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EX-20 - EXHIBIT 20 - BOWL AMERICA INCex20.htm
EX-32 - EXHIBIT 32 - BOWL AMERICA INCex32.htm
EX-31.1 - EXHIBIT 31.1 - BOWL AMERICA INCex31-1.htm
EX-31.2 - EXHIBIT 31.2 - BOWL AMERICA INCex31-2.htm
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 27, 2010   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)   NYSE Amex Exchange
 
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.   YES [ ]  NO [X]
 
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.   YES[ ]  NO [X]
 
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 whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Date File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (Section 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).      YES [ ]  NO [ ]
 
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K, (Section 229.405) 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.    [X]
 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company.  See definitions of “large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
 
 
 

 
 
Large Accelerated Filer [ ] Accelerated Filer [ ]  
Non-accelerated Filer [ ] Smaller reporting company [X]  
 
Indicate by checkmark whether the registrant is a shell company (as defined by Rule 12b-2 of the Act).  YES [ ]  NO [X]

As of December 27, 2009, which was the last business day of the registrant's most recently completed second quarter, 3,672,549 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 NYSE Amex Exchange) of Bowl America Incorporated held by nonaffiliates of the registrant was approximately $37 million.  As of that date 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 December 27, 2009, the total aggregate market value for both classes of common stock held by nonaffiliates would be approximately $45 million.

Indicate the number of shares outstanding of each of the registrant’s
classes of common stock, as of the latest practicable date:
 
  Shares outstanding at
  September 1, 2010
Class A Common Stock  
$.10 par value 3,678,509
   
Class B Common Stock  
$.10 par value 1,468,462
 
 
 

 
 
DOCUMENTS INCORPORATED BY REFERENCE

    Portions of registrant's definitive proxy statement, which will be filed with the Commission not later than 120 days after June 27, 2010, are incorporated into Part III of this Form 10-K.  The Selected Financial Data (Item 6), Management’s Discussion & Analysis (Item 7) and financial statements (Item 8) attached to and included in this filing are incorporated herein by reference and filed as exhibits hereto.
 
 
 

 
 
BOWL AMERICA INCORPORATED

INDEX TO FISCAL 2010 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)   Financial Information about Geographic Areas  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, Related Stockholder Matters and Issuer Purchases of Equity Securities 2
     
ITEM 6. Selected Financial Data 3
     
ITEM 7. Management's Discussion and Analysis of Financial Condition and Results of Operations 3
     
ITEM 8. Financial Statements and Supplementary Data 3
     
ITEM 9.  Changes in and Disagreements with Accountants on Accounting and Financial Disclosure 3
     
ITEM 9A(T). Controls and Procedures 4
     
PART III
     
ITEM 10.  Directors, Executive Officers and Corporate Governance 4
     
ITEM 11. Executive Compensation  4
     
ITEM 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters 5
     
ITEM 13.  Certain Relationships and Related Transactions, and Director Independence    5
     
ITEM 14. Principal Accountant Fees and Services  5
     
PART IV
     
ITEM 15.  Exhibits and Financial Statement Schedules  
  (a)1. Financial Statements  5
  (a)3. Exhibits 5-6
     
Signatures  7-8
 
 
 

 
 
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 19 bowling centers.  The Company’s bowling center in Falls Church, Virginia, was closed in February 2007, due to roof damage from an ice storm.  The center reopened March 31, 2008.

   (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.  At the end of the fiscal year 2010, the Company had revenues of approximately $27.1 million, per share earnings of $.36, and approximately $41 million in total assets.  Merchandise sales, including food and beverages, were approximately 29% of operating revenues.  The balance of operating revenues (approximately 71%) represents fees for bowling and related services.  See the Company’s Consolidated Financial Statements on pages 16 through 28 of this Form 10-K for more detailed information.

   (c)   Narrative Description of Business
   As of September 1, 2010 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 four bowling centers in the greater metropolitan area of Richmond, Virginia.  These 19 bowling centers contain a total of 756 lanes.
 
   These establishments are fully air-conditioned with facilities for service of food and beverages, game rooms, rental lockers, and meeting room 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 markets in which it operates.  The principal method of competition is the quality of service furnished to the Company's customers.  Its primary competitors are Brunswick Corporation, a large bowling equipment manufacturer, 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 600.

   (d)   Financial Information about Geographic Areas

   The Company has no foreign operations.

 
-1-

 
 
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 2014 through 2019.  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.  [REMOVED AND RESERVED]
 
PART II

ITEM 5.  MARKET FOR THE REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

(a) Market Information
    The principal market on which the Company's Class A Common Stock is traded is the NYSE Amex.  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 high and low sales price range of the Company's Class A Common Stock in each quarter of fiscal years 2010 and 2009.
 
2010
 
1st Qtr
   
2nd Qtr
   
3rd Qtr
   
4th Qtr
 
                         
High
    $14.44       $16.50       $14.49       $13.87  
Low
    $12.01       $10.50       $12.56       $12.11  
                                 
2009
 
1st Qtr
   
2nd Qtr
   
3rd Qtr
   
4th Qtr
 
                                 
High
    $14.96       $13.50       $10.64       $14.69  
Low
    $12.34       $8.60       $9.00       $9.25  

(b) Holders
    As of June 27, 2010, the approximate number of holders of record of the Company's Class A Common Stock was 356 and of the Company's Class B Common Stock was 26.

(c) Cash Dividends
    The table below presents the quarterly cash dividends per share of Class A Common Stock and Class B Common Stock paid, and the quarter in which the payment was made during fiscal 2010 and 2009.
 
Class A Common Stock
Quarter
 
2010
 
2009
 
       
First
 
15.5 cents
 
15 cents
Second
 
15.5 cents
 
15 cents
Third
 
15.5 cents
 
15 cents
Fourth
 
15.5 cents
 
15.5 cents
 
 
-2-

 
 
Class B Common Stock 
Quarter
 
2010
 
2009
 
       
First
 
15.5 cents
 
15 cents
Second
 
15.5 cents
 
15 cents
Third
 
15.5 cents
 
15 cents
Fourth
 
15.5 cents
 
15.5 cents
 
    The Board of Directors decides the amount and timing of any dividend at its quarterly meetings based on its appraisal of the state of the business and estimate of future opportunities at such time.

