TravelCenters Of America LLC
|
||||
(Exact Name of Registrant as Specified in its Charter)
|
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Delaware
|
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20-5701514
|
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(State or Other Jurisdiction of Incorporation or Organization)
|
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(I.R.S. Employer Identification No.)
|
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24601 Center Ridge Road, Westlake, OH 44145-5639
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(Address and Zip Code of Principal Executive Offices)
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(440) 808-9100
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(Registrant's Telephone Number, Including Area Code)
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Securities registered pursuant to Section 12(b) of the Act:
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Title of each class
|
|
Trading Symbols
|
|
Name of each exchange on which registered
|
Common Shares
|
|
TA
|
|
The Nasdaq Stock Market LLC
|
8.25% Senior Notes due 2028
|
|
TANNI
|
|
The Nasdaq Stock Market LLC
|
8.00% Senior Notes due 2029
|
|
TANNL
|
|
The Nasdaq Stock Market LLC
|
8.00% Senior Notes due 2030
|
|
TANNZ
|
|
The Nasdaq Stock Market LLC
|
Large accelerated filer
o
|
|
Accelerated filer
x
|
|
|
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Non-accelerated filer
o
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Smaller reporting company
x
|
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Emerging growth company
o
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Page
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March 31,
2019 |
|
December 31,
2018 |
||||
Assets:
|
|
|
|
|
|
||
Current assets:
|
|
|
|
|
|
||
Cash and cash equivalents
|
$
|
24,749
|
|
|
$
|
314,387
|
|
Accounts receivable (less allowance for doubtful accounts of $747 and $959 as of
March 31, 2019 and December 31, 2018, respectively)
|
138,561
|
|
|
97,449
|
|
||
Inventory
|
194,168
|
|
|
196,721
|
|
||
Other current assets
|
29,290
|
|
|
35,119
|
|
||
Total current assets
|
386,768
|
|
|
643,676
|
|
||
|
|
|
|
||||
Property and equipment, net
|
883,960
|
|
|
628,537
|
|
||
Operating lease assets
|
1,827,690
|
|
|
—
|
|
||
Goodwill
|
25,259
|
|
|
25,259
|
|
||
Intangible assets, net
|
21,993
|
|
|
22,887
|
|
||
Other noncurrent assets
|
98,741
|
|
|
121,749
|
|
||
Total assets
|
$
|
3,244,411
|
|
|
$
|
1,442,108
|
|
|
|
|
|
||||
Liabilities and Shareholders' Equity:
|
|
|
|
|
|
||
Current liabilities:
|
|
|
|
|
|
||
Accounts payable
|
$
|
189,023
|
|
|
$
|
120,914
|
|
Current operating lease liabilities
|
93,981
|
|
|
—
|
|
||
Current HPT Leases liabilities
|
—
|
|
|
42,109
|
|
||
Other current liabilities
|
145,573
|
|
|
125,668
|
|
||
Total current liabilities
|
428,577
|
|
|
288,691
|
|
||
|
|
|
|
||||
Long term debt, net
|
320,748
|
|
|
320,528
|
|
||
Noncurrent operating lease liabilities
|
1,918,377
|
|
|
—
|
|
||
Noncurrent HPT Leases liabilities
|
—
|
|
|
353,756
|
|
||
Other noncurrent liabilities
|
52,033
|
|
|
28,741
|
|
||
Total liabilities
|
2,719,735
|
|
|
991,716
|
|
||
|
|
|
|
||||
Shareholders' equity:
|
|
|
|
|
|
||
Common shares, no par value, 43,369 shares authorized as of March 31, 2019
and December 31, 2018, and 40,398 and 40,402 shares issued and
outstanding as of March 31, 2019 and December 31, 2018, respectively
|
696,017
|
|
|
695,315
|
|
||
Accumulated other comprehensive income
|
452
|
|
|
355
|
|
||
Accumulated deficit
|
(173,277
|
)
|
|
(246,773
|
)
|
||
Total TA shareholders' equity
|
523,192
|
|
|
448,897
|
|
||
Noncontrolling interest
|
1,484
|
|
|
1,495
|
|
||
Total shareholders' equity
|
524,676
|
|
|
450,392
|
|
||
Total liabilities and shareholders' equity
|
$
|
3,244,411
|
|
|
$
|
1,442,108
|
|
|
Three Months Ended
March 31, |
||||||
|
2019
|
|
2018
|
||||
Revenues:
|
|
|
|
|
|
||
Fuel
|
$
|
983,141
|
|
|
$
|
986,345
