<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 28, 1998 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 17, 1998, 4,120,351 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 $32 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 17, 1998, the total aggregate market value for both classes of common
stock would be approximately $44 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 28, 1998 are incorpor-
ated into Part III of this Form 10-K. Portions of Bowl America's 1998 Annual
Report are incorporated by reference in Part II, Items 5,6,7 and 8.
<PAGE>
BOWL AMERICA INCORPORATED
INDEX TO FISCAL 1998 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 1998 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.
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
29% of operating revenues. The balance of operating revenues (approximately
71%) represents fees for bowling and related services.
(c) Narrative Description of Business
As of September 1, 1998 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 center in Winter Park, 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 1999 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 28, 1998.
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 28, 1998.
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 28,
1998 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 28, 1998 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 28, 1998 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 28, 1998
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 28, 1998 and June 29, 1997
Consolidated statements of earnings - years ended June 28, 1998,
June 29, 1997, and June 30, 1996
Consolidated statements of stockholders' equity - years ended
June 28, 1998, June 29, 1997, and June 30, 1996
Consolidated statements of cash flows - years ended
June 28, 1998, June 29, 1997, and June 30, 1996
Notes to the consolidated financial statements - years ended
June 28, 1998, June 29, 1997, and June 30, 1996
<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
new employment contract with Leslie H. Goldberg, President, for the
period from June 29, 1998 to June 27, 1999.
<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 24, 1998
Ruth Macklin
Ruth Macklin
Senior Vice President-Treasurer
Date: September 24, 1998
Cheryl A. Dragoo
Cheryl A. Dragoo
Assistant Treasurer and Controller
Principal Accounting Officer
Date: September 24, 1998
<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 24, 1998
Ruth Macklin A. Joseph Levy
Ruth Macklin A. Joseph Levy
Senior Vice President-Treasurer Senior Vice President-Secretary
and Director and Director
Date: September 24, 1998 Date: September 24, 1998
Joan Sobkov Stanley H. Katzman
Joan Sobkov Stanley H. Katzman
Director Director
Date: September 24, 1998 Date: September 24, 1998
Warren T. Braham Merle Fabian
Warren T. Braham Merle Fabian
Director Director
Date: September 24, 1998 Date: September 24, 1998
Allan L. Sher
Allan L. Sher
Director
Date: September 24, 1998
<PAGE>
BOWL AMERICA INCORPORATED AND SUBSIDIARIES
PRESIDENT'S LETTER
September 21, 1998
Dear Fellow Owner:
We survived El Nino.
For new owners, a discussion about the influence of weather on bowling may
be helpful. League bowlers provide the steady base to support our operations
by showing up every week. The casual or non-organized bowlers provide a less
predictable but increasingly important contribution to our earnings.
League bowling is influenced by predictable weather, such as the change of
seasons. Indoor recreation, including bowling, declines in the summer when
there is competition with a wider variety of outdoor activities. Casual
bowling varies with unpredictable changes in weather. Rain is always a
benefit. Snow and ice keep our customers at home, although the league bowlers
only postpone their trip until the weather is better, when their matches are
made up.
Last winter was almost completely snow free and the weather patterns also
created a relatively rain free spring and summer. Therefore, it was
particularly gratifying to achieve a fourth quarter profit increase.
Each quarter of fiscal 1998 was better than the same quarter during the
prior year, and 16 of our 23 centers improved their operating results.
All of this overlays the long-term decline in league bowling. Bowler's
Digest in a recent issue noted that our biggest market, Metropolitan
Washington, had the third greatest number of league bowlers in the country,
climbing past many areas historically famous for league bowling. In the
course of the article, it noted that the local women's bowlers association
had a membership of 19,000. What the article did not note was that ten
years ago that membership was 42,000. Remember, that's in a good bowling
market.
We have been able to overcome part of this decline by investing in glow-in-
the-dark and bumper bowling equipment, which is primarily used by casual
bowlers. But, two of our best performing centers could not accommodate much
of the new equipment, and still significantly improved their results, mostly
by working harder at giving good service. In independent surveys and by our
own observations, we have seen a higher level of customer service. More and
more, when observing our staff solve a problem, I find myself wishing I had
thought of their response.