    (d) Securities Authorized for Issuance Under Equity Compensation Plans
          None
    (e) Performance Graph
          Not required
    (f) Issuer purchases of equity securities

                     
Maximum number
 
               
Total number of
   
(or approximate
 
               
shares purchased
   
dollar value of
 
               
as part of
   
shares that may
 
               
publicly
   
yet be purchased
 
   
Total number of
 
Average price
 
announced plans
   
under the plans
 
Period
 
shares purchased
 
paid per share
 
or programs
   
or programs
 
03/29/10-
                       
04/25/10
   
-
     
-
     
-
     
-
 
                                 
04/26/10-
                               
05/23/10
   
-
     
-
     
-
     
-
 
                                 
05/24/10-
                               
06/27/10
   
1
      $13.40                  
Total
   
1
      $13.40      
-
     
-
 
 
ITEM 6.  SELECTED FINANCIAL DATA

    The information is set forth in the section entitled "Selected Financial Data" on page 15 of this Form 10-K.  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 is set forth in the section entitled "Management's Discussion and Analysis of Financial Condition and Results of Operations" on Pages 10 through 13 of this Form 10-K.

ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
    The financial statements and notes thereto are set forth on pages 16 through 28 of this Form 10-K.
    Supplementary data is not required.

ITEM 9.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
    None
 
 
-3-

 
 
ITEM 9A. CONTROLS AND PROCEDURES

Disclosure Controls and Procedures

    The Company's disclosure controls and procedures are designed to provide reasonable assurance that information required to be disclosed by it in its periodic reports filed with the Securities and Exchange Commission is recorded, processed, summarized and reported within the time periods specified in the Commission’s rules and forms.  Based on an evaluation of the Company’s disclosure controls and procedures conducted by the Company’s Chief Executive Officer and Chief Financial Officer, such officers concluded that the Company's disclosure controls and procedures were effective as of June 27, 2010.  Additionally, the Company’s officers concluded that the Company’s disclosure controls and procedures were effective as of June 27, 2010 to ensure that information required to be disclosed in the reports filed under the Exchange Act was accumulated and communicated to management, including the Company’s Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosures.

Internal Control over Financial Reporting

    (a) Management’s Annual Report on Internal Control Over Financial Reporting

    In accordance with Section 404(a) of the Sarbanes-Oxley Act of 2002 and Item 308(a) of the Commission’s Regulation S-K, the report of management on the Company’s internal control over financial reporting is set forth immediately preceding the Company’s financial statements included in this Annual Report on Form 10-K.

    (b) Changes in Internal Control Over Financial Reporting

    In accordance with Rule 13-a-15(d) under the Securities Exchange Act of 1934, management, with the participation of the Company’s Chief Executive Officer and Chief Financial Officer, determined that there was no change in the Company’s internal control over financial reporting that occurred during the fourth quarter ended June 27, 2010 that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

PART III

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

    Pursuant to General Instruction G(3) of Form 10-K, the information called for by this item regarding directors and executive officers 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.

 
-4-

 
 
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, AND DIRECTOR INDEPENDENCE

    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 SERVICES

    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 AND FINANCIAL STATEMENT SCHEDULES

    (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:

Report of Independent Registered Public Accounting Firm

Consolidated balance sheets as of June 27, 2010 and June 28, 2009

Consolidated statements of earnings and comprehensive earnings - years ended June 27, 2010 and June 28, 2009

Consolidated statements of stockholders' equity - years ended June 27, 2010 and June 28, 2009

Consolidated statements of cash flows - years ended June 27, 2010 and June 28, 2009

Notes to the consolidated financial statements - years ended June 27, 2010 and June 28, 2009

    (a)2. Exhibits:
3(i)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.)

 
-5-

 
 
3(i)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(ii) By-laws of the Registrant (Incorporated by reference from exhibit 3 to the Registrant’s Annual Report on Form 10-K for fiscal year ended July 2, 1989.)

10(a) Amended Employment Agreement, dated June 22, 2010, between Registrant and Leslie H. Goldberg (Incorporated by reference From Registrant’s Form 8-K filed June 24, 2010.)
 
10(b) Amended Employment Agreement, dated June 22, 2010, between Registrant and Cheryl A. Dragoo.  (Incorporated by reference from Registrant's Form 8-K filed June 24, 2010.)
 
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)
 
99(a) Selected Financial Data (Item 6), set forth as page 15 hereof

99(b) Management’s Discussion & Analysis of Financial Condition and Results of Operations (Item 7), set forth as pages 10-13 hereof

99(c) Consolidated Financial Statements(Item 8), set forth as pages 16-28 hereof
 
 
-6-

 
 
BOWL AMERICA INCORPORATED

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
 
BOWL AMERICA INCORPORATED
       
         
         
/s/ Leslie H. Goldberg
     
 
Leslie H. Goldberg
       
President        
Chief Executive and Operating Officer        
         
Date:  September 24, 2010        
         
         
/s/ Cheryl A. Dragoo
       
Cheryl A. Dragoo
       
Chief Financial Officer,        
Assistant Treasurer and Controller
     
 
Principal Accounting Officer
       
         
Date:  September 24, 2010        

 
-7-

 
 
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
 
/s/ Leslie H. Goldberg
 
 
 
 
Leslie H. Goldberg        
President, Principal Executive        
& Operating Officer & Director        
         
Date:  September 24, 2010        
         
         
/s/ Ruth Macklin  
 
/s/ A. Joseph Levy
 
 
Ruth Macklin     A. Joseph Levy    
Senior Vice President-Treasurer   Senior Vice President-Secretary    
and Director   and Director    
         
Date:  September 24, 2010   Date:  September 24, 2010    
         
         
/s/ Warren T. Braham
 
/s/ Stanley H. Katzman
 
 
Warren T. Braham 
  Stanley H. Katzman    
Director      Director    
         
Date:  September 24, 2010    Date:  September 24, 2010    
         
         
/s/ Allan L. Sher   /s/ Merle Fabian    
Allan L. Sher    Merle Fabian    
Director    Director    
         
Date:  September 24, 2010   Date:  September 24, 2010    
         
         
/s/ Cheryl A. Dragoo         
Cheryl A Dragoo        
Principal Accounting Officer,        
and Director        
         
Date:  September 24, 2010        
 
 
-8-

 
 
Management’s Annual Report on Internal Control Over Financial Reporting

   The following sets forth, in accordance with Section 404(a) of the Sarbanes-Oxley Act of 2002 and Item 308(a) of the Securities and Exchange Commission’s Regulation S-K, the annual report of management of the Company on the Company’s internal control over financial reporting.

