October 19, 2016
Dear Fellow Owners:
Just last week the front page of my local newspaper had a headline emphasizing thatthe National Football League TV packages suffered large declines in ratings. Thenthis week the Wall Street Journal did a feature on the number of restaurant chains thatwere filing for bankruptcy and/or closing locations. It would seem that the old pattern ofconsumer preferences changing is in fact accelerating and is most pronounced in thethings that people view as entertainment.
However the particular impact of in-home entertainment is not new. Our predecessorcompany went into business two months before World War II. We were exposedto the behavioral changes brought about by new television technology. First was yourlittle 10 inch black and white that seemed to be a miracle, followed eventually by colortelevision, VCRs, DVDs, high definition, cable, 3-D and, of course, streaming TV. Eachof these events had an impact that was noticeable on the bowling business and from eachof them Bowl America recovered. This year was the 53rd consecutive year of profitableoperation.
We think two factors have helped us. Most important is our view that anenlightened policy toward our employees has produced an experienced staff able to dealwith the changing bowling customer. We have instituted non-contributory profit-sharingand stock ownership plans which make our employees partners in our business. Over700 Bowl America employees are owners of that stock. Bowling as a sport has long beengender neutral, giving us the advantage both among customers and employees of beingavailable to all of the population. It is these roots in bowling as a game that have made itnatural for so many of our staff to be bowlers. They might have participated in a “mixed”neighborhood bowling league or been a female bowler whose skills closed down a “pot”game because she took all the money from the boys. My parents regularly bowledtogether in the thirties. It was so much fun they decided to start a business.
This open atmosphere has been coupled with a conservative fiscal policy. BowlAmerica owns most of its real estate rather than leasing it. It has no mortgages. Thisstability is a key to the development of long-term employment opportunities.
None of these activities will necessarily prevent us from suffering some sort oftotally unexpected catastrophe that damages the business. What it does do is provide uswith a staff not afraid of change and not inexperienced in dealing with it.
I am pleased to thank all of the employee co-owners who have been willing to makea career of Bowl America and therefore made Bowl America a place to have a career.
| Regards, |
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|  |
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| Leslie H. Goldberg, President |
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
FORWARD-LOOKING STATEMENTS
This Annual Report on Form 10-K 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 Annual Report on Form 10-K 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 Annual Report on Form 10-K are made as of the date hereof. We are under no obligation to publicly update or revise any forward-looking statement as a result of new information, future events or otherwise, except as otherwise required by law.
OVERVIEW
The Company is in the entertainment business which, by its nature, has ups and downs based on consumer tastes and preferences. Generally, promotional and open play bowling, which depends on the public’s discretionary budget dollars and their choices, accounts for more than half of our business. An unstable economy can lead many to participate in entertainment that is close to home and relatively inexpensive. Bowling has those advantages. However, the longer the economic recovery remains unstable, the less willing people are to spend on other than necessities. Current economic and political conditions continue to create 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. 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 for open 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.
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 during downturns in business, to capitalize on opportunities for expansion and modernization, to provide a secure source of income and to provide a predictable return to its owners. For these reasons, the Company prefers a conservative approach to investing rather than taking greater risk for possible rapid growth. The Company balances market volatility by using both fixed income and equity investments in managing its reserve funds. Any equity security is subject to price fluctuation, however, the stocks held by the Company have relatively low volatility. The Company has long been invested in a Government National Mortgage Association (“Ginnie Mae”) fund and domestically domiciled stocks with the perceived potential of appreciation, primarily telecommunications stocks. This diversity also provides a measure of safety of principal.
With the exception of an additional 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. 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 $4,400,000 in dividends, the majority of which were tax favored in the form of exclusion from federal taxable income. The exclusion continues into the current year. These marketable securities are carried at their fair value on the last day of each reporting period. The fair value of the securities on July 3, 2016 was approximately $6,002,000. The value of securities held at June 28, 2015 was approximately $5,200.000.
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.The fund is carried at fair value on thelast day of the reporting period and at July 3, 2016, the value was approximately $2,823,000. In August 2015 approximately $1,000,000 of this fund was redeemed to meet the August 2015 dividend payment.
Short-term investments consisting mainly of Certificates of Deposits, and cash and cash equivalents totaled $1,471,000 at the end of fiscal 2016 compared to $912,000 at the end of fiscal 2015. In August 2016 the Company secured a short-term loan for $500,000 partially collateralized with $350,000 in certificates of deposits, to fund the August dividend.
The Company's position in all the above investments is a source of expansion capital. 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. The Company made no application for third party funding in fiscal 2016 as cash and cash flows were sufficient to finance all contemplated purchases and to meet short-term purchase commitments and operating lease commitments.
Cash flow provided by operating activities for the year ended July 3, 2016, was $3,442,000. Equipment purchases during fiscal year 2016 used approximately $320,000. Proceeds from Ginnie Mae dividends totaling approximately$72,000 in fiscal year 2016 were used to purchase additional shares in the fund. The Company sold a storage warehouse and some equipment, no longer needed, for $50,000 in June 2016. Cash on hand and the $1,000,000 redemption of the Vanguard fund mentioned above was used to meet the balance of $3,509,000 required to pay regular dividends during the fiscal year.
The Company paid cash dividends totaling approximately $3.5 million, or $.68 per share, to shareholders during the 2016 fiscal year. In June 2016, the Company declared a quarterly $.17 per share dividend, paid in August 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 of the business and estimate of opportunities at such time.
RESULTS OF OPERATIONS
The following table sets forth the items in our consolidated summary of operations for the fiscal fourth quarters ended July 3, 2016 and June 28, 2015, respectively, and the dollar and percentage changes therein.
