Winmark Corporation Announces Third Quarter Results

Winmark Corporation (Nasdaq: WINA) announced today net income for the quarter ended September 24, 2022 of $10,368,600 or $2.93 per share diluted compared to net income of $10,082,500 or $2.67 per share diluted in 2021. For the nine months ended September 24, 2022, net income was $29,248,300 or $8.11 per share diluted compared to net income of $28,330,900 or $7.40 per share diluted for the same period last year.

“Our third quarter results reflect strong performance during the back to school season,” commented Brett D. Heffes, Chairman and Chief Executive Officer.

Winmark - the Resale Company®, 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®, Once Upon A Child®, Play It Again Sports®, Style Encore® and Music Go Round®. At September 24, 2022, there were 1,291 franchises in operation and over 2,800 available territories. An additional 54 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 24, 2022

 

December 25, 2021

ASSETS

Current Assets:

 

 

 

 

 

 

Cash and cash equivalents

 

$

16,986,000

 

 

$

11,407,000

 

Restricted cash

 

 

55,000

 

 

 

30,000

 

Receivables, net

 

 

1,633,600

 

 

 

1,103,400

 

Net investment in leases - current

 

 

839,900

 

 

 

2,890,600

 

Income tax receivable

 

 

43,400

 

 

 

667,500

 

Inventories

 

 

637,900

 

 

 

325,200

 

Prepaid expenses

 

 

1,006,100

 

 

 

1,008,600

 

Total current assets

 

 

21,201,900

 

 

 

17,432,300

 

 

 

 

 

 

 

 

Net investment in leases – long-term

 

 

63,600

 

 

 

229,300

 

Property and equipment, net

 

 

1,740,700

 

 

 

1,976,900

 

Operating lease right of use asset

 

 

2,796,300

 

 

 

2,982,000

 

Intangible assets, net

 

 

3,436,700

 

 

 

 

Goodwill

 

 

607,500

 

 

 

607,500

 

Other assets

 

 

416,300

 

 

 

418,300

 

Deferred income taxes

 

 

3,467,400

 

 

 

3,252,700

 

 

 

$

33,730,400

 

 

$

26,899,000

 

 

 

 

 

 

 

 

LIABILITIES AND SHAREHOLDERS’ EQUITY (DEFICIT)

Current Liabilities:

 

 

 

 

 

 

Notes payable, net

 

$

4,217,900

 

 

$

4,232,600

 

Accounts payable

 

 

1,909,900

 

 

 

2,099,000

 

Accrued liabilities

 

 

3,870,000

 

 

 

2,001,000

 

Deferred revenue

 

 

1,647,000

 

 

 

1,645,000

 

Total current liabilities

 

 

11,644,800

 

 

 

9,977,600

 

Long-Term Liabilities:

 

 

 

 

 

 

Line of Credit/Term Loan

 

 

30,000,000

 

 

 

 

Notes payable, net

 

 

40,121,200

 

 

 

43,376,400

 

Deferred revenue

 

 

7,026,200

 

 

 

6,863,500

 

Operating lease liabilities

 

 

4,432,800

 

 

 

4,810,100

 

Other liabilities

 

 

940,500

 

 

 

954,800

 

Total long-term liabilities

 

 

82,520,700

 

 

 

56,004,800

 

Shareholders’ Equity (Deficit):

 

 

 

 

 

 

Common stock, no par, 10,000,000 shares authorized, 3,439,832 and 3,635,806 shares issued and outstanding

 

 

382,100

 

 

 

 

Retained earnings (accumulated deficit)

 

 

(60,817,200

)

 

 

(39,083,400

)

Total shareholders’ equity (deficit)

 

 

(60,435,100

)

 

 

(39,083,400

)

 

 

$

33,730,400

 

 

$

26,899,000

 

WINMARK CORPORATION

CONDENSED STATEMENTS OF OPERATIONS

(Unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Quarter Ended

 

Nine Months Ended

 

 

 

September 24, 2022

 

September 25, 2021

 

September 24, 2022

 

September 25, 2021

 

Revenue:

 

 

 

 

 

 

 

 

 

 

 

 

 

Royalties

 

$

17,859,000

 

 

$

16,375,900

 

 

$

49,230,400

 

 

$

45,141,200

 

 

Leasing income

 

 

1,762,100

 

 

 

2,266,200

 

 

 

5,845,800

 

 

 

8,351,800

 

 

Merchandise sales

 

 

746,000

 

 

 

704,800

 

 

 

2,687,500

 

 

 

1,980,300

 

 

Franchise fees

 

 

348,100

 

 

 

383,400

 

 

 

1,160,200

 

 

 

1,101,300

 

 

Other

 

 

449,300

 

 

 

423,100

 

 

 

1,361,200

 

 

 

1,267,300

 

 

Total revenue

 

 

21,164,500

 

 

 

20,153,400

 

 

 

60,285,100

 

 

 

57,841,900

 

 

Cost of merchandise sold

 

 

717,600

 

 

 

681,100

 

 

 

2,552,300

 

 

 

1,887,700

 

 

Leasing expense

 

 

376,300

 

 

 

358,900

 

 

 

891,900

 

 

 

1,410,800

 

 

Provision for credit losses

 

 

(22,000

)

 

 

(55,900

)

 

 

(46,600

)

 

 

(167,300

)

 

Selling, general and administrative expenses

 

 

5,671,500

 

 

 

5,380,100

 

 

 

16,673,100

 

 

 

16,287,600

 

 

Income from operations

 

 

14,421,100

 

 

 

13,789,200

 

 

 

40,214,400

 

 

 

38,423,100

 

 

Interest expense

 

