Bowlin Travel Centers (BWTL) 10-Q/A 2006 Q3 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 July 31, 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 September 13, 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 and six months ended July 31, 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 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 September 13, 2006.

BOWLIN TRAVEL CENTERS, INC.

	INDEX
PART I.  FINANCIAL INFORMATION		Page No.
Item 1.	Financial Statements
	Condensed Balance Sheets as of July 31, 2006 and January 31, 2006	3
	Condensed Statements of Income for the Three and Six Months Ended July 31, 2006 and 2005	4
	Condensed Statements of Cash Flows for the Six Months Ended July 31, 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	12
Item 4.	Controls and Procedures	13
PART II.  OTHER INFORMATION
Item 1.	Legal Proceedings	14
Item 1A.	Risk Factors	14
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	14
Item 3.	Defaults Upon Senior Securities	14
Item 4.	Submission of Matters to a Vote of Security Holders	14
Item 5.	Other Information	14
Item 6.	Exhibits	14
	Signatures	15

2

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

BOWLIN TRAVEL CENTERS, INC.

Condensed Balance Sheets

(in thousands, except share data)

	July 31,		January 31,
	2006		2006
	(Unaudited)
Assets
Current assets:
Cash and cash equivalents	$	2,943	$	2,615
Accounts receivable		41		41
Deferred income taxes		42		72
Inventories		4,040		3,606
Prepaid expenses		302		276
Income taxes		23		—
Notes receivable, current maturities		19		9
Total current assets		7,410		6,619
Property and equipment, net		12,461		12,541
Intangible assets, net		174		190
Interest receivable		8		13
Investment in real estate		415		415
Notes receivable, less current maturities		83		102
Total assets	$	20,551	$	19,880
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable	$	1,568		861
Current installments of long-term debt		494		515
Accrued liabilities		639		682
Deferred revenue		—		96
Income taxes		6		—
Total current liabilities		2,707		2,154
Deferred income taxes		846		884
Long-term debt, less current installments		4,575		4,799
Total liabilities		8,128		7,837
Stockholders’ equity:
Preferred stock, $0.001 par value; 1,000,000 shares authorized, none issued or outstanding at July 31, 2006 and January 31, 2006		—		—
Common stock, $0.001 par value; 10,000,000 shares authorized, 4,583,348 issued and outstanding at July 31, 2006 and January 31, 2006		5		5
Additional paid in capital		9,775		9,775
Retained earnings		2,643		2,263
Total stockholders’ equity		12,423		12,043
Total liabilities and stockholders’ equity	$	20,551	$	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						Six Months Ended
	July 31,			July 31,			July 31,			July 31,
	2006			2005			2006			2005
	(Unaudited)			(Unaudited)			(Unaudited)			(Unaudited)
Gross sales	$	9,231		$	8,374		$	16,870		$	14,568
Less discounts on sales		92			62			179			106
Net sales		9,139			8,312			16,691			14,462
Cost of goods sold		6,232			5,347			11,517			9,406
Gross profit		2,907			2,965			5,174			5,056
General and administrative expenses		(2,142	)		(2,187	)		(4,058	)		(4,007	)
Depreciation and amortization		(220	)		(218	)		(437	)		(444	)
Operating income		545			560			679			605
Non-operating income (expense):
Interest income		20			11			37			28
Gain on sale of property and equipment		2			206			5			206
Interest expense		(110	)		(99	)		(214	)		(191	)
Miscellaneous income		—			—			24			—
Rental income		47			45			93			90
Total non-operating loss (income)		(41	)		163			(55	)		133
Income before income taxes		504			723			624			738
Income tax expense		196			278			245			287
Net income	$	308		$	445		$	379		$	451
Earnings per share:
Basic and diluted	$	0.07		$	0.10		$	0.08		$	0.10
Weighted average common shares outstanding		4,583,348			4,583,348			4,583,348			4,583,348

See accompanying notes to condensed financial statements.

4

BOWLIN TRAVEL CENTERS, INC.