|
|
Nonfuel
|
440,874
|
|
|
423,875
|
|
||
Rent and royalties from franchisees
|
3,277
|
|
|
4,110
|
|
||
Total revenues
|
1,427,292
|
|
|
1,414,330
|
|
||
|
|
|
|
||||
Cost of goods sold (excluding depreciation):
|
|
|
|
||||
Fuel
|
908,394
|
|
|
903,448
|
|
||
Nonfuel
|
168,268
|
|
|
161,411
|
|
||
Total cost of goods sold
|
1,076,662
|
|
|
1,064,859
|
|
||
|
|
|
|
||||
Site level operating expense
|
232,720
|
|
|
223,012
|
|
||
Selling, general and administrative expense
|
37,110
|
|
|
36,494
|
|
||
Real estate rent expense
|
66,413
|
|
|
70,236
|
|
||
Depreciation and amortization expense
|
24,759
|
|
|
20,546
|
|
||
|
|
|
|
||||
Loss from operations
|
(10,372
|
)
|
|
(817
|
)
|
||
|
|
|
|
||||
Interest expense, net
|
7,050
|
|
|
7,580
|
|
||
Other expense, net
|
574
|
|
|
1,293
|
|
||
Loss before income taxes and discontinued operations
|
(17,996
|
)
|
|
(9,690
|
)
|
||
Benefit for income taxes
|
5,267
|
|
|
3,663
|
|
||
Loss from continuing operations
|
(12,729
|
)
|
|
(6,027
|
)
|
||
Loss from discontinued operations, net of taxes
|
—
|
|
|
(4,051
|
)
|
||
Net loss
|
(12,729
|
)
|
|
(10,078
|
)
|
||
Less: net income for noncontrolling interest
|
18
|
|
|
34
|
|
||
Net loss attributable to common shareholders
|
$
|
(12,747
|
)
|
|
$
|
(10,112
|
)
|
|
|
|
|
||||
Other comprehensive income (loss), net of taxes:
|
|
|
|
|
|
||
Foreign currency gain (loss), net of taxes of $25 and $(36), respectively
|
$
|
31
|
|
|
$
|
(62
|
)
|
Equity interest in investee's unrealized gain (loss) on investments
|
66
|
|
|
(93
|
)
|
||
Other comprehensive income (loss) attributable to common shareholders
|
97
|
|
|
(155
|
)
|
||
|
|
|
|
||||
Comprehensive loss attributable to common shareholders
|
$
|
(12,650
|
)
|
|
$
|
(10,267
|
)
|
|
|
|
|
||||
Net loss per common share attributable to common shareholders:
|
|
|
|
|
|
||
Basic and diluted from continuing operations
|
$
|
(0.32
|
)
|
|
$
|
(0.15
|
)
|
Basic and diluted from discontinued operations
|
—
|
|
|
(0.10
|
)
|
||
Basic and diluted
|
(0.32
|
)
|
|
(0.25
|
)
|
|
Three Months Ended
March 31, |
||||||
|
2019
|
|
2018
|
||||
Cash flows from operating activities:
|
|
|
|
|
|
||
Net loss
|
$
|
(12,729
|
)
|
|
$
|
(10,078
|
)
|
Less: loss from discontinued operations, net of taxes
|
—
|
|
|
(4,051
|
)
|
||
Loss from continuing operations
|
(12,729
|
)
|
|
(6,027
|
)
|
||
Adjustments to reconcile loss from continuing operations to net cash provided by
operating activities of continuing operations:
|
|
|
|
|
|
||
Noncash rent adjustments
|
(1,526
|
)
|
|
(3,608
|
)
|
||
Depreciation and amortization expense
|
24,759
|
|
|
20,546
|
|
||
Deferred income tax benefit
|
(4,403
|
)
|
|
(3,625
|
)
|
||
Changes in operating assets and liabilities:
|
|
|
|
|
|
||
Accounts receivable
|
(40,902
|
)
|
|
(28,145
|
)
|
||
Inventory
|
2,563
|
|
|
1,939
|
|
||
Other assets
|
6,485
|
|
|
2,587
|
|
||
Accounts payable and other liabilities
|
63,315
|
|
|
38,463
|
|
||
Other, net
|
636
|
|
|
4,213
|
|
||
Net cash provided by operating activities of continuing operations
|
38,198
|
|
|
26,343
|
|
||
Net cash provided by operating activities of discontinued operations
|
—
|
|
|
1,854
|
|
||
Net cash provided by operating activities
|
38,198
|
|
|
28,197
|
|
||
|
|
|
|
||||
Cash flows from investing activities:
|
|
|
|
|
|
||
Acquisitions of travel centers from HPT
|
(309,637
|
)
|
|
—
|
|
||
Capital expenditures
|
(16,688
|
)
|
|
(23,086
|
)
|
||
Proceeds from asset sales to HPT
|
—
|
|
|
12,792
|
|
||
Other
|
(1,500
|
)
|
|
—
|
|
||
Net cash used in investing activities of continuing operations
|
(327,825
|
)
|
|
(10,294
|
)
|
||
Net cash used in investing activities of discontinued operations
|
—
|
|
|
(1,859
|
)
|
||
Net cash used in investing activities
|
(327,825
|
)
|
|
(12,153
|
)
|
||
|
|
|
|
||||
Cash flows from financing activities:
|
|
|
|
|
|
||
Proceeds from sale leaseback transactions with HPT
|
—
|
|
|
345
|
|
||
Sale leaseback financing obligation payments
|
—
|
|
|
(236
|
)
|
||
