Form 10-K/A BOWL AMERICA INC For: Jul 01

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 fiscal year 2018, the Company and its wholly-owned subsidiaries operated 18 bowling centers.

 

(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. At the end of the fiscal year 2018, the Company had operating revenues from continuing operations of approximately $24.8 million, and approximately $29 million in total assets. 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. Earnings per share for fiscal 2018 were $0.73.

 

(c) Narrative Description of Business

As of September 1, 2018 the Company operated 10 bowling centers in the greater metropolitan area of Washington, D.C., one bowling center in the greater metropolitan area of Baltimore, Maryland, three bowling centers in the greater metropolitan area of Jacksonville, Florida, and four bowling centers in the greater metropolitan area of Richmond, Virginia. These 18 bowling centers contain a total of 726 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 rent, and bowling balls are provided free. In addition, each center sells retail bowling accessories. Most locations are equipped for glow-in-the-dark bowling, popular for parties and non-league bowling. The Company outsourced the operation of its amusement games to a third party for a one year term at a flat annual fee.

 

The bowling equipment essential for the Company's operation is readily available. The Company’s major source of 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 competitor is Bowlero Corporation (formerly Bowlmor AMF) and many of our centers face competition from bowling centers located in close proximity to our centers.         

 

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 500 including approximately 250 full time employees.

 

(d) Financial Information about Geographic Areas

 

The Company has no foreign operations.

 

ITEM 1A. RISK FACTORS

 

Not required for smaller reporting companies

 

 

ITEM 2. PROPERTIES

 

The Company owns its general corporate offices which are located at 6446 Edsall Road, Alexandria, Virginia 22312. Two of the Company's bowling centers are located in leased premises, and the remaining sixteen centers are owned by the Company. Each of the Company's leases expire in fiscal 2020. 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. MINE SAFETY DISCLOSURES

 

Not Applicable.

 

PART II

 

ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

 

Market Information

The principal market on which the Company's Class A Common Stock is traded is the NYSE American. The Company's Class B Common Stock is not listed on any exchange and is not publicly traded. Each share of Class B Common Stock can be converted to one share of Class A Common Stock at any time.

  

The table below presents the high and low sales price of the Company's Class A Common Stock in each quarter of fiscal years 2018 and 2017 as reported by the NYSE American.

 

2018		1st Qtr				2nd Qtr				3rd Qtr				4th Qtr
High		$	14.74			$	15.30			$	16.64			$	16.05
Low		$	13.43			$	14.25			$	14.50			$	14.50

 

2017		1st Qtr				2nd Qtr				3rd Qtr				4th Qtr
High		$	15.04			$	17.25			$	16.79			$	14.74
Low		$	14.11			$	14.09			$	14.15			$	14.17

 

Holders

As of July 1, 2018, the approximate number of holders of record of the Company's Class A Common Stock was 263 and of the Company's Class B Common Stock was 18.

 

Cash Dividends

The table below presents the quarterly cash dividends per share of Class A Common Stock and Class B Common Stock paid, and the quarter in which the payment was made during fiscal 2018 and 2017.

 

Class A and Class B Common Stock
Quarter	2018	2017
First	17 cents	17 cents
Second	17 cents	17 cents
Third	17 cents	17 cents
Fourth	17 cents	17 cents

 

The Board of Directors decides the amount and timing of any dividend at its quarterly meetings based on its appraisal of the state of the business, the economic climate and estimate of future opportunities at such time.

 

 

ITEM 6. SELECTED FINANCIAL DATA

 

The information is set forth in the section of Exhibit 99(a) entitled "Selected Financial Data" on page 14 of this Form 10-K and is incorporated herein by reference. 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 of Exhibit 99(b) entitled "Management's Discussion and Analysis of Financial Condition and Results of Operations" on Pages 9 through 13 of this Form 10-K and is incorporated herein by reference.

 

 

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

 

The financial statements and notes thereto are set forth in Exhibit 99(c) on pages 16 through 27 of this Form 10-K and is incorporated herein by reference.

Supplementary data is not required.

