SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 or 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended June 29, 2008 Commission file Number 1-7829
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
Securities Registered Pursuant to Section 12(b) of the Act:
Title of Class Name of Exchange on
which registered
Common stock (par value $.10) American Stock Exchange
Indicate by check mark if the registrant is a well-known seasoned issuer,
as defined in Rule 405 of the Securities Act. YES [ ] NO [X]
Indicate by check mark if the registrant is not required to file reports
pursuant to Section 13 or Section 15(d) of the Act. YES[ ] NO [X]
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. YES [X] NO [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K, (Section 229.405) is not contained herein, and will
not be contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-K
or any amendments to this Form 10-K. [X]
Indicate by check mark whether the registrant is a large accelerated filer
an accelerated filer, a non-accelerated filer or a smaller reporting company.
See definitions of "large accelerated filer", "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 checkmark whether the registrant is a shell company (as
defined by Rule 12b-2 of the act). YES [ ] NO [X]
As of December 30, 2007, which was the last business day of the
registrant's most recently completed second quarter, 3,667,228 Class A common
shares were outstanding, and the aggregate market value of the common shares
(based upon the closing price of these shares on the American Stock Exchange)
of Bowl America Incorporated held by nonaffiliates of the registrant was
approximately $37 million. As of that date 1,468,462 Class B common shares
were outstanding. Class B common shareholders have the right to convert their
Class B common to Class A common stock on a share for share basis. If the
Class B shares were converted to Class A shares as of December 30, 2007, the
total aggregate market value for both classes of common stock held by
nonaffiliates would be approximately $40 million.
Indicate the number of shares outstanding of each of the registrant?s
Classes of common stock, as of the latest practicable date:
Shares outstanding at
September 1, 2008
Class A Common Stock
$.10 par value 3,667,228
Class B Common Stock
$.10 par value 1,468,462
DOCUMENTS INCORPORATED BY REFERENCE
Portions of registrant's definitive proxy statement, which will be filed
with the Commission not later than 120 days after June 29, 2008, are
incorporated into Part III of this Form 10-K.
BOWL AMERICA INCORPORATED
INDEX TO FISCAL 2008 10-K FILING
PART I
Page
Cover Page
Documents Incorporated by Reference
Index
ITEM 1. Business
(a) General Development of Business 1
(b) Financial Information about Industry Segments 1
(c) Narrative Description of Business 1
(d) Financial Information about Geographic Areas 1
ITEM 2. Properties 2
ITEM 3. Legal Proceedings 2
ITEM 4. Submission of Matters to a Vote of Security Holders 2
PART II
ITEM 5. Market for Registrant's Common Equity, Related Stockholder
Matters and Issuer Purchases of Equity Securities 2
ITEM 6. Selected Financial Data 3
ITEM 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations 3
ITEM 8. Financial Statements and Supplementary Data 3
ITEM 9. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure 3
ITEM 9A(T). Controls and Procedures 4
PART III
ITEM 10. Directors, Executive Officers and Corporate Governance 4
ITEM 11. Executive Compensation 4
ITEM 12. Security Ownership of Certain Beneficial Owners and Management
and Related Stockholder Matters 5
ITEM 13. Certain Relationships and Related Transactions,
and Director Independence 5
ITEM 14. Principal Accountant Fees and Services 5
PART IV
ITEM 15. Exhibits and Financial Statement Schedules
(a)1. Financial Statements 5
(a)3. Exhibits 5-6
Signatures 7-8
PART I
ITEM 1. BUSINESS
(a) General Development of Business
Bowl America Incorporated (herein referred to as the Company) was
incorporated in 1958. The Company commenced business with one bowling center
in 1958, and at the end of the past fiscal year, the Company and its wholly-
owned subsidiaries operated 19 bowling centers. The bowling center in Falls
Church, Virginia, was closed in February 2007, due to damage from an ice storm.
The center reopened March 31, 2008.
(b) Financial Information about Industry Segments
The Company operates in one segment. Its principal source of
revenue consists of fees charged for the use of bowling lanes and other
facilities and from the sale of food and beverages for consumption on the
premises. Merchandise sales, including food and beverages, were approximately
29% of operating revenues. The balance of operating revenues (approximately
71%) represents fees for bowling and related services.
(c) Narrative Description of Business
As of September 1, 2008 the Registrant and its subsidiaries operated
10 bowling centers in the greater metropolitan area of Washington, D.C., one
bowling center in the greater metropolitan area of Baltimore, Maryland, one
bowling center in Orlando, Florida, three bowling centers in the greater
metropolitan area of Jacksonville, Florida, and four bowling centers in the
greater metropolitan area of Richmond, Virginia. These 19 bowling centers
contain a total of 756 lanes.
These establishments are fully air-conditioned with facilities for
service of food and beverages, game rooms, rental lockers, and meeting room
facilities. All centers provide shoes for rental, and bowling balls are
provided free. In addition, each center retails bowling accessories. Most
locations are equipped for glow-in-the-dark bowling, popular for parties and
non-league bowling.
The bowling equipment essential for the Company's operation is
readily available. The major source of its equipment is Brunswick Corporation.
The bowling business is a seasonal one, and most of the business takes
place from October through May. It is highly competitive, but the Company has
managed to maintain its position in the markets in which it operates. The
principal method of competition is the quality of service furnished to the
Company's customers. Its primary competitors are two large bowling equipment
manufacturers, Brunswick Corporation and AMF Bowling Worldwide, Inc.
Compliance with federal, state and local environmental protection laws
has not materially affected the Company.
The number of persons employed by the Company and its subsidiaries is
approximately 750.
(d) Financial Information about Geographic Areas
The Company has no foreign operations.
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ITEM 2. PROPERTIES
The Company's general offices are located at 6446 Edsall Road,
Alexandria, Virginia 22312.
Two of the Company's bowling centers are located in leased premises,
and the remaining seventeen centers are owned by the Company. The Company's
leases expire from 2009 through 2014. The specific locations of the bowling
centers are discussed under Item 1 (c).
ITEM 3. LEGAL PROCEEDINGS
There are no material pending legal proceedings other than ordinary
routine litigation incidental to the business.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders during the
fourth quarter ended June 29, 2008.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER
MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
(a) Market Information
The principal market on which the Company's Class A Common Stock is traded is
the American Stock Exchange. The Company's Class B Common Stock is not listed
on any exchange and is not traded. This stock can be converted to Class A
Common Stock at any time. The table below presents the high and low sales
price range of the Company's Class A stock in each quarter of fiscal 2008 and
2007.
