Business Wire | Nov 4, 2020 08:57AM EST

CORRECTING and REPLACING TravelCenters of America Inc. Announces Third Quarter 2020 Financial Results

Nov. 04, 2020

WESTLAKE, Ohio--(BUSINESS WIRE)--Nov. 04, 2020--Please replace the release with the following corrected version to add the Calculation of adjusted fuel gross margin and adjusted fuel gross margin per gallon table and move footnote (11) underneath the Calculation of adjusted EBITDAR margin table.

The updated release reads:

TRAVELCENTERS OF AMERICA INC. ANNOUNCES THIRD QUARTER 2020 FINANCIAL RESULTS

Net Income Per Share of Common Stock Attributable to Common Stockholders of $0.61 for the 2020 Third Quarter

Adjusted Net Income Per Share of Common Stock Attributable to Common Stockholders of $0.65 for the 2020 Third Quarter

Net Income Increased362.4% and Adjusted EBITDAR Increased 10.0% for the 2020 Third Quarter Over Prior Year Period

TravelCenters of America Inc. (Nasdaq: TA) today announced financial results for the quarter and nine months ended September 30, 2020.

Jonathan M. Pertchik, TA's CEO, made the following statement regarding the 2020 third quarter results:

"Despite the continued challenges presented by the global pandemic and the corresponding economic recession, we generated increases of 362.4% in net income, 29.9% in adjusted EBITDA and 10.0% in adjusted EBITDAR over the prior year third quarter. Fuel gross margin increased slightly by 0.8% over the prior year period driven by a significant increase in diesel fuel sales volume and the federal biodiesel blenders' tax credit. Four wheel traffic, which is reflected in gasoline sales volume, remained down over the prior year period and low volatility in the diesel fuel wholesale market caused fuel gross margin per gallon to decline compared to last year. Overall nonfuel revenues decreased 3.7% over the prior year period driven almost entirely by a reduction in revenues at our full service restaurants, many of which remain closed due to precautions taken in response to COVID-19. However, certain of our transformation initiatives have resulted in solid improvements in our store and retail, quick service restaurant and truck service departments, as well as improved revenues from diesel exhaust fluid. Although adjusted fuel gross margin and nonfuel revenues decreased 4.7% during the 2020 third quarter, our adjusted EBITDAR margin increased to 19.4% as compared to 16.8% for the prior year period. This improvement was a direct result of our sound discipline in managing expenses."

Reconciliations to GAAP:

Adjusted net income (loss), adjusted net income (loss) per share of common stock attributable to common stockholders, adjusted fuel gross margin, adjusted fuel gross margin per gallon, adjusted fuel gross margin and nonfuel revenues, EBITDA, adjusted EBITDA, adjusted EBITDAR and adjusted EBITDAR margin are non-GAAP financial measures. The U.S. generally accepted accounting principles, or GAAP, financial measures that are most directly comparable to the non-GAAP measures disclosed herein are included in the supplemental tables below.

Third Quarter 2020 Highlights:

* Cash and cash equivalents of $280.4 million and availability under TA's revolving credit facility of $70.9 million for total liquidity of $351.3 million as of September 30, 2020. * The following table presents detailed results for TA's fuel sales for the 2020 and 2019 third quarters.

Three Months Ended (in thousands) September 30,

2020 2019 Change

Fuel sales volume (gallons):

Diesel fuel 485,488 431,336 12.6 %

Gasoline 69,614 80,343 (13.4) %

Total fuel sales volume 555,102 511,679 8.5 %



Fuel gross margin $ 80,123 $ 79,458 0.8 %

Adjusted fuel gross margin 70,565 79,458 (11.2) %

Fuel gross margin per gallon $ 0.144 $ 0.155 (7.1) %

Adjusted fuel gross margin per gallon 0.127 0.155 (18.1) %

* The following table presents detailed results for TA's nonfuel revenues for the 2020 and 2019 third quarters.

Three Months Ended (in thousands) September 30,

2020 2019 Change

Nonfuel revenues:

Truck service $ 189,630 $ 186,430 1.7 %

Store and retail services 179,517 173,033 3.7 %

Restaurant 77,665 109,129 (28.8) %

Diesel exhaust fluid 27,285 23,497 16.1 %

Total nonfuel revenues $ 474,097 $ 492,089 (3.7) %



Nonfuel gross margin $ 285,983 $ 294,504 (2.9) %

Nonfuel gross margin percentage 60.3 % 59.8 % 50 pts

* Adjusted fuel gross margin and nonfuel revenues of $544.7 million decreased $26.9 million, or 4.7%, as compared to the prior year period. * Net income of $8.7 million increased $6.8 million, or 362.4%, and adjusted net income of $9.2 million increased $7.3 million, or 389.9%, as compared to the prior year period. * Adjusted EBITDA of $41.5 million increased $9.6 million, or 29.9%, as compared to the prior year period. * Adjusted EBITDAR of $105.4 million increased $9.6 million, or 10.0%, as compared to the prior year period. * Adjusted EBITDAR margin increased to 19.4% from 16.8% for the prior year period.

