Sales for fiscal 1997 increased $24.1 million, or 20.5% over sales for
fiscal 1996. The increase was due to a comparable store sales increase of 7.9%
and an increase of approximately $16.3 million for stores opened since April 1,
1995. During the year, 40 stores were opened and one was closed. At March 31,
1997, the Company had 313 stores in operation.

18
19

Management believes that sales increases were driven, in part, by
pent-up demand from previously deferred repairs, combined with a number of
industry factors. These include an increase in the average age of vehicles, a
decrease in the number of service bays, an increase in the number of registered
vehicles, and a shift in the consumer mentality from "do-it-yourself" to
"do-it-for-me" caused by the increased complexity of cars. Additionally,
management believes that successful performance of its operating strategy,
centered on owning and operating all of its stores, helped contribute to the
sales increase. Company operated stores facilitate focused and consistent
execution in key areas such as the Company's unwavering commitment to customer
satisfaction, comprehensive training of service technicians and competitive
pricing.

Gross profit for fiscal 1997 was $62.4 million or 44.2% of sales, as
compared with $50.9 million or 43.4% of sales for fiscal 1996. The improvement
in gross profit as a percentage of sales is primarily due to increases in
selling prices coupled with a reduction in certain material costs as a result of
renegotiated pricing with various vendors.

Operating, selling, general and administrative expenses for fiscal 1997
increased by $6.5 million to $41.7 million and, as a percentage of sales,
decreased by .5% as compared to fiscal 1996. The increase in total dollars
expended is primarily attributable to increased store supervision and increased
store support expenses related to the Company's expansion. These expenses
declined as a percentage of sales largely due to management's continued focus on
discretionary spending and controlling costs. One area accounting for a more
significant portion of the decrease as a percent of sales was an increase in the
amount of cooperative advertising credits which the Company received during
fiscal 1997 as compared to the previous year. Management was effective in
improving various programs negotiated with vendors.

Operating income in fiscal 1997 of $20.6 million, or 14.6% of sales
increased by $5.1 million over the fiscal 1996 level of $15.6 million due to the
factors discussed above.

Interest expense, net of interest income, was unchanged as a percent of
sales for fiscal 1997 as compared to fiscal 1996. While average debt outstanding
for the year ended March 31, 1997 was up approximately $11.0 million over the
year ended March 31, 1996, the weighted average interest rate declined by
approximately 1.5 percentage points.

Other expense, net, at .3% of sales for the year ended March 31, 1997
remained unchanged as percent of sales from the year ended March 31, 1996. This
amount includes carrying costs for the Company's former warehouse facility which
was sold in the fourth quarter of fiscal 1997.

The Company's effective tax rate was 39.8% of pre-tax income in fiscal
1997 as compared to 39.6% for fiscal 1996.

Net income for fiscal 1997 increased by $2.6 million or 33.8% over
fiscal 1996, reflecting higher gross profit and lower operating expenses,
partially offset by a higher effective tax rate.

19
20

FISCAL 1996 AS COMPARED TO FISCAL 1995

Sales for fiscal 1996 increased $8.0 million, or 7.3%, over sales for
fiscal 1995. This increase was due to an increase of approximately $17.3 million
for stores opened since April 1, 1995, partially offset by a comparable store
sales decrease of 3.9%. During the year, 43 stores were opened and one was
closed. At March 31, 1996, the Company had 274 stores in operation.

Management believes that the comparable store sales decrease resulted
from a slowdown in consumer spending for most of calendar 1995, caused by a
general decline in economic conditions, particularly in the northeastern part of
the country where most of the Company's stores are located.

Gross profit for fiscal 1996 was $50.9 million or 43.4% of sales, as
compared with $49.4 million or 45.3% of sales for fiscal 1995. The reduction in
gross profit as a percent of sales was due, in part, to an increase in purchases
at the store level of certain higher-cost parts. During periods of slower sales,
store personnel more readily accept undercar repair work outside of the normal
recurring services the store usually provides. This repair work often involves
parts not stocked by the Company. In addition, labor costs increased as a
percent of sales because, during periods of slower sales when technicians may
not be fully productive, they will receive a minimum base level wage. Lastly,
distribution and occupancy costs increased as a percent of sales for fiscal 1996
primarily due to an increase in the number of stores against a decrease in
comparable store sales.

Operating, selling, general and administrative expenses for fiscal 1996
increased by $3.0 million to $35.3 million and, as a percentage of sales,
increased by .4% as compared to fiscal 1995. This increase in total dollars
expended is due, among other things, to additional supervision and advertising
expense in newly-added stores and regions, greater costs related to the
Company's continuing investment in training, and additional store expenses
related to the growth in the number of stores. Although expenses increased
during fiscal 1996 as compared to fiscal 1995, the growth rate of these expenses
(9.3%) was lower than the percentage increase in the number of stores (18.5%),
due to ongoing, concerted efforts by management to control costs and to operate
within budgetary constraints. Accounting for a large portion of the cost
reductions were decreases in bonus and profit sharing expenses. Since the
Company did not attain the minimum required percentage of targeted profit
performance, employee bonus payments were significantly reduced and were
eliminated for executive officers, and profit sharing contributions were
eliminated.

Operating income in fiscal 1996 of $15.6 million, or 13.3% of sales,
decreased by $1.5 million from the fiscal 1995 level of $17.1 million due to the
factors discussed above.

Interest expense, net of interest income, increased as a percent of
sales from 1.8% in fiscal 1995 to 2.2% in fiscal 1996 primarily due to increased
borrowings. Average debt outstanding for the year ended March 31, 1996 was up
approximately $9.7 million as compared to the year ended March 31, 1995.

20
21

Other expense, net, of $.3 million in fiscal 1996 represents costs
incurred to move to the Company's new office/warehouse facility as well as
carrying costs for the former warehouse facility through fiscal 1997.

The Company's effective tax rate decreased to 39.6% of pre-tax income
in fiscal 1996 from 39.9% in fiscal 1995 primarily due to reductions in state
tax rates in two of the states in which the Company operates.

Net income for fiscal 1996 decreased by $1.5 million or 16.2% compared
to fiscal 1995 due to the factors discussed above.

CAPITAL RESOURCES AND LIQUIDITY

Capital Resources

The Company's primary capital requirements for fiscal 1997 were the
funding of its new store expansion program and the upgrading of
facilities and systems in existing stores, totaling $28.3 million, and
principal payments on long-term debt and capital leases of $49.5
million.

In both fiscal years 1997 and 1996, these capital requirements were met
by cash flow from operations and through the use of a Revolving Credit
Facility. Additionally, in fiscal 1996, capital requirements were met
through the use of interim and permanent mortgages. (See additional
discussion under "Liquidity".)

In fiscal 1998, the Company intends to open 40-50 new stores. Total
capital required to open a new store ranges, on average (based upon the
last three fiscal years' openings), from $242,000 to $843,000 depending
on whether the store is leased, owned or land leased. Management
believes that the Company has sufficient resources available (including
cash and equivalents, cash flow from operations and bank financing) to
expand its business as currently planned for the next several years.

Liquidity

At March 31, 1997, the Company had a $3.5 million line of credit for
the purpose of issuing stand-by-letters of credit on an unsecured
basis. The line requires fees aggregating .875% annually of the face
amount of each stand-by-letter of credit, payable quarterly in advance.
A total of $3.3 million of letters of credit were outstanding under
this line at March 31, 1997.

As of June 1, 1997, the Company had outstanding $3.7 million in
principal amount of its 10.65% Senior Notes due 2000 (the "Senior
Notes") with Massachusetts Mutual Life Insurance Company pursuant to a
Senior Note Agreement. The fourth of six annual installments of
principal of $1.8 million was paid on April l, 1997.

21
22

Through February 1996, the Company had a real estate line of credit of
$25.0 million to be used for the placement of store mortgages. This
line was terminated in fiscal 1996 at the Company's initiative and
replaced by a new unsecured Revolving Credit facility with two banks.
The Company must pay a facility fee of .125% annually on the unused
portion of the facility. In March 1997, the Company received a
commitment from the lenders to increase the amount available under the
facility from $30 million to $50 million and extend the term to March
2000.

The Company has available a line of credit of $7.5 million under a
short-term borrowing agreement at the lower of the prime rate or other
rate options available at the time of borrowing. There are no
commitment fees associated with this line of credit. Based upon the
Company's ability and intent to refinance the amount outstanding under
the line of credit with its expanded Revolving Credit facility, the
$1.8 million balance has been classified as long-term debt at March 31,
1997.

Prior to the termination of the real estate line, the Company had
utilized $13.2 million for permanent mortgages. Any mortgage may be
converted from a floating rate to a fixed rate loan during the first
five years of its seven-year term. Interest is payable monthly. Monthly
installments of principal are required based on 20-year amortization
periods.

During fiscal 1995, the Company purchased 12.7 acres of land for $.7
million from the City of Rochester, New York, on which its new
office/warehouse facility is located. The City has provided financing
for 100 percent of the cost of the land via a 20-year non-interest
bearing mortgage, all due and payable in 2014.

To finance its new office/warehouse building, the Company obtained
permanent mortgage financing consisting of a 10-year mortgage for $2.9
million and an eight-year term loan in the amount of $.7 million. Both
obligations require monthly interest payments, and each may be
converted from a floating rate to a fixed rate loan before the last two
years of their respective terms. The mortgage requires equal monthly
installments of principal based on a 20-year amortization period, and
the term loan requires equal monthly payments of principal to fully
amortize the debt over the eight-year term. The Company entered into an
interest rate swap agreement with a major financial institution which
effectively fixes the interest rate over the terms of the
aforementioned agreements at 7.15%.

The Company also obtained a commitment for a $.5 million term loan to
finance equipment for the new office/warehouse building. The obligation
requires equal monthly principal payments to fully amortize the debt
over a five-year term. Interest is payable monthly, and the obligation
may be converted from a floating rate to a fixed rate loan during the
first three years. No amounts had been borrowed under this term loan as
of March 31, 1997.

22
23

Certain of the Company's long-term debt agreements require, among other
things, the maintenance of specified current ratios, interest and rent
coverage ratios and amounts of tangible net worth, and also contain
restrictions on dividend payments and capital expenditures. The Company
is in compliance with these requirements at March 31, 1997, and does
not believe that the covenants materially affect its business.

As of March 31, 1997, the Company had cash and equivalents of $6.4
million.

Inflation

The Company does not believe its operations have been materially
affected by inflation. The Company has been successful, in many cases,
in mitigating the effects of merchandise cost increases principally
through the use of volume discounts and alternative vendors.

