Winmark Corporation Announces Second Quarter Results

By: Winmark Corporation | 2 Shares 74 Reads

MINNEAPOLIS - July 17, 2013 - (BUSINESS WIRE) - Winmark Corporation (Nasdaq: WINA) announced today net income for the quarter ended June 29, 2013 of $4,336,900 (or $.83 per share diluted) compared to net income of $3,404,400 (or $.65 per share diluted) in the second quarter of 2012.

Earnings growth in the second quarter was due to a higher store count when compared to last year as well as increased sales from franchisees. Additionally, the profitability of the leasing business improved due to the size and performance of the Company’s lease portfolio. John Morgan, Chairman and CEO commented “Your company and its employees worked very hard during the quarter in preparation for our first Style Encore store, which is scheduled to open in the third quarter. We have awarded a total of eight franchise agreements to launch this exciting new women’s resale concept.”

Winmark Corporation creates, supports and finances business. At June 29, 2013, there were 986 franchises in operation under the brands Plato's Closet®, Play It Again Sports®, Once Upon A Child®, Music Go Round® and Style Encore™. An additional 67 retail franchises have been awarded but are not open. In addition, at June 29, 2013, the Company had a lease portfolio equal to $37.2 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. 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)

	June 29, 2013			December 29, 2012
ASSETS
Current Assets:
Cash and cash equivalents	$	2,041,300		$	2,233,400
Marketable securities		84,500			85,900
Receivables, net		1,230,400			1,237,100
Net investment in leases - current		16,149,700			13,461,200
Income tax receivable		856,800			1,400,700
Inventories		76,800			71,200
Prepaid expenses		388,800			445,200
Total current assets		20,828,300			18,934,700

Net investment in leases – long-term		21,043,900			22,697,100
Property and equipment, net		1,166,000			1,229,500
Other assets		677,500			677,500
	$	43,715,700		$	43,538,800
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current Liabilities:
Line of credit	$	2,000,000		$	10,800,000
Accounts payable		1,258,600			2,203,700
Accrued liabilities		1,983,800			1,286,300
Discounted lease rentals		906,400			896,800
Rents received in advance		62,000			134,800
Deferred revenue		1,569,700			1,641,700
Deferred income taxes		3,555,600			3,549,900
Total current liabilities		11,336,100			20,513,200

Long-Term Liabilities:
Discounted lease rentals		445,200			177,900
Rents received in advance		119,700			117,700
Deferred revenue		956,100			953,000
Other liabilities		1,184,600			1,254,700
Deferred income taxes		2,659,600			2,594,300
Total long-term liabilities		5,365,200			5,097,600

Shareholders’ Equity:
Common stock, no par, 10,000,000 shares authorized, 5,044,484 and 4,996,459 shares issued and outstanding		1,142,900			-
Accumulated other comprehensive loss		(4,900	)		(4,000	)
Retained earnings		25,876,400			17,932,000
Total shareholders’ equity		27,014,400			17,928,000
	$	43,715,700		$	43,538,800

WINMARK CORPORATION
CONDENSED STATEMENTS OF OPERATIONS
(Unaudited)

	Quarter Ended						Six Months Ended
	June 29, 2013			June 30, 2012			June 29, 2013			June 30, 2012
REVENUE:
Royalties	$	8,608,200		$	7,693,900		$	17,083,100		$	15,982,400
Leasing income		4,130,200			3,285,000			7,538,000			5,677,100
Merchandise sales		557,400			656,800			1,223,100			1,366,600
Franchise fees		389,600			270,000			804,200			555,000
Other		338,100			286,700			523,500			444,700
Total revenue		14,023,500			12,192,400			27,171,900			24,025,800

COST OF MERCHANDISE SOLD		524,400			633,500			1,165,500			1,297,800

LEASING EXPENSE		610,500			325,700			890,200			565,500

PROVISION FOR CREDIT LOSSES		(51,700	)		(14,900	)		(37,900	)		(67,900	)

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES		5,879,100			5,221,600			11,417,000			10,357,700

Income from operations		7,061,200			6,026,500			13,737,100			11,872,700

LOSS FROM EQUITY INVESTMENTS		-			(240,700	)		-			(278,100	)

INTEREST EXPENSE		(55,100	)		(122,300	)		(144,600	)		(192,100	)

INTEREST AND OTHER INCOME (EXPENSE)		(100	)		(10,000	)		(10,300	)		36,300

Income before income taxes		7,006,000			5,653,500			13,582,200			11,438,800

PROVISION FOR INCOME TAXES		(2,669,100	)		(2,249,100	)		(5,187,800	)		(4,518,400	)

NET INCOME	$	4,336,900		$	3,404,400		$	8,394,400		$	6,920,400

EARNINGS PER SHARE – BASIC	$	.86		$	.67		$	1.68		$	1.37

EARNINGS PER SHARE – DILUTED	$	.83		$	.65		$	1.61		$	1.31

WEIGHTED AVERAGE SHARES OUTSTANDING – BASIC		5,024,284			5,056,289			5,010,803			5,054,620

WEIGHTED AVERAGE SHARES OUTSTANDING – DILUTED		5,200,592			5,268,245			5,201,644			5,274,223