General
and administrative expenses for continuing operations consist primarily
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, accounting,
legal and investor relations fees. General and administrative
expenses increased 1.5% to $1.849 million for the three months ended October
31,
2007, from $1.821 million for the three months ended October 31,
2006. The increase is due to increases in personnel related costs,
general repair and maintenance that includes weed and trash clean up at
the
retail locations, donations, costs associated with the Company’s inventory
bar-coding project and an increase in supplies partially offset by decreases
in
sign repair and maintenance, freight as a result of volume purchasing and
decreases in overall insurance costs.
Depreciation
and amortization expense for continuing operations increased 7.3% to $205,000
for the three months ended October 31, 2007, from $191,000 for the three
months
ended October 31, 2006. The increase is associated with certain asset
additions for the three months ended October 31, 2007 offset by some assets
becoming fully depreciated or disposed of.
The
above
factors contributed to an overall decrease in operating income from continuing
operations of 361.4% to a loss of $183,000 for the three months ended October
31, 2007, compared to operating income from continuing operations of $70,000
for
the three months ended October 31, 2006.
BOWLIN
TRAVEL CENTERS, INC.
Non-operating
income (expense) includes interest income, gains and losses from
the sale of
assets, rental income and interest expense. Interest income increased
114.8% to $58,000 for the three months ended October 31, 2007,
compared to
interest income of $27,000 for the three months ended October 31,
2006. The increase is due to better interest rates in the current
period and additional certificates of deposit purchased by the
Company from the
proceeds of the sale of the Rio North facility. There was a gain from
the sale of assets of $10,000 for the three months ended October
31, 2007 from
$29,000 for the three months ended October 31, 2006. The gain of
$10,000 for the three months ended October 31, 2007 is due to installment
payments received related to notes receivable that include deferred
gains of
approximately $5,000 and a gain on the sale of property, fixtures
and equipment
located in Lordsburg, New Mexico to Don Juan Restaurant of approximately
$5,000. The gain of $29,000 for the three months ended October 31,
2006 is due to the sale of vehicles and equipment of approximately
$2,000 as
well as installment payments received related to notes receivable
that include
deferred gains of approximately $27,000. Rental income was $38,000
for the three months ended October 31, 2007 compared to $44,000
for the three
months ended October 31, 2006. Interest expense decreased 3.5% to
$83,000 for the three months ended October 31, 2007, from $86,000
for the three
months ended October 31, 2006. The decrease is primarily due to the
Company’s change in terms agreements on September 29, 2006 with its primary
lender that resulted in a lower interest rate.
Income
(loss) from continuing operations before income taxes decreased
290.5% to a loss
of $160,000 for the three months ended October 31, 2007, compared
to income
before income taxes of $84,000 for the three months ended October
31, 2006,
primarily due to increases in discounts as a result of a 25% off
sale on all
merchandise in August 2007 and a gold jewelry sale that began before
Mother’s
Day and has continued through the year, an increase in cost of
goods sold, and
an increase in general and administrative expense. As a percentage of
net revenues, the loss from continuing operations before income
taxes was 2.4%
for the three months ended October 31, 2007, compared income from
continuing
operations of 1.2% for the three months ended October 31,
2006.
Income
tax benefit (expense) for continuing operations decreased 223.3% with an
income
tax benefit of $53,000 for the three months ended October 31, 2007, compared
to
income tax expense for continuing operations of $43,000 for the three months
ended October 31, 2006. The decrease is a result of the loss from
continuing operations before income taxes of $160,000 for the three months
ended
October 31, 2007 compared to income from continuing operations before income
taxes of $84,000 for the three months ended October 31, 2006.
The
foregoing factors contributed to a net loss from continuing operations
of
$107,000 for the three months ended October 31, 2007, compared to net income
from continuing operations of $41,000 for the three months ended October
31,
2006.