Creating a commitment to service is an evolutionary process. It was 40 years
ago that the prospectus shown in the background was issued. Three of our
current directors were listed as stockholders in that prospectus and Ron Kuhn,
our current Director of Maintenance (who builds all of our facilities) was on
the payroll. Irv Clark, Director of Operations, started at Bowl America in
1963, and Cheryl Dragoo, our Controller, in 1972.
Each of them first worked in a bowling center. Our association with Ron is
older than Bowl America. He first worked at the Clarendon Bowling Center,
a business founded in 1938 by the same four partners who later founded Bowl
America and whose families continue in the business today. It is difficult
for us older people to find businesses we traded with while growing up that
are still around and can trace their management to the time of our youth.
(Anyone who can think of another one besides us and Marriott, drop me a
line.)
<PAGE>
Weather does not recognize our fiscal calendar. Rain continued to stay
away during the first part of fiscal 1999. It looked like the entire
State of Florida was on fire during July, and August was the driest in
history in our Northern markets. Despite the weather, we were still able
to improve our operating results for the two months. This may not produce
a better quarter because the late Labor Day has resulted in one less week of
winter league bowling in September. However, those predictable leagues will
complete their season one week later and that revenue will be shown in the
fourth quarter. There is also La Nina to consider. This is the phenomenon
that is said to typically follow El Nino and create hurricanes in the fall
and a cold icy winter in the East.
But there is little we can do about the weather. Continuing to adapt to the
shift to casual bowling while not discouraging the heaviest users, our
league bowlers, remains our biggest challenge. Our biggest asset in managing
the process remains our capable and experienced staff.
* * *
Each of our four founders were succeeded by at least one family member, and
this year, one of these successors retired after 28 years on the Board.
Dr. Howard Katzman came on the Board when our company had significant debt
and derived 95% of its earnings from premises with LEASES that would by now
have expired. During his tenure, we bacame a company with a like percentage
of earnings coming from facilities OWNED by the company, or with leases
extending at least until 2010. All debt was retired and important contingency
reserves created. Howard never supported the expedient and always was
prepared to invest in the future.
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 1998 was $5,262,000 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 $9,986,000 at the
end of fiscal 1998 compared to $8,173,000 at the end of fiscal 1997.
On February 1, 1997, the 16-lane expansion at Bowl America Dranesville began
operation. During the fourth quarter of fiscal year 1997, two centers which,
at the expiration of their leases, were operating with negative cash flows
were closed.
Marketable securities, primarily telecommunication stocks, are carried at their
price on the last day of the quarter. During the fiscal year the market value
of the Company's holdings increased approximately $2 million with a net after
tax unrealized gain of $1,162,000. There were no transactions in these stocks.
Expenditures for property, plant and equipment during the fiscal year were
lower than the prior year and the additional funds were invested. The current
period purchases included over $100,000 for glow-in-the-dark equipment and
$260,000 for bowling lanes. The Company also expended approximately $385,000
for amusement games, continuing to replace leased machines with owned machines
and upgrading current games. The Company plans purchases of approximately
$400,000 for bowling lanes and equipment to be installed in fiscal year 1999.
The Company is actively seeking property for additional locations. At year end
the Company had made offers to purchase two sites for developing bowling
centers. If both transactions are realized the approximate cost of land,
building and equipment would be $8 million. Cash and cash flows are sufficient
to finance these purchases. The Company's position in telecommunication stocks
is an additional source of expansion capital.
Cash dividends paid to shareholders during fiscal 1998 exceeded $2.2 million.
It was the twenty-sixth consecutive year of increased dividends. While no
factors requiring a change in the dividend rate are apparent, the Board of
Directors decides the amount and timing of any dividend at its quarterly
meeting based on its appraisal of the state of the business and its estimate
of future opportunities.
RESULTS OF CONSOLIDATED OPERATIONS
The Company operated two fewer centers in fiscal year 1998 than in the
prior year when, as mentioned above, two centers were closed in the fourth
quarter and one fewer in the first quarter of fiscal 1997 and in fiscal 1996.
All comparisions in this report are significantly influenced by the change in
the number of operating locations.
