<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 27, 1999 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, 1999, 3,739,841 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 $26 million; 1,505,826
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, 1999, the total aggregate market value for both classes of common
stock would be approximately $37 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 27, 1999 are incorpor-
ated into Part III of this Form 10-K. Portions of Bowl America's 1999 Annual
Report are incorporated by reference in Part II, Items 5,6,7 and 8.
<PAGE>
BOWL AMERICA INCORPORATED
INDEX TO FISCAL 1999 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 1999 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 22 bowling centers.
The Company's lease of Bowl America Twinbrook has expired and it
no longer occupies the premises. The Company is seeking other new bowling
locations and has executed a contract to purchase a site on which it will
construct a new bowling center, subject to approval of its site plan and
the granting of an exception to construct a bowling center from county
authorities.
(b) Financial Information about Industry Segments
The Company operates in one segment. Its principal source of
revenue consists of fees charged for the use of bowling lanes and other
facilities and from the sale of food and beverages for consumption on the
premises. 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, 1999 the Registrant and its subsidiaries operated
13 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 22 bowling centers
contain a total of 854 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.
Six 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 2000 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 27, 1999.
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 27, 1999.
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 27,
1999 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 27, 1999 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 27, 1999 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 27, 1999
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 27, 1999 and June 28, 1998
Consolidated statements of earnings and comprehensive earnings
- years ended June 27, 1999, June 28, 1998, and June 29, 1997
Consolidated statements of stockholders' equity - years ended
June 27, 1999, June 28, 1998, and June 29, 1997
Consolidated statements of cash flows - years ended
June 27, 1999, June 28, 1998, and June 29, 1997
Notes to the consolidated financial statements - years ended
June 27, 1999, June 28, 1998, and June 29, 1997
<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 28, 1999 to July 2, 2000.
<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 23, 1999
Ruth Macklin
Ruth Macklin
Senior Vice President-Treasurer
Date: September 23, 1999
Cheryl A. Dragoo
Cheryl A. Dragoo
Assistant Treasurer and Controller
Principal Accounting Officer
Date: September 23, 1999
<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 23, 1999
Ruth Macklin A. Joseph Levy
Ruth Macklin A. Joseph Levy
Senior Vice President-Treasurer Senior Vice President-Secretary
and Director and Director
Date: September 23, 1999 Date: September 23, 1999
Warren T. Braham Stanley H. Katzman
Warren T. Braham Stanley H. Katzman
Director Director
Date: September 23, 1999 Date: September 23, 1999
Allan L. Sher Merle Fabian
Allan L. Sher Merle Fabian
Director Director
Date: September 23, 1999 Date: September 23, 1999
Irvin Clark
Irvin Clark
Director
Date: September 23, 1999
<PAGE>
BOWL AMERICA INCORPORATED AND SUBSIDIARIES
PRESIDENT'S LETTER
September 16, 1999
Dear Fellow Owner:
We continue to adapt successfully to our customers' changing entertainment
tastes.
Profits grew again while our core league business continued to decline.
Earnings per share increased 13% over fiscal 1998 and 39% over 1997 despite
the fall off in adult league bowling. The upswing in open play and special
events was even more pronounced this summer. Our June-August gross revenues
were up 9% with one fewer center. In both July and August, we operated
profitably. In the last 15 years, only once was even one of those two months
profitable (August 1992).
Part of what is happening has historic roots. When a bowling center is filled
with leagues, potential open play customers become discouraged and may not
even try to bowl. This provides a shrinking pool of replacement bowlers for
existing leagues. It is only when league play has contracted enough that
people feel they can drop into a bowling center on a weeknight and get a lane
that we can begin to build back our customer base. During World War II, our
center was triple shifted with leagues. A five person team that bowled at
5:00 p.m. was followed by a 7:00 p.m. league and a third group at 9:00 p.m.
Some of the later bowlers would even stay on into the wee hours to test their
skills. It was, in fact, impossible to get together a group for a spur of the
moment bowling party. The end of gas rationing and the coming of TV changed
all that, so a new generation was able to "get a lane". The next wave of new
people came with the automatic pinsetter which led to new centers, more
capacity and more bowlers.
Now it is again possible most nights and in most cities to get together a group
of friends and just go bowling. Our challenge is to make sure that those
customers enjoy themselves enough to participate regularly and to talk about
the fun they had to their friends, neighbors and fellow workers.
