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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 or 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended June 29, 2003 Commission file Number 1-7829
BOWL AMERICA INCORPORATED
(Exact name of registrant as specified in its charter.)
MARYLAND 54-0646173
(State of Incorporation) (I.R.S. Employer Identification No.)
6446 Edsall Road, Alexandria, Virginia 22312
(Address of principal executive offices) (Zip Code)
(703)941-6300
Registrant's telephone number, including area code
Securities Registered Pursuant to Section 12(b) of the Act:
Title of Class Name of Exchange on
which registered
Common stock (par value $.10) American Stock Exchange
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 [X] NO [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K, Section 229.405 of this Chapter, is not contained
herein, and will not be contained to the best of registrant's knowledge, in
definitive Proxy or information statements incorporated by reference in Part
III of this Form 10-K or any amendments to this Form 10-K. YES [X] NO [ ]
Indicate by check mark whether the registrant is an accelerated filer (as
Defined in Exchange Act Rule 12 b-2). YES [ ] NO [X]
As of August 18, 2003, 3,670,112 Class A common shares were outstanding,
and the aggregate market value of the common shares (based upon the closing
price of these shares on the American Stock Exchange) of Bowl America
Incorporated held by nonaffiliates was approximately $47 million; 1,468,462
Class B common shares were outstanding. Class B common shareholders have the
right to convert their Class B common to Class A common stock on a share for
share basis. If the Class B shares were converted to Class A shares as of
August 18, 2003, the total aggregate market value for both classes of common
stock would be approximately $66 million. (This includes the amount of
shares held by all officers and directors as a group and by anyone known to
own more than 5% of the stock.)
DOCUMENTS INCORPORATED BY REFERENCE
Portions of registrant's definitive proxy statements, which will be filed
with the Commission not later than 120 days after June 29, 2003 are
incorporated into Part III of this Form 10-K. Portions of Bowl America's 2003
Annual Report to shareholders are incorporated by reference in Part II,
Items 5,6,7 and 8.
BOWL AMERICA INCORPORATED
INDEX TO FISCAL 2003 10-K FILING
PART I
Page
Cover Page
Documents Incorporated by Reference
Index
ITEM 1. Business
(a) General Development of Business 1
(b) Financial Information about Industry Segments 1
(c) Narrative Description of Business 1
(d) Foreign Operations 1
ITEM 2. Properties 2
ITEM 3. Legal Proceedings 2
ITEM 4. Submission of Matters to a Vote of Security Holders 2
PART II
ITEM 5. Market for Registrant's Common Equity and Related
Stockholder Matters 2
ITEM 6. Selected Financial Data 2
ITEM 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations 2
ITEM 7a.Quantitative and Qualitative Disclosure About Market Risk 2
ITEM 8. Financial Statements and Supplementary Data 3
ITEM 9. Changes in and Disagreements with Accountants and
Financial Disclosure 3
ITEM 9A.Controls and Procedures 3
PART III
ITEM 10.Directors and Executive Officers of the Registrant 3
ITEM 11.Executive Compensation 3
ITEM 12.Security Ownership of Certain Beneficial Owners and Management
and Related Stockholder Matters
(a) Security Ownership of Certain Beneficial Owners 3
(b) Security Ownership of Management 3
(c) Changes in Control 3
(d) Securities Authorized for Issuance Under Equity
Compensation Plans 3
BOWL AMERICA INCORPORATED
INDEX TO FISCAL 2003 10-K FILING
PART III
(Continued)
Page
ITEM 13.Certain Relationships and Related Transactions
(a) Transactions with Management and Others 3
(b) Certain Business Relationships 3
(c) Indebtedness of Management 3
(d) Transactions with Promoters 3
ITEM 14.Principal Accountant Fees and Services 3
PART IV
ITEM 15.Exhibits, Financial Statements and Reports on Form 8-K
(a)1. Financial Statements 4
(a)2. Exhibits 4
(b) Reports on Form 8-K 4
Signatures 5-6
PART I
ITEM 1. BUSINESS
(a) General Development of Business
Bowl America Incorporated (herein referred to as the Company) was
incorporated in 1958. The Company commenced business with one bowling center
in 1958, and at the end of the past fiscal year, the Company and its wholly-
owned subsidiaries operated 18 bowling centers.
In May of fiscal year 2003 the Company closed Bowl America Silver
Spring, operating in a negative cash flow position, after reaching an agreement
For the sale of the building and ground lease. Consummation of the sale of
that center was effected on August 25, 2003, subsequent to the end of the
fiscal year.
(b) Financial Information about Industry Segments
The Company operates in one segment. Its principal source of
revenue consists of fees charged for the use of bowling lanes and other
facilities and from the sale of food and beverages for consumption on the
premises. Merchandise sales, including food and beverages, were approximately
30% of operating revenues. The balance of operating revenues (approximately
70%) represents fees for bowling and related services.
(c) Narrative Description of Business
As of September 1, 2003 the Registrant and its subsidiaries operated
10 bowling centers in the greater metropolitan area of Washington, D.C., one
bowling center in the greater metropolitan area of Baltimore, Maryland, one
bowling center in Orlando, Florida, three bowling centers in the greater
metropolitan area of Jacksonville, Florida, and three bowling centers in the
greater metropolitan area of Richmond, Virginia. These 18 bowling centers
contain a total of 716 lanes.
These establishments are fully air-conditioned with facilities for
service of food and beverages, game rooms, rental lockers, and playroom
facilities. All centers provide shoes for rental, and bowling balls are
provided free. In addition, each center retails bowling accessories. Most
locations are equipped for glow-in-the-dark bowling, popular for parties and
non-league bowling.
The bowling equipment essential for the Company's operation is
readily available. The major source of its equipment is Brunswick Corporation.
The bowling business is a seasonal one, and most of the business takes
place from October through May. It is highly competitive, but the Company has
managed to maintain its position in the field. The principal method of
competition is the quality of service furnished to the Company's customers.
Its primary competitors are two large bowling equipment manufacturers,
Brunswick Corporation and AMF Bowling Worldwide, Inc.
Compliance with federal, state and local environmental protection laws
has not materially affected the Company.
The number of persons employed by the Company and its subsidiaries is
approximately 700.
(d) Foreign Operations
The Company has no foreign operations.
ITEM 2. PROPERTIES
The Company's general offices are located at 6446 Edsall Road,
Alexandria, Virginia 22312. Two of the Company's bowling centers are located
in leased premises, and the remaining seventeen centers are owned by the
Company. The Company's leases expire from 2009 through 2014. The specific
locations of the bowling centers are discussed under Item 1 (c).
