10-K/A 1 bwl-a20151007_10ka.htm FORM 10-K/A

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-K/A

 

ANNUAL REPORT PURSUANT TO SECTION 13 or 15(d) OF

THE SECURITIES EXCHANGE ACT OF 1934

 

For the fiscal year ended June 28, 2015

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

 

 

Class A Common stock (par value $.10)

NYSE MKT

 

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 Data 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 [X] 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. [ ]

 

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 26, 2014, which was the last business day of the registrant's most recently completed second quarter, 3,746,454 Class A common shares were outstanding, and the aggregate market value of the Class A common shares (based upon the closing price of these shares on the NYSE MKT) of Bowl America Incorporated held by non-affiliates of the registrant was approximately $34 million. As of that date 1,414,517 Class B common shares were outstanding. Class B common shareholders have the right to convert their Class B common stock to Class A common stock on a share for share basis. If all of the Class B shares were converted to Class A shares as of December 26, 2014, the total aggregate market value for both classes of common stock held by non-affiliates would be approximately $36 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 15, 2015

Class A Common Stock $.10 par value

3,746,454

Class B Common Stock $.10 par value

 1,414,517

 

 
 

 

  

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 28, 2015, are incorporated by reference into Part III of this Form 10-K. The Selected Financial Data (Item 6), Management’s Discussion & Analysis (Item 7), Financial Statements (Item 8) and Management’s Annual Report on Internal Control Over Financial Reporting (Item 9A) attached to this filing as exhibits are incorporated herein by reference.

 

 

 
 

 

   

BOWL AMERICA INCORPORATED

INDEX TO FISCAL 2015 10-K FILING

 

 

    Page
       
    PART I  
       

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.

  Mine Safety Disclosures 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.

  Controls and Procedures 3
       

 

  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 4
       

ITEM 13.

  Certain Relationships and Related Transactions, and Director Independence 4
       

ITEM 14.

  Principal Accountant Fees and Services 4
       

 

  PART IV  
       

ITEM 15.

  Exhibits and Financial Statement Schedules  

(a)

  Financial Statements 5

(b)

  Exhibits 5
       

Signatures

    6-7

 

 

 
 -i-

 

    

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 fiscal year 2015, the Company and its wholly-owned subsidiaries operated 18 bowling centers.

          

(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 2015, the Company had operating revenues from continuing operations of approximately $23.1 million, and approximately $32 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. Earnings per share for fiscal 2015 were $0.32.

 

(c) Narrative Description of Business

During fiscal year 2015, the Company operated 10 bowling centers in the greater metropolitan area of Washington, D.C., one bowling center in the greater metropolitan area of Baltimore, Maryland, three bowling centers in the greater metropolitan area of Jacksonville, Florida, and four bowling centers in the greater metropolitan area of Richmond, Virginia. These 18 bowling centers contain a total of 726 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 sells retail 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 Company’s major source of 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 competitor is Bowlmor AMF.

 

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 500 including approximately 250 full time employees.

         

(d) Financial Information about Geographic Areas 

 

The Company has no foreign operations.

 

 

 
-1-

 

 

ITEM 2. PROPERTIES

 

The Company owns its general offices which are located at 6446 Edsall Road, Alexandria, Virginia 22312.

 

Two of the Company's bowling centers are located in leased premises, and the remaining sixteen centers are owned by the Company. The Company's leases expire in fiscal 2020. 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. MINE SAFETY DISCLOSURES

 

Not Applicable.

 

PART II

 

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

 

Market Information         

The principal market on which the Company's Class A Common Stock is traded is the NYSE MKT. The Company's Class B Common Stock is not listed on any exchange and is not publicly traded. Each share of Class B Common Stock can be converted to one share of Class A Common Stock at any time.

          

The table below presents the high and low sales price of the Company's Class A Common Stock in each quarter of fiscal years 2015 and 2014.

  

2015

 

1st Qtr

   

2nd Qtr

   

3rd Qtr

   

4th Qtr

 

High

  $ 15.50     $ 15.45     $ 15.50     $ 15.50  

Low

  $ 13.12     $ 13.79     $ 14.08     $ 14.27  

 

2014

 

1st Qtr

   

2nd Qtr

   

3rd Qtr

   

4th Qtr

 

High

  $ 14.35     $ 15.34     $ 15.50     $ 15.50  

Low

  $ 13.01     $ 13.55     $ 13.65     $ 14.04  

 

Holders      

As of September 15, 2015, the approximate number of holders of record of the Company's Class A Common Stock was 297 and of the Company's Class B Common Stock was 23.

  

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 2015 and 2014.

  

Class A Common Stock

Quarter

  2015     2014  
                 

First

  17 cents     16.5 cents  

Second

  17 cents     16.5 cents  

Third

  17 cents     16.5 cents  

Fourth

  17 cents     16.5 cents  

 

 

 
-2-

 

   

Class B Common Stock

Quarter

  2015     2014  
                 

First

  17 cents     16.5 cents  

Second

  17 cents     16.5 cents  

Third

  17 cents     16.5 cents  

Fourth

  17 cents     16.5 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, the economic climate and estimate of future opportunities at such time.