Fourteen weeks ended July 3, 2016 and | ||||||||||||||||
Thirteen weeks ended June 28, 2015 | ||||||||||||||||
Dollars in thousands | ||||||||||||||||
2016 | 2015 | Change | % Change | |||||||||||||
Operating Revenues: | ||||||||||||||||
Bowling and other | $ | 4,001 | $ | 3,497 | $ | 504 | 14.4 | % | ||||||||
Food, beverage & merchandise sales | 1,749 | 1,512 | 237 | 15.7 | ||||||||||||
| 5,750 | 5,009 | 741 | 14.8 | |||||||||||||
Operating Expenses: | ||||||||||||||||
Compensation & benefits | 2,823 | 2,674 | 149 | 5.6 | ||||||||||||
Cost of bowling & other | 1,431 | 1,285 | 146 | 11.4 | ||||||||||||
Cost of food, beverage & merchandise sales | 563 | 485 | 78 | 16.1 | ||||||||||||
Depreciation & amortization | 144 | 268 | (124 | ) | (46.3 | ) | ||||||||||
General & administrative | 89 | 222 | (133 | ) | (59.9 | ) | ||||||||||
| 5,050 | 4,934 | 116 | 2.4 | |||||||||||||
Loss on disposal of assets | (10 | ) | (4 | ) | 6 | 150.0 | ||||||||||
Operating income | 690 | 71 | 619 | 871.8 | ||||||||||||
Interest, dividend and other income | 110 | 120 | (10 | ) | (8.3 | ) | ||||||||||
Earnings before taxes | 800 | 191 | 609 | 318.8 | ||||||||||||
Income taxes | 281 | (13 | ) | 294 | 2261.5 | |||||||||||
Net Earnings | $ | 519 | $ | 204 | $ | 315 | 154.4 | |||||||||
The following table sets forth the items in our consolidated summary of operations for the 53 week fiscal year ended July 3, 2016 and 52 week fiscal year ended June 28, 2015, respectively, and the dollar and percentage changes therein.
Fifty-three weeks ended July 3, 2016 and | ||||||||||||||||
Fifty-two weeks ended June 28, 2015 | ||||||||||||||||
Dollars in thousands | ||||||||||||||||
2016 | 2015 | Change | % Change | |||||||||||||
Operating Revenues: | ||||||||||||||||
Bowling and other | $ | 16,878 | $ | 16,309 | $ | 569 | 3.5 | % | ||||||||
Food, beverage & merchandise sales | 7,220 | 6,816 | 404 | 5.9 | ||||||||||||
| 24,098 | 23,125 | 973 | 4.2 | |||||||||||||
Operating Expenses: | ||||||||||||||||
Compensation & benefits | 11,071 | 11,014 | 57 | 0.5 | ||||||||||||
Cost of bowling & other | 5,947 | 5,950 | (3 | ) | (0.1 | ) | ||||||||||
Cost of food, beverage & merchandise sales | 2,203 | 2,086 | 117 | 5.6 | ||||||||||||
Depreciation & amortization | 1,153 | 1,255 | (102 | ) | (8.1 | ) | ||||||||||
General & administrative | 853 | 910 | (57 | ) | (6.2 | ) | ||||||||||
| 21,227 | 21,215 | 12 | 0.1 | |||||||||||||
(Loss) gain on disposal of assets | (10 | ) | (4 | ) | 6 | 150.0 | ||||||||||
Operating income | 2,861 | 1,906 | 955 | 50.1 | ||||||||||||
Interest, dividend and other income | 450 | 495 | (45 | ) | (9.1 | ) | ||||||||||
Earnings before taxes | 3,311 | 2,401 | 910 | 37.9 | ||||||||||||
Income taxes | 1,160 | 761 | 399 | 52.4 | ||||||||||||
Net Earnings | $ | 2,151 | $ | 1,640 | $ | 511 | 31.1 | |||||||||
Net Earnings were $518,712 or $.10 per share for the fourteen week period and $2,151,025 or $.42 per share for the fifty-three week period ended July 3, 2016. For the thirteen week and fifty-two week periods ended June 28, 2015 net earnings were $203,752 or $.04 per share and $1,640,229 or $.32 per share, respectively. Fiscal 2016 consisted of 53 weeks with the extra week included in the fourth quarter and 2015 consisted of 52 weeks. Eighteen centers were in operation throughout both years.
Operating Revenues
Total operating revenue increased 4.2%, or $973,000, to $24.1 million in fiscal 2016 compared to an increase of 1.5%, or $345,000, to $23.1 million in fiscal 2015. Bowling and other revenue increased $569,000 in fiscal 2016 versus an increase of $214,000 in fiscal 2015. Food, beverage and merchandise sales increased $404,000 and $130,000 in fiscal 2016 and fiscal 2015, respectively.
Management believes that open play revenue was lost in both years as a result of snow storms in the normally busiest months of fiscal years 2016 and 2015. Promotional pricing throughout both fiscal years also depressed bowling revenue.
Operating Expenses
As discussed in more detail below, total operating expenses increased 0.1%, or $12,000, in fiscal year 2016 versus a decrease of 1.7%, or $367,000 in fiscal 2015. Costs for employee compensation and benefits were up 0.5% or $57,000 in fiscal 2016 versus a decrease of 1% or $110,000 in fiscal 2015. Group health insurance costs declined primarily due to plan offerings and lower premiums. This category includes contributions to our two benefit plans, both of which are defined contribution plans. The contributions can only be made from profits and there is no additional obligation beyond the current year contribution.
Cost of bowling and other services decreased $3,000 or 0.1% in the year ended July 3, 2016 versus a decrease of $159,000 or 2.6% in the prior fiscal year. Maintenance expense was flat in fiscal 2016 and decreased $59,000 or 6.2% in fiscal 2015. Snow removal costs in both fiscal years were high due to winter storms. Utility costs were down 4.5% in the current fiscal year as telephone, electric and gas expense decreased versus in increase in the prior fiscal year. Supplies expense increased 1% in both fiscal 2016 and 2015. Advertising costs decreased 2.1% and 24.8% in fiscal 2016 and 2015, respectively.
Cost of food, beverage and merchandise sales increased $117,000 or 5.6% in fiscal 2016 and $24,000 or 1.2% in fiscal 2015, the result of higher food and beverage sales.
Depreciation expenses decreased approximately $102,000 or 8.1% in fiscal 2016 versus a decrease of approximately $69,000 or 5.2% in the prior year after several large assets became fully depreciated.
Operating income increased 50.1% or $955,000 to $2.9 million in fiscal year 2016 from $1.9 million in fiscal 2015.
Interest, Dividend and Other Income
Interest and dividend income decreased $45,000 or 9.1% in fiscal 2016 and $168,000 or 25.4% in the prior year.
Income taxes
Effective income tax rates on continuing operations for the Company were 35.0% for fiscal 2016 and 31.7% for fiscal2015, the difference from statutory rates is primarily due to the partial exclusion of dividends received on investments which, in fiscal 2015 was a higher portion of income than in the prior year.
