EX-99.3 5 a18-24175_1ex99d3.htm EX-99.3

Exhibit 99.3

 

TravelCenters of America LLC

Pro Forma Condensed Consolidated Financial Statements (Unaudited)

 

On September 1, 2018, we entered into an Asset Purchase Agreement, or the Agreement, with EG Group, or the Buyer, pursuant to which, upon the terms and subject to the conditions thereto, the Buyer has agreed to purchase 225 of our standalone convenience stores, one standalone restaurant, five parcels of vacant land and certain other related assets, including inventories, or the Convenience Store Business, for an aggregate purchase price of approximately $330.8 million. This sale price includes $25.8 million of estimated net working capital items that are based on balances as of June 30, 2018, and are subject to adjustment based upon the values of these working capital items and certain other customary proration adjustments as of the closing date. The closing of the transaction is expected to occur in the 2018 fourth quarter.

 

The adjustments to the pro forma condensed consolidated balance sheets as of June 30, 2018, assume that this transaction occurred on that date. The adjustments to the pro forma condensed consolidated statements of operations for the six months ended June 30, 2018, and the year ended December 31, 2017, assume that this transaction occurred on January 1, 2017. The pro forma financial statements are 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, 2017, which we refer to as our Annual Report, and our Quarterly Report on Form 10-Q for the period ended June 30, 2018, 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 transaction, (2) factually supportable, and (3) expected to have a continuing impact on the results of operations. Further, the condensed consolidated statements of operations for the year ended December 31, 2017, reflects different amounts than those presented in our Annual Report as a result of our adoption effective January 1, 2018, of Accounting Standards Update 2014-09, Revenue from Contracts with Customers, or ASU 2014-09. The pro forma financial statements should be read in conjunction with the accompanying notes.

 

1



 

TravelCenters of America LLC

Pro Forma Condensed Consolidated Balance Sheets (Unaudited)

June 30, 2018

(in thousands)

 

 

 

As Reported

 

Pro Forma
Adjustments

 

Note

 

Pro Forma

 

Assets:

 

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

78,189

 

$

320,089

 

2 (a)

 

$

398,278

 

Accounts receivable (less allowance for doubtful accounts of $619 as of June 30, 2018)

 

162,588

 

 

 

 

162,588

 

Inventory

 

216,063

 

(24,679

)

2 (b)

 

191,384

 

Other current assets

 

26,446

 

(2,247

)

2 (b)

 

24,199

 

Total current assets

 

483,286

 

293,163

 

 

 

776,449

 

 

 

 

 

 

 

 

 

 

 

Property and equipment, net

 

980,894

 

(379,190

)

2 (b)

 

601,704

 

Goodwill

 

43,099

 

(17,942

)

2 (b)

 

25,157

 

Other intangible assets, net

 

31,946

 

(8,069

)

2 (b)

 

23,877

 

Other noncurrent assets

 

101,688

 

25,114

 

2 (c)

 

126,802

 

Total assets

 

$

1,640,913

 

$

(86,924

)

 

 

$

1,553,989

 

 

 

 

 

 

 

 

 

 

 

Liabilities and Shareholders’ Equity:

 

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

 

Accounts payable

 

$

193,232

 

$

 

 

 

$

193,232

 

Current HPT Leases liabilities

 

41,693

 

 

 

 

41,693

 

Other current liabilities

 

162,388

 

(1,657

)

2 (b)

 

160,731

 

Total current liabilities

 

397,313

 

(1,657

)

 

 

395,656

 

 

 

 

 

 

 

 

 

 

 

Long term debt, net

 

320,077

 

 

 

 

320,077

 

Noncurrent HPT Leases liabilities

 

361,413

 

 

 

 

361,413

 

Other noncurrent liabilities

 

35,743

 

(8,909

)

2 (b)

 

26,834

 

Total liabilities

 

1,114,546

 

(10,566

)

 

 

1,103,980

 

 

 

 

 

 

 

 

 

 

 

Total shareholders’ equity

 

526,367

 

(76,358

)

2 (d)

 

450,009

 

Total liabilities and shareholders’ equity

 

$

1,640,913

 

$

(86,924

)

 

 

$

1,553,989

 

 

2



 

