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24601 Center Ridge Road,

Westlake,

OH

44145-5639

(Address and Zip Code of Principal Executive Offices)

(440)

808-9100

(Registrant's 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 o

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).  Yes x  No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer o						Accelerated filer x
Non-accelerated filer o						Smaller reporting company x
Emerging growth company o

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes ☐ No x

Number of the registrant's shares of common stock outstanding as of November 4, 2019: 8,085,249.

TABLE OF CONTENTS

						Page
PART I — FINANCIAL INFORMATION
Item 1.			Financial Statements (Unaudited)			1
			Consolidated Balance Sheets as of September 30, 2019 and December 31, 2018			1
			Consolidated Statements of Operations and Comprehensive Income (Loss) for the Three and Nine Months Ended September 30, 2019 and 2018			2
			Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2019 and 2018			3
			Consolidated Statements of Stockholders' Equity for the Three Months Ended September 30, 2019 and 2018			4
			Consolidated Statements of Stockholders' Equity for the Nine Months Ended September 30, 2019 and 2018			5
			Notes to Consolidated Financial Statements			6
Item 2.			Management's Discussion and Analysis of Financial Condition and Results of Operations			19
Item 3.			Quantitative and Qualitative Disclosures About Market Risk			30
Item 4.			Controls and Procedures			30
			Warning Concerning Forward-Looking Statements			31
PART II — OTHER INFORMATION									34
Item 1.			Legal Proceedings			34
Item 1A.			Risk Factors			34
Item 2.			Unregistered Sales of Equity Securities and Use of Proceeds			37
Item 6.			Exhibits			38
SIGNATURE						40

As used herein the terms "we," "us," "our" and "TA" include TravelCenters of America Inc. and its consolidated subsidiaries unless otherwise expressly stated or the context otherwise requires.

Part I.  Financial Information

Item 1.  Financial Statements

TravelCenters of America Inc.

Consolidated Balance Sheets (Unaudited)

(in thousands, except par value amount)

			September 30, 2019						December 31, 2018
Assets:
Current assets:
Cash and cash equivalents			$	32,546					$	314,387
Accounts receivable (net of allowance for doubtful accounts of $1,033 and $959 as of September 30, 2019 and December 31, 2018, respectively)			133,906						97,449
Inventory			195,202						196,721
Other current assets			27,433						35,119
Total current assets			389,087						643,676
Property and equipment, net			880,058						628,537
Operating lease assets			1,802,394						—
Goodwill			25,259						25,259
Intangible assets, net			21,179						22,887
Other noncurrent assets			100,335						121,749
Total assets			$	3,218,312					$	1,442,108
Liabilities and Stockholders' Equity:
Current liabilities:
Accounts payable			$	167,373					$	120,914
Current operating lease liabilities			99,217						—
Current SVC Leases liabilities			—						42,109
Other current liabilities			172,799						125,668
Total current liabilities			439,389						288,691
Long term debt, net			321,196						320,528
Noncurrent operating lease liabilities			1,875,062						—
Noncurrent SVC Leases liabilities			—						353,756
Other noncurrent liabilities			53,403						28,741
Total liabilities			2,689,050						991,716
Stockholders' equity:
Common stock, $0.001 par value, 8,674 shares of common stock authorized as of    September 30, 2019 and December 31, 2018, and 8,085 and 8,080 shares of    common stock issued and outstanding as of September 30, 2019 and December 31,    2018, respectively			8						8
Additional paid-in capital			697,558						695,307
Accumulated other comprehensive income			484						355
Accumulated deficit			(170,267)						(246,773)
Total TA stockholders' equity			527,783						448,897
Noncontrolling interest			1,479						1,495
Total stockholders' equity			529,262						450,392
Total liabilities and stockholders' equity			$	3,218,312					$	1,442,108

The accompanying notes are an integral part of these consolidated financial statements.

TravelCenters of America Inc.

Consolidated Statements of Operations and Comprehensive Income (Loss) (Unaudited)

(in thousands, except per share amounts)

			Three Months Ended September 30,																		Nine Months Ended September 30,
			2019						2018						2019						2018
Revenues:
Fuel			$	1,074,680					$	1,172,913					$	3,175,492					$	3,308,744
Nonfuel			492,089						482,570						1,409,045						1,377,887
Rent and royalties from franchisees			3,723						3,863						10,611						12,022
Total revenues			1,570,492						1,659,346						4,595,148						4,698,653
Cost of goods sold (excluding depreciation):
Fuel			995,222						1,096,065						2,944,465						3,074,621
Nonfuel			197,585						192,507						553,351						538,162
Total cost of goods sold			1,192,807						1,288,572						3,497,816						3,612,783
Site level operating expense			241,740						233,344						709,105						685,217
Selling, general and administrative expense			40,178						35,490						116,850						99,464
Real estate rent expense			63,911						71,116						194,094						212,036
Depreciation and amortization expense			24,146						20,407						72,118						62,076
Income from operations			7,710						10,417						5,165						27,077
Interest expense, net			7,048						7,518						21,262						21,963
Other (income) expense, net			(60)						(569)						370						1,627
Income (loss) before income taxes and discontinued operations			722						3,468						(16,467)						3,487
Benefit (provision) for income taxes			1,150						(1,879)						6,819						713
Income (loss) from continuing operations			1,872						1,589						(9,648)						4,200
Loss from discontinued operations, net of taxes			—						(72,070)						—						(118,683)
Net income (loss)			1,872						(70,481)						(9,648)						(114,483)
Less: net income for noncontrolling interest			40						33						89						121
Net income (loss) attributable to common stockholders			$	1,832					$	(70,514)					$	(9,737)					$	(114,604)
Other comprehensive (loss) income,    net of taxes:
Foreign currency (loss) gain, net of taxes of    $(14), $22, $37 and $(42), respectively			$	(8)					$	31					$	38					$	(72)
Interest in equity investee's unrealized (losses) gains on investments			(46)						173						91						90
Other comprehensive (loss) income    attributable to common stockholders			(54)						204						129						18
Comprehensive income (loss) attributable to common stockholders			$	1,778					$	(70,310)					$	(9,608)					$	(114,586)
Net income (loss) per share of common stock attributable to common stockholders:
Basic and diluted from continuing operations			$	0.23					$	0.20					$	(1.20)					$	0.51
Basic and diluted from discontinued operations			—						(9.07)						—						(14.86)
Basic and diluted			0.23						(8.87)						(1.20)						(14.35)

