UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934 FOR THE FISCAL YEAR ENDED JANUARY 31, 2003
OR
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934 FOR THE TRANSITION PERIOD FROM _______________ TO _______________
COMMISSION FILE NO. 000-31701
BOWLIN TRAVEL CENTERS, INC.
(Name of the registrant as specified in its charter)
NEVADA 85-0473277
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
150 LOUISIANA NE, ALBUQUERQUE, NM 87108
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 505-266-5985
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE EXCHANGE ACT:
Title of each class Name of each exchange on which registered
COMMON STOCK, $.001 PAR VALUE OTC.BB
- ------------------------------------ -----------------------------------------
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE EXCHANGE ACT:
NONE
- --------------------------------------------------------------------------------
(Title of class)
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 in response to Item
405 of Regulation S-K 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 amendment to this
Form 10-K [X]
The aggregate market value of the voting and non-voting common stock held by
non-affiliates of the registrant at July 31, 2002 was $2,612,712.
The number of shares of Common Stock, $.001 par value, outstanding as of
April 16, 2003: 4,583,348
FORWARD-LOOKING STATEMENTS
Certain statements in this Annual Report on Form 10-K constitute
forward-looking statements within the meaning of Section 21E of the Securities
Exchange Act of 1934, as amended, and should be read in conjunction with the
Consolidated Financial Statements of Bowlin Travel Centers, Inc., a Nevada
corporation (the "Company" or "Bowlin Travel Centers"). Such forward-looking
statements involve known and unknown risks, uncertainties and other factors that
could cause the Company's actual results to differ materially from those
contained in these forward-looking statements, including those set forth under
the heading "RISK FACTORS" under ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS and the risks and other factors
described elsewhere. The cautionary factors, risks and other factors presented
should not be construed as exhaustive. The Company assumes no obligation to
update these forward-looking statements to reflect actual results, changes in
assumptions or changes in other factors affecting such forward-looking
statements.
PART I
ITEM 1. BUSINESS
COMPANY OVERVIEW
The Company operates travel centers dedicated to serving the traveling
public in rural and smaller metropolitan areas of the Southwestern United
States. The Company's tradition of serving the public dates back to 1912, when
the founder, Claude M. Bowlin, started trading goods and services with Native
Americans in New Mexico. Bowlin Travel Centers currently operates eleven
full-service travel centers along interstate highways in Arizona and New Mexico.
The Company advertises its travel centers through a network of approximately 300
outdoor advertising display faces. The Company's travel centers offer brand name
food, gasoline and a variety of unique Southwestern merchandise to the traveling
public.
The Company was formed on August 8, 2000, as a wholly owned subsidiary
of Bowlin Outdoor Advertising and Travel Centers Incorporated ("Bowlin
Outdoor"). Pursuant to a Contribution Agreement, dated as of November 1, 2000,
Bowlin Outdoor contributed substantially all of the assets and liabilities
directly related to its travel centers business to Bowlin Travel Centers.
Prior to August 8, 2000 the Company's travel centers were owned and
operated as a business segment of Bowlin Outdoor. Bowlin Outdoor operated two
business segments; travel centers and outdoor advertising. Bowlin Outdoor's
common stock was traded on the American Stock Exchange and was a public
reporting company. On January 30, 2001, Bowlin Travel Centers, Inc. became an
independent company through a spin-off transaction whereby shares of Bowlin
Travel Centers, Inc. common stock were distributed to the shareholders of Bowlin
Outdoor.
RECENT DEVELOPMENTS
During the past fiscal year, approximately twelve acres of previously
undeveloped land in Alamogordo, New Mexico owned by the Company was sub-divided
into thirty-five approximately quarter-acre residential lots. The subdivision
includes paved roads, sidewalks, fencing, water, sewer and electricity. Two
manufactured homes have been purchased and installed and a realtor is listing
the property. The Company anticipates sales to begin soon and plans to sell the
lots over the next few years.
1
INDUSTRY OVERVIEW
The travel services industry in which the Company competes includes
convenience stores that may or may not offer gasoline, and fast food and
full-service restaurants located along rural interstate highways. The Company
believes that the current trend in the travel services industry is toward
strategic pairings at a single location of complementary products that are
noncompetitive, such as brand name gasoline and brand name fast food
restaurants. This concept, known as "co-branding," has recently seen greater
acceptance by both traditional operators and larger petroleum companies. The
travel services industry has also been characterized in recent periods by
consolidation or closure of smaller operators. The convenience store industry
includes both traditional operators that focus primarily on the sale of food and
beverages but also offer gasoline, and large petroleum companies that offer food
and beverages primarily to attract gasoline customers.
The restaurant segment of the travel services industry is highly
competitive, most notably in the areas of consistency of quality, variety,
price, location, speed of service and effectiveness of marketing. The major
chains are aggressively increasing market penetration by opening new
restaurants, including restaurants at "special sites" such as retail centers,
travel centers and gasoline outlets. Smaller quick-service restaurant chains and
franchise operations are focusing on brand and image enhancement and co-branding
strategies.
BUSINESS STRATEGY
The Company's business strategy is to capture a greater market share
of the interstate traveler market in Arizona and New Mexico by offering name
brand recognized food service operations and gasoline, and unique Southwestern
souvenirs and gifts, at a single location and at competitive prices delivered
with a high standard of service.
The Company's travel centers are strategically located along
well-traveled interstate highways in Arizona and New Mexico where there are
generally few gas stations, convenience stores or restaurants. Most of the
Company's travel centers offer food and beverages, ranging from drinks and snack
foods at some locations to full-service restaurants at others. The Company's
food service operations at five of the Company's eleven travel centers operate
under the Dairy Queen/Brazier or Dairy Queen trade names.
The Company's travel centers offer brand name gasoline such as CITGO,
EXXON, and Diamond Shamrock. The Company is an authorized distributor of CITGO
and EXXON petroleum products. Three of the Company's locations are EXXON
stations and six of its locations are CITGO stations. One travel center is
Chevron and one travel center is Diamond Shamrock.
The Company's billboard advertising for its travel centers emphasizes
the wide range of unique Southwestern souvenirs and gifts available at the
travel centers, as well as the availability of gasoline and food. Merchandise at
each of the Company's stores is offered at prices intended to suit the budgets
and tastes of a diverse traveling population. The merchandise ranges from
inexpensive Southwestern gifts and souvenirs to unique handcrafted jewelry,
rugs, pottery, and other gifts.
GROWTH STRATEGY
TRAVEL CENTERS
o The Company is committed to expanding its travel center operations through
internal development.
2
o The Company believes that the co-branding concept implemented at its travel
centers has resulted in increased revenues, and intends to pursue
opportunities to acquire rights to additional brand name products.
o The Company intends to continue to offer high quality brand name food and
products in a clean, safe environment designed to appeal to travelers on
interstate highways.
o The Company intends to continue to increase sales at existing locations
through ongoing renovation and upgrading of facilities, including gasoline
sales by focusing on the marketing of CITGO and EXXON gasoline brands
through its travel center outlets.
GASOLINE WHOLESALING
The Company has been wholesaling gasoline since 1997. Since 1997,
revenues from wholesaling gasoline have accounted for an average of
approximately 6.5% of gross revenues. Other than purchasing gas for retail sales
through its travel centers, the Company currently wholesales gasoline to only
two customers. The Company intends to maintain its current level of gasoline
wholesaling and does not anticipate expanding or actively marketing its
wholesaling business. See "Business Operations - Gasoline Wholesaling".
BUSINESS OPERATIONS
The Company sells food, gasoline and merchandise through its eleven
travel centers located along two interstate highways (I-10 and I-40) in Arizona
and New Mexico. These are key highways for travel to numerous tourist and
recreational destinations as well as arteries for regional traffic among major
Southwestern cities. All of the Company's travel centers are open every day of
the year except Christmas.
Each of the Company's travel centers maintains a distinct,
theme-oriented atmosphere. In addition to the Southwestern merchandise it
purchases from Native American tribes, the Company also imports approximately
650 items from Mexico, including handmade blankets, earthen pottery and wood
items. Additional goods, novelties and imprinted merchandise are imported from
several Pacific Rim countries. The Company has long-standing relationships with
many of its vendors and suppliers. While the Company has no formal agreements
with any of its vendors and suppliers of Southwestern merchandise and items from
Mexico, the Company believes that there are adequate resources outside of those
that are regularly used so that the Company could continue to provide these
items even if it were unable to use its regular sources.
The Company sells food under the Dairy Queen and Dairy Queen/Brazier
brand names. The Company's terms of its agreements with Dairy Queen obligate the
Company to pay a franchise royalty and in some instances a promotion fee, each
equal to a percentage of gross sales revenues from products sold, as well as
comply with certain provisions governing the operation of the franchised stores.
The Company is obligated to pay Dairy Queen 4% of its sales of their products.
The Company currently operates five Dairy Queens at its travel centers.
It has individual franchise agreements for each Dairy Queen operated at the
travel centers. None of these agreements are exclusive nor do they prevent the
Company from entering into agreements with other food franchisors. Several of
the agreements have different termination provisions and are effective for
different terms. Under three of the Dairy Queen agreements, the term continues
until the Company elects to terminate it with 60 days prior written notice, or
if the Company or Dairy Queen elect to terminate the agreement because the other
has breached the agreement and has not cured that breach within 14 days of
3
notice of the breach. The other two Dairy Queen agreements are for specific
terms. One of those Dairy Queen agreements, entered into February 1, 1984, is
for a term of 25 years and the other, entered into on November 18, 1986, is for
a term of 20 years. The Company may not terminate either of these agreements
unless it gives notice to Dairy Queen that they are in breach of the agreement
and Dairy Queen has not cured that breach within thirty days of our notice.
Dairy Queen may terminate either of these agreements if they deliver notice to
the Company that it is in breach of the agreement and it does not cure that
breach within 14 days of that notice.
The Company continuously monitors and upgrades its travel center
facilities to maintain a high level of comfort, quality and appearance. Periodic
improvements typically include new awnings and facings, new signage and enhanced
lighting, furnishings, buildings and parking lot improvements.
The Company is an authorized CITGO and EXXON distributor. The Company
sells CITGO gasoline at six travel centers, and EXXON gasoline at three travel
centers. At two travel centers the Company sells Chevron and Shamrock gasoline.
The fact that the Company is an authorized CITGO and EXXON distributor
has significance in the Company's industry. As licensed distributors for CITGO
and EXXON, the Company purchases gasoline directly from CITGO and EXXON as
direct marketers and at the lowest wholesale prices they offer. Prior to
becoming a licensed distributor, the Company purchased gasoline through other
distributors, paying a distributor's markup price. This required the Company to
negotiate and enter into agreements with other distributors to try to purchase
gasoline at the lowest possible price. The CITGO and EXXON distribution
agreement allows the Company to streamline its gasoline supply arrangements and
take advantage of volume-driven pricing by consolidating purchases from these
suppliers.
The CITGO distribution agreement has an initial three-year term
beginning February 1, 2001 and expiring January 31, 2004, and automatically
renews for a three-year term through 2007. The EXXON distribution agreement has
a three-year term beginning April 1, 2002 and expiring March 31, 2005. CITGO's
and EXXON's ability to terminate or refuse to renew the agreement is subject to
the occurrence of certain events set forth in the Petroleum Marketing Practices
Act, which includes bankruptcy, or breach of the agreement, or termination by
CITGO or EXXON of its petroleum marketing activities in the Company's
distribution area. CITGO and EXXON may terminate or refuse to renew these
agreements only if it terminates or refuses to renew the agreement in compliance
with the Petroleum Marketing Practices Act.
The Company's agreements with CITGO and EXXON do not prohibit it from
entering into similar arrangements with other petroleum companies. The terms of
the distribution agreements require the Company to purchase certain monthly
minimum quantities of gasoline during the term of the agreement, which includes
gasoline purchased for sale at its travel centers. The amount of required
gasoline purchase ranges from a low of 84,000 gallons to a high of 306,000
gallons per month. The Company determines the amount of gasoline it will
purchase under the agreements based on what it believes its needs will be for
gasoline, including seasonal demands. These determinations are based on
historical sales and internal forecasts. Since the effective date of the CITGO
distribution agreement, purchases of CITGO products have not met the minimum
quantities. Since the effective date of the EXXON agreement, purchases have not
met the minimum quantities. Additionally, the minimum quantities can be
increased or decreased, as applicable, to accommodate additional travel centers,
or losses of travel centers.
In addition to the requirement to purchase minimum amounts under the
CITGO and EXXON distribution agreements, the Company is also required to pay a
processing fee of approximately 3% of the value of the sale for purchases of
gasoline made by customers using a credit card.