Discontinued
operations include the property, fixtures and equipment for the two retail
locations that the Company has listed for sale as well as the retail location
sold during the quarter ending October 31, 2007. There was a loss of
$68,000 for discontinued operations for the three months ended October
31, 2007
compared to a loss of $84,000 for the three months ended October 31,
2006. There is an income tax benefit of $28,000 for the three months
ended October 31, 2007, compared to an income tax benefit of $36,000 for
the
three months ended October 31, 2006. The net loss from discontinued
operations for the three months ended October 31, 2007 is $40,000 compared
to a
net loss from discontinued operations for the three months ended October
31,
2006 of $48,000.
The
foregoing factors contributed to a net loss for the three months ended
October
31, 2007 of $147,000 compared to net loss of $7,000 for the three months
ended
October 31, 2006.
BOWLIN
TRAVEL CENTERS, INC.
Comparison
of the Nine Months Ended October 31, 2007 and October 31,
2006
Gross
sales from continuing operations at the Company’s travel centers increased by
2.0% to $21.986 million for the nine months ended October 31, 2007, from
$21.561
million for the nine months ended October 31, 2006. Merchandise sales
from continuing operations increased 0.8% to $7.379 million for the nine
months
ended October 31, 2007, from $7.318 million for the nine months ended
October
31, 2006. The increase is primarily due to increases in gold and moccasin
sales
offset by a decrease in general merchandise sales, fireworks and t-shirts
sales. In addition, gas prices continue to have a negative impact on
sales. Retail gasoline sales from continuing operations increased
4.0% to $7.998 million for the nine months ended October 31, 2007, from
$7.690
million for the same period in 2006. The increase is due to an
increase in the average retail price per gallon of $0.15 partially offset
by a
decrease in gallons sold of approximately 358,000 gallons and decreased
highway
traffic due to weather conditions during the first quarter of fiscal
year
2008. The average gallon of gasoline retailed for $3.06 for the nine
months ended October 31, 2007 compared to $2.91 for the nine months ended
October 31, 2006. Restaurant sales from continuing operations
increased 0.3% to $1.920 million for the nine months ended October 31,
2007,
from $1.915 million for the nine months ended October 31, 2006. The
increase is due increases in retail prices offset by increases in convenience
store food sales at Picacho Peak Plaza that negatively affect restaurant
sales,
weather related conditions that slowed overall highway traffic during
the first
quarter of fiscal year 2008 as well as overall gas prices that continue
to
negatively affect sales. Wholesale gasoline sales to independent
retailers increased 1.1% to $4.689 million for the nine months ended
October 31,
2007, from $4.638 million for the nine months ended October 31,
2006. The increase is primarily due to market price increases
partially offset by a decrease in fuel gallons purchased of approximately
129,000 gallons and one independent retailer present in the prior
period.
Cost
of
goods sold for continuing operations increased 2.8% to $14.935 million
for the
nine months ended October 31, 2007, from $14.529 million for the nine months
ended October 31, 2006. Merchandise cost of goods from continuing
operations increased 3.3% to $2.594 million for the nine months ended October
31, 2007, from $2.511 million for the nine months ended October 31,
2006. The increase is primarily related to an adjustment in the prior
period due to inventory variances related to the third quarter interim
physical
inventories at the Company’s retail locations and is offset by the decrease in
sales due to the weather related conditions that slowed overall highway
traffic
during the first quarter of fiscal 2008. Retail gasoline cost of
goods from continuing operations increased 3.7% to $7.123 million for the
nine
months ended October 31, 2007, from $6.866 million for the nine months
ended
October 31, 2006. The increase corresponds to increases in overall market
prices
during the period and is partially offset by a decrease in gallons sold
and
decreased highway traffic during the first quarter of fiscal 2008 due to
weather
conditions. Restaurant cost of goods from continuing operations
increased 2.4% to $548,000 for the nine months ended October 31, 2007,
from
$535,000 for the nine months ended October 31, 2006. The increase is
due to higher costs related to gasoline fuel surcharges. Wholesale
gasoline cost of goods increased 1.1% to $4.670 million for the nine months
ended October 31, 2007, from $4.618 million for the nine months ended October
31, 2006. The increase is primarily due to market price increases
offset by a decrease in fuel gallons purchased due to on independent retailer
present in the prior period. Cost of goods sold as a percentage of
net revenues increased to 69.1% for the nine months ended October 31, 2007,
as
compared to 67.9% for the nine months ended October 31, 2006. The
increase is primarily due to the increase in of overall market prices increases
during the period partially offset by a decrease in fuel gallons
purchased.
