Fuel Sales Volume Increased 5.3% for the
2019 Fourth Quarter
TA Recognized $70.2 million Federal
Biodiesel Blenders' Tax Credit
Nonfuel Gross Margin Increased 1.4% for the
2019 Fourth Quarter
TravelCenters of America Inc. (Nasdaq: TA) today announced
financial results for the three months and year ended December 31,
2019.
Jonathan M. Pertchik, TA's CEO, made the following statement
regarding the 2019 fourth quarter results:
"TA ended the year on a positive note. Net income for the fourth
quarter benefited from a significant increase in fuel gross margin
as a result of the reinstatement of the federal biodiesel blenders'
tax credit for 2018 and 2019, a 5.3% increase in fuel sales volume
and a more favorable fuel purchasing environment, as well as a 1.4%
increase in nonfuel gross margin. The company also made progress in
its key business initiatives during the fourth quarter, including
expanding its travel center network with two new franchise
agreements, extending truck service programs through the
TechOn-Site® and RoadSquad® services and agreeing to convert up to
94 full service restaurants to IHOP over the next five years."
The following table summarizes TA's financial results for the
2019 and 2018 fourth quarters.
(in thousands, except per share
amounts)
Three Months Ended
December 31,
2019
2018
Income (loss) from continuing
operations
$
43,117
$
(6,973)
Net income (loss)
43,117
(5,921)
Net income (loss) attributable to common
stockholders
43,082
(5,949)
Income (loss) per share of common stock
from continuing operations attributable to common stockholders
(basic and diluted)(1)
$
5.29
$
(0.87)
(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 2019 and 2018 fourth quarters.
(in thousands, except per share
amounts)
Three Months Ended
December 31,
2019
2018
Non-GAAP measures:(1)
Adjusted loss from continuing
operations
$
(7,210
)
$
(6,699
)
Adjusted loss per share of common stock
from continuing operations
attributable to common stockholders (basic
and diluted)(2)
$
(0.89
)
$
(0.84
)
EBITDA$
89,511
$
20,309
Adjusted EBITDA
19,861
20,673
(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 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 Fuel Gross Margin. The following table
presents details for TA's fuel sales for the 2019 and 2018 fourth
quarters.
(in thousands, except per gallon
amounts)
Three Months Ended
December 31,
2019
2018
Change
Fuel sales volume (gallons):
Diesel fuel
423,943
400,506
5.9
%
Gasoline
73,259
71,696
2.2
%
Total fuel sales volume
497,202
472,202
5.3
%
Fuel revenues
$
1,071,577
$
1,086,987
(1.4
)
%
Fuel gross margin
147,691
85,904
71.9
%
Adjusted fuel gross margin(1)
77,462
85,904
(9.8
)
%
Fuel gross margin per gallon
$
0.297
$
0.182
63.2
%
Adjusted fuel gross margin per
gallon(1)
0.156
0.182
(14.3
)
%
(1) The 2019 fourth quarter amount excludes
the $70.2 million benefit from the federal biodiesel blenders' tax
credit TA recognized in December 2019. See the reconciliations from
fuel gross margin to adjusted fuel gross margin and fuel gross
margin per gallon to adjusted fuel gross margin per gallon in the
supplemental tables below.
Fuel sales volume for the 2019 fourth quarter increased by 25.0
million gallons, or 5.3%, as compared to the 2018 fourth quarter
due to the following factors:
- a same site fuel sales volume increase of 24.6 million gallons,
or 5.3%, as compared to the 2018 fourth quarter primarily due to
the success of TA's marketing initiatives; and
- an increase of 0.4 million gallons at sites opened since the
beginning of the 2018 fourth quarter.
Fuel revenues for the 2019 fourth quarter decreased by $15.4
million, or 1.4%, as compared to the 2018 fourth quarter primarily
due to a decrease in market prices for fuel during the 2019 fourth
quarter, 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. As a result, TA recognized $70.2 million as a reduction to
TA's fuel cost of goods sold in the 2019 fourth quarter relating to
2018 and 2019. It typically has taken TA approximately six to eight
months to collect the cash refunds related to the federal biodiesel
blenders' tax credit and TA expects to collect the full amount for
2018 and 2019 by the 2020 fourth quarter. For the years 2020
through 2022, the benefit of the federal biodiesel blenders' tax
credit will be included in the price TA pays for biodiesel. TA
anticipates the benefit it will realize in future periods for the
federal biodiesel blenders' tax credit may be less than the benefit
realized for each of the years 2017 through 2019.
