A 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 October 31, 1998
[ ] 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 December 14, 1998, 4,384,848 shares of the issuer's common stock were
outstanding.
<PAGE>
BOWLIN
OUTDOOR ADVERTISING & TRAVEL CENTERS
INCORPORATED AND SUBSIDIARIES
INDEX
PART I. FINANCIAL INFORMATION
Page No.
--------
Item 1. Consolidated Financial Statements
Consolidated Balance Sheets as of
October 31, 1998 and January 31, 1998....................2
Consolidated Statements of Income for the
Three Months Ended and Nine Months Ended
October 31, 1998 and 1997.................................4
Consolidated Statements of Stockholders'
Equity for the Nine months ended October 31, 1998.........5
Consolidated Statements of Cash Flows for the
Nine Months Ended October 31, 1998 and 1997...............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........................................17
Item 6. Exhibits and Reports on Form 8-K ........................17
Signatures ..............................................18
1
<PAGE>
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)
OCTOBER 31, JANUARY 31,
1998 1998
(UNAUDITED) (UNAUDITED)
----------- -----------
Current assets:
Cash and cash equivalents $ 1,701 $ 4,054
Accounts receivable, net 762 579
Notes receivable, related
parties - current maturities 11 30
Inventories 4,197 3,623
Prepaid expenses 558 448
Income taxes 106 90
Other current assets 34 11
----------- -----------
Total current assets 7,369 8,835
Notes receivable, related parties,
less current maturities 3 20
Property & equipment, net 21,186 15,728
Intangible assets, net 1,230 1,200
Other assets 71 76
----------- -----------
Total assets $ 29,859 $ 25,859
=========== ===========
(Continued)
2
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BOWLIN
OUTDOOR ADVERTISING & TRAVEL CENTERS
INCORPORATED AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
LIABILITIES AND STOCKHOLDERS' EQUITY
(IN THOUSANDS, EXCEPT SHARE DATA)
OCTOBER 31, JANUARY 31,
1998 1998
(UNAUDITED) (UNAUDITED)
----------- -----------
Current liabilities:
Short-term borrowing, bank $ 689 $ 745
Accounts payable 1,176 1,351
Long-term debt, current maturities 1,345 779
Accrued liabilities 340 456
----------- -----------
Total current liabilities 3,550 3,331
Deferred income taxes 236 177
Long-term debt, less current maturities 11,018 8,124
----------- -----------
Total liabilities 14,804 11,632
Stockholders' equity
Common stock, $.001 par value; authorized
100,000,000 shares; issued and outstand-
ing 4,384,848 shares 4 4
Additional paid-in capital 11,604 11,604
Retained earnings 3,447 2,619
----------- -----------
Total stockholders' equity 15,055 14,227
----------- -----------
Total liabilities and stockholders' equity $ 29,859 25,859
=========== ===========
See accompanying notes to consolidated financial statements.
3
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BOWLIN
OUTDOOR ADVERTISING & TRAVEL CENTERS
INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<TABLE>
<S> <C> <C> <C> <C>
THREE MONTHS ENDED NINE MONTHS ENDED
------------------------------ -----------------------------
OCTOBER 31, OCTOBER 31, OCTOBER 31, OCTOBER 31,
1998 1997 1998 1997
(UNAUDITED) (UNAUDITED) (UNAUDITED) (UNAUDITED)
----------- ----------- ----------- -----------
Gross sales $ 7,897 $ 6,702 $ 23,648 $ 21,276
Less discounts on sales 73 66 208 221
----------- ----------- ----------- -----------
Net sales 7,824 6,636 23,440 21,055
Cost of goods sold 4,819 4,230 14,636 13,720
----------- ----------- ----------- -----------
Gross profit 3,005 2,406 8,804 7,335
General and administrative expenses (1,885) (1,590) (5,462) (4,902)
Other income 3 8 6 78
Depreciation and amortization (493) (305) (1,354) (833)
----------- ----------- ----------- -----------
Operating income 630 519 1,994 1,678
Other non-operating income (expense):
Interest income 23 71 84 216
Gain on sale of property and
equipment 8 -- 12 189
Interest expense (255) (186) (729) (534)
----------- ----------- ----------- -----------
Total other non-operating
income (expense), net (224) (115) (633) (129)
----------- ----------- ----------- -----------
Income before taxes 406 404 1,361 1,549
Income taxes 163 146 533 604
----------- ----------- ----------- -----------
Net Income $ 243 $ 258 $ 828 $ 945
=========== =========== =========== ===========
Weighted average common shares 4,384,848 4,384,848 4,384,848 4,384,848
Weighted average common and potential
dilutive common shares 4,384,848 4,384,848 4,388,166 4,384,848
Earnings per share
Basic $ 0.06 $ 0.06 $ 0.19 $ 0.22
=========== =========== =========== ===========
Diluted $ 0.06 $ 0.06 $ 0.19 $ 0.22
=========== =========== =========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
4
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BOWLIN
OUTDOOR ADVERTISING & TRAVEL CENTERS
INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
(IN THOUSANDS)
<TABLE>
<S> <C> <C> <C> <C> <C>
FOR THE NINE MONTHS ENDED
UNAUDITED
---------
COMMON ADDITIONAL
NUMBER STOCK, PAID-IN RETAINED
OF SHARES AT PAR CAPITAL EARNINGS TOTAL
--------------------------------------------------------------------------
Balance at January 31, 1998 4,384,848 $ 4 $ 11,604 $ 2,619 $ 14,227
Net income 828 828
--------------------------------------------------------------------------
Balance at October 31, 1998 4,384,848 $ 4 $ 11,604 $ 3,447 $ 15,055
==========================================================================
</TABLE>
See accompanying notes to consolidated financial statements.
5
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BOWLIN
OUTDOOR ADVERTISING & TRAVEL CENTERS
INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<S> <C> <C>
FOR THE NINE MONTHS ENDED
-------------------------------
OCTOBER 31, OCTOBER 31,
1998 1997
(UNAUDITED) (UNAUDITED)
----------- -----------
Cash flows from operating activities:
Net income $ 828 $ 945
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization 1,354 833
Gain on sales of property and equipment (12) (189)
Deferred income taxes 59 50
Imputed interest 24 --
Changes in operating assets and
liabilities (1,127) (764)
----------- -----------
Net cash provided by operating activities 1,126 875
Cash flows from investing activities:
Proceeds from sale of assets 16 423
Business acquisitions (note 2) (2,047) (4,865)
Purchases of property and equipment, net (3,084) (2,110)
Proceeds (disbursements) on notes receivable, net 36 4
----------- -----------
Net cash used in investing activities (5,079) (6,548)
Cash flows from financing activities:
Borrowings on short-term debt 689 3,532
Borrowings on long-term debt 2,341 --
Payments on short-term debt (745) (621)
Payments on long-term debt (685) --
----------- -----------
Net cash provided by financing activities 1,600 2,911
Net decrease in cash and cash equivalents (2,353) (2,762)
Cash and cash equivalents at beginning of period 4,054 7,519
----------- -----------
Cash and cash equivalents at end of period $ 1,701 $ 4,757
=========== ===========
</TABLE>
(Continued)
6
<PAGE>
BOWLIN
OUTDOOR ADVERTISING & TRAVEL CENTERS
INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS, CONTINUED
(IN THOUSANDS)
OCTOBER 31, OCTOBER 31,
1998 1997
(UNAUDITED) (UNAUDITED)
----------- -----------
Supplemental disclosure of cash flow
information:
Noncash investing and financing activities:
Acquisition of outdoor advertising
assets in exchange for long-term debt $ 1,650 $ 2,775
=========== ===========
Acquisition of covenants not-to-compete
in exchange for long-term debt $ 130 $ --
=========== ===========
Exchange of property and equipment and
note payable on sale of partnership
investment $ -- $ 1,284
=========== ===========
Acquisitions:
Fair value of assets acquired and
liabilities assumed at the date of
the acquisitions were as follows:
Accounts receivable $ 34 $ 74
Prepaid expenses 31 15
Billboards 1,927 3,865
Vehicles and equipment 55 63
Goodwill -- 863
Accounts payable -- (15)
=========== ===========
See accompanying notes to consolidated financial statements.
7
<PAGE>
BOWLIN
OUTDOOR ADVERTISING & TRAVEL CENTERS
INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
1. The consolidated financial statements for the nine months ended October 31,
1998 and October 31, 1997 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-KSB for the fiscal year ended January 31, 1998.
Results of operations for interim periods are not necessarily indicative of
results that may be expected for the year as a whole. Certain amounts in
the January 31, 1998 financial statements have been reclassified to conform
with the October 31, 1998 presentation.
2. 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.
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Three months ended October 31,
-------------------------------------------------------------------------------
1998 1997
------------------------------------- --------------------------------------
Income Shares Per Share Income Shares Per Share
(Numerator) (Denominator) Amount (Numerator) (Denominator) Amount
Basic EPS $ 243,000 4,384,848 $ 0.06 $ 258,000 4,384,848 $ 0.06
--------- ---------
Income available to
common stockholders
Effect if Dilutive Securities:
Stock options
----------- ------------- ----------- -------------
Diluted EPS
Income available to common
stockholders plus assumed
conversions $ 243,000 4,384,848 $ 0.06 $ 258,000 4,384,848 $ 0.06
----------- ------------- --------- ----------- ------------- ---------
Nine months ended October 31,
-------------------------------------------------------------------------------
1998 1997
------------------------------------- --------------------------------------
Income Shares Per Share Income Shares Per Share
(Numerator) (Denominator) Amount (Numerator) (Denominator) Amount
Basic EPS $ 828,000 4,384,848 $ 0.19 $ 945,000 4,384,848 $ 0.22
--------- ---------
Income available to
common stockholders
Effect if Dilutive Securities:
Stock options 3,318
----------- ------------- ----------- -------------
Diluted EPS
Income available to common
stockholders plus assumed
conversions $ 828,000 4,388,166 $ 0.19 $ 945,000 4,384,848 $ 0.22
----------- ------------- --------- ----------- ------------- ---------
</TABLE>
8
<PAGE>
3. Acquisitions. On February 1, 1998, the Company acquired the outdoor
advertising assets of Big-Tex Outdoor Advertising (Big-Tex) for $1,559,000.
The Company paid $559,000 from the proceeds of the initial public offering
and financed $1,000,000 with bank debt. Big-Tex owned and operated
approximately 285 poster and painted faces in the Brownwood, Texas metro
area. The Company also entered into a non-compete agreement with the former
principals of Big-Tex for a period of ten years from the date of the
acquisition, payable in ten annual installments of $10,000 beginning in
February 1999. The acquisition was accounted for as a purchase. The results
of Big-Tex's operations have been combined with the Company's since the
date of acquisition. The purchase price was allocated to the assets
acquired based on their estimated fair values and no goodwill was recorded
in connection with the purchase.
On March 3, 1998, the Company acquired the outdoor advertising assets of
Norwood Outdoor, Inc. (Norwood) for $1,006,000. The Company paid $350,000
from the proceeds of the initial public offering, $6,000 cash and financed
$650,000 with bank debt. Norwood owned and operated approximately 140
poster and painted bulletin faces in the Brady, Texas metro area. The
acquisition was accounted for as a purchase. The results of Norwood's
operations have been combined with the Company's since the date of
acquisition. The purchase price was allocated to the assets acquired based
on their estimated fair values and no goodwill was recorded in connection
with the purchase.
On May 1, 1998 the Company purchased the outdoor advertising assets of
Edgar Outdoor Advertising Co. for $900,000. The Company paid $900,000 at
closing from the proceeds of the initial public offering. Edgar owned and
operated approximately 62 painted bulletin faces in central Texas. The
acquisition was accounted for as a purchase. The results of Edgar's
operations have been combined with the Company's since the date of
acquisition. The purchase price was allocated to the assets acquired based
on their estimated fair values and no goodwill was recorded in connection
with the purchase.
