Bowl America (BWL.A) 10-Q 2015 Q2 Quarterly report

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:DECEMBER28, 2014

COMMISSION FILE NUMBER:001-7829

BOWL AMERICA INCORPORATED

(Exact name of registrant as specified in its charter)

MARYLAND	54-0646173
(State of Incorporation)	(I.R.S.Employer Identification No)

6446 Edsall Road, Alexandria, Virginia  22312

(Address of principal executive offices)(Zip Code)

(703) 941-6300

(Registrant's telephone number including area code)

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).Yes X No __

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or asmaller reporting company. See the definitions of “accelerated filer,” “large accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large Accelerated Filer __    Accelerated Filer __    Non-Accelerated Filer __    Smaller Reporting Company X

Indicate by check mark whether the registrant is a shell company (as defined by Rule 12b-2 of the Exchange Act)   Yes __    NoX

Indicate the number of shares outstanding of each of the issuer'sclasses of common stock, as of the latest practicable date:

	Shares Outstanding at
	January 26, 2015
Class A Common Stock,
$.10 par value	3,746,454
Class B Common Stock,
$.10 par value	1,414,517

PART 1. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

  BOWL AMERICA INCORPORATED AND SUBSIDIARIES

  CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS

  (Unaudited)

	Thirteen Weeks Ended				Twenty-six Weeks Ended
	December 28,		December 29,		December 28,			December 29,
	2014		2013		2014			2013
Operating Revenues:
Bowling and other	$	4,203,410	$	4,216,078	$	7,504,753		$	7,611,304
Food, beverage and merchandise sales		1,766,628		1,750,768		3,094,629			3,105,816
Total Operating Revenues		5,970,038		5,966,846		10,599,382			10,717,120
Operating Expenses:
Employee compensation and benefits		2,742,256		2,768,185		5,495,483			5,581,908
Cost of bowling and other services		1,478,048		1,575,977		3,006,754			3,134,164
Cost of food, beverage and merchandise sales		553,436		542,714		988,626			979,515
Depreciation and amortization		330,813		366,014		656,205			721,306
General and administrative		235,073		239,280		452,426			445,557
Total Operating Expenses		5,339,626		5,492,170		10,599,494			10,862,450
Operating Income (loss)		630,412		474,676		(112	)		(145,330	)
Interest, dividend and other income		110,991		90,461		257,298			229,230
Earnings from continuing operations beforeprovision for income taxes		741,403		565,137		257,186			83,900
Provision for income taxes		259,500		197,800		90,000			29,400
Net Earnings from continuing operations	$	481,903	$	367,337	$	167,186		$	54,500
Income (loss) from discontinued operations, net of tax	$	-	$	3,604	$	-		$	(1,949	)
Net Earnings	$	481,903	$	370,941	$	167,186		$	52,551
Earnings per share-basic & diluted
Continuing operations	$	.09	$	.07	$	.03		$	.01
Discontinued operations	$	-	$	.00	$	-		$	.00
NET EARNINGS PER SHARE	$	.09	$	.07	$	.03		$	.01
Weighted average shares outstanding		5,160,971		5,160,971		5,160,971			5,160,971
Dividends paid	$	877,365	$	851,561	$	1,754,730		$	1,703,122
Per share, dividends paid, Class A	$	.17	$	.165	$	.34		$	.33
Per share, dividends paid, Class B	$	.17	$	.165	$	.34		$	.33

The operating results for the thirteen (13) and twenty-six (26) week periods ended December 28, 2014 are not necessarily indicative of results to be expected for the year.  See notes to condensed consolidated financial statements.

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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 28,			December 29,		December 28,			December 29,
	2014			2013		2014			2013
Net Earnings	$	481,903		$	370,941	$	167,186		$	52,551
Other comprehensive earnings- net of tax
Unrealized (loss) gain on available-for-sale securities net of tax (benefit) of$(74,506) and $13,416 for 13 weeks,and ($100,296) and ($45,338) for 26 weeks		(121,049	)		21,787		(162,948	)		(73,671	)
Comprehensive earnings (loss)	$	360,854		$	392,728	$	4,238		$	(21,120	)

The operating results for the thirteen (13) and twenty-six (26) week periods ended December 28, 2014 are not necessarily indicative of results to be expected for the year.