Growth Strategies

TA has commenced numerous initiatives across its organization for the purpose of improving and enhancing operational efficiencies and profitability, including a company wide reorganization plan, or the Reorganization Plan. TA believes certain of these initiatives will increase diesel fuel and gasoline gross margin and fuel sales volume, increase market share in the truck service industry, improve merchandising and gross margin in store and retail services, improve operating effectiveness in its full service restaurants and expand its franchise base, while focusing on opportunities to further control costs in field operations.

On April 30, 2020, TA committed to and initiated the Reorganization Plan to improve the efficiency of its operations. As part of the Reorganization Plan, TA reduced its headcount and eliminated certain positions, which TA expects to result in approximately $13.1 million of net annual savings in selling, general and administrative expense. In addition, TA has made certain changes in its leadership and their roles and created both a corporate development and a procurement team. The costs of the Reorganization Plan were $4.3 million, which were comprised primarily of severance, outplacement services, stock based compensation expense associated with the accelerated vesting of previously granted stock awards for certain employees and fees for recruitment of certain executive positions.

On October 28, 2019, TA entered into a multi unit franchise agreement with IHOP Franchisor LLC a subsidiary of IHOP(r), or IHOP, in which TA agreed to rebrand and convert up to 94 of its full service restaurants to IHOP restaurants over five years. Due to the COVID-19 pandemic, TA and IHOP agreed to delay the rebranding schedule by one year. Of the 94, TA is obligated to convert the initial 20 full service restaurants to IHOP restaurants with the remaining conversions at its discretion. TA currently operates these full service restaurants under its Iron Skillet or Country Pride brand names. The average investment per site to rebrand these restaurants is expected to be approximately $1.4 million.

Since the beginning of 2019, TA has entered into franchise agreements for 23 travel centers to be operated under one of TA's travel center brand names; four of these franchised travel centers began operations during 2019, two began operations in the 2020 first quarter, five began operations in the 2020 second quarter, two began operations in the 2020 third quarter, one began operations in the 2020 fourth quarter to date and TA anticipates the remaining nine franchised travel centers will be added to its network by the end of 2021. In addition, TA has entered into an agreement with one of these franchisees pursuant to which TA expects to add two additional franchised travel centers to its network, one within five years and the other within 10 years.

Underwritten Public Equity Offering

On July 6, 2020, TA received net proceeds of $80.0 million, after $0.3 million of offering costs and $5.1 million of underwriting discounts and commissions, from the sale and issuance of 6.1 million shares of common stock in an underwritten public equity offering. TA intends to use the net proceeds from this offering to fund deferred maintenance and other capital expenditures necessary to enhance property conditions and implement growth initiatives, for working capital and for general corporate purposes.

Conference Call

On November 4, 2020, at 10:00 a.m. Eastern time, TA will host a conference call to discuss its financial results and other activities for the three months ended September 30, 2020. Following management's remarks, there will be a question and answer period.

The conference call telephone number is 877-329-4614. Participants calling from outside the United States and Canada should dial 412-317-5437. No pass code is necessary to access the call from either number. Participants should dial in about 15 minutes prior to the scheduled start of the call. A replay of the conference call will be available for about a week after the call. To hear the replay, dial 412-317-0088. The replay pass code is 10148171.

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

About TravelCenters of America Inc.

TA's nationwide business includes travel centers located in 44 U.S. states and in Canada, standalone truck service facilities located in three states and standalone restaurants located in 12 states. TA's travel centers operate under the "TravelCenters of America," "TA," "TA Express," "Petro Stopping Centers" and "Petro" brand names and offer diesel fuel and gasoline, restaurants, truck repair services, travel/convenience stores and other services designed to provide attractive and efficient travel experiences to professional drivers and other motorists. TA's standalone truck service facilities operate under the "TA Truck Service" brand name. TA's standalone restaurants operate principally under the "Quaker Steak & Lube," or QSL, brand name.

TRAVELCENTERS OF AMERICA INC.

CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)

(in thousands, except per share amounts)

Three Months Ended Nine Months Ended September 30, September 30,

2020 2019 2020 2019

Revenues:

Fuel $ 791,880 $ 1,074,680 $ 2,244,219 $ 3,175,492

Nonfuel 474,097 492,089 1,304,674 1,409,045

Rent androyalties from 3,947 3,723 10,482 10,611 franchisees

Total revenues 1,269,924 1,570,492 3,559,375 4,595,148



Cost of goodssold (excluding depreciation):

Fuel 711,757 995,222 1,990,241 2,944,465

Nonfuel 188,114 197,585 512,784 553,351

Total cost of 899,871 1,192,807 2,503,025 3,497,816 goods sold



Site leveloperating 221,864 241,740 655,950 709,105 expense

Selling, generaland 32,967 40,178 108,171 116,850 administrativeexpense

Real estate rent 65,226 63,911 191,893 194,094 expense

Depreciation andamortization 32,299 24,146 89,113 72,118 expense



Income from 17,697 7,710 11,223 5,165 operations



Interest 7,375 7,048 22,064 21,262 expense, net

Other expense 233 (60) 1,109 370 (income), net

Income (loss)before income 10,089 722 (11,950) (16,467) taxes

(Provision)benefit for (1,432) 1,150 4,222 6,819 income taxes

Net income 8,657 1,872 (7,728) (9,648) (loss)

Less: net incomefor 52 40 104 89 noncontrollinginterest

Net income(loss)attributable to $ 8,605 $ 1,832 $ (7,832) $ (9,737) commonstockholders



Net income(loss) per shareof common stock attributable tocommonstockholders:

Basic and $ 0.61 $ 0.23 $ (0.76) $ (1.20) diluted



Weighted averagevested shares of 13,779 7,777 9,890 7,770 common stock

Weighted averageunvested shares 286 309 358 313 of common stock

These financial statements should be read in conjunction with TA's Quarterly Report on Form 10-Q for the quarter ended September 30, 2020, to be filed with the U.S. Securities and Exchange Commission.

TRAVELCENTERS OF AMERICA INC.

RECONCILIATION OF NON-GAAP FINANCIAL MEASURES

(in thousands, except per share amounts)

TA believes the non-GAAP financial measures presented in the tables below are meaningful supplemental disclosures. Management uses these measures in developing internal budgets and forecasts and analyzing TA's performance and believes that they may help investors gain a better understanding of changes in TA's operating results and its ability to pay rent or service debt when due, make capital expenditures and expand its business. These non-GAAP financial measures also may help investors to make comparisons between TA and other companies and to make comparisons of TA's financial and operating results between periods.

The non-GAAP financial measures TA presents should not be considered as alternatives to net income (loss) attributable to common stockholders, net income (loss), income from operations or net income (loss) per share of common stock attributable to common stockholders as an indicator of TA's operating performance or as a measure of TA's liquidity. Also, the non-GAAP financial measures TA presents may not be comparable to similarly titled amounts calculated by other companies.

TA believes that adjusted net income (loss), adjusted net income (loss) per share of common stock attributable to common stockholders, adjusted fuel gross margin and nonfuel revenues, EBITDA, adjusted EBITDA, adjusted fuel gross margin and adjusted fuel gross margin per gallon are meaningful disclosures that may help investors to better understand TA's financial performance by providing financial information that represents the operating results of TA's operations without the effects of items that do not result directly from TA's normal recurring operations and may allow investors to better compare TA's performance between periods and to the performance of other companies. TA calculates EBITDA as net income (loss) before interest, income taxes and depreciation and amortization expense, as shown below. TA calculates adjusted EBITDA by excluding items that it considers not to be normal, recurring, cash operating expenses or gains or losses.

In addition, TA believes that, because it leases a majority of its travel centers, presenting adjusted EBITDAR and adjusted EBITDAR margin may help investors compare the value of TA against companies that own and finance ownership of their properties with debt financing, since these measures eliminate the effects of variability in leasing methods and capital structures. These measures may also help investors evaluate TA's valuation if it owned its leased properties and financed that ownership with debt, in which case the interest expense TA incurred for that debt financing would be added back when calculating EBITDA. Adjusted EBITDAR and adjusted EBITDAR margin are presented solely as valuation measures and should not be viewed as measures of overall operating performance or considered in isolation or as an alternative to net income (loss) because they exclude the real estate rent expense associated with TA's leases and they are presented for the limited purposes referenced herein. TA calculates EBITDAR as net income (loss) before interest, income taxes, real estate rent expense and depreciation and amortization expense and adjusted EBITDAR by excluding items that it considers not to be normal, recurring, cash operating expenses or gains or losses. TA calculates adjusted EBITDAR margin as adjusted EBITDAR as a percentage of adjusted fuel gross margin and nonfuel revenues.

TA excluded the federal biodiesel blenders' tax credit when calculating its non-GAAP financial measures. In December 2019, the U.S. government retroactively reinstated the federal biodiesel blenders' tax credit for 2018 and 2019, as well as approved the federal biodiesel blenders' tax credit through 2022. As a result, the three and nine months ended September 30, 2019, do not include the benefit of the federal biodiesel blenders' tax credit and excluding the benefit for the three and nine months ended September 30, 2020, allows investors to better compare TA's performance between periods.

