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,
2005 |
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OR |
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| o |
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
incorporation
or organization) |
(I.R.S.
Employer Identification No.) |
| |
|
|
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: |
| |
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|
|
Title of each class |
|
Name of each exchange on which
registered |
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|
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Common Stock, $.001 Par Value |
|
OTC.BB |
|
|
|
| |
|
SECURITIES REGISTERED PURSUANT TO SECTION
12(g)
OF THE EXCHANGE ACT: |
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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 o
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
Indicate
by check mark whether the registrant is an accelerated filer (as defined in Rule
12b-2 of the Act). Yes o No
x
The
aggregate market value of the voting and non-voting common stock held by
non-affiliates of the registrant at July 31, 2004 was $2,612,712.
The
number of shares of Common Stock, $.001 par value, outstanding as of April 27,
2005: 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 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 twelve 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, the Company became an independent company through a spin-off
transaction whereby shares of the Company’s common stock were distributed to the
shareholders of Bowlin Outdoor.
Recent
Developments
On
January 18, 2005, the Company opened a new state-of-the-art travel center in
Picacho, Arizona. Strategically located on I-10 between metropolitan Phoenix and
Tucson, the new facility has 10,000 square feet of retail space, a convenience
department for gourmet coffee and snacks with a large screen plasma TV with
satellite news plus a state-of-the-art super-pumper gasoline facility offering
CITGO brand gasoline.
On March
24, 2004, the Company disposed of land and building located in Las Cruces, New
Mexico to a third party. The assets had a carrying book value of approximately
$268,000. The Company exchanged the assets for land and building adjacent to the
Company’s warehouse facility located in Las Cruces, New Mexico. The fair value
of assets received and the carrying value of the assets exchanged by the Company
was approximately equal. Therefore, no gain or loss was recorded on the
transaction.
Subsequent
Event
None.
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 twelve travel centers operate under the
Dairy Queen/Brazier or Dairy Queen trade names.
The
Company’s travel centers offer brand name gasoline such as ExxonMobil, CITGO,
and Chevron. The Company is an authorized distributor of ExxonMobil and CITGO
petroleum products. Seven of the Company’s locations are ExxonMobil stations and
four of its locations are CITGO stations. One travel center is a Chevron
station.
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
|
|
The
Company is committed to expanding its travel center operations through
internal development. |
|
§ |
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.
|
|
§ |
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. |
|
§ |
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 ExxonMobil and CITGO 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 6.8% 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 twelve 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 5.5% of its sales of their products in New
Mexico and 4.0% for its sales of their products in Arizona.
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 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 it is 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 it delivers 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 ExxonMobil and CITGO distributor. The Company sells
ExxonMobil gasoline at seven travel centers, and CITGO gasoline at four travel
centers. One of the travel centers sells Chevron gasoline.
The fact
that the Company is an authorized ExxonMobil and CITGO distributor has
significance in the Company’s industry. As licensed distributors for ExxonMobil
and CITGO, the Company purchases gasoline directly from ExxonMobil and CITGO as
direct marketers 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 ExxonMobil and CITGO 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
ExxonMobil distribution agreement had a three-year term beginning April 1, 2002
and expiring March 31, 2005. ExxonMobil has extended the Company’s current
distribution agreement until August 31, 2005. ExxonMobil is currently developing
a new distributor franchise agreement that will become effective September 1,
2005. During this extension period business will continue under the same terms
and conditions as contained in the current distribution agreement. 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. ExxonMobil’s and CITGO’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 ExxonMobil or CITGO of its petroleum marketing
activities in the Company’s distribution area. ExxonMobil and CITGO 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 ExxonMobil and CITGO 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
purchases ranges from a low of 171,000 gallons to a high of 200,000 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 ExxonMobil distribution
agreement, purchases of ExxonMobil products did not meet the minimum quantities
for the first contract year ended March 31, 2003, but have met the minimum
quantities for contract years ended March 31, 2004 and March 31, 2005. Since the
effective date of the CITGO agreement, purchases did not meet the minimum
quantities for the first three years but have met the minimum quantities for the
most recent contract year ended January 31, 2005. There are no penalties
associated with not meeting the minimum quantities for ExxonMobil or
CITGO. 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 ExxonMobil and
CITGO 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.
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 7.8%
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
January
31, |
|
Gross
Revenues |
|
Revenue
from
Gasoline
Wholesaling |
|
Percentage
of
Gross
Revenues
Attributable
to
Gasoline
Wholesaling |
| |
|
|
|
|
|
|
|
2001 |
|
$26,969,000 |
|
$1,802,000 |
|
6.68 |
|
2002 |
|
$23,540,000 |
|
$2,126,000 |
|
9.03 |
|
2003 |
|
$22,503,000 |
|
$1,789,000 |
|
7.95 |
|
2004 |
|
$21,848,000 |
|
$1,749,000 |
|
8.00 |
|
2005 |
|
$24,090,000 |
|
$1,754,000 |
|
7.28 |
The Company does not derive a material amount of gross 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, 2005, the Company had approximately 146 full-time and 32 part-time
employees; 53 were located in Arizona, 125 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.
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.
The
Company anticipates that in the next twelve months 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.
Trademarks
The
Company operates its travel centers under a number of its own trademarks such as
The Thing, 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, ExxonMobil and CITGO trademarks. The Company’s right
to use the trademarks Dairy Queen, Dairy Queen/Brazier, ExxonMobil and CITGO 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 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 |
|
Bowlin’s
Running Indian |
|
New
Mexico |
|
March
30, 2014 |
|
Bowlin
Travel Centers |
|
Arizona |
|
April
26, 2006 |
ITEM 2.
PROPERTIES
As of
January 31, 2005, the Company operated twelve travel centers, nine of which are
in New Mexico and three of which are in Arizona. The Company owns the real
estate and improvements where seven of its travel centers are located, all of
which are subject to mortgages. Five 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 owns its
principal office space. The Company owns a central warehouse and distribution
facility occupying approximately 44,000 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
The
Company did not submit any matters to a vote of security holders in the fourth
quarter of fiscal 2005.
