Winmark Corporation Announces Year End Results

MINNEAPOLIS - (BUSINESS WIRE) - Feb. 27, 2013 - Winmark Corporation (Nasdaq: WINA) announced today net income for the year ended December 29, 2012 of $12,937,900 or $2.47 per share diluted, compared to net income of $14,095,000 or $2.69 per share diluted, in 2011. The fourth quarter 2012 net income was $1,758,000 or $.34 per share diluted, compared to net income of $4,185,000 or $.80 per share diluted, for the same period last year. Revenues for the year ended December 29, 2012 were $51,943,100, up from $51,335,000 in 2011. In addition, as previously disclosed, the company’s results were negatively impacted by a $2.5 million after-tax earnings charge, or $0.47 per share, in the fourth quarter related to the impairment of its investments in both Tomsten, Inc. (d/b/a Archiver’s) and BridgeFunds, LLC.

John L. Morgan, Chairman and Chief Executive Officer, stated, “Our 2012 results continued to demonstrate the strength of our franchising business, with solid growth in royalties and new franchise agreements. Our leasing business, while exhibiting a modest increase in profitability, achieved more meaningful growth in the portfolio of customers and equipment that, along with the development of our sales staff, positions us well for continued long-term success.”

“We are excited about our prospects for 2013 and look forward to introducing our Style EncoreTM concept to the market place as well as the continued execution of our business model,” Mr. Morgan added.

Winmark Corporation creates, supports and finances business. At December 29, 2012, there were 968 franchises in operation under the brands Plato's Closet®, Play It Again Sports®, Once Upon A Child®, and Music Go Round®. An additional 65 retail franchises have been awarded but are not open. In addition, at December 29, 2012, the Company had a lease portfolio equal to $36.2 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)

             
      December 29, 2012     December 31, 2011
ASSETS
Current Assets:            
Cash and cash equivalents     $ 2,233,400       $ 9,020,100
Marketable securities       85,900         1,043,800
Receivables, net       1,237,100         1,316,200
Net investment in leases - current       13,461,200         11,746,900
Income tax receivable       1,400,700         116,500
Inventories       71,200         68,500
Prepaid expenses       445,200         362,000
Total current assets       18,934,700         23,674,000
                   
Net investment in leases – long-term       22,697,100         18,102,000
Long-term investments, net       -         3,817,400
Property and equipment, net       1,229,500         1,474,800
Other assets       677,500         677,500
      $ 43,538,800       $ 47,745,700
 
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current Liabilities:            
Line of credit     $ 10,800,000       $ -
Accounts payable       2,203,700         1,460,300
Accrued liabilities       1,286,300         1,346,000
Discounted lease rentals       896,800         20,800
Rents received in advance       134,800         274,700
Deferred revenue       1,641,700         1,212,400
Deferred income taxes       3,549,900         3,464,800
Total current liabilities       20,513,200         7,779,000
             
Long-Term Liabilities:            
Discounted lease rentals       177,900         -
Rents received in advance       117,700         269,400
Deferred revenue       953,000         844,300
Other liabilities       1,254,700         1,389,200
Deferred income taxes       2,594,300         2,355,100
Total long-term liabilities       5,097,600         4,858,000
             
Shareholders’ Equity:            

Common stock, no par, 10,000,000 shares authorized,
 4,996,459 and 4,987,643 shares issued and outstanding

     

-

       

629,800

Accumulated other comprehensive (loss) income       (4,000 )       17,000
Retained earnings       17,932,000         34,461,900
                   
Total shareholders' equity       17,928,000         35,108,700
      $ 43,538,800       $ 47,745,700
                   
 
WINMARK CORPORATION
CONDENSED STATEMENTS OF OPERATIONS

(unaudited)

           
      Quarter Ended   Fiscal Year Ended
      December 29, 2012   December 31, 2011   December 29, 2012   December 31, 2011
REVENUE:                  
Royalties     $ 8,599,400     $ 8,442,100     $ 33,760,200     $ 30,360,600  
Leasing income       3,222,000       3,780,200       13,211,800       16,364,700  
Merchandise sales       667,500       482,900       2,750,700       2,481,600  
Franchise fees       325,000       245,000       1,291,000       1,081,200  
Other       304,300       281,600       929,400       1,046,900  
Total revenue       13,118,200       13,231,800       51,943,100       51,335,000  
                                   
COST OF MERCHANDISE SOLD       639,300       457,900       2,621,500       2,366,400  
LEASING EXPENSE       453,600       966,500       1,789,800       5,115,800  
PROVISION FOR CREDIT LOSSES       22,000       (51,600 )     (47,600 )     (43,400 )
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES       5,040,400       4,953,200       20,280,300       19,048,600  
Income from operations       6,962,900       6,905,800       27,299,100       24,847,600  
LOSS FROM EQUITY INVESTMENTS       (1,842,500 )     (71,200 )     (2,492,900 )     (515,800 )
IMPAIRMENT OF INVESTMENT IN NOTES       (663,700 )     (337,000 )     (1,324,400 )     (883,100 )
INTEREST EXPENSE       (90,000 )     (27,800 )     (392,300 )     (112,000 )
INTEREST AND OTHER INCOME       15,400       22,800       66,000       44,900  
Income before income taxes       4,382,100       6,492,600       23,155,500       23,381,600  
PROVISION FOR INCOME TAXES       (2,624,100 )     (2,307,600 )     (10,217,600 )     (9,286,600 )
NET INCOME     $ 1,758,000     $ 4,185,000     $ 12,937,900     $ 14,095,000  
EARNINGS PER SHARE – BASIC     $ .35     $ .84     $ 2.57     $ 2.83  
EARNINGS PER SHARE – DILUTED     $ .34     $ .80     $ 2.47     $ 2.69  
WEIGHTED AVERAGE SHARES OUTSTANDING – BASIC       4,986,957       4,975,878       5,027,509       4,979,036  
WEIGHTED AVERAGE SHARES OUTSTANDING – DILUTED       5,179,504       5,235,590       5,237,671       5,238,412  

Contact:

Winmark Corporation
John L. Morgan
763-520-8500

###

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