SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 or 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended June 30, 201329, 2014 Commission file Number 1-7829
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
Securities Registered Pursuant to Section 12(b) of the Act:
Title of Class |
| Name of Exchange on which registered | ||
Class A Common stock (par value $.10) |
| NYSE MKT |
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 ofthe Securities Act. YES [ ] NO [X]
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 orSection 15(d) of the Act. YES[ ] NO [X]
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter periodshorterperiod that the registrant was required to file such reports), and (2) has been subject to such filingrequirements for the past 90 days. YES [X] NO [ ]
Indicate by check mark whether the registrant has submitted electronically and posted on its corporateWeb site, if any, every Interactive Date File required to be submitted and posted pursuant to Rule 405of Regulation S-T (Section 232.405 of this chapter) during the preceding 12 months (or for suchshorter period that the registrant was required to submit and post such files). YES [X] NO [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K, (Section(Section 229.405) is not contained herein, and will not be contained, to the best of registrant's knowledge,in definitive proxy or information statements incorporated by reference in Part III of this Form 10-Kor any amendments to this Form 10-K. [ ]
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 definitions of “large accelerated filer”, “accelerated filer”“acceleratedfiler” 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 checkmark whether the registrant is a shell company (as defined by Rule 12b-2 of the Act).YES.YES [ ] NO [X]
As of December 28, 2012,29, 2013, which was the last business day of the registrant's most recently completed second quarter, 3,683,0093,746,454 Class A common shares were outstanding, and the aggregate market valueof the Class A common shares (based upon the closing price of these shares on the NYSE MKTofMKT)of Bowl America Incorporated held by non-affiliates of the registrant was approximately $33$35 million.As of that date 1,468,4621,414,517 Class B common shares were outstanding. Class B common shareholders havethe right to convert their Class B common stock to Class A common stock on a share for share basis. If theall ofthe Class B shares were converted to Class A shares as of December 28, 2012,29, 2013, the total aggregate market valuemarketvalue for both classes of common stock held by non-affiliates would be approximately $39$37 million.
Indicate the number of shares outstanding of each of the registrant’s
classes of common stock, as of the latest practicable date:
Shares outstanding at | |||||
September 15, | |||||
Class A Common Stock | |||||
$.10 par value | 3,746,454 | ||||
Class B Common Stock | |||||
$.10 par value | 1,414,517 |
DOCUMENTS INCORPORATED BY REFERENCE
Portions of registrant's definitive proxy statement, which will be filed with the Commission not later than 120 days after June 30, 2013,29, 2014, are incorporated by reference into Part III of this Form 10-K. The Selected Financial Data (Item 6), Management’s Discussion & Analysis (Item 7), financial statementsFinancial Statements (Item 8) and Management’s Annual Report on Internal Control Over Financial Reporting (Item 9A) attached to this filing as exhibits are incorporated herein by reference.
BOWL AMERICA INCORPORATED
INDEX TO FISCAL 20132014 10-K FILING
PART I
PART I
ITEM 1. BUSINESS
(a) General Development of Business Bowl America Incorporated (herein referred to as the “Company”) was incorporated in 1958. The Company commenced business with one bowling center in 1958, and at the end fiscal year
(b) Financial Information about Industry Segments The Company operates in one segment. Its principal source of revenue consists of fees charged for the use of bowling lanes and other facilities and from the sale of food and beverages for consumption on the premises. At the end of the fiscal year
(c) Narrative Description of Business As of September 1,
These establishments are fully air-conditioned with facilities for service of food and beverages, game rooms, rental lockers, and meeting room facilities. All centers provide shoes for rental, and bowling balls are provided free. In addition, each center
The bowling equipment essential for the Company's operation is readily available. The Company’s major source of
The bowling business is a seasonal one, and most of the business takes place from October through May. It is highly competitive, but the Company has managed to maintain its position in the markets in which it operates. The principal method of competition is the quality of service furnished to the Company's customers. Its primary competitors are Brunswick Corporation, a large bowling equipment manufacturer, and Bowlmor AMF.
