Fuel Gross Margin Increased 19.6% and
Adjusted Fuel Gross Margin Increased 9.6% for the 2020 Second
Quarter
Net Income Increased 78.3%, Adjusted EBITDA
Increased 22.1% and Adjusted EBITDAR Increased 6.5% for the
2020 Second Quarter
Net Income Per Share of Common Stock
Attributable to Common Stockholders of $0.26 and Adjusted Net
Income Per Share of Common Stock Attributable to Common
Stockholders of $0.59 for the 2020 Second Quarter
TravelCenters of America Inc. (Nasdaq: TA) today announced
financial results for the three and six months ended June 30,
2020.
Jonathan M. Pertchik, TA's CEO, made the following statement
regarding the 2020 second quarter results:
"Despite the challenges presented by a global pandemic and a
corresponding shutdown of major portions of the U.S. economy for a
large part of the 2020 second quarter, our newly constituted senior
leadership team, together with our broader organization, generated
increases of 78.3% in net income, 22.1% in adjusted EBITDA and 6.5%
in adjusted EBITDAR over the prior year second quarter. Although
nonfuel revenues decreased 14.8% during the second quarter,
adjusted EBITDAR margin increased to 20.7% as compared to 17.2%
last year. The improved year-over-year performance was a
consequence of improved discipline in managing expenses, prompt
furloughing of employees in response to reduced business as a
result of COVID-19 and business management improvements. In
addition, fuel gross margin increased by 19.6% and adjusted fuel
gross margin increased by 9.6% versus prior year, driven by a
favorable fuel purchasing environment, changes to our approach to
pricing and the federal biodiesel blenders' tax credit.
"On a strategic front, in early July, we raised approximately
$80.1 million of net proceeds in an equity offering intended
primarily to fund deferred maintenance and other capital
expenditures necessary to update property conditions and implement
growth initiatives, as well as for working capital and for general
corporate purposes. With this capital raise complete, our
management team in place and our plan to transform the business in
hand, we can focus our collective energy on executing through
operational initiatives to improve TA’s performance and create long
term value for our stockholders."
The following table summarizes TA's financial results for the
2020 and 2019 second quarters.
(in thousands, except per share
amounts)
Three Months Ended June
30,
2020
2019
Net income
$
2,156
$
1,209
Net income attributable to common
stockholders
2,124
1,178
Net income per share of common stock
attributable to common stockholders (basic and diluted)
$
0.26
$
0.15
The following table summarizes TA's non-GAAP financial measures
for the 2020 and 2019 second quarters.
(in thousands, except per share
amounts)
Three Months Ended June
30,
2020
2019
Non-GAAP measures:(1)
Adjusted net income
$
4,977
$
1,209
Adjusted net income per share of common
stock attributable to common stockholders (basic and diluted)
$
0.59
$
0.15
EBITDA
$
38,730
$
31,184
Adjusted EBITDA
38,083
31,184
Adjusted EBITDAR
101,162
94,954
Adjusted fuel gross margin and nonfuel
revenues
489,755
552,904
Adjusted EBITDAR margin
20.7
%
17.2
%
(1)
Reconciliations from net income, net
income per share of common stock attributable to common
stockholders, fuel gross margin and nonfuel revenues, 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.
Financial Results Commentary
All of TA's company operated locations are same site locations
with the exception of one standalone restaurant. As a result, same
site operating results are not presented as they would 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
second quarters.
(in thousands, except per gallon
amounts)
Three Months Ended June
30,
2020
2019
Change
Fuel sales volume (gallons):
Diesel fuel
423,082
426,543
(0.8
)%
Gasoline
53,134
75,803
(29.9
)%
Total fuel sales volume
476,216
502,346
(5.2
)%
Fuel revenues
$
577,410
$
1,117,671
(48.3
)%
Fuel gross margin
91,900
76,822
19.6
%
Adjusted fuel gross margin(1)
84,185
76,822
9.6
%
Fuel gross margin per gallon
$
0.193
$
0.153
26.1
%
Adjusted fuel gross margin per
gallon(1)
0.177
0.153
15.7
%
(1)
Reconciliations from fuel gross margin and
fuel gross margin per gallon, as applicable, the financial measures
determined in accordance with U.S. GAAP to the non-GAAP measures
disclosed herein are included in the supplemental tables below.
