10-Q 1 bwl-a20131101_10q.htm FORM 10-Q bwl-a20131101_10q.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: SEPTEMBER 29, 2013

 

COMMISSION FILE NUMBER: 001-7829

 

BOWL AMERICA INCORPORATED

(Exact name of registrant as specified in its charter)

 

MARYLAND

54-0646173

(State of Incorporation)

(I.R.S.Employer Identification No.)

 

6446 Edsall Road, Alexandria, Virginia  22312

(Address of principal executive offices)(Zip Code)

 

(703) 941-6300

(Registrant's telephone number including area code)

 

 

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was

required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No __

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (232.405) of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes X No __

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, 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

  

November 6, 2013

Class A Common Stock,

  

$.10 par value

3,746,454

  

  

Class B Common Stock,

  

$.10 par value

1,414,517

 

 

 
 

 

 

PART 1. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

 

  BOWL AMERICA INCORPORATED AND SUBSIDIARIES

  CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS

  (Unaudited)

                                    

   

Thirteen Weeks Ended

 
   

September 29,

   

September 30,

 
   

2013

   

2012

 

Operating Revenues:

               

Bowling and other

  $ 3,395,226     $ 3,617,525  

Food, beverage and merchandise sales

    1,355,048       1,492,367  

Total Operating Revenue

    4,750,274       5,109,892  
                 

Operating Expenses:

               

Employee compensation and benefits

    2,813,723       2,903,111  

Cost of bowling and other services

    1,558,187       1,579,700  

Cost of food, beverage and merchandise sales

    436,801       448,356  

Depreciation and amortization

    355,292       387,701  

General and administrative

    206,277       263,927  

Total Operating Expenses

    5,370,280       5,582,795  
                 

Operating Loss

    (620,006

)

    (472,903

)

Interest and dividend income

    138,769       131,219  
                 

Loss from continuing operations before provision for income tax benefit

    (481,237

)

    (341,684

)

Provision for income tax benefit

    (168,400

)

    (119,600

)

                 

Net Loss from continuing operations

  $ (312,837

)

  $ (222,084

)

                 

Loss from discontinued operations, net of tax

  $ (5,553

)

  $ (18,909

)

Net loss

  $ (318,390

)

  $ (240,993

)

                 

Loss per share-basic & diluted

               

Continuing operations

  $ (.06

)

  $ (.04

)

Discontinued operations

  $ .00     $ (.01

)

Net Loss per share

  $ (.06

)

  $ (.05

)

                 

Weighted average shares outstanding

    5,160,971       5,151,471  
                 

Dividends paid

  $ 851,561     $ 824,235  
                 

Per share, dividends paid, Class A

  $ .165     $ .16  
                 

Per share, dividends paid, Class B

  $ .165     $ .16  

 

The operating results for the thirteen (13) week period ended September 29, 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

 
   

September 29,

2013

   

September 30,

2012

 
                 

Net Loss

  $ (318,390

)

  $ (240,993

)

Other comprehensive earnings- net of tax

               

Unrealized (loss) gain on available- for-sale securities net of tax benefit of $58,754 and $123,879

    ( 95,458

)

    201,265  
                 
                 

Comprehensive Loss

  $ (413,848

)

  $ (39,728

)


 

The operating results for the thirteen (13) week period ended September 29, 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

 
   

September 29,

2013

   

June 30,

2013

 

ASSETS

 

CURRENT ASSETS:

               

Cash and cash equivalents

  $ 1,778,487     $ 3,437,780  

Short-term investments

    1,448,882       949,815  

Inventories

    660,978       519,179  

Prepaid expenses and other

    349,493       563,591  

Income taxes refundable

    64,129       58,129  

Current deferred income tax

    178,158       6,658  

TOTAL CURRENT ASSETS

    4,480,127       5,535,152  

LAND, BUILDINGS & EQUIPMENT, net of accumulated depreciation of $38,473,619 and $38,144,649

    21,668,619       21,979,489  

OTHER ASSETS:

               

Marketable investment securities

    8,593,913       8,477,227  

Cash surrender value-life insurance

    648,717       648,717  

Other

    80,665       84,465  

TOTAL OTHER ASSETS

    9,323,295       9,210,409  

TOTAL ASSETS

  $ 35,472,041     $ 36,725,050  
                 

LIABILITIES AND STOCKHOLDERS' EQUITY

 

CURRENT LIABILITIES:

               

Accounts payable

  $ 430,326     $ 694,454  

Accrued expenses

    968,271       1,045,645  

Dividends payable

    851,561       851,561  

Other current liabilities

    875,167       311,284  

Income taxes payable

    -       151,227  

TOTAL CURRENT LIABILITIES

    3,125,325       3,054,171  

LONG-TERM DEFERRED COMPENSATION

    39,194       39,194  

NONCURRENT DEFERRED INCOME TAXES

    2,541,130       2,599,884  

TOTAL LIABILITIES

    5,705,649       5,693,249  
                 

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 3,746,454

    374,645       374,645  

Class B issued and outstanding 1,414,517

    141,452       141,452  

Additional paid-in capital

    7,849,814       7,849,814  

Accumulated other comprehensive earnings-

               

Unrealized gain on available-for-sale securities, net of tax

    2,488,562       2,584,020  

Retained earnings

    18,911,919       20,081,870  

TOTAL STOCKHOLDERS' EQUITY

    29,766,392       31,031,801  
                 

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY

  $ 35,472,041     $ 36,725,050  

 

See notes to condensed consolidated financial statements.