The accompanying notes are an integral part of these consolidated financial statements.

TravelCenters of America Inc.

Consolidated Statements of Cash Flows (Unaudited)

(in thousands)

			Nine Months Ended September 30,
			2019						2018
Cash flows from operating activities:
Net loss			$	(9,648)					$	(114,483)
Less: loss from discontinued operations, net of taxes			—						(118,683)
(Loss) income from continuing operations			(9,648)						4,200
Adjustments to reconcile (loss) income from continuing operations to net cash    provided by operating activities of continuing operations:
Noncash rent (credits) charges, net			(14,233)						(10,857)
Depreciation and amortization expense			72,118						62,076
Deferred income tax benefit			(5,660)						(15,285)
Changes in operating assets and liabilities:
Accounts receivable			(36,615)						(44,154)
Inventory			1,534						(11,170)
Other assets			7,472						(66)
Accounts payable and other liabilities			74,027						107,887
Other, net			3,277						22,776
Net cash provided by operating activities of continuing operations			92,272						115,407
Net cash provided by operating activities of discontinued operations			—						7,423
Net cash provided by operating activities			92,272						122,830
Cash flows from investing activities:
Acquisitions of travel centers from SVC			(309,637)						—
Capital expenditures			(63,157)						(106,756)
Proceeds from asset sales to SVC			—						44,162
Proceeds from asset sales			880						—
Other			(1,500)						(1,359)
Net cash used in investing activities of continuing operations			(373,414)						(63,953)
Net cash used in investing activities of discontinued operations			—						(7,429)
Net cash used in investing activities			(373,414)						(71,382)
Cash flows from financing activities:
Proceeds from sale leaseback transactions with SVC			—						491
Distributions to noncontrolling interest			(105)						(101)
Sale leaseback financing obligation payments			—						(802)
Other			(658)						(970)
Net cash used in financing activities			(763)						(1,382)
Effect of exchange rate changes on cash			64						(80)
Net (decrease) increase in cash and cash equivalents			(281,841)						49,986
Cash and cash equivalents at the beginning of the period			314,387						36,082
Cash and cash equivalents at the end of the period			32,546						86,068
Less: cash of discontinued operations at the end of the period			—						549
Cash and cash equivalents of continuing operations at the end of the period			$	32,546					$	85,519
Supplemental disclosure of cash flow information:
Interest paid (including rent classified as interest and net of capitalized interest)			$	20,896					$	21,855
Income taxes paid, net of refunds			145						166

The accompanying notes are an integral part of these consolidated financial statements.

TravelCenters of America Inc.

Consolidated Statements of Stockholders' Equity (Unaudited)

(in thousands)

			Number of Shares of Common Stock						Common Stock						Additional Paid-In Capital						Accumulated Other Comprehensive Income						Accumulated Deficit						Treasury Stock						Total TA Stockholders' Equity						Noncontrolling Interest						Total Stockholders' Equity
June 30, 2019			8,087						$	8					$	696,878					$	538					$	(172,099)					$	—					$	525,325					$	1,439					$	526,764
Grants under share    award plan and    stock based    compensation, net			(2)						—						680						—						—						(12)						668						—						668
Retirement of    treasury stock			—						—						—						—						—						12						12						—						12
Other comprehensive loss, net of taxes			—						—						—						(54)						—						—						(54)						—						(54)
Net income			—						—						—						—						1,832						—						1,832						40						1,872
September 30, 2019			8,085						$	8					$	697,558					$	484					$	(170,267)					$	—					$	527,783					$	1,479					$	529,262
June 30, 2018			7,954						$	8					$	694,841					$	394					$	(170,310)					$	—					$	524,933					$	1,434					$	526,367
Grants under share    award plan and    stock based    compensation, net			—						—						(77)						—						—						(970)						(1,047)						—						(1,047)
Retirement of    treasury stock			—						—						—						—						—						970						970						—						970
Other comprehensive    income, net of taxes			—						—						—						204						—						—						204						—						204
Net (loss) income			—						—						—						—						(70,514)						—						(70,514)						33						(70,481)
September 30, 2018			7,954						$	8					$	694,764					$	598					$	(240,824)					$	—					$	454,546					$	1,467					$	456,013

The accompanying notes are an integral part of these consolidated financial statements.

TravelCenters of America Inc.

