Document and Entity Information
Document and Entity Information - shares | 6 Months Ended | |
Jun. 30, 2018 | Jul. 13, 2018 | |
Document and Entity Information | ||
Entity Registrant Name | WINMARK CORP | |
Entity Central Index Key | 908,315 | |
Document Type | 10-Q | |
Document Period End Date | Jun. 30, 2018 | |
Amendment Flag | false | |
Current Fiscal Year End Date | --12-29 | |
Entity Current Reporting Status | Yes | |
Entity Filer Category | Accelerated Filer | |
Entity Common Stock, Shares Outstanding | 3,868,526 | |
Document Fiscal Year Focus | 2,018 | |
Document Fiscal Period Focus | Q2 |
CONSOLIDATED BALANCE SHEETS
CONSOLIDATED BALANCE SHEETS - USD ($) | Jun. 30, 2018 | Dec. 30, 2017 |
Current Assets: | ||
Cash and cash equivalents | $ 1,232,900 | $ 1,073,200 |
Restricted cash | 105,000 | 90,000 |
Receivables, less allowance for doubtful accounts of $400 and $400 | 1,502,000 | 1,796,000 |
Net investment in leases - current | 17,046,100 | 15,332,300 |
Income tax receivable | 2,161,800 | |
Inventories | 150,100 | 97,100 |
Prepaid expenses | 765,800 | 901,600 |
Total current assets | 20,801,900 | 21,452,000 |
Net investment in leases - long-term | 26,380,400 | 25,945,300 |
Property and equipment, net | 630,400 | 486,800 |
Goodwill | 607,500 | 607,500 |
Other assets | 396,800 | 350,400 |
Total assets | 48,817,000 | 48,842,000 |
Current Liabilities: | ||
Notes payable, net of unamortized debt issuance costs of $13,900 and $13,900 | 3,236,100 | 3,236,100 |
Accounts payable | 1,502,900 | 2,073,000 |
Income tax payable | 237,200 | |
Accrued liabilities | 3,214,400 | 1,837,300 |
Discounted lease rentals | 1,637,100 | 570,800 |
Deferred revenue | 3,047,200 | 3,012,700 |
Total current liabilities | 12,874,900 | 10,729,900 |
Long-Term Liabilities: | ||
Line of credit | 18,400,000 | 35,400,000 |
Notes payable, net of unamortized debt issuance costs of $89,500 and $96,500 | 27,223,000 | 28,841,000 |
Discounted lease rentals | 2,260,900 | 1,121,600 |
Deferred revenue | 7,294,500 | 7,297,500 |
Other liabilities | 1,161,300 | 845,000 |
Deferred income taxes | 360,200 | 320,500 |
Total long-term liabilities | 56,699,900 | 73,825,600 |
Shareholders' Equity (Deficit): | ||
Common stock, no par value, 10,000,000 shares authorized, 3,868,526 and 3,843,078 shares issued and outstanding | 3,329,600 | 1,476,200 |
Retained earnings (accumulated deficit) | (24,087,400) | (37,189,700) |
Total shareholders' equity (deficit) | (20,757,800) | (35,713,500) |
Total liabilities and shareholders' equity (deficit) | $ 48,817,000 | $ 48,842,000 |
CONSOLIDATED BALANCE SHEETS (Pa
CONSOLIDATED BALANCE SHEETS (Parenthetical) - USD ($) | Jun. 30, 2018 | Dec. 30, 2017 |
CONSOLIDATED CONDENSED BALANCE SHEETS | ||
Receivables, allowance for doubtful accounts | $ 400 | $ 400 |
Unamortized debt issuance costs - Current | 13,900 | 13,900 |
Unamortized debt issuance costs - Noncurrent | $ 89,500 | $ 96,500 |
Common stock, par value (in dollars per share) | $ 0 | $ 0 |
Common stock, shares authorized | 10,000,000 | 10,000,000 |
Common stock, shares issued | 3,868,526 | 3,843,078 |
Common stock, shares outstanding | 3,868,526 | 3,843,078 |
CONSOLIDATED STATEMENTS OF OPER
CONSOLIDATED STATEMENTS OF OPERATIONS - USD ($) | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2018 | Jul. 01, 2017 | Jun. 30, 2018 | Jul. 01, 2017 | |
Revenue: | ||||
Leasing income | $ 4,857,100 | $ 3,946,600 | $ 10,385,900 | $ 9,806,200 |
Total revenue | 18,159,800 | 16,429,700 | 36,320,800 | 34,240,600 |
Leasing expense | 495,800 | 660,600 | 1,050,700 | 1,932,000 |
Provision for credit losses | 109,000 | (11,500) | 204,000 | (12,900) |
Selling, general and administrative expenses | 6,799,300 | 6,468,400 | 13,493,700 | 12,980,900 |
Income from operations | 10,074,700 | 8,813,100 | 20,148,900 | 18,126,500 |
Interest expense | (657,900) | (446,300) | (1,401,700) | (945,400) |
Interest and other income (expense) | (11,300) | 100 | (12,300) | 1,900 |
Income before income taxes | 9,405,500 | 8,366,900 | 18,734,900 | 17,183,000 |
Provision for income taxes | (2,262,500) | (2,836,200) | (4,631,500) | (6,101,500) |
Net income | $ 7,143,000 | $ 5,530,700 | $ 14,103,400 | $ 11,081,500 |
Earnings per share - basic (in dollars per share) | $ 1.85 | $ 1.32 | $ 3.66 | $ 2.65 |
Earnings per share - diluted (in dollars per share) | $ 1.73 | $ 1.23 | $ 3.42 | $ 2.48 |
Weighted average shares outstanding - basic | 3,858,446 | 4,201,982 | 3,852,880 | 4,184,558 |
Weighted average shares outstanding - diluted | 4,133,535 | 4,483,647 | 4,129,055 | 4,467,072 |
Royalties | ||||
Revenue: | ||||
Revenue | $ 11,821,000 | $ 11,094,400 | $ 22,870,000 | $ 21,548,400 |
Merchandise sales | ||||
Revenue: | ||||
Revenue | 704,900 | 537,100 | 1,481,800 | 1,285,400 |
Cost of merchandise sold | 681,000 | 499,100 | 1,423,500 | 1,214,100 |
Franchise fees | ||||
Revenue: | ||||
Revenue | 378,100 | 468,800 | 779,000 | 837,400 |
Other | ||||
Revenue: | ||||
Revenue | $ 398,700 | $ 382,800 | $ 804,100 | $ 763,200 |
CONSOLIDATED STATEMENTS OF COMP
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME - USD ($) | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2018 | Jul. 01, 2017 | Jun. 30, 2018 | Jul. 01, 2017 | |
CONSOLIDATED CONDENSED STATEMENTS OF COMPREHENSIVE INCOME | ||||
Net income | $ 7,143,000 | $ 5,530,700 | $ 14,103,400 | $ 11,081,500 |
Other comprehensive income (loss), before tax: | ||||
Unrealized holding net gains (losses) arising during period | 9,000 | 16,600 | ||
Other comprehensive income (loss), before tax | 9,000 | 16,600 | ||
Income tax (expense) benefit related to items of other comprehensive income: | ||||
Unrealized holding net gains/losses arising during period | (3,500) | (6,300) | ||
Income tax (expense) benefit related to items of other comprehensive income | (3,500) | (6,300) | ||
Other comprehensive income (loss), net of tax | 5,500 | 10,300 | ||
Comprehensive income | $ 7,143,000 | $ 5,536,200 | $ 14,103,400 | $ 11,091,800 |
CONSOLIDATED STATEMENTS OF CASH
CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) | 6 Months Ended | |
Jun. 30, 2018 | Jul. 01, 2017 | |
OPERATING ACTIVITIES: | ||
Net Income | $ 14,103,400 | $ 11,081,500 |
Adjustments to reconcile net income to net cash provided by operating activities: | ||
Depreciation and amortization | 155,100 | 188,700 |
Provision for credit losses | 204,000 | (12,900) |
Compensation expense related to stock options | 1,006,900 | 966,600 |
Deferred income taxes | 39,700 | 140,300 |
Deferred initial direct costs | (1,083,100) | (250,000) |
Amortization of deferred initial direct costs | 562,200 | 238,300 |
Tax benefits on exercised stock options | 125,700 | 518,000 |
Change in operating assets and liabilities: | ||
Receivables | 294,000 | (153,100) |
Income tax receivable/payable | 2,273,300 | (175,700) |
Inventories | (53,000) | (11,900) |
Prepaid expenses | 135,800 | 587,000 |
Other assets | (46,400) | 5,300 |
Accounts payable | (570,100) | (282,500) |
Accrued and other liabilities | 1,674,200 | 686,900 |
Rents received in advance and security deposits | (460,100) | 6,600 |
Deferred revenue | 31,500 | (147,000) |
Net cash provided by operating activities | 18,393,100 | 13,386,100 |
INVESTING ACTIVITIES: | ||
Purchase of property and equipment | (298,700) | (44,200) |
Purchase of equipment for lease contracts | (12,895,200) | (13,532,300) |
Principal collections on lease receivables | 10,838,200 | 13,982,500 |
Net cash provided by (used for) investing activities | (2,355,700) | 406,000 |
FINANCING ACTIVITIES: | ||
Proceeds from borrowings on line of credit | 4,000,000 | 6,800,000 |
Payments on line of credit | (21,000,000) | (20,100,000) |
Payments on notes payable | (1,625,000) | (1,000,000) |
Proceeds from exercises of stock options | 846,500 | 1,197,000 |
Dividends paid | (1,001,100) | (880,100) |
Proceeds from discounted lease rentals | 2,916,900 | |
Net cash used for financing activities | (15,862,700) | (13,983,100) |
NET INCREASE (DECREASE) IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH | 174,700 | (191,000) |
Cash, cash equivalents and restricted cash, beginning of period | 1,163,200 | 1,292,900 |
Cash, cash equivalents and restricted cash, end of period | $ 1,337,900 | $ 1,101,900 |
