PART 1. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

  BOWL AMERICA INCORPORATED AND SUBSIDIARIES

  CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS

  (Unaudited)

The operating results for the thirteen (13) and thirty-nine (39) week periodsperiod ended March 31,September 29, 2019 are not necessarily indicative of results to be expected for the year.  See notes to condensed consolidated financial statements.

BOWL AMERICA INCORPORATED AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS (CONTINUED)Condensed Consolidated Balance Sheets

(Unaudited)

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE EARNINGS

The operating results for the thirteen (13) and thirty-nine (39) week periods ended March 31, 2019 are not necessarily indicative of results to be expected for the year.

See notes to condensed consolidated financial statements.

Condensed  Consolidated Balance SheetsCONDENSED CONSOLIDATED STATEMENTS  OF CASH FLOWS

(Unaudited)

See notes to condensed consolidated financial statements.

BOWL AMERICA INCORPORATED AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)STOCKHOLDERS' EQUITY

See

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

BOWL AMERICA INCORPORATED AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the Thirteen and Thirty-nine Weeks Ended

March 31,September 29, 2019

(Unaudited)

(Unaudited)

The shares of common stock included in the equity securities portfolio as of March 31, 2019 were:includes the following stocks:

 On May 25, 2018, Windstream completed a 1-for-5 reverse split reducing Bowl America’s holdings to 135 shares. On July 10, 2017, Frontier Communications completed a 1-for-15 reverse stock split reducing Bowl America’s holdings to 300 shares from 4,508.

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

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

FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains forward-looking statements concerning our business, operations and financial performance and condition as well as our plans, objectives and expectations for our business operations and financial performance and condition that are subject to risks and uncertainties. All statements other than statements of historical fact included in this Quarterly Report on Form 10-Q are forward-looking statements. These forward-looking statements are based on current expectations, estimates, forecasts and projections about our business, our sales and the industry in which we operate and our management’s beliefs and assumptions. These statements are not guarantees of future performance or development and involve risks, uncertainties and other factors that are in some cases beyond our control. The forward-looking statements included in this Quarterly Report on Form 10-Q are made as of the date hereof. We are under no obligation to publicly update or revise any forward-looking statement as a result of new information, future events or otherwise, except as otherwise required by law.

LIQUIDITY AND CAPITAL RESOURCES

The Company views a strong financial position as a major benefit to shareholders and emphasizes payment of dividends as

part of its financial plan.  A portion of earnings has consistently been invested to create a reserve to protect the Company in downturns in business, to capitalize on opportunities for expansion and modernization, and to provide a secure source of income.income and to provide a predictable return to its owners.  For these reasons, the Company prefers a conservative approach to investing rather than taking greater risk for possible rapid growth.  The Company balances market volatility by using both fixed income and equity investments in managing its reserve funds. Any equity security is subject to price fluctuation;fluctuation, however, the stocks held by the Company have historically had relatively low volatility. The Company has long been invested in a Government National Mortgage Association (“Ginnie Mae”) fund and domestically domiciled stocks with the perceived potential of appreciation, primarily telecommunications stocks. The Company considers that this diversity also provides a measure of safety of principal.

With the exception of 13,120 shares of Verizon, the equity securitiescommon stocks in our portfolio have come from spin-offs, mergers and acquisitions of AT&T and United Telecommunications (now Sprint) purchased in 1979 and 1984 and from one insurance company acquired at no cost when thatthe company demutualized. While not all stocks in the portfolio are domestic American companies any longer, since the original purchases at an approximate cost of $630,000, we have received approximately $967,000 from mergers and sales and over $5,000,000$5,300,000 in dividends, the majority of which received favorablewere tax treatmentfavored in the form of a dividends received deductionexclusion from federal taxable income. While the deductionexclusion continues into this fiscal year the Tax Cuts and Jobs Act (“Tax Act”) reduces the percent deductible.excludable. These equitymarketable securities are carried at their fair value on the last day of each reporting period. The fair value of the securities on March 31,September 29, 2019 was approximately $4,965,000 and on July 1, 2018$5.5 million. The value of securities held at June 30, 2019 was approximately $4,817,000.$5.1 million. Effective July 2, 2018 these securities were reclassified to current assets from long-term marketable securities.

