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EX-10.8 - EX-10.8 - TravelCenters of America Inc. /MD/a16-13824_1ex10d8.htm
EX-10.7 - EX-10.7 - TravelCenters of America Inc. /MD/a16-13824_1ex10d7.htm
EX-10.6 - EX-10.6 - TravelCenters of America Inc. /MD/a16-13824_1ex10d6.htm
EX-10.5 - EX-10.5 - TravelCenters of America Inc. /MD/a16-13824_1ex10d5.htm
EX-10.4 - EX-10.4 - TravelCenters of America Inc. /MD/a16-13824_1ex10d4.htm
EX-10.3 - EX-10.3 - TravelCenters of America Inc. /MD/a16-13824_1ex10d3.htm
EX-10.2 - EX-10.2 - TravelCenters of America Inc. /MD/a16-13824_1ex10d2.htm
EX-10.1 - EX-10.1 - TravelCenters of America Inc. /MD/a16-13824_1ex10d1.htm
8-K - 8-K - TravelCenters of America Inc. /MD/a16-13824_18k.htm

Exhibit 99.1

 

Pro Forma Condensed Consolidated Financial Statements (Unaudited)

 

On June 1, 2015, TravelCenters of America LLC and three of its subsidiaries, which we refer to collectively as we, our, us, or TA, entered into a Transaction Agreement with our principal landlord, Hospitality Properties Trust, and four of its subsidiaries, which we refer to collectively as HPT, as disclosed in the Current Report on Form 8-K filed with the Securities and Exchange Commission on June 5, 2015. The transactions contemplated by the Transaction Agreement, include (i) the amendment and restatement of our lease with HPT for 144 properties, which we refer to as the Prior TA Lease, (ii) the sale of properties and other assets to, and our lease back of those properties and assets from, HPT, (iii) the purchase of properties from HPT and (iv) the sale to HPT of five travel centers upon the completion of their development, which was then expected to be completed before June 30, 2017, at a purchase price equal to their development costs, including the cost of land, which costs were estimated to be not more than $118.0 million in the aggregate, and our lease back of these properties from HPT.

 

On June 22, 2016, we entered into a First Amendment to Transaction Agreement, or the Amendment, with HPT to, among other things, replace one of the five development properties that we had agreed to sell to and lease back from HPT with two alternative existing travel centers owned by us.

 

Since June 1, 2015, we completed certain of the transactions contemplated by the Transaction Agreement and the Amendment as summarized below:

 

·                   On June 9, 2015, the Prior TA Lease was expanded and subdivided into four new leases, which we refer to collectively as the New TA Leases. The initial terms for the New TA Leases end on December 31, 2026, 2028, 2029 and 2030. Each of the New TA Leases grants us two renewal options of 15 years each.

 

·                   On June 9, 2015, HPT purchased from us, for $183.4 million, 10 travel centers we owned and certain assets we owned at eight properties we leased from HPT under the Prior TA Lease. HPT leased back these properties to us under the New TA Leases. Our annual rent increased by $15.8 million as a result of the sale and leaseback of properties completed on June 9, 2015.

 

·                   On June 9, 2015, we purchased from HPT, for $45.0 million, five travel centers that we previously leased from HPT under the Prior TA Lease. Our annual rent decreased by $3.9 million as a result of our completion of the purchase of these properties.

 

·                   On June 16, 2015, HPT purchased from us, for $24.4 million, one travel center we owned and certain assets we owned at another travel center that we lease from HPT under one of the New TA Leases and HPT leased back the travel center and assets to us under two of the New TA Leases. Our annual rent increased by $2.1 million as a result of the sale and leaseback of the travel center and assets completed on June 16, 2015.

 

·                   On June 23, 2015, HPT purchased from us, for $20.1 million, one travel center we owned and certain assets we owned at another travel center that we lease from HPT under one of the New TA Leases and HPT leased back the travel center and assets to us under two of the New TA Leases. Our annual rent increased by $1.7 million as a result of the sale and leaseback of the travel center and assets completed on June 23, 2015.

