10-Q 1 bowlam_10q-033113.htm FORM 10-Q bowlam_10q-033113.htm
 
FORM  10-Q

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

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

FOR THE QUARTERLY PERIOD ENDED: MARCH 31, 2013

COMMISSION FILE NUMBER: 0-7829

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, or a smaller reporting company.  See the definitions of “accelerated filer,” “large accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large Accelerated Filer __          Accelerated Filer __          Non-Accelerated Filer __          Smaller Reporting Company X

Indicate by check mark whether the registrant is a shell company (as defined by Rule 12b-2 of the Exchange Act)   Yes __    No X

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

 
Shares Outstanding at
 
April 28, 2013
Class A Common Stock,
 
$.10 par value
3,736,954
   
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
 
   
March 31,
2013
   
April 1,
2012
   
March 31,
2013
   
April 1,
2012
 
Operating Revenues:
                       
Bowling and other
 
$
5,523,397
   
$
5,447,516
   
$
13,566,115
   
$
13,849,219
 
Food, beverage and merchandise sales
   
2,210,364
     
2,291,401
     
5,559,863
     
5,815,438
 
     
7,733,761
     
7,738,917
     
19,125,978
     
19,664,657
 
                                 
Operating Expenses:
                               
Employee compensation and benefits
   
2,972,933
     
3,089,348
     
 8,839,577
     
 9,187,596
 
Cost of bowling and other services
   
1,617,082
     
1,575,872
     
4,812,867
     
5,121,198
 
Cost of food, beverage and merchandise sales
 
597,196
     
599,917
     
1,599,746
     
1,648,712
 
Depreciation and amortization
   
364,028
     
378,134
     
1,141,143
     
1,200,535
 
General and administrative
   
237,088
     
237,399
     
707,214
     
750,707
 
     
5,788,327
     
5,880,670
     
17,100,547
     
17,908,748
 
                                 
Operating Income
   
1,945,434
     
1,858,247
     
2,025,431
 
   
1,755,909
 
Interest and dividend income
   
 98,030
     
126,710
     
348,314
     
390,742
 
                                 
Earnings before provision for income taxes
   
2,043,464
     
1,984,957
     
2,373,745
     
2,146,651
 
Provision for income taxes
   
715,200
     
694,800
     
830,800
     
751,400
 
                                 
Net Earnings
 
$
1,328,264
   
$
1,290,157
   
$
1,542,945
   
$
1,395,251
 
                                 
Earnings per share-basic & diluted
 
$
.26
   
$
.25
   
$
.30
   
$
.27
 
                                 
Weighted average shares outstanding
   
5,151,471
     
5,151,471
     
5,151,471
     
5,151,471
 
                                 
Dividends paid
 
$
.00
   
$
  824,235
   
$
5,099,957
   
$
2,472,706
 
                                 
Per share, dividends paid, Class A
 
$
.00
   
$
.16
 
 
$
.99
   
$
.48
 
                                 
Per share, dividends paid, Class B
 
$
.00
   
$
.16
   
$
.99
   
$
.48
 

The operating results for the thirteen (13) and thirty-nine (39) week periods ended March 31, 2013 are not necessarily indicative of results to be expected for the year.  See notes to condensed consolidated financial statements.
 
 
2

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

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE EARNINGS
 
   
Thirteen Weeks Ended
   
Thirty-nine Weeks Ended
 
   
March 31,
2013
   
April 1,
2012
   
March 31,
2013
   
April 1,
2012
 
                         
Net Earnings
 
$
1,328,264
   
$
1,290,157
   
$
1,542,945
   
$
1,395,251
 
Other comprehensive earnings- net of tax
                               
Unrealized gain (loss)on available-for-sale securities net of tax (benefit) of $174,133 and $24,023 for 13 weeks, and $88,511 and ($47,184) for 39 weeks
   
282,909
 
   
 39,029
 
   
 143,801
 
   
(76,657
)
                                 
Comprehensive earnings
 
$
1,611,173
   
$
1,329,186
   
$
1,686,746
   
$
1,318,594
 

The operating results for the thirteen (13) and thirty-nine (39) week periods ended March 31, 2013 are not necessarily indicative of results to be expected for the year.

