TA says while it is still losing money, its financial numbers look better for the second quarter of the year than they did in the first quarter.


TravelCenters of America LLC announced financial results for the three and six month periods ended June 30, 2008. For the second quarter, revenues were $2.28 billion, with a net loss of $9.76 million. That compares to revenues of $1.49 billion and net loss of $6.34 million for the first quarter of 2007. For the first half of the year, TZ reported $4.186 billion in revenue and a net loss of $58.21 million, compared to revenues of $2.58 billion and net loss of $38 million in the same period in 2007.

As of June 30, TA's business included 236 sites, 167 of which were operated under the "TravelCenters of America" or "TA" brand names and 69 that were operated under the "Petro" brand name.

The increase in revenues and expenses during the 2008 periods over the 2007 periods principally reflects two factors: increased fuel prices and TA's acquisition of Petro on May 30, 2007. During the three months ended June 30, 2008, the slowing of the U.S. economy and the persistence of high fuel prices continued to present TA with numerous operating challenges.

On a same site basis, TA's total fuel volumes were down 16 percent for the 2008 second quarter over the corresponding 2007 period and down by 14 percent for the first six months of 2008 as compared to the 2007 period.

However, TA says it believes it has made significant progress toward adjusting its business to these challenges. TA's net loss, EBITDAR and adjusted EBITDAR for the second quarter of 2008 improved over the first quarter of 2008 by $38.7 million, $39.2 million and $31.9 million, respectively.

A significant part of the improvements realized in the quarter ended June 30, 2008 compared to the immediately prior calendar quarter may have resulted from seasonality; there is usually more trucking business in the second calendar quarter than in the first calendar quarter of each year. However, TA believes that its operating initiatives undertaken during the past year have been
significant contributors to these improved results; specifically, the staffing reorganization undertaken to realize Petro integration synergies, the personnel cost savings announced in March 2008, the termination of the fuel marketing arrangement with Simons Petroleum and several fuel purchasing and pricing strategies which are designed to improve TA's operating margins. All of these initiatives are continuing at this time as TA continues to adjust its operations to current market conditions.

TA's capital plan for the balance of 2008 remains essentially unchanged from that announced in May 2008. As of June 30, 2008, approximately $40 million of planned capital projects remain to be completed, which projects are limited to those necessary to finish projects started during 2007 and to maintain TA's operations. Some of these projects may be funded by Hospitality Properties Trust, or Hospitality Trust, under the amended lease arrangements announced in May 2008.

As of June 30, 2008, TA had approximately $106 million in cash and cash equivalents. In addition, TA's $100 million bank credit facility remains partially unused.

The improved operating results show that it can cover its current lease obligations to Hospitality Trust for the quarter. Nonetheless, the challenging industry conditions which TA faces caused TA to initiate negotiations with Hospitality Trust to improve its working capital position in the event that the current unfavorable market conditions in which TA operates persist for an extended period. In response to this request, TA and Hospitality Trust have agreed to a rent deferral arrangement, significant terms of which include:
* TA currently leases 185 travel centers from Hospitality Trust under two leases for combined rent of $18.8 million per month. This rent amount periodically increases pursuant to formulas in the leases. TA will have the option to defer its monthly rent payments to Hospitality Trust by up to $5 million per month for periods beginning July 1, 2008 until December 31, 2010.
* TA will not be obligated to pay cash interest on the deferred rent through December 31, 2009. Instead, TA will issue 1.54 million TA common shares to Hospitality Trust (approximately 9.6% of TA's shares outstanding after this new issuance). In the event TA does not defer its monthly rent payments for the full permitted amounts through December 31, 2009, the pro-rata amount of TA shares issued to Hospitality Trust may be repurchased by TA for nominal consideration.
* In the event that any rents which have been deferred remain unpaid or additional rent amounts are deferred after December 31, 2009, interest on all such amounts will be payable to Hospitality Trust monthly at the rate of 12 percent per annum, beginning January 1, 2010.
* No rent deferrals are permitted for rent periods after December 31, 2010. Any deferred rent (and interest thereon) not paid will be due to Hospitality Trust on July 1, 2011. Any deferred amounts (and interest) may be prepaid at anytime.
* This deferral agreement also includes a prohibition on share repurchases and dividends by TA while any deferred rent remains unpaid and has change of control covenants so that amounts deferred will be payable to Hospitality Trust in the event TA experiences a change of control while deferred rent is unpaid.


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