  

ITEM 6. SELECTED FINANCIAL DATA

         

The information is set forth in the section of Exhibit 99(a) entitled "Selected Financial Data" on page 13 of this Form 10-K and is incorporated herein by reference. 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 of Exhibit 99(b) entitled "Management's Discussion and Analysis of Financial Condition and Results of Operations" on Pages 9 through 12 of this Form 10-K and is incorporated herein by reference.

  

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

         

The financial statements and notes thereto are set forth in Exhibit 99(c) on pages 16 through 28 of this Form 10-K and is incorporated herein by reference. Supplementary data is not required.

  

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE       

 

NONE. 

 

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 28, 2015. Additionally, the Company’s officers concluded that the Company’s disclosure controls and procedures were effective as of June 28, 2015 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.

 

 

 
-3-

 

  

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 Regulation S-K, the report of management on the Company’s internal control over financial reporting is set forth in Exhibit 99(d) in this Annual Report on Form 10-K and is included herein by reference.

         

(b) Changes in Internal Control Over Financial Reporting

         

There was no change in the Company’s internal control over financial reporting that occurred during the fourth quarter ended June 28, 2015 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.

 

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.

  

 

 
-4-

 

  

PART IV

 

ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

         

 

(a)

Financial Statements

               

The following consolidated financial statements of Bowl America Incorporated and its subsidiaries are incorporated by reference in Part II, Item 8:

               

Reports of Independent Registered Public Accounting Firms

               

Consolidated balance sheets as of June 28, 2015 and June 29, 2014

               

Consolidated statements of earnings and comprehensive earnings - years ended June 28, 2015 and June 29, 2014

               

Consolidated statements of stockholders' equity - years ended June 28, 2015 and June 29, 2014

               

Consolidated statements of cash flows - years ended June 28, 2015 and June 29, 2014

               

Notes to the consolidated financial statements - years ended June 28, 2015 and June 29, 2014

 

 

(b)

Exhibits:

3(i)a Articles of Incorporation of the Registrant and amendments through December 1994 thereto (Incorporated by reference from exhibit number 3 to the Annual Report for 1989 on Form 10-K for fiscal year ended July 2, 1995.)

               

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.)

               

10.1     Amended Employment Agreement, dated as of June 22, 2015, between the Company and Leslie H. Goldberg (incorporated by reference to Exhibit 10.1 to Form 8-K filed on June 22, 2015).

               

10.2     Amended Employment Agreement, dated as of June 22, 2015, between the Company and Cheryl A. Dragoo (incorporated by reference to Exhibit 10.1 to Form 8-K filed on June 22, 2015).

                

20 Press release dated September 24, 2015

             

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 13 hereof

               

99(b) Management’s Discussion & Analysis of Financial Condition and Results of Operations (Item 7), set forth as pages 9-12 hereof

               

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

               

99(d) Management’s Annual Report on Internal Control Over Financial Reporting, (Item 9-A) set forth as page 8 hereof

              

101 Interactive files formatted in XBRL (Extensible Business Reporting Language)

 

 

 
-5-

 

  

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, 2015

 

 

/s/ Cheryl A. Dragoo

Cheryl A. Dragoo

Chief Financial Officer,

Senior Vice President

Principal Financial and Accounting Officer

 

Date: September 24, 2015

 

 

 
-6-

 

  

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 and Director

 

 

 

 

         
Date: September 24, 2015        

 

 

 

/s/ Ruth Macklin

 

 

/s/ Cheryl A Dragoo

 

Ruth Macklin 

 

 

Cheryl A Dragoo

 

Senior Vice President, Secretary, Treasurer and Director

 

 

Senior Vice President, Principal Financial & Accounting Officer and Director

 

         
Date: September 24, 2015     Date: September 24, 2015  

 

 

 

/s/ Warren T. Braham

 

 

/s/ Nancy Hull

 

Warren T. Braham 

 

 

Nancy Hull

 

Director 

 

 

Director

 

         
Date: September 24, 2015      Date: September 24, 2015  

 

 

 

/s/ Allan L. Sher

 

 

/s/ Merle Fabian

 

Allan L. Sher

 

 

Merle Fabian

 

Director

 

 

Director

 

         
Date: September 24, 2015     Date: September 24, 2015  

 

 

 

/s/ Arthur H. Bill

 

 

 

 

Arthur H. Bill

 

 

 

 

Director

 

 

 

 

         
Date: September 24, 2015        

 

 

 
-7-

 

 

Exhibit 99(d) Management’s Annual Report on Internal Control Over Financial Reporting

 

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 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 28, 2015. 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 28, 2015, 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.

 

 

 
-8-

 

   

Exhibit 99(b) MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

 

FORWARD-LOOKING STATEMENTS

    

This Annual Report of Form 10-K 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 Annual Report on Form 10-K 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 Annual Report on Form 10-K are made as of 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.

 

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, the longer the economy remains unstable, the less willing people are to spend on other than necessities. Current economic and political conditions continue to create challenges, but our response is 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.

 

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 during 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.

