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Winmark Corporation Announces Second Quarter Results

Winmark Corporation (Nasdaq: WINA) announced today net income for the quarter ended June 27, 2020 of $5,055,200 (or $1.33 per share diluted) compared to net income of $7,301,900 (or $1.79 per share diluted) in the second quarter of 2019. For the six months ended June 27, 2020, net income was $12,372,200 (or $3.21 per share diluted) compared to net income of $14,574,100 (or $3.52 per share diluted) for the same period last year.

Second quarter results were impacted by the COVID-19 pandemic, with royalty revenues 38% lower than the second quarter of 2019. The Company experienced sequential monthly improvement in royalties during the second quarter as franchised stores reopened, with April, May and June royalty revenues of 16%, 76% and 108% of 2019, respectively. Additionally, during the quarter, the Company repaid $40.0 million in borrowings under its revolving credit facility, ending the quarter with no revolver borrowings and $1.3 million of cash.

Brett D. Heffes, Chief Executive Officer, commented, "Our franchisee’s performance improved throughout the quarter, as they have proven extremely resilient during the pandemic. While store operations are not fully back to pre-COVID levels, substantial progress has been made in the past 90 days and we are pleased with the overall performance of the Company. I am impressed daily by the efforts of both our franchisees as well as our Winmark employees."

Winmark Corporation creates, supports and finances business. At June 27, 2020, there were 1,255 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 42 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)

 

 

 

 

 

 

 

 

 

 

June 27, 2020

 

December 28, 2019

ASSETS

Current Assets:

 

 

 

 

 

 

Cash and cash equivalents

 

$

1,287,900

 

$

25,130,300

Restricted cash

 

 

50,000

 

 

50,000

Receivables, net

 

 

1,893,800

 

 

1,669,500

Net investment in leases - current

 

 

11,688,600

 

 

12,800,100

Income tax receivable

 

 

-

 

 

497,900

Inventories

 

 

83,800

 

 

86,000

Prepaid expenses

 

 

966,900

 

 

968,100

Total current assets

 

 

15,971,000

 

 

41,201,900

 

 

 

 

 

 

 

Net investment in leases – long-term

 

 

7,152,500

 

 

12,505,500

Property and equipment, net

 

 

2,560,100

 

 

2,772,600

Operating lease right of use asset

 

 

3,353,100

 

 

3,595,200

Goodwill

 

 

607,500

 

 

607,500

Other assets

 

 

475,300

 

 

492,500

Deferred income taxes

 

 

1,506,900

 

 

667,000

 

 

$

31,626,400

 

$

61,842,200

 

 

 

 

 

 

 

LIABILITIES AND SHAREHOLDERS’ EQUITY (DEFICIT)

Current Liabilities:

 

 

 

 

 

 

Notes payable, net

 

$

4,236,100

 

$

3,736,100

Accounts payable

 

 

1,831,600

 

 

1,015,000

Income tax payable

 

 

3,280,800

 

 

-

Accrued liabilities

 

 

2,455,900

 

 

2,783,100

Discounted lease rentals

 

 

1,974,700

 

 

2,680,700

Deferred revenue

 

 

1,694,300

 

 

1,717,000

Total current liabilities

 

 

15,473,400

 

 

11,931,900

 

 

 

 

 

 

 

Long-Term Liabilities:

 

 

 

 

 

 

Notes payable, net

 

 

19,750,700

 

 

21,868,800

Discounted lease rentals

 

 

1,033,400

 

 

836,900

Deferred revenue

 

 

7,469,100

 

 

7,858,500

Operating lease liabilities

 

 

5,522,800

 

 

5,846,100

Other liabilities

 

 

943,200

 

 

1,051,700

Total long-term liabilities

 

 

34,719,200

 

 

37,462,000

 

 

 

 

 

 

 

Shareholders’ Equity (Deficit):

 

 

 

 

 

 

Common stock, no par, 10,000,000 shares authorized,
3,723,187 and 3,947,858 shares issued and outstanding

 

 

6,411,300

 

 

11,929,300

Retained earnings (accumulated deficit)

 

 

(24,977,500)

 

 

519,000

Total shareholders’ equity (deficit)

 

 

(18,566,200)

 

 

12,448,300

 

 

$

31,626,400

 

$

61,842,200

 

WINMARK CORPORATION

CONDENSED STATEMENTS OF OPERATIONS

(Unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Quarter Ended

 

Six Months Ended

 

 

 

June 27, 2020

 

June 29, 2019

 

June 27, 2020

 

June 29, 2019

 

Revenue:

 

 

 

 

 

 

 

 

 

 

 

 

 

Royalties

 

$

7,805,800

 

$

12,653,200

 

$

18,978,300

 

$

24,414,600

 

Leasing income

 

 

3,473,800

 

 

3,203,000

 

 

9,345,000

 

 

8,358,300

 

Merchandise sales

 

 

361,500

 

 

721,800

 

 

1,115,600

 

 

1,332,800

 

Franchise fees

 

 

342,100

 

 

413,900

 

 

729,500

 

 

805,700

 

Other

 

 

406,300

 

 

412,300

 

 

821,100

 

 

824,000

 

Total revenue

 

 

12,389,500

 

 

17,404,200

 

 

30,989,500

 

 

35,735,400

 

Cost of merchandise sold

 

 

346,100

 

 

681,200

 

 

1,063,800

 

 

1,252,700

 

Leasing expense

 

 

516,600

 

 

370,900

 

 

1,932,800

 

 

1,069,600

 

Provision for credit losses

 

 

(111,500)

 

 

69,300

 

 

503,900

 

 

79,400

 

Selling, general and administrative expenses

 

 

4,960,500

 

 

6,435,900

 

 

10,709,400

 

 

13,420,300

 

Income from operations

 

 

6,677,800

 

 

9,846,900

 

 

16,779,600

 

 

19,913,400

 

Interest expense

 

 

(538,700)

 

 

(500,300)

 

 

(1,063,900)

 

 

(942,500)

 

Interest and other income (expense)

 

 

12,600

 

 

(6,100)

 

 

18,500

 

 

(6,400)

 

Income before income taxes

 

 

6,151,700

 

 

9,340,500

 

 

15,734,200

 

 

18,964,500

 

Provision for income taxes

 

 

(1,096,500)

 

 

(2,038,600)

 

 

(3,362,000)

 

 

(4,390,400)

 

Net income

 

$

5,055,200

 

$

7,301,900

 

$

12,372,200

 

$

14,574,100

 

Earnings per share - basic

 

$

1.37

 

$

1.94

 

$

3.34

 

$

3.80

 

Earnings per share - diluted

 

$

1.33

 

$

1.79

 

$

3.21

 

$

3.52

 

Weighted average shares outstanding - basic

 

 

3,688,248

 

 

3,771,439

 

 

3,699,923

 

 

3,839,563

 

Weighted average shares outstanding - diluted

 

 

3,803,807

 

 

4,072,408

 

 

3,857,779

 

 

4,135,827

 

 

View source version on businesswire.com: https://www.businesswire.com/news/home/20200715005707/en/

Contacts

Brett D. Heffes
763/520-8500