Winmark Corporation Announces Year End Results

Rhea-AI Summary

Winmark Corporation (Nasdaq: WINA) reported strong financial performance for the year ended December 25, 2021, with a net income of $39.9 million, or $10.48 per share diluted, compared to $29.8 million, or $7.72 per share diluted in 2020. Q4 results also showed growth, with net income at $11.6 million, up from $8.1 million year-over-year. Revenue increased to $78.2 million from $66.1 million, reflecting the company's successful focus on the resale market and strategic plan to eliminate non-core activities. As of December 25, 2021, Winmark had 1,271 franchises operating and 46 awarded but not yet open.

Positive

• Net income rose to $39.9 million in 2021, up 34% from 2020.
• Earnings per share increased to $10.48, a 36% increase year-over-year.
• Fourth quarter net income increased to $11.6 million, up 43% from Q4 2020.
• Revenue growth to $78.2 million, a 18% increase compared to 2020.
• The company has 1,271 operational franchises and 46 additional franchises awarded.

Negative

• None.

MINNEAPOLIS--(BUSINESS WIRE)-- Winmark Corporation (Nasdaq: WINA) announced today net income for the year ended December 25, 2021 of $39,919,900 or $10.48 per share diluted compared to net income of $29,823,300 or $7.72 per share diluted in 2020. The fourth quarter 2021 net income was $11,589,000 or $3.09 per share diluted, compared to net income of $8,092,300 or $2.09 per share diluted, for the same period last year. Revenues for the year ended December 25, 2021 were $78,216,200 up from $66,061,800 in 2020.

“Our 2021 financial results were exceptional. This is a testament to the hard work of our franchise partners, the strength of our sustainable business model as well as the incredible efforts of our employees,” stated Brett D. Heffes, Chairman and Chief Executive Officer. “The strategic decision to finalize plans for shedding all non-core activities was a key moment in our history. We believe that our focus on the large and growing resale market will benefit all Winmark stakeholders.”

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 December 25, 2021, there were 1,271 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)
		December 25, 2021				December 26, 2020
ASSETS
Current Assets:
Cash and cash equivalents		$	11,407,000			$	6,659,000
Restricted cash			30,000				25,000
Receivables, net			1,103,400				1,581,900
Net investment in leases - current			2,890,600				8,687,500
Income tax receivable			667,500				221,200
Inventories			325,200				106,600
Prepaid expenses			1,008,600				995,200
Total current assets			17,432,300				18,276,400
Net investment in leases – long-term			229,300				4,573,600
Property and equipment, net			1,976,900				2,332,800
Operating lease right of use asset			2,982,000				3,226,300
Goodwill			607,500				607,500
Other assets			418,300				435,900
Deferred income taxes			3,252,700				1,890,700
		$	26,899,000			$	31,343,200
LIABILITIES AND SHAREHOLDERS’ EQUITY (DEFICIT)
Current Liabilities:
Notes payable, net		$	4,232,600			$	4,236,100
Accounts payable			2,099,000				1,769,600
Accrued liabilities			2,001,000				2,624,000
Discounted lease rentals			—				1,096,600
Deferred revenue			1,645,000				1,657,400
Total current liabilities			9,977,600				11,383,700
Long-Term Liabilities:
Notes payable, net			43,376,400				17,632,700
Discounted lease rentals			—				574,000
Deferred revenue			6,863,500				7,050,900
Operating lease liabilities			4,810,100				5,307,400
Other liabilities			954,800				773,200
Total long-term liabilities			56,004,800				31,338,200
Shareholders’ Equity (Deficit):
Common stock, no par, 10,000,000 shares authorized, 3,635,806 and 3,756,028 shares issued and outstanding			—				9,281,800
Retained earnings (accumulated deficit)			(39,083,400	)			(20,660,500	)
Total shareholders’ equity (deficit)			(39,083,400	)			(11,378,700	)
		$	26,899,000			$	31,343,200