    

With the exception of 13,120 shares of Verizon, the 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 and from one insurance company acquired at no cost when that company demutualized. The Company purchased a total of 10,000 shares of Verizon during previous periods at a cost of approximately $430,000 and 3,120 shares of Verizon were received as a special dividend from Vodafone. 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 $967,000 from mergers and sales, and over $4,151,000 in dividends, the majority of which were tax favored in the form of exclusion from federal taxable income. The exclusion continues into the current year. These marketable securities are carried at their fair value on the last day of each reporting period. The fair value of the securities on June 28, 2015 was approximately $5,200,000. The value of securities held at June 29, 2014 was approximately $5,400.000.

    

The Company’s original investment in the Vanguard GNMA bond 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 and at June 28, 2015, the value was approximately $3,676,000. In August 2015 approximately $1,000,000 of this fund was redeemed to meet the August 2015 dividend payment.

 

 

 
-9-

 

       

Short-term investments consisting mainly of Certificates of Deposits, and cash and cash equivalents totaled $912,000 at the end of fiscal 2015 compared to $2,295,000 at the end of fiscal 2014.

    

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. The Company has made no application for third party funding as cash and cash flows are currently sufficient to finance all contemplated purchases and to meet short-term purchase commitments and operating lease commitments.    

    

Cash flow provided by operating activities for the year ended June 28, 2015, was $3,053,000. Equipment purchases during fiscal year 2015 used approximately $797,000. Proceeds from Ginnie Mae dividends totaling approximately $112,600 in fiscal year 2015 were used to purchase additional shares in the fund. Short-term cash was used to meet the balance of $3,509,000 required to pay regular dividends during the fiscal year.

    

The Company paid cash dividends totaling approximately $3.5 million, or $.68 per share, to shareholders during the 2015 fiscal year, making this the forty-third consecutive year of increased regular dividends per share. In June 2015, the Company declared a quarterly $.17 per share dividend, paid in August 2015. 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 of the business and estimate of opportunities at such time.

 

RESULTS OF OPERATIONS

     

The following table sets forth the items in our consolidated summary of operations for the fiscal fourth quarters ended June 28, 2015 and June 29, 2014, respectively, and the dollar and percentage changes therein.

  

   

Thirteen weeks ended

 
   

June 28, 2015 and June 29, 2014

 
   

Dollars in thousands

 
   

2015

   

2014

   

Change

   

% Change

 

Operating Revenues:

                               

Bowling and other

  $ 3,497     $ 3,315     $ 182       5.5

%

Food, beverage & merchandise sales

    1,512       1,441       71       4.9  
      5,009       4,756       253       5.3  

Operating Expenses:

                               

Compensation & benefits

    2,674       2,697       (23

)

    (.8

)

Cost of bowling & other

    1,285       1,316       (31

)

    (2.4

)

Cost of food, beverage & merchandise sales

    485       479       6       1.3  

Depreciation & amortization

    268       273       (5

)

    (1.8

)

General & administrative

    222       300       (78

)

    (26.0

)

      4,934       5,065       (131

)

    (2.6

)

(Loss) gain on disposal of assets

    (4

)

    9       (13

)

    (144.4

)

Operating income from continuing operations

    71       (300

)

    371       123.7  

Interest, dividend and other income

    120       102       18       17.6  

Earnings from continuing operations before taxes

    191       (198

)

    389       196.5  

Income taxes

    (13

)

    (227

)

    214       94.3  

Earnings from continuing operations

    204       29       175       603.4  

(Loss) from discontinued operations net of tax

    -       (1

)

    1       100.0  

Net Earnings

  $ 204     $ 28     $ 176       628.6  

 

 
-10-

 

 

The following table sets forth the items in our consolidated summary of operations for the fiscal years ended June 28, 2015 and June 29, 2014, respectively, and the dollar and percentage changes therein.

 

   

Fifty-two weeks ended

 
   

June 28, 2015 and June 29, 2014

 
   

Dollars in thousands

 
   

2015

   

2014

   

Change

   

% Change

 

Operating Revenues:

                               

Bowling and other

  $ 16,309     $ 16,094     $ 215       1.3

%

Food, beverage & merchandise sales

    6,816       6,686       130       1.9  
      23,125       22,780       345       1.5  

Operating Expenses:

                               

Compensation & benefits

    11,014       11,124       (110

)

    (1.0

)

Cost of bowling & other

    5,950       6,110       (160

)

    (2.6

)

Cost of food, beverage & merchandise sales

    2,086       2,062       24       1.2  

Depreciation & amortization

    1,255       1,323       (68

)

    (5.1

)

General & administrative

    910       963       (53

)

    (5.5

)

      21,215       21,582       (367

)

    (1.7

)

(Loss) gain on disposal of assets

    (4

)

    9       (13

)

    (144.4

)

Operating income from continuing operations

    1,906       1,207       699       57.9  

Interest, dividend and other income

    495       663       (168

)

    (25.3

)

Earnings from continuing operations before taxes

    2,401       1,870       531       28.4  

Income taxes

    761       497       264       53.1  

Earnings from continuing operations

    1,640       1,373       267       19.4  

(Loss) from discontinued operations net of tax

    -       (3

)

    3       100.0  

Net Earnings

  $ 1,640     $ 1,370     $ 270       19.7  

 

Net Earnings were $203,752 or $.04 per share for the thirteen week period and $1,640,229 or $.32 per share for the fifty-two week period ended June 28, 2015. Including discontinued operations, for the thirteen week and fifty-two week periods ended June 29, 2014 net earnings were $27,875 or $.01 per share and $1,370,394 or $.27 per share, respectively. Fiscal 2015 and 2014 each consisted of 52 weeks and eighteen centers were in operation throughout both years.

