Winmark Corporation Announces Second Quarter Results

MINNEAPOLIS - July 13, 2016 - (BUSINESS WIRE) - Winmark Corporation (Nasdaq: WINA) announced today net income for the quarter ended June 25, 2016 of $5,394,300 (or $1.25 per share diluted) compared to net income of $4,751,400 (or $1.00 per share diluted) in the second quarter of 2015. For the six months ended June 25, 2016, net income was $9,957,200 (or $2.31 per share diluted) compared to net income of $10,805,700 (or $2.18 per share diluted) for the same period last year.

“The second quarter was a strong one for Winmark.” stated Brett D. Heffes, Chief Executive Officer. “Steady franchisee performance, increased leasing activity and sound expense control combined to deliver outstanding growth in operating income and per share results.”

Winmark Corporation creates, supports and finances business. At June 25, 2016, there were 1,169 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 74 retail franchises have been awarded but are not open. In addition, at June 25, 2016, the Company had a lease portfolio equal to $37.0 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)

 
      June 25, 2016     December 26, 2015
ASSETS
Current Assets:            
Cash and cash equivalents     $ 1,058,800       $ 1,006,700  
Marketable securities       197,300         227,800  
Receivables, net       1,388,800         1,416,900  
Restricted cash       25,000         25,000  
Net investment in leases - current       16,486,500         17,741,500  
Income tax receivable       768,900         3,290,400  
Inventories       81,200         45,200  
Prepaid expenses       790,400         677,800  
Total current assets       20,796,900         24,431,300  
                     
Net investment in leases – long-term       20,477,700         21,246,000  
Property and equipment, net       935,700         1,121,500  
Goodwill       607,500         607,500  
      $ 42,817,800       $ 47,406,300  
 
LIABILITIES AND SHAREHOLDERS’ EQUITY (DEFICIT)
Current Liabilities:            
Notes payable, net     $ 1,990,000       $ 1,990,000  
Accounts payable       990,100         1,643,300  
Accrued liabilities       2,385,000         1,875,700  
Discounted lease rentals       -         38,700  
Deferred revenue       1,804,200         1,963,200  
Total current liabilities       7,169,300         7,510,900  
                     
Long-Term Liabilities:            
Line of credit       30,500,000         42,400,000  
Notes payable, net       20,921,500         21,916,500  
Deferred revenue       1,438,000         1,421,600  
Other liabilities       1,101,000         1,216,300  
Deferred income taxes       3,614,800         3,614,800  
Total long-term liabilities       57,575,300         70,569,200  
                     
Shareholders’ Equity (Deficit):            

Common stock, no par, 10,000,000 shares authorized, 4,109,760 and 4,124,767 shares issued and outstanding

     

336,300

       

406,500

 
Accumulated other comprehensive loss       (11,500 )       (32,900 )
Retained earnings (accumulated deficit)       (22,251,600 )       (31,047,400 )
                     
Total shareholders’ equity (deficit)       (21,926,800 )       (30,673,800 )
      $ 42,817,800       $ 47,406,300  
                     

 

 
WINMARK CORPORATION
CONDENSED STATEMENTS OF OPERATIONS

(Unaudited)

             
      Quarter Ended     Six Months Ended
      June 25, 2016     June 27, 2015     June 25, 2016     June 27, 2015
REVENUE:                        
Royalties     $ 10,557,300       $ 10,214,400       $ 20,829,800       $ 19,940,600  
Leasing income       4,152,300         3,663,300         8,665,000         13,672,900  
Merchandise sales       625,300         686,300         1,362,400         1,420,000  
Franchise fees       493,500         475,900         866,000         770,300  
Other       471,400         436,800         756,900         697,000  
Total revenue       16,299,800         15,476,700         32,480,100         36,500,800  
                                         
COST OF MERCHANDISE SOLD       588,300         645,800         1,285,700         1,344,000  
                                         
LEASING EXPENSE       460,100         510,500         1,364,200         4,767,900  
                                         
PROVISION FOR CREDIT LOSSES       (7,900 )       (93,100 )       (22,300 )       (162,200 )
                                         
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES       5,936,200         6,329,300         12,490,800         12,492,800  
                                         
Income from operations       9,323,100         8,084,200         17,361,700         18,058,300  
                                         
INTEREST EXPENSE       (593,800 )       (369,500 )       (1,234,500 )       (455,200 )
                                         
INTEREST AND OTHER INCOME (EXPENSE)       9,500         9,700         (1,000 )       (49,400 )
                                         
Income before income taxes       8,738,800         7,724,400         16,126,200         17,553,700  
                                         
PROVISION FOR INCOME TAXES       (3,344,500 )       (2,973,000 )       (6,169,000 )       (6,748,000 )
                                         
NET INCOME     $ 5,394,300       $ 4,751,400       $ 9,957,200       $ 10,805,700  
                                         
EARNINGS PER SHARE – BASIC     $ 1.31       $ 1.04       $ 2.42       $ 2.26  
                                         
EARNINGS PER SHARE – DILUTED     $ 1.25       $ 1.00       $ 2.31       $ 2.18  
                                         
WEIGHTED AVERAGE SHARES OUTSTANDING – BASIC       4,110,429         4,578,934         4,112,254         4,789,205  
                                         
WEIGHTED AVERAGE SHARES OUTSTANDING – DILUTED       4,318,763         4,768,777         4,316,346         4,968,122  
                                         

SOURCE Winmark Corporation

Contact: 

Brett D. Heffes
Winmark Corporation
763-520-8500

###

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