Distribution to noncontrolling interest
|
(29
|
)
|
|
—
|
|
||
Other
|
(26
|
)
|
|
(26
|
)
|
||
Net cash (used in) provided by financing activities
|
(55
|
)
|
|
83
|
|
||
|
|
|
|
||||
Effect of exchange rate changes on cash
|
44
|
|
|
(70
|
)
|
||
Net (decrease) increase in cash and cash equivalents
|
(289,638
|
)
|
|
16,057
|
|
||
Cash and cash equivalents at the beginning of the period
|
314,387
|
|
|
36,082
|
|
||
Cash and cash equivalents at the end of the period
|
24,749
|
|
|
52,139
|
|
||
Less: cash of discontinued operations at the end of the period
|
—
|
|
|
551
|
|
||
Cash and cash equivalents of continuing operations at the end of the period
|
$
|
24,749
|
|
|
$
|
51,588
|
|
|
|
|
|
||||
Supplemental disclosure of cash flow information:
|
|
|
|
|
|
||
Interest paid (including rent classified as interest and net of capitalized interest)
|
$
|
6,889
|
|
|
$
|
7,932
|
|
Income taxes refunded, net of payments
|
454
|
|
|
447
|
|
|
Number of
Common
Shares
|
|
Common
Shares
|
|
Accumulated
Other
Comprehensive
Income
|
|
Accumulated
Deficit
|
|
Total TA
Shareholders'
Equity
|
|
Noncontrolling
Interest
|
|
Total
Shareholders'
Equity
|
|||||||||||||
December 31, 2018
|
40,402
|
|
|
$
|
695,315
|
|
|
$
|
355
|
|
|
$
|
(246,773
|
)
|
|
$
|
448,897
|
|
|
$
|
1,495
|
|
|
$
|
450,392
|
|
Grants under share
award plan and
share based
compensation, net
|
(4
|
)
|
|
702
|
|
|
—
|
|
|
—
|
|
|
702
|
|
|
—
|
|
|
702
|
|
||||||
Distribution to
noncontrolling
interest
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(29
|
)
|
|
(29
|
)
|
||||||
Other comprehensive
income, net of taxes
|
—
|
|
|
—
|
|
|
97
|
|
|
—
|
|
|
97
|
|
|
—
|
|
|
97
|
|
||||||
Cumulative effect of
adoption of ASC
842, net of taxes
|
—
|
|
|
—
|
|
|
—
|
|
|
86,243
|
|
|
86,243
|
|
|
—
|
|
|
86,243
|
|
||||||
Net (loss) income
|
—
|
|
|
—
|
|
|
—
|
|
|
(12,747
|
)
|
|
(12,747
|
)
|
|
18
|
|
|
(12,729
|
)
|
||||||
March 31, 2019
|
40,398
|
|
|
$
|
696,017
|
|
|
$
|
452
|
|
|
$
|
(173,277
|
)
|
|
$
|
523,192
|
|
|
$
|
1,484
|
|
|
$
|
524,676
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
December 31, 2017
|
39,984
|
|
|
$
|
690,688
|
|
|
$
|
580
|
|
|
$
|
(126,220
|
)
|
|
$
|
565,048
|
|
|
$
|
1,447
|
|
|
$
|
566,495
|
|
Grants under share
award plan and
share based
compensation, net
|
16
|
|
|
2,018
|
|
|
—
|
|
|
—
|
|
|
2,018
|
|
|
—
|
|
|
2,018
|
|
||||||
Other comprehensive
loss, net of taxes
|
—
|
|
|
—
|
|
|
(155
|
)
|
|
—
|
|
|
(155
|
)
|
|
—
|
|
|
(155
|
)
|
||||||
Net (loss) income
|
—
|
|
|
—
|
|
|
—
|
|
|
(10,112
|
)
|
|
(10,112
|
)
|
|
34
|
|
|
(10,078
|
)
|
||||||
March 31, 2018
|
40,000
|
|
|
$
|
692,706
|
|
|
$
|
425
|
|
|
$
|
(136,332
|
)
|
|
$
|
556,799
|
|
|
$
|
1,481
|
|
|
$
|
558,280
|
|
1.
|
Business Description and Basis of Presentation
|
2.
|
Revenues
|
|
Three Months Ended
March 31, |
||||||
|
2019
|
|
2018
|
||||
Nonfuel revenues:
|
|
|
|
||||
Store and retail services
|
$
|
180,425
|
|
|
$
|
170,390
|
|
Truck service
|
161,195
|
|
|
156,520
|
|
||
Restaurants
|
99,254
|
|
|
96,965
|
|
||
Total nonfuel revenues
|
$
|
440,874
|
|
|
$
|
423,875
|
|
|
Customer
Loyalty
Programs
|
|
Other Contract
Liabilities
|
|
Total
|
||||||
December 31, 2017
|
$
|
15,165
|
|
|
$
|
4,681
|
|
|
$
|
19,846
|
|
Increases due to unsatisfied performance obligations
arising during the period
|
81,517
|
|
|
10,083
|
|
|
91,600
|
|
|||
Revenues recognized from satisfying performance
obligations during the period
|
(74,548
|
)
|
|
(10,064
|
)
|
|
(84,612
|
)
|
|||
Other
|
(6,644
|
)
|
|
(1,230
|
)
|
|
(7,874
|
)
|
|||
December 31, 2018
|
15,490
|
|
|
3,470
|
|
|
18,960
|
|
|||
Increases due to unsatisfied performance obligations
arising during the period
|
22,099
|
|
|
2,619
|
|
|
24,718
|
|
|||
Revenues recognized from satisfying performance
obligations during the period
|
(20,239
|
)
|
|
(2,481
|
)
|
|
(22,720
|
)
|
|||
Other
|
(2,107
|
)
|
|
(314
|
)
|
|
(2,421
|
)
|
|||
March 31, 2019
|
$
|
15,243
|
|
|
$
|
3,294
|
|
|
$
|
18,537
|
|
3.
|
Acquisitions
|
4.
