<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
----------------------------
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended June 30, 1999
Commission file number 333-26497
----------------------------
TRAVELCENTERS OF AMERICA, INC.
(Exact name of Registrant as specified in its charter)
DELAWARE 36-3856519
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
24601 Center Ridge Road, Suite 200
Westlake, OH 44145-5634
(Address of principal executive offices, including zip code)
(440) 808-9100
(Telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
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TRAVELCENTERS OF AMERICA, INC.
This Quarterly Report on Form 10-Q contains historical information and
forward-looking statements. Statements looking forward in time are included in
this Form 10-Q pursuant to the "safe harbor" provisions of the Private
Securities Litigation Reform Act of 1995. They involve known and unknown risks
and uncertainties that may cause the Company's actual results to differ from
future performance suggested herein. In the context of forward-looking
information provided in this Form 10-Q and in other reports, please refer to the
discussion of risk factors detailed in, as well as the other information
contained in, the Company's filings with the Securities and Exchange Commission.
<TABLE>
<CAPTION>
INDEX PAGE NO.
----- --------
<S> <C> <C>
PART I. FINANCIAL INFORMATION
Item 1. Consolidated Balance Sheet as of June 30, 1999 and December 3
31, 1998
Unaudited Consolidated Statement of Income and Retained Earnings 4
(Deficit) for the three months ended June 30, 1999 and 1998
and for the six months ended June 30, 1999 and 1998
Unaudited Consolidated Statement of Cash Flows for the six months 5
ended June 30, 1999 and 1998
Selected Notes to Unaudited Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial Condition 19
and Results of Operations
Item 3. Quantitative and Qualitative Disclosures
About Market Risk 24
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 25
Item 4. Submission of Matters to a Vote of Security Holders 25
Item 6. Exhibits and Reports on Form 8-K 25
SIGNATURE 26
</TABLE>
2
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TRAVELCENTERS OF AMERICA, INC.
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1999 1998
(UNAUDITED)
------------------------------
ASSETS (IN THOUSANDS OF DOLLARS)
<S> <C> <C>
Current assets:
Cash (Note 3)..................................................................... $ 20,468 $ 89,200
Accounts receivable (less allowance for doubtful accounts of $4,030 for 1999
and $3,907 for 1998)........................................................... 62,115 61,012
Inventories....................................................................... 48,895 42,952
Deferred income taxes............................................................. 5,235 4,459
Other current assets.............................................................. 21,767 12,619
---------- ----------
Total current assets......................................................... 158,480 210,242
Notes receivable, net................................................................ 1,500 1,239
Property and equipment, net.......................................................... 444,632 361,803
Intangible assets.................................................................... 33,456 21,141
Deferred financing costs............................................................. 8,663 9,284
Deferred income taxes................................................................ - 2,924
Other assets......................................................................... 3,361 3,428
---------- ----------
Total assets................................................................. $ 650,092 $ 610,061
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current maturities of long-term debt.............................................. $ 1,594 $ 1,594
Accounts payable.................................................................. 26,875 20,915
Other accrued liabilities......................................................... 89,799 88,165
---------- ----------
Total current liabilities.................................................... 118,268 110,674
Commitments and contingencies (Note 8)
Long-term debt....................................................................... 415,122 390,865
Deferred income taxes................................................................ 4,574 937
Other long-term liabilities.......................................................... 10,783 9,162
---------- ----------
548,747 511,638
Mandatorily redeemable senior convertible participating preferred stock.............. 74,697 69,974
Other preferred stock, common stock and other stockholders' equity................... 46,356 43,547
Retained deficit..................................................................... (19,708) (15,098)
---------- ----------
26,648 28,449
---------- ----------
Total liabilities and stockholders' equity................................... $ 650,092 $ 610,061
========== ==========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
3
<PAGE> 4
TRAVELCENTERS OF AMERICA, INC.
UNAUDITED CONSOLIDATED STATEMENT OF INCOME AND RETAINED EARNINGS (DEFICIT)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
----------------------------- -----------------------------
1999 1998 1999 1998
-------------- -------------- -------------- --------------
(IN THOUSANDS OF DOLLARS EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C>
Revenues:
Fuel.............................................................. $ 217,828 $ 137,914 $ 381,286 $ 270,522
Nonfuel........................................................... 119,036 86,187 218,742 161,224
Rent and royalties................................................ 5,507 5,436 10,572 11,114
---------- ---------- ---------- ----------
Total revenues.................................................... 342,371 229,537 610,600 442,860
Cost of revenues (excluding depreciation)............................ 241,567 157,373 423,245 304,583
---------- ---------- ---------- -------
Gross profit (excluding depreciation)................................ 100,804 72,164 187,355 138,277
Operating expenses................................................... 65,601 45,511 124,336 90,001
Selling, general and administrative expenses......................... 10,375 9,428 19,661 18,368
Transition expense................................................... 1,192 881 1,647 1,874
Depreciation and amortization expense................................ 10,558 8,027 21,767 24,571
Loss on sales of property and equipment.............................. 210 101 260 144
Stock compensation expense........................................... 900 875 1,800 1,750
---------- ---------- ---------- ----------
Income from operations............................................... 11,968 7,341 17,884 1,569
Interest expense, net................................................ (9,136) (6,144) (17,503) (12,134)
---------- ---------- ---------- ----------
Income (loss) before income taxes.................................... 2,832 1,197 381 (10,565)
Provision (benefit) for income taxes................................. 1,042 519 268 (3,960)
---------- ---------- ---------- ----------
Net income (loss).................................................... 1,790 678 113 (6,605)
Less: preferred dividends......................................... (2,361) (2,073) (4,723) (4,145)
Retained earnings (deficit) - beginning of the period................ (19,137) (7,801) (15,098) 1,554
---------- ---------- ---------- ----------
Retained (deficit) - end of the period............................... $ (19,708) $ (9,196) $ (19,708) $ (9,196)
=========== ========== =========== ==========
Earnings per common share (basic and diluted) $ (0.91) $ (2.34) $ (7.51) $ (17.59)
========== ========== ========== ==========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
4
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TRAVELCENTERS OF AMERICA, INC.
UNAUDITED CONSOLIDATED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30,
------------------------------
1999 1998
------------------------------
(IN THOUSANDS OF DOLLARS)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) .......................................................... $ 113 $ (6,605)
Adjustments to reconcile net income (loss) to net cash provided by
operating activities:
Depreciation and amortization expense.................................... 21,767 24,571
Deferred income tax provision............................................ 570 (4,904)
Provision for doubtful accounts.......................................... 771 568
Provision for stock compensation......................................... 1,800 1,750
Loss on sales of property and equipment.................................. 260 144
Changes in assets and liabilities, adjusted for the effects of business
acquisitions:
Accounts receivable.................................................... 3,863 (4,115)
Inventories............................................................ 215 (2,920)
Other current assets................................................... (9,056) 674
Accounts payable....................................................... (941) 6,097
Other current liabilities.............................................. (10,588) 5,094
Other, net............................................................... (89) (1,039)
---------- ----------
Net cash provided by operating activities................................ 8,685 19,315
---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Business acquisitions....................................................... (57,044) (1,828)
Proceeds from sales of property and equipment............................... 209 137
Capital expenditures........................................................ (44,838) (29,649)
---------- ----------
Net cash used in investing activities.................................... (101,673) (31,340)
-------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Revolving loan borrowings................................................... 25,000 -
Long-term debt repayments................................................... (744) (250)
Repurchase of common stock.................................................. - (375)
---------- ----------
Net cash provided by (used in) financing activities...................... 24,256 (625)
---------- ----------
Net (decrease) in cash................................................. (68,732) (12,650)
Cash at the beginning of the period............................................ 89,200 71,756
---------- ----------
Cash at the end of the period.................................................. $ 20,468 $ 59,106
========== ==========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
5
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TRAVELCENTERS OF AMERICA, INC.
------------------------------
SELECTED NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
-------------------------------------------------------------
1. BUSINESS DESCRIPTION AND SUMMARY OF OPERATING STRUCTURE
The Company is a nationwide marketer of truck and auto fuel and related
products and services through a network of 159 full-service travel centers (the
"Network") in 40 states. Of the Network locations at June 30, 1999, the Company
owns or leases 149 locations, 30 of which are leased to independent
lessee-franchisees ("Operators") of the Company ("Leased Sites"), and 119 of
which are operated by the Company ("Company-operated Sites"). Ten locations are
owned or leased and operated by independent franchisees ("Franchisee-Owners") of
the Company ("Franchisee-Owner Sites"). The Company purchases and resells diesel
fuel, gasoline and other travel center products and services to consumers,
commercial fleets, operators and independent franchisees; provides fleet credit
card and customer information services through its proprietary ACCESS 76 billing
system; conducts centralized purchasing programs; creates promotional programs;
and, as a franchisor, assists the Operators and Franchisee-Owners in providing
service to commercial fleets and the motoring public.