PART
II
ITEM
5. MARKET
FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS, AND ISSUER
PURCHASES OR EQUITY SECURITIES
As of
April 27, 2005, there were 4,583,348 shares of common stock of Bowlin Travel
Centers, Inc. outstanding. There are no outstanding options or warrants to
purchase, or securities convertible into shares of common stock of Bowlin Travel
Centers, Inc. Shares of the common stock of the Company are traded on the OTC
Bulletin Board under the symbol “BWTL”. On April 27, 2005, there were
approximately 26 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
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. The Company
made no purchases of its equity securities in the fourth quarter of fiscal
2005.
|
Fiscal
Year Ended
January
31, 2004 |
|
High |
|
Low |
| |
|
|
|
|
|
Fiscal
Quarter Ended 4/30 |
|
$1.90 |
|
$1.26 |
|
Fiscal
Quarter Ended 7/31 |
|
$2.00 |
|
$1.60 |
|
Fiscal
Quarter Ended 10/31 |
|
$2.00 |
|
$1.60 |
|
Fiscal
Quarter Ended 1/31 |
|
$2.00 |
|
$1.75 |
| |
|
|
|
|
|
Fiscal
Year Ended
January
31, 2005 |
|
High |
|
Low |
| |
|
|
|
|
|
Fiscal
Quarter Ended 4/30 |
|
$2.00 |
|
$1.65 |
|
Fiscal
Quarter Ended 7/31 |
|
$1.80 |
|
$1.50 |
|
Fiscal
Quarter Ended 10/31 |
|
$1.90 |
|
$1.52 |
|
Fiscal
Quarter Ended 1/31 |
|
$2.00 |
|
$1.73 |
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 financial data presented below are derived from the audited financial
statements of the Company for the five years ended January 31, 2005. The data
presented below should be read in conjunction with the audited 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, * |
|
| |
|
2005 |
|
2004 |
|
2003 |
|
2002 |
|
2001 |
|
STATEMENT
OF INCOME DATA: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
sales |
|
$ |
23,599,177 |
|
$ |
21,362,822 |
|
$ |
22,083,320 |
|
$ |
23,115,131 |
|
$ |
26,569,870 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income |
|
$ |
438,927 |
|
$ |
493,894 |
|
$ |
507,258 |
|
$ |
173,234 |
|
$ |
298,812 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings
per share |
|
$ |
0.10 |
|
$ |
0.11 |
|
$ |
0.11 |
|
$ |
0.04 |
|
$ |
0.07 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BALANCE
SHEET DATA (at end of period): |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
assets |
|
$ |
20,085,144 |
|
$ |
17,456,106 |
|
$ |
16,383,388 |
|
$ |
18,527,507 |
|
$ |
16,990,676 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term
debt, including current maturities |
|
$ |
5,844,366 |
|
$ |
4,144,619 |
|
$ |
4,046,640 |
|
$ |
4,684,334 |
|
$ |
5,940,469 |
|
________________
*
The Company did not operate independently during fiscal period
2001.
ITEM
7. MANAGEMENT’S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
Overview
The
following is a discussion of the financial condition and results of operations
of the Company as of and for the three fiscal years ended January 31, 2005, 2004
and 2003. 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.
Fiscal
Year Ended January 31, 2005 (Fiscal 2005) Compared to Fiscal Year Ended January
31, 2004 (Fiscal 2004)
Gross
sales at the Company’s travel centers increased 10.3% to $24.090 million for
fiscal 2005, from $21.848 million for fiscal 2004. Merchandise sales increased
3.8% to $9.632 million for fiscal 2005, from $9.283 million for fiscal 2004. The
increase is primarily due to sales incentives, additional supervisory support
dedicated to the stores as well as an increase of $150,000 at one location due
to additions of billboards advertising that location. Gasoline sales increased
19.4% to $10.279 million for fiscal 2005, from $8.605 million for fiscal 2004.
The increase is due to market price increases. Restaurant sales increased 9.6%
to $2.424 million for fiscal 2005, from $2.211 million for fiscal 2004. The
increase is primarily due to sales incentive programs, supervisory support
dedicated to the restaurants as well as an increase of $61,000 at one location
due to additions of billboards advertising that location. Wholesale gasoline
sales to independent retailers increased 0.3% to $1.755 million for fiscal 2005,
from $1.749 million for fiscal 2004. The increase is due to market price
increases offset by decreases in volume.
Cost of
goods sold for the travel centers increased 12.4% to $15.113 million for fiscal
2005, from $13.450 million for fiscal 2004. Merchandise cost of goods decreased
0.6% to $3.530 million for fiscal 2005, from $3.551 million for fiscal 2004. The
decrease corresponds to continued volume purchasing as well as maintaining
mark-ups. Gasoline cost of goods increased 21.2% to $9.150 million for fiscal
2005, from $7.547 million for fiscal 2004. The increase is due to market prices
increases. Restaurant cost of goods increased 11.8% to $729,000 for fiscal 2005,
from $652,000 for fiscal 2004. The increase directly corresponds to the increase
in restaurant sales as well as an increase in prices. Wholesale gasoline cost of
goods increased 0.2% to $1.704 million in fiscal 2005, from $1.700 million for
fiscal 2004. The increase is primarily due market price increases offset by
decreases in volume. Cost of goods sold as a percentage of gross revenues
increased for fiscal 2005 to 62.7%, compared to 61.6% for fiscal
2004.
Gross
profit for the travel centers increased 7.2% to $8.486 million for fiscal 2005
from $7.913 million for fiscal 2004. The increase is primarily due attributable
to improved management of cost of goods due to increases in volume
purchasing.
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
7.6% to $7.073 million for fiscal 2005, from $6.573 million for fiscal 2004. The
increase is due to bonuses related to the sales incentive programs, additional
personnel, sign rent related to the additions of billboards advertising one
location, utilities related to trash removal, normal repair and maintenance to
billboards and credit card fees related to processing credit cards through the
Company’s gasoline distributorships.
Depreciation
and amortization expenses increased by 2.6% to $703,000 for fiscal 2005, from
$685,000 for fiscal 2004. The increase is primarily associated with certain
assets related to capital expenditures.
The above
factors contributed to an increase in travel centers operating income of 8.4% to
$710,000 for fiscal 2005, from $655,000 for fiscal 2004.