Condensed Statements of Cash Flows

(in thousands)

	For the Six Months Ended
	July 31,			July 31,
	2006			2005
	(Unaudited)			(Unaudited)
Cash flows from operating activities:
Net income	$	379		$	451
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization		437			444
Amortization of loan fee		12			19
Deferred income taxes, net		(8	)		(18	)
Gain on sale of assets		(5	)		(206	)
Changes in operating assets and liabilities, net		91			602
Net cash provided by operating activities		906			1,292
Cash flows from investing activities:
Proceeds from sale of assets		3			206
Purchases of property and equipment, net		(355	)		(297	)
Accrued interest receivable		5			21
Investment in real estate		—			(2	)
Notes receivable, net		13			169
Net cash used in (provided by) investing activities		(334	)		97
Cash flows from financing activities:
Payments on long-term debt		(244	)		(273	)
Net cash used in financing activities		(244	)		(273	)
Net increase in cash and cash equivalents		328			1,116
Cash and cash equivalents at beginning of period		2,615			2,043
Cash and cash equivalents at end of period	$	2,943		$	3,159

See accompanying notes to condensed financial statements.

5

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 and six months ended July 31, 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 sell ExxonMobil petroleum products. The other independent wholesaler sells CITGO petroleum products.

3.     Subsequent event. In August 2006, the Company sold property to two third parties for notes receivable of $54,250, $54,250 and $108,500. The note receivable of $54,250 has a stated rate of interest of 8.5 % and is payable in monthly installments of $680 for five years at which time the entire remaining principal balance together with accrued interest is due. The $54,250 note receivable has a stated rate of interest of 9% and is payable in quarterly installments of $3,398 for five years. The note receivable of $108,500 has a stated interest rate of interest of 9% and is payable in quarterly installments of $6,797 for five years.

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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 July 31, 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 and six months ended July 31, 2006 and 2005 (unaudited and amounts in thousands):

7

BOWLIN TRAVEL CENTERS, INC.

	Three Months Ended				Six Months Ended
	2006		2005		2006		2005
Selected Statement of Operations Data:
(in thousands, except per share data)
Gross sales	$	9,231	$	8,374	$	16,870	$	14,568
Net income	$	308	$	445	$	379	$	451
Earnings per share	$	0.07	$	0.10	$	0.08	$	0.10

Comparison of the Three Months Ended July 31, 2006 and July 31, 2005

Gross sales at the Company’s travel centers increased by 10.2% to $9.231 million for the three months ended July 31, 2006, from $8.374 million for the three months ended July 31, 2005. Merchandise sales decreased 7.2% to $3.308 million for the three months ended July 31, 2006, from $3.563 million for the three months ended July 31, 2005. The decrease is primarily due to decreases in fireworks sales of $157,000 as a result of bans in New Mexico due to drought conditions, general merchandise and cigarette sales. Retail gasoline sales increased 4.4% to $3.704 million for the three months ended July 31, 2006, from $3.548 million for the same period in 2005. The increase is due to market price increases as the average gallon of gasoline retailed for $3.18 for the three months ended July 31, 2006, compared to $2.40 for the three months ended July 31, 2005. The increase in retail gasoline sales is partially offset by a decrease in gasoline gallons sold of 314,000 gallons during the three months ended July 31, 2006. Restaurant sales increased 2.8% to $738,000 for the three months ended July 31, 2006, from $718,000 for the three months ended July 31, 2005. The increase is primarily due to adjustments of retail prices in relationship to costs. Wholesale gasoline sales to independent retailers increased 171.7% to $1.481 million for the three months ended July 31, 2006, from $545,000 for the three months ended July 31, 2005. The increase is primarily due to the addition of three independent wholesale locations during the three months ended July 31, 2006.

Cost of goods sold increased 16.6% to $6.232 million for the three months ended July 31, 2006, from $5.347 million for the three months ended July 31, 2005. Merchandise cost of goods decreased 13.7% to $1.215 million for the three months ended July 31, 2006, from $1.408 million for the three months ended July 31, 2005. The decrease is related to the decrease in sales as well as adjustments of standard markups within certain product categories that the Company gets as a result of volume purchasing. Retail gasoline cost of goods increased 5.0% to $3.337 million for the three months ended July 31, 2006, from $3.178 million for the three months ended July 31, 2005. The increase corresponds to market price increases, which is partially offset by decreases in gallons sold. Restaurant cost of goods decreased 10.1% to $204,000 for the three months ended July 31, 2006, from $227,000 for the three months ended July 31, 2005. The decrease is primarily due to retail prices that increased higher than cost increases as well as better inventory control. Wholesale gasoline cost of goods increased 176.9% to $1.476 million for the three months ended July 31, 2006, from $533,000 for the three months ended July 31, 2005. The increase is primarily due to the addition of three independent wholesale locations during the three months ended July 31, 2006. In addition, the increase in wholesale gasoline cost of goods exceeds the increase in sales due to one wholesale location that had better mark-ups in the prior period that were not present in the current period. Cost of goods sold as a percentage of gross revenues increased to 67.5% for the three months ended July 31, 2006, as compared to 63.9% for the three months ended July 31, 2005.

