Third Quarter Income From Continuing
Operations Increased 17.8%;
Fuel Sales Volume Increased 4.3%;
TA Enters IHOP Agreement to Rebrand 94
Restaurants to IHOP Brand
TravelCenters of America Inc. (Nasdaq: TA) today announced
financial results for the three and nine months ended September 30,
2019.
Andrew J. Rebholz, TA's CEO, made the following statement
regarding the 2019 third quarter results:
"Our third quarter operating results reflect continued growth in
our business. As compared to the prior year quarter, we posted
increases in both total and same site fuel sales volume, both total
and same site nonfuel revenues, income from continuing operations
and net income (loss), and we also increased our EBITDA. The growth
in site level operating expense was largely in line with, and due
to, our increased level of nonfuel sales other than for certain
increases in maintenance, insurance and property tax expenses. Our
selling, general and administrative expense for the 2019 third
quarter was largely flat sequentially. We believe our strategy is
working, although freight market headwinds somewhat tempered the
growth in our business.
"Net income for the third quarter of $1.9 million was a $72.4
million improvement over the prior year third quarter, which
included a $72.1 million loss from discontinued operations, net of
taxes; discontinued operations aside, we increased income from
continuing operations by 17.8% and EBITDA by 1.7% over the prior
year third quarter.
"We continued to expand our travel center network during the
third quarter, signing franchise agreements for three additional
travel centers, bringing the total for 2019 to 10, of which three
have started operations under our brands thus far. We have a number
of additional potential franchise locations in the pipeline and
expect to acquire one operating travel center business and one
development parcel of land in the next few months.
"Also, I am pleased to note that we continue to accelerate our
restaurant rebranding program pursuant to the franchise development
agreement we recently entered with IHOP to rebrand and convert up
to 94 of the restaurants at our travel centers to IHOP over the
next five years. I believe the introduction of this brand to our
travel centers will earn a 20% return on our investment, due in
part to increased gasoline sales volume and additional store sales
from the anticipated increase in customers visiting our sites.
"The strategy we adopted in May 2018 to refocus our efforts on
our core travel center operations, to grow that business and reduce
our financial leverage has been successful to date and we expect to
continue to pursue this strategy."
The following table summarizes TA's financial results for the
three and nine months ended September 30, 2019 and 2018.
Three Months Ended
September 30,
Nine Months Ended
September 30,
(in thousands, except per share
amounts)
2019
2018
2019
2018
Income (loss) from continuing
operations
$
1,872
$
1,589
$
(9,648)
$
4,200
Net income (loss)
1,872
(70,481)
(9,648)
(114,483)
Net income (loss) attributable to common
stockholders
1,832
(70,514)
(9,737)
(114,604)
Income (loss) per share of common stock
from
continuing operations attributable to
common
stockholders (basic and diluted)(1)
$
0.23
$
0.20
$
(1.20)
$
0.51
(1) Income (loss) per share of common stock from continuing
operations attributable to common stockholders has been
retrospectively adjusted to reflect the reverse stock split of TA's
outstanding shares of common stock effective August 1, 2019.
The following table summarizes TA's non-GAAP financial measures
for the three and nine months ended September 30, 2019 and
2018.
(in thousands, except per share
amounts)
Three Months Ended
September 30,
Nine Months Ended
September 30,
2019
2018
2019
2018
Non-GAAP Measures:(1)
Adjusted income (loss) from continuing
operations
$
1,872
$
1,589
$
(11,483)
$
(18,552)
Adjusted income (loss) per share of common
stock
from continuing operations attributable to
common
stockholders (basic and diluted)(2)
$
0.23
$
0.20
$
(1.43)
$
(2.34)
EBITDA
$
31,916
$
31,393
$
76,913
$
87,526
Adjusted EBITDA
31,916
31,393
74,460
57,879
(1) Reconciliations from income (loss) from continuing
operations, income (loss) per share of common stock from continuing
operations attributable to common stockholders and net income
(loss), as applicable, the financial measures determined in
accordance with U.S. generally accepted accounting principles, or
GAAP, to the non-GAAP measures disclosed herein are included in the
supplemental tables below. (2) Adjusted income (loss) per share of
common stock from continuing operations attributable to common
stockholders has been retrospectively adjusted to reflect the
reverse stock split of TA's outstanding shares of common stock
effective August 1, 2019.
Financial Results Commentary
Fuel Sales Volume and Gross Margin. Fuel sales volume for the
2019 third quarter increased by 21.2 million gallons, or 4.3%, as
compared to the 2018 third quarter due to the following
factors:
- a same site fuel sales volume increase of 18.7 million gallons,
or 3.9%, which primarily resulted from improved market conditions
and the success of TA's marketing initiatives; and
- an increase of 2.5 million gallons at sites opened since the
beginning of the 2018 third quarter.