Other
income (expense) includes interest income, gains and losses from the sale of
assets, rental income and interest expense. Interest income decreased 50.0% to
$45,000 in fiscal 2005, from $90,000 in fiscal 2004. The decrease is primarily
due to bond interest and mortgages receivable interest earned in the prior
period not present in the current period. Gains from the sale of property and
equipment decreased to $3,000 in fiscal 2005 from $54,000 in fiscal 2004.
Property and equipment sold in fiscal year 2005 include an alarm system, a Dairy
Queen walk-in compressor, two vehicles, several cash registers and a printer.
Miscellaneous income decreased 69.2% to $400 in fiscal 2005, from $1,300 in
fiscal 2004. Rental income was $189,000 in fiscal 2005, compared to $193,000 in
fiscal 2004. The Company leases available office space at the Company’s
corporate headquarters as well as housing to management at the store sites.
Interest expense increased 10.2% to $203,000 for fiscal 2005, from $185,000 for
fiscal 2004. The increase is primarily attributable to higher interest
rates.
Income
before income taxes decreased 8.0% to $744,000 for fiscal 2005, from $809,000
for fiscal 2004. The decrease is primarily due the decrease in miscellaneous
income partially offset by the increase in interest expense. As a percentage of
gross revenues, income before income taxes decreased to 3.1% for fiscal 2005,
from 3.7% for fiscal 2004.
Income
taxes decreased to $305,000 for fiscal 2005, compared to $315,000 for fiscal
2004, as a result of lower pre-tax income partially offset by non-deductible
expenses added back to income for tax calculations. The effective tax rate for
fiscal 2005 was 41.0%, compared to 38.9% for fiscal 2004.
The
foregoing factors contributed to the Company’s decrease in net income for fiscal
2005 to $439,000, compared to $494,000 for fiscal 2004.
Fiscal
Year Ended January 31, 2004 (Fiscal 2004) Compared to Fiscal Year Ended January
31, 2003 (Fiscal 2003)
Gross
sales at the Company’s travel centers decreased 2.9% to $21.848 million for
fiscal 2004, from $22.503 million for fiscal 2003. Merchandise sales decreased
3.8% to $9.283 million for fiscal 2004, from $9.650 million for fiscal 2003. The
decrease is primarily due a major interstate construction project that adversely
affected merchandise sales at one location by $226,000 as well as uncertainties
in the national economy. Gasoline sales decreased 5.0% to $8.605 million for
fiscal 2004, from $9.058 million for fiscal 2003. The decrease is primarily due
to a major interstate project that adversely affected gasoline sales at one
location by $1.110 million. Restaurant sales increased 10.2% to $2.211 million
for fiscal 2004, from $2.006 million for fiscal 2003. 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 to independent retailers decreased 2.2% to $1.749 million for fiscal 2004,
from $1.789 million for fiscal 2003. The decrease is due to a general decline in
highway travel for fiscal 2004 compared to fiscal 2003 as well as a discontinued
wholesale location that was present in fiscal 2003 not present in fiscal
2004.
Cost of
goods sold for the travel centers decreased 6.2% to $13.450 million for fiscal
2004, from $14.333 million for fiscal 2003. Merchandise cost of goods decreased
7.3% to $3.614 million for fiscal 2004, from $3.897 million for fiscal 2003. The
decrease directly corresponds to the decrease in merchandise sales that
adversely affected one location by $129,000, improved purchase pricing as well
as maintaining mark-ups. Gasoline cost of goods decreased 7.5% to $7.547 million
for fiscal 2004, from $8.157 million for fiscal 2003. The decrease directly
corresponds to the decrease in gasoline sales that adversely affected gas cost
of goods at one location by $1.001 million. Restaurant cost of goods increased
11.1% to $589,000 for fiscal 2004, from $530,000 for fiscal 2003. The increase
directly corresponds to the increase in restaurant sales. Wholesale gasoline
cost of goods decreased 2.8% to $1.700 million in fiscal 2004, from $1.749
million for fiscal 2003. The decrease is primarily due to an additional
wholesale location in the prior year not present in the current year. Cost of
goods sold as a percentage of gross revenues improved for fiscal 2004 to 61.6%,
compared to 63.7% for fiscal 2003.
Gross
profit for the travel centers increased 2.1% to $7.913 million for fiscal 2004
from $7.751 million for fiscal 2003. The increase is primarily due attributable
to improved management of cost of goods due to increases in volume
purchasing.
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
3.8% to $6.573 million for fiscal 2004, from $6.330 million for fiscal 2003. 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 continuing
bonuses and commissions for travel center personnel related to sales incentive
programs.
Depreciation
and amortization expenses decreased by 6.8% to $685,000 for fiscal 2004, from
$735,000 for fiscal 2003. The decrease is primarily associated with assets
becoming fully depreciated.
The above
factors contributed to a decrease in travel centers operating income of 4.5% to
$655,000 for fiscal 2004, from $686,000 for fiscal 2003.
Other
income (expense) includes interest income, gains and losses from the sale of
assets, rental income and interest expense. Interest income decreased 15.1% to
$90,000 in fiscal 2004, from $106,000 in fiscal 2003. The decrease is primarily
due to lower cash balances in the current period partially offset by the
interest earned on a 4.24% bond held for approximately nine months in fiscal
2004. Gains from the sale of property and equipment increased to $54,000 in
fiscal 2004 from $4,000 in fiscal in 2003. Property and equipment sold in fiscal
year 2004 include land, one of the Company’s Dairy Queens, a lot and
manufactured home associated with the Company’s investment in real estate,
various vehicles as well as three gas tanks. Miscellaneous income decreased
97.5% to $1,000 in fiscal 2004, from $40,000 in fiscal 2003. The decrease is
primarily due to a refund of excise taxes in the second quarter of fiscal 2003
not present in fiscal 2004. Rental income was $193,000 in fiscal 2004, compared
to $188,000 in fiscal 2003. The Company leases available office space at the
Company’s corporate headquarters as well as housing to management at the store
site. Interest expense decreased 15.5% to $185,000 for fiscal 2004, from
$219,000 for fiscal 2003. The decrease is primarily attributable to lower
interest rates as well as lower debt balances for most of fiscal
2004.