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BOWLIN TRAVEL CENTERS, INC.

Gross profit decreased 2.0% to $2.907 million for the three months ended July 31, 2006, from $2.965 million for the three months ended July 31, 2005. The decrease is primarily due to better markups of one wholesale location not present in the current period as well as increases of discounts at one of the Company’s retail locations.

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 decreased 2.1% to $2.142 million for the three months ended July 31, 2006, from $2.187 million for the three months ended July 31, 2005. The decrease is due to lower freight costs as a result of volume purchasing, decreases in health insurance and decreases in contract labor.

Depreciation and amortization expense increased 0.9% to $220,000 for the three months ended July 31, 2006, from $218,000 for the three months ended July 31, 2005. The increase is associated with certain asset additions in the second quarter offset by some assets becoming fully depreciated.

The above factors contributed to an overall decrease in operating income of 2.7% to $545,000 for the three months ended July 31, 2006, compared to operating income of $560,000 for the three months ended July 31, 2005.

Non-operating income (expense) includes interest income, gains and losses from the sale of assets, rental income and interest expense. Interest income increased 81.8% to $20,000 for the three months ended July 31, 2006, compared to interest income of $11,000 for the three months ended July 31, 2005. The increase is due to better interest rates in the current period as well as interest earned on notes receivable in the current period that were not present in the prior period. Gains from the sale of assets decreased to $2,000 for the three months ended July 31, 2006 from $206,000 for the three months ended July 31, 2005. The gain of $2,000 for the three months ended July 31, 2006 is due to the sale of a vehicle as well as installment payments received related to notes receivable that include deferred gains. The gain of $206,000 for the three months ended July 31, 2005 is primarily due to a balloon payment related to a note receivable that included a deferred gain. Rental income was $47,000 for the three months ended July 31, 2006 compared to $45,000 for the three months ended July 31, 2005. Interest expense increased 11.1% to $110,000 for the three months ended July 31, 2006, from $99,000 for the three months ended July 31, 2005. The increase is primarily due to increases in interest rates.

Income before income taxes decreased 30.3% to $504,000 for the three months ended July 31, 2006, compared to income before income taxes of $723,000 for the three months ended July 31, 2005. As a percentage of gross revenues, income before income taxes was 5.5% for the three months ended July 31, 2006, compared to 8.6% for the three months ended July 31, 2005.

Income tax expense decreased 29.5% to $196,000 for the three months ended July 31, 2006, compared to an income tax expense of $278,000 for the three months ended July 31, 2005. The decrease is a result of lower income before income taxes.

The foregoing factors contributed to net income for the three months ended July 31, 2006 of $308,000 compared to a net income of $445,000 for the three months ended July 31, 2005.

9

BOWLIN TRAVEL CENTERS, INC.

Comparison of the Six Months Ended July 31, 2006 and July 31, 2005

Gross sales at the Company’s travel centers increased by 15.8% to $16.870 million for the six months ended July 31, 2006, from $14.568 million for the six months ended July 31, 2005. Merchandise sales decreased 2.0% to $5.822 million for the six months ended July 31, 2006, from $5.942 million for the six months ended July 31, 2005. The decrease is primarily due to decreases in fireworks sales of $138,000 as a result of bans in New Mexico due to drought conditions, general merchandise and cigarette sales partially offset by increases in t-shirt sales. Retail gasoline sales increased 8.3% to $6.821 million for the six months ended July 31, 2006, from $6.300 million for the same period in 2005. The increase is due to market price increases as the average gallon of gasoline retailed for $2.95 for the six months ended July 31, 2006, compared to $2.32 for the six months ended July 31, 2005. The increase in retail gasoline sales is partially offset by a decrease in gasoline gallons sold of 406,000 gallons during the six months ended July 31, 2006. Restaurant sales increased 2.7% to $1.355 million for the six months ended July 31, 2006, from $1.319 million for the six months ended July 31, 2005. The increase is primarily due to adjustments of retail prices in relationship to costs. Wholesale gasoline sales to independent retailers increased 185.2% to $2.872 million for the six months ended July 31, 2006, from $1.007 million for the six months ended July 31, 2005. The increase is primarily due to the addition of three independent wholesale locations during the six months ended July 31, 2006.