|
Discontinued Operations
|
|
Three Months
Ended
March 31, 2018 |
||
Revenues
|
$
|
170,743
|
|
Cost of goods sold (excluding depreciation)
|
139,704
|
|
|
Site level operating expense
|
26,548
|
|
|
Selling, general and administrative expense
|
1,927
|
|
|
Real estate rent expense
|
576
|
|
|
Depreciation and amortization expense
|
7,002
|
|
|
Loss from discontinued operations before income taxes
|
(5,014
|
)
|
|
Benefit for income taxes
|
963
|
|
|
Loss from discontinued operations, net of taxes
|
$
|
(4,051
|
)
|
5.
|
Earnings Per Share from Continuing Operations
|
|
Three Months Ended
March 31, |
||||||
|
2019
|
|
2018
|
||||
Loss from continuing operations
|
$
|
(12,729
|
)
|
|
$
|
(6,027
|
)
|
Less: net income for noncontrolling interests
|
18
|
|
|
34
|
|
||
Loss from continuing operations attributable to common shareholders
|
(12,747
|
)
|
|
(6,061
|
)
|
||
Less: loss from continuing operations attributable to participating securities
|
(497
|
)
|
|
(305
|
)
|
||
Loss from continuing operations available to common shareholders
|
$
|
(12,250
|
)
|
|
$
|
(5,756
|
)
|
|
|
|
|
||||
Weighted average common shares
(1)
|
38,823
|
|
|
37,980
|
|
||
|
|
|
|
||||
Basic and diluted loss per common share from continuing operations
attributable to common shareholders
|
$
|
(0.32
|
)
|
|
$
|
(0.15
|
)
|
(1)
|
Excludes unvested shares awarded under our share award plans, which shares are considered participating securities because they participate equally in earnings and losses with all of our other common shares. The weighted average number of unvested shares outstanding for the
three months ended
March 31, 2019
and
2018
, was
1,576
and
2,009
, respectively.
|
6.
|
Leasing Transactions
|
|
Classification in our Consolidated Statements of
Operations and Comprehensive Loss
|
|
Three Months
Ended
March 31, 2019 |
||
Operating lease costs - HPT Leases
|
Real estate rent expense
|
|
$
|
62,120
|
|
Operating lease costs - other leases
|
Real estate rent expense
|
|
2,724
|
|
|
Variable lease costs - HPT Leases
|
Real estate rent expense
|
|
1,421
|
|
|
Variable lease costs - other leases
|
Real estate rent expense
|
|
148
|
|
|
Total real estate rent expense
|
|
|
66,413
|
|
|
Operating lease costs - equipment and other
|
Site level operating and selling, general and administrative
|
|
570
|
|
|
Short-term lease costs
|
Site level operating and selling, general and administrative
|
|
813
|
|
|
Sublease income
|
Nonfuel revenues
|
|
(564
|
)
|
|
Net lease costs
|
|
|
$
|
67,232
|
|
|
HPT Leases
|
|
Other Leases
|
|
Total
|
||||||
Years ended December 31:
|
|
|
|
|
|
||||||
2019
|
$
|
271,294
|
|
|
$
|
5,193
|
|
|
$
|
276,487
|
|
2020
|
271,332
|
|
|
4,136
|
|
|
275,468
|
|
|||
2021
|
270,241
|
|
|
3,171
|
|
|
273,412
|
|
|||
2022
|
268,788
|
|
|
2,206
|
|
|
270,994
|
|
|||
2023
|
250,977
|
|
|
1,618
|
|
|
252,595
|
|
|||
Thereafter
|
2,226,845
|
|
|
7,206
|
|
|
2,234,051
|
|
|||
Total operating lease payments
|
3,559,477
|
|
|
23,530
|
|
|
3,583,007
|
|
|||
Less: present value discount
(1)
|
(1,565,671
|
)
|
|
(4,978
|
)
|
|
(1,570,649
|
)
|
|||
Present value of operating lease liabilities
|
$
|
1,993,806
|
|
|
$
|
18,552
|
|
|
$
|
2,012,358
|
|
(1)
|
The discount rate used to derive the present value of unpaid lease payments is based on the rates implicit in the lease, if available, or our incremental borrowing rate.
|
|
March 31,
2019 |
||
Operating lease assets:
|
|
||
HPT Leases
|
$
|
1,810,239
|
|
Other operating leases
|
17,451
|
|
|
Total operating lease assets
|
$
|
1,827,690
|
|
|
|
||
Operating lease liabilities:
|
|
||
HPT Leases
|
$
|
89,634
|
|
Other operating leases
|
4,347
|
|
|
Total current operating lease liabilities
|
$
|
93,981
|
|
|
|
||
HPT Leases
|
$
|
1,904,172
|
|
Other operating leases
|
14,205
|
|
|
Total noncurrent operating lease liabilities
|
$
|
1,918,377
|
|
•
|
We purchased from HPT
20
travel center properties, which we previously leased from HPT, for a total purchase price of
$309,637
, including
$1,437
of transaction related costs.
|
•
|
Our annual minimum rent due to HPT was reduced by
$43,148
.
|
•
|
The term of each HPT Lease was extended by
three
years.
|
•
|
Commencing on
April 1, 2019
, we will pay to HPT
16
quarterly installments of approximately
$4,404
each (an aggregate of
$70,458
) to fully satisfy and discharge our
$150,000
deferred rent obligation to HPT that otherwise would have become due in
five
installments between 2024 and 2030.
