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TravelCenters Of America LLC Announces Second Quarter 2013 Results

RESULTS THAT DIFFER FROM THOSE STATED OR IMPLIED BY TA’S FORWARD LOOKING STATEMENTS MAY ALSO BE CAUSED BY VARIOUS CHANGES IN TA’S BUSINESS OR MARKET CONDITIONS, AS DESCRIBED MORE FULLY IN TA’S PERIODIC REPORTS, INCLUDING TA’S ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 2012, FILED WITH THE U.S. SECURITIES AND EXCHANGE COMMISSION, OR “SEC”, AND TA’S QUARTERLY REPORT ON FORM 10-Q FOR THE THREE MONTHS ENDED JUNE 30, 2013, TO BE FILED WITH THE SEC, UNDER “WARNING CONCERNING FORWARD LOOKING STATEMENTS,” AND “RISK FACTORS” AND ELSEWHERE IN THOSE REPORTS. COPIES OF THOSE REPORTS ARE OR WILL BE AVAILABLE AT THE WEBSITE OF THE U.S. SECURITIES AND EXCHANGE COMMISSION: WWW.SEC.GOV.

YOU SHOULD NOT PLACE UNDUE RELIANCE UPON FORWARD LOOKING STATEMENTS. EXCEPT AS REQUIRED BY LAW, TA UNDERTAKES NO OBLIGATION TO UPDATE OR REVISE ANY FORWARD LOOKING STATEMENTS AS A RESULT OF NEW INFORMATION, FUTURE EVENTS OR OTHERWISE.

TRAVELCENTERS OF AMERICA LLC

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)

(in thousands, except per share data)

   
Three Months Ended June 30,
2013   2012
Revenues:
Fuel $ 1,635,400 $ 1,689,007
Nonfuel 380,041 348,743
Rent and royalties   3,313   3,757
Total revenues 2,018,754 2,041,507
 
Cost of goods sold (excluding depreciation):
Fuel 1,545,588 1,592,870
Nonfuel   171,938   154,414
Total cost of goods sold (excluding depreciation) 1,717,526 1,747,284
 
Operating expenses:
Site level operating 190,646 176,088
Selling, general & administrative 24,482 24,366
Real estate rent 52,104 49,347
Depreciation and amortization   14,025   12,405
Total operating expenses   281,257   262,206
 
Income from operations 19,971 32,017
 
Income from equity investees 723 662
Acquisition costs (205 ) (316 )
Interest income 307 360
Interest expense   (4,430 )   (2,482 )
Income before income taxes 16,366 30,241
Provision for income taxes   382   389
Net income $ 15,984 $ 29,852
 
Net income per share:
Basic and diluted $ 0.54 $ 1.04
 

These financial statements should be read in conjunction with TA’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2013, to be filed with the U.S. Securities and Exchange Commission.

TRAVELCENTERS OF AMERICA LLC

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)

(in thousands, except per share data)

   
Six Months Ended June 30,
2013     2012
Revenues:
Fuel $ 3,260,507 $ 3,372,200
Nonfuel 709,235 656,897
Rent and royalties   6,363   7,279
Total revenues 3,976,105 4,036,376
 
Cost of goods sold (excluding depreciation):
Fuel 3,093,767 3,207,617
Nonfuel   317,303   291,184
Total cost of goods sold (excluding depreciation) 3,411,070 3,498,801
 
Operating expenses:
Site level operating 374,579 346,225
Selling, general & administrative 47,709 47,533
Real estate rent 103,988 98,845
Depreciation and amortization   27,248   24,264
Total operating expenses   553,524   516,867
 
Income from operations 11,511 20,708
 
Income from equity investees 1,159 462
Acquisition costs (320 ) (458 )
Interest income 542 582
Interest expense   (8,495 )   (4,994 )
Income before income taxes 4,397 16,300
Provision for income taxes   552   633
Net income $ 3,845 $ 15,667
 
Net income per share:
Basic and diluted $ 0.13 $ 0.54

These financial statements should be read in conjunction with TA’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2013, to be filed with the U.S. Securities and Exchange Commission.