TA believes that net income (loss) is the most directly comparable GAAP financial measure to adjusted net income (loss), EBITDA, adjusted EBITDA and adjusted EBITDAR; net income (loss) per share of common stock attributable to common stockholders is the most directly comparable GAAP financial measure to adjusted net income (loss) per share of common stock attributable to common stockholders; fuel gross margin and nonfuel revenues are the most directly comparable GAAP financial measure to adjusted fuel gross margin and nonfuel revenues; and that fuel gross margin and fuel gross margin per gallon are the most directly comparable GAAP financial measures to adjusted fuel gross margin and adjusted fuel gross margin per gallon, respectively.

TRAVELCENTERS OF AMERICA INC.

RECONCILIATION OF NON-GAAP FINANCIAL MEASURES

(in thousands, except per share amounts)

The following tables present the reconciliations of the non-GAAP financial measures to the respective most directly comparable GAAP financial measures for the three and nine months ended September 30, 2020 and 2019.

Three Months Ended Nine Months EndedCalculation of adjusted September 30, September 30,net income (loss): 2020 2019 2020 2019

Net income (loss) $ 8,657 $ 1,872 $ (7,728 ) $ (9,648 )

Add: Impairment of 6,610 - 6,610 - property and equipment^(1)

Add: Impairment of 1,262 - 1,262 - operating lease assets^(1)

Add: Asset write offs^(2) 2,372 - 8,906 -

Add: Reorganization Plan - - 4,288 - costs^(3)

Add: Field employee bonus - - 3,769 - expense^(4)

Add: Goodwill impairment^ - - 3,046 - (5)

Add: Executive - - 2,109 - compensation expense^(6)

Less: Federal biodiesel (9,558 ) - (20,788 ) - blenders' tax credit^(7)

Add: Costs of SVC - - - 458 transactions^(8)

Less: Loyalty award - - - (2,911 )expiration^(9)

(Less) add: Net income (173 ) - (2,319 ) 618 (loss) tax impact^(10)

Adjusted net income (loss) $ 9,170 $ 1,872 $ (845 ) $ (11,483 )

Calculation of adjusted net income (loss) per share of common stock attributable to common stockholders (basic and diluted):

Three Months EndedSeptember 30,

Nine Months EndedSeptember 30,

2020

2019

2020

2019

Net income (loss) per share of common stock attributable to common stockholders (basic and diluted)

$

0.61

$

0.23

$

(0.76

)

$

(1.20

)

Add: Impairment of property and equipment(1)

0.47

-

0.64

-

Add: Impairment of operating lease assets(1)

0.09

-

0.12

-

Add: Asset write offs(2)

0.17

-

0.87

-

Add: Reorganization Plan costs(3)

-

-

0.42

-

Add: Field employee bonus expense(4)

-

-

0.37

-

Add: Goodwill impairment(5)

-

-

0.30

-

Add: Executive compensation expense(6)

-

-

0.21

-

Less: Federal biodiesel blenders' tax credit(7)

(0.68

)

-

(2.03

)

-

Add: Costs of SVC transactions(8)

-

-

-

0.06

Less: Loyalty award expiration(9)

-

-

-

(0.36

)

(Less) add: Net income (loss) tax impact(10)

(0.01

)

-

(0.23

)

0.07

Adjusted net income (loss) per share of common stock attributable to common stockholders (basic and diluted)

$

0.65

$

0.23

$

(0.09

)

$

(1.43

)

Calculation of adjusted net Three Months Ended Nine Months Endedincome (loss) per share of common September 30, September 30,stock attributable to commonstockholders (basic and diluted): 2020 2019 2020 2019

Net income (loss) per share ofcommon stock attributable to $ 0.61 $ 0.23 $ (0.76 ) $ (1.20 )common stockholders (basic anddiluted)

Add: Impairment of property and 0.47 - 0.64 - equipment^(1)

Add: Impairment of operating 0.09 - 0.12 - lease assets^(1)

Add: Asset write offs^(2) 0.17 - 0.87 -

Add: Reorganization Plan costs^ - - 0.42 - (3)

Add: Field employee bonus expense - - 0.37 - ^(4)

Add: Goodwill impairment^(5) - - 0.30 -

Add: Executive compensation - - 0.21 - expense^(6)

Less: Federal biodiesel blenders' (0.68 ) - (2.03 ) - tax credit^(7)

Add: Costs of SVC transactions^ - - - 0.06 (8)

Less: Loyalty award expiration^ - - - (0.36 )(9)

(Less) add: Net income (loss) tax (0.01 ) - (0.23 ) 0.07 impact^(10)

Adjusted net income (loss) pershare of common stock $ 0.65 $ 0.23 $ (0.09 ) $ (1.43 )attributable to commonstockholders (basic and diluted)

Calculation of adjusted fuel gross margin and nonfuel revenues:

Three Months EndedSeptember 30,

Nine Months EndedSeptember 30,

2020

2019

2020

2019

Fuel gross margin

$

80,123

$

79,458

$

253,978

$

231,027

Nonfuel revenues

474,097

492,089

1,304,674

1,409,045

Total fuel gross margin and nonfuel revenues

554,220

571,547

1,558,652

1,640,072

Less: Federal biodiesel blenders' tax credit(7)

