bai_10k-070112.htm
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 July 1, 2012 |
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 |
| |
|
| Class A Common stock (par value $.10) |
NYSE MKT 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 whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Date File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (Section 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). 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. [ ]
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, 2011, which was the last business day of the registrant's most recently completed second quarter, 3,683,009 Class A common shares were outstanding, and the aggregate market value of the Class A common shares (based upon the closing price of these shares on the NYSE MKT Exchange) of Bowl America Incorporated held by non-affiliates of the registrant was approximately $34 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 stock 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, 2011, the total aggregate market value for both classes of common stock held by non-affiliates would be approximately $39 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 15, 2012
|
| Class A Common Stock |
|
|
|
| $.10 par value |
|
|
3,683,009 |
| 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 July 1, 2012, are incorporated by reference into Part III of this Form 10-K. The Selected Financial Data (Item 6), Management’s Discussion & Analysis (Item 7), financial statements (Item 8) and Management’s Annual Report on Internal Control Over Financial Reporting (Item 9A) attached to in this filing as exhibits are incorporated herein by reference.
BOWL AMERICA INCORPORATED
INDEX TO FISCAL 2012 10-K FILING
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PART I
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Page
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ITEM 1. Business
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(a) General Development of Business
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1
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(b) Financial Information about Industry Segments
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1
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(c) Narrative Description of Business
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1
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(d) Financial Information about Geographic Areas
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1
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ITEM 2. Properties
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2
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ITEM 3. Legal Proceedings
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2
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ITEM 4. Mine Safety Disclosures
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2
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PART II
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ITEM 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
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2
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ITEM 6. Selected Financial Data
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3
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ITEM 7. Management's Discussion and Analysis of Financial Condition and Results of Operations
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3
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ITEM 8. Financial Statements and Supplementary Data
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3
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ITEM 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
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3
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ITEM 9A Controls and Procedures
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3
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PART III
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ITEM 10. Directors, Executive Officers and Corporate Governance
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4
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ITEM 11. Executive Compensation
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4
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ITEM 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
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4
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ITEM 13. Certain Relationships and Related Transactions, and Director Independence
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4
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ITEM 14. Principal Accountant Fees and Services
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4
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PART IV
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ITEM 15. Exhibits and Financial Statement Schedules
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(a)1. Financial Statements
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5
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(a)3. Exhibits
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5
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Signatures
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6-7
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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 fiscal year 2012, the Company and its wholly-owned subsidiaries operated 19 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 2012, the Company had revenues of approximately $24.7 million, per share earnings of $.28, and approximately $39 million in total assets. Merchandise sales, including food and beverages, were approximately 30% of operating revenues. The balance of operating revenues (approximately 70%) represents fees for bowling and related services. See the Company’s Consolidated Financial Statements elsewhere in this Form 10-K for more detailed information.
(c) Narrative Description of Business
As of September 1, 2012 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 Brunswick Corporation, a large bowling equipment manufacturer, 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 600 including approximately 250 full time employees.
(d) Financial Information about Geographic Areas
The Company has no foreign operations.
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 2014 through 2015. 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 MKT. 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 Common Stock in each quarter of fiscal years 2012 and 2011.
|
2012
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1st Qtr
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2nd Qtr
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3rd Qtr
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4th Qtr
|
|
| |
|
|
|
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|
|
|
|
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|
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High
|
|
$ |
13.50 |
|
|
$ |
13.33 |
|
|
$ |
14.85 |
|
|
$ |
13.81 |
|
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Low
|
|
$ |
12.07 |
|
|
$ |
12.09 |
|
|
$ |
12.49 |
|
|
$ |
12.50 |
|
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2011
|
|
1st Qtr
|
|
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2nd Qtr
|
|
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3rd Qtr
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4th Qtr
|
|
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|
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High
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$ |
15.45 |
|
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$ |
13.61 |
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$ |
13.63 |
|
|
$ |
13.50 |
|
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Low
|
|
$ |
10.87 |
|
|
$ |
11.54 |
|
|
$ |
12.40 |
|
|
$ |
12.00 |
|
Holders
As of July 1, 2012, the approximate number of holders of record of the Company's Class A Common Stock was 317 and of the Company's Class B Common Stock was 24.
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 2012 and 2011.
|
Class A Common Stock
|
|
Quarter
|
2012
|
2011
|
|
|
|
|
|
|
|
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First
|
16 cents
|
15.5 cents
|
|
Second
|
16 cents
|
15.5 cents
|
|
Third
|
16 cents
|
16 cents
|
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Fourth
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16 cents
|
16 cents
|
|
Class B Common Stock
|
|
Quarter
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2012
|
2011
|
|
|
|
|
|
|
|
|
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First
|
16 cents
|
15.5 cents
|
|
Second
|
16 cents
|
15.5 cents
|
|
Third
|
16 cents
|
16 cents
|
|
Fourth
|
16 cents
|
16 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 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 12 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 15 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, 2012. Additionally, the Company’s officers concluded that the Company’s disclosure controls and procedures were effective as of July 1, 2012 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 the Commission’s 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
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 July 1, 2012 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)1. Financial Statements
The following consolidated financial statements of Bowl America Incorporated and its subsidiaries are ncorporated by reference in Part II, Item 8:
Report of Independent Registered Public Accounting Firm
Consolidated balance sheets as of July 1, 2012 and July 3, 2011
Consolidated statements of earnings and comprehensive earnings - years ended July 1, 2012 and July 3, 2011
Consolidated statements of stockholders' equity - years ended July 1, 2012 and July 3, 2011
Consolidated statements of cash flows - years ended July 1, 2012 and July 3, 2011
Notes to the consolidated financial statements - years ended July 1, 2012 and July 3, 2011
(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.)
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 Registrant’s Annual Report on Form 10-K for fiscal year ended July 2, 1989.)