TRAVELCENTERS OF AMERICA LLC

CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)

(in thousands)

       
June 30, December 31,
2013 2012
Assets
Current assets:
Cash and cash equivalents $ 135,091 $ 35,189
Accounts receivable, net 179,084 106,273
Inventories 192,404 191,006
Other current assets   56,075   61,020

Total current assets

562,654 393,488
 
Property and equipment, net 609,444 576,512
Goodwill and intangible assets, net 24,571 20,041
Other noncurrent assets   33,414   28,240
Total assets $ 1,230,083 $ 1,018,281
 
Liabilities and Shareholders’ Equity
Current liabilities:
Accounts payable $ 209,387 $ 143,605
Current HPT Leases Liabilities 31,557 28,354
Other current liabilities   143,078   111,168
Total current liabilities 384,022 283,127
 
Noncurrent HPT Leases liabilities 344,750 351,135
Senior Notes due 2028 110,000
Other noncurrent liabilities   32,579   30,585
Total liabilities 871,351 664,847
 
Shareholders’ equity   358,732   353,434
Total liabilities and shareholders’ equity $ 1,230,083 $ 1,018,281
 

These financial statements should be read in conjunction with TA’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2013, to be filed with the U.S. Securities and Exchange Commission.

TRAVELCENTERS OF AMERICA LLC

CONSOLIDATED SUPPLEMENTAL DATA

(in thousands)

       

Three Months Ended June 30,

Six Months Ended June 30,

2013     2012 2013     2012
Calculation of EBITDAR: (1)
Net income $ 15,984 $ 29,852 $ 3,845 $ 15,667
Add: income taxes 382 389 552 633
Add: depreciation and amortization 14,025 12,405 27,248 24,264
Deduct: interest income (307 ) (360 ) (542 ) (582 )
Add: interest expense (2) 4,430 2,482 8,495 4,994
Add: real estate rent expense (3)   52,104   49,347   103,988   98,845
EBITDAR $ 86,618 $ 94,115 $ 143,586 $ 143,821
 

(1) EBITDAR is a not a GAAP financial measure. TA calculates EBITDAR as earnings before interest, taxes, depreciation, amortization and rent. TA believes EBITDAR is a useful indication of its operating performance and its ability to pay rent or service debt, make capital expenditures and expand its business. TA believes that EBITDAR is a meaningful disclosure that may help interested persons to better understand its financial performance, including comparing its performance between periods and to the performance of other companies. However, EBITDAR as presented may not be comparable to similarly titled amounts calculated by other companies. This information should not be considered as an alternative to net income, income from continuing operations, operating profit, cash flow from operations or any other operating or liquidity performance measure prescribed by U.S. generally accepted accounting principles, or GAAP.

(2) Interest expense included the following:

   

Three Months Ended June 30,

   

Six Months Ended June 30,

2013     2012 2013     2012
Interest related to TA’s Senior Notes and Credit Facility $ 2,742 $ 533 $ 5,115 $ 1,071
HPT rent classified as interest $ 1,743 1,810 3,484 3,620
Amortization of deferred financing costs 170 88 325 175
Capitalized interest (316 ) (641 )
Other   91   51   212   128
$ 4,430 $ 2,482 $ 8,495 $ 4,994
 