(9,558

)

-

(20,788

)

-

Less: Loyalty award expiration(9)

-

-

-

(2,911

)

Adjusted fuel gross margin and nonfuel revenues

$

544,662

$

571,547

$

1,537,864

$

1,637,161

Calculation of Three Months Ended Nine Months Endedadjusted fuel gross September 30, September 30,margin and nonfuelrevenues: 2020 2019 2020 2019

Fuel gross margin $ 80,123 $ 79,458 $ 253,978 $ 231,027

Nonfuel revenues 474,097 492,089 1,304,674 1,409,045

Total fuel grossmargin and nonfuel 554,220 571,547 1,558,652 1,640,072 revenues

Less: Federalbiodiesel blenders' (9,558 ) - (20,788 ) - tax credit^(7)

Less: Loyalty award - - - (2,911 )expiration^(9)

Adjusted fuel grossmargin and nonfuel $ 544,662 $ 571,547 $ 1,537,864 $ 1,637,161 revenues

Calculation of EBITDA, adjusted EBITDA and adjusted EBITDAR:

Three Months EndedSeptember 30,

Nine Months EndedSeptember 30,

2020

2019

2020

2019

Net income (loss)

$

8,657

$

1,872

$

(7,728

)

$

(9,648

)

Add (less): Provision (benefit) for income taxes

1,432

(1,150

)

(4,222

)

(6,819

)

Add: Depreciation and amortization expense

32,299

24,146

89,113

72,118

Add: Interest expense, net

7,375

7,048

22,064

21,262

EBITDA

49,763

31,916

99,227

76,913

Add: Impairment of operating lease assets(1)

1,262

-

1,262

-

Add: Reorganization Plan costs(3)

-

-

4,288

-

Add: Field employee bonus expense(4)

-

-

3,769

-

Add: Executive compensation expense(6)

-

-

2,109

-

Less: Federal biodiesel blenders' tax credit(7)

(9,558

)

-

(20,788

)

-

Add: Costs of SVC transactions(8)

-

-

-

458

Less: Loyalty award expiration(9)

-

-

-

(2,911

)

Adjusted EBITDA

41,467

31,916

89,867

74,460

Add: Real estate rent expense

65,226

63,911

191,893

194,094

Less: Impairment of operating lease assets(1)

(1,262

)

-

(1,262

)

-

Adjusted EBITDAR

$

105,431

$

95,827

$

280,498

$

268,554

Calculation of EBITDA, Three Months Ended Nine Months Endedadjusted EBITDA and September 30, September 30,adjusted EBITDAR: 2020 2019 2020 2019

Net income (loss) $ 8,657 $ 1,872 $ (7,728 ) $ (9,648 )

Add (less): Provision(benefit) for income 1,432 (1,150 ) (4,222 ) (6,819 )taxes

Add: Depreciation and 32,299 24,146 89,113 72,118 amortization expense

Add: Interest expense, 7,375 7,048 22,064 21,262 net

EBITDA 49,763 31,916 99,227 76,913

Add: Impairment ofoperating lease assets^ 1,262 - 1,262 - (1)

Add: Reorganization Plan - - 4,288 - costs^(3)

Add: Field employee - - 3,769 - bonus expense^(4)

Add: Executive - - 2,109 - compensation expense^(6)

Less: Federal biodiesel (9,558 ) - (20,788 ) - blenders' tax credit^(7)

Add: Costs of SVC - - - 458 transactions^(8)

Less: Loyalty award - - - (2,911 )expiration^(9)

Adjusted EBITDA 41,467 31,916 89,867 74,460

Add: Real estate rent 65,226 63,911 191,893 194,094 expense

Less: Impairment ofoperating lease assets^ (1,262 ) - (1,262 ) - (1)

Adjusted EBITDAR $ 105,431 $ 95,827 $ 280,498 $ 268,554

Calculation of adjusted EBITDAR margin:

Three Months EndedSeptember 30,

Nine Months EndedSeptember 30,

2020

2019

2020

2019

Adjusted EBITDAR(11)

$

105,431

$

95,827

$

280,498

$

268,554

Adjusted fuel gross margin and nonfuel revenues(11)

544,662

571,547

1,537,864

1,637,161

Adjusted EBITDAR margin

19.4

%

16.8

%

18.2

%

16.4

%

Three Months Ended Nine Months EndedCalculation of adjusted September 30, September 30,EBITDAR margin: 2020 2019 2020 2019

Adjusted EBITDAR^(11) $ 105,431 $ 95,827 $ 280,498 $ 268,554

Adjusted fuel grossmargin and nonfuel 544,662 571,547 1,537,864 1,637,161 revenues^(11)

Adjusted EBITDAR margin 19.4 % 16.8 % 18.2 % 16.4 %

(11)

Reconciliations from net income (loss) and fuel gross margin and nonfuel revenues, the financial measures determined in accordance with GAAP to the non-GAAP measures disclosed herein, are included in the supplemental tables above.

