Document and Entity Information
Document and Entity Information - shares | 6 Months Ended | |
Jul. 01, 2023 | Jul. 17, 2023 | |
Document and Entity Information | ||
Entity Registrant Name | WINMARK CORPORATION | |
Document Type | 10-Q | |
Document Quarterly Report | true | |
Document Period End Date | Jul. 01, 2023 | |
Document Transition Report | false | |
Entity File Number | 000-22012 | |
Entity Incorporation, State or Country Code | MN | |
Entity Tax Identification Number | 41-1622691 | |
Entity Address, Address Line One | 605 Highway 169 North, Suite 400 | |
Entity Address, City or Town | Minneapolis | |
Entity Address, State or Province | MN | |
Entity Address, Postal Zip Code | 55441 | |
City Area Code | 763 | |
Local Phone Number | 520-8500 | |
Title of 12(b) Security | Common Stock, no par value per share | |
Trading Symbol | WINA | |
Security Exchange Name | NASDAQ | |
Amendment Flag | false | |
Entity Current Reporting Status | Yes | |
Entity Interactive Data Current | Yes | |
Entity Filer Category | Non-accelerated Filer | |
Entity Small Business | true | |
Entity Emerging Growth Company | false | |
Entity Shell Company | false | |
Entity Common Stock, Shares Outstanding | 3,485,661 | |
Current Fiscal Year End Date | --12-30 | |
Entity Central Index Key | 0000908315 | |
Document Fiscal Year Focus | 2023 | |
Document Fiscal Period Focus | Q2 |
CONSOLIDATED CONDENSED BALANCE
CONSOLIDATED CONDENSED BALANCE SHEETS - USD ($) | Jul. 01, 2023 | Dec. 31, 2022 |
Current Assets: | ||
Cash and cash equivalents | $ 32,321,500 | $ 13,615,600 |
Restricted cash | 55,000 | 65,000 |
Receivables, less allowance for doubtful accounts of $1,300 and $800 | 1,592,500 | 1,438,600 |
Net investment in leases - current | 90,000 | 344,900 |
Income tax receivable | 522,500 | 558,700 |
Inventories | 446,900 | 770,600 |
Prepaid expenses | 819,700 | 1,310,400 |
Total current assets | 35,848,100 | 18,103,800 |
Net investment in leases - long-term | 5,400 | |
Property and equipment, net | 1,593,400 | 1,704,600 |
Operating lease right of use asset | 2,580,400 | 2,716,000 |
Intangible assets, net | 3,171,300 | 3,348,300 |
Goodwill | 607,500 | 607,500 |
Other assets | 461,300 | 429,700 |
Deferred income taxes | 3,392,000 | 3,540,400 |
Total assets | 47,654,000 | 30,455,700 |
Current Liabilities: | ||
Notes payable, net of unamortized debt issuance costs of $32,100 and $32,100 | 4,217,900 | 4,217,900 |
Accounts payable | 1,638,400 | 2,122,000 |
Accrued liabilities | 4,269,000 | 2,611,700 |
Deferred revenue | 1,677,700 | 1,643,900 |
Total current liabilities | 11,803,000 | 10,595,500 |
Long-term Liabilities: | ||
Line of credit/Term loan | 30,000,000 | 30,000,000 |
Notes payable, net of unamortized debt issuance costs of $104,800 and $120,800 | 36,957,700 | 39,066,700 |
Deferred revenue | 7,338,300 | 6,974,200 |
Operating lease liabilities | 4,013,200 | 4,287,000 |
Other liabilities | 1,154,900 | 1,164,400 |
Total long-term liabilities | 79,464,100 | 81,492,300 |
Shareholders' Equity (Deficit): | ||
Common stock, no par value, 10,000,000 shares authorized, 3,485,036 and 3,459,673 shares issued and outstanding | 5,723,600 | 1,806,700 |
Retained earnings (accumulated deficit) | (49,336,700) | (63,438,800) |
Total shareholders' equity (deficit) | (43,613,100) | (61,632,100) |
Total liabilities and shareholders' equity (deficit) | $ 47,654,000 | $ 30,455,700 |
CONSOLIDATED CONDENSED BALANC_2
CONSOLIDATED CONDENSED BALANCE SHEETS (Parenthetical) - USD ($) | Jul. 01, 2023 | Dec. 31, 2022 |
CONSOLIDATED CONDENSED BALANCE SHEETS | ||
Receivables, allowance for doubtful accounts | $ 1,300 | $ 800 |
Unamortized debt issuance costs - Current | 32,100 | 32,100 |
Unamortized debt issuance costs - Noncurrent | $ 104,800 | $ 120,800 |
Common stock, par value (in dollars per share) | $ 0 | $ 0 |
Common stock, shares authorized | 10,000,000 | 10,000,000 |
Common stock, shares issued | 3,485,036 | 3,459,673 |
Common stock, shares outstanding | 3,485,036 | 3,459,673 |
CONSOLIDATED CONDENSED STATEMEN
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS - USD ($) | 3 Months Ended | 6 Months Ended | ||
Jul. 01, 2023 | Jun. 25, 2022 | Jul. 01, 2023 | Jun. 25, 2022 | |
Revenue: | ||||
Leasing income | $ 1,019,800 | $ 1,212,000 | $ 2,656,800 | $ 4,083,700 |
Total revenue | 20,362,200 | 19,070,800 | 40,885,800 | 39,120,600 |
Leasing expense | 54,300 | 299,600 | 370,700 | 515,600 |
Provisions for credit losses | (700) | (15,700) | (5,300) | (24,600) |
Selling, general and administrative expenses | 5,810,000 | 5,461,600 | 12,446,100 | 11,001,600 |
Income from operations | 13,250,800 | 12,355,100 | 25,639,200 | 25,793,300 |
Interest expense | (779,100) | (712,000) | (1,576,700) | (1,225,100) |
Interest and other income (expense) | 292,300 | (13,800) | 418,000 | (14,700) |
Income before income taxes | 12,764,000 | 11,629,300 | 24,480,500 | 24,553,500 |
Provision for income taxes | (2,395,200) | (2,602,100) | (5,169,000) | (5,673,800) |
Net income | $ 10,368,800 | $ 9,027,200 | $ 19,311,500 | $ 18,879,700 |
Earnings per share - basic (in dollars per share) | $ 2.98 | $ 2.61 | $ 5.57 | $ 5.35 |
Earnings per share - diluted (in dollars per share) | $ 2.85 | $ 2.54 | $ 5.34 | $ 5.19 |
Weighted average shares outstanding - basic | 3,478,628 | 3,463,886 | 3,469,675 | 3,530,902 |
