-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, VpkzufkJvssA9vGKfH0AMGO3TybX6NU8OuDGuA2Xzk7KjEB30p9IiNOAx22eyGLs AAPYcnpPRe9NHWMeXfXphA== 0000950152-01-502022.txt : 20010516 0000950152-01-502022.hdr.sgml : 20010516 ACCESSION NUMBER: 0000950152-01-502022 CONFORMED SUBMISSION TYPE: 424B3 PUBLIC DOCUMENT COUNT: 1 FILED AS OF DATE: 20010515 FILER: COMPANY DATA: COMPANY CONFORMED NAME: TRAVELCENTERS OF AMERICA INC CENTRAL INDEX KEY: 0001038523 STANDARD INDUSTRIAL CLASSIFICATION: RETAIL-AUTO & HOME SUPPLY STORES [5531] IRS NUMBER: 363856519 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 424B3 SEC ACT: SEC FILE NUMBER: 333-52444 FILM NUMBER: 1637949 BUSINESS ADDRESS: STREET 1: 24601 CENTER RIDGE ROAD STREET 2: SUITE 200 CITY: WESTLAKE STATE: OH ZIP: 44145-5634 BUSINESS PHONE: 4408089100 MAIL ADDRESS: STREET 1: 24601 CENTER RIDGE ROAD STREET 2: SUITE 200 CITY: WESTLAKE STATE: OH ZIP: 44145-5634 424B3 1 l88027be424b3.txt TRAVELCENTERS OF AMERICA, INC. FORM 424B3 1 Filed pursuant to Rule 424 (b) (3) File No. 333-52444 TRAVELCENTERS OF AMERICA, INC. SUPPLEMENT NO. 1 TO PROSPECTUS DATED APRIL 11, 2001 THE DATE OF THIS SUPPLEMENT IS MAY 15, 2001 ON MAY 15, 2001, TRAVELCENTERS OF AMERICA, INC. FILED THE ATTACHED REPORT ON FORM 10-Q FOR THE QUARTER ENDED MARCH 31, 2001 2 SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 ____________________ FORM 10-Q [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Quarterly Period Ended March 31, 2001 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 [ ] 3 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, 2000 and March 31, 2001 2 Unaudited Consolidated Statement of Operations for the three months ended March 31, 2000 and 2001 3 Unaudited Consolidated Statement of Cash Flows for the three months ended March 31, 2000 and 2001 4 Unaudited Statement of Stockholders' Equity for the three months ended March 31, 2000 and 2001 5 Selected Notes to Unaudited Consolidated Financial Statements 6 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 16 Item 3. Quantitative and Qualitative Disclosures About Market Risk 20 PART II. OTHER INFORMATION Item 1. Legal Proceedings 20 Item 4. Submission of Matters to a Vote of Security Holders 20 Item 6. Exhibits and Reports on Form 8-K 20 SIGNATURE 21
1 4 TRAVELCENTERS OF AMERICA, INC. CONSOLIDATED BALANCE SHEET
MARCH 31, DECEMBER 31, 2001 2000 (UNAUDITED) ----------- ----------- ASSETS (IN THOUSANDS OF DOLLARS) Current assets: Cash ............................................................................. $ 29,019 $ 23,370 Accounts receivable (less allowance for doubtful accounts of $4,291 for 2000 and $4,085 for 2001) .............................................................. 81,388 75,424 Inventories ...................................................................... 61,772 57,393 Deferred income taxes ............................................................ 7,288 6,691 Other current assets ............................................................. 13,501 12,074 --------- --------- Total current assets ........................................................ 192,968 174,952 Notes receivable, net ............................................................... 214 214 Property and equipment, net ......................................................... 465,633 460,832 Intangible assets ................................................................... 27,079 26,168 Deferred financing costs ............................................................ 32,662 32,116 Deferred income taxes ............................................................... 7,933 12,801 Other noncurrent assets ............................................................. 8,566 8,510 --------- --------- Total assets ................................................................ $ 735,055 $ 715,593 ========= ========= LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Current maturities of long-term debt ............................................. $ 123 $ 983 Accounts payable ................................................................. 82,844 79,199 Other accrued liabilities ........................................................ 71,274 71,141 --------- --------- Total current liabilities ................................................... 154,241 151,323 Commitments and contingencies (Note 5) Long-term debt ...................................................................... 547,607 537,826 Deferred income taxes ............................................................... 3,167 3,278 Other noncurrent liabilities ........................................................ 5,416 7,232 --------- --------- 710,431 699,659 Redeemable equity ................................................................... 527 527 Nonredeemable equity: Common stock and other stockholders' equity ...................................... 215,843 214,577 Accumulated deficit .............................................................. (191,746) (199,170) --------- --------- Total nonredeemable equity .................................................. 24,097 15,407 --------- --------- Total liabilities, redeemable equity and nonredeemable stockholders' equity . $ 735,055 $ 715,593 ========= =========
The accompanying notes are an integral part of these consolidated financial statements. 2 5