Compliance with federal, state and local environmental protection laws has not materially affected the Company.
The number of persons employed by the Company and its subsidiaries is approximately 500 including approximately 250 full time employees.
(d) Financial Information about Geographic Areas
The Company has no foreign operations.
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ITEM 2. PROPERTIES
The Company owns its general offices which are located at 6446 Edsall Road, Alexandria, Virginia 22312.
Two of the Company's bowling centers are located in leased premises, and the remaining sixteen centers are owned by the Company.
ITEM 3. LEGAL PROCEEDINGS
There are no material pending legal proceedings other than ordinary routine litigation incidental to the business.
ITEM 4. MINE SAFETY DISCLOSURES
Not Applicable.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDERMATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
Market Information The principal market on which the Company's Class A Common Stock is traded is the NYSE MKT.
The table below presents the high and low sales price of the Company's Class A Common Stock in each quarter of fiscal years 2013 1st Qtr 2nd Qtr 3rd Qtr 4th Qtr High Low 2012 1st Qtr 2nd Qtr 3rd Qtr 4th Qtr High Low
Holders As of
Cash Dividends The table below presents the quarterly cash dividends per share of Class A Common Stock and Class B Common Stock paid, and the quarter in which the payment was made during fiscal
Class A Common Stock Quarter 2013 2012 First 16 cents 16 cents Second 83 cents 16 cents Third 0 cents 16 cents Fourth 16.5 cents 16 cents -2- Class B Common Stock Quarter 2013 2012 First 16 cents 16 cents Second 83 cents 16 cents Third 0 cents 16 cents Fourth 16.5 cents 16 cents Quarter 2014 2013 First Second Third Fourth
The Board of Directors decides the amount and timing of any dividend at its quarterly meetings based on its appraisal of the state of the business, the economic climate and estimate of future opportunities at such time.
ITEM 6. SELECTED FINANCIAL DATA
The information is set forth in the section of Exhibit 99(a) entitled "Selected Financial Data" on page 14 of this Form 10-K and is incorporated herein by reference. Such information should be read in conjunction with the audited financial statements.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION ANDRESULTS OF OPERATIONS
The information is set forth in the section of Exhibit 99(b) entitled "Management's Discussion and Analysis of Financial Condition and Results of Operations" on Pages 9 through 12 of this Form 10-K and is incorporated herein by reference.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA The financial statements and notes thereto are set forth in Exhibit 99(c) on pages 15 through 27 of this Form 10-K and is incorporated herein by reference. Supplementary data is not required.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTINGAND FINANCIAL DISCLOSURE
None
ITEM 9A. CONTROLS AND PROCEDURES
Disclosure Controls and Procedures
The Company's disclosure controls and procedures are designed to provide reasonable assurance that information required to be disclosed by it in its periodic reports filed with the Securities and Exchange Commission is recorded, processed, summarized and reported within the time periods specified in the Commission’s rules and forms. Based on an evaluation of the Company’s disclosure controls and procedures conducted by the Company’s Chief Executive Officer and Chief Financial Officer, such officers concluded that the Company's disclosure controls and procedures were effective as of June
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Internal Control over Financial Reporting
(a) Management’s Annual Report on Internal Control Over Financial Reporting
In accordance with Section 404(a) of the Sarbanes-Oxley Act of 2002 and Item 308(a) of Regulation S-K, the report of management on the Company’s internal control over financial reporting is set forth in Exhibit 99(d) in this Annual Report on Form 10-K and is included herein by reference.
(b) Changes in Internal Control Over Financial Reporting
There was no change in the Company’s internal control over financial reporting that occurred during the fourth quarter ended June
PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
Pursuant to General Instruction G(3) of Form 10-K, the information called for by this item regarding directors and executive officers is hereby incorporated by reference from the Company's definitive proxy statement to be filed pursuant to Regulation 14A not later than 120 days after the end of the fiscal year covered by this report.
