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Winmark Corporation Announces First Quarter Results

WINA

Winmark Corporation (Nasdaq: WINA) announced today net income for the quarter ended April 1, 2023 of $8,942,700 or $2.49 per share diluted compared to net income of $9,852,500 or $2.65 per share diluted in 2022. Results during the quarter were impacted by the Company’s decision in May 2021 to run-off its leasing portfolio.

“2023 is off to a good start,” 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 April 1, 2023, there were 1,297 franchises in operation and over 2,800 available territories. An additional 70 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)

April 1, 2023

December 31, 2022

ASSETS

Current Assets:

Cash and cash equivalents

$

24,551,600

$

13,615,600

Restricted cash

80,000

65,000

Receivables, net

1,581,800

1,438,600

Net investment in leases - current

125,300

344,900

Income tax receivable

558,700

Inventories

414,300

770,600

Prepaid expenses

888,000

1,310,400

Total current assets

27,641,000

18,103,800

Net investment in leases – long-term

5,400

Property and equipment, net

1,606,100

1,704,600

Operating lease right of use asset

2,649,100

2,716,000

Intangible assets, net

3,259,800

3,348,300

Goodwill

607,500

607,500

Other assets

470,100

429,700

Deferred income taxes

3,516,200

3,540,400

$

39,749,800

$

30,455,700

LIABILITIES AND SHAREHOLDERS’ EQUITY (DEFICIT)

Current Liabilities:

Notes payable, net

$

4,217,900

$

4,217,900

Accounts payable

1,443,700

2,122,000

Income tax payable

2,009,900

Accrued liabilities

3,884,600

2,611,700

Deferred revenue

1,673,700

1,643,900

Total current liabilities

13,229,800

10,595,500

Long-Term Liabilities:

Line of Credit/Term Loan

30,000,000

30,000,000

Notes payable, net

38,012,200

39,066,700

Deferred revenue

7,242,100

6,974,200

Operating lease liabilities

4,151,100

4,287,000

Other liabilities

1,159,600

1,164,400

Total long-term liabilities

80,565,000

81,492,300

Shareholders’ Equity (Deficit):

Common stock, no par, 10,000,000 shares authorized,
3,463,191 and 3,459,673 shares issued and outstanding

2,873,000

1,806,700

Retained earnings (accumulated deficit)

(56,918,000

)

(63,438,800

)

Total shareholders’ equity (deficit)

(54,045,000

)

(61,632,100

)

$

39,749,800

$

30,455,700

WINMARK CORPORATION

CONDENSED STATEMENTS OF OPERATIONS

(Unaudited)

Three Months Ended

April 1, 2023

March 26, 2022

Revenue:

Royalties

$

16,747,700

$

15,390,100

Leasing income

1,637,000

2,871,700

Merchandise sales

1,276,000

914,300

Franchise fees

378,200

420,600

Other

484,700

453,100

Total revenue

20,523,600

20,049,800

Cost of merchandise sold

1,187,300

864,500

Leasing expense

316,400

216,000

Provision for credit losses

(4,600

)

(8,900

)

Selling, general and administrative expenses

6,636,100

5,540,000

Income from operations

12,388,400

13,438,200

Interest expense

(797,600

)

(513,100

)

Interest and other income (expense)

125,700

(900

)

Income before income taxes

11,716,500

12,924,200

Provision for income taxes

(2,773,800

)

(3,071,700

)

Net income

$

8,942,700

$

9,852,500

Earnings per share - basic

$

2.58

$

2.74

Earnings per share - diluted

$

2.49

$

2.65

Weighted average shares outstanding - basic

3,460,720

3,597,926

Weighted average shares outstanding - diluted

3,594,234

3,716,322

WINMARK CORPORATION

CONDENSED STATEMENTS OF CASH FLOWS

(Unaudited)

Three Months Ended

April 1, 2023

March 26, 2022

OPERATING ACTIVITIES:

Net income

$

8,942,700

$

9,852,500

Adjustments to reconcile net income to net cash provided by operating activities:

Depreciation and amortization

192,500

102,500

Provision for credit losses

(4,600

)

(8,900

)

Compensation expense related to stock options

475,900

421,600

Deferred income taxes

24,200

(113,200

)

Operating lease right of use asset amortization

66,900

60,300

Tax benefits on exercised stock options

77,700

95,300

Change in operating assets and liabilities:

Receivables

(143,200

)

(369,900

)

Principal collections on lease receivables

423,800

530,500

Income tax receivable/payable

2,490,900

2,946,500

Inventories

356,300

(167,100

)

Prepaid expenses

422,400

23,500

Other assets

(40,400

)

(10,400

)

Accounts payable

(678,300

)

(203,000

)

Accrued and other liabilities

1,140,200

390,500

Rents received in advance and security deposits

(194,200

)

(159,700

)

Deferred revenue

297,700

(43,100

)

Net cash provided by operating activities

13,850,500

13,347,900

INVESTING ACTIVITIES:

Purchase of property and equipment

(5,500

)

(21,500

)

Net cash used for investing activities

(5,500

)

(21,500

)

FINANCING ACTIVITIES:

Proceeds from borrowings on line of credit/term loan

15,600,000

Payments on line of credit/term loan

(2,000,000

)

Payments on notes payable

(1,062,500

)

(1,062,500

)

Repurchases of common stock

(36,591,400

)

Proceeds from exercises of stock options

590,400

1,258,300

Dividends paid

(2,421,900

)

(1,625,300

)

Net cash used for financing activities

(2,894,000

)

(24,420,900

)

NET INCREASE (DECREASE) IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH

10,951,000

(11,094,500

)

Cash, cash equivalents and restricted cash, beginning of period

13,680,600

11,437,000

Cash, cash equivalents and restricted cash, end of period

$

24,631,600

$

342,500

SUPPLEMENTAL DISCLOSURES:

Cash paid for interest

$

791,500

$

490,500

Cash paid for income taxes

$

181,200

$

143,100

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:

Three Months Ended

April 1, 2023

March 26, 2022

Cash and cash equivalents

$

24,551,600

$

287,500

Restricted cash

80,000

55,000

Total cash, cash equivalents and restricted cash

$

24,631,600

$

342,500



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