ITEM 3. LEGAL PROCEEDINGS
There are no material pending legal proceedings other than ordinary
routine litigation incidental to the business.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders during the
fourth quarter ended June 29, 2003.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED SECURITY HOLDER
MATTERS
The information set forth in the section entitled "Market
Information", "Holders", and "Dividends" on page 3 of the Company's June 29,
2003 Annual Report is incorporated by reference herein.
ITEM 6. SELECTED FINANCIAL DATA
The information set forth in the section entitled "Selected Financial
Data" on page 3 of the Company's June 29, 2003 Annual Report is incorporated by
reference herein. Such information should be read in conjunction with the
audited financial statements.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The information set forth in the section entitled "Management's
Discussion and Analysis of Financial Condition and Results of Operations" on
page 2 of the Company's June 29, 2003 Annual Report is incorporated by
reference herein.
ITEM 7a. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Interest Rate Risk. Our short-term investments and certain cash
equivalents are subject to interest rate risk. We manage this risk by
maintaining an investment portfolio of available-for-sale instruments with high
credit quality and relatively short average maturities. The fair value of
marketable debt securities held was $9,505,768 and $8,183,932 at June 29, 2003
and June 30, 2002, respectively. The fair value of certain fixed rate debt
securities will change depending on movements in interest rates. Declines in
interest rates will affect our interest income. Based on our portfolio of debt
securities at June 29, 2003, a 10% decline in the average yield would not have
a material impact on our interest income.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The Consolidated Financial Statements and related notes thereto, the
Independent Auditors' Report and the Selected Quarterly Financial Data
(unaudited), as contained on pages 4 through 12 of the Company's June 29, 2003
Annual Report, are incorporated by reference herein.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE
None
ITEM 9A. CONTROLS AND PROCEDURES
The Company's Chief Executive Officer and Chief Financial Officer have
concluded that the Company's disclosure controls and procedures are effective
based on their evaluation of such controls and procedures as of the end of the
period covered by this report, based on their evaluation of these controls and
procedures in accordance with Rule 13a-15(b) under the Securities Exchange Act
of 1934. There were no changes in the Company's internal control over financial
reporting identified in connection with the evaluation required by Rule
13a-15(d) under the Securities Exchange Act of 1934 that occurred during the
fourth quarter of the Company's fiscal year ended June 29, 2003 that has
materially affected, or is reasonably likely to materially affect, the Company's
internal control over financial reporting.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Pursuant to General Instruction G(3) of Form 10-K, the information
called for by this item regarding directors is hereby incorporated by reference
from the Company's definitive proxy statement to be filed pursuant to
Regulation 14A not later than 120 days after the end of the fiscal year covered
by this report.
ITEM 11. EXECUTIVE COMPENSATION
Pursuant to General Instruction G(3) of Form 10-K, the information
called for by this item is hereby incorporated by reference from the Company's
definitive proxy statement to be filed pursuant to Regulation 14A not later
than 120 days after the end of the fiscal year covered by this report.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
AND RELATED STOCKHOLDER MATTERS
Pursuant to General Instruction G(3) of Form 10-K, the information
called for by this item is hereby incorporated by reference from the Company's
definitive proxy statement to be filed pursuant to Regulation 14A not later
than 120 days after the end of the fiscal year covered by this report.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Pursuant to General Instruction G(3) of Form 10-K, the information
called for by this item is hereby incorporated by reference from the Company's
definitive proxy statement to be filed pursuant to Regulation 14A not later
than 120 days after the end of the fiscal year covered by this report.
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND EXPENSES
Pursuant to General Instruction G(3) of Form 10-K, the information
called for by this item is hereby incorporated by reference from the Company's
definitive proxy statement to be filed pursuant to Regulation 14A not later
than 120 days after the end of the fiscal year covered by this report.
PART IV
ITEM 15. EXHIBITS, FINANCIAL STATEMENTS AND REPORTS ON FORM 8-K
(a)1. Financial Statements
The following consolidated financial statements of Bowl America
Incorporated and its subsidiaries are incorporated by reference in Part II,
Item 8:
Independent auditors' report
Consolidated balance sheets - June 29, 2003 and June 30, 2002
Consolidated statements of earnings and comprehensive earnings -
years ended June 29, 2003, June 30, 2002, and July 1, 2001
Consolidated statements of stockholders' equity - years ended
June 29, 2003, June 30, 2002, and July 1, 2001
Consolidated statements of cash flows - years ended
June 29, 2003, June 30, 2002, and July 1, 2001
Notes to the consolidated financial statements - years ended
June 29, 2003, June 30, 2002, and July 1, 2001
(a)2. Exhibits:
3(a) Articles of Incorporation of the Registrant and amendments
through December 1988 thereto (Incorporated by reference from
exhibit number 3 to the Annual Report for 1989 on Form 10-K for
fiscal year ended July 2, 1989.)
3(b) Amendment to and restatement of Article FIFTH (b) III 2.2
of the Registrant's Articles of Incorporation (Incorporated by
reference from the Registrant's Form 8-K filed December 9, 1994.)
3(c) By-laws of the Registrant (Incorporated by reference from
exhibit 3 to the Annual Report for 1989 on Form 10-K for fiscal
year ended July 2, 1989.)
21 Subsidiaries of registrant (Incorporated by reference from
exhibit number 1 to the Registrant's Annual Report on Form 10-K
for fiscal year ended June 30, 2002.
31.1 Written statement of Chief Executive Officer (Rule 13a-14a
Certification)
31.2 Written statement of Chief Financial Officer (Rule 13a-14a
Certification)
32 Written statement of Chief Executive and Chief Financial
Officers (Section 1350 Certifications)
(b) Reports on Form 8-K:
None
BOWL AMERICA INCORPORATED
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Company has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
BOWL AMERICA INCORPORATED
Leslie H. Goldberg
President and Principal Executive
& Operating Officer
Date: September 25, 2003
Cheryl A. Dragoo
Chief Financial Officer,
Assistant Treasurer and Controller
Principal Accounting Officer
Date: September 25, 2003
BOWL AMERICA INCORPORATED
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant and in the capacities and the dates indicated.
Name, Title, Capacity
Leslie H. Goldberg
President, Principal Executive
& Operating Officer & Director
Date: September 25, 2003
Ruth Macklin A. Joseph Levy
Senior Vice President-Treasurer Senior Vice President-Secretary
and Director and Director
Date: September 25, 2003 Date: September 25, 2003
Warren T. Braham Stanley H. Katzman
Director Director
Date: September 25, 2003 Date: September 25, 2003
Allan L. Sher Merle Fabian
Director Director
Date: September 25, 2003 Date: September 25, 2003
Irvin Clark
Director
Date: September 25, 2003
BOWL AMERICA INCORPORATED
PRESIDENT'S LETTER
September 22, 2003
Dear Fellow Owners:
I concluded last year's Annual Report with another commercial for our
30-year old dividend policy. Specifically, I said that, "More and more
respected voices are now supporting dividends as a method of rewarding ownership
and promoting corporate honesty. Dividends have the benefit of being paid in
cash, not accounting fantasy. The disadvantage is that they are subject to
double taxation. But tax laws can and should be changed."
