10-Q 1 bowl_10q-010112.htm FORM 10-Q bowl_10q-010112.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: JANUARY 1, 2012

COMMISSION FILE NUMBER: 0-1830

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

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

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

(703) 941-6300
(Registrant's telephone number including area code)
 
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes X  No __

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
Yes 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
 
January 26, 2012
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
   
Twenty-six Weeks Ended
 
   
January 1,
   
December 26,
   
January 1,
   
December 26,
 
   
2012
   
2010
   
2012
   
2010
 
Operating Revenues:
                       
Bowling and other
 
$
4,503,640
   
$
4,553,314
   
$
8,401,703
   
$
8,560,644
 
Food, beverage and merchandise sales
   
1,926,499
     
1,926,558
     
3,524,037
     
3,569,207
 
     
6,430,139
     
6,479,872
     
11,925,740
     
12,129,851
 
                                 
Operating Expenses:
                               
Employee compensation and benefits
   
3,052,849
     
3,118,492
     
6,098,248
     
6,209,476
 
Cost of bowling and other services
   
1,713,475
     
1,847,946
     
3,545,326
     
3,716,927
 
Cost of food, beverage and merchandise sales
 
566,451
     
569,960
     
1,048,795
     
1,046,344
 
Depreciation and amortization
   
398,634
     
432,051
     
822,401
     
868,473
 
General and administrative
   
259,288
     
251,317
     
513,308
     
493,501
 
     
5,990,697
     
6,219,766
     
12,028,078
     
12,334,721
 
                                 
Operating Income (loss)
   
439,442
     
260,106
     
(102,338
)
   
(204,870
)
Interest and dividend income
   
145,595
     
185,904
     
264,032
     
330,811
 
                                 
Earnings before provision for income taxes
   
585,037
     
446,010
     
161,694
     
125,941
 
Provision for income taxes
   
204,770
     
160,600
     
56,600
     
45,400
 
                                 
Net Earnings
 
$
380,267
   
$
285,410
   
$
105,094
   
$
80,541
 
                                 
Earnings per share-basic & diluted
 
$
.07
   
$
.06
   
$
.02
   
$
.02
 
                                 
Weighted average shares outstanding
   
5,151,471
     
5,146,971
     
5,151,471
     
5,146,971
 
                                 
Dividends paid
 
$
824,236
   
$
797,781
   
$
1,648,471
   
$
1,595,562
 
                                 
Per share, dividends paid, Class A
 
$
.16
   
$
.155
 
 
$
.32
   
$
.31
 
                                 
Per share, dividends paid, Class B
 
$
.16
   
$
.155
   
$
.32
   
$
.31
 
 
The operating results for the thirteen (13) and twenty-six (26) week periods ended January 1, 2012 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
   
Twenty-six Weeks Ended
 
   
January 1,
   
December 26,
   
January 1,
   
December 26,
 
   
2012
   
2010
   
2012
   
2010
 
                         
Net Earnings
 
$
380,267
   
$
285,410
   
$
105,094
   
$
80,541
 
Other comprehensive earnings- net of tax
                               
Unrealized gain (loss) on available-for-sale securities net of tax (benefit) of $79,288 and $53,401 for 13 weeks, and ($71,207) and $231,584 for 26 weeks
   
128,819
     
86,758
     
(115,686
)
   
376,245
 
                                 
Comprehensive earnings (loss)
 
$
509,086
   
$
372,168
   
$
(10,592
)
 
$
456,786
 
                                 
 
The operating results for the thirteen (13) and twenty-six (26) week periods ended January 1, 2012 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
 
   
January 1,
   
July 3,
 
   
2012
   
2011
 
ASSETS
CURRENT ASSETS:
           
Cash and cash equivalents
 
$
2,566,764
   
$
2,361,846
 
Short-term investments
   
4,665,027
 
   
6,297,822
 
Inventories
   
561,219
     
480,318
 
Prepaid expenses and other
   
472,286
     
701,711
 
Income taxes refundable
   
337,247
     
275,847
 
TOTAL CURRENT ASSETS
   
8,602,543
     
10,117,544
 
LAND, BUILDINGS & EQUIPMENT
               
Net of accumulated depreciation of $38,320,842 and $37,570,380
   
23,057,458
 
   
22,581,314
 
OTHER ASSETS:
               
Marketable securities
   
7,625,884
     
7,538,332
 
Cash surrender value-life insurance
   
594,792
     
594,792
 
Other
   
83,280
     
85,780
 
TOTAL OTHER ASSETS
   
8,303,956
 
   
8,218,904
 
TOTAL ASSETS
 
$
39,963,957
   
$
40,917,762
 
                 
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
               
Accounts payable
 
$
572,333
   
$
666,784
 
Accrued expenses
   
757,098
 
 
 