Income
before income taxes increased 0.5% to $809,000 for fiscal 2004, from $805,000
for fiscal 2003. The increase is primarily due to the decrease in cost of goods
sold, a decrease 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 3.7% for
fiscal 2004, from 3.6% for fiscal 2003.
Income
taxes increased to $315,000 for fiscal 2004, compared to $298,000 for fiscal
2003, as a result of higher pre-tax income and the $40,000 excise tax refund
that reduced taxable income in fiscal 2003. The effective tax rate for fiscal
2004 was 38.9%, compared to 37.0% for fiscal 2003.
The
foregoing factors contributed to the Company’s decrease in net income for fiscal
2004 to $494,000, compared to $507,000 for fiscal 2003.
Liquidity
and Capital Resources
At
January 31, 2005, the Company had working capital of $3.582 million compared to
working capital of $3.791 million at January 31, 2004. At January 31, 2005, the
company had a current ratio of 2.5:1 compared to a current ratio of 2.6:1 at
January 31, 2004 (“current ratio” is the ratio of current assets to current
liabilities). The decrease in working capital is primarily due to decreases in
cash of $197,000, an increase in inventory of $254,000, a decrease in the
current portion of long-term debt of $194,000 partially offset by a decrease in
prepaid expenses of $149,000, an increase in short-term borrowing of $200,000
and an increase in accrued salaries of $60,000.
The net
cash provided by operating activities was $1.409 million at January 31, 2005,
compared to $1.260 million at January 31, 2004. During fiscal 2005, there were
increases in net operating assets and liabilities of $249,000, an increase in
depreciation and amortization of $18,000, a decrease in the gain on sales of
property and equipment partially offset by a decrease in the provision for
deferred income taxes of $120,000.
Net cash
used in investing activities was $3.450 million at January 31, 2005, compared to
net cash used by investing activities of $1.533 million at January 31, 2004. The
increase was primarily due to purchases of property and equipment of $3.540
million of which $2.480 million was for the new travel center in Picacho,
Arizona offset by a decrease to the investment in real estate of $36,000 as well
as payments received from notes receivable of $43,000.
Net cash
provided by financing activities was $1.845 million at January 31, 2005,
compared to net cash provided by financing activities of $96,000 at January 31,
2004. Payments on long-term debt were $975,000 at January 31, 2005 compared to
payments on long-term debt of $652,000 at January 31, 2004. Proceeds from
long-term borrowing were $2.675 million at January 31, 2005 compared to proceeds
from long-term borrowing of $750,000 at January 31, 2004. Proceeds from
short-term borrowing were $200,000 at January 31, 2005 compared to proceeds from
short-term borrowing of $10,000 at January 31, 2004. Payments for debt issuance
costs were $55,000 at January 31, 2005 compared to debt issuance costs of
$13,000 at January 31, 2004.
As of
January 31, 2005, the Company was indebted to various banks and individuals in
an aggregate principal amount of approximately $5.844 million under various
loans and promissory notes, compared to $4.145 million as of January 31, 2004.
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
September 2008 to February 2015 and accrue interest at rates ranging from 4.58%
to 5.25% per annum. The Company’s total monthly payments on outstanding
long-term debt obligations are approximately $78,000.
Approximately
$5.772 million of the approximately $5.844 million outstanding as of January 31,
2005 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.
In July
2004, the Company renewed a $1,250,000 open line of credit with one of its
existing lenders. The line of credit is secured by buildings and equipment. The
Company borrowed $200,000 during fiscal year 2005. As of January 31, 2005,
$1,039,750 remains on the open line of credit which will mature July 2005 and
requires variable interest at the bank’s prime rate. The rate was 5.25% at
January 31, 2005.
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, 2005, the Company
was in compliance with the minimum financial ratios.
The
Company has forecasted approximately $750,000 for capital commitments for fiscal
year 2006 consisting 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.
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. The Company is not
currently a party to any agreements to acquire any additional travel centers.
But if the Company were to 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.
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.
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:
| |
§ |
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 |
| |
|
|
| |
§ |
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, 2003, 2004 and 2005 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. 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.
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 ExxonMobil and CITGO
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.
The
ExxonMobil distribution agreement had a three-year term beginning April 1, 2002
and expiring March 31, 2005. ExxonMobil has extended the Company’s current
distribution agreement until August 31, 2005. ExxonMobil is currently developing
a new distributor franchise agreement that will become effective September 1,
2005. During this extension period business will continue under the same terms
and conditions as contained in the current distribution agreement. 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. ExxonMobil’s and CITGO’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 ExxonMobil or CITGO
of its petroleum marketing activities in the Company’s distribution area.
ExxonMobil and CITGO 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
“Item I. Business Operations”). 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
| |
§ |
major and independent oil
companies; |
| |
|
|
| |
§ |
independent service station operators;
|
| |
|
|
| |
§ |
national and independent operators of
restaurants, diners and other eating establishments; and |
| |
|
|
| |
§ |
national and independent operators of
convenience stores and other retail outlets. |
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 twelve 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 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
7A. QUANTITATIVE
AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
As of
January 31, 2005, approximately $5.772 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.
ITEM
8. FINANCIAL
STATEMENTS AND SUPPLEMENTARY DATA
Following
on next page.
BOWLIN
TRAVEL CENTERS, INC.
Financial
Statements
January
31, 2005 and 2004
Report
of Independent Registered
Public
Accounting Firm
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, 2005 and 2004, and the related statements of income, stockholders’
equity and cash flows for each of the three years in the period ended January
31, 2005. These financial statements are the responsibility of the Company’s
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We
conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audits to obtain reasonable assurance about whether the
financial statements are free of material misstatement. The Company is not
required to have, nor were we engaged to perform, an audit of its internal
control over financial reporting. Our audits included consideration of internal
control over financial reporting as a basis for designing audit procedures that
are appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Company's internal control over financial
reporting. Accordingly, we express no such opinion. 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, 2005 and 2004, and the results of its operations and its cash
flows for each of the three years in the period ended January 31, 2005, in
conformity with accounting principles generally accepted in the United States of
America.