The Company was incorporated on December 2, 1992 as National/Auto
Truckstops Holdings Corporation. The Company's name was changed to TravelCenters
of America, Inc. in March 1997. In April 1993, the Company acquired (the
"National Acquisition") the truckstop network assets operated under the Unocal
76 trademarks (the "National Network") from a subsidiary of Unocal Corporation
(together with its subsidiaries "Unocal") and in December 1993 acquired (the "TA
Acquisition") the truckstop network assets operated under the TA trademarks (the
"TA Network") from subsidiaries of The British Petroleum Company p.l.c.
(together with its subsidiaries "BP"). In December 1998, the Company acquired
(the "Burns Acquisition") the truckstop network assets operated under the Burns
Bros. trademarks (the "Burns Network") from Burns Bros., Inc., and certain of
its affiliates (collectively "Burns"). In June 1999, the Company acquired (the
"TPOA Acquisition") the truckstop network operated under the Travel Port
trademarks (the "TPOA Network") of Travel Ports of America, Inc. ("TPOA"). See
Note 6 for further discussion of the TPOA Acquisition. At June 30, 1999, the
Network was composed of 130 sites operating under the TA brand name, 7 sites
operating under the Burns trademarks, 16 operating under the TPOA trademarks and
six operating under the Unocal 76 trademarks (primarily due to local sign
permitting issues).
The accompanying unaudited, consolidated financial statements as of and
for the three- and six-month periods ended June 30, 1999 and 1998 have been
prepared in accordance with generally accepted accounting principles for interim
financial information. Accordingly, these statements should be read in
conjunction with the audited financial statements as of and for the year ended
December 31, 1998. In the opinion of management, the accompanying unaudited,
consolidated financial statements contain all adjustments, all of which were of
a normal recurring nature, necessary to present fairly, in all material
respects, the consolidated results of operations and of cash flows for the
three- and six-month periods ended June 30, 1999 and 1998, and are not
necessarily indicative of the results to be expected for the full year.
2. EARNINGS PER SHARE
A reconciliation of the income and shares used in the computation of
earnings per share follows:
<TABLE>
<CAPTION>
THREE MONTHS ENDED JUNE 30, SIX MONTHS ENDED JUNE 30,
1999 1998 1999 1998
---------------- --------------- --------------- ----------------
(DOLLARS AND SHARES IN (DOLLARS AND SHARES IN
THOUSANDS) THOUSANDS)
<S> <C> <C> <C> <C>
Net income (loss) $ 1,790 $ 678 $ 113 $ (6,605)
Less: Preferred stock dividends (2,361) (2,073) (4,723) (4,145)
--------- --------- --------- ---------
Net loss available to common stockholders (571) (1,395) (4,610) (10,750)
Weighted average shares outstanding 628 596 614 611
--------- --------- --------- ---------
Loss per share $ (0.91) $ (2.34) $ (7.51) $ (17.59)
========= ========= ========= =========
</TABLE>
The assumed conversion of stock options, warrants and convertible
series of preferred stock would have an antidilutive effect on the loss per
share for the three- and six-month periods ended June 30, 1999 and 1998. In July
1999, the Company issued 200,000 shares of its common stock and an option to
purchase an additional 100,000 shares.
6
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TRAVELCENTERS OF AMERICA, INC.
------------------------------
SELECTED NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
-------------------------------------------------------------
3. RESTRICTED CASH
As part of the refinancing the Company completed in December 1998 (the
"1998 Refinancing"), $42,000,000 was borrowed to prefund future capital
expenditures and business acquisitions. Use of this cash was restricted to these
purposes and the funds were maintained in a cash collateral account until so
used. This amount was included in the cash balance in the balance sheet. In the
first quarter of 1999, $12,000,000 of this balance was used for capital
expenditures. In the second quarter of 1999, the remaining $30,000,000 was used
to partially fund the TPOA Acquisition (see Note 6).
4. INVENTORIES
Inventories consist of the following:
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1999 1998
------------------------------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Nonfuel products................................................... $ 46,556 $ 39,973
Petroleum products................................................. 2,339 2,979
---------- ----------
Total inventories............................................ $ 48,895 $ 42,952
========== ==========
</TABLE>
5. PROPERTY AND EQUIPMENT
During the first quarter of 1998 the estimated useful lives of certain
machinery, equipment, furniture and fixtures were revised downward from 10 years
to five years. The effect of this change in estimate resulted in a $9,486,000
charge to depreciation expense and reductions in income before extraordinary
items, net income and earnings per share of $9,486,000, $5,668,000 and $9.08 per
share, respectively. This change resulted in these assets becoming fully
depreciated at March 31, 1998.
6. BUSINESS ACQUISITIONS
All business acquisitions have been accounted for under the purchase
method. The results of operations of the acquired businesses are included in the
consolidated financial statements from the respective dates of the acquisitions.
TPOA Acquisition. Effective June 1, 1999, the Company consummated the
TPOA Acquisition by acquiring 100 percent of the common stock of TPOA at a price
of $4.30 per share. Under the terms of the related merger agreement and certain
ancillary agreements, the Company paid cash of approximately $27,760,000 for all
of TPOA's outstanding common shares and common stock equivalents except
approximately 653,000 common shares that were exchanged for 85,000 shares of the
Company's common stock. In addition, the Company paid cash of approximately
$31,007,000 to retire all of TPOA's indebtedness outstanding as of the merger
date. TPOA operated a network of 16 travel centers in seven states, primarily in
the northeastern U.S., and a single fuel terminal in Pennsylvania. Upon
consummation of the acquisition, TPOA was merged into TA.
The total cost of the acquisition, which included $19,366,000 of assets
other than property and equipment acquired, was $85,264,000, comprised of the
cash paid for the TPOA stock and to repay the TPOA debt of $58,767,000, the
value of the 85,000 shares of the Company's common stock issued in exchange for
TPOA shares of $2,808,000, liabilities assumed of $21,185,000 and direct costs
of the acquisition of $2,504,000. The cost was allocated to the assets and
liabilities acquired on the basis of their estimated fair values at the
acquisition date. The excess of purchase price over the estimated fair values of
the net assets acquired, in the amount of $10,359,000, has been recorded as
goodwill and is being amortized on a straight-line basis over 15 years. The cash
portion of the TPOA Acquisition was initially funded with $30,000,000 of the
restricted cash provided by the 1998 Refinancing (see Note 3), $25,000,000 of
borrowings under the Company's revolving credit facility and other available
cash on hand from operations. The
7
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TRAVELCENTERS OF AMERICA, INC.
------------------------------
SELECTED NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
-------------------------------------------------------------
Company expects to repay the revolving credit facility borrowings by the end of
the year with cash from operations: $10,000,000 was repaid in August 1999.
Burns Acquisition. On December 3, 1998, the Company completed the Burns
Acquisition, whereby the Company acquired from Burns the land, buildings,
equipment and inventories at 17 of the 19 sites comprising the Travel Stops
division of Burns, the equipment and inventories used in Burns' fuel wholesaling
and transportation businesses and certain accounts receivable related to the
acquired assets.
The total cost of the assets acquired was $60,728,000, comprised of the
cash consideration paid to Burns of $56,240,000, liabilities assumed of
$3,920,000 and direct costs of the acquisition of $568,000. The cost was
allocated to the assets and liabilities acquired on the basis of their estimated
fair values at the acquisition date. The Burns Acquisition was funded with
borrowings under the Company's long-term bank term loan facility as part of the
1998 Refinancing.
The following unaudited pro forma information presents the results of
operations of the Company as if the TPOA Acquisition and the Burns Acquisition
had each taken place on January 1, 1998.
<TABLE>
<CAPTION>
YEAR ENDED SIX MONTHS ENDED
DECEMBER 31, JUNE 30,
1998 1999 1998
------------------ --------------- --------------
(IN THOUSANDS OF DOLLARS
EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C>
Total revenue.......................................................... $ 1,205,835 $ 667,059 $590,100
Gross profit........................................................... $ 389,069 $ 211,881 $186,086
Income from operations................................................. $ 30,413 $ 21,854 $ 7,111
Net income (loss)...................................................... $ (2,060) $ 1,861 $ (5,830)
Loss per common share (basic and diluted).............................. $ (17.61) $ (4.66) $ (16.33)
</TABLE>
These pro forma results of operations have been prepared for
comparative purposes only and do not purport to be indicative of the results of
operations which actually would have resulted had the acquisitions occurred on
January 1, 1998, or which may result in the future.
7. SUPPLEMENTAL CASH FLOW INFORMATION
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
-----------------------------------------------------------
1999 1998 1999 1998
-------------------------------------------- --------------
(DOLLARS IN THOUSANDS) (DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Cash paid during the period for:
Interest $ 13,174 $ 9,050 $ 17,547 $ 12,211
Income taxes $ 1,719 $ 98 $ 1,054 $ 113
Inventory and property and equipment
received in liquidation of trade accounts
and notes receivable $ - $ 355 $ - $ 355
</TABLE>
As part of the TPOA Acquisition (see Note 6), the Company issued 85,000
shares of its common stock in exchange for approximately 653,000 shares of
TPOA's common stock. The shares issued by the Company were valued at
approximately $2,808,000, which was included in the purchase price of the TPOA
Acquisition.
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TRAVELCENTERS OF AMERICA, INC.
