Winmark Corporation (Nasdaq: WINA) announced today net income for the quarter ended April 1, 2023 of $8,942,700 or $2.49 per share diluted compared to net income of $9,852,500 or $2.65 per share diluted in 2022. Results during the quarter were impacted by the Company’s decision in May 2021 to run-off its leasing portfolio.

“2023 is off to a good start,” 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 April 1, 2023, there were 1,297 franchises in operation and over 2,800 available territories. An additional 70 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)

 

 

 

 

 

 

 

 

 

April 1, 2023

 

December 31, 2022

ASSETS

Current Assets:

 

 

 

 

 

 

Cash and cash equivalents

 

$

24,551,600

 

 

$

13,615,600

 

Restricted cash

 

 

80,000

 

 

 

65,000

 

Receivables, net

 

 

1,581,800

 

 

 

1,438,600

 

Net investment in leases - current

 

 

125,300

 

 

 

344,900

 

Income tax receivable

 

 

 

 

 

558,700

 

Inventories

 

 

414,300

 

 

 

770,600

 

Prepaid expenses

 

 

888,000

 

 

 

1,310,400

 

Total current assets

 

 

27,641,000

 

 

 

18,103,800

 

 

 

 

 

 

 

 

Net investment in leases – long-term

 

 

 

 

 

5,400

 

Property and equipment, net

 

 

1,606,100

 

 

 

1,704,600

 

Operating lease right of use asset

 

 

2,649,100

 

 

 

2,716,000

 

Intangible assets, net

 

 

3,259,800

 

 

 

3,348,300

 

Goodwill

 

 

607,500

 

 

 

607,500

 

Other assets

 

 

470,100

 

 

 

429,700

 

Deferred income taxes

 

 

3,516,200

 

 

 

3,540,400

 

 

 

$

39,749,800

 

 

$

30,455,700

 

 

 

 

 

 

 

 

LIABILITIES AND SHAREHOLDERS’ EQUITY (DEFICIT)

Current Liabilities:

 

 

 

 

 

 

Notes payable, net

 

$

4,217,900

 

 

$

4,217,900

 

Accounts payable

 

 

1,443,700

 

 

 

2,122,000

 

Income tax payable

 

 

2,009,900

 

 

 

 

Accrued liabilities

 

 

3,884,600

 

 

 

2,611,700

 

Deferred revenue

 

 

1,673,700

 

 

 

1,643,900

 

Total current liabilities

 

 

13,229,800

 

 

 

10,595,500

 

Long-Term Liabilities:

 

 

 

 

 

 

Line of Credit/Term Loan

 

 

30,000,000

 

 

 

30,000,000

 

Notes payable, net

 

 

38,012,200

 

 

 

39,066,700

 

Deferred revenue

 

 

7,242,100

 

 

 

6,974,200

 

Operating lease liabilities

 

 

4,151,100

 

 

 

4,287,000

 

Other liabilities

 

 

1,159,600

 

 

 

1,164,400

 

Total long-term liabilities

 

 

80,565,000

 

 

 

81,492,300

 

Shareholders’ Equity (Deficit):

 

 

 

 

 

 

Common stock, no par, 10,000,000 shares authorized, 3,463,191 and 3,459,673 shares issued and outstanding

 

 

2,873,000

 

 

 

1,806,700

 

Retained earnings (accumulated deficit)

 

 

(56,918,000

)

 

 

(63,438,800

)

Total shareholders’ equity (deficit)

 

 

(54,045,000

)

 

 

(61,632,100

)

 

 

$

39,749,800

 

 

$

30,455,700

 

 

WINMARK CORPORATION

CONDENSED STATEMENTS OF OPERATIONS

(Unaudited)

 

 

 

 

 

 

Three Months Ended

 

April 1, 2023

March 26, 2022

Revenue:

 

 

 

 

Royalties

$

16,747,700

 

$

15,390,100

 

Leasing income

 

1,637,000

 

 

2,871,700

 

Merchandise sales

 

1,276,000

 

 

914,300

 

Franchise fees

 

378,200

 

 

420,600

 

Other

 

484,700

 

 

453,100

 

Total revenue

 

20,523,600

 

 

20,049,800

 

Cost of merchandise sold

 

1,187,300

 

 

864,500

 

Leasing expense

 

316,400

 

 

216,000

 

Provision for credit losses

 

(4,600

)

 

(8,900

)

Selling, general and administrative expenses

 

6,636,100

 

 

5,540,000

 

Income from operations

 

12,388,400

 

 