Imagine my surprise when the tax treatment of dividends did change. I
hope this is only the first step on the part of public policy makers in
recognizing the advantages of investors profiting from owning businesses rather
than profiting from selling pieces of paper. A dividend allows an owner to
profit without selling his assets. If you have to sell your stake to profit,
you face a problem of buying something to replace it. If you think you will get
a fair shake on that transaction, please count the number of stock exchange
members who make the newspapers for violating your trust.
In the classic "fox guarding the henhouse" approach, it is the stock
exchanges that decide the standards for corporate governance of public
companies. The current panacea is control of companies by "independent"
directors. I favor "dependent" control on boards. This has nothing to do with
honesty. Honesty is not based on the dependence or independence of individual
board members. My preference is, however, related to the fact that the
"dependent" directors will be more likely to share in any loss caused by their
decision making. If a director shares with the other owners the risk of loss
from collapse of the enterprise, he or she is more likely to focus on the
company's survival.
It is, therefore, satisfying that our policy of increasing dividends at a
rate greater than inflation has survived for 31 years and that we have already
started on year thirty-two. Our conservative financial management gives us a
cushion for the future, but we would clearly prefer to find additional bowling
center opportunities for a portion of that cushion.
An emphasis on survival does not mean the avoidance of prudent risk. We
have been aggressively working to improve the profitability of our existing
centers. We are seeing signs of our broadening appeal to age groups we
previously underserved. Our Glow-in-the-Dark bowling continues to be successful
and our "All You Can Bowl Nights" made an important contribution to earnings in
the second half of the year. Furthermore, we have grown more sophisticated in
our promotion of bowling parties. In fact, the web site www.bowlingparty.com
belongs to Bowl America and will be running beginning this holiday season.
As often happens, precipitation has influenced our results. While the
winter storms closed us down in the North, we gained throughout the spring and
the first part of fiscal year 2004 from a record number of rainy days.
Customers substituted bowling for outdoor activities. However Hurricane Isabel
provided more rain than our power companies could handle, causing closings in
our bowling centers and disruption of the water supply that is essential to
selling food.
We will not have the drain caused by the operating losses at the bowling
center in Silver Spring, which we have sold. We considered various proposals
for remodeling the facility but were not convinced that we could operate
profitably even with a major physical upgrade. We look forward to fiscal 2004
as being yet another year during which we can sustain the returns you receive
as an owner of this business.
Regards,
Leslie H. Goldberg, President
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES
Cash flow provided by operating activities in fiscal 2003 was $5,451,000 which
was sufficient to meet day-to-day cash needs. Short-term investments consisting
mainly of U.S. Treasury Notes and Bills, cash and cash equivalents totaled
$11,009,000 at the end of fiscal 2003 compared to $9,818,000 at the end of
fiscal 2002.
During fiscal year 2003, the Company expended approximately $1,525,000 for the
purchase of bowling equipment, primarily plastic lane overlays, and restaurant
equipment to improve its facilities. The Company is actively seeking property
for the development of new bowling centers. Cash and cash flows are sufficient
to finance all contemplated purchases and construction and to meet short-term
purchase commitments and operating lease commitments. The Company's holdings
of marketable equity securities, primarily telecommunication stocks, are an
additional source of expansion capital. These marketable securities are carried
at their fair value on the last day of the year. The value of the securities
on June 29, 2003 was $3.9 million compared to approximately $4 million at
June 30, 2002.
Cash dividends of $.48 per share, totaling $2.5 million were paid to
shareholders during the 2003 fiscal year. This was the thirty-first consecutive
year of increased dividends per share. In June 2003, the Company declared a
$.125 per share dividend, an increase over the previous quarterly dividend, to
be paid in August 2003. While no factors requiring a change in the dividend
rate are yet apparent, the Board of Directors decides the amount and timing of
any dividend at its quarterly meeting based on its appraisal of the state of the
business and estimate of future opportunities.
In March 2003, the Company entered into an agreement to sell the Silver Spring
building and assign the ground lease for $2.3 million subject to certain
conditions precedent to final closing. In May 2003, the Company ceased
operating the facility, and on August 25, 2003, the Company consummated the
final closing of the sale and received the cash proceeds. The Company will
record a gain of approximately $2.1 million in fiscal 2004.
Two leased locations were closed during fiscal 2002. One, operating at break-
even, was closed at the end of the first quarter and the second ceased operation
during the fourth quarter after the Company was unable to negotiate a new lease
for this profitable location.
RESULTS OF OPERATIONS
During the peak bowling season of fiscal 2003 nineteen centers were in
operation. In the comparable fiscal 2002 season, twenty locations were
operating and in fiscal 2001, there were twenty-one centers in operation.
The changes in the number of centers in operation affected all income, expense
and comparisons for the periods presented in this report. Fiscal years 2003,
2002 and 2001 each consisted of 52 weeks.
Operating revenues decreased by $525,000 or 2% in fiscal 2003 as like percentage
decreases occurred in both the bowling and other and the food, beverage and
merchandise sales categories. In the prior fiscal year operating revenue
increased $500,000 or 2%. During fiscal 2003 winter snowstorms caused the
closing of all locations in the Company's northern market. The fourth quarter
benefited not only from league play make-up games, but also from rainy weather
which caused people to seek indoor activities. Linage increased over the prior
year despite the operation of one fewer center. While the average game rate was
down in fiscal 2003, promotional pricing during normally slow times resulted in
increased traffic. Ancillary services revenue increased 3% in the current year
and 2% in the prior year.
Food and beverage sales were flat in the current year period, however,
merchandise sales were lower than in the prior year when we reduced sales prices
on merchandise to eliminate overstock. In the current year cost of food,
beverage and merchandise sales decreased 7% primarily as a result of lower
sales. In the prior year cost of sales increased 12%.
Total operating expense decreased approximately $245,000 or 1% in the current
year and was flat in the prior year. Costs for employee compensation and
benefits were flat in the current year although group health insurance costs
were up 12% over the prior year period.
Maintenance costs increased 7% in fiscal year 2003 following a decrease of 10%
in the prior year. While the Company has changed to plastic lanes from wooden
ones at most locations, several centers required resurfacing this year. Last
year, no lanes were resurfaced. Snow removal costs were another item
responsible for the current year increase.
Supplies expenses were down 1% in the current fiscal year and 5% in the prior
fiscal year. Advertising costs were up 3% and down 4%, respectively. Utility
costs dropped 6% in the current year compared to a 1% decline in the prior year.
Rent expense decreased 19% in the current year and 1% in the prior year
primarily as a result of fewer leased locations in operation. Insurance expense
increased 15% in fiscal 2003 and 32% in fiscal year 2002.
Depreciation expenses decreased by $151,000 and $176,000 or 8% and 9% in fiscal
2003 and 2002, respectively. Large assets reaching full depreciation and fewer
locations in operation were responsible for the decreases in both years.
Interest and dividend income declined from the prior year. Although dividend
income was up 7% in the current fiscal year period, the increase could not
offset the decline in interest primarily due to lower interest rates on
investments.
