Bowlin Travel Centers (BWTL) 10-Q/A 2006 Q2 Quarterly report (amended)

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q/A

(Amendment No. 1)

ý	QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the quarterly period ended April 30, 2006
o	TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the transition period from __________ to __________

Commission file number:  000-31701

BOWLIN TRAVEL CENTERS, INC.

(Exact name of registrant as specified in its charter)

NEVADA	85-0473277
(State or other jurisdiction of	(IRS Employer Identification No.)
incorporation or organization)
150 LOUISIANA NE, ALBUQUERQUE, NM	87108
(Address of principal executive offices)	(Zip Code)

   505-266-5985

(Registrant’s telephone number, including area code)

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 ý No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer (as defined by Rule 12b-2 of the Exchange Act).

Large accelerated filer o Accelerated filer o  Non-accelerated filer ý

Indicate by check mark whether the registrant is a shell company (as defined by Rule 12b-2 of the Exchange Act).  Yes  o No ý

As of June 12, 2006, 4,583,348 shares of the issuer’s common stock were outstanding.

EXPLANATORY NOTE

We are filing this Amendment No. 1 to our Quarterly Report on Form 10-Q for the three months ended April 30, 2006 for the purpose of making certain disclosure changes in response to a comment letter from the Division of Corporate Finance of the Securities and Exchange Commission relating to our 10-K. We have updated Item 2, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” related to the “Overview” and “Liquidity and Capital Resources”; Item 3, “Quantitative and Qualitative Disclosures About Market Risk” and Item 4 “Controls and Procedures” to give effect to the filing of this Amendment No. 1. We have also filed updated certifications pursuant 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and certifications pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1933.

Other than the changes described in the preceding paragraph, no other information in this Amendment No. 1 has been updated to reflect any subsequent information or events since the original filing of this Form 10-Q on June 12, 2006.

BOWLIN TRAVEL CENTERS, INC.

	INDEX
PART I.  FINANCIAL INFORMATION		Page No.
Item 1.	Financial Statements
	Condensed Balance Sheets as of April 30, 2006 and January 31, 2006	3
	Condensed Statements of Income for the Three Months Ended April 30, 2006 and 2005	4
	Condensed Statements of Cash Flows for the Three Months Ended April 30, 2006 and 2005	5
	Notes to the Condensed Financial Statements	6
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	7
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	10
Item 4.	Controls and Procedures	11
PART II.  OTHER INFORMATION
Item 1.	Legal Proceedings	11
Item 1A.	Risk Factors	11
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	11
Item 3.	Defaults Upon Senior Securities	11
Item 4.	Submission of Matters to a Vote of Security Holders	11
Item 5.	Other Information	11
Item 6.	Exhibits	12
	Signatures	12

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PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

BOWLIN TRAVEL CENTERS, INC.

Condensed Balance Sheets

(in thousands, except share data)

	April 30,		January 31,
	2006		2006
	(Unaudited)
Assets
Current assets:
Cash and cash equivalents	$	2,915	$	2,615
Accounts receivable		275		41
Deferred income taxes		50		72
Inventories		3,964		3,606
Prepaid expenses		167		276
Notes receivable, current maturities		20		9
Total current assets		7,391		6,619
Property and equipment, net		12,505		12,541
Intangible assets, net		183		190
Interest receivable		4		13
Investment in real estate		415		415
Notes receivable		88		102
Total assets	$	20,586	$	19,880
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable	$	1,822		861
Current installments of long-term debt		514		515
Accrued liabilities		578		682
Deferred revenue		18		96
Total current liabilities		2,932		2,154
Deferred income taxes		864		884
Long-term debt, less current installments		4,675		4,799
Total liabilities		8,471		7,837
Stockholders’ equity:
Preferred stock, $0.001 par value; 1,000,000 shares authorized, none issued or outstanding at April 30, 2006 and January 31, 2006		—		—
Common stock, $0.001 par value; 10,000,000 shares authorized, 4,583,348 issued and outstanding at April 30, 2006 and January 31, 2006		5		5
Additional paid in capital		9,775		9,775
Retained earnings		2,335		2,263
Total stockholders’ equity		12,115		12,043
Total liabilities and stockholders’ equity	$	20,586	$	19,880

See accompanying notes to condensed financial statements.

