TravelCenters of America (TA) News

Aug. 9, 2010 (Business Wire) -- TravelCenters of America LLC (NYSE Amex: TA) today announced financial results for the three and six months ended June 30, 2010.

In addition to the historical financial results prepared in accordance with generally accepted accounting principles and presented in this press release, TA is furnishing supplemental data that it believes may help investors better understand TA’s business. Included in this supplemental data is same site operating data that includes operating data for all of the travel centers in operation on June 30, 2010, that were operated by TA continuously since the beginning of the comparative periods presented. Also included is a presentation of earnings before interest, taxes, depreciation, amortization and rent, or EBITDAR. A reconciliation that shows the calculation of EBITDAR from net income (loss), the most directly comparable financial measure calculated and presented in accordance with generally accepted accounting principles, or GAAP, also appears in the supplemental data.

At June 30, 2010, TA’s business included 229 sites, 166 of which were operated under the “TravelCenters of America” or “TA” brand names and 63 of which were operated under the “Petro” brand name.

Business Commentary

TA’s results for the second quarter of 2010 compared to the second quarter of 2009 reflected favorable changes in net income (loss), which improved by $16.2 million, from a net loss of $15.0 million for the 2009 second quarter to net income of $1.2 million for the 2010 second quarter, and in EBITDAR, which increased by $18.9 million. The fuel margin per gallon TA achieved in the 2010 second quarter was a key factor in this improvement. Although other factors have an effect, fuel gross margins per gallon tend to be lower during periods of rising fuel prices and higher during periods of falling fuel prices. Although they were at a higher level than in the 2009 second quarter, fuel commodity prices trended lower throughout the second quarter of 2010. As a result, TA’s fuel gross margin per gallon increased as compared to the prior year when fuel commodity prices were rising and, combined with an increase in fuel sales volumes, resulted in total fuel gross margin that was $15.5 million higher in the second quarter of 2010 than the second quarter of 2009. Nonfuel sales for the 2010 second quarter and first half increased from the comparable periods of 2009 largely due to an increased number of customers in TA’s travel centers as a result of increased trucking activity. TA’s nonfuel gross margin as a percentage of nonfuel revenues on a same site basis for the second quarter of 2010 increased from the prior year quarter as a result of a shift in sales mix to relatively higher margin products and services, a reduced level of sales price discounting and lower purchase prices for certain nonfuel items. Additionally, operating expenses decreased as a percentage of nonfuel sales on a same site basis because certain of TA’s expenses are fixed in nature so increases in its revenues do not result in corresponding increases in its operating expenses.

During the second quarter of 2010, TA experienced an increase in same site fuel sales volume of 7.1%, compared with the second quarter of 2009. Similarly, during the first half of 2010 TA’s same site fuel volumes increased 8.1%, compared with the first half of 2009. These increases resulted from a combination of TA’s marketing and customer service initiatives and increased trucking activity attributable to increased economic activity in the U.S. during the second quarter and first half of 2010, compared to the same periods of the prior year. The second quarter same site fuel sales volume increase continued the positive trend that began in the fourth quarter of 2009 after the negative trend that had persisted since 2007 had moderated during the first three quarters of 2009. The following table presents the quarterly changes in fuel sales volumes on a same site basis compared to the same quarter of the prior year.

The trucking industry is the primary customer for TA’s goods and services. Freight and trucking demand in the U.S. generally reflects the level of commercial activity in the U.S. economy. The condition of the U.S. economy generally, and the financial condition and activity of the trucking industry in the U.S. specifically, impacted TA’s financial results during the first half of 2010 and TA expects these matters will continue to impact its financial results in future periods. During the first half of 2010, although the U.S. economy showed increased activity, the generally difficult economic conditions in the U.S. continued to present TA with significant operating challenges. While TA’s fuel sales volumes and nonfuel revenues in the second quarter and first half of 2010 both increased on a same site basis over the comparable periods of the prior year, these levels of activity continue to be well below those experienced before the recession from which the U.S. economy now may be recovering; however, the strength and sustainability of any such recovery is uncertain, including the risk that a possible “double dip” recession may occur.

