TravelCenters of America LLC Announces First Quarter 2019 Financial Results

First Quarter Fuel Sales Volume Increased 3.0%

Nonfuel Revenues Increased 4.0%

WESTLAKE, Ohio–(BUSINESS WIRE)–TravelCenters of America LLC (Nasdaq: TA) today announced financial
results for the three months ended March 31, 2019:

(in thousands, except per share amounts)         Three Months Ended
March 31,
2019     2018
Loss from continuing operations $ (12,729 ) $ (6,027 )
Net loss (12,729 ) (10,078 )
Net loss attributable to common shareholders (12,747 ) (10,112 )
 

Loss per common share from continuing operations attributable to
common shareholders (basic and diluted)

$ (0.32 ) $ (0.15 )
 
Non-GAAP Measures:(1)
Adjusted loss from continuing operations $ (14,576 ) $ (22,136 )

Adjusted loss per common share from continuing operations
attributable to common shareholders (basic and diluted)

$ (0.36 ) $ (0.55 )
EBITDA $ 13,813 $ 14,385
Adjusted EBITDA 11,360 (2,957 )
(1)     Reconciliations from loss from continuing operations, loss per
common share from continuing operations attributable to common
shareholders and net 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.

Andrew J. Rebholz, TA’s CEO, made the following statement regarding the
2019 first quarter results:

« We believe our operating results for the first quarter of 2019
demonstrated that the business initiatives and plans we outlined earlier
this year are continuing to succeed. During the 2019 first quarter both
fuel sales volume and nonfuel revenues showed solid growth, improving by
3.0% and 4.0%, respectively, in total and by 2.0% and 2.7%,
respectively, on a same site basis as compared to the prior year
quarter. These improvements were aided by our introduction of our
revamped UltraONE 2.0 loyalty program that customers are embracing.
Designed to incentivize and reward customers for their loyalty while
providing the TA full service array of redemption offers to suit
customers’ varying needs, this program attracted approximately 30,000
new and reactivated members in the first quarter. In addition, we kept
our site level operating expense in line with our nonfuel revenue
increases, experiencing only a slight 20 basis point increase in the
ratio of those expenses to nonfuel revenues that is due in part to
increased staffing in advance of increased business in our truck service
programs.

« While we sustained a net loss for the quarter of $12.7 million that is
$2.7 million more than the prior year quarter, the net loss for the 2019
first quarter is less than it was in the first quarter of 2018 after
removing the effects of the one time items included in each period’s
GAAP results. Adjusted EBITDA for 2019 of $11.4 million is an
improvement of $14.3 million over the 2018 first quarter. It is worth
noting that a net loss is not unusual for our first quarter because the
first quarter typically generates our weakest financial results given
the seasonality in our business.

« Our efforts to reduce leverage following the December 2018 sale of our
standalone convenience stores business culminated in the January 2019
transactions with Hospitality Properties Trust that reduced our annual
minimum rent payable to HPT by $43.1 million and contributed to our
improved adjusted loss from continuing operations and adjusted EBITDA,
as well as to a $10.0 million increase over the 2018 first quarter in
our cash provided by operations.

« Additionally, our network expansion program is underway. Thus far in
2019, we have signed franchise agreements for four sites and have a
robust pipeline of potential additional franchisees. This success to
date buoys our confidence that our network expansion can be a largely
asset-light growth area, although we do also have a pipeline of site
acquisition opportunities being pursued. I believe the momentum of the
first quarter’s results combined with the strength of our business plans
will translate to increased EBITDA and cash flow this year. »

Financial Results Commentary

Fuel: The following table presents details for TA’s fuel sales
during the quarter.

(in thousands, except per gallon amounts)         Three Months Ended
March 31,
   
2019     2018 Change
Fuel sales volume (gallons):
Diesel fuel 408,422 391,740 4.3 %
Gasoline 63,480   66,506   (4.5 )%
Total fuel sales volume 471,902   458,246   3.0 %
 
Fuel revenues $ 983,141 $ 986,345 (0.3 )%
Fuel gross margin 74,747 82,897 (9.8 )%
Adjusted fuel gross margin(1) 71,907 59,646 20.6 %
Fuel gross margin per gallon $ 0.158 $ 0.181 (12.7 )%
Adjusted fuel gross margin per gallon(1) 0.152 0.130 16.9 %
(1)     The 2019 amount excludes $2.8 million of a one time reversal of
loyalty award accruals recognized in connection with introducing a
revised customer loyalty program and the 2018 amount excludes the
$23.3 million benefit from the federal biodiesel blenders’ tax
credit that the U.S. government retroactively reinstated for 2017 in
February 2018. The U.S. government has not yet reinstated the
federal biodiesel blenders’ tax credit for 2018 or 2019. See the
reconciliations from fuel gross margin in total and per gallon in
the supplemental tables below.