1,224,237
 
Dividends payable
   
824,235
     
824,235
 
Other current liabilities
   
1,640,449
     
302,394
 
Current deferred income taxes
   
53,311
     
53,311
 
TOTAL CURRENT LIABILITIES
   
3,847,426
     
3,070,961
 
LONG-TERM DEFERRED COMPENSATION
   
43,701
     
43,701
 
NONCURRENT DEFERRED INCOME TAXES
   
2,430,502
     
2,501,709
 
TOTAL LIABILITIES
   
6,321,629
     
5,616,371
 
                 
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 3,683,009
   
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
   
2,167,268
 
   
2,282,954
 
Retained earnings
   
23,232,649
     
24,776,026
 
TOTAL STOCKHOLDERS' EQUITY
   
33,642,328
     
35,301,391
 
                 
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY
 
$
39,963,957
   
$
40,917,762
 
                 
 
See notes to condensed consolidated financial statements.
 
4

 

BOWL AMERICA INCORPORATED AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS  OF CASH FLOWS
(Unaudited)
 
   
Twenty-six Weeks Ended
 
   
January 1,
   
December 26,
 
   
2012
   
2010
 
Cash Flows From Operating Activities
           
Net earnings
 
$
105,094
   
$
80,541
 
Adjustments to reconcile net earnings to net cash provided by operating activities:
               
Depreciation and amortization
   
822,401
 
   
868,473
 
Changes in assets and liabilities
               
Increase in inventories
   
(80,901
)
   
(39,674
)
Decrease (increase) in prepaid & other
   
229,425
 
   
(252,180
)
Increase in income taxes refundable
   
(61,400
)
   
(78,400
)
Decrease in other long-term assets
   
2,500
   
 
1,941
 
(Decrease) increase in accounts payable
   
(94,451
)
   
282,720
 
Decrease in accrued expenses
   
(467,139
)
   
(438,280
)
Increase in other current liabilities
   
1,338,055
     
1,402,848
 
Net cash provided by operating activities
   
1,793,584
     
1,827,989
 
                 
Cash Flows From Investing Activities
               
Expenditures for land, building and equip
   
(1,298,545
)
   
(638,176
)
Net sales & maturities of short-term
               
Investments
   
1,632,795
     
1,191,523
 
Purchases of marketable securities
   
(274,445
)
   
(122,747
)
Net cash provided by
               
Investing activities
   
59,805
 
   
430,600
 
                 
Cash Flows From Financing Activities
               
Payment of cash dividends
   
(1,648,471
)
   
(1,595,562
)
                 
Net cash used in financing activities
   
(1,648,471
)
   
(1,595,562
)
                 
Net Increase in Cash and Equivalents
   
204,918
 
   
663,027
 
                 
Cash and Equivalents, Beginning of period
   
2,361,846
     
2,579,487
 
                 
Cash and Equivalents, End of period
 
$
2,566,764
   
$
3,242,514
 
                 
                 
Supplemental Disclosures of Cash Flow Information
               
Cash Paid During the Period for:
               
Income taxes
 
$
118,000
   
$
123,800
 
 
See notes to condensed consolidated financial information.

 
5

 
 
BOWL AMERICA INCORPORATED AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
For the Twenty-six Weeks Ended
January 1, 2012
(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.
 
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 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 January 1, 2012 and July 3, 2011 were as follows:

January 1, 2012
Description
 
Fair Value
   
Cost basis
   
Unrealized Gain
 
Short-term investments
  $ 4,665,027     $ 4,665,027     $ -  
Equity securities
  $ 4,182,053     $ 888,998     $ 3,293,055  
Mutual funds
  $ 3,443,831     $ 3,235,646     $ 208,185  
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:
 
January 1, 2012
Description
 
Quoted
Price for Identical Assets
(Level 1)
   
Significant Other Observable Inputs
(Level 2)
   
Significant Unobservable Inputs
(Level 3)
 
                   
Certificates of deposits
  $ -     $ 4,665,027     $ -  
Equity securities
    4,182,053       -       -  
Mutual funds
    3,443,831       -       -  
                         
Total
  $ 7,625,884     $ 4,665,027     $ -  
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 stocks included in the equity securities portfolio as of January 1, 2012 were:
 
82,112 shares of AT&T
  4,398 shares of CenturyTel
 354 shares of Fairpoint Communications
  4,508 shares of Frontier Communications
 939 shares of Supermedia
 475 shares of LSI
 774 shares of NCR
40,000 shares of Sprint
 774 shares of Teradata
23,784 shares of Verizon
11,865 shares of Vodafone
  4,079 shares of Windstream
  2,520 shares of Manulife
 
 
3. Commitments and Contingencies

The Company’s purchase commitments at January 1, 2012 are for materials, supplies, services and equipment as part of the normal course of business.

