Winmark Corporation Announces Second Quarter Results

By: Winmark Corporation | 1,014 Shares 109 Reads

MINNEAPOLIS - (BUSINESS WIRE) - July 15, 2020 - Winmark Corporation (Nasdaq: WINA) announced today net income for the quarter ended June 27, 2020 of $5,055,200 (or $1.33 per share diluted) compared to net income of $7,301,900 (or $1.79 per share diluted) in the second quarter of 2019. For the six months ended June 27, 2020, net income was $12,372,200 (or $3.21 per share diluted) compared to net income of $14,574,100 (or $3.52 per share diluted) for the same period last year.

Second quarter results were impacted by the COVID-19 pandemic, with royalty revenues 38% lower than the second quarter of 2019. The Company experienced sequential monthly improvement in royalties during the second quarter as franchised stores reopened, with April, May and June royalty revenues of 16%, 76% and 108% of 2019, respectively. Additionally, during the quarter, the Company repaid $40.0 million in borrowings under its revolving credit facility, ending the quarter with no revolver borrowings and $1.3 million of cash.

Brett D. Heffes, Chief Executive Officer, commented, “Our franchisee’s performance improved throughout the quarter, as they have proven extremely resilient during the pandemic. While store operations are not fully back to pre-COVID levels, substantial progress has been made in the past 90 days and we are pleased with the overall performance of the Company. I am impressed daily by the efforts of both our franchisees as well as our Winmark employees.”

Winmark Corporation creates, supports and finances business. At June 27, 2020, there were 1,255 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)


	June 27, 2020		December 28, 2019
ASSETS
Current Assets:
Cash and cash equivalents	$	1,287,900	$	25,130,300
Restricted cash		50,000		50,000
Receivables, net		1,893,800		1,669,500
Net investment in leases - current		11,688,600		12,800,100
Income tax receivable		-		497,900
Inventories		83,800		86,000
Prepaid expenses		966,900		968,100
Total current assets		15,971,000		41,201,900

Net investment in leases – long-term		7,152,500		12,505,500
Property and equipment, net		2,560,100		2,772,600
Operating lease right of use asset		3,353,100		3,595,200
Goodwill		607,500		607,500
Other assets		475,300		492,500
Deferred income taxes		1,506,900		667,000
	$	31,626,400	$	61,842,200

LIABILITIES AND SHAREHOLDERS’ EQUITY (DEFICIT)
Current Liabilities:
Notes payable, net	$	4,236,100	$	3,736,100
Accounts payable		1,831,600		1,015,000
Income tax payable		3,280,800		-
Accrued liabilities		2,455,900		2,783,100
Discounted lease rentals		1,974,700		2,680,700
Deferred revenue		1,694,300		1,717,000
Total current liabilities		15,473,400		11,931,900

Long-Term Liabilities:
Notes payable, net		19,750,700		21,868,800
Discounted lease rentals		1,033,400		836,900
Deferred revenue		7,469,100		7,858,500
Operating lease liabilities		5,522,800		5,846,100
Other liabilities		943,200		1,051,700
Total long-term liabilities		34,719,200		37,462,000

Shareholders’ Equity (Deficit):
Common stock, no par, 10,000,000 shares authorized, 3,723,187 and 3,947,858 shares issued and outstanding		6,411,300		11,929,300
Retained earnings (accumulated deficit)		(24,977,500)		519,000
Total shareholders’ equity (deficit)		(18,566,200)		12,448,300
	$	31,626,400	$	61,842,200

WINMARK CORPORATION CONDENSED STATEMENTS OF OPERATIONS (Unaudited)


	Quarter Ended				Six Months Ended
	June 27, 2020		June 29, 2019		June 27, 2020		June 29, 2019
Revenue:
Royalties	$	7,805,800	$	12,653,200	$	18,978,300	$	24,414,600
Leasing income		3,473,800		3,203,000		9,345,000		8,358,300
Merchandise sales		361,500		721,800		1,115,600		1,332,800
Franchise fees		342,100		413,900		729,500		805,700
Other		406,300		412,300		821,100		824,000
Total revenue		12,389,500		17,404,200		30,989,500		35,735,400
Cost of merchandise sold		346,100		681,200		1,063,800		1,252,700
Leasing expense		516,600		370,900		1,932,800		1,069,600
Provision for credit losses		(111,500)		69,300		503,900		79,400
Selling, general and administrative expenses		4,960,500		6,435,900		10,709,400		13,420,300
Income from operations		6,677,800		9,846,900		16,779,600		19,913,400
Interest expense		(538,700)		(500,300)		(1,063,900)		(942,500)
Interest and other income (expense)		12,600		(6,100)		18,500		(6,400)
Income before income taxes		6,151,700		9,340,500		15,734,200		18,964,500
Provision for income taxes		(1,096,500)		(2,038,600)		(3,362,000)		(4,390,400)
Net income	$	5,055,200	$	7,301,900	$	12,372,200	$	14,574,100
Earnings per share - basic	$	1.37	$	1.94	$	3.34	$	3.80
Earnings per share - diluted	$	1.33	$	1.79	$	3.21	$	3.52
Weighted average shares outstanding - basic		3,688,248		3,771,439		3,699,923		3,839,563
Weighted average shares outstanding - diluted		3,803,807		4,072,408		3,857,779		4,135,827