See notes to condensed consolidated financial statements.

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BOWL AMERICA INCORPORATED AND SUBSIDIARIES

Condensed  Consolidated Balance Sheets

(Unaudited)

	As of
	December 28,		June 29,
	2014		2014
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	1,960,794	$	842,114
Short-term investments		133,572		1,453,326
Inventories		580,988		520,355
Prepaid expenses and other		96,621		610,416
Income taxes refundable		314,856		312,856
TOTAL CURRENT ASSETS		3,086,831		3,739,067
LAND, BUILDINGS & EQUIPMENT
Net of accumulated depreciation of$39,983,909 and $39,358,295		20,635,713		20,887,127
OTHER ASSETS:
Marketable securities		8,766,664		8,979,499
Cash surrender value-life insurance		677,922		677,922
Other		80,965		80,165
TOTAL OTHER ASSETS		9,525,551		9,737,586
TOTAL ASSETS	$	33,248,095	$	34,363,780
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable	$	529,646	$	681,509
Accrued expenses		641,585		1,091,098
Dividends payable		877,365		877,365
Other current liabilities		1,644,547		308,068
Current deferred income taxes		24,705		24,705
TOTAL CURRENT LIABILITIES		3,717,848		2,982,745
LONG-TERM DEFERRED COMPENSATION		34,088		34,088
NONCURRENT DEFERRED INCOME TAXES		2,267,920		2,368,216
TOTAL LIABILITIES		6,019,856		5,385,049
COMMITMENTS AND CONTINGENCIES (Note 3)
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
Class B issued and outstanding 1,414,517		141,452		141,452
Additional paid-in capital		7,849,814		7,849,814
Accumulated other comprehensive earnings-
Unrealized gain on available-for-salesecurities, net of tax		2,429,655		2,592,603
Retained earnings		16,432,673		18,020,217
TOTAL STOCKHOLDERS'EQUITY		27,228,239		28,978,731
TOTAL LIABILITIES AND STOCKHOLDERS'EQUITY	$	33,248,095	$	34,363,780

See notes to condensed consolidated financial statements.

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BOWL AMERICA INCORPORATED AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS  OF CASH FLOWS

(Unaudited)

	Twenty-six Weeks Ended
	December 28,			December 29,
	2014			2013
Cash Flows From Operating Activities
Net earnings	$	167,186		$	52,551
Adjustments to reconcile net earningsto net cash provided byoperating activities:
Depreciation and amortization		656,205			721,306
Changes in assets and liabilities
Increase in inventories		(60,633	)		(73,525	)
Decrease in prepaid & other		513,795			287,698
Increase in income taxes refundable		(2,000	)		(84,700	)
(Increase) decrease in other long-term assets		(800	)		3,800
Decrease in accounts payable		(151,863	)		(205,046	)
Decrease in accrued expenses		(449,513	)		(303,403	)
Decrease in income taxes payable		-			(151,227	)
Increase in other current liabilities		1,336,479			1,239,710
Net cash provided byoperating activities		2,008,856			1,487,164
Cash Flows From Investing Activities
Expenditures for land, building and equip		(404,791	)		(117,231	)
Net sales & maturities (purchases)of short-termInvestments		1,319,754			(500,233	)
Purchases of marketable securities		(50,409	)		(293,978	)
Net cash provided by (used in)Investing activities		864,554			(911,442	)
Cash Flows From Financing Activities
Payment of cash dividends		(1,754,730	)		(1,703,122	)
Net cash used in financing activities		(1,754,730	)		(1,703,122	)
NetIncrease (decrease)in Cash and Equivalents		1,118,680			(1,127,400	)
Cash and Equivalents, Beginning of period		842,114			3,437,780
Cash and Equivalents, End of period	$	1,960,794		$	2,310,380
Supplemental Disclosures of Cash Flow Information
Cash Paid During the Period for:
Income taxes	$	92,000		$	264,227

See notes to condensed consolidated financial information.

