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Winmark Corporation Announces Second Quarter Results

Winmark Corporation (Nasdaq: WINA) announced today net income for the quarter ended June 25, 2022 of $9,027,200 or $2.54 per share diluted compared to net income of $8,937,300 or $2.33 per share diluted in 2021. For the six months ended June 25, 2022, net income was $18,879,700 or $5.19 per share diluted compared to net income of $18,248,400 or $4.74 per share diluted for the same period last year.

“We are pleased with our results for the first half of the year,” 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 June 25, 2022, there were 1,293 franchises in operation and over 2,800 available territories. An additional 46 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 25, 2022

 

December 25, 2021

ASSETS

Current Assets:

 

 

 

 

 

 

Cash and cash equivalents

 

$

8,696,600

 

 

$

11,407,000

 

Restricted cash

 

 

55,000

 

 

 

30,000

 

Receivables, net

 

 

1,321,800

 

 

 

1,103,400

 

Net investment in leases - current

 

 

1,870,100

 

 

 

2,890,600

 

Income tax receivable

 

 

869,000

 

 

 

667,500

 

Inventories

 

 

603,400

 

 

 

325,200

 

Prepaid expenses

 

 

861,000

 

 

 

1,008,600

 

Total current assets

 

 

14,276,900

 

 

 

17,432,300

 

 

 

 

 

 

 

 

Net investment in leases – long-term

 

 

111,000

 

 

 

229,300

 

Property and equipment, net

 

 

1,815,300

 

 

 

1,976,900

 

Operating lease right of use asset

 

 

2,859,800

 

 

 

2,982,000

 

Intangible assets, net

 

 

3,525,200

 

 

 

 

Goodwill

 

 

607,500

 

 

 

607,500

 

Other assets

 

 

420,500

 

 

 

418,300

 

Deferred income taxes

 

 

3,438,100

 

 

 

3,252,700

 

 

 

$

27,054,300

 

 

$

26,899,000

 

 

 

 

 

 

 

 

LIABILITIES AND SHAREHOLDERS’ EQUITY (DEFICIT)

Current Liabilities:

 

 

 

 

 

 

Notes payable, net

 

$

4,217,900

 

 

$

4,232,600

 

Accounts payable

 

 

1,889,300

 

 

 

2,099,000

 

Accrued liabilities

 

 

4,563,100

 

 

 

2,001,000

 

Deferred revenue

 

 

1,631,100

 

 

 

1,645,000

 

Total current liabilities

 

 

12,301,400

 

 

 

9,977,600

 

Long-Term Liabilities:

 

 

 

 

 

 

Line of Credit/Term Loan

 

 

30,000,000

 

 

 

 

Notes payable, net

 

 

41,175,700

 

 

 

43,376,400

 

Deferred revenue

 

 

6,849,200

 

 

 

6,863,500

 

Operating lease liabilities

 

 

4,561,500

 

 

 

4,810,100

 

Other liabilities

 

 

945,200

 

 

 

954,800

 

Total long-term liabilities

 

 

83,531,600

 

 

 

56,004,800

 

Shareholders’ Equity (Deficit):

 

 

 

 

 

 

Common stock, no par, 10,000,000 shares authorized,

3,437,806 and 3,635,806 shares issued and outstanding

 

 

 

 

 

 

Retained earnings (accumulated deficit)

 

 

(68,778,700

)

 

 

(39,083,400

)

Total shareholders’ equity (deficit)

 

 

(68,778,700

)

 

 

(39,083,400

)

 

 

$

27,054,300

 

 

$

26,899,000

 

WINMARK CORPORATION

CONDENSED STATEMENTS OF OPERATIONS

(Unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Quarter Ended

 

Six Months Ended

 

 

 

June 25, 2022

 

June 26, 2021

 

June 25, 2022

 

June 26, 2021

 

Revenue:

 

 

 

 

 

 

 

 

 

 

 

 

 

Royalties

 

$

15,981,300

 

 

$

14,716,500

 

 

$

31,371,400

 

 

$

28,765,300

 

 

Leasing income

 

 

1,212,000

 

 

 

2,848,600

 

 

 

4,083,700

 

 

 

6,085,600

 

 

Merchandise sales

 

 

1,027,200

 

 

 

683,100

 

 

 

1,941,500

 

 

 

1,275,500

 

 

Franchise fees

 

 

391,500

 

 

 

358,900

 

 

 

812,100

 

 

 

717,900

 

 

Other

 

 

458,800

 

 

 

422,500

 

 

 

911,900

 

 

 

844,200

 

 

Total revenue

 

 

19,070,800

 

 

 

19,029,600

 

 

 

39,120,600

 

 

 

37,688,500

 

 

Cost of merchandise sold

 

 

970,200

 

 

 

647,800

 

 

 

1,834,700

 

 

 

1,206,600

 

 

Leasing expense

 

 

299,600

 

 

 

662,400

 

 

 

515,600

 

 

 

1,051,900

 

 

Provision for credit losses

 

 

(15,700

)

 

 

(62,700

)

 

 

(24,600

)

 

 

(111,400

)

 

Selling, general and administrative expenses

 

 

5,461,600

 

 

 

5,805,200

 

 

 

11,001,600

 

 

 

10,907,500

 

 

Income from operations

 

 

12,355,100

 

 

 

11,976,900

 

 

 

25,793,300

 

 

 

24,633,900

 

 

Interest expense

 

 

(712,000

)

 

 

(304,300

)

 

 

(1,225,100

)