 

·                   On September 23, 2015, HPT purchased from us, for $51.5 million, two travel centers we owned and certain assets we owned at another travel center that we lease from HPT under one of the New TA Leases and HPT leased back the two travel centers and assets to us under three of the New TA Leases. Our annual rent increased by $4.4 million as a result of the sale and leaseback of the travel center and assets completed on September 23, 2015.

 

·                   On March 31, 2016, HPT purchased from us, for $19.7 million, one travel center we developed and owned and HPT leased back the travel center to us under one of the New TA Leases. Our annual rent increased by $1.7 million as a result of the sale and leaseback of the travel center completed on March 31, 2016.

 



 

·                   On June 22, 2016, pursuant to the Amendment, HPT purchased from us, for $23.9 million, two travel centers we owned and HPT leased back these two travel centers to us under two of the New TA Leases. Our annual rent increased by $2.0 million as a result of the sale and leaseback of the travel centers completed on June 22, 2016.

 

As of June 22, 2016, after giving effect to the above referenced transactions completed through that date, we leased a total of 156 properties from HPT under the New TA Leases.

 

2



 

The pro forma financial statements included herein include adjustments related to the amendments to the terms of our leases with HPT and our purchase of assets and our sale and lease back of assets on June 9, 2015, June 16, 2015, June 23, 2015, September 23, 2015, March 31, 2016, and June 22, 2016. The pro forma financial statements do not reflect adjustments related to the future sale and lease back of the remaining three properties we expect to sell to HPT after we have completed the construction of travel centers at those properties, as contemplated in the Transaction Agreement. The pro forma financial statements also do not reflect adjustments to rent payable to HPT as a result of our sales to HPT during the periods presented of improvements at properties that we lease from HPT, for periods prior to the dates HPT purchased such improvements. Such improvements totaled $20.6 million during the three months ended March 31, 2016, and $99.9 million during the year ended December 31, 2015, and, in accordance with the leases, annual minimum rent at the time HPT purchased these improvements was increased by 8.5% of the amount of the improvements purchased by HPT. No pro forma adjustments have been made to reflect the results of operations for periods prior to our acquisitions of the travel centers and convenience stores we acquired from parties other than HPT during the periods presented, or to eliminate the one time acquisition costs related to such acquisition activities. For the three months ended March 31, 2016, and the year ended December 31, 2015, we incurred $1.0 million and $5.0 million of acquisition costs, respectively.

 

The adjustments to the pro forma condensed consolidated balance sheet as of March 31, 2016, assume that these transactions occurred on that date. The adjustments to the pro forma condensed consolidated statements of income for the three months ended March 31, 2016, and for the year ended December 31, 2015, assume that these transactions occurred on January 1, 2015. The pro forma financial statements are primarily based on, and should be read in conjunction with, our audited consolidated financial statements and accompanying notes included in our Annual Report on Form 10-K for the year ended December 31, 2015, which we refer to as our Annual Report, and our unaudited consolidated financial statements and accompanying notes included in our Quarterly Report on Form 10-Q for the quarter ended March 31, 2016, which we refer to as our Quarterly Report.

 

The historical consolidated financial information of TA has been adjusted in the pro forma financial statements to give effect to pro forma events that are (1) directly attributable to the transactions, (2) factually supportable, and (3) expected to have a continuing impact on the results of operations. The pro forma financial statements should be read in conjunction with the accompanying notes.

 

3



 

Travel Centers of America LLC

Pro Forma Condensed Consolidated Balance Sheets (Unaudited)

(in thousands)

 

 

 

March 31, 2016
(as reported)

 

Transaction
adjustments

 

Note

 

March 31, 2016
pro forma

 

Assets

 

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

129,604

 

$

23,876

 

2 (a)

 

$

153,480

 

Accounts receivable (less allowance for doubtful accounts of $761)

 

108,859

 

 

 

 

108,859

 

Inventory

 

184,803

 

 

 

 

184,803

 

Other current assets

 

42,310

 

 

 

 

42,310

 

Total current assets

 

465,576

 

23,876

 

 

 

489,452

 

 

 

 

 

 

 

 

 

 

 

Property and equipment, net

 