TRAVELCENTERS OF AMERICA, INC. UNAUDITED CONSOLIDATED STATEMENT OF OPERATIONS THREE MONTHS ENDED MARCH 31, -------------------------- 2000 2001 --------- --------- (IN THOUSANDS OF DOLLARS EXCEPT PER SHARE AMOUNTS) Revenues: Fuel ..................................................... $ 328,203 $ 359,369 Nonfuel .................................................. 123,887 133,391 Rent and royalties ....................................... 4,720 4,254 --------- --------- Total revenues .................................. 456,810 497,014 Cost of goods sold (excluding depreciation): Fuel ..................................................... 301,981 334,690 Nonfuel .................................................. 50,691 55,020 --------- --------- Total cost of goods sold (excluding depreciation) 352,672 389,710 --------- --------- Gross profit (excluding depreciation) .................... 104,138 107,304 Operating expenses ....................................... 72,785 78,656 Selling, general and administrative expenses ............. 9,766 9,861 Transition expenses ...................................... 259 -- Depreciation and amortization expense .................... 14,773 15,585 (Gain) loss on sales of property and equipment ........... 61 (1,329) Stock compensation expense ............................... 450 -- --------- --------- Income from operations ................................... 6,044 4,531 Interest and other financial costs, net .................. (10,660) (15,342) --------- --------- Loss before income taxes ................................. (4,616) (10,811) Benefit for income taxes ................................. (1,637) (3,387) --------- --------- Net (loss) ............................................... (2,979) (7,424) Less: preferred dividend accretion ....................... (2,691) -- --------- --------- (Loss) available to common stockholders .................. $ (5,670) $ (7,424) ========= ========= Loss per common share (basic and diluted) ................ $ (6.47) $ (1.07) ========= =========
The accompanying notes are an integral part of these consolidated financial statements. 3 6
TRAVELCENTERS OF AMERICA, INC. UNAUDITED CONSOLIDATED STATEMENT OF CASH FLOWS THREE MONTHS ENDED MARCH 31, --------------------------- 2000 2001 -------- -------- (IN THOUSANDS OF DOLLARS) CASH FLOWS FROM OPERATING ACTIVITIES: Net (loss) .................................................................... $ (2,979) $ (7,424) Adjustments to reconcile net loss to net cash provided by operating activities: Depreciation and amortization expense ...................................... 15,129 16,132 Deferred income tax provision .............................................. 530 (3,508) Provision for doubtful accounts ............................................ 330 250 Provision for stock compensation ........................................... 450 -- (Gain) loss on sales of property and equipment ............................. 61 (1,329) Changes in assets and liabilities, adjusted for the effects of business acquisitions: Accounts receivable ...................................................... (12,254) 3,626 Inventories .............................................................. 1,754 4,379 Other current assets ..................................................... 2,472 1,427 Accounts payable ......................................................... 13,137 (3,645) Other current liabilities ................................................ (9,462) 966 Other, net ................................................................. (288) (124) -------- -------- Net cash provided by operating activities .................................. 8,880 10,750 -------- -------- CASH FLOWS FROM INVESTING ACTIVITIES: Business acquisitions ......................................................... (8,959) -- Proceeds from sales of property and equipment ................................. 5 5,430 Capital expenditures .......................................................... (11,409) (11,530) -------- -------- Net cash used in investing activities ...................................... (20,363) (6,100) -------- -------- CASH FLOWS FROM FINANCING ACTIVITIES: Revolving loan borrowings (repayments), net ................................... 12,100 (9,200) Long-term debt repayments ..................................................... (380) -- Merger and recapitalization expenses paid ..................................... -- (1,099) -------- -------- Net cash provided by (used in) financing activities ........................ 11,720 (10,299) -------- -------- Net increase (decrease) in cash .......................................... 237 (5,649) Cash at the beginning of the period .............................................. 18,040 29,019 -------- -------- Cash at the end of the period .................................................... $ 18,277 $ 23,370 ======== ========
The accompanying notes are an integral part of these consolidated financial statements. 4 7
TRAVELCENTERS OF AMERICA, INC. UNAUDITED STATEMENT OF STOCKHOLDERS' EQUITY THREE MONTHS ENDED MARCH 31, ------------------------------- 2000 2001 ------------------------------- (IN THOUSANDS OF DOLLARS) PREFERRED STOCK: Balance at beginning and end of period .................................... $ 38 $ -- ========= ========= COMMON STOCK: Balance at beginning and end of period .................................... $ 14 $ 3 ========= ========= TREASURY STOCK: Balance at beginning of period ............................................ $ (9,058) $ -- Acquisition of treasury stock ...................................... (125) -- --------- --------- Balance at end of period .................................................. $ (9,183) $ -- ========= ========= ADDITIONAL PAID-IN CAPITAL: Balance at beginning and end of period .................................... $ 61,122 $ 215,840 ========= ========= ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS): Balance at beginning of period ............................................ $ -- $ -- Change in accounting principle, net of tax ......................... -- (343) Change in fair value of interest rate protection agreement, net of tax ......................................................... -- (923) --------- --------- Balance at end of period .................................................. $ -- $ (1,266) ========= ========= ACCUMULATED DEFICIT: Balance at beginning of period ............................................ $ 24,764 $(191,746) Net loss ........................................................... (2,979) (7,424) Accretion of preferred stock dividends ............................. (2,691) -- --------- --------- Balance at end of period .................................................. $ (30,434) $(199,170) ========= =========
