The following discussion should be read in conjunction with the consolidated
financial statements and related notes included elsewhere in this Quarterly
Report on Form 10-Q, or this Quarterly Report, and with our Annual Report on
Form 10-K for the fiscal year ended December 31, 2019, or our Annual
Report. Amounts are in thousands of dollars or gallons, as applicable, unless
indicated otherwise.

Company Overview
As of June 30, 2020, we operated or franchised 268 travel centers, three
standalone truck service facilities and 40 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.
We manage our business as one segment. We make specific disclosures concerning
fuel and nonfuel products and services because they facilitate 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.
COVID-19
In March 2020, COVID-19 was declared a pandemic by the World Health
Organization, and the U.S. Health and Human Services Secretary declared a public
health emergency in the United States in response to the outbreak. The COVID-19
pandemic and various governmental and market responses in an attempt to contain
and mitigate the spread of the virus and its detrimental public health impact
have had, and continue to have, a severe negative impact on the global economy,
including the U.S. economy. As a result, most market observers believe the
global economy is in the midst of a recession. Our business is focused on travel
centers and related trucking and driver services, products and amenities. Our
business benefited from being recognized as a business that provides services to
essential businesses by various governmental authorities, which allowed us to
continue operating our travel centers. Further, we also benefited from increased
initial demand by businesses and households to stock up on certain products in
response to the COVID-19 pandemic, which resulted in increased trucking activity
to transport those goods across the United States. We experienced increased
diesel fuel sales volume during the three months ended March 31, 2020, as
compared to the three months ended March 31, 2019, due to an initial increase in
demand for certain products as businesses and households stocked up on those
products as the implications of the COVID-19 pandemic began to be more widely
understood. The initial increase in demand began to decline during April 2020,
resulting in a decrease in diesel fuel sales volume during the three months
ended June 30, 2020, as compared to the three months ended June 30, 2019. In
addition, during the three and six months ended June 30, 2020, we experienced an
increase in fuel gross margin as compared to the three and six months ended
June 30, 2019, as both diesel fuel and gasoline costs declined as a result of a
more favorable fuel purchasing environment due to a reduction in demand and
disagreements among certain major oil producing countries and cartels that
resulted in delays in reducing, or failures to adequately reduce, oil supplies
in response to the sharp drop in demand, as well as the benefit recognized in
connection with the federal biodiesel blenders' tax credit. Due to governmental
stay in place orders, social distancing and other reductions in activity, demand
for gasoline volume during the second half of March 2020 through June 30, 2020,
declined sharply, resulting in reduced gasoline sales volume sold by us during
the three and six months ended June 30, 2020, as compared to the three and six
months ended June 30, 2019, and demand for certain of our nonfuel products and
services have declined. As a result, in March 2020 we temporarily closed most of
our full service restaurants and limited our product offerings at some of our
restaurants and travel centers. As a result, we experienced a decrease in
nonfuel revenues for the three and six months ended June 30, 2020, as compared
to the three and six months ended June 30, 2019. As governments began to lift
stay in place orders, we recognized increases in our truck service and store and
retail services revenues in June 2020 as compared to June 2019. Although we
began reopening some of our restaurants beginning in May 2020 as certain states
began allowing restaurants to reopen, the recent increase in COVID-19 infections
in several states has resulted in closing or re-closing certain of our
restaurants.
States and municipalities across the United States have been re-opening their
economies and easing certain restrictions they had previously implemented in
response to the COVID-19 pandemic, often in stages that are phased in over time.
Recently, economic data has indicated that the U.S. economy has improved since
the lowest periods experienced in March and April 2020. However, certain areas
of the United States have experienced increased numbers of COVID-19 infections
following the re-openings of their economies and easing of restrictions and, in
some cases, certain states have required closings of certain business activity
and imposed other restrictions in response. It is unclear whether the increases
in the number of infections will continue and amplify or whether any so-called
"second waves" of COVID-19 infections will be experienced in the United States
or elsewhere and, if so, what the impact of that would be on human health and
safety, the economy and our business.