Weighted average shares outstanding - diluted | 3,634,688 | 3,559,231 | 3,614,462 | 3,637,772 |
Royalties | ||||
Revenue: | ||||
Revenue | $ 17,105,800 | $ 15,981,300 | $ 33,853,500 | $ 31,371,400 |
Merchandise sales | ||||
Revenue: | ||||
Revenue | 1,328,100 | 1,027,200 | 2,604,100 | 1,941,500 |
Cost of merchandise sold | 1,247,800 | 970,200 | 2,435,100 | 1,834,700 |
Franchise fees | ||||
Revenue: | ||||
Revenue | 420,700 | 391,500 | 798,900 | 812,100 |
Other | ||||
Revenue: | ||||
Revenue | $ 487,800 | $ 458,800 | $ 972,500 | $ 911,900 |
CONSOLIDATED CONDENSED STATEM_2
CONSOLIDATED CONDENSED STATEMENTS OF SHAREHOLDERS' EQUITY (DEFICIT) - USD ($) | Common Stock | Retained Earnings (Accumulated Deficit). | Total |
BALANCE at Dec. 25, 2021 | $ (39,083,400) | $ (39,083,400) | |
BALANCE (in shares) at Dec. 25, 2021 | 3,635,806 | ||
Shareholders' Equity (Deficit) | |||
Repurchase of common stock | $ (1,679,900) | (34,911,500) | (36,591,400) |
Repurchase of common stock (in shares) | (164,586) | ||
Stock options exercised | $ 1,258,300 | 1,258,300 | |
Stock options exercised (in shares) | 9,156 | ||
Compensation expense relating to stock options | $ 421,600 | 421,600 | |
Cash dividends | (1,625,300) | (1,625,300) | |
Comprehensive income (Net income) | 9,852,500 | 9,852,500 | |
BALANCE at Mar. 26, 2022 | (65,767,700) | (65,767,700) | |
BALANCE (in shares) at Mar. 26, 2022 | 3,480,376 | ||
Shareholders' Equity (Deficit) | |||
Repurchase of common stock | $ (1,645,200) | (9,610,900) | (11,256,100) |
Repurchase of common stock (in shares) | (55,694) | ||
Stock options exercised | $ 1,295,400 | 1,295,400 | |
Stock options exercised (in shares) | 13,124 | ||
Compensation expense relating to stock options | $ 349,800 | 349,800 | |
Cash dividends | (2,427,300) | (2,427,300) | |
Comprehensive income (Net income) | 9,027,200 | 9,027,200 | |
BALANCE at Jun. 25, 2022 | (68,778,700) | (68,778,700) | |
BALANCE (in shares) at Jun. 25, 2022 | 3,437,806 | ||
BALANCE at Dec. 31, 2022 | $ 1,806,700 | (63,438,800) | $ (61,632,100) |
BALANCE (in shares) at Dec. 31, 2022 | 3,459,673 | 3,459,673 | |
Shareholders' Equity (Deficit) | |||
Stock options exercised | $ 590,400 | $ 590,400 | |
Stock options exercised (in shares) | 3,518 | ||
Compensation expense relating to stock options | $ 475,900 | 475,900 | |
Cash dividends | (2,421,900) | (2,421,900) | |
Comprehensive income (Net income) | 8,942,700 | 8,942,700 | |
BALANCE at Apr. 01, 2023 | $ 2,873,000 | (56,918,000) | (54,045,000) |
BALANCE (in shares) at Apr. 01, 2023 | 3,463,191 | ||
BALANCE at Dec. 31, 2022 | $ 1,806,700 | (63,438,800) | $ (61,632,100) |
BALANCE (in shares) at Dec. 31, 2022 | 3,459,673 | 3,459,673 | |
BALANCE at Jul. 01, 2023 | $ 5,723,600 | (49,336,700) | $ (43,613,100) |
BALANCE (in shares) at Jul. 01, 2023 | 3,485,036 | 3,485,036 | |
BALANCE at Apr. 01, 2023 | $ 2,873,000 | (56,918,000) | $ (54,045,000) |
BALANCE (in shares) at Apr. 01, 2023 | 3,463,191 | ||
Shareholders' Equity (Deficit) | |||
Stock options exercised | $ 2,384,500 | 2,384,500 | |
Stock options exercised (in shares) | 21,845 | ||
Compensation expense relating to stock options | $ 466,100 | 466,100 | |
Cash dividends | (2,787,500) | (2,787,500) | |
Comprehensive income (Net income) | 10,368,800 | 10,368,800 | |
BALANCE at Jul. 01, 2023 | $ 5,723,600 | $ (49,336,700) | $ (43,613,100) |
BALANCE (in shares) at Jul. 01, 2023 | 3,485,036 | 3,485,036 |
CONSOLIDATED CONDENSED STATEM_3
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS - USD ($) | 6 Months Ended | |
Jul. 01, 2023 | Jun. 25, 2022 | |
OPERATING ACTIVITIES: | ||
Net Income | $ 19,311,500 | $ 18,879,700 |
Adjustments to reconcile net income to net cash provided by operating activities: | ||
Depreciation and amortization | 385,100 | 219,400 |
Provisions for credit losses | (5,300) | (24,600) |
Compensation expense related to stock options | 942,000 | 771,400 |
Deferred income taxes | 148,400 | (185,400) |
Operating lease right of use asset amortization | 135,600 | 122,200 |
Tax benefits on exercised stock options | 832,300 | 348,000 |
Change in operating assets and liabilities: | ||
Receivables | (153,900) | (218,400) |
Principal collections on lease receivables | 499,800 | 1,636,100 |
Income tax receivable/payable | (796,100) | (549,500) |
Inventories | 323,700 | (278,200) |
Prepaid expenses | 490,700 | 147,600 |
Other assets | (31,600) | (2,200) |
Accounts payable | (483,600) | (209,700) |
Accrued and other liabilities | 1,390,000 | 2,213,500 |
Rents received in advance and security deposits | (234,200) | (472,700) |
Deferred revenue | 397,900 | (28,200) |
Net cash provided by operating activities | 23,152,300 | 22,369,000 |
INVESTING ACTIVITIES: | ||
Purchase of property and equipment | (96,900) | (43,000) |
Reacquired franchise rights | (3,540,000) | |
Net cash used for investing activities | (96,900) | (3,583,000) |
FINANCING ACTIVITIES: | ||
Proceeds from borrowings on line of credit/term loan | 33,700,000 | |
Payments on line of credit/term loan | (3,700,000) | |
Payments on notes payable | (2,125,000) | (2,125,000) |
Repurchases of common stock | (47,847,500) | |
Proceeds from exercises of stock options | 2,974,900 | 2,553,700 |
Dividends paid | (5,209,400) | (4,052,600) |