1,030,026

 

(12,024)

 

2 (b)

 

1,018,002

 

Goodwill and intangible assets, net

 

110,743

 

 

 

 

110,743

 

Other noncurrent assets

 

31,625

 

 

 

 

31,625

 

Total assets

 

$

1,637,970

 

$

11,852

 

 

 

$

1,649,822

 

 

 

 

 

 

 

 

 

 

 

Liabilities and Shareholders’ Equity

 

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

 

Accounts payable

 

$

129,023

 

$

 

 

 

$

129,023

 

Current HPT Lease liabilities

 

37,465

 

984

 

2 (c)

 

38,449

 

Other current liabilities

 

164,420

 

 

 

 

164,420

 

Total current liabilities

 

330,908

 

984

 

 

 

331,892

 

 

 

 

 

 

 

 

 

 

 

Long term debt

 

316,696

 

 

 

 

316,696

 

Noncurrent HPT Lease liabilities

 

382,000

 

10,868

 

2 (c)

 

392,868

 

Other noncurrent liabilities

 

67,696

 

 

 

 

67,696

 

Total liabilities

 

1,097,300

 

11,852

 

 

 

1,109,152

 

 

 

 

 

 

 

 

 

 

 

Total shareholders’ equity

 

540,670

 

 

 

 

540,670

 

Total liabilities and shareholders’ equity

 

$

1,637,970

 

$

11,852

 

 

 

$

1,649,822

 

 

4



 

Travel Centers of America LLC

Pro Forma Condensed Consolidated Statements of Income (Unaudited)

Three months ended March 31, 2016

(in thousands, except per share data)

 

 

 

As reported

 

Transaction
adjustments

 

Note

 

Pro forma

 

Revenues:

 

 

 

 

 

 

 

 

 

Fuel

 

$

709,528

 

$

 

 

 

$

709,528

 

Nonfuel

 

450,646

 

 

 

 

450,646

 

Rent and royalties from franchisees

 

4,276

 

 

 

 

4,276

 

Total revenues

 

1,164,450

 

 

 

 

1,164,450

 

 

 

 

 

 

 

 

 

 

 

Cost of goods sold (excluding depreciation):

 

 

 

 

 

 

 

 

 

Fuel

 

617,827

 

 

 

 

617,827

 

Nonfuel

 

206,331

 

 

 

 

206,331

 

Total cost of goods sold

 

824,158

 

 

 

 

824,158

 

 

 

 

 

 

 

 

 

 

 

Operating expenses:

 

 

 

 

 

 

 

 

 

Site level operating

 

234,050

 

 

 

 

234,050

 

Selling, general and administrative

 

30,966

 

 

 

 

30,966

 

Real estate rent

 

63,529

 

680

 

2 (d)

 

64,209

 

Depreciation and amortization

 

20,525

 

(203)

 

2 (e)

 

20,322

 

Total operating expenses

 

349,070

 

477

 

 

 

349,547

 

 

 

 

 

 

 

 

 

 

 

Loss from operations

 

(8,778)

 

(477)

 

 

 

(9,255)

 

 

 

 

 

 

 

 

 

 

 

Acquisition costs

 

969

 

 

 

 

969

 

Interest expense, net

 

6,821

 

 

 

 

6,821

 

Income from equity investees

 

947

 

 

 

 

947

 

Loss before income taxes

 

(15,621)

 

(477)

 

 

 

(16,098)

 

Benefit for income taxes

 

5,677

 

186

 

2 (f)

 

5,863

 

Net loss

 

$

(9,944)

 

$

(291)

 

 

 

$

(10,235)

 

 

 

 

 

 

 

 

 

 

 

Net loss per common share:

 

 

 

 

 

 

 

 

 

Basic and diluted

 

$

(0.26)

 

$

(0.01)

 

 

 

$

(0.27)

 

 

5



 

Travel Centers of America LLC

Pro Forma Condensed Consolidated Statements of Income (Unaudited)

Year Ended December 31, 2015

(in thousands, except per share data)

 

 

 

As reported

 

Transaction
adjustments

 

Note

 

