Fuel Sales Volume Increased 3.6% for the
2020 First Quarter
Fuel Gross Margin Increased 9.6% for the
2020 First Quarter
TravelCenters of America Inc. (Nasdaq: TA) today announced
financial results for the three months ended March 31, 2020.
Jonathan M. Pertchik, TA's CEO, made the following statement
regarding the 2020 first quarter results:
"We navigated through a challenging first quarter, the latter
part of which was heavily impacted by the COVID-19 pandemic. Our
fuel sales volume during the first quarter increased 3.6%, which
was driven entirely by diesel fuel sales volume. Our gasoline sales
volume, after being up most of the first quarter, declined
significantly beginning mid-March as consumers responded to the
COVID-19 pandemic. Despite the decrease in gasoline sales volume,
total fuel gross margin was strong in March as both diesel fuel and
gasoline costs declined as a result of reduced demand, which
resulted in a 9.6% increase in our fuel gross margin for the 2020
first quarter.
"The strong fuel gross margin was more than offset by a decline
in our nonfuel gross margin primarily due to the
government-mandated stay at home orders and temporary closures of
certain full service restaurants that were issued in mid-March,
which affected the traffic at locations we operate. In addition to
dealing with the effects of the COVID-19 pandemic, the results from
our truck service and stores were largely impacted by unseasonably
mild weather experienced in the 2020 first quarter as compared to
extreme cold weather in the 2019 first quarter.
"On April 30, 2020, TA commenced a company-wide reorganization,
which includes an approximately 130 position reduction in force,
numerous leadership changes, the creation of both a corporate
development and also a procurement group, which we expect to result
in approximately $13.1 million of net annual savings in selling,
general and administrative expense, and the planning for a wide
array and long list of initiatives to improve overall company
performance, by addressing both top line and bottom line challenges
and opportunities."
The following table summarizes TA's financial results for the
2020 and 2019 first quarters.
(in thousands, except per share
amounts)
Three Months Ended
March 31,
2020
2019
Net loss
$
(18,541
)
$
(12,729
)
Net loss attributable to common
stockholders
(18,561
)
(12,747
)
Net loss per share of common
stock attributable to common stockholders (basic and
diluted)(1)
$
(2.23
)
$
(1.58
)
(1)
Net loss per share of common
stock attributable to common stockholders for the 2019 first
quarter 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 2020 and 2019 first quarters.
(in thousands, except per share
amounts)
Three Months Ended
March 31,
2020
2019
Non-GAAP measures:(1)
Adjusted net loss
$
(14,992
)
$
(14,564
)
Adjusted net loss per share of
common stock attributable to common stockholders (basic and
diluted)(2)
$
(1.81
)
$
(1.81
)
EBITDA
$
10,734
$
13,813
Adjusted EBITDA
10,317
11,360
(1)
Reconciliations from net loss and
net loss per share of common stock attributable to common
stockholders, 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 net loss per share of
common stock attributable to common stockholders for the 2019 first
quarter 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
As of the 2020 first quarter all of TA's company operated
locations were same site locations with the exception of one
standalone restaurant, which was converted from a franchise
operated location to a company operated location during the 2019
fourth quarter and whose results of operations are not material to
TA's consolidated financial results. As a result, same site
operating results are not presented as it does not provide
materially different information from TA's consolidated
results.
Fuel Sales Volume and Fuel Gross Margin. The following
table presents details for TA's fuel sales for the 2020 and 2019
first quarters.
(in thousands, except per gallon
amounts)
Three Months Ended
March 31,
2020
2019
Change
Fuel sales volume (gallons):
Diesel fuel
429,022
408,422
5.0
%
Gasoline
59,764
63,480
(5.9
)%
Total fuel sales volume
488,786
471,902
3.6
%
Fuel revenues
$
874,929
$
983,141
(11.0
)%
Fuel gross margin
81,955
74,747
9.6
%
Adjusted fuel gross margin
78,440
71,907
9.1
%
Fuel gross margin per gallon
$
0.168
$
0.158
6.3
%
Adjusted fuel gross margin per gallon
0.161
0.152
5.9
%
Fuel sales volume for the 2020 first quarter increased by 16.9
million gallons, or 3.6%, as compared to the 2019 first quarter due
to the success of TA's marketing initiatives and improved market
conditions during the first two and one-half months of 2020, and
the increase in trucking activity during the last two weeks of
March 2020 as a result of the initial increase in demand for
certain products as businesses and households stocked up on those
products as the implications of the COVID-19 pandemic began to be
widely understood.