Effective income tax rates for the Company were 35.9% for fiscal 2003, 36.1% in
2002 and 34.7% in 2001, the difference from statutory rates being primarily for
the partial exclusion of dividends received on investments and the state tax
exemption for interest on U.S. Government obligations.
CRITICAL ACCOUNTING POLICIES
We have identified accounting for marketable investment securities under SFAS
115 "Accounting for Certain Investments in Debt and Equity Securities" as a
critical accounting policy due to the significance of the amounts included in
our balance sheet under the captions of Short-term investments and Marketable
equity securities. The Company exercises judgment in determining the
classification of its investment securities as available-for-sale and in
determining their fair value. The Company records these investments at their
fair value with the unrealized gain or loss recorded in accumulated other
comprehensive income, a component of stockholders' equity, net of deferred
taxes. Additionally, from time to time the Company must assess whether
write-downs are necessary for other than temporary declines in value.
-2-
BOWL AMERICA INCORPORATED AND SUBSIDIARIES
CONSOLIDATED SUMMARY OF OPERATIONS
Selected Financial Data
For the Years Ended
June 29, June 30, July 1, July 2, June 27,
2003 2002 2001 2000 1999
__________________________________________________________
Operating Revenues $29,375,692 $29,809,586 $29,400,903 $28,902,200 $27,547,490
Operating Expenses 24,262,944 24,416,010 24,508,226 23,151,241 22,995,118
Interest and dividend
Income 475,598 598,982 1,035,712 823,470 684,781
__________ __________ __________ __________ __________
Earnings before pro-
vision for income
taxes 5,588,346 5,992,558 5,928,389 6,574,429 5,237,153
Provision for income
taxes 2,005,000 2,174,000 2,060,000 2,361,000 1,902,000
__________ __________ __________ __________ __________
Net Earnings $ 3,583,346 $ 3,818,558 $ 3,868,389 $ 4,213,429 $ 3,335,153
Weighted Average
Shares Outstanding
Basic & Diluted 5,145,934 5,132,083 5,222,876 5,587,892 6,026,032
Earnings Per Share
Basic & Diluted $.70 $.74 $.74 $.75 $.55
Net Cash Provided by
Operating Activities $5,450,867 $5,954,909 $4,795,680 $6,636,768 $5,334,800
Cash Dividends Paid $2,470,081 $2,371,121 $2,256,182 $2,197,659 $2,249,628
Cash Dividends Paid
Per Share-Class A $.48 $.46 $.45 $.43 $.41
-Class B $.48 $.46 $.45 $.43 $.41
Total Assets $37,536,507 $36,562,578 $37,509,243 $40,622,676 $41,659,313
Stockholders' Equity $32,953,150 $32,682,139 $32,614,517 $34,779,772 $35,388,822
Net Book Value Per
Share $6.41 $6.35 $6.64 $7.11 $6.73
Net Earnings as a %
of Beginning Stock-
holders' Equity 11.0% 11.7% 11.1% 11.9% 9.5%
Lanes in Operation 716 746 820 854 854
Centers in Operation 18 19 21 22 22
All share and per share amounts (excluding Net Book Value Per Share) have
been adjusted to reflect both the 5% stock dividend distributed on July 26,
2001 and the 5% stock dividend distributed on July 26, 2000.
Market Information
The principal market on which the Company's Class A Common Stock is traded is
the American Stock Exchange. The Company's Class B Common Stock is not listed
on any exchange and is not traded. This stock can be converted to Class A
Common Stock at any time. The table below presents the price range of the
Company's Class A stock in each quarter of fiscal 2003 and 2002.
2003 1st Qtr 2nd Qtr 3rd Qtr 4th Qtr
_________________________________________________________
High 12.00 12.15 11.95 11.73
Low 11.00 11.50 11.50 11.12
2002 1st Qtr 2nd Qtr 3rd Qtr 4th Qtr
_______________________________________________________
High 11.25 11.30 12.00 12.25
Low 10.01 10.45 10.75 11.25
Holders
The approximate number of holders of record of the Company's Class A Common
Stock as of June 29, 2003 is 430 and of the Company's Class B Common Stock
is 30.
Cash Dividends
The table below presents the cash dividends per share of Class A and Class B
stock paid, and the quarter in which the payment was made during fiscal 2003
and 2002.
Class A Common Stock
Quarter 2003 2002
___________________________________________
First 12 cents 11.5 cents
Second 12 cents 11.5 cents
Third 12 cents 11.5 cents
Fourth 12 cents 11.5 cents
Class B Common Stock
Quarter 2002 2001
___________________________________________
First 12 cents 11.5 cents
Second 12 cents 11.5 cents
Third 12 cents 11.5 cents
Fourth 12 cents 11.5 cents
-3-
BOWL AMERICA INCORPORATED AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
June 29, 2003 June 30, 2002
ASSETS
Current Assets
Cash and cash equivalents (Note 2) $ 1,503,313 $ 1,633,817
Short-term investments (Note 4) 9,505,678 8,183,932
Inventories 565,071 541,027
Prepaid expenses and other 590,555 479,289
Income taxes refundable 443,788 699,768
__________ __________
Total Current Assets 12,608,405 11,537,833
Property, Plant and Equipment, Net (Note 5) 20,287,508 20,505,586
Assets Held for Sale (Note 3) 117,948 -
Other Assets
Marketable equity securities (Note 4) 3,932,550 3,990,248
Cash surrender value-officers'life insurance 463,579 431,249
Other 126,517 97,662
__________ __________
TOTAL ASSETS $37,536,507 $36,562,578
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts payable $ 700,425 $ 701,671
Accrued expenses 1,552,410 749,245
Other current liabilities 354,854 369,027
Current deferred income taxes 103,300 -
__________ __________
Total Current Liabilities 2,710,989 1,819,943
Long-Term Deferred Compensation 133,468 132,496
Non-current Deferred Income Taxes (Note 9) 1,738,900 1,928,000
__________ __________
TOTAL LIABILITIES 4,583,357 3,880,439
Commitments and Contingencies (Note 6)
Stockholders' Equity (Note 7)
Preferred stock, par value $10 a share
Authorized and unissued 2,000,000 shares
Common stock, par value $.10 per share
Authorized 10,000,000 shares
Class A outstanding
3,670,112 and 3,666,376 shares 367,012 366,638
Class B outstanding
1,468,462 and 1,483,620 shares 146,846 148,362
Additional paid-in capital 7,480,257 7,603,646
Accumulated other comprehensive earnings-
Unrealized gain on available-for-sale
securities, net of tax 1,972,513 2,043,062
Retained earnings 22,986,522 22,520,431
__________ __________
TOTAL STOCKHOLDERS' EQUITY $32,953,150 $32,682,139
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $37,536,507 $36,562,578
See notes to consolidated financial statements.