Financial Accounting Standards

Statement of Position (SOP) 93-7, "Reporting on Advertising Costs,"
which provides guidance on financial reporting on advertising costs,
was issued in December 1993. This Statement was adopted by the Company
in fiscal 1996 and had an immaterial effect on the results of
operations.

Effective in fiscal 1997, the Company adopted the disclosure
requirements of Statement of Financial Accounting Standards No. 123,
"Accounting for Stock-Based Compensation". As permitted under SFAS 123,
the Company will continue to measure stock-based compensation cost as
the excess of the quoted market price of the Company's common stock at
the grant date over the amount the employee must pay for the stock.

Statement of Financial Accounting Standards No. 128 ("SFAS 128"),
"Earnings Per Share", was issued in February 1997. This Statement
establishes standards for computing and presenting earnings per share
("EPS"), and simplifies the standards previously found in APB Opinion
No. 15 ("APB 15"). It replaces the presentation of primary EPS with a
presentation of basic EPS, and also requires dual presentation of basic
and diluted EPS on the face of the income statement for all entities
with complex capital structures. The Company plans to adopt the
Statement in fiscal 1998.

The Company expects that basic EPS as calculated under SFAS 128 will
not vary materially from primary EPS as calculated under APB 15 because
of minimal option activity, nor vary materially from diluted EPS.

23
24

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Page

Report of Independent Accountants................................... 25

Audited Financial Statements:

Consolidated Balance Sheet at March 31, 1997 and 1996...... 26

Consolidated Statement of Income for the three years
ended March 31, 1997.................................... 27

Consolidated Statement of Changes in Shareholders'
Equity for the three years ended March 31, 1997.... 28

Consolidated Statement of Cash Flows for the three
years ended March 31, 1997......................... 29

Notes to Consolidated Financial Statements.................. 30

Selected Quarterly Financial Information (Unaudited)................. 45

24
25

REPORT OF INDEPENDENT ACCOUNTANTS

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

In our opinion, the consolidated financial statements listed in the accompanying
index present fairly, in all material respects, the financial position of Monro
Muffler Brake, Inc. and its subsidiary at March 31, 1997 and 1996, and the
results of their operations and their cash flows for each of the three years in
the period ended March 31, 1997, in conformity with generally accepted
accounting principles. These financial statements are the responsibility of the
Company's management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of these
statements in accordance with generally accepted auditing standards which
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for the opinion expressed above.

PRICE WATERHOUSE LLP
Rochester, New York
May 19, 1997

25
26

MONRO MUFFLER BRAKE, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEET
================================================================================

MARCH 31,
1997 1996
---- ----
(DOLLARS IN THOUSANDS)
ASSETS

Current assets:
Cash and equivalents, including interest-bearing
accounts of $6,438 in 1997 and $5,280 in 1996 $ 6,438 $ 5,280
Trade receivables 1,128 1,230
Inventories 20,010 16,538
Federal and state income taxes receivable 296 18
Deferred income tax asset 1,790 1,275
Other current assets 2,935 2,206
--------- ---------
Total current assets 32,597 26,547
--------- ---------
Property, plant and equipment 151,906 126,248
Less - Accumulated depreciation and amortization (42,223) (35,969)
--------- ---------
Net property, plant and equipment 109,683 90,279
Other noncurrent assets 3,987 3,229
--------- ----------
Total assets $ 146,267 $ 120,055
========= =========

LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities:
Current portion of long-term debt $ 3,128 $ 3,165
Trade payables 8,728 6,870
Accrued interest 270 345
Accrued payroll, payroll taxes and other payroll
benefits 4,260 2,836
Accrued insurance 2,110 1,579
Other current liabilities 4,522 2,861
--------- ---------
Total current liabilities 23,018 17,656

Long-term debt 54,864 45,459
Deferred income tax liability 1,760 1,053
--------- ---------
Total liabilities 79,642 64,168
--------- ---------

Commitments
Shareholders' equity:
Class C Convertible Preferred Stock, $1.50 par value, $.239 and $.251
conversion value at March 31, 1997 and 1996, respectively; 150,000 shares
authorized; 91,727 shares issued and outstanding in 1997 and 1996 138 138
Common Stock, $.01 par value, 15,000,000 shares authorized; 7,470,326 shares
and 6,914,835 shares issued and outstanding in 1997 and 1996, respectively 75 69
Additional paid-in capital 22,190 17,061
Retained earnings 44,222 38,619
--------- ---------
Total shareholders' equity 66,625 55,887
--------- ---------
Total liabilities and shareholders' equity $ 146,267 $ 120,055
========= =========

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

26
27

MONRO MUFFLER BRAKE, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENT OF INCOME
================================================================================

YEAR ENDED MARCH 31,
--------------------
1997 1996 1995
---- ---- ----
(DOLLARS IN THOUSANDS, EXCEPT
PER SHARE DATA)

Sales $141,169 $117,104 $109,098
Cost of sales, including distribution and occupancy costs (a) 78,792 66,236 59,725
-------- -------- --------

Gross profit 62,377 50,868 49,373
Operating, selling, general and administrative expenses 41,749 35,299 32,304
-------- -------- --------

Operating income 20,628 15,569 17,069
Interest expense, net of interest income of $23 in 1997, $39 in 1996,
and $157 in 1995 (a) 3,224 2,637 1,939
Other expense, net 475 330 22
-------- -------- --------

Income before provision for income taxes 16,929 12,602 15,108
Provision for income taxes 6,738 4,988 6,024
-------- -------- --------

Net income $ 10,191 $ 7,614 $ 9,084
========= ========= =========

Earnings per share $ 1.25 $ .94 $ 1.12
========= ========= =========

Weighted average number of shares of common stock and
common stock equivalents used in computing earnings per share 8,171 8,077 8,084
========= ========= =========

(a) Costs and expenses include charges for payments under operating and
capital leases with affiliated parties totaling $1,828, $1,688, and
$1,812 for the years ended March 31, 1997, 1996 and 1995, respectively.

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

27
28

MONRO MUFFLER BRAKE, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
================================================================================

CLASS C
CONVERTIBLE ADDITIONAL
PREFERRED COMMON PAID-IN RETAINED
STOCK STOCK CAPITAL EARNINGS TOTAL
----- ----- ------- -------- -----
(DOLLARS IN THOUSANDS)

Balance at March 31, 1994 $138 $60 $ 5,381 $33,236 $38,815

Net income 9,084 9,084

Exercise of stock options 2 268 270

Stock dividend 3 5,310 (5,313)
------ ------ --------- ---------- ----------
Balance at March 31, 1995 138 65 10,959 37,007 48,169

Net income 7,614 7,614

Exercise of stock options 104 104

Stock dividend 4 5,998 (6,002)
------ ------ --------- ---------- ----------
Balance at March 31, 1996 138 69 17,061 38,619 55,887

Net income 10,191 10,191

Exercise of stock options 2 545 547

Stock dividend 4 4,584 (4,588)
------ ------ --------- ---------- ----------

Balance at March 31, 1997 $138 $75 $22,190 $44,222 $66,625
====== ====== ======= ========== ==========

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

28

29

MONRO MUFFLER BRAKE, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENT OF CASH FLOWS
================================================================================

YEAR ENDED MARCH 31,
--------------------
1997 1996 1995
-------- -------- --------
(DOLLARS IN THOUSANDS)
INCREASE (DECREASE) IN CASH

Cash flows from operating activities:
Net income $10,191 $ 7,614 $ 9,084
------- ------- ---------
Adjustments to reconcile net income to net cash provided
by operating activities -
Depreciation and amortization 8,099 6,762 5,492
Net change in deferred income taxes 192 (266) 152
Gain on disposal of property, plant and equipment (100) (1)
Decrease (increase) in trade receivables 102 (174) (100)
Increase in inventories (3,472) (2,721) (1,938)
(Increase) decrease in other current assets (717) (373) 10
Increase in other noncurrent assets (63) (462) (48)
Increase in trade payables 1,858 1,810 1,284
Increase in accrued expenses 3,541 270 918
Decrease (increase) in federal and state income taxes payable (278) 10 (177)
-------- -------- --------
Total adjustments 9,162 4,855 5,593
-------- -------- --------
Net cash provided by operating activities 19,353 12,469 14,677
-------- -------- --------

Cash flows from investing activities:
Proceeds from the sale of short-term investments 171
Capital expenditures (27,562) (25,581) (20,299)
Proceeds from the sale of property, plant and
equipment 97 68
Payment for purchase of miscellaneous acquisitions (2,416)
-------- -------- --------
Net cash used for investing activities (27,465) (27,929) (20,128)
-------- -------- --------

Cash flows from financing activities:
Proceeds from the sale of common stock 547 104 270
Proceeds from borrowings 58,227 38,520 11,260
Principal payments on long-term debt and capital
lease obligations (49,504) (22,739) (6,854)
-------- -------- --------
Net cash provided by financing activities 9,270 15,885 4,676
-------- -------- --------

Increase (decrease) in cash 1,158 425 (775)
Cash at beginning of year 5,280 4,855 5,630
-------- -------- --------
Cash at end of year $ 6,438 $ 5,280 $ 4,855
======== ======== ========

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

29
30

MONRO MUFFLER BRAKE, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================

NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES

BACKGROUND

Monro Muffler Brake, Inc. and its wholly owned subsidiary, Monro Service
Corporation (the "Company"), had 313 automotive repair centers operating
primarily in the northeast region of the United States as of March 31, 1997. The
Company experienced a change in control during 1984 which was accounted for as a
purchase and required the recording of a new basis for assets and liabilities.

The accompanying consolidated financial statements have been prepared in
accordance with generally accepted accounting principles. The preparation of
financial statements in conformity with such principles requires the use of
estimates by management during the reporting period. Actual results could differ
from those estimates.

A description of the Company's major accounting policies follows.

FISCAL YEAR

The Company's fiscal year ends on March 31.

CONSOLIDATION

The consolidated financial statements include the Company and its wholly owned
subsidiary, Monro Service Corporation, after the elimination of intercompany
transactions and balances.

REVENUE RECOGNITION

Sales are recorded upon completion of automotive undercar repair services
provided to customers or upon the sale of incidental products and services to
customers.

INVENTORIES

The Company's inventories consist of automotive parts and tires.

Substantially all merchandise inventories are valued under the last-in,
first-out (LIFO) method. Under the first-in, first-out (FIFO) method, these
inventories would have been $544,000, $647,000 and $556,000 higher at March 31,
1997, 1996 and 1995, respectively. The FIFO value of inventory approximates the
current replacement cost.