Fuel revenues for the 2020 first quarter decreased by $108.2
million, or 11.0%, as compared to the 2019 first quarter. The
decrease in fuel revenues was primarily due to a decrease in market
prices for fuel, partially offset by an increase in fuel sales
volume.
In December 2019, the U.S. government retroactively reinstated
the federal biodiesel blenders' tax credit for 2018 and 2019, as
well as approved the federal biodiesel blenders' tax credit through
2022. During the 2020 first quarter, TA recognized $3.5 million as
a reduction to its fuel cost of goods sold relating to the federal
biodiesel blenders' tax credit. For the remainder of 2020 through
2022, the benefit of the federal biodiesel blenders' tax credit
will be included in the price TA pays for biodiesel.
Fuel gross margin for the 2020 first quarter increased by $7.2
million, or 9.6%, as compared to the 2019 first quarter primarily
as a result of an increase in fuel sales volume, a more favorable
fuel purchasing environment, primarily in March 2020 as a result of
reduced demand, and the $3.5 million benefit recognized in
connection with the federal biodiesel blenders' tax credit in the
2020 first quarter, partially offset by $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
during the 2019 first quarter.
Adjusted fuel gross margin for the 2020 first quarter increased
by $6.5 million, or 9.1%, as compared to the 2019 first quarter
primarily due to the increase in fuel sales volume and a more
favorable fuel purchasing environment, primarily in March 2020.
Nonfuel Revenues and Nonfuel Gross Margin. The following
table presents details for TA's nonfuel revenues for the 2020 and
2019 first quarters.
(in thousands)
Three Months Ended
March 31,
2020
2019
Change
Nonfuel revenues:
Store and retail services
$
176,828
$
180,425
(2.0
)%
Truck service
153,967
161,195
(4.5
)%
Restaurant
94,212
99,254
(5.1
)%
Total nonfuel revenues
425,007
440,874
(3.6
)%
Nonfuel gross margin
$
263,288
$
272,606
(3.4
)%
Nonfuel gross margin percentage
61.9
%
61.8
%
10
pts
Nonfuel revenues for the 2020 first quarter decreased by $15.9
million, or 3.6%, as compared to the 2019 first quarter primarily
as a result of a decrease in truck service revenues during the 2020
first quarter and a decrease in revenues at both TA's standalone
restaurants and the restaurants in TA's travel centers, primarily
in March 2020 as a result of the COVID-19 pandemic. In addition,
the 2019 first quarter benefited from a particularly strong
financial performance in truck service and store and retail
services as a result of the extreme cold weather experienced in
some parts of the United States during the 2019 first quarter, as
compared to unseasonably mild weather experienced during the 2020
first quarter. These decreases were partially offset by an increase
in diesel exhaust fluid, or DEF, sales as a result of an increase
in newer trucks on the road that require DEF and the positive
impact of certain of TA's marketing initiatives in its quick
service restaurants.
Nonfuel gross margin for the 2020 first quarter decreased by
$9.3 million, or 3.4%, as compared to the 2019 first quarter due to
the decrease in nonfuel revenues, primarily in March 2020 as a
result of the COVID-19 pandemic. Nonfuel gross margin percentage
for the 2020 first quarter improved slightly to 61.9% from 61.8%
for the 2019 first quarter.
Rent and Royalties from Franchisees Revenues. Rent and
royalties from franchisees revenues for the 2020 first quarter
increased by $0.1 million, or 4.1%, as compared to the 2019 first
quarter primarily as a result of the six franchised travel centers
and three franchised standalone restaurants that began operations
since the 2019 first quarter, partially offset by the closure of
two franchised standalone restaurants and TA's purchase of one
standalone restaurant from a former franchisee since the 2019 first
quarter.
Expenses. Site level operating expense for the 2020 first
quarter increased by $3.8 million, or 1.7%, as compared to the 2019
first quarter primarily due to increased labor costs as a result of
new positions created related to the realignment of TA's regional
and field management structure during the 2019 fourth quarter, an
increase in bonuses to support those who continued to work at TA's
locations during the COVID-19 pandemic and an increase in medical
and workers compensation claims expense, as well as an increase in
non-labor general liability claims expense. These increases were
partially offset by a decrease in maintenance and environmental
expense and inventory shrink. Site level operating expense as a
percentage of nonfuel revenues was 55.7% for the 2020 first quarter
as compared to 52.8% for the 2019 first quarter primarily due to
the increase in labor costs and the decrease in nonfuel
revenues.
