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Press release from Business Wire

Winmark Corporation Announces Second Quarter Results

Wednesday, July 16, 2014

Winmark Corporation Announces Second Quarter Results

12:21 EDT Wednesday, July 16, 2014

MINNEAPOLIS (Business Wire) -- Winmark Corporation (Nasdaq:WINA) announced today net income for the quarter ended June 28, 2014 of $4,280,800 (or $.82 per share diluted) compared to net income of $4,336,900 (or $.83 per share diluted) in the second quarter of 2013. For the six months ended June 28, 2014, net income was $8,832,700 (or $1.67 per share diluted) compared to net income of $8,394,400 (or $1.61 per share diluted) for the same period last year.

“Our franchising business continued to show steady growth in both royalties and new stores during the second quarter, while expenses increased as we continue to invest in our new Style Encore concept,” noted John Morgan, Chairman and Chief Executive Officer. “Profits from our leasing business were lower when compared to last year due to the timing of customer activity in our portfolio, which is unpredictable and will vary from quarter to quarter. Long-term growth in the leasing portfolio is a key indicator of future profits from our leasing business, and our leasing portfolio grew by fifteen percent from the end of last year. Additionally, the increase in debt during the quarter was primarily due to the Company's repurchase of common stock,” Mr. Morgan added.

Winmark Corporation creates, supports and finances business. At June 28, 2014, there were 1,047 franchises in operation under the brands Plato's Closet®, Once Upon A Child®, Play It Again Sports®, Music Go Round® and Style Encore®. An additional 104 retail franchises have been awarded but are not open. In addition, at June 28, 2014, the Company had a lease portfolio equal to $43.2 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 28, 2014     December 28, 2013
ASSETS
Current Assets:    
Cash and cash equivalents $ 2,144,700 $ 10,642,600
Marketable securities 839,900 736,500
Receivables, net 1,088,000 1,205,500
Net investment in leases - current 21,023,400 17,239,900
Income tax receivable 748,500 166,500
Inventories 78,600 96,700
Prepaid expenses   393,500     587,300  
Total current assets 26,316,600 30,675,000
Net investment in leases – long-term 22,203,600 20,301,400
Property and equipment, net 1,517,700 1,382,200
Other assets   677,500     677,500  
$ 50,715,400   $ 53,036,100  
 
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Line of credit $ 23,100,000 $ -
Accounts payable 1,423,500 2,441,400
Accrued liabilities 2,571,300 1,233,100
Discounted lease rentals 313,600 424,900
Deferred revenue 2,116,800 2,199,900
Deferred income taxes   3,276,600     4,208,200  
Total current liabilities 32,801,800 10,507,500
Long-Term Liabilities:
Discounted lease rentals 149,600 277,400
Deferred revenue 1,266,300 1,180,700
Other liabilities 1,433,800 1,489,000
Deferred income taxes   465,700     1,436,800  
Total long-term liabilities 3,315,400 4,383,900
Shareholders' Equity:

Common stock, no par, 10,000,000 shares authorized, 5,062,380 and 5,143,530 shares issued and outstanding

-

2,949,500

Accumulated other comprehensive loss (3,200 ) (4,100 )
Retained earnings   14,601,400     35,199,300  
Total shareholders' equity   14,598,200     38,144,700  
$ 50,715,400   $ 53,036,100  
 
 
WINMARK CORPORATION
CONDENSED STATEMENTS OF OPERATIONS

(Unaudited)

     
Quarter Ended     Six Months Ended
June 28, 2014     June 29, 2013     June 28, 2014     June 29, 2013
REVENUE:        
Royalties $ 9,200,800 $ 8,608,200 $ 18,010,800 $ 17,083,100
Leasing income 3,157,600 4,130,200 7,533,200 7,538,000
Merchandise sales 685,800 557,400 1,473,800 1,223,100
Franchise fees 607,500 389,600 956,500 804,200
Other   387,200     338,100     617,200     523,500  
Total revenue 14,038,900 14,023,500 28,591,500 27,171,900
COST OF MERCHANDISE SOLD 659,300 524,400 1,414,000 1,165,500
LEASING EXPENSE 119,100 610,500 425,700 890,200
PROVISION FOR CREDIT LOSSES (11,100 ) (51,700 ) 27,800 (37,900 )
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES   6,179,000     5,879,100     12,196,900     11,417,000  
Income from operations 7,092,600 7,061,200 14,527,100 13,737,100
INTEREST EXPENSE (144,100 ) (55,100 ) (206,200 ) (144,600 )
INTEREST AND OTHER INCOME (EXPENSE)   900     (100 )   1,000     (10,300 )
Income before income taxes 6,949,400 7,006,000 14,321,900 13,582,200
PROVISION FOR INCOME TAXES   (2,668,600 )   (2,669,100 )   (5,489,200 )   (5,187,800 )
NET INCOME $ 4,280,800   $ 4,336,900   $ 8,832,700   $ 8,394,400  
EARNINGS PER SHARE – BASIC $ .84   $ .86   $ 1.72   $ 1.68  
EARNINGS PER SHARE – DILUTED $ .82   $ .83   $ 1.67   $ 1.61  
WEIGHTED AVERAGE SHARES OUTSTANDING – BASIC   5,109,049     5,024,284     5,128,789     5,010,803  
WEIGHTED AVERAGE SHARES OUTSTANDING – DILUTED   5,243,123     5,200,592     5,275,539     5,201,644  
 

Winmark Corporation
Brett D. Heffes, 763-520-8500

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