FORM  10-Q

UNITED STATES

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:DECEMBER27OCTOBER 2, 20156

COMMISSION FILE NUMBER:001-7829001-7829

BOWL AMERICA INCORPORATED

(Exact name of registrant as specified in its charter)

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 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.

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'sclassesissuer's

classes of common stock, as of the latest practicable date:

PART 1. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

BOWL AMERICA INCORPORATED AND SUBSIDIARIES

  CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS

  (Unaudited)

The operating results for the thirteen (13) and twenty-six (26) week periodsperiod ended December 27, 2015October 2, 2016 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

The operating results for the thirteen (13) and twenty-six (26) week periodsperiod ended December 27, 2015October 2, 2016 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 Sheets

(Unaudited)

See notes to condensed consolidated financial statements.

BOWL AMERICA INCORPORATED AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS  OF CASH FLOWS

(Unaudited)

See notes to condensed consolidated financial information.statements.

BOWL AMERICA INCORPORATED AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the Thirteen and Twenty-six Weeks Ended

December 27, 2015October 2, 2016

(Unaudited)

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

The shares of common stock included in the equity securities portfolio as of December 27, 2015 were:includes the following stocks:

     On August 1, 2016, Dex Media, a spin off from Verizon, completed a financial restructure. Previous shares of Dex Media’s common stock were cancelled with no distribution to shareholders resulting in a loss of $5,845 on the Company’s holdings.

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.

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. The forward-looking statements included in this Quarterly Report on Form 10-Q are made as of the date hereof. We are under no obligation to publicly update or revise any forward-looking statement as a result of new information, future events or otherwise, except as otherwise required by law.

LIQUIDITY AND CAPITAL RESOURCES

The Company views a strong financial position as a major benefit to shareholders and emphasizes payment of dividends as 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.income and to provide a predictable return to its owners.  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.

With the exception of 13,120 shares of Verizon, the 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. NotWhile not all stocks in the portfolio are domestic American companies any longer. Sincelonger, since the original purchases at an approximate cost of $630,000, we have received approximately $967,000 from mergers and sales and over $4,151,000$4,400,000 in dividends, the majority of which receive favorablewere tax treatmentfavored in the form of a dividends received deductionexclusion from federal taxable income. The dividends received deductionexclusion continues into this fiscal year. These equitymarketable securities are carried at their fair value on the last day of each reporting period. The fair value of the securities on December 27, 2015October 2, 2016 was approximately $4,900,000.$5.7 million. The value of securities held at July 3, 2016 was approximately $6 million. Short-term investments consisting mainly of Certificates of Deposits, cash and cash equivalents totaled $1,057,000 at October 2, 2016 compared to $1,471,000 at July 3, 2016.

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. In August 2015, $1,000,000 of this fund was redeemed to meet the August 2015 dividend payment. The fund is carried at fair value on the last day of the reporting period. At December 27, 2015,October 2, 2016, the value was approximately $2,730,000.

Short-term investments consisting mainly$2,838,000. In August 2015 $1,000,000 of Certificates of Deposits, and cash and cash equivalents totaled $2,195,000 atthis fund was redeemed to meet the end of the fiscal second quarter of 2016 compared to $912,000 at June 28, 2015.August 2015 dividend payment.

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.

In August 2016 the six-monthCompany obtained a $500,000 short-term loan to meet the August 2016 dividend obligation. The loan, collateralized by certificates of deposits, is due in February 2017. Interest is due and paid monthly and is based on the one-month LIBOR rate plus 2.5%.

During the three-month period ended December 27, 2015,October 2, 2016, the Company expended approximately $112,000$105,000 for the purchase of building, entertainment and restaurant equipment.  TheExcept as noted above, the Company has no long-term debt and has made no application forcurrent plans to obtain additional third party funding as cash and cash flows are sufficient to finance all contemplated purchases and to meet short-term purchase commitments and operating lease commitments.

The six-monthfirst quarter decreases in the categories of Prepaid expenses and other and of Accounts Payable and Accrued Expenses arewere 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 December 27, 2015,October 2, 2016, league deposits of approximately $1,449,000$766,000 were included in the current liabilities category.

