Winmark Corporation Announces First Quarter Results

MINNEAPOLIS - (BUSINESS WIRE) - April 18, 2018 - 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.

Contact:

Brett D. Heffes
Winmark Corporation
763-520-8500

SOURCE Winmark Corporation

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