ITEM 11. EXECUTIVE COMPENSATION
Pursuant to General Instruction G(3) of Form 10-K, the information called for by this item is hereby incorporated by reference from the Company's definitive proxy statement to be filed pursuant to Regulation 14A not laterthan 120 days after the end of the fiscal year covered by this report.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
Pursuant to General Instruction G(3) of Form 10-K, the information called for by this item is hereby incorporated by reference from the Company's definitive proxy statement to be filed pursuant to Regulation 14A not laterthan 120 days after the end of the fiscal year covered by this report.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND
Pursuant to General Instruction G(3) of Form 10-K, the information called for by this item is hereby incorporated by reference from the Company's definitive proxy statement to be filed pursuant to Regulation 14A not laterthan 120 days after the end of the fiscal year covered by this report.
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
Pursuant to General Instruction G(3) of Form 10-K, the information called for by this item is hereby incorporated by reference from the Company's definitive proxy statement to be filed pursuant to Regulation 14A not laterthan 120 days after the end of the fiscal year covered by this report.
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PART IV
ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES (a) Financial Statements The following consolidated financial statements of Bowl America Incorporated and its subsidiaries
Report of Independent Registered Public Accounting Firm
Consolidated balance sheets as of June 29, 2014 and June 30, 2013
Consolidated statements of earnings and comprehensive earnings - years ended June 29, 2014 and June 30, 2013
Consolidated statements of stockholders' equity - years ended June 29, 2014 and June 30, 2013
Consolidated statements of cash flows - years ended June 29, 2014 and June 30, 2013
Notes to the consolidated financial statements - years ended June 29, 2014 and June 30, 2013
(b) Exhibits: 3(i)a Articles of Incorporation of the Registrant and amendments through December
3(i)b Amendment to and restatement of Article FIFTH (b) III 2.2 of the Registrant's Articles
3(ii) By-laws of the Registrant (Incorporated by reference from exhibit 3 to the Registrant’s
10.1 Amended Employment Agreement, dated as of June 18, 2013, between the Company andLeslie H. Goldberg (incorporated by reference to Exhibit 10.1 to Form 8-K filed on June 19, 2013).
10.2 Amended Employment Agreement, dated as of October 19, 2012, between the Company and Cheryl
20 Press release dated September
21 Subsidiaries of registrant (Incorporated by reference from exhibit number 1 to the Registrant'sAnnual Report on Form 10-K for fiscal year ended June 30, 2002.)
31.1 Written statement of Chief Executive Officer (Rule 13a-14a Certification) 31.2 Written statement of Chief Financial Officer (Rule 13a-14a Certification) 32 Written statement of Chief Executive and Chief Financial Officers (Section 1350 Certifications)
99(a) Selected Financial Data (Item 6), set forth as page 14 hereof
99(b) Management’s Discussion & Analysis of Financial Condition and Results of Operations (Item 7),set forth as pages 9-12 hereof
99(c) Consolidated Financial Statements (Item 8), set forth as pages 15-27 hereof
99(d) Management’s Annual Report on Internal Control Over Financial Reporting, (Item 9-A)set forth as page 8 hereof
101 Interactive files formatted in XBRL (Extensible Business Reporting Language)
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BOWL AMERICA INCORPORATED
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange 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
/s/ Leslie H. Goldberg Leslie H. Goldberg President Chief Executive and Operating Officer
Date: September
/s/ Cheryl A. Dragoo Cheryl A. Dragoo Chief Financial Officer, Senior Vice President Principal Financial and Accounting Officer
Date: September
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and the dates indicated.
Name, Title, Capacity
/s/ Leslie H. Goldberg Leslie H. Goldberg President, Principal Executive & Operating Officer and Director Date: September 25, 2014
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Exhibit 99(d) Management’s Annual Report on Internal Control Over Financial Reporting
Management’s Annual Report on Internal Control Over Financial Reporting
The following sets forth, in accordance with Section 404(a) of the Sarbanes-Oxley Act of 2002 and Item 308(a) of Regulation S-K, the annual report of management of the Company on the Company’s internal control over financial reporting.