Cash flow provided by operating activities in the twenty-sixthirteen weeks ended December 27, 2015October 2, 2016 was $2,186,000$84,000 which, along with cash on hand, and redemptiona note in the amount of a portion of the Vanguard GNMA fund, mentioned above,$500,000 was sufficient to meet day-to-day cash needs and pay dividends. Cash dividends of approximately $877,000, or $.17 per share, were paid to shareholders during the quarterthree-month period ended December 27, 2015, and the six months total was approximately $1,754,000 or $.34 per share.October 2, 2016.  In December 2015September 2016, the Company declared a regular quarterly dividend of $.17 per share, payable February 10, 2016 to shareholders of record on January 14,November 16, 2016.  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 and trends of the business and estimate of future opportunities at such time.

OVERVIEWOverview

The Company is in the entertainment business which, by its nature, has ups and downs based on consumer tastes and preferences.  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 longerif the economy remains unsteady, theremainsunstable, people are less willing people are to spend on other than necessities.  Weather is also a factor, especially for casual bowlers.  While extreme heat or rainy weather prompt people to look for indoor activities, heavy snow storms can keep customers from reaching the centers. Postponed league games are made up later in the season, but lost open play income is neverisnever recovered.  The Company operates primarily in the Washington, DC area where its business is vulnerable to decreases in government spendingsequestration or other downsizing of the federal government. Current economic conditions continue to create challenging times but our response will be helped by having the resources to be able to promote the sport.

RESULTS OF OPERATIONS

The following tables settable sets forth the items in our consolidated summary of operations for the fiscal quarters ended October 2, 2016 and year-to-date periods ended DecemberSeptember 27, 2015, and December 28, 2014, and the dollar and percentage changes therein.

Earnings were $508,901 or $.10 per share forFor the thirteen week period and $360,825ended October 2, 2016 there was a loss of $720 or $.07$.00 per share forshare. For the twenty-sixthirteen week period ended DecemberSeptember 27, 2015. For the thirteen-week and twenty-six periods ended December 28, 2014, net earnings were $481,903 or $.09 per share and $167,1862015 there was a loss of $148,076 or $.03 per share, respectively. Management believes thatshare. Eighteen locations were in operation in both the continuing uncertainty of an economic recoverycurrent and prior year quarters. The bowling business is seasonal and the consequences of federal tax and spending provisions are influencingfirst quarter which includes summer months is typically the public’s view of discretionary spending.slowest. The operating results for the fiscal 2016 periods2017 period included in this report are not necessarily indicative of results to be expected for the year.

Operating Revenues

Total operating revenues increased $36,0002.9% or $144,000 to $6,006,000$5,064,000 in the most recentthirteen-week period ended October 2, 2016, compared to an increase of 6.3% or $291,000 to $4,920,000 in the three-month period ended September 27, 2015.  Bowling and other revenue increased $103,000 or 3% in the current year fiscal quarter compared to an increase of $3,000 to $5,970,000 in the three-month period ended December 28, 2014.  The current fiscal six-month period operating revenues were up $327,000 versus a decrease of $118,000$173,000 or 5% in the comparable six-month period aprior year ago.  Bowling and other revenue decreased $37,000 in the quarter and increased $135,000 year-to-date for the periods ended December 27, 2015 versus a decline of $13,000 in the quarter and a decrease of $106,000 for the six-month period ended December 28, 2014.

quarter. Food, beverage and merchandise sales increased $73,000were up $41,000 or 4%2.8% in the current year quarter and were up $192,000due to increased traffic, compared to an increase of $118,000 or 8.9% in the six-month period.prior year comparable quarter.  Cost of sales increased 2%$13,000 in the current fiscal three monthyear three-month period and 4% for the six month period ended December 27, 2015.due to higher sales.