TravelCenters of America LLC

Pro Forma Condensed Consolidated Statements of Operations (Unaudited)

Six Months Ended June 30, 2018

(in thousands, except per share amounts)

 

 

 

As Reported

 

Pro Forma
Adjustments

 

Note

 

Pro Forma

 

Revenues:

 

 

 

 

 

 

 

 

 

Fuel

 

$

2,397,848

 

$

(253,592

)

2 (e)

 

$

2,144,256

 

Nonfuel

 

1,019,260

 

(124,812

)

2 (e)

 

894,448

 

Rent and royalties from franchisees

 

8,264

 

(105

)

2 (e)

 

8,159

 

Total revenues

 

3,425,372

 

(378,509

)

 

 

3,046,863

 

 

 

 

 

 

 

 

 

 

 

Cost of goods sold (excluding depreciation):

 

 

 

 

 

 

 

 

 

Fuel

 

2,215,497

 

(228,605

)

2 (e)

 

1,986,892

 

Nonfuel

 

426,029

 

(79,653

)

2 (e)

 

346,376

 

Total cost of goods sold

 

2,641,526

 

(308,258

)

 

 

2,333,268

 

 

 

 

 

 

 

 

 

 

 

Operating expenses:

 

 

 

 

 

 

 

 

 

Site level operating

 

505,844

 

(53,970

)

2 (e)

 

451,874

 

Selling, general and administrative

 

67,994

 

(4,799

)

2 (f)

 

63,195

 

Real estate rent

 

142,069

 

(1,149

)

2 (e)

 

140,920

 

Depreciation and amortization

 

57,466

 

(15,899

)

2 (e)

 

41,567

 

Impairment of goodwill

 

51,500

 

(51,500

)

2 (g)

 

 

Total operating expenses

 

824,873

 

(127,317

)

 

 

697,556

 

 

 

 

 

 

 

 

 

 

 

(Loss) income from operations

 

(41,027

)

57,066

 

 

 

16,039

 

 

 

 

 

 

 

 

 

 

 

Interest expense, net

 

14,448

 

 

 

 

14,448

 

Loss from equity investees

 

(2,193

)

 

 

 

(2,193

)

(Loss) income before income taxes

 

(57,668

)

57,066

 

 

 

(602

)

Benefit (provision) for income taxes

 

13,666

 

(14,124

)

2 (h)

 

(458

)

Net loss

 

(44,002

)

42,942

 

 

 

(1,060

)

Less: net income for noncontrolling interests

 

88

 

 

 

 

88

 

Net loss attributable to common shareholders

 

$

(44,090

)

$

42,942

 

 

 

$

(1,148

)

 

 

 

 

 

 

 

 

 

 

Net loss per common share attributable to common shareholders:

 

 

 

 

 

 

 

 

 

Basic and diluted

 

$

(1.10

)

$

1.07

 

 

 

$

(0.03

)

 

3



 

TravelCenters of America LLC

Pro Forma Condensed Consolidated Statements of Operations (Unaudited)

Year Ended December 31, 2017

(in thousands, except per share amounts)

 

 

 

As Reported
(Note 3)

 

Pro Forma
Adjustments

 

Note

 

Pro Forma

 

Revenues:

 

 

 

 

 

 

 

 

 

Fuel

 

$

4,025,289

 

$

(457,901

)

2 (e)

 

$

3,567,388

 

Nonfuel

 

2,009,804

 

(261,913

)

2 (e)

 

1,747,891

 

Rent and royalties from franchisees

 

18,236

 

(215

)

2 (e)

 

18,021

 

Total revenues

 

6,053,329

 

(720,029

)

 

 

5,333,300

 

 

 

 

 

 

 

 

 

 

 

Cost of goods sold (excluding depreciation):

 

 

 

 

 

 

 

 

 

Fuel

 

3,696,733

 

(403,719

)

2 (e)

 

3,293,014

 

Nonfuel

 

859,829

 

(171,223

)

2 (e)

 

688,606

 

Total cost of goods sold

 

4,556,562

 

(574,942

)

 

 

3,981,620

 

 

 

 

 

 

 

 

 

 

 

Operating expenses:

 

 

 

 

 

 

 

 

 

Site level operating

 

980,749

 