Net Earnings
Net earnings from continuing operations in fiscal 2016 were $2.2 million, or $.42 per share, compared to $1.6 million, or $.32 per share in fiscal 2015.
CRITICAL ACCOUNTING POLICIES
We have identified accounting for marketable investment securities as a critical accounting policy due to the significance of the amounts included in our balance sheet. The Company exercises judgment in determining the classification of its investment securities as available-for-sale and in determining their fair value. The Companyrecords these investments at their fair value based on quoted market prices with the unrealized gain or loss recordedin accumulated other comprehensive income, 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.
We have identified accounting for the impairment of long-lived assets as a critical accounting policy due to the significance of the amounts included in our balance sheet under the caption of Land, Buildings and Equipment. TheCompany reviews long-lived assets whenever events or changes indicate that the carrying amount of an asset may notbe 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 undiscounted future cash flows are less than the carrying amount. There were no impairment losses recorded in fiscal 2016 or 2015.
BOWL AMERICA INCORPORATED AND SUBSIDIARIES
CONSOLIDATED SUMMARY OF OPERATIONS
Selected Financial Data
For the Years Ended | ||||||||||||||||||||
July3, | June 28, | June 29, | June 30, | July 1, | ||||||||||||||||
2016 | 2015 | 2014 | 2013 | 2012 | ||||||||||||||||
Operating revenues | $ | 24,097,862 | $ | 23,124,541 | $ | 22,780,017 | $ | 23,857,281 | $ | 24,343,024 | ||||||||||
Operating expenses | 21,226,560 | 21,214,632 | 21,581,531 | 22,095,866 | 22,742,905 | |||||||||||||||
(Loss) gain on disposal of land, building andequipment | (10,035 | ) | (3,854 | ) | 8,820 | 980 | 25,924 | |||||||||||||
Interest, dividend and other income | 449,998 | 494,645 | 662,693 | 435,141 | 499,873 | |||||||||||||||
Earnings from continuing operationsbefore provision for income taxes | 3,311,265 | 2,400,700 | 1,869,999 | 2,197,536 | 2,125,916 | |||||||||||||||
Provision for income taxes | 1,160,240, | 760,471 | 496,831 | 711,763 | 626,677 | |||||||||||||||
Earnings from continuing operations | $ | 2,151,025 | $ | 1,640,229 | $ | 1,373,168 | $ | 1,485,773 | $ | 1,499,239 | ||||||||||
(Loss) gain from discontinued operations - net of tax | - | - | (2,774 | ) | 1,669,449 | (74,398 | ) | |||||||||||||
Net Earnings | $ | 2,151,025 | $ | 1,640,229 | $ | 1,370,394 | $ | 3,155,222 | $ | 1,424,841 | ||||||||||
Weighted average shares outstanding- Basic & Diluted | 5,160,971 | 5,160,971 | 5,160,971 | 5,151,784 | 5,151,471 | |||||||||||||||
Earnings per share-Basic & diluted | ||||||||||||||||||||
Continuing operations | $ | .42 | $ | .32 | $ | .27 | $ | .29 | $ | .29 | ||||||||||
Discontinued operations | .00 | .00 | .00 | .32 | (.01 | ) | ||||||||||||||
Net earnings per share-Basic & diluted | $ | .42 | $ | .32 | $ | .27 | $ | .61 | $ | .28 | ||||||||||
Net cash provided by operating activities | $ | 3,441,813 | $ | 3,052,817 | $ | 2,053,510 | $ | 2,206,533 | $ | 2,769,286 | ||||||||||
Cash dividends paid | $ | 3,509,461 | $ | 3,509,460 | $ | 3,406,243 | $ | 5,949,951 | $ | 3,296,942 | ||||||||||
Cash dividends paid Per share - Class A | $ | 0.68 | $ | 0.68 | $ | 0.66 | $ | 1.155 | $ | 0.64 | ||||||||||
- Class B | $ | 0.68 | $ | 0.68 | $ | 0.66 | $ | 1.155 | $ | 0.64 | ||||||||||
Total assets | $ | 31,851,135 | $ | 32,062,409 | $ | 34,363,780 | $ | 36,725,050 | $ | 39,368,174 | ||||||||||
Stockholders' equity | $ | 26,149,342 | $ | 26,974,079 | $ | 28,978,731 | $ | 31,031,801 | $ | 33,685,154 | ||||||||||
Net book value per share | $ | 5.07 | $ | 5.23 | $ | 5.61 | $ | 6.01 | $ | 6.54 | ||||||||||
Net earnings as a % of beginning stockholders' equity | 8.0 | % | 5.7 | % | 4.4 | % | 9.4 | % | 4.0 | % | ||||||||||
Lanes in operation | 726 | 726 | 726 | 726 | 756 | |||||||||||||||
Centers in operation | 18 | 18 | 18 | 18 | 19 | |||||||||||||||
Market Information
The principal market on which the Company's Class A Common Stock is traded is the NYSE MKT. TheCompany's Class B Common Stock is not listed on any exchange and is not publicly traded. Each share of Class B Common Stock can be converted to one share of Class A Common Stock at any time.
The table below presents the high and low sales price of the Company's Class A Common Stock in each quarter of fiscal years 2016 and 2015 as reported by the NYSE MKT.
2016 | 1st Qtr | 2nd Qtr | 3rd Qtr | 4th Qtr |
High | $15.50 | $15.31 | $14.70 | $15.15 |
Low | $14.28 | $13.22 | $13.61 | $14.00 |
2015 | 1st Qtr | 2nd Qtr | 3rd Qtr | 4th Qtr |
|
|
|
| |
High | $15.50 | $15.45 | $15.50 | $15.50 |
Low | $13.12 | $13.79 | $14.08 | $14.27 |
Holders
As of July 3, 2016, the approximate number of holders of record of the Company's Class A Common Stock was 283 and of the Company's Class B Common Stock was 19.
Cash Dividends
The table below presents the quarterly cash dividends per share of Class A Common Stock and Class B Common Stock paid, and the quarter in which the payment was made during fiscal 2016 and 2015.