4
GASOLINE WHOLESALING
The Company currently wholesales gasoline to only two customers. Over
the past five years, wholesaling of gasoline has accounted for, on average,
approximately 7.0% of overall revenues. The Company intends to maintain its
current level of gasoline wholesaling and does not anticipate expanding or
actively marketing its wholesaling business. Below is a table that shows the
revenues generated from gasoline wholesaling, total revenues for the periods
reflected, and the percentage total of overall revenues attributable to gasoline
wholesaling.
Gasoline wholesaling revenues as a percentage of Gross Revenues (unaudited):
FISCAL YEAR ENDED GROSS REVENUES REVENUE FROM GASOLINE PERCENTAGE OF GROSS
JANUARY 31, WHOLESALING REVENUES ATTRIBUTABLE TO
GASOLINE WHOLESALING
- ----------------- -------------- --------------------- ------------------------
1999 $23,803,000 $1,229,000 5.16
2000 $27,242,000 $1,672,000 6.14
2001 $27,164,000 $1,802,000 6.63
2002 $23,649,000 $2,126,000 8.99
2003 $22,603,000 $1,789,000 7.91
The Company does not derive a material amount of net revenue from the
wholesaling of gasoline. The cost of goods sold as a percentage of gross
revenues for gasoline wholesaling is approximately 96%.
COMPETITION
The Company faces competition at its travel centers from quick-service
and full-service restaurants, convenience stores, gift shops and, to some
extent, from truck stops located along interstate highways in Arizona and New
Mexico. Large petroleum companies operate some of the travel centers that the
Company competes with, while many others are small independently owned
operations that do not offer brand name food service or gasoline. Giant
Industries, Inc., a refiner and marketer of petroleum products, operates two
travel centers, one in Arizona and one in New Mexico, which are high volume
diesel fueling and large truck repair facilities that also include small
shopping malls, full-service restaurants, convenience stores, fast food
restaurants and gift shops. The Company's principal competition from truck stops
includes Love's Country Stores, Inc., Petro Corporation and Flying J. Many
convenience stores are operated by large, national chains that are substantially
larger, better capitalized and have greater name recognition and access to
greater financial and other resources than the Company. Although the Company
faces substantial competition, the Company believes that few of its competitors
offer the same breadth of products and services dedicated to the traveling
public that the Company offers.
EMPLOYEES
As of January 31, 2003, the Company had approximately 129 full-time and
39 part-time employees; 46 were located in Arizona, 122 were located in New
Mexico. None of the Company's employees are covered by a collective bargaining
agreement and the Company believes that relations with its employees are good.
5
REGULATION
The Company's operations are subject to regulation for dispensing
gasoline, maintaining mobile homes, dispensing food, sales of fireworks, sales
of cactus, operating outdoor advertising signs, waste disposal and air quality
control. The Company also must maintain registration of company vehicles,
general business licenses and corporate licenses.
Each food service operation is subject to licensing and regulation by a
number of governmental authorities relating to health, safety, cleanliness and
food handling. The Company's food service operations are also subject to Federal
and state laws governing such matters as working conditions, overtime, tip
credits and minimum wages. The Company believes that operations at its travel
centers comply in all material respects with applicable licensing and regulatory
requirements; however, future changes in existing regulations or the adoption of
additional regulations could result in material increases in operating costs.
Travel center operations are also subject to extensive laws and
regulations governing the sale of tobacco, and in New Mexico travel centers, the
sale of fireworks. Such regulations include certain mandatory licensing
procedures and ongoing compliance measures, as well as special sales tax
measures. These regulations are subject to change and future modifications may
result in decreased revenues or profit margins at the Company's travel centers
as a result of such changes.
Nearly all licenses and registrations are subject to renewal each year.
The Company is not aware of any reason it would be unable to renew any of its
licenses and registrations. The Company estimates that the total cost spent on
an annual basis for all licenses and registrations is less than $15,000.
Historically, ongoing costs have been incurred to comply with Federal,
state and local environmental laws and regulations, primarily relating to
underground storage tanks. These costs include assessment, compliance, and
remediation costs, as well as certain ongoing capital expenditures relating to
gasoline dispensing operations. In general, the Company is responsible for the
first $10,000 to clean up a previous underground storage tank site. The
remaining costs are generally reimbursable by the State.
The Company anticipates that the regulating agencies will develop
regulations for above ground storage of fuel and anticipate that because of its
expenditures and compliance, ongoing costs for compliance should not be
material. Over the next twelve months, the Company anticipates spending less
than $100,000 to complete any remaining clean up from underground storage tank
sites. Of this amount, the Company anticipates being reimbursed for all but
approximately $10,000. The Company does not anticipate any other material costs
for regulatory compliance during the next twelve months.
TRADEMARKS
The Company operates its travel centers under a number of its own
trademarks such as The Thing, Trails West, Butterfield Station and Bowlin's
Running Indian, as well as certain trademarks owned by third parties and
licensed to the Company, such as the Dairy Queen, Dairy Queen/Brazier, CITGO and
EXXON trademarks. The Company's right to use the trademarks Dairy Queen, Dairy
Queen/Brazier, CITGO and EXXON are derived from the agreements entered into with
these companies, and these rights expire when those agreements expire or are
terminated. The Company has a Federal trademark for "BOWLIN" that is effective
through 2008. All other rights to trade names that the Company uses in its
operations are protected through common law or state rights granted through a
registration process. The Company believes that its trademark rights will not
materially limit competition with its travel centers. The Company also believes
that, other than its Federal trademark for "BOWLIN", none of the trademarks
6
owned are material to overall business; however, the loss of one or more of our
licensed trademarks could have an adverse effect.
TRADEMARK / TRADE NAME WHERE REGISTERED EXPIRATION OF REGISTRATION
- ---------------------- ------------------------ --------------------------
BOWLIN United States Patent and
Trademark Office October 27, 2008
Trails West New Mexico July 29, 2004
Bowlin's Running Indian New Mexico March 30, 2004
Bowlin Travel Centers Arizona April 26, 2006
ITEM 2. PROPERTIES
As of January 31, 2003, the Company operated eleven travel centers. The
Company owns the real estate and improvements where seven of its travel centers
are located, all of which are subject to mortgages. Four of the Company's
existing travel centers are located on real estate that the Company leases from
various third parties. These leases have terms ranging from five to thirty-five
years, assuming exercise by the Company of all renewal options available under
certain leases.
The Company's principal executive offices occupy approximately 20,000
square feet of space owned by the Company in Albuquerque, New Mexico. The
Company's principal office space is subject to a mortgage, which matures on
November 1, 2005, and the principal balance accrues interest at the bank's prime
rate (4.25% at January 31, 2003). The Company owns a central warehouse and
distribution facility occupying 27,000 square feet in Las Cruces, New Mexico.
The Company believes that its headquarters and warehouse facilities are adequate
for its operations for the foreseeable future.
ITEM 3. LEGAL PROCEEDINGS
The Company from time to time may be involved in litigation in the
ordinary course of business, including disputes involving employment claims and
construction matters. The Company is not currently a party to any lawsuit or
proceeding which, in the opinion of management, is likely to have a material
adverse effect on the Company's business operations or financial condition.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
On December 16, 2002, the Company held a special stockholders meeting
to elect three members to the Board of Directors. David B. Raybould, Nina J.
Pratz and Kim D. Stake were elected to the Board of Directors at the December
16, 2002 special meeting with 3,000,186 votes for all three nominees, no votes
against and no votes withheld. Michael L. Bowlin and William J. McCabe continued
serving on the Board of Directors. There were no other matters voted on at the
special meeting.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
As of January 31, 2003, there were 4,583,348 shares of common stock of
Bowlin Travel Centers outstanding. There are no outstanding options or warrants
to purchase, or securities convertible into shares of common stock of Bowlin
Travel Centers. Shares of the common stock of the Company are traded on the OTC
Bulletin Board under the symbol "BWTL". On April 16, 2003, there were
approximately 28 holders of record of the Company's common stock. The following
table sets forth the high and low sales prices for the Company's common stock
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for each quarter during the past two fiscal years. These over-the-counter market
quotations reflect inter-dealer prices, without retail mark-up, mark-down or
commission, and may not necessarily represent actual transactions.
Fiscal Year Ended
January 31, 2002 HIGH LOW
----------------- ---- ---
Fiscal Quarter Ended 4/30 $ 1.25 $ 1.00
Fiscal Quarter Ended 7/31 $ 2.70 $ 1.50
Fiscal Quarter Ended 10/31 $ 2.05 $ 1.09
Fiscal Quarter Ended 1/31 $ 1.50 $ 1.15
Fiscal Year Ended
January 31, 2003 HIGH LOW
----------------- ---- ---
Fiscal Quarter Ended 4/30 $ 1.75 $ 1.35
Fiscal Quarter Ended 7/31 $ 1.80 $ 1.50
Fiscal Quarter Ended 10/31 $ 1.85 $ 1.55
Fiscal Quarter Ended 1/31 $ 1.61 $ 1.26
The Company is authorized to issue up to 10,000,000 shares of common
stock, par value $.001 per share, and up to 1,000,000 shares of preferred stock,
par value $.001. Holders of shares of common stock are entitled to one vote per
share on all matters to be voted on by stockholders and do not have cumulative
voting rights. Subject to the rights of holders of outstanding shares of
preferred stock, if any, the holders of common stock are entitled to receive
such dividends, if any, as may be declared from time to time by the Board of
Directors in its discretion from funds legally available therefor, and upon
liquidation, dissolution, or winding up are entitled to receive all assets
available for distribution to the stockholders. The common stock has no
preemptive or other subscription rights, and there are no conversion rights or
redemption or sinking fund provisions with respect to such shares. All of the
outstanding shares of common stock are fully paid and nonassessable. Since
becoming a publicly traded company, Bowlin Travel Centers has not paid dividends
and has no intention of paying cash dividends in the foreseeable future.
In the Company's Articles of Incorporation, pursuant to Nevada Revised
Statues Section 78.378, the Company elected not to be governed by the provisions
of Nevada Revised Statutes Section 78.378 to 78.3793, inclusive. Pursuant to
Nevada Revised Statutes Section 78.434, the Company also elected not to be
governed by the provisions of Nevada Revised Statutes Sections 78.411 to 78.444,
inclusive. These statutes are sometimes referred to as "interested stockholder"
statutes and their purpose is to limit the way in which a stockholder may effect
a business combination with the corporation without board or stockholder
approval. Because the Company has elected not to be governed by these statutes,
a person or entity could attempt a takeover, or attempt to acquire a controlling
interest of, and effect a business combination with, Bowlin Travel Centers
without the restrictions of these Nevada Revised Statutes provisions. See, also,
"Risk Factors - OUR CURRENT CAPITALIZATION COULD DELAY, DEFER OR PREVENT A
CHANGE OF CONTROL".
ITEM 6. SELECTED FINANCIAL DATA
The selected consolidated financial data presented below are derived
from the audited financial statements of the Company for the five years ended
January 31, 2003. The data presented below should be read in conjunction with
8
the audited consolidated financial statements, related notes and Management's
Discussion and Analysis of Financial Condition and Results of Operations
included herein.
Because Bowlin Travel Centers did not operate independently of Bowlin
Outdoor, and was a segment of the business operations of Bowlin Outdoor during
the periods prior to the fiscal year ended January 31, 2002, it might have
recorded different results had it been operated independently of Bowlin Outdoor.
Therefore, the financial information presented below is not necessarily
indicative of the results of operations or financial position that would have
resulted if Bowlin Travel Centers had been a separate, stand-alone business
during the periods shown, or of its future performance as a separate,
stand-alone business.
SELECTED FINANACIAL DATA
------------------------------------------------------------------------
YEARS ENDED JANUARY 31,*
------------------------------------------------------------------------
2003 2002 2001 2000 1999
------------------------------------------------------------------------
STATEMENT OF INCOME DATA:
Net sales $ 22,183,398 $ 23,224,102 $ 26,765,264 $ 26,855,781 $23,519,909
============ ============ ============ ============= ===========
Net income $ 507,258 $ 173,234 $ 298,812 $ 487,366 $ 253,672
============ ============ ============ ============= ===========
Earnings per share $ 0.11 $ 0.04 $ 0.07 $ 0.11 $ 0.06
============ ============ ============ ============= ===========
BALANCE SHEET DATA (at end of
period):
Total assets $ 16,383,388 $ 16,532,141 $ 18,527,507 $ 16,990,676 $16,163,671
============ ============ ============ ============= ===========
Long-term debt, including current
maturities $ 4,046,640 $ 4,684,334 $ 5,940,469 $ 6,723,555 $ 6,769,025
============ ============ ============ ============= ===========
*The Company did not operate independently during fiscal periods 2001, 2000 and 1999.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
OVERVIEW
The following is a discussion of the consolidated financial condition
and results of operations of the Company as of and for the three fiscal years
ended January 31, 2003, 2002 and 2001. This discussion should be read in
conjunction with the Financial Statements of the Company and the related notes
included elsewhere in this Form 10-K. References to specific years refer to the
Company's fiscal year ending January 31 of such year.
