TRAVIS BOATS & MOTORS INC - 10-K Annual Report

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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

Form 10-K

_X_ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934 (Fee Required)

For the Fiscal Year Ended September 30, 1997

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934

Commission file number 0-20757

TRAVIS BOATS & MOTORS, INC.
(Exact name of registrant as specified in its charter)

TEXAS
(State or other jurisdiction of
incorporation or organization)

74-2024798
(I.R.S. Employer Indentification Number)

5000 Plaza on the Lake, Suite 250, Austin, Texas 78746
(Address of principal executive offices)

Registrant's telephone number, including area code: (512) 347-8787
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:

Common Stock, $.01 Par Value
(Title of class)

Indicate by check mark whether the Registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceeding 12 months (or for such shorter
period that Registrant was required to file such reports), and (2) has
been subject to such filing requirements for the past 90 days.
Yes _X_ No___

Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of Registrant's knowledge, in definitve proxy or
information statements incorporated by reference in Part III of this
Report on Form 10-K or any amendment to this Report on Form 10-K.
_____

The aggregate market value of the voting stock (which consists solely
of shares of Common Stock) held by non-affiliates of the Registrant as of
December 18, 1997, (based upon the last reported price of $23.25 per
share) was approximately $63,484,637 on such date.

The number of shares of the issuer's Common Stock, par value $.01 per
share, outstanding as of December 18, 1997 was 4,294,867 of which
2,730,522 shares were held by non-affiliates.

Documents Incorporated by reference: Portions of Registrant's Proxy
Statement relating to the 1998 Annual Meeting of Stockholders to be held
in March 1998, have been incorporated by reference herein (Part III).

TRAVIS BOATS & MOTORS, INC. AND CONSOLIDATED SUBSIDIARIES

REPORT ON FORM 10-K

TABLE OF CONTENTS

RISK FACTORS

PART I
Item 1. Business

Item 2. Properties

Item 3. Legal Proceedings

Item 4. Submission of Matters to a Vote of Security Holders

PART II

Item 5. Market for Registrant's Common Stock and Related
Shareholder Matters

Item 6. Selected Financial Data

Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations

Item 8. Financial Statements

Item 9. Changes in and Disagreements with Accountants and
Financial Disclosure

PART III

Item 10. Directors and Executive Officers

Item 11. Executive Compensation

Item 12. Security Ownership of Certain Beneficial Owners and
Management

Item 13. Certain Relationships and Related Transactions

PART IV

Item 14. Exhibits, Financial Statement Schedules, and Reports
on Form 8-K

Item 15. Index to Consolidated Financial Statements

Risk Factors

This Report on Form 10-K contains forward-looking statements that
involve risks and uncertainties. The Company's actual results could
differ materially from those discussed herein. Factors that could cause
or contribute to such differences include, but are not limited to, the
factors set forth below, those discussed in ''Management's Discussion and
Analysis of Financial Condition and Results of Operations'' and those
discussed elsewhere in this Report on Form 10-K.

Impact of Seasonality and Weather on Operations. The Company's
business, as well as the entire recreational boating industry, is highly
seasonal. Strong sales typically begin in January with the onset of the
public boat and recreation shows, and continue through July. Over the
previous four-year period, the average net sales for the quarterly
periods ended March 31 and June 30 represented in excess of 28% and 37%,
respectively, of the Company's average annual net sales. If, for any
reason, the Company's sales were to be substantially below those normally
expected during these periods, the Company's business, financial
condition and results of operations would be materially and adversely
affected. The Company generally realizes significantly lower sales in the
quarterly period ending December 31, resulting in operating losses during
that quarter.

The Company's business is also significantly affected by weather
patterns which may adversely impact the Company's operating results. For
example, drought conditions or merely reduced rainfall levels, as well as
excessive rain, may force area lakes to close or render boating dangerous
or inconvenient, thereby curtailing customer demand for the Company's
products. In addition, unseasonably cool weather and prolonged winter
conditions may lead to a shorter selling season in certain locations.
Although the Company's geographic expansion has reduced, and is expected
to continue to reduce, the overall impact on the Company of adverse
weather conditions in any one market area, such conditions will continue
to represent potential, material adverse risks to the Company and its
future financial performance. Due to the foregoing factors, among others,
the Company's operating results in some future quarters may be below the
expectations of stock market analysts and investors. In such event, there
could be an immediate and significant adverse effect on the trading price
of the Common Stock. See ''Management's Discussion and Analysis of
Financial Condition and Results of Operations.''

Impact of General Economic Conditions and Discretionary Consumer
Spending. The Company's operations are dependent upon a number of
factors relating to or affecting consumer spending. The Company's
operations may be adversely affected by unfavorable local, regional or
national economic developments or uncertainties regarding future economic
prospects that reduce consumer spending in the markets served by the
Company's stores. Consumer spending on non-essential goods such as
recreational boats can also be adversely affected due to declines in
consumer confidence levels, even if prevailing economic conditions are
positive. In an economic downturn, consumer discretionary spending levels
are also reduced, often resulting in disproportionately large declines in
the sale of high-dollar items such as recreational boats. For example,
during the Company's 1988-1990 fiscal years, the Texas economy was
severely depressed due to declines in the financial, oil and gas and real
estate markets. While the Company remained profitable during these
periods, its operating performance declined. There can be no assurance
that a similar economic downturn might not recur in Texas or any other
market or that the Company could remain profitable during any such
period. Similarly, rising interest rates could have a negative impact on
consumers' ability or willingness to obtain financing from third-party
lenders, which could also adversely affect the ability of the Company to
sell its products. Changes in federal and state tax laws including,
without limitation, the imposition or proposed adoption of luxury or
similar taxes on certain consumer products, could also influence
consumers' decisions to purchase products offered by the Company and
could have a negative effect on the Company's sales. Local influences
such as corporate downsizing, military base closings and the Mexican peso
devaluation have adversely affected and may continue to influence the
Company's operations in certain markets.

Dependence Upon Expansion. A significant portion of the Company's
growth has resulted from, and will continue to be increasingly dependent
upon, the addition of new stores and continued sales and profitability
from existing stores. Since October 1991, at which time the Company
operated five stores in Texas, the Company has opened or acquired 15 new
store locations in Texas, Arkansas, Louisiana, Alabama, Tennessee,
Mississippi, and Florida. During fiscal years 1997 and 1996, the stores
added since October 1991 have collectively accounted for approximately
70.6% and 57.6%, respectively, of the Company's aggregate net sales.
Comparable store sales increased 5.7% and 4.3% in fiscal years 1997 and
1996, respectively. Recent rates of comparable store sales and net income
growth are not necessarily indicative of the comparable store performance
that may be achieved by the Company in the foreseeable future. See
''Management's Discussion and Analysis of Financial Condition and Results
of Operations.''

The Company intends to continue to pursue a strategy of growth into
new markets through acquiring existing boat retailers, converting
compatible facilities to Travis Boating Centers and building new store
facilities. Accomplishing these goals for expansion will depend upon a
number of general factors, including the identification of new markets in
which the Company can obtain approval to sell its existing or
substantially similar product lines, the Company's financial
capabilities, the hiring, training and retention of qualified personnel
and the timely integration of new stores into existing operations. The
acquisition strategy will further depend upon the Company's ability to
locate suitable acquisition candidates at a reasonable cost and to
dispose, timely and effectively, of the acquired entity's remaining
inventory, as well as the ability of the Company to sell its Travis
Edition product line to the customer base of the previous owner. There
can be no assurance that the Company can identify suitable acquisition
candidates or complete acquisitions on terms and conditions favorable to
the Company.

The strategy of growth through conversion of compatible facilities to
Travis Boating Centers or the construction of new Travis Boating Centers
will further depend upon the Company's ability (i) to locate and
construct suitable facilities at a reasonable cost in those new markets
in which the Company believes it can obtain adequate market penetration
at standard operating margins without the acquisition of an existing
dealer, (ii) to obtain the reliable data necessary to determine the size
and product preferences of such potential markets and (iii) to introduce
successfully its Travis Edition line. There can be no assurance that the
Company will be able to open and operate new stores on a timely or
profitable basis. Moreover, the costs associated with opening such stores
may adversely affect the Company's profitability. See ''Management's
Discussion and Analysis of Financial Condition and Results of
Operations.''

Management of Growth. The Company has undergone a period of rapid
growth. Management has expended and expects to continue to expend
significant time and effort in acquiring and opening new stores. There
can be no assurance that the Company's systems, procedures and controls
will be adequate to support the Company's expanding operations. The
inability of the Company to manage its growth properly could have a
material adverse effect on the Company's business, financial condition
and results of operations.

The Company's management information system is designed to improve its
ability to monitor and manage its geographically dispersed stores. This
system is operational in 19 of the Company's 20 stores, with the most
recently acquired store planned to be operational during fiscal 1998.
There can be no assurance that the system will function as planned or
that the system can be integrated smoothly with new store openings and
acquisitions.

The Company's planned growth will also impose significant added
responsibilities on members of senior management, including the need to
identify, recruit and integrate new senior level managers, and the
ability to maintain or expand Travis Edition's and Travis Boating
Center's successful appeal to consumers. There is no assurance that any
additions to management can be readily and successfully achieved or that
the Company will be able to continue to grow its business.

Reliance on Manufacturers and Other Key Vendors. The Company's
success is dependent upon its relationship with, and favorable pricing
arrangements from, a limited number of major manufacturers. In the event
these arrangements were to change or terminate for any reason, including
changes in competitive, regulatory or marketing practices, the Company's
business, financial condition and results of operations could be
adversely affected.

As is typical in the industry, the Company deals with each of its
manufacturers pursuant to an annually renewable, non-exclusive, dealer
agreement that does not contain any contractual provisions concerning
product pricing or required purchasing levels. Pricing is generally
established on a model year basis, but is subject to change at the
manufacturer's sole discretion.

The Company purchased approximately 100% of its new outboard motors
for use on its Travis Edition lines of recreational boats in fiscal years
1997 and 1996, respectively, from Outboard Marine Corporation (''OMC''),
the manufacturer of Johnson outboard motors. Unlike the Company's other
dealer agreements, the Company's agreement with OMC is multi-year in
nature. The current agreement, which is in the first of five years, sets
forth an established discount level from the then prevailing dealer net
price over the entire term of the agreement. This dealer agreement may be
canceled by either party if the volume of product purchased or available
to be purchased is not maintained at pre-established levels. If the
Company's contract with OMC were canceled or modified, it could have a
material adverse effect on the Company's business, financial condition
and results of operations.

Approximately 34.3% and 22.7% of the Company's net inventory purchases
in fiscal years 1997 and 1996, respectively, were from a single boat
supplier. The Company also currently purchases a high percentage of the
annual production of a limited number of boat manufacturers. To ensure
adequate inventory levels to support the Company's expansion, it may be
necessary for such manufacturers to increase production levels or
allocate a greater percentage of their production to the Company. In the
event that the operations of the Company's manufacturers were interrupted
or discontinued, the Company could experience temporary inventory
shortfalls, or disruptions or delays with respect to any unfilled
purchase orders then outstanding. Although the Company believes that
adequate alternate sources would be available that could replace a
manufacturer as a product resource, there can be no assurance that such
alternate sources will be available at the time of any such interruption
or that alternative products will be available at comparable quality and
prices. The unanticipated failure of any manufacturer or supplier to meet
the Company's requirements with regard to volume or design
specifications, the Company's inability to locate acceptable alternative
manufacturers or suppliers, the Company's failure to have dealer
agreements renewed or to meet certain volume requirements with regard to
purchasing, or any substantial increase in the manufacturer's pricing to
the Company, could have a material adverse effect on the Company's
business, financial condition and results of operations.

