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Winmark Corporation Announces Second Quarter Results

Winmark Corporation (Nasdaq: WINA) announced today net income for the quarter ended June 29, 2013 of $4,336,900 (or $.83 per share diluted) compared to net income of $3,404,400 (or $.65 per share diluted) in the second quarter of 2012.

Earnings growth in the second quarter was due to a higher store count when compared to last year as well as increased sales from franchisees. Additionally, the profitability of the leasing business improved due to the size and performance of the Company’s lease portfolio. John Morgan, Chairman and CEO commented “Your company and its employees worked very hard during the quarter in preparation for our first Style Encore store, which is scheduled to open in the third quarter. We have awarded a total of eight franchise agreements to launch this exciting new women’s resale concept.”

Winmark Corporation creates, supports and finances business. At June 29, 2013, there were 986 franchises in operation under the brands Plato's Closet®, Play It Again Sports®, Once Upon A Child®, Music Go Round® and Style Encore™. An additional 67 retail franchises have been awarded but are not open. In addition, at June 29, 2013, the Company had a lease portfolio equal to $37.2 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. 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 29, 2013       December 29, 2012
ASSETS
Current Assets:      
Cash and cash equivalents $ 2,041,300 $ 2,233,400
Marketable securities 84,500 85,900
Receivables, net 1,230,400 1,237,100
Net investment in leases - current 16,149,700 13,461,200
Income tax receivable 856,800 1,400,700
Inventories 76,800 71,200
Prepaid expenses   388,800     445,200  
Total current assets 20,828,300 18,934,700
 
Net investment in leases – long-term 21,043,900 22,697,100
Property and equipment, net 1,166,000 1,229,500
Other assets   677,500     677,500  
$ 43,715,700   $ 43,538,800  
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current Liabilities:
Line of credit $ 2,000,000 $ 10,800,000
Accounts payable 1,258,600 2,203,700
Accrued liabilities 1,983,800 1,286,300
Discounted lease rentals 906,400 896,800
Rents received in advance 62,000 134,800
Deferred revenue 1,569,700 1,641,700
Deferred income taxes   3,555,600     3,549,900  
Total current liabilities 11,336,100 20,513,200
 
Long-Term Liabilities:
Discounted lease rentals 445,200 177,900
Rents received in advance 119,700 117,700
Deferred revenue 956,100 953,000
Other liabilities 1,184,600 1,254,700
Deferred income taxes   2,659,600     2,594,300  
Total long-term liabilities 5,365,200 5,097,600
 
Shareholders’ Equity:

Common stock, no par, 10,000,000 shares authorized, 5,044,484 and 4,996,459 shares issued and outstanding

1,142,900

-

Accumulated other comprehensive loss (4,900 ) (4,000 )
Retained earnings   25,876,400     17,932,000  
Total shareholders’ equity   27,014,400     17,928,000  
$ 43,715,700   $ 43,538,800  
 

WINMARK CORPORATION

CONDENSED STATEMENTS OF OPERATIONS

(Unaudited)

         
Quarter Ended     Six Months Ended
June 29, 2013     June 30, 2012     June 29, 2013     June 30, 2012
REVENUE:        
Royalties $ 8,608,200 $ 7,693,900 $ 17,083,100 $ 15,982,400
Leasing income 4,130,200 3,285,000 7,538,000 5,677,100
Merchandise sales 557,400 656,800 1,223,100 1,366,600
Franchise fees 389,600 270,000 804,200 555,000
Other   338,100     286,700     523,500     444,700  
Total revenue 14,023,500 12,192,400 27,171,900 24,025,800
 
COST OF MERCHANDISE SOLD 524,400 633,500 1,165,500 1,297,800
 
LEASING EXPENSE 610,500 325,700 890,200 565,500
 
PROVISION FOR CREDIT LOSSES (51,700 ) (14,900 ) (37,900 ) (67,900 )
 
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES   5,879,100     5,221,600     11,417,000     10,357,700  
 
Income from operations 7,061,200 6,026,500 13,737,100 11,872,700
 
LOSS FROM EQUITY INVESTMENTS - (240,700 ) - (278,100 )
 
INTEREST EXPENSE (55,100 ) (122,300 ) (144,600 ) (192,100 )
 
INTEREST AND OTHER INCOME (EXPENSE)   (100 )   (10,000 )   (10,300 )   36,300  
 
Income before income taxes 7,006,000 5,653,500 13,582,200 11,438,800
 
PROVISION FOR INCOME TAXES   (2,669,100 )   (2,249,100 )   (5,187,800 )   (4,518,400 )
 
NET INCOME $ 4,336,900   $ 3,404,400   $ 8,394,400   $ 6,920,400  
 
EARNINGS PER SHARE – BASIC $ .86   $ .67   $ 1.68   $ 1.37  
 
EARNINGS PER SHARE – DILUTED $ .83   $ .65   $ 1.61   $ 1.31  
 
WEIGHTED AVERAGE SHARES OUTSTANDING – BASIC   5,024,284     5,056,289     5,010,803     5,054,620  
 
WEIGHTED AVERAGE SHARES OUTSTANDING – DILUTED   5,200,592     5,268,245     5,201,644     5,274,223  




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