 

Operating Revenues

   

Total operating revenue increased 1.5%, or $345,000, to $23.1 million in fiscal 2015 compared to a decrease of 4.8%, or $1,077,000, to $22.8 million in fiscal 2014. Bowling and other revenue increased $214,000 in fiscal 2015 versus a decrease of $820,000 in fiscal 2014. Food, beverage and merchandise sales increased $130,000 in fiscal 2015 and decreased $257,000 in fiscal 2014.

 

Management believes that open play revenue was lost in both years as a result of snow storms in the normally busiest months of fiscal years 2015 and 2014. Promotional pricing throughout both fiscal years also depressed bowling revenue. Management also believes that the capricious nature of the economic recovery and federal tax and spending provisions continue to adversely influence customers’ decisions for recreational spending for both league and open play games. The Company continues to review and adjust its budget in light of current economic conditions.

 

Operating Expenses

     

As discussed in more detail below, total operating expenses decreased 1.7%, or $367,000, in fiscal year 2015 versus a decrease of 2.3%, or $514,000 in fiscal 2014. Costs for employee compensation and benefits were down 1% or $110,000 in fiscal 2015 versus a decrease of 4.4% or $507,000 in fiscal 2014. The Company continued to make scheduling adjustments resulting in a decrease in compensation. In addition, group health insurance costs declined primarily due to plan offerings and lower premiums. This category includes contributions to our two benefit plans, both of which are defined contribution plans. The contributions can only be made from profits and there is no additional obligation beyond the current year contribution.

 

 

 
-11-

 

 

Cost of bowling and other services decreased $159,000 or 2.6% in the year ended June 28, 2015 versus an increase of $14,000 or 0.2% in the prior fiscal year. Maintenance expense decreased $59,000 or 6.2% in fiscal 2015 and rose 26.2% or $198,000 in fiscal year 2014. Snow removal costs in both fiscal years were high due to winter storms. Utility costs were flat in the current fiscal year as declines in telephone expense offset increases in electric and gas expense. and increased 2.9% in fiscal 2014. Supplies expense increased 1% in fiscal 2015 and declined 5.9% in fiscal 2014. Advertising costs decreased 24.8% in fiscal 2015 and 2.4% in the prior year period. Both years included updating interiors at several locations.

    

Cost of food, beverage and merchandise sales increased $24,000 or 1.2% in fiscal 2015, primarily the result of higher food and beverage sales, and increased $41,000 or 2% in fiscal 2014, primarily due to higher merchandise sales.

    

Depreciation expenses decreased approximately $69,000 or 5.2% in fiscal 2015 versus a decrease of approximately $99,000 or 7% in the prior year after several large assets became fully depreciated.

    

Operating income from continuing operations increased 57.9% or $699,000 to $1.9 million in fiscal year 2015 from $1.2 million in fiscal 2014.

 

Interest and Dividend Income

 

Interest and dividend income decreased $168,000 or 25.4% in fiscal 2015. In the prior year the same category increased $228,000 or 52.4% primarily due to the special Vodafone dividend mentioned above and increased holdings in Verizon.

 

Income taxes

    

Effective income tax rates on continuing operations for the Company were 31.7% for fiscal 2015 and 26.5% for fiscal 2014, the difference from statutory rates is primarily due to the partial exclusion of dividends received on investments which, in fiscal 2014 was a higher portion of income than in the prior year.

 

Net Earnings

    

Net earnings from continuing operations in fiscal 2015 were $1.6 million, or $.32 per share, compared to $1.4 million, or $.27 per share in fiscal 2014.

 

Loss from discontinued operations – net of tax

     

Fiscal 2014 included a net of tax loss of $2,774 from the discontinued Winter Park, Florida location.

 

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. There were no impairment losses recorded in fiscal 2015 or 2014.

 

 

 
-12-

 

  

Exhibit 99(a) Selected Financial Data

 

BOWL AMERICA INCORPORATED AND SUBSIDIARIES

CONSOLIDATED SUMMARY OF OPERATIONS

  

Selected Financial Data

 

   

For the Years Ended

 
   

June 28,

   

June 29,

   

June 30,

   

July 1,

   

July 3,

 
   

2015

   

2014

   

2013

   

2012

   

2011

 

Operating revenues

  $ 23,124,541     $ 22,780,017     $ 23,857,281     $ 24,343,024     $ 26,154,437  

Operating expenses

    21,214,632       21,581,531       22,095,866       22,742,905       24,235,601  

(Loss) gain on disposal of land, building and equipment

    (3,854

)

