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TravelCenters of America LLC Announces Third Quarter 2017 Financial ResultsTravelCenters of America LLC (Nasdaq: TA) today announced financial results for the three and nine months ended September 30, 2017:
Thomas M. O'Brien, TA's CEO, made the following statement regarding the 2017 third quarter results: "TA's third quarter 2017 net income includes three notable items that were not comparable to TA's third quarter 2016 net income. Two of these items largely offset one another: our reversal of the expense related to excess transaction fees withheld by a fuel card transaction processor, Comdata, that are related to earlier quarters of $4.6 million and a noncash asset write off of $4.0 million. A $58.6 million noncash income tax benefit was also recognized in the 2017 third quarter; that was the primary reason for the change in net income between third quarter 2016 and third quarter 2017. "TA has not yet recognized any amount for recovery of the legal and other fees incurred in its litigation with Comdata. Although the Delaware Court of Chancery has found that TA is entitled to an award of attorney's fees, TA expects the amount of the award may be contested and the Court has not yet determined the amount. "EBITDA for the third quarter of 2017 was $44.3 million, or 6.0% below EBITDA for the third quarter of 2016. EBITDA in the 2017 third quarter shows many positives from our continued efforts on fuel purchasing and sales strategies, nonfuel programs and cost control. Unfortunately, these positives were overcome by negatives associated with same site fuel volume declines and the absence in 2017 of a federal biodiesel fuel tax credit program which was in place during 2016. "I remain confident in our ability to mitigate the negative impact of declining fuel volumes with nonfuel sales, our cost control efforts, and contributions from, in particular, our convenience store portfolio, which added $1.5 million in site level gross margin in excess of site level operating expenses in the 2017 third quarter, or 12.3% over the comparable 2016 amount." Business Commentary Fuel sales volume decreased by 12.0 million gallons, or 2.1%, and same site fuel sales volume decreased by 14.5 million gallons, or 2.6%, each for the 2017 third quarter compared to the 2016 third quarter. TA believes the fuel volume decrease experienced during the 2017 third quarter resulted primarily from continued fuel efficiency gains, especially by TA's commercial diesel fuel customers. Fuel revenue increased by $108.0 million, or 11.4%, in the 2017 third quarter compared to the 2016 third quarter primarily due to higher market prices for fuel during the 2017 third quarter. Fuel gross margin decreased by $5.0 million ($0.005 per gallon), to $105.0 million ($0.189 per gallon) primarily as a result of the federal biodiesel fuel tax credit program that was in place in 2016 but has not been in 2017 and the increasing diesel fuel cost trend during the 2017 third quarter versus a declining to flat fuel cost trend during the 2016 third quarter, partially offset by the positive impact of TA's fuel purchasing and sales strategies. Nonfuel revenue increased $5.3 million, or 1.0%, in the 2017 third quarter compared to the 2016 third quarter due to a $7.0 million increase attributable to sites acquired and developed since the beginning of the 2016 third quarter, partially offset by a $1.7 million same site decrease primarily due to reduced restaurant business while TA was converting certain locations from full service to quick service restaurants. Nonfuel gross margin increased $4.7 million, or 1.7%, in the 2017 third quarter compared to the 2016 third quarter due to a $5.2 million increase from sites acquired and developed since the beginning of the 2016 third quarter, partially offset by a $0.5 million, or 0.2%, decrease in same site nonfuel gross margin. Site level operating expenses decreased $3.4 million, or 1.4%, in the 2017 third quarter compared to the 2016 third quarter primarily due to a one time expense reduction of $4.6 million to recognize a receivable for excess transaction fees TA expensed prior to the third quarter that it now expects to recover from Comdata and various cost savings initiatives, partially offset by a $4.6 million increase in site level operating expenses from sites acquired and developed since the beginning of the 2016 third quarter. Selling, general and administrative expenses for the 2017 third quarter increased $1.8 million, or 5.1%, compared to the 2016 third quarter, primarily attributable to increased personnel costs and $0.3 million of litigation costs related to TA's dispute with Comdata, partially offset by certain cost control initiatives. Real estate rent expense increased $3.0 million, or 4.5%, in the 2017 third quarter compared to the 2016 third quarter primarily from TA's sale to, and lease back from, Hospitality Properties Trust, or HPT, of two travel centers and