Winmark Corporation Announces Second Quarter Results

Rhea-AI Summary

Winmark Corporation (Nasdaq: WINA) reported a net income of $8,937,300 or $2.33 per diluted share for the quarter ending June 26, 2021, up from $5,055,200 or $1.33 per share in 2020. For the first half of 2021, net income rose to $18,248,400 or $4.74 per share, compared to $12,372,200 or $3.21 per share last year. The company operates 1,266 franchises and has over 2,000 available territories. Winmark's business model focuses on sustainability and supporting small business formation through franchises like Plato’s Closet and Once Upon A Child.

Positive

• Net income increased by 76% year-over-year for the quarter.
• Earnings per share rose from $1.33 to $2.33, a 75% improvement.
• Net income for the first half of 2021 saw a 47% increase compared to 2020.
• Currently, 1,266 franchises are operational, indicating business growth.

Negative

• None.

Winmark Corporation (Nasdaq: WINA) announced today net income for the quarter ended June 26, 2021 of $8,937,300 or $2.33 per share diluted compared to net income of $5,055,200 or $1.33 per share diluted in 2020. For the six months ended June 26, 2021, net income was $18,248,400 or $4.74 per share diluted compared to net income of $12,372,200 or $3.21 per share diluted for the same period last year.

“Our business model is thriving in the current retail environment,” commented Brett D. Heffes, Chairman and Chief Executive Officer.

Winmark, the Resale Company^TM, is a nationally recognized franchising business focused on sustainability and small business formation. We champion and guide entrepreneurs interested in operating one of our award winning resale franchises: Plato’s Closet®, Once Upon A Child®, Play It Again Sports®, Style Encore® and Music Go Round®. At June 26, 2021, there were 1,266 franchises in operation and over 2,000 available territories. An additional 36 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 26, 2021				December 26, 2020
ASSETS
Current Assets:
Cash and cash equivalents		$	7,223,300			$	6,659,000
Restricted cash			25,000				25,000
Receivables, net			1,176,300				1,581,900
Net investment in leases - current			6,005,300				8,687,500
Income tax receivable			695,200				221,200
Inventories			329,400				106,600
Prepaid expenses			687,200				995,200
Total current assets			16,141,700				18,276,400
Net investment in leases – long-term			1,779,400				4,573,600
Property and equipment, net			2,158,200				2,332,800
Operating lease right of use asset			3,116,400				3,226,300
Goodwill			607,500				607,500
Other assets			418,100				435,900
Deferred income taxes			2,798,100				1,890,700
		$	27,019,400			$	31,343,200
LIABILITIES AND SHAREHOLDERS’ EQUITY (DEFICIT)
Current Liabilities:
Notes payable, net		$	4,236,100			$	4,236,100
Accounts payable			1,458,000				1,769,600
Accrued liabilities			3,102,600				2,624,000
Discounted lease rentals			816,200				1,096,600
Deferred revenue			1,650,200				1,657,400
Total current liabilities			11,263,100				11,383,700
Long-Term Liabilities:
Notes payable, net			15,514,600				17,632,700
Discounted lease rentals			217,200				574,000
Deferred revenue			6,937,800				7,050,900
Operating lease liabilities			5,063,500				5,307,400
Other liabilities			763,700				773,200
Total long-term liabilities			28,496,800				31,338,200
Shareholders’ Equity (Deficit):
Common stock, no par, 10,000,000 shares authorized, 3,668,019 and 3,756,028 shares issued and outstanding			—				9,281,800
Retained earnings (accumulated deficit)			(12,740,500	)			(20,660,500	)
Total shareholders’ equity (deficit)			(12,740,500	)			(11,378,700	)
		$	27,019,400			$	31,343,200

