<PAGE>
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 June 29, 1997 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
Common stock (par value $.10) American Stock Exchange
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 if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K, Section 229.405 of this Chapter, 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. YES [X] NO [ ]
As of August 15, 1997, 4,125,998 Class A common shares were outstanding,
and the aggregate market value of the common shares (based upon the closing
price of these shares on the American Stock Exchange) of Bowl America
Incorporated held by nonaffiliates was approximately $29 million; 1,536,146
Class B common shares were outstanding. Class B common shareholders have the
right to convert their Class B common to Class A common stock on a share for
share basis. If the Class B shares were converted to Class A shares as of
August 15, 1997, the total aggregate market value for both classes of common
stock would be approximately $40 million. (This includes the amount of
shares held by all officers and directors as a group and by anyone known to
own more than 5% of the stock.)
<PAGE>
DOCUMENTS INCORPORATED BY REFERENCE
Portions of registrant's definitive proxy statements, which will be filed
with the Commission not later than 120 days after June 29, 1997 are incorpor-
ated into Part III of this Form 10-K. Portions of Bowl America's 1996 Annual
Report are incorporated by reference in Part II, Items 5,6,7 and 8.
<PAGE>
BOWL AMERICA INCORPORATED
INDEX TO FISCAL 1997 10-K FILING
PART I
Page
Cover Page
Documents Incorporated by Reference
Index
ITEM 1. Business
(a) General Development of Business 1
(b) Financial Information about Industry Segments 1
(c) Narrative Description of Business 1
(d) Foreign Operations 1
ITEM 2. Properties 2
ITEM 3. Legal Proceedings 2
ITEM 4. Submission of Matters to a Vote of Security Holders 2
PART II
ITEM 5. Market for Registrant's Common Stock and Related Security
Holder Matters 2
ITEM 6. Selected Financial Data 2
ITEM 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations 2
ITEM 8. Financial Statements and Supplementary Data 2
ITEM 9. Changes in and Disagreements with Accountants and
Financial Disclosure 2
PART III
ITEM 10.Directors and Executive Officers of the Registrant 3
ITEM 11.Executive Compensation 3
ITEM 12.Security Ownership of Certain Beneficial Owners and Management
(a) Security Ownership of Certain Beneficial Owners 3
(b) Security Ownership of Management 3
(c) Changes in Control 3
<PAGE>
BOWL AMERICA INCORPORATED
INDEX TO FISCAL 1997 10-K FILING
PART III
continued
Page
ITEM 13.Certain Relationships and Related Transactions
(a) Transactions with Management and Others 3
(b) Certain Business Relationships 3
(c) Indebtedness of Management 3
(d) Transactions with Promoters 3
PART IV
ITEM 14.Exhibits, Financial Statements and Reports on Form 8-K
(a)1. Financial Statements 3
(a)2. Exhibits 4
(b) Reports on Form 8-K 4
Signatures 5-6
<PAGE>
PART I
ITEM 1. BUSINESS
(a) General Development of Business
Bowl America Incorporated (herein referred to as the Company) was
incorporated in 1958. The Company commenced business with one bowling center
in 1958, and at the end of the past fiscal year, the Company and its wholly-
owned subsidiaries operated 23 bowling centers.
It did not renew the leases of the bowling center in Odenton,
Maryland, which lease expired May 31, 1997, and the bowling center in
Sanford, Florida, which lease expired June 15, 1997.
The Company completed the enlargement of its bowling center in
Dranesville, Virginia from 32 lanes to 48 lanes and the expanded center opened
on February 1, 1997. The Company is seeking other new bowling locations.
(b) Financial Information about Industry Segments
The Company has no segments in different industries. 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. 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.
(c) Narrative Description of Business
As of September 1, 1997 the Registrant and its subsidiaries operated
14 bowling centers in the greater metropolitan area of Washington, D.C., two
bowling centers in the greater metropolitan area of Baltimore, Maryland, one
bowling centers in the greater metropolitan area of Orlando, Florida, three
bowling centers in the greater metropolitan area of Jacksonville, Florida, and
three bowling centers in the greater metropolitan area of Richmond, Virginia.
These 23 bowling centers contain a total of 886 lanes.
These establishments are fully air-conditioned with facilities for
service of food and beverages, game rooms, rental lockers, and playroom
facilities. All centers provide shoes for rental, and bowling balls are
provided free. In addition, each center retails bowling acessories.
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 field. The principal method of
competition is the quality of service furnished to the Company's customers.
Its primary competitors are two large bowling equipment manufacturers,
Brunswick Corporation and AMF, 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 750.
(d) Foreign Operations
The Company has no foreign operations.
<PAGE>
ITEM 2. PROPERTIES
The Company's general offices are located at 6446 Edsall Road,
Alexandria, Virginia 22312.