Limitations to Market Entry. Under certain of its dealer agreements,
the Company must obtain permission from its manufacturers to sell
products in new markets. While the Company has received permission to
sell Johnson motors and various boat lines in its immediate expansion
markets, manufacturers have not granted such permission to the Company in
each of its broader target markets. While the Company believes it can
sell products of other manufacturers in new markets, there can be no
assurance that all of the Company's current manufacturers will grant
permission for the Company to sell in new markets, or if unable to obtain
such permission, that the Company can obtain suitable alternative sources
of supply.

Unlike other states the Company has targeted for expansion, the State
of Oklahoma has had restrictions on the location of competing marine
dealers that limit the ability of new entrants in the retail boat
industry to compete in Oklahoma. There can be no assurance that other
states will not pass similar or other restrictions limiting new
competition.

Income from Financing, Insurance and Extended Service Contracts. A
substantial portion of the Company's income results from the origination
and placement of customer financing and the sale of insurance products
and extended service contracts (collectively, ''F&I Products''), the most
significant component of which is the income resulting from the Company's
origination of customer financing. For example, during fiscal years 1997
and 1996, respectively, F&I Products accounted for approximately 4.4% and
4.2% of net sales and approximately 16.7% and 16.5% of gross profit. The
Company's lenders may choose to pursue this business directly, rather
than through intermediaries such as the Company. Moreover, lenders may
impose terms in their boat financing arrangements with the Company that
may be materially unfavorable to the Company or its customers. For these
and other reasons, the Company could experience a significant reduction
in income resulting from reduced demand for its customer financing
programs. In addition, if profit margins are reduced on sales of F&I
Products, or if these products are no longer available, it would have a
material adverse effect on the Company's business, financial condition
and results of operations. Furthermore, although optional extended
service contracts sold by the Company are from third party providers that
have further reinsured their warranty exposure and the Company has never
experienced any claims due to the default of a third party extended
service contract provider, the Company may experience significant breach
of warranty claims as a result of the failure of a third party extended
service contract provider or reinsurers that may, in the aggregate, be
material to the Company's business.

Availability of Financing. The Company currently has significant
floor plan and other inventory lines of credit from financial
institutions and other lenders, which the Company believes reflect
competitive terms and conditions. While the Company believes it will
continue to obtain comparable financing from these or other lenders,
there can be no assurance that such financing will be available to the
Company. The failure to obtain sufficient financing on favorable terms
and conditions could have a material adverse effect on the business,
financial condition and results of operations of the Company. See
''Management's Discussion and Analysis of Financial Condition and Results
of Operations-Liquidity and Capital Resources.''

Dependence on Key Personnel. The Company believes its success
depends, in large part, upon the continued services of key management
personnel, including Mark T. Walton, Chairman of the Board and President;
Ronnie L. Spradling, Executive Vice President-New Store Development; and
Michael B. Perrine, Chief Financial Officer, Secretary and Treasurer; and
other key employees. Although the Company has employment agreements
through TBC Management, Ltd. (an affiliated partnership of the Company)
with each of Messrs. Walton, Spradling and Perrine expiring in June 1999,
the loss of any of these individuals could materially and adversely
affect the Company, including its business expansion plans. The Company
maintains and is the beneficiary of key-man life insurance policies on
Messrs. Walton and Perrine in the amount of $1.0 million each, and on Mr.
Spradling in the amount of $500,000.

Product and Service Liability Risks. Products sold or serviced by
the Company may expose it to potential liability for personal injury or
property damage claims relating to the use of those products.
Additionally, as a result of the Company's activities in custom packaging
its Travis Edition lines, the Company may be included as a defendant in
product liability claims relating to defects in manufacture or design.
Historically, the resolution of product liability claims has not
materially affected the Company's business. The Company generally
requires manufacturers from which it purchases products to supply proof
of product liability insurance. Although the Company maintains third-
party product liability insurance that it believes to be adequate, there
can be no assurance that the Company will not experience legal claims in
excess of its insurance coverage, or claims that are ultimately not
covered by insurance. Furthermore, if any significant claims are made
against the Company, the Company's business, financial condition and
results of operations may be adversely affected by related negative
publicity.

.

Volatility of Stock Price. Prior to the Company's initial public
offering in June 1996, there was no public trading market for the
Company's Common Stock. There can be no assurance of an ongoing active
trading market or that the market price of the Common Stock will not
decline. It is anticipated that there will be limited float in the market
due to the relatively low number of shares owned by the public and
consequently, fluctuations in the market price for the Common Stock could
be significant. Recent market conditions for newly public companies, as
well as the Company's quarterly variations in operating results due to
seasonality and other factors, are likely to result in significant
fluctuations in the market price for the Common Stock. Future
announcements concerning the Company or its competitors, including
government regulations, litigation or changes in earnings estimates or
descriptive materials published by analysts, may also cause the market
price of the Common Stock to fluctuate substantially. These fluctuations,
as well as general economic, political and market conditions, such as
recessions, may adversely affect the market price of the Common Stock.
See ''Management's Discussion and Analysis of Financial Condition and
Results of Operations.''

Shares Eligible for Future Sale. Sales of substantial amounts of the
Company's Common Stock in the public market, or the perception that such
sales may occur, could have a material adverse effect on the market price
of the Common Stock. As of December 18, 1997, the Company, its officers
and directors and certain stockholders, beneficially own or control
voting rights, in the aggregate, on approximately 1,619,557 shares of
Common Stock. No prediction can be made as to the effect, if any, that
future sales of shares, or the availability of shares for future sale,
will have on the market price of the Common Stock prevailing from time to
time.

Anti-takeover Effect of Articles and Bylaw Provisions. The Company's
Articles of Incorporation provide that up to 1,000,000 shares of
preferred stock may be issued by the Company from time to time in one or
more series. The Board of Directors is authorized to determine the
rights, preferences, privileges and restrictions granted to and imposed
upon any unissued series of preferred stock and to fix the number of
shares of any series of preferred stock and the designation of any such
series, without any vote or action by the Company's stockholders. The
Board of Directors may authorize and issue preferred stock with voting or
conversion rights that could adversely affect the voting power or other
rights of the holders of Common Stock. In addition, the issuance of
preferred stock could have the effect of delaying, deferring or
preventing a change in control of the Company. The Company's Articles of
Incorporation also allow the Board of Directors to fix the number of
directors in the Bylaws with no minimum or maximum number of directors
required. The Company's Bylaws currently provide that the Board of
Directors shall be divided into three classes of two or three directors
each, with each class elected for three-year terms expiring in successive
years. The effect of these provisions may be to delay or prevent a tender
offer or takeover attempt that a stockholder might consider to be in the
stockholder's best interest, including attempts that might result in a
premium over the market price for the shares held by the stockholders.

PART I

Other than statements of historical fact, all statements contained in
this Report on Form 10-K, including statements in ''Item 1. Business'',
and ''Management's Discussion and Analysis of Financial Condition and
Results of Operations'', are forward-looking statements as that term is
defined in Section 21E of the Exchange Act that involve a number of
uncertainties. The actual results of the future events described in the
forward-looking statements in this Report on Form 10-K could differ
materially from those stated in such forward-looking statements. Among
the factors that could cause actual results to differ materially are:
general economic conditions, competition and government regulations, as
well as the risks and uncertainties discussed in this Report on Form 10-
K, including without limitation, the matters discussed in ''Risk
Factors'' and the uncertainties set forth from time to time in the
Company's other public reports, filings and public statements. All
forward-looking statements in this Report on Form 10-K are expressly
qualified in their entirety by the cautionary statements in this
paragraph.

Item 1. Business

General

Travis Boats & Motors, Inc. (''Travis Boats'' or the ''Company'') is a
leading multi-state superstore retailer of recreational boats, motors,
trailers and related marine accessories in the southern United States.
The Company, which currently operates 20 stores under the name Travis
Boating Center in Texas, Arkansas, Louisiana, Alabama, Tennessee,
Mississippi and Florida differentiates itself from competitors by
providing customers a unique superstore shopping experience that
showcases a broad selection of high quality boats, motors, trailers and
related marine accessories at firm, clearly posted low prices. Each
superstore also offers complete customer service and support, including
in-house financing programs and full-service repair facilities staffed by
factory-trained mechanics.

History

Travis Boats was incorporated as a Texas corporation in 1979. As used
herein and unless otherwise required by the context, the terms ''Travis
Boats'' and the ''Company'' shall mean Travis Boats & Motors, Inc. and
its direct and indirect subsidiaries.

Since its founding as a single retail store in Austin, Texas, the
Company has grown both through acquisitions and the establishment of new
store locations. During the 1980's, the Company expanded into San
Antonio, Texas with the construction of a new store facility. The Company
subsequently made acquisitions of boat retailers operating within the
Texas markets of Midland, Dallas and Abilene. It was during this initial
period of expansion that the Company began developing the systems
necessary to manage a multi-store operation and leveraging the economies
of scale associated with volume purchasing. The Company's success in
these areas led to the proprietary Travis Edition packaging concept and
the Company's pricing philosophy. Since 1990, Travis Boats has opened or
acquired 15 additional store locations in the following states: Texas
(3), Arkansas (2), Louisiana (3), Alabama (2), Tennessee (2), Mississippi
(1) and Florida (2).

Included in the new store acquisitions are the following transactions:

Effective September 20, 1995, the Company acquired substantially all
of the assets of Red River Marine, Inc., which operated store locations
in the resort communities of Hot Springs and Heber Springs, Arkansas.

Effective December 1, 1995, the Company acquired substantially all of
the assets of Clay's Boats & Motors, Inc., which operated a single store
location in New Iberia, Louisiana.

Effective October 3, 1996, the Company acquired substantially all of
the assets of North Alabama Watersports, which operated a single store
location in Florence, Alabama.

Effective November 1, 1996, the Company acquired substantially all of
the assets of Tri-Lakes Marine, Inc., which operated store locations in
Winchester, Tennessee and Huntsville, Alabama

Effective February 19, 1997, the Company acquired substantially all of
the assets of Bent's Marine, Inc., which operated a single store location
in Metairie, Louisiana.

Effective August 1, 1997, the Company acquired selected assets from
McLeod Marine, Inc. of Pascagoula, Mississippi.

Effective September 30, 1997, the Company acquired all of the
outstanding stock of Adventure Marine and Outdoors, Inc. , which operated
a store location in Fort Walton Beach, Florida; Adventure Marine South,
Inc., which operated a store location in Key Largo, Florida, and
Adventure Boat Brokerage, Inc., which operated a store location in Fort
Walton Beach, Florida.

Subsequent to September 30, 1997, the Company has completed the
acquisition of assets of one corporation:

Effective November 20, 1997, the Company acquired substantially all of
the assets of Southeastern Marine Group, Inc., which operated a single
store location in Hendersonville, Tennessee.

The Company sells approximately 50 different models of brand-name
fishing, water-skiing and general recreational boats, along with motors,
trailers, accessories and related equipment. Personal watercraft, off-
shore fishing boats and cabin cruisers are also offered for sale at
selected store locations. During fiscal 1997, substantially all of the
boats sold range in size from 16 to 23 feet at prices ranging from $7,500
to $23,000 with gross profit margins between approximately 21% and 23%.
Approximately 4.5% of new boat sales are personal watercraft with retail
prices generally ranging from $5,000 to $10,000 and approximately 3.2% of
new boat sales are off-shore fishing boats and cruisers with lengths of
27 feet or greater and ranging in retail price from $50,000 to $300,000.

