BOWLIN
OUTDOOR ADVERTISING & TRAVEL CENTERS
INCORPORATED AND SUBSIDIARIES
United States Securities and Exchange Commission
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended July 31, 2000
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE EXCHANGE ACT
For the transition period from ________ to ________
Commission File Number 0-21451
BOWLIN Outdoor Advertising
& Travel Centers Incorporated (Exact
name of registrant as specified in its
charter)
NEVADA 85-0113644
(State or other jurisdiction (IRS Employer Identification No.)
of incorporation or organization)
150 LOUISIANA NE, ALBUQUERQUE, NM 87108
(Address of principal executive offices) (Zip Code)
Issuer's telephone number: 505-266-5985
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 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 ___
As of September 13, 2000, 4,390,098 shares of the issuer's common stock were
outstanding.
INDEX
PART I. FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements Page No.
Consolidated Balance Sheets as of
July 31, 2000 and January 31, 2000...........................2
Consolidated Statements of Income
for the Three and Six Months Ended
July 31, 2000 and 1999.......................................4
Consolidated Statement of Stockholders'
Equity for the Six Months Ended July 31, 2000................5
Consolidated Statements of Cash Flows for the
Three and Six Months Ended July 31, 2000 and 1999............6
Notes to the Consolidated Financial Statements...............8
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations.........................10
Item 3. Quantitative and Qualitative Disclosures About
Market Risk.................................................17
PART II. OTHER INFORMATION
Item 1. Legal Proceedings...........................................17
Item 2. Changes in Securities and Use of Proceeds...................17
Item 3. Defaults Upon Senior Securities.............................17
Item 4. Submission of Matters to a Vote of Security Holders.........17
Item 5. Other Information...........................................18
Item 6. Exhibits and Reports on Form 8-K ...........................18
Signatures .................................................18
1
BOWLIN
OUTDOOR ADVERTISING & TRAVEL CENTERS
INCORPORATED AND SUBSIDIARIES
PART I. FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements
BOWLIN
OUTDOOR ADVERTISING & TRAVEL CENTERS
INCORPORATED AND SUBSIDIARIES
Consolidated Balance Sheets
Assets
(In thousands, except share data)
July 31, January 31,
2000 2000
(Unaudited)
-------------------- --------------------
Current assets:
Cash and cash equivalents $ 3,136 $ 1,559
Accounts receivable, Outdoor Advertising, net 678 595
Accounts receivable, other 259 559
Accounts receivable, related parties 123 122
Inventories 3,448 3,534
Prepaid expenses and other current assets 946 693
Income taxes 174 849
Notes receivable, related parties 14 14
-------------------- --------------------
Total current assets 8,778 7,925
Property & equipment, net 30,289 30,556
Intangible assets, net 1,869 2,024
Other assets 424 276
-------------------- --------------------
Total assets $ 41,360 $ 40,781
==================== ====================
(Continued)
2
Consolidated Balance Sheets
Liabilities and Stockholders' Equity
(In thousands, except share data)
July 31, January 31,
2000 2000
(Unaudited)
-------------------- ---------------------
Current liabilities:
Short-term borrowings, bank $ 907 $ 242
Accounts payable 1,381 1,417
Current installments of long-term debt 1,568 1,503
Accrued liabilities 624 455
Deferred income 233 142
-------------------- ---------------------
Total current liabilities 4,713 3,759
Deferred income taxes 972 898
Long-term debt, less current installments 20,074 20,886
-------------------- ---------------------
Total liabilities 25,759 25,543
Stockholders' equity:
Common stock, $.001 par value; authorized 100,000,000
shares; issued and outstanding 4,389,098 and 4 4
4,384,848 shares
Additional paid-in capital 11,621 11,604
Retained earnings 3,976 3,630
-------------------- ---------------------
Total stockholders' equity $ 15,601 $ 15,238
-------------------- ---------------------
Total liabilities and stockholders' equity $ 41,360 $ 40,781
==================== =====================
See accompanying notes to consolidated
financial statements.
