Winmark Corporation Announces Year End Results

MINNEAPOLIS - February 25, 2014 - (BUSINESS WIRE) - Winmark Corporation (Nasdaq: WINA) announced today net income for the year ended December 28, 2013 of $18,231,600 or $3.48 per share diluted, compared to net income of $12,937,900 or $2.47 per share diluted, in 2012. The fourth quarter 2013 net income was $4,585,800 or $.87 per share diluted, compared to net income of $1,758,000 or $.34 per share diluted, for the same period last year. Revenues for the year ended December 28, 2013 were $55,731,200, up from $51,943,100 in 2012.

"During 2013, we passed an important milestone by opening our 1,000th franchised store location and we ended the year with 112 awarded, but unopened stores. Additionally, the profitability of our leasing business enjoyed solid growth as we continued to add new customers."

Earnings growth in the fourth quarter was primarily attributable to the non-cash charges recorded during the fourth quarter of 2012 related to the Company’s long-term investments. John L. Morgan, Chairman and Chief Executive Officer, commented, "During 2013, we passed an important milestone by opening our 1,000th franchised store location and we ended the year with 112 awarded, but unopened stores. Additionally, the profitability of our leasing business enjoyed solid growth as we continued to add new customers."

Winmark Corporation creates, supports and finances business. At December 28, 2013, there were 1,005 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 112 retail franchises have been awarded but are not open. In addition, at December 28, 2013, the Company had a lease portfolio equal to $37.5 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 28, 2013     December 29, 2012
 
ASSETS
         
Current Assets:        
Cash and cash equivalents   $ 10,642,600     $ 2,233,400  
Marketable securities     736,500       85,900  
Receivables, net     1,205,500       1,237,100  
Net investment in leases - current     17,239,900       13,461,200  
Income tax receivable     166,500       1,400,700  
Inventories     96,700       71,200  
Prepaid expenses     587,300       445,200  
Total current assets     30,675,000       18,934,700  
                 
Net investment in leases – long-term     20,301,400       22,697,100  
Property and equipment, net     1,382,200       1,229,500  
Other assets     677,500       677,500  
    $ 53,036,100     $ 43,538,800  
 
LIABILITIES AND SHAREHOLDERS’ EQUITY
         
Current Liabilities:        
Line of credit   $ -     $ 10,800,000  
Accounts payable     2,441,400       2,203,700  
Accrued liabilities     1,233,100       1,421,100  
Discounted lease rentals     424,900       896,800  
Deferred revenue     2,199,900       1,641,700  
Deferred income taxes     4,208,200       3,549,900  
Total current liabilities     10,507,500       20,513,200  
         
Long-Term Liabilities:        
Discounted lease rentals     277,400       177,900  
Deferred revenue     1,180,700       953,000  
Other liabilities     1,489,000       1,372,400  
Deferred income taxes     1,436,800       2,594,300  
Total long-term liabilities     4,383,900       5,097,600  
         
Shareholders’ Equity:        

Common stock, no par, 10,000,000 shares authorized, 5,143,530 and 4,996,459 shares issued and outstanding

   

2,949,500

     

-

 
Accumulated other comprehensive loss     (4,100 )     (4,000 )
Retained earnings     35,199,300       17,932,000  
Total shareholders' equity     38,144,700       17,928,000  
    $ 53,036,100     $ 43,538,800  
                  
 

WINMARK CORPORATION

CONDENSED STATEMENTS OF OPERATIONS

(unaudited)

     
    Quarter Ended   Fiscal Year Ended
    December 28, 2013   December 29, 2012   December 28, 2013   December 29, 2012
REVENUE:                
Royalties   $ 9,407,100       $ 8,599,400       $ 36,344,100       $ 33,760,200  
Leasing income     3,176,000       3,222,000       14,524,100       13,211,800  
Merchandise sales     506,000       667,500       2,327,100       2,750,700  
Franchise fees     315,100       325,000       1,459,300       1,291,000  
Other     363,200       304,300       1,076,600       929,400  
Total revenue     13,767,400       13,118,200       55,731,200       51,943,100  
                                 
COST OF MERCHANDISE SOLD     471,000       639,300       2,205,700       2,621,500  
                                 
LEASING EXPENSE     302,500       453,600       1,592,000       1,789,800  
                                 
PROVISION FOR CREDIT LOSSES     23,000       22,000       (44,700 )     (47,600 )
                                 
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES     5,469,300       5,040,400       22,198,200       20,280,300  
                                 
Income from operations     7,501,600       6,962,900       29,780,000       27,299,100  
                                 
LOSS FROM EQUITY INVESTMENTS     -       (1,842,500 )     -       (2,492,900 )
                                 
IMPAIRMENT OF INVESTMENT IN NOTES     -       (663,700 )     -       (1,324,400 )
                                 
INTEREST EXPENSE     (33,400 )     (90,000 )     (213,500 )     (392,300 )
                                 
INTEREST AND OTHER INCOME     28,200       15,400       23,400       66,000  
                                 
Income before income taxes     7,496,400       4,382,100       29,589,900       23,155,500  
                                 
PROVISION FOR INCOME TAXES     (2,910,600 )     (2,624,100 )     (11,358,300 )     (10,217,600 )
                                 
NET INCOME   $ 4,585,800     $ 1,758,000     $ 18,231,600     $ 12,937,900  
                                 
EARNINGS PER SHARE – BASIC   $ .89     $ .35     $ 3.60     $ 2.57  
                                 
EARNINGS PER SHARE – DILUTED   $ .87     $ .34     $ 3.48     $ 2.47  
                                 
WEIGHTED AVERAGE SHARES OUTSTANDING – BASIC     5,137,415       4,986,957       5,068,975       5,027,509  
                                 
WEIGHTED AVERAGE SHARES OUTSTANDING – DILUTED     5,297,878       5,179,504       5,241,121       5,237,671  

Contact:

Brett D. Heffes
Winmark Corporation
763-520-8500

###

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