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:March 30, 2014SEPTEMBER28, 2014
COMMISSION FILE NUMBER:001-7829001-7829
BOWL AMERICA INCORPORATED
(Exact name of registrant as specified in its charter)
MARYLAND | 54-0646173 |
(State of Incorporation) | (I.R.S.Employer Identification |
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 theSecurities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant wasrequired 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(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).
YesX No __
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or asmaller 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 __ | 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 __ NoX
Indicate the number of shares outstanding of each of the issuer'sclasses of common stock, as of the latest practicable date:
| Shares Outstanding at |
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|
Class A Common Stock, |
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$.10 par value | 3,746,454 |
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Class B Common Stock, |
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$.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 |
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| Thirty-nine Weeks Ended |
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| March 30, |
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| March 31, |
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| March 30, |
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| March 31, |
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| 2014 |
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| 2013 |
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| 2014 |
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| 2013 |
| ||||
Operating Revenues: |
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Bowling and other |
| $ | 5,168,318 |
| $ | 5,458,826 |
|
| $ | 12,779,622 |
|
| $ | 13,396,625 |
| |
Food, beverage and merchandise sales |
|
| 2,138,735 |
|
|
| 2,180,386 |
|
|
| 5,244,551 |
|
|
| 5,482,527 |
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Total Operating Revenues |
|
| 7,307,053 |
|
|
| 7,639,212 |
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|
| 18,024,173 |
|
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| 18,879,152 |
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Operating Expenses: |
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Employee compensation and benefits |
|
| 2,845,221 |
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| 2,929,070 |
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|
| 8,427,129 |
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|
| 8,697,034 |
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Cost of bowling and other services |
|
| 1,659,275 |
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|
| 1,574,577 |
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| 4,793,439 |
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| 4,683,280 |
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Cost of food, beverage and merchandise sales |
| 603,860 |
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|
| 588,450 |
|
|
| 1,583,375 |
|
|
| 1,576,514 |
| |
Depreciation and amortization |
|
| 329,280 |
|
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| 363,270 |
|
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| 1,050,586 |
|
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| 1,135,541 |
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General and administrative |
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| 217,127 |
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| 237,088 |
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| 662,684 |
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| 707,214 |
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Total Operating Expenses |
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| 5,654,763 |
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| 5,692,455 |
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| 16,517,213 |
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| 16,799,583 |
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Operating Income |
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| 1,652,290 |
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| 1,946,757 |
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| 1,506,960 |
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| 2,079,569 | |
Interest and dividend income |
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| 332,066 |
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| 98,030 |
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| 561,296 |
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| 348,314 |
| |
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Earnings from continuing operations before provision for income taxes |
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| 1,984,356 |
|
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| 2,044,787 |
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| 2,068,256 |
|
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| 2,427,883 |
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Provision for income taxes |
|
| 694,500 |
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| 715,600 |
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| 723,900 |