3
Consolidated 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,
2000 1999 2000 1999
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
--------------- --------------- --------------- --------------
Gross sales $ 10,192 $ 9,861 $ 19,014 $ 17,908
Less discounts on sales 110 102 201 181
--------------- --------------- --------------- --------------
Net sales 10,082 9,759 18,813 17,727
Cost of goods sold 6,363 6,174 12,138 11,188
--------------- --------------- --------------- --------------
Gross profit 3,719 3,585 6,675 6,539
General and administrative expenses (1,995) (2,033) (3,862) (3,953)
Depreciation and amortization (682) (631) (1,353) (1,201)
--------------- --------------- --------------- --------------
Operating income 1,042 921 1,460 1,385
Non-operating income (expense):
Interest income 36 26 57 49
Gain from insurance proceeds - 227 - 227
Gain on sale of property and
equipment 37 10 131 15
Interest expense (560) (479) (1,076) (909)
--------------- --------------- --------------- --------------
Total non-operating income
(expense) (487) (216) (888) (618)
--------------- --------------- --------------- --------------
Income before income taxes 555 705 572 767
Income taxes 212 273 226 300
--------------- --------------- --------------- --------------
Net income $ 343 $ 432 $ 346 $ 467
=============== =============== =============== ==============
Weighted average common shares 4,385,941 4,384,848 4,385,397 4,384,848
Weighted average common and
potential dilutive common shares 4,457,647 4,384,848 4,445,604 4,384,848
Earnings per share
Basic $ 0.08 $ 0.10 $ 0.08 $ 0.11
=============== =============== =============== ==============
Diluted $ 0.08 $ 0.10 $ 0.08 $ 0.11
=============== =============== =============== ==============
See accompanying notes to consolidated
financial statements.
4
Consolidated Statement of Stockholders' Equity
(In thousands, except share data)
For the Six Months Ended July 31, 2000
(Unaudited)
------------------------------------------------------------------------------------
Common Additional
Number stock, paid-in Retained
of shares at par capital earnings Total
--------- ------ ---------- -------- -----
Balance at January 31, 2000 4,384,848 $ 4 $ 11,604 $ 3,630 $ 15,238
Stock option exercises 4,250 17 17
Net income 346 346
------------------------------------------------------------------------------------
Balance at July 31, 2000 4,389,098 $ 4 $ 11,621 $ 3,976 $ 15,601
====================================================================================
See accompanying notes to consolidated
financial statements.
5
Consolidated Statements of Cash Flows
(In thousands)
For the Six Months Ended
------------------------------------------
July 31, July 31,
2000 1999
(Unaudited) (Unaudited)
----------------- -----------------
Cash flows from operating activities:
Net income 346 467
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization $ 1,353 $ 1,201
Amortization of loan fees 89 78
Provision for bad debts 57 18
Gain from insurance proceeds - (227)
Gain on sales of property and equipment (131) (15)
Deferred income taxes 74 187
Imputed interest 5 6
Changes in operating assets and
liabilities, net
----------------- -----------------
Net cash provided by operating activities 2,695 2,446
Cash flows from investing activities:
Proceeds from sale of assets 202 31
Business acquisitions - (1,516)
Purchases of property and equipment, net (1,257) (2,814)
Proceeds from insurance - 599
Capital received from partnership - 15
Proceeds from notes receivable, net 7 2
----------------- -----------------
Net cash used in investing activities (1,048) (3,683)
Cash flows from financing activities:
Short-term borrowings, bank, net 665 569
Borrowings on long-term debt 48 1,750
Payments on long-term debt (800) (652)
Proceeds from stock option exercises 17 -
----------------- -----------------
Net cash (used in) provided by financing
activities (70) 1,667
Net increase in cash and cash equivalents 1,577 430
Cash and cash equivalents at beginning of period 1,559 2,199
----------------- -----------------
Cash and cash equivalents at end of period $ 3,136 $ 2,629
================= =================
(Continued)
6
Consolidated Statements of Cash Flows, Continued
(In thousands)
July 31, July 31,
2000 1999
(Unaudited) (Unaudited)
----------------- -----------------
Supplemental disclosure of cash flow information:
Sale of property and equipment in exchange
for note receivable $ 166 $ -
================= =================
Acquisitions:
Fair value of assets acquired and liabilities
assumed at the date of the acquisitions
were as follows:
Prepaid expenses $ - $ 3
Billboards - 1,463
Covenants not to compete - 50
================= =================
See accompanying notes to consolidated
financial statements.