    8,820       980       25,924       14,187  

Interest, dividend and other income

    494,645       662,693       435,141       499,873       579,960  

Earnings from continuing operations

                                       

before provision for income taxes

    2,400,700       1,869,999       2,197,536       2,125,916       2,512,983  

Provision for income taxes

    760,471,       496,831       711,763       626,677       866,619  

Earnings from continuing operations

  $ 1,640,229     $ 1,373,168     $ 1,485,773     $ 1,499,239     $ 1,646,364  

(Loss) gain from discontinued operations - net of tax

    -       (2,774

)

    1,669,449       (74,398

)

    (89,435

)

Net Earnings

  $ 1,640,229     $ 1,370,394     $ 3,155,222     $ 1,424,841     $ 1,556,929  
                                         

Weighted average shares outstanding- Basic & Diluted

    5,160,971       5,160,971       5,151,784       5,151,471       5,147,117  
                                         

Earnings per share-Basic & diluted

                                       

Continuing operations

  $ .32     $ .27     $ .29     $ .29     $ .32  

Discontinued operations

    .00       .00       .32       (.01

)

    (.02

)

Net earnings per share-Basic & diluted

  $ .32     $ .27     $ .61     $ .28     $ .30  
                                         

Net cash provided by operating activities

  $ 3,052,817     $ 2,053,510     $ 2,206,533     $ 2,769,286     $ 3,529,193  
                                         

Cash dividends paid

  $ 3,509,460     $ 3,406,243     $ 5,949,951     $ 3,296,942     $ 3,242,593  

Cash dividends paid Per share - Class A

  $ 0.68     $ 0.66     $ 1.155     $ 0.64     $ 0.63  

- Class B

  $ 0.68     $ 0.66     $ 1.155     $ 0.64     $ 0.63  
                                         

Total assets

  $ 32,062,409     $ 34,363,780     $ 36,725,050     $ 39,368,174     $ 40,917,762  
                                         

Stockholders' equity

  $ 26,974,079     $ 28,978,731     $ 31,031,801     $ 33,685,154     $ 35,301,391  
                                         

Net book value per share

  $ 5.23     $ 5.61     $ 6.01     $ 6.54     $ 6.85  
                                         

Net earnings as a % of beginning stockholders' equity

    5.7

%

    4.4

%

    9.4

%

    4.0

%

    4.3

%

                                         

Lanes in operation

    726       726       726       756       756  

Centers in operation

    18       18       18       19       19  

 

 

 
-13-

 

 

 

1395 Piccard Drive, Suite 240

 

 

Rockville, Maryland 20850

 

 

Phone 301.337.3305

 

 

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 28, 2015, and the related Consolidated Statements of Earnings and Comprehensive Earnings, Stockholders' Equity and Cash Flows for the year then ended. Bowl America Incorporated and Subsidiaries’ management is responsible for these consolidated financial statements. 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. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included 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, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides 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 28, 2015, and the results of their operations and their cash flows for the year then ended in conformity with accounting principles generally accepted in the United States of America.

 

/s/ MN Blum LLC

 

MN Blum, LLC

Rockville, Maryland

September 24, 2015

  

 

 
-14-

 

 

 

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 29, 2014 and the related Consolidated Statements of Earnings and Comprehensive Earnings, Stockholders' Equity and Cash Flows for the year then ended. Bowl America Incorporated and Subsidiaries’ management is responsible for these consolidated financial statements. 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. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included 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, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides 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 29, 2014, and the results of their operations and their cash flows for the year then ended in conformity with accounting principles generally accepted in the United States of America.

 

/s/ Aronson, LLC

 

Aronson, LLC

Rockville, Maryland

September 25, 2014

 

 

 
-15-

 

 

Exhibit 99(c) Consolidated Financial Statements

 

BOWL AMERICA INCORPORATED AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

  

   

As of

 
   

June 28,

   

June 29,

 
   

2015

   

2014

 

ASSETS

 

CURRENT ASSETS:

               

Cash and cash equivalents (Note 2)

  $ 778,367     $ 842,114  

Short-term investments (Note 3)

    133,729       1,453,326  

Inventories

    552,889       520,355  

Prepaid expenses and other

    488,212       610,416  

Income taxes refundable

    51,309       312,856  

TOTAL CURRENT ASSETS

    2,004,506       3,739,067  

LAND, BUILDINGS & EQUIPMENT, net (Note 4)

    20,417,454       20,887,127  

OTHER ASSETS:

               

Marketable investment securities (Note 3)

    8,866,392       8,979,499  

Cash surrender value-life insurance

    707,592       677,922  

Other

    66,465       80,165  

TOTAL OTHER ASSETS

    9,640,449       9,737,586  

TOTAL ASSETS

  $ 32,062,409     $ 34,363,780  
                 

LIABILITIES AND STOCKHOLDERS' EQUITY

 

CURRENT LIABILITIES:

               

Accounts payable

  $ 709,453     $ 681,509  

Accrued expenses

    1,001,754       1,091,098  

Dividends payable

    877,365       877,365  

Other current liabilities

    290,833       308,068  

Current deferred income taxes (Note 7)