|
•
|
Commencing with the year ending
December 31, 2020
, we will be obligated to pay to HPT an additional amount of percentage rent equal to one-half percent (
0.5%
) of the excess of our annual nonfuel revenues at leased sites over the nonfuel revenues for each respective site for the year ending
December 31, 2019
.
|
•
|
Certain of the
179
travel center properties that we continue to lease from HPT were reallocated among the HPT Leases.
|
|
December 31,
2018 |
||
Current HPT Leases liabilities:
|
|
|
|
Accrued rent
|
$
|
24,721
|
|
Sale leaseback financing obligations
(1)
|
1,032
|
|
|
Straight line rent accrual
(2)
|
2,458
|
|
|
Deferred gain
(3)
|
10,128
|
|
|
Deferred tenant improvements allowance
(4)
|
3,770
|
|
|
Total current HPT Leases liabilities
|
$
|
42,109
|
|
|
|
||
Noncurrent HPT Leases liabilities:
|
|
|
|
Deferred rent obligation
(5)
|
$
|
150,000
|
|
Sale leaseback financing obligations
(1)
|
22,365
|
|
|
Straight line rent accrual
(2)
|
46,431
|
|
|
Deferred gain
(3)
|
100,913
|
|
|
Deferred tenant improvements allowance
(4)
|
34,047
|
|
|
Total noncurrent HPT Leases liabilities
|
$
|
353,756
|
|
(1)
|
Sale Leaseback Financing Obligations.
As of December 31, 2018, the assets related to
two
travel centers we leased from HPT were reflected in our consolidated balance sheet, as was the related financing obligation. This accounting was required primarily because, at the time of the inception of the prior leases with HPT, more than a minor portion of these
two
travel centers was subleased to third parties. Upon adoption of ASC 842 on January 1, 2019, these failed sale leasebacks were reclassified as operating leases, which resulted in a gain that was recognized in our beginning accumulated deficit. See above for more information about the impact of adopting ASC 842.
|
(2)
|
Straight Line Rent Accrual.
As of December 31, 2018, the straight line rent accrual included the accrued rent expense from 2007 to 2012 for stated increases in our annual minimum rent due under our then existing TA lease. The TA Leases we entered into with HPT in connection with the 2015 transaction agreement contain no stated rent payment increases. Prior to the adoption of ASC 842, we amortized this accrual on a straight line basis over the current terms of the TA Leases as a reduction of real estate rent expense. The straight line rent accrual also included our obligation for the estimated cost of removing underground storage tanks at properties leased from HPT at the end of the related lease; we recognized these obligations on a straight line basis over the term of the related leases as additional real estate rent expense. As of January 1, 2019, the straight line rent accrual was reclassified as a reduction to our operating lease assets and the obligation for the estimated cost of removal of underground storage tanks was reclassified to other noncurrent liabilities.
|
(3)
|
Deferred Gain.
The deferred gain primarily includes
$145,462
of gains from the sales of travel centers and certain other assets to HPT during 2015 and 2016. Prior to the adoption of ASC 842, we amortized the deferred gains on a straight line basis over the terms of the related leases as a reduction of real estate rent expense. Upon adoption of ASC 842 on January 1, 2019, we recognized the unamortized deferred gain of
$85,053
, net of taxes, in our beginning accumulated deficit. See above for more information about the impact of adopting ASC 842.
|
(4)
|
Deferred Tenant Improvements Allowance.
HPT funded certain capital projects at the properties we lease under the HPT Leases without an increase in rent payable by us. In connection with HPT's initial capital commitment, we recognized a liability for rent deemed to be related to this capital commitment as a deferred tenant improvements allowance. Prior to the adoption of ASC 842, we amortized the deferred tenant improvements allowance on a straight line basis over the terms of the HPT Leases as a reduction of real estate rent expense. Upon the adoption of ASC 842 on January 1, 2019, the unamortized balance of the deferred tenant improvements allowance was reclassified as a reduction to our operating lease assets.
|
(5)
|
Deferred Rent Obligation
. Pursuant to a rent deferral agreement with HPT, we previously deferred as of December 31, 2010, a total of
$150,000
of rent payable to HPT, which remained outstanding as of December 31, 2018, and had been due in
five
installments between 2024 and 2030. Upon the adoption of ASC 842 on January 1, 2019, these future lease payments were included in our calculation of our operating lease assets and liabilities and the deferred rent obligation was reclassified as a reduction to our operating lease assets. In January 2019, as described above and pursuant to the terms of the Transaction Agreements, our deferred rent obligation was reduced to
$70,458
, payable in
16
equal quarterly installments commencing on April 1, 2019, and our operating lease assets and liabilities were remeasured using these revised payment amounts.
|
7.
|
Business Management Agreement with RMR
|
8.
|
Related Party Transactions
|
9.
|
Contingencies
|
10.
|
Inventory
|
|
March 31,
2019 |
|
December 31,
2018 |
||||
Nonfuel products
|
$
|
159,373
|
|
|
$
|
163,302
|
|
Fuel products
|
34,795
|
|
|
33,419
|
|
||
Total inventory
|
$
|
194,168
|
|
|
$
|
196,721
|
|
•
|
we recognized an
$8,549
decrease in site level gross margin in excess of site level operating expense, which primarily resulted from the
$23,251
benefit from the federal biodiesel blenders' tax credit that was retroactively reinstated for 2017 and recognized in February 2018 that has not yet been reinstated for 2018;
|
•
|
we recognized a
$4,213
increase in depreciation and amortization expense, primarily as a result of the
20
travel centers acquired from Hospitality Properties Trust, or HPT, in January 2019; and
|
•
|
we recognized a
$3,823
decrease in real estate rent expense, which was primarily attributable to the decrease in annual minimum rent as a result of the agreements entered into with HPT in January 2019, or the Transaction Agreements.
