Company Quick10K Filing
Winmark
Price171.64 EPS8
Shares4 P/E23
MCap706 P/FCF19
Net Debt15 EBIT43
TEV721 TEV/EBIT17
TTM 2019-09-30, in MM, except price, ratios
10-Q 2020-09-26 Filed 2020-10-20
10-Q 2020-06-27 Filed 2020-07-21
10-Q 2020-03-28 Filed 2020-04-22
10-K 2019-12-28 Filed 2020-03-10
10-Q 2019-09-28 Filed 2019-10-22
10-Q 2019-06-29 Filed 2019-07-23
10-Q 2019-03-30 Filed 2019-04-26
10-K 2018-12-29 Filed 2019-03-08
10-Q 2018-09-29 Filed 2018-10-23
10-Q 2018-06-30 Filed 2018-07-24
10-Q 2018-03-31 Filed 2018-05-01
10-K 2017-12-30 Filed 2018-03-09
10-Q 2017-09-30 Filed 2017-10-24
10-Q 2017-07-01 Filed 2017-07-25
10-Q 2017-04-01 Filed 2017-04-25
10-K 2016-12-31 Filed 2017-03-10
10-Q 2016-09-24 Filed 2016-10-18
10-Q 2016-06-25 Filed 2016-07-20
10-Q 2016-03-26 Filed 2016-04-21
10-K 2015-12-26 Filed 2016-03-08
10-Q 2015-09-26 Filed 2015-10-21
10-Q 2015-06-27 Filed 2015-07-23
10-Q 2015-03-28 Filed 2015-04-23
10-K 2014-12-27 Filed 2015-03-11
10-Q 2014-09-27 Filed 2014-10-22
10-Q 2014-06-28 Filed 2014-07-23
10-Q 2014-03-29 Filed 2014-04-23
10-K 2013-12-28 Filed 2014-03-12
10-Q 2013-09-28 Filed 2013-10-23
10-Q 2013-06-29 Filed 2013-07-24
10-Q 2013-03-30 Filed 2013-04-24
10-K 2012-12-29 Filed 2013-03-14
10-Q 2012-09-29 Filed 2012-10-25
10-Q 2012-06-30 Filed 2012-07-27
10-Q 2012-03-31 Filed 2012-04-25
10-K 2011-12-31 Filed 2012-03-15
10-Q 2011-09-24 Filed 2011-10-21
10-Q 2011-06-25 Filed 2011-07-25
10-Q 2011-03-26 Filed 2011-04-20
10-K 2010-12-25 Filed 2011-03-10
10-Q 2010-09-25 Filed 2010-10-21
10-Q 2010-06-26 Filed 2010-07-23
10-Q 2010-03-27 Filed 2010-04-21
10-K 2009-12-26 Filed 2010-03-11
8-K 2020-10-14
8-K 2020-09-02
8-K 2020-08-05
8-K 2020-07-15
8-K 2020-07-15
8-K 2020-04-29
8-K 2020-04-14
8-K 2020-03-26
8-K 2020-02-26
8-K 2020-02-26
8-K 2020-01-29
8-K 2019-12-16
8-K 2019-10-23
8-K 2019-10-16
8-K 2019-07-24
8-K 2019-06-29
8-K 2019-06-26
8-K 2019-04-24
8-K 2019-04-17
8-K 2019-02-28
8-K 2019-01-23
8-K 2018-10-24
8-K 2018-10-17
8-K 2018-07-25
8-K 2018-07-18
8-K 2018-05-17
8-K 2018-04-25
8-K 2018-04-18
8-K 2018-02-26
8-K 2018-01-24

WINA 10Q Quarterly Report

Part I. Financial Information
Item 1: Financial Statements
Item 2: Management's Discussion and Analysis of Financial Condition and Results of Operations
Item 3: Quantitative and Qualitative Disclosures About Market Risk
Item 4: Controls and Procedures
Part II. Other Information
Item 1: Legal Proceedings
Item 1A: Risk Factors
Item 2: Unregistered Sales of Equity Securities and Use of Proceeds
Item 3: Defaults Upon Senior Securities
Item 4: Mine Safety Disclosures
Item 5: Other Information
Item 6: Exhibits
EX-31.1 c315-20200926ex3110ba436.htm
EX-31.2 c315-20200926ex312e75293.htm
EX-32.1 c315-20200926ex3214c4894.htm
EX-32.2 c315-20200926ex322e7c41c.htm

