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SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
-------------------------------
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended June 30, 2002
Commission file number 333-52442
--------------------------
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 44145-5639
(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 [ ]
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 our 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, our
filings with the Securities and Exchange Commission.
INDEX PAGE NO.
PART I. FINANCIAL INFORMATION
Item 1. Consolidated Balance Sheet as of December 31, 2001 (derived
from audited data) and June 30, 2002 (unaudited) 2
Unaudited Consolidated Statement of Operations for the three
months and six months ended June 30, 2001 and 2002 3
Unaudited Consolidated Statement of Cash Flows for the six
months ended June 30, 2001 and 2002 4
Unaudited Statement of Nonredeemable Stockholders' Equity
for the six months ended June 30, 2001 and 2002 5
Selected Notes to Unaudited Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 20
Item 3. Quantitative and Qualitative Disclosures About
Market Risk 27
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 28
Item 4. Submission of Matters to a Vote of Security Holders 28
Item 6. Exhibits and Reports on Form 8-K 28
SIGNATURE 29
1
TRAVELCENTERS OF AMERICA, INC.
CONSOLIDATED BALANCE SHEET
JUNE 30,
DECEMBER 31, 2002
2001 (UNAUDITED)
------------------------------
ASSETS (IN THOUSANDS OF DOLLARS)
Current assets:
Cash.............................................................................. $ 19,888 $ 25,559
Accounts receivable (less allowance for doubtful accounts of $3,060 for 2001 and
$2,694 for 2002)............................................................... 43,856 54,542
Inventories....................................................................... 57,419 55,296
Deferred income taxes............................................................. 5,044 4,839
Other current assets.............................................................. 8,121 6,916
---------- ----------
Total current assets......................................................... 134,328 147,152
Property and equipment, net.......................................................... 461,167 455,154
Intangible assets, net............................................................... 23,561 26,267
Deferred financing costs, net........................................................ 30,202 28,722
Deferred income taxes................................................................ 19,908 21,172
Other noncurrent assets.............................................................. 10,690 11,868
---------- ----------
Total assets................................................................. $ 679,856 $ 690,335
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current maturities of long-term debt.............................................. $ 3,409 $ 3,451
Accounts payable.................................................................. 60,429 73,685
Other accrued liabilities......................................................... 43,541 55,052
---------- ----------
Total current liabilities.................................................... 107,379 132,188
Commitments and contingencies (Note 7)
Long-term debt....................................................................... 548,869 537,957
Deferred income taxes................................................................ 2,851 2,843
Other noncurrent liabilities......................................................... 7,857 6,268
---------- ----------
666,956 679,256
Redeemable equity.................................................................... 565 604
Nonredeemable equity:
Common stock and other stockholders' equity....................................... 213,923 214,824
Accumulated deficit............................................................... (201,588) (204,349)
---------- ----------
Total nonredeemable equity................................................... 12,335 10,475
---------- ----------
Total liabilities, redeemable equity and nonredeemable stockholders' equity.. $ 679,856 $ 690,335
========== ==========
The accompanying notes are an integral part of these
consolidated financial statements.
2
TRAVELCENTERS OF AMERICA, INC.
UNAUDITED CONSOLIDATED STATEMENT OF OPERATIONS
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
--------------------------- ---------------------------
2001 2002 2001 2002
------------- ----------- ------------ -----------
(IN THOUSANDS OF DOLLARS EXCEPT PER SHARE AMOUNTS)
Revenues:
Fuel............................................. $ 363,728 $ 302,401 $ 723,097 $ 556,579
Nonfuel.......................................... 151,490 159,354 284,881 298,241
Rent and royalties............................... 4,356 3,997 8,610 7,987
---------- ---------- ---------- ----------
Total revenues............................. 519,574 465,752 1,016,588 862,807
Cost of goods sold (excluding depreciation):
Fuel............................................. 337,732 276,578 672,423 506,683
Nonfuel.......................................... 61,204 65,911 116,224 122,092
---------- ---------- ---------- ----------
Total cost of goods sold (excluding
depreciation)........................... 398,936 342,489 788,647 628,775
---------- ---------- ---------- ----------
Gross profit (excluding depreciation)............... 120,638 123,263 227,941 234,032
Operating expenses.................................. 81,991 82,393 160,647 163,105
Selling, general and administrative expenses........ 9,983 9,827 19,845 19,582
Depreciation and amortization expense............... 14,245 15,157 29,830 29,369
(Gain) loss on sales of property and equipment...... 15 (21) (1,314) (14)
---------- ---------- ---------- ----------
Income from operations.............................. 14,404 15,907 18,933 21,990
Interest and other financial costs, net............. (14,932) (13,039) (30,273) (25,944)
---------- ---------- ---------- ----------
Income (loss) before income taxes................... (528) 2,868 (11,340) (3,954)
Provision (benefit) for income taxes................ 74 869 (3,314) (1,193)
---------- ---------- ---------- ----------
Net income (loss)................................... $ (602) $ 1,999 $ (8,026) $ (2,761)
========== ========== ========== ==========
Income (loss) per common share:
Basic............................................ $ (0.09) $ 0.29 $ (1.16) $ (0.40)
Diluted.......................................... $ (0.09) $ 0.28 $ (1.16) $ (0.40)
The accompanying notes are an integral part of these
consolidated financial statements.
3
TRAVELCENTERS OF AMERICA, INC.
UNAUDITED CONSOLIDATED STATEMENT OF CASH FLOWS
SIX MONTHS ENDED
JUNE 30,
---------------------------------
2001 2002
--------------- -------------
(IN THOUSANDS OF DOLLARS)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net (loss)........................................................................ $ (8,026) $ (2,761)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization expense.......................................... 29,830 29,369
Amortization of deferred financing costs....................................... 1,220 1,480
Deferred income tax provision.................................................. (3,558) (1,533)
Provision for doubtful accounts................................................ 500 500
(Gain) on sales of property and equipment...................................... (1,314) (14)
Changes in assets and liabilities, adjusted for the effects of business
acquisitions:
Accounts receivable......................................................... 5,974 (12,276)
Inventories................................................................. 3,201 2,394
Other current assets........................................................ 3,838 1,167
Accounts payable and other accrued liabilities.............................. (11,783) 24,917
Other, net..................................................................... 300 (1,731)
----------- -----------
Net cash provided by operating activities..................................... 20,182 41,512
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Business acquisitions............................................................ - (3,063)
Proceeds from sales of property and equipment.................................... 5,431 2,535
Capital expenditures............................................................. (23,530) (23,739)
----------- -----------
Net cash used in investing activities......................................... (18,099) (24,267)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Revolving loan borrowings (repayments), net...................................... (5,400) (10,600)
Long-term debt repayments........................................................ (40) (863)
Issuance of common stock......................................................... 38 39
Merger and recapitalization expenses paid........................................ (2,423) (150)
----------- -----------
Net cash used in financing activities......................................... (7,825) (11,574)
----------- -----------
Net increase (decrease) in cash........................................... (5,742) 5,671
Cash at the beginning of the period.................................................. 29,019 19,888
----------- -----------
Cash at the end of the period........................................................ $ 23,277 $ 25,559
=========== ===========
The accompanying notes are an integral part of these
consolidated financial statements.
4
TRAVELCENTERS OF AMERICA, INC.
UNAUDITED STATEMENT OF NONREDEEMABLE STOCKHOLDERS' EQUITY
SIX MONTHS ENDED
JUNE 30,
---------------------------------
2001 2002
--------------- -------------
(IN THOUSANDS OF DOLLARS)
COMMON STOCK:
Balance at beginning and end of period............................................ $ 3 $ 3
=========== ===========
ADDITIONAL PAID-IN CAPITAL:
Balance at beginning and end of period............................................ $ 215,840 $ 215,840
=========== ===========
ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS):
Balance at beginning of period.................................................... $ - $ (1,920)
Change in accounting principle, net of tax.................................... (343) -
Change in fair value of interest rate protection agreement, net of tax........ (919) 901
----------- -----------
Balance at end of period......................................................... $ (1,262) $ (1,019)
=========== ===========
ACCUMULATED DEFICIT:
Balance at beginning of period.................................................... $ (191,746) $ (201,588)
Net loss...................................................................... (8,026) (2,761)
----------- -----------
Balance at end of period.......................................................... $ (199,772) $ (204,349)
=========== ===========
5
TRAVELCENTERS OF AMERICA, INC.
SELECTED NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
1. BUSINESS DESCRIPTION AND SUMMARY OF OPERATING STRUCTURE
We are a holding company which, through our wholly owned subsidiaries,
owns, operates and franchises travel centers along the United States interstate
highway system to serve long-haul trucking fleets and their drivers, independent
truck drivers and general motorists. At June 30, 2002, our geographically
diverse nationwide network of full-service travel centers consisted of 151 sites
located in 40 states. Our operations are conducted through three distinct types
of travel centers: (1) sites owned or leased and operated by us, which we refer
to as company-operated sites; (2) sites owned by us and leased to independent
lessee-franchisees, which we refer to as leased sites; and (3) sites owned and
operated by independent franchisees, which we refer to as franchisee-owned
sites.