|
|
Three Months Ended
March 31, |
|
|
|||||||
|
2019
|
|
2018
|
|
Change
|
|||||
Revenues:
|
|
|
|
|
|
|||||
Fuel
|
$
|
983,141
|
|
|
$
|
986,345
|
|
|
(0.3
|
)%
|
Nonfuel
|
440,874
|
|
|
423,875
|
|
|
4.0
|
%
|
||
Rent and royalties from franchisees
|
3,277
|
|
|
4,110
|
|
|
(20.3
|
)%
|
||
Total revenues
|
1,427,292
|
|
|
1,414,330
|
|
|
0.9
|
%
|
||
|
|
|
|
|
|
|||||
Gross margin:
|
|
|
|
|
|
|||||
Fuel
(1)
|
74,747
|
|
|
82,897
|
|
|
(9.8
|
)%
|
||
Nonfuel
|
272,606
|
|
|
262,464
|
|
|
3.9
|
%
|
||
Rent and royalties from franchisees
|
3,277
|
|
|
4,110
|
|
|
(20.3
|
)%
|
||
Total gross margin
|
350,630
|
|
|
349,471
|
|
|
0.3
|
%
|
||
|
|
|
|
|
|
|||||
Site level operating expense
|
232,720
|
|
|
223,012
|
|
|
4.4
|
%
|
||
Selling, general and administrative expense
|
37,110
|
|
|
36,494
|
|
|
1.7
|
%
|
||
Real estate rent expense
|
66,413
|
|
|
70,236
|
|
|
(5.4
|
)%
|
||
Depreciation and amortization expense
|
24,759
|
|
|
20,546
|
|
|
20.5
|
%
|
||
|
|
|
|
|
|
|||||
Loss from operations
|
(10,372
|
)
|
|
(817
|
)
|
|
NM
|
|
||
|
|
|
|
|
|
|||||
Interest expense, net
|
7,050
|
|
|
7,580
|
|
|
(7.0
|
)%
|
||
Other expense, net
|
574
|
|
|
1,293
|
|
|
(55.6
|
)%
|
||
Loss before income taxes and discontinued operations
|
(17,996
|
)
|
|
(9,690
|
)
|
|
(85.7
|
)%
|
||
Benefit for income taxes
|
5,267
|
|
|
3,663
|
|
|
43.8
|
%
|
||
Loss from continuing operations
|
(12,729
|
)
|
|
(6,027
|
)
|
|
(111.2
|
)%
|
||
Loss from discontinued operations, net of taxes
|
—
|
|
|
(4,051
|
)
|
|
NM
|
|
||
Net loss
|
(12,729
|
)
|
|
(10,078
|
)
|
|
(26.3
|
)%
|
||
Less: net income for noncontrolling interests
|
18
|
|
|
34
|
|
|
(47.1
|
)%
|
||
Net loss attributable to common shareholders
|
$
|
(12,747
|
)
|
|
$
|
(10,112
|
)
|
|
(26.1
|
)%
|
(1)
|
The 2019 amount includes
$2,840
of a one time reversal of loyalty award accruals recognized in connection with introducing a revised customer loyalty program and the 2018 amount includes the
$23,251
benefit from the federal biodiesel blenders' tax credit that the U.S. government retroactively reinstated for 2017 in February 2018. The U.S. government has not yet reinstated the federal biodiesel blenders' tax credit for 2018 or 2019.
|
|
Three Months Ended
March 31, |
|
|
|||||||
|
2019
|
|
2018
|
|
Change
|
|||||
Number of same site company operated locations
|
241
|
|
|
241
|
|
|
—
|
|
||
|
|
|
|
|
|
|||||
Diesel sales volume (gallons)
|
400,248
|
|
|
387,894
|
|
|
3.2
|
%
|
||
Gasoline sales volume (gallons)
|
59,838
|
|
|
63,187
|
|
|
(5.3)
|
%
|
||
Total fuel sales volume (gallons)
|
460,086
|
|
|
451,081
|
|
|
2.0
|
%
|
||
|
|
|
|
|
|
|||||
Fuel revenues
|
$
|
952,617
|
|
|
$
|
969,817
|
|
|
(1.8)
|
%
|
Fuel gross margin
(1)
|
74,153
|
|
|
82,156
|
|
|
(9.7)
|
%
|
||
Fuel gross margin per gallon
|
$
|
0.161
|
|
|
$
|
0.182
|
|
|
(11.5)
|
%
|
|
|
|
|
|
|
|||||
Nonfuel revenues
|
$
|
434,227
|
|
|
$
|
422,718
|
|
|
2.7
|
%
|
Nonfuel gross margin
|
268,325
|
|
|
261,519
|
|
|
2.6
|
%
|
||
Nonfuel gross margin percentage
|
61.8
|
%
|
|
61.9
|
%
|
|
(10
|
)pts
|
||
|
|
|
|
|
|
|||||
Total gross margin
(1)
|
$
|
342,478
|
|
|
$
|
343,675
|
|
|
(0.3)
|
%
|
Site level operating expense
|
228,621
|
|
|
221,910
|
|
|
3.0
|
%
|
||
Site level operating expense as a percentage of nonfuel revenues
|
52.7
|
%
|
|
52.5
|
%
|
|
20
|
pts
|
||
Site level gross margin in excess of site level operating expense
(1)
|
$
|
113,857
|
|
|
$
|
121,765
|
|
|
(6.5)
|
%
|
(1)
|
The 2019 amount includes
$2,812
of a one time reversal of loyalty award accruals recognized in connection with introducing a revised customer loyalty program and the 2018 amount includes the
$23,234
benefit from the federal biodiesel blenders' tax credit that the U.S. government retroactively reinstated for 2017 in February 2018. The U.S. government has not yet reinstated the federal biodiesel blenders' tax credit for 2018 or 2019.