Consolidated Statements of Stockholders' Equity (Unaudited)

(in thousands)

			Number of Shares of Common Stock						Common Stock						Additional Paid-In Capital						Accumulated Other Comprehensive Income						Accumulated Deficit						Treasury Stock						Total TA Stockholders' Equity						Noncontrolling Interest						Total Stockholders' Equity
December 31, 2018			8,080						$	8					$	695,307					$	355					$	(246,773)					$	—					$	448,897					$	1,495					$	450,392
Grants under share    award plan and    stock based    compensation, net			5						—						2,251						—						—						(14)						2,237						—						2,237
Retirement of    treasury stock			—						—						—						—						—						14						14						—						14
Distributions to    noncontrolling    interest			—						—						—						—						—						—						—						(105)						(105)
Other comprehensive income, net of taxes			—						—						—						129						—						—						129						—						129
Cumulative effect    of adoption of ASC    842, net of taxes			—						—						—						—						86,243						—						86,243						—						86,243
Net (loss) income			—						—						—						—						(9,737)						—						(9,737)						89						(9,648)
September 30, 2019			8,085						$	8					$	697,558					$	484					$	(170,267)					$	—					$	527,783					$	1,479					$	529,262
December 31, 2017			7,997						$	8					$	690,680					$	580					$	(126,220)					$	—					$	565,048					$	1,447					$	566,495
Grants under share    award plan and    share based    compensation, net			(43)						—						4,084						—						—						(970)						3,114						—						3,114
Retirement of    treasury stock			—						—						—						—						—						970						970						—						970
Distributions to    noncontrolling    interest			—						—						—						—						—						—						—						(101)						(101)
Other comprehensive    income, net of taxes			—						—						—						18						—						—						18						—						18
Net (loss) income			—						—						—						—						(114,604)						—						(114,604)						121						(114,483)
September 30, 2018			7,954						$	8					$	694,764					$	598					$	(240,824)					$	—					$	454,546					$	1,467					$	456,013

The accompanying notes are an integral part of these consolidated financial statements.

Notes to Consolidated Financial Statements (Unaudited)

(dollars and shares in thousands, except par value and per share amounts)

1.Business Description and Basis of Presentation

TravelCenters of America Inc. is a Maryland corporation. Prior to August 1, 2019, we were organized as a Delaware limited liability company. On August 1, 2019, in conjunction with our conversion from a Delaware limited liability company to a Maryland corporation, we assigned a $0.001 par value per share to our common stock and the excess over the par value has been classified as additional paid-in capital on our consolidated balance sheets. In addition, on August 1, 2019, we completed a reverse stock split of our outstanding shares of common stock pursuant to which every five shares of our issued and outstanding common stock were exchanged for one share of our common stock. The common stock information included within this Quarterly Report on Form 10-Q, or this Quarterly Report, has been retrospectively adjusted to reflect the par value and the reverse stock split for all periods and dates presented. See Note 5 for more information about our reverse stock split.

As of September 30, 2019, we operated or franchised 304 travel centers, standalone truck service facilities and standalone restaurants. Our customers include trucking fleets and their drivers, independent truck drivers, highway and local motorists and casual diners. We also collect rents, royalties and other fees from our tenants and franchisees.

As of September 30, 2019, our business included 259 travel centers in 44 states in the United States and the province of Ontario, Canada, primarily along the U.S. interstate highway system, operated primarily under the "TravelCenters of America," "TA," "TA Express," "Petro Stopping Centers" and "Petro" brand names. Of our 259 travel centers at September 30, 2019, we owned 51, we leased 181, we operated two for a joint venture in which we own a noncontrolling interest and 25 were owned or leased from others by our franchisees. We operated 232 of our travel centers and franchisees operated 27 travel centers, including two we leased to franchisees. Our travel centers offer a broad range of products and services, including diesel fuel and gasoline, as well as nonfuel products and services such as truck repair and maintenance services, full service restaurants, quick service restaurants and various customer amenities.

As of September 30, 2019, our business included two standalone truck service facilities operated under the "TA Truck Service" brand name. Of our two standalone truck service facilities, we leased one and owned one. Our standalone truck service facilities offer extensive maintenance and emergency repair and roadside services to large trucks.

As of September 30, 2019, our business included 43 standalone restaurants in 12 states in the United States operated primarily under the "Quaker Steak & Lube," or QSL, brand name. Of our 43 standalone restaurants at September 30, 2019, we operated 15 restaurants (six we owned, eight we leased and one we operated for a joint venture in which we owned a noncontrolling interest) and 28 were owned or leased from others and operated by our franchisees.

We manage our business as one segment. 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 a single travel center located in a foreign country, Canada, that we do not consider material to our operations.

On December 5, 2018, we sold 225 convenience stores, one standalone restaurant and certain related assets, or our convenience stores business. As a result, the results of our convenience stores business are reported as discontinued operations for the three and nine months ended September 30, 2018, in our consolidated statements of operations and comprehensive income (loss). See Note 4 for more information about our discontinued operations.

The accompanying 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 presented 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, 2018, or our Annual Report. In the opinion of our management, the accompanying 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.

Reclassifications. Certain prior year amounts have been reclassified to be consistent with the current year presentation within our consolidated financial statements.

