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Winmark Corporation Announces Year End Results

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Winmark Corporation (Nasdaq: WINA) announced today net income for the year ended December 27, 2014 of $20,066,500 or $3.85 per share diluted, compared to net income of $18,231,600 or $3.48 per share diluted, in 2013. The fourth quarter 2014 net income was $5,610,800 or $1.09 per share diluted, compared to net income of $4,585,800 or $.87 per share diluted, for the same period last year. Revenues for the year ended December 27, 2014 were $61,178,700, up from $55,731,200 in 2013.

John L. Morgan, Chairman and Chief Executive Officer, commented, “We ended the year with a solid fourth quarter that was highlighted by a growing and profitable leasing portfolio, as well as steady growth in our franchising business. We opened 94 stores in 2014 and signed an additional 90 agreements for future store openings across all of our brands. Our newest resale concept, Style Encore, currently has 27 open stores and is being well received by both consumers and franchisees.”

Winmark Corporation creates, supports and finances business. At December 27, 2014, there were 1,092 franchises in operation under the brands Plato’s Closet(R), Once Upon A Child(R), Play It Again Sports(R), Music Go Round(R) and Style Encore(R). An additional 105 retail franchises have been awarded but are not open. In addition, at December 27, 2014, the Company had a lease portfolio equal to $44.0 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)

December 27, 2014 December 28, 2013
ASSETS
Current Assets:
Cash and cash equivalents $ 2,089,700 $ 10,642,600
Marketable securities 466,800 736,500
Receivables, net 1,328,200 1,205,500
Net investment in leases – current 19,831,600 17,239,900
Income tax receivable 4,163,900 166,500
Inventories 93,500 96,700
Prepaid expenses 467,400 587,300
Total current assets 28,441,100 30,675,000
Net investment in leases – long-term 24,188,900 20,301,400
Property and equipment, net 1,420,300 1,382,200
Other assets 677,500 677,500
$ 54,727,800 $ 53,036,100
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current Liabilities:
Line of credit $ 18,500,000 $
Accounts payable 1,955,500 2,441,400
Accrued liabilities 1,759,200 1,233,100
Discounted lease rentals 227,300 424,900
Deferred revenue 2,142,600 2,199,900
Deferred income taxes 4,412,600 4,208,200
Total current liabilities 28,997,200 10,507,500
Long-Term Liabilities:
Discounted lease rentals 25,800 277,400
Deferred revenue 1,347,800 1,180,700
Other liabilities 1,403,200 1,489,000
Deferred income taxes 1,344,300 1,436,800
Total long-term liabilities 4,121,100 4,383,900
Shareholders’ Equity:

Common stock, no par, 10,000,000 shares authorized, 4,998,512 and 5,143,530 shares issued and outstanding

422,400

2,949,500

Accumulated other comprehensive loss (37,100 ) (4,100 )
Retained earnings 21,224,200 35,199,300
Total shareholders’ equity 21,609,500 38,144,700
$ 54,727,800 $ 53,036,100

WINMARK CORPORATION

CONDENSED STATEMENTS OF OPERATIONS

(unaudited)

Quarter Ended Fiscal Year Ended
December 27, 2014 December 28, 2013 December 27, 2014 December 28, 2013
REVENUE:
Royalties $ 10,236,600 $ 9,407,100 $ 38,972,400 $ 36,344,100
Leasing income 4,592,300 3,176,000 16,247,300 14,524,100
Merchandise sales 468,700 506,000 2,728,600 2,327,100
Franchise fees 475,000 315,100 1,989,700 1,459,300
Other 410,200 363,200 1,240,700 1,076,600
Total revenue 16,182,800 13,767,400 61,178,700 55,731,200
COST OF MERCHANDISE SOLD 463,600 471,000 2,619,900 2,205,700
LEASING EXPENSE 396,400 302,500 1,630,600 1,592,000
PROVISION FOR CREDIT LOSSES 36,800 23,000 62,900 (44,700 )
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES 5,931,500 5,469,300 23,806,000 22,198,200
Income from operations 9,354,500 7,501,600 33,059,300 29,780,000
INTEREST EXPENSE (127,800 ) (33,400 ) (484,500 ) (213,500 )
INTEREST AND OTHER INCOME (EXPENSE) (14,200 ) 28,200 14,000 23,400
Income before income taxes 9,212,500 7,496,400 32,588,800 29,589,900
PROVISION FOR INCOME TAXES (3,601,700 ) (2,910,600 ) (12,522,300 ) (11,358,300 )
NET INCOME $ 5,610,800 $ 4,585,800 $ 20,066,500 $ 18,231,600
EARNINGS PER SHARE – BASIC $ 1.12 $ .89 $ 3.96 $ 3.60
EARNINGS PER SHARE – DILUTED $ 1.09 $ .87 $ 3.85 $ 3.48
WEIGHTED AVERAGE SHARES OUTSTANDING – BASIC 4,997,831 5,137,415 5,069,391 5,068,975
WEIGHTED AVERAGE SHARES OUTSTANDING – DILUTED 5,159,804 5,297,878 5,216,914 5,241,121

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