Fuel revenues for the 2019 third quarter decreased by $98.2
million, or 8.4%, as compared to the 2018 third quarter primarily
due to a decrease in market prices for fuel during the 2019 third
quarter, which was partially offset by the increase in fuel sales
volume.
Fuel gross margin for the 2019 third quarter increased by $2.6
million, or 3.4%, as compared to the 2018 third quarter. Diesel
fuel gross margin was essentially flat for the 2019 third quarter
as compared to the 2018 third quarter due to a slightly lower
diesel fuel gross margin per gallon, which was largely offset by a
5.6% increase in diesel fuel sales volume. The decline in diesel
fuel gross margin per gallon primarily was due to the higher cost
associated with increased rewards under TA's new loyalty program to
incentivize drivers to purchase higher fuel volumes and a reduced
benefit realized from biodiesel blending. Gasoline gross margin
increased for the 2019 third quarter as compared to the 2018 third
quarter primarily as a result of TA managing sales pricing to
balance sales volume and profitability.
The following table presents details for TA's fuel sales during
the 2019 third quarter as compared to the 2018 third quarter.
(in thousands, except per gallon
amounts)
Three Months Ended
September 30,
2019
2018
Change
Fuel sales volume (gallons):
Diesel fuel
431,336
408,403
5.6
%
Gasoline
80,343
82,086
(2.1)
%
Total fuel sales volume
511,679
490,489
4.3
%
Fuel revenues
$
1,074,680
$
1,172,913
(8.4)
%
Fuel gross margin
79,458
76,848
3.4
%
Fuel gross margin per gallon
$
0.155
$
0.157
(1.3)
%
Although the U.S. government to date has not retroactively
reinstated the federal biodiesel blenders' tax credit for 2018 or
2019, TA believes the U.S. government may do so before the end of
2019. If the federal biodiesel blenders' tax credit is reinstated
for 2018 and 2019, TA expects to recognize reductions in fuel cost
of goods sold of approximately $35.0 million relating to 2018 and
$28.9 million relating to the nine months ended September 30, 2019,
in the period the U.S. government enacts the tax credit
reinstatement. While TA would recognize a benefit to its fuel cost
of goods sold in the period the related legislation is enacted, it
typically has taken TA approximately six to eight months to collect
the related cash refunds. Although TA believes reinstatement of
this credit is possible, TA cannot be certain that the U.S.
government will choose to do so. TA has not recognized any amount
of the expected federal biodiesel blenders' tax credit for 2018 or
2019.
Nonfuel Revenues and Gross Margin. Nonfuel revenues for the 2019
third quarter increased by $9.5 million, or 2.0%, as compared to
the 2018 third quarter due to the following factors:
- an $8.8 million same site increase primarily due to an increase
in diesel exhaust fluid sales as a result of newer trucks on the
road, and the positive impact of certain of TA's pricing and
marketing initiatives. These increases were partially offset by the
impact of the planned closure and remodeling of certain full
service restaurants; and
- a $0.7 million net increase at sites opened or closed since the
beginning of the 2018 third quarter.
Nonfuel gross margin for the 2019 third quarter increased by
$4.4 million, or 1.5%, as compared to the 2018 third quarter due to
the following factors:
- the $9.5 million increase in nonfuel revenues; and
- a partially offsetting slight decline in the nonfuel gross
margin percentage that primarily resulted from a change in the mix
of products and services sold.
The following table presents details for TA's nonfuel revenues
during the 2019 third quarter as compared to the 2018 third
quarter.
Three Months Ended
September 30,
(in thousands)
2019
2018
Change
Nonfuel revenues:
Store and retail services
$
196,530
$
191,001
2.9
%
Truck service
186,430
182,854
2.0
%
Restaurant
109,129
108,715
0.4
%
Total nonfuel revenues
492,089
482,570
2.0
%
Nonfuel gross margin
$
294,504
$
290,063
1.5
%
Nonfuel gross margin percentage
59.8
%
60.1
%
(30)
pts
Rent and Royalties from Franchisees. Rent and royalties from
franchisees revenues for the 2019 third quarter declined by $0.1
million, or 3.6%, as compared to the 2018 third quarter primarily
due to the following factors:
- a $0.3 million decline from rent and royalties earned in the
2018 third quarter from two travel centers TA owns and now operates
that had been leased to franchisees until September and November
2018;
- a $0.1 million decline from Quaker Steak & Lube, or QSL,
franchised restaurants for which the franchise agreements were
terminated since the beginning of the 2018 third quarter; and
- a $0.1 million offsetting increase in royalties from travel
centers or QSL restaurants added to TA's network during 2019.