improvements at leased sites since the beginning of the 2016 third quarter. Depreciation and amortization expense increased $8.0 million, or 35.3%, in the 2017 third quarter compared to the 2016 third quarter primarily resulting from a $4.0 million impairment charge relating to certain property and equipment, and an increase in the amount of depreciable assets as a result of the locations acquired and other capital investments TA completed since the beginning of the 2016 third quarter. Net income for the 2017 third quarter was $62.4 million compared to net income of $11.0 million for the 2016 third quarter. Net income attributable to common shareholders for the 2017 third quarter was $62.3 million ($1.58 per common share) compared to net income attributable to common shareholders of $10.9 million ($0.28 per common share) for the 2016 third quarter. The increases in net income and in net income attributable to common shareholders are primarily due to the recognition of an income tax benefit of $58.6 million resulting from the resolution of certain previously uncertain tax positions. EBITDA for the 2017 third quarter decreased by $2.9 million, or 6.0%, as compared to the 2016 third quarter as the negative impacts of changes in fuel gross margin, real estate rent and selling, general and administrative expenses were not fully offset by the positive impact of changes in nonfuel gross margin and site level operating expenses. A reconciliation from net income to EBITDA appears in the supplemental data below. Travel Centers Segment Both fuel and nonfuel revenues increased, resulting in an increase in total revenues of $101.5 million, or 8.2%, in the 2017 third quarter as compared to the 2016 third quarter. The increase in total revenues was primarily due to increases in market prices for fuel and from sales at recently acquired or developed properties. Site level gross margin in excess of site level operating expenses increased in the 2017 third quarter by $2.2 million, or 1.7%, as compared to the 2016 third quarter primarily due to a $4.6 million reversal of excess transaction fees expensed prior to the third quarter that TA now expects to recover from Comdata, and a $3.4 million increase in nonfuel gross margin, partially offset by a $6.8 million decrease in fuel gross margin. On a same site basis, site level gross margin in excess of site level operating expenses increased in the 2017 third quarter by $0.3 million, or 0.2%, as compared to the 2016 third quarter, primarily due to a $4.5 million reversal of excess transaction fees expensed prior to the third quarter that TA now expects to recover from Comdata, and a $4.5 million reduction in site level operating expenses primarily due to operating cost control measures, largely offset by an $8.1 million decrease in fuel gross margin. On a same site basis, (220 locations) site level gross margin in excess of site level operating expenses was $444.0 million for the 12 months ended September 30, 2017, $6.2 million, or 1.4%, less than the comparable period ended September 30, 2016, principally due to an $18.8 million decline in fuel gross margin. TA acquired or developed 17 travel centers during the four year period ended September 30, 2017. Of these travel centers, 11 are included in the same site data for the 12 months ended September 30, 2017 and 2016. As of September 30, 2017, TA had invested $107.3 million (including the cost of improvements) in these 11 locations, and these locations generated $12.2 million of site level gross margin in excess of site level operating expenses during the 12 months ended September 30, 2017. The remaining six locations were acquired or developed for a total investment of $111.0 million (including the cost of improvements), and these locations generated $6.0 million of site level gross margin in excess of site level operating expenses during the 12 months ended September 30, 2017, during which they were open for an average of 11 months. Convenience Stores Segment Fuel revenues increased by $10.4 million due to increases in market prices for fuel, partially offset by a decrease in nonfuel revenues, resulting in an increase in total revenues of $10.0 million, or 5.2%, in the 2017 third quarter compared to the 2016 third quarter. Nonfuel revenues decreased primarily as a result of the mix of products and services sold. Site level gross margin in excess of site level operating expenses increased in the 2017 third quarter by $1.5 million, or 12.3%, as compared to the 2016 third quarter due to increases in fuel ($1.6 million, or 10.4%) and nonfuel gross margin ($0.8 million, or 3.3%) as operations at newer sites continue to improve, partially offset by an increase in site level operating expenses ($0.9 million, or 3.2%). On a same site basis, site level gross margin in excess of site level operating expenses increased by $1.5 million, or 12.4%, in the 2017 third quarter compared to the 2016 third quarter due to increases in fuel ($1.6 