10-Q 1 bowlam_10q-100211.htm QUARTERLY REPORT bowlam_10q-100211.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: OCTOBER 2, 2011

COMMISSION FILE NUMBER: 0-1830

BOWL AMERICA INCORPORATED
(Exact name of registrant as specified in its charter)

MARYLAND
54-0646173
(State of Incorporation)
(I.R.S.Employer Identification No.)

6446 Edsall Road, Alexandria, Virginia  22312
(Address of principal executive offices)(Zip Code)

(703) 941-6300
(Registrant's telephone number including area code)

 
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes x  No o

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 o

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 o          Accelerated Filer o          Non-Accelerated Filer o          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 o  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
 
November 6, 2011
Class A Common Stock,
 
$.10 par value
3,683,009
   
Class B Common Stock,
 
$.10 par value
1,468,462
 
 
 

 
 
PART 1. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS

  BOWL AMERICA INCORPORATED AND SUBSIDIARIES
  CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
  (Unaudited)
 
   
Thirteen Weeks Ended
 
   
October 2,
   
September 26,
 
   
2011
   
2010
 
Operating Revenues:
           
Bowling and other
 
$
3,898,063
   
$
4,007,330
 
Food, beverage and merchandise sales
   
1,597,538
     
1,642,649
 
     
5,495,601
     
5,649,979
 
                 
Operating Expenses:
               
Employee compensation and benefits
   
3,045,399
     
3,090,984
 
Cost of bowling and other services
   
1,831,851
     
1,868,981
 
Cost of food, beverage and merchandise sales
 
482,344
     
476,384
 
Depreciation and amortization
   
423,767
     
436,422
 
General and administrative
   
254,020
     
242,184
 
     
6,037,381
     
6,114,955
 
                 
Operating Loss
   
(541,780
)
   
(464,976
Interest and dividend income
   
118,437
     
144,907
 
                 
Loss before provision for income tax benefit
   
(423,343
)
   
(320,069
)
Provision for income tax benefit
   
(148,170
)
   
 (115,200
)
                 
Net Loss
 
$
(275,173
)
 
$
   (204,869
)
                 
Loss per share-basic & diluted
 
$
(.05
)
 
$
(.04
)
                 
Weighted average shares outstanding
   
5,151,471
     
5,146,971
 
                 
Dividends paid
 
$
824,235
   
$
  797,781
 
                 
Per share, dividends paid, Class A
 
$
.16
   
$
.155
 
                 
Per share, dividends paid, Class B
 
$
.16
   
$
.155
 

 
The operating results for the thirteen (13) week period ended October 2, 2011 are not necessarily indicative of results to be expected for the year.  See notes to condensed consolidated financial statements.
 
 
2

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

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE EARNINGS
 
   
Thirteen Weeks Ended
 
   
October 2,
   
September 26,
 
   
2011
   
2010
 
             
Net Loss
 
$
(275,173
)
 
$
 (204,869
)
Other comprehensive earnings- net of tax
               
Unrealized (loss) gain on available-for-sale securities net of tax of ($150,495) and $178,183
   
(244,505
)
   
 289,487
 
                 
Comprehensive (Loss) earnings
 
$
(519,678
)
 
$
   84,618
 

 
The operating results for the thirteen (13) week period ended October 2, 2011 are not necessarily indicative of results to be expected for the year.

See notes to condensed consolidated financial statements.
 
 
3

 
 
BOWL AMERICA INCORPORATED AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
 
   
As of
 
   
October 2,
   
July 3,
 
   
2011
   
2011
 
ASSETS
 
CURRENT ASSETS:
           
Cash and cash equivalents
 
$
2,761,032
   
$
2,361,846
 
Short-term investments
   
5,190,374
     
6,297,822
 
Inventories
   
634,905
     
480,318
 
Prepaid expenses and other
   
546,136
     
  701,711
 
Income taxes refundable
   
          277,847
     
275,847
 
Current deferred income taxes
   
94,859
     
-
 
TOTAL CURRENT ASSETS
   
 9,505,153
     
10,117,544
 
LAND, BUILDINGS & EQUIPMENT, net of accumulated depreciation of 37,988,842 and 37,570,380
   
