10-Q 1 bwl-a20210328_10q.htm FORM 10-Q bwl-a20210328_10q.htm
 

 

FORM  10-Q

 

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

 

FOR THE QUARTERLY PERIOD ENDED: March 28, 2021

 

COMMISSION FILE NUMBER:  001-7829

 

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 each class  

Trading Symbol(s)  

Name of each exchange on which registered  

Class A Common stock (par value $.10)

BWL-A

NYSE American

 

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 ☒   No ☐

 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (232.405) of this chapter during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

Yes ☒   No ☐

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “ large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large Accelerated Filer ☐      Accelerated Filer ☐

Non-Accelerated Filer ☐      Smaller Reporting Company ☒      Emerging Growth Company ☐

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

 

Indicate by check mark whether the registrant is a shell company (as defined by Rule 12b-2 of the Exchange Act)

Yes ☐    No ☒

 

Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date:

 

 

Shares Outstanding at

 

May 10, 2021

   

Class A Common Stock,

 

$.10 par value

3,746,454

 

 

Class B Common Stock,

 

$.10 par value

1,414,517

 

 

 

 

PART 1. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

 
 

BOWL AMERICA INCORPORATED AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS

(Unaudited)

 

   

Thirteen Weeks Ended

   

Thirty-nine Weeks Ended

 
   

March 28,

   

March 29,

   

March 28,

   

March 29,

 
   

2021

   

2020

   

2021

   

2020

 

Operating Revenues:

                               

Bowling and other

  $ 2,555,725     $ 4,455,810     $ 5,545,779     $ 12,376,206  

Food, beverage and merchandise sales

    1,033,167       1,803,800       2,198,972       5,172,874  

Total Operating Revenues

    3,588,892       6,259,610       7,744,751       17,549,080  
                                 

Operating Expenses:

                               

Employee compensation and benefits

    1,592,258       2,648,427       4,463,031       8,106,410  

Cost of bowling and other services

    933,651       1,462,254       2,840,934       4,477,990  

Cost of food, beverage and merchandise sales

    315,143       532,943       694,217       1,537,259  

Depreciation and amortization

    243,408       243,808       739,024       714,560  

General and administrative

    177,999       277,030       527,073       884,369  

Total Operating Expenses

    3,262,459       5,164,462       9,264,279       15,720,588  
                                 

Operating Income (loss)

    326,433       1,095,148       (1,519,528

)

    1,828,492  

Interest, dividend and other income

    95,489       96,842       277,653       313,163  

Change in value of investments

    119,969       (1,000,868

)

    420,786       (410,933

)

Earnings (loss) before provision for income taxes

    541,891       191,122       (821,089

)

    1,730,722  
                                 

Provision for income taxes

    131,505       33,800       (191,970

)

    410,400  
                                 

Net Earnings (loss)

  $ 410,386     $ 157,322     $ (629,119

)

  $ 1,320,322  
                                 

Earnings (loss) per share-basic & diluted

  $ .08     $ .03     $ (.12

)

  $ .26  
                                 

NET EARNINGS (LOSS) PER SHARE

  $ .08     $ .03     $ (.12

)

  $ .26  
                                 

Weighted average shares outstanding

    5,160,971       5,160,971       5,160,971       5,160,971  
                                 

Dividends paid

  $ -     $ 903,170     $ -     $ 2,709,511  
                                 
                                 

Per share, dividends paid, Class A

  $ -     $ .175     $ -     $ .525  
                                 

Per share, dividends paid, Class B

  $ -     $ .175     $ -     $ .525  

 

 

 

The operating results for the thirteen (13) and thirty-nine (39) week periods ended March 28, 2021 are not necessarily indicative of results to be expected for the year.  See notes to condensed consolidated financial statements.