The Company custom designs and pre-packages combinations of popular
brand-name boats, such as Larson, Sprint, Pro-Line and Sea Ark boats with
Johnson outboard and other motors, trailers and numerous accessories,
under its proprietary Travis Edition product line. These signature Travis
Edition packages, which account for the vast majority of total new boat
sales, have been designed and developed in coordination with the
manufacturers and often include distinguishing features and accessories
that have historically been unavailable to, or listed as optional by,
many competitors. These factors enable the Company to provide the
customer with an exceptional product that is conveniently packaged for
immediate enjoyment and competitively priced.

The Company believes that it offers a selection of boat, motor and
trailer packages that fall within the price range of the majority of all
boats, motors and trailers sold in the United States. The Company's
product line generally consists of boat packages priced from $7,500-
$23,000 with approximate even distribution within this price range. As
the Company continues to operate in Florida and enters other coastal type
markets along the Gulf of Mexico or the Atlantic coast, management
believes that the distribution of off-shore fishing boats and cabin
cruisers will increase as a percentage of net sales. Management believes
that by combining flexible financing arrangements with an even
distribution of products through a broad price range, the Company is able
to offer boat packages to customers with different purchasing budgets and
varying income levels.

Effective September 30, 1995, the Company elected to change its fiscal
year end from December 31 to September 30. This change was made to
establish a fiscal year that more closely conforms to the business cycle
of the Company.

Business Strategy

Management of the Company believes it is the first to have developed a
multi-state, chain superstore merchandising strategy in the recreational
boating business. The Company's objective is to become the dominant
retailer of recreational boats, motors, trailers and marine accessories
in the southern United States, prior to its focus and possible expansion
into other regions. Management's merchandising strategy is based on
providing customers with a comprehensive selection of quality, brand name
boats and boating products in a comfortable superstore environment. The
Company intends to continue to build brand identity by placing the Travis
Edition name on complete boating packages. Travis Boats has developed and
implemented a business strategy designed to increase its market
penetration within both existing and new market areas through a variety
of advertising and promotional events. The Company intends to emphasize
the following key elements of its business strategy:

Travis Boating Center superstore. Travis Boating Center superstores
have a distinctive and stylish trade dress accented with deep blue
awnings, a nautical neon building decoration, expansive glass storefronts
and brightly lit interiors. The stores range in size from approximately
2,000 (temporary store locations) to over 33,000 square feet and
management estimates the average store size at approximately 21,000
square feet. The superstore locations present customers with a broad
array of boats and often over 9,000 parts and accessories in a clean,
well-stocked, air-conditioned shopping environment. All boats are
typically displayed fully rigged with motor, trailer and a complete
accessory package, giving a ''ready to take home'' impression.
Professionally-trained mechanics operate service bays, providing
customers with quality and reliable maintenance and repair service.

Travis Edition concept. The Company uses extensive market research,
combined with the design resources of its manufacturers, to develop
custom Travis Edition boating packages. The Company's significant
purchasing power and consequent ability to coordinate designs with
manufacturers have enabled the Company to obtain products directly from
the factory at the lowest prices, with favorable delivery schedules and
with distinguishing features and accessories that have historically been
unavailable to, or listed as optional by, many competitors. The Company
can also add certain additional features after receipt of the product to
enhance the Company's Travis Edition packages. Each Travis Edition is a
complete, full-feature package, including the boat, motor, trailer and
numerous additional accessories and design features often not found on
competitors' products, thus providing customers with superior value.
These features often include enhanced styling such as additional exterior
colors, complete instrumentation in dashboards, transoms warrantied for
life, canopy tops, trolling motors, upgraded interiors with stereos, wood
grain dashboards, in-dash depth finders, stainless steel motor propellers
and enhanced hull design not available on other models. In addition,
Travis Edition boats are identified by the Company's attractive private
label logo as well as the respective manufacturer's logo.

Unlike most recreational boat dealers, the Company establishes firm
prices on its Travis Edition packages and generally maintains such prices
for an entire season. Prices are advertised and clearly posted so that
the customer receives the same price at any Travis Boating Center. The
Company's selling philosophy eliminates customer anxiety associated with
bargaining or negotiation and results in a price at or below prices
generally available from competitors. The Company believes this pricing
strategy and low-pressure sales style provide the customer with the
comfort and confidence of having received a better boat with more
features at a lower price. In the Company's view, this approach has
promoted good customer relationships and enhanced the Company's
reputation in the industry as a leading provider of quality and value.

Boat Show Participation. The Company also participates in boat
shows, typically held in January through March, in each of its markets
and in certain markets of close proximity. These shows are normally held
at convention centers, with all area dealers purchasing space to display
their respective product offerings. Boat shows and other offsite
promotions generate a significant amount of interest in products and
often have an immediate impact on sales at a nominal incremental cost.
Although total boat show sales are difficult to assess, management
attributes a significant portion of the second fiscal quarter's net sales
to such shows.

F&I Products. In the Company's efforts to maintain customer service
and support for customers purchasing its Travis Edition boat packages it
also offers customers the ability to purchase extended service contracts
and insurance coverages, including credit life and accident/disability
coverages (collectively ''F&I Products''). The Company also offers to
assist the customer in obtaining financing for their boat purchase
through a diversified group of financial institutions with which the
Company maintains financing agreements. The Company earns commissions on
these F&I Products based upon the Company's mark-up over the cost of the
products. F&I Products account for a substantial portion of the Company's
income, the most significant component of which is the income resulting
from the Company's origination of customer financing.

Operations

Purchasing. The Company is the largest volume buyer in the United
States of Johnson outboard motors from Outboard Marine Corporation
(''OMC'') and is the largest domestic volume buyer of boats from
substantially all of the boat manufacturers it represents. As a result,
the Company has significant access to the manufacturers and substantial
input into the design process for the new boats that are introduced to
the market each year by such manufacturers. In addition, the Company has
designed and developed, in coordination with its manufacturers, signature
Travis Edition boating packages which account for the vast majority of
its total new boat sales. The Company's purchasing power allows it to
purchase boats that are pre-rigged for the Company's Travis Edition
lines. Approximately 34.3% and 22.7% of the Company's net purchases in
fiscal years 1997 and 1996, respectively, were from Genmar Industries
which manufactures the Larson, AquaSport and (formerly) the Cajun boat
lines.

The Company typically deals with each of its manufacturers pursuant to
an annually renewable, non-exclusive dealer agreement which does not
contain any contractual provisions concerning product pricing or
purchasing levels. Pricing is generally established on an annual basis,
but may be changed at the manufacturer's sole discretion. The Company's
agreement with OMC, unlike its other dealer agreements, is multi-year in
nature. The current agreement, which is in the first of five years, sets
forth an established discount level from the then prevailing OMC dealer
net price over the entire term of the agreement. This dealer agreement
may be canceled by either party if volume of product purchased or
available to be purchased is not maintained at pre-established levels.
OMC supplied products that represented approximately $17.7 million, or
42.1% and $20.3 million, or 38.7%, of the Company's net purchases during
fiscal years 1997 and 1996, respectively.

Pursuant to its arrangements with certain manufacturers, the Company's
right to display some product lines in certain markets may be restricted.

Floor plan and other inventory financing. The Company acquires a
substantial portion of its inventory through floor plan financing
agreements. Inventory is generally purchased under floor plan lines of
credit (secured by such inventory) maintained with third party finance
companies or under revolving lines of credit maintained with commercial
banks, depending upon the type of product purchased. The finance
companies maintain relationships with certain manufacturers that allow
the Company to obtain several months of interest-free financing,
generally from August of one year through at least May of the following
year. Management believes that these financing arrangements are standard
within the industry. As of September 30, 1997, the Company and its
subsidiaries owed an aggregate of approximately $20.4 million pursuant to
the floor plan and revolving lines of credit.

Competition. The Company operates in a highly competitive
environment. In addition to facing competition generally from businesses
seeking to attract discretionary spending dollars, the recreational boat
industry itself is highly fragmented, resulting in intense competition
for customers, access to quality products, access to boat show space in
new markets and suitable store locations. The Company relies heavily on
boat shows to generate sales. If the Company is impeded in its ability to
participate in boat shows in its existing or targeted markets, it could
have a material adverse effect on the Company's business, financial
condition and results of operations.

The Company competes primarily with single location or single state
boat dealers and, to a lesser degree, with national specialty marine
stores, catalog retailers, sporting goods stores and mass merchants,
particularly with respect to parts and accessories. Dealer competition
continues to increase based on the quality of available products, the
price and value of the products and attention to customer service. There
is significant competition both within markets currently being served by
the Company and in new markets into which the Company plans to enter. The
Company competes in each of its markets with retailers of brands of boats
and motors not sold by the Company in that market. Management believes
that a trend in the industry is for independent dealers to attempt to
form buyer's groups, for manufacturers to include more features as
standard equipment on boats and consequently, for dealers to offer
packages comparable to those offered by the Company as its Travis Edition
lines. In addition, several of the Company's competitors, especially
those selling boating accessories, are large national or regional chains
that have substantially greater financial, marketing and other resources
than the Company. There can be no assurance that the Company will be able
to compete successfully in the retail marine industry in the future.

Impact of Environmental and Other Regulatory Issues. On October 31,
1994, the U.S. Environmental Protection Agency (''EPA'') announced
proposed emissions regulations for outboard marine motors. The proposed
regulations would require a 75% average reduction in hydrocarbon
emissions for outboard motors and set standards for carbon monoxide and
nitrogen oxide emissions as well. Under the proposed regulations,
manufacturers would begin phasing in low emission models in 1998 and have
nine years to achieve full compliance. The EPA estimated that its
proposed regulations, if enacted, will result in an increase in the
average price of an outboard marine motor of $700 after full
implementation of the regulations in the year 2006. Costs of comparable
new models, if materially more expensive than previous models, or the
manufacturer's inability to comply with EPA requirements, could have a
material adverse effect on the Company's business, financial condition
and results of operations.

The Company, in the ordinary course of its business, is required to
dispose of certain waste products that are regulated by state or federal
agencies. These products include waste motor oil, tires, batteries and
certain paints. It is the Company's policy to use appropriately licensed
waste disposal firms to handle this refuse. If there were improper
disposal of these products, it could result in potential liability for
the Company. Although the Company does not own or operate any underground
petroleum storage tanks, it currently maintains several above-ground
tanks, which are subject to registration, testing and governmental
regulation.

Additionally, certain states have required or are considering
requiring a license in order to operate a recreational boat or personal
watercraft. While such licensing requirements are not expected to be
unduly restrictive, regulations may discourage potential first-time
buyers, thereby limiting future sales, which could have a material
adverse effect on the Company's business, financial condition and results
of operations.

Trademarks and service marks. The Company does not hold any
registered trade or service marks at this time but has trademark
applications pending with the U.S. Patent and Trademark Office for the
names ''Travis Boating Center'' and ''Travis Edition,'' for its corporate
logo and for the overall appearance and trade dress of its Travis Boating
Centers. There can be no assurance that any of these applications will be
granted. However, based on a number of years of use, the Company believes
it has common law rights to these marks at least in its current market
areas.