million) and nonfuel ($0.8 million) gross margin, partially offset by an increase ($0.9 million) in site level operating expenses. On a same site basis TA had invested $340.7 million (including the cost of improvements) in 180 locations, and these locations generated site level gross margin in excess of site level operating expenses of $33.9 million for the 12 months ended September 30, 2017, $5.0 million, or 17.2%, over the comparable period ended September 30, 2016. TA acquired 49 convenience stores during the two year period ended September 30, 2017, none of which are included in the same site data for the 12 months ended September 30, 2017 and 2016. As of September 30, 2017, TA had invested $102.6 million (including the cost of improvements) in these locations, and these locations generated $6.4 million of site level gross margin in excess of site level operating expenses during the 12 months ended September 30, 2017. Some of these 49 convenience stores were fully or partially out of service while improvements were being made to them during the 12 months ended September 30, 2017. Conference Call: On Tuesday, November 7, 2017, at 10:00 a.m. Eastern Time, TA will host a conference call to discuss its financial results and other activities for the three months ended September 30, 2017. Following management's remarks, there will be a question and answer period. The conference call telephone number is 877-329-4614. Participants calling from outside the United States and Canada should dial 412-317-5437. No pass code is necessary to access the call from either number. Participants should dial in about 15 minutes prior to the scheduled start of the call. A replay of the conference call will be available for about a week after the call. To hear the replay, dial 412-317-0088. The replay pass code is 10113392. A live audio webcast of the conference call will also be available in a listen only mode on TA's website at www.ta-petro.com. To access the webcast, participants should visit TA's website about five minutes before the call. The archived webcast will be available for replay on TA's website for about one week after the call. The transcription, recording and retransmission in any way of TA's third quarter conference call is strictly prohibited without the prior written consent of TA. The Company's website is not incorporated as part of this press release. About TravelCenters of America LLC: TA's nationwide business includes travel centers located in 43 U.S. states and in Canada, standalone convenience stores in 11 states and standalone restaurants in 14 states. TA's travel centers operate under the "TravelCenters of America," "TA," "Petro Stopping Centers" and "Petro" brand names and offer diesel and gasoline fueling, restaurants, truck repair services, travel/convenience stores and other services which are designed to provide attractive and efficient travel experiences to professional drivers and other motorists. TA's convenience stores operate principally under the "Minit Mart" brand name and offer gasoline fueling as well as nonfuel products and services such as coffee, groceries, fresh food offerings and other convenience items. TA's standalone restaurants operate principally under the "Quaker Steak & Lube" brand name. WARNING CONCERNING FORWARD LOOKING STATEMENTS THIS PRESS RELEASE CONTAINS STATEMENTS THAT CONSTITUTE FORWARD LOOKING STATEMENTS WITHIN THE MEANING OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995 AND OTHER SECURITIES LAWS. WHENEVER TA USES WORDS SUCH AS "BELIEVE," "EXPECT," "ANTICIPATE," "INTEND," "PLAN," "ESTIMATE," "WILL," "MAY" AND NEGATIVES OR DERIVATIVES OF THESE OR SIMILAR EXPRESSIONS, TA IS MAKING FORWARD LOOKING STATEMENTS. THESE FORWARD LOOKING STATEMENTS ARE BASED UPON TA'S PRESENT INTENT, BELIEFS OR EXPECTATIONS, BUT FORWARD LOOKING STATEMENTS ARE NOT GUARANTEED TO OCCUR AND MAY NOT OCCUR. ACTUAL RESULTS MAY DIFFER MATERIALLY FROM THOSE CONTAINED IN OR IMPLIED BY TA'S FORWARD LOOKING STATEMENTS AS A RESULT OF VARIOUS FACTORS. AMONG OTHERS, THE FORWARD LOOKING STATEMENTS WHICH APPEAR IN THIS PRESS RELEASE THAT MAY NOT OCCUR INCLUDE:
THE INFORMATION CONTAINED IN TA'S PERIODIC REPORTS, INCLUDING TA'S ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 2016, WHICH HAS BEEN FILED WITH THE U.S. SECURITIES AND EXCHANGE COMMISSION, OR SEC, AND TA'S QUARTERLY REPORTS ON FORM 10-Q FOR THE PERIODS ENDED MARCH 31, 2017, JUNE 30, 2017 AND SEPTEMBER 30, 2017, WHICH HAVE BEEN OR WILL BE FILED WITH THE SEC, UNDER THE CAPTION "RISK FACTORS," OR ELSEWHERE IN THOSE REPORTS, OR INCORPORATED THEREIN, IDENTIFIES OTHER IMPORTANT FACTORS THAT COULD CAUSE DIFFERENCES FROM TA'S FORWARD LOOKING STATEMENTS. TA'S FILINGS WITH THE SEC ARE AVAILABLE ON THE SEC'S WEBSITE AT WWW.SEC.GOV. YOU SHOULD NOT PLACE UNDUE RELIANCE UPON FORWARD LOOKING STATEMENTS. EXCEPT AS REQUIRED BY LAW, TA DOES NOT INTEND TO UPDATE OR CHANGE ANY FORWARD LOOKING STATEMENT AS A RESULT OF NEW INFORMATION, FUTURE EVENTS OR OTHERWISE.