7
Notes to Consolidated Financial Statements (Unaudited)
1. The consolidated financial statements for the three and six months ended
July 31, 2000 and 1999 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 consolidated financial
statements should be read in conjunction with the consolidated financial
statements and 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, 2000.
Results of operations for interim periods are not necessarily indicative of
results that may be expected for the year as a whole.
2. In May 2000, the Company sold certain assets, including land and equipment,
to a third party for $25,000 cash and a note receivable for $400,000. The
note receivable has a stated rate of interest of 8 percent and is payable
in annual installments of $37,500 through 2004 with the balance due in
2005. The assets sold had a carrying value of $170,258 and the costs
incurred to sell the assets was $6,043. The gain on the sale of the
property was $248,699, of which $14,625 was recognized initially and
$234,074 was deferred and will be recognized into income using the
installment method as payments are received. The deferred gain is reflected
as a reduction to the note receivable in the accompanying balance sheet.
3. Earnings per Share. The following table is a reconciliation of the
numerators and denominators of the basic and diluted per share computations
for income from continuing operations.
Three months ended July 31,
---------------------------------------------------------------------------------
2000 1999
-------------------------------------- ----------------------------------------
Income Shares Per Share Income Shares Per Share
(Numerator) (Denominator) Amount (Numerator) (Denominator) Amount
Basic EPS - net income $ 343,000 4,385,941 $ 0.08 $ 432,000 4,384,848 $ 0.10
---------- -----------
Effect of Dilutive Securities
Stock options 71,706 -
------------ -------------- -------------- -------------
Diluted EPS - net income $ 343,000 4,457,647 $ 0.08 $ 432,000 4,384,848 $ 0.10
============ ============== ========== ============== ============= ===========
Six months ended July 31,
---------------------------------------------------------------------------------
2000 1999
-------------------------------------- ----------------------------------------
Income Shares Per Share Income Shares Per Share
(Numerator) (Denominator) Amount (Numerator) (Denominator) Amount
Basic EPS - net income $ 346,000 4,385,397 $ 0.08 $ 467,000 4,384,848 $ 0.11
---------- -----------
Effect of Dilutive Securities
Stock options 60,207 -
------------ -------------- -------------- -------------
Diluted EPS - net income $ 346,000 4,445,604 $ 0.08 $ 467,000 4,384,848 $ 0.11
============ ============== ========== ============== ============= ===========
8
4. Segment Information: Travel center operations, which represents 77 percent
of net sales of the Company, and outdoor advertising operations, which
represents 23 percent of net sales, are the Company's reportable segments
under SFAS No. 131, Disclosure about Segments of an Enterprise and Related
Information. The travel center segment provides for the retail sale of
merchandise, food and gasoline to the traveling public while the outdoor
advertising segment operates billboard advertising displays which are
situated on interstate highways, primarily in the Southwestern United
States. No single customer accounted for 10 percent of consolidated net
sales in any period.
Effective February 1, 2000, the Company measures its segments' results of
operations (segment profit) based on operating income less allocable
interest expense. Accordingly, segment profit for all periods presented has
been retroactively restated to conform to the new presentation. The
accounting policies used to measure segment results of operations are the
same as those described in note 1 to the consolidated financial statements
included in Form 10-K for the year ended January 31, 2000.
Summarized financial information concerning the Company's reportable
segments as of and for the respective periods ended July 31, are shown in
the following table.
Travel Outdoor
Center Advertising Corporate Total
(in thousands) Operations Operations and other (1)
-------------- --------------- --------------- ---------------
Three months
ended July 31,
Net sales (2)
2000 $ 7,877 2,205 - 10,082
1999 7,761 1,998 - 9,759
Segment profit (3)
(Income before
income taxes)
2000 $ 634 62 (141) 555
1999 557 87 61 705
Six months
ended July 31,
Net sales (2)
2000 $ 14,552 4,261 - 18,813
1999 13,891 3,836 - 17,727
Segment profit (3)
(Income before
income taxes)
2000 $ 772 20 (220) 572
1999 710 147 (90) 767
(1) Corporate and other results of operations include costs associated
with certain members of executive management, the corporate accounting
and finance function and other typical administrative functions not
considered in assessing segment profit.