20 Press release dated September 27, 2012
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)
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 9-12 hereof
99(c) Consolidated Financial Statements (Item 8), set forth as pages 15-27 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: September 27, 2012
/s/ Cheryl A. Dragoo
Cheryl A. Dragoo
Chief Financial Officer,
Senior Vice President and Controller
Principal Accounting Officer
Date: September 27, 2012
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: September 27, 2012
| /s/ Ruth Macklin |
/s/ Cheryl A. Dragoo |
| Ruth Macklin |
Cheryl A Dragoo |
| Senior Vice President, Secretary, |
Senior Vice President |
| Treasurer and Director |
Principal Accounting Officer and Director |
| |
|
| Date: September 27, 2012 |
Date: September 27, 2012 |
| /s/ Warren T. Braham |
/s/ Stanley H. Katzman |
| Warren T. Braham |
Stanley H. Katzman |
| Director |
Director |
| |
|
| Date: September 27, 2012 |
Date: September 27, 2012 |
| /s/ Allan L. Sher |
/s/ Merle Fabian |
| Allan L. Sher |
Merle Fabian |
| Director |
Director |
| |
|
| Date: September 27, 2012 |
Date: September 27, 2012 |
/s/ Arthur H. Bill
Arthur H. Bill
Director
Date: September 27, 2012
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 the Securities and Exchange Commission’s 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;
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·
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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
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|
|
·
|
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, 2012. 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 July 1, 2012, 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 of 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 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.
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 in downturns in business, to capitalize on opportunities for expansion and modernization and to provide a secure source of income. 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 (“Ginnie Mae”) fund and domestically domiciled stocks with the perceived potential of appreciation, primarily telecommunications stocks. This diversity also provides a measure of safety of principal.
The Company purchased 5,000 shares of Verizon for $178,200 during the fiscal year ended July 1, 2012. The remainder of common stocks 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 one insurance company acquired at no cost when the company demutualized. While not all stocks in the portfolio are domestic American companies any longer, since the original purchases at an approximate cost of $630,000, we have received approximately $962,000 from mergers and sales and over $3,200,000 in dividends, the majority of which are tax favored in the form of exclusion from federal taxable income. These marketable securities are carried at their fair value on the last day of the year. The value of the securities including the additional Verizon shares, on July 1, 2012 was approximately $4.8 million. The value of securities held on July 3, 2011 was approximately $4.2 million.
Short-term investments consisting mainly of Certificates of Deposits, cash and cash equivalents totaled $6,196,000 at the end of fiscal 2012 compared to $8,660,000 at the end of fiscal 2011.
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 weekly and any use of this reserve at its quarterly meetings.
Cash flow provided by operating activities for the year ended July 1, 2012, was $2,769,000. Equipment purchases during fiscal year 2012 used approximately $1,609,000 and $178,200 was used for the purchase of Verizon shares. Proceeds from Ginnie Mae dividends totaling approximately $156,800 in fiscal 2012, were used to purchase additional shares in the fund. Short-term cash was used to meet the balance required to pay dividends totaling $3,296,942.
The change in Accrued Expenses generally relates to timing of payments including compensation and cash contribution to benefit plans.
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 paid cash dividends totaling approximately $3.3 million, or $.64 per share to shareholders during the 2012 fiscal year, making this the fortieth consecutive year of increased regular dividends per share. In June 2012, the Company declared a quarterly $.16 per share dividend, paid in August 2012. 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 future opportunities at such time.
OVERVIEW
The Company is in the entertainment business which, by its nature, has ups and downs based on consumer tastes and whims. 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. An unstable economy can lead many to participate in entertainment that is close to home and relatively inexpensive. Bowling has those advantages. However, the longer the economy remains unstable, the less willing people are to spend on other than necessities. Current economic conditions continue to create 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.
RESULTS OF OPERATIONS
The following table sets forth the items in our consolidated summary of operations for the fiscal years ended July 1, 2012 and July 3, 2011, respectively, and the dollar and percentage changes therein.
| |
|
Fifty-two weeks ended July 1, 2012
and Fifty-three weeks ended July 3, 2011
Dollars in thousands
|
|
|
|
|
2012
|
|
|
2011
|
|
|
Change
|
|
|
% Change
|
|
|
Operating Revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bowling and other
|
|
$
|
17,362
|
|
|
$
|
18,722
|
|
|
$
|
(1,360
|
)
|
|
|
(7.3
|
)%
|
|
Food, beverage & merchandise sales
|
|
|
7,305
|
|
|
|
7,782
|
|
|
|
(477
|
)
|
|
|
(6.1
|
)
|
|
Gain (loss) on sales of assets
|
|
|
26
|
|
|
|
14
|
|
|
|
12
|
|
|
|
85.7
|
|
| |
|
|
24,693
|
|
|
|
26,518
|
|
|
|
(1,825
|
)
|
|
|
(6.9
|
)
|
|
Operating Expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Compensation & benefits
|
|
|
12,037
|
|
|
|
12,588
|
|
|
|
(551
|
)
|
|
|
(4.4
|
)
|
|
Cost of bowling & other
|
|
|
6,646
|
|
|
|
7,400
|
|
|
|
(754
|
)
|
|
|
(10.2
|
)
|
|
Cost of food, beverage & merch sales
|
|
|
2,104
|
|
|
|
2,224
|
|
|
|
(120
|
)
|
|
|
(5.4
|
)
|
|
Depreciation & amortization
|
|
|
1,465
|
|
|
|
1,549
|
|
|
|
(84
|
)
|
|
|
(5.4
|
)
|
|
General & administrative
|
|
|
932
|
|
|
|
965
|
|
|
|
(33
|
)
|
|
|
(3.4
|
)
|
| |
|
|
23,184
|
|
|
|
24,726
|
|
|
|
(1,542
|
)
|
|
|
(6.2
|
)
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Income
|
|
|
1,509
|
|
|
|
1,792
|
|
|
|
(283
|
)
|
|
|
(15.8
|
)
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest & dividend income
|
|
|
500
|
|
|
|
580
|
|
|
|
(80
|
)
|
|
|
(13.8
|
)
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings before taxes
|
|
|
2,009
|
|
|
|
2,372
|
|
|
|
(363
|
)
|
|
|
(15.3
|
)
|
|
Income taxes
|
|
|
584
|
|
|
|
815
|
|
|
|
(231
|
)
|
|
|
(28.3
|
)
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Earnings
|
|
$
|
1,425
|
|
|
$
|
1,557
|
|
|
$
|
(132
|
)
|
|
|
(8.5
|
)
|
Fiscal 2012 consisted of 52 weeks. Fiscal year 2011 consisted of 53 weeks with the extra week reported in the fourth quarter. All revenue and expense categories and comparisons in this report are influenced by the difference in the number of weeks in operation. Nineteen centers were in operation throughout both years.