PROPERTY, PLANT AND EQUIPMENT

All property, plant and equipment are stated at cost. For assets acquired in
conjunction with the 1984 change in control referred to above, cost represents
an allocation of the total purchase price to individual assets based on their
estimated fair values at the date of acquisition. Depreciation of property,
plant and equipment is provided on the straight-line basis. Buildings and
improvements are depreciated over lives varying from 10 to 39 years; machinery,
fixtures and equipment over lives varying from 5 to 15 years; and vehicles over
lives varying from 5 to 7 years.

Certain leases have been capitalized and are classified on the balance sheet as
fixed assets. These assets are being amortized on a straight-line basis over
their estimated lives, which coincide with the terms of the leases (Note 3).

30
31

MONRO MUFFLER BRAKE, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================

ADVERTISING

The Company expenses the production costs of advertising the first time the
advertising takes place, except for direct response advertising which is
capitalized and amortized over its expected period of future benefits.

Direct response advertising consists primarily of coupons for the Company's
services. The capitalized costs of this advertising are amortized over the
period of the coupon's validity.

Advertising expense for the years ended March 31, 1997, 1996 and 1995 was not
material to these financial statements.

INTEREST RATE HEDGE AGREEMENTS

The Company enters into interest rate hedge agreements which involve the
exchange of fixed and floating rate interest payments periodically over the life
of the agreement without the exchange of the underlying principal amounts. The
differential to be paid or received is accrued as interest rates change and is
recognized over the life of the agreements as an adjustment to interest expense.

EARNINGS PER SHARE

Earnings per share was computed by dividing net income by the weighted average
number of shares of common stock and common stock equivalents outstanding during
the respective year. Common stock equivalents consist of shares of common stock
(i) issuable upon exercise of outstanding stock options and (ii) issuable upon
conversion of the Class C convertible preferred stock (the "Class C preferred
stock"). The weighted average number of shares for all periods presented in the
accompanying financial statements has been adjusted for the five percent stock
dividends paid in August 1996, August 1995 and in August 1994 (Note 8).

STOCK-BASED COMPENSATION

The Company measures stock-based compensation cost as the excess of the quoted
market price of the Company's common stock at the grant date over the amount the
employee must pay for the stock. The Company's policy is to generally grant
stock options at fair market value at the date of grant.

STATEMENT OF CASH FLOWS

For purposes of the Statement of Cash Flows, the Company considers all highly
liquid instruments with a maturity of three months or less to be cash
equivalents.

RECLASSIFICATIONS

Certain amounts in the Consolidated Balance Sheet and the Consolidated Statement
of Cash Flows have been reclassified to improve reporting and maintain
comparability among the periods presented.

NOTE 2 - ACQUISITIONS

During fiscal 1996, the Company completed the acquisition of 14 existing
automotive repair stores in five separate transactions totalling $2.8 million.
The largest of the acquisitions was the purchase of the operating assets of
seven Muffler Xpress stores located in North and South Carolina and Virginia for
$1.2 million in September 1995. These acquisitions were accounted for as
purchases and did not have a significant effect on the Company's consolidated
financial statements.

31
32

MONRO MUFFLER BRAKE, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================

NOTE 3 - PROPERTY, PLANT AND EQUIPMENT

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

MARCH 31, 1997 MARCH 31, 1996
-------------------------------------------- ------------------------------------
OWNED LEASED TOTAL OWNED LEASED TOTAL
----- ------ ----- ----- ------ -----
(DOLLARS IN THOUSANDS)

Land $ 21,398 $ 21,398 $15,864 $15,864
Buildings and
improvements 67,751 $6,838 74,589 54,517 $6,391 60,908
Equipment, signage
and fixtures 43,773 82 43,855 37,831 82 37,913
Vehicles 6,527 385 6,912 5,905 222 6,127
Construction-in-
progress 5,152 5,152 5,436 5,436
-------- ------ -------- ------- ------ -------
144,601 7,305 151,906 119,553 6,695 126,248
Less - Accumulated
depreciation and
amortization 38,358 3,865 42,223 32,444 3,525 35,969
-------- ------ -------- ------- ------ -------
$106,243 $3,440 $109,683 $87,109 $3,170 $90,279
======== ====== ======== ======= ====== =======

Interest costs capitalized aggregated $568,000 in 1997 and $617,000 in 1996.

Amortization expense recorded under capital leases totaled $398,000, $360,000
and $326,000 for the years ended March 31, 1997, 1996 and 1995, respectively.

NOTE 4 - OTHER NONCURRENT ASSETS

Other noncurrent assets consist of the following:

MARCH 31,
---------
1997 1996
---- ----
(DOLLARS IN THOUSANDS)

Mortgage receivable $ 975
Deferred debt issuance costs 460 $ 578
Non-compete agreements 544 555
Investment in limited partnership 339 378
Goodwill 1,342 1,393
Other 327 325
------ -----
$3,987 $3,229
====== ======

Accumulated amortization associated with noncurrent assets at March 31, 1997 and
1996 amounted to $1,562,000 and $1,211,000, respectively.

Goodwill is being amortized on a straight-line basis over periods ranging from 5
to 20 years.

32
33

MONRO MUFFLER BRAKE, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

================================================================================

NOTE 5- LONG-TERM DEBT

Long-term debt consists of the following:

MARCH 31,
---------
1997 1996
---- ----
(DOLLARS IN THOUSANDS)

Revolving Credit Facility $30,000 $19,790
Line of Credit 1,800
10.65% Senior Notes, due in installments through fiscal year 2000 5,500 7,333
Mortgage Notes Payable, LIBOR plus 1.0%, secured by store properties, due
in installments through 2003 (a) 9,578
Mortgage Notes Payable, LIBOR plus 1.6%, secured by store
properties, due in installments through 2001 (a) 4,466
Mortgage Notes Payable, LIBOR plus 1.35%, secured by store properties,
due in installments through 2002 (a) 1,990
Mortgage Notes Payable, LIBOR plus 1.25%, secured by store properties, due
in installments through 2003 (a) 3,683
Mortgage Note Payable, LIBOR plus .8%, secured by new warehouse and
office building, due in installments through 2006 (a) 2,755 2,903
Term loan financing, LIBOR plus .8%, secured by new warehouse and
office building, due in installments through 2004 (a) 609 702
Mortgage Note Payable, non-interest bearing, secured by new warehouse and office
land, due in one installment in 2015 660 660
Other mortgages and notes, prime plus .75% to 10.5%, partially secured by store
properties and equipment, due in installments through 2003 (a) 1,777 1,932
Obligations under capital leases, 6.0% to 16.8%, secured by store properties and
certain equipment, due in installments through 2012 5,330 5,055
8.5% Mortgage Note Payable, secured by warehouse and office
building, due in installments through 1997 162

------------- -------------
58,009 48,676
Less - Unamortized debt discount (b) 17 52
------------- -------------
57,992 48,624
Less - Current portion 3,128 3,165
------------- -------------

$54,864 $45,459
============= =============

(a) The prime rate at March 31, 1997 was 8.5%. The London Interbank Offered
Rate (LIBOR) at March 31, 1997 was 5.69%.

(b) The debt discount is the result of valuing the debt at fair market
value as of the 1984 purchase date.

33
34

MONRO MUFFLER BRAKE, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================

At March 31, 1997, the Company has a $3.5 million line of credit for the purpose
of issuing stand-by-letters of credit on an unsecured basis. The line requires
fees aggregating .875% annually of the face amount of each stand-by-letter of
credit, payable quarterly in advance. A total of $3.3 million of letters of
credit were outstanding under this line at March 31, 1997.

Through February 1996, the Company had a real estate line of credit of $25.0
million to be used for the placement of store mortgages. The real estate line of
credit was terminated in fiscal 1996 at the Company's initiative and replaced by
a new Revolving Credit Facility.

Prior to the termination of the real estate line of credit, the Company had
utilized $13.2 million for permanent mortgages. Any mortgage may be converted
from a floating rate to a fixed rate loan during the first five years of its
seven-year term. Interest is payable monthly. Equal monthly installments of
principal are required based on 20-year amortization periods. During fiscal
1997, the Company completed the modification of its LIBOR based mortgages,
reducing the various interest rates to LIBOR plus 1.0%.

In February 1996, the Company finalized an unsecured Revolving Credit Agreement
with two banks. Under the terms of the Agreement, the Company may borrow at the
prime rate or at a LIBOR based rate which fluctuates quarterly dependent upon
Company performance. The Company must pay a facility fee of .125% annually on
the unused portion of the commitment. In March 1997, the Company received a
commitment from the lenders to increase the amount available under the facility
from $30 million to $50 million and extend the term to March 2000. Principal
payments begin in April 2000 in equal monthly installments based on a five-year
amortization period.

The Company has available an unsecured line of credit of $7.5 million under a
short-term borrowing agreement at the lower of the prime rate or other rate
options available at the time of borrowing. There are no commitment fees
associated with this line of credit. Based upon the Company's ability and intent
to refinance the amount outstanding under the line of credit with its expanded
Revolving Credit facility, the $1.8 million balance has been classified as
long-term debt at March 31, 1997.

During fiscal 1995, the Company purchased 12.7 acres of land for $.7 million
from the City of Rochester, New York, on which its new office/warehouse facility
is located. The City has provided financing for 100 percent of the cost of the
land via a 20-year non-interest bearing mortgage, all due and payable in 2015.

To finance its new office/warehouse building, the Company obtained permanent
mortgage financing consisting of a 10-year mortgage for $2.9 million and an
eight-year term loan in the amount of $.7 million. Both obligations require
monthly interest payments, and each may be converted from a floating rate to a
fixed rate loan before the last two years of their respective terms. The
mortgage requires equal monthly installments of principal based on a 20-year
amortization period, and the term loan requires constant monthly payments of
principal to fully amortize the debt over the eight-year term. The Company
entered into an interest rate swap agreement with a major financial institution
which effectively fixes the interest rate over the terms of the aforementioned
agreements at 7.15%.

The Company also has obtained a commitment for a $.5 million term loan to
finance equipment for the new office/warehouse building. The obligation requires
equal monthly principal payments to fully amortize the debt over a five-year
term. Interest is payable monthly at LIBOR plus .8%, and the obligation may be
converted from a floating rate to a fixed rate loan during the first three
years. No amounts had been borrowed under this term loan as of March 31, 1997.

Certain of the Company's long-term debt agreements require, among other things,
the maintenance of specified current ratios, interest and rent coverage ratios
and amounts of tangible net worth, and also contain restrictions on dividend
payments and capital expenditures. The Company is in compliance with these
requirements at March 31, 1997. These agreements permit mortgages and specific
financing lease arrangements with other parties with certain limitations.