1. Management of the Company is responsible for establishing and maintaining adequate internal control over financial reporting in a process designed by, or under the supervision of the Company’s Chief Executive Officer and Chief Financial Officer, and effected by the Company’s Board of Directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles and includes those policies and procedures that:

 
·
Pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the Company;
 
 
·
Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the Company; and
 
 
·
Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company’s assets that could have a material effect on the financial statements.
 
2. Management of the Company, in accordance with Rule 13a-15(d) under the Securities Exchange Act of 1934 and with the participation of the Company’s Chief Executive
Officer and Chief Financial Officer, evaluated the effectiveness of the Company’s internal control over financial reporting as of June 27, 2010.  The framework on which management’s evaluation of the Company’s internal control over financial reporting is based is the “Internal Control-Integrated Framework” published in 1992 by the Committee of Sponsoring Organizations (“COSO”) of the Treadway Commission.

3. Management has determined that the Company’s internal control over financial reporting, as of June 27, 2010, was effective.  No material weaknesses in the Company’s internal control over financial reporting were identified by management.  Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.  Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

4. This annual report does not include an attestation report of the Company’s registered public accounting firm regarding internal control over financial reporting.  Management’s report was not subject to attestation by the Company’s independent registered public accounting firm pursuant to a permanent exemption for non-accelerated filers from the internal control audit requirements of Section 404(b) of the Sarbanes-Oxley Act of 2002.

 
-9-

 

Exhibit99(b)
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

LIQUIDITY AND CAPITAL RESOURCES
 
   The Company views a strong financial position as a major benefit to shareholders and emphasizes payment of dividends as part of its financial plan.  A portion of earnings has consistently been invested to create a reserve to protect the Company in downturns in business, to capitalize on opportunities for expansion and modernization and to provide a secure source of income.  For these reasons, the Company prefers a conservative approach to investing rather than taking greater risk for possible rapid growth.  The Company balances market volatility by using both fixed income and equity investments in managing its reserve funds.  Any equity security is subject to price fluctuation, however, the stocks held by the Company have relatively low volatility.  The Company has long been invested in a Government National Mortgage Association (“Ginnie Mae”) fund and domestically domiciled stocks with the perceived potential of appreciation, primarily telecommunications stocks.  This diversity also provides a measure of safety of principal.

   Common stocks in our portfolio have come from spin-offs, mergers and acquisitions of AT&T and United Telecommunications (now Sprint) purchased in 1979 and 1984.  While not all stocks in the portfolio are domestic American companies any longer, since the original purchases at an approximate cost of $630,000, we have received approximately $962,000 from mergers and sales and over $2,700,000 in dividends, the majority of which are tax favored in the form of exclusion from federal taxable income.  These marketable securities are carried at their fair value on the last day of the year.  The value of the securities on June 27, 2010 was approximately $3.3 million, unchanged from June 28, 2009.
 
   Short-term investments consisting mainly of Certificates of Deposits, cash and cash equivalents totaled $9,716,000 at the end of fiscal 2010 compared to $11,020,000 at the end of fiscal 2009.

   The Company's position in all the above investments is a source of expansion capital.    Potential volatility in the trading prices of the marketable securities held by the Company could impact the Company’s opportunities for expansion.  The Board of Directors reviews the portfolio weekly and any use of this reserve at its quarterly meetings.

   Cash receipts exceeded day-to-day cash needs by $2,945,000.  Equipment purchases during fiscal year 2010 used approximately $942,000 and short-term cash was used to meet the balance required to pay dividends of $3,187,444.

   The Company is considering additional properties for the development of new bowling centers.  The Company has made no application for third party funding as cash and cash flows are sufficient to finance all contemplated purchases and to meet short-term purchase commitments and operating lease commitments.

   The Company paid cash dividends totaling approximately $3.2 million, or $.62 per share to shareholders during the 2010 fiscal year, making this the thirty-eighth consecutive year of increased regular dividends per share.  In June 2010, the Company declared a quarterly $.155 per share dividend paid in August 2010.  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 at such time.

 
-10-

 
 
OVERVIEW

    The Company is in the entertainment business which, by its nature, has ups and downs based on consumer tastes and whims.  Generally, promotional and open play bowling which depends on the public’s discretionary budget dollars and their choices, accounts for more than half of our business.  An unstable economy can lead many to participate in entertainment that is close to home and relatively inexpensive.  Bowling has those advantages.  However, the longer the economy remains unstable, the less willing people are to spend on other than necessities.  Current economic conditions continue to create challenging times, but our response will be helped by having the resources to be able to promote the sport.  Weather is also a factor, especially for casual bowlers.  While extreme heat or rainy weather prompt people to look for indoor activities, heavy snow storms can keep customers from reaching the centers.  Postponed league games are made up later in the season, but lost open play income is never recovered.
 
RESULTS OF OPERATIONS

    The combination of adverse weather in our northern market areas during the second and third quarters of fiscal 2010 and the ongoing negative economic climate, resulting in lower traffic, was the primary cause of the 39.5% drop in net earnings for fiscal year ended June 27, 2010.    In fiscal 2010, the Mid-Atlantic region suffered the worst winter on record, with three of four major snowstorms occurring on weekends.  Center closings due to these storms at the height of the open play bowling season resulted in the loss of non-league bowling and restaurant sales that cannot be recaptured.  Snow removal expense due to the storms, also a record amount, exceeded $190,000.