Our travel centers are located at key points along the U.S. interstate
highway system, typically on 20- to 25-acre sites. Operating under the
"TravelCenters of America" and "TA" brand names, our nationwide network provides
our customers with diesel fuel and gasoline as well as non-fuel products and
services such as truck repair and maintenance services, full-service
restaurants, 20 different brands of fast food restaurants, travel and
convenience stores with a selection of over 4,000 items and other driver
amenities. We also collect rents and franchise royalties from the franchisees
who operate the leased sites and franchisee-owner sites and, as a franchisor,
assist our franchisees in providing service to long-haul trucking fleets and
their drivers, independent truck drivers and general motorists.
The consolidated financial statements include the accounts of
TravelCenters of America, Inc. and its wholly owned subsidiaries, TA Operating
Corporation and TA Franchise Systems Inc., as well as TA Licensing, Inc., TA
Travel, L.L.C., TravelCenters Realty, Inc. and TravelCenters Properties, L.P.,
which are all direct or indirect wholly owned subsidiaries of TA Operating
Corporation. Intercompany accounts and transactions have been eliminated.
The accompanying unaudited, consolidated financial statements as of
June 30, 2002 and for the three- and six-month periods ended June 30, 2001 and
2002 have been prepared in accordance with generally accepted accounting
principles. Accordingly, these statements should be read in conjunction with our
audited financial statements as of and for the year ended December 31, 2001. 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, our consolidated
financial position at June 30, 2002, our results of operations for the three-
and six-month periods ended June 30, 2001 and 2002, and our changes in
nonredeemable stockholders' equity and cash flows for the six-month periods
ended June 30, 2001 and 2002, and are not necessarily indicative of the results
to be expected for the full year.
2. RECENTLY ADOPTED ACCOUNTING STANDARDS
FAS 142. Effective January 1, 2002, we adopted Statement of Financial
Accounting Standards (FAS) No. 142, "Goodwill and Other Intangible Assets."
Under FAS 142, goodwill and intangible assets with indefinite lives are no
longer amortized but are reviewed annually (or more frequently if impairment
indicators arise) for impairment. Separable intangible assets that are not
deemed to have indefinite lives continue to be amortized over their useful
lives. Our trademark intangible assets have been deemed to have indefinite
lives. During the first quarter of 2002 we completed the transitional impairment
test for our trademarks and determined that the estimated fair values of these
intangible assets exceeded their respective carrying amounts. Accordingly, we
did not recognize an impairment loss with respect to our trademark intangible
assets. For purposes of testing goodwill for impairment under the transitional
accounting provisions of FAS 142, goodwill must first be allocated to reporting
units. FAS 142 requires us to compare the fair value of the reporting unit to
its carrying value to determine if there is potential impairment. If the fair
value of the reporting unit is less than its carrying value, an impairment loss
would be recognized to the extent that the fair value of the goodwill within the
reporting unit is less than the carrying value. For purposes of applying the
provisions of FAS 142, we have determined that we are one reporting unit. The
fair value of the reporting unit exceeded the carrying value of the reporting
unit at January 1, 2002. Accordingly, we did not recognize an impairment loss
with respect to our goodwill.
6
TRAVELCENTERS OF AMERICA, INC.
SELECTED NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
The following table provides a reconciliation of the prior-year
periods' reported net loss to adjusted net loss had FAS 142 been applied as of
the beginning of 2001:
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
------------------------------------------------------------
2001 2002 2001 2002
------------- ----------- ----------- -------------
(IN THOUSANDS OF DOLLARS EXCEPT PER SHARE AMOUNTS)
Reported net income (loss)........................ $ (602) $ 1,999 $ (8,026) $ (2,761)
Add back amortization (net of tax):
Goodwill........................................ 316 - 632 -
Trademarks...................................... 32 - 63 -
---------- ---------- ---------- ----------
Adjusted net income (loss)........................ $ (254) $ 1,999 $ (7,331) $ (2,761)
========== ========== ========== ==========
Earnings per share - basic:
Reported net income (loss)...................... $ (0.09) $ 0.29 $ (1.16) $ (0.40)
Goodwill amortization........................... 0.04 - 0.09 -
Trademarks amortization......................... 0.01 - 0.01 -
--------- --------- --------- ---------
Adjusted net income (loss)........................ $ (0.04) $ 0.29 $ (1.06) $ (0.40)
========= ========= ========= =========
Earnings per share - diluted:
Reported net income (loss)...................... $ (0.09) $ 0.28 $ (1.16) $ (0.40)
Goodwill amortization........................... 0.04 - 0.09 -
Trademarks amortization......................... 0.01 - 0.01 -
--------- --------- --------- ---------
Adjusted net income (loss)........................ $ (0.04) $ 0.28 $ (1.06) $ (0.40)
========= ========= ========= =========
FAS 144. Effective January 1, 2002, we adopted FAS 144, "Accounting for
the Impairment or Disposal of Long-Lived Assets." This statement amended
previous accounting and disclosure requirements for impairments and disposals of
long-lived assets, including with respect to discontinued operations. The
provisions of FAS 144 are generally to be applied prospectively. The adoption of
FAS 144 had no effect on our consolidated results of operations and financial
position.
3. EARNINGS PER SHARE
A reconciliation of the income and shares used in the computation
follows:
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
-----------------------------------------------------------
2001 2002 2001 2002
------------- ----------- ----------- ------------
(IN THOUSANDS OF DOLLARS EXCEPT PER SHARE AMOUNTS)
Basic earnings per share:
Net income (loss).................................. $ (602) $ 1,999 $ (8,026) $ (2,761)
Weighted average shares outstanding................ 6,931 6,935 6,931 6,933
--------- --------- --------- ---------
Basic income (loss) per share...................... $ (0.09) $ 0.29 $ (1.16) $ (0.40)
========= ========= ======== =========
Diluted earnings per share:
Net income (loss).................................. $ (602) $ 1,999 $ (8,026) $ (2,761)
Weighted average shares outstanding................ 6,931 6,935 6,931 6,933
Add: exercisable warrants......................... - 208 - -
--------- --------- --------- ---------
Total shares for denominator....................... 6,931 7,143 6,931 6,933
--------- --------- --------- ---------
Diluted income (loss) per share...................... $ (0.09) $ 0.28 $ (1.16) $ (0.40)
========= ========= ========= =========
7
TRAVELCENTERS OF AMERICA, INC.
SELECTED NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
The assumed conversion of warrants would have had an antidilutive
effect on the loss per share for the three-month period ended June 30, 2001 and
the six-month periods ended June 30, 2001 and 2002. The assumed conversion of
vested stock options would have had an antidilutive effect on earnings per share
for the three-and six-month periods ended June 30, 2001 and 2002.
4. COMPREHENSIVE INCOME
Comprehensive income (loss) consisted of the following:
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
------------------------------------------------------------
2001 2002 2001 2002
-------------- ------------ ------------ -------------
(IN THOUSANDS OF DOLLARS EXCEPT PER SHARE AMOUNTS)
Net income (loss)....................................... $ (602) $ 1,999 $ (8,026) $ (2,761)
Change in accounting principle, net of tax of $176...... - - (343) -
Gain (loss) on fair value of interest rate protection
agreement, net of tax................................. 4 283 (919) 901
---------- ---------- ---------- ----------
Total comprehensive income (loss)..................... $ (598) $ 2,282 $ (9,288) $ (1,860)
========== ========== ========== ==========
5. INVENTORIES
Inventories consisted of the following:
DECEMBER 31, JUNE 30,
2001 2002
------------- ------------
(IN THOUSANDS OF DOLLARS)
Nonfuel merchandise............................................................... $ 51,808 $ 49,853
Petroleum products................................................................ 5,611 5,443
------------ ------------
Total inventories............................................................. $ 57,419 $ 55,296
============ ============
6. INTANGIBLE ASSETS
Intangible assets consisted of the following:
DECEMBER 31, JUNE 30,
2001 2002
------------- ------------
(IN THOUSANDS OF DOLLARS)
Amortizable intangible assets:
Noncompetition agreements............................................ $ 26,200 $ 26,200
Leasehold interest................................................... 1,724 1,724
Other................................................................ 849 849
------------ ------------
Total amortizable intangible assets.............................. 28,773 28,773
Less - accumulated amortization............................................. 25,953 26,901
------------ ------------
Net carrying value of amortizable intangible assets.............. 2,820 1,872
Net carrying value of goodwill.............................................. 19,343 22,997
Net carrying value of trademarks............................................ 1,398 1,398
------------ ------------
Intangible assets, net........................................... $ 23,561 $ 26,267
============ ============
8
TRAVELCENTERS OF AMERICA, INC.
