Winmark Corporation Announces Year End Results

By: Winmark Corporation via Business Wire

February 21, 2024 at 10:39 AM EST

Winmark Corporation (Nasdaq: WINA) announced today net income for the year ended December 30, 2023 of $40,178,100 or $11.04 per share diluted compared to net income of $39,424,900 or $10.97 per share diluted in 2022. The fourth quarter 2023 net income was $9,716,800 or $2.64 per share diluted, compared to net income of $10,176,600 or $2.86 per share diluted, for the same period last year. Revenues for the year ended December 30, 2023 were $83,243,500, up from $81,410,800 in 2022. 2023 results were impacted by the Company’s decision in May 2021 to run-off its leasing portfolio. Additionally, financial performance for the fourth quarter and full year 2022 included an extra week of operations due to the Company’s fiscal year ending on the last Saturday of December.

“Our 2023 results reflected positive performance by our franchise partners; however, growth was lower in the second half of the year,” commented Brett D. Heffes, Chair and Chief Executive Officer.

Winmark - the Resale Company®, is a nationally recognized franchisor 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 30, 2023, there were 1,319 franchises in operation and over 2,800 available territories. An additional 71 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 30, 2023		December 31, 2022

ASSETS
Current Assets:

Cash and cash equivalents	$	13,361,500	$	13,615,600
Restricted cash		25,000		65,000
Receivables, net		1,475,300		1,438,600
Net investment in leases - current		75,100		344,900
Income tax receivable		31,400		558,700
Inventories		386,100		770,600
Prepaid expenses		1,392,100		1,310,400
Total current assets		16,746,500		18,103,800

Net investment in leases – long-term		—		5,400
Property and equipment, net		1,669,800		1,704,600
Operating lease right of use asset		2,425,900		2,716,000
Intangible assets, net		2,994,300		3,348,300
Goodwill		607,500		607,500
Other assets		471,300		429,700
Deferred income taxes		4,052,400		3,540,400
	$	28,967,700	$	30,455,700

LIABILITIES AND SHAREHOLDERS’ EQUITY (DEFICIT)

Current Liabilities:
Notes payable, net	$	4,217,900		$	4,217,900
Accounts payable		1,719,400			2,122,000
Accrued liabilities		2,858,200			2,611,700
Deferred revenue		1,666,100			1,643,900
Total current liabilities		10,461,600			10,595,500
Long-Term Liabilities:
Line of credit/Term loan		30,000,000			30,000,000
Notes payable, net		34,848,800			39,066,700
Deferred revenue		7,657,500			6,974,200
Operating lease liabilities		3,715,800			4,287,000
Other liabilities		1,440,100			1,164,400
Total long-term liabilities		77,662,200			81,492,300
Shareholders’ Equity (Deficit):
Common stock, no par, 10,000,000 shares authorized, 3,496,977 and 3,459,673 shares issued and outstanding		7,768,800			1,806,700
Retained earnings (accumulated deficit)		(66,924,900	)		(63,438,800	)
Total shareholders’ equity (deficit)		(59,156,100	)		(61,632,100	)
	$	28,967,700		$	30,455,700

WINMARK CORPORATION CONDENSED STATEMENTS OF OPERATIONS (Unaudited)