Cost of goods sold increased 22.4% to $11.517 million for the six months ended July 31, 2006, from $9.406 million for the six months ended July 31, 2005. Merchandise cost of goods decreased 7.5% to $2.183 million for the six months ended July 31, 2006, from $2.360 million for the six months ended July 31, 2005. The decrease is related to the decrease in sales as well as adjustments of standard markups within certain product categories that the Company gets as a result of volume purchasing. Retail gasoline cost of goods increased 8.3% to $6.119 million for the six months ended July 31, 2006, from $5.650 million for the six months ended July 31, 2005. The increase corresponds to market price increases, partially offset by decreases in gallons sold. Restaurant cost of goods decreased 8.3% to $376,000 for the six months ended July 31, 2006, from $410,000 for the six months ended July 31, 2005. The decrease is primarily due to a retail prices that increased higher than cost increases as well as better inventory control. Wholesale gasoline cost of goods increased 187.9% to $2.839 million for the six months ended July 31, 2006, from $986,000 for the six months ended July 31, 2005. The increase is primarily due to the addition of thee independent wholesale locations during the six months ended July 31, 2006. In addition, the increase in wholesale gasoline cost of goods exceeds the increase in sales due to one wholesale location that had better mark-ups in the prior period that were not present in the current period. Cost of goods sold as a percentage of gross revenues increased to 68.3% for the six months ended July 31, 2006, as compared to 64.6% for the six months ended July 31, 2005.

Gross profit increased 2.3% to $5.174 million for the six months ended July 31, 2006, from $5.056 million for the six months ended July 31, 2005. The increase corresponds to adjustments of standard markups within certain product categories that the Company gets as a result of volume purchasing offset by an increase in discounts at one location.

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 1.3% to $4.058 million for the six months ended July 31, 2006, from $4.007 million for the six months ended July 31, 2005. The increase is due to sign repairs and maintenance and increased credit card fees related to processing credit cards through the Company’s gasoline distributorships.

Depreciation and amortization expense decreased 1.6% to $437,000 for the six months ended July 31, 2006, from $444,000 for the six months ended July 31, 2005. The decrease is associated with certain asset additions becoming fully depreciated.

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BOWLIN TRAVEL CENTERS, INC.

The above factors contributed to an overall increase in operating income of 12.2% to $679,000 for the six months ended July 31, 2006, compared to operating income of $605,000 for the six months ended July 31, 2005.

Non-operating income (expense) includes interest income, gains and losses from the sale of assets, rental income and interest expense. Interest income increased 33.1% to $37,000 for the six months ended July 31, 2006, compared to interest income of $28,000 for the six months ended July 31, 2005. The increase is due to better interest rates in the current period as well as interest earned on notes receivable in the current period that were not present in the prior period. Gains from the sale of assets decreased to $5,000 for the six months ended July 31, 2006 from $206,000 for the six months ended July 31, 2005. The gain of $5,000 for the six months ended July 31, 2006 is primarily due to the sale of vehicles and equipment as well as installment payments received related to notes receivable that include deferred gains. The gain of $206,000 for the six months ended July 31, 2005 is primarily due to a balloon payment related to a note receivable that included a deferred gain. Miscellaneous income of $24,000 for the three months ended July 31, 2006 compared to no miscellaneous income for the three months ended July 31, 2005. Rental income was $93,000 for the six months ended July 31, 2006 compared to $90,000 for the six months ended July 31, 2005. Interest expense increased 12.0% to $214,000 for the six months ended July 31, 2006, from $191,000 for the six months ended July 31, 2005. The increase is primarily due to increases in interest rates.

Income before income taxes decreased 15.4% to $624,000 for the six months ended July 31, 2006, compared to income before income taxes of $738,000 for the six months ended July 31, 2005. As a percentage of gross revenues, income before income taxes was 3.7% for the six months ended July 31, 2006, compared to 5.1% for the six months ended July 31, 2005.

Income tax expense decreased 14.6% to $245,000 for the six months ended July 31, 2006, compared to an income tax expense of $287,000 for the six months ended July 31, 2005. The decrease is a result of lower income before income taxes.

The foregoing factors contributed to net income for the six months ended July 31, 2006 of $379,000 compared to a net income of $451,000 for the six months ended July 31, 2005.