-4-
BOWL AMERICA INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS & COMPREHENSIVE EARNINGS
For the Years Ended
June 29, 2003 June 30, 2002 July 1, 2001
______________________________________________
Operating Revenues
Bowling and other $20,574,413 $20,926,272 $20,807,378
Food, beverage and
merchandise sales 8,801,279 8,974,870 8,593,525
__________ __________ __________
29,375,692 29,901,142 29,400,903
Operating Expenses
Compensation and benefits 12,976,056 12,962,448 12,601,235
Cost of bowling and other 5,983,292 5,893,138 5,676,633
Cost of food, beverage and
merchandise sales 2,771,356 2,989,809 2,679,472
Depreciation and amortization 1,613,379 1,763,931 1,940,368
General and administrative 918,861 898,240 1,610,518
__________ __________ __________
24,262,944 24,507,566 24,508,226
Operating Income 5,112,748 5,393,576 4,892,677
Interest and dividend income 475,598 598,982 1,035,712
__________ __________ __________
Earnings before provision
for income taxes 5,588,346 5,992,558 5,928,389
Provision for income taxes(Note 8)
Current 2,050,000 1,923,000 2,218,000
Deferred (45,000) 251,000 (158,000)
_________ __________ __________
2,005,000 2,174,000 2,060,000
Net Earnings $ 3,583,346 $ 3,818,558 $ 3,868,389
Other Comprehensive (Loss)Earnings
Net of Tax-unrealized (loss)
on available-for-sale securities (70,549) (1,384,409) (1,818,950)
_________ _________ _________
Comprehensive Earnings 3,512,797 2,434,149 2,049,439
Earnings Per Share-Basic &
Diluted $.70 $.74 $.74
All share and per share amounts have been adjusted to reflect both the 5%
stock dividend distributed on July 26, 2001 and the 5% stock dividend
distributed on July 26, 2000.
-5-
BOWL AMERICA INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
COMMON STOCK Accumulated
_______________________________________ Additional Other
Class A Class A Class B Class B Paid-In Comprehensive Retained
Shares Amount Shares Amount Capital Earnings(1) Earnings
Balance July 2, 2000 3,406,070 $340,607 1,488,826 $148,883 $3,870,546 $5,246,421 $25,173,315
Stock issued in 5% dividend 170,112 17,011 74,431 7,443 1,901,322 - (1,925,776)
Purchase of stock (100,206) (10,021) (143,830) (14,383) (916,037) - (1,150,671)
Conversion-Class B to Class A 3,000 300 (3,000) (300) - - -
Shares issued for ESOP plan 13,000 1,300 - - 131,300 - -
Cash dividends paid(45 cents/sh) - - - - - - (2,256,182)
Change in unrealized gain on
available-for-sale securities - - - - (1,818,950) -
Net earnings for the year - - - - - - 3,868,389
_________________________________________________________________________________________________________________________
Balance July 1, 2001 3,491,976 $349,197 1,416,427 $141,643 $4,987,131 $3,427,471 $23,709,075
Stock issued in 5% dividend 174,365 17,437 70,809 7,081 2,488,516 - (2,513,034)
Purchase of stock (59) (6) - - (86) - (544)
Conversion-Class B to Class A 3,616 362 (3,616) (362) - - -
Shares issued for ESOP plan 9,000 900 - - 101,700 - -
Settlement of employee stock loans (4,010) (401) - - 38,813 - (38,415)
Repayment of employee loans (8,512) (851) - - (12,428) - (84,088)
Cash dividends paid(46 cents/sh) - - - - - - (2,371,121)
Change in unrealized gain on
available-for-sale securities - - - - - (1,384,409) -
Net earnings for the year - - - - - - 3,818,558
_______________________________________________________________________________________________________________________
Balance June 30, 2002 3,666,376 $366,638 1,483,620 $148,362 $7,603,646 $2,043,062 $22,520,431
Purchase of stock (470) (47) (15,158) (1,516) (174,250) - (4,851)
Shares issued for ESOP plan 4,206 421 - - 48,579 - -
Cash dividends paid(48 cents/sh) - - - - - - (2,470,081)
Accrued dividends declared June 24, 2003, payable August 12, 2003 - - - (642,323)
Change in unrealized gain on
available-for-sale securities - - - - - (70,549) -
Repayment of stock loan - - - - 2,282 - -
Net earnings for the year - - - - - - 3,583,346
________________________________________________________________________________________________________________________
Balance, June 29, 2003 3,670,112 $367,012 1,468,462 $146,846 $7,480,257 $1,972,513 $22,986,522
(1)Unrealized gains and losses are shown net of tax
See notes to consolidated financial statements.
-6-
BOWL AMERICA INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
June 29, June 30, July 1,
2003 2002 2001
Cash Flows From Operating Activities
Net earnings $3,583,346 $3,818,558 $3,868,389
Adjustments to reconcile net earnings to
net cash provided by operating activities:
Depreciation and amortization 1,613,379 1,763,931 1,940,368
(Decrease)increase in deferred income tax (45,000) 251,000 (158,000)
Loss (gain) on disposition of assets-net 11,932 63,789 (35,647)
Stock issuance-ESOP Plan 49,000 102,600 132,600
Gain on sale-available-for-sale securities - - (290,951)
Changes in assets and liabilities:
(Increase) decrease in inventories (24,044) 179,478 (62,877)
(Increase) decrease in prepaid expenses
and other (111,266) 388,649 (427,620)
Decrease (increase) in income taxes
refundable 255,980 (250,675) (578,483)
(Increase) decrease in other long-term
assets (28,855) 91,836 13,689
(Decrease) increase in accounts payable (1,246) (369,862) 383,350
Increase (decrease) in accrued expenses 160,842 (32,533) 40,781
Decrease in other current liabilities (14,173) (31,862) (29,919)
Decrease in long-term deferred compensation 972 (20,000) -
_________ _________ _________
Net cash provided by operating activities $5,450,867 $5,954,909 $4,795,680
_________ _________ _________
Cash Flows from Investing Activities
Expenditures for property,plant,equipment (1,525,181) (1,254,521) (3,615,517)
Net (purchases) sales and maturities of
short-term investments (1,371,706) (2,013,396) 2,786,311
Increase in cash surrender value (32,330) (19,838) (23,227)
Net (purchases) proceeds from purchases
or sale of marketable securities (1,409) - 219,225
_________ _________ _________
Net cash used in investing activities (2,930,626) (3,287,755) (633,208)
_________ _________ _________
Cash Flows from Financing Activities
Payment of cash dividends (2,470,081) (2,371,121) (2,256,182)
Purchase of Class A Common Stock (5,589) (636) (923,400)
Purchase of Class B Common Stock (175,075) - (1,167,712)
_________ _________ _________
Net cash used in financing activities (2,650,745) (2,371,757) (4,347,294)
_________ _________ _________
Net (Decrease) Increase in Cash and
Cash Equivalents (130,504) 295,397 (184,822)
Cash and Cash Equivalents, Beginning of Year 1,633,817 1,338,420 1,523,242
_________ _________ _________
Cash and Cash Equivalents, End of Year $1,503,313 $1,633,817 $1,338,420
Supplemental Disclosures of Cash Flow Information
Cash paid during the year for
Income taxes $2,324,881 $2,633,781 $2,852,134
Non-cash Investing and Financing Activities
Settlement of employee stock loans by
acquisition of common stock $ - 44,667 -
Repayment of employee loans by
acquisition of common stock $ - 88,877 -
See notes to consolidated financial statements.