However, our historic emphasis on leagues will stand us well even in this new
environment. In a new article last week, a financial analyst was quoted as
saying that another recreation company, currently in bankruptcy, needed only
to get customers to come back a SECOND time to survive. The Bowl America
staff has been trained to get customers to come back 35 times a year. They
should find it easy to persuade the casual bowler to return because they have
learned that recreation is an experience, not a product. It is superior
customer service that has made Bowl America the bowling centers for people
who love to bowl.
While we will make some changes in our physical plant, most of our assets are
of equal appeal to both groups. Our locations are well positioned for both
after work and neighborhood use. Electronic scoring makes this game easy for
beginners and keeps statistics for our league players. We have menus tailored
for active customers. Our experience the last few years has convinced us that
we can continue to invest in carefully selected new locations. Also, the
greater the number of recreation events a person tries, the greater the
bargain bowling seems. Therefore, we should get the advantage of better pricing
to support all of our locations.
One of the problems with regard to this year, however, is that this mix of
business will cause our results to be less predictable because of the lower
number of pre-contracted every week league players. Further, we have been
fortunate the last two years to have had mild winters which enabled bowlers
to get to our centers almost without interruption. On a more positive note,
we have the exceptional start this summer and this is a 53-week year.
Additionally, our stock purchases, while reducing total earnings, should
serve to increase our cash flow and per share results.
One of the best things we have going for us is the number of people on our
staff who have dealt with swings in entertainment tastes and kept Bowl America
profitable over the years. They are being challenged by this changing
environment, but I am confident they can handle it.
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 1999 was $5,335,000 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 $9,248,000 at the
end of fiscal 1999 compared to $9,986,000 at the end of fiscal 1998.
The Company purchased 401,610 shares of its previously outstanding common stock
in fiscal year 1999 for a cost of $2,850,000. An additional 75,820 shares have
been purchased for approximately $509,000 since year end.
Approximately $971,000 was expended to acquire property and equipment during
fiscal 1999. The purchases included amusement game machines and upgraded
bowling equipment. In last year's report it was mentioned that Bowl America
had made offers to purchase two sites. Currently the Company has a signed
contract with contingencies for approval of permits on one of those sites.
There is no other contract; however, the Company is actively seeking land for
an additional location. Cash and cash flows are sufficient to finance the
estimated $8 million costs of land, building and equipment should two contracts
reach fruition. The Company's position in telecommunication stocks is an
additional source of expansion capital.
These marketable securities are carried at their fair value on the last day
of the quarter. During the year ended June 27, 1999, the value of the
Company's holdings increased approximately $3 million with a net after
tax unrealized gain of $1,951,000. There were no transactions in these stocks.
Dividends per share increased for the twenty-seventh consecutive year. Cash
dividends paid to shareholders during fiscal 1999 exceeded $2.2 million.
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.
During the fourth quarter of fiscal 1999, the Company closed a location
operating with a negative cash flow. In the fourth quarter of fiscal 1997 two
centers were closed at the expiration of their leases. These centers were
producing negative cash flow as well.
RESULTS OF CONSOLIDATED OPERATIONS
The current year comparisons reflect the same number of centers in operation
for the peak periods of fiscal 1999 and 1998. The prior period comparisions
are significantly influenced by the change in operating locations from 25 to 23.
Total consolidated operating revenues increased 2% in fiscal 1999 and less
than 1% in fiscal 1998. Bowling and related services revenue was up 2% in
both the current and prior years. In the current year increases in the
average game rate and rental shoe revenue offset the decline in linage.
In the prior year the increase in amusement game revenue as a result of
more Company owned machines in service was primarily responsible.
<PAGE>
Total food, beverage and merchandise sales were up 1% in the current year
versus a decrease of 2% in the prior year. The total cost of food, beverage
and merchandise sales decreased slightly in fiscal 1999 and 2% in the prior
year.
Bowling lane maintenance including the resurfacing of the majority of our
wooden lanes was mainly responsible for a 12% increase in maintenance costs
in the current year versus a decrease in maintenance costs last year.
Advertising and supplies costs decreased in both years. The prior year
included costs related to the equipment and advertising of additional glow-in-
the-dark locations.
Utility expense decreased 2% in the current year and 8% in the prior year.
The prior year decrease was a result of mild winter weather and fewer locations
in operation.
