2017 1st Qtr Form 10-Q (00014803).DOCX

Table of Contents

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☒

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 29, 2024

☐

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number: 000-22012

WINMARK CORPORATION

(Exact name of registrant as specified in its charter)


Minnesota		41-1622691
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

605 Highway 169 North, Suite 400, Minneapolis, MN 55441

(Address of principal executive offices) (Zip Code)

(763) 520-8500

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:


Title of each class:	Trading Symbol	Name of each exchange on which registered:
Common Stock, no par value per share	WINA	Nasdaq Global Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer ☒

Non-accelerated filer ☐

Accelerated filer ☐

Smaller reporting company ☐

Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ◻

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes ☐ No ☒

Common stock, no par value, 3,520,327 shares outstanding as of July 15, 2024.

Table of Contents

WINMARK CORPORATION AND SUBSIDIARIES

INDEX


		PAGE

PART I.	FINANCIAL INFORMATION

Item 1.	Financial Statements (Unaudited)

	CONSOLIDATED CONDENSED BALANCE SHEETS June 29, 2024 and December 30, 2023	3

	CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS Three Months Ended June 29, 2024 and July 1, 2023 Six Months Ended June 29, 2024 and July 1, 2023	4

	CONSOLIDATED CONDENSED STATEMENTS OF SHAREHOLDERS’ EQUITY (DEFICIT) Three Months Ended June 29, 2024 and July 1, 2023 Six Months Ended June 29, 2024 and July 1, 2023	5

	CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS Six Months Ended June 29, 2024 and July 1, 2023	6

	NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS	7

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	12

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	17

Item 4.	Controls and Procedures	17

PART II.	OTHER INFORMATION	18

Item 1.	Legal Proceedings	18

Item 1A.	Risk Factors	18

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	18

Item 3.	Defaults Upon Senior Securities	19

Item 4.	Mine Safety Disclosures	19

Item 5.	Other Information	19

Item 6.	Exhibits	19

	SIGNATURES	20

Table of Contents

PART I. FINANCIAL INFORMATION

ITEM 1: Financial Statements

WINMARK CORPORATION AND SUBSIDIARIES

CONSOLIDATED CONDENSED BALANCE SHEETS

(Unaudited)


	June 29, 2024		December 30, 2023
ASSETS
Current Assets:
Cash and cash equivalents	$	29,397,400	$	13,361,500
Restricted cash		—		25,000
Receivables, less allowance for credit losses of $500 and $600		1,611,400		1,475,300
Net investment in leases - current		—		75,100
Income tax receivable		655,800		31,400
Inventories		268,200		386,100
Prepaid expenses		1,020,800		1,392,100
Total current assets		32,953,600		16,746,500
Property and equipment, net		1,636,100		1,669,800
Operating lease right of use asset		2,275,600		2,425,900
Intangible assets, net		2,817,300		2,994,300
Goodwill		607,500		607,500
Other assets		479,500		471,300
Deferred income taxes		3,917,300		4,052,400
	$	44,686,900	$	28,967,700

LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)
Current Liabilities:
Notes payable, net of unamortized debt issuance costs of $30,400 and $32,100	$	4,218,700	$	4,217,900
Accounts payable		1,478,700		1,719,400
Accrued liabilities		4,092,500		2,858,200
Deferred revenue		1,662,200		1,666,100
Total current liabilities		11,452,100		10,461,600
Long-term Liabilities:
Line of credit/Term loan		30,000,000		30,000,000
Notes payable, net of unamortized debt issuance costs of $74,300 and $88,700		32,739,000		34,848,800
Deferred revenue		7,874,600		7,657,500
Operating lease liabilities		3,415,300		3,715,800
Other liabilities		1,430,600		1,440,100
Total long-term liabilities		75,459,500		77,662,200
Shareholders’ Equity (Deficit):
Common stock, no par value, 10,000,000 shares authorized, 3,520,327 and 3,496,977 shares issued and outstanding		11,413,500		7,768,800
Retained earnings (accumulated deficit)		(53,638,200)		(66,924,900)
Total shareholders' equity (deficit)		(42,224,700)		(59,156,100)
	$	44,686,900	$	28,967,700

The accompanying notes are an integral part of these financial statements.

