Play it Again Parent Sees Flat Q4 Profits on Declining Revenues

Winmark Corporation reported that net income for the year ended December 25, 2004 of $4.1 million, or 63 cents per share diluted, compared to net income of $4.0 million, or 63 cents per share, in 2003. The fourth quarter 2004 net income was $980,100, or 15 cents per share diluted, compared to net income of $1.0 million, or 16 cents per share diluted, for the same period last year. Revenues for the year were $27.2 million, down from $31.2 million in 2003.

John Morgan, Chairman and Chief Executive Officer, stated, “In 2004, we saw an increase in royalties and franchise fees as a result of the hard work of our franchisee partners and the performance of our brands. Our results have and will continue to be challenged by start-up expenses associated with the launch of our equipment leasing business.”

                            WINMARK CORPORATION
                      CONDENSED STATEMENTS OF OPERATIONS
                                 (unaudited)

                              Quarter Ended           Fiscal Year Ended
                         December 25, December 27, December 25, December 27,
                            2004         2003         2004         2003
    REVENUE:
      Royalties         $4,169,600   $4,216,900  $16,889,300  $16,333,700
      Merchandise sales  1,819,500    2,825,900    8,733,600   13,427,600
      Franchise fees       290,100      290,000      983,700      860,300
      Other                162,600      128,100      595,300      621,800
        Total revenue    6,441,800    7,460,900   27,201,900   31,243,400

    COST OF MERCHANDISE
     SOLD                1,503,900    2,244,600    7,228,400   10,692,400

    SELLING, GENERAL
     AND ADMINISTRATIVE
     EXPENSES            3,345,900    3,399,800   13,348,800   14,155,900

        Income from
         operations      1,592,000    1,816,500    6,624,700    6,395,100

    LOSS FROM EQUITY
     INVESTMENTS           (71,700)     (72,200)    (194,800)    (136,300)

    GAIN (LOSS) ON SALE
     OF MARKETABLE
     SECURITIES                  -      (51,800)     173,800      101,500

    INTEREST AND OTHER
     INCOME (LOSS)         113,200       (3,400)     266,800      182,400

        Income before
         income taxes    1,633,500    1,689,100    6,870,500    6,542,700

    PROVISION FOR
     INCOME TAXES          653,400      658,700    2,788,500    2,529,600

    NET INCOME            $980,100   $1,030,400   $4,082,000   $4,013,100

    EARNINGS PER
     SHARE - BASIC            $.16         $.18         $.70         $.71

    WEIGHTED AVERAGE
     SHARES OUTSTANDING
     - BASIC             5,964,547    5,669,096    5,872,084    5,665,700

    EARNINGS PER
     SHARE - DILUTED          $.15         $.16         $.63         $.63