Operating Revenues
Total operating revenue decreased $1,825,000 to $24.7 million in fiscal 2012 compared to a decrease of $609,000 to $26.5 million in fiscal 2011. Bowling and other revenue decreased $1,360,000 in fiscal 2012 versus a decrease of $388,000 in fiscal 2011. Food, beverage and merchandise sales decreased $477,000 in fiscal 2012 versus a decrease of $192,000 in fiscal 2011.
Management believes that the length and uncertainty of the economic recovery has adversely affected customers’ appetites for recreational spending for both league and open play games. The Company continues to review and adjust its budget in light of the current economic conditions.
Operating Expenses
As discussed in more detail below, total operating expenses decreased 6.2%, or $1,542,000, in fiscal year 2012 versus a decrease of 0.3%, or $68,000 in fiscal 2011. Costs for employee compensation and benefits were down 4.4% or $551,000 in fiscal 2012 versus an increase of 0.4% or $45,000 in fiscal 2011. The Company continued to make scheduling adjustments resulting in a decrease in compensation. In addition, in fiscal year 2012 group health insurance costs declined primarily due to lower premiums and fewer participants. In the prior year higher company contributions to group health insurance benefit were the cause of the increased expense in this category. This category includes 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 $754,000 or 10% in the year ended July 1, 2012 versus a decrease of $52,000 or less than 1% in the prior fiscal year. Maintenance expense declined 16% or $161,000 in fiscal year 2012 and was down 5% or $49,000 in the prior year. Both years included interior updating at several locations, however costs for repairs to air conditioning were down in the fiscal year ended July 1, 2012. Supplies expense decreased 5% or $49,000 in fiscal 2012 partially due to changes in purchasing patterns. The prior year showed an increase of 3%, or $31,000 in part resulting from increased use of computer supplies. Advertising costs decreased $343,000, or 36%, in fiscal 2012 and increased $110,000 or 13% in fiscal 2011. The prior year included aggressive multi-media campaigns. Utility costs decreased 2% in fiscal versus a decrease of 1% in fiscal 2011. Fiscal 2012 included one of the warmest winters on record which resulted in lower natural gas prices and usage.
Cost of food, beverage and merchandise sales decreased $120,000 or 5% primarily due to lower food and beverage sales. The same category increased $8,000 or less than 1% in fiscal 2011 due to lower profit margin on merchandise sales.
Depreciation expenses decreased approximately $84,000 or 5% and $138,000 or 8% in fiscal year 2012 and 2011 respectively, as some large assets reached full depreciation.
Operating income in fiscal 2012 decreased 15.8% from $1.8 million in fiscal 2011 to $1.5 million.
Interest and Dividend Income
Interest and dividend income declined 14% in fiscal 2012. Interest income in fiscal 2012 declined 23% due to lower balances and lower average interest rates on investments, however dividend income was up 10% due to increased dividends on our stock portfolio including increased holdings in Verizon.
Income taxes
Effective income tax rates for the Company were 29.1% for fiscal 2012 and 34.4% for fiscal 2011, the difference from statutory rates being in part for the partial exclusion of dividends received on investments which, in fiscal 2012 was a higher portion of income than in prior years.
Net Earnings
Net earnings in fiscal 2012 were $1.4 million, or $.28 per share, compared to $1.6 million, or $.30 per share in fiscal 2011.
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.
| |
805 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 July 1, 2012 and July 3, 2011, and the related Consolidated Statements of Earnings and Comprehensive Earnings, Stockholders' Equity and Cash Flows for the years then ended. Bowl America Incorporated and Subsidiaries’ management is responsible for these consolidated financial statements. Our responsibility is to express an opinion on these consolidated 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 consolidated financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included 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 consolidated financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. 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 July 1, 2012 and July 3, 2011, 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.