 

 

 
4

 

 

BOWL AMERICA INCORPORATED AND SUBSIDIARIES

 

CONDENSED CONSOLIDATED STATEMENTS  OF CASH FLOWS

(Unaudited)

 

   

Thirteen Weeks Ended

 
   

September 29,

2013

   

September 30,

2012

 

Cash Flows From Operating Activities

               

Net loss

  $ (318,390

)

  $ (240,993

)

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

               

Depreciation and amortization (including discontinued operations)

    355,292       390,387  

Changes in assets and liabilities

               

Increase in inventories

    (141,799

)

    (118,228

)

Decrease in prepaid & other

    214,098       147,099  

Increase in income taxes refundable

    (6,000

)

    -  

Decrease in income taxes payable

    (151,227

)

    -  

Decrease in other long-term assets

    3,800       -  

Increase in deferred tax asset

    (171,500

)

    (129,700

)

(Decrease) increase in accounts payable

    (264,128

)

    209  

Decrease in accrued expenses

    (77,374

)

    (64,911

)

Increase in other current liabilities

    563,883       608,856  

Net cash provided by operating activities

    6,655       592,719  
                 

Cash Flows From Investing Activities

               

Expenditures for land, building and equip

    (44,422

)

    (288,633

)

Net (purchases) sales & maturities of short-term Investments

    (499,067

)

    406,233  

Purchases of marketable securities

    (270,898

)

    (23,693

)

Net cash (used by)  provided by investing activities

    (814,387

)

    93,907  
                 

Cash Flows From Financing Activities

               

Payment of cash dividends

    (851,561

)

    (824,235

)

Net cash used in financing activities

    (851,561

)

    (824,235

)

                 

Net (Decrease) increase in Cash and Equivalents

    (1,659,293

)

    (137,609

)

                 

Cash and Equivalents, Beginning of period

    3,437,780       2,332,022  
                 

Cash and Equivalents, End of period

  $ 1,778,487     $ 2,194,413  
                 
                 

Supplemental Disclosures of Cash Flow Information

               

Cash Paid During the Period for:

               

Income taxes

  $ 157,227     $ -  

 

See notes to condensed consolidated financial statements.

 

 

 
5

 

 

BOWL AMERICA INCORPORATED AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 

For the Thirteen Weeks Ended

September 29, 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 June 30, 2013 has been derived from the Company's audited financial statements.  Certain information and note disclosures normally included in the annual financial statements, prepared in accordance with accounting principles generally accepted in the United States of America, have been condensed or omitted pursuant to those rules and regulations, although the Company believes that the disclosures made are adequate to make the information presented not misleading.

 

In the opinion of management, the accompanying unaudited condensed consolidated financial statements reflect all adjustments and reclassifications (all of which are of a normal, recurring nature) that are necessary for the fair presentation of the Company’s financial position and results of operations for the periods presented.  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 June 30, 2013.

 

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 September 29, 2013 and June 30, 2013 were as follows: 

 

 

September 29, 2013

Description

 

Fair Value

   

Cost basis

   

Unrealized Gain

 

Short-term investments

  $ 1,448,882     $ 1,448,882     $ -  

Equity securities

  $ 5,120,924     $ 1,140,656     $ 3,980,268  

Mutual funds

  $ 3,472,989     $ 3,432,986     $ 40,003  

June 30, 2013

Description

 

Fair Value

   

Cost basis

   

Unrealized Gain

 

Short-term investments

  $ 949,815     $ 949,815     $ -  

Equity securities

  $ 5,046,557     $ 888,998     $ 4,157,559  

Mutual funds

  $ 3,430,670     $ 3,413,745     $ 16,925  

 

 

 

 
6

 

 

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

 

September 29, 2013

 

 

Description

 

Quoted

Price for Identical

Assets

(Level 1)

   

Significant Other

Observable

 Inputs

(Level 2)

   

Significant Unobservable

Inputs

(Level 3)

 
                         

Certificates of deposits

  $ -     $ 1,448,882     $ -  

Equity securities

    5,120,924       -       -  

Mutual funds

    3,472,989       -       -  
                         

Total

  $ 8,593,913     $ 1,448,882     $ -  

June 30, 2013

 

