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TravelCenters Of America LLC Announces Third 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 REPORTS ON FORM 10-Q FOR THE PERIODS ENDED MARCH 31, JUNE 30 AND SEPTEMBER 30, 2013, WHICH HAVE BEEN OR WILL 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 September 30,
2013   2012
Revenues:
Fuel $ 1,667,464 $ 1,666,810
Nonfuel 391,319 363,402
Rent and royalties   3,313   3,941
Total revenues 2,062,096 2,034,153
 
Cost of goods sold (excluding depreciation):
Fuel 1,576,118 1,581,830
Nonfuel   178,837   164,017
Total cost of goods sold (excluding depreciation) 1,754,955 1,745,847
 
Operating expenses:
Site level operating 195,428 179,737
Selling, general & administrative 23,705 25,577
Real estate rent 52,424 49,185
Depreciation and amortization   14,646   12,874
Total operating expenses   286,203   267,373
 
Income from operations 20,938 20,933
 
Income from equity investees 859 801
Acquisition costs (1,026 ) (189 )
Interest income 620 512
Interest expense   (4,514 )   (2,638 )
Income before income taxes 16,877 19,419
Provision for income taxes   1,074   429
Net income $ 15,803 $ 18,990
 
Net income per share:
Basic and diluted $ 0.53 $ 0.66

These financial statements should be read in conjunction with TA’s Quarterly Report on Form 10-Q for the quarter ended September 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)

 
Nine Months Ended September 30,
2013   2012
Revenues:
Fuel $ 4,927,971 $ 5,039,010
Nonfuel 1,100,554 1,020,299
Rent and royalties   9,676   11,220
Total revenues 6,038,201 6,070,529
 
Cost of goods sold (excluding depreciation):
Fuel 4,669,885 4,789,447
Nonfuel   496,140   455,201
Total cost of goods sold (excluding depreciation) 5,166,025 5,244,648
 
Operating expenses:
Site level operating 570,007 525,962
Selling, general & administrative 71,414 73,110
Real estate rent 156,412 148,030
Depreciation and amortization   41,894   37,138
Total operating expenses   839,727   784,240
 
Income from operations 32,449 41,641
 
Income from equity investees 2,018 1,263
Acquisition costs (1,346 ) (647 )
Interest income 1,162 1,094
Interest expense   (13,009 )   (7,632 )
Income before income taxes 21,274 35,719
Provision for income taxes   1,626   1,062
Net income $ 19,648 $ 34,657
 
Net income per share:
Basic and diluted $ 0.66 $ 1.20

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

   
TRAVELCENTERS OF AMERICA LLC
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)

(in thousands)

 
September 30, December 31,
2013 2012
Assets
Current assets:
Cash and cash equivalents $ 126,862 $ 35,189
Accounts receivable, net 153,955 106,273
Inventories 193,088 191,006
Other current assets   53,123   61,020
Total current assets 527,028 393,488
 
Property and equipment, net 623,255 576,512
Goodwill and intangible assets, net 24,297 20,041
Other noncurrent assets   34,574   28,240
Total assets $ 1,209,154 $ 1,018,281
 
Liabilities and Shareholders’ Equity
Current liabilities:
Accounts payable $ 178,177 $ 143,605
Current HPT Leases Liabilities 31,765 28,354
Other current liabilities   138,420   111,168
Total current liabilities 348,362 283,127
 
Noncurrent HPT Leases liabilities 342,449 351,135
Senior Notes due 2028 110,000
Other noncurrent liabilities   33,298   30,585
Total liabilities 834,109 664,847
 
Shareholders’ equity   375,045   353,434
Total liabilities and shareholders’ equity $ 1,209,154 $ 1,018,281

These financial statements should be read in conjunction with TA’s Quarterly Report on Form 10-Q for the quarter ended September 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 Nine Months Ended
September 30, September 30,
2013 2012 2013 2012
Calculation of EBITDAR: (1)
Net income $ 15,803 $ 18,990 $ 19,648 $ 34,657
Add: income taxes 1,074 429 1,626 1,062
Add: depreciation and amortization 14,646 12,874 41,894 37,138
Deduct: interest income (620 ) (512 ) (1,162 ) (1,094 )
Add: interest expense (2) 4,514 2,638 13,009 7,632
Add: real estate rent expense (3)   52,424   49,185   156,412   148,030
EBITDAR $ 87,841 $ 83,604 $ 231,427 $ 227,425

(1) EBITDAR is a not a financial measure prescribed by U.S. generally accepted accounting principles, or GAAP. 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 GAAP.

