Winmark Corporation Announces Third Quarter Results

By: Winmark Corporation | 0 Shares 67 Reads

MINNEAPOLIS--(BUSINESS WIRE)--Winmark Corporation (Nasdaq: WINA) announced today net income for the quarter ended September 24, 2011 of $3,483,500, or $.66 per share diluted, compared to net income of $2,690,000, or $.51 per share diluted, in 2010. For the nine months ended September 24, 2011, net income was $9,910,000, or $1.89 per share diluted, compared to net income of $7,209,800, or $1.39 per share diluted, for the same period last year.

John L. Morgan, Chairman and Chief Executive Officer, stated, "During the quarter, our earnings growth was primarily driven by the continued strong performance of our franchising brands. Additionally, our leasing business continued to show significant increases in both profitability and customer activity. During the quarter, our pre-tax income was reduced by approximately $0.5 million, or $0.10 per share, due to our share of losses from Tomsten, Inc. as well as an impairment charge relating to our investment in BridgeFunds, LLC."

Winmark Corporation creates, supports and finances business. At September 24, 2011, there were 923 franchises in operation under the brands Play It Again Sports®, Plato's Closet®, Once Upon A Child®, and Music Go Round®. An additional 39 retail franchises have been awarded but are not open. In addition, at September 24, 2011, the Company had loans and leases equal to $31.8 million.

This press release contains forward-looking statements within the meaning of the safe harbor provisions of Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), relating to future events or the future financial performance of the Company including statements with respect to our ability to finance the growth of our leasing and franchising businesses for the foreseeable future. Such forward-looking statements are only predictions or statements of intention subject to risks and uncertainties and actual events or results could differ materially from those anticipated. Because actual result may differ, shareholders and prospective investors are cautioned not to place undue reliance on such forward-looking statements.

WINMARK CORPORATION
CONDENSED BALANCE SHEETS
(unaudited)

	September 24, 2011			December 25, 2010
ASSETS
Current Assets:
Cash and cash equivalents	$	3,896,500		$	2,257,100
Marketable securities		331,000			161,000
Receivables, net		1,330,300			1,841,300
Net investment in leases - current		13,010,300			13,856,700
Income tax receivable		-			294,700
Inventories		68,000			85,900
Prepaid expenses		508,900			382,600
Total current assets		19,145,000			18,879,300

Net investment in leases - long-term		17,168,800			16,802,500
Long-term investments, net		4,225,600			3,973,800
Property and equipment, net		1,562,500			1,785,900
Other assets		677,500			680,500
	$	42,779,400		$	42,122,000

LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Line of credit	$	-		$	8,800,000
Accounts payable		1,689,200			1,274,200
Income tax payable		2,263,300			-
Accrued liabilities		1,992,400			1,513,600
Discounted lease rentals		74,900			530,400
Rents received in advance		263,800			291,800
Deferred revenue		1,149,000			1,041,700
Deferred income taxes		1,832,500			1,832,500
Total current liabilities		9,265,100			15,284,200

Long-Term Liabilities:
Discounted lease rentals		2,400			26,500
Rents received in advance		421,400			696,900
Deferred revenue		830,500			767,600
Other liabilities		1,250,700			1,678,000
Deferred income taxes		655,800			655,800
Total long-term liabilities		3,160,800			3,824,800

Shareholders' Equity:
Common stock, no par, 10,000,000 shares authorized, 4,972,081 and 5,020,739 shares issued and outstanding		-			513,700
Accumulated other comprehensive loss		(72,600	)		-
Retained earnings		30,426,100			22,499,300
Total shareholders' equity		30,353,500			23,013,000
	$	42,779,400		$	42,122,000

WINMARK CORPORATION
CONDENSED STATEMENTS OF OPERATIONS
(Unaudited)

	Quarter Ended						Nine Months Ended
	September 24, 2011			September 25, 2010			September 24, 2011			September 25, 2010
REVENUE:
Royalties	$	8,046,400		$	7,030,000		$	21,918,500		$	19,761,800
Leasing income		2,369,300			2,419,600			12,584,500			7,290,300
Merchandise sales		664,300			964,000			1,998,700			2,009,200
Franchise fees		516,200			357,100			836,200			885,600
Other		177,300			236,600			765,300			782,300
Total revenue		11,773,500			11,007,300			38,103,200			30,729,200

COST OF MERCHANDISE SOLD		631,400			920,600			1,908,500			1,911,800

LEASING EXPENSE		290,400			387,600			4,149,300			1,374,200

PROVISION FOR CREDIT LOSSES		(13,100	)		130,500			8,200			142,400

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES		4,219,100			4,360,200			14,095,400			14,093,300

Income from operations		6,645,700			5,208,400			17,941,800			13,207,500

LOSS FROM EQUITY INVESTMENTS		(224,700	)		(200,200	)		(444,600	)		(322,400	)

IMPAIRMENT OF INVESTMENT IN NOTES		(293,200	)		-			(546,100	)		-

INTEREST EXPENSE		(26,200	)		(363,900	)		(84,200	)		(925,200	)

INTEREST AND OTHER INCOME/(EXPENSE)		(9,000	)		96,100			22,100			376,800

Income before income taxes		6,092,600			4,740,400			16,889,000			12,336,700

PROVISION FOR INCOME TAXES		(2,609,100	)		(2,050,400	)		(6,979,000	)		(5,126,900	)

NET INCOME	$	3,483,500		$	2,690,000		$	9,910,000		$	7,209,800

EARNINGS PER SHARE - BASIC	$	.70		$	.54		$	1.99		$	1.43

EARNINGS PER SHARE - DILUTED	$	.66		$	.51		$	1.89		$	1.39

WEIGHTED AVERAGE SHARES OUTSTANDING - BASIC		4,970,046			5,011,862			4,980,160			5,055,405

WEIGHTED AVERAGE SHARES OUTSTANDING - DILUTED		5,263,343			5,224,580			5,239,424			5,203,628