(2) There were no inter-segment sales.
(3) Management does not consider interest income, non-operating income and
expense amounts or income tax expense in the determination of the
operating performance of the reportable segments. However, the amount
reported for corporate and other includes interest income and
non-operating income and expense. The total segment profit agrees to
income before income taxes in the consolidated statements of income.
9
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 consolidated financial condition and
results of operations of the Company as of and for the periods ended July 31,
2000 and 1999. This discussion should be read in conjunction with the
Consolidated Financial Statements of the Company and the related notes included
in the Company's Form 10-K for the fiscal year ended January 31, 2000.
The Company operates in two industry segments, outdoor advertising and travel
centers. In order to perform a meaningful evaluation of the Company's
performance in each of its operating segments, the Company has presented
selected operating data which separately sets forth the revenue, expenses and
operating income attributable to each segment, and also separately sets forth
the corporate expenses of the Company which management does not allocate to
either of the Company's segments for purposes of determining their respective
operating income. The discussion of results of operations which follows compares
such selected operating data and corporate expense data for the interim periods
presented.
10
Results of Operations
The following table presents certain income and expense items derived from the
Consolidated Statements of Income for the three and six months ended July 31
(unaudited and amounts in thousands):
Six Months Ended Three Months Ended
2000 1999 2000 1999
---------------------- -----------------------
Travel centers:
Gross sales $ 14,753 $ 14,072 $ 7,987 $ 7,863
Discounts on sales 201 181 110 102
----------- ----------- ----------- -----------
Net sales 14,552 13,891 7,877 7,761
Cost of sales 10,171 9,475 5,361 5,261
----------- ----------- ----------- -----------
4,381 4,416 2,516 2,500
General and administrative expenses 3,042 3,160 1,592 1,652
Depreciation and amortization 298 294 151 161
----------- ----------- ----------- -----------
Operating income 1,041 962 773 687
Interest expense 269 252 139 130
----------- ----------- ----------- -----------
Segment profit 772 710 634 557
Outdoor advertising:
Gross sales 4,261 3,836 2,205 1,998
Direct operating expenses 1,967 1,713 1,002 913
----------- ----------- ----------- -----------
2,294 2,123 1,203 1,085
General and administrative expenses 540 514 260 236
Depreciation and amortization 976 846 486 433
----------- ----------- ----------- -----------
Operating income 778 763 457 416
Interest expense 758 616 395 329
----------- ----------- ----------- -----------
Segment profit 20 147 62 87
Corporate and other:
General and administrative expenses (280) (279) (143) (145)
Depreciation and amortization (79) (61) (45) (37)
Interest expense (49) (41) (26) (20)
Other income, net 188 291 73 263
----------- ----------- ----------- -----------
Income before income taxes 572 767 555 705
Income taxes 226 300 212 273
----------- ----------- ----------- -----------
Net income $ 346 $ 467 $ 343 $ 432
=========== =========== =========== ===========
EBITDA(1) - Travel centers $ 1,339 $ 1,256 $ 924 $ 848
=========== =========== =========== ===========
EBITDA - Outdoor advertising $ 1,754 $ 1,609 $ 943 $ 849
=========== =========== =========== ===========
EBITDA - Total company $ 2,813 $ 2,586 $ 1,724 $ 1,552
============ =========== =========== ===========
EBITDA margin - Travel centers 9.1% 8.9% 11.6% 10.8%
============ =========== =========== ===========
EBITDA margin - Outdoor advertising 41.2% 41.9% 42.8% 42.5%
============ =========== =========== ===========
EBITDA margin - Total company 14.8% 14.4% 16.9% 15.7%
============ =========== =========== ===========
(Continued)
11
(1) EBITDA is defined as operating income before depreciation and
amortization. It represents a measure which management believes is
customarily used to evaluate the financial performance of companies in the
media industry. However, EBITDA is not a measure of financial performance
under generally accepted accounting principals and should not be
considered an alternative to operating income or net income as an
indicator of the Company's operating performance or to net cash provided
by operating activities as a measure of its liquidity.
