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 September 28, 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, 3,520,402 shares outstanding as of October 14, 2024.

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WINMARK CORPORATION AND SUBSIDIARIES

INDEX


		PAGE

PART I.	FINANCIAL INFORMATION

Item 1.	Financial Statements (Unaudited)

	CONSOLIDATED CONDENSED BALANCE SHEETS September 28, 2024 and December 30, 2023	3

	CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS Three Months Ended September 28, 2024 and September 30, 2023 Nine Months Ended September 28, 2024 and September 30, 2023	4

	CONSOLIDATED CONDENSED STATEMENTS OF SHAREHOLDERS’ EQUITY (DEFICIT) Three Months Ended September 28, 2024 and September 30, 2023 Nine Months Ended September 28, 2024 and September 30, 2023	5

	CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS Nine Months Ended September 28, 2024 and September 30, 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	18

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)


	September 28, 2024		December 30, 2023
ASSETS
Current Assets:
Cash and cash equivalents	$	37,197,000	$	13,361,500
Restricted cash		90,000		25,000
Receivables, less allowance for credit losses of $500 and $600		1,602,200		1,475,300
Net investment in leases - current		—		75,100
Income tax receivable		—		31,400
Inventories		441,800		386,100
Prepaid expenses		1,171,600		1,392,100
Total current assets		40,502,600		16,746,500
Property and equipment, net		1,519,000		1,669,800
Operating lease right of use asset		2,197,600		2,425,900
Intangible assets, net		2,728,800		2,994,300
Goodwill		607,500		607,500
Other assets		478,400		471,300
Deferred income taxes		3,917,300		4,052,400
	$	51,951,200	$	28,967,700

LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)
Current Liabilities:
Notes payable, net of unamortized debt issuance costs of $27,900 and $32,100	$	3,472,100	$	4,217,900
Accounts payable		1,600,700		1,719,400
Income tax payable		30,400		—
Accrued liabilities		3,776,100		2,858,200
Deferred revenue		1,670,100		1,666,100
Total current liabilities		10,549,400		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 $68,800 and $88,700		32,431,200		34,848,800
Deferred revenue		8,028,600		7,657,500
Operating lease liabilities		3,260,100		3,715,800
Other liabilities		1,425,800		1,440,100
Total long-term liabilities		75,145,700		77,662,200
Shareholders’ Equity (Deficit):
Common stock, no par value, 10,000,000 shares authorized, 3,520,402 and 3,496,977 shares issued and outstanding		11,941,900		7,768,800
Retained earnings (accumulated deficit)		(45,685,800)		(66,924,900)
Total shareholders' equity (deficit)		(33,743,900)		(59,156,100)
	$	51,951,200	$	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				Nine Months Ended
	September 28, 2024		September 30, 2023		September 28, 2024		September 30, 2023
Revenue:
Royalties	$	19,512,500	$	19,210,000	$	54,555,700	$	53,063,400
Leasing income		316,200		1,291,900		1,677,400		3,948,700
Merchandise sales		702,500		997,800		2,738,500		3,601,900
Franchise fees		451,200		334,400		1,182,700		1,133,400
Other		528,500		483,700		1,586,800		1,456,200
Total revenue		21,510,900		22,317,800		61,741,100		63,203,600
Cost of merchandise sold		662,500		935,400		2,562,600		3,370,500
Leasing expense		—		11,000		36,600		381,700
Provision for credit losses		—		700		(1,500)		(4,600)
Selling, general and administrative expenses		5,919,800		6,248,200		18,979,000		18,694,300
Income from operations		14,928,600		15,122,500		40,164,400		40,761,700
Interest expense		(704,100)		(763,100)		(2,163,300)		(2,339,800)
Interest and other income		386,400		385,400		855,200		803,400
Income before income taxes		14,610,900		14,744,800		38,856,300		39,225,300
Provision for income taxes		(3,490,200)		(3,595,000)		(8,485,100)		(8,764,000)
Net income	$	11,120,700	$	11,149,800	$	30,371,200	$	30,461,300
Earnings per share - basic	$	3.16	$	3.20	$	8.65	$	8.77
Earnings per share - diluted	$	3.03	$	3.05	$	8.29	$	8.40
Weighted average shares outstanding - basic		3,520,334		3,485,852		3,510,461		3,475,066
Weighted average shares outstanding - diluted		3,671,121		3,653,730		3,663,309		3,627,550

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)

SEC Form 10-Q filed by Winmark Corporation