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We believe that our travel centers and the truck drivers that we serve are
critical to sustaining a resilient supply chain to support essential services
and daily consumption across the United States. However, as the economic
downturn continues, demand for the transporting of products across the United
States by trucks may decline, possibly significantly. If that occurs, our
business, results of operations and financial position may become increasingly
significantly negatively impacted. Further, these economic conditions may result
in trucking companies being unable to continue as going concerns.
We have taken several actions in an attempt to address the operating and
financial impact from the COVID-19 pandemic, including:
•we significantly reduced our planned capital expenditures for 2020 to conserve
cash and liquidity;
•we have rationalized our hours of operation and employment levels, including
furloughing approximately 4,300 field employees, as well as approximately 120
corporate employees. Some of these employees returned to work during May and
June 2020 as we began to reopen some of our full service restaurants;
•we temporarily closed most of our full service restaurants;
•we have implemented enhanced sanitizing and cleaning procedures at our travel
centers in accordance with the U.S. Centers for Disease Control and Prevention,
or the CDC, guidance; and
•we have been actively engaging with government authorities, our customers,
suppliers and other vendors to try to best execute our business during the
pandemic.
We are closely monitoring the impact of the COVID-19 pandemic on all aspects of
our business, including:
•our trucking customers and their ability to withstand the current economic
conditions;
•our operations, liquidity and capital needs and resources;
•conducting financial modeling and sensitivity analyses;
•actively communicating with our customers, vendors and other key constituents
and stakeholders in order to help assess market conditions, opportunities, best
practices and mitigate risks and potential adverse impacts; and
•monitoring, with the assistance of counsel and other specialists, possible
government relief funding sources and other programs that may be available to
us, our franchisees or our tenants to enable us and them to operate through the
current economic conditions and enhance our franchisees' ability to pay us
royalties and our tenants' ability to pay us rent.
We believe that our current financial resources and our expectations as to the
future performance of the trucking industry and our operations will enable us to
withstand the COVID-19 pandemic and its aftermath. As of August 4, 2020, we had:
•approximately $210,200 of cash and cash equivalents, $80,056 of which was
raised through an underwritten public equity offering of our common stock that
we completed in July 2020;
•$84,304 of availability under our revolving credit facility, or our Credit
Facility;
•no debt maturities until 2024 when our Credit Facility is scheduled to expire;
•our ability to request that Service Properties Trust, or SVC, purchase from us
qualified capital improvements we make to the travel centers we lease from SVC
in return for increased rent, although SVC is not obligated to agree to make
those purchases; and
•unencumbered properties, which had a net book value of $509,126 as of June 30,
2020, that may be a source for financing.
We have taken various measures to protect the health and safety of our
customers, employees and other persons who visit our travel centers and
restaurants. These measures include, among others:
•we have supplied masks and gloves to all of our employees;
•we are mandating masks at all of our sites and at our headquarters;
•we have temporarily closed all self service food service stations in the
convenience stores in most of our travel centers;
•we have increased the frequency of our routine cleaning and sanitizing
schedule, as well as implemented enhanced sanitizing and cleaning procedures at
our travel centers and at the fuel pumps and pin pads;
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•we are following state and local health department regulations in all of our
sites;
•we are encouraging customers and employees to follow CDC recommendations of
practicing social distancing;
•we have advised our employees to take care of themselves and to be aware of
best practices for preventive safety measures, including frequent hand washing,
wearing masks, practicing social distancing when possible and staying home when
feeling ill; and
•we have temporarily closed all gyms and lounge areas within our travel centers.
There are extensive uncertainties surrounding the COVID-19 pandemic and its
aftermath. These uncertainties include, among others:
•the duration and severity of the current economic downturn;
•the strength and sustainability of any economic recovery;
•the timing and process for how the government and other market participants may
oversee and conduct the return of economic activity when the COVID-19 pandemic
abates, such as what continuing restrictions and protective measures may remain
in place or be added and what restrictions and protective measures may be lifted
or reduced in order to foster a return of increased economic activity in the
United States; and
•whether, following a recommencing of a more normal level of economic
activities, the United States or other countries experience "second waves" of
COVID-19 infection outbreaks and, if so, the responses of governments,
businesses and the general public to those events.