/s/
NEFF + RICCI, LLP
Albuquerque,
New Mexico
April 6,
2005
|
BOWLIN
TRAVEL CENTERS, INC. |
|
| |
|
|
Balance
Sheets |
|
|
January
31, 2005 and 2004 |
|
| |
|
|
|
|
|
|
Assets |
|
2005 |
|
2004 |
|
|
Current
assets: |
|
|
|
|
|
|
|
|
Cash
and cash equivalents |
|
$ |
2,043,203 |
|
|
2,239,723
|
|
|
Accounts
receivable |
|
|
8,755 |
|
|
70,148
|
|
|
Accounts
receivable - related parties |
|
|
43,251 |
|
|
37,165
|
|
|
Inventories |
|
|
3,506,831 |
|
|
3,252,721
|
|
|
Prepaid
expenses |
|
|
363,749 |
|
|
512,537 |
|
|
Notes
receivable, current maturities |
|
|
3,368 |
|
|
19,004
|
|
|
Total
current assets |
|
|
5,969,157 |
|
|
6,131,298
|
|
|
Property
and equipment, net |
|
|
13,265,165 |
|
|
10,430,342
|
|
|
Intangible
assets, net |
|
|
225,052 |
|
|
204,409
|
|
|
Interest
receivable |
|
|
21,218 |
|
|
22,142 |
|
|
Investment
in real estate |
|
|
439,036 |
|
|
475,127 |
|
|
Notes
receivable, less current portion |
|
|
165,516 |
|
|
192,788
|
|
|
Total
assets |
|
$ |
20,085,144 |
|
|
17,456,106 |
|
| |
|
|
|
|
|
|
|
|
Liabilities
and Stockholders’ Equity |
|
|
|
|
|
|
|
|
Current
liabilities: |
|
|
|
|
|
|
|
|
Short-term
borrowing |
|
$ |
210,250 |
|
|
10,250 |
|
|
Current
maturities of long-term debt |
|
|
581,944 |
|
|
776,033
|
|
|
Accounts
payable |
|
|
1,083,087 |
|
|
1,109,033
|
|
|
Accrued
salaries and benefits |
|
|
256,565 |
|
|
197,059
|
|
|
Accrued
liabilities |
|
|
224,203 |
|
|
213,627 |
|
|
Deferred
revenue, current |
|
|
30,835 |
|
|
34,057 |
|
|
Total
current liabilities |
|
|
2,386,884
|
|
|
2,340,059 |
|
| |
|
|
|
|
|
|
|
|
Deferred
income taxes |
|
|
877,200
|
|
|
793,300
|
|
|
Deferred
revenue, long-term |
|
|
165,550 |
|
|
— |
|
|
Long-term
debt, less current maturities |
|
|
5,262,422 |
|
|
3,368,586
|
|
|
Total
liabilities |
|
|
8,692,056
|
|
|
6,501,945
|
|
| |
|
|
|
|
|
|
|
|
Commitments |
|
|
— |
|
|
— |
|
| |
|
|
|
|
|
|
|
|
Stockholders’
equity: |
|
|
|
|
|
|
|
|
Preferred
stock, $.001 par value; 1,000,000 shares authorized, |
|
|
|
|
|
|
|
|
none
issued or outstanding at January 31, 2005 and 2004 |
|
|
— |
|
|
— |
|
|
Common
stock, $.001 par value; 10,000,000 shares authorized, |
|
|
|
|
|
|
|
|
4,583,348
issued and outstanding at January 31, 2005 and 2004 |
|
|
4,583
|
|
|
4,583
|
|
|
Additional
paid-in capital |
|
|
9,775,192
|
|
|
9,775,192
|
|
|
Retained
earnings |
|
|
1,613,313 |
|
|
1,174,386 |
|
|
Total
stockholders’ equity |
|
|
11,393,088
|
|
|
10,954,161
|
|
|
Total
liabilities and stockholders’ equity |
|
$ |
20,085,144 |
|
|
17,456,106 |
|
| |
|
|
|
|
|
|
|
|
See
accompanying notes to financial statements. |
|
|
|
|
|
|
|
|
BOWLIN
TRAVEL CENTERS, INC. |
|
| |
|
|
Statements
of Income |
|
| |
|
|
|
|
|
|
|
| |
|
Years
ended January 31, |
|
| |
|
2005 |
|
2004 |
|
2003 |
|
| |
|
|
|
|
|
|
|
|
Gross
sales |
|
$ |
24,089,536 |
|
|
21,848,055 |
|
|
22,502,733 |
|
|
Less
discounts on sales |
|
|
(490,359 |
) |
|
(485,233 |
) |
|
(419,413 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
Net
sales |
|
|
23,599,177 |
|
|
21,362,822 |
|
|
22,083,320 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
Cost
of goods sold |
|
|
15,113,327 |
|
|
13,449,655 |
|
|
14,332,798 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
Gross
profit |
|
|
8,485,850 |
|
|
7,913,167 |
|
|
7,750,522 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
General
and administrative expense |
|
|
(7,072,962 |
) |
|
(6,572,708 |
) |
|
(6,329,558 |
) |
|
Depreciation
and amortization |
|
|
(703,050 |
) |
|
(685,051 |
) |
|
(734,946 |
) |
|
Operating
income |
|
|
709,838 |
|
|
655,408 |
|
|
686,018 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
Other
income (expense): |
|
|
|
|
|
|
|
|
|
|
|
Interest
income |
|
|
45,075 |
|
|
89,973 |
|
|
106,342 |
|
|
Gain
on sale of property and equipment |
|
|
2,997 |
|
|
53,615 |
|
|
3,945 |
|
|
Rental
income |
|
|
189,413 |
|
|
192,864 |
|
|
187,540 |
|
|
Miscellaneous |
|
|
370 |
|
|
1,347 |
|
|
40,018 |
|
|
Interest
expense |
|
|
(203,366 |
) |
|
(184,513 |
) |
|
(219,105 |
) |
|
Total
other income (expense) |
|
|
34,489 |
|
|
153,286 |
|
|
118,740 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
Income
before income taxes |
|
|
744,327 |
|
|
808,694 |
|
|
804,758 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
Income
taxes |
|
|
305,400 |
|
|
314,800 |
|
|
297,500 |
|
|
Net
income |
|
$ |
438,927 |
|
|
493,894 |
|
|
507,258 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
Earnings
per share: |
|
|
|
|
|
|
|
|
|
|
|
Weighted
average common shares |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,583,348 |
|
|
4,583,348 |
|
|
4,583,348 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
Basic
and diluted |
|
$ |
0.10 |
|
|
0.11 |
|
|
0.11 |
|
| |
|
See
accompanying notes to financial
statements. |
|
BOWLIN
TRAVEL CENTERS, INC. |
|
| |
|
|
Statements
of Stockholders’ Equity |
|
|
For
the Years Ended January 31, 2005, 2004 and 2003 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
Common |
|
Additional |
|
|
|
|
|
| |
|
Number |
|
stock, |
|
paid-in |
|
Retained |
|
|
|
| |
|
of
shares |
|
at
par |
|
capital |
|
earnings |
|
Total |
|
| |
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
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 |
|
|
Net
income |
|
|
— |
|
|
— |
|
|
— |
|
|
493,894 |
|
|
493,894 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
at January 31, 2004 |
|
|
4,583,348 |
|
|
4,583 |
|
|
9,775,192 |
|
|
1,174,386 |
|
|
10,954,161 |
|
|
Net
income |
|
|
— |
|
|
— |
|
|
— |
|
|
438,927 |
|
|
438,927 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
at January 31, 2005 |
|
|
4,583,348 |
|
$ |
4,583 |
|
|
9,775,192 |
|
|
1,613,313 |
|
|
11,393,088 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See
accompanying notes to financial statements. |
|
|
|
|
|
|
|
|
|
|
|
|
Management
believes that all notes receivable are fully collectable. Therefore, no
allowance is deemed to be required.