 

(820,500

)

 

 

(323,200

)

 

 

(2,045,600

)

 

 

(945,600

)

 

Interest and other income (expense)

 

 

21,700

 

 

 

(18,800

)

 

 

7,000

 

 

 

(7,100

)

 

Income before income taxes

 

 

13,622,300

 

 

 

13,447,200

 

 

 

38,175,800

 

 

 

37,470,400

 

 

Provision for income taxes

 

 

(3,253,700

)

 

 

(3,364,700

)

 

 

(8,927,500

)

 

 

(9,139,500

)

 

Net income

 

$

10,368,600

 

 

$

10,082,500

 

 

$

29,248,300

 

 

$

28,330,900

 

 

Earnings per share - basic

 

$

3.01

 

 

$

2.77

 

 

$

8.36

 

 

$

7.68

 

 

Earnings per share - diluted

 

$

2.93

 

 

$

2.67

 

 

$

8.11

 

 

$

7.40

 

 

Weighted average shares outstanding - basic

 

 

3,439,417

 

 

 

3,635,055

 

 

 

3,500,411

 

 

 

3,688,419

 

 

Weighted average shares outstanding - diluted

 

 

3,540,779

 

 

 

3,782,873

 

 

 

3,605,445

 

 

 

3,829,322

 

 

WINMARK CORPORATION

CONDENSED STATEMENTS OF CASH FLOWS

(Unaudited)

 

 

 

 

 

 

 

 

 

 

Nine Months Ended

 

 

 

September 24, 2022

 

September 25, 2021

 

OPERATING ACTIVITIES:

 

 

 

 

 

 

 

Net income

 

$

29,248,300

 

 

$

28,330,900

 

 

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

 

 

 

 

 

 

 

Depreciation and amortization

 

 

409,500

 

 

 

328,800

 

 

Provision for credit losses

 

 

(46,600

)

 

 

(167,300

)

 

Compensation expense related to stock options

 

 

1,203,800

 

 

 

1,074,200

 

 

Deferred income taxes

 

 

(214,700

)

 

 

(1,365,500

)

 

Deferred initial direct costs

 

 

 

 

 

(2,100

)

 

Amortization of deferred initial direct costs

 

 

 

 

 

18,800

 

 

Operating lease right of use asset amortization

 

 

185,700

 

 

 

167,000

 

 

Tax benefits on exercised stock options

 

 

429,500

 

 

 

249,200

 

 

Change in operating assets and liabilities:

 

 

 

 

 

 

 

Receivables

 

 

(530,200

)

 

 

187,000

 

 

Principal collections on lease receivables

 

 

2,819,200

 

 

 

7,452,200

 

 

Income tax receivable/payable

 

 

194,600

 

 

 

(216,200

)

 

Inventories

 

 

(312,700

)

 

 

(302,000

)

 

Prepaid expenses

 

 

2,500

 

 

 

36,500

 

 

Other assets

 

 

2,000

 

 

 

19,000

 

 

Accounts payable

 

 

(189,100

)

 

 

219,000

 

 

Accrued and other liabilities

 

 

1,395,000

 

 

 

(94,100

)

 

Rents received in advance and security deposits

 

 

(556,200

)

 

 

(674,500

)

 

Deferred revenue

 

 

164,700

 

 

 

(214,800

)

 

Net cash provided by operating activities

 

 

34,205,300

 

 

 

35,046,100

 

 

INVESTING ACTIVITIES:

 

 

 

 

 

 

 

Purchase of property and equipment

 

 

(70,000

)

 

 

(51,800

)

 

Reacquired franchise rights

 

 

(3,540,000

)

 

 

 

 

Purchase of equipment for lease contracts

 

 

 

 

 

(78,200

)

 

Net cash used for investing activities

 

 

(3,610,000

)

 

 

(130,000

)

 

FINANCING ACTIVITIES:

 

 

 

 

 

 

 

Proceeds from borrowings on line of credit

 

 

33,700,000

 

 

 

 

 

Payments on line of credit

 

 

(3,700,000

)

 

 

 

 

Proceeds from borrowings on notes payable

 

 

 

 

 

30,000,000

 

 

Payments on notes payable

 

 

(3,187,500

)

 

 

(3,187,500

)

 

Repurchases of common stock

 

 

(48,281,200

)

 

 

(27,892,900

)

 

Proceeds from exercises of stock options

 

 

2,937,100

 

 

 

1,299,300

 

 

Dividends paid

 

 

(6,459,700

)

 

 

(4,234,900

)

 

Net cash used for financing activities

 

 

(24,991,300

)

 

 

(4,016,000

)

 

NET INCREASE IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH

 

 

5,604,000

 

 

 

30,900,100

 

 

Cash, cash equivalents and restricted cash, beginning of period

 

 

11,437,000

 

 

 

6,684,000

 

 

Cash, cash equivalents and restricted cash, end of period

 

$

17,041,000

 

 

$

37,584,100

 

 

SUPPLEMENTAL DISCLOSURES:

 

 

 

 

 

 

 

Cash paid for interest

 

$

1,925,400

 

 

$

884,100

 

 

Cash paid for income taxes

 

$

8,518,100

 

 

$

10,472,000

 

 

 

 

 

 

 

 

 

 

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 24, 2022

 

September 25, 2021

 

Cash and cash equivalents

 

$

16,986,000

 

 

$

37,569,100

 

 

Restricted cash

 

 

55,000

 

 

 

15,000

 

 

Total cash, cash equivalents and restricted cash

 

$

17,041,000

 

 

$

37,584,100

 

 

 

Contacts

Brett D. Heffes

763/520-8500

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