22,368,568
     
22,581,314
 
OTHER ASSETS:
               
Marketable investment securities
   
7,172,114
     
7,538,332
 
Cash surrender value-life insurance
   
594,792
     
594,792
 
Other
   
85,780
     
85,780
 
TOTAL OTHER ASSETS
   
7,852,686
     
8,218,904
 
TOTAL ASSETS
 
$
39,726,407
   
$
40,917,762
 
                 
LIABILITIES AND STOCKHOLDERS' EQUITY
 
CURRENT LIABILITIES:
               
Accounts payable
 
$
691,516
   
$
666,784
 
Accrued expenses
   
  933,093
     
1,224,237
 
Dividends payable
   
824,235
     
824,235
 
Other current liabilities
   
925,170
     
302,394
 
Current deferred income taxes
   
-
     
            53,311
 
TOTAL CURRENT LIABILITIES
   
3,374,014
     
3,070,961
 
LONG-TERM DEFERRED COMPENSATION
   
43,701
     
43,701
 
NONCURRENT DEFERRED INCOME TAXES
   
2,351,214
     
2,501,709
 
TOTAL LIABILITIES
   
5,768,929
     
5,616,371
 
                 
COMMITMENTS AND CONTINGENCIES
               
                 
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 3,683,009
   
368,301
     
368,301
 
Class B issued and outstanding 1,468,462
   
146,846
     
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
   
2,038,449
     
2,282,954
 
Retained earnings
   
23,676,618
     
24,776,026
 
TOTAL STOCKHOLDERS' EQUITY
   
33,957,478
     
35,301,391
 
                 
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY
 
$
39,726,407
   
$
40,917,762
 
 
See notes to condensed consolidated financial statements.
 
 
4

 

BOWL AMERICA INCORPORATED AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS  OF CASH FLOWS
(Unaudited)
 
   
Thirteen Weeks Ended
 
   
October 2,
   
September 26,
 
   
2011
   
2010
 
Cash Flows From Operating Activities
           
Net loss
 
$
(275,173
)
 
$
   (204,869
)
Adjustments to reconcile net loss to net cash provided by operating activities:
               
Depreciation and amortization
   
  423,767
 
   
  436,422
 
Changes in assets and liabilities
               
Increase in inventories
   
(154,587
)
   
(126,796
)
Decrease in prepaid & other
   
  155,575
     
 325,988
 
Increase in income taxes refundable
   
           (2,000
)
   
-
 
Increase in deferred tax asset
   
    (148,170
)
   
(115,200
)
Increase (decrease) in accounts payable
   
 24,732
     
(42,506
)
Decrease in accrued expenses
   
(291,144
)
   
(133,063
)
Increase in other current liabilities
   
  622,776
     
  567,185
 
Net cash provided by operating activities
   
355,776
     
  707,161
 
                 
Cash Flows From Investing Activities
               
Expenditures for land, building and equip
   
(211,021
)
   
(102,792
)
Net sales & maturities of short-term Investments
   
1,107,448
     
  865,259
 
Purchases of marketable securities
   
(28,782
)
   
(28,356
)
Net cash provided by Investing activities
   
867,645
 
   
734,111
 
                 
Cash Flows From Financing Activities
               
Payment of cash dividends
   
(824,235
)
   
(797,781
)
Net cash used in financing activities
   
(824,235
)
   
(797,781
)
                 
Net Increase in Cash and Equivalents
   
399,186
 
   
   643,491
 
                 
Cash and Equivalents, Beginning of period
   
2,361,846
     
2,579,487
 
                 
Cash and Equivalents, End of period
 
$
2,761,032
   
$
3,222,978
 
                 
Supplemental Disclosures of Cash Flow Information
               
Cash Paid During the Period for:
               
Income taxes
 
$
2,000
   
$
    -
 
 
See notes to condensed consolidated financial information.