-7-
BOWL AMERICA INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Description of Business
Bowl America Incorporated is engaged in the operation of 18 bowling
centers, with food and beverage service in each center. Ten centers are
located in metropolitan Washington D.C., one center in metropolitan
Baltimore, Maryland, one center in metropolitan Orlando, Florida, three
centers in metropolitan Richmond, Virginia, and three centers in metropolitan
Jacksonville, Florida. These 18 centers contain a total of 716 lanes.
The Company operates in one segment.
Principles of Consolidation
The consolidated financial statements include the accounts of the Company
and all of its wholly owned subsidiary corporations. All significant inter-
company items have been eliminated in the consolidated financial statements.
Fiscal Year
The Company's fiscal year ends on the Sunday nearest to June 30. Fiscal
year 2003 ended June 29, 2003, fiscal year 2002 ended June 30, 2002, and fiscal
year 2001 ended July 1, 2001. Fiscal years 2003, 2002 and 2001 each consisted
of 52 weeks.
Estimates
The preparation of consolidated financial statements in conformity with
accounting principles generally accepted in the United States of America
requires management to make estimates and assumptions. These estimates and
assumptions affect the reported amounts of assets and liabilities and disclosure
of contingent assets and liabilities at the date of the financial statements
and the reported amounts of revenues and expenses during the reporting period.
Actual results may differ from those estimates. Significant estimates include
the deferred compensation liability for executives and key employees including
survivor benefits, cash surrender value of officers' life insurance, the Federal
and State income taxes (current and deferred), and market assumptions used in
estimating the fair value of certain assets such as marketable securities.
Revenue Recognition
The Company records revenue for fees charged for use of bowling lanes and
other facilities at the time the services are provided. Food, beverage and
merchandise sales are recorded as revenue at the time the product is given to
the customer.
Depreciation and Amortization
Depreciation and amortization for financial statement purposes are
calculated by use of the straight-line method. Amortization of leasehold
improvements is calculated over the estimated useful life of the asset or
term of the lease, whichever is shorter. The categories of property, plant,
and equipment and the ranges of estimated useful lives on which depreciation
and amortization rates are based are as follows:
Bowling lanes and equipment 3-10 years
Building and building improvements 10-30 years
Leasehold improvements 10 years
Amusement games 3-5 years
Maintenance and repairs and minor replacements are charged to expense when
incurred. Major replacements and betterments are capitalized. The accounts
are adjusted for the sale or other disposition of property, and the resulting
gain or loss is credited or charged to income.
Impairment of Long-Lived Assets
The Company reviews long-lived assets whenever events or changes indicate
that the carrying amount of an asset may not be recoverable. In making such
evaluations, the Company compares the expected future cash flows to the
carrying amount of the assets. An impairment loss, equal to the difference
between the assets' fair value and carrying value, is recognized when
the estimated future cash flows are less that the carrying amount.
Inventories
Inventories are stated at the lower of cost (first-in, first-out method)
or market.
Income Taxes
Income taxes are accounted for in accordance with Statement of
Financial Accounting Standards ("SFAS") No. 109, "Accounting for Income
Taxes". Under this method, deferred income tax liabilities and assets
are based on the differences between the financial statement and tax bases
of assets and liabilities, using tax rates currently in effect. A valuation
allowance is provided when it is more likely than not that a deferred tax
asset will not be realized.
Fair Value of Financial Instruments
The fair value of short-term investments and the non-current marketable
security portfolio is disclosed in Note 4.
Investment Securities
The Company accounts for its investments in accordance with SFAS No. 115
"Accounting for Certain Investments in Debt and Equity Securities". All of
the Company's readily marketable debt and equity securities are classified as
available-for-sale. Accordingly these securities are recorded at fair value
with any unrealized gains and losses excluded from earnings and reported, net
of deferred taxes, within a separate component of stockholders' equity until
realized. Realized gains or losses on the sale of debt and equity securities
are reported in earnings and determined using the adjusted cost of the
specific security sold.
Earnings Per Share
Earnings per share basic and diluted, have been calculated using the
weighted average number of shares of Class A and Class B common stock
outstanding of 5,145,934, 5,132,083 and 5,222,876, for fiscal years 2003,
2002 and 2001, respectively, and have been adjusted to reflect both the 5% stock
dividend distributed on July 26, 2001 and the 5% stock dividend distributed on
July 26, 2000.
Comprehensive Earnings
In accordance with SFAS No. 130 "Reporting Comprehensive Income", a
consolidated statement of comprehensive earnings reflecting the aggregation
of net earnings and unrealized gain or loss on available-for-sale securities,
the Company's principal components of other comprehensive earnings, has been
presented for each of the three years in the period ended June 29, 2003.
-8-
Cash and Cash Equivalents
For purposes of the Consolidated Statements of Cash Flows, the Company
considers money market funds, certificates of deposits, repurchase agreements
and treasury securities with original maturities of three months or less to be
cash equivalents.
Assets Held for Sale
The Company accounts for assets held for sale at the lower of cost or fair
value less costs to sell in accordance with the criteria for SFAS No. 144
"Accounting for the Impairment or Disposal of Long-Lived Assets." Assets held
for sale are not depreciated.
Other Current Liabilities
Other current liabilities include prize fund monies held by the Company for
bowling leagues. The funds are returned to the leagues at the end of the league
bowling season. At June 29, 2003, and June 29, 2002 other current liabilities
included $352,800, and $365,000, respectively, in prize fund monies.
New Accounting Pronouncements
In April 2003, SFAS No. 149, "Amendment of Statement 133 on Derivative
Instruments and Hedging Activities" was issued. SFAS No. 149 amends and
clarifies financial accounting and reporting for derivative instruments,
including certain derivative instruments embedded in other contracts
(collectively referred to as derivatives) and for the hedging activities under
SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities."
SFAS No. 149 is effective for contracts entered into or modified after June 30,
2003 and for hedging relationships designated after June 30, 2003. The adoption
of SFAS No. 149 will not have a material effect on the Company's financial
position or results of operations.
In May 2003, the FASB issued SFAS No. 150 "Accounting for Certain Financial
Instruments with Characteristics of both Liabilities and Equity." This
Statement establishes standards for how an issuer classifies and measures
certain financial instruments with characteristics of both liabilities and
equity. It requires that an issuer classify a financial instrument that is
within its scope as a liability (or an asset in some circumstances). Many of
those instruments were previously classified as equity. Some of the provisions
of this statement are consistent with the current definition of liabilities
in FASB Concepts Statement No. 6, "Elements of Financial Statements." The
remaining provisions of this Statement are consistent with the FASB's proposal
to revise that definition to encompass certain obligations that a reporting
entity can or must settle by issuing its own equity shares, depending on the
nature of the relationship established between the holder and the issuer. This
Statement is effective for financial instruments entered into or modified after
May 31, 2003, and otherwise is effective at the beginning of the first interim
period beginning after June 15, 2003. The adoption of SFAS No.150 did not have
any effect on the Company's financial statements.
