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Winmark Corporation Announces Third Quarter Results

Winmark Corporation (Nasdaq: WINA) announced today net income for the quarter ended September 25, 2010 of $2,690,000, or $.51 per share diluted, compared to net income of $1,779,500, or $.33 per share diluted, in 2009. For the nine months ended September 25, 2010, net income was $7,209,800, or $1.39 per share diluted, compared to net income of $4,388,500, or $.82 per share diluted, for the same period last year.

John L. Morgan, Chairman and Chief Executive Officer, stated, “The positive trends in our business continued during the third quarter. Our strong financial performance included the further strengthening of our balance sheet.”

Winmark Corporation creates, supports and finances business. At September 25, 2010, there were 892 franchises in operation under the brands Play It Again Sports®, Plato's Closet®, Once Upon A Child®, and Music Go Round® and there were 16 territories in operation under the Wirth Business Credit® brand. An additional 39 retail franchises have been awarded but are not open. In addition, at September 25, 2010, the Company had loans and leases equal to $34.4 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 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)

         
September 25, 2010     December 26, 2009
ASSETS
Current Assets:    
Cash and cash equivalents $ 2,169,400 $ 9,490,800
Marketable securities 318,000 1,274,000
Current investments 2,000,000 2,000,000
Receivables, less allowance for doubtful accounts of
$21,800 and $35,700 2,005,700 1,761,100
Net investment in leases - current 15,729,900 17,575,900
Income tax receivable 1,032,100 -
Inventories 95,600 111,400
Prepaid expenses   500,000     398,800
Total current assets 23,850,700 32,612,000
Net investment in leases – long-term 16,637,400 19,423,700
Long-term investments 1,910,500 2,232,900
Long-term receivables, net 6,000 14,900
Property and equipment, net 1,667,700 1,843,500
Other assets   677,500     677,500
$ 44,749,800   $ 56,804,500
 
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current Liabilities:
Current line of credit $ 15,400,000 $ 3,983,100
Current renewable subordinated notes - 9,166,900
Accounts payable 1,358,000 1,415,200
Income tax payable - 183,500
Accrued liabilities 2,188,500 1,794,100
Current discounted lease rentals 618,900 972,600
Current rents received in advance 312,600 294,400
Current deferred revenue 1,096,800 1,188,800
Deferred income taxes   1,057,700     1,057,700
Total current liabilities 22,032,500 20,056,300
Long-term line of credit - 5,298,900
Long-term renewable subordinated notes - 12,058,700
Long-term discounted lease rentals 122,000 507,600
Long-term rents received in advance 820,900 1,332,000
Long-term deferred revenue 771,000 709,500
Other long-term liabilities 1,209,500 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 195,300 -
Accumulated other comprehensive income (loss) (96,100 ) 9,600
Retained earnings   19,480,300     15,319,100
Total shareholders’ equity   19,579,500     15,328,700
$ 44,749,800   $ 56,804,500
 
   
WINMARK CORPORATION
CONDENSED STATEMENTS OF OPERATIONS

(Unaudited)

     
Quarter Ended Nine Months Ended
September 25, 2010   September 26, 2009 September 25, 2010   September 26, 2009
REVENUE:
Royalties $ 7,030,000 $ 6,405,200 $ 19,761,800 $ 17,646,600
Leasing income 2,419,600 2,271,600 7,290,300 7,116,400
Merchandise sales 964,000 593,800 2,009,200 1,898,500
Franchise fees 357,100 419,600 885,600 804,600
Other   236,600     134,600     782,300     446,800  
Total revenue 11,007,300 9,824,800 30,729,200 27,912,900
COST OF MERCHANDISE SOLD 920,600 569,700 1,911,800 1,816,700
LEASING EXPENSE 387,600 548,000 1,374,200 1,743,300
PROVISION FOR CREDIT LOSSES 130,500 853,600 142,400 1,877,500
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES   4,360,200     4,666,800     14,093,300     14,379,900  
Income from operations 5,208,400 3,186,700 13,207,500 8,095,500
LOSS FROM EQUITY INVESTMENTS (200,200 ) (57,300 ) (322,400 ) (61,400 )
INTEREST EXPENSE (363,900 ) (317,300 ) (925,200 ) (1,009,800 )
INTEREST AND OTHER INCOME   96,100     178,700     376,800     351,400  
Income before income taxes 4,740,400 2,990,800 12,336,700 7,375,700
PROVISION FOR INCOME TAXES   (2,050,400 )   (1,211,300 )   (5,126,900 )   (2,987,200 )
NET INCOME $ 2,690,000   $ 1,779,500   $ 7,209,800   $ 4,388,500  
EARNINGS PER SHARE – BASIC $ .54   $ .34   $ 1.43   $ .82  
EARNINGS PER SHARE – DILUTED $ .51   $ .33   $ 1.39   $ .82  
WEIGHTED AVERAGE SHARES OUTSTANDING – BASIC   5,011,862     5,282,349     5,055,405     5,335,869  
WEIGHTED AVERAGE SHARES OUTSTANDING – DILUTED   5,224,580     5,329,697     5,203,628     5,357,259  
 




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