Selling, general and administrative expense for the 2020 first
quarter increased by $0.1 million, or 0.3%, as compared to the 2019
first quarter. The increase was primarily attributable to $1.7
million of expenses related to executive officer retirement and
separation agreements and executive recruitment fees recognized in
the 2020 first quarter, partially offset by a reduced headcount as
a result of the realignment of TA's regional and field management
structure during the 2019 fourth quarter and a decrease in legal
fees and marketing expense.
Real estate rent expense for the 2020 first quarter decreased by
$2.8 million, or 4.3%, as compared to the 2019 first quarter. The
decrease in real estate rent expense was primarily the result of
TA's purchase of 20 travel centers it previously leased from
Service Properties Trust, or SVC, in January 2019, which reduced
TA's annual minimum rent due to SVC by $43.1 million.
Depreciation and amortization expense for the 2020 first quarter
increased by $3.8 million, or 15.4%, as compared to the 2019 first
quarter. The increase primarily resulted from TA's write off of
certain assets, which totaled $5.2 million, related to programs
which TA determined to cancel, partially offset by a decrease as a
result of the three year useful life extension of the leasehold
improvements at the travel centers leased from SVC as a result of
the January 2019 lease amendments.
Net Loss. Net loss for the 2020 first quarter increased
by $5.8 million, or 45.7%, as compared to the 2019 first quarter.
The increase in net loss primarily resulted from the decrease in
nonfuel gross margin and the increases in site level operating
expense and depreciation and amortization expense, partially offset
by an increase in fuel gross margin and the decrease in real estate
rent expense.
EBITDA and Adjusted EBITDA. EBITDA for the 2020 first
quarter decreased by $3.1 million, or 22.3%, as compared to the
2019 first quarter and adjusted EBITDA for the 2020 first quarter
decreased by $1.0 million, or 9.2%, as compared to the 2019 first
quarter. These decreases primarily resulted from the decrease in
nonfuel gross margin and the increase in site level operating
expense, partially offset by an increase in fuel gross margin and
the decrease in real estate rent expense.
Growth Strategies
TA commenced a company-wide reorganization plan, or the
Reorganization Plan, as of April 30, 2020, which included a
reduction of approximately 130 positions and elimination of certain
positions, certain changes in TA's leadership and their roles and
the creation of both a corporate development and a procurement
team, which TA expects to result in approximately $13.1 million of
net annual savings in selling, general and administrative expense,
and the planning for a wide array and long list of initiatives to
improve overall company performance, by addressing both top line
and bottom line challenges and opportunities.
On October 28, 2019, TA entered into a multi unit franchise
agreement with IHOP Franchisor LLC a subsidiary of IHOP®, or IHOP,
in which TA agreed to rebrand and convert up to 94 of its full
service restaurants to IHOP restaurants over five years. Due to the
COVID-19 pandemic, TA and IHOP have agreed to delay the rebranding
schedule by one year. 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 its Iron Skillet or Country
Pride brand names. The average investment per site to rebrand these
restaurants is expected to be approximately $1.1 million.
Since the beginning of 2019, TA has entered into franchise
agreements for 18 travel centers to be operated under TA's travel
center brand names; four of these franchised travel centers began
operations during 2019, two began operations in the 2020 first
quarter, two began operations in the 2020 second quarter to date
and TA anticipates the remaining 10 franchised travel centers will
be added to its network by the end of the 2021 first 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.
Since the beginning of 2019, TA has entered into franchise
agreements for six standalone restaurants to be operated under the
Quaker Steak & Lube brand name; three of these franchised
restaurants began operations during 2019, one began operations in
the 2020 second quarter to date and TA anticipates the remaining
two will be added to its network by the end of 2020.
TA entered an agreement to purchase a parcel of land for $1.4
million, which TA expects to complete by the end of 2020. TA
expects that either they or one of its franchisees will develop a
TA Express branded travel center on this site.
