<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 March 31, 2000
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 [ ]
<PAGE> 2
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 March 31, 2000 and December
31, 1999 2
Unaudited Consolidated Statement of Operations and Retained
Earnings (Deficit) for the three months ended March 31, 2000
and 1999 3
Unaudited Consolidated Statement of Cash Flows for the three
months ended March 31, 2000 and 1999 4
Selected Notes to Unaudited Consolidated Financial Statements 5
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 15
Item 3. Quantitative and Qualitative Disclosures About
Market Risk 19
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 19
Item 4. Submission of Matters to a Vote of Security Holders 19
Item 6. Exhibits and Reports on Form 8-K 19
SIGNATURE 20
</TABLE>
1
<PAGE> 3
<TABLE>
TRAVELCENTERS OF AMERICA, INC.
CONSOLIDATED BALANCE SHEET
<CAPTION>
MARCH 31, DECEMBER 31,
2000 1999
(UNAUDITED)
----------- ------------
ASSETS (IN THOUSANDS OF DOLLARS)
<S> <C> <C>
Current assets:
Cash ..................................................................... $ 18,277 $ 18,040
Accounts receivable (less allowance for doubtful accounts of $3,130 for
2000 and $2,894 for 1999) ............................................. 78,238 66,439
Inventories .............................................................. 58,298 59,043
Deferred income taxes .................................................... 4,548 4,533
Other current assets ..................................................... 13,969 16,441
-------- --------
Total current assets ................................................ 173,330 164,496
Notes receivable, net ....................................................... 1,415 1,383
Property and equipment, net ................................................. 455,473 454,093
Intangible assets ........................................................... 27,611 28,792
Deferred financing costs .................................................... 8,064 8,411
Deferred income taxes ....................................................... 1,334 1,879
Other assets ................................................................ 5,924 808
-------- --------
Total assets ........................................................ $673,151 $659,862
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current maturities of long-term debt ..................................... $ 1,601 $ 1,601
Accounts payable ......................................................... 74,057 60,920
Other accrued liabilities ................................................ 57,281 66,743
-------- --------
Total current liabilities ........................................... 132,939 129,264
Commitments and contingencies (Note 6)
Long-term debt .............................................................. 416,638 404,369
Deferred income taxes ....................................................... 1,639 1,639
Other long-term liabilities ................................................. 17,064 16,615
-------- --------
568,280 551,887
Mandatorily redeemable senior convertible participating preferred stock ..... 82,430 79,739
Other preferred stock, common stock and other stockholders' equity .......... 52,875 53,000
Retained (deficit) .......................................................... (30,434) (24,764)
-------- --------
22,441 28,236
-------- --------
Total liabilities and stockholders' equity .......................... $673,151 $659,862
======== ========
</TABLE>
The accompanying notes are an integral part of
these consolidated financial statements.
2
<PAGE> 4
<TABLE>
TRAVELCENTERS OF AMERICA, INC.
UNAUDITED CONSOLIDATED STATEMENT OF OPERATIONS AND RETAINED EARNINGS (DEFICIT)
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
--------------------------
2000 1999
-------- --------
(IN THOUSANDS OF DOLLARS
EXCEPT PER SHARE AMOUNTS)
<S> <C> <C>
Revenues:
Fuel ........................................ $328,203 $163,458
Nonfuel ..................................... 123,887 99,705
Rent and royalties .......................... 4,720 5,065
-------- --------
Total revenues .............................. 456,810 268,228
Cost of revenues (excluding depreciation) ...... 352,672 181,677
-------- --------
Gross profit (excluding depreciation) .......... 104,138 86,551
Operating expenses ............................. 72,785 58,735
Selling, general and administrative expenses ... 9,766 9,286
Transition expenses ............................ 259 455
Depreciation and amortization expense .......... 15,129 11,209
Loss on sales of property and equipment ........ 61 50
Stock compensation expense ..................... 450 900
-------- --------
Income from operations ......................... 5,688 5,916
Interest expense, net .......................... (10,304) (8,367)
-------- --------
Loss before income taxes ....................... (4,616) (2,451)
Benefit for income taxes ....................... (1,637) (774)
-------- --------
Net (loss) ..................................... (2,979) (1,677)
Less: preferred dividends ...................... (2,691) (2,362)
Retained (deficit) - beginning of the period ... (24,764) (15,098)
-------- --------
Retained (deficit) - end of the period ......... $(30,434) $(19,137)
======== ========
Earnings per common share (basic and diluted) .. $ (6.47) $ (6.73)
======== ========
</TABLE>
The accompanying notes are an integral part of
these consolidated financial statements.
3
<PAGE> 5
<TABLE>
TRAVELCENTERS OF AMERICA, INC.
