Form 8-K - Current report

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d)

of the Securities Exchange Act of 1934

Date of report (Date of earliest event reported): February 21, 2024

Winmark Corporation

(Exact Name of Registrant as Specified in Its Charter)

Minnesota

(State or Other Jurisdiction of Incorporation)


000-22012	41-1622691
(Commission File Number)	(I.R.S. Employer Identification Number)

605 Highway 169 North, Suite 400, Minneapolis, Minnesota 55441

(Address of Principal Executive Offices) (Zip Code)

(763) 520-8500

(Registrant’s Telephone Number, Including Area Code)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

☐Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

☐Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

☐	Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

☐	Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Securities registered pursuant to Section 12(b) of the Act:


Title of each class:	Trading Symbol	Name of each exchange on which registered:
Common Stock, no par value per share	WINA	Nasdaq Global Market

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Item 2.02Results of Operations and Financial Condition

On February 21, 2024, Winmark Corporation (the “Company”) announced in a press release its results of operations and financial condition for the year ended December 30, 2023. A copy of the press release is attached as Exhibit 99.1 of this Current Report on Form 8-K.

Item 7.01Regulation FD Disclosure

On February 21, 2024, the Company announced in a press release its results of operations and financial condition for the year ended December 30, 2023. A copy of the press release is attached as Exhibit 99.1 of this Current Report on Form 8-K.

Item 9.01Financial Statements and Exhibits

(d)Exhibits

c
99.1		Year End Results Press Release dated February 21, 2024
104		Cover Page Interactive Data File (embedded within the Inline XBRL Document and incorporated as Exhibit 101)

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

co
	WINMARK CORPORATION

Date: February 21, 2024	By:	/s/ Anthony D. Ishaug
	Anthony D. Ishaug
	Chief Financial Officer and Treasurer

Exhibit 99.1

Contact:Anthony D. Ishaug

763/520-8500

FOR IMMEDIATE RELEASE

WINMARK CORPORATION ANNOUNCES YEAR END RESULTS

Minneapolis, MN (February 21, 2024) - Winmark Corporation (Nasdaq: WINA) announced today net income for the year ended December 30, 2023 of $40,178,100 or $11.04 per share diluted compared to net income of $39,424,900 or $10.97 per share diluted in 2022. The fourth quarter 2023 net income was $9,716,800 or $2.64 per share diluted, compared to net income of $10,176,600 or $2.86 per share diluted, for the same period last year. Revenues for the year ended December 30, 2023 were $83,243,500, up from $81,410,800 in 2022. 2023 results were impacted by the Company’s decision in May 2021 to run-off its leasing portfolio. Additionally, financial performance for the fourth quarter and full year 2022 included an extra week of operations due to the Company’s fiscal year ending on the last Saturday of December.

“Our 2023 results reflected positive performance by our franchise partners; however, growth was lower in the second half of the year,” 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 December 30, 2023, there were 1,319 franchises in operation and over 2,800 available territories. An additional 71 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)


	December 30, 2023		December 31, 2022
ASSETS
Current Assets:
Cash and cash equivalents	$	13,361,500	$	13,615,600
Restricted cash		25,000		65,000
Receivables, net		1,475,300		1,438,600
Net investment in leases - current		75,100		344,900
Income tax receivable		31,400		558,700
Inventories		386,100		770,600
Prepaid expenses		1,392,100		1,310,400
Total current assets		16,746,500		18,103,800

Net investment in leases – long-term		—		5,400
Property and equipment, net		1,669,800		1,704,600
Operating lease right of use asset		2,425,900		2,716,000
Intangible assets, net		2,994,300		3,348,300
Goodwill		607,500		607,500
Other assets		471,300		429,700
Deferred income taxes		4,052,400		3,540,400
	$	28,967,700	$	30,455,700

LIABILITIES AND SHAREHOLDERS’ EQUITY (DEFICIT)
Current Liabilities:
Notes payable, net	$	4,217,900	$	4,217,900
Accounts payable		1,719,400		2,122,000
Accrued liabilities		2,858,200		2,611,700
Deferred revenue		1,666,100		1,643,900
Total current liabilities		10,461,600		10,595,500
Long-Term Liabilities:
Line of credit/Term loan		30,000,000		30,000,000
Notes payable, net		34,848,800		39,066,700
Deferred revenue		7,657,500		6,974,200
Operating lease liabilities		3,715,800		4,287,000
Other liabilities		1,440,100		1,164,400
Total long-term liabilities		77,662,200		81,492,300
Shareholders’ Equity (Deficit):
Common stock, no par, 10,000,000 shares authorized, 3,496,977 and 3,459,673 shares issued and outstanding		7,768,800		1,806,700
Retained earnings (accumulated deficit)		(66,924,900)		(63,438,800)
Total shareholders’ equity (deficit)		(59,156,100)		(61,632,100)
	$	28,967,700	$	30,455,700

Winmark Corporation

CONDENSED STATEMENTS OF OPERATIONS

(Unaudited)


