Winmark Corporation WINA announced today net income for the quarter ended September 30, 2017 of $5,719,000 (or $1.33 per share diluted) compared to net income of $6,094,200 (or $1.41 per share diluted) in the third quarter of 2016. For the nine months ended September 30, 2017, net income was $16,908,600 (or $3.83 per share diluted) compared to net income of $16,051,400 (or $3.72 per share diluted) for the same period last year.
The Company experienced royalty growth driven primarily by increased sales from franchisees, while profits in the leasing business were lower when compared to last year due to a decrease in customer activity within the lease portfolio. Brett D. Heffes, Chief Executive Officer, commented, "We are pleased with the performance of the franchising business during the quarter, and the response to Winmark Franchise Partners, which we have continued to invest in during the quarter, has been extremely positive."
Winmark Corporation creates, supports and finances business. At September 30, 2017, there were 1,210 franchises in operation under the brands Plato's Closet®, Once Upon A Child®, Play It Again Sports®, Style Encore® and Music Go Round®. An additional 62 retail franchises have been awarded but are not open. In addition, at September 30, 2017, the Company had a lease portfolio of $40.6 million.
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) |
||||||||||
| September 30, 2017 | December 31, 2016 | |||||||||
| ASSETS | ||||||||||
| Current Assets: | ||||||||||
| Cash and cash equivalents | $ | 1,060,700 | $ | 1,252,900 | ||||||
| Marketable securities | — | 199,900 | ||||||||
| Receivables, net | 1,708,100 | 1,479,200 | ||||||||
| Restricted cash | 40,000 | 40,000 | ||||||||
| Net investment in leases - current | 16,311,000 | 17,004,800 | ||||||||
| Income tax receivable | 1,721,500 | 1,678,800 | ||||||||
| Inventories | 67,000 | 87,500 | ||||||||
| Prepaid expenses | 865,400 | 1,050,700 | ||||||||
| Total current assets | 21,773,700 | 22,793,800 | ||||||||
| Net investment in leases – long-term | 24,249,500 | 24,410,700 | ||||||||
| Property and equipment, net | 547,700 | 769,600 | ||||||||
| Goodwill | 607,500 | 607,500 | ||||||||
| $ | 47,178,400 | $ | 48,581,600 | |||||||
| LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT) | ||||||||||
| Current Liabilities: | ||||||||||
| Notes payable, net | $ | 3,236,100 | $ | 1,990,000 | ||||||
| Accounts payable | 1,474,600 | 1,692,000 | ||||||||
| Accrued liabilities | 2,906,100 | 1,811,100 | ||||||||
| Deferred revenue | 1,649,300 | 1,864,700 | ||||||||
| Total current liabilities | 9,266,100 | 7,357,800 | ||||||||
| Long-Term Liabilities: | ||||||||||
| Line of credit | 41,900,000 | 23,400,000 | ||||||||
| Notes payable, net | 29,650,100 | 19,926,500 | ||||||||
| Deferred revenue | 1,458,200 | 1,423,800 | ||||||||
| Other liabilities | 808,400 | 993,600 | ||||||||
| Deferred income taxes | 3,485,300 | 3,331,900 | ||||||||
| Total long-term liabilities | 77,302,000 | 49,075,800 | ||||||||
| Shareholders' Equity (Deficit): | ||||||||||
|
Common stock, no par, 10,000,000 shares authorized, 3,821,528 and 4,165,769 shares issued and outstanding |
— | 2,976,100 | ||||||||
| Accumulated other comprehensive income (loss) | — | (9,900 | ) | |||||||
| Retained earnings (accumulated deficit) | (39,389,700 | ) | (10,818,200 | ) | ||||||
| Total shareholders' equity (deficit) | (39,389,700 | ) | (7,852,000 | ) | ||||||
| $ | 47,178,400 | $ | 48,581,600 | |||||||
| WINMARK CORPORATION | ||||||||||||||||||||
| CONDENSED STATEMENTS OF OPERATIONS | ||||||||||||||||||||
|
(Unaudited) |
||||||||||||||||||||
| Quarter Ended | Nine Months Ended | |||||||||||||||||||
| September 30, 2017 | September 24, 2016 | September 30, 2017 | September 24, 2016 | |||||||||||||||||
| REVENUE: | ||||||||||||||||||||
| Royalties | $ | 12,316,700 | $ | 11,311,000 | $ | 33,865,100 | $ | 32,140,800 | ||||||||||||
| Leasing income | 3,915,800 | 4,174,000 | 13,722,000 | 12,839,000 | ||||||||||||||||
| Merchandise sales | 773,100 | 520,000 | 2,058,500 | 1,882,400 | ||||||||||||||||
| Franchise fees | 317,800 | 501,800 | 1,262,500 | 1,367,800 | ||||||||||||||||
| Other | 244,500 | 227,500 | 1,033,100 | 984,400 | ||||||||||||||||
| Total revenue | 17,567,900 | 16,734,300 | 51,941,200 | 49,214,400 | ||||||||||||||||
| COST OF MERCHANDISE SOLD | 728,300 | 499,100 | 1,942,400 | 1,784,800 | ||||||||||||||||
| LEASING EXPENSE | 792,000 | 646,200 | 2,724,000 | 2,010,400 | ||||||||||||||||
| PROVISION FOR CREDIT LOSSES | (13,300 | ) | (29,700 | ) | (26,200 | ) | (52,000 | ) | ||||||||||||
| SELLING, GENERAL AND ADMINISTRATIVE EXPENSES | 6,208,900 | 5,180,700 | 19,179,400 | 17,671,500 | ||||||||||||||||
| Income from operations | 9,852,000 | 10,438,000 | 28,121,600 | 27,799,700 | ||||||||||||||||
| INTEREST EXPENSE | (613,900 | ) | (552,300 | ) | (1,559,300 | ) | (1,786,800 | ) | ||||||||||||
| INTEREST AND OTHER INCOME (EXPENSE) | 28,000 | (6,300 | ) | 29,900 | (7,300 | ) | ||||||||||||||
| Income before income taxes | 9,266,100 | 9,879,400 | 26,592,200 | 26,005,600 | ||||||||||||||||
| PROVISION FOR INCOME TAXES | (3,547,100 | ) | (3,785,200 | ) | (9,683,600 | ) | (9,954,200 | ) | ||||||||||||
| NET INCOME | $ | 5,719,000 | $ | 6,094,200 | $ | 16,908,600 | $ | 16,051,400 | ||||||||||||
| EARNINGS PER SHARE – BASIC | $ | 1.42 | $ | 1.48 | $ | 4.09 | $ | 3.90 | ||||||||||||
| EARNINGS PER SHARE – DILUTED | $ | 1.33 | $ | 1.41 | $ | 3.83 | $ | 3.72 | ||||||||||||
| WEIGHTED AVERAGE SHARES OUTSTANDING – BASIC | 4,024,692 | 4,116,957 | 4,131,269 | 4,113,819 | ||||||||||||||||
| WEIGHTED AVERAGE SHARES OUTSTANDING – DILUTED | 4,314,412 | 4,328,168 | 4,416,185 | 4,320,284 | ||||||||||||||||
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