 

 

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

None   

 

 

ITEM 9A. 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 July 1, 2018. Additionally, the Company’s officers concluded that the Company’s disclosure controls and procedures were effective as of July 1, 2018 to ensure that information required to be disclosed in the reports filed under 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 Regulation S-K, the report of management on the Company’s internal control over financial reporting is set forth in Exhibit 99(d) in this Annual Report on Form 10-K and is included herein by reference.

 

(b) Changes in Internal Control Over Financial Reporting

 

There was no change in the Company’s internal control over financial reporting that occurred during the fourth quarter ended July 1, 2018 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.

 

 

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)

Financial Statements

The following consolidated financial statements of Bowl America Incorporated and its subsidiaries are incorporated by reference in Part II, Item 8:

 

Reports of Independent Registered Public Accounting Firms

 

Consolidated balance sheets as of July 1, 2018 and July 2, 2017

 

Consolidated statements of earnings and comprehensive earnings - years ended July 1, 2018 and July 2, 2017

 

Consolidated statements of stockholders' equity - years ended July 1, 2018 and July 2, 2017

 

Consolidated statements of cash flows - years ended July 1, 2018 and July 2, 2017

 

Notes to the consolidated financial statements - years ended July 1, 2018 and July 2, 2017

 

(b)

Exhibits:

3.1   Articles of Incorporation of the Registrant and amendments through December 1994 thereto (incorporated by reference to Exhibit 3.1 to Form 10-K filed September 28, 2017)

 

3.2   By-laws of the Registrant (incorporated by reference to Exhibit 3.2 to Form 10-K filed September 28, 2017)

  

10.1   Amended Employment Agreement, dated as of December 5, 2017, between the Company and Leslie H. Goldberg (incorporated by reference to Exhibit 10.1 to Form 8-K filed on December 6, 2017).

 

10.2   Amended Employment Agreement, dated as of June 22, 2015, between the Company and Cheryl A. Dragoo (incorporated by reference to Exhibit 10.2 to Form 8-K filed on June 22, 2015).

 

20   Press release dated September 27, 2018

 

21   Subsidiaries of registrant (Incorporated by reference from exhibit number 21 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)

              

99(a) Selected Financial Data (Item 6), set forth as page 14 hereof

 

99(b) Management’s Discussion & Analysis of Financial Condition and Results of Operations (Item 7), set forth as pages 9-13 hereof

 

99(c) Consolidated Financial Statements (Item 8), set forth as pages 16-27 hereof

 

99(d) Management’s Annual Report on Internal Control Over Financial Reporting, (Item 9-A) set forth as page 8 hereof

 

101 Interactive files formatted in XBRL (Extensible Business Reporting Language)

 

 

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

 

 

/s/ Leslie H. Goldberg

Leslie H. Goldberg

President

Chief Executive and Operating Officer

 

Date: October 15, 2018

 

 

/s/ Cheryl A. Dragoo

Cheryl A. Dragoo

Chief Financial Officer,

Senior Vice President

Principal Financial and Accounting Officer

 

Date: October 15, 2018

 

 

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

 

 

/s/ Leslie H. Goldberg

Leslie H. Goldberg

President, Principal Executive

& Operating Officer and Director

 

Date: October 15, 2018

 

 

 

/s/ Ruth Macklin Ruth Macklin Senior Vice President, Secretary, Treasurer and Director	/s/ Cheryl A. Dragoo Cheryl A Dragoo Senior Vice President, Principal Financial & Accounting Officer and Director
Date: October 15, 2018	Date: October 15, 2018
/s/ Allan L. Sher Allan L. Sher Director	/s/ Merle Fabian Merle Fabian Director
Date: October 15, 2018	Date: October 15, 2018
/s/ Arthur H. Bill Arthur H. Bill Director	/s/ Nancy Hull Nancy E. Hull Director
Date: October 15, 2018	Date: October 15, 2018

 

 

Exhibit 99(d) Management’s Annual Report on Internal Control Over Financial Reporting

 

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 Regulation S-K, the annual report of management of 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 July 1, 2018. 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 2013 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 July 1, 2018, was effective. No material weaknesses in the Company’s internal control over financial reporting were identified by management. 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 independent registered public accounting firm pursuant to a permanent exemption for non-accelerated filers from the internal control audit requirements of Section 404(b) of the Sarbanes-Oxley Act of 2002.