Total consolidated operating revenues increased slightly in fiscal 1998 versus
a decrease of 1% in fiscal 1997. Bowling and related services revenue
comprised primarily of fees charged for the use of bowling lanes and shoes and
income from amusement games was up 2% in the current year compared to a slight
increase in the prior year.
Amusement game revenue was up over 30% in the current year and more than 20%
in the prior as a result of the number of Company owned machines in service.
The average price per game of bowling increased in both the current and prior
year periods although the increases could not offset the loss of revenue from
the lower number of games bowled in the periods.
<PAGE>
Total food, beverage and merchandise sales were down 2% in the current year
versus a decrease of 5% in the prior year. At comparable locations there was
an increase of 2% in sales during fiscal 1998. The total cost of food,
beverage and merchandise sales declined 2% in both the current and prior year
periods as a result of the lower sales.
Total consolidated operating expenses decreased 3% in fiscal 1998 versus a
decrease of 1% in fiscal 1997. More than half of the decrease was in employee
compensation and benefits cost due primarily to operating fewer centers.
Maintenance and advertising costs were down in both the current and prior year
periods. Supplies and services costs increased 2% in the current year and 5%
in the prior year mainly due to glow-in-the-dark and amusement game expenses.
Utility costs decreased 8% in the current year and 3% in the prior year.
Rent expense was up 9% in the current year as a one time termination payment
under an expired lease more than offset the reduction in rent from fewer leased
centers. Insurance expense decreased 15% in the current period and 3% in the
prior period.
Depreciation expense was up 10% in the current year and 4% in the prior year.
The increases in both years relate mainly to the depreciation for amusement
games and the expansion at Bowl America Dranesville.
The Company's effective income tax rates were 35.9% in 1998, 38.4% in 1997,
and 37.6% in 1996, 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.
YEAR 2000
The Year 2000 issue and its potentially adverse effect on information
technology and embedded technology systems has received much attention
during the year.
The Company has been reviewing its computer systems including hardware and
software as well as electronic equipment which is operated by computer chips
to determine the extent of this challenge for Bowl America. The Company has
also identified and requested written verification from vendors and suppliers
concerning their readiness for the year 2000.
As of September 1, 1998, the majority of the Company's systems have been
assessed and most found to be year 2000 ready. Of those systems not yet 2000
compliant the cost of remediation does not appear to be material. Final
identification of requirements and the steps to be implemented is expected to
be completed in the second quarter of fiscal 1999. All updates and
replacements are expected to be completed by fiscal year end 1999. We have
received written verification from the vendors with whom we have material
relationships that they are addressing the issue and expect to be 2000
ready by mid 1999.
-2-
<PAGE>
BOWL AMERICA INCORPORATED AND SUBSIDIARIES
CONSOLIDATED SUMMARY OF OPERATIONS
Selected Financial Data
<TABLE>
<CAPTION>
For the Years Ended
June 28, June 29, June 30, July 2, July 3,
1998 1997 1996 1995 1994
__________________________________________________________
<S> <C> <C> <C> <C> <C>
Operating Revenues $27,086,822 $26,995,056 $27,326,958 $29,493,578 $28,171,010
Operating Expenses 22,984,246 23,585,519 23,829,561 24,967,878 22,568,589
Interest and dividend
Income 675,302 632,927 663,550 593,207 479,938
__________ __________ __________ __________ __________
Earnings before pro-
vision for income
taxes 4,777,878 4,042,464 4,160,947 5,118,907 6,082,359
Provision for income
taxes 1,716,000 1,552,000 1,567,000 1,849,000 2,265,000
__________ __________ __________ __________ __________
Net Earnings $ 3,061,878 $ 2,490,464 $ 2,593,947 $ 3,269,907 $ 3,817,359
Weighted Average
Shares Outstanding
Basic & Diluted 5,659,864 5,680,425 5,728,183 5,747,746 5,760,568
Earnings Per Share
Basic & Diluted $.54 $.44 $.45 $.57 $.66
Net Cash Provided by
Operating Activities $5,261,518 $4,513,157 $5,174,075 $4,271,585 $6,621,007
Dividends Paid $2,264,293 $2,187,567 $2,177,956 $2,069,302 $2,017,736
Dividends Paid Per
Share-Class A $.40 $.385 $.38 $.36 $.35
-Class B $.40 $.385 $.38 $.36 $.35
Total Assets $40,435,450 $38,002,571 $37,901,254 $36,584,745 $33,549,994
Stockholders' Equity $35,291,573 $33,381,832 $32,903,833 $32,443,501 $29,947,687
Net Book Value Per
Share $6.24 $5.90 $5.79 $5.64 $5.20
Net Earnings as a %
of Beginning Stock-
holders' Equity 9.2% 7.6% 8.0% 10.9% 13.4%
Lanes in Operation 886 886 936 936 936
Centers in Operation 23 23 25 25 25
</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 1998 and 1997.