    In fiscal 2009 the Company received a final settlement of $261,000, included under Recoveries as a credit in Operating Expenses, from a claim under its business interruption insurance for lost income from its Falls Church center which was closed from February 2007 through March 2008 due to roof damage from an ice storm.  Fiscal year 2009 comparisons to the prior year are influenced by the difference of months in operation at the Falls Church location.  Fiscal years 2010 and 2009 each consisted of 52 weeks and nineteen centers were in operation throughout both years.
 
    The following table sets forth the items in our consolidated summary of operations for the fiscal years ended June 27, 2010 and June 28, 2009, respectively, and the dollar and percentage changes therein.
 
 
 
Fifty-two weeks ended
 
   
June 27, 2010 and June 28, 2009
 
   
Dollars in thousands
 
 
 
2010
   
2009
   
Change
   
% Change
 
Operating Revenues:
                       
Bowling and other
 
$
19,110
   
$
21,038
   
$
(1,928
)
   
(9.2
)%
Food, beverage & merchandise sales
   
7,974
     
8,674
     
(700
)
   
(8.1
)
Gain (loss) on sales of assets
   
43
     
(1
)
   
44
 
   
4400.0
 
     
27,127
     
29,711
     
(2,584
)
   
(8.7
)
Operating Expenses:
                               
Compensation & benefits
   
12,543
     
13,356
     
(813
)
   
(6.1
)
Cost of bowling & other
   
7,452
     
7,433
     
19
 
   
 .2
 
Cost of food, beverage & merch sales
   
2,216
     
2,503
     
(287
)
   
(11.5
)
Depreciation & amortization
   
1,687
     
1,727
     
(40
)
   
(2.3
)
Recoveries
   
-
 
   
(261
)
   
261
 
   
100.0
 
General & administrative
   
896
     
938
     
(42
)
   
(4.5
)
     
24,794
     
25,696
     
(902
)
   
(3.5
)
                                 
Operating Income
   
2,333
     
4,015
     
(1,682
)
   
(41.9
)
                                 
Interest & dividend income
   
530
     
679
     
(149
)
   
(21.9
)
                                 
Earnings before taxes
   
2,863
     
4,694
     
(1,831
)
   
 (39.0
)
Income taxes
   
1,012
     
1,637
     
(625
)
   
(38.2
)
                                 
Net Earnings
 
$
1,851
   
$
3,057
   
$
(1,206
)
   
(39.5
)
 
 
-11-

 

Operating Revenues

   Total operating revenue decreased $2,584,000 to $27.1 million in fiscal 2010 compared to an increase of $362,000 to $29.7 million in fiscal 2009.  Operating revenues excluding the loss or gain on the sale of assets decreased $2,628,000 in fiscal 2010 versus an increase of $408,000 in fiscal 2009.  Bowling and other revenue decreased $1,928,000 in fiscal 2010 versus an increase of $167,000 in fiscal 2009.  Food, beverage and merchandise sales decreased $700,000 in fiscal 2010 versus an increase of $241,000 in fiscal 2009.

Operating Expenses

   As discussed in more detail below, total operating expenses decreased 3.5%, or $902,000, in fiscal year 2010 versus an increase of 2.8%, or $706,000 in fiscal 2009.  Excluding the effect of the insurance recovery from the prior year, operating expenses were down 4.5% or $1,163,000 in fiscal 2010.  Costs for employee compensation and benefits were down 6.1% in fiscal 2009 and down 2.8% in the prior year period.  Continuing its response to economic conditions, the Company’s scheduling adjustments have resulted in savings in this category which includes contributions to our two benefit plans, both of which are defined contribution plans.  There is no additional obligation beyond the current year contribution.

   Cost of bowling and other services increased slightly, by $19,000, in fiscal 2010 compared to an increase of 8.1% or $555,000, in fiscal year 2009.  Maintenance expense was up 17%, or $161,000, in fiscal 2010 as a result of the cost of snow removal.  The increase in fiscal 2009 was primarily due to building and parking lot repairs.    Supplies expense declined 6%, or $61,000, in fiscal 2010, compared to an increase of 8% in fiscal 2009 that was partially due to the change in needs for the Falls Church center.  Advertising costs increased $105,000, or 14%, in fiscal 2010 and $194,000 or 35% in fiscal 2009 due to aggressive multi-media campaigns.  Utility costs decreased 9% in fiscal 2010 partially as a result of upgrading electric fixtures and lower gas costs.  In fiscal 2009 utility costs were up 13%.

   Cost of food, beverage and merchandise sales declined 11.5% in fiscal 2010 due to lower sales and tighter inventory control.

   Depreciation expenses decreased approximately 2% in both fiscal year 2010 and 2009 as some large assets reached full depreciation.
 
   Operating income in fiscal 2010 decreased 41.9% from $4.0 million in fiscal 2009 to $2.3 million.

Interest and Dividend Income

   The decline in interest income due primarily to lower interest rates on investments, resulted in declines of 21.9% and 16.3% in fiscal 2010 and 2009, respectively.

Income taxes

   Effective income tax rates for the Company were 35.3% for fiscal 2010 and 34.9% for fiscal 2009, the difference from statutory rates being primarily for the partial exclusion of dividends received on investments.

 
-12-

 

Net Earnings

   Net earnings in fiscal 2010 were $1.9 million, or $.36 per share, compared to $3.1 million, or $.60 per share in fiscal 2009.

CRITICAL ACCOUNTING POLICIES

   We have identified accounting for marketable investment securities as a critical accounting policy due to the significance of the amounts included in our balance sheet.  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 based on quoted market prices 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.

   We have identified accounting for the impairment of long-lived assets as a critical accounting policy due to the significance of the amounts included in our balance sheet under the caption of Land, Buildings and Equipment.  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 undiscounted future cash flows are less than the carrying amount.