Expenses. Site level operating expense for the 2019 third
quarter increased by $8.4 million, or 3.6%, as compared to the 2018
third quarter. New sites accounted for $1.3 million of this
increase. On a same site basis, site level operating expense
increased $7.1 million, primarily due to increased labor costs to
support TA's growth in nonfuel revenues, as well as higher
maintenance, insurance and property tax expenses. Site level
operating expense as a percentage of nonfuel revenues on a same
site basis was 48.8% for the 2019 third quarter as compared to
48.2% for the 2018 third quarter. The increase in this percentage
primarily reflects higher nonlabor costs such as maintenance,
insurance and property taxes; the ratio of labor costs to nonfuel
revenues on a same site basis was consistent between the 2019 and
2018 third quarters.
Selling, general and administrative expense for the 2019 third
quarter increased by $4.7 million, or 13.2%, as compared to the
2018 third quarter primarily due to a $2.6 million increase in
legal costs and increased compensation expense as a result of
annual salary increases and increased headcount to support the
growth in TA's business.
Real estate rent expense for the 2019 third quarter decreased by
$7.2 million, or 10.1%, as compared to the 2018 third quarter
primarily as a result of TA's purchase of 20 travel centers from
Service Properties Trust (formerly known as Hospitality Properties
Trust), or SVC, in January 2019, partially offset by increases that
resulted from TA's sales to, and lease back from, SVC of
improvements at leased sites during 2018.
Depreciation and amortization expense for the 2019 third quarter
increased by $3.7 million, or 18.3%, as compared to the 2018 third
quarter primarily due to TA's acquisition of 20 travel centers from
SVC in January 2019.
Net Income (Loss) and Adjusted EBITDA. Net income (loss) for the
2019 third quarter improved by $72.4 million, as compared to the
2018 third quarter primarily due to a $72.1 million loss from
discontinued operations, net of taxes, during the 2018 third
quarter. Adjusted EBITDA for the 2019 third quarter increased by
$0.5 million, as compared to the 2018 third quarter primarily as a
result of the decrease in real estate rent expense due to the
purchase of 20 travel centers from SVC in January 2019.
Growth Strategies
Thus far in 2019, TA has entered into franchise agreements
covering 10 travel centers to be operated under TA's travel center
brand names; two of these franchised travel centers began
operations under one of TA's travel center brands during the nine
months ended September 30, 2019, one started in the 2019 fourth
quarter to date, and TA anticipates four franchised travel centers
to begin by the end of 2019, with the remaining three franchised
travel centers expected to be added to TA's network by the end of
the 2020 third quarter. In addition, TA has entered into an
agreement with one of these franchisees pursuant to which TA
expects to add two additional franchised travel centers to its
network, one within five years and the other within 10 years.
TA currently has contracts in place for the purchase of an
existing travel center business for $11.6 million (expected to
close in January 2020) and for a parcel of land for $1.4 million
(expected to close in November 2019) on which TA plans to develop a
TA Express travel center for approximately $12.6 million.
Thus far in 2019, TA has entered into franchise agreements
covering six restaurants to be operated under the QSL brand name;
three of these franchised restaurants opened in the 2019 third
quarter and TA anticipates the remaining three restaurants will be
added to its network by the end of the 2020 first quarter.
On October 28, 2019, TA entered into a multi unit franchise
agreement with International House of Pancakes, LLC, or IHOP, in
which TA agreed to rebrand and convert up to 94 of its full service
restaurants to IHOP restaurants over the next five years, or the
IHOP Agreement. Of the 94, TA is obligated to convert the initial
20 full service restaurants to IHOP restaurants with the remaining
conversions at its discretion. TA currently operates these full
service restaurants under the Iron Skillet or Country Pride brand
names. Pursuant to the IHOP Agreement, among other things, TA has
agreed to rebrand 15 full service restaurants by the end of 2020,
20 full service restaurants in each of 2021, 2022 and 2023 and 19
full service restaurants in 2024. The average investment per site
to rebrand these restaurants is expected to be approximately $1.1
million and TA anticipates a return on its investment of
approximately 20%.
Concurrent with entering into the IHOP Agreement, TA entered
into a Secured Advance Note with IHOP, or the IHOP Note, pursuant
to which it can borrow up to $10.0 million in connection with the
costs to convert its full service restaurants to IHOP
restaurants.
Conference Call
On Tuesday, November 5, 2019, at 10:00 a.m. Eastern time, TA
will host a conference call to discuss its financial results and
other activities for the three months ended September 30, 2019.
Following management's remarks, there will be a question and answer
period.