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| 849,700 |
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Net Earnings from continuing operations |
| $ | 1,289,856 |
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| $ | 1,329,187 |
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| $ | 1,344,356 |
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| $ | 1,578,183 |
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Income (loss) from discontinued operations, net of tax | $ | 112 | $ | (923 | ) | $ | (1,837 | ) | $ | (35,238 | ) | |||||
Net Earnings | $ | 1,289,968 | $ | 1,328,264 | $ | 1,342,519 | $ | 1,542,945 | ||||||||
Earnings per share-basic & diluted |
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Continuing operations | $ | .25 | $ | .26 | $ | .26 | $ | .30 | ||||||||
Discontinued operations | $ | .00 | $ | .00 |
| $ | .00 | $ | (.00 | ) | ||||||
NET EARNINGS PER SHARE |
| $ | .25 |
|
| $ | .26 |
|
| $ | .26 |
|
| $ | .30 |
|
Weighted average shares outstanding |
|
| 5,160,971 |
|
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| 5,151,471 |
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| 5,160,971 |
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| 5,151,471 |
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Dividends paid |
| $ | 851,560 |
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| $ | - |
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| $ | 2,554,682 |
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| $ | 5,099,957 |
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Per share, dividends paid, Class A |
| $ | .165 |
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| $ | .00 |
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| $ | .495 |
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| $ | .99 |
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Per share, dividends paid, Class B |
| $ | .165 |
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| $ | .00 |
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| $ | .495 |
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| $ | .99 |
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Thirteen Weeks Ended | ||||||||
September 28, | September 29, | |||||||
2014 | 2013 | |||||||
Operating Revenues: | ||||||||
Bowling and other | $ | 3,301,343 | $ | 3,395,226 | ||||
Food, beverage and merchandise sales | 1,328,001 | 1,355,048 | ||||||
Total Operating Revenue | 4,629,344 | 4,750,274 | ||||||
Operating Expenses: | ||||||||
Employee compensation and benefits | 2,753,227 | 2,813,723 | ||||||
Cost of bowling and other services | 1,528,706 | 1,558,187 | ||||||
Cost of food, beverage and merchandise sales | 435,190 | 436,801 | ||||||
Depreciation and amortization | 325,392 | 355,292 | ||||||
General and administrative | 217,353 | 206,277 | ||||||
Total Operating Expenses | 5,259,868 | 5,370,280 | ||||||
Operating Loss | (630,524 | ) | (620,006 | ) | ||||
Interest, dividend and other income | 146,307 | 138,769 | ||||||
Loss from continuing operations before provision forincome tax benefit | (484,217 | ) | (481,237 | ) | ||||
Provision for income tax benefit | (169,500 | ) | (168,400 | ) | ||||
Net loss from continuing operations | $ | (314,717 | ) | $ | (312,837 | ) | ||
Loss from discontinued operations, net of tax | $ | - | $ | (5,553 | ) | |||
Net loss | $ | (314,717 | ) | $ | (318,390 | ) | ||
Loss per share-basic & diluted | ||||||||
Continuing operations | $ | (.06 | ) | $ | (.06 | ) | ||
Discontinued operations | $ | .00 | $ | (.00 | ) | |||
Net loss per share | $ | (.06 | ) | $ | (.06 | ) | ||
Weighted average shares outstanding | 5,160,971 | 5,160,971 | ||||||
Dividends paid | $ | 877,365 | $ | 851,561 | ||||
Per share, dividends paid, Class A | $ | .17 | $ | .165 | ||||
Per share, dividends paid, Class B | $ | .17 | $ | .165 |
The operating results for the thirteen (13) and thirty-nine (39) week periodsperiod ended March 30,September 28, 2014 are not necessarily indicative of results to be expected for the year. See notes to condensed consolidated financial statements.
BOWL AMERICA INCORPORATED AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS (CONTINUED)
(Unaudited)
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE EARNINGS
Thirteen Weeks Ended | Thirty-nine Weeks Ended | |||||||||||||||
March 30, | March 31, | March 30, | March 31, | |||||||||||||
2014 | 2013 | 2014 | 2013 | |||||||||||||
Net Earnings | $ | 1,289,968 | $ | 1,328,264 | $ | 1,342,519 | $ | 1,542,945 | ||||||||
Other comprehensive earnings- net of tax | ||||||||||||||||
Unrealized gain (loss) on available-for-sale securities net of tax (benefit) of $9,393 and $174,133 for 13 weeks, and ($35,945) and $88,511 for 39 weeks | 15,273 | 282,909 | (58,398 | ) | 143,801 | |||||||||||
Comprehensive earnings | $ | 1,305,241 | $ | 1,611,173 | $ | 1,284,121 | $ | 1,686,746 |
Thirteen Weeks Ended | ||||||||
September 28, | September 29, | |||||||
2014 | 2013 | |||||||
Net Loss | $ | (314,717 | ) | $ | (318,390 | ) | ||
Other comprehensive earnings-net of tax | ||||||||
Unrealized (loss) gain on available-for-sale securities net of tax benefit of$25,790 and $58,754 | ( 41,899 | ) | (95,458 | ) | ||||
Comprehensive Loss | $ | (356,616 | ) | $ | (413,848 | ) |
The operating results for the thirteen (13) and thirty-nine (39) week periodsperiod ended March 30,September 28, 2014 are not necessarily indicative of results to be expected for the year.
See notes to condensed consolidated financial statements.