TRAVELCENTERS OF AMERICA LLC Non-GAAP financial measures are financial measures that are not determined in accordance with GAAP. TA believes the non-GAAP financial measures presented in the table below are meaningful supplemental disclosures because they may help investors gain a better understanding of changes in TA's operating results and its ability to pay rent or service debt, make capital expenditures and expand its business. These non-GAAP financial measures also may help investors to make comparisons between TA and other companies on both a GAAP and a non-GAAP basis. TA calculates EBITDA as earnings before interest, taxes and depreciation and amortization, as shown below. TA believes that EBITDA is a meaningful disclosure that may help investors to better understand its financial performance, including by allowing investors to compare TA's performance between periods and to the performance of other companies. EBITDA is used by management to evaluate TA's financial performance and compare TA's performance over time and to the performance of other companies. This information should not be considered as an alternative to net income attributable to common shareholders, net income or income from operations, as an indicator of TA's operating performance or as a measure of TA's liquidity. Also, EBITDA as presented may not be comparable to similarly titled amounts calculated by other companies. TA believes that net income is the most comparable financial measure, determined according to GAAP, to TA's presentation of EBITDA. The following table presents the reconciliation of this non-GAAP financial measure to net income for the three and nine months ended September 30, 2017 and 2016.
TRAVELCENTERS OF AMERICA LLC CONSOLIDATED SAME SITE OPERATING DATA The following table presents consolidated operating data for the periods noted for all of the locations in operation on September 30, 2017, that were operated by TA continuously since the beginning of the earliest period presented, with the exception of six locations TA operates that are owned by an unconsolidated joint venture in which TA owns a noncontrolling interest. This data excludes revenues and expenses at locations TA does not operate, such as rents and royalties from franchisees, and corporate level selling, general and administrative expenses. TA does not exclude locations from the same site comparisons as a result of capital improvements to the site or changes in the services offered.
TRAVELCENTERS OF AMERICA LLC TRAVEL CENTERS SEGMENT SAME SITE OPERATING DATA The following table presents operating data for the periods noted for all of the travel centers in operation on September 30, 2017, that were operated by TA continuously since the beginning of the earliest period presented, with the exception of two travel centers TA operates that are owned by an unconsolidated joint venture in which TA owns a noncontrolling interest. This data also excludes revenues and expenses at travel centers TA does not operate, such as rents and royalties from franchisees, and corporate level selling, general and administrative expenses. TA does not exclude locations from the same site comparisons as a result of capital improvements to the site or changes in the services offered.
TRAVELCENTERS OF AMERICA LLC CONVENIENCE STORES SEGMENT SAME SITE OPERATING DATA The following table presents operating data for the periods noted for all of the convenience stores in operation on September 30, 2017, that were operated by TA continuously since the beginning of the earliest period presented, with the exception of three convenience stores TA operates that are owned by an unconsolidated joint venture in which TA owns a noncontrolling interest. This data also excludes revenues and expenses at convenience stores TA does not operate, such as revenues from a dealer operated convenience store, and corporate level selling, general and administrative expenses. TA does not exclude locations from the same site comparisons as a result of capital improvements to the site or changes in the services offered.
TRAVELCENTERS OF AMERICA LLC The following tables present business segment information for travel centers and convenience stores, or TA's reportable segments, for the three and nine months ended September 30, 2017 and 2016.
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