 
-13-

 

805 King Farm Boulevard
Rockville, Maryland 20850
Phone 301.231.6200
Fax 301.231.7630

Report of Independent Registered Public Accounting Firm

Board of Directors and Stockholders
Bowl America Incorporated
Alexandria, Virginia

We have audited the accompanying Consolidated Balance Sheets of Bowl America Incorporated and Subsidiaries as of June 27, 2010 and June 28, 2009, and the related Consolidated Statements of Earnings and Comprehensive Earnings, Stockholders' Equity and Cash Flows for the years then ended.  These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States).  Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement.  An audit includes consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting.  Accordingly, we express no such opinion.  An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements.  An audit also includes assessing the accounting principles used and significant estimates made by management.  We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Bowl America Incorporated and Subsidiaries as of June 27, 2010 and June 28, 2009, and the results of their operations and their cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America.

/S/ Aronson & Company

Aronson & Company
Rockville, Maryland
September 24, 2010

 
-14-

 
 
Exhibit 99(a) Selected Financial Data
 
BOWL AMERICA INCORPORATED AND SUBSIDIARIES
CONSOLIDATED SUMMARY OF OPERATIONS
 
Selected Financial Data
   
For the Years Ended
 
   
June 27,
   
June 28,
   
June 29,
   
July 1,
   
July 2,
 
   
2010
   
2009
   
2008
   
2007
   
2006
 
Operating revenues
 
$
27,127,073
   
$
29,710,743
   
$
29,349,214
   
$
31,989,893
   
$
30,343,279
 
Operating expenses
   
24,793,942
     
25,696,315
     
24,990,753
     
26,481,388
     
25,410,113
 
Interest and dividend income
   
529,845
     
679,287
     
811,205
     
863,983
     
655,818
 
Investment earnings (loss)
   
   -
     
   -
     
267,237
     
(3,613
)
   
   -
 
Earnings before provision for income taxes
   
2,862,976
     
4,693,715
     
5,436,903
     
6,368,875
     
5,588,984
 
Provision for income taxes
   
1,012,264
     
1,636,433
     
1,902,363
     
2,179,932
     
1,949,409
 
Net earnings
 
$
1,850,712
   
$
3,057,282
   
$
3,534,540
   
$
4,188,943
   
$
3,639,575
 
                                         
Weighted average shares outstanding- Basic & Diluted
   
5,141,102
     
5,133,375
     
5,135,693
     
5,136,499
     
5,136,968
 
                                         
Earnings per share- Basic & Diluted
 
$
.36
   
$
.60
   
$
.69
   
$
.82
   
$
.71
 
                                         
Net cash provided by operating activities
 
$
2,944,882
   
$
6,502,922
   
$
3,499,703
   
$
6,101,075
   
$
4,292,512
 
                                         
Cash dividends paid
 
$
3,187,444
   
$
3,105,700
   
$
3,543,631
   
$
2,927,853
   
$
2,876,696
 
Cash dividends paid Per share - Class A
 
$
0.62
   
$
0.605
   
$
0.69
   
$
0.57
   
$
0.56
 
                                                       - Class B
 
$
0.62
   
$
0.605
   
$
0.69
   
$
0.57
   
$
0.56
 
                                         
Total assets
 
$
41,410,343
   
$
42,966,669
   
$
44,056,750
   
$
45,834,730
   
$
43,130,385
 
                                         
Stockholders' equity
 
$
36,403,807
   
$
37,579,197
   
$
38,214,963
   
$
39,337,237
   
$
37,088,954
 
                                         
Net book value per share
 
$
7.07
   
$
7.31
   
$
7.44
   
$
7.66
   
$
7.22
 
                                         
Net earnings as a % of beginning stock holders' equity
   
4.9
%
   
 8.0
%
   
 9.0
%
   
11.3
%
   
10.1
%
                                         
Lanes in operation
   
756
     
756
     
756
     
756
     
756
 
Centers in operation
   
19
     
19
     
19
     
19
     
19
 
 
 
-15-

 

Exhibit 99(c) Consolidated Financial Statements

BOWL AMERICA INCORPORATED AND SUBSIDIARIES
Consolidated Balance Sheets
   
As of
 
   
June 27,
   
June 28,
 
   
2010
   
2009
 
ASSETS
 
CURRENT ASSETS:
           
Cash and cash equivalents (Note 2)
 
$
2,579,487
   
$
3,459,812
 
Short-term investments (Note 3)
   
7,136,584
 
   
7,560,195
 
Inventories
   
520,372
     
509,892
 
Prepaid expenses and other
   
439,744
     
  453,007
 
Income taxes refundable
   
          634,787
     
426,657
 
TOTAL CURRENT ASSETS
   
11,310,974
     
12,409,563
 
LAND, BUILDINGS & EQUIPMENT, net (Note 4)
   
22,975,778
     
23,720,920
 
OTHER ASSETS:
               
Marketable investment securities (Note 3)
   
6,466,885
     
6,194,270
 
Cash surrender value-life insurance
   
568,626
     
542,136
 
Other
   
88,080
     
99,780
 
TOTAL OTHER ASSETS
   
7,123,591
 
   
6,836,186
 
TOTAL ASSETS
 
$
41,410,343
   
$
42,966,669
 
                 
LIABILITIES AND STOCKHOLDERS' EQUITY
 
CURRENT LIABILITIES:
               
Accounts payable
 
$
701,209
   
$
917,295
 
Accrued expenses
   
1,036,225
 
 
 
1,085,700
 
Dividends payable
   
797,781
     
796,868
 
Other current liabilities
   
292,920
     
342,404
 
Current deferred income taxes (Note 7)
   
61,563
     
            24,627
 
TOTAL CURRENT LIABILITIES
   
2,889,698
     
3,166,894
 
LONG-TERM DEFERRED COMPENSATION
   
47,675
     
51,408
 
NONCURRENT DEFERRED INCOME TAXES (Note 7)
   
2,069,163
     
2,169,170
 
TOTAL LIABILITIES
   
5,006,536
     
5,387,472
 
                 
COMMITMENTS AND CONTINGENCIES (Note 5)
               
                 
STOCKHOLDERS' EQUITY (Note 8)
               
Preferred stock, par value $10 a share:
               
Authorized and unissued,
               
2,000,000 shares
   
-
     
-
 
Common stock, par value $.10 a share:
               
Authorized, 10,000,000 shares
               
Class A issued and outstanding 3,678,509 and 3,672,615
   
367,851
     
367,261
 
Class B issued and outstanding 1,468,462
   
146,846
     
146,846
 
Additional paid-in capital
   
7,672,094
     
7,594,615
 
Accumulated other comprehensive earnings-
               
Unrealized gain on available-for-sale
               
securities, net of tax
   
1,728,872
 
   
1,643,497
 
Retained earnings
   
26,488,144
     
27,826,978
 
TOTAL STOCKHOLDERS'EQUITY
   
36,403,807
     
37,579,197
 
                 
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY
 
$
41,410,343
   
$
42,966,669
 
 
The accompanying notes to the consolidated financial statements are an integral part of these financial statements.

