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EX-32 - EXHIBIT 32 - BOWL AMERICA INCex32.htm
EX-20 - EXHIBIT 20 - BOWL AMERICA INCex20.htm
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EX-31.1 - EXHIBIT 31.1 - BOWL AMERICA INCex31-1.htm
 
FORM  10-Q

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

FOR THE QUARTERLY PERIOD ENDED: MARCH 27, 2011

COMMISSION FILE NUMBER: 0-1830

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)

 
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 Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
Yes__  No __

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 the definitions of “accelerated filer,” “large 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 check mark whether the registrant is a shell company (as defined by Rule 12b-2 of the Exchange Act)
    Yes __    No X

Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date:

 
Shares Outstanding at
 
April 25, 2011
Class A Common Stock,
 
$.10 par value
3,678,509
   
Class B Common Stock,
 
$.10 par value
1,468,462

 
 
 
 

 
PART 1. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS

  BOWL AMERICA INCORPORATED AND SUBSIDIARIES
  CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
  (Unaudited)
 
   
Thirteen Weeks Ended
   
Thirty-nine Weeks Ended
 
   
March 27,
   
March 28,
   
March 27,
   
March 28,
 
   
2011
   
2010
   
2011
   
2010
 
Operating Revenues:
                       
Bowling and other
 
$
5,872,814
   
$
5,833,898
   
$
14,433,458
   
$
15,010,131
 
Food, beverage and merchandise sales
   
2,401,908
     
2,458,194
     
5,971,115
     
6,247,751
 
     
8,274,722
     
8,292,092
     
20,404,573
     
21,257,882
 
                                 
Operating Expenses:
                               
Employee compensation and benefits
   
3,172,698
     
3,241,426
     
 9,382,174
     
 9,522,704
 
Cost of bowling and other services
   
1,930,569
     
2,026,064
     
5,647,496
     
5,788,535
 
Cost of food, beverage and merchandise sales
 
629,513
     
625,193
     
1,675,857
     
1,714,016
 
Depreciation and amortization
   
436,051
     
449,253
     
1,304,524
     
1,366,756
 
General and administrative
   
216,320
     
217,728
     
709,821
     
732,216
 
     
6,385,151
     
6,559,664
     
18,719,872
     
19,124,227
 
                                 
Operating Income
   
1,889,571
     
1,732,428
     
1,684,701
 
   
2,133,655
 
Interest and dividend income
   
116,742
     
136,797
     
447,553
     
411,692
 
                                 
Earnings before provision for income
                               
taxes
   
2,006,313
     
1,869,225
     
2,132,254
     
2,545,347
 
Provision for income taxes
   
722,200
     
653,900
     
767,600
     
890,900
 
                                 
Net Earnings
 
$
1,284,113
   
$
1,215,325
   
$
1,364,654
   
$
1,654,447
 
                                 
Earnings per share-basic & diluted
 
$
.25
   
$
.24
   
$
.27
   
$
.32
 
                                 
Weighted average shares outstanding
   
5,146,971
     
5,140,999
     
5,146,971
     
5,141,035
 
                                 
Dividends paid
 
$
823,515
   
$
  796,857
   
$
2,419,077
   
$
2,390,592
 
                                 
Per share, dividends paid, Class A
 
$
.16
   
$
.155
 
 
$
.47
   
$
.465
 
                                 
Per share, dividends paid, Class B
 
$
.16
   
$
.155
   
$
.47
   
$
.465
 

The operating results for the thirteen (13) and thirty-nine (39) week periods ended March 27, 2011 are not necessarily indicative of results to be expected for the year.  See notes to condensed consolidated financial statements.
 
 
 
 
2

 
BOWL AMERICA INCORPORATED AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS (CONTINUED)
(Unaudited)

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE EARNINGS
 
   
Thirteen Weeks Ended
   
Thirty-nine Weeks Ended
 
   
March 27,
   
March 28,
   
March 27,
   
March 28,
 
   
2011
   
2010
   
2011
   
2010
 
                         
Net Earnings
 
$
1,284,113
   
$
1,215,325
   
$
1,364,654
   
$
1,654,447
 
Other comprehensive earnings- net of tax
                               
Unrealized (loss) gain on available-
                               
for-sale securities net of tax of
                               
($12,065) and ($63,519) for 13 weeks,
                               
and $219,519 and $66,501 for 39 weeks
   
(19,598
)
   
(104,097
)
   
 356,647
 
   
108,043
 
                                 
Comprehensive earnings
 
$
1,264,515
   
$
1,111,228
   
$
1,721,301
   
$
1,762,490
 
                                 

The operating results for the thirteen (13) and thirty-nine (39) week periods ended March 27, 2011 are not necessarily indicative of results to be expected for the year.