CONSOLIDATED STATEMENTS OF CAS7
CONSOLIDATED STATEMENTS OF CASH FLOWS - Supplemental Dislcosures - USD ($) | 6 Months Ended | |
Jun. 30, 2018 | Jul. 01, 2017 | |
SUPPLEMENTAL DISCLOSURES: | ||
Cash paid for interest | $ 1,404,800 | $ 980,300 |
Cash paid for income taxes | 2,192,700 | 5,654,000 |
Reconciliation of cash, cash equivalents and restricted cash: | ||
Cash and cash equivalents | 1,232,900 | 1,071,900 |
Restricted cash | 105,000 | 30,000 |
Total cash, cash equivalents and restricted cash | $ 1,337,900 | $ 1,101,900 |
Management's Interim Financial
Management's Interim Financial Statement Representation: | 6 Months Ended |
Jun. 30, 2018 | |
Management's Interim Financial Statement Representation: | |
Management's Interim Financial Statement Representation: | WINMARK CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS 1. Management’s Interim Financial Statement Representation: The accompanying consolidated condensed financial statements have been prepared by Winmark Corporation and subsidiaries (the Company), without audit, pursuant to the rules and regulations of the Securities and Exchange Commission. The Company has a 52/53 week year which ends on the last Saturday in December. The information in the consolidated condensed financial statements includes normal recurring adjustments and reflects all adjustments which are, in the opinion of management, necessary for a fair presentation of such financial statements. The consolidated condensed financial statements and notes are presented in accordance with accounting principles generally accepted in the United States of America for interim financial information and with the instructions for Form 10-Q, and therefore do not contain certain information included in the Company’s annual consolidated financial statements and notes. This report should be read in conjunction with the audited consolidated financial statements and the notes thereto included in the Company’s latest Annual Report on Form 10-K. Revenues and operating results for the six months ended June 30, 2018 are not necessarily indicative of the results to be expected for the full year. |
Organization and Business_
Organization and Business: | 6 Months Ended |
Jun. 30, 2018 | |
Organization and Business: | |
Organization and Business: | 2. Organization and Business: The Company offers licenses to operate franchises using the service marks Plato’s Closet®, Once Upon A Child®, Play It Again Sports®, Style Encore® and Music Go Round®. The Company uses its Winmark Franchise Partners® mark in connection with its strategic consulting and corporate development activities. The Company also operates both middle market and small-ticket equipment leasing businesses under the Winmark Capital® and Wirth Business Credit® marks. |
Recent Accounting Pronouncement
Recent Accounting Pronouncements: | 6 Months Ended |
Jun. 30, 2018 | |
Recent Accounting Pronouncements: | |
Recent Accounting Pronouncements: | 3. Recent Accounting Pronouncements: Recently Issued Accounting Pronouncements In February 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2016-02, Leases (Topic 842) , which provides guidance on accounting for leases that supersedes existing lease accounting guidance. The ASU’s core principle is that a lessee should recognize lease assets and lease liabilities for those leases classified as operating leases under existing lease accounting guidance. The new standard also makes targeted changes to lessor accounting. In July 2018, the FASB issued ASU 2018-10, Codification Improvements to Topic 842 (Leases), which provides narrow amendments to clarify how to apply certain aspects of the new lease standard. This guidance is effective for reporting periods beginning after December 15, 2018, with early adoption permitted. The provisions of this guidance are to be applied using a modified retrospective approach, with elective reliefs. The Company is currently in the process of evaluating the impact of the adoption of this ASU on the Company’s consolidated financial statements. In June 2016, the FASB issued ASU 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses of Financial Instruments , which changes the methodology for measuring credit losses on financial instruments and the timing of when such losses are recorded. This guidance will be effective for reporting periods beginning after December 15, 2019, with early adoption permitted. The Company is currently in the process of evaluating the impact of the adoption of this ASU on the Company’s consolidated financial statements. Recently Adopted Accounting Pronouncements In November 2016, the FASB issued ASU 2016-18 Statement of Cash Flows , Restricted Cash which provides guidance on the presentation of restricted cash within an entity’s cash flow statement. The Company adopted ASU 2016-18 in the first quarter of 2018 on a retrospective basis. Restricted cash is now presented with cash and cash equivalents when reconciling the beginning of period and end of period total amounts shown on the statement of cash flows. As a result of this adoption, for the six months ended July 1, 2017, $10,000 that was previously reported as a cash inflow from operating activities related to a corresponding decrease in restricted cash is no longer presented within the net change in cash, cash equivalents and restricted cash. In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers , which provides guidance for revenue recognition that supersedes existing revenue recognition guidance (but does not apply to nor supersede accounting guidance for lease contracts). The ASU’s core principle is that an entity will recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The ASU also requires more detailed disclosures to enable users of financial statements to understand the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers. The Company adopted ASU 2014-09 in the first quarter of 2018, using the full retrospective method . The adoption of this guidance did not impact the Company’s recognition of leasing revenues or revenue from royalties that are based on a percentage of franchisee sales. Upon adoption, initial franchise fees, which were previously recognized upon the opening of a franchise, are deferred and recognized over the term of the estimated life of the franchise. The effect of the required deferral of initial franchise fees received in a given year was mitigated by the recognition of revenue from fees retrospectively deferred from prior years. The Company bills and collects marketing fees from its franchisees at various times throughout the year. This amount is included in the Revenue: Other line of the Consolidated Condensed Statements of Operations. Previously, marketing fees were recognized at the time of billing. In accordance with the new guidance, the Company recognizes marketing fee revenue on a straight line basis over the franchise duration. The Company previously recognized commission fees related to franchise agreement contracts as selling expenses when they were incurred. In accordance with the new guidance, the Company capitalizes the commission fees as costs of obtaining a contract and amortizes them over the franchise duration. (See Note 4 – Revenue Recognition: Franchising) Adoption of the standard using the full retrospective method also required the Company to restate certain previously reported results, as shown in the tables below: Condensed Consolidated Statement of Operations: Three Months Ended July 1, 2017 Six Months Ended July 1, 2017 As Previously Reported Adjustments As Restated As Previously Reported Adjustments As Restated Revenue: Franchise fees $ 675,400 $ (206,600) $ 468,800 $ 944,700 $ (107,300) $ 837,400 Other 496,000 (113,200) 382,800 788,600 (25,400) 763,200 Selling, general and administrative expenses 6,467,100 1,300 6,468,400 12,970,500 10,400 12,980,900 Provision for income taxes (2,914,800) 78,600 (2,836,200) (6,136,500) 35,000 (6,101,500) Net income 5,773,200 (242,500) 5,530,700 11,189,600 (108,100) 11,081,500 Earnings per share - basic $ 1.37 $ $ $ 2.67 $ $ Earnings per share - diluted $ 1.29 $ $ $ 2.50 $ $ Consolidated Balance Sheet: December 30, 2017 As Previously Reported Adjustments As Restated ASSETS Prepaid expenses $ 814,800 $ 86,800 $ 901,600 Other assets — 350,400 350,400 LIABILITIES AND SHAREHOLDERS’ EQUITY (DEFICIT): Deferred revenue-Current $ 1,736,200 $ 1,276,500 $ 3,012,700 Deferred revenue-Long term 1,465,500 5,832,000 7,297,500 Deferred income taxes 1,956,500 (1,636,000) 320,500 Retained earnings (accumulated deficit) (32,154,400) (5,035,300) (37,189,700) |