 
-16-

 

BOWL AMERICA INCORPORATED AND SUBSIDIARIES
  CONSOLIDATED STATEMENTS OF EARNINGS AND COMPREHENSIVE EARNINGS
   
   
For the Years Ended
 
   
June 27,
   
June 28,
 
   
2010
   
2009
 
Operating Revenues:
           
Bowling and other
  $ 19,109,668     $ 21,037,547  
Food, beverage and merchandise sales
    7,974,228       8,674,571  
Gain (loss) on sale of land, buildings and equipment
    43,177       (1,375 )
      27,127,073       29,710,743  
                 
Operating Expenses:
               
Employee compensation and benefits
    12,543,436       13,356,076  
Cost of bowling and other services
    7,452,046       7,433,061  
Cost of food, beverage and merchandise sales
    2,215,625       2,503,200  
Depreciation and amortization
    1,687,150       1,726,854  
Recoveries
    -       (261,100 )
General and administrative
    895,685       938,224  
      24,793,942       25,696,315  
                 
Operating Income
    2,333,131       4,014,428  
Interest and dividend income
    529,845       679,287  
                 
Earnings before provision for income
               
  Taxes
    2,862,976       4,693,715  
Provision for income taxes (Note 7)
               
  Current
    1,127,883       1,720,556  
  Deferred
    (115,619 )     ( 84,123 )
      1,012,264       1,636,433  
                 
Net Earnings
  $ 1,850,712     $ 3,057,282  
                 
Earnings per share-basic & diluted
  $ .36     $ .60  
                 
Weighted average shares outstanding
    5,141,102       5,133,375  
                 
Dividends paid
  $ 3,187,444     $ 3,105,700  
                 
Per share, dividends paid, Class A
  $ .62     $ .605  
                 
Per share, dividends paid, Class B
  $ .62     $ .605  
                 
                 
Net Earnings
  $ 1,850,712     $ 3,057,282  
Other comprehensive earnings- net of tax
               
Unrealized gain (loss) on available-for–sale
               
securities net of tax (tax benefit) of
               
$52,548 and ($309,664)
    85,375       (637,624 )
                 
                 
Comprehensive earnings
  $ 1,936,087     $ 2,419,658  
 
The accompanying notes to the consolidated financial statements are an integral part of these financial statements.
 
 
-17-

 

BOWL AMERICA INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
 
   
COMMON STOCK
         
Accumulated
Other
       
   
Class A
Shares
   
Class A
Amount
   
Class B
Shares
   
Class B
Amount
   
Additional
Paid-In Capital
   
Comprehensive Earnings
   
Retained
Earnings
 
Balance, June 29, 2008
   
3,667,228
   
$
366,722
     
1,468,462
   
$
146,846
   
$
7,478,838
   
$
2,281,121
   
$
27,941,436
 
Purchase of stock
   
(4,613
)
   
(461
)
   
-
     
-
     
(6,823
)
   
-
     
(39,525
)
Shares issued for ESOP
 
 
10,000
 
   
1,000
     
-
     
-
 
   
122,600
     
-
 
   
-
 
Cash dividends paid
   
-
     
-
     
-
     
-
     
-
     
-
     
(2,335,347
)
Accrued dividends declared
                                                       
June 16, 2009, payable
                                                       
August 12, 2009
   
-
     
-
     
-
     
-
     
-
     
-
     
(796,868
)
                                                         
Change in unrealized gain on
                                                       
available-for-sale securities
                                                       
(shown net of tax benefit)
   
-
     
-
     
-
     
-
     
-
     
(637,624
)
   
-
 
Net earnings for the year
   
-
     
-
     
-
     
-
     
-
     
-
     
3,057,282
 
Balance, June 28,2009
   
3,672,615
   
$
367,261
     
1,468,462
   
$
146,846
   
$
7,594,615
   
$
1,643,497
   
$
27,826,978
 
Purchase of stock
   
(106
)
   
(10
)
   
-
     
-
     
(161
)
   
-
     
(1,189
)
Shares issued for ESOP
   
 6,000
     
  600
     
-
     
-
     
 77,640
     
-
     
-
 
Cash dividends paid
   
-
     
-
     
-
     
-
     
-
     
-
     
(2,390,576
)
Accrued dividends declared
                                                       
June 22, 2010, payable
                                                       
August 4, 2010
   
-
     
-
     
-
     
-
     
-
     
-
     
(797,781
)
Change in unrealized gain on available-for-sale securities (shown net of tax)
   
-
     
-
     
-
     
-
     
-
     
  85,375
     
-
 
Net earnings for the year
   
-
     
-
     
-
     
-
     
-
     
-
     
1,850,712
 
Balance, June 27, 2010
   
3,678,509
   
$
367,851
     
1,468,462
   
$
146,846
   
$
7,672,094
   
$
1,728,872
   
$
26,488,144
 
 
The accompanying notes to the consolidated financial statements are an integral part of these financial statements.