/s/ Aronson, LLC
Aronson, LLC
Rockville, Maryland
September 27, 2012
Exhibit 99(a) Selected Financial Data
BOWL AMERICA INCORPORATED AND SUBSIDIARIES
CONSOLIDATED SUMMARY OF OPERATIONS
Selected Financial Data
| |
|
For the Years Ended
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating revenues
|
|
$
|
24,692,723
|
|
|
$
|
26,517,850
|
|
|
$
|
27,127,073
|
|
|
$
|
29,710,743
|
|
|
$
|
29,349,214
|
|
|
Operating expenses
|
|
|
23,183,698
|
|
|
|
24,725,442
|
|
|
|
24,793,942
|
|
|
|
25,696,315
|
|
|
|
24,990,753
|
|
|
Interest and dividend income
|
|
|
499,873
|
|
|
|
579,960
|
|
|
|
529,845
|
|
|
|
679,287
|
|
|
|
811,205
|
|
|
Investment earnings (loss)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
267,237
|
|
|
Earnings before provision for income taxes
|
|
|
2,008,898
|
|
|
|
2,372,368
|
|
|
|
2,862,976
|
|
|
|
4,693,715
|
|
|
|
5,436,903
|
|
|
Provision for income taxes
|
|
|
584,057
|
|
|
|
815,439
|
|
|
|
1,012,264
|
|
|
|
1,636,433
|
|
|
|
1,902,363
|
|
|
Net earnings
|
|
$
|
1,424,841
|
|
|
$
|
1,556,929
|
|
|
$
|
1,850,712
|
|
|
$
|
3,057,282
|
|
|
$
|
3,534,540
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares outstanding- Basic & Diluted
|
|
|
5,151,471
|
|
|
|
5,147,117
|
|
|
|
5,141,102
|
|
|
|
5,133,375
|
|
|
|
5,135,693
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per share- Basic & Diluted
|
|
$
|
.28
|
|
|
$
|
.30
|
|
|
$
|
.36
|
|
|
$
|
.60
|
|
|
$
|
.69
|
|
|
Net cash provided by operating activities
|
|
$
|
2,769,286
|
|
|
$
|
3,529,193
|
|
|
$
|
2,944,882
|
|
|
$
|
6,502,922
|
|
|
$
|
3,499,703
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash dividends paid
|
|
$
|
3,296,942
|
|
|
$
|
3,242,593
|
|
|
$
|
3,187,444
|
|
|
$
|
3,105,700
|
|
|
$
|
3,543,631
|
|
|
Cash dividends paid Per share - Class A
|
|
$
|
0.64
|
|
|
$
|
0.63
|
|
|
$
|
0.62
|
|
|
$
|
0.605
|
|
|
$
|
0.69
|
|
|
-Class B
|
|
$
|
0.64
|
|
|
$
|
0.63
|
|
|
$
|
0.62
|
|
|
$
|
0.605
|
|
|
$
|
0.69
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
39,368,174
|
|
|
$
|
40,917,762
|
|
|
$
|
41,410,343
|
|
|
$
|
42,966,669
|
|
|
$
|
44,056,750
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders' equity
|
|
$
|
33,685,154
|
|
|
$
|
35,301,391
|
|
|
$
|
36,403,807
|
|
|
$
|
37,579,197
|
|
|
$
|
38,214,963
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net book value per share
|
|
$
|
6.54
|
|
|
$
|
6.85
|
|
|
$
|
7.07
|
|
|
$
|
7.31
|
|
|
$
|
7.44
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings as a % of beginning stock holders' equity
|
|
|
4.0
|
%
|
|
|
4.3
|
%
|
|
|
4.9
|
%
|
|
|
8.0
|
%
|
|
|
9.0
|
%
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Lanes in operation
|
|
|
756
|
|
|
|
756
|
|
|
|
756
|
|
|
|
756
|
|
|
|
756
|
|
|
Centers in operation
|
|
|
19
|
|
|
|
19
|
|
|
|
19
|
|
|
|
19
|
|
|
|
19
|
|
Exhibit 99(c) Consolidated Financial Statements
BOWL AMERICA INCORPORATED AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
| |
|
As of
|
|
| |
|
|
|
|
|
|
|
ASSETS
|
|
|
CURRENT ASSETS:
|
|
|
|
|
|
|
|
Cash and cash equivalents (Note 2)
|
|
$
|
2,332,022
|
|
|
$
|
2,361,846
|
|
|
Short-term investments (Note 3)
|
|
|
3,863,721
|
|
|
|
6,297,822
|
|
|
Inventories
|
|
|
535,412
|
|
|
|
480,318
|
|
|
Prepaid expenses and other
|
|
|
613,891
|
|
|
|
701,711
|
|
|
Income taxes refundable
|
|
|
313,518
|
|
|
|
275,847
|
|
|
TOTAL CURRENT ASSETS
|
|
|
7,658,564
|
|
|
|
10,117,544
|
|
|
LAND, BUILDINGS & EQUIPMENT, net (Note 4)
|
|
|
22,718,526
|
|
|
|
22,581,314
|
|
|
OTHER ASSETS:
|
|
|
|
|
|
|
|
|
|
Marketable investment securities (Note 3)
|
|
|
8,286,680
|
|
|
|
7,538,332
|
|
|
Cash surrender value-life insurance
|
|
|
619,624
|
|
|
|
594,792
|
|
|
Other
|
|
|
84,780
|
|
|
|
85,780
|
|
|
TOTAL OTHER ASSETS
|
|
|
8,991,084
|
|
|
|
8,218,904
|
|
|
TOTAL ASSETS
|
|
$
|
39,368,174
|
|
|
$
|
40,917,762
|
|
| |
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS' EQUITY
|
|
|
CURRENT LIABILITIES:
|
|
|
|
|
|
|
|
|
|
Accounts payable
|
|
$
|
722,380
|
|
|
$
|
666,784
|
|
|
Accrued expenses
|
|
|
1,004,221
|
|
|
|
1,224,237
|
|
|
Dividends payable
|
|
|
824,235
|
|
|
|
824,235
|
|
|
Other current liabilities
|
|
|
295,978
|
|
|
|
302,394
|
|
|
Current deferred income taxes (Note 7)
|
|
|
65,552
|
|
|
|
53,311 |
|
|
TOTAL CURRENT LIABILITIES
|
|
|
2,912,366
|
|
|
|
3,070,961
|
|
|
LONG-TERM DEFERRED COMPENSATION
|
|
|
44,217
|
|
|
|
43,701
|
|
|
NONCURRENT DEFERRED INCOME TAXES (Note 7)
|
|
|
2,726,437
|
|
|
|
2,501,709
|
|
|
TOTAL LIABILITIES
|
|
|
5,683,020
|
|
|
|
5,616,371
|
|
| |
|
|
|
|
|
|
|
|
|
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 a share: Authorized, 10,000,000 shares
|
|
|
|
|
|
|
|
|
|
Class A issued and outstanding 3,683,009
|
|
|
368,301
|
|
|
|
368,301
|
|
|
Class B issued and outstanding 1,468,462
|
|
|
146,846
|
|
|
|
146,846
|
|
|
Additional paid-in capital
|
|
|
7,727,264
|
|
|
|
7,727,264
|
|
|
Accumulated other comprehensive earnings-
|
|
|
|
|
|
|
|
|
|
Unrealized gain on available-for-sale
|
|
|
|
|
|
|
|
|
|
securities, net of tax
|
|
|
2,538,818
|
|
|
|
2,282,954
|
|
|
