Winmark Corporation Announces Third Quarter Results

Rhea-AI Summary

Winmark Corporation (Nasdaq: WINA) reported a net income of $9,358,800 ($2.43 per diluted share) for the third quarter of 2020, a rise from $9,113,800 ($2.24 per diluted share) in Q3 2019. However, the nine-month net income decreased to $21,731,000 ($5.63 per diluted share) from $23,687,900 ($5.76 per diluted share) in the previous year. As of September 26, 2020, Winmark operates 1,262 franchises under various brand names, with 35 additional franchises awarded but not yet opened.

Positive

• Quarterly net income increased by 2.7% year-over-year ($9.4M vs. $9.1M).
• Diluted earnings per share rose to $2.43 in Q3 2020 from $2.24 in Q3 2019.
• Strong franchise operation with 1,262 franchises currently open.

Negative

• Nine-month net income declined by 8.2% year-over-year ($21.7M vs. $23.7M).
• Diluted earnings per share decreased from $5.76 to $5.63 for the nine-month period.

MINNEAPOLIS--(BUSINESS WIRE)--Winmark Corporation (Nasdaq: WINA) announced today net income for the quarter ended September 26, 2020 of $9,358,800 (or $2.43 per share diluted) compared to net income of $9,113,800 (or $2.24 per share diluted) in the third quarter of 2019. For the nine months ended September 26, 2020, net income was $21,731,000 (or $5.63 per share diluted) compared to net income of $23,687,900 (or $5.76 per share diluted) for the same period last year.

Winmark Corporation creates, supports and finances business. At September 26, 2020, there were 1,262 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 35 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)
		September 26, 2020				December 28, 2019
ASSETS
Current Assets:
Cash and cash equivalents		$	8,267,400			$	25,130,300
Restricted cash			50,000				50,000
Receivables, net			1,947,600				1,669,500
Net investment in leases - current			10,514,200				12,800,100
Income tax receivable			—				497,900
Inventories			85,100				86,000
Prepaid expenses			1,158,800				968,100
Total current assets			22,023,100				41,201,900
Net investment in leases – long-term			5,090,800				12,505,500
Property and equipment, net			2,439,100				2,772,600
Operating lease right of use asset			3,301,800				3,595,200
Goodwill			607,500				607,500
Other assets			458,300				492,500
Deferred income taxes			1,918,000				667,000
		$	35,838,600			$	61,842,200
LIABILITIES AND SHAREHOLDERS’ EQUITY (DEFICIT)
Current Liabilities:
Notes payable, net		$	4,236,100			$	3,736,100
Accounts payable			1,272,700				1,015,000
Income tax payable			472,500				—
Accrued liabilities			2,478,000				2,783,100
Discounted lease rentals			1,522,500				2,680,700
Deferred revenue			1,675,200				1,717,000
Total current liabilities			11,657,000				11,931,900
Long-Term Liabilities:
Notes payable, net		$	18,691,700			$	21,868,800
Discounted lease rentals			763,000				836,900
Deferred revenue			7,270,000				7,858,500
Operating lease liabilities			5,417,500				5,846,100
Other liabilities			873,100				1,051,700
Total long-term liabilities			33,015,300				37,462,000
Shareholders’ Equity (Deficit):
Common stock, no par, 10,000,000 shares authorized, 3,735,437 and 3,947,858 shares issued and outstanding			7,717,800				11,929,300
Retained earnings (accumulated deficit)			(16,551,500	)			519,000
Total shareholders’ equity (deficit)			(8,833,700	)			12,448,300
		$	35,838,600			$	61,842,200

WINMARK CORPORATION
CONDENSED STATEMENTS OF OPERATIONS
(Unaudited)
		Quarter Ended								Nine Months Ended
		September 26, 2020				September 28, 2019				September 26, 2020				September 28, 2019
Revenue:
Royalties		$	14,210,000			$	13,808,800			$	33,188,300			$	38,223,400
Leasing income			2,695,800				4,375,500				12,040,800				12,733,800
Merchandise sales			631,200				704,500				1,746,800				2,037,300
Franchise fees			335,400				377,400				1,064,900				1,183,100
Other			404,600				414,700				1,225,700				1,238,700
Total revenue			18,277,000				19,680,900				49,266,500				55,416,300
Cost of merchandise sold			598,200				671,700				1,662,000				1,924,400
Leasing expense			510,900				572,400				2,443,700				1,642,000
Provision for credit losses			(339,600	)			(55,500	)			164,300				23,900
Selling, general and administrative expenses			5,009,700				6,217,600				15,719,100				19,637,900
Income from operations			12,497,800				12,274,700				29,277,400				32,188,100
Interest expense			(345,700	)			(406,200	)			(1,409,600	)			(1,348,700	)
Interest and other income (expense)			9,200				500				27,700				(5,900	)
Income before income taxes			12,161,300				11,869,000				27,895,500				30,833,500
Provision for income taxes			(2,802,500	)			(2,755,200	)			(6,164,500	)			(7,145,600	)
Net income		$	9,358,800			$	9,113,800			$	21,731,000			$	23,687,900
Earnings per share - basic		$	2.51			$	2.39			$	5.86			$	6.19
Earnings per share - diluted		$	2.43			$	2.24			$	5.63			$	5.76
Weighted average shares outstanding - basic			3,730,490				3,808,863				3,710,112				3,829,329
Weighted average shares outstanding - diluted			3,857,702				4,065,301				3,857,754				4,112,318