Bowl America (BWL.A) 10-Q 2016 Q3 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:March27, 2016

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's

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

	Shares Outstanding at
	May 7, 2016
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				Thirty-nine Weeks Ended
	March 27, 2016		March 29, 2015		March 27, 2016		March 29, 2015
Operating Revenues:
Bowling and other	$	5,236,678	$	5,307,071	$	12,876,763	$	12,811,824
Food, beverage and merchandise sales		2,184,589		2,209,356		5,470,696		5,303,985
Total Operating Revenues		7,421,267		7,516,427		18,347,459		18,115,809
Operating Expenses:
Employee compensation and benefits		2,764,045		2,844,728		8,247,146		8,340,211
Cost of bowling and other services		1,558,273		1,658,483		4,516,368		4,665,237
Cost of food, beverage and merchandise sales		607,830		612,349		1,640,210		1,600,975
Depreciation and amortization		334,572		330,813		1,009,354		987,018
General and administrative		300,079		234,963		763,448		687,389
Total Operating Expenses		5,564,799		5,681,336		16,176,526		16,280,830
Operating Income		1,856,468		1,835,091		2,170,933		1,834,979
Interest, dividend and other income		99,620		117,600		340,280		374,898
Earnings before provision for income taxes		1,956,088		1,952,691		2,511,213		2,209,877
Provision for income taxes		684,600		683,400		878,900		773,400
Net Earnings	$	1,271,488	$	1,269,291	$	1,632,313	$	1,436,477
Earnings per share-basic & diluted	$	.25	$	.25	$	.32	$	.28
NET EARNINGS PER SHARE	$	.25	$	.25	$	.32	$	.28
Weighted average shares outstanding		5,160,971		5,160,971		5,160,971		5,160,971
Dividends paid	$	877,365	$	877,365	$	2,632,095	$	2,632,095
Per share, dividends paid, Class A	$	.17	$	.17	$	.51	$	.51
Per share, dividends paid, Class B	$	.17	$	.17	$	.51	$	.51

The operating results for the thirteen (13) and thirty-nine (39) week periods ended March 27, 2016 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					Thirty-nine Weeks Ended
	March 27, 2016		March 29, 2015			March 27, 2016			March 29, 2015
Net Earnings	$	1,271,488	$	1,269,291		$	1,632,313		$	1,436,477
Other comprehensive earnings- net of tax
Unrealized gain (loss) on available- for-sale securities net of tax (benefit) of $223,370 and ($41,494) for 13 weeks, and $132,025 and ($141,790) for 39 weeks		362,900		(67,414	)		214,494			(230,362	)
Reclassification adjustment for gain included in Net Income, net of tax of $9,258		-		-			(15,041	)		-
Comprehensive earnings	$	1,634,388	$	1,201,877		$	1,831,766		$	1,206,115

The operating results for the thirteen (13) and thirty-nine (39) week periods ended March 27, 2016 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
	March 27, 2016		June 28, 2015
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	4,031,670	$	778,367
Short-term investments		133,795		133,729
Inventories		485,559		552,889
Prepaid expenses and other		318,284		488,212
Income taxes refundable		-		51,309
TOTAL CURRENT ASSETS		4,969,308		2,004,506
LAND, BUILDINGS & EQUIPMENT
Net of accumulated depreciation of $41,160,341 and $40,237,794		19,642,686		20,417,454
OTHER ASSETS:
Marketable securities		8,267,702		8,866,392
Cash surrender value-life insurance		707,592		707,592
Other		66,465		66,465
TOTAL OTHER ASSETS		9,041,759		9,640,449
TOTAL ASSETS	$	33,653,753	$	32,062,409
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable	$	869,687	$	709,453
Accrued expenses		817,970		1,001,754
Dividends payable		877,365		877,365
Other current liabilities		2,386,724		290,833
Income taxes payable		196,565		-
Current deferred income taxes		9,113		9,113
TOTAL CURRENT LIABILITIES		5,157,424		2,888,518
LONG-TERM DEFERRED COMPENSATION		28,897		28,897
NONCURRENT DEFERRED INCOME TAXES		2,293,682		2,170,915
TOTAL LIABILITIES		7,480,003		5,088,330
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		7,854,108		7,854,108
Accumulated other comprehensive earnings-
Unrealized gain on available-for-sale
securities, net of tax		2,652,341		2,452,888
Retained earnings		15,151,204		16,150,986
TOTAL STOCKHOLDERS'EQUITY		26,173,750		26,974,079
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	33,653,753	$	32,062,409

See notes to condensed consolidated financial statements.