2008 1st Qtr 2nd Qtr 3rd Qtr 4th Qtr
_______________________________________________________
High $17.35 $16.28 $15.91 $15.75
Low $16.10 $15.76 $15.20 $13.75
2007 1st Qtr 2nd Qtr 3rd Qtr 4th Qtr
_______________________________________________________
High $14.68 $15.85 $16.80 $17.05
Low $14.35 $14.31 $15.75 $16.52
(b) Holders
The approximate number of holders of record of the Company's Class A Common
Stock as of June 29, 2008 is 392 and of the Company's Class B Common Stock
is 26.
-2-
(c) Cash Dividends
The table below presents the cash dividends per share of Class A and Class B
stock paid, and the quarter in which the payment was made during fiscal 2008
and 2007.
Class A Common Stock
Quarter 2008 2007
_________________________________________
First 14.5 cents 14 cents
Second 14.5 cents 14 cents
Third 25 cents 14.5 cents
Fourth 15 cents 14.5 cents
Class B Common Stock
Quarter 2008 2007
_________________________________________
First 14.5 cents 14 cents
Second 14.5 cents 14 cents
Third 25 cents 14.5 cents
Fourth 15 cents 14.5 cents
(d) Securities Authorized for Issuance Under Equity Compensation Plans
None
(e) Performance Graph
Not required
ITEM 6. SELECTED FINANCIAL DATA
The information is set forth in the section entitled "Selected
Financial Data" on page 13 of this Form 10-K. Such information should be read
in conjunction with the audited financial statements.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The information is set forth in the section entitled "Management's
Discussion and Analysis of Financial Condition and Results of Operations" on
Pages 10 through 12 of this Form 10-K.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The financial statements are set forth on pages 14 through 25 of this
Form 10-K. Supplementary data is not required.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE
None
-3-
ITEM 9A(T). CONTROLS AND PROCEDURES
Disclosure Controls and Procedures
The Company's disclosure controls and procedures are designed to
provide reasonable assurance that information required to be disclosed by it in
its periodic reports filed with the Securities and Exchange Commission is
recorded, processed, summarized and reported within the time periods specified
in the Commission's rules and forms. Based on an evaluation of the Company's
disclosure controls and procedures conducted by the Company's Chief Executive
Officer and Chief Financial Officer, such officers concluded that the Company's
disclosure controls and procedures were effective as of June 29, 2008.
Additionally, the Company's officers concluded that the Company's disclosure
controls and procedures were effective as of June 29, 2008 to ensure that
information required to be disclosed in the reports filed with the Exchange
Act was accumulated and communicated to management, including the Company's
Chief Executive Officer and Chief Financial Officer, to allow timely decisions
regarding required disclosures.
Internal Control over Financial Reporting
(a) Management's Annual Report on Internal Control Over Financial
Reporting
In accordance with Section 404(a) of the Sarbanes-Oxley Act of 2002
and Item 308(a) of the Commission's Regulation S-K, the report of management
on the Company's internal control over financial reporting is set forth
immediately preceding the Company's financial statements included in this
Annual Report on Form 10-K.
(b) Changes in Internal Control Over Financial Reporting
In accordance with Rule 13-a-15(d) under the Securities Exchange Act
of 1934, management, with the participation of the Company's Chief Executive
Officer and Chief Financial Officer, determined that there was no change in
the Company's internal control over financial reporting that occurred during
the fourth quarter ended June 29, 2008 that has materially affected, or is
reasonably likely to materially affect, the Company's internal control over
financial reporting.
PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
Pursuant to General Instruction G(3) of Form 10-K, the information
called for by this item regarding directors and executive officers is hereby
incorporated by reference from the Company's definitive proxy statement to be
filed pursuant to Regulation 14A not later than 120 days after the end of the
fiscal year covered by this report.
ITEM 11. EXECUTIVE COMPENSATION
Pursuant to General Instruction G(3) of Form 10-K, the information
called for by this item is hereby incorporated by reference from the Company's
definitive proxy statement to be filed pursuant to Regulation 14A not later
than 120 days after the end of the fiscal year covered by this report.
-4-
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
AND RELATED STOCKHOLDER MATTERS
Pursuant to General Instruction G(3) of Form 10-K, the information
called for by this item is hereby incorporated by reference from the Company's
definitive proxy statement to be filed pursuant to Regulation 14A not later
than 120 days after the end of the fiscal year covered by this report.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
INDEPENDENCE
Pursuant to General Instruction G(3) of Form 10-K, the information
called for by this item is hereby incorporated by reference from the Company's
definitive proxy statement to be filed pursuant to Regulation 14A not later
than 120 days after the end of the fiscal year covered by this report.
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
Pursuant to General Instruction G(3) of Form 10-K, the information
called for by this item is hereby incorporated by reference from the Company's
definitive proxy statement to be filed pursuant to Regulation 14A not later
than 120 days after the end of the fiscal year covered by this report.
PART IV
ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a)1. Financial Statements
The following consolidated financial statements of Bowl America
Incorporated and its subsidiaries are incorporated by reference
in Part II, Item 8:
Report of Independent Registered Public Accounting Firm
Consolidated balance sheets - June 29, 2008 and July 1, 2007
Consolidated statements of earnings and comprehensive earnings
- years ended June 29, 2008, and July 1, 2007
Consolidated statements of stockholders' equity - years ended
June 29, 2008, and July 1, 2007
Consolidated statements of cash flows - years ended
June 29, 2008, and July 1, 2007
Notes to the consolidated financial statements - years ended
June 29, 2008, and July 1, 2007
(a)2. Exhibits:
3(i)a Articles of Incorporation of the Registrant and amendments
through December 1988 thereto (Incorporated by reference from
exhibit number 3 to the Annual Report for 1989 on Form 10-K for
fiscal year ended July 2, 1989.)
-5-
3(i)b Amendment to and restatement of Article FIFTH (b) III 2.2
of the Registrant's Articles of Incorporation (Incorporated by
reference from the Registrant's Form 8-K filed December 9, 1994.)
3(ii) By-laws of the Registrant (Incorporated by reference from
exhibit 3 to the Annual Report for 1989 on Form 10-K for fiscal
year ended July 2, 1989.)
10(a) Employment Agreement, as amended June 17, 2008, between
Registrant and Leslie H. Goldberg (filed herewith)
10(b) Employment agreement, dated December 5, 2006, between
Registrant and Cheryl A. Dragoo. (Incorporated by reference
from Registrant's Form 8-K filed December 7, 2006)
21 Subsidiaries of registrant (Incorporated by reference from
exhibit number 1 to the Registrant's Annual Report on Form 10-K
for fiscal year ended June 30, 2002.)