34
35

MONRO MUFFLER BRAKE, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================

Aggregate debt maturities (excluding amortization of debt discount) over the
next five years and thereafter are as follows:

CAPITAL LEASES
--------------
AGGREGATE IMPUTED ALL OTHER
YEAR ENDED MARCH 31, AMOUNT INTEREST DEBT TOTAL
-------------------- ------ -------- ---- -----
(DOLLARS IN THOUSANDS)

1998 $1,202 $(855) $2,798 $ 3,145
1999 1,157 (803) 3,249 3,603
2000 1,132 (747) 3,928 4,313
2001 1,137 (680) 9,296 9,753
2002 1,096 (598) 8,374 8,872
Thereafter 5,843 (2554) 25,034 28,323
-------
Total $58,009
=======

NOTE 6 - FAIR VALUE OF FINANCIAL INSTRUMENTS

Financial instruments consisted of the following:

MARCH 31, 1997 MARCH 31, 1996
-------------- --------------
CARRYING FAIR CARRYING FAIR
AMOUNT VALUE AMOUNT VALUE
------ ----- ------ -----
(DOLLARS IN THOUSANDS)

Cash and cash equivalents $ 6,438 $ 6,438 $ 5,280 $ 5,280
Long-term debt, including current portion $52,679 $52,298 $43,621 $43,768

The carrying amount of cash and cash equivalents approximates fair value because
their maturity is generally less than one year in duration. Fair value of
long-term debt was estimated using either quoted market prices for the same or
similar issues, or the current rates offered to the Company for debt with
similar maturities.

35
36

MONRO MUFFLER BRAKE, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================

NOTE 7 - INCOME TAXES

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

YEAR ENDED MARCH 31,
--------------------
1997 1996 1995
---- ---- ----
(DOLLARS IN THOUSANDS)

Currently payable -
Federal $ 5,418 $ 4,340 $ 4,760
State 1,128 908 1,148
------- ------- -------
6,546 5,248 5,908
Deferred -
Federal 159 (219) 98
State 33 (41) 18
------- ------- -------
192 (260) 116
------- ------- -------
Total $ 6,738 $ 4,988 $ 6,024
======= ======= =======

Deferred tax (liabilities) assets are comprised of the following:

YEAR ENDED MARCH 31,
--------------------
1997 1996 1995
---- ---- ----
(DOLLARS IN THOUSANDS)

Property and equipment basis differences $(2,014) $(1,352) $(1,241)
Prepaid expenses (397) (316) (365)
Tax shelter investment (287) (263) (240)
Installment sale (265)
Other (79) (33) (82)
------- ------- -------

Gross deferred tax liabilities (3,042) (1,964) (1,928)
------- ------- -------

Capital leases 755 527 640
Insurance accruals 798 605 524
Inventory reserves 43 65 84
Vacation accrual 174 166 152
Warranty and other reserves 1,034 551 388
Other 268 272 96
------- ------- -------

Gross deferred tax assets 3,072 2,186 1,884
------- ------- -------

Net deferred tax asset (liability) $ 30 $ 222 $ (44)
======= ======= =======

The Company believes that it is more likely than not that the net deferred tax
asset will be realized through taxable earnings or alternative tax strategies.

36
37

MONRO MUFFLER BRAKE, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================

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

YEAR ENDED MARCH 31,
--------------------
1997 1996 1995
---- ---- ----
AMOUNT PERCENT AMOUNT PERCENT AMOUNT PERCENT
------ ------- ------ ------- ------ -------
(DOLLARS IN THOUSANDS)

Federal income tax based on
statutory tax rate applied
to income before taxes $5,883 34.8 $4,311 34.2 $5,188 34.3
State income tax, net of
federal income tax benefit 758 4.5 570 4.5 766 5.1
Other 97 .5 107 .9 70 .5
====== ====== ====== ====== ====== ======
$6,738 39.8 $4,988 39.6 $6,024 39.9
====== ====== ====== ====== ====== ======

NOTE 8 - CONVERTIBLE PREFERRED STOCK AND COMMON STOCK

A summary of the changes in the number of shares of Class C preferred stock and
common stock is as follows:

COMMON CLASS C
STOCK CONVERTIBLE PREFERRED
SHARES STOCK
------------ ---------------------

Balance at March 31, 1995 6,531,230 91,727
Stock options exercised 57,116
Stock dividend 326,489
--------- ------
Balance at March 31, 1996 6,914,835 91,727
Stock options exercised 209,826
Stock dividend 345,665
--------- ------
Balance at March 31, 1997 7,470,326 91,727
========= ======

On January 26, 1996, the Board of Directors declared a five percent stock
dividend on the Company's common stock, paid August 5, 1996, to shareholders of
record as of June 21, 1996. The Company also paid a five percent stock dividend
on August 7, 1995, to shareholders of record as of June 23, 1995, and on August
1, 1994, to shareholders of record as of June 17, 1994. All share and per share
information included in the accompanying financial statements and notes have
been adjusted to give retroactive effect to these dividends.

Additionally, in accordance with antidilution provisions of the Class C
convertible preferred stock, the conversion value of the preferred stock was
restated to $.239 per share.

37
38

MONRO MUFFLER BRAKE, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================

Holders of at least 60% of the Class C preferred stock must approve any action
authorized by the holders of common stock. In addition, there are certain
restrictions on the transferability of shares of Class C preferred stock.

Under the 1984 and 1987 Incentive Stock Option Plans, 660,020 shares (as
retroactively adjusted for the five percent stock dividends) of the common stock
were reserved for issuance to officers and key employees. The 1989 Incentive
Stock Option Plan authorized an additional 157,148 shares (as retroactively
adjusted for the five percent stock dividends) for issuance.

In January 1994 and May 1995, the Board of Directors authorized an additional
233,840 and 99,750 shares, respectively (as retroactively adjusted for the stock
dividends), for issuance under the 1989 Plan. These amounts were approved by
shareholders in August 1994 and August 1995, respectively.

Generally, options vest with respect to 60% of the shares of common stock
subject thereto three years after the date of grant. Options on 50% of the
remaining shares vest on the fourth anniversary of the date of grant, and the
balance vests on the fifth anniversary of the date of grant.

The outstanding options have a duration of ten years and are exercisable through
November 2006.

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

WEIGHTED
AVERAGE
EXERCISE AVAILABLE
PRICE OUTSTANDING EXERCISABLE FOR GRANT
--------- ----------- ----------- ---------

AT MARCH 31, 1994 $3.74 793,659 633,785 214,771

Granted $16.90 22,050 (22,050)
Became exercisable 48,922
Exercised $.87 (310,301) (310,301)
Canceled $13.82 (231) 231
------------ ------------ -----------
AT MARCH 31, 1995 $6.08 505,177 372,406 192,952

Authorized 99,750
Granted $14.49 166,320 (166,320)
Became exercisable 21,934
Exercised $1.76 (59,972) (59,972)
Canceled $13.98 (3,419) (1,621) 3,419
Rounding for stock dividend 9 1
------------ ------------ -----------
AT MARCH 31, 1996 $8.76 608,115 332,747 129,802

Granted $15.43 112,609 (112,609)
Became exercisable 51,633
Exercised $2.61 (209,826) (209,826)
Canceled $14.90 (21,021) 21,021
Rounding for stock dividend (3)
------------ ------------ -----------
AT MARCH 31, 1997 $12.67 489,877 174,554 38,211
============ ============ ===========

38

39

MONRO MUFFLER BRAKE, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================

The following table summarizes information about fixed stock options outstanding
at March 31, 1997:

OPTIONS OUTSTANDING OPTIONS EXERCISABLE
---------------------- -----------------------
WEIGHTED WEIGHTED WEIGHTED
AVERAGE AVERAGE AVERAGE
RANGE OF SHARES REMAINING EXERCISE SHARES EXERCISE
EXERCISE PRICES UNDER OPTION LIFE PRICE UNDER OPTION PRICE

$ 1.00 - $10.00 87,957 2.55 $ 4.19 87,957 $ 4.19
$10.01 - $15.00 196,873 7.01 $13.06 77,566 $13.01
$15.01 - $19.75 205,047 8.73 $15.94 9,031 $16.09

In August 1994, subject to the approval of shareholders in August 1995, the
Board of Directors authorized a non-employee directors' stock option plan. The
plan initially reserves 60,637 shares of common stock (as retroactively adjusted
for the five percent stock dividends), and provides for (i) the grant to each
non-employee director as of August 1, 1994 of an option to purchase 2,756 shares
of the Company's common stock (as retroactively adjusted for the five percent
stock dividends) and (ii) the annual grant to each non-employee director of an
option to purchase 2,756 shares (as retroactively adjusted for the five percent
stock dividends) on the date of the annual meeting of shareholders beginning in
1995. The options expire ten years from the date of grant and have an exercise
price equal to the fair market value of the Company's common stock on the date
of grant. Options vest immediately upon issuance.

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

OPTION PRICE AVAILABLE
PER SHARE OUTSTANDING EXERCISABLE FOR GRANT
--------- ----------- ----------- ---------

AT MARCH 31, 1994 -0- -0- -0-

Authorized 60,637
Granted $15.59 19,294 19,294 (19,294)
--------- --------- ------------
AT MARCH 31, 1995 $15.59 19,294 19,294 41,343

Granted $14.05 19,294 19,294 (19,294)
--------- --------- ------------
AT MARCH 31, 1996 $14.05 - $15.59 38,588 38,588 22,049

Granted $18.75 19,294 19,294 (19,294)
--------- ---------
------------
AT MARCH 31, 1997 $14.05 - $18.75 57,882 57,882 2,755
========= ========= ============

In May 1997, the Board of Directors authorized an additional 200,000 shares for
issuance under the 1989 Employees' Incentive Stock Option Plan and 65,000 shares
under the 1994 Non-Employee Directors' Stock Option Plan, subject to the
approval of shareholders in August 1997.

Effective in fiscal 1997, the Company adopted the disclosure requirements of
Statement of Financial Accounting Standards No. 123 (SFAS 123), "Accounting for
Stock-Based Compensation." As permitted under SFAS 123, the Company will
continue to measure stock-based compensation cost as the excess of the quoted
market price of the Company's common stock at the grant date over the amount the
employee must pay for the stock.

39
40
MONRO MUFFLER BRAKE, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================

SFAS 123 requires disclosure of pro forma net income and pro forma net income
per share as if the fair value-based method had been applied in measuring
compensation cost for the stock-based awards granted in fiscal years 1997 and
1996. Management believes that 1997 and 1996 pro forma amounts are not
representative of the effects of stock-based awards on future pro forma net
income and pro forma earnings per share because those pro forma amounts exclude
the pro forma compensation expense related to unvested stock options granted
before fiscal 1996.