The forward-looking statements included in Management's Discussion and
Analysis of Financial Condition and Results of Operations reflect management's
best judgement based on factors currently known and involve risks and
uncertainties. Actual results could differ materially from those anticipated in
these forward-looking statements as a result of a number of factors, including
but not limited to, those discussed.
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FISCAL YEAR ENDED JANUARY 31, 2003 (FISCAL 2003) COMPARED TO FISCAL YEAR ENDED
JANUARY 31, 2002 (FISCAL 2002)
Gross sales at the Company's travel centers decreased 4.4% to $22.603
million for fiscal 2003, from $23.649 million for fiscal 2002. Merchandise sales
increased 5.6% to $9.750 million for fiscal 2003, from $9.236 million for fiscal
2002. The increase is primarily due to new sales incentive programs in the
current fiscal year as well as more efficient purchasing and turns on inventory.
Gasoline sales decreased 12.0% to $9.058 million for fiscal 2003, from $10.291
million for fiscal 2002. The decrease is primarily due to a decrease in gasoline
gallon sales as a result of a general decline in highway travel for fiscal 2003
compared to fiscal 2002. Restaurant sales increased 0.5% to $2.006 million for
fiscal 2003, from $1.997 million for fiscal 2002. The increase is primarily due
new sales incentive programs in the current fiscal year as well as additional
supervisory support dedicated to the restaurants. Wholesale gasoline sales
decreased 15.8% to $1.789 million for fiscal 2003, from $2.125 million for
fiscal 2002 due to a decrease in gasoline gallon sales as a result of a general
decline in highway travel for fiscal compared to fiscal 2002 as well as a
discontinued wholesale location occurring during fiscal 2003.
Cost of goods sold for the travel centers decreased 10.3% to $14.333
million for fiscal 2003, from $15.974 million for fiscal 2002. Merchandise cost
of goods decreased 1.1% to $3.897 million for fiscal 2003, from $3.943 million
for fiscal 2002. The decrease is primarily due to the new sales incentive
programs in the current fiscal year, improved purchase pricing as well as
maintaining mark-ups. Gasoline cost of goods decreased 13.1% to $8.157 million
for fiscal 2003, from $9.391 million for fiscal 2002. The decrease directly
corresponds to the decrease in gasoline sales. Restaurant cost of goods
decreased 8.0% to $530,000 for fiscal 2003, from $576,000 for fiscal 2002. The
decrease is primarily due to better inventory control. Wholesale gasoline cost
of goods decreased 15.3% to $1.749 million in fiscal 2003, from $2.064 million
for fiscal 2002 which directly corresponds to the decrease in wholesale gasoline
sales. Cost of goods sold as a percentage of gross revenues improved for fiscal
2003 is 63.4%, compared to 67.5% for fiscal 2002.
Gross profit for the travel centers increased 8.3% to $7.851 million
for fiscal 2003 from $7.250 million for fiscal 2002. The increase is primarily
due to the decrease in cost of goods sold due to new sales incentive programs
present in the current fiscal year.
General and administrative expenses for travel centers consist of
salaries, bonuses and commissions for travel center personnel, property costs
and repairs and maintenance. General and administrative expenses also include
executive and administrative compensation and benefits, investor relations and
accounting and legal fees. General and administrative expenses for the travel
centers increased 4.3% to $6.329 million for fiscal 2003, from $6.070 million
for fiscal 2002. The increase is primarily due to bonuses related to the new
sales incentive programs present in the current fiscal year. The increase is
also due to the increases in insurance, rents and leases and divisional
allocation of administrative support of the retail locations.
Depreciation and amortization expenses decreased by 2.3% to $735,000
for fiscal 2003, from $752,000 for fiscal 2002. The decrease is primarily
associated with assets becoming fully depreciated.
The above factors contributed to an increase in travel centers
operating income of 83.9% to $787,000 for fiscal 2003, from $428,000 for fiscal
2002.
Other income (expense) includes interest income, gains and losses from
the sale of assets, rental income and interest expense. Interest income
decreased 20.9% to $106,000 in fiscal 2003, from $134,000 in fiscal 2002
10
primarily as a result of lower cash balances as well as lower interest rates.
Gains from the sale of assets decreased to $4,000 in fiscal 2003 from $35,000 in
fiscal in 2002. Miscellaneous income increased 566.7% to $40,000 in fiscal 2003,
from $6,000 in fiscal 2002. The increase is primarily due to a refund of excise
taxes in the second quarter of fiscal 2003. Rental income was $87,000 in fiscal
2003, compared to $86,000 in fiscal 2002. The Company leases available office
space at the Company's corporate headquarters. Interest expense decreased 45.5%
to $219,000 for fiscal 2003, from $402,000 for fiscal 2002. The decrease is
primarily attributable to lower interest rates as well as lower debt balances.
Income before income taxes increased 178.5% to $805,000 for fiscal
2003, from $290,000 for fiscal 2002. The increase is primarily due to the
decrease in cost of goods sold, an increase in miscellaneous income and a
decrease in interest expense partially offset by the increase in general and
administrative expenses. As a percentage of gross revenues, income before income
taxes increased to 3.6% for the fiscal ended 2003, from 1.2% for fiscal 2002.
Income taxes increased to $298,000 for fiscal 2003, compared to
$116,000 for fiscal 2002, as a result of higher pre-tax income. The effective
tax rate for fiscal 2003 was 37.0%, compared to 40.0% for fiscal 2002.
The foregoing factors contributed to the Company's increase in net
income for fiscal 2003 to $507,000, compared to $173,000 for fiscal 2002.
FISCAL YEAR ENDED JANUARY 31, 2002 (FISCAL 2002) COMPARED TO FISCAL YEAR ENDED
JANUARY 31, 2001 (FISCAL 2001)
Gross sales at the Company's travel centers decreased 12.9% to $23.649
million for fiscal 2002, from $27.164 million for fiscal 2001. Merchandise sales
decreased 3.2% to $9.236 million for fiscal 2002, from $9.541 million for fiscal
2001. Gasoline sales decreased 23.0% to $10.291 million for fiscal 2002, from
$13.360 million for fiscal 2001. Restaurant sales decreased 18.9% to $1.997
million for fiscal 2002, from $2.461 million for fiscal 2001. The decreases are
primarily due to a decrease in gasoline sales as a result of a general decline
in highway travel. In addition, the decrease in merchandise, gas and restaurant
sales were due to the divestiture of two travel centers during the first quarter
of fiscal year 2002 and two travel centers during fiscal year 2001. Wholesale
gasoline sales increased 17.9% to $2.125 million for fiscal 2002, from $1.802
million for fiscal 2001 due to an additional wholesale location.
Cost of goods sold for the travel centers decreased 14.8% to $15.974
million for fiscal 2002, from $18.749 million for fiscal 2001. Merchandise cost
of goods decreased 5.8% to $3.943 for fiscal 2002, from $4.184 for fiscal 2001.
Gasoline cost of goods decreased 22.7% to $9.391 for fiscal 2002, from $12.142
for fiscal 2001. Restaurant cost of goods decreased 15.2% to $576,000 for fiscal
2002, from $679,000 for fiscal 2001. The decreases are attributable to the
decrease in gasoline sales impacted by a general decline in highway travel as
well as the divestiture of two travel centers in the first quarter of fiscal
2002 and two travel centers in fiscal 2001. Wholesale gasoline cost of goods
increased 18.3% to $2.064 million in fiscal 2002, from $1.744 million for fiscal
2001 due to an additional wholesale location. Cost of goods sold as a percentage
of gross revenues for fiscal 2002 was 67.5% compared to 69.0% for fiscal 2001.
Gross profit for the travel centers decreased 9.6% to $7.250 million
for fiscal 2002 from $8.016 million for fiscal 2001. Lower volume of gasoline
gallons negatively impacted gasoline sales as well as the divestiture of two
travel centers in the first quarter of fiscal 2002 and two travel centers in
fiscal 2001.
11
General and administrative expenses for travel centers consist of
salaries, bonuses and commissions for travel center personnel, property costs
and repairs and maintenance. General and administrative expenses also include
executive and administrative compensation and benefits, investor relations and
accounting and legal fees. General and administrative expenses for the travel
centers decreased 10.0% to $6.070 million for fiscal 2002, from $6.742 million
for fiscal 2001. The decrease is primarily due to downsizing related to the
spin-off transaction as well as the divestiture of two travel centers in the
first quarter of fiscal 2002 and two travel centers in fiscal 2001. The decrease
is also due to the reduction of salaries and the related benefits and taxes, as
well as rents and leases due to the sale one of the Company's travel center
locations in the first quarter of fiscal 2002.
Depreciation and amortization expenses decreased by 3.5% to $752,000
for fiscal 2002, from $779,000 for fiscal 2001.
Prior to January 31, 2001, the Company and the Company's former parent,
Bowlin Outdoor Advertising & Travel Centers, Incorporated (BOATC) operated under
a management services agreement pursuant to which the Company provided
management, corporate general and administrative services to BOATC and for which
BOATC paid the Company a management fee. Management fee income consisted of
reimbursements for certain corporate general and administrative functions
performed on behalf of BOATC including treasury, accounting tax, human
resources, and other support services. The management service agreement was
terminated on January 31, 2001 when BOATC merged with Lamar Advertising Company
and therefore, no management fee income was earned by the Company in fiscal
2002.
The above factors contributed to a decrease in travel centers operating
income of 39.4% to $429,000 for fiscal 2002, from $708,000 for fiscal 2001.
Other income (expense) includes interest income, gains and losses from
the sale of assets, rental income and interest expense. Interest income
decreased 26.0% to $134,000 in fiscal 2002, from $181,000 in fiscal 2001
primarily as a result of lower cash balances as well as lower interest rates.
Gains from the sale of assets decreased to $35,000 in fiscal 2002 from $267,000
in fiscal in 2001 primarily due to the sale of one of the Company's travel
centers in fiscal 2001 and the sales of certain other assets. Rental income was
$86,000 in fiscal 2002 as a result of leases for available office space at the
Company's corporate headquarters. There was no rental income in fiscal 2001.
Interest expense decreased 35.8% to $402,000 for fiscal 2002, from $626,000 for
fiscal 2001. The decrease is primarily attributable to lower interest rates as
well as lower debt balances.
Income before income taxes decreased 45.3% to $290,000 for fiscal 2002,
from $530,000 for fiscal 2001 primarily due to the management fee income of
$213,000 in fiscal 2001 not present in fiscal 2002 as well as the gain on sale
of assets of $35,000 in fiscal 2002 compared to $267,000 in fiscal 2001. The
decrease in income before income taxes was partially offset by the decrease in
general and administrative expenses and rental income of $86,000 in fiscal 2002
not present in fiscal 2001. As a percentage of gross revenues, income before
income taxes decreased to 1.2% for the fiscal ended 2002, from 2.0% for fiscal
2001.
Income taxes decreased to $116,000 for fiscal 2002, compared to
$232,000 for fiscal 2001, as a result of lower pre-tax income. The effective tax
rate for fiscal 2002 was 40.0%, compared to 43.8% for fiscal 2001.
The foregoing factors contributed to the Company's decrease in net income for
fiscal 2002 to $173,000, compared to $299,000 for fiscal 2001.
12
LIQUIDITY AND CAPITAL RESOURCES
At January 31, 2003, the Company had working capital of $4.038 million
compared to working capital of $4.282 million at January 31, 2002. At January
31, 2003, the company had a current ratio of 3.1:1 compared to a current ratio
of 3.2:1 at January 31, 2002 ("current ratio" is the ratio of current assets to
current liabilities). The decrease in working capital is primarily due to
decreases in cash of $255,000 and accounts receivable of $159,000 partially
offset by an increase in inventory of $98,000 and a decrease in current
maturities of long-term debt of $62,000.
The net cash provided by operating activities was $1.281 million at
January 31, 2003, compared to $687,000 at January 31, 2002. During fiscal 2003,
there were increases in operating assets and liabilities of $51,000, a decrease
in depreciation of $17,000 and a decrease in gains on sale of property and
equipment, partially offset by a decrease in the provision for deferred income
taxes of $48,000.
Net cash used in investing activities was $898,000 at January 31, 2003,
compared to net cash used by investing activities of $803,000 at January 31,
2002. The increase was due primarily to an investment in real estate development
of $475,000 during fiscal year 2003 offset by decreases in the purchases of
property and equipment of $140,000. There was no real estate development at
January 31, 2002.
