Basis of Presentation, Business Description and Organization

3 Months Ended

Mar. 31, 2015

Basis of Presentation, Business Description and Organization

Basis of Presentation, Business Description and Organization

1.Basis of Presentation, Business Description and Organization

TravelCenters of America LLC, which we refer to as the Company or we, us and our, operates and franchises travel centers under the “TravelCenters of America,” “TA” and related brand names, or the TA brand, and the “Petro Stopping Centers” and “Petro” brand names, or the Petro brand, primarily along the United States, or U.S., interstate highway system.  Our travel center customers include trucking fleets and their drivers, independent truck drivers and motorists.  We also operate convenience stores with retail gasoline stations, primarily under the “Minit Mart” brand name, that generally serve motorists.  Our travel centers include, on average, approximately 25 acres of land and typically offer customers diesel fuel and gasoline as well as nonfuel products and services such as truck repair and maintenance services, full service restaurants, quick service restaurants, or QSRs, travel and convenience stores and various other driver amenities.  Additionally, we collect rents, royalties and other fees from our franchisees.

At March 31, 2015, our business included 251 travel centers in 43 states in the U.S. and the province of Ontario, Canada.  Our travel centers included 175 operated under the TA brand and 76 operated under the Petro brand.  Of our 251 travel centers at March 31, 2015, 39 are owned by us, 187 are leased or managed by us, including 183 that we leased from Hospitality Properties Trust, or HPT, two we operate for a joint venture in which we own a noncontrolling interest and 25 are owned or leased from others by franchisees.  We sublease to franchisees five of the travel centers we lease from HPT.

Additionally, as of March 31, 2015, we operated 60 gasoline stations/convenience stores in six states, primarily Kentucky and Minnesota.  Of our 60 gasoline stations/convenience stores at March 31, 2015, we owned 51 and we leased seven, including one that we leased from HPT, and we operated two for a joint venture in which we own a noncontrolling interest.

We manage our business as one operating segment and, therefore, have one reportable segment. Our locations sell similar products and services, use similar processes to sell products and services, and sell products and services to similar groups of customers. We make specific disclosures concerning fuel and nonfuel products and services because it facilitates our discussion of trends and operational initiatives within our business and industry.  We have only a single travel center located in a foreign country, Canada, and the revenues and assets related to that travel center are not material to us.

The accompanying condensed consolidated financial statements are unaudited.  These unaudited interim financial statements have been prepared in accordance with U.S. generally accepted accounting principles, or GAAP, applicable for interim financial statements.  The disclosures do not include all the information necessary for complete financial statements in accordance with GAAP.  These unaudited interim financial statements should be read in conjunction with the consolidated financial statements and notes contained in our Annual Report on Form 10-K for the fiscal year ended December 31, 2014, or our Annual Report.  In the opinion of our management, the accompanying condensed consolidated financial statements include all adjustments, including normal recurring adjustments, considered necessary for a fair presentation.  All intercompany transactions and balances have been eliminated.  While our revenues are modestly seasonal, the quarterly variations in our operating results may reflect greater seasonal differences because our rent expense and certain other costs do not vary seasonally.  For this and other reasons, our operating results for interim periods are not necessarily indicative of the results that may be expected for a full year.

Certain prior year amounts have been reclassified in our condensed consolidated statements of income and comprehensive income and our condensed consolidated statements of cash flows to be consistent with the current year presentation.

Fair Value Measurement

We refer to our $110,000 of 8.25% Senior Notes due 2028 and our $120,000 of 8.00% Senior Notes due 2029 collectively as our Senior Notes, which are our senior unsecured obligations.  We estimate that, based on their trading prices (a Level 1 input), the fair value of our Senior Notes on March 31, 2015, was $239,408.

Recently Issued Accounting Pronouncements

In April 2015, the Financial Accounting Standards Board, or FASB, issued Accounting Standards Update 2015-03, Simplifying the Presentation of Debt Issuance Costs, which requires debt issuance costs to be presented in the balance sheet as a reduction of the associated debt liability.  This update is effective for interim and annual reporting periods beginning after December 15, 2015, and requires retrospective application.  The implementation of this update is not expected to cause any material changes to our consolidated financial statements other than the reclassification of debt issuance costs from assets to a reduction of liabilities on our condensed consolidated balance sheets.

In May 2014, the FASB issued Accounting Standards Update 2014-09, Revenue from Contracts with Customers, which establishes a comprehensive revenue recognition standard under GAAP for virtually all industries. The new standard will apply for annual periods beginning after December 15, 2016, including interim periods therein. Early adoption is prohibited. We have not yet determined the effects, if any, adoption of this update may have on our consolidated financial statements.