5

BOWL AMERICA INCORPORATED AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the Thirteen and Twenty-six Weeks Ended

December 28, 2014

(Unaudited)

1.  Basis for Presentation

The accompanying unaudited condensed consolidated financial statements of Bowl America Incorporated and subsidiaries (the "Company"), have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission.  The condensed consolidated balance sheet as of June 29, 2014 has been derived from the Company's audited financial statements.  Certain information and note disclosures normally included in the annual financial statements, prepared in accordance with accounting principles generally accepted in the United States of America, have been condensed or omitted pursuant to those rules and regulations, although the Company believes that the disclosures made are adequate to make the information presented not misleading.

In the opinion of management, the accompanying unaudited condensed consolidated financial statements reflect all adjustments and reclassifications (all of which are of a normal, recurring nature) that are necessary for the fair presentation of the Company’s financial position and results of operations for the periods presented.  It is suggested that these condensed consolidated financial statements be read in conjunction with the consolidated financial statements and notes thereto included in the Company's annual report on Form 10-K for the year ended June 29, 2014.

2.  Investments

     The Company’s investments are categorized as available-for-sale. Short-term investments consist of certificates of deposits with maturities of generally three months to one year. Equity securities consist primarily of telecommunications stocks. Mutual funds consist of federal agency mortgage backed securities (Ginnie Mae). The fair value of the Company’s investments at December 28, 2014 and June 29, 2014 were as follows:

December 28, 2014					Unrealized Gain/
Description	Fair Value		Cost basis		(loss)
Short-term investments	$	133,572	$	133,572	$	-
Equity securities	$	5,087,022	$	1,285,759	$	3,801,263
Mutual funds	$	3,679,642	$	3,555,796	$	123,846

June29, 2014					Unrealized Gain
Description	Fair Value		Cost basis		(loss)
Short-term investments	$	1,453,326	$	1,453,326	$	-
Equity securities	$	5,373,986	$	1,285,759	$	4,088,227
Mutual funds	$	3,605,513	$	3,505,388	$	100,125

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

December 28, 2014	Quoted Price for Identical Assets		Significant Other Observable Inputs		Significant Unobservable Inputs
Description	(Level 1)		(Level 2)		(Level 3)
Certificates of deposits	$	-	$	133,572	$	-
Equity securities		5,087,022		-		-
Mutual funds		3,679,642		-		-
Total	$	8,766,664	$	133,572	$	-

June 29, 2014	Quoted Price for Identical Assets		Significant Other Observable Inputs		Significant Unobservable Inputs
Description	(Level 1)		(Level 2)		(Level 3)
Certificates of deposits	$	-	$	1,453,326	$	-
Equity securities		5,373,986		-		-
Mutual funds		3,605,513		-		-
Total	$	8,979,499	$	1,453,326	$	-

The stocks included in the equity securities portfolio as of December 28, 2014 were:

82,112	shares of AT&T
2,520	shares of Manulife
412	shares of DexMedia
774	shares of NCR
774	shares of Teradata
6,471	shares of Vodafone
4,398	shares of CenturyLink
4,508	shares of Frontier Communications
40,000	shares of Sprint
31,904	shares of Verizon
4,079	shares of Windstream

      The Mutual fund included in the table above is Vanguard GNMA Admiral Shares #536 fund. The fair value of certificates of deposits is estimated using present value techniques and comparing the values derived from those techniques to certificates with similar values.

3. Commitments and Contingencies

The Company’s purchase commitments at December 28, 2014 are for materials, supplies, services and equipment as part of the normal course of business.

4.  Employee benefit plans

The Company has two defined contribution plans with Company contributions determined by the Board of Directors.  The Company has no defined benefit plan or other postretirement plan.

5. New Accounting Standards

        In April 2014, the Financial Accounting Standards Board (“FASB”) issued accounting guidance amending the requirements for reporting discontinued operations. This guidance limits the requirement for discontinued operations treatmentto the disposal of a component of an entity, or a group of components of an entity, that represents a strategic shift that has (or will have) a major effect on an entity’s operations and financial results.  The Company has adopted the guidance effective for interim periods beginning on or after December 15, 2014.