Revenue Recognition_ Franchisin
Revenue Recognition: Franchising | 6 Months Ended |
Jun. 30, 2018 | |
Revenue Recognition: Franchising | |
Revenue Recognition: Franchising | 4. Revenue Recognition: Franchising The following is a description of the principal sources of revenue for the company’s franchising segment. The Company’s performance obligations under franchise agreements consist of (a) a franchise license, including a license to use one of our brands, (b) a point-of-sale software license, (c) initial services, such as pre-opening training and marketing support, and (d) ongoing services, such as marketing services and operational support. These performance obligations are highly interrelated so we do not consider them to be individually distinct and therefore account for them under ASC 606 as a single performance obligation, which is satisfied by providing a right to use our intellectual property over the estimated life of the franchise. The disaggregation of the Company’s franchise revenue is presented within the Revenue lines of the Consolidated Condensed Statements of Operations with the amounts included in Revenue: Other delineated below. For more detailed information about reportable segments, see Note 13 – “Segment Reporting”. Royalties The Company collects royalties from each retail franchise based upon a percentage of retail store gross sales. The Company recognizes royalties as revenue when earned. Merchandise Sales Merchandise sales include the sale of point-of-sale technology equipment to franchisees and the sale of a limited amount of sporting goods to certain Play It Again Sports franchisees. Merchandise sales, which includes shipping and handling charges, are recognized at a point in time when the product has been shipped to the franchisee. Sales taxes that are collected from customers and remitted to governmental authorities are accounted for on a net basis and therefore excluded from merchandise sales. Shipping and handling costs associated with outbound freight are accounted for as a fulfillment cost and included in cost of merchandise sold. Franchise Fees The Company collects initial franchise fees when franchise agreements are signed. The Company recognizes franchise fee revenue over the estimated life of the franchise, beginning with the opening of the franchise, which is when the Company has performed substantially all initial services required by the franchise agreement and the franchisee benefits from the rights afforded by the franchise agreement. Marketing Fees Marketing fee revenue is included in the Revenue: Other line of the Consolidated Condensed Statements of Operations. The Company bills and collects annual marketing fees from its franchisees at various times throughout the year. The Company recognizes marketing fee revenue on a straight line basis over the franchise duration. The Company recognized $0.3 million of marketing fee revenue for each of the three months ended June 30, 2018 and July 1, 2017, and $0.6 million for each of the six months ended June 30, 2018 and July 1, 2017. Software License Fees Software license fee revenue is included in the Revenue: Other line of the Consolidated Condensed Statements of Operations. The Company bills and collects software license fees from its franchisees when the point-of-sale system is provided to the franchisee. The Company recognizes software license fee revenue on a straight line basis over the franchise duration. The Company recognized $0.1 million of software license fee revenue for each of the three months ended June 30, 2018 and July 1, 2017, and $0.2 million for each of the six months ended June 30, 2018 and July 1, 2017. Contract Liabilities The Company’s contract liabilities for its franchise revenues consist of deferred revenue associated with franchise fees and software license fees described above. The table below presents the activity of the current and noncurrent deferred franchise revenue during the first six months of 2018 and 2017, respectively: June 30, 2018 July 1, 2017 Balance at beginning of period $ 10,310,200 $ 10,408,500 Franchise and software license fees collected from franchisees, excluding amount earned as revenue during the period 964,700 836,300 Fees earned that were included in the balance at the beginning of the period (933,200) (983,300) Balance at end of period $ 10,341,700 $ 10,261,500 The following table illustrates future estimated revenue to be recognized for the remainder of 2018 and full fiscal years thereafter related to performance obligations that are unsatisfied (or partially unsatisfied) as of June 30, 2018. Contract Liabilities expected to be recognized in Amount 2018 $ 838,800 2019 1,679,800 2020 1,543,200 2021 1,404,400 2022 1,259,500 Thereafter 3,616,000 $ 10,341,700 Commission Fees The Company capitalizes incremental commission fees paid as a result of obtaining franchise agreement contracts. Capitalized commission fees of $0.5 million and $0.4 million are outstanding at June 30, 2018 and December 30, 2017, respectively and are included in Prepaid expenses and Other assets of the Consolidated Condensed Balance Sheets. Capitalized commission fees are amortized over the life of the franchise and are included in selling, general and administrative expenses. During the three months ended June 30, 2018 and July 1, 2017, the Company recognized $24,500 and $24,800 of commission fee expense, respectively. During the six months ended June 30, 2018 and July 1, 2017, the Company recognized $48,400 and $49,900 of commission fee expense, respectively. |
Fair Value Measurements_
Fair Value Measurements: | 6 Months Ended |
Jun. 30, 2018 | |
Fair Value Measurements: | |
Fair Value Measurements: | 5. Fair Value Measurements: The Company defines fair value as the price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. The Company uses three levels of inputs to measure fair value: · Level 1 – quoted prices in active markets for identical assets and liabilities. · Level 2 – observable inputs other than quoted prices in active markets for identical assets and liabilities. · Level 3 – unobservable inputs in which there is little or no market data available, which require the reporting entity to develop its own assumptions. Due to their nature, the carrying value of cash equivalents, receivables, payables and debt obligations approximates fair value. |
Investment in Leasing Operation
Investment in Leasing Operations: | 6 Months Ended |
Jun. 30, 2018 | |
Investment in Leasing Operations: | |
Investment in Leasing Operations: | 6. Investment in Leasing Operations: Investment in leasing operations consists of the following: June 30, 2018 December 30, 2017 Direct financing and sales-type leases: Minimum lease payments receivable $ 42,666,700 $ 36,119,700 Estimated residual value of equipment 3,830,400 4,762,700 Unearned lease income net of initial direct costs deferred (7,727,200) (5,371,900) Security deposits (4,039,700) (4,526,000) Equipment installed on leases not yet commenced 9,363,000 10,989,700 Total investment in direct financing and sales-type leases 44,093,200 41,974,200 Allowance for credit losses (755,900) (711,200) Net investment in direct financing and sales-type leases 43,337,300 41,263,000 Operating leases: Operating lease assets 1,370,900 1,045,400 Less accumulated depreciation and amortization (1,281,700) (1,030,800) Net investment in operating leases 89,200 14,600 Total net investment in leasing operations $ 43,426,500 $ 41,277,600 As of June 30, 2018, the $43.4 million total net investment in leases consists of $17.0 million classified as current and $26.4 million classified as long-term. As of December 30, 2017, the $41.3 million total net investment in leases consists of $15.3 million classified as current