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Winmark Corporation Announces Second Quarter Results

Winmark Corporation (Nasdaq: WINA) announced today net income for the quarter ended June 26, 2010 of $2,338,700 (or $.45 per share diluted) compared to net income of $1,195,300 (or $.22 per share diluted) in 2009. For the six months ended June 26, 2010, net income was $4,519,800 (or $.87 per share diluted) compared to net income of $2,609,000 (or $.49 per share diluted) for the same period last year.

John L. Morgan, Chairman and Chief Executive Officer, stated, “During the second quarter, we were able to grow our profits while maintaining expenses relatively flat when compared to last year. We are extremely pleased with how our business has performed during the first six months of 2010.”

Winmark Corporation creates, supports and finances business. At June 26, 2010, there were 889 franchises in operation under the brands Play It Again Sports®, Once Upon A Child®, Plato's Closet® and Music Go Round® and there were 19 territories in operation under the Wirth Business Credit® brand. An additional 46 retail franchises have been awarded but are not open. In addition, at June 26, 2010, the Company had loans and leases equal to $35.4 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 and the payment of cash dividends 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)

       
June 26, 2010   December 26, 2009
ASSETS
Current Assets:  
Cash and cash equivalents $ 10,635,800 $ 9,490,800
Marketable securities 609,600 1,274,000
Current investments 2,000,000 2,000,000

Receivables, less allowance for doubtful accounts of$19,400 and $35,700

1,633,700

1,761,100

Net investment in leases - current 14,733,200 17,575,900
Income tax receivable 183,400 -
Inventories 138,500 111,400
Prepaid expenses   325,700     398,800
Total current assets 30,259,900 32,612,000
Net investment in leases – long-term 18,664,600 19,423,700
Long-term investments 2,110,600 2,232,900
Long-term receivables, net 9,100 14,900
Property and equipment, net 1,754,500 1,843,500
Other assets   677,500     677,500
$ 53,476,200   $ 56,804,500
 
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current Liabilities:
Current line of credit $ 3,763,300 $ 3,983,100
Current renewable subordinated notes 8,706,800 9,166,900
Accounts payable 1,481,200 1,415,200
Income tax payable - 183,500
Accrued liabilities 2,556,400 1,794,100
Current discounted lease rentals 603,200 972,600
Current rents received in advance 329,800 294,400
Current deferred revenue 1,257,800 1,188,800
Deferred income taxes   1,057,700     1,057,700
Total current liabilities 19,756,200 20,056,300
Long-term line of credit 3,550,600 5,298,900
Long-term renewable subordinated notes 9,896,000 12,058,700
Long-term discounted lease rentals 259,000 507,600
Long-term rents received in advance 982,000 1,332,000
Long-term deferred revenue 761,600 709,500
Other long-term liabilities 1,239,400 1,298,400
Deferred income taxes 214,400 214,400
Shareholders’ Equity:

Common stock, no par, 10,000,000 shares authorized,5,011,862 and 5,125,025 shares issued and outstanding

-

-

Accumulated other comprehensive income (loss) (73,600 ) 9,600
Retained earnings   16,890,600     15,319,100
Total shareholders’ equity   16,817,000     15,328,700
$ 53,476,200   $ 56,804,500
 

WINMARK CORPORATION

CONDENSED STATEMENTS OF OPERATIONS

(Unaudited)

       
Quarter Ended   Six Months Ended
June 26, 2010   June 27, 2009   June 26, 2010   June 27, 2009
REVENUE:    
Royalties $ 6,368,300 $ 5,607,900 $ 12,731,800 $ 11,241,400
Leasing income 2,345,800 2,143,100 4,870,700 4,844,800
Merchandise sales 550,500 679,300 1,045,200 1,304,700
Franchise fees 305,000 235,000 528,500 385,000
Other   309,500     172,800     545,700     312,200  
Total revenue 9,879,100 8,838,100 19,721,900 18,088,100
 
COST OF MERCHANDISE SOLD 520,200 651,100 991,200 1,247,000
 
LEASING EXPENSE 439,300 512,800 986,600 1,195,300
 
PROVISION FOR CREDIT LOSSES (160,200 ) 604,200 11,900 1,023,900
 
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES   4,877,200     4,830,600     9,733,100     9,713,100  
 
Income from operations 4,202,600 2,239,400 7,999,100 4,908,800
 
LOSS FROM EQUITY INVESTMENTS (102,000 ) (600 ) (122,200 ) (4,100 )
 
INTEREST EXPENSE (273,100 ) (341,400 ) (561,300 ) (692,500 )
 
INTEREST AND OTHER INCOME   103,000     111,600     280,700     172,700  
 
Income before income taxes 3,930,500 2,009,000 7,596,300 4,384,900
 
PROVISION FOR INCOME TAXES   (1,591,800 )   (813,700 )   (3,076,500 )   (1,775,900 )
 
NET INCOME $ 2,338,700   $ 1,195,300   $ 4,519,800   $ 2,609,000  
 
EARNINGS PER SHARE – BASIC $ .47   $ .22   $ .89   $ .49  
 
EARNINGS PER SHARE – DILUTED $ .45   $ .22   $ .87   $ .49  
 
WEIGHTED AVERAGE SHARES OUTSTANDING – BASIC   5,025,944     5,328,831     5,077,179     5,362,489  
 
WEIGHTED AVERAGE SHARES OUTSTANDING – DILUTED   5,189,925     5,343,532     5,193,154     5,370,900  




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