 

2

 

 

 

Condensed Consolidated Balance Sheets

(Unaudited)

 

   

As of

 
   

March 28,

   

June 28,

 
   

2021

   

2020

 

ASSETS

 

CURRENT ASSETS:

               

Cash and cash equivalents

  $ 1,988,094     $ 1,659,264  

Short-term investments

    -       134,202  

Marketable investment securities

    5,642,060       5,216,218  

Inventories

    413,405       486,105  

Prepaid expenses and other

    394,650       523,662  

Income taxes refundable

    651,681       766,244  

TOTAL CURRENT ASSETS

    9,089,890       8,785,695  

LAND, BUILDINGS & EQUIPMENT, net of accumulated depreciation of $41,637,900 and $41,039,447

    17,082,247       17,667,517  

OTHER ASSETS:

               

Right to use asset

    1,690,749       1,812,937  

Cash surrender value-life insurance

    282,895       282,895  

Other

    64,265       64,265  

TOTAL OTHER ASSETS

    2,037,909       2,160,097  

TOTAL ASSETS

  $ 28,210,046     $ 28,613,309  
                 

LIABILITIES AND STOCKHOLDERS' EQUITY

 

CURRENT LIABILITIES:

               

Accounts payable

  $ 329,439     $ 269,373  

Accrued expenses

    595,142       932,528  

Other current liabilities

    1,210,049       395,629  

TOTAL CURRENT LIABILITIES

    2,134,630       1,597,530  

Lease liability

    1,553,097       1,672,371  

Note Payable PPP Loan

    1,500,000       1,500,000  

DEFERRED INCOME TAXES

    1,134,421       1,326,391  

TOTAL LIABILITIES

    6,322,148       6,096,292  
                 

COMMITMENTS AND CONTINGENCIES

               
                 

STOCKHOLDERS' EQUITY

               

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 3,746,454

    374,645       374,645  

Class B issued and outstanding 1,414,517

    141,452       141,452  

Additional paid-in capital

    7,854,108       7,854,108  

Retained earnings

    13,517,693       14,146,812  

TOTAL STOCKHOLDERS' EQUITY

    21,887,898       22,517,017  
                 

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY

  $ 28,210,046     $ 28,613,309  

 

See notes to condensed consolidated financial statements.

 

3

 

 

BOWL AMERICA INCORPORATED AND SUBSIDIARIES

 

CONDENSED CONSOLIDATED STATEMENTS  OF CASH FLOWS

(Unaudited)

 

   

Thirty-nine Weeks Ended

 
   

March 28,

   

March 29,

 
   

2021

   

2020

 

Cash Flows From Operating Activities

               

Net (loss) earnings

  $ ( 629,119

)

  $ 1,320,322  

Adjustments to reconcile net (loss) earnings to net cash provided by operating activities:

               

Depreciation and amortization

    739,024       714,560  

Amortization of right to use asset

    122,188       124,758  

Decrease in deferred taxes

    (191,970

)

    (104,660

)

Unrealized (gain) loss on marketable investment securities

    (420,786

)

    415,137  

Net purchases of marketable investment securities

    (5,056

)

    (22,285

)

Gain on sale of available-for-sale securities

    -       (9,487

)

Changes in assets and liabilities

               

Decrease in inventories

    72,700       31,415  

Decrease in prepaid & other

    129,012       644,459  

Increase (decrease) in accounts payable

    60,066       (434,537

)

Decrease in accrued expenses

    (337,386

)

    (371,510

)

Decrease income taxes refundable

    114,563       119,296  

Increase in current liabilities

    814,420       1,934,932  

Decrease in lease liability

    (119,274

)

    (115,667

)

Net cash provided by operating activities

    348,382       4,246,733  
                 

Cash Flows From Investing Activities

               

Expenditures for land, building and equip

    (153,754

)

    (473,962

)

Net sales and maturities of short-term investments

    134,202       299,079  

Proceeds from sale of available-for-sale securities

    -       1,000,000  

Decrease in cash surrender value of officers life insurance

    -       521,938  

Net cash (used in) provided by

               

Investing activities

    (19,552

)

    1,347,055  
                 

Cash Flows From Financing Activities

               

Payment of cash dividends

    -       (2,709,511

)

                 

Net cash used in financing activities

    -       (2,709,511

)

                 

Net Increase in Cash and Equivalents

    328,830       2,884,277  
                 

Cash and Equivalents, Beginning of period

    1,659,264       269,844  
                 

Cash and Equivalents, End of period

  $ 1,988,094     $ 3,154,121  
                 
                 

Supplemental Disclosures of Cash Flow Information

               

Cash Paid During the Period for:

               

Income taxes

  $ -     $ 401,200  

 

See notes to condensed consolidated financial statements

 