SELECTED NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
The changes in the carrying amount of goodwill for the six months ended
June 30, 2002 were as follows (in thousands of dollars):
Balance as of January 1, 2002............................... $ 19,343
Goodwill acquired during the period......................... 3,654
-----------
Balance as of June 30, 2002................................. $ 22,997
===========
During the six months ended June 30, 2002, we recognized $3,654,000 of
goodwill as a result of the business acquisitions we completed by converting
three leased sites to company-operated sites.
Total intangible asset amortization expense for our amortizable
intangible assets for the six-month periods ended June 30, 2001 and 2002 were
$948,000 and $948,000, respectively. The estimated aggregate intangible assets
amortization expense for the year ending December 31, 2002 and each of the three
succeeding fiscal years are $1,896,000 for 2002; $678,000 for 2003; $176,000 for
2004 and $70,000 for 2005. Our amortizable intangible assets will be fully
amortized by December 31, 2005.
7. COMMITMENTS AND CONTINGENCIES
Environmental Matters
Our operations and properties are extensively regulated through
environmental laws and regulations ("Environmental Laws") that (i) govern
operations that may have adverse environmental effects, such as discharges to
air, soil and water, as well as the management of petroleum products and other
hazardous substances ("Hazardous Substances"), or (ii) impose liability for the
costs of cleaning up sites affected by, and for damages resulting from, disposal
or other releases of Hazardous Substances.
We own and use underground storage tanks and aboveground storage tanks
to store petroleum products and waste at our facilities. We 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
storage tank into the environment. At some locations, we must also comply with
Environmental Laws relating to vapor recovery and discharges to water. We
believe that all of our travel centers are in material compliance with
applicable requirements of Environmental Laws.
We have received notices of alleged violations of Environmental Laws,
or are aware of the need to undertake corrective actions to comply with
Environmental Laws, at company-owned travel centers in a number of
jurisdictions. We do not expect that any financial penalties associated with
these alleged violations, or compliance costs incurred in connection with these
violations or corrective actions, will be material to our results of operations
or financial condition. We are conducting investigatory and/or remedial actions
with respect to releases of Hazardous Substances that have occurred subsequent
to the acquisitions of the Unocal and BP networks and also regarding historical
contamination at certain of the former Burns Bros. and Travel Ports facilities.
While we cannot precisely estimate the ultimate costs we will incur in
connection with the investigation and remediation of these properties, based on
our current knowledge, we do not expect that the costs to be incurred at these
properties, individually or in the aggregate, will be material to our results of
operations or financial condition. While the matters discussed above are, to the
best of our knowledge, the only proceedings for which we are currently exposed
to potential liability, particularly given the environmental indemnities
obtained as part of the Unocal and BP acquisitions, we cannot assure you 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 us. As of June 30, 2002, we had a
reserve for these matters of $3,763,000. While it is not possible to quantify
with certainty the environmental exposure, in our opinion, the potential
liability, beyond that considered in the
9
TRAVELCENTERS OF AMERICA, INC.
SELECTED NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
reserve, for all environmental proceedings, based on information known to date,
will not have a material adverse effect on our financial condition, results of
operations or liquidity.
Pending Litigation
We are involved from time to time in various legal and administrative
proceedings and threatened legal and administrative proceedings incidental to
the ordinary course of our business. We believe that we are not now involved in
any litigation, individually, or in the aggregate, which could have a material
adverse affect on our business, financial condition, results of operations or
cash flows.
8. SUPPLEMENTAL CASH FLOW INFORMATION
SIX MONTHS ENDED
JUNE 30,
-------------------------------
2001 2002
--------------- ---------------
(IN THOUSANDS OF DOLLARS)
Revolving loan borrowings........................................ $ 355,300 $ 242,500
Revolving loan repayments........................................ (360,700) (253,100)
----------- -----------
Revolving loan borrowings (repayments), net.................... $ (5,400) $ (10,600)
=========== ===========
Cash paid during the period for:
Interest....................................................... $ 31,998 $ 23,487
Income taxes (net of refunds).................................. $ 243 $ 275
During the six-month period ended June 30, 2002, we acquired $1,494,000
of inventory, property and equipment and goodwill in settlement of accounts and
notes receivable as part of the conversions of leased sites to company-operated
sites and received $250,000 of notes as partial consideration for inventories
sold in connection with the sales of two company-operated sites.
9. OTHER INFORMATION
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
----------------------------- -------------------------
2001 2002 2001 2002
------------- ------------ ----------- -----------
(IN THOUSANDS OF DOLLARS)
Interest and other financial costs consists of the following:
Cash interest expense.................................. $ (14,010) $ (12,031) $ (28,577) $ (23,942)
Cash interest income................................... 27 47 78 71
Amortization of discount on debt....................... (276) (303) (554) (593)
Amortization of deferred financing costs............... (673) (752) (1,220) (1,480)
---------- ---------- ---------- ----------
Interest and other financial costs, net................ $ (14,932) $ (13,039) $ (30,273) $ (25,944)
========== ========== ========== ==========
10. RELATED PARTY TRANSACTIONS
During the six-month periods ended June 30, 2001 and 2002, we made
purchases of diesel fuel in the amount of $107,997,000 and $82,851,000,
respectively, from a company in which we have a minority investment and made
sales of diesel fuel in the amount of $7,793,000 and $1,581,000, respectively,
to this affiliate. We also lease a travel center from this affiliate. Rent
expense related to this site for the six-month periods ended June 30, 2001 and
2002 was $204,000 and $204,000, respectively. At December 31, 2001 and June 30,
2002, our receivables from this affiliate were $789,000 and $165,000,
respectively, while our payables to this affiliate were $944,000 and $419,000,
respectively.
10
TRAVELCENTERS OF AMERICA, INC.
SELECTED NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
Certain members of our senior management have purchased common stock
pursuant to management subscription agreements (see Note 16 - Repurchase
Rights). As a result of such purchases, we have notes and related interest
receivable from the management stockholders totaling $1,310,000 and $1,384,000
at December 31, 2001 and June 30, 2002, respectively.
11. CONDENSED CONSOLIDATING FINANCIAL STATEMENT SCHEDULES
The following schedules set forth our condensed consolidating balance
sheet schedules as of December 31, 2001 and June 30, 2002, our condensed
consolidating statement of operations schedules for the three- and six-month
periods ended June 30, 2001 and 2002 and our condensed consolidating statement
of cash flows schedules for the six-month periods ended June 30, 2001 and 2002.
In the following schedules, "Parent Company" refers to the unconsolidated
balances of TravelCenters of America, Inc., "Guarantor Subsidiaries" refers to
the combined unconsolidated balances of TA Operating Corporation and its
subsidiaries, and "Nonguarantor Subsidiary" refers to the balances of TA
Franchise Systems Inc. "Eliminations" represent the adjustments necessary to (a)
eliminate intercompany transactions and (b) eliminate our investments in our
subsidiaries.
The Guarantor Subsidiaries (TA Operating Corporation, TA Licensing,
Inc., TA Travel, L.L.C., TravelCenters Realty, Inc. and TravelCenters
Properties, L.P.) are direct or indirect wholly-owned subsidiaries of ours and
have fully and unconditionally, jointly and severally, guaranteed our
indebtedness.
11
TRAVELCENTERS OF AMERICA, INC.
SELECTED NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
CONDENSED CONSOLIDATING BALANCE SHEET SCHEDULES:
DECEMBER 31, 2001
-----------------------------------------------------------------------------
PARENT GUARANTOR NONGUARANTOR
COMPANY SUBSIDIARIES SUBSIDIARY ELIMINATIONS CONSOLIDATED
------------- ------------- ------------ ------------ -------------
(IN THOUSANDS OF DOLLARS)
ASSETS
Current assets:
Cash....................................... $ - $ 19,888 $ - $ - $ 19,888
Accounts receivable, net................... - 43,820 1,160 (1,124) 43,856
Inventories................................ - 57,419 - - 57,419
Deferred income taxes...................... - 4,997 47 - 5,044
Other current assets....................... 622 7,499 - - 8,121
----------- ----------- ----------- ----------- -----------
Total current assets.................. 622 133,623 1,207 (1,124) 134,328
Property and equipment, net................... - 461,167 - - 461,167
Intangible assets, net........................ - 23,561 - - 23,561
Deferred financing costs, net................. 30,202 - - - 30,202
Deferred income taxes......................... 28,571 (8,663) - - 19,908
Other noncurrent assets....................... 1,249 9,441 - - 10,690
Investment in subsidiaries.................... 226,137 - - (226,137) -
----------- ----------- ----------- ----------- -----------
Total assets.......................... $ 286,781 $ 619,129 $ 1,207 $ (227,261) $ 679,856
=========== =========== =========== =========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current maturities of long-term debt....... $ 3,280 $ 129 $ - $ - $ 3,409
Accounts payable........................... - 60,269 160 - 60,429
Other accrued liabilities.................. 2,605 40,818 1,242 (1,124) 43,541
----------- ----------- ----------- ----------- -----------
Total current liabilities............. 5,885 101,216 1,402 (1,124) 107,379
Long-term debt................................ 546,110 2,759 - - 548,869
Deferred income taxes......................... - 2,851 - - 2,851
Intercompany payable (receivable)............. (282,279) 287,346 (5,067) - -
Other noncurrent liabilities.................. 2,911 4,946 - - 7,857
----------- ----------- ------------ ----------- -----------
Total liabilities..................... 272,627 399,118 (3,665) (1,124) 666,956
Redeemable equity............................. 565 - - - 565
Nonredeemable stockholders' equity:
Common stock and other nonredeemable
stockholders' equity.................... 215,177 192,335 - (193,589) 213,923
Retained earnings (accumulated
deficit)................................. (201,588) 27,676 4,872 (32,548) (201,588)
----------- ----------- ----------- ----------- -----------
Total nonredeemable stockholders'
equity............................. 13,589 220,011 4,872 (226,137) 12,335
----------- ----------- ----------- ----------- -----------
Total liabilities, redeemable equity
and nonredeemable stockholders'
equity............................. $ 286,781 $ 619,129 $ 1,207 $ (227,261) $ 679,856
=========== =========== =========== =========== ===========
12
TRAVELCENTERS OF AMERICA, INC.