We have also implemented enhanced cleaning protocols and social distancing
guidelines at our corporate headquarters, as well as business continuity plans
to help our employees remain healthy and able to support us remotely, including
providing appropriate information technology such as notebook computers, smart
phones, computer applications, information technology security applications and
technology support.
As a result of these uncertainties, we are unable to determine what the ultimate
impact will be on our and our customers', vendors' and other stakeholders'
businesses, operations, financial results and financial position. For further
information and risks relating to the COVID-19 pandemic and its aftermath on us
and our business, please refer to Part II, Item 1A. "Risk Factors" in this
Quarterly Report.

Executive Summary of Financial Results
During the three months ended June 30, 2020 and 2019, we generated income before
income taxes of $3,243 and $807, respectively. The $2,436 increase in income
before income taxes was primarily due to the following factors:
•site level gross margin in excess of site level operating expense increased
$5,748, which primarily resulted from an increase in fuel gross margin due to a
more favorable fuel purchasing environment and the $7,715 benefit recognized in
connection with the federal biodiesel blenders' tax credit in the three months
ended June 30, 2020, and a decrease in site level operating expense, partially
offset by a decrease in nonfuel gross margin as a result of the impact of the
COVID-19 pandemic;
•selling, general and administrative expense decreased by $1,586, which
primarily resulted from the elimination of approximately 130 positions as part
of the Reorganization Plan, as defined below, and approximately 120 corporate
employees furloughed in response to the COVID-19 pandemic, as well as a
reduction in travel related and marketing expenses. These decreases were
partially offset by $3,884 of non-recurring restructuring costs associated with
the Reorganization Plan; and
•real estate rent expense decreased $691, which primarily resulted from a
decrease in percentage rent due to SVC as a result of the decrease in our
nonfuel revenues during the three months ended June 30, 2020, as compared to the
three months ended June 30, 2019.
The above factors were partially offset by an increase in depreciation and
amortization expense of $5,041, primarily as a result of a $3,046 goodwill
impairment charge recognized during the three months ended June 30, 2020, with
respect to our Quaker Steak & Lube, or QSL, business, the $834 write off of
intangible assets associated with three franchised standalone restaurants that
closed during the three months ended June 30, 2020, and the $539 write off of
certain assets related to programs that were canceled.
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During the six months ended June 30, 2020 and 2019, we generated a loss before
income taxes of $22,039 and $17,189, respectively. The $4,850 change in our loss
before income taxes was primarily due to the following factors:
•depreciation and amortization expense increased $8,842, which primarily
resulted from the $5,701 write off of certain assets related to programs that
were canceled, the $3,046 goodwill impairment charge recognized during the six
months ended June 30, 2020, with respect to our QSL business and the $834 write
off of intangible assets associated with three franchised standalone restaurants
that closed during the six months ended June 30, 2020; and
•site level gross margin in excess of site level operating expense declined $71,
which primarily resulted from a decrease in nonfuel gross margin as a result of
the impact of the COVID-19 pandemic, partially offset by a decrease in site
level operating expense and an increase in fuel gross margin primarily as a
result of a more favorable fuel purchasing environment and the $11,230 benefit
recognized in connection with the federal biodiesel blenders' tax credit during
the six months ended June 30, 2020.
The above factors were partially offset by the following:
•real estate rent expense decreased $3,516, which was primarily the result of
our acquisition in January 2019 of 20 travel centers from SVC that we previously
leased from SVC which reduced our annual minimum rent and a decrease in
percentage rent due to SVC as a result of the decrease in our nonfuel revenues
during the six months ended June 30, 2020, as compared to the six months ended
June 30, 2019; and
•selling, general and administrative expense decreased $1,468, which primarily
resulted from the elimination of approximately 130 positions as part of the
Reorganization Plan and approximately 120 corporate employees furloughed in
response to the COVID-19 pandemic, as well as a reduction in travel related
expenses and marketing expenses, partially offset by $4,288 of non-recurring
restructuring costs associated with the Reorganization Plan.