The conference call telephone number is 877-329-4614.
Participants calling from outside the United States and Canada
should dial 412-317-5437. No pass code is necessary to access the
call from either number. Participants should dial in about 15
minutes prior to the scheduled start of the call. A replay of the
conference call will be available for about a week after the call.
To hear the replay, dial 412-317-0088. The replay pass code is
10134934.
A live audio webcast of the conference call will also be
available in a listen only mode on TA's website at
www.ta-petro.com. To access the webcast, participants should visit
TA's website about five minutes before the call. The archived
webcast will be available for replay on TA's website for about one
week after the call. The transcription, recording and
retransmission in any way of TA's third quarter conference call is
strictly prohibited without the prior written consent of TA.
The Company's website is not incorporated as part of this press
release.
About TravelCenters of America Inc.
TA's nationwide business includes travel centers located in 44
U.S. states and in Canada, standalone truck service facilities
located in two states and standalone restaurants located in 12
states. TA's travel centers operate under the "TravelCenters of
America," "TA," "TA Express," "Petro Stopping Centers" and "Petro"
brand names and offer diesel fuel and gasoline, restaurants, truck
repair services, travel/convenience stores and other services
designed to provide attractive and efficient travel experiences to
professional drivers and other motorists. TA's standalone truck
service facilities operate under the "TA Truck Service" brand name.
TA's standalone restaurants operate principally under the "Quaker
Steak & Lube" brand name.
TRAVELCENTERS OF AMERICA INC.
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) (in thousands,
except per share amounts)
Three Months Ended
September 30,
Nine Months Ended
September 30,
2019
2018
2019
2018
Revenues:
Fuel
$
1,074,680
$
1,172,913
$
3,175,492
$
3,308,744
Nonfuel
492,089
482,570
1,409,045
1,377,887
Rent and royalties from franchisees
3,723
3,863
10,611
12,022
Total revenues
1,570,492
1,659,346
4,595,148
4,698,653
Cost of goods sold (excluding
depreciation):
Fuel
995,222
1,096,065
2,944,465
3,074,621
Nonfuel
197,585
192,507
553,351
538,162
Total cost of goods sold
1,192,807
1,288,572
3,497,816
3,612,783
Site level operating expense
241,740
233,344
709,105
685,217
Selling, general and administrative
expense
40,178
35,490
116,850
99,464
Real estate rent expense
63,911
71,116
194,094
212,036
Depreciation and amortization expense
24,146
20,407
72,118
62,076
Income from operations
7,710
10,417
5,165
27,077
Interest expense, net
7,048
7,518
21,262
21,963
Other (income) expense, net
(60)
(569)
370
1,627
Income (loss) before income taxes
and
discontinued operations
722
3,468
(16,467)
3,487
Benefit (provision) for income taxes
1,150
(1,879)
6,819
713
Income (loss) from continuing
operations
1,872
1,589
(9,648)
4,200
Loss from discontinued operations,
net of taxes
—
(72,070)
—
(118,683)
Net income (loss)
1,872
(70,481)
(9,648)
(114,483)
Less: net income for noncontrolling
interest
40
33
89
121
Net income (loss) attributable
to
common stockholders
$
1,832
$
(70,514)
$
(9,737)
$
(114,604)
Net income (loss) per share of common
stock
attributable to common
stockholders(1):
Basic and diluted from continuing
operations
$
0.23
$
0.20
$
(1.20)
$
0.51
Basic and diluted from discontinued
operations
—
(9.07)
—
(14.86)
Basic and diluted
0.23
(8.87)
(1.20)
(14.35)
(1) Net income (loss) per share of common stock attributable to
common stockholders has been retrospectively adjusted to reflect
the reverse stock split of TA's outstanding shares of common stock
effective August 1, 2019.
These financial statements should be read in
conjunction with TA's Quarterly Report on Form 10-Q for the quarter
ended September 30, 2019, to be filed with the U.S. Securities and
Exchange Commission.
TRAVELCENTERS OF AMERICA INC. RECONCILIATION OF
NON-GAAP FINANCIAL MEASURES (in thousands, unless indicated
otherwise)
TA believes the non-GAAP financial measures presented in the
tables below are meaningful supplemental disclosures because they
may help investors gain a better understanding of changes in TA's
operating results and its ability to pay rent or service debt when
due, make capital expenditures and expand its business. These
non-GAAP financial measures also may help investors to make
comparisons between TA and other companies and to make comparisons
of TA's financial and operating results between periods.
