10-Q 1 rmr0210q.txt FORM 10-Q FOR QUARTER ENDED MARCH 31, 2002 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 31, 2002 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 28, 2002 Class A Common Stock, 3,657,376 $.10 par value Class B Common Stock 1,483,620 $.10 par value BOWL AMERICA INCORPORATED AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF EARNINGS PART I - FINANCIAL INFORMATION
Thirteen Weeks Ended Thirty-nine Weeks Ended March 31, April 1, March 31, April 1, 2002 2001 2002 2001 _______________________ __________________________ Operating Revenues Bowling and other $6,343,476 $6,465,529 $16,367,505 $16,344,999 Food and merchandise sales 2,652,796 2,647,759 6,929,940 6,737,817 _________ _________ __________ __________ 8,996,272 9,113,288 23,297,445 23,082,816 Operating Expenses Compensation and benefits 3,445,331 3,320,547 9,791,895 9,538,142 Cost of bowling and other 1,530,203 1,477,447 4,472,522 4,293,696 Cost of food and mdse sales 847,715 837,795 2,356,453 2,181,949 Depreciation and amortization 436,758 487,994 1,325,950 1,469,833 General and administrative 201,206 464,525 649,817 908,843 _________ _________ __________ __________ 6,461,213 6,588,308 18,596,637 18,392,463 Operating Income 2,535,059 2,524,980 4,700,808 4,690,353 Interest and dividend income 175,713 186,524 446,813 760,538 _________ _________ __________ __________ Earnings before provision for income taxes 2,710,772 2,711,504 5,147,621 5,450,891 Provision for income taxes 973,172 973,500 1,848,000 1,956,900 _________ _________ __________ __________ Net Earnings $1,737,600 $1,738,004 $ 3,299,621 $ 3,493,991 Earnings per share- basic and diluted $.33 $.33* $.64 $.66* Weighted average shares outstanding 5,146,828 5,178,010* 5,128,095 5,262,055* Dividends paid $592,044 $575,417 $1,779,882 $1,693,210 Per share, Class A $.115 $.11* $.345 $.32* Per share, Class B $.115 $.11* $.345 $.32* *Restated for 5% stock dividend paid July 26, 2001. CONSOLIDATED STATEMENT OF COMPREHENSIVE EARNINGS Net earnings $1,737,600 $1,738,004 $ 3,299,621 $ 3,493,991 Other comprehensive earnings net of tax Unrealized loss on available-for-sale securities (537,358) (199,634) (745,064) (1,731,104) _________ _________ _________ _________ Comprehensive earnings $1,200,242 $1,538,370 $ 2,554,557 $ 1,762,887
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. -2- BOWL AMERICA INCORPORATED AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS
March 31, 2002 July 1, 2001 _______________ _____________ ASSETS Current Assets Cash and cash equivalents $ 3,181,979 $ 1,338,420 Short-term investments 8,736,616 6,236,665 Inventories 532,937 720,505 Prepaid expenses and other 1,111,547 867,938 Income taxes refundable - 449,093 __________ __________ Total Current Assets 13,563,079 9,612,621 Property, Plant and Equipment less accumulated depreciation of $27,285,698 and $26,598,008 20,807,076 21,078,785 Other Assets Marketable equity securities 5,034,288 6,216,928 Cash surrender value-life insurance 414,203 411,411 Other long-term assets 117,338 278,121 __________ __________ TOTAL ASSETS $39,935,984 $37,597,866 LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities Accounts payable $ 678,206 $ 1,071,563 Accrued expenses 1,135,465 934,274 Income taxes payable 214,970 - Other current liabilities 2,520,793 400,889 __________ __________ Total Current Liabilities 4,549,434 2,406,726 Noncurrent Deferred Income Taxes 2,051,398 2,488,000 _________ _________ TOTAL LIABILITIES 6,600,832 4,894,726 __________ __________ 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 - 3,657,376 and 3,491,976 shares 365,737 349,197 Class B issued and outstanding - 1,483,620 and 1,416,427 shares 148,361 141,643 Additional paid-in capital 7,545,902 5,075,754 Unrealized gain on available-for- sale securities, net of tax 2,682,407 3,427,471 Retained earnings 22,592,745 23,709,075 __________ __________ TOTAL STOCKHOLDERS' EQUITY $33,335,152 $32,703,140 TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $39,935,984 $37,597,866 See notes to financial information.
