|
||||||||||||||||||||||||||
| SEC Info℠ | | | Home | | | Search | | | My Interests | | | Help | | | Sign In | | | Please Sign In | |||||||
|
||||||||||||||||||||||||||
As Of Filer Filing For·On·As Docs:Size Issuer Agent 10/24/13 Bowl America Inc ANNLRPT 6/30/13 1:986K RDG Filings/FA |
Document/Exhibit Description Pages Size 1: ANNLRPT Annual Report by an International Development Bank HTML 615K
President’s Letter
Experience Matters
Years of Bowl America Experience for Managers and Regional Managers
43 years 41 years 33 years 32 years 30 years 25 years 23 years
20 years 20 years 20 years 20 years 18 years 16 years 13 years
11 years 11 years 5 years 5 years 2 years 6 months 5 months
Dear Fellow Owners:
I thought you would be interested in the number of years each Bowl America Center Manager and Regional Manager has been with the Company. We believe that experience is a great teacher when it comes to customer service.
Do our conservative financial policies have an impact on employee attitude? Survival of the employer is the cornerstone of employee security. But benefits must be personal for employees to commit to a career. Our full-time employees, without cost to them, participate in our stock ownership plan which now owns 7% of Bowl America stock. An equal contribution is made each year to the employee profit-sharing plan which provides no cost options for employee retirement.
We have also been helped by a secure customer base. We feel one of our great strengths is our locations in economically the best market in the country, supported to a large extent by federal government employment. Over the last year much of that advantage has begun to deteriorate and as I write this, the future of some of the 400,000 government workers in the Washington DC area and countless federal contractors is under challenge.
The challenges extend to this fragile economy as well. Even the advocates of the massive government borrowings admit that while they are sure it can be unwound, no one has done it before. Historically, governments simply print more money and pay their obligations with deflated currency. Years ago The Economist magazine described inflation as the transfer of wealth from renters to owners of real estate.
Should that be the outcome, our debt-free ownership of our income properties will provide us all an additional benefit.
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 sold its Winter Park, Florida center, which had been operating with a negative cash flow, for $2,850,000 in May 2013. The gain on the sale, which included the land, building and equipment, was $2,768,000.
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 that 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 $3,400,000 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 on June 30, 2013 was approximately $5.0 million. The value of securities held at July 1, 2012 was approximately $4.8 million.
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. Except for a one time sale of approximately $666,000 in 1991, all earnings have been reinvested. The fund is carried at fair value on the last day of the reporting period. At June 30, 2013, the value was approximately $3,431,000.
Short-term investments consisting mainly of Certificates of Deposits, cash and cash equivalents totaled $4,388,000 at the end of fiscal 2013 compared to $6,196,000 at the end of fiscal 2012. As noted below, short-term investments were used, along with cash on hand, to fund the dividends paid to shareholders during the quarter ended December 30, 2012.
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. The Company has made no application for third party funding as cash and cash flows are currently sufficient to finance all contemplated purchases and to meet short-term purchase commitments and operating lease commitments.
Cash flow provided by operating activities for the year ended June 30, 2013, was $2,207,000. Equipment purchases during fiscal year 2013 used approximately $770,000. Proceeds from Ginnie Mae dividends totaling approximately $117,500 in fiscal year 2013 were used to purchase additional shares in the fund. Short-term cash was used to meet the balance of $5,950,000 required to pay regular dividends totaling $.655 per share during the fiscal year and a special dividend of $.50 per share, paid in December 2012.
The change in Accrued Expenses generally relates to timing of payments including compensation and cash contributions to benefit plans.
The Company paid cash dividends totaling approximately $5.9 million, or $1.155 per share, to shareholders during the 2013 fiscal year, making this the forty-first consecutive year of increased regular dividends per share. In June 2013, the Company declared a quarterly $.165 per share dividend, paid in August 2013. The economic climate is part of the consideration at the Directors quarterly reviews of future estimates of cash flows. The Board of Directors decides the amount and timing of any dividend at its quarterly meeting based on its appraisal of the state of the business and estimate of opportunities at such time.
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. Mild winter weather in fiscal years 2013 and 2012 caused few cancellations.
RESULTS OF OPERATIONS
The following table sets forth the items in our consolidated summary of operations for the fiscal years ended June 30, 2013 and July 1, 2012, respectively, and the dollar and percentage changes therein.
As noted above, the Bowl America Winter Park location was sold in May 2013, and its operations for the periods of fiscal 2013 and 2012 have been shown separately under Gain (loss) from discontinued operations, net of tax. The information included in Operating Revenues and Operating Expenses below relates to the eighteen centers that were in operation for the fiscal years ended 2013 and 2012. Fiscal 2013 and fiscal 2012 each consisted of 52 weeks.
Operating Revenues
Total operating revenue decreased 2.0% or $486,000 to $23.9 million in fiscal 2013 compared to a decrease of 6.9% or $1,811,000 to $24.3 million in fiscal 2012. Bowling and other revenue decreased $228,000 in fiscal 2013 versus a decrease of $1,348,000 in fiscal 2012. Food, beverage and merchandise sales decreased $258,000 in fiscal 2013 versus a decrease of $464,000 in fiscal 2012.
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 2.8%, or $647,000, in fiscal year 2013 versus a decrease of 6.2%, or $1,493,000 in fiscal 2012. Costs for employee compensation and benefits were down 1.6% or $187,000 in fiscal 2013 versus a decrease of 4.2% or $516,000 in fiscal 2012. The Company continued to make scheduling adjustments resulting in a decrease in compensation. In addition, group health insurance costs declined primarily due to lower premiums and fewer participants. This category includes contributions to our two benefit plans, both of which are defined contribution plans. The contribution, which can only be made from profits, increased for fiscal year 2013 by $147,500. There is no additional obligation beyond the current year contribution.
Cost of bowling and other services decreased $367,000 or 5.7% in the year ended June 30, 2013 versus a decrease of $751,000 or 10.4% in the prior fiscal year. Maintenance expense declined 8% or $65,000 in fiscal year 2013 and was down 17% or $167,000 in the prior year. Both years included interior updating at several locations. Supplies expense was flat in fiscal 2013 versus a decrease of 5% or $49,000 in fiscal 2012. Advertising costs decreased $164,000, or 27%, in fiscal 2013 and decreased $343,000 or 36% in fiscal 2012. Utility costs decreased 6% in fiscal 2013 versus a decrease of 1% in fiscal 2012. Energy management and lower electric costs were primarily responsible for the decrease in fiscal year 2013. 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 $52,000 or 3% in fiscal 2013 and $116,000 or 5% in fiscal 2012, primarily due to lower food and beverage sales.
Depreciation expenses decreased approximately $35,000 or 2% and $77,000 or 5% in fiscal year 2013 and 2012 respectively.
Operating income from continuing operations increased 8.4% or $136,000 to $1.8 million in fiscal year 2013 from $1.6 million in fiscal 2012.
Interest and Dividend Income
Interest and dividend income declined 13% in fiscal 2013 and 14% in fiscal 2012 due to lower balances and lower average interest rates on investments. Dividend income was up slightly in fiscal 2013 versus an increase of 10% in fiscal year 2012, the first year of dividends on the purchase of additional Verizon shares.
Income taxes
Effective income tax rates on continuing operations for the Company were 32.4% for fiscal 2013 and 29.5% for fiscal 2012, 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 from continuing operations in both fiscal 2013 and fiscal 2012 were $1.5 million, or $.29 per share.
Gain (loss) from discontinued operations – net of tax
Income from discontinued operations, net of tax in fiscal year 2013 includes the $2,768,000 gain on the sale of our Winter Park, Florida location. Fiscal year 2012 includes the operating loss net of tax on that location.
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 notbe recoverable. In making such evaluations, the Company compares the expected future cash flows to the carrying amount of the assets. An impairment loss equal to the difference between the assets' fair value and
carrying value is recognized when the estimated undiscounted future cash flows are less than the carrying amount. There were no impairment losses recorded in fiscal 2013 or 2012.
BOWL AMERICA INCORPORATED AND SUBSIDIARIES
CONSOLIDATED SUMMARY OF OPERATIONS
Selected Financial Data
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. Each share of Class B Common Stock can be converted to one share of Class A Common Stock at any time.
The table below presents the high and low sales price of the Company’s Class A Common Stock in each quarter of fiscal years 2013 and 2012.
Holders
As of June 30, 2013, the approximate number of holders of record of the Company’s Class A Common Stock was 312 and of the Company’s Class B Common Stock was 23.
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 2013 and 2012.
The Board of Directors decides the amount and timing of any dividend at its quarterly meetings based on its appraisal of the state of the business, the economic climate and estimate of future opportunities at such time.
CONSOLIDATED BALANCE SHEETS
The accompanying notes to the consolidated financial statements are an integral part of these financial statements.
CONSOLIDATED STATEMENTS OF EARNINGS AND COMPREHENSIVE EARNINGS
The accompanying notes to the consolidated financial statements are an integral part of these financial statements.
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, 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 benefit) |
- | - | - | - | - | 255,864 | - | |||||||||||||||||||||
|
Net earnings for the year |
- | - | - | - | - | - | 1,424,841 | |||||||||||||||||||||
|
Balance, July 1, 2012 |
3,683,009 | $ | 368,301 | 1,468,462 | $ | 146,846 | $ | 7,727,264094 | $ | 2,538,818 | $ | 22,903,925 | ||||||||||||||||
|
Conversion of shares - Class B to Class A |
53,945 | 5,394 | (53,945 |
) |
(5,394 |
) |
- | - | - | |||||||||||||||||||
|
Cash dividends paid |
- | - | - | - | - | - | (5,125,716 |
) | ||||||||||||||||||||
|
Shares issued for ESOP |
9,500 | 950 | - | - | 122,550 | - | - | |||||||||||||||||||||
|
Accrued dividends declared June 18, 2013, payable August 7, 2013 |
- | - | - | - | - | - | (851,561 |
) | ||||||||||||||||||||
|
Change in unrealized gain on available-for-sale securities (shown net of tax) |
- | - | - | - | - | 45,202 | - | |||||||||||||||||||||
|
Net earnings for the year |
- | - | - | - | - | - | 3,155,222 | |||||||||||||||||||||
|
Balance, June 30, 2013 |
3,746,454 | $ | 374,645 | 1,414,517 | $ | 141,452 | $ | 7,849,814 | $ | 2,584,020 | $ | 20,081,870 | ||||||||||||||||
The accompanying notes to the consolidated financial statements are an integral part of these financial statements.
CONSOLIDATED STATEMENTS OF CASH FLOWS
The accompanying notes to the consolidated financial statements are an integral part of these financial statements.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
Organization
Bowl America Incorporated is engaged in the operation of 18 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, four centers in metropolitan Richmond, Virginia, and three centers in metropolitan Jacksonville, Florida. These 18 centers contain a total of 726 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 2013 ended June 30, 2013, and fiscal year 2012 ended July 1, 2012. Both years consisted of 52 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 26, 2013.
In August 2013, the Company exercised its option to extend the lease for one location for a five year period such that the lease now expires in 2019.
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 (in years) |
3 |
- | 10 |
|
Building and building improvements (in years) |
10 |
- | 39 |
|
Leasehold improvements (in years) |
5 |
- | 15 |
|
Amusement games (in 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 June 30, 2013, and July 1, 2012, were $449,710 and $616,148, 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 5,151,784, and 5,151,471, for fiscal years 2013 and 2012, 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 June 30, 2013 and July 1, 2012.
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 June 30, 2013 and July 1, 2012 other current liabilities included $289,521 and $287,273, 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.
2. CASH AND CASH EQUIVALENTS
Cash and cash equivalents consisted of the following:
June 30, 2013 Demand deposits and cash on hand Money market funds
$
2,216,729
$
1,486,497
1,221,051
845,525
$
3,437,780
$
2,332,022
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 June 30, 2013, the fair value of short-term investments was $949,815. At July 1, 2012, the fair value of short-term investments was $3,863,721. 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 June 30, 2013, the Company had $16,925 of gross unrealized gains from its investments in federal agency mortgage backed securities which had a fair value of $3,430,670. As of July 1, 2012, $201,981 in gross unrealized gains were from its investments in federal agency mortgage backed securities which had a fair value of $3,498,182. The Company’s investments were was follows:
During fiscal 2013 and fiscal 2012, the Company had certain equity securities with cumulative unrealized losses of $1,623 and $5,487 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 |
||||||||||||||||||||||
|
Fair Value |
Unrealized Loss |
Fair Value |
Unrealized Loss |
Fair Value |
Unrealized Loss |
|||||||||||||||||||
|
Equity securities |
$ | - | $ | - | $ | 3,392 | $ | (1,623 |
) |
$ | 3,392 | $ | (1,623 |
) | ||||||||||
|
Less than 12 months |
12 Months or greater |
Total |
||||||||||||||||||||||
|
Fair Value |
Unrealized Loss |
Fair Value |
Unrealized Loss |
Fair Value |
Unrealized Loss |
|||||||||||||||||||
|
Equity securities |
$ | - | $ | - | $ | 5,373 | $ | (5,487 |
) |
$ | 5,373 | $ | (5,487 |
) | ||||||||||
The equity securities portfolio includes the following stocks:
There were no sales or exchanges of holdings in the years ended June 30, 2013 and July 1, 2012 other than the exchange of the Company’s shares of SuperMedia for shares of DexMedia as a result of the merger on April 30, 2013. The Company purchased 5,000 shares of Verizon during fiscal 2012.
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 or indirectly; and
Level 3. Unobservable inputs in which there is little or no market data, which require the reporting entity to develop its own assumptions.
The fair value of these assets as of June 30, 2013 is as follows:
The fair value of these assets as of July 1, 2012 was as follows:
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:
Depreciation and amortization expense for buildings and equipment for fiscal years 2013 and 2012 was $1,426,175, and $1,465,149, 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 June 30, 2013, the minimum fixed rental commitments related to all non-cancelable leases, were as follows:
|
Year Ending |
||||
|
2014 |
$ | 280,667 | ||
|
2015 |
16,667 | |||
|
Total minimum lease payments |
$ | 297,334 |
Net rent expense was as follows:
|
For the Years Ended |
||||||||
|
June 30, |
||||||||
|
2012 |
||||||||
|
Minimum rent under operating leases |
$ | 288,000 | $ | 288,000 | ||||
|
Excess percentage rents |
- | - | ||||||
| $ | 288,000 | $ | 288,000 | |||||
Purchase Commitments
The Company's purchase commitments at June 30, 2013 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 June 30, 2013 and July 1, 2012, contributions in the amounts of $124,000 and $50,000, respectively, 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 2013, the Company contributed 9,500 shares of Bowl America common stock valued at $123,500, based on the market price on the date of contribution. The Company contributed $50,000 for fiscal year 2012. 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 June 30, 2013 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 28, 2009 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:
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:
Income tax expense from continuing operations differs from the amounts computed by applying the U.S. Federal income tax rate to income from continuing operations before tax for the following reasons:
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. In the year ended June 30, 2013, 53,945 shares of Class B stock were converted to Class A stock.
At June 30, 2013, and July 1, 2012, 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 2011 to 2013. These employee loans have been recorded as a reduction of additional paid-in capital.
9. DEFERRED COMPENSATION
Deferred compensation payable was a total of $45,236 at June 30, 2013, and $50,221 at July 1, 2012. The current portion of these amounts is $6,042 at June 30, 2013, and $6,004 at July 1, 2012, and is included in accrued expenses.
10. DISCONTINUED OPERATIONS
On May 30, 2013 the Company consummated the sale of Bowl America Winter Park in Orlando, Florida for $2,850,000 resulting in a gain on the sale of the land, building and equipment of $2,768,066. The location had been operating with negative cash flow. In the years ended June 30, 2013 and July 1, 2012, revenues for this location were $295,611 and $323,775, respectively.
805 King Farm Boulevard 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 June 30, 2013 and July 1, 2012, 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 June 30, 2013 and July 1, 2012, 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
Rockville, Maryland
directors
Arthur H. Bill
Retired Attorney
Warren T. Braham
Retired Attorney
Cheryl A. Dragoo
Controller,Senior Vice President &
Chief Financial Officer
Bowl America Inc.
Merle Fabian
Retired Librarian
Leslie H. Goldberg
President &
Chief Executive Officer
Bowl America Inc.
Stanley H. Katzman
Retired Senior Computer Specialist
National Institutes of Health
Ruth E. Macklin
Retired Educator
Allan L. Sher
Retired Senior Executive of
Securities Brokerage Industry
officers
Leslie H. Goldberg
President & Chief Executive Officer
Ruth E. Macklin
Senior Vice President
Secretary & Treasurer
Cheryl A. Dragoo
Senior Vice President, Assistant Treasurer
& Chief Financial Officer
Michael T. Dick
Assistant Secretary
directory
Transfer Agent and Registrar
Registrar and Transfer Company
10 Commerce Drive
Auditors
Aronson LLC
Corporate Offices
6446 Edsall Road
703/941-6300
Mailing Address
Post Office Box 1288
Counsel
Foley & Lardner LLP
Symbol
NYSE MKT
BWL A
| This ‘ANNLRPT’ Filing | Date | Other Filings | ||
|---|---|---|---|---|
 | ||||
| Filed on: | 10/24/13 | DEF 14A | ||
| 10/15/13 | ||||
| 9/26/13 | 10-K, 8-K | |||
| 8/7/13 | ||||
| 7/1/13 | ||||
| For Period End: | 6/30/13 | 10-K | ||
| 6/28/13 | ||||
| 6/18/13 | 8-K | |||
| 5/30/13 | ||||
| 4/30/13 | ||||
| 12/30/12 | 10-Q | |||
| 9/15/12 | ||||
| 8/22/12 | ||||
| 7/1/12 | 10-K | |||
| 6/19/12 | ||||
| 7/3/11 | 10-K | |||
| 6/28/09 | 10-K | |||
| List all Filings | ||||