Fuel sales volume for the 2020 second quarter decreased by 26.1
million gallons, or 5.2%, as compared to the 2019 second quarter
due to a decrease in trucking activity and consumer travel as a
result of the COVID-19 pandemic, primarily during April and May of
2020.
Fuel revenues for the 2020 second quarter decreased by $540.3
million, or 48.3%, as compared to the 2019 second quarter. The
decrease in fuel revenues was primarily due to a decrease in market
prices for fuel and a decrease in fuel sales volume.
Fuel gross margin for the 2020 second quarter increased by $15.1
million, or 19.6%, as compared to the 2019 second quarter primarily
as a result of a more favorable fuel purchasing environment and the
$7.7 million benefit recognized in connection with the federal
biodiesel blenders' tax credit in the 2020 second quarter partially
offset by a decrease in fuel sales volume, primarily during April
and May of 2020.
In December 2019, the U.S. government retroactively reinstated
the federal biodiesel blenders' tax credit for 2018 and 2019, and
approved the federal biodiesel blenders' tax credit through 2022.
During the 2020 second quarter, TA recognized $7.7 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.
Adjusted fuel gross margin for the 2020 second quarter increased
by $7.4 million, or 9.6%, as compared to the 2019 second quarter
primarily due to a more favorable fuel purchasing environment.
Nonfuel Revenues and Nonfuel Gross Margin. The following
table presents details for TA's nonfuel revenues for the 2020 and
2019 second quarters.
(in thousands)
Three Months Ended June
30,
2020
2019
Change
Nonfuel revenues:
Truck service
$
160,987
$
173,431
(7.2
)%
Store and retail services
158,240
170,056
(6.9
)%
Restaurant
61,492
108,756
(43.5
)%
Diesel exhaust fluid
24,851
23,839
4.2
%
Total nonfuel revenues
405,570
476,082
(14.8
)%
Nonfuel gross margin
$
242,619
$
288,584
(15.9
)%
Nonfuel gross margin percentage
59.8
%
60.6
%
(80
)pts
Nonfuel revenues for the 2020 second quarter decreased by $70.5
million, or 14.8%, as compared to the 2019 second quarter primarily
as a result of a decrease in revenues at both TA's standalone
restaurants and the restaurants in TA's travel centers due to the
temporary closure or limitation of services at those locations, as
well as a decrease in TA's truck service and store and retail
services businesses in April and May 2020 due to a decrease in
trucking activity and consumer travel, all of which were primarily
the result of the COVID-19 pandemic. As governments began to lift
stay in place orders, TA started to reopen its full service
restaurants and in June 2020, TA recognized increases in its truck
service and store and retail services revenues as compared to June
2019.
Nonfuel gross margin for the 2020 second quarter decreased by
$46.0 million, or 15.9%, as compared to the 2019 second quarter
primarily due to a decrease in nonfuel revenues as a result of the
COVID-19 pandemic. Nonfuel gross margin percentage for the 2020
second quarter declined to 59.8% from 60.6% for the 2019 second
quarter primarily due to a change in the mix of products and
services sold and certain pricing and marketing initiatives.
Rent and Royalties from Franchisees. Rent and royalties
from franchisees for the 2020 second quarter decreased by $0.5
million, or 13.5%, as compared to the 2019 second quarter primarily
as a result of the closure of four franchised standalone
restaurants, TA's purchase of one standalone restaurant from a
former franchisee since the 2019 second quarter and the temporary
closures of certain franchised standalone restaurants as a result
of the COVID-19 pandemic, partially offset by the 10 franchised
travel centers and five franchised standalone restaurants that
began operations after the 2019 second quarter.
Site Level Operating Expense. Site level operating
expense for the 2020 second quarter decreased by $37.1 million, or
15.8%, as compared to the 2019 second quarter primarily due to the
furloughing of approximately 4,300 field employees in response to
the COVID-19 pandemic and a decrease in nonlabor costs such as
maintenance, certain utilities and supplies. These decreases were
partially offset by increased labor costs as a result of an
increase in technician count in TA's truck service department to
support an anticipated increase in sales and cash bonuses TA paid
to certain employees who continued to work at its locations during
the COVID-19 pandemic. Site level operating expense as a percentage
of nonfuel revenues improved to 48.7% for the 2020 second quarter
from 49.3% for the 2019 second quarter primarily due to a decrease
in nonlabor costs such as maintenance, certain utilities and
supplies.