Class A Common Stock | ||
Quarter | 2016 | 2015 |
First | 17 cents | 17 cents |
Second | 17 cents | 17 cents |
Third | 17 cents | 17 cents |
Fourth | 17 cents | 17 cents |
Class B Common Stock | ||
Quarter | 2016 | 2015 |
First | 17 cents | 17 cents |
Second | 17 cents | 17 cents |
Third | 17 cents | 17 cents |
Fourth | 17 cents | 17 cents |
The Board of Directors decides the amount and timing of any dividend at its quarterly meetings based on its appraisal of the state of the business, the economic climate and estimate of future opportunities at such time.
BOWL AMERICA INCORPORATED AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
As of | ||||||||
July3, | June 28, | |||||||
2016 | 2015 | |||||||
ASSETS | ||||||||
CURRENT ASSETS: | ||||||||
Cash and cash equivalents (Note 2) | $ | 986,193 | $ | 778,367 | ||||
Short-term investments (Note 3) | 484,558 | 133,729 | ||||||
Inventories | 561,217 | 552,889 | ||||||
Prepaid expenses and other | 664,379 | 488,212 | ||||||
Income taxes refundable | - | 51,309 | ||||||
TOTAL CURRENT ASSETS | 2,696,347 | 2,004,506 | ||||||
LAND, BUILDINGS & EQUIPMENT, net (Note 4) | 19,523,856 | 20,417,454 | ||||||
OTHER ASSETS: | ||||||||
Marketable investment securities (Note 3) | 8,824,456 | 8,866,392 | ||||||
Cash surrender value-life insurance | 740,161 | 707,592 | ||||||
Other | 66,315 | 66,465 | ||||||
TOTAL OTHER ASSETS | 9,630,932 | 9,640,449 | ||||||
TOTAL ASSETS | $ | 31,851,135 | $ | 32,062,409 | ||||
LIABILITIES AND STOCKHOLDERS' EQUITY | ||||||||
CURRENT LIABILITIES: | ||||||||
Accounts payable | $ | 660,711 | $ | 709,453 | ||||
Accrued expenses | 1,193,463 | 1,001,754 | ||||||
Dividends payable | 877,365 | 877,365 | ||||||
Income taxes payable | 207,840 | - | ||||||
Other current liabilities | 325,982 | 290,833 | ||||||
Current deferred income taxes (Note 7) | 27,850 | 9,113 | ||||||
TOTAL CURRENT LIABILITIES | 3,293,211 | 2,888,518 | ||||||
LONG-TERM DEFERRED COMPENSATION | 23,620 | 28,897 | ||||||
NONCURRENT DEFERRED INCOME TAXES (Note 7) | 2,384,962 | 2,170,915 | ||||||
TOTAL LIABILITIES | 5,701,793 | 5,088,330 | ||||||
COMMITMENTS AND CONTINGENCIES (Note 5) | ||||||||
STOCKHOLDERS' EQUITY (Note 8) | ||||||||
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 sharesClass 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-salesecurities, net of tax | 2,986,587 | 2,452,888 | ||||||
Retained earnings | 14,792,550 | 16,150,986 | ||||||
TOTAL STOCKHOLDERS'EQUITY | 26,149,342 | 26,974,079 | ||||||
TOTAL LIABILITIES AND STOCKHOLDERS'EQUITY | $ | 31,851,135 | $ | 32,062,409 | ||||
The accompanying notes to the consolidated financial statements are an integral part of these financial statements.
BOWL AMERICA INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS AND COMPREHENSIVE EARNINGS
For the Years Ended | ||||||||
July3, | June 28, | |||||||
2016 | 2015 | |||||||
Operating Revenues: | ||||||||
Bowling and other | $ | 16,878,423 | $ | 16,308,611 | ||||
Food, beverage and merchandise sales | 7,219,439 | 6,815,930 | ||||||
Total Operating Revenue | 24,097,862 | 23,124,541 | ||||||
Operating Expenses: | ||||||||
Employee compensation and benefits | 11,070,655 | 11,014,082 | ||||||
Cost of bowling and other services | 5,947,418 | 5,950,351 | ||||||
Cost of food, beverage and merchandise sales | 2,202,901 | 2,086,079 | ||||||
Depreciation and amortization | 1,153,121 | 1,254,541 | ||||||
General and administrative | 852,465 | 909,579 | ||||||
Total Operating Expense | 21,226,560 | 21,214,632 | ||||||
Loss on disposal of land, buildings andequipment | (10,035 | ) | (3,854 | ) | ||||
Operating Income | 2,861,267 | 1,906,055 | ||||||
Interest, dividend and other income | 449,998 | 494,645 | ||||||
Earnings before provision for income taxes | 3,311,265 | 2,400,700 | ||||||
Provision for income taxes (Note 7) | ||||||||
Current | 1,258,674 | 886,134 | ||||||
Deferred | (98,434 | ) | (125,663 | ) | ||||
Total Provision for Income Taxes | 1,160,240 | 760,471 | ||||||
Net Earnings | $ | 2,151,025 | $ | 1,640,229 | ||||
Earnings per share-basic & diluted | $ | .42 | $ | .32 | ||||
Weighted average shares outstanding | 5,160,971 | 5,160,971 | ||||||
Dividends paid | $ | 3,509,461 | $ | 3,509,460 | ||||
Per share, dividends paid, Class A | $ | 0.68 | $ | 0.68 | ||||
Per share, dividends paid, Class B | $ | 0.68 | $ | 0.68 | ||||
Net Earnings | $ | 2,151,025 | $ | 1,640,229 | ||||
Other comprehensive earnings- net of taxUnrealized gain (loss) on available-for–salesecurities net of tax (benefit) of $334,549 and($85,995) | 548,740 | (139,715 | ) | |||||
Reclassification adjustment for gain included in NetIncome, net of tax of $9,258 | (15,041 | ) | - | |||||
Comprehensive earnings | $ | 2,684,724 | $ | 1,500,514 | ||||
The accompanying notes to the consolidated financial statements are an integral part of these financial statements.