The accompanying notes are an integral part of these consolidated financial statements. 5 8 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 March 31, 2001, our geographically diverse nationwide network of full-service travel centers consisted of 156 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-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. National Auto/Truckstops, Inc. was a wholly owned subsidiary of ours until November 14, 2000, at which time it was merged with and into TA Operating Corporation. Intercompany accounts and transactions have been eliminated. The accompanying unaudited, consolidated financial statements as of and for the quarters ended March 31, 2000 and 2001 have been prepared in accordance with generally accepted accounting principles for interim financial information. Accordingly, these statements should be read in conjunction with our audited financial statements as of and for the year ended December 31, 2000. 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, results of operations and cash flows for the three-month periods ended March 31, 2000 and 2001, and are not necessarily indicative of the results to be expected for the full year. 2. EARNINGS PER SHARE A reconciliation of the income and shares used in the computation follows:
THREE MONTHS ENDED MARCH 31, ----------------------------- 2000 2001 ------- ------- (DOLLARS AND SHARES IN THOUSANDS EXCEPT PER SHARE AMOUNTS) Basic EPS and Diluted EPS: Net loss ............................................. $(2,979) $(7,424) Less: Preferred stock dividend accretion ............ (2,691) -- ------- ------- Net loss available to common stockholders ............ (5,670) (7,424) Weighted average shares outstanding .................. 877 6,930 ------- ------- Loss per share ....................................... $ (6.47) $ (1.07) ======= =======
The assumed conversion of stock options, warrants and convertible series of preferred stock would have had an antidilutive effect on the loss per share for the quarter ended March 31, 2000. 6 9 TRAVELCENTERS OF AMERICA, INC. SELECTED NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS 3. DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES We use interest rate protection agreements to reduce our exposure to market risks from changes in interest rates by fixing interest rates on variable rate debt and reducing certain exposures to interest rate fluctuation. Amounts currently due to or from interest rate protection agreement counterparties are recorded in interest expense in the period in which they accrue. We are currently party to one interest rate swap with a notional amount of $80,000,000 that has been designated as a cash flow hedge of interest payments due with respect to the term loan under our Senior Credit Facility. Effective January 1, 2001, we adopted the provisions of Statement of Financial Accounting Standards (SFAS) No. 133, "Accounting for Derivative Instruments and Hedging Activities." Due to our limited use of derivative instruments and our minimal level of hedging activity, the effect on our results of operations and financial position of adopting SFAS 133 was immaterial. Comprehensive income (loss) consists of the following:
THREE MONTHS ENDED MARCH 31, ---------------------- 2000 2001 ------- ------- (IN THOUSANDS OF DOLLARS) Net loss ....................................................................... $(2,979) $(7,424) Loss on fair value of interest rate protection agreement, net of tax ........... -- (923) ------- ------- Total comprehensive income (loss) ............................................ $(2,979) $(8,347) ======= =======
4. INVENTORIES Inventories consist of the following:
DECEMBER 31, MARCH 31, 2000 2001 ------------- ----------- (IN THOUSANDS OF DOLLARS) Nonfuel merchandise ............................................ $50,809 $50,979 6,414 Petroleum products ............................................. 10,963 6,414 ------- ------- Total inventories ........................................ $61,772 $57,393 ======= =======
5. 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. 7 10 TRAVELCENTERS OF AMERICA, INC. SELECTED NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS 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 March 31, 2001, we had a reserve for these matters of $5,576,000. While it is not possible to quantify with certainty the environmental exposure, in our opinion, 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 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. 6. SUPPLEMENTAL CASH FLOW INFORMATION