SELECTED NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2002
----------------------------------------------------------------------------
PARENT GUARANTOR NONGUARANTOR
COMPANY SUBSIDIARIES SUBSIDIARY ELIMINATIONS CONSOLIDATED
------------ ------------- ------------ ------------ ---------------
(IN THOUSANDS OF DOLLARS)
ASSETS
Current assets:
Cash.................................... $ - $ 25,559 $ - $ - $ 25,559
Accounts receivable, net................ - 54,840 826 (1,124) 54,542
Inventories............................. - 55,296 - - 55,296
Deferred income taxes................... - 4,792 47 - 4,839
Other current assets.................... 552 6,364 - - 6,916
---------- ---------- ---------- ---------- ----------
Total current assets............... 552 146,851 873 (1,124) 147,152
Property and equipment, net................ - 455,154 - - 455,154
Intangible assets, net..................... - 26,267 - - 26,267
Deferred financing costs, net.............. 28,722 - - - 28,722
Deferred income taxes...................... 29,421 (8,249) - - 21,172
Other noncurrent assets.................... 1,032 10,836 - - 11,868
Investment in subsidiaries................. 235,020 - - (235,020) -
---------- ---------- ---------- ---------- ----------
Total assets....................... $ 294,747 $ 630,859 $ 873 $ (236,144) $ 690,335
========== ========== ========== ========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current maturities of long-term debt.. $ 3,280 $ 171 $ - $ - $ 3,451
Accounts payable...................... - 73,480 205 - 73,685
Other accrued liabilities............. (1,392) 56,631 937 (1,124) 55,052
---------- ---------- ---------- ---------- ----------
Total current liabilities........ 1,888 130,282 1,142 (1,124) 132,188
Long-term debt (net of
unamortized discount)................. 535,227 2,730 - - 537,957
Deferred income taxes.................... - 2,843 - - 2,843
Intercompany payable (receivable)........ (256,246) 261,386 (5,140) - -
Other noncurrent liabilities............. 1,544 4,724 - - 6,268
---------- ---------- ---------- ---------- ----------
Total liabilities................ 282,413 401,965 (3,998) (1,124) 679,256
Redeemable equity........................ 604 - - - 604
Nonredeemable stockholders' equity:
Common stock and other
stockholders' equity................. 216,079 192,336 - (193,591) 214,824
Retained earnings (deficit).......... (204,349) 36,558 4,871 (41,429) (204,349)
---------- ---------- ---------- ---------- ----------
Total nonredeemable stockholders'
equity........................ 11,730 228,894 4,871 (235,020) 10,475
---------- ---------- ---------- ---------- ----------
Total liabilities, redeemable
equity and nonredeemable
stockholders' equity.......... $ 294,747 $ 630,859 $ 873 $ (236,144) $ 690,335
========== ========== ========== ========== ==========
13
TRAVELCENTERS OF AMERICA, INC.
SELECTED NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS SCHEDULES:
THREE MONTHS ENDED JUNE 30, 2001
-------------------------------------------------------------------------
PARENT GUARANTOR NONGUARANTOR
COMPANY SUBSIDIARIES SUBSIDIARY ELIMINATIONS CONSOLIDATED
------------- ------------ ------------ ------------ ------------
(IN THOUSANDS OF DOLLARS)
Revenues:
Fuel................................... $ - $ 363,728 $ - $ - $ 363,728
Nonfuel................................ - 151,490 - - 151,490
Rent and royalties..................... - 3,768 1,642 (1,054) 4,356
---------- ---------- ---------- ---------- ----------
Total revenues......................... - 518,986 1,642 (1,054) 519,574
Cost of goods sold (excluding
depreciation) .......................... - 398,936 - - 398,936
---------- ---------- ---------- ---------- ----------
Gross profit (excluding depreciation)..... - 120,050 1,642 (1,054) 120,638
Operating expenses........................ - 81,976 1,069 (1,054) 81,991
Selling, general and
administrative expenses............... 58 9,536 389 - 9,983
Depreciation and amortization expense..... - 14,245 - - 14,245
Loss on sales of property and equipment - 15 - - 15
---------- ---------- ---------- ---------- ----------
Income (loss) from operations............. (58) 14,278 184 - 14,404
Interest and other financial costs, net... (6,175) (8,757) - - (14,932)
Equity income (loss)...................... 3,327 - - (3,327) -
---------- ---------- ---------- ---------- ----------
Income (loss) before income taxes......... (2,906) 5,521 184 (3,327) (528)
Provision (benefit) for income taxes...... (2,304) 2,315 63 - 74
---------- ---------- ---------- ---------- ----------
Net income (loss)......................... $ (602) $ 3,206 $ 121 $ (3,327) $ (602)
========== ========== ========== ========== ==========
14
TRAVELCENTERS OF AMERICA, INC.
SELECTED NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
THREE MONTHS ENDED JUNE 30, 2002
------------------------------------------------------------------------
PARENT GUARANTOR NONGUARANTOR
COMPANY SUBSIDIARY SUBSIDIARY ELIMINATIONS CONSOLIDATED
------------- ------------ ------------ ------------ -------------
(IN THOUSANDS OF DOLLARS)
Revenues:
Fuel................................... $ - $ 302,401 $ - $ - $ 302,401
Nonfuel................................ - 159,354 - - 159,354
Rent and royalties..................... - 3,610 1,534 (1,147) 3,997
---------- ---------- ---------- ---------- ----------
Total revenues......................... - 465,365 1,534 (1,147) 465,752
Cost of goods sold (excluding
depreciation) .......................... - 342,489 - - 342,489
---------- ---------- ---------- ---------- ----------
Gross profit (excluding depreciation)..... - 122,876 1,534 (1,147) 123,263
Operating expenses........................ - 82,380 1,160 (1,147) 82,393
Selling, general and
administrative expenses............... 192 9,260 375 - 9,827
Depreciation and amortization expense..... - 15,157 - - 15,157
(Gain) on sales of property and equipment. - (21) - - (21)
---------- ---------- ---------- ---------- ----------
Income (loss) from operations............. (192) 16,100 (1) - 15,907
Interest and other financial costs, net... (8,507) (4,532) - - (13,039)
Equity income (loss)...................... 7,740 - - (7,740) -
---------- ---------- ---------- ---------- ----------
Income (loss) before income taxes......... (959) 11,568 (1) (7,740) 2,868
Provision (benefit) for income taxes...... (2,958) 3,827 - - 869
---------- ---------- ---------- ---------- ----------
Net income (loss)......................... $ 1,999 $ 7,741 $ (1) $ (7,740) $ 1,999
========== ========== ========== ========== ==========
15
TRAVELCENTERS OF AMERICA, INC.
SELECTED NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
SIX MONTHS ENDED JUNE 30, 2001
-------------------------------------------------------------------------
PARENT GUARANTOR NONGUARANTOR
COMPANY SUBSIDIARIES SUBSIDIARY ELIMINATIONS CONSOLIDATED
------------- -------------- -------------- -------------- --------------
(IN THOUSANDS OF DOLLARS)
Revenues:
Fuel................................... $ - $ 723,097 $ - $ - $ 723,097
Nonfuel................................ - 284,881 - - 284,881
Rent and royalties..................... - 7,486 3,161 (2,037) 8,610
---------- ---------- ---------- ---------- ----------
Total revenues......................... - 1,015,464 3,161 (2,037) 1,016,588
Cost of goods sold (excluding depreciation) - 788,647 - - 788,647
---------- ---------- ---------- ---------- ----------
Gross profit (excluding depreciation)..... - 226,817 3,161 (2,037) 227,941
Operating expenses........................ - 160,599 2,085 (2,037) 160,647
Selling, general and
administrative expenses............... 254 18,145 1,446 - 19,845
Depreciation and amortization expense..... - 29,830 - - 29,830
(Gain) on sales of property and equipment - (1,314) - - (1,314)
---------- ---------- ---------- ---------- ----------
Income (loss) from operations............. (254) 19,557 (370) - 18,933
Interest and other financial costs, net... (12,983) (17,290) - - (30,273)
Equity income (loss)...................... 1,133 - - (1,133) -
---------- ---------- ---------- ---------- ----------
Income (loss) before income taxes......... (12,104) 2,267 (370) (1,133) (11,340)
Provision (benefit) for income taxes...... (4,078) 890 (126) - (3,314)
---------- ---------- ---------- ---------- ----------
Net income (loss)......................... $ (8,026) $ 1,377 $ (244) $ (1,133) $ (8,026)
========== ========== ========== ========== ==========
16
TRAVELCENTERS OF AMERICA, INC.