 

Description

 

Quoted

Price for Identical

Assets

(Level 1)

   

Significant Other

Observable Inputs

(Level 2)

   

Significant

Unobservable Inputs

(Level 3)

 
                         

Certificates of deposits

  $ -     $ 949,815     $ -  

Equity securities

    5,046,557       -       -  

Mutual funds

    3,430,670       -       -  
                         

Total

  $ 8,477,227     $ 949,815     $ -  

  

The stocks included in the portfolio as of September 29, 2013 were:

 

82,112

 shares of AT&T

4,508

 shares of Frontier Communications

475

 shares of LSI

40,000

 shares of Sprint

11,865

 shares of Vodafone

2,520

 shares of Manulife

4,398

 shares of CenturyLink

412

 shares of DexMedia

774

 shares of NCR

28,784

 shares of Verizon

4,079

 shares of Windstream

 774

 shares of Teradata

 

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 September 29, 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 Standards

 

       There were no new accounting pronouncements during the quarter ended September 29, 2013, that would impact the

Company.

 

 

 
7

 

 

 

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 12, 2013, 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

 

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 of the date hereof. We are under no obligation to publicly update or revise any forward-looking statement as a result of new information, future events or otherwise, except as otherwise required by law.

 

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 $251,658 during the quarter ended September 29, 2013. In fiscal year 2012, 5,000 shares of Verizon were purchased for $178,200. 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 one insurance company acquired at no cost when the 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 $3,400,000 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 each reporting period. The value of the securities on September 29, 2013, including the most recent purchase, was approximately $5.1 million. The value of securities held at June 30, 2013 was approximately $5.0 million. Short-term investments consisting mainly of Certificates of Deposits, cash and cash equivalents totaled $3,227,000 at September 29, 2013 compared to $4,388,000 at June 30, 2013.

 

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 September 29, 2013, the value was approximately $3,473,000.

 

The Company’s position in all the above investments is a source of capital for possible expansion. Potential volatility in the trading prices of the marketable securities held by the Company could impact the Company’s opportunities for expansion. The Board of Directors reviews the portfolio weekly and any use of this reserve at its quarterly meetings.

 

The Company sold its Winter Park, Florida location, which had been operating with a negative cash flow, in May 2013 for $2,850,000 resulting in a gain of $2,768,000.

 

In the three-month period ended September 29, 2013, the Company expended approximately $44,000 for the purchase of building, entertainment and restaurant equipment.  The Company has no current plans to obtain 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 Accounts Payable were attributable primarily to the timing of the payments including compensation, insurance and taxes and for contributions to benefit plans.

 

 

 
9

 

 

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 September 29, 2013, league deposits of approximately $714,000 were included in the current liabilities category.

 

Cash flow provided by operating activities in the thirteen weeks ended September 29, 2013 was $7,000 which, along with cash on hand, was sufficient to meet day-to-day cash needs and pay dividends. Cash dividends of approximately $852,000, or $.165 per share, were paid to shareholders during the three-month period ended September 29, 2013.  In September 2013, the Company declared a regular quarterly dividend of $.165 per share, payable November 14, 2013.  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 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.  Mild winter weather in fiscal 2013 caused few cancellations. The Company operates in the Washington, DC area where its business is vulnerable to sequestration or other downsizing of the federal government. Current economic conditions continue to create challenging times but our response will be helped by having the resources to be able to promote the sport.

 

RESULTS OF OPERATIONS

 

The following table sets forth the items in our consolidated summary of operations for the fiscal quarter ended September 29, 2013, and September 30, 2012, and the dollar and percentage changes therein.

 

   

Thirteen weeks ended

 
   

September 29, 2013 and September 30, 2012

 
   

Dollars in thousands

 
   

2013

   

2012

   

Change

   

% Change

 

Operating Revenues:

                               

Bowling and other

  $ 3,395     $ 3,618     $ (223

)

    (6.2

)

Food, beverage & merchandise sales

    1,355       1,492       (137

)

    (9.2

)

      4,750       5,110       (360

)

    (7.0

)

Operating Expenses:

                               

Compensation & benefits

    2,814       2,903       (89

)

    (3.1

)

Cost of bowling & other

    1,558       1,580       (22

)

    (1.4

)

Cost of food, beverage & merchandise sales

    437       448       (11

)

    (2.4

)

Depreciation & amortization

    355       388       (33

)

    (8.5

)

General & administrative

    206       264       (58

)

    (22.0

)

      5,370       5,583       (213

)

    (3.8

)

                                 

Operating Loss from continuing operations

    (620

)

    (473

)

    (147

)

    (31.1

)

                                 

Interest & dividend income

    139       131       8       6.1  

Loss from continuing operations before tax benefit

    (481

)