Effects of Fuel Prices and Supply and Demand Factors
Our revenues and income are subject to fluctuations, sometimes material, as a
result of market prices and the availability of, and demand for, diesel fuel and
gasoline. These factors are subject to the worldwide petroleum products supply
chain, which historically has experienced price and supply volatility as a
result of, among other things, severe weather, terrorism, political crises,
military actions and variations in demand that are often the result of changes
in the macroeconomic environment. Also, concerted efforts by major oil producing
countries and cartels to influence oil supply may impact prices as well as other
actions by governments regarding trade policies may impact fuel prices.
Over the past several years there have been significant changes in the cost of
fuel. During the three months ended June 30, 2020, fuel prices trended upward,
increasing 22.3% as compared to the beginning of the period. During the six
months ended June 30, 2020, fuel prices trended downward, declining 43.8% as
compared to the beginning of the period. The decrease in fuel prices for the six
months ended June 30, 2020, primarily resulted from a 52.7% decrease in March
and April 2020 as a result of the sharp decrease in demand resulting from the
COVID-19 pandemic and the related economic downturn. The average fuel price
during the three and six months ended June 30, 2020, was 52.7% and 36.8%,
respectively, lower than the average fuel price during the three and six months
ended June 30, 2019. We generally are able to pass changes in our cost for fuel
products to our customers, but typically with a delay, such that during periods
of rising fuel commodity prices, fuel gross margin per gallon tends to be lower
than it otherwise may have been and during periods of falling fuel commodity
prices, fuel gross margin per gallon tends to be higher than it otherwise may
have been. Increases in the prices we pay for fuel can have negative effects on
our sales and profitability and increase our working capital requirements.
Due to the volatility of our fuel costs and our methods of pricing fuel to our
customers, we believe that fuel revenues are not a reliable metric for analyzing
our results of operations from period to period. As a result solely of changes
in fuel prices, our fuel revenues may materially increase or decrease, in both
absolute amounts and on a percentage basis, without a comparable change in fuel
sales volume or in fuel gross margin, as evidenced by the three months ended
June 30, 2020. We therefore consider fuel sales volume and fuel gross margin to
be better measures of our performance.
We believe that demand for fuel by trucking companies and motorists for a
constant level of miles driven will continue to decline over time because of
technological innovations that improve fuel efficiency of motor vehicle engines,
other fuel conservation practices and alternative fuels and technologies. We
believe these factors, combined with competitive pressures, impact the level of
fuel sales volume we realize. During the three and six months ended June 30,
2020, fuel sales volumes declined as compared to the three and six months ended
June 30, 2019. These decreases primarily resulted from a decrease in trucking
activity and consumer travel as a result of the COVID-19 pandemic, primarily
during April and May 2020.
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Factors Affecting Comparability
Growth Strategies
On October 28, 2019, we entered into a multi unit franchise agreement with IHOP
Franchisor LLC a subsidiary of IHOP®, or IHOP, in which we agreed to rebrand and
convert up to 94 of our full service restaurants to IHOP restaurants over five
years, or the IHOP Agreement. Due to the COVID-19 pandemic, we and IHOP have
agreed to delay the rebranding schedule by one year. Of the 94, we are obligated
to convert the initial 20 full service restaurants to IHOP restaurants, with the
remaining conversions at our discretion. We currently operate these full service
restaurants under our Iron Skillet or Country Pride brand names. The average
investment per site to rebrand these restaurants is expected to be approximately
$1,100.