THREE MONTHS ENDED MARCH 31, ------------------------------- 2000 2001 --------- --------- (IN THOUSANDS OF DOLLARS) Revolving loan borrowings ............................................ $ 70,200 $ 181,600 Revolving loan repayments ............................................ (58,100) (190,800) --------- --------- Revolving loan borrowings (repayments), net ........................ $ 12,100 $ (9,200) ========= ========= Cash paid during the period for: Interest ........................................................... $ 6,375 $ 9,046 Income taxes (net of refunds) ...................................... $ 1,687 $ (50)
During the first quarter of 2000, we assumed a note payable for $540,000 as part of the consideration paid in acquiring a full-service travel center and acquired $125,000 of treasury stock in payment of accounts receivable. 8 11 TRAVELCENTERS OF AMERICA, INC. SELECTED NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS 7. OTHER INFORMATION
THREE MONTHS ENDED MARCH 31, ------------------------------ 2000 2001 -------- -------- (IN THOUSANDS OF DOLLARS) Interest and other financial costs consists of the following: Cash interest expense ................................................ $(10,390) $(14,567) Cash interest income ................................................. 113 51 Amortization of discount on debt ..................................... (27) (279) Amortization of deferred financing costs ............................. (356) (547) -------- -------- Interest and other financial costs, net .............................. $(10,660) $(15,342) ======== ========
8. CONDENSED CONSOLIDATING FINANCIAL STATEMENT SCHEDULES The following schedules set forth our condensed consolidating balance sheet schedules as of December 31, 2000 and March 31, 2001 and our condensed consolidating statement of operations schedules and condensed consolidating statement of cash flows schedules for the three-month periods ended March 31, 2000 and 2001. 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 National Auto/Truckstops, Inc. (until its merger into TA Operating Corporation on November 14, 2000), 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, National Auto/Truckstops, Inc. (until its merger into TA Operating Corporation on November 14, 2000), 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. 9 12 TRAVELCENTERS OF AMERICA, INC. SELECTED NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
CONDENSED CONSOLIDATING BALANCE SHEET SCHEDULES: DECEMBER 31, 2000 ------------------------------------------------------------------------------ PARENT GUARANTOR NONGUARANTOR COMPANY SUBSIDIARIES SUBSIDIARY ELIMINATIONS CONSOLIDATED --------- ------------ ----------- ------------ ------------ (IN THOUSANDS OF DOLLARS) ASSETS Current assets: Cash ........................................... $ -- $ 29,019 $ -- $ -- $ 29,019 Accounts receivable, net ....................... -- 81,015 1,366 (993) 81,388 Inventories .................................... -- 61,772 -- -- 61,772 Deferred income taxes .......................... -- 7,288 -- -- 7,288 Other current assets ........................... 6,114 9,349 128 (2,090) 13,501 --------- --------- --------- --------- --------- Total current assets ...................... 6,114 188,443 1494 (3,083) 192,968 Notes receivable, net ............................. -- 214 -- -- 214 Property and equipment, net ....................... -- 465,633 -- -- 465,633 Intangible assets ................................. -- 27,079 -- -- 27,079 Deferred financing costs .......................... 32,662 -- -- -- 32,662 Deferred income taxes ............................. 12,833 (4,900) -- -- 7,933 Other noncurrent assets ........................... 827 7,739 -- -- 8,566 Investment in subsidiaries ........................ 220,579 -- -- (220,579) -- --------- --------- --------- --------- --------- Total assets .............................. $ 273,015 $ 684,208 $ 1,494 $(223,662) $ 735,055 ========= ========= ========= ========= ========= LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Current maturities of long-term debt ........... $ -- $ 123 $ -- $ -- $ 123 Accounts payable ............................... -- 82,615 229 -- 82,844 Other accrued liabilities ...................... 8,730 64,544 1,083 (3,083) 71,274 --------- --------- --------- --------- --------- Total current liabilities ................. 8,730 147,282 1,312 (3,083) 154,241 Long-term debt .................................... 544,788 2,819 -- -- 547,607 Deferred income taxes ............................. -- 3,167 -- -- 3,167 Intercompany payable (receivable) ................. (306,382) 311,263 (4,881) -- -- Other noncurrent liabilities ...................... -- 5,416 -- -- 5,416 --------- --------- --------- --------- --------- Total liabilities ......................... 247,136 469,947 (3,569) (3,083) 710,431 Redeemable equity ................................. 527 -- -- -- 527 Nonredeemable stockholders' equity: Common stock and other stockholders' equity ......................................... 217,098 185,660 -- (186,915) 215,843 Retained earnings (accumulated deficit) ..................................... (191,746) 28,601 5,063 (33,664) (191,746) --------- --------- --------- --------- --------- Total nonredeemable stockholders' equity ................................. 25,352 214,261 5,063 (220,579) 24,097 --------- --------- --------- --------- --------- Total liabilities, redeemable equity and nonredeemable stockholders' equity ................................. $ 273,015 $ 684,208 $ 1,494 $(223,662) $ 735,055 ========= ========= ========= ========= =========