See notes to condensed consolidated financial statements.
 
 
3

 

BOWL AMERICA INCORPORATED AND SUBSIDIARIES
Condensed  Consolidated Balance Sheets
(Unaudited)
 
   
As of
 
   
March 31,
2013
   
July 1,
2012
 
ASSETS
 
CURRENT ASSETS:
           
Cash and cash equivalents
 
$
4,499,396
   
$
2,332,022
 
Short-term investments
   
948,724
 
   
3,863,721
 
Inventories
   
523,326
     
535,412
 
Prepaid expenses and other
   
627,752
     
613,891
 
Income taxes refundable
   
-
     
313,518
 
TOTAL CURRENT ASSETS
   
6,599,198
     
7,658,564
 
LAND, BUILDINGS & EQUIPMENT
               
Net of accumulated depreciation of $39,071,548 and $38,021,911
   
22,316,671
 
   
22,718,526
 
OTHER ASSETS:
               
Marketable securities
   
8,616,693
     
8,286,680
 
Cash surrender value-life insurance
   
619,624
     
619,624
 
Other
   
84,780
     
84,780
 
TOTAL OTHER ASSETS
   
9,321,097
 
   
8,991,084
 
TOTAL ASSETS
 
$
38,236,966
   
$
39,368,174
 
                 
LIABILITIES AND STOCKHOLDERS' EQUITY
 
CURRENT LIABILITIES:
               
Accounts payable
 
$
688,116
   
$
722,380
 
Accrued expenses
   
885,133
 
 
 
1,004,221
 
Dividends payable
   
849,992
     
824,235
 
Income taxes payable
   
223,362
     
-
 
Other current liabilities
   
2,419,460
     
295,978
 
Current deferred income taxes
   
65,552
     
65,552
 
TOTAL CURRENT LIABILITIES
   
5,131,615
     
2,912,366
 
LONG-TERM DEFERRED COMPENSATION
   
44,217
     
44,217
 
NONCURRENT DEFERRED INCOME TAXES
   
2,814,948
     
2,726,437
 
TOTAL LIABILITIES
   
7,990,780
     
5,683,020
 
                 
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 3,736,954 and 3,683,009
   
373,695
     
368,301
 
Class B issued and outstanding 1,414,517 and 1,468,462
   
141,452
     
146,846
 
Additional paid-in capital
   
7,727,264
     
7,727,264
 
Accumulated other comprehensive earnings-
               
Unrealized gain on available-for-sale securities, net of tax
   
2,682,619
 
   
2,538,818
 
Retained earnings
   
19,321,156
     
22,903,925
 
TOTAL STOCKHOLDERS' EQUITY
   
30,246,186
     
33,685,154
 
                 
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY
 
$
38,236,966
   
$
39,368,174
 
 
See notes to condensed consolidated financial statements.

 
4

 

BOWL AMERICA INCORPORATED AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS  OF CASH FLOWS
(Unaudited)
 
   
Thirty-nine Weeks Ended
 
   
March 31,
2013
   
April 1,
2012
 
Cash Flows From Operating Activities
           
Net earnings
 
$
1,542,945
   
$
1,395,251
 
Adjustments to reconcile net earnings to net cash provided by operating activities:
               
Depreciation and amortization
   
1,141,143
 
   
1,200,535
 
Changes in assets and liabilities
               
Decrease (increase) in inventories
   
 12,086
 
   
(18,128
)
(Increase) decrease in prepaid & other
   
   (13,861
)
   
  86,405
 
Decrease in income taxes refundable
   
313,518
 
   
275,847
 
Decrease in other long-term assets
   
 -
   
  
 1,000
 
Decrease in accounts payable
   
(34,264
)
   
(39,114
)
Decrease in accrued expenses
   
(119,088
)
   