The Company’s original investment in the Vanguard GNMA bond fund began in 1988 with purchases of shares in the fund totaling approximately $1,400,000.$1,400,000 and has been viewed as a reserve source of income as stated above. The fund is carried at fair value on the last day of the reporting period. At March 31,September 29, 2019, the value was approximately $1,893,000 and at July 1, 2018,$952,000. In August 2019 approximately $1,000,000 of the valuefund was $1,825,000.redeemed to meet the August 2019 dividend payment.

Short-term investments including any Certificates of Deposits, Treasury Bills and cash and cash equivalents totaled $3,012,000$1,258,278 at the end of the fiscal third quarter ofSeptember 29, 2019 compared to $1,341,000$703,093 at July 1, 2018.June 30, 2019.

The Company’s position in all the above investments is a source of capital for possible expansion. Potential volatility in the trading prices of the marketable securities held by the Company could impact the Company’s opportunities for expansion. The Board of Directors reviews the portfolio weekly and any use of this reserve at its quarterly meetings.

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

In

During the nine-monththree-month period ended March 31,September 29, 2019, the Company expended approximately $389,000$203,000 for the purchase of building, entertainment and restaurant equipment. The Company has no long-term debt and has nocurrent plans to obtain additional third party funding as cash and cash flows are sufficient to finance all contemplated purchases and to meet short-term purchase commitments and operating lease commitments.

The nine-monthfirst quarter decreases in the categories of Prepaid expenses and other and of Accounts Payable and Accrued Expenses arewere attributable primarily due to seasonalthe timing of the payments including compensation, insurance and taxes and for contributions to benefit plans.

Current liabilities generally increase during the first three quarters of the fiscal year as bowling leagues deposit prize fund monies with the Company throughout the league season. These funds are returned to the leagues at the end of the bowling season, generally in the fourth quarter. At March 31,September 29, 2019, league deposits of approximately $1,946,000$766,000 were included in the current liabilities category.

Cash flow provided by operating activities in the thirty-ninethirteen weeks ended March 31,September 29, 2019 was $4,744,000$661,000 which, along with cash on hand and the redemption of a portion of the GNMA fund, mentioned above, was sufficient to meet day-to-day cash needs and pay dividends. Cash dividends of approximately $903,000,$903,170, or $.175 per share, were paid to shareholders during the quarterthree-month period ended March 31, 2019, and the nine months total was approximately $2,684,000 or $.52 per share.September 29, 2019.  In MarchSeptember 2019, the Company declared a regular quarterly dividend of $.175 per share, payable May 15, 2019 to shareholders of record on April 18,November 14, 2019.  The economic climate is part of the consideration at the Directors’ quarterly reviews of future estimates of cash flows. The Board of Directors decides the amount and timing of any dividend at its quarterly meeting based on its appraisal of the state and trends of the business and estimate of future opportunities at such time.

OVERVIEWOverview

The Company is in the entertainment business which, by its nature, has ups and downs based on consumer tastes and preferences.  Generally, promotional and open play bowling which depends on the public’s discretionary budget dollars and their choices, accounts for more than half of our business. While bowling has the advantage of being an entertainment that is close to home and relatively inexpensive, new forms of sports and entertainment are offered to the public continually creating challenges, but our response is helped by having the resources to be able to promote the sport. Weather is also a factor, especially for casual bowlers.  While extreme heat or rainy weather prompt people to look for indoor activities, heavy snow storms can keep customers from reaching the centers. Postponed league games are made up later in the season, but lost open play income is never recovered.  The Company operates primarily in the Washington, DC area where its business is vulnerable to sequestration or other downsizing of the federal government. The Company currently operates 18 bowling centers, 16 of which are owned by the Company and 2 of which are leased centers. In March 2019, the Company elected not to renew the lease for its bowling center in Manassas due to the performance at the center. The lease terminates August 31, 2019.