Reclassifications
Certain previous year amounts have been reclassified to conform with the
current year presentation.
2. CASH AND CASH EQUIVALENTS
Cash and cash equivalents consisted of the following:
June 29, June 30,
2003 2002
Demand deposits and cash on hand $ 517,874 $ 688,048
Money market funds 286,439 286,769
Repurchase agreements 699,000 659,000
_________ _________
$1,503,313 $1,633,817
3. ASSETS HELD FOR SALE AND REMAINING LEASE OBLIGATIONS
In March 2003, the Company entered into an agreement to sell the Silver
Spring building and assign the ground lease for $2.3 million subject to certain
conditions precedent to final closing. The facility is classified as Assets
Held for Sale at June 29, 2003 and is carried at its net book value of
approximately $118,000. On August 25, 2003, the Company consummated the final
closing of the sale and received cash proceeds and recorded the gain on the sale
of the building.
4. INVESTMENTS
Short-term investments consist of certificates of deposits, U.S. Treasury
securities and a mutual fund which invests in mortgage backed securities
(maturities of generally three months to one year). At June 29, 2003, the
fair value of short-term investments was $9,505,678 with an unrealized gain of
$56,875. At June 30, 2002, the fair value of short-term investments was
$8,183,932 with an unrealized gain of $108,946. Non-current investments are
marketable equity securities which consist primarily of telecommunications
stocks. The Company has classified all readily marketable debt and equity
securities as available-for-sale. These available-for-sale securities
are carried at fair value in accordance with the provisions of SFAS No. 115.
The following table summarizes the cost and approximate fair values of
equity securities available-for-sale as of June 29, 2003, and June 30, 2002
as follows:
Original Unrealized Fair
Cost Gain Value
June 29, 2003
Securities available-for-sale $859,191 $3,073,359 $3,932,550
June 30 2002
Securities available-for-sale $857,782 $3,132,466 $3,990,248
This portfolio includes the following telecommunications stocks:
16,835 shares of AT&T Wireless
2,209 shares of Agere
3,946 shares of Alltel
669 shares of Avaya
27,572 shares of Bell South
8,028 shares of Lucent Technologies
9,969 shares of Qwest
45,580 shares of SBC Communications
32,000 shares of Sprint Fon
16,000 shares of Sprint PCS
18,784 shares of Verizon
13,560 shares of Vodafone
-9-
There were no sales of available-for-sale securities in the years ended
June 29, 2003 and June 30, 2002. In the year ended July 1, 2001, proceeds
from the sale of available-for-sale securities were $2,072,112 with a
corresponding gross realized gain of $290,951 recorded as interest and
dividend income.
5. PROPERTY, PLANT, AND EQUIPMENT
Property, plant, and equipment, as cost, consist of the following:
June 29, June 30,
2003 2002
Bowling lanes and equipment $18,450,048 $17,864,384
Amusement games 908,480 948,045
Buildings and building improvements 19,013,470 19,667,611
Leasehold improvements 309,898 317,398
Land 8,572,206 8,572,206
Bowling lanes and equipment not yet in use 241,461 132,033
__________ __________
47,495,563 47,501,677
Less accumulated depreciation and
amortization 27,208,055 26,996,091
__________ __________
$20,287,508 $20,505,586
Depreciation and amortization expense for Property, Plant and Equipment
for fiscal years 2003, 2002, and 2001 was $1,613,379, $1,763,931, and
$1,940,368 respectively. Bowling lanes and equipment not yet in use are
not depreciated.
6. COMMITMENTS AND CONTINGENCIES
Lease Commitments
The Company and its subsidiaries are obligated under long-term real estate
lease agreements for three bowling centers. Certain of the Company's real
estate leases provide for additional annual rents based upon total gross
revenues and increases in real estate taxes and insurance.
At June 29, 2003, the minimum fixed rental commitments related to all
non-cancelable leases, were as follows:
Year Ending
2004 $298,720
2005 298,720
2006 298,720
2007 298,720
2008 298,720
Thereafter 1,478,386
_________
Total minimum lease payments $2,971,986
The table above includes a $15,000 annual ground lease through 2058
Which was subsequently assigned at the sale of the Silver Spring building.
Net rent expense was as follows:
For the Years Ended
2003 2002 2001
Minimum rent under operating leases $296,557 $333,060 $366,097
Excess percentage rents 27,321 92,497 89,807
_______ _______ _______
$323,878 $425,557 $455,904
Other Commitments
The Company has placed an order totaling approximately $226,800 for the
purchase of bowling pins to be delivered after July 1, 2003.
7. STOCKHOLDERS' EQUITY
The Class A shares have one vote per share voting power. The Class B
shares may vote ten votes per share and are convertible to Class A shares at
the option of the stockholder.
At June 29, 2003 and June 30, 2002, the Company had $41,956 and $43,956,
respectively, in employee loans related to the issuance of shares. These
loans are secured by the shares of the Company's common stock acquired and are
full recourse notes. The notes bear interest at rates of 5% to 6 1/2% and are
payable over a term of three years from the date of the agreements which range
from 2001 to 2003. These employee loans have been recorded as a reduction of
additional paid-in capital.
The Company distributed a 5% stock dividend on July 26, 2001, where
Class A and B stockholders received one share of common stock for each
twenty shares of Class A and Class B common stock held as of the date of record.
8. PROFIT-SHARING AND ESOP PLAN
The Company has a profit-sharing plan which, generally, covers all
individuals who were employed at the end of the fiscal year and had one thousand
or more hours of service during that fiscal year. The Plan provides for Company
contributions as determined by the Board of Directors. For the years ended
June 29, 2003, June 30, 2002, and July 1, 2001, contributions in the amount of
$145,000, $165,000, and $160,000, respectively, were charged to operating
expense.
Effective March 31, 1987, the Company adopted an Employee Stock Ownership
Plan (ESOP) which generally covers all employees who on the last day of the
fiscal year or December 29 have been employed for one year with at least one
thousand hours of service. The Plan provides for Company contributions as
determined by the Board of Directors. Prior to fiscal year 1995, the
contributions were allocated to participants based on compensation and years
of service. Contributions since fiscal year 1995 are allocated based on
compensation only in order to comply with Internal Revenue Service code
requirements. The value of the Company's contributions to the Plan for fiscal
years 2003, 2002, and 2001 was $145,000, $162,600, and $165,100, respectively.
-10-
9. INCOME TAXES
The significant components of the Company's deferred tax assets and
liabilities were as follows:
June 29, June 30,
2003 2002
Deferred tax assets:
Other 95,000 64,000
_________ _________
Total deferred tax assets 95,000 64,000
Deferred tax liabilities:
Property, plant and equipment 582,200 596,000
Unrealized gain on available-
for-sale securities 1,157,000 1,199,000
Prepaid expenses 198,000 140,000
Other - 57,000
_________ _________
Total deferred tax liabilities 1,937,200 1,992,000
_________ _________
Net deferred income taxes $1,842,200 $1,928,000
Income tax expense differs from the amounts computed by applying the U.S.