Rent expense decreased 20% in the current year. Last year's rent expense
included a one-time termination payment under an expired lease. Insurance
costs increased 6% versus a decrease of 15% in the prior period.
Depreciation expense decreased 2% in fiscal 1999 and increased 10% in fiscal
1998. The increase in the number of owned amusement game machines and the
Dranesville expansion were the primary reasons for the increase last year.
The Company's effective income tax rates were 36.3% in 1999, 35.9% in 1998,
and 38.4% in 1997, 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
Preparing for Year 2000 has been a priority for Bowl America. The Company
has reviewed its computerized operations including the hardware and
software of its main computer system as well as bowling center autoscoring
systems. Because Bowl America does not rely heavily on date sensitive
calculations for its internal operations, the cost of remediation has not
been material, less than $100,000.
As of September 1, 1999, the operating system and all significant software
of the corporate computer were year 2000 ready. All autoscore systems in the
bowling centers have been upgraded to be compliant.
We are continuing to receive compliance information from our material vendors
on their progress. Many are currently Year 2000 ready while others continue
to state that they will be ready on a timely basis.
-2-
<PAGE>
BOWL AMERICA INCORPORATED AND SUBSIDIARIES
CONSOLIDATED SUMMARY OF OPERATIONS
Selected Financial Data
<TABLE>
<CAPTION>
For the Years Ended
June 27, June 28, June 29, June 30, July 2,
1999 1998 1997 1996 1995
__________________________________________________________
<S> <C> <C> <C> <C> <C>
Operating Revenues $27,547,490 $27,086,822 $26,995,056 $27,326,958 $29,493,578
Operating Expenses 22,995,118 22,984,246 23,585,519 23,829,561 24,967,878
Interest and dividend
Income 684,781 675,302 632,927 663,550 593,207
__________ __________ __________ __________ __________
Earnings before pro-
vision for income
taxes 5,237,153 4,777,878 4,042,464 4,160,947 5,118,907
Provision for income
taxes 1,902,000 1,716,000 1,552,000 1,567,000 1,849,000
__________ __________ __________ __________ __________
Net Earnings $ 3,335,153 $ 3,061,878 $ 2,490,464 $ 2,593,947 $ 3,269,907
Weighted Average
Shares Outstanding
Basic & Diluted 5,465,789 5,659,864 5,680,425 5,728,183 5,747,746
Earnings Per Share
Basic & Diluted $.61 $.54 $.44 $.45 $.57
Net Cash Provided by
Operating Activities $5,334,800 $5,261,518 $4,513,157 $5,174,075 $4,271,585
Dividends Paid $2,249,628 $2,264,293 $2,187,567 $2,177,956 $2,069,302
Dividends Paid Per
Share-Class A $.41 $.40 $.385 $.38 $.36
-Class B $.41 $.40 $.385 $.38 $.36
Total Assets $41,747,936 $40,435,450 $38,002,571 $37,901,254 $36,584,745
Stockholders' Equity $35,477,445 $35,291,573 $33,381,832 $32,903,833 $32,443,501
Net Book Value Per
Share $6.49 $6.24 $5.90 $5.79 $5.64
Net Earnings as a %
of Beginning Stock-
holders' Equity 9.5% 9.2% 7.6% 8.0% 10.9%
Lanes in Operation 854 886 886 936 936
Centers in Operation 22 23 23 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 1999 and 1998.
<TABLE>
<CAPTION>
1999 1st Qtr 2nd Qtr 3rd Qtr 4th Qtr
_______________________________________________________
<S> <C> <C> <C> <C>
High 9 7 3/4 7 3/4 7 3/8
Low 7 3/16 6 7/8 6 3/4 6 3/8
</TABLE>
<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>
Holders
The approximate number of holders of record of the Company's Class A Common
Stock as of June 27, 1999 is 524 and of the Company's Class B Common Stock
is 39.
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 1999 and 1998.