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BOWL AMERICA INCORPORATED AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS  OF CASH FLOWS

(Unaudited)

	March 27, 2016			March 29, 2015
Cash Flows From Operating Activities
Net earnings	$	1,632,313		$	1,436,477
Adjustments to reconcile net earnings to net cash provided by operating activities
Depreciation and amortization		1,009,354			987,018
Gain on sale of available-for-sale securities		(24,299	)		-
Changes in assets and liabilities
Decrease in inventories		67,330			25,876
Decrease in prepaid & other		169,928			331,909
Decrease in income taxes refundable		51,309			298,577
Increase in other long-term assets		-			(1,300	)
Increase (decrease) in accounts payable		160,234			(83,474	)
Decrease in accrued expenses		(183,784	)		(274,603	)
Increase in income taxes payable		196,565			-
Increase in other current liabilities		2,095,891			2,066,827
Net cash provided by operating activities		5,174,841			4,787,307
Cash Flows From Investing Activities
Expenditures for land, building and equipment		(234,586	)		(549,747	)
Net sales & maturities (purchases) of short-term investments		(66	)		1,319,636
Proceeds from sale of available-for-sale securities		1,000,000			-
Purchases of marketable securities		(54,791	)		(91,782	)
Net cash provided by investing activities		710,557			678,107
Cash Flows From Financing Activities
Payment of cash dividends		(2,632,095	)		(2,632,095	)
Net cash used in financing activities		(2,632,095	)		(2,632,095	)
Netincreasein Cash and Equivalents		3,253,303			2,833,319
Cash and Equivalents, Beginning of period		778,367			842,114
Cash and Equivalents, End of period	$	4,031,670		$	3,675,433
Supplemental Disclosures of Cash Flow Information
Cash Paid During the Period for:
Income taxes	$	606,026		$	474,822

See notes to condensed consolidated financial information.

5

BOWL AMERICA INCORPORATED AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the Thirteen and Thirty-nine Weeks Ended

March 27, 2016

(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 28, 2015 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-K for the year ended June 28, 2015.

2.  Investments

     The Company’s investments are categorized as available-for-sale. Short-term investments consist of certificates of deposits with maturities of generally three months to one year. Equity securities consist primarily of telecommunications stocks. Mutual funds consist of federal agency mortgage backed securities (Ginnie Mae). The fair value of the Company’s investments at March 27, 2016 and June 28, 2015 were as follows: 

March 27, 2016Description	Fair Value		Cost basis		Unrealized Gain
Short-term investments	$	133,795	$	133,795	$	-
Equity securities	$	5,495,517	$	1,285,759	$	4,209,758
Mutual funds	$	2,772,185	$	2,697,081	$	75,104
June28, 2015Description	Fair Value		Cost basis		Unrealized Gain
Short-term investments	$	133,729	$	133,729	$	-
Equity securities	$	5,190,387	$	1,285,759	$	3,904,628
Mutual funds	$	3,676,005	$	3,617,991	$	58,014

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

March 27, 2016Description	Quoted Price for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Certificates of deposits	$	-	$	133,795	$	-
Equity securities		5,495,517		-		-
Mutual funds		2,772,185		-		-
Total	$	8,267,702	$	133,795	$	-
June 28, 2015Description	Quoted Price for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Certificates of deposits	$	-	$	133,729	$	-
Equity securities		5,190,387		-		-
Mutual funds		3,676,005		-		-
Total	$	8,866,392	$	133,729	$	-

The common stocks included in the equity securities portfolio as of March 27, 2016 were:

AT&Tshares	82,112
Manulifeshares	2,520
DexMediashares	412
NCRshares	774
Teradatashares	774
Vodafoneshares	6,471
CenturyLinkshares	4,398
Frontier Communications shares	4,508
Sprintshares	40,000
Verizonshares	31,904
Windstreamshares	679
CSAL shares	815

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

3. Commitments and Contingencies

The Company’s purchase commitments at March 27, 2016 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 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 forthe 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.