31.1 Written statement of Chief Executive Officer (Rule 13a-14a
Certification)
31.2 Written statement of Chief Financial Officer (Rule 13a-14a
Certification)
32 Written statement of Chief Executive and Chief Financial
Officers (Section 1350 Certifications)
-6-
BOWL AMERICA INCORPORATED
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange 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
Leslie H. Goldberg
President
Chief Executive and Operating Officer
Date: September 25, 2008
Cheryl A. Dragoo
Chief Financial Officer,
Assistant Treasurer and Controller
Principal Accounting Officer
Date: September 25, 2008
-7-
BOWL AMERICA INCORPORATED
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant and in the capacities and the dates indicated.
Name, Title, Capacity
Leslie H. Goldberg
President, Principal Executive
& Operating Officer & Director
Date: September 25, 2008
Ruth Macklin A. Joseph Levy
Senior Vice President-Treasurer Senior Vice President-Secretary
and Director and Director
Date: September 25, 2008 Date: September 25, 2008
Warren T. Braham Stanley H. Katzman
Director Director
Date: September 25, 2008 Date: September 25, 2008
Allan L. Sher Merle Fabian
Director Director
Date: September 25, 2008 Date: September 25, 2008
-8-
Management's Annual Report on Internal Control Over Financial Reporting
The following sets forth, in accordance with Section 404(a) of the
Sarbanes-Oxley Act of 2002 and Item 308(a) of the Securities and Exchange
Commission's Regulation S-K, the annual report of management of Bowl America
Incorporated (the "Company") on the Company's internal control over financial
reporting.
1. Management of the Company is responsible for establishing and maintaining
adequate internal control over financial reporting in a process designed by,
or under the supervision of the Company's Chief Executive Officer and Chief
Financial Officer and effected by the Company's Board of Directors, management
and other personnel, to provide reasonable assurance regarding the reliability
of financial reporting and the preparation of financial statements for external
purposes in accordance with generally accepted accounting principles and
includes those policies and procedures that:
* Pertain to the maintenance of records that in reasonable detail
accurately and fairly reflect the transactions and dispositions
of the assets of the Company;
* Provide reasonable assurance that transactions are recorded as
necessary to permit preparation of financial statements in
accordance with generally accepted accounting principles, and
that receipts and expenditures of the Company are being made only
in accordance with authorizations of management and directors of
the Company; and
* Provide reasonable assurance regarding prevention or timely
detection of unauthorized acquisition, use or disposition of the
Company's assets that could have a material effect on the
financial statements.
2. Management of the Company, in accordance with Rule 13a-15(d) under the
Securities Exchange Act of 1934 and with the participation of the Company's
Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness
of the Company's internal control over financial reporting as of June 29, 2008.
The framework on which management's evaluation of the Company's internal control
over financial reporting is based is the "Internal Control-Integrated Framework"
published in 1992 by the Committee of Sponsoring Organizations ("COSO") of the
Treadway Commission.
3. Management has determined that the Company's internal control over
financial reporting as of June 29, 2008, was effective. Because of its inherent
limitations, internal control over financial reporting may not prevent or detect
misstatements. Also, projections of any evaluation of effectiveness to future
periods are subject to the risk that controls may become inadequate because of
changes in conditions, or that the degree of compliance with the policies or
procedures may deteriorate.
4. This annual report does not include an attestation report of the Company's
registered public accounting firm regarding internal control over financial
reporting. Management's report was not subject to attestation by the Company's
registered public accounting firm pursuant to temporary rules of the Securities
and Exchange Commission that permit the company to provide only management's
report in this annual report.
-9-
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES
Cash flow provided by operating activities in fiscal 2008 was
$3,500,000 which was sufficient to meet day-to-day cash needs. Short-
term investments consisting mainly of Certificates of Deposits, cash
and cash equivalents totaled $8,404,000 at the end of fiscal 2008
compared to $9,013,000 at the end of fiscal 2007. In the third quarter of
fiscal 2007, a bowling center in Falls Church, Virginia, was temporarily
closed due to roof damage caused by an ice storm. The building remained
closed for repairs through the first three quarters of fiscal 2008, reopening
on March 31, 2008, the first day of the fiscal fourth quarter.
During fiscal year 2008, the Company expended approximately $740,000 for
the purchase of entertainment and restaurant equipment. In May 2008, the
Company purchased and received bowling pins totaling approximately $246,000.
The Company is seeking property for the development of new bowling centers.
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.
The Company's position in marketable equity securities, primarily
telecommunication stocks, is a further source of expansion capital. These
marketable securities are carried at their fair value on the last day of the
year. The value of the securities on June 29, 2008 was approximately $4.3
million compared to $6.1 million at July 1, 2007, prior to disposition of
Alltel and Avaya stock. During the second quarter of fiscal 2008, the Company
received approximately $291,000 from the combination of the sale of its Alltel
holdings and the mandatory conversion of Avaya stock for cash.
Cash dividends totaling $3.5 million, or $.69 per share, including a $.10
per share special dividend on the 50th anniversary of the opening of Bowl
America's first location, were paid to shareholders during the 2008 fiscal year,
making this the thirty-sixth consecutive year of increased dividends per share.
In June 2008, the Company declared a quarterly $.15 per share dividend paid in
August 2008. While no factors requiring a change in the dividend rate are yet
apparent, 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 future opportunities.
RESULTS OF OPERATIONS
Fiscal years 2008 and 2007 each consisted of 52 weeks. The Company
temporarily closed its existing Falls Church, Virginia, bowling center in
February 2007 when its roof was damaged by an ice storm. The center reopened
on March 31, 2008. In fiscal 2008, eighteen centers were in operation for the
first nine months and nineteen centers were operating during the final three
months. In fiscal 2007, until the ice storm occurred about half-way through
the third quarter, nineteen centers were in operation. All comparisons in this
discussion and throughout the report are affected by the change in the number
of centers in operation in fiscal years 2008 and 2007.
Management has not completed its analysis of expected business interruption
insurance recovery for the closed center, but the Company believes it will
-10-
recover $800,000 of lost income, included in Operating Revenues, for the period
July 2, 2007 through June 29, 2008. Estimated insurance recovery of $440,000
was included in the same category in fiscal 2007. The amounts are net after
expenses and are allocated to Bowling and other and Food, beverage and
merchandise sales.
Operating revenues decreased $1,870,000 or about 6% in fiscal 2008 and
increased $1,654,000 or about 5% in fiscal 2007. Bowling and other revenue
decreased $1,446,000 or 6% in fiscal 2008 and increased $1,241,000 or 6% in
fiscal 2007. Food, beverage and merchandise sales declined $425,000 or 5% in
fiscal 2008 and rose $413,000 or 5% in fiscal 2007.