 
-18-

 
 
BOWL AMERICA INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS

   
For the Years Ended
 
   
June 27,
   
June 28,
 
   
2010
   
2009
 
Cash Flows From Operating Activities
           
Net earnings
 
$
1,850,712
   
$
3,057,282
 
Adjustments to reconcile net earnings
               
   to net cash provided by
               
   operating activities:
               
Depreciation and amortization
   
1,687,150
 
   
1,726,854
 
Decrease in deferred income tax
   
(115,619
)
   
( 84,123
)
(Gain) loss on disposition of assets-net
   
(43,177
)
   
  1,375
 
Stock issuance – ESOP plan
 
 
78,240
     
123,600
 
Changes in assets and liabilities
               
(Increase) decrease in inventories
   
(10,479
)
   
 290,667
 
Decrease in prepaid and other
   
   13,263
     
1,506,842
 
Increase in income taxes refundable
   
(208,130
)
   
(59,673
)
Decrease (increase) in other long-term assets
   
11,700
 
   
(2,420
)
Decrease in accounts payable
   
(216,086
)
   
(2,465
)
Decrease in accrued expenses
   
(49,475
)
   
(61,824
)
(Decrease) increase in other current liabilities
   
(49,484
)
   
10,020
 
Decrease in long-term deferred compensation
   
(3,733
)
   
(3,213
)
Net cash provided by
               
   operating activities
   
2,944,882
     
6,502,922
 
                 
Cash Flows From Investing Activities
               
Expenditures for land, building and equipment
   
(942,214
)
   
(602,889
)
Sale of assets
   
43,383
     
14,500
 
Net sales (purchases) and maturities of short-term
               
   investments
   
423,611
     
(1,285,921
)
Purchases of marketable securities
   
(134,693
)
   
(133,295
)
Increase in cash surrender value
   
(26,490
)
 
 
  (12,508
)
 
               
 Net cash used in investing activities
   
(636,403
)
   
(2,020,113
)
                 
Cash Flows From Financing Activities
               
Payment of cash dividends
   
(3,187,444
)
   
(3,105,700
)
Purchase of Class A Common Stock
   
(1,360
)
   
(46,809
)
                 
Net cash used in financing activities
   
(3,188,804
)
   
(3,152,509
)
                 
Net (Decrease) increase in Cash and Equivalents
   
(880,325
)
   
1,330,300
 
                 
Cash and Equivalents, Beginning of period
   
3,459,812
     
2,129,512
 
                 
Cash and Equivalents, End of period
 
$
2,579,487
   
$
3,459,812
 
                 
Supplemental Disclosures of Cash Flow Information
               
Cash Paid During the Period for:
               
Income taxes
 
$
1,333,544
   
$
1,795,939
 
 
The accompanying notes to the consolidated financial statements are an integral part of these financial statements.
 
 
-19-

 
 
BOWL AMERICA INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1.  ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES

Organization
 
Bowl America Incorporated is engaged in the operation of 19 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, four centers in metropolitan Richmond, Virginia, and three centers in metropolitan Jacksonville, Florida.  These 19 centers contain a total of 756 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 2010 ended June 27, 2010, and fiscal year 2009 ended June 28, 2009. Fiscal years 2010 and 2009 each consisted of 52 weeks.

Subsequent Events
 
The Company has evaluated subsequent events through the time of filing these financial statements with the Securities and Exchange Commission on September 24, 2010.

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 consolidated 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, depreciation expense, 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 and long-lived assets.

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.

 
-20-

 
 
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
10-39 years
Leasehold improvements
5-10 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 undiscounted future cash flows are less than the carrying amount.

Dividends
 
It is the Company's policy to accrue a dividend liability at the time the dividends are declared.

Advertising Expense
 
It is the Company's policy to expense advertising expenditures as they are incurred.  The Company's advertising expenses for the years ending June 27, 2010, and June 28, 2009, were $849,095 and $743,748, respectively.

Inventories
 
Inventories are stated at the lower of cost (first-in, first-out method) or market.  Inventories consist of resale merchandise including food and beverage and bowling supplies.

Income Taxes
 
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.

Investment 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.

 
-21-

 
 
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 5,141,102, and 5,133,375, for fiscal years 2010 and 2009, respectively.

Comprehensive Earnings
 
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 two years in the period ended June 27, 2010.

Cash and Cash Equivalents
 
For purposes of the consolidated statements of cash flows, the Company considers money market funds, certificates of deposits, and repurchase agreements with original maturities of three months or less to be cash equivalents.  The Company maintains cash accounts which may exceed Federally insured limits during the year, but does not believe that this results in any significant credit risk.

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 27, 2010 and June 28, 2009 other current liabilities included $283,344 and $342,747, respectively, in prize fund monies.

Reclassifications
 
Certain previous year amounts have been reclassified to conform with the current year presentation.

New Accounting Standards
 
In January 2010, the Financial Accounting Standards Board (“FASB”) issued guidance to improve disclosures about fair value instruments.  The guidance requires additional disclosure about significant transfers between levels 1, 2, and 3 of the fair value hierarchy and requires disclosure of changes in level 3 activity on a gross basis.  In addition, the guidance clarifies existing requirements regarding the required level of disaggregation by class of assets and liabilities and also clarifies disclosures of inputs and valuation techniques.  The guidance became effective beginning in the Company’s third quarter of fiscal year 2010, except for the requirement to disclose level 3 activity on a gross basis, which will be effective as of the beginning of the Company’s fiscal year 2012.  The Company has adopted this guidance and the adoption did not have a material impact on the Company’s consolidated financial statements.
 
In June 2009, FASB issued guidance related to variable interest entities (VIEs) which modifies how a company determines when VIEs should be consolidated.  The guidance clarifies that the determination of whether a company is required to consolidate an entity is based on, among other things, an entity’s purpose and design  and a company’s ability to direct the activities of the entity that most significantly impact the entity’s economic performance.  The guidance requires an ongoing reassessment of whether a company is primarily beneficiary of a variable interest entity and requires additional disclosures about a company’s involvement in variable interest entities.  The guidance is effective as of the beginning of the Company’s fiscal year 2011, and its adoption is not expected to have an impact on the Company’s consolidated financial statements.

 
-22-

 
 
2.  CASH AND CASH EQUIVALENTS

Cash and cash equivalents consisted of the following:

 
 
June 27,
   
June 28,
 
   
2010
   
2009
 
Demand deposits and cash on hand
  $ 1,486,403     $ 2,949,812  
Money market funds
    755,671       -  
Repurchase agreements
    337,413       510,000  
    $ 2,579,487     $ 3,459,812  

The Company’s overnight repurchase agreements have restrictions that allow for the funds to be invested only in government backed securities.  The account balances at times exceed federally insured limits.  The Company does not believe this poses any significant risk.