and $26.0 million classified as long-term. As of June 30, 2018, leased assets with one customer approximated 28% of the Company’s total assets. A portion of the lease payments receivable from this customer is assigned as collateral in non-recourse financing with financial institutions. See Note 10 – “Discounted Lease Rentals”. Future minimum lease payments receivable under lease contracts and the amortization of unearned lease income, net of initial direct costs deferred, is as follows for the remainder of fiscal 2018 and the full fiscal years thereafter as of June 30, 2018: Direct Financing and Sales-Type Leases Operating Leases Minimum Lease Income Minimum Lease Fiscal Year Payments Receivable Amortization Payments Receivable 2018 $ 12,738,700 $ 3,418,500 $ 84,300 2019 21,656,500 3,855,000 76,900 2020 7,581,200 442,500 — 2021 664,100 9,300 — 2022 13,700 1,300 — Thereafter 12,500 600 — $ 42,666,700 $ 7,727,200 $ 161,200 The activity in the allowance for credit losses for leasing operations during the first six months of 2018 and 2017, respectively, is as follows: June 30, 2018 July 1, 2017 Balance at beginning of period $ 711,200 $ 896,000 Provisions charged to expense 204,000 (12,900) Recoveries (60,900) 10,200 Deductions for amounts written-off (98,400) — Balance at end of period $ 755,900 $ 893,300 The Company’s investment in direct financing and sales-type leases (“Investment In Leases”) and allowance for credit losses by loss evaluation methodology are as follows: June 30, 2018 December 30, 2017 Investment Allowance for Investment Allowance for In Leases Credit Losses In Leases Credit Losses Collectively evaluated for loss potential $ 44,093,200 $ 755,900 $ 41,974,200 $ 711,200 Individually evaluated for loss potential — — — — Total $ 44,093,200 $ 755,900 $ 41,974,200 $ 711,200 The Company’s key credit quality indicator for its investment in direct financing and sales-type leases is the status of the lease, defined as accruing or non-accrual. Leases that are accruing income are considered to have a lower risk of loss. Non-accrual leases are those that the Company believes have a higher risk of loss. The following table sets forth information regarding the Company’s accruing and non-accrual leases. Delinquent balances are determined based on the contractual terms of the lease. June 30, 2018 0-60 Days 61-90 Days Over 90 Days Delinquent Delinquent Delinquent and and Accruing and Accruing Accruing Non-Accrual Total Middle-Market $ 42,843,000 $ — $ — $ — $ 42,843,000 Small-Ticket 1,247,500 — — 2,700 1,250,200 Total Investment in Leases $ 44,090,500 $ — $ — $ 2,700 $ 44,093,200 December 30, 2017 0-60 Days 61-90 Days Over 90 Days Delinquent Delinquent Delinquent and and Accruing and Accruing Accruing Non-Accrual Total Middle-Market $ 40,657,500 $ 133,700 $ — $ — $ 40,791,200 Small-Ticket 1,183,000 — — — 1,183,000 Total Investment in Leases $ 41,840,500 $ 133,700 $ — $ — $ 41,974,200 |
Earnings Per Share_
Earnings Per Share: | 6 Months Ended |
Jun. 30, 2018 | |
Earnings Per Share: | |
Earnings Per Share: | 7. Earnings Per Share: The following table sets forth the presentation of shares outstanding used in the calculation of basic and diluted earnings per share (“EPS”): Three Months Ended Six Months Ended June 30, 2018 July 1, 2017 June 30, 2018 July 1, 2017 Denominator for basic EPS — weighted average common shares 3,858,446 4,201,982 3,852,880 4,184,558 Dilutive shares associated with option plans 275,089 281,665 276,175 282,514 Denominator for diluted EPS — weighted average common shares and dilutive potential common shares 4,133,535 4,483,647 4,129,055 4,467,072 Options excluded from EPS calculation — anti-dilutive 19,504 14,620 22,976 19,133 |
Shareholders' Equity (Deficit)_
Shareholders' Equity (Deficit): | 6 Months Ended |
Jun. 30, 2018 | |
Shareholders' Equity (Deficit): | |
Shareholders' Equity (Deficit): | 8. Shareholders’ Equity (Deficit): Dividends On January 24, 2018, the Company’s Board of Directors approved the payment of a $0.11 per share quarterly cash dividend to shareholders of record at the close of business on February 7, 2018, which was paid on March 1, 2018. On April 25, 2018, the Company’s Board of Directors approved the payment of a $0.15 per share quarterly cash dividend to shareholders of record at the close of business on May 9, 2018, which was paid on June 1, 2018. Repurchase of Common Stock In the first six months of 2018 the Company repurchased no shares of its common stock. Under the Board of Directors’ authorization, as of June 30, 2018, the Company has the ability to repurchase an additional 142,988 shares of its common stock. Repurchases may be made from time to time at prevailing prices, subject to certain restrictions on volume, pricing and timing. Stock Option Plans and Stock-Based Compensation The Company had authorized up to 750,000 shares of common stock be reserved for granting either nonqualified or incentive stock options to officers and key employees under the Company’s 2001 Stock Option Plan (the “2001 Plan”). The 2001 Plan expired on February 20, 2011. As of June 30, 2018, the Company has authorized up to 700,000 shares of common stock to be reserved for granting either nonqualified or incentive stock options to officers and key employees under the Company’s 2010 Stock Option Plan (the “2010 Plan”). The Company also sponsors a Stock Option Plan for Nonemployee Directors (the “Nonemployee Directors Plan”) and has reserved a total of 350,000 shares for issuance to directors of the Company who are not employees. Stock option activity under the 2001 Plan, 2010 Plan and Nonemployee Directors Plan (collectively, the “Option Plans”) as of June 30, 2018 was as follows: Weighted Average Remaining Number of Weighted Average Contractual Life Shares Exercise Price (years) Intrinsic Value Outstanding, December 30, 2017 658,184 $ 72.33 5.87 $ 37,723,800 Granted 35,000 143.20 Exercised (27,697) 41.39 Forfeited (4,063) 113.95 Outstanding, June 30, 2018 661,424 $ 77.12 5.69 $ 47,178,100 Exercisable, June 30, 2018 487,335 $ 62.07 4.66 $ 42,095,400 The fair value of options granted under the Option Plans during the first six months of 2018 and 2017 were estimated on the date of grant using the Black-Scholes option pricing model with the following weighted average assumptions and results: Six Months Ended June 30, 2018 July 1, 2017 Risk free interest rate 2.73 % % Expected life (years) 6 6 Expected volatility 20.40 % % Dividend yield 1.17 % 1.14 % Option fair value $ 31.44 $ During the six months ended June 30, 2018, option holders surrendered 2,249 shares of previously owned common shares as payment for options shares exercised as provided for by the Option Plans. All unexercised options at June 30, 2018 have an exercise price equal to the fair market value on the date of the grant. Compensation expense of $1,006,900 and $966,600 relating to the vested portion of the fair value of stock options granted was expensed to “Selling, General and Administrative Expenses” in the first six months of 2018 and 2017, respectively. As of June 30, 2018, the Company had $4.4 million of total unrecognized compensation expense related to stock options that is expected to be recognized over the remaining weighted average vesting period of approximately 2.6 years. |
Debt_
Debt: | 6 Months Ended |
Jun. 30, 2018 | |
Debt: | |
