Business Wire | Jul 14, 2021 11:34AM EDT

Winmark Corporation Announces Second Quarter Results

Jul. 14, 2021

MINNEAPOLIS--(BUSINESS WIRE)--Jul. 14, 2021--Winmark Corporation (Nasdaq: WINA) announced today net income for the quarter ended June 26, 2021 of $8,937,300 or $2.33 per share diluted compared to net income of $5,055,200 or $1.33 per share diluted in 2020. For the six months ended June 26, 2021, net income was $18,248,400 or $4.74 per share diluted compared to net income of $12,372,200 or $3.21 per share diluted for the same period last year.

"Our business model is thriving in the current retail environment," commented Brett D. Heffes, Chairman and Chief Executive Officer.

Winmark, the Resale CompanyTM, is a nationally recognized franchising business focused on sustainability and small business formation. We champion and guide entrepreneurs interested in operating one of our award winning resale franchises: Plato's Closet(r), Once Upon A Child(r), Play It Again Sports(r), Style Encore(r) and Music Go Round(r). At June 26, 2021, there were 1,266 franchises in operation and over 2,000 available territories. An additional 36 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 26, 2021 December 26, 2020

ASSETS

Current Assets:

Cash and cash equivalents $ 7,223,300 $ 6,659,000

Restricted cash 25,000 25,000

Receivables, net 1,176,300 1,581,900

Net investment in leases - current 6,005,300 8,687,500

Income tax receivable 695,200 221,200

Inventories 329,400 106,600

Prepaid expenses 687,200 995,200

Total current assets 16,141,700 18,276,400



Net investment in leases - long-term 1,779,400 4,573,600

Property and equipment, net 2,158,200 2,332,800

Operating lease right of use asset 3,116,400 3,226,300

Goodwill 607,500 607,500

Other assets 418,100 435,900

Deferred income taxes 2,798,100 1,890,700

$ 27,019,400 $ 31,343,200



LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)

Current Liabilities:

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

Accounts payable 1,458,000 1,769,600

Accrued liabilities 3,102,600 2,624,000

Discounted lease rentals 816,200 1,096,600

Deferred revenue 1,650,200 1,657,400

Total current liabilities 11,263,100 11,383,700

Long-Term Liabilities:

Notes payable, net 15,514,600 17,632,700

Discounted lease rentals 217,200 574,000

Deferred revenue 6,937,800 7,050,900

Operating lease liabilities 5,063,500 5,307,400

Other liabilities 763,700 773,200

Total long-term liabilities 28,496,800 31,338,200

Shareholders' Equity (Deficit):

Common stock, no par, 10,000,000 sharesauthorized, - 9,281,800 3,668,019 and 3,756,028 shares issued andoutstanding

Retained earnings (accumulated deficit) (12,740,500 ) (20,660,500 )

Total shareholders' equity (deficit) (12,740,500 ) (11,378,700 )

$ 27,019,400 $ 31,343,200

WINMARK CORPORATION

CONDENSED STATEMENTS OF OPERATIONS

(Unaudited)

Quarter Ended

Six Months Ended

June 26, 2021

June 27, 2020

June 26, 2021

June 27, 2020

Revenue:

Royalties

$

14,716,500

$

7,805,800

$

28,765,300

$

18,978,300

Leasing income

2,848,600

3,473,800

6,085,600

9,345,000

Merchandise sales

683,100

361,500

1,275,500

1,115,600

Franchise fees

358,900

342,100

717,900

729,500

Other

422,500

406,300

844,200

821,100

Total revenue

19,029,600

12,389,500

37,688,500

30,989,500

Cost of merchandise sold

647,800

346,100

1,206,600

1,063,800

Leasing expense

662,400

516,600

1,051,900

1,932,800

Provision for credit losses

(62,700

)

(111,500

)

(111,400

)

503,900

Selling, general and administrative expenses

5,805,200

4,960,500

10,907,500

10,709,400

Income from operations

11,976,900

6,677,800

24,633,900

16,779,600

Interest expense

(304,300

)

(538,700

)

(622,400

)

(1,063,900

)

Interest and other income

4,900

12,600

11,700

18,500

Income before income taxes

11,677,500

6,151,700

24,023,200

15,734,200

Provision for income taxes

(2,740,200

)

(1,096,500

)

(5,774,800

)

(3,362,000

)

Net income

$

8,937,300

$

5,055,200

$

18,248,400

$

12,372,200

Earnings per share - basic

$

2.42

$

1.37

$

4.91

$

3.34

Earnings per share - diluted

$

2.33

$

1.33

$

4.74

$

3.21

Weighted average shares outstanding - basic

3,693,503

3,688,248

3,715,088

3,699,923

Weighted average shares outstanding - diluted

3,830,844

3,803,807

3,852,534

3,857,779

WINMARK CORPORATION

CONDENSED STATEMENTS OF OPERATIONS

(Unaudited)