Selling, General and Administrative Expense. Selling,
general and administrative expense for the 2020 second quarter
decreased by $1.6 million, or 4.0%, as compared to the 2019 second
quarter. The decrease was primarily attributable to the elimination
of approximately 130 positions as part of the Reorganization Plan,
as defined below, during the 2020 second quarter, the furloughing
of approximately 120 corporate employees in response to the
COVID-19 pandemic and a reduction in travel related expenses and
marketing expenses. These decreases were largely offset by $3.9
million of non-recurring costs associated with the Reorganization
Plan.
Real Estate Rent Expense. Real estate rent expense for
the 2020 second quarter decreased by $0.7 million, or 1.1%, as
compared to the 2019 second quarter. The decrease was primarily the
result of a decrease in percentage rent due to Service Properties
Trust, or SVC, as a result of the decrease in TA's nonfuel revenues
during the 2020 second quarter.
Depreciation and Amortization Expense. Depreciation and
amortization expense for the 2020 second quarter increased by $5.0
million, or 21.7%, as compared to the 2019 second quarter. The
increase was primarily the result of a $3.0 million goodwill
impairment charge recognized with respect to TA's Quaker Steak
& Lube, or QSL, business, the $0.8 million write off of
intangible assets associated with three franchised standalone
restaurants that closed during the 2020 second quarter and the $0.5
million write off of certain assets related to programs that were
canceled.
Net Income. Net income for the 2020 second quarter
increased by $0.9 million, or 78.3%, as compared to the 2019 second
quarter. The increase in net income primarily resulted from the
increase in site level gross margin in excess of site level
operating expense and the decrease in selling, general and
administrative expense and real estate rent expense, partially
offset by an increase in depreciation and amortization expense.
EBITDA and Adjusted EBITDA. EBITDA for the 2020 second
quarter increased by $7.5 million, or 24.2%, as compared to the
2019 second quarter and adjusted EBITDA for the 2020 second quarter
increased by $6.9 million, or 22.1%, as compared to the 2019 second
quarter. These increases primarily resulted from the increase in
fuel gross margin and the decreases in site level operating expense
and selling, general and administrative expense.
Adjusted EBITDAR and Adjusted EBITDAR Margin. Adjusted
EBITDAR for the 2020 second quarter increased by $6.2 million, or
6.5%, as compared to the 2019 second quarter and adjusted EBITDAR
margin for the 2020 second quarter increased to 20.7% from 17.2%
for the 2019 second quarter. These increases primarily resulted
from the increase in fuel gross margin and the decrease in selling,
general and administrative expense.
Growth Strategies
On April 30, 2020, TA committed to and initiated a
reorganization plan, or the Reorganization Plan, to improve the
efficiency of its operations. As part of the Reorganization Plan,
TA reduced its headcount and eliminated certain positions, which TA
expects to result in approximately $13.1 million of net annual
savings in selling, general and administrative expense. In
addition, TA has made certain changes in its leadership and their
roles and created both a corporate development and a procurement
team. On April 30, 2020, the Reorganization Plan was communicated
to those employees impacted. The costs of the Reorganization Plan
were $4.3 million, which 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 second quarter, TA recognized $3.9
million of costs associated with the Reorganization Plan as
selling, general and administrative expense in its consolidated
statements of operations and comprehensive income (loss).
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 21 travel centers to be operated under one of TA's
travel center brand names; four of these franchised travel centers
began operations during 2019, two began operations in the 2020
first quarter, five began operations in the 2020 second quarter,
two began operations in the 2020 third quarter to date and TA
anticipates the remaining eight franchised travel centers will be
added to its network by the end of 2021. 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.