UNAUDITED CONSOLIDATED STATEMENT OF CASH FLOWS
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
-------------------------
2000 1999
-------- --------
(IN THOUSANDS OF DOLLARS)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net (loss) ........................................................... $ (2,979) $ (1,677)
Adjustments to reconcile net loss to net cash provided by operating
activities:
Depreciation and amortization expense ............................. 15,129 11,209
Deferred income tax provision ..................................... 530 (844)
Provision for doubtful accounts ................................... 330 330
Provision for stock compensation .................................. 450 900
Loss on sales of property and equipment ........................... 61 50
Changes in assets and liabilities, adjusted for the effects of
business acquisitions:
Accounts receivable ............................................. (12,254) (10,982)
Inventories ..................................................... 1,754 (2,827)
Other current assets ............................................ 2,472 (4,646)
Accounts payable ................................................ 13,137 8,378
Other current liabilities ....................................... (9,462) 222
Other, net ........................................................ (288) 390
-------- --------
Net cash provided by operating activities ......................... 8,880 503
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Business acquisitions ................................................ (8,959) --
Proceeds from sales of property and equipment ........................ 5 --
Capital expenditures ................................................. (11,409) (19,915)
-------- --------
Net cash used in investing activities ............................. (20,363) (19,915)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Revolving loan borrowings ............................................ 70,200 --
Revolving loan repayments ............................................ (58,100) --
Long-term debt repayments ............................................ (380) (372)
Issuance of common stock ............................................. -- 38
-------- --------
Net cash provided by (used in) financing activities ............... 11,720 (334)
-------- --------
Net increase (decrease) in cash ................................. 237 (19,746)
Cash at the beginning of the period ..................................... 18,040 89,200
-------- --------
Cash at the end of the period ........................................... $ 18,277 $ 69,454
======== ========
</TABLE>
The accompanying notes are an integral part of
these consolidated financial statements.
4
<PAGE> 6
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 160 full-service travel centers in 40 states,
primarily operating under the "TravelCenters of America" or "TA" trademarks. Of
the network locations at March 31, 2000, the Company owns or leases 150
locations, 28 of which are leased to independent lessee-franchisees
("Operators") of the Company ("Leased Sites"), and 122 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 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 (the "National Network") of
a subsidiary of Unocal Corporation (together with its subsidiaries "Unocal") and
in December 1993 acquired (the "TA Acquisition") the truckstop network assets
(the "TA Network") of certain 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 (the "Burns
Network") of Burns Bros., Inc., and certain of its affiliates (collectively
"Burns"). In June 1999 the Company acquired (the "TPOA Acquisition") Travel
Ports of America, Inc. ("TPOA"), which operated a network of truck stops (the
"TPOA Network"). See Note 4 for disclosure regarding the TPOA Acquisition.
The consolidated financial statements include the accounts of
TravelCenters of America, Inc. and its wholly owned subsidiaries, TA Operating
Corporation ("TA"), TA Franchise Systems Inc. ("TAFSI"), National
Auto/Truckstops, Inc. ("National"), and TA Licensing, Inc., ("TA Licensing,"
formerly known as Travel Port Systems, Inc.) and TA Travel, L.L.C., a wholly
owned subsidiary of TA. Intercompany accounts and transactions have been
eliminated.
The accompanying unaudited, consolidated financial statements as of and
for the quarters ended March 31, 2000 and 1999 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, 1999. 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-month periods ended March
31, 2000 and 1999, and are not necessarily indicative of the results to be
expected for the full year.
5
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TRAVELCENTERS OF AMERICA, INC.
SELECTED NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
2. EARNINGS PER SHARE
A reconciliation of the income and shares used in the computation
follows:
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31,
----------------------------
2000 1999
------- -------
(DOLLARS AND SHARES IN THOUSANDS
EXCEPT PER SHARE AMOUNTS)
<S> <C> <C>
Net loss ................................... $(2,979) $(1,677)
Less: Preferred stock dividends ........... (2,691) (2,362)
------- -------
Net loss available to common stockholders .. (5,670) (4,039)
Weighted average shares outstanding ........ 877 600
------- -------
Loss per share ............................. $ (6.47) $ (6.73)
======= =======
</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 quarters ended March 31, 2000 and 1999.
3. INVENTORIES
Inventories consist of the following:
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
2000 1999
--------- ------------
(IN THOUSANDS OF DOLLARS)
<S> <C> <C>
Nonfuel merchandise .......... $49,924 $51,043
Petroleum products ........... 8,374 8,000
------- -------
Total inventories ...... $58,298 $59,043
======= =======
</TABLE>
4. 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 was $86,003,000. This was comprised
of cash paid to purchase the TPOA stock and 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 $22,124,000 and direct
costs of the acquisition of $2,304,000. The cost was allocated to the assets and
liabilities acquired on the basis of their estimated fair values at the
acquisition date, including $27,585,000 of assets other than the property and
equipment acquired. The excess of purchase price over the estimated fair values
of the net assets acquired, in the amount of $9,907,000, 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, $25,000,000 of borrowings
under the Company's revolving credit facility and other available cash.
6
<PAGE> 8
TRAVELCENTERS OF AMERICA, INC.