On June 1, 1998 the Company purchased the outdoor advertising assets of J &
J Sign Company, located in Silver City, New Mexico. The Company paid
$332,000 from the proceeds of the initial public offering. J & J owned and
operated approximately 40 painted bulletin faces in Southwestern New
Mexico. The acquisition was accounted for as a purchase. The purchase price
was allocated to the assets acquired based on their estimated fair values
and no goodwill was recorded in connection with the purchase.
On August 14, 1998 the Company purchased the outdoor advertising assets of
T & C Outdoor for $160,000 cash. T & C owned and operated approximately 20
faces in central Texas. The acquisition was accounted for as a purchase.
The purchase price was allocated to the assets acquired based on their
estimated fair values and no goodwill was recorded in connection with the
purchase.
The following unaudited proforma consolidated results of operations have
been prepared as if the acquisitions of Big-Tex, Norwood and Edgar occurred
on February 1, 1998 and 1997. The effect of the Company's acquisitions of
the assets of J & J and T & C are not material to the combined results of
operations of the Company.
9
<PAGE>
(in thousands except per share amounts)
Nine Months Ended October 31
(unaudited)
1998 1997
---- ----
Gross sales $ 23,745 $ 22,218
Net income 848 1,041
Earnings per basic and
diluted share $ .19 $ .24
========== ===========
The proforma information is presented for informational purposes only and
is not necessarily indicative of the results of operations that actually
would have been achieved had the acquisition been consummated as of that
time, nor is it intended to be a projection of future results.
4. Subsequent Events: On November 10, 1998, the Company entered into a credit
agreement with one of its existing lenders for the following: 1) a new term
note, in the amount of $12,000,000, created to refinance existing
borrowings and to provide funds for working capital; 2) a new line of
credit, which is a multiple advance line, in the amount of $10,000,000, to
fund purchases of existing outdoor advertising business and/or billboard
properties; 3) an increase in the existing $500,000 working capital line to
$2,000,000; 4) the existing facility line to fund the acquisition and/or
construction of travel centers is reduced to $6,000,000; and 5) the
existing leasing line of $2,000,000 was terminated. Each note will bear
interest based on the LIBOR 90 day rate index for the first 90 day rate
period. At the end of each rate period the Company will have the option to
choose a different rate period or remain at the 90 day index if no election
is made. The Matrix rate will be based on the Company's earnings as
reported in the Company's most recently available 10Q.
On November 16, 1998 the Company purchased the outdoor advertising assets
of Faris Outdoor Advertising, Inc. for $2,500,000 which was financed with
bank debt. Faris owned and operated approximately 132 painted bulletin
faces in central Texas.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
OVERVIEW
The following is a discussion of the consolidated financial condition and
results of operations of the Company as of and for the two fiscal periods ended
October 31, 1998 and 1997. 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-KSB for the fiscal year ended January 31,
1998.
The Company operates in two industry segments, travel centers and outdoor
advertising. 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
10
<PAGE>
the corporate expenses of the Company which are not properly allocable 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.
The forward-looking statements included in Management's Discussion and Analysis
of Financial Condition and Results of Operations, which reflect management's
best judgment based on factors currently known, involve risks and uncertainties.
Actual results could differ materially from those anticipated in these
forward-looking statements as a result of a number of factors, including but not
limited to those discussed.
11
<PAGE>
RESULTS OF OPERATIONS
The following table presents certain income and expense items derived from the
Consolidated Statements of Income for the nine months ended October 31
(unaudited and amounts in thousands):
% INCR/
1998 1997 (DECR)
---- ---- -------
TRAVEL CENTERS:
Gross sales 18,617 17,749 4.9%
Discounts on sales 208 221 (5.9%)
------ ------
Net sales 18,409 17,528 5.0%
Cost of sales 12,394 11,814 4.9%
------ ------
6,015 5,714 5.3%
General and administrative
expenses 4,369 4,006 9.1%
Depreciation and
amortization 450 318 41.5%
------ ------
Operating income 1,196 1,390 (14.0%)
OUTDOOR ADVERTISING:
Gross sales 5,031 3,527 42.6%
Direct operating expenses 2,242 1,906 17.6%
------ ------
2,789 1,621 72.1%
General and administrative expenses 741 538 37.7%
Depreciation and amortization 820 419 95.7%
------ ------
Operating income 1,228 664 84.9%
CORPORATE AND OTHER:
General and administrative expenses (352) (358) (1.7%)
Depreciation and amortization (84) (96) (12.5%)
Interest expense (729) (534) 36.5%
Other income, net 102 483 (78.9%)
------ ------
INCOME BEFORE TAXES 1,361 1,549 (12.1%)
INCOME TAXES 533 604 (11.8%)
------ ------
NET INCOME 828 945 (12.4%)
12
<PAGE>
COMPARISON OF THE NINE MONTHS ENDED OCTOBER 31, 1998 AND OCTOBER 31, 1997
TRAVEL CENTERS. Gross sales at the Company's Travel Centers increased by 4.9% to
$18.617 million for the nine months ended October 31, 1998 from $17.749 million
for the nine months ended October 31, 1997. This increase is primarily
attributable to a 11.3% increase in merchandise sales which were $6.183 million
for the nine months ended October 31,1998 compared with $5.556 million for the
nine months ended October 31,1997. Gasoline sales increased 2.0% to $9.242
million for the nine months ended October 31, 1998 from $9.058 million for the
same period in 1997. Wholesale gasoline sales increased 42.6% to $967,000 for
the nine months ended October 31, 1998, as compared to $678,000 for the nine
months ended October 31, 1997. Restaurant sales decreased by 9.4% to $2.225
million for the nine months ended October 31, 1998 compared with $2.457 for the
nine months ended October 31, 1997. Cost of goods sold for the travel centers
increased 4.9% to $12.394 million for the nine months ended October 31, 1998
from $11.814 million for the nine months ended October 31, 1997, primarily as a
result of an increase in merchandise sales.
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
increased to $4.369 million for the nine months ended October 31 1998 from
$4.006 million for the nine months ended October 31, 1997.
Depreciation and amortization expense increased by 41.5% to $450,000 for the
nine months ended October 31, 1998 as compared to $318,000 for the nine months
ended October 31, 1997. The increase is attributable to additions of depreciable
assets during the current period.
The above factors contributed to an overall decrease in travel center operating
income of 14.0% to $1.196 million for the nine months ended October 31,1998 from
$1.390 million for the nine months ended October 31, 1997. This decrease is
primarily attributable to increases in depreciation and general and
administrative expenses.
OUTDOOR ADVERTISING. Gross sales from the Company's Outdoor Advertising
increased 42.6% to $5.031 million for the nine months ended October 31, 1998
from $3.527 million for the nine months ended October 31, 1997. The increase was
primarily attributable to the continual assimilation of the Company's
acquisitions, 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. Production expenses
include salaries for operations personnel and real estate representatives,
property taxes, materials and repairs and maintenance of advertising displays.
Selling expenses consist primarily of salaries and commissions for salespersons
and travel related to sales. Direct operating costs increased 17.6% to $2.242
million for the nine months ended October 31, 1998 from $1.906 million for the
nine months ended October 31, 1997, principally due to additional direct
operating costs associated with the acquisitions.
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 increased 37.7% to $741,000 for the nine months ended
October 31, 1998 from $538,000 for the nine months ended October 31, 1997.
13
<PAGE>
Depreciation and amortization expense increased 95.7% to $820,000 for the nine
months ended October 31, 1998 from $419,000 for the nine months ended October
31, 1997. The increase is attributable to scheduled depreciation of advertising
display structures and machinery and equipment primarily associated with
acquisitions as well as the amortization of goodwill and non-compete covenants.
The above factors contributed to the increase in outdoor advertising operating
income of 84.9% to $1.228 million for the nine months ended October 31, 1998
from $664,000 for the nine months ended October 31, 1997. In addition, earnings
before interest, taxes, depreciation and amortization (EBITDA) for outdoor
advertising increased 89.1% to $2.048 million for the nine months ended October
31, 1998 from $1.083 million for the nine months ended October 31, 1997. The
EBITDA margin for outdoor advertising increased to 40.7% for the nine months
ended October 31, 1998 as compared to 30.7% for the nine months ended October
31, 1997.
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 slightly to $352,000 for the nine
months ended October 31, 1998 as compared to $358,000 for the nine months ended
October 31, 1997.
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
decreased to $84,000 for the nine months ended October 31, 1998 as compared to
$96,000 for the nine months ended October 31, 1997.
Interest expense increased by 36.5% to $729,000 for the nine months ended
October 31, 1998 as compared to $534,000 for the nine months ended October 31,
1997. The increase is primarily attributable to the increase in debt associated
with the Company's acquisitions.
Other income, net, primarily includes operating rental revenues from the
Company's former subsidiary, gains and/or losses from the sales of assets, and
interest income. Other income, net, decreased 78.9% to $102,000 for the nine
months ended October 31, 1998 as compared to $483,000 for the nine months ended
October 31, 1997. The decrease is due to certain non-operating gains in 1997 not
present in 1998 and a decrease in interest income due to use of IPO proceeds for
acquisitions.
Income before taxes decreased 12.1% to $1.361 million for the nine months ended
October 31, 1998 as compared to $1.549 million for the nine months ended October
31, 1997. As a percentage of gross revenues, income before taxes decreased to
5.8% for the nine months ended October 31, 1998 as compared to 7.3% for the nine
months ended October 31, 1997.
Income taxes were $533,000 for the nine months ended October 31, 1998 as
compared to $604,000 for the nine months ended October 31, 1997, as the result
of lower pretax income.
The foregoing factors contributed to a decrease in the Company's net income for
the nine months ended October 31, 1998 to $828,000 as compared to $945,000 for
the nine months ended October 31, 1997.
LIQUIDITY AND CAPITAL RESOURCES
At October 31,1998, the Company had working capital of $3.819 million and a
current ratio of 2.1:1, compared to working capital of $5.504 million and a
current ratio of 2.7:1 at January 31, 1998. Working capital and the current
ratio decreased for the nine months ended October 31, 1998 as a result of IPO
proceeds used in the current period but present at January 31, 1998.
14
<PAGE>
Net cash provided by operating activities was $1.126 million for the nine months
ended October 31, 1998 as compared to net cash provided by operating activities
of $875,000 for the nine months ended October 31, 1997. Net cash provided in the
current period is primarily attributable to increased depreciation and
amortization from acquisitions and decreases in gains on sales of property and
equipment as well as an increase in cash used to fund operating assets and
liabilities. Net cash used for investing activities for the nine months ended
October 31, 1998 was $5.079 million, of which $2.047 million was used in the
purchase of the outdoor advertising assets of Big-Tex, Norwood, Edgar, J & J and
T & C, and $3.084 million was used for purchases of property and equipment. For
the nine months ended October 31, 1997, net cash used for investing activities
was $6.548 million, of which $4.865 million was used for acquisitions.
Net cash provided by financing activities for the nine months ended October 31,
1998 was $1.600 million as compared to $2.911 million for the nine months ended
October 31, 1997. At October 31, 1998 and 1997 financing activities were a
result of borrowings and payments on debt.
On February 1, 1998, the Company acquired the outdoor advertising assets of
Big-Tex Outdoor Advertising (Big-Tex) for $1,559,000. The Company paid $559,000
from the proceeds of the initial public offering and financed $1,000,000 with
bank debt. Big-Tex owned and operated approximately 285 poster and painted faces
in the Brownwood, Texas metro area. The Company also entered into a non-compete
agreement with the former principals of Big-Tex for a period of ten years from
the date of the acquisition, payable in ten annual installments of $10,000
beginning in February 1999. The acquisition was accounted for as a purchase. The
results of Big-Tex's operations have been combined with the Company's since the
date of acquisition. The purchase price was allocated to the assets acquired
based on their estimated fair values and no goodwill was recorded in connection
with the purchase.