Capital Expenditures and Liquidity

During the six months ended June 30, 2010, TA invested $15.8 million in capital projects and received $3.5 million of funding from its principal landlord, Hospitality Properties Trust, or HPT, pursuant to the tenant improvements allowance afforded TA under its lease with HPT with no corresponding increase in rent. TA’s current capital plan for 2010 anticipates expenditures of approximately $63 million, some of which may be funded by HPT under TA’s lease agreements with HPT. At June 30, 2010, $3.6 million of funding remained available, without an increase in rent payments, under the tenant improvements allowance from HPT, which amount would be discounted pursuant to the terms of the lease to the extent that TA receives the funds on an accelerated basis.

At June 30, 2010, TA had approximately $170.0 million in cash and cash equivalents. TA also maintains a $100 million revolving secured bank credit facility. At June 30, 2010, no amounts were outstanding under this facility; however $63.2 million of the facility was used to support letters of credit issued in the ordinary course of TA’s business. As more fully described in the notes to TA’s financial statements to be filed in TA’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2010, this facility is collateralized principally by a portion of TA’s inventory, accounts receivable and cash. TA also owns various unencumbered real estate and other assets that may be additional sources of liquidity over time, to the extent they can be financed or sold.

Pursuant to an arrangement with HPT, TA has the option to defer up to $5 million of rent for each month during 2010. TA has taken all deferrals available to date and at June 30, 2010, the total amount of deferred rent payable to HPT was $120 million. Any deferred rent and interest thereon not previously paid are due on July 1, 2011. In light of the recent and current economic, industry and global credit market conditions and TA’s historical operating losses, the availability and terms of any credit TA may be able to obtain are uncertain, which may limit the availability of TA’s sources of financing and affect TA’s ability to repay deferred rent due to HPT by July 1, 2011.

Industry Competition Update

On June 30, 2010, two of TA’s competitors, Pilot Travel Centers LLC and Flying J Inc., announced that they completed a merger, effective July 1, 2010, and that the new company would be called Pilot Flying J. That merger combined the first and second largest competitors in TA’s industry, based on diesel fuel sales volume. As a result of this combination, TA may see increased competitive pressure that could negatively impact its sales volumes and profitability. In addition, most of TA’s trucking customers transact business with TA by use of fuel cards, which are issued by third party fuel card companies. The fuel card industry has only a few significant participants, including Comdata, the largest issuer of fuel cards, and TCH, a company owned or affiliated with Pilot Flying J. TA is unable to determine the extent of the effect the combined Pilot Flying J may have on TA’s financial position, results of operations, or competitive position, although TA expects the combination may significantly alter the competitive conditions in the travel center industry. Further, TA is unable to determine the extent of the effect that competition, or lack thereof, between Comdata and TCH in particular, may result in future increases in TA’s transaction fee expenses or working capital requirements, or both.

Conference Call:

On August 9, 2010, at 10:00 a.m. Eastern Time, TA will host a conference call to discuss its financial results and other activities for the three and six months ended June 30, 2010. Following management’s remarks there will be a question and answer period.

The conference call telephone number is (888) 801-6497. Participants calling from outside the United States and Canada should dial (913) 312-0392. 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 (719) 457-0820. The replay pass code is 4342995.

A live audio webcast of the conference call will also be available in a listen only mode on TA’s web site at www.tatravelcenters.com. To access the webcast, participants should visit TA’s web site about five minutes before the call. The archived webcast will be available for replay on TA’s web site for about one week after the call. The recording and retransmission in any way of TA’s second quarter 2010 conference call is strictly prohibited without the prior written consent of TA.