(321,532
)
Increase in income taxes payable
   
223,362
     
101,512
 
Increase in other current liabilities
   
2,123,482
     
2,032,736
 
Net cash provided by operating activities
   
5,189,323
     
4,714,512
 
                 
Cash Flows From Investing Activities
               
Expenditures for land, building and equip
   
(739,288
)
   
(1,492,348
)
Net sales & maturities of short-term investments
   
2,914,997
 
   
1,634,096
 
Purchases of marketable securities
   
(97,701
)
   
(309,663
)
Net cash provided by (used in) Investing activities
   
 2,078,008
     
(167,915
)
                 
Cash Flows From Financing Activities
               
Payment of cash dividends
   
(5,099,957
)
   
(2,472,706
)
                 
Net cash used in financing activities
   
(5,099,957
)
   
(2,472,706
)
                 
Net Increase in Cash and Equivalents
   
2,167,374
 
   
2,073,891
 
                 
Cash and Equivalents, Beginning of period
   
2,332,022
     
2,361,846
 
                 
Cash and Equivalents, End of period
 
$
4,499,396
   
$
4,435,737
 
                 
Supplemental Disclosures of Cash Flow Information
               
Cash Paid During the Period for:
               
Income taxes
 
$
293,920
   
$
  256,041
 
 
See notes to condensed consolidated financial information.

 
5

 
 
BOWL AMERICA INCORPORATED AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
For the Thirty-nine Weeks Ended
March 31, 2013
(Unaudited)

1.  Basis for Presentation
 
The accompanying unaudited condensed consolidated financial statements of Bowl America Incorporated and subsidiaries (the "Company") have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission.  The condensed consolidated balance sheet as of July 1, 2012 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 not misleading.
 
In the opinion of management, the accompanying unaudited condensed consolidated financial statements reflect all adjustments and reclassifications (all of which are of a normal, recurring nature) that are necessary for the fair presentation of the Company’s financial position and results of operations for the periods presented.  It is suggested that these condensed consolidated financial statements be read in conjunction with the consolidated financial statements and notes thereto included in the Company's annual report on Form 10-K for the year ended July 1, 2012.

2.  Investments
 
The Company’s investments are categorized as available-for-sale.  Short-term investments consist of certificates of deposits with maturities of generally three months to one year.  Equity securities consist primarily of telecommunications stocks.  Mutual funds consist of federal agency mortgage backed securities (Ginnie Mae).  The fair value of the Company’s investments at March 31, 2013 and July 1, 2012 were as follows:
 
March 31, 2013
Description
 
Fair Value
   
Cost basis
   
Unrealized Gain
 
Short-term investments
  $ 948,724     $ 948,724     $ -  
Equity securities
  $ 5,085,086     $ 888,998     $ 4,196,088  
Mutual fund
  $ 3,531,607     $ 3,393,902     $ 137,705  
 
July 1, 2012
Description
 
Fair Value
   
Cost basis
   
Unrealized Gain
 
Short-term investments
  $ 3,863,721     $ 3,863,721     $ -  
Equity securities
  $ 4,788,498     $ 888,998     $ 3,899,500  
Mutual fund
  $ 3,498,182     $ 3,296,201     $ 201,981  

 
6

 

The fair values of the Company’s investments were determined as follows:
 
March 31, 2013
Description
 
Quoted
Price for Identical Assets
(Level 1)
   
Significant Other Observable Inputs
(Level 2)
   
Significant Unobservable Inputs
(Level 3)
 
                   
Certificates of deposits
  $ -     $ 948,724     $ -  
Equity securities
    5,085,086       -       -  
Mutual fund
    3,531,607       -       -  
                         
Total
  $ 8,616,693     $ 948,724     $ -  
 
July 1, 2012
Description
 
Quoted
Price for Identical Assets
(Level 1)
   
Significant Other Observable Inputs
(Level 2)
   
Significant Unobservable Inputs
(Level 3)
 
                   
Certificates of deposits
  $ -     $ 3,863,721     $ -  
Equity securities
    4,788,498       -       -  
Mutual fund
    3,498,182       -       -  
                         