Fuel sales volume for the 2019 first quarter increased by 13.7
million gallons, or 3.0%, as compared to the 2018 first quarter due to
the following factors:

  • a same site fuel sales volume increase of 9.0 million gallons,
    or 2.0%, which primarily resulted from improved market conditions and
    the success of TA’s marketing initiatives; and
  • a net increase of 4.7 million gallons at sites opened or closed since
    the beginning of the 2018 first quarter.

Fuel revenues decreased by $3.2 million, or 0.3%, in the 2019
first quarter as compared to the 2018 first quarter, primarily due to
the following factors:

  • a decrease in market prices for fuel during the 2019 first quarter; and
  • the increase in fuel sales volume, which partially offset the decrease
    in market prices for fuel.

Fuel gross margin for the 2019 first quarter decreased by $8.2 million,
or 9.8%, as compared to the 2018 first quarter, primarily due to the
following factors:

  • the $23.3 million benefit recognized in the first quarter of 2018 in
    connection with the February 2018 reinstatement for 2017 of the
    federal biodiesel blenders’ tax credit that did not recur in the first
    quarter of 2019; and
  • the 13.7 million gallon increase in fuel sales volume and a more
    favorable fuel purchasing environment in the 2019 first quarter.

Although, the U.S. government has not yet retroactively reinstated the
federal biodiesel blenders’ tax credit for 2018 or 2019, TA believes the
U.S. government may do so by the third quarter of 2019. If the federal
biodiesel blenders’ tax credit is reinstated for 2018 and 2019, TA
expects to recognize reductions in fuel cost of goods sold of
approximately $35.0 million relating to 2018 and $5.9 million relating
to the 2019 first quarter in the period the U.S. government enacts the
tax credit reinstatement. Although TA believes reinstatement of this
credit is possible, TA cannot be certain that the U.S. government will
choose to do so.

Nonfuel: The following table presents details for TA’s nonfuel
revenues during the quarter.

(in thousands)         Three Months Ended
March 31,
   
2019     2018 Change
Nonfuel revenues:
Store and retail services $ 180,425 $ 170,390 5.9 %
Truck service 161,195 156,520 3.0 %
Restaurants 99,254   96,965   2.4 %
Total nonfuel revenues 440,874   423,875   4.0 %
 
Nonfuel gross margin 272,606 262,464 3.9 %
Nonfuel gross margin percentage 61.8 % 61.9 % (10 )pts

Nonfuel revenues increased by $17.0 million, or 4.0%, in the 2019
first quarter as compared to the 2018 first quarter, due to the
following factors:

  • an $11.5 million same site increase primarily due to the positive
    impact of certain of TA’s marketing initiatives in store and retail
    services and growth in TA’s truck service program; and
  • a $5.5 million net increase attributable to sites opened and closed
    since the beginning of the 2018 first quarter.

Nonfuel gross margin increased by $10.1 million, or 3.9%, in the 2019
first quarter as compared to the 2018 first quarter, due to the
following factors:

  • the $17.0 million increase in nonfuel revenues; and
  • a slight decline in the nonfuel gross margin percentage that primarily
    resulted from a change in mix of products and services sold, which
    partially offset the increase in nonfuel revenues.

Loss from continuing operations and adjusted loss from continuing
operations
: Loss from continuing operations for the 2019
first quarter was $12.7 million, as compared to $6.0 million for the
2018 first quarter. The larger loss in the 2019 period is due to the
$23.3 million benefit related to the federal biodiesel blenders’ tax
credit recognized in the 2018 period not recurring in 2019. Adjusted
loss from continuing operations for the 2019 first quarter was $14.6
million, as compared to $22.1 million for the 2018 first quarter. The
improvement in adjusted loss from continuing operations is primarily due
to an improvement in site level gross margin in excess of site level
operating expense, after excluding the federal biodiesel blenders’ tax
credit recognized in the 2018 first quarter.

(in thousands)         Three Months Ended
March 31,
   
2019     2018 Change
Fuel gross margin(1) $ 74,747 $ 82,897 (9.8 )%
Nonfuel gross margin 272,606 262,464 3.9 %
Rent and royalties from franchisees gross margin 3,277   4,110   (20.3 )%
Total site level gross margin(1) 350,630 349,471 0.3 %
Less: site level operating expense 232,720   223,012   4.4 %
Site level gross margin in excess of site level operating expense(1) $ 117,910   $ 126,459   (6.8 )%
Site level operating expense as a percentage of nonfuel revenues 52.8 % 52.6 % 20 pts
(1)     The 2019 amount includes $2.8 million of a one time reversal of
loyalty award accruals recognized in connection with introducing a
revised customer loyalty program and the 2018 amount includes the
$23.3 million benefit from the federal biodiesel blenders’ tax
credit that was retroactively reinstated for 2017 in February 2018.