|
|
Gallons Sold
|
|
Fuel Revenues
|
|||
Results for the three months ended March 31, 2018
|
458,246
|
|
|
$
|
986,345
|
|
Decrease due to petroleum products price changes
|
|
|
(31,986
|
)
|
||
Increase due to same site volume changes
|
9,005
|
|
|
19,454
|
|
|
Increase due to locations opened
|
5,091
|
|
|
10,265
|
|
|
Decrease due to locations closed
|
(341
|
)
|
|
(704
|
)
|
|
Decrease in wholesale fuel sales volume
|
(99
|
)
|
|
(233
|
)
|
|
Net change from prior year period
|
13,656
|
|
|
(3,204
|
)
|
|
Results for the three months ended March 31, 2019
|
471,902
|
|
|
$
|
983,141
|
|
•
|
cash balance;
|
•
|
operating cash flow;
|
•
|
our revolving credit facility, or our Credit Facility, with a current maximum availability of
$200,000
subject to limits based on our qualified collateral;
|
•
|
sales to HPT of improvements we make to the sites we lease from HPT;
|
•
|
potential issuances of new debt and equity securities; and
|
•
|
potential financing or selling of unencumbered real estate that we own.
|
•
|
continuing decreased demand for our fuel products resulting from regulatory and market efforts for improved engine fuel efficiency, fuel conservation and alternative fuels and technologies;
|
•
|
decreased demand for our products and services that we may experience as a result of competition or otherwise;
|
•
|
the fixed nature of a significant portion of our expenses, which may restrict our ability to realize a sufficient reduction in our expenses to offset a reduction in our revenues;
|
•
|
the costs and funding that may be required to execute our growth initiatives;
|
•
|
the possible inability of acquired or developed properties to generate the stabilized financial results we expected at the time of acquisition or development;
|
•
|
increasing labor cost inflation;
|
•
|
increasing market interest rates that may increase our cost of capital;
|
•
|
the risk of an economic slowdown or recession in the U.S. economy; and
|
•
|
the negative impacts on our gross margins and working capital requirements if there were a return to the higher level of prices for petroleum products we experienced in prior years or due to increases in the cost of our fuel or nonfuel products resulting from inflation generally.
|
•
|
Our operating results for the three months ended
March 31, 2019
, reflect certain improvements such as increases in nonfuel revenues and nonfuel gross margin over the same period last year. This may imply that we will increase or maintain these improvements and that we will be profitable in the future. However, certain of these improvements resulted from unique items that may not occur in the future. In addition, customer demand and competitive conditions, among other factors, may significantly impact our nonfuel revenues and the costs of our nonfuel products may increase in the future because of inflation or other reasons. If nonfuel sales volume declines, if we are not able to pass increases in nonfuel costs to our customers or if our nonfuel sales mix changes in a manner that negatively impacts our nonfuel gross margin, our nonfuel revenues or our nonfuel gross margin may decline. In fact, since we became a public company in 2007, we have been able to produce only occasional profits and we have accumulated significant losses. We may be unable to produce future profits and our losses may increase;
|
•
|
We expect that locations we acquire, develop or renovate will produce stabilized financial results after a period of time following acquisition, development or renovation. This statement may imply that stabilization of our acquired, developed or renovated sites will occur as expected, and if so, will generate increased operating income. However, many of the locations we have acquired or may acquire in the future produced operating results that caused the prior owners to exit these businesses. Our ability to operate these acquired, developed or renovated locations profitably depends upon many factors, some of which are beyond our control. Accordingly, these locations may not generate increased operating income or it may take longer than we expect to realize any such increases;
|
•
|
We have made acquisitions and developed new locations and we may make acquisitions and develop new locations in the future including adding sites through franchising. Managing and integrating acquired, developed and franchised locations can be difficult, time consuming and/or more expensive than anticipated and involve risks of financial losses. We may not operate our acquired or developed locations as profitably as we may expect. In addition, acquisitions or property development may subject us to greater risks than our continuing operations, including the assumption of unknown liabilities;
|
•
|
We believe the U.S. government may retroactively reinstate the federal biodiesel blenders' tax credit for 2018 and 2019 by the third quarter of 2019 and that we may recognize a reduction in our fuel cost of goods sold for the refund from this credit of approximately
$35.0 million
and
$5.9 million
, respectively, in the period in which the U.S. government enacts the tax credit reinstatement. However, the U.S. government may not retroactively reinstate this tax credit at the level we expect or at all and we may not realize the reductions in our fuel cost of goods sold that we expect. In addition, these statements about the federal biodiesel blenders' tax credit may imply that the U.S. government will extend or retroactively reinstate the federal biodiesel blenders’ tax credit for future years. However, the U.S. government may choose not to do so;
|
•
|
We have a Credit Facility with a current maximum availability of
$200.0 million
. The availability of this maximum amount is subject to limits based on our qualified collateral, including our eligible cash, accounts receivable and inventory, that varies in amount from time to time. Accordingly, our borrowing and letter of credit availability at any time may be less than
$200.0 million
. At
March 31, 2019
, based on our eligible collateral at that date, our borrowing and letter of credit availability was
$136.0 million
, of which we had used
$14.8 million
for outstanding letters of credit. The maximum amount available under the Credit Facility may be increased to
$300.0 million
, the availability of which is subject to limits based on our available collateral and lender participation. However, if we do not have sufficient collateral or if we are unable to identify lenders willing to increase their commitments or join our Credit Facility, we may not be able to increase the size of our Credit Facility or the availability of borrowings when we may want or need to do so. We intend to renew or replace the Credit Facility prior to December 2019, when it expires, but we do not know whether we will be able to do so or what the terms of any replacement credit facility would be; and
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We may seek to finance or sell unencumbered real estate that we own. However, we do not know the extent to which we can monetize our existing unencumbered real estate or what the terms of any such financing or sale would be.
