Winmark Corporation Announces Third Quarter Results

MINNEAPOLIS - October 12, 2016 - (BUSINESS WIRE) - Winmark Corporation (Nasdaq: WINA) announced today net income for the quarter ended September 24, 2016 of $6,094,200 (or $1.41 per share diluted) compared to net income of $5,339,600 (or $1.23 per share diluted) in the third quarter of 2015. For the nine months ended September 24, 2016, net income was $16,051,400 (or $3.72 per share diluted) compared to net income of $16,145,300 (or $3.39 per share diluted) for the same period last year.

Earnings growth during the third quarter was driven by an increase in customer activity within the Company’s lease portfolio and reduced selling, general and administrative expenses. Brett D. Heffes, Chief Executive Officer, commented, “I am pleased that we were able to grow our earnings per share by 15% over last year. Our performance during the quarter demonstrated the benefits of our diverse business model.”

Winmark Corporation creates, supports and finances business. At September 24, 2016, there were 1,184 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 67 retail franchises have been awarded but are not open. In addition, at September 24, 2016, the Company had a lease portfolio of $37.3 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 including statements with respect to our ability to finance the growth of our leasing and franchising businesses for the foreseeable future. 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)

             
      September 24, 2016     December 26, 2015
ASSETS
Current Assets:            
Cash and cash equivalents     $ 1,120,900       $ 1,006,700  
Marketable securities       204,100         227,800  
Receivables, net       1,555,300         1,416,900  
Restricted cash       40,000         25,000  
Net investment in leases - current       16,264,100         17,741,500  
Income tax receivable       769,200         3,290,400  
Inventories       95,600         45,200  
Prepaid expenses       921,000         677,800  
Total current assets       20,970,200         24,431,300  
                     
Net investment in leases – long-term       21,070,300         21,246,000  
Property and equipment, net       847,700         1,121,500  
Goodwill       607,500         607,500  
      $ 43,495,700       $ 47,406,300  
             
LIABILITIES AND SHAREHOLDERS’ EQUITY (DEFICIT)
Current Liabilities:            
Notes payable, net     $ 1,990,000       $ 1,990,000  
Accounts payable       1,118,900         1,643,300  
Accrued liabilities       2,644,500         1,875,700  
Discounted lease rentals       -         38,700  
Deferred revenue       1,671,700         1,963,200  
Total current liabilities       7,425,100         7,510,900  
             
Long-Term Liabilities:            
Line of credit       25,200,000         42,400,000  
Notes payable, net       20,424,000         21,916,500  
Deferred revenue       1,451,200         1,421,600  
Other liabilities       1,036,100         1,216,300  
Deferred income taxes       3,676,900         3,614,800  
Total long-term liabilities       51,788,200         70,569,200  
             
Shareholders’ Equity (Deficit):            

Common stock, no par, 10,000,000 shares authorized, 4,122,037 and 4,124,767 shares issued and outstanding

     

859,200

       

406,500

 
Accumulated other comprehensive loss       (7,300 )       (32,900 )
Retained earnings (accumulated deficit)       (16,569,500 )       (31,047,400 )
                     
Total shareholders’ equity (deficit)       (15,717,600 )       (30,673,800 )
      $ 43,495,700       $ 47,406,300  

 

 
WINMARK CORPORATION
CONDENSED STATEMENTS OF OPERATIONS

(Unaudited)

             
      Quarter Ended     Nine Months Ended
      September 24, 2016     September 26, 2015     September 24, 2016     September 26, 2015
REVENUE:                        
Royalties     $ 11,311,000       $ 11,286,100       $ 32,140,800       $ 31,226,700  
Leasing income       4,174,000         3,247,000         12,839,000         16,919,900  
Merchandise sales       520,000         762,300         1,882,400         2,182,300  
Franchise fees       501,800         483,200         1,367,800         1,253,500  
Other       227,500         220,900         984,400         917,900  
Total revenue       16,734,300         15,999,500         49,214,400         52,500,300  
                                         
COST OF MERCHANDISE SOLD       499,100         711,600         1,784,800         2,055,600  
                                         
LEASING EXPENSE       646,200         173,400         2,010,400         4,941,300  
                                         
PROVISION FOR CREDIT LOSSES       (29,700 )       38,800         (52,000 )       (123,400 )
                                         
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES       5,180,700         5,733,900         17,671,500         18,226,700  
                                         
Income from operations       10,438,000         9,341,800         27,799,700         27,400,100  
                                         
INTEREST EXPENSE       (552,300 )       (687,700 )       (1,786,800 )       (1,142,900 )
                                         
INTEREST AND OTHER INCOME/(EXPENSE)       (6,300 )       (12,400 )       (7,300 )       (61,800 )
                                         
Income before income taxes       9,879,400         8,641,700         26,005,600         26,195,400  
                                         
PROVISION FOR INCOME TAXES       (3,785,200 )       (3,302,100 )       (9,954,200 )       (10,050,100 )
                                         
NET INCOME     $ 6,094,200       $ 5,339,600       $ 16,051,400       $ 16,145,300  
                                         
EARNINGS PER SHARE – BASIC     $ 1.48       $ 1.29       $ 3.90       $ 3.53  
                                         
EARNINGS PER SHARE – DILUTED     $ 1.41       $ 1.23       $ 3.72       $ 3.39  
                                         
WEIGHTED AVERAGE SHARES OUTSTANDING – BASIC       4,116,957         4,128,031         4,113,819         4,568,813  
                                         
WEIGHTED AVERAGE SHARES OUTSTANDING – DILUTED       4,328,168         4,338,230         4,320,284         4,758,158  
                                         

SOURCE Winmark Corporation

Contact:

Brett D. Heffes
Winmark Corporation
763-520-8500

###

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