Gross
profit from continuing operations decreased 2.9% to $6.673 million for
the nine
months ended October 31, 2007, from $6.871 million for the nine months
ended
October 31, 2006. The decrease is primarily due to an increase in
discounts on sales as a result of a 25% off sale on all merchandise in
August
2007 as well as a gold jewelry sale that started before Mother’s Day and has
continued through the year, and a decrease in merchandise sales from continuing
operations due to related to weather conditions that slowed overall highway
traffic during the quarter ended April 30, 2007.
BOWLIN
TRAVEL CENTERS, INC.
General
and administrative expenses for continuing operations consist primarily
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, accounting,
legal and investor relations fees. General and administrative
expenses increased 5.8% to $5.756 million for the nine months ended October
31,
2007, from $5.440 million for the nine months ended October 31,
2006. The increase is due to increases in personnel related costs,
general repair and maintenance that includes repair and maintenance related
to
overall weather conditions such as snow removal and wind damage as well
as an
increase in weed and trash clean up at the retail locations, donations,
accounting costs related to Section 404 of Sarbanes-Oxley internal controls
over
financial reporting compliance, utilities also related to the unusual
winter
weather, and costs associated with the Company’s inventory bar-coding project
partially offset by decreases in sign repair and maintenance as a result
of the
winter weather limiting the Company’s ability to travel to billboard locations
and the loss of one of the Company’s sign repair contractor vendors, freight as
a result of volume purchasing and decreases in overall insurance.
Depreciation
and amortization expense for continuing operations increased 5.5% to
$594,000
for the nine months ended October 31, 2007, from $563,000 for the nine
months
ended October 31, 2006. The increase is associated with certain asset
additions offset by some assets becoming fully depreciated or disposed
of.
The
above
factors contributed to an overall decrease in operating income from continuing
operations of 62.8% to $323,000 for the nine months ended October 31,
2007,
compared to operating income from continuing operations of $868,000 for
the nine
months ended October 31, 2006.
Non-operating
income (expense) includes interest income, gains and losses from the sale
of
assets, rental income and interest expense. Interest income increased
107.8% to $133,000 for the nine months ended October 31, 2007, compared
to
interest income of $64,000 for the nine months ended October 31,
2006. The increase is due to better interest rates in the current
period and additional certificates of deposit purchased by the Company
from the
proceeds of the sale of the Rio North facility. Gains from the sale
of assets increased to $37,000 for the nine months ended October 31, 2007
from
$35,000 for the nine months ended October 31, 2006. The gain of
$37,000 for the nine months ended October 31, 2007 is due to installment
payments received related to notes receivable that include deferred gains
of
approximately $37,000, an earnest deposit of $24,000 that was forfeited
due to a
purchase agreement closing date expiring, a gain of approximately $5,000
from
the sale of property, fixtures and equipment located in Lordsburg, New
Mexico to
Don Juan Restaurant, partially offset by a write off of approximately $28,000
of
impaired assets, and a loss of approximately $1,000 on the sale of equipment
and
two vehicles. The gain of $35,000 for the nine months ended October
31, 2006 is due to the sale of vehicles and equipment of approximately
$3,000 as
well as approximately $32,000 of installment payments received related
to notes
receivable that include deferred gains. Miscellaneous income of
$2,000 for the nine months ended October 31, 2007 is due to a movie company
using one of the Company’s land locations for filming. Miscellaneous
income for the nine months ended October 31, 2006 is the sale of fill dirt
to a
construction company working in southern New Mexico. Rental income
was $123,000 for the nine months ended October 31, 2007 compared to $132,000
for
the nine months ended October 31, 2006. Interest expense increased
16.4% to $298,000 for the nine months ended October 31, 2007, from $256,000
for
the nine months ended October 31, 2006. The increase is primarily due
to fees related to the exchange of debt of approximately $62,000 (see Note
5 to
the financial statements), partially offset by the Company’s change in terms
agreements on September 29, 2006 with its primary lender that resulted
in a
lower interest rate.