COVID-19
In March 2020, 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 benefited from being
recognized as a business that provides services to essential
businesses by various governmental authorities, which has allowed
TA to continue operating. The initial increased demand by
businesses and households to stock up on certain products in
response to the COVID-19 pandemic, which resulted in increased
trucking activity to transport those goods across the United
States, began to decline in April 2020 and as a result, TA
experienced a decrease in diesel fuel sales volume during the 2020
second quarter as compared to the 2019 second quarter. During the
2020 second quarter as compared to the 2019 second quarter, TA
experienced an increase in fuel gross margin, as both diesel fuel
and gasoline costs declined as a result of a more favorable fuel
purchasing environment due to a reduction in demand and the benefit
recognized in connection with the federal biodiesel blenders' tax
credit. However, due to governmental stay in place orders, social
distancing and other reductions in activity, demand for gasoline
volume during 2020 second quarter declined sharply, resulting in
reduced gasoline sales volume sold by TA during the 2020 second
quarter as compared to the 2019 second quarter, and demand for
certain of its nonfuel products and services has declined. As a
result, TA temporarily closed most of its full service restaurants
and limited product offerings at some of its restaurants and travel
centers. As a result, TA experienced a decrease in nonfuel revenues
for the 2020 second quarter as compared to the 2019 second quarter.
As governments began to lift stay in place orders, TA recognized
increases in its truck service and store and retail services
revenues in June 2020 as compared to June 2019. Although TA began
reopening some of its restaurants beginning in May 2020 as certain
states began allowing restaurants to reopen, the recent increase in
COVID-19 infections in several states has resulted in closing or
re-closing certain of TA's restaurants.
Underwritten Public Equity Offering
On July 6, 2020, TA received net proceeds of $80.1 million,
after $0.2 million of offering costs and $5.1 million of
underwriting discounts and commissions, from the sale and issuance
of 6.1 million shares of common stock in an underwritten public
equity offering. TA intends to use the net proceeds from this
offering to fund deferred maintenance and other capital
expenditures necessary to enhance property conditions and implement
growth initiatives, for working capital and for general corporate
purposes.
Conference Call
On August 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 June 30, 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
10145359.
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 second 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 June
30,
Six Months Ended June
30,
2020
2019
2020
2019
Revenues:
Fuel
$
577,410
$
1,117,671
$
1,452,339
$
2,100,812
Nonfuel
405,570
476,082
830,577
916,956
Rent and royalties from franchisees
3,123
3,611
6,535
6,888
Total revenues
986,103
1,597,364
2,289,451
3,024,656
Cost of goods sold (excluding
depreciation):
Fuel
485,510
1,040,849
1,278,484
1,949,243
Nonfuel
162,951
187,498
324,670
355,766
Total cost of goods sold
648,461
1,228,347
1,603,154
2,305,009
Site level operating expense
197,522
234,645
434,086
467,365
Selling, general and administrative
expense
37,976
39,562
75,204
76,672
Real estate rent expense
63,079
63,770
126,667
130,183
Depreciation and amortization expense
28,254
23,213
56,814
47,972
Income (loss) from operations
10,811
7,827
(6,474
)
(2,545
)
Interest expense, net
7,233
7,164
14,689
14,214
Other expense (income), net
335
(144
)
876
430
Income (loss) before income
taxes
3,243
807
(22,039
)
(17,189
)
(Provision) benefit for income taxes
(1,087
)
402
5,654
5,669
Net income (loss)
2,156
1,209
(16,385
)
(11,520
)
Less: net income for noncontrolling
interest
32
31
52
49
Net income (loss) attributable
to
common stockholders
$
2,124
$
1,178
$
(16,437
)
$
(11,569
)
Net income (loss) per share of common
stock attributable to common stockholders:
Basic and diluted
$
0.26
$
0.15
$
(1.98
)
$
(1.43
)
These financial statements should be read in
conjunction with TA's Quarterly Report on Form 10-Q for the quarter
ended June 30, 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. Management
uses these measures in developing internal budgets and forecasts
and analyzing TA's performance and believes that 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.
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
operations or net income (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 adjusted net income (loss), adjusted net income
(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. TA calculates EBITDA as net income (loss) before
interest, income 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.
In addition, TA believes that, because it leases a majority of
its travel centers, presenting adjusted EBITDAR and adjusted
EBITDAR margin may help investors compare the value of TA against
companies that own and finance ownership of their properties with
debt financing, since these measures eliminate the effects of
variability in leasing methods and capital structures. These
measures may also help investors evaluate TA's valuation if it
owned its leased properties and financed that ownership with debt,
in which case the interest expense TA incurred for that debt
financing would be added back when calculating EBITDA. Adjusted
EBITDAR and adjusted EBITDAR margin are presented solely as
valuation measures and should not be viewed as measures of overall
operating performance or considered in isolation or as an
alternative to net income (loss) because they exclude the rent
expense associated with operating leases and they are presented for
the limited purposes referenced herein. TA calculates EBITDAR as
net income (loss) before interest, income taxes, real estate rent
expense and depreciation and amortization expense and adjusted
EBITDAR by excluding items that it considers not to be normal,
recurring, cash operating expenses or gains or losses. TA
calculates adjusted EBITDAR margin as adjusted EBITDAR as a
percentage of adjusted fuel gross margin and nonfuel revenues.