4

 

 

BOWL AMERICA INCORPORATED AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

(Unaudited)

 

   

COMMON STOCK

                 
   

Class A

Shares

   

Class A

Amount

   

Class B

Shares

   

Class B

Amount

   

Additional

Paid-In Capital

   

Retained

Earnings

 

Balance, June 30, 2019

    3,746,454     $ 374,645       1,414,517     $ 141,452     $ 7,854,108     $ 15,549,961  

Cash dividends declared Sept 2019 paid November 2019

    -       -       -       -       -       (903,170

)

Net earnings for the quarter

    -       -       -       -       -       285,325  

Balance, September 29, 2019

    3,746,454     $ 374,645       1,414,517     $ 141,452     $ 7,854,108     $ 14,932,116  

Cash dividends declared Dec 2019 paid February 2020

    -       -       -       -       -       (903,171

)

Net earnings for the quarter

    -       -       -       -       -       877,675  

Balance, December 29, 2019

    3,746,454     $ 374,645       1,414,517     $ 141,452     $ 7,854,108     $ 14,906,620  

Net earnings for the quarter

    -       -       -       -       -       157,322  

Balance, March 29, 2020

    3,746,454     $ 374,645       1,414,517     $ 141,452     $ 7,854,108     $ 15,063,942  

 

 

 

   

COMMON STOCK

                 
   

Class A

Shares

   

Class A

Amount

   

Class B

Shares

   

Class B

Amount

   

Additional

Paid-In Capital

   

Retained

Earnings

 

Balance, June 28, 2020

    3,746,454     $ 374,645       1,414,517     $ 141,452     $ 7,854,108     $ 14,146,812  

Net loss for the quarter

    -       -       -       -       -       (737,723

)

Balance, September 27, 2020

    3,746,454     $ 374,645       1,414,517     $ 141,452     $ 7,854,108     $ 13,409,089  

Net loss for the quarter

    -       -       -       -       -       (301,782

)

Balance, December 27, 2020

    3,746,454     $ 374,645       1,414,517     $ 141,452     $ 7,854,108     $ 13,107,307  

Net earnings for the quarter

    -       -       -       -       -       410,386  

Balance, March 28, 2021

    3,746,454     $ 374,645       1,414,517     $ 141,452     $ 7,854,108     $ 13,517,693  

 

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

 

5

 

BOWL AMERICA INCORPORATED AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the Thirteen and Thirty-nine Weeks Ended

March 28, 2021

 

(Unaudited)

 

 

1.   Basis for Presentation

 

The accompanying unaudited condensed consolidated financial statements of Bowl America Incorporated and subsidiaries (collectively, the "Company"), have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission.  The condensed consolidated balance sheet as of June 28, 2020 has been derived from the Company's 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 condensed consolidated financial statements reflect all adjustments and reclassifications (all of which are of a normal, recurring nature) that are necessary for the fair presentation of the Company’s financial position and results of operations for the periods presented.  These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company's annual report on Form 10-K for the year ended June 28, 2020.

 

 

2.

Investments

 

The Company’s investments are categorized as available-for-sale. Short-term investments consist of certificates of deposits and Treasury bills with maturities of generally three months to one year. Equity securities consist primarily of telecommunications stocks and a mutual fund that invests in federal agency mortgage backed securities (Ginnie Mae). The fair value of the Company’s investments at March 28, 2021 and June 28, 2020 were as follows:

 

 

 

March 28, 2021               Unrealized Gain/  

Description

 

Fair Value

   

Cost basis

   

(loss)

 

Short-term investments

  $ -     $ -     $ -  

Equity securities

  $ 5,153,120     $ 1,279,914     $ 3,873,206  

Mutual fund

  $ 488,940     $ 480,235     $ 8,705  

 

June 28, 2020               Unrealized Gain/  

Description

 

Fair Value

   

Cost basis

   

(loss)

 

Short-term investments

  $ 134,202     $ 134,202     $ -  

Equity securities

  $ 4,725,470     $ 1,279,914     $ 3,445,556  

Mutual funds

  $ 490,748     $ 475,179     $ 15,569  

 

6

 

The fair values of the Company’s investments were determined as follows:         

 

March 28, 2021   Quoted     Significant        

Description

 

