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EX-32 - EXHIBIT 32 - BOWL AMERICA INCex32.htm
EX-31.2 - EXHIBIT 31.2 - BOWL AMERICA INCex31-2.htm
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EX-20 - EXHIBIT 20 - BOWL AMERICA INCex20.htm

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

FORM  10-Q

 

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

 

FOR THE QUARTERLY PERIOD ENDED: April 2, 2017

 

COMMISSION FILE NUMBER: 001-7829

 

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)

 

 

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 X    No __

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “ large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large Accelerated Filer __      Accelerated Filer __

Non-Accelerated Filer __      Smaller Reporting Company X      Emerging Growth Company __

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. __

 

 

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

  

May 10, 2017

Class A Common Stock,

  

$.10 par value

3,746,454

  

  

Class B Common Stock,

  

$.10 par value

1,414,517

 

 

 
 

 

 

 

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

 
   

April 2,

   

March 27,

   

April 2,

   

March 27,

 
   

2017

   

2016

   

2017

   

2016

 

Operating Revenues:

                               

Bowling and other

  $ 5,298,395     $ 5,236,678     $ 13,254,733     $ 12,876,763  

Food, beverage and merchandise sales

    2,192,397       2,184,589       5,534,939       5,470,696  

Total Operating Revenues

    7,490,792       7,421,267       18,789,672       18,347,459  
                                 

Operating Expenses:

                               

Employee compensation and benefits

    2,782,206       2,764,045       8,200,918       8,247,146  

Cost of bowling and other services

    1,559,551       1,558,273       4,501,128       4,516,368  

Cost of food, beverage and merchandise sales

    631,312       607,830       1,690,770       1,640,210  

Depreciation and amortization

    260,568       334,572       828,460       1,009,354  

General and administrative

    236,785       300,079       678,126       763,448  

Total Operating Expenses

    5,470,422       5,564,799       15,899,402       16,176,526  
                                 

Gain on sale of assets

    34,376       -       34,376       -  

Operating Income

    2,054,746       1,856,468       2,924,646       2,170,933  

Interest, dividend and other income

    110,801       99,620       315,703       340,280  

Interest expense

    980       -       6,296       -  
                                 

Earnings before provision for income taxes

    2,164,567       1,956,088       3,234,053       2,511,213  
                                 

Provision for income taxes

    757,700       684,600       1,132,000       878,900  
                                 

Net Earnings

  $ 1,406,867     $ 1,271,488     $ 2,102,053     $ 1,632,313  
                                 

Earnings per share-basic & diluted

  $ .27     $ .25     $ .41     $ .32  
                                 

NET EARNINGS PER SHARE

  $ .27     $ .25     $ .41     $ .32  
                                 

Weighted average shares outstanding

    5,160,971       5,160,971       5,160,971       5,160,971  
                                 

Dividends paid

  $ 877,365     $ 877,365     $ 2,632,095     $ 2,632,095  
                                 

Per share, dividends paid, Class A

  $ .17     $ .17     $ .51     $ .51  
                                 

Per share, dividends paid, Class B

  $ .17     $ .17     $ .51     $ .51  

 

 

The operating results for the thirteen (13) and thirty-nine (39) week periods ended April 2, 2017 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

 
   

April 2,

   

March 27,

   

April 2,

   

March 27,

 
   

2017

   

2016

   

2017

   

2016

 
                                 

Net Earnings

  $ 1,406,867     $ 1,271,488     $ 2,102,053     $ 1,632,313  

Other comprehensive earnings- net of tax

                               

Unrealized (loss) gain on available- for-sale securities net of tax (benefit) of ($81,372) and $223,370 for 13 weeks, and ($140,372) and $132,302 for 39 weeks

    (132,005

)

    362,900       (228,013

)

    214,494  

Reclassification adjustment for loss (gain) included in Net Income net of tax (benefit) of ($2,227) and $9,258

    -       -       3,619       (15,041

)

                                 

Comprehensive earnings

  $ 1,274,862     $ 1,634,388     $ 1,877,659     $ 1,831,766  


 

The operating results for the thirteen (13) and thirty-nine (39) week periods ended April 2, 2017 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

 
   

April 2,

   

July 3,

 
   

2017

   

2016

 

ASSETS

 

CURRENT ASSETS:

               