WINMARK CORPORATION
CONDENSED STATEMENTS OF OPERATIONS
(Unaudited)
		Quarter Ended								Fiscal Year Ended
		December 25, 2021				December 26, 2020				December 25, 2021				December 26, 2020
Revenue:
Royalties		$	15,638,100			$	13,097,900			$	60,779,300			$	46,286,200
Leasing income			2,796,500				2,443,200				11,148,300				14,484,000
Merchandise sales			1,119,800				468,600				3,100,100				2,215,400
Franchise fees			395,600				379,600				1,496,900				1,444,500
Other			424,300				406,000				1,691,600				1,631,700
Total revenue			20,374,300				16,795,300				78,216,200				66,061,800
Cost of merchandise sold			1,052,800				441,900				2,940,500				2,103,900
Leasing expense			439,500				178,900				1,850,300				2,622,600
Provision for credit losses			(39,300	)			(243,600	)			(206,600	)			(79,300	)
Selling, general and administrative expenses			6,008,200				5,484,000				22,295,800				21,203,100
Income from operations			12,913,100				10,934,100				51,336,200				40,211,500
Interest expense			(508,300	)			(327,900	)			(1,453,900	)			(1,737,500	)
Interest and other income (expense)			(7,900	)			15,700				(15,000	)			43,400
Income before income taxes			12,396,900				10,621,900				49,867,300				38,517,400
Provision for income taxes			(807,900	)			(2,529,600	)			(9,947,400	)			(8,694,100	)
Net income		$	11,589,000			$	8,092,300			$	39,919,900			$	29,823,300
Earnings per share - basic		$	3.20			$	2.16			$	10.87			$	8.02
Earnings per share - diluted		$	3.09			$	2.09			$	10.48			$	7.72
Weighted average shares outstanding - basic			3,622,690				3,747,604				3,671,980				3,719,485
Weighted average shares outstanding - diluted			3,753,982				3,879,796				3,810,480				3,863,264

WINMARK CORPORATION
CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
		Fiscal Year Ended
		December 25, 2021				December 26, 2020
OPERATING ACTIVITIES:
Net income		$	39,919,900			$	29,823,300
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization			430,600				484,700
Provision for credit losses			(206,600	)			(79,300	)
Compensation expense related to stock options			1,435,500				1,315,200
Deferred income taxes			(1,362,000	)			(1,223,700	)
Loss from disposal of property and equipment			—				200
Deferred initial direct costs			(2,100	)			(18,300	)
Amortization of deferred initial direct costs			18,900				105,900
Operating lease right of use asset amortization			244,300				368,900
Tax benefits on exercised stock options			2,479,600				872,900
Change in operating assets and liabilities:
Receivables			478,500				87,600
Principal collections on lease receivables			9,915,400				14,829,200
Income tax receivable/payable			(2,925,900	)			(596,200	)
Inventories			(218,600	)			(20,600	)
Prepaid expenses			(13,400	)			(27,100	)
Other assets			17,600				56,600
Accounts payable			329,400				754,600
Accrued and other liabilities			(948,500	)			(691,400	)
Rents received in advance and security deposits			(1,046,600	)			(1,954,000	)
Deferred revenue			(199,800	)			(867,200	)
Net cash provided by operating activities			48,346,200				43,221,300
INVESTING ACTIVITIES:
Purchase of property and equipment			(74,700	)			(45,100	)
Purchase of equipment for lease contracts			(208,400	)			(4,114,000	)
Net cash used for investing activities			(283,100	)			(4,159,100	)
FINANCING ACTIVITIES:
Proceeds from borrowings on line of credit			—				46,600,000
Payments on line of credit			—				(46,600,000	)
Proceeds from borrowings on notes payable			30,000,000				—
Payments on notes payable			(4,250,000	)			(3,750,000	)
Repurchases of common stock			(44,217,500	)			(48,987,500	)
Proceeds from exercises of stock options			8,320,000				8,252,800
Dividends paid			(33,162,600	)			(14,230,800	)
Proceeds from discounted lease rentals			—				1,157,000
Net cash used for financing activities			(43,310,100	)			(57,558,500	)
NET INCREASE (DECREASE) IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH			4,753,000				(18,496,300	)
Cash, cash equivalents and restricted cash, beginning of period			6,684,000				25,180,300
Cash, cash equivalents and restricted cash, end of period		$	11,437,000			$	6,684,000
SUPPLEMENTAL DISCLOSURES:
Cash paid for interest		$	1,388,900			$	1,738,400
Cash paid for income taxes		$	11,555,100			$	9,552,500
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:
		Fiscal Year Ended
		December 25, 2021				December 26, 2020
Cash and cash equivalents		$	11,407,000			$	6,659,000
Restricted cash			30,000				25,000
Total cash, cash equivalents and restricted cash		$	11,437,000			$	6,684,000

 

View source version on businesswire.com: https://www.businesswire.com/news/home/20220223005920/en/

Brett D. Heffes

763/520-8500

Source: Winmark Corporation

FAQ

What were Winmark Corporation's earnings for 2021?

Winmark Corporation reported a net income of $39.9 million or $10.48 per share diluted for the year ended December 25, 2021.

How did Winmark's fourth quarter performance compare to last year?

In Q4 2021, Winmark reported a net income of $11.6 million, up 43% from $8.1 million in Q4 2020.

What was Winmark's revenue for the year ended December 25, 2021?

Winmark's revenue for 2021 was $78.2 million, an 18% increase from $66.1 million in 2020.

How many franchises does Winmark currently operate?

As of December 25, 2021, Winmark operated 1,271 franchises.

What strategic decision did Winmark make that affected its 2021 performance?

Winmark decided to shed all non-core activities to focus on the growing resale market.