<TABLE>
<CAPTION>
Class A Common Stock
Quarter 1999 1998
___________________________________________
<S> <C> <C>
First 10 cents 10 cents
Second 10 cents 10 cents
Third 10.5 cents 10 cents
Fourth 10.5 cents 10 cents
</TABLE>
<TABLE>
<CAPTION>
Class B Common Stock
Quarter 1999 1998
___________________________________________
<S> <C> <C>
First 10 cents 10 cents
Second 10 cents 10 cents
Third 10.5 cents 10 cents
Fourth 10.5 cents 10 cents
</TABLE>
-3-
<PAGE>
<PAGE>
BOWL AMERICA INCORPORATED AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
June 27, 1999 June 28, 1998
____________ ____________
<S> <C> <C>
ASSETS
Current Assets
Cash and cash equivalents (Note 2) $ 1,557,225 $ 1,944,462
Short-term investments (Note 3) 7,690,576 8,041,136
Inventories 618,875 697,571
Prepaid expenses and other 482,279 489,758
Income taxes refundable 89,194 -
Deferred income taxes (Note 8) 15,000 21,000
__________ __________
Total Current Assets 10,453,149 11,193,927
Property, Plant and Equipment, Net (Note 4) 20,908,976 22,223,345
Other Assets
Marketable equity securities (Note 3) 9,506,955 6,360,356
Cash surrender value-officers'life insurance 384,925 383,343
Other 493,931 274,479
__________ __________
TOTAL ASSETS $41,747,936 $40,435,450
</TABLE>
<PAGE>
BOWL AMERICA INCORPORATED AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
June 27, 1999 June 28, 1998
_____________ ____________
LIABILITIES AND STOCKHOLDERS' EQUITY
<S> <C> <C>
Current Liabilities
Accounts payable $ 738,040 $ 848,330
Accrued expenses 977,400 776,051
Other current liabilities 349,051 343,496
__________ __________
Total Current Liabilities 2,064,491 1,967,877
Noncurrent Deferred Income Taxes (Note 8) 4,206,000 3,176,000
__________ __________
TOTAL LIABILITIES 6,270,491 5,143,877
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
3,746,171 and 4,120,351 shares 374,617 412,035
Class B issued
1,508,716 and 1,536,146 shares 150,871 153,614
Additional paid-in capital 4,265,443 4,893,504
Accumulated other comprehensive earnings-
Unrealized gain on securities
available-for-sale, net of tax 5,285,930 3,335,331
Retained earnings 25,400,584 26,497,089
__________ __________
TOTAL STOCKHOLDERS' EQUITY $35,477,445 $35,291,573
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $41,747,936 $40,435,450
<FN>
See notes to consolidated financial information.
</TABLE>
-4-
<PAGE>
BOWL AMERICA INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS & COMPREHENSIVE EARNINGS
<TABLE>
<CAPTION>
For the Years Ended
June 27, 1999 June 28, 1998 June 29, 1997
______________________________________________
<S> <C> <C> <C>
Operating Revenues
Bowling and other $19,696,199 $19,327,793 $19,037,964
Food, beverage and
merchandise sales 7,851,291 7,759,029 7,957,092
__________ __________ __________
27,547,490 27,086,822 26,995,056
Operating Expenses
Compensation and benefits 11,820,526 11,608,348 11,944,536
Cost of bowling and other 5,654,989 5,762,553 6,192,194
Cost of food, beverage and
merchandise sales 2,414,579 2,434,639 2,496,024
Depreciation and amortization 2,268,267 2,322,999 2,110,570
General and administrative 836,757 855,707 842,195
__________ __________ __________
22,995,118 22,984,246 23,585,519
Operating Income 4,552,372 4,102,576 3,409,537
Interest and dividend income 684,781 675,302 632,927
__________ __________ __________
Earnings before provision
for income taxes 5,237,153 4,777,878 4,042,464
Provision for income taxes(Note 8)
Current 2,062,000 1,801,000 1,596,000
Deferred (160,000) (85,000) (44,000)
_________ __________ __________
1,902,000 1,716,000 1,552,000
Net Earnings $ 3,335,153 $ 3,061,878 $ 2,490,464
Other Comprehensive Earnings Net
of Tax-unrealized gain on
available-for-sale securities 1,950,599 1,162,298 314,821
Comprehensive Earnings 5,285,752 4,224,176 2,805,285
Earnings Per Share-Basic &
Diluted $.61 $.54 $.44
<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 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 1/2cents/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
Purchase of stock (374,180) (37,418) (27,430) (2,743) (628,061) - (2,182,030)
Cash dividends paid(41 cents/sh) - - - - - - (2,249,628)
Change in unrealized gain on
available-for-sale securities - - - - - 1,950,599 -
Net earnings for the year - - - - - - 3,335,153
