Document and Entity Information
Document and Entity Information - USD ($) | 12 Months Ended | ||
Dec. 28, 2019 | Mar. 09, 2020 | Jun. 29, 2019 | |
Document and Entity Information | |||
Entity Registrant Name | WINMARK CORP | ||
Entity Central Index Key | 0000908315 | ||
Document Type | 10-K | ||
Document Period End Date | Dec. 28, 2019 | ||
Amendment Flag | false | ||
Current Fiscal Year End Date | --12-28 | ||
Entity Well-known Seasoned Issuer | No | ||
Entity Voluntary Filers | No | ||
Entity Current Reporting Status | Yes | ||
Entity Interactive Data Current | Yes | ||
Entity Filer Category | Accelerated Filer | ||
Entity Public Float | $ 339,792,677 | ||
Entity Common Stock, Shares Outstanding | 3,648,753 | ||
Document Fiscal Year Focus | 2019 | ||
Document Fiscal Period Focus | FY | ||
Entity Small Business | true | ||
Entity Emerging Growth Company | false | ||
Entity Shell Company | false |
CONSOLIDATED BALANCE SHEETS
CONSOLIDATED BALANCE SHEETS - USD ($) | Dec. 28, 2019 | Dec. 29, 2018 |
Current Assets: | ||
Cash and cash equivalents | $ 25,130,300 | $ 2,496,000 |
Restricted cash | 50,000 | 80,000 |
Receivables, less allowance for doubtful accounts of $1,900 and $400 | 1,669,500 | 1,553,100 |
Net investment in leases - current | 12,800,100 | |
Net investment in leases - current | 18,547,500 | |
Income tax receivable | 497,900 | 565,500 |
Inventories | 86,000 | 107,600 |
Prepaid expenses | 968,100 | 901,600 |
Total current assets | 41,201,900 | 24,251,300 |
Net investment in leases - long-term | 12,505,500 | |
Net investment in leases - long-term | 20,455,500 | |
Property and equipment: | ||
Furniture and equipment | 3,910,900 | 3,518,600 |
Building and building improvements | 2,955,100 | 1,466,400 |
Less - accumulated depreciation and amortization | (4,093,400) | (4,118,800) |
Property and equipment, net | 2,772,600 | 866,200 |
Operating lease right of use asset | 3,595,200 | |
Goodwill | 607,500 | 607,500 |
Other assets | 492,500 | 482,600 |
Deferred income taxes | 667,000 | |
Total assets | 61,842,200 | 46,663,100 |
Current Liabilities: | ||
Notes payable, net of unamortized debt issuance costs of $13,900 and $13,900 | 3,736,100 | 3,236,100 |
Accounts payable | 1,015,000 | 1,351,800 |
Accrued liabilities | 2,783,100 | 3,128,600 |
Discounted lease rentals | 2,680,700 | 3,021,900 |
Deferred revenue | 1,717,000 | 1,744,900 |
Total current liabilities | 11,931,900 | 12,483,300 |
Long-term Liabilities: | ||
Notes payable, net of unamortized debt issuance costs of $68,700 and $82,600 | 21,868,800 | 25,604,900 |
Discounted lease rentals | 836,900 | 2,723,500 |
Deferred revenue | 7,858,500 | 8,432,400 |
Operating lease liabilities | 5,846,100 | |
Other liabilities | 1,051,700 | 1,079,200 |
Deferred income taxes | 1,148,300 | |
Total long-term liabilities | 37,462,000 | 38,988,300 |
Commitments and Contingencies | ||
Shareholders' Equity (Deficit): | ||
Common stock, no par value, 10,000,000 shares authorized, 3,947,858 and 3,907,686 shares issued and outstanding | 11,929,300 | 4,425,600 |
Retained earnings (accumulated deficit) | 519,000 | (9,234,100) |
Total shareholders' equity (deficit) | 12,448,300 | (4,808,500) |
Total liabilities and shareholders' equity (deficit) | $ 61,842,200 | $ 46,663,100 |
CONSOLIDATED BALANCE SHEETS (Pa
CONSOLIDATED BALANCE SHEETS (Parenthetical) - USD ($) | Dec. 28, 2019 | Dec. 29, 2018 |
CONSOLIDATED CONDENSED BALANCE SHEETS | ||
Receivables, allowance for doubtful accounts | $ 1,900 | $ 400 |
Unamortized debt issuance costs - Current | 13,900 | 13,900 |
Unamortized debt issuance costs - Noncurrent | $ 68,700 | $ 82,600 |
Common stock, par value (in dollars per share) | $ 0 | $ 0 |
Common stock, shares authorized | 10,000,000 | 10,000,000 |
Common stock, shares issued | 3,947,858 | 3,907,686 |
Common stock, shares outstanding | 3,947,858 | 3,907,686 |
CONSOLIDATED STATEMENTS OF OPER
CONSOLIDATED STATEMENTS OF OPERATIONS - USD ($) | 12 Months Ended | ||
Dec. 28, 2019 | Dec. 29, 2018 | Dec. 30, 2017 | |
Revenue: | |||
Leasing income | $ 16,055,800 | ||
Leasing income | $ 18,176,500 | $ 18,470,200 | |
Total revenue | 73,298,900 | 72,511,100 | 69,757,300 |
Cost of merchandise sold | 2,469,700 | 2,741,100 | 2,432,600 |
Leasing expense | 2,031,100 | 1,929,300 | 3,269,100 |
Provision for credit losses | (78,300) | 38,600 | 9,000 |
Selling, general and administrative expenses | 25,745,300 | 26,038,300 | 25,241,600 |
Income from operations | 43,131,100 | 41,763,800 | 38,805,000 |
Interest expense | (1,731,100) | (2,447,500) | (2,366,400) |
Interest and other income (expense) | 67,400 | (33,200) | 12,900 |
Income before income taxes | 41,467,400 | 39,283,100 | 36,451,500 |
Provision for income taxes | (9,318,100) | (9,157,600) | (11,871,000) |
Net income | $ 32,149,300 | $ 30,125,500 | $ 24,580,500 |
Earnings per share - basic (in dollars per share) | $ 8.37 | $ 7.77 | $ 6.06 |
Earnings per share - diluted (in dollars per share) | $ 7.84 | $ 7.26 | $ 5.66 |
Weighted average shares outstanding - basic | 3,840,638 | 3,874,757 | 4,056,049 |
Weighted average shares outstanding - diluted | 4,100,629 | 4,149,779 | 4,339,944 |
Royalties | |||
Revenue: | |||
Revenue | $ 51,421,800 | $ 48,224,500 | $ 45,643,500 |
Merchandise sales | |||
Revenue: | |||
Revenue | 2,618,800 | 2,903,100 | 2,572,200 |
Franchise fees | |||
Revenue: | |||
Revenue | 1,540,900 | 1,580,300 | 1,541,100 |
Other | |||
Revenue: | |||
Revenue | $ 1,661,600 | $ 1,626,700 | $ 1,530,300 |
CONSOLIDATED STATEMENTS OF COMP
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME | 12 Months Ended |
Dec. 30, 2017USD ($) | |
CONSOLIDATED CONDENSED STATEMENTS OF COMPREHENSIVE INCOME | |
Net income | $ 24,580,500 |
Other comprehensive income, before tax: | |
Unrealized holding net gains arising during period | 15,900 |
Other comprehensive income, before tax | 15,900 |
Income tax expense related to items of other comprehensive income: | |
Unrealized holding net gains/losses arising during period | (6,000) |
Income tax expense related to items of other comprehensive income | (6,000) |
Other comprehensive income, net of tax | 9,900 |
Comprehensive income | $ 24,590,400 |
CONSOLIDATED STATEMENTS OF SHAR
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (DEFICIT) - USD ($) | Common Stock | Retained Earnings (Accumulated Deficit). | Accumulated Other Comprehensive Income (Loss) | Total |
BALANCE at Dec. 31, 2016 | $ 2,976,100 | $ (15,868,900) | $ (9,900) | $ (12,902,700) |
BALANCE (in shares) at Dec. 31, 2016 | 4,165,769 | |||
Shareholders’ Equity (Deficit) | ||||
Repurchase of common stock | $ (5,766,200) | (44,136,300) | (49,902,500) | |
Repurchase of common stock (in shares) | (400,000) | |||
Stock options exercised | $ 2,309,700 | 2,309,700 | ||
Stock options exercised (in shares) | 77,309 | |||
Compensation expense relating to stock options | $ 1,956,600 | 1,956,600 | ||
Cash dividends | (1,765,000) | (1,765,000) | ||
Comprehensive income | 24,580,500 | $ 9,900 | 24,590,400 | |
BALANCE at Dec. 30, 2017 | $ 1,476,200 | (37,189,700) | (35,713,500) | |
BALANCE (in shares) at Dec. 30, 2017 | 3,843,078 | |||
Shareholders’ Equity (Deficit) | ||||
Repurchase of common stock | $ (1,846,400) | (1,846,400) | ||
Repurchase of common stock (in shares) | (12,384) | |||
Stock options exercised | $ 2,819,700 | 2,819,700 | ||
Stock options exercised (in shares) | 76,992 | |||
Compensation expense relating to stock options | $ 1,976,100 | 1,976,100 | ||
Cash dividends | (2,169,900) | (2,169,900) | ||
Comprehensive income | 30,125,500 | 30,125,500 | ||
BALANCE at Dec. 29, 2018 | $ 4,425,600 | (9,234,100) | $ (4,808,500) | |
BALANCE (in shares) at Dec. 29, 2018 | 3,907,686 | 3,907,686 | ||
Shareholders’ Equity (Deficit) | ||||
Repurchase of common stock | $ (5,081,000) | (18,947,100) | $ (24,028,100) | |
Repurchase of common stock (in shares) | (150,000) | |||
Stock options exercised | $ 10,918,300 | 10,918,300 | ||
Stock options exercised (in shares) | 190,172 | |||
Compensation expense relating to stock options | $ 1,666,400 | 1,666,400 | ||
Cash dividends | (3,449,100) | (3,449,100) | ||
Comprehensive income | 32,149,300 | 32,149,300 | ||
BALANCE at Dec. 28, 2019 | $ 11,929,300 | $ 519,000 | $ 12,448,300 | |
BALANCE (in shares) at Dec. 28, 2019 | 3,947,858 | 3,947,858 |
CONSOLIDATED STATEMENTS OF CASH
CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) | 12 Months Ended | ||
Dec. 28, 2019 | Dec. 29, 2018 | Dec. 30, 2017 | |
OPERATING ACTIVITIES: | |||
Net Income | $ 32,149,300 | $ 30,125,500 | $ 24,580,500 |
Adjustments to reconcile net income to net cash provided by operating activities: | |||
Depreciation and amortization | 400,100 | 314,100 | 355,400 |
Provision for credit losses | (78,300) | 38,600 | 9,000 |
Compensation expense related to stock options | 1,666,400 | 1,976,100 | 1,956,600 |
Deferred income taxes | (1,815,300) | 827,800 | (1,370,300) |
Gain on sale of marketable securities | (1,400) | ||
Loss from disposal of property and equipment | 1,900 | ||
Deferred initial direct costs | (92,600) | (1,367,800) | (416,300) |
Amortization of deferred initial direct costs | 550,000 | 1,048,500 | 447,700 |
Operating lease right of use asset amortization | 345,400 | ||
Tax benefits on exercised stock options | 1,218,900 | 403,800 | 882,300 |
Change in operating assets and liabilities: | |||
Receivables | (116,400) | 242,900 | (316,800) |
Principal collections on lease receivables | 19,421,400 | ||
Income tax receivable/payable | (1,151,300) | 1,192,500 | (1,371,300) |
Inventories | 21,600 | (10,500) | (9,600) |
Prepaid expenses | (66,500) | 242,400 | |
Other assets | (9,900) | (132,200) | (15,500) |
Accounts payable | (336,800) | (721,200) | 381,000 |
Accrued and other liabilities | (661,600) | 1,490,000 | (174,400) |
Rents received in advance and security deposits | (197,300) | (358,200) | 126,700 |
Deferred revenue | (601,800) | (132,900) | (98,300) |
Net cash provided by operating activities | 50,647,200 | 34,937,000 | 25,207,700 |
INVESTING ACTIVITIES: | |||
Proceeds from sale of marketable securities | 217,200 | ||
Purchase of property and equipment | (169,400) | (693,500) | (72,600) |
Purchase of equipment for lease contracts | (9,009,000) | (23,104,800) | (25,403,200) |
Principal collections on lease receivables | 24,252,200 | 25,343,800 | |
Net cash provided by (used for) investing activities | (9,178,400) | 453,900 | 85,200 |
FINANCING ACTIVITIES: | |||
Proceeds from borrowings on line of credit | 18,800,000 | 7,300,000 | 51,900,000 |
Payments on line of credit | (18,800,000) | (42,700,000) | (39,900,000) |
Proceeds from borrowings on notes payable | 12,500,000 | ||
Payments on notes payable | (3,250,000) | (3,250,000) | (2,312,500) |
Repurchases of common stock | (24,028,100) | (1,846,400) | (49,902,500) |
Proceeds from exercises of stock options | 10,918,300 | 2,819,700 | 2,309,700 |
Dividends paid | (3,449,100) | (2,169,900) | (1,765,000) |
Proceeds from discounted lease rentals | 944,400 | 5,868,500 | 1,747,700 |
Net cash used for financing activities | (18,864,500) | (33,978,100) | (25,422,600) |
NET INCREASE (DECREASE) IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH | 22,604,300 | 1,412,800 | (129,700) |
Cash, cash equivalents and restricted cash, beginning of period | 2,576,000 | 1,163,200 | 1,292,900 |
Cash, cash equivalents and restricted cash, end of period | $ 25,180,300 | $ 2,576,000 | $ 1,163,200 |
CONSOLIDATED STATEMENTS OF CA_2
CONSOLIDATED STATEMENTS OF CASH FLOWS - Supplemental Disclosures - USD ($) | 12 Months Ended | ||
Dec. 28, 2019 | Dec. 29, 2018 | Dec. 30, 2017 | |
SUPPLEMENTAL DISCLOSURES: | |||
Cash paid for interest | $ 1,705,600 | $ 2,497,000 | $ 2,176,100 |
Cash paid for income taxes | 11,122,300 | 6,727,600 | 13,585,200 |
Non-cash landlord leasehold improvements | 2,139,000 | ||
Reconciliation of cash, cash equivalents and restricted cash: | |||
Cash and cash equivalents | 25,130,300 | 2,496,000 | 1,073,200 |
Restricted cash | 50,000 | 80,000 | 90,000 |
Total cash, cash equivalents and restricted cash | $ 25,180,300 | $ 2,576,000 | $ 1,163,200 |
Organization and Business_
Organization and Business: | 12 Months Ended |
Dec. 28, 2019 | |
Organization and Business: | |
Organization and Business: | 1. Organization and Business: Winmark Corporation and subsidiaries (the Company) offers licenses to operate franchises using the service marks Plato’s Closet®, Play It Again Sports®, Once Upon A Child®, Style Encore® and Music Go Round®. In addition, the Company sells point-of-sale system hardware to its franchisees and certain merchandise to its Play It Again Sports franchisees. 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. The Company has a 52/53-week fiscal year that ends on the last Saturday in December. Fiscal years 2019, 2018 and 2017 were 52-week fiscal years. Following is a summary of our franchising activity for the fiscal year ended December 28, 2019: 12/29/2018 OPENED CLOSED 12/28/2019 Plato’s Closet Franchises - US and Canada 480 6 (3) 483 Once Upon A Child Franchises - US and Canada 379 12 (3) 388 Play It Again Sports Franchises - US and Canada 281 4 (5) 280 Style Encore Franchises - US and Canada 67 5 (4) 68 Music Go Round Franchises - US 34 4 (1) 37 Total Franchised Stores 1,241 31 (16) 1,256 |
Significant Accounting Policies
Significant Accounting Policies: | 12 Months Ended |
Dec. 28, 2019 | |
Significant Accounting Policies: | |