See notes to condensed consolidated financial statements.
 
 
 
 
 
3

 
BOWL AMERICA INCORPORATED AND SUBSIDIARIES
Condensed  Consolidated Balance Sheets
(Unaudited)
 
   
As of
 
   
March 27,
   
June 27,
 
   
2011
   
2010
 
ASSETS
 
CURRENT ASSETS:
           
Cash and cash equivalents
 
$
4,510,391
   
$
2,579,487
 
Short-term investments
   
6,799,521
 
   
7,136,584
 
Inventories
   
498,251
     
520,372
 
Prepaid expenses and other
   
759,158
     
  439,744
 
Income taxes refundable
   
19,733
     
634,787
 
TOTAL CURRENT ASSETS
   
12,587,054
     
11,310,974
 
LAND, BUILDINGS & EQUIPMENT
               
Net of accumulated depreciation of
               
$37,477,741 and $36,345,796
   
22,579,812
 
   
22,975,778
 
OTHER ASSETS:
               
Marketable securities
   
7,192,219
     
6,466,885
 
Cash surrender value-life insurance
   
568,626
     
568,626
 
Other
   
85,780
     
88,080
 
TOTAL OTHER ASSETS
   
7,846,625
 
   
7,123,591
 
TOTAL ASSETS
 
$
43,013,491
   
$
41,410,343
 
                 
LIABILITIES AND STOCKHOLDERS' EQUITY
 
CURRENT LIABILITIES:
               
Accounts payable
 
$
643,991
   
$
701,209
 
Accrued expenses
   
932,654
 
 
 
1,036,225
 
Dividends payable
   
823,515
     
797,781
 
Other current liabilities
   
2,535,114
     
292,920
 
Current deferred income taxes
   
   61,563
     
 61,563
 
TOTAL CURRENT LIABILITIES
   
4,996,837
     
2,889,698
 
LONG-TERM DEFERRED COMPENSATION
   
47,675
     
47,675
 
NONCURRENT DEFERRED INCOME TAXES
   
2,288,682
     
2,069,163
 
TOTAL LIABILITIES
   
7,333,194
     
5,006,536
 
                 
COMMITMENTS AND CONTINGENCIES (Note 3)
               
                 
STOCKHOLDERS' EQUITY
               
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
   
367,851
     
367,851
 
Class B issued and outstanding 1,468,462
   
146,846
     
146,846
 
Additional paid-in capital
   
7,672,094
     
7,672,094
 
Accumulated other comprehensive earnings-
               
Unrealized gain on available-for-sale
               
securities, net of tax
   
2,085,519
 
   
1,728,872
 
Retained earnings
   
25,407,987
     
26,488,144
 
TOTAL STOCKHOLDERS' EQUITY
   
35,680,297
     
36,403,807
 
                 
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY
 
$
43,013,491
   
$
41,410,343
 
                 
 
See notes to condensed consolidated financial statements.
 
 
 
 
4

 

BOWL AMERICA INCORPORATED AND SUBSIDIARIES
 
CONDENSED CONSOLIDATED STATEMENTS  OF CASH FLOWS
(Unaudited)
 
   
Thirty-nine Weeks Ended
 
   
March 27,
   
March 28,
 
   
2011
   
2010
 
Cash Flows From Operating Activities
           
Net earnings
 
$
1,364,654
   
$
1,654,447
 
Adjustments to reconcile net earnings
               
to net cash provided by
               
operating activities:
               
Depreciation and amortization
   
1,304,524
 
   
1,366,756
 
Changes in assets and liabilities
               
Decrease in inventories
   
22,121
 
   
39,162
 
Increase in prepaid & other
   
(319,414
)
   
(126,885
)
Decrease (increase) in income taxes refundable
   
615,054
 
   
(46,054
)
Decrease in other long-term assets
   
2,300
   
 
11,400
 
Decrease in accounts payable
   
(57,218
)
   
(237,579
)
Decrease in accrued expenses
   
(103,571
)
   
(111,834
)
Increase in other current liabilities
   
2,242,194
     
2,208,550
 
Net cash provided by
               
operating activities
   
5,070,644
     
4,757,963
 
                 
Cash Flows From Investing Activities
               
Expenditures for land, building and equip
   
(908,558
)
   
(847,270
)
Net sales & maturities of short-term investments
   
337,063
 
   
342,765
 
Purchases of marketable securities
   
(149,168
)
   
(109,236
)
Net cash used in
               
Investing activities
   
(720,663
)
   