7

       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.This amendment is effective for the Company’s fiscal year ending June 2020 with early adoption permitted. We are in the process of evaluating the impact the adoption of this guidance will have on our consolidated financial statements and related disclosures

6. Subsequent Events

      The Company has evaluated subsequent events through the time of filing these financial statements with the Securities and Exchange Commission on May 10, 2016, 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. 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 $4,151,000 in dividends, the majority of which receive favorable tax treatment in the form of a dividends received deduction from federal taxable income. The dividends received deduction continues into this fiscal year. These equity securities are carried at their fair value on the last day of each reporting period. The fair value of the securities on March 27, 2016 was approximately $5,496,000.

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. In August 2015, $1,000,000 of this fund was redeemed to meet the August 2015 dividend payment. The fund is carried at fair value on the last day of the reporting period. At March 27, 2016, the fair value was approximately $2,772,000.

Short-term investments consisting mainly of Certificates of Deposits, and cash and cash equivalents totaled $4,165,000 at the end of the fiscal third quarter of 2016 compared to $912,000 at June 28, 2015.

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 nine-month period ended March 27, 2016, the Company expended approximately $235,000 for the purchase of building, entertainment and restaurant equipment. The Company has no long-term debt and 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.

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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 March 27, 2016, league deposits of approximately $2,065,000 were included in the current liabilities category.

Cash flow provided by operating activities in the thirty nine weeks ended March 27, 2016 was $5,175,000 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 March 27, 2016, and the nine months total was approximately $2,632,000 or $.51 per share.   In March 2016 the Company declared a regular quarterly dividend of $.17 per share, payable May 11, 2016 to shareholders of record on April 19, 2016. The economic climate is part of the consideration at the Directors’ quarterly reviews of future estimates of cash flows. The Board of Directors decides the amount and timing of any dividend at its quarterly meeting based on its appraisal of the state and trends of the business and estimate of future opportunities at such time. 

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 andtheir 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 theeconomy 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, snowstorms can keep customers from reaching the centers. The “Blizzard of 2016” occurred on the weekend of January 22-24,2016 causing the closure of all of our northern market locations for up to 3 days. Weekends tend to be heaviest foropen play while the majority of league play occurs on weekdays. 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 ourresponse will be helped by having the resources to be able to promote the sport. 

RESULTS OF OPERATIONS

Earnings were $1,271,488 or $.25 per share for the thirteen week period and $1,632,313 or $.32 per share for the thirty-nine week period ended March 27, 2016. For the thirteen-week and thirty-nine week periods ended March 29, 2015, earnings were $1,269,291 or $.25 per share and $1,436,477 or $.28 per share, respectively.   Both the current and prior fiscal years were impacted by snow storms causing postponements of league bowling and loss of open play revenue. Management believes that the public is more cautious in discretionary spending during times of economic concern. The operating results for fiscal 2016 periods included in this report are not necessarily indicative of results to be expected for the year.

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The following tables set forth the items in our consolidated summary of operations for the fiscal quarter and year-to-date periods ended March 27, 2016, and March 29, 2015, and the dollar and percentage changes therein.

	Thirteen weeks ended March 27, 2016 and March 29, 2015 Dollars in thousands
	2016		2015		Change			% Change
Operating Revenues:
Bowling and other	$	5,237	$	5,307	$	(70	)		(1.3	)
Food, beverage and merchandise sales		2,185		2,209		(24	)		(1.1	)
Total Operating Revenues		7,422		7,516		(94	)		(1.3	)
Operating Expenses:
Employee compensation and benefits		2,764		2,845		(81	)		(2.9	)
Cost of bowling and other services		1,559		1,658		(99	)		(6.0	)
Cost of food, beverage and merchandise sales		607		612		(5	)		(0.8	)
Depreciation and amortization		334		331		3			0.9
General and administrative		301		235		66			21.9
Total Operating Expenses		5,565		5,681		(116	)		(2.0	)
Operating income		1,857		1,835		22			1.2
Interest, dividend and other income		99		118		(19	)		(16.1	)
Earnings before taxes		1,956		1,953		3			0.2
Income taxes		685		684		1			0.2
Net Earnings	$	1,271	$	1,269	$	2			0.2