Liquidity and Capital Resources

At July 31, 2006, the Company had working capital of $4.703 million compared to working capital of $4.465 million at January 31, 2006 (“working capital” is the excess of total current assets over total current liabilities). At July 31, 2006, the Company had a current ratio of 2.7:1, compared to a current ratio of 3.1:1 as of January 31, 2006 (“current ratio” is the ratio of current assets to current liabilities). The increase in working capital is due to an increase in cash of $328,000, an increase in inventory of $434,000, a decrease in the current portion of long-term debt of $43,000, a decrease in accrued liabilities of $43,000, a decrease in deferred revenue of $96,000 offset by an increase in accounts payable of $707,000. The increases in cash, inventory and accounts payable is due to the summer being the peak season of the Company’s travel center operations, as higher traffic typically occurs during the summer months. The decrease in accrued liabilities since January 31, 2006 is due to decreases in salaries and wages, as discretionary bonuses were accrued through January 2006 to be paid the following fiscal year, and a decrease fuel in tax payable. This was partially offset by an increase in sales tax liability due to peak season sales and 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 program 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. The decrease in the current portion of long-term debt is normal scheduled payments.

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BOWLIN TRAVEL CENTERS, INC.

The Company’s travel center operations are subject to seasonal fluctuations. The second quarter of the fiscal year is typically the Company’s peak season. Through out the Company’s fiscal year, revenues and earnings may experience substantial fluctuations from quarter to quarter. These fluctuations could result in period of increased or decreased cash flow as well as increased or decreased net income.

Net cash provided by operating activities was $906,000 for the six months ended July 31, 2006, compared to $1.292 million for the six months ended July 31, 2005. Net cash provided by operating activities for the six months ended July 31, 2006 is primarily attributable to net income of $379,000 adjusted for depreciation and amortization expense of $437,000 and changes in operating assets and liabilities of $91,000. Net cash provided by operating activities for the six months ended July 31, 2005 was primarily attributable to net income of $451,000 adjusted for depreciation and amortization expense of $444,000 and changes in operating assets and liabilities of $602,000 offset by the gain on sales of assets of $206,000.

Net cash used in investing activities for the six months ended July 31, 2006 was $334,000 primarily consisting of $355,000 which was used for purchases of property and equipment, offset by accrued interest receivable of $5,000, notes receivable of $13,000 and proceeds from the sale of property and equipment of $3,000.

Net cash used in investing activities for the six months ended July 31, 2005 was $97,000 primarily consisting of proceeds of $206,000 from the sale of assets and proceeds of $169,000 from notes receivable partially offset by $297,000 used for purchases of property and equipment.

Net cash used by financing activities for the six months ended July 31, 2006 was $224,000, which consisted of payments on long-term debt. For the six months ended July 31, 2005, net cash used in financing activities was $274,000, 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 July 31, 2006, retail gasoline sales accounted for approximately 40.1% 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 to is 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 the prime rate. 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 July 31, 2006, a hypothetical 1% increase in interest rates would result in an annual increase in interest expense of approximately $50,000.

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BOWLIN TRAVEL CENTERS, INC.

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.

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 used 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 $1.448 million or 35.8% 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 second quarter was approximately $1.357 million or 33.6% 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 $1.128 million or 27.9% 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 firs 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.

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BOWLIN TRAVEL CENTERS, INC.

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.

Item 6. Exhibits

Exhibit 10.38 - Purchase and Sale Agreements, dated August 15, 2006 by and between Bowlin Travel Centers, Inc. and Teak, LLC for a tract of land known as Lot 1 Bowlin Tracts in the County of Dona Ana, New Mexico.

Exhibit 10.39 - Purchase and Sale Agreements, dated August 15, 2006 by and between Bowlin Travel Centers, Inc. and Teak, LLC for a tract of land known as Lot 2 Bowlin Tracts in the County of Dona Ana, New Mexico.

Exhibit 10.40 - Purchase and Sale Agreements, dated August 15, 2006 by and between Bowlin Travel Centers, Inc. and Larjon, LLC for a tract of land known as part of Lot 53, Subdivision of Lots 4 and 5 of the Brazito Tract.

Exhibit 10.41 - Promissory Note, dated August 15, 2006 by and between Bowlin Travel Centers Inc. and C. C. Bess.

Exhibit 31.1 - Certification pursuant to Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934, as amended.

Exhibit 31.2 - Certification pursuant to Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934, as amended.

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BOWLIN TRAVEL CENTERS, INC.

Exhibit 32.1 - Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

Exhibit 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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