(613,741
)
                 
Cash Flows From Financing Activities
               
Payment of cash dividends
   
(2,419,077
)
   
(2,390,592
)
Purchase of Class A Common Stock
   
-
 
   
(1,347
)
                 
Net cash used in financing activities
   
(2,419,077
)
   
(2,391,939
)
                 
Net Increase in Cash and Equivalents
   
1,930,904
 
   
1,752,283
 
                 
Cash and Equivalents, Beginning of period
   
2,579,487
     
3,459,812
 
                 
Cash and Equivalents, End of period
 
$
4,510,391
   
$
5,212,095
 
                 
                 
Supplemental Disclosures of Cash Flow Information
               
Cash Paid During the Period for:
               
Income taxes
 
$
152,546
   
$
936,954
 
 
See notes to condensed consolidated financial information.
 
 
 
5

 
BOWL AMERICA INCORPORATED AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
For the Thirty-nine Weeks Ended
March 27, 2011
(Unaudited)

1.  Basis for Presentation
 
The accompanying unaudited condensed consolidated financial statements of Bowl America Incorporated and subsidiaries (the "Company") have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission.  The condensed consolidated balance sheet as of June 27, 2010 has been derived from the Company's June 27, 2010 audited financial statements.  Certain information and note disclosures normally included in the annual financial statements, prepared in accordance with accounting principles generally accepted in the United States of America, have been condensed or omitted pursuant to those rules and regulations, although the Company believes that the disclosures made are adequate to make the information presented not misleading.
 
In the opinion of management, the accompanying unaudited condensed consolidated financial statements reflect all adjustments and reclassifications (all of which are of a normal, recurring nature) that are necessary for the fair presentation of the Company’s financial position and results of operations for the periods presented.  It is suggested that these condensed consolidated financial statements be read in conjunction with the consolidated financial statements and notes thereto included in the Company's latest annual report to the Securities and Exchange Commission on Form 10-K for the year ended June 27, 2010.

2.  Investments

        The Company’s investments are categorized as available-for-sale.  Short-term investments consist of certificates of deposits with maturities of generally three months to one year.  Equity securities consist primarily of telecommunications stocks.  Mutual funds consist of federal agency mortgage backed securities (Ginnie Mae).  The fair value of the Company’s investments at March 27, 2011 and June 27, 2010 were as follows:


March 27, 2011
Description
 
Fair Value
   
Cost basis
   
Unrealized Gain
 
Short-term investments
  $ 6,799,521     $ 6,799,521     $ -  
Equity securities
  $ 3,976,980     $ 710,799     $ 3,266,181  
Mutual funds
  $ 3,215,239     $ 3,112,245     $ 102,994  
                         
June 27, 2010
Description
 
Fair Value
   
Cost basis
   
Unrealized Gain
 
Short-term investments
  $ 7,136,584     $ 7,136,584     $ -  
Equity securities
  $ 3,322,089     $ 710,799     $ 2,611,290  
Mutual funds
  $ 3,144,796     $ 2,963,078     $ 181,718  





 
6

 
The fair values of the Company’s investments were determined as follows:
 
March 27, 2011
Description
 
Quoted
Price for Identical Assets
(Level 1)
   
Significant Other Observable Inputs
(Level 2)
   
Significant Unobservable Inputs
(Level 3)
 
                   
Certificates of deposits
  $ -     $ 6,799,521     $ -  
Equity securities
    3,976,980       -       -  
Mutual funds
    3,215,239       -       -  
                         
Total
  $ 7,192,219     $ 6,799,521     $ -  
                         
June 27, 2010
Description
 
Quoted Price for Identical Assets
(Level 1)
   
Significant Other Observable Inputs
(Level 2)
   
Significant Unobservable Inputs
(Level 3)
 
                         
Certificates of deposits
  $ -     $ 7,136,584     $ -  
Equity securities
    3,322,089       -       -  
Mutual funds
    3,144,796       -       -  
                         
Total
  $ 6,466,885     $ 7,136,584     $ -  

 
The telecommunications stocks included in the portfolio as of March 27, 2011 were:
 
82,112 shares of AT&T
  2,740 shares of CenturyLink
  4,508 shares of Frontier Communications
     939 shares of Supermedia
     475 shares of LSI
  9,969 shares of Qwest
40,000 shares of Sprint
18,784 shares of Verizon
11,865 shares of Vodafone
  4,079 shares of Windstream
 
3.  Commitments and Contingencies

The Company’s purchase commitments at March 27, 2011 are for materials, supplies, services and equipment as part of the normal course of business.