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Continued improved fuel efficiency of motor vehicle engines and other fuel conservation and alternative fuel practices and sources employed or used by our customers and alternative fuel technologies or other means of transportation that may be developed and widely adopted in the future may continue to reduce the demand for the fuel that we sell and may adversely affect our business;
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Competition within the travel center, truck repair and restaurant industries may adversely impact our financial results. Our business requires substantial amounts of working capital and our competitors may have greater financial and other resources than we do;
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Future increases in fuel prices may reduce the demand for the products and services that we sell;
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Future commodity fuel price increases, fuel price volatility or other factors may cause us to need more working capital to maintain our inventory and carry our accounts receivable than we now expect and the general availability of, demand for and pricing of motor fuels may change in ways which lower the profitability associated with our selling motor fuels;
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Our suppliers may be unwilling or unable to maintain the current credit terms for our purchases. If we are unable to purchase goods on reasonable credit terms, our required working capital may increase and we may incur material losses. Also, in times of rising fuel and nonfuel prices, our suppliers may be unwilling or unable to increase the credit amounts they extend to us, which may increase our working capital requirements. The availability and the terms of any credit we may be able to obtain are uncertain;
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Most of our trucking company customers transact business with us by use of fuel cards issued by third party fuel card companies. Fuel card companies facilitate payments to us and charge us fees for these services. The fuel card industry has only a few significant participants. We believe almost all trucking companies use only a single fuel card provider and have become increasingly dependent upon services provided by their respective fuel card provider to manage their fleets. Continued lack of competition among fuel card companies may result in future increases in our transaction fee expenses or working capital requirements, or both;
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Fuel supply disruptions may occur, which may limit our ability to purchase fuel for resale;
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If trucking companies are unable to satisfy market demands for transporting goods or if the use of other means of transporting goods increases, the trucking industry may experience reduced business, which would negatively affect our business, results of operations and liquidity;
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Compliance with, and changes to, federal, state and local laws and regulations, including those related to tax, employment and environmental matters, accounting rules and financial reporting standards, payment card industry requirements and similar matters may increase our operating costs and reduce or eliminate our profits;
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We are routinely involved in litigation. Discovery during litigation and court decisions often have unanticipated results. Litigation is usually expensive and can be distracting to management. We cannot be sure of the outcome of any of the litigation matters in which we are or may become involved;
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Acts of terrorism, geopolitical risks, wars, outbreaks of so called pandemics or other man made or natural disasters beyond our control may adversely affect our financial results; and
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Although we believe that we benefit from our relationships with our related parties, including HPT, RMR, AIC and others affiliated with them, actual and potential conflicts of interest with related parties may present a contrary perception or result in litigation, and the benefits we believe we may realize from the relationships may not materialize.
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TRAVELCENTERS OF AMERICA LLC
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By:
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/s/ William E. Myers
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Date:
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May 7, 2019
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Name:
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William E. Myers
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Title:
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Executive Vice President,
Chief Financial Officer and Treasurer
(Principal Financial Officer and Principal Accounting Officer)
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1.
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I have reviewed this quarterly report on Form 10-Q of TravelCenters of America LLC;
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2.
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Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
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3.
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Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
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4.
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The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
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a)
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Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
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b)
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Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
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c)
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Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
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d)
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Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
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5.
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The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
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a)
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All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
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b)
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Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
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Date: May 7, 2019
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/s/ Andrew J. Rebholz
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Andrew J. Rebholz
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Chief Executive Officer
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1.
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I have reviewed this quarterly report on Form 10-Q of TravelCenters of America LLC;
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2.
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Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
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3.
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Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
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4.
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The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
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a)
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Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
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b)
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Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
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c)
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Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
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d)
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Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
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5.
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The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
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a)
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All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
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b)
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Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
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Date: May 7, 2019
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/s/ William E. Myers
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William E. Myers
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Executive Vice President, Chief Financial Officer and Treasurer
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Date: May 7, 2019
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/s/ Andrew J. Rebholz
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Andrew J. Rebholz
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Chief Executive Officer
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/s/ William E. Myers
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William E. Myers
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Executive Vice President, Chief Financial Officer and Treasurer
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