Debt: | 9. Debt: Line of Credit As of June 30, 2018, there was $18.4 million in borrowings outstanding under the Company’s revolving credit facility with CIBC Bank USA and BMO Harris Bank N.A. (the “Line of Credit”) bearing interest ranging from 3.73% to 5.00% leaving $31.6 million available for additional borrowings. The Line of Credit has been and will continue to be used for general corporate purposes. The Line of Credit is secured by a lien against substantially all of the Company’s assets, contains customary financial conditions and covenants, and requires maintenance of minimum levels of debt service coverage and tangible net worth and maximum levels of leverage (all as defined within the Line of Credit). As of June 30, 2018, the Company was in compliance with all of its financial covenants. Notes Payable As of June 30, 2018, the Company had $19.0 million in principal outstanding from the $25.0 million Series A notes issued in May 2015 and $11.6 million in principal outstanding from the $12.5 million Series B notes issued in August 2017 under its Note Agreement with Prudential Investment Management, Inc., its affiliates and managed accounts (“Prudential”). The final maturity of the Series A and Series B notes is 10 years from the issuance date. For the Series A notes, interest at a rate of 5.50% per annum on the outstanding principal balance is payable quarterly, along with required prepayments of the principal of $500,000 quarterly for the first five years, and $750,000 quarterly thereafter until the principal is paid in full. For the Series B notes, interest at a rate of 5.10% per annum on the outstanding principal balance is payable quarterly, along with required prepayments of the principal of $312,500 quarterly until the principal is paid in full. The Series A and Series B notes may be prepaid, at the option of the Company, in whole or in part (in a minimum amount of $1.0 million), but prepayments require payment of a Yield Maintenance Amount, as defined in the Note Agreement. The Company’s obligations under the Note Agreement are secured by a lien against substantially all of the Company’s assets (as the notes rank pari passu with the Line of Credit), and the Note Agreement contains customary financial conditions and covenants, and requires maintenance of minimum levels of fixed charge coverage and tangible net worth and maximum levels of leverage (all as defined within the Note Agreement). As of June 30, 2018, the Company was in compliance with all of its financial covenants. In connection with the Note Agreement, the Company incurred debt issuance costs, of which unamortized amounts are presented as a direct deduction from the carrying amount of the related liability. |
Discounted Lease Rentals_
Discounted Lease Rentals: | 6 Months Ended |
Jun. 30, 2018 | |
Discounted Lease Rentals: | |
Discounted Lease Rentals: | 10. Discounted Lease Rentals: The Company utilized certain lease receivables and underlying equipment as collateral to borrow from financial institutions at a weighted average rate of 6.19% at June 30, 2018 on a non-recourse basis. As of June 30, 2018, $1.6 million of the $3.9 million liability balance is current. |
Income Taxes_
Income Taxes: | 6 Months Ended |
Jun. 30, 2018 | |
Income Taxes: | |
Income Taxes: | 11. Income Taxes: For the three months ended June 30, 2018 and July 1, 2017, the effective income tax rate was 24.1% and 33.9%, respectively. For the six months ended June 30, 2018 and July 1, 2017, the effective income tax rate was 24.7% and 35.5%, respectively. The lower effective income tax rates in the 2018 periods when compared to the 2017 periods are primarily due to the enactment of the Tax Cuts and Jobs Act that reduced the federal corporate income tax rate from 35% to 21% beginning in 2018. |
Commitments and Contingencies_
Commitments and Contingencies: | 6 Months Ended |
Jun. 30, 2018 | |
Commitments and Contingencies: | |
Commitments and Contingencies: | 12. Commitments and Contingencies: In May 2018, the Company entered into an amendment to its lease for its corporate headquarters facility that, among other things, provides for an extension of the lease term for ten years and four months, commencing on September 1, 2019. The Company is obligated to pay rent monthly under the lease, and will pay an estimated $8.0 million in total rental payments over the entire term of the extended period of the lease. The Company is also obligated to pay estimated taxes and operating expenses (which change annually). |
Segment Reporting_
Segment Reporting: | 6 Months Ended |
Jun. 30, 2018 | |
Segment Reporting: | |
Segment Reporting: | 13. Segment Reporting: The Company currently has two reportable business segments, franchising and leasing. The franchising segment franchises value-oriented retail store concepts that buy, sell, trade and consign merchandise, as well as provides strategic consulting services related to franchising. The leasing segment includes (i) Winmark Capital Corporation, a middle-market equipment leasing business and (ii) Wirth Business Credit, Inc., a small ticket financing business. Segment reporting is intended to give financial statement users a better view of how the Company manages and evaluates its businesses. The Company’s internal management reporting is the basis for the information disclosed for its business segments and includes allocation of shared-service costs. Segment assets are those that are directly used in or identified with segment operations, including cash, accounts receivable, prepaid expenses, inventory, property and equipment and investment in leasing operations. Unallocated assets include corporate cash and cash equivalents, current and deferred tax amounts and other corporate assets. Inter-segment balances and transactions have been eliminated. The following tables summarize financial information by segment and provide a reconciliation of segment contribution to operating income: Three Months Ended Six Months Ended June 30, 2018 July 1, 2017 June 30, 2018 July 1, 2017 Revenue: Franchising $ 13,302,700 $ 12,483,100 $ 25,934,900 $ 24,434,400 Leasing 4,857,100 3,946,600 10,385,900 9,806,200 Total revenue $ 18,159,800 $ 16,429,700 $ 36,320,800 $ 34,240,600 Reconciliation to operating income: Franchising segment contribution $ $ $ $ Leasing segment contribution Total operating income $ 10,074,700 $ 8,813,100 $ 20,148,900 $ 18,126,500 Depreciation and amortization: Franchising $ 60,700 $ 69,100 $ 117,900 $ 144,900 Leasing 18,600 21,100 37,200 43,800 Total depreciation and amortization $ 79,300 $ 90,200 $ 155,100 $ 188,700 As of June 30, 2018 December 30, 2017 Identifiable assets: Franchising $ 3,814,000 $ 4,051,400 Leasing 44,552,300 42,153,600 Unallocated 450,700 2,637,000 Total $ 48,817,000 $ 48,842,000 |
Recent Accounting Pronounceme21
Recent Accounting Pronouncements: (Tables) | 6 Months Ended |
Jun. 30, 2018 | |
Accounting Standards Update 2014-09 | |
Recent Accounting Pronouncements: | |
Schedule of previously reported amounts as restated | Condensed Consolidated Statement of Operations: Three Months Ended July 1, 2017 Six Months Ended July 1, 2017 As Previously Reported Adjustments As Restated As Previously Reported Adjustments As Restated Revenue: Franchise fees $ 675,400 $ (206,600) $ 468,800 $ 944,700 $ (107,300) $ 837,400 Other 496,000 (113,200) 382,800 788,600 (25,400) 763,200 Selling, general and administrative expenses 6,467,100 1,300 6,468,400 12,970,500 10,400 12,980,900 Provision for income taxes (2,914,800) 78,600 (2,836,200) (6,136,500) 35,000 (6,101,500) Net income 5,773,200 (242,500) 5,530,700 11,189,600 (108,100) 11,081,500 Earnings per share - basic $ 1.37 $ $ $ 2.67 $ $ Earnings per share - diluted $ 1.29 $ $ $ 2.50 $ $ Consolidated Balance Sheet: December 30, 2017 As Previously Reported Adjustments As Restated ASSETS Prepaid expenses $ 814,800 $ 86,800 $ 901,600 Other assets — 350,400 350,400 LIABILITIES AND SHAREHOLDERS’ EQUITY (DEFICIT): Deferred revenue-Current $ 1,736,200 $ 1,276,500 $ 3,012,700 Deferred revenue-Long term 1,465,500 5,832,000 7,297,500 Deferred income taxes 1,956,500 (1,636,000) 320,500 Retained earnings (accumulated deficit) (32,154,400) (5,035,300) (37,189,700) |
Revenue Recognition_ Franchis22
Revenue Recognition: Franchising (Tables) | 6 Months Ended |
Jun. 30, 2018 | |
Revenue Recognition: Franchising | |
Schedule of activity of current and noncurrent deferred franchise revenue | June 30, 2018 July 1, 2017 Balance at beginning of period $ 10,310,200 $ 10,408,500 Franchise and software license fees collected from franchisees, excluding amount earned as revenue during the period 964,700 836,300 Fees earned that were included in the balance at the beginning of the period (933,200) (983,300) Balance at end of period $ 10,341,700 $ 10,261,500 |
Schedule of future estimated revenue to be recognized related to performance obligations | Contract Liabilities expected to be recognized in Amount 2018 $ 838,800 2019 1,679,800 2020 1,543,200 2021 1,404,400 2022 1,259,500 Thereafter 3,616,000 $ 10,341,700 |