Reconciliations from net income (loss) and fuel gross margin and nonfuel^ revenues, the financial measures determined in accordance with GAAP to the(11) non-GAAP measures disclosed herein, are included in the supplemental tables above.

Calculation of adjusted fuel gross margin

and adjusted fuel gross margin per gallon:

Three Months EndedSeptember 30,

Nine Months EndedSeptember 30,

2020

2019

2020

2019

Fuel gross margin

$

80,123

$

79,458

$

253,978

$

231,027

Less: Federal biodiesel blenders' tax credit(7)

(9,558

)

-

(20,788

)

-

Less: Loyalty award expiration(9)

-

-

-

(2,840

)

Adjusted fuel gross margin

$

70,565

$

79,458

$

233,190

$

228,187

Fuel gross margin per gallon

$

0.144

$

0.155

$

0.167

$

0.155

Less: Federal biodiesel blenders' tax credit(7)

(0.017

)

-

(0.014

)

-

Less: Loyalty award expiration(9)

-

-

-

(0.002

)

Adjusted fuel gross margin per gallon

$

0.127

$

0.155

$

0.153

$

0.153

Calculation of adjusted Three Months Ended Nine Months Endedfuel gross margin September 30, September 30,

and adjusted fuel grossmargin per gallon: 2020 2019 2020 2019

Fuel gross margin $ 80,123 $ 79,458 $ 253,978 $ 231,027

Less: Federal biodiesel (9,558 ) - (20,788 ) - blenders' tax credit^(7)

Less: Loyalty award - - - (2,840 )expiration^(9)

Adjusted fuel gross $ 70,565 $ 79,458 $ 233,190 $ 228,187 margin



Fuel gross margin per $ 0.144 $ 0.155 $ 0.167 $ 0.155 gallon

Less: Federal biodiesel (0.017 ) - (0.014 ) - blenders' tax credit^(7)

Less: Loyalty award - - - (0.002 )expiration^(9)

Adjusted fuel gross $ 0.127 $ 0.155 $ 0.153 $ 0.153 margin per gallon

(1)Impairment of Property and Equipment and Operating Lease Assets. During the three and nine months September 30, 2020, TA recognized $6.6 million and $1.3 million of impairment charges to property and equipment and operating lease assets, respectively, related to certain standalone QSL restaurants. The impairment charges were recognized in depreciation and amortization expense and real estate rent expense, respectively, in TA's consolidated statements of operations and comprehensive income (loss).

(2)

Asset Write Offs. During the three and nine months ended September 30, 2020, TA wrote off $2.4 million and $8.1 million, respectively, related to programs that were canceled. During the nine months ended September 30, 2020, TA wrote off $0.8 million of intangibles relating to three QSL franchises that closed in April 2020. These amounts were included in depreciation and amortization expense in TA's consolidated statements of operations and comprehensive income (loss).

(3)

Reorganization Plan Costs. On April 30, 2020, TA commenced a company-wide Reorganization Plan. During the nine months ended September 30, 2020, TA recognized $4.3 million of costs related to the Reorganization Plan, which were included in selling, general and administrative expense in TA's consolidated statements of operations and comprehensive income (loss).

(4)

Field Employee Bonus Expense. In March and April 2020, TA paid cash bonuses to certain employees who continued to work at its locations during the COVID-19 pandemic. These bonuses resulted in additional compensation expense of $3.8 million for the nine months ended September 30, 2020, which were included in site level operating expense in TA's consolidated statements of operations and comprehensive income (loss).

(5)

Goodwill Impairment. During the nine months ended September 30, 2020, TA recognized a goodwill impairment charge of $3.0 million with respect to its QSL reporting unit, which was recognized in depreciation and amortization expense in TA's consolidated statements of operations and comprehensive income (loss).

(6)

Executive Compensation Expense. TA agreed to accelerate the vesting of previously granted stock awards and make cash payments as part of TA's retirement and separation agreements with certain former executive officers. The accelerations and cash payments resulted in additional compensation expense of $2.1 million for the nine months ended September 30, 2020, which were included in selling, general and administrative expense in TA's consolidated statements of operations and comprehensive income (loss).

(7)

Federal Biodiesel Blenders' Tax Credit. In December 2019, the U.S. government retroactively reinstated the federal biodiesel blenders' tax credit for 2018 and 2019, as well as approved the federal biodiesel blenders' tax credit through 2022. As a result, TA recognized $9.6 million and $20.8 million for the three and nine months ended September 30, 2020, respectively, which were recognized as a reduction to fuel cost of goods sold in TA's consolidated statements of operations and comprehensive income (loss).