13,438,200

 

Interest expense

 

(797,600

)

 

(513,100

)

Interest and other income (expense)

 

125,700

 

 

(900

)

Income before income taxes

 

11,716,500

 

 

12,924,200

 

Provision for income taxes

 

(2,773,800

)

 

(3,071,700

)

Net income

$

8,942,700

 

$

9,852,500

 

Earnings per share - basic

$

2.58

 

$

2.74

 

Earnings per share - diluted

$

2.49

 

$

2.65

 

Weighted average shares outstanding - basic

 

3,460,720

 

 

3,597,926

 

Weighted average shares outstanding - diluted

 

3,594,234

 

 

3,716,322

 

 

WINMARK CORPORATION

CONDENSED STATEMENTS OF CASH FLOWS

(Unaudited)

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

 

 

April 1, 2023

 

March 26, 2022

 

OPERATING ACTIVITIES:

 

 

 

 

 

 

 

Net income

 

$

8,942,700

 

 

$

9,852,500

 

 

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

 

 

 

 

 

 

 

Depreciation and amortization

 

 

192,500

 

 

 

102,500

 

 

Provision for credit losses

 

 

(4,600

)

 

 

(8,900

)

 

Compensation expense related to stock options

 

 

475,900

 

 

 

421,600

 

 

Deferred income taxes

 

 

24,200

 

 

 

(113,200

)

 

Operating lease right of use asset amortization

 

 

66,900

 

 

 

60,300

 

 

Tax benefits on exercised stock options

 

 

77,700

 

 

 

95,300

 

 

Change in operating assets and liabilities:

 

 

 

 

 

 

 

Receivables

 

 

(143,200

)

 

 

(369,900

)

 

Principal collections on lease receivables

 

 

423,800

 

 

 

530,500

 

 

Income tax receivable/payable

 

 

2,490,900

 

 

 

2,946,500

 

 

Inventories

 

 

356,300

 

 

 

(167,100

)

 

Prepaid expenses

 

 

422,400

 

 

 

23,500

 

 

Other assets

 

 

(40,400

)

 

 

(10,400

)

 

Accounts payable

 

 

(678,300

)

 

 

(203,000

)

 

Accrued and other liabilities

 

 

1,140,200

 

 

 

390,500

 

 

Rents received in advance and security deposits

 

 

(194,200

)

 

 

(159,700

)

 

Deferred revenue

 

 

297,700

 

 

 

(43,100

)

 

Net cash provided by operating activities

 

 

13,850,500

 

 

 

13,347,900

 

 

INVESTING ACTIVITIES:

 

 

 

 

 

 

 

Purchase of property and equipment

 

 

(5,500

)

 

 

(21,500

)

 

Net cash used for investing activities

 

 

(5,500

)

 

 

(21,500

)

 

FINANCING ACTIVITIES:

 

 

 

 

 

 

 

Proceeds from borrowings on line of credit/term loan

 

 

 

 

 

15,600,000

 

 

Payments on line of credit/term loan

 

 

 

 

 

(2,000,000

)

 

Payments on notes payable

 

 

(1,062,500

)

 

 

(1,062,500

)

 

Repurchases of common stock

 

 

 

 

 

(36,591,400

)

 

Proceeds from exercises of stock options

 

 

590,400

 

 

 

1,258,300

 

 

Dividends paid

 

 

(2,421,900

)

 

 

(1,625,300

)

 

Net cash used for financing activities

 

 

(2,894,000

)

 

 

(24,420,900

)

 

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

 

 

10,951,000

 

 

 

(11,094,500

)

 

Cash, cash equivalents and restricted cash, beginning of period

 

 

13,680,600

 

 

 

11,437,000

 

 

Cash, cash equivalents and restricted cash, end of period

 

$

24,631,600

 

 

$

342,500

 

 

SUPPLEMENTAL DISCLOSURES:

 

 

 

 

 

 

 

Cash paid for interest

 

$

791,500

 

 

$

490,500

 

 

Cash paid for income taxes

 

$

181,200

 

 

$

143,100

 

 

 

 

 

 

 

 

 

 

 

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

 

 

 

April 1, 2023

 

March 26, 2022

 

Cash and cash equivalents

 

$

24,551,600

 

 

$

287,500

 

 

Restricted cash

 

 

80,000

 

 

 

55,000

 

 

Total cash, cash equivalents and restricted cash

 

$

24,631,600

 

 

$

342,500

 

 

 

Anthony D. Ishaug 763/520-8500

Winmark (NASDAQ:WINA)
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