EX-99.2 3 a07-14149_1ex99d2.htm EX-99.2

Exhibit 99.2

TRAVELCENTERS OF AMERICA LLC

INTRODUCTION TO SUPPLEMENTAL INFORMATION

The adjusted pro forma information provided herein is based on our operating results for the two months ended March 31, 2007, and the historical operating results of TravelCenters of America, Inc., our predecessor, for the one month ended January 31, 2007, and the three months ended March 31, 2006, adjusted for HPT’s acquisition of our predecessor and our recapitalization and spin off from HPT, or the “Transaction”. The adjustments applied to the historical operating results are described in the reconciliations to the historical financial information beginning on page 6 and the notes thereto beginning on page 8.  The adjusted pro forma statement of operations assumes that the Transaction occurred at the beginning of the period presented. The information provided in this release does not represent our financial condition or results of operations for any future date or period.  Actual future results may be materially different from those presented herein.  Differences could arise from many factors, including, but not limited to, those related to our operation as a separate publicly owned company, interest earned on our cash balances, competition in our business, our ability to successfully attract or retain customers and employees, our ability to control operating expenses, our capital structure and other factors.  Further, we have not given pro forma or adjusted pro forma effect to the following for any periods prior to the Transaction:

·        The costs which we will incur to operate as a separate public company.

·                        Interest income we may earn on cash which we received from HPT prior to our spin off.

1




TRAVELCENTERS OF AMERICA LLC

SUMMARY PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS (1)

(dollars in thousands, except per share data)

 

 

Three months ended March 31,

 

 

 

2007

 

2006

 

Revenues:

 

 

 

 

 

Fuel

 

$

881,196

 

$

884,145

 

Non-fuel

 

205,719

 

199,907

 

Rent and royalties

 

2,437

 

2,306

 

Total revenues

 

1,089,352

 

1,086,358

 

 

 

 

 

 

 

Cost of goods sold (excluding depreciation):

 

 

 

 

 

Fuel

 

850,096

 

857,009

 

Non-fuel

 

83,712

 

82,280

 

Total cost of goods sold (excluding depreciation)

 

933,808

 

939,289

 

 

 

 

 

 

 

Operating expenses:

 

 

 

 

 

Site level operating

 

108,505

 

103,282

 

Selling, general & administrative (2)

 

21,240

 

12,887

 

Real estate lease rent (3)

 

42,643

 

42,557

 

Depreciation and amortization

 

7,932

 

7,932

 

Merger related

 

44,972

 

 

(Gain) loss on asset sales

 

(24

)

(279

)

Total operating expenses

 

225,268

 

166,379

 

 

 

 

 

 

 

Loss from operations

 

(69,724

)

(19,310

)

Debt extinguishment expense

 

(16,140

)

 

Interest expense, net (3)

 

(1,493

)

(2,633

)

Loss before income taxes

 

(87,357

)

(21,943

)

Provision (benefits) for income taxes

 

(33,021

)

(8,294

)

 

 

 

 

 

 

Net loss

 

$

(54,336

)

$

(13,649

)

 

 

 

 

 

 

Earnings (loss) per common shares

 

 

 

 

 

Basic

 

$

(6.17

)

$

(1.55

)

 

 

 

 

 

 

Diluted

 

$

(6.17

)

$

(1.55

)

 


(1)  See pages 6 to 9 for a reconciliation of the historical results to these pro forma results.

(2)  Selling, general and administrative expenses for the three months ended March 31, 2007 includes $1.9 million of expense related to executive retention and separation payments and $4.3 million related to our predecessors stock compensation plan.

(3)  Our lease with HPT requires us to pay rent of $153.5 million for the period from February 1, 2007, through January 31, 2008.  Our lease with HPT requires us to pay, on average, $170.7 million per annum over the 16 year lease term.  Certain of our travel centers leased from HPT do not qualify for operating lease treatment but are instead treated as capitalized leases under generally accepted accounting principles, or GAAP. As a result, a portion of the rent expense to HPT is recognized as interest expense in our pro forma statement of operations (see Note D to this supplemental information on page 9 for a further discussion).  Under GAAP, we recognize our rent obligations on a pro forma basis as follows:

 

Three months ended March 31,

 

 

 

2007

 

2006

 

 

 

 

 

 

 

Minimum base rent (cash payments)

 

$

38,375

 

$

38,375

 

Required straight line rent adjustment

 

4,305

 

4,305

 

Total average rent to HPT

 

42,680

 

42,680

 

Less amount recognized as interest

 

(2,828

)

(2,828

)

Rent to HPT recognized as rent expense

 

$

39,852

 

$

39,852

 

 

Rent expense also includes “other real estate rent” related to real estate leased from parties other than HPT of $2,791 and $2,705 for the three month periods ended March 31, 2007 and 2006, respectively.