Comparison of the Six Months Ended July 31, 2000 and July 31, 1999
Outdoor Advertising. Gross sales from the Company's outdoor advertising
increased 11.1% to $4.261 million for the six months ended July 31, 2000, from
$3.836 million for the six months ended July 31, 1999. The increase was
primarily attributable to the continual assimilation of the Company's
acquisitions, internal development, increased usage of available sign inventory,
and increases in rates.
Direct operating expenses related to outdoor advertising consist of rental
payments to property owners for the use of land on which advertising displays
are located, production expenses and selling expenses. Selling expenses consist
primarily of salaries and commissions for salespersons and travel related to
sales. Direct operating costs increased 14.8% to $1.967 million for the six
months ended July 31, 2000, from $1.713 million for the six months ended July
31, 1999. The increase is principally due to increases in salaries, sign
repairs, cost of production and utilities. Direct operating expenses as a
percentage of gross revenues for the six months ended July 31, 2000 was 46.2%
compared to 44.7% for the six months ended July 31, 1999.
General and administrative expenses for outdoor advertising consist of salaries
and wages for administrative personnel, insurance, legal fees, association dues
and subscriptions and other indirect operating expenses. General and
administrative expenses were $540,000 for the six months ended July 31, 2000,
compared to $514,000 for the six months ended July 31, 1999.
Depreciation and amortization expense increased 15.4% to $976,000 for the six
months ended July 31, 2000, from $846,000 for the six months ended July 31,
1999. The increase is attributable to scheduled depreciation of advertising
display structures as well as the amortization of goodwill and non-compete
covenants.
The above factors contributed to the increase in outdoor advertising operating
income of 2.0% to $778,000 for the six months ended July 31, 2000, from $763,000
for the six months ended July 31, 1999.
Interest expense increased 23.1% to $758,000 for the six months ended July 31,
2000, from $616,000 for the six months ended July 31, 1999 due to additional
borrowings to fund acquisitions and internal development.
Segment profit decreased 86.4% to $20,000 for the six months ended July 31,
2000, from $147,000 for the six months ended July 31, 1999 primarily as a result
of increases in depreciation and amortization, and interest expense.
EBITDA for outdoor advertising increased 9.0% to $1.754 million for the six
months ended July 31, 2000, from $1.609 million for the six months ended July
31, 1999. The EBITDA margin for outdoor advertising decreased to 41.2% for the
six months ended July 31, 2000, compared to 41.9% for the six months ended July
31, 1999.
12
Travel Centers. Gross sales at the Company's travel centers increased by 4.8% to
$14.753 million for the six months ended July 31, 2000, from $14.072 million for
the six months ended July 31, 1999. Merchandise sales increased 1.1% to $5.257
million for the six months ended July 31, 2000, from $5.200 million for the six
months ended July 31, 1999. Gasoline sales increased 8.6% to $7.114 million for
the six months ended July 31, 2000, from $6.551 million for the same period in
1999. Wholesale gasoline sales increased 16.2% to $945,000 for the six months
ended July 31, 2000, from $813,000 for the six months ended July 31, 1999.
Restaurant sales decreased 4.7% to $1.437 million for the six months ended July
31, 2000, from $1.508 million for the six months ended July 31, 1999.
Cost of goods sold for the travel centers increased 7.3% to $10.171 million for
the six months ended July 31, 2000, from $9.475 million for the six months ended
July 31, 1999. Merchandise cost of goods increased 0.5% to $2.350 million for
the six months ended July 31, 2000, from $2.338 million for the six months ended
July 31, 1999. Gasoline cost of goods increased 10.4% to $6.520 millions for the
six months ended July 31, 2000, from $5.905 million for the six months ended
July 31, 1999. Wholesale gasoline cost of goods increased 17.1% to $917,000 for
the six months ended July 31, 2000, from $783,000 for the six months ended July
31, 1999. Restaurant cost of goods decreased 14.5% to $384,000 for the six
months ended July 31, 2000, from $449,000 for the six months ended July 31,
1999. Cost of goods sold as a percentage of gross revenues for the six months
ended July 31, 2000 was 68.9% compared to 67.3% for the six months ended July
31, 1999.
Gross profit for the travel centers slightly decreased 0.8% to $4.381 million
for the six months ended July 31, 2000, from $4.416 million for the six months
ended July 31, 1999. Lower margins on convenience store product sales and
gasoline sales for the six months ended July 31, 2000 continued to negatively
impact gross margin.