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BOWLIN TRAVEL CENTERS, INC.

Condensed Statements of Income

(in thousands, except share and per share data)

	Three Months Ended
	April 30,			April 30,
	2006			2005
	(Unaudited)			(Unaudited)
Gross sales	$	7,639		$	6,194
Less discounts on sales		87			44
Net sales		7,552			6,150
Cost of goods sold		5,266			4,040
Gross profit		2,286			2,110
General and administrative expenses		(1,935	)		(1,840	)
Depreciation and amortization		(217	)		(226	)
Operating income		134			44
Non-operating income (expense):
Interest income		17			17
Interest expense		(103	)		(92	)
Gain on sale of property and equipment		3			—
Miscellaneous income		24			—
Rental income		45			45
Total non-operating income (expense)		(14	)		(30	)
Income before income taxes		120			14
Income tax expense		48			8
Net income	$	72		$	6
Earnings per share:
Weighted average common shares outstanding		4,583,348			4,583,348
Basic and diluted	$	0 .016		$	0 .001

See accompanying notes to condensed financial statements.

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BOWLIN TRAVEL CENTERS, INC.

Condensed Statements of Cash Flows

(in thousands)

	For the Three Months Ended
	April 30,			April 30,
	2006			2005
	(Unaudited)			(Unaudited)
Cash flows from operating activities:
Net income	$	72		$	6
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization		217			226
Amortization of loan fee		5			9
Deferred income taxes, net		2			(7	)
Gain on sale of assets		(3	)		—
Changes in operating assets and liabilities, net		296			(20	)
Net cash provided by operating activities		589			214
Cash flows from investing activities:
Proceeds from sale of assets		1			—
Purchases of property and equipment, net		(179	)		(94	)
Accrued interest receivable		9			(8	)
Notes receivable, net		5			—
Net cash used in investing activities		(164	)		(102	)
Cash flows from financing activities:
Payments on long-term debt		(125	)		(137	)
Net cash used in financing activities		(125	)		(137	)
Net increase (decrease) in cash and cash equivalents		300			(25	)
Cash and cash equivalents at beginning of period		2,615			2,043
Cash and cash equivalents at end of period	$	2,915		$	2,018

See accompanying notes to condensed financial statements.

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BOWLIN TRAVEL CENTERS, INC.

Notes to Condensed Financial Statements (Unaudited)

1.   The condensed financial statements of Bowlin Travel Centers, Inc. (the “Company”) as of and for the three months ended April 30, 2006 and 2005 are unaudited and reflect all adjustments (consisting only of normal recurring adjustments) which are, in the opinion of management, necessary for a fair presentation of the financial position and operating results for the interim periods. The interim financial statements should be read in conjunction with the financial statementsand notes, together with management’s discussion and analysis of financial condition and results of operations, contained in the Company’s annual report on Form 10-K for the fiscal year ended January 31, 2006. Results of operations for interim periods are not necessarily indicative of results that may be expected for the year as a whole.

2.   Beginning February 1, 2006, the Company began wholesaling gasoline to three new independent wholesale locations. Two of the independent wholesalers will sell ExxonMobil petroleum products. The other independent wholesaler will sell CITGO petroleum products.

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BOWLIN TRAVEL CENTERS, INC.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Certain statements contained herein with respect to factors which may affect future earnings, including management’s beliefs and assumptions based on information currently available, are forward-looking statements made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements that are not historical facts involve risks and uncertainties, and results could vary materially from the descriptions contained herein.

Overview

The following is a discussion of the financial condition and results of operations of the Company as of and for the periods ended April 30, 2006 and 2005. This discussion should be read in conjunction with the Financial Statements of the Company and the related notes included in the Company’s annual report on Form 10-K for fiscal year ended January 31, 2006.

The Company’s principal business activities include the operation of full-service travel centers and restaurants that offer brand name food and gasoline, and a unique variety of Southwestern merchandise to the traveling public in New Mexico and Arizona.