Employees. As of September 30, 1997, the Company's staff consisted
of 369 employees, 356 of whom are full time. The full-time employees
include 20 in store level management and 20 in corporate administration
and management. The Company is not a party to any collective bargaining
agreements and is not aware of any efforts to unionize its employees. The
Company considers its relations with its employees to be good.

Fiscal year 1997 acquisitions. The Company acquired substantially
all of the assets of North Alabama Watersports, Inc. in October 1996,
Tri-Lakes Marine, Inc. in November 1996, Bent's Marine, Inc. in February
1997, , as well as Adventure Marine and Outdoors, Inc., Adventure Marine
South, Inc. and Adventure Boat Brokerage, Inc. in September 1997. The
Company also acquired certain selected assets from McLeod Marine, Inc. in
August 1997. The results of the aformentioned fiscal 1997 acquisitions
from their respective acquisition dates through September 30, 1997 are
included in the discussion below.

Effective October 3, 1996, the Company acquired certain assets of North
Alabama Watersports, Inc. (''NAWS''). This acquisition included boat,
motor and trailer inventory, as well as parts and accessories inventory
of the location. The purchase price was $892,255, of which $79,707 was
financed by the issuance of notes payable to the seller.

The acquisition has been accounted for using the purchase method of
accounting and, accordingly, the operating results of NAWS have been
included in the consolidated financial statements from the date of
acquisition. The purchase price ($892,255) has been allocated to the
tangible net assets acquired ($687,255) based on their respective fair
values at the date of acquisition. The resulting excess purchase price
($205,000) was allocated to a noncompete agreement and goodwill.

Effective November 1, 1996, the Company acquired Tri-Lakes Marine, Inc.
(''Tri-Lakes'') with retail store locations in Tennessee and Alabama. The
acquisition included furniture, fixtures and equipment, boat, motor and
trailer inventory, as well as parts and accessories. The purchase price
was $1,242,924, of which $642,924 was paid in cash and $600,000 was
financed by the issuance of a note payable to the seller.

The acquisition has been accounted for using the purchase method of
accounting and, accordingly, the operating results of Tri-Lakes have been
included in the consolidated financial statements from the date of
acquisition. The purchase price ($1,242,924) and liabilities assumed
($1,937,279) have been allocated to the tangible net assets acquired
($2,536,092) based on their respective fair values at the date of
acquisition. The resulting excess purchase price ($644,111) was allocated
to noncompete agreements and to goodwill.

Effective February 19, 1997, the Company acquired Bent's Marine, Inc.
(''Bent's'') with a single retail store locations in Metairie, Louisiana
. The acquisition included furniture, fixtures and equipment, boat, motor
and trailer inventory, as well as parts and accessories. The purchase
price was $1,518,550, of which $1,063,671 was paid in cash and $454,879
was financed by the issuance of a note payable to the seller.

The acquisition has been accounted for using the purchase method of
accounting and, accordingly, the operating results of Bent's have been
included in the consolidated financial statements from the date of
acquisition. The purchase price ($1,518,550) has been allocated to the
tangible net assets acquired ($839,627) based on their respective fair
values at the date of acquisition. The resulting excess purchase price
($678,923) was allocated to noncompete agreements and to goodwill.

Effective August 1, 1997, the Company acquired certain selected assets
from McLeod Marine, Inc. (''McLeod''). McLeod operates a single retail
store locations in Pascagoula, Mississippi. The certain selected assets
acquired included miscellaneous equipment, selected boat, motor and
trailer inventory, as well as certain parts and accessories. The purchase
price of $958,080 was paid in cash.

The certain selected acquired assets have been accounted for using the
purchase method of accounting and, accordingly, the operating results of
Travis Boating Center Mississippi which purchased the assets and has been
in operation since August, 1997 have been included in the consolidated
financial statements from the date of acquisition. The purchase price
($958,080) has been allocated to the tangible net assets acquired
($730,080) based on their respective fair values at the date of
acquisition. The resulting excess purchase price ($228,000) was allocated
to noncompete agreements and to goodwill.

On December 12, 1997, effective as of September 30, 1997, the Company
consummated the acquisition of Adventure Marine, a retail boating
organization with store locations in Fort Walton Beach, Florida and Key
Largo, Florida, through the acquisition of 100% of the common stock of
three companies, Adventure Marine & Outdoors, Inc., Adventure Boat
Brokerage, Inc. and Adventure Marine South, Inc. (collectively the three
companies are referred to as "Adventure Marine"). The total
consideration for Adventure Marine consisted of $729,643 in cash,
$115,000 in notes payable to the sellers, the assumption of $5,535,861in
liabilities and $1,477,392 paid via the issuance of 88,361 newly issued
common shares of common stock of the Company. An additional $700,000 in
cash was paid to a principal of Adventure Marine in exchange for an
agreement not to compete.

The acquisition has been accounted for using the purchase method of
accounting and, accordingly, the operating results of Adventure Marine
have been included in the consolidated financial statements from the date
of acquisition. The purchase price ($3,022,035), related acquisition
costs ($145,000) and liabilities assumed ($5,058,826) have been allocated
to the tangible net assets acquired ($5,535,861) based on their
respective fair values at the date of acquisition. The resulting excess
purchase price ($2,690,000) was allocated to noncompete agreements and
to goodwill.

Prior to the acquisition, the shareholders of Adventure Marine consisted
of three persons, John Reinhold, Paul ("Joey") Roberts, and Frederic
Pace, none of whom had any relationship to the Company, its affiliates,
any officers or directors of the Company or any associate of any officers
or directors of the Company.

The purchase of the Adventure Marine was funded through internally
generated working capital and borrowings under the Company's floor plan
and revolving lines of credit.

Effective November 20, 1997, the Company acquired certain assets of
Southeastern Marine Group, Inc. ("Southeastern"). This acquisition
included boat, motor and trailer inventory, as well as parts and
accessories inventory of the sellers. The purchase price was $1,730,134
of which $124,000 was financed by the issuance of notes payable to the
sellers.

The acquisition has been accounted for using the purchase method of
accounting and, accordingly, the operating results of Southeastern have
been included in the consolidated financial statements from the date of
acquisition. The purchase price ($1,730,134) has been allocated to the
tangible net assets acquired ($1,450,134) based on their respective fair
values at the date of acquisition. The resulting excess purchase price
($280,000) was allocated to noncompete agreements and goodwill.

See "Management's Discussion and Analysis of Financial Condition and
Results of Operations."

Item 2. Properties

The Company leases its corporate offices which are located at 5000
Plaza on the Lake, Suite 250, Austin, Texas. The Company also owns and
operates Travis Boating Center locations in Abilene, Austin, Beaumont,
Dallas, Midland and San Antonio, Texas; Baton Rouge, Louisiana; Hot
Springs, Arkansas; and Pascagoula, Mississippi. The remaining facilities
are leased under leases with original lease terms generally ranging from
five to ten years with additional multi-year renewal options. The
Company typically pays a fixed rent and in substantially all of the
leased locations the Company is responsible for the payment of taxes,
insurance, repairs and maintenance.

The chart below reflects the status and approximate size of the
various Travis Boating Center locations operated as of December 17,
1997.

Square Owned or Year of
Location Footage* Acreage* Leased Market Entry
- --------------------------- -------- -------- --------- ------------
Austin, Texas(1) 20,000 3.5 Owned 1979
San Antonio,Texas(1)(3) 15,500 1.9 Owned 1982
Midland, Texas(1) 18,750 3.8 Owned 1982
Dallas, Texas(1) 20,000 4.2 Owned 1983
Abilene, Texas(2) 24,250 3.7 Owned 1989
Houston, Texas(2) 15,100 2.2 Leased 1991
Baton Rouge, Louisiana(2) 33,200 7.5 Owned 1992
Beaumont, Texas(2) 25,500 6.5 Owned 1994
Arlington, Texas(2) 31,000 6.0 Leased 1995
Heber Springs, Arkansas(2) 26,000 9.0 Leased 1995
Hot Springs, Arkansas(2) 20,510 3.0 Owned 1995
New Iberia, Louisiana(4) 24,000 3.3 Leased 1995
Florence, Alabama(4) 22,500 6.0 Leased 1996
Huntsville, Alabama(3) 2,000 3.0 Leased 1996
Winchester, Tennessee(4) 25,000 3.5 Leased 1996
Metairie, Louisiana(3)(5) 10,000 1.3 Leased 1997
Pascagoula, Mississippi(2) 28,000 4.1 Owned 1997
Key Largo, Florida(3) 3,000 1.4 Leased 1997
Ft. Walton Beach Fl.-Sales(4) 7,000 2.9 Leased 1997
Ft. Walton Beach Fl.-Service(4) 7,500 2.0 Leased 1997
Hendersonville, Tennessee(4)(5) 31,320 3.6 Leased 1997

* Square footage and acreage are approximate.
(1) Newly constructed store.
(2) Facility acquired and converted to superstore.
(3) Temporary facility. To be relocated.
(4) Acquired facility.
(5) Acquired subsequent to September 30, 1997.

Item 3. Legal Proceedings

The Company is not a party to any material legal proceedings. The
Company is, however, involved in various legal proceedings arising out of
its operations in the ordinary course of business. The Company believes
that the outcome of all such proceedings, even if determined adversely,
would not have a material adverse effect on its business, financial
condition or results of operations.

Item 4. Submission of Matters to a Vote of Security Holders

No matter was submitted to a vote of security holders of the Company
during the fourth quarter of the fiscal year ended September 30, 1997.

PART II

Item 5. Market for Registrant's Common Stock and Related Stockholder
Matters

The Company's common stock trades on the Nasdaq Stock Market under the
symbol: TRVS. At December 15, 1997, the Company had 32 shareholders of
record; however the Company believes its shares are beneficially owned by
more than 400 shareholders. On December 17, 1997, the last reported sales
price of the common stock on the NASDAQ National Market System was $22.75
per share.

The following table sets forth for the period indicated, on a per
share basis, the range of high and low sales prices for the Company's
common stock as quoted by the NASDAQ. These price quotations reflect
inter-dealer prices, without adjustment for retail mark-ups, mark-downs
or commissions and may not necessarily represent actual transactions:

Sales Price

Quarter Ended High Low Ending
- ------------------------ ------- ------ -------

December 31, 1996 $14.125 $10.75 $13.125
March 31, 1997 $13.25 $11.125 $11.625
June 30, 1997 $14.00 $10.75 $13.125
September 30, 1997 $21.25 $13.25 $20.375

The Company has never declared or paid cash dividends on its Common
Stock and presently has no plans to do so. Any change in the Company's
dividend policy will be at the sole discretion of the Board of Directors
and will depend on the Company's profitability, financial condition,
capital needs, future loan covenants, general economic conditions, future
prospects and other factors deemed relevant by the Board of Directors.
The Company currently intends to retain earnings for use in the operation
and expansion of the Company's business and does not anticipate paying
cash dividends in the foreseeable future. Certain covenants contained in
the Company's loan agreements effectively restrict the payment of any
dividends without the lender's prior consent.