	Quarter Ended						Fiscal Year Ended
	December 30, 2023			December 31, 2022			December 30, 2023			December 31, 2022
Revenue:
Royalties	$	17,167,200		$	17,917,700		$	70,230,700		$	67,148,100
Leasing income		817,600			1,091,900			4,766,200			6,937,700
Merchandise sales		1,159,200			1,234,100			4,761,100			3,921,600
Franchise fees		378,600			415,200			1,512,000			1,575,400
Other		517,300			466,800			1,973,500			1,828,000
Total revenue		20,039,900			21,125,700			83,243,500			81,410,800
Cost of merchandise sold		1,091,100			1,160,500			4,461,500			3,712,800
Leasing expense		16,600			92,800			398,300			984,700
Provision for credit losses		(1,000	)		(11,300	)		(5,600	)		(57,900	)
Selling, general and administrative expenses		6,414,400			6,485,300			25,108,700			23,158,400
Income from operations		12,518,800			13,398,400			53,280,600			53,612,800
Interest expense		(751,100	)		(869,300	)		(3,091,000	)		(2,914,900	)
Interest and other income		368,300			78,600			1,171,700			85,600
Income before income taxes		12,136,000			12,607,700			51,361,300			50,783,500
Provision for income taxes		(2,419,200	)		(2,431,100	)		(11,183,200	)		(11,358,600	)
Net income	$	9,716,800		$	10,176,600		$	40,178,100		$	39,424,900
Earnings per share - basic	$	2.78		$	2.95		$	11.55		$	11.30
Earnings per share - diluted	$	2.64		$	2.86		$	11.04		$	10.97
Weighted average shares outstanding - basic		3,494,544			3,452,399			3,479,936			3,487,732
Weighted average shares outstanding - diluted		3,679,444			3,556,190			3,640,524			3,592,456

WINMARK CORPORATION CONDENSED STATEMENTS OF CASH FLOWS (Unaudited)

	Year Ended
	December 30, 2023			December 31, 2022
OPERATING ACTIVITIES:
Net income	$	40,178,100		$	39,424,900
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		772,700			603,100
Provision for credit losses		(5,600	)		(57,900	)
Compensation expense related to stock options		1,952,400			1,652,400
Deferred income taxes		(512,000	)		(287,700	)
Gain from disposal of property and equipment		—			(9,400	)
Operating lease right of use asset amortization		290,100			266,000
Tax benefits on exercised stock options		1,138,500			858,300
Change in operating assets and liabilities:
Receivables		(36,700	)		(335,200	)
Principal collections on lease receivables		556,000			3,646,700
Income tax receivable/payable		(611,200	)		(749,500	)
Inventories		384,500			(445,400	)
Prepaid expenses		(81,700	)		(301,800	)
Other assets		(41,600	)		(11,400	)
Accounts payable		(402,600	)		23,000
Accrued and other liabilities		(16,900	)		222,800
Rents received in advance and security deposits		(275,200	)		(819,200	)
Deferred revenue		705,500			109,600
Net cash provided by operating activities		43,994,300			43,789,300
INVESTING ACTIVITIES:
Proceeds from sales of property and equipment					9,400
Purchase of property and equipment		(383,900	)		(139,100	)
Reacquired franchise rights		—			(3,540,000	)
Net cash used for investing activities		(383,900	)		(3,669,700	)
FINANCING ACTIVITIES:
Proceeds from borrowings on line of credit/term loan		—			33,700,000
Payments on line of credit/term loan		—			(3,700,000	)
Payments on notes payable		(4,250,000	)		(4,250,000	)
Repurchases of common stock		—			(49,119,800	)
Proceeds from exercises of stock options		4,009,700			4,751,700
Dividends paid		(43,664,200	)		(19,257,900	)
Net cash used for financing activities		(43,904,500	)		(37,876,000	)
NET INCREASE (DECREASE) IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH		(294,100	)		2,243,600
Cash, cash equivalents and restricted cash, beginning of period		13,680,600			11,437,000
Cash, cash equivalents and restricted cash, end of period	$	13,386,500		$	13,680,600
SUPPLEMENTAL DISCLOSURES:
Cash paid for interest	$	3,049,400		$	2,722,500
Cash paid for income taxes	$	10,874,300		$	11,308,800

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:

	Year Ended
	December 30, 2023		December 31, 2022
Cash and cash equivalents	$	13,361,500	$	13,615,600
Restricted cash		25,000		65,000
Total cash, cash equivalents and restricted cash	$	13,386,500	$	13,680,600