Fair Value Measurement

Senior Notes

We collectively refer to our $110,000 of 8.25% Senior Notes due 2028, our $120,000 of 8.00% Senior Notes due 2029 and our $100,000 of 8.00% Senior Notes due 2030 as our Senior Notes, which are our senior unsecured obligations. We estimate that, based on their trading prices (a Level 1 input), the aggregate fair value of our Senior Notes on September 30, 2019, was $333,236.

Goodwill Impairment

Goodwill is tested for impairment annually as of July 31, or more frequently if the circumstances warrant, at the reporting unit level. As of July 31, 2019, we evaluated our travel centers and QSL reporting units for impairment using a qualitative analysis which included evaluating financial trends and industry and market conditions and assessing the reasonableness of the assumptions used in the most recent quantitative analysis, including comparing actual results to the projections used in the quantitative analysis. Based on our analyses, we concluded that as of July 31, 2019, our goodwill in those reporting units was not impaired.

Changes in Accounting Principles

In February 2016, the Financial Accounting Standards Board, or the FASB, issued Accounting Standards Update 2016-02, Leases, or ASU 2016-02, which established a comprehensive lease standard under GAAP for virtually all industries. In August 2018, the FASB issued Accounting Standards Update 2018-11, Targeted Improvements to ASC 842, or ASU 2018-11, which allowed companies to adopt the standard using the modified retrospective transition method. ASU 2016-02 and 2018-11 are collectively referred to as ASC 842. ASC 842 requires lessees to apply a dual approach, classifying leases as either finance or operating leases. This classification determines whether the lease expense is recognized based on the effective interest method or on a straight line basis over the term of the lease. A lessee is also required to recognize a right of use asset and a lease liability for all leases with a term of greater than 12 months regardless of their classification. Leases with a term of 12 months or less will be accounted for similar to existing guidance for operating leases. We adopted ASC 842 on January 1, 2019, using the modified retrospective transition method, and elected to not restate prior year comparative periods. We elected to adopt the package of practical expedients; accordingly, we retained the lease classification and initial direct costs for any leases that existed prior to adoption and we did not revisit whether any existing or expired contracts contain leases. See Note 6 for more information about the impact of ASC 842.

In June 2018, the FASB issued Accounting Standards Update 2018-07, Compensation - Stock Compensation, or ASU 2018-07, which aligns the accounting for stock based payments to nonemployees with the accounting for stock based payments to employees. We adopted ASU 2018-07 on January 1, 2019, using the modified retrospective transition method, which had no impact on our prior year comparative periods. Historically, compensation expense related to stock awards granted to nonemployees was determined based on the vesting date fair value. Under ASU 2018-07, compensation expense relating to all stock awards is now measured at the grant date fair value and amortized to expense over the related vesting period. Upon adoption of ASU 2018-07, stock awards to nonemployees were remeasured using the adoption date fair value, or the market value of our shares of common stock as of January 1, 2019. We include stock based compensation expense in selling, general and administrative expense in our consolidated statements of operations and comprehensive income (loss).

2. Revenues

We recognize revenues based on the consideration specified in the contract with the customer, excluding any sales incentives (such as customer loyalty programs and customer rebates) and amounts collected on behalf of third parties (such as sales and excise taxes). The majority of our revenues are generated at the point of sale in our retail locations. Revenues consist of fuel revenues, nonfuel revenues and rents and royalties from franchisees.

Disaggregation of Revenues

We disaggregate our revenues based on the type of good or service provided to the customer, or by fuel revenues and nonfuel revenues, in our consolidated statements of operations and comprehensive income (loss). Nonfuel revenues disaggregated by type of good or service for the three and nine months ended September 30, 2019 and 2018, were as follows:

As of September 30, 2019, we expect the unsatisfied performance obligations relating to our customer loyalty programs will be satisfied within 12 months.

3. Acquisitions

In January 2019, we entered into agreements, or the Transaction Agreements, with Service Properties Trust (formerly known as Hospitality Properties Trust), or SVC, pursuant to which, among other things, we purchased 20 travel centers for $309,637, which amount includes $1,437 of transaction related costs. These acquisitions were accounted for as asset acquisitions that resulted in the derecognition of certain operating lease assets and liabilities for a net recognized aggregate cost basis of the acquired assets of $284,902. See Note 6 for more information about the Transaction Agreements and our leases with SVC and Note 9 for more information about our relationship with SVC.

As of September 30, 2019, we had entered into agreements to acquire one operating travel center business for $11,600, which we expect to account for as a business acquisition, and one parcel of land for $1,358, which we expect to account for as an asset acquisition. We expect to complete these acquisitions by the end of the first quarter of 2020, but these purchases are subject to conditions and may not occur, may be delayed or the terms may change.

4. Discontinued Operations

On December 5, 2018, we completed the sale of our convenience stores business for an aggregate sales price of $330,609. We received net proceeds from this sale of $319,853 after transaction related costs of $9,650 and cash sold of $1,106. For more information about our discontinued operations, refer to Note 4 to the Consolidated Financial Statements in our Annual Report.

The following table presents the results of operations for our discontinued operations for the three and nine months ended September 30, 2018.

5.  Earnings Per Share of Common Stock from Continuing Operations

On August 1, 2019, in conjunction with our conversion from a Delaware limited liability company to a Maryland corporation, we completed a reverse stock split of our outstanding shares of common stock pursuant to which every five shares of our issued and outstanding common stock were exchanged for one share of our common stock. No fractional shares were issued in the reverse stock split. Instead, fractional shares that otherwise would have resulted from the reverse stock split were purchased by us at the closing price of our common stock on July 31, 2019. The common stock information included within this Quarterly Report has been retrospectively adjusted to reflect this reverse stock split.