Income
from continuing operations before income taxes decreased 63.1% to $320,000
for
the nine months ended October 31, 2007, compared to income before income
taxes
of $867,000 for the nine months ended October 31, 2006. As a
percentage of net revenues, income before income taxes was 1.5% for the
nine
months ended October 31, 2007, compared to 4.1% for the nine months ended
October 31, 2006.
BOWLIN
TRAVEL CENTERS, INC.
Income
tax expense for continuing operations decreased 62.0% to $133,000 for
the nine
months ended October 31, 2007, compared to income tax expense for continuing
operations of $350,000 for the nine months ended October 31,
2006. The decrease is primarily a result of lower income from
continuing operations before income taxes.
The
foregoing factors contributed to income from continuing operations of
$187,000
for the nine months ended October 31, 2007, compared to net income from
continuing operations of $517,000 for the nine months ended October 31,
2006.
Discontinued
operations include the property, fixtures and equipment for the two retail
locations that the Company has listed for sale as well as the retail
location
sold during the nine months ending October 31, 2007. There was a loss
of $270,000 for discontinued operations for the nine months ended October
31,
2007 compared to a loss of $242,000 for the nine months ended October
31,
2006. There is an income tax benefit of $107,000 for the nine months
ended October 31, 2007 compared to an income tax benefit of $98,000 for
the nine
months ended October 31, 2006. The net loss from discontinued
operations for the nine months ended October 31, 2007 is $163,000 compared
to a
net loss from discontinued operations for the nine months ended October
31, 2006
of $144,000.
Income
from the disposal of discontinued operations, net of income tax expense
of
$549,000 for the nine months ended October 31, 2007, is due to the sale
of
property, fixtures and equipment on located 17 miles west of Albuquerque,
New
Mexico at the Rio Puerco exit. The gain on the sale of the property,
fixtures and equipment of approximately $967,000 was reduced by the retirement
of loan fees of approximately $69,000 that were related to this retail
location
due to the exchange of debt (see Note 5 to the financial statements)
and is net
of income tax expense of approximately $349,000.
The
foregoing factors contributed to net income for the nine months ended October
31, 2007 of $573,000 compared to net income of $373,000 for the nine months
ended October 31, 2006.
Liquidity
and Capital Resources
At
October 31, 2007, the Company had working capital of $7.147 million compared
to
working capital of $5.052 million at January 31, 2007 (“working capital” is the
excess of total current assets over total current liabilities). At
October 31, 2007, the Company had a current ratio of 5.1:1; compared to
a
current ratio of 3.7:1 as of January 31, 2007 (“current ratio” is the ratio of
current assets to current liabilities). The increase in working
capital is due to an increase in marketable securities of $1.747 million,
an
increase accounts receivable of $36,000, an increase in prepaid expenses
of
$39,000, an increase in interest receivable of $18,000, an increase in
income
tax assets of $297,000, a decrease in accrued liabilities of $175,000,
and a
decrease in deferred revenue of $20,000 partially offset by a decrease
in cash
of $107,000, a decrease in inventory of $69,000, and an increase in accounts
payable of $59,000. The increase in marketable securities, which
consist of twelve-month certificates of deposit, is due to $247,000 certificates
with maturity dates greater than three months in the current period as
well as
the purchase of $1.500 million certificates. The increase in accounts
receivable is due to timing of electronic fund transfers related to the
Company’s wholesale gasoline sales. The increase in prepaid expenses
is primarily due to an increase in prepaid insurance as June 1, 2007 was
the
renewal date partially offset by prepaid rent. The increase in
interest receivable is primarily due to additional certificates of
deposit. The increase in income tax assets is a result of deferred
tax assets and liabilities recognized for future tax consequences attributable
to differences between financial statement carrying amounts of existing
current
assets and liabilities and their respective tax bases. The decrease
in accrued liabilities is due to decreases in accrued salaries and wages
plus
the payroll taxes related to discretionary bonuses were accrued through
January
31, 2007 and paid during the current fiscal year partially offset by an
increase
accrued in property taxes that will be paid in December 2007. The
decrease in deferred revenue is a result of outdoor advertising billboard
revenue as the Company cancelled its contract with Clear Channel. The
decrease in cash is primarily due to no certificates of deposit with less
than
three month maturities at the end of October 31, 2007. The decrease
in inventory is primarily due to the sale of Rio North and the elimination
of
that inventory, as well as a decrease in inventory at the central warehouse,
partially offset by an increase in gasoline inventory due to the increase
in
market prices. The increase in accounts payable is primarily due to
timing of electronic fund transfers related to the Company’s wholesale gasoline
sales
BOWLIN
TRAVEL CENTERS, INC.