BOWL AMERICA INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
COMMON STOCK | Accumulated | |||||||||||||||||||||||||||
Class A Shares | Class A Amount | Class B Shares | Class B Amount | Additional Paid-In Capital | Other Comprehensive Earnings | Retained Earnings | ||||||||||||||||||||||
Balance, June 29, 2014 | 3,746,454 | $ | 374,645 | 1,414,517 | $ | 141,452 | $ | 7,849,814 | $ | 2,592,603 | $ | 18,020,217 | ||||||||||||||||
Cash dividends paid | - | - | - | - | - | - | (2,632,095 | ) | ||||||||||||||||||||
Accrued dividends declaredJune 16, 2015 payable August 12, 2015 | - | - | - | - | - | - | (877,365 | ) | ||||||||||||||||||||
Change in unrealized gain on available-for-sale securities (shown net of tax) | - | - | - | - | - | (139,715 | ) | - | ||||||||||||||||||||
Repayment of employee loan | - | - | - | - | 4,294 | - | - | |||||||||||||||||||||
Net earnings for the year | - | - | - | - | - | - | 1,640,229 | |||||||||||||||||||||
Balance, June 28, 2015 | 3,746,454 | $ | 374,645 | 1,414,517 | $ | 141,452 | $ | 7,854,108 | $ | 2,452,888 | $ | 16,150,986 | ||||||||||||||||
Cash dividends paid | - | - | - | - | - | - | (2,632,095 | ) | ||||||||||||||||||||
Accrued dividends declaredJune 21, 2016, payable August 17, 2016 | - | - | - | - | - | - | (877,366 | ) | ||||||||||||||||||||
Change in unrealized gain on available-for-sale securities (shown net of tax) | - | - | - | - | - | 548,740 | - | |||||||||||||||||||||
Reclassification adjustment for gain | - | - | - | - | - | - | - | |||||||||||||||||||||
Included in net income, net of tax | - | - | - | - | - | (15,041 | ) | - | ||||||||||||||||||||
Net earnings for the year | - | - | - | - | - | - | 2,151,025 | |||||||||||||||||||||
Balance, July3, 2016 | 3,746,454 | $ | 374,645 | 1,414,517 | $ | 141,452 | $ | 7,854,108 | $ | 2,986,587 | $ | 14,792,550 | ||||||||||||||||
The accompanying notes to the consolidated financial statements are an integral part of these financial statements.
BOWL AMERICA INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Years Ended | ||||||||
July3, | June 28, | |||||||
2016 | 2015 | |||||||
Cash Flows From Operating Activities | ||||||||
Net earnings | $ | 2,151,025 | $ | 1,640,229 | ||||
Adjustments to reconcile net earningsto net cash provided byoperating activities: | ||||||||
Depreciation and amortization | 1,153,121 | 1,254,541 | ||||||
Decrease in deferred income tax | (95,712 | ) | (126,898 | ) | ||||
Loss on disposition of assets-net | 10,035 | 3,854 | ||||||
Gain on sale of available-for-sale securities | (24,299 | ) | - | |||||
Changes in assets and liabilities | ||||||||
Increase in inventories | (8,328 | ) | (32,534 | ) | ||||
(Increase) decrease in prepaid and other | (176,167 | ) | 122,204 | |||||
Decrease in income taxes refundable | 51,309 | 261,547 | ||||||
Decrease in other long-term assets | 150 | 13,700 | ||||||
(Decrease) increase in accounts payable | (48,742 | ) | 27,944 | |||||
Increase (decrease) in accrued expenses | 191,709 | (89,344 | ) | |||||
Increase in income taxes payable | 207,840 | - | ||||||
Increase (decrease) in other current liabilities | 35,149 | (17,235 | ) | |||||
Decrease in long-term deferred compensation | (5,277 | ) | (5,191 | ) | ||||
Net cash provided by operating activities | 3,441,813 | 3,052,817 | ||||||
Cash Flows From Investing Activities | ||||||||
Expenditures for land, building and equipment | (319,558 | ) | (796,622 | ) | ||||
Sale of assets | 50,000 | 7,900 | ||||||
Net (purchases) sales and maturities of short-term investments | (350,829 | ) | 1,319,597 | |||||
Purchases of marketable securities | (71,570 | ) | (112,603 | ) | ||||
Proceeds from sale of marketable securities | 1,000,000 | - | ||||||
Increase in cash surrender value | (32,569 | ) | (29,670 | ) | ||||
Net cash provided by investing activities | 275,474 | 388,602 | ||||||
Cash Flows From Financing Activities | ||||||||
Payment of cash dividends | (3,509,461 | ) | (3,509,460 | ) | ||||
Repayment of stock loan | - | 4,294 | ||||||
Net cash used in financing activities | (3,509,461 | ) | (3,505,166 | ) | ||||
NetChangein Cash and Equivalents | 207,826 | (63,747 | ) | |||||
Cash and Equivalents, Beginning of period | 778,367 | 842,114 | ||||||
Cash and Equivalents, End of period | $ | 986,193 | $ | 778,367 | ||||
Supplemental Disclosures of Cash Flow Information | ||||||||
Cash Paid During the Period for: | ||||||||
Income taxes | $ | 934,026 | $ | 633,000 | ||||
The accompanying notes to the consolidated financial statements are an integral part of these financial statements.
BOWL AMERICA INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
Organization
Bowl America Incorporated is engaged in the operation of 18 bowling centers, with food and beverage service in each center. Ten centers are located in metropolitan Washington D.C., one center in metropolitan Baltimore, Maryland, four centers in metropolitan Richmond, Virginia, and three centers in metropolitan Jacksonville, Florida. These 18 centers contain a total of 726 lanes. The Company operates in one segment.
Principles of Consolidation
The consolidated financial statements include the accounts of the Company and all of its wholly-owned subsidiary corporations. All significant inter-company items have been eliminated in the consolidated financial statements.
Fiscal Year
The Company's fiscal year ends on the Sunday nearest to June 30. Fiscal year 2016 ended July 3, 2016, and fiscal year 2015 ended June 28, 2015. Fiscal year 2016 consisted of 53 weeks and fiscal year 2015 consisted of 52 weeks.
Subsequent Events
The Company has evaluated subsequent events through the date of filing these financial statements with the Securities and Exchange Commission on September 29, 2016.In August 2016 the Company secured a short-term loan of $500,000 collateralized by $350,000 in certificates of deposits to meet the August 2016 dividend payment.
Estimates
The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions. These estimates and assumptions affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results may differ from those estimates.Significant estimates include the deferred compensation liability for executives and key employees including survivor benefits, depreciation expense, cash surrender value of officers' life insurance, the Federal and State income taxes (current and deferred), and market assumptions used in estimating the fair value of certain assets such as marketable securities and long-lived assets.