Retained earnings
|
|
|
22,903,925
|
|
|
|
24,776,026
|
|
|
TOTAL STOCKHOLDERS'EQUITY
|
|
|
33,685,154
|
|
|
|
35,301,391
|
|
| |
|
|
|
|
|
|
|
|
|
TOTAL LIABILITIES AND STOCKHOLDERS'EQUITY
|
|
$
|
39,368,174
|
|
|
$
|
40,917,762
|
|
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
| |
|
For the Years Ended
|
|
| |
|
July 1,
2012
|
|
|
|
|
| Operating Revenues: |
|
|
|
|
|
|
|
Bowling and other
|
|
$ |
17,361,438 |
|
|
$ |
18,721,460 |
|
|
Food, beverage and merchandise sales
|
|
|
7,305,361 |
|
|
|
7,782,203 |
|
|
Gain on sale of land, buildings and equipment
|
|
|
25,924 |
|
|
|
14,187 |
|
|
Total Operating Revenue
|
|
|
24,692,723 |
|
|
|
26,517,850 |
|
| |
|
|
|
|
|
|
|
|
|
Operating Expenses:
|
|
|
|
|
|
|
|
|
|
Employee compensation and benefits
|
|
|
12,037,180 |
|
|
|
12,588,313 |
|
|
Cost of bowling and other services
|
|
|
6,645,737 |
|
|
|
7,400,000 |
|
|
Cost of food, beverage and merchandise sales
|
|
|
2,103,521 |
|
|
|
2,223,613 |
|
|
Depreciation and amortization
|
|
|
1,465,149 |
|
|
|
1,549,166 |
|
|
General and administrative
|
|
|
932,111 |
|
|
|
964,350 |
|
|
Total Operating Expense
|
|
|
23,183,698 |
|
|
|
24,725,442 |
|
| |
|
|
|
|
|
|
|
|
|
Operating Income
|
|
|
1,509,025 |
|
|
|
1,792,408 |
|
|
Interest and dividend income
|
|
|
499,873 |
|
|
|
579,960 |
|
| |
|
|
|
|
|
|
|
|
|
Earnings before provision for income
|
|
|
|
|
|
|
|
|
|
Taxes
|
|
|
2,008,898 |
|
|
|
2,372,368 |
|
|
Provision for income taxes (Note 7)
|
|
|
|
|
|
|
|
|
|
Current
|
|
|
504,573 |
|
|
|
732,186 |
|
|
Deferred
|
|
|
79,484 |
|
|
|
83,253 |
|
| |
|
|
584,057 |
|
|
|
815,439 |
|
| |
|
|
|
|
|
|
|
|
|
Net Earnings
|
|
$ |
1,424,841 |
|
|
$ |
1,556,929 |
|
| |
|
|
|
|
|
|
|
|
|
Earnings per share-basic & diluted
|
|
$ |
.28 |
|
|
$ |
.30 |
|
| |
|
|
|
|
|
|
|
|
|
Weighted average shares outstanding
|
|
|
5,151,471 |
|
|
|
5,147,117 |
|
| |
|
|
|
|
|
|
|
|
|
Dividends paid
|
|
$ |
3,296,942 |
|
|
$ |
3,242,593 |
|
| |
|
|
|
|
|
|
|
|
|
Per share, dividends paid, Class A
|
|
$ |
.64 |
|
|
$ |
.63 |
|
| |
|
|
|
|
|
|
|
|
|
Per share, dividends paid, Class B
|
|
$ |
.64 |
|
|
$ |
.63 |
|
| |
|
|
|
|
|
|
|
|
|
Net Earnings
|
|
$ |
1,424,841 |
|
|
$ |
1,556,929 |
|
|
Other comprehensive earnings- net of tax
|
|
|
|
|
|
|
|
|
|
Unrealized gain on available-for–sale securities net of tax of $157,484 and $341,043
|
|
|
255,864 |
|
|
|
554,082 |
|
| |
|
|
|
|
|
|
|
|
|
Comprehensive earnings
|
|
$ |
1,680,705 |
|
|
$ |
2,111,011 |
|
| |
|
|
|
|
|
|
|
|
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
| |
|
COMMON STOCK
|
|
|
|
|
|
Accumulated |
|
|
|
|
| |
|
Class A
Shares
|
|
|
Class A
Amount
|
|
|
Class B
Shares
|
|
|
Class B
Amount
|
|
|
Additional
Paid-In Capital
|
|
|
Other Comprehensive Earnings
|
|
|
Retained
Earnings
|
|
|
Balance, June 27, 2010
|
|
|
3,678,509
|
|
|
$
|
367,851
|
|
|
|
1,468,462
|
|
|
$
|
146,846
|
|
|
$
|
7,672,094
|
|
|
$
|
1,728,872
|
|
|
$
|
26,488,144
|
|
|
Shares issued for ESOP
|
|
|
4,500
|
|
|
|
450
|
|
|
|
-
|
|
|
|
-
|
|
|
|
55,170
|
|
|
|
-
|
|
|
|
-
|
|
|
Cash dividends paid
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(2,444,812
|
)
|
|
Accrued dividends declared June 21, 2011, payable August 17, 2011
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(824,235
|
)
|
|
Change in unrealized gain on
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
available-for-sale securities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(shown net of tax benefit)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
554,082
|
|
|
|
-
|
|
|
Net earnings for the year
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1,556,929
|
|
|
Balance, July 3, 2011
|
|
|
3,683,009
|
|
|
$
|
368,301
|
|
|
|
1,468,462
|
|
|
$
|
146,846
|
|
|
$
|
7,727,264
|
|
|
$
|
2,282,954
|
|
|
$
|
24,776,026
|
|
|
Cash dividends paid
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(2,472,707
|
)
|
|
Accrued dividends declared June 19, 2012, payable August 22, 2012
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(824,235
|
)
|
|
Change in unrealized gain on available-for-sale securities (shown net of tax)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
255,864
|
|
|
|
-
|
|
|
Net earnings for the year
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1,424,841
|
|
|
Balance, July 1, 2012
|
|
|
3,683,009
|
|
|
$
|
368,301
|
|
|
|
1,468,462
|
|
|
$
|
146,846
|
|
|
$
|
7,727,264
|
|
|
$
|
2,538,818
|
|
|
$
|
22,903,925
|
|
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
| |
|
For the Years Ended
|
|
| |
|
|
|
|
|
|
|
Cash Flows From Operating Activities
|
|
|
|
|
|
|
|
Net earnings
|
|
$
|
1,424,841
|
|
|
$
|
1,556,929
|
|
|
Adjustments to reconcile net earnings to net cash provided by operating activities:
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
|
1,465,149
|
|
|
|
1,549,166
|
|
|
Increase in deferred income tax
|
|
|
79,485
|
|
|
|
83,251
|
|
|
Gain on disposition of assets-net
|
|
|
(25,924
|
)
|
|
|
(14,187
|
)
|
|
Stock issuance – ESOP plan
|
|
|
-
|
|
|
|
55,620
|
|
|
Changes in assets and liabilities
|
|
|
|
|