<TABLE>
<CAPTION>
1998 1st Qtr 2nd Qtr 3rd Qtr 4th Qtr
_______________________________________________________
<S> <C> <C> <C> <C>
High 9 3/8 9 7/16 9 3/8 9 1/8
Low 6 3/4 7 1/4 8 1/4 8 1/8
</TABLE>
<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>
Holders
The approximate number of holders of record of the Company's Class A Common
Stock as of June 28, 1998 is 545 and of the Company's Class B Common Stock
is 37.
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 1998 and 1997.
<TABLE>
<CAPTION>
Class A Common Stock
Quarter 1998 1997
___________________________________________
<S> <C> <C>
First 10 cents 9.5 cents
Second 10 cents 9.5 cents
Third 10 cents 9.5 cents
Fourth 10 cents 10 cents
</TABLE>
<TABLE>
<CAPTION>
Class B Common Stock
Quarter 1998 1997
___________________________________________
<S> <C> <C>
First 10 cents 9.5 cents
Second 10 cents 9.5 cents
Third 10 cents 9.5 cents
Fourth 10 cents 10 cents
</TABLE>
-3-
<PAGE>
<PAGE>
BOWL AMERICA INCORPORATED AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
June 28, 1998 June 29, 1997
____________ ____________
<S> <C> <C>
ASSETS
Current Assets
Cash and cash equivalents (Note 2) $ 1,944,462 $ 1,797,656
Short-term investments (Note 3) 8,041,136 6,375,039
Inventories 697,571 700,200
Prepaid expenses and other 489,758 459,652
Income taxes refundable - 32,982
Deferred income taxes (Note 8) 21,000 -
__________ __________
Total Current Assets 11,193,927 9,365,529
Property, Plant and Equipment, Net (Note 4) 22,223,345 23,454,699
Other Assets
Marketable equity securities (Note 3) 6,360,356 4,363,058
Cash surrender value-officers'life insurance 383,343 354,206
Other 274,479 465,079
__________ __________
TOTAL ASSETS $40,435,450 $38,002,571
</TABLE>
<PAGE>
BOWL AMERICA INCORPORATED AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
June 28, 1998 June 29, 1997
_____________ ____________
LIABILITIES AND STOCKHOLDERS' EQUITY
<S> <C> <C>
Current Liabilities
Accounts payable $ 848,330 $ 992,397
Accrued expenses 776,051 840,502
Other current liabilities 343,496 382,840
Deferred income taxes (Note 8) - 70,000
__________ __________
Total Current Liabilities 1,967,877 2,285,739
Noncurrent Deferred Income Taxes (Note 8) 3,176,000 2,335,000
__________ __________
TOTAL LIABILITIES 5,143,877 4,620,739
Commitments and Contingencies (Note 5)
Stockholders' Equity (Note 6)
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
4,120,351 and 4,125,998 shares 412,035 412,600
Class B issued 1,536,146 153,614 153,614
Additional paid-in capital 4,893,504 4,896,835
Unrealized gain on securities
available-for-sale, net of tax 3,335,331 2,173,033
Retained earnings 26,497,089 25,745,750
__________ __________
TOTAL STOCKHOLDERS' EQUITY $35,291,573 $33,381,832
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $40,435,450 $38,002,571
<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 28, 1998 June 29, 1997 June 30, 1996
______________________________________________
<S> <C> <C> <C>
Operating Revenues
Bowling and other $19,327,793 $19,037,964 $18,949,937
Food, beverage and
merchandise sales 7,759,029 7,957,092 8,377,021
__________ __________ __________
27,086,822 26,995,056 27,326,958
Operating Expenses
Compensation and benefits 11,608,348 11,944,536 12,069,124
Cost of bowling and other 5,762,553 6,192,194 6,396,141
Cost of food, beverage and
merchandise sales 2,434,639 2,496,024 2,542,485
Depreciation and amortization 2,322,999 2,110,570 2,034,605
General and administrative 855,707 842,195 787,206
__________ __________ __________
22,984,246 23,585,519 23,829,561
Operating Income 4,102,576 3,409,537 3,497,397
Interest and dividend income 675,302 632,927 663,550
__________ __________ __________
Earnings before provision
for income taxes 4,777,878 4,042,464 4,160,947