BOWL AMERICA INCORPORATED AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETSCondensed Consolidated Balance Sheets
(Unaudited)
As of | As of | |||||||||||||||
March 30, | June 30, 2013 | September 28, | June 29, | |||||||||||||
2014 | 2014 | |||||||||||||||
ASSETS | ASSETS | ASSETS | ||||||||||||||
CURRENT ASSETS: | ||||||||||||||||
Cash and cash equivalents | $ | 4,016,985 | $ | 3,437,780 | $ | 1,303,145 | $ | 842,114 | ||||||||
Short-term investments | 1,451,871 | 949,815 | 133,549 | 1,453,326 | ||||||||||||
Inventories | 559,743 | 519,179 | 602,681 | 520,355 | ||||||||||||
Prepaid expenses and other | 481,605 | 563,591 | 210,265 | 610,416 | ||||||||||||
Income taxes refundable | - | 58,129 | 312,856 | 312,856 | ||||||||||||
Current deferred income taxes | 6,658 | 6,658 | ||||||||||||||
Current deferred income tax | 169,500 | - | ||||||||||||||
TOTAL CURRENT ASSETS | 6,516,862 | 5,535,152 | 2,731,996 | 3,739,067 | ||||||||||||
LAND, BUILDINGS & EQUIPMENT | ||||||||||||||||
Net of accumulated depreciation of $39,120,022 and $38,144,649 | 21,088,165 | 21,979,489 | ||||||||||||||
LAND, BUILDINGS & EQUIPMENT, net ofaccumulated depreciation of $39,661,343 and $39,358,295 | 20,877,722 | 20,887,127 | ||||||||||||||
OTHER ASSETS: | ||||||||||||||||
Marketable securities | 8,851,635 | 8,477,227 | ||||||||||||||
Marketable investment securities | 8,936,100 | 8,979,499 | ||||||||||||||
Cash surrender value-life insurance | 648,717 | 648,717 | 677,922 | 677,922 | ||||||||||||
Other | 80,165 | 84,465 | 80,165 | 80,165 | ||||||||||||
TOTAL OTHER ASSETS | 9,580,517 | 9,210,409 | 9,694,187 | 9,737,586 | ||||||||||||
TOTAL ASSETS | $ | 37,185,544 | $ | 36,725,050 | $ | 33,303,905 | $ | 34,363,780 | ||||||||
LIABILITIES AND STOCKHOLDERS' EQUITY | LIABILITIES AND STOCKHOLDERS' EQUITY | LIABILITIES AND STOCKHOLDERS' EQUITY | ||||||||||||||
CURRENT LIABILITIES: | ||||||||||||||||
Accounts payable | $ | 583,965 | $ | 694,454 | $ | 495,578 | $ | 681,509 | ||||||||
Accrued expenses | 889,252 | 1,045,645 | 882,566 | 1,091,098 | ||||||||||||
Dividends payable | 851,561 | 851,561 | 877,365 | 877,365 | ||||||||||||
Other current liabilities | 2,308,666 | 311,284 | 902,427 | 308,068 | ||||||||||||
Income taxes payable | 187,727 | 151,227 | ||||||||||||||
Current deferred income taxes | 24,705 | 24,705 | ||||||||||||||
TOTAL CURRENT LIABILITIES | 4,821,171 | 3,054,171 | 3,182,641 | 2,982,745 | ||||||||||||
LONG-TERM DEFERRED COMPENSATION | 39,194 | 39,194 | 34,088 | 34,088 | ||||||||||||
NONCURRENT DEFERRED INCOME TAXES | 2,563,939 | 2,599,884 | 2,342,426 | 2,368,216 | ||||||||||||
TOTAL LIABILITIES | 7,424,304 | 5,693,249 | 5,559,155 | 5,385,049 | ||||||||||||
COMMITMENTS AND CONTINGENCIES (Note 3) | ||||||||||||||||
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 | ||||||||||||||||
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 | 374,645 | 374,645 | ||||||||||||
Class B issued and outstanding 1,414,517 | 141,452 | 141,452 | 141,452 | 141,452 | ||||||||||||
Additional paid-in capital | 7,849,814 | 7,849,814 | 7,849,814 | 7,849,814 | ||||||||||||
Accumulated other comprehensive earnings - Unrealized gain on available-for-sale securities, net of tax | 2,525,622 | 2,584,020 | ||||||||||||||
Accumulated other comprehensive earnings- | ||||||||||||||||
Unrealized gain on available-for-sale securities, net of tax | 2,550,704 | 2,592,603 | ||||||||||||||
Retained earnings | 18,869,707 | 20,081,870 | 16,828,135 | 18,020,217 | ||||||||||||
TOTAL STOCKHOLDERS' EQUITY | 29,761,240 | 31,031,801 | 27,744,750 | 28,978,731 | ||||||||||||
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY | $ | 37,185,544 | $ | 36,725,050 | $ | 33,303,905 | $ | 34,363,780 |
See notes to condensed consolidated financial statements.
BOWL AMERICA INCORPORATED AND SUBSIDIARIES |
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Thirty-nine Weeks Ended | Thirteen Weeks Ended | |||||||||||||||
March 30, | March 31, | September 28, | September 29, | |||||||||||||
2014 | 2013 | 2014 | 2013 | |||||||||||||
Cash Flows From Operating Activities | ||||||||||||||||
Net earnings | $ | 1,342,519 | $ | 1,542,945 | ||||||||||||
Adjustments to reconcile net earnings to net cash provided by operating activities | ||||||||||||||||
Depreciation and amortization (including discontinued operations) | 1,050,586 | 1,141,143 | ||||||||||||||
Net loss | $ | (314,717 | ) | $ | (318,390 | ) | ||||||||||
Adjustments to reconcile net lossto net cash provided byoperating activities: | ||||||||||||||||
Depreciation and amortization | 325,392 | 355,292 | ||||||||||||||
Changes in assets and liabilities | ||||||||||||||||
(Increase) decrease in inventories | (40,564 | ) | 12,086 | |||||||||||||
Decrease (increase) in prepaid & other | 81,986 | (13,861 | ) | |||||||||||||
Decrease in income taxes refundable | 58,129 | 313,518 | ||||||||||||||
Increase in inventories | (82,326 | ) | (141,799 | ) | ||||||||||||
Decrease in prepaid & other | 400,151 | 214,098 | ||||||||||||||
Increase in income taxes refundable | - | (6,000 | ) | |||||||||||||
Decrease in income taxes payable | - | (151,227 | ) | |||||||||||||
Decrease in other long-term assets | 4,300 | - | - | 3,800 | ||||||||||||
Decrease in accounts payable | (110,489 | ) | (34,264 | ) | ||||||||||||
Increase in deferred tax asset | (169,500 | ) | (171,500 | ) | ||||||||||||
Decrease increase in accounts payable | (185,931 | ) | (264,128 | ) | ||||||||||||
Decrease in accrued expenses | (156,393 | ) | (119,088 | ) | (208,532 | ) | (77,374 | ) | ||||||||
Increase in income taxes payable | 36,500 | 223,362 | ||||||||||||||
Increase in other current liabilities | 1,997,382 | 2,123,482 | 594,359 | 563,883 | ||||||||||||
Net cash provided by operating activities | 4,263,956 | 5,189,323 | 358,896 | 6,655 | ||||||||||||
Cash Flows From Investing Activities | ||||||||||||||||
Expenditures for land, building and equip | (159,262 | ) | (739,288 | ) | ||||||||||||
Net (purchases) sales & maturities of short-term investments | (502,056 | ) | 2,914,997 | |||||||||||||
Expenditures for land, building and equipment | (315,987 | ) | (44,422 | ) | ||||||||||||
Net sales & maturities (purchases) of short-term investments | 1,319,777 | (499,067 | ) | |||||||||||||
Purchases of marketable securities | (468,751 | ) | (97,701 | ) | (24,290 | ) | (270,898 | ) | ||||||||
Net cash (used in) provided by investing activities | (1,130,069 | ) | 2,078,008 | |||||||||||||
Net cash provided by (used by) investing activities | 979,500 | (814,387 | ) | |||||||||||||
Cash Flows From Financing Activities | ||||||||||||||||
Payment of cash dividends | (2,554,682 | ) | (5,099,957 | ) | (877,365 | ) | (851,561 | ) | ||||||||
Net cash used in financing activities | (2,554,682 | ) | (5,099,957 | ) | (877,365 | ) | (851,561 | ) | ||||||||
Net increase in Cash and Equivalents | 579,205 | 2,167,374 | ||||||||||||||
NetIncrease (decrease)in Cash and Equivalents | 461,031 | (1,659,293 | ) | |||||||||||||
Cash and Equivalents, Beginning of period | 3,437,780 | 2,332,022 | ||||||||||||||
Cash andCashEquivalents, Beginning of period | 842,114 | 3,437,780 | ||||||||||||||
Cash and Equivalents, End of period | $ | 4,016,985 | $ | 4,499,396 | ||||||||||||
Cash andCashEquivalents, End of period | $ | 1,303,145 | $ | 1,778,487 | ||||||||||||
Supplemental Disclosures of Cash Flow Information | ||||||||||||||||
Cash Paid During the Period for: | ||||||||||||||||
Income taxes | $ | 628,271 | $ | 293,920 | $ | - | $ | 157,227 |
See notes to condensed consolidated financial information.statements.
BOWL AMERICA INCORPORATED AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
For the Thirteen and Thirty-nine Weeks Ended
March 30,September 28, 2014
(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, 201329, 2014 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, 2013.29, 2014.
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 March 30,September 28, 2014 and June 30, 201329, 2014 were as follows:
March 30, 2014 Description | Fair Value | Cost basis | Unrealized Gain/ (loss) | |||||||||
Short-term investments | $ | 1,451,871 | $ | 1,451,871 | $ | - | ||||||
Equity securities | $ | 5,324,266 | $ | 1,290,775 | $ | 4,033,491 | ||||||
Mutual funds | $ | 3,527,369 | $ | 3,480,719 | $ | 46,650 |
June 30, 2013 Description | Fair Value | Cost basis | Unrealized Gain | |||||||||||||||||||||
September28, 2014 Description | Fair Value | Cost basis | Unrealized Gain | |||||||||||||||||||||
Short-term investments | $ | 949,815 | $ | 949,815 | $ | - | $ | 133,549 | $ | 133,549 | $ | - | ||||||||||||
Equity securities | $ | 5,046,557 | $ | 888,998 | $ | 4,157,559 | $ | 5,319,759 | $ | 1,285,759 | $ | 4,034,000 | ||||||||||||
Mutual funds | $ | 3,430,670 | $ | 3,413,745 | $ | 16,925 | $ | 3,616,341 | $ | 3,529,677 | $ | 86,664 |
June29, 2014 Description | Fair Value | Cost basis | Unrealized Gain | |||||||||
Short-term investments | $ | 1,453,326 | $ | 1,453,326 | $ | - | ||||||
Equity securities | $ | 5,373,986 | $ | 1,285,759 | $ | 4,088,227 | ||||||
Mutual funds | $ | 3,605,513 | $ | 3,505,388 | $ | 100,125 |
The fair values of the Company’s investments were determined as follows:
March 30, 2014
Description | Quoted Price for Identical Assets (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | |||||||||
Certificates of deposits | $ | - | $ | 1,451,871 | $ | - | ||||||
Equity securities | 5,324,266 | - | - | |||||||||
Mutual funds | 3,527,369 | - | - | |||||||||
Total | $ | 8,851,635 | $ | 1,451,871 | $ | - |
June 30, 2013
Description | Quoted Price for Identical Assets (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | |||||||||||||||||||||
September 28, 2014
Description | Quoted Price for Identical Assets (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | |||||||||||||||||||||
Certificates of deposits | $ | - | $ | 949,815 | $ | - | $ | - | $ | 133,549 | $ | - | ||||||||||||
Equity securities | 5,046,557 | - | - | 5,319,759 | - | - | ||||||||||||||||||
Mutual funds | 3,430,670 | - | - | 3,616,341 | - | - | ||||||||||||||||||
Total | $ | 8,477,227 | $ | 949,815 | $ | - | $ | 8,936,100 | $ | 133,549 | $ | - |
June 29, 2014
Description | Quoted Price for Identical Assets (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | |||||||||
Certificates of deposits | $ | - | $ | 1,453,326 | $ | - | ||||||
Equity securities | 5,373,986 | - | - | |||||||||
Mutual funds | 3,605,513 | - | - | |||||||||
Total | $ | 8,979,499 | $ | 1,453,326 | $ | - |
The stocks included in the equity securities portfolio as of March 30,September 28, 2014 were:
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82,112 | shares of AT&T | 4,398 | shares of CenturyLink |
4,508 | shares of Frontier Communications | 412 | shares of DexMedia |
774 | shares of Teradata | 774 | shares of NCR |
40,000 | shares of Sprint | 31,904 | shares of Verizon |
6,471 | shares of Vodafone | 4,079 | shares of Windstream |
2,520 | shares of Manulife |
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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 March 30,September 28, 2014, 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 March 30,September 28, 2014, that would impact the Company.theCompany.
6. Subsequent Events
The Company has evaluated subsequent events through the time of filing these financial statements with the Securities and Exchange Commission on May 13,November 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.
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, 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, including, but not limited to, (i) an unstable economy, (ii) weather conditions, (iii) changes in consumer habits or (iv) our ability to generate a positive return on our investments.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. The operating results included in this report are not necessarily indicative of results to be expected for the year.
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.
LIQUIDITY AND CAPITAL RESOURCES
The Company views a strong financial position as a major benefit to shareholders and emphasizes payment of dividends as partaspart 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.
DuringWith the quarter ended March 30, 2014, the Company received a special dividend from Vodaphone consistingexception of 3,12013,120 shares of Verizon, stock valued at $150,000 and cash of $58,000. The funding for that dividend was fromVodafone’s sale of their interest in Verizon Wireless. The Company had previously 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 thatthe company demutualized. The Company purchased a total of 10,000 shares of Verizon during previous periods at a cost of approximately $430,000 and 3,120 shares of Verizon were received as a special dividend from Vodafone. 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$967,000 from mergers and sales and over $3,600,000$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 each reporting period. The fair value of the securities on March 30,September 28, 2014 was approximately $5,300,000.$5.3 million. The value of securities held at June 29, 2014 was approximately $5.4 million. Short-term investments consisting mainly of Certificates of Deposits, cash and cash equivalents totaled $1,437,000 at September 28, 2014 compared to $2,295,000 at June 29, 2014.
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 March 30,September 28, 2014, the value was approximately $3,500,000.
Short-term investments consisting mainly of Certificates of Deposits, and cash and cash equivalents totaled $5,469,000 at the end of the fiscal third quarter of 2014 compared to $4,388,000 at June 30, 2013.$3,616,000.
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.
InDuring the nine-monththree-month period ended March 30,September 28, 2014, the Company expended approximately $159,000$316,000 for the purchase of building, entertainment and restaurant equipment. The Company has made no application forcurrent 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 nine-monthfirst quarter decreases in the categories of Prepaid expenses and other and of Accounts Payable and Accrued Expenses arepayable were attributable primarily due to seasonalthe timing of the 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 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 March 30,September 28, 2014, league deposits of approximately $2,041,000$738,000 were included in the current liabilities category.
Cash flow provided by operating activities in the thirty-ninethirteen weeks ended March 30,September 28, 2014 was $4,264,000$359,000 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,$877,000, or $.165$.17 per share, were paid to shareholders during the quarterthree-month period ended March 30,September 28, 2014. In September 2014, and the nine months total was approximately $2,555,000 or $.495 per share. In March 2014 the CompanytheCompany declared a regular quarterly dividend of $.165$.17 per share, payable May 14, 2014 to shareholders of record on April 17,November 12, 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.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 remainsunstable, 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 isnever recovered. The Company operates primarily 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
As noted above,The following table sets forth the items in our consolidated summary of operations for the fiscal quarters ended September 28, 2014, and September 29, 2013, and the dollar and percentage changes therein.
Thirteen weeks ended | ||||||||||||||||
September 28, 2014 and September 29, 2013 | ||||||||||||||||
Dollars in thousands | ||||||||||||||||
2014 | 2013 | Change | % Change | |||||||||||||
Operating Revenues: | ||||||||||||||||
Bowling and other | $ | 3,301 | $ | 3,395 | $ | (94 | ) | (2.8 | ) | |||||||
Food, beverage and merchandise sales | 1,328 | 1,355 | (27 | ) | (2.0 | ) | ||||||||||
4,629 | 4,750 | (121 | ) | (2.5 | ) | |||||||||||
Operating Expenses: | ||||||||||||||||
Employee Compensation and benefits | 2,753 | 2,814 | (61 | ) | (2.2 | ) | ||||||||||
Cost of bowling and other services | 1,529 | 1,558 | (29 | ) | (1.9 | ) | ||||||||||
Cost of food, beverage and merchandise sales | 435 | 437 | (2 | ) | (.4 | ) | ||||||||||
Depreciation and amortization | 325 | 355 | (30 | ) | (8.4 | ) | ||||||||||
General and administrative | 218 | 206 | 12 | 5.4 | ||||||||||||
5,260 | 5,370 | (110 | ) | (2.0 | ) | |||||||||||
Operating loss from continuing operations | (631 | ) | (620 | ) | (11 | ) | (1.8 | ) | ||||||||
Interest, dividend and other income | 146 | 139 | 7 | 5.0 | ||||||||||||
Loss from continuing operations before tax benefit | (485 | ) | (481 | ) | (4 | ) | (.6 | ) | ||||||||
Income tax benefit | (170 | ) | (168 | ) | (2 | ) | (.7 | ) | ||||||||
Loss from continuing operations | $ | (315 | ) | $ | (313 | ) | $ | (2 | ) | (.6 | ) | |||||
Loss from discontinued operations, net of tax | $ | 0 | $ | (5 | ) | $ | 5 | 100.0 | ||||||||
Net loss | $ | (315 | ) | $ | (318 | ) | $ | 3 | 1.2 |
For the thirteen week period ended September 28, 2014 there was a loss of $314,717 or $.06 per share. Including the loss from discontinued operations of $5,553 related to a Florida location was sold in May 2013, and its operations have been shown separately under Income (loss) from discontinued operations, net of tax. Including discontinued operations, for the thirteen-week periodsperiod ended March 30, 2014, and March 31,September 29, 2013, there was a net earningsloss of $318,390, or $.06 loss per share. Eighteen locations were $1,289,968 or $.25 per share and $1,328,264 or $.26 per share, respectively. Forin operation in both the current year quarter and in the prior year thirty-nine weeks, net earnings were $1,342,519 or $.26 per sharecomparable period. The bowling business is seasonal and $1,542,945, or $.30 per share, respectively. Snow storms in December 2013, and February and March 2014 caused postponements of league bowling to the third and fourth quarters offirst quarter which includes summer months is typically the current fiscal year.slowest. Management believes that the continuinglength and uncertainty of an economic recovery and the consequences of federal tax and spending provisionsconditions are negatively influencing the public’s view of discretionary spending. The operating results for the fiscal 2014 periods2015 period included in this report are not necessarily indicative of results to be expected for the year.
The following tables set forthinformation included in Operating Revenues and Operating Expenses below relates to the itemseighteen centers that were in our consolidated summary of operationsoperation for both the fiscal quarter and year-to-date periods ended March 30,September 28, 2014 and March 31, 2013, and the dollar and percentage changes therein.prior year quarter ended September 29, 2013.
Thirteen weeks ended | ||||||||||||||||
March 30, 2014 and March 31, 2013 | ||||||||||||||||
Dollars in thousands | ||||||||||||||||
2014 | 2013 | Change | % Change | |||||||||||||
Operating Revenues: | ||||||||||||||||
Bowling and other | $ | 5,168 | $ | 5,459 | $ | (291 | ) | (5.3 | ) | |||||||
Food, beverage and merchandise sales | 2,139 | 2,180 | (41 | ) | (1.9 | ) | ||||||||||
Total Operating Revenues | 7,307 | 7,639 | (332 | ) | (4.3 | ) | ||||||||||
Operating Expenses: | ||||||||||||||||
Employee compensation and benefits | 2,845 | 2,929 | (84 | ) | (2.9 | ) | ||||||||||
Cost of bowling and other services | 1,659 | 1,575 | 84 | 5.3 | ||||||||||||
Cost of food, beverage and merchandise sales | 604 | 588 | 16 | 2.7 | ||||||||||||
Depreciation and amortization | 330 | 363 | (33 | ) | (9.1 | ) | ||||||||||
General and administrative | 217 | 237 | (20 | ) | (8.4 | ) | ||||||||||
Total Operating Expenses | 5,655 | 5,692 | (37 | ) | (0.6 | ) | ||||||||||
Operating income from continuing operations | 1,652 | 1,947 | (295 | ) | (15.1 | ) | ||||||||||
Interest and dividend income | 332 | 98 | 234 | 238.8 | ||||||||||||
Earnings from continuing operations before taxes | 1,984 | 2,045 | (61 | ) | (3.0 | ) | ||||||||||
Income taxes | 694 | 716 | (22 | ) | (3.1 | ) | ||||||||||
Income from continuing operations | 1,290 | 1,329 | (39 | ) | (2.9 | ) | ||||||||||
Income (loss) from discontinued operations, net of tax | - | (1 | ) | 1 | 100.0 | |||||||||||
Net Earnings | $ | 1,290 | $ | 1,328 | $ | (38 | ) | (2.9 | ) |
Thirty-nine weeks ended | ||||||||||||||||
March 30, 2014 and March 31, 2013 | ||||||||||||||||
Dollars in thousands | ||||||||||||||||
2014 | 2013 | Change | % Change | |||||||||||||
Operating Revenues: | ||||||||||||||||
Bowling and other | $ | 12,780 | $ | 13,397 | $ | (617 | ) | (4.6 | ) | |||||||
Food, beverage and merchandise sales | 5,244 | 5,482 | (238 | ) | (4.3 | ) | ||||||||||
Total Operating Revenues | 18,024 | 18,879 | (855 | ) | (4.5 | ) | ||||||||||
Operating Expenses: | ||||||||||||||||
Employee compensation and benefits | 8,427 | 8,697 | (270 | ) | (3.1 | ) | ||||||||||
Cost of bowling and other services | 4,793 | 4,683 | 110 | 2.3 | ||||||||||||
Cost of food, beverage and merchandise sales | 1,583 | 1,576 | 7 | 0.4 | ||||||||||||
Depreciation and amortization | 1,051 | 1,136 | (85 | ) | (7.5 | ) | ||||||||||
General and administrative | 663 | 707 | (44 | ) | (6.2 | ) | ||||||||||
Total Operating Expenses | 16,517 | 16,799 | (282 | ) | (1.7 | ) | ||||||||||
Operating income from continuing operations | 1,507 | 2,080 | (573 | ) | (27.5 | ) | ||||||||||
Interest and dividend income | 561 | 348 | 213 | 61.2 | ||||||||||||
Earnings from continuing operations before taxes | 2,068 | 2,428 | (360 | ) | (14.8 | ) | ||||||||||
Income taxes | 724 | 850 | (126 | ) | (14.8 | ) | ||||||||||
Income from continuing operations | 1,344 | 1,578 | (234 | ) | (14.8 | ) | ||||||||||
Loss from discontinued operations, net of tax | (2 | ) | (35 | ) | 33 | 94.3 | ||||||||||
Net Earnings | $ | 1,342 | $ | 1,543 | $ | (201 | ) | (13.0 | ) |
Operating Revenues
Total operating revenues decreased $332,0002.5% or $121,000 to $7,307,000$4,629,000 in the quarterthirteen-week period ended March 30,September 28, 2014, compared to a decrease of $2,0007% or $360,000 to $7,639,000$4,750,000 in the three-month period ended March 31,September 29, 2013. For the current fiscal nine-month period operating revenues were down $855,000 versus a decrease of $544,000 in the comparable nine-month period a year ago. Bowling and other revenue declined $291,000 and $617,000, respectivelydecreased $94,000 or 3% in the current year fiscal quarter and year-to-date periods ended March 30, 2014 in part duecompared to the use of promotional pricing. Management believes the winter weather in the quarter ended March 30, 2014 negatively impacted open play revenue. In addition, some league play scheduled for the second and third quarters will occur in the fourth quarter. Prior year comparable three and nine month period revenues showed an increase of $74,000 and a decrease of $288,000, respectively.