    (342

)

    (139

)

    (40.6

)

Income tax benefit

    (168

)

    (120

)

    (48

)

    (40.0

)

                                 

Loss from continuing operations

  $ (313

)

  $ (222

)

  $ (91

)

    (41.0

)

Loss from discontinued operations, net of tax

  $ (5

)

  $ (19

)

  $ 14       73.7  

Net Loss

  $ (318

)

  $ (241

)

  $ (77

)

    (31.9

)

 

 

 

 
10

 

 

 

As noted above, a Florida location was sold in May 2013, and its operations for the periods ended September 2013 and September 2012 have been shown separately under Loss from discontinued operations, net of tax. Including discontinued operations, for the thirteen-week period ended September 29, 2013, there was a net loss of $318,390, or $.06 loss per share. For the prior year thirteen-week period ended September 30, 2012, there was a net loss of $240,993, or $.05 loss per share. Eighteen locations were in operation in the current year quarter and nineteen locations were in operation in the prior year comparable period. The bowling business is seasonal and the first quarter which includes summer months is typically the slowest. Management believes that the length and uncertainty of economic conditions are negatively influencing the public’s discretionary spending. The operating results for the fiscal 2014 period included in this report are not necessarily indicative of results to be expected for the year.

 

The information included in Operating Revenues and Operating Expenses below relates to the eighteen centers that were in operation for both the fiscal quarter ended September 29, 2013 and the prior year quarter ended September 30, 2012.

 

Operating Revenues

 

Total operating revenues decreased 8% or $360,000 to $4,750,000 in the thirteen-week period ended September 29, 2013, compared to a decrease of 6% or $309,000 to $5,110,000 in the three-month period ended September 30, 2012.  Bowling and other revenue decreased $222,000 or 7% in the current year fiscal quarter compared to a decrease of $226,000 or 6% in the comparable prior year quarter. Food, beverage and merchandise sales were down $137,000 or 10% in the current year quarter due to lower traffic, compared to a decrease of $83,000 or 6% in the prior year comparable quarter.  Cost of sales declined $12,000 or 3% in the current year three-month period due to lower sales.

 

Operating Expenses

 

Operating expenses were down $213,000 or 4% in the three-month period ended September 29, 2013 compared to a decrease of $332,000 or 6% in the prior year quarter ended September 30, 2012.  Employee compensation and benefits were down $89,000 and $84,000 or 3% in each of the fiscal first quarters of 2014 and 2013, respectively. The Company continued to make scheduling adjustments in response to lower traffic.  In addition, group health insurance costs decreased as a result of lower premiums and fewer participants. 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 $22,000 or 1% in the quarter ended September 29, 2013 versus a decrease of $199,000 or 13% in the comparable quarter ended September 30, 2012. Maintenance and repair costs were up $26,000 or 12% in the current year quarter versus a decrease of $39,000 or 21% in the comparable quarter of fiscal 2013. The current year period included roof repairs and storm drain work.   Advertising costs decreased $27,000 or 25% in the quarter ended September 29, 2013 as the Company used less expensive digital advertising more heavily in the current fiscal year.  For the three month period ended September 29, 2013, utility costs were up slightly. In the prior year quarter costs were down $25,000 or 6%. Supplies and services expenses were down $26,000 or 14% in the current year thirteen-week period and were down $16,000 or 8% in the prior year comparable period.

 

Depreciation and amortization expense was down 9% in the three-month period ended September 29, 2013, and down 8% in the prior year comparable three-month period as assets reached full depreciation.

 

As stated above, the first quarter of the fiscal year is seasonally the slowest and the quarter ended September 29, 2013 resulted in an operating loss from continuing operations of $313,000. The comparable quarter last year produced an operating loss from continuing operations of $222,000.

 

Interest and Dividend Income

 

Interest and dividend income increased $8,000 or 5% versus an increase of $13,000 or 10% in the fiscal 2014 and 2013 quarters, respectively. Interest income in the current year period declined due to lower balances and interest rates, however dividend income was up in part due to the increased holdings in Verizon, mentioned above.

 

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.

 

 

 
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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 September 29, 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 September 29, 2013, 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 12, 2013 (furnished herewith)

  

  

31.1

Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act filed herewith

  

  

31.2

Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act filed herewith

  

  

32

Written Statement of the Chief Executive Officer and Chief Financial Officer Pursuant to 18 U.S.C. 1350 filed herewith

   

101

Interactive data files for the thirteen weeks ended September 29, 2013 in eXtensible Business Reporting Language

 

 

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 12, 2013

By:  /s/ Leslie H Goldberg 

  

       Leslie H. Goldberg, President

  

  

  

  

  

  

Date: November 12, 2013

By:  /s/ Cheryl A. Dragoo

  

        Cheryl A. Dragoo, Controller

 

 

 

 

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