 

 

Exhibit 99(b) MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

 

FORWARD-LOOKING STATEMENTS

 

This Annual Report on Form 10-K contains forward-looking statements concerning our business, operations and financial performance and condition as well as our plans, objectives and expectations for our business operations and financial performance and condition that are subject to risks and uncertainties. All statements other than statements of historical fact included in this Annual Report on Form 10-K are forward-looking statements. These forward-looking statements are based on current expectations, estimates, forecasts and projections about our business, our sales and the industry in which we operate and our management’s beliefs and assumptions. These statements are not guarantees of future performance or development and involve risks, uncertainties and other factors that are in some cases beyond our control. The forward-looking statements included in this Annual Report on Form 10-K are made as of the date hereof. We are under no obligation to publicly update or revise any forward-looking statement as a result of new information, future events or otherwise, except as otherwise required by law.

 

OVERVIEW

 

The Company is in the entertainment business which, by its nature, has ups and downs based on consumer tastes and preferences. Generally, promotional and open play bowling, which depends on the public’s discretionary budget dollars and their choices, accounts for more than half of our business. While bowling has the advantage of being an entertainment that is close to home and relatively inexpensive, new forms of sports and entertainment are offered to the public continually creating challenges, but our response is helped by having the resources to be able to promote the sport. Weather is also a factor, especially for casual bowlers. While extreme heat or rainy weather prompt people to look for indoor activities, heavy snow storms can keep customers from reaching the centers. Postponed league games are made up later in the season, but lost open play income is never recovered. The Company operates primarily in the Washington, DC area where its business is vulnerable to sequestration or other downsizing of the federal government.

 

LIQUIDITY AND CAPITAL RESOURCES

 

The Company views a strong financial position as a major benefit to shareholders and emphasizes payment of dividends as part of its financial plan. A portion of earnings has consistently been invested to create a reserve to protect the Company during downturns in business, to capitalize on opportunities for expansion and modernization, to provide a secure source of income and to provide a predictable return to its owners. For these reasons, the Company prefers a conservative approach to investing rather than taking greater risk for possible rapid growth. The Company balances market volatility by using both fixed income and equity investments in managing its reserve funds. Any equity security is subject to price fluctuation; however, the stocks held by the Company have relatively low volatility. The Company has long been invested in a Government National Mortgage Association (“GNMA”) fund and domestically domiciled stocks, primarily telecommunications stocks, with the perceived potential of appreciation. This diversity also provides a measure of safety of principal.

 

With the exception of an additional 13,120 shares of Verizon, the shares of common stock in our portfolio have come from spin-offs, mergers and acquisitions of AT&T and United Telecommunications (now Sprint) purchased in 1979 and 1984 and from one insurance company acquired at no cost when that company demutualized. While not all shares in the portfolio are domestic American companies any longer, since the original purchases at an approximate cost of $630,000, we have received approximately $967,000 from mergers and sales, and over $5,000,000 in dividends, the majority of which were tax favored in the form of a partial exclusion from federal taxable income. While the exclusion continues into the current year, the Tax Cuts and Jobs Act (“Tax Act”) reduces the percent excludable. These marketable securities are carried at their fair value on the last day of each reporting period. The fair value of the securities on July 1, 2018 was approximately $4,817,000 and the value of securities held at July 2, 2017 was approximately $5,272,000.

 

 

The Company’s original investment in the Vanguard GNMA mutual fund began in 1988 with purchases of shares in the fund totaling approximately $1,400,000. The fund is carried at fair value on the last day of the reporting period and at July 1, 2018 the fair value was approximately $1,825,000. In August 2017, approximately $1,000,000 of shares of this fund were redeemed to meet the August 2017 dividend payment.

 

Short-term investments at the end of fiscal 2018, including the GNMA mutual fund, Certificates of Deposits, US Treasury bills, and cash and cash equivalents totaled $3,166,000 at the end of fiscal 2018. Short-term investments consisting of the GMNA fund, Certificates of Deposits, and cash and cash equivalents totaled $3,556,000 at the end of fiscal 2017.

 

The Company's position in all the above investments is a source of expansion capital. Potential volatility in the trading prices of the marketable securities held by the Company could impact the Company’s opportunities for expansion. The Board of Directors reviews the portfolio regularly and any use of this reserve at its quarterly meetings.

