Winmark Corporation Announces Third Quarter Results

MINNEAPOLIS--()--Winmark Corporation (Nasdaq: WINA) announced today net income for the quarter ended September 24, 2016 of $6,094,200 (or $1.41 per share diluted) compared to net income of $5,339,600 (or $1.23 per share diluted) in the third quarter of 2015. For the nine months ended September 24, 2016, net income was $16,051,400 (or $3.72 per share diluted) compared to net income of $16,145,300 (or $3.39 per share diluted) for the same period last year.

Earnings growth during the third quarter was driven by an increase in customer activity within the Company’s lease portfolio and reduced selling, general and administrative expenses. Brett D. Heffes, Chief Executive Officer, commented, “I am pleased that we were able to grow our earnings per share by 15% over last year. Our performance during the quarter demonstrated the benefits of our diverse business model.”

Winmark Corporation creates, supports and finances business. At September 24, 2016, there were 1,184 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 67 retail franchises have been awarded but are not open. In addition, at September 24, 2016, the Company had a lease portfolio of $37.3 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 including statements with respect to our ability to finance the growth of our leasing and franchising businesses for the foreseeable future. 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)

           
September 24, 2016     December 26, 2015
ASSETS
Current Assets:    
Cash and cash equivalents $ 1,120,900 $ 1,006,700
Marketable securities 204,100 227,800
Receivables, net 1,555,300 1,416,900
Restricted cash 40,000 25,000
Net investment in leases - current 16,264,100 17,741,500
Income tax receivable 769,200 3,290,400
Inventories 95,600 45,200
Prepaid expenses   921,000     677,800  
Total current assets 20,970,200 24,431,300
 
Net investment in leases – long-term 21,070,300 21,246,000
Property and equipment, net 847,700 1,121,500
Goodwill   607,500     607,500  
$ 43,495,700   $ 47,406,300  
 
LIABILITIES AND SHAREHOLDERS’ EQUITY (DEFICIT)
Current Liabilities:
Notes payable, net $ 1,990,000 $ 1,990,000
Accounts payable 1,118,900 1,643,300
Accrued liabilities 2,644,500 1,875,700
Discounted lease rentals - 38,700
Deferred revenue   1,671,700     1,963,200  
Total current liabilities 7,425,100 7,510,900
 
Long-Term Liabilities:
Line of credit 25,200,000 42,400,000
Notes payable, net 20,424,000 21,916,500
Deferred revenue 1,451,200 1,421,600
Other liabilities 1,036,100 1,216,300
Deferred income taxes   3,676,900     3,614,800  
Total long-term liabilities 51,788,200 70,569,200
 
Shareholders’ Equity (Deficit):

Common stock, no par, 10,000,000 shares authorized, 4,122,037 and 4,124,767 shares issued and outstanding

859,200

406,500

Accumulated other comprehensive loss (7,300 ) (32,900 )
Retained earnings (accumulated deficit)   (16,569,500 )   (31,047,400 )
 
Total shareholders’ equity (deficit)   (15,717,600 )   (30,673,800 )
$ 43,495,700   $ 47,406,300  
 
WINMARK CORPORATION
CONDENSED STATEMENTS OF OPERATIONS

(Unaudited)

           
Quarter Ended     Nine Months Ended
September 24, 2016     September 26, 2015     September 24, 2016     September 26, 2015
REVENUE:        
Royalties $ 11,311,000 $ 11,286,100 $ 32,140,800 $ 31,226,700
Leasing income 4,174,000 3,247,000 12,839,000 16,919,900
Merchandise sales 520,000 762,300 1,882,400 2,182,300
Franchise fees 501,800 483,200 1,367,800 1,253,500
Other   227,500     220,900     984,400     917,900  
Total revenue 16,734,300 15,999,500 49,214,400 52,500,300
 
COST OF MERCHANDISE SOLD 499,100 711,600 1,784,800 2,055,600
 
LEASING EXPENSE 646,200 173,400 2,010,400 4,941,300
 
PROVISION FOR CREDIT LOSSES (29,700 ) 38,800 (52,000 ) (123,400 )
 
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES   5,180,700     5,733,900     17,671,500     18,226,700  
 
Income from operations 10,438,000 9,341,800 27,799,700 27,400,100
 
INTEREST EXPENSE (552,300 ) (687,700 ) (1,786,800 ) (1,142,900 )
 
INTEREST AND OTHER INCOME/(EXPENSE)   (6,300 )   (12,400 )   (7,300 )   (61,800 )
 
Income before income taxes 9,879,400 8,641,700 26,005,600 26,195,400
 
PROVISION FOR INCOME TAXES   (3,785,200 )   (3,302,100 )   (9,954,200 )   (10,050,100 )
 
NET INCOME $ 6,094,200   $ 5,339,600   $ 16,051,400   $ 16,145,300  
 
EARNINGS PER SHARE – BASIC $ 1.48   $ 1.29   $ 3.90   $ 3.53  
 
EARNINGS PER SHARE – DILUTED $ 1.41   $ 1.23   $ 3.72   $ 3.39  
 
WEIGHTED AVERAGE SHARES OUTSTANDING – BASIC   4,116,957     4,128,031     4,113,819     4,568,813  
 
WEIGHTED AVERAGE SHARES OUTSTANDING – DILUTED   4,328,168     4,338,230     4,320,284     4,758,158  
 

Contacts

Winmark Corporation
Brett D. Heffes, 763-520-8500

Contacts

Winmark Corporation
Brett D. Heffes, 763-520-8500