Seven of the Company's bowling centers are located in leased premises,
and the remaining sixteen centers are owned by the Company. The Company's
leases, giving effect to option renewal periods, expire from 1998 through
2014 and the remainder thereafter. In addition to the above, there is one
ground lease which expires in 2058. 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. There were no legal proceedings
terminated during the fourth quarter ended June 29, 1997.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders during the
fourth quarter ended June 29, 1997.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED SECURITY HOLDER
MATTERS
The information set forth in the section entitled "Market
Information", "Holders", and "Dividends" on page 3 of the Company's June 29,
1997 Annual Report is incorporated by reference herein.
ITEM 6. SELECTED FINANCIAL DATA
The information set forth in the section entitled "Selected Financial
Data" on page 3 of the Company's June 29, 1997 Annual Report is incorporated by
reference herein.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The information set forth in the section entitled "Management's
Discussion and Analysis of Financial Condition and Results of Operations" on
page 2 of the Company's June 29, 1997 Annual Report is incorporated by
reference herein.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The Consolidated Financial Statements and related notes thereto, the
Independent Auditors' Report and the Selected Quarterly Financial Data
(unaudited), as contained on pages 4 through 10 of the Company's June 29, 1997
Annual Report, are incorporated by reference herein.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE
None
<PAGE>
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Pursuant to General Instruction G(3) of Form 10-K, the information
called for by this item regarding directors 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
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
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 14. EXHIBITS, FINANCIAL STATEMENTS AND REPORTS ON FORM 8-K
(a)1. Financial Statements
The following consolidated financial statements of Bowl America
Incorporated and its subsidiaries are incorporated by reference
in Part II, Item 8:
Independent auditors' report
Consolidated balance sheets - June 29, 1997 and June 30, 1996
Consolidated statements of earnings - years ended June 29, 1997,
June 30, 1996, and July 2, 1995
Consolidated statements of stockholders' equity - years ended
June 29, 1997, June 30, 1996, and July 2, 1995
Consolidated statements of cash flows - years ended
June 29, 1997, June 30, 1996, and July 2, 1995
Notes to the consolidated financial statements - years ended
June 29, 1997, June 30, 1996, and July 2, 1995
<PAGE>
(a)2. Exhibits:
1. Subsidiaries of registrant
(b) Reports on Form 8-K:
The Company filed a report on Form 8-K with respect to the
extension of the employment contract with Leslie H. Goldberg,
President, for the period from July 1, 1997 to June 28, 1998.
<PAGE>
BOWL AMERICA INCORPORATED
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Company has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
BOWL AMERICA INCORPORATED
Leslie H. Goldberg
Leslie H. Goldberg
President and Principal Executive
& Operating Officer
Date: September 25, 1997
Ruth Macklin
Ruth Macklin
Senior Vice President-Treasurer
Date: September 25, 1997
Cheryl A. Dragoo
Cheryl A. Dragoo
Assistant Treasurer and Controller
Principal Accounting Officer
Date: September 25, 1997
<PAGE>
BOWL AMERICA INCORPORATED
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
Leslie H. Goldberg
Leslie H. Goldberg
President, Principal Executive
& Operating Officer & Director
Date: September 25, 1997
Ruth Macklin Howard Katzman
Ruth Macklin Howard Katzman
Senior Vice President-Treasurer Senior Vice President-Secretary
and Director and Director
Date: September 25, 1997 Date: September 25, 1997
Joan Sobkov A. Joseph Levy
Joan Sobkov A. Joseph Levy
Director Director
Date: September 25, 1997 Date: September 25, 1997
Warren T. Braham Merle Fabian
Warren T. Braham Merle Fabian
Director Director
Date: September 25, 1997 Date: September 25, 1997
Allan L. Sher
Allan L. Sher
Director
Date: September 25, 1997
<PAGE>
BOWL AMERICA INCORPORATED AND SUBSIDIARIES
PRESIDENT'S LETTER
September 19, 1997
Dear Fellow Employees and Owners:
On a particularly difficult stretch of river Lewis and Clark discovered
that, despite vigorous rowing, their canoes were moving backward relative to
the shore. The current was stronger than the men. The only answer was to move
to land and arduously proceed on foot parallel to the river. Eventually, they
reached a milder current and were able to again capitalize on the advantages
afforded by river travel.
We feel that many of our efforts to expand our core league business have
enabled us to move relative to the current, but not to the shore. Again in
fiscal 1997, league bowling declined, even as shopping checks of competitive
establishments near our key centers showed Bowl America had significantly
more league bowlers. As a result, both earnings and cash flow were slightly
lower than fiscal 1996. Some of our initiatives to improve other parts of our
business only produced results late in the year, and could not offset the
league loss.
One such effort that shows promise is glow-in-the-dark bowling. Normal
lighting is replaced with black light and laser lights reflecting off phos-
phorescent pins and bowling lanes, and is combined with upbeat music. It has
been well received in all but one of our first installations. We now have 12
centers in operation or scheduled for equipment. In addition to higher
revenues, we're seeing increased traffic from young adults, a group we had not
been regularly reaching.
We are also promoting Bowl America to an even younger group. Many of you
are familiar with our "Rolling Bowling" program, in which we install our short-
ened bowling lane and a pinsetter in a tractor trailer in order to deliver
bowling directly to schools. This year, we replaced our original trailer with
an improved model and now have 27 schools on the waiting list for visits. We
also worked closely with local school systems to reward academic achievements.
Students were offered a free bowling game at a Bowl America center for every
"A" on their final report cards. Bowling by family members and friends of the
honorees and food sales made up for the lost revenue while exposing our
facilities to a wider audience.
