Winmark Corporation (NASDAQ:WINA) announced today net income for the quarter ended September 24, 2022 of $10,368,600 or $2.93 per share diluted compared to net income of $10,082,500 or $2.67 per share diluted in 2021. For the nine months ended September 24, 2022, net income was $29,248,300 or $8.11 per share diluted compared to net income of $28,330,900 or $7.40 per share diluted for the same period last year.

"Our third quarter results reflect strong performance during the back to school season," 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 September 24, 2022, there were 1,291 franchises in operation and over 2,800 available territories. An additional 54 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 24, 2022			December 25, 2021
ASSETS
Current Assets:
Cash and cash equivalents	$	16,986,000		$	11,407,000
Restricted cash		55,000			30,000
Receivables, net		1,633,600			1,103,400
Net investment in leases - current		839,900			2,890,600
Income tax receivable		43,400			667,500
Inventories		637,900			325,200
Prepaid expenses		1,006,100			1,008,600
Total current assets		21,201,900			17,432,300

Net investment in leases – long-term		63,600			229,300
Property and equipment, net		1,740,700			1,976,900
Operating lease right of use asset		2,796,300			2,982,000
Intangible assets, net		3,436,700			—
Goodwill		607,500			607,500
Other assets		416,300			418,300
Deferred income taxes		3,467,400			3,252,700
	$	33,730,400		$	26,899,000

LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)
Current Liabilities:
Notes payable, net	$	4,217,900		$	4,232,600
Accounts payable		1,909,900			2,099,000
Accrued liabilities		3,870,000			2,001,000
Deferred revenue		1,647,000			1,645,000
Total current liabilities		11,644,800			9,977,600
Long-Term Liabilities:
Line of Credit/Term Loan		30,000,000			—
Notes payable, net		40,121,200			43,376,400
Deferred revenue		7,026,200			6,863,500
Operating lease liabilities		4,432,800			4,810,100
Other liabilities		940,500			954,800
Total long-term liabilities		82,520,700			56,004,800
Shareholders' Equity (Deficit):
Common stock, no par, 10,000,000 shares authorized, 3,439,832 and 3,635,806 shares issued and outstanding		382,100			—
Retained earnings (accumulated deficit)		(60,817,200	)		(39,083,400	)
Total shareholders' equity (deficit)		(60,435,100	)		(39,083,400	)
	$	33,730,400		$	26,899,000

WINMARK CORPORATION CONDENSED STATEMENTS OF OPERATIONS (Unaudited)

	Quarter Ended						Nine Months Ended
	September 24, 2022			September 25, 2021			September 24, 2022			September 25, 2021
Revenue:
Royalties	$	17,859,000		$	16,375,900		$	49,230,400		$	45,141,200
Leasing income		1,762,100			2,266,200			5,845,800			8,351,800
Merchandise sales		746,000			704,800			2,687,500			1,980,300
Franchise fees		348,100			383,400			1,160,200			1,101,300
Other		449,300			423,100			1,361,200			1,267,300
Total revenue		21,164,500			20,153,400			60,285,100			57,841,900
Cost of merchandise sold		717,600			681,100			2,552,300			1,887,700
Leasing expense		376,300			358,900			891,900			1,410,800
Provision for credit losses		(22,000	)		(55,900	)		(46,600	)		(167,300	)
Selling, general and administrative expenses		5,671,500			5,380,100			16,673,100			16,287,600
Income from operations		14,421,100			13,789,200			40,214,400			38,423,100
Interest expense		(820,500	)		(323,200	)		(2,045,600	)		(945,600	)
Interest and other income (expense)		21,700			(18,800	)		7,000			(7,100	)
Income before income taxes		13,622,300			13,447,200			38,175,800			37,470,400
Provision for income taxes		(3,253,700	)		(3,364,700	)		(8,927,500	)		(9,139,500	)
Net income	$	10,368,600		$	10,082,500		$	29,248,300		$	28,330,900
Earnings per share - basic	$	3.01		$	2.77		$	8.36		$	7.68
Earnings per share - diluted	$	2.93		$	2.67		$	8.11		$	7.40
Weighted average shares outstanding - basic		3,439,417			3,635,055			3,500,411			3,688,419
Weighted average shares outstanding - diluted		3,540,779			3,782,873			3,605,445			3,829,322

WINMARK CORPORATION CONDENSED STATEMENTS OF CASH FLOWS (Unaudited)

	Nine Months Ended
	September 24, 2022			September 25, 2021
OPERATING ACTIVITIES:
Net income	$	29,248,300		$	28,330,900
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		409,500			328,800
Provision for credit losses		(46,600	)		(167,300	)
Compensation expense related to stock options		1,203,800			1,074,200
Deferred income taxes		(214,700	)		(1,365,500	)
Deferred initial direct costs		—			(2,100	)
Amortization of deferred initial direct costs		—			18,800
Operating lease right of use asset amortization		185,700			167,000
Tax benefits on exercised stock options		429,500			249,200
Change in operating assets and liabilities:
Receivables		(530,200	)		187,000
Principal collections on lease receivables		2,819,200			7,452,200
Income tax receivable/payable		194,600			(216,200	)
Inventories		(312,700	)		(302,000	)
Prepaid expenses		2,500			36,500
Other assets		2,000			19,000
Accounts payable		(189,100	)		219,000
Accrued and other liabilities		1,395,000			(94,100	)
Rents received in advance and security deposits		(556,200	)		(674,500	)
Deferred revenue		164,700			(214,800	)
Net cash provided by operating activities		34,205,300			35,046,100
INVESTING ACTIVITIES:
Purchase of property and equipment		(70,000	)		(51,800	)
Reacquired franchise rights		(3,540,000	)		—
Purchase of equipment for lease contracts		—			(78,200	)
Net cash used for investing activities		(3,610,000	)		(130,000	)
FINANCING ACTIVITIES:
Proceeds from borrowings on line of credit		33,700,000			—
Payments on line of credit		(3,700,000	)		—
Proceeds from borrowings on notes payable		—			30,000,000
Payments on notes payable		(3,187,500	)		(3,187,500	)
Repurchases of common stock		(48,281,200	)		(27,892,900	)
Proceeds from exercises of stock options		2,937,100			1,299,300
Dividends paid		(6,459,700	)		(4,234,900	)
Net cash used for financing activities		(24,991,300	)		(4,016,000	)
NET INCREASE IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH		5,604,000			30,900,100
Cash, cash equivalents and restricted cash, beginning of period		11,437,000			6,684,000
Cash, cash equivalents and restricted cash, end of period	$	17,041,000		$	37,584,100
SUPPLEMENTAL DISCLOSURES:
Cash paid for interest	$	1,925,400		$	884,100
Cash paid for income taxes	$	8,518,100		$	10,472,000

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 24, 2022			September 25, 2021
Cash and cash equivalents	$	16,986,000		$	37,569,100
Restricted cash		55,000			15,000
Total cash, cash equivalents and restricted cash	$	17,041,000		$	37,584,100

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Winmark Corporation Announces Third Quarter Results