10-Q 1 bwl-a20131031_10q.htm FORM 10-Q bwl-a20131031_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: DECEMBER 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

  

January 27, 2014

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

   

Twenty-six Weeks Ended

 
   

December 29,

2013

   

December 30,

2012

   

December 29,

2013

   

December 30,

2012

 

Operating Revenues:

                               

Bowling and other

  $ 4,216,078     $ 4,320,274     $ 7,611,304     $ 7,937,799  

Food, beverage and merchandise sales

    1,750,768       1,809,774       3,105,816       3,302,141  

Total Operating Revenues

    5,966,846       6,130,048       10,717,120       11,239,940  
                                 

Operating Expenses:

                               

Employee compensation and benefits

    2,768,185       2,864,853       5,581,908       5,767,964  

Cost of bowling and other services

    1,575,977       1,529,003       3,134,164       3,108,703  

Cost of food, beverage and merchandise sales

    542,714       539,708       979,515       988,064  

Depreciation and amortization

    366,014       384,570       721,306       772,271  

General and administrative

    239,280       206,199       445,557       470,126  

Total Operating Expenses

    5,492,170       5,524,333       10,862,450       11,107,128  
                                 

Operating Income (loss)

    474,676       605,715       (145,330

)

    132,812  

Interest and dividend income

    90,461       119,065       229,230       250,284  
                                 

Earnings from continuing operations before provision for income taxes

    565,137       724,780       83,900       383,096  

Provision for income taxes

    197,800       253,700       29,400       134,100  
                                 

Net Earnings from continuing operations

  $ 367,337     $ 471,080     $ 54,500     $ 248,996  
                                 

Income (loss) from discontinued operations, net of tax

  $ 3,604     $ (15,406

)

  $ (1,949

)

  $ (34,315

)

                                 

Net Earnings

  $ 370,941     $ 455,674     $ 52,551     $ 214,681  
                                 

Earnings per share-basic & diluted

                               

Continuing operations

  $ .07     $ .09     $ .01     $ .05  

Discontinued operations

  $ .00     $ .00     $ .00     $ (.01

)

                                 

NET EARNINGS (LOSS) PER SHARE

  $ .07     $ .09     $ .01     $ .04  
                                 

Weighted average shares outstanding

    5,160,971       5,151,471       5,160,971       5,151,471  
                                 

Dividends paid

  $ 851,561     $ 4,275,753     $ 1,703,122     $ 5,099,957  
                                 

Per share, dividends paid, Class A

  $ .165     $ .83     $ .33     $ .99  
                                 

Per share, dividends paid, Class B

  $ .165     $ .83     $ .33     $ .99  

 

 

The operating results for the thirteen (13) and twenty-six (26) week periods ended December 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

   

Twenty-six Weeks Ended

 
   

December 29,

2013

   

December 30,

2012

   

December 29,

2013

   

December 30,

2012

 
                                 

Net Earnings

  $ 370,941     $ 455,674     $ 52,551     $ 214,681  

Other comprehensive earnings- net of tax

                               

Unrealized gain (loss) on available-for-sale securities net of tax (benefit) of $13,416 and ($209,501) for 13 weeks, and ($45,338) and ($86,622) for 26 weeks

    21,787       (340,373

)

    (73,671

)

    (139,108

)

                                 

Comprehensive earnings (loss)

  $ 392,728     $ 115,301     $ (21,120

)

  $ 75,573  


 

The operating results for the thirteen (13) and twenty-six (26) week periods ended December 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

 
   

December 29,

2013

   

June 30,

2013

 

ASSETS

 

CURRENT ASSETS:

               

Cash and cash equivalents

  $ 2,310,380     $ 3,437,780  

Short-term investments

    1,450,048       949,815  

Inventories

    592,704       519,179  

Prepaid expenses and other

    275,893       563,591  

Income taxes refundable

    142,829       58,129  

Current deferred income taxes

    6,658       6,658  

TOTAL CURRENT ASSETS

    4,778,512       5,535,152  

LAND, BUILDINGS & EQUIPMENT

               