|
|
|
|
|
(Increase) decrease in inventories
|
|
|
(55,094
|
)
|
|
|
40,054
|
|
|
Decrease (increase) in prepaid and other
|
|
|
87,820
|
|
|
|
(261,967
|
)
|
|
(Increase) decrease in income taxes refundable
|
|
|
(37,671
|
)
|
|
|
358,940
|
|
|
Decrease in other long-term assets
|
|
|
1,000
|
|
|
|
2,300
|
|
|
Increase (decrease) in accounts payable
|
|
|
55,596
|
|
|
|
(34,425
|
)
|
|
(Decrease) increase in accrued expenses
|
|
|
(220,016
|
)
|
|
|
188,012
|
|
|
(Decrease) increase in other current liabilities
|
|
|
(6,416
|
)
|
|
|
9,474
|
|
|
Increase (decrease) in long-term deferred compensation
|
|
|
516
|
|
|
|
(3,974
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by operating activities
|
|
|
2,769,286
|
|
|
|
3,529,193
|
|
| |
|
|
|
|
|
|
|
|
|
Cash Flows From Investing Activities
|
|
|
|
|
|
|
|
|
|
Expenditures for land, building and equipment
|
|
|
(1,608,587
|
)
|
|
|
(1,163,265
|
)
|
|
Sale of assets
|
|
|
32,150
|
|
|
|
22,750
|
|
|
Net sales and maturities of short-term investments
|
|
|
2,434,101
|
|
|
|
838,762
|
|
|
Purchases of marketable securities
|
|
|
(335,000
|
)
|
|
|
(176,322
|
)
|
|
Increase in cash surrender value
|
|
|
(24,832
|
)
|
|
|
(26,166
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Net cash used in investing activities
|
|
|
497,832
|
|
|
|
(504,241
|
)
|
| |
|
|
|
|
|
|
|
|
|
Cash Flows From Financing Activities
|
|
|
|
|
|
|
|
|
|
Payment of cash dividends
|
|
|
(3,296,942
|
)
|
|
|
(3,242,593
|
)
|
| |
|
|
|
|
|
|
|
|
|
Net cash used in financing activities
|
|
|
(3,296,942
|
)
|
|
|
(3,242,593
|
)
|
| |
|
|
|
|
|
|
|
|
|
Net (Decrease) increase in Cash and Equivalents
|
|
|
(29,824
|
)
|
|
|
(217,641
|
)
|
| |
|
|
|
|
|
|
|
|
|
Cash and Equivalents, Beginning of period
|
|
|
2,361,846
|
|
|
|
2,579,487
|
|
| |
|
|
|
|
|
|
|
|
|
Cash and Equivalents, End of period
|
|
$
|
2,332,022
|
|
|
$
|
2,361,846
|
|
| |
|
|
|
|
|
|
|
|
|
Supplemental Disclosures of Cash Flow Information
|
|
|
|
|
|
|
|
|
|
Cash Paid During the Period for:
|
|
|
|
|
|
|
|
|
|
Income taxes
|
|
$
|
548,430
|
|
|
$
|
373,246
|
|
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
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 2012 ended July 1, 2012, and consisted of 52 weeks. Fiscal year 2011 ended July 3, 2011 and consisted of 53 weeks.
Subsequent Events
The Company has evaluated subsequent events through the date of filing these financial statements with the Securities and Exchange Commission on September 27, 2012.
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 and amortization rates are based are as follows:
|
Bowling lanes and equipment (years)
|
3
|
- |
10 |
|
Building and building improvements (years)
|
10
|
- |
39 |
|
Leasehold improvements (years)
|
5
|
- |
15 |
|
Amusement games (years)
|
3
|
- |
5 |
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 July 1, 2012, and July 3, 2011, were $616,148 and $959,043, 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
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
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.
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 5,151,471, and 5,147,117, for fiscal years 2012 and 2011, respectively.
Comprehensive Earnings
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 the years ended July 1, 2012 and July 3, 2011.
Cash and Cash Equivalents
For purposes of the consolidated statements of cash flows, the Company considers money market funds and certificates of deposits, 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 July 1, 2012 and July 3, 2011 other current liabilities included $287,273 and $289,718, respectively, in prize fund monies.
Reclassifications
Certain previous year amounts have been reclassified to conform with the current year presentation.
New Accounting Standards
In July 2012, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2012-02 “Testing Indefinite-Lived Intangible Assets for Impairment”. This update provides entities with the option of first assessing qualitative factors to determine whether it is more likely than not that indefinite lived intangible assets are impaired. This standard is effective for fiscal years beginning after September 15, 2012 and early adoption is permitted. The Company’s does not believe this standard will have an impact on the Company’s financial statements as the Company holds no indefinite lived intangibles.
In June 2011, the FASB issued ASU 2011-05, “Presentation of Comprehensive Income.” This update requires that all non-owner changes in stockholders’ equity be presented either in a single continuous statement of comprehensive income or in two separate but consecutive statements. This update eliminates the option to present the components of other comprehensive income as part of the statement of changes in stockholders’ equity. These changes became effective for the Company in the fiscal 2012 third quarter and did not have a significant impact on the Company’s financial statements as comprehensive earnings were already presented in consecutive statements.