Total
  $ 8,286,680     $ 3,863,721     $ -  
 
The shares of common stocks included in the portfolio as of March 31, 2013 were:

82,112
  shares of AT&T
354
  shares of Fairpoint Communications
939
  shares of Supermedia
774
  shares of NCR
774
  shares of Teradata
11,865
  shares of Vodafone
2,520
  shares of Manulife
4,398
  shares of CenturyLink
4,508
  shares of Frontier Communications
475
  shares of LSI
40,000
  shares of Sprint
23,784
  shares of Verizon
4,079
  shares of Windstream
 
The mutual fund included in the table above is Vanguard GNMA Admiral Shares #536 fund.

3.  Commitments and Contingencies

The Company’s purchase commitments at March 31, 2013 are for materials, supplies, services and equipment as part of the normal course of business.

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

5.  New Accounting Pronouncements

Comprehensive Income. In February 2013, the Financial Accounting Standards Board issued guidance to improve the reporting of amounts reclassified out of accumulated other comprehensive income. The guidance amends the presentation of changes in accumulated other comprehensive income and requires an entity to disaggregate the total change of each component of other comprehensive income either on the face of the net income statement or as a separate disclosure in the notes. This guidance is effective prospectively for fiscal years beginning after December 15, 2012. The Company adopted the guidance on January 1, 2013, as required. There was no material impact on the Consolidated Financial Statements resulting from the adoption.

 
7

 
 
6.  Conversion of Shares of Class B Common Stock

During the quarter ended March 31, 2013,  53,945 shares of Bowl America Class B Common Stock were converted into 53,945 shares of Bowl America Class A Common Stock, increasing the total number of outstanding Class A shares to 3,736,954 and decreasing the total number of Class B outstanding shares to 1,414,517 as of March 31, 2013.  Class B shares, which have the right to 10 votes per share, are not traded on any exchange and can be converted into Class A shares at any time.  Class A shares cannot be converted into Class B shares.

7.  Subsequent Events

The Company has evaluated subsequent events through the time of filing these financial statements with the Securities and Exchange Commission on May 14, 2013, and has determined that no material subsequent events have occurred.

8.  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 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 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” or “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.

The Company purchased 5,000 shares of Verizon for $178,200 in the quarter ended January 1, 2012.  The remainder of 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.  While not all stocks in the portfolio are domestic American companies any longer, since the original purchases at an approximate cost of $630,000, we have received approximately $962,000 from mergers and sales, and over $3,200,000 in dividends, the majority of which are tax favored in the form of exclusion from federal taxable income.  The fair value of the securities on March 31, 2013 was approximately $5,085,000.

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.  Except for a one time sale of approximately $666,000 in 1991, all earnings have been reinvested.  The fund is carried at fair value on the last day of the reporting period.  At March 31, 2013, the value was approximately $3,532,000.
 
Short-term investments consisting mainly of Certificates of Deposits, cash and cash equivalents totaled $5,448,000 at the end of the fiscal third quarter of 2013 compared to $6,196,000 at the end of fiscal 2012.   As noted below, short-term investments were used, along with cash on hand, to fund the dividends paid to shareholders during the quarter ended December 30, 2012.

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.

In the nine-month period ended March 31, 2013, the Company expended approximately $739,000 for the purchase of building, entertainment and restaurant equipment.  The Company has made no application for third party funding as cash and cash flows are sufficient to finance all contemplated purchases and to meet short-term purchase commitments and operating lease commitments.
 
 
9

 
 
Current liabilities generally increase during the first three quarters of the fiscal year as leagues deposit prize fund monies with the Company throughout the league season.  These funds are returned to the leagues at the end of the bowling season, generally in the fourth quarter.  At March 31, 2013, league deposits of approximately $2,123,000 were included in the current liabilities category.