Investment in Leasing Operati23
Investment in Leasing Operations: (Tables) | 6 Months Ended |
Jun. 30, 2018 | |
Investment in Leasing Operations: | |
Schedule of investment in leasing operations | June 30, 2018 December 30, 2017 Direct financing and sales-type leases: Minimum lease payments receivable $ 42,666,700 $ 36,119,700 Estimated residual value of equipment 3,830,400 4,762,700 Unearned lease income net of initial direct costs deferred (7,727,200) (5,371,900) Security deposits (4,039,700) (4,526,000) Equipment installed on leases not yet commenced 9,363,000 10,989,700 Total investment in direct financing and sales-type leases 44,093,200 41,974,200 Allowance for credit losses (755,900) (711,200) Net investment in direct financing and sales-type leases 43,337,300 41,263,000 Operating leases: Operating lease assets 1,370,900 1,045,400 Less accumulated depreciation and amortization (1,281,700) (1,030,800) Net investment in operating leases 89,200 14,600 Total net investment in leasing operations $ 43,426,500 $ 41,277,600 |
Schedule of future minimum lease payments receivable under lease contracts and the amortization of unearned lease income, net of initial direct costs deferred | Direct Financing and Sales-Type Leases Operating Leases Minimum Lease Income Minimum Lease Fiscal Year Payments Receivable Amortization Payments Receivable 2018 $ 12,738,700 $ 3,418,500 $ 84,300 2019 21,656,500 3,855,000 76,900 2020 7,581,200 442,500 — 2021 664,100 9,300 — 2022 13,700 1,300 — Thereafter 12,500 600 — $ 42,666,700 $ 7,727,200 $ 161,200 |
Schedule of activity in the allowance for credit losses for leasing operations | June 30, 2018 July 1, 2017 Balance at beginning of period $ 711,200 $ 896,000 Provisions charged to expense 204,000 (12,900) Recoveries (60,900) 10,200 Deductions for amounts written-off (98,400) — Balance at end of period $ 755,900 $ 893,300 |
Schedule of investment in direct financing and sales-type leases (investment in leases) and allowance for credit losses by loss evaluation methodology | June 30, 2018 December 30, 2017 Investment Allowance for Investment Allowance for In Leases Credit Losses In Leases Credit Losses Collectively evaluated for loss potential $ 44,093,200 $ 755,900 $ 41,974,200 $ 711,200 Individually evaluated for loss potential — — — — Total $ 44,093,200 $ 755,900 $ 41,974,200 $ 711,200 |
Schedule of information regarding accruing and non-accrual leases | June 30, 2018 0-60 Days 61-90 Days Over 90 Days Delinquent Delinquent Delinquent and and Accruing and Accruing Accruing Non-Accrual Total Middle-Market $ 42,843,000 $ — $ — $ — $ 42,843,000 Small-Ticket 1,247,500 — — 2,700 1,250,200 Total Investment in Leases $ 44,090,500 $ — $ — $ 2,700 $ 44,093,200 December 30, 2017 0-60 Days 61-90 Days Over 90 Days Delinquent Delinquent Delinquent and and Accruing and Accruing Accruing Non-Accrual Total Middle-Market $ 40,657,500 $ 133,700 $ — $ — $ 40,791,200 Small-Ticket 1,183,000 — — — 1,183,000 Total Investment in Leases $ 41,840,500 $ 133,700 $ — $ — $ 41,974,200 |
Earnings Per Share_ (Tables)
Earnings Per Share: (Tables) | 6 Months Ended |
Jun. 30, 2018 | |
Earnings Per Share: | |
Schedule of shares outstanding used in the calculation of basic and diluted earnings per share | Three Months Ended Six Months Ended June 30, 2018 July 1, 2017 June 30, 2018 July 1, 2017 Denominator for basic EPS — weighted average common shares 3,858,446 4,201,982 3,852,880 4,184,558 Dilutive shares associated with option plans 275,089 281,665 276,175 282,514 Denominator for diluted EPS — weighted average common shares and dilutive potential common shares 4,133,535 4,483,647 4,129,055 4,467,072 Options excluded from EPS calculation — anti-dilutive 19,504 14,620 22,976 19,133 |
Shareholders' Equity (Deficit25
Shareholders' Equity (Deficit): (Tables) | 6 Months Ended |
Jun. 30, 2018 | |
Shareholders' Equity (Deficit): | |
Schedule of stock option activity | Weighted Average Remaining Number of Weighted Average Contractual Life Shares Exercise Price (years) Intrinsic Value Outstanding, December 30, 2017 658,184 $ 72.33 5.87 $ 37,723,800 Granted 35,000 143.20 Exercised (27,697) 41.39 Forfeited (4,063) 113.95 Outstanding, June 30, 2018 661,424 $ 77.12 5.69 $ 47,178,100 Exercisable, June 30, 2018 487,335 $ 62.07 4.66 $ 42,095,400 |
Schedule of weighted average assumptions used in estimation of fair value of options granted | Six Months Ended June 30, 2018 July 1, 2017 Risk free interest rate 2.73 % % Expected life (years) 6 6 Expected volatility 20.40 % % Dividend yield 1.17 % 1.14 % Option fair value $ 31.44 $ |
Segment Reporting_ (Tables)
Segment Reporting: (Tables) | 6 Months Ended |
Jun. 30, 2018 | |
Segment Reporting: | |
Schedule of financial information by segment and reconciliation of segment contribution to operating income | Three Months Ended Six Months Ended June 30, 2018 July 1, 2017 June 30, 2018 July 1, 2017 Revenue: Franchising $ 13,302,700 $ 12,483,100 $ 25,934,900 $ 24,434,400 Leasing 4,857,100 3,946,600 10,385,900 9,806,200 Total revenue $ 18,159,800 $ 16,429,700 $ 36,320,800 $ 34,240,600 Reconciliation to operating income: Franchising segment contribution $ $ $ $ Leasing segment contribution Total operating income $ 10,074,700 $ 8,813,100 $ 20,148,900 $ 18,126,500 Depreciation and amortization: Franchising $ 60,700 $ 69,100 $ 117,900 $ 144,900 Leasing 18,600 21,100 37,200 43,800 Total depreciation and amortization $ 79,300 $ 90,200 $ 155,100 $ 188,700 As of June 30, 2018 December 30, 2017 Identifiable assets: Franchising $ 3,814,000 $ 4,051,400 Leasing 44,552,300 42,153,600 Unallocated 450,700 2,637,000 Total $ 48,817,000 $ 48,842,000 |
Management's Interim Financia27
Management's Interim Financial Statement Representation: (Details) | 6 Months Ended |
Jun. 30, 2018item | |
Minimum | |
Number of Weeks in Fiscal Year | 52 |
Maximum | |
Number of Weeks in Fiscal Year | 53 |
Recent Accounting Pronounceme28
Recent Accounting Pronouncements: ASU 2016-18 (Details) | 6 Months Ended |
Jul. 01, 2017USD ($) | |
Accounting Standards Update 2016-18 | Previously Reported | |
Recently Adopted Accounting Pronouncements | |
Increase in restricted cash | $ 10,000 |
Recent Accounting Pronounceme29
Recent Accounting Pronouncements: ASU 2014-09 (Details) - USD ($) | 3 Months Ended | 6 Months Ended | |||
Jun. 30, 2018 | Jul. 01, 2017 | Jun. 30, 2018 | Jul. 01, 2017 | Dec. 30, 2017 | |
Consolidated Statement of Operations | |||||
Selling, general and administrative expenses | $ 6,799,300 | $ 6,468,400 | $ 13,493,700 | $ 12,980,900 | |
Provision for income taxes | (2,262,500) | (2,836,200) | (4,631,500) | (6,101,500) | |
Net Income | $ 7,143,000 | $ 5,530,700 | $ 14,103,400 | $ 11,081,500 | |
Earnings per share - basic (in dollars per share) | $ 1.85 | $ 1.32 | $ 3.66 | $ 2.65 | |
Earnings per share - diluted (in dollars per share) | $ 1.73 | $ 1.23 | $ 3.42 | $ 2.48 | |
ASSETS | |||||
Prepaid expenses | $ 765,800 | $ 765,800 | $ 901,600 | ||
Other assets | 396,800 | 396,800 | 350,400 | ||
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT) | |||||
Deferred revenue - Current | 3,047,200 | 3,047,200 | 3,012,700 | ||
Deferred revenue - Long term | 7,294,500 | 7,294,500 | 7,297,500 | ||
Deferred income taxes | 360,200 | 360,200 | 320,500 | ||
Retained earnings (accumulated deficit) | (24,087,400) | (24,087,400) | (37,189,700) | ||
Franchise fees | |||||
Consolidated Statement of Operations | |||||
Revenue | 378,100 | $ 468,800 | 779,000 | $ 837,400 | |
Other | |||||
Consolidated Statement of Operations | |||||
Revenue | $ 398,700 | 382,800 | $ 804,100 | 763,200 | |
As Previously Reported | |||||
Consolidated Statement of Operations | |||||
Selling, general and administrative expenses | 6,467,100 | 12,970,500 | |||
Provision for income taxes | (2,914,800) | (6,136,500) | |||
Net Income | $ 5,773,200 | $ 11,189,600 | |||
Earnings per share - basic (in dollars per share) | $ 1.37 | $ 2.67 | |||
Earnings per share - diluted (in dollars per share) | $ 1.29 | $ 2.50 | |||
ASSETS | |||||
Prepaid expenses | 814,800 | ||||
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT) | |||||
Deferred revenue - Current | 1,736,200 | ||||