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

5.  Subsequent Events

      The Company has evaluated subsequent events through the time of filing these financial statements with the Securities and Exchange Commission on February 14, 2012, and has determined that no material subsequent events have occurred.

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

 
7

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

LIQUIDITY AND CAPITAL RESOURCES
 
The Company views a strong financial position as a major benefit to shareholders and emphasizes payment of dividends as part of its financial plan.  A portion of earnings has consistently been invested 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.

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 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 January 1, 2012 was approximately $4,182,000.  Short-term investments consisting mainly of Certificates of Deposits, cash and cash equivalents totaled $7,232,000 at the end of the fiscal second 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 six-month period ended January 1, 2012, the Company expended approximately $1,299,000 for the purchase of bowling and restaurant equipment including new automatic scoring systems at some locations.   The higher purchase volume was due to modernization at centers facing new competition.  The timing of the purchases was due to expected favorable tax treatment on purchases made by December 31, 2011.  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 six-month changes in the categories of Accounts Payable and Accrued Expenses are primarily due to seasonal timing of payments including cash contribution to a benefit plan.

Current liabilities generally increase during the first three quarters of the fiscal year as leagues deposit prize fund monies with the Company throughout the league season.  These funds are returned to the leagues at the end of the bowling season, generally in the fourth quarter.  At January 1, 2012, league deposits of approximately $1,470,000 were included in the current liabilities category.

Cash flow provided by operating activities in the twenty-six weeks ended January 1, 2012 was $1,794,000 which, along with cash on hand, was sufficient to meet day-to-day cash needs and pay dividends.  Cash dividends of approximately $1,649,000, or $.32 per share, were paid to shareholders during the six month period ended January 1, 2012.  In December 2011, the Company declared a regular quarterly dividend to $.16 per share, payable February 15, 2012.  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.

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
 
 
8

 


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
Net earnings were $380,267 or $.07 per share for the thirteen-week period ended January 1, 2012, and $285,410 or $.06 per share for the thirteen weeks ended December 26, 2010.  For the current year and prior year twenty-six week periods net earnings were $105,094 and $80,541, respectively or $.02 per share each year.  Fiscal year 2011 was a 53-week year which resulted in a later calendar date start to fiscal 2012.  The second quarter ended January 1, 2012 and included the school holiday week between Christmas and New Year’s Day, typically a heavy open play bowling week.  In the prior year that holiday week fell in the fiscal third quarter.

Management believes that the uncertainty of an economic recovery continues to impact the public’s view of discretionary spending.  The operating results for fiscal 2012 periods included in this report are not necessarily indicative of results to be expected for the year.

The following table sets forth the items in our consolidated summary of operations for the fiscal year-to-date periods ended January 1, 2012, and December 26, 2010, and the dollar and percentage changes therein.

   
Twenty-six weeks ended
 
   
January 1, 2012 and December 26, 2010
 
   
Dollars in thousands
 
 
 
01/01/2012
   
12/26/2010
   
Change
   
% Change
 
Operating Revenues:
                       
Bowling and other
 
$
8,402
   
$
8,561
   
$
(159
)
   
(1.8
)%
Food, beverage & merchandise sales
   
3,524
     
3,569
     
(45
)
   
(1.3
)
     
11,926
     
12,130
     
(204
)
   
(1.7
)
Operating Expenses:
                               
Compensation & benefits
   
6,098
     
6,209
     
(111
)
   
(1.8
)
Cost of bowling & other
   
3,545
     
3,717
     
(172
)
   
(4.6
)
Cost of food, beverage & merch sales
   
1,049
     
1,046
     
3
 
   
.3
 
Depreciation & amortization
   
823
     
869
     
(46
)
   
(5.2
)
General & administrative
   
513
     
494
     
19
 
   
3.8
 
     
12,028
     
12,335
     
(307
)
   
(2.5
)
                                 
Operating (Loss) income
   
(102
)
   
(205
)
   
103
 
   
50.2
 
                                 
Interest & dividend income
   
264
     
331
     
(67
)
   
(20.2
)
                                 
Earnings before taxes
   
162
     
126
     
36
 
   
28.6
 
Income taxes
   
57
     
45
     
12
 
   
26.7
 
                                 
Net Earnings
 
$
105
   
$
81
   
$
24
 
   
29.6
 
 
                Operating Revenues

Total operating revenues decreased $50,000 to $6,430,000 in the most recent quarter compared to a decrease of $411,000 to $6,480,000 in the three-month period ended December 26, 2010.  For the current fiscal six-month period operating revenues were down $204,000 versus a decrease of $836,000 in the comparable six-month period a year ago.  Bowling and other revenue declined $50,000 in the quarter and $159,000 year-to-date for the periods ended January 1, 2012 compared to the same periods in fiscal 2011.   Prior year comparable three and six month period revenues showed decreases of $297,000 and $615,000, respectively.