Cash and cash equivalents

  $ 1,437,260     $ 986,193  

Short-term investments

    1,455,275       484,558  

Inventories

    508,922       561,217  

Prepaid expenses and other

    546,505       664,379  

TOTAL CURRENT ASSETS

    3,947,962       2,696,347  

LAND, BUILDINGS & EQUIPMENT

               

Net of accumulated depreciation of $41,305,837 and $40,987,543

    18,927,970       19,523,856  

OTHER ASSETS:

               

Marketable securities

    8,522,841       8,824,456  

Cash surrender value-life insurance

    740,161       740,161  

Other

    66,315       66,315  

TOTAL OTHER ASSETS

    9,329,317       9,630,932  

TOTAL ASSETS

  $ 32,205,249     $ 31,851,135  
                 

LIABILITIES AND STOCKHOLDERS' EQUITY

 

CURRENT LIABILITIES:

               

Accounts payable

  $ 558,521     $ 660,711  

Accrued expenses

    759,279       1,193,463  

Dividends payable

    877,365       877,365  

Income taxes payable

    73,077       207,840  

Other current liabilities

    2,243,856       325,982  

Current deferred income taxes

    27,850       27,850  

TOTAL CURRENT LIABILITIES

    4,539,948       3,293,211  

LONG-TERM DEFERRED COMPENSATION

    23,620       23,620  

NONCURRENT DEFERRED INCOME TAXES

    2,246,775       2,384,962  

TOTAL LIABILITIES

    6,810,343       5,701,793  
                 

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 3,746,454

    374,645       374,645  

Class B issued and outstanding 1,414,517

    141,452       141,452  

Additional paid-in capital

    7,854,108       7,854,108  
Accumulated other comprehensive earnings-                
Unrealized gain on available-for-sale securities, net of tax     2,762,193       2,986,587  

Retained earnings

    14,262,508       14,792,550  

TOTAL STOCKHOLDERS' EQUITY

    25,394,906       26,149,342  
                 

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY

  $ 32,205,249     $ 31,851,135  

 

See notes to condensed consolidated financial statements.

 

 
4

 

 

BOWL AMERICA INCORPORATED AND SUBSIDIARIES

 

CONDENSED CONSOLIDATED STATEMENTS  OF CASH FLOWS

(Unaudited)

 

   

Thirty-nine Weeks Ended

 
   

April 2,

   

March 27,

 
   

2017

   

2016

 

Cash Flows From Operating Activities

               

Net earnings

  $ 2,102,053     $ 1,632,313  

Adjustments to reconcile net earnings to net cash provided by operating activities:

               

Depreciation and amortization

    828,460       1,009,354  

Gain on sale of assets

    (34,376

)

    -  

Loss on involuntary cancellation of available-for-sale securities

    5,845       -  

Gain on sale of available-for-sale securities

    -       (24,299

)

Changes in assets and liabilities

               

Decrease in inventories

    52,295       67,330  

Decrease in prepaid & other

    117,874       169,928  

Decrease in income taxes refundable

    -       51,309  

(Decrease) increase in accounts payable

    (102,190

)

    160,234  

Decrease in accrued expenses

    (434,184

)

    (183,784

)

(Decrease) increase in income taxes payable

    (134,763

)

    196,565  

Increase in other current liabilities

    1,917,874       2,095,891  

Net cash provided by operating activities

    4,318,888       5,174,841  
                 

Cash Flows From Investing Activities

               

Expenditures for land, building and equip

    (238,948

)

    (234,586

)

Sale of assets

    40,750       -  

Net purchases of short-term investments

    (970,717

)

    (66

)

Proceeds from sale of available-for-sale securities

    -       1,000,000  

Purchases of marketable securities

    (66,811

)

    (54,791

)

Net cash (used in) provided by Investing activities

    ( 1,235,726

)

    710,557  
                 

Cash Flows From Financing Activities

               

Proceeds from note payable

    500,000       -  

Payment of note payable

    (500,000

)

    -  

Payment of cash dividends

    (2,632,095

)

    (2,632,095

)

                 

Net cash used in financing activities

    (2,632,095

)

    (2,632,095

)

                 

Net Increase in Cash and Equivalents

    451,067       3,253,303  
                 

Cash and Equivalents, Beginning of period

    986,193       778,367  
                 

Cash and Equivalents, End of period

  $ 1,437,260     $ 4,031,670  
                 
                 

Supplemental Disclosures of Cash Flow Information

               

Cash Paid During the Period for:

               

Interest

  $ 6,296     $ -  

Income taxes

  $ 1,266,763     $ 606,026  

 

See notes to condensed consolidated financial information.