Item 6. Selected Consolidated Financial Data

The following selected consolidated financial information should be
read in conjunction with and is qualified in its entirety by reference to
the consolidated financial statements of the Company and the notes
thereto included elsewhere in this Report on Form 10-K:

Fiscal Year Ended Fiscal Year Tweleve Months Fiscal Year Fiscal Year
December 31, Ended Ended Ended Ended
September 30, September 30, September 30, September 30,
1993 (1) 1994 (1) 1995 (1) 1995 (2) 1996(1)(3) 1997(1)(4)
---------- ---------- ---------- ---------- ---------- ----------

Consolidated Statement of
Operations Data:
Net sales $ 25,757 $ 37,225 $ 41,442 $ 44,617 $ 64,555 $ 91,309
Gross profit 5,946 8,734 10,306 10,815 16,483 23,955
Selling, general and
administrative expenses 4,496 6,333 6,353 7,526 10,857 15,562
Operating income 1,270 2,135 3,736 3,004 5,061 7,480
Interest expense 449 629 670 845 1,289 1,354
Net income 596 1,023 2,050 1,486 2,383 3,982
Net income per share $ 0.23 $ 0.39 $ 0.76 $ 0.55 $ 0.78 $ 0.94
Weighted avg. shares
outstanding 2,564 2,600 2,672 2,663 3,043 4,251
Store Data:
Stores open at period end 7 8 11 11 12 20
Average sales per store(5) $ 3,679 $ 4,653 $ 4,886 $ 5,283 $ 5,617 $ 5,775
Percentage increase in
comparable store sales(6) 25.6% 28.4% 5.0% 12.2% 4.3% 5.7%

December 31, September 30, September 30, September 30,
1993 (1) 1994 (1) 1995 1996 1997
---------- ---------- ---------- ---------- ----------

Consolidated Balance Sheet Data:
Cash and cash equivalents $ 139 $ 259 $ 996 $ 1,533 $ 0
Working capital 11 1,866 2,808 15,263 0
Total assets 14,088 17,434 23,357 31,350 0
Short-term debt, including current
maturities of long-term debt 10,608 10,977 11,443 4,661 0
Long-term debt less current
maturities 1,013 2,588 4,876 4,334 0
Stockholders' equity 1,485 2,562 4,812 18,598 0

(1) The Company's fiscal years ended on December 31 in 1993 and 1994,
and on September 30 in 1995, pursuant to a change adopted in 1995,
resulting in a nine-month 1995 fiscal year. The Consolidated Statement
of Operations Data for the fiscal years ended December 31, 1993 and
1994 and September 30, 1995, 1996 and 1997 has been derived from the
consolidated financial statements of the Company. All other financial
and store data has been derived from the Company's unaudited
consolidated financial statements.
(2) Reflects inclusion of nine-month audited financial statements for
the fiscal year ended September 30, 1995 and the three-month unaudited
financial statements for the quarter ended December 31, 1994, in order
to provide a basis for comparing 12 months of operations in 1995 to
fiscal 1996 operations.
(3) The operations of Red River Marine, Inc. acquired in September 1995
and Clay's Boats & Motors, Inc. acquired in December 1995 are included
for the fiscal 1996 period. See ''Management's Discussion and Analysis
of Financial Condition and Results of Operations'' and Note 4 of Notes
to Consolidated Financial Statements.
(4) The operations of North Alabama Watersports, Inc. acquired in
October 1996, Tri-Lakes Marine, Inc. acquired in November 1996, Bent's
Marine, Inc. acquired in February 1997, Adventure Marine and Outdoors,
Inc., Adventure Marine South, Inc. and Adventure Boat Brokerage, Inc.
acquired in September 1997 are included for the fiscal 1997 period.
Also includes the operations of Travis Boating Center Mississippi,
which acquired certain assets from McLeod Marine, Inc. on August 1,
1997. See ''Management's Discussion and Analysis of Financial
Condition and Results of Operations'' and Note 4 of Notes to
Consolidated Financial Statements.
(5) Includes only those stores open for the entire preceeding 12-month
period.
(6) New stores or upgraded facilities are included in the comparable
store base at the beginning of the store's thirteenth complete month
of operations.

Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations

The following discussion should be read in conjunction with the
consolidated financial statements of the Company and the notes thereto
included elsewhere in this Report on Form 10-K. The discussion in this
section of this Report on Form 10-K contains forward-looking statements
that involve risks and uncertainties. The Company's actual results could
differ materially from those discussed herein. Factors that could cause
or contribute to such differences include, but are not limited to, those
discussed in this section, those discussed in ''Risk Factors'' and those
discussed elsewhere in this Report on Form 10-K.

Overview

The following discussion compares fiscal years 1996 and 1997, which
reflects the inclusion of the audited consolidated financial statements
for the fiscal years ended September 30, 1996 and 1997, respectively.
The Company acquired substantially all of the assets of North Alabama
Watersports, Inc. in October 1996, Tri-Lakes Marine, Inc. in November
1996, Bent's Marine, Inc. in February 1997, , as well as Adventure
Marine and Outdoors, Inc., Adventure Marine South, Inc. and Adventure
Boat Brokerage, Inc. in September 1997. The Company also acquired
certain selected assets from McLeod Marine, Inc. in August 1997. The
results of the aformentioned fiscal 1997 acquisitions from their
respective acquisition dates through September 30, 1997 are included in
the discussion below.

The Company acquired substantially all of the assets of Red River
Marine, Inc. in September 1995 and also acquired substantially all of the
assets of Clay's Boats & Motors, Inc. in December 1995. The results of
Red River Marine and Clay's Boats & Motors from their respective
acquisition dates through September 30, 1996 are included in the
discussion below.

Effective September 30, 1995, the Company elected to change its fiscal
year end from December 31 to September 30. This change was made to
establish a fiscal year that more closely conforms to the business cycle
of the Company. The following discussion compares fiscal year 1996 to the
12 month period ended September 30, 1995, which reflects the inclusion of
the nine-month audited consolidated financial statements for the fiscal
year ended September 30, 1995 and the three-month unaudited consolidated
financial statements for the quarter ended December 31, 1994 in order to
provide a basis for comparing 12 months of operations.

The following table sets forth for the periods indicated certain
financial data as a percentage of net sales:

Twelve Months Fiscal Year Fiscal Year
Fiscal Years Ended Ended Ended Ended
December 31, September 30, September 30, September 30, September 30,
1994 1995 1995 1996 1996
========= ========= ========= ========= =========

Net sales 100.0% 100.0% 100.0% 100.0% 100.0%
Costs of goods sold 76.5 75.1 75.8 74.5 73.8
--------- --------- --------- --------- ---------
Gross profit 23.5 24.9 24.2 25.5 26.2
Selling, general and
administrative expenses 17.0 15.3 16.9 16.8 17.0
Operating income 5.7 9.0 6.7 7.8 8.2
Interest expense 1.7 1.6 1.9 2.0 1.5
Other income 0.2 0.3 0.0 0.0 0.0
--------- --------- --------- --------- ---------
Income before income taxes 4.2 7.7 5.2 5.9 6.7
Income tax expense 1.5 2.8 1.9 2.2 2.3
--------- --------- --------- --------- ---------
Net income 2.7% 4.9% 3.3% 3.7% 4.4%

Results of Operations

Highlights

Fiscal year 1997 was a record year for the Company, which included the
following achievements compared to fiscal 1996:

- -Net sales increased 41.4% to $91.3 million.

- -Gross profit margins increased as a percentage of net sales by 70 basis
points from 25.5% to 26.2%.

- -Operating income increased as a percentage of net sales by 40 basis
points from 7.8% to 8.2%.

- -Net income increased by 67.1% from $2.4 million to $4.0 million.

- -Primary earnings per share increased by 20.5% from $.78 to $.94, while
the weighted average common shares outstanding increased by 39.7%.

Fiscal Year Ended September 30, 1997 Compared to the Fiscal Year Ended
September 30, 1996

Net sales. Net sales increased by 41.3% to $91.3million in fiscal
1997 from $64.6million in fiscal 1996. Of this increase in net sales,
$22.0 million, or 82.4% is related to the stores acquired or newly
opened in fiscal 1997, $2.1 million is attributable to a 5.7% growth in
comparable store sales (6 stores in base) and $1.2 million or 4.5% is
related to the five existing store locations which relocated or upgraded
facilities to meet the Company's superstore standards during fiscal years
1996 or 1997, and thus not yet includeable in the comparable store base.
General growth in overall sales volume was in part the result of growth
in new Travis Edition boating packages introduced in fiscal 1997. This
included the new addition of the Pro-Line and Polar brand boats as well
as new boat models introduced by the Company's existing boat
manufacturers. These additional new Travis Edition boat lines have
allowed the Company to further broaden its boat line-up in an effort to
continue to address the needs and desires of the recreational boating
population. During fiscal 1997, the Company experienced increased
parts/accessories and service labor sales as an increased percentage of
the Company's store base was renovated to superstore standards which
provide larger and more accessible areas to merchandise its product
selection and conduct repair work on boats. This resulted in enhanced
sales of parts/accessories and service labor both in actual dollars and
as a percentage of net sales. Parts/accessory sales increased from $5.7
million, or 8.8% of net sales, to $8.6 million, or 9.4% of net sales, in
fiscal years 1996 and 1997, respectively. Service labor sales increased
from $2.3 million, or 3.6% of net sales, to $3.3 million, or 3.6% of net
sales, in fiscal years 1996 and 1997, respectively. Net sales also
benefitted from the Company's introduction of an used boat superstore on
the premises of its Beaumont, Texas store location. The used boat sales
from this facility in fiscal 1997 were approximately $600,000. The
Company plans to continue to explore the used boat market and potential
sites for used boat superstores.

The Company discontinued its emphasis on the sales program featuring
weekend sales shows in the parking lots of local Sam's Clubs or certain
other large retailers as certain retailers did not allow for the Company
to display its entire product line which in turn did not allow for
maximum sales reach and productivity. This ''parking lot'' program which
was initiated with several shows in late 1995, expanded during fiscal
1996 to include a full-time travelling sales team and participation in
approximately 35 parking lot shows (primarily during the second and third
fiscal quarters) which generated net sales of approximately $2.5 million
during fiscal 1996.

Net sales from comparable stores, which had 6 stores included in the
base for calculation, increased 5.7% in fiscal 1997. The Company
relocated or renovated 5 stores and opened or acquired an additional 8
stores during fiscal years 1997 and 1996 rendering such locations to be
excluded from the comparable store base. The Company's planned
acquisition strategy and subsequent renovation of stores to superstore
standards is expected to continue to negatively impact the number of
stores includable in comparable store base calculations in relationship
to the total number of store locations operated. See ''Risk Factors-
Dependence on Expansion.'' As such, comparable store performance is
expected to remain unstable until higher percentages of the Company's
stores are includable in comparable store calculations.

Included within net sales is revenue that the Company earns related to
F&I Products. The Company, through relationships with various national
and local lenders, is able to place financing for its customers' boating
purchases. These lenders allow the Company to ''sell'' the loan at a rate
higher than a minimum rate established by each such lender and the
Company earns fees based on the percentage increase in the loan rate over
the lender's minimum rate. The Company sells these loans without recourse
except that in certain instances the Company must return the fees earned
if the customer repays the loan or defaults in the first 120-180 days.
The Company also sells, as a broker, certain types of insurance
(property/casualty, credit life, disability) and extended service
contracts. The Company may also sell these products at amounts over a
minimum established cost and earn income based upon the profit over the
minimum established cost. Net sales attributable to F&I Products
increased by 48.2% to approximately $4.0 million in fiscal 1997 from $2.7
million in fiscal 1996. This improvement was primarily due to higher net
spreads achieved in the placement of customer financing, as well as
overall increases in the percentage of customers buying these products
(which is referred to as ''sell-through''). This increase was enhanced by
the Company's continued emphasis on training of F&I employees and
achievement of established goals.

