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Winmark Corporation Announces Year End Results

Winmark Corporation (Nasdaq: WINA) announced today net income for the year ended December 31, 2011 of $14,095,000 or $2.69 per share diluted, compared to net income of $10,329,000 or $1.98 per share diluted, in 2010. The fourth quarter 2011 net income was $4,185,000 or $.80 per share diluted, compared to net income of $3,119,200 or $.60 per share diluted, for the same period last year. Revenues for the year ended December 31, 2011 were $51,335,000, up from $41,203,600 in 2010.

John L. Morgan, Chairman and Chief Executive Officer, stated, “We had a good year and fourth quarter due to the steady growth of our franchise business and the significant improvement in our leasing business. We believe that we are well positioned for long-term profitable growth.”

Winmark Corporation creates, supports and finances business. At December 31, 2011, there were 930 franchises in operation under the brands Plato's Closet®, Play It Again Sports®, Once Upon A Child®, and Music Go Round®. An additional 44 retail franchises have been awarded but are not open. In addition, at December 31, 2011, the Company had a lease portfolio equal to $29.8 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 31, 2011   December 25, 2010
ASSETS
Current Assets:  
Cash and cash equivalents $ 9,020,100 $ 2,257,100
Marketable securities 1,043,800 161,000
Receivables, net 1,316,200 1,841,300
Net investment in leases - current 11,746,900 13,856,700
Income tax receivable 116,500 294,700
Inventories 68,500 85,900
Prepaid expenses   362,000   382,600
Total current assets 23,674,000 18,879,300
 
Net investment in leases – long-term 18,102,000 16,802,500
Long-term investments, net 3,817,400 3,973,800
Property and equipment, net 1,474,800 1,785,900
Other assets   677,500   680,500
$ 47,745,700 $ 42,122,000
 
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current Liabilities:
Line of credit $ - $ 8,800,000
Accounts payable 1,460,300 1,274,200
Accrued liabilities 1,346,000 1,513,600
Discounted lease rentals 20,800 530,400
Rents received in advance 274,700 291,800
Deferred revenue 1,212,400 1,041,700
Deferred income taxes   3,464,800   1,832,500
Total current liabilities 7,779,000 15,284,200
 
Long-Term Liabilities:
Discounted lease rentals - 26,500
Rents received in advance 269,400 696,900
Deferred revenue 844,300 767,600
Other liabilities 1,389,200 1,678,000
Deferred income taxes   2,355,100   655,800
Total long-term liabilities 4,858,000 3,824,800
 
Shareholders’ Equity:

Common stock, no par, 10,000,000 shares authorized, 4,987,643 and 5,020,739 shares issued and outstanding

629,800

513,700

Accumulated other comprehensive income 17,000 -
Retained earnings   34,461,900   22,499,300
 
Total shareholders' equity   35,108,700   23,013,000
$ 47,745,700 $ 42,122,000
 

WINMARK CORPORATION

CONDENSED STATEMENTS OF OPERATIONS

(unaudited)

       
Quarter Ended   Fiscal Year Ended
December 31, 2011   December 25, 2010   December 31, 2011   December 25, 2010
REVENUE:    
Royalties $ 8,442,100 $ 6,727,500 $ 30,360,600 $ 26,489,300
Leasing income 3,780,200 2,606,000 16,364,700 9,896,300
Merchandise sales 482,900 335,600 2,481,600 2,344,800
Franchise fees 245,000 480,800 1,081,200 1,366,400
Other   281,600     324,500     1,046,900     1,106,800  
Total revenue 13,231,800 10,474,400 51,335,000 41,203,600
 
COST OF MERCHANDISE SOLD 457,900 319,300 2,366,400 2,231,100
 
LEASING EXPENSE 966,500 250,000 5,115,800 1,624,200
 
PROVISION FOR CREDIT LOSSES (51,600 ) 46,600 (43,400 ) 189,000
 
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES   4,953,200     4,527,000     19,048,600     18,620,300  
 
Income from operations 6,905,800 5,331,500 24,847,600 18,539,000
 
GAIN (LOSS) FROM EQUITY INVESTMENTS (71,200 ) 63,300 (515,800 ) (259,100 )
 
IMPAIRMENT OF INVESTMENT IN NOTES (337,000 ) - (883,100 ) -
 
INTEREST EXPENSE (27,800 ) (55,000 ) (112,000 ) (980,200 )
 
INTEREST AND OTHER INCOME/(EXPENSE)   22,800     (119,000 )   44,900     257,800  
 
Income before income taxes 6,492,600 5,220,800 23,381,600 17,557,500
 
PROVISION FOR INCOME TAXES   (2,307,600 )   (2,101,600 )   (9,286,600 )   (7,228,500 )
 
NET INCOME $ 4,185,000   $ 3,119,200   $ 14,095,000   $ 10,329,000  
 
EARNINGS PER SHARE – BASIC $ .84   $ .62   $ 2.83   $ 2.05  
 
EARNINGS PER SHARE – DILUTED $ .80   $ .60   $ 2.69   $ 1.98  
 
WEIGHTED AVERAGE SHARES OUTSTANDING – BASIC   4,975,878     5,013,772     4,979,036     5,044,995  
 
WEIGHTED AVERAGE SHARES OUTSTANDING – DILUTED   5,235,590     5,231,581     5,238,412     5,210,614  




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