	Thirty-nine weeks ended March 27, 2016 and March 29, 2015 Dollars in thousands
	2016		2015		Change			% Change
Operating Revenues:
Bowling and other	$	12,877	$	12,812	$	65			.5
Food, beverage and merchandise sales		5,471		5,304		167			3.2
Total Operating Revenues		18,348		18,116		232			1.3
Operating Expenses:
Employee compensation and benefits		8,247		8,340		(93	)		(1.1	)
Cost of bowling and other services		4,517		4,665		(148	)		(3.2	)
Cost of food, beverage and merchandise sales		1,640		1,601		39			2.4
Depreciation and amortization		1,009		987		22			2.2
General and administrative		764		688		76			11.0
Total Operating Expenses		16,177		16,281		(104	)		(0.6	)
Operating income		2,171		1,835		336			18.3
Interest, dividend and other income		340		375		(35	)		(9.3	)
Earnings before taxes		2,511		2,210		301			13.6
Income taxes		879		774		105			13.6
Net Earnings	$	1,632	$	1,436	$	196			13.6

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 Operating Revenues

Total operating revenues decreased $94,000 to $7,422,000 in the quarter ended March 27, 2016 compared to an increase of $209,000 to $7,516,000 in the three-month period ended March 29, 2015.  For the current fiscal nine-month period operating revenues were up $232,000 versus an increase of $92,000 in the comparable nine-month period a year ago.  Bowling and other revenue declined $70,000 in the quarter and increased $65,000 in the year-to-date period ended March 27, 2016, and was up $139,000 and $32,000, respectively, in the prior year comparable periods. Management believes the winter weather in each of the quarters ended in March 2016 and 2015 negatively impacted open play revenue. In addition, some league play scheduled for the third quarter will occur in the fourth quarter.

Food, beverage and merchandise sales decreased $24,000 or 1% in the current year quarter and were up $167,000 or 3% in the nine-month period. Cost of sales was down 1% in the current year quarter and up 2% for the nine month period ended March 27, 2016.

 Operating Expenses

Operating expenses were down $116,000 or 2% and down $104,000 or 1% in the current three and nine-month periods, respectively, compared to an increase of  $26,000 or less than 1% and a decrease of $236,000 or 1% in the three and nine month periods, respectively, last year.  Employee compensation and benefits were down $81,000 or 3% for the current fiscal year three month period and down $93,000 or 1% in the nine month period versus no change and a decline of $87,000 or 1% in the prior year comparable periods, respectively. Group health insurance costs were down $41,000 or 12% in the current nine month period as a result of changes in plan offerings with 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 was down $148,000 or 3% versus a decrease of $128,000 or 3% in the nine-month periods ended March 27, 2016 and March 29, 2015, respectively. In the current thirty-nine weeks ended March 27, 2016, maintenance and repair costs were up $11,000 or 2%. The current and prior year nine month periods included snow removal costs of $120,000 and $80,000, respectively. Advertising costs during the current year thirty-nine week period ended March 27, 2016 were down $18,000. For the nine month period ended March 27, 2016 utility costs were down $51,000 due to lower electric and gas expense as winter temperatures were milder than the prior year comparable period. Supplies and services expenses were up slightly in the current year nine month period and were flat in the nine month period ended March 29, 2015.

Insurance expense excluding health insurance decreased 9% in the current year-to-date period due to lower premiums compared to a decrease of 1% in the prior year nine month period.

Depreciation and amortization expense was up 2% in the nine month period ended March 27, 2016 down 6% in the prior year comparable period.

As a result of the above, the current nine-month period of fiscal 2016 showed operating income of $2,171,000 compared to $1,835,000 in the prior year comparable nine-month period.

 Interest and Dividend Income

Interest and dividend income decreased $35,000 or 9% in the fiscal 2016 nine-month period. The prior year comparable period included greater long and short term gain on the Ginnie Mae portfolio.

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CRITICAL ACCOUNTING POLICIES

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

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

ITEM 4. CONTROLS AND PROCEDURES.

The Company’s Chief Executive Officer and Chief Financial Officer have concluded that the Company’s disclosure controls and procedures are effective based on their evaluation of such controls and procedures as of March 27, 2016. There was no change in the Company’s internal control over financial reporting identified in connection with the evaluation that occurred during the quarter ended March 27, 2016, 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 May 10, 2016 (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 thirty-nine weeks ended March 27, 2016 in eXtensible Business Reporting 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: May 10, 2016	By:	/s/ Leslie H Goldberg
		Leslie H. Goldberg, President
Date: May 10, 2016	By:	/s/ Cheryl A Dragoo
		Cheryl A. Dragoo, CFO

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