On March 3, 1998, the Company acquired the outdoor advertising assets of Norwood
Outdoor, Inc. (Norwood) for $1,006,000. The Company paid $350,000 from the
proceeds of the initial public offering, $6000 cash and financed $650,000 with
bank debt. Norwood owned and operated approximately 140 poster and painted
bulletin faces in the Brady, Texas metro area. The acquisition was accounted for
as a purchase. The results of Norwood's operations have been combined with the
Company's since the date of acquisition. The purchase price was allocated to the
assets acquired based on their estimated fair values and no goodwill was
recorded in connection with the purchase.
On May 1, 1998 the Company purchased the outdoor advertising assets of Edgar
Outdoor Advertising Co. for $900,000 with the proceeds of the initial public
offering. Edgar owned and operated approximately 62 painted bulletin faces in
central Texas. The acquisition was accounted for as a purchase. The results of
Edgar's operations have been combined with the Company's since the date of
acquisition. The purchase price was allocated to the assets acquired based on
their estimated fair values and no goodwill was recorded in connection with the
purchase.
On June 1, 1998 the Company purchased the outdoor advertising assets of J & J
Sign Company, located in Silver City, New Mexico. The Company paid $332,000 from
the proceeds of the initial public offering. J & J owned and operated
approximately 40 painted bulletin faces in Southwestern New Mexico. The
acquisition was accounted for as a purchase. The purchase price was allocated to
the assets acquired based on their estimated fair values and no goodwill was
recorded in connection with the purchase.
On August 14, 1998 the Company purchased the outdoor advertising assets of T & C
Outdoor for $160,000 cash. T & C owned and operated approximately 20 faces in
central Texas. The acquisition was accounted for as a purchase. The purchase
price was allocated to the assets acquired based on their estimated fair values
and no goodwill was recorded in connection with the purchase.
On November 10, 1998, the Company entered into a credit agreement with one of
its existing lenders for the following: 1) a new term note, in the amount of
$12,000,000, created to refinance existing borrowings and to provide funds for
working capital; 2) a new line of credit, which is a multiple advance line, in
the amount of $10,000,000, to fund purchases of existing outdoor advertising
business and/or billboard properties, 3) an increase in the existing $500,000
working capital line to $2,000,000; 4) the existing facility line to fund the
acquisition and/or construction of travel centers is reduced to $6,000,000; and
5) the existing leasing line of $2,000,000 was terminated. Each note will bear
interest based on the LIBOR 90 day rate index for the first 90 day rate period.
At the end of each rate period the Company will have the option to choose a
different rate period or remain at the 90 day index if no election is made. The
Matrix rate will be based on the Company's earnings as reported in the Company's
most recently available 10Q.
On November 16, 1998 the Company purchased the outdoor advertising assets of
Faris Outdoor Advertising, Inc. for $2,500,000 which was financed with bank
debt. Faris owned and operated approximately 132 painted bulletin faces in
central Texas.
The construction of a new travel center located approximately 20 miles west of
Albuquerque, New Mexico, on Interstate 40 is scheduled to open by the end of
December. Renovation and upgrades of existing facilities continues.
15
<PAGE>
Although the Company does not have any agreements in place, it will continue
discussions with acquisition candidates throughout the Southwestern United
States. The Company has not executed a letter of intent or other agreement,
binding or non-binding, to make 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, 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.
YEAR 2000
The Year 2000 Issue is the result of computer programs that were written using
two digits rather than four to define the applicable year. As a result, any of
the Company's computer programs that have date-sensitive software may recognize
a date using "00" as the year 1900 rather than the year 2000. This could result
in a system failure or miscalculations which could result in disruptions in the
operations of the Company and its suppliers and customers.
STATE OF READINESS. The Company has conducted a comprehensive review of its
computer systems to identify those portions that could be affected by the Year
2000 Issue. The evaluation revealed that the Company's network hardware and
operating system, voice mail system, e-mail system, and accounting software are
the major resources that do have Year 2000 compliance issues. Fortunately, the
identified systems are "off-the-shelf" products with Year 2000 compliant
versions now available.
The Company has not yet completed its survey of its significant suppliers,
vendors, and pertinent institutions to determine the extent to which the Company
is vulnerable to those third parties' failure to remediate their Year 2000
issues. The Company will complete its survey by the end of the first quarter of
1999. There can be no guarantee that the systems of other companies on which the
Company's business relies will be timely converted or that failure to convert by
another company, or a conversion that is incompatible with the Company's
systems, would not have a material adverse effect on the Company and its
operations.
COSTS TO ADDRESS YEAR 2000 ISSUES. The Company estimates over the next twelve
months that the costs associated with the implementation plan will not exceed
$50,000.
RISKS ASSOCIATED WITH YEAR 2000 ISSUES. The Company's failure to resolve Year
2000 Issues on or before December 31, 1999 could result in system
miscalculations causing disruption in operations, including, among other things,
a temporary inability to process transactions, send invoices, determine payments
due, send and/or receive e-mail, or engage in similar normal business
activities. Additionally, failure of third parties upon whom the Company's
business relies to timely remediate their Year 2000 Issues could result in
disruptions in the Company's supply of parts and materials, late, missed or
unapplied payments, temporary disruptions in order processing and other general
problems related to the Company's daily operations. The Company presently
believes that, with modifications to existing software and conversions to new
software, the Year 2000 problem will not pose significant operational problems
for the Company. Until the Company receives responses from significant
suppliers, vendors and pertinent institutions, the overall risks associated with
the Year 2000 Issue remain difficult to accurately describe and quantify, and
there can be no guarantee that the Year 2000 Issue will not have a material
adverse effect on the Company and its operations.
CONTINGENCY PLAN. The Company has not determined the specific risks that may
need to be addressed by a contingency plan. It is the Company's goal to have the
internal major Year 2000 Issues resolved and external effects determined by the
end of the second quarter of 1999.
16
<PAGE>
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
Not required.
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. SUBMISSIONS OF MATTERS TO A VOTE OF SECURITY HOLDERS. None.
ITEM 5. OTHER INFORMATION. None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a). Exhibit No. Exhibit Name
----------- ------------
2.7 Purchase Agreement dated November 16, 1998 between the
Registrant and Faris Outdoor Advertising, Inc.
10.46 Credit Agreement with First Security Bank, dated as of
November 10, 1998 granting the Registrant funds in the
aggregate principal amount of $30,000,000
27 Financial Data Schedule
(b). No reports were filed on Form 8-K during the nine months ended
October 31, 1998.
17
<PAGE>
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: December 14, 1998
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
MASTER LOAN AGREEMENT
This Master Loan Agreement dated effective November 10, 1998, is between
BOWLIN OUTDOOR ADVERTISING & TRAVEL CENTERS INCORPORATED (the "Borrower") and
FIRST SECURITY BANK OF NEW MEXICO, N.A. ("Bank"), a national banking
association. In consideration of the mutual covenants and agreements contained
in this Agreement and for other good and valuable consideration, the Borrower
and the Bank agree:
THE PROPOSED LOANS
1. Borrower is presently indebted to the Bank on a number of loans
identified in the Credit Agreement dated effective November 25, 1997.
2. Borrower has requested that the Bank grant significant additional credit
facilities and modify the amounts, terms, and/or conditions of certain, but not
all, of the existing credit facilities. The Bank is willing to grant additional
credit facilities and to modify specific terms of certain existing notes and
other credit facilities upon the terms and conditions outlined in this
Agreement.
3. This Agreement replaces the Credit Agreement dated effective November
25, 1997, and the Commitment Letter dated October 27, 1998.
4. A new $12,000,000 Outdoor Term Note is created to refinance existing
borrowings including those at Norwest Bank New Mexico, N.A and to provide funds
for working capital.
5. A new $10,000,000 Outdoor Acquisition Line is created to fund purchases
of existing outdoor advertising business and/or billboard properties, a portion
of which may be used for term financing of billboards constructed by the
Borrower.
6. Increase the existing $500,000 Working Capital Line to $2,000,000.
7. The existing $8,000,000 Facility Line to fund acquisition and/or
construction of travel centers is reduced to $6,000,000.
8. The $2,000,000 "Leasing Line" dated November 25, 1997, to fund leases of
vehicles, fuel dispensing and other equipment is terminated.
<PAGE>
SECTION 1 - DEFINITIONS.
As used in this Agreement, the following terms shall have the respective
meanings indicated:
1.01 AGREEMENT means this Master Loan Agreement.
1.02 BANK means First Security Bank of New Mexico, N.A. and its successors
and assigns.
1.03 BORROWER means BOWLIN Outdoor Advertising & Travel Centers
Incorporated, a Nevada corporation whose office and principle place of business
is 150 Louisiana Blvd, NE, Albuquerque, NM 87108, and all successors and
assigns.
1.04 BORROWER'S RESOLUTIONS AND APPROVALS means, the resolutions duly
adopted by the Borrower authorizing and consenting to the Loan and to the
execution and delivery of the Loan Documents. The Borrower's Resolutions must be
evidenced by resolutions and authorizations in form acceptable to the Bank.
1.05 BUSINESS DAY means a day when the Bank is open for business.
1.06 CLOSING and CLOSING DATE mean the effective date of November 10, 1998.
1.07 EXISTING NOTES means the existing promissory notes payable to the Bank
listed on Exhibit 1.07. The Borrower is the maker on these notes or has assumed
all of makers obligations under the terms of the Assumption Agreement dated
effective August 28,1996.
1.08 FACILITY LINE means the line of credit to fund the maximum aggregate
amount of $6,000,000 (including amounts previously funded) to the Borrower to
construct, purchase or remodel travel centers and to purchase vehicles, computer
equipment, and other allowed fixtures and equipment as provided in this
Agreement.
1.09 GOVERNMENTAL AUTHORITY means the United States of America and any
state government; any political subdivision of any of the foregoing and any
agency, department, commission, board, bureau or instrumentality of any of them
which now or hereafter exercises jurisdiction over the Borrower.
1.10 LOAN means, collectively all loans from the Bank to the Borrower
described in this Agreement, evidenced by the Notes or other Loan Documents.
2
<PAGE>
1.11 LOAN DOCUMENT(S) means this Agreement, the Notes, and all other
security interest, deeds of trust, pledges, mortgages, assignments, collateral,
lien, lien perfection, or instruments executed in connection with or as security
for the payment of the Loan or for performance of the Borrower's Obligations
under this Agreement, or for both such payment and performance and all renewals,
extensions, modifications and amendments of any of the foregoing.
1.12 NOTE(S) means the promissory notes, or obligations referred or in the
form attached as follows, executed and delivered to the Bank by the Borrower,
together with all extensions, amendments, modifications, revisions,
replacements, and substitutions thereof permitted by the Bank:
a.) The existing Notes by the Borrower to the Bank listed on Exhibit
1.07(a),
b.) Individual notes identified in Exhibit 1.07(a) and future notes
executed by the Borrower to the Bank, in the form required by the Bank, up
to the maximum aggregated face amount of $6,000,000 under the $6,000,000
Facility Line,
c.) The $2,000,000 "Working Capital Note" in the form attached as Exhibit
1.12(c).
d.) The "$12,000,000 Outdoor Term Note" in the form is attached as Exhibit
1.12(d).
e.) Individual notes executed by the Borrower to the Bank, in the form
required by the Bank, up to the maximum aggregate face amount of
$10,000,000 under the Outdoor Acquisition Line.
f.) The Modification Agreement, in the form attached as Exhibit 1.12(f),
extending the final maturity date of Note No. 9008, dated January 31, 1995,
in the original principal amount of $765,000, to January 31, 2005.
g.) The Modification Agreement, in the form attached as Exhibit 1.12(g),
extending the final maturity date of Note No. 9010, dated May 16, 1995, in
the original principal amount of $900,000, to May 16, 2005.
3
<PAGE>
1.13 OUTDOOR ACQUISITION LINE means the line of credit in maximum aggregate
face amount of $10,000,000 to fund the Borrower's purchase of existing outdoor
advertising company(ies) and/or existing billboards and sites.