-3- BOWL AMERICA INCORPORATED CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE THIRTY-NINE WEEKS ENDED MARCH 31, 2002 AND APRIL 1, 2001
March 31, April 1, 2002 2001 Cash Flows From Operating Activities: Net earnings $3,299,621 $ 3,493,991 Adjustments to reconcile net earnings to net cash provided by operating activities Depreciation and amortization 1,325,950 1,469,833 Changes in assets and liabilities Decrease in inventories 187,568 89,454 Increase in prepaid expenses & other (243,609) (259,624) Decrease in other long-term assets 157,991 40,413 (Decrease) increase in accounts payable (393,357) 242,360 Increase in accrued expenses 201,191 145,562 Increase in income taxes payable 664,063 236,408 Increase in other current liabilities 2,120,878 2,118,490 _________ _________ Net cash provided by operating activities $7,320,296 $ 7,576,887 _________ _________ Cash flows from investing activities Expenditures for property,plant,equip (1,054,241) (3,182,895) Net sales and maturities (purchases) of short-term investments (2,499,951) 352,548 _________ _________ Net cash used in investing activities (3,554,192) (2,830,347) _________ _________ Cash flows from financing activities Payment of cash dividends (1,779,882) (1,693,210) Purchase of Common Stock (142,663) (2,091,111) _________ _________ Net cash used in financing activities (1,922,545) (3,784,321) _________ _________ Net Increase in Cash and Cash Equivalents 1,843,559 962,219 Cash and Equivalents, Beginning of Year 1,338,420 1,523,242 _________ _________ Cash and Equivalents, End of Period $3,181,979 $ 2,485,461 Supplemental Disclosures of Cash Flow Information Cash paid during the period for Income taxes $1,183,963 $ 1,721,823 See notes to financial information.
-4- BOWL AMERICA INCORPORATED AND SUBSIDIARIES NOTES TO FINANCIAL STATEMENTS For the Thirty-nine Weeks Ended March 31, 2002 1. Consolidated Financial Statements The accompanying unaudited consolidated financial statements of Bowl America Incorporated and subsidiaries (the "Company"), have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission. The consolidated balance sheet as of July 1, 2001 has been derived from the Company's July 1, 2001 audited financial statements. Certain information and note disclosures normally included in the annual financial statements, prepared in accordance with accounting principles generally accepted in the United States of America, have been condensed or omitted pursuant to those rules and regulations, although the Company believes that the disclosures made are adequate to make the information presented not misleading. In the opinion of management, the accompanying unaudited consolidated financial statements reflect all adjustments and reclassifications (all of which are of a normal, recurring nature) that are necessary for the fair presentation for the periods presented. It is suggested that these consolidated financial statements be read in conjunction with the consolidated financial statements and notes thereto included in the Company's latest annual report to the Securities and Exchange Commission on Form 10-K for the year ended July 1, 2001. 2. Marketable Equity Securities Marketable equity securities are carried at fair value in accordance with the provisions of SFAS No. 115. The telecommunications stocks included in the portfolio as of March 31, 2002 were: 16,835 shares of AT&T Wireless 3,946 shares of Alltel 27,572 shares of Bell South 8,028 shares of Lucent Technologies 9,969 shares of Qwest Communications 45,580 shares of SBC 32,000 shares of SprintFon 16,000 shares of SprintPCS 18,784 shares of Verizon 13,560 shares of Vodafone/Airtouch -5- ITEM 2. BOWL AMERICA INCORPORATED MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS March 31, 2002 Liquidity and Capital Resources Short-term investments consisting mainly of U.S. Treasury Bills and Notes, and cash totaled $11,918,000 at the end of the third quarter of fiscal 2002 or $2,768,000 higher than at the beginning of the quarter. The increased funds resulted primarily from operations, which reflects the seasonal nature of the business. During the nine-month period the Company expended approximatley $1,100,000 for the purchase of bowling equipment and amusement games as existing locations are upgraded. The Company is actively seeking property for the development of additional bowling centers. Cash and cash flow are sufficient to finance all currently planned purchases and construction. The Company's holdings of marketable equity securities consisting of telecommunications stocks is another potential source of expansion capital. These securities are carried at their fair value on the last day of the quarter. For the three-month period ending March 31, 2002, the market value decreased by $900,000 to approximately $5,000,000. Current liabilities include $2 million 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. 