8-K

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): February 23, 2022

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 February 23, 2022, Winmark Corporation (the “Company”) announced in a press release its results of operations and financial condition for the year ended December 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 February 23, 2022, the Company announced in a press release its results of operations and financial condition for the year ended December 25, 2021. A copy of the press release is attached as Exhibit 99.1 of this Current Report on Form 8-K

Item 9.01Financial Statements and Exhibits

(d)Exhibits

c
99.1	Press Release dated February 23, 2022
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: February 23, 2022	By:	/s/ Anthony D. Ishaug
	Anthony D. Ishaug
	Chief Financial Officer and Treasurer

EX-99.1

Exhibit 99.1

Contact:Brett D. Heffes

763/520-8500

FOR IMMEDIATE RELEASE

WINMARK CORPORATION ANNOUNCES YEAR END RESULTS

Minneapolis, MN (February 23, 2022)  -  Winmark Corporation (Nasdaq: WINA) announced today net income for the year ended December 25, 2021 of $39,919,900 or $10.48 per share diluted compared to net income of $29,823,300 or $7.72 per share diluted in 2020.  The fourth quarter 2021 net income was $11,589,000 or $3.09 per share diluted, compared to net income of $8,092,300 or $2.09 per share diluted, for the same period last year.  Revenues for the year ended December 25, 2021 were $78,216,200 up from $66,061,800 in 2020.

“Our 2021 financial results were exceptional.  This is a testament to the hard work of our franchise partners, the strength of our sustainable business model as well as the incredible efforts of our employees,” stated Brett D. Heffes, Chairman and Chief Executive Officer.  “The strategic decision to finalize plans for shedding all non-core activities was a key moment in our history.  We believe that our focus on the large and growing resale market will benefit all Winmark stakeholders.”

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 December 25, 2021, there were 1,271 franchises in operation and over 2,800 available territories.  An additional 46 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)

	December 25, 2021		December 26, 2020
ASSETS
Current Assets:
Cash and cash equivalents	$	11,407,000	$	6,659,000
Restricted cash		30,000		25,000
Receivables, net		1,103,400		1,581,900
Net investment in leases - current		2,890,600		8,687,500
Income tax receivable		667,500		221,200
Inventories		325,200		106,600
Prepaid expenses		1,008,600		995,200
Total current assets		17,432,300		18,276,400
Net investment in leases – long-term		229,300		4,573,600
Property and equipment, net		1,976,900		2,332,800
Operating lease right of use asset		2,982,000		3,226,300
Goodwill		607,500		607,500
Other assets		418,300		435,900
Deferred income taxes		3,252,700		1,890,700
	$	26,899,000	$	31,343,200
LIABILITIES AND SHAREHOLDERS’ EQUITY (DEFICIT)
Current Liabilities:
Notes payable, net	$	4,232,600	$	4,236,100
Accounts payable		2,099,000		1,769,600
Accrued liabilities		2,001,000		2,624,000
Discounted lease rentals		—		1,096,600
Deferred revenue		1,645,000		1,657,400
Total current liabilities		9,977,600		11,383,700
Long-Term Liabilities:
Notes payable, net		43,376,400		17,632,700
Discounted lease rentals		—		574,000
Deferred revenue		6,863,500		7,050,900
Operating lease liabilities		4,810,100		5,307,400
Other liabilities		954,800		773,200
Total long-term liabilities		56,004,800		31,338,200
Shareholders’ Equity (Deficit):
Common stock, no par, 10,000,000 shares authorized, 3,635,806 and 3,756,028 shares issued and outstanding		—		9,281,800
Retained earnings (accumulated deficit)		(39,083,400)		(20,660,500)
Total shareholders’ equity (deficit)		(39,083,400)		(11,378,700)
	$	26,899,000	$	31,343,200

2

Winmark Corporation

CONDENSED STATEMENTS OF OPERATIONS

(Unaudited)