These improved contacts with many educational systems are also helping us
accomplish our long-term objective of benefiting from reduced gender discrimin-
ation in sports. During the year, the last legal challenge to Title IX was
decided. While we applaud the increased opportunities available to all
athletes, we believe that gender neutral competition, such as bowling, delivers
important educational advantages over "separate but equal" programs. We are
especially pleased that one locality has made bowling a "letter" sport for
mixed gender teams. It could take years to see all of the benefits of our
strengthened youth activities, but some results are already apparent. It now
appears that we have more youth league participants again this year, after a
10 percent increase last year.
<PAGE>
We now own most of our amusement games, instead of using concessionaires.
In addition to not having to share the revenue with the outside operator, we
have almost tripled the gross game play at all the converted locations.
This conversion, installation of glow-in-the-dark, our expansion at
Dranesville, and the closing of two unprofitable centers created extra
expense in the last quarter of 1997, but has improved profitability at the
start of fiscal 1998. Our normal July and August operating losses were
sharply reduced. However, we had fewer adult league bowlers in the first
week of the new fall season than last year. We cannot yet determine if the
improved youth play and special events, along with greater profitability from
video games and the 16 extra lanes at Dranesville will offset the league
shortfall.
Remember, the Lewis and Clark party eventually got to where they were
going. It just took longer than they expected.
Leslie H. Goldberg
Leslie H. Goldberg, President
<PAGE>
BOWL AMERICA INCORPORATED AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES
Cash flow provided by operating activities in fiscal 1997 was $4,513,000 which
was sufficient to meet day-to-day cash needs. Short-term investments consist-
ing mainly of U.S. Treasury Bills and Notes, and cash totaled $8,173,000 at the
end of fiscal 1997 compared to $8,881,000 at the end of fiscal 1996.
On September 1, 1994, the Company opened Bowl America Gaithersburg, a 48-lane
center with a full service restaurant. A center was closed in May 1995.
During the fourth quarter of fiscal 1997, the Company closed two centers which,
at the expiration of their leases, were operating with negative cash flows.
On February 1, 1997, the Company began operation of the 16-lane expansion at
Bowl America Dranesville. In addition to increasing the number of lanes from
32 to 48, this project included installation of the most up-to-date automatic
scoring system and enlarging and remodeling the food service portion of the
location. Of the $2.1 million spent for this addition, approximately $1.6
million was expended during fiscal year 1997.
Bowl America, following the bowling industry trend to create a more diverse
entertainment appeal, introduced glow-in-the-dark bowling augmented by laser
lights and high energy stereo sound in eight locations in the second half of
fiscal 1997. Increases in linage and food and merchandise sales have resulted.
Additional locations are being outfitted with this equipment. The Company is
also continuing its program of replacing leased amusement game machines with
owned machines, expending over $400,000 during the fiscal year. This change-
over has resulted in an increase in game revenue at the affected locations.
Additional expenditures are also planned as the Company continues to modern-
ize other existing centers. Cash and cash flow are adequate to finance all
currently planned purchases and construction. The Company has maintained its
fiscal year end 1996 position in telecommunications stocks as a further
source of expansion capital.
Cash dividends paid to shareholders during fiscal 1997 exceeded $2 million.
A two-for-one stock split in the form of a dividend was paid February 15, 1995.
RESULTS OF OPERATIONS
The Company operated the same number of bowling centers through the peak
periods of fiscal years 1997 and 1996, although two locations were closed in
the current year, one in May and the other in June. In fiscal year 1995 one
more center was in operation. Fiscal year 1995 also included additional
expenses related to the opening of Bowl America Gaithersburg. All prior year
comparisons are significantly influenced by these factors.
Operating revenues decreased 1% in 1997 versus a 7% decrease in fiscal 1996.
Bowling and related services revenue was up slightly in the current year
compared to a decrease of 8% in the prior year. The Blizzard of '96 and the
winter cold and snow took a heavy toll on our northern market in fiscal 1996.
<PAGE>
The current year average price per game was higher than the prior year when
promotional pricing was heavily used. However, the increase was not enough
to offset the decrease in the number of games bowled. Amusement game income
was up more than 20% over the prior year due mainly to the increase in the
number of owned machines in service.
Food, beverage and merchandise sales were down 5% in the current year
compared to a 6% decrease in the prior year due primarily to less traffic.
Cost of food, beverage and merchandise sales declined 2% in the current year
as a result of the reduced volume of sales.
Operating expenses decreased 1% in fiscal 1997 versus a decrease of 5% in
the prior year. In fiscal 1996, approximately half of the decrease was in
employee compensation and benefits cost, resulting mainly from the difference
in the number of centers in operation.
Advertising costs decreased 13% in the current year versus a decrease of 16%
in the previous period. Most of the advertising in both periods was through
print media in newspapers and direct mail.
Supplies and services costs increased 5% in the current year partially due
to costs associated with glow-in-the-dark bowling. In the prior year costs
were down 8% primarily because of the change in the number of operating centers.
Maintenance and utility costs were down in both the current and prior years.
Rent expense was flat in fiscal 1997 versus a 13% decrease in the prior
year. The prior year decrease was the result of closing a leased center,
mentioned above, and lower sales at some of our leased locations. Insurance
expense decreased 3% in the current period compared with a 6% decrease last
year.