Federal income tax rate to income before tax for the following reasons:
For the Years Ended
2003 % 2002 % 2001 %
Taxes computed at
statutory rate $1,900,000 34.0% $2,045,000 34.0% $2,016,000 34.0%
State income taxes, net
of Federal income tax
benefit 161,000 2.9 175,000 2.9 85,000 1.4
Dividends received
exclusion (40,000) (.72) (22,000) (.36) (37,000) (.62)
All other-net (16,000) (.28) (24,000) (.41) (4,000) (.07)
_________ ____ _________ ____ _________ ____
$2,005,000 35.9% $2,174,000 36.1% $2,060,000 34.7%
10. RELATED PARTIES
At June 29, 2003 and June 30, 2002, the Company had recorded $99,600 and
$102,200, respectively, in deferred compensation payable to one officer and
one major shareholder. The amounts are payable over the next ten years.
Deferred compensation payable to non-related parties was a total of $59,500 at
June 29, 2003 and $57,100 at June 30, 2002. The current portion of these
amounts, $25,632 at June 29, 2003 and $26,800 at June 30, 2002 is included in
accrued expenses.
11. SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)
The following summary represents the results of operations for each of the
quarters in fiscal years 2003 and 2002 (dollars in thousands, except for
earnings per share):
Earnings
Operating Operating Before Earnings
Revenues Income Income Net Per
Taxes Earnings Share
2003
June 29, 2003 $6,878 $ 942 $1,047 $ 682 $.14
March 30, 2003 8,845 2,436 2,567 1,640 .31
December 29, 2002 7,527 1,479 1,602 1,024 .20
September 29, 2002 6,126 256 372 237 .05
2002
June 30, 2002 $6,603 $ 693 $ 845 $ 519 $.10
March 31, 2002 8,997 2,535 2,711 1,738 .33
December 30, 2001 7,867 1,694 1,832 1,174 .23
September 30, 2001 6,434 472 605 388 .08
Per share amounts have been adjusted to reflect both the 5% stock dividend
distributed on July 26, 2001 and the 5% stock dividend distributed on
July 26, 2000.
-11-
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders
Bowl America Incorporated
Alexandria, Virginia
We have audited the accompanying consolidated balance sheets of Bowl
America Incorporated and subsidiaries ("the Company")as of June 29, 2003 and
June 30, 2002, and the related consolidated statements of earnings and
comprehensive earnings, stockholders' equity and cash flows for each of the
three fiscal years in the period ended June 29, 2003. These financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States of America. Those standards require that we
plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in
all material respects, the financial position of the Company as of June 29, 2003
and June 30, 2002, and the results of their operations and their cash flows for
each of the three fiscal years in the period ended June 29, 2003, in conformity
with accounting principles generally accepted in the United States of America.
Deloitte and Touche LLP
McLean, Virginia
September 12, 2003
-12-
EX-31.1
Exhibit 31.1 to Form 10-K
Certification of Chief Executive Officer
Pursuant to Section 302 of the Sarbanes-Oxley Act and Rule 13a-14(a)
Or 15d-14(a) under the Securities Exchange Act of 1934
I, Leslie H. Goldberg, certify that:
1. I have reviewed this Annual Report on Form 10-K of Bowl America Incorporated;
2. Based on my knowledge, this report does not contain any untrue statement of a
material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material respects
the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this report;
4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:
a) Designed such disclosure controls and procedures, or caused such disclosure
controls and procedures to be designed under our supervision, to ensure that
material information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities,
particularly during the period in which this report is being prepared;
b) Evaluated the effectiveness of the registrant's disclosure controls and
procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the end
of the period covered by this report based on such evaluation; and
c) Disclosed in this report any change in the registrant's internal control
over financial reporting that occurred during the registrant's fourth fiscal
quarter that has materially affected, or is reasonably likely to materially
affect, the registrant's internal control over financial reporting: and
5. The registrant's other certifying officer and I have disclosed, based on our
most recent evaluation of internal control over financial reporting, to the
registrant's auditors and the audit committee of registrant's board of
directors (or persons performing the equivalent functions):
a) All significant deficiencies and material weaknesses in the design or
operation of internal controls over financial reporting which are reasonably
likely to adversely affect the registrant's ability to record, process,
summarize and report financial information; and
b) Any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal control
over financial reporting.
Date: September 25, 2003
Leslie H Goldberg
Chief Executive Officer
Exhibit 31.2
Exhibit 31.2 to Form 10K
Certification of Chief Financial Officer
Pursuant to Section 302 of the Sarbanes-Oxley Act and Rule 13a-14(a)
Or 15d-14(a) under the Securities Exchange Act of 1934
I, Cheryl A. Dragoo, certify that:
1. I have reviewed this Annual Report on Form 10-K of Bowl America Incorporated;
2. Based on my knowledge, this report does not contain any untrue statement of a
material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material respects
the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this report;
4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:
a) Designed such disclosure controls and procedures, or caused such disclosure
controls and procedures to be designed under our supervision, to ensure that
material information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities,
particularly during the period in which this report is being prepared;
b) Evaluated the effectiveness of the registrant's disclosure controls and
procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the end
of the period covered by this report based on such evaluation; and
c) Disclosed in this report any change in the registrant's internal control
over financial reporting that occurred during the registrant's fourth
fiscal quarter that has materially affected, or is reasonably likely to
materially affect, the registrant's internal control over financial
reporting: and
5. The registrant's other certifying officer and I have disclosed, based on
our most recent evaluation of internal control over financial reporting, to
the registrant's auditors and the audit committee of registrant's board of
directors (or persons performing the equivalent functions):
a) All significant deficiencies and material weaknesses in the design or
operation of internal controls over financial reporting which are reasonably
likely to adversely affect the registrant's ability to record, process,
summarize and report financial information; and
b) Any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal control
over financial reporting.
Date: September 25, 2003
Cheryl A. Dragoo
Chief Financial Officer
Exhibit 32
Exhibit 32 to Form 10K
Written Statement of the Chief Executive Officer and Chief Financial Officer
Pursuant to 18 U.S.C. 1350
Solely for the purposes of complying with 18 U.S.C. 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, we, the undersigned
Chief Executive Officer and Chief Financial Officer of Bowl America Incorporated
(the "Company"), hereby certify, based on our knowledge, that the Annual Report
on Form 10-K of the Company for the year ended June 29, 2003, (the "Report")
fully complies with the requirements of Section 13(a) of the Securities Act of
1934 and that information contained in the Report fairly presents, in all
material respects, the financial condition and results of operations of the
Company.
Leslie H. Goldberg
Chief Executive Officer
Cheryl A. Dragoo
Chief Financial Officer
Date: September 25, 2003