$222,000 or 7% in the comparable prior year quarter. Food, beverage and merchandise sales were down $41,000$27,000 or 1.9%2% in the current year quarter and down $238,000due to lower traffic, compared to a decrease of $137,000 or 4.3%10% in the prior year comparable quarter. Cost of sales declined $2,000 in the current year nine-month period. Cost of sales for the quarter ended March 30, 2014 was up 2.7% in the three month andflat in the nine-month periods, respectively,three-month period due primarily to increased merchandiselower sales.
Operating Expenses
Operating expenses were down $37,000 or less than 1% and $282,000$110,000 or 2% to $5,260,000 in the current three and nine-month periods, respectively, versus decreasesthree-month period ended September 28, 2014 compared to a decrease of $81,000 or 1% and $771,000$213,000 or 4% to $5,370,000 in the three and nine month periods, respectively, last year.prior year quarter ended September 29, 2013. Employee compensation and benefits for the three and nine month periods were down $84,000$60,000 or 2% and $270,000, respectively,$89,000 or 3% in each period ended March 30,the fiscal first quarters of 2015 and 2014, as therespectively. The Company continued to make scheduling adjustments in response to customerlower traffic. In addition, group health insurance costsstate unemployment tax rates decreased as a result of lower premiums and fewer participants. In the prior year comparable periods employee compensation and benefits expenses were down $108,000and $327,000 or 4% each in the three month and nine-month periods ended March 31, 2013, respectively.current year. 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 increased $110,000decreased $29,000 or 2% and decreased $297,000 or 6% in the nine-month periodsquarter ended March 30,September 28, 2014 and March 31, 2013, respectively. Inversus a decrease of $22,000 or 1% in the thirty-nine weekscomparable quarter ended March 30, 2014, maintenanceSeptember 29, 2013. Maintenance and repair costs were up $117,000$2,000 or 22% as the Company expended more than $105,000 for snow and ice removal. Advertising costs during1% in the current year thirty-nine week period ended March 30, 2014, were down $18,000. Forquarter versus an increase of $26,000 or 12% in the nine month period ended March 30, 2014 utility costs were up $36,000 or 3% due primarily to higher heating costs ascomparable quarter of fiscal 2014. Both the current year and prior year periods included roof repairs, and the current year period was colder thanincluded plumbing repairs at two locations. The prior year expense included storm drain work. Advertising costs decreased $7,000 or 7% in the prior year. In the periodquarter ended March 31, 2013 utilitySeptember 28, 2014. Utility costs were down $60,000$23,000 or 5%6% in the three month period ended September 28, 2014 in part due to lower fuelelectric rates in our Maryland locations. For the three month period ended September 29, 2013 costs and our efforts in energy management.were up slightly. Supplies and services expenses were down $27,000 and $24,000up $9,000 or 4% in each of the nine month periods ended March 30, 2014 and March 31, 2013, respectively.
Insurance expense excluding health insurance decreased 4%5% in the current year-to-dateyear thirteen-week period versus a decreaseand were down $26,000 or 14% in the prior year comparable period, partially due to timing of 1% in last year’s comparable period.bulk purchases.
Depreciation and amortization expense was down 8% in the current nine-monththree-month period ended September 29, 2013, and 5% in the prior year nine-month period.
As a result of the above, the current nine-month period of fiscal 2014 showed operating income from continuing operations of $1,507,000 compared to $2,080,000down 9% in the prior year comparable nine-monththree-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 28, 2014 resulted in an operating loss from continuing operations of $315,000 compared to an operating loss from continuing operations of $313,000 in the prior year period.
Interest, Dividend and Dividend OtherIncome
Interest, dividend and dividendother income increased $213,000$8,000, or 5% in each of the fiscal 2015 and 2014 nine-month period and decreased $42,000 in the comparable 2013 year-to-date period.. Dividend income increased in fiscal 2014 primarily as a result of the special Vodafone dividend, mentioned above, and dividends received on the increased holdings in Verizon. Interest income decreased in the current year as a result of lower interest rates on investments.quarters, respectively.
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 March 30,September 28, 2014. 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 March 30,September 28, 2014, that materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.
BOWL AMERICA INCORPORATED AND SUBSIDIARIES
S.E.C. FORM 10-Q
PART II - OTHER INFORMATION
Item 6. Exhibits.
20 | Press release issued |
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31.1 | Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act filed herewith |
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31.2 | Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act filed herewith |
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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 |
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) |
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Date: | By: |
| Leslie H. Goldberg, President |
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Date: | By: /s/ Cheryl |
| Cheryl A. Dragoo, Controller |
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