	Quarter Ended				Fiscal Year Ended
	December 25, 2021		December 26, 2020		December 25, 2021		December 26, 2020
Revenue:
Royalties	$	15,638,100	$	13,097,900	$	60,779,300	$	46,286,200
Leasing income		2,796,500		2,443,200		11,148,300		14,484,000
Merchandise sales		1,119,800		468,600		3,100,100		2,215,400
Franchise fees		395,600		379,600		1,496,900		1,444,500
Other		424,300		406,000		1,691,600		1,631,700
Total revenue		20,374,300		16,795,300		78,216,200		66,061,800
Cost of merchandise sold		1,052,800		441,900		2,940,500		2,103,900
Leasing expense		439,500		178,900		1,850,300		2,622,600
Provision for credit losses		(39,300)		(243,600)		(206,600)		(79,300)
Selling, general and administrative expenses		6,008,200		5,484,000		22,295,800		21,203,100
Income from operations		12,913,100		10,934,100		51,336,200		40,211,500
Interest expense		(508,300)		(327,900)		(1,453,900)		(1,737,500)
Interest and other income (expense)		(7,900)		15,700		(15,000)		43,400
Income before income taxes		12,396,900		10,621,900		49,867,300		38,517,400
Provision for income taxes		(807,900)		(2,529,600)		(9,947,400)		(8,694,100)
Net income	$	11,589,000	$	8,092,300	$	39,919,900	$	29,823,300
Earnings per share - basic	$	3.20	$	2.16	$	10.87	$	8.02
Earnings per share - diluted	$	3.09	$	2.09	$	10.48	$	7.72
Weighted average shares outstanding - basic		3,622,690		3,747,604		3,671,980		3,719,485
Weighted average shares outstanding - diluted		3,753,982		3,879,796		3,810,480		3,863,264

3

Winmark Corporation

CONDENSED STATEMENTS OF CASH FLOWS

(Unaudited)

	Fiscal Year Ended
	December 25, 2021		December 26, 2020
OPERATING ACTIVITIES:
Net income	$	39,919,900	$	29,823,300
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		430,600		484,700
Provision for credit losses		(206,600)		(79,300)
Compensation expense related to stock options		1,435,500		1,315,200
Deferred income taxes		(1,362,000)		(1,223,700)
Loss from disposal of property and equipment		—		200
Deferred initial direct costs		(2,100)		(18,300)
Amortization of deferred initial direct costs		18,900		105,900
Operating lease right of use asset amortization		244,300		368,900
Tax benefits on exercised stock options		2,479,600		872,900
Change in operating assets and liabilities:
Receivables		478,500		87,600
Principal collections on lease receivables		9,915,400		14,829,200
Income tax receivable/payable		(2,925,900)		(596,200)
Inventories		(218,600)		(20,600)
Prepaid expenses		(13,400)		(27,100)
Other assets		17,600		56,600
Accounts payable		329,400		754,600
Accrued and other liabilities		(948,500)		(691,400)
Rents received in advance and security deposits		(1,046,600)		(1,954,000)
Deferred revenue		(199,800)		(867,200)
Net cash provided by operating activities		48,346,200		43,221,300
INVESTING ACTIVITIES:
Purchase of property and equipment		(74,700)		(45,100)
Purchase of equipment for lease contracts		(208,400)		(4,114,000)
Net cash used for investing activities		(283,100)		(4,159,100)
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		(4,250,000)		(3,750,000)
Repurchases of common stock		(44,217,500)		(48,987,500)
Proceeds from exercises of stock options		8,320,000		8,252,800
Dividends paid		(33,162,600)		(14,230,800)
Proceeds from discounted lease rentals		—		1,157,000
Net cash used for financing activities		(43,310,100)		(57,558,500)
NET INCREASE (DECREASE) IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH		4,753,000		(18,496,300)
Cash, cash equivalents and restricted cash, beginning of period		6,684,000		25,180,300
Cash, cash equivalents and restricted cash, end of period	$	11,437,000	$	6,684,000
SUPPLEMENTAL DISCLOSURES:
Cash paid for interest	$	1,388,900	$	1,738,400
Cash paid for income taxes	$	11,555,100	$	9,552,500
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:
	Fiscal Year Ended
	December 25, 2021		December 26, 2020
Cash and cash equivalents	$	11,407,000	$	6,659,000
Restricted cash		30,000		25,000
Total cash, cash equivalents and restricted cash	$	11,437,000	$	6,684,000

4

XML

Document and Entity Information	Apr. 14, 2021
Document and Entity Information [Abstract]
Document Type	8-K
Document Period End Date	Feb. 23, 2022
Entity File Number	000-22012
Entity Registrant Name	Winmark Corporation
Entity Incorporation, State or Country Code	MN
Entity Tax Identification Number	41-1622691
Entity Address, Address Line One	605 Highway 169 North
Entity Address, Adress Line Two	Suite 400
Entity Address, City or Town	Minneapolis
Entity Address, State or Province	MN
Entity Address, Postal Zip Code	55441
City Area Code	763
Local Phone Number	520-8500
Written Communications	false
Soliciting Material	false
Pre-commencement Tender Offer	false
Pre-commencement Issuer Tender Offer	false
Title of 12(b) Security	Common Stock, no par value per share
Trading Symbol	WINA
Security Exchange Name	NASDAQ
Entity Emerging Growth Company	false
Entity Central Index Key	0000908315
Amendment Flag	false