Net cash used for financing activities | (4,359,500) | (21,471,400) |
NET INCREASE (DECREASE) IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH | 18,695,900 | (2,685,400) |
Cash, cash equivalents and restricted cash, beginning of period | 13,680,600 | 11,437,000 |
Cash, cash equivalents and restricted cash, end of period | $ 32,376,500 | $ 8,751,600 |
CONSOLIDATED CONDENSED STATEM_4
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS - Supplemental Disclosures - USD ($) | 6 Months Ended | |
Jul. 01, 2023 | Jun. 25, 2022 | |
SUPPLEMENTAL DISCLOSURES: | ||
Cash paid for interest | $ 1,563,800 | $ 1,108,100 |
Cash paid for income taxes | 4,984,600 | 6,060,800 |
Reconciliation of cash, cash equivalents and restricted cash: | ||
Cash and cash equivalents | 32,321,500 | 8,696,600 |
Restricted cash | 55,000 | 55,000 |
Total cash, cash equivalents and restricted cash | $ 32,376,500 | $ 8,751,600 |
Management's Interim Financial
Management's Interim Financial Statement Representation: | 6 Months Ended |
Jul. 01, 2023 | |
Management's Interim Financial Statement Representation: | |
Management's Interim Financial Statement Representation: | WINMARK CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS 1. Management’s Interim Financial Statement Representation: The accompanying consolidated condensed financial statements have been prepared by Winmark Corporation and subsidiaries (the Company), without audit, pursuant to the rules and regulations of the Securities and Exchange Commission. The Company has a week year which ends on the last Saturday in December. The information in the consolidated condensed financial statements includes normal recurring adjustments and reflects all adjustments which are, in the opinion of management, necessary for a fair presentation of such financial statements. The consolidated condensed financial statements and notes are presented in accordance with accounting principles generally accepted in the United States of America for interim financial information and with the instructions for Form 10-Q, and therefore do not contain certain information included in the Company’s annual consolidated financial statements and notes. This report should be read in conjunction with the audited consolidated financial statements and the notes thereto included in the Company’s latest Annual Report on Form 10-K. Revenues and operating results for the six months ended July 1, 2023 are not necessarily indicative of the results to be expected for the full year. Reclassifications 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_
Organization and Business: | 6 Months Ended |
Jul. 01, 2023 | |
Organization and Business: | |
Organization and Business: | 2. Organization and Business: The Company offers licenses to operate franchises using the service marks Plato’s Closet®, Once Upon A Child®, Play It Again Sports®, Style Encore® and Music Go Round®. The Company also operates a middle market equipment leasing business under the Winmark Capital® mark. |
Contract Liabilities_
Contract Liabilities: | 6 Months Ended |
Jul. 01, 2023 | |
Contract Liabilities: | |
Contract Liabilities: | 3. 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 the first six months of 2023 and 2022, respectively: July 1, 2023 June 25, 2022 Balance at beginning of period $ 8,618,100 $ 8,508,500 Franchise and software license fees collected from franchisees, excluding amount earned as revenue during the period 1,349,500 937,900 Fees earned that were included in the balance at the beginning of the period (951,600) (966,100) Balance at end of period $ 9,016,000 $ 8,480,300 The following table illustrates future estimated revenue to be recognized for the remainder of 2023 and full fiscal years thereafter related to performance obligations that are unsatisfied (or partially unsatisfied) as of July 1, 2023. Contract Liabilities expected to be recognized in Amount 2023 $ 805,700 2024 1,567,500 2025 1,351,100 2026 1,146,700 2027 972,000 Thereafter 3,173,000 $ 9,016,000 |
Fair Value Measurements_
Fair Value Measurements: | 6 Months Ended |
Jul. 01, 2023 | |
Fair Value Measurements: | |
Fair Value Measurements: | 4. Fair Value Measurements: The Company defines fair value as the price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. The Company uses three levels of inputs to measure fair value: ● Level 1 – quoted prices in active markets for identical assets and liabilities. ● Level 2 – observable inputs other than quoted prices in active markets for identical assets and liabilities. ● Level 3 – unobservable inputs in which there is little or no market data available, which require the reporting entity to develop its own assumptions. Due to their nature, the carrying value of cash equivalents, receivables, payables and debt obligations approximates fair value. |
Investment in Leasing Operation
Investment in Leasing Operations: | 6 Months Ended |
Jul. 01, 2023 | |
Investment in Leasing Operations: | |
