Winmark Corporation Announces First Quarter Results

MINNEAPOLIS--()--Winmark Corporation (Nasdaq: WINA) announced today net income for the quarter ended March 31, 2018 of $6,960,400 (or $1.69 per share diluted) compared to net income of $5,550,800 (or $1.25 per share diluted) in the first quarter of 2017.

Brett D. Heffes, Chief Executive Officer, stated, “The first quarter of the year was highlighted by continued positive trends in our franchising business. Our improved operating results combined with a decrease in tax expense due to the reduction in corporate tax rates yielded exceptionally strong growth in earnings per share.”

Winmark Corporation creates, supports and finances business. At March 31, 2018, there were 1,223 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 59 retail franchises have been awarded but are not open. In addition, at March 31, 2018, the Company had a lease portfolio of $41.9 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)

           
March 31, 2018 December 30, 2017 (1)
ASSETS
Current Assets:
Cash and cash equivalents $ 1,800,600 $ 1,073,200
Restricted cash 105,000 90,000
Receivables, net 1,592,800 1,796,000
Net investment in leases - current 15,597,200 15,332,300
Income tax receivable 2,161,800
Inventories 79,700 97,100
Prepaid expenses 653,300   901,600  
Total current assets 19,828,600 21,452,000
 
Net investment in leases – long-term 26,309,300 25,945,300
Property and equipment, net 581,200 486,800
Goodwill 607,500 607,500
Other assets 398,200   350,400  
$ 47,724,800   $ 48,842,000  
 
LIABILITIES AND SHAREHOLDERS’ EQUITY (DEFICIT)
Current Liabilities:
Notes payable, net $ 3,236,100 $ 3,236,100
Accounts payable 2,067,600 2,073,000
Income tax payable 31,100
Accrued liabilities 2,101,900 1,837,300
Discounted lease rentals 1,612,100 570,800
Deferred revenue 3,016,900   3,012,700  
Total current liabilities 12,065,700 10,729,900
 
Long-Term Liabilities:
Line of credit 24,600,000 35,400,000
Notes payable, net 28,032,000 28,841,000
Discounted lease rentals 2,679,700 1,121,600
Deferred revenue 7,306,000 7,297,500
Other liabilities 1,358,000 845,000
Deferred income taxes 320,500   320,500  
Total long-term liabilities 64,296,200 73,825,600
 
Shareholders’ Equity (Deficit):

Common stock, no par, 10,000,000 shares authorized, 3,849,506 and 3,843,078 shares issued and outstanding

2,015,400 1,476,200
Retained earnings (accumulated deficit) (30,652,500 ) (37,189,700 )
 
Total shareholders’ equity (deficit) (28,637,100 ) (35,713,500 )
$ 47,724,800   $ 48,842,000  
 

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

 
 
WINMARK CORPORATION
CONDENSED STATEMENTS OF OPERATIONS

(Unaudited)

           
Three Months Ended
March 31, 2018     April 1, 2017 (1)
REVENUE:    
Royalties $ 11,049,000 $ 10,454,000
Leasing income 5,528,800 5,859,600
Merchandise sales 776,900 748,300
Franchise fees 400,900 368,600
Other 405,400   380,400  
Total revenue 18,161,000 17,810,900
COST OF MERCHANDISE SOLD 742,500 715,000
LEASING EXPENSE 554,900 1,271,400
PROVISION FOR CREDIT LOSSES 95,000 (1,400 )
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES 6,694,400   6,512,500  
Income from operations 10,074,200 9,313,400
INTEREST EXPENSE (743,800 ) (499,100 )
INTEREST AND OTHER INCOME (EXPENSE) (1,000 ) 1,800  
Income before income taxes 9,329,400 8,816,100
PROVISION FOR INCOME TAXES (2,369,000 ) (3,265,300 )
NET INCOME $ 6,960,400   $ 5,550,800  
EARNINGS PER SHARE – BASIC $ 1.81   $ 1.33  
EARNINGS PER SHARE – DILUTED $ 1.69   $ 1.25  
WEIGHTED AVERAGE SHARES OUTSTANDING – BASIC 3,847,312   4,167,132  
WEIGHTED AVERAGE SHARES OUTSTANDING – DILUTED 4,124,573   4,450,495  
 

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

 

Contacts

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

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