------------------------------
SELECTED NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
-------------------------------------------------------------
8. COMMITMENTS AND CONTINGENCIES
ENVIRONMENTAL MATTERS
The Company's operations and properties are subject to extensive
regulation pursuant to federal, state and local laws, regulations and ordinances
that (i) govern activities and operations that may have adverse environmental
effects, such as discharges to air, soil and water, as well as handling, storage
and disposal practices for petroleum products and other hazardous and toxic
substances ("Hazardous Substances") or (ii) impose liability and damages for the
costs of cleaning up sites affected by, and for damages resulting from, past
spills and disposal or other releases of Hazardous Substances ("Environmental
Laws").
The Company owns and uses underground storage tanks ("USTs") and
aboveground storage tanks ("ASTs") at Company-operated and Leased Sites to store
petroleum products and waste. These tanks must comply with requirements of
Environmental Laws regarding tank construction, integrity testing, leak
detection and monitoring, overfill and spill control, release reporting,
financial assurance and corrective action in case of a release from a UST or AST
into the environment. At certain locations, the Company also is subject to
Environmental Laws relating to vapor recovery and discharges to water. The
Company believes that all of its travel centers are in material compliance with
applicable requirements of Environmental Laws. While the costs of compliance for
these matters have not had a material adverse impact on the Company, it is
impossible to predict accurately the ultimate effect these changing laws and
regulations may have on the Company in the future.
The Company has received notices of alleged violations of Environmental
Laws, or is aware of the need to undertake corrective actions to comply with
Environmental Laws, at Company-owned travel centers in a number of
jurisdictions. The Company does not expect that any financial penalties
associated with these alleged violations, instances of noncompliance, or
compliance costs incurred in connection therewith, will be material to the
Company's results of operation or financial condition. The Company is conducting
investigatory and/or remedial actions with respect to releases and/or spills of
Hazardous Substances at various sites. While the Company cannot precisely
estimate the ultimate costs it will incur in connection with the investigation
and remediation of these properties, based on its current knowledge, the Company
does not expect that the costs to be incurred at these properties, individually
or in the aggregate, will be material to the Company's results of operation or
financial condition. While the aforementioned matters are, to the best knowledge
of the Company, the only proceedings for which the Company is currently exposed
to potential liability (particularly given the environmental indemnities
obtained as part of the National Acquisition and the TA Acquisition), there can
be no assurance that additional contamination does not exist at these or
additional Network properties, or that material liability will not be imposed in
the future. If additional environmental problems arise or are discovered, or if
additional environmental requirements are imposed by government agencies,
increased environmental compliance or remediation expenditures may be required,
which could have a material adverse effect on the Company.
The Company has estimated the current ranges of remediation costs at
currently active sites and what it believes will be its ultimate share for such
costs after required indemnification and remediation is performed by Unocal and
BP under the environmental agreements and has a reserve, which includes the
environmental liabilities assumed as part of the Burns Acquisition and the TPOA
Acquisition, of $8,197,000 for such matters. While it is not possible to
quantify with certainty the environmental exposure, in the opinion of
management, the potential liability, beyond that considered in the reserve, for
all environmental proceedings, based on information known to date, will not have
a material adverse effect on the financial condition, results of operations or
cash flows of the Company.
PENDING LITIGATION
The Company is involved from time to time in various legal and
administrative proceedings incidental to the ordinary course of its business.
The Company is not now involved in any litigation, individually, or in the
aggregate, which could have a material adverse affect on the Company's business,
financial condition, results of operations or cash flows.
9
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TRAVELCENTERS OF AMERICA, INC.
------------------------------
SELECTED NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
-------------------------------------------------------------
9. RECLASSIFICATIONS
Certain prior year amounts have been reclassified to conform with the
current year presentation.
10. CONDENSED CONSOLIDATING FINANCIAL STATEMENT SCHEDULES
The following schedules set forth the consolidating balance sheets of
the Company as of June 30, 1999 and December 31, 1998, the consolidating
statements of income and retained earnings (deficit) of the Company for the
three months and six months ended June 30, 1999 and 1998, and the consolidating
statements of cash flows of the Company for the six months ended June 30, 1999
and 1998. In the following schedules, "Parent Company' refers to the
unconsolidated balances of TravelCenters of America, Inc., "Guarantor
Subsidiaries" refers to the combined unconsolidated balances of TA and National,
and "Nonguarantor Subsidiary" refers to the balances of TAFSI. "Eliminations"
represent the adjustments necessary to (a) eliminate intercompany transactions
and, (b) eliminate the Company's investments in its subsidiaries. The Guarantor
Subsidiaries, TA and National, are wholly-owned subsidiaries of the Company and
have fully and unconditionally, jointly and severally, guaranteed the Company's
indebtedness. In the 10-Q filing, the Company has not presented separate
financial statements and other disclosures concerning the Guarantor Subsidiaries
because management has determined such information is not material to investors.
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TRAVELCENTERS OF AMERICA, INC.
------------------------------
SELECTED NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
-------------------------------------------------------------
CONDENSED CONSOLIDATING BALANCE SHEET SCHEDULES:
<TABLE>
<CAPTION>
JUNE 30, 1999
-----------------------------------------------------------------------------
PARENT GUARANTOR NONGUARANTOR ELIMINATIONS CONSOLIDATED
COMPANY SUBSIDIARIES SUBSIDIARY
------------------------------ ------------------------------ ---------------
(IN THOUSANDS OF DOLLARS)
<S> <C> <C> <C> <C> <C>
ASSETS
Current assets:
Cash.................................. $ 99 $ 20,369 $ - $ - $ 20,468
Accounts receivable, net.............. - 61,072 1,043 - 62,115
Inventories........................... - 48,895 - - 48,895
Deferred income taxes................. - 5,235 - - 5,235
Other current assets.................. 775 20,585 407 - 21,767
---------- ---------- ---------- ----------- ----------
Total current assets............. 874 156,156 1,450 - 158,480
Notes receivable, net.................... 999 501 - - 1,500
Property and equipment, net.............. - 444,632 - - 444,632
Intangible assets........................ - 33,456 - - 33,456
Deferred financing costs................. 8,663 - - - 8,663
Other assets........................... . 717 2,644 - - 3,361
Investments in subsidiaries.............. 339,092 3,700 - (342,792) -
---------- ---------- ---------- ----------- ----------
Total assets..................... $ 350,345 $ 641,089 $ 1,450 $ (342,792) $ 650,092
========== ========== ========== =========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current maturities of long-term debt.. $ 1,446 $ 148 $ - $ - $ 1,594
Accounts payable...................... - 26,875 - - 26,875
Other accrued liabilities............. 5,041 84,563 195 - 89,799
---------- ---------- ---------- ----------- ----------
Total current liabilities........ 6,487 111,586 195 - 118,268
Long-term debt........................... 412,219 2,903 - - 415,122
Deferred income taxes.................... (879) 5,453 - - 4,574
Intercompany advances.................... (170,081) 399,551 (6,067) (223,403) -
Other liabilities........................ - 10,783 - - 10,783
---------- ---------- ---------- ----------- ----------
247,746 530,276 (5,872) (223,403) 548,747
Mandatorily redeemable senior convertible
participating preferred stock......... 74,697 - - - 74,697
Other preferred stock, common stock and
other stockholders' equity............ 47,610 84,880 - (86,134) 46,356
Retained earnings (deficit).............. (19,708) 25,933 7,322 (33,255) (19,708)
---------- ---------- ---------- ----------- ----------
27,902 110,813 7,322 (119,389) 26,648
---------- ---------- ---------- ----------- ----------
Total liabilities and
stockholders' equity............ $ 350,345 $ 641,089 $ 1,450 $ (342,792) $ 650,092
========== ========== ========== =========== ==========
</TABLE>
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TRAVELCENTERS OF AMERICA, INC.
------------------------------
SELECTED NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
-------------------------------------------------------------
<TABLE>
<CAPTION>
DECEMBER 31, 1998
-----------------------------------------------------------------------------
PARENT GUARANTOR NONGUARANTOR ELIMINATIONS CONSOLIDATED
COMPANY SUBSIDIARIES SUBSIDIARY
------------------------------ ------------------------------ ---------------
(IN THOUSANDS OF DOLLARS)
ASSETS
Current assets:
<S> <C> <C> <C> <C> <C>
Cash.................................. $ 59,665 $ 29,535 $ - $ - $ 89,200
Accounts receivable, net.............. - 60,176 836 - 61,012
Inventories........................... - 42,952 - - 42,952
Deferred income taxes................. - 4,459 - - 4,459
Other current assets.................. 98,323 29,210 7,860 (122,774) 12,619
---------- ---------- ---------- ----------- ----------
Total current assets............. 157,988 166,332 8,696 (122,774) 210,242
Notes receivable, net.................... 967 272 - - 1,239
Property and equipment, net.............. - 361,803 - - 361,803
Intangible assets........................ - 21,141 - - 21,141
Deferred financing costs................. 9,284 - - - 9,284
Deferred income taxes.................... 879 2,045 - - 2,924
Other assets............................. 730 6,398 - (3,700) 3,428
Investments in subsidiaries.............. 338,205 - - (338,205) -
---------- ---------- ---------- ----------- ----------
Total assets..................... $ 508,053 $ 557,991 $ 8,696 $ (464,679) $ 610,061
========== ========== ========== =========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current maturities of long-term debt.. $ 1,446 $ 148 $ - $ - $ 1,594
Accounts payable...................... - 20,908 7 - 20,915
Other accrued liabilities............. 18,988 189,022 2,916 (122,761) 88,165
---------- ---------- ---------- ----------- ----------
Total current liabilities........ 20,434 210,078 2,923 (122,761) 110,674
Long-term debt........................... 387,942 2,923 - - 390,865
Deferred income taxes.................... - 937 - - 937
Intercompany advances.................... - 223,404 - (223,404) -
Other liabilities........................ - 9,162 - - 9,162
---------- ---------- ---------- ----------- ----------
Total liabilities................ 408,376 446,504 2,923 (346,165) 511,638
Mandatorily redeemable senior convertible
participating preferred stock......... 69,974 - - - 69,974
Other preferred stock, common stock and
other stockholders' equity............ 44,801 84,880 - (86,134) 43,547
Retained earnings........................ (15,098) 26,607 5,773 (32,380) (15,098)
---------- ---------- ---------- ----------- ----------
29,703 111,487 5,773 (118,514) 28,449
---------- ---------- ---------- ----------- ----------
Total liabilities and
stockholders' equity........... $ 508,053 $ 557,991 $ 8,696 $ (464,679) $ 610,061
========== ========== ========== =========== ==========
</TABLE>
12
<PAGE> 13
TRAVELCENTERS OF AMERICA, INC.