Fuel gross margin for the 2019 fourth quarter increased by $61.8
million, or 71.9%, as compared to the 2018 fourth quarter primarily
due to the $70.2 million benefit from the federal biodiesel
blenders' tax credit that was retroactively reinstated for 2018 and
2019 and recognized in December 2019, a 5.3% increase in fuel sales
volume and a more favorable fuel purchasing environment in the 2019
fourth quarter as compared to the 2018 fourth quarter. The increase
was partially offset by the higher cost associated with increased
rewards under TA's customer loyalty program to incentivize drivers
to purchase higher fuel volume.
Adjusted fuel gross margin for the 2019 fourth quarter decreased
by $8.4 million, or 9.8%, as compared to the 2018 fourth quarter
primarily due to the higher cost associated with increased rewards
under TA's customer loyalty program and an unusually strong
trucking freight environment in the 2018 fourth quarter, partially
offset by the increase in fuel sales volume and a more favorable
fuel purchasing environment in the 2019 fourth quarter.
Nonfuel Revenues and Nonfuel Gross Margin. The following table
presents details for TA's nonfuel revenues during the 2019 fourth
quarter as compared to the 2018 fourth quarter.
(in thousands)
Three Months Ended
December 31,
2019
2018
Change
Nonfuel revenues:
Store and retail services
$
186,004
$
182,894
1.7
%
Truck service
153,147
155,896
(1.8)
%
Restaurant
107,951
103,664
4.1
%
Total nonfuel revenues
447,102
442,454
1.1
%
Nonfuel gross margin
$
274,035
$
270,151
1.4
%
Nonfuel gross margin percentage
61.3
%
61.1
%
20
pts
Nonfuel revenues for the 2019 fourth quarter increased by $4.6
million, or 1.1%, as compared to the 2018 fourth quarter due to the
following factors:
- a $3.2 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 in its stores and quick service restaurants,
partially offset by a 1.8% decrease in truck service revenues;
and
- a $1.4 million net increase at sites opened or closed since the
beginning of the 2018 fourth quarter.
Nonfuel gross margin for the 2019 fourth quarter increased by
$3.9 million, or 1.4%, as compared to the 2018 fourth quarter
primarily due to the $4.6 million increase in nonfuel revenues, as
noted above.
Rent and Royalties from Franchisees Revenues. Rent and royalties
from franchisees revenues for the 2019 fourth quarter decreased by
$0.6 million, or 14.3%, as compared to the 2018 fourth quarter
primarily due to the following factors:
- an $0.8 million decrease in royalties earned in the 2019 fourth
quarter from one travel center TA acquired from a former franchisee
in November 2018; and
- a $41.0 thousand decline from Quaker Steak & Lube, or QSL,
franchised restaurants for which the franchise agreements were
terminated since the beginning of the 2018 fourth quarter.
Expenses. Site level operating expense for the 2019 fourth
quarter increased by $5.2 million, or 2.3%, as compared to the 2018
fourth quarter. New sites accounted for $0.1 million of this
increase. On a same site basis, site level operating expense
increased by $5.1 million primarily due to increased labor costs to
support TA's growth in nonfuel revenues. Site level operating
expense as a percentage of nonfuel revenues on a same site basis
was 52.4% for the 2019 fourth quarter as compared to 51.6% for the
2018 fourth quarter. The increase in this percentage primarily
reflects higher labor costs primarily due to new positions created
as a result of a realignment of TA's regional and field management
structure during the 2019 fourth quarter; the ratio of nonlabor
costs to nonfuel revenues on a same site basis was consistent
between the 2019 and 2018 fourth quarters.
Selling, general and administrative expense for the 2019 fourth
quarter remained consistent with the 2018 fourth quarter.
