Winmark Corporation Announces Third Quarter Results

MINNEAPOLIS - October 17, 2017 - (BUSINESS WIRE) - Winmark Corporation (Nasdaq: WINA) announced today net income for the quarter ended September 30, 2017 of $5,719,000 (or $1.33 per share diluted) compared to net income of $6,094,200 (or $1.41 per share diluted) in the third quarter of 2016. For the nine months ended September 30, 2017, net income was $16,908,600 (or $3.83 per share diluted) compared to net income of $16,051,400 (or $3.72 per share diluted) for the same period last year.

The Company experienced royalty growth driven primarily by increased sales from franchisees, while profits in the leasing business were lower when compared to last year due to a decrease in customer activity within the lease portfolio. Brett D. Heffes, Chief Executive Officer, commented, “We are pleased with the performance of the franchising business during the quarter, and the response to Winmark Franchise Partners, which we have continued to invest in during the quarter, has been extremely positive.”

Winmark Corporation creates, supports and finances business. At September 30, 2017, there were 1,210 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 September 30, 2017, the Company had a lease portfolio of $40.6 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)

             
      September 30, 2017     December 31, 2016
ASSETS
Current Assets:            
Cash and cash equivalents     $ 1,060,700       $ 1,252,900  
Marketable securities               199,900  
Receivables, net       1,708,100         1,479,200  
Restricted cash       40,000         40,000  
Net investment in leases - current       16,311,000         17,004,800  
Income tax receivable       1,721,500         1,678,800  
Inventories       67,000         87,500  
Prepaid expenses       865,400         1,050,700  
Total current assets       21,773,700         22,793,800  
             
Net investment in leases – long-term       24,249,500         24,410,700  
Property and equipment, net       547,700         769,600  
Goodwill       607,500         607,500  
      $ 47,178,400       $ 48,581,600  
             
LIABILITIES AND SHAREHOLDERS’ EQUITY (DEFICIT)
Current Liabilities:            
Notes payable, net     $ 3,236,100       $ 1,990,000  
Accounts payable       1,474,600         1,692,000  
Accrued liabilities       2,906,100         1,811,100  
Deferred revenue       1,649,300         1,864,700  
Total current liabilities       9,266,100         7,357,800  
             
Long-Term Liabilities:            
Line of credit       41,900,000         23,400,000  
Notes payable, net       29,650,100         19,926,500  
Deferred revenue       1,458,200         1,423,800  
Other liabilities       808,400         993,600  
Deferred income taxes       3,485,300         3,331,900  
Total long-term liabilities       77,302,000         49,075,800  
             
Shareholders’ Equity (Deficit):            

Common stock, no par, 10,000,000 shares authorized, 3,821,528 and 4,165,769 shares issued and outstanding

              2,976,100  
Accumulated other comprehensive income (loss)               (9,900 )
Retained earnings (accumulated deficit)       (39,389,700 )       (10,818,200 )
             
Total shareholders’ equity (deficit)       (39,389,700 )       (7,852,000 )
      $ 47,178,400       $ 48,581,600  
                     
 
 
 
WINMARK CORPORATION
CONDENSED STATEMENTS OF OPERATIONS

(Unaudited)

                         
      Quarter Ended     Nine Months Ended
      September 30, 2017     September 24, 2016     September 30, 2017     September 24, 2016
REVENUE:                        
Royalties     $ 12,316,700       $ 11,311,000       $ 33,865,100       $ 32,140,800  
Leasing income       3,915,800         4,174,000         13,722,000         12,839,000  
Merchandise sales       773,100         520,000         2,058,500         1,882,400  
Franchise fees       317,800         501,800         1,262,500         1,367,800  
Other       244,500         227,500         1,033,100         984,400  
Total revenue       17,567,900         16,734,300         51,941,200         49,214,400  
COST OF MERCHANDISE SOLD       728,300         499,100         1,942,400         1,784,800  
LEASING EXPENSE       792,000         646,200         2,724,000         2,010,400  
PROVISION FOR CREDIT LOSSES       (13,300 )       (29,700 )       (26,200 )       (52,000 )
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES       6,208,900         5,180,700         19,179,400         17,671,500  
Income from operations       9,852,000         10,438,000         28,121,600         27,799,700  
INTEREST EXPENSE       (613,900 )       (552,300 )       (1,559,300 )       (1,786,800 )
INTEREST AND OTHER INCOME (EXPENSE)       28,000         (6,300 )       29,900         (7,300 )
Income before income taxes       9,266,100         9,879,400         26,592,200         26,005,600  
PROVISION FOR INCOME TAXES       (3,547,100 )       (3,785,200 )       (9,683,600 )       (9,954,200 )
NET INCOME     $ 5,719,000       $ 6,094,200       $ 16,908,600       $ 16,051,400  
EARNINGS PER SHARE – BASIC     $ 1.42       $ 1.48       $ 4.09       $ 3.90  
EARNINGS PER SHARE – DILUTED     $ 1.33       $ 1.41       $ 3.83       $ 3.72  
WEIGHTED AVERAGE SHARES OUTSTANDING – BASIC       4,024,692         4,116,957         4,131,269         4,113,819  
WEIGHTED AVERAGE SHARES OUTSTANDING – DILUTED       4,314,412         4,328,168         4,416,185         4,320,284  
                                         

Contact:

Brett D. Heffes
Winmark Corporation
763-520-8500

SOURCE Winmark Corporation

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