COVID-19
During the 2020 first quarter, COVID-19 was declared a pandemic
by the World Health Organization and the U.S. Health and Human
Services Secretary declared a public health emergency in the United
States in response to the outbreak. TA's business has been
designated an “essential service” by many public authorities, which
has allowed TA to continue operating. TA experienced increased
diesel fuel sales volume during the 2020 first quarter as compared
to the 2019 first quarter due to an initial increase in demand for
certain products as businesses and households stocked up on those
products as the implications of the COVID-19 pandemic began to be
widely understood. In addition, TA experienced an increase in fuel
gross margin in March 2020 as both diesel fuel and gasoline costs
declined as a result of a more favorable fuel purchasing
environment due to a reduction in demand. However, due to the
governmental stay in place orders, social distancing and other
reductions in activity, demand for gasoline volume during the
second half of March 2020 declined sharply, resulting in reduced
gasoline sales volume sold by TA during the 2020 first quarter as
compared to the 2019 first quarter and demand for certain of TA's
nonfuel products and services, such as its restaurants, has
declined. As a result, TA has temporarily closed most of its full
service restaurants and limited its product offerings at some of
its restaurants and travel centers. Further, on April 17, 2020, in
an attempt to address the operating and financial impact of the
COVID-19 pandemic, TA furloughed approximately 2,900 field
employees, as well as approximately 122 corporate employees.
Reorganization Plan
On April 30, 2020, TA committed to and initiated the
Reorganization Plan to improve the efficiency of its operations. As
part of the Reorganization Plan, TA reduced its headcount and
eliminated certain positions. On April 30, 2020, the Reorganization
Plan was communicated to those employees impacted. The costs of the
Reorganization Plan are expected to be approximately $4.2 million,
which will be recognized as selling, general and administrative
expense. These costs are comprised primarily of severance,
outplacement services, stock based compensation expense associated
with the accelerated vesting of previously granted stock awards for
certain employees and fees for recruitment of certain executive
positions. During the 2020 first quarter, TA recognized executive
recruitment fees of $0.4 million and TA expects to recognize the
remainder of these costs during the 2020 second quarter.
Conference Call
On May 5, 2020, 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 March 31, 2020. 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
10141380.
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 first 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 three 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
March 31,
2020
2019
Revenues:
Fuel
$
874,929
$
983,141
Nonfuel
425,007
440,874
Rent and royalties from franchisees
3,412
3,277
Total revenues
1,303,348
1,427,292
Cost of goods sold (excluding
depreciation):
Fuel
792,974
908,394
Nonfuel
161,719
168,268
Total cost of goods sold
954,693
1,076,662
Site level operating expense
236,564
232,720
Selling, general and administrative
expense
37,228
37,110
Real estate rent expense
63,588
66,413
Depreciation and amortization expense
28,560
24,759
Loss from operations
(17,285
)
(10,372
)
Interest expense, net
7,456
7,050
Other expense, net
541
574
Loss before income taxes
(25,282
)
(17,996
)
Benefit for income taxes
6,741
5,267
Net loss
(18,541
)
(12,729
)
Less: net income for noncontrolling
interest
20
18
Net loss attributable to common
stockholders
$
(18,561
)
$
(12,747
)
Net loss per share of common stock
attributable to common stockholders(1):
Basic and diluted
$
(2.23
)
$
(1.58
)
(1)
Net loss per share of common
stock attributable to common stockholders for the three months
ended March 31, 2019, 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 March 31, 2020, to be filed with the U.S. Securities and
Exchange Commission.
TRAVELCENTERS OF AMERICA INC. RECONCILIATION OF
NON-GAAP FINANCIAL MEASURES (in thousands, except per share
amounts)
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 net loss, adjusted net loss per share
of common stock 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 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 loss before interest,
taxes and depreciation and amortization expense, 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.
TA excluded the federal biodiesel blenders' tax credit when
calculating adjusted net loss, adjusted net loss per share of
common stock attributable to common stockholders, adjusted EBITDA,
adjusted fuel gross margin and adjusted fuel gross margin per
gallon. In December 2019, the U.S. government retroactively
reinstated the federal biodiesel blenders' tax credit for 2018 and
2019, as well as approved the federal biodiesel blenders' tax
credit through 2022. As a result, the three months ended March 31,
2019, does not include the benefit of the federal biodiesel
blenders' tax credit and excluding the benefit for the three months
ended March 31, 2020, allows investors to better compare TA's
performance between periods.
The non-GAAP financial measures TA presents should not be
considered as alternatives to net loss attributable to common
stockholders, net loss, loss from operations or net loss per share
of common stock 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 net loss is the most directly comparable GAAP
financial measure to adjusted net loss, EBITDA and adjusted EBITDA;
net loss per share of common stock attributable to common
stockholders is the most directly comparable GAAP financial measure
to adjusted net loss per share of common stock attributable to
common stockholders; 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 months ended March 31, 2020 and 2019.