Quarter Ended Six Months Ended

June 26, 2021 June 27, 2020 June 26, 2021 June 27, 2020

Revenue:

Royalties $ 14,716,500 $ 7,805,800 $ 28,765,300 $ 18,978,300

Leasing income 2,848,600 3,473,800 6,085,600 9,345,000

Merchandise 683,100 361,500 1,275,500 1,115,600 sales

Franchise fees 358,900 342,100 717,900 729,500

Other 422,500 406,300 844,200 821,100

Total revenue 19,029,600 12,389,500 37,688,500 30,989,500

Cost ofmerchandise 647,800 346,100 1,206,600 1,063,800 sold

Leasing 662,400 516,600 1,051,900 1,932,800 expense

Provision for (62,700 ) (111,500 ) (111,400 ) 503,900 credit losses

Selling,general and 5,805,200 4,960,500 10,907,500 10,709,400 administrativeexpenses

Income from 11,976,900 6,677,800 24,633,900 16,779,600 operations

Interest (304,300 ) (538,700 ) (622,400 ) (1,063,900 ) expense

Interest and 4,900 12,600 11,700 18,500 other income

Income before 11,677,500 6,151,700 24,023,200 15,734,200 income taxes

Provision for (2,740,200 ) (1,096,500 ) (5,774,800 ) (3,362,000 ) income taxes

Net income $ 8,937,300 $ 5,055,200 $ 18,248,400 $ 12,372,200

Earnings per $ 2.42 $ 1.37 $ 4.91 $ 3.34 share - basic

Earnings pershare - $ 2.33 $ 1.33 $ 4.74 $ 3.21 diluted

Weightedaverage shares 3,693,503 3,688,248 3,715,088 3,699,923 outstanding -basic

Weightedaverage shares 3,830,844 3,803,807 3,852,534 3,857,779 outstanding -diluted

WINMARK CORPORATION

CONDENSED STATEMENTS OF CASH FLOWS

(Unaudited)

Six Months Ended

June 26, 2021

June 27, 2020

OPERATING ACTIVITIES:

Net income

$

18,248,400

$

12,372,200

Adjustments to reconcile net income to net cash provided by operating activities:

Depreciation and amortization

223,200

246,000

Provision for credit losses

(111,400

)

503,900

Compensation expense related to stock options

698,100

538,000

Deferred income taxes

(907,400

)

(839,900

)

Loss from disposal of property and equipment

-

200

Deferred initial direct costs

(2,100

)

(14,500

)

Amortization of deferred initial direct costs

16,400

66,400

Operating lease right of use asset amortization

109,900

242,100

Tax benefits on exercised stock options

248,900

477,900

Change in operating assets and liabilities:

Receivables

405,600

(224,300

)

Principal collections on lease receivables

5,332,200

7,995,000

Income tax receivable/payable

(722,900

)

3,300,800

Inventories

(222,800

)

2,200

Prepaid expenses

308,000

1,200

Other assets

17,800

17,200

Accounts payable

(311,600

)

816,600

Accrued and other liabilities

232,100

(701,600

)

Rents received in advance and security deposits

(317,700

)

(1,145,100

)

Deferred revenue

(120,300

)

(412,100

)

Net cash provided by operating activities

23,124,400

23,242,200

INVESTING ACTIVITIES:

Purchase of property and equipment

(48,600

)

(33,700

)

Purchase of equipment for lease contracts

(78,200

)

(2,658,200

)

Net cash used for investing activities

(126,800

)

(2,691,900

)

FINANCING ACTIVITIES:

Proceeds from borrowings on line of credit

-

45,700,000

Payments on line of credit

-

(45,700,000

)

Payments on notes payable

(2,125,000

)

(1,625,000

)

Repurchases of common stock

(18,918,200

)

(48,987,500

)

Proceeds from exercises of stock options

1,210,300

6,159,500

Dividends paid

(2,600,400

)

(1,096,700

)

Proceeds from discounted lease rentals

-

1,157,000

Net cash used for financing activities

(22,433,300

)

(44,392,700

)

NET INCREASE (DECREASE) IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH

564,300

(23,842,400

)

Cash, cash equivalents and restricted cash, beginning of period

6,684,000

25,180,300

Cash, cash equivalents and restricted cash, end of period

$

7,248,300

$

1,337,900

SUPPLEMENTAL DISCLOSURES:

Cash paid for interest

$

603,700

$

1,067,000

Cash paid for income taxes

$

7,156,200

$

423,300

The following table provides a reconciliation of cash, cash equivalents and restricted cash reported within the Condensed Balance Sheets to the total of the same amounts shown above:

Six Months Ended

June 26, 2021

June 27, 2020

Cash and cash equivalents

$

7,223,300

$

1,287,900

Restricted cash

25,000

50,000

Total cash, cash equivalents and restricted cash

$

7,248,300

$

1,337,900

View source version on businesswire.com: https://www.businesswire.com/news/home/20210714005721/en/

CONTACT: Brett D. Heffes 763/520-8500