UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Quarter Ended March 29, 1998 Commission file Number 0-1830 BOWL AMERICA INCORPORATED (Exact name of registrant as specified in its charter.) MARYLAND 54-0646173 (State of Incorporation) (I.R.S. Employer Identification No.) 6446 Edsall Road, Alexandria, Virginia 22312 (Address of principal executive offices) (Zip Code) (703)941-6300 Registrant's telephone number, including area code Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of 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 the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practical date: Shares Outstanding at April 26, 1998 Class A Common Stock, 4,120,351 $.10 par value Class B Common Stock 1,536,146 $.10 par value BOWL AMERICA INCORPORATED AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF EARNINGS PART I - FINANCIAL INFORMATION Thirteen Weeks Ended Thirty-nine Weeks Ended March 29, March 30, March 29, March 30, 1998 1997 1998 1997 _______________________ __________________________ Operating Revenues Bowling and other $6,211,143 $6,062,748 $15,288,672 $14,863,432 Food and merchandise sales 2,411,610 2,439,554 6,097,810 6,155,120 _________ _________ __________ __________ 8,622,753 8,502,302 21,386,482 21,018,552 Operating Expenses Compensation and benefits 3,103,145 3,168,017 8,847,149 9,033,911 Cost of bowling and other 1,452,079 1,597,975 4,581,961 4,743,635 Cost of food and mdse sales 754,617 756,050 2,015,928 2,022,277 Depreciation and amortization 592,304 509,241 1,724,724 1,512,862 General and administrative 214,141 188,064 635,457 554,075 _________ _________ __________ __________ 6,116,286 6,219,347 17,805,219 17,866,760 Operating Income 2,506,467 2,282,955 3,581,263 3,151,792 Interest and dividend income 197,160 197,137 482,198 443,350 _________ _________ __________ __________ Earnings before provision for income taxes 2,703,627 2,480,092 4,063,461 3,595,142 Provision for income taxes 1,018,991 934,208 1,519,288 1,341,832 _________ _________ __________ __________ Net Earnings $1,684,636 $1,545,884 $ 2,544,173 $ 2,253,310 Earnings per share $.30 $.28 $.45 $.40 Weighted average shares outstanding 5,657,457 5,681,536 5,660,582 5,682,049 Dividends paid $566,214 $541,534 $1,698,643 $1,619,415 Per share, Class A $.10 $.095 $.30 $.285 Per share, Class B $.10 $.095 $.30 $.285 The operating results for these thirteen (13) and thirty-nine (39) week periods are not necessarily indicative of results to be expected for the year. See notes to financial information. BOWL AMERICA INCORPORATED AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS March 29, 1998 June 29, 1997 _______________ _____________ ASSETS Current Assets Cash and cash equivalents $ 1,385,513 $ 1,797,656 Short-term investments 10,466,026 6,375,039 Inventories 609,900 700,200 Prepaid expenses and other 801,333 459,652 Income taxes refundable - 32,982 __________ __________ Total Current Assets 13,262,772 9,365,529 Property, Plant and Equipment less accumulated depreciation of $21,607,107 and $20,052,750 22,656,262 23,454,699 Other Assets Noncurrent marketable securities 6,351,553 4,363,058 Cash surrender value-life insurance 358,429 354,206 Other long-term assets 217,332 465,079 __________ __________ TOTAL ASSETS $42,846,348 $38,002,571 BOWL AMERICA INCORPORATED AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS March 29, 1998 June 29, 1997 _______________ ____________ LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities Accounts payable $ 723,600 $ 992,397 Accrued expenses and payroll ded 971,444 840,502 Income taxes payable 284,742 - Other current liabilities 2,295,847 382,840 Current deferred income taxes 70,000 70,000 __________ __________ Total Current Liabilities 4,345,633 2,285,739 Noncurrent Deferred Income Taxes 3,090,628 2,335,000 TOTAL LIABILITIES 7,436,261 4,620,739 __________ __________ Stockholders' Equity 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 issued and outstanding - 4,120,351 and 4,125,998 shares 412,035 412,600 Class B issued and outstanding - 1,536,146 153,614 153,614 Additional paid-in capital 4,893,503 4,896,835 Unrealized gain on securities available-for-sale, net of tax 3,405,901 2,173,033 Retained earnings 26,545,034 25,745,750 __________ __________ TOTAL STOCKHOLDERS' EQUITY $35,410,087 $33,381,832 TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $42,846,348 $38,002,571 <FN> See notes to financial information. BOWL AMERICA INCORPORATED CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE THIRTY-NINE WEEKS ENDED MARCH 29, 1998 AND MARCH 30, 1997 March 29, March 30, 1998 1997 Cash Flows From Operating Activities: Net earnings $2,544,173 $ 2,253,310 Adjustments to reconcile net earnings to net cash provided by operating activities Depreciation and amortization 1,724,724 1,512,862 Gain on disposition of assets-net - 25,301 Changes in assets and liabilities Decrease in inventories 90,300 16,614 Increase in prepaid and other (341,681) (196,602) Decrease in other long-term assets 243,525 302,008 Decrease in accounts payable (268,797) (730,676) Increase in accrued expenses and payroll deductions 130,942 305,432 Increase in income taxes payable 284,742 547,346 Decrease in income taxes refundable 32,982 204,662 Increase in other current liabilities 1,913,007 1,926,612 _________ _________ Net cash provided by operating activities $6,353,917 $ 6,166,869 _________ _________ Cash flows from investing activities Expenditures for property,plant,equip (926,287) (2,504,270) Net increase in short-term investments (4,090,987) (2,116,518) _________ _________ Net cash used in investing activities (5,017,274) (4,620,788) _________ _________ Cash flows from financing activities Payment of cash dividends (1,698,643) (1,619,415) Purchase of Class A Common Stock (50,143) (6,353) _________ _________ Net cash used in financing activities (1,748,786) (1,625,768) _________ _________ Net Decrease in Cash and Cash Equivalents (412,143) (79,687) Cash and Equivalents, Beginning of Year 1,797,656 2,120,862 _________ _________ Cash and Equivalents, End of Period $1,385,513 $ 2,041,175 Supplemental Disclosures of