(3) Property
and Equipment
Property
and equipment consist of the following at January 31:
| |
|
Estimated
life (years) |
|
2005 |
|
2004 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
Land |
|
|
|
|
$ |
2,472,104 |
|
|
2,606,925 |
|
|
Buildings
and improvements |
|
|
10
- 40 |
|
|
10,254,455 |
|
|
7,762,510 |
|
|
Machinery
and equipment |
|
|
3 -
10 |
|
|
7,756,969 |
|
|
6,419,054 |
|
|
Autos,
trucks and mobile homes |
|
|
3 -
10 |
|
|
1,759,685 |
|
|
1,580,942 |
|
|
Billboards |
|
|
15
- 20 |
|
|
1,529,529 |
|
|
1,427,686 |
|
|
Construction
in progress |
|
|
|
|
|
27,164 |
|
|
511,600 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
Less
accumulated depreciation |
|
|
|
|
|
(10,534,741 |
) |
|
(9,878,375 |
) |
| |
|
|
|
|
$ |
13,265,165 |
|
|
10,430,342 |
|
On
January 18, 2005, the Company opened a new state-of-the-art travel center in
Picacho, Arizona. Strategically located on I-10 between metropolitan Phoenix and
Tucson, the new facility has 10,000 square feet of retail space, a convenience
department for gourmet coffee and snacks with a large screen plasma TV with
satellite news plus a state-of-the-art super-pumper gasoline facility offering
CITGO brand gasoline. The total cost of the project was approximately
$2,480,000.
On March
24, 2004, the Company disposed of land and building located in Las Cruces, New
Mexico to a third party. The assets had a carrying book value of approximately
$268,000. The Company exchanged the assets for land and building adjacent to the
Company’s warehouse facility located in Las Cruces, New Mexico. The fair value
of assets received and the carrying value of the assets exchanged by the Company
was approximately equal. Therefore, no gain or loss was recorded on the
transaction.
|
BOWLIN TRAVEL CENTERS,
INC. |
|
|
|
Notes to Financial
Statements |
|
January 31,
2005 |
(4) Intangible
Assets
Intangible
assets, at cost, consist of the following at January 31:
| |
|
|
2005 |
|
|
2004 |
|
| |
|
|
|
|
|
|
|
|
Franchise
fees |
|
$ |
132,442 |
|
|
132,442 |
|
|
Debt
issuance costs |
|
|
378,565 |
|
|
323,790 |
|
| |
|
|
511,007 |
|
|
456,232 |
|
|
Less
accumulated amortization |
|
|
(285,955 |
) |
|
(251,823 |
) |
| |
|
$ |
225,052 |
|
|
204,409 |
|
(5) 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 were purchased and installed. One lot and manufactured home
were sold in December 2003. The other manufactured home was moved for the
Company’s use at the new facility in Picacho, Arizona. The thirty-four lots that
remain are for sale.
(6) Short-term
Borrowing
In July
2004, the Company renewed a $1,250,000 open line of credit with one of its
existing lenders. The line of credit is secured by buildings and equipment. The
Company borrowed $200,000 during fiscal year 2005. As of January 31, 2005,
$1,039,750 remains on the open line of credit which will mature July 2005 and
requires variable interest (5.25% at January 31, 2005).
(7) Long-term
Debt
Long-term
debt consists of the following at January 31:
| |
|
2005 |
|
2004 |
|
| |
|
|
|
|
|
|
|
|
Due
bank, maturity September 2008, variable interest (4.58% at January 31,
2005), monthly installments of $27,345, secured by buildings and
equipment |
|
$ |
1,060,089 |
|
|
1,412,886 |
|
|
Due
bank, maturity October 2013, variable interest (5.25% at January 31,
2005), monthly installments of $6,830, secured by land and
buildings |
|
|
571,779 |
|
|
650,859 |
|
|
Due
bank, maturity October 2013, variable interest (5.25% at January 31,
2005), monthly installments of $4,072, secured by land and
buildings |
|
|
343,165 |
|
|
389,730 |
|
|
Due
bank, maturity November 2005, variable interest (5.25% at January 31,
2005), monthly installments of $4,920 secured by buildings and
equipment |
|
|
— |
|
|
337,585 |
|
|
Due
bank, maturity September 2014, variable interest (5.25% at
January 31, 2005), monthly installments of $5,132, secured by
buildings and equipment |
|
|
468,740 |
|
|
524,805 |
|
|
BOWLIN TRAVEL CENTERS,
INC. |
|
|
|
Notes to Financial
Statements |
|
January 31,
2005 |
| |
|
2005 |
|
2004 |
|
| |
|
|
|
|
|
|
|
|
Due
bank, maturity January 2013, interest at 6%, monthly installments of $944,
secured by land. |
|
|
71,881 |
|
|
78,754 |
|
|
Due
bank, maturity January 2011, variable interest (5.25% at January 31,
2005), monthly installments of $10,580, secured by buildings and
equipment. |
|
|
656,991 |
|
|
750,000 |
|
|
Due
bank, maturity February 2015, variable interest (5.25% at January 31,
2005), monthly installments of $14,650, secured by buildings and
equipment. |
|
|
2,175,000 |
|
|
— |
|
|
Due
bank, maturity November 2014, variable interest (5.25% at January 31,
2005), monthly installments of $3,317, secured by buildings and
equipment. |
|
|
496,721 |
|
|
— |
|
| |
|
|
5,844,366 |
|
|
4,144,619 |
|
|
Less
current maturities |
|
|
(581,944 |
) |
|
(776,033 |
) |
| |
|
$ |
5,262,422 |
|
|
3,368,586 |
|
| |
|
|
|
|
|
|
|
Future
maturities of long-term debt for the years ending January 31 are as
follows:
|
2006 |
|
$ |
581,944 |
|
|
2007 |
|
|
616,684 |
|
|
2008 |
|
|
647,817 |
|
|
2009 |
|
|
515,829 |
|
|
2010 |
|
|
372,082 |
|
|
Thereafter |
|
|
3,110,010 |
|
|
Total |
|
$ |
5,844,366 |
|
(8) Income
Taxes
Income taxes
consist of the following for the years ended January 31:
| |
|
Current |
|
Deferred |
|
Total |
|
|
2005: |
|
|
|
|
|
|
|
|
U.S.
