Winmark Corporation Announces Second Quarter Results

Rhea-AI Summary

Winmark Corporation (Nasdaq: WINA) reported net income of $9,027,200 or $2.54 per diluted share for the quarter ended June 25, 2022, an increase from $8,937,300 or $2.33 per diluted share in 2021. For the first half of 2022, net income reached $18,879,700 or $5.19 per diluted share, up from $18,248,400 or $4.74 per diluted share last year. The company operates 1,293 franchises with over 2,800 available territories and has awarded 46 more franchises that are not yet opened.

Positive

• Increased quarterly net income to $9,027,200 (up from $8,937,300 in 2021).
• Quarterly EPS grew to $2.54 (from $2.33 in 2021).
• Net income for six months rose to $18,879,700 (up from $18,248,400 last year).
• Six-month EPS increased to $5.19 (from $4.74 last year).
• Continued franchise growth with 1,293 operational franchises and 2,800+ available territories.

Negative

• None.

MINNEAPOLIS--(BUSINESS WIRE)-- Winmark Corporation (Nasdaq: WINA) announced today net income for the quarter ended June 25, 2022 of $9,027,200 or $2.54 per share diluted compared to net income of $8,937,300 or $2.33 per share diluted in 2021. For the six months ended June 25, 2022, net income was $18,879,700 or $5.19 per share diluted compared to net income of $18,248,400 or $4.74 per share diluted for the same period last year.

“We are pleased with our results for the first half of the year,” commented Brett D. Heffes, Chairman and Chief Executive Officer.

Winmark - the Resale Company®, 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 25, 2022, there were 1,293 franchises in operation and over 2,800 available territories. An additional 46 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 25, 2022				December 25, 2021
ASSETS
Current Assets:
Cash and cash equivalents		$	8,696,600			$	11,407,000
Restricted cash			55,000				30,000
Receivables, net			1,321,800				1,103,400
Net investment in leases - current			1,870,100				2,890,600
Income tax receivable			869,000				667,500
Inventories			603,400				325,200
Prepaid expenses			861,000				1,008,600
Total current assets			14,276,900				17,432,300
Net investment in leases – long-term			111,000				229,300
Property and equipment, net			1,815,300				1,976,900
Operating lease right of use asset			2,859,800				2,982,000
Intangible assets, net			3,525,200				—
Goodwill			607,500				607,500
Other assets			420,500				418,300
Deferred income taxes			3,438,100				3,252,700
		$	27,054,300			$	26,899,000
LIABILITIES AND SHAREHOLDERS’ EQUITY (DEFICIT)
Current Liabilities:
Notes payable, net		$	4,217,900			$	4,232,600
Accounts payable			1,889,300				2,099,000
Accrued liabilities			4,563,100				2,001,000
Deferred revenue			1,631,100				1,645,000
Total current liabilities			12,301,400				9,977,600
Long-Term Liabilities:
Line of Credit/Term Loan			30,000,000				—
Notes payable, net			41,175,700				43,376,400
Deferred revenue			6,849,200				6,863,500
Operating lease liabilities			4,561,500				4,810,100
Other liabilities			945,200				954,800
Total long-term liabilities			83,531,600				56,004,800
Shareholders’ Equity (Deficit):
Common stock, no par, 10,000,000 shares authorized, 3,437,806 and 3,635,806 shares issued and outstanding			—				—
Retained earnings (accumulated deficit)			(68,778,700	)			(39,083,400	)
Total shareholders’ equity (deficit)			(68,778,700	)			(39,083,400	)
		$	27,054,300			$	26,899,000