SELECTED NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
The following unaudited pro forma information presents the results of
operations of the Company as if the TPOA Acquisition had taken place on January
1, 1999.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31, 1999
-------------------------
(IN THOUSANDS OF DOLLARS
EXCEPT PER SHARE AMOUNTS)
<S> <C>
Total revenue.............................................. $303,886
Gross profit............................................... $101,229
Income from operations..................................... $ 7,147
Net (loss)................................................. $(1,385)
Loss per common share (basic and diluted).................. $ (6.25)
</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 that actually would have resulted had the acquisition occurred on
January 1, 1999, or that may result in the future.
5. 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.
7
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TRAVELCENTERS OF AMERICA, INC.
SELECTED NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
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 entered into with those companies as part
of the National Acquisition and the TA Acquisition, respectively, and has a
reserve of $7,100,000 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
liquidity 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.
6. SUPPLEMENTAL CASH FLOW INFORMATION
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
------------------
2000 1999
------ ------
(IN THOUSANDS OF DOLLARS)
<S> <C> <C>
Cash paid during the period for:
Interest.......................................................... $6,375 $4,374
Income taxes (net of refunds)..................................... $1,687 $ 806
</TABLE>
During the first quarter of 2000, the Company assumed a note payable
for $540,000 as part of the consideration paid in acquiring a full-service
travel center and acquired $125,000 of treasury stock in payment of accounts
receivable from a former Operator.
7. CONDENSED CONSOLIDATING FINANCIAL STATEMENT SCHEDULES
The following schedules set forth the consolidating balance sheets of
the Company as of March 31, 2000 and December 31, 1999 and the consolidating
statements of operations and retained earnings (deficit) and of cash flows of
the Company for the three months ended March 31, 2000 and 1999. In the following
schedules, "Parent Company" refers to the unconsolidated balances of
TravelCenters of America, Inc., "Guarantor Subsidiaries" refers to the combined
balances of TA, National and TA Licensing, including related intercompany
eliminations, and "Nonguarantor Subsidiary" refers to the balances of TAFSI.
"Eliminations" represent the adjustments necessary to (a) eliminate intercompany
transactions between the Parent Company, the Guarantor Subsidiaries on a
combined basis and the Nonguarantor Subsidiary and, (b) eliminate the Company's
investments in its subsidiaries. The Guarantor Subsidiaries (TA, National and TA
Licensing), 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.
8
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TRAVELCENTERS OF AMERICA, INC.
SELECTED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
CONDENSED CONSOLIDATING BALANCE SHEET SCHEDULES:
<TABLE>
<CAPTION>
MARCH 31, 2000
--------------------------------------------------------------------------------
PARENT GUARANTOR NONGUARANTOR
COMPANY SUBSIDIARIES SUBSIDIARY ELIMINATIONS CONSOLIDATED
------- ------------ ------------ ------------ ------------
(IN THOUSANDS OF DOLLARS)
<S> <C> <C> <C> <C> <C>
ASSETS
Current assets:
Cash ..................................... $ -- $ 18,277 $ -- $ -- $ 18,277
Accounts receivable, net ................. -- 76,986 1,252 -- 78,238
Inventories .............................. -- 58,298 -- -- 58,298
Deferred income taxes .................... -- 4,548 -- -- 4,548
Other current assets ..................... 3,902 11,937 -- (1,870) 13,969
-------- -------- ------- --------- --------
Total current assets ................ 3,902 170,046 1,252 (1,870) 173,330
Notes receivable, net ....................... 1,074 341 -- -- 1,415
Property and equipment, net ................. -- 455,473 -- -- 455,473
Intangible assets ........................... -- 27,611 -- -- 27,611
Deferred financing costs .................... 8,064 -- -- -- 8,064
Deferred income taxes ....................... 879 455 -- -- 1,334
Other assets ................................ -- 5,924 -- -- 5,924
Investment in subsidiaries .................. 115,804 -- -- (115,804) --
-------- -------- ------- --------- --------
Total assets ........................ $129,723 $659,850 $ 1,252 $(117,674) $673,151
======== ======== ======= ========= ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current maturities of long-term debt ..... $ 1,446 $ 155 $ -- $ -- $ 1,601
Accounts payable ......................... -- 73,977 80 -- 74,057
Other accrued liabilities ................ 9,160 49,400 591 (1,870) 57,281
-------- -------- ------- --------- --------
Total current liabilities ........... 10,606 123,532 671 (1,870) 132,939
Long-term debt .............................. 413,234 3,404 -- -- 416,638
Deferred income taxes ....................... -- 1,639 -- -- 1,639
Intercompany payable (receivable) ........... (400,242) 406,708 (6,466) -- --
Other liabilities ........................... -- 17,064 -- -- 17,064
-------- -------- ------- --------- --------
Total liabilities ................... 23,598 552,347 (5,795) (1,870) 568,280
Mandatorily redeemable senior convertible
participating preferred stock ............ 82,430 -- -- -- 82,430
Other preferred stock, common stock and other
stockholders' equity ..................... 54,129 84,839 -- (86,093) 52,875
Retained earnings (deficit) ................. (30,434) 22,664 7,047 (29,711) (30,434)
-------- -------- ------- --------- --------
23,695 107,503 7,047 (115,804) 22,441
-------- -------- ------- --------- --------
Total liabilities and stockholders'
equity ........................... $129,723 $659,850 $ 1,252 $(117,674) $673,151
======== ======== ======= ========= ========
</TABLE>
9
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TRAVELCENTERS OF AMERICA, INC.
