The operating results for the thirteen (13) and twenty-six (26) week periodsperiod ended JanuaryOctober 1, 2017 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 January October 1, 2017 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 statements.

BOWL AMERICA INCORPORATED AND SUBSIDIARIES

 CONDENSED CONSOLIDATED STATEMENTS  OF CASH FLOWS

(Unaudited)

BOWL AMERICA INCORPORATED AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the Thirteen and Twenty-sixThirteen Weeks Ended

January October 1, 2017

(Unaudited)

Company.

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 part of its financial plan.  A portion of earnings has consistently been invested to create a reserve to protect the Company in downturns in business, to capitalize on opportunities for expansion and modernization, to provide a secure source of 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 shares ofthe common stockstocks 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 oneinsuranceone insurance company acquired at no cost when that company demutualized. While not all sharesstocks in the portfolio are domesticAmericandomestic American companies any longer, since the original purchases at an approximate cost of $630,000, we have receivedapproximatelyreceived approximately $967,000 from mergers and sales and over $4,400,000$4,700,000 in dividends, the majority of which were tax favored inthein the form of an exclusion from federal taxable income. The dividends exclusion continues into this fiscal year. ThesemarketableThese marketable securities are carried at their fair value on the last day of each reporting period. The value of the securities onJanuaryon October 1, 2017 was approximately $5,933,000 and on$5.5 million. The value of securities held at July 3, 20162, 2017 was approximately $6,002,000.$5.3 million.

The Company’sCompany’s original investment in the Vanguard GNMA bond fund began in 1988 with purchases of shares in the fund totaling approximately $1,400,000. The fund is carried at fair value on the last day of the reporting period. At JanuaryOctober 1, 2017, the value was approximately $2,786,000.$1,838,000. In August 2017, $1,000,000 of this fund was redeemed to meet the August 2017 dividend payment.

Short-term investments consisting mainlyincluding the GNMA fund, mentioned above, that was reclassified to short term investments from the category of marketable securities in the prior year, Certificates of Deposits, and cash and cash equivalents totaled $1,855,000$2,786,000 at the end of the fiscal second quarter ofOctober 1, 2017 compared to $1,471,000$3,557,000 at July 3, 2016.2, 2017.

The Company’sCompany’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 Company obtained a $500,000 short-term loan to meet the August 2016 dividend obligation. The loan was collateralized by certificates of deposits. Interest was due and paid monthly and was based on the one- month LIBOR rate plus 2.5%. The loan was repaid in full on January 6, 2017.

InDuring the six-monththree-month period ended JanuaryOctober 1, 2017, the Company expended approximately $170,000$388,000 for the purchase of building, entertainment and restaurant equipment.  TheExcept as noted above, the Company has no long-term debt and has no current 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 JanuaryOctober 1, 2017, league deposits of approximately $1,396,000$742,000 were included in the current liabilities category.

Cash flow provided by operating activities in the twenty-sixthirteen weeks ended January October 1, 2017 was $1,859,000$491,000 which, along with cash on hand, and a note in the amountredemption of $500,000,GNMA funds, mentioned above, 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 JanuaryOctober 1, 2017, and the six months total was approximately $1,754,000 or $.34 per share.2017.  In December 2016September 2017, the Company declared a regular quarterly dividend of $.17 per share, payable FebruaryNovember 15, 2017 to shareholders of record on January 10, 2017.  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 inWhile bowling has the advantage of being an entertainment that is close to home and relatively inexpensive.  Bowling has those advantages.  Howeverinexpensive, new forms of sports and entertainment are offered to the longerpublic continually creating challenges, but our response is helped by having the economy remains unsteady,resources to be able to promote the less willing people are to spend on other than necessities.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.  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 and year-to-date periodsquarters ended JanuaryOctober 1, 2017 and December 27, 2015,October 2, 2016, and the dollar and percentage changes therein.

Earnings were $695,906 forFor the thirteen week period and $695,186,ended October 1, 2017 net income was $195,000 or $.14$.04 per share for bothshare. For the thirteen and twenty-six week periodsperiod ended January 1, 2017. For the thirteen-week and twenty-six periods ended December 27, 2015, net earnings were $508,901October 2, 2016 there was a loss of $720 or $.10$.00 per share and $360,825 or $.07 per share, respectively.share. Eighteen centerslocations were in operation in both the current and prior year quarters althoughquarters. In September Hurricane MatthewIrma caused thea two day closure of our Florida centers for two days.locations although the properties did not sustain damage. The fiscal 2017 secondbowling business is seasonal and the first quarter includedwhich includes summer months is typically the holiday week between Christmasslowest. In the current year period, the increase in open play bowling more than offset a decline in league play resulting in an increase in both games bowled and New Year’s Day which typically falls in the third fiscal quarter.bowling revenue. The operating results for the fiscal 2017 periods2018 period included in this report are not necessarily indicative of results to be expected for the year.