7

        In May 2014, the FASB issued a new standard related to revenue recognition. Under the new standard, recognition of revenue occurs when a customer obtains control of promised goods or services in an amount that reflects the consideration which the entity expects to receive in exchange for those goods or services. In addition, the standard requires disclosure of the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers. The new standard will be effective for the Company beginning July 1, 2017 and early adoption is not permitted. We are currently evaluating the impact this standard will have on our consolidated financial statements.

6. Subsequent Events

      The Company has evaluated subsequent events through the time of filing these financial statements with the Securities and Exchange Commission on February 10, 2015, and has determined that no material subsequent events have occurred.

7.  Reclassifications

Certain previous year amounts have been reclassified to conform with current year presentation.

8

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 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 and to provide a secure source of income.  For these reasons, the Company prefers a conservative approach to investing rather than taking greater risk for possible rapid growth.  The Company balances market volatility by using both fixed income and equity investments in managing its reserve funds. Any equity security is subject to price fluctuation, however, the stocks held by the Company have relatively low volatility. The Company has long been invested in a Government National Mortgage Association (“Ginnie Mae”) fund and domestically domiciled stocks with the perceived potential of appreciation, primarily telecommunications stocks. The Company considers that this diversity also provides a measure of safety of principal.

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 that company demutualized. The Company purchased a total of 10,000 shares of Verizon during previous periods at a cost of approximately $430,000 and 3,120 shares of Verizon were received as a special dividend from Vodafone. While not all stocks in the portfolio are domestic American companies any longer, since the original purchases at an approximate cost of $630,000, we have received approximately $967,000 from mergers and sales, and over $3,900,000 in dividends, the majority of which are tax favored in the form of exclusion from federal taxable income. These marketable securities are carried at their fair value on the last day of each reporting period. The fair value of the securities on December 28, 2014 was approximately $5,100,000.

The Company’s original investment in the Vanguard GNMA bond fund began in 1988 with purchases of shares in the fund totaling approximately $1,400,000. Except for a one time sale of approximately $666,000 in 1991, all earnings have been reinvested. The fund is carried at fair value on the last day of the reporting period. At December 28, 2014, the value was approximately $3,680,000.

Short-term investments consisting mainly of Certificates of Deposits, and cash and cash equivalents totaled $2,094,000 at the end of the fiscal second quarter of 2015 compared to $2,295,000 at June 29, 2014.

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 the six-month period ended December 28, 2014, the Company expended approximately $405,000 for the purchase of building, entertainment and restaurant equipment. The Company has made no application for 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.

9

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 28, 2014, league deposits of approximately $1,451,000 were included in the current liabilities category.

Cash flow provided by operating activities in the twenty-six weeks ended December 28, 2014 was $2,009,000 which, along with cash on hand and short-term investments, was sufficient to meet day-to-day cash needs and pay dividends. Cash dividends of approximately $877,000, or $.17 per share, were paid to shareholders during the quarter ended December 28, 2014, and the six months total was approximately $1,754,000 or $.34 per share.   In December 2014 the Company declared a regular quarterly dividend of $.17 per share, payable February 11, 2015 to shareholders of record on January 9, 2015. 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 whims.  Generally, promotional and open play bowling which depends on the public’s discretionary budget dollars and their choices, accounts for more than half of our business. An unstable economy can lead many to participate inentertainment that is close to home and relatively inexpensive.  Bowling has those advantages.  However the longer the economy remains unstable, the less willing people are to spend on other than necessities.  Weather is also a factor,especially for casual bowlers.  While extreme heat or rainy weather prompts people to look for indoor activities, 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.  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 set forth the items in our consolidated summary of operations for the fiscal quarter and year-to-date periods ended December 28, 2014, and December 29, 2013, and the dollar and percentage changes therein.