Reported and pro forma net income and earnings per share amounts are set forth
below:

YEAR ENDED MARCH 31,
--------------------
1997 1996
---- ----
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

Net income
As reported $ 10,191 $7,614
Pro forma 9,859 7,416

Earnings per share

As reported $ 1.25 $ .94
Pro forma 1.21 .92

The weighted average fair value per option at the date of grant for options
granted during fiscal 1997 and 1996 was $7.94 and $7.43, respectively. The fair
values of the options granted were estimated on the date of their grant using
the Black-Scholes option-pricing model based on the following weighted average
assumptions:

YEAR ENDED MARCH 31,
--------------------
1997 1996
---- ----

Risk free interest rate 6.24% 6.52%
Expected life 9 years 9 years
Expected volatility 26.0% 26.0%
Expected dividend yield 0% 0%

Forfeitures are recognized as they occur.

NOTE 9 - OPERATING LEASES AND OTHER COMMITMENTS

The Company leases retail facilities and computer equipment under noncancellable
lease agreements which expire at various dates through fiscal year 2013. In
addition to stated minimum payments, certain real estate leases have provisions
for contingent rentals when retail sales exceed specified levels. Generally, the
leases provide for renewal for various periods at stipulated rates. Most of the
facilities' leases require payment of property taxes, insurance and maintenance
costs in addition to rental payments, and several provide an option to purchase
the property at the end of the lease term.

40
41

MONRO MUFFLER BRAKE, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================

Future minimum payments required under noncancellable leases are as follows:

YEAR ENDED MARCH 31, AMOUNT
- - -------------------- ---------------------
(DOLLARS IN THOUSANDS)

1998 $ 7,194
1999 7,308
2000 7,266
2001 6,810
2002 5,851
Thereafter 24,310
----------

Total $ 58,739
==========

Rent expense under operating leases totaled $6,965,000, $5,500,000 and
$4,681,000 in 1997, 1996 and 1995, respectively, including contingent rentals of
$649,000, $511,000 and $587,000 in each respective year.

The Company has an employment agreement with its Chief Executive Officer. The
agreement has a two-year base term and continues year to year until terminated
by the Executive or the Company. The agreement includes a covenant against
competition with the Company for two years after termination, and provides the
Executive two years' salary and certain additional rights in the event of a
termination without cause (as defined), or a termination in the event of a
change in control (as defined).

NOTE 10 - EMPLOYEE RETIREMENT AND PROFIT SHARING PLANS

The Company has a noncontributory defined benefit plan covering most employees.
Coverage under the plan begins after completing one year of service and
attainment of age twenty-one. Benefits are based primarily on years of service
and employees' pay near retirement. The Company's funding policy is consistent
with the funding requirements of Federal law and regulations. Plan assets are
invested in fixed income funds.

The plan's funded status was as follows:

MARCH 31,
----------
1997 1996
---- ----
(DOLLARS IN THOUSANDS)

Actuarial present value of benefit obligation:
Vested benefit obligation $(3,382) $(3,177)
======== ========

Accumulated benefit obligation $(3,590) $(3,322)
======== ========

Projected benefit obligation $(4,325) $(4,103)
Plan assets at fair value 3,566 3,370
-------- -------

Projected benefit obligation in excess of plan assets (759) (733)
Unrecognized net loss 622 766
Unrecognized prior service cost 24 27
Unrecognized net transition asset (146) (175)
-------- -------

Pension liability at March 31 $ (259) $ (115)
========= =======

41
42

MONRO MUFFLER BRAKE, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================

Pension cost included the following components:

YEAR ENDED MARCH 31,
--------------------
1997 1996 1995
---- ---- ----
(DOLLARS IN THOUSANDS)

Service cost - benefits earned during the period $ 259 $ 230 $ 215
Interest cost on projected benefit obligation 293 277 248
Return on plan assets (271) (227) (159)
Amortization of net transition asset 4 14 (13)
-------- ------- -------

Net pension cost $ 285 $ 294 $ 291
======= ======= =======

The projected benefit obligation at March 31, 1997 and 1996 assumed discount
rates of 7.5%. Increase in future compensation levels was assumed to be 5% in
1997 and 1996. The assumed long-term rate of return on plan assets at March 31,
1997 and 1996 was 8%.

The unrecognized transition asset is being amortized over fifteen years
beginning April 1, 1988. The unrecognized prior service cost is being amortized
over fifteen years beginning April 1, 1990.

The Company also has a profit sharing plan which covers full-time employees who
meet the age and service requirements of the plan. The annual contribution to
the plan is at the discretion of the Compensation and Benefits Committee of the
Board of Directors and, before annual forfeitures which reduce the annual
contribution, totaled $500,000 and $475,000 for the years ended March 31, 1997
and 1995, respectively. No contribution was made for the year ended March 31,
1996.

The Company's management bonus plan provides for the payment of annual cash
bonus awards to participating employees, as selected by the Board of Directors,
based primarily on the Company's attaining pre-tax income targets established by
the Board of Directors. Charges to expense applicable to the management bonus
plan totaled $779,000, $104,000 and $764,000 for the years ended March 31, 1997,
1996 and 1995 respectively. Because the Company did not attain a minimum
required percentage of targeted profit performance in fiscal 1996, 1996 expense
does not include any bonus amounts for executive officers.

NOTE 11 - RELATED PARTY TRANSACTIONS

Certain (a) principal shareholders/directors of the Company, (b) partnerships in
which such persons have interests or (c) trusts of which members of their
families are beneficiaries are lessors of certain facilities to the Company.
Payments under such operating and capital leases amounted to $1,828,000,
$1,688,000 and $1,812,000 for the years ended March 31, 1997, 1996 and 1995,
respectively. Amounts payable under these lease agreements totaled $88,000 and
$79,000, respectively, at March 31, 1997 and 1996.

No related party leases, other than renewals or modifications of leases on
existing stores, have been entered into since May 1989 and no new leases are
contemplated.

Effective July 1991, the Company entered into a management agreement with an
investment banking firm associated with a principal shareholder/director of the
Company to provide financial advice. The agreement provides for an annual fee of
$160,000, plus reimbursement of out-of-pocket expenses. During fiscal 1997, 1996
and 1995, the Company incurred fees of $160,000 annually under this agreement.
In addition, this investment banking firm, from time to time, provides
additional investment banking services to the Company for customary fees.

42
43

MONRO MUFFLER BRAKE, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================

NOTE 12 - SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION

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

YEAR ENDED MARCH 31, 1997

In connection with the declaration of a five percent stock dividend (Note 8),
the Company increased common stock and additional paid-in capital by $4,000 and
$4,584,000, respectively, and decreased retained earnings by $4,588,000.

Capital lease obligations of $722,000 were incurred under various lease
agreements.

In connection with the sale of its former headquarters building, the Company
reduced fixed assets and increased other assets (mortgage receivable) by
$989,000.

In connection with the termination of a capital lease, the Company reduced debt
and fixed assets by $112,000.

YEAR ENDED MARCH 31, 1996

In connection with the declaration of a five percent stock dividend (Note 8),
the Company increased common stock and additional paid-in capital by $4,000 and
$5,998,000, respectively, and decreased retained earnings by $6,002,000.

Capital lease obligations of $772,000 were incurred under various lease
agreements.

In connection with the acquisition of several automotive repair stores,
liabilities were assumed as follows:

(DOLLARS IN
THOUSANDS)

Fair value of assets acquired $2,835
Cash paid 2,416

-----------
Liabilities assumed $ 419
===========

YEAR ENDED MARCH 31, 1995

In connection with the declaration of a five percent stock dividend (Note 8),
the Company increased common stock and additional paid-in capital by $3,000 and
$5,310,000, respectively, and decreased retained earnings by $5,313,000.

A capital lease obligation of $35,000 was incurred under a lease agreement.

YEAR ENDED MARCH 31,
--------------------
1997 1996 1995
---- ---- ----
(DOLLARS IN THOUSANDS)

Cash paid during the year:
Interest, net $3,867 $3,205 $2,447
Income taxes, net $6,823 $5,244 $6,049

43
44
MONRO MUFFLER BRAKE, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================

NOTE 13 - SUBSEQUENT EVENT

On May 14, 1997, the Board of Directors declared a five percent stock dividend,
payable August 4, 1997, to common stockholders of record as of June 20, 1997.
Shares of common or preferred stock included in the accompanying financial
statements and notes have not been adjusted to reflect this dividend.
---

NOTE 14 - NEW ACCOUNTING STANDARDS

Statement of Financial Accounting Standards No. 128 ("SFAS 128"), "Earnings Per
Share", was issued in February 1997. This Statement establishes standards for
computing and presenting earnings per share ("EPS"), and simplifies the
standards previously found in APB Opinion No. 15 ("APB 15"). It replaces the
presentation of primary EPS with a presentation of basic EPS, and also requires
dual presentation of basic and diluted EPS on the face of the income statement
for all entities with complex capital structures. The Company plans to adopt the
Statement in fiscal 1998.

The Company expects that basic EPS as calculated under SFAS 128 will not vary
materially from primary EPS as calculated under APB 15 because of minimal option
activity, nor vary materially from diluted EPS.

44

45
SELECTED QUARTERLY FINANCIAL INFORMATION (UNAUDITED)

The following table sets forth income statement data by quarter for the fiscal
years ended March 31, 1997 and 1996.