Calculation of adjusted net
loss:
Three Months Ended
March 31,
2020
2019
Net loss
$
(18,541
)
$
(12,729
)
Add: Asset write offs(1)
5,162
—
Add: Executive compensation expense(2)
1,710
—
Add: Field employee bonus expense(3)
1,388
—
Less: Federal biodiesel blenders' tax
credit(4)
(3,515
)
—
Add: Costs of SVC transactions(5)
—
458
Less: Loyalty award expiration(6)
—
(2,911
)
(Less) add: Net income tax impact(7)
(1,196
)
618
Adjusted net loss
$
(14,992
)
$
(14,564
)
TRAVELCENTERS OF AMERICA INC.
RECONCILIATION OF NON-GAAP
FINANCIAL MEASURES
(in thousands, except per share
amounts)
Calculation of adjusted net loss per
share of common stock attributable to common stockholders (basic
and diluted):
Three Months Ended
March 31,
2020
2019
Net loss per share of common stock
attributable to common stockholders (basic and diluted)
$
(2.23
)
$
(1.58
)
Add: Asset write offs(1)
0.62
—
Add: Executive compensation expense(2)
0.20
—
Add: Field employee bonus expense(3)
0.17
—
Less: Federal biodiesel blenders' tax
credit(4)
(0.42
)
—
Add: Costs of SVC transactions(5)
—
0.06
Less: Loyalty award expiration(6)
—
(0.36
)
(Less) add: Net income tax impact(7)
(0.15
)
0.07
Adjusted net loss per share of common
stock attributable to common stockholders (basic and diluted)
$
(1.81
)
$
(1.81
)
Calculation of EBITDA and adjusted
EBITDA:
Three Months Ended
March 31,
2020
2019
Net loss
$
(18,541
)
$
(12,729
)
Less: Benefit for income taxes
(6,741
)
(5,267
)
Add: Depreciation and amortization
expense
28,560
24,759
Add: Interest expense, net
7,456
7,050
EBITDA
10,734
13,813
Add: Executive compensation expense(2)
1,710
—
Add: Field employee bonus expense(3)
1,388
—
Less: Federal biodiesel blenders' tax
credit(4)
(3,515
)
—
Add: Costs of SVC transactions(5)
—
458
Less: Loyalty award expiration(6)
—
(2,911
)
Adjusted EBITDA
$
10,317
$
11,360
Calculation of adjusted fuel gross
margin and adjusted fuel gross margin per gallon:
Three Months Ended
March 31,
2020
2019
Fuel gross margin
$
81,955
$
74,747
Less: Federal biodiesel blenders' tax
credit(4)
(3,515
)
—
Less: Loyalty award expiration(6)
—
(2,840
)
Adjusted fuel gross margin
$
78,440
$
71,907
Fuel gross margin per gallon
$
0.168
$
0.158
Less: Federal biodiesel blenders' tax
credit(4)
(0.007
)
—
Less: Loyalty award expiration(6)
—
(0.006
)
Adjusted fuel gross margin per gallon
$
0.161
$
0.152
TRAVELCENTERS OF AMERICA INC.
RECONCILIATION OF NON-GAAP
FINANCIAL MEASURES
(in thousands, except per share
amounts)
(1)
Asset Write Offs. During the
three months ended March 31, 2020, TA wrote off certain assets,
which totaled $5.2 million, related to programs which TA determined
to cancel, which was included in depreciation and amortization
expense in TA's consolidated statements of operations and
comprehensive loss.
(2)
Executive Compensation Expense.
During the three months ended March 31, 2020, TA agreed to
accelerate the vesting of previously granted stock awards and make
cash payments as part of TA's retirement and separation agreements
with certain former officers, and incurred executive recruitment
fees. The accelerations, cash payments and executive recruitment
fees resulted in additional compensation expense of $1.7 million
for the three months ended March 31, 2020, which was included in
selling, general and administrative expense in TA's consolidated
statements of operations and comprehensive loss.
(3)
Field Employee Bonus Expense. In
March 2020, TA paid cash bonuses to certain employees who continued
to work at its locations during the COVID-19 pandemic. These
bonuses resulted in additional compensation expense of $1.4 million
for the three months ended March 31, 2020, which was included in
site level operating expense in TA's consolidated statements of
operations and comprehensive loss.
(4)
Federal Biodiesel Blenders' Tax
Credit. In December 2019, the U.S. government retroactively
reinstated the federal biodiesel blenders' tax credit for 2018 and
2019, as well as approved the federal biodiesel blenders' tax
credit through 2022. As a result, TA recognized $3.5 million for
the three months ended March 31, 2020, which was recognized as a
reduction to fuel cost of goods sold in TA's consolidated
statements of operations and comprehensive loss.