About TravelCenters of America LLC:

TA’s travel centers operate under the “TravelCenters of America”, “TA” and “Petro” brand names and offer diesel and gasoline fueling services, restaurants, truck repair facilities, stores and other services. TA’s nationwide business includes travel centers located in 41 U.S. states and in Canada.

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 FEDERAL SECURITIES LAWS. ALSO, WHENEVER TA USES WORDS SUCH AS ‘‘BELIEVE’’, ‘‘EXPECT’’, ‘‘ANTICIPATE’’, ‘‘INTEND’’, ‘‘PLAN’’, ‘‘ESTIMATE’’ 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 THESE FORWARD LOOKING STATEMENTS AS A RESULT OF VARIOUS FACTORS. AMONG OTHERS, THE FORWARD LOOKING STATEMENTS WHICH APPEAR IN THIS PRESS RELEASE THAT MAY NOT OCCUR INCLUDE:

• THIS PRESS RELEASE STATES THAT TA’S FUEL SALES VOLUME ON A SAME SITE BASIS FOR THE SECOND QUARTER AND FIRST HALF OF 2010 INCREASED OVER THE SECOND QUARTER AND FIRST HALF OF 2009, RESPECTIVELY. THIS STATEMENT MAY IMPLY THAT ECONOMIC CONDITIONS IN THE U.S. GENERALLY AND THE TRUCKING AND TRAVEL CENTER INDUSTRIES IN PARTICULAR ARE IMPROVING AND THAT TA’S RESULTS OF OPERATIONS AND CASH FLOWS FROM OPERATIONS WILL IMPROVE IN THE FUTURE. HOWEVER, THE POSITIVE TREND IN FUEL SALES VOLUMES TA EXPERIENCED MAY BE THE RESULT OF INCREASED MARKET SHARE AND NOT AN IMPROVING MARKET OR MAY NOT CONTINUE. ACCORDINGLY, TA’S FUEL SALES VOLUMES MAY NOT CONTINUE TO INCREASE OR BE SUSTAINED;
• THIS PRESS RELEASE STATES THAT TA’S CAPITAL PLAN FOR 2010 ANTICIPATES EXPENDITURES OF APPROXIMATELY $63 MILLION. HOWEVER, THE AMOUNT AND TIMING OF CAPITAL PROJECT EXPENDITURES ARE OFTEN DIFFICULT TO PROJECT. SOME CAPITAL PROJECTS COST MORE THAN ANTICIPATED AND TA MAY SPEND MORE THAN $63 MILLION TO COMPLETE ITS CAPITAL PROJECTS. CURRENTLY UNANTICIPATED PROJECTS THAT ARE REQUIRED TO BE COMPLETED MAY ARISE AND CAUSE TA TO SPEND MORE THAN CURRENTLY ANTICIPATED. SOME CAPITAL PROJECTS TAKE MORE TIME THAN ANTICIPATED AND TA MAY NOT COMPLETE THESE CAPITAL PROJECTS IN 2010. AS A RESULT OF MARKET CONDITIONS, TA MAY DEFER CERTAIN CAPITAL PROJECTS AND SUCH DEFERRAL MAY HARM TA’S BUSINESS OR REQUIRE IT TO MAKE LARGER AMOUNTS OF CAPITAL EXPENDITURES IN THE FUTURE;
• THE STATEMENTS IN THIS PRESS RELEASE THAT TA HAD $170 MILLION OF CASH AND CASH EQUIVALENTS AT JUNE 30, 2010, THAT THERE WERE NO AMOUNTS OUTSTANDING UNDER TA’S BANK CREDIT FACILITY, AND THAT TA OWNS UNENCUMBERED REAL ESTATE AND OTHER ASSETS THAT MAY BE ADDITIONAL SOURCES OF LIQUIDITY OVER TIME MAY IMPLY THAT TA HAS ABUNDANT WORKING CAPITAL AND CASH LIQUIDITY. IN FACT, TA’S REGULAR OPERATIONS REQUIRE LARGE AMOUNTS OF WORKING CASH; AS OF JUNE 30, 2010, $63.2 MILLION OF TA’S BANK CREDIT FACILITY WAS USED TO SECURE LETTERS OF CREDIT FOR TA’S SUPPLIERS, TA HAS COLLATERALIZED THIS FACILITY WITH A PORTION OF ITS WORKING CAPITAL ITEMS, INCLUDING A PORTION OF ITS CASH, AND TA DOES NOT KNOW THE EXTENT TO WHICH IT COULD MONETIZE ITS EXISTING UNENCUMBERED REAL ESTATE. ACCORDINGLY, TA MAY NOT HAVE SUFFICIENT WORKING CAPITAL OR CASH LIQUIDITY; AND
• TA’S DESCRIPTION OF THE RENT DEFERRAL AGREEMENT WITH HPT MAY IMPLY THAT THE RENT DEFERRAL AMOUNTS TOGETHER WITH TA’S CASH ON HAND AND CASH PROVIDED BY TA’S OPERATING ACTIVITIES WILL BE SUFFICIENT TO ALLOW TA TO GENERATE POSITIVE CASH FLOW FROM OPERATIONS AND TO MEET ITS OBLIGATIONS. IN FACT, TA MAY NOT BE ABLE TO GENERATE POSITIVE CASH FLOW FROM OPERATIONS OR TO MEET ITS OBLIGATIONS, INCLUDING THE PAYMENT TO HPT BY JULY 1, 2011, OF ALL UNPAID DEFERRED RENT (AND INTEREST THEREON).