4.  Employee benefit plans
 
The Company has two defined contribution plans with Company contributions determined by the Board of Directors.  The Company has no defined benefit plan or other postretirement plan.

5.  Subsequent Events

       The Company has evaluated subsequent events through the time of filing these financial statements with the Securities and Exchange Commission on May 10, 2011, and has determined that no material subsequent events have occurred.

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


 
7

 
ITEM 2.  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 with the objective of having funds available to protect the Company in downturns in business, to capitalize on opportunities for expansion and modernization and to provide a 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.  The Company considers that 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 at a cost of approximately $630,000.  While not all stocks in the portfolio are domestic American companies any longer, 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 quarter.  The value of the securities on March 27, 2011 was approximately $3,977,000, an increase of $28,000 from December 26, 2010.  Short-term investments consisting mainly of Certificates of Deposits, cash and cash equivalents totaled $11,310,000 at the end of the fiscal third quarter of 2011 compared to $9,716,000 at the end of fiscal 2010.  

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 investments at its quarterly meetings.

In the nine-month period ended March 27, 2011, the Company expended approximately $909,000 for the purchase of entertainment and restaurant equipment and building improvements.   The Company has made no application for third party funding as the Company believes cash and cash flows are sufficient to finance all contemplated purchases and to meet short-term purchase commitments and operating lease commitments.

The nine-month changes in the categories of Accounts Payable and Accrued Expenses are primarily due to seasonal timing of payments including cash contribution to a benefit plan.

Current liabilities generally increase during the first three quarters of the fiscal year as leagues deposit prize fund monies with the Company throughout the league season.  These funds are returned to the leagues at the end of the bowling season, generally in the fourth quarter.  At March 27, 2011, league deposits of approximately $2,247,000 were included in the current liabilities category.

Cash flow provided by operating activities in the thirty-nine weeks ended March 27, 2011 was $5,071,000 which, along with cash on hand, was sufficient to meet day-to-day cash needs and pay dividends.  Cash dividends of approximately $2,419,000, or $.47 per share, were paid to shareholders during the nine month period ended March 27, 2011.  In March 2011, the Company declared a regular quarterly dividend of $.16 per share, payable May 11, 2011.  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.

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.  Weather is also a factor, especially for casual bowlers.  While rainy weather prompts 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.  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.

 
8

 
RESULTS OF OPERATIONS
Net earnings were $1,284,113 or $.25 per share for the thirteen-week period ended March 27, 2011, and $1,215,325 or $.24 per share for the thirteen weeks ended March 28, 2010.  For the current thirty-nine week period net earnings were $1,364,654 or $.27 per share compared to $1,654,447 or $.32 per share for the comparable period a year ago.  

Management believes that the slow pace of economic recovery continues to concern the public and continues to affect our customers’ discretionary spending.  In the quarter ended March 28, 2010, our northern market centers suffered three major snow storms, two of them falling on weekends.  They were a major factor in low third quarter revenues last year.  The operating results for fiscal 2011 periods included in this report are not necessarily indicative of results to be expected for the year.

The following table sets forth the items in our consolidated summary of operations for the fiscal year-to-date periods ended March 27, 2011, and March 28, 2010, and the dollar and percentage changes therein.

   
Thirty-nine weeks ended
 
   
March 27, 2011 and March 28, 2010
 
   
Dollars in thousands
 
 
 
03/27/2011
   
03/28/2010
   
Change
   
% Change
 
Operating Revenues:
                       
Bowling and other
 
$
14,434
   
$
15,010
   
$
(576
)
   
(3.8
)%
Food, beverage & merchandise sales
   
5,971
     
6,248
     
(277
)
   
(4.4
)
     
20,405
     
21,258
     
(853
)
   
(4.0
)
Operating Expenses:
                               
Compensation & benefits
   
9,382
     
9,523
     
(141
)
   
(1.5
)
Cost of bowling & other
   
5,647
     
5,788
     
(141
)
   
(2.4
)
Cost of food, beverage & merch sales
   
1,676
     
1,714
     
(38
)
   
(2.2
)
Depreciation & amortization
   
1,305
     
1,367
     
(62
)
   
(4.5
)
General & administrative
   
710
     
732
     
(22
)
   
(3.0
)
     
18,720
     
19,124
     
(404
)
   
(2.1
)
                                 
Operating income
   
1,685
 
   
2,134
     
(449
)
   
(21.0
)
                                 
Interest & dividend income
   
447
     
411
     
36
 
   
8.2
 
                                 
Earnings before taxes
   
2,132
     
2,545
     
(413
)
   
(16.2
)
Income taxes
   
767
     
891
     
(124
)
   
(13.9
)
                                 
Net Earnings
 
$
1,365
   
$
1,654
   
$
(289
)
   
(17.5
)
                                 
 
                Operating Revenues

Total operating revenues in the most recent quarter decreased $17,000 to $8,275,000 compared to a decrease of $892,000 to $8,292,000 in the three-month period ended March 28, 2010.  For the current fiscal nine-month period operating revenues were down $853,000 versus a decrease of $2,107,000 in the comparable nine-month period a year ago.  The current year declines may be partially attributable to customers concerns about discretionary spending.  The prior year three and nine month periods included the effects of winter storms and the resulting center closings.