1. Management of the Company is responsible for establishing and maintaining adequate internal control overfinancial reporting in a process designed by, or under the supervision of the Company’s Chief Executive Officer andChief Financial Officer, and effected by the Company’s Board of Directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles and includes those policies and procedures that:
2. Management of the Company, in accordance with Rule 13a-15(d) under the Securities Exchange Act of 1934 and with the participation of the Company’s Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of the Company’s internal control over financial reporting as of June
3. Management has determined that the Company’s internal control over financial reporting, as of June
4. This annual report does not include an attestation report of the Company’s registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by the Company’s independent registered public accounting firm pursuant to a permanent exemption for non-accelerated filers from the internal control audit requirements of Section 404(b) of the Sarbanes-Oxley Act of 2002.
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Exhibit 99(b) MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONAND RESULTS OF OPERATIONS
FORWARD-LOOKING STATEMENTS
This Annual Report of Form 10-K 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 Annual Report on Form 10-K are forward-looking statements. These forward-looking statements are based on current expectations, estimates, forecasts and projections about our business, our sales 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 Annual Report on Form 10-K 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.
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. Current economic conditions continue to create challenges, but our response is helped by having the resources to be able to promote the sport. 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. 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 during 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. This diversity also provides a measure of safety of principal. During the year ended June 29, 2014, the Company purchased 5,000 shares of Verizon for $251,600 and received a special dividend from Vodafone consisting of 3,120 shares of Verizon valued at $150,000 and cash of $58,000. The Company’s holdings in LSI were purchased by Anago in a mandatory conversion to cash, resulting in a gain of $281. 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 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 $967,000 from mergers and sales and over $3,900,000 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 year. The value of the securities on June 29, 2014 was approximately $5.4 million. The value of securities held at June 30, 2013 was approximately $5.0 million. 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 in1991, all earnings have been reinvested. The fund is carried at fair value on the last day of the reporting period. At June 29, 2014, the value was approximately $3,605,000. -9- Short-term investments consisting mainly of Certificates of Deposits, and cash and cash equivalents totaled $2,295,000 at the end of fiscal 2014 compared to $4,388,000 at the end of fiscal 2013. 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. The Company has made no application for third party funding as cash and cash flows are currently sufficient to finance all contemplated purchases and to meet short-term purchase commitments and operating lease commitments. The Company sold its Winter Park, Florida center, which had been operating with a negative cash flow, for $2,850,000 in May 2013. The gain on the sale, which included the land, building and equipment, was $2,768,000. Cash flow provided by operating activities for the year ended June 29, 2014, was $2,053,000. Equipment purchases during fiscal year 2014 used approximately $261,000. Proceeds from Ginnie Mae dividends totaling approximately$91,600 in fiscal The Company paid cash dividends totaling approximately $3.4 million, or $.66 per share, to shareholders during the 2014 fiscal year, making this the forty-second consecutive year of increased regular dividends per share. In June 2014, the Company declared a quarterly $.17 per share dividend, paid in August 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
RESULTS OF OPERATIONS
The following table sets forth the items in our consolidated summary of operations for the fiscal years ended June 29, 2014 and June 30, 2013,
Fifty-two weeks ended June 30, 2013 and July 1, 2012 Dollars in thousands 2013 2012 Change % Change Operating Revenues: Bowling and other ) )% Food, beverage & merchandise sales ) ) ) ) Operating Expenses: Compensation & benefits ) ) Cost of bowling & other ) ) Cost of food, beverage & merch sales ) ) Depreciation & amortization ) ) General & administrative ) ) ) ) Gain on sales of assets ) ) Operating income from continuing operations Interest & dividend income ) Earnings from continuing operations before taxes Income taxes Earnings from continuing operations ) ) Gain (loss) from discontinued operations net of tax ) Net Earnings -10- The following table sets forth the items in our consolidated summary of operations for the fiscal fourth quarters ended June 29, 2014 and June 30, 2013, respectively, and the dollar and percentage changes therein.
