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Winmark Corporation Announces Second Quarter Results

Winmark Corporation (Nasdaq: WINA) announced today net income for the quarter ended June 25, 2011 of $3,400,200 (or $.65 per share diluted) compared to net income of $2,338,700 (or $.45 per share diluted) in 2010. For the six months ended June 25, 2011, net income was $6,426,500 (or $1.23 per share diluted) compared to net income of $4,519,800 (or $.87 per share diluted) for the same period last year.

John L. Morgan, Chairman and Chief Executive Officer, stated, “Our results during the second quarter were strong. Our leasing business experienced significant growth in profitability due to high levels of activity within our portfolio. Our franchising business continued to exhibit outstanding financial performance. Additionally, we paid down our line of credit and ended the quarter with no bank debt.”

Winmark Corporation creates, supports and finances business. At June 25, 2011, there were 907 franchises in operation under the brands Play It Again Sports®, Plato's Closet®, Once Upon A Child® and Music Go Round®. An additional 50 retail franchises have been awarded but are not open. In addition, at June 25, 2011, the Company had loans and leases equal to $31.7 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)

             

  June 25, 2011  

    December 25, 2010
 
ASSETS
Current Assets:    
Cash and cash equivalents $ 1,036,000 $ 2,257,100
Marketable securities 7,400 161,000
Receivables, net 1,643,700 1,841,300

Net investment in leases – current

12,226,700 13,856,700
Income tax receivable - 294,700
Inventories 50,300 85,900
Prepaid expenses   324,100   382,600
Total current assets 15,288,200 18,879,300
 

Net investment in leases – long-term

17,716,200 16,802,500
Long-term investments, net 4,500,900 3,973,800
Property and equipment, net 1,655,900 1,785,900
Other assets   677,500   680,500
$ 39,838,700 $ 42,122,000
 
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current Liabilities:
Line of credit $ - $ 8,800,000
Accounts payable 2,039,300 1,274,200
Income taxes payable 1,449,500 -
Accrued liabilities 2,276,700 1,513,600
Discounted lease rentals 203,600 530,400
Rents received in advance 256,600 291,800
Deferred revenue 1,402,400 1,041,700
Deferred income taxes   1,832,500   1,832,500
Total current liabilities 9,460,600 15,284,200
 
Long-Term Liabilities:
Discounted lease rentals 9,300 26,500
Rents received in advance 517,000 696,900
Deferred revenue 819,800 767,600
Other liabilities 1,282,200 1,678,000
Deferred income taxes   655,800   655,800
Total long-term liabilities 3,284,100 3,824,800
 
Shareholders’ Equity:
Common stock, no par, 10,000,000 shares authorized,

4,968,789 and 5,020,739 shares issued and outstanding

- 513,700
Accumulated other comprehensive loss (600) -
Retained earnings   27,094,600   22,499,300
Total shareholders’ equity   27,094,000   23,013,000
$ 39,838,700 $ 42,122,000
 
 
WINMARK CORPORATION
CONDENSED STATEMENTS OF OPERATIONS

(Unaudited)

             
Quarter Ended     Six Months Ended
June 25, 2011     June 26, 2010     June 25, 2011     June 26, 2010
REVENUE:        
Royalties $ 6,819,300 $ 6,368,300 $ 13,872,100 $ 12,731,800
Leasing income 6,980,200 2,345,800 10,215,200 4,870,700
Merchandise sales 833,000 550,500 1,334,400 1,045,200
Franchise fees 245,000 305,000 320,000 528,500
Other   347,300   309,500   588,000   545,700
Total revenue 15,224,800 9,879,100 26,329,700 19,721,900
 
COST OF MERCHANDISE SOLD 794,200 520,200 1,277,100 991,200
 
LEASING EXPENSE 3,340,200 439,300 3,858,900 986,600
 
PROVISION FOR CREDIT LOSSES (24,100) (160,200) 21,300 11,900
 
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES   5,030,400   4,877,200   9,876,300   9,733,100
 
Income from operations 6,084,100 4,202,600 11,296,100 7,999,100
 
LOSS FROM EQUITY INVESTMENTS (142,900) (102,000) (219,900) (122,200)
 
IMPAIRMENT OF INVESTMENT IN NOTES (252,900) - (252,900) -
 
INTEREST EXPENSE (26,900) (273,100) (58,000) (561,300)
 
INTEREST AND OTHER INCOME   13,900   103,000   31,100   280,700
 
Income before income taxes 5,675,300 3,930,500 10,796,400 7,596,300
 
PROVISION FOR INCOME TAXES   (2,275,100)   (1,591,800)   (4,369,900)   (3,076,500)
 
NET INCOME $ 3,400,200 $ 2,338,700 $ 6,426,500 $ 4,519,800
 
EARNINGS PER SHARE – BASIC $ .68 $ .47 $ 1.29 $ .89
 
EARNINGS PER SHARE – DILUTED $ .65 $ .45 $ 1.23 $ .87
 
WEIGHTED AVERAGE SHARES OUTSTANDING – BASIC   4,980,844   5,025,944   4,985,220   5,077,179
 
WEIGHTED AVERAGE SHARES OUTSTANDING – DILUTED   5,239,443   5,189,925   5,227,468   5,193,154
 




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