	Thirteen weeks ended
	December 28, 2014 and December 29, 2013
	Dollars in thousands
	2014			2013		Change			% Change
Operating Revenues:
Bowling and other	$	4,203		$	4,216	$	(13	)		(0.3	)
Food, beverage and merchandise sales		1,767			1,751		16			0.9
Total Operating Revenue		5,970	��		5,967		3			0.1
Operating Expenses:
Employee Compensation and benefits		2,742			2,768		(26	)		(0.9	)
Cost of bowling and other services		1,478			1,576		(98	)		(6.2	)
Cost of food, beverage and merchandise sales		554			543		11			2.0
Depreciation and amortization		331			366		(35	)		(9.6	)
General and administrative		235			239		(4	)		(1.7	)
Total Operating Expenses		5,340			5,492		(152	)		(2.8	)
Operating Income from continuing operations		630			475		155			32.6
Interest, dividend and other income		111			90		21			24.3
Earnings from continuing operations before taxes		741			565		176			31.2
Income taxes		259			198		61			30.8
Income from continuing operations		482			367		115			31.3
Income (loss) from discontinued operations, net of tax		-			4		(4	)		(100.0	)
Net Earnings	$	482		$	371	$	111			29.9

10

	Twenty-six weeks ended
	December 28, 2014 and December 29, 2013
	Dollars in thousands
	2014		2013			Change			% Change
Operating Revenues:
Bowling and other	$	7,505	$	7,611		$	(106	)		(1.4	)
Food, beverage and merchandise sales		3,094		3,106			(12	)		(0.4	)
Total Operating Revenues		10,599		10,717			(118	)		(1.1	)
Operating Expenses:
Employee Compensation and benefits		5,495		5,582			(87	)		(1.6	)
Cost of bowling and other services		3,007		3,134			(127	)		(4.1	)
Cost of food, beverage and merchandise sales		989		979			10			1.0
Depreciation and amortization		656		721			(65	)		(9.0	)
General and administrative		452		446			6			1.3
Total Operating Expenses		10,599		10,862			(263	)		(2.4	)
Operating (Loss) income from continuing operations		0		(145	)		145			100.0
Interest, dividend and other income		257		229			28			12.2
Earnings from continuing operations before taxes		257		84			173			206.0
Income taxes		90		29			61			210.3
Income from continuing operations		167		55			112			203.6
Loss from discontinued operations, net of tax		-		(2	)		2			100.0
Net Earnings	$	167	$	53		$	114			215.1

Earnings were $481,903 or $.09 per share for the thirteen week period and $167,186 or $.03 per share for the twenty-six week period ended December 28, 2014. Including discontinued operations, for the thirteen-week and twenty-six periods ended December 29, 2013, net earnings were $370,941or $.07 per share and $52,551 or $.01 per share, respectively. In the prior fiscal year snow storms in December 2013 caused postponements of league bowling to later quarters of that fiscal year. Management believes that the continuing uncertainty of an economic recovery and the consequences of federal tax and spending provisions are influencing the public’s view of discretionary spending. The operating results for fiscal 2015 periods included in this report are not necessarily indicative of results to be expected for the year.

The information included in Operating Revenues and Operating Expenses below relate to the eighteen centers that were in operation for both the fiscal periods ended December 28, 2014 and the prior year periods ended December 29, 2013.

 Operating Revenues

Total operating revenues increased $3,000 to $5,970,000 in the most recent quarter compared to a decrease of $163,000 to $5,967,000 in the three-month period ended December 29, 2013.  For the current fiscal six-month period operating revenues were down $118,000 versus a decrease of $523,000 in the comparable six-month period a year ago.  Bowling and other revenue declined $13,000 in the quarter and $106,000 year-to-date for the periods ended December 28, 2014. Prior year comparable three and six month period revenues showed decreases of $104,000 and $327,000, respectively.

Food, beverage and merchandise sales increased $16,000 or 1% in the current year quarter and were down $12,000 in the six-month period.  Cost of sales increased 2% in the three month and 1% for the six month period ended December 28, 2014.