Food, beverage and merchandise sales were down $56,000 and $277,000 or 2% and 4% in the current year quarter and nine-month periods, respectively.  Cost of sales increased less than 1% in the current year quarter and decreased approximately $38,000 or 2% for the nine-month period.


 
 
9

 
 
                Operating Expenses

Operating expenses were down $175,000 and $404,000 or 3% and 2% in the current three and nine-month periods, respectively.  Results in the same category last year were flat for the three-month period and down $607,000 for the nine-month period. Employee compensation and benefits were down 2% in the current year three-month and nine-month periods or $69,000 and $141,000, respectively, as the Company continued to make scheduling adjustments in response to customer traffic.  In the prior year comparable periods the category was down $162,000 or 5% and $701,000 or 7%, respectively.   Included in this category of expense are 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 decreased $141,000 or 2% versus an increase of $67,000 or 1% in the nine-month periods, respectively. In the thirteen weeks ended March 27, 2011, maintenance and repair costs were down $116,000 or 33% compared to the prior year similar period when snow removal costs were $150,000.  For the nine-month period maintenance costs are down $86,000 or 10%.  Advertising costs during the current year quarter increased $16,000 or 8%.  The current nine-month period was up $93,000 or 15% versus an increase of $46,000 or 8% in the prior year comparable period.  The rises in both periods were due to increases in the amount of advertising and higher costs for that advertising.  In the nine month periods ended March 2011 and March 2010, respectively, utility costs were down $61,000 or 5% and $84,000 or 6%.  Lower fuel costs and our ongoing efforts in energy management are primarily responsible for the decreases.  Supplies and services expenses were up 2% and 3% in the current and prior nine-month periods, respectively.

Insurance expense excluding health insurance declined 4% in the current year-to-date period versus an increase of 8% in last year’s comparable period due to policy and coverage changes.  Accounting fees are down in the current year as the Company qualifies for exemption from certain requirements of the Sarbanes-Oxley Act.

Depreciation and amortization expense was down 5% in the current year nine-month period.

As a result of the above, the current thirty-nine week period of fiscal 2011 showed operating income of $1,685,000, a decrease of approximately $449,000 from the prior year comparable period operating income of $2,134,000.

                Interest and Dividend Income

Interest and dividend income increased $36,000 in the fiscal 2011 year-to-date period and decreased $87,000 in the comparable 2010 year-to-date period.  The increase in the current year period ended March 27, 2011 is due to capital gains received from the Ginnie Mae fund offsetting declining interest primarily because of lower rates.

 
 
10

 
CRITICAL ACCOUNTING POLICIES

Management has identified accounting for marketable investment securities as a critical accounting policy due to the significance of the amounts included in the Company’s balance sheet under the captions of Short-term investments and Marketable 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 earnings, 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.

Management has identified accounting for the impairment of long-lived assets as a critical accounting policy due to the significance of the amounts included in the Company’s 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 future cash flows are less than the carrying amount.

ITEM 4. 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 March 27, 2011. There was no change in the Company’s internal control over financial reporting identified in connection with the evaluation that occurred during the quarter ended March 27, 2011, that materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.


 
 
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BOWL AMERICA INCORPORATED AND SUBSIDIARIES
S.E.C. FORM 10-Q

PART II - OTHER INFORMATION

 
Item 6.  Exhibits.
 
20
Press release issued May 10, 2011 (furnished herewith)
   
31.1
Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act filed herewith
   
31.2
Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act filed herewith
   
32
Written Statement of the Chief Executive Officer and Chief Financial Officer Pursuant to 18 U.S.C. 1350 filed herewith
 
 
 
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Pursuant to the requirements of the Securities 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
   
(Registrant)
     
Date: May 10, 2011
By:
/s/ Leslie H. Goldberg
   
Leslie H. Goldberg, President
     
     
     
Date: May 10, 2011
By:
/s/ Cheryl A. Dragoo
   
Cheryl A. Dragoo, Controller


13