As noted above, the Bowl America Winter Park location was sold in May 2013, and its operations for the periods
Operating Revenues
Total operating revenue decreased 4.8%, or $1,077,000, to $22.8 million in fiscal 2014 compared to a decrease of 2.0%, or $486,000, to $23.9 million in fiscal
Management believes that winter weather primarily in the
Operating Expenses
As discussed in more detail below, total operating expenses decreased 2.3%, or $514,000, in fiscal year 2014 versus a decrease of 2.8%, or $647,000 in fiscal
-11- Cost of bowling and other services
Cost of food, beverage and merchandise sales increased $41,000 or 2% in fiscal 2014, primarily the result of higher merchandise sales, and decreased $52,000 or 3% in fiscal 2013,
Depreciation expenses decreased approximately $99,000 or 7% in fiscal 2014 as several large assets became fully depreciated and decreased $35,000 or 2%
Operating income from continuing operations
Interest and Dividend Income
Interest and dividend income increased $228,000 or 52.4% in fiscal 2014 primarily due to the special Vodafone dividend mentioned above and increased holdings in Verizon. The same category declined 13% or $65,000 in fiscal 2013
Income taxes
Effective income tax rates on continuing operations for the Company were 26.5% for fiscal 2014 and 32.4% for
Net Earnings
Net earnings from continuing operations in
Fiscal 2014 included a net of tax loss of $2,774 from the discontinued Winter Park, Florida location. Income from discontinued operations, net of tax in fiscal year 2013
CRITICAL ACCOUNTING POLICIES
We have identified accounting for marketable investment securities as a critical accounting policy due to the significance of the amounts included in our balance sheet. The Company exercises judgment in determining the classification of its investment securities as available-for-sale and in determining their fair value. The Companyrecords these investments at their fair value based on quoted market prices with the unrealized gain or loss recordedin accumulated other comprehensive income, 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.
We have identified accounting for the impairment of long-lived assets as a critical accounting policy due to the significance of the amounts included in our balance sheet under the caption of Land, Buildings and Equipment. TheCompany reviews long-lived assets whenever events or changes indicate that the carrying amount of an asset may notbe 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 undiscounted future cash flows are less than the carrying amount. There were no impairment losses recorded in fiscal
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Report of Independent Registered Public Accounting Firm
Board of Directors and Stockholders Bowl America Incorporated Alexandria, Virginia
We have audited the accompanying Consolidated Balance Sheets of Bowl America Incorporated and Subsidiaries as of June 29, 2014 and June 30, 2013,
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Bowl America Incorporated and Subsidiaries as of June 29, 2014 and June 30, 2013,
/s/ Aronson, LLC
Aronson, LLC Rockville, Maryland September
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Exhibit 99(a) Selected Financial Data
BOWL AMERICA INCORPORATED AND SUBSIDIARIES CONSOLIDATED SUMMARY OF OPERATIONS
Selected Financial Data
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Exhibit 99(c) Consolidated Financial Statements
BOWL AMERICA INCORPORATED AND SUBSIDIARIES
The accompanying notes to the consolidated financial statements are an integral part of these financial statements.
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BOWL AMERICA INCORPORATED AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF EARNINGS AND COMPREHENSIVE EARNINGS For the Years Ended June 30, July 1, 2013 2012 Operating Revenues: Bowling and other Food, beverage and merchandise sales Total Operating Revenue Operating Expenses: Employee compensation and benefits Cost of bowling and other services Cost of food, beverage and merchandise sales Depreciation and amortization General and administrative Total Operating Expense Gain on sale of land, buildings and equipment Operating Income Interest and dividend income Earnings from continuing operations before provisionfor income taxes Provision for income taxes from continuingOperations (Note 7) Current Deferred ) Earnings from continuing operations Gain (loss) from discontinued operations,net of tax (Note 10) ) Net Earnings Earnings per share-basic & diluted Continuing operations Discontinued operations ) Net Earnings Weighted average shares outstanding Dividends paid Per share, dividends paid, Class A Per share, dividends paid, Class B Net Earnings Other comprehensive earnings- net of tax Unrealized gain on available-for–sale securities net of tax of $27,800 and $157,484 Comprehensive earnings
The accompanying notes to the consolidated financial statements are an integral part of -16-
BOWL AMERICA INCORPORATED AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
The accompanying notes to the consolidated financial statements are an integral part of these financial statements.