QUARTER ENDED
-------------
JUNE 30, SEPT.30, DEC.31, MARCH 31,
1996 1996 1996 1997
---- ---- ---- ----
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

Sales.....................................$37,745 $37,799 $33,560 $32,065
Cost of sales including distribution
and occupancy costs..................... 20,666 20,291 19,867 17,968
------- ------- ------- -------
Gross profit.............................. 17,079 17,508 13,693 14,097
Operating, selling, general
and administrative expenses............. 10,645 10,386 9,978 10,740
------- ------- ------- -------
Operating income.......................... 6,434 7,122 3,715 3,357
Interest expense - net.................... 814 851 837 722
Other expense............................. 16 55 205 199
------- ------- ------- -------
Income before provision for income taxes.. 5,604 6,216 2,673 2,436
Provision for income taxes................ 2,225 2,474 1,064 975
------- ------- ------- -------
Net income................................$ 3,379 $ 3,742 $ 1,609 $ 1,461
======= ======= ======= =======
Earnings per share (b)....................$ .42 $ .46 $ .20 $ .18
======= ======= ======= =======
Weighted number of Common Stock
shares and equivalents (a) (b).......... 8,133 8,210 8,158 8,182
======= ======= ======= =======

1995 1995 1995 1996
---- ---- ---- ----
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

Sales.....................................$28,945 $31,217 $28,190 $28,752
Cost of sales including distribution
and occupancy costs..................... 15,865 17,004 16,995 16,372
------- ------- ------- -------
Gross profit.............................. 13,080 14,213 11,195 12,380
Operating, selling, general
and administrative expenses............. 8,863 8,528 8,709 9,199
------- ------- ------- -------
Operating income.......................... 4,217 5,685 2,486 3,181
Interest expense - net.................... 666 573 544 854
Other expense............................. 129 5 3 193
------- ------- ------- -------
Income before provision for income taxes.. 3,422 5,107 1,939 2,134
Provision for income taxes................ 1,347 2,043 745 853
------- ------- ------- -------
Net income................................$ 2,075 $ 3,064 $ 1,194 $ 1,281
======= ======= ======= =======
Earnings per share (b)....................$ .26 $ .38 $ .15 $ .16
======= ======= ======= =======
Weighted number of Common Stock
shares and equivalents (a) (b).......... 8,090 8,074 8,072 8,073
======= ======= ======= =======

(a) Earnings per share for each period was computed by dividing net income by
the weighted average number of shares of Common Stock and Common Stock
equivalents outstanding during the respective quarters.

(b) All share and per share information has been adjusted to give retroactive
effect to the five percent stock dividends paid in August 1996, August 1995 and
in August 1994.

45
46

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

None.

PART III
--------

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY
- - -------- -----------------------------------------------

Information concerning the directors of the Company is incorporated herein by
reference to the section captioned "Election of Directors" in the Proxy
Statement.

Information concerning the executive officers of the Company is set forth in
Item 4A of Part I hereof.

Information concerning required Section 16(a) disclosure is incorporated
herein by reference to the section captioned "Compliance with Section 16(a) of
the Exchange Act" in the Proxy Statement.

ITEM 11. EXECUTIVE COMPENSATION
- - -------- ----------------------

Information concerning executive compensation is incorporated herein by
reference to the section captioned "Executive Compensation" in the Proxy
Statement.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
- - -------- -----------------------------------------------
AND MANAGEMENT
- - --------------

Information concerning security ownership of certain beneficial owners and
management is incorporated herein by reference to the sections captioned
"Principal Shareholders" and "Election of Directors" in the Proxy Statement.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
- - -------- ----------------------------------------------

Information concerning certain relationships and related transactions is
incorporated herein by reference to the sections captioned "Compensation
Committee Interlocks and Insider Participation" and "Certain Transactions"
in the Proxy Statement.

46

47

PART IV
-------

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
- - -------- ----------------------------------------------------------------

FINANCIAL STATEMENTS
--------------------

Reference is made to Item 8 of Part II hereof.

FINANCIAL STATEMENT SCHEDULES
-----------------------------

Schedules have been omitted because they are inapplicable, not
required, or the information is included elsewhere in the Financial
Statements or the notes thereto.

EXHIBITS
--------

Reference is made to the Index to Exhibits accompanying this Form 10-K
as filed with the Securities and Exchange Commission. The Company will
furnish to any shareholder, upon written request, any exhibit listed
in such Index to Exhibits upon payment by such shareholder of the
Company's reasonable expenses in furnishing any such exhibit.

REPORTS ON FORM 8-K
-------------------

No reports on Form 8-K were filed during the last quarter of fiscal
1997.

47

48

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the registrant has duly caused this report to
be signed on its behalf by the undersigned, thereunto duly authorized.

MONRO MUFFLER BRAKE, INC.
(Registrant)

By /S/ LAWRENCE C. DAY
-------------------------------------------
Lawrence C. Day
President and Chief Executive Officer

Date: June 27, 1997

Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant and in the capacities indicated as of June 27, 1997.

SIGNATURE TITLE

/S/ CATHERINE D'AMICO Senior Vice President-Finance, Chief
- - ----------------------- Financial Officer and Treasurer
Catherine D'Amico (Principal Financial and Accounting
Officer)

Burton S. August* Director

Charles J. August* Director

Robert W. August* Director

Frederick M. Danziger* Director

Jack M. Gallagher* Director

Donald Glickman* Director

Peter J. Solomon* Director

Lionel B. Spiro* Director

W. Gary Wood* Director

*By /S/ LAWRENCE C. DAY
-----------------------------------------
Lawrence C. Day
Chief Executive Officer,
Director and as Attorney-in-Fact

48

49

INDEX TO EXHIBITS

he following is a list of all exhibits filed herewith or incorporated
ce herein:

EXHIBIT NO. PAGE DOCUMENT
- - ----------- ---- --------

3.01* Restated Certificate of Incorporation of the Company, dated
July 23, 1991, with Certificate of Amendment, dated November
1, 1991. (1992 Form 10-K, Exhibit No. 3.01)

3.02* Restated By-Laws of the Company, dated July 23, 1991.
(Amendment No. 1, Exhibit No. 3.04)

4.01* Revolving Credit Agreement, dated February 7, 1996, among
Monro Muffler Brake, Inc., as borrower, and The Chase
Manhattan Bank, N.A. and Fleet Bank as lenders, and The
Chase Manhattan Bank, N.A. as agent. (1996 Form 10-K,
Exhibit No. 4.01)

4.02* Senior Note Agreement, dated March 1, 1989, between the
Company and Massachusetts Mutual Life Insurance Company.
(Form S-1, Exhibit No. 4.02)

4.02a* Amendment No. 1, dated June 17, 1991, to Senior Note
Agreement, between the Company and Massachusetts Mutual Life
Insurance Company. (Amendment No. 1, Exhibit No. 4.02a)

4.03* 10.65% Senior Notes Due April 1, 1999, dated March 22, 1989,
issued by the Company to Massachusetts Mutual Life Insurance
Company. (Form S-1, Exhibit No. 4.03)

4.04* Form of 10% Subordinated Promissory Note, dated July 12,
1984, issued by the Company to Charles J. August, Robert W.
August, John W. August, Burton Stuart August and Waldemar
Bachman. No amounts were outstanding as of March 31, 1995.
(Form S-1, Exhibit No. 4.07)

4.05* Unsecured Line of Credit, Commitment Letter, dated October
5, 1995, between the Company and The Chase Manhattan Bank,
N.A. (September 1995 Form 10-Q, Exhibit No. 4.01)

4.06* Offering Line of Credit for Standby Letters of
Credit, Commitment Letter, dated October 5, 1995, between the
Company and The Chase Manhattan Bank, N.A. (September 1995
Form 10-Q, Exhibit No. 4.02)

4.07* Real Estate Line of Credit, Commitment Letter, dated January
13, 1995, between the Company and The Chase Manhattan Bank,
N.A. (December 1994 Form 10-Q, Exhibit No. 4.01)

4.08* Commitment Letter for new headquarters facility, dated
January 13, 1995, between the Company and The Chase
Manhattan Bank, N.A. (December 1994 Form 10-Q, Exhibit No.
4.04)

49

50

EXHIBIT NO. PAGE DOCUMENT
- - ----------- ---- --------

10.01* 1984 Employees' Incentive Stock Option Plan, as amended
through December 23, 1992. (Form S-8, Exhibit No. 4-1)**

10.02* 1987 Employees' Incentive Stock Option Plan, as amended
through December 23, 1992. (Form S-8, Exhibit No. 4-2)**

10.03* 1989 Employees' Incentive Stock Option Plan, as amended
through December 23, 1992. (Form S-8, Exhibit No. 4-3)**

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

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

10.03c 58 Amendment, dated as of May 14, 1997 to the 1989 Employees'
Incentive Stock Option Plan (1997 Form 10-K, Exhibit
No. 10.03c)**

10.04* Retirement Plan of the Company, as amended and restated
effective as of April 1, 1989. (September 1993 Form 10-Q,
Exhibit No. 10)**

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

10.06* Mortgage and Security Agreement, dated September 1, 1987,
between the Company and The Chase Lincoln First Bank, N.A.,
with Mortgage Note, dated September 21, 1987, and
Conditional Assignment of Leases and Rents, dated September
1, 1987, with respect to Shop No. 87. (Form S-1, Exhibit No.
10.07)

10.07* Bond and Mortgage, dated April 9, 1986, among the Company,
Gerald Levin and Eleanor B. Levin, and Frank A. Cancelino
and Jemma A. Cancelino, with respect to Shop No. 75. (Form
S-1, Exhibit No. 10.08)

10.08* Mortgage, dated July 31, 1987, between the Company and
Central Trust Company, with Mortgage Note, dated July 31,
1987, with respect to Shop No. 82. (Form S-1, Exhibit No.
10.09)

10.08a* Amendment, dated June 17, 1991, to Mortgage with respect to
Shop No. 82, between the Company and Central Trust Company.
(Amendment No. 1, Exhibit No. 10.09a)

10.09* Mortgage and Security Agreement, dated September 21, 1987
between the Company and Chase Lincoln First Bank, N.A., with
Mortgage Note, dated September 21, 1987, and Conditional
Assignment of Leases and Rents, dated September 1, 1987,
with respect to Shop No. 78. (Form S-1, Exhibit No. 10.10)

10.10* Mortgage and Security Agreement, dated September 1, 1987,
between the Company and Chase Lincoln First Bank, N.A., with
Mortgage Note, dated September 1, 1987, and Conditional
Assignment of Leases and Rents, dated September 1, 1987,
with respect to Shop No. 86. (Form S-1, Exhibit No. 10.11)

50

51

EXHIBIT NO. PAGE DOCUMENT
- - ----------- ---- --------

10.11* Mortgage and Security Agreement, dated December 1, 1987,
between the Company and Chase Lincoln First Bank, N.A., with
Mortgage Note, dated December 28, 1987, and Conditional
Assignment of Leases and Rents, dated December 1, 1987, with
respect to Shop No. 90. (Form S-1, Exhibit No. 10.12)

10.12* Mortgage and Security Agreement, dated August 1, 1988,
between the Company and Chase Lincoln First Bank, N.A., with
Mortgage Note, dated August 9, 1988, and Conditional
Assignment of Leases and Rents, dated August 1, 1988, with
respect to Shop No. 120. (Form S-1, Exhibit No. 10.13)

10.13* Mortgage and Security Agreement, dated August 1, 1988,
between the Company and Chase Lincoln First Bank, N.A., with
Mortgage Note, dated August 9, 1988, and Conditional
Assignment of Leases and Rents, dated August 1, 1988, with
respect to Shop No. 124. (Form S-1, Exhibit No. 10.14)

