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Winmark Corporation Announces Year End Results

Winmark Corporation (Nasdaq: WINA) announced today net income for the year ended December 29, 2012 of $12,937,900 or $2.47 per share diluted, compared to net income of $14,095,000 or $2.69 per share diluted, in 2011. The fourth quarter 2012 net income was $1,758,000 or $.34 per share diluted, compared to net income of $4,185,000 or $.80 per share diluted, for the same period last year. Revenues for the year ended December 29, 2012 were $51,943,100, up from $51,335,000 in 2011. In addition, as previously disclosed, the company’s results were negatively impacted by a $2.5 million after-tax earnings charge, or $0.47 per share, in the fourth quarter related to the impairment of its investments in both Tomsten, Inc. (d/b/a Archiver’s) and BridgeFunds, LLC.

John L. Morgan, Chairman and Chief Executive Officer, stated, “Our 2012 results continued to demonstrate the strength of our franchising business, with solid growth in royalties and new franchise agreements. Our leasing business, while exhibiting a modest increase in profitability, achieved more meaningful growth in the portfolio of customers and equipment that, along with the development of our sales staff, positions us well for continued long-term success.”

“We are excited about our prospects for 2013 and look forward to introducing our Style Encore TM concept to the market place as well as the continued execution of our business model,” Mr. Morgan added.

Winmark Corporation creates, supports and finances business. At December 29, 2012, there were 968 franchises in operation under the brands Plato's Closet®, Play It Again Sports®, Once Upon A Child®, and Music Go Round®. An additional 65 retail franchises have been awarded but are not open. In addition, at December 29, 2012, the Company had a lease portfolio equal to $36.2 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 29, 2012     December 31, 2011
ASSETS
Current Assets:    
Cash and cash equivalents $ 2,233,400 $ 9,020,100
Marketable securities 85,900 1,043,800
Receivables, net 1,237,100 1,316,200
Net investment in leases - current 13,461,200 11,746,900
Income tax receivable 1,400,700 116,500
Inventories 71,200 68,500
Prepaid expenses   445,200     362,000
Total current assets 18,934,700 23,674,000
 
Net investment in leases – long-term 22,697,100 18,102,000
Long-term investments, net - 3,817,400
Property and equipment, net 1,229,500 1,474,800
Other assets   677,500     677,500
$ 43,538,800   $ 47,745,700
 
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current Liabilities:
Line of credit $ 10,800,000 $ -
Accounts payable 2,203,700 1,460,300
Accrued liabilities 1,286,300 1,346,000
Discounted lease rentals 896,800 20,800
Rents received in advance 134,800 274,700
Deferred revenue 1,641,700 1,212,400
Deferred income taxes   3,549,900     3,464,800
Total current liabilities 20,513,200 7,779,000
 
Long-Term Liabilities:
Discounted lease rentals 177,900 -
Rents received in advance 117,700 269,400
Deferred revenue 953,000 844,300
Other liabilities 1,254,700 1,389,200
Deferred income taxes   2,594,300     2,355,100
Total long-term liabilities 5,097,600 4,858,000
 
Shareholders’ Equity:

Common stock, no par, 10,000,000 shares authorized, 4,996,459 and 4,987,643 shares issued and outstanding

-

629,800

Accumulated other comprehensive (loss) income (4,000 ) 17,000
Retained earnings   17,932,000     34,461,900
 
Total shareholders' equity   17,928,000     35,108,700
$ 43,538,800   $ 47,745,700
 
 
WINMARK CORPORATION
CONDENSED STATEMENTS OF OPERATIONS

(unaudited)

         
Quarter Ended   Fiscal Year Ended
December 29, 2012   December 31, 2011   December 29, 2012   December 31, 2011
REVENUE:    
Royalties $ 8,599,400 $ 8,442,100 $ 33,760,200 $ 30,360,600
Leasing income 3,222,000 3,780,200 13,211,800 16,364,700
Merchandise sales 667,500 482,900 2,750,700 2,481,600
Franchise fees 325,000 245,000 1,291,000 1,081,200
Other   304,300     281,600     929,400     1,046,900  
Total revenue 13,118,200 13,231,800 51,943,100 51,335,000
 
COST OF MERCHANDISE SOLD 639,300 457,900 2,621,500 2,366,400
LEASING EXPENSE 453,600 966,500 1,789,800 5,115,800
PROVISION FOR CREDIT LOSSES 22,000 (51,600 ) (47,600 ) (43,400 )
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES   5,040,400     4,953,200     20,280,300     19,048,600  
Income from operations 6,962,900 6,905,800 27,299,100 24,847,600
LOSS FROM EQUITY INVESTMENTS (1,842,500 ) (71,200 ) (2,492,900 ) (515,800 )
IMPAIRMENT OF INVESTMENT IN NOTES (663,700 ) (337,000 ) (1,324,400 ) (883,100 )
INTEREST EXPENSE (90,000 ) (27,800 ) (392,300 ) (112,000 )
INTEREST AND OTHER INCOME   15,400     22,800     66,000     44,900  
Income before income taxes 4,382,100 6,492,600 23,155,500 23,381,600
PROVISION FOR INCOME TAXES   (2,624,100 )   (2,307,600 )   (10,217,600 )   (9,286,600 )
NET INCOME $ 1,758,000   $ 4,185,000   $ 12,937,900   $ 14,095,000  
EARNINGS PER SHARE – BASIC $ .35   $ .84   $ 2.57   $ 2.83  
EARNINGS PER SHARE – DILUTED $ .34   $ .80   $ 2.47   $ 2.69  
WEIGHTED AVERAGE SHARES OUTSTANDING – BASIC   4,986,957     4,975,878     5,027,509     4,979,036  
WEIGHTED AVERAGE SHARES OUTSTANDING – DILUTED   5,179,504     5,235,590     5,237,671     5,238,412  




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