Play It Again Parent Sees Net Nearly Halved for 2005

February 20, 2006
SGB Update

Winmark Corporation saw net income for the year ended December 31, 2005 of $2.1 million or 33 cents per share diluted, down 48.6% from net income of $4.1 million or 63 cents per share, in 2004. The fourth quarter 2005 net loss was ($68,600), or (1 cent) per share diluted, compared to net income of $980,100, or 15 cents per share diluted, for the same period last year. Revenues for the year were $26.6 million, down 2.2% from $27.2 million in 2004.

“2005 was a year where we continued to improve our franchising business and build the leasing sales and operations infrastructure to support future growth. Our fourth quarter results were negatively impacted by two items: an impairment charge related to Winmark's investment in eFrame, LLC of $937,610, or 8 cents per share and a stock option compensation charge of approximately $420,000 or 4 cents per share,” stated John Morgan, Chairman and Chief Executive Officer. “2006 will be the first full year that both our franchise and leasing businesses will be firmly in place.”

Play It Again Parent Sees Net Nearly Halved for 2005

February 17, 2006
SGB Update

Winmark Corporation saw net income for the year ended December 31, 2005 of $2.1 million or 33 cents per share diluted, down 48.6% from net income of $4,082,000 or 63 cents per share, in 2004. The fourth quarter 2005 net loss was ($68,600), or (1 cent) per share diluted, compared to net income of $980,100, or 15 cents per share diluted, for the same period last year. Revenues for the year were $26,593,000, down 2.2% from $27,201,900 in 2004.

“2005 was a year where we continued to improve our franchising business and build the leasing sales and operations infrastructure to support future growth. Our fourth quarter results were negatively impacted by two items: an impairment charge related to Winmark's investment in eFrame, LLC of $937,610, or $0.08 per share and a stock option compensation charge of approximately $420,000 or $0.04 per share,” stated John Morgan, Chairman and Chief Executive Officer. “2006 will be the first full year that both our franchise and leasing businesses will be firmly in place.”

   WINMARK CORPORATION
                      CONDENSED STATEMENTS OF OPERATIONS
                                 (unaudited)

                               Quarter Ended           Fiscal Year Ended
                         December 31, December 25, December 31, December 25,
                            2005         2004         2005         2004
    REVENUE:
      Royalties         $4,921,600   $4,169,600  $17,875,000  $16,889,300
      Merchandise sales  1,260,900    1,819,500    6,654,600    8,733,600
      Franchise fees       307,500      290,100    1,052,500      983,700
      Leasing income       157,100       49,700      430,300       65,300
      Other                148,300      112,900      580,600      530,000
        Total revenue    6,795,400    6,441,800   26,593,000   27,201,900

    COST OF MERCHANDISE
     SOLD                1,040,600    1,503,900    5,505,800    7,228,400

    SELLING, GENERAL
     AND ADMINISTRATIVE
     EXPENSES            4,915,000    3,345,900   16,593,100   13,348,800

        Income from
         operations        839,800    1,592,000    4,494,100    6,624,700

    LOSS FROM EQUITY
     INVESTMENTS          (980,100)     (71,700)  (1,168,900)    (194,800)

    GAIN ON SALE OF
     MARKETABLE SECURITIES   9,600            -       27,000      173,800

    INTEREST AND OTHER
     INCOME                 79,000      113,200      303,100      266,800

        Income (loss)
         before income
         taxes             (51,700)   1,633,500    3,655,300    6,870,500

    PROVISION FOR
     INCOME TAXES           16,900      653,400    1,555,300    2,788,500

    NET INCOME (LOSS)     $(68,600)    $980,100   $2,100,000   $4,082,000

    EARNINGS (LOSS) PER
     SHARE - BASIC           $(.01)        $.16         $.35         $.70

    WEIGHTED AVERAGE
     SHARES OUTSTANDING
     - BASIC             5,998,787    5,964,547    6,018,197    5,872,084

    EARNINGS (LOSS) PER
     SHARE - DILUTED         $(.01)        $.15         $.33         $.63

    WEIGHTED AVERAGE
     SHARES OUTSTANDING
     - DILUTED           6,335,904    6,614,275    6,358,167    6,499,935
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