Investment in Leasing Operations: | 5. Investment in Leasing Operations: In May 2021, the Company made the decision to no longer solicit new leasing customers and will pursue an orderly run-off for its leasing portfolio. Leasing income as presented on the Consolidated Condensed Statements of Operations consists of the following: Three Months Ended Three Months Ended Six Months Ended Six Months Ended July 1, 2023 June 25, 2022 July 1, 2023 June 25, 2022 Interest income on direct financing and sales-type leases $ 78,700 $ 205,300 $ 173,500 $ 483,800 Selling profit (loss) at commencement of sales-type leases — 34,800 — 1,298,000 Operating lease income 674,200 528,300 1,526,800 910,100 Income on sales of equipment under lease 87,400 328,700 645,600 932,100 Other 179,500 114,900 310,900 459,700 Leasing income $ 1,019,800 $ 1,212,000 $ 2,656,800 $ 4,083,700 |
Intangible Assets_
Intangible Assets: | 6 Months Ended |
Jul. 01, 2023 | |
Intangible Assets | |
Intangible Assets | 6. Intangible Assets In June 2022, Winmark terminated an agreement that contained the rights for eleven Play It Again Sports stores to operate separately from Winmark’s franchise system. In terminating the agreement, which included stores. Upon termination of the agreement, individual franchise agreements were signed for these Intangible assets consist of these reacquired franchise rights. The Company amortizes the fair value of the reacquired franchise rights over the contract term of the franchise. The Company recognized The following table illustrates future amortization to be expensed for the remainder of 2023 and full fiscal years thereafter related to reacquired franchise rights as of July 1, 2023. Amortization expected to be expensed in Amount 2023 $ 177,000 2024 354,000 2025 354,000 2026 354,000 2027 354,000 Thereafter 1,578,300 $ 3,171,300 |
Earnings Per Share_
Earnings Per Share: | 6 Months Ended |
Jul. 01, 2023 | |
Earnings Per Share: | |
Earnings Per Share: | 7. Earnings Per Share: The following table sets forth the presentation of shares outstanding used in the calculation of basic and diluted earnings per share (“EPS”): Three Months Ended Six Months Ended July 1, 2023 June 25, 2022 July 1, 2023 June 25, 2022 Denominator for basic EPS — weighted average common shares 3,478,628 3,463,886 3,469,675 3,530,902 Dilutive shares associated with option plans 156,060 95,345 144,787 106,870 Denominator for diluted EPS — weighted average common shares and dilutive potential common shares 3,634,688 3,559,231 3,614,462 3,637,772 Options excluded from EPS calculation — anti-dilutive 2,836 21,488 4,977 16,379 |
Shareholders' Equity (Deficit)_
Shareholders' Equity (Deficit): | 6 Months Ended |
Jul. 01, 2023 | |
Shareholders' Equity (Deficit): | |
Shareholders' Equity (Deficit): | 8. Shareholders’ Equity (Deficit): Dividends On January 25, 2023, the Company’s Board of Directors approved the payment of a $0.70 per share quarterly cash dividend to shareholders of record at the close of business on February 8, 2023, which was paid on March 1, 2023. On April 19, 2023, the Company’s Board of Directors approved the payment of a $0.80 per share quarterly cash dividend to shareholders of record at the close of business on May 17, 2023, which was paid on June 1, 2023. Repurchase of Common Stock In the first six months of 2023, the Company didn’t repurchase any shares of its common stock. Under the Board of Directors’ authorization, as of July 1, 2023, the Company has the ability to repurchase an additional 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 Stock option activity under the Company’s option plans as of July 1, 2023 was as follows: Weighted Average Remaining Number of Weighted Average Contractual Life Shares Exercise Price (years) Intrinsic Value Outstanding, December 31, 2022 361,628 $ 164.70 6.40 $ 26,688,183 Granted 19,540 317.93 Exercised (25,363) 117.29 Forfeited (3,752) 204.26 Outstanding, July 1, 2023 352,053 $ 176.20 6.29 $ 55,016,100 Exercisable, July 1, 2023 217,208 $ 141.65 4.83 $ 41,447,400 The fair value of options granted under the Option Plans during the first six months of 2023 and 2022 were estimated on the date of grant using the Black-Scholes option pricing model with the following weighted average assumptions and results: Six Months Ended July 1, 2023 June 25, 2022 Risk free interest rate 3.86 % 2.70 % Expected life (years) 6 6 Expected volatility 28.04 % 27.47 % Dividend yield 3.00 % 4.61 % Option fair value $ 76.01 $ 33.38 All unexercised options at July 1, 2023 have an exercise price equal to the fair market value on the date of the grant. Compensation expense of $942,000 and $771,400 relating to the vested portion of the fair value of stock options granted was expensed to “Selling, General and Administrative Expenses” in the first six months of 2023 and 2022, respectively. As of July 1, 2023, the Company had |
Debt_
Debt: | 6 Months Ended |
Jul. 01, 2023 | |
Debt: | |