TA believes that adjusted income (loss) from continuing
operations, adjusted income (loss) per share of common stock from
continuing operations attributable to common stockholders, EBITDA,
adjusted EBITDA, adjusted fuel gross margin and adjusted fuel gross
margin per gallon are meaningful disclosures that may help
investors to better understand TA's financial performance by
providing financial information that represents the operating
results of TA's continuing operations without the effects of items
that do not result directly from TA's normal recurring operations
and may allow investors to better compare TA's performance between
periods and to the performance of other companies. Management uses
these measures in developing internal budgets and forecasts and
analyzing TA's performance. TA calculates EBITDA as net income
(loss) before loss from discontinued operations, interest, taxes,
and depreciation and amortization, as shown below. TA calculates
adjusted EBITDA by excluding items that it considers not to be
normal, recurring, cash operating expenses or gains or losses.
The non-GAAP financial measures TA presents should not be
considered as alternatives to net income (loss) attributable to
common stockholders, net income (loss), income (loss) from
continuing operations, income from operations or income (loss) per
share of common stock from continuing operations attributable to
common stockholders as an indicator of TA's operating performance
or as a measure of TA's liquidity. Also, the non-GAAP financial
measures TA presents may not be comparable to similarly titled
amounts calculated by other companies.
TA believes that income (loss) from continuing operations is the
most directly comparable GAAP financial measure to adjusted income
(loss) from continuing operations; income (loss) per share of
common stock from continuing operations attributable to common
stockholders is the most directly comparable GAAP financial measure
to adjusted income (loss) per share of common stock from continuing
operations attributable to common stockholders; net income (loss)
is the most directly comparable GAAP financial measure to EBITDA
and adjusted EBITDA; and that fuel gross margin and fuel gross
margin per gallon are the most directly comparable GAAP financial
measures to adjusted fuel gross margin and adjusted fuel gross
margin per gallon, respectively. The following tables present the
reconciliations of the non-GAAP financial measures to the
respective most directly comparable GAAP financial measures for the
three and nine months ended September 30, 2019 and 2018.
Calculation of adjusted income
(loss)
from continuing operations:
Three Months Ended
September 30,
Nine Months Ended
September 30,
2019
2018
2019
2018
Income (loss) from continuing
operations
$
1,872
$
1,589
$
(9,648)
$
4,200
Add: Costs of SVC transactions(1)
—
—
458
—
Less: Loyalty award expiration(2)
—
—
(2,911)
—
Add: Executive officer retirement
agreement expenses(3)
—
—
—
3,571
Less: Comdata interest income(4)
—
—
—
(568)
Less: Comdata legal reimbursements, net of
expenses(4)
—
—
—
(9,967)
Less: Federal biodiesel blenders' tax
credit(5)
—
—
—
(23,251)
Add: Net tax impact(6)
—
—
618
7,463
Adjusted income (loss) from continuing
operations
$
1,872
$
1,589
$
(11,483)
$
(18,552)
Calculation of adjusted income (loss)
per share of
common stock from continuing
operations
attributable to common
stockholders
(basic and diluted):
Three Months Ended
September 30,
Nine Months Ended
September 30,
2019
2018
2019
2018
Income (loss) per share of common stock
from
continuing operations attributable to
common
stockholders (basic and diluted)
$
0.23
$
0.20
$
(1.20)
$
0.51
Add: Costs of SVC transactions(1)
—
—
0.06
—
Less: Loyalty award expiration(2)
—
—
(0.36)
—
Add: Executive officer retirement
agreement expenses(3)
—
—
—
0.45
Less: Comdata interest income(4)
—
—
—
(0.07)
Less: Comdata legal reimbursements, net of
expenses(4)
—
—
—
(1.25)
Less: Federal biodiesel blenders' tax
credit(5)
—
—
—
(2.91)
Add: Net tax impact(6)
—
—
0.07
0.93
Adjusted income (loss) per share of common
stock from continuing operations attributable to common
stockholders (basic and diluted)
$
0.23
$
0.20
$
(1.43)
$
(2.34)
Calculation of EBITDA and adjusted
EBITDA:
Three Months Ended
September 30,
Nine Months Ended
September 30,
2019
2018
2019
2018
Net income (loss)
$
1,872
$
(70,481)
$
(9,648)
$
(114,483)