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BOWL AMERICA INCORPORATED AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Years Ended June 30, July 1, 2013 2012 Cash Flows From Operating Activities Net earnings Adjustments to reconcile net earnings to net cash provided by operating activities: Depreciation and amortization (including discontinued operations) (Decrease) increase in deferred income tax ) Gain on disposition of assets-net ) ) Stock issuance – ESOP plan Changes in assets and liabilities Decrease (increase) in inventories ) Decrease in prepaid and other Decrease (increase) in income taxes refundable ) Increase in income taxes payable Decrease in other long-term assets (Decrease) increase in accounts payable ) Increase (decrease) in accrued expenses ) Increase (decrease) in other current liabilities ) (Decrease) increase in long-term deferred compensation ) Net cash provided by operating activities Cash Flows From Investing Activities Expenditures for land, building and equipment ) ) Sale of assets Net sales and maturities of short-term investments Purchases of marketable securities ) ) Increase in cash surrender value ) ) Net cash provided by investing activities Cash Flows From Financing Activities Payment of cash dividends ) ) Net cash used in financing activities ) ) Net Increase (decrease) in Cash and Equivalents ) Cash and Equivalents, Beginning of period Cash and Equivalents, End of period Supplemental Disclosures of Cash Flow Information Cash Paid During the Period for: Income taxes
The accompanying notes to the consolidated financial statements are an integral part of these financial statements.
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BOWL AMERICA INCORPORATED AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
Organization Bowl America Incorporated is engaged in the operation of 18 bowling centers, with food and beverage service in each center. Ten centers are located in metropolitan Washington D.C., one center in metropolitan Baltimore, Maryland, four centers in metropolitan Richmond, Virginia, and three centers in metropolitan Jacksonville, Florida. These 18 centers contain a total of 726 lanes. The Company operates in one segment.
Principles of Consolidation The consolidated financial statements include the accounts of the Company and all of its wholly-owned subsidiary corporations. All significant inter-company items have been eliminated in the consolidated financial statements.
Fiscal Year The Company's fiscal year ends on the Sunday nearest to June 30. Fiscal year 2014 ended June 29, 2014, and fiscal year 2013 ended June 30,
Subsequent Events The Company has evaluated subsequent events through the date of filing these financial statements with the Securities and Exchange Commission on September
Estimates The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions. These estimates and assumptions affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results may differ from those estimates.Significant estimates include the deferred compensation liability for executives and key employees including survivor benefits, depreciation expense, cash surrender value of officers' life insurance, the Federal and State income taxes (current and deferred), and market assumptions used in estimating the fair value of certain assets such as marketable securities and long-lived assets.
Revenue Recognition The Company records revenue for fees charged for use of bowling lanes and other facilities at the time the services are provided. Food, beverage and merchandise sales are recorded as revenue at the time the product is given to the customer.
-19- Depreciation and Amortization Depreciation and amortization for financial statement purposes are calculated by use of the straight-line method. Amortization of leasehold improvements is calculated over the estimated useful life of the
Bowling lanes and equipment (in years) - Building and building improvements (in years) - Leasehold improvements (in years) - Amusement games (in years) -
Maintenance and repairs and minor replacements are charged to expense when incurred. Major replacements and betterments are capitalized. The accounts are adjusted for the sale or other disposition of property, and the resulting gain or loss is credited or charged to income.