Net of accumulated depreciation of $38,766,778 and $38,144,649

    21,375,414       21,979,489  

OTHER ASSETS:

               

Marketable securities

    8,652,195       8,477,227  

Cash surrender value-life insurance

    648,717       648,717  

Other

    80,665       84,465  

TOTAL OTHER ASSETS

    9,381,577       9,210,409  

TOTAL ASSETS

  $ 35,535,503     $ 36,725,050  
                 

LIABILITIES AND STOCKHOLDERS' EQUITY

 

CURRENT LIABILITIES:

               

Accounts payable

  $ 489,408     $ 694,454  

Accrued expenses

    742,242       1,045,645  

Dividends payable

    851,561       851,561  

Other current liabilities

    1,550,994       311,284  

Income taxes payable

    -       151,227  

TOTAL CURRENT LIABILITIES

    3,634,205       3,054,171  

LONG-TERM DEFERRED COMPENSATION

    39,194       39,194  

NONCURRENT DEFERRED INCOME TAXES

    2,554,545       2,599,884  

TOTAL LIABILITIES

    6,227,944       5,693,249  
                 

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 3,746,454

    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

    2,510,349       2,584,020  

Retained earnings

    18,431,299       20,081,870  

TOTAL STOCKHOLDERS' EQUITY

    29,307,559       31,031,801  
                 

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY

  $ 35,535,503     $ 36,725,050  

 

See notes to condensed consolidated financial statements.

 

 
4

 

 

BOWL AMERICA INCORPORATED AND SUBSIDIARIES

 

CONDENSED CONSOLIDATED STATEMENTS  OF CASH FLOWS

(Unaudited)

 

   

Twenty-six Weeks Ended

 
   

December 29,

2013

   

December 30,

2012

 

Cash Flows From Operating Activities

               

Net earnings

  $ 52,551     $ 214,681  

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

               

Depreciation and amortization (including discontinued operations)

    721,306       777,115  

Changes in assets and liabilities

               

Increase in inventories

    (73,525

)

    (48,552

)

Decrease in prepaid & other

    287,698       102,261  

(Increase) decrease in income taxes refundable

    (84,700

)

    22,600  

Decrease in other long-term assets

    3,800       -  

Decrease in accounts payable

    (205,046

)

    (200,220

)

Decrease in accrued expenses

    (303,403

)

    (248,869

)

Decrease in income taxes payable

    (151,227

)

       

Increase in other current liabilities

    1,239,710       1,350,495  

Net cash provided by operating activities

    1,487,164       1,969,511  
                 

Cash Flows From Investing Activities

               

Expenditures for land, building and equip

    (117,231

)

    (414,489

)

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

    (500,233

)

    2,915,202  

Purchases of marketable securities

    (293,978

)

    (74,814

)

Net cash (used in) provided by Investing activities

    (911,442

)

    2,425,899  
                 

Cash Flows From Financing Activities

               

Payment of cash dividends

    (1,703,122

)

    (5,099,957

)

Net cash used in financing activities

    (1,703,122

)

    (5,099,957

)

                 

Net Decrease in Cash and Equivalents

    (1,127,400

)

    (704,547

)

                 

Cash and Equivalents, Beginning of period

    3,437,780       2,332,022  
                 

Cash and Equivalents, End of period

  $ 2,310,380     $ 1,627,475  
                 
                 

Supplemental Disclosures of Cash Flow Information

               

Cash Paid During the Period for:

               

Income taxes

  $ 264,227     $ 93,000  

 

See notes to condensed consolidated financial information.