Deferred revenue - Long term | 1,465,500 | ||||
Deferred income taxes | 1,956,500 | ||||
Retained earnings (accumulated deficit) | (32,154,400) | ||||
As Previously Reported | Franchise fees | |||||
Consolidated Statement of Operations | |||||
Revenue | $ 675,400 | $ 944,700 | |||
As Previously Reported | Other | |||||
Consolidated Statement of Operations | |||||
Revenue | 496,000 | 788,600 | |||
Adjustments | |||||
Consolidated Statement of Operations | |||||
Selling, general and administrative expenses | 1,300 | 10,400 | |||
Provision for income taxes | 78,600 | 35,000 | |||
Net Income | $ (242,500) | $ (108,100) | |||
Earnings per share - basic (in dollars per share) | $ (0.05) | $ (0.02) | |||
Earnings per share - diluted (in dollars per share) | $ (0.06) | $ (0.02) | |||
ASSETS | |||||
Prepaid expenses | 86,800 | ||||
Other assets | 350,400 | ||||
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT) | |||||
Deferred revenue - Current | 1,276,500 | ||||
Deferred revenue - Long term | 5,832,000 | ||||
Deferred income taxes | (1,636,000) | ||||
Retained earnings (accumulated deficit) | $ (5,035,300) | ||||
Adjustments | Franchise fees | |||||
Consolidated Statement of Operations | |||||
Revenue | $ (206,600) | $ (107,300) | |||
Adjustments | Other | |||||
Consolidated Statement of Operations | |||||
Revenue | $ (113,200) | $ (25,400) |
Revenue Recognition_ Franchis30
Revenue Recognition: Franchising - Other (Details) - USD ($) $ in Millions | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2018 | Jul. 01, 2017 | Jun. 30, 2018 | Jul. 01, 2017 | |
Marketing Fees | ||||
Revenue recognition | ||||
Revenue | $ 0.3 | $ 0.3 | $ 0.6 | $ 0.6 |
Software License Fees | ||||
Revenue recognition | ||||
Revenue | $ 0.1 | $ 0.1 | $ 0.2 | $ 0.2 |
Revenue Recognition_ Franchis31
Revenue Recognition: Franchising - Contract Liabilities (Details) - USD ($) | 6 Months Ended | |
Jun. 30, 2018 | Jul. 01, 2017 | |
Revenue Recognition: Franchising | ||
Balance at beginning of period | $ 10,310,200 | $ 10,408,500 |
Franchise and software license fees collected from franchisees, excluding amount earned as revenue during the period | 964,700 | 836,300 |
Fees earned that were included in the balance at the beginning of the period | (933,200) | (983,300) |
Balance at end of period | $ 10,341,700 | $ 10,261,500 |
Revenue Recognition_ Franchis32
Revenue Recognition: Franchising - Performance Obligations (Details) | 6 Months Ended |
Jun. 30, 2018USD ($) | |
Revenue Recognition: Franchising | |
Revenue, remaining peformance obligation | $ 10,341,700 |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2018-07-01 | |
Revenue Recognition: Franchising | |
Revenue, remaining peformance obligation | $ 838,800 |
Future estimated revenue to be recognised related to performance obligations | |
Duration of expected recognition period for remaining performance obligation | 6 months |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2018-12-30 | |
Revenue Recognition: Franchising | |
Revenue, remaining peformance obligation | $ 1,679,800 |
Future estimated revenue to be recognised related to performance obligations | |
Duration of expected recognition period for remaining performance obligation | 1 year |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2019-12-29 | |
Revenue Recognition: Franchising | |
Revenue, remaining peformance obligation | $ 1,543,200 |
Future estimated revenue to be recognised related to performance obligations | |
Duration of expected recognition period for remaining performance obligation | 1 year |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2020-12-27 | |
Revenue Recognition: Franchising | |
Revenue, remaining peformance obligation | $ 1,404,400 |
Future estimated revenue to be recognised related to performance obligations | |
Duration of expected recognition period for remaining performance obligation | 1 year |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2021-12-26 | |
Revenue Recognition: Franchising | |
Revenue, remaining peformance obligation | $ 1,259,500 |
Future estimated revenue to be recognised related to performance obligations | |
Duration of expected recognition period for remaining performance obligation | 1 year |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2023-01-01 | |
Revenue Recognition: Franchising | |
Revenue, remaining peformance obligation | $ 3,616,000 |
Future estimated revenue to be recognised related to performance obligations | |
Duration of expected recognition period for remaining performance obligation |
Revenue Recognition_ Franchis33
Revenue Recognition: Franchising - Commission Fees (Details) - Commission Fees - USD ($) | 3 Months Ended | 6 Months Ended | |||
Jun. 30, 2018 | Jul. 01, 2017 | Jun. 30, 2018 | Jul. 01, 2017 | Dec. 30, 2017 | |
Commission Fees | |||||
Capitalized contract costs | $ 500,000 | $ 500,000 | $ 400,000 | ||
Expense | $ 24,500 | $ 24,800 | $ 48,400 | $ 49,900 |
Investment in Leasing Operati34
Investment in Leasing Operations: Summary of Leasing Operations (Details) - USD ($) | Jun. 30, 2018 | Dec. 30, 2017 |
Direct financing and sales-type leases: | ||
Minimum lease payments receivable | $ 42,666,700 | $ 36,119,700 |
Estimated residual value of equipment | 3,830,400 | 4,762,700 |
Unearned lease income net of initial direct costs deferred | (7,727,200) | (5,371,900) |
Security deposits | (4,039,700) | (4,526,000) |
Equipment installed on leases not yet commenced | 9,363,000 | 10,989,700 |
Total investment in direct financing and sales-type leases | 44,093,200 | 41,974,200 |
Allowance for credit losses | (755,900) | (711,200) |
Net investment in direct financing and sales-type leases | 43,337,300 | 41,263,000 |
Operating leases: | ||
Operating lease assets | 1,370,900 | 1,045,400 |
Less accumulated depreciation and amortization | (1,281,700) | (1,030,800) |
Net investment in operating leases | 89,200 | 14,600 |
Total net investment in leasing operations | 43,426,500 | 41,277,600 |
Net investment in leases - current | 17,046,100 | 15,332,300 |
Net investment in leases - long-term | $ 26,380,400 | $ 25,945,300 |
Investment in Leasing Operati35
Investment in Leasing Operations: Risk Concentration (Details) - Total assets | 6 Months Ended |
Jun. 30, 2018customer | |
Investment in leasing operations | |
Number of customers | 1 |
Customer One Concentration Risk | |
Investment in leasing operations | |
Percentage of concentration risk | 28.00% |
Investment in Leasing Operati36
Investment in Leasing Operations: Minimum Lease Payments Receivable (Details) - USD ($) | Jun. 30, 2018 | Dec. 30, 2017 |
Direct Financing and Sales-Type Leases, Minimum Lease Payments Receivable | ||
2,018 | $ 12,738,700 | |
2,019 | 21,656,500 | |
2,020 | 7,581,200 | |
2,021 | 664,100 | |
2,022 | 13,700 | |
Thereafter | 12,500 | |
Total | 42,666,700 | $ 36,119,700 |
Direct Financing and Sales-Type Leases, Income Amortization | ||
2,018 | 3,418,500 | |
2,019 | 3,855,000 | |
2,020 | 442,500 | |
2,021 | 9,300 | |
2,022 | 1,300 | |
Thereafter | 600 | |
Total | 7,727,200 | |
Operating Leases, Minimum Lease Payments Receivable | ||
2,018 | 84,300 | |
2,019 | 76,900 | |
Total | $ 161,200 |
Investment in Leasing Operati37
Investment in Leasing Operations: Credit Losses (Details) - USD ($) | 3 Months Ended | 6 Months Ended | |||
Jun. 30, 2018 | Jul. 01, 2017 | Jun. 30, 2018 | Jul. 01, 2017 | Dec. 30, 2017 | |
Activity in the allowance for credit losses for leasing operations | |||||
Balance at beginning of period | $ 711,200 | $ 896,000 | |||
Provision for credit losses | $ 109,000 | $ (11,500) | 204,000 | (12,900) | |
Recoveries | (60,900) | 10,200 | |||
Deductions for amounts written-off | (98,400) | ||||
Balance at end of period | 755,900 | $ 893,300 | 755,900 | $ 893,300 | |
Investment In Leases | |||||
Total investment in direct financing and sales-type leases | 44,093,200 | 44,093,200 | $ 41,974,200 | ||
Allowance for Credit Losses | |||||
Total | 755,900 | 755,900 | 711,200 | ||
Investment in leases | |||||
Investment In Leases | |||||
Collectively evaluated for loss potential | 44,093,200 | 44,093,200 | 41,974,200 | ||
Total investment in direct financing and sales-type leases | 44,093,200 | 44,093,200 | 41,974,200 | ||