Price for

Identical Assets

(Level 1)

   

Other

Observable

Inputs

(Level 2)

   

Significant

Unobservable

Inputs

(Level 3)

 
                         

Certificates of deposits and Treasury bills

  $ -     $ -     $ -  

Equity securities

    5,153,120       -       -  

Mutual fund

    488,940       -       -  
                         

Total

  $ 5,642,060     $       $ -  

 

June 28, 2020   Quoted     Significant        

Description

 

Price for

Identical Assets

(Level 1)

   

Other

Observable

Inputs

(Level 2)

   

Significant

Unobservable

Inputs

(Level 3)

 
                         

Certificates of deposits

  $ -     $ 134,202     $ -  

Equity securities

    4,725,470       -       -  

Mutual fund

    490,748       -       -  
                         

Total

  $ 5,216,218     $ 134,202     $ -  

 

The shares of common stock included in the equity securities portfolio as of March 28, 2021 were:

 

 

AT&T shares

    82,112  

Manulife shares

    2,520  

Uniti Group shares (formerly CSAL)

    815  

NCR shares

    774  

Teradata shares

    774  

Vodafone shares

    6,471  

Lumen Technologies

    4,398  

Frontier Communications shares

    300  

T-Mobile shares

    4,102  

Verizon shares

    31,904  

 

On April 1, 2020, T-Mobile and Sprint completed their merger exchanging 40,000 shares of Sprint for 4,102 shares of T-Mobile.

 

The Mutual fund included in the table above is Vanguard GNMA Admiral Shares #536 fund. The fair value of certificates of deposits is estimated using present value techniques and comparing the values derived from those techniques to certificates with similar values.

 

 

3.

Leasing arrangements

 

As of March 28, 2021, the Company leased one bowling center. The lease is classified as an operating lease in accordance with ASU 2016-02.  For the 39 week period ended March 28, 2021, the Company recorded amortization of its right to use asset under the lease of $122,188 which is included as a component of rent expense.  The lease liability at March 28, 2021 was $1,553,097. The current portion of the lease liability of $158,087 is included in other current liabilities on the accompanying condensed consolidated balance sheet. 

 

7

 

 

4.  Commitments and Contingencies

 

The Company’s purchase commitments at March 28, 2021 are for materials, supplies, services and equipment as part of the normal course of business.

 

 

5.   Employee benefit plans

 

The Company has two defined contribution plans with Company contributions determined by the Board of Directors.  The Company has no defined benefit plan or other post-retirement plan.

 

 

6. New Accounting Standards

 

In February 2016, the FASB issued guidance on leases which requires entities to recognize right-of-use assets and lease liabilities on the balance sheet for the rights and obligations created by all leases, including operating leases, with terms of more than 12 months. The new guidance also requires additional disclosures on the amount, timing, and uncertainty of cash flows arising from leases. These disclosures include qualitative and quantitative information. The Company adopted this standard effective July 1, 2019. The result was the recognition of a right to use asset of $1,977,523 and a corresponding lease liability for the same amount.

 

In August 2018, the FASB issued ASU No. 2018-13, Fair Value Measurement Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement. As part of the FASB's disclosure framework project, it has eliminated, amended and added disclosure requirements for fair value measurements. Entities will no longer be required to disclose the amount of, and reasons for, transfers between Level 1 and Level 2 of the fair value hierarchy, the policy of timing of transfers between levels of the fair value hierarchy and the valuation processes for Level 3 fair value measurements. Public companies will be required to disclose the range and weighted average used to develop significant unobservable inputs for Level 3 fair value measurements. This ASU is effective for public entities for annual and interim periods beginning after December 15, 2019. Early adoption is permitted as of the beginning of any interim or annual reporting period.  The Company does not believe it will materially impact disclosures.

 

 

7.   Subsequent Events

 

On April 15, 2021, the Company received notification that the Small Business Administration had approved the Paycheck Protection Program (PPP) loan forgiveness application for the full amount of the $1,500,000 loan.

 

 

8.

Reclassifications

 

Certain previous year amounts have been reclassified to conform with current year presentation.