Total operating expense decreased $691,000 or 3% in fiscal 2008 and
increased $1,071,000 or 4% in fiscal 2007. Costs for employee compensation
and benefits were down 2% in fiscal 2008 and up 5% in the prior year period.
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 1% and increased 3% in fiscal
years 2008 and 2007, respectively. Maintenance expense decreased 13% in fiscal
2008 and increased 4% in fiscal 2007. Supplies expense dropped 10% in fiscal
2008 and was up 17% in fiscal 2007. In the prior year point-of-sale systems
and entertainment supplies were responsible for the majority of the increase.
Advertising costs decreased $41,000 or 7% in fiscal 2008 compared to a
decrease of $91,000 or 13% in fiscal 2007. Utility costs were up 3% in fiscal
2008 and 4% in fiscal 2007.
Rent expense declined 13% in fiscal year 2008 and was up 7% fiscal year 2007
primarily as a result of changes in percentage rent at a leased location.
Insurance expense, excluding health and life, increased 3% in fiscal 2008 and
declined 6% in fiscal 2007.
Depreciation expenses decreased $154,000 or 8% in fiscal year 2008 as no
depreciation expense was recorded for Falls Church for the period of its
closure. Depreciation expense increased $253,000 or 15% in fiscal 2007, the
first full year of operation for the Short Pump location.
Operating income in fiscal 2008 decreased approximately 21% to $4.3 million
from $5.5 million in fiscal 2007.
Interest and dividend income decreased 6% in fiscal 2008 as a result of
lower investment balances and lower interest rates. In fiscal 2007 the same
category increased 32% in part from a one-time dividend on a telecom stock.
Investment earnings of $267,000 on the Alltel and Avaya transactions
mentioned above, were recorded in fiscal 2008.
Effective income tax rates for the Company were 35% for fiscal 2008, and
34.4% for fiscal 2007, the difference from statutory rates being primarily for
the partial exclusion of dividends received on investments and the state tax
exemption for interest on U.S. Government obligations.
Net earnings in fiscal 2008 were $3.5 million or $.69 per share compared to
$4.2 million or $.82 per share in fiscal 2007.
-11-
CRITICAL ACCOUNTING POLICIES
We have identified accounting for marketable investment securities
under SFAS 115 "Accounting for Certain Investments in Debt and Equity
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 Company records these
investments at their fair value based on quoted market prices with the
unrealized gain or loss recorded in 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
under SFAS 144 Accounting for the Impairment or Disposal 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. 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 undiscounted
future cash flows are less than the carrying amount.
-12-
BOWL AMERICA INCORPORATED AND SUBSIDIARIES
CONSOLIDATED SUMMARY OF OPERATIONS
Selected Financial Data
For the Years Ended
June 29, July 1, July 2, July 3, June 27,
2008 2007 2006 2005 2004
__________________________________________________________
Operating Revenues $30,103,846 $31,974,336 $30,320,251 $28,607,145 $28,433,689
Operating Expenses 25,790,753 26,481,388 25,410,113 23,435,145 23,539,032
Interest and dividend
Income 811,205 863,983 655,818 609,963 413,738
Investment Earnings
(loss) 267,237 (3,613) - 151,817 -
Gain on Sale of Land,
Buildings and
Equipment 45,368 15,557 23,028 65,531 2,201,240
__________ __________ _________ _________ _________
Earnings before pro-
vision for income
taxes 5,436,903 6,368,875 5,588,984 5,999,311 7,509,635
Provision for income
taxes 1,902,363 2,179,932 1,949,409 2,150,030 2,807,896
__________ __________ __________ __________ __________
Net Earnings $ 3,534,540 $ 4,188,943 $ 3,639,575 $ 3,849,281 $ 4,701,739
Weighted Average
Shares Outstanding
Basic & Diluted 5,135,693 5,136,499 5,136,968 5,137,773 5,138,559
Earnings Per Share
Basic & Diluted $.69 $.82 $.71 $.75 $.91
Net Cash Provided by
Operating Activities $3,499,703 $6,101,075 $4,292,512 $5,503,187 $5,501,857
Cash Dividends Paid $3,543,631 $2,927,853 $2,876,696 $2,774,419 $2,672,062
Cash Dividends Paid
Per Share-Class A $.69 $.57 $.56 $.54 $.52
-Class B $.69 $.57 $.56 $.54 $.52
Total Assets $44,056,750 $45,834,730 $43,130,385 $42,548,998 $40,579,581
Stockholders' Equity $38,214,963 $39,337,237 $37,088,954 $36,191,662 $34,896,581
Net Book Value Per
Share $7.44 $7.66 $7.22 $7.04 $6.79
Net Earnings as a %
of Beginning Stock-
holders' Equity 9.0% 11.3% 10.1% 11.0% 14.3%
Lanes in Operation 756 756 756 716 716
Centers in Operation 19 19 19 18 18
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BOWL AMERICA INCORPORATED AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
June 29, 2008 July 1, 2007
ASSETS
Current Assets
Cash and cash equivalents (Note 2) $ 2,129,512 $ 1,547,345
Short-term investments (Note 3) 6,274,274 7,465,611
Inventories 800,559 581,705
Prepaid expenses and other 1,959,849 1,067,523
Income taxes refundable 366,984 36,555
Current deferred income taxes (Note 7) 27,141 29,154
__________ __________
Total Current Assets 11,558,319 10,727,893
__________ __________
Land, Buildings and Equipment, Net (Note 4) 24,860,760 25,887,241
__________ __________
Other Assets
Marketable investment securities (Note 3) 7,008,263 8,620,817
Cash surrender value-officers'life insurance 529,628 502,099
Other 99,780 96,680
__________ __________
Total Other Assets 7,637,671 9,219,596
__________ __________
TOTAL ASSETS $44,056,750 $45,834,730
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts payable $ 919,760 $ 919,297
Accrued expenses 1,147,524 1,067,203
Dividends payable 770,353 744,679
Other current liabilities 332,385 330,372
_________ _________
Total Current Liabilities 3,170,022 3,061,551
Long-Term Deferred Compensation 54,621 59,224
Non-current Deferred Income Taxes (Note 7) 2,617,144 3,376,718
_________ _________
TOTAL LIABILITIES 5,841,787 6,497,493
_________ _________
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 per share
Authorized 10,000,000 shares
Class A outstanding
3,667,228 and 3,667,254 366,722 366,725
Class B outstanding 1,468,462 shares 146,846 146,846
Additional paid-in capital 7,478,838 7,478,876
Accumulated other comprehensive earnings-
Unrealized gain on available-for-sale
securities, net of tax 2,281,121 3,368,192
Retained earnings 27,941,436 27,976,598
__________ __________
TOTAL STOCKHOLDERS' EQUITY $38,214,963 $39,337,237
__________ __________
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $44,056,750 $45,834,730
=========== ==========
The accompanying notes to the consolidated financial statements are an integral
part of these financial statements.