------------------------------
SELECTED NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
-------------------------------------------------------------
CONDENSED CONSOLIDATING STATEMENT OF INCOME AND RETAINED
EARNINGS (DEFICIT) SCHEDULES:
<TABLE>
<CAPTION>
THREE MONTHS ENDED JUNE 30, 1999
-------------------------------------------------------------------------
PARENT GUARANTOR NONGUARANTOR ELIMINATIONS CONSOLIDATED
COMPANY SUBSIDIARIES SUBSIDIARY
-------------- -------------- -------------- ----------------------------
(IN THOUSANDS OF DOLLARS)
<S> <C> <C> <C> <C> <C>
Revenues:
Fuel................................... $ - $ 217,828 $ - $ - $ 217,828
Nonfuel................................ - 118,669 425 (58) 119,036
Rent and royalties..................... - 8,487 1,886 (4,866) 5,507
---------- ---------- ---------- ---------- ----------
Total revenues......................... - 344,984 2,311 (4,924) 342,371
Cost of revenues (excluding depreciation). - 241,567 - - 241,567
---------- ---------- ---------- ---------- ----------
Gross profit (excluding depreciation)..... - 103,417 2,311 (4,924) 100,804
Operating expenses........................ - 70,144 266 (4,809) 65,601
Selling, general and
administrative expenses............... 240 9,262 988 (115) 10,375
Transition expense........................ - 1,192 - - 1,192
Depreciation and amortization expense..... 334 10,224 - - 10,558
Loss on sales of property and equipment - 210 - - 210
Stock compensation expense................ - 900 - - 900
---------- ---------- ---------- ---------- ----------
Income (loss) from operations............. (574) 11,485 1,057 - 11,968
Interest expense, net..................... - (9,136) - - (9,136)
Equity income (loss)...................... 2,169 - - (2,169) -
---------- ---------- ---------- ---------- ----------
Income (loss) before income taxes ........ 1,595 2,349 1,057 (2,169) 2,832
Provision (benefit) for income taxes...... (195) 843 394 - 1,042
---------- ---------- ---------- ---------- ----------
Net income (loss)......................... 1,790 1,506 663 (2,169) 1,790
Less: preferred dividends................. (2,361) - - - (2,361)
Retained earnings (deficit) - beginning of
the period............................... (19,137) 24,427 6,659 (31,086) (19,137)
---------- ---------- ---------- ---------- ----------
Retained earnings (deficit) - end of the
period................................. $ (19,708) $ 25,933 $ 7,322 $ (33,255) $ (19,708)
========== ========== ========== ========== ==========
</TABLE>
13
<PAGE> 14
TRAVELCENTERS OF AMERICA, INC.
------------------------------
SELECTED NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
-------------------------------------------------------------
<TABLE>
<CAPTION>
THREE MONTHS ENDED JUNE 30, 1998
-------------------------------------------------------------------------
PARENT GUARANTOR NONGUARANTOR ELIMINATIONS CONSOLIDATED
COMPANY SUBSIDIARIES SUBSIDIARY
-------------- -------------- -------------- ----------------------------
(IN THOUSANDS OF DOLLARS)
<S> <C> <C> <C> <C> <C>
Revenues:
Fuel................................... $ - $ 137,914 $ - $ - $ 137,914
Nonfuel................................ - 86,036 151 - 86,187
Rent and royalties..................... - 8,227 1,656 (4,447) 5,436
---------- ---------- ---------- ---------- ----------
Total revenues......................... - 232,177 1,807 (4,447) 229,537
Cost of revenues (excluding depreciation). - 157,373 - - 157,373
---------- ---------- ---------- ---------- ------------
Gross profit (excluding depreciation)..... - 74,804 1,807 (4,447) 72,164
Operating expenses........................ 52 49,662 244 (4,447) 45,511
Selling, general and
administrative expenses............... 191 9,020 217 - 9,428
Transition expense........................ - 881 - - 881
Depreciation and amortization expense..... 373 7,654 - - 8,027
Loss on sales of property and equipment - 101 - - 101
Stock compensation expense - 875 - - 875
---------- ---------- ---------- ---------- ----------
Income (loss) from operations............. (616) 6,611 1,346 - 7,341
Interest expense, net..................... (949) (5,195) - - (6,144)
Equity income (loss)...................... 1,711 - - (1,711) -
---------- ---------- ---------- ---------- ----------
Income (loss) before income taxes ........ 146 1,416 1,346 (1,711) 1,197
Provision (benefit) for income taxes...... (532) 549 502 - 519
---------- ---------- ---------- ---------- ----------
Net income (loss)......................... 678 867 844 (1,711) 678
Less: preferred dividends................. (2,073) - - - (2,073)
Retained earnings (deficit) - beginning of
the period............................... (7,801) 25,242 3,041 (28,283) (7,801)
---------- ---------- ---------- ---------- ----------
Retained earnings (deficit) - end of the
period................................. $ (9,196) $ 26,109 $ 3,885 $ (29,994) $ (9,196)
========== ========== ========== ========== ==========
</TABLE>
14
<PAGE> 15
TRAVELCENTERS OF AMERICA, INC.
------------------------------
SELECTED NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
-------------------------------------------------------------
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30, 1999
-------------------------------------------------------------------------
PARENT GUARANTOR NONGUARANTOR ELIMINATIONS CONSOLIDATED
COMPANY SUBSIDIARIES SUBSIDIARY
-------------- -------------- -------------- ----------------------------
(IN THOUSANDS OF DOLLARS)
<S> <C> <C> <C> <C> <C>
Revenues:
Fuel................................... $ - $ 381,286 $ - $ - $ 381,286
Nonfuel................................ - 218,250 606 (114) 218,742
Rent and royalties..................... - 16,762 3,543 (9,733) 10,572
---------- ---------- ---------- ---------- ----------
Total revenues......................... - 616,298 4,149 (9,847) 610,600
Cost of revenues (excluding depreciation). - 423,245 - - 423,245
---------- ---------- ---------- ---------- ----------
Gross profit (excluding depreciation)..... - 193,053 4,149 (9,847) 187,355
Operating expenses........................ - 133,595 473 (9,732) 124,336
Selling, general and
administrative expenses............... 486 18,084 1,206 (115) 19,661
Transition expense........................ - 1,647 - - 1,647
Depreciation and amortization expense..... 668 21,099 - - 21,767
Loss on sales of property and equipment - 260 - - 260
Stock compensation expense................ - 1,800 - - 1,800
---------- ---------- ---------- ---------- ----------
Income (loss) from operations............. (1,154) 16,568 2,470 - 17,884
Interest expense, net..................... - (17,503) - - (17,503)
Equity income (loss)...................... 875 - - (875) -
---------- ---------- ---------- ---------- ----------
Income (loss) before income taxes ........ (279) (935) 2,470 (875) 381
Provision (benefit) for income taxes...... (392) (261) 921 - 268
---------- ---------- ---------- ---------- ----------
Net income (loss)......................... 113 (674) 1,549 (875) 113
Less: preferred dividends................. (4,723) - - - (4,723)
Retained earnings (deficit) - beginning of
the period............................... (15,098) 26,607 5,773 (32,380) (15,098)
---------- ---------- ---------- ---------- ----------
Retained earnings (deficit) - end of the
period................................. $ (19,708) $ 25,933 $ 7,322 $ (33,255) $ (19,708)
========== ========== ========== ========== ==========
</TABLE>
15
<PAGE> 16
TRAVELCENTERS OF AMERICA, INC.