SELECTED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
DECEMBER 31, 1999
------------------------------------------------------------------------------
PARENT GUARANTOR NONGUARANTOR
COMPANY SUBSIDIARIES SUBSIDIARY ELIMINATIONS CONSOLIDATED
--------- ------------ ------------ ------------ ------------
(IN THOUSANDS OF DOLLARS)
<S> <C> <C> <C> <C> <C>
Current assets:
Cash ................................. $ -- $ 18,040 $ -- $ -- $ 18,040
Accounts receivable, net ............. -- 65,344 1,095 -- 66,439
Inventories .......................... -- 59,043 -- -- 59,043
Deferred income taxes ................ -- 4,533 -- -- 4,533
Other current assets ................. 278 16,163 -- -- 16,441
--------- -------- ------- --------- --------
Total current assets ............ 278 163,123 1,095 -- 164,496
Notes receivable, net ................... 1,062 321 -- -- 1,383
Property and equipment, net ............. -- 454,093 -- -- 454,093
Intangible assets ....................... -- 28,792 -- -- 28,792
Deferred financing costs ................ 8,411 -- -- -- 8,411
Deferred income taxes ................... 880 999 -- -- 1,879
Other assets ............................ -- 808 -- -- 808
Investment in subsidiaries .............. 118,417 -- -- (118,417) --
--------- -------- ------- --------- --------
Total assets .................... $ 129,048 $648,136 $ 1,095 $(118,417) $659,862
========= ======== ======= ========= ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current maturities of long-term debt . $ 1,446 $ 155 $ -- $ -- $ 1,601
Accounts payable ..................... -- 60,660 260 -- 60,920
Other accrued liabilities ............ 6,592 60,043 108 -- 66,743
--------- -------- ------- --------- --------
Total current liabilities ....... 8,038 120,858 368 -- 129,264
Long-term debt (net of unamortized
discount) ............................ 401,495 2,874 -- -- 404,369
Deferred income taxes ................... -- 1,639 -- -- 1,639
Intercompany payable (receivable) ....... (389,715) 396,370 (6,655) -- --
Other liabilities ....................... -- 16,615 -- -- 16,615
--------- -------- ------- --------- --------
Total liabilities ............... 19,818 538,356 (6,287) -- 551,887
Mandatorily redeemable senior convertible
participating preferred stock ........ 79,739 -- -- -- 79,739
Other preferred stock, common stock and
other stockholders' equity ........... 54,255 84,839 -- (86,094) 53,000
Retained earnings (deficit) ............. (24,764) 24,941 7,382 (32,323) (24,764)
--------- -------- ------- --------- --------
29,491 109,780 7,382 (118,417) 28,236
--------- -------- ------- --------- --------
Total liabilities and
stockholders' equity ......... $ 129,048 $648,136 $ 1,095 $(118,417) $659,862
========= ======== ======= ========= ========
</TABLE>
10
<PAGE> 12
TRAVELCENTERS OF AMERICA, INC.
SELECTED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS AND RETAINED EARNINGS (DEFICIT)
SCHEDULES:
<TABLE>
<CAPTION>
MARCH 31, 2000
------------------------------------------------------------------------------
PARENT GUARANTOR NONGUARANTOR
COMPANY SUBSIDIARIES SUBSIDIARY ELIMINATIONS CONSOLIDATED
-------- ------------ ------------ ------------ ------------
(IN THOUSANDS OF DOLLARS)
<S> <C> <C> <C> <C> <C>
Revenues:
Fuel ..................................... $ -- $328,203 $ -- $ -- $ 328,203
Nonfuel .................................. -- 123,887 -- 123,887
Rent and royalties ....................... -- 2,988 1,732 -- 4,720
-------- -------- ------ -------- ---------
Total revenues ........................... -- 455,078 1,732 -- 456,810
Cost of revenues (excluding depreciation) .. -- 352,672 -- -- 352,672
-------- -------- ------ -------- ---------
Gross profit (excluding depreciation) ....... -- 102,406 1,732 -- 104,138
Operating expenses .......................... -- 71,658 1,127 -- 72,785
Selling, general and
administrative expenses ................. 200 8,411 1,155 -- 9,766
Transition expenses ......................... -- 259 -- -- 259
Depreciation and amortization expense ....... 356 14,773 -- -- 15,129
Loss on sales of property and equipment ..... -- 61 -- -- 61
Stock compensation expense .................. -- 450 -- -- 450
-------- -------- ------ -------- ---------
Income (loss) from operations ............... (556) 6,794 (550) -- 5,688
Interest expense, net ....................... -- (10,304) -- -- (10,304)
Equity income (loss) ........................ (2,612) -- -- 2,612 --
-------- -------- ------ -------- ---------
Income (loss) before income taxes ........... (3,168) (3,510) (550) 2,612 (4,616)
Provision (benefit) for income taxes ........ (189) (1,233) (215) -- (1,637)
-------- -------- ------ -------- ---------
Net income (loss) ........................... (2,979) (2,277) (335) 2,612 (2,979)
Less: preferred dividends ................... (2,691) -- -- -- (2,691)
Retained earnings (deficit) - beginning of
the period ............................... (24,764) 24,941 7,382 (32,323) (24,764)
-------- -------- ------ -------- ---------
Retained earnings (deficit) - end of the
period ................................... $(30,434) $ 22,664 $7,047 $(29,711) $ (30,434)
======== ======== ====== ======== =========
</TABLE>
11
<PAGE> 13
TRAVELCENTERS OF AMERICA, INC.