TA excluded the federal biodiesel blenders' tax credit when
calculating adjusted net income (loss), adjusted net income (loss)
per share of common stock attributable to common stockholders,
adjusted EBITDA, adjusted EBITDAR, adjusted EBITDAR margin,
adjusted fuel gross margin and nonfuel revenues, 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 and six months ended June 30, 2019, do not
include the benefit of the federal biodiesel blenders' tax credit
and excluding the benefit for the three and six months ended June
30, 2020, allows investors to better compare TA's performance
between periods.
TA believes that net income (loss) is the most directly
comparable GAAP financial measure to adjusted net income (loss),
EBITDA, adjusted EBITDA and adjusted EBITDAR; net income (loss) per
share of common stock attributable to common stockholders is the
most directly comparable GAAP financial measure to adjusted net
income (loss) per share of common stock attributable to common
stockholders; fuel gross margin and nonfuel revenues are the most
directly comparable GAAP financial measure to adjusted fuel gross
margin and nonfuel revenues; 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.
TRAVELCENTERS OF AMERICA INC. RECONCILIATION OF
NON-GAAP FINANCIAL MEASURES (in thousands, except per share
amounts)
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 six months ended June 30, 2020
and 2019.
Calculation of adjusted net income
(loss):
Three Months Ended June
30,
Six Months Ended June
30,
2020
2019
2020
2019
Net income (loss)
$
2,156
$
1,209
$
(16,385
)
$
(11,520
)
Add: Reorganization Plan costs(1)
3,884
—
4,288
—
Add: Goodwill impairment(2)
3,046
—
3,046
—
Add: Field employee bonus expense(3)
2,381
—
3,769
—
Add: Asset write offs(4)
1,372
—
6,534
—
Add: Executive compensation expense(5)
803
—
2,109
—
Less: Federal biodiesel blenders' tax
credit(6)
(7,715
)
—
(11,230
)
—
Add: Costs of SVC transactions(7)
—
—
—
458
Less: Loyalty award expiration(8)
—
—
—
(2,911
)
(Less) add: Net income tax impact(9)
(950
)
—
(2,146
)
618
Adjusted net income (loss)
$
4,977
$
1,209
$
(10,015
)
$
(13,355
)
Calculation of adjusted net income
(loss) per share of common stock attributable to common
stockholders (basic and diluted):
Three Months Ended June
30,
Six Months Ended June
30,
2020
2019
2020
2019
Net income (loss) per share of common
stock attributable to common stockholders (basic and diluted)
$
0.26
$
0.15
$
(1.98
)
$
(1.43
)
Add: Reorganization Plan costs(1)
0.47
—
0.52
—
Add: Goodwill impairment(2)
0.36
—
0.37
—
Add: Field employee bonus expense(3)
0.29
—
0.45
—
Add: Asset write offs(4)
0.16
—
0.79
—
Add: Executive compensation expense(5)
0.10
—
0.25
—
Less: Federal biodiesel blenders' tax
credit(6)
(0.93
)
—
(1.35
)
—
Add: Costs of SVC transactions(7)
—
—
—
0.06
Less: Loyalty award expiration(8)
—
—
—
(0.36
)
(Less) add: Net income tax impact(9)
(0.12
)
—
(0.26
)
0.07
Adjusted net income (loss) per share of
common stock attributable to common stockholders (basic and
diluted)
$
0.59
$
0.15
$
(1.21
)
$
(1.66
)
Calculation of EBITDA, adjusted EBITDA
and adjusted EBITDAR:
Three Months Ended June
30,
Six Months Ended June
30,
2020
2019
2020
2019
Net income (loss)
$
2,156
$
1,209
$
(16,385
)
$
(11,520
)
Add (less): Provision (benefit) for income
taxes
1,087
(402
)
(5,654
)
(5,669
)
Add: Depreciation and amortization
expense
28,254
23,213
56,814
47,972
Add: Interest expense, net
7,233
7,164
14,689
14,214
EBITDA
38,730
31,184
49,464
44,997
Add: Reorganization Plan costs(1)
3,884
—
4,288
—
Add: Field employee bonus expense(3)
2,381
—
3,769
—
Add: Executive compensation expense(5)
803
—
2,109
—
