Winmark Corporation Announces First Quarter Results

MINNEAPOLIS--(BUSINESS WIRE)--Winmark Corporation (Nasdaq: WINA) announced today net income for the quarter ended March 30, 2024 of $8,819,000 or $2.41 per share diluted compared to net income of $8,942,700 or $2.49 per share diluted in 2023. Results during the quarter were impacted by the Company's decision in May 2021 to run-off its leasing portfolio

"Performance during the first quarter was adequate," commented Brett D. Heffes, Chair and Chief Executive Officer.

Winmark - the Resale Company®, is a nationally recognized franchisor 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 March 30, 2024, there were 1,327 franchises in operation and over 2,800 available territories. An additional 73 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)
		March 30, 2024				December 30, 2023
ASSETS
Current Assets:
Cash and cash equivalents		$	22,872,200			$	13,361,500
Restricted cash			-				25,000
Receivables, net			1,688,600				1,475,300
Net investment in leases - current			34,100				75,100
Income tax receivable			-				31,400
Inventories			420,900				386,100
Prepaid expenses			1,265,600				1,392,100
Total current assets			26,281,400				16,746,500
Property and equipment, net			1,649,400				1,669,800
Operating lease right of use asset			2,351,700				2,425,900
Intangible assets, net			2,905,800				2,994,300
Goodwill			607,500				607,500
Other assets			487,800				471,300
Deferred income taxes			4,052,400				4,052,400
		$	38,336,000			$	28,967,700
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)
Current Liabilities:
Notes payable, net		$	4,217,900			$	4,217,900
Accounts payable			1,296,300				1,719,400
Income tax payable			2,469,000				-
Accrued liabilities			4,734,000				2,858,200
Deferred revenue			1,657,300				1,666,100
Total current liabilities			14,374,500				10,461,600
Long-Term Liabilities:
Line of credit/Term loan			30,000,000				30,000,000
Notes payable, net			33,794,300				34,848,800
Deferred revenue			7,744,400				7,657,500
Operating lease liabilities			3,566,600				3,715,800
Other liabilities			1,435,300				1,440,100
Total long-term liabilities			76,540,600				77,662,200
Shareholders' Equity (Deficit):
Common stock, no par, 10,000,000 shares authorized, 3,4997,430 and 3,496,977 shares issued and outstanding			8,324,700				7,768,800
Retained earnings (accumulated deficit)			(60,903,800	)			(66,924,900	)
Total shareholders' equity (deficit)			(52,579,100	)			(59,156,100	)
		$	38,336,000			$	28,967,700

WINMARK CORPORATION
CONDENSED STATEMENTS OF OPERATIONS
(Unaudited)
		Three Months Ended
		March 30, 2024				April 1, 2023
Revenue:
Royalties		$	17,268,700			$	16,747,700
Leasing income			836,800				1,637,000
Merchandise sales			1,110,500				1,276,000
Franchise fees			364,500				378,200
Other			529,000				484,700
Total revenue			20,109,500				20,523,600
Cost of merchandise sold			1,038,900				1,187,300
Leasing expense			36,600				316,400
Provision for credit losses			(1,500	)			(4,600	)
Selling, general and administrative expenses			6,817,300				6,636,100
Income from operations			12,218,200				12,388,400
Interest expense			(737,700	)			(797,600	)
Interest and other income			187,900				125,700
Income before income taxes			11,668,400				11,716,500
Provision for income taxes			(2,849,400	)			(2,773,800	)
Net income		$	8,819,000			$	8,942,700
Earnings per share - basic		$	2.52			$	2.58
Earnings per share - diluted		$	2.41			$	2.49
Weighted average shares outstanding - basic			3,497,261				3,460,720
Weighted average shares outstanding - diluted			3,661,367				3,594,234

WINMARK CORPORATION
CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
		Three Months Ended
		March 30, 2024				April 1, 2023
OPERATING ACTIVITIES:
Net income		$	8,819,000			$	8,942,700
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation of property and equipment			108,300				104,000
Amortization of intangible assets			88,500				88,500
Provision for credit losses			(1,500	)			(4,600	)
Compensation expense related to stock options			485,900				475,900
Deferred income taxes			-				24,200
Operating lease right of use asset amortization			74,200				66,900
Tax benefits on exercised stock options			-				77,700
Change in operating assets and liabilities:
Receivables			(213,300	)			(143,200	)
Principal collections on lease receivables			62,300				423,800
Income tax receivable/payable			2,500,400				2,490,900
Inventories			(34,800	)			356,300
Prepaid expenses			126,500				422,400
Other assets			(16,600	)			(40,400	)
Accounts payable			(423,100	)			(678,300	)
Accrued and other liabilities			1,729,800				1,140,200
Rents received in advance and security deposits			(19,700	)			(194,200	)
Deferred revenue			78,100				297,700
Net cash provided by operating activities			13,364,000				13,850,500
INVESTING ACTIVITIES:
Purchase of property and equipment			(87,900	)			(5,500	)
Net cash used for investing activities			(87,900	)			(5,500	)
FINANCING ACTIVITIES:
Payments on notes payable			(1,062,500	)			(1,062,500	)
Proceeds from exercises of stock options			70,000				590,400
Dividends paid			(2,797,900	)			(2,421,900	)
Net cash used for financing activities			(3,790,400	)			(2,894,000	)
NET INCREASE (DECREASE) IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH			9,485,700				10,951,000
Cash, cash equivalents and restricted cash, beginning of period			13,386,500				13,680,600
Cash, cash equivalents and restricted cash, end of period		$	22,872,200			$	24,631,600
SUPPLEMENTAL DISCLOSURES:
Cash paid for interest		$	725,700			$	791,500
Cash paid for income taxes		$	349,100			$	181,200
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:
		Three Months Ended
		March 30, 2024				April 1, 2023
Cash and cash equivalents		$	22,872,200			$	24,551,600
Restricted cash			-				80,000
Total cash, cash equivalents and restricted cash		$	22,872,200			$	24,631,600

Contacts

Anthony D. Ishaug
763/520-8500