    9,113       24,705  

TOTAL CURRENT LIABILITIES

    2,888,518       2,982,745  

LONG-TERM DEFERRED COMPENSATION

    28,897       34,088  

NONCURRENT DEFERRED INCOME TAXES (Note 7)

    2,170,915       2,368,216  

TOTAL LIABILITIES

    5,088,330       5,385,049  
                 

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 3,746,454

    374,645       374,645  

Class B issued and outstanding 1,414,517

    141,452       141,452  

Additional paid-in capital

    7,854,108       7,849,814  

Accumulated other comprehensive earnings-Unrealized gain on available-for-sale securities, net of tax

    2,452,888       2,592,603  

Retained earnings

    16,150,986       18,020,217  

TOTAL STOCKHOLDERS'EQUITY

    26,974,079       28,978,731  
                 

TOTAL LIABILITIES AND STOCKHOLDERS'EQUITY

  $ 32,062,409     $ 34,363,780  

 

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 28,     June 29,  
    2015     2014  
Operating Revenues:                

Bowling and other

  $ 16,308,611     $ 16,094,493  

Food, beverage and merchandise sales

    6,815,930       6,685,524  

Total Operating Revenue

    23,124,541       22,780,017  
                 

Operating Expenses:

               

Employee compensation and benefits

    11,014,082       11,124,100  

Cost of bowling and other services

    5,950,351       6,109,533  

Cost of food, beverage and merchandise sales

    2,086,079       2,062,262  

Depreciation and amortization

    1,254,541       1,323,276  

General and administrative

    909,579       962,360  

Total Operating Expense

    21,214,632       21,581,531  

(Loss) gain on disposal of land, buildings and equipment

    (3,854

)

    8,820  

Operating Income

    1,906,055       1,207,306  

Interest, dividend and other income

    494,645       662,693  

Earnings from continuing operations before provision for income taxes

    2,400,700       1,869,999  

Provision for income taxes from continuing Operations (Note 7)

               

Current

    886,134       723,999  

Deferred

    (125,663

)

    (227,168

)

      760,471       496,831  

Earnings from continuing operations

  $ 1,640,229     $ 1,373,168  

(Loss) from discontinued operations, net of tax (Note 10)

    -       (2,774

)

Net Earnings

    1,640,229       1,370,394  

Earnings per share-basic & diluted

               

Continuing operations

  $ .32     $ .27  

Discontinued operations

    .00       .00  

Net Earnings

    .32       .27  
                 

Weighted average shares outstanding

    5,160,971       5,160,971  
                 

Dividends paid

  $ 3,509,460     $ 3,406,243  
                 

Per share, dividends paid, Class A

  $ 0.68     $ 0.66  
                 

Per share, dividends paid, Class B

  $ 0.68     $ 0.66  
                 
Net Earnings   $ 1,640,229     $ 1,370,394  
Other comprehensive earnings- net of tax Unrealized (loss) gain on available-for–sale securities net of tax (benefit) of ($85,995) and $4,666     (139,715 )     7,578  
Comprehensive earnings   $ 1,500,514     $ 1,377,972  

 

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

         
   

Class A

Shares

   

Class A

Amount

   

Class B

Shares

   

Class B

Amount

   

Additional

Paid-In

Capital

   

Other Comprehensive Earnings

   

Retained

Earnings

 

Balance, June 30, 2013

    3,746,454     $ 374,645       1,414,517     $ 141,452     $ 7,849,814     $ 2,584,020     $ 20,081,870  

Cash dividends paid

    -       -       -       -       -       -       (2,554,682

)

Accrued dividends declared June 17, 2014 payable August 15, 2014

    -       -       -       -       -       -       (877,365

)

Change in unrealized gain on available-for- sale securities (shown net of tax)

    -       -       -       -       -       7,578       -  

Reclassification adjustment for loss included in net income, net of tax

    -       -       -       -       -       1,005       -  

Net earnings for the year

    -       -       -       -       -       -       1,370,394  

Balance, June 29, 2014

    3,746,454     $ 374,645       1,414,517     $ 141,452     $ 7,849,814     $ 2,592,603     $ 18,020,217  

Cash dividends paid

    -       -       -       -       -       -       (2,632,095

)

Accrued dividends declared June 16, 2015, payable August 12, 2015

    -       -       -       -       -       -       (877,365

)

Change in unrealized gain on available-for-sale securities (shown net of tax)

    -       -       -       -       -       (139,715

)

    -  

Repayment of employee loan

    -       -       -       -       4,294       -       -  

Net earnings for the year

    -       -       -       -       -       -       1,640,229  

Balance, June 28, 2015

    3,746,454     $ 374,645       1,414,517     $ 141,452     $ 7,854,108     $ 2,452,888     $ 16,150,986  

 

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 28,

   

June 29,

 
   

2015

   

2014

 

Cash Flows From Operating Activities

               

Net earnings

  $ 1,640,229     $ 1,370,394  

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

               

Depreciation and amortization (including discontinued operations)

    1,254,541       1,323,276  

Decrease in deferred income tax

    (126,898

)

    (205,590

)

(Loss) gain on disposition of assets-net

    3,854       (8,820

)