SELECTED NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
SIX MONTHS ENDED JUNE 30, 2002
-------------------------------------------------------------------------
PARENT GUARANTOR NONGUARANTOR
COMPANY SUBSIDIARY SUBSIDIARY ELIMINATIONS CONSOLIDATED
------------ ------------ ------------ ------------ --------------
(IN THOUSANDS OF DOLLARS)
Revenues:
Fuel................................... $ - $ 556,579 $ - $ - $ 556,579
Nonfuel................................ - 298,241 - - 298,241
Rent and royalties..................... - 7,199 2,959 (2,171) 7,987
--------- --------- --------- --------- ---------
Total revenues......................... - 862,019 2,959 (2,171) 862,807
Cost of goods sold (excluding
depreciation)........................... - 628,775 - - 628,775
--------- --------- --------- --------- ---------
Gross profit (excluding depreciation)..... - 233,244 2,959 (2,171) 234,032
Operating expenses........................ - 163,077 2,199 (2,171) 163,105
Selling, general and
administrative expenses............... 737 18,084 761 - 19,582
Depreciation and amortization expense..... - 29,369 - - 29,369
(Gain) on sales of property and
equipment............................... - (14) - - (14)
--------- --------- --------- --------- ---------
Income (loss) from operations............. (737) 22,728 (1) - 21,990
Interest and other financial costs, net... (16,902) (9,042) - - (25,944)
Equity income (loss)...................... 8,881 - - (8,881) -
--------- --------- --------- --------- ---------
Income (loss) before income taxes......... (8,758) 13,686 (1) (8,881) (3,954)
Provision (benefit) for income taxes...... (5,997) 4,804 - - (1,193)
---------- --------- --------- --------- ---------
Net income (loss)......................... $ (2,761) $ 8,882 $ (1) $ (8,881) $ (2,761)
========= ========= ========= ========= =========
17
TRAVELCENTERS OF AMERICA, INC.
SELECTED NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOW SCHEDULES:
SIX MONTHS ENDED JUNE 30, 2001
---------------------------------------------------------------------------
PARENT GUARANTOR NONGUARANTOR
COMPANY SUBSIDIARIES SUBSIDIARY ELIMINATIONS CONSOLIDATED
------------- ------------- ------------- ------------ --------------
(IN THOUSANDS OF DOLLARS)
CASH FLOWS PROVIDED BY (USED IN)
OPERATING ACTIVITIES................ $ (14,098) $ 34,280 $ - $ - $ 20,182
---------- ---------- ---------- ---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sales of property and
equipment........................ - 5,431 - - 5,431
Capital expenditures................ - (23,530) - - (23,530)
---------- ---------- ---------- ---------- ----------
Net cash used in investing
activities..................... - (18,099) - - (18,099)
---------- ---------- ---------- ---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Revolving loan borrowings
(repayments), net................ (5,400) - - - (5,400)
Long-term debt repayments........... - (40) - - (40)
Issuance of common stock............ 38 - - - 38
Merger and recapitalization
expenses paid.................... (2,423) - - - (2,423)
Intercompany advances............... 21,883 (21,883) - - -
---------- ---------- ---------- ---------- ----------
Net cash used in financing
activities..................... 14,098 (21,923) - - (7,825)
---------- ---------- ---------- ---------- ----------
Net decrease in cash............. - (5,742) - - (5,742)
Cash at the beginning of the period.... - 29,019 - - 29,019
---------- ---------- ---------- ---------- ----------
Cash at the end of the period.......... $ - $ 23,277 $ - $ - $ 23,277
========== ========== ========== ========== ==========
18
TRAVELCENTERS OF AMERICA, INC.
SELECTED NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
SIX MONTHS ENDED JUNE 30, 2002
--------------------------------------------------------------------------
PARENT GUARANTOR NONGUARANTOR
COMPANY SUBSIDIARIES SUBSIDIARY ELIMINATIONS CONSOLIDATED
------------- ------------ ------------ ------------ -------------
(IN THOUSANDS OF DOLLARS)
CASH FLOWS PROVIDED BY (USED IN)
OPERATING ACTIVITIES................... $ (14,652) $ 56,091 $ 73 $ - $ 41,512
----------- ---------- ---------- ---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Business acquisitions.................. - (3,063) - - (3,063)
Proceeds from sales of property and
equipment........................... - 2,535 - - 2,535
Capital expenditures................... - (23,739) - - (23,739)
---------- ---------- ---------- ---------- ----------
Net cash used in investing
activities........................ - (24,267) - - (24,267)
---------- ---------- ---------- ---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Revolving loan borrowings
(repayments), net................... (10,600) - - - (10,600)
Long-term debt repayments........... (820) (43) - - (863)
Issuance of common stock............ 39 - - - 39
Merger and recapitalization
expenses paid.................... (150) - - - (150)
Intercompany advances............... 26,183 (26,110) (73) - -
---------- ---------- ---------- ---------- ----------
Net cash used in financing
activities........................ 14,652 (26,153) (73) - (11,574)
---------- ---------- ---------- ---------- ----------
Net decrease in cash................ - 5,671 - - 5,671
Cash at the beginning of the period....... - 19,888 - - 19,888
---------- ---------- ---------- ---------- ----------
Cash at the end of the period............. $ - $ 25,559 $ - $ - $ 25,559
========== ========== ========== ========== ==========
19
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the
unaudited consolidated financial statements and selected notes to unaudited
consolidated financial statements included herein, and the audited financial
statements and the Management's Discussion and Analysis included with our Form
10-K for the year ended December 31, 2001. Our results of operations for a
particular quarter may not be indicative of results expected during the other
quarters or for the entire year.
CRITICAL ACCOUNTING POLICIES
We have no material changes to the disclosure on this matter made in
our annual report on Form 10-K for the year ended December 31, 2001 except that
effective January 1, 2002, we adopted two recently issued accounting standards,
Statement of Financial Accounting Standards (FAS) No. 142, "Goodwill and Other
Intangible Assets," and FAS 144, "Accounting for the Impairment or Disposal of
Long-Lived Assets." With respect to our adoption of FAS 142 for goodwill, we
have determined that we are one reporting unit and that the estimated fair value
of that reporting unit, based on a discounted cash flow analysis, exceeded its
carrying value as of January 1, 2002. With respect to our trademark intangible
assets, the estimated fair values, based on a discounted cash flow analysis,
exceeded the carrying value as of January 1, 2002. Accordingly, we have not
recognized an impairment charge with respect to any of our intangible assets. A
number of assumptions and methods are used in preparing the valuations
underlying these impairment tests, including estimates of future cash flows and
discount rates. Applying other assumptions or valuation methods could result in
different results of these impairment tests. Similarly, defining the reporting
unit differently could lead to a different result for goodwill.
OVERVIEW
We are a holding company which, through our wholly owned subsidiaries,
owns, operates and franchises travel centers along the United States interstate
highway system to serve long-haul trucking fleets and their drivers, independent
truck drivers and general motorists. Our network is the largest, and only
nationwide, full-service travel center network in the United States. Our
geographically diverse network consists of 151 sites located in 40 states. Our
operations are conducted through three distinct types of travel centers:
- sites owned or leased and operated by us, which we refer to as
company-operated sites;
- sites owned by us and leased to independent lessee-franchisees, which
we refer to as leased sites; and
- sites owned and operated by independent franchisees, which we refer to
as franchisee-owned sites.
Our travel centers are located at key points along the U.S. interstate
highway system, typically on 20- to 25-acres sites. Most of our network
properties were developed more than 20 years ago when prime real estate
locations along the interstate highway system were more readily available than
they are today, making a network such as ours difficult to replicate. Operating
under the "TravelCenters of America" and "TA" brand names, our nationwide
network provides an advantage to long-haul trucking fleets by enabling them to
route their trucks within a single network from coast to coast.
One of the primary strengths of our business is the diversity of our
revenue sources. We have a broad range of product and service offerings,
including diesel fuel and gasoline, truck repair and maintenance services,
full-service restaurants, 20 different brands of fast food restaurants, travel
and convenience stores with a selection of over 4,000 items and other driver
amenities.