 

Cash flow provided by operating activities for the year ended July 1, 2018, was $3,999,000. Proceeds from GNMA dividends totaling approximately $56,000 in fiscal year 2018 were used to purchase additional shares in the fund. Cash on hand and the partial redemption of the GNMA fund, mentioned above, were used to meet the $3,509,000 required to pay regular dividends during the fiscal year.

 

The Company paid cash dividends totaling approximately $3.5 million, or $.68 per share, to shareholders during the 2018 fiscal year. In June 2018, the Company declared a quarterly $.17 per share dividend, paid in August 2018. The economic climate is part of the consideration at the Directors quarterly reviews of future estimates of cash flows. The Board of Directors decides the amount and timing of any dividend at its quarterly meeting based on its appraisal of the state of the business and estimate of opportunities at such time.

 

Building, entertainment and restaurant equipment purchases during fiscal year 2018 used approximately $787,000. The Company has no long-term debt and has made no application for third party funding as cash and cash flows are currently sufficient to finance all contemplated purchases and to meet short-term purchase commitments and operating lease commitments.

 

RESULTS OF OPERATIONS

 

The following table sets forth the items in our consolidated summary of operations for the fiscal fourth quarters ended July 1, 2018 and July 2, 2017, respectively, and the dollar and percentage changes therein.

 

		Thirteen weeks ended July 1, 2018 and July 2, 2017
		Dollars in thousands
		2018				2017				Change				% Change
Operating Revenues:
Bowling and other		$	3,830			$	3,633			$	197				5.4	%
Food, beverage & merchandise sales			1,682				1,510				172				11.4
			5,512				5,143				369				7.2
Operating Expenses:
Compensation & benefits			2,685				2,617				68				2.6
Cost of bowling & other			1,366				1,380				(14	)			(1.0	)
Cost of food, beverage & merchandise sales			530				505				25				5.0
Depreciation & amortization			234				145				89				61.4
General & administrative			173				125				48				38.4
			4,988				4,772				216				4.5
Gain (loss) on disposal of assets			(3	)			44				(47	)			(106.8	)
Operating income			521				415				106				25.5
Interest, dividend and other income			95				97				(2	)			(2.1	)
Earnings before taxes			616				512				104				20.3
Income taxes			65				163				(98	)			(60.1	)
Net Earnings		$	551			$	349			$	202				57.9

 

 

The following table sets forth the items in our consolidated summary of operations for the 52 week fiscal years ended July 1, 2018 and July 2, 2017, respectively, and the dollar and percentage changes therein.

  

 

		Fifty-two weeks ended July 1, 2018 and July 2, 2017
		Dollars in thousands
		2018				2017				Change				% Change
Operating Revenues:
Bowling and other		$	17,486			$	16,888			$	598				3.5	%
Food, beverage & merchandise sales			7,285				7,045				240				3.4
			24,771				23,933				838				3.5
Operating Expenses:
Compensation & benefits			10,891				10,818				73				.7
Cost of bowling & other			5,890				5,881				9				.2
Cost of food, beverage & merchandise sales			2,189				2,195				(6	)			(.3	)
Depreciation & amortization			946				974				(28	)			(2.9	)
General & administrative			836				803				33				4.1
			20,752				20,671				81				.4
(Loss) gain on disposal of assets			(3	)			78				(81	)			(103.8	)
Operating income			4,016				3,340				676				20.2
Interest, dividend and other income			387				412				(25	)			(6.1	)
Interest expense			-				6				(6	)			(100.0	)
Earnings before taxes			4,403				3,746				657				17.5
Income taxes			617				1,295				(678	)			(52.4	)
Net Earnings		$	3,786			$	2,451			$	1,335				54.5

 

 

Net Earnings were $551,260 or $.10 per share for the thirteen week period and $3,785,985 or $.73 per share for the fifty-two week period ended July 1, 2018. For the thirteen week and fifty-two week periods ended July 2, 2017 net earnings were $349,057 or $.07 per share and $2,451,110 or $.48 per share, respectively. Fiscals 2018 and 2017 each consisted of 52 weeks. Eighteen centers were in operation throughout both years. The fiscal 2017 comparisons to its prior year as noted below are influenced by the fact that fiscal year 2016 was a 53-week year.