Winmark Earnings 2020-09-26

Balance SheetIncome StatementCash Flow
553515-5-25-452012201420172020
Assets, Equity
25201510502012201420172020
Rev, G Profit, Net Income
1593-3-9-152012201420172020
Ops, Inv, Fin

2017 1st Qtr Form 10-Q (00014803).DOCX
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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 September 26, 2020

or

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, 3,740,296 shares outstanding as of October 16, 2020.

Table of Contents

WINMARK CORPORATION AND SUBSIDIARIES

INDEX

PAGE

PART I.

FINANCIAL INFORMATION

Item 1.

Financial Statements (Unaudited)

CONSOLIDATED CONDENSED BALANCE SHEETS
September 26, 2020 and December 28, 2019

3

CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
Three Months Ended September 26, 2020 and September 28, 2019
Nine Months Ended September 26, 2020 and September 28, 2019

4

CONSOLIDATED CONDENSED STATEMENTS OF SHAREHOLDERS’ EQUITY (DEFICIT):
Three Months Ended September 26, 2020 and September 28, 2019
Nine Months Ended September 26, 2020 and September 28, 2019

5

CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
Nine Months Ended September 26, 2020 and September 28, 2019

6

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

7

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

14

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

23

Item 4.

Controls and Procedures

23

PART II.

OTHER INFORMATION

24

Item 1.

Legal Proceedings

24

Item 1A.

Risk Factors

24

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

25

Item 3.

Defaults Upon Senior Securities

25

Item 4.

Mine Safety Disclosures

25

Item 5.

Other Information

25

Item 6.

Exhibits

26

SIGNATURES

27

2

Table of Contents

PART I.          FINANCIAL INFORMATION

ITEM 1: Financial Statements

WINMARK CORPORATION AND SUBSIDIARIES

CONSOLIDATED CONDENSED BALANCE SHEETS

(Unaudited)

September 26, 2020

December 28, 2019

ASSETS

Current Assets:

Cash and cash equivalents

 

$

8,267,400

 

$

25,130,300

Restricted cash

50,000

50,000

Receivables, less allowance for doubtful accounts of $800 and $1,900

 

1,947,600

 

1,669,500

Net investment in leases - current

 

10,514,200

 

12,800,100

Income tax receivable

 

 

497,900

Inventories

 

85,100

 

86,000

Prepaid expenses

 

1,158,800

 

968,100

Total current assets

 

22,023,100

 

41,201,900

Net investment in leases - long-term

 

5,090,800

 

12,505,500

Property and equipment, net

2,439,100

2,772,600

Operating lease right of use assets

3,301,800

3,595,200

Goodwill

 

607,500

 

607,500

Other assets

458,300

492,500

Deferred income taxes

1,918,000

667,000

 

$

35,838,600

 

$

61,842,200

LIABILITIES AND SHAREHOLDERS’ EQUITY (DEFICIT)

Current Liabilities:

Notes payable, net of unamortized debt issuance costs of $13,900 and $13,900

 

$

4,236,100

 

$

3,736,100

Accounts payable

 

1,272,700

 

1,015,000

Income tax payable

 

472,500

 

Accrued liabilities

 

2,478,000

 

2,783,100

Discounted lease rentals

1,522,500

2,680,700

Deferred revenue

 

1,675,200

 

1,717,000

Total current liabilities

 

11,657,000

 

11,931,900

Long-Term Liabilities:

Notes payable, net of unamortized debt issuance costs of $58,300 and $68,700

 

18,691,700

 

21,868,800

Discounted lease rentals

 

763,000

 

836,900

Deferred revenue

7,270,000

7,858,500

Operating lease liabilities

5,417,500

5,846,100

Other liabilities

 

873,100

 

1,051,700

Total long-term liabilities

 

33,015,300

 

37,462,000

Shareholders’ Equity (Deficit):