 Operating Expenses

Operating expenses were down $152,000 or 3% and $263,000 or 2% in the current three and six-month periods, respectively, versus decreases of  $32,000 or less than 1% and $245,000 or 2% each in the three and six month periods, respectively, last year.  Employee compensation and benefits for the three and six month periods were down $26,000 or 1% and $87,000 or 2%, respectively, in the periods ended December 28, 2014, partially as a result of lower state unemployment tax rates. Group health insurance costs decreased slightly as a result of lower premiums and fewer participants. In the prior year comparable periods employee compensation and benefits expenses were down $97,000 and $186,000 or 3%, respectively.

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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 $127,000 or 4% and increased $25,000 or 1% in the six-month periods ended December 28, 2014 and December 29, 2013, respectively. In the twenty-six weeks ended December 29, 2013, maintenance and repair costs were up $13,000 or 3% in part due to sewer repairs at one location. Advertising costs during the current year twenty-six week period ended December 28, 2014, were down $92,000. For the six month period ended December 28, 2014 utility costs were down $25,000 or 3%. In the period ended December 29, 2013 utility costs were up $14,000 or 2% due primarily to higher heating costs as the prior year period was colder than the current year. Supplies and services expenses were down $11,000 or 3% in the current year six-month period and were flat in the six-month period in the prior year. The timing of purchases and lower costs of some supplies were the primary reasons for the decrease.

Insurance expense excluding health insurance decreased 1% in the current year-to-date period versus a decrease of 6% in last year’s comparable period.

Depreciation and amortization expense was down 9% in the current six-month period and 7% in the prior year six-month period.

As a result of the above, the current six-month period of fiscal 2015 showed operating income of $167,000 compared to $55,000 from continuing operations in the prior year comparable six-month period.

Interest,Dividend and Other Income

Interest, dividend and other income increased $28,000 in the fiscal 2015 six-month period and decreased $21,000 in the comparable 2014 year-to-date period, respectively. The current year increase relates primarily to ancillary income.

CRITICAL ACCOUNTING POLICIES

Management has identified accounting for marketable investment securities as a critical accounting policy due to the significance of the amounts included in the Company’s balance sheet under the captions of Short-term investments and Marketable securities.  The Company exercises judgment in determining the classification of its investment securities as available-for-sale and in determining their fair value.  The Company records these investments at their fair value with the unrealized gain or loss recorded in accumulated other comprehensive earnings, a component of stockholders’ equity, net of deferred taxes.  Additionally, from time to time the Company must assess whether write-downs are necessary for other than temporary declines in value.

Management has identified accounting for the impairment of long-lived assets as a critical accounting policy due to the significance of the amounts included in the Company’s balance sheet under the caption of Land, Buildings and Equipment.  The Company reviews long-lived assets whenever events or changes indicate that the carrying amount of an asset may not be recoverable.  In making such evaluations, the Company compares the expected future cash flows to the carrying amount of the assets.  An impairment loss equal to the difference between the assets’ fair value and carrying value is recognized when the estimated future cash flows are less than the carrying amount.

ITEM 4. CONTROLS AND PROCEDURES.

The Company’s Chief Executive Officer and Chief Financial Officer have concluded that the Company’s disclosure controls and procedures are effective based on their evaluation of such controls and procedures as of December 28, 2014. There was no change in the Company’s internal control over financial reporting identified in connection with the evaluation that occurred during the quarter ended December 28, 2014, that materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

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BOWL AMERICA INCORPORATED AND SUBSIDIARIES

S.E.C. FORM 10-Q

PART II - OTHER INFORMATION

Item 6.  Exhibits.

20	Press release issued February 10, 2015 (furnished herewith)
31.1	Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act filed herewith
31.2	Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act filed herewith
32	Written Statement of the Chief Executive Officer and Chief Financial Officer Pursuant to 18 U.S.C. 1350 filed herewith
101	Interactive data files for the thirteen and twenty six weeks ended December 28, 2014 in eXtensible BusinessReporting Language

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Pursuant to the requirements of the Securities Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	Bowl America Incorporated
	(Registrant)
Date: February 10, 2015	By:	/s/ Leslie H Goldberg
		Leslie H. Goldberg, President
Date: February 10, 2015	By:	/s/ Cheryl A Dragoo
		Cheryl A. Dragoo, Controller

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