2




TRAVELCENTERS OF AMERICA LLC

SUMMARY ADJUSTED PRO FORMA CONSOLIDATED SUPPLEMENTAL DATA

(dollars in thousands, except per share data)

 

Three months ended

 

 

 

March 31,

 

 

 

2007

 

2006

 

EBITDAR (1)

 

 

 

 

 

Net loss

 

$

(54,336

)

$

(13,649

)

Add: income taxes

 

(33,021

)

(8,294

)

Add: depreciation and amortization

 

7,932

 

7,932

 

Add: interest expense, net

 

1,493

 

2,633

 

Add: real estate lease rent

 

42,643

 

42,557

 

EBITDAR: (1)

 

(35,289

)

31,179

 

 

 

 

 

 

 

Add: noncash share based compensation expense (2)

 

4,268

 

11

 

Add: nonrecurring merger related expenses (3)

 

44,972

 

 

Add: executive retention and separation payments (4)

 

1,920

 

 

Add: debt extinguishment expense (5)

 

16,140

 

 

Adjusted EBITDAR (1)

 

$

32,011

 

$

31,190

 

 


(1)  We calculate EBITDAR as earnings before interest, taxes, depreciation and amortization and rent, and we define Adjusted EBITDAR as EBITDAR excluding the impact of certain non-cash items and certain items which we consider to be non-recurring.  We consider EBITDAR and Adjusted EBITDAR to be measures which are useful indications of our operating performance and our ability to pay rent or service debt, fund capital expenditures and expand our business.  We believe that EBITDAR and Adjusted EBITDAR are meaningful disclosures that may help shareholders to understand our financial performance, including comparing our performance between periods and to other companies.  However, EBITDAR and Adjusted EBITDAR as presented may not be comparable to amounts calculated by other companies.  This information should not be considered as an alternative to net income, income from continuing operations, operating profit, cash flow from operations or any other operating or liquidity performance measure prescribed by GAAP.

(2)  The historical noncash share based compensation expense relates to the vesting of options of our predecessor’s, TravelCenters of America, Inc.’s, shares which were redeemed upon the closing of HPT’s acquisition of TravelCenters of America, Inc.

(3)  This amount relates to costs incurred by our predecessor, TravelCenters of America, Inc., in marketing itself for sale and consummating the Transaction and primarily consists of investment banking fees, other transaction advisory fees and management bonus payments.

(4)  During the three months ended March 31, 2007, pursuant to the employment agreements we entered with former executive officers, we accrued $1.0 million of expense related to separation payments due to these former executive officers in 2007, and also amortized into expense $0.9 million related to various retention bonus payments that are required to be made in December 2007 and January 2009 to certain of our executives who remain in our employ through those dates.

(5)  For the quarter ended March 31, 2007, the amount shown relates to cost incurred, primarily noncash write offs, by our predecessor, TravelCenters of America, Inc., in connection with the repayment in full of its indebtedness.

3




TRAVELCENTERS OF AMERICA LLC

SITE OPERATING DATA(1)

(dollars and gallons in thousands, except where otherwise indicated)

 

Three months ended

 

 

 

March 31,

 

 

 

Combined (2)

 

Predecessor

 

 

 

 

 

2007

 

2006

 

Change

 

Site counts at end of period:

 

 

 

 

 

 

 

Company operated sites

 

141

 

140

 

+1

 

Franchisee operated sites

 

23

 

23

 

 

Network total

 

164

 

163

 

+1

 

 

 

 

 

 

 

 

 

No. of sites under development

 

1

 

2

 

-1

 

 

 

 

 

 

 

 

 

Diesel sales volume (gallons)

 