 

8

 

 

 

ITEM 2.  MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

 

FORWARD-LOOKING STATEMENTS

 

This Quarterly Report on Form 10-Q 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 Quarterly Report on Form 10-Q are forward-looking statements. These forward-looking statements are based on current expectations, estimates, forecasts and projections about our business, our sales and the industry in which we operate and our management’s beliefs and assumptions. These statements are not guarantees of future performance or development and involve risks, uncertainties and other factors that are in some cases beyond our control, including but not limited to the duration of the continued negative impact from the COVID-19 pandemic. The forward-looking statements included in this Quarterly Report on Form 10-Q are made as 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.

 

COVID-19

 

The Company closed all bowling centers on March 18, 2020, as required by the orders from state and federal governments, in an effort to mitigate the spread of COVID-19.  Our three Florida locations reopened in May 2020, which provided the Company some revenue in the fourth quarter of fiscal 2020 while all other centers remained closed.  All of our Virginia centers reopened in early July 2020, one Maryland location opened July 22, 2020 and the last closed center was allowed to reopen on August 31, 2020.  Currently, all three of our Florida centers and one of two Maryland centers may operate at 100% capacity while the Virginia locations were mandated at 30% capacity and reduced times for selling alcoholic beverages during the quarter ended March 28, 2021.  It is expected that Virginia locations will increase to 50% capacity as of May 16, 2021.  The other Maryland location was at 25% for the quarter but has since been allowed to operate at 50% capacity with county officials adjusting capacities based on reported COVID vaccinations in their jurisdiction.  We implemented social distancing and enhanced cleaning procedures and we continue to request the wearing of masks in the centers except when eating or drinking.  Our safety procedures are designed to keep employees and customers safe and have allowed us to offer league bowling.  All center employees except each center manager were furloughed in March 2020 and the corporate staff was reduced to a minimum.  Employees are returned to work as business requires and currently approximately 62% of pre-COVID employees have returned to work.  The Company maintained health insurance for all employees on the plan at the time of closure through January 31, 2021.

 

Future developments in the continuously changing pandemic environment, whether new mandated closures or restrictions, a worsening of the global and local economy, high unemployment rates, reduced consumer discretionary spending and other factors can negatively affect our business, however it is difficult to determine with much accuracy what the longer term impact could be. Our fall league bowling season was better than expected in spite of the limitations, as we have been able to be creative in making maximum use of space while following social distancing requirements. However, revenues from parties and corporate events are currently non-existent. Most bowling leagues adopted a split season schedule with the hope that more bowlers could be added in the second half of the season. We saw some increase in the number of league bowlers since the third quarter of fiscal 2021 began.

 

Management believes the effects of the pandemic will continue to have an adverse effect on our revenues, financial condition and operating results for fiscal 2021 and potentially, some time after.

 

LIQUIDITY AND CAPITAL RESOURCES

 

The Company views a strong financial position as a major benefit to shareholders.  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 historically had relatively low volatility. The Company has long been invested in a Government National Mortgage Association (“Ginnie Mae”) fund and equity securities, primarily telecommunications stocks, with the perceived potential of appreciation. The Company considers that this diversity also provides a measure of safety of principal.

 

9

 

With the exception of 13,120 shares of Verizon, the equity securities in our portfolio have come from spin-offs, mergers and acquisitions of AT&T and United Telecommunications (now T-Mobile) purchased in 1979 and 1984 and from one insurance company acquired at no cost when that company demutualized. Since the original purchases at an approximate cost of $630,000, we have received approximately $967,000 from mergers and sales, and over $5,300,000 in dividends, the majority of which received favorable tax treatment in the form of a dividends received deduction from federal taxable income. While the favorable tax treatment continues into this fiscal year, the Tax Cuts and Jobs Act (“Tax Act”) reduces the percent deductible. These equity securities are carried at their fair value on the last day of each reporting period. The fair value of the securities on March 28, 2021 was approximately $5,153,000 and on June 28, 2020 was approximately $4,725,000.

 

The Company’s original investment in the Vanguard GNMA bond fund began in 1988 with purchases of shares in the fund totaling approximately $1,400,000. In August 2019, $1,000,000 of this fund was redeemed to meet the August 2019 dividend payment. In May 2020, $500,000 was redeemed to fund operating costs. The fund is carried at fair value on the last day of the reporting period. At March 28, 2021, the fair value was approximately $489,000 and at June 28, 2020, the fair value was $491,000.