------------------------------
SELECTED NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
-------------------------------------------------------------
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30, 1998
-------------------------------------------------------------------------
PARENT GUARANTOR NONGUARANTOR ELIMINATIONS CONSOLIDATED
COMPANY SUBSIDIARIES SUBSIDIARY
-------------- -------------- -------------- ----------------------------
(IN THOUSANDS OF DOLLARS)
<S> <C> <C> <C> <C> <C>
Revenues:
Fuel................................... $ - $ 270,522 $ - $ - $ 270,522
Nonfuel................................ - 161,072 152 - 161,224
Rent and royalties..................... - 16,578 3,339 (8,803) 11,114
---------- ---------- ---------- ---------- ----------
Total revenues......................... - 448,172 3,491 (8,803) 442,860
Cost of revenues (excluding depreciation). - 304,583 - - 304,583
---------- ---------- ---------- ---------- ----------
Gross profit (excluding depreciation)..... - 143,589 3,491 (8,803) 138,277
Operating expenses........................ 106 98,318 380 (8,803) 90,001
Selling, general and
administrative expenses............... 446 17,486 436 - 18,368
Transition expense........................ - 1,874 - - 1,874
Depreciation and amortization expense..... 747 23,824 - - 24,571
Loss on sales of property and equipment - 144 - - 144
Stock compensation expense................ - 1,750 - - 1,750
---------- ---------- ---------- ---------- ----------
Income (loss) from operations............. (1,299) 193 2,675 - 1,569
Interest expense, net..................... (1,828) (10,306) - - (12,134)
Equity income (loss)...................... (4,541) - - 4,541 -
---------- ---------- ---------- ---------- ----------
Income (loss) before income taxes ........ (7,668) (10,113) 2,675 4,541 (10,565)
Provision (benefit) for income taxes...... (1,063) (3,895) 998 - (3,960)
---------- ---------- ---------- ---------- ----------
Net income (loss)......................... (6,605) (6,218) 1,677 4,541 (6,605)
Less: preferred dividends................. (4,145) - - - (4,145)
Retained earnings (deficit) - beginning
of the period............................ 1,554 32,327 2,208 (34,535) 1,554
---------- ---------- ---------- ---------- ----------
Retained earnings - (deficit) end of the
period................................. $ (9,196) $ 26,109 $ 3,885 $ (29,994) $ (9,196)
========== ========== ========== ========== ==========
</TABLE>
16
<PAGE> 17
TRAVELCENTERS OF AMERICA, INC.
------------------------------
SELECTED NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
-------------------------------------------------------------
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS SCHEDULES:
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30, 1999
-------------------------------------------------------------------------
PARENT GUARANTOR NONGUARANTOR ELIMINATIONS CONSOLIDATED
COMPANY SUBSIDIARIES SUBSIDIARY
-------------- -------------- ---------------------------- --------------
(IN THOUSANDS OF DOLLARS)
<S> <C> <C> <C> <C> <C>
CASH FLOWS PROVIDED BY (USED IN)
OPERATING ACTIVITIES.................. $ 4,019 $ 4,666 $ - $ - $ 8,685
---------- ---------- ---------- ---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Business acquisitions................. - (57,044) - - (57,044)
Proceeds from sales of
property and equipment.............. - 209 - - 209
Capital expenditures.................. - (44,838) - - (44,838)
---------- ---------- ---------- ---------- ----------
Net cash used in investing
activities......................... - (101,673) - - (101,673)
---------- ---------- ---------- ---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Revolving loan borrowings............. 25,000 - - - 25,000
Long-term debt repayments............. (723) (21) - - (744)
Repurchase of common stock............ - - - - -
Intercompany advances................. (87,862) 87,862 - - -
---------- ---------- ---------- ---------- ----------
Net cash used in financing
activities...................... (63,585) 87,841 - - 24,256
---------- ---------- ---------- ---------- ----------
Net increase (decrease) in cash......... (59,566) (9,166) - - (68,732)
Cash at the beginning of the period...... 59,665 29,535 - - 89,200
---------- ---------- ---------- ---------- ----------
Cash at the end of the period............ $ 99 $ 20,369 $ - $ - $ 20,468
========== ========== ========== ========== ==========
</TABLE>
17
<PAGE> 18
TRAVELCENTERS OF AMERICA, INC.
------------------------------
SELECTED NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
-------------------------------------------------------------
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30, 1998
-------------------------------------------------------------------------
PARENT GUARANTOR NONGUARANTOR ELIMINATIONS CONSOLIDATED
COMPANY SUBSIDIARIES SUBSIDIARY
-------------- -------------- ---------------------------- --------------
(IN THOUSANDS OF DOLLARS)
<S> <C> <C> <C> <C> <C>
CASH FLOWS PROVIDED BY (USED IN)
OPERATING ACTIVITIES.................. $ (1,970) $ 21,285 $ - $ - $ 19,315
---------- ---------- ---------- ---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Business acquisitions................. - (1,828) - - (1,828)
Proceeds from sales of
property and equipment.............. - 137 - - 137
Capital expenditures.................. - (29,649) - - (29,649)
---------- ---------- ---------- ---------- ----------
Net cash used in investing
activities....................... - (31,340) - - (31,340)
---------- ---------- ---------- ---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Long-term debt repayments............. (250) - - - (250)
Repurchase of common stock............ (375) - - - (375)
Intercompany advances................. (15,385) 15,385 - - -
---------- ---------- ---------- ---------- ----------
Net cash used in financing
activities....................... (16,010) 15,385 - - (625)
---------- ---------- ---------- ---------- ----------
Net increase (decrease) in cash......... (17,980) 5,330 - - (12,650)
Cash at the beginning of the period...... 59,592 12,164 - - 71,756
---------- ---------- ---------- ---------- ----------
Cash at the end of the period............ $ 41,612 $ 17,494 $ - $ - $ 59,106
========== ========== ========== ========== ==========
</TABLE>
18
<PAGE> 19
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the
unaudited consolidated financial statements and notes to consolidated financial
statements included herein, and the audited financial statements and
Management's Discussion and Analysis included with the Company's Form 10-K for
the year ended December 31, 1998.
OVERVIEW
The Company is a holding company which, through its wholly-owned
subsidiaries, owns, operates and franchises more travel centers in the United
States than any of its competitors with 159 network sites in 40 states,
including 149 Company-owned locations. As a result of the Combination Plan, the
Burns Acquisition and the TPOA Acquisition, the Company's network consists of
sites operating under four distinct trademarks and brand names. Currently, 130
sites are branded as "TA," six sites are branded as "Unocal 76," 7 sites are
branded as "Burns Bros." and 16 sites are branded as "Travel Port." The
Company's plans are to rebrand all of its sites under the "TA" trademarks and is
continuing to do so subject to local permitting ordinances and negotiations with
franchisees.
COMBINATION PLAN
During the three months and six months ended June 30, 1999, the Company
incurred approximately $1.2 million and $1.6 million, respectively, of expenses
related to the Combination Plan. These costs, identified as transition expense
in the Company's consolidated financial statements, are expected to total
approximately $22.0 million, of which approximately $3.0 million to $4.0 million
is expected to be incurred in 1999. These expenses relate to, among other
things, (i) employee separations, (ii) the costs to convert National, Burns and
TPOA Network travel centers to Network travel centers, (iii) the costs to
dispose of travel centers or terminate lease or franchise agreements, and (iv)
the costs of integrating the management and operations of the Existing Networks
into the Network, including relocation, travel, training, and legal expenses.
NETWORK COMPOSITION
The change in the number of sites within the Company's network is the
most significant factor driving the changes from prior periods in the Company's
results of operations. During the second quarter of 1998, the Company converted
three Leased Sites to Company-operated Sites and sold one closed site. In the
second half of 1998, the Company sold one Company-operated site, converted two
Leased Sites to Company-operated Sites and acquired 17 Company-operated Sites in
the Burns Acquisition. In the first half of 1999, the Company sold one
Company-operated site, acquired 16 Company-operated Sites in the TPOA
Acquisition and opened one newly-constructed Company-operated Site. The
following table sets forth the number and type of ownership and management of
the travel centers operating in the Company's network.
<TABLE>
<CAPTION>
AS OF
AS OF JUNE 30, DECEMBER 31,
1999 1998 1998
------------- --------------- --------------
<S> <C> <C> <C>
Company-owned sites:
Company-operated sites 119 82 103
Leased sites 30 35 30
Sites under development 4 5 5
------- ------- -------
Total Company-owned sites 153 122 138
Franchisee-owner sites 10 10 10
-------- -------- --------
Total 163 132 148
======== ======== ========
Company-operated stand-alone shops - 2 -
======== ======== ========
</TABLE>
19
<PAGE> 20
RESULTS OF OPERATIONS FOR THE SIX- AND THREE-MONTH PERIODS ENDED JUNE 30, 1999
AND 1998
Revenues
The Company's consolidated revenues for the three- and six-month
periods ended June 30, 1999 were $342.4 million and $610.6 million,
respectively, which represent increases from the prior periods of $112.9
million, or 49.2% for the three-month period and $167.8 million, or 37.9% for
the six-month period.
Fuel revenue for the six months ended June 30, 1999 reflects an
increase of $110.8 million, or 41.0%. For the second quarter, the 1999 amount
reflects an increase from the same period in 1998 of $79.9 million, or 57.9%.