(108,084

)

2 (e)

 

872,665

 

Selling, general and administrative

 

156,347

 

(10,333

)

2 (f)

 

146,014

 

Real estate rent

 

277,127

 

(2,235

)

2 (e)

 

274,892

 

Depreciation and amortization

 

128,416

 

(39,178

)

2 (e)

 

89,238

 

Total operating expenses

 

1,542,639

 

(159,830

)

 

 

1,382,809

 

 

 

 

 

 

 

 

 

 

 

Loss from operations

 

(45,872

)

14,743

 

 

 

(31,129

)

 

 

 

 

 

 

 

 

 

 

Acquisition costs

 

247

 

 

 

 

247

 

Interest expense, net

 

29,962

 

 

 

 

29,962

 

Income from equity investees

 

1,088

 

 

 

 

1,088

 

Loss before income taxes

 

(74,993

)

14,743

 

 

 

(60,250

)

Benefit for income taxes

 

84,276

 

(5,735

)

2 (h)

 

78,541

 

Net income

 

9,283

 

9,008

 

 

 

18,291

 

Less: net income for noncontrolling interests

 

132

 

 

 

 

132

 

Net income attributable to common shareholders

 

$

9,151

 

$

9,008

 

 

 

$

18,159

 

 

 

 

 

 

 

 

 

 

 

Net income per common share attributable to common shareholders:

 

 

 

 

 

 

 

 

 

Basic and diluted

 

$

0.23

 

$

0.23

 

 

 

$

0.46

 

 

4



 

TravelCenters of America LLC

Notes to Condensed Consolidated Pro Forma Financial Statements (Unaudited)

(in thousands)

 

1.              Basis of Presentation

 

The condensed consolidated pro forma financial statements were derived from historical financial statements in accordance with U.S. generally accepted accounting principles, and should be read in conjunction with our Annual Report and Quarterly Report. The condensed consolidated 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 date indicated. In addition, the condensed consolidated pro forma financial statements do not purport to project our future operating results.

 

2.              Pro Forma Adjustments

 

The condensed consolidated pro forma financial statements were prepared based on our historical consolidated financial statements.

 

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

 

Pro Forma Balance Sheets Adjustments

 

Pursuant to the Agreement, the sale proceeds include variable amounts that are based on the balances at or near the closing date of certain assets and liabilities, most notably inventories. The pro forma adjustment amounts described below assume total sale proceeds of $330,786, which includes $25,786 of net working capital items based on the applicable balances as of June 30, 2018. The balances of these net working capital items, and the total sale price, are subject to change. Further, the amounts of the other assets and liabilities to be disposed of in this transaction as described in (b) below will also differ at closing from the June 30, 2018, balances reflected in the pro forma adjustments described below. Changes in these balances from the estimates used in this pro forma financial information will result in changes to the net cash proceeds generated from the sale described in (a) below and to the final impairment charge and deferred income taxes adjustments described in (d) and (c) below, respectively.

 

(a)         Cash

 

The adjustment to cash totaling $320,089 includes the following items:

 

 

 

June 30, 2018

 

Expected proceeds from the sale of the Convenience Store Business

 

$

330,786

 

Less: transaction costs

 

(10,697

)

Net pro forma adjustment

 

$

320,089

 

 

The pro forma condensed consolidated statements of operations do not assume investment income related to the transaction proceeds.

 

(b)         Discontinued operations

 

These adjustments represent the elimination of the net carrying values of the assets and liabilities of the Convenience Store Business that are being sold to or assumed by the Buyer pursuant to the Agreement, as well as the goodwill associated with the Convenience Store Business that will be fully impaired at the time of the sale.

 

(c)          Deferred income taxes

 

The adjustment to other noncurrent assets totaling $25,114 represents the tax benefit of the expected impairment charge arising from the sale of the Convenience Store Business.

 

5



 

TravelCenters of America LLC

Notes to Condensed Consolidated Pro Forma Financial Statements (Unaudited)

(in thousands)

 

(d)         Impairment charge

 

The adjustment to shareholders’ equity reflects the effect on accumulated deficit of the $101,472 impairment charge, net of deferred income tax assets of $25,114, expected to arise from the sale of the Convenience Store Business, including incurring $10,697 of transaction related expenses. The impairment charge arises as a result of the carrying value of the assets to be disposed of exceeding the expected proceeds from the sale of the Convenience Store Business. The estimated impairment charge will be recognized in TA’s financial statements for the quarter ending September 30, 2018, and has not been reflected in the pro forma condensed consolidated statements of operations included herein because it is considered to be nonrecurring in nature.