 
5

 

BOWL AMERICA INCORPORATED AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the Thirteen Weeks Ended
October 2, 2011
(Unaudited)
 
 
1.  Basis for Presentation
 
The accompanying unaudited condensed consolidated financial statements of Bowl America Incorporated and subsidiaries (the "Company"), have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission.  The condensed consolidated balance sheet as of July 3, 2011 has been derived from the Company's July 3, 2011 audited financial statements.  Certain information and note disclosures normally included in the annual financial statements, prepared in accordance with accounting principles generally accepted in the United States of America, have been condensed or omitted pursuant to those rules and regulations, although the Company believes that the disclosures made are adequate to make the information presented not misleading.
 
In the opinion of management, the accompanying unaudited condensed consolidated financial statements reflect all adjustments and reclassifications (all of which are of a normal, recurring nature) that are necessary for the fair presentation of the Company’s financial position and results of operations for the periods presented.  It is suggested that these condensed consolidated financial statements be read in conjunction with the consolidated financial statements and notes thereto included in the Company's latest annual report to the Securities and Exchange Commission on Form 10-K for the year ended July 3, 2011.

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 October 2, 2011 and July 3, 2011 were as follows:
 
October 2, 2011
Description
 
Fair Value
   
Cost Basis
   
Unrealized Gain
 
Short-term investments
  $ 5,190,374     $ 5,190,374     $ -  
Equity securities
  $ 3,768,206     $ 710,799     $ 3,057,407  
Mutual funds
  $ 3,403,908     $ 3,168,181     $ 235,727  
                   
July 3, 2011
Description
 
Fair Value
   
Cost Basis
   
Unrealized Gain
 
Short-term investments
  $ 6,297,822     $ 6,297,822     $ -  
Equity securities
  $ 4,235,914     $ 710,799     $ 3,525,115  
Mutual funds
  $ 3,302,418     $ 3,139,399     $ 163,019  

 
6

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

October 2, 2011
 
 
 
Description
 
Quoted
Price for Identical Assets
(Level 1)
   
Significant Other Observable Inputs
(Level 2)
   
Significant Unobservable Inputs
(Level 3)
 
                   
Certificates of deposits
  $ -     $ 5,190,374     $ -  
Equity securities
    3,768,206       -       -  
Mutual funds
    3,403,908       -       -  
                         
Total
  $ 7,172,114     $ 5,190,374     $ -  
                   
July 3, 2011
 
 
 
Description
 
Quoted
Price for Identical Assets
(Level 1)
   
Significant Other Observable Inputs
(Level 2)
   
Significant Unobservable Inputs
(Level 3)
 
                         
Certificates of deposits
  $ -     $ 6,297,822     $ -  
Equity securities
    4,235,914       -       -  
Mutual funds
    3,302,418       -       -  
                         
Total
  $ 7,538,332     $ 6,297,822     $ -  
 
The telecommunications stocks included in the portfolio as of October 2, 2011 were:
 
82,112 shares of AT&T
4,398 shares of CenturyLink
4,508 shares of Frontier Communications
939 shares of Supermedia
475 shares of LSI
354 shares of Faitpoint Communications
40,000 shares of Sprint
18,784 shares of Verizon
11,865 shares of Vodafone
4,079 shares of Windstream
 
The fair value of certificates of deposits is estimated using net present value techniques and comparing the values derived from those techniques to certificates with similar values.
 
3.  Commitments and Contingencies

The Company’s purchase commitments at October 2, 2011, are for materials, supplies, services and equipment as part of the normal course of business.

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

 5. New Accounting Standards
 
In June 2011, the Financial Accounting Standards Board (FASB) issued guidance in the form of an amendment that requires all non-owner changes in stockholders' equity be presented either in a single continuous statement of comprehensive income or in two separate but consecutive statements. In the two-statement approach, the first statement should present total net income and its components followed consecutively by a second statement that should present total other comprehensive income, the components of other comprehensive income, and the total of comprehensive income.  This amendment is effective for fiscal years and interim periods beginning after December 15, 2011.  Management does not believe this will have a material effect on its financial statements as currently two consecutive separate statements are presented.

 
7

 
 
In May 2011, the FASB issued guidance in the form of an amendment, which is intended to improve comparability of fair value measurements presented and disclosed in financial statements.  This amendment is effective for fiscal years and interim periods beginning after December 15, 2011.  The amendment increases disclosure related to the measurement of non-financial assets at fair value.  Management does not believe this will have a material impact on the financial statements.
 