10.14* Mortgage and Security Agreement, dated August 1, 1988,
between the Company and Chase Lincoln First Bank, N.A., with
Mortgage Note, dated August 9, 1988, and Conditional
Assignment of Leases and Rents, dated August 1, 1988, with
respect to Shop No. 125. (Form S-1, Exhibit No. 10.15)

10.15* Mortgage, dated January 1, 1983, among the Company, Lincoln
First Bank, N.A., Mary C. Vasile, David A. Vasile, Marie J.
Vasile, Vincenza Vasile, Anthony G. Cashette, Joseph A.
Fischette and Lillian Lobene, with Mortgage Note, dated
January 1, 1983, and Assignment of Mortgage, dated December
3, 1984, by Lillian Lobene to Leo and Matilda Iaia, with
respect to the Company's former headquarters offices and
warehouse facilities. No amounts were outstanding as of
March 31, 1997. (Form S-1, Exhibit No. 10.16)

10.15a* Modification and Extension Agreement, dated January 28,
1993, among the Company, The Chase Manhattan Bank, N.A.
(formerly Lincoln First Bank, N.A.), Mary C. Vasile, David
A. Vasile, Robert Oppenheimer, Vincenza Vasile, Anthony G.
Cashette, Joseph A. Fischette and Leo and Matilda Iaia, with
respect to the Company's former headquarters offices and
warehouse facilities. No amounts were outstanding as of
March 31, 1997. (1993 Form 10-K, Exhibit No. 10.15a)

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

10.17* Sublease, dated June 1, 1980, among August, August and Lane
Co-venture and the Company, with Amendment of Lease, dated
July 11, 1984, and assigned by August, August and Lane
Co-venture to AA & L Associates, L.P., effective January 2,
1996 with respect to Shop No. 3. (Form S-1, Exhibit No.
10.19)

51

52

EXHIBIT NO. PAGE DOCUMENT
- - ---------- ---- --------

10.18* Lease, dated March 8, 1972, among Charles J. August, Burton
S. August and Sheldon A. Lane and the Company, with
Amendment of Lease, dated July 11, 1984, with respect to
Shop No. 7. (Form S-1, Exhibit No. 10.20)

10.18a* Confirmation of Assignment of Lease, dated December 31,
1991, among Charles J. August, Burton S. August and Sheldon
A. Lane and Stoneridge 7 Realty Partnership, with respect to
Shop No. 7. (1992 Form 10-K, Exhibit No. 10.20a)

10.19* Lease, effective December 1, 1985, among Chase Lincoln First
Bank, N.A. and Burton S. August, as Trustees and the
Company, with Assignment of Lease, dated June 7, 1991, among
Chase Lincoln First Bank, N.A. and Burton S. August, as
Trustees, and August, Eastwood & August, with respect to
Shop No. 8. (Form S-1, Exhibit No. 10.21)

10.20* Lease, dated February 10, 1972, among Charles J. August,
Burton S. August and Sheldon A. Lane and the Company as
amended July 11, 1984 and assigned to Lane, August, August
Trust on June 7, 1991, and assigned to Lane, August, August
LLC effective January 2, 1996, with respect to Shop No. 9.
(Form S-1, Exhibit No. 10.22)

10.21* Lease, dated May 1, 1973, among Charles J. August, Burton S.
August and Sheldon A. Lane and the Company, with Amendment
of Lease, dated July 11, 1984, and Assignment of Lease,
dated June 7, 1991, among Charles J. August, Burton S.
August and Sheldon A. Lane and 35 Howard Road Joint Venture,
with respect to Shop No. 10. (Form S-1, Exhibit No. 10.23)

10.22* Lease, dated May 7, 1973, among Charles J. August, Burton S.
August and Sheldon A. Lane and the Company, with Amendment
of Lease, dated July 11, 1984, and assigned by Mssrs.
August, August and Lane to AA & L Associates, L.P.,
effective January 2, 1996, with respect to Shop No. 12.
(Form S-1, Exhibit No. 10.24)

10.23* Lease, dated July 25, 1974, among Charles J. August, Burton
S. August and Sheldon A. Lane and the Company, with
Amendment of Lease, dated July 11, 1984, and Assignment of
Lease, dated June 7, 1991, among Charles J. August, Burton
S. August and Sheldon A. Lane and AA & L Associates, L. P.,
with respect to Shop No. 14. (Form S-1, Exhibit No. 10.25)

10.24* Lease, effective April 1, 1975, among Charles J. August,
Burton S. August and Sheldon A. Lane and the Company, with
Amendment of Lease, dated July 11, 1984, and Assignment of
Lease, dated June 7, 1991, among Charles J. August, Burton
S. August and Sheldon A. Lane and Lane, August, August Trust
and assigned by Lane, August, August Trust to Lane, August,
August LLC, effective January 2, 1996, with respect to Shop
No. 15. (Form S-1, Exhibit No. 10.26)

10.25* Lease, dated as of September 25, 1991, among Charles J.
August, Burton S. August and Sheldon A. Lane and the
Company, with respect to Shop No. 17. (1992 Form 10-K,
Exhibit No. 10.27)

52

53

EXHIBIT NO. PAGE DOCUMENT
- - ---------- ---- --------

10.26* Lease, effective May 1, 1979, among Charles J. August,
Burton S. August and Sheldon A. Lane and the Company, with
Amendment of Lease, dated July 11, 1984, and Assignment of
Lease, dated June 7, 1991, among Charles J. August, Burton
S. August and Sheldon A. Lane and AA & L Associates, L.P.,
with respect to Shop No. 23. (Form S-1, Exhibit No. 10.28)

10.27* Lease, effective May 1, 1980, among Charles J. August,
Burton S. August and Sheldon A. Lane and the Company, with
Amendment of Lease, dated July 11, 1984, and Assignment of
Lease, dated June 7, 1991, among Charles J. August, Burton
S. August and Sheldon A. Lane and AA & L Associates, L.P.,
with respect to Shop No. 25. (Form S-1, Exhibit No. 10.29)

10.28* Lease, effective March 1, 1980, among Charles J. August,
Burton S. August and Sheldon A. Lane and the Company, with
Amendment of Lease, dated July 11, 1984, and Assignment of
Lease, dated June 7, 1991, among Charles J. August, Burton
S. August and Sheldon A. Lane and AA & L Associates, L.P.,
with respect to Shop No. 27. (Form S-1, Exhibit No. 10.30)

10.29* Lease, effective July 1, 1980, among Charles J. August,
Burton S. August and Sheldon A. Lane and the Company, with
Amendment of Lease, dated July 11, 1984, and Assignment of
Lease, dated June 7, 1991, among Charles J. August, Burton
S. August and Sheldon A. Lane and AA & L Associates, L.P.,
with respect to Shop No. 28. (Form S-1, Exhibit No. 10.31)

10.30* Lease, effective November 1, 1980, among Charles J. August,
Burton S. August and Sheldon A. Lane and the Company, with
Amendment of Lease, dated July 11, 1984, and Assignment of
Lease, dated June 7, 1991, among Charles J. August, Burton
S. August and Sheldon A. Lane and AA & L Associates, L.P.,
with respect to Shop No. 29. (Form S-1, Exhibit No. 10.32)

10.31* Lease, effective August 1, 1983, among Charles J. August,
Burton S. August and Sheldon A. Lane and the Company, with
Amendment of Lease, dated July 11, 1984, and Assignment of
Lease, dated June 7, 1991, among Charles J. August, Burton
S. August and Sheldon A. Lane and AA & L Associates, L.P.,
with respect to Shop No. 30. (Form S-1, Exhibit No. 10.33)

10.32* Lease, effective December 1, 1981, among Charles J. August,
Burton S. August and Sheldon A. Lane and the Company, with
Amendment of Lease, dated July 11, 1984, and assigned by
Mssrs. August, August and Lane to August, August and Lane of
Rochester, LLC, effective January 2, 1996, with respect to
Shop No. 31. (Form S-1, Exhibit No. 10.34)

10.33* Modification and Extension Agreement, dated August 12, 1991,
among Charles J. August, Burton S. August and Sheldon A.
Lane and the Company, and assigned by Mssrs. August, August
and Lane to August, August and Lane of Rochester, LLC,
effective January 2, 1996, with respect to Shop No. 33.
(1992 Form 10-K, Exhibit No. 10.35)

53

54

EXHIBIT NO. PAGE DOCUMENT
- - ---------- ---- --------

10.34* Lease, effective December 1, 1981, among Charles J. August,
Burton S. August and Sheldon A. Lane and the Company, with
Amendment of Lease, dated July 11, 1984, and assigned by
Mssrs. August, August and Lane to August, August and Lane of
Rochester, LLC, effective January 2, 1996, with respect to
Shop No. 34. (Form S-1, Exhibit No. 10.36)

10.35* Lease, dated April 10, 1984, among Charles J. August, Burton
S. August and Sheldon A. Lane and the Company, with
Amendment of Lease, dated July 11, 1984, and Assignment of
Lease, dated June 7, 1991, among Charles J. August, Burton
S. August and Sheldon A. Lane and AA & L Associates, L.P.,
with respect to Shop No. 35. (Form S-1, Exhibit No. 10.37)

10.36* Lease, effective October 1, 1983, among Charles J. August,
Burton S. August and Sheldon A. Lane and the Company, with
Amendment of Lease, dated July 11, 1984, with respect to
Shop No. 36. (Form S-1, Exhibit No. 10.38)

10.36a* Assignment of Lease, dated October 1, 1991, among Charles J.
August, Burton S. August and Sheldon A. Lane and AA & L
Associates, L.P., with respect to Shop No. 36. (1992 Form
10-K, Exhibit No. 10.38a)

10.37* Lease, effective July 1, 1983, among Charles J. August,
Burton S. August and Sheldon A. Lane and the Company, with
Amendment of Lease, dated July 11, 1984, and Assignment of
Lease, dated June 7, 1991, among Charles J. August, Burton
S. August and Sheldon A. Lane and AA & L Associates, L.P.,
with respect to Shop No. 43. (Form S-1, Exhibit No. 10.39)

10.38* Lease, dated as of February 1, 1983, among Charles J.
August, Burton S. August and Sheldon A. Lane and the
Company, with Amendment of Lease, dated July 11, 1984, and
assigned by Mssrs. August, August and Lane to AA & L
Associates, L.P., effective January 2, 1996, with respect to
Shop No. 44. (Form S-1, Exhibit No. 10.40)

10.39* Sublease, dated as of May 1, 1979, among Charles J. August,
Burton S. August and Sheldon A. Lane and the Company, with
Amendment of Lease, dated July 11, 1984, and Assignment of
Lease, dated June 7, 1991, among Charles J. August, Burton
S. August and Sheldon A. Lane and AA & L Associates, L.P.,
with respect to Shop No. 45. (Form S-1, Exhibit No. 10.41)