-14-
BOWL AMERICA INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS & COMPREHENSIVE EARNINGS
For the Years Ended
June 29, 2008 July 1, 2007
Operating Revenues
Bowling and other $21,430,757 $22,876,620
Food, beverage and merchandise sales 8,673,089 9,097,716
__________ __________
30,103,846 31,974,336
__________ __________
Operating Expenses
Compensation and benefits 13,749,121 14,016,650
Cost of bowling and other 6,877,826 6,956,702
Cost of food, beverage and
merchandise sales 2,532,285 2,673,667
Depreciation and amortization 1,764,226 1,918,595
General and administrative 867,295 915,774
__________ __________
25,790,753 26,481,388
__________ __________
Operating Income 4,313,093 5,492,948
Interest and dividend income 811,205 863,983
Investment earnings (loss) 267,237 (3,613)
Gain on sale of land, buildings and equipment 45,368 15,557
__________ __________
Earnings before provision for income taxes 5,436,903 6,368,875
__________ __________
Provision for income taxes(Note 7)
Current 2,022,306 2,118,337
Deferred (119,943) 61,595
__________ __________
1,902,363 2,179,932
__________ __________
Net Earnings $ 3,534,540 $ 4,188,943
__________ __________
Earnings Per Share-Basic & Diluted $.69 $.82
___ ___
Net Earnings $ 3,534,540 $ 4,188,943
Other Comprehensive (Loss) Gain Net of Tax
Unrealized gain on available-for-sale securities,
net of (543,668) and 602,769 (926,896) 1,027,254
Reclassification adjustment for (gain) loss
included in net income net of 98,797 and (1,335) (160,175) 2,373
__________ __________
Comprehensive Earnings $ 2,447,469 $ 5,218,570
__________ __________
The accompanying notes to the consolidated financial statements are an integral
part of these financial statements.
-15-
BOWL AMERICA INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
COMMON STOCK Accumulated
_______________________________________ Additional Other
Class A Class A Class B Class B Paid-In Comprehensive Retained
Shares Amount Shares Amount Capital Earnings Earnings
___________________________________________________________________________________________________________
Balance, July 2, 2006 3,668,430 $366,843 1,468,462 $146,846 $7,480,615 $2,338,565 $26,756,085
Purchase of stock (1,176) (118) - - (1,739) - (15,063)
Cash dividends paid - - - - - - (2,208,688)
Accrued dividends declared
June 19, 2007, payable
August 10, 2007 - - - - - - (744,679)
Change in unrealized gain on
available-for-sale securities
(shown net of tax) - - - - - 1,027,254 -
Reclassification adjustment
for loss included in net income,
net of tax - - - - - 2,373 -
Net earnings for the year - - - - - - 4,188,943
__________________________________________________________________________________________________________
Balance, July 1, 2007 3,667,254 $366,725 1,468,462 $146,846 $7,478,876 $3,368,192 $27,976,598
Purchase of stock (26) (3) - - (38) - (397)
Cash dividends paid - - - - - - (2,798,952)
Accrued dividends declared
June 17, 2008, payable
August 6, 2008 - - - - - - (770,353)
Change in unrealized gain on
available-for-sale securities
(shown net of tax) - - - - - (926,896) -
Reclassification adjustment
for gain included in net income,
net of tax - - - - - (160,175) -
Net earnings for the year - - - - - - 3,534,540
__________________________________________________________________________________________________________
Balance, June 29 2008 3,667,228 $366,722 1,468,462 $146,846 $7,478,838 $2,281,121 $27,941,436
<FN>
The accompanying notes to the consolidated financial statements are an integral part of these financial
statements.
-16-
BOWL AMERICA INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
June 29, July 1,
2008 2007
Cash Flows From Operating Activities
Net earnings $3,534,540 $4,188,943
Adjustments to reconcile net earnings to
net cash provided by operating activities:
Depreciation and amortization 1,764,226 1,918,595
(Decrease) increase in deferred income tax (119,943) 61,595
Gain on disposition of assets-net (45,368) (15,557)
(Gain) loss on sale of available-for-sale
securities (267,237) 3,613
Changes in assets and liabilities:
(Increase) decrease in inventories (218,854) 43,762
Increase in prepaid expenses and other (892,326) (20,615)
(Increase) decrease in income taxes refundable (330,429) 136,318
Increase in other long-term assets (3,100) (4,205)
Increase in accounts payable 463 8,747
Increase (decrease) in accrued expenses 80,321 (147,577)
Increase (decrease) in other current liabilities 2,013 (65,547)
Decrease in long-term deferred compensation (4,603) (6,997)
_________ _________
Net cash provided by operating activities $3,499,703 $6,101,075
_________ _________
Cash Flows from Investing Activities
Expenditures for land, buildings, equipment (740,277) (802,065)
Sale of assets 47,900 59,650
Sales and maturities (purchases) of
short-term investments 1,191,337 (1,820,315)
Purchases of marketable securities (135,831) (124,425)
(Increase) decrease in cash surrender value (27,528) 3,565
Proceeds from sale of marketable securities 290,932 18,946
_________ _________
Net cash provided by (used in) investing activities 626,533 (2,664,644)
_________ _________
Cash Flows from Financing Activities
Payment of cash dividends (3,543,631) (2,927,853)
Purchase of Class A Common Stock (438) (16,920)
_________ _________
Net cash used in financing activities (3,544,069) (2,944,773)
_________ _________
Net Increase in Cash and Cash Equivalents 582,167 491,658
_________ _________
Cash and Cash Equivalents, Beginning of Year 1,547,345 1,055,687
_________ _________
Cash and Cash Equivalents, End of Year $2,129,512 $1,547,345
========= =========
Supplemental Disclosures of Cash Flow Information
Cash paid during the year for
Income taxes $2,352,735 $1,993,078
The accompanying notes to the consolidated financial statements are an integral
part of these financial statements.
-17-
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 19 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, one center in metropolitan Orlando, Florida, four
centers in metropolitan Richmond, Virginia, and three centers in metropolitan
Jacksonville, Florida. These 19 centers contain a total of 756 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 2008 ended June 29, 2008, and fiscal year 2007 ended July 1, 2007. Fiscal
years 2008 and 2007 each consisted of 52 weeks.