Impairment of Long-Lived Assets 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 differencebetween the assets' fair value and carrying value, is recognized when the estimated undiscounted future cash flows are less than the carrying amount.
Dividends It is the Company's policy to accrue a dividend liability at the time the dividends are declared.
Advertising Expense It is the Company's policy to expense advertising expenditures as they are incurred. The Company's advertising expenses for the years ending June 29, 2014, and June 30, 2013, were $433,525 and
Inventories Inventories are stated at the lower of cost (first-in, first-out method) or market. Inventories consist of resale merchandise including food and beverage and bowling supplies.
Income Taxes Deferred income tax liabilities and assets are based on the differences between the financial statement and tax bases of assets and liabilities, using tax rates currently in effect. A valuation allowance is provided when it is more likely than not that a deferred tax asset will not be realized.
Investment Securities All of the Company's readily marketable debt and equity securities are classified as available-for-sale. Accordingly, these securities are recorded at fair value with any unrealized gains and losses excluded from earnings and reported, net of deferred taxes, within a separate component of stockholders' equity until realized. Realized gains or losses on the sale of debt and equity securities are reported in earnings and determined using the adjusted cost of the specific security sold.
Earnings Per Share Earnings per share basic and diluted, have been calculated using the weighted average number of shares of Class A and Class B common stock outstanding of
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Comprehensive Earnings A consolidated statement of comprehensive earnings reflecting the aggregation of net earnings and unrealized gain or loss on available-for-sale securities, the Company's principal components of other comprehensive earnings, has been presented for the years ended June 29, 2014 and June 30,
Cash and Cash Equivalents For purposes of the consolidated statements of cash flows, the Company considers money market funds and certificates of deposits, with original maturities of three months or less to be cash equivalents. The Company maintains cash accounts which may exceed federally insured limits during the year, but does not believe that this results in any significant credit risk.
Other Current Liabilities Other current liabilities include prize fund monies held by the Company for bowling leagues. The funds are returned to the leagues at the end of the league bowling season. At June 29, 2014 and June 30, 2013
Reclassifications Certain previous year amounts have been reclassified to conform with the current year presentation.
In In February 2013, the FASB issued guidance on disclosure requirements for Recent accounting guidance not yet adopted In May 2014, the FASB issued a new standard related to revenue recognition. Under the new standard, recognition of revenue occurs when a customer obtains control of promised goods or services in an amount that reflects the consideration to which the entity expects to receive in exchange for those goods or services. In addition, the standard requires disclosure of the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with
2. CASH AND CASH EQUIVALENTS Cash and cash equivalents consisted of the following: June 30,2013 July 1, 2012 Demand deposits and cash on hand Money market funds
The account balances at times exceed federally insured limits. The Company does not believe this poses any significant risk.
3. INVESTMENTS The Company’s marketable securities are categorized as available-for-sale securities. The cost for marketable securities was determined using the specific identification method. The fair values of marketable securities are based on the quoted market price for those securities. Short-term investments consist of certificates of deposits with maturities of generally three months to one year. At June
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As of June Original Cost Unrealized Gain Unrealized Loss Fair Value June 30, 2013 Equity securities Mutual fund Certificates of deposits July 1, 2012 Equity securities Mutual fund Certificates of deposits
During fiscal
Less than 12 months 12 Months or greater Total July 1,2012 Fair Value Unrealized loss Fair Value Unrealized loss Fair Value Unrealized loss -22-
The equity securities portfolio includes the following stocks:
During the year ended June 29, 2014, the Company purchased 5,000 shares of Verizon. In addition the Company received 3,120 shares of Verizon as a result of Vodafone’s special dividend funded by its sale of Verizon Wireless. LSI was purchased by Anago in an all cash transaction resulting in a gain of $281 on the Company’s holdings
As stated in Note 1, the Company records its readily marketable debt and equity securities at fair value. These assets are valued in accordance with a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value as follows:
Level 1. Observable inputs such as quoted prices in active markets for identical assets or liabilities; Level 2. Inputs, other than the quoted prices in active markets, that are observable either directly or indirectly; and Level 3. Unobservable inputs in which there is little or no market data, which require the reportingentity to develop its own assumptions. A financial instrument's level within the fair value heirarchy is based on the lowest level of any input that is significant to the fair value measurement.