Operating Expenses

Operating expenses were down $23,000$138,000 or 2.6% to $5,156,000 in the current three monththree-month period ended October 2, 2016 compared to an increase of $34,000 or 1% to $5,294,000 in the prior year quarter ended September 27, 2015.  Employee compensation and benefits were up $13,000 in six-month perioddown $65,000 or 2% and down $7,000 or less than 1%, respectively, versus decreases of  $152,000 or 3% and $263,000 or 2% in the threefiscal first quarters of 2017 and six month periods, respectively, last2016, respectively. The Company continued to make scheduling adjustments resulting in a decrease in compensation.  In addition, state unemployment tax rates decreased from the prior year. Employee compensation and benefits forIn the three and six month periods were down $6,000 and $12,000 or less than 1%, respectively, in the periods ended December 27, 2015. Groupcurrent year group health insurance costs decreased 10% as a result ofwere lower due to changes in plan offerings andwith lower premiums.   In the prior year comparable periods employee compensation and benefits expenses were down $26,000 or 1% and $87,000 or 2%, respectively.

Included in this category of expense are contributions to our two benefit plans, both of which are defined contribution plans. There is no additional obligation beyond the current year contribution.

Cost of bowling and other services decreased $49,000$42,000 or 2% and decreased $127,000 or 4%3% in the six-month periodsquarter ended DecemberOctober 2, 2016 versus a decrease of $18,000 or 1% in the comparable quarter ended September 27, 20152015. Maintenance and December 28, 2014, respectively. In the twenty-six weeks ended December 27, 2015, maintenance andrepairrepair costs declined $14,000were up $22,000 or 3%. Advertising costs during10% and $2,000 or 1% in the current year twenty-six weekand prior year quarters, respectively. The current year period included roof repairs and plumbing repairs at several locations. The prior fiscal year period included air conditioning repairs at several locations. Advertising costs decreased $6,000 or 7% in the quarter ended December 27, 2015, were flat. For the fiscal six month period ended December 27, 2015 utilityOctober 2, 2016.  Utility costs were down 2% primarily a result of lower gas expense as Novemberup $3,000 or 1% in the in both the current and December were unseasonably mild.prior year periods. Supplies and services expenses were down $20,000 or 10% and were up $9,000$15,000 or 2%8% in the current year six-month periodthirteen-week periods ended October 2, 2016 and were down $11,000 or 3% in the six-month period in the prior year. TheSeptember 27, 2015, respectively, partially due to timing of purchases was the primary reason for the fluctuations in both years.

Insurance expense excluding health insurance decreased 10% in the current year-to-date period versus a decrease of 1% in last year’s comparable period.bulk purchases.

Depreciation and amortization expense was up 3%down 13% in the current six-monththree-month period and down 9% in the prior year six-month period.ended October 2, 2016 as a large group of assets reached full depreciation.

As a result of thestated above, the first six-month periodquarter of the fiscal year is seasonally the slowest and the quarter ended October 2, 2016 resulted in an operating incomeloss of $314,000$720 compared to an operating loss of $112$148,000 in the prior year comparable six-month period.

Interest,Dividend and OtherIncome

Interest, dividend and other income decreased $16,000declined in the fiscalthree month period ended October 2, 2016 six-month periodprimarily due to the timing of receipts for ancillary income and increased $28,000 in the comparable 2015 year-to-date period, respectively. The current year decrease relates primarily to ancillary income.end of some parking lot rental agreements.

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-saleasavailable-for-sale and in determining their fair value.  The Company records these investments at their fair value with the unrealized gain or loss recorded in accumulated other comprehensive earnings, a component of stockholders’ equity, net of deferred taxes.  Additionally, from time to time the Company must assess whether write-downs are necessary for other than temporary declines in value.

Management has identified accounting for the impairment of long-lived assets as a critical accounting policy due to the significance of the amounts included in the Company’s balance sheet under the caption of Land, Buildings and

Equipment.  The Company reviews long-lived assets whenever events or changes indicate that the carrying amount of an asset may not be recoverable.  In making such evaluations, the Company compares the expected future cash flows to the carrying amount of the assets.  An impairment loss equal to the difference between the assets’ fair value and carrying value is recognized when the estimated future cash flows are less than the carrying amount.

ITEM 4. CONTROLS AND PROCEDURES.

The Company’s Chief Executive Officer and Chief Financial Officer have concluded that the Company’s disclosure controls and procedures are effective based on their evaluation of such controls and procedures as of December 27, 2015.October 2, 2016. There was no change in the Company’s internal control over financial reporting identified in connection with the evaluation that occurred during the quarter ended December 27, 2015,October 2, 2016, 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.

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.

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