The non-fuel products and services we offer to our customers complement
our fuel business and provide us a means to increase our revenues and gross
profit despite price pressure on fuel as a result of competition and volatile
crude oil and petroleum product prices, particularly in times of historically
high prices. For the six-month periods ended June 30, 2001 and 2002, our
revenues and gross profit were composed as follows:
20
SIX MONTHS ENDED
JUNE 30,
-----------------------------
2001 2002
-------------- --------------
(IN THOUSANDS OF DOLLARS)
Revenues:
Fuel.................................................................. 71.1% 64.5%
Non-fuel.............................................................. 28.0% 34.6%
Rent and royalties.................................................... 0.9% 0.9%
--------- ---------
Total revenues.................................................. 100.0% 100.0%
========= =========
Gross profit (excluding depreciation):
Fuel.................................................................. 22.2% 21.3%
Non-fuel.............................................................. 74.0% 75.3%
Rent and royalties.................................................... 3.8% 3.4%
--------- ---------
Total gross profit (excluding depreciation)..................... 100.0% 100.0%
========= =========
COMPOSITION OF OUR NETWORK
The changes in the number of sites within our network and in their
method of operation (company-operated, leased or franchisee-owned) are
significant factors influencing the changes in our results of operations. The
following table summarizes the changes in the composition of our network from
December 31, 2000 through June 30, 2002:
COMPANY- FRANCHISEE-
OPERATED LEASED OWNED TOTAL
SITES SITES SITES SITES
------------ ---------- ----------- ---------
Number of sites at December 31, 2000(1)................. 122 26 9 157
January - June 2001 Activity:
Sales of sites....................................... - (1) - (1)
------ ------ ------ -----
Number of sites at June 30, 2001(1)..................... 122 25 9 156
July - December 2001 Activity:
Sales of sites....................................... (3) - - (3)
------ ------ ------ -----
Number of sites at December 31, 2001.................... 119 25 9 153
2002 Activity:
Sales of sites....................................... (2) - - (2)
Conversions of leased sites to
company-operated sites............................. 3 (3) - -
------ ------ ------ -----
Number of sites at June 30, 2002........................ 120 22 9 151
====== ====== ====== =====
(1) Includes one company-operated site held for development until its
construction was completed during 2001.
In July 2002, the lease and franchise agreements covering another
leased site were mutually terminated and, as a result, this site was converted
into a company-operated site.
RESULTS OF OPERATIONS
QUARTER ENDED JUNE 30, 2002 COMPARED TO QUARTER ENDED JUNE 30, 2001
Revenues. Our consolidated revenues for the quarter ended June 30, 2002
were $465.8 million, which represents a decrease from the quarter ended June 30,
2001 of $53.8 million, or 10.4%, that is primarily attributable to a decrease in
fuel revenue.
21
Fuel revenue for the quarter ended June 30, 2002 decreased by $61.3
million, or 16.9%, as compared to the same period in 2001. The decrease was
attributable principally to decreases in diesel fuel and gasoline average
selling prices. Average diesel fuel and gasoline sales prices for the quarter
ended June 30, 2002 decreased by 17.3% and 20.6%, respectively, as compared to
the same period in 2001, primarily reflecting decreases in commodity prices and
also reflecting our more competitive retail fuel pricing, particularly for
gasoline. The fuel revenue decline also resulted from a decrease in our diesel
fuel sales volumes that was partially offset by an increase in gasoline sales
volumes. Diesel fuel and gasoline sales volumes for the quarter ended June 30,
2002 decreased 3.3% and increased 39.9%, respectively, as compared to the same
period in 2001. For the quarter ended June 30, 2002, we sold 332.4 million
gallons of diesel fuel and 43.8 million gallons of gasoline, as compared to
343.8 million gallons of diesel fuel and 31.3 million gallons of gasoline for
the quarter ended June 30, 2001. The diesel fuel sales volume decrease resulted
from a 5.1 million gallon, or 29.3%, decline in our wholesale diesel fuel sales
as a result of a planned retrenchment in this area, a 1.4% decrease in same-site
diesel fuel sales volumes, and a net reduction in sales volumes at sites we
added to or eliminated from our network during 2001 and 2002. The gasoline sales
volume increase was primarily attributable to a 34.4% increase in same-site
gasoline sales volumes. We believe the same-site diesel fuel sales volume
decrease resulted from a decline in trucking activity in the second quarter of
2002 as compared to the second quarter of 2001, resulting from the general
condition of the United States economy, and occurred in spite of our continued
emphasis on competitively pricing our diesel fuel. We believe the same-site
increase in gasoline sales volume resulted primarily from increased general
motorist visits to our sites as a result of our gasoline and QSR offering
upgrades and additions under our capital program, as well as our more
competitive retail gasoline pricing.
Non-fuel revenues for the quarter ended June 30, 2002 of $159.4 million
reflected an increase of $7.9 million, or 5.2%, from the same period in 2001.
The increase was primarily attributable to an increase in non-fuel sales on a
same-site basis of 4.0% for the quarter ended June 30, 2002 versus the same
period in 2001. We believe the same-site increase reflected increased customer
traffic resulting, in part, from the significant capital improvements that we
have made in the network under our capital investment program to re-image,
re-brand and upgrade our travel centers. The increase was also attributable to
sales at the company-operated sites added to our network since June 2001.
Rent and royalty revenues for the quarter ended June 30, 2002 reflected
a $0.4 million, or 9.1%, decrease from the same period in 2001. This decrease
was primarily attributable to the rent and royalty revenue lost as a result of
the conversions of leased sites to company-operated sites, partially offset by a
2.8% increase in same-site royalty revenue and a 2.6% increase in same-site rent
revenue.
Gross Profit (excluding depreciation). Our gross profit for the quarter
ended June 30, 2002 was $123.3 million, compared to $120.6 million for the same
period in 2001, an increase of $2.7 million, or 2.2%. The increase in our gross
profit was primarily due to increases in diesel fuel margin per gallon, gasoline
sales volume and non-fuel sales volume that were partially offset by a decrease
in diesel fuel sales volume, a reduced level of gasoline margin per gallon and
decreased rent and royalty revenue.
Operating and Selling, General and Administrative Expenses. Operating
expenses included the direct expenses of company-operated sites and the
ownership costs of leased sites. Selling, general and administrative expenses
included corporate overhead and administrative costs.
Our operating expenses increased by $0.4 million, or 0.5%, to $82.4
million for the quarter ended June 30, 2002 compared to $82.0 million for the
same period in 2001. This increase was attributable to a $1.6 million net
increase resulting from company-operated sites we added to our network or
eliminated from our network since the first quarter of 2001, partially offset by
a 0.6% decline in operating expenses on a same-site basis, despite an increase
in non-fuel sales volume. On a same-site basis, operating expenses as a percent
age of non-fuel revenues for the second quarter of 2002 were 51.0%, compared to
53.4% for the same period in 2001. The same-site results reflected reduced
utility costs and the results of our cost-cutting measures at our sites,
partially offset by increased rent expense at sites we lease under operating
leases.
Our selling, general and administrative expenses for the quarter ended
June 30, 2002 were $9.8 million, which reflected a decrease of $0.2 million, or
2.0%, from the same period in 2001.
22
Depreciation and Amortization Expense. Depreciation and amortization
expense for the quarter ended June 30, 2002 was $15.2 million, compared to $14.2
million for the same period in 2001. This increase was attributable to a higher
level of newly capitalized assets in the second quarter of 2002 as compared to
the second quarter of 2001, partially offset by reduced depreciation as a result
of changes we made in depreciable lives for certain assets that were effective
April 1, 2001, and reduced amortization expense due to the adoption of FAS 142.
During the quarter ended June 30, 2002 we recognized an impairment charge of
$0.8 million with respect to certain of the sites we are holding for sale as a
result of reductions in estimated sales proceeds.
As a result of adopting FAS 142 effective January 1, 2002, our goodwill
and trademark intangible assets are no longer amortized. Pursuant to FAS 142,
intangible assets must be periodically tested for impairment. During the first
quarter of 2002, we completed our transitional impairment review of our
trademark intangible assets and determined that there was no impairment. During
the second quarter of 2002 we completed the transitional impairment review of
goodwill and determined that there was no impairment. We also adopted FAS 144
effective January 1, 2002. The adoption of FAS 144 did not have a material
impact on our consolidated results of operations.