Debt: | 9. Debt: Line of Credit/Term Loan As of July 1, 2023, there were no revolving loans outstanding under the Company’s credit facility with CIBC Bank USA (the “Line of Credit”), leaving $20.0 million available for additional borrowings. As of July 1, 2023, the Company had delayed draw term loan borrowings totaling $30.0 million under the Line of Credit bearing interest ranging from 4.60% to 4.75%. The Line of Credit has been and will continue to be used for general corporate purposes. The Line of Credit is secured by a lien against substantially all of the Company’s assets, (as the Line of Credit ranks pari passu with the Prudential facilities described below) contains customary financial conditions and covenants, and requires maintenance of minimum levels of debt service coverage and maximum levels of leverage (all as defined within the Line of Credit). As of July 1, 2023, the Company was in compliance with all of its financial covenants. Notes Payable As of July 1, 2023, the Company had aggregate principal outstanding of $41.3 million under its Note Agreement (“the Note Agreement”) with PGIM, Inc (formerly Prudential Investment Management, Inc.) its affiliates and managed accounts (collectively, “Prudential”) consisting of $6.0 million in principal outstanding from the $25.0 million Series A notes issued in May 2015, $5.3 million in principal outstanding from the $12.5 million Series B notes issued in August 2017 and $30.0 million in principal outstanding from the $30.0 million Series C notes issued in September 2021. The final maturity of the Series A 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 debt service coverage and maximum levels of leverage (all as defined within the Note Agreement). As of July 1, 2023, 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. In April 2022, the Company entered into a Private Shelf Agreement (the “Shelf Agreement”) with Prudential, summarized as follows: ● For a period three years from entry into the Shelf Agreement, subject to certain customary conditions, the Company may offer and Prudential may purchase from the Company privately negotiated senior notes (“Shelf Notes”) in the aggregate principal amount up to (i) $100.0 million, less (ii) the aggregate principal amount of notes outstanding at such point (including notes outstanding under the existing Prudential Note Agreement); ● Each Shelf Note issued will have an average life and maturity of no more than 12.5 years from the date of original issuance, with interest payable at a rate per annum determined at the time of each issuance; ● The Shelf Notes will be secured by all of the Company’s assets and the Shelf Notes will rank pari passu with the Company’s obligations to the lenders under the Line of Credit and the Note Agreement; ● The Shelf Notes may be prepaid, at the option of the Company, in whole or in part (in a minimum amount of $1 million), but prepayments will require payment of a Yield Maintenance Amount (as defined within the Shelf Agreement); ● The Shelf Agreement contains customary affirmative covenants and negative covenants that are substantially the same as those contained in the Line of Credit and Note Agreement. As of July 1, 2023, the Company had not issued any notes under the Shelf Agreement and was in compliance with all of its financial covenants. |
Operating Leases_
Operating Leases: | 6 Months Ended |
Jul. 01, 2023 | |
Operating Leases: | |
Operating Leases: | 10. Operating Leases: As of July 1, 2023, the Company leases its Minnesota corporate headquarters in a facility with an operating lease that expires in December 2029. The remaining lease term for this lease is 6.5 years and the discount rate is 5.5% . The Company recognized Maturities of operating lease liabilities is as follows for the remainder of fiscal 2023 and full fiscal years thereafter as of July 1, 2023: Operating Lease Liabilities expected to be recognized in Amount 2023 $ 385,100 2024 784,400 2025 806,000 2026 828,200 2027 851,100 Thereafter 1,773,300 Total lease payments 5,428,100 Less imputed interest (929,600) Present value of lease liabilities $ 4,498,500 Of the $4.5 million operating lease liability outstanding at July 1, 2023, $0.5 million is included in Accrued liabilities in the Current liabilities Supplemental cash flow information related to our operating leases is as follows for the period ended July 1, 2023: Six Months Ended July 1, 2023 June 25, 2022 Cash paid for amounts included in the measurement of lease liabilities: Operating cash flow outflow from operating leases $ 378,200 $ 368,100 |
Segment Reporting_
Segment Reporting: | 6 Months Ended |
Jul. 01, 2023 | |
Segment Reporting: | |
Segment Reporting: | 11. Segment Reporting: For 2022, the Company’s leasing business did not reach any of the quantitative thresholds for a reportable segment, and the Company does not expect the results from its leasing business to be of significance in future periods. The revenues and operating income from the Company’s leasing business are included in Other in its reportable segment disclosures. During 2022, the segment asset information was no longer provided to the Company’s Chief Operating Decision Maker and therefore is not disclosed below. Disclosures for 2022 have been recast to be consistent with the 2023 presentation. The Company currently has one reportable operating segment, franchising, and one non-reportable operating segment. The franchising segment franchises value-oriented retail store concepts that buy, sell and trade merchandise. The non-reportable operating segment includes the Company’s equipment leasing 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 operating segments. The following tables summarize financial information by segment and provide a reconciliation of segment contribution to operating income: Three Months Ended Six Months Ended July 1, 2023 June 25, 2022 July 1, 2023 June 25, 2022 Revenue: Franchising $ 19,342,400 $ 17,858,800 $ 38,229,000 $ 35,036,900 Other 1,019,800 1,212,000 2,656,800 4,083,700 Total revenue $ 20,362,200 $ 19,070,800 $ 40,885,800 $ 39,120,600 Reconciliation to operating income: Franchising segment contribution $ 12,383,900 $ 11,742,400 $ 23,591,400 $ 22,943,100 Other operating segment contribution 866,900 612,700 2,047,800 2,850,200 Total operating income $ 13,250,800 $ 12,355,100 $ 25,639,200 $ 25,793,300 |