 

 
5

 

 

BOWL AMERICA INCORPORATED AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the Thirteen and Twenty-six Weeks Ended

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

 

December 29, 2013

Description

 

Fair Value

   

Cost basis

   

Unrealized Gain/(loss)

 

Short-term investments

  $ 1,450,048     $ 1,450,048     $ -  

Equity securities

  $ 5,202,446     $ 1,140,656     $ 4,061,790  

Mutual funds

  $ 3,449,749     $ 3,456,064     $ (6,315 )

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:

 

December 29, 2013

 

Description

 

Quoted Price for Identical Assets

(Level 1)

   

Significant Other Observable Inputs

(Level 2)

   

Significant Unobservable Inputs

(Level 3)

 
                         

Certificates of deposits

  $ -     $ 1,450,048     $ -  

Equity securities

    5,202,446       -       -  

Mutual funds

    3,449,749       -       -  
                         

Total

  $ 8,652,195     $ 1,450,048     $ -  

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 equity securities portfolio as of December 29, 2013 were:

 

82,112

 shares of AT&T

2,520

 shares of Manulife

     412

 shares of DexMedia

     774

 shares of NCR

     774

 shares of Teradata

11,865

 shares of Vodafone

4,398

 shares of CenturyLink
4,508  shares of Frontier Communications

     475

 shares of LSI

40,000

 shares of Sprint

28,784

 shares of Verizon

4,079

 shares of Windstream

 

      The Mutual fund included in the table above is Vanguard GNMA Admiral Shares #536 fund. The fair value of certificates of deposits is estimated using 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 December 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 December 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 February 12, 2014, 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 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 current fiscal year and in fiscal 2013, 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 from one insurance company acquired at no cost when that company demutualized. While not all stocks in the portfolio are domestic American companies any longer, since the original purchases at an approximate cost of $630,000, we have received approximately $962,000 from mergers and sales, and over $3,400,000 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 fair value of the securities on December 29, 2013 was approximately $5,200,000.

 

The Company’s original investment in the Vanguard GNMA bond fund began in 1988 with purchases of shares in the fund totaling approximately $1,400,000. Except for a one time sale of approximately $666,000 in 1991, all earnings have been reinvested. The fund is carried at fair value on the last day of the reporting period. At December 29, 2013, the value was approximately $3,450,000.

 

Short-term investments consisting mainly of Certificates of Deposits, and cash and cash equivalents totaled $3,760,000 at the end of the fiscal second quarter of 2014 compared to $4,388,000 at June 30, 2013.

 

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 six-month period ended December 29, 2013, the Company expended approximately $117,000 for the purchase of building, entertainment and restaurant equipment. The Company has made no application for third party funding as cash and cash flows are sufficient to finance all contemplated purchases and to meet short-term purchase commitments and operating lease commitments.

 

 
9

 

 

The six-month decreases in the categories of Prepaid expenses and other, Accounts Payable and Accrued Expenses are primarily due to seasonal timing of payments including compensation, insurance and taxes and for contributions to benefit plans.

 

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 December 29, 2013, league deposits of approximately $1,376,000 were included in the current liabilities category.

 

Cash flow provided by operating activities in the twenty-six weeks ended December 29, 2013 was $1,487,000 which, along with cash on hand and short-term investments, 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 quarter ended December 29, 2013, and the six months total was approximately $1,703,000 or $.33 per share.   In December 2013 the Company declared a regular quarterly dividend of $.165 per share, payable February 14, 2014 to shareholders of record on January 10, 2014. The economic climate is part of the consideration at the Directors’ quarterly reviews of future estimates of cash flows. The Board of Directors decides the amount and timing of any dividend at its quarterly meeting based on its appraisal of the state of the business and estimate of future opportunities.

 

OVERVIEW

 

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

 

RESULTS OF OPERATIONS

 

The following tables set forth the items in our consolidated summary of operations for the fiscal quarter and year-to-date periods ended December 29, 2013, and December 30, 2012, and the dollar and percentage changes therein.