Net cash used in financing activities was $638,000 at January 31, 2003,
compared to net cash used by financing activities of $1.256 million at January
31, 2002. Payments on long-term debt were $723,000 at January 31, 2003 compared
to payments on long-term debt of $1,256,000 at January 31, 2002. Proceeds from
borrowing were $85,000 at January 31, 2003. There was no proceeds from borrowing
at January 31, 2002.
As of January 31, 2003, the company was indebted to various banks
and individuals in an aggregate principal amount of approximately $4.046 million
under various loans and promissory notes, compared to $4.684 as of January 31,
2002. Land, buildings, equipment and inventories of the Company secure many of
the loans and promissory notes. The loans and promissory notes mature at dates
from the current fiscal year to October 2013 and accrue interest at rates
ranging from 4.133% to 8% per annum. The Company's total monthly payments on
outstanding long-term debt obligations are approximately $77,000.
Approximately $3.972 million of the approximately $4.046 million
outstanding as of January 31, 2003 was borrowed under the Master Loan Agreement
with Bank of the West. Under this master loan agreement, the Company grants a
security interest in substantially all of its assets and property as security
interests against its obligations under the agreement.
Under the Master Loan Agreement, the Company must maintain minimum
financial ratios, calculated quarterly from fiscal quarter reviewed statements
with income and expense items annualized. For fiscal year ending January 31,
2003, the Company was in compliance with the minimum financial ratios.
The Company has forecasted approximately $2.5 million for capital
commitments for fiscal year 2004 consisting primarily of renovation and
upgrading of facilities. The Company expects to use current working capital and
cash flows from operations to fund these commitments as well as debt sources for
these commitments.
13
The Company is unaware of any trends or demands, commitments or
uncertainties that will result or are reasonably likely to result in liquidity
increasing or decreasing in any material way over the next twelve months. The
Company believes that its working capital and the cash flow generated from
current operations will be sufficient to fund operations over the next twelve
months without borrowing any additional funds under the credit facility. While
the Company is not currently a party to any agreements to acquire any additional
travel centers, nor does the Company have plans to build any additional travel
centers in the near term, if the Company were to acquire or construct any
additional travel centers it would likely have to obtain additional financing to
do so, either under the current credit facility or through other means. The
Company cannot predict with any certainty what the terms of such financing might
be.
ITEM 7A QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
As of January 31, 2003, approximately $1.799 million of the Company's
total indebtedness is accruing interest at variable rates tied to LIBOR or the
respective bank's prime lending rate. As such, the Company is subject to
fluctuations in interest rates that could have a negative impact on the net
income of the Company. In addition, it is likely that future indebtedness
incurred by the Company will be at variable rates that could impact the
Company's ability to finance internal development and growth of the business.
The Company does not, however, believe that any risk inherent in the variable
rate nature of its debt is likely to have a material effect on its financial
position, results of operations or liquidity.
The Company has not entered into any market risk sensitive instruments
for trading purposes. Further, the Company does not currently have any
derivative instruments outstanding and has no plans to use any form of
derivative instruments to manage its business in the foreseeable future.
Profit margins on gasoline sales can be adversely affected by factors
beyond the control of the Company, including supply and demand in the retail
gasoline market, price volatility and price competition from other gasoline
marketers. The availability and price of gas could have an adverse impact on
general highway traffic. The Company has not entered into any long-term
fixed-price supply agreements for gasoline. Any substantial decrease in profit
margins on gasoline sales or number of gallons sold could have a material
adverse effect on the Company's gross margins and operating income.
RISK FACTORS
The Company does not provide forecasts of potential future financial
performance. While management is optimistic about long-term prospects, the
following issues and uncertainties, among others, should be considered in
evaluating our growth outlook.
This Form 10-K contains forward-looking statements that involve risks
and uncertainties. You should not rely on these forward-looking statements. The
Company uses words such as "anticipate," "believe," "plan," "expect," "future,"
"intend" and similar expressions to identify such forward-looking statements.
This Form 10-K also contains forward-looking statements attributed to certain
third parties relating to their estimates regarding the travel center industry,
among other things. You should not place undue reliance on those forward-looking
statements. Actual results could differ materially from those anticipated in the
forward-looking statements for many reasons, including the risks faced described
below and elsewhere in this Form 10-K.
14
THE COMPANY'S SHARES OF COMMON STOCK ARE TRADED ON THE OTC BULLETIN
BOARD AND WILL LIKELY BE SUBJECT TO SIGNIFICANT PRICE VOLATILITY AND AN ILLIQUID
MARKET.
The Company's shares trade on the OTC Bulletin Board. In order to
purchase and sell shares of the Company's common stock on the OTC Bulletin
Board, you must use one of the market makers then making a market in the stock.
Because of the wide variance in the BID and ASK spreads, there is significant
risk that an investor that sold shares on the OTC Bulletin Board would sell them
for a price that was significantly lower than the price at which the shares
could be purchased, and vice versa. The number of shares traded to date
indicates that the market for the Company's shares of common stock is illiquid
which could make it difficult to purchase or sell shares.
THE COMPANY'S HISTORICAL FINANCIAL INFORMATION MAY NOT BE
REPRESENTATIVE OF ITS RESULTS AS A SEPARATE COMPANY.
The historical financial information prior to fiscal year 2002 included
in this Form 10-K may not reflect what results of operations, financial position
and cash flows would have been had the Company been a separate, stand-alone
entity during the periods presented or what results of operations, financial
position and cash flows will be in the future. This is because:
o adjustments and allocations have been made, primarily with respect to
corporate-level expenses and administrative functions, because Bowlin
Outdoor did not account for the Company as, and the Company was not
operating as, a separate stand-alone business for all periods presented;
and
o the information does not reflect changes that may occur in the future as a
result of the Company's separation from Bowlin Outdoor
For additional information, see "Selected Financial Data" and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."
THE COMPANY MIGHT INCUR GREATER COSTS AND EXPENSES IN PROPORTION TO ITS
REVENUES OPERATING AS A STAND-ALONE ENTITY THAT COULD ADVERSELY AFFECT
PROFITABILITY.
The Company has operated as a stand-alone entity separate from Bowlin
Outdoor for fiscal 2002 and 2003 only. The Company may have benefited in periods
prior to fiscal 2002 from operating as a division of Bowlin Outdoor by sharing
some expenses, personnel and other costs. General and administrative costs, as a
percentage of revenue, could increase as a result of the Company operating
independently of Bowlin Outdoor. If the costs and expenses of operating
independently are substantially greater than the costs and expenses of operating
as a division of Bowlin Outdoor, it could have a negative effect on
profitability and an adverse effect on business operations and financial
condition.
THE COMPANY MIGHT NOT BE ABLE TO SECURE ADDITIONAL FINANCING.
The Company has been able to secure financing for the purchase of
additional assets from commercial lenders in amounts up to 100% of the fair
market value of the acquired assets. However, this financing was obtained by
Bowlin Outdoor as a single consolidated entity. The Company might not be able to
obtain additional financing as a stand-alone company without the outdoor
advertising segment of Bowlin Outdoor. If obtainable, there can be no assurance
that any additional financing will be available in the future on terms
acceptable to the Company. The Company anticipates that any financing secured
could impose certain financial and other restrictive covenants upon operations.
15
THERE IS NO ASSURANCE THAT THE COMPANY WILL BE ABLE TO SUCCESSFULLY
EXPAND BUSINESS.
The Company intends to continue to explore the possibilities of
acquiring or building additional travel centers. Although existing operations
are based primarily in the Southwest, current expansion plans include
consideration of acquisition opportunities in both the Southwest and other
geographic regions of the United States. However, there can be no assurance that
suitable acquisitions can be identified, and the Company will likely face
competition from other companies for available acquisition opportunities. Any
such acquisition would be subject to negotiation of definitive agreements,
appropriate financing arrangements and performance of due diligence. There can
be no assurance that the Company will be able to complete such acquisitions,
obtain acceptable financing, or any required consent of our bank lenders, or
that such acquisitions, if completed, can be integrated successfully into
existing operations. The success of an expansion program will depend on a number
of factors, including the availability of sufficient capital, the identification
of appropriate expansion opportunities, the Company's ability to attract and
retain qualified employees and management, and the continuing profitability of
existing operations. There can be no assurance that the Company will achieve its
planned expansion or that any expansion will be profitable.
THE COMPANY'S USE OF PETROLEUM PRODUCTS SUBJECTS IT TO VARIOUS LAWS AND
REGULATIONS, AND EXPOSES IT TO SUBSTANTIAL RISKS.
The Company is subject to federal, state and local laws and regulations
governing the use, storage, handling, and disposal of petroleum products. While
the Company believes that it is compliant with environmental laws and
regulations, the risk of accidental contamination to the environment or injury
cannot be eliminated. In the event of such an accident, the Company could be
held liable for any damages that result and any such liability could exceed
available resources. The Company could be required to incur significant costs to
comply with environmental laws and regulations that may be enacted in the
future.
BECAUSE ALL OF THE COMPANY'S TRAVEL CENTERS ARE LOCATED IN ARIZONA AND
NEW MEXICO, A DOWNTURN IN THE ECONOMIC CONDITIONS IN THE SOUTHWESTERN UNITED
STATES COULD ADVERSELY AFFECT BUSINESS OPERATIONS AND FINANCIAL CONDITIONS.
The Company's travel centers are located only in Arizona and New
Mexico. The Company relies on the business generated from travelers and patrons
within these two states, and those traveling through these states. Risks from
economic downturns are not diversified or spread out across several regions.
Because of the geographic concentration of the Company's travel centers,
business may be adversely affected in the event of a downturn in general
economic conditions in the Southwestern United States generally, or in Arizona
or New Mexico.
THE COMPANY DEPENDS ON THIRD PARTY RELATIONSHIPS.
The Company is dependent on a number of third party relationships under
which it offers brand name and other products at its travel centers. These brand
name relationships include distributorship relationships with CITGO and EXXON
and existing franchise agreements with Dairy Queen/Brazier. The Company's
existing operations and plans for future growth anticipate the continued
existence of such relationships.
16
The CITGO distribution agreement has an initial three-year term
beginning February 2, 2001 and expiring January 31, 2004, and automatically
renews for a three-year term through 2007. The EXXON distribution agreement has
a three-year term beginning April 1, 2002 and expiring March 31, 2005. CITGO's
and EXXON's ability to terminate or refuse to renew the agreement with the
Company is subject to the occurrence of certain events set forth in the
Petroleum Marketing Practices Act, which includes bankruptcy, or breach of the
agreement by the Company, or termination by CITGO or EXXON of its petroleum
marketing activities in the Company's distribution area. CITGO and EXXON may
terminate or refuse to renew these agreements only if it terminates or refuses
to renew the agreement in compliance with the Petroleum Marketing Practices Act.
Under three of the Company's Dairy Queen agreements, the term continues
until the Company elects to terminate it with 60 days prior written notice, or
if the Company or Dairy Queen elect to terminate the agreement because the other
has breached the agreement and has not cured that breach within 14 days of
notice of the breach. The other two Dairy Queen agreements are for specific
terms. One of those Dairy Queen agreements, entered into February 1, 1984, is
for a term of 25 years and the other, entered into on November 18, 1986, is for
a term of 20 years. The Company may not terminate either of these agreements
unless it gives notice to Dairy Queen that they are in breach of the agreement
and Dairy Queen has not cured that breach within thirty days of notice. Dairy
Queen may terminate either of these agreements if they deliver notice to the
Company that it is in breach of the agreement and does not cure that breach
within 14 days of that notice.
There can be no assurance that the agreements that govern these
relationships will not be terminated (for greater detail regarding the terms of
these agreements, see "Business Operations - Travel Centers and Gasoline
Retailing"). Several of these agreements contain provisions that prohibit the
Company from offering additional products or services that are competitive to
those of its suppliers. Although the Company does not currently anticipate
having to forego a significant business opportunity in order to comply with such
agreements, there can be no assurance that adherence to existing agreements will
not prevent it from pursuing opportunities that management would otherwise deem
advisable. In addition, there are no material early termination provisions under
any of the franchise or petroleum distribution agreements.
The Company also relies upon several at-will relationships with various
third parties for much of its souvenir and gift merchandise. Although the
Company believes it has good relationships with its suppliers, there can be no
assurance that the Company will be able to maintain relationships with suppliers
of suitable merchandise at appropriate prices and in sufficient quantities.
IF THE COMPANY IS NOT ABLE TO SUCCESSFULLY COMPETE IN ITS INDUSTRY IT
COULD HAVE AN ADVERSE IMPACT ON BUSINESS OPERATIONS OR FINANCIAL CONDITION.