 

Pro Forma Statements of Operations Adjustments

 

(e)          Discontinued operations

 

These adjustments represent the elimination of the revenues and expenses directly generated from the operations of the Convenience Store Business.

 

(f)           Selling, general and administrative expenses

 

The adjustments to selling, general and administrative expenses include the expenses identifiable as directly relating to the Convenience Store Business, primarily including the personnel costs and other expenses TA anticipates it will no longer incur as a result of the corporate level positions to be eliminated as a consequence of the sale.

 

(g)          Impairment of goodwill

 

This adjustment represents the elimination of the goodwill impairment charge of $51,500 TA recognized during the six months ended June 30, 2018, in connection with its convenience stores segment.

 

(h)         Benefit (provision) for income taxes

 

The benefit (provision) for income taxes has been affected at a blended statutory federal and state income tax rate of 24.75% for the six months ended June 30, 2018, and 38.9% for the year ended December 31, 2017.

 

3.              Adoption of ASU 2014-09

 

The condensed consolidated statements of operations for the year ended December 31, 2017, has been adjusted to reflect the impact of TA’s implementation of ASU 2014-09, as of January 1, 2018, which required that TA restate its consolidated financial statements for prior year comparative periods. Although the majority of TA’s revenue is initiated at the point of sale, the implementation of this standard affected the accounting for its loyalty programs, initial franchise fees and advertising fees received from franchisees.

 

Loyalty programs. Prior to the adoption of ASU 2014-09, TA recognized the estimated cost of loyalty awards as a discount against the nonfuel revenues from which the rewards were redeemed. Loyalty awards now are recognized against the revenue that generates the loyalty award, primarily fuel revenues. The adoption of the new standard resulted in a $65,623 reclassification between fuel revenues and nonfuel revenues for the year ended December 31, 2017.

 

Initial and renewal franchise fees. Prior to the adoption of ASU 2014-09, TA recognized initial franchise fees as revenue at the time the franchisee opened for business, which is when it had fulfilled its initial obligations under the related agreement. Initial and renewal franchise fees now are recognized as revenue over the term of the related franchise agreement, which is the period the customer benefits from use of the franchise rights. The adoption of the new standard resulted in an increase in rent and royalties from franchisees revenues of $52 for the year ended December 31, 2017.

 

Advertising fees. Prior to the adoption of ASU 2014-09, TA recognized advertising fees collected from franchisees as a reduction of the related advertising expenses incurred. TA now recognizes these advertising fees as revenue. The adoption of the new standard for these advertising fees resulted in an increase in each of selling, general and administrative expenses and rent and royalties from franchisees revenues of $1,684 for the year ended December 31, 2017.

 

6



 

TravelCenters of America LLC

Notes to Condensed Consolidated Pro Forma Financial Statements (Unaudited)

(in thousands)

 

The following table presents the effect of the adoption of the new standard on TA’s consolidated statement of operations for the year ended December 31, 2017:

 

 

 

As Reported

 

Adoption of
ASU 2014-09

 

As Adjusted

 

Revenues:

 

 

 

 

 

 

 

Fuel

 

$

4,090,912

 

$

(65,623

)

$

4,025,289

 

Nonfuel

 

1,944,181

 

65,623

 

2,009,804

 

Rent and royalties from franchisees

 

16,500

 

1,736

 

18,236

 

Total revenues

 

6,051,593

 

1,736

 

6,053,329

 

 

 

 

 

 

 

 

 

Selling, general and administrative expenses

 

154,663

 

1,684

 

156,347

 

Loss before income taxes

 

(75,045

)

52

 

(74,993

)

Benefit for income taxes

 

84,439

 

(163

)

84,276

 

Net income

 

9,394

 

(111

)

9,283

 

Net income attributable to common shareholders

 

$

9,262

 

$

(111

)

$

9,151

 

 

7