The fair value of these assets as of June
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The fair value of these assets as of
The fair value of certificates of deposits is estimated using net present value techniques and comparing the values to certificates with similar terms.
4. LAND, BUILDINGS, AND EQUIPMENT Land, buildings, and equipment,
June 30, 2013 July 1, 2012 Buildings Leasehold and building improvements Bowling lanes and equipment Land Amusement games Bowling lanes and equipment not yet in use Less accumulated depreciation and amortization
Depreciation and amortization expense for buildings and equipment for fiscal years 2014 and 2013 was $1,323,276, and
5. COMMITMENTS AND CONTINGENCIES Lease Commitments The Company and its subsidiaries are obligated under long-term real estate lease agreements for two bowling centers. Certain of the Company's real estate leases provide for In June 2014, the Company amended a lease for one location for a five year and
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At June Year Ending 2014 2015 Total minimum lease payments
Net rent expense was as follows: For the Years Ended June 30, 2013 July 1, 2012 Minimum rent under operating leases Excess percentage rents
Purchase Commitments The Company's purchase commitments at June
6. PROFIT-SHARING AND ESOP PLAN The Company has two defined contribution plans. The first is a profit-sharing plan which, generally, covers all employees who on the last day of the fiscal year or December 29 have been employed for one year with at least one thousand hours of service. The Plan provides for Company contributions asdetermined by the Board of Directors. For the years ended June 29, 2014 and June 30, 2013,
Effective March 31, 1987, the Company adopted an Employee Stock Ownership Plan (ESOP) which generally covers all individuals who were employed at the end of the fiscal year and had one thousand or more hours of service during that fiscal year. The Plan provides for Company contributions as determinedby the Board of Directors. The Company contributed $48,000 for fiscal year 2014. For fiscal year 2013, the Company contributed 9,500 shares of Bowl America common stock valued at $123,500, based on the market price on the date of contribution.
7. INCOME TAXES The Company is required to analyze all material positions it has taken or plans to take in all tax returns that have been filed or should have been filed with all taxing authorities for all years still subject to challenge by those taxing authorities. If the position taken is “more-likely-than-not” to be sustained by the taxing authority on its technical merits and if there is more than a 50% likelihood that the position would be sustained if challenged and considered by the highest court in the relevant jurisdiction, the tax consequences of that position should be reflected in the taxpayer’s financial statements.
The Company had no material unrecognized tax benefits at June -25-
The significant components of the Company's deferred tax assets and liabilities were as follows: June 29, June 30, 2014 2013 Deferred tax: Land, buildings, and equipment Unrealized gain on available-for-sale securities Prepaid expenses and other Deferred tax liabilities June 30, 2013 July 1, 2012 Deferred tax: Land, buildings, and equipment Unrealized gain on available-for-sale securities Dividends received Prepaid expenses and other Deferred tax liabilities Income tax expense differs from the amounts computed by applying the U.S. Federal income tax rate to income before tax for the following reasons: For the Years Ended 2013 2012 Taxes computed at statutory rate State income taxes, net of Federal income tax benefit Dividends received exclusion All other net
Income tax expense from continuing operations differs from the amounts computed by applying
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8. STOCKHOLDERS' EQUITY The Class A shares have one vote per
At June 29, 2014, and June 30, 2013,
9. DEFERRED COMPENSATION Deferred compensation payable was a total of $40,213 at June 29, 2014, and $45,236 at June 30,
10. DISCONTINUED OPERATIONS On May 30, 2013 the Company consummated the sale of Bowl America Winter Park in Orlando, Florida for $2,850,000 resulting in a gain on the sale of the land, building and equipment of The location had been operating with negative cash flow. In the
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