The Company's travel centers face competition from
o major and independent oil companies;
o independent service station operators;
o national and independent operators of restaurants, diners and
other eating establishments; and
o national and independent operators of convenience stores and
other retail outlets.
17
Some of the Company's competitors, including major oil companies
and convenience store operators, are substantially larger, better capitalized,
and have greater name recognition and access to greater resources than the
Company does. There can be no assurance that the Company's travel centers will
be able to compete successfully in their respective markets in the future.
THE COMPANY'S BUSINESS IS SEASONAL AND REVENUES FLUCTUATE QUARTERLY.
The Company's travel center operations are subject to seasonal
fluctuations, and revenues may be affected by many factors, including weather,
holidays and the price of alternative travel modes. Revenues and earnings may
experience substantial fluctuations from quarter to quarter. These fluctuations
could result in periods of decreased cash flow that might cause the Company to
use its lending sources, or to secure additional financing, in order to cover
expenses during those periods. This could increase the interest expense of the
Company's operations and decrease net income and have a material adverse effect
on business and results of operations.
THE COMPANY IS SUBJECT TO NUMEROUS GOVERNMENTAL REGULATIONS, INCLUDING
THOSE RELATED TO FOOD HANDLING, FIREWORKS SALES, TOBACCO SALES, AND UNDERGROUND
STORAGE TANKS.
Each of the Company's food service operations is subject to licensing
and regulation by a number of governmental authorities, including regulations
relating to health, safety, cleanliness and food handling, as well as federal
and state laws governing such matters as working conditions, overtime, tip
credits and minimum wages. The Company's travel center operations are also
subject to extensive laws and regulations governing the sale of tobacco and
fireworks in New Mexico travel centers. In addition, the Company has incurred
ongoing costs to comply with federal, state and local environmental laws and
regulations, primarily relating to underground storage tanks. These costs
include assessment, compliance, and remediation costs, as well as certain
ongoing capital expenditures relating to gasoline dispensing operations.
Such regulations include certain mandatory licensing procedures and the
ongoing compliance measures, as well as special sales tax measures. The Company
believes that operations at its eleven travel centers comply with all applicable
licensing and regulatory requirements. However, any failure to comply with
applicable regulations, or the adoption of additional regulations or changes in
existing regulations could impose additional compliance costs, require a
cessation of certain activities or otherwise have a material adverse effect on
business and results of operations.
THE COMPANY'S CURRENT CAPITALIZATION COULD DELAY, DEFER OR PREVENT A
CHANGE OF CONTROL.
In the Company's Articles of Incorporation, pursuant to Nevada Revised
Statues Section 78.378, the Company elected not to be governed by the provisions
of Nevada Revised Statutes Section 78.378 to 78.3793, inclusive. Pursuant to
Nevada Revised Statutes Section 78.434, the Company also elected not to be
governed by the provisions of Nevada Revised Statutes Sections 78.411 to 78.444,
inclusive. These statutes are sometimes referred to as "interested stockholder"
statutes and their purpose is to limit the way in which a stockholder may effect
a business combination with the corporation without board or stockholder
approval. Because the Company has elected not to be governed by these statutes,
a person or entity could attempt a takeover, or attempt to acquire a controlling
interest of, and effect a business combination with, Bowlin Travel Centers
without the restrictions of these Nevada Revised Statutes provisions.
However, the Company's Board of Directors has the authority to issue up
to ten million (10,000,000) shares of common stock, $.001 par value, and up to
one million (1,000,000) shares of preferred stock, $.001 par value, in one or
18
more series, and to determine the price, rights, preferences and privileges of
the shares of each such series without any further vote or action by the
stockholders. The rights of the holders of common stock will be subject to, and
may be adversely affected by, the rights of the holders of any shares of
preferred stock that may be issued in the future. The issuance of preferred
stock could have the effect of making it more difficult for a third party to
acquire a majority of the outstanding voting stock of the Company, thereby
delaying, deferring or preventing a change of control of the Company.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Following on next page.
19
BOWLIN TRAVEL CENTERS, INC.
Financial Statements
January 31, 2003 and 2002
20
INDEPENDENT AUDITORS' REPORT
The Board of Directors
Bowlin Travel Centers, Inc.
Albuquerque, New Mexico
We have audited the accompanying balance sheets of Bowlin Travel Centers, Inc.
as of January 31, 2003 and 2002, and the statements of income, stockholders'
equity and cash flows for each of the two years in the period ended January 31,
2003. 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. The financial statements of Bowlin Travel
Centers, Inc. for the year ended January 31, 2001, were audited by other
auditors whose report dated March 30, 2001, expressed an unqualified opinion on
those statements.
We conducted our audit in accordance with auditing standards generally accepted
in the United States of America. 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 our audits provide a reasonable
basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Bowlin Travel Centers, Inc. at
January 31, 2003 and 2002, and the results of its operations and its cash flows
for each of the two years in the period ended January 31, 2003, in conformity
with accounting principles generally accepted in the United States of America.
/s/ NEFF & RICCI LLP
Albuquerque, New Mexico
March 28, 2003
21
BOWLIN TRAVEL CENTERS, INC.
BALANCE SHEETS
JANUARY 31, 2003 AND 2002
ASSETS 2003 2002
----------- -----------
Current assets:
Cash and cash equivalents $ 2,416,265 2,671,048
Accounts receivable 106,350 267,171
Accounts receivable - related parties 4,175 2,738
Inventories 3,093,936 2,996,273
Prepaid expenses 308,606 279,899
Mortgages receivable, current maturities 8,790 3,784
Notes receivable, current maturities 32,957 38,538
----------- -----------
Total current assets 5,971,079 6,259,451
----------- -----------
Property and equipment, net 9,166,847 9,397,253
Intangible assets, net 239,877 278,342
Interest receivable 26,936 26,835
Investment in real estate 475,051 --
Mortgages receivable, less current portion 301,339 340,837
Notes receivable, less current portion 202,259 229,423
----------- -----------
Total assets $16,383,388 16,532,141
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current maturities of long-term debt $ 646,571 708,718
Accounts payable 995,377 989,305
Accrued salaries and benefits 32,583 23,051
Accrued liabilities 223,854 223,012
Deferred revenue 33,361 33,330
Income taxes payable 1,706 --
----------- -----------
Total current liabilities 1,933,452 1,977,416
Deferred income taxes 589,600 626,100
Long-term debt, less current maturities 3,400,069 3,975,616
----------- -----------
Total liabilities 5,923,121 6,579,132
----------- -----------
Commitments -- --
Stockholders' equity:
Preferred stock, $.001 par value; 1,000,000 shares
authorized, none issued or outstanding -- --
Common stock, $.001 par value; 10,000,000 shares
authorized, 4,583,348 issued and outstanding 4,583 4,583
Additional paid-in capital 9,775,192 9,775,192
Retained earnings 680,492 173,234
----------- -----------
Total stockholders' equity 10,460,267 9,953,009
----------- -----------
Total liabilities and stockholders' equity $16,383,388 16,532,141
=========== ===========
See accompanying notes to financial statements.
22
BOWLIN TRAVEL CENTERS, INC.
STATEMENTS OF INCOME
YEARS ENDED JANUARY 31,
--------------------------------------------
2003 2002 2001
------------ ------------ ------------
Gross sales $ 22,602,811 23,649,381 27,164,286
Less discounts on sales 419,413 425,279 399,022
------------ ------------ ------------
Net sales 22,183,398 23,224,102 26,765,264
Cost of goods sold 14,332,798 15,973,719 18,748,526
------------ ------------ ------------
Gross profit 7,850,600 7,250,383 8,016,738
General and administrative expense (6,329,558) (6,069,578) (6,742,579)
Depreciation and amortization (734,946) (751,857) (778,788)
Management fee income -- -- 212,693
------------ ------------ ------------
Operating income 786,096 428,948 708,064
Other income (expense):
Interest income 106,342 134,392 180,851
Gain on sale of property and equipment 3,945 34,969 266,897
Rental income 87,462 86,425 --
Miscellaneous 40,018 6,398 --
Interest expense (219,105) (401,498) (625,500)
------------ ------------ ------------
Total other income (expense) 18,662 (139,314) (177,752)
------------ ------------ ------------
Income before income taxes 804,758 289,634 530,312
Income taxes 297,500 116,400 231,500
------------ ------------ ------------
Net income $ 507,258 173,234 298,812
============ ============ ============
Earnings per share:
Weighted average common shares
outstanding 4,583,348 4,583,348 4,583,348
============ ============ ============
Basic and diluted $ 0.11 0.04 0.07
============ ============ ============
See accompanying notes to financial statements.
23
BOWLIN TRAVEL CENTERS, INC.
STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED JANUARY 31, 2003, 2002 AND 2001
COMMON ADDITIONAL PARENT'S
NUMBER STOCK, PAID-IN EQUITY IN RETAINED
OF SHARES AT PAR CAPITAL DIVISION EARNINGS TOTAL
---------- ---------- ---------- ---------- ---------- ----------
Balance at January 31, 2000 -- $ -- -- 8,121,024 -- 8,121,024
Parent's distribution to subsidiary -- -- -- 1,359,939 -- 1,359,939
Net income -- -- -- 298,812 -- 298,812
Issuance of common stock in
connection with spin-off transaction 4,583,348 4,583 9,775,192 (9,779,775) -- --
---------- ---------- ---------- ---------- ---------- ----------
Balance at January 31, 2001 4,583,348 4,583 9,775,192 -- -- 9,779,775
Net income -- -- -- -- 173,234 173,234
---------- ---------- ---------- ---------- ---------- ----------
Balance at January 31, 2002 4,583,348 4,583 9,775,192 -- 173,234 9,953,009
Net income -- -- -- -- 507,258 507,258
---------- ---------- ---------- ---------- ---------- ----------
Balance at January 31, 2003 4,583,348 $ 4,583 9,775,192 -- 680,492 10,460,267
========== ========== ========== ========== ========== ==========
See accompanying notes to financial statements.
24
BOWLIN TRAVEL CENTERS, INC.
STATEMENT OF CASH FLOWS
YEARS ENDED JANUARY 31,
-----------------------------------------
2003 2002 2001
----------- ----------- -----------
Cash flows from operating activities:
Net income $ 507,258 173,234 298,812
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 734,946 751,857 778,788
Amortization of loan fee 27,902 26,093 --
Gain on sale of property and equipment (3,945) (34,969) (266,897)
(Benefit) provision for deferred income taxes (36,500) 12,700 20,600
Changes in operating assets and liabilities
Accounts receivable 159,384 344,366 33,007
Inventories (97,663) 428,472 104,945
Prepaid expenses and other (28,707) 24,902 (54,436)
Accounts payable and accrued liabilities 16,477 (925,165) 124,523
Income taxes 1,706 (114,300) --
----------- ----------- -----------
Net cash provided by operating activities 1,280,858 687,190 1,039,342
----------- ----------- -----------
Cash flows from investing activities:
Proceeds from sale of assets 4,875 71,300 837,064
Purchases of property and equipment (501,197) (640,872) (303,423)
Accrued interest receivable (101) -- --
Investment in real estate (475,051) -- --
Increase in mortgages receivable -- (345,000) --
Payments received from mortgages receivable 34,492 379 --
Increase in notes receivable -- (44,500) (33,782)
Payment received from notes receivable 39,035 155,921 37,739
----------- ----------- -----------
Net cash (used in) provided by investing activities (897,947) (802,772) 537,598
----------- ----------- -----------
Cash flows from financing activities:
Payments on long-term debt (722,694) (1,256,135) (783,086)
Payments for debt issuance costs -- -- (16,005)
Capital contribution from parent -- -- 1,359,939
Due to related party -- -- 516,043
Proceeds from borrowings 85,000 -- --
----------- ----------- -----------
Net cash (used in) provided by financing activities (637,694) (1,256,135) 1,076,891
----------- ----------- -----------
Net (decrease) increase in cash and cash equivalents (254,783) (1,371,717) 2,653,831
Cash and cash equivalents at beginning of period 2,671,048 4,042,765 1,388,934
----------- ----------- -----------
Cash and cash equivalents at end of period $ 2,416,265 2,671,048 4,042,765
=========== =========== ===========
(Continued)
25
BOWLIN TRAVEL CENTERS, INC.
STATEMENT OF CASH FLOWS
YEARS ENDED JANUARY 31,
-----------------------------------------
2003 2002 2001
----------- ----------- -----------
Supplemental disclosure of cash flow information:
Interest paid $ 219,105 401,498 594,947
=========== =========== ===========
Income taxes paid $ 331,510 103,700 210,900
=========== =========== ===========
Noncash investing and financing activities:
Notes receivable issued on accounts receivable $ -- -- 33,783
=========== =========== ===========
Property and equipment in exchange for
note payable $ -- 30,554 180,039
=========== =========== ===========
Like-kind exchange of property and
equipment $ -- 155,576 --
=========== =========== ===========
See accompanying notes to financial statements.