10 13 TRAVELCENTERS OF AMERICA, INC. SELECTED NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2001 ---------------------------------------------------------------------------- PARENT GUARANTOR NONGUARANTOR COMPANY SUBSIDIARIES SUBSIDIARY ELIMINATIONS CONSOLIDATED --------- ------------ ----------- ------------ ------------- (IN THOUSANDS OF DOLLARS) ASSETS Current assets: Cash .................................... $ -- $ 23,370 $ -- $ -- $ 23,370 Accounts receivable, net ................ -- 75,115 1,292 (983) 75,424 Inventories ............................. -- 57,393 -- -- 57,393 Deferred income taxes ................... -- 6,691 -- -- 6,691 Other current assets .................... 6,899 7,948 103 (2,876) 12,074 --------- --------- --------- --------- --------- Total current assets ............... 6,899 170,517 1,395 (3,859) 174,952 Notes receivable, net ...................... -- 214 -- -- 214 Property and equipment, net ................ -- 460,832 -- -- 460,832 Intangible assets .......................... -- 26,168 -- -- 26,168 Deferred financing costs ................... 32,116 -- -- -- 32,116 Deferred income taxes ...................... 15,259 (2,458) -- -- 12,801 Other noncurrent assets .................... 753 7,757 -- -- 8,510 Investment in subsidiaries ................. 218,386 -- -- (218,386) -- --------- --------- --------- --------- --------- Total assets ....................... $ 273,413 $ 663,030 $ 1,395 $(222,245) $ 715,593 ========= ========= ========= ========= ========= LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Current maturities of long-term debt .... $ 820 $ 163 $ -- $ -- $ 983 Accounts payable ........................ -- 78,897 302 -- 79,199 Other accrued liabilities ............... 14,164 59,953 884 (3,860) 71,141 --------- --------- --------- --------- --------- Total current liabilities .......... 14,984 139,013 1,186 (3,860) 151,323 Long-term debt (net of unamortized discount) ............................... 535,019 2,807 -- -- 537,826 Deferred income taxes ...................... -- 3,278 -- -- 3,278 Intercompany payable (receivable) .......... (295,697) 300,186 (4,489) -- -- Other noncurrent liabilities ............... 1,918 5,314 -- -- 7,232 --------- --------- --------- --------- --------- Total liabilities .................. 256,224 450,598 (3,303) (3,860) 699,659 Redeemable equity .......................... 527 -- -- -- 527 Nonredeemable stockholders' equity: Common stock and other stockholders' equity ................... 215,832 185,660 -- (186,915) 214,577 Retained earnings (deficit) ............ (199,170) 26,772 4,698 (31,470) (199,170) --------- --------- --------- --------- --------- Total nonredeemable stockholders' equity .......................... 16,662 212,432 4,698 (218,385) 15,407 --------- --------- --------- --------- --------- Total liabilities, redeemable equity and nonredeemable stockholders' equity ............ $ 273,413 $ 663,030 $ 1,395 $(222,245) $ 715,593 ========= ========= ========= ========= =========
11 14 TRAVELCENTERS OF AMERICA, INC. SELECTED NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS SCHEDULES:
MARCH 31, 2000 ------------------------------------------------------------------- PARENT GUARANTOR NONGUARANTOR COMPANY SUBSIDIARIES SUBSIDIARY ELIMINATIONS CONSOLIDATED --------- ------------ ------------ ------------ ------------ (IN THOUSANDS OF DOLLARS) Revenues: Fuel ..................................... $ -- $ 328,203 $ -- $ -- $ 328,203 Nonfuel .................................. -- 123,887 -- 123,887 Rent and royalties ....................... -- 2,988 1,732 -- 4,720 --------- --------- --------- --------- --------- Total revenues ........................... -- 455,078 1,732 -- 456,810 Cost of goods sold (excluding depreciation) ............................ -- 352,672 -- -- 352,672 --------- --------- --------- --------- --------- Gross profit (excluding depreciation) ....... -- 102,406 1,732 -- 104,138 Operating expenses .......................... -- 71,658 1,127 -- 72,785 Selling, general and administrative expenses ................. 200 8,411 1,155 -- 9,766 Transition expenses ......................... -- 259 -- -- 259 Depreciation and amortization expense ....... -- 14,773 -- -- 14,773 Loss on sales of property and equipment ..... -- 61 -- -- 61 Stock compensation expense .................. -- 450 -- -- 450 --------- --------- --------- --------- --------- Income (loss) from operations ............... (200) 6,794 (550) -- 6,044 Interest and other financial costs, net ..... (356) (10,304) -- -- (10,660) Equity income (loss) ........................ (2,612) -- -- 2,612 -- --------- --------- --------- --------- --------- Income (loss) before income taxes ........... (3,168) (3,510) (550) 2,612 (4,616) Provision (benefit) for income taxes ........ (189) (1,233) (215) -- (1,637) --------- --------- --------- --------- --------- Net income (loss) ........................... (2,979) (2,277) (335) 2,612 (2,979) Less: preferred dividend accretion .......... (2,691) -- -- -- (2,691) --------- --------- --------- --------- --------- Income (loss) available to common stockholders .......................... $ (5,670) $ (2,277) $ (335) $ 2,612 $ (5,670) ========= ========= ========= ========= =========