Depreciation expense was up 4% in the current year and 5% in the prior year.
The current year increase relates mainly to the depreciation of amusement
games and the expansion associated with Bowl America Dranesville.
Income tax percentages were 38.4% in 1997, 37.6% in 1996, and 36.1% in 1995,
the difference from statutory rates being primarily for the partial exclusion
of dividends received on investments and the state income tax exemption for
interest on U.S. Government obligations.
-2-
<PAGE>
BOWL AMERICA INCORPORATED AND SUBSIDIARIES
CONSOLIDATED SUMMARY OF OPERATIONS
Selected Financial Data
<TABLE>
<CAPTION>
For the Years Ended
June 29, June 30, July 2, July 3, June 27,
1997 1996 1995 1994 1993
__________________________________________________________
<S> <C> <C> <C> <C> <C>
Operating Revenues $26,995,056 $27,326,958 $29,493,578 $28,171,010 $27,234,560
Operating Expenses 23,585,519 23,829,561 24,967,878 22,568,589 21,530,864
Interest and dividend
Income 632,927 663,550 593,207 479,938 620,745
__________ __________ __________ __________ __________
Earnings before pro-
vision for income
taxes 4,042,464 4,160,947 5,118,907 6,082,359 6,324,441
Provision for income
taxes 1,552,000 1,567,000 1,849,000 2,265,000 2,350,000
__________ __________ __________ __________ __________
Net Earnings $ 2,490,464 $ 2,593,947 $ 3,269,907 $ 3,817,359 $ 3,974,441
Weighted Average
Shares Outstanding 5,680,425 5,728,183 5,747,746 5,760,568 5,783,648
Earnings Per Share $.44 $.45 $.57 $.66 $.69
Net Cash Provided by
Operating Activities $4,513,157 $5,174,075 $4,271,585 $6,621,007 $4,879,381
Dividends Paid $2,187,567 $2,177,956 $2,069,302 $2,017,736 $1,937,832
Dividends Paid Per
Share-Class A $.385 $.38 $.36 $.35 $.335
-Class B $.385 $.38 $.36 $.35 $.335
Total Assets $38,002,571 $37,901,254 $36,584,745 $33,594,994 $31,611,489
Stockholders' Equity $33,381,832 $32,903,833 $32,443,501 $29,947,687 $28,451,547
Net Book Value Per
Share $5.90 $5.79 $5.64 $5.20 $4.92
Net Earnings as a %
of Beginning Stock-
holders' Equity 7.6% 8.0% 10.9% 13.4% 15.0%
Lanes in Operation 886 936 936 936 904
Centers in Operation 23 25 25 25 24
</TABLE>
All share and per share amounts have been adjusted to reflect the declaration
of a two-for-one stock split effective February 15, 1995.
<PAGE>
Market Information
The principal market on which the Company's Class A Common Stock is traded is
the American Stock Exchange. 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 price range of the
Company's Class A stock in each quarter of fiscal 1997 and 1996.
<TABLE>
<CAPTION>
1997 1st Qtr 2nd Qtr 3rd Qtr 4th Qtr
_______________________________________________________
<S> <C> <C> <C> <C>
High 7 1/8 7 7 1/2 7 1/4
Low 6 1/2 6 1/2 6 1/2 6 3/4
</TABLE>
<TABLE>
<CAPTION>
1996 1st Qtr 2nd Qtr 3rd Qtr 4th Qtr
_______________________________________________________
<S> <C> <C> <C> <C>
High 9 8 5/8 8 1/8 7 1/4
Low 8 7 1/2 7 6 5/8
</TABLE>
Holders
The approximate number of holders of record of the Company's Class A Common
Stock as of June 29, 1997 is 544 and of the Company's Class B Common Stock
is 36.
Dividends
The table below presents the dividends per share of Class A and Class B stock
paid, and the quarter in which the payment was made during fiscal 1997 and 1996.