26
BOWLIN TRAVEL CENTERS, INC.
Notes to Financial Statements
January 31, 2003
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) DESCRIPTION OF BUSINESS
Bowlin Travel Centers, Inc. (BTC or the Company) is located in
Albuquerque, New Mexico. Through January 30, 2001, the Company
operated as a separate division of Bowlin Outdoor Advertising & Travel
Centers, Inc. (BOATC), a public company traded on the American Stock
Exchange. On January 30, 2001, BTC became an independent company
through a spin-off transaction whereby shares of BTC were distributed
to the shareholders of BOATC. Inter-company transactions have
generally been limited to management fees, federal and state income
tax allocations, cash advances and cash distributions and are recorded
and funded through an inter-company receivable/payable account.
BTC's articles of incorporation authorize 10,000,000 shares of common
stock ($.001 par value) and 1,000,000 shares of preferred stock ($.001
par value) which can be issued at the discretion of the Board of
Directors.
The Company's principal business activities include the operation of
full-service travel centers and restaurants which offer brand-name
food and gasoline, and a unique variety of Southwestern merchandise to
the traveling public in the Southwestern United States, primarily New
Mexico.
(b) CASH AND CASH EQUIVALENTS
The Company considers all liquid investments with a maturity of three
months or less when purchased to be cash equivalents. The Company
places its temporary cash investments with a local financial
institution. Excess collected funds are invested in securities
repurchase agreements and are collateralized by securities with fair
market values of 102 percent. The remaining funds at year-end were
covered by Federal Deposit Insurance Corporation insurance.
(c) INVENTORIES
Inventories consist primarily of merchandise and gasoline for resale
and are stated at the lower of cost or market value, with cost being
determined using the first-in, first-out (FIFO) method.
(d) PROPERTY AND EQUIPMENT
Property and equipment are carried at cost. Maintenance and repairs,
including the replacement of minor items, are expensed as incurred,
and major additions to property and equipment are capitalized.
Depreciation is provided by the Company using primarily straight-line
as well as accelerated methods.
(e) INTANGIBLE ASSETS
Debt issuance costs are deferred and amortized over the terms of the
respective borrowings on a straight-line basis for the revolving
portion and the interest method for the term note portion. Franchise
fees are amortized on a straight-line basis over the shorter of the
life of the related franchise agreements or the periods estimated to
be benefited, ranging from fifteen to twenty-five years.
(Continued)
27
BOWLIN TRAVEL CENTERS, INC.
Notes to Financial Statements
January 31, 2003
(f) SALES AND COST RECOGNITION
Sales of merchandise are recognized at the time of sale and the
associated costs of the merchandise are included in cost of sales.
(g) INCOME TAXES
Income taxes are accounted for under the asset and liability method.
Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial
statement carrying amounts of existing assets and liabilities and
their respective tax bases and operating loss and tax credit
carryforwards. Deferred tax assets and liabilities are measured using
enacted tax rates expected to apply to taxable income in the years in
which those temporary differences are expected to be recovered or
settled. The effect on deferred tax assets and liabilities of a change
in tax rates is recognized in income in the period that includes the
enactment date.
(h) IMPAIRMENT OF LONG-LIVED ASSETS AND LONG-LIVED ASSETS TO BE DISPOSED
OF
The Company reviews its long-lived assets and certain identifiable
intangibles for impairment whenever events or changes in circumstances
indicate that the carrying amount of an asset may not be recoverable.
Recoverability of assets to be held and used is measured by a
comparison of the carrying amount of an asset to future net cash flows
expected to be generated by the asset. If such assets are considered
to be impaired, the impairment to be recognized is measured by the
amount by which the carrying amount of the assets exceeds the fair
value of the assets. Assets to be disposed of are reported at the
lower or the carrying amount of fair value less costs to sell.
(i) FINANCIAL INSTRUMENTS
The Company's financial instruments are cash and cash equivalents,
accounts receivable, notes receivable, accounts payable, accrued
liabilities and long-term debt. The carrying amounts of cash and cash
equivalents, accounts receivable, notes receivable, accounts payable,
accrued liabilities and long-term debt approximate fair value.
(j) USE OF ESTIMATES
Management of the Company has made a number of estimates and
assumptions relating to the reporting of assets and liabilities and
the disclosure of contingent assets and liabilities to prepare these
consolidated financial statements in conformity with generally
accepted accounting principles. Actual results could differ from those
estimates.
(k) EARNINGS PER SHARE
Earnings per share of common stock, both basic and diluted, are
computed by dividing net income by the weighted average common shares
outstanding, assuming the shares distributed on January 31, 2003 were
outstanding for all periods presented. Diluted earnings per share is
calculated in the same manner as basic earnings per share as there
were no potential dilutive securities outstanding for all periods
presented.
(l) RECLASSIFICATIONS
Certain 2002 amounts have been reclassified to conform to 2003
presentation. Such reclassifications had no effect on net income.
(Continued)
28
BOWLIN TRAVEL CENTERS, INC.
Notes to Financial Statements
January 31, 2003
(m) ACCOUNTS RECEIVABLE
Management believes that all accounts receivable are fully
collectable. Therefore, no allowance for doubtful accounts is deemed
to be required.
(2) MORTGAGES RECEIVABLE
Mortgages receivable as of January 31, 2003 and 2002 consist of the
following:
2003 2002
-------- --------
14% note, due $560 monthly through
November 1, 2004 (including interest) $ 17,567 $ 44,789
14% note, due $1,243 monthly through
November 15, 2004 (including interest) 95,065 99,926
13% note, due $586 monthly through
December 20, 2006 (including interest) 49,433 50,000
12.5% note, due $1,134 monthly through
December 1, 2005 (including interest) 98,626 99,906
12% note, due $586 monthly through
January 18, 2007 (including interest) 49,438 50,000
-------- --------
310,129 344,621
Less current portion 8,790 3,784
-------- --------
$301,339 $340,837
======== ========
All mortgages receivable are collateralized by land and buildings. In the
event of default, foreclosure would occur and the property would be sold to
pay the balance of the loans. Management believes that all mortgages
receivable are fully collectable. Therefore, no allowance is deemed to be
required.
(3) NOTES RECEIVABLE
Notes receivable as of January 31, 2003 and 2002 consist of the following:
2003 2002
-------- --------
8% note, due $37,500 annually through
2004 (including interest) with the balance
due in 2005 (a) $174,889 174,539
9% note, due $691 monthly through June 1,
2008 (including interest) (b) 35,597 40,479
10% note, due $1,592 monthly through
October 1, 2003 (including interest) (c) 13,749 30,554
10% note, due $1,090 monthly through
October 15, 2003 (including interest) 10,981 22,389
-------- --------
235,216 267,961
Less current portion 32,957 38,538
-------- --------
$202,259 229,423
======== ========
(Continued)
29
BOWLIN TRAVEL CENTERS, INC.
Notes to Financial Statements
January 31, 2003
(a) Collateralized by land and improvements and equipment sold.
In the event of default, the property and equipment reverts
back to the Company.
(b) Collateralized by land and buildings sold. In the even of
default, the property reverts back to the Company.
(c) Collateralized by the equipment sold. In the event of
default, the equipment reverts back to the Company.
Management believes that all notes receivable are fully collectable.
Therefore, no allowance is deemed to be required.
(4) PROPERTY AND EQUIPMENT
Property and equipment consist of the following at January 31:
ESTIMATED
LIFE (YEARS) 2003 2002
------------ ----------- -----------
Land $ 2,561,999 2,443,343
Buildings and improvements 10 - 40 7,422,229 7,375,879
Machinery and equipment 3 - 10 5,897,080 5,744,622
Autos, trucks and mobile homes 3 - 10 1,398,771 1,341,079
Billboards 15 - 20 1,283,065 1,180,404
Construction in progress 54,225 60,665
----------- -----------
Less accumulated depreciation (9,450,522) (8,748,739)
----------- -----------
$ 9,166,847 9,397,253
=========== ===========
On April 27, 2001, the Company sold one of its travel centers located in
Benson, Arizona. Certain assets, including building and equipment, were
sold to a third party for $40,000 cash and a note receivable for $10,000.
The note receivable was fully collected during the year ended January 31,
2002. The assets sold had a carrying value of $50,070. The loss on the sale
of the travel center was $70.
On May 1, 2001 the Company disposed of one of its travel centers located in
Edgewood, New Mexico to a third party. The assets had a carrying value of
approximately $156,000. The Company exchanged the assets for twenty-three
billboards. The fair value of assets given up by the Company was
approximately the fair value of assets received. Therefore, no gain or loss
was recorded on the transaction. The Company currently provides wholesale
gasoline to this third party location.
(Continued)
30
BOWLIN TRAVEL CENTERS, INC.
Notes to Financial Statements
January 31, 2003
(5) INTANGIBLE ASSETS
Intangible assets, at cost, consist of the following at January 31:
2003 2002
-------- --------
Franchise fees $192,442 192,442
Debt issuance costs 311,272 311,272
-------- --------
503,714 503,714
Less accumulated amortization (263,837) (225,372)
-------- --------
$239,877 278,342
======== ========
(6) INVESTMENT IN REAL ESTATE
Approximately twelve acres of previously undeveloped land in Alamogordo,
New Mexico was sub-divided into thirty-five approximately quarter-acre
residential lots. The subdivision includes paved roads, fencing, water,
sewer and electricity. Two manufactured homes have been purchased and
installed and a realtor is listing the property. The Company anticipates
sales to begin soon and plans to sell the lots over the next few years.
(7) SHORT-TERM BORROWING
In November 2000, the Company entered into a credit agreement with one of
its existing lenders that included a working capital line-of-credit. The
$1,000,000 line-of-credit matures March 31, 2002 and requires variable
interest (4.25% at January 31, 2003). The Company elected not to renew this
line-of credit.
(8) LONG-TERM DEBT
Long-term debt consists of the following at January 31:
2003 2002
---------- ---------
Due bank, maturity November 2005, variable
interest (4.133% at January 31, 2003),
monthly installments of $37,398, secured
by buildings and equipment $1,799,091 2,164,213
Due bank, maturity October 2013, variable
interest (4.25% at January 31, 2003), monthly
installments of $10,317, secured by land and
buildings 745,153 832,371
Due bank, maturity October 2013, variable
interest (4.25% at January 31, 2003), monthly
installments of $6,081, secured by land and
buildings 445,056 496,199
Due bank, maturity January 2005, variable
interest at index rate (4.25% at January 31,
2003), monthly installments of $4,920 secured
by buildings and equipment 380,907 421,839
Due bank, maturity November 2005, variable
interest at index rate (4.25% at January 31,
2003), monthly installments of $7,517, secured
by buildings and equipment 591,433 652,779
(Continued)
31
BOWLIN TRAVEL CENTERS, INC.
Notes to Financial Statements
January 31, 2003
Due bank, maturity August 2003, variable
interest at index rate of (4.25% at
January 31, 2003), monthly installments of
$7,792, secured by land, buildings, equipment
and inventories -- 92,528
Due individual, maturity September 2003, interest
at 8.00%, monthly payments of $1,400, unsecured -- 24,405
Due bank, maturity January 2013, interest at 6%,
monthly installments of $944, secured by land 85,000 --
---------- ----------
4,046,640 4,684,334
Less current maturities 646,571 708,718
---------- ----------
$3,400,069 3,975,616
========== ==========
Future maturities of long-term debt for the years ending January 31 are as
follows:
2004 $ 646,571
2005 674,782
2006 1,936,770
2007 176,935
2008 184,742
Thereafter 426,840
-----------
Total $ 4,046,640
===========
(9) INCOME TAXES
Income taxes consist of the following for the years ended January 31:
CURRENT DEFERRED TOTAL
--------- --------- ---------
2003:
U.S. Federal $ 278,300 (30,400) 247,900
State 55,700 (6,100) 49,600
--------- --------- ---------
$ 334,000 (36,500) 297,500
========= ========= =========
2002:
U.S. Federal $ 86,400 10,600 97,000
State 17,300 2,100 19,400
--------- --------- ---------
$ 103,700 12,700 116,400
========= ========= =========
2001:
U.S. Federal $ 175,700 17,200 192,900
State 35,200 3,400 38,600
--------- --------- ---------
$ 210,900 20,600 231,500
========= ========= =========
(Continued)
32
BOWLIN TRAVEL CENTERS, INC.