 

 
5

 

 

BOWL AMERICA INCORPORATED AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the Thirteen and Thirty-nine Weeks Ended

April 2, 2017

(Unaudited)

 

1.  Basis for Presentation

 

The accompanying unaudited condensed consolidated financial statements of Bowl America Incorporated and subsidiaries (collectively, the "Company"), have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission.  The condensed consolidated balance sheet as of July 3, 2016 has been derived from the Company's 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.  These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company's annual report on Form 10-K for the year ended July 3, 2016.

 

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 April 2, 2017 and July 3, 2016 were as follows:

 

 

April 2, 2017

Description

 

Fair Value

   

Cost basis

   

Unrealized Gain/

(loss)

 

Short-term investments

  $ 1,455,275     $ 1,455,275     $ -  

Equity securities

  $ 5,727,527     $ 1,279,914     $ 4,447,613  

Mutual fund

  $ 2,795,314     $ 2,780,671     $ 14,643  

July 3, 2016

Description

 

Fair Value

   

Cost basis

   

Unrealized Gain

(loss)

 

Short-term investments

  $ 484,558     $ 484,558     $ -  

Equity securities

  $ 6,001,841     $ 1,285,759     $ 4,716,082  

Mutual fund

  $ 2,822,615     $ 2,713,860     $ 108,755  

 

 
6

 

 

The fair values of the Company’s investments were determined as follows:

 

April 2, 2017

 

 

 

Description

 

Quoted

Price for Identical Assets

(Level 1)

   

Significant

Other

Observable

Inputs

(Level 2)

   

Significant

Unobservable

Inputs

(Level 3)

 
                         

Certificates of deposits

  $ -     $ 1,455,275     $ -  

Equity securities

    5,727,527       -       -  

Mutual fund

    2,795,314       -       -  
                         

Total

  $ 8,522,841     $ 1,455,275     $ -  

 

July 3, 2016

 

 

 

Description

 

Quoted

Price for

Identical Assets

(Level 1)

   

Significant

Other

Observable

Inputs

(Level 2)

   

Significant

Unobservable

Inputs

(Level 3)

 
                         

Certificates of deposits

  $ -     $ 484,558     $ -  

Equity securities

    6,001,841       -       -  

Mutual fund

    2,822,615       -       -  
                         

Total

  $ 8,824,456     $ 484,558     $ -  

 

The shares of common stock included in the equity securities portfolio as of April 2, 2017 were:

 

 

AT&T shares

    82,112  

Manulife shares

    2,520  

Uniti Group shares (formerly CSAL)

    815  

NCR shares

    774  

Teradata shares

    774  

Vodafone shares

    6,471  

CenturyLink shares

    4,398  

Frontier Communications shares

    4,508  

Sprint shares

    40,000  

Verizon shares

    31,904  

Windstream shares

    679  

 

       On August 1, 2016, Dex Media, a spin off from Verizon, completed a financial restructure. Previous shares of Dex Media’s common stock were cancelled with no distribution to shareholders resulting in a loss of $5,845 on the Company’s holdings.

 

       Communications Sales & Leasing Inc (“CSAL”) changed its corporate name to Uniti Group Inc (“UNIT”) effective February 27, 2017.

 

       The Mutual fund included in the table above is Vanguard GNMA Admiral Shares #536 fund. The fair value of certificates of deposits is estimated using present value techniques and comparing the values derived from those techniques to certificates with similar values.

 

3. Note Payable

 

       In August 2016, the Company obtained a $500,000 short-term loan that was due in February 2017. The loan interest was at the one month LIBOR rate plus 2.5% with interest only payable monthly. A portion of the loan was collateralized by certificates of deposits. The loan was paid in full on January 6, 2017.

 

4. Commitments and Contingencies

 

       The Company’s purchase commitments at April 2, 2017 are for materials, supplies, services and equipment as part of the normal course of business.

 

 
7

 

 

5.  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 post-retirement plan.

