Winmark Corporation Announces First Quarter Results
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Winmark Corporation Announces First Quarter Results

MINNEAPOLIS - (BUSINESS WIRE) - April 14, 2020 - Winmark Corporation (Nasdaq: WINA) announced today net income for the quarter ended March 28, 2020 of $7,317,000 or $1.87 per share diluted compared to net income of $7,272,200 or $1.73 per share diluted in 2019.

First quarter earnings were positively impacted by an increase in customer activity in the Company’s lease portfolio. Despite a lower portfolio size, the Company’s leasing income net of leasing expense was comparable to the first quarter of 2019. Earnings also benefited from a lower level of selling, general and administrative expenses in the first quarter of approximately $1.2 million when compared to the first quarter of 2019. These items were partially offset by additional provision for credit losses in the Company’s lease portfolio to reflect the estimated impact of the COVID-19 pandemic, as well as lower royalty revenues when compared to the first quarter of 2019.

“Following a strong start to the year, during the last three weeks of the quarter our franchising performance was negatively impacted by the COVID-19 pandemic. This led to a substantial number of temporary store closings and greatly reduced customer traffic for our franchised locations that were still operational during the quarter,” stated Brett D. Heffes, Chairman and Chief Executive Officer. “I want to express my sincere gratitude and thank you to our employees who are managing through this crisis in an exceptional manner. I applaud your work ethic, passion for Winmark and your commitment to continue to support both our franchisees and leasing customers during this unprecedented period of time.”

“While our franchisees’ operations have been negatively impacted and our visibility is limited, we are still experiencing modest levels of royalties due to the ingenuity, resiliency and perseverance of our franchise partners. We are inspired daily by our franchisees and the efforts they are undertaking to continue to serve the communities in which we operate.”

Winmark Corporation creates, supports and finances business. At March 28, 2020, there were 1,256 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 42 retail franchises have been awarded but are not open.

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 28, 2020

 

December 28, 2019

ASSETS

Current Assets:

 

 

 

   

 

 

Cash and cash equivalents

 

$

28,347,000

 

 

$

25,130,300

Restricted cash

 

 

50,000

 

 

 

50,000

Receivables, net

 

 

980,500

 

 

 

1,669,500

Net investment in leases - current

 

 

12,422,200

 

 

 

12,800,100

Income tax receivable

 

 

   

 

497,900

Inventories

 

 

105,200

 

 

 

86,000

Prepaid expenses

 

 

1,221,900

 

 

 

968,100

Total current assets

 

 

43,126,800

 

 

 

41,201,900

 

 

 

 

   

 

 

Net investment in leases – long-term

 

 

8,921,700

 

 

 

12,505,500

Property and equipment, net

 

 

2,680,700

 

 

 

2,772,600

Operating lease right of use asset

 

 

3,403,100

 

 

 

3,595,200

Goodwill

 

 

607,500

 

 

 

607,500

Other assets

 

 

496,100

 

 

 

492,500

Deferred income taxes

 

 

655,900

 

 

 

667,000

 

 

$

59,891,800

 

 

$

61,842,200

 

 

 

 

   

 

 

LIABILITIES AND SHAREHOLDERS’ EQUITY (DEFICIT)

Current Liabilities:

 

 

 

   

 

 

Notes payable, net

 

$

3,986,100

 

 

$

3,736,100

Accounts payable

 

 

1,071,200

 

 

 

1,015,000

Income tax payable

 

 

1,635,600

 

 

 

Accrued liabilities

 

 

2,342,000

 

 

 

2,783,100

Discounted lease rentals

 

 

2,436,300

 

 

 

2,680,700

Deferred revenue

 

 

1,714,400

 

 

 

1,717,000

Total current liabilities

 

 

13,185,600

 

 

 

11,931,900

Long-Term Liabilities:

 

 

 

   

 

 

Line of Credit

 

 

40,000,000

 

 

 

Notes payable, net

 

 

20,809,700

 

 

 

21,868,800

Discounted lease rentals

 

 

1,341,400

 

 

 

836,900

Deferred revenue

 

 

7,765,600

 

 

 

7,858,500

Operating lease liabilities

 

 

5,625,100

 

 

 

5,846,100

Other liabilities

 

 

1,012,600

 

 

 

1,051,700

Total long-term liabilities

 

 

76,554,400

 

 

 

37,462,000

Shareholders’ Equity (Deficit):

 

 

 

   

 

 

Common stock, no par, 10,000,000 shares authorized, 3,650,753 and 3,947,858 shares issued and outstanding

 

 

   

 

11,929,300

Retained earnings (accumulated deficit)

 

 

(29,848,200

)

 

 

519,000

Total shareholders’ equity (deficit)

 

 

(29,848,200

)

 

 

12,448,300

 

 

$

59,891,800

 

 

$

61,842,200

 

WINMARK CORPORATION

CONDENSED STATEMENTS OF OPERATIONS

(Unaudited)

 

 

 

 

 

 

 

 

 

Three Months Ended

 

 

March 28, 2020

 

March 30, 2019

Revenue:

 

 

 

 

 

 

Royalties

 

$

11,172,500

 

 

$

11,761,400

 

Leasing income

 

 

5,871,200

 

 

 

5,155,300

 

Merchandise sales

 

 

754,100

 

 

 

611,000

 

Franchise fees

 

 

387,400

 

 

 

391,800

 

Other

 

 

414,800

 

 

 

411,700

 

Total revenue

 

 

18,600,000

 

 

 

18,331,200

 

Cost of merchandise sold

 

 

717,700

 

 

 

571,500

 

Leasing expense

 

 

1,416,200

 

 

 

698,700

 

Provision for credit losses

 

 

615,400

 

 

 

10,100

 

Selling, general and administrative expenses

 

 

5,748,900

 

 

 

6,984,400

 

Income from operations

 

 

10,101,800

 

 

 

10,066,500

 

Interest expense

 

 

(525,200

)

 

 

(442,200

)

Interest and other income (expense)

 

 

5,900

 

 

 

(300

)

Income before income taxes

 

 

9,582,500

 

 

 

9,624,000

 

Provision for income taxes

 

 

(2,265,500

)

 

 

(2,351,800

)

Net income

 

$

7,317,000

 

 

$

7,272,200

 

Earnings per share - basic

 

$

1.97

 

 

$

1.86

 

Earnings per share - diluted

 

$

1.87

 

 

$

1.73

 

Weighted average shares outstanding - basic

 

 

3,711,597

 

 

 

3,906,895

 

Weighted average shares outstanding - diluted

 

 

3,911,751

 

 

 

4,198,454

 

Contact:

Brett D. Heffes
763-520-8500

SOURCE Winmark Corporation

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