Pro forma

 

Revenues:

 

 

 

 

 

 

 

 

 

Fuel

 

$

4,055,448

 

$

 

 

 

$

4,055,448

 

Nonfuel

 

1,782,761

 

 

 

 

1,782,761

 

Rent and royalties from franchisees

 

12,424

 

 

 

 

12,424

 

Total revenues

 

5,850,633

 

 

 

 

5,850,633

 

 

 

 

 

 

 

 

 

 

 

Cost of goods sold (excluding depreciation):

 

 

 

 

 

 

 

 

 

Fuel

 

3,640,954

 

 

 

 

3,640,954

 

Nonfuel

 

819,995

 

 

 

 

819,995

 

Total cost of goods sold

 

4,460,949

 

 

 

 

4,460,949

 

 

 

 

 

 

 

 

 

 

 

Operating expenses:

 

 

 

 

 

 

 

 

 

Site level operating

 

885,646

 

 

 

 

885,646

 

Selling, general and administrative

 

121,767

 

 

 

 

121,767

 

Real estate rent

 

231,591

 

11,659

 

2 (d)

 

243,250

 

Depreciation and amortization

 

72,383

 

(4,673)

 

2 (e)

 

67,710

 

Total operating expenses

 

1,311,387

 

6,986

 

 

 

1,318,373

 

 

 

 

 

 

 

 

 

 

 

Income from operations

 

78,297

 

(6,986)

 

 

 

71,311

 

 

 

 

 

 

 

 

 

 

 

Acquisition costs

 

5,048

 

 

 

 

5,048

 

Interest expense, net

 

22,545

 

(1,846)

 

2 (d)

 

20,699

 

Income from equity investees

 

4,056

 

 

 

 

4,056

 

Loss on extinguishment of debt

 

10,502

 

(10,502)

 

2 (g)

 

 

Income before income taxes

 

44,258

 

5,362

 

 

 

49,620

 

Provision for income taxes

 

16,539

 

2,086

 

2 (f)

 

18,625

 

Net income

 

$

27,719

 

$

3,276

 

 

 

$

30,995

 

 

 

 

 

 

 

 

 

 

 

Net income per common share:

 

 

 

 

 

 

 

 

 

Basic and diluted

 

$

0.72

 

$

0.09

 

 

 

$

0.81

 

 

6



 

TravelCenters of America LLC

Notes to Condensed Consolidated Pro Forma Financial Statements (Unaudited)

(In thousands, unless indicated otherwise)

 

Note 1.         Basis of Presentation

 

The condensed consolidated pro forma financial statements were derived from historical financial statements prepared in accordance with U.S. generally accepted accounting principles, and should be read in conjunction with our Annual and Quarterly Reports. The pro forma financial statements are presented for informational purposes only and are not necessarily indicative of what our results of operations actually would have been had the transaction been completed as of the dates indicated. In addition, the pro forma financial statements do not purport to project our future operating results. The accompanying pro forma financial statements do not reflect adjustments related to the expected sale and lease back of the three remaining properties we agreed to sell to HPT after we have completed the construction of travel centers at those properties.

 

 

Note 2. Pro Forma Transaction Adjustments

 

The condensed consolidated pro forma financial statements were prepared based on our historical consolidated financial statements and include adjustments for the amendments to the terms of our leases with HPT and our purchase of assets and our sale and lease back of assets on June 9, 2015, June 16, 2015, June 23, 2015, September 23, 2015, March 31, 2016, and June 22, 2016.

 

The historical consolidated financial information of TA has been adjusted in the pro forma financial statements to give effect to events that are (1) directly attributable to the transactions, (2) factually supportable, and (3) expected to have a continuing impact on the results of operations. The pro forma statements of income do not reflect the one time transaction related expense adjustment described in note (g) below.

 

Pro Forma Balance Sheet Adjustments

 

(a)               Cash

 

The adjustment to cash totaling $23,876 is comprised of proceeds from the sale to HPT of two travel centers. The pro forma statements of income do not assume investment income related to the net increase in cash from the transactions.