409,218

 

414,380

 

-1.2

%

Gasoline sales volume (gallons)

 

45,313

 

47,172

 

-3.9

%

Total fuel sales volume (gallons)

 

454,531

 

461,552

 

-1.5

%

 

 

 

 

 

 

 

 

Total fuel gross margin

 

$

31,100

 

$

27,136

 

+14.6

%

Total fuel gross margin per gallon (cents per gallon)

 

$

0.068

 

$

0.059

 

+16.4

%

 

 

 

 

 

 

 

 

Total nonfuel revenues

 

$

205,719

 

$

199,907

 

+2.9

%

Total nonfuel gross margin

 

$

122,007

 

$

117,627

 

+3.7

%

 

 

 

 

 

 

 

 

Nonfuel gross margin percentage

 

59.3

%

58.8

%

+50 b.p. 

 

 

 

 

 

 

 

 

Total margin

 

$

155,544

 

$

147,069

 

+5.8

%

Operating expenses

 

$

108,505

 

$

103,282

 

+5.1

%

 


(1)  Includes operating results only of company operated travel centers and excludes results of travel centers operated by franchisees.

(2)  The operating results presented for the three months ended March 31, 2007 represent the sum of the results of the Company for the two months ended March 31, 2007 and the results of our predecessor for the one month ended January 31, 2007.

4




TRAVELCENTERS OF AMERICA LLC

SAME SITE OPERATING DATA (1)

(dollars and gallons in thousands, except where otherwise indicated)

 

 

Three months ended

 

 

 

March 31,

 

 

 

Combined (2)

 

Predecessor

 

 

 

 

2007

 

2006

 

Change

 

 

 

 

 

 

 

 

 

Number of travel centers(3)

 

138

 

138

 

 

 

 

 

 

 

 

 

 

 

Diesel sales volume (gallons)

 

371,638

 

373,499

 

-0.5

%

Gasoline sales volume (gallons)

 

45,039

 

46,726

 

-3.6

%

Total fuel gross sales volume (gallons)

 

416,677

 

420,225

 

-0.8

%

 

 

 

 

 

 

 

 

Total fuel gross margin

 

30,397

 

26,604

 

+14.3

%

Total fuel gross margin per gallon (cents per gallon)

 

$

0.073

 

$

0.063

 

+15.2

%

 

 

 

 

 

 

 

 

Total nonfuel revenues

 

203,533

 

198,648

 

+2.5

%

Total nonfuel gross margin

 

120,714

 

116,853

 

+3.3

%

 

 

 

 

 

 

 

 

Nonfuel gross margin percentage

 

59.3

%

58.8

%

+50 b.p. 

 

 

 

 

 

 

 

 

Total margin

 

$

151,111

 

$

143,457

 

+5.3

%

Operating expenses

 

$

107,059

 

$

102,647

 

+4.3

%

 


(1)  Includes only company operated travel centers and excludes travel centers operated by franchisees.

(2)  The operating results presented for the three months ended March 31, 2007 represent the sum of the results of the Company for the two months ended March 31, 2007 and the results of our predecessor for the one month ended January 31, 2007.

(3)  Includes travel centers that were continuously company operated since January 1, 2006.

5




TRAVELCENTERS OF AMERICA LLC

RECONCILIATION OF PRO FORMA TO PREDECESSOR HISTORICAL

CONSOLIDATED STATEMENTS OF OPERATIONS

THREE MONTHS ENDED MARCH 31, 2007

(dollars in thousands, except per share data)

 

 

Company

 

Predecessor

 

 

 

 

 

 

 

Two months

 

One month

 

 

 

 

 

 

 

ended

 

ended

 

Pro Forma

 

 

 

 

 

March 31, 2007

 

January 31, 2007

 

Adjustment (1)

 

Pro Forma

 

 

 

 

 

 

 

 

 

 

 

Revenues:

 

 

 

 

 

 

 

 

 

Fuel

 

$

596,143

 

$

285,053

 

$

 

$

881,196

 

Non fuel

 

138,924

 

66,795

 

 

205,719

 

Rent and royalties

 

1,603

 

834

 

 

2,437

 

Total revenues

 

736,670

 

352,682

 

 

1,089,352

 