Common stock, no par value, 10,000,000 shares authorized, 3,735,437 and 3,947,858 shares issued and outstanding

 

7,717,800

 

11,929,300

Retained earnings (accumulated deficit)

 

(16,551,500)

 

519,000

Total shareholders’ equity (deficit)

 

(8,833,700)

 

12,448,300

 

$

35,838,600

 

$

61,842,200

The accompanying notes are an integral part of these financial statements

3

Table of Contents

WINMARK CORPORATION AND SUBSIDIARIES

CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS

(Unaudited)

Three Months Ended

Nine Months Ended

    

September 26, 2020

    

September 28, 2019

    

September 26, 2020

    

September 28, 2019

    

Revenue:

Royalties

$

14,210,000

$

13,808,800

$

33,188,300

$

38,223,400

Leasing income

 

2,695,800

 

4,375,500

 

12,040,800

 

12,733,800

Merchandise sales

 

631,200

 

704,500

 

1,746,800

 

2,037,300

Franchise fees

 

335,400

 

377,400

 

1,064,900

 

1,183,100

Other

 

404,600

 

414,700

 

1,225,700

 

1,238,700

Total revenue

 

18,277,000

 

19,680,900

 

49,266,500

 

55,416,300

Cost of merchandise sold

 

598,200

 

671,700

 

1,662,000

 

1,924,400

Leasing expense

 

510,900

 

572,400

 

2,443,700

 

1,642,000

Provision for credit losses

 

(339,600)

 

(55,500)

 

164,300

 

23,900

Selling, general and administrative expenses

 

5,009,700

 

6,217,600

 

15,719,100

 

19,637,900

Income from operations

 

12,497,800

 

12,274,700

 

29,277,400

 

32,188,100

Interest expense

 

(345,700)

 

(406,200)

 

(1,409,600)

 

(1,348,700)

Interest and other income (expense)

 

9,200

 

500

 

27,700

 

(5,900)

Income before income taxes

 

12,161,300

 

11,869,000

 

27,895,500

 

30,833,500

Provision for income taxes

 

(2,802,500)

 

(2,755,200)

 

(6,164,500)

 

(7,145,600)

Net income

$

9,358,800

$

9,113,800

$

21,731,000

$

23,687,900

Earnings per share - basic

$

2.51

$

2.39

$

5.86

$

6.19

Earnings per share - diluted

$

2.43

$

2.24

$

5.63

$

5.76

Weighted average shares outstanding - basic

 

3,730,490

 

3,808,863

 

3,710,112

 

3,829,329

Weighted average shares outstanding - diluted

 

3,857,702

 

4,065,301

 

3,857,754

 

4,112,318

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

4

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 28, 2019

3,947,858

11,929,300

$

519,000

$

12,448,300

Repurchase of common stock

 

(300,000)

(12,215,500)

(36,772,000)

(48,987,500)

Stock options exercised

 

2,895

145,900

145,900

Compensation expense relating to stock options

 

140,300

140,300

Cash dividends ($0.25 per share)

 

(912,200)

(912,200)

Comprehensive income (Net income)

 

7,317,000

7,317,000

BALANCE, March 28, 2020

 

3,650,753

(29,848,200)

(29,848,200)

Stock options exercised

 

72,434

6,013,600

6,013,600

Compensation expense relating to stock options

 

397,700

397,700

Cash dividends ($0.05 per share)

 

(184,500)

(184,500)

Comprehensive income (Net income)

 

5,055,200

5,055,200

BALANCE, June 27, 2020

 

3,723,187

6,411,300

(24,977,500)

(18,566,200)

Stock options exercised

 

12,250

914,600

914,600

Compensation expense relating to stock options

 

391,900

391,900

Cash dividends ($0.25 per share)

 

(932,800)

(932,800)

Comprehensive income (Net income)

 

9,358,800

9,358,800

BALANCE, September 26, 2020

 

3,735,437

$

7,717,800

$

(16,551,500)

$

(8,833,700)

Retained

Earnings

Common Stock

(Accumulated

    

Shares

    

Amount

    

Deficit)

    