(8)

Costs ofSVC Transactions. In January 2019, TA and SVC amended their leases and completed certain other related transactions. During the nine months ended September 30, 2019, TA incurred $0.5 million of expenses associated with these transactions. These expenses were included in selling, general and administrative expense in TA's consolidated statements of operations and comprehensive income (loss).

(9)

Loyalty Award Expiration. During the nine months ended September 30, 2019, TA introduced a new customer loyalty program, UltraONE 2.0. As a result of introducing the new customer loyalty program, certain loyalty awards earned under the program now expire in 10 days for all loyalty members. This update resulted in the immediate expiration of certain loyalty awards upon adoption of the new customer loyalty program, generating $2.9 million of additional revenue during the nine months ended September 30, 2019, $2.8 million of which was recognized as fuel revenues and $0.1 million as nonfuel revenues in TA's consolidated statements of operations and comprehensive income (loss).

(10)

Net Income (Loss) Tax Impact. TA calculated the income tax impact of the adjustments described above by using its estimated statutory income tax rate of 25.2% for the three and nine months ended September 30, 2020 and 2019.

Impairment of Property and Equipment and Operating Lease Assets. During the three and nine months September 30, 2020, TA recognized $6.6 million and $1.3 million of impairment charges to property and equipment and^(1) operating lease assets, respectively, related to certain standalone QSL restaurants. The impairment charges were recognized in depreciation and amortization expense and real estate rent expense, respectively, in TA's consolidated statements of operations and comprehensive income (loss).

Asset Write Offs. During the three and nine months ended September 30, 2020, TA wrote off $2.4 million and $8.1 million, respectively, related to programs that were canceled. During the nine months ended September^(2) 30, 2020, TA wrote off $0.8 million of intangibles relating to three QSL franchises that closed in April 2020. These amounts were included in depreciation and amortization expense in TA's consolidated statements of operations and comprehensive income (loss).

Reorganization Plan Costs. On April 30, 2020, TA commenced a company-wide Reorganization Plan. During the nine months ended September 30, 2020, TA^(3) recognized $4.3 million of costs related to the Reorganization Plan, which were included in selling, general and administrative expense in TA's consolidated statements of operations and comprehensive income (loss).

Field Employee Bonus Expense. In March and April 2020, TA paid cash bonuses to certain employees who continued to work at its locations^(4) during the COVID-19 pandemic. These bonuses resulted in additional compensation expense of $3.8 million for the nine months ended September 30, 2020, which were included in site level operating expense in TA's consolidated statements of operations and comprehensive income (loss).

Goodwill Impairment. During the nine months ended September 30, 2020, TA recognized a goodwill impairment charge of $3.0 million with respect to^(5) its QSL reporting unit, which was recognized in depreciation and amortization expense in TA's consolidated statements of operations and comprehensive income (loss).

Executive Compensation Expense. TA agreed to accelerate the vesting of previously granted stock awards and make cash payments as part of TA's retirement and separation agreements with certain former executive^(6) officers. The accelerations and cash payments resulted in additional compensation expense of $2.1 million for the nine months ended September 30, 2020, which were included in selling, general and administrative expense in TA's consolidated statements of operations and comprehensive income (loss).

Federal Biodiesel Blenders' Tax Credit. In December 2019, the U.S. government retroactively reinstated the federal biodiesel blenders' tax credit for 2018 and 2019, as well as approved the federal biodiesel^(7) blenders' tax credit through 2022. As a result, TA recognized $9.6 million and $20.8 million for the three and nine months ended September 30, 2020, respectively, which were recognized as a reduction to fuel cost of goods sold in TA's consolidated statements of operations and comprehensive income (loss).

Costs of SVC Transactions. In January 2019, TA and SVC amended their leases and completed certain other related transactions. During the nine^(8) months ended September 30, 2019, TA incurred $0.5 million of expenses associated with these transactions. These expenses were included in selling, general and administrative expense in TA's consolidated statements of operations and comprehensive income (loss).

Loyalty Award Expiration. During the nine months ended September 30, 2019, TA introduced a new customer loyalty program, UltraONE 2.0. As a result of introducing the new customer loyalty program, certain loyalty awards earned under the program now expire in 10 days for all loyalty^(9) members. This update resulted in the immediate expiration of certain loyalty awards upon adoption of the new customer loyalty program, generating $2.9 million of additional revenue during the nine months ended September 30, 2019, $2.8 million of which was recognized as fuel revenues and $0.1 million as nonfuel revenues in TA's consolidated statements of operations and comprehensive income (loss).

Net Income (Loss) Tax Impact. TA calculated the income tax impact of the^ adjustments described above by using its estimated statutory income tax(10) rate of 25.2% for the three and nine months ended September 30, 2020 and 2019.



TRAVELCENTERS OF AMERICA INC.

CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)

(in thousands)

September 30,2020

December 31,2019

Assets:

Current assets:

Cash and cash equivalents

$

280,442

$

17,206

Accounts receivable, net

113,628

173,496

Inventory

160,913

196,611

Other current assets

29,304

32,456

Total current assets

584,287

419,769

Property and equipment, net

821,208

868,503

Operating lease assets

1,760,914

1,817,998

Goodwill

22,213

25,259

Intangible assets, net

19,060

20,707

Other noncurrent assets

81,859

78,659

Total assets

$

3,289,541

$

3,230,895

Liabilities and Stockholders' Equity:

Current liabilities:

Accounts payable

$

155,494

$

147,440

Current operating lease liabilities

110,769

104,070

Other current liabilities

174,154

138,455

Total current liabilities

440,417

389,965

Long term debt, net

338,001

329,321

Noncurrent operating lease liabilities

1,798,500

1,880,188

Other noncurrent liabilities

65,737

58,885

Total liabilities

2,642,655

2,658,359

Stockholders' equity (14,396 and 8,307 shares of common stock outstanding as of September 30, 2020 and December 31, 2019, respectively)

646,886

572,536

Total liabilities and stockholders' equity

$

3,289,541

$

3,230,895

These financial statements should be read in conjunction with TA's Quarterly Report on Form 10-Q for the quarter ended September 30, 2020, to be filed with the U.S. Securities and Exchange Commission.

Warning Concerning Forward-Looking Statements

This press release contains statements that constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and other securities laws. Whenever TA uses words such as "believe," "expect," "anticipate," "intend," "plan," "estimate," "will," "may" and negatives or derivatives of these or similar expressions, TA is making forward-looking statements. These forward-looking statements are based upon TA's present intent, beliefs or expectations, but forward-looking statements are not guaranteed to occur and may not occur. Actual results may differ materially from those contained in or implied by TA's forward-looking statements. Forward-looking statements involve known and unknown risks, uncertainties and other factors, some of which are beyond TA's control. Among others, the forward-looking statements which appear in this press release that may not occur include:

* Statements about increased operating results may imply that TA will realize similar or better results in the future and that TA's business may be profitable in the future. TA operates in a highly competitive industry and its business is subject to various market and other risks and challenges. As a result, TA may not be able to realize similar or better results in the future and it may fail to be profitable in the future for these or other reasons. Since TA became publicly traded in 2007, TA's operations have generated losses and only occasionally generated profits; * Statements about managing expenses, new management, transformational initiatives and implementation of transitional plans may imply that these changes and developments will result in improvements to TA's business, operations and financial results. However, these changes may not be successful or sustainable. Further, even if they are successful and sustainable, other factors and risks may result in TA not achieving the benefits that it expects from these matters; * Statements about TA commencing numerous initiatives which it believes will improve and enhance its operational efficiencies and profitability, increase diesel fuel and gasoline gross margin and fuel sales volume, increase market share in the truck service industry, improve merchandising and gross margin in store and retail services, improve operating effectiveness in its full service restaurants and expand its franchise base. However, TA may not be able to recognize the improvements to its operating results that it anticipates. In addition, the costs incurred to complete the initiatives may cost more than TA anticipates; * Statements about the expectation that TA will recognize annual cost savings of approximately $13.1 million as a result of the Reorganization Plan. However, TA may not realize or maintain the cost savings it expects; * Statements about expecting to expand TA's network by entering into new franchise agreements. However, TA may not succeed in entering these agreements and the commencement and stabilization of any new franchisees may not occur or may be delayed, and these franchises may not be successful or generate the royalties for TA that it expects; and * Statements about TA entering into a multi unit franchise agreement with IHOP to rebrand and convert up to 94 of its full service restaurants to IHOP restaurants. However, TA is only obligated to convert the 20 full service restaurants to IHOP with the remaining conversions at its discretion. TA may fail to convert those 20 restaurants and may determine not to convert some or all of the remaining 74 restaurants. The costs for these conversions may exceed TA's expectations and TA may fail to complete these conversions in accordance with the schedule, or at all. In addition, TA may not realize the return on investment it currently is anticipating and TA may incur losses with respect to these conversions.

The information contained in TA's periodic reports, including TA's Annual Report on Form 10-K for the year ended December 31, 2019, which has been filed with the U.S. Securities and Exchange Commission, or SEC, and TA's Quarterly Reports on Form 10-Q for the periods ended March 31, 2020, June 30, 2020, and September 30, 2020, which have been or will be filed with the SEC, under the caption "Risk Factors," or elsewhere in those reports, or incorporated therein, identifies other important factors that could cause differences from TA's forward-looking statements. TA's filings with the SEC are available on the SEC's website at www.sec.gov.

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

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

View source version on businesswire.com: https://www.businesswire.com/news/home/20201104005113/en/

CONTACT: Contact: Kristin Brown, Director of Investor Relations (617) 796-8251 www.ta-petro.com