Federal |
|
$ |
184,500 |
|
|
69,900 |
|
|
254,400 |
|
|
State
|
|
|
37,000 |
|
|
14,000 |
|
|
51,000 |
|
| |
|
$ |
221,500 |
|
|
83,900 |
|
|
305,400 |
|
|
2004: |
|
|
|
|
|
|
|
|
|
|
|
U.S.
Federal |
|
$ |
92,600 |
|
|
169,700 |
|
|
262,300 |
|
|
State
|
|
|
18,500 |
|
|
34,000 |
|
|
52,500 |
|
| |
|
$ |
111,100 |
|
|
203,700 |
|
|
314,800 |
|
|
BOWLIN TRAVEL CENTERS,
INC. |
|
|
|
Notes to Financial
Statements |
|
January 31,
2005 |
|
|
|
|
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 |
|
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:
| |
|
2005 |
|
2004 |
|
2003 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
Computed
“expected” tax |
|
$ |
253,071 |
|
|
274,956 |
|
|
273,618 |
|
|
State income taxes, net of
federal tax benefit |
|
|
33,629 |
|
|
34,673 |
|
|
32,761 |
|
|
Other |
|
|
18,700 |
|
|
5,171 |
|
|
(8,879 |
) |
|
Total |
|
$ |
305,400 |
|
|
314,800 |
|
|
297,500 |
|
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:
| |
|
2005 |
|
2004 |
|
| |
|
|
|
|
|
|
|
|
Deferred
tax assets - |
|
|
|
|
|
|
|
|
At
January 31, 2005, deferred revenue principally due to accrual for
financial reporting purposes |
|
$ |
55,468 |
|
|
— |
|
|
Other |
|
|
16,239 |
|
|
11,464 |
|
|
Total
gross deferred tax assets |
|
|
71,707 |
|
|
11,464 |
|
|
Deferred
tax liabilities: |
|
|
|
|
|
|
|
|
Property
and equipment, principally due to differences in
depreciation |
|
|
948,907 |
|
|
792,773 |
|
|
At
January 31, 2004 compensated absences principally due to accrual for
financial reporting purposes |
|
|
— |
|
|
11,991 |
|
|
Total
gross deferred liabilities |
|
|
948,907 |
|
|
804,764 |
|
|
Net
deferred tax liability |
|
$ |
877,200 |
|
|
793,300 |
|
| |
|
|
|
|
|
|
|
There was
no valuation allowance for deferred tax assets as of January 31, 2005 or 2004.
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.
|
BOWLIN TRAVEL CENTERS,
INC. |
|
|
|
Notes to Financial
Statements |
|
January 31,
2005 |
(9)
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 $64,361, $48,806 and
$69,886 in fiscal 2005, 2004 and 2003, respectively.
(10)
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 $237,970, $246,528 and $229,724 for the
years ended January 31, 2005, 2004 and 2003, respectively. The Company also
leases land where several of its retail billboards are located and rent expense
for these leases was $152,158, $117,148 and $138,126 for the years ended
January 31, 2005, 2004 and 2003, 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, 2005. 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: |
|
|
|
|
|
2006 |
|
$ |
208,984 |
|
|
2007 |
|
|
148,649 |
|
|
2008 |
|
|
139,213 |
|
|
2009 |
|
|
135,001 |
|
|
2010 |
|
|
127,599 |
|
|
Thereafter |
|
|
1,552,175 |
|
|
Total |
|
$ |
2,311,621 |
|
| |
|
|
|
|
|
BOWLIN TRAVEL CENTERS,
INC. |
|
|
|
Notes to Financial
Statements |
|
January 31,
2005 |
(11) 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 niece of Michael L.
Bowlin. The sales with the associated cost of goods and gross profit consist of
the following at January:
| |
|
2005 |
|
2004 |
|
2003 |
|
| |
|
|
|
|
|
|
|
|
Gross
sales |
|
$ |
1,333,324 |
|
|
1,399,527 |
|
|
1,179,052 |
|
|
Cost
of goods sold |
|
|
1,288,990 |
|
|
1,355,553 |
|
|
1,144,956 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
Gross
profit |
|
$ |
44,334 |
|
|
43,974 |
|
|
34,096 |
|
| |
|
|
|
|
|
|
|
|
|
|
ITEM
9. CHANGES
IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE
None.
ITEM
9A. CONTROLS
AND PROCEDURES
The
Company’s management evaluated, with the participation of the Chief Executive
Officer and Chief Financial Officer, the effectiveness of the Company’s
disclosure controls and procedures as of the end of the period covered by this
report. Based on that evaluation, the Chief Executive Officer and Chief
Financial Officer have concluded that the Company’s disclosure controls and
procedures were effective as of the end of the period covered by this
report.