THESE AND OTHER UNEXPECTED RESULTS MAY BE CAUSED BY VARIOUS FACTORS, SOME OF WHICH ARE BEYOND TA’S CONTROL, INCLUDING:

• FUTURE FUEL PRICE INCREASES, FUEL PRICE VOLATILITY, COMPETITION OR OTHER FACTORS MAY CAUSE TA TO NEED MORE WORKING CAPITAL TO MAINTAIN ITS INVENTORIES AND CARRY ITS ACCOUNTS RECEIVABLE THAN TA NOW EXPECTS;

• IN THE PAST, INCREASES IN FUEL PRICES HAVE REDUCED THE DEMAND FOR THE PRODUCTS AND SERVICES THAT TA SELLS BECAUSE HIGH FUEL PRICES MAY HAVE ENCOURAGED FUEL CONSERVATION, DIRECTED FREIGHT BUSINESS AWAY FROM TRUCKING OR OTHERWISE ADVERSELY AFFECTED THE BUSINESS OF TA’S CUSTOMERS. FUTURE INCREASES IN FUEL PRICES MAY HAVE SIMILAR AND OTHER ADVERSE EFFECTS ON TA’S BUSINESS;
• TA’S SUPPLIERS MAY BE UNWILLING OR UNABLE TO MAINTAIN CURRENT TERMS FOR PURCHASES ON CREDIT. IF TA IS UNABLE TO PURCHASE GOODS ON REASONABLE CREDIT TERMS, TA’S REQUIRED WORKING CAPITAL MAY INCREASE AND TA MAY INCUR MATERIAL LOSSES. ALSO, IN LIGHT OF THE RECENT AND CURRENT ECONOMIC, INDUSTRY AND GLOBAL CREDIT MARKET CONDITIONS AND TA’S HISTORICAL OPERATING LOSSES, THE AVAILABILITY AND THE TERMS OF ANY CREDIT TA MAY BE ABLE TO OBTAIN ARE UNCERTAIN. TA’S $100 MILLION REVOLVING CREDIT FACILITY EXPIRES IN 2012. TA’S FAILURE TO RENEW ITS EXISTING CREDIT FACILITY OR TO OBTAIN NEW OR SUBSTITUTE FINANCING ON REASONABLE TERMS WOULD ADVERSELY AFFECT TA’S ABILITY TO FUND ITS BUSINESS AND OPERATIONS. IN ADDITION, TA IS OBLIGATED TO PAY HPT ALL DEFERRED RENT AND UNPAID INTEREST THEREON BY JULY 1, 2011. AS OF JUNE 30, 2010, TA HAS DEFERRED AN AGGREGATE OF $120 MILLION OF RENT AND MAY DEFER UP TO AN ADDITIONAL $30 MILLION OF RENT THROUGH 2010. THERE CAN BE NO ASSURANCES THAT TA WILL HAVE THE NECESSARY FUNDING TO REPAY BY JULY 1, 2011, ALL AMOUNTS OF DEFERRED RENT AND INTEREST THEREON;
• IF THE RECENT DIFFICULT U.S. ECONOMIC AND TRUCKING INDUSTRY CONDITIONS CONTINUE, WORSEN OR LAST FOR AN EXTENDED PERIOD, TA’S CUSTOMERS MAY PURCHASE LESS OF TA’S GOODS AND SERVICES AND TA MAY SUFFER LOSSES;
• TA IS CURRENTLY INVOLVED IN SEVERAL LITIGATION MATTERS. DISCOVERY AND COURT DECISIONS DURING LITIGATION OFTEN RESULT IN UNANTICIPATED RESULTS. LITIGATION IS USUALLY EXPENSIVE AND DISTRACTING TO MANAGEMENT. TA CAN PROVIDE NO ASSURANCE AS TO THE OUTCOME OF ANY OF THE LITIGATION MATTERS IN WHICH IT IS INVOLVED; AND