SELECTED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
MARCH 31, 1999
---------------------------------------------------------------------------
PARENT GUARANTOR NONGUARANTOR
COMPANY SUBSIDIARY SUBSIDIARY ELIMINATIONS CONSOLIDATED
-------- ---------- ------------ ------------ ------------
(IN THOUSANDS OF DOLLARS)
<S> <C> <C> <C> <C> <C>
Revenues:
Fuel ..................................... $ -- $163,458 $ -- $ -- $163,458
Nonfuel .................................. -- 99,524 181 -- 99,705
Rent and royalties ....................... -- 3,407 1,658 -- 5,065
-------- -------- ------ -------- --------
Total revenues ........................... -- 266,389 1,839 -- 268,228
Cost of revenues (excluding depreciation) .. -- 181,677 -- -- 181,677
-------- -------- ------ -------- --------
Gross profit (excluding depreciation) ....... -- 84,712 1,839 -- 86,551
Operating expenses .......................... 54 58,473 208 -- 58,735
Selling, general and
administrative expenses ................. 192 8,876 218 -- 9,286
Transition expenses ......................... -- 455 -- -- 455
Depreciation and amortization expense ....... 334 10,875 -- -- 11,209
Loss on sales of property and equipment ..... -- 50 -- -- 50
Stock compensation expense .................. -- 900 -- -- 900
-------- -------- ------ -------- --------
Income (loss) from operations ............... (580) 5,083 1,413 -- 5,916
Interest expense, net ....................... -- (8,367) -- -- (8,367)
Equity income (loss) ........................ (1,294) -- -- 1,294 --
-------- -------- ------ -------- --------
Income (loss) before income taxes ........... (1,874) (3,284) 1,413 1,294 (2,451)
Provision (benefit) for income taxes ........ (197) (1,104) 527 -- (774)
-------- -------- ------ -------- --------
Net income (loss) ........................... (1,677) (2,180) 886 1,294 (1,677)
Less: preferred dividends ................... (2,362) -- -- -- (2,362)
Retained earnings (deficit) - beginning of
the period ............................... (15,098) 26,607 5,773 (32,380) (15,098)
-------- -------- ------ -------- --------
Retained earnings (deficit) - end of the
period ................................... $(19,137) $ 24,427 $6,659 $(31,086) $(19,137)
======== ======== ====== ======== ========
</TABLE>
12
<PAGE> 14
TRAVELCENTERS OF AMERICA, INC.
SELECTED NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOW SCHEDULES:
<TABLE>
<CAPTION>
MARCH 31, 2000
----------------------------------------------------------------------
PARENT GUARANTOR NONGUARANTOR
COMPANY SUBSIDIARIES SUBSIDIARY ELIMINATIONS CONSOLIDATED
-------- ------------ ------------ ------------ ------------
(IN THOUSANDS OF DOLLARS)
<S> <C> <C> <C> <C> <C>
CASH FLOWS PROVIDED BY (USED IN)
OPERATING ACTIVITIES ................. $ (3,699) $ 12,579 $ -- $ -- $ 8,880
-------- -------- ---- ---- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Business acquisitions ................ -- (8,959) -- -- (8,959)
Proceeds from sales of property and
equipment ......................... -- 5 -- -- 5
Capital expenditures ................. -- (11,409) -- -- (11,409)
-------- -------- ---- ---- --------
Net cash used in investing
activities ...................... -- (20,363) -- -- (20,363)
-------- -------- ---- ---- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Revolving loan borrowings ............ 70,200 -- -- -- 70,200
Revolving loan repayments ............ (58,100) -- -- -- (58,100)
Long-term debt repayments ............ (362) (18) -- -- (380)
Intercompany advances ................ (8,039) 8,039 -- -- --
-------- -------- ---- ---- --------
Net cash provided by (used in)
financing activities ............ 3,699 8,021 -- -- 11,720
-------- -------- ---- ---- --------
Net increase in cash ................... -- 237 -- -- 237
Cash at the beginning of the period ..... -- 18,040 -- -- 18,040
-------- -------- ---- ---- --------
Cash at the end of the period ........... $ -- $ 18,277 $ -- $ -- $ 18,277
======== ======== ==== ==== ========
</TABLE>
13
<PAGE> 15
TRAVELCENTERS OF AMERICA, INC.