Gain on sale of available-for-sale securities

    -       (281

)

Changes in assets and liabilities

               

Increase in inventories

    (32,534

)

    (1,176

)

Decrease (increase) in prepaid and other

    122,204       (46,825

)

Decrease (increase) in income taxes refundable

    261,547       (254,727

)

Decrease in income taxes payable

    -       (151,227

)

Decrease in other long-term assets

    13,700       4,300  

Increase (decrease) in accounts payable

    27,944       (12,945

)

(Decrease) increase in accrued expenses

    (89,344

)

    45,453  

Decrease in other current liabilities

    ( 17,235

)

    (3,216

)

Decrease in long-term deferred compensation

    (5,191

)

    (5,106

)

                 

Net cash provided by operating activities

    3,052,817       2,053,510  
                 

Cash Flows From Investing Activities

               

Expenditures for land, building and equipment

    (796,622

)

    (260,794

)

Sale of assets

    7,900       38,700  

Net sales (purchases) and maturities of short-term investments

    1,319,597       (503,511

)

Purchases of marketable securities

    (112,603

)

    (493,419

)

Proceeds from sale of marketable securities

    -       5296  

Increase in cash surrender value

    (29,670

)

    (29,205

)

                 

Net cash provided by (used in) investing activities

    388,602       (1,242,933

)

                 

Cash Flows From Financing Activities

               

Payment of cash dividends

    (3,509,460

)

    (3,406,243

)

Repayment of stock loan

    4,294       -  
                 

Net cash used in financing activities

    (3,505,166

)

    (3,406,243

)

                 

Net Decrease in Cash and Equivalents

    (63,747

)

    (2,595,666

)

                 

Cash and Equivalents, Beginning of period

    842,114       3,437,780  
                 

Cash and Equivalents, End of period

  $ 778,367     $ 842,114  
                 

Supplemental Disclosures of Cash Flow Information

               

Cash Paid During the Period for:

               

Income taxes

  $ 633,000     $ 1,044,000  

 

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 18 bowling centers, with food and beverage service in each center. Ten centers are located in metropolitan Washington D.C., one center in metropolitan Baltimore, Maryland, four centers in metropolitan Richmond, Virginia, and three centers in metropolitan Jacksonville, Florida. These 18 centers contain a total of 726 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 2015 ended June 28, 2015, and fiscal year 2014 ended June 29, 2014. Both years consisted of 52 weeks.

 

Subsequent Events

The Company has evaluated subsequent events through the date of filing these financial statements with the Securities and Exchange Commission on September 24, 2015. In August 2015 approximately $1,000,000 of the federal agency mortgage backed securities (Vanguard GNMA fund) was redeemed to meet the August 2015 dividend payment.

 

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 (years)

3 - 10

Building and building improvements (years)

10 - 39

Leasehold improvements (years)

5 - 15

Amusement games (years)

3 - 5

    

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 28, 2015, and June 29, 2014, were $325,914 and $433,525, 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.

 

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 5,160,971, for both fiscal years 2015 and 2014.

 

 

 
-21-

 

 

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 the years ended June 28, 2015 and June 29, 2014.

 

Cash and Cash Equivalents

For purposes of the consolidated statements of cash flows, the Company considers money market funds and certificates of deposits, 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 28, 2015 and June 29, 2014 other current liabilities included $278,560 and $291,688, respectively, in prize fund monies.

 

Reclassifications

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

  

Recent accounting guidance not yet adopted 

In May 2014, the FASB issued a new standard related to revenue recognition. Under the new standard, recognition of revenue occurs when a customer obtains control of promised goods or services in an amount that reflects the consideration which the entity expects to receive in exchange for those goods or services. In addition, the standard requires disclosure of the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers. The new standard will be effective for the Company beginning July 1, 2017 and early adoption is not permitted. We are currently evaluating the impact this standard will have on the consolidated financial statements.

 

In July 2015 the FASB issued a new standard that simplifies measurement of inventory as either the lower of cost or market with market being net realizable value.  Net realizable value is the estimated selling price in the ordinary course of business less reasonably predictable completion, disposal and transportation costs.  This does not change LIFO and retail inventory method measurements.  The standard is effective for fiscal years beginning after December 15, 2016, including interim period within those fiscal years.  Earlier application is permitted. We are currently evaluating the impact this standard will have on the consolidated financial statements.

  

 

 
-22-

 

  

2. CASH AND CASH EQUIVALENTS

 

 Cash and cash equivalents consisted of the following:

  

    June 28, 2015     June 29, 2014  
                 

Demand deposits and cash on hand

  $ 558,364     $ 634,923  

Money market funds

    220,003       207,191  
    $ 778,367     $ 842,114  

 

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 28, 2015, the fair value of short-term investments was $133,729. At June 29, 2014, the fair value of short-term investments was $1,453,326. 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 28, 2015, the Company had $58,014 of gross unrealized gains from its investments in federal agency mortgage backed securities owned through a mutual fund which had a fair value of $3,676,005. As of June 29, 2014, $100,125 in gross unrealized gains were from its investments in federal agency mortgage backed securities which had a fair value of $3,605,513. The Company’s investments were as follows:

  

June 28, 2015

 

Original

Cost

   

Unrealized

Gain

   

Unrealized

Loss

   

Fair

Value

 

Equity securities

  $ 1,285,759     $ 3,910,144     $ (5,516 )   $ 5,190,387  
                                 

Mutual fund

    3,617,991       58,014       -       3,676,005  
                                 

Certificates of deposits

    133,729       -       -       133,729  
                                 

June 29, 2014

                               

Equity securities

  $ 1,285,759     $ 4,089,398     $ (1,171 )   $ 5,373,986  
                                 

Mutual fund

    3,505,388       100,125       -       3,605,513  
                                 

Certificates of deposits

    1,453,326       -       -       1,453,326  

 

 

 
-23-

 

    

During fiscal 2015 and fiscal 2014, the Company had certain equity securities with cumulative unrealized losses of $5,516 and $1,171 respectively. 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.

 

    Less than 12 months     12 Months or greater     Total  

June 28, 2015

  Fair Value     Unrealized loss     Fair Value     Unrealized loss     Fair Value     Unrealized loss  

Equity securities

  $ -     $ -     $ 329     $ (5,516 )   $ 329     $ (5,516 )

 

 

  Less than 12months     12 Months or greater     Total  
June 29, 2014   Fair Value     Unrealized loss     Fair Value     Unrealized loss     Fair Value     Unrealized loss  

Equity securities

  $ 4,674     $ (1,171 )   $ -     $ -     $ 4,674     $ (1,171 )

  

The equity securities portfolio includes the following stocks:

      

    82,112  

shares of AT&T

    4,398   shares of CenturyLink
    4,508  

shares of Frontier Communications

    774   shares of Teradata
    412  

shares of DexMedia

    774   shares of NCR
    40,000  

shares of Sprint Nextel

    31,904   shares of Verizon
    6,471  

shares of Vodafone

    679   shares of Windstream
    2,520  

shares of Manulife

    815   shares of CSAL

 

During the year ended June 28, 2015 Windstream spun off Communication Sales & Leasing (CSAL) and followed immediately with a 1-for-6 reverse split of Windstream shares.

         

During the year ended June 29, 2014, the Company purchased 5,000 shares of Verizon. In addition the Company received 3,120 shares of Verizon as a result of Vodafone’s special dividend funded by its sale of Verizon Wireless. LSI was purchased by Anago in an all cash transaction resulting in a gain of $281 on the Company’s holdings of LSI.

  

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.

     

A financial instrument’s level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement.

                                     

 

 
-24-

 

 

The fair value of these assets as of June 28, 2015 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 28, 2015

   

June 28, 2015

 
                                         

Equity securities

  $ 5,190,387     $ -     $ -     $ (183,599 )   $ 3,904,627  
                                         

Mutual fund

    3,676,005       -       -       (42,111 )     58,014  
                                         

Certificates of deposits

    -       133,729       -       -       -  

TOTAL

  $ 8,866,392     $ 133,729       -     $ (225,710 )   $ 3,962,641  

 

The fair value of these assets as of June 29, 2014 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 29, 2014

   

June 29, 2014

 
                                         

Equity securities

  $ 5,373,986     $ -     $ -     $ (70,956 )   $ 4,088,226  
                                         

Mutual fund

    3,605,513       -       -       83,200       100,125  
                                         

Certificates of deposits

    -       1,453,326       -       -       -  

TOTAL

  $ 8,979,499     $ 1,453,326       -     $ 12,244     $ 4,188,351  

 

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

 

4. LAND, BUILDINGS, AND EQUIPMENT

Land, buildings, and equipment, at cost, consisted of the following:

 

   

June 28,

2015

   

June 29,

2014

 

Buildings

  $ 18,741,152     $ 18,504,838  

Leasehold and building improvements

    8,102,338       8,069,448  

Bowling lanes and equipment

    22,404,206       22,230,327  

Land

    10,526,607       10,526,607  

Amusement games

    739,007       750,079  

Bowling lanes and equipment not yet in use

    141,938       164,123  
      60,655,248       60,245,422  

Less accumulated depreciation and amortization

    40,237,794       39,358,295  
    $ 20,417,454     $ 20,887,127  

 

 

 
-25-

 

 

Depreciation and amortization expense for buildings and equipment for fiscal years 2015 and 2014 was $1,254,541, and $1,323,276, respectively. The Company includes construction in progress costs in the bowling lanes and equipment not yet in use category until completion of the project. Bowling lanes and equipment not yet in use are not depreciated.

 

5. COMMITMENTS AND CONTINGENCIES

 

Lease Commitments

The Company and its subsidiaries are obligated under long-term real estate lease agreements for two bowling centers. Certain of the Company's real estate leases provide for increases in real estate taxes.

 

In June 2014, the Company amended a lease for one location for a five year and 3 month period with an option for an additional five year period such that the lease including the five year option now expires in 2024.  

 

At June 28, 2015, the minimum fixed rental commitments related to all non-cancelable leases, were as follows:

           

Year Ending

       

2016

  $ 318,000  

2017

    318,000  

2018

    318,000  

2019

    318,000