Total

BALANCE, December 29, 2018

3,907,686

$

4,425,600

$

(9,234,100)

$

(4,808,500)

Repurchase of common stock

 

(150,000)

(5,081,000)

(18,947,100)

(24,028,100)

Stock options exercised

 

1,500

156,600

156,600

Compensation expense relating to stock options

 

498,800

498,800

Cash dividends ($0.15 per share)

 

(586,100)

(586,100)

Comprehensive income (Net income)

 

7,272,200

7,272,200

BALANCE, March 30, 2019

 

3,759,186

(21,495,100)

(21,495,100)

Stock options exercised

 

22,153

788,800

788,800

Compensation expense relating to stock options

 

516,800

516,800

Cash dividends ($0.25 per share)

 

(942,800)

(942,800)

Comprehensive income (Net income)

 

7,301,900

7,301,900

BALANCE, June 29, 2019

 

3,781,339

1,305,600

(15,136,000)

(13,830,400)

Stock options exercised

 

41,639

2,049,600

2,049,600

Compensation expense relating to stock options

 

495,800

495,800

Cash dividends ($0.25 per share)

 

(954,800)

(954,800)

Comprehensive income (Net income)

 

9,113,800

9,113,800

BALANCE, September 28, 2019

 

3,822,978

$

3,851,000

$

(6,977,000)

$

(3,126,000)

The accompanying notes are an integral part of these financial statements

5

Table of Contents

WINMARK CORPORATION AND SUBSIDIARIES

CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS

(Unaudited)

Nine Months Ended

    

September 26, 2020

    

September 28, 2019

    

OPERATING ACTIVITIES:

Net income

$

21,731,000

$

23,687,900

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

Depreciation and amortization

 

366,700

 

276,700

Provision for credit losses

 

164,300

 

23,900

Compensation expense related to stock options

 

929,900

 

1,511,400

Deferred income taxes

 

(1,251,000)

 

(1,320,800)

Loss from disposal of property and equipment

200

Deferred initial direct costs

 

(18,300)

 

(87,400)

Amortization of deferred initial direct costs

 

89,400

 

492,800

Operating lease right of use asset amortization

293,400

285,000

Tax benefits on exercised stock options

 

602,400

 

580,700

Change in operating assets and liabilities:

Receivables

 

(278,100)

 

(41,300)

Principal collections on lease receivables

11,418,500

14,407,300

Income tax receivable/payable

 

368,000

 

(406,900)

Inventories

 

900

 

37,900

Prepaid expenses

 

(190,700)

 

(110,900)

Other assets

34,200

(18,600)

Accounts payable

 

257,700

 

(166,500)

Accrued and other liabilities

 

(864,100)

 

(519,300)

Rents received in advance and security deposits

 

(1,252,000)

 

(149,500)

Deferred revenue

 

(630,300)

 

(414,500)

Net cash provided by operating activities

 

31,772,100

 

38,067,900

INVESTING ACTIVITIES:

Purchase of property and equipment

 

(33,400)

 

(135,200)

Purchase of equipment for lease contracts

 

(3,128,200)

 

(7,936,600)

Net cash used for investing activities

 

(3,161,600)

 

(8,071,800)

FINANCING ACTIVITIES:

Proceeds from borrowings on line of credit

 

46,600,000

 

18,800,000

Payments on line of credit

 

(46,600,000)

 

(18,800,000)

Payments on notes payable

(2,687,500)

(2,437,500)

Repurchases of common stock

 

(48,987,500)

 

(24,028,100)

Proceeds from exercises of stock options

 

7,074,100

 

2,995,000

Dividends paid

 

(2,029,500)

 

(2,483,700)

Proceeds from discounted lease rentals

1,157,000

944,400

Net cash used for financing activities

 

(45,473,400)

 

(25,009,900)

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

 

(16,862,900)

 

4,986,200

Cash, cash equivalents and restricted cash, beginning of period

 

25,180,300

 

2,576,000

Cash, cash equivalents and restricted cash, end of period

$

8,317,400

$

7,562,200

SUPPLEMENTAL DISCLOSURES:

Cash paid for interest

$

1,426,100

$

1,322,800

Cash paid for income taxes

$

6,445,200

$

8,292,700

Non-cash landlord leasehold improvements

$

$

2,139,000

The following table provides a reconciliation of cash, cash equivalents and restricted cash reported within the Consolidated Condensed Balance Sheets to the total of the same amounts shown above:

Nine Months Ended

    

September 26, 2020

    

September 28, 2019

    

Cash and cash equivalents

$

8,267,400

$

7,487,200

Restricted cash

 

50,000

 

75,000

Total cash, cash equivalents and restricted cash

$

8,317,400

$

7,562,200

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

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WINMARK CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

1. Management’s Interim Financial Statement Representation:

The accompanying consolidated condensed financial statements have been prepared by Winmark Corporation and subsidiaries (the Company), without audit, pursuant to the rules and regulations of the Securities and Exchange Commission. The Company has a 52/53 week year which ends on the last Saturday in December. The information in the consolidated condensed financial statements includes normal recurring adjustments and reflects all adjustments which are, in the opinion of management, necessary for a fair presentation of such financial statements. The consolidated condensed financial statements and notes are presented in accordance with accounting principles generally accepted in the United States of America for interim financial information and with the instructions for Form 10-Q, and therefore do not contain certain information included in the Company’s annual consolidated financial statements and notes. This report should be read in conjunction with the audited consolidated financial statements and the notes thereto included in the Company’s latest Annual Report on Form 10-K.

Revenues and operating results for the nine months ended September 26, 2020 are not necessarily indicative of the results to be expected for the full year.

Reclassifications

Certain reclassifications of previously reported amounts have been made to conform to the current year presentation. Such reclassifications did not impact net income or shareholders’ equity (deficit) as previously reported.

2. Organization and Business:

The Company offers licenses to operate franchises using the service marks Plato’s Closet®, Once Upon A Child®, Play It Again Sports®, Style Encore® and Music Go Round®. The Company also operates both middle market and small-ticket equipment leasing businesses under the Winmark Capital® and Wirth Business Credit® marks.

3. Recent Accounting Pronouncements:

Recently Issued Accounting Pronouncements

In June 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses of Financial Instruments, which changes the methodology for measuring credit losses on financial instruments and the timing of when such losses are recorded. This guidance was to be effective for reporting periods beginning after December 15, 2019, with early adoption permitted. In November 2019, the FASB issued ASU 2019-10, Financial Instruments – Credit Losses (Topic 326), Derivatives and Hedging (Topic 815), and Leases (Topic 842) Effective Dates, which deferred the effective dates for the Company, as a smaller reporting company, until fiscal year 2023. The Company currently plans to adopt the guidance at the beginning of fiscal 2023. The Company is continuing to assess the impact of the standard on its consolidated financial statements.

4. Contract Liabilities:

The Company’s contract liabilities for its franchise revenues consist of deferred revenue associated with franchise fees and software license fees. The table below presents the activity of the current and noncurrent deferred franchise revenue during the first nine months of 2020 and 2019, respectively:

    

September 26, 2020

    

September 28, 2019

Balance at beginning of period

$

9,575,500

$

10,177,300

Franchise and software license fees collected from franchisees, excluding amount earned as revenue during the period

 

656,700

 

979,700

Fees earned that were included in the balance at the beginning of the period

 

(1,287,000)

 

(1,394,200)

Balance at end of period

$

8,945,200

$

9,762,800

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The following table illustrates future estimated revenue to be recognized for the remainder of 2020 and full fiscal years thereafter related to performance obligations that are unsatisfied (or partially unsatisfied) as of September 26, 2020.

Contract Liabilities expected to be recognized in

Amount

2020

$

425,500

2021

 

1,642,800

2022

 

1,497,800

2023

 

1,326,600

2024

 

1,128,800

Thereafter

 

2,923,700

$

8,945,200

5. Fair Value Measurements:

The Company defines fair value as the price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date.  The Company uses three levels of inputs to measure fair value:

Level 1 – quoted prices in active markets for identical assets and liabilities.
Level 2 – observable inputs other than quoted prices in active markets for identical assets and liabilities.
Level 3 – unobservable inputs in which there is little or no market data available, which require the reporting entity to develop its own assumptions.