Provision for income taxes(Note 8)
Current 1,801,000 1,596,000 1,559,000
Deferred (85,000) (44,000) 8,000
_________ __________ __________
1,716,000 1,552,000 1,567,000
Net Earnings $ 3,061,878 $ 2,490,464 $ 2,593,947
Earnings Per Share-Basic &
Diluted $.54 $.44 $.45
<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(1) Earnings
<S> <C> <C> <C> <C> <C> <C> <C>
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
Purchase of stock (5,647) (565) - - (3,331) - (46,246)
Cash dividends paid(40 cents/sh) - - - - - - (2,264,293)
Change in unrealized gain on
available-for-sale securities - - - - - 1,162,298 -
Net earnings for the year - - - - - - 3,061,878
________________________________________________________________________________________________________________________
Balance, June 28, 1998 4,120,351 $412,035 1,536,146 $153,614 $4,893,504 $3,335,331 $26,497,089
<FN> (1)Unrealized gains and losses are shown net of tax
See notes to consolidated financial statements.
</TABLE>
-5-
<PAGE>
BOWL AMERICA INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
June 28, June 29, June 30,
1998 1997 1996
<S> <C> <C> <C>
Cash Flows From Operating Activities
Net earnings $3,061,878 $2,490,464 $2,593,947
Adjustments to reconcile net earnings to
net cash provided by operating activities:
Depreciation and amortization 2,322,999 2,110,570 2,034,605
(Decrease) increase in deferred
income taxes (85,000) (44,000) 8,000
Loss (gain) on disposition of assets-net 13,397 (12,588) 21,087
Changes in assets and liabilities:
Decrease (increase) in inventories 2,629 (14,423) (68,647)
(Increase) decrease in prepaid expenses
and other (30,106) 277,007 (174,442)
Decrease in income taxes refundable 32,982 171,680 239,964
Decrease (increase) in other long-term
assets 190,600 60,084 (39,161)
(Decrease) increase in accounts payable (144,066) (454,756) 753,873
Decrease in accrued expenses and
payroll deductions (64,451) (65,737) (141,027)
Decrease in other current liabilities (39,344) (5,144) (54,124)
_________ _________ _________
Net cash provided by operating activities $5,261,518 $4,513,157 $5,174,075
_________ _________ _________
Cash Flows from Investing Activities
Expenditures for property,plant,equipment (1,105,043) (2,872,160) (1,336,946)
Net (increase) decrease in short-term
investments (1,666,097) 385,127 (99,208)
(Increase) decrease in cash surrender
value (29,137) (22,044) 15,150
_________ _________ _________
Net cash used in investing activities (2,800,277) (2,509,077) (1,421,004)
_________ _________ _________
Cash Flows from Financing Activities
Payment of cash dividends (2,264,293) (2,187,567) (2,177,956)
Purchase of Class A Common Stock (50,142) (139,719) (427,931)
_________ _________ _________
Net cash used in financing activities (2,314,435) (2,327,286) (2,605,887)
_________ _________ _________
Net Increase (Decrease) in Cash
and Cash Equivalents 146,806 (323,206) 1,147,184
Cash and Cash Equivalents, Beginning of Year 1,797,656 2,120,862 973,678
_________ _________ _________
Cash and Cash Equivalents, End of Year $1,944,462 $1,797,656 $2,120,862
Supplemental Disclosures of Cash Flow Information
Cash paid during the year for
Income taxes $1,969,113 $1,430,334 $1,319,661
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 1998 ended June 28, 1998, fiscal year 1997 ended June 29, 1997, and fiscal
year 1996 ended June 30, 1996. Fiscal years 1998, 1997 and 1996 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
Income taxes are accounted for in accordance with Statement of
Financial Accounting Standards ("SFAS") No. 109, "Accounting for Income
Taxes". Under this method, 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 realization of deferred tax assets does not
appear probable.