The Company’s gross retail sales include merchandise, retail gasoline sales, restaurant sales and wholesale gasoline sales. Each of the Company’s travel center locations retail a variety of unique Southwestern souvenirs and gifts. Eleven of the twelve retail operations retail gasoline. Five of the Company’s twelve locations have full-service restaurants that operate under the Dairy Queen/Brazier or Dairy Queen brand names. The merchandise, gasoline and restaurant retail sales are all a part of the Company’s ongoing retail business and have been aggregated.

The Company wholesales gasoline to four independent third party locations. The wholesale gasoline does not meet the operating segment definition criteria of paragraph 10(b) of FAS 131 as the Company does not review wholesale gasoline operating results for decision making about resource allocation. Therefore, wholesale gasoline sales have been aggregated with the Company’s business activities.

The discussion of results of operations, which follows, compares such selected operating data for the interim periods presented.

Results of Operations

The following table presents certain income and expense items derived from the Statements of Operations for the three months ended April 30, 2006 and 2005 (unaudited and amounts in thousands):

	Three Months Ended
	April 30, 2006		April 30, 2005
Selected Statement of Operations Data:
(in thousands, except per share data)
Gross sales	$	7,639	$	6,194
Net income	$	72	$	6
Earnings per share	$	0.016	$	0.001

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BOWLIN TRAVEL CENTERS, INC.

Comparison of the Three Months Ended April 30, 2006 and April 30, 2005

Gross sales at the Company’s travel centers increased by 23.3% to $7.639 million for the three months ended April 30, 2006, from $6.194 million for the three months ended April 30, 2005. Merchandise sales increased 5.9% to $2.514 million for the three months ended April 30, 2006, from $2.376 million for the three months ended April 30, 2005. The increase is due to sales incentives, supervisory support dedicated to the stores as well as improved performance by store management. Retail gasoline sales increased 13.3% to $3.117 million for the three months ended April 30, 2006, from $2.752 million for the same period in 2005. The increase is due to market price increases. Restaurant sales increased 2.3% to $618,000 for the three months ended April 30, 2006, from $604,000 for the three months ended April 30, 2005. The increase is due to improvement in middle management that supports restaurant operations. Wholesale gasoline sales to independent retailers increased 200.9% to $1.390 million for the three months ended April 30, 2006, from $462,000 for the three months ended April 30, 2005. The increase is primarily due to the addition of three independent wholesale locations during the three months ended April 30, 2006.

Cost of goods sold increased 30.3% to $5.266 million for the three months ended April 30, 2006, from $4.040 million for the three months ended April 30, 2005. Merchandise cost of goods decreased 0.4% to $929,000 for the three months ended April 30, 2006, from $933,000 for the three months ended April 30, 2005. This decrease corresponds to adjustments of standard markups within certain product categories that the Company gets as a result of volume purchasing. Retail gasoline cost of goods increased 12.6% to $2.782 million for the three months ended April 30, 2006, from $2.471 million for the three months ended April 30, 2005. The increase corresponds to market price increases. Restaurant cost of goods decreased 6.6% to $171,000 for the three months ended April 30, 2006, from $183,000 for the three months ended April 30, 2005. The decrease is primarily due to a realignment of retail prices in relationship to cost increases as well as better inventory control. Wholesale gasoline cost of goods increased 205.5% to $1.384 million for the three months ended April 30, 2006, from $453,000 for the three months ended April 30, 2005. The increase is primarily due to the addition of three independent wholesale locations during the three months ended April 30, 2006. Cost of goods sold as a percentage of gross revenues increased to 68.9% for the three months ended April 30, 2006, as compared to 65.2% for the three months ended April 30, 2005.

Gross profit increased 8.3% to $2.286 million for the three months ended April 30, 2006, from $2.110 million for the three months ended April 30, 2005. The increase corresponds to adjustments of standard markups within certain product categories that the Company gets as a result of volume purchasing as well as improved performance by store management.

General and administrative expenses 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, accounting, legal and investor relations fees. General and administrative expenses increased 5.2% to $1.935 million for the three months ended April 30, 2006, from $1.840 million for the three months ended April 30, 2005. The increase is due to store related personnel expenses, sign repairs and maintenance as the Company prepares for its peak season, and credit card fees related to processing credit cards through the Company’s gasoline distributorships.