 

Operating Revenues

 

Total operating revenue increased 3.5%, or $838,000, to $24.8 million in fiscal 2018 compared to a decrease of 0.7%, or $165,000, to $23.9 million in fiscal 2017. Bowling and other revenue increased $598,000 in fiscal 2018 versus an increase of $10,000 in fiscal 2017. Food, beverage and merchandise sales increased $240,000 and decreased $175,000 in fiscal 2018 and fiscal 2017, respectively.

 

Management believes that in fiscal 2018 open play revenue and food and beverage sales increased as our customers responded to a perceived healthier economy and weather conducive to indoor activities.

 

Operating Expenses

 

As discussed in more detail below, total operating expenses increased 0.4%, or $81,000, in fiscal year 2018 versus a decrease of 2.6%, or $556,000 in fiscal 2017. Costs for employee compensation and benefits were up 0.7% or $73,000 in fiscal 2018 versus a decrease of 2.3% or $253,000 in fiscal 2017. Group health insurance costs declined primarily due to plan offerings and lower enrollment. This category includes contributions to our two benefit plans, both of which are defined contribution plans. The contributions can only be made from profits and there is no additional obligation beyond the current year contribution.

 

 

Cost of bowling and other services increased $9,000 or 0.2% in the year ended July 1, 2018 and decreased $66,000 or 1.1% in the prior fiscal year. Maintenance expense increased $17,000 or 1.9% in fiscal 2018 primarily due to roof repairs and interior upgrades, versus a decrease of $37,000 or 4.1% in fiscal 2017. Utility costs were up 2.6% and 0.7% in the current and prior years, respectively. The current year increase was primarily the result of increased gas usage in the unusually cold winter months Supplies expense decreased 9.7% in fiscal 2018 versus a decrease of 3.4% in fiscal 2017. The current year decrease is primarily attributable to the decrease in amusement game supplies as the Company outsourced its amusement game business. Advertising costs were down 2.6% in the current year and were flat in the fiscal year 2017.

 

Cost of food, beverage and merchandise sales decreased $6,000 or 0.3% in fiscal 2018, the result of better inventory control.

 

Depreciation expenses decreased approximately $28,000 or 2.9% in fiscal 2018 versus a decrease of approximately $179,000 or 15.5% in the prior year as large assets became fully depreciated.

 

Operating income increased 20.2% or $676,000 to $4.0 million in fiscal year 2018 from $3.3 million in fiscal 2017.

 

Interest, Dividend and Other Income

 

Interest and dividend income decreased $25,000 or 6.1% in fiscal 2018 and $38,000 or 8.4% in the prior year.

 

Income taxes

 

In December 2017 the U.S. government enacted tax legislation which reduced the corporate tax rate from 34% to 21%. Per the provisions of the law, the Company, which operates on a fiscal calendar, calculated taxes using a blended rate. The effective income tax rate on continuing operations for the Company was 28.8% for fiscal 2018, although a one time required adjustment to the Company’s deferred tax account due to the Tax Act resulted in a 14% rate for fiscal 2018. The prior year effective rate was 34.4%.

 

Net Earnings

 

Net earnings from continuing operations in fiscal 2018 were $3.8 million, or $.73 per share, compared to $2.5 million, or $.48 per share in fiscal 2017.

 

 

CRITICAL ACCOUNTING POLICIES

 

We have identified accounting for marketable investment securities as a critical accounting policy due to the significance of the amounts included in our balance sheet. The Company exercises judgment in determining the classification of its investment securities as available-for-sale and in determining their fair value. The 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 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. There were no impairment losses recorded in fiscal 2018 or 2017.