In May 2011, the FASB issued ASU No. 2011-04, “Fair Value Measurements (Topic 820): Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs.” (“ASU 2011-04”). This amendment contains certain updates to the fair value measurement guidance as well as enhanced disclosure requirements. The most significant change in disclosures is an expansion of the information required for “Level 3” measurements, including enhanced disclosure for: (1) the valuation processes used by the reporting entity; and (2) the sensitivity of the fair value measurement to changes in unobservable inputs and the interrelationships between those unobservable inputs, if any. The provisions of this update are effective for interim and annual periods beginning on or after December 15, 2011, with early adoption prohibited. The Company’s adoption of this standard did not have a significant impact on the Company’s fair value measurements, financial condition, results of operations or cash flows.
2. CASH AND CASH EQUIVALENTS
Cash and cash equivalents consisted of the following:
| |
|
July 1, 2012
|
|
|
July 3, 2011
|
|
| |
|
|
|
|
|
|
|
Demand deposits and cash on hand
|
|
$ |
1,486,497 |
|
|
$ |
1,600,965 |
|
|
Money market funds
|
|
|
845,525 |
|
|
|
760,881 |
|
| |
|
$ |
2,332,022 |
|
|
$ |
2,361,846 |
|
The account balances at times exceed federally insured limits. The Company does not believe this poses any significant risk.
3. INVESTMENTS
The Company’s marketable securities are categorized as available-for-sale securities. The cost for marketable securities was determined using the specific identification method. The fair values of marketable securities are based on the quoted market price for those securities. Short-term investments consist of certificates of deposits with maturities of generally three months to one year. At July 1, 2012, the fair value of short-term investments was $3,863,721. At July 3, 2011, the fair value of short-term investments was $6,297,822. 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 July 1, 2012, the Company had $201,981 of gross unrealized gains from its investments in federal agency mortgage backed securities which had a fair value of $3,498,182. As of July 3, 2011, $163,019 in gross unrealized gains were from its investments in federal agency mortgage backed securities which had a fair value of $3,302,418. The Company’s investments were was follows:
| |
|
Original
Cost
|
|
|
Unrealized
Gain
|
|
|
Unrealized
Loss
|
|
|
Fair
Value
|
|
|
July 1, 2012
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity securities
|
|
$ |
888,998 |
|
|
$ |
3,904,987 |
|
|
$ |
(5,487 |
) |
|
$ |
4,788,498 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mutual fund
|
|
|
3,296,201 |
|
|
|
201,981 |
|
|
|
- |
|
|
|
3,498,182 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Certificates of deposits
|
|
|
3,863,721 |
|
|
|
- |
|
|
|
- |
|
|
|
3,863,721 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
July 3, 2011
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity securities
|
|
$ |
710,799 |
|
|
$ |
3,528,860 |
|
|
$ |
(3,745 |
) |
|
$ |
4,235,914 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mutual fund
|
|
|
3,139,399 |
|
|
|
163,019 |
|
|
|
- |
|
|
|
3,302,418 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Certificates of deposits
|
|
|
6,297,822 |
|
|
|
- |
|
|
|
- |
|
|
|
6,297,822 |
|
During fiscal 2012 and fiscal 2011, the Company had certain equity securities with cumulative unrealized losses of $5,487 and $3,745 respectively. Management believes the unrealized losses are temporary and the Company has the ability and intent to hold these securities long enough to recover its investment.
| |
|
Less than 12 months
|
|
|
12 Months or greater
|
|
|
Total
|
|
|
|
|
|
|
|
Unrealized
loss
|
|
|
|
|
|
Unrealized
loss
|
|
|
|
|
|
Unrealized
loss
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity securities
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
5,373 |
|
|
$ |
(5,487 |
) |
|
$ |
5,373 |
|
|
$ |
(5,487 |
) |
| |
|
Less than 12 months
|
|
|
12 Months or greater
|
|
|
Total
|
|
|
July 3, 2011
|
|
|
|
|
Unrealized
loss
|
|
|
|
|
|
Unrealized
loss
|
|
|
|
|
|
Unrealized
loss
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity securities
|
|
$ |
3,444 |
|
|
$ |
(1,571 |
) |
|
$ |
3,671 |
|
|
$ |
(2,174 |
) |
|
$ |
7,115 |
|
|
$ |
(3,745 |
) |
The equity securities portfolio includes the following stocks:
| 82,112 |
shares of AT&T |
| 354 |
shares of Fairpoint Communications |
| 939 |
shares of SuperMedia |
| 40,000 |
shares of Sprint Nextel |
| 11,865 |
shares of Vodafone |
| 2,520 |
shares of Manulife |
| 774 |
shares of Teradata |
| 4,398 |
shares of CenturyLink |
| 4,508 |
shares of Frontier Communications |
| 475 |
shares of LSI |
| 23,784 |
shares of Verizon |
| 4,079 |
shares of Windstream |
| 774 |
shares of NCR |
The Company purchased 5,000 shares of Verizon during fiscal 2012. There were no sales or exchanges of holdings in the years ended July 1, 2012 and July 3, 2011 other than the exchange of the Company’s shares of Qwest for shares of CenturyLink as a result of the merger on April 1, 2011.