 

(b)               Property and equipment, net

 

The adjustment to property and equipment, net totaling $12,024 reflects the sale of two travel centers to HPT.

 

(c)                Deferred Gain

 

In conjunction with the sale of two travel centers we recognized an aggregate deferred gain of $11,852 which is to be amortized as a reduction to rent expense over the term of the respective leases on a straight line basis.

 

The deferred gain is comprised as follows:

 

Total deferred gain

 

$

11,852

 

Less: current portion of deferred gain

 

984

 

Long term deferred gain

 

$

10,868

 

 

7



 

Pro Forma Statements of Income Adjustments

 

(d)               Real estate rent

 

The increase in our annual base rent payable to HPT as a result of the sale and lease back and purchase transactions described above is calculated as follows:

 

Proceeds from the sales of 14 travel centers and certain assets at 11 properties during 2015

 

$

279,382

 

Less: Purchase price of five travel centers

 

(45,042

)

Net proceeds from transaction

 

234,340

 

Rent increase rate

 

8.6

%

Net increase in annual base rent from 2015 transactions

 

20,153

 

 

 

 

 

Proceeds from the sales of one development property and two travel centers during 2016

 

43,559

 

Rent increase rate

 

8.5

%

Increase in annual base rent from 2016 transactions

 

3,703

 

 

 

 

 

Total net increase in annual base rent

 

$

23,856

 

 

Adjustments to real estate rent expense consisted of the following:

 

 

 

Three Months Ended
March 31, 2016

 

Year Ended
December 31, 2015
(1)

Increase in base rent due to sale and lease back and purchase transactions

 

$

926

 

$

12,100

Add: HPT rent previously classified as interest expense

 

 

1,846

Add: HPT rent previously charged against the sale leaseback financing obligation

 

 

704

Pro forma increase in real estate rent

 

926

 

14,650

Less: Amortization of deferred gain

 

(246)

 

(4,869)

Add: Amortization of other existing deferred rent credits over longer amended lease terms

 

 

1,878

Net adjustment to real estate rent expense

 

$

680

 

$

11,659

 

(1) On June 9, 2015, June 16, 2015, June 23, 2015, and September 23, 2015, we completed certain of the transactions contemplated by the Transaction Agreement, as described above. Our historical results for the year ended December 31, 2015, include the effects of those completed transactions from those respective dates.

 

Taking into account the transaction completed on June 22, 2016, our annual run rate rent expense as of March 31, 2016 was as follows:

 

Annual rent payments obligation

 

$

272,230

 

Adjustments:

 

 

 

Less: Amortization of deferred gain

 

(9,920

)

Less: Net amortization of deferred rent credits and accruals

 

(6,845

)

Less: Portion of rent payment recognized as principal and interest payments related to sale leaseback financing obligation

 

(2,138

)

Annual run rate rent expense as of March 31, 2016

 

$

253,327

 

 

The annual run rate rent expense as of March 31, 2016, does not take into account future increases in rent that may result from sales of improvements to HPT and from percentage rent.

 

8



 

(e)                Depreciation and amortization

 

Adjustments to depreciation and amortization expense in the pro forma statements of income consisted of the following:

 

 

 

Three Months Ended
March 31, 2016

 

Year Ended
December 31, 2015

Adjustment to remove depreciation expense related to the assets sold to HPT

 

$

(203)

 

$

(4,360)

Adjustment to remove depreciation expense related to properties that qualified for sale leaseback accounting effective June 1, 2015

 

 

(313)

 

 

$

(203)

 

$

(4,673)

 

(f)                 Provision for income taxes

 

The pro forma transaction adjustments have been tax affected at a blended statutory federal and state income tax rate of 38.9%.

 

(g)                Loss on extinguishment of debt

 

The purchase of five properties on June 9, 2015, that we formerly leased from HPT and subleased to franchisees, resulted in a loss on extinguishment of debt of $10,502 because the lease of these properties had been accounted for as a financing and the purchase prices paid for the properties exceeded the unamortized balance of the sale leaseback financing obligation. This loss on extinguishment of debt is eliminated and not reflected in the pro forma statements of income because it is non-recurring.

 

9