Contract Liabilities_ (Tables)
Contract Liabilities: (Tables) | 6 Months Ended |
Jul. 01, 2023 | |
Contract Liabilities: | |
Schedule of activity of current and noncurrent deferred franchise revenue | July 1, 2023 June 25, 2022 Balance at beginning of period $ 8,618,100 $ 8,508,500 Franchise and software license fees collected from franchisees, excluding amount earned as revenue during the period 1,349,500 937,900 Fees earned that were included in the balance at the beginning of the period (951,600) (966,100) Balance at end of period $ 9,016,000 $ 8,480,300 |
Schedule of future estimated revenue to be recognized related to performance obligations | Contract Liabilities expected to be recognized in Amount 2023 $ 805,700 2024 1,567,500 2025 1,351,100 2026 1,146,700 2027 972,000 Thereafter 3,173,000 $ 9,016,000 |
Investment in Leasing Operati_2
Investment in Leasing Operations: (Tables) | 6 Months Ended |
Jul. 01, 2023 | |
Investment in Leasing Operations: | |
Schedule of components of leasing income | Three Months Ended Three Months Ended Six Months Ended Six Months Ended July 1, 2023 June 25, 2022 July 1, 2023 June 25, 2022 Interest income on direct financing and sales-type leases $ 78,700 $ 205,300 $ 173,500 $ 483,800 Selling profit (loss) at commencement of sales-type leases — 34,800 — 1,298,000 Operating lease income 674,200 528,300 1,526,800 910,100 Income on sales of equipment under lease 87,400 328,700 645,600 932,100 Other 179,500 114,900 310,900 459,700 Leasing income $ 1,019,800 $ 1,212,000 $ 2,656,800 $ 4,083,700 |
Intangible Assets_ (Tables)
Intangible Assets: (Tables) | 6 Months Ended |
Jul. 01, 2023 | |
Intangible Assets | |
Schedule of future amortization to be expensed | Amortization expected to be expensed in Amount 2023 $ 177,000 2024 354,000 2025 354,000 2026 354,000 2027 354,000 Thereafter 1,578,300 $ 3,171,300 |
Earnings Per Share_ (Tables)
Earnings Per Share: (Tables) | 6 Months Ended |
Jul. 01, 2023 | |
Earnings Per Share: | |
Schedule of shares outstanding used in the calculation of basic and diluted earnings per share | Three Months Ended Six Months Ended July 1, 2023 June 25, 2022 July 1, 2023 June 25, 2022 Denominator for basic EPS — weighted average common shares 3,478,628 3,463,886 3,469,675 3,530,902 Dilutive shares associated with option plans 156,060 95,345 144,787 106,870 Denominator for diluted EPS — weighted average common shares and dilutive potential common shares 3,634,688 3,559,231 3,614,462 3,637,772 Options excluded from EPS calculation — anti-dilutive 2,836 21,488 4,977 16,379 |
Shareholders' Equity (Deficit_2
Shareholders' Equity (Deficit): (Tables) | 6 Months Ended |
Jul. 01, 2023 | |
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, 2022 361,628 $ 164.70 6.40 $ 26,688,183 Granted 19,540 317.93 Exercised (25,363) 117.29 Forfeited (3,752) 204.26 Outstanding, July 1, 2023 352,053 $ 176.20 6.29 $ 55,016,100 Exercisable, July 1, 2023 217,208 $ 141.65 4.83 $ 41,447,400 |
Schedule of weighted average assumptions used in estimation of fair value of options granted | Six Months Ended July 1, 2023 June 25, 2022 Risk free interest rate 3.86 % 2.70 % Expected life (years) 6 6 Expected volatility 28.04 % 27.47 % Dividend yield 3.00 % 4.61 % Option fair value $ 76.01 $ 33.38 |
Operating Leases_ (Tables)
Operating Leases: (Tables) | 6 Months Ended |
Jul. 01, 2023 | |
Operating Leases: | |
Schedule of maturities of operating lease liabilities | Operating Lease Liabilities expected to be recognized in Amount 2023 $ 385,100 2024 784,400 2025 806,000 2026 828,200 2027 851,100 Thereafter 1,773,300 Total lease payments 5,428,100 Less imputed interest (929,600) Present value of lease liabilities $ 4,498,500 |
Schedule of supplemental cash flow information related to operating leases | Six Months Ended July 1, 2023 June 25, 2022 Cash paid for amounts included in the measurement of lease liabilities: Operating cash flow outflow from operating leases $ 378,200 $ 368,100 |
Segment Reporting_ (Tables)
Segment Reporting: (Tables) | 6 Months Ended |
Jul. 01, 2023 | |
Segment Reporting: | |
Schedule of financial information by segment and reconciliation of segment contribution to operating income | Three Months Ended Six Months Ended July 1, 2023 June 25, 2022 July 1, 2023 June 25, 2022 Revenue: Franchising $ 19,342,400 $ 17,858,800 $ 38,229,000 $ 35,036,900 Other 1,019,800 1,212,000 2,656,800 4,083,700 Total revenue $ 20,362,200 $ 19,070,800 $ 40,885,800 $ 39,120,600 Reconciliation to operating income: Franchising segment contribution $ 12,383,900 $ 11,742,400 $ 23,591,400 $ 22,943,100 Other operating segment contribution 866,900 612,700 2,047,800 2,850,200 Total operating income $ 13,250,800 $ 12,355,100 $ 25,639,200 $ 25,793,300 |
Management's Interim Financia_2
Management's Interim Financial Statement Representation: (Details) | 6 Months Ended |
Jul. 01, 2023 item | |
Minimum | |