Depreciation and amortization expense decreased 4.0% to $217,000 for the three months ended April 30, 2006, from $226,000 for the three months ended April 30, 2005. The decrease is associated with certain assets becoming fully depreciated.

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BOWLIN TRAVEL CENTERS, INC.

The above factors contributed to an overall increase in operating income of 204.5% to $134,000 for the three months ended April 30, 2006, compared to operating income of $44,000 for the three months ended April 30, 2005.

Non-operating income (expense) includes interest income, rental income and interest expense. Interest income is unchanged at $17,000 for the three months ended April 30, 2006 and for the three months ended April 30, 2005. There was miscellaneous income of $24,000 for the three months ended April 30, 2006 compared to no miscellaneous income for the three months ended April 30, 2005. Rental income was $45,000 for the three months ended April 30, 2006 as well as the three months ended April 30, 2005. Interest expense increased 12.0% to $103,000 for the three months ended April 30, 2006, from $92,000 for the three months ended April 30, 2005. The increase is primarily due to increases in interest rates.

Income before income taxes increased 757.1% to $120,000 for the three months ended April 30, 2006, compared to income before income taxes of $14,000 for the three months ended April 30, 2005. As a percentage of gross revenues, income before income taxes was 1.6% for the three months ended April 30, 2006, compared to 0.2% for the three months ended April 30, 2005.

Income tax expense increased 500.0% to $48,000 for the three months ended April 30, 2006, compared to an income tax expense of $8,000 for the three months ended April 30, 2005. The increase is a result of higher income before income taxes.

The foregoing factors contributed to net income for the three months ended April 30, 2006 of $72,000 compared to a net income of $6,000 for the three months ended April 30, 2005.

Liquidity and Capital Resources

At April 30, 2006, the Company had working capital of $4.459 million compared to working capital of $4.465 million as of January 31, 2006 (“working capital” is the excess of total current assets over total current liabilities). At April 30, 2006 the Company had a current ratio of 2.5:1, compared to a current ratio of 3.1:1 at January 31, 2006 (“current ratio” is the ratio of current assets to current liabilities). The decrease in working capital is due to an increase in prepaids of $130,000 and accounts payable of $961,000. The decrease in working capital is offset by an increase in cash of $300,000, an increase in accounts receivable of $234,000, an increase in inventory of $359,000, a decrease in accrued liabilities of $104,000 and a decrease in the current portion of deferred revenue of $77,000. The decrease in prepaids is due to decreases in insurance and rent. The increase in accounts payable is due to the preparation for the Company’s summer peak season that typically begins in the second quarter as well as an increase in the market price of gasoline. The increase in cash is attributable to net income and increases in credit cards clearing as well as receivables collected related to gasoline wholesale sales. The increase in accounts receivable is due to the three new wholesale locations. The increase in inventory is due to preparation for the Company’s summer peak season that typically occurs in the second quarter as well as an increase in the market price of gasoline. The decrease in accrued liabilities is primarily due to decreases in accrued salaries and wages, as discretionary bonuses were accrued through January 2006 to be paid the following fiscal year partially offset by an increase in property taxes that were paid in December 2005 and have been accruing since that time. The decrease in deferred revenue is a result of the end of a two-year brand incentive programs for four locations branded ExxonMobil in fiscal year 2004 as well as a decrease in outdoor advertising billboard revenue as the Company had several annual contracts that did not begin until August 1, 2006.

9

BOWLIN TRAVEL CENTERS, INC.

Net cash provided by operating activities was $589,000 for the three months ended April 30, 2006, compared to $214,000 for the three months ended April 30, 2005. Net cash provided by operating activities for the three months ended April 30, 2006 is primarily attributable to net income of $72,000 adjusted for depreciation and amortization expense of $217,000 and changes in operating assets and liabilities of $296,000 partially offset by the gain on property and equipment of $3,000. Net cash provided by operating activities for the three months ended April 30, 2005 was primarily attributable to net income adjusted for depreciation and amortization expense of $226,000 and amortization of loan fees of $9,000 partially offset by changes in other operating assets and liabilities of $20,000 and deferred income taxes $7,000.