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 asset or
term of the lease, whichever is shorter. The categories of property, plant,
and equipment and the ranges of estimated useful lives on which depreciation
-18-
and amortization rates are based are as follows:
Bowling lanes and equipment 3-10 years
Building and building improvements 10-39 years
Leasehold improvements 5-10 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 difference
between 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 June 29,
2008, and July 1, 2007, were $549,548 and $590,767, 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
Income taxes are accounted for in accordance with Statement of
Financial Accounting Standards ("SFAS") No. 109, "Accounting for Income
Taxes". Under this method, 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
The Company accounts for its investments in accordance with SFAS No. 115
"Accounting for Certain Investments in Debt and Equity 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.
-19-
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 5,135,693, and 5,136,499, for fiscal years 2008 and 2007,
respectively.
Comprehensive Earnings
In accordance with SFAS No. 130 "Reporting Comprehensive Income", 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 each of the two years in the period ended June 29, 2008.
Cash and Cash Equivalents
For purposes of the consolidated statements of cash flows, the Company
considers money market funds, certificates of deposits, and repurchase
agreements 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 June 29, 2008, and July 1, 2007 other current
liabilities included $334,785, and $317,973, respectively, in prize fund
monies.
Reclassifications
Certain previous year amounts have been reclassified to conform with the
current year presentation.
New Accounting Standards
Financial Accounting Standards Board Interpretation (FIN) No. 48,
" Accounting for Uncertainty in Income Taxes" was issued in July 2006 and
interprets FASB Statement of Financial Accounting Standards (SFAS) No. 109,
"Accounting for Income Taxes". FIN 48 requires all taxpayers to analyze all
material positions they have taken or plan 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 GAAP financial statements. Earlier proposed interpretations
of SFAS 109 had recommended a "probable" standard for recognition of tax
consequences rather than the "more-likely-than-not" standard finally adopted.
The Company was required to implement FIN 48 on July 2, 2007. Consequently,
the Company analyzed its tax positions and determined that no material tax
positions recognition criteria are different under the new standard.
In May 2008, the FASB issued SFAS No. 162, "The Hierarchy of Generally
Accepted Accounting Principles" ("SFAS No. 162"). SFAS No. 162 identifies the
-20-
sources of accounting principles and the framework for selecting the principles
used in the preparation of financial statements that are presented in conformity
with generally accepted accounting principles. SFAS No. 162 is effective 60
days following approval by the Securities and Exchange Commission of the
Public Company Accounting Oversight Board's amendments to AU Section 411,
The Meaning of Present Fairly in Conformity with Generally Accepted
Accounting Principles. The Company does not believe this statement will have
a material impact on its financial position or results of operations.
In May 2008, the FASB issued SFAS No. 163, "Accounting for Financial
Guarantee Insurance Contracts - An interpretation of FASB Statement No. 60".
SFAS No. 163 requires that an insurance enterprise recognize a claim liability
prior to an event of default when there is evidence that credit deterioration
has occurred in an insured financial obligation. It also clarifies how
Statement 60 applies to financial guarantee insurance contracts, including the
recognition and measurement to be used to account for premium revenue and
claim liabilities, and requires expanded disclosures about financial guarantee
insurance disclosures about the insurance enterprise's risk-management
activities. SFAS No. 163 requires that disclosures about the risk-management
activities of the insurance enterprise be effective for the first period
beginning after issuance. Except for those disclosures, earlier application
is not permitted. The Company does not believe this statement will have a
material impact on its financial position or results of operations.
2. CASH AND CASH EQUIVALENTS
Cash and cash equivalents consisted of the following:
June 29, July 1,
2008 2007
Demand deposits and cash on hand $1,015,558 $ 482,667
Money market funds 175,645 175,645
Repurchase agreements 938,309 889,033
_________ _________
$2,129,512 $1,547,345
3. INVESTMENTS
The Company's marketable securities are categorized as available-for-sale
securities as defined by SFAS No. 115, "Accounting for Certain Investments in
Debt and Equity Securities". The cost for marketable securities was determined
using the specific identification method. The fair values of marketable
securities are estimated based on the quoted market price for those securities.
Short-term investments consist of certificates of deposits and U.S. Treasury
securities with maturities of generally three months to one year. At June 29,
2008, the fair value of short-term investments was $6,274,274. At July 1, 2007,
the fair value of short-term investments was $7,465,611. 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 June 29, 2008, the Company had $21,130 of gross unrealized losses from
its investments in federal agency mortgage backed securities which had a fair
value of $2,673,962. As of July 1, 2007, $81,216 gross unrealized losses were
-21-
from its investments in federal agency mortgage backed securities which had a
fair value of $2,479,493.
The following table shows the gross unrealized losses and fair value of the
Company's investments with unrealized losses that are not deemed to be other-
than-temporarily impaired, aggregated by investment category and length of time
that individual securities have been in a continuous unrealized loss position,
at June 29, 2008.
Less Than 12 Months 12 Months or Greater Total
___________________ ____________________ __________________
Fair Unrealized Fair Unrealized Fair Unrealized
Value Losses Value Losses Value Losses
___________________ ____________________ ___________________
Mutual fund $ - $ - $2,673,962 $21,130 $2,673,962 $21,130
During fiscal 2008, the cumulative losses on the Company's investments in
the mutual fund holding mortgage-backed securities, primarily Government
National Mortgage Association ("Ginnie Mae"), decreased by approximately
$60,000 from $80,000 at the end of the previous year to an unrealized loss of
$20,000 as of June 29, 2008. The value of these investments fluctuate based
upon the market interest rates and credit quality. To mitigate credit quality
risk, the contractual cash flows of the underlying investments are guaranteed
by an agency of the U.S. government. Accordingly, it is expected that the
securities would not be settled at a price less than the cost of the Company's
investment. The Company does not consider these investments to be other-than-
temporarily impaired at June 29, 2008.
The following table summarizes the cost and approximate fair values of
equity securities available-for-sale as of June 29, 2008, and July 1, 2007
as follows:
Original Unrealized Fair
Cost Gain Value
___________________________________________________________________________
June 29, 2008
Securities available-for-sale $710,799 $3,623,502 $4,334,301
July 1, 2007
Securities available-for-sale $734,496 $5,406,828 $6,141,324
This portfolio includes the following telecommunications stocks:
82,112 shares of AT&T
2,000 shares of Embarq
354 shares of Fairpoint Communications
939 shares of Idearc
475 shares of LSI
9,969 shares of Qwest
40,000 shares of Sprint Nextel
18,784 shares of Verizon
11,865 shares of Vodafone
4,079 shares of Windstream
-22-
In the year ended June 29, 2008, the Company recorded a pre-tax gain of
$267,237 from the combination of the sale of its holdings in Alltel and the
mandatory conversion of Avaya stock for cash. In the year ended July 1, 2007,
the Company sold its holdings in Lucent Technologies for a pre-tax loss of
$3,613.