WINMARK CORPORATION CONDENSED STATEMENTS OF OPERATIONS (Unaudited)
		Quarter Ended								Six Months Ended
		June 25, 2022				June 26, 2021				June 25, 2022				June 26, 2021
Revenue:
Royalties		$	15,981,300			$	14,716,500			$	31,371,400			$	28,765,300
Leasing income			1,212,000				2,848,600				4,083,700				6,085,600
Merchandise sales			1,027,200				683,100				1,941,500				1,275,500
Franchise fees			391,500				358,900				812,100				717,900
Other			458,800				422,500				911,900				844,200
Total revenue			19,070,800				19,029,600				39,120,600				37,688,500
Cost of merchandise sold			970,200				647,800				1,834,700				1,206,600
Leasing expense			299,600				662,400				515,600				1,051,900
Provision for credit losses			(15,700	)			(62,700	)			(24,600	)			(111,400	)
Selling, general and administrative expenses			5,461,600				5,805,200				11,001,600				10,907,500
Income from operations			12,355,100				11,976,900				25,793,300				24,633,900
Interest expense			(712,000	)			(304,300	)			(1,225,100	)			(622,400	)
Interest and other income (expense)			(13,800	)			4,900				(14,700	)			11,700
Income before income taxes			11,629,300				11,677,500				24,553,500				24,023,200
Provision for income taxes			(2,602,100	)			(2,740,200	)			(5,673,800	)			(5,774,800	)
Net income		$	9,027,200			$	8,937,300			$	18,879,700			$	18,248,400
Earnings per share - basic		$	2.61			$	2.42			$	5.35			$	4.91
Earnings per share - diluted		$	2.54			$	2.33			$	5.19			$	4.74
Weighted average shares outstanding - basic			3,463,886				3,693,503				3,530,902				3,715,088
Weighted average shares outstanding - diluted			3,559,231				3,830,844				3,637,772				3,852,534

WINMARK CORPORATION CONDENSED STATEMENTS OF CASH FLOWS (Unaudited)
		Six Months Ended
		June 25, 2022				June 26, 2021
OPERATING ACTIVITIES:
Net income		$	18,879,700			$	18,248,400
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization			219,400				223,200
Provision for credit losses			(24,600	)			(111,400	)
Compensation expense related to stock options			771,400				698,100
Deferred income taxes			(185,400	)			(907,400	)
Deferred initial direct costs			—				(2,100	)
Amortization of deferred initial direct costs			—				16,400
Operating lease right of use asset amortization			122,200				109,900
Tax benefits on exercised stock options			348,000				248,900
Change in operating assets and liabilities:
Receivables			(218,400	)			405,600
Principal collections on lease receivables			1,636,100				5,332,200
Income tax receivable/payable			(549,500	)			(722,900	)
Inventories			(278,200	)			(222,800	)
Prepaid expenses			147,600				308,000
Other assets			(2,200	)			17,800
Accounts payable			(209,700	)			(311,600	)
Accrued and other liabilities			2,213,500				232,100
Rents received in advance and security deposits			(472,700	)			(317,700	)
Deferred revenue			(28,200	)			(120,300	)
Net cash provided by operating activities			22,369,000				23,124,400
INVESTING ACTIVITIES:
Purchase of property and equipment			(43,000	)			(48,600	)
Reacquired franchise rights			(3,540,000	)			—
Purchase of equipment for lease contracts			—				(78,200	)
Net cash used for investing activities			(3,583,000	)			(126,800	)
FINANCING ACTIVITIES:
Proceeds from borrowings on line of credit			33,700,000				—
Payments on line of credit			(3,700,000	)			—
Payments on notes payable			(2,125,000	)			(2,125,000	)
Repurchases of common stock			(47,847,500	)			(18,918,200	)
Proceeds from exercises of stock options			2,553,700				1,210,300
Dividends paid			(4,052,600	)			(2,600,400	)
Net cash used for financing activities			(21,471,400	)			(22,433,300	)
NET INCREASE (DECREASE) IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH			(2,685,400	)			564,300
Cash, cash equivalents and restricted cash, beginning of period			11,437,000				6,684,000
Cash, cash equivalents and restricted cash, end of period		$	8,751,600			$	7,248,300
SUPPLEMENTAL DISCLOSURES:
Cash paid for interest		$	1,108,100			$	603,700
Cash paid for income taxes		$	6,060,800			$	7,156,200
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 25, 2022				June 26, 2021
Cash and cash equivalents		$	8,696,600			$	7,223,300
Restricted cash			55,000				25,000
Total cash, cash equivalents and restricted cash		$	8,751,600			$	7,248,300

 

View source version on businesswire.com: https://www.businesswire.com/news/home/20220713005603/en/

Brett D. Heffes

763/520-8500

Source: Winmark Corporation

FAQ

What were Winmark Corporation's earnings results for Q2 2022?

Winmark Corporation reported a net income of $9,027,200 or $2.54 per diluted share for Q2 2022.

How did Winmark's net income compare year-over-year for Q2 2022?

Net income for Q2 2022 increased from $8,937,300 in 2021 to $9,027,200.

What was Winmark's six-month net income for 2022?

For the six months ended June 25, 2022, Winmark's net income was $18,879,700.

What is the current number of franchises for Winmark Corporation?

Winmark currently operates 1,293 franchises.

How many available territories does Winmark Corporation have?

Winmark has over 2,800 available territories.