The following table presents a reconciliation of income (loss) from continuing operations to income (loss) from continuing operations available to common stockholders and the related earnings per share of common stock.

⁽¹⁾ Reflects the retrospective adjustment related to the reverse stock split completed on August 1, 2019, and excludes unvested shares of common stock awarded under our share award plans, which shares of common stock are considered participating securities because they participate equally in earnings and losses with all of our other shares of common stock. The weighted average number of unvested shares of common stock outstanding for the three months ended September 30, 2019 and 2018, was 309 and 274, respectively. The weighted average number of unvested shares of common stock outstanding for the nine months ended September 30, 2019 and 2018, was 313 and 358, respectively.

6.  Leasing Transactions

On January 1, 2019, we adopted ASC 842 using the modified retrospective transition method and elected to not restate prior year comparative periods. We elected to adopt the package of practical expedients; accordingly, we retained the lease classification and initial direct costs for any leases that existed prior to adoption and we did not revisit whether any existing or expired contracts contain leases.

On the date we adopted ASC 842, we recognized operating lease assets of $1,785,866 and operating lease liabilities of $1,996,957. We also recognized an adjustment to our beginning accumulated deficit of $86,243, net of taxes, consisting of (i) the previously recognized deferred gain on sale leaseback transactions of $113,712, (ii) the previously recognized liability for certain failed sale leaseback transactions recognized as financings of $1,591 and (iii) the related tax effect of $29,060.

As a Lessee

We have lease agreements covering many of our properties, as well as various equipment, with the most significant leases being our five leases with SVC, which are further described below. Certain of our leases include renewal options and purchase options. Renewal periods are included in calculating our operating lease assets and liabilities when they are reasonably certain. Leases with an initial term of 12 months or less are not recognized in our consolidated balance sheets. As of September 30, 2019, all of our leases were classified as operating leases.

Certain of our operating leases provide for variable lease costs, which primarily include percentage rent and our obligation for the estimated cost of removing underground storage tanks under the SVC Leases (as defined below).

Our lease costs are included in various balances in our consolidated statements of operations and comprehensive income (loss), as shown in the following table. For the three and nine months ended September 30, 2019, our lease costs consisted of the following:

Maturities of our operating lease liabilities that had remaining noncancelable lease terms in excess of one year as of September 30, 2019, were as follows:

⁽¹⁾ Includes rent for properties we sublease from SVC and pay directly to SVC's landlords.

⁽²⁾ The discount rate used to derive the present value of unpaid lease payments is based on the rates implicit in the SVC Leases and our incremental borrowing rate for all other leases.

The weighted average remaining lease term as of September 30, 2019, was 13 years. Our weighted average discount rate as of September 30, 2019, was 9.4%.

TravelCenters of America Inc.

Notes to Consolidated Financial Statements (Unaudited)

(dollars and shares in thousands, except par value and per share amounts)

During the nine months ended September 30, 2019, we paid $208,327 for amounts that had been included in the measurement of our operating lease liabilities.

As of September 30, 2019, our operating lease assets and liabilities consisted of the following:

			SVC Leases						Other						Total
Operating lease assets			$	1,780,064					$	22,330					$	1,802,394
Current operating lease liabilities			93,627						5,590						99,217
Noncurrent operating lease liabilities			1,857,170						17,892						1,875,062

As previously disclosed in our Annual Report and under the previous lease accounting standard, future minimum lease payments required under leases that had remaining noncancelable lease terms in excess of one year as of December 31, 2018, were as follows (included herein are the full payments then due under the SVC Leases, including the amount attributed to the lease of those sites that were accounted for as a financing as of December 31, 2018, in our consolidated balance sheet as reflected in the sale leaseback financing obligations):

			Total
Years ended December 31:
2019			$	302,855
2020			301,220
2021			299,393
2022			296,551
2023			295,534
Thereafter			1,980,078
Total			$	3,475,631

The amounts in the table above are as of December 31, 2018, and do not reflect the $43,148 annual minimum rent reduction resulting from the Transaction Agreements entered into in January 2019, as further described below.

Leasing Agreements with SVC

As of September 30, 2019, we leased from SVC a total of 179 properties under five leases, four of which we refer to as the TA Leases and one of which we refer to as the Petro Lease, and which we refer to collectively as the SVC Leases. In January 2019, we entered into the Transaction Agreements, pursuant to which:

•We purchased from SVC 20 travel center properties, which we previously leased from SVC, for a total purchase price of $309,637, including $1,437 of transaction related costs.

•As a result of our purchases of the 20 travel center properties, our annual minimum rent due to SVC was reduced by $43,148.

•The term of each SVC Lease was extended by three years.

•Commencing on April 1, 2019, we began to pay SVC 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 SVC that otherwise would have become due in five installments between 2024 and 2030. We paid to SVC $4,404 and $8,807 in respect of such obligation for the three and nine months ended September 30, 2019, respectively.

•Commencing with the year ending December 31, 2020, we will be obligated to pay to SVC 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 SVC were reallocated among the SVC Leases.

As a result of the Transaction Agreements, our operating lease assets and liabilities each increased by $23,673. In addition, the purchase of the 20 travel center properties resulted in the derecognition of certain operating lease assets and liabilities. See Note 3 for more information about these acquisitions.

