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Winmark Corporation Announces Third Quarter Results

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October 14, 2015 11:58 AM EDT

MINNEAPOLIS--(BUSINESS WIRE)-- Winmark Corporation (Nasdaq: WINA) announced today net income for the quarter ended September 26, 2015 of $5,339,600 (or $1.23 per share diluted) compared to net income of $5,623,000 (or $1.09 per share diluted) in the third quarter of 2014. For the nine months ended September 26, 2015, net income was $16,145,300 (or $3.39 per share diluted) compared to net income of $14,455,700 (or $2.76 per share diluted) for the same period last year.

The Company experienced modest royalty growth in the franchising business, while profits in the leasing business were lower when compared to last year due to the timing of customer activity in the portfolio. Earnings per share growth during the quarter was positively impacted by the previously reported self-tender offer.

Winmark Corporation creates, supports and finances business. At September 26, 2015, there were 1,133 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 September 26, 2015, the Company had a lease portfolio of $40.3 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)

           
September 26, 2015     December 27, 2014
ASSETS
Current Assets:    
Cash and cash equivalents $ 1,060,700 $ 2,089,700
Marketable securities 226,500 466,800
Receivables, net 1,314,200 1,328,200
Net investment in leases - current 18,260,700 19,831,600
Income tax receivable 855,000 4,163,900
Inventories 59,600 93,500
Prepaid expenses   757,500     467,400  
Total current assets 22,534,200 28,441,100
 
Net investment in leases – long-term 21,994,700 24,188,900
Property and equipment, net 1,218,800 1,420,300
Other assets 607,500 677,500
Deferred income taxes   419,400     -  
$ 46,774,600   $ 54,727,800  
 
LIABILITIES AND SHAREHOLDERS’ EQUITY (DEFICIT)
Current Liabilities:
Line of credit $ - $ 18,500,000
Notes payable, net 1,988,700 -
Accounts payable 1,208,400 1,955,500
Accrued liabilities 3,139,800 1,759,200
Discounted lease rentals 75,800 227,300
Deferred revenue 2,139,200 2,142,600
Deferred income taxes   2,846,400     4,412,600  
Total current liabilities 11,398,300 28,997,200
 
Long-Term Liabilities:
Line of credit 46,200,000 -
Notes payable, net 22,403,200 -
Discounted lease rentals - 25,800
Deferred revenue 1,536,100 1,347,800
Other liabilities 1,248,800 1,403,200
Deferred income taxes   -     1,344,300  
Total long-term liabilities 71,388,100 4,121,100
 
Shareholders’ Equity (Deficit):

Common stock, no par, 10,000,000 shares authorized, 4,128,031 and 4,998,512 shares issued and outstanding

434,700

422,400

Accumulated other comprehensive loss (33,700 ) (37,100 )
Retained earnings (accumulated deficit)   (36,412,800 )   21,224,200  
 
Total shareholders’ equity (deficit)   (36,011,800 )   21,609,500  
$ 46,774,600   $ 54,727,800  
 
 
WINMARK CORPORATION
CONDENSED STATEMENTS OF OPERATIONS

(Unaudited)

           
Quarter Ended     Nine Months Ended
September 26, 2015     September 27, 2014     September 26, 2015     September 27, 2014
REVENUE:        
Royalties $ 11,286,100 $ 10,725,000 $ 31,226,700 $ 28,735,800
Leasing income 3,247,000 4,121,800 16,919,900 11,655,000
Merchandise sales 762,300 786,100 2,182,300 2,259,900
Franchise fees 483,200 558,200 1,253,500 1,514,700
Other   220,900     213,300     917,900     830,500  
Total revenue 15,999,500 16,404,400 52,500,300 44,995,900
 
COST OF MERCHANDISE SOLD 711,600 742,300 2,055,600 2,156,300
 
LEASING EXPENSE 173,400 808,500 4,941,300 1,234,200
 
PROVISION FOR CREDIT LOSSES 38,800 (1,700 ) (123,400 ) 26,100
 
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES   5,733,900     5,677,600     18,226,700     17,874,500  
 
Income from operations 9,341,800 9,177,700 27,400,100 23,704,800
 
INTEREST EXPENSE (687,700 ) (150,500 ) (1,142,900 ) (356,700 )
 
INTEREST AND OTHER INCOME/(EXPENSE)   (12,400 )   27,200     (61,800 )   28,200  
 
Income before income taxes 8,641,700 9,054,400 26,195,400 23,376,300
 
PROVISION FOR INCOME TAXES   (3,302,100 )   (3,431,400 )   (10,050,100 )   (8,920,600 )
 
NET INCOME $ 5,339,600   $ 5,623,000   $ 16,145,300   $ 14,455,700  
 
EARNINGS PER SHARE – BASIC $ 1.29   $ 1.12   $ 3.53   $ 2.84  
 
EARNINGS PER SHARE – DILUTED $ 1.23   $ 1.09   $ 3.39   $ 2.76  
 
WEIGHTED AVERAGE SHARES OUTSTANDING – BASIC   4,128,031     5,022,166     4,568,813     5,093,243  
 
WEIGHTED AVERAGE SHARES OUTSTANDING – DILUTED   4,338,230     5,156,785     4,758,158     5,235,949  
 

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

Source: Winmark Corporation


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