Real estate rent expense for the 2019 fourth quarter decreased
by $7.8 million, or 10.9%, as compared to the 2018 fourth 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, that TA formerly leased, partially
offset by increases that resulted from TA's sales to, and lease
back from, SVC of improvements at leased sites during the 2018
fourth quarter and $0.6 million of impairment charges to operating
lease assets related to certain standalone restaurants.
Depreciation and amortization expense for the 2019 fourth
quarter increased by $7.0 million, or 33.4%, as compared to the
2018 fourth quarter primarily due to TA's purchase of 20 travel
centers from SVC in January 2019 and $2.4 million of impairment
charges related to certain standalone restaurants.
Net Income (Loss) and Adjusted EBITDA. Net income (loss) for the
2019 fourth quarter increased by $49.0 million as compared to the
2018 fourth quarter primarily due to the $70.2 million benefit from
the federal biodiesel blenders' tax credit that was retroactively
reinstated for 2018 and 2019 and recognized in December 2019.
Adjusted EBITDA for the 2019 fourth quarter decreased by $0.8
million as compared to the 2018 fourth quarter primarily as a
result of the decrease in adjusted fuel gross margin as a result of
the higher cost associated with increased rewards under TA's
customer loyalty program and the increase in site level operating
expense.
Growth Strategies
On October 28, 2019, TA entered into a multi unit franchise
agreement with IHOP Franchisor 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, TA has agreed to, among other
things, 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%.
During 2019, TA entered into franchise agreements for 12 travel
centers to be operated under TA's travel center brand names; four
of these franchised travel centers began operations under one of
TA's travel center brands during 2019, two began operations in the
2020 first quarter to date and TA anticipates six franchised travel
centers to begin operations by the end of 2020. 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
TA's network, one within five years and the other within 10
years.
During 2019, TA entered into franchise agreements for six
standalone restaurants to be operated under the QSL brand name;
three of these franchised restaurants began operations during 2019,
and TA anticipates the remaining three restaurants will be added to
its network by the end of the 2020 second quarter.
TA currently has a contract in place for the purchase of a
parcel of land for $1.4 million (expected to close by the end of
the 2020 second quarter) on which TA, or one of its franchisees,
plans to develop a TA Express travel center.
West Greenwich Term Loan
On February 7, 2020, TA entered into a 10 year term loan for
$16.6 million with The Washington Trust Company, or the West
Greenwich Loan. The West Greenwich Loan is secured by a mortgage
encumbering one of TA's travel centers. The interest rate is fixed
at 3.85% for five years based on the five year Federal Home Loan
Bank rate plus 198 basis points, and will reset thereafter. The
West Greenwich Loan requires TA to make principal and interest
payments monthly. TA plans to use the proceeds from the West
Greenwich Loan for general business purposes. TA may, at its option
with 60 days prior written notice, at a nominal penalty within the
first three years, at any time repay the loan in full prior to the
end of the 10 year term.
Conference Call
On Tuesday, February 25, 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 and year ended December 31,
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
10137793.