3.  INVESTMENTS

The Company’s marketable securities are categorized as available-for-sale securities.  The cost for marketable securities was determined using the specific identification method.  The fair values of marketable securities are based on the quoted market price for those securities.  Short-term investments consist of certificates of deposits with maturities of generally three months to one year.  At June 27, 2010, the fair value of short-term investments was $7,136,584.  At June 28, 2009, the fair value of short-term investments was $7,560,195.  Non-current investments are marketable securities which primarily consist of telecommunications stocks and a mutual fund that invests in mortgage backed securities.  Unrealized gains and losses are reported as a component of accumulated other comprehensive earnings in Stockholders’ Equity.

As of June 27, 2010, the Company had $181,718 of gross unrealized gains from its investments in federal agency mortgage backed securities which had a fair value of $3,144,796.  As of June 28, 2009, $80,224 in gross unrealized gains were from its investments in federal agency mortgage backed securities which had a fair value of $2,908,610.  The Company’s investments were was follows:

    Original Cost     Unrealized Gain     Unrealized Loss     Fair Value  
June 27, 2010
 
 
   
 
   
 
   
 
 
Equity securities
  $ 710,799     $ 2,613,973     $ (2,683 )   $ 3,322,089  
                                 
Mutual fund     2,963,078       181,718       -       3,144,796  
                                 
Certificates of deposits     7,136,584       -       -       7,136,584  
                                 
June 28, 2009                                
Equity securities
  $ 710,799     $ 2,588,149     $ (13,288 )        
                                 
Mutual fund
    2,828,386       80,224       -       2,908,610  
                                 
Certificates of deposits and U.S. Treasury securities
    7,560,195       -       -       7,560,195  
 
 
-23-

 
 
During fiscal 2010, the Company had certain equity securities with cumulative unrealized losses of $2,683.  Management believes the unrealized losses are temporary and the Company has the ability and intent to hold these securities long enough to recover its investment.

June 27, 2010
  Less than 12 months     12 Months or greater     Total  
    Fair Value     Unrealized Loss     Fair Value     Unrealized Loss     Fair Value     Unrealized Loss  
                                     
Equity securities   $ -     $ -     $ 2,332     $ (2,683   $ 2,332     $ (2,683 )

June 28, 2009
  Less than 12 months     12 Months or greater     Total  
    Fair Value     Unrealized Loss     Fair Value     Unrealized Loss     Fair Value     Unrealized Loss  
                                     
Equity securities   $ 44,200     $ (13,288   $ -     $ -     $ 44,200     $ (13,288 )
 
The equity securities portfolio includes the following telecommunications stocks:

 
82,112
  shares of AT&T
 
2,740
  shares of CenturyLink
 
354
  shares of Fairpoint Communications
 
4,508
  shares of Frontier Communications
 
939
  shares of Idearc
 
475
  shares of LSI
 
9,969
  shares of Qwest
 
40,000
  shares of Sprint Nextel
 
18,784
  shares of Verizon
 
11,865
  shares of Vodafone
 
4,079
  shares of Windstream
 
There were no sales or exchanges of holdings in the years ended June 27, 2010 and June 28, 2009 other than the exchange of the Company’s shares of Embarq for its current shares of CenturyLink as a result of the merger of those companies in July 2009.

As stated in Note 1, the Company records its readily marketable debt and equity securities at fair value.  These assets are valued in accordance with a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value as follows:

Level 1.  Observable inputs such as quoted prices in active markets for identical assets or liabilities;
Level 2.  Inputs, other than the quoted prices in active markets, that are observable either directly or indirectly; and
Level 3.  Unobservable inputs in which there is little or no market data, which require the reporting entity to develop its own assumptions.

 
-24-

 
 
The fair value of these assets as of June 27, 2010 is as follows:

   
Quoted
   
Significant
         
Unrealized
   
Cumulative
 
   
Price for
   
Other
   
Significant
   
gains/(losses)
   
Unrealized
 
   
Identical
   
Observable
   
Unobservable
   
for the
   
gains/(losses)
 
   
Assets
   
Inputs
   
Inputs
   
Year Ended
   
as of
 
Description
 
(Level 1)
   
(Level 2)
   
(Level 3)
   
June 27,2010
   
June 27, 2010
 
                               
Equity securities
  $ 3,322,089     $ -     $ -     $ 36,429     $ 2,611,290  
                                         
Mutual fund
    3,144,796       -       -       101,494       181,718  
                                         
Certificates of deposits
     -        7,136,584        -        -        -  
TOTAL
  $ 6,466,885     $ 7,136,584       -     $ 137,923     $ 2,793,008  

The fair value of these assets as of June 28, 2009 was as follows:

   
Quoted
   
Significant
         
Unrealized
   
Cumulative
 
   
Price for
   
Other
   
Significant
   
gains/(losses)
   
Unrealized
 
   
Identical
   
Observable
   
Unobservable
   
for the
   
gains/(losses)
 
   
Assets
   
Inputs
   
Inputs
   
Year Ended
   
as of
 
Description
 
(Level 1)
   
(Level 2)
   
(Level 3)
   
June 28,2009
   
June 28, 2009
 
                               
Equity securities
  $ 3,285,660     $ -     $ -     $ (1,048,641 )   $ 2,574,861  
                                         
Mutual fund
    2,908,610       -       -       101,353       80,224  
                                         
Certificates of deposits
     -        7,560,195        -        -        -  
TOTAL
  $ 6,194,270     $ 7,560,195       -     $ (947,288 )   $ 2,655,085  

The fair value of certificates of deposits is estimated using net present value techniques and comparing the values to certificates with similar terms.

 
-25-

 
 
4.  LAND, BUILDINGS, AND EQUIPMENT
 
Land, buildings, and equipment, as cost, consisted of the following:

   
June 27,
   
June 28,
 
   
2010
   
2009
 
             
Buildings
  $ 17,541,393     $ 17,541,393  
Leasehold and building improvements