RESULTS OF OPERATIONS

The following tables settable sets forth the items in our consolidated summary of operations for the fiscal quarters and year-to-date periods ended March 31,September 29, 2019 and April 1,September 30, 2018, and the dollar and percentage changes therein.

Net earnings were $1,806,243 or $.35 per share forFor the thirteen week period and $2,804,066,ended September 29, 2019, net earnings were $285,325, or $.54$.06 per share and for the thirty-nine weekprior year period ended March 31, 2019 and included increases of $367,820 and $173,985 in the fair value of marketable investment securities, respectively, attributable to the change in accounting standards effective July 2, 2018.  

For the thirteen-week and thirty-nine week periods ended April 1,September 30, 2018 net earnings were $1,602,799$440,000 or $.31$.09 per share and $3,234,725 or $.63 per share, respectively, helped by a one time required reporting adjustment to the Company’s deferred tax account due to the Tax Act.share. Eighteen centerslocations were in operation in boththe first month of the current year quarter, before the Manassas closing mentioned above, and throughout the prior year quarters.

quarter. Expenses related to closing were approximately $104,000 in the quarter. The bowling business is seasonal and the first quarter which includes summer months is typically the slowest. Management believes that good weather and rain free weekends throughout much of the first quarter of fiscal 2020 contributed to a decline in open play bowling. The operating results for the fiscal 2019 periods2020 period included in this report are not necessarily indicative of results to be expected for the year.

Operating Revenues

Total operating revenues decreased $183,0005.8% or $316,000 to $7,443,000$5,125,000 in the most recentthirteen-week period ended September 29, 2019, compared to an increase of 3.3% or $177,000 to $5,441,000 in the three-month period ended September 30, 2018.  Bowling and other revenue decreased $223,000 or 5.8% in the current year fiscal quarter compared to an increase of $135,000 to $7,626,000 in the three-month period ended April 1, 2018.  The current fiscal nine month period operating revenues were down $46,000 versus an increase of $468,000$85,000 or 2.3% in the comparable nine month period aprior year ago.  Bowling and other revenue decreased $165,000 in the quarter and $155,000 year-to-date for the periods ended March 31, 2019 versus increases of $124,000 in the quarter and $401,000 for the nine-month period ended April 1, 2018.

quarter. Food, beverage and merchandise sales decreased $18,000were down $93,000 or 0.8%5.8% in the current year quarter and were up $109,000compared to an increase of $92,000 or 1.9%6.0% in the nine-month period.prior year comparable quarter.  Cost of sales increased 3.1%decreased $39,000 in the fiscal three months and decreased 1.5% in the nine month periods ended March 31, 2019.current year three-month period.

Operating Expenses

Operating expenses increased $104,000$84,000 or 1.9% and $228,000 or 1.5%1.6% to $5,285,000 in the current three month and nine-month periods versus decreasesthree-month period ended September 29, 2019 compared to an increase of $45,000$133,000 or 0.8% and $136,000 or 0.9%, respectively,2.6% to $5,201,000 in the three and nine month periods last year.prior year quarter ended September 30, 2018.  Employee compensation and benefits forwere down $5,000 or 0.2% and up $57,000 or 2.1% in the fiscal first quarters of 2020 and 2019, third quarter were up $42,000 or 1.5% and $140,000 or 1.7% in the nine month period partially the result of increased overtime in the current tight labor market. In the comparable prior year quarter there was an increase of $19,000 or 0.7% and the nine month period ended April 1, 2018 showed an increase of $5,000 or 0.1%.respectively. Included in this category of expense are contributions to our two benefit plans, both of which are defined contribution plans. There is no additional obligation beyond the current year contribution.