4. LAND, BUILDINGS, AND EQUIPMENT
Land, buildings, and equipment, as cost, consisted of the following:
June 29, July 1,
2008 2007
Buildings $17,541,393 $17,541,393
Leasehold and building improvements 7,031,329 6,787,535
Bowling lanes and equipment 22,079,218 21,884,653
Land 10,590,450 10,590,450
Amusement games 844,343 814,345
Bowling lanes and equipment not yet in use 171,630 150,107
__________ __________
58,258,363 57,768,483
Less accumulated depreciation and
amortization 33,397,603 31,881,242
__________ __________
$24,860,760 $25,887,241
Depreciation and amortization expense for buildings and equipment for
fiscal years 2008 and 2007 was $1,764,226, and $1,918,595, respectively.
No depreciation expense was recorded for Bowl America Falls Church during
the period when it was closed. The Company includes construction in progress
costs in the bowling lanes and equipment not yet in use category until
completion of the project. Bowling lanes and equipment not yet in use are
not depreciated.
5. COMMITMENTS AND CONTINGENCIES
In February 2007, the Company temporarily closed an existing bowling center
in Falls Church, Virginia when its roof was damaged by an ice storm. The
center reopened on March 31, 2008. The Company has business interruption
insurance that management believes will cover the lost income of the center
while repairs were being made. At June 29, 2008, no final settlement of the
loss has taken place. The Company believes that a reasonable estimate for the
amount to be recovered is $1,240,000 from the date of the roof damage through
June 29, 2008. In fiscal years 2008 and 2007, $800,000 and $440,000,
respectively, were recognized as revenue and receivables for those amounts are
included in Prepaid expenses and other on the Consolidated Balance Sheets at
June 29, 2008 and July 1, 2007, respectively. The estimate was based on the
average yearly percentage change in revenues between 2007 fiscal year and 2006
fiscal year multiplied by the prior year earnings of that center and
subtracting the year to date earnings up until the roof collapse.
-23-
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 additional annual rents based upon total gross
revenues and increases in real estate taxes and insurance.
At June 29, 2008, the minimum fixed rental commitments related to all
non-cancelable leases, were as follows:
Year Ending
2009 $272,951
2010 103,413
2011 88,000
2012 88,000
2013 88,000
Thereafter 80,667
_______
Total minimum lease payments $721,031
Net rent expense was as follows:
For the Years Ended
June 29, July 1,
2008 2007
Minimum rent under operating leases $272,950 $272,704
Excess percentage rents 4,744 46,562
_______ _______
$277,694 $319,266
Purchase Commitments
The Company's purchase commitments at June 29, 2008 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 as
determined by the Board of Directors. For the years ended June 29, 2008,
and July 1, 2007, contributions in the amount of $125,000, and $140,000,
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 or more hours of service during
that fiscal year. The Plan provides for Company contributions as determined
by the Board of Directors. The value of the Company's contributions to the
Plan for fiscal years 2008 and 2007 was $125,000, and $140,000, respectively.
The Company has no defined benefit plan or other post retirement plan.
-24-
7. INCOME TAXES
The significant components of the Company's deferred tax assets and
liabilities were as follows:
June 29, July 1,
2008 2007
Deferred tax:
Land, buildings, and equipment $1,259,692 $1,412,809
Unrealized gain on available-
for-sale securities 1,356,702 1,969,749
Prepaid expenses and other (26,391) (34,994)
_________ _________
Deferred tax liabilities $2,590,003 $3,347,564
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
2008 2007
Taxes computed at
statutory rate 34.0% 34.0%
State income taxes, net
of Federal income tax
benefit 3.8 2.0
Dividends received
exclusion (2.5) (.9)
All other-net (.3) (.7)
____ ____
35.0% 34.4%
8. STOCKHOLDERS' EQUITY
The Class A shares have one vote per share voting power. The Class B
shares may vote ten votes per share and are convertible to Class A shares at
the option of the stockholder.
At June 29, 2008, and July 1, 2007, the Company had $39,093 in employee
loans related to the issuance of shares. 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 3 1/2% to 5% and are payable over a term
of three years from the date of the agreements which range from 2007 to 2008.
These employee loans have been recorded as a reduction of additional paid-in
capital.
9. DEFERRED COMPENSATION
Deferred compensation payable was a total of $54,621 at June 29, 2008, and
$59,224 at July 1, 2007. The current portion of these amounts is $8,113 at
June 29, 2008, and $7,272 at July 1, 2007, and is included in accrued expenses.
-25-
Aronson & Company 700 King Farm Boulevard
Rockville, Maryland 20850
Phone 301.231.6200
Fax 301.231.7630
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Board of Directors and Stockholders
Bowl America Incorporated
Alexandria, Virginia
We have audited the accompanying consolidated Balance Sheets of Bowl America
Incorporated and Subsidiaries as of June 29, 2008 and July 1, 2007, and the
related Consolidated Statements of Earnings and Comprehensive Earnings,
Stockholders' Equity and Cash Flows for the years then ended. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these 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 financial statements are free of material misstatement. An audit includes
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 financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management. 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 June 29, 2008 and July 1, 2007,
and the results of their operations and their cash flows for the years then
ended in conformity with accounting principles generally accepted in the
United States of America.
As discussed in Note 1 to the financial statements, the Company adopted
Financial Accounting Standards Board Interpretation No. 48, "Accounting for
Uncertainty in Income Taxes-an interpretation of FASB Statement No. 109",
July 2, 2007.
Aronson & Company
Rockville, Maryland
September 24, 2008
-26-
EX-31.1
Exhibit 31.1 to Form 10-K
Certification of Chief Executive Officer
Pursuant to Section 302 of the Sarbanes-Oxley Act and Rule 13a-14(a)
Or 15d-14(a) under the Securities Exchange Act of 1934
I, Leslie H. Goldberg, certify that:
1. I have reviewed this Annual Report on Form 10-K of Bowl America Incorporated;
2. Based on my knowledge, this report does not contain any untrue statement of a
material fact or omit to state a material fact necessary to make the statements
made, in light of the circumstances under which such statements were made, not
misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material respects
the financial condition, results of operations and cash flows of the registrant
as of, and for, the periods presented in this report;
4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial
reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the
registrant and have:
a) Designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our supervision,
to ensure that material information relating to the registrant, including
its consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this report is being
prepared;
b) Designed such internal control over financial reporting, or caused such
internal control over financial reporting to be designed under our
supervision, to provide reasonable assurance regarding the reliability of
financial reporting and the preparation of financial statements for
external purposes in accordance with generally accepted accounting
principles;
c) Evaluated the effectiveness of the registrant's disclosure controls and
procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the end of
the period covered by this report based on such evaluation; and
d) Disclosed in this report any change in the registrant's internal control
over financial reporting that occurred during the registrant's most
recent fourth fiscal quarter that has materially affected, or is
reasonably likely to materially affect, the registrant's internal control
over financial reporting; and
5. The registrant's other certifying officer and I have disclosed, based on our
most recent evaluation of internal control over financial reporting, to the
registrant's auditors and the audit committee of registrant's board of directors
(or persons performing the equivalent functions):
a) All significant deficiencies and material weaknesses in the design or
operation of internal controls over financial reporting which are
reasonably likely to adversely affect the registrant's ability to record,
process, summarize and report financial information; and
b) Any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
control over financial reporting.