1.14 OUTDOOR ACQUISITION ASSETS means the existing outdoor advertising
business or billboards, panels, signs, locations for such signs purchased by the
Borrower.
1.15 OUTDOOR TERM LOAN means the $12,000,000 term note created, in part, to
fund the refinance of the Borrower's existing loans from Norwest Bank New
Mexico, N.A and certain other lenders as listed in Exhibit 1.15. The balance of
the proceeds of this note will be disbursed to the Borrower, at closing, for
working capital.
1.16 OBLIGATIONS means all obligations of the Borrower:
a.) To pay the principal of, and interest on, each Note and any Renewal
Note in accordance with their respective terms, now existing or existing in
the future, and to satisfy all of its other liabilities to the Bank whether
hereunder or otherwise, whether now existing or hereafter incurred, matured
or unmatured, direct or contingent, joint or several, including any
extensions, modifications, renewals thereof and substitutions therefor;
b.) To repay to the Bank all amounts advanced by the Bank hereunder or
otherwise on behalf of the Borrower, including, but without limitation,
advances for Loan Fees, principal or interest payments to prior secured
parties or lienholders, or for taxes or levies; and
c.) To reimburse the Bank, on demand, for all of the Bank's expenses and
costs, including the reasonable fees and expenses of its counsel, in
connection with the administration, amendment, modification or enforcement
of the Loan Documents and any documents evidencing or relating to a Renewal
Note, including, without limitation, any proceeding brought or threatened
to enforce payment of any of the Obligations.
1.17 RENEWAL NOTE means any promissory note executed and delivered by the
Borrower to the Bank in connection with a renewal, extension, modification,
amendment, revision, replacement or substitution of any Note in accordance with
the terms of this Agreement.
1.18 WORKING CAPITAL LINE means the revolving twenty-four (24) month
revolving line of credit in the maximum principal amount of $2,000,000 to fund
the Borrower's short term working capital needs.
4
<PAGE>
SECTION 2 - THE LOAN.
2.01 General Terms. Borrower's obligation to repay the Loan shall be
evidenced by the Notes, any Renewal Note, and the other Loan Documents, all of
which Borrower shall execute and deliver to the Bank before it may receive any
Loan proceeds.
2.02 Right of Set-off. Collateral includes the Bank's right of set-off
against any balance or share belonging to Borrower of any deposit or other
account with the Bank, notwithstanding any other security for the Loan.
2.03 Interest Rates. Interest shall accrue on each Note at the rate or
index specified in the Note as established at the time the Note is executed and
in accordance with this Agreement. The Bank may, at its option, calculate and
charge interest as though each payment is made on the payment due date with
principal reductions effective as of the date of receipt.
2.04 Repayment of Notes. Each Note shall be due and payable on the date(s)
specified in the Note and in accordance with the terms thereof. All payments
shall be paid directly to the Bank in immediately available funds. Alternatively
and at its sole discretion, the Bank may charge any deposit account of Borrower
for all or any part of the Obligations due or declared due. The records
maintained by the Bank shall be deemed to be evidence of the date of the amount
of each payment on each Note and the other Obligations. Payments may be applied
to a Note in such amounts and in such order or priority as the Bank deems
necessary and as provided in the Note or in this Agreement. Additional principal
payments on certain notes may be required based on the Borrower's earnings as
provided in Section 3.01(l), below.
5
<PAGE>
2.05 Loan Fees and Costs. Borrower shall pay to the Bank fees on the Notes
as follows:
a.) Facility Line fees:
i) on each Note for construction of a travel center, a fee of 35 basis
points (.35%) of the maximum Note amount, payable when the Note is
executed,
ii) upon completion of construction and conversion of the construction
note to a term amortization, and for the purchase of an existing
travel center, a fee of 35 basis points (.35%) of the maximum Note
amount, payable when the Note is executed,
iii) for each Note to finance vehicles, fuel dispensing equipment,
computer systems and furniture, fixtures and equipment and for any
other allowed purpose, a fee of 25 basis points (.25%) of the maximum
Note amount, payable when the Note is executed.
b.) Outdoor Term Loan Fees: a fee of 25 basis points (.25%) of the
$12,000,000 Term Loan, payable at Closing.
c.) Working Capital Line: a fee of 25 basis points (.25%) of the $2,000,000
face amount of the Working Capital Note, payable at Closing.
d.) Outdoor Acquisitions Line/Note Fees: a fee of 10 basis points (.10%) of
the $10,000,000 Outdoor Acquisitions Line, payable at Closing, plus a fee
of 15 basis points (.15%) of the face (maximum) amount of each Note
executed under this Line, payable upon execution of the Note.
e.) Other Fees and Costs: the Borrower will reimburse the Bank at Closing
for all out-of-pocket expenses and costs incurred by the Bank in connection
with this Loan including the cost of all lien searches, filing, and
recording fees, and preparation and review of this Agreement and other Loan
Documents. The Bank's attorneys fees will not exceed $12,000.00 (plus
applicable tax). The Borrower will promptly reimburse the Bank after
Closing for such cost and expense amounts not available at Closing or
incurred after the date of Closing. A schedule of the estimated costs,
expenses, and fees available as of Closing Date are attached as Exhibit
2.05(e).
6
<PAGE>
f.) Credit for Commitment Fee: the Borrower paid, upon execution of the
October 27, 1998, Commitment Letter a fee of $10,000. Such fee will, at
Closing, be a credit against the fees and costs payable by the Borrower.
2.06 Two Year Limitation on Advances Under the Facility Line:
Notwithstanding any later maturity date in any Note, any requests for funding by
the Borrower and any obligations of the Bank to fund advances under the Facility
Line are subject to a two (2) year limitation (November 10, 2000). Any request
to create a Note under the Facility Line must be received by the Bank from the
Borrower and all necessary Note(s) and all other Loan Documents necessary to
such request must be completed not later than November 10, 2000. Funding on an
individual Note made prior to such date may be completed after that date in
accordance with the provisions of this Agreement and Exhibit 4.01.
SECTION 3 - COVENANTS OF THE BORROWER.
3.01 Affirmative Covenants. So long as any Obligations remain unpaid, the
Borrower will, unless the Bank shall otherwise consent in writing:
a.) Compliance with Laws, Etc. Comply, and cause each of its subsidiaries
to comply, in all material respects with (i) all material laws, rules,
regulations and orders (including, without limitation, ERISA and all
applicable environmental laws) and (ii) all other laws, rules, regulations
and orders, promptly upon discovery of any non-compliance.
b.) Payment of Taxes, Etc. Pay and discharge, and cause each of its
subsidiaries to pay and discharge, before the same shall become delinquent,
(i) all taxes, assessments and governmental charges or levies imposed upon
it or upon its property provided, however, that neither the Borrower nor
any of its subsidiaries shall be required to pay or discharge any such tax,
assessment, charge or claim that is being contested in good faith and by
proper proceedings and as to which appropriate reserves are being
maintained.
c.) Maintenance of Insurance. Maintain, and cause each of its subsidiaries
to maintain, insurance with responsible and reputable insurance companies
or associations, in such amounts and covering such risks as is acceptable
to the Bank, and not less than the usual amounts and coverage types carried
by companies engaged in similar businesses and owning similar properties in
the same general areas in which the Borrower or such subsidiary operates.
The Borrower and all subsidiaries may maintain reasonable amounts of self
insurance consistent with their financial condition and other relevant
criteria, provided that any such self insurance must be approved by the
Bank in writing.
7
<PAGE>
d.) Preservation of Corporate Existence and Approvals.Preserve and
maintain, and cause each of its subsidiaries to preserve and maintain (i)
its corporate existence, rights (charter and statutory), franchises and
privileges in the jurisdiction of its incorporation, and qualify and remain
qualified, and causes each of its subsidiaries to qualify and remain
qualified, as a foreign corporation in each jurisdiction in which such
qualification is necessary or desirable in view of its business and
operations or the ownership of its properties.
e.) Maintenance of Properties, Etc. Maintain and preserve, and cause each
of its subsidiaries to maintain and preserve, all of its properties that
are used or useful in the conduct of its business in good working order and
condition, ordinary wear and tear excepted.
f.) Performance of other obligations. Perform and observe all of the terms
and provisions of all other loans, debts and obligations to all other
lenders and creditors.
g.) Transactions with Affiliates. Conduct, and cause each of its
subsidiaries to conduct, all transactions with any of their affiliates on
terms that are fair and reasonable and no less favorable to the Borrower or
such subsidiary than it would obtain in a comparable arm's-length
transaction with a person not an affiliate.
h.) Financial Ratio Covenants. The Borrower shall maintain, during the term
of this Loan, each of the following minimum financial ratios:
i. Minimum debt coverage ration of 1.15 to 1.0
ii. Minimum interest coverage ratio of 1.5 to 1.0
iii. Net worth of company must increase by at least 50% of net profit
on an annual basis.
iv. Tangible leverage ratio of not more than 6.5 to 1.0
8
<PAGE>
v. For purposes of calculating these ratios, the following definitions
and formulas apply:
"Earnings" means earnings before interest, taxes, depreciation
and amortization.
"Interest Coverage Ratio" means earnings divided by (Interest
expense (+) taxes).
"Debt Coverage Ratio" means earnings divided by (Prior year
current maturities of long term debt (+) interest expense (+)
taxes).
"Tangible Leverage Ratio" means total liabilities / tangible net
worth. Tangible net worth is defined as the sum of (Capital
stock, paid in capital and returned earnings) Less the sum of a
good will or other intangible assets.
All ratios will be calculated quarterly from the Borrower's
fiscal quarter statements with income and expense items
annualized.
i.) The Borrower shall furnish to the Bank:
1) as soon as possible and in any event within five days after the
occurrence of each Default or Event of Default continuing on the date
of such statement, a statement by the chief financial officer of the
Borrower setting forth details of such Default and the action that the
Borrower has taken and proposes to take with respect thereto;
2) as soon as available and in any event within 50 days after the end
of each of the first three fiscal quarters of each fiscal year of the
Borrower, a copy of the 10-Q and other related filings submitted by
the Borrower to the Securities and Exchange Commission (the "SEC");
3) as soon as available and in any event within 90 days after the end
of each fiscal year of the Borrower, a copy of the annual 10-K
submitted by the Borrower to the SEC to include the Borrower's audited
financial statements and all schedules, accounts, opinions, and notes;
9
<PAGE>
4) promptly after the commencement thereof, notice of all actions,
suits and proceedings threatened or pending before any court or
governmental department, commission, board, bureau, agency or
instrumentality, domestic or foreign, materially affecting the
Borrower or any of its subsidiaries;
5) promptly after the sending or filing thereof, copies of all proxy
statements, other financial statements and reports that the Borrower
sends to its stockholders, and copies of all regular, periodic and
special reports, and all registration statements and other reports or
information, that the Borrower files with the Securities and Exchange
Commission or any governmental authority that may be substituted
therefor, or with any national securities exchange;
6) promptly after the furnishing thereof, copies of any statement or
report furnished to any other holder of the securities of the Borrower
or of any of its subsidiaries with respect to any pending or potential
non-compliance with the terms of any other indenture, loan or credit
or similar agreement, and not otherwise required to be furnished to
the Lenders pursuant to any other clause of this Section;
j.) Examination Rights. At any reasonable time and from time to time,
permit, the Bank shall have the right to (i) to examine and make copies of
and abstracts from the records and books of account of, and visit the
properties of, the Borrower or any such subsidiary and (ii) to discuss the
affairs, finances and accounts of the Borrower and any of its subsidiaries
with any of their officers or directors and with their independent
certified public accountants.
k.) Books and Records. Keep, and cause each of its subsidiaries to keep,
proper books of record and account, in which full and correct entries shall
be made of all financial transactions and the assets and business of the
Borrower and each such subsidiary in accordance with GAAP.