(3) Real estate rent expense recognized under GAAP differs from TA’s obligation to pay cash for rent under its leases. Cash paid under real property lease agreements was $56,064 and $54,166 during the three month periods ended June 30, 2013 and 2012, respectively, while the total rent amounts expensed during the quarters ended June 30, 2013 and 2012, were $52,104 and $49,347, respectively. Cash paid under lease agreements was $112,323 and $107,744 during the six month periods ended June 30, 2013 and 2012, respectively, while the total rent amounts expensed during the six months ended June 30, 2013 and 2012, were $103,988 and $98,845, respectively. GAAP requires recognition of minimum lease payments payable during the lease term in equal amounts on a straight line basis over the lease term. In addition, under GAAP, a portion of the rent TA pays to HPT is classified as interest expense and a portion of the rent payments to HPT is applied to amortize a sale/leaseback financing obligation. Also, under GAAP, TA amortizes as a reduction of rent expense the deferred tenant improvement allowance that HPT paid to TA during the four years from 2007 through 2010 and the deferred gain realized on the sale of assets that TA leased back. A reconciliation of these amounts is as follows.

    Three Months Ended June 30,     Six Months Ended June 30,
2013     2012 2013     2012
 
Cash payments to HPT for rent $ 53,473 $ 51,713 $ 107,125 $ 102,897
Other cash rental payments   2,591   2,453   5,198   4,847
Total cash payments under real property leases 56,064 54,166 112,323 107,744
Adjustments for:
Accrued estimated percentage rent not yet paid 584 208 584 208
Noncash straight line rent accrual – HPT (523 ) (1,013 ) (900 ) (1,134 )
Noncash straight line rent accrual – other 3 54 24 163
Amortization of sale/leaseback financing obligation (512 ) (549 ) (1,022 ) (1,098 )
Portion of rent payments classified as interest expense (1,743 ) (1,810 ) (3,484 ) (3,620 )
Amortization of deferred tenant improvements allowance (1,692 ) (1,692 ) (3,384 ) (3,384 )
Amortization of deferred gain on sale/leaseback transactions   (77 )   (17 )   (153 )   (34 )
Total amount expensed as rent $ 52,104 $ 49,347 $ 103,988 $ 98,845
 

SUPPLEMENTAL SAME SITE OPERATING DATA

The following table presents operating data for all of the locations in operation on June 30, 2013, that were operated by TA continuously since the beginning of the earliest applicable period presented. This data excludes revenues and expenses that were not generated at locations TA operates, such as rents and royalties from franchises, and corporate level selling, general and administrative expenses.

TRAVELCENTERS OF AMERICA LLC

SAME SITE OPERATING DATA (1)

(in thousands, except for number of locations and percentage amounts)

       
Three Months Ended June 30, Six Months Ended June 30,
2013     2012     Change

Fav/(Unfav)

2013     2012     Change

Fav/(Unfav)

Number of company operated locations 192 192   191 191  
 
Fuel sales volume (gallons) 482,022 500,122 (3.6) % 943,299 984,615 (4.2) %
 
Fuel revenues $ 1,512,711 $ 1,600,826 (5.5) % $ 3,026,024 $ 3,193,318 (5.2) %
Fuel gross margin $ 84,594 $ 95,670 (11.6) % $ 158,089 $ 163,230 (3.1) %
 
Nonfuel revenues $ 359,389 $ 347,284 3.5 % $ 670,585 $ 653,442 2.6 %
Nonfuel gross margin $ 196,657 $ 193,542 1.6 % $ 370,485 $ 363,870 1.8 %
Nonfuel gross margin percentage 54.7 % 55.7 % (100) pts 55.2 % 55.7 % (50) pts
 
Total gross margin $ 281,251 $ 289,212 (2.8) % $ 528,574 $ 527,100 0.3 %
Site level operating expenses $ 178,720 $ 173,436 3.0 % $ 347,442 $ 339,244 2.4 %
Site level operating expenses as a percentage of nonfuel revenues 49.7 % 49.9 % 20 pts 51.8 % 51.9 % 10 pts
Site level gross margin in excess of site level operating expense $ 102,531 $ 115,776 (11.4) % $ 181,132 $ 187,856 (3.6) %
 

(1) Excludes two locations TA operates that are owned by a joint venture and locations operated by TA’s franchisees.

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