Cost of goods sold (excluding depreciation):

 

 

 

 

 

 

 

 

 

Fuel

 

579,402

 

270,694

 

 

850,096

 

Non fuel

 

56,234

 

27,478

 

 

83,712

 

Total cost of goods sold (excluding depreciation)

 

635,636

 

298,172

 

 

933,808

 

 

 

 

 

 

 

 

 

 

 

Operating expenses:

 

 

 

 

 

 

 

 

 

Site level operating

 

72,412

 

36,093

 

 

108,505

 

Selling, general and administrative

 

11,861

 

8,892

 

487

A

21,240

 

Real estate lease rent

 

28,428

 

931

 

13,284

B

42,643

 

Depreciation and amortization

 

5,288

 

5,810

 

(3,166

)C

7,932

 

Merger related

 

 

44,972

 

 

44,972

 

(Gain) loss on asset sales, net

 

 

(24

)

 

(24

)

Total operating expenses

 

117,989

 

96,674

 

10,605

 

225,268

 

 

 

 

 

 

 

 

 

 

 

Loss from operations

 

(16,955

)

(42,164

)

(10,605

)

(69,724

)

Debt extinguishment expenses

 

 

(16,140

)

 

(16,140

)

Interest expense, net

 

(777

)

(4,214

)

(943

)D

(1,493

)

 

 

 

 

 

 

4,441

E

 

 

Loss before income taxes

 

(17,732

)

(62,518

)

(7,107

)

(87,357

)

Provision (benefits) for income taxes

 

(6,703

)

(40,470

)

14,152

F

(33,021

)

 

 

 

 

 

 

 

 

 

 

Net loss

 

$

(11,029

)

$

(22,048

)

$

(21,259

)

$

(54,336

)

 

 

 

 

 

 

 

 

 

 

Weighted average shares outstanding

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

8,809

 

6,937

 

(6,937

)G

8,809

 

Diluted

 

8,809

 

6,937

 

(6,937

)G

8,809

 

Basic earnings (loss) per share

 

$

(1.25

)

$

(3.18

)

 

 

$

(6.17

)

 

 

 

 

 

 

 

 

 

 

Diluted earnings (loss) per share

 

$

(1.25

)

$

(3.18

)

 

 

$

(6.17

)

 


(1)  See page 8 for footnotes.

6




TRAVELCENTERS OF AMERICA LLC

RECONCILIATION OF PRO FORMA TO PREDECESSOR HISTORICAL

CONSOLIDATED STATEMENTS OF OPERATIONS

THREE MONTHS ENDED MARCH 31, 2006

(dollars in thousands, except per share data)

 

 

Predecessor

 

Pro Forma

 

 

 

 

 

Historical

 

Adjustment(1)

 

Pro Forma

 

Revenues:

 

 

 

 

 

 

 

Fuel

 

$

884,145

 

$

 

$

884,145

 

Non-fuel

 

199,907

 

 

199,907

 

Rent and royalties

 

2,306

 

 

2,306

 

Total revenues

 

1,086,358

 

 

1,086,358

 

 

 

 

 

 

 

 

 

Cost of goods sold (excluding depreciation):

 

 

 

 

 

 

 

Fuel

 

857,009

 

 

857,009

 

Non-fuel

 

82,280

 

 

82,280

 

Total cost of goods sold (excluding depreciation)

 

939,289

 

 

939,289

 

 

 

 

 

 

 

 

 

Operating expenses:

 

 

 

 

 

 

 

Site level operating

 

103,282

 

 

103,282

 

Selling, general & administrative

 

11,525

 

1,362

A

12,887

 

Real estate lease rent

 

2,705

 

39,852

B

42,557

 

Depreciation and amortization

 

16,650

 

(8,718

)C

7,932

 

(Gain) Loss on fixed asset sales, net

 

(279

)

 

(279

)

Total operating expenses

 

133,883

 

32,496

 

166,379

 

 

 

 

 

 

 

 

 

Income (loss)from operations

 

13,186

 

(32,496

)

(19,310

)

Interest expense, net

 

(11,410

)

(2,828

)D

(2,633

)

 

 

 

 

11,605

E

 

 

Income (loss) before income taxes

 

1,776

 

(23,719

)

(21,943

)

