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 December 27, 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
January 25, 1999
Class A Common Stock, 3,931,371
$.10 par value
Class B Common Stock 1,508,716
$.10 par value
BOWL AMERICA INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
PART I - FINANCIAL INFORMATION
Thirteen Weeks Ended Twenty-six Weeks Ended
December 27, December 28, December 27, December 28,
1998 1997 1998 1997
_______________________ __________________________
Operating Revenues
Bowling and other $5,145,267 $5,246,651 $ 8,982,858 $ 9,077,529
Food, beverage and
merchandise sales 2,027,273 2,100,224 3,596,908 3,686,200
_________ _________ __________ __________
7,172,540 7,346,875 12,579,766 12,763,729
Operating Expenses
Compensation and benefits 2,971,699 2,964,446 5,739,218 5,744,004
Cost of bowling and other 1,349,090 1,599,550 2,800,601 3,129,882
Cost of food and mdse sales 651,974 749,536 1,160,432 1,261,311
Depreciation and
amortization 563,394 581,806 1,143,905 1,132,420
General and administrative 239,585 229,732 451,479 421,316
_________ _________ __________ __________
5,775,742 6,125,070 11,295,635 11,688,933
Operating Income 1,396,798 1,221,805 1,284,131 1,074,796
Interest and dividend
income 163,696 149,940 328,314 285,038
_________ _________ __________ __________
Earnings before provision
for income taxes 1,560,494 1,371,745 1,612,445 1,359,834
Provision for income taxes 550,398 512,912 563,868 500,297
_________ _________ __________ __________
Net Earnings $1,010,096 $ 858,833 $ 1,048,577 $ 859,537
Earnings per share $.18 $.15 $.19 $.15
Weighted average shares
outstanding 5,526,550 5,662,144 5,589,024 5,662,144
Dividends paid $559,849 $566,215 $1,125,499 $1,132,429
Per share, Class A $.10 $.10 $.20 $.20
Per share, Class B $.10 $.10 $.20 $.20
The operating results for these thirteen (13) and twenty-six (26) 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
December 27, 1998 June 28, 1998
_______________ _____________
ASSETS
Current Assets
Cash and cash equivalents $ 1,475,551 $ 1,944,462
Short-term investments 8,038,333 8,041,136
Inventories 736,924 697,571
Prepaid expenses and other 573,483 489,758
Deferred income taxes 21,000 21,000
__________ __________
Total Current Assets 10,845,291 11,193,927
Property, Plant and Equipment
less accumulated depreciation of
$23,137,823 and $22,183,152 21,689,322 22,223,345
Other Assets
Marketable equity securities 9,802,381 6,360,356
Cash surrender value-life insurance 386,961 383,343
Other long-term assets 217,332 274,479
__________ __________
TOTAL ASSETS $42,941,287 $40,435,450
BOWL AMERICA INCORPORATED AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
December 27, 1998 June 28, 1998
_______________ ____________
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts payable $ 509,213 $ 848,330
Accrued expenses and payroll ded 753,180 776,051
Income taxes payable 8,476 -
Other current liabilities 1,419,574 343,496
__________ __________
Total Current Liabilities 2,690,443 1,967,877
Noncurrent Deferred Income Taxes 4,483,970 3,176,000
TOTAL LIABILITIES 7,174,413 5,143,877
__________ __________
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 -
3,931,371 and 4,120,351 shares 393,137 412,035
Class B issued and outstanding -
1,508,716 and 1,536,146 150,871 153,614
Additional paid-in capital 4,393,232 4,893,504
Unrealized gain on securities
available-for-sale, 5,469,386 3,335,331
Retained earnings 25,360,248 26,497,089
__________ __________
TOTAL STOCKHOLDERS' EQUITY $35,766,874 $35,291,573
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY $42,941,287 $40,435,450
<FN>
See notes to financial information.
BOWL AMERICA INCORPORATED
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE TWENTY-SIX WEEKS ENDED DECEMBER 27, 1998 AND DECEMBER 28, 1997
December 27, December 28,
1998 1997
Cash Flows From Operating Activities:
Net earnings $1,048,577 $ 859,537
Adjustments to reconcile net
earnings to net cash provided
by operating activities
Depreciation and amortization 1,143,905 1,058,154
Loss (gain) on sale/abandonment of
assets net - 16,631
Changes in assets and liabilities
Increase in inventories (39,353) (58,964)
Increase in prepaid and other (83,725) (46,135)
Decrease in other long-term assets 53,529 247,746
Decrease in accounts payable (339,117) (167,201)
Decrease in accrued expenses
and payroll deductions (22,871) (11,762)
Increase in income taxes payable 8,476 249,914
Decrease in income taxes refundable - 32,982
Increase in other current liabilities 1,076,078 1,086,240
_________ _________
Net cash provided by operating activities $2,845,499 $3,267,142
_________ _________
Cash flows from investing activities
Expenditures for property,plant,equip (609,882) (779,701)
Net decrease (increase) in
short-term investments 2,803 (1,209,677)
_________ _________
Net cash used in investing activities (607,079) (1,989,378)
_________ _________
Cash flows from financing activities
Payment of cash dividends (1,125,499) (1,132,429)
Purchase of Class A & B Common Stock (1,581,832) -
_________ _________
Net cash used in financing activities (2,707,331) (1,132,429)
_________ _________
Net (Decrease) Increase in Cash
and Equivalents (468,911) 145,335
Cash and Equivalents, Beginning of Year 1,944,462 1,797,656
_________ _________
Cash and Equivalents, End of Period $1,475,551 $1,942,991
Supplemental Disclosures of Cash Flow Information
Cash paid during the period for
Income taxes $ 558,683 $ 217,401
<FN>
See notes to financial information.