Net cash used in investing activities for the three months ended April 30, 2006 was $164,000 primarily consisting of $179,000 which was used for purchases of property and equipment, offset by accrued interest receivable of $9,000, notes receivable of $5,000 and proceeds from the sale of property and equipment of $1,000. Net cash used in investing activities for the three months ended April 30, 2005 was $102,000 primarily consisting of $94,000 which was used for purchases of property and equipment plus accrued interest receivable of $8,000.

Net cash used by financing activities for the three months ended April 30, 2006 was $125,000, which consisted of payments on long-term debt. For the three months ended April 30, 2005, net cash used in financing activities was $137,000, which were 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 April 30, 2006, retail gasoline sales accounted for approximately 49.9% of the Company’s gross 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.

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

The principal market risk to which the Company is exposed are interest rates on the Company’s debt. The Company’s interest sensitive liabilities are its debt instruments. Variable interest on the majority of the Company’s debt equals LIBOR plus an applicable margin. Because rates may increase or decrease at any time, the Company is exposed to market risk as a result of the impact that changes in these base rates may have on the interest rate applicable to Company borrowings. Management does not, however, believe that any risk inherent in the variable rate nature of its debt is likely to have a material effect on the Company’s financial position, results of operations or liquidity.

Based upon the Company’s variable rate debt at April 30, 2006, a hypothetical 1% increase in interest rates would result in an annual increase in interest expense of approximately $51,000.

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 the Company’s 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.

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BOWLIN TRAVEL CENTERS, INC.

Item 4. 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 there was a material weaknesses in the control environment related to general merchandise inventory at the Company’s twelve retail locations and that the related disclosure controls and procedures are ineffective. The Company used estimates throughout the year that are based on standard markups within defined categories to record cost of goods. The Company historically counts physical inventory at each location at the end of each fiscal year. Therefore, variances between the estimates used and physical counts are accounted for at the end of the fiscal year rather than periodically.

The general merchandise inventory at the Company’s twelve retail locations was approximately $1.627 million or 41.0% of the Company’s total inventory. Inventory at the Company’s warehouse was maintained on a perpetual inventory system where purchases and issues are recorded directly into the inventory account as they occur. Therefore, the balance in the warehouse inventory account represents the ending inventory amount and there is no weakness related to the warehouse inventory. The warehouse inventory balance at the end of the Company’s first quarter was approximately $1.328 million or 33.5% of the Company’s total inventory. Other key inventories including gasoline, Dairy Queen food and jewelry were taken monthly and the physical was reconciled to the book; therefore there are no weaknesses related to these inventories. Gasoline, Dairy Queen food, and jewelry inventories were approximately $902,000 or 22.8% of the Company’s total inventory.

The Company has dedicated resources to correct this issue and has implemented a plan to use an electronic point of sale merchandise tracking system that will provide the Company with the ability to conduct more periodic physical inventories as well as more accurately monitor cost of goods sold. The first phase of the plan, which is in process, is to have all items in the Company’s central warehouse bar-coded.

Other than the above issue, there were no changes in the Company’s internal control over financial reporting that occurred during the quarter covered by this report that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

PART II. OTHER INFORMATION

Item 1. Legal Proceedings.   None.

Item 1A. Risk Factors.   There were no material changes from the Company’s risk factors disclosed in Item 1A. Risk Factors of the Company’s Annual Report on Form 10-K for the year ended January 31, 2006.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.   None.

Item 3. Defaults Upon Senior Securities.   None.

Item 4. Submission of Matters to a Vote of Security Holders.   None.

Item 5. Other Information.   None.

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BOWLIN TRAVEL CENTERS, INC.

Item 6. Exhibits

Exhibit Number	Description
31.1	Certification pursuant to Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934, as amended.
31.2	Certification pursuant to Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934, as amended.
32.1	Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2	Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

Signatures

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

Dated:  October 31, 2006	/s/  Michael L. Bowlin
	Michael L. Bowlin, Chairman of the Board, President and Chief Executive Officer

/s/  Nina J. Pratz

Nina J. Pratz, Chief Financial Officer

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