Fair Value of Financial Instruments
The fair value of the noncurrent marketable security portfolio is disclosed
in Note 3. The cost of all other financial instruments approximates fair value.
Investment Securities
Effective July 4, 1994, the Company adopted SFAS No. 115 entitled
"Accounting for Certain Investments in Debt and Equity 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 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.
Earnings Per Share
During fiscal year 1998 the Company adopted SFAS No. 128 "Earnings Per
Share". For the years ended June 28, 1998, June 29, 1997, and June 30, 1996,
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
5,659,864, 5,680,425 and 5,728,183, respectively.
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 Not Yet Adopted
The Financial Accounting Standards Board issued SFAS No. 130, "Reporting
Comprehensive Income", in June 1997. SFAS No. 130 establishes standards for
reporting and display of comprehensive income and its components (revenues,
expenses, gains and losses) in a full set of general-purpose financial
statements. Comprehensive income consists of the total change in equity
during the period, exclusive of any shareholders contributions and
distributions. Other comprehensive income includes such items as unrealized
gains and losses on available-for-sale securities. This statement is effective
for fiscal years beginning after December 15, 1997. Reclassification of
financial statements for earlier periods provided for comprehensive income is
required. The Company will adopt this standard in the first quarter of fiscal
year 1999. The adoption of this standard will have no effect on the Company's
reported results of operations or financial position.
-7-
<PAGE>
The Financial Accounting Standards Board issued SFAS No. 131,
"Disclosures About Segments of an Enterprise and Related Information," in
June 1997. SFAS No. 131 establishes criteria for determining an operating
segment and the related financial information required to be disclosed.
SFAS No. 131 is effective for fiscal years beginning after December 15,
1997; however, disclosure is not required in interim financial statements
in the initial year of adoption. Accordingly, the Company will make the
required disclosures for the fiscal year ending June 27, 1999. The adoption
of this standard will have no effect on the Company's reported results of
operations or financial position.
2. CASH AND CASH EQUIVALENTS
Cash and cash equivalents consisted of the following:
June 28, June 29,
1998 1997
Demand deposits and cash on hand $ 631,661 $ 491,537
Money market funds 152,801 538,119
Repurchase agreements 1,160,000 768,000
________ _________
$1,944,462 $1,797,656
3. INVESTMENTS
Short-term investments consist of certificates of deposits, U.S. Treasury
securities and a mutual fund which invests in mortgage backed securities
(maturities of generally three months to one year). Non-current investments
are marketable equity securities which consist of twelve telecommunications
stocks. The Company has classified all readily marketable debt and equity
securities as available-for-sale. These available-for-sale securities are
carried at fair value in accordance with the provisions of SFAS No. 115.
For the U.S. Treasury securities and the mutual fund, the cost of these
investments approximates fair value.
The following table summarizes the cost and approximate fair values of
equity securities available-for-sale as of June 28, 1998, and June 29, 1997
as follows:
<TABLE>
<CAPTION>
Original Unrealized Fair
Cost Gain Value
<S> <C> <C> <C>
June 28, 1998
Securities available-for-sale $857,782 $5,502,574 $6,360,356
June 29, 1997
Securities available-for-sale $857,782 $3,505,276 $4,363,058
</TABLE>
There were no sales of these available-for-sale securities in the years
ended June 28, 1998, June 29, 1997 and June 30, 1996.
