Winmark Corporation Announces Year End Results

MINNEAPOLIS - (BUSINESS WIRE) - February 26, 2018 - 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  
                         

Contact:

Brett D. Heffes
Winmark Corporation
763-520-8500

SOURCE Winmark Corporation

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