Business Wire | Jul 15, 2020 12:10PM EDT

Winmark Corporation Announces Second Quarter Results

Jul. 15, 2020

MINNEAPOLIS--(BUSINESS WIRE)--Jul. 15, 2020--Winmark Corporation (Nasdaq: WINA) announced today net income for the quarter ended June 27, 2020 of $5,055,200 (or $1.33 per share diluted) compared to net income of $7,301,900 (or $1.79 per share diluted) in the second quarter of 2019. For the six months ended June 27, 2020, net income was $12,372,200 (or $3.21 per share diluted) compared to net income of $14,574,100 (or $3.52 per share diluted) for the same period last year.

Second quarter results were impacted by the COVID-19 pandemic, with royalty revenues 38% lower than the second quarter of 2019. The Company experienced sequential monthly improvement in royalties during the second quarter as franchised stores reopened, with April, May and June royalty revenues of 16%, 76% and 108% of 2019, respectively. Additionally, during the quarter, the Company repaid $40.0 million in borrowings under its revolving credit facility, ending the quarter with no revolver borrowings and $1.3 million of cash.

Brett D. Heffes, Chief Executive Officer, commented, "Our franchisee's performance improved throughout the quarter, as they have proven extremely resilient during the pandemic. While store operations are not fully back to pre-COVID levels, substantial progress has been made in the past 90 days and we are pleased with the overall performance of the Company. I am impressed daily by the efforts of both our franchisees as well as our Winmark employees."

Winmark Corporation creates, supports and finances business. At June 27, 2020, there were 1,255 franchises in operation under the brands Plato's Closet(r), Once Upon A Child(r), Play It Again Sports(r), Style Encore(r) and Music Go Round(r). An additional 42 retail franchises have been awarded but are not open.

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 27, 2020 December 28, 2019

ASSETS

Current Assets:

Cash and cash equivalents $ 1,287,900 $ 25,130,300

Restricted cash 50,000 50,000

Receivables, net 1,893,800 1,669,500

Net investment in leases - current 11,688,600 12,800,100

Income tax receivable - 497,900

Inventories 83,800 86,000

Prepaid expenses 966,900 968,100

Total current assets 15,971,000 41,201,900



Net investment in leases - long-term 7,152,500 12,505,500

Property and equipment, net 2,560,100 2,772,600

Operating lease right of use asset 3,353,100 3,595,200

Goodwill 607,500 607,500

Other assets 475,300 492,500

Deferred income taxes 1,506,900 667,000

$ 31,626,400 $ 61,842,200



LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)

Current Liabilities:

Notes payable, net $ 4,236,100 $ 3,736,100

Accounts payable 1,831,600 1,015,000

Income tax payable 3,280,800 -

Accrued liabilities 2,455,900 2,783,100

Discounted lease rentals 1,974,700 2,680,700

Deferred revenue 1,694,300 1,717,000

Total current liabilities 15,473,400 11,931,900



Long-Term Liabilities:

Notes payable, net 19,750,700 21,868,800

Discounted lease rentals 1,033,400 836,900

Deferred revenue 7,469,100 7,858,500

Operating lease liabilities 5,522,800 5,846,100

Other liabilities 943,200 1,051,700

Total long-term liabilities 34,719,200 37,462,000



Shareholders' Equity (Deficit):

Common stock, no par, 10,000,000 sharesauthorized, 6,411,300 11,929,3003,723,187 and 3,947,858 shares issued andoutstanding

Retained earnings (accumulated deficit) (24,977,500) 519,000

Total shareholders' equity (deficit) (18,566,200) 12,448,300

$ 31,626,400 $ 61,842,200



WINMARK CORPORATION

CONDENSED STATEMENTS OF OPERATIONS

(Unaudited)



Quarter Ended Six Months Ended

June 27, 2020 June 29, 2019 June 27, 2020 June 29, 2019

Revenue:

Royalties $ 7,805,800 $ 12,653,200 $ 18,978,300 $ 24,414,600

Leasing income 3,473,800 3,203,000 9,345,000 8,358,300

Merchandise 361,500 721,800 1,115,600 1,332,800 sales

Franchise fees 342,100 413,900 729,500 805,700

Other 406,300 412,300 821,100 824,000

Total revenue 12,389,500 17,404,200 30,989,500 35,735,400

Cost ofmerchandise 346,100 681,200 1,063,800 1,252,700 sold

Leasing 516,600 370,900 1,932,800 1,069,600 expense

Provision for (111,500) 69,300 503,900 79,400 credit losses

Selling,general and 4,960,500 6,435,900 10,709,400 13,420,300 administrativeexpenses

Income from 6,677,800 9,846,900 16,779,600 19,913,400 operations

Interest (538,700) (500,300) (1,063,900) (942,500) expense

Interest andother income 12,600 (6,100) 18,500 (6,400) (expense)

Income before 6,151,700 9,340,500 15,734,200 18,964,500 income taxes

Provision for (1,096,500) (2,038,600) (3,362,000) (4,390,400) income taxes

Net income $ 5,055,200 $ 7,301,900 $ 12,372,200 $ 14,574,100

Earnings per $ 1.37 $ 1.94 $ 3.34 $ 3.80 share - basic

Earnings pershare - $ 1.33 $ 1.79 $ 3.21 $ 3.52 diluted

Weightedaverage shares 3,688,248 3,771,439 3,699,923 3,839,563 outstanding -basic

Weightedaverage shares 3,803,807 4,072,408 3,857,779 4,135,827 outstanding -diluted

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CONTACT: Brett D. Heffes 763/520-8500