10.40* Lease, effective October 1, 1985, among Charles J. August,
Burton S. August and Sheldon A. Lane and the Company, with
Amendment of Lease, dated as of July 11, 1984, and
Assignment of Lease, dated June 7, 1991, among Burton S.
August, as Trustee, and Lane, August, August Trust, and
assigned by Lane, August, August Trust to Lane, August,
August LLC, effective January 2, 1996, with respect to Shop
No. 48. (Form S-1, Exhibit No. 10.42)

10.41* Lease, dated as of January 1, 1984, among Charles J. August,
Burton S. August and Sheldon A. Lane and the Company, with
Amendment of Lease, dated July 11, 1984, and assigned by
Mssrs. August, August and Lane to AA & L Associates, L.P.,
effective January 2, 1996, with respect to Shop No. 49.
(Form S-1, Exhibit No. 10.43)

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EXHIBIT NO. PAGE DOCUMENT
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10.42* Lease, dated July 1, 1982, among Charles J. August, Burton
S. August and Sheldon A. Lane and the Company, with
Amendment of Lease, dated July 11, 1984, and assigned by
Mssrs. August, August and Lane to AA & L Associates, L.P.,
effective January 2, 1996, with respect to Shop No. 51.
(Form S-1, Exhibit No. 10.44)

10.43* Lease, dated July 1, 1982, among Charles J. August, Burton
S. August and Sheldon A. Lane and the Company, with
Amendment of Lease, dated July 11, 1984, with respect to
Shop No. 52. (Form S-1, Exhibit No. 10.45)

10.44* Lease, dated May 1, 1979, among Charles J. August, Burton S.
August and Sheldon A. Lane and the Company, with Amendment
of Lease, dated July 11, 1984, and Assignment of Lease,
dated June 7, 1991, among Charles J. August, Burton S.
August and Sheldon A. Lane and AA & L Associates, L.P., with
respect to Shop No. 53. (Form S-1, Exhibit No. 10.46)

10.45* Lease, dated July 1, 1982, among Charles J. August, Burton
S. August and Sheldon A. Lane and the Company, with
Amendment of Lease, dated July 11, 1984, with respect to
Shop No. 54. (Form S-1, Exhibit No. 10.47)

10.46* Lease, effective September 1, 1983, among Charles J. August,
Burton S. August and Sheldon A. Lane and the Company, with
Amendment of Lease, dated July 11, 1984, and Assignment of
Lease, dated June 7, 1991, among Charles J. August, Burton
S. August and Sheldon A. Lane and AA & L Associates, L.P.,
with respect to Shop No. 55. (Form S-1, Exhibit No. 10.48)

10.47* Lease, dated as of July 1, 1984, among Charles J. August,
Burton S. August and Sheldon A. Lane and the Company, with
Amendment of Lease, dated July 11, 1984, and Assignment of
Lease, dated June 7, 1991, among Charles J. August, Burton
S. August and Sheldon A. Lane and AA & L Associates, L.P.,
with respect to Shop No. 57. (Form S-1, Exhibit No. 10.49)

10.48* Lease, dated July 1, 1982, among Charles J. August, Burton
S. August and Sheldon A. Lane and the Company, with
Amendment of Lease, dated July 11, 1984, with respect to
Shop No. 58. (Form S-1, Exhibit No. 10.50)

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

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

10.51* Lease, effective October 20, 1986, between the Company and
Conifer Wappingers Falls Associates, with respect to Shop
No. 79. (Form S-1, Exhibit No. 10.53)

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EXHIBIT NO. PAGE DOCUMENT
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10.52* Lease, dated January 25, 1988, between the Company and
Conifer Northeast Associates, with Letter Agreement, dated
February 3, 1988, amending Lease and Amendment Agreement,
dated January 6, 1989, with respect to Shop No. 107. (Form
S-1, Exhibit No. 10.54)

10.53* Lease, dated March 16, 1988, between the Company and Conifer
Northeast Associates, with Letter Agreement, dated February
3, 1988, amending Lease and Amendment Agreement, dated
January 6, 1989, with respect to Shop. No. 109. (Form S-1,
Exhibit No. 10.55)

10.54* Lease, dated February 11, 1988, between the Company and
Conifer Northeast Associates, with Letter Agreement, dated
February 3, 1988, amending Lease and Amendment Agreement,
dated January 6, 1989, and Non-disturbance and Attornment
Agreement, dated February 11, 1988, between the Company and
Central Trust Company, with respect to Shop No. 114. (Form
S-1, Exhibit No. 10.56)

10.55* Purchase Agreement, dated December 1, 1987, between the
Company and Conifer Northeast Associates, with Lease, dated
February 25, 1988, between the Company and Conifer Northeast
Associates, Letter Agreement, dated February 3, 1988,
amending Lease, Amendment Agreement, dated January 6, 1989,
and Non-Disturbance and Attornment Agreement, dated February
25, 1988, between the Company and Central Trust Company,
with respect to Shop No. 116. (Form S-1, Exhibit No. 10.57)

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

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

10.58* Form of Mortgage and Security Agreement, between the Company
and The Chase Manhattan Bank, N.A., with Form of Mortgage
Note and Form of Conditional Assignment of Leases and Rents,
in connection with each of fifteen mortgages on Shop Nos.
137, 140, 143, 146, 162, 164, 168, 169, 172, 177, 179, 184,
185, 186 and 191 entered into since the filing of the 1992
Form 10-K. (1993 Form 10-K, Exhibit No. 10.57)

10.59* Form of Mortgage and Security Agreement, between the Company
and The Chase Manhattan Bank, N.A., with Form of Mortgage
Note and Form of Conditional Assignment of Leases and Rents,
in connection with each of five mortgages on Shop Nos. 160,
183, 190, 192 and 193 entered into since the filing of the
1993 Form 10-K. (1994 Form 10-K, Exhibit No. 10.59)

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

10.61* Lease Agreement, dated October 11, 1994, between the Company
and the City of Rochester, New York. (1995 Form 10-K,
Exhibit 10.61)

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57

EXHIBIT NO. PAGE DOCUMENT
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10.62* Mortgage Notes, Collateral Security Mortgage and Security
Agreement, Indemnification Agreement and Guarantee, dated
September 22, 1995 between Monro Service Corporation, County
of Monroe Industrial Development Agency, the Company and The
Chase Manhattan Bank, N.A. (September 1995 Form 10-Q,
Exhibit No. 10.02)

10.63* Form of Mortgage and Security Agreement, between the Company
and The Chase Manhattan Bank, N.A., with Form of Mortgage
Note and Form of Conditional Assignment of Leases and Rents,
in connection with each of nine mortgages on Store Nos. 205,
207, 210, 213, 216, 226, 229, 230 and 236 entered into
September 14, 1995. (September 1995 Form 10-Q, Exhibit No.
10.01)

10.64* Amendment to Lease Agreement, dated September 19, 1995
between the Company and the County of Monroe Industrial
Development Agency. (September 1995 Form 10-Q, Exhibit No.
10.00)

10.65* Employment Agreement dated February 18, 1995, between the
Company and Jack M. Gallagher. (1995 Form 10-K, Exhibit No.
10.62)**

10.66* Asset Purchase Agreement by and between Monro Muffler Brake,
Inc. as the buyer and Xpress Automotive Group, Inc. as the
seller, as entered into July 25, 1995. (September 1995 Form
10-Q, Exhibit No. 10.03)

10.67 59 Employment Agreement dated February 26, 1997, between the
Company and Lawrence C. Day. (1997 Form 10-K, Exhibit No.
10.67)**

10.68* Mortgage Modification Agreement, dated October 11, 1996
between the Company and Chase Manhattan Bank, N.A., in
connection with each of 33 mortgages for Store Nos. 78, 86,
87, 90, 137, 140, 143, 146, 160, 162, 164, 168, 169, 172,
177, 179, 183, 184, 185, 186, 190, 191, 192, 193, 205, 207,
210, 213, 216, 226, 229, 230 and 236. (September 1996
Form 10-Q, Exhibit No. 10)

10.69* Purchase Agreement between Walker Manufacturing Company, a
division of Tenneco Automotive and Monro Muffler Brake,
Inc. dated as of November 5, 1996. (December 1996 Form
10-Q, Exhibit 10.1)

11.01 71 Computation of Per Share Earnings.

21.01 72 Subsidiaries of the Company.

23.01 73 Consent of Price Waterhouse.

24.01 74 Powers of Attorney.

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58

* An asterisk "*" following an exhibit number indicates that
the exhibit is incorporated herein by reference to an
exhibit to one of the following documents: (1) the Company's
Registration Statement on Form S-1 (Registration No.
33-41290), filed with the Securities and Exchange Commission
on June 19, 1991 ("Form S-1"); (2) Amendment No. 1 thereto,
filed July 22, 1991 ("Amendment No. 1"); (3) the Company's
Annual Report on Form 10-K for the fiscal year ended March
31, 1992 ("1992 Form 10-K"); the Company's Registration
Statement on Form S-8, filed with the Securities and
Exchange Commission on December 24, 1992 ("Form S-8"); (5)
the Company's Annual Report on Form 10-K for the fiscal year
ended March 31, 1993 ("1993 Form 10-K"); (6) the Company's
Quarterly Report on Form 10-Q for the fiscal quarter ended
September 30, 1993 ("September 1993 Form 10-Q"); (7) the
Company's Quarterly Report on Form 10-Q for the fiscal
quarter ended December 31, 1994 ("December 1994 Form 10-Q");
(8) the Company's Annual Report on Form 10-K for the fiscal
year ended March 31, 1994 ("1994 Form 10-K"); (9) the
Company's Annual Report on Form 10-K for the fiscal year
ended March 31, 1995 ("1995 Form 10-K"); (10) the
Company's Quarterly Report on Form 10-Q for the fiscal
quarter ended September 30, 1995 ("September 1995 Form
10-Q"); (11) the Company's Quarterly Report on Form 10-Q for
the fiscal quarter ended September 30, 1996 ("September 1996
Form 10-Q"); (12) the Company's Quarterly Report on Form
10-Q for the fiscal quarter ended December 31, 1996 ("the
December 1996 Form 10-Q") or (13) the Company's Annual
Report on Form 10-K for the fiscal year ended March 31, 1996
("1996 Form 10-K"). The appropriate document and exhibit
number are indicated in parentheses.

** Management contract or compensatory plan or arrangement
required to be filed as an exhibit to this Form 10-K
pursuant to Item 14(c) hereof.

58