As stated in Note 1, the Company records its readily marketable debt and equity securities at fair value. These assets are valued in accordance with a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value as follows:
| |
Level 1.
|
Observable inputs such as quoted prices in active markets for identical assets or liabilities;
|
| |
Level 2.
|
Inputs, other than the quoted prices in active markets, that are observable either directly orindirectly; and
|
| |
Level 3.
|
Unobservable inputs in which there is little or no market data, which require the reportingentity to develop its own assumptions.
|
The fair value of these assets as of July 1, 2012 is as follows:
|
Description
|
|
|
|
|
|
|
|
|
|
|
Unrealized
gains/(losses)
for the
Year Ended
July 1, 2012
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity securities
|
|
$ |
4,788,498 |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
374,386 |
|
|
$ |
3,899,500 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mutual fund
|
|
|
3,498,182 |
|
|
|
- |
|
|
|
- |
|
|
|
38,962 |
|
|
|
201,981 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Certificates of deposits
|
|
|
- |
|
|
|
3,863,721 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
TOTAL
|
|
$ |
8,286,680 |
|
|
$ |
3,863,721 |
|
|
|
- |
|
|
$ |
413,348 |
|
|
$ |
4,101,481 |
|
The fair value of these assets as of July 3, 2011 was as follows:
|
Description
|
|
|
|
|
|
|
|
|
|
|
Unrealized
gains/(losses)
for the
Year Ended
July 3, 2011
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity securities
|
|
$ |
4,235,914 |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
913,824 |
|
|
$ |
3,525,114 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mutual fund
|
|
|
3,302,418 |
|
|
|
- |
|
|
|
- |
|
|
|
(18,699 |
) |
|
|
163,019 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Certificates of deposits
|
|
|
- |
|
|
|
6,297,822 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
TOTAL
|
|
$ |
7,538,332 |
|
|
$ |
6,297,822 |
|
|
|
- |
|
|
$ |
895,125 |
|
|
$ |
3,688,133 |
|
The fair value of certificates of deposits is estimated using net present value techniques and comparing the values to certificates with similar terms.
4. LAND, BUILDINGS, AND EQUIPMENT
Land, buildings, and equipment, as cost, consisted of the following:
| |
|
|
|
|
|
|
|
Buildings
|
|
$ |
18,205,337 |
|
|
$ |
17,908,793 |
|
|
Leasehold and building improvements
|
|
|
7,958,366 |
|
|
|
7,817,752 |
|
|
Bowling lanes and equipment
|
|
|
22,891,473 |
|
|
|
22,796,335 |
|
|
Land
|
|
|
10,590,450 |
|
|
|
10,590,450 |
|
|
Amusement games
|
|
|
818,190 |
|
|
|
821,819 |
|
|
Bowling lanes and equipment not yet in use
|
|
|
276,621 |
|
|
|
216,545 |
|
| |
|
|
60,740,437 |
|
|
|
60,151,694 |
|
|
Less accumulated depreciation and amortization
|
|
|
38,021,911 |
|
|
|
37,570,380 |
|
| |
|
$ |
22,718,526 |
|
|
$ |
22,581,314 |
|
Depreciation and amortization expense for buildings and equipment for fiscal years 2012 and 2011 was $1,465,149, and $1,549,166, respectively. 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
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 July 1, 2012, the minimum fixed rental commitments related to all non-cancelable leases, were as follows:
|
Year Ending
|
|
|
|
|
2013
|
|
$ |
288,000 |
|
|
2014
|
|
|
280,667 |
|
|
2015
|
|
|
16,667 |
|
|
Total minimum lease payments
|
|
$ |
585,334 |
|
Net rent expense was as follows:
| |
|
For the Years Ended
|
|
| |
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
Minimum rent under operating leases
|
|
$ |
288,000 |
|
|
$ |
288,000 |
|
|
Excess percentage rents
|
|
|
- |
|
|
|
767 |
|
| |
|
$ |
288,000 |
|
|
$ |
288,767 |
|
Purchase Commitments
The Company's purchase commitments at July 1, 2012 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 July 1, 2012 and July 3, 2011, contributions in the amount of $50,000 for each year, 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. For fiscal year 2012, the Company contributed $50,000 and for fiscal year 2011 the Company contributed 4,500 shares of Bowl America common stock valued at $55,620, based on the market price on the date of contribution. The Company has no defined benefit plan or other post retirement plan.
7. INCOME TAXES
The Company is required to analyze all material positions it has taken or plans 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 financial statements.
The Company had no material unrecognized tax benefits at July 1, 2012 nor does it expect any significant change in that status during the next twelve months. No accrued interest or penalties on uncertain tax positions have been included on the consolidated statements of earnings and comprehensive earnings or the consolidated balance sheet. Should the Company adopt tax positions for which it would be appropriate to accrue interest and penalties, such costs would be reflected in the tax expense for the period in which such costs accrued. The Company is subject to U.S. Federal income tax and to several state jurisdictions. Returns filed for tax periods ending after June 29, 2008 are still open to examination by those relevant taxing authorities.
The significant components of the Company's deferred tax assets and liabilities were as follows:
| |
|
|
|
|
|
|
|
Deferred tax:
|
|
|
|
|
|
|
|
Land, buildings, and equipment
|
|
$ |
1,255,699 |
|
|
$ |
1,169,898 |
|
|
Unrealized gain on available- for-sale securities
|
|
|
1,563,743 |
|
|
|
1,405,218 |
|
|
Dividends received
|
|
|
|
|
|
|
|
|
|
Prepaid expenses and other
|
|
|
(27,453 |
) |
|
|
(20,096 |
) |
|
Deferred tax liabilities
|
|
$ |
2,791,989 |
|
|
$ |
2,555,020 |
|
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
|
|
|
|
|
2012
|
|
|
2011
|
|
|
Taxes computed at statutory rate
|
|
|
34.0 |
% |
|
|
34.0 |
% |
|
State income taxes, net of Federal income tax benefit
|
|
|
2.4 |
|
|
|
3.7 |
|
|
Dividends received exclusion
|
|
|
(3.0 |
) |
|
|
(2.3 |
) |
|
All other net
|
|
|
(4.3 |
) |
|
|
(1.0 |
) |
|
|
|
|
29.1 |
% |
|
|
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 July 1, 2012, and July 3, 2011, 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 2010 to 2011. These employee loans have been recorded as a reduction of additional paid-in capital.
9. DEFERRED COMPENSATION
Deferred compensation payable was a total of $50,221 at July 1, 2012, and $49,021 at July 3, 2011. The current portion of these amounts is $6,004 at July 1, 2012, and $5,320 at July 3, 2011, and is included in accrued expenses.
-27-