Notes to Financial Statements
January 31, 2003
Income tax expense differed from the amounts computed by applying the U.S.
federal income tax rate of 34 percent to pre-tax income as a result of the
following for the years ended January 31:
2003 2002 2001
--------- --------- ---------
Computed "expected" tax $ 273,618 98,476 180,306
State income taxes, net of federal
tax benefit 32,761 12,825 25,497
Other (8,879) 5,099 25,697
--------- --------- ---------
Total $ 297,500 116,400 231,500
========= ========= =========
The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and deferred tax liabilities are as
follows at January 31:
2003 2002
-------- --------
Deferred tax assets:
Compensated absences, principally due to
accrual for financial reporting purposes $ 51,030 37,813
-------- --------
Total gross deferred tax assets 51,030 37,813
-------- --------
Deferred tax liabilities:
Property and equipment, principally due to
differences in depreciation 614,282 648,777
Other 26,348 15,136
-------- --------
Total gross deferred liabilities 640,630 663,913
-------- --------
Net deferred tax liability $589,600 626,100
======== ========
There was no valuation allowance for deferred tax assets as of January 31,
2003, 2002 or 2001. Based upon the level of historical taxable income and
projections for future taxable income over the periods in which the
deferred tax assets are deductible, management believes it is more likely
than not that the Company will realize the benefits of these deductible
differences.
(10) PROFIT-SHARING PLAN
The Company maintains a qualified defined contribution profit-sharing plan
that covers substantially all employees. The plan year end is December 31.
The elected salary reduction is subject to limits as defined by the
Internal Revenue Code. The Company provides a matching contribution and
additional discretionary contributions as determined by resolution of the
board of directors. Legal and accounting expenses related to the plan are
absorbed by the Company. The Company's contributions to the profit-sharing
plan were $69,886, $59,022 and $62,315 in fiscal 2003, 2002 and 2001,
respectively.
(Continued)
33
BOWLIN TRAVEL CENTERS, INC.
Notes to Financial Statements
January 31, 2003
(11) COMMITMENTS
The Company leases land at several of its retail operating locations.
Included in general and administrative expenses in the accompanying
statements of income is rental expense for these land leases of $229,724,
$234,676 and $296,080 for the years ended January 31, 2003, 2002 and 2001,
respectively. The Company also leases land where several of its retail
billboards are located and rent expense for these leases was $138,126,
$132,730 and $85,273 for the years ended January 31, 2003, 2002 and 2001,
respectively.
The leasing agreements for the various locations include 5 to 30 year
leases with remaining lives on those leases ranging from approximately 5 to
15 years at January 31, 2003. Contingent rentals are generally based on
percentages of specified gross receipts. Several leases include terms for
computation of rent expense as the greater of a percent of gross receipts
or a percent of land value as defined by the lease. In most cases, the
Company is responsible for certain repairs and maintenance, insurance,
property taxes or property tax increases, and utilities.
Future minimum rental payments under these leases are as follows:
Year ending January 31:
2004 $ 211,705
2005 208,611
2006 185,473
2007 154,219
2008 114,091
Thereafter 1,710,513
-----------
Total $ 2,584,612
===========
(12) RELATED PARTY TRANSACTIONS
Wholesale gasoline distribution sales were sold to a Stuckey's franchise
travel center not owned by the Company. The travel center is owned by the
daughter of an individual who is a stockholder in the Company. The sales
with the associated cost of goods and gross profit consist of the following
at January:
2003 2002 2001
---------- ---------- ----------
Gross sales $1,179,052 1,311,206 1,433,398
Cost of goods sold 1,144,956 1,257,959 1,380,472
---------- ---------- ----------
Gross profit $ 34,096 53,247 52,926
========== ========== ==========
34
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
On May 9, 2001, Bowlin Travel Centers, Inc. (the "COMPANY"), with the
approval of the Company's board of directors, dismissed KPMG, LLP ("KPMG") as
its independent accountants. As discussed below, the Company has engaged the
firm of Neff & Ricci LLP ("NEFF & RICCI") as its independent auditors for the
2002 Fiscal Year.
KPMG's reports on the Company's consolidated financial statements for
the past two years have not contained any adverse opinion or disclaimer of
opinion and have not been qualified or modified as to uncertainty, audit scope
or accounting principles. In addition, during the Company's two most recent
fiscal years and the subsequent interim periods preceding KPMG's dismissal,
there have not been any disagreements with KPMG on any matter of accounting
principles or practices, financial statement disclosure, or auditing scope or
procedure which disagreements, if not resolved to the satisfaction of KPMG,
would have caused them to make a reference to the subject matter of the
disagreement in connection with their reports.
During the Company's two most recent fiscal years and subsequent
interim period preceding the dismissal of KPMG:
(i) KPMG did not advise the Company that the internal controls
necessary for the Company to develop reliable financial statements did not
exist;
(ii) KPMG did not advise the Company that information had come to
KPMG's attention that led them to no longer be able to rely on management's
representations, or that made them unwilling to be associated with the financial
statements prepared by management;
(iii) KPMG did not advise the Company of the need to expand
significantly the scope of their audit, or that information had come to their
attention during such period that, if further investigated, may (i) materially
impact the fairness or reliability of previously issued Reports of Independent
Auditors and the underlying consolidated financial statements, or the financial
statements issued or to be issued covering the fiscal period(s) subsequent to
the date of the most recent financial statements covered by an audit report, or
(ii) cause KPMG to be unwilling to rely on management's representations or be
associated with the Company's consolidated financial statements; and
(iv) KPMG did not advise the Company that information had come to
their attention that they had concluded materially impacted the fairness or
reliability of previously issued Reports of Independent Auditors and the
underlying consolidated financial statements, or the consolidated financial
statements issued or to be issued covering the fiscal period(s) subsequent to
the date of the most recent consolidated financial statements covered by an
audit report.
The Company provided KPMG with a copy of the foregoing disclosure, and
requested that KPMG furnish it with a letter addressed to the Securities and
Exchange Commission stating whether or not it agrees with such disclosure. The
Company filed as an Exhibit to the Form 8-K a copy of the letter from KPMG
required by Item 304 of Regulation S-K.
On May 9, 2001, the Company engaged Neff & Ricci as its independent
auditors. Prior to its engagement, the Company had not consulted with Neff &
Ricci with respect to:
(i) the application of accounting principles to a specified
transaction, either completed or proposed; or the type of audit opinion that
might be rendered on the Company's financial statements; or
35
(ii) any matter that was either the subject of a disagreement (as
defined in Item 304(a)(1)(iv) of Regulation S-K) or a reportable event (as
described in Item 304(a)(1)(v) of Regulation S-K).
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The following table sets forth information regarding the officers and
directors of Bowlin Travel Centers. A summary of the background and experience
of each of these individuals is set forth after the table.
NAME AGE POSITION
Michael L. Bowlin 59 Chairman of the Board, President and
Chief Executive Officer
William J. McCabe 53 Senior Vice President - Management
Information Systems, Secretary, Treasurer
and Director
David B. Raybould 50 Director
Nina J. Pratz 51 Chief Financial Officer, Senior Vice
President and Director
Kim D. Stake 47 Chief Administrative Officer, Vice President
and Director
- -----------------
MICHAEL L. BOWLIN. Mr. Bowlin has served as Chairman of the Board and
Chief Executive Officer, President and as a Director of the Company since August
of 2000. Mr. Bowlin served as Chairman of the Board and Chief Executive Officer
of Bowlin Outdoor Advertising and Travel Centers, Inc. ("Bowlin Outdoor") from
1991 through January of 2001, and as President from 1983 through 1991. Mr.
Bowlin had been employed by Bowlin Outdoor since 1968. Mr. Bowlin holds a
Bachelor's degree in Business Administration from Arizona State University.
WILLIAM J. MCCABE. Mr. McCabe has served as Senior Vice President,
Management Information Systems, Secretary, Treasurer and as a Director of the
Company since August of 2000. Mr. McCabe served as a member of the Board of
Directors of Bowlin Outdoor from 1983 until August 1996. Prior to 1997, Mr.
McCabe served as Senior Vice President - Advertising Services from 1993 to 1996,
Vice President of Outdoor Operations from 1988 to 1992 and as Vice President of
Accounting from 1984 to 1987. Mr. McCabe has been employed by the Company since
1976 in such additional capacities as a Staff Accountant and Controller. Mr.
McCabe holds a Bachelor's degree in Business Administration from New Mexico
State University.
DAVID B. RAYBOULD. Mr. Raybould has been employed as a sales
professional by Xpedx, a division of International Paper Company from 1995 until
June 2002. During his employment with Xpedx, Mr. Raybould was a consultant to
small, independent business firms as well as many Fortune 500 companies. Mr.
Raybould holds a Bachelor's degree in Business Administration from the
University of New Mexico.
NINA J. PRATZ. Ms. Pratz has served as the Company's Senior Vice
President and Chief Financial Officer since April of 2001. Ms. Pratz has served
as a member of the Bowlin Outdoor's Board of Directors from 1976 until January
2001. Prior to 1997, Ms. Pratz served as Chief Administrative Officer of Bowlin
Outdoor since 1988. Ms. Pratz holds a Bachelor's degree in Business
Administration from New Mexico State University.
36
KIM D. STAKE. Ms. Stake has served as Vice President and Chief
Administrative Officer since April of 2002. Ms. Stake has been employed with the
Company since December 1997. Ms. Stake also serves in such capacities as
Controller and SEC compliance. Prior to December 1997, Ms. Stake was employed in
public accounting. Ms. Stake holds a Bachelor's degree in Business
Administration from the University of New Mexico.
ITEM 11. EXECUTIVE COMPENSATION
No employee or officer of Bowlin Travel Centers has entered into an
employment agreement with Bowlin Travel Centers, nor do we anticipate entering
into any employment agreements in the future.
The following table summarizes all compensation paid by Bowlin Travel
Centers, Inc. to its Chief Executive Officer for services rendered to Bowlin
Travel Centers, Inc. during the fiscal years ended January 31, 2003, 2002 and
2001. The Company has no other executive officer whose total annual salary and
bonus paid to them by Bowlin Travel Centers, Inc. exceeded $100,000 for the most
recent fiscal year. All information set forth in this table reflects
compensation earned by these individuals for services with Bowlin Travel
Centers.
| LONG TERM |
|COMPENSATION |
ANNUAL COMPENSATION | AWARDS |
----------------------------- |------------ |
OTHER | SECURITIES |
ANNUAL | UNDERLYING | ALL OTHER
FISCAL SALARY BONUS COMPENSA- | OPTIONS/ | COMPENSA-
NAME AND PRINCIPAL POSITION YEAR ($)(1) ($) TION ($) | SARS (#) | TION ($)
- ---------------------------- ------ -------- ----- ----------- | ----------- | ---------
Michael L. Bowlin 2003 136,300 -- 16,823 (2) | -- | --
Chairman of the Board, 2002 116,300 -- 15,974 (2) | -- | --
President, CEO & 2001 195,000 -- 17,304 (2) | -- | --
Director
- -------------------------------
(1) Includes amounts deferred at the election of the CEO and COO to be
contributed to his 401(k) Profit Sharing Plan account.
(2) Amount for 2003 includes (i) $1,784 of Bowlin Travel Centers discretionary
matching contributions allocated to Mr. Bowlin's 401(k) Profit Sharing Plan
account; (ii) $8,289 for premiums on term life, auto and disability
insurance policies of which Mr. Bowlin or his wife is the owner; and (iii)
$6,750 for Mr. Bowlin's car allowance. Amount for 2002 includes (i) $2,216
of Bowlin Travel Centers discretionary matching contributions allocated to
Mr. Bowlin's 401(k) Profit Sharing Plan account; (ii) $7,758 for premiums
on term life, auto and disability insurance policies of which Mr. Bowlin or
his wife is the owner; and (iii) $6,000 for Mr. Bowlin's use of a company
owned vehicle. Amount for 2001 includes (i) $3,699 of Bowlin's
discretionary matching contributions allocated to Mr. Bowlin's 401(k)
Profit Sharing Plan account; (ii) $7,105 for premiums on term life, auto
and disability insurance policies of which Mr. Bowlin or his wife is the
owner; and (iii) $6,500 for Mr. Bowlin's use of a company owned vehicle
37
COMPENSATION OF DIRECTORS
Directors who are not employees of the Company are entitled to receive
$500 per each meeting of the Board of Directors, or any committee thereof,
attended. Directors do not receive any other compensation for services as
directors of the Company.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
As of January 31, 2003, there were 4,583,348 shares of Bowlin Outdoor
common stock outstanding. The following table sets forth the number of shares of
common stock beneficially owned by (i) all persons known by the Company to be
the beneficial owners of more than five percent of the outstanding shares of
common stock; (ii) each Director of the Company; (iii) the executive officers of
the Company; and (iv) all Directors and executive officers of the Company as a
group.