• AS A RESULT OF THE LARGE VOLUME OF PUBLIC TRADING IN TA’S SHARES DURING 2007, TA EXPERIENCED A CHANGE IN OWNERSHIP AS DEFINED BY SECTION 382 OF THE INTERNAL REVENUE CODE, OR THE CODE. CONSEQUENTLY, TA IS UNABLE TO USE ITS NET OPERATING LOSS GENERATED IN 2007 TO OFFSET ANY FUTURE TAXABLE INCOME TA MAY REALIZE. IF TA EXPERIENCES ADDITIONAL CHANGES IN OWNERSHIP, AS DEFINED IN THE CODE, ITS NET OPERATING LOSSES GENERATED AFTER 2007 COULD ALSO BE SUBJECT TO LIMITATIONS ON USAGE.

TA HAS PRODUCED PROFITABLE OPERATIONS IN ONLY THREE QUARTERLY REPORTING PERIODS SINCE IT BECAME A PUBLICLY OWNED COMPANY ON JANUARY 31, 2007. ALTHOUGH TA’S PLANS ARE INTENDED TO CREATE PROFITABLE OPERATIONS, THERE CAN BE NO ASSURANCE THAT THESE PLANS WILL SUCCEED.

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 ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 2009, UNDER “WARNING CONCERNING FORWARD LOOKING STATEMENTS” AND “RISK FACTORS” AND UNDER THOSE SECTIONS AND ELSEWHERE IN TA’S QUARTERLY REPORT ON FORM 10-Q FOR THE QUARTER ENDED JUNE 30, 2010.

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.

These condensed financial statements should be read in conjunction with TA’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2010, to be filed with the Securities and Exchange Commission.

These condensed financial statements should be read in conjunction with TA’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2010, to be filed with the Securities and Exchange Commission.

These condensed financial statements should be read in conjunction with TA’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2010, to be filed with the Securities and Exchange Commission.

SUPPLEMENTAL SAME SITE OPERATING DATA

The following table presents operating data for all of the travel centers in operation on June 30, 2010, that were operated by TA since January 1, 2009. This data excludes revenues and expenses that were not generated by TA, such as rents and royalties from franchises, and corporate level selling, general and administrative expenses.