Less: Federal biodiesel blenders' tax
credit(6)
(7,715
)
—
(11,230
)
—
Add: Costs of SVC transactions(7)
—
—
—
458
Less: Loyalty award expiration(8)
—
—
—
(2,911
)
Adjusted EBITDA
38,083
31,184
48,400
42,544
Add: Real estate rent expense
63,079
63,770
126,667
130,183
Adjusted EBITDAR
$
101,162
$
94,954
$
175,067
$
172,727
Calculation of adjusted fuel gross
margin and nonfuel revenues and adjusted EBITDAR margin:
Three Months Ended June
30,
Six Months Ended June
30,
2020
2019
2020
2019
Fuel gross margin
$
91,900
$
76,822
$
173,855
$
151,569
Nonfuel revenues
405,570
476,082
830,577
916,956
Total fuel gross margin and nonfuel
revenues
497,470
552,904
1,004,432
1,068,525
Less: Federal biodiesel blenders' tax
credit(6)
(7,715
)
—
(11,230
)
—
Less: Loyalty award expiration(8)
—
—
—
(2,911
)
Adjusted fuel gross margin and nonfuel
revenues
$
489,755
$
552,904
$
993,202
$
1,065,614
Adjusted EBITDAR margin
20.7
%
17.2
%
17.6
%
16.2
%
Calculation of adjusted fuel gross
margin and adjusted fuel gross margin per gallon:
Three Months Ended June
30,
Six Months Ended June
30,
2020
2019
2020
2019
Fuel gross margin
$
91,900
$
76,822
$
173,855
$
151,569
Less: Federal biodiesel blenders' tax
credit(6)
(7,715
)
—
(11,230
)
—
Less: Loyalty award expiration(8)
—
—
—
(2,840
)
Adjusted fuel gross margin
$
84,185
$
76,822
$
162,625
$
148,729
Fuel gross margin per gallon
$
0.193
$
0.153
$
0.180
$
0.156
Less: Federal biodiesel blenders' tax
credit(6)
(0.016
)
—
(0.011
)
—
Less: Loyalty award expiration(8)
—
—
—
(0.003
)
Adjusted fuel gross margin per gallon
$
0.177
$
0.153
$
0.169
$
0.153
TRAVELCENTERS OF AMERICA INC.
RECONCILIATION OF NON-GAAP
FINANCIAL MEASURES
(in thousands, except per share
amounts)
(1)
Reorganization Plan Costs. On
April 30, 2020, TA commenced a company-wide Reorganization Plan.
During the three and six months ended June 30, 2020, TA recognized
$3.9 million and $4.3 million, respectively, of costs related to
the Reorganization Plan, which were included in selling, general
and administrative expense in TA's consolidated statements of
operations and comprehensive income (loss).
(2)
Goodwill Impairment. During the
three and six months ended June 30, 2020, TA recognized a goodwill
impairment charge of $3.0 million with respect to its QSL reporting
unit, which was recognized in depreciation and amortization expense
in TA's consolidated statements of operations and comprehensive
income (loss).
(3)
Field Employee Bonus Expense. In
March and April 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 $2.4
million and $3.8 million for the three and six months ended June
30, 2020, respectively, which were included in site level operating
expense in TA's consolidated statements of operations and
comprehensive income (loss).
(4)
Asset Write Offs. During the
three and six months ended June 30, 2020, TA wrote off $0.8 million
of intangibles relating to three QSL franchises that closed in
April 2020. During the three and six months ended June 30, 2020, TA
wrote off $0.5 million and $5.7 million, respectively, related to
programs that were canceled. These amounts were included in
depreciation and amortization expense in TA's consolidated
statements of operations and comprehensive income (loss).
(5)
Executive Compensation Expense.
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 executive officers. The
accelerations and cash payments resulted in additional compensation
expense of $0.8 million and $2.1 million for the three and six
months ended June 30, 2020, respectively, which were included in
selling, general and administrative expense in TA's consolidated
statements of operations and comprehensive income (loss).