The increases in fuel revenue for the three- and six-month periods primarily
result from increased diesel sales volumes combined, with respect to the second
quarter results, with an increase in diesel pump prices. For the three months
and six months ended June 30, 1999, diesel sales volumes increased 38.1% and
41.3% between years, respectively, due in large part to the increased number of
Network sites, but also due to increased year-to-date sales volumes over 1998 on
a same-site basis of 17.0%. For the three-and six months periods ended June 30,
1999, the Company sold 326.0 million and 646.1 million gallons of diesel fuel,
respectively. Average diesel sale prices for the second quarter of 1999
increased 13.3% over the 1998 second quarter, while the average diesel sale
price for the six months of 1999 are 1.3% below the same period in 1998. The
movements in average retail prices correspond with the decreasing crude oil
prices experienced throughout 1998 and the increasing crude oil prices beginning
in March 1999.
Nonfuel revenues for the quarter ended June 30, 1999 increased 38.2% to
$119.1 million from $86.2 million for the same period in 1998. For the six-month
period ended June 30, 1999 nonfuel revenues increased 35.7% to $218.7 million
from $161.2 million for the same period in 1998. These increases are due to the
increase in the number of Company-operated sites between years, coupled with an
8.9% increase in year-to-date total nonfuel revenues over the prior year on a
same-site basis.
Rent and royalty revenue for the second quarter of 1999 reflects a $0.1
million, or 1.9%, increase over the prior year second quarter. This increase is
attributable to a 4.1% increase, on a same-site basis, in royalty revenue, as a
result of improved franchisee sales, and annual rent escalations somewhat offset
by the rent and royalty revenue lost as a result of the five conversions of
Leased Sites to Company-operated Sites during 1998. Rent and royalty revenue for
the six-months ended June 30, 1999 is down $0.5 million or 4.5%, from the 1998
period due to the five Leased Site conversions, the effect of which is somewhat
reduced by an increase in same-site royalty revenues of 11.0%.
Gross Profit
The Company's gross profit for the second quarter of 1999 was $100.8
million, compared to $72.2 million for 1998, an increase of $28.6 million, or
39.6%. Year-to-date gross profit through June 30, 1999 was $187.4 million
compared to $138.3 million for 1998, an increase of $49.1 million, or 35.5%. The
increases in the Company's gross profit were primarily due to increases in
nonfuel revenues and diesel fuel margins.
Operating and Selling, General and Administrative Expenses
Operating expenses include the direct expenses of Company-operated
Sites, and selling, general and administrative expenses (SG&A) include corporate
overhead and administrative costs.
The Company's operating expenses for the three-month period ended June
30, 1999 increased by $20.1 million, or 44.2%, to $65.6 million versus the prior
year quarter. Operating expenses for the six-month period ending June 30, 1999
increased by $34.3 million, or 38.1%, to $124.3 million. These increases reflect
the increased number of Company-operated Sites. On a same-site basis, operating
expenses as a percentage of nonfuel revenues for the six months ended June 30,
1999 were 59.8%, an improvement from the 60.1% for the same period in the prior
year. For the six months ended June 30, 1999, operating expenses increased 8.3%
over the 1998 period on a same-site basis, due to the increased nonfuel sales.
The Company's SG&A for the second quarter increased from $9.4 million
in 1998 to $10.4 million in 1999. Year-to-date SG&A expense increased from $18.4
million in 1998 to $19.7 million in 1999. The increases in SG&A are primarily a
result of increased staffing to support the Company's growth from the Burns
Acquisition and, to a lesser degree, the TPOA Acquisition.
20
<PAGE> 21
Transition Expense
Transition expenses for the six months ended June 30, 1999 were $1.6
million, compared to $1.9 million for the same period in 1998. For the three
months ended June 30, 1999, these expenses were $1.2 million, compared to $0.9
million for the same period in 1998. These costs were incurred in effecting the
Combination Plan and in integrating and converting the Burns Network and TPOA
Network sites into the Network. The Company anticipates approximately $3.0
million to $4.0 million of such costs to be incurred in 1999, primarily related
to integrating and converting the Burns Network and TPOA Network sites.
Depreciation and Amortization Expense
Depreciation and amortization for the second quarter of 1999 was $10.6
million, compared to $8.0 million for the same period in the prior year.
Depreciation for the six-month period ending June 30, 1999 was $21.8 million,
compared to $24.6 million for the same period in 1998. The increases in
depreciation and amortization are primarily attributable to the increased level
of depreciable assets and intangibles resulting from the Burns Acquisition and
the TPOA Acquisition as well as the significant capital additions made in 1998
and the first half of 1999. For the year-to-date period, these increases are
offset by a one-time charge recognized in the first quarter of 1998.
During the first quarter of 1998, the estimated useful lives of certain
machinery, equipment, furniture and fixtures were revised downward from 10 years
to five years. The effect of this change in estimate resulted in a $9.5 million
charge to depreciation expense and reductions in income before extraordinary
items, net income and earnings per share of $9.5 million, $5.7 million and $9.08
per share, respectively. This change resulted in these assets becoming fully
depreciated at March 31, 1998. In addition, an impairment reserve of $0.6
million recorded in the 1997 fourth quarter with respect to certain sites being
held for sale was completely reversed in the 1998 second quarter. This reversal
was based on increases in the estimated sales prices of the respective sites.
Income from Operations
Income from operations was $11.9 million for the second quarter of
1999, compared to $7.3 million for the second quarter of 1998, an increase of
$4.5 million or 60.8%. This increase is the net result of an increase in gross
profit of $28.6 million partially offset by increases in the expense categories,
primarily operating expenses and depreciation and amortization expense. Income
from operations was $17.9 million for the six months ended June 30, 1999,
compared to $1.6 million for the six months ended June 30, 1998, an increase
of $16.3 million or 1,018.8%. This increase is much higher than that for the
second quarter as a result of the $9.5 million depreciation adjustment
charged to expense in the first quarter of 1998. For the six-month period,
gross profit improved over the prior year by $49.1 million but increases in
the expense categories, except for depreciation and amortization expense,
partially offset the increased gross profit.
EBITDA (defined as income from operations plus the sum of (a)
depreciation, amortization and other non-cash charges, (b) transition expense
and (c) gains or losses from sales of property and equipment) for the Company
for the three- and six-month periods ending June 30, 1999 was $24.8 million and
$43.4 million, respectively, compared to $17.2 million and $29.9 million for the
respective 1998 periods.
Interest Expense - Net
Interest expense for the first quarter and first half of 1999 was $3.0
million and $5.4 million higher than the same periods in the prior year as a
result of the increased debt balance and interest rate after the consummation of
the 1998 Refinancing (discussed in Liquidity and Capital Resources below).
LIQUIDITY AND CAPITAL RESOURCES
The Company's cash requirements consist principally of working capital
needs, payments of principal and interest on outstanding indebtedness and
capital expenditures, including expenditures for acquisitions, expansion and
environmental upgrades.
Net cash provided by operating activities totaled $8.7 million for the
first half of 1999, compared to $19.3 million for the same period in the prior
year. The decrease between years is primarily the result of an increase in
profitability of $9.8 million, which is more than offset by an increase in
working capital of $20.4 million, principally caused by the rapid increase in
diesel fuel sales.
21
<PAGE> 22
Net cash used in investing activities increased to $101.7 million for
the first half of 1999, up from $31.3 million for the first half of 1998. The
increase is primarily the result of the increased spending for business
acquisitions, as well as an increase in capital expenditures of $15.2 million.
Business acquisitions for 1999 represent amounts spent for the TPOA Acquisition.
For 1998, business acquisitions represent the cost to acquire the leasehold
interests of Operators when converting Leased Sites to Company-operated Sites.
The Company completed three such conversions during the first half of 1998 and
none thus far in 1999. Although this aspect of the Combination Plan has been
substantially completed, the Company expects to complete additional conversions
of Leased Sites to Company-operated Sites from time to time in the future. The
increase in capital expenditures in 1999 versus 1998 reflects the Company's
accelerated implementation of the Capital Program. During 1999, the Company's
capital spending has been increasingly directed towards revenue-generating
projects such as QSR and repair shop installations, site remodeling projects,
and construction of new travel centers.
Net cash provided by financing activities was $24.3 million during the
first half of 1999, compared to $0.6 million used during the first half of the
prior year. In 1999, the Company drew down $25.0 million of its revolving credit
facility to partially fund the TPOA Acquisition and made its scheduled debt
repayments of $0.7 million. In 1998, the Company made its scheduled debt
repayments of $0.3 million and paid $0.4 million to repurchase shares of its
common stock from certain of its Operators from whom the Company had acquired
their leasehold interests and travel center businesses.
The Company expects to invest approximately $315 million in the Network
between 1997 and the end of 2001 (with approximately $198 million of this amount
having been spent by June 30, 1999) in connection with the Capital Program to
upgrade, rebrand, reimage and increase the number of travel centers.
Approximately $50 million of the capital expenditures intended to be made
represent normal ongoing maintenance and related capital expenditures (with
approximately $10 million of this amount to be spent each year). The Company has
budgeted expenditures in order to add additional sites, rebrand and reimage
sites, add additional non-fuel offerings (such as quick-serve restaurant
offerings) at existing sites, make required environmental improvements, and
purchase, install and upgrade its information systems. Excluding the TPOA
Acquisition, the Company expects to spend approximately $68 million for capital
investments in 1999.