On October 14, 2019, we and SVC amended the SVC Leases, pursuant to which, among other things, certain of the 179 travel center properties that we lease from SVC were reallocated among the SVC Leases. The amendments did not have a material impact on our real estate rent expense or operating lease assets and liabilities.

In addition to the payment of annual minimum rent, the SVC Leases provide for payment to SVC of percentage rent, calculated at 3.0% of the increase in total nonfuel revenues at each property over base year levels (the base year is 2012 for 35 properties, 2015 for 138 properties, 2017 for two properties, 2019 for three properties and 2020 for one property). The percentage rent amounts due were $1,020 and $1,002 for the three months ended September 30, 2019 and 2018, respectively, and $3,047 and $2,674 for the nine months ended September 30, 2019 and 2018, respectively. As noted above, pursuant to the Transaction Agreements, we are obligated to pay additional percentage rent commencing with the year ended December 31, 2020.

We recognized total rent expense under the SVC Leases of $60,985 and $68,513 for the three months ended September 30, 2019 and 2018, respectively, and $185,415 and $204,224 for the nine months ended September 30, 2019 and 2018, respectively.

During the nine months ended September 30, 2018, we sold to SVC $44,653 of improvements we made to properties leased from SVC; as a result, pursuant to the terms of the SVC Leases, our annual minimum rent payable to SVC increased by $3,795. During the nine months ended September 30, 2019, we did not sell to SVC any improvements we made to properties leased from SVC. At September 30, 2019, our property and equipment balance included $31,589 of improvements of the type that we historically requested that SVC purchase for an increase in annual minimum rent; however, we may elect not to sell some of those improvements and SVC is not obligated to purchase these improvements.

Pursuant to a rent deferral agreement with SVC, deferred rent shall be accelerated and interest shall begin to accrue thereon at 1.0% per month on the deferred rent amounts if certain events occur, including: our default under the SVC Leases; a change of control of us, as defined in the deferral agreement; or our declaration or payment of a dividend or other distribution in respect of our common stock. The total amount of deferred rent outstanding as of September 30, 2019, was $61,651.

As permitted by the SVC Leases, we sublease a portion of certain travel centers to third parties to operate other retail operations. These subleases are classified as operating leases. We recognized sublease rental income of $532 and $543 for the three months ended September 30, 2019 and 2018, respectively, and $1,687 and $1,721 for the nine months ended September 30, 2019 and 2018, respectively.

TravelCenters of America Inc.

Notes to Consolidated Financial Statements (Unaudited)

(dollars and shares in thousands, except par value and per share amounts)

The following table summarizes the various amounts related to the SVC Leases that were included in our consolidated balance sheet as of December 31, 2018.

			December 31, 2018
Current SVC 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 SVC Leases liabilities			$	42,109
Noncurrent SVC 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 SVC Leases liabilities			$	353,756

⁽¹⁾ Sale Leaseback Financing Obligations. As of December 31, 2018, the assets related to two travel centers we leased from SVC were reflected in our consolidated balance sheet, as were the related financing obligations. This accounting was required primarily because, at the time of the inception of the prior leases with SVC, more than a minor portion of these two travel centers was subleased to third parties. Upon adoption of ASC 842, these failed sale leasebacks were reclassified as operating leases, which resulted in a gain that was recognized in our beginning accumulated deficit as of January 1, 2019. 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 in connection with a transaction agreement we entered into with SVC in 2015 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 SVC 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 included $145,462 of gains from the sales of travel centers and certain other assets to SVC 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, we recognized the unamortized deferred gain of $85,053, net of taxes, in our beginning accumulated deficit as of January 1, 2019. See above for more information about the impact of adopting ASC 842.

⁽⁴⁾ Deferred Tenant Improvements Allowance. SVC funded certain capital projects at the properties we lease under the SVC Leases without an increase in rent payable by us. In connection with SVC'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 SVC Leases as a reduction of real estate rent expense. Upon the adoption of ASC 842, the unamortized balance of the deferred tenant improvements allowance was reclassified as a reduction to our operating lease assets as of January 1, 2019.

⁽⁵⁾ Deferred Rent Obligation. Pursuant to a rent deferral agreement with SVC, we previously deferred as of December 31, 2010, a total of $150,000 of rent payable to SVC, 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, 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 as of January 1, 2019. 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. The total amount of deferred rent outstanding as of September 30, 2019, was $61,651.

As a Lessor

As of September 30, 2019, we leased two travel centers to franchisees. These two lease agreements expire in June 2022. These leases include rent escalations that are contingent on future events, namely inflation or our investing in capital improvements at these travel centers. During the nine months ended September 30, 2018, we leased four travel centers to franchisees, one of which expired prior to June 30, 2018, and one expired in the three months ended September 30, 2018. Rent revenue from these operating leases totaled $572 and $690 for the three months ended September 30, 2019 and 2018, respectively, and $1,722 and $2,502 for the nine months ended September 30, 2019 and 2018, respectively. Future minimum lease payments due to us for the two leased sites under these operating leases as of September 30, 2019, was $563 for the remainder of 2019, $2,250 for each of the years 2020 and 2021 and $1,125 for 2022. See above for information regarding certain properties that we lease from SVC in which we sublease a portion of the properties to third parties to operate other retail operations.

