Winmark Corporation Announces Second Quarter Results

By: Winmark Corporation | 0 Shares 183 Reads

MINNEAPOLIS - July 16, 2014 - (BUSINESS WIRE) - Winmark Corporation (Nasdaq:WINA) announced 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