Gross profit. Gross profit increased by 45.3% to approximately $24.0
million in fiscal 1997 from $16.5 million in fiscal 1996. Gross profit as
a percent of sales increased to 26.2% in fiscal 1997 from 25.5% in fiscal
1996. The Company generally seeks to maintain a gross profit margin of
21% to 23% on its boating packages and is able to further leverage the
margin through sales of parts/accessories, service labor and F&I
Products, all of which generally produce gross profit margins in excess
of 25%. During fiscal 1997, the Company's gross profit margin was
positively impacted by the increased revenues derived from the
parts/accessory, service labor and used boat sales as discussed above in
Net Sales.

Net sales attributable to F&I Products, which have a significant
impact on the gross profit margin, contributed $4.0 million, or 16.6%, of
total gross profit in fiscal 1997, as compared to $2.7 million, or 16.4%,
of total gross profit for fiscal 1996. Net sales attributable to F&I
Products are reported on a net basis and therefore all of such sales
contribute directly to the Company's gross profit. The costs associated
with the sale of F&I Products are included in selling, general and
administrative expenses.

Selling, general and administrative expenses. Selling, general and
administrative expenses increased by 43.1% to $15.6 million in fiscal
1997 from $10.9 million for fiscal 1996. Selling, general and
administrative expenses as a percent of net sales increased by 20 basis
points to 17.0% in fiscal 1997 from 16.8% for fiscal 1996. In terms of
both actual dollars and as a percentage of net sales, the increase in
selling, general and administrative expenses was primarily attributable
to increased expenses associated with the operation of a larger store
network, through growth in the corporate-office staffing infrastructure
and increased advertising costs associated with introducing Travis Boats
and its Travis Edition products into new geographically diverse regions.
Rental expense also increased as a percent of net sales as the Company
expanded and relocated its Corporate headquarters which had previously
been located in the Austin, Texas superstore facility. Opening and other
start-up costs associated with the relocation of the Arlington, Texas
facility to a new superstore location, and the opening of satellite sales
facility locations in Dallas, Texas and Hot Springs, Arkansas also
contributed to the increase in selling, general and administrative
expenses.

Costs associated with being a public company such as annual reports,
investor relations, investor presentations and certain legal and
accounting issues further impacted selling, general and administrative
expenses.

Interest expense. Interest expense, in actual dollars, increased by
5.0% to $1.4 million in fiscal 1997 from $1.3 million in fiscal 1996.
However, interest expense as a percent of net sales, decreased to 1.5% in
fiscal 1997 from 2.0% in fiscal 1996. Effective with the funding of the
Company's Initial Public Offering in late June of 1996 and an additional
140,500 shares in the over-allotment option, the Company reduced certain
revolving indebtedness and certain long term indebtedness. The Company
has since continued to utilize available working capital and has
negotiated reduced borrowing rates under its floor plan and revolving
lines of credit which have combined to provide for the containment of
interest expense and its percentage decrease as a percent of net sales.
The Company intends to reborrow under its revolving credit lines as
necessary to fund future acquisitions and to support working capital
needs. See ''Liquidity and Capital Resources.''

Net income. Net income increased by 67.1% to approximately $4.0
million in fiscal 1997 from $2.4 million in fiscal 1996. Net income as a
percent of sales increased to 4.4% from 3.7% during the same periods. Net
income attributable to F&I Products increased by 48.2% to approximately
$1.2 million in fiscal 1997 from $810,000 in fiscal 1996. The calculation
of net income attributable to F&I Products is based on an allocation of
gross profit after adjusting for costs which management believes are
directly allocable to F&I Products.

Fiscal Year Ended September 30, 1996 Compared to the Twelve Months Ended
September 30, 1995

Net sales. Net sales increased by 45% to $64.6 million in fiscal
1996 from $44.6 million in the twelve months ended September 30, 1995. Of
this increase, $780,000 was attributable to 4.3% growth in comparable
store sales (4 stores in base) and $16.6 million, or 83.0% is related to
the four stores acquired or newly opened in 1995 and $2.5 million, or
12.5% is related to the four store existing store locations which
relocated or upgraded facilities to meet the Company's superstore
standards during fiscal 1996. General growth in overall sales volume was
in part the result of growth in new boating packages introduced in fiscal
1996 and in the expanded offering of boating packages introduced in 1995
along with increased sales of parts/accessories, service labor and F&I
Products. Net sales also benefitted from the Company's participation in
additional season-opening boat shows and a new sales program featuring
weekend sales shows in the parking lots of local Sam's Clubs or certain
other large retailers. The ''parking lot'' program which was initiated
with several shows in late 1995, expanded during fiscal 1996 to include a
full-time travelling sales team and participation in approximately 35
parking lot shows (primarily during the second and third fiscal quarters)
which generated net sales of approximately $2.5 million.

Net sales from comparable stores, which had 4 stores included in the
base for calculation, increased 4.3% in fiscal 1996. The Company
relocated or renovated 4 stores and acquired or opened an additional 4
stores during fiscal years 1995 and 1996 rendering such locations to be
excluded from the comparable store base. The Company's planned
acquisition strategy and subsequent renovation of stores to superstore
standards is expected to continue to negatively impact the number of
stores includable in comparable store base calculations in relationship
to the total number of store locations operated. See ''Risk Factors-
Dependence on Expansion.'' As such, comparable store performance is
expected to remain unstable until higher percentages of the Company's
stores are includable in comparable store calculations.

Included within net sales is revenue that the Company earns related to
F&I Products. The Company, through relationships with various national
and local lenders, is able to place financing for its customers' boating
purchases. These lenders allow the Company to ''sell'' the loan at a rate
higher than a minimum rate established by each such lender and the
Company earns fees based on the percentage increase in the loan rate over
the lender's minimum rate. The Company sells these loans without recourse
except that in certain instances the Company must return the fees earned
if the customer repays the loan or defaults in the first 120-180 days.
The Company also sells, as a broker, certain types of insurance
(property/casualty, credit life, disability) and extended service
contracts. The Company may also sell these products at amounts over a
minimum established cost and earn income based upon the profit over the
minimum established cost. Net sales attributable to F&I Products
increased by 75.3% to $2.7 million in fiscal 1996 from $1.6 million in
the twelve months ended September 30, 1995. This improvement was
primarily due to higher net spreads achieved in the placement of customer
financing, as well as overall increases in the percentage of customers
buying these products (which is referred to as ''sell-through''). This
increase was enhanced by the Company's continued emphasis on training of
F&I employees and achievement of established goals.

Gross profit. Gross profit increased by 52.8% to $16.5 million in
fiscal 1996 from $10.8 million in the twelve months ended September 30,
1995. Gross profit as a percent of sales increased to 25.5% in fiscal
1996 from 24.2% in the twelve months ended September 30, 1995. The
Company generally seeks to maintain a gross profit margin of 21% to 23%
on its boating packages and is able to further leverage the margin
through sales of parts/accessories, service labor and F&I Products, all
of which generally produce gross profit margins in excess of 25%.

Net sales attributable to F&I Products, which have a significant
impact on the gross profit margin, contributed $2.7 million, or 16.4%, of
total gross profit in fiscal 1996, as compared to $1.6 million, or 14.8%,
of total gross profit for the twelve months ended September 30, 1995. Net
sales attributable to F&I Products are reported on a net basis and
therefore all of such sales contribute directly to the Company's gross
profit. The costs associated with the sale of F&I Products are included
in selling, general and administrative expenses.

Selling, general and administrative expenses. Selling, general and
administrative expenses increased by 45.3% to $10.9 million in fiscal
1996 from $7.5 million for the twelve months ended September 30, 1995.
Selling, general and administrative expenses as a percent of net sales
decreased to 16.8% in fiscal 1996 from 16.9% for the twelve months ended
September 30, 1995. The decrease in selling, general and administrative
expenses as a percent of net sales was the result of the economies of
operating a larger store base and regional market presence, particularly
in the leveraging of advertising, insurance, rents and
depreciation/amortization expenses. In terms of dollars, the increase in
selling, general and administrative expenses was primarily attributable
to increased expenses associated with the operation of a larger store
network, the Company's participation in additional season-opening boat
shows and the expenses related to completing the implementation of the
Company's management information system in all of its stores operating as
of September 30, 1996. Additionally, the Company's management information
system has been implemented in the three store locations acquired since
September 30, 1996.

Interest expense. Interest expense, in actual dollars, increased by
45.7% to $1.3 million in fiscal 1996 from $845,000 in the twelve months
ended September 30, 1995. However, interest expense as a percent of net
sales remained flat at 1.9% and 2.0% in the 1995 and 1996 periods,
respectively. The Company incurred additional debt levels in the
acquisition of Red River Marine and Clay's Boats & Motors as well as
higher balances on the Company's floor plan lines of credit necessary to
support inventory requirements for the additional stores and actual
increase in net sales. Effective with the funding of the Company's
Initial Public Offering in late June of 1996 and an additional 140,500
shares in the over-allotment options, the Company reduced certain
revolving indebtedness and certain long term indebtedness. This reduction
of debt in the Company's third and fourth fiscal quarters provided for
the containment of interest expense and its percentage decrease as a
percent of net sales. The Company intends to reborrow under its revolving
credit lines as necessary to fund future acquisitions and to support
working capital needs. See ''Liquidity and Capital Resources.''

Net income. Net income increased by 60.3% to $2.4 million in fiscal
1996 from $1.5 million in the twelve months ended September 30, 1995. Net
income as a percent of sales increased to 3.7% from 3.4% during the same
periods. Net income attributable to F&I Products increased by 73.8% to
$810,000 in fiscal 1996 from $466,000 in the twelve months ended
September 30, 1995. The calculation of net income attributable to F&I
Products is based on an allocation of gross profit after adjusting for
costs which management believes are directly allocable to F&I Products.

Quarterly Data and Seasonality

The following table sets forth certain unaudited quarterly financial
data for each of the Company's last eight quarters and such data
expressed as a percentage of the Company's net sales for the respective
quarters. The information has been derived from unaudited financial
statements that, in the opinion of management, reflect all adjustments
(consisting only of normal recurring adjustments) necessary for a fair
presentation of such quarterly information. The operating results for any
quarter are not necessarily indicative of the results to be expected for
any future period.

Quarter Ended
Fiscal Year 1996 Fiscal Year 1997
Dec. 31 March 31 June 30 Sept. 30 Dec. 31 March 31 June 30 Sept. 30
--------- --------- --------- --------- --------- --------- --------- ---------
(In thousands)

Net sales $ 3,564 $ 18,453 $ 26,445 $ 16,093 $ 5,451 $ 24,273 $ 37,348 $ 24,237
Gross profit 948 4,623 6,613 4,299 1,341 6,404 9,531 6,679
Selling, general and
Administrative
expenses 1,551 2,751 3,767 2,788 2,140 3,638 5,426 4,358
Operating income (loss) (729) 1,736 2,705 1,349 (983) 2,529 3,873 2,061
Interest expense 276 393 424 196 214 415 412 313
Net income (loss) (642) 885 1,416 724 (744) 1,320 2,172 1,234
Net Income per Share (.24) .32 .52 .18 (.18) .32 .53 .29
Wtd. Average Shares
Outstanding 2,684 2,684 2,741 4,097 4,137 4,137 4,137 4,291

As a Percentage of Net Sales

Net sales 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
Gross profit 26.6 25.1 25.0 26.7 24.6% 26.4% 25.5% 27.6%
Selling, general and
administrative
expenses 43.5 14.9 14.2 17.3 39.3% 15.0% 14.5% 18.0%
Operating income (loss) (20.5) 9.4 10.2 8.4 (18.0) 10.4 10.4 8.5
Interest expense 7.7 2.1 1.6 1.2 3.9 1.7 1.1 1.3
Net income (loss) (17.9) 4.8 5.4 4.5 (13.7) 5.4 5.8 5.1

The Company's business, as well as the sales demand for various types
of boats, tends to be highly seasonal. Strong sales typically begin in
January with the onset of the public boat and recreation shows, and
continue through July. Over the previous four-year period, the average
annual net sales for the quarterly periods ended March 31 and June 30
represented in excess of 28% and 37%, respectively, of the Company's
annual net sales. With regard to net income, the Company historically
generates profits in three of its fiscal quarters and experiences
operating losses in the quarter ended December 31 due to a broad seasonal
slowdown in sales. During the quarter ended September 30, inventory
typically reaches its lowest levels and accumulated cash reserves reach
the highest levels. During the quarter ended December 31, the Company
generally builds inventory levels in preparation for the upcoming selling
season which begins with boat and recreation shows occurring during
January through March in certain market areas in which the Company
conducts business. Travis Boats' operating results would be materially
and adversely affected if net sales were to fall significantly below
historical levels during the months of January through June.