Provision (benefit) for income taxes

 

672

 

(8,966

)F

(8,294

)

 

 

 

 

 

 

 

 

Net income (loss)

 

$

1,104

 

$

(14,753

)

$

(13,649

)

 

 

 

 

 

 

 

 

Weighted average shares outstanding

 

 

 

 

 

 

 

Basic

 

6,937

 

1,872

G

8,809

 

Diluted

 

7,468

 

1,341

G

8,809

 

 

 

 

 

 

 

 

 

Basic earnings (loss) per common share

 

$

0.16

 

 

 

$

(1.55

)

 

 

 

 

 

 

 

 

Diluted earnings (loss) per common share

 

$

0.15

 

 

 

$

(1.55

)

 


(1)  See page 8 for footnotes.

7




TRAVELCENTERS OF AMERICA LLC

FOOTNOTES TO PRO FORMA ADJUSTMENTS

(in thousands, except per share data)

Pro forma Statement of Operations Adjustments

A.                                   After our spin off from HPT, we entered into a management and shared services agreement with Reit Management and Research LLC, or RMR, pursuant to which we will receive certain management services related to our current status as a separate publicly owned company and as more fully described in our Form S-1 filed with the Securities and Exchange Commission on January 26, 2007. This adjustment represents the expense we would have incurred pursuant to the fee formula in that agreement if that agreement had been in effect for January 2007 and for the three months ended March 31, 2006.

B.                                     Our agreement to lease real estate owned by HPT requires us to make minimum rent payments that have scheduled increases during the term of the lease as described in our Form S-1 filed with the Securities and Exchange Commission on January 26, 2007.  Adjustments have been calculated as follows (this rent is included in our historical results for the two months ended March 31, 2007):

 

One month

 

Three months

 

 

 

ended

 

ended

 

 

 

January 31, 2007

 

March 31, 2006

 

 

 

 

 

 

 

Minimum base rent (cash payments)

 

$

12,792

 

$

38,375

 

Required straight line rent adjustment

 

1,435

 

4,305

 

Total

 

14,227

 

42,680

 

Less amount recognized as interest (see Note D)

 

(943

)

(2,828

)

Total adjustment

 

$

13,284

 

$

39,852

 

 

C.                                     As part of the restructuring we retained a portion of the property, equipment and personal property used in the operations of our travel centers.  In addition, we retained certain identifiable intangible assets.  This adjustment represents the elimination of historical depreciation and amortization expense recognized by our predecessor and the addition of estimated depreciation and amortization expense related to the property, equipment and intangible assets retained by us at allocated valuations. The depreciation and amortization expense is based on the estimated useful lives of the assets (this expense is included in our historical results for the two months ended March 31, 2007).

 

One month

 

Three months

 

 

 

ended

 

ended

 

 

 

January 31, 2007

 

March 31, 2006

 

 

 

 

 

 

 

Elimination of historical depreciation and amortization

 

$

(5,810

)

$

(16,650

)

Addition of depreciation and amortization

 

2,644

 

7,932

 

Net adjustment

 

$

(3,166

)

$

(8,718

)

 

8




D.                                    Our spin off from HPT required us to evaluate our lease with HPT under Statement of Financial Accounting Standards No. 98, or FAS 98.  Under FAS 98, thirteen of the travel centers owned by our predecessor that we now lease from HPT did not qualify for operating lease treatment because more than a minor portion of those travel centers are subleased to third parties and one travel center did not qualify for operating lease treatment for other reasons. We carry these travel centers at an amount equal to HPT’s recorded initial carrying amount, equal to their fair value, and have an equal amount of liability, representing our obligation to make future rent payments to HPT, which future payments will be recognized as interest expense in our statement of operations. See Note B.

E.                                      All of our predecessor’s debt was extinguished at the time of HPT’s acquisition of our predecessor. This adjustment represents the elimination of historical interest expense and other financial costs related to our predecessor’s debt.

F.                                     This adjustment represents the net effect of eliminating our predecessor’s historical tax provision and establishing a tax provision, at our estimated effective income tax rate for 2007 of 37.8%, based on the pro forma amount of income or loss before income taxes for the period.

G.                                     This adjustment represents the elimination of our predecessor’s shares outstanding.

9