Winmark Corporation Announces Second Quarter Results

MINNEAPOLIS - (BUSINESS WIRE) - July 18, 2018 - Winmark Corporation (Nasdaq: WINA) announced today net income for the quarter ended June 30, 2018 of $7,143,000 (or $1.73 per share diluted) compared to net income of $5,530,700 (or $1.23 per share diluted) in the second quarter of 2017. For the six months ended June 30, 2018, net income was $14,103,400 (or $3.42 per share diluted) compared to net income of $11,081,500 (or $2.48 per share diluted) for the same period last year.

Brett D. Heffes, Chief Executive Officer, commented, “The strong start to 2018 has been highlighted by the positive performance of our franchisees. We continue to be pleased with the results of the overall business.”

Winmark Corporation creates, supports and finances business. At June 30, 2018, there were 1,224 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 June 30, 2018, the Company had a lease portfolio of $43.4 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 30, 2018   December 30, 2017 (1)
ASSETS
Current Assets:            
Cash and cash equivalents   $ 1,232,900     $ 1,073,200  
Restricted cash     105,000       90,000  
Receivables, net     1,502,000       1,796,000  
Net investment in leases - current     17,046,100       15,332,300  
Income tax receivable           2,161,800  
Inventories     150,100       97,100  
Prepaid expenses     765,800       901,600  
Total current assets     20,801,900       21,452,000  
             
Net investment in leases – long-term     26,380,400       25,945,300  
Property and equipment, net     630,400       486,800  
Goodwill     607,500       607,500  
Other assets     396,800       350,400  
    $ 48,817,000     $ 48,842,000  
             
LIABILITIES AND SHAREHOLDERS’ EQUITY (DEFICIT)
Current Liabilities:            
Notes payable, net   $ 3,236,100     $ 3,236,100  
Accounts payable     1,502,900       2,073,000  
Income tax payable     237,200        
Accrued liabilities     3,214,400       1,837,300  
Discounted lease rentals     1,637,100       570,800  
Deferred revenue     3,047,200       3,012,700  
Total current liabilities     12,874,900       10,729,900  
             
Long-Term Liabilities:            
Line of credit     18,400,000       35,400,000  
Notes payable, net     27,223,000       28,841,000  
Discounted lease rentals     2,260,900       1,121,600  
Deferred revenue     7,294,500       7,297,500  
Other liabilities     1,161,300       845,000  
Deferred income taxes     360,200       320,500  
Total long-term liabilities     56,699,900       73,825,600  
             
Shareholders’ Equity (Deficit):            

Common stock, no par, 10,000,000 shares authorized, 3,868,526 and 3,843,078 shares issued and outstanding

    3,329,600       1,476,200  
Retained earnings (accumulated deficit)     (24,087,400 )     (37,189,700 )
             
Total shareholders’ equity (deficit)     (20,757,800 )     (35,713,500 )
    $ 48,817,000     $ 48,842,000  
             

(1) Adjusted for the adoption of ASU 2014-09 under the retrospective method.

WINMARK CORPORATION

CONDENSED STATEMENTS OF OPERATIONS

(Unaudited)

                         
    Quarter Ended   Six Months Ended
    June 30, 2018  

July 1, 2017 (1)

  June 30, 2018   July 1, 2017 (1)
REVENUE:                        
Royalties   $ 11,821,000     $ 11,094,400     $ 22,870,000     $ 21,548,400  
Leasing income     4,857,100       3,946,600       10,385,900       9,806,200  
Merchandise sales     704,900       537,100       1,481,800       1,285,400  
Franchise fees     378,100       468,800       779,000       837,400  
Other     398,700       382,800       804,100       763,200  
Total revenue     18,159,800       16,429,700       36,320,800       34,240,600  
COST OF MERCHANDISE SOLD     681,000       499,100       1,423,500       1,214,100  
LEASING EXPENSE     495,800       660,600       1,050,700       1,932,000  
PROVISION FOR CREDIT LOSSES     109,000       (11,500 )     204,000       (12,900 )
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES     6,799,300       6,468,400       13,493,700       12,980,900  
Income from operations     10,074,700       8,813,100       20,148,900       18,126,500  
INTEREST EXPENSE     (657,900 )     (446,300 )     (1,401,700 )     (945,400 )
INTEREST AND OTHER INCOME (EXPENSE)     (11,300 )     100       (12,300 )     1,900  
Income before income taxes     9,405,500       8,366,900       18,734,900       17,183,000  
PROVISION FOR INCOME TAXES     (2,262,500 )     (2,836,200 )     (4,631,500 )     (6,101,500 )
NET INCOME   $ 7,143,000     $ 5,530,700     $ 14,103,400     $ 11,081,500  
EARNINGS PER SHARE – BASIC   $ 1.85     $ 1.32     $ 3.66     $ 2.65  
EARNINGS PER SHARE – DILUTED   $ 1.73     $ 1.23     $ 3.42     $ 2.48  
WEIGHTED AVERAGE SHARES OUTSTANDING – BASIC     3,858,446       4,201,982       3,852,880       4,184,558  
WEIGHTED AVERAGE SHARES OUTSTANDING – DILUTED     4,133,535       4,483,647       4,129,055       4,467,072  
                         

(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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