7. Revolving Credit Facility

On July 19, 2019, we and certain of our subsidiaries, as borrowers or guarantors, entered into an amendment, or the Amendment, to our amended and restated loan and security agreement, or the Credit Facility, dated October 25, 2011, with Wells Fargo Capital Finance, LLC, as administrative agent for various lenders. The Amendment, among other things: (i) extended the maturity of the Credit Facility from December 19, 2019, to July 19, 2024; (ii) reduced the applicable margins on borrowings and standby letter of credit fees by 25 basis points and on commercial letter of credit fees by 12.5 basis points; (iii) made certain adjustments to the limitations on investments, dividends and stock repurchases under the Credit Facility in a manner favorable to us; (iv) reduced the sublimit for issuance of letters of credit under the Credit Facility from $170,000 to $125,000; and (v) made certain adjustments to the borrowing base calculation in a manner we believe to be favorable to us.

Under the Credit Facility, a maximum of $200,000 may be drawn, repaid and redrawn until maturity. The availability of the maximum amount is subject to limits based on qualified collateral. Subject to available collateral and lender participation, the maximum amount of this Credit Facility may be increased to $300,000. The Credit Facility may be used for general business purposes and allows for the issuance of letters of credit. Generally, no principal payments are due until maturity. Under the terms of the Credit Facility, interest is payable on outstanding borrowings at a rate based on, at our option, LIBOR or a base rate, plus a premium (which premium is subject to adjustment based upon facility availability, utilization and other matters).

As of September 30, 2019, the applicable margin was 1.25% for LIBOR borrowings and standby letter of credit fees, 0.25% for Base Rate borrowings and 0.625% for commercial letter of credit fees, in each case subject to adjustment based on facility availability, utilization and other matters. As of September 30, 2019, the unused line fee was 0.25% per annum, subject to adjustment according to the average daily principal amount of unused commitments under the Credit Facility.

The Credit Facility requires us to maintain certain levels of collateral, limits our ability to incur debt and liens, restricts us from making certain investments and paying dividends and other distributions, requires us to maintain a minimum fixed charge ratio under certain circumstances and contains other customary covenants and conditions. The Credit Facility provides for the acceleration of principal and interest payments upon an event of default including, but not limited to, failure to pay interest or other amounts due, a change in control of us, as defined in the Credit Facility, and our default under certain contracts, including our leases with SVC and our business management agreement with The RMR Group LLC, or RMR. Our Credit Facility is secured by substantially all of our cash, accounts receivable, inventory, equipment and intangible assets. The amount available to us is determined by reference to a borrowing base calculation based on eligible collateral. At September 30, 2019, based on our qualified collateral, a total of $129,085 was available to us for loans and letters of credit under the Credit Facility. At September 30, 2019, there were no loans outstanding under the Credit Facility but we had outstanding $14,813 of letters of credit issued under that facility, securing certain insurance, fuel tax and other obligations. These letters of credit reduce the amount available for borrowing under the Credit Facility, leaving $114,272 available for use as of that date.

8. Business Management Agreement with RMR

RMR provides us certain services pursuant to a business management agreement that we require to operate our business, and which relate to various aspects of our business. We incurred aggregate fees and costs payable to RMR of $3,572 and $4,029 for the three months ended September 30, 2019 and 2018, respectively, and $9,983 and $11,113 for the nine months ended September 30, 2019 and 2018, respectively, for these services, which includes reimbursements for our share of RMR's costs for providing internal audit services. These amounts are included in selling, general and administrative expense and loss from discontinued operations, net of taxes in our consolidated statements of operations and comprehensive income (loss). For more information about our relationship with RMR refer to Note 9 of this Quarterly Report and Notes 13 and 14 to the Consolidated Financial Statements in our Annual Report.

9. Related Party Transactions

We have relationships and historical and continuing transactions with SVC, RMR, Affiliates Insurance Company, or AIC, and others related to them, including other companies to which RMR or its subsidiaries provide management services and which have directors, trustees and officers who are also our Directors or officers.

Relationship with SVC

We are SVC's largest tenant and SVC is our principal landlord and largest stockholder. As of September 30, 2019, SVC owned 684 shares of our common stock, representing approximately 8.5% of our outstanding shares of common stock.

As of September 30, 2019, we leased from SVC a total of 179 properties under the SVC Leases. RMR provides management services to both us and SVC, and Adam D. Portnoy, the Chair of our Board of Directors and one of our Managing Directors, also serves as a managing trustee and chair of the board of trustees of SVC. See Note 6 for more information about our lease agreements and transactions with SVC.

Relationship with RMR

We have an agreement with RMR to provide management services to us. Adam D. Portnoy is the sole trustee, an officer and the controlling shareholder of ABP Trust, which is the controlling shareholder of The RMR Group Inc., a managing director and the president and chief executive officer of The RMR Group Inc. and an officer and employee of RMR. Andrew J. Rebholz, our other Managing Director and Chief Executive Officer, and our President and Chief Operating Officer, Executive Vice President, Chief Financial Officer and Treasurer, Executive Vice President and General Counsel, and Secretary are also officers and employees of RMR. The RMR Group Inc. is the managing member of RMR. See Note 8 for more information regarding our management agreement with RMR. As of September 30, 2019, RMR owned 299 shares of our common stock, representing approximately 3.7% of our outstanding shares of common stock.