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 fourth 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
December 31,
Year Ended December
31,
2019
2018
2019
2018
Revenues:
Fuel
$
1,071,577
$
1,086,987
$
4,247,069
$
4,395,731
Nonfuel
447,102
442,454
1,856,147
1,820,341
Rent and royalties from franchisees
3,532
4,121
14,143
16,143
Total revenues
1,522,211
1,533,562
6,117,359
6,232,215
Cost of goods sold (excluding
depreciation):
Fuel
923,886
1,001,083
3,868,351
4,075,704
Nonfuel
173,067
172,303
726,418
710,465
Total cost of goods sold
1,096,953
1,173,386
4,594,769
4,786,169
Site level operating expense
234,705
229,513
943,810
914,730
Selling, general and administrative
expense
38,624
38,481
155,474
137,945
Real estate rent expense
63,668
71,440
257,762
283,476
Depreciation and amortization expense
28,142
21,103
100,260
83,179
Income (loss) from operations
60,119
(361
)
65,284
26,716
Interest expense, net
7,094
7,040
28,356
29,003
Other (income) expense, net
(1,250
)
433
(880
)
2,060
Income (loss) before income taxes
and
discontinued operations
54,275
(7,834
)
37,808
(4,347
)
(Provision) benefit for income taxes
(11,158
)
861
(4,339
)
1,574
Income (loss) from continuing
operations
43,117
(6,973
)
33,469
(2,773
)
Income (loss) from discontinued
operations,
net of taxes
—
1,052
—
(117,631
)
Net income (loss)
43,117
(5,921
)
33,469
(120,404
)
Less: net income for noncontrolling
interest
35
28
124
149
Net income (loss) attributable
to
common stockholders
$
43,082
$
(5,949
)
$
33,345
$
(120,553
)
Net income (loss) per share of common
stock attributable to common stockholders(1):
Basic and diluted from continuing
operations
$
5.29
$
(0.87
)
$
4.12
$
(0.37
)
Basic and diluted from discontinued
operations
—
0.13
—
(14.72
)
Basic and diluted
5.29
(0.74
)
4.12
(15.09
)
(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 Annual Report on Form 10-K for the year ended
December 31, 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 loss from continuing operations,
adjusted 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
income (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 (loss) 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 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
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 months and years ended December 31, 2019 and 2018.
Calculation of adjusted loss
from
continuing operations:
Three Months Ended
December 31,
Year Ended December
31,
2019
2018
2019
2018
Income (loss) from continuing
operations
$
43,117
$
(6,973
)
$
33,469
$
(2,773
)
Add: Costs of SVC transactions(1)
—
364
458
364
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: Comdata interest income(4)
—
—
—
(568
)
Less: Federal biodiesel blenders' tax
credit(5)
(70,229
)
—
(70,229
)
(23,251
)
Add: Impairment of property and
equipment(6)
2,369
—
2,369
—
Add: Impairment of operating lease
assets(6)
579
—
579
—
Add (less): Net income tax impact(7)
16,954
(90
)
17,572
7,373
Adjusted loss from continuing
operations
$
(7,210
)
$
(6,699
)
$
(18,693
)
$
(25,251
)
Calculation of adjusted loss per share
of
common stock from continuing
operations
attributable to common
stockholders
(basic and diluted):
Three Months Ended
December 31,
Year Ended December
31,
2019
2018
2019
2018
Income (loss) per share of common stock
from
continuing operations attributable to
common
stockholders (basic and diluted)
$
5.29
$
(0.87
)
$
4.12
$
(0.37
)
Add: Costs of SVC transactions(1)
—
0.05
0.06
0.05
Less: Loyalty award expiration(2)
—
—
(0.36
)
—
Add: Executive officer retirement
agreement expenses(3)
—
—
—
0.45
Less: Comdata legal reimbursements, net of
expenses(4)
—
—
—
(1.25
)
Less: Comdata interest income(4)
—
—
—
(0.07
)
Less: Federal biodiesel blenders' tax
credit(5)
(8.62
)
—
(8.67
)
(2.91
)
Add: Impairment of property and
equipment(6)
0.29
—
0.29
—
Add: Impairment of operating lease
assets(6)
0.07
—
0.07
—
Add (less): Net income tax impact(7)