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. The Company paid a 5% stock dividend on both July 26, 2001 and July 26, 2000. All applicable share and per share data in prior periods have been restated for the effect of the stock dividends. On March 19, 2002 the Company declared a cash dividend of $.115 per share on its Class A and Class B Common Stock, payable on May 15, 2002 to share- holders of record as of April 24, 2002. During the fourth quarter of fiscal 2002, the Company will close a center at the end of its lease as the Company was unable to negotiate a new lease. Results of Operations During the first quarter of fiscal 2002, a center operating at break-even was closed at the end of its lease. The Company also closed a leased location in the second quarter of fiscal 2001. The changes in the number of centers in operation affected all income, expense and comparisons for the periods presented in this report. There were net earnings of $.33 per share for both the thirteen-week periods ended March 31, 2002 and April 1, 2001. For the current thirty-nine week period net earnings per share were $.64 compared to $.66 for the comparable period a year ago. -6- Operating revenues decreased 1% for the three-month period ended March 31, 2002 versus an increase of 5% in the comparable period a year ago. For the current nine-month period operating revenues were up 1% versus a 5% increase in the prior year nine-month period. Food, beverage and merchandise sales were flat in the quarter ended March 31, 2002, and up 3% in the nine-month period. Cost of sales was up 1% for the three-month period and 8% in the nine-month period ended March 31, 2002. Operating expenses excluding depreciation and amortization decreased 1% in the current three-month period but were up 2% through the nine-month period. In the prior year the three-month period was up 10% and the nine-month period showed an increase of 7% in expenses. Employee compensation and benefits were up 4% in the current quarter and 3% in the nine-month period. Overtime pay and a still tight labor market during our busy season were the main causes for the increases. Advertising costs during the quarter ended March 31, 2002, decreased 35% compared to the prior year quarter. Last year the Company acquired a second "Rolling Bowling" trailer. These tractor-trailers, containing a working bowling lane and pinsetter, are used at fairs, schools and other events to promote bowling. The higher expense in advertising last year was primarily due to the cost of preparing both trailers for the new season. Utility costs for the current quarter were down 3% versus an increase of 6% in last year's quarter. For the nine-month period ending March 31, 2002, utility costs were flat compared to an increase of 2% for the comparable prior year period. General and administrative expenses decreased significantly in the current three-month and nine-month periods from the prior year periods. Last year the Company was defending a lawsuit brought by a former employee, which commenced during the first quarter of fiscal year 2001 and was decided in the Company's favor in the fourth quarter of fiscal 2001. Depreciation and amortization expense decreased 10% in the year-to-date period versus a decrease of 11% in the comparable prior year period. Several large capital assets have reached full depreciation. Rent expense for the nine-months ended March 31, 2002 was down 5% due to the closing of a leased center mentioned above. Rent expense in the prior year's comparable period decreased 25% after the closing of a leased location and the purchase of a formerly leased center. Insurance expense increased approximately 20% through the nine-month period ended March 31, 2002 primarily due to an increase in premiums as a result of the events of September 11. ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Not applicable -7- BOWL AMERICA INCORPORATED AND SUBSIDIARIES S.E.C. FORM 10-Q March 31, 2002 PART II - OTHER INFORMATION Item 6 - Exhibits and Reports on Form 8-K (a) Exhibits None (b) Reports on Form 8-K None 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 14, 2002 Leslie H. Goldberg Date Leslie H. Goldberg President May 14, 2002 Cheryl A. Dragoo Date Cheryl A. Dragoo Controller -8-