 

 

Exhibit 99(a) Selected Financial Data

 

 

BOWL AMERICA INCORPORATED AND SUBSIDIARIES

CONSOLIDATED SUMMARY OF OPERATIONS

 

 

Selected Financial Data

 

		For the Years Ended
		July 1,				July 2,				July 3,				June 28,				June 29,
		2018				2017				2016				2015				2014
Operating revenues		$	24,770,884			$	23,932,504			$	24,097,862			$	23,124,541			$	22,780,017
Operating expenses			20,751,639				20,670,929				21,226,560				21,214,632				21,581,531
(Loss) gain on disposal of land, building and Equipment			(3,306	)			77,972				(10,035	)			(3,854	)			8,820
Interest, dividend and other income			387,531				412,299				449,998				494,645				662,693
Interest expense			-				6,296				-				-				-
Earnings from continuing operations before provision for income taxes			4,403,470				3,745,550				3,311,265				2,400,700				1,869,999
Provision for income taxes			617,485				1,294,440				1,160,240				760,471				496,831
Earnings from continuing operations		$	3,785,985			$	2,451,110			$	2,151,025			$	1,640,229			$	1,373,168
(Loss) gain from discontinued operations - net of tax			-				-				-				-				(2,774	)
Net Earnings		$	3,785,985			$	2,451,110			$	2,151,025			$	1,640,229			$	1,370,394
Weighted average shares outstanding- Basic & Diluted			5,160,971				5,160,971				5,160,971				5,160,971				5,160,971
Earnings per share-Basic & diluted
Continuing operations		$	.73			$	.48			$	.42			$	.32			$	.27
Discontinued operations			.00				.00				.00				.00				.00
Net earnings per share-Basic & diluted		$	.73			$	.48			$	.42			$	.32			$	.27
Net cash provided by operating activities		$	3,999,109			$	3,128,551			$	3,441,813			$	3,052,817			$	2,053,510
Cash dividends paid		$	3,509,460			$	3,509,460			$	3,509,461			$	3,509,460			$	3,406,243
Cash dividends paid Per share - Class A		$	0.68			$	0.68			$	0.68			$	0.68			$	0.66
- Class B		$	0.68			$	0.68			$	0.68			$	0.68			$	0.66
Total assets		$	28,909,126			$	29,618,151			$	31,851,135			$	32,062,409			$	34,363,780
Stockholders' equity		$	24,483,675			$	24,586,393			$	26,149,342			$	26,974,079			$	28,978,731
Net book value per share		$	4.74			$	4.76			$	5.07			$	5.23			$	5.61
Net earnings as a % of beginning stockholders' equity			15.4	%			9.4	%			8.0	%			5.7	%			4.4	%
Lanes in operation			726				726				726				726				726
Centers in operation			18				18				18				18				18

 

 

1395 Piccard Drive, Suite 240 Rockville, Maryland 20850 Phone 301.337.3305

 

Report of Independent Registered Public Accounting Firm

 

To the Board of Directors and Stockholders of Bowl America Incorporated

 

Opinion on the Financial Statements

 

We have audited the accompanying Consolidated Balance Sheets of Bowl America Incorporated and Subsidiaries (the Company) as of July 1, 2018 and July 2, 2017, and the related Consolidated Statements of Earnings and Comprehensive Earnings, Stockholders’ Equity and Cash Flows for the years ended July 1, 2018 and July 2, 2017, and the related notes (collectively referred to as the consolidated financial statements). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of July 1, 2018 and July 2, 2017, and the results of its operations and its cash flows for each of the years in the two-year period ended July 1, 2018, in conformity with accounting principles generally accepted in the United States of America.

 

Basis for Opinion

 

These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

 

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting, 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.

 

Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.

 

 

 

We have served as the Company’s auditor since 2014.

 

/s/ MN Blum LLC

 

MN Blum, LLC

Rockville, Maryland

September 27, 2018

 

 

Exhibit 99(c) Consolidated Financial Statements

 

BOWL AMERICA INCORPORATED AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

 

 

The accompanying notes to the consolidated financial statements are an integral part of these financial statements.

 

 

BOWL AMERICA INCORPORATED AND SUBSIDIARIES

  CONSOLIDATED STATEMENTS OF EARNINGS AND COMPREHENSIVE EARNINGS

   

 

The accompanying notes to the consolidated financial statements are an integral part of these financial statements.

 

 

BOWL AMERICA INCORPORATED AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

 

 

The accompanying notes to the consolidated financial statements are an integral part of these financial statements.

 

 

BOWL AMERICA INCORPORATED AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

 

                                    

The accompanying notes to the consolidated financial statements are an integral part of these financial statements.