 

 

6. New Accounting Standards

 

     In January 2016, the Financial Accounting Standards Board (FASB) issued guidance on equity securities that requires entities to recognize changes in unrealized gains and losses on equity securities in income in the current period unless the entity is recording the related investment under the equity method or consolidating the related entity. This amendment is effective for the Company’s fiscal year ending June 2019 with earlier adoption permitted. Management is currently assessing the impact of this standard on the Company’s financial statements.

 

     In February 2016, the FASB issued guidance on leases which requires entities to recognize right-of-use assets and lease liabilities on the balance sheet for the rights and obligations created by all leases, including operating leases, with terms of more than 12 months. The new guidance also requires additional disclosures on the amount, timing, and uncertainty of cash flows arising from leases. These disclosures include qualitative and quantitative information. This amendment is effective for the Company’s fiscal year ending June 2020 with early adoption permitted. We are in the process of evaluating the impact the adoption of this guidance will have on our consolidated financial statements and related disclosures

 

There were no new accounting pronouncements during the quarter ended April 2, 2017, that would impact the Company.

 

7.  Reclassifications

 

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

 

 
8

 

 

ITEM 2.  MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

 

FORWARD-LOOKING STATEMENTS

 

This Quarterly Report on Form 10-Q contains forward-looking statements concerning our business, operations and financial performance and condition as well as our plans, objectives and expectations for our business operations and financial performance and condition that are subject to risks and uncertainties. All statements other than statements of historical fact included in this Quarterly Report on Form 10-Q are forward-looking statements. These forward-looking statements are based on current expectations, estimates, forecasts and projections about our business, our sales and the industry in which we operate and our management’s beliefs and assumptions. These statements are not guarantees of future performance or development and involve risks, uncertainties and other factors that are in some cases beyond our control. The forward-looking statements included in this Quarterly Report on Form 10-Q are made as the date hereof. We are under no obligation to publicly update or revise any forward-looking statement as a result of new information, future events or otherwise, except as otherwise required by law.

 

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, to provide a secure source of income and to provide a predictable return to its owners.  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 (“GNMA”) 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.

 

With the exception of 13,120 shares of Verizon, the shares of common stock in our portfolio have come from spin-offs, mergers and acquisitions of AT&T and United Telecommunications (now Sprint) purchased in 1979 and 1984 and from one insurance company acquired at no cost when that company demutualized. While not all shares in the portfolio are domestic American companies any longer, since the original purchases at an approximate cost of $630,000, we have received approximately $967,000 from mergers and sales, and over $4,400,000 in dividends, the majority of which were tax favored in the form of an exclusion from federal taxable income. The dividends exclusion continues into this fiscal year. These marketable securities are carried at their fair value on the last day of each reporting period. The value of the securities on April 2, 2017 was approximately $5,728,000 and on July 3, 2016 was approximately $6,002,000.

 

The Company’s original investment in the Vanguard GNMA mutual fund began in 1988 with purchases of shares in the fund totaling approximately $1,400,000. The fund is carried at fair value on the last day of the reporting period. At April 2, 2017, the value was approximately $2,795,000.

 

Short-term investments consisting mainly of Certificates of Deposits, and cash and cash equivalents totaled $2,893,000 at the end of the fiscal third quarter of 2017 compared to $1,471,000 at July 3, 2016.

 

The Company’s position in all the above investments is a source of capital for possible expansion. 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.

 

 In August 2016 the Company obtained a $500,000 short-term loan to meet the August 2016 dividend obligation. The loan was collateralized by certificates of deposits. Interest was due and paid monthly and was based on the one-month LIBOR rate plus 2.5%. The loan was repaid in full on January 6, 2017.

 

In the nine-month period ended April 2, 2017, the Company expended approximately $239,000 for the purchase of building, entertainment and restaurant equipment. In the quarter ended March 2017 the Company signed an agreement with a third party vendor to take over operations of its amusement games. The vendor is purchasing all of the Company’s games, the majority of which are fully depreciated, and replacing them, at their expense, with new games. As of March 27, 2017, the Company had received approximately $39,000 for the games sold to that point. The agreement is for a one year period and the Company will receive a flat fee that exceeds the Company’s annual net profit on those games in recent years. The Company has no long-term debt and has no current plans to obtain additional 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.

 

 
9

 

 

The nine-month decreases in the categories of Prepaid expenses and other, Accounts Payable and Accrued Expenses are primarily due to seasonal timing of payments including compensation, insurance and taxes and for contributions to benefit plans.

 

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 April 2, 2017, league deposits of approximately $1,907,000 were included in the current liabilities category.