Add: Loss from discontinued operations,
net of taxes
—
72,070
—
118,683
Income (loss) from continuing
operations
1,872
1,589
(9,648)
4,200
(Less) add: (Benefit) provision for income
taxes
(1,150)
1,879
(6,819)
(713)
Add: Depreciation and amortization
expense
24,146
20,407
72,118
62,076
Add: Interest expense, net
7,048
7,518
21,262
21,963
EBITDA
31,916
31,393
76,913
87,526
Add: Costs of SVC transactions(1)
—
—
458
—
Less: Loyalty award expiration(2)
—
—
(2,911)
—
Add: Executive officer retirement
agreement expenses(3)
—
—
—
3,571
Less: Comdata legal reimbursements, net of
expenses(4)
—
—
—
(9,967)
Less: Federal biodiesel blenders' tax
credit(5)
—
—
—
(23,251)
Adjusted EBITDA
$
31,916
$
31,393
$
74,460
$
57,879
Calculation of adjusted fuel gross
margin
and adjusted fuel gross margin per
gallon:
Three Months Ended
September 30,
Nine Months Ended
September 30,
2019
2018
2019
2018
Fuel gross margin
$
79,458
$
76,848
$
231,027
$
234,123
Less: Loyalty award expiration(2)
—
—
(2,840)
—
Less: Federal biodiesel blenders' tax
credit(5)
—
—
—
(23,251)
Adjusted fuel gross margin
$
79,458
$
76,848
$
228,187
$
210,872
Fuel gross margin per gallon
$
0.155
$
0.157
$
0.155
$
0.163
Less: Loyalty award expiration(2)
—
—
(0.002)
—
Less: Federal biodiesel blenders' tax
credit(5)
—
—
—
(0.016)
Adjusted fuel gross margin per gallon
$
0.155
$
0.157
$
0.153
$
0.147
(1) Costs of SVC Transactions. In January 2019, TA entered
transaction agreements with SVC pursuant to which they amended
their leases. During the nine months ended September 30, 2019, TA
incurred $0.5 million of expenses associated with the amendments of
these leases, which were included in selling, general and
administrative expense in TA's consolidated statements of
operations and comprehensive income (loss). (2) Loyalty Award
Expiration. During the nine months ended September 30, 2019, TA
introduced a new customer loyalty program, UltraONE 2.0. As a
result of introducing the new customer loyalty program, certain
loyalty awards earned under the program now expire in 10 days for
all loyalty members. This update resulted in the immediate
expiration of certain loyalty awards upon adoption of the new
customer loyalty program, generating $2.9 million of additional
revenue during the nine months ended September 30, 2019, $2.8
million of which was recognized to fuel revenues and $0.1 million
to nonfuel revenues in TA's consolidated statements of operations
and comprehensive income (loss). (3) Executive Officer Retirement
Agreement Expenses. As part of TA's retirement agreement with a
certain former officer, TA agreed to accelerate the vesting of
previously granted stock awards and make a cash payment. This
vesting acceleration and cash payment resulted in additional
compensation expense of $3.6 million for the nine months ended
September 30, 2018, which was included in selling, general and
administrative expense in TA's consolidated statements of
operations and comprehensive income (loss). (4) Comdata Legal
Reimbursements, Net of Expenses and Interest Income. On April 9,
2018, the Court of Chancery of the State of Delaware entered its
final order and judgment with respect to TA's litigation with
Comdata Inc., or Comdata, or the Order. Pursuant to the Order,
Comdata was required to, among other things, reimburse TA for
attorneys' fees and costs, together with interest, in the amount of
$10.7 million, which TA collected in April 2018. In addition,
during the nine months ended September 30, 2018, TA incurred $0.1
million of legal fees in its litigation with Comdata. The legal
reimbursements and expenses were included in selling, general and
administrative expense in TA's consolidated statements of
operations and comprehensive income (loss). (5) Federal Biodiesel
Blenders' Tax Credit. On February 8, 2018, the U.S. government
retroactively reinstated the 2017 federal biodiesel blenders' tax
credit. TA's recovery as a result of this tax credit was $23.3
million and was recognized in February 2018 as a reduction to fuel
cost of goods sold in TA's consolidated statement of operations and
comprehensive income (loss). TA collected this amount during the
remainder of 2018. (6) Net Tax Impact. TA calculated the tax impact
of the adjustments described above by using its estimated statutory
rate of 25.2% and 24.7% for the three and nine months ended
September 30, 2019 and 2018, respectively.
TRAVELCENTERS OF AMERICA INC.
