Winmark Corporation (NASDAQ:WINA) announced today net income for the quarter ended September 25, 2021 of $10,082,500 or $2.67 per share diluted compared to net income of $9,358,800 or $2.43 per share diluted in 2020. For the nine months ended September 25, 2021, net income was $28,330,900 or $7.40 per share diluted compared to net income of $21,731,000 or $5.63 per share diluted for the same period last year.

"We are pleased with the continued strength of our business and the performance of our franchisees. Our sustainable business model continues to be well received by consumers in the communities we serve," commented Brett D. Heffes, Chairman and Chief Executive Officer.

Winmark - the Resale Company^TM, 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 September 25, 2021, there were 1,269 franchises in operation and over 2,000 available territories. An additional 39 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)


	September 25, 2021			December 26, 2020
ASSETS
Current Assets:
Cash and cash equivalents	$	37,569,100		$	6,659,000
Restricted cash		15,000			25,000
Receivables, net		1,394,900			1,581,900
Net investment in leases - current		3,884,600			8,687,500
Income tax receivable		188,200			221,200
Inventories		408,600			106,600
Prepaid expenses		958,700			995,200
Total current assets		44,419,100			18,276,400

Net investment in leases – long-term		1,157,000			4,573,600
Property and equipment, net		2,055,800			2,332,800
Operating lease right of use asset		3,059,300			3,226,300
Goodwill		607,500			607,500
Other assets		416,900			435,900
Deferred income taxes		3,256,200			1,890,700
	$	54,971,800		$	31,343,200

LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)
Current Liabilities:
Notes payable, net	$	4,232,600		$	4,236,100
Accounts payable		1,988,600			1,769,600
Accrued liabilities		2,918,800			2,624,000
Discounted lease rentals		—			1,096,600
Deferred revenue		1,643,900			1,657,400
Total current liabilities		10,783,900			11,383,700
Long-Term Liabilities:
Notes payable, net		44,434,500			17,632,700
Discounted lease rentals		—			574,000
Deferred revenue		6,849,600			7,050,900
Operating lease liabilities		4,946,900			5,307,400
Other liabilities		759,000			773,200
Total long-term liabilities		56,990,000			31,338,200
Shareholders' Equity (Deficit):
Common stock, no par, 10,000,000 shares authorized, 3,623,538 and 3,756,028 shares issued and outstanding		—			9,281,800
Retained earnings (accumulated deficit)		(12,802,100	)		(20,660,500	)
Total shareholders' equity (deficit)		(12,802,100	)		(11,378,700	)
	$	54,971,800		$	31,343,200


WINMARK CORPORATION CONDENSED STATEMENTS OF OPERATIONS (Unaudited)


	Quarter Ended						Nine Months Ended
	September 25, 2021			September 26, 2020			September 25, 2021			September 26, 2020
Revenue:
Royalties	$	16,375,900		$	14,210,000		$	45,141,200		$	33,188,300
Leasing income		2,266,200			2,695,800			8,351,800			12,040,800
Merchandise sales		704,800			631,200			1,980,300			1,746,800
Franchise fees		383,400			335,400			1,101,300			1,064,900
Other		423,100			404,600			1,267,300			1,225,700
Total revenue		20,153,400			18,277,000			57,841,900			49,266,500
Cost of merchandise sold		681,100			598,200			1,887,700			1,662,000
Leasing expense		358,900			510,900			1,410,800			2,443,700
Provision for credit losses		(55,900	)		(339,600	)		(167,300	)		164,300
Selling, general and administrative expenses		5,380,100			5,009,700			16,287,600			15,719,100
Income from operations		13,789,200			12,497,800			38,423,100			29,277,400
Interest expense		(323,200	)		(345,700	)		(945,600	)		(1,409,600	)
Interest and other income (expense)		(18,800	)		9,200			(7,100	)		27,700
Income before income taxes		13,447,200			12,161,300			37,470,400			27,895,500
Provision for income taxes		(3,364,700	)		(2,802,500	)		(9,139,500	)		(6,164,500	)
Net income	$	10,082,500		$	9,358,800		$	28,330,900		$	21,731,000
Earnings per share - basic	$	2.77		$	2.51		$	7.68		$	5.86
Earnings per share - diluted	$	2.67		$	2.43		$	7.40		$	5.63
Weighted average shares outstanding - basic		3,635,055			3,730,490			3,688,419			3,710,112
Weighted average shares outstanding - diluted		3,782,873			3,857,702			3,829,322			3,857,754


WINMARK CORPORATION CONDENSED STATEMENTS OF CASH FLOWS (Unaudited)

	Nine Months Ended
	September 25, 2021			September 26, 2020
OPERATING ACTIVITIES:
Net income	$	28,330,900		$	21,731,000
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		328,800			366,700
Provision for credit losses		(167,300	)		164,300
Compensation expense related to stock options		1,074,200			929,900
Deferred income taxes		(1,365,500	)		(1,251,000	)
Loss from disposal of property and equipment		—			200
Deferred initial direct costs		(2,100	)		(18,300	)
Amortization of deferred initial direct costs		18,800			89,400
Operating lease right of use asset amortization		167,000			293,400
Tax benefits on exercised stock options		249,200			602,400
Change in operating assets and liabilities:
Receivables		187,000			(278,100	)
Principal collections on lease receivables		7,452,200			11,418,500
Income tax receivable/payable		(216,200	)		368,000
Inventories		(302,000	)		900
Prepaid expenses		36,500			(190,700	)
Other assets		19,000			34,200
Accounts payable		219,000			257,700
Accrued and other liabilities		(94,100	)		(864,100	)
Rents received in advance and security deposits		(674,500	)		(1,252,000	)
Deferred revenue		(214,800	)		(630,300	)
Net cash provided by operating activities		35,046,100			31,772,100
INVESTING ACTIVITIES:
Purchase of property and equipment		(51,800	)		(33,400	)
Purchase of equipment for lease contracts		(78,200	)		(3,128,200	)
Net cash used for investing activities		(130,000	)		(3,161,600	)
FINANCING ACTIVITIES:
Proceeds from borrowings on line of credit		—			46,600,000
Payments on line of credit		—			(46,600,000	)
Proceeds from borrowings on notes payable		30,000,000			—
Payments on notes payable		(3,187,500	)		(2,687,500	)
Repurchases of common stock		(27,892,900	)		(48,987,500	)
Proceeds from exercises of stock options		1,299,300			7,074,100
Dividends paid		(4,234,900	)		(2,029,500	)
Proceeds from discounted lease rentals		—			1,157,000
Net cash used for financing activities		(4,016,000	)		(45,473,400	)
NET INCREASE (DECREASE) IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH		30,900,100			(16,862,900	)
Cash, cash equivalents and restricted cash, beginning of period		6,684,000			25,180,300
Cash, cash equivalents and restricted cash, end of period	$	37,584,100		$	8,317,400
SUPPLEMENTAL DISCLOSURES:
Cash paid for interest	$	884,100		$	1,426,100
Cash paid for income taxes	$	10,472,000		$	6,445,200

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:
	Nine Months Ended
	September 25, 2021			September 26, 2020
Cash and cash equivalents	$	37,569,100		$	8,267,400
Restricted cash		15,000			50,000
Total cash, cash equivalents and restricted cash	$	37,584,100		$	8,317,400

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