________________________________________________________________________________________________________________________
Balance, June 27, 1999 3,746,171 $374,617 1,508,716 $150,871 $4,265,443 $5,285,930 $25,400,584
<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 27, June 28, June 29,
1999 1998 1997
<S> <C> <C> <C>
Cash Flows From Operating Activities
Net earnings $3,335,153 $3,061,878 $2,490,464
Adjustments to reconcile net earnings to
net cash provided by operating activities:
Depreciation and amortization 2,268,267 2,322,999 2,110,570
Increase in deferred income taxes (160,000) (85,000) (44,000)
Loss (gain) on disposition of assets-net 17,237 13,397 (12,588)
Changes in assets and liabilities:
Decrease (increase) in inventories 78,696 2,629 (14,423)
Decrease (increase) in prepaid expenses
and other 7,479 (30,106) 277,007
(Increase) decrease in income taxes
refundable (89,194) 32,982 171,680
(Increase) decrease in other long-term
assets (219,452) 190,600 60,084
Decrease in accounts payable (110,290) (144,066) (454,756)
Increase (decrease) in accrued expenses
and payroll deductions 201,349 (64,451) (65,737)
Increase (decrease) in other current
liabilities 5,555 (39,344) (5,144)
_________ _________ _________
Net cash provided by operating activities $5,334,800 $5,261,518 $4,513,157
_________ _________ _________
Cash Flows from Investing Activities
Expenditures for property,plant,equipment (971,135) (1,105,043) (2,872,160)
Net decrease (increase) in short-term
investments 350,560 (1,666,097) 385,127
(Increase) decrease in cash surrender
value (1,582) (29,137) (22,044)
_________ _________ _________
Net cash used in investing activities (622,157) (2,800,277) (2,509,077)
_________ _________ _________
Cash Flows from Financing Activities
Payment of cash dividends (2,249,628) (2,264,293) (2,187,567)
Purchase of Class A Common Stock (2,654,813) (50,142) (139,719)
Purchase of Class B Common Stock (195,439) - -
_________ _________ _________
Net cash used in financing activities (5,099,880) (2,314,435) (2,327,286)
_________ _________ _________
Net (Decrease) Increase in Cash
and Cash Equivalents (387,237) 146,806 (323,206)
Cash and Cash Equivalents, Beginning of Year 1,944,462 1,797,656 2,120,862
_________ _________ _________
Cash and Cash Equivalents, End of Year $1,557,225 $1,944,462 $1,797,656
Supplemental Disclosures of Cash Flow Information
Cash paid during the year for
Income taxes $2,282,560 $1,969,113 $1,430,334
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 22 bowling
centers, with food and beverage service in each center. Thirteen 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 22 centers contain a total of 854 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 1999 ended June 27, 1999, fiscal year 1998 ended June 28, 1998, and fiscal
year 1997 ended June 29, 1997. Fiscal years 1999, 1998 and 1997 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
The Company accounts for its investments in accordance with 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
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
5,465,789, 5,659,864 and 5,680,425, respectively.
Comprehensive Earnings
In fiscal 1999, the Company adopted the provisions of Statement of
Financial Accounting Standards No. 130 ("SFAS 130"), "Reporting Comprehensive
Income." As such, a consolidated statements of comprehensive earnings
reflecting the aggregation of net earnings and unrealized gain on available-
for-sale securities, the Company's principal components of other comprehensive
earnings, has been presented for each of the three years in the period ended
June 27, 1999.
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.
-7-
<PAGE>
2. CASH AND CASH EQUIVALENTS
Cash and cash equivalents consisted of the following:
June 27, June 28,
1999 1998
Demand deposits and cash on hand $ 172,671 $ 631,661
Money market funds 367,554 152,801
Repurchase agreements 1,017,000 1,160,000
________ _________
$1,557,225 $1,944,462
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 27, 1999, and June 28, 1998
as follows:
<TABLE>
<CAPTION>
Original Unrealized Fair
Cost Gain Value
<S> <C> <C> <C>
June 27, 1999
Securities available-for-sale $857,782 $8,649,173 $9,506,955
June 28, 1998
Securities available-for-sale $857,782 $5,502,574 $6,360,356
</TABLE>
There were no sales of these available-for-sale securities in the years
ended June 27, 1999, June 28, 1998 and June 29, 1997.