2.08
(0.02
)
2.17
0.92
Adjusted loss per share of common stock
from
continuing operations attributable to
common
stockholders (basic and diluted)
$
(0.89
)
$
(0.84
)
$
(2.32
)
$
(3.18
)
Calculation of EBITDA and adjusted
EBITDA:
Three Months Ended
December 31,
Year Ended December
31,
2019
2018
2019
2018
Net income (loss)
$
43,117
$
(5,921
)
$
33,469
$
(120,404
)
(Less) add: (Income) loss from
discontinued operations, net of taxes
—
(1,052
)
—
117,631
Income (loss) from continuing
operations
43,117
(6,973
)
33,469
(2,773
)
Add (less): Provision (benefit) for income
taxes
11,158
(861
)
4,339
(1,574
)
Add: Depreciation and amortization
expense
28,142
21,103
100,260
83,179
Add: Interest expense, net
7,094
7,040
28,356
29,003
EBITDA
89,511
20,309
166,424
107,835
Add: Costs of SVC transactions(1)
—
364
458
364
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)
(70,229
)
—
(70,229
)
(23,251
)
Add: Impairment of operating lease
assets(6)
579
—
579
—
Adjusted EBITDA
$
19,861
$
20,673
$
94,321
$
78,552
Calculation of adjusted fuel gross
margin
and adjusted fuel gross margin per
gallon:
Three Months Ended
December 31,
Year Ended December
31,
2019
2018
2019
2018
Fuel gross margin
$
147,691
$
85,904
$
378,718
$
320,027
Less: Loyalty award expiration(2)
—
—
(2,840
)
—
Less: Federal biodiesel blenders' tax
credit(5)
(70,229
)
—
(70,229
)
(23,251
)
Adjusted fuel gross margin
$
77,462
$
85,904
$
305,649
$
296,776
Fuel gross margin per gallon
$
0.297
$
0.182
$
0.191
$
0.168
Less: Loyalty award expiration(2)
—
—
(0.001
)
—
Less: Federal biodiesel blenders' tax
credit(5)
(0.141
)
—
(0.035
)
(0.012
)
Adjusted fuel gross margin per gallon
$
0.156
$
0.182
$
0.155
$
0.156
(1) Costs of SVC Transactions. In January
2019, TA entered transaction agreements with SVC pursuant to which
they amended their leases. During the year ended December 31, 2019,
TA incurred $0.5 million of expenses associated with amendments of
these leases. During the three months and year ended December 31,
2018, TA incurred $0.4 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). (2) Loyalty Award
Expiration. During the year ended December 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
year ended December 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 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 acceleration and cash payment
resulted in additional compensation expense of $3.6 million for the
year ended December 31, 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 year ended December 31, 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' consolidated statements of operations
and comprehensive income (loss). (5) Federal Biodiesel Blenders'
Tax Credit. In December 2019, the U.S. government retroactively
reinstated the federal biodiesel blenders' tax credit for 2018 and
2019, and in February 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 $70.2 million for 2018
and 2019 and $23.3 million for 2017, which were recognized in
December 2019 and February 2018, respectively, as a reduction to
fuel cost of goods sold in TA's consolidated statements of
operations and comprehensive income (loss). (6) Impairment of
Property and Equipment and Operating Lease Assets. During the three
months and year ended December 31, 2019, TA recognized $2.4 million
and $0.6 million of impairment charges to property and equipment
and operating lease assets, respectively, related to certain
standalone restaurants. The impairment charges were recognized in
depreciation and amortization expense and real estate rent expense,
respectively, in TA's consolidated statements of operations and
comprehensive income (loss). (7) Net Income Tax Impact. TA
calculated the income tax impact of the adjustments described above
by using its estimated statutory rates of 25.2% and 24.7% for the
three months and years ended December 31, 2019 and 2018,
respectively.
TRAVELCENTERS OF AMERICA INC.