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED) (in
thousands)
September 30,
2019
December 31,
2018
Assets:
Current assets:
Cash and cash equivalents
$
32,546
$
314,387
Accounts receivable, net
133,906
97,449
Inventory
195,202
196,721
Other current assets
27,433
35,119
Total current assets
389,087
643,676
Property and equipment, net
880,058
628,537
Operating lease assets
1,802,394
—
Goodwill
25,259
25,259
Intangible assets, net
21,179
22,887
Other noncurrent assets
100,335
121,749
Total assets
$
3,218,312
$
1,442,108
Liabilities and Stockholders'
Equity:
Current liabilities:
Accounts payable
$
167,373
$
120,914
Current operating lease liabilities
99,217
—
Current SVC Leases liabilities
—
42,109
Other current liabilities
172,799
125,668
Total current liabilities
439,389
288,691
Long term debt, net
321,196
320,528
Noncurrent operating lease liabilities
1,875,062
—
Noncurrent SVC Leases liabilities
—
353,756
Other noncurrent liabilities
53,403
28,741
Total liabilities
2,689,050
991,716
Stockholders' equity (8,085 and 8,080
shares of common stock outstanding
as of September 30, 2019 and December 31,
2018, respectively)(1)
529,262
450,392
Total liabilities and stockholders'
equity
$
3,218,312
$
1,442,108
(1) TA's shares of common stock outstanding have been
retrospectively adjusted to reflect the reverse stock split of TA's
outstanding shares of common stock effective August 1, 2019.
These financial statements should be read in
conjunction with TA's Quarterly Report on Form 10-Q for the quarter
ended September 30, 2019, to be filed with the U.S. Securities and
Exchange Commission.
TRAVELCENTERS OF AMERICA INC. SUPPLEMENTAL SAME
SITE OPERATING DATA (dollars and gallons in thousands, unless
indicated otherwise)
The following table presents operating data for the periods
noted for all of the locations in operation on September 30, 2019,
that were operated by TA continuously since the beginning of the
earliest period presented, with the exception of three locations TA
operates that are owned by an unconsolidated joint venture in which
TA owns a noncontrolling interest. This data excludes revenues and
expenses at locations TA does not operate, such as rents and
royalties from franchisees, the results of TA's discontinued
operations and corporate level selling, general and administrative
expense. TA does not exclude locations from the same site
comparisons as a result of capital improvements to the site or
changes in the services offered.
Three Months Ended
September 30,
Nine Months Ended
September 30,
2019
2018
Change
2019
2018
Change
Number of same site company
operated locations(1)
242
242
—
241
241
—
Diesel sales volume (gallons)
424,443
403,407
5.2
%
1,240,628
1,192,249
4.1
%
Gasoline sales volume (gallons)
76,079
78,424
(3.0)
%
206,848
215,946
(4.2)
%
Total fuel sales volume (gallons)
500,522
481,831
3.9
%
1,447,476
1,408,195
2.8
%
Fuel revenues
$
1,048,355
$
1,149,629
(8.8)
%
$
3,079,025
$
3,242,172
(5.0)
%
Fuel gross margin(2)
78,431
75,944
3.3
%
228,637
231,546
(1.3)
%
Fuel gross margin per gallon
$
0.157
$
0.158
(0.6)
%
$
0.158
$
0.164
(3.7)
%
Nonfuel revenues
$
489,646
$
480,895
1.8
%
$
1,392,143
$
1,370,664
1.6
%
Nonfuel gross margin
293,700
288,720
1.7
%
845,706
834,620
1.3
%
Nonfuel gross margin percentage
60.0%
60.0%
—
pts
60.7%
60.9%
(20)
pts
Total gross margin(2)
$
372,131
$
364,664
2.0
%
$
1,074,343
$
1,066,166
0.8
%
Site level operating expense
238,900
231,830
3.0
%
696,967
679,534
2.6
%
Site level operating expense as a
percentage of nonfuel revenues
48.8%
48.2%
60
pts
50.1%
49.6%
50
pts
Site level gross margin in excess of
site level operating expense(2)
$
133,231
$
132,834
0.3
%
$
377,376
$
386,632
(2.4)
%
(1) Same site operations for the three months ended September
30, 2019, included 228 travel centers, one standalone truck service
facility and 13 standalone restaurants that TA operated since July
1, 2018. Same site operations for the nine months ended September
30, 2019, included 227 travel centers, one standalone truck service
facility and 13 standalone restaurants that TA operated since
January 1, 2018. (2) The amount for the nine months ended September
30, 2019, includes $2.8 million of a one time benefit due to the
reversal of loyalty award accruals recognized in connection with
introducing a revised customer loyalty program, and the amount for
the nine months ended September 30, 2018, includes the $23.2
million benefit from the federal biodiesel blenders' tax credit
that the U.S. government retroactively reinstated for 2017 in
February 2018. The U.S. government has not yet reinstated the
federal biodiesel blenders' tax credit for 2018 or 2019.
Warning Concerning
Forward-Looking Statements
This press release contains statements that constitute
forward-looking statements within the meaning of the Private
Securities Litigation Reform Act of 1995 and other securities laws.