10
<PAGE>
l.) Additional Debt Service based on Excess Cash Flow. Additional principal
payment of up to $400,000 per year, applied at the Borrowers' option to
either the $12,000,000 Outdoor Term Note or any one or more of the
individual notes under the $10,000,000 Outdoor Acquisition Line, will be
required. Provided no default exists, the Borrower may direct which Note(s)
the additional payments will reduce. Excess Cash Flow means 50% of the
excess EBITDA above the 1.3 to 1.0 debt service coverage ratio (calculated
as of the Company's fiscal year-end) up to the maximum amount of $400,000.
The additional debt service payments will be due annually beginning May 1,
2001, for the fiscal year ending January 31, 2001.
m.) List of Billboards and Locations. The Borrower shall provide to the
Bank within 30 days of the Closing Date and thereafter within 30 days of
the end of the Borrower's fiscal year, a listing of all of Borrower's
Billboards by state and county. The initial list shall include the specific
property address or legal description and for Billboards located on sites
not owned by the Borrower, the name and address of the property owner,
lessor or licensor of the site.
n.) Billboard Receivables Listing. At the Bank's written request, the
Borrower shall provide to the Bank within 10 days of the receipt of the
request, a listing of all receivables for all Billboard advertising
contracts, leases, rentals and revenues to include the name and address of
the obligor and an aging of the receivables.
o.) Additional Loan Documents. The Borrower shall immediately execute and
deliver any additional or further Loan Documents which the Bank in its sole
discretion determines necessary to create, document, or perfect any of the
collateral, lien, or lien perfection interests contemplated or referenced
in this Agreement, including any exhibit hereto. Additional documents may,
at the Bank's option, include documents to create or perfect liens as to
Billboard sites and leasehold interest to be filed in county real property
records.
p.) Subordination of Seller Financing. Any lien(s) or security interests in
favor of any seller to secure repayment of any portion of the purchase of
billboard or outdoor advertising assets or businesses shall be subordinated
to the Bank. The subordination amount shall be equal to all downpayments
and principal payments made thereafter on such financing.
11
<PAGE>
q.) Libor Rate Notes; Indemnification for Prepayments. If the Borrower
elects to prepay any portion of any Note for which the interest rate is
based on the London Interbank Offered Rate ("LIBOR"), all such prepayments
shall be subject to, and shall require that the Borrower pay to the Bank at
the time of such prepayment, an amount(s) which the Bank reasonably
determines will be sufficient to compensate for any loss, cost, expense or
risk incurred by the Bank as a result of the Borrower's prepayment(s) prior
to the expiration of applicable LIBOR Rate Period elected. The Bank will
provide to the Borrower its calculation of such cost. Additional debt
service payments required under subsection 3.01(l), above, are not
prepayments under this provision.
SECTION 3.02 NEGATIVE COVENANTS. So long as any obligations remain unpaid, the
Borrower will not, without the prior written consent of the Bank:
a.) Mergers, Etc. Merge with or into or consolidate with or into any other
entity , or acquire all or substantially all of the assets of any
non-outdoor advertising or non-travel center business or entity, or permit
any of its subsidiaries to do so, except that (i) any subsidiary of the
Borrower may merge or consolidate with or into or acquire assets of, any
other subsidiary of the Borrower and (ii) any of the Borrower's
subsidiaries may merge into or dispose of assets to the Borrower; provided,
however, that in each case, immediately after giving effect thereto, no
Event of Default would exist, and in the case of any such merger to which
the Borrower is a party, the Borrower is the surviving corporation.
b.) Sales, Pledge, Transfer of Assets. Sell, pledge, grant liens,
mortgages, deeds of trust or security interests in, transfer or otherwise
dispose of, or permit any of its subsidiaries to sell, transfer, or
otherwise dispose of, any of its assets (including, without limitation, all
or substantially all of its assets, whether in one transaction or a series
of related transactions) except (i) in connection with a transaction
authorized by this Agreement; or (ii) sale, transfer or disposition of
assets, not in excess of the aggregate book value of such assets of
$5,000,000 in any fiscal year. (In no event will any such sale of assets
allowed by this subsection be at less than fair market value.)
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c.) Investments in Other Entities. Make or hold, or permit the Borrower or
any of its subsidiaries to make or hold, any investment in any other entity
in excess of $5,000,000, without the Bank's prior written consent. This
restriction shall not prevent the Borrower from purchasing, acquiring a
travel centers or billboard business(es) allowed under the terms of this
Agreement.
d.) Change in Nature of Business. Except in connection with transactions
permitted under Section 3.02(b) and (c) above, make, or permit any of its
subsidiaries to make, any material change in the nature of its business as
carried on at the date hereof.
e.) Accounting Changes. Make or permit, or permit any of its subsidiaries
to make or permit, any change in accounting policies or reporting
practices, except as required by GAAP, or as permitted by GAAP, unless the
amounts involved or the resulting changes are not material.
f.) Limitation on Other Borrowings. The Borrower shall not, except with the
Bank's prior written consent:
i) incur, assume or otherwise become obligated on loans, borrowings,
debts, leases, or other financing with any person or entity in an
amount exceeding the aggregate of $500,000 per fiscal year and the
aggregate maximum amount of $3,000,000. (Such obligation limits do not
include amounts due to vendors for fuels, supplies, materials, labor,
and similar day to day operating expenses incurred in the ordinary
course of the Borrower's travel center and outdoor advertising
business), or
ii) incur any indebtedness or other obligations to any lender to
finance the acquisition of any outdoor advertising business or
billboards, or
iii) incur any indebtedness or other obligations to the owner or
seller of any single or related group of outdoor advertising assets or
businesses to finance the purchase of such assets (seller financing)
in excess of $2,000,000 and in no event in excess of the aggregate
maximum amount of $5,000,000 for all such types of indebtedness.
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SECTION 4 - ADVANCES ON LINES.
Provided no Default exists, provided the Borrower has compiled with and
observed all covenants, requirements and conditions of this Agreement, and
provided the Borrower is not prohibited from doing so by any Governmental
Authority, Borrower may request advances on the various Lines as provided below.
The Bank shall have no obligation to make advances, which would cause the
aggregate outstanding principal balance of the Notes to exceed the applicable
maximum loan amount for that Line.
4.01 Advances under $6,000,000 Facility Line. See disbursement requirements
and procedures in Exhibit 4.01 attached.
4.02 Advances under the $10,000,000 Outdoor Acquisition Line. See
disbursement requirements and procedures in Exhibit 4.02 attached.
4.03 Advances on $2,000,000 Working Capital Line. The Working Capital Line
is a revolving line of credit on which the Borrower may from time to time
request advances of not less than $100,000. The maximum principal balance,
including any requested advance, shall not at any time exceed $2,000,000. The
Borrower shall use proceeds from advances only for its short term working
capital needs and, may not without the Bank's prior written consent, use
proceeds from the advances under this line:
1) fund the acquisition or construction of travel center, or
2) purchase or acquire Outdoor Acquisition Assets.
SECTION 5 - COLLATERAL.
5.01 Collateral. The Bank and the Borrower intend and agree that the
collateral for this Loan is a first lien (except where a second or inferior lien
position is specifically referenced) on all of the assets of the Borrower, both
tangible and intangible, including cash, cash equivalents, inventory, accounts,
chattel paper, documents, instruments, investment property, rights to proceeds
and all other forms of payments, rentals, contract and advertising revenues,
real estate, leasehold interests, furniture, fixtures, and equipment, contract
rights and other agreements, and general intangibles, together with a pledge of
all currently owned or later acquired subsidiaries, and including but not
limited to all Debtor's assets used in its outdoor advertising (billboard) and
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travel center businesses. "Billboard" includes, without limitation, all
billboards, panels, signs, and other types of advertising signs, all structures
to or upon which such signs are mounted or displayed, all lighting, and other
electrical and electronics, equipment, and controls, and all of the Borrower's
fee simple and leasehold interests and rights to each location or site where
such signs are, or become, located together with all licenses, permits, or other
governmental approvals related to such signs. Such collateral secures all
Obligations of the Borrower to the Bank and includes, but is not limited to, the
following liens, mortgages, security interests and other collateral documents:
a.) All existing collateral documents and lien interests listed on Exhibit
5.01(a) attached.
b.) A first real estate mortgage (or deed of trust, leasehold mortgage or
leasehold deed of trust) on the real property and improvements for each
travel center now owned, and on each travel center constructed, purchased,
or remodeled under the Facility Line.
c.) The security interests, liens, pledges, assignments, mortgages, deeds
of trust, leasehold mortgages, leasehold deeds of trust and other
collateral interests granted, or to be granted, by the Borrower to the Bank
listed in Exhibit 5.01(c).
d.) Insurance coverage and loss payee provisions for all of Borrower's
assets which are collateral for the lines, including all vehicles and
equipment owned by the Bank and leased to Borrower under the Lease line.
e.) Collateral liens on any travel centers purchased, constructed, or
remodeled on Outdoor Acquisition Assets, and any additional collateral
liens which the Bank requires the Borrower to grant to the Bank during the
term of the Loan including real estate lien and lien perfection documents
on billboard site leases.
SECTION 6 - DEFAULT AND REMEDIES.
6.01 Events of Default. Each of the following shall constitute an Event of
Default under this Agreement:
a.) Failure of Borrower to make any payment on any Note, , or any other
Obligations to the Bank within five (5) Business Days after receipt of
certified written notice from the Bank.
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b.) Any warranty, representation or statement made or furnished to Bank by
or on behalf of Borrower under this Agreement or any Loan Document is false
or misleading in any material respect at the time made or furnished.
c.) This Agreement or any other Loan Document ceases to be in full force
and effect.
d.) Any default by Borrower on any indebtedness to any other lender or
default or material non-compliance by the Borrower on any borrowing,
obligation, or contractual liability with any third party.
e.) The dissolution or termination of Borrower's existence as a going
business, the insolvency of Borrower, the appointment of a receiver for any
part of Borrower's property, any assignment for the benefit of creditors,
or the commencement of any proceeding under any bankruptcy or insolvency
laws by or against Borrower.
f.) Commencement of foreclosure or forfeiture proceedings, whether by
judicial proceeding, self-help, repossession or any other method, by any
creditor of Borrower, including any garnishment, attachment, or levy on or
of any of Borrower's deposit accounts with Lender.
g.) A material adverse change occurs in Borrower's financial condition, or
Bank in good faith believes the prospect of payment or performance of the
Indebtedness is impaired.
h.) As to any breach or failure to observe or perform any non-payment
(non-monetary) condition, requirement or restriction under this Agreement
or any other Loan Document when such breach is susceptible to cure, the
Borrower fails to cure or remedy such breach within 15 days after receipt
of certified written notice from the Bank of such breach.
i.) Borrower breaches or fails to observe any other term, condition,
requirement, or restriction under this Agreement, in any other Loan
Document, or in any other agreement with the Bank which is not susceptible
to cure.
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j.) Any enforcement action is commenced against the Borrower by the SEC, or
trading in the Borrower's stock is suspended or halted by the SEC or any
exchange regulated by the SEC.
6.02 Cessation of Advances , Acceleration and Other Remedies. Upon the
occurrence of any Event of Default as described in section 6.01, the Bank may
forthwith or at any time during such default or events, without notice to the
Borrower refuse to make further advances on any Line or Note, and may,
independent of such decision, declare the unpaid balance of the Obligations,
including all principal and all interest then accrued, to be immediately due and
payable; and the Obligations shall become and be immediately due and payable
without presentment, notice of protest or other notice of dishonor or of any
other kind of notice whatsoever, including, without limitation, notice of
default, notice of intent to accelerate and notice of acceleration, all of which
are hereby expressly waived by Borrower; and the Bank may immediately enforce
its rights under the Loan Documents; and may exercise all rights available to it
in law or equity including all rights available under this Agreement or under
the other Loan Documents.
SECTION 7 - MISCELLANEOUS.