The
Company’s travel center operations are subject to seasonal
fluctuations. The first quarter of the fiscal year is typically the
weakest. The second quarter is normally the Company’s strongest due
to the summer being the Company’s peak season. The third quarter of
the fiscal year is not as strong due to the end of summer. Throughout
the Company’s fiscal year, revenues and earnings may experience substantial
fluctuations from quarter to quarter. These fluctuations could result
in periods of increased or decreased cash flow as well as increased
or decreased
net income.
Net
cash
provided by operating activities from continuing operations was $214,000
for the
nine months ended October 31, 2007, compared to $1.086 million for
the nine
months ended October 31, 2006. Net cash provided by operating
activities for the nine months ended October 31, 2007 is primarily
attributable
to net income of $573,000 adjusted for depreciation and amortization
expense of
$655,000, the increase in deferred income taxes of $298,000, changes
in
operating assets and liabilities, net, of $439,000, and the retirement
of debt
issuance costs (see Note 5 to the financial statements) of $132,000,
partially
offset by the gain on sale of assets of $1.004 million. Net cash
provided by operating activities for the nine months ended October
31, 2006 was
primarily attributable to net income of $373,000 adjusted for depreciation
and
amortization expense of $660,000 and changes in operating assets and
liabilities, net, of $121,000 partially offset by a decrease in deferred
income
taxes of $45,000 and the gain on sales of assets of $35,000.
Net
cash
used in investing activities for the nine months ended October 31, 2007
was
$117,000 primarily consisting of an increase in marketable securities
of $1.727
million and $874,000 used for purchases of property and equipment partially
offset by the proceeds from the sale of property and equipment and the
sale of
property, fixtures and equipment of $2.448 million and payments from
notes
receivable of $78,000. Net cash used in investing activities for the
nine months ended October 31, 2006 was $577,000, primarily consisting
of
$602,000 used for purchases of property and equipment, notes receivable,
net of
$190,000 partially offset by the proceeds from the sale of property and
equipment of $142,000 and a decrease in marketable securities of
$81,000.
Net
cash
used by financing activities for the nine months ended October 31, 2007
was
$204,000, which consisted of payments on long-term debt. For the nine
months ended October 31, 2006, net cash used in financing activities was
$339,000 that consisted of payments on long-term debt.
The
Company’s business and cash flow from operations rely on revenues generated from
the sale of gasoline. During the quarter ended October 31, 2007,
retail gasoline sales from continuing operations accounted for approximately
37.0% of the Company’s net sales. To the extent that the availability
of gasoline was restricted for any reasons, including due to storms, political
issues, pipeline disruption, war, act or threats of terrorism in the United
States or abroad, the Company’s gross sales would be affected, thereby reducing
the amount of net cash that would be provided by operating
activities. It is impossible to foresee or predict the exact economic
effect on cash flows that any such restriction would have.