(5)
Costs of SVC Transactions. In
January 2019, TA entered transaction agreements with SVC pursuant
to which they amended their leases. During the three months ended
March 31, 2019, TA incurred $0.5 million of expenses associated
with the amendments of these leases. These expenses were included
in selling, general and administrative expense in TA's consolidated
statements of operations and comprehensive loss.
(6)
Loyalty Award Expiration. During
the three months ended March 31, 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 three months ended March
31, 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 loss.
(7)
Net Income Tax Impact. TA
calculated the income tax impact of the adjustments described above
by using its estimated statutory rate of 25.2% for the three months
ended March 31, 2020 and 2019.
TRAVELCENTERS OF AMERICA INC.
CONDENSED CONSOLIDATED BALANCE
SHEETS (UNAUDITED)
(in thousands)
March 31, 2020
December 31,
2019
Assets:
Current assets:
Cash and cash equivalents
$
20,318
$
17,206
Accounts receivable, net
175,454
173,496
Inventory
169,151
196,611
Other current assets
29,791
32,456
Total current assets
394,714
419,769
Property and equipment, net
856,138
868,503
Operating lease assets
1,801,437
1,817,998
Goodwill
25,259
25,259
Intangible assets, net
20,421
20,707
Other noncurrent assets
84,693
78,659
Total assets
$
3,182,662
$
3,230,895
Liabilities and Stockholders'
Equity:
Current liabilities:
Accounts payable
$
126,524
$
147,440
Current operating lease liabilities
106,654
104,070
Other current liabilities
141,411
138,455
Total current liabilities
374,589
389,965
Long term debt, net
337,840
329,321
Noncurrent operating lease liabilities
1,854,644
1,880,188
Other noncurrent liabilities
60,557
58,885
Total liabilities
2,627,630
2,658,359
Stockholders' equity (8,319 and 8,307
shares of common stock outstanding as of March 31, 2020 and
December 31, 2019, respectively)
555,032
572,536
Total liabilities and stockholders'
equity
$
3,182,662
$
3,230,895
These financial statements should be read in
conjunction with TA's Quarterly Report on Form 10-Q for the quarter
ended March 31, 2020, to be filed with the U.S. Securities and
Exchange Commission.
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 increased fuel sales volume and fuel gross
margin may imply that TA's business may be profitable in the
future. 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 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 increased fuel sales volume in March 2020 as a
result of the COVID-19 pandemic. These statements may imply that TA
will continue to recognize increases in fuel sales volume and fuel
gross margin. However, as the initial demand for business and
household products that arose in response to the COVID-19 pandemic
and government protective measures abates, TA expects the demand
for diesel fuel will decline as a result of fewer goods being
transported across the United States and the resulting declines in
truck driving mileage if the current economic conditions continue
or worsen. In addition, due to the governmental stay in place
orders and other reductions in activity, demand for gasoline has
declined and is expected to remain at depressed levels for the
duration of the current economic downturn;
- Statements that TA has been designated an “essential service”
by many public authorities, which has allowed it to continue
operating during the COVID-19 pandemic. This may imply that TA will
continue to be designated an essential service; however, TA could
lose that designation, which could result in TA having to close or
reduce operations at certain or all of its travel centers for an
indefinite period;
- Statements about the expectation that TA will recognize annual
cost savings of approximately $13.1 million and incur costs of
approximately $4.2 million as a result of the Reorganization Plan.
However, TA may not realize or maintain the cost savings it expects
and the costs TA incurs to implement and execute the Reorganization
Plan may be greater than TA expects;
- Statements about the franchise agreements TA entered into with
franchisees pursuant to which TA expects to add TA branded travel
centers and QSL branded 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 an agreement TA has entered into to purchase a
parcel of land and TA's expectation that TA or one of its
franchisees plans to develop a TA Express branded travel center on
that parcel of land. However, this acquisition is subject to
conditions; as a result, this acquisition may not occur, may be
delayed or its terms may change. In addition, if this acquisition
is completed, TA and its franchisees may elect to not develop a TA
Express branded travel center on this land. 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
- Statements about TA entering 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 its 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,
or at all. In addition, TA may not realize the return on investment
it currently is anticipating and TA 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,
2019, which has been filed with the U.S. Securities and Exchange
Commission, or SEC, and TA's Quarterly Report on Form 10-Q for the
period ended March 31, 2020, which has 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/20200505005277/en/
Kristin Brown, Director of Investor Relations (617) 796-8251
www.ta-petro.com
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