SELECTED NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
MARCH 31, 1999
-----------------------------------------------------------------------
PARENT GUARANTOR NONGUARANTOR
COMPANY SUBSIDIARIES SUBSIDIARY ELIMINATIONS CONSOLIDATED
-------- ------------ ------------ ------------ ------------
(IN THOUSANDS OF DOLLARS)
<S> <C> <C> <C> <C> <C>
CASH FLOWS PROVIDED BY (USED IN)
OPERATING ACTIVITIES ................ $ 3,341 $ (2,838) $ -- $ -- $ 503
-------- -------- ---- ---- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures ................ -- (19,915) -- -- (19,915)
-------- -------- ---- ---- --------
Net cash used in investing
activities ..................... -- (19,915) -- -- (19,915)
-------- -------- ---- ---- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Long-term debt repayments ........... (361) (11) -- -- (372)
Issuance of common stock ............ 38 -- -- -- 38
Intercompany advances ............... (17,415) 17,415 -- -- --
-------- -------- ---- ---- --------
Net cash used in financing
activities ..................... (17,738) 17,404 -- -- (334)
-------- -------- ---- ---- --------
Net (decrease) in cash ........... (14,397) (5,349) -- -- (19,746)
Cash at the beginning of the period .... 59,665 29,535 -- -- 89,200
-------- -------- ---- ---- --------
Cash at the end of the period .......... $ 45,268 $ 24,186 $ -- $ -- $ 69,454
======== ======== ==== ==== ========
</TABLE>
14
<PAGE> 16
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 the
Management's Discussion and Analysis included with the Company's Form 10-K for
the year ended December 31, 1999.
OVERVIEW
The Company is a holding company which, through its wholly-owned
subsidiaries, owns, operates and franchises more full-service travel centers in
the United States than any of its competitors with 160 network sites nationwide,
including 150 Company-owned locations. The Company was formed in December 1992
to facilitate the National Acquisition in April 1993. In December 1993, the
Company acquired the TA Network. In December 1998, the Company acquired the
Burns Network and in June 1999 the Company acquired the TPOA Network.
Historically, under the Company's ownership, National operated principally as a
fuel wholesaler and franchisor, with relatively few Company-operated sites. As a
result, its revenues consisted primarily of wholesale diesel fuel sales to
Operators and Franchisee-Owners, rent from Operators of Leased Sites and nonfuel
franchise royalty payments. In contrast, TA operated principally as an
owner-operator of travel centers, as did Burns and TPOA. Consequently, while TA
derived the majority of its revenues from retail diesel fuel sales, the majority
of its gross profit has been derived from, and its principal strategic focus has
been, the sale of higher margin nonfuel products and services.
COMBINATION PLAN AND TRANSITION EXPENSES
During the three months ended March 31, 2000, the Company incurred
approximately $0.3 million of expenses related to the Combination Plan and
integrating acquired sites into the Network, bringing the total of such expenses
incurred since inception of the Combination Plan to $23.1 million. These costs,
identified as transition expenses in the Company's consolidated financial
statements, are expected to total less than $1.0 million in 2000. Generally,
these expenses related to, among other things, (i) the costs to convert National
Network travel centers to Network travel centers, (ii) the costs to dispose of
travel centers or terminate lease or franchise agreements, and (iii) the costs
of integrating the management and operations of the National Network, the Burns
Network and the TPOA Network into the Network, including relocation, travel,
training, and legal expenses. For 2000, the costs primarily relate to finalizing
the integration of the TPOA Network sites and the final matters related to the
Combination Plan. The Company expects no further transition expense after 2000.
NETWORK COMPOSITION
The change in the number of sites within the Company's network is the
most significant factor driving the changes from the prior year in the Company's
results of operations. In June 1999, the Company acquired 16 Company-operated
Sites in the TPOA Acquisition. During the second half of 1999, the Company sold
three Company-operated Sites, sold one Leased Site to the Operator who signed a
franchise agreement to brand the site as a Franchisee-owner Site, sold one
closed site, closed two Company-operated Sites now held for sale, and opened two
newly-constructed Company-operated Sites. During the first quarter of 2000, the
Company acquired two new Company-operated sites, converted a Leased Site to a
Company-operated Site and converted a Franchisee-owner Site to a
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
networks.