Food, beverage and merchandise sales were flat in the quarter and down $45,000 or 1% in the six-month period.  Cost of sales was flat in both the three month and six month periods ended January 1, 2012.
 
 
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                Operating Expenses

Operating expenses were down $229,000 or 4% and $307,000 or 3% in the current three and six-month periods, respectively, versus decreases of  $156,000 and $230,000 or 2% each in the three and six month periods respectively last year.  Employee compensation and benefits for the three and six month periods were down $65,000 and $111,000, respectively, or 2% in both periods ended January 1, 2012, as the Company continued to make scheduling adjustments in response to customer traffic.  In the prior year comparable periods the category was down slightly in the three month period and down $72,000 or 1% in the six-month period, respectively.   Included in this category of expense are contributions to our two benefit plans, both of which are defined contribution plans. There is no additional obligation beyond the current year contribution.

Cost of bowling and other services decreased $172,000 or 5% versus a decrease of $45,000 or 1% in the six-month periods ended January 1, 2012 and December 26, 2010, respectively. In the twenty-six weeks ended January 1, 2012, maintenance and repair costs were down $85,000 or 17%.  In the prior year twenty-six week period costs were up $29,000 or 6% primarily due to major air conditioning repairs.  Advertising costs during the current year twenty-six week period were down $66,000 or 14% versus an increase of $28,000 or 6% in the prior year comparable period, due in part to the change in media used.  For the six month periods ended January 1, 2012 and December 26, 2010, respectively, utility costs were flat and down $32,000 or 4%.  Higher electric fuel rates at most locations in our Northern market since July 2011 offset the savings from our energy management program.  Lower fuel costs and our efforts in energy management are primarily responsible for the prior year decrease.  Supplies and services expenses were down 3% in the current year six-month period and were up 3% in the six-month period ended December 2010.  The changes in both years are partially a result of the timing of purchases.

Insurance expense excluding health insurance increased 7% in the current year-to-date period as the market hardens, versus a decrease of 10% in last year’s comparable period when the Company made policy and coverage changes

Depreciation and amortization expense was down 5% in both the current and prior year six-month period; however, this category may increase in the last half of the year.  Depreciation expense generally begins in the quarter following an asset purchase.  The automatic scoring systems, mentioned above, were installed in December 2011.

As a result of the above, the current six-month period of fiscal 2012 showed an operating loss of $102,000 compared to the prior year six-month period that showed an operating loss of $205,000.

                Interest and Dividend Income

Interest and dividend income decreased $67,000 in the fiscal 2012 six-month period and increased $56,000 in the comparable 2011 year-to-date period, respectively. The current year decrease is a result of lower investment balances, lower interest rates  and lower capital gains from the Ginnie Mae fund.  The increase in the prior year period ended December 26, 2010, was due primarily to the capital gains received from the Ginnie Mae fund.
 
 
10

 
 
CRITICAL ACCOUNTING POLICIES

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

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

ITEM 4. CONTROLS AND PROCEDURES.

The Company’s Chief Executive Officer and Chief Financial Officer have concluded that the Company’s disclosure controls and procedures are effective based on their evaluation of such controls and procedures as of January 1, 2012. 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 January 1, 2012, that materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

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

PART II - OTHER INFORMATION
 
Item 6.  Exhibits.
 
20
Press release issued February 14, 2012 (furnished herewith)
   
31.1
Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act filed herewith
   
31.2
Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act filed herewith
   
32
Written Statement of the Chief Executive Officer and Chief Financial Officer Pursuant to 18 U.S.C. 1350 filed herewith
 
 
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Pursuant to the requirements of the Securities Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
 
 
Bowl America Incorporated
 
(Registrant)
   
Date: February 14, 2012
By:  /s/ Leslie H. Goldberg
 
Leslie H. Goldberg, President
   
   
   
Date: February 14, 2012
By:  /s/ Cheryl A. Dragoo
 
Cheryl A. Dragoo, Controller
 
 
13