12 15 TRAVELCENTERS OF AMERICA, INC. SELECTED NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2001 ------------------------------------------------------------------------ PARENT GUARANTOR NONGUARANTOR COMPANY SUBSIDIARY SUBSIDIARY ELIMINATIONS CONSOLIDATED --------- ---------- ----------- ------------ ------------ (IN THOUSANDS OF DOLLARS) Revenues: Fuel ........................................ $ -- $ 359,369 $ -- $ -- $ 359,369 Nonfuel ..................................... -- 133,391 -- -- 133,391 Rent and royalties .......................... -- 3,718 1,519 (983) 4,254 --------- --------- --------- --------- --------- Total revenues .............................. -- 496,478 1,519 (983) 497,014 Cost of goods sold (excluding depreciation) .... -- 389,710 -- -- 389,710 --------- --------- --------- --------- --------- Gross profit (excluding depreciation) .......... -- 106,768 1,519 (983) 107,304 Operating expenses ............................. -- 78,623 1,016 (983) 78,656 Selling, general and administrative expenses .................... 196 8,608 1,057 -- 9,861 Depreciation and amortization expense .......... -- 15,585 -- -- 15,585 (Gain) on sales of property and equipment ...... -- (1,329) -- -- (1,329) --------- --------- --------- --------- --------- Income (loss) from operations .................. (196) 5,281 (554) -- 4,531 Interest and other financial costs, net ........ (6,808) (8,534) -- -- (15,342) Equity income (loss) ........................... (2,194) -- -- 2,194 -- --------- --------- --------- --------- --------- Income (loss) before income taxes .............. (9,198) (3,253) (554) 2,194 (10,811) Provision (benefit) for income taxes ........... (1,774) (1,425) (188) -- (3,387) --------- --------- --------- --------- --------- Net income (loss) .............................. $ (7,424) $ (1,828) $ (366) $ 2,194 $ (7,424) ========= ========= ========= ========= =========
13 16 TRAVELCENTERS OF AMERICA, INC. SELECTED NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS CONDENSED CONSOLIDATING STATEMENT OF CASH FLOW SCHEDULES:
MARCH 31, 2000 -------------------------------------------------------------------------- PARENT GUARANTOR ONGUARANTOR COMPANY SUBSIDIARIES NSUBSIDIARY ELIMINATIONS CONSOLIDATED -------- ------------ ----------- ------------ ------------ (IN THOUSANDS OF DOLLARS) CASH FLOWS PROVIDED BY (USED IN) OPERATING ACTIVITIES ..................... $ (3,699) $ 12,579 $ -- $ -- $ 8,880 -------- -------- ----------- ----------- -------- CASH FLOWS FROM INVESTING ACTIVITIES: Business acquisitions .................... -- (8,959) -- -- (8,959) Proceeds from sales of property and equipment ............................. -- 5 -- -- 5 Capital expenditures ..................... -- (11,409) -- -- (11,409) -------- -------- ----------- ----------- -------- Net cash used in investing activities .......................... -- (20,363) -- -- (20,363) -------- -------- ----------- ----------- -------- CASH FLOWS FROM FINANCING ACTIVITIES: Revolving loan borrowings (repayments), net ..................... 12,100 -- -- -- 12,100 Long-term debt repayments ................ (362) (18) -- -- (380) Intercompany advances .................... (8,039) 8,039 -- -- -- -------- -------- ----------- ----------- -------- Net cash provided by (used in) financing activities ................ 3,699 8,021 -- -- 11,720 -------- -------- ----------- ----------- -------- Net increase in cash .................. -- 237 -- -- 237 Cash at the beginning of the period ......... -- 18,040 -- -- 18,040 -------- -------- ----------- ----------- -------- Cash at the end of the period ............... $ -- $ 18,277 $ -- $ -- $ 18,277 ======== ======== =========== =========== ========
14 17 TRAVELCENTERS OF AMERICA, INC. SELECTED NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2001 ---------------------------------------------------------------------------- PARENT GUARANTOR NONGUARANTOR COMPANY SUBSIDIARIES SUBSIDIARY ELIMINATIONS CONSOLIDATED --------- ------------ ------------ ------------ ------------ (IN THOUSANDS OF DOLLARS) CASH FLOWS PROVIDED BY (USED IN) OPERATING ACTIVITIES ........................ $ (3,678) $ 14,428 $ -- $ -- $ 10,750 --------- --------- --------- --------- --------- CASH FLOWS FROM INVESTING ACTIVITIES: Proceeds from sales of property and equipment ................................ -- 5,430 -- -- 5,430 Capital expenditures ........................ -- (11,530) -- -- (11,530) --------- --------- --------- --------- --------- Net cash used in investing activities ............................. -- (6,100) -- -- (6,100) --------- --------- --------- --------- --------- CASH FLOWS FROM FINANCING ACTIVITIES: Revolving loan borrowings (repayments), net ........................ (9,200) -- -- -- (9,200) Merger and recapitalization expenses paid ............................ (1,099) -- -- -- (1,099) Intercompany advances ....................... 13,977 (13,977) -- -- -- --------- --------- --------- --------- --------- Net cash used in financing activities ............................. 3,678 (13,977) -- -- (10,299) --------- --------- --------- --------- --------- Net increase in cash ..................... -- (5,649) -- -- (5,649) Cash at the beginning of the period ............ -- 29,019 -- -- 29,019 --------- --------- --------- --------- --------- Cash at the end of the period .................. $ -- $ 23,370 $ -- $ -- $ 23,370 ========= ========= ========= ========= =========
15 18 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, 2000. 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 156 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-acre 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 inflated and volatile crude oil and petroleum product prices. For the three months ended March 31, 2001 we earned gross profit on our fuel sales and non-fuel sales of 6.9% and 58.8%, respectively. Accordingly, for the quarter ended March 31, 2001, while fuel sales constituted 72% of our total revenues and non-fuel sales constituted 27% of our total revenues, our non-fuel business generated 73% of our total gross profit while our fuel business generated 23% of our total gross profit. Rents and royalties constitute 1% of our total revenues and 4% of our total gross profit. COMPOSITION OF OUR NETWORK The change in the number of sites within our network and in their method of operation is a significant factor influencing the changes in our results of operations. The following table summarizes the changes in the composition of our network from March 31, 2000 through March 31, 2001:
COMPANY- FRANCHISEE- OPERATED LEASED OWNER TOTAL SITES SITES SITES SITES ------ ------ ------ ------ Number of sites at March 31, 2000(1) ...... 122 28 10 160 Activity: Sales of sites ......................... (2) (1) -- (3) Conversions of leased sites to company-operated sites ............. 2 (2) -- -- Termination of franchisee-owned site ... -- -- (1) (1) ------ ------ ------ ------ Number of sites at March 31, 2001(1) ...... 122 25 9 156 ====== ====== ====== ======
(1) Includes one company-operated site held for development. 16 19 RESULTS OF OPERATIONS QUARTER ENDED MARCH 31, 2001 COMPARED TO QUARTER ENDED MARCH 31, 2000 Revenues. Our consolidated revenues for the quarter ended March 31, 2001 were $497.0 million, which represents an increase from the quarter ended March 31, 2000 of $40.2 million, or 8.8%. Fuel revenue for the quarter ended March 31, 2001 increased by $31.2 million, or 9.5%, over the same period in 2000. The increase was attributable principally to increases in diesel fuel and gasoline sales volumes and was also due to a slight increase in average selling prices. Diesel fuel and gasoline sales volumes for the quarter ended March 31, 2001 increased 6.8% and 20.3%, respectively, as compared to the same period in 2000. For the quarter ended March 31, 2001, we sold 355.4 million gallons of diesel fuel and 22.5 million gallons of gasoline, as compared to 332.8 million gallons of diesel fuel and 18.7 million gallons of gasoline for the quarter ended March 31, 2000. These sales volume increases were due primarily to increases in same-site sales volumes and sales at sites we acquired or built during 2000, partially offset by a reduced level of wholesale fuel sales. Same-site diesel fuel sales volume for 2001 reflected a 12.2% increase from 2000 and same-site gasoline sales volume for 2001 reflected a 14.7% increase from 2000. We believe the same-site diesel fuel sales volume increase is a result of our more competitive retail fuel pricing posture adopted in July 2000, in combination with the September 2000 introduction of our enhanced customer loyalty program, which we refer to as the RoadKing Club. 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. Average diesel fuel and gasoline sales prices for the quarter ended March 31, 2001 increased by 1.8% and 1.4%, respectively, as compared to the same period in 2000, reflecting increases in commodity prices that were partially offset by our more competitive fuel pricing. Non-fuel revenues for the quarter ended March 31, 2001 of $133.4 million reflected an increase of $9.5 million, or 7.7%, from the same period in 2000. The increase was primarily attributable to the increased sales at the company-operated sites added to our network in 2000. Further, on a same-site basis, non-fuel revenue increased 3.0% for the quarter ended March 31, 2001 versus the same period in 2000. 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. Rent and royalty revenues for the quarter ended March 31, 2001 reflected a $0.5 million, or 10.6%, decrease from the same period in 2000. This decrease was primarily attributable to the rent and royalty revenue lost as a result of the conversions of leased and franchisee-owned sites to company-operated sites and the termination of the franchise agreements with two franchisees. This decrease was also affected by a 1.0% decrease in same-site royalty revenue and a 3.2% increase in same-site rent revenue. Gross Profit (excluding depreciation). Our gross profit for the quarter ended March 31, 2001 was $107.3 million, compared to $104.1 million for the same period in 2000, an increase of $3.2 million, or 3.1%. The increase in our gross profit was primarily due to increases in fuel and non-fuel sales volume that were partially offset by a reduced level of fuel 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 $5.9 million, or 8.1%, to $78.7 million for the quarter ended March 31, 2001 compared to $72.8 million for the same period in 2000. This increase reflected both increased non-fuel sales volume and a $1.5 million increase in utilities expenses that resulted from significantly higher natural gas and electricity prices and relatively colder weather in 2001. On a same-site basis, operating expenses as a percentage of non-fuel revenues for 2001 were 58.4%, compared to 58.1% for the same period in 2000, reflecting the increased utility costs that were partially offset by the results of our cost-cutting measures at our sites. Our selling, general and administrative expenses for the quarter ended March 31, 2001 were $9.8 million, which reflected no change from the same period in 2000. 17 20 Transition Expenses. Transition expenses were the costs incurred in combining the Unocal, BP, Burns Bros. and Travel Ports networks. As the integration of sites from our acquisitions was completed during 2000, we did not incur any transition expenses in the quarter ended March 31, 2001, and we do not anticipate incurring transition expenses in 2001. Depreciation and Amortization Expense. Depreciation and amortization expense for 2001 was $15.6 million, compared to $14.8 million for 2000. This increase resulted from a larger base of assets in 2001 due to our continued capital investments. Income from Operations. We generated income from operations of $4.5 million for the quarter ended March 31, 2001, compared to income from operations of $6.0 million for the same period in 2000. This decrease of $1.5 million was primarily attributable to (a) the decreased level of fuel margin per gallon, (b) the $0.5 million decrease in rent and royalty revenue, (c) the increase in operating expense as a percentage of non-fuel revenues, largely resulting from the increased utility costs, and (d) a $0.8 million increase in depreciation and amortization expense, partially offset by (e) a $1.3 million gain on sales of property and equipment, and (f) elimination of transition expenses and stock compensation expenses. EBITDA for the quarter ended March 31, 2001 was $20.1 million, as compared to EBITDA of $21.5 million for the quarter ended March 31, 2000. 