Net loss and adjusted EBITDA: Net loss for the 2019 first quarter
decreased by $2.7 million, as compared to the 2018 first quarter and
adjusted EBITDA for the 2019 first quarter increased by $14.3 million,
as compared to the 2018 first quarter.

Lease Amendments and Travel Center Purchases

In January 2019, TA acquired from Hospitality Properties Trust, or HPT,
20 travel centers it previously leased from HPT for $309.6 million,
including $1.4 million of transaction related costs, and amended its
leases with HPT such that: (i) the 20 purchased travel centers were
removed from the HPT leases and TA’s annual minimum rent was reduced by
$43.1 million; (ii) the term of each of the five leases was extended by
three years; (iii) the amount of the deferred rent obligation to be paid
to HPT was reduced to $70.5 million and TA agreed to pay that amount in
16 equal quarterly installments beginning April 1, 2019; and (iv)
commencing with the year ended December 31, 2020, TA will be obligated
to pay to HPT an additional amount of percentage rent equal to one-half
percent (0.5%) of the excess of the annual nonfuel revenues at leased
sites over the nonfuel revenues for each respective site for the year
ending December 31, 2019.

Growth Strategies

Thus far in 2019, TA has signed four franchise agreements with a
franchisee under the TA Express brand name. TA anticipates these four TA
Express branded travel centers will be added to its network by the 2020
first quarter. In addition, TA has signed agreements with this
franchisee pursuant to which TA expects to add two additional TA Express
branded travel centers to its network, one within five years and one
within ten years.

Adoption of New Lease Accounting Standard

In February 2016, the Financial Accounting Standards Board, or the FASB,
issued Accounting Standards Update 2016-02, Leases, or ASU
2016-02, and in August 2018, the FASB issued Accounting Standards Update
2018-11, Targeted Improvements to ASC 842, or ASU 2018-11, collectively
referred to as ASC 842, which established a comprehensive lease
standard under GAAP for virtually all industries. TA adopted ASC 842 on
January 1, 2019, using the modified retrospective transition method, and
elected to not restate prior year comparative periods. As a result of
adopting ASC 842 on January 1, 2019, TA recognized operating lease
assets of $1.8 billion, operating lease liabilities of $2.0 billion and
an adjustment to its beginning accumulated deficit of $86.2 million.

Conference Call

On Tuesday, May 7, 2019, at 10:00 a.m. Eastern time, TA will host a
conference call to discuss its financial results and other activities
for the three months ended March 31, 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 10130290.

A live audio webcast of the conference call will also be available in a
listen only mode on TA’s website at www.ta-petro.com.
To access the webcast, participants should visit TA’s website about five
minutes before the call. The archived webcast will be available for
replay on TA’s website for about one week after the call. The
transcription, recording and retransmission in any way of TA’s first
quarter conference call is strictly prohibited without the prior written
consent of TA.
The Company’s website is not incorporated as part of
this press release.

About TravelCenters of America LLC

TA’s nationwide business includes travel centers located in 43 U.S.
states and in Canada and standalone restaurants in 14 states. TA’s
travel centers operate under the « TravelCenters of America, » « TA, » « TA
Express, » « Petro Stopping Centers » and « Petro » brand names and offer
diesel and gasoline fueling, 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 restaurants operate principally under
the « Quaker Steak & Lube » brand name.