(6)
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 $7.7 million and
$11.2 million for the three and six months ended June 30, 2020,
respectively, which were recognized as a reduction to fuel cost of
goods sold in TA's consolidated statements of operations and
comprehensive income (loss).
(7)
Costs of SVC Transactions. In
January 2019, TA and SVC amended their leases and completed certain
other related transactions. During the six months ended June 30,
2019, TA incurred $0.5 million of expenses associated with these
transactions. These expenses were included in selling, general and
administrative expense in TA's consolidated statements of
operations and comprehensive income (loss).
(8)
Loyalty Award Expiration. During
the six months ended June 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 six months ended June 30,
2019, $2.8 million of which was recognized as fuel revenues and
$0.1 million as nonfuel revenues in TA's consolidated statements of
operations and comprehensive income (loss).
(9)
Net Income Tax Impact. TA
calculated the income tax impact of the adjustments described above
by using its estimated statutory income tax rate of 25.2% for the
three and six months ended June 30, 2020 and 2019.
TRAVELCENTERS OF AMERICA INC.
CONDENSED CONSOLIDATED BALANCE
SHEETS (UNAUDITED)
(in thousands)
June 30, 2020
December 31,
2019
Assets:
Current assets:
Cash and cash equivalents
$
142,786
$
17,206
Accounts receivable, net
118,511
173,496
Inventory
162,710
196,611
Other current assets
26,915
32,456
Total current assets
450,922
419,769
Property and equipment, net
841,669
868,503
Operating lease assets
1,782,222
1,817,998
Goodwill
22,213
25,259
Intangible assets, net
19,321
20,707
Other noncurrent assets
84,210
78,659
Total assets
$
3,200,557
$
3,230,895
Liabilities and Stockholders'
Equity:
Current liabilities:
Accounts payable
$
146,566
$
147,440
Current operating lease liabilities
108,627
104,070
Other current liabilities
160,415
138,455
Total current liabilities
415,608
389,965
Long term debt, net
337,903
329,321
Noncurrent operating lease liabilities
1,827,113
1,880,188
Other noncurrent liabilities
61,648
58,885
Total liabilities
2,642,272
2,658,359
Stockholders' equity (8,298 and 8,307
shares of common stock outstanding as of June 30, 2020 and December
31, 2019, respectively)
558,285
572,536
Total liabilities and stockholders'
equity
$
3,200,557
$
3,230,895
These financial statements should be read in
conjunction with TA's Quarterly Report on Form 10-Q for the quarter
ended June 30, 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 gross margin, adjusted fuel
gross margin, net income, EBITDA, adjusted EBITDA, adjusted EBITDAR
and adjusted EBITDAR 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 that TA has been recognized as a business that
provides services to essential businesses 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 that TA recognized increases in its truck service
and store and retail services revenues in June 2020. This may imply
that TA will increase or maintain these improvements and that TA
will be profitable in the future. However, customer demand and
competitive conditions, among other factors, may significantly
impact TA's nonfuel sales. In addition, many parts of the United
States have experienced increased numbers of COVID-19 infections
since June 2020 and that development may result in adverse economic
consequences that may adversely affect TA, its customers and its
business. If nonfuel sales volume declines, if TA is not able to
pass increases in nonfuel costs to its customers or if its nonfuel
sales mix changes in a manner that negatively impacts its nonfuel
gross margin, TA's nonfuel revenues or its nonfuel gross margin may
decline;
- Statements about managing expenses, improved processes and
policies, new management and initiatives, and implementation of
transitional plans may imply that these changes and developments
will result in improvements to TA's business, operations and
financial results. However, these changes may not be successful or
sustainable. Further, even if they are successful and maintainable,
other factors and risks may result in TA not achieving the benefits
that it expects from these matters;
- Statements about costs TA has incurred to support its
anticipated 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 costs may exceed any increased revenue TA may
receive from this growth or the returns on these investments may be
less than expected;
- Statements about the expectation that TA will recognize annual
cost savings of approximately $13.1 million and incur costs of
approximately $4.3 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 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; 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 20 full service restaurants to IHOP with
the remaining conversions at its discretion. TA may fail to convert
those 20 restaurants and may determine not to convert some or all
of the remaining 74 restaurants. The 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 Reports on Form 10-Q for the
periods ended March 31, 2020, and June 30, 2020, 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/20200805005257/en/
Kristin Brown, Director of Investor Relations (617) 796-8251
www.ta-petro.com
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