Winmark Corporation Announces Second Quarter Results

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  

Contact:

Winmark Corporation
John L. Morgan
763-520-8500

###

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