<TABLE>
<CAPTION>
Class A Common Stock
Quarter 1997 1996
___________________________________________
<S> <C> <C>
First 9.5 cents 9.5 cents
Second 9.5 cents 9.5 cents
Third 9.5 cents 9.5 cents
Fourth 10 cents 9.5 cents
</TABLE>
<TABLE>
<CAPTION>
Class B Common Stock
Quarter 1997 1996
___________________________________________
<S> <C> <C>
First 9.5 cents 9.5 cents
Second 9.5 cents 9.5 cents
Third 9.5 cents 9.5 cents
Fourth 10 cents 9.5 cents
</TABLE>
-3-
<PAGE>
<PAGE>
BOWL AMERICA INCORPORATED AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
June 29, 1997 June 30, 1996
____________ ____________
<S> <C> <C>
ASSETS
Current Assets
Cash and cash equivalents (Note 2) $ 1,797,656 $ 2,120,862
Short-term investments (Note 3) 6,375,039 6,760,166
Inventories 700,200 685,777
Prepaid expenses and other 459,652 736,659
Income taxes refundable 32,982 204,662
__________ __________
Total Current Assets 9,365,529 10,508,126
Property, Plant and Equipment, Net (Note 5) 23,454,699 22,680,521
Other Assets
Marketable securities avail-for-sale(Note 4) 4,363,058 3,855,282
Cash surrender value-officers'life insurance 354,206 332,162
Other long-term assets 465,079 525,163
__________ __________
TOTAL ASSETS $38,002,571 $37,901,254
</TABLE>
<PAGE>
BOWL AMERICA INCORPORATED AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
June 29, 1997 June 30, 1996
_____________ ____________
LIABILITIES AND STOCKHOLDERS' EQUITY
<S> <C> <C>
Current Liabilities
Accounts payable $ 992,397 $ 1,447,153
Accrued expenses and payroll deductions 840,502 906,239
Other current liabilities 382,840 388,029
Current deferred income taxes (Note 9) 70,000 114,000
__________ __________
Total Current Liabilities 2,285,739 2,855,421
Noncurrent Deferred Income Taxes (Note 9) 2,335,000 2,142,000
__________ __________
TOTAL LIABILITIES 4,620,739 4,997,421
Commitments and Contingencies (Note 6)
Stockholders' Equity (Note 7)
Preferred stock,
par value $10 a share: Authorized
and unissued 2,000,000 shares
Common stock,
par value $.10 per share
Authorized 10,000,000 shares
Class A issued
4,125,998 and 4,146,310 shares 412,600 414,631
Class B issued 1,536,146 153,614 153,614
Additional paid-in capital 4,896,835 4,908,819
Unrealized gain on securities
available-for-sale, net of tax 2,173,033 1,858,212
Retained earnings 25,745,750 25,568,557
__________ __________
TOTAL STOCKHOLDERS' EQUITY $33,381,832 $32,903,833
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $38,002,571 $37,901,254
<FN>
See notes to consolidated financial information.
</TABLE>
-4-
<PAGE>
BOWL AMERICA INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
<TABLE>
<CAPTION>
For the Years Ended
June 29, 1997 June 30, 1996 July 2, 1995
______________________________________________
<S> <C> <C> <C>
Operating Revenues
Bowling and other $19,037,964 $18,949,937 $20,558,584
Food and merchandise sales 7,957,092 8,377,021 8,934,994
__________ __________ __________
26,995,056 27,326,958 29,493,578
Operating Expenses
Compensation and benefits 11,944,536 12,069,124 12,760,142
Cost of bowling and other 6,192,194 6,396,141 6,776,985
Cost of food and mdse sales 2,496,024 2,542,485 2,688,905
Depreciation and amortization 2,110,570 2,034,605 1,941,730
General and administrative 842,195 787,206 800,116
__________ __________ __________
23,585,519 23,829,561 24,967,878
Operating Income 3,409,537 3,497,397 4,525,700
Interest and dividend income 632,927 663,550 593,207
__________ __________ __________
Earnings before provision
for income taxes 4,042,464 4,160,947 5,118,907
Provision for income taxes(Note 9)
Current 1,596,000 1,559,000 1,786,000
Deferred (44,000) 8,000 63,000
_________ __________ __________
1,552,000 1,567,000 1,849,000
Net Earnings $ 2,490,464 $ 2,593,947 $ 3,269,907
Earnings Per Share $.44 $.45 $.57
<FN>
See notes to consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
BOWL AMERICA INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
COMMON STOCK Net Unrealized
_______________________________________ Additional Gain on Avail-
Class A Class A Class B Class B Paid-In able-for-Sale Retained
Shares Amount Shares Amount Capital Securities Earnings
<S> <C> <C> <C> <C> <C> <C> <C>
Balance July 3, 1994 1,333,019 $133,302 1,543,046 $154,304 $5,257,734 - $24,402,347
Adoption of SFAS No.115 - - - - - $1,337,267 -
Two-for-one stock split 2,872,553 287,255 - - (287,255) - -
Stock issuance cost - - - - (17,500) - -
Conversion from Class B to Class A 6,900 690 (6,900) (690) - - -
Purchase of stock (5,541) (554) - - (8,394) - (64,283)
Cash dividends paid(36 cents/sh) - - - - - - (2,069,302)
Change in unrealized gain on
available-for-sale securities - - - - - 48,673 -
Net earnings for the year - - - - - - 3,269,907
______________________________________________________________________________________________________________________
Balance July 2, 1995 4,206,931 $420,693 1,536,146 $153,614 $4,944,585 $1,385,940 $25,538,669
Purchase of stock (60,621) (6,062) - - (35,766) (386,103)
Cash dividends paid(38 cents/sh) - - - - - (2,177,956)
Change in unrealized gain on
available-for-sale securities - - - - - 472,272 -
Net earnings for the year - - - - - - 2,593,947
_______________________________________________________________________________________________________________________
Balance June 30, 1996 4,146,310 $414,631 1,536,146 $153,614 $4,908,819 $1,858,212 $25,568,557
Purchase of stock (20,312) (2,031) - - (11,984) - (125,704)
Cash dividends paid(38 1/2 cents/sh) - - - - - - (2,187,567)
Change in unrealized gain on
available-for-sale securities - - - - - 314,821 -
Net earnings for the year - - - - - - 2,490,464
______________________________________________________________________________________________________________________
Balance June 29, 1997 4,125,998 $412,600 1,536,146 $153,614 $4,896,835 $2,173,033 $25,745,750
<FN> See notes to consolidated financial statements.