 

 

BOWL AMERICA INCORPORATED AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

 

 

 

 

 

 

 

 

EXHIBIT 20

 

For Immediate Release

September 27, 2018

 

BOWL AMERICA ON A ROLL OF INCREASED EARNINGS

 

Bowl America Incorporated today reported earnings per share of $.73 for its fiscal year ended July 1, 2018, compared to $.48 in the prior fiscal year ended July 2, 2017. Per share earnings for the fiscal 2018 fourth quarter were $.10, up $.03 compared to the fiscal 2017 fourth quarter.

 

The Company believes that fewer snow storms and more rainy weekends during fiscal 2018 contributed to increased traffic resulting in an improvement to revenues and a 20% increase in operating income. As previously reported, the Tax Cuts and Jobs Act of December 2017 provided a one time tax benefit of approximately $.13 per share, and also reduced our corporate tax rate for the 2018 fiscal year. The Company’s tax rate will further decrease in fiscal 2019, our first full year under the new rate.

 

A more detailed explanation of results is available in the Company’s Form 10-K filing available through the website www.bowlamericainc.com. Bowl America operates 18 bowling centers and its Class A common stock trades on the NYSE American under the symbol BWLA.

 

* * *

 

BOWL AMERICA INCORPORATED

Results of Operations

 

		Thirteen				Thirteen				Fifty-two				Fifty-two
		Weeks Ended				Weeks Ended				Weeks Ended				Weeks Ended
		07/01/18				07/02/17				07/01/18				07/02/17
Operating Revenues
Bowling and other		$	3,829,858			$	3,633,124			$	17,486,194			$	16,887,857
Food, beverage and merchandise sales			1,682,532				1,509,708				7,284,690				7,044,647
			5,512,390				5,142,832				24,770,884				23,932,504
Operating expenses excluding depreciation and amortization			4,754,199				4,626,134				19,805,533				19,697,080
Depreciation and amortization			233,970				145,389				946,106				973,849
(Loss) gain on disposition of assets			(3,306	)			43,596				(3,306	)			77,972
Interest, dividend and other income			94,935				96,596				387,531				412,299
Interest expense			-				-				-				6,296
Earnings (loss) before taxes			615,850				511,501				4,403,470				3,745,550
Net Earnings			551,260				349,057				3,785,985				2,451,110
Comprehensive Earnings		$	420,933			$	68,852			$	3,406,742			$	1,946,511
Weighted average shares outstanding			5,160,971				5,160,971				5,160,971				5,160,971
EARNINGS PER SHARE			.10				.07				.73				.48

 

* * * *

 

SUMMARY OF FINANCIAL POSITION

Dollars in Thousands

 

		07/01/18				07/02/17
ASSETS
Total current assets including cash and short-term investment of $3,166 and $3,556		$	4,610			$	4,646
Property and investments			24,299				24,972
TOTAL ASSETS		$	28,909			$	29,618
LIABILITIES AND STOCKHOLDERS' EQUITY
Total current liabilities		$	3,096			$	2,986
Other liabilities			1,329				2,046
Stockholders' equity			24,484				24,586
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY		$	28,909			$	29,618

 

EX-31.1

Exhibit 31.1 to Form 10-K/A

 

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/A 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 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 the 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 control 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: October 15, 2018

 

 /s/ Leslie H. Goldberg

Leslie H. Goldberg

Chief Executive Officer

EX-31.2

Exhibit 31.2 to Form 10-K/A

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/A 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 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 the 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 control 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: October 15, 2018

 

/s/ Cheryl A. Dragoo

Cheryl A. Dragoo

Chief Financial Officer

Exhibit 32

Exhibit 32 to Form 10K/A

 

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"), respectively, hereby certify, based on our knowledge, that the Annual Report on Form 10-K/A of the Company for the year ended July 1, 2018, (the "Report") fully complies with the requirements of Section 13(a) of the Securities Exchange 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.

 

 

/s/ Leslie H. Goldberg

Leslie H. Goldberg

Chief Executive Officer

 

/s/ Cheryl A. Dragoo

Cheryl A. Dragoo

Chief Financial Officer

 

Date: October 15, 2018