Winmark Corporation (Nasdaq: WINA) announced today net income for the quarter ended March 26, 2011 of $3,026,300 (or $.58 per share diluted) compared to net income of $2,181,100 (or $.42 per share diluted) in the first quarter of 2010.

John L. Morgan, Chairman and Chief Executive Officer, stated, “The growth in our first quarter operating earnings was primarily a result of increased profitability in our leasing business as well as continued strength in our franchising operations. We ended the quarter with a solid balance sheet that provides us with the ability to support the needs of our current and future leasing customers.”

Winmark Corporation creates, supports and finances business. At March 26, 2011, there were 902 franchises in operation under the brands Play It Again Sports®, Plato's Closet®, Once Upon A Child®, and Music Go Round®. An additional 42 retail franchises have been awarded but are not open. In addition, at March 26, 2011, the Company had loans and leases equal to $32.4 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
           

    March 26, 2011    
    December 25, 2010
(unaudited)     (audited)
ASSETS
Current Assets:
Cash and cash equivalents $ 2,367,600 $ 2,257,100
Marketable securities - 161,000
Receivables, less allowance for doubtful accounts of
$16,100 and $17,000 1,349,000 1,841,300

Net investment in leases - current
12,890,300 13,856,700
Income tax receivable - 294,700
Inventories 47,800 85,900
Prepaid expenses   408,200   382,600
Total current assets 17,062,900 18,879,300

Net investment in leases - long-term
17,541,700 16,802,500
Long-term investments 3,896,800 3,973,800
Property and equipment, net 1,697,800 1,785,900
Other assets   677,500   680,500
$ 40,876,700 $ 42,122,000
 
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current Liabilities:
Line of credit $ 3,500,000 $ 8,800,000

Accounts payable
2,435,900 1,274,200
Income taxes payable 218,400 -
Accrued liabilities 1,572,100 1,513,600
Discounted lease rentals 334,400 530,400
Rents received in advance 248,300 291,800
Deferred revenue 1,261,400 1,041,700
Deferred income taxes   1,832,500   1,832,500
Total current liabilities 11,403,000 15,284,200
 
Long-Term Liabilities:
Discounted lease rentals 16,200 26,500
Rents received in advance 625,400 696,900
Deferred revenue 764,700 767,600
Other liabilities 3,309,900 1,678,000
Deferred income taxes   655,800   655,800
Total long-term liabilities 5,372,000 3,824,800
 
Shareholders’ Equity:
Common stock, no par, 10,000,000 shares authorized,
4,974,006 and 5,020,739 shares issued and outstanding - 513,700
Retained earnings   24,101,700   22,499,300
Total shareholders’ equity   24,101,700   23,013,000
$ 40,876,700 $ 42,122,000
 
 
WINMARK CORPORATION
CONDENSED STATEMENTS OF OPERATIONS
(unaudited)
     
Three Months Ended
March 26, 2011     March 27, 2010
REVENUE:    
Royalties $ 7,052,800 $ 6,363,500
Leasing income 3,235,000 2,524,900
Merchandise sales 501,400 494,700
Franchise fees 75,000 223,500
Other   240,700   236,200
Total revenue 11,104,900 9,842,800
 
COST OF MERCHANDISE SOLD 482,900 471,000
 
LEASING EXPENSE 518,700 547,300
 
PROVISION FOR CREDIT LOSSES 45,400 172,100
 
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES   4,845,900   4,855,900
Income from operations 5,212,000 3,796,500
 
LOSS FROM EQUITY INVESTMENTS (77,000) (20,200)
 
INTEREST EXPENSE (31,100) (288,200)
 
INTEREST AND OTHER INCOME   17,200   177,700
Income before income taxes 5,121,100 3,665,800
 

PROVISION FOR INCOME TAXES
 

(2,094,800)
 

(1,484,700)
 

NET INCOME

$

3,026,300

$

2,181,100
 
EARNINGS PER SHARE - BASIC $ .61 $ .43
 
EARNINGS PER SHARE - DILUTED $ .58 $ .42
 
WEIGHTED AVERAGE SHARES OUTSTANDING - BASIC   4,989,588   5,128,408
 
WEIGHTED AVERAGE SHARES OUTSTANDING - DILUTED   5,215,484   5,196,377
 

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