There has
been no change in the Company’s internal control over financial reporting that
occurred during the fourth quarter of fiscal 2005 that has materially affected,
or is reasonably likely to materially affect, the Company’s internal control
over financial reporting.
It should
be noted that any system of controls, however well designed and operated, can
provide only reasonable, and not absolute, assurance that the objectives of the
system are met. In addition, the design of any control system is based in part
upon certain assumptions about the likelihood of future events. Because of these
and other inherent limitations of control systems, there can be no assurance
that any design will succeed in achieving its stated goals under all potential
future conditions, regardless of how remote.
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 |
61 |
Chairman
of the Board, President and Chief Executive Officer |
|
William
J. McCabe |
55 |
Senior
Vice President -Management
Information
Systems, Secretary, Treasurer and Director |
|
David
B. Raybould |
52 |
Director
|
|
Nina
J. Pratz |
53 |
Chief
Financial Officer, Senior Vice President and Director |
|
Kim
D. Stäke |
49 |
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
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.
Kim
D. Stäke. Ms.
Stäke has served as Vice President and Chief Administrative Officer since April
of 2002. Ms. Stäke has been employed with the Company since December 1997. Ms.
Stäke also serves in such capacities as Controller and SEC compliance. Prior to
December 1997, Ms. Stäke was employed in public accounting. Ms. Stäke holds a
Bachelor’s degree in Business Administration from the University of New
Mexico.
In lieu
of an Audit Committee, the Company’s Board of Directors is responsible for
reviewing and making recommendations concerning the selection of outside
auditors, reviewing the scope, results and effectiveness of the annual audit of
the Company's financial statements and other services provided by the Company’s
independent public accountants. The Board of Directors also reviews the
Company's internal accounting controls, practices and policies. The Board of
Directors has not made a determination as to whether any of the current members
qualify as an “audit committee financial expert”.
The
Company promotes accountability for adherence to honest and ethical conduct;
endeavors to provide full, fair, accurate, timely and understandable disclosure
in reports and documents that the Company files with the Commission and in other
public communications made by the Company; strive to be compliant with
applicable governmental laws, rules and regulations; and promotes prompt
internal reporting of violations of the code of ethics to an appropriate person
or persons. The Company has not formally adopted a written code of business
conduct and ethics that governs to the Company’s employees, officers and
directors as the amendment to Item 406 of Regulation S-K does not require the
Company to do so.
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, 2005, 2004 and 2003. The Company
has no other executive officer whose total annual salary and bonus paid to them
by Bowlin Travel Centers, Inc. exceeded $100,000 for the most recent fiscal
year. All information set forth in this table reflects compensation earned by
these individuals for services with Bowlin Travel Centers.
| |
|
|
|
|
|
Long
Term
Compensation |
|
|
|
| |
|
|
|
Annual
Compensation |
|
Awards |
|
|
|
|
Name
and Principal Position |
|
Fiscal
Year |
|
Salary
($)
(1) |
|
Bonus
($)
|
|
Other
Annual Compensation
($)
|
|
Securities
Underlying
Options/
SARs
(#) |
|
All
Other
Compensation
($) |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Michael
L. Bowlin
Chairman
of the Board,
President,
CEO &
Director |
|
|
2005
2004
2003 |
|
|
97,550
97,550
101,300 |
|
|
35,000
35,000
35,000 |
|
|
17,438
(2
16,664
(2
16,823
(2 |
)
)
)
|
|
|
|
|
|
|
________________
| (1) |
Includes
amounts deferred at the election of the CEO to be contributed to his
401(k) Profit Sharing Plan account. |
| |
|
| (2) |
Amount
for 2005 includes (i) $1,620 of Bowlin Travel Centers discretionary
matching contributions allocated to Mr. Bowlin’s 401(k) Profit Sharing
Plan account; (ii) $9,318 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 car allowance. Amount for 2004 includes (i) $1,620
of Bowlin Travel Centers discretionary matching contributions allocated to
Mr. Bowlin’s 401(k) Profit Sharing Plan account; (ii) $8,544 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 car allowance.
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 use of a company owned vehicle.
|
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, 2005, 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.
|
Name
of Beneficial Owner |
|
Amount
Paid
and
Nature of
Beneficial
Ownership
(3) |
|
Percent
of
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. Stäke (1) |
|
|
* |
|
|
* |
|
|
David
B. Raybould (1) |
|
|
|
|
|
|
|
|
Monica
A. Bowlin (6)(1) |
|
|
2,818,536 |
|
|
61.5% |
|
|
Jonathan
Brooks (2) |
|
|
585,550 |
|
|
12.8% |
|
|
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 27, 2005. |
| (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. |
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 niece of Michael L.
Bowlin. The sales with the associated cost of goods and gross profit consist of
the following the year ended January 31:
| |
|
2005 |
|
2004 |
|
2003 |
|
| |
|
|
|
|
|
|
|
|
Gross
sales |
|
$ |
1,333,324 |
|
|
1,399,527 |
|
|
1,179,052 |
|
|
Cost
of goods sold |
|
|
1,288,990 |
|
|
1,355,553 |
|
|
1,144,956 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
Gross
profit |
|
$ |
44,334 |
|
|
43,974 |
|
|
34,096 |
|
ITEM
14. PRINCIPAL
ACCOUNTING FEES AND SERVICES
The Board
of Directors approves the fees and other significant compensation to be paid to
the independent auditors for the purpose of preparing or issuing an audit report
or related work. The Company provides appropriate funding, as determined by the
Board of Directors, for payment of fees and other significant compensation to
the independent auditor. The Board of Directors also preapproves all auditing
services and permitted non-audit services (including the fees and terms thereof)
to be performed for the Company by its independent auditors, subject to the de
minimis exceptions for non-audit services described in the Securities Exchange
Act of 1934.
Audit
Fees
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 years ended January 31, 2005 and January 31, 2004, and for the review
of the financial statements included in the Company’s Quarterly Reports on Form
10-Q for the fiscal years ended January 31, 2005 and January 31, 2004, were
approximately $35,000.
PART
IV
ITEM
15. EXHIBITS
AND FINANCIAL STATEMENT SCHEDULES
| |
The
exhibits as indexed below are included as part of this Form
10-K. |
INDEX
TO EXHIBITS