 

Cash flow provided by operating activities in the thirty-nine weeks ended April 2, 2017 was $4,319,000 which, along with cash on hand, and a note in the amount of $500,000, mentioned above, was sufficient to meet day-to-day cash needs and pay dividends. Cash dividends of approximately $877,000, or $.17 per share, were paid to shareholders during the quarter ended April 2, 2017, and the nine months total was approximately $2,632,000 or $.51 per share.   In March 2017 the Company declared a regular quarterly dividend of $.17 per share, payable May 16, 2017 to shareholders of record on April 20, 2017. The economic climate is part of the consideration at the Directors’ quarterly reviews of future estimates of cash flows. The Board of Directors decides the amount and timing of any dividend at its quarterly meeting based on its appraisal of the state and trends of the business and estimate of future opportunities at such time.

 

OVERVIEW

 

The Company is in the entertainment business which, by its nature, has ups and downs based on consumer tastes and preferences.  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 if the economy is perceived as unsteady, people are less willing to spend on other than necessities.  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.  The Company operates primarily in the Washington, DC area where its business is vulnerable to decreases in government spending or other downsizing of the federal government. 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.

 

RESULTS OF OPERATIONS

 

The following tables set forth the items in our consolidated summary of operations for the fiscal quarters and year-to-date periods ended April 2, 2017, and March 27, 2016, and the dollar and percentage changes therein.

 

   

Thirteen weeks ended

 
   

April 2, 2017 and March 27, 2016

 
   

Dollars in thousands

 
   

2017

   

2016

   

Change

   

% Change

 

Operating Revenues:

                               

Bowling and other

  $ 5,299     $ 5,237     $ 62       1.2  

Food, beverage and merchandise sales

    2,192       2,185       7       0.3  

Total Operating Revenue

    7,491       7,422       69       0.9  

Operating Expenses:

                               

Employee Compensation and benefits

    2,782       2,764       18       0.7  

Cost of bowling and other services

    1,560       1,559       1       0.0  

Cost of food, beverage and merchandise sales

    631       607       24       4.0  

Depreciation and amortization

    260       334       (74

)

    (22.2

)

General and administrative

    237       301       (64

)

    (21.3

)

Total Operating Expenses

    5,470       5,565       (95

)

    (1.7

)

Gain on sale of assets

    34       -       34       100.0  

Operating Income

    2,055       1,857       198       10.7  

Interest, dividend and other income

    111       99       12       12.1  

Interest expense

    1       -       1       100.0  

Earnings before taxes

    2,165       1,956       209       10.7  

Income taxes

    758       685       73       10.7  

Net Earnings

  $ 1,407       1,271       136       10.7  

 

 
10

 

 

   

Thirty-nine weeks ended

 
   

April 2, 2017 and March 27, 2016

 
   

Dollars in thousands

 
   

2017

   

2016

   

Change

   

% Change

 

Operating Revenues:

                               

Bowling and other

  $ 13,255     $ 12,877     $ 378       2.9  

Food, beverage and merchandise sales

    5,535       5,471       64       1.2  

Total Operating Revenues

    18,790       18,348       442       2.4  

Operating Expenses:

                               

Employee Compensation and benefits

    8,201       8,247       (46

)

    (0.6

)

Cost of bowling and other services

    4,501       4,517       (16

)

    (0.4

)

Cost of food, beverage and merchandise sales

    1,691       1,640       51       3.1  

Depreciation and amortization

    828       1,009       (181

)

    (17.9

)

General and administrative

    678       764       (86

)

    (11.3

)

Total Operating Expenses

    15,899       16,177       (278

)

    (1.7

)

Gain on sales of assets

    34       -       34       100.0  

Operating income

    2,925       2,171       754       34.7  

Interest, dividend and other income

    315       340       (25

)

    (7.4

)

Interest expense

    6       -       6       100.0  

Earnings before taxes

    3,234       2,511       723       28.8  

Income taxes

    1,132       879       253       28.8  

Net Earnings

  $ 2,102     $ 1,632     $ 470       28.8  

 

 

Earnings were $1,406,867 or $.27 per share for the thirteen week period and $2,102,053, or $.41 per share for the thirty-nine week periods ended April 2, 2017. For the thirteen-week and thirty-nine periods ended March 27, 2016, net earnings were $1,271,488 or $.25 per share and $1,632,313 or $.32 per share, respectively. Eighteen centers were in operation in both the current and prior year quarters. The current year quarter included unusually warm winter weather although a mid-March storm caused the postponement of some league games. Last year’s comparable quarter included the “Blizzard of 2016” which resulted in the closure of all northern market locations for up to 3 days. The holiday week between Christmas and New Year’s Day which typically falls in the third fiscal quarter fell in the fiscal second quarter this year. The operating results for fiscal 2017 periods included in this report are not necessarily indicative of results to be expected for the year.

