Winmark Corporation Announces Second Quarter Results

MINNEAPOLIS - July 16, 2014 - (BUSINESS WIRE) - Winmark Corporation (Nasdaq:WINA) announced net income for the quarter ended June 28, 2014 of $4,280,800 (or $.82 per share diluted) compared to net income of $4,336,900 (or $.83 per share diluted) in the second quarter of 2013. For the six months ended June 28, 2014, net income was $8,832,700 (or $1.67 per share diluted) compared to net income of $8,394,400 (or $1.61 per share diluted) for the same period last year.

"Our franchising business continued to show steady growth in both royalties and new stores during the second quarter, while expenses increased as we continue to invest in our new Style Encore concept," noted John Morgan, Chairman and Chief Executive Officer. "Profits from our leasing business were lower when compared to last year due to the timing of customer activity in our portfolio, which is unpredictable and will vary from quarter to quarter. Long-term growth in the leasing portfolio is a key indicator of future profits from our leasing business, and our leasing portfolio grew by fifteen percent from the end of last year. Additionally, the increase in debt during the quarter was primarily due to the Company’s repurchase of common stock," Mr. Morgan added.

Winmark Corporation creates, supports and finances business. At June 28, 2014, there were 1,047 franchises in operation under the brands Plato's Closet®, Once Upon A Child®, Play It Again Sports®, Music Go Round® and Style Encore®. An additional 104 retail franchises have been awarded but are not open. In addition, at June 28, 2014, the Company had a lease portfolio equal to $43.2 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 28, 2014     December 28, 2013
ASSETS
Current Assets:            
Cash and cash equivalents     $ 2,144,700       $ 10,642,600  
Marketable securities       839,900         736,500  
Receivables, net       1,088,000         1,205,500  
Net investment in leases - current       21,023,400         17,239,900  
Income tax receivable       748,500         166,500  
Inventories       78,600         96,700  
Prepaid expenses       393,500         587,300  
Total current assets       26,316,600         30,675,000  
Net investment in leases – long-term       22,203,600         20,301,400  
Property and equipment, net       1,517,700         1,382,200  
Other assets       677,500         677,500  
      $ 50,715,400       $ 53,036,100  
 
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current Liabilities:            
Line of credit     $ 23,100,000       $ -  
Accounts payable       1,423,500         2,441,400  
Accrued liabilities       2,571,300         1,233,100  
Discounted lease rentals       313,600         424,900  
Deferred revenue       2,116,800         2,199,900  
Deferred income taxes       3,276,600         4,208,200  
Total current liabilities       32,801,800         10,507,500  
Long-Term Liabilities:            
Discounted lease rentals       149,600         277,400  
Deferred revenue       1,266,300         1,180,700  
Other liabilities       1,433,800         1,489,000  
Deferred income taxes       465,700         1,436,800  
Total long-term liabilities       3,315,400         4,383,900  
Shareholders’ Equity:            

Common stock, no par, 10,000,000 shares authorized, 5,062,380 and 5,143,530 shares issued and outstanding

     

-

       

2,949,500

 
Accumulated other comprehensive loss       (3,200 )       (4,100 )
Retained earnings       14,601,400         35,199,300  
Total shareholders’ equity       14,598,200         38,144,700  
      $ 50,715,400       $ 53,036,100  
                     
 
 

 
WINMARK CORPORATION
CONDENSED STATEMENTS OF OPERATIONS

(Unaudited)

       
      Quarter Ended     Six Months Ended
      June 28, 2014        June 29, 2013        June 28, 2014        June 29, 2013
REVENUE:                        
Royalties     $ 9,200,800       $ 8,608,200       $ 18,010,800       $ 17,083,100  
Leasing income       3,157,600         4,130,200         7,533,200         7,538,000  
Merchandise sales       685,800         557,400         1,473,800         1,223,100  
Franchise fees       607,500         389,600         956,500         804,200  
Other       387,200         338,100         617,200         523,500  
Total revenue       14,038,900         14,023,500         28,591,500         27,171,900  
COST OF MERCHANDISE SOLD       659,300         524,400         1,414,000         1,165,500  
LEASING EXPENSE       119,100         610,500         425,700         890,200  
PROVISION FOR CREDIT LOSSES       (11,100 )       (51,700 )       27,800         (37,900 )
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES       6,179,000         5,879,100         12,196,900         11,417,000  
Income from operations       7,092,600         7,061,200         14,527,100         13,737,100  
INTEREST EXPENSE       (144,100 )       (55,100 )       (206,200 )       (144,600 )
INTEREST AND OTHER INCOME (EXPENSE)       900         (100 )       1,000         (10,300 )
Income before income taxes       6,949,400         7,006,000         14,321,900         13,582,200  
PROVISION FOR INCOME TAXES       (2,668,600 )       (2,669,100 )       (5,489,200 )       (5,187,800 )
NET INCOME     $ 4,280,800       $ 4,336,900       $ 8,832,700       $ 8,394,400  
EARNINGS PER SHARE – BASIC     $ .84       $ .86       $ 1.72       $ 1.68  
EARNINGS PER SHARE – DILUTED     $ .82       $ .83       $ 1.67       $ 1.61  
WEIGHTED AVERAGE SHARES OUTSTANDING – BASIC       5,109,049         5,024,284         5,128,789         5,010,803  
WEIGHTED AVERAGE SHARES OUTSTANDING – DILUTED       5,243,123         5,200,592         5,275,539         5,201,644  
                          

Contact:

Brett D. Heffes
Winmark Corporation
763-520-8500

###

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