Cost of bowling and other services increased $35,000 and $103,000$65,000 or 2.3%4.2% in both the three month and nine month periodsquarter ended March 31,September 29, 2019 respectively. In the prior year comparable three month and nine month periods the same category showed a decline of $12,000 or 0.8% andversus an increase of $23,000$69,000 or 0.5%, respectively. In4.7% in the thirty-nine weekscomparable quarter ended March 31, 2019, maintenanceSeptember 30, 2018. Maintenance and repair costs increased $38,000$15,000 or 7.5% and $11,000 or 5.6% primarily due to roof repairs and changeover to LED lighting in signs and parking lot lights. Advertising costs during the current year thirty-nine week periodand prior year quarters, respectively. Both the current and prior year periods included roof and building repairs at several locations. Advertising costs decreased $19,000 or 18.4% in the quarter ended March 31, 2019, were up $33,000 or 13.7% due to a social media campaign. For the fiscal nine-month period ended March 31, 2019 utilitySeptember 29, 2019.  Utility costs were down $22,000flat in the current period versus a decrease of $8,000 or 2.0 % primarily due to lower electric costs.2.0% in the prior year quarter. Supplies and services expenses were flat for the current nine month period.

Insurance expense excluding health insurance decreased less than 1.0%up $26,000 or 15.8% in part related to closing costs at Manassas in the current year-to-dateyear period versus an increase of 5.7%and were flat in last year’s comparablethe prior period.

Depreciation and amortization expense was up 1.0% in the current nine-monthincreased $3,000 or 1.3% period ended September 29, 2019 due to increased capital expenditurespurchases.

The quarter ended September 29, 2019 resulted in a net operating loss of $160,000 which includes approximately $104,000 in one-time expenses related to the closing of the Manassas location. Operating income was $240,000 in the prior year and down 14.0% in the prior year comparable period when a large group of assets became fully depreciated.

As a result of the above, the nine-month period of fiscal 2019 resulted in operating income of $3,220,603 compared to operating income of $3,495,024 in the prior year comparable nine-month period.

Interest,Dividend and OtherIncome

Interest, dividend and other income increased $5,000$1,000 to $106,000 in the fiscal 2019 nine-monththree month period and decreased $22,000 in the comparable 2018 year-to-date period, respectively.ended September 29, 2019.

Income TaxesIncome taxes

The Tax Act of December 2017 reduced the federal corporate tax rate from 34% to 21%. Taxes for both the fiscalcurrent year and prior year quarters ended September 29, 2019 periodsand September 30, 2018 reflect the reduced federal rate resulting in an effective tax rate of approximately 24%. In fiscal 2018’s comparable periods the provisions call for a blended tax rate for fiscal year companies resulting in an effective rate of approximately 30.5%. In addition the Tax Act required an adjustment to the Company’s deferred tax account in the second quarter of fiscal 2018 resulting in credits to income tax expense for both the quarter and nine month period. During the second quarter of the prior fiscal year the Company recorded provisional discrete tax benefits of $604,190 related to the Tax Act.  The resulting adjustment increased the prior year-to-date earnings per share by 11.7 centsrate.

CRITICALCRITICAL ACCOUNTING POLICIES

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

Management has identified accounting for the impairment of long-lived assets as a critical accounting policy due to the significance of the amounts included in the Company’s balance sheet under the caption of Land, Buildings and

Equipment.  The Company reviews long-lived assets whenever events or changes indicate that the carrying amount of an asset may not be recoverable.  In making such evaluations, the Company compares the expected future cash flows to the carrying amount of the assets.  An impairment loss equal to the difference between the assets’ fair value and carrying value is recognized when the estimated future cash flows are less than the carrying amount.

ITEM 4. CONTROLS AND PROCEDURES.

The Company’s Interim Chief Executive Officer and Chief Financial Officer has concluded that the Company’s disclosure controls and procedures are effective based on theher evaluation of such controls and procedures as of March 31,September 29, 2019. There was no change in the Company’s internal control over financial reporting identified in connection with the evaluation that occurred during the quarter ended March 31,September 29, 2019, that materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

BOWL AMERICA INCORPORATED AND SUBSIDIARIES

S.E.C. FORM 10-Q

PART II - OTHER INFORMATION

Item 6.  Exhibits.

SIGNATURES

Pursuant to the requirements of the Securities Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

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