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED) (in
thousands)
December 31,
2019
2018
Assets:
Current assets:
Cash and cash equivalents
$
17,206
$
314,387
Accounts receivable, net
173,496
97,449
Inventory
196,611
196,721
Other current assets
32,456
35,119
Total current assets
419,769
643,676
Property and equipment, net
868,503
628,537
Operating lease assets
1,817,998
—
Goodwill
25,259
25,259
Intangible assets, net
20,707
22,887
Other noncurrent assets
78,659
121,749
Total assets
$
3,230,895
$
1,442,108
Liabilities and Stockholders'
Equity:
Current liabilities:
Accounts payable
$
147,440
$
120,914
Current operating lease liabilities
104,070
—
Current SVC Leases liabilities
—
42,109
Other current liabilities
138,455
125,668
Total current liabilities
389,965
288,691
Long term debt, net
329,321
320,528
Noncurrent operating lease liabilities
1,880,188
—
Noncurrent SVC Leases liabilities
—
353,756
Other noncurrent liabilities
58,885
28,741
Total liabilities
2,658,359
991,716
Stockholders' equity (8,307 and 8,080
shares of common stock outstanding
as of December 31, 2019 and 2018,
respectively)(1)
572,536
450,392
Total liabilities and stockholders'
equity
$
3,230,895
$
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 Annual Report on Form 10-K for the year ended
December 31, 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 December 31, 2019,
that were operated by TA continuously since the beginning of the
earliest period presented, with the exception of three locations TA
operated that are owned by an unconsolidated joint venture in which
TA owned 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
December 31,
Year Ended December
31,
2019
2018
Change
2019
2018
Change
Number of same site company
operated locations(1)
243
243
—
241
241
—
Diesel sales volume (gallons)
418,798
395,696
5.8
%
1,655,280
1,584,863
4.4
%
Gasoline sales volume (gallons)
69,395
67,875
2.2
%
275,771
283,365
(2.7
)
%
Total fuel sales volume (gallons)
488,193
463,571
5.3
%
1,931,051
1,868,228
3.4
%
Fuel revenues
$
1,046,792
$
1,066,381
(1.8
)
%
$
4,116,591
$
4,300,816
(4.3
)
%
Fuel gross margin(2)
146,664
85,804
70.9
%
374,820
316,940
18.3
%
Fuel gross margin per gallon
$
0.300
$
0.185
62.2
%
$
0.194
$
0.170
14.1
%
Nonfuel revenues
$
443,636
$
440,475
0.7
%
$
1,831,343
$
1,807,153
1.3
%
Nonfuel gross margin
271,438
268,702
1.0
%
1,114,068
1,100,908
1.2
%
Nonfuel gross margin percentage
61.2
%
61.0
%
20
pts
60.8
%
60.9
%
(10
)
pts
Total gross margin(2)
$
418,102
$
354,506
17.9
%
$
1,488,888
$
1,417,848
5.0
%
Site level operating expense
232,514
227,453
2.2
%
926,939
904,782
2.4
%
Site level operating expense as a
percentage of nonfuel revenues
52.4
%
51.6
%
80
pts
50.6
%
50.1
%
50
pts
Site level gross margin in excess of site
level operating expense(2)
$
185,588
$
127,053
46.1
%
$
561,949
$
513,066
9.5
%
(1) Same site operations for the three months
ended December 31, 2019, included 229 travel centers, one
standalone truck service facility and 13 standalone restaurants
that TA operated since October 1, 2018. Same site operations for
the year ended December 31, 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
three months ended December 31, 2019, includes a $70.2 million
benefit from the federal biodiesel blenders' tax credit that the
U.S. government retroactively reinstated for 2018 and 2019 in
December 2019. The amount for the year ended December 31, 2019,
includes $2.8 million of a one time reversal of loyalty award
accruals recognized in connection with introducing a revised
customer loyalty program and a $70.1 million benefit from the
federal biodiesel blenders' tax credit. The amount for the year
ended December 31, 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.
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
sales volume and fuel and nonfuel gross margins may imply that TA's
business may be profitable in the future. However, TA's improved
fuel gross margin was the result of the federal biodiesel blenders'
tax credits for 2018 and 2019 that TA recognized in 2019, and
absent the federal biodiesel blenders' tax credit, TA's fuel gross
margin declined for the 2019 fourth quarter compared to the 2018
fourth quarter. 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 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 costs
may exceed any increased revenue TA may receive from this growth or
result in its returns on these investments being less than
expected;
- Statements about the franchise agreements TA entered into 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 an agreement TA has entered into to purchase a
parcel of land. This statement may imply that TA will purchase this
property. However, this agreement is subject to conditions; as a
result, this acquisition may not occur, may be delayed or its terms
may change;
- Statements about the expectation that TA or one of its
franchisees plans to develop a TA Express travel center on a parcel
of land that TA has agreed to purchase. As noted above, TA's
purchase of this land is subject to conditions and TA and its
franchisees may elect to not develop a TA Express 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 and its anticipated return
on its investment of approximately 20% from these conversions. 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,
2019, which has been or will be filed with the U.S. Securities and
Exchange Commission, or 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/20200225005256/en/
Kristin Brown, Director of Investor Relations (617) 796-8251
www.ta-petro.com
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