Revenue Recognition
The Company records revenue for fees charged for use of bowling lanes and other facilities at the time the services are provided. Food, beverage and merchandise sales are recorded as revenue at the time the product is given to the customer.
Depreciation and Amortization
Depreciation and amortization for financial statement purposes are calculated by use of the straight-line method. Amortization of leasehold improvements is calculated over the estimated useful life of the assetor term of the lease, whichever is shorter. The categories of property, plant, and equipment and the ranges of estimated useful lives on which depreciation and amortization rates are based are as follows:
Bowling lanes and equipment | 3-10 years |
Building and building improvements | 10-39 years |
Leasehold improvements | 5-15 years |
Amusement games | 3-5 years |
Maintenance and repairs and minor replacements are charged to expense when incurred. Major replacements and betterments are capitalized. The accounts are adjusted for the sale or other disposition of property, and the resulting gain or loss is credited or charged to income.
Impairment of Long-Lived Assets
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 differencebetween the assets' fair value and carrying value, is recognized when the estimated undiscounted future cash flows are less than the carrying amount.
Dividends
It is the Company's policy to accrue a dividend liability at the time the dividends are declared.
Advertising Expense
It is the Company's policy to expense advertising expenditures as they are incurred. The Company's advertising expenses for the years ending July 3, 2016, and June 28, 2015, were $319,129 and $325,914, respectively.
Inventories
Inventories are stated at the lower of cost (first-in, first-out method) or market. Inventories consist of resale merchandise including food and beverage and bowling supplies.
Income Taxes
Deferred income tax liabilities and assets are based on the differences between the financial statement and tax bases of assets and liabilities, using tax rates currently in effect. A valuation allowance is provided when it is more likely than not that a deferred tax asset will not be realized.
Investment Securities
All of the Company's readily marketable debt and equity securities are classified as available-for-sale. Accordingly, these securities are recorded at fair value with any unrealized gains and losses excluded from earnings and reported, net of deferred taxes, within a separate component of stockholders' equity until realized. Realized gains or losses on the sale of debt and equity securities are reported in earnings and determined using the adjusted cost of the specific security sold.
Earnings Per Share
Earnings per share basic and diluted, have been calculated using the weighted average number of shares of Class A and Class B common stock outstanding of 5,160,971, for both fiscal years 2016 and 2015.
Comprehensive Earnings
A consolidated statement of comprehensive earnings reflecting the aggregation of net earnings and unrealized gain or loss on available-for-sale securities, the Company's principal components of other comprehensive earnings, has been presented for the years ended July 3, 2016 and June 28, 2015.
Cash and Cash Equivalents
For purposes of the consolidated statements of cash flows, the Company considers money market funds and certificates of deposits, with original maturities of three months or less to be cash equivalents. The Company maintains cash accounts which may exceed federally insured limits during the year, but does not believe that this results in any significant credit risk.
Other Current Liabilities
Other current liabilities include prize fund monies held by the Company for bowling leagues. The funds are returned to the leagues at the end of the league bowling season. At July 3, 2016 and June 28, 2015 other current liabilities included $314,599 and $278,560, respectively, in prize fund monies.
Reclassifications
Certain previous year amounts have been reclassified to conform with the current year presentation.
Recent accounting guidance not yet adopted
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.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
2. CASH AND CASH EQUIVALENTS
Cash and cash equivalents consisted of the following:
July 3,2016 | June 28, 2015 | |||||||
Demand deposits and cash on hand | $ | 543,639 | $ | 558,364 | ||||
Money market funds | 442,554 | 220,003 | ||||||
Cash and Cash Equivalents | $ | 986,193 | $ | 778,367 | ||||
The account balances at times exceed federally insured limits. The Company does not believe this poses any significant risk.
3. INVESTMENTS
The Company’s marketable securities are categorized as available-for-sale securities. The cost for marketable securities was determined using the specific identification method. The fair values of marketable securities are based on the quoted market price for those securities. Short-term investments consist of certificates of deposits with maturities of generally three months to one year. At July 3, 2016, the fair value of short-term investments was $484,558. At June 28, 2015, the fair value of short-terminvestments was $133,729. Non-current investments are marketable securities which primarily consist of telecommunications stocks and a mutual fund that invests in mortgage backed securities. Unrealized gains and losses are reported as a component of accumulated other comprehensive earnings in Stockholders’ Equity.
As of July 3, 2016, the Company had $108,755 of gross unrealized gains from its investments in federal agency mortgage backed securities owned through a mutual fund which had a fair value of $2,822,615. In August 2015 the Company redeemed $1,000,000 of this fund to meet the August 2015 dividend payment. As of June 28, 2015, $58,014 in gross unrealized gains were from its investments in federal agency mortgage backed securities which had a fair value of $3,676,005. The Company’s investments were as follows:
| Original Cost | Unrealized Gain | Unrealized Loss | Fair Value | ||||||||||||
| July 3, 2016 | ||||||||||||||||
Equity securities | $ | 1,285,759 | $ | 4,721,885 | $ | (5,804 | ) | $ | 6,001,841 | |||||||
Mutual fund | 2,713,860 | 108,755 | - | 2,822,615 | ||||||||||||
Certificates of deposits | 484,558 | - | - | 484,558 | ||||||||||||
June 28, 2015 | ||||||||||||||||
Equity securities | $ | 1,285,759 | $ | 3,910,144 | $ | (5,516 | ) | $ | 5,190,387 | |||||||
Mutual fund | 3,617,991 | 58,014 | - | 3,676,005 | ||||||||||||
Certificates of deposits | 133,729 | - | - | 133,729 | ||||||||||||
During fiscal 2016 and fiscal 2015, the Company had certain equity securities with cumulative unrealized losses of $5,804 and $5,516 respectively.
| Less than 12 months | 12 Months or greater | Total | ||||||||||||||||||||||
July 3,2016 | Fair Value | Unrealized loss | Fair Value | Unrealized loss | Fair Value | Unrealized loss | ||||||||||||||||||
| Equity securities | $ | - | $ | - | $ | 41 | $ | (5,804 | ) | $ | 41 | $ | (5,804 | ) | ||||||||||
| Less than 12 months | 12 Months or greater | Total | ||||||||||||||||||||||
June 28,2015 | Fair Value | Unrealized loss | Fair Value | Unrealized loss | Fair Value | Unrealized loss | ||||||||||||||||||
Equity securities | $ | - | $ | - | $ | 329 | $ | (5,516 | ) | $ | 329 | $ | (5,516 | ) | ||||||||||
The equity securities portfolio includes the following stocks:
AT&T shares | 82,112 | |||
Manulife shares | 2,520 | |||
DexMedia shares | 412 | |||
NCR shares | 774 | |||
Teradata shares | 774 | |||
Vodafone shares | 6,471 | |||
CenturyLink shares | 4,398 | |||
Frontier Communications shares | 4,508 | |||
Sprint shares | 40,000 | |||
Verizon shares | 31,904 | |||
Windstream shares | 679 | |||
CSAL shares | 815 |
On August 1, 2016 Dex Media completed a financial restructure. Previous shares of its common stock were cancelled with no distribution to shareholders.