Number of Weeks in Fiscal Year | 52 |
Maximum | |
Number of Weeks in Fiscal Year | 53 |
Contract Liabilities_ Activity
Contract Liabilities: Activity (Details) - USD ($) | 6 Months Ended | |
Jul. 01, 2023 | Jun. 25, 2022 | |
Activity of the current and noncurrent deferred franchise revenue | ||
Balance at beginning of period | $ 8,618,100 | $ 8,508,500 |
Franchise and software license fees collected from franchisees, excluding amount earned as revenue during the period | 1,349,500 | 937,900 |
Fees earned that were included in the balance at the beginning of the period | (951,600) | (966,100) |
Balance at end of period | $ 9,016,000 | $ 8,480,300 |
Contract Liabilities_ Performan
Contract Liabilities: Performance Obligations (Details) | Jul. 01, 2023 USD ($) |
Future estimated revenue to be recognized related to performance obligations | |
Revenue, remaining performance obligation | $ 9,016,000 |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2023-07-02 | |
Future estimated revenue to be recognized related to performance obligations | |
Duration of expected recognition period for remaining performance obligation | 6 months |
Revenue, remaining performance obligation | $ 805,700 |
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 | $ 1,567,500 |
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 | 1 year |
Revenue, remaining performance obligation | $ 1,351,100 |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2025-12-28 | |
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 | $ 1,146,700 |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2026-12-27 | |
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 | $ 972,000 |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2027-12-26 | |
Future estimated revenue to be recognized related to performance obligations | |
Duration of expected recognition period for remaining performance obligation | |
Revenue, remaining performance obligation | $ 3,173,000 |
Investment in Leasing Operati_3
Investment in Leasing Operations: Leasing Income (Details) - USD ($) | 3 Months Ended | 6 Months Ended | ||
Jul. 01, 2023 | Jun. 25, 2022 | Jul. 01, 2023 | Jun. 25, 2022 | |
Leasing income | ||||
Interest income on direct financing and sales-type leases | $ 78,700 | $ 205,300 | $ 173,500 | $ 483,800 |
Selling profit (loss) at commencement of sales-type leases | 34,800 | 1,298,000 | ||
Operating lease income | 674,200 | 528,300 | 1,526,800 | 910,100 |
Income on sales of equipment under lease | 87,400 | 328,700 | 645,600 | 932,100 |
Other | 179,500 | 114,900 | 310,900 | 459,700 |
Leasing income | $ 1,019,800 | $ 1,212,000 | $ 2,656,800 | $ 4,083,700 |
Intangible Assets_ Franchise ri
Intangible Assets: Franchise rights (Details) | 1 Months Ended | 6 Months Ended | |
Jun. 30, 2022 USD ($) store | Jul. 01, 2023 USD ($) | Jun. 25, 2022 USD ($) | |
Intangible Assets | |||
Termination of agreement, number of stores | 11 | ||
Termination of agreement, consideration paid by Winmark | $ | $ 3,540,000 | ||
Number of stores in which Winmark reacquired the franchise rights | 11 | ||
Number of stores that signed franchise agreements | 11 | ||
Amortization of intangible assets | $ | $ 177,000 | $ 14,800 | |
Franchise Rights | |||
Intangible Assets | |||
Useful life | 10 years |
Intangible Assets_ Amortization
Intangible Assets: Amortization (Details) - USD ($) | Jul. 01, 2023 | Dec. 31, 2022 |
Future amortization to be expensed: | ||
2023 | $ 177,000 | |
2024 | 354,000 | |
2025 | 354,000 | |
2026 | 354,000 | |
2027 | 354,000 | |
Thereafter | 1,578,300 | |
Total | $ 3,171,300 | $ 3,348,300 |
Earnings Per Share_ (Details)
Earnings Per Share: (Details) - shares | 3 Months Ended | 6 Months Ended | ||
Jul. 01, 2023 | Jun. 25, 2022 | Jul. 01, 2023 | Jun. 25, 2022 | |
Earnings Per Share: | ||||
Denominator for basic EPS - weighted average common shares | 3,478,628 | 3,463,886 | 3,469,675 | 3,530,902 |
Dilutive shares associated with option plans | 156,060 | 95,345 | 144,787 | 106,870 |
Denominator for diluted EPS - weighted average common shares and dilutive potential common shares | 3,634,688 | 3,559,231 | 3,614,462 | 3,637,772 |
Options excluded from EPS calculation - anti-dilutive (in shares) | 2,836 | 21,488 | 4,977 | 16,379 |
Shareholders' Equity (Deficit_3
Shareholders' Equity (Deficit): Dividends and Repurchase of Common Stock (Details) - $ / shares | Apr. 19, 2023 | Jan. 25, 2023 | Jul. 01, 2023 |
Dividends | |||
Cash dividends declared and paid (in dollars per share) | $ 0.80 | $ 0.70 | |
Common Stock Repurchase Program | |||
Repurchase of Common Stock | |||
Number of additional shares that can be repurchased | 78,600 |
Shareholders' Equity (Deficit_4
Shareholders' Equity (Deficit): Stock Options Activity (Details) - Stock options - USD ($) | 6 Months Ended | 12 Months Ended | |
Jul. 01, 2023 | Jun. 25, 2022 | Dec. 31, 2022 | |
Number of Shares | |||
Outstanding at the beginning of the period (in shares) | 361,628 | ||
Granted (in shares) | 19,540 | ||
Exercised (in shares) | (25,363) | ||
Forfeited (in shares) | (3,752) | ||
Outstanding at the end of the period (in shares) | 352,053 | 361,628 | |
Exercisable at the end of the period (in shares) | 217,208 | ||
Weighted Average Exercise Price | |||
Outstanding at the beginning of the period (in dollars per share) | $ 164.70 | ||