In order to provide for its growth, the Company, among other things,
has completed refinancings in each of 1998 and 1997. In the 1998 Refinancing,
completed on December 3, 1998, the Company increased its term loan facility, and
its borrowings under the facility, by $150.0 million. The proceeds of the
borrowing were used to redeem the Series II Senior Secured Notes ($50.0
million), fund the Burns Acquisition (approximately $56.8 million), and prefund
$42.0 million of planned capital expenditures and business acquisitions, with
the remainder used for costs of the 1998 Refinancing and accrued interest. The
$42.0 million for prefunded capital expenditures and business acquisitions was
required to be maintained in a cash collateral account and to be used only for
such expenditures, which it since has been. The TPOA Acquisition was completed
effective June 1, 1999 and the Company used $30.0 million from the collateral
account to partially fund this acquisition. During the first quarter of 1999,
$12.0 million was withdrawn from the collateral account to fund capital
expenditures. As of June 30, 1999, the Company had available $13.5 million of
its $40.0 million revolving credit facility.
The Company anticipates that it will be able to fund its 1999 working
capital requirements and capital expenditures primarily from funds generated
from the refinancing, funds generated from operations and asset sales, and, to
the extent necessary, from borrowings under the revolving facility. The
Company's long-term liquidity requirements, including capital expenditures, are
expected to be financed by a combination of internally generated funds,
borrowings and other sources of external financing as needed.
FREIGHTLINER RELATIONSHIP
In July 1999, the Company signed an agreement with Freightliner
Corporation ("Freightliner") to become an authorized provider of express
service, minor repair work and a specified menu of warranty repairs to
Freightliner's customers (the "Freightliner Program"). Under the agreement, the
Company will be incorporated into Freightliner's 24-hour customer assistance
center database and be a major referral point for emergency and roadside repairs
and will also have access to Freightliner's parts distribution, service and
technical information systems. Freightliner, a DaimlerChrysler Company, is the
leading heavy truck manufacturer in North America. The Company believes this
relationship will result in a considerable increase in nonfuel revenues
generated by the Company's truck maintenance and repair shops. Freightliner has
also acquired a minority ownership interest in the Company through the purchase
of 200,000 shares of the Company's common stock for $6.7 million.
22
<PAGE> 23
ENVIRONMENTAL MATTERS
The Company owns and operates USTs and ASTs at Company-operated Sites
and Leased Sites which must comply with certain statutory and regulatory
requirements. The Company has estimated the current ranges of remediation costs
at currently active sites and what it believes will be its ultimate share for
such costs after required indemnification and remediation is performed by Unocal
and BP under the respective Environmental Agreements and has a reserve for such
matters of $8.2 million as of June 30, 1999. While it is not possible to
quantify with certainty the environmental exposure, in the opinion of
management, the potential liability, beyond that considered in the reserve, for
all environmental proceedings, based on information known to date, will not have
a material adverse effect on the financial condition, results of operations or
liquidity of the Company.
YEAR 2000 READINESS DISCLOSURE
The Year 2000 issue results from date sensitive computer programs that
improperly handle dates beyond 1999. This issue will impact virtually every
business that relies on a computer, including the Company, its customers and
suppliers and other third party service providers such as credit and trucking
fleet billing card providers, utilities and other basic service providers. The
Company's management is working to ensure that its Year 2000 issues are
addressed on a company-wide basis, which includes (1) internal information
technology (IT) systems such as any hardware and software used to process daily
operational data and information; (2) non-IT systems or embedded technology such
as micro-controllers contained in various equipment; and (3) Year 2000
compliance of key third parties, including suppliers, customers and third party
credit and trucking fleet billing card providers, especially those with which
the Company conducts business electronically.
The Company is currently in the process of making its IT systems Year
2000 compliant. As a result of the Combination Plan, management determined a new
IT system was required to handle the combined operations of TA and National, as
neither TA's nor National's IT systems had the capability of handling the
combined operations as effectively as desired. To this end, the Company has
begun implementing the SAP Enterprise Resource Planning system in a phased
approach. The SAP system is Year 2000 compliant, and the Company began using the
financial, asset management and project system modules of the new system during
the second quarter of 1999. A second phase of the implementation of SAP, which
will replace the Company's fuel management and accounting systems, is targeted
for completion in December of 1999. This implementation has not been accelerated
due to Year 2000 issues. Only minor modifications are necessary to current
systems that will continue to be used, such as the Access 76 fleet billing
system and certain retail point of sale systems, and management is confident
these modifications will be completed and tested prior to December 31, 1999. The
costs of these modifications are not expected to be material to the Company's
financial position or results of operations.
The Company is currently in the process of surveying and testing its
significant non-IT systems, such as in fuel pumps, cash registers and truck
repair equipment, to determine whether such systems are Year 2000 compliant. As
a result of the significant capital improvements made at the Company's sites,
over the past few years, substantially all of the Company's mission critical
non-IT systems recently have been upgraded or are in the process of being
upgraded and are believed to be Year 2000 compliant, although the Company is
still in the process of formally testing and evaluating its non-IT systems. The
Company expects to complete this process by September 30, 1999.
The Company's management believes that its efforts and plans to ensure
its internal IT and non-IT systems are Year 2000 compliant are adequate and,
therefore, the greatest risk to the Company's operations lies with third
parties. The Company has contacted key third parties and has started to conduct
testing of interfaces to ensure Year 2000 compliance. While all testing has
not been completed as of this time, the Company plans to complete testing with
all parties by September 30, 1999. When that process is complete, management
will complete an analysis of its most reasonably likely worst case scenario
and a contingency plan to deal with that scenario will be developed. The most
critical of these third parties are those companies which provide billing
services to our customers and interface to our critical fuel desk POS system.
The POS system is currently Year 2000 compliant and testing with all billing
services interfacing to that system is complete. With this testing and
implementation behind us, a major risk factor with regard to Year 2000
readiness has been minimized, if not eliminated.
23
<PAGE> 24
While management believes the Company is adequately addressing the Year
2000 issue and will not suffer a material adverse effect from such issues, there
is no guarantee that the estimated completion dates and costs will be achieved.
In addition, there is no guarantee that key third parties will be successful in
completing their Year 2000 efforts. If needed modifications are not made on a
timely basis, including to third parties' systems, and/or contingency plans are
not implemented, the Year 2000 issue could have an adverse effect on the
Company's operations and, potentially, its financial condition.
RECENTLY ISSUED ACCOUNTING PRONOUNCEMENT
In June 1998, the Financial Accounting Standards Board issued Financial
Accounting Standard No. 133, "Accounting for Derivative Instruments and Hedging
Activities" ("FAS 133"), which requires entities to recognize all derivatives as
either assets or liabilities in the balance sheet and measure those instruments
at fair value. Changes in the fair values are required to be recognized in
income when they occur, except for derivatives that qualify as hedges. For the
Company, adoption of this standard, as subsequently amended, is required for the
first quarter of 2001. At this time, the Company has not completed its analysis
of the effect on its financial statements of adopting FAS 133. However, as the
Company utilizes derivatives on a limited basis and only as hedges of either
commodity price risk or interest rate risk, the effect of FAS 133 on the
Company's statement of income is not expected to be material.
FORWARD-LOOKING STATEMENTS
The Company is making this statement in order to satisfy the "safe
harbor" provision contained in the Private Securities Litigation Reform Act of
1995. The statements contained in this report that are not statements of
historical fact may include forward-looking statements that involve a number of
risks and uncertainties. Moreover, from time to time the Company may issue other
forward-looking statements. Such forward-looking statements are made based on
management's expectations and beliefs concerning future events impacting the
Company and are subject to uncertainties and factors relating to the Company's
operations and business environment, all of which are difficult to predict and
many of which are beyond the control of the Company, that could cause actual
results of the Company to differ materially from those matters expressed in or
implied by forward-looking statements. The following factors are among those
that could cause actual results to differ materially from the forward-looking
statements: competition from other travel center and truckstop operators,
including additional or improved services or facilities of competitors; the
economic condition of the trucking industry, which in turn is dependent on
general economic factors; diesel and gasoline fuel pricing; availability of fuel
supply; and difficulties that may be encountered by the Company or its
franchisees in implementing the Combination Plan, integrating the Burns Network
and TPOA Network sites into the Network, and implementing the Freightliner
Program. The forward-looking statements should be considered in light of these
factors.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
The Company is exposed to commodity price risk and interest rate risk.