The Company's business is also significantly affected by weather
patterns. Weather conditions that are unseasonable or unusual may
adversely affect the Company's results of operations. For example,
drought conditions or merely reduced rainfall levels, as well as
excessive rain, may affect the Company's sale of boating packages and
related products and accessories. While management believes that the
Company's quarterly net sales will continue to be impacted by
seasonality, quarterly results may become less susceptible to certain
regional weather conditions as expansion occurs throughout the southern
United States.

Quarterly results may fluctuate as a result of the expenses associated
with new store openings or acquisitions. The Company, prior to fiscal
1997, had attempted to concentrate expansion during the seasonal slowdown
generally occurring in the quarter ending December 31. During fiscal
1997, the Company modified its acquisition strategy to acquire store
locations through-out the fiscal year. This was done to allow the
Company the opportunity to derive in-season sales from the acquisitions
as well as to provide a longer period in which to integrate the acquired
store's operations. Accordingly, the results for any quarterly period
may not be indicative of the expected results for any other quarterly
period.

Year 2000 Issues

The Year 2000 issue is the result of computer programs being written
using two digits rather than four (for example, "97" for 1997) to define
the applicable year. Any of the Company's programs that have time-
sensitive software may recognize a date using "00" as the year 1900
rather than the year 2000. In some cases, the new date will cause
computers to stop operating, while in other cases, incorrect output may
result. Since the Company is currently in the process of replacing and
upgrading its computer hardware and software systems, the Company
believes that there is little business risk attributable to the Year 2000
issue.

Liquidity and Capital Resources

The Company's short-term cash needs are primarily for working capital
to support operations including inventory requirements, off-season
liquidity and store expansion. These short-term cash needs have
historically been financed with cash from operations and borrowings under
the Company's floor plan and revolving credit lines (collectively the
"credit facilities"). At September 30, 1997, the Company had working
capital of $14.8 million, including $3.9 million in accounts receivable
(primarily contracts in transit from sales) and $34.5 million in
inventories, offset by approximately $5.2 million of accounts payable and
accrued liabilities, $14.4 million outstanding under floor plan lines of
credit, approximately $6.0 million under revolving lines of credit and
$4.3 million in other current liabilities and short-term indebtedness
including current maturities of long-term debt. Contracts in transit are
amounts receivable from a customer or a customer's financial institution
related to that customer's purchase of a boat. As of September 30, 1997,
the aggregate maximum borrowing limits under floor plan and revolving
lines of credit were approximately $25.0 million and $55.0 million,
respectively.

In fiscal 1996, operating activities utilized cash flows of $2.1
million due primarily to an increase of $6.2 million in inventories,
offset partially by unearned revenue of $1.2 million relating to a volume
purchase from a manufacturer. Of the increase in inventories,
approximately $4.4 million is related to stocking of the newly acquired
store locations since the acquisitions during fiscal 1996 occured in the
off-season and the acquired store locations had little remaining
inventory. Subsequently, the Company maintains a representative level of
stocking of its Travis Edition boating packages and generally over 9,000
stock keeping units in parts/accessories.

In fiscal 1997, operating activities utilized cash flows of $808,000
due primarily to an increase of $5.2 million and $2.0 million in
inventories and accounts receivable, respectively. These amounts were
offset partially by an increase in accrued liabilities of $913,000 and an
additional $1.4 million payable to the sellers of Adventure Marine (which
is payable in 88,361 shares of newly issued shares of the Company's
common stock) related to the purchase which is effective as of September
30, 1997. Of the increase in inventories, approximately $14.6 million is
related to inventory acquired in seven store acquisitions during fiscal
1997 and the initial stocking of Travis Editions product in the newly
acquired locations.

Financing activities in fiscal 1997 provided $10.8 million of cash
flows primarily from the net proceeds of borrowings under the Company's
credit facilities. Effective October 31, 1997, the Company renewed and
increased its $15.0 million revolving line of credit agented by
NationsBank of Texas, N.A. to a new credit limit of $55.0 million. The
line provides for borrowing pursuant to a borrowing formula based upon
the certain of the Company's inventory and accounts receivable.
Collateral consists of a security interest in specific inventories (and
proceeds thereof), accounts receivable and contracts in transit. The line
has a maturity on October 31, 1999 and pricing is at the Company's
election of the prime rate minus .375% or on a LIBOR based price
structure. There is a fee on the unused portion assessed quarterly. A
comprehensive loan agreement governs the line of credit. The agreement
contains financial covenants regulating debt service coverages, tangible
net worth, operating leverage and restrictions on dividends or
distributions. As of December 18, 1997, $18.3 million was drawn on the
revolving line and the Company could borrow an additional $3.1 million
based upon the revolving line's borrowing formula. Management believes
the Company to be in compliance with the terms and conditions of this
loan agreement.

The Company also maintains floor plan lines of credit with various
finance companies totalling approximately $25 million in credit limits,
which generally have no stated maturity and utilize subsidies from
manufacturers to provide for certain interest free periods each calendar
year (usually August through at least May). Certain floor plan lines of
credit with finance companies are governed by loan agreements containing
financial covenants concerning, among others, minimum tangible net worth
and leverage ratios. As of December 18, 1997, approximately $19.5 million
was drawn under the floor plan lines and management believes the Company
was in compliance with the terms and conditions of these loan agreements.

Merchandise inventories were $20.6 million and $34.5 million as of
September 30, 1996 and September 30, 1997, respectively. Accounts
receivable increased by approximately $2.6 million to $3.9 million at the
end of fiscal 1997 from a year earlier. The receivables amount represents
primarily contracts in transit generated from sales. Costs in excess of
net assets acquired increased to by approximately $4.3 million to $5.4
million in fiscal 1997 due to the acquisitions during fiscal 1997
discussed previously in the section Overview.

The Company had net capital expenditures of approximately $1.4 million
in fiscal 1996 and approximately $5.7 million in fiscal 1997. Capital
expenditures during fiscal 1996 included the acquisition of Clay's Boats
& Motors, the renovation of several facilities to the Company's
superstore standards and expenses related to the roll-out of the
Company's management information systems in certain store locations. In
fiscal 1997 the Company's capital expenditures included the acquisitions
of the store locations discussed previously in the section Overview. The
Company also acquired land and buildings for store locations in Beaumont,
Texas and Pascagoula, Mississippi and continued to renovate certain store
locations to superstore standards. The fiscal 1997 capital expenditures
were primarily financed under the Company's credit facilities and
additionally with certain individuals and corporations.

The Company's revolving credit facility, floor plan lines of credit
and internally generated working capital should be sufficient to meet the
Company's cash requirements in the near future.

New Accounting Standards

In March 1995, the Financial Accounting Standards Board (FASB) issues
Statement No. 121, ''Accounting for the Impairment of Long-Lived Assets
and for Long-Lived Assets to be Disposed of '', which requires impairment
losses to be recorded on long-lived assets used in operations when
indicators of impairment are present and the undiscounted cash flows
estimated to be generated by those assets are less than the assets'
carrying amount. Statement No. 121 also addresses the accounting for
long-lived assets that are held for disposition. The Company adopted
Statement No. 121 effective October 1, 1995. No material impact to the
Company's results of operations or financial position resulted from such
adoption.

The Company has elected to follow Accounting Principles Board No. 25,
Accounting for Stock Issued to Employees (APB 25), and related
interpretations in accounting for its employee stock options because the
alternative fair value accounting provided for under FASB Statement No.
123, Accounting for Stock-Based Compensation (Statement 123), requires
use of option valuation models that were not developed for use in valuing
employee stock options. Under APB 25, because the exercise price of the
Company's employee stock options equals the market price of the
underlying stock on the date of grant, no compensation expense is
recognized.

Pro forma information regarding net income and earnings per share is
required by Statement 123, which also requires that the information be
determined as if the Company had accounted for its employee stock options
granted subsequent to June 30, 1995 under the fair value method
prescribed by Statement 123. The Company has evaluated the effects of
Statement 123 and determined that it does not have a material effect on
the Company's statement of operations or earnings per share.

In February 1997, the Financial Accounting Standards Board issued
Statement No. 128, Earnings Per Share (Statement 128), which is required
to be adopted for financial statements issued for periods ending after
December 15, 1997. At that time the Company will be required to change
the method currently used to compute earnings per share and to restate
all prior periods. Under the new requirements, the presentation of
primary earnings per share is replaced with a presentation of basic
earnings per share, the calculation of which excludes the dilutive effect
of common stock equivalents.

Inflation

The Company believes that inflation generally has not had a material
impact on its operations or liquidity to date.

Item 8. Financial Statements

For the financial statements and supplementary data required by this
Item 8, see the Index to Consolidated Financial Statements and Schedules.

Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure

Not applicable.

PART III

Item 10. Directors and Executive Officers

There is incorporated herein by reference that portion of the
Company's proxy statement for the 1998 Annual Meeting of Stockholders
which appears therein under the captions ''Item 1: Election of
Directors'' and ''Information Concerning Directors.''

Item 11. Executive Compensation

There is incorporated in this Item 11 by reference that portion of the
Company's definitive proxy statement for the 1998 Annual Meeting of
Stockholders which appears under the caption ''Executive Compensation.''

Item 12. Security Ownership of Certain Beneficial Owners and Management

There is incorporated in this Item 12 by reference that portion of the
Company's definitive proxy statement for the 1998 Annual Meeting of
Stockholders which appears under the caption ''Securities Holdings of
Principal Stockholders, Directors, Nominees and Officers.''

Item 13. Certain Relationships and Related Transactions

There is incorporated in this Item 13 by reference that portion of the
Company's definitive proxy statement for the 1998 Annual Meeting of
Stockholders which appears under the captions ''Certain Relationships and
Related Transactions'' and ''Compensation Committee Interlocks and
Insider Participation.''

PART IV

Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K

(a) 1. Financial Statements

The following consolidated financial statements of the Company are
included following the Index to Consolidated Financial Statements and
Schedules on page F-1 of this Report.

Report of Ernst & Young LLP, Independent Auditors F-1
Consolidated Balance Sheets F-2
Consolidated Statements of Income F-3
Consolidated Statements of Shareholder's Equity F-4
Consolidated Statements of Cash Flows F-5
Notes to Consolidated Financial Statements F-6

(a) 2. Financial Statement Schedules

All other schedules have been omitted because they are not applicable,
not required under the instructions, or the information requested is set
forth in the consolidated financial statements or related notes thereto.