 

                Operating Revenues

 

Total operating revenues increased $69,000 to $7,491,000 in the most recent quarter compared to a decline of $94,000 to $7,422,000 in the three-month period ended March 27, 2016.  The current fiscal nine month period operating revenues were up $442,000 versus an increase of $232,000 in the comparable nine month period a year ago.  Bowling and other revenue increased $62,000 in the quarter and $378,000 year-to-date for the periods ended April 2, 2017 versus a decline of $70,000 in the quarter and an increase of $65,000 for the nine-month period ended March 27, 2016.

 

Food, beverage and merchandise sales increased $7,000 or 0.3% in the current year quarter and were up $64,000 or 1.2% in the nine-month period.  Cost of sales increased 4.0% in the fiscal three months and 3.1% in the nine month periods ended April 2,

2017.

 

                Operating Expenses

 

Operating expenses were down $95,000 and $278,000 or 1.7% in both the current three month and nine-month period versus a decrease of  $116,000 or 2% and $104,000 or 0.6% in the three and nine month periods, respectively, last year.  Employee compensation and benefits for the fiscal 2017 third quarter were up $18,000 or 0.7% and were down $46,000 or 0.6% in the nine month period. In the comparable prior year three and nine month periods ended March 27, 2016 there were decreases of $81,000 or 2.9% and $93,000 or 1.1%, respectively. Group health insurance costs for the current nine month period decreased 7.6% as a result of changes in plan offerings and lower premiums. 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 was flat and decreased $16,000 or 0.4% in the three month and nine month periods ended April 2, 2017, respectively. In the thirty-nine weeks ended April 2, 2017, maintenance and repair costs declined $25,000 or 3.7% primarily due to lower snow removal costs in the current year. Advertising costs during the current year thirty-nine week period ended April 2, 2017, were up $3,000 or 1.3%.

 

 
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11

For the fiscal nine-month period ended April 2, 2017 utility costs were up $10,000 or 1.0 % primarily a result of higher utility taxes. Supplies and services expenses were down $5,000 or 0.8% in the current year nine-month period and were up slightly in the comparable period in the prior year. While most supply costs were higher, the decline in amusement game supplies throughout the current nine month period more than offset the increases.

 

Insurance expense excluding health insurance decreased 3.0% in the current year-to-date period versus a decrease of 9.0% in last year’s comparable period.

 

Depreciation and amortization expense was down 17.9% in the current nine-month period the result of a large group of assets reaching full depreciation.

 

The Company recorded a $34,000 gain on the sale of some of its amusement games as it transitions from owning games to receiving income from a third party vendor as described above.

 

As a result of the above, the nine-month period of fiscal 2017 resulted in operating income of $2,924,646 compared to operating income of $2,170,933 in the prior year comparable nine-month period.

 

                Interest, Dividend and Other Income

 

Interest, dividend and other income decreased $25,000 in the fiscal 2017 nine-month period and decreased $35,000 in the comparable 2016 year-to-date period, respectively. The decrease in both years relates primarily to decreases in ancillary income.

 

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 April 2, 2017. 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 April 2, 2017, that materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

 

 
12

 

 

BOWL AMERICA INCORPORATED AND SUBSIDIARIES

S.E.C. FORM 10-Q

 

PART II - OTHER INFORMATION

 

 

Item 6.  Exhibits.

 

20

Press release issued May 16, 2017 (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

101

Interactive data files for the thirteen and thirty-nine weeks ended April 2, 2017 in eXtensible Business

Reporting Language

 

 
13

 

 

SIGNATURES

 

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 16, 2017

By:  /s/ Leslie H Goldberg

  

Leslie H. Goldberg, President

  

  

  

  

  

  

Date: May 16, 2017

By:  /s/ Cheryl A Dragoo  

  

Cheryl A. Dragoo, CFO

 

 

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