</TABLE>
-5-
<PAGE>
BOWL AMERICA INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
June 29, June 30, July 2,
1997 1996 1995
<S> <C> <C> <C>
Cash Flows From Operating Activities
Net earnings $2,490,464 $2,593,947 $3,269,907
Adjustments to reconcile net earnings to
net cash provided by operating activities:
Depreciation and amortization 2,110,570 2,034,605 1,941,730
(Decrease) increase in deferred
income taxes (44,000) 8,000 63,167
(Gain) loss on disposition of assets-net (12,588) 21,087 21,779
Changes in assets and liabilities:
Increase in inventories (14,423) (68,647) (30,695)
Decrease (increase) in prepaid expenses
and other 277,007 (174,442) (188,543)
Decrease (increase) in other long-term
assets 60,084 (39,161) 12,929
(Decrease) increase in accounts payable (454,756) 753,873 (75,532)
Decrease in accrued expenses and
payroll deductions (65,737) (141,027) (213,688)
Decrease (increase) in income taxes payable
or refundable 171,680 239,964 (557,302)
(Decrease) increase in other current
liabilities (5,144) (54,124) 27,833
_________ _________ _________
Net cash provided by operating activities $4,513,157 $5,174,075 $4,271,585
_________ _________ _________
Cash flows from investing activities
Expenditures for property,plant,equipment (2,872,160) (1,336,946) (2,913,732)
Net decrease increase in short-term
investments 385,127 (99,208) (1,659,523)
Other (22,044) 15,150 (33,296)
_________ _________ _________
Net cash used in investing activities (2,509,077) (1,421,004) (4,606,551)
_________ _________ _________
Cash flows from financing activities
Payment of cash dividends (2,187,567) (2,177,956) (2,069,302)
Stock issuance cost - - (17,500)
Purchase of Class A Common Stock (139,719) (427,931) (73,231)
_________ _________ _________
Net cash used in financing activities (2,327,286) (2,605,887) (2,160,033)
_________ _________ _________
Net(Decrease)Increase in Cash and Equivalents (323,206) 1,147,184 (2,494,999)
Cash and Cash Equivalents, Beginning of Year 2,120,862 973,678 3,468,677
_________ _________ _________
Cash and Cash Equivalents, End of Year $1,797,656 $2,120,862 $ 973,678
Supplemental Disclosures of Cash Flow Information
Cash paid during the year for
Income taxes $1,430,334 $1,319,661 $2,268,126
Interest $1,528 $1,528 $1,528
See notes to financial information.
</TABLE>
-6-
<PAGE>
BOWL AMERICA INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Description of Business
Bowl America Incorporated is engaged in the operation of 23 bowling
centers, with food and beverage service in each center. Fourteen centers are
located in metropolitan Washington D.C., two centers in metropolitan
Baltimore, Maryland, one center in metropolitan Orlando, Florida, three
centers in metropolitan Richmond, Virginia, and three centers in metropolitan
Jacksonville, Florida. These 23 centers contain a total of 886 lanes.
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 1997 ended June 29, 1997, fiscal year 1996 ended June 30, 1996, and fiscal
year 1995 ended July 2, 1995. Fiscal years 1997, 1996 and 1995 each
consisted of 52 weeks.
Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Depreciation and Amortization
Depreciation and amortization for financial statement purposes are calcu-
lated by use of the straight-line method. Amortization of leasehold improve-
ments 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 3-10 years
Building and building improvements 10-30 years
Leasehold improvements 10 years
Amusement games 3 years
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.
Inventories
Inventories are stated at the lower of cost (first-in, first-out method)
or market.
<PAGE>
Income Taxes
Effective June 28, 1993, the Company adopted Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes" (SFAS No. 109),
which requires an asset and liability approach to financial accounting and
reporting for income taxes. Deferred income tax assets and liabilities are
computed annually for differences between the financial statement and tax bases
of assets and liabilities that will result in taxable or deductible amounts in
the future based on enacted tax laws and rates applicable to the periods in
which the differences are expected to affect taxable income. Valuation allow-
ances are established when necessary to reduce deferred tax assets to the
amount expected to be realized. Income tax expense is the tax payable or
refundable for the period plus or minus the change during the period in
deferred tax assets and liabilities.
Fair Value of Financial Instruments
The fair value of the noncurrent marketable security portfolio is disclosed
in Note 4. The cost of all other financial instruments approximates fair value.
Investment Securities
Effective July 4, 1994, the Company adopted Statement of Financial Account-
ing Standards No. 115 (SFAS No. 115) entitled "Accounting for Certain Invest-
ments in Debt and Equity Securities". The standard requires debt and equity
securities to be segregated into the following three categories: trading,
held-to-maturity and available-for-sale. Trading securities are purchased and
held principally for the purpose of reselling them within a short period of
time. Their unrealized gains and losses are included in earnings. Debt
securities classified as held-to-maturity will be accounted for at amortized
cost, and require the Company to have both the positive intent and ability to
hold those securities to maturity. Securities not classified as either trading
or held-to-maturity are considered to be available-for-sale. Unrealized gains
and losses for available-for-sale securities are excluded from earnings and
reported, net of deferred taxes, as a separate component of stockholders'
equity until realized. Realized gains and losses on the sale of debt and
equity securities are reported in earnings and determined using the adjusted
cost of the specific security sold. The impact of the adoption of SFAS No. 115
is shown on the Consolidated Statements of Stockholders' Equity.