(2) Interest expense included the following:

  Three Months Ended     Nine Months Ended
September 30, September 30,
2013   2012 2013   2012
Interest related to TA’s Senior Notes and Credit Facility $ 2,731 $ 535 $ 7,845 $ 1,605
HPT rent classified as interest $ 1,757 1,816 5,242 5,436
Amortization of deferred financing costs 171 89 496 263
Capitalized interest (166 ) (806 )
Other   21   198   232   328
$ 4,514 $ 2,638 $ 13,009 $ 7,632

(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 $57,067 and $54,321 during the three month periods ended September 30, 2013 and 2012, respectively, while the total rent amounts expensed during the quarters ended September 30, 2013 and 2012, were $52,424 and $49,185, respectively. Cash paid under lease agreements was $169,391 and $162,275 during the nine month periods ended September 30, 2013 and 2012, respectively, while the total rent amounts expensed during the nine months ended September 30, 2013 and 2012, were $156,412 and $148,030, 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 liability. 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   Nine Months Ended
September 30, September 30,
2013   2012 2013   2012
 
Cash payments to HPT for rent $ 54,637 $ 51,867 $ 161,763 $ 154,973
Other cash rental payments   2,430   2,454   7,628   7,302
Total cash payments under real property leases 57,067 54,321 169,391 162,275
Adjustments for:
Change in accrued estimated percentage rent (111 ) 76 473 76
Adjustments to recognize rent on a straight line basis – HPT (483 ) (1,172 ) (1,383 ) (2,306 )
Adjustments to recognize rent on a straight line basis – other 2 29 27 191
Amortization of sale/leaseback financing obligation (525 ) (543 ) (1,547 ) (1,641 )
Portion of rent payments recognized as interest expense (1,757 ) (1,816 ) (5,242 ) (5,436 )
Amortization of deferred leasehold improvements allowance (1,692 ) (1,692 ) (5,077 ) (5,077 )
Amortization of deferred gain on sale/leaseback transactions   (77 )   (18 )   (230 )   (52 )
Total amount expensed as rent $ 52,424 $ 49,185 $ 156,412 $ 148,030

SUPPLEMENTAL SAME SITE OPERATING DATA

The following table presents operating data for all of the locations in operation on September 30, 2013, that were operated by TA continuously since the beginning of the earliest applicable period presented, with the exception of two locations TA operates that are owned by a joint venture. 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 September 30, Nine Months Ended September 30,
    Change     Change
2013 2012 Fav/(Unfav) 2013 2012 Fav/(Unfav)
Number of company operated locations 195 195   191 191  
 
Fuel sales volume (gallons) 478,374 485,129 (1.4) % 1,415,805 1,465,932 (3.4) %
 
Fuel revenues $ 1,535,620 $ 1,583,090 (3.0) % $ 4,542,954 $ 4,764,085 (4.6) %
Fuel gross margin $ 86,085 $ 83,009 3.7 % $ 243,222 $ 245,689 (1.0) %
 
Nonfuel revenues $ 370,661 $ 359,009 3.2 % $ 1,035,559 $ 1,008,252 2.7 %
Nonfuel gross margin $ 201,246 $ 197,118 2.1 % $ 568,619 $ 558,617 1.8 %
Nonfuel gross margin percentage 54.3 % 54.9 % (60) pts 54.9 % 55.4 % (50) pts
 
Total gross margin $ 287,331 $ 280,127 2.6 % $ 811,841 $ 804,306 0.9 %
Site level operating expenses $ 184,336 $ 176,858 4.2 % $ 532,600 $ 514,336 3.6 %
Site level operating expenses as a percentage of nonfuel revenues 49.7 % 49.3 % (40) pts 51.4 % 51.0 % (40) pts
Site level gross margin in excess of site level operating expense $ 102,995 $ 103,269 (0.3) % $ 279,241 $ 289,970 (3.7) %

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

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