AMOUNT AND NATURE OF PERCENT OF
NAME OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP(3) CLASS(4)
------------------------- ----------------------- ----------
Michael L. Bowlin (5)(1) 2,818,536 61.5%
William J. McCabe (1) 64,548 1.4%
Nina J. Pratz (1) 116,802 2.5%
Kim D. Stake (1) * *
David B. Raybould (1) -- --
Monica A. Bowlin (6)(1) 2,818,536 61.5%
Jonathan Brooks(2) 543,950 11.9%
All directors and executive
officers as a group (5 persons) 2,999,886 65.4%
- -----------------------------------
*Less than 1.0%
(1) Address is c/o Bowlin Travel Centers, Inc., 150 Louisiana NE, Albuquerque,
NM, 87108.
(2) Address is 1999 Avenue of the Stars, Suite 2040, Los Angeles, CA, 90067.
(3) Unless otherwise noted and subject to community property laws, where
applicable, the persons named in the table above have sole voting and
investment power with respect to all shares of Common Stock as shown
beneficially owned by them.
(4) The shares and percentages shown include the shares of common stock
actually owned as of April 16, 2003.
(5) Includes 425,687 shares held by Mr. Bowlin's wife and 171,332 shares held
by each of three daughters. Mr. Bowlin disclaims beneficial ownership of an
aggregate of 513,996 of such shares, which are held by three of his
daughters.
(6) Includes 1,878,853 shares held by Mrs. Bowlin's husband and 171,332 shares
held by each of her three daughters. Mrs. Bowlin disclaims beneficial
ownership of an aggregate of 513,996 of such shares, which are held by
three of her daughters.
38
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
WHOLESALING TO RELATIVE OF OFFICER AND DIRECTOR AND STOCKHOLDER OF
BOWLIN TRAVEL CENTERS
Wholesale gasoline distribution sales were sold to a Stuckey's
franchise travel center not owned by the Company. The travel center is owned by
the daughter of an individual who is a stockholder in the Company. The sales
with the associated cost of goods and gross profit consist of the following at
January:
2003 2002 2001
---------- ---------- ----------
Gross sales $1,179,052 1,311,206 1,433,398
Cost of goods sold 1,144,956 1,257,959 1,380,472
---------- ---------- ----------
Gross profit $ 34,096 53,247 52,926
========== ========== ==========
ITEM 14. CONTROLS AND PROCEDURES
Based on an evaluation of disclosure controls and procedures for the
period ended January 31, 2003 conducted by our Chief Executive Officer and Chief
Financial Officer within the last ninety (90) days, we concluded that our
disclosure controls and procedures are effective.
Based on an evaluation of our internal controls conducted by management
within the last ninety (90) days, no significant deficiencies or material
weaknesses were identified and we have not made any significant changes in our
internal controls or in other factors that could significantly affect internal
controls since such evaluation.
PART IV
ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) Exhibits
The exhibits as indexed below are included as part of this Form 10-K.
(b) Reports on Form 8-K
No reports were filed on Form 8-K during the three months ended January 31,
2003.
ITEM 16. ACCOUNTANT FEES AND SERVICES
The aggregate fees billed by Neff & Ricci LLP ("Neff & Ricci") for
professional services rendered for the audit of the Company's annual financial
statements for the fiscal year ended January 31, 2002, and for the review of the
financial statements included in the Company's Quarterly Reports on Form 10-Q
for the fiscal year were approximately $35,000.
39
INDEX TO EXHIBITS
EXHIBIT
3.1(1) Form of Certificate of Incorporation of Bowlin Travel Centers, Inc.
3.2(1) Bylaws of Bowlin Travel Centers, Inc.
10.1(1) Management Services Agreement, between Bowlin Outdoor Advertising and
Travel Centers Incorporated and Bowlin Travel Centers, dated August 1,
2000.
10.2(1) Distributor Franchise Agreement, dated as of July 19, 1995, between
the Registrant and CITGO Petroleum Corporation
10.3(1) Distributor Sales Agreement, dated as of April 1, 1999, between the
Registrant and Exxon Company, U.S.A. (a division of Exxon Corporation)
10.8(1) Lease, dated as of January 12, 1987, between Janet Prince and the
Registrant
10.9(1) Commercial Lease, dated as of September 21, 1996, between the State of
Arizona and the Registrant, as amended
10.10(1) Commercial Lease, dated as of March 16, 2000, between the New Mexico
Commissioner of Public Lands and the Registrant, as amended
10.12(1) Lease Agreement, dated as of June 23, 1989, between the Registrant and
Rex Kipp, Jr., as amended
10.13(1) Lease, dated as of September 29, 1983, between J.T. and Ida M. Turner
and the Registrant
10.14(1) Business Lease, dated as of October 1, 1996, between the Registrant
and the New Mexico Commission of Public Lands
10.15(1) Commercial Lease, dated as of September 21, 1996, between the
Registrant and the State of Arizona, as amended
10.19(1) "Dairy Queen" Operating Agreement, dated as of March 10, 1983, between
Interstate Dairy Queen Corporation and the Registrant d/b/a DQ/B of
Edgewood, NM, together with amendments and ancillary agreements
related thereto
10.20(1) "Dairy Queen" Operating Agreement, dated as of May 1, 1982, between
Interstate Dairy Queen Corporation and the Registrant d/b/a DQ/B of
Flying C, New Mexico, together with amendments and ancillary
agreements related thereto
10.21(1) "Dairy Queen" Store Operating Agreement, dated as of November 18,
1986, between Dairy Queen of Southern Arizona, Inc. and the
Registrant, together with amendments and ancillary agreements related
thereto
10.22(1) "Dairy Queen" Operating Agreement, dated as of September 1, 1982,
between Interstate Dairy Queen Corporation and the Registrant d/b/a DQ
of Bluewater, New Mexico, together with amendments and ancillary
agreements related thereto
10.23(1) "Dairy Queen" Store Operating Agreement, dated as of February 1, 1984,
between Dairy Queen of Arizona, Inc. and the Registrant, together with
amendments and ancillary agreements related thereto
10.25(1) "Dairy Queen" Operating Agreement, dated as of June 7, 1989, between
Interstate Dairy Queen Corporation and the Registrant d/b/a "DQ" at
Butterfield Station, together with amendments and ancillary agreements
related thereto
10.26(1) Letter of Agreement, dated as of March 1, 1987, between Stuckey's
Corporation and the Registrant confirming franchise of Benson, AZ
Stuckey's Pecan Shoppe
10.27(2) Franchise Agreement, dated as of July 7, 1982, between Stuckey's, Inc.
and the Registrant, together with a related Personal Guaranty and
Indemnity
10.28(2) Amended and Restated Master Loan Agreement with First Security Bank,
dated as of November 10, 2000, by and among the Registrant, Bowlin
Outdoor Advertising and Travel Centers Incorporated, and First
Security Bank.
10.29(1) Lease Agreement between Bowlin Outdoor Advertising and Travel Centers
Incorporated and the Registrant, dated August 1, 2000.
40
10.30(2) Contribution Agreement, dated as of November 1, 2000, by and between
the Registrant and Bowlin Outdoor Advertising and Travel Centers
Incorporated.
10.31(2) Tax Sharing and Disaffiliation Agreement, dated as of November 1,
2000, by and between the Registrant and Bowlin Outdoor Advertising and
Travel Centers Incorporated.
99.1 Certification pursuant to Section 906 of the Sarbanes-Oxley Act of
2002.
99.2 Certification pursuant to Section 906 of the Sarbanes-Oxley Act of
2002.
(1) Incorporated by reference to the correspondingly numbered Exhibits in the
Registrant's Form 10, filed November 10, 2000.
(2) Incorporated by reference to the correspondingly numbered Exhibits in the
Registrant's Amendment No. 1 to the Form 10, filed December 8, 2000.
SIGNATURES
In accordance with Section 13 or 15(d) of the Securities Exchange Act
of 1934, the registrant caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
Bowlin Travel Centers Inc
By: /s/ MICHAEL L. BOWLIN
-----------------------------------------
Michael L. Bowlin, Chairman of the Board,
President and Chief Executive Officer
Date: April 22, 2003
In accordance with the Securities Exchange Act of 1934, this report has
been signed by the following persons on behalf of the Company and in the
capacities and on the dates indicated:
SIGNATURE DATE
By: /s/ MICHAEL L. BOWLIN April 22, 2003
-------------------------------------------------
Michael L. Bowlin, Chairman of the Board,
President, CEO and Director (Principal
Executive Officer)
By: /s/ NINA J. PRATZ April 22, 2003
-------------------------------------------------
Chief Financial Officer, Senior Vice President,
and Director
By: /s/ WILLIAM J. MCCABE April 22, 2003
-------------------------------------------------
Senior Vice President, Management Information
Systems, Secretary, Treasurer and Director
By: /s/ KIM D. STAKE April 22, 2003
-------------------------------------------------
Kim D. Stake, Chief Administrative Officer,
Vice President and Director
By: /s/ DAVID B. RAYBOULD April 22, 2003
-------------------------------------------------
David B. Raybould, Director
41
CERTIFICATION PURSUANT TO
15 U.S.C. 78m(a) OR 78o(d)
(SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002)
I, Michael L. Bowlin, certify that:
1. I have reviewed this annual report on Form 10-K of Bowlin Travel
Centers, Inc.;
2. Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances
under which such statements were made, not misleading with respect to
the period covered by this annual report; and
3. Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all
material respects the financial condition, results of operations and
cash flows of the registrant as of, and for, the periods presented in
this annual report.
4. The Company's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the Company and
we have:
(a) designed such disclosure controls and procedures to ensure
that material information relating to the Company, including its
consolidated subsidiaries, is made known to us by others within
those entities, particularly during the period in which this
quarterly report is being prepared;
(b) evaluated the effectiveness of the Company's disclosure
controls and procedures as of a date within 90 days prior to the
filing date of this annual report (the "Evaluation Date"); and
(c) presented in this annual report our conclusions about the
effectiveness of the disclosure controls and procedures based on
our evaluation as of the Evaluation Date;
5. The Company's other certifying officers and I have disclosed, based on
our most recent evaluation, to the Company's auditors and the audit
committee of Company's board of directors (or persons performing the
equivalent function):
(a) all significant deficiencies in the design or operation of
internal controls which could adversely affect the Company's
ability to record, process, summarize and report financial data
and have identified for the Company's auditors any material
weaknesses in internal controls; and
(b) any fraud, whether or not material, that involves management
or other employees who have a significant role in the Company's
internal controls; and
42
6. The Company's other certifying officers and I have indicated in this
annual report whether or not there were significant changes in
internal controls or in other factors that could significantly affect
internal controls subsequent to the date of our most recent
evaluation, including any corrective actions with regard to
significant deficiencies and material weaknesses.
Date: April 22, 2003
/s/ MICHAEL L. BOWLIN
-----------------------------------------
Michael L. Bowlin, Chairman of the Board,
President and Chief Executive Officer
43
CERTIFICATION PURSUANT TO
15 U.S.C. 78m(a) OR 78o(d)
(SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002)
I, Nina J. Pratz, certify that:
1. I have reviewed this annual report on Form 10-K of Bowlin Travel
Centers, Inc.;
2. Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances
under which such statements were made, not misleading with respect to
the period covered by this annual report; and
3. Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all
material respects the financial condition, results of operations and
cash flows of the registrant as of, and for, the periods presented in
this annual report.
4. The Company's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the Company and
we have:
(a) designed such disclosure controls and procedures to ensure
that material information relating to the Company, including its
consolidated subsidiaries, is made known to us by others within
those entities, particularly during the period in which this
annual report is being prepared;
(b) evaluated the effectiveness of the Company's disclosure
controls and procedures as of a date within 90 days prior to the
filing date of this annual report (the "Evaluation Date"); and
(c) presented in this annual report our conclusions about the
effectiveness of the disclosure controls and procedures based on
our evaluation as of the Evaluation Date;
5. The Company's other certifying officers and I have disclosed, based on
our most recent evaluation, to the Company's auditors and the audit
committee of Company's board of directors (or persons performing the
equivalent function):
(a) all significant deficiencies in the design or operation of
internal controls which could adversely affect the Company's
ability to record, process, summarize and report financial data
and have identified for the Company's auditors any material
weaknesses in internal controls; and
(b) any fraud, whether or not material, that involves management
or other employees who have a significant role in the Company's
internal controls; and
44
6. The Company's other certifying officers and I have indicated in this
annual report whether or not there were significant changes in
internal controls or in other factors that could significantly affect
internal controls subsequent to the date of our most recent
evaluation, including any corrective actions with regard to
significant deficiencies and material weaknesses.
Date: April 22, 2003
/s/ NINA J. PRATZ
--------------------------------------
Nina J. Pratz, Chief Financial Officer
Bowlin Travel Centers, Inc.
45