Significant Accounting Policies: | 2. Significant Accounting Policies: Principles of Consolidation The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries, Winmark Capital Corporation, Wirth Business Credit, Inc. and Grow Biz Games, Inc. All material inter-company transactions have been eliminated in consolidation. Cash Equivalents Cash equivalents consist of highly liquid investments with an original maturity of three months or less when purchased. Cash equivalents are stated at cost, which approximates fair value. As of December 28, 2019 and December 29, 2018, the Company had $56,500 and $83,000 of cash located in Canadian banks. The Company holds its cash and cash equivalents with financial institutions and at times, such balances may be in excess of insurance limits. Receivables The Company provides an allowance for doubtful accounts on trade receivables. The allowance for doubtful accounts was $1,900 and $400 at December 28, 2019 and December 29, 2018, respectively. If receivables in excess of the provided allowance are determined uncollectible, they are charged to expense in the year the determination is made. Trade receivables are written off when they become uncollectible (which generally occurs when the franchise terminates and there is no reasonable expectation of collection), and payments subsequently received on such receivable are credited to the allowance for doubtful accounts. Historically, receivables balances written off have not exceeded allowances provided. Restricted Cash The Company is required by certain states to maintain initial franchise fees in a restricted bank account until the franchise opens. The use of these funds by the Company is restricted until the franchise opens. Cash held in escrow totaled $50,000 and $80,000 at December 28, 2019 and December 29, 2018, respectively. Investment in Leasing Operations The Company uses the direct finance method of accounting to record income from direct financing leases. At the inception of a lease, the Company records the minimum future lease payments receivable, the estimated residual value of the leased equipment and the unearned lease income. Initial direct costs related to lease originations are deferred as part of the investment and amortized over the lease term. Unearned lease income is the amount by which the total lease receivable plus the estimated residual value exceeds the cost of the equipment. Leasing Income Recognition Leasing income for direct financing leases is recognized under the effective interest method. The effective interest method of income recognition applies a constant rate of interest equal to the internal rate of return on the lease. For sales-type leases in which the equipment has a fair value greater or less than its carrying amount, selling profit/loss is recognized at commencement. For subsequent periods or for leases in which the equipment’s fair value is equal to its carrying amount, the recording of income is consistent with the accounting for a direct financing lease. For leases that are accounted for as operating leases, income is recognized on a straight-line basis when payments under the lease contract are due. Generally, when a lease is more than 90 days delinquent (when more than three monthly payments are owed), the lease is classified as being on non-accrual and the Company stops recognizing leasing income on that date. Payments received on leases in non-accrual status generally reduce the lease receivable. Leases on non-accrual status remain classified as such until there is sustained payment performance that, in the Company’s judgment, would indicate that all contractual amounts will be collected in full. Leasing Expense Leasing expense includes the cost of financing equipment purchases, the cost of equipment sales as well as depreciation expense for operating lease assets. Initial Direct Costs The Company defers initial direct costs incurred to originate its leases in accordance with applicable accounting guidance . The initial direct costs deferred are part of the investment in leasing operations and are amortized using the effective interest method. Initial direct costs include commissions and costs associated with credit evaluation, recording guarantees and other security arrangements, documentation and transaction closing. Lease Residual Values Residual values reflect the estimated amounts to be received at lease termination from sales or other dispositions of leased equipment to unrelated parties. The leased equipment residual values are based on the Company’s best estimate. Allowance for Credit Losses The Company maintains an allowance for credit losses at an amount that it believes to be sufficient to absorb losses inherent in its existing lease portfolio as of the reporting dates. Leases are collectively evaluated for potential loss. The Company’s methodology for determining the allowance for credit losses includes consideration of the level of delinquencies and non-accrual leases, historical net charge-off amounts and review of any significant concentrations. A provision is charged against earnings to maintain the allowance for credit losses at the appropriate level. If the actual results are different from the Company’s estimates, results could be different. The Company’s policy is to charge-off against the allowance the estimated unrecoverable portion of accounts once they reach 121 days delinquent. Inventories The Company values its inventories at the lower of cost, as determined by the weighted average cost method and net realizable values. Inventory consists of computer hardware and related accessories. Impairment of Long-lived Assets The Company reviews its long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. If the carrying amount of the asset exceeds expected undiscounted future cash flows, the Company measures the amount of impairment by comparing the carrying amount of the asset to its fair value. Property and Equipment Property and equipment is stated at cost. Depreciation and amortization for financial reporting purposes is provided on the straight-line method. Estimated useful lives used in calculating depreciation and amortization are: three to five years for computer and peripheral equipment, five to seven years for furniture and equipment and the shorter of the lease term or useful life for leasehold improvements. Major repairs, refurbishments and improvements which significantly extend the useful lives of the related assets are capitalized. Maintenance and repairs, supplies and accessories are charged to expense as incurred. Goodwill The Company reviews its goodwill for impairment at its fiscal year end or whenever events or changes in circumstances indicate that there has been impairment in the value of its goodwill. No impairment was noted during the years ended December 28, 2019 and December 29, 2018. Goodwill of $607,500 in the consolidated balance sheets at December 28, 2019 and December 29, 2018 is all attributable to the Franchising segment. Use of Estimates The preparation of financial statements in conformity with generally accepted U.S. accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. The ultimate results could differ from those estimates. The most significant estimates relate to allowance for credit losses. These estimates may be adjusted as more current information becomes available, and any adjustment could be significant. Advertising Advertising costs are charged to operating expenses as incurred. Advertising costs were $402,700, $423,400 and $307,700 for fiscal years 2019, 2018 and 2017, respectively. Accounting for Stock-Based Compensation The Company recognizes the cost of all share-based payments to employees, including grants of employee stock options, in the consolidated financial statements based on the grant date fair value of those awards. This cost is recognized over the period for which an employee is required to provide service in exchange for the award. The Company estimates the fair value of options granted using the Black-Scholes option valuation model. The Company estimates the volatility of its common stock at the date of grant based on its historical volatility rate. The Company’s decision to use historical volatility was based upon the lack of actively traded options on its common stock. The Company estimates the expected term based upon historical option exercises. The risk-free interest rate assumption is based on observed interest rates for the expected term. The Company uses historical data to estimate pre-vesting option forfeitures and record share-based compensation expense only for those awards that are expected to vest. For options granted, the Company amortizes the fair value on a straight-line basis. All options are amortized over the vesting periods, which are generally four years beginning from the date of grant. 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 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. 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. The Company had deferred franchise fee revenue of $7,623,800 and $8,214,600 at December 28, 2019 and December 29, 2018, respectively. Marketing Fees Marketing fee revenue is included in the Revenue: Other line of the Consolidated 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 $1.3 million, $1.3 million and $1.2 million for the fiscal years ended December 28, 2019, December 29, 2018 and December 30, 2017, respectively. Software License Fees Software license fee revenue is included in the Revenue: Other line of the Consolidated 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 $0.3 million for each of the fiscal years ended December 28, 2019, December 29, 2018 and December 30, 2017. The Company had deferred software license fees of $1,741,800 and $1,767,700 at December 28, 2019 and December 29, 2018, respectively. 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. Commission Fees The Company capitalizes incremental commission fees paid as a result of obtaining franchise agreement contracts. Capitalized commission fees of $0.6 million and $0.6 million are outstanding at December 28, 2019 and December 29, 2018, respectively and are included in Prepaid expenses and Other assets of the Consolidated Balance Sheets. Capitalized commission fees are amortized over the life of the franchise and are included in selling, general and administrative expenses. During the fiscal years ended December 28, 2019, December 29, 2018 and December 30, 2017, the Company recognized $107,200, $99,500 and $98,800 of commission fee expense, respectively. Income Taxes We account for incomes taxes under the asset and liability method. Under this method, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. We recognize the effect of income tax positions only if those positions are more likely than not to be sustained. Recognized income tax positions are measured at the largest amount that is greater than 50% likely of being realized. Changes in recognition or measurement are reflected in the period in which the change in judgment occurs. We record interest and penalties related to unrecognized tax benefits in income tax expense. Sales Tax The Company’s accounting policy is to present taxes collected from customers and remitted to government authorities on a net basis. Discounted Lease Rentals The Company may utilize its lease rentals receivable and underlying equipment as collateral to borrow from financial institutions at fixed rates on a non-recourse basis. In the event of a default by a customer, the financial institution has a first lien on the underlying leased equipment, with no further recourse against the Company. Proceeds from discounting are recorded on the balance sheet as discounted lease rentals. As customers make payments, lease income and interest expense are recorded and discounted lease rentals are reduced by the effective interest method. Earnings Per Share The Company calculates earnings per share by dividing net income by the weighted average number of shares of common stock outstanding to arrive at the Earnings Per Share — Basic. The Company calculates Earnings Per Share — Diluted by dividing net income by the weighted average number of shares of common stock and dilutive stock equivalents from the potential exercise of stock options using the treasury stock method. The following table sets forth the presentation of shares outstanding used in the calculation of basic and diluted earnings per share (“EPS”): Year Ended December 28, 2019 December 29, 2018 December 30, 2017 Denominator for basic EPS — weighted average common shares 3,840,638 3,874,757 4,056,049 Dilutive shares associated with option plans 259,991 275,022 283,895 Denominator for diluted EPS — weighted average common shares and dilutive potential common shares 4,100,629 4,149,779 4,339,944 Options excluded from EPS calculation — anti-dilutive 10,262 21,933 24,516 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. Recently Issued Accounting Pronouncements In June 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“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 was to be effective for reporting periods beginning after December 15, 2019, with early adoption permitted. In November 2019, the FASB issued ASU 2019-10, Financial Instruments – Credit Losses (Topic 326), Derivatives and Hedging (Topic 815), and Leases (Topic 842) Effective Dates, which deferred the effective dates for the Company, as a smaller reporting company, until fiscal year 2023. The Company currently plans to adopt the guidance at the beginning of fiscal 2023. The Company is continuing to assess the impact of the standard on its consolidated financial statements. Recently Adopted Accounting Pronouncements In February 2016, the FASB issued 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, as well as adding new disclosures for leasing activities. 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. In July 2018, the FASB also issued ASU 2018-11, Leases (Topic 842): Targeted Improvements , which provides an optional transition method that allows entities to elect to apply the standard prospectively at its effective date, versus recasting the prior periods presented. The Company used the prospective approach of adoption when the new guidance was adopted on December 30, 2018, the first day of fiscal 2019. In addition, the Company elected the package of practical expedients permitted under the transition guidance within the new standard which allowed it to carry forward historical lease classification. Under ASU 2018-20 Leases (Topic 842): Narrow Scope Improvements for Lessors , the Company has elected the practical expedient to exclude from its income statement, taxes imposed on leasing revenue transactions by a government agency that are collected by the lessor from the lessee. Upon adoption, as a lessee, the Company recognized operating lease right-of-use assets of $6.0 million and operating lease liabilities of $6.3 million on its Consolidated Balance Sheets. The adoption of the standard did not have a material impact on its Consolidated Statements of Operations or Shareholders’ Equity (Deficit). As a lessor, the adoption of the new standard required the Company to present cash receipts from leases within operating activities in the Consolidated Statements of Cash Flows, where in prior periods such cash receipts are presented within investing activities. For the year ended December 28, 2019, principal collections on lease receivables were $19.4 million. As a lessor, leasing income for direct financing leases is recognized under the effective interest method. The effective interest method of income recognition applies a constant rate of interest equal to the internal rate of return on the lease. For sales-type leases in which the equipment has a fair value greater or less than its carrying amount, selling profit/loss is recognized at commencement. For subsequent periods or for leases in which the equipment’s fair value is equal to its carrying amount, the recording of income is consistent with the accounting for a direct financing lease. For leases that are accounted for as operating leases, income is recognized on a straight-line basis when payments under the lease contract are due. Additional information and disclosures required by this new standard for the Company as a lessee are contained in Note 10 – “Operating Leases”, and as a lessor in Note 3 – “Investment in Leasing Operations”. Reclassifications In addition to the adjustments noted above, certain reclassifications of previously reported amounts have been made to conform to the current year presentation. Such reclassifications did not impact net income or shareholders’ equity (deficit) as previously reported. |
Investment in Leasing Operation
Investment in Leasing Operations: | 12 Months Ended |
Dec. 28, 2019 | |
Investment in Leasing Operations: | |