<PAGE>
4. PROPERTY, PLANT, AND EQUIPMENT
Property, plant, and equipment, as cost, consist of the following:
<TABLE>
<CAPTION>
June 27, June 28,
1999 1998
<S> <C> <C>
Bowling lanes and equipment $17,575,699 $17,530,264
Amusement games 779,012 726,527
Buildings and building improvements 17,389,469 17,262,980
Leasehold improvements 866,707 956,173
Land 7,698,228 7,698,228
Bowling lanes and equipment not yet in use 303,095 232,325
__________ __________
44,612,210 44,406,497
Less accumulated depreciation and
amortization 23,703,234 22,183,152
__________ __________
$20,908,976 $22,223,345
</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 27, 1999, the minimum fixed rental commitments related to all
noncancelable leases, were as follows:
Year Ending
2000 400,000
2001 300,305
2002 70,880
2003 15,000
2004 15,000
Thereafter 808,750
_________
Total minimum lease payments $1,609,935
Net rental expense was as follows:
For the Years Ended
1999 1998 1997
Minimum rental under operating leases $453,166 $442,400 $524,484
Excess percentage rentals 124,587 277,785 135,786
_______ _______ _______
$577,753 $720,185 $660,270
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 27, 1999, June 28, 1998, and June 29, 1997, contributions in the amount of
$137,500, $125,000, and $110,000, 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 1999,
1998, and 1997 were $137,500, $125,000, and $110,000, respectively.
9. INCOME TAXES
The significant components of the Company's deferred tax assets and liabil-
ities were as follows:
June 27, June 28,
1999 1998
Deferred tax assets:
Accrued expenses $ 66,000 $ 64,000
Other 43,000 56,000
_________ _________
Total deferred tax assets 109,000 120,000
Deferred tax liabilities:
Property, plant and equipment 786,000 952,000
Unrealized gain on available-
for-sale securities 3,363,000 2,167,000
Prepaid expenses 94,000 99,000
Other 57,000 57,000
_________ _________
Total deferred tax liabilities 4,300,000 3,275,000
_________ _________
Net deferred income taxes $4,191,000 $3,155,000
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
1999 % 1998 % 1997 %
<S> <C> <C> <C> <C> <C> <C>
Taxes computed at statutory rate $1,781,000 34.0% $1,624,000 34.0% $1,374,000 34.0%
State income taxes, net of Federal
income tax benefit 156,000 3.0 241,000 5.0 220,000 5.4
Dividends received exclusion (32,000) (0.6) (91,000) (1.9) (29,000) (0.7)
All other-net (3,000) (.07) (58,000) (1.2) (13,000) (0.3)
_________ ____ _________ ____ _________ ____
$1,902,000 36.3% $1,716,000 35.9% $1,552,000 38.4%
</TABLE>
<PAGE>
9. SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)
The following summary represents the results of operations for each of the
quarters in fiscal years 1999 and 1998 (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>
1999
June 27, 1999 $6,259 $ 682 $ 860 $ 509 $.10
March 28, 1999 8,709 2,586 2,765 1,778 .32
December 27, 1998 7,172 1,397 1,560 1,010 .18
September 27, 1998 5,407 (113) 52 38 .01
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) - -
</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 27, 1999 and June 28, 1998,
and the related consolidated statements of earnings and comprehensive earnings,
stockholders' equity and cash flows for each of the three years in the period
ended June 27, 1999. 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 27, 1999 and June 28, 1998, and the results of their
operations and their cash flows for each of the three years in the period ended
June 27, 1999, in conformity with generally accepted accounting principles.
Deloitte and Touche LLP
Washington, DC
August 20, 1999
-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-27-1999
<PERIOD-END> JUN-27-1999
<CASH> 1,557
<SECURITIES> 9,507
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 619
<CURRENT-ASSETS> 10,453
<PP&E> 44,612
<DEPRECIATION> 23,703
<TOTAL-ASSETS> 41,748
<CURRENT-LIABILITIES> 2,065
<BONDS> 0
0
0
<COMMON> 525
<OTHER-SE> 34,952
<TOTAL-LIABILITY-AND-EQUITY> 41,748
<SALES> 7,851
<TOTAL-REVENUES> 27,547
<CGS> 2,415
<TOTAL-COSTS> 20,580
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 5,237
<INCOME-TAX> 1,902
<INCOME-CONTINUING> 3,335
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,335
<EPS-BASIC> .61
<EPS-DILUTED> .61