	Quarter Ended				Fiscal Year Ended
	December 30, 2023		December 31, 2022		December 30, 2023		December 31, 2022
Revenue:
Royalties	$	17,167,200	$	17,917,700	$	70,230,700	$	67,148,100
Leasing income		817,600		1,091,900		4,766,200		6,937,700
Merchandise sales		1,159,200		1,234,100		4,761,100		3,921,600
Franchise fees		378,600		415,200		1,512,000		1,575,400
Other		517,300		466,800		1,973,500		1,828,000
Total revenue		20,039,900		21,125,700		83,243,500		81,410,800
Cost of merchandise sold		1,091,100		1,160,500		4,461,500		3,712,800
Leasing expense		16,600		92,800		398,300		984,700
Provision for credit losses		(1,000)		(11,300)		(5,600)		(57,900)
Selling, general and administrative expenses		6,414,400		6,485,300		25,108,700		23,158,400
Income from operations		12,518,800		13,398,400		53,280,600		53,612,800
Interest expense		(751,100)		(869,300)		(3,091,000)		(2,914,900)
Interest and other income		368,300		78,600		1,171,700		85,600
Income before income taxes		12,136,000		12,607,700		51,361,300		50,783,500
Provision for income taxes		(2,419,200)		(2,431,100)		(11,183,200)		(11,358,600)
Net income	$	9,716,800	$	10,176,600	$	40,178,100	$	39,424,900
Earnings per share - basic	$	2.78	$	2.95	$	11.55	$	11.30
Earnings per share - diluted	$	2.64	$	2.86	$	11.04	$	10.97
Weighted average shares outstanding - basic		3,494,544		3,452,399		3,479,936		3,487,732
Weighted average shares outstanding - diluted		3,679,444		3,556,190		3,640,524		3,592,456

Winmark Corporation

CONDENSED STATEMENTS OF CASH FLOWS

(Unaudited)


	Year Ended
	December 30, 2023		December 31, 2022
OPERATING ACTIVITIES:
Net income	$	40,178,100	$	39,424,900
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		772,700		603,100
Provision for credit losses		(5,600)		(57,900)
Compensation expense related to stock options		1,952,400		1,652,400
Deferred income taxes		(512,000)		(287,700)
Gain from disposal of property and equipment		—		(9,400)
Operating lease right of use asset amortization		290,100		266,000
Tax benefits on exercised stock options		1,138,500		858,300
Change in operating assets and liabilities:
Receivables		(36,700)		(335,200)
Principal collections on lease receivables		556,000		3,646,700
Income tax receivable/payable		(611,200)		(749,500)
Inventories		384,500		(445,400)
Prepaid expenses		(81,700)		(301,800)
Other assets		(41,600)		(11,400)
Accounts payable		(402,600)		23,000
Accrued and other liabilities		(16,900)		222,800
Rents received in advance and security deposits		(275,200)		(819,200)
Deferred revenue		705,500		109,600
Net cash provided by operating activities		43,994,300		43,789,300
INVESTING ACTIVITIES:
Proceeds from sales of property and equipment				9,400
Purchase of property and equipment		(383,900)		(139,100)
Reacquired franchise rights		—		(3,540,000)
Net cash used for investing activities		(383,900)		(3,669,700)
FINANCING ACTIVITIES:
Proceeds from borrowings on line of credit/term loan		—		33,700,000
Payments on line of credit/term loan		—		(3,700,000)
Payments on notes payable		(4,250,000)		(4,250,000)
Repurchases of common stock		—		(49,119,800)
Proceeds from exercises of stock options		4,009,700		4,751,700
Dividends paid		(43,664,200)		(19,257,900)
Net cash used for financing activities		(43,904,500)		(37,876,000)
NET INCREASE (DECREASE) IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH		(294,100)		2,243,600
Cash, cash equivalents and restricted cash, beginning of period		13,680,600		11,437,000
Cash, cash equivalents and restricted cash, end of period	$	13,386,500	$	13,680,600
SUPPLEMENTAL DISCLOSURES:
Cash paid for interest	$	3,049,400	$	2,722,500
Cash paid for income taxes	$	10,874,300	$	11,308,800

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:
	Year Ended
	December 30, 2023		December 31, 2022
Cash and cash equivalents	$	13,361,500	$	13,615,600
Restricted cash		25,000		65,000
Total cash, cash equivalents and restricted cash	$	13,386,500	$	13,680,600

Document and Entity Information	Feb. 21, 2024
Document and Entity Information [Abstract]
Document Type	8-K
Document Period End Date	Feb. 21, 2024
Entity File Number	000-22012
Entity Registrant Name	Winmark Corporation
Entity Incorporation, State or Country Code	MN
Entity Tax Identification Number	41-1622691
Entity Address, Address Line One	605 Highway 169 North
Entity Address, Adress Line Two	Suite 400
Entity Address, City or Town	Minneapolis
Entity Address, State or Province	MN
Entity Address, Postal Zip Code	55441
City Area Code	763
Local Phone Number	520-8500
Written Communications	false
Soliciting Material	false
Pre-commencement Tender Offer	false
Pre-commencement Issuer Tender Offer	false
Title of 12(b) Security	Common Stock, no par value per share
Trading Symbol	WINA
Security Exchange Name	NASDAQ
Entity Emerging Growth Company	false
Entity Central Index Key	0000908315
Amendment Flag	false