 

In March 2020 the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) which is administered by the Small Business Administration was signed into law.  The CARES Act established a  a paycheck Protection Program (“PPP”) under which qualified businesses could apply for a loan to help fund payroll, rent and related costs.  The Company applied for and received a PPP loan and on June 1, 2020 received $1,500,000 under a loan agreement which calls for interest of 1%.    All or a portion of payments of principal and interest may be forgiven if used for covered, documented payroll costs, rent and utilities.  The Company applied for loan forgiveness in the third quarter of fiscal 2021 and received 100% forgiveness on April 15, 2021.  The Consolidated Appropriations Act of 2021 allows any expenses paid with the PPP Loan and forgiven by the Small Business Administration to be deductible for federal tax purposes.

 

Short-term investments including Certificates of Deposits, and cash and cash equivalents totaled $1,988,000 at the end of the fiscal third quarter of 2021 compared to $1,793,000 at June 28, 2020.

 

Potential volatility in the trading prices of the marketable securities held by the Company could negatively impact the fair value of the securities. The Board of Directors reviews the portfolio and any use of this reserve at its quarterly meetings.

 

The Company closed its leased Mathis Avenue location in Manassas, Virginia, which had been operating with a negative cash flow, on July 28, 2019. Most of the equipment was transferred to our other locations.

 

In the nine-month period ended March 28, 2021, the Company expended approximately $153,800 for the purchase of building, entertainment and restaurant equipment. The Company has no plans to obtain third party funding as cash reserves and cash flows are currently sufficient to finance all contemplated purchases and to meet short-term purchase commitments and operating lease commitments.

 

The nine-month decreases in the categories of Prepaid expenses and other, and Accrued Expenses are primarily due to seasonal timing of payments including compensation, insurance and taxes and for contributions to benefit plans.

 

Current liabilities generally increase during the first three quarters of the fiscal year as leagues deposit prize fund monies with the Company throughout the league season. These funds are returned to the leagues at the end of the bowling season, generally in the fourth quarter. At March 28, 2021, league deposits of approximately $855,000 were included in the current liabilities category.

 

Cash flow provided by operating activities in the thirty-nine weeks ended March 28, 2021 was approximately $348,000 which, along with cash on hand, was sufficient to meet day-to-day cash needs. In March 2020, the Company suspended quarterly dividends following the required shutdown of the Company’s bowling centers. 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 and trends 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 preferences. Generally, promotional and open play bowling which depends on the public’s discretionary budget dollars and their choices, accounts for more than half of our business. While bowling has the advantage of being an entertainment that is close to home and relatively inexpensive, new forms of sports and entertainment are offered to the public continually creating challenges, but our response is helped by having the resources to be able to promote the sport. Weather is also a factor, especially for casual bowlers.  While extreme heat or rainy weather prompt people to look for indoor activities, heavy snow storms can keep customers from reaching the centers. Postponed league games are made up later in the season, but lost open play income is never recovered.  The Company operates primarily in the Washington, DC area where its business is also vulnerable to sequestration or other downsizing of the federal government.

 

10

 

RESULTS OF OPERATIONS

 

The following tables set forth the items in our consolidated summary of operations for the fiscal quarters and year-to-date periods ended March 28, 2021, and March 29, 2020, and the dollar and percentage changes therein.

 

   

Thirteen weeks ended

 
   

March 28, 2021 and March 29, 2020

 
   

Dollars in thousands

 
   

2021

   

2020

   

Change

   

% Change

 

Operating Revenues:

                               

Bowling and other

  $ 2,556     $ 4,456     $ (1,900

)

    (42.6

)

Food, beverage and merchandise sales

    1,033       1,804       (771

)

    (42.7

)

Total Operating Revenue

    3,589       6,260       (2,671

)

    (42.7

)

Operating Expenses:

                               

Employee Compensation and benefits

    1,592       2,649       (1,057

)

    (39.9

)

Cost of bowling and other services

    934       1,462       (528

)

    (36.1

)

Cost of food, beverage and merchandise sales

    315       533       (218

)

    (40.9

)

Depreciation and amortization

    244       244       -       -  

General and administrative

    178       277       (99

)

    (35.7

)

Total Operating Expenses

    3,263       5,165       (1,902

)