BOWL AMERICA INCORPORATED AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
For the Twenty-six Weeks Ended
December 27, 1998
1. Consolidated Financial Statements
The consolidated balance sheets as of December 27, 1998, and the
consolidated statements of earnings and cash flows for the three-month
and six-month periods ended December 27, 1998 and December 28, 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 as they 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 December 27,
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 28, 1998.
2. Reporting Comprehensive Income
Effective June 29, 1998, the Company adopted Statement of Financial
Accounting Standards No. 130, "Reporting Comprehensive Income"
("SFAS 130"), that establishes rules for the reporting and display
of comprehensive income and its components. Adoption of SFAS 130
requires unrealized gains and losses on the Company's available-
for-sale securities adjustments to be included in other comprehensive
income. The components of comprehensive income are as follows:
December 27, December 28,
1998 1997
Net Income $1,048,577 $ 859,537
Other comprehensive income:
Unrealized gain on available-
for-sale equity securities,
net of tax 2,134,055 573,461
_________ _________
Comprehensive income $3,182,632 $1,432,998
BOWL AMERICA INCORPORATED
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
December 27, 1998
Liquidity and Capital Resources
Short-term investments, consisting mainly of U.S. Treasury Bills
and Notes, and cash totaled $9,514,000 at the end of the second
quarter of fiscal 1999 or $113,000 lower than at the beginning
of the quarter. The normal seasonal increase in cash was offset
by the purchase during the quarter of 173,980 shares of Class A
and 27,430 shares of Class B previously outstanding stock for
approximately $1,473,000.
The Company also expended approximately $270,000 during the quarter
for bowling equipment and amusement game machines. The Company is
actively seeking property for additional locations. While previous
offers have not yet been accepted, the Company continues to pursue
contracts on two sites. Cash and cash flow are sufficient to finance
all currently planned purchases and construction. The fiscal year end
1998 position in telecommunications stocks has been maintained as a
further source of expansion capital.
These securities are carried at their fair value on the last day of the
quarter. For the six-month period ending December 27, 1998, the
market value increased by approximately $3,440,000 resulting in an
unrealized after tax gain of $2,134,000.
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.
Results of Operations
After several years of changes in the number of operating locations,
the current year comparisons reflect the same twenty-three centers in
operation. All of the prior year's percentage changes were influenced
by the change in the number of centers in operation.
There was a $.18 per share profit for the thirteen-week period ending
December 27, 1998, versus a $.15 per share profit for the thirteen weeks
ended December 28, 1997 which included higher than normal operating
expenses as detailed below. For the current twenty-six week period
earnings per share were $.19 compared to $.15 for the comparable period
a year ago. The return to more typical costs was primarily responsible
for the increase in earnings.
Operating revenues decreased 1% for the current six-month period,
versus a increase of 2% in the comparable period a year ago.
The average game rate increased in the current six-month period,
but could not offset the loss caused by lower linage. Exceptionally
dry and warm weather into December resulted in lower traffic at northern
bowling centers. This contributed to the decline in amusement game
income.
For the six-month period food, beverage and merchandise sales were down
2% and cost of sales decreased due to the lower sales.
Operating expenses excluding depreciation and amortization decreased 4%
in the current six-month period versus a 1% decrease in the comparable
period last year. Employee compensation and benefits were flat this period
versus a 2% decrease in the prior year period.
In the current six-month period supplies and services expense decrease 12%.
Last year's costs included large purchases of glow-in-the-dark and amusement
game supplies. Advertising costs decreased 12% from the prior six-month
period and decreased 15% in the a year ago. Equipment expense increased in
the current year by 17% primarily due to the higher costs associated with
bowling pins and rental shoes. Utility costs decreased 4% in the current
six-month period because of lower heating requirements and 6% in the prior
year period.
Depreciation and amortization expense increased 1% in the current year
period versus an increase of 13% in the comparable period last year.
The increase last year was primarily due to amusement game machine and
glow-in-the-dark equipment purchases. Rent expense decreased 30% in
the current period. Last year rent expense included a one-time
termination payment under an expired lease.
YEAR 2000
Bowl America considers Year 2000 issues to be a priority. The Company
has assessed its computer and related systems and has identified those
which require time and expeditures to become year 2000 ready. Bowl
America does not rely heavily on date sensitive hardware or software
for its internal operations. The operating system of the corporate
computer system is currently compliant as is most of the software
used by the Company. Upgrades to some of the automatic scoring
systems in use in the bowling centers will be required. All updates
and replacements are expected to be completed by the fiscal year end
1999. The cost of remediation does not appear to be material.
The Company continues to receive written verification from vendors and
suppliers with whom it has material relationships that they are
addressing the Year 2000 issue and expect to be ready by mid 1999.
BOWL AMERICA INCORPORATED AND SUBSIDIARIES
S.E.C. FORM 10-Q
December 27, 1998
PART II - OTHER INFORMATION
An 8-K was filed in December 1998, which referred to the election
of a new board member after a previous board member declined to stand
for election and to the result of the vote on a shareholder proposal.
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
February 9, 1999 Leslie H. Goldberg
Date Leslie H. Goldberg
President
February 9, 1999 Cheryl A. Dragoo
Date Cheryl A. Dragoo
Controller