7.01 Execution and Form of Documents. Each written instrument required by
this Agreement or any of the other Loan Documents to be furnished to the Bank
shall be duly executed by the person or persons specified (or where no
particular person is specified, by such person as the Bank shall require), duly
acknowledged where required by the Bank and, in the case of affidavits and
similar sworn instruments, duly sworn to and subscribed before a notary public
duly authorized to act in the premises by Governmental Authority; shall be
furnished to the Bank in one or more copies as required by the Bank; shall be in
such form and of such substance as shall be effective, in the judgment of the
Bank, to accomplish the results intended by such instrument; and shall in all
respects be in form and substance satisfactory to the Bank and to its legal
counsel.
7.02 Assignment of Loan Proceeds. Borrower irrevocably assigns to the Bank
and grants a security interest to the Bank in and to its right, title and
interest in:
a.) All Loan proceeds held by the Bank, whether or not disbursed; and
b.) All funds deposited by the Borrower with the Bank under this Agreement
or otherwise.
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7.03 Severability. If any item, term or provision contained in the Loan
Documents is in conflict, or may hereafter be held to be in conflict with the
laws of the United States or the State of New Mexico, as applicable, or any
political subdivision of any of them, then only the documents containing such
provision shall be affected and it shall be affected only as to such particular
item, term or provision and shall in all other respects remain in full force and
effect.
7.04 No Waiver. No course of dealing between the Bank and the Borrower or
any guarantor, or any delay on the part of the Bank in exercising any rights
hereunder or under the Loan Documents shall operate as a waiver of any rights of
the Bank, except to the extent, if any, expressly waived in writing by the Bank.
7.05 Survival. All covenants, agreements, representations and warranties
made by the Borrower in the Loan Documents and in any certificates or other
documents or instruments delivered pursuant to this Agreement shall survive the
making by the Bank of the Loan and the execution and delivery of the Loan
Documents, and shall continue in full force and effect until the Obligations are
paid in full.
7.06 Notices. All notices required to be given in writing under this
Agreement shall be given by hand delivery, by a certified delivery by a
nationally recognized overnight courier service, or by the U.S. Postal Service,
and shall be effective when actually delivered, or when delivery during regular
business hours is attempted on a Business Day at the notice address of the party
to whom the notice is to be given. Any party may change its address for notices
under this Agreement by giving written notice to the other party.
Notice Addresses: Borrower:
BOWLIN Outdoor Advertising & Travel Centers, Inc.
150 Louisiana Blvd. NE
Albuquerque, NM 87108
Attn: Michael L. Bowlin, President
Bank:
First Security Bank of New Mexico, N.A.
P.O. Box 1305
Albuquerque, NM 87103
Attn: Commercial Loans, James Bertram, Vice President
7.07 Modification. This Agreement shall not be changed orally or by course
of conduct or dealing but shall be changed only by agreement in writing signed
by all parties hereto.
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7.08 Counterparts. This Agreement may be executed simultaneously in any
number of counterparts, each of which, when so executed and delivered, shall be
an original, but such counterparts shall together constitute one and the same
instrument.
7.09 Binding Effect. This Agreement shall be binding upon the Bank, the
Borrower and their respective successors, assigns, heirs and personal
representatives.
7.10 No Partnership or Joint Venture. Notwithstanding anything to the
contrary in the Loan Documents, and notwithstanding any action the Bank takes
pursuant to the Loan Documents, the Bank and the Borrower shall not be deemed to
be engaged in a partnership or joint venture, nor shall the Bank be deemed to be
an agent or principal of the Borrower.
7.11 Assignment by the Bank. The Loan Documents, each Note, any Renewal
Note and the Loan contemplated thereby, may be placed, participated, assigned
and/or serviced by the Bank and/or its successors and assigns, and in connection
with any of the foregoing, the Bank may retain a portion of the fees or interest
paid on the Notes or may receive servicing, brokerage or other fees from the
purchaser or participant. Any such placement, participation, assignment or
servicing shall be at the Bank's sole option; and the Bank and its successors
and assigns shall have no obligations to disclose to the Borrower the receipt,
or contemplated receipt, of any such fees, nor shall the Borrower have any claim
or right to the same. The Bank shall have the right to disclose and to provide
to any prospective purchaser or participant copies of Loan Documents and
financial and other information of or about the Borrower.
7.12 Relation to Other Documents. This Loan Agreement supersedes and
replaces all prior agreements, commitments, and understandings between the Bank
and the Borrower, written or unwritten, including all previous loan agreements.
The provisions of this Agreement are not intended to supersede the provisions of
the other Loan Documents, but should be construed as supplemental thereto.
However, except as specifically provided herein, if there is any inconsistency
between the provisions of this Agreement and the other Loan Documents, this
Agreement shall be control.
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7.13 Jurisdiction. Borrower hereby irrevocably agrees that any legal action
or proceedings against the Borrower with respect to this Agreement may be
brought in the courts of the State of New Mexico or in the U.S. District Court
for the District of New Mexico. Borrower hereby consents and submits to the
jurisdiction of such courts and further consents to the personal jurisdiction of
any court located within Bernalillo County, New Mexico, with respect to any
lawsuit to enforce the obligations of Borrower under this Agreement. This
provision shall not limit the right of the Bank to bring such action or
proceedings against the Borrower in the courts of such other states or
jurisdictions where the Borrower may be subject to jurisdiction nor to any
action required to be brought in another jurisdiction as the Borrower(s) real
property assets or interests located in such other jurisdictions.
7.14 Governing Law. This Agreement and the Loan Documents have been
negotiated, executed and delivered solely within the State of New Mexico. The
rights and obligations of the parties under this Agreement and under each of the
Loan Documents shall be governed by and construed and interpreted in accordance
with the laws of the State of New Mexico.
7.15 Jury trial waiver. In any action, claim, counterclaim, or other
proceeding based upon or related in any manner to this agreement, the note, or
the other loan documents, borrower, the bank, and all makers, sureties,
guarantors of the note, and this agreement, together with all successors and
assigns of the foregoing, waive the right to a jury demand and to a trial by
jury and stipulate that the trier of fact shall be the designated judge in such
proceeding and acknowledge and agree that such waiver may significantly limit an
important common law, constitutional, and/or statutory right which would be
otherwise available.
7.16 YEAR 2000 COMPLIANCE (Y2K). The Borrower shall take all action that
may be necessary or desirable, or that the Bank may reasonably request, in order
to ensure that the Borrower, its affiliates, and all customers, suppliers and
vendors that are material to the Borrower's business, become Year 2000 Compliant
on or before August 1, 1999. Such acts shall include, without limitation, (i)
performing a comprehensive inventory, review and assessment of all of the
Borrower's systems and adopting a detailed plan, with itemized budget and
timetable, for the remediation, monitoring and testing of such systems, and (ii)
making a detailed inquiry of all material customers, suppliers and vendors to
ascertain whether such entities are aware of the need to be Year 2000 Compliant
and are taking all appropriate steps to become Year 2000 Compliant on the timely
basis. The Borrower shall, promptly upon request, provide to the Bank such
certifications or other evidence of Borrower's compliance with the terms of this
section as the Bank may from time to time reasonably require.
BANK: BORROWER:
First Security Bank of BOWLIN Outdoor Advertising &
New Mexico, N.A. Travel Centers Incorporated
--------------------------- ----------------------------
By: James J. Bertram, By: Michael L. Bowlin,
Vice President President
20
ASSET PURCHASE AGREEMENT
THIS AGREEMENT is hereby made this, November 16, 1998 by and among BANNER
Advertising, Inc., a Texas corporation (individually "BANNER"), FARIS OUTDOOR
ADVERTISING, INC., a Texas corporation (individually "FOA"), George W. FARIS,
III, an individual (individually "FARIS"), and Robert L. SANDLIN, an individual
(individually "SANDLIN"), and BOWLIN Outdoor Advertising & Travel Centers
Incorporated, a Nevada corporation ("BOWLIN"). BANNER, FOA, FARIS and SANDLIN
are collectively referred to herein as the "SELLER".
Purpose of Agreement
BOWLIN desires to purchase and SELLER desires to sell certain tangible and
intangible assets that comprise a certain portion of SELLER's business engaged
in outdoor advertising. Therefore, in consideration of the premises and of the
mutual representations, warranties herein contained, the parties hereby agree as
follows:
Terms and Conditions
Purchase Price
The purchase price shall be Two Million Five Hundred Thousand and No/100 Dollars
($2,500,000.00).
In addition to the amount specified above, at closing an adjustment of the
purchase price listed above shall be made for:
(a) an amount equal to the amount of any prepaid rents, leases, permits and
taxes as specified in attached Exhibit E and incorporated for all purposes
herein. This amount will be paid by BOWLIN to SELLER, but will be reduced
by the amount of any prepaid advertising rents received by SELLER and
further reduced by BOWLIN's prorated share (prorated by day as of Closing
date) of the current month's revenue billed in advance by SELLER; and
(b) an amount equal to the amount of current accounts receivable will be
paid by BOWLIN to SELLER provided that SELLER guarantees the collection of
such accounts receivable within ninety (90) days of Closing. SELLER hereby
agrees to make immediate cash payment to BOWLIN, upon BOWLIN's request, of
the amount of any such account receivable not collected within ninety (90)
days of Closing, save and except any amount of such account receivable
attributable to "current month's revenue" previously prorated to BOWLIN
pursuant to subparagraph (a) immediately preceding.
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As additional consideration for SANDLIN's agreement to sell his assets covered
by this Agreement, BOWLIN has agreed, and does agree, to indemnify BOB SANDLIN
COMPANY, INC. (individually "BSC"), a Texas corporation, as is provided in the
paragraphs on "Indemnification" contained hereafter.
The purchase price, the indemnity of Bob Sandlin Company, Inc., as provided
herein, and payments noted above, shall be the sole considerations paid by
BOWLIN under this agreement.
Date of Closing
The parties contemplate that Closing shall take place on November 16, 1998. If
Closing does not occur by that date, it will occur as soon thereafter as BOWLIN
is able to complete its due diligence investigation. The parties agree that
BOWLIN's obligation to complete this purchase is contingent upon BOWLIN being
satisfied, in its sole discretion, that all representations made to it
concerning SELLER's assets are true; that the financial condition, books, and
accounts of SELLER are sound; that the land leases, easements, outdoor
advertising permits and advertising contracts are of satisfactory condition to
BOWLIN; and that the value of the assets being transferred is not less than the
purchase price. Transfer of Assets to BOWLIN, and Transfer of Funds to SELLER
shall take place on November 16, 1998.
Transfer of Assets
At closing, SELLER will sell, transfer, assign, convey and deliver to BOWLIN
free and clear of any liens, debts, or encumbrances, save and except any liens
or encumbrances affecting the underlying fee title estate on the real property
subject of the land leases and/or easements for the sign sites, and BOWLIN will
purchase, accept and acquire from SELLER all of the Assets listed in Exhibit A
attached hereto and incorporated for all purposes herein.
Instruments of Transfer
(a) SELLER Deliveries. At the closing, SELLER shall deliver to BOWLIN:
i. A bill of sale transferring to BOWLIN title to the Assets as
provided herein, in form and substance acceptable to BOWLIN and
SELLER;
ii. Form(s) from SELLER to the Texas Department of Transportation
regarding transfer of the outdoor advertising permits from SELLER
to BOWLIN.
iii. Assignment of land lease agreements and/or easements pertinent to
sign sites located on property owned by third parties (See
attached Exhibit G);
iv. Such other bills of sale, titles and other instruments of
assignment, transfer and conveyance as BOWLIN shall reasonably
request, in recordable form, where appropriate, and properly
executed, evidenced and notarized where appropriate in such form
as shall be necessary or appropriate to vest in BOWLIN good title
to the Assets.
v. Advertising contracts for all current advertisers.
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(b) BOWLIN's Deliveries. At the closing, BOWLIN shall deliver to SELLER:
i. Immediately available funds to one or more accounts designed by
SELLER for the purchase price as specified herein;
ii. Checks in an amount sufficient to pay the net amount due for
items listed in Exhibit E.