<TABLE>
<CAPTION>
AS OF MARCH 31, AS OF
--------------- DECEMBER 31,
2000 1999 1999
---- ---- ----
<S> <C> <C> <C>
Company-owned and operated sites(1) 122 106 118
Company-owned and leased sites 28 30 29
--- --- ---
Total Company-owned sites 150 136 147
Franchisee-owner sites 10 10 11
--- --- ---
Total 160 146 158
=== === ===
</TABLE>
(1) Excludes three closed sites as of March 31, 2000 and December 31, 1999
and two closed sites as of March 31, 1999.
15
<PAGE> 17
RESULTS OF OPERATIONS
Revenues
The Company's consolidated revenues for the three months ended March
31, 2000 were $456.8 million, which represents an increase from the same period
in the prior year of $188.6 million, or 70.3%.
Fuel revenue for the three months ended March 31, 2000 increased by
$164.7 million, or 100.7%, over the same period in 1999. The increase is
attributable to increases in diesel and gasoline sales volumes as well as an
increase in average pump prices. Diesel and gasoline sales volumes increased
4.0% and 20.6%, respectively, between years, due to added volume from the
increased number of Network sites and same-site increases of 1.4% for gasoline
over the 1999 first quarter, somewhat offset by decreased sales volumes from
1999 on a same-site basis of 11.1% for diesel fuel. The diesel volume decline
and relatively slight gasoline increase from 1999 on a same-site basis are
attributable to the effects of the sharp rise in commodity prices, which reduced
overall demand for fuel. For the quarter ended March 31, 2000, the Company sold
332.8 million gallons of diesel and 18.7 million gallons of gasoline. Average
diesel and gasoline sales prices for 2000 increased 93.3% and 63.9%
respectively, over 1999. The increase in average retail prices corresponds with
increasing crude oil prices and refined products prices throughout 2000 as a
result of supply shortages.
Nonfuel revenues in 2000 of $123.9 million reflect an increase of $24.2
million, or 24.2% from 1999. The increase primarily results from the increased
number of Company-operated Sites in the Network. Further, on a same-site basis,
nonfuel revenue increased 4.9% in 2000 versus 1999, reflecting the effects of
the significant capital investments the Company has made in the Network pursuant
to the Capital Program.
Rent and royalty revenues for 2000 reflect a $0.4 million or 7.8%
decrease from the prior year. This decrease is attributable to the rent and
royalty revenue lost as a result of the conversion of one Leased Site to a
Franchisee-owner Site in 1999 and the conversions of one Leased Site and one
Franchisee-owner Site to Company -operated sites during 2000, somewhat offset by
a same-site rent increase of 1.5% and a same-site increase of 0.2% in royalty
revenue as a result of improved franchisee sales levels.
Gross Profit
The Company's gross profit for the first quarter of 2000 was $104.1
million, compared to $86.6 million for 1999, an increase of $17.5 million, or
20.2%. The increase in the Company's gross profit was primarily due to increases
in nonfuel revenues and fuel margin, partially offset by decreased rent revenue.
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 increased by $14.1 million, or 24.0%,
to $72.8 million for the three-month period ended March 31, 2000. These
increases reflect the increased number of Company-operated Sites, as well as
increased nonfuel sales volume at continuing sites. On a same-site basis,
operating expenses as a percentage of nonfuel revenues for the first quarter of
2000 were 56.6%, compared to 57.1% for the 1999 period.
The Company's SG&A for the first quarter increased from $9.3 million in
1999 to $9.8 million in 2000, reflecting increased staffing and other expenses
(such as travel, insurance and advertising) to support the Company's growth from
the Burns Acquisition and the TPOA Acquisition.
Transition Expenses
Transition expenses for the first quarter of 2000 decreased from $0.5
million in 1999 to $0.3 million in 2000. These costs were incurred integrating
the Burns and TPOA sites into the Company's Network. The Company anticipates
less than $1.0 million of such costs in 2000.
16
<PAGE> 18
Depreciation and Amortization Expense
Depreciation and amortization expense for the first quarter of 2000 was
$15.1 million, compared to $11.2 million for the same period last year. This
increase results from a larger base of depreciable assets in 2000 due to the
TPOA Acquisition and continued capital investments pursuant to the Capital
Program.
Income (Loss) from Operations
The Company generated income from operations of $5.7 million for the
first quarter of 2000, compared to income from operations of $5.9 million for
the same period in the prior year. This is the result of an increase in gross
profit of $17.5 million, more than offset by an increase in expenses. 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 month
period ended March 31, 2000 was $21.6 million, compared to $18.5 million for the
same period in the prior year. The increased EBITDA for 2000 is primarily the
result of additional Company-operated Sites due to the TPOA Acquisition and
incremental nonfuel revenues generated by capital projects.
Interest Expense - Net
Interest expense for the first quarter of 2000 was $1.9 million higher
than the same period in the prior year as a result of increased interest rates
and the increased debt balance that primarily results from the TPOA Acquisition
(discussed in Liquidity and Capital Resources below).