6.  Subsequent Events
 
The Company has evaluated subsequent events through the time of filing these financial statements with the Securities and Exchange Commission on November 15, 2011, and has determined that no material subsequent events have occurred.

7.  Reclassifications
 
Certain previous year amounts have been reclassified to conform with current year presentation.
 
 
8

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

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

Common stocks in our portfolio have come from spin-offs, mergers and acquisitions of AT&T and United Telecommunications (now Sprint) purchased in 1979 and 1984 at a cost of approximately $630,000.  While not all stocks in the portfolio are domestic American companies any longer, we have received approximately $962,000 from mergers and sales, and over $2,900,000 in dividends, the majority of which are tax favored in the form of exclusion from federal taxable income.
These marketable securities are carried at their fair value on the last day of the quarter.  The value of the securities on October 2, 2011 was approximately $3,768,000, a decrease of $468,000 from July 3, 2011.  Short-term investments consisting mainly of Certificates of Deposits, cash and cash equivalents totaled $7,951,000 at the end of the fiscal first quarter of 2012 compared to $8,660,000 at the end of fiscal 2011.  

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 three-month period ended October 2, 2011, the Company expended approximately $211,000 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.

The first quarter decreases in the categories of Prepaid expenses and other and of Accrued expenses is attributable primarily to the timing of the payments including compensation, insurance and taxes and for the contribution to a benefit plan.

Current liabilities generally increase during the first three quarters of the fiscal year as bowling 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 October 2, 2011, league deposits of approximately $753,000 were included in the current liabilities category.

Cash flow provided by operating activities in the thirteen weeks ended October 2, 2011 was $356,000 which, along with cash on hand, was sufficient to meet day-to-day cash needs and pay dividends.  Cash dividends of approximately $824,000, or $.16 per share, were paid to shareholders during the three-month period ended October 2, 2011.  In September 2011, the Company declared a regular quarterly dividend of $.16 per share, payable November 16, 2011.  The uncertain economic climate may require a review by the directors 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 at such time.

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 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.  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.
 
 
9

 
 
RESULTS OF OPERATIONS

For the thirteen-week period ended October 2, 2011 there was a net loss of $275,173, or $.05 loss per share.  For the prior year thirteen-week period ended September 26, 2010, there was a net loss of $204,869, or $.04 loss per share.  Nineteen locations were in operation in both periods.  The bowling business is seasonal and the first quarter which includes summer months is typically the slowest.  Fiscal 2011 was a 53-week year which resulted in a later calendar date start to fiscal 2012, a 52-week year.  Because of this shift, the quarter ended October 2, 2011 included one more week of fall season league bowling than the quarter ended September 26, 2010.  The fourth quarter of fiscal 2012 will have one fewer week of league bowling and thirteen weeks of business, one less than the fiscal 2011 fourth quarter.  Management believes that the continuing uncertain economic conditions are negatively affecting the public’s discretionary spending.  The operating results for the fiscal 2012 period included in this report are not necessarily indicative of results to be expected for the year.

The following table sets forth the items in our consolidated summary of operations for the fiscal quarter ended October 2, 2011, and September 26, 2010, and the dollar and percentage changes therein.
 
   
Thirteen weeks ended
 
   
October 2, 2011 and September 26, 2010
 
   
Dollars in thousands
 
 
 
2011
   
2010
   
Change
   
% Change
 
Operating Revenues:
                       
Bowling and other
 
$
 3,898
   
$
4,007
   
$
(109
)
   
(2.7
)
Food, beverage & merchandise sales
   
1,597
     
1,643
     
(46
)
   
(2.8
)
     
5,495
     
5,650
     
(155
)
   
(2.7
)
Operating Expenses:
                               
Compensation & benefits
   
3,045
     
3,091
     
(46
)
   
(1.5
)
Cost of bowling & other
   
1,832
     
1,869
     
(37
)
   
(2.0
)
Cost of food, beverage & merchandise  sales
   
482
     
476
     
  6
 
   
1.3
 
Depreciation & amortization
   
424
     
437
     
(13
)
   
(3.0
)
General & administrative
   
254
     
242
     
12
     
5.0
 
     
6,037
     
6,115
     
(78
)
   