    (36.8

)

Operating Income

    326       1,095       (769

)

    (70.2

)

Interest, dividend and other income

    96       97       (1

)

    (1.0

)

Change in value of marketable investment securities

    120       (1,001

)

    1,121       112.0  
                                 

Earnings before taxes

    542       191       351       183.8  

Income taxes

    132       34       98       288.2  

Net Earnings

  $ 410       157       253       161.1  

 

 

 

   

Thirty-nine weeks ended

 
   

March 28, 2021 and March 29, 2020

 
   

Dollars in thousands

 
   

2021

   

2020

   

Change

   

% Change

 

Operating Revenues:

                               

Bowling and other

  $ 5,546     $ 12,376     $ (6,830

)

    (55.2

)

Food, beverage and merchandise sales

    2,199       5,173       (2,974

)

    (57.5

)

Total Operating Revenues

    7,745       17,549       (9,804

)

    (55.9

)

Operating Expenses:

                               

Employee Compensation and benefits

    4,463       8,107       (3,644

)

    (45.0

)

Cost of bowling and other services

    2,841       4,478       (1,637

)

    (36.6

)

Cost of food, beverage and merchandise sales

    694       1,537       (843

)

    (54.8

)

Depreciation and amortization

    739       715       24       3.4  

General and administrative

    527       884       (357

)

    (40.4

)

Total Operating Expenses

    9,264       15,721       (6,457

)

    (41.1

)

Operating (loss) income

    (1,519

)

    1,828       (3,347

)

    (183.1

)

Interest, dividend and other income

    277       313       (36

)

    (11.5

)

Change in value of marketable investment securities

    421       (411

)

    832       202.4  

(Loss) earnings before taxes

    (821

)

    1,730       (2,551

)

    (147.5

)

Income taxes (benefit)

    (192

)

    410       (602

)

    (146.8

)

                                 

Net (Loss) Earnings

  $ (629

)

  $ 1,320     $ (1,949

)

    (147.7

)

 

11

 

For the thirteen week period ended March 28, 2021, net earnings were $410,386 or $.08 per share. Net loss for the thirty-nine week period was $629,119 or $.12 per share. Net earnings, including a decrease of $1,001,000 in the value of investment securities, for the thirteen week period ended March 29, 2020, were $157,322 or $.03 per share and for the thirty-nine week period were $1,320,322 or $.26 per share.

 

The decrease in the Company’s earnings was primarily caused by COVID-19 related issues and restrictions. All seventeen of the Company’s bowling centers were closed on March 18, 2020, by government order due to the COVID-19 pandemic.  Only our three Florida centers were open the entire 39 week period ended March 28, 2021, having reopened in late May 2020. Thirteen of the remaining locations opened in July 2020 and the last center reopened on August 31, 2020. All locations were mandated at 50% capacity or less during the first quarter.  In the quarter ended December 27, 2020, Virginia and Maryland imposed tighter restrictions not only on capacity but on food and beverage service.  Restrictions have eased as mentioned above,  however only 4 locations are currently permitted to operate at 100% capacity. All comparisons in this discussion are significantly impacted by the ongoing government mandates and public perception of the current state of the COVID19 pandemic. 

 

The operating results for fiscal 2021 periods included in this report are not necessarily indicative of results to be expected for the year.

 

Operating Revenues

 

Total operating revenues decreased $2,671,000 or 42.7% to $3,589,000 and decreased $9,804,000 or 55.9% to $7,745,000 in the current year thirteen and thirty-nine week periods, respectively. In the prior year comparable periods ended March 29, 2020, thirteen week and thirty-nine week revenues decreased $1,183,000 or 15.9% and $1,663,000 or 8.7%, respectively. Bowling and other revenue decreased $1,900,000 in the quarter and $6,830,000 year-to-date for the periods ended March 28, 2021 versus decreases of $802,000 in the quarter and $1,125,000 for the nine-month period ended March 29, 2020.