Whenever TA uses words such as "believe," "expect," "anticipate,"
"intend," "plan," "estimate," "will," "may" and negatives or
derivatives of these or similar expressions, TA is making
forward-looking statements. These forward-looking statements are
based upon TA's present intent, beliefs or expectations, but
forward-looking statements are not guaranteed to occur and may not
occur. Actual results may differ materially from those contained in
or implied by TA's forward-looking statements. Forward-looking
statements involve known and unknown risks, uncertainties and other
factors, some of which are beyond TA's control. Among others, the
forward-looking statements which appear in this press release that
may not occur include:
- Statements about improved operating results and increased fuel
and nonfuel gross margins may imply that TA's business may be
profitable in the future. Further, statements about TA's continued
growth in its business may imply that its business will continue to
grow in the future and that any such growth will be beneficial to
TA. However, TA operates in a highly competitive industry and its
business is subject to various market and other risks and
challenges. As a result, TA may fail to be profitable, and its
business may not continue to grow, in the future for these or other
reasons. Since TA became publicly traded in 2007, TA's operations
have generated losses and only occasionally generated profits. TA
may be unable to produce future profits and TA's losses may
increase. In addition, any growth in TA's business may not be
beneficial to TA and may result in TA realizing losses if the
growth is not profitable;
- Statements about TA's success in executing on the strategy it
adopted in May 2018 to refocus its efforts on its core travel
center operations, to grow that business and reduce its financial
leverage and that it expects to continue this strategy. These
statements may imply that TA will continue to pursue this strategy
and that the strategy will continue to be successful. TA operates
in a dynamic business environment and its current strategy may not
continue to be successful or as successful as other strategies and
TA may fail to execute its strategy or it may decide to pursue
other strategies;
- Statements about costs TA has incurred to support its business
growth. These statements may imply that these costs will result in
TA receiving increased revenues and realizing its expected return
on its investments in growing its business. However, these may
exceed any increased revenue TA may receive from this growth or
result in its returns on its investments in the growth of its
business being less than expected;
- Statements about TA's belief that the U.S. government may
retroactively reinstate the federal biodiesel blenders' tax credit
for 2018 and 2019 before the end of 2019 and the amounts by which
that credit may reduce TA's fuel cost of goods sold in the period
the U.S. government enacts the tax credit reinstatement. However,
the U.S. government may not retroactively reinstate this tax credit
at the level TA expects or at all and TA may not realize the
reductions in its fuel cost of goods sold that it expects or
receive those amounts in accordance with the timing it expects or
at all;
- Statements about the franchise agreements TA entered with
franchisees pursuant to which TA expects to add TA branded travel
centers and restaurants to its network. These franchise agreements
are subject to conditions and these franchise arrangements may not
occur or may be delayed, and the terms of the arrangements may
change;
- Statements about agreements TA has entered into to purchase an
existing travel center and a parcel of land. These statements may
imply that TA will purchase these properties. However, those
agreements are subject to conditions; as a result, those
acquisitions may not occur, may be delayed or their terms may
change;
- Statements about TA's expected costs to develop a TA Express
travel center on a parcel of land that it has agreed to purchase.
As noted above, TA's purchase of this land is subject to
conditions. Further, development projects can be difficult, time
consuming and more expensive than anticipated and involve risks of
financial losses. TA's costs for developing this land, if it
completes its purchase of this land, may cost more and take longer
to complete than TA currently expects; and
- TA entered into a multi unit franchise agreement with IHOP to
rebrand and convert up to 94 of its full service restaurants to
IHOP restaurants. However, TA is only obligated to convert the
initial 20 full service restaurants to IHOP with the remaining
conversions at TA's discretion. TA may fail to convert those 20
initial restaurants and may determine not to convert some or all of
the remaining 74 restaurants. The timing and costs for these
conversions may exceed TA's expectations and TA may fail to
complete these conversions in accordance with the schedule. In
addition, TA may not realize the 20% return on investment it is
anticipating and it may incur losses with respect to these
conversions.
The information contained in TA's periodic reports, including
TA's Annual Report on Form 10-K for the year ended December 31,
2018, which has been filed with the U.S. Securities and Exchange
Commission, or SEC, and TA's Quarterly Reports on Form 10-Q for the
periods ended March 31, 2019, June 30, 2019 and September 30, 2019,
which have been or will be filed with the SEC, under the caption
"Risk Factors," or elsewhere in those reports, or incorporated
therein, identifies other important factors that could cause
differences from TA's forward-looking statements. TA's filings with
the SEC are available on the SEC's website at www.sec.gov.
You should not place undue reliance upon forward-looking
statements.
Except as required by law, TA does not intend to update or
change any forward-looking statement as a result of new
information, future events or otherwise.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20191105005305/en/
Contact: Kristin Brown, Director of Investor Relations (617)
796-8251 www.ta-petro.com
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