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Winmark Corporation Announces Third Quarter Results

Winmark Corporation (Nasdaq: WINA) announced today net income for the quarter ended September 29, 2012 of $4,259,500 (or $.82 per share diluted) compared to net income of $3,483,500 (or $.66 per share diluted) in 2011. For the nine months ended September 29, 2012, net income was $11,179,900 (or $2.13 per share diluted) compared to net income of $9,910,000 (or $1.89 per share diluted) for the same period last year.

John L. Morgan, Chairman and Chief Executive Officer, stated, “During the quarter, our pre-tax income was reduced by approximately $1.0 million, or $0.20 per share, due to our share of losses from Tomsten, Inc. as well as an impairment charge relating to our investment in BridgeFunds, L.L.C. This compares with a reduction of pre-tax income during the third quarter of 2011 from these investments of $0.5 million, or $0.10 per share.”

Mr. Morgan continued, “The strong cash flow from our franchising business allows us to grow our leasing operations. Franchising cash flow is improved by additional stores and store sales growth, which in turn provides us with the capital to invest on behalf of our leasing customers. This combination is the cornerstone of Winmark’s business model.”

Winmark Corporation creates, supports and finances business. At September 29, 2012, there were 958 franchises in operation under the brands Plato's Closet®, Play It Again Sports®, Once Upon A Child®, and Music Go Round®. An additional 59 retail franchises have been awarded but are not open. In addition, at September 29, 2012, the Company had a lease portfolio of $34.1 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 29, 2012     December 31, 2011
ASSETS
Current Assets:    
Cash and cash equivalents $ 2,249,200 $ 9,020,100
Marketable securities 90,400 1,043,800
Receivables, net 1,164,500 1,316,200
Net investment in leases - current 10,764,800 11,746,900
Income tax receivable 427,800 116,500
Inventories 85,300 68,500
Prepaid expenses   573,300   362,000
Total current assets 15,355,300 23,674,000
 
Net investment in leases – long-term 23,373,200 18,102,000
Long-term investments, net 2,506,300 3,817,400
Property and equipment, net 1,229,700 1,474,800
Other assets   677,500   677,500
$ 43,142,000 $ 47,745,700
 
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current Liabilities:
Line of credit $ 10,700,000 $ -
Accounts payable 1,511,300 1,460,300
Accrued liabilities 2,443,900 1,346,000
Discounted lease rentals 570,100 20,800
Rents received in advance 206,600 274,700
Deferred revenue 1,583,400 1,212,400
Deferred income taxes   3,447,600   3,464,800
Total current liabilities 20,462,900 7,779,000
 
Long-Term Liabilities:
Discounted lease rentals 658,600 -
Rents received in advance 135,100 269,400
Deferred revenue 923,800 844,300
Other liabilities 1,289,700 1,389,200
Deferred income taxes   2,586,500   2,355,100
Total long-term liabilities 5,593,700 4,858,000
 
Shareholders’ Equity:
Common stock, no par, 10,000,000 shares authorized,

4,993,927 and 4,987,643 shares issued and outstanding

-

629,800

Accumulated other comprehensive (loss) income (1,200) 17,000
Retained earnings   17,086,600   34,461,900
 
Total shareholders’ equity   17,085,400   35,108,700
$ 43,142,000 $ 47,745,700
 
 
WINMARK CORPORATION
CONDENSED STATEMENTS OF OPERATIONS

(Unaudited)

           
Quarter Ended     Nine Months Ended
September 29, 2012     September 24, 2011     September 29, 2012     September 24, 2011
REVENUE:        
Royalties $ 9,178,400 $ 8,046,400 $ 25,160,800 $ 21,918,500
Leasing income 4,312,700 2,369,300 9,989,800 12,584,500
Merchandise sales 716,600 664,300 2,083,200 1,998,700
Franchise fees 411,000 516,200 966,000 836,200
Other   180,400   177,300   625,100   765,300
Total revenue 14,799,100 11,773,500 38,824,900 38,103,200
 
COST OF MERCHANDISE SOLD 684,400 631,400 1,982,200 1,908,500
 
LEASING EXPENSE 770,700 290,400 1,336,200 4,149,300
 
PROVISION FOR CREDIT LOSSES (1,700) (13,100) (69,600) 8,200
 
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES   4,882,200   4,219,100   15,239,900   14,095,400
 
Income from operations 8,463,500 6,645,700 20,336,200 17,941,800
 
LOSS FROM EQUITY INVESTMENTS (372,300) (224,700) (650,400) (444,600)
 
IMPAIRMENT OF INVESTMENT IN NOTES (660,700) (293,200) (660,700) (546,100)
 
INTEREST EXPENSE (110,200) (26,200) (302,300) (84,200)
 
INTEREST AND OTHER INCOME/(EXPENSE)   14,300   (9,000)   50,600   22,100
 
Income before income taxes 7,334,600 6,092,600 18,773,400 16,889,000
 
PROVISION FOR INCOME TAXES   (3,075,100)   (2,609,100)   (7,593,500)   (6,979,000)
 
NET INCOME $ 4,259,500 $ 3,483,500 $ 11,179,900 $ 9,910,000
 
EARNINGS PER SHARE – BASIC $ .85 $ .70 $ 2.22 $ 1.99
 
EARNINGS PER SHARE – DILUTED $ .82 $ .66 $ 2.13 $ 1.89
 
WEIGHTED AVERAGE SHARES OUTSTANDING – BASIC   5,013,822   4,970,046   5,041,023   4,980,160
 
WEIGHTED AVERAGE SHARES OUTSTANDING – DILUTED   5,222,719   5,263,343   5,257,057   5,239,424
 




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