Relationship with AIC

We, SVC and five other companies to which RMR provides management services currently own AIC, an Indiana insurance company, in equal amounts. We and the other AIC shareholders historically participated in a combined property insurance program arranged and reinsured in part by AIC. The policies under that program expired on June 30, 2019, and we and the other AIC shareholders elected not to renew the AIC property insurance program; we have instead purchased standalone property insurance coverage with unrelated third party insurance providers.

As of September 30, 2019 and December 31, 2018, our investment in AIC had a carrying value of $9,340 and $8,632, respectively. These amounts are included in other noncurrent assets in our consolidated balance sheets. We recognized income of $83 and $826 related to our investment in AIC for the three months ended September 30, 2019 and 2018, respectively, and $617 and $882 for the nine months ended September 30, 2019 and 2018, respectively, which amounts are included in other (income) expense, net in our consolidated statements of operations and comprehensive income (loss). Our other comprehensive (loss) income attributable to common stockholders includes our proportionate share of unrealized losses and gains on fixed income securities held for sale, which are owned by AIC, related to our investment in AIC.

AIC is in the process of dissolving. In connection with its dissolution, we expect to receive a capital distribution in the fourth quarter of 2019.

For more information about these and other such relationships and certain other related party transactions, refer to our Annual Report.

10. Contingencies

Environmental Contingencies

Extensive environmental laws regulate our operations and properties. These laws may require us to investigate and clean up hazardous substances, including petroleum or natural gas products, released at our owned and leased properties. Governmental entities or third parties may hold us liable for property damage and personal injuries, and for investigation, remediation and monitoring costs incurred in connection with any contamination and regulatory compliance at our locations. We use both underground storage tanks and above ground storage tanks to store petroleum products, natural gas and other hazardous substances at our locations. We must comply with environmental laws regarding tank construction, integrity testing, leak detection and monitoring, overfill and spill control, release reporting and financial assurance for corrective action in the event of a release. At some locations we must also comply with environmental laws relative to vapor recovery or discharges to water. Under the terms of the SVC Leases, we generally have agreed to indemnify SVC for any environmental liabilities related to properties that we lease from SVC and we are required to pay all environmental related expenses incurred in the operation of the leased properties. We have entered into certain other agreements in which we have agreed to indemnify third parties for environmental liabilities and expenses resulting from our operations.

From time to time we have received, and in the future likely will receive, notices of alleged violations of environmental laws or otherwise have become or will become aware of the need to undertake corrective actions to comply with environmental laws at our locations. Investigatory and remedial actions were, and regularly are, undertaken with respect to releases of hazardous substances at our locations. In some cases we have received, and may receive in the future, contributions to partially offset our environmental costs from insurers, from state funds established for environmental clean up associated with the sale of petroleum products or from indemnitors who agreed to fund certain environmental related costs at locations purchased from those indemnitors. To the extent we incur material amounts for environmental matters for which we do not receive or expect to receive insurance or other third party reimbursement and for which we have not previously recorded a liability, our operating results may be materially adversely affected. In addition, to the extent we fail to comply with environmental laws and regulations, or we become subject to costs and requirements not similarly experienced by our competitors, our competitive position may be harmed.

At September 30, 2019, we had an accrued liability of $3,143 for environmental matters as well as a receivable for expected recoveries of certain of these estimated future expenditures of $968, resulting in an estimated net amount of $2,175 that we expect to fund in the future. We cannot precisely know the ultimate costs we may incur in connection with currently known environmental related violations, corrective actions, investigation and remediation; however, we do not expect the costs for such matters to be material, individually or in the aggregate, to our financial position or results of operations.

We currently have insurance of up to $20,000 per incident and up to $20,000 in the aggregate for certain environmental liabilities, subject, in each case, to certain limitations and deductibles, which expires in June 2021. However, we can provide no assurance that we will be able to maintain similar environmental insurance coverage in the future on acceptable terms.

We cannot predict the ultimate effect changing circumstances and changing environmental laws may have on us in the future or the ultimate outcome of matters currently pending. We cannot be certain that contamination presently unknown to us does not exist at our sites, or that a material liability will not be imposed on us in the future. If we discover additional environmental issues, or if government agencies impose additional environmental requirements, increased environmental compliance or remediation expenditures may be required, which could have a material adverse effect on us.

Legal Proceedings

We are routinely involved in various legal and administrative proceedings incidental to the ordinary course of our business, including commercial disputes, employment related claims, wage and hour claims, premises liability claims and tax audits among others. We do not expect that any litigation or administrative proceedings in which we are presently involved, or of which we are aware, will have a material adverse effect on our business, financial condition, results of operations or cash flows.

On April 5, 2019, two plaintiffs filed a class action complaint against us in Ohio state court alleging that certain credit and debit card receipts printed by us included more information than permitted by the Fair and Accurate Credit Transactions Act. The complaint does not seek any actual damages, but plaintiffs seek statutory damages for the individual plaintiffs and members of the class, as well as declaratory relief, punitive damages, attorneys' fees and costs. In June 2019, we filed a motion to dismiss. On July 5, 2019, plaintiffs filed an amended complaint, which added a request for injunctive relief and on August 2, 2019, we filed a renewed motion to dismiss, which remains pending. We intend to vigorously defend against these claims. However, the outcome of litigation is inherently uncertain and we are not able to assess our exposure at this time.

11. Inventory

Inventory at September 30, 2019 and December 31, 2018, consisted of the following: