FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON,, D.C. 20549
Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
FOR THE QUARTERLY PERIOD ENDED: DECEMBER 31, 201727, 2020
COMMISSION FILE NUMBER: 001-7829
BOWL AMERICA INCORPORATED
(Exact name of registrant as specified in its charter)
MARYLAND | 54-0646173 |
(State of Incorporation) | ( |
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 requiredSecurities registered pursuant to be filed by Section 13 or 15(d)12(b) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes X No __Act:
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).
Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
Class A Common stock (par value $.10) | BWL-A | NYSE American |
Yes X No __
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐ |
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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 such files). Yes ☒ No ☐ |
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a
smallerasmaller reporting company, or an emerging growth company. See the definitions of “ large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large Accelerated Filer __☐ Accelerated Filer __☐
Non-Accelerated Filer __☐ Smaller Reporting Company X☒ Emerging Growth Company __☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended
transition period for complying with any new or revised financial accounting standards
provided pursuant to Section 13(a) of the Exchange Act. __
If an emerging growth company, indicate be check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) 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 __☐ No X☒
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date:
| Shares Outstanding at |
| February |
Class A Common Stock, |
|
$.10 par value |
|
|
|
Class B Common Stock, |
|
$.10 par value |
|
PART 1. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
BOWL AMERICA INCORPORATED AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
(Unaudited)
Thirteen Weeks Ended | Twenty-six Weeks Ended | Thirteen Weeks Ended | Twenty-six Weeks Ended | |||||||||||||||||||||||||||||
December 31, | January 1, | December 31, | January 1, | December 27, | December 29, | December 27, | December 29, | |||||||||||||||||||||||||
2017 | 2017 | 2017 | 2017 | 2020 | 2019 | 2020 | 2019 | |||||||||||||||||||||||||
Operating Revenues: | ||||||||||||||||||||||||||||||||
Bowling and other | $ | 4,484,745 | $ | 4,378,959 | $ | 8,233,015 | $ | 7,956,338 | $ | 1,823,182 | $ | 4,310,723 | $ | 2,990,054 | $ | 7,920,396 | ||||||||||||||||
Food, beverage and merchandise sales | 1,883,777 | 1,855,585 | 3,399,260 | 3,342,542 | 696,675 | 1,854,136 | 1,165,805 | 3,369,074 | ||||||||||||||||||||||||
Total Operating Revenues | 6,368,522 | 6,234,544 | 11,632,275 | 11,298,880 | 2,519,857 | 6,164,859 | 4,155,859 | 11,289,470 | ||||||||||||||||||||||||
Operating Expenses: | ||||||||||||||||||||||||||||||||
Employee compensation and benefits | 2,720,700 | 2,737,379 | 5,404,571 | 5,418,712 | 1,551,301 | 2,722,769 | 2,870,773 | 5,457,983 | ||||||||||||||||||||||||
Cost of bowling and other services | 1,508,075 | 1,472,207 | 2,975,983 | 2,941,577 | 963,603 | 1,413,563 | 1,907,283 | 3,015,736 | ||||||||||||||||||||||||
Cost of food, beverage and merchandise sales | 574,338 | 577,183 | 1,047,225 | 1,059,458 | 231,801 | 560,284 | 379,074 | 1,004,316 | ||||||||||||||||||||||||
Depreciation and amortization | 238,026 | 275,198 | 474,110 | 567,892 | 247,808 | 235,574 | 495,616 | 470,752 | ||||||||||||||||||||||||
General and administrative | 229,403 | 210,565 | 436,031 | 441,341 | 191,574 | 339,240 | 349,074 | 607,339 | ||||||||||||||||||||||||
Total Operating Expenses | 5,270,542 | 5,272,532 | 10,337,920 | 10,428,980 | 3,186,087 | 5,271,430 | 6,001,820 | 10,556,126 | ||||||||||||||||||||||||
Operating Income | 1,097,980 | 962,012 | 1,294,355 | 869,900 | (666,230 | ) | 893,429 | (1,845,961 | ) | 733,344 | ||||||||||||||||||||||
Interest, dividend and other income | 81,449 | 111,188 | 185,466 | 204,902 | ||||||||||||||||||||||||||||
Interest expense | - | 2,594 | - | 5,316 | ||||||||||||||||||||||||||||
Interest, dividend and other income | 97,338 | 109,864 | 186,854 | 216,321 | ||||||||||||||||||||||||||||
Change in value of investments | 174,591 | 160,882 | 300,817 | 589,935 | ||||||||||||||||||||||||||||
PPP Loan interest expense | - | - | (4,690 | ) | - | |||||||||||||||||||||||||||
Earnings before provision for income taxes | 1,179,429 | 1,070,606 | 1,479,821 | 1,069,486 | ||||||||||||||||||||||||||||
(Loss) earnings before provision for income taxes | (394,301 | ) | 1,164,175 | (1,362,980 | ) | 1,539,600 | ||||||||||||||||||||||||||
Provision for income taxes (benefit) | (257,305 | ) | 374,700 | (152,105 | ) | 374,300 | (92,519 | ) | 286,500 | (323,475 | ) | 376,600 | ||||||||||||||||||||
Net Earnings | $ | 1,436,734 | $ | 695,906 | $ | 1,631,926 | $ | 695,186 | ||||||||||||||||||||||||
Net (Loss) earnings | $ | (301,782 | ) | $ | 877,675 | $ | (1,039,505 | ) | $ | 1,163,000 | ||||||||||||||||||||||
Earnings per share-basic & diluted | $ | .28 | $ | .14 | $ | .32 | $ | .14 | ||||||||||||||||||||||||
(Loss) earnings per share-basic & diluted | $ | (.06 | ) | $ | .17 | $ | (.20 | ) | $ | .23 | ||||||||||||||||||||||
Weighted average shares outstanding | 5,160,971 | 5,160,971 | 5,160,971 | 5,160,971 | 5,160,971 | 5,160,971 | 5,160,971 | 5,160,971 | ||||||||||||||||||||||||
Dividends paid | $ | 877,365 | $ | 877,365 | $ | 1,754,730 | $ | 1,754,730 | $ | 0 | $ | 903,170 | $ | 0 | $ | 1,780,535 | ||||||||||||||||
Per share, dividends paid, Class A | $ | .17 | $ | .17 | $ | .34 | $ | .34 | $ | 0 | $ | .175 | $ | 0 | $ | .35 | ||||||||||||||||
Per share, dividends paid, Class B | $ | .17 | $ | .17 | $ | .34 | $ | .34 | $ | 0 | $ | .175 | $ | 0 | $ | .35 |
The operating results for the thirteen (13) and twenty-sixtwenty-six (26) week periods ended December 31, 201727, 2020 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 | Twenty-six Weeks Ended | |||||||||||||||
December 31, | January 1, | December 31, | January 1, | |||||||||||||
2017 | 2017 | 2017 | 2017 | |||||||||||||
Net Earnings | $ | 1,436,734 | $ | 695,906 | $ | 1,631,926 | $ | 695,186 | ||||||||
Other comprehensive earnings- net of tax | ||||||||||||||||
Unrealized gain (loss) on available- for-sale securities net of tax (benefit) of ($598) and $54,819 for 13 weeks, and $91,192 and ($59,000) for 26 weeks | 1,775 | 88,938 | 148,960 | (96,008 | ) | |||||||||||
Reclassification adjustment for (gain) loss included in Net Income net of tax (benefit) of $2,167 & ($2,227) | - | - | (3,520 | ) | 3,619 | |||||||||||
Comprehensive earnings | $ | 1,438,509 | $ | 784,844 | $ | 1,777,366 | $ | 602,797 |
The operating results for the thirteen (13) and twenty-six (26) week periods ended December 31, 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)
As of | As of | |||||||||||||||
December 31, | July 2, | December 27, | June 28, | |||||||||||||
2017 | 2017 | 2020 | 2020 | |||||||||||||
ASSETS | ASSETS | ASSETS | ||||||||||||||
CURRENT ASSETS: | ||||||||||||||||
Cash and cash equivalents | $ | 1,293,634 | $ | 604,671 | $ | 846,250 | $ | 1,659,264 | ||||||||
Short-term investments | 1,972,472 | 2,951,315 | 134,251 | 134,202 | ||||||||||||
Marketable investment securities | 5,521,168 | 5,216,218 | ||||||||||||||
Inventories | 554,234 | 534,741 | 439,393 | 486,105 | ||||||||||||
Prepaid expenses and other | 512,782 | 555,687 | 250,986 | 523,662 | ||||||||||||
Income tax refundable | 25,572 | - | ||||||||||||||
Current deferred income tax benefit | 10,597 | 8,162 | ||||||||||||||
Income taxes refundable | 766,244 | 766,244 | ||||||||||||||
TOTAL CURRENT ASSETS | 4,369,291 | 4,654,576 | 7,958,292 | 8,785,695 | ||||||||||||
LAND, BUILDINGS & EQUIPMENT, net of accumulated depreciation of $40,848,979 and $40,978,609 | 19,062,939 | 18,860,778 | ||||||||||||||
LAND, BUILDINGS & EQUIPMENT, net of accumulated depreciation of $41,535,063 and $41,039,447 | 17,247,883 | 17,667,517 | ||||||||||||||
OTHER ASSETS: | ||||||||||||||||
Marketable investment securities | 5,523,003 | 5,272,318 | ||||||||||||||
Right to use asset | 1,731,935 | 1,812,937 | ||||||||||||||
Cash surrender value-life insurance | 772,326 | 772,326 | 282,895 | 282,895 | ||||||||||||
Other | 66,315 | 66,315 | 64,265 | 64,265 | ||||||||||||
TOTAL OTHER ASSETS | 6,361,644 | 6,110,959 | 2,079,095 | 2,160,097 | ||||||||||||
TOTAL ASSETS | $ | 29,793,874 | $ | 29,626,313 | $ | 27,285,270 | $ | 28,613,309 | ||||||||
LIABILITIES AND STOCKHOLDERS' EQUITY | LIABILITIES AND STOCKHOLDERS' EQUITY | LIABILITIES AND STOCKHOLDERS' EQUITY | ||||||||||||||
CURRENT LIABILITIES: | ||||||||||||||||
Accounts payable | $ | 472,306 | $ | 673,786 | $ | 218,375 | $ | 269,373 | ||||||||
Accrued expenses | 662,548 | 1,069,668 | 618,681 | 932,528 | ||||||||||||
Dividends payable | 877,365 | 877,365 | ||||||||||||||
Income taxes payable | - | 22,543 | ||||||||||||||
Other current liabilities | 1,631,122 | 342,324 | 874,453 | 395,629 | ||||||||||||
TOTAL CURRENT LIABILITIES | 3,643,341 | 2,985,686 | 1,711,509 | 1,597,530 | ||||||||||||
LONG-TERM DEFERRED COMPENSATION | 18,413 | 18,413 | ||||||||||||||
NONCURRENT DEFERRED INCOME TAXES | 1,523,091 | 2,035,821 | ||||||||||||||
Lease liability | 1,593,333 | 1,672,371 | ||||||||||||||
Note Payable PPP loan | 1,500,000 | 1,500,000 | ||||||||||||||
DEFERRED INCOME TAXES | 1,002,916 | 1,326,391 | ||||||||||||||
TOTAL LIABILITIES | 5,184,845 | 5,039,920 | 5,807,758 | 6,096,292 | ||||||||||||
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 | ||||||||||||||||
Class A issued and outstanding 3,746,454 | 374,645 | 374,645 | ||||||||||||||
Common stock, par value $.10 a share: Authorized, 10,000,000 shares Class A issued and outstanding 3,746,454 | 374,645 | 374,645 | ||||||||||||||
Class B issued and outstanding 1,414,517 | 141,452 | 141,452 | 141,452 | 141,452 | ||||||||||||
Additional paid-in capital | 7,854,108 | 7,854,108 | 7,854,108 | 7,854,108 | ||||||||||||
Accumulated other comprehensive earnings- | ||||||||||||||||
Unrealized gain on available-for-sale securities, net of tax | 2,627,428 | 2,481,988 | ||||||||||||||
Retained earnings | 13,611,396 | 13,734,200 | 13,107,307 | 14,146,812 | ||||||||||||
TOTAL STOCKHOLDERS' EQUITY | 24,609,029 | 24,586,393 | 21,477,512 | 22,517,017 | ||||||||||||
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY | $ | 29,793,874 | $ | 29,626,313 | $ | 27,285,270 | $ | 28,613,309 |
See notes to condensed consolidated financial statements.
BOWL AMERICA INCORPORATED AND SUBSIDIARIES |
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Twenty-six Weeks Ended | Twenty-six Weeks Ended | |||||||||||||||
December 31, | January 1, | December 27, | December 29, | |||||||||||||
2017 | 2017 | 2020 | 2019 | |||||||||||||
Cash Flows From Operating Activities | ||||||||||||||||
Net earnings | $ | 1,631,926 | $ | 695,186 | $ | (1,039,505 | ) | $ | 1,163,000 | |||||||
Adjustments to reconcile net earnings to net cash provided by operating activities: | ||||||||||||||||
Depreciation and amortization | 474,110 | 567,892 | 495,616 | 470,752 | ||||||||||||
Loss on involuntary cancellation of available-for-sale securities | - | 5,845 | ||||||||||||||
Gain on sale of available-for-sale securities | (8,531 | ) | - | |||||||||||||
Provisional estimate for reduction in deferred tax from tax act | (604,190 | ) | - | |||||||||||||
Amortization of right to use asset | 81,002 | 85,372 | ||||||||||||||
(Decrease) increase in deferred taxes | (323,475 | ) | 147,662 | |||||||||||||
Unrealized gain on marketable securities | (300,817 | ) | (585,731 | ) | ||||||||||||
Net purchases of marketable securities | (4,133 | ) | (16,349 | ) | ||||||||||||
Gain on sale of trading securities | - | (9,487 | ) | |||||||||||||
Decrease in long-term assets | - | 2,000 | ||||||||||||||
Changes in assets and liabilities | ||||||||||||||||
(Increase) decrease in inventories | (19,493 | ) | 7,265 | |||||||||||||
Decrease in inventories | 46,712 | 14,396 | ||||||||||||||
Decrease in prepaid & other | 42,905 | 240,828 | 272,676 | 513,486 | ||||||||||||
Decrease in accounts payable | (201,480 | ) | (152,617 | ) | ||||||||||||
Decrease in accounts payable | (50,998 | ) | (327,762 | ) | ||||||||||||
Decrease in accrued expenses | (407,120 | ) | (549,138 | ) | (313,847 | ) | (346,642 | ) | ||||||||
Decrease in income taxes payable | (48,115 | ) | (252,800 | ) | ||||||||||||
Decrease in income taxes refundable | - | 150,675 | ||||||||||||||
Increase in other current liabilities | 1,288,798 | 1,296,409 | 478,824 | 1,318,844 | ||||||||||||
Net cash provided by operating activities | 2,148,810 | 1,858,870 | ||||||||||||||
Decrease in lease liability | (79,038 | ) | (79,117 | ) | ||||||||||||
Net cash (used in) provided by operating activities | (736,983 | ) | 2,501,099 | |||||||||||||
Cash Flows From Investing Activities | ||||||||||||||||
Expenditures for land, building and equip | (676,271 | ) | (170,629 | ) | ||||||||||||
Net sales & maturities (purchases) of short-term investments | (42 | ) | (1,748 | ) | ||||||||||||
Proceeds from sale of available-for-sale securities | 1,000,000 | - | ||||||||||||||
Purchases of marketable securities | (28,804 | ) | (49,677 | ) | ||||||||||||
Net cash provided by (used in) investing activities | 294,883 | (222,054 | ) | |||||||||||||
Net expenditures for land, building and equipment | (75,982 | ) | (455,981 | ) | ||||||||||||
Net (purchases) sales & maturities of short-term investments | (49 | ) | 299,096 | |||||||||||||
Proceeds from sale of securities | - | 1,000,000 | ||||||||||||||
Net cash (used in) provided by investing activities | (76,031 | ) | 843,115 | |||||||||||||
Cash Flows From Financing Activities | ||||||||||||||||
Proceeds from note payable | - | 500,000 | ||||||||||||||
Payment of cash dividends | (1,754,730 | ) | (1,754,730 | ) | ||||||||||||
Payment of cash dividends | - | (1,806,341 | ) | |||||||||||||
Net cash used in financing activities | (1,754,730 | ) | (1,254,730 | ) | - | (1,806,341 | ) | |||||||||
Net Increase in Cash and Equivalents | 688,963 | 382,086 | (813,014 | ) | 1,537,873 | |||||||||||
Cash and Equivalents, Beginning of period | 604,671 | 986,193 | 1,659,264 | 269,844 | ||||||||||||
Cash and Equivalents, End of period | $ | 1,293,634 | $ | 1,368,279 | $ | 846,250 | $ | 1,807,717 | ||||||||
Supplemental Disclosures of Cash Flow Information | ||||||||||||||||
Cash Paid During the Period for: | ||||||||||||||||
Interest | - | 5,316 | ||||||||||||||
Income taxes | $ | 500,200 | $ | 627,100 | $ | 0 | $ | 86,700 |
See notes to condensed consolidated financial information.
BOWL AMERICA INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(Unaudited)
COMMON STOCK | ||||||||||||||||||||||||
Class A Shares | Class A Amount | Class B Shares | Class B Amount | Additional Paid-In Capital | Retained Earnings | |||||||||||||||||||
Balance, June 30, 2019 | 3,746,454 | $ | 374,645 | 1,414,517 | $ | 141,452 | $ | 7,854,108 | $ | 15,549,961 | ||||||||||||||
Cash dividends paid | - | - | - | - | - | (903,170 | ) | |||||||||||||||||
Net earnings for the quarter | - | - | - | - | - | 285,325 | ||||||||||||||||||
Balance, September 29, 2019 | 3,746,454 | $ | 374,645 | 1,414,517 | $ | 141,452 | $ | 7,854,108 | $ | 14,932,116 | ||||||||||||||
Cash dividends paid | - | - | - | - | - | (903,171 | ) | |||||||||||||||||
Net earnings for the quarter | - | - | - | - | - | 877,675 | ||||||||||||||||||
Balance, December 29, 2019 | 3,746,454 | $ | 374,645 | 1,414,517 | $ | 141,452 | $ | 7,854,108 | $ | 14,906,620 |
COMMON STOCK | ||||||||||||||||||||||||
Class A Shares | Class A Amount | Class B Shares | Class B Amount | Additional Paid-In Capital | Retained Earnings | |||||||||||||||||||
Balance, June 28, 2020 | 3,746,454 | $ | 374,645 | 1,414,517 | $ | 141,452 | $ | 7,854,108 | $ | 14,146,812 | ||||||||||||||
Cash dividends paid | - | - | - | - | - | - | ||||||||||||||||||
Net loss for the quarter | - | - | - | - | - | (737,723 | ) | |||||||||||||||||
Balance, September 27, 2020 | 3,746,454 | $ | 374,645 | 1,414,517 | $ | 141,452 | $ | 7,854,108 | $ | 13,409,089 | ||||||||||||||
Cash dividends paid | - | - | - | - | - | - | ||||||||||||||||||
Net loss for the quarter | - | - | - | - | - | (301,782 | ) | |||||||||||||||||
Balance, December 27, 2020 | 3,746,454 | $ | 374,645 | 1,414,517 | $ | 141,452 | $ | 7,854,108 | $ | 13,107,307 |
The accompanying notes to the consolidated financial statements are an integral part of these financial statements.
BOWL AMERICA INCORPORATED AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
For the Twenty-sixTwenty-six Weeks Ended
December 31, 201727, 2020
(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 July 2, 2017 June 28, 2020 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. These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company's annual report on Form 10-K10-K for the year ended July 2, 2017.June 28, 2020.
2. Investments
The Company’s investments are categorized as available-for-sale.current assets. Short-term investments consist of certificates of deposits and treasury bills with maturities of generally three months to one year. Equity securities consist primarily of telecommunications stocks. Mutual funds consist ofstocks and a mutual fund that invests in federal agency mortgage backed securities (Ginnie Mae). The fair value of the Company’s investments at December 31, 2017 27, 2020 and July 2, 2017 June 28, 2020 were as follows:
December 31, 2017 Description |
Fair Value |
Cost basis | Unrealized Gain (loss) | |||||||||||||||||||||
December 27, 2020 Description |
Fair Value |
Cost basis |
Unrealized Gain (Loss) | |||||||||||||||||||||
Short-term investments | $ | 133,965 | $ | 133,965 | $ | - | $ | 134,251 | $ | 134,251 | $ | - | ||||||||||||
Equity securities | $ | 5,523,003 | $ | 1,279,914 | $ | 4,243,089 | $ | 5,029,019 | $ | 1,279,914 | $ | 3,749,105 | ||||||||||||
Mutual funds | $ | 1,838,507 | $ | 1,837,480 | $ | 1,027 | $ | 492,149 | $ | 479,312 | $ | 12,837 | ||||||||||||
July 2, 2017 Description |
Fair Value |
Cost basis |
Unrealized Gain | |||||||||||||||||||||
June 28, 2020 Description |
Fair Value |
Cost basis |
Unrealized Gain | |||||||||||||||||||||
Short-term investments | $ | 133,922 | $ | 133,922 | $ | - | $ | 134,202 | $ | 134,202 | $ | - | ||||||||||||
Equity securities | $ | 5,272,318 | $ | 1,279,914 | $ | 3,992,404 | $ | 4,725,470 | $ | 1,279,914 | $ | 3,445,556 | ||||||||||||
Mutual funds | $ | 2,817,392 | $ | 2,800,144 | $ | 17,248 | $ | 490,748 | $ | 475,179 | $ | 15,569 |
The fair values of the Company’sCompany’s investments were determined as follows:
December 31, 2017
Description | Quoted Price for Identical Assets (Level 1)
| Significant Other Observable Inputs (Level 2) |
Significant Unobservable Inputs (Level 3) | |||||||||
Certificates of deposits | $ | - | $ | 133,965 | $ | - | ||||||
Equity securities | 5,523,003 | - | - | |||||||||
Mutual funds | 1,838,507 | - | - | |||||||||
Total | $ | 7,361,510 | $ | 133,965 | $ | - |
July 2, 2017
Description | Quoted Price for Identical Assets (Level 1) | Significant Other Observable Inputs (Level 2) |
Significant Unobservable Inputs (Level 3) | |||||||||||||||||||||
December 27, 2020
Description | Quoted Price for Identical Assets (Level 1) | Significant Other Observable Inputs (Level 2) |
Significant Unobservable Inputs (Level 3) | |||||||||||||||||||||
Certificates of deposits and Treasury Bills | $ | - | $ | 134,251 | $ | - | ||||||||||||||||||
Equity securities | 5,029,019 | - | - | |||||||||||||||||||||
Mutual funds | 492,149 | - | - | |||||||||||||||||||||
Total | $ | 5,521,168 | $ | 134,251 | $ | - | ||||||||||||||||||
June 28, 2020
Description |
Quoted Price for Identical Assets (Level 1) | Significant Other Observable Inputs (Level 2) |
Significant Unobservable Inputs (Level 3) | |||||||||||||||||||||
Certificates of deposits | $ | - | $ | 133,922 | $ | - | $ | - | $ | 134,202 | $ | - | ||||||||||||
Equity securities | 5,272,318 | - | - | 4,725,470 | - | - | ||||||||||||||||||
Mutual funds | 2,817,392 | - | - | 490,748 | - | - | ||||||||||||||||||
Total | $ | 8,089,710 | $ | 133,922 | $ | - | $ | 5,216,218 | $ | 134,202 | $ | - |
The equity securities portfolio includes the following stocks:
AT&T shares | 82,112 | |||
Manulife shares | 2,520 | |||
Uniti shares | 815 | |||
NCR shares | 774 | |||
Teradata shares | 774 | |||
Vodafone shares | 6,471 | |||
| 4,398 | |||
Frontier Communications shares | 300 | |||
| ||||
| 31,904 | |||
Windstream shares |
On July 10, 2017, Frontier Communications completed a 1-for-15 reverse stock split reducing Bowl America’s holdings to 300 shares from 4,508. On August 1, 2016 Dex Media completed a financial restructuring. 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.
3.3. Leasing arrangements
As of December 27, 2020, the Company leases one bowling center. The lease is classified as an operating lease in accordance with ASU 2016-02. For the 26 week period ended December 27, 2020, the Company recorded amortization of its right to use asset under the lease of $81,002 which is included as a component of rent expense. The non-current lease liability at December 27, 2020 was $1,593,333. The current portion of the lease liability of $156,200 is included in other current liabilities on the accompanying condensed consolidated balance sheet.
4. Commitments and Contingencies
The Company’sCompany’s purchase commitments at December 31, 2017, 27, 2020, are for materials, supplies, services and equipment as part of the normal course of business.
4.5. 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.Income Taxes
A. On December 22, 2017, the U.S. government enacted comprehensive tax legislation commonly referred to as the Tax Cuts and Jobs Act (the “Tax Act”). The Tax Act includes broad and complex changes to the U.S. tax code, including a reduction in the U.S. federal corporate tax rate from 35 percent to 21 percent effective January 1, 2018.. For fiscal 2018, the Company will record its income tax provision based on a blended U.S. statutory tax rate of 27.5 percent, which is based on a proration of the applicable tax rates before and after the effective date of the Tax Act. The statutory tax rate of 21 percent will apply for fiscal 2019 and beyond.
The Tax Act also puts in place new tax laws that may impact the Company’s taxable income beginning in fiscal 2019, which include, but are not limited to (i) reducing the dividends received exclusion, (ii) adding a provision that could limit the amount of deductible interest expense, and (iii) limiting the deductibility of certain executive compensation.
Shortly after the Tax Act was enacted, the SEC issued accounting guidance, which provides a one-year measurement period during which a company may complete its accounting for the impacts of the Tax Act. To the extent a company’s accounting for certain income tax effects of the Tax Act is incomplete, the company may determine a reasonable estimate for those effects and record a provisional estimate in its financial statements. If a company cannot determine a provisional estimate to be included in the financial statements, it should continue to apply the provisions of the tax laws that were in effect immediately prior to the Tax Act being enacted.
During the second quarter of fiscal 2018, the Company recorded provisional discrete tax benefits of $ 604,190 related to the Tax Act. The Company adjusted its U.S. deferred tax liabilities by $604,190 due to the reduction in the U.S. federal corporate tax rate. The resulting adjustment increased current quarter and year to date earnings per share by 11.7 cents. This net reduction in deferred tax liabilities also included the estimated impact on the Company’s net state deferred tax liabilities.
6. New Accounting Standards
In January 2016, the Financial Accounting Standards Board (FASB) issued guidance on equity securities that requires entities to recognize changes in unrealized gains and losses on equity securities in income in the current period unless the entity is recording the related investment under the equity method or consolidating the related entity. This amendment is effective for the Company’s fiscal year ending June 2019 with earlier adoption permitted. Management is currently assessing the impact of this standard on the Company’s financial statements.
In February 2016, the FASB issued guidance on leases which requires entities to recognize right-of-use assets and lease liabilities on the balance sheet for the rights and obligations created by all leases, including operating leases, with terms of more than 12 months. The new guidance also requires additional disclosures on the amount, timing, and uncertainty of cash flows arising from leases. These disclosures include qualitative and quantitative information. The Company adopted this standard effective July 1, 2019. The result was the recognition of a right to use asset of $1,977,523 and a corresponding lease liability for the same amount.
In August 2018, the FASB issued ASU No. 2018-13, Fair Value Measurement Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement. As part of the FASB's disclosure framework project, it has eliminated, amended and added disclosure requirements for fair value measurements. Entities will no longer be required to disclose the amount of, and reasons for, transfers between Level 1 and Level 2 of the fair value hierarchy, the policy of timing of transfers between levels of the fair value hierarchy and the valuation processes for Level 3 fair value measurements. Public companies will be required to disclose the range and weighted average used to develop significant unobservable inputs for Level 3 fair value measurements. This amendmentASU is effective for public entities for annual and interim periods beginning after December 15, 2019. Early adoption is permitted as of the Company’s fiscal year ending June 2020 with early adoption permitted. We are in the processbeginning of evaluating the impact the adoption of this guidance will have on our consolidated financial statements and related disclosures.
7. Subsequent Events
any interim or annual reporting period. The Company has evaluated subsequent events through the time of filing these financial statements with the Securities and Exchange Commission on February 13, 2018, and has determined that no material subsequent events have occurred.does not believe it will materially impact disclosures.
8.7. 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.control, including but not limited to the duration of the continued negative impact from the COVID-19 pandemic. The forward-looking statements included in this Quarterly Report on Form 10-Q are made as the date hereof. We are under no obligation to publicly update or revise any forward-looking statement as a result of new information, future events or otherwise, except as otherwise required by law.
COVID-19
The Company closed all bowling centers on March 18, 2020, as required by the orders from state and federal governments, in an effort to mitigate the spread of COVID-19. Our three Florida locations reopened in May 2020, which provided the Company some revenue in the fourth quarter of fiscal 2020 while all other centers remained closed. All of our Virginia centers reopened in early July 2020, one Maryland location opened July 22, 2020 and the last closed center was allowed to reopen on August 31, 2020. Currently, the Florida centers may operate at 100% capacity while the Virginia locations are mandated at 30% capacity and reduced times for selling alcoholic beverages. Maryland locations operated between 25% and 50% during the second quarter for fiscal 2021 with county officials adjusting capacities based on reported COVID cases in their jurisdictions. We implemented social distancing and enhanced cleaning procedures and we continue to request the wearing of masks in the centers except when eating or drinking. Our safety procedures are designed to keep employees and customers safe and have allowed us to offer league bowling. All center employees except the center manager were furloughed in March 2020 and the corporate staff was reduced to a minimum. Employees are returned to work as business requires and currently approximately 62% of pre-COVID employees have been returned to work. The Company has maintained health insurance for all employees on the plan at the time of closure through January 31, 2021.
Future developments in the continuously changing pandemic environment, whether new mandated closures or restrictions, a worsening of the global and local economy, high unemployment rates, reduced consumer discretionary spending and other factors can negatively affect our business, however it is difficult to determine with much accuracy what the longer term impact could be. Our fall league bowling season was better than expected in spite of the limitations, as we have been able to be creative in making maximum use of space while following social distancing requirements. However, revenues from parties and corporate events are currently non-existent. Most bowling leagues adopted a split season schedule with the hope that more bowlers could be added in the second half of the season. We have seen some increase in the number of league bowlers since the third quarter of fiscal 2021 began.
Management believes the effects of the pandemic will continue to have an adverse effect on our revenues, financial condition and operating results for fiscal 2021 and potentially, some time after.
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.shareholders. 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 historically had relatively low volatility. The Company has long been invested in a Government National Mortgage Association (“Ginnie Mae”) fund and domestically domiciledequity securities, primarily telecommunications stocks, with the perceived potential of appreciation, primarily telecommunications stocks.appreciation. The Company considers that this diversity also provides a measure of safety of principal.
With the exception of 13,120 shares of Verizon, the equity securities in our portfolio have come from spin-offs, mergers and acquisitions of AT&T and United Telecommunications (now Sprint)T-Mobile) purchased in 1979 and 1984 and from one insurance company acquired at no cost when that company demutualized. While not all stocks in the portfolio are domestic American companies any longer, sinceSince the original purchases at an approximate cost of $630,000, we have received approximately $967,000 from mergers and sales, and over $4,700,000$5,300,000 in dividends, the majority of which received favorable tax treatment in the form of a dividends received deduction from federal taxable income. The dividends received deductionWhile the favorable tax treatment continues into this fiscal year.year, the Tax Cuts and Jobs Act (“Tax Act”) reduces the percent deductible. These equity securities are carried at their fair value on the last day of each reporting period. The fair value of the securities on December 31, 201727, 2020 was approximately $5,500,000$5,029,000 and on July 2, 2017June 28, 2020 was approximately $5,300,000.$4,725,000.
TheThe 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 2017,2019, $1,000,000 of this fund was redeemed to meet the August 20172019 dividend payment. In May 2020, $500,000 was redeemed to fund operating costs. The fund is carried at fair value on the last day of the reporting period. At December 31, 2017,27, 2020, the fair value was approximately $1,838,000$492,000 and at July 2, 2017,June 28, 2020, the fair value was $1,837,000..$491,000.
In March 2020 the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) which is administered by the Small Business Administration was signed into law. The CARES Act established a Paycheck Protection Program (“PPP”) under which qualified businesses could apply for a loan to help fund payroll, rent and related costs. The Company applied for a PPP loan and on June 1, 2020 received $1,500,000 under a loan agreement which calls for interest of 1%. The loan repayment, after a seven month deferral, begins January 1, 2021 and final payment is due June 1, 2022. All or a portion of payments of principal and interest may be forgiven if used for covered, documented payroll costs, rent and utilities. We anticipate applying for loan forgiveness in the third quarter of fiscal 2021. Any amount not forgiven will be due at maturity. The Consolidated Appropriations Act of 2021 allows any expenses paid with the PPP Loan and forgiven will be deductible for federal tax purposes.
Short-term investments investments including 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 $3,266,000$981,000 at the end of the fiscal second quarter of 20182021 compared to $3,556,000$1,793,000 at July 2, 2017.June 28, 2020.
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 negatively impact the Company’s opportunities for expansion.fair value of the securities. The Board of Directors reviews the portfolio weekly and any use of this reserve at its quarterly meetings.
In August 2016The Company closed its leased Mathis Avenue location in Manassas, Virginia, which had been operating with a negative cash flow, on July 28, 2019. Most of the Company obtained a $500,000 short-term loanequipment was transferred to meet the August 2016 dividend obligation. The loan was paid in full January 6, 2017.our other locations.
In the six-month period ended December 31, 2017,27, 2020, the Company expended approximately $676,000$76,000 for the purchase of building, entertainment and restaurant equipment. The Company has no long-term debt and has made no application forplans to obtain third party funding as cash reserves and cash flows are currently sufficient to finance all contemplated purchases and to meet short-term purchase commitments and operating lease commitments.
The six-month decreases in the categories of Prepaid expenses and other, Accounts Payable and Accrued Expenses are primarily due to seasonal timing of payments including compensation, insurance and taxes and for contributions to benefit plans.
Current liabilities generally increase during the first three quarters of the fiscal year as leagues deposit prize fund monies with the Company throughout the league season. These funds are returned to the leagues at the end of the bowling season, generally in the fourth quarter. At December 31, 2017,27, 2020, league deposits of approximately $1,394,000$532,000 were included in the current liabilities category.
Cash flow provided byused in operating activities in the twenty-sixtwenty-six weeks ended December 31, 201727, 2020 was $2,149,000approximately $737,000 which, along with cash on hand and redemption of a portion of the Vanguard GNMA fund, 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 quarter ended December 31, 2017, and the six months total was approximately $1,754,000 or $.34 per share.needs. In December 2017March 2020, the Company declared a regularsuspended quarterly dividenddividends following the required shutdown of $.17 per share, payable February 14, 2018 to shareholders of record on January 10, 2018.the Company’s bowling centers. 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.
OVERVIEW
The Company is in the entertainment business which, by its nature, has ups and downs based on consumer tastes and preferences.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. While bowling has the advantage of being an entertainment that is close to home and relatively inexpensive, new forms of sports and entertainment are offered to the public continually creating challenges, but our response is helped by having the resources to be able to promote the sport. Weather is also a factor, especially for casual bowlers. While extreme heat or rainy weather prompt people to look for indoor activities, heavy snow storms can keep customers from reaching the centers. Postponed league games are made up later in the season, but lost open play income is never recovered. The Company operates primarily in the Washington, DC area where its business is also vulnerable to sequestration or other downsizing of the federal government.
RESULTS OF OPERATIONS
The following tablestables set forth the items in our consolidated summary of operations for the fiscal quarters and year-to-date periods ended December 31, 2017,27, 2020, and January 1, 2017,December 29, 2019, and the dollar and percentage changes therein.
Thirteen weeks ended | ||||||||||||||||
December 31, 2017 and January 1, 2017 | ||||||||||||||||
Dollars in thousands | ||||||||||||||||
12/31/ 2017 | 1/01/ 2017 | Change | % Change | |||||||||||||
Operating Revenues: | ||||||||||||||||
Bowling and other | $ | 4,485 | $ | 4,379 | $ | 106 | 2.4 | |||||||||
1,884 | 1,856 | 28 | 1.5 | |||||||||||||
Total Operating Revenue | 6,369 | 6,235 | 134 | 2.2 | ||||||||||||
Operating Expenses: | ||||||||||||||||
Employee Compensation and benefits | 2,721 | 2,738 | (17 | ) | (0.6 | ) | ||||||||||
Cost of bowling and other services | 1,508 | 1,472 | 36 | 2.4 | ||||||||||||
Cost of food, beverage and merchandise sales | 574 | 577 | (3 | ) | (0.5 | ) | ||||||||||
Depreciation and amortization | 238 | 275 | (37 | ) | (13.4 | ) | ||||||||||
General and administrative | 230 | 211 | 19 | 9.0 | ||||||||||||
Total Operating Expenses | 5,271 | 5,273 | (2 | ) | (0.0 | ) | ||||||||||
Operating Income | 1,098 | 962 | 136 | 14.1 | ||||||||||||
Interest, dividend and other income | 82 | 112 | (30 | ) | (26.8 | ) | ||||||||||
Interest expense | - | 3 | (3 | ) | (100.0 | ) | ||||||||||
Earnings before taxes | 1,180 | 1,071 | 109 | 10.2 | ||||||||||||
Income taxes (benefit) provision | (257 | ) | 375 | (632 | ) | (168.5 | ) | |||||||||
Net Earnings | $ | 1,437 | 696 | 741 | 106.5 |
Twenty-six weeks ended | Thirteen weeks ended | |||||||||||||||||||||||||||||||
December 31, 2017 and January 1, 2017 | December 27, 2020 and December 29, 2019 | |||||||||||||||||||||||||||||||
Dollars in thousands | Dollars in thousands | |||||||||||||||||||||||||||||||
12/31/2017 | 1/01/ 2017 | Change | % Change | 12/27/2020 | 12/29/2019 | $ Change | % Change | |||||||||||||||||||||||||
Operating Revenues: | ||||||||||||||||||||||||||||||||
Bowling and other | $ | 8,233 | $ | 7,956 | $ | 277 | 3.5 | $ | 1,823 | $ | 4,311 | $ | (2,488 | ) | (57.7 | )% | ||||||||||||||||
Food, beverage and merchandise sales | 3,399 | 3,343 | 56 | 1.7 | 697 | 1,854 | (1,157 | ) | (62.4 | ) | ||||||||||||||||||||||
Total Operating Revenues | 11,632 | 11,299 | 333 | 3.0 | ||||||||||||||||||||||||||||
Total Operating Revenue | 2,520 | 6,165 | (3,645 | ) | (59.1 | ) | ||||||||||||||||||||||||||
Operating Expenses: | ||||||||||||||||||||||||||||||||
Employee Compensation and benefits | 5,405 | 5,419 | (14 | ) | (0.3 | ) | 1,551 | 2,723 | (1,172 | ) | (43.0 | ) | ||||||||||||||||||||
Cost of bowling and other services | 2,976 | 2,942 | 34 | 1.2 | 964 | 1,413 | (449 | ) | (31.8 | ) | ||||||||||||||||||||||
Cost of food, beverage and merchandise sales | 1,047 | 1,059 | (12 | ) | (1.1 | ) | 232 | 560 | (328 | ) | (58.6 | ) | ||||||||||||||||||||
Depreciation and amortization | 474 | 568 | (94 | ) | (16.5 | ) | 248 | 236 | 12 | 5.1 | ) | |||||||||||||||||||||
General and administrative | 436 | 441 | (5 | ) | (1.1 | ) | 191 | 339 | (148 | ) | (43.7 | ) | ||||||||||||||||||||
Total Operating Expenses | 10,338 | 10,429 | (91 | ) | (0.9 | ) | 3,186 | 5,271 | (2,085 | ) | (39.6 | ) | ||||||||||||||||||||
Operating income | 1,294 | 870 | 424 | 48.7 | ||||||||||||||||||||||||||||
Interest, dividend and other income | 186 | 205 | (19 | ) | (9.3 | ) | ||||||||||||||||||||||||||
Interest expense | - | 5 | (5 | ) | (100.0 | ) | ||||||||||||||||||||||||||
Earnings before taxes | 1,480 | 1,070 | 410 | 38.3 | ||||||||||||||||||||||||||||
Income taxes (benefit) provision | (152 | ) | 375 | (527 | ) | (140.5 | ) | |||||||||||||||||||||||||
Net Earnings | $ | 1,632 | $ | 695 | $ | 937 | 134.8 | |||||||||||||||||||||||||
Operating (Loss) income | (666 | ) | 894 | (1,560 | ) | (174.5 | ) | |||||||||||||||||||||||||
Interest, dividend and other income | 97 | 110 | (13 | ) | (11.8 | ) | ||||||||||||||||||||||||||
Change in value of marketable securities | 175 | 160 | 15 | 9.4 | ||||||||||||||||||||||||||||
(Loss) earnings before taxes | (394 | ) | 1,164 | (1,558 | ) | (133.8 | ) | |||||||||||||||||||||||||
Income taxes (benefit) provision | (92 | ) | 286 | (378 | ) | (132.2 | ) | |||||||||||||||||||||||||
Net (Loss) earnings | $ | (302 | ) | 878 | (1,180 | ) | (134.4 | ) |
Twenty-six weeks ended | ||||||||||||||||
December 27, 2020 and December 29, 2019 | ||||||||||||||||
Dollars in thousands | ||||||||||||||||
12/27/2020 | 12/29/2019 | $ Change | % Change | |||||||||||||
Operating Revenues: | ||||||||||||||||
Bowling and other | $ | 2,990 | $ | 7,920 | $ | (4,930 | ) | (62.2 | )% | |||||||
Food, beverage and merchandise sales | 1,166 | 3,369 | (2,203 | ) | (65.4 | ) | ||||||||||
Total Operating Revenues | 4,156 | 11,289 | (7,133 | ) | (63.2 | ) | ||||||||||
Operating Expenses: | ||||||||||||||||
Employee Compensation and benefits | 2,871 | 5,458 | (2,587 | ) | (47.4 | ) | ||||||||||
Cost of bowling and other services | 1,907 | 3,016 | (1,109 | ) | (36.8 | ) | ||||||||||
Cost of food, beverage and merchandise sales | 379 | 1,004 | (625 | ) | (62.3 | ) | ||||||||||
Depreciation and amortization | 496 | 471 | 25 | 5.3 | ||||||||||||
General and administrative | 349 | 607 | (258 | ) | (42.5 | ) | ||||||||||
Total Operating Expenses | 6,002 | 10,556 | (4,554 | ) | (43.1 | ) | ||||||||||
Operating (loss) income | (1,846 | ) | 733 | (2,579 | ) | (351.8 | ) | |||||||||
Interest, dividend and other income | 187 | 217 | (30 | ) | (13.8 | ) | ||||||||||
Change in value of marketable securities | 301 | 590 | (289 | ) | (49.0 | ) | ||||||||||
PPP loan interest expense | 5 | 5 | 100.0 | |||||||||||||
(Loss) earnings before taxes | ( 1,363 | ) | 1,540 | (2,903 | ) | (188.5 | ) | |||||||||
Income taxes (benefit) provision | (323 | ) | 377 | (700 | ) | (185.7 | ) | |||||||||
Net (Loss) earnings | $ | (1,040 | ) | $ | 1,163 | $ | (2,203 | ) | (189.4 | ) |
For the thirteen week and twenty-six week periods ended December 27, 2020 net loss was $301,782 or $.06 per share. and $1,039,505 or $.20 per share, respectively. Earnings were $1,436,734$877,675 or $.28$.17 per share and $1,163,000 or $.23 per share for the thirteen week period and $1,631,926 or $.32 per share for the twenty-six week period ended December 31, 2017. For29, 2019, respectively.