The Company's fuel purchase contracts provide for purchase prices based on
average market prices for diesel and gasoline, exposing the Company to commodity
price risk. The Company mitigates this risk exposure in a few ways, but
primarily by maintaining only a few days of inventory on hand and selling a
large portion of its fuel volume under "cost plus" pricing formulae, which
minimize the effect on the Company's margins of sudden sharp changes in
commodity market prices. The Company manages the price exposure related to sales
volumes not covered by cost plus arrangements through the use, on a limited
basis, of derivative instruments designated by management as hedges of
anticipated purchases. The total volume covered by open derivative contracts at
any point in time during 1998 was immaterial. There were no open derivative
contracts during the six months ended June 30, 1999 or at June 30, 1999. The
interest rate risk faced by the Company results from the highly-leveraged
position of the Company and its level of variable rate indebtedness, the rates
for which are based on short-term lending rates, primarily the London Interbank
Offered Rate. During the first quarter of 1999, in order to somewhat mitigate
its interest rate risk, the Company entered into two interest rate swap
agreements with a counterparty. The first swap agreement fixes the interest rate
on a notional amount of the Company's variable rate indebtedness of $35 million
of three-month LIBOR, within a floor of 5.00% and a cap of 6.75%. The second
swap agreement is related to the Company's $125 million Senior Subordinated
Notes due 2007 and provides that the Company pay a variable interest rate based
on a six-month LIBOR, with a floor of 9.25% and a cap of 11.8%. Regarding the
Company's debt obligations with interest rate risk, there were no material
changes from the information provided in the Company's Form 10-K for the year
ended December 31, 1998.
24
<PAGE> 25
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
The Company is involved from time to time in various legal and
administrative proceedings incidental to the ordinary course of its business.
The Company is not now involved in any litigation, individually, or in the
aggregate, which could have a material adverse affect on the Company's business,
financial condition, results of operations or cash flows.
Item 4. Submission of Matters to a Vote of Security Holders
The Annual Meeting of Stockholders of TravelCenters of America, Inc.
was held on May 3, 1999, for the purpose of electing a board of directors and
ratifying the appointment of PricewaterhouseCoopers LLP as the Company's
independent accountants. The nominees for director, Harrison T. Bubb, Robert B.
Calhoun, Jr., Margaret M. Eisen, Edwin P. Kuhn, Eugene P. Lynch, Louis J.
Mischianti and Rolf H. Towe, were all elected by the following vote:
Shares Voted "For" 2,987,913
Shares Voted "Against" 380,000
Shares "Withheld" 0
The resolution to ratify the appointment of PricewaterhouseCoopers LLP as the
Company's independent accountants for the year ending December 31,1999 was
approved by the following vote:
Shares Voted "For" 5,468,569
Shares Voted "Against" 380,000
Shares "Withheld" 26,840
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit
Number Exhibit
- ----------------- ------------------------------------------------------------
3.2 Certificate of Amendment to the Restated Certificate of
Incorporation of the Company
27 Financial Data Schedule
(b) Reports on Form 8-K
On June 16, 1999, the Company filed a report on Form 8-K related to its
acquisition of TPOA. This Form 8-K will be amended as of August 17, 1999.
25
<PAGE> 26
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
TRAVELCENTERS OF AMERICA, INC.
(Registrant)
Date: August 16, 1999 By: /s/ James W. George
------------------------
Name: James W. George
Title: Senior Vice President and
Chief Financial Officer
(Principal Financial Officer and
Duly Authorized Officer)
26
<PAGE> 1
Exhibit 3.2
CERTIFICATE OF AMENDMENT
TO THE
RESTATED CERTIFICATE OF INCORPORATION
OF
TRAVELCENTERS OF AMERICA, INC.
TRAVELCENTERS OF AMERICA, INC. (the "Corporation"), a corporation
organized and existing under and by virtue of the Delaware General Corporation
Law, does hereby certify as follows:
FIRST: Section 4.3.1(c) of the Restated Certificate of Incorporation of
the Corporation is hereby deleted in its entirety and amended to read as
follows:
"4.3.1(c) SUBORDINATE STOCK. Subject to the prior rights of
the holders of Senior Preferred Stock upon any liquidation,
distribution or winding-up of the Corporation and subject to the
restrictions on the payment of dividends or making of distributions on
the capital stock of the Corporation as set forth in Section 4.3.7
hereof, so long as any Series I Preferred Stock shall remain
outstanding, no dividend shall be declared or paid upon, nor shall any
distribution be made upon, (A) any shares of Series II Preferred Stock,
Common Stock, other than dividends or distributions on the Series I
Preferred Stock, Series II Preferred Stock, Common Stock in equal
amounts as provided in Section 4.3.1(b) above or (B) any shares of
Subordinate Stock (as defined below), other than dividends or
distributions payable in shares of Subordinate Stock. "Subordinate
Stock" means any class of shares which shall rank junior in right of
payment to the Senior Preferred Stock and Junior Preferred Stock in
respect of either dividends or distributions upon the liquidation,
dissolution or winding-up of the Corporation, other than the Common
Stock."
SECOND: Section 4.3.2(c) of the Restated Certificate of Incorporation
of the Corporation is hereby deleted in its entirety and amended to read as
follows:
"4.3.2(c) SUBORDINATE STOCK. Subject to the prior rights of
the holders of Senior Preferred Stock upon any liquidation, dissolution
or winding-up of the Corporation and subject to the restrictions on the
payment of dividends or making of distributions on the capital stock of
the Corporation as set forth in Section 4.3.7 hereof, so long as any
Series II Preferred Stock shall remain outstanding, no dividend shall
be declared or paid upon, nor shall any distribution be made upon, (A)
any shares of Series I Preferred Stock or Common Stock, other than
dividends or distributions on the Series I Preferred Stock, Series II
Preferred Stock and Common Stock in equal amounts as provided in
Section 4.3.2(b) above or (B) any shares of Subordinate Stock, other
than dividends or distributions payable in shares of Subordinate
Stock."
THIRD: Section 4.3.3(c) of the Restated Certificate of Incorporation of
the Corporation is hereby deleted in its entirety and amended to read as
follows:
1
<PAGE> 2
"4.3.3(c) SUBORDINATE STOCK. Subject to the restrictions on
the payment of dividends or making of distributions on the capital
stock of the Corporation as provided in Section 4.3.7 hereof, so long
as any Series I Senior Preferred Stock shall remain outstanding, no
dividend shall be declared or paid upon, nor shall any distribution be
made upon, (A) any shares of Junior Preferred Stock or Common Stock,
other than dividends or distributions on the Junior Preferred Stock and
Common Stock in equal amounts as provided in Section 4.3.3(b)(i) above
or (B) any shares of Subordinate Stock, other than dividends or
distributions payable in shares of Subordinate Stock."
FOURTH: Section 4.3.4(c) of the Restated Certificate of Incorporation
of the Corporation is hereby deleted in its entirety and amended to read as
follows:
"4.3.4(c) SUBORDINATE STOCK. Subject to the restrictions on
the payment of dividends or making of distributions on the capital
stock of the Corporation as provided in Section 4.3.7 hereof, so long
as any Series II Senior Preferred Stock shall remain outstanding, no
dividend shall be declared or paid upon, nor shall any distribution be
made upon, (A) any shares of Junior Preferred Stock or Common Stock,
other than dividends or distributions on the Junior Preferred Stock and
Common Stock in equal amounts as provided in Section 4.3.4(b)(i) above
or (B) any shares of Subordinate Stock, other than dividends or
distributions payable in shares of Subordinate Stock."
FIFTH: That the Board of Directors of the Corporation, by written
consent dated as of February 26, 1999, adopted a resolution proposing and
declaring advisable the foregoing amendments to the Restated Certificate of
Incorporation of the Corporation.
SIXTH: This Certificate of Amendment of the Restated Certificate of
Incorporation was duly adopted by the requisite vote of the Board of Directors
of the Corporation.
SEVENTH: By an Action of Shareholders by Written Consent dated as of
March 31, 1999, executed in accordance with Section 228(a) of the Delaware
General Corporation Law, the necessary number of shares as required by statute
did consent in writing to the adoption of the foregoing amendments, and written
notice of the taking of such corporate action has been given to stockholders of
the Corporation who have not consented in writing.
EIGHTH: That the foregoing amendments were duly adopted in accordance
with the provisions of Section 242 of the Delaware General Corporation Law.
IN WITNESS WHEREOF, the Corporation has caused this Certificate to be
duly executed in its corporate name this 3rd day of May, 1999.
TRAVELCENTERS OF AMERICA, INC.
By: /s/ Edwin P. Kuhn
--------------------------------
Edwin P. Kuhn, President and
Chief Executive Officer
2
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
COMPANY'S CONSOLIDATED FINANCIAL STATEMENTS FOR THE QUARTER ENDED JUNE 30, 1999
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> JUN-30-1999
<CASH> 20,468
<SECURITIES> 0
<RECEIVABLES> 66,145
<ALLOWANCES> 4,030
<INVENTORY> 48,895
<CURRENT-ASSETS> 158,480
<PP&E> 444,632
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<TOTAL-ASSETS> 650,092
<CURRENT-LIABILITIES> 118,268
<BONDS> 415,122
74,697
38
<COMMON> 15
<OTHER-SE> 26,595
<TOTAL-LIABILITY-AND-EQUITY> 650,092
<SALES> 600,028
<TOTAL-REVENUES> 610,600
<CGS> 423,245
<TOTAL-COSTS> 423,245
<OTHER-EXPENSES> 168,700
<LOSS-PROVISION> 771
<INTEREST-EXPENSE> 17,503
<INCOME-PRETAX> 381
<INCOME-TAX> 268
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<NET-INCOME> 113
<EPS-BASIC> (7.51)
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