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 for the travel centers
decreased 3.7% to $3.042 million for the six months ended July 31, 2000, from
$3.160 million for the six months ended July 31, 1999.
Depreciation and amortization expense increased 1.4% to $298,000 for the six
months ended July 31, 2000, from $294,000 for the six months ended July 31,
1999.
The above factors contributed to an overall increase in travel center operating
income of 8.2% to $1.041 million for the six months ended July 31, 2000, from
$962,000 for the six months ended July 31, 1999.
Interest expense increased 6.7% to $269,000 for the six months ended July 31,
2000, from $252,000 for the six months ended July 31, 1999.
Segment profit increased 8.7% to $772,000 for the six months ended July 31, 2000
from $710,000 for the six months ended July 31, 1999 primarily as a result of
increases in gross sales with a corresponding decrease in general and
administrative expenses.
EBITDA for travel centers increased 6.6% to $1.339 million for the six months
ended July 31, 2000, from $1.256 million for the six months ended July 31, 1999.
The EBITDA margin for travel centers increased to 9.1% for the six months ended
July 31, 2000, compared to 8.9% for the six months ended July 31, 1999.
13
Corporate and Other. General and administrative expenses for corporate and other
operations of the Company consist primarily of executive and administrative
compensation and benefits, accounting, legal and investor relations fees.
General and administrative expenses increased to $280,000 for the six months
ended July 31, 2000, from $279,000 for the six months ended July 31, 1999.
Depreciation and amortization expenses for the Company's corporate and other
operations consist of depreciation associated with the corporate headquarters,
furniture and fixtures and vehicles. Depreciation and amortization expenses
increased to $79,000 for the six months ended July 31, 2000, from $61,000 for
the six months ended July 31, 1999.
Interest expense increased 19.5% to $49,000 for the six months ended July 31,
2000, from $41,000 for the six months ended July 31, 1999.
Other income, net, includes gains and/or losses from the sales of assets and
interest income. Other income, net, decreased 35.4% to $188,000 for the six
months ended July 31, 2000, from $291,000 for the six months ended July 31,
1999. The decrease is primarily due to a one-time gain of $227,000 from
insurance proceeds in fiscal year 2000 not present in fiscal year 2001.
Income before income taxes decreased 25.4% to $572,000 for the six months ended
July 31, 2000, from $767,000 for the six months ended July 31, 1999. As a
percentage of gross revenues, income before income taxes decreased to 3.0% for
the six months ended July 31, 2000, from 4.3% for the six months ended July 31,
1999.
Income taxes were $226,000 for the six months ended July 31, 2000, compared to
$300,000 for the six months ended July 31, 1999, as the result of lower pretax
income.
The foregoing factors contributed to an increase in the Company's net income for
the six months ended July 31, 2000 to $346,000 compared to $467,000 for the six
months ended July 31, 1999.
Increases in depreciation and amortization as well as interest expense have been
substantial. Management expects depreciation and amortization and interest
expense to continue to increase which may lead to future net losses.
Comparison of the Three Months Ended July 31, 2000 and July 31, 1999
Outdoor Advertising. Gross sales from the Company's outdoor advertising
increased 10.4% to $2.205 million for the three months ended July 31, 2000, from
$1.998 million for the three months ended July 31, 1999. The increase was
primarily attributable to the continual assimilation of the Company's
acquisitions, internal development, increased usage of available sign inventory,
and increases in rates.
Direct operating expenses related to outdoor advertising consist of rental
payments to property owners for the use of land on which advertising displays
are located, production expenses and selling expenses. Selling expenses consist
primarily of salaries and commissions for salespersons and travel related to
sales. Direct operating costs increased 9.7% to $1.002 million for the three
months ended July 31, 2000, from $913,000 for the three months ended July 31,
1999. The increase is principally due to increases in salaries, sign repairs,
cost of production and utilities. Direct operating expenses as a percentage of
gross revenues for the three months ended July 31, 2000 was 45.4% compared to
45.7% for the three months ended July 31, 1999.
General and administrative expenses for outdoor advertising consist of salaries
and wages for administrative personnel, insurance, legal fees, association dues
and subscriptions and other indirect operating expenses. General and
administrative expenses were $260,000 for the three months ended July 31, 2000,
compared to $236,000 for the three months ended July 31, 1999.
