Winmark Corporation Announces Year End Results

MINNEAPOLIS--()--Winmark Corporation (Nasdaq: WINA) announced today net income for the year ended December 30, 2017 of $24,565,100 or $5.66 per share diluted compared to net income of $22,217,600 or $5.13 per share diluted in 2016. The fourth quarter 2017 net income was $7,656,500 or $1.86 per share diluted, compared to net income of $6,166,200 or $1.41 per share diluted, for the same period last year. Revenues for the year ended December 30, 2017 were $69,745,900, up from $66,580,300 in 2016. As a result of the recently enacted Tax Cut and Jobs Act, the Company recognized a one-time, non-cash, tax benefit of approximately $1.5 million or $0.36 per share in the fourth quarter related to the remeasurement of its deferred tax assets and liabilities from the reduction in U.S. federal corporate income tax rates.

Throughout the year, we experienced steady growth in royalties as our franchisees continued to perform well,” noted Brett D. Heffes, Chief Executive Officer. “We have continued to invest in Winmark Franchise Partners since its launch earlier last year, and I am excited by the long-term opportunities for this business.”

Winmark Corporation creates, supports and finances business. At December 30, 2017, there were 1,211 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 62 retail franchises have been awarded but are not open. In addition, at December 30, 2017, the Company had a lease portfolio of $41.3 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)

           

December 30, 2017

December 31, 2016

ASSETS
Current Assets:
Cash and cash equivalents $ 1,073,200 $ 1,252,900
Marketable securities 199,900
Receivables, net 1,796,000 1,479,200
Restricted cash 90,000 40,000
Net investment in leases - current 15,332,300 17,004,800
Income tax receivable 2,161,800 1,678,800
Inventories 97,100 87,500
Prepaid expenses 814,800   1,050,700  
Total current assets 21,365,200 22,793,800
 
Net investment in leases – long-term 25,945,300 24,410,700
Property and equipment, net 486,800 769,600
Goodwill 607,500   607,500  
$ 48,404,800   $ 48,581,600  
 
LIABILITIES AND SHAREHOLDERS’ EQUITY (DEFICIT)
Current Liabilities:
Notes payable, net $ 3,236,100 $ 1,990,000
Accounts payable 2,073,000 1,692,000
Accrued liabilities 1,837,300 1,811,100
Discounted lease rentals 570,800
Deferred revenue 1,736,200   1,864,700  
Total current liabilities 9,453,400 7,357,800
 
Long-Term Liabilities:
Line of credit 35,400,000 23,400,000
Notes payable, net 28,841,000 19,926,500
Discounted lease rentals 1,121,600
Deferred revenue 1,465,500 1,423,800
Other liabilities 845,000 993,600
Deferred income taxes 1,956,500   3,331,900  
Total long-term liabilities 69,629,600 49,075,800
 
Shareholders’ Equity (Deficit):

Common stock, no par, 10,000,000 shares authorized, 3,843,078 and 4,165,769 shares issued and outstanding

1,476,200 2,976,100
Accumulated other comprehensive income (loss) (9,900 )
Retained earnings (accumulated deficit) (32,154,400 ) (10,818,200 )
 
Total shareholders’ equity (deficit) (30,678,200 ) (7,852,000 )
$ 48,404,800   $ 48,581,600  
 
 
WINMARK CORPORATION
CONDENSED STATEMENTS OF OPERATIONS

(Unaudited)

                       
Quarter Ended     Fiscal Year Ended
December 30, 2017     December 31, 2016     December 30, 2017     December 31, 2016
REVENUE:        
Royalties $ 11,778,400 $ 11,854,100 $ 45,643,500 $ 43,994,900
Leasing income 4,748,200 4,444,600 18,470,200 17,283,600
Merchandise sales 513,700 334,500 2,572,200 2,216,900
Franchise fees 267,200 257,000 1,529,700 1,624,800
Other 497,200   475,700   1,530,300   1,460,100  
Total revenue 17,804,700 17,365,900 69,745,900 66,580,300
COST OF MERCHANDISE SOLD 490,200 316,600 2,432,600 2,101,400
LEASING EXPENSE 545,100 313,400 3,269,100 2,323,800
PROVISION FOR CREDIT LOSSES 35,200 70,500 9,000 18,500
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES 6,071,200   6,164,100   25,250,600   23,835,600  
Income from operations 10,663,000 10,501,300 38,784,600 38,301,000
INTEREST EXPENSE (807,100 ) (556,000 ) (2,366,400 ) (2,342,800 )
INTEREST AND OTHER INCOME (EXPENSE) (17,000 ) (4,900 ) 12,900   (12,200 )
Income before income taxes 9,838,900 9,940,400 36,431,100 35,946,000
PROVISION FOR INCOME TAXES (2,182,400 ) (3,774,200 ) (11,866,000 ) (13,728,400 )
NET INCOME $ 7,656,500   $ 6,166,200   $ 24,565,100   $ 22,217,600  
EARNINGS PER SHARE – BASIC $ 2.00   $ 1.49   $ 6.06   $ 5.39  
EARNINGS PER SHARE – DILUTED $ 1.86   $ 1.41   $ 5.66   $ 5.13  
WEIGHTED AVERAGE SHARES OUTSTANDING – BASIC 3,830,396   4,148,021   4,056,049   4,122,854  
WEIGHTED AVERAGE SHARES OUTSTANDING – DILUTED 4,111,229   4,359,170   4,339,944   4,330,490  
 

Contacts

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

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