Income from Operations. We generated income from operations of $15.9
million for the quarter ended June 30, 2002, compared to income from operations
of $14.4 million for the same period in 2001. This increase of $1.5 million, or
10.4%, was primarily attributable to the increase in gross profit that was
partially offset by the increase in operating expenses. EBITDA for the quarter
ended June 30, 2002 was $31.0 million, as compared to EBITDA of $28.7 million
for the quarter ended June 30, 2001. This increase of $2.3 million, or 8.0%
resulted from the increase in gross profit that was partially offset by the net
increase in operating and administrative expenses. EBITDA, as used here, is
based on the definition for EBITDA in our debt agreements and consists of net
income plus the sum of (a) income taxes, (b) interest and other financial costs,
net, (c) depreciation, amortization and other noncash charges, which includes
stock compensation expense, and (d) transition expense. We have included certain
information concerning EBITDA because we believe that EBITDA is generally
accepted as providing useful information regarding a company's ability to
service and/or incur debt. EBITDA should not be considered in isolation from, or
as a substitute for, net income, cash flows or other consolidated income or cash
flow statement data prepared in accordance with generally accepted accounting
principles or as a measure of a company's profitability or liquidity. While
EBITDA is frequently used as a measure of operations and ability to meet debt
service requirements, it is not necessarily comparable to similarly titled
captions of other companies due to differences in methods of calculation.
Interest and Other Financial Costs--Net. Interest and other financial
costs, net, for the quarter ended June 30, 2002 decreased by $1.9 million, or
12.8%, compared to 2001. This decrease resulted from the decline in interest
rates since the second quarter of 2001 as well as from our decreased
indebtedness.
Income Taxes. Our effective income tax rate for the quarter ended June
30, 2002 and was 30.2%. This rate differed from the federal statutory rate due
primarily to state income taxes and nondeductible expenses, partially offset by
the benefit of certain tax credits. For the quarter ended June 30, 2001, we
recognized a $0.1 million income tax provision despite a $0.5 million pre-tax
loss as a result of state income taxes and nondeductible expenses.
SIX MONTHS ENDED JUNE 30, 2002 COMPARED TO SIX MONTH ENDED JUNE 30, 2001
Revenues. Our consolidated revenues for the six months ended June 30,
2002 were $862.8 million, which represents a decrease from the six months ended
June 30, 2001 of $153.8 million, or 15.1%, that is primarily attributable to a
decrease in fuel revenue.
Fuel revenue for the six months ended June 30, 2002 decreased by $166.5
million, or 23.0%, as compared to the same period in 2001. The decrease was
attributable principally to decreases in diesel fuel and gasoline average
selling prices. Average diesel fuel and gasoline sales prices for the six months
ended June 30, 2002 decreased by 22.7% and 23.4%, respectively, as compared to
the same period in 2001, primarily reflecting decreases in commodity prices and
also reflecting our more competitive retail fuel pricing, particularly for
gasoline. The fuel revenue decline also resulted from a decrease in our diesel
fuel sales volumes that was partially offset by an increase in gasoline sales
volumes. Diesel fuel and gasoline sales volumes for the six months ended June
30, 2002 decreased 4.1% and increased 40.6%, respectively, as compared to the
same period in 2001. For the six months ended June 30, 2002, we sold 670.2
million gallons of diesel fuel and 75.5 million gallons of gasoline, as compared
to 699.2 million gallons of diesel fuel and 53.7 million gallons of gasoline for
the six months ended June 30, 2001. The diesel fuel sales volume decrease
resulted from a 14.1 million gallon, or 38.6%, decline in our wholesale diesel
fuel sales as a result of a planned retrenchment in this area, a 2.0% decrease
in same-site diesel fuel sales volumes, and a net
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reduction in sales volumes at sites we added to or eliminated from our network
during 2001 and 2002. The gasoline sales volume increase was primarily
attributable to a 37.2% increase in same-site gasoline sales volumes. We believe
the same-site diesel fuel sales volume decrease resulted from a decline in
trucking activity in 2002 as compared to 2001, resulting from the general
condition of the United States economy, and occurred in spite of our continued
emphasis on competitively pricing our diesel fuel. We believe the same-site
increase in gasoline sales volume resulted primarily from increased general
motorist visits to our sites as a result of our gasoline and QSR offering
upgrades and additions under our capital program, as well as our more
competitive retail gasoline pricing.
Non-fuel revenues for the six months ended June 30, 2002 of $298.2
million reflected an increase of $13.3 million, or 4.7%, from the same period in
2001. The increase was primarily attributable to an increase in non-fuel sales
on a same-site basis of 3.6% for the six months ended June 30, 2002 versus the
same period in 2001. We believe the same-site increase reflected increased
customer traffic resulting, in part, from the significant capital improvements
that we have made in the network under our capital investment program to
re-image, re-brand and upgrade our travel centers. The increase was also
attributable to sales at the company-operated sites added to our network since
June 2001.
Rent and royalty revenues for the six months ended June 30, 2002
reflected a $0.6 million, or 7.0%, decrease from the same period in 2001. This
decrease was primarily attributable to the rent and royalty revenue lost as a
result of the conversions of leased sites to company-operated sites, partially
offset by a 1.2% increase in same-site royalty revenue and a 2.3% increase in
same-site rent revenue.
Gross Profit (excluding depreciation). Our gross profit for the six
months ended June 30, 2002 was $234.0 million, compared to $227.9 million for
the same period in 2001, an increase of $6.1 million, or 2.7%. The increase in
our gross profit was primarily due to increases in diesel fuel margin per
gallon, in gasoline sales volume and non-fuel sales volume that were partially
offset by a decrease in diesel fuel sales volume, a reduced level of gasoline
margin per gallon and decreased rent and royalty revenue.
Operating and Selling, General and Administrative Expenses. Operating
expenses included the direct expenses of company-operated sites and the
ownership costs of leased sites. Selling, general and administrative expenses
included corporate overhead and administrative costs.
Our operating expenses increased by $2.5 million, or 1.6%, to $163.1
million for the six months ended June 30, 2002 compared to $160.6 million for
the same period in 2001. This increase was attributable to a $0.7 million, or
0.5%, increase in operating expenses on a same-site basis and a $1.6 million net
increase resulting from company-operated sites we added to our network or
eliminated from our network during 2001 or 2002. The same-site increase
reflected cost increases in operating expenses related to the increased level of
non-fuel sales. On a same-site basis, operating expenses as a percentage of
non-fuel revenues for the six months ended June 30, 2002 were 54.0%, compared to
55.7% for the same period in 2001, reflecting reduced utility costs and the
results of our cost-cutting measures at our sites, partially offset by increased
rent expense at sites we lease under operating leases.
Our selling, general and administrative expenses for the six months
ended June 30, 2002 were $19.6 million, which reflected a decrease of $0.2
million, or 1.0% from the same period in 2001.
Depreciation and Amortization Expense. Depreciation and amortization
expense for the six months ended June 30, 2002 was $29.4 million, compared to
$29.8 million for the same period 2001. This decrease was attributable to the
change we made in depreciable lives of certain assets effective April 1, 2001, a
$0.8 million decrease in amortization of intangible assets and a relatively
smaller amount of capital expenditures in 2001 and 2002 than in earlier years.
During the six months ended June 30, 2002 we recognized an impairment charge of
$1.1 million with respect to certain of the sites we are holding for sale as a
result of reductions in estimated sales proceeds.
As a result of adopting FAS 142 effective January 1, 2002, our goodwill
and trademark intangible assets are no longer amortized. Pursuant to FAS 142,
intangible assets must be periodically tested for impairment. During the first
quarter of 2002, we completed our transitional impairment review of our
trademark intangible assets and determined that there was no impairment. During
the second quarter of 2002 we completed the transitional impairment review of
goodwill and determined that there was no impairment. We also adopted FAS 144
effective January 1, 2002. The adoption of FAS 144 did not have a material
impact on our consolidated results of operations.
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Income from Operations. We generated income from operations of $22.0
million for the six months ended June 30, 2002, compared to income from
operations of $18.9 million for the same period in 2001. This increase of $3.1
million, or 16.4%, was primarily attributable to the increase in gross profit
that was partially offset by the increase in operating expenses. EBITDA for the
six months ended June 30, 2002 was $51.3 million, as compared to EBITDA of $48.8
million for the six months ended June 30, 2001. This increase of $2.5 million,
or 5.1%, occurred despite a $1.3 million decrease in gains on sales of property
and equipment in 2002 as compared to 2001. EBITDA, as used here, is based on the
definition for EBITDA in our debt agreements and consists of net income plus the
sum of (a) income taxes, (b) interest and other financial costs, net, (c)
depreciation, amortization and other noncash charges, which includes stock
compensation expense, and (d) transition expense.
Interest and Other Financial Costs--Net. Interest and other financial
costs, net, for the six months ended June 30, 2002 decreased by $4.4 million, or
14.5%, compared to 2001. This decrease resulted from the decline in interest
rates since the first quarter of 2001 as well as from the decrease in our
indebtedness.
Income Taxes. Our effective income tax benefit rates for the six-month
periods ended June 30, 2002 and 2001 were 30.1% and 29.2%, respectively. These
rates differed from the federal statutory rate due primarily to state income
taxes and nondeductible expenses, partially offset by the benefit of certain tax
credits.