Allowance for Credit Losses | |||||
Collectively evaluated for loss potential | 755,900 | 755,900 | 711,200 | ||
Total | $ 755,900 | $ 755,900 | $ 711,200 |
Investment in Leasing Operati38
Investment in Leasing Operations: Investment Aging (Details) - USD ($) | Jun. 30, 2018 | Dec. 30, 2017 |
Investment in leasing operations | ||
0-60 Days Delinquent and Accruing | $ 44,090,500 | $ 41,840,500 |
61-90 Days Delinquent and Accruing | 133,700 | |
Non-Accrual | 2,700 | |
Total investment in direct financing and sales-type leases | 44,093,200 | 41,974,200 |
Middle-Market | ||
Investment in leasing operations | ||
0-60 Days Delinquent and Accruing | 42,843,000 | 40,657,500 |
61-90 Days Delinquent and Accruing | 133,700 | |
Total investment in direct financing and sales-type leases | 42,843,000 | 40,791,200 |
Small-Ticket | ||
Investment in leasing operations | ||
0-60 Days Delinquent and Accruing | 1,247,500 | 1,183,000 |
Non-Accrual | 2,700 | |
Total investment in direct financing and sales-type leases | $ 1,250,200 | $ 1,183,000 |
Earnings Per Share_ (Details)
Earnings Per Share: (Details) - shares | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2018 | Jul. 01, 2017 | Jun. 30, 2018 | Jul. 01, 2017 | |
Earnings Per Share: | ||||
Denominator for basic EPS - weighted average common shares | 3,858,446 | 4,201,982 | 3,852,880 | 4,184,558 |
Dilutive shares associated with option plans | 275,089 | 281,665 | 276,175 | 282,514 |
Denominator for diluted EPS - weighted average common shares and dilutive potential common shares | 4,133,535 | 4,483,647 | 4,129,055 | 4,467,072 |
Options excluded from EPS calculation - anti-dilutive (in shares) | 19,504 | 14,620 | 22,976 | 19,133 |
Shareholders' Equity (Deficit40
Shareholders' Equity (Deficit): Dividends and Repurchase of Common Stock (Details) - $ / shares | Apr. 25, 2018 | Jan. 24, 2018 | Jun. 30, 2018 |
Dividends | |||
Cash dividends declared and paid (in dollars per share) | $ 0.15 | $ 0.11 | |
Common Stock Repurchase Program | |||
Repurchase of Common Stock | |||
Number of shares repurchased | 0 | ||
Number of additional shares that can be repurchased | 142,988 |
Shareholders' Equity (Deficit41
Shareholders' Equity (Deficit): Stock Option Plans and Stock-Based Compensation (Details) - Stock options - USD ($) | 6 Months Ended | 12 Months Ended | ||
Jun. 30, 2018 | Jul. 01, 2017 | Dec. 30, 2017 | Feb. 20, 2011 | |
Number of Shares | ||||
Outstanding at the beginning of the period (in shares) | 658,184 | |||
Granted (in shares) | 35,000 | |||
Exercised (in shares) | (27,697) | |||
Forfeited (in shares) | (4,063) | |||
Outstanding at the end of the period (in shares) | 661,424 | 658,184 | ||
Exercisable at the end of the period (in shares) | 487,335 | |||
Weighted Average Exercise Price | ||||
Outstanding at the beginning of the period (in dollars per share) | $ 72.33 | |||
Granted (in dollars per share) | 143.20 | |||
Exercised (in dollars per share) | 41.39 | |||
Forfeited (in dollars per share) | 113.95 | |||
Outstanding at the end of the period (in dollars per share) | 77.12 | $ 72.33 | ||
Exercisable at the end of the period (in dollars per share) | $ 62.07 | |||
Weighted Average Remaining Contractual Life (years) | ||||
Outstanding | 5 years 8 months 9 days | 5 years 10 months 13 days | ||
Exercisable at the end of the period | 4 years 7 months 28 days | |||
Intrinsic Value | ||||
Outstanding | $ 47,178,100 | $ 37,723,800 | ||
Exercisable at the end of the period | $ 42,095,400 | |||
Weighted average assumptions and results used in estimation of fair value of options granted | ||||
Risk free interest rate (as a percent) | 2.73% | 1.90% | ||
Expected life (years) | 6 years | 6 years | ||
Expected volatility (as a percent) | 20.40% | 26.93% | ||
Dividend yield (as a percent) | 1.17% | 1.14% | ||
Option fair value (in dollars per share) | $ 31.44 | $ 31.38 | ||
Additional disclosures | ||||
Shares of previously owned common stock surrendered as payment for option shares exercised | 2,249 | |||
Compensation expense | $ 1,006,900 | $ 966,600 | ||
Total unrecognized compensation expense | $ 4,400,000 | |||
Weighted average period for recognition of unrecognized compensation expense | 2 years 7 months 6 days | |||
2001 Plan | ||||
Stock Option Plans | ||||
Number of shares authorized for issuance | 750,000 | |||
2010 Plan | ||||
Stock Option Plans | ||||
Number of shares authorized for issuance | 700,000 | |||
Nonemployee Directors Plan | ||||
Stock Option Plans | ||||
Number of shares authorized for issuance | 350,000 |
Debt_ Line of Credit (Details)
Debt: Line of Credit (Details) - Line of Credit $ in Millions | Jun. 30, 2018USD ($) |
Line of Credit | |
Borrowings outstanding | $ 18.4 |
Line of credit available for additional borrowings | $ 31.6 |
Minimum | |
Line of Credit | |
Interest rate (as a percent) | 3.73% |
Maximum | |
Line of Credit | |
Interest rate (as a percent) | 5.00% |
Debt_ Notes Payable (Details)
Debt: Notes Payable (Details) - Prudential Investment Management, Inc - USD ($) | 6 Months Ended | ||
Jun. 30, 2018 | Aug. 31, 2017 | May 31, 2015 | |
Notes Payable | |||
Notes Payable | |||
Minimum prepayment | $ 1,000,000 | ||
Series A Notes | |||
Notes Payable | |||
Principal amount outstanding | $ 19,000,000 | ||
Note payable, face amount | $ 25,000,000 | ||
Term of notes payable | 10 years | ||
Interest rate (as a percent) | 5.50% | ||
Quarterly principal payment, first five years | $ 500,000 | ||
Quarterly principal payment, thereafter | 750,000 | ||
Series B Notes | |||
Notes Payable | |||
Principal amount outstanding | $ 11,600,000 | ||
Note payable, face amount | $ 12,500,000 | ||
Term of notes payable | 10 years | ||
Interest rate (as a percent) | 5.10% | ||
Quarterly principal payment | $ 312,500 |
Discounted Lease Rentals_ (Deta
Discounted Lease Rentals: (Details) - USD ($) | Jun. 30, 2018 | Dec. 30, 2017 |
Discounted Lease Rentals | ||
Discounted lease rentals, current | $ 1,637,100 | $ 570,800 |
Discounted lease rentals | $ 3,900,000 | |
Secured Debt | ||
Discounted Lease Rentals | ||
Weighted average interest rate on a non-recourse basis (as a percent) | 6.19% |
Income Taxes_ (Details)
Income Taxes: (Details) | 3 Months Ended | 6 Months Ended | 12 Months Ended | ||
Jun. 30, 2018 | Jul. 01, 2017 | Jun. 30, 2018 | Jul. 01, 2017 | Dec. 30, 2017 | |
Income Taxes: | |||||
Effective tax rate (as a percent) | 24.10% | 33.90% | 24.70% | 35.50% | |
Corporate income tax rate (as a percent) | 21.00% | 35.00% |
Commitments and Contingencies_
Commitments and Contingencies: (Details) - Lease Amendment, May 2018 - Scenario, Forecast $ in Millions | Sep. 01, 2019USD ($) |
Commitments and Contingencies: | |
Term of lease | 10 years 4 months |
Estimated total rental payments over the entire term of the extended lease period | $ 8 |
Segment Reporting_ (Details)
Segment Reporting: (Details) | 3 Months Ended | 6 Months Ended | |||
Jun. 30, 2018USD ($) | Jul. 01, 2017USD ($) | Jun. 30, 2018USD ($)item | Jul. 01, 2017USD ($) | Dec. 30, 2017USD ($) | |
Segment Reporting | |||||
Number of reportable business segments | item | 2 | ||||
Total revenue | $ 18,159,800 | $ 16,429,700 | $ 36,320,800 | $ 34,240,600 | |
Total operating income | 10,074,700 | 8,813,100 | 20,148,900 | 18,126,500 | |
Total depreciation and amortization | 79,300 | 90,200 | 155,100 | 188,700 | |
Total identifiable assets | 48,817,000 | 48,817,000 | $ 48,842,000 | ||
Operating | Franchising | |||||
Segment Reporting | |||||
Total revenue | 13,302,700 | 12,483,100 | 25,934,900 | 24,434,400 | |
Total operating income | 7,407,500 | 6,891,200 | 14,200,000 | 13,211,700 | |
Total depreciation and amortization | 60,700 | 69,100 | 117,900 | 144,900 | |
Total identifiable assets | 3,814,000 | 3,814,000 | 4,051,400 | ||
Operating | Leasing | |||||
Segment Reporting | |||||
Total revenue | 4,857,100 | 3,946,600 | 10,385,900 | 9,806,200 | |
Total operating income | 2,667,200 | 1,921,900 | 5,948,900 | 4,914,800 | |
Total depreciation and amortization | 18,600 | $ 21,100 | 37,200 | $ 43,800 | |
Total identifiable assets | 44,552,300 | 44,552,300 | 42,153,600 | ||
Unallocated | |||||
Segment Reporting | |||||
Total identifiable assets | $ 450,700 | $ 450,700 | $ 2,637,000 |