Due to their nature, the carrying value of cash equivalents, receivables, payables and debt obligations approximates fair value.

6. Investment in Leasing Operations:

Investment in leasing operations consists of the following:

    

September 26, 2020

    

December 28, 2019

Direct financing and sales-type leases:

Minimum lease payments receivable

$

16,854,200

$

26,001,200

Estimated unguaranteed residual value of equipment

 

2,992,600

 

4,109,800

Unearned lease income, net of initial direct costs deferred

 

(1,823,600)

 

(4,039,400)

Security deposits

 

(2,637,800)

 

(3,852,000)

Equipment installed on leases not yet commenced

 

660,300

 

3,437,800

Total investment in direct financing and sales-type leases

 

16,045,700

 

25,657,400

Allowance for credit losses

 

(583,600)

 

(580,600)

Net investment in direct financing and sales-type leases

 

15,462,100

 

25,076,800

Operating leases:

Operating lease assets

 

707,100

 

820,700

Less accumulated depreciation and amortization

 

(564,200)

 

(591,900)

Net investment in operating leases

 

142,900

 

228,800

Total net investment in leasing operations

$

15,605,000

$

25,305,600

As of September 26, 2020, the $15.6 million total net investment in leases consists of $10.5 million classified as current and $5.1 million classified as long-term. As of December 28, 2019, the $25.3 million total net investment in leases consists of $12.8 million classified as current and $12.5 million classified as long-term.

As of September 26, 2020, there were no customers with leased assets greater than 10% of the Company’s total assets.

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Future minimum lease payments receivable under lease contracts and the amortization of unearned lease income, net of initial direct costs deferred, is as follows for the remainder of fiscal 2020 and the full fiscal years thereafter as of September 26, 2020:

Direct Financing and Sales-Type Leases

 

    

Minimum Lease

    

Income

 

Fiscal Year

Payments Receivable

 Amortization

 

2020

$

3,382,200

$

564,900

2021

 

10,571,100

 

1,099,900

2022

 

2,726,500

 

150,200

2023

 

145,700

 

6,200

2024

 

15,200

 

1,700

Thereafter

 

13,500

 

700

$

16,854,200

$

1,823,600

The activity in the allowance for credit losses for leasing operations during the first nine months of 2020 and 2019, respectively, is as follows:

    

September 26, 2020

    

September 28, 2019

    

Balance at beginning of period

$

580,600

$

861,200

Provisions charged to expense

 

164,300

 

23,900

Recoveries

 

(12,400)

 

15,700

Deductions for amounts written-off

 

(148,900)

 

(224,000)

Balance at end of period

$

583,600

$

676,800

The Company’s investment in direct financing and sales-type leases (“Investment In Leases”) and allowance for credit losses by loss evaluation methodology are as follows:

September 26, 2020

December 28, 2019

    

Investment

    

Allowance for

    

Investment

    

Allowance for

In Leases

Credit Losses

In Leases

Credit Losses

Collectively evaluated for loss potential

$

16,045,700

583,600

$

25,657,400

$

580,600

Individually evaluated for loss potential

 

 

 

 

Total

$

16,045,700

$

583,600

$

25,657,400

$

580,600

The Company’s key credit quality indicator for its investment in direct financing and sales-type leases is the status of the lease, defined as accruing or non-accrual. Leases that are accruing income are considered to have a lower risk of loss. Non-accrual leases are those that the Company believes have a higher risk of loss. The following table sets forth information regarding the Company’s accruing and non-accrual leases. Delinquent balances are determined based on the contractual terms of the lease.

