Winmark (WINA) 8-K Winmark Corporation Announces Second Quarter Results

Exhibit 99.1

Contact:Brett D. Heffes

763/520-8500

FOR IMMEDIATE RELEASE

WINMARK CORPORATION ANNOUNCES

SECOND QUARTER RESULTS

Minneapolis, MN (July 13, 2022) - Winmark Corporation (Nasdaq: WINA) announced today net income for the quarter ended June 25, 2022 of $9,027,200 or $2.54 per share diluted compared to net income of $8,937,300 or $2.33 per share diluted in 2021. For the six months ended June 25, 2022, net income was $18,879,700 or $5.19 per share diluted compared to net income of $18,248,400 or $4.74 per share diluted for the same period last year.

“We are pleased with our results for the first half of the year,” commented Brett D. Heffes, Chairman and Chief Executive Officer.

Winmark - the Resale Company®, is a nationally recognized franchising business focused on sustainability and small-business formation.  We champion and guide entrepreneurs interested in operating one of our award winning resale franchises: Plato’s Closet®, Once Upon A Child®, Play It Again Sports®, Style Encore® and Music Go Round®.  At June 25, 2022, there were 1,293 franchises in operation and over 2,800 available territories.  An additional 46 franchises have been awarded but are not open.  

This press release contains forward-looking statements within the meaning of the safe harbor provisions of Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), relating to future events or the future financial performance of the Company.  Such forward-looking statements are only predictions or statements of intention subject to risks and uncertainties and actual events or results could differ materially from those anticipated.  Because actual result may differ, shareholders and prospective investors are cautioned not to place undue reliance on such forward-looking statements.

WINMARK CORPORATION

CONDENSED BALANCE SHEETS

(Unaudited)

	June 25, 2022		December 25, 2021
ASSETS
Current Assets:
Cash and cash equivalents	$	8,696,600	$	11,407,000
Restricted cash		55,000		30,000
Receivables, net		1,321,800		1,103,400
Net investment in leases - current		1,870,100		2,890,600
Income tax receivable		869,000		667,500
Inventories		603,400		325,200
Prepaid expenses		861,000		1,008,600
Total current assets		14,276,900		17,432,300
Net investment in leases – long-term		111,000		229,300
Property and equipment, net		1,815,300		1,976,900
Operating lease right of use asset		2,859,800		2,982,000
Intangible assets, net		3,525,200		—
Goodwill		607,500		607,500
Other assets		420,500		418,300
Deferred income taxes		3,438,100		3,252,700
	$	27,054,300	$	26,899,000
LIABILITIES AND SHAREHOLDERS’ EQUITY (DEFICIT)
Current Liabilities:
Notes payable, net	$	4,217,900	$	4,232,600
Accounts payable		1,889,300		2,099,000
Accrued liabilities		4,563,100		2,001,000
Deferred revenue		1,631,100		1,645,000
Total current liabilities		12,301,400		9,977,600
Long-Term Liabilities:
Line of Credit/Term Loan		30,000,000		—
Notes payable, net		41,175,700		43,376,400
Deferred revenue		6,849,200		6,863,500
Operating lease liabilities		4,561,500		4,810,100
Other liabilities		945,200		954,800
Total long-term liabilities		83,531,600		56,004,800
Shareholders’ Equity (Deficit):
Common stock, no par, 10,000,000 shares authorized, 3,437,806 and 3,635,806 shares issued and outstanding		—		—
Retained earnings (accumulated deficit)		(68,778,700)		(39,083,400)
Total shareholders’ equity (deficit)		(68,778,700)		(39,083,400)
	$	27,054,300	$	26,899,000

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Winmark Corporation

CONDENSED STATEMENTS OF OPERATIONS

(Unaudited)

	Quarter Ended				Six Months Ended
	June 25, 2022		June 26, 2021		June 25, 2022		June 26, 2021
Revenue:
Royalties	$	15,981,300	$	14,716,500	$	31,371,400	$	28,765,300
Leasing income		1,212,000		2,848,600		4,083,700		6,085,600
Merchandise sales		1,027,200		683,100		1,941,500		1,275,500
Franchise fees		391,500		358,900		812,100		717,900
Other		458,800		422,500		911,900		844,200
Total revenue		19,070,800		19,029,600		39,120,600		37,688,500
Cost of merchandise sold		970,200		647,800		1,834,700		1,206,600
Leasing expense		299,600		662,400		515,600		1,051,900
Provision for credit losses		(15,700)		(62,700)		(24,600)		(111,400)
Selling, general and administrative expenses		5,461,600		5,805,200		11,001,600		10,907,500
Income from operations		12,355,100		11,976,900		25,793,300		24,633,900
Interest expense		(712,000)		(304,300)		(1,225,100)		(622,400)
Interest and other income (expense)		(13,800)		4,900		(14,700)		11,700
Income before income taxes		11,629,300		11,677,500		24,553,500		24,023,200
Provision for income taxes		(2,602,100)		(2,740,200)		(5,673,800)		(5,774,800)
Net income	$	9,027,200	$	8,937,300	$	18,879,700	$	18,248,400
Earnings per share - basic	$	2.61	$	2.42	$	5.35	$	4.91
Earnings per share - diluted	$	2.54	$	2.33	$	5.19	$	4.74
Weighted average shares outstanding - basic		3,463,886		3,693,503		3,530,902		3,715,088
Weighted average shares outstanding - diluted		3,559,231		3,830,844		3,637,772		3,852,534

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Winmark Corporation

CONDENSED STATEMENTS OF CASH FLOWS

(Unaudited)

	Six Months Ended
	June 25, 2022		June 26, 2021
OPERATING ACTIVITIES:
Net income	$	18,879,700	$	18,248,400
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		219,400		223,200
Provision for credit losses		(24,600)		(111,400)
Compensation expense related to stock options		771,400		698,100
Deferred income taxes		(185,400)		(907,400)
Deferred initial direct costs		—		(2,100)
Amortization of deferred initial direct costs		—		16,400
Operating lease right of use asset amortization		122,200		109,900
Tax benefits on exercised stock options		348,000		248,900
Change in operating assets and liabilities:
Receivables		(218,400)		405,600
Principal collections on lease receivables		1,636,100		5,332,200
Income tax receivable/payable		(549,500)		(722,900)
Inventories		(278,200)		(222,800)
Prepaid expenses		147,600		308,000
Other assets		(2,200)		17,800
Accounts payable		(209,700)		(311,600)
Accrued and other liabilities		2,213,500		232,100
Rents received in advance and security deposits		(472,700)		(317,700)
Deferred revenue		(28,200)		(120,300)
Net cash provided by operating activities		22,369,000		23,124,400
INVESTING ACTIVITIES:
Purchase of property and equipment		(43,000)		(48,600)
Reacquired franchise rights		(3,540,000)		—
Purchase of equipment for lease contracts		—		(78,200)
Net cash used for investing activities		(3,583,000)		(126,800)
FINANCING ACTIVITIES:
Proceeds from borrowings on line of credit		33,700,000		—
Payments on line of credit		(3,700,000)		—
Payments on notes payable		(2,125,000)		(2,125,000)
Repurchases of common stock		(47,847,500)		(18,918,200)
Proceeds from exercises of stock options		2,553,700		1,210,300
Dividends paid		(4,052,600)		(2,600,400)
Net cash used for financing activities		(21,471,400)		(22,433,300)
NET INCREASE (DECREASE) IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH		(2,685,400)		564,300
Cash, cash equivalents and restricted cash, beginning of period		11,437,000		6,684,000
Cash, cash equivalents and restricted cash, end of period	$	8,751,600	$	7,248,300
SUPPLEMENTAL DISCLOSURES:
Cash paid for interest	$	1,108,100	$	603,700
Cash paid for income taxes	$	6,060,800	$	7,156,200
The following table provides a reconciliation of cash, cash equivalents and restricted cash reported within the Condensed Balance Sheets to the total of the same amounts shown above:
	Six Months Ended
	June 25, 2022		June 26, 2021
Cash and cash equivalents	$	8,696,600	$	7,223,300
Restricted cash		55,000		25,000
Total cash, cash equivalents and restricted cash	$	8,751,600	$	7,248,300

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