Winmark Corporation Announces Third Quarter Results

MINNEAPOLIS--(BUSINESS WIRE)-- Winmark Corporation (Nasdaq: WINA) announced today net income for the quarter ended September 29, 2018 of $8,364,300 (or $2.01 per share diluted) compared to net income of $5,860,600 (or $1.36 per share diluted) in the third quarter of 2017. For the nine months ended September 29, 2018, net income was $22,467,700 (or $5.43 per share diluted) compared to net income of $16,942,100 (or $3.84 per share diluted) for the same period last year.

Brett D. Heffes, Chief Executive Officer, commented, “Earnings growth during the third quarter reflected a continuation of the strong operating performance of our businesses throughout the year.”

Winmark Corporation creates, supports and finances business. At September 29, 2018, there were 1,236 franchises in operation under the brands Plato’s Closet®, Once Upon A Child®, Play It Again Sports®, Style Encore® and Music Go Round®. An additional 51 retail franchises have been awarded but are not open. In addition, at September 29, 2018, the Company had a lease portfolio of $44.5 million.

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 29, 2018			December 30, 2017 (1)
ASSETS
Current Assets:
Cash and cash equivalents		$	1,187,200		$	1,073,200
Restricted cash			55,000			90,000
Receivables, net			1,756,900			1,796,000
Net investment in leases - current			17,568,700			15,332,300
Income tax receivable			—			2,161,800
Inventories			128,200			97,100
Prepaid expenses			1,075,400			901,600
Total current assets			21,771,400			21,452,000
Net investment in leases – long-term			26,949,600			25,945,300
Property and equipment, net			725,500			486,800
Goodwill			607,500			607,500
Other assets			440,500			350,400
		$	50,494,500		$	48,842,000
LIABILITIES AND SHAREHOLDERS’ EQUITY (DEFICIT)
Current Liabilities:
Notes payable, net		$	3,236,100		$	3,236,100
Accounts payable			1,445,000			2,073,000
Income tax payable			902,800			—
Accrued liabilities			3,273,000			1,837,300
Discounted lease rentals			2,555,600			570,800
Deferred revenue			2,887,200			3,012,700
Total current liabilities			14,299,700			10,729,900
Long-Term Liabilities:
Line of credit			10,100,000			35,400,000
Notes payable, net			26,413,900			28,841,000
Discounted lease rentals			2,364,600			1,121,600
Deferred revenue			7,387,300			7,297,500
Other liabilities			1,211,900			845,000
Deferred income taxes			425,800			320,500
Total long-term liabilities			47,903,500			73,825,600
Shareholders’ Equity (Deficit):
Common stock, no par, 10,000,000 shares authorized, 3,901,202 and 3,843,078 shares issued and outstanding			4,597,400			1,476,200
Retained earnings (accumulated deficit)			(16,306,100)			(37,189,700)
Total shareholders’ equity (deficit)			(11,708,700)			(35,713,500)
		$	50,494,500		$	48,842,000

(1) Adjusted for the adoption of ASU 2014-09 under the retrospective method.

WINMARK CORPORATION
CONDENSED STATEMENTS OF OPERATIONS
(Unaudited)
		Quarter Ended						Nine Months Ended
		Sept. 29, 2018			Sept. 30, 2017 (1)			Sept. 29, 2018			Sept. 30, 2017 (1)
REVENUE:
Royalties		$	12,865,900		$	12,316,700		$	35,735,900		$	33,865,100
Leasing income			4,608,600			3,915,800			14,994,500			13,722,000
Merchandise sales			858,400			773,100			2,340,200			2,058,500
Franchise fees			383,300			342,900			1,162,300			1,180,300
Other			402,300			382,400			1,206,400			1,145,600
Total revenue			19,118,500			17,730,900			55,439,300			51,971,500
COST OF MERCHANDISE SOLD			811,500			728,300			2,235,000			1,942,400
LEASING EXPENSE			718,500			792,000			1,769,200			2,724,000
PROVISION FOR CREDIT LOSSES			(55,600)			(13,300)			148,400			(26,200)
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES			6,208,800			6,184,400			19,702,500			19,165,300
Income from operations			11,435,300			10,039,500			31,584,200			28,166,000
INTEREST EXPENSE			(576,900)			(613,900)			(1,978,600)			(1,559,300)
INTEREST AND OTHER INCOME (EXPENSE)			(1,000)			28,000			(13,300)			29,900
Income before income taxes			10,857,400			9,453,600			29,592,300			26,636,600
PROVISION FOR INCOME TAXES			(2,493,100)			(3,593,000)			(7,124,600)			(9,694,500)
NET INCOME		$	8,364,300		$	5,860,600		$	22,467,700		$	16,942,100
EARNINGS PER SHARE – BASIC		$	2.15		$	1.46		$	5.81		$	4.10
EARNINGS PER SHARE – DILUTED		$	2.01		$	1.36		$	5.43		$	3.84
WEIGHTED AVERAGE SHARES OUTSTANDING – BASIC			3,886,473			4,024,692			3,864,077			4,131,269
WEIGHTED AVERAGE SHARES OUTSTANDING – DILUTED			4,164,339			4,314,412			4,140,816			4,416,185

(1)Adjusted for the adoption of ASU 2014-09 under the retrospective method.

View source version on businesswire.com: https://www.businesswire.com/news/home/20181017005661/en/

Winmark Corporation
Brett D. Heffes, 763-520-8500

Source: Winmark Corporation

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