Table of Contents

WINMARK CORPORATION AND SUBSIDIARIES

CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS

(Unaudited)


	Three Months Ended				Six Months Ended
	June 29, 2024		July 1, 2023		June 29, 2024		July 1, 2023
Revenue:
Royalties	$	17,774,500	$	17,105,800	$	35,043,200	$	33,853,500
Leasing income		524,400		1,019,800		1,361,200		2,656,800
Merchandise sales		925,500		1,328,100		2,036,000		2,604,100
Franchise fees		366,900		420,700		731,500		798,900
Other		529,200		487,800		1,058,300		972,500
Total revenue		20,120,500		20,362,200		40,230,200		40,885,800
Cost of merchandise sold		861,100		1,247,800		1,900,100		2,435,100
Leasing expense		—		54,300		36,600		370,700
Provision for credit losses		—		(700)		(1,500)		(5,300)
Selling, general and administrative expenses		6,241,800		5,810,000		13,059,200		12,446,100
Income from operations		13,017,600		13,250,800		25,235,800		25,639,200
Interest expense		(721,400)		(779,100)		(1,459,200)		(1,576,700)
Interest and other income		280,800		292,300		468,800		418,000
Income before income taxes		12,577,000		12,764,000		24,245,400		24,480,500
Provision for income taxes		(2,145,600)		(2,395,200)		(4,995,000)		(5,169,000)
Net income	$	10,431,400	$	10,368,800	$	19,250,400	$	19,311,500
Earnings per share - basic	$	2.97	$	2.98	$	5.49	$	5.57
Earnings per share - diluted	$	2.85	$	2.85	$	5.26	$	5.34
Weighted average shares outstanding - basic		3,513,788		3,478,628		3,505,526		3,469,675
Weighted average shares outstanding - diluted		3,657,439		3,634,688		3,659,405		3,614,462

The accompanying notes are an integral part of these financial statements.

Table of Contents

WINMARK CORPORATION AND SUBSIDIARIES

CONSOLIDATED CONDENSED STATEMENTS OF SHAREHOLDERS’ EQUITY (DEFICIT)

(Unaudited)


				Retained
				Earnings
	Common Stock			(Accumulated
	Shares	Amount		Deficit)		Total
BALANCE, December 30, 2023	3,496,977	$	7,768,800	$	(66,924,900)	$	(59,156,100)
Stock options exercised	453		70,000		—		70,000
Compensation expense relating to stock options	—		485,900		—		485,900
Cash dividends ($0.80 per share)	—		—		(2,797,900)		(2,797,900)
Comprehensive income (Net income)	—		—		8,819,000		8,819,000
BALANCE, March 30, 2024	3,497,430		8,324,700		(60,903,800)		(52,579,100)
Stock options exercised	22,897		2,634,200		—		2,634,200
Compensation expense relating to stock options	—		454,600		—		454,600
Cash dividends ($0.90 per share)	—		—		(3,165,800)		(3,165,800)
Comprehensive income (Net income)	—		—		10,431,400		10,431,400
BALANCE, June 29, 2024	3,520,327		11,413,500		(53,638,200)		(42,224,700)


				Retained
				Earnings
	Common Stock			(Accumulated
	Shares	Amount		Deficit)		Total
BALANCE, December 31, 2022	3,459,673	$	1,806,700	$	(63,438,800)	$	(61,632,100)
Stock options exercised	3,518		590,400		—		590,400
Compensation expense relating to stock options	—		475,900		—		475,900
Cash dividends ($0.70 per share)	—		—		(2,421,900)		(2,421,900)
Comprehensive income (Net income)	—

SEC Form 10-Q filed by Winmark Corporation