Investment in Leasing Operations: | 3. Investment in Leasing Operations: Investment in leasing operations consists of the following: December 28, 2019 December 29, 2018 Direct financing and sales-type leases: Minimum lease payments receivable $ 26,001,200 $ 40,822,400 Estimated unguaranteed residual value of equipment 4,109,800 4,741,200 Unearned lease income, net of initial direct costs deferred (4,039,400) (6,739,900) Security deposits (3,852,000) (4,118,300) Equipment installed on leases not yet commenced 3,437,800 5,094,800 Total investment in direct financing and sales-type leases 25,657,400 39,800,200 Allowance for credit losses (580,600) (861,200) Net investment in direct financing and sales-type leases 25,076,800 38,939,000 Operating leases: Operating lease assets 820,700 777,000 Less accumulated depreciation and amortization (591,900) (713,000) Net investment in operating leases 228,800 64,000 Total net investment in leasing operations $ 25,305,600 $ 39,003,000 As of December 28, 2019, the $25.3 million total net investment in leases consisted of $12.8 million classified as current and $12.5 million classified as long-term. As of December 29, 2018, the $39.0 million total net investment in leases consisted of $18.5 million classified as current and $20.5 million classified as long-term. As of December 28, 2019, no customer had leased assets totaling more than 10% of the Company’s total assets. As of December 29, 2018, leased assets with two customers approximated 24% and 11%, respectively, of the Company’s total assets. A portion of the lease payments receivable from these customers is assigned as collateral in non-recourse financing with financial institutions. See Note 8 – “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 as of December 28, 2019: Direct Financing and Sales-Type Leases Minimum Lease Income Fiscal Year Payments Receivable Amortization 2020 $ 16,855,200 $ 3,193,700 2021 8,049,100 802,000 2022 1,084,400 43,100 2023 8,100 500 2024 4,400 100 Thereafter — — $ 26,001,200 $ 4,039,400 The activity in the allowance for credit losses for leasing operations during 2019, 2018 and 2017, respectively, is as follows: December 28, 2019 December 29, 2018 December 30, 2017 Balance at beginning of period $ 861,200 $ 711,200 $ 896,000 Provisions charged to expense (78,300) 38,600 9,000 Recoveries 21,900 213,500 8,600 Deductions for amounts written-off (224,200) (102,100) (202,400) Balance at end of period $ 580,600 $ 861,200 $ 711,200 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: December 28, 2019 December 29, 2018 Investment Allowance for Investment Allowance for In Leases Credit Losses In Leases Credit Losses Collectively evaluated for loss potential $ 25,657,400 580,600 $ 39,800,200 $ 861,200 Individually evaluated for loss potential — — — — Total $ 25,657,400 $ 580,600 $ 39,800,200 $ 861,200 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. December 28, 2019 0-60 Days 61-90 Days Over 90 Days Delinquent Delinquent Delinquent and and Accruing and Accruing Accruing Non-Accrual Total Middle-Market $ 24,546,300 $ — $ — $ — $ 24,546,300 Small-Ticket 1,111,100 — — — 1,111,100 Total Investment in Leases $ 25,657,400 $ — $ — $ — $ 25,657,400 December 29, 2018 0-60 Days 61-90 Days Over 90 Days Delinquent Delinquent Delinquent and and Accruing and Accruing Accruing Non-Accrual Total Middle-Market $ 38,395,000 $ — $ — $ 70,000 $ 38,465,000 Small-Ticket 1,335,200 — — — 1,335,200 Total Investment in Leases $ 39,730,200 $ — $ — $ 70,000 $ 39,800,200 The Company leases high-technology and other business-essential equipment to its leasing customers. Upon expiration of the initial term or extended lease term, depending on the structure of the lease, the customer may return the equipment, renew the lease for an additional term, or purchase the equipment. Due to the uncertainty of such outcome at the end of the lease term, the lease as recorded at commencement represents only the current terms of the agreement. As a lessor, the Company’s leases do not contain non-lease components. The residual values reflect the estimated amounts to be received at lease termination from sales or other dispositions of leased equipment to unrelated parties. The leased equipment residual values are based on the Company’s best estimate. The Company’s risk management strategy for its residual value includes the contractual obligations of customer to maintain, service, and insure the leased equipment, the use of third party remarketers as well as the analytical review of historical asset dispositions . Leasing income as presented on the Consolidated Statements of Operations consists of the following: Year Ended December 28, 2019 Interest income on direct financing and sales-type leases $ 7,602,600 Selling profit (loss) at commencement of sales-type leases 2,470,300 Operating lease income 2,525,600 Income on sales of equipment under lease 2,855,400 Other 601,900 Leasing income $ 16,055,800 |
Receivables_
Receivables: | 12 Months Ended |
Dec. 28, 2019 | |
Receivables: | |
Receivables: | 4. Receivables: The Company’s current receivables consisted of the following: December 28, 2019 December 29, 2018 Trade $ 35,800 $ 19,700 Royalty 1,543,100 1,396,000 Other 90,600 137,400 $ 1,669,500 $ 1,553,100 As part of its normal operating procedures, the Company requires Standby Letters of Credit as collateral for a portion of its trade receivables. |
Shareholders' Equity (Deficit)_
Shareholders' Equity (Deficit): | 12 Months Ended |
Dec. 28, 2019 | |
Shareholders' Equity (Deficit): | |
Shareholders' Equity (Deficit): | 5. Shareholders’ Equity (Deficit): Dividends In 2019, the Company declared and paid quarterly cash dividends totaling $0.90 per share ($3.4 million). In 2018, the Company declared and paid quarterly cash dividends totaling $0.56 per share ($2.2 million). In 2017, the Company declared and paid quarterly cash dividends totaling $0.43 per share ($1.8 million). Repurchase of Common Stock In February 2019, the Company’s Board of Directors authorized the repurchase of up to 150,000 shares of our common stock for a price of $159.63 per share through a tender offer (the “2019 Tender Offer”). The 2019 Tender Offer began on the date of the announcement, February 28, 2019 and expired March 28, 2019. Upon expiration, the Company accepted for payment 150,000 shares for a total purchase price of approximately $24.0 million, including fees and expenses related to the 2019 Tender Offer. The 2019 Tender Offer was financed in part by net borrowings under the Line of Credit. (See Note 6 – “Debt”). In 2018 the Company purchased 12,384 shares of our common stock for an aggregate purchase price of $1.8 million or $149.10 per share. In July 2017, the Company’s Board of Directors authorized the repurchase of up to 400,000 shares of our common stock for a price of $124.48 per share through a tender offer (the “2017 Tender Offer”). The 2017 Tender Offer began on the date of the announcement, July 19, 2017 and expired on August 16, 2017. Upon expiration, the Company accepted for payment 400,000 shares for a total purchase price of approximately $49.9 million, including fees and expenses related to the 2017 Tender Offer. The 2017 Tender Offer was financed by net borrowings under the Line of Credit and Notes Payable. (See Note 6 – “Debt”). Under a previous Board of Directors’ authorization, as of December 28, 2019 the Company has the ability to repurchase an additional 130,604 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 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 December 28, 2019, the Company has authorized up to 700,000 shares of common stock for granting either nonqualified or incentive stock options to officers and key employees under the Company’s 2010 Stock Option Plan (the “2010 Plan”). Grants under the 2001 Plan and 2010 Plan are made by the Compensation Committee of the Board of Directors at a price of not less than 100% of the fair market value on the date of grant. If an incentive stock option is granted to an individual who owns more than 10% of the voting rights of the Company’s common stock, the option exercise price may not be less than 110% of the fair market value on the date of grant. The term of the options may not exceed 10 years, except in the case of nonqualified stock options, whereby the terms are established by the Compensation Committee. Options may be exercisable in whole or in installments, as determined by the Compensation Committee. As of December 28, 2019, 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 December 28, 2019 was as follows: Weighted Average Remaining Number of Weighted Average Contractual Life Shares Exercise Price (years) Intrinsic Value Outstanding, December 31, 2016 673,670 $ 62.11 6.11 $ 43,139,100 Granted 69,500 128.00 Exercised (80,236) 33.41 Forfeited (4,750) 95.28 Outstanding, December 30, 2017 658,184 72.33 5.87 37,723,800 Granted 69,000 149.51 Exercised (79,241) 39.37 Forfeited (8,563) 119.24 Outstanding, December 29, 2018 639,380 5.61 47,808,100 Granted 54,800 170.14 Exercised (190,172) 57.41 Forfeited (24,450) Outstanding, December 28, 2019 479,558 $ 5.79 $ 45,283,200 Exercisable, December 28, 2019 344,108 $ 83.08 4.69 $ 38,930,300 The fair value of options granted under the Option Plans during 2019, 2018 and 2017 were estimated on the date of the grant using the Black-Scholes option pricing model with the following weighted average assumptions and results: Year Ended December 28, 2019 December 29, 2018 December 30, 2017 Risk free interest rate 1.85 % 2.73 % 2.05 % Expected life (years) 6 6 6 Expected volatility 19.30 % 19.94 % 25.64 % Dividend yield 1.38 % 1.13 % 1.10 % Option fair value $ 30.96 $ 32.45 $ 32.07 The total intrinsic value of options exercised during 2019, 2018 and 2017 was $22.7 million, $8.3 million and $7.7 million, respectively. The total fair value of shares vested during 2019, 2018 and 2017 was $8.6 million, $7.8 million and $7.3 million, respectively. During 2019, 2018 and 2017, option holders surrendered 0 shares, 2,249 shares and 2,927 shares, respectively, of previously owned common stock as payment for option shares exercised as provided for by the Option Plans. All unexercised options at December 28, 2019 have an exercise price equal to the fair market value on the date of the grant. Compensation expense of $1,666,400, $1,976,100 and $1,956,600 relating to the vested portion of the fair value of stock options granted was expensed to “Selling, General and Administrative Expenses” in 2019, 2018 and 2017, respectively. As of December 28, 2019, the Company had $3.7 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: | 12 Months Ended |
Dec. 28, 2019 | |
Debt: | |
Debt: | 6. Debt: Line of Credit As of December 28, 2019 there were no borrowings outstanding under the Company’s revolving credit facility with CIBC Bank USA (as successor by merger to The PrivateBank and Trust Company) and BMO Harris Bank N.A. (the “Line of Credit”). In July 2017, the Line of Credit was amended to, among other things: · Provide the consent of the lenders for the 2017 Tender Offer; · Extend the termination date from May 14, 2019 to July 19, 2021; · Amend the tangible net worth covenant calculation to remove the effect of the 2017 Tender Offer; · Reduce the applicable margin on interest rate options in connection with LIBOR loans under the Line of Credit; and · Permit the Company to sell up to $15.0 million in term notes to one or more affiliates or managed accounts of Prudential Investment Management, Inc. (“Prudential”) to partially fund the 2017 Tender Offer. In December 2019, the Line of Credit was amended to, among other things: · Provide the consent of the lenders for the 2020 Tender Offer (See Note 14 - “Subsequent Events”); · Amend the tangible net worth covenant calculation to remove the effect of the 2020 Tender Offer; and · Allow the replacement of LIBOR. The Line of Credit has been and will continue to be used for general corporate purposes. During 2019 and 2017, the Line of Credit was used to finance in part the 2019 Tender Offer and 2017 Tender Offer (as indicated above). Borrowings under the Line of Credit are subject to certain borrowing base limitations, and 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). In July 2019 the aggregate commitments under the Line of Credit automatically reduced by $5.0 million and will reduce automatically by the same amount each subsequent July thereafter through the term of the facility. As of December 28, 2019, the Company was in compliance with all of its financial covenants and the Company’s additional borrowing availability under the Line of Credit was $45.0 million. The Line of Credit allows the Company to choose between two interest rate options in connection with its borrowings. The interest rate options are the Base Rate (as defined) and the LIBOR Rate (as defined) plus an applicable margin of 0% and 2.0%, respectively. Interest periods for LIBOR borrowings can be one, two, three, six or twelve months, as selected by the Company. The Line of Credit also provides for non-utilization fees of 0.25% per annum on the daily average of the unused commitment. Notes Payable In May 2015, the Company entered into a $25.0 million Note Agreement (the “Note Agreement”) with Prudential. In July 2017, the Note Agreement was amended to, among other things: · Provide the consent of Prudential for the 2017 Tender Offer; · Amend the tangible net worth covenant calculation to remove the effect of the 2017 Tender Offer; and · Provide for a new $12.5 million term loan to partially fund the 2017 Tender offer. In December 2019, the Note Agreement was amended to, among other things: · Provide the consent of Prudential for the 2020 Tender Offer (See Note 14 - “Subsequent Events”); and · Amend the tangible net worth covenant calculation to remove the effects of the 2020 Tender Offer. As of December 28, 2019, the Company had $16.0 million in principal outstanding from the $25.0 million Series A notes issued in May 2015 and $9.7 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. 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 December 28, 2019, 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. As of December 28, 2019, required prepayments of the notes payable for each of the next five years and thereafter are as follows: 2020 $ 3,750,000 2021 4,250,000 2022 4,250,000 2023 4,250,000 2024 4,250,000 Thereafter 4,937,500 Total $ 25,687,500 |
Accrued Liabilities_
Accrued Liabilities: | 12 Months Ended |
Dec. 28, 2019 | |
Accrued Liabilities | |
Accrued Liabilities: | 7. Accrued Liabilities: Accrued liabilities at December 28, 2019 and December 29, 2018 are as follows: December 28, 2019 December 29, 2018 Accrued compensation and benefits $ 887,900 $ 1,490,700 Rent related liabilities 388,500 91,100 Accrued interest 210,800 218,600 Accrued purchases of goods and services 186,200 716,400 Other 1,109,700 611,800 $ 2,783,100 $ 3,128,600 |
Discounted Lease Rentals_
Discounted Lease Rentals: | 12 Months Ended |
Dec. 28, 2019 | |
Discounted Lease Rentals: | |
Discounted Lease Rentals: | 8. 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 6.39% at December 28, 2019 on a non-recourse basis. As of December 28, 2019, $2.7 million of the $3.5 million liability balance was current . As of December 29, 2018, $3.0 million of the $5.7 million liability balance was current. |
Contract Liabilities_
Contract Liabilities: | 12 Months Ended |
Dec. 28, 2019 | |
Contract Liabilities: | |
Contract Liabilities: | 9. Contract Liabilities: The Company’s contract liabilities for its franchise revenues consist of deferred revenue associated with franchise fees and software license fees. The table below presents the activity of the current and noncurrent deferred franchise revenue during fiscal years 2019 and 2018, respectively: December 28, 2019 December 29, 2018 Balance at beginning of period $ 10,177,300 $ 10,310,200 Franchise and software license fees collected from franchisees, excluding amount earned as revenue during the period 1,203,500 1,749,100 Fees earned that were included in the balance at the beginning of the period (1,805,300) (1,882,000) Balance at end of period $ 9,575,500 $ 10,177,300 The following table illustrates future estimated revenue to be recognized for the next five fiscal years and fiscal years thereafter related to performance obligations that are unsatisfied (or partially unsatisfied) as of December 28, 2019: Contract Liabilities expected to be recognized in Amount 2020 $ 1,717,000 2021 1,578,200 2022 1,433,300 2023 1,262,000 2024 1,064,300 Thereafter 2,520,700 $ 9,575,500 |
Operating Leases_
Operating Leases: | 12 Months Ended |
Dec. 28, 2019 | |
Operating Leases: | |
Operating Leases: | 10. Operating Leases : As of December 28, 2019, the Company leases its Minnesota corporate headquarters in a facility with an operating lease that expires in December 2029 as well as satellite office space in California with an operating lease that expires in August 2022. Our leases include both lease (fixed payments including rent) and non-lease components (common area or other maintenance costs and taxes) which are accounted for as a single lease component as we have elected the practical expedient to group lease and non-lease components for all leases. The corporate headquarters lease provides us the option to extend the lease for two additional five year periods. The California lease provides us an option to extend the lease for an additional three year period. The lease renewal options are at our sole discretion; therefore, the renewals to extend the lease term are not included in our right of use assets and lease liabilities as they are not reasonably certain of exercise. The weighted average remaining lease term for these leases is 9.9 years and the weighted average discount rate is 5.5%. As our leases do not provide an implicit rate, we use our incremental borrowing rate based on the information available at the lease commencement date in determining the present value of the lease payments. The Company recognized $1,358,000, $1,235,000 and $1,102,000 of rent expense for the periods ended December 28, 2019, December 29, 2018 and December 30, 2017, respectively. Maturities of operating lease liabilities is as follows as of December 28, 2019: Operating Lease Liabilities expected to be recognized in Amount 2020 $ 704,300 2021 783,600 2022 784,400 2023 763,300 2024 784,400 Thereafter 4,258,600 Total lease payments 8,078,600 Less imputed interest (1,863,100) Present value of lease liabilities $ 6,215,500 Of the $6.2 million operating lease liability outstanding at December 28, 2019, $0.4 million is included in Accrued liabilities in the Current liabilities section of the Consolidated Balance Sheets. For leases that contain predetermined fixed escalations of the minimum rent, we recognize the related rent expense on a straight-line basis from the date we take possession of the property to the end of the initial lease term. We record any difference between the straight-line rent amounts and amounts payable under the leases as an adjustment to the amortization of the operating lease right of use assets and operating lease liabilities. Cash or lease incentives received upon entering into certain leases (“tenant allowances”) are recognized on a straight-line basis as a reduction to rent from the date we take possession of the property through the end of the initial lease term. In 2019, we recorded a $2.1 million tenant allowance for non-cash landlord leasehold improvements received as a reduction to the operating lease right of use asset. The reduction in rent also causes a reduction in the amortization of the operating lease right of use asset through the end of the initial lease term. The Company’s policy for leases with a term of twelve months or less is to exclude these short-term leases from our right of use assets and lease liabilities. Supplemental cash flow information related to our operating leases is as follows for the period ended December 28, 2019: Year Ended December 28, 2019 Cash paid for amounts included in the measurement of lease liabilities: Operating cash flow outflow from operating leases $ 493,900 The following disclosures for the year ended December 29, 2018 were made in accordance with the accounting guidance for operating leases in effect at that time. As of December 29, 2018 minimum rental commitments under noncancelable operating leases, exclusive of maintenance, insurance, taxes and other expenses, were as follows: 2019 $ 503,700 2020 762,500 2021 783,600 2022 784,400 2023 763,300 Thereafter 5,042,900 Total $ 8,640,400 At December 29, 2018 total deferred rent included in our consolidated balance sheets was $0.3 million of which $0.2 million was included in other liabilities. |
Income Taxes_
Income Taxes: | 12 Months Ended |
Dec. 28, 2019 | |
Income Taxes: | |
Income Taxes: | 11. Income Taxes: A reconciliation of the expected federal income tax expense based on the federal statutory tax rate to the actual income tax expense is provided below: Year Ended December 28, 2019 December 29, 2018 December 30, 2017 Federal income tax expense at statutory rate (21%, 21%, 35%) $ 8,708,200 $ 8,249,400 $ 12,758,000 Change in valuation allowance 147,900 (13,800) 7,500 State and local income taxes, net of federal benefit 1,310,800 1,334,100 1,057,100 Permanent differences, including stock option expenses (1,056,800) (355,500) (628,400) Adjustment to uncertain tax positions (58,500) 4,500 77,800 Rate change — — (1,540,300) Other, net 266,500 (61,100) 139,300 Actual income tax expense $ 9,318,100 $ 9,157,600 $ 11,871,000 Components of the provision for income taxes are as follows: Year Ended December 28, 2019 December 29, 2018 December 30, 2017 Current: Federal $ 9,076,400 $ 6,355,800 $ 10,296,100 State 1,693,800 1,551,000 1,688,100 Foreign 363,200 423,000 365,900 Current provision 11,133,400 8,329,800 12,350,100 Deferred: Federal (1,834,800) 967,300 (463,800) State 19,500 (139,500) (15,300) Deferred provision (1,815,300) 827,800 (479,100) Total provision for income taxes $ 9,318,100 $ 9,157,600 $ 11,871,000 The tax effects of temporary differences that give rise to the net deferred income tax assets and liabilities are presented below: December 28, 2019 December 29, 2018 Deferred tax assets: Accounts receivable and lease reserves $ 154,700 $ 215,900 Non-qualified stock option expense 1,758,100 2,071,600 Deferred revenue 1,957,500 2,020,100 Trademarks 34,500 39,800 Lease deposits 930,700 1,004,700 Loss from and impairment of equity and note investments 2,595,500 2,620,700 Foreign tax credits 173,100 — Valuation allowance (2,768,600) (2,620,700) Other 194,400 331,400 Total deferred tax assets 5,029,900 5,683,500 Deferred tax liabilities: Lease revenue and initial direct costs (4,207,400) (6,664,800) Depreciation and amortization (155,500) (167,000) Total deferred tax liabilities (4,362,900) (6,831,800) Total net deferred tax assets (liabilities) $ 667,000 $ (1,148,300) On December 22, 2017, the Tax Cut and Jobs Act (the “Tax Act”) was signed into law. The Tax Act made changes to the U.S. tax code that affected our income tax rates in 2017, 2018 and 2019, notably the reduction of the U.S. federal corporate income tax rate from 35% to 21% beginning in 2018. Accounting guidance applicable to income taxes required us to recognize the impact of the change in tax rate on our existing deferred tax assets and liabilities as of the date that the Tax Act was signed into law. We recorded a reduction in our 2017 income tax expense of $1.5 million and a corresponding reduction in our net deferred income tax liabilities as a result of the decrease in the federal income tax rate. The Company has assessed its taxable earnings history and prospective future taxable income. Based upon this assessment, the Company has determined that it is more likely than not that its deferred tax assets will be realized in future periods and no valuation allowance is necessary, except for the deferred tax assets related to the loss from and impairment of equity and note investments (which are capital losses for tax purposes) and the foreign tax credits. As a result, valuation allowances of $2.8 million and $2.6 million as of December 28, 2019 and December 29, 2018, respectively, have been recorded. The amount of unrecognized tax benefits, including interest and penalties, as of December 28, 2019 and December 29, 2018, was $532,500 and $589,000, respectively, primarily for potential state taxes. The Company recognizes interest accrued related to unrecognized tax benefits and penalties as income tax expense for all periods presented. The Company had accrued approximately $33,500 and $37,700 for the payment of interest and penalties at December 28, 2019 and December 29, 2018, respectively. The following table summarizes the activity related to the Company’s unrecognized tax benefits: Total Balance at December 30, 2017 $ 551,100 Increases related to current year tax positions 135,600 Expiration of the statute of limitations for the assessment of taxes (135,400) Balance at December 29, 2018 551,300 Increases related to current year tax positions 131,900 Expiration of the statute of limitations for the assessment of taxes (184,200) Balance at December 28, 2019 $ 499,000 The Company and its subsidiaries file income tax returns in the U.S. federal, numerous state and certain foreign jurisdictions. With few exceptions, we are no longer subject to U.S. federal, state and local, or non-U.S. income tax examinations by tax authorities for years before 2015. We expect various statutes of limitation to expire during the next 12 months. Due to the uncertain response of taxing authorities, a range of outcomes cannot be reasonably estimated at this time. |
Commitments and Contingencies_
Commitments and Contingencies: | 12 Months Ended |
Dec. 28, 2019 | |
Commitments and Contingencies: | |
Commitments and Contingencies: | 12. Commitments and Contingencies: Employee Benefit Plan The Company provides a 401(k) Savings Incentive Plan which covers substantially all employees. The plan provides for matching contributions and optional profit-sharing contributions at the discretion of the Board of Directors. Employee contributions are fully vested; matching and profit sharing contributions are subject to a five-year service vesting schedule. Company contributions to the plan for 2019, 2018 and 2017 were $343,500, $361,400 and $319,700, respectively. Litigation The Company is exposed to a number of asserted and unasserted legal claims encountered in the normal course of business. Management believes that the ultimate resolution of these matters will not have a material adverse effect on the consolidated financial position or results of operations of the Company. |
Segment Reporting_
Segment Reporting: | 12 Months Ended |
Dec. 28, 2019 | |
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, restricted cash, accounts receivable, prepaid expenses, inventory, property and equipment, investment in leasing operations and goodwill. Unallocated assets include corporate cash and cash equivalents, current and deferred tax amounts, operating lease right of use assets 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: Year ended December 28, 2019 December 29, 2018 December 30, 2017 Revenue: Franchising $ 57,243,100 $ 54,334,600 $ 51,287,100 Leasing 16,055,800 18,176,500 18,470,200 Total revenue $ 73,298,900 $ 72,511,100 $ 69,757,300 Reconciliation to operating income: Franchising segment contribution $ 35,169,900 $ 31,882,200 $ 29,513,900 Leasing segment contribution 7,961,200 9,881,600 9,291,100 Total operating income $ 43,131,100 $ 41,763,800 $ 38,805,000 Depreciation and amortization: Franchising $ 281,600 $ 240,500 $ 271,300 Leasing 118,500 73,600 84,100 Total depreciation and amortization $ 400,100 $ 314,100 $ 355,400 As of December 28, 2019 December 29, 2018 Identifiable assets: Franchising $ 3,736,000 $ 5,208,400 Leasing 26,596,700 40,490,000 Unallocated 31,509,500 964,700 Total $ 61,842,200 $ 46,663,100 Revenues are all generated from United States operations other than franchising revenues from Canadian operations of $4.7 million, $4.4 million and $3.8 million in each of fiscal 2019, 2018 and 2017, respectively. All long-lived assets are located within the United States. |
Subsequent Events
Subsequent Events | 12 Months Ended |
Dec. 28, 2019 | |
Subsequent Events: | |
Subsequent Events: | 14. Subsequent Events: In December 2019, the Company’s Board of Directors authorized the repurchase of up to 300,000 shares of our common stock for a price of $163.00 per share through a tender offer (the “2020 Tender Offer”). The 2020 Tender Offer began on the date of the announcement, December 17, 2019 and expired on January 16, 2020. Upon expiration, the Company purchased 300,000 shares for a total purchase price of approximately $49.0 million, including fees and expenses related to the Tender Offer. The 2020 Tender Offer was financed in part by net borrowings of $19.2 million under the Line of Credit. (See Note 6 – “Debt”). |
Quarterly Financial Data (Unaud
Quarterly Financial Data (Unaudited): | 12 Months Ended |
Dec. 28, 2019 | |
Quarterly Financial Data (Unaudited): | |
Quarterly Financial Data (Unaudited): | 15. Quarterly Financial Data (Unaudited): The Company’s unaudited quarterly results for the years ended December 28, 2019 and December 29, 2018 were as follows: First Second Third Fourth Quarter Quarter Quarter Quarter Total 2019 Total Revenue $ 18,331,200 $ 17,404,200 $ 19,680,900 $ 17,882,600 $ 73,298,900 Income from Operations 10,066,500 9,846,900 12,274,700 10,943,000 43,131,100 Net Income 7,272,200 7,301,900 9,113,800 8,461,400 32,149,300 Net Income Per Common Share — Basic $ 1.86 $ 1.94 $ 2.39 $ 2.18 $ Net Income Per Common Share — Diluted $ 1.73 $ 1.79 $ $ 2.08 $ 7.84 2018 Total Revenue $ 18,161,000 $ 18,159,800 $ 19,118,500 $ 17,071,800 $ 72,511,100 Income from Operations 10,074,200 10,074,700 11,435,300 10,179,600 41,763,800 Net Income 6,960,400 7,143,000 8,364,300 7,657,800 30,125,500 Net Income Per Common Share — Basic $ 1.81 $ 1.85 $ 2.15 $ 1.96 $ Net Income Per Common Share — Diluted $ 1.69 $ 1.73 $ $ 1.83 $ 7.26 The total of basic and diluted earnings per common share by quarter may not equal the totals for the year as there are changes in the weighted average number of common shares outstanding each quarter and basic and diluted earnings per common share are calculated independently for each quarter. |
Significant Accounting Polici_2
Significant Accounting Policies: (Policies) | 12 Months Ended |
Dec. 28, 2019 | |
Significant Accounting Policies: | |
Principles of Consolidation | Principles of Consolidation The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries, Winmark Capital Corporation, Wirth Business Credit, Inc. and Grow Biz Games, Inc. All material inter-company transactions have been eliminated in consolidation. |
Cash Equivalents | Cash Equivalents Cash equivalents consist of highly liquid investments with an original maturity of three months or less when purchased. Cash equivalents are stated at cost, which approximates fair value. As of December 28, 2019 and December 29, 2018, the Company had $56,500 and $83,000 of cash located in Canadian banks. The Company holds its cash and cash equivalents with financial institutions and at times, such balances may be in excess of insurance limits. |
Receivables | Receivables The Company provides an allowance for doubtful accounts on trade receivables. The allowance for doubtful accounts was $1,900 and $400 at December 28, 2019 and December 29, 2018, respectively. If receivables in excess of the provided allowance are determined uncollectible, they are charged to expense in the year the determination is made. Trade receivables are written off when they become uncollectible (which generally occurs when the franchise terminates and there is no reasonable expectation of collection), and payments subsequently received on such receivable are credited to the allowance for doubtful accounts. Historically, receivables balances written off have not exceeded allowances provided. |
Restricted Cash | Restricted Cash The Company is required by certain states to maintain initial franchise fees in a restricted bank account until the franchise opens. The use of these funds by the Company is restricted until the franchise opens. Cash held in escrow totaled $50,000 and $80,000 at December 28, 2019 and December 29, 2018, respectively. |
Investment in Leasing Operations | Investment in Leasing Operations The Company uses the direct finance method of accounting to record income from direct financing leases. At the inception of a lease, the Company records the minimum future lease payments receivable, the estimated residual value of the leased equipment and the unearned lease income. Initial direct costs related to lease originations are deferred as part of the investment and amortized over the lease term. Unearned lease income is the amount by which the total lease receivable plus the estimated residual value exceeds the cost of the equipment. Leasing Income Recognition Leasing income for direct financing leases is recognized under the effective interest method. The effective interest method of income recognition applies a constant rate of interest equal to the internal rate of return on the lease. For sales-type leases in which the equipment has a fair value greater or less than its carrying amount, selling profit/loss is recognized at commencement. For subsequent periods or for leases in which the equipment’s fair value is equal to its carrying amount, the recording of income is consistent with the accounting for a direct financing lease. For leases that are accounted for as operating leases, income is recognized on a straight-line basis when payments under the lease contract are due. Generally, when a lease is more than 90 days delinquent (when more than three monthly payments are owed), the lease is classified as being on non-accrual and the Company stops recognizing leasing income on that date. Payments received on leases in non-accrual status generally reduce the lease receivable. Leases on non-accrual status remain classified as such until there is sustained payment performance that, in the Company’s judgment, would indicate that all contractual amounts will be collected in full. Leasing Expense Leasing expense includes the cost of financing equipment purchases, the cost of equipment sales as well as depreciation expense for operating lease assets. Initial Direct Costs The Company defers initial direct costs incurred to originate its leases in accordance with applicable accounting guidance . The initial direct costs deferred are part of the investment in leasing operations and are amortized using the effective interest method. Initial direct costs include commissions and costs associated with credit evaluation, recording guarantees and other security arrangements, documentation and transaction closing. Lease Residual Values Residual values reflect the estimated amounts to be received at lease termination from sales or other dispositions of leased equipment to unrelated parties. The leased equipment residual values are based on the Company’s best estimate. Allowance for Credit Losses The Company maintains an allowance for credit losses at an amount that it believes to be sufficient to absorb losses inherent in its existing lease portfolio as of the reporting dates. Leases are collectively evaluated for potential loss. The Company’s methodology for determining the allowance for credit losses includes consideration of the level of delinquencies and non-accrual leases, historical net charge-off amounts and review of any significant concentrations. A provision is charged against earnings to maintain the allowance for credit losses at the appropriate level. If the actual results are different from the Company’s estimates, results could be different. The Company’s policy is to charge-off against the allowance the estimated unrecoverable portion of accounts once they reach 121 days delinquent. |
Inventories | Inventories The Company values its inventories at the lower of cost, as determined by the weighted average cost method and net realizable values. Inventory consists of computer hardware and related accessories. |
Impairment of Long-lived Assets | Impairment of Long-lived Assets The Company reviews its long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. If the carrying amount of the asset exceeds expected undiscounted future cash flows, the Company measures the amount of impairment by comparing the carrying amount of the asset to its fair value. |
Property and Equipment | Property and Equipment Property and equipment is stated at cost. Depreciation and amortization for financial reporting purposes is provided on the straight-line method. Estimated useful lives used in calculating depreciation and amortization are: three to five years for computer and peripheral equipment, five to seven years for furniture and equipment and the shorter of the lease term or useful life for leasehold improvements. Major repairs, refurbishments and improvements which significantly extend the useful lives of the related assets are capitalized. Maintenance and repairs, supplies and accessories are charged to expense as incurred. |
Goodwill | Goodwill The Company reviews its goodwill for impairment at its fiscal year end or whenever events or changes in circumstances indicate that there has been impairment in the value of its goodwill. No impairment was noted during the years ended December 28, 2019 and December 29, 2018. Goodwill of $607,500 in the consolidated balance sheets at December 28, 2019 and December 29, 2018 is all attributable to the Franchising segment. |
Use of Estimates | Use of Estimates The preparation of financial statements in conformity with generally accepted U.S. accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. The ultimate results could differ from those estimates. The most significant estimates relate to allowance for credit losses. These estimates may be adjusted as more current information becomes available, and any adjustment could be significant. |
Advertising | Advertising Advertising costs are charged to operating expenses as incurred. Advertising costs were $402,700, $423,400 and $307,700 for fiscal years 2019, 2018 and 2017, respectively. |
Accounting for Stock-Based Compensation | Accounting for Stock-Based Compensation The Company recognizes the cost of all share-based payments to employees, including grants of employee stock options, in the consolidated financial statements based on the grant date fair value of those awards. This cost is recognized over the period for which an employee is required to provide service in exchange for the award. The Company estimates the fair value of options granted using the Black-Scholes option valuation model. The Company estimates the volatility of its common stock at the date of grant based on its historical volatility rate. The Company’s decision to use historical volatility was based upon the lack of actively traded options on its common stock. The Company estimates the expected term based upon historical option exercises. The risk-free interest rate assumption is based on observed interest rates for the expected term. The Company uses historical data to estimate pre-vesting option forfeitures and record share-based compensation expense only for those awards that are expected to vest. For options granted, the Company amortizes the fair value on a straight-line basis. All options are amortized over the vesting periods, which are generally four years beginning from the date of grant. |
Revenue Recognition - Franchising | 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 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. 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. The Company had deferred franchise fee revenue of $7,623,800 and $8,214,600 at December 28, 2019 and December 29, 2018, respectively. Marketing Fees Marketing fee revenue is included in the Revenue: Other line of the Consolidated 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 $1.3 million, $1.3 million and $1.2 million for the fiscal years ended December 28, 2019, December 29, 2018 and December 30, 2017, respectively. Software License Fees Software license fee revenue is included in the Revenue: Other line of the Consolidated 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 $0.3 million for each of the fiscal years ended December 28, 2019, December 29, 2018 and December 30, 2017. The Company had deferred software license fees of $1,741,800 and $1,767,700 at December 28, 2019 and December 29, 2018, respectively. 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. Commission Fees The Company capitalizes incremental commission fees paid as a result of obtaining franchise agreement contracts. Capitalized commission fees of $0.6 million and $0.6 million are outstanding at December 28, 2019 and December 29, 2018, respectively and are included in Prepaid expenses and Other assets of the Consolidated Balance Sheets. Capitalized commission fees are amortized over the life of the franchise and are included in selling, general and administrative expenses. During the fiscal years ended December 28, 2019, December 29, 2018 and December 30, 2017, the Company recognized $107,200, $99,500 and $98,800 of commission fee expense, respectively. |
Income Taxes | Income Taxes We account for incomes taxes under the asset and liability method. Under this method, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. We recognize the effect of income tax positions only if those positions are more likely than not to be sustained. Recognized income tax positions are measured at the largest amount that is greater than 50% likely of being realized. Changes in recognition or measurement are reflected in the period in which the change in judgment occurs. We record interest and penalties related to unrecognized tax benefits in income tax expense. |
Sales Tax | Sales Tax The Company’s accounting policy is to present taxes collected from customers and remitted to government authorities on a net basis. |
Discounted Lease Rentals | Discounted Lease Rentals The Company may utilize its lease rentals receivable and underlying equipment as collateral to borrow from financial institutions at fixed rates on a non-recourse basis. In the event of a default by a customer, the financial institution has a first lien on the underlying leased equipment, with no further recourse against the Company. Proceeds from discounting are recorded on the balance sheet as discounted lease rentals. As customers make payments, lease income and interest expense are recorded and discounted lease rentals are reduced by the effective interest method. |
Earnings Per Share | Earnings Per Share The Company calculates earnings per share by dividing net income by the weighted average number of shares of common stock outstanding to arrive at the Earnings Per Share — Basic. The Company calculates Earnings Per Share — Diluted by dividing net income by the weighted average number of shares of common stock and dilutive stock equivalents from the potential exercise of stock options using the treasury stock method. The following table sets forth the presentation of shares outstanding used in the calculation of basic and diluted earnings per share (“EPS”): Year Ended December 28, 2019 December 29, 2018 December 30, 2017 Denominator for basic EPS — weighted average common shares 3,840,638 3,874,757 4,056,049 Dilutive shares associated with option plans 259,991 275,022 283,895 Denominator for diluted EPS — weighted average common shares and dilutive potential common shares 4,100,629 4,149,779 4,339,944 Options excluded from EPS calculation — anti-dilutive 10,262 21,933 24,516 |
Fair Value Measurements | 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. |
Recent Accounting Pronouncements: | Recently Issued Accounting Pronouncements In June 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“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 was to be effective for reporting periods beginning after December 15, 2019, with early adoption permitted. In November 2019, the FASB issued ASU 2019-10, Financial Instruments – Credit Losses (Topic 326), Derivatives and Hedging (Topic 815), and Leases (Topic 842) Effective Dates, which deferred the effective dates for the Company, as a smaller reporting company, until fiscal year 2023. The Company currently plans to adopt the guidance at the beginning of fiscal 2023. The Company is continuing to assess the impact of the standard on its consolidated financial statements. Recently Adopted Accounting Pronouncements In February 2016, the FASB issued 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, as well as adding new disclosures for leasing activities. 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. In July 2018, the FASB also issued ASU 2018-11, Leases (Topic 842): Targeted Improvements , which provides an optional transition method that allows entities to elect to apply the standard prospectively at its effective date, versus recasting the prior periods presented. The Company used the prospective approach of adoption when the new guidance was adopted on December 30, 2018, the first day of fiscal 2019. In addition, the Company elected the package of practical expedients permitted under the transition guidance within the new standard which allowed it to carry forward historical lease classification. Under ASU 2018-20 Leases (Topic 842): Narrow Scope Improvements for Lessors , the Company has elected the practical expedient to exclude from its income statement, taxes imposed on leasing revenue transactions by a government agency that are collected by the lessor from the lessee. Upon adoption, as a lessee, the Company recognized operating lease right-of-use assets of $6.0 million and operating lease liabilities of $6.3 million on its Consolidated Balance Sheets. The adoption of the standard did not have a material impact on its Consolidated Statements of Operations or Shareholders’ Equity (Deficit). As a lessor, the adoption of the new standard required the Company to present cash receipts from leases within operating activities in the Consolidated Statements of Cash Flows, where in prior periods such cash receipts are presented within investing activities. For the year ended December 28, 2019, principal collections on lease receivables were $19.4 million. As a lessor, leasing income for direct financing leases is recognized under the effective interest method. The effective interest method of income recognition applies a constant rate of interest equal to the internal rate of return on the lease. For sales-type leases in which the equipment has a fair value greater or less than its carrying amount, selling profit/loss is recognized at commencement. For subsequent periods or for leases in which the equipment’s fair value is equal to its carrying amount, the recording of income is consistent with the accounting for a direct financing lease. For leases that are accounted for as operating leases, income is recognized on a straight-line basis when payments under the lease contract are due. Additional information and disclosures required by this new standard for the Company as a lessee are contained in Note 10 – “Operating Leases”, and as a lessor in Note 3 – “Investment in Leasing Operations”. |
Reclassifications | Reclassifications In addition to the adjustments noted above, certain reclassifications of previously reported amounts have been made to conform to the current year presentation. Such reclassifications did not impact net income or shareholders’ equity (deficit) as previously reported. |
Organization and Business_ (Tab
Organization and Business: (Tables) | 12 Months Ended |
Dec. 28, 2019 | |
Organization and Business: | |
Summary of franchising activity | 12/29/2018 OPENED CLOSED 12/28/2019 Plato’s Closet Franchises - US and Canada 480 6 (3) 483 Once Upon A Child Franchises - US and Canada 379 12 (3) 388 Play It Again Sports Franchises - US and Canada 281 4 (5) 280 Style Encore Franchises - US and Canada 67 5 (4) 68 Music Go Round Franchises - US 34 4 (1) 37 Total Franchised Stores 1,241 31 (16) 1,256 |
Significant Accounting Polici_3
Significant Accounting Policies: (Tables) | 12 Months Ended |
Dec. 28, 2019 | |
Significant Accounting Policies: | |
Schedule of shares outstanding used in the calculation of basic and diluted earnings per share | Year Ended December 28, 2019 December 29, 2018 December 30, 2017 Denominator for basic EPS — weighted average common shares 3,840,638 3,874,757 4,056,049 Dilutive shares associated with option plans 259,991 275,022 283,895 Denominator for diluted EPS — weighted average common shares and dilutive potential common shares 4,100,629 4,149,779 4,339,944 Options excluded from EPS calculation — anti-dilutive 10,262 21,933 24,516 |
Investment in Leasing Operati_2
Investment in Leasing Operations: (Tables) | 12 Months Ended |
Dec. 28, 2019 | |
Investment in Leasing Operations: | |
Schedule of investment in leasing operations | December 28, 2019 December 29, 2018 Direct financing and sales-type leases: Minimum lease payments receivable $ 26,001,200 $ 40,822,400 Estimated unguaranteed residual value of equipment 4,109,800 4,741,200 Unearned lease income, net of initial direct costs deferred (4,039,400) (6,739,900) Security deposits (3,852,000) (4,118,300) Equipment installed on leases not yet commenced 3,437,800 5,094,800 Total investment in direct financing and sales-type leases 25,657,400 39,800,200 Allowance for credit losses (580,600) (861,200) Net investment in direct financing and sales-type leases 25,076,800 38,939,000 Operating leases: Operating lease assets 820,700 777,000 Less accumulated depreciation and amortization (591,900) (713,000) Net investment in operating leases 228,800 64,000 Total net investment in leasing operations $ 25,305,600 $ 39,003,000 |
Schedule of future minimum lease payments receivable under lease contracts and the amortization of unearned lease income, net of initial direct costs deferred | Future minimum lease payments receivable under lease contracts and the amortization of unearned lease income, net of initial direct costs deferred, is as follows as of December 28, 2019: Direct Financing and Sales-Type Leases Minimum Lease Income Fiscal Year Payments Receivable Amortization 2020 $ 16,855,200 $ 3,193,700 2021 8,049,100 802,000 2022 1,084,400 43,100 2023 8,100 500 2024 4,400 100 Thereafter — — $ 26,001,200 $ 4,039,400 |
Schedule of activity in the allowance for credit losses for leasing operations | December 28, 2019 December 29, 2018 December 30, 2017 Balance at beginning of period $ 861,200 $ 711,200 $ 896,000 Provisions charged to expense (78,300) 38,600 9,000 Recoveries 21,900 213,500 8,600 Deductions for amounts written-off (224,200) (102,100) (202,400) Balance at end of period $ 580,600 $ 861,200 $ 711,200 |
Schedule of investment in direct financing and sales-type leases (investment in leases) and allowance for credit losses by loss evaluation methodology | December 28, 2019 December 29, 2018 Investment Allowance for Investment Allowance for In Leases Credit Losses In Leases Credit Losses Collectively evaluated for loss potential $ 25,657,400 580,600 $ 39,800,200 $ 861,200 Individually evaluated for loss potential — — — — Total $ 25,657,400 $ 580,600 $ 39,800,200 $ 861,200 |
Schedule of information regarding accruing and non-accrual leases | December 28, 2019 0-60 Days 61-90 Days Over 90 Days Delinquent Delinquent Delinquent and and Accruing and Accruing Accruing Non-Accrual Total Middle-Market $ 24,546,300 $ — $ — $ — $ 24,546,300 Small-Ticket 1,111,100 — — — 1,111,100 Total Investment in Leases $ 25,657,400 $ — $ — $ — $ 25,657,400 December 29, 2018 0-60 Days 61-90 Days Over 90 Days Delinquent Delinquent Delinquent and and Accruing and Accruing Accruing Non-Accrual Total Middle-Market $ 38,395,000 $ — $ — $ 70,000 $ 38,465,000 Small-Ticket 1,335,200 — — — 1,335,200 Total Investment in Leases $ 39,730,200 $ — $ — $ 70,000 $ 39,800,200 |
Schedule of components of leasing income | Year Ended December 28, 2019 Interest income on direct financing and sales-type leases $ 7,602,600 Selling profit (loss) at commencement of sales-type leases 2,470,300 Operating lease income 2,525,600 Income on sales of equipment under lease 2,855,400 Other 601,900 Leasing income $ 16,055,800 |
Receivables_ (Tables)
Receivables: (Tables) | 12 Months Ended |
Dec. 28, 2019 | |
Receivables: | |
Schedule of the Company's current receivables | December 28, 2019 December 29, 2018 Trade $ 35,800 $ 19,700 Royalty 1,543,100 1,396,000 Other 90,600 137,400 $ 1,669,500 $ 1,553,100 |
Shareholders' Equity (Deficit_2
Shareholders' Equity (Deficit): (Tables) | 12 Months Ended |
Dec. 28, 2019 | |
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 31, 2016 673,670 $ 62.11 6.11 $ 43,139,100 Granted 69,500 128.00 Exercised (80,236) 33.41 Forfeited (4,750) 95.28 Outstanding, December 30, 2017 658,184 72.33 5.87 37,723,800 Granted 69,000 149.51 Exercised (79,241) 39.37 Forfeited (8,563) 119.24 Outstanding, December 29, 2018 639,380 5.61 47,808,100 Granted 54,800 170.14 Exercised (190,172) 57.41 Forfeited (24,450) Outstanding, December 28, 2019 479,558 $ 5.79 $ 45,283,200 Exercisable, December 28, 2019 344,108 $ 83.08 4.69 $ 38,930,300 |
Schedule of weighted average assumptions used in estimation of fair value of options granted | Year Ended December 28, 2019 December 29, 2018 December 30, 2017 Risk free interest rate 1.85 % 2.73 % 2.05 % Expected life (years) 6 6 6 Expected volatility 19.30 % 19.94 % 25.64 % Dividend yield 1.38 % 1.13 % 1.10 % Option fair value $ 30.96 $ 32.45 $ 32.07 |
Debt (Tables)
Debt (Tables) | 12 Months Ended |
Dec. 28, 2019 | |
Debt: | |
Schedule of required prepayments of the notes payable for each of the next five years and thereafter | 2020 $ 3,750,000 2021 4,250,000 2022 4,250,000 2023 4,250,000 2024 4,250,000 Thereafter 4,937,500 Total $ 25,687,500 |
Accrued Liabilities (Tables)
Accrued Liabilities (Tables) | 12 Months Ended |
Dec. 28, 2019 | |
Accrued Liabilities | |
Schedule of accrued liabilities | December 28, 2019 December 29, 2018 Accrued compensation and benefits $ 887,900 $ 1,490,700 Rent related liabilities 388,500 91,100 Accrued interest 210,800 218,600 Accrued purchases of goods and services 186,200 716,400 Other 1,109,700 611,800 $ 2,783,100 $ 3,128,600 |
Contract Liabilities_ (Tables)
Contract Liabilities: (Tables) | 12 Months Ended |
Dec. 28, 2019 | |
Contract Liabilities: | |
Schedule of activity of current and noncurrent deferred franchise revenue | December 28, 2019 December 29, 2018 Balance at beginning of period $ 10,177,300 $ 10,310,200 Franchise and software license fees collected from franchisees, excluding amount earned as revenue during the period 1,203,500 1,749,100 Fees earned that were included in the balance at the beginning of the period (1,805,300) (1,882,000) Balance at end of period $ 9,575,500 $ 10,177,300 |
Schedule of future estimated revenue to be recognized related to performance obligations | Contract Liabilities expected to be recognized in Amount 2020 $ 1,717,000 2021 1,578,200 2022 1,433,300 2023 1,262,000 2024 1,064,300 Thereafter 2,520,700 $ 9,575,500 |
Operating Leases_ (Tables)
Operating Leases: (Tables) | 12 Months Ended |
Dec. 28, 2019 | |
Operating Leases: | |
Schedule of maturities of operating lease liabilities | Operating Lease Liabilities expected to be recognized in Amount 2020 $ 704,300 2021 783,600 2022 784,400 2023 763,300 2024 784,400 Thereafter 4,258,600 Total lease payments 8,078,600 Less imputed interest (1,863,100) Present value of lease liabilities $ 6,215,500 |
Schedule of supplemental cash flow information related to operating leases | Year Ended December 28, 2019 Cash paid for amounts included in the measurement of lease liabilities: Operating cash flow outflow from operating leases $ 493,900 |
Schedule of minimum rental commitments under noncancelable operating leases, made in accordance with accountaing guidance from the prior year | As of December 29, 2018 minimum rental commitments under noncancelable operating leases, exclusive of maintenance, insurance, taxes and other expenses, were as follows: 2019 $ 503,700 2020 762,500 2021 783,600 2022 784,400 2023 763,300 Thereafter 5,042,900 Total $ 8,640,400 |
Income Taxes_ (Tables)
Income Taxes: (Tables) | 12 Months Ended |
Dec. 28, 2019 | |
Income Taxes: | |
Schedule of reconciliation of the expected federal income tax expense based on the federal statutory tax rate to the actual income tax expense | Year Ended December 28, 2019 December 29, 2018 December 30, 2017 Federal income tax expense at statutory rate (21%, 21%, 35%) $ 8,708,200 $ 8,249,400 $ 12,758,000 Change in valuation allowance 147,900 (13,800) 7,500 State and local income taxes, net of federal benefit 1,310,800 1,334,100 1,057,100 Permanent differences, including stock option expenses (1,056,800) (355,500) (628,400) Adjustment to uncertain tax positions (58,500) 4,500 77,800 Rate change — — (1,540,300) Other, net 266,500 (61,100) 139,300 Actual income tax expense $ 9,318,100 $ 9,157,600 $ 11,871,000 |
Schedule of components of the provision for income taxes | Year Ended December 28, 2019 December 29, 2018 December 30, 2017 Current: Federal $ 9,076,400 $ 6,355,800 $ 10,296,100 State 1,693,800 1,551,000 1,688,100 Foreign 363,200 423,000 365,900 Current provision 11,133,400 8,329,800 12,350,100 Deferred: Federal (1,834,800) 967,300 (463,800) State 19,500 (139,500) (15,300) Deferred provision (1,815,300) 827,800 (479,100) Total provision for income taxes $ 9,318,100 $ 9,157,600 $ 11,871,000 |
Schedule of tax effects of temporary differences that give rise to the net deferred income tax assets and liabilities | December 28, 2019 December 29, 2018 Deferred tax assets: Accounts receivable and lease reserves $ 154,700 $ 215,900 Non-qualified stock option expense 1,758,100 2,071,600 Deferred revenue 1,957,500 2,020,100 Trademarks 34,500 39,800 Lease deposits 930,700 1,004,700 Loss from and impairment of equity and note investments 2,595,500 2,620,700 Foreign tax credits 173,100 — Valuation allowance (2,768,600) (2,620,700) Other 194,400 331,400 Total deferred tax assets 5,029,900 5,683,500 Deferred tax liabilities: Lease revenue and initial direct costs (4,207,400) (6,664,800) Depreciation and amortization (155,500) (167,000) Total deferred tax liabilities (4,362,900) (6,831,800) Total net deferred tax assets (liabilities) $ 667,000 $ (1,148,300) |
Summary of activity related to the Company's unrecognized tax benefits | Total Balance at December 30, 2017 $ 551,100 Increases related to current year tax positions 135,600 Expiration of the statute of limitations for the assessment of taxes (135,400) Balance at December 29, 2018 551,300 Increases related to current year tax positions 131,900 Expiration of the statute of limitations for the assessment of taxes (184,200) Balance at December 28, 2019 $ 499,000 |
Segment Reporting_ (Tables)
Segment Reporting: (Tables) | 12 Months Ended |
Dec. 28, 2019 | |
Segment Reporting: | |
Schedule of financial information by segment and reconciliation of segment contribution to operating income | Year ended December 28, 2019 December 29, 2018 December 30, 2017 Revenue: Franchising $ 57,243,100 $ 54,334,600 $ 51,287,100 Leasing 16,055,800 18,176,500 18,470,200 Total revenue $ 73,298,900 $ 72,511,100 $ 69,757,300 Reconciliation to operating income: Franchising segment contribution $ 35,169,900 $ 31,882,200 $ 29,513,900 Leasing segment contribution 7,961,200 9,881,600 9,291,100 Total operating income $ 43,131,100 $ 41,763,800 $ 38,805,000 Depreciation and amortization: Franchising $ 281,600 $ 240,500 $ 271,300 Leasing 118,500 73,600 84,100 Total depreciation and amortization $ 400,100 $ 314,100 $ 355,400 As of December 28, 2019 December 29, 2018 Identifiable assets: Franchising $ 3,736,000 $ 5,208,400 Leasing 26,596,700 40,490,000 Unallocated 31,509,500 964,700 Total $ 61,842,200 $ 46,663,100 |
Quarterly Financial Data (Una_2
Quarterly Financial Data (Unaudited): (Tables) | 12 Months Ended |
Dec. 28, 2019 | |
Quarterly Financial Data (Unaudited): | |
Schedule of the Company's quarterly financial data | First Second Third Fourth Quarter Quarter Quarter Quarter Total 2019 Total Revenue $ 18,331,200 $ 17,404,200 $ 19,680,900 $ 17,882,600 $ 73,298,900 Income from Operations 10,066,500 9,846,900 12,274,700 10,943,000 43,131,100 Net Income 7,272,200 7,301,900 9,113,800 8,461,400 32,149,300 Net Income Per Common Share — Basic $ 1.86 $ 1.94 $ 2.39 $ 2.18 $ Net Income Per Common Share — Diluted $ 1.73 $ 1.79 $ $ 2.08 $ 7.84 2018 Total Revenue $ 18,161,000 $ 18,159,800 $ 19,118,500 $ 17,071,800 $ 72,511,100 Income from Operations 10,074,200 10,074,700 11,435,300 10,179,600 41,763,800 Net Income 6,960,400 7,143,000 8,364,300 7,657,800 30,125,500 Net Income Per Common Share — Basic $ 1.81 $ 1.85 $ 2.15 $ 1.96 $ Net Income Per Common Share — Diluted $ 1.69 $ 1.73 $ $ 1.83 $ 7.26 |
Organization and Business_ (Det
Organization and Business: (Details) - item | 12 Months Ended | |
Dec. 28, 2019 | Dec. 29, 2018 | |
Franchising activity | ||
Number of weeks in a fiscal year | 52 | 52 |
Number of franchises in operation at the beginning of the period | 1,241 | |
OPENED | 31 | |
CLOSED | (16) | |
Number of franchises in operation at the end of the period | 1,256 | 1,241 |
Plato's Closet | US and Canada | ||
Franchising activity | ||
Number of franchises in operation at the beginning of the period | 480 | |
OPENED | 6 | |
CLOSED | (3) | |
Number of franchises in operation at the end of the period | 483 | 480 |
Once Upon A Child | US and Canada | ||
Franchising activity | ||
Number of franchises in operation at the beginning of the period | 379 | |
OPENED | 12 | |
CLOSED | (3) | |
Number of franchises in operation at the end of the period | 388 | 379 |
Play It Again Sports | US and Canada | ||
Franchising activity | ||
Number of franchises in operation at the beginning of the period | 281 | |
OPENED | 4 | |
CLOSED | (5) | |
Number of franchises in operation at the end of the period | 280 | 281 |
Style Encore | US | ||
Franchising activity | ||
Number of franchises in operation at the beginning of the period | 67 | |
OPENED | 5 | |
CLOSED | (4) | |
Number of franchises in operation at the end of the period | 68 | 67 |
Music Go Round | US | ||
Franchising activity | ||
Number of franchises in operation at the beginning of the period | 34 | |
OPENED | 4 | |
CLOSED | (1) | |
Number of franchises in operation at the end of the period | 37 | 34 |
Significant Accounting Polici_4
Significant Accounting Policies: Balance Sheet Disclosures (Details) - USD ($) | 12 Months Ended | ||
Dec. 28, 2019 | Dec. 29, 2018 | Dec. 30, 2017 | |
Receivables | |||
Allowance for Doubtful Accounts Receivable, Current | $ 1,900 | $ 400 | |
Restricted Cash | |||
Restricted cash held in escrow | $ 50,000 | 80,000 | $ 90,000 |
Allowance for Credit Losses | |||
Delinquent period for charging-off against allowance for credit losses | 121 days | ||
Canadian operations | |||
Cash Equivalents | |||
Cash located in banks | $ 56,500 | $ 83,000 |
Significant Accounting Polici_5
Significant Accounting Policies: PPE, Goodwill, Advertising, Stock-Based Comp (Details) - USD ($) | 12 Months Ended | ||
Dec. 28, 2019 | Dec. 29, 2018 | Dec. 30, 2017 | |
Goodwill | |||
Goodwill impairment | $ 0 | $ 0 | |
Goodwill | 607,500 | 607,500 | |
Advertising | |||
Advertising costs | $ 402,700 | $ 423,400 | $ 307,700 |
Accounting for Stock-Based Compensation | |||
Stock options, vesting period | 4 years | ||
Computer and peripheral equipment | Minimum | |||
Property, plant and equipment | |||
Estimated useful lives | 3 years | ||
Computer and peripheral equipment | Maximum | |||
Property, plant and equipment | |||
Estimated useful lives | 5 years | ||
Furniture and equipment | Minimum | |||
Property, plant and equipment | |||
Estimated useful lives | 5 years | ||
Furniture and equipment | Maximum | |||
Property, plant and equipment | |||
Estimated useful lives | 7 years |
Significant Accounting Polici_6
Significant Accounting Policies: Marketing Fees and Software License Fees (Details) - USD ($) | 12 Months Ended | ||
Dec. 28, 2019 | Dec. 29, 2018 | Dec. 30, 2017 | |
Revenue recognition | |||
Deferred revenue | $ 9,575,500 | $ 10,177,300 | $ 10,310,200 |
Franchise fees | |||
Revenue recognition | |||
Deferred revenue | 7,623,800 | 8,214,600 | |
Revenue | 1,540,900 | 1,580,300 | 1,541,100 |
Marketing Fees | |||
Revenue recognition | |||
Revenue | 1,300,000 | 1,300,000 | 1,200,000 |
Software License Fees | |||
Revenue recognition | |||
Deferred revenue | 1,741,800 | 1,767,700 | |
Revenue | $ 300,000 | $ 300,000 | $ 300,000 |
Significant Accounting Polici_7
Significant Accounting Policies: Commission Fees (Details) - Commission Fees - USD ($) | 12 Months Ended | ||
Dec. 28, 2019 | Dec. 29, 2018 | Dec. 30, 2017 | |
Commission Fees | |||
Capitalized contract costs | $ 600,000 | $ 600,000 | |
Expense | $ 107,200 | $ 99,500 | $ 98,800 |
Significant Accounting Polici_8
Significant Accounting Policies: Earnings Per Share (Details) - shares | 12 Months Ended | ||
Dec. 28, 2019 | Dec. 29, 2018 | Dec. 30, 2017 | |
Earnings Per Share | |||
Denominator for basic EPS - weighted average common shares | 3,840,638 | 3,874,757 | 4,056,049 |
Dilutive shares associated with option plans | 259,991 | 275,022 | 283,895 |
Denominator for diluted EPS - weighted average common shares and dilutive potential common shares | 4,100,629 | 4,149,779 | 4,339,944 |
Options excluded from EPS calculation - anti-dilutive (in shares) | 10,262 | 21,933 | 24,516 |
Significant Accounting Polici_9
Significant Accounting Policies: Recent Accounting Pronouncements - ASU 2016-02 (Details) - USD ($) | 12 Months Ended | |
Dec. 28, 2019 | Dec. 30, 2018 | |
Recent Accounting Pronouncements | ||
Operating lease right of use asset | $ 3,595,200 | |
Operating lease liabilities | 6,215,500 | |
Principal collections on lease receivables | 19,421,400 | |
Accounting Standards Update 2016-02 | ||
Recent Accounting Pronouncements | ||
Principal collections on lease receivables | $ 19,400,000 | |
Adjustment | Accounting Standards Update 2016-02 | ||
Recent Accounting Pronouncements | ||
Operating lease right of use asset | $ 6,000,000 | |
Operating lease liabilities | $ 6,300,000 |
Investment in Leasing Operati_3
Investment in Leasing Operations: Summary of Leasing Operations (Details) - USD ($) | Dec. 28, 2019 | Dec. 29, 2018 |
Direct financing and sales-type leases: | ||
Minimum lease payments receivable | $ 26,001,200 | |
Minimum lease payments receivable | $ 40,822,400 | |
Estimated unguaranteed residual value of equipment | 4,109,800 | |
Estimated unguaranteed residual value of equipment | 4,741,200 | |
Unearned lease income net of initial direct costs deferred | (4,039,400) | |
Unearned lease income net of initial direct costs deferred | (6,739,900) | |
Security deposits | (3,852,000) | |
Security deposits | (4,118,300) | |
Equipment installed on leases not yet commenced | 3,437,800 | |
Equipment installed on leases not yet commenced | 5,094,800 | |
Total investment in direct financing and sales-type leases | 25,657,400 | |
Total investment in direct financing and sales-type leases | 39,800,200 | |
Allowance for credit losses | (580,600) | |
Allowance for credit losses | (861,200) | |
Net investment in direct financing and sales-type leases | 25,076,800 | |
Net investment in direct financing and sales-type leases | 38,939,000 | |
Operating leases: | ||
Operating lease assets | 820,700 | |
Less accumulated depreciation and amortization | (591,900) | |
Net investment in operating leases | 228,800 | |
Total net investment in leasing operations | 25,305,600 | |
Operating lease assets | 777,000 | |
Less accumulated depreciation and amortization | (713,000) | |
Net investment in operating leases | 64,000 | |
Total net investment in leasing operations | 39,003,000 | |
Net investment in leases - current | 12,800,100 | |
Net investment in leases - long-term | $ 12,505,500 | |
Net investment in leases - current | 18,547,500 | |
Net investment in leases - long-term | $ 20,455,500 |
Investment in Leasing Operati_4
Investment in Leasing Operations: Risk Concentration (Details) - Total assets - customer | 12 Months Ended | |
Dec. 28, 2019 | Dec. 29, 2018 | |
Investment in leasing operations | ||
Number of customers | 0 | 2 |
Customer One Concentration Risk | ||
Investment in leasing operations | ||
Percentage of concentration risk | 24.00% | |
Customer Two Concentration Risk | ||
Investment in leasing operations | ||
Percentage of concentration risk | 11.00% |
Investment in Leasing Operati_5
Investment in Leasing Operations: Minimum Lease Payments Receivable (Details) | Dec. 28, 2019USD ($) |
Direct Financing and Sales-Type Leases, Minimum Lease Payments Receivable | |
2020 | $ 16,855,200 |
2021 | 8,049,100 |
2022 | 1,084,400 |
2023 | 8,100 |
2024 | 4,400 |
Total | 26,001,200 |
Direct Financing and Sales-Type Leases, Income Amortization | |
2020 | 3,193,700 |
2021 | 802,000 |
2022 | 43,100 |
2023 | 500 |
2024 | 100 |
Total | $ 4,039,400 |
Investment in Leasing Operati_6
Investment in Leasing Operations: Credit Losses (Details) - USD ($) | 12 Months Ended | ||
Dec. 28, 2019 | Dec. 29, 2018 | Dec. 30, 2017 | |
Activity in the allowance for credit losses for leasing operations | |||
Balance at beginning of period | $ 861,200 | $ 711,200 | $ 896,000 |
Provision for credit losses | (78,300) | 38,600 | 9,000 |
Recoveries | 21,900 | 213,500 | 8,600 |
Deductions for amounts written-off | (224,200) | (102,100) | (202,400) |
Balance at end of period | 580,600 | 861,200 | $ 711,200 |
Investment In Leases | |||
Total investment in direct financing and sales-type leases | 25,657,400 | ||
Total investment in direct financing and sales-type leases | 39,800,200 | ||
Allowance for Credit Losses | |||
Total | 580,600 | ||
Total | 861,200 | ||
Investment in leases | |||
Investment In Leases | |||
Collectively evaluated for loss potential | 25,657,400 | 39,800,200 | |
Total investment in direct financing and sales-type leases | 25,657,400 | ||
Total investment in direct financing and sales-type leases | 39,800,200 | ||
Allowance for Credit Losses | |||
Collectively evaluated for loss potential | 580,600 | 861,200 | |
Total | $ 580,600 | ||
Total | $ 861,200 |
Investment in Leasing Operati_7
Investment in Leasing Operations: Investment Aging (Details) - USD ($) | Dec. 28, 2019 | Dec. 29, 2018 |
Investment in leasing operations | ||
0-60 Days Delinquent and Accruing | $ 25,657,400 | $ 39,730,200 |
Non-Accrual | 70,000 | |
Total investment in direct financing and sales-type leases | 25,657,400 | |
Total investment in direct financing and sales-type leases | 39,800,200 | |
Middle-Market | ||
Investment in leasing operations | ||
0-60 Days Delinquent and Accruing | 24,546,300 | 38,395,000 |
Non-Accrual | 70,000 | |
Total investment in direct financing and sales-type leases | 24,546,300 | |
Total investment in direct financing and sales-type leases | 38,465,000 | |
Small-Ticket | ||
Investment in leasing operations | ||
0-60 Days Delinquent and Accruing | 1,111,100 | 1,335,200 |
Total investment in direct financing and sales-type leases | $ 1,111,100 | |
Total investment in direct financing and sales-type leases | $ 1,335,200 |
Investment in Leasing Operati_8
Investment in Leasing Operations: Leasing Income (Details) | 12 Months Ended |
Dec. 28, 2019USD ($) | |
Leasing income | |
Interest income on direct financing and sales-type leases | $ 7,602,600 |
Selling profit (loss) at commencement of sales-type leases | 2,470,300 |
Operating lease income | 2,525,600 |
Income on sales of equipment under lease | 2,855,400 |
Other | 601,900 |
Leasing income | $ 16,055,800 |
Receivables_ (Details)
Receivables: (Details) - USD ($) | Dec. 28, 2019 | Dec. 29, 2018 |
Current receivables | ||
Trade | $ 35,800 | $ 19,700 |
Royalty | 1,543,100 | 1,396,000 |
Other | 90,600 | 137,400 |
Total current receivables | $ 1,669,500 | $ 1,553,100 |
Shareholders' Equity (Deficit_3
Shareholders' Equity (Deficit): Dividends and Repurchase of Common Stock (Details) - USD ($) | Mar. 28, 2019 | Aug. 16, 2017 | Jul. 19, 2017 | Feb. 28, 2019 | Dec. 28, 2019 | Dec. 29, 2018 | Dec. 30, 2017 |
Repurchase of Common Stock | |||||||
Aggregate purchase price of shares repurchased (in dollars) | $ 24,028,100 | $ 1,846,400 | $ 49,902,500 | ||||
Dividends | |||||||
Cash dividends declared and paid (in dollars per share) | $ 0.90 | $ 0.56 | $ 0.43 | ||||
Aggregate quarterly cash dividends declared and paid | $ 3,449,100 | $ 2,169,900 | $ 1,765,000 | ||||
2019 Tender Offer | |||||||
Repurchase of Common Stock | |||||||
Shares authorized for repurchase per tender offer | 150,000 | ||||||
Price per share of common stock per tender offer | $ 159.63 | ||||||
Number of shares repurchased | 150,000 | ||||||
Purchase price of shares per tender offer | $ 24,000,000 | ||||||
Tender Offer | |||||||
Repurchase of Common Stock | |||||||
Shares authorized for repurchase per tender offer | 400,000 | ||||||
Price per share of common stock per tender offer | $ 124.48 | ||||||
Number of shares repurchased | 400,000 | ||||||
Aggregate purchase price of shares repurchased (in dollars) | $ 49,900,000 | ||||||
Common Stock Repurchase Program | |||||||
Repurchase of Common Stock | |||||||
Purchase of stock, price per share | $ 149.10 | ||||||
Number of shares repurchased | 12,384 | ||||||
Aggregate purchase price of shares repurchased (in dollars) | $ 1,800,000 | ||||||
Number of additional shares that can be repurchased | 130,604 |
Shareholders' Equity (Deficit_4
Shareholders' Equity (Deficit): Stock Options (Details) - shares | 12 Months Ended | |
Dec. 28, 2019 | Feb. 20, 2011 | |
2001 Plan and 2010 Plan | Stock options | Minimum | ||
Stock Option Plans | ||
Exercise price of stock options as a percentage of fair value on the date of grant | 100.00% | |
Threshold voting rights above which the option exercise price may not be less than 110% of the fair market value (as a percent) | 10.00% | |
Exercise price of stock options as a percentage of fair value on the date of grant for an individual who owns more than 10% of voting rights | 110.00% | |
2001 Plan and 2010 Plan | Stock options | Maximum | ||
Stock Option Plans | ||
Term of the option | 10 years | |
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 options | ||
Stock Option Plans | ||
Number of shares authorized for issuance | 350,000 |
Shareholders' Equity (Deficit_5
Shareholders' Equity (Deficit): Stock Options Activity (Details) - Stock options - USD ($) | 12 Months Ended | |||
Dec. 28, 2019 | Dec. 29, 2018 | Dec. 30, 2017 | Dec. 31, 2016 | |
Number of Shares | ||||
Outstanding at the beginning of the period (in shares) | 639,380 | 658,184 | 673,670 | |
Granted (in shares) | 54,800 | 69,000 | 69,500 | |
Exercised (in shares) | (190,172) | (79,241) | (80,236) | |
Forfeited (in shares) | (24,450) | (8,563) | (4,750) | |
Outstanding at the end of the period (in shares) | 479,558 | 639,380 | 658,184 | 673,670 |
Exercisable at the end of the period (in shares) | 344,108 | |||
Weighted Average Exercise Price | ||||
Outstanding at the beginning of the period (in dollars per share) | $ 84.12 | $ 72.33 | $ 62.11 | |
Granted (in dollars per share) | 170.14 | 149.51 | 128 | |
Exercised (in dollars per share) | 57.41 | 39.37 | 33.41 | |
Forfeited (in dollars per share) | 138.13 | 119.24 | 95.28 | |
Outstanding at the end of the period (in dollars per share) | 101.78 | $ 84.12 | $ 72.33 | $ 62.11 |
Exercisable at the end of the period (in dollars per share) | $ 83.08 | |||
Weighted Average Remaining Contractual Life (years) | ||||
Outstanding | 5 years 9 months 15 days | 5 years 7 months 10 days | 5 years 10 months 13 days | 6 years 1 month 10 days |
Exercisable at the end of the period | 4 years 8 months 9 days | |||
Intrinsic Value | ||||
Outstanding at the beginning of the period | $ 47,808,100 | $ 37,723,800 | $ 43,139,100 | |
Outstanding at the end of the period | 45,283,200 | $ 47,808,100 | $ 37,723,800 | $ 43,139,100 |
Exercisable at the end of the period | $ 38,930,300 | |||
Weighted average assumptions and results used in estimation of fair value of options granted | ||||
Risk free interest rate (as a percent) | 1.85% | 2.73% | 2.05% | |
Expected life (years) | 6 years | 6 years | 6 years | |
Expected volatility (as a percent) | 19.30% | 19.94% | 25.64% | |
Dividend yield (as a percent) | 1.38% | 1.13% | 1.10% | |
Option fair value (in dollars per share) | $ 30.96 | $ 32.45 | $ 32.07 |
Shareholders' Equity (Deficit_6
Shareholders' Equity (Deficit): Additional Information (Details) - Stock options - USD ($) | 12 Months Ended | ||
Dec. 28, 2019 | Dec. 29, 2018 | Dec. 30, 2017 | |
Additional disclosures | |||
Total intrinsic value of options exercised | $ 22,700,000 | $ 8,300,000 | $ 7,700,000 |
Total fair value of shares vested | $ 8,600,000 | $ 7,800,000 | $ 7,300,000 |
Shares of previously owned common stock surrendered as payment for option shares exercised | 0 | 2,249 | 2,927 |
Compensation expense | $ 1,666,400 | $ 1,976,100 | $ 1,956,600 |
Total unrecognized compensation expense | $ 3,700,000 | ||
Weighted average period for recognition of unrecognized compensation expense | 2 years 7 months 6 days |
Debt_ Line of Credit (Details)
Debt: Line of Credit (Details) $ in Millions | 12 Months Ended | |
Dec. 28, 2019USD ($)item | Jul. 31, 2017USD ($) | |
Private Bank, Trust Company and BMO Harris Bank N A | One month LIBOR | ||
Line of Credit | ||
Variable rate basis | one month LIBOR | |
Private Bank, Trust Company and BMO Harris Bank N A | Two month LIBOR | ||
Line of Credit | ||
Variable rate basis | two month LIBOR | |
Private Bank, Trust Company and BMO Harris Bank N A | Three month LIBOR | ||
Line of Credit | ||
Variable rate basis | three month LIBOR | |
Private Bank, Trust Company and BMO Harris Bank N A | Six month LIBOR | ||
Line of Credit | ||
Variable rate basis | six month LIBOR | |
Private Bank, Trust Company and BMO Harris Bank N A | Twelve month LIBOR | ||
Line of Credit | ||
Variable rate basis | twelve month LIBOR | |
Line of Credit | ||
Line of Credit | ||
Borrowings outstanding | $ 0 | |
Line of Credit | Private Bank, Trust Company and BMO Harris Bank N A | ||
Line of Credit | ||
Terms notes, available borrowing to fund Tender Offer | $ 15 | |
Automatic deduction in the aggregate commitments under the line of credit effective July 2019 and each subsequent July thereafter through the term of the facility | $ 5 | |
Line of credit available for additional borrowings | $ 45 | |
Number of interest rate options | item | 2 | |
Non-utilization fees (as a percent) | 0.25% | |
Line of Credit | Private Bank, Trust Company and BMO Harris Bank N A | Base Rate | ||
Line of Credit | ||
Variable rate basis | Base Rate | |
Applicable margin (as a percent) | 0.00% | |
Line of Credit | Private Bank, Trust Company and BMO Harris Bank N A | LIBOR | ||
Line of Credit | ||
Variable rate basis | LIBOR | |
Applicable margin (as a percent) | 2.00% |
Debt_ Notes Payable (Details)
Debt: Notes Payable (Details) - USD ($) | 12 Months Ended | |||
Dec. 28, 2019 | Dec. 30, 2017 | Jul. 31, 2017 | May 31, 2015 | |
Notes Payable | ||||
Proceeds from the Note Agreement | $ 12,500,000 | |||
Notes Payable | Prudential Investment Management, Inc | ||||
Notes Payable | ||||
Minimum prepayment | $ 1,000,000 | |||
Series A Notes | Prudential Investment Management, Inc | ||||
Notes Payable | ||||
Principal amount outstanding | $ 16,000,000 | |||
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 | Prudential Investment Management, Inc | ||||
Notes Payable | ||||
Principal amount outstanding | $ 9,700,000 | |||
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 |
Debt_ Maturities (Details)
Debt: Maturities (Details) | Dec. 28, 2019USD ($) |
Required prepayments of the notes payable for each of the next five years and thereafter | |
2020 | $ 3,750,000 |
2021 | 4,250,000 |
2022 | 4,250,000 |
2023 | 4,250,000 |
2024 | 4,250,000 |
Thereafter | 4,937,500 |
Total | $ 25,687,500 |
Accrued Liabilities_ (Details)
Accrued Liabilities: (Details) - USD ($) | Dec. 28, 2019 | Dec. 29, 2018 |
Accrued Liabilities | ||
Accrued compensation and benefits | $ 887,900 | $ 1,490,700 |
Deferred rent | 388,500 | 91,100 |
Accrued interest | 210,800 | 218,600 |
Accrued purchases of goods and services | 186,200 | 716,400 |
Other | 1,109,700 | 611,800 |
Accrued liabilities | $ 2,783,100 | $ 3,128,600 |
Discounted Lease Rentals_ (Deta
Discounted Lease Rentals: (Details) - USD ($) | Dec. 28, 2019 | Dec. 29, 2018 |
Discounted Lease Rentals | ||
Discounted lease rentals, current | $ 2,680,700 | $ 3,021,900 |
Discounted lease rentals | $ 3,500,000 | $ 5,700,000 |
Secured Debt. | ||
Discounted Lease Rentals | ||
Weighted average interest rate on a non-recourse basis (as a percent) | 6.39% |
Contract Liabilities - Activity
Contract Liabilities - Activity (Details) - USD ($) | 12 Months Ended | |
Dec. 28, 2019 | Dec. 29, 2018 | |
Activity of the current and noncurrent deferred franchise revenue | ||
Balance at beginning of period | $ 10,177,300 | $ 10,310,200 |
Franchise and software license fees collected from franchisees, excluding amount earned as revenue during the period | 1,203,500 | 1,749,100 |
Fees earned that were included in the balance at the beginning of the period | (1,805,300) | (1,882,000) |
Balance at end of period | $ 9,575,500 | $ 10,177,300 |
Contract Liabilities - Performa
Contract Liabilities - Performance Obligations (Details) | Dec. 28, 2019USD ($) |
Future estimated revenue to be recognized related to performance obligations | |
Revenue, remaining performance obligation | $ 9,575,500 |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2019-12-29 | |
Future estimated revenue to be recognized related to performance obligations | |
Duration of expected recognition period for remaining performance obligation | 1 year |
Revenue, remaining performance obligation | $ 1,717,000 |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2020-12-27 | |
Future estimated revenue to be recognized related to performance obligations | |
Duration of expected recognition period for remaining performance obligation | 1 year |
Revenue, remaining performance obligation | $ 1,578,200 |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2021-12-26 | |
Future estimated revenue to be recognized related to performance obligations | |
Duration of expected recognition period for remaining performance obligation | 1 year |
Revenue, remaining performance obligation | $ 1,433,300 |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2023-01-01 | |
Future estimated revenue to be recognized related to performance obligations | |
Duration of expected recognition period for remaining performance obligation | 1 year |
Revenue, remaining performance obligation | $ 1,262,000 |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2023-12-31 | |
Future estimated revenue to be recognized related to performance obligations | |
Duration of expected recognition period for remaining performance obligation | 1 year |
Revenue, remaining performance obligation | $ 1,064,300 |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2024-12-29 | |
Future estimated revenue to be recognized related to performance obligations | |
Duration of expected recognition period for remaining performance obligation | |
Revenue, remaining performance obligation | $ 2,520,700 |
Operating Leases_ (Details)
Operating Leases: (Details) | 12 Months Ended | ||
Dec. 28, 2019USD ($)item | Dec. 29, 2018USD ($) | Dec. 30, 2017USD ($) | |
Operating Leases | |||
Weighted average remaining lease term | 9 years 10 months 24 days | ||
Weighted average discount rate (as a percent) | 5.50% | ||
Rent expense | $ 1,358,000 | ||
Rent expense | $ 1,235,000 | $ 1,102,000 | |
Corporate headquarters, Minnesota | |||
Operating Leases | |||
Lease renewal option | true | ||
Number of lease extension periods | item | 2 | ||
Lease renewal term | 5 years | ||
Satellite office space, California | |||
Operating Leases | |||
Lease renewal option | true | ||
Lease renewal term | 3 years |
Operating Leases_ Maturities an
Operating Leases: Maturities and other (Details) - USD ($) | 12 Months Ended | |
Dec. 28, 2019 | Dec. 29, 2018 | |
Maturities of operating lease liabilities: | ||
2020 | $ 704,300 | |
2021 | 783,600 | |
2022 | 784,400 | |
2023 | 763,300 | |
2024 | 784,400 | |
Thereafter | 4,258,600 | |
Total | 8,078,600 | |
Less imputed interest | (1,863,100) | |
Present value of lease liabilities | 6,215,500 | |
Operating lease liability | ||
Operating lease liability, current | $ 400,000 | |
Operating Lease, Liability, Current, Statement of Financial Position [Extensible List] | Accrued Liabilities, Current | |
Total deferred rent | $ 300,000 | |
Deferred rent included in other liabilities | $ 200,000 | |
Other disclosures | ||
Tenant allowance recorded during the year as a reduction to the operating lease right of use asset | $ 2,100,000 | |
Cash paid for amounts included in the measurement of lease liabilities: | ||
Operating cash flow outflow from operating leases | $ 493,900 |
Operating Leases_ Prior year ac
Operating Leases: Prior year accounting guidance (Details) | Dec. 29, 2018USD ($) |
Minimum rental commitments | |
2019 | $ 503,700 |
2020 | 762,500 |
2021 | 783,600 |
2022 | 784,400 |
2023 | 763,300 |
Thereafter | 5,042,900 |
Total | 8,640,400 |
Total deferred rent | 300,000 |
Deferred rent included in other liabilities | $ 200,000 |
Income Taxes_ Reconciliation, C
Income Taxes: Reconciliation, Components and Deferred Taxes (Details) - USD ($) | 12 Months Ended | ||
Dec. 28, 2019 | Dec. 29, 2018 | Dec. 30, 2017 | |
Income Taxes: | |||
Federal statutory tax rate (as a percent) | 21.00% | 21.00% | 35.00% |
Reconciliation of the expected federal income tax expense based on the federal statutory tax rate to the actual income tax expense | |||
Federal income tax expense at statutory rate (21%, 21%, 35%) | $ 8,708,200 | $ 8,249,400 | $ 12,758,000 |
Change in valuation allowance | 147,900 | (13,800) | 7,500 |
State and local income taxes, net of federal benefit | 1,310,800 | 1,334,100 | 1,057,100 |
Permanent differences, including stock option expenses | (1,056,800) | (355,500) | (628,400) |
Adjustment to uncertain tax positions | (58,500) | 4,500 | 77,800 |
Rate change | (1,540,300) | ||
Other, net | 266,500 | (61,100) | 139,300 |
Total provision for income taxes | 9,318,100 | 9,157,600 | 11,871,000 |
Current provision for income taxes: | |||
Federal | 9,076,400 | 6,355,800 | 10,296,100 |
State | 1,693,800 | 1,551,000 | 1,688,100 |
Foreign | 363,200 | 423,000 | 365,900 |
Current provision | 11,133,400 | 8,329,800 | 12,350,100 |
Deferred provision for income taxes: | |||
Federal | (1,834,800) | 967,300 | (463,800) |
State | 19,500 | (139,500) | (15,300) |
Deferred provision | (1,815,300) | 827,800 | (479,100) |
Total provision for income taxes | 9,318,100 | 9,157,600 | $ 11,871,000 |
Deferred tax assets: | |||
Accounts receivable and lease reserves | 154,700 | 215,900 | |
Non-qualified stock option expense | 1,758,100 | 2,071,600 | |
Deferred revenue | 1,957,500 | 2,020,100 | |
Trademarks | 34,500 | 39,800 | |
Lease deposits | 930,700 | 1,004,700 | |
Loss from and impairment of equity and note investments | 2,595,500 | 2,620,700 | |
Foreign tax credits | 173,100 | ||
Valuation allowance | (2,768,600) | (2,620,700) | |
Other | 194,400 | 331,400 | |
Total deferred tax assets | 5,029,900 | 5,683,500 | |
Deferred tax liabilities: | |||
Lease revenue and initial direct costs | (4,207,400) | (6,664,800) | |
Depreciation and amortization | (155,500) | (167,000) | |
Total deferred tax liabilities | (4,362,900) | (6,831,800) | |
Total net deferred tax liabilities | $ (1,148,300) | ||
Total net deferred tax liabilities | $ 667,000 |
Income Taxes_ Other (Details)
Income Taxes: Other (Details) - USD ($) | 12 Months Ended | ||
Dec. 28, 2019 | Dec. 29, 2018 | Dec. 30, 2017 | |
Tax Act | |||
Corporate income tax rate (as a percent) | 21.00% | 21.00% | 35.00% |
Reduction of income tax expense related to the decrease in the federal income tax rate | $ 1,500,000 | ||
Deferred tax assets, valuation allowance | |||
Valuation allowance | $ 2,768,600 | $ 2,620,700 | |
Unrecognized Tax Benefits | |||
Unrecognized tax benefits, including interest and penalties | 532,500 | 589,000 | |
Interest and penalties accrued related to unrecognized tax benefit | 33,500 | 37,700 | |
Activity related to the company's unrecognized tax benefits | |||
Balance at the beginning of the period | 551,300 | 551,100 | |
Increases related to current year tax positions | 131,900 | 135,600 | |
Expiration of the statute of limitations for the assessment of taxes | (184,200) | (135,400) | |
Balance at the end of the period | $ 499,000 | $ 551,300 | $ 551,100 |
Period over which various statutes of limitations are expected to expire | 12 months |
Commitments and Contingencies_
Commitments and Contingencies: (Details) - USD ($) | 12 Months Ended | ||
Dec. 28, 2019 | Dec. 29, 2018 | Dec. 30, 2017 | |
Employee Benefit Plan | |||
Service period for vesting of employer contribution | 5 years | ||
Company contributions | $ 343,500 | $ 361,400 | $ 319,700 |
Segment Reporting_ (Details)
Segment Reporting: (Details) | 3 Months Ended | 12 Months Ended | |||||||||
Dec. 28, 2019USD ($) | Sep. 28, 2019USD ($) | Jun. 29, 2019USD ($) | Mar. 30, 2019USD ($) | Dec. 29, 2018USD ($) | Sep. 29, 2018USD ($) | Jun. 30, 2018USD ($) | Mar. 31, 2018USD ($) | Dec. 28, 2019USD ($)item | Dec. 29, 2018USD ($) | Dec. 30, 2017USD ($) | |
Segment Reporting | |||||||||||
Number of reportable business segments | item | 2 | ||||||||||
Total revenue | $ 17,882,600 | $ 19,680,900 | $ 17,404,200 | $ 18,331,200 | $ 17,071,800 | $ 19,118,500 | $ 18,159,800 | $ 18,161,000 | $ 73,298,900 | $ 72,511,100 | $ 69,757,300 |
Total operating income | 10,943,000 | $ 12,274,700 | $ 9,846,900 | $ 10,066,500 | 10,179,600 | $ 11,435,300 | $ 10,074,700 | $ 10,074,200 | 43,131,100 | 41,763,800 | 38,805,000 |
Total depreciation and amortization | 400,100 | 314,100 | 355,400 | ||||||||
Total identifiable assets | 61,842,200 | 46,663,100 | 61,842,200 | 46,663,100 | |||||||
Franchising | Canadian operations | |||||||||||
Segment Reporting | |||||||||||
Total revenue | 4,700,000 | 4,400,000 | 3,800,000 | ||||||||
Operating | Franchising | |||||||||||
Segment Reporting | |||||||||||
Total revenue | 57,243,100 | 54,334,600 | 51,287,100 | ||||||||
Total operating income | 35,169,900 | 31,882,200 | 29,513,900 | ||||||||
Total depreciation and amortization | 281,600 | 240,500 | 271,300 | ||||||||
Total identifiable assets | 3,736,000 | 5,208,400 | 3,736,000 | 5,208,400 | |||||||
Operating | Leasing | |||||||||||
Segment Reporting | |||||||||||
Total revenue | 16,055,800 | 18,176,500 | 18,470,200 | ||||||||
Total operating income | 7,961,200 | 9,881,600 | 9,291,100 | ||||||||
Total depreciation and amortization | 118,500 | 73,600 | $ 84,100 | ||||||||
Total identifiable assets | 26,596,700 | 40,490,000 | 26,596,700 | 40,490,000 | |||||||
Unallocated | |||||||||||
Segment Reporting | |||||||||||
Total identifiable assets | $ 31,509,500 | $ 964,700 | $ 31,509,500 | $ 964,700 |
Subsequent Events (Details)
Subsequent Events (Details) - USD ($) | Jan. 16, 2020 | Dec. 31, 2019 | Dec. 28, 2019 | Dec. 29, 2018 | Dec. 30, 2017 |
Subsequent Events | |||||
Borrowing from Line of Credit for Tender Offer | $ 18,800,000 | $ 7,300,000 | $ 51,900,000 | ||
2020 Tender Offer | Subsequent Event | |||||
Subsequent Events | |||||
Shares authorized for repurchase per tender offer | 300,000 | ||||
Price per share of common stock per tender offer | $ 163 | ||||
Number of shares repurchased | 300,000 | ||||
Purchase price of shares per tender offer | $ 49,000,000 | ||||
Borrowing from Line of Credit for Tender Offer | $ 19,200,000 |
Quarterly Financial Data (Detai
Quarterly Financial Data (Details) - USD ($) | 3 Months Ended | 12 Months Ended | |||||||||
Dec. 28, 2019 | Sep. 28, 2019 | Jun. 29, 2019 | Mar. 30, 2019 | Dec. 29, 2018 | Sep. 29, 2018 | Jun. 30, 2018 | Mar. 31, 2018 | Dec. 28, 2019 | Dec. 29, 2018 | Dec. 30, 2017 | |
Quarterly Financial Data (Unaudited): | |||||||||||
Total Revenue | $ 17,882,600 | $ 19,680,900 | $ 17,404,200 | $ 18,331,200 | $ 17,071,800 | $ 19,118,500 | $ 18,159,800 | $ 18,161,000 | $ 73,298,900 | $ 72,511,100 | $ 69,757,300 |
Income from Operations | 10,943,000 | 12,274,700 | 9,846,900 | 10,066,500 | 10,179,600 | 11,435,300 | 10,074,700 | 10,074,200 | 43,131,100 | 41,763,800 | 38,805,000 |
Net Income | $ 8,461,400 | $ 9,113,800 | $ 7,301,900 | $ 7,272,200 | $ 7,657,800 | $ 8,364,300 | $ 7,143,000 | $ 6,960,400 | $ 32,149,300 | $ 30,125,500 | $ 24,580,500 |
Net Income Per Common Share - Basic | $ 2.18 | $ 2.39 | $ 1.94 | $ 1.86 | $ 1.96 | $ 2.15 | $ 1.85 | $ 1.81 | $ 8.37 | $ 7.77 | $ 6.06 |
Net Income Per Common Share - Diluted | $ 2.08 | $ 2.24 | $ 1.79 | $ 1.73 | $ 1.83 | $ 2.01 | $ 1.73 | $ 1.69 | $ 7.84 | $ 7.26 | $ 5.66 |