During the year ended June 28, 2015 Windstream spun off Communication Sales & Leasing (CSAL) and followed immediately with a 1-for-6 reverse split of Windstream shares.
As stated in Note 1, the Company records its readily marketable debt and equity securities at fair value. These assets are valued in accordance with a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value as follows:
| Level 1. | Observable inputs such as quoted prices in active markets for identical assets or liabilities; |
| Level 2. | Inputs, other than the quoted prices in active markets, that are observable either directly or indirectly; and |
| Level 3. | Unobservable inputs in which there is little or no market data, which require the reporting entity to develop its own assumptions. |
A financial instrument’s level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement.
The fair value of these assets as of July 3, 2016 is as follows:
Quoted | Significant | Unrealized | Cumulative | |||||||||||||||||
Price for | Other | Significant | gains/(losses) | Unrealized | ||||||||||||||||
Identical | Observable | Unobservable | for the | gains/(losses) | ||||||||||||||||
Assets | Inputs | Inputs | Year Ended | as of | ||||||||||||||||
Description | (Level 1) | (Level 2) | (Level 3) | July 3, 2016 | July 3, 2016 | |||||||||||||||
Equity securities | $ | 6,001,841 | $ | - | $ | - | $ | 811,454 | $ | 4,716,081 | ||||||||||
Mutual fund | 2,822,615 | - | - | 66,629 | 108,755 | |||||||||||||||
Certificates of deposits | - | 484,558 | - | - | - | |||||||||||||||
TOTAL | $ | 8,824,456 | $ | 484,558 | - | $ | 878,083 | $ | 4,824,836 | |||||||||||
The fair value of these assets as of June 28, 2015 was as follows:
Quoted | Significant | Unrealized | Cumulative | |||||||||||||||||
Price for | Other | Significant | gains/(losses) | Unrealized | ||||||||||||||||
Identical | Observable | Unobservable | for the | gains/(losses) | ||||||||||||||||
Assets | Inputs | Inputs | Year Ended | as of | ||||||||||||||||
Description | (Level 1) | (Level 2) | (Level 3) | June 28, 2015 | June 28, 2015 | |||||||||||||||
Equity securities | $ | 5,190,387 | $ | - | $ | - | $ | (183,599 | ) | $ | 3,904,627 | |||||||||
Mutual fund | 3,676,005 | - | - | (42,111 | ) | 58,014 | ||||||||||||||
Certificates of deposits | - | 133,729 | - | - | - | |||||||||||||||
TOTAL | $ | 8,866,392 | $ | 133,729 | - | $ | (225,710 | ) | $ | 3,962,641 | ||||||||||
The fair value of certificates of deposits is estimated using net present value techniques and comparing the values to certificates with similar terms.
4. LAND, BUILDINGS, AND EQUIPMENT
Land, buildings, and equipment, at cost, consisted of the following:
July 3, | June 28, | |||||||
2016 | 2015 | |||||||
Buildings | $ | 18,666,152 | $ | 18,741,152 | ||||
Leasehold and building improvements | 8,068,521 | 8,102,338 | ||||||
Bowling lanes and equipment | 22,429,142 | 22,404,206 | ||||||
Land | 10,516,607 | 10,526,607 | ||||||
Amusement games | 726,471 | 739,007 | ||||||
Bowling lanes and equipment not yet in use | 104,506 | 141,938 | ||||||
Total Land, Buildings, and Equipment | 60,511,399 | 60,655,248 | ||||||
Less accumulated depreciation and amortization | 40,987,543 | 40,237,794 | ||||||
Land, Buildings, and Equipment, net | $ | 19,523,856 | $ | 20,417,454 | ||||
Depreciation and amortization expense for buildings and equipment for fiscal years 2016 and 2015 was $1,153,121, and $1,254,541, respectively. The Company includes construction in progress costs in the bowling lanes and equipment not yet in use category until completion of the project. Bowling lanesand equipment not yet in use are not depreciated.
5. COMMITMENTS AND CONTINGENCIES
Lease Commitments
The Company and its subsidiaries are obligated under long-term real estate lease agreements for two bowling centers. Certain of the Company's real estate leases provide for increases in real estate taxes.
At July 3, 2016, the minimum fixed rental commitments related to all non-cancelable leases, were as follows:
Year Ending | ||||
2017 | $ | 318,000 | ||
2018 | 318,000 | |||
2019 | 318,000 | |||
2020 | 33,834 | |||
Thereafter | - | |||
Total minimum lease payments | $ | 987,834 |
Net rent expense was as follows:
For the Years Ended | ||||||||
July 3, | June 28, | |||||||
2016 | 2015 | |||||||
Minimum rent under operating leases | $ | 318,000 | $ | 315,500 | ||||
Excess percentage rents | - | - | ||||||
Net rent expense | $ | 318,000 | $ | 315,500 | ||||
Purchase Commitments
The Company's purchase commitments at July 3, 2016 are for materials, supplies, services and equipment as part of the normal course of business.
6. PROFIT-SHARING AND ESOP PLAN
The Company has two defined contribution plans. The first is a profit-sharing plan which, generally, covers all employees who on the last day of the fiscal year or December 29 have been employed for one year with at least one thousand hours of service. The Plan provides for Company contributions asdetermined by the Board of Directors. For the years ended July 3, 2016 and June 28, 2015, contributions in the amounts of $75,000 and $57,500, respectively, were charged to operating expense.