Cash flow provided by operating activities in the thirty-nine weeks ended March 31, 2013 was $5,189,000 which, along with cash on hand and short-term investments, was sufficient to meet day-to-day cash needs and pay dividends. In December 2012, after reviewing cash and other reserves, the economic climate, and possible changes to federal tax rates on dividends, the Board of Directors declared a special dividend of $.50 per share paid December 28, 2012. Additionally, the Company declared a regular quarterly dividend of $.165 per share, usually paid in February, paid December 28, 2012. Total cash dividends of approximately $4,276,000, or $.83 per share, were paid to shareholders during the quarter ended December 30, 2012, and the nine months total was approximately $5,100,000 or $.99 per share. 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 future opportunities.

OVERVIEW

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

The following table sets forth the items in our consolidated summary of operations for the fiscal year-to-date periods ended March 31, 2013, and April 1, 2012, and the dollar and percentage changes therein.

   
Thirty-nine weeks ended
March 31, 2013 and April 1, 2012
 
   
Dollars in thousands
 
 
 
03/31/2013
   
04/01/2012
   
Change
   
% Change
 
Operating Revenues:
                       
Bowling and other
 
$
13,566
   
$
13,849
   
$
(283
)
   
(2.0
)%
Food, beverage & merchandise sales
   
5,560
     
5,816
     
(256
)
   
(4.4
)
     
19,126
     
19,665
     
(539
)
   
(2.7
)
Operating Expenses:
                               
Compensation & benefits
   
8,839
     
9,188
     
(349
)
   
(3.8
)
Cost of bowling & other
   
4,813
     
5,121
     
(308
)
   
(6.0
)
Cost of food, beverage & merch sales
   
1,600
     
1,649
     
(49
)
   
(3.0
)
Depreciation & amortization
   
1,141
     
1,200
     
(59
)
   
(4.9
)
General & administrative
   
707
     
751
     
(44
)
   
(5.9
)
     
17,100
     
17,909
     
(809
)
   
(4.5
)
                                 
Operating income
   
2,026
 
   
1,756
     
270
 
   
15.4
 
                                 
Interest & dividend income
   
348
     
391
     
(43
)
   
(11.0
)
                                 
Earnings before taxes
   
2,374
     
2,147
     
 227
 
   
10.6
 
Income taxes
   
831
     
752
     
79
 
   
10.5
 
                                 
Net Earnings
 
$
1,543
   
$
1,395
   
$
 148
 
   
10.6
 
 
 
10

 

Net earnings were $1,328,264 or $.26 per share for the quarter ended March 31, 2013 and $1,290,157 or $.25 per share for the quarter ended April 1, 2012.  Thirty-nine weeks year-to-date net earnings were $1,542,945 or $.30 per share and $1,395,251 or $.27 per share for the current and prior year periods, respectively.  
 
The current year quarter included both the New Year’s holiday and Spring Break week in the Metropolitan Washington, DC area.  Spring Break week occurred in the fourth quarter last year.  Management believes that the federal government’s sequestration policies are a source of unease with our customers and potential customers, especially in the Northern market area.  Although the economic conditions appear to be more positive, management believes people remain hesitant to spend discretionary dollars.  The operating results for fiscal 2013 periods included in this report are not necessarily indicative of results to be expected for the year.
 
Operating Revenues
 
Total operating revenues in the most recent quarter decreased $5,000 to $7,734,000 compared to a decrease of $536,000 to $7,739,000 in the three-month period ended April 1, 2012.  For the current fiscal nine-month period operating revenues were down $539,000 to $19,126,000 versus a decrease of $740,000 to $19,665,000 in the comparable nine-month period a year ago.  Management believes that the current year declines are partially attributable to customers concerns about discretionary spending as stated above.

Food, beverage and merchandise sales were down approximately $81,000 and $256,000 or 4% in both the current year quarter and nine-month periods, respectively.  The comparable prior year periods showed decreases of $111,000 and $155,000 or 5% and 3%, respectively.  Cost of sales were flat in the current year quarter and decreased 3% in the current year to date period.
 
