Winmark Corporation Announces Third Quarter Results

By: Winmark Corporation | 0 Shares 271 Reads

MINNEAPOLIS - (BUSINESS WIRE) - October 16, 2019 - Winmark Corporation (Nasdaq: WINA) announced today net income for the quarter ended September 28, 2019 of $9,113,800 (or $2.24 per share diluted) compared to net income of $8,364,300 (or $2.01 per share diluted) in the third quarter of 2019. For the nine months ended September 28, 2019, net income was $23,687,900 (or $5.76 per share diluted) compared to net income of $22,467,700 (or $5.43 per share diluted) for the same period last year.

“I am pleased with the performance of our core franchising operations during the quarter. However, during 2019, the pace of new equipment purchases in our leasing business has slowed and the size of our portfolio has declined,” commented Brett D. Heffes, Chief Executive Officer. “We continue to explore ways to grow leased assets and acquire new customers.”

Winmark Corporation creates, supports and finances business. At September 28, 2019, there were 1,255 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 40 retail franchises have been awarded but are not open. In addition, at September 28, 2019, the Company had a lease portfolio of $30.0 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 28, 2019			December 29, 2018
ASSETS
Current Assets:
Cash and cash equivalents	$	7,487,200		$	2,496,000
Restricted cash		75,000			80,000
Receivables, net		1,594,400			1,553,100
Net investment in leases - current		14,352,800			18,547,500
Income tax receivable		391,700			565,500
Inventories		69,700			107,600
Prepaid expenses		1,012,500			901,600
Total current assets		24,983,300			24,251,300

Net investment in leases – long-term		15,644,900			20,455,500
Property and equipment, net		2,863,700			866,200
Operating lease right of use asset		3,734,400			—
Goodwill		607,500			607,500
Other assets		501,200			482,600
Deferred income taxes		172,500			—
	$	48,507,500		$	46,663,100

LIABILITIES AND SHAREHOLDERS’ EQUITY (DEFICIT)
Current Liabilities:
Notes payable, net	$	3,486,100		$	3,236,100
Accounts payable		1,185,300			1,351,800
Accrued liabilities		2,980,000			3,128,600
Discounted lease rentals		3,012,900			3,021,900
Deferred revenue		1,730,900			1,744,900
Total current liabilities		12,395,200			12,483,300
Long-Term Liabilities:
Notes payable, net		22,927,800			25,604,900
Discounted lease rentals		1,354,000			2,723,500
Deferred revenue		8,031,900			8,432,400
Operating lease liabilities		5,953,100			—
Other liabilities		971,500			1,079,200
Deferred income taxes		—			1,148,300
Total long-term liabilities		39,238,300			38,988,300
Shareholders’ Equity (Deficit):
Common stock, no par, 10,000,000 shares authorized, 3,822,978 and 3,907,686 shares issued and outstanding		3,851,000			4,425,600
Retained earnings (accumulated deficit)		(6,977,000	)		(9,234,100	)
Total shareholders’ equity (deficit)		(3,126,000	)		(4,808,500	)
	$	48,507,500		$	46,663,100

WINMARK CORPORATION CONDENSED STATEMENTS OF OPERATIONS (Unaudited)

	Quarter Ended						Nine Months Ended
	September 28, 2019			September 29, 2018			September 28, 2019			September 29, 2018
REVENUE:
Royalties	$	13,808,800		$	12,865,900		$	38,223,400		$	35,735,900
Leasing income		4,375,500			4,608,600			12,733,800			14,994,500
Merchandise sales		704,500			858,400			2,037,300			2,340,200
Franchise fees		377,400			383,300			1,183,100			1,162,300
Other		414,700			402,300			1,238,700			1,206,400
Total revenue		19,680,900			19,118,500			55,416,300			55,439,300
COST OF MERCHANDISE SOLD		671,700			811,500			1,924,400			2,235,000
LEASING EXPENSE		572,400			718,500			1,642,000			1,769,200
PROVISION FOR CREDIT LOSSES		(55,500	)		(55,600	)		23,900			148,400
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES		6,217,600			6,208,800			19,637,900			19,702,500
Income from operations		12,274,700			11,435,300			32,188,100			31,584,200
INTEREST EXPENSE		(406,200	)		(576,900	)		(1,348,700	)		(1,978,600	)
INTEREST AND OTHER INCOME (EXPENSE)		500			(1,000	)		(5,900	)		(13,300	)
Income before income taxes		11,869,000			10,857,400			30,833,500			29,592,300
PROVISION FOR INCOME TAXES		(2,755,200	)		(2,493,100	)		(7,145,600	)		(7,124,600	)
NET INCOME	$	9,113,800		$	8,364,300		$	23,687,900		$	22,467,700
EARNINGS PER SHARE – BASIC	$	2.39		$	2.15		$	6.19		$	5.81
EARNINGS PER SHARE – DILUTED	$	2.24		$	2.01		$	5.76		$	5.43
WEIGHTED AVERAGE SHARES OUTSTANDING – BASIC		3,808,863			3,886,473			3,829,329			3,864,077
WEIGHTED AVERAGE SHARES OUTSTANDING – DILUTED		4,065,301			4,164,339			4,112,318			4,140,816