Earnings Per Share
For the years ended June 29, 1997, June 30, 1996, and July 2, 1995,
earnings per share have been calculated using the weighted average number of
shares of Class A and Class B common stock outstanding of 5,680,425, 5,728,183
and 5,747,746, respectively. As discussed in Note 7, during the year ended
July 2, 1995, the Company declared a 2-for-1 stock split in the form of a
dividend. Prior year amounts have been restated to reflect the impact of this
transaction. The Financial Accounting Standards Board issues SFAS No. 128,
"Earnings per Share" in February 1997. This standard will be effective for the
Company beginning in fiscal 1998. The proforma effect of adopting this
standard has no impact on the earnings per share calculation for the years
ended June 29, 1997, June 30, 1996, and July 2, 1995.
-7-
<PAGE>
Cash and Cash Equivalents
For purposes of the Consolidated Statements of Cash Flows, the Company
considers money market funds, certificates of deposits, repurchase agreements
and treasury securities with original maturities of three months or less to be
cash equivalents.
New Accounting Pronouncement Adopted
Effective July 1, 1996 the Company adopted the provisions of Statement of
Financial Accounting Standards No. 121, "Accounting for the Impairment of Long-
Lived Assets and for Long-Lived Assets to be Disposed Of". This statement
requires companies to write down to the estimated fair value long-lived assets
that are impaired. The Company determined that no impairment loss need be
recognized for applicable assets of continuing operations.
New Accounting Pronouncement Not Yet Adopted
The Financial Accounting Standards Board issued Statement of Financial
Accounting Standards No. 131, "Disclosures About Segments of an Enterprise and
Related Information," in June 1997. This standard will be effective for the
Company beginning in fiscal year 1998 and is not expected to have a significant
impact on the Company's financial statements.
2. CASH AND CASH EQUIVALENTS
Cash and cash equivalents consisted of the following:
June 29, June 30,
1997 1996
Demand deposits and cash on hand $ 491,537 $ 516,104
Money market funds 538,119 783,758
Repurchase agreements 768,000 821,000
________ _________
$1,797,656 $2,120,862
3. SHORT-TERM INVESTMENTS
Short-term investments consist of certificates of deposits, U.S. Treasury
securities, and a mutual fund which invests in mortgage backed securities with
maturities of generally three months to one year. The Company has classified
the debt and equity securities as available-for-sale. The cost of these
investments approximates fair value.
4. MARKETABLE SECURITIES AVAILABLE-FOR-SALE
Marketable securities available-for-sale are carried at fair value in
accordance with the provisions of SFAS No. 115.
The majority of this portfolio is invested in the common stocks of twelve
telecommunication companies.
<PAGE>
A summary of the cost and approximate fair values of equity securities
available-for-sale shown in the table above as of June 29, 1997, and
June 30, 1996, is as follows:
<TABLE>
<CAPTION>
Original Unrealized Fair
Cost Gain Value
<S> <C> <C> <C>
June 29, 1997
Securities available-for-sale $857,782 $3,505,276 $4,363,058
June 30, 1996
Securities available-for-sale $857,782 $2,997,500 $3,855,282
</TABLE>
There were no sales of these available-for-sale securities in the years
ended June 29, 1997, June 30, 1996 and July 2, 1995.
5. PROPERTY, PLANT, AND EQUIPMENT
Property, plant, and equipment, as cost, consist of the following:
<TABLE>
<CAPTION>
1997 1996
<S> <C> <C>
Bowling lanes and equipment $17,140,723 $17,201,186
Amusement games 461,283 -
Buildings and building improvements 17,055,845 15,355,042
Leasehold improvements 958,511 1,028,033
Land 7,698,228 7,698,228
Bowling lanes and equipment not yet in use 192,859 666,142
__________ __________
43,507,499 41,948,631
Less accumulated depreciation and
amortization 20,052,750 19,268,110
__________ __________
$23,454,699 $22,680,521
</TABLE>
6. COMMITMENTS AND CONTINGENCIES
Lease Commitments
The Company and its subsidiaries are obligated under long-term real estate
lease agreements for seven 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. Generally, the
leases contain renewal options ranging from 5 to 10 years.
At June 29, 1997, the minimum fixed rental commitments related to all
noncancelable leases, were as follows:
Year Ending
1998 400,000
1999 400,000
2000 400,000
2001 339,630
2002 113,250
Thereafter 838,750
_________
Total minimum lease payments $2,491,630
Net rental expense was as follows:
For the Years Ended
1997 1996 1995
Minimum rental under operating leases $524,484 $534,000 $581,000
Excess percentage rentals 135,786 144,026 181,899
_______ _______ _______
$660,270 $678,026 $762,899
-8-
<PAGE>
7. STOCKHOLDERS' EQUITY
The Company declared a 2-for-1 stock split in the form of a dividend
effective February 15, 1995, wherein both Class A and Class B stockholders
received one share of Class A common stock for each share of Class A and
Class B common stock held as of the date of record. All prior years earnings
per share and dividends per share have been restated to reflect the impact of
this transaction.
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.
