Winmark Corporation Announces Third Quarter Results

MINNEAPOLIS--(BUSINESS WIRE)--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