Income taxes
The Company's effective income tax rate for the first quarter of 2000
and 1999 was 35.5% and 31.6%, respectively. These rates differ from the federal
statutory rate due primarily to state income taxes and nondeductible expenses,
partially offset by the benefit of certain tax credits. The change between years
in the effective tax rate is primarily the result of changes in state taxes, net
of the federal effect.
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 and expansion.
Net cash provided by operating activities totaled $8.9 million for the
first quarter of 2000, compared to $0.5 million for the same period in the prior
year. The increase is primarily the result of increased EBITDA and a decline in
the cash invested in working capital between years.
Net cash used in investing activities increased to $20.4 million for
the first quarter of 2000, up from $19.9 million for the first quarter of 1999.
The increase is the result of increased spending for business acquisitions
substantially offset by the decreased level of construction activity in 2000
compared to 1999. In 2000, the Company's business acquisitions consisted of the
conversion of a Leased Site to a Company-operated Site, the conversion of a
Franchisee-Owner Site to a Company-operated Site, the acquisition of two new
Company-operated Sites that were not previously part of the Network and a
minority investment in a related business. There were no such transactions
during the 1999 first quarter. The level of capital spending in 2000 has been
reduced as a result of the effect on the Company's expected cash flows of the
depressed diesel fuel volume as a result of the sharp increases in commodity
prices.
Net cash provided by financing activities was $11.7 million during the
first quarter of 2000, while cash used in financing activities in the first
quarter of 1999 was $0.3 million. For 2000, the cash was provided by net
borrowings, under the Company's revolving credit facility, primarily to fund
capital expenditures.
The Company expects to invest approximately $340 million in the Network
between 1997 and the end of 2001 (with $248 million of this amount having been
spent by March 31, 2000) in connection with the Capital Program to upgrade,
rebrand, reimage and increase the number of travel centers. 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. The capital expenditures
budget for 2000 is approximately $65 million.
17
<PAGE> 19
The Company anticipates that it will be able to fund its 2000 working
capital requirements and capital expenditures primarily from funds generated
from operations and asset sales, and, to the extent necessary, from borrowings
under its revolving credit 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 to
enter into the ServicePoint Program. Under the agreement, the Company's truck
repair facilities are being added to Freightliner's 24-hour customer assistance
center database to be a major referral point for emergency and roadside repairs
and also have access to Freightliner's parts distribution, service and technical
information systems. The Company believes the ServicePoint Program, which will
be implemented at substantially all of the Company's truck repair shops by the
end of 2000, will generate an increase in nonfuel revenues in 2000 but will have
a larger effect in 2001 and thereafter.
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 environmental agreements entered into with those companies as
part of the National Acquisition and the TA Acquisition, respectively, and has a
reserve for such matters of $7.1 million as of March 31, 2000. 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.
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 is required for the first quarter of 2000. 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
operations 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 and TPOA
sites into the Network, and implementing the ServicePoint Program. The
forward-looking statements should be considered in light of these factors.
18
<PAGE> 20
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 the three months ended March 31, 2000 was immaterial.
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. The Company mitigates this risk through the use of interest rate
swap agreements. Regarding the Company's debt obligations with interest rate
risk, and the related interest rate swap agreements, there were no material
changes from the information provided in the Company's Form 10-K for the year
ended December 31, 1999.
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
No matters were submitted to a vote of security holders during the
first quarter.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit
Number Exhibit
- ------- ----------------------------------------------------------
27 Financial Data Schedule
(b) Reports on Form 8-K
During the first quarter of 2000, the Company filed no reports on Form
8-K.
19
<PAGE> 21
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: May 15, 2000 By: /s/ James W. George
-----------------------------------------
Name: James W. George
Title: Senior Vice President and
Chief Financial Officer
(Principal Financial Officer and
Duly Authorized Officer)
20
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
COMPANY'S CONSOLIDATED FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<CASH> 18,277
<SECURITIES> 0
<RECEIVABLES> 81,368
<ALLOWANCES> 3,130
<INVENTORY> 58,298
<CURRENT-ASSETS> 173,330
<PP&E> 455,473
<DEPRECIATION> 0
<TOTAL-ASSETS> 673,151
<CURRENT-LIABILITIES> 132,939
<BONDS> 416,638
82,430
38
<COMMON> 17
<OTHER-SE> 22,386
<TOTAL-LIABILITY-AND-EQUITY> 673,151
<SALES> 452,090
<TOTAL-REVENUES> 456,810
<CGS> 352,672
<TOTAL-COSTS> 352,672
<OTHER-EXPENSES> 98,450
<LOSS-PROVISION> 330
<INTEREST-EXPENSE> 10,304
<INCOME-PRETAX> (4,616)
<INCOME-TAX> (1,637)
<INCOME-CONTINUING> (2,979)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2,979)
<EPS-BASIC> (6.47)
<EPS-DILUTED> (6.47)
</TABLE>