 

Food, beverage and merchandise sales decreased $771,000 or 42.7% in the current year quarter and $2,974,000 or 57.5% in the current nine-month period.  Cost of sales decreased $218,000 or 40.9% in the current quarter and decreased $843,000 or 54.8% in the nine month period ended March 28, 2021

 

Operating Expenses

 

Operating expenses decreased  $1,902,000 or 36.8% and  $6,457,000 or 41.1% in the current three month and nine-month periods  versus decreases of  $364,000 or 6.6% and $270,000 or 1.7%, respectively, in the three and nine month periods last year.  Employee compensation and benefits for the fiscal 2021 third quarter were down $1,057,000 or 39.9% and $3,644,000 or 45.0% in the nine month period compared to the prior year periods.  In the comparable prior year quarter there was a decrease of $194,000 or 6.8% and the nine month period ended March 29, 2020 showed a decrease of $239,000 or 2.9%.   Included in this category of expense are 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 $528,000 and $1,637,000 or 36.1% and 36.6% in the three month and nine month periods ended March 28, 2021, respectively.  In the prior year comparable three month and nine month periods the same category showed a decline of $121,000 or 7.6% and a decrease of $149,000 or 3.2%, respectively. In the thirty-nine weeks ended March 28, 2021, maintenance and repair costs decreased $284,000 or 44.2% compared to the same period a year ago. Both years included roof repairs and changeover to LED lighting for parking lot lights and the current year included bi-annual roof truss inspections.  Advertising costs during the current year thirty-nine week period ended March 28, 2021, were down $170,000 or 64.4% as no advertising campaigns were scheduled in the current year.  For the fiscal nine-month period ended March 28, 2021 utility costs were down $268,000 or 26.7 % from the comparable prior year period primarily due to operating fewer hours.  Supplies and services expenses were down $294,000 or 53.4% for the current nine month period compared to the prior year period.   

 

Insurance expense excluding health insurance decreased 2.2% in the current year-to-date period however, recent policy renewals will result in an increase in premiums in future periods.

 

Depreciation and amortization expense was up 3.4% in the current nine-month period due to capital expenditures and was up 1% in the prior year comparable period due to capital expenditures. 

 

As a result of the above, the nine-month period of fiscal 2021 resulted in operating loss of $629,119 compared to operating income of $1,320,322 in the prior year comparable nine-month period.

 

12

 

Interest, Dividend and Other Income

 

Interest, dividend and other income decreased $36,000 in the fiscal 2021 nine-month period and increased $15,000 in the comparable 2020 year-to-date period, respectively.

 

 

Income Taxes

 

The Tax Act of December 2017 reduced the federal corporate tax rate from 34% to 21%. The taxes and tax benefits for the fiscal periods shown reflect the reduced rate.

 

 

CRITICAL ACCOUNTING POLICIES

 

Management has identified accounting for marketable investment securities as a critical accounting policy due to the significance of the amounts included in the Company’s balance sheet under the captions of Short term investments and Marketable investment securities.  The Company exercises judgment in determining their fair value.  The Company records these investments at their fair value with the unrealized gain or loss recorded in income or loss in the current period.

 

Management has identified accounting for the impairment of long-lived assets as a critical accounting policy due to the significance of the amounts included in the Company’s 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 future cash flows are less than the carrying amount.

 

ITEM 4. CONTROLS AND PROCEDURES.

 

The Company’s Chief Executive Officer and Chief Financial Officer has concluded that the Company’s disclosure controls and procedures are effective based on the evaluation of such controls and procedures as of March 28, 2021. There was no change in the Company’s internal control over financial reporting identified in connection with the evaluation that occurred during the quarter ended March 28, 2021, that materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

 

13

 

 

BOWL AMERICA INCORPORATED AND SUBSIDIARIES

S.E.C. FORM 10-Q

 

PART II - OTHER INFORMATION

 

 

Item 6.  Exhibits.

 

20

Press release issued May 11, 2021 (furnished herewith)

 

 

31

Certification of Chief Executive Officer and Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act filed herewith

   

32

Written Statement of the Chief Executive Officer and Chief Financial Officer Pursuant to 18 U.S.C. 1350 filed herewith

   

101

Interactive data files for the thirteen and thirty-nine weeks ended March 28, 2021 in eXtensible Business Reporting Language

 

14

 

 

SIGNATURES

 

 

Pursuant to the requirements of the Securities 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)

 

 

Date: May 11, 2021

By: /s/ Cheryl A Dragoo

 

Cheryl A. Dragoo, CEO and CFO

 

15