Effective March 31, 1987, the Company adopted an Employee Stock Ownership Plan (ESOP) which generally covers all individuals who were employed at the end of the fiscal year and had one thousand ormore hours of service during that fiscal year. The Plan provides for Company contributions as determinedby the Board of Directors. The Company contributed $75,000 for fiscal year 2016 and $57,500 for fiscal year 2015. The Company has no defined benefit plan or other post retirement plan.
7. INCOME TAXES
The Company is required to analyze all material positions it has taken or plans to take in all tax returns that have been filed or should have been filed with all taxing authorities for all years still subject to challenge by those taxing authorities. If the position taken is “more-likely-than-not” to be sustained by the taxing authority on its technical merits and if there is more than a 50% likelihood that the position would be sustained if challenged and considered by the highest court in the relevant jurisdiction, the tax consequences of that position should be reflected in the taxpayer’s financial statements.
The Company had no material unrecognized tax benefits at July 3, 2016 nor does it expect any significant change in that status during the next twelve months. No accrued interest or penalties onuncertain tax positions have been included on the consolidated statements of earnings and comprehensive earnings or the consolidated balance sheet. Should the Company adopt tax positions for which it would be appropriate to accrue interest and penalties, such costs would be reflected in the tax expense for the period in which such costs accrued. The Company is subject to U.S. Federal income tax and to several state jurisdictions. Returns filed for tax periods ending after July 1, 2012 are still open to examination by those relevant taxing authorities.
The significant components of the Company's deferred tax assets and liabilities were as follows:
July 3, | June 28, | |||||||
2016 | 2015 | |||||||
Deferred tax: | ||||||||
Land, buildings, and equipment | $ | 596,688 | $ | 696,244 | ||||
Unrealized gain on available-for-sale securities | 1,840,861 | 1,509,633 | ||||||
Prepaid expenses and other | (24,725 | ) | (25,849 | ) | ||||
Deferred tax liabilities | $ | 2,412,824 | $ | 2,180,028 | ||||
Income tax expense differs from the amounts computed by applying the U.S. Federal income tax rate to income before tax for the following reasons:
For the Years Ended | ||||||||
2016 | 2015 | |||||||
Taxes computed at statutory rate | 34.0 | % | 34.0 | % | ||||
State income taxes, net of Federal income tax benefit | 4.1 | 2.8 | ||||||
Dividends received exclusion | (2.1 | ) | (2.8 | ) | ||||
All other net | (1.0 | ) | (2.3 | ) | ||||
Net effective rate | 35.0 | % | 31.7 | % | ||||
8. STOCKHOLDERS' EQUITY
The Class A shares have one vote per share. The Class B shares may vote ten votes per share and are convertible to Class A shares at the option of the stockholder.
At July 3, 2016, and June 28, 2015, the Company had $34,799 in employee loans related to the issuance of shares, respectively. These loans are secured by the shares of the Company's common stock acquired and are full recourse notes. The notes bear interest at rates of 2% to 2.5% and are payable over a term of three years from the date of the agreements which range from 2014 to 2015. These employee loans have been recorded as a reduction of additional paid-in capital.
9. DEFERRED COMPENSATION
Deferred compensation payable was a total of $29,915 at July 3, 2016, and $35,106 at June 28, 2015. The current portion of these amounts is $6,295 at July 3, 2016, and $6,209 at June 28, 2015, and is included in accrued expenses.
| 1395 Piccard Drive, Suite 240 Rockville, Maryland 20850 Phone 301.337.3305 |
Report of Independent Registered Public Accounting Firm
To the Board of Directors and Stockholders of
Bowl America Incorporated
Alexandria, Virginia
We have audited the accompanying Consolidated Balance Sheets of Bowl America Incorporated and Subsidiaries as of July 3, 2016 and June 28, 2015, and the related Consolidated Statements of Earnings and Comprehensive Earnings, Stockholders' Equity and Cash Flows for the years ended July 3, 2016 and June 28, 2015. Bowl America Incorporated and Subsidiaries’ management is responsible for these consolidated financial statements. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Bowl America Incorporated and Subsidiaries as of July 3, 2016 and June 28, 2015, and the results of their operations and their cash flows for the years ended July 3, 2016 and June 28, 2015, in conformity with accounting principles generally accepted in the United States of America.
/s/ MN Blum LLC
MN Blum, LLC
Rockville, Maryland
September 29, 2016
Metropolitan Washington | Lanes |
Bowl America Bull Run | 32 |
Bowl America Burke | 34 |
Bowl America Chantilly | 40 |
Bowl America Dranesville | 48 |
Bowl America Fairfax | 40 |
Bowl America Falls Church | 48 |
Bowl America Gaithersburg | 48 |
Bowl America Manassas | 44 |
Bowl America Shirley | 40 |
Bowl America Woodbridge | 40 |
Metropolitan Baltimore | Lanes |
Bowl America Glen Burnie | 48 |
Richmond | Lanes |
Bowl America Eastern Richmond | 36 |
Bowl America Midlothian | 52 |
Bowl America Short Pump | 40 |
Bowl America Southwest | 40 |
Jacksonville | Lanes |
Bowl America Mandarin | 32 |
Bowl America Orange Park | 32 |
Bowl America Southside | 32 |
directors
Arthur H. Bill
Retired Attorney
Warren T. Braham
Retired Attorney
Cheryl A. Dragoo
Controller, Senior Vice President &
Chief Financial Officer
Bowl America Inc.
Merle Fabian
Retired Librarian
Leslie H. Goldberg
President &
Chief Executive Officer
Bowl America Inc.
Nancy E. Hull
Owner
Simplified Bookkeeping, LTD
Ruth E. Macklin
Retired Educator
Allan L. Sher
Retired Senior Executive of
Securities Brokerage Industry
officers
Leslie H. Goldberg
President & Chief Executive Officer
Ruth E. Macklin
Senior Vice President, Secretary & Treasurer
Cheryl A. Dragoo
Senior Vice President, Assistant Treasurer
& Chief Financial Officer
Albert B. Young
Assistant Secretary & Assistant Controller
directory
Transfer Agent and Registrar
Computershare, Inc.
250 Royall Street
Canton, MA 02021
Auditors
MN Blum, LLC
Corporate Offices
6446 Edsall Road
Alexandria, VA 22312
703/941-6300
Mailing Address
Post Office Box 1288
Springfield, VA 22151
Counsel
Foley & Lardner LLP
Symbol
NYSE MKT
BWL A
Web site
www.bowlamericainc.com