Operating Revenues

Total operating revenues increased $229,0003.9% or $200,000 to $6,235,000$5,264,000 in the most recentthirteen-week period ended October 1, 2017, compared to an increase of 2.9% or $144,000 to $5,064,000 in the three-month period ended October 2, 2016.  Bowling and other revenue increased $171,000 or 4.8% in the current year fiscal quarter compared to an increase of $36,000 to $6,006,000 in the three-month period ended December 27, 2015.  The current fiscal six-month period operating revenues were up $373,000 versus an increase of $327,000$103,000 or 3% in the comparable six-month period aprior year ago.  Bowling and other revenue increased $213,000 in the quarter and $316,000 year-to-date for the periods ended January 1, 2017 versus a decline of $37,000 in the quarter and an increase of $135,000 for the six-month period ended December 27, 2015.

quarter. Food, beverage and merchandise sales increased $16,000were up $29,000 or 0.8%2% in the current year quarter and were up $57,000due to increased traffic, compared to an increase of $41,000 or 2.8% in the six-month period.prior year comparable quarter.  Cost of sales increased 2.5%decreased $9,000 in both the fiscal three month and six month periods ended January 1, 2017.current year three-month period.

OperatingOperating Expenses

Operating expenses were down $44,000$88,000 or 0.8%1.7% to $5,068,000 in the current three monththree-month period and $183,000 or 1.7% in six-month period versusended October 1, 2017 compared to a decrease of $23,000 and an increase of $13,000$138,000 or less than 1%2.6% to $5,156,000 in the three and six month periods, respectively, last year.prior year quarter ended October 2, 2016.  Employee compensation and benefits forwere up $3,000 or 0.1% and down $65,000 or 2.4% in the fiscal first quarters of 2018 and 2017, second quarter were flat and were down $64,000 or 1.2% in the six month period.respectively. In the comparable priorcurrent year periods ended December 27, 2015 there were decreases of $6,000 and $12,000 or less than 1%, respectively. Groupgroup health insurance costs decreased 6.4% as a result ofwere lower due to changes in plan offerings andwith lower premiums.   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 $25,000decreased $1,000 or 1.7% and decreased $16,000 or 0.5%0.1% in the three month and six month periodsquarter ended JanuaryOctober 1, 2017 respectively. Inversus a decrease of $42,000 or 2.8% in the twenty-six weekscomparable quarter ended January 1, 2017, maintenanceOctober 2, 2016. Maintenance and repair costs declined $15,000$2,000 or 3.6%. Advertising costs during1% and were up $22,000 or 10% in the current year twenty-six week periodand prior year quarters, respectively. Both the current and prior year periods included roof and building repairs at several locations. Advertising costs decreased $6,600 or 7.5% in the quarter ended JanuaryOctober 1, 2017, were up $4,000 or 2.2%.

For the fiscal six-month period ended January 1, 2017 utility2017.  Utility costs were up $14,000$3,000 or 2.1 % primarily a result of higher utility taxes.1% in the in both the current and prior year periods. Supplies and services expenses were down $11,000$21,000 or 2.8% in the current year six-month period11% and were up $9,000$20,000 or 2.2%10% in the six-month period in the prior year. Thethirteen-week periods ended October 1, 2017 and October 2, 2016, respectively, partially due to timing of purchases was the primary reason for the fluctuations in both years.

Insurance expense excluding health insurance decreased 1.7% in the current year-to-date period versus a decrease of 10% in last year’s comparable period.bulk purchases.

Depreciation and amortization expense was down 15.9%19.5% in the current six-monththree-month period the result ofended October 1, 2017 as a large group of assets reachinghave reached full depreciation. Increased capital purchases in the current year will result in a smaller decline in depreciation expense in future quarters.

As a resultThe first quarter of the above,fiscal year is seasonally the first six-month period of fiscalslowest and the quarter ended October 1, 2017 resulted in net operating income of $869,900 compared to$196,000 versus an operating incomeloss of $314,465$92,000 in the prior year comparable six-month period.

Interest,Dividend and OtherIncome

Interest, dividend and other income decreased $36,000increased $10,000 to $104,000 in the fiscalthree month period ended October 1, 2017 six-month period and decreased $17,000 inprimarily from the comparable 2016 year-to-date period, respectively. The decrease in both years relates primarily to ancillary income includinggain on the endsale of parking lot rental agreements.the GNMA securities.

CRITICALCRITICAL 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’sCompany’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’sCompany’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’sCompany’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 JanuaryOctober 1, 2017. 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 JanuaryOctober 1, 2017, 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.

SIGNATURES

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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