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 nonfuel
    gross margins may imply that TA’s business may be profitable in the
    future. However, certain of those improvements resulted from unique
    items that may not occur in the future. In addition, 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;
  • Statements that TA’s purchase of 20 travel centers from HPT reduced
    TA’s annual minimum rent payable to HPT by $43.1 million. TA’s travel
    centers are open for business 24 hours per day, 365 days per year. Due
    to the nature and intensity of the uses of TA’s locations, they
    require regular and substantial expenditures for maintenance and
    capital investments to remain functional and attractive to customers.
    The reduction in annual minimum rent TA achieved by purchasing travel
    centers from HPT may be temporary and subsequently offset by increases
    to the annual minimum rent payable to HPT as a result of HPT’s
    purchase of qualifying improvements TA makes to its leased travel
    centers or other transactions;
  • Statements about TA’s belief that the U.S. government may
    retroactively reinstate the federal biodiesel blenders’ tax credit for
    2018 and 2019 by the third quarter of 2019 and the amounts by which
    that credit may reduce TA’s fuel cost of goods sold in the period the
    U.S. government enacts the tax credit reinstatement. However, the U.S.
    government may not retroactively reinstate this tax credit at the
    level TA expects or at all and TA may not realize the reductions in
    its fuel cost of goods sold that it expects;
  • Statements about the improvements experienced as a result of TA’s
    revamped UltraONE 2.0 customer loyalty program may imply that TA’s
    operating results will improve and that its business may be profitable
    in the future. However, the increased interest in the UltraONE 2.0
    customer loyalty program may be temporary and may not continue in
    future periods, and may not result in improved operating results;
  • Statements about experiencing increased site level operating expense
    due to staffing in advance of increased business in TA’s truck service
    programs may imply that TA will in fact realize increased business in
    its truck service programs and that its operating results will improve
    as a result. However, TA’s ability to realize increased business will
    depend on, among other things, customer demand, TA’s ability to offer
    competitive services and TA’s ability to procure customer orders and
    purchases of those services. TA may not succeed in increasing business
    in its truck service business and TA may not realize profits from any
    such increased business;
  • Statements about the seasonality of TA’s business and that it is not
    unusual for TA to realize a net loss for the first quarter of the year
    in light of that seasonality may imply that TA’s business will be
    profitable in future quarters and that TA will experience net income
    in those quarters. However, TA’s business is subject to various risks
    and uncertainties. As a result, TA may fail to realize net income in
    future quarters;
  • Statements about the franchise agreements TA entered with a franchisee
    pursuant to which TA expects to add up to six TA Express branded
    travel centers to its network, as well as, the pipeline of site
    acquisition opportunities being pursued. 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.
    In addition, acquisition opportunities may not occur or may subject TA
    to greater risks than anticipated. These opportunities may not result
    in the increased EBITDA and cash flows as expected; and
  • Statements about TA’s belief that the momentum of TA’s 2019 first
    quarter results combined with the strength of TA’s business plans will
    translate to increased EBITDA and cash flow in 2019 may imply that TA
    will in fact realize these increases in EBITDA and cash flow. However,
    TA’s business is subject to various risks and uncertainties, the
    positive momentum that TA believes exists may not exist or could stop
    or reverse, and TA’s business plan may prove to not be successful. As
    a result, TA may not experience increased EBITDA and cash flow in 2019
    and its EBITDA and cash flow could decline in 2019 and future periods.

The information contained in TA’s periodic reports, including TA’s
Annual Report on Form 10-K for the year ended December 31, 2018, which
has been filed with the U.S. Securities and Exchange Commission, or SEC,
and TA’s Quarterly Report on Form 10-Q for the period ended March 31,
2019, which has been or will be filed with the SEC, under the caption
« Risk Factors, » or elsewhere in those reports, or incorporated therein,
identifies other important factors that could cause differences from
TA’s forward-looking statements. TA’s filings with the SEC are available
on the SEC’s website at www.sec.gov.

You should not place undue reliance upon forward-looking statements.

Except as required by law, TA does not intend to update or change any
forward-looking statement as a result of new information, future events
or otherwise.

 

TRAVELCENTERS OF AMERICA LLC
CONSOLIDATED STATEMENTS OF
OPERATIONS (UNAUDITED)
(in thousands, except per share
amounts)

       
Three Months Ended
March 31,
2019     2018
Revenues:
Fuel $ 983,141 $ 986,345
Nonfuel 440,874 423,875
Rent and royalties from franchisees 3,277   4,110  
Total revenues 1,427,292   1,414,330  
 
Cost of goods sold (excluding depreciation):
Fuel 908,394 903,448
Nonfuel 168,268   161,411  
Total cost of goods sold 1,076,662 1,064,859
 
Site level operating expense 232,720 223,012
Selling, general and administrative expense 37,110 36,494
Real estate rent expense 66,413 70,236
Depreciation and amortization expense 24,759   20,546  
 
Loss from operations (10,372 ) (817 )
 
Interest expense, net 7,050 7,580
Other expense, net 574   1,293  
Loss before income taxes and discontinued operations (17,996 ) (9,690 )
Benefit for income taxes 5,267   3,663  
Loss from continuing operations (12,729 ) (6,027 )
Loss from discontinued operations, net of taxes   (4,051 )
Net loss (12,729 ) (10,078 )
Less: net income for noncontrolling interest 18   34  
Net loss attributable to common shareholders $ (12,747 ) $ (10,112 )
 
Net loss per common share attributable to common shareholders:
Basic and diluted from continuing operations $ (0.32 ) $ (0.15 )
Basic and diluted from discontinued operations (0.10 )
Basic and diluted (0.32 ) (0.25 )

These financial statements should be read in conjunction with
TA’s Quarterly Report on Form 10-Q for the quarter ended March 31,
2019, to be filed with the U.S. Securities and Exchange Commission.

TRAVELCENTERS OF AMERICA LLC
RECONCILIATION OF NON-GAAP FINANCIAL
MEASURES
(in thousands, except per share amounts 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 common share from continuing operations attributable to common
shareholders, 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.

Contacts

Katie Strohacker, Senior Director of Investor Relations
(617)
796-8251
www.ta-petro.com

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