14
Depreciation and amortization expense increased 12.2% to $486,000 for the three
months ended July 31, 2000, from $433,000 for the three months ended July 31,
1999. The increase is attributable to scheduled depreciation of advertising
display structures as well as the amortization of goodwill and non-compete
covenants.
The above factors contributed to the increase in outdoor advertising operating
income of 9.9% to $457,000 for the three months ended July 31, 2000, from
$416,000 for the three months ended July 31, 1999.
Interest expense increased 20.1% to $395,000 for the three months ended July 31,
2000, from $329,000 for the three months ended July 31, 1999 due to additional
borrowings to fund acquisitions and internal development.
Segment profit decreased 28.7% to $62,000 for the three months ended July 31,
2000, from $87,000 for the three months ended July 31, 1999 primarily as a
result of increases in depreciation and amortization, and interest expense.
EBITDA for outdoor advertising increased 11.1% to $943,000 for the three months
ended July 31, 2000, from $849,000 for the three months ended July 31, 1999. The
EBITDA margin for outdoor advertising increased to 42.8% for the three months
ended July 31, 2000, compared to 42.5% for the three months ended July 31, 1999.
Travel Centers. Gross sales at the Company's travel centers increased by 1.6% to
$7.987 million for the three months ended July 31, 2000, from $7.863 million for
the three months ended July 31, 1999. Merchandise sales decreased 0.9% to $3.032
million for the three months ended July 31, 2000, from $3.061 million for the
three months ended July 31, 1999. Gasoline sales increased 3.8% to $3.628
million for the three months ended July 31, 2000, from $3.495 million for the
same period in 1999. Wholesale gasoline sales increased 15.8% to $536,000 for
the three months ended July 31, 2000, from $463,000 for the three months ended
July 31, 1999. Restaurant sales decreased 6.3% to $791,000 for the three months
ended July 31, 2000, from $844,000 for the three months ended July 31, 1999.
Cost of goods sold for the travel centers increased 1.9% to $5.361 million for
the three months ended July 31, 2000, from $5.261 million for the three months
ended July 31, 1999. Merchandise cost of goods decreased 4.2% to $1.339 million
for the three months ended July 31, 2000, from $1.398 million for the three
months ended July 31, 1999. Gasoline cost of goods increased 3.7% to $3.290
millions for the three months ended July 31, 2000, from $3.174 million for the
three months ended July 31, 1999. Wholesale gasoline cost of goods increased
16.8% to $521,000 for the three months ended July 31, 2000, from $446,000 for
the three months ended July 31, 1999. Restaurant cost of goods decreased 13.2%
to $211,000 for the three months ended July 31, 2000, from $243,000 for the
three months ended July 31, 1999. Cost of goods sold as a percentage of gross
revenues for the three months ended July 31, 2000 was 67.1% compared to 66.9%
for the three months ended July 31, 1999.
Gross profit for the travel centers increased 0.6% to $2.516 million for the
three months ended July 31, 2000, from $2.500 million for the three months ended
July 31, 1999. Lower margins on convenience store product sales and gasoline
sales for the three months ended July 31, 2000 continued to negatively impact
gross margin.
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 for the travel centers
decreased 3.6% to $1.592 million for the three months ended July 31, 2000, from
$1.652 million for the three months ended July 31, 1999.
15
Depreciation and amortization expense decreased 6.2% to $151,000 for the three
months ended July 31, 2000, from $161,000 for the three months ended July 31,
1999.
The above factors contributed to an overall increase in travel center operating
income of 12.5% to $773,000 for the three months ended July 31, 2000, from
$687,000 for the three months ended July 31, 1999.
Interest expense increased 6.9% to $139,000 for the three months ended July 31,
2000, from $130,000 for the three months ended July 31, 1999.
Segment profit increased 13.8% to $634,000 for the three months ended July 31,
2000 from $557,000 for the three months ended July 31, 1999 primarily as a
result of decreases in general and administrative expenses and depreciation and
amortization.