All seventeen of the thirteen-week and twenty-six periods ended January 1, 2017, net earnings were $695,906 and $695,186 or $.14 per share, respectively. EighteenCompany’s bowling centers were closed on March 18, 2020, by government order due to the COVID-19 pandemic. Only our three Florida centers were open the entire 13 week period ended September 27, 2020, having reopened in operationlate May 2020. Thirteen of the remaining locations opened in bothJuly 2020 and the last center reopened on August 31, 2020. All locations were mandated at 50% capacity or less during the first quarter. In the quarter ended December 27, 2020, Virginia and Maryland imposed tighter restrictions not only on capacity but on food and beverage service. While mild weather more conducive to outdoor activities may have been a factor, the pandemic was the primary negative factor on revenues. All comparisons in this discussion are significantly impacted by the ongoing government mandates and public perception of the current and prior year periods. In addition, bothstate of the current and prior year periods included the holiday week between Christmas and New Year’s Day.COVID-19 pandemic. The operating results for the fiscal 20182021 periods included in this report are not necessarily indicative of results to be expected for the year.
Operating Revenues
Total operating revenues increased $134,000decreased $3,645,000 or 59.1% to $6,369,000$2,520,000 in the quarter ended December 31, 201727, 2020 compared to an increasea decrease of $229,000$163,000 or 2.6% to $6,235,000$6,165,000 in the three-month periodquarter ended January 1, 2017.December 29, 2019. The current fiscal 2021 six-month period operating revenues were up $333,000down $7,133,000 or 63.2% versus an increasea decrease of $373,000$480,000 or 4.0% in the comparable six-month period a year ago. Bowling and other revenue increased $106,000decreased $2,488,000 in the quarter and increased $277,000decreased $4,930,000 year-to-date for the periods ended December 31, 201727, 2020 versus an increasea decrease of $213,000$99,000 in the quarter and a decrease of $316,000$323,000 for the six-month period ended January 1, 2017.December 29, 2019.
Food, beverage and merchandise sales increased $28,000 decreased $1,157,000 or 1.5%62.4% in the current year quarter and were up $56,000down $2,203,000 or 1.7%65.4% in the six-month period. Cost of sales decreased 0.5%58.6% in the current fiscal three month period and 1.1%decreased 36.8% for the six month period ended December 31, 2017.27, 2020.
Operating Expenses
Operating expenses were down $2,000$2,085,000 or 39.6% in the current three month period and down $91,000decreased $4,554,000 or 43.1% in six-month period versus an increase of $10,000 or 0.2% and an increase of $94,000 or less than 1%, respectively, versus decreases of $44,000 or 0.8% and $183,000 or 1.7% in the three and six month periods respectively, last year.year, respectively. Employee compensation and benefits for the current three and six month periods were down $17,000$1,172,000 or 43.0% and $14,000$2,587,000 or less than 1%47.4%, respectively, inprimarily the periods ended December 31, 2017. Group health insurance costs decreased 7.3% as a result of changesthe reduced hours of operation due to restrictions in plan offerings and lower participation.capacity caused by COVID. Included in this category of expense are contributions to our two benefit plans, both of which are defined contribution plans. Contributions can only be made from profits. There is no additional obligation beyond the current year contribution.
Cost of bowling and other services increased $36,000 decreased $1,109,000 or 2.4%36.8% and $34,000decreased $28,000 or 1.2%0.9% in the six-month periods ended December 31, 2017,27, 2020 and December 29, 2019, respectively. In the twenty-six weeks ended December 31, 2017,27, 2020, maintenance and repair costs, increased $47,000 including $18,000 in roof repairs at several locations, declined $179,000 or 12.1%, primarily42.1%. In the result of interior upgrades to two locations. comparable period ended December 29, 2019, maintenance and repair costs decreased $22,000 or 5.0%.
Advertising costs during the current year twenty-six week period ended December 31 2017,27, 2020 were up $3,000down $122,000 or 1.6%67.1%. For the fiscal six month period ended December 31, 201727, 2020 utility costs were up 0.9%declined $216,000 or 30.8%. Supplies and services expenses were down $34,000$207,000 or 8.7%56.6% in the current year six-month period primarily the result of a decrease in the cost of amusement game supplies as a result of outsourcing our amusement game business.period.
Insurance expense excluding health insurance increased 5%decreased 2.8% in the current year-to-date period versus a decrease of 1% in last year’s comparable period.however spring renewal premiums are expected to increase over the prior year.
Depreciation and amortization expense was down 16.5%increased $25,000 or 5.3% in the current six-month period and down 15.9%versus a decrease of 1.7% in the prior year six-month period.
As a result of the above, the first six-month period of fiscal 20182021 resulted in operating incomeloss of $1,294,000$1,040,000 compared to operating income of $869,900$733,000 in the prior year comparable six-month period.period of fiscal 2020.
Interest, Dividend and Other Income
Interest,, dividend and other income decreased $19,000$30,000 in the fiscal 20182021 six-month period and decreased $36,000increased $20,000 in the comparable 20172020 year-to-date period, respectively. The current year decrease relates primarily to lower investment balances.
Income Taxes
On The Tax Act of December 22, 2017 the U.S. government enacted comprehensive tax legislation, the Tax Cuts and Jobs Act (“Tax Act”), which reduced the federal corporate tax rate from 35%34% to 21%. The provisions calltax benefits in fiscal 2021 and the taxes for a blended tax rate forthe fiscal year companies resulting in a reduction of2020 periods reflect the effective tax rate from 34.4% last year to approximately 30.5% in the current year. In addition the Tax Act required an adjustment to the Company’s deferred tax account in this second quarter resulting in credits to income tax expense for both the current year quarter and six month period.reduced rate.
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’sCompany’s balance sheet under the captions of Short-term investments and Marketable investment 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 timeincome or loss in the Company must assess whether write-downs are necessary for other than temporary declines in value.current period.
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 havehas concluded that the Company’s disclosure controls and procedures are effective based on their evaluation of such controls and procedures as of December 31, 2017.27, 2020. 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 31, 2017,27, 2020, 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 5. Other Information
Item 5.02(e) | Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers. |
On February 4, 2021, the Board of Directors of the Company and Ms. Cheryl Dragoo agreed to amend her amended and restated employment agreement to extend the term until the end of the Company’s 2022 fiscal year on June 27, 2022.
The forgoing summary does not purport to be complete and is qualified in its entirety by the Amendment No. 1 to the Employment Agreement, a copy of which is filed as Exhibit 10.1 to this Quarterly Report on Form 10-Q.
Item 9.01(d) Financial Statements and Exhibits.
10.1 Amendment No. 1 to Amended Employment Agreement between the Company and Cheryl A. Dragoo.
Item 6. Exhibits.
10.1 | Amendment No. 1 to Amended Employment Agreement between the Company and Cheryl A. Dragoo (filed herewith) |
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101 | Interactive data files for the thirteen and twenty six weeks ended December Reporting Language |
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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Cheryl A. Dragoo, |
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