8-K - WINA - Equibles

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d)

of the Securities Exchange Act of 1934

Date of report (Date of earliest event reported): October 13, 2021

Winmark Corporation

(Exact Name of Registrant as Specified in Its Charter)

Minnesota

(State or Other Jurisdiction of Incorporation)


000-22012	41-1622691
(Commission File Number)	(I.R.S. Employer Identification Number)

605 Highway 169 North , Suite 400 , Minneapolis , Minnesota **** 55441

(Address of Principal Executive Offices) (Zip Code)

( 763 ) 520-8500

(Registrant’s Telephone Number, Including Area Code)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

☐Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

☐Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

☐	Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

☐	Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

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 is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

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. ☐

Item 2.02Results of Operations and Financial Condition

On October 13, 2021, Winmark Corporation (the “Company”) announced in a press release its results of operations and financial condition for the third quarter ended September 25, 2021. A copy of the press release is attached as Exhibit 99.1 of this Current Report on Form 8-K.

Item 7.01Regulation FD Disclosure

On October 13, 2021, the Company announced in a press release its results of operations and financial condition for the third quarter ended September 25, 2021. A copy of the press release is attached as Exhibit 99.1 of this Current Report on Form 8-K.

On October 13, 2021, the Company announced in a press release that its Board of Directors has approved the payment of a quarterly cash dividend to its shareholders. The quarterly dividend of $0.45 per share will be paid on December 1, 2021 to shareholders of record on the close of business on November 10, 2021. Additionally, the Board of Directors has approved the payment of a special dividend to shareholders. The special dividend of $7.50 per share will be paid on December 1, 2021 to shareholders of record on the close of business on November 10, 2021. The total amount of the special dividend payment will be approximately $27.2 million based on the current number of shares outstanding. Future regular or special dividends will be subject to Board approval. A copy of the press release is attached as Exhibit 99.2 of this Current Report on Form 8-K.

On October 14, 2021, the Company repurchased 74,900 shares of its common stock in a block trade from an institutional shareholder at $208.00 per share under its existing share repurchase authorization. The aggregate purchase price of approximately $15.6 million will be paid with cash on hand.

Item 8.01Other Events

On October 13, 2021, the Company announced in a press release that its Board of Directors has approved the payment of a quarterly cash dividend to its shareholders. The quarterly dividend of $0.45 per share will be paid on December 1, 2021 to shareholders of record on the close of business on November 10, 2021. Additionally, the Board of Directors has approved the payment of a special dividend to shareholders. The special dividend of $7.50 per share will be paid on December 1, 2021 to shareholders of record on the close of business on November 10, 2021. The total amount of the special dividend payment will be approximately $27.2 million based on the current number of shares outstanding. Future special or regular dividends will be subject to Board approval. A copy of the press release is attached as Exhibit 99.2 of this Current Report on Form 8-K.

Forward Looking Statements

Certain statements in this Current Report on Form 8-K are forward looking statements made under the safe harbor provision of the Private Securities Litigation Reform Act. Such statements are based on management’s current expectations as of the date of this Report, but involve risks, uncertainties and other factors that may cause actual results to differ materially from those contemplated by such forward looking statements. Investors are cautioned to consider these forward looking statements in light of important factors which may result in material variations

between results contemplated by such forward looking statements and actual results and conditions. More detailed information about these factors is contained under the headings “Forward Looking Statements” and “Risk Factors” in the Company’s periodic reports filed with the SEC, including the Company’s most recent Annual Report on Form 10-K for the fiscal year ended December 26, 2020 and Quarterly Report on Form 10-Q for the second quarter ended June 26, 2021. We caution investors to not place undue reliance on these forward-looking statements, which speak only as of the date they were made. The Company undertakes no obligation to revise or update publicly any forward-looking statements for any reason.

Item 9.01Financial Statements and Exhibits

(d)Exhibits

c
99.1		Third Quarter Results Press Release dated October 13, 2021
99.2		Quarterly Cash Dividend and Special Dividend Press Release dated October 13, 2021
104		Cover Page Interactive Data File (embedded within the Inline XBRL Document and incorporated as Exhibit 101)

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

co
	WINMARK CORPORATION

Date: October 14, 2021	By:	/s/ Anthony D. Ishaug
	Anthony D. Ishaug
	Chief Financial Officer and Treasurer

2020 2nd Qtr Results (00022559).DOCX

Exhibit 99.1

Contact:Brett D. Heffes

763/520-8500

FOR IMMEDIATE RELEASE

WINMARK CORPORATION ANNOUNCES

THIRD QUARTER RESULTS

Minneapolis, MN (October 13, 2021) - 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,<br>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

Ex_99.1_2017_2nd_Qtr_Dividend.DOCX

Exhibit 99.2

Contact:Brett D. Heffes

763/520-8500

FOR IMMEDIATE RELEASE

WINMARK CORPORATION ANNOUNCES

QUARTERLY CASH DIVIDEND AND SPECIAL DIVIDEND

Minneapolis, MN (October 13, 2021) - Winmark Corporation (Nasdaq: WINA) announced today that its Board of Directors has approved the payment of a quarterly cash dividend to shareholders. The quarterly dividend of $0.45 per share will be paid December 1, 2021 to shareholders of record on the close of business on November 10, 2021. Additionally, the Board of Directors has approved the payment of a special dividend to shareholders. The special dividend of $7.50 per share will be paid on December 1, 2021 to shareholders of record on the close of business on November 10, 2021. The total amount of the special dividend payment will be approximately $27.2 million based on the current number of shares outstanding. It is anticipated that Winmark will use cash on hand to finance the special dividend. Future dividends will be subject to Board approval.

Brett D. Heffes, Chairman and Chief Executive Officer, stated, “Today’s announcement of a $7.50 per share special dividend reflects the strength and resiliency of our operating model. During the past ten years, we have completed approximately $250 million of share repurchases and declared $110 million of dividends resulting in a total return of capital to shareholders of $360 million. We intend to continue to execute a balanced capital allocation strategy for the benefit of all Winmark shareholders.”

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.