EBITDA for travel centers increased 9.0% to $924,000 for the three months ended
July 31, 2000, from $848,000 for the three months ended July 31, 1999. The
EBITDA margin for travel centers decreased slightly to 11.6% for the three
months ended July 31, 2000, compared to 10.8% for the three months ended July
31, 1999.
Corporate and Other. General and administrative expenses for corporate and other
operations of the Company consist primarily of executive and administrative
compensation and benefits, accounting, legal and investor relations fees.
General and administrative expenses decreased to $143,000 for the three months
ended July 31, 2000, from $145,000 for the three months ended July 31, 1999.
Depreciation and amortization expenses for the Company's corporate and other
operations consist of depreciation associated with the corporate headquarters,
furniture and fixtures and vehicles. Depreciation and amortization expenses
increased to $45,000 for the three months ended July 31, 2000, from $37,000 for
the three months ended July 31, 1999.
Interest expense increased 30.0% to $26,000 for the three months ended July 31,
2000, from $20,000 for the three months ended July 31, 1999.
Other income, net, includes gains and/or losses from the sales of assets and
interest income. Other income, net, decreased 72.2% to $73,000 for the three
months ended July 31, 2000, from $263,000 for the three months ended July 31,
1999. The decrease is due to a one-time gain from insurance proceeds of $227,000
first quarter of fiscal year 2000 not present in fiscal year 2001.
Income before income taxes decreased 21.3% to $555,000 for the three months
ended July 31, 2000, from $705,000 for the three months ended July 31, 1999. As
a percentage of gross revenues, income before income taxes decreased to 5.4% for
the three months ended July 31, 2000, from 7.1% for the three months ended July
31, 1999, primarily as a result of increased depreciation and amortization, and
interest expense.
Income taxes were $212,000 for the three months ended July 31, 2000, compared to
$273,000 for the three months ended July 31, 1999, as the result of lower pretax
income.
The foregoing factors contributed to a decrease in the Company's net income for
the three months ended July 31, 2000 to $343,000 compared to $432,000 for the
three months ended July 31, 1999.
16
Liquidity and Capital Resources
At July 31, 2000, the Company had working capital of $4.065 million and a
current ratio of 1.9:1, compared to working capital of $4.166 million and a
current ratio of 2.1:1 January 31, 2000. Net cash provided by operating
activities was $2.695 million for the six months ended July 31, 2000, compared
to $2.446 million for the six months ended July 31, 1999. Net cash provided in
the current period is primarily attributable to increased depreciation and
amortization expense and other operating assets and liabilities.
Net cash used in investing activities for the six months ended July 31, 2000 was
$1.048 million, of which $1.257 million was used for purchases of property and
equipment, partially offset by proceeds from sales of assets. For the six months
ended July 31, 1999, net cash used for investing activities was $3.683 million,
of which $2.814 was used for purchases of property and equipment and $1.516
million was used for acquisitions.
Net cash used in financing activities for the six months ended July 31, 2000 was
$70,000 as compared to cash provided by financing activities of $1.667 million
for the six months ended July 31, 1999. At July 31, 2000 and 1999, financing
activities were primarily a result of borrowings and payments on debt.
Although the Company does not have any agreements in place, it will continue
discussions with acquisition candidates. The Company has not executed a letter
of intent or other agreement, binding or non-binding, to make any such
acquisitions. Any such acquisition would be subject to the negotiation and
execution of definitive agreements, appropriate financing arrangements,
performance of due diligence, approval of the Company's Board of Directors,
receipt by the Company of unqualified audited financial statements, and the
satisfaction of other customary closing conditions. The Company would likely
finance any such acquisitions with cash, additional indebtedness or a
combination of the two. Any commercial financing obtained for purposes of
acquiring additional assets is likely to impose certain financial and other
restrictive covenants upon the Company and increase the Company's interest
expense.
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
The principal market risks to which the Company is exposed to 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.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings. None.
Item 2. Changes in 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.
17
Item 5. Other Information. None.
Item 6. Exhibits and Reports on Form 8-K.
(a). Exhibit No. Exhibit Name
27 Financial Data Schedule
(b). No reports were filed on Form 8-K during the six months ended
July 31, 2000.
Signatures
In accordance with the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
Date: September 13, 2000
BOWLIN Outdoor Advertising
& Travel Centers Incorporated
/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
(Principal Financial and Accounting Officer)
18