 

   

Thirteen weeks ended

December 29, 2013 and December 30, 2012

 
   

Dollars in thousands

 
   

2013

   

2012

   

Change

   

% Change

 

Operating Revenues:

                               

Bowling and other

  $ 4,216     $ 4,320     $ (104

)

    (2.4

)

Food, beverage and merchandise sales

    1,751       1,810       (59

)

    (3.3

)

Total Operating Revenue

    5,967       6,130       (163

)

    (2.7

)

Operating Expenses:

                               

Employee Compensation and benefits

    2,768       2,865       (97

)

    (3.4

)

Cost of bowling and other services

    1,576       1,529       47       3.1  

Cost of food, beverage and merchandise sales

    543       540       3       0.5  

Depreciation and amortization

    366       384       (18

)

    (4.7

)

General and administrative

    239       206       33       16.0  

Total Operating Expenses

    5,492       5,524       (32

)

    (0.6

)

                                 

Operating Income from continuing operations

    475       606       (131

)

    (21.6

)

Interest and dividend income

    90       119       (29

)

    (24.4

)

Earnings from continuing operations before taxes

    565       725       (160

)

    (22.1

)

Income taxes

    198       254       (56

)

    (22.0

)

Income from continuing operations

    367       471       (104

)

    (22.1

)

Income (loss) from discontinued operations, net of tax

    4       (15

)

    19       126.7  

Net Earnings

  $ 371     $ 456     $ (85

)

    (18.6

)

 

 
10

 

  

   

Twenty-six weeks ended

December 29, 2013 and December 30, 2012

 
   

Dollars in thousands

 
   

2013

   

2012

   

Change

   

% Change

 

Operating Revenues:

                               

Bowling and other

  $ 7,611     $ 7,938     $ (327

)

    (4.1

)

Food, beverage and merchandise sales

    3,106       3,302       (196

)

    (5.9

)

Total Operating Revenues

    10,717       11,240       (523

)

    (4.7

)

Operating Expenses:

                               

Employee Compensation and benefits

    5,582       5,768       (186

)

    (3.2

)

Cost of bowling and other services

    3,134       3,109       25       0.8  

Cost of food, beverage and merchandise sales

    979       988       (9

)

    (0.9

)

Depreciation and amortization

    721       772       (51

)

    (6.6

)

General and administrative

    446       470       (24

)

    (5.1

)

Total Operating Expenses

    10,862       11,107       (245

)

    (2.2

)

                                 

Operating (Loss) income from continuing operations

    (145

)

    133       (278

)

    (209.0

)

Interest and dividend income

    229       250       (21

)

    (8.4

)

Earnings from continuing operations before taxes

    84       383       (299

)

    (78.1

)

Income taxes

    29       134       (105

)

    (78.4

)

Income from continuing operations

    55       249       (194

)

    (77.9

)

Loss from discontinued operations, net of tax

    (2

)

    (34

)

    32       94.1  

Net Earnings

  $ 53     $ 215     $ (162

)

    (75.3

)

 

As noted above, a Florida location was sold in May 2013, and its operations for the periods ended December 2013 and December 2012 have been shown separately under Income (loss) from discontinued operations, net of tax. Including discontinued operations, for the thirteen-week periods ended December 29, 2013, and December 30, 2012, net earnings were $370,941or $.07 per share and $455,674 or $.09 per share, respectively. For the current year and prior year twenty-six weeks periods net earnings were $52,551 or $.01 per share and $214,681, or $.04 per share, respectively. Management believes that the continuing uncertainty of an economic recovery and the consequences of federal tax and spending provisions are influencing the public’s view of discretionary spending. The operating results for fiscal 2014 periods included in this report are not necessarily indicative of results to be expected for the year.  