(a) 3. Exhibits

The following Exhibits are incorporated by reference to the filing or
are included following the Index to Exhibits.

INDEX TO EXHIBITS

(a) Exhibits: Except as otherwise noted, all Exhibits have been
previously filed with Registrant's S-1 dated June 1996.

3.1 Restated Articles of Incorporation of the Registrant,
as amended.
3.2 Restated Bylaws of the Registrant, as amended.
10.2(a) Agreement dated as of August 11, 1995, between the
Company and Outboard Marine
Corporation.
10.2(b) Dealer Agreement dated as of October 13, 1995,
between the Company and Outboard Marine Corporation.
10.3 Dealer Agreement dated as of August 17, 1995, between
the Company and Larson Boats, a Division of Larson/Glastron Boats,
Inc., a subsidiary of Genmar Industries, Inc.
10.4 Dealer Agreement dated as of August 17, 1995, between
the Company and Mastercrafters Corporation.
10.5(a) Inventory Security Agreement and Power of Attorney
dated as of November 30, 1993, Between Bombardier Capital Inc. and
the Company.
10.5(b) Inventory Security Agreement and Power of Attorney dated as of
November 30, 1993, Between Bombardier Capital Inc. and Falcon Marine
Abilene, Inc.
10.6(a) Agreement for Wholesale Financing dated as of August 17, 1995,
by and among Deutsche Financial Services Corporation, the Company
and its subsidiaries; and Amendment to Agreement for Wholesale
Financing dated as of September 22, 1995.
10.6(b) Agreement for Wholesale Financing dated as of August 17, 1995,
between Deutsche Financial Services Corporation and Travis Boats &
Motors Baton Rouge, Inc.
10.7(a) Inventory Loan Agreement dated as of September 20, 1995, between
TBC Arkansas, Inc. And Hibernia National Bank.
10.7(b) Commercial Security Agreement dated September 1, 1995, between
TBC Arkansas, Inc. and Hibernia National Bank.
10.8(a) Inventory Loan Agreement dated as of December 17, 1992, between
Travis Boats & Motors Baton Rouge, Inc. and Hibernia National Bank;
and First Amendment to Inventory Loan Agreement dated as of
February 7, 1994.
10.8(b) Promissory Note dated May 30, 1995, in the original principal
amount of $100,000, payable By Travis Boats & Motors Baton Rouge,
Inc. to Hibernia National Bank.
10.8(c) Promissory Note dated May 30, 1995, in the original principal
amount of $800,000, payable By Travis Boats & Motors Baton Rouge,
Inc. to Hibernia National Bank.
10.8(d) Promissory Note dated July 14, 1995, in the original principal
amount of $480,000, payable By Travis Boats & Motors Baton Rouge,
Inc. to Hibernia National Bank.
10.8(e) Business Loan Agreement dated July 14, 1995, between Travis
Boats & Motors Baton Rouge, Inc. and Hibernia National Bank.
10.8(f) Commercial Security Agreement dated July 14, 1995, between
Travis Boats & Motors Baton Rouge, Inc. and Hibernia National Bank.
10.8(g) Collateral Mortgage dated July 14, 1995, from Travis Boats &
Motors Baton Rouge, Inc. to Hibernia National Bank.
10.8(h) Assignment of Leases and Rents dated July 14, 1995, between
Travis Boats & Motors Baton Rouge, Inc. and Hibernia National Bank.
10.8(i) Pledge of Collateral Mortgage Note dated July 14, 1995, from
Travis Boats & Motors Baton Rouge, Inc. to Hibernia National Bank.
10.9(a) Promissory Note dated September 1, 1995, in the original
principal amount of $3,000,000, Payable by TBC Arkansas, Inc. to
Hibernia National Bank.
10.9(b) Commercial Guaranty dated September 1, 1995 by the Company in
favor of Hibernia National Bank guarantying a $3,000,000 Promissory
Note.
10.9(c) Promissory Note dated September 1, 1995, in the original principal
amount of $250,000, Payable by TBC Arkansas to Hibernia National Bank.
10.10(a) Amended and Restated Loan Agreement dated as of September 15,
1995, by and among NationsBank of Texas, N.A., the Company and its
subsidiaries.
10.10(b)Security Agreement dated July 31, 1995, by and among Nations Bank
of Texas, N.A., the Company and its subsidiaries.
10.11 General Promissory Note dated August 31, 1995, in the original
principal amount of $300,000, payable by the Company to Amerisure
Property & Casualty, Ltd.
10.12 General Promissory Note dated August 31, 1995, in the original
principal amount of $100,000, payable by the Company to Capitol
Commerce Reporter, Inc.
10.13 General Promissory Note dated August 31, 1995, in the original
principal amount of $75,000, payable by the Company to Capitol
Commerce Reporter, Inc.
10.14 General Promissory Note dated August 31, 1995, in the original
principal amount of $150,000, payable by the Company to Joe Simpson
and Pat Simpson.
10.15 Asset Purchase Agreement dated as of September 20, 1995, by and
among Red River Marine, Inc., Red River Marine, Inc. #2, and TBC
Arkansas, Inc.
10.16 Promissory Note dated September 20, 1995, in the original principal
amount of $800,000, Payable by TBC Arkansas, Inc. to Benny Hargrove.
10.17(a)Promissory Note dated as of September 20, 1995, in the original
principal amount of $462,145.53, payable by TBC Arkansas, Inc. to Red
River Marine, Inc. #2.
10.17(b) Mortgage With Power of Sale (Realty) dated September 20, 1995,
from TBC Arkansas, Inc. to Red River Marine, Inc. #2.
10.18 Promissory Note dated September 20, 1995, in the original principal
amount of $230,177.16, payable by TBC Arkansas, Inc. to Red River
Marine, Inc. and Red River Marine, Inc. #2.
10.19 Promissory Note dated September 20, 1995, in the original principal
amount of $108,750, Payable by TBC Arkansas, Inc. to Red River Marine,
Inc. and Red River Marine, Inc. #2.
10.20 Travis Boats and Motors, Inc. 1995 Incentive Plan.
10.21 Form of Amended and Restated Employment Agreement dated May 7, 1996,
between the Company and Mark T. Walton, Ronnie L. Spradling and
Michael B. Perrine.
10.22 Form of Option Agreement dated May 17, 1995, between the Company and
Michael B. Perrine, Ronnie L. Spradling and Mark T. Walton.
10.23 Form of Indemnification Agreement for Directors and Officers of the
Company.
10.24 Management Agreement dated December 14, 1995, by and among TBC
Management, Ltd., The Company and its subsidiaries.
10.25 [Intentionally left blank]
10.26(a) First Lien Promissory Note dated September 15, 1995, in the
original principal amount of $679,000, payable by Travis Snowden
Marine, Inc. to NationsBank of Texas, N.A.
10.26(c) First Lien Deed of Trust, Assignment, Security Agreement and
Financing Statement dated September 15, 1995, from Travis Snowden
Marine, Inc. to Michael F. Hord, Trustee.
10.27(a) Second Modification and Extension Agreement dated April 26, 1994,
between the Company and NationsBank of Texas, N.A.
10.27(b) ''504'' Note dated April 28, 1994, in the original principal
amount of $454,000, payable by the Company to Cen-Tex Certified
Development Corporation.
10.27(c) Deed of Trust, Assignment, Security Agreement and Financing
Statement dated March 5, 1993, from the Company to Michael F. Hord,
Trustee.
10.27(d) Deed of Trust dated April 28, 1994, from the Company to Wm. H.
Harrison, Jr., Trustee.
10.28 Trust Agreement dated December 31, 1994, by and among Ideal Insurance
Company, Ltd. and the Company.
16 Letter re change in certifying accountant.

Portions of this exhibit have been omitted and are subject to an
application for confidential treatment filed separately with the
Commission.

The above Exhibits have been previously filed with Registrant's S-1 dated
June 1996.

(b) Financial Statement Schedules: None.

The following exhibits are filed herewith

10.29(a) Revolving Credit Agreement dated as of December 12, 1996, in the
original principal amount of $15,000,000 by and among the Company,
its Subsidiaries and NationsBank of Texas, N.A. as agent.
10.29(b) Commercial Security Agreement dated as of December 12, 1996 by
and among the Company, its Subsidiaries and NationsBank of Texas,
N.A. as agent.
10.29(c) Promissory Note dated as of December 12, 1996 in ane original
principal amount of $9,000,000 among the Company, its subsidiaries and
NationsBank of Texas, N.A., as agent.
10.29(d) Promissory Note dated as of December 12, 1996 in the original
principal amount of $6,000,000 among the Company, its subsidiaries and
NationsBank of Texas, N.A. as agent.
10.30 Asset Purchase Agreement dated as of November 1, 1996 between Travis
Boating Center Tennessee, Inc. and Tri-Lakes Marine, Inc.
10.31 Asset Purchase Agreement dated as of November 1, 1996 between Travis
Boating Center Alabama, Inc. and Tri-Lakes Marine, Inc.

The above Exhibits have been previously filed with
Registrant's Report on Form 10-K for the fiscal
year ended September 30, 1996.

The following exhibits are filed herewith on the
Registrant's Report on Form 10-K for the fiscal
year ended September 30, 1997.

10.32(#) Asset Purchase Agreement dated as of February 19, 1997 between
Travis Boating Center Louisiana, Inc. and Bent's Marine, Inc.
10.33 Asset Purchase Agreement dated as of August 1, 1997 between Travis
Boating Center Mississippi, Inc. and McLeod Marine, Inc
10.34 Stock Purchase Agreement dated as of September 30, 1997 among
Travis Boating Center Florida, Inc. and Frederic D. Pace and John W.
Reinhold providing for the purchase of 100% of the common stock of
Adventure Boat Brokerage, Inc.
10.35 Stock Purchase Agreement dated as of September 30, 1997 among Travis
Boating Center Florida, Inc. and John W. Reinhold providing for the
purchase of 100% of the common stock of Adventure Marine & Outdoors,
Inc.
10.36 Stock Purchase Agreement dated as of September 30, 1997 among Travis
Boating Center Florida, Inc. and Frederic D. Pace and John W. Reinhold
providing for the purchase of 100% of the common stock of Adventure
Marine South, Inc.
10.37 First Amendment to Revolving Credit Agreement dated as of October 31,
1997, in the original principal amount of $55,000,000 by and among the
Company, its Subsidiaries and NationsBank of Texas, N.A. as agent.
10.38 Asset Purchase Agreement dated as of November 20, 1997 between Travis
Boating Center Tennessee, Inc. and Southeastern Marine Group, Inc.
10.39(+) Travis Boats & Motors, Inc. 1995 Incentive Plan filed pursuant to
Form S-8 filed on December 11,1997.
21.1 List of Subsidiaries of Registrant.
23.1(+) Consent of Ernst & Young LLP, Independent Auditors of Registrant,
dated December 23, 1997.
27.1 Financial Data Schedule.

(#) Incorporated by reference from the Company Report on Form 10-Q for
the quarter ended March 31, 1997.
(+) Incorporated by reference from the Company's filing on Form S-8 on
December 11, 1997.

No annual report or proxy material has been sent to security holders
as of the date of this Form 10-K; however, the Company anticipates
sending the annual report and proxy materials on or before any applicable
deadlines. When such a