Business Wire | Oct 13, 2021 11:38AM EDT

Winmark Corporation Announces Third Quarter Results

Oct. 13, 2021

MINNEAPOLIS--(BUSINESS WIRE)--Oct. 13, 2021--Winmark Corporation (Nasdaq: WINA) announced today net income for the quarter ended September 25, 2021 of $10,082,500 or $2.67 per share diluted compared to net income of $9,358,800 or $2.43 per share diluted in 2020. For the nine months ended September 25, 2021, net income was $28,330,900 or $7.40 per share diluted compared to net income of $21,731,000 or $5.63 per share diluted for the same period last year.

"We are pleased with the continued strength of our business and the performance of our franchisees. Our sustainable business model continues to be well received by consumers in the communities we serve," 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 September 25, 2021, there were 1,269 franchises in operation and over 2,000 available territories. An additional 39 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)



September 25, December 26, 2021 2020

ASSETS

Current Assets:

Cash and cash equivalents $ 37,569,100 $ 6,659,000

Restricted cash 15,000 25,000

Receivables, net 1,394,900 1,581,900

Net investment in leases - current 3,884,600 8,687,500

Income tax receivable 188,200 221,200

Inventories 408,600 106,600

Prepaid expenses 958,700 995,200

Total current assets 44,419,100 18,276,400



Net investment in leases - long-term 1,157,000 4,573,600

Property and equipment, net 2,055,800 2,332,800

Operating lease right of use asset 3,059,300 3,226,300

Goodwill 607,500 607,500

Other assets 416,900 435,900

Deferred income taxes 3,256,200 1,890,700

$ 54,971,800 $ 31,343,200



LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)

Current Liabilities:

Notes payable, net $ 4,232,600 $ 4,236,100

Accounts payable 1,988,600 1,769,600

Accrued liabilities 2,918,800 2,624,000

Discounted lease rentals - 1,096,600

Deferred revenue 1,643,900 1,657,400

Total current liabilities 10,783,900 11,383,700

Long-Term Liabilities:

Notes payable, net 44,434,500 17,632,700

Discounted lease rentals - 574,000

Deferred revenue 6,849,600 7,050,900

Operating lease liabilities 4,946,900 5,307,400

Other liabilities 759,000 773,200

Total long-term liabilities 56,990,000 31,338,200

Shareholders' Equity (Deficit):

Common stock, no par, 10,000,000 sharesauthorized, - 9,281,800 3,623,538 and 3,756,028 shares issued andoutstanding

Retained earnings (accumulated deficit) (12,802,100 ) (20,660,500 )

Total shareholders' equity (deficit) (12,802,100 ) (11,378,700 )

$ 54,971,800 $ 31,343,200

WINMARK CORPORATION

CONDENSED STATEMENTS OF OPERATIONS

(Unaudited)

Quarter Ended

Nine Months Ended

September 25, 2021

September 26, 2020

September 25, 2021

September 26, 2020

Revenue:

Royalties

$

16,375,900

$

14,210,000

$

45,141,200

$

33,188,300

Leasing income

2,266,200

2,695,800

8,351,800

12,040,800

Merchandise sales

704,800

631,200

1,980,300

1,746,800

Franchise fees

383,400

335,400

1,101,300

1,064,900

Other

423,100

404,600

1,267,300

1,225,700

Total revenue

20,153,400

18,277,000

57,841,900

49,266,500

Cost of merchandise sold

681,100

598,200

1,887,700

1,662,000

Leasing expense

358,900

510,900

1,410,800

2,443,700

Provision for credit losses

(55,900

)

(339,600

)

(167,300

)

164,300

Selling, general and administrative expenses

5,380,100

5,009,700

16,287,600

15,719,100

Income from operations

13,789,200

12,497,800

38,423,100

29,277,400

Interest expense

(323,200

)

(345,700

)

(945,600

)

(1,409,600

)

Interest and other income (expense)

(18,800

)

9,200

(7,100

)

27,700

Income before income taxes

13,447,200

12,161,300

37,470,400

27,895,500

Provision for income taxes

(3,364,700

)

(2,802,500

)

(9,139,500

)

(6,164,500

)

Net income

$

10,082,500

$

9,358,800

$

28,330,900

$

21,731,000

Earnings per share - basic

$

2.77

$

2.51

$

7.68

$

5.86

Earnings per share - diluted

$

2.67

$

2.43

$

7.40

$

5.63

Weighted average shares outstanding - basic

3,635,055

3,730,490

3,688,419

3,710,112

Weighted average shares outstanding - diluted

3,782,873

3,857,702

3,829,322

3,857,754





WINMARK CORPORATION

CONDENSED STATEMENTS OF OPERATIONS

(Unaudited)



Quarter Ended Nine Months Ended

September 25, September 26, September 25, September 26, 2021 2020 2021 2020

Revenue:

Royalties $ 16,375,900 $ 14,210,000 $ 45,141,200 $ 33,188,300

Leasing income 2,266,200 2,695,800 8,351,800 12,040,800

Merchandise 704,800 631,200 1,980,300 1,746,800 sales

Franchise fees 383,400 335,400 1,101,300 1,064,900

Other 423,100 404,600 1,267,300 1,225,700

Total revenue 20,153,400 18,277,000 57,841,900 49,266,500

Cost ofmerchandise 681,100 598,200 1,887,700 1,662,000 sold

Leasing 358,900 510,900 1,410,800 2,443,700 expense

Provision for (55,900 ) (339,600 ) (167,300 ) 164,300 credit losses

Selling,general and 5,380,100 5,009,700 16,287,600 15,719,100 administrativeexpenses

Income from 13,789,200 12,497,800 38,423,100 29,277,400 operations

Interest (323,200 ) (345,700 ) (945,600 ) (1,409,600 )expense

Interest andother income (18,800 ) 9,200 (7,100 ) 27,700 (expense)

Income before 13,447,200 12,161,300 37,470,400 27,895,500 income taxes

Provision for (3,364,700 ) (2,802,500 ) (9,139,500 ) (6,164,500 )income taxes

Net income $ 10,082,500 $ 9,358,800 $ 28,330,900 $ 21,731,000

Earnings per $ 2.77 $ 2.51 $ 7.68 $ 5.86 share - basic

Earnings pershare - $ 2.67 $ 2.43 $ 7.40 $ 5.63 diluted

Weightedaverage shares 3,635,055 3,730,490 3,688,419 3,710,112 outstanding -basic

Weightedaverage shares 3,782,873 3,857,702 3,829,322 3,857,754 outstanding -diluted

WINMARK CORPORATION

CONDENSED STATEMENTS OF CASH FLOWS

(Unaudited)

Nine Months Ended

September 25, 2021

September 26, 2020

OPERATING ACTIVITIES:

Net income

$

28,330,900

$

21,731,000

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

Depreciation and amortization

328,800

366,700

Provision for credit losses

(167,300

)

164,300

Compensation expense related to stock options

1,074,200

929,900

Deferred income taxes

(1,365,500

)

(1,251,000

)

Loss from disposal of property and equipment

-

200

Deferred initial direct costs

(2,100

)

(18,300

)

Amortization of deferred initial direct costs

18,800

89,400

Operating lease right of use asset amortization

167,000

293,400

Tax benefits on exercised stock options

249,200

602,400

Change in operating assets and liabilities:

Receivables

187,000

(278,100

)

Principal collections on lease receivables

7,452,200

11,418,500

Income tax receivable/payable

(216,200

)

368,000

Inventories

(302,000

)

900

Prepaid expenses

36,500

(190,700

)

Other assets

19,000

34,200

Accounts payable

219,000

257,700

Accrued and other liabilities

(94,100

)

(864,100

)

Rents received in advance and security deposits

(674,500

)

(1,252,000

)

Deferred revenue

(214,800

)

(630,300

)

Net cash provided by operating activities

35,046,100

31,772,100

INVESTING ACTIVITIES:

Purchase of property and equipment

(51,800

)

(33,400

)

Purchase of equipment for lease contracts

(78,200

)

(3,128,200

)

Net cash used for investing activities

(130,000

)

(3,161,600

)

FINANCING ACTIVITIES:

Proceeds from borrowings on line of credit

-

46,600,000

Payments on line of credit

-

(46,600,000

)

Proceeds from borrowings on notes payable

30,000,000

-

Payments on notes payable

(3,187,500

)

(2,687,500

)

Repurchases of common stock

(27,892,900

)

(48,987,500

)

Proceeds from exercises of stock options

1,299,300

7,074,100

Dividends paid

(4,234,900

)

(2,029,500

)

Proceeds from discounted lease rentals

-

1,157,000

Net cash used for financing activities

(4,016,000

)

(45,473,400

)

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

30,900,100

(16,862,900

)

Cash, cash equivalents and restricted cash, beginning of period

6,684,000

25,180,300

Cash, cash equivalents and restricted cash, end of period

$

37,584,100

$

8,317,400

SUPPLEMENTAL DISCLOSURES:

Cash paid for interest

$

884,100

$

1,426,100

Cash paid for income taxes

$

10,472,000

$

6,445,200

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:

Nine Months Ended

September 25, 2021

September 26, 2020

Cash and cash equivalents

$

37,569,100

$

8,267,400

Restricted cash

15,000

50,000

Total cash, cash equivalents and restricted cash

$

37,584,100

$

8,317,400

View source version on businesswire.com: https://www.businesswire.com/news/home/20211013005878/en/

CONTACT: Brett D. Heffes 763/520-8500