 

 Operating Revenues

 

Total operating revenues decreased $163,000 to $5,967,000 in the most recent quarter compared to a decrease of $233,000 to $6,130,000 in the three-month period ended December 30, 2012.  For the current fiscal six-month period operating revenues were down $523,000 versus a decrease of $542,000 in the comparable six-month period a year ago.  Bowling and other revenue declined $104,000 in the quarter and $327,000 year-to-date for the periods ended December 29, 2013. Prior year comparable three and six month period revenues showed decreases of $233,000 and $362,000, respectively. The 2014 fiscal year winter league bowling linage had been approximately equal to the prior year until December snow storms caused postponements of league play until the third and fourth quarters.

 

Food, beverage and merchandise sales were down $59,000 or 3.3% in the current year quarter and down $196,000 or 5.9% in the six-month period.  Cost of sales fluctuated less than 1% in both the three month and six month periods ended December 29, 2013. 

 Operating Expenses

 

Operating expenses were down $32,000 or less than 1% and $245,000 or 2% in the current three and six-month periods, respectively, versus decreases of  $358,000 and $690,000 or 6% each in the three and six month periods, respectively, last year.  Employee compensation and benefits for the three and six month periods were down $97,000 and $186,000, respectively, or 3% in each period ended December 29, 2013, as the Company continued to make scheduling adjustments in response to customer traffic.  In addition, group health insurance costs decreased as a result of lower premiums and fewer participants. In the prior year comparable periods employee compensation and benefits expenses were down $136,000 or 5% in the three month period and down $219,000 or 4% in the six-month period ended December 30, 2012.   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.

 

 
11

 

 

Cost of bowling and other services increased $25,000 or 1% and decreased $338,000 or 10% in the six-month periods ended December 29, 2013 and December 30, 2012, respectively. In the twenty-six weeks ended December 29, 2013, maintenance and repair costs were up $13,000 or 3% in part due to sewer repairs at one location. Advertising costs during the current year twenty-six week period ended December 29, 2013, were down $7,000. For the six month period ended December 29, 2013 utility costs were up $14,000 or 2% due primarily to higher heating costs as the current year period has been colder than the prior year. In the period ended December 30, 2012 utility costs were down $51,000 or 7% due to lower fuel costs and our efforts in energy management. Supplies and services expenses were flat in the current year six-month period and down $38,000 or 9% in the six-month period in the prior year when changes in the timing of purchases and lower costs of some supplies were the reasons for the decrease.

 

Insurance expense excluding health insurance decreased 6% in the current year-to-date period versus a decrease of 12% in last year’s comparable period when the Company made policy and coverage changes.

 

Depreciation and amortization expense was down 7% in the current six-month period and 6% in the prior year six-month period.

 

As a result of the above, the current six-month period of fiscal 2014 showed operating income from continuing operations of $55,000 compared to $249,000 in the prior year comparable six-month period.

 

Interest and Dividend Income

 

Interest and dividend income decreased $21,000 in the fiscal 2014 six-month period and decreased $14,000 in the comparable 2013 year-to-date period, respectively. The current year decrease in interest income is a result of lower investment balances and lower interest rates. Dividend income increased in fiscal 2014 primarily as a result of dividends received on the increased holdings in Verizon.

 

 

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 December 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 December 29, 2013, that materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

 

 
12

 

 

BOWL AMERICA INCORPORATED AND SUBSIDIARIES

S.E.C. FORM 10-Q

 

PART II - OTHER INFORMATION

 

 

Item 6.  Exhibits.

 

20

Press release issued February 12, 2014 (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 and twenty six weeks ended December 29, 2013 in eXtensible Business Reporting Language

 

 
13

 

  

Pursuant to the requirements of the Securities Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

 

  

Bowl America Incorporated

  

(Registrant)

  

  

Date: February 12, 2014

By:  /s/ Leslie H. Goldberg

  

Leslie H. Goldberg, President

  

  

  

  

  

  

Date: February 12, 2014

By:  /s/ Cheryl A. Dragoo

  

Cheryl A. Dragoo, Controller

 

 

14