 

 

(622,400

)

 

Interest and other income (expense)

 

 

(13,800

)

 

 

4,900

 

 

 

(14,700

)

 

 

11,700

 

 

Income before income taxes

 

 

11,629,300

 

 

 

11,677,500

 

 

 

24,553,500

 

 

 

24,023,200

 

 

Provision for income taxes

 

 

(2,602,100

)

 

 

(2,740,200

)

 

 

(5,673,800

)

 

 

(5,774,800

)

 

Net income

 

$

9,027,200

 

 

$

8,937,300

 

 

$

18,879,700

 

 

$

18,248,400

 

 

Earnings per share - basic

 

$

2.61

 

 

$

2.42

 

 

$

5.35

 

 

$

4.91

 

 

Earnings per share - diluted

 

$

2.54

 

 

$

2.33

 

 

$

5.19

 

 

$

4.74

 

 

Weighted average shares outstanding - basic

 

 

3,463,886

 

 

 

3,693,503

 

 

 

3,530,902

 

 

 

3,715,088

 

 

Weighted average shares outstanding - diluted

 

 

3,559,231

 

 

 

3,830,844

 

 

 

3,637,772

 

 

 

3,852,534

 

 

WINMARK CORPORATION

CONDENSED STATEMENTS OF CASH FLOWS

(Unaudited)

 

 

 

 

 

 

 

 

 

 

Six Months Ended

 

 

 

June 25, 2022

 

June 26, 2021

 

OPERATING ACTIVITIES:

 

 

 

 

 

 

 

Net income

 

$

18,879,700

 

 

$

18,248,400

 

 

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

 

 

 

 

 

 

 

Depreciation and amortization

 

 

219,400

 

 

 

223,200

 

 

Provision for credit losses

 

 

(24,600

)

 

 

(111,400

)

 

Compensation expense related to stock options

 

 

771,400

 

 

 

698,100

 

 

Deferred income taxes

 

 

(185,400

)

 

 

(907,400

)

 

Deferred initial direct costs

 

 

 

 

 

(2,100

)

 

Amortization of deferred initial direct costs

 

 

 

 

 

16,400

 

 

Operating lease right of use asset amortization

 

 

122,200

 

 

 

109,900

 

 

Tax benefits on exercised stock options

 

 

348,000

 

 

 

248,900

 

 

Change in operating assets and liabilities:

 

 

 

 

 

 

 

Receivables

 

 

(218,400

)

 

 

405,600

 

 

Principal collections on lease receivables

 

 

1,636,100

 

 

 

5,332,200

 

 

Income tax receivable/payable

 

 

(549,500

)

 

 

(722,900

)

 

Inventories

 

 

(278,200

)

 

 

(222,800

)

 

Prepaid expenses

 

 

147,600

 

 

 

308,000

 

 

Other assets

 

 

(2,200

)

 

 

17,800

 

 

Accounts payable

 

 

(209,700

)

 

 

(311,600

)

 

Accrued and other liabilities

 

 

2,213,500

 

 

 

232,100

 

 

Rents received in advance and security deposits

 

 

(472,700

)

 

 

(317,700

)

 

Deferred revenue

 

 

(28,200

)

 

 

(120,300

)

 

Net cash provided by operating activities

 

 

22,369,000

 

 

 

23,124,400

 

 

INVESTING ACTIVITIES:

 

 

 

 

 

 

 

Purchase of property and equipment

 

 

(43,000

)

 

 

(48,600

)

 

Reacquired franchise rights

 

 

(3,540,000

)

 

 

 

 

Purchase of equipment for lease contracts

 

 

 

 

 

(78,200

)

 

Net cash used for investing activities

 

 

(3,583,000

)

 

 

(126,800

)

 

FINANCING ACTIVITIES:

 

 

 

 

 

 

 

Proceeds from borrowings on line of credit

 

 

33,700,000

 

 

 

 

 

Payments on line of credit

 

 

(3,700,000

)

 

 

 

 

Payments on notes payable

 

 

(2,125,000

)

 

 

(2,125,000

)

 

Repurchases of common stock

 

 

(47,847,500

)

 

 

(18,918,200

)

 

Proceeds from exercises of stock options

 

 

2,553,700

 

 

 

1,210,300

 

 

Dividends paid

 

 

(4,052,600

)

 

 

(2,600,400

)

 

Net cash used for financing activities

 

 

(21,471,400

)

 

 

(22,433,300

)

 

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

 

 

(2,685,400

)

 

 

564,300

 

 

Cash, cash equivalents and restricted cash, beginning of period

 

 

11,437,000

 

 

 

6,684,000

 

 

Cash, cash equivalents and restricted cash, end of period

 

$

8,751,600

 

 

$

7,248,300

 

 

SUPPLEMENTAL DISCLOSURES:

 

 

 

 

 

 

 

Cash paid for interest

 

$

1,108,100

 

 

$

603,700

 

 

Cash paid for income taxes

 

$

6,060,800

 

 

$

7,156,200

 

 

 

 

 

 

 

 

 

 

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:

 

 

Six Months Ended

 

 

 

June 25, 2022

 

June 26, 2021

 

Cash and cash equivalents

 

$

8,696,600

 

 

$

7,223,300

 

 

Restricted cash

 

 

55,000

 

 

 

25,000

 

 

Total cash, cash equivalents and restricted cash

 

$

8,751,600

 

 

$

7,248,300

 

 

 

Contacts

Brett D. Heffes

763/520-8500

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