<PAGE>
4. PROPERTY, PLANT, AND EQUIPMENT
Property, plant, and equipment, as cost, consist of the following:
<TABLE>
<CAPTION>
June 28, June 29,
1998 1997
<S> <C> <C>
Bowling lanes and equipment $17,530,264 $17,140,723
Amusement games 726,527 461,283
Buildings and building improvements 17,262,980 17,055,845
Leasehold improvements 956,173 958,511
Land 7,698,228 7,698,228
Bowling lanes and equipment not yet in use 232,325 192,859
__________ __________
44,406,497 43,507,449
Less accumulated depreciation and
amortization 22,183,152 20,052,750
__________ __________
$22,223,345 $23,454,699
</TABLE>
5. 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 28, 1998, the minimum fixed rental commitments related to all
noncancelable leases, were as follows:
Year Ending
1999 400,000
2000 400,000
2001 300,305
2002 70,880
2003 15,000
Thereafter 823,750
_________
Total minimum lease payments $2,009,935
Net rental expense was as follows:
For the Years Ended
1998 1997 1996
Minimum rental under operating leases $442,400 $524,484 $534,000
Excess percentage rentals 277,785 135,786 144,026
_______ _______ _______
$720,185 $660,270 $678,026
6. 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.
-8-
<PAGE>
7. 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 28, 1998, June 29, 1997, and June 30, 1996, contributions in the amount of
$125,000, $110,000, and $105,000, 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 1998,
1997, and 1996 were $125,000, $110,000, and $105,000, respectively.
9. INCOME TAXES
The significant components of the Company's deferred tax assets and liabil-
ities were as follows:
June 28, June 29,
1998 1997
Deferred tax assets:
Accrued expenses $ 64,000 $ 68,000
Other 56,000 -
_________ _________
Total deferred tax assets 120,000 68,000
Deferred tax liabilities:
Property, plant and equipment 952,000 1,003,000
Unrealized gain on available-
for-sale securities 2,167,000 1,332,000
Prepaid expenses 99,000 76,000
Other 57,000 62,000
_________ _________
Total deferred tax liabilities 3,275,000 2,473,000
_________ _________
Net deferred income taxes $3,155,000 $2,405,000
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
1998 % 1997 % 1996 %
<S> <C> <C> <C> <C> <C> <C>
Taxes computed at statutory rate $1,624,000 34.0% $1,374,000 34.0% $1,415,000 34.0%
State income taxes, net of Federal
income tax benefit 241,000 5.0 220,000 5.4 155,000 3.7
Dividends received exclusion (91,000) (1.9) (29,000) (0.7) (30,000) (0.7)
All other-net (58,000) (1.2) (13,000) (0.3) 27,000 .6
_________ ____ _________ ____ _________ ____
$1,716,000 35.9% $1,552,000 38.4% $1,567,000 37.6%
</TABLE>
<PAGE>
9. SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)
The following summary represents the results of operations for each of the
quarters in fiscal years 1998 and 1997 (dollars in thousands, except for
earnings per share):
<TABLE>
<CAPTION>
Earnings
(Loss)
Before Earnings
Operating Operating Provision Net (Loss)
Revenues Income for Income Earnings Per
(Loss) Taxes (Loss) Share
<S> <C> <C> <C> <C> <C>
1998
June 28, 1998 $5,700 $ 522 $ 714 $ 518 $.09
March 29, 1998 8,623 2,506 2,704 1,685 .30
December 28, 1997 7,347 1,222 1,372 859 .15
September 28, 1997 5,417 (147) (12) - -
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)
</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 28, 1998 and June 29, 1997,
and the related consolidated statements of earnings, stockholders' equity and
cash flows for each of the three years in the period ended June 28, 1998.
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 28, 1998 and June 29, 1997, and the results of their
operations and their cash flows for each of the three years in the period ended
June 28, 1998, in conformity with generally accepted accounting principles.
Deloitte and Touche LLP
Washington, DC
September 3, 1998
-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-28-1998
<PERIOD-END> JUN-28-1998
<CASH> 1,944
<SECURITIES> 6,360
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 698
<CURRENT-ASSETS> 11,194
<PP&E> 44,406
<DEPRECIATION> 22,183
<TOTAL-ASSETS> 40,435
<CURRENT-LIABILITIES> 1,968
<BONDS> 0
0
0
<COMMON> 566
<OTHER-SE> 34,726
<TOTAL-LIABILITY-AND-EQUITY> 40,435
<SALES> 7,759
<TOTAL-REVENUES> 27,087
<CGS> 2,435
<TOTAL-COSTS> 20,549
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 4,778
<INCOME-TAX> 1,716
<INCOME-CONTINUING> 3,062
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,062
<EPS-PRIMARY> .54
<EPS-DILUTED> .54