Cash Flow Information Cash paid during the period for Income taxes $1,201,564 $ 589,824 <FN> See notes to financial information. BOWL AMERICA INCORPORATED AND SUBSIDIARIES NOTES TO FINANCIAL STATEMENTS For the Thirty-nine Weeks Ended March 29, 1998 1. Consolidated Financial Statements The consolidated balance sheets as of March 29, 1998, and the consolidated statements of earnings and cash flows for the three-month and nine-month periods ended March 29, 1998 and March 30, 1997 have been prepared by the Company, without audit. This quarterly financial information is submitted in response to the requirements of Form 10-Q and does not purport to be financial statements prepared in accordance with generally accepted accounting principles. They therefore do not include all disclosures which might be associated with such statements. In the opinion of management such information includes all adjustments, consisting only of normal recurring accruals, necessary to present fairly the financial position at March 29, 1998, and for all periods presented. For a summary of significant accounting principles, which have been continued without change refer to Note 1 to the financial statements for the year ended June 29, 1997. 2. Earnings Per Share The Financial Accounting Standards Board issued SFAS No. 128, "Earnings per Share" in February 1997. The effect of adopting this standard has no impact on the earnings per share calculation for the periods ended March 29, 1998 and March 30, 1997. BOWL AMERICA INCORPORATED MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS March 29, 1998 Liquidity and Capital Resources Short-term investments consisting mainly of U.S. Treasury Bills and Notes, and cash totaled $11,852,000 at the end of the third quarter of fiscal 1998 or $2,324,000 higher than at the beginning of the quarter. The increase relates mainly to the seasonal nature of bowling participation. Current liabilities include $1,900,000 in league deposits of prize fund monies which are returned to the leagues at the end of the bowling season, generally during the fourth quarter. Marketable securities, primarily telecommunications stocks, are carried at their price on the last day of the quarter. For the nine month period ending March 29, 1998, the market value increased by approximately $2,000,000 with a net after tax gain of $1,200,000. There were no transactions in these stocks. Expenditures including $163,000 for new bowling lanes and $130,000 for bumper assemblies are planned as the Company continues to modernize existing locations. The Company is actively seeking property for additional locations. Cash and cash flow are sufficient to finance all currently planned purchases and construction. The Company's position in telecommunications stocks is an additional source of expansion capital. While no factors requiring a change in the dividend rate are 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 its estimate of future opportunities. On February 1, 1997, the 16-lane expansion from 32 to 48 lanes at Bowl America Dranesville began operation. During the fourth quarter of fiscal 1997, the Company closed two centers which, at the expiration of their leases, were operating with negative cash flows. Results of Operations As noted above, the Company operated two fewer centers in the fiscal 1998 period than in the prior year period and one fewer in the first quarter of fiscal 1997 than in fiscal 1996. All comparisons in this report are significantly influenced by the change in the number of operating locations. There was a $.30 per share profit for the thirteen-week period ending March 29, 1998, versus $.28 per share profit for the thirteen weeks ending March 30, 1997. For the current thirty-nine week period earnings per share were $.45 compared to $.40 for the comparable period a year ago. Operating revenues increased 1% for the current three-month period and 2% for the current nine-month period versus an increase of 3% and a decrease of 2% respectively in the period year. Linage at comparable centers was up. Bowling and other income increased partially because the price per game in the three and nine month periods was up over the prior year periods. In addition, amusement game income continues to increase over the prior year as the Company now owns the majority of the games. Food and beverage sales were down in the current period overall, but at comparable locations there was a 3% increase for both the quarter and nine-month periods. Cost of food and beverage sales at comparable centers was flat. Operating expenses excluding depreciation and amortization decreased 3% in the three-month period and 2% in the current nine-month period versus a 3% decrease in the nine-month period last year. Employee compensation and benefits were down 2% in both the current and prior year nine-month periods. Advertising costs decreased 43% from the prior year quarter mainly due to our use of print media, newspapers and direct mail, as our primary advertising campaign vehicle. Glow-in-the-dark bowling and amusement game supplies have been largely responsible for an increase in the supplies and services expense. Utility costs decreased 11% in the current quarter resulting in a 7% decrease for the nine-month period compared to a 4% decrease in the prior year period. Increases in depreciation and amortization expense of 14% in the current nine-month period relate to the purchases of amusement games and glow-in-the-dark bowling equipment and the Dranesville expansion. Rent expense decreased 18% in the current quarter as we operated two fewer leased centers than in the prior year. S.E.C. FORM 10-Q March 29, 1998 PART II - OTHER INFORMATION No material unusual charges or credits to income or changes in independent accountants occurred during the quarter which would require the filing of a Form 8-K. BOWL AMERICA INCORPORATED AND SUBSIDIARIES SIGNATURES Pursuant to the requirement 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 Registrant May 11, 1998 Leslie H. Goldberg Date Leslie H. Goldberg President May 11, 1998 Cheryl A. Dragoo Date Cheryl A. Dragoo Controller