(c) Other Transfer Instruments. Following the Closing, at the request of
BOWLIN, SELLER shall deliver any further Instruments and take all
reasonable action as may be necessary or appropriate to vest in BOWLIN
all of SELLER's title to the assets. This will specifically include
all historical and current files and documentation related to
structures, advertisers, permits, licenses, lighting and any other
pertinent data.
Assumption of Liabilities
It is expressly understood and agreed by the parties hereto that except as
is otherwise provided herein to the contrary, BOWLIN assumes no debts,
liabilities (including tax liabilities) or obligations (contractual or
otherwise) of SELLER or any other debts, liabilities or obligations related
to the conduct of SELLER's business arising prior to Closing. BOWLIN shall
assume SELLER's obligations pursuant to the advertising contracts, land
leases, easements, outdoor advertising permits and any other of SELLER's
assets purchased by BOWLIN that accrue after the Closing so long as such
accrual was not as a result of a default thereunder by SELLER for which
SELLER will continue to be responsible. BOWLIN agrees to hold harmless and
indemnify SELLER from any actions brought as a result of an breach by
BOWLIN of the obligations assumed pursuant to the previous sentence.
Representations and Warranties
SELLER represents and warrants to BOWLIN as of the date hereof and on the
closing date as follows (all representations and warranties being joint and
several):
(a) Authority. SELLER has the legal authority to sell, transfer, and
deliver to BOWLIN the tangible and intangible assets of the SELLER's
outdoor advertising business.
(b) Title. SELLER has good and indefeasible title to all properties,
assets and leasehold estates, real and personal, tangible and
intangible, to be transferred pursuant to this Agreement subject to no
mortgage, pledge, lien, conditional sales agreement, encumbrance or
charge except for mortgages, liens or encumbrances on the real
property fee simple estates of the ground lessors and liens to be
released at Closing.
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(c) Insurance. SELLER carries insurance, which it believes to be adequate
in character and amount, with reputable insurers in respect of assets
being acquired and such insurance policies are still in full force and
effect, and shall be in effect without interruption until closing has
occurred.
(d) Violations, Suits, Claims, etc. To the best of SELLER's actual
knowledge, SELLER is not in default under any law or regulation, or
under any order of any court or federal, state, municipal or other
governmental department, commission, board, bureau, agency or
instrumentality wherever located, and to SELLER's actual knowledge and
belief there are (1) no claims, actions, suits or proceedings
instituted or filed and (2) no claims actions, suits or proceedings
threatened presently or which in the future may be threatened or
asserted against or affecting SELLER at law or in equity, or before or
by any federal, state, municipal or other governmental department,
commission, board, bureau, agency or instrumentality wherever located,
and (3) there are no potential claims, demands, liens, encumbrances,
or debts with regard to the assets that are the subject of this sale
or that may create for BOWLIN any environmental or regulatory
liability, except as have been previously disclosed to BOWLIN.
(e) Tax Returns. SELLER has filed or will file all requisite federal,
state and other tax returns due for all fiscal periods ended on or
before the date of this agreement. There are no claims against SELLER
for federal, state or other taxes for any period or periods to and
including the date of this agreement.
(f) Authorizations and Enforceability. SELLER has all requisite power and
authority to execute, deliver and perform this Agreement and the other
agreements and instruments delivered pursuant hereto and to consummate
the transactions contemplated hereby. This Agreement and the other
agreements and instruments delivered pursuant hereto have been duly
and validly authorized, executed and delivered by SELLER and
constitutes the valid and binding obligations of SELLER, fully
enforceable in accordance with their terms.
(g) Effect of Agreement. To the best of SELLER's actual knowledge, the
execution, delivery and performance of this Agreement by SELLER and
the consummation of the transactions contemplated hereby will not,
with or without the giving of notice or the lapse of time, or both:
(a) violate any material provision of law, statute, rule or regulation
to which SELLER is subject; (b) violate any judgment, order, writ or
decree of any court, arbitrator or governmental agency applicable to
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SELLER; or (c) result in a material breach of or material conflict
with any term, covenant, condition or provision of, result in the
modification or termination of, constitute a material default under,
or result in the creation or imposition of, any lien, security
interest, charge or encumbrance upon any of the Assets pursuant to any
charter, bylaw, commitment, contract or other agreement or instrument,
to which SELLER is a party or by which any of its Assets is bound.
(h) Permits, Licenses, Compliance with Applicable Laws and Court Orders.
SELLER has all requisite power and authority, and all permits,
licenses and approvals of governmental and administrative authorities,
to own, lease and operate its properties and to carry on its business
as presently conducted; all such permits, licenses and approvals
material to the conduct of the business of SELLER are in full force
and effect. To the best of SELLER's actual knowledge, SELLER's conduct
of its business does not materially violate or infringe any applicable
law, statute, ordinance or regulation. To the best of SELLER's actual
knowledge, SELLER is not in default in any respect under any
executive, legislative, judicial, administrative or private (such as
arbitration) ruling, order, writ, injunction or decree.
(i) Financial Information. All financial information relating to the
Assets or the business and provided to BOWLIN by SELLER have been
prepared from the books and records of SELLER and fairly and
accurately present the financial condition of SELLER and the business
relating to the Assets as of the date of such information.
(j) Agreements, Plans, Arrangements, etc. Except as set forth in Exhibit
A, none of the Assets are bound or affected by, any oral or written:
(1) lease agreement (whether as lessor or lessee) relating to real or
personal property;
(2) license agreement, assignment or other contract (whether as
licensor or licensee, assignor or assignee) relating to
trademarks, trade names, patents, copyrights (or applications
therefor);
(3) agreement with any business broker with respect to this
transaction;
(4) agreement with any supplier, distributor, franchisor, dealer,
sales agent or representative;
(5) joint venture or partnership agreement with any other person;
(6) agreement with any bank, factor, finance company or similar
organization regarding the financing of accounts receivable or
other extensions of credit;
(7) agreement granting any lien, security interest or mortgage on any
Asset or other property of SELLER, including, without limitation,
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any factoring agreement for the assignment of accounts
receivable, other then encumbrances that will be released at
Closing;
(8) agreement for the Construction or modification of any Asset or
leasehold interest of SELLER;
(9) agreement with any employee, consultant, or independent
contractor providing personal services to SELLER.
(k) Acquisition Agreements. There are no agreements relating to the
acquisition of the business or Assets of SELLER to which SELLER is
presently a party, other than this Agreement.
(l) Status of Real Property. SELLER has not received any notice of
noncompliance with respect to real property on which any of the Assets
are located (the "Real Property") with any applicable statutes, laws,
codes, ordinances, regulations or requirements relating to fire,
safety, health or environmental matters or noncompliance with any
covenants, conditions and restrictions (whether or not of record) or
local, municipal, regional, state or federal requirements or
regulations. To the best of SELLER's actual knowledge, there has been
no release or discharge on or under the Real Property by SELLER of any
toxic or hazardous substance, material or waste which is or has been
regulated by any governmental or quasi-governmental authority or is or
has been listed as toxic or hazardous under any applicable local,
state or federal law. To the best of the SELLER's actual knowledge,
there are no subsurface or other conditions related to toxic or
hazardous waste affecting the Real Property or any portion or
component thereof, and there are no underground storage tanks located
on the Real Property.
(m) Defects. To the best of SELLER's actual knowledge, there are no
structural or operational defects in any of the Assets. SELLER
acknowledges that to the best of SELLER's actual knowledge all signs
were constructed and installed to normal industry standards by
qualified and licensed manufacturers and installers.
(n) Leases Current. All obligations of the SELLER under all existing lease
agreements which are required by such agreements to have been
performed by SELLER have been fulfilled by the respective SELLER,
including the payment by the respective SELLER of all lease payments
due and payable through the date hereof.
(o) Permits Current. All payments due and payable for required permits
from governmental bodies have through the date hereof been fulfilled
by the respective SELLER.
6
<PAGE>
BOWLIN represents and warrants to SELLER as of the date hereof and the Closing
date as follows:
(a) Organization. BOWLIN is a validly existing corporation organized under
the laws of the State of Nevada and has all requisite corporate power
and authority to own, operate and lease its properties and assets.
(b) Authority. BOWLIN has full corporate power, authority and legal rights
to execute and deliver, and to perform its obligations under this
Agreement, and has taken all necessary action to authorize the
purchase hereunder on the terms and conditions of this Agreement and
to authorize the execution, delivery and performance of this
Agreement. This Agreement has been duly executed by BOWLIN, and
constitutes a legal, valid and binding obligation of BOWLIN
enforceable in accordance with its terms.
(c) Compliance with Instruments, Consents, Adverse Agreements. Neither the
execution and delivery of this Agreement nor the consummation of the
transactions contemplated hereby will conflict with or result in any
violation of or constitute a default under the articles of
incorporation or the by-laws of BOWLIN, or any Law, Instrument, lien
or other Contract by which BOWLIN is bound. BOWLIN is not a party or
subject to any Contract, or subject to any article or other corporate
restriction or any Law which materially and adversely affect the
business operation, prospects, properties, assets or condition,
financial or otherwise, of BOWLIN.
(d) Litigation. There is no suit, action or litigation, administrative,
arbitration, or other proceeding or governmental investigation pending
or, to the knowledge of BOWLIN, threatened which might, severally or
in the aggregate materially and adversely affect the financial
condition or prospects of BOWLIN or BOWLIN's ability to acquire the
Assets as contemplated by this Agreement.
(e) Brokers. All negotiations relative to the Agreement and the
transactions contemplated hereby have been carried on by BOWLIN is
such manner without giving rise to any valid claim against SELLER for
a finder's fee, brokerage commission or other like payment.
Conditions to BOWLIN's Obligations
The obligations of BOWLIN hereunder are subject to the fulfillment, at or
prior to the Closing, of each of the following conditions, any or all of
which may be waived in writing by BOWLIN, in its sole discretion:
(a) Accuracy of Representations and Warranties. Each of the
representations and warranties of SELLER contained in this Agreement
shall be true on and as of the Closing Date with the same force and
effect as though made on and as of the Closing Date, except as
affected by transactions contemplated hereby.
7
<PAGE>
(b) Performance of Covenants. SELLER shall have performed and complied
with all covenants, obligations and agreements to be performed or
complied with by it on or before the Closing Date pursuant to this
Agreement.
(c) No Litigation or Claims. No claim, action, suit, proceeding,
arbitration, investigation or hearing or notice of hearing shall be
pending or threatened against or affecting SELLER which: (a) might
foreseeably result, or has resulted, either in an action to enjoin or
prevent or delay the consummation of the transactions contemplated by
this Agreement or in such an injunction; or (b) could, in the
determination of BOWLIN, have an adverse effect on the assets to be
transferred hereunder.
(d) No Violations. No material violation of SELLER shall exist, or be
alleged by any governmental authority to exist, of any law, statute,
ordinance or regulation, the enforcement of which would adversely
affect the financial condition, results of operations, properties or
business of SELLER.
(e) Consents and Assignments. SELLER shall have delivered to BOWLIN all
requested consents and assignments of all persons and entities
necessary for the performance of the transactions contemplated by this
Agreement, including the transfer of all assets and the assignment of
leases, and SELLER shall have obtained the consents of: any lender to
SELLER, or, in the alternative, the release of all liens held by such
lender, with respect to the sale and transfer of the assets; and any
other consents of third parties reasonably deemed necessary or
appropriate by BOWLIN.
(f) Satisfactory Completion of Due Diligence. BOWLIN shall be satisfied in
its sole discretion with the content of the final Exhibits hereto and
other related documents for closing and shall otherwise be satisfied
in its sole discretion with the results of its due diligence review,
including the right to terminate this agreement with no penalty in the
event that the land leases, outdoor advertising permits and
advertising contracts are not of satisfactory condition to BOWLIN.