8. PROFIT-SHARING AND ESOP PLAN
The Company has a profit-sharing plan which, generally, covers all individ-
uals 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 the years ended
June 29, 1997, June 30, 1996, and July 2, 1995, contributions in the amount of
$110,000, $105,000, and $130,000, respectively, were charged to operations.
Effective March 31, 1987, the Company adopted an Employee Stock Ownership
Plan (ESOP) 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. Prior to fiscal year 1995, the
contributions were allocated to participants based on compensation and years
of service. Since fiscal year 1995 contributions are allocated based on
compensation only in order to comply with Internal Revenue Service code
requirements. The Company's contributions to the Plan for fiscal years 1997,
1996, and 1995 were $110,000, $105,000, and $130,000, respectively.
9. INCOME TAXES
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:
<TABLE>
<CAPTION>
For the Years Ended
1997 % 1996 % 1995 %
<S> <C> <C> <C> <C> <C> <C>
Taxes computed at statutory rate $1,374,000 34.0% $1,415,000 34.0% $1,740,000 34.0%
State income taxes, net of Federal
income tax benefit 220,000 5.4 155,000 3.7 190,000 3.7
Dividends received exclusion (29,000) (0.7) (30,000) (0.7) (29,000) (0.6)
All other-net (13,000) (0.3) 27,000 0.6 (52,000) (1.0)
_________ ____ _________ ____ _________ ____
$1,552,000 38.4% $1,567,000 37.6% $1,849,000 36.1%
</TABLE>
<PAGE>
The significant components of the Company's deferred tax assets and liabil-
ities were as follows:
1997 1996
Deferred tax assets:
Accrued expenses $ 68,000 $ 68,000
Deferred tax liabilities:
Property, plant and equipment 1,003,000 1,003,000
Unrealized gain on available-
for-sale securities 1,332,000 1,139,000
Prepaid expenses 76,000 100,000
Other 62,000 82,000
_________ _________
Total deferred tax liabilities 2,473,000 2,324,000
_________ _________
Net deferred income taxes $2,405,000 $2,256,000
10. SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)
The following summary represents the results of operations for each of the
quarters in fiscal 1997 and 1996 (dollars in thousands, except for earnings per
share):
<TABLE>
<CAPTION>
Earnings
(Loss)
Before Earnings
Operating Gross Provision Net (Loss)
Revenues Profit for Income Earnings Per
(Loss) Taxes (Loss) Share
<S> <C> <C> <C> <C> <C>
1997
June 29, 1997 $5,977 $ 258 $ 447 $ 237 $.04
March 30, 1997 8,502 2,283 2,480 1,546 .28
December 29, 1996 7,151 1,190 1,314 823 .14
September 29, 1996 5,365 (321) (199) (116) (.02)
1996
June 30, 1996 $5,903 $ 505 $ 693 $ 419 $.07
March 31, 1996 8,334 2,064 2,244 1,400 .24
December 31, 1995 7,422 1,277 1,432 896 .16
October 1, 1995 5,668 (349) (208) (121) (.02)
</TABLE>
-9-
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the 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 29, 1997 and June 30, 1996,
and the related consolidated statements of earnings, stockholders' equity and
cash flows for each of the three years in the period ended June 29, 1997.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements
based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes 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, such consolidated financial statements present fairly, in
all material respects, the financial position of Bowl America Incorporated and
subsidiaries as of June 29, 1997 and June 30, 1996, and the results of their
operations and their cash flows for each of the three years in the period ended
June 29, 1997, in conformity with generally accepted accounting principles.
As discussed in Note 1 to the consolidated financial statements effective
July 4, 1994, the Company changed its method of accounting for investment
securities.
Deloitte and Touche LLP
Washington, DC
September 4, 1997
-10-
<PAGE>
<PAGE>
Exhibit 1
SUBSIDIARIES OF THE CORPORATION
The following table shows each of the significant subsidiaries of Registrant
and the State of Incorporation.
Subsidiary State of Incorporation
Bowl America of Florida Inc. Florida
Bowl America Shirley Inc. Virginia
Falls Church Bowl Inc. Virginia
Reisterstown Bowl Inc. Maryland
Manassas Bowl Inc. Virginia
Westwood Bowl Inc. Maryland
Bowl America Duke Inc. Virginia
The foregoing subsidiaries are wholly-owned.
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<EXCHANGE-RATE> 1
<S> <C>
<PERIOD-TYPE> Year
<FISCAL-YEAR-END> JUN-29-1997
<PERIOD-END> JUN-29-1997
<CASH> 1,798
<SECURITIES> 4,363
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 700
<CURRENT-ASSETS> 9,366
<PP&E> 43,507
<DEPRECIATION> 20,053
<TOTAL-ASSETS> 38,003
<CURRENT-LIABILITIES> 2,286
<BONDS> 0
0
0
<COMMON> 566
<OTHER-SE> 32,816
<TOTAL-LIABILITY-AND-EQUITY> 38,003
<SALES> 7,957
<TOTAL-REVENUES> 26,995
<CGS> 2,496
<TOTAL-COSTS> 21,090
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 4,042
<INCOME-TAX> 1,552
<INCOME-CONTINUING> 2,490
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,490
<EPS-PRIMARY> .44
<EPS-DILUTED> .44