Date: September 25, 2008
Leslie H. Goldberg
Chief Executive Officer
Exhibit 31.2
Exhibit 31.2 to Form 10K
Certification of Chief Financial Officer
Pursuant to Section 302 of the Sarbanes-Oxley Act and Rule 13a-14(a)
Or 15d-14(a) under the Securities Exchange Act of 1934
I, Cheryl A. Dragoo, certify that:
1. I have reviewed this Annual Report on Form 10-K of Bowl America Incorporated;
2. Based on my knowledge, this report does not contain any untrue statement of a
material fact or omit to state a material fact necessary to make the statements
made, in light of the circumstances under which such statements were made, not
misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material respects
the financial condition, results of operations and cash flows of the registrant
as of, and for, the periods presented in this report;
4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial
reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the
registrant and have:
a) Designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our supervision,
to ensure that material information relating to the registrant, including
its consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this report is being
prepared;
b) Designed such internal control over financial reporting, or caused such
internal control over financial reporting to be designed under our
supervision, to provide reasonable assurance regarding the reliability of
financial reporting and the preparation of financial statements for
external purposes in accordance with generally accepted accounting
principles;
c) Evaluated the effectiveness of the registrant's disclosure controls and
procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the end of
the period covered by this report based on such evaluation; and
d) Disclosed in this report any change in the registrant's internal control
over financial reporting that occurred during the registrant's most
recent fourth fiscal quarter that has materially affected, or is
reasonably likely to materially affect, the registrant's internal control
over financial reporting; and
5. The registrant's other certifying officer and I have disclosed, based on our
most recent evaluation of internal control over financial reporting, to the
registrant's auditors and the audit committee of registrant's board of directors
(or persons performing the equivalent functions):
a) All significant deficiencies and material weaknesses in the design or
operation of internal controls over financial reporting which are
reasonably likely to adversely affect the registrant's ability to record,
process, summarize and report financial information; and
b) Any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
control over financial reporting.
Date: September 25, 2008
Cheryl A. Dragoo
Chief Financial Officer
Exhibit 32
Exhibit 32 to Form 10K
Written Statement of the Chief Executive Officer and Chief Financial Officer
Pursuant to 18 U.S.C. 1350
Solely for the purposes of complying with 18 U.S.C. 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, we, the undersigned
Chief Executive Officer and Chief Financial Officer of Bowl America Incorporated
(the "Company"), hereby certify, based on our knowledge, that the Annual Report
on Form 10-K of the Company for the year ended June 29, 2008, (the "Report")
fully complies with the requirements of Section 13(a) of the Securities Act of
1934 and that information contained in the Report fairly presents, in all
material respects, the financial condition and results of operations of the
Company.
Leslie H. Goldberg
Chief Executive Officer
Cheryl A. Dragoo
Chief Financial Officer
Date: September 25, 2008
Exhibit 10(a)
Exhibit 10(a) to Form 10-K
AMENDED EMPLOYMENT AGREEMENT
THIS AMENDED AGREEMENT made this 17th day of June 2008, by and
between BOWL AMERICA INCORPORATED, hereinafter called "Corporation", and
LESLIE H. GOLDBERG, hereinafter called "Goldberg",
WITNESSETH:
WHEREAS Corporation's prior Employment Agreement with Goldberg
expires on June 29, 2008;
WHEREAS the parties desire to enter into a new Employment Contract
to go into effect on June 30, 2008;
WHEREAS Goldberg is an important and valuable executive with
recognized leadership and experience in the bowling industry, and the
Corporation deems it to be in its interest and in the interest of its
stockholders to secure Goldberg's services for the Corporation and
subsidiaries as may be designated by the Corporation;
NOW, THEREFORE, in consideration of the premises and the mutual
agreements hereinafter contained, the parties hereby agree as follows:
1. Corporation hereby employs Goldberg, and Goldberg hereby
agrees to work for Corporation for a term of one year commencing
June 30, 2008, and expiring at the end of Corporation's next
fiscal year on June 28, 2009.
2. Goldberg shall serve as President of the Corporation,
performing the functions and duties normally performed by such
an officer.
3. Goldberg shall devote his full time and attention to the
affairs of the Corporation. In the event of a change in the
managerial control of the Corporation, Goldberg shall have the
option of not performing any services outside of the Greater
Washington Area.
4. Goldberg shall be entitled by way of remuneration for his
services the sum of $76,000 per year to be paid in bi-weekly
installments. Goldberg shall receive as additional annual
compensation payable within seventy-five (75) days after the
close of Corporation's fiscal year, two percent (2%) of the
consolidated annual net profits prior to income taxes of the
Corporation and its subsidiaries that exceeds $2,500,000.00.
5. In the event that Goldberg leaves the employ of the
Corporation at the termination of the contract or in the event
that he becomes disabled during the term of this contract so
that he cannot carry on his duties as President, he shall act as
consultant to the Corporation. He shall receive as compensation
an annual sum equal to one-half of the average of his previous 3
years compensation, payable in monthly installments for a term of
ten (10) years. Goldberg shall have the option to remain covered
by the Corporation's Health Insurance Plan and shall pay the same
proportionate amount of the premium as the other Officers of the
Corporation.
6. This Agreement is purely personal with Leslie Goldberg and in
the event of his death during the contract period or during the
period that he receives income pursuant to Provision No. 5, this
Agreement shall terminate and the obligations of the Corporation
to make any payments shall cease.
7. Goldberg hereby agrees that he will not associate himself in
any manner with any bowling company or other enterprise, which is
or would be in competition with Corporation in the Greater
Washington, D.C., area; Greater Baltimore, Maryland, area; Greater
Richmond, Virginia, area; and Greater Jacksonville and Orlando,
Florida, areas; or in any other area in which Corporation should
open a future bowling center during the period that Goldberg is
receiving payments pursuant to Provision 5 hereof.
BOWL AMERICA INCORPORATED
By Cheryl A. Dragoo
Assistant Treasurer
ATTEST:
Michael T. Dick
Assistant Secretary
Leslie H. Goldberg