WINMARK CORPORATION
CONDENSED STATEMENTS OF OPERATIONS
(Unaudited)
		Quarter Ended								Six Months Ended
		June 26, 2021				June 27, 2020				June 26, 2021				June 27, 2020
Revenue:
Royalties		$	14,716,500			$	7,805,800			$	28,765,300			$	18,978,300
Leasing income			2,848,600				3,473,800				6,085,600				9,345,000
Merchandise sales			683,100				361,500				1,275,500				1,115,600
Franchise fees			358,900				342,100				717,900				729,500
Other			422,500				406,300				844,200				821,100
Total revenue			19,029,600				12,389,500				37,688,500				30,989,500
Cost of merchandise sold			647,800				346,100				1,206,600				1,063,800
Leasing expense			662,400				516,600				1,051,900				1,932,800
Provision for credit losses			(62,700	)			(111,500	)			(111,400	)			503,900
Selling, general and administrative expenses			5,805,200				4,960,500				10,907,500				10,709,400
Income from operations			11,976,900				6,677,800				24,633,900				16,779,600
Interest expense			(304,300	)			(538,700	)			(622,400	)			(1,063,900	)
Interest and other income			4,900				12,600				11,700				18,500
Income before income taxes			11,677,500				6,151,700				24,023,200				15,734,200
Provision for income taxes			(2,740,200	)			(1,096,500	)			(5,774,800	)			(3,362,000	)
Net income		$	8,937,300			$	5,055,200			$	18,248,400			$	12,372,200
Earnings per share - basic		$	2.42			$	1.37			$	4.91			$	3.34
Earnings per share - diluted		$	2.33			$	1.33			$	4.74			$	3.21
Weighted average shares outstanding - basic			3,693,503				3,688,248				3,715,088				3,699,923
Weighted average shares outstanding - diluted			3,830,844				3,803,807				3,852,534				3,857,779

WINMARK CORPORATION
CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
		Six Months Ended
		June 26, 2021				June 27, 2020
OPERATING ACTIVITIES:
Net income		$	18,248,400			$	12,372,200
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization			223,200				246,000
Provision for credit losses			(111,400	)			503,900
Compensation expense related to stock options			698,100				538,000
Deferred income taxes			(907,400	)			(839,900	)
Loss from disposal of property and equipment			—				200
Deferred initial direct costs			(2,100	)			(14,500	)
Amortization of deferred initial direct costs			16,400				66,400
Operating lease right of use asset amortization			109,900				242,100
Tax benefits on exercised stock options			248,900				477,900
Change in operating assets and liabilities:
Receivables			405,600				(224,300	)
Principal collections on lease receivables			5,332,200				7,995,000
Income tax receivable/payable			(722,900	)			3,300,800
Inventories			(222,800	)			2,200
Prepaid expenses			308,000				1,200
Other assets			17,800				17,200
Accounts payable			(311,600	)			816,600
Accrued and other liabilities			232,100				(701,600	)
Rents received in advance and security deposits			(317,700	)			(1,145,100	)
Deferred revenue			(120,300	)			(412,100	)
Net cash provided by operating activities			23,124,400				23,242,200
INVESTING ACTIVITIES:
Purchase of property and equipment			(48,600	)			(33,700	)
Purchase of equipment for lease contracts			(78,200	)			(2,658,200	)
Net cash used for investing activities			(126,800	)			(2,691,900	)
FINANCING ACTIVITIES:
Proceeds from borrowings on line of credit			—				45,700,000
Payments on line of credit			—				(45,700,000	)
Payments on notes payable			(2,125,000	)			(1,625,000	)
Repurchases of common stock			(18,918,200	)			(48,987,500	)
Proceeds from exercises of stock options			1,210,300				6,159,500
Dividends paid			(2,600,400	)			(1,096,700	)
Proceeds from discounted lease rentals			—				1,157,000
Net cash used for financing activities			(22,433,300	)			(44,392,700	)
NET INCREASE (DECREASE) IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH			564,300				(23,842,400	)
Cash, cash equivalents and restricted cash, beginning of period			6,684,000				25,180,300
Cash, cash equivalents and restricted cash, end of period		$	7,248,300			$	1,337,900
SUPPLEMENTAL DISCLOSURES:
Cash paid for interest		$	603,700			$	1,067,000
Cash paid for income taxes		$	7,156,200			$	423,300
The following table provides a reconciliation of cash, cash equivalents and restricted cash reported within the Condensed Balance Sheets to the total of the same amounts shown above:
		Six Months Ended
		June 26, 2021				June 27, 2020
Cash and cash equivalents		$	7,223,300			$	1,287,900
Restricted cash			25,000				50,000
Total cash, cash equivalents and restricted cash		$	7,248,300			$	1,337,900

 

View source version on businesswire.com: https://www.businesswire.com/news/home/20210714005721/en/

FAQ

What were Winmark Corporation's Q2 2021 earnings results?

Winmark Corporation reported a net income of $8,937,300 or $2.33 per diluted share for Q2 2021.

How did Winmark's earnings for the first half of 2021 compare to 2020?

For the first half of 2021, Winmark reported net income of $18,248,400 or $4.74 per share, an increase from $12,372,200 or $3.21 per share in 2020.

How many franchises does Winmark have as of June 26, 2021?

As of June 26, 2021, Winmark has 1,266 franchises in operation.

What is the business model of Winmark Corporation?

Winmark's business model focuses on sustainability and supporting small business formation through franchising.

How many territories are available for Winmark franchises?

Winmark has over 2,000 available territories for new franchises.