Operating Expenses

Operating expenses were down $92,000 and $809,000 or 2% and 5% in the current three and nine-month periods, respectively.  Expenses in the same category last year were down $504,000 for the three-month period and down $811,000 for the nine-month period. Employee compensation and benefits were down approximately $116,000 in the current year three-month period and $348,000 in the nine-month period or 4% in each period, partially a result of lower costs due to changes in group health insurance and in scheduling adjustments.  In the prior year comparable periods the category was down 2% and 3% in each period or $83,000 and $194,000, respectively.  Included in this category of expense are contributions to our two benefit plans, both of which are defined contribution plans. There is no additional obligation beyond the current year contribution.

Cost of bowling and other services increased $41,000 or 3% in the quarter and decreased $308,000 or 6% in the nine-month periods, respectively. In the thirteen weeks ended March 31, 2013, maintenance and repair costs were down $27,000 or 14% compared to the prior year similar period.  For the nine-month period maintenance costs were down $79,000 or 13%.  Advertising costs for the nine-month current year period decreased $114,000 or 24% versus a decrease of $227,000 or 32% in the prior year comparable period.  In the nine month periods ended March 31, 2013 and April 1, 2012, respectively, utility costs were down 6% and 1%.  In the current year period, lower electric rates in our northern market and continued energy management helped offset higher natural gas billings.  Supplies and services expenses were up 5% and down 3% in the current and prior three-month periods, respectively, in part due to purchase patterns in both years.

Insurance expense excluding health insurance declined 1% in the current year-to-date period as markets harden.  In the prior year comparable period insurance expense declined 13%.

Depreciation and amortization expense was down 5% in the current year nine-month period and 8% in the prior year comparable period.

As a result of the above, the current thirty-nine week period of fiscal 2013 showed operating income of $2,026,000, an increase of approximately $270,000 from the prior year comparable period operating income of $1,756,000.
 
Interest and Dividend Income

Interest and dividend income decreased approximately $43,000 in the fiscal 2013 year-to-date period versus a decrease of $56,000 in the fiscal 2012 year-to-date period.  The decrease in the current year period is due to lower balances, lower interest rates and lower capital gains received from the Ginnie Mae fund.
 
 
11

 

CRITICAL ACCOUNTING POLICIES

Management has identified accounting for marketable investment securities as a critical accounting policy due to the significance of the amounts included in the Company’s balance sheet under the captions of Short-term investments and Marketable securities.  The Company exercises judgment in determining the classification of its investment securities as available-for-sale and in determining their fair value.  The Company records these investments at their fair value with the unrealized gain or loss recorded in accumulated other comprehensive earnings, a component of stockholders’ equity, net of deferred taxes.  Additionally, from time to time the Company must assess whether write-downs are necessary for other than temporary declines in value.

Management has identified accounting for the impairment of long-lived assets as a critical accounting policy due to the significance of the amounts included in the Company’s balance sheet under the caption of Land, Buildings and Equipment.  The Company reviews long-lived assets whenever events or changes indicate that the carrying amount of an asset may not be recoverable.  In making such evaluations, the Company compares the expected future cash flows to the carrying amount of the assets.  An impairment loss equal to the difference between the assets’ fair value and carrying value is recognized when the estimated future cash flows are less than the carrying amount.

ITEM 4. CONTROLS AND PROCEDURES.

The Company’s Chief Executive Officer and Chief Financial Officer have concluded that the Company’s disclosure controls and procedures are effective based on their evaluation of such controls and procedures as of March 31, 2013. There was no change in the Company’s internal control over financial reporting identified in connection with the evaluation that occurred during the quarter ended March 31, 2013, 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 14, 2013 (furnished herewith)
   
31.1
Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act
   
31.2
Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act
   
32
Written Statement of the Chief Executive Officer and Chief Financial Officer Pursuant to 18 U.S.C. 1350
   
101
Interactive data files for the thirteen weeks ended March 31, 2013, formatted in XBRL (eXtensible Business Reporting Language)
 
 
13

 
 
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 14, 2013
By:
/s/ Leslie H. Goldberg
   
Leslie H. Goldberg, President
     
Date: May 14, 2013
By:
/s/ Cheryl A. Dragoo
   
Cheryl A. Dragoo, Controller


14