September 26, 2020

    

0-60 Days

    

61-90 Days

    

Over 90 Days

    

    

Delinquent

Delinquent

Delinquent and

and Accruing

and Accruing

Accruing

Non-Accrual

Total

Middle-Market

$

15,051,900

$

$

$

$

15,051,900

Small-Ticket

 

993,800

 

 

 

 

993,800

Total Investment in Leases

$

16,045,700

$

$

$

$

16,045,700

December 28, 2019

    

0-60 Days

    

61-90 Days

    

Over 90 Days

    

    

Delinquent

Delinquent

Delinquent and

and Accruing

and Accruing

Accruing

Non-Accrual

Total

Middle-Market

$

24,546,300

$

$

$

$

24,546,300

Small-Ticket

 

1,111,100

 

 

 

 

1,111,100

Total Investment in Leases

$

25,657,400

$

$

$

$

25,657,400

The Company leases high-technology and other business-essential equipment to its leasing customers. Upon expiration of the initial term or extended lease term, depending on the structure of the lease, the customer may return the

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equipment, renew the lease for an additional term, or purchase the equipment. Due to the uncertainty of such outcome at the end of the lease term, the lease as recorded at commencement represents only the current terms of the agreement. As a lessor, the Company’s leases do not contain non-lease components. The residual values reflect the estimated amounts to be received at lease termination from sales or other dispositions of leased equipment to unrelated parties. The leased equipment residual values are based on the Company’s best estimate. The Company’s risk management strategy for its residual value includes the contractual obligations of customer to maintain, service, and insure the leased equipment, the use of third party remarketers as well as the analytical review of historical asset dispositions.

Leasing income as presented on the Consolidated Condensed Statements of Operations consists of the following:

Three Months Ended

Three Months Ended

Nine Months Ended

Nine Months Ended

    

September 26, 2020

    

September 28, 2019

    

September 26, 2020

    

September 28, 2019

Interest income on direct financing and sales-type leases

$

839,600

$

1,856,000

$

2,947,900

$

6,066,800

Selling profit (loss) at commencement of sales-type leases

 

267,700

 

1,098,100

 

1,453,600

 

1,971,600

Operating lease income

668,600

702,600

1,758,500

1,908,700

Income on sales of equipment under lease

913,400

496,600

5,078,300

2,268,500

Other

6,500

222,200

802,500

518,200

Leasing income

$

2,695,800

$

4,375,500

$

12,040,800

$

12,733,800

7. Earnings Per Share:

The following table sets forth the presentation of shares outstanding used in the calculation of basic and diluted earnings per share (“EPS”):

Three Months Ended

Nine Months Ended

    

September 26, 2020

    

September 28, 2019

    

September 26, 2020

    

September 28, 2019

    

Denominator for basic EPS — weighted average common shares

 

3,730,490

 

3,808,863

 

3,710,112

 

3,829,329

 

Dilutive shares associated with option plans

 

127,212

 

256,438

 

147,642

 

282,989

 

Denominator for diluted EPS — weighted average common shares and dilutive potential common shares

 

3,857,702

 

4,065,301

 

3,857,754

 

4,112,318

 

Options excluded from EPS calculation — anti-dilutive

 

11,979

 

7,146

 

11,057

 

6,782

 

8. Shareholders’ Equity (Deficit):

Dividends

On January 29, 2020, the Company’s Board of Directors approved the payment of a $0.25 per share quarterly cash dividend to shareholders of record at the close of business on February 12, 2020, which was paid on March 2, 2020.

On April 29, 2020, the Company’s Board of Directors approved the payment of a $0.05 per share quarterly cash dividend to shareholders of record at the close of business on May 13, 2020, which was paid on June 1, 2020.

On July 15, 2020, the Company’s Board of Directors approved the payment of a $0.25 per share quarterly cash dividend to shareholders of record at the close of business on August 12, 2020, which was paid on September 1, 2020.

Repurchase of Common Stock

In December 2019, the Company’s Board of Directors authorized the repurchase of up to 300,000 shares of our common stock for a price of $163.00 per share through a tender offer (the “2020 Tender Offer”). The 2020 Tender Offer began on the date of the announcement, December 17, 2019 and expired on January 16, 2020. Upon expiration, the Company purchased 300,000 shares for a total purchase price of approximately $49.0 million, including fees and expenses related

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to the Tender Offer. The 2020 Tender Offer was financed in part by net borrowings of $19.2 million under the Line of Credit. (See Note 9 – “Debt”).

Under a previous Board of Directors’ authorization, as of September 26, 2020, the Company has the ability to repurchase an additional 130,604 shares of its common stock. Repurchases