8
<PAGE>
Indemnification
(a) Indemnification Obligations of SELLER. SELLER shall defend, indemnify,
save and keep harmless BOWLIN and its successors and permitted assigns
against and from any liability, loss, cost, damage, claim, fine,
penalty or expense, including, without limitation, reasonable
attorneys' fee ("Damages"), sustained or incurred by any of them
resulting from or arising out of or by virtue of : (a) any material
inaccuracy in or material breach of any representation and warranty
made by SELLER in the Agreement or in any closing document delivered
to BOWLIN in connection with this Agreement; and/or (b) any breach of
contract on or prior to the Closing arising out of SELLER's ownership
of the Assets; and/or (c) any personal injury and/or property damage
from any accident occurring on or before the Closing arising out of
SELLER's ownership of the billboards.
(b) Indemnification Obligations of BOWLIN. BOWLIN shall defend, indemnify,
save and keep harmless SELLER and BSC and their successors and
permitted assigns against and from all Damages (as defined in
subparagraph (a) immediately preceding) sustained or incurred by any
of them resulting from or arising out of or by virtue of: (a) any
material inaccuracy in or breach of any representation and warranty
made by BOWLIN in this Agreement or in any closing document delivered
to SELLER in connection with this Agreement; and/or (b) BOWLIN's
failure to pay, discharge and perform any of the liabilities assumed
in this Agreement; and/or (c) any breach of contract arising out of
BOWLIN's ownership of the Assets from and after the Closing, and/or
(d) any personal injury and/or property damage arising out of any
accident occurring from and after the Closing. BOWLIN'S
INDEMNIFICATION OBLIGATIONS UNDER THIS SUBPARAGRAPH SHALL INCLUDE
DAMAGES WHICH ARISE FROM THE SOLE OR CONCURRENT NEGLIGENCE OR FAULT OF
SELLER AND/OR BSC OR EMPLOYEES OR INDEPENDENT CONTRACTORS DIRECTLY
RESPONSIBLE TO SELLER AND/OR BSC, ARISING OUT OF, INCIDENT TO, OR IN
ANY WAY CONNECTED OR RELATED TO THE ORIGINAL CONSTRUCTION, USE,
CONDITION, LOCATION, MAINTENANCE, REPAIR OR OPERATION OF THE
BILLBOARDS. IT IS THE EXPRESSED INTENTION OF THE PARTIES HERETO, BOTH
SELLER AND/OR BSC AND BOWLIN, THAT THE INDEMNITY PROVIDED FOR IN THIS
PARAGRAPH IS AN INDEMNITY BY BOWLIN TO INDEMNIFY AND PROTECT SELLER
AND/OR BSC FROM THE CONSEQUENCES OF SELLERS AND BSC'S OWN NEGLIGENCE,
WHETHER THAT NEGLIGENCE IS THE SOLE OR A CONCURRING CAUSE OF THE
INJURY, DEATH OR DAMAGE. BOWLIN'S INDEMNITY SET FORTH IN THIS
PARAGRAPH SHALL INURE TO THE BENEFIT OF THE SELLER AND/OR BSC AND
BANNER, FOA, FARIS, AND SANDLIN, WHICH COMPRISE THE SELLER.
Taxes
Real Estate and personal property taxes, if any, assessed or to be assessed
for the current calendar or fiscal year, regardless of when payable, shall
be prorated between BOWLIN and SELLER as of the closing date.
9
<PAGE>
Risk of Loss
The risk of loss or destruction of or damage to the assets transferred hereunder
from any cause whatsoever at all times on or subsequent to the execution of this
document but before closing shall be borne by SELLER.
Choice of Law and Venue
It is expressly agreed and stipulated that this contract shall be deemed to have
been made and is to be performable in Fort Worth, Tarrant County, Texas. All
questions concerning the validity, interpretation or performance of any of its
terms or provisions, or of any rights or obligations of the parties hereto,
shall be governed by the resolved in accordance with the laws of the State of
Texas. Any disputes between or among the parties to this contract concerning the
subject matter of this contract shall be submitted for resolution to any court
of competent jurisdiction sitting in Fort Worth, Tarrant County, Texas, which
shall have exclusive venue thereof.
Right of First Refusal
If any of BANNER, FOA or FARIS desire to sell assets of the type purchased
herein in the future, and any one or more of them receive(s) from a third party
a bona fide offer for the purchase of such assets, then BANNER, FOA or FARIS
agree(s) to disclose the terms of such third party offer to BOWLIN, in writing,
within ten (10) calendar days following the receipt of such offer. BOWLIN will
have seven (7) calendar days after receiving notice of the terms of the offer
within which to elect to purchase all of the assets subject of such offer on
terms identical to those offered by the third party. BOWLIN's election must be
made by written notice to BANNER, FOA or FARIS, as the case may be, accompanied
by a check for Ten Thousand and No/100 Dollars ($10,000.00), payable to the
order of the BANNER, FOA or FARIS, as the case may be, such sum to be applied to
the purchase price for such assets. Within fifteen (15) calendar days after the
period for BOWLIN's election, the parties will enter into a formal contract of
sale containing all terms of the original bona fide offer made to BANNER, FOA or
FARIS, as the case may be, from the third party except as the parties may
mutually agree otherwise. If BOWLIN fails to give the notice and tender the
payment as provided herein, BANNER, FOA or FARIS, as the case may be, will be
relieved of all liability to BOWLIN under this agreement and may dispose of the
assets as such party (either BANNER, FOA or FARIS, as the case may be, sees fit.
In the event BOWLIN fails at any time to exercise this right of refusal to
purchase any future assets, then this right of refusal granted herein shall be
void, canceled, terminated and of no further force and effect, and any assets
which BANNER, FOA or FARIS desire to sell, either at such time or in the future,
will be unencumbered, free and available for sale without notice to or any right
in, or obligation to, BOWLIN whatsoever. BOWLIN agrees to execute an appropriate
release of its right of refusal within ten (10) days after a request to do so
subsequent to its failure to exercise its right of refusal.
10
<PAGE>
Miscellaneous
(a) Expenses. Except as otherwise provided herein, whether or not the
transactions contemplated by this Agreement are consummated, each
party hereto shall pay its own expenses and the fees and expenses of
its counsel and accountants and other experts. Furthermore, BOWLIN
shall be responsible for payment to the business broker retained by
it.
(b) Actual Knowledge. Whenever used herein, the term "actual knowledge"
shall mean only information currently, consciously possessed by SELLER
without having made any investigation or inquiry and does not include
any knowledge which might be obtained by such inquiry or investigation
nor any constructive knowledge.
(c) Survival of Representations and Warranties. The representations,
warranties, covenants and agreements set forth in this Agreement and
any other written representation in any ancillary document shall
survive the Closing.
(d) Waivers. The waiver by any party hereto of a breach of any provision
of this Agreement shall not operate or be construed as a waiver of any
subsequent breach.
(e) Binding Effect; Benefits. This Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective
successors and assigns.
(f) Notices. All notices, requests, demands and other communications which
are required to be or may be given under this Agreement shall be in
writing and shall be deemed to have been duly given when delivered in
person or transmitted by fax or five (5) days after deposit in the
U.S. mails by certified or registered first class mail, postage
prepaid, return receipt requested, addressed to the party to whom the
same is so given or made.
if to SELLER to:
George W. Faris, III
P.O. Box 330326
Fort Worth, Texas 76163-0326
With a copy to:
James W. Schell
Pope, Hardwicke, Christie, Harrell, Schell & Kelly, L.L.P.
306 W. 7th, Suite 901
Fort Worth, Texas 76102-4995
11
<PAGE>
if to BOWLIN to:
BOWLIN Outdoor Advertising and Travel Centers Incorporated
150 Louisiana Blvd. N.E.
Albuquerque, New Mexico 87108
Attention: Michael L. Bowlin, President
or to such other address or Fax Number as any party may designate by
giving notice to the other parties hereto.
(g) Further Assurances. SELLER shall, from time to time at or after the
Closing, at the request of BOWLIN, and without further consideration,
execute and deliver such other instruments and take such other actions
as may be required to confer to BOWLIN and its assignees the benefits
contemplated by this Agreement.
(h) Entire Agreement. This document contains the entire agreement between
the parties and supersedes all prior agreements between the parties,
if any, written or oral, with respect to the subject matter thereof.
(i) The parties agree that this Agreement may be transmitted between them
by facsimile machine. The parties intend that faxed signatures
constitute original signatures and that a faxed Agreement containing
the signatures (original or faxed) of all the parties is binding on
the parties.
AGREED and ACCEPTED:
BOWLIN:
BOWLIN OUTDOOR ADVERTISING & TRAVEL CENTERS INCORPORATED
By:/s/ C. C. Bess
------------------------------------
C. C. Bess, Executive Vice President
<PAGE>
SELLER:
BANNER ADVERTISING, INC.
By:/s/ George W. Farris, III
------------------------------------
George W. Faris, III, President
FARIS OUTDOOR ADVERTISING, INC.
By:/s/ George W. Farris, III
------------------------------------
George W. Faris, III, President
By:/s/ George W. Farris, III
------------------------------------
George W. Faris, III, Individually
By:/s/ Robert L. Sandlin
------------------------------------
Robert L. Sandlin, Individually
13
<PAGE>
Acknowledgment for Corporations
STATE OF Texas )
) ss.
COUNTY OF [ ] )
The foregoing instrument was acknowledged before me this [ ] day of
[ ], 199[ ], by C. C. Bess, Executive Vice President of BOWLIN
Outdoor Advertising & Travel Centers Incorporated, a Nevada Corporation, on
behalf of the corporation.
--------------------------------
Notary Public
My commission expires:
- ----------------------
STATE OF Texas )
) ss.
COUNTY OF [ ] )
The foregoing instrument was acknowledged before me this [ ] day of
[ ], 199[ ], by George W. Faris, III, President of BANNER
ADVERTISING, INC. a Texas corporation, on behalf of the corporation.
--------------------------------
Notary Public
My commission expires:
- ----------------------
STATE OF Texas )
) ss.
COUNTY OF [ ] )
The foregoing instrument was acknowledged before me this [ ] day of
[ ], 199[ ], by George W. Faris, III, President of FARIS OUTDOOR
ADVERTISING, INC. a Texas corporation, on behalf of the corporation.
--------------------------------
Notary Public
My commission expires:
- ----------------------
14
<PAGE>
Acknowledgment for Individual
STATE OF Texas )
) ss.
COUNTY OF [ ] )
The foregoing instrument was acknowledged before me this [ ] day of
[ ], 199[ ], by George W. Faris, III, Individually.
--------------------------------
Notary Public
My commission expires:
- ----------------------
Acknowledgment for Individual
STATE OF Texas )
) ss.
COUNTY OF [ ] )
The foregoing instrument was acknowledged before me this [ ] day of
[ ], 199[ ], by Robert L. Sandlin, Individually.
--------------------------------
Notary Public
My commission expires:
- ----------------------
15
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<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JAN-31-1998
<PERIOD-END> OCT-31-1998
<CASH> 1701000
<SECURITIES> 0
<RECEIVABLES> 762000
<ALLOWANCES> 0
<INVENTORY> 4197000
<CURRENT-ASSETS> 7369000
<PP&E> 33936000
<DEPRECIATION> 12750000
<TOTAL-ASSETS> 29859000
<CURRENT-LIABILITIES> 3550000
<BONDS> 0
0
0
<COMMON> 4385
<OTHER-SE> 15051000
<TOTAL-LIABILITY-AND-EQUITY> 29859000
<SALES> 23440000
<TOTAL-REVENUES> 23648000
<CGS> 14636000
<TOTAL-COSTS> 14636000
<OTHER-EXPENSES> 5462000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 729000
<INCOME-PRETAX> 1361000
<INCOME-TAX> 533000
<INCOME-CONTINUING> 828000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 828000
<EPS-PRIMARY> .19
<EPS-DILUTED> .19
</TABLE>