(1.3
)
                                 
Operating Loss
   
(542
)
   
(465
)
   
(77
)
   
( 16.5
)
                                 
Interest & dividend income
   
119
     
145
     
(26
)
   
(17.9
)
                                 
Loss before taxes
   
(423
)
   
 (320
)
   
(103
)
   
(32.2
)
Income tax benefit
   
(148
)
   
(115
)
   
(33
)
   
(28.7
)
                                 
Net Loss
 
$
(275
)
 
$
(205
)
 
$
(70
)
   
(34.1
)

Operating Revenues

Total operating revenues decreased $155,000 to $5,495,000 in the thirteen-week period ended October 2, 2011, compared to a decrease of $425,000 to $5,650,000 in the three-month period ended September 26, 2010.  Bowling and other revenue decreased $109,000 in the current year fiscal quarter compared to a decrease of $319,000 in the comparable prior year quarter.  In addition to the impact of a continuing unfavorable economic climate in both periods, the prior year period included the beginning of the first league season since the law banning indoor smoking took effect in Virginia and league participation was adversely affected.

Food, beverage and merchandise sales were down $46,000 or 3% in the current year quarter due to lower traffic, compared to a decrease of $106,000 or 6% in the prior year comparable quarter.  Cost of sales increased approximately $6,000 or 1% in the current year three-month period due partially to lower margins on sales.
 
 
10

 
 
Operating Expenses

Operating expenses were down $78,000 and $74,000 or 1% in each of the three-month periods ended October 2, 2011 and September 26, 2010 respectively.  Employee compensation and benefits were down $46,000 and $55,000 or approximately 2% in each of the fiscal first quarters of 2012 and 2011, respectively.  The Company continued to make scheduling adjustments in response to lower traffic.  Included in this category of expense are contributions to our two benefit plans, both of which are defined contribution plans. There is no additional obligation beyond the current year contribution.

Cost of bowling and other services decreased $37,000 or 2% in the quarter ended October 2, 2011 versus an increase of  $11,000 or less than 1% in the comparable quarter ended September 26, 2010.  Maintenance and repair costs were down $10,000 or 4% in the current year quarter versus an increase of $11,000 or 5% in the fiscal 2011 quarter that was primarily due to major air conditioning repairs.   Advertising costs increased approximately 1% in the quarter ended October 2, 2011 and $28,000 or 14% in the prior year comparable quarter when the Company stepped up its ad campaigns.  For the three month period ended October 2, 2011, utility costs were down slightly and in the prior year quarter costs were up less than 1%.  In the prior year period, the cost for cooling during the record hot summer offset the saving from changes to more energy efficient electric fixtures.  Supplies and services expenses were flat in the current year thirteen-week period and increased 2% in the prior year comparable period.  

Depreciation and amortization expense was down 3% in the three-month period ended October 2, 2011, and down  5% in the prior year comparable three-month period as some large assets reached full depreciation.

As stated above, the first quarter of the fiscal year is seasonally the slowest and the quarter ended October 2, 2011 resulted in an operating loss of $542,000.  The comparable quarter last year produced an operating loss of $465,000.

 Interest and Dividend Income

Interest and dividend income declined $26,000 or 18% versus an increase of $9,000 or 7% in the fiscal 2012 and 2011 year-to-date periods, respectively, due primarily to changes in interest rates on investments.

 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 October 2, 2011. There was no change in the Company’s internal control over financial reporting identified in connection with the evaluation that occurred during the quarter ended October 2, 2011, that materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

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

PART II - OTHER INFORMATION
 
Item 6.  Exhibits.
 
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Press release issued November 15, 2011 (furnished herewith)
   
31.1
Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act filed herewith
   
31.2
Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act filed herewith
   
32
Written Statement of the Chief Executive Officer and Chief Financial Officer Pursuant to 18 U.S.C. 1350 filed herewith
 
 
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: November 15, 2011
By:  /s/ Leslie H Goldberg
 
 
Leslie H. Goldberg, President
 
     
     
     
Date: November 15, 2011
By:  /s/ Cheryl A. Dragoo
 
 
Cheryl A. Dragoo, Controller
 
 
 
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