Granted (in dollars per share) | 317.93 | ||
Exercised (in dollars per share) | 117.29 | ||
Forfeited (in dollars per share) | 204.26 | ||
Outstanding at the end of the period (in dollars per share) | 176.20 | $ 164.70 | |
Exercisable at the end of the period (in dollars per share) | $ 141.65 | ||
Weighted Average Remaining Contractual Life (years) | |||
Outstanding | 6 years 3 months 14 days | 6 years 4 months 24 days | |
Exercisable at the end of the period | 4 years 9 months 29 days | ||
Intrinsic Value | |||
Outstanding at the beginning of the period | $ 26,688,183 | ||
Outstanding at the end of the period | 55,016,100 | $ 26,688,183 | |
Exercisable at the end of the period | $ 41,447,400 | ||
Weighted average assumptions and results used in estimation of fair value of options granted | |||
Risk free interest rate (as a percent) | 3.86% | 2.70% | |
Expected life (years) | 6 years | 6 years | |
Expected volatility (as a percent) | 28.04% | 27.47% | |
Dividend yield (as a percent) | 3% | 4.61% | |
Option fair value (in dollars per share) | $ 76.01 | $ 33.38 |
Shareholders' Equity (Deficit_5
Shareholders' Equity (Deficit): Additional Information (Details) - Stock options - USD ($) | 6 Months Ended | |
Jul. 01, 2023 | Jun. 25, 2022 | |
Additional disclosures | ||
Compensation expense | $ 942,000 | $ 771,400 |
Total unrecognized compensation expense | $ 5,100,000 | |
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 | Jul. 01, 2023 USD ($) |
Delayed Draw Term Facility | |
Line of Credit | |
Borrowings outstanding | $ 30 |
Delayed Draw Term Facility | Minimum | |
Line of Credit | |
Interest rate (as a percent) | 4.60% |
Delayed Draw Term Facility | Maximum | |
Line of Credit | |
Interest rate (as a percent) | 4.75% |
Revolving Loans | |
Line of Credit | |
Borrowings outstanding | $ 0 |
Line of credit available for additional borrowings | $ 20 |
Debt_ Notes Payable (Details)
Debt: Notes Payable (Details) - USD ($) | 1 Months Ended | 6 Months Ended | |||
Apr. 30, 2022 | Jul. 01, 2023 | Sep. 30, 2021 | Aug. 31, 2017 | May 31, 2015 | |
Note Agreement | Notes Payable. | |||||
Notes Payable | |||||
Principal amount outstanding | $ 41,300,000 | ||||
Minimum prepayment | 1,000,000 | ||||
Note Agreement | Series A Notes | |||||
Notes Payable | |||||
Principal amount outstanding | $ 6,000,000 | ||||
Note payable, face amount | $ 25,000,000 | ||||
Debt term | 10 years | ||||
Interest rate (as a percent) | 5.50% | ||||
Quarterly principal payment, first five years | $ 500,000 | ||||
Quarterly principal payment, thereafter | 750,000 | ||||
Note Agreement | Series B Notes | |||||
Notes Payable | |||||
Principal amount outstanding | $ 5,300,000 | ||||
Note payable, face amount | $ 12,500,000 | ||||
Debt term | 10 years | ||||
Interest rate (as a percent) | 5.10% | ||||
Quarterly principal payment | $ 312,500 | ||||
Note Agreement | Series C Notes | |||||
Notes Payable | |||||
Principal amount outstanding | $ 30,000,000 | ||||
Note payable, face amount | $ 30,000,000 | ||||
Debt term | 7 years | ||||
Interest rate (as a percent) | 3.18% | ||||
Shelf Agreement | Senior Notes | |||||
Notes Payable | |||||
Shelf Agreement term | 3 years | ||||
Maximum amount of Shelf Notes available for issuance. | $ 100,000,000 | ||||
Minimum prepayment | $ 1,000,000 | ||||
Shelf Agreement | Senior Notes | Maximum | |||||
Notes Payable | |||||
Debt term | 12 years 6 months |
Operating Leases_ Summary (Deta
Operating Leases: Summary (Details) - USD ($) | 6 Months Ended | |
Jul. 01, 2023 | Jun. 25, 2022 | |
Operating Leases: | ||
Remaining lease term | 6 years 6 months | |
Discount rate (as a percent) | 5.50% | |
Rent expense | $ 582,300 | $ 604,900 |
Operating Leases_ Maturities an
Operating Leases: Maturities and other (Details) - USD ($) | 6 Months Ended | |
Jul. 01, 2023 | Jun. 25, 2022 | |
Maturities of operating lease liabilities: | ||
2023 | $ 385,100 | |
2024 | 784,400 | |
2025 | 806,000 | |
2026 | 828,200 | |
2027 | 851,100 | |
Thereafter | 1,773,300 | |
Total | 5,428,100 | |
Less imputed interest | (929,600) | |
Present value of lease liabilities | 4,498,500 | |
Operating lease liability | ||
Operating lease liability, current | $ 500,000 | |
Operating Lease, Liability, Current, Statement of Financial Position [Extensible List] | Accrued Liabilities, Current | |
Cash paid for amounts included in the measurement of lease liabilities: | ||
Operating cash flow outflow from operating leases | $ 378,200 | $ 368,100 |
Segment Reporting_ (Details)
Segment Reporting: (Details) | 3 Months Ended | 6 Months Ended | ||
Jul. 01, 2023 USD ($) | Jun. 25, 2022 USD ($) | Jul. 01, 2023 USD ($) item | Jun. 25, 2022 USD ($) | |
Segment Reporting | ||||
Number of reportable business segments | item | 1 | |||
Total revenue | $ 20,362,200 | $ 19,070,800 | $ 40,885,800 | $ 39,120,600 |
Total operating income | 13,250,800 | 12,355,100 | 25,639,200 | 25,793,300 |
Operating | Franchising | ||||
Segment Reporting | ||||
Total revenue | 19,342,400 | 17,858,800 | 38,229,000 | 35,036,900 |
Total operating income | 12,383,900 | 11,742,400 | 23,591,400 | 22,943,100 |
Operating | Other. | ||||
Segment Reporting | ||||
Total revenue | 1,019,800 | 1,212,000 | 2,656,800 | 4,083,700 |
Total operating income | $ 866,900 | $ 612,700 | $ 2,047,800 | $ 2,850,200 |