LIQUIDITY AND CAPITAL RESOURCES
Our principal liquidity requirements are to meet our working capital
and capital expenditure needs, including expenditures for acquisitions and
expansion, and to service the payments of principal and interest on outstanding
indebtedness. Our principal source of liquidity to meet these requirements is
operating cash flows. The revolving credit facility of our Senior Credit
Facility provides us a secondary source of liquidity, primarily to better match
the timing of cash expenditures to the timing of our cash receipts due to the
somewhat seasonal nature of our operations, the uneven level of capital
expenditures throughout the year and the timing of debt and interest payments.
The primary risks we face with respect to the expected levels of operating cash
flows are a decrease in the demand of our customers for our products and
services and increases in crude oil and/or petroleum products prices and
increases in interest rates. It is reasonably likely that the United States
economy could fall into a deeper recession, or make a slower recovery, than
expected. Similarly, it is reasonably likely that interest rates and petroleum
products prices will increase during 2002 from levels that existed during 2001,
possibly to levels greater than that contemplated in our expectations. If the
economy stagnates or worsens, our customers could be adversely affected, which
could further intensify competition within our industry and reduce the level of
cash we could generate from our operations. A one-percentage point increase in
interest rates increases our annual cash outlays by approximately $3.5 million.
A significant increase in diesel fuel and gasoline prices increases our cash
investment in working capital and can also have a depressing effect on our sales
volumes and fuel margins per gallon. The primary risk we face with respect to
the expected availability of borrowings under our revolving credit facility are
the limitations imposed upon us by the covenants contained in our Senior Credit
Facility. Should our level of sales volume or interest rate and petroleum
products price levels vary adversely and significantly from expectations, it is
reasonably likely that we would need to reduce our capital expenditures or be
effectively barred from further revolving credit facility borrowings in order to
maintain compliance with our debt covenants, in the absence of a debt covenant
waiver or an amendment to the related agreement.
We anticipate that we will be able to fund our 2002 working capital
requirements and capital expenditures primarily from funds generated from
operations and proceeds from the sales of travel centers we are holding for
sale, and, to the extent necessary, from borrowings under our revolving credit
facility. At June 30, 2002, we had outstanding borrowings and issued letters of
credit of $33.3 million and $5.5 million, respectively, leaving $61.2 million of
our $100 million revolving credit facility available for borrowings. Our
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. Our ability to fund our capital
investment requirements, interest and principal payment obligations and working
capital requirements and to comply with all of the financial covenants under our
debt agreements depends on our future operations, performance and cash flow.
These are subject to prevailing economic conditions and to financial, business
and other factors, some of which are beyond our control.
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HISTORICAL CASH FLOWS
Net cash provided by operating activities totaled $41.5 million for the
first six months of 2002, compared to $20.2 million for the same period in the
prior year. This increase in cash provided by operating activities was
attributable to the $2.5 million increase in EBITDA as compared to the first six
months of the prior year, the $4.4 million decrease in interest expense, and a
$14.4 million increase in cash generated from net reductions of working capital
in 2002 as compared to 2001.
Net cash used in investing activities was $24.3 million for the first
six months of 2002, as compared to $18.1 million for the first six months of
2001. This increase in cash used in investing activities is attributable to
decreased proceeds from sales of property and equipment and an increase in cash
invested in business acquisitions. In the first six months of 2002, we received
$2.5 million of sales proceeds, primarily from the sales of two travel center
sites, while in the first six months of 2001 we received $5.4 million of
proceeds from asset sales. In the first six months of 2001, we made no business
acquisitions, while in the first six months of 2002 we completed three business
acquisitions, converting three leased sites to company-operated sites. Although
the level of capital expenditures in the first six months of 2002 was consistent
with that in the first six months of 2001, our capital expenditures for the year
2002 will not match those of the year 2001 due to a planned reduction of capital
spending, primarily as a result of the significant progress made to date with
respect to our site re-image program. We expect 2002 capital expenditures, net
of proceeds from asset sales, to total $42 million.
Net cash used in financing activities was $11.6 million during the
first six months of 2002 and $7.8 million during the first six months of 2001.
In the first six months of 2002, we made net repayments of revolving credit
facility indebtedness of $10.6 million, made scheduled debt repayments of $0.9
million, and paid $0.2 million of fees and expenses recognized in connection
with our merger and recapitalization transactions of November 2000. In the first
six months of 2001, we made net repayments of revolving credit facility
indebtedness of $5.4 million and used $2.4 million to pay fees related to our
merger and recapitalization transactions of November 2000.
DESCRIPTION OF INDEBTEDNESS
We have no material changes to the disclosure on this matter made in
our annual report on Form 10-K for the year ended December 31, 2001.
OFF-BALANCE SHEET ARRANGEMENTS
We have no material changes to the disclosure on this matter made in
our annual report on Form 10-K for the year ended December 31, 2001.
SUMMARY OF CONTRACTUAL OBLIGATIONS AND COMMERCIAL COMMITMENTS
We have no material changes to the disclosure on this matter made in
our annual report on Form 10-K for the year ended December 31, 2001.
ENVIRONMENTAL MATTERS
We own and operate underground storage tanks and aboveground storage
tanks at company-operated sites and leased sites that must comply with
Environmental Laws. We have estimated the current ranges of remediation costs at
currently active sites and what we believe will be our ultimate share for those
costs and, as of June 30, 2002, we had a reserve of $3.8 million for
unindemnified environmental matters for which we are responsible. Under the
environmental agreements entered into as part of the acquisition of the Unocal
and BP networks, Unocal and BP are required to provide indemnification for, and
conduct remediation of, certain pre-closing environmental conditions. In
addition, we have obtained insurance of up to $25.0 million for known and up to
$40.0 million for unknown environmental liabilities, subject, in each case, to
certain limitations. While it is not possible to quantify with certainty our
environmental exposure, we believe that 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 our
financial condition, results of operations or our liquidity.
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RECENT ACCOUNTING PRONOUNCEMENTS
In June 2001, the FASB issued FAS 143, "Accounting for Asset Retirement
Obligations." FAS 143 requires recognition of the fair value of the liability
associated with the legal obligation to retire long-lived assets in the period
in which the obligation is incurred. At that time, an asset retirement cost of
an equal amount is to be capitalized and subsequently allocated to expense using
a systematic and rational approach over the estimated useful life of the related
asset. We are required to adopt FAS 143 effective January 1, 2003. We are
currently evaluating the effects of adopting FAS 143, but do not anticipate that
adopting FAS 143 will have a material effect on our results of operations or
financial position. Adopting FAS 143 will have no effect on our liquidity.
FORWARD-LOOKING STATEMENTS
This quarterly report includes forward-looking statements within the
meaning of the Private Securities Litigation Reform Act of 1995. These
statements relate to our future prospects, developments and business strategies.
The statements contained in this offering circular that are not statements of
historical fact may include forward-looking statements that involve a number of
risks and uncertainties. We have used the words "may," "will," "expect,"
"anticipate," "believe," "estimate," "plan," "intend" and similar expressions in
this report to identify forward-looking statements. These forward-looking
statements are made based on our expectations and beliefs concerning future
events affecting us and are subject to uncertainties and factors relating to our
operations and business environment, all of which are difficult to predict and
many of which are beyond our control, that could cause our actual results to
differ materially from those matters expressed in or implied by forward-looking
statements. The following factors are among those that could cause our actual
results to differ materially from the forward-looking statements:
- competition from other travel center and truck stop 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;
- increased environmental governmental regulation;
- changes in governmental regulation of the trucking industry, including
regulations relating to diesel fuel and gasoline;
- changes in accounting standards generally accepted in the United
States;
- diesel fuel and gasoline pricing;
- availability of diesel fuel and gasoline supply;
- delays in completing our capital investment program to re-image,
re-brand and upgrade our travel center sites; and
- availability of sufficient qualified personnel to staff
company-operated sites.
All of our forward-looking statements should be considered in light of
these factors. We do not undertake to update our forward-looking statements to
reflect future events or circumstances.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We have no material changes to the disclosure on this matter made in
our annual report on Form 10-K for the year ended December 31, 2001.
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PART II - OTHER INFORMATION
Item 1. Legal Proceedings
We are involved from time to time in various legal and administrative
proceedings and threatened legal and administrative proceedings incidental to
the ordinary course of our business. We believe that we are not now involved in
any litigation, individually, or in the aggregate, which could have a material
adverse affect on our 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
second quarter of 2002.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit
Number Exhibit
--------------- -------------------------------------------------------------------------------
99.1 Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350
99.2 Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350
(b) Reports on Form 8-K
During the second quarter of 2002, we filed no reports on Form 8-K.
28
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
TRAVELCENTERS OF AMERICA, INC.
(Registrant)
Date: August 12, 2002 By: /s/ James W. George
----------------------------------------
Name: James W. George
Title: Senior Vice President and
Chief Financial Officer
(Principal Financial Officer and
Duly Authorized Officer)
29