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. EBITDA for 2001 decreased from 2000 primarily as a result of the reduced level of fuel margin, the decrease in rent and royalty revenue and increased operating expenses relative to the increase in non-fuel revenues. Interest and Other Financial Costs--Net. Interest and other financial costs, net, for the quarter ended March 31, 2001 increased by $4.7 million, or 43.9%, compared to 2000. This increase resulted from the increased debt levels associated with the refinancing we completed in November 2000 as part of our merger and recapitalization transactions. In addition, we recognized an increase in amortization of debt discount and of deferred financing costs as a result of the debt discount and deferred financing costs incurred as part of our refinancing in November 2000. Income Taxes. Our effective income tax benefit rates for the quarters March 31, 2001 and 2000 were 31.3% and 35.5%, 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. The change between years in the effective tax rate was due to changes in state income taxes. 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. Net cash provided by operating activities totaled $10.8 million for the first quarter of 2001, compared to $8.9 million for the same period in the prior year. In 2001, we generated $6.6 million of cash from net reductions in working capital, as compared to a net investment of cash in working capital of $4.6 million in 2000. This increase in cash from working capital was partially offset by the $1.5 million decline in EBITDA from the prior year first quarter and the $5.0 million increase in interest expense. Net cash used in investing activities was $6.1 million for the first quarter of 2001, as compared to $20.4 million for the first quarter of 2000. This decrease in cash used in investing activities is attributable to increased proceeds from sales of property and equipment and a reduction in cash invested in business acquisitions. In the first quarter of 2001, we received $5.4 million of sales proceeds, primarily from the sales of two travel center sites, one in December 2000 and one in January 2001, while in the first quarter of 2000 we received essentially no proceeds from asset sales. In the first quarter of 2001, we made no business acquisitions, while in the first quarter of 2000 we completed five business acquisitions: we converted one leased site to a company-operated site, converted one franchisee-owned site to a company-operated site, acquired two company-operated sites from outside our network and made a minority investment in a related business. Although the level of capital expenditures in the first quarter of 2001 was consistent with that in the first quarter of 2000, our capital expenditures for the year 2001 will not match those of the year 2000 due to a planned reduction of capital spending, primarily as a result of the significant progress made in 2000 with respect to our site re-image program. We expect 2001 capital expenditures to total $50 million. 18 21 Net cash used in financing activities was $10.3 million during the first quarter of 2001, while cash provided by financing activities in the first quarter of 2000 was $11.7 million. In the first quarter of 2001, we made net repayments of revolving credit facility indebtedness of $9.2 million and paid $1.1 million of fees and expenses recognized in connection with our merger and recapitalization transactions in 2000. In the first quarter of 2000, we made net borrowings under our revolving credit facility of $12.1 million, primarily to fund the business acquisitions we completed in that quarter. At March 31, 2001, $67.3 million of our $100 million revolving credit facility was available for borrowings. We anticipate that we will be able to fund our 2001 working capital requirements and capital expenditures primarily from funds generated from operations and asset sales, and, to the extent necessary, from borrowings under our revolving credit facility. 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. 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 March 31, 2001, we had a reserve of $5.6 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. 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 offering circular 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; - - diesel fuel and gasoline pricing; - - availability of diesel fuel supply; 19 22 - - 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 or risk factors 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, 2000. 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 first quarter. Item 6. Exhibits and Reports on Form 8-K (a) Exhibits None (b) Reports on Form 8-K During the first quarter of 2001, we filed no reports on Form 8-K. 20 23 SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. TRAVELCENTERS OF AMERICA, INC. (Registrant) Date: May 15, 2001 By: /s/ James W. George -------------------------------------------- Name: James W. George Title: Senior Vice President and Chief Financial Officer (Principal Financial Officer and Duly Authorized Officer) 21 -----END PRIVACY-ENHANCED MESSAGE-----