Since the beginning of 2019, we have entered into franchise agreements for 21
travel centers to be operated under our travel center brand names; four of these
franchised travel centers began operations during 2019, two began operations
during the 2020 first quarter, five began operations in the 2020 second quarter,
two began operations in the 2020 third quarter to date and we anticipate the
remaining eight franchised travel centers will be added to our network by the
end of 2021. In addition, we have entered into an agreement with one of these
franchisees pursuant to which we expect to add two additional franchised travel
centers to our network, one within five years and the other within 10 years.
Lease Amendments and Travel Center Purchases
In January 2019, we acquired from SVC 20 travel centers we previously leased
from SVC for $309,637, which includes $1,437 of transaction related costs, and
we and SVC amended our five leases such that: (i) the 20 purchased travel
centers were removed from the applicable leases and our annual minimum rent was
reduced by $43,148; (ii) the term of each of the leases was extended by three
years; (iii) the amount of the deferred rent obligation to be paid to SVC was
reduced from $150,000 to $70,458 and we began to pay that amount in 16 equal
quarterly installments commencing on April 1, 2019; and (iv) commencing on
January 1, 2020, we began to pay to SVC an additional amount of percentage rent
equal to one-half percent (0.5%) of the excess of the annual nonfuel revenues at
leased sites over the nonfuel revenues for each respective site for the year
ending December 31, 2019. These lease amendments are further described in Note 6
to the Consolidated Financial Statements included in Item 1 of this Quarterly
Report.
Federal Biodiesel Blenders' Tax Credit
In December 2019, the U.S. government retroactively reinstated the federal
biodiesel blenders' tax credit for 2018 and 2019, and approved the federal
biodiesel blenders' tax credit through 2022. During the three and six months
ended June 30, 2020, we recognized $7,715 and $11,230, respectively, as a
reduction to our fuel cost of goods sold relating to the federal biodiesel
blenders' tax credit. For the remainder of 2020 through 2022, the benefit of the
federal biodiesel blenders' tax credit will be included in the price we pay for
biodiesel.


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Reorganization Plan
On April 30, 2020, we committed to and initiated a reorganization plan, or the
Reorganization Plan, to improve the efficiency of its operations. As part of the
Reorganization Plan, we reduced our headcount and eliminated certain positions,
which we expect to result in approximately $13,100 of net annual savings in
selling, general and administrative expense. In addition, we have also made
certain changes in our leadership and their roles and created both a corporate
development and a procurement team. On April 30, 2020, the Reorganization Plan
was communicated to those employees impacted. The costs of the Reorganization
Plan were $4,288, which are comprised primarily of severance, outplacement
services, stock based compensation expense associated with the accelerated
vesting of previously granted stock awards for certain employees and fees for
recruitment of certain executive positions. During the three and six months
ended June 30, 2020, we recognized $3,884 and $4,288, respectively, of costs
associated with the Reorganization Plan as selling, general and administrative
expense in our consolidated statements of operations and comprehensive income
(loss). See Note 12 to the Consolidated Financial Statements included in Item 1
of this Quarterly Report for more information about our Reorganization Plan.

Seasonality


Our sales volumes are generally lower in the first and fourth quarters than the
second and third quarters of each year. In the first quarter, the movement of
freight by professional truck drivers as well as motorist travel are usually at
their lowest levels of the calendar year. In the fourth quarter, freight
movement is typically lower due to the holiday season. While our revenues are
modestly seasonal, quarterly variations in our operating results may reflect
greater seasonal differences as our rent expense and certain other costs do not
vary seasonally. The COVID-19 pandemic and current economic conditions have, and
may in the future, significantly alter the seasonal aspects of our business,
including that we did not, and may not, realize in 2020 the increased business
we typically experience in the second and third quarters.
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Results of Operations
All of our company operated locations are same site locations with the exception
of one standalone restaurant. As a result, same site operating results are not
presented as part of this discussion and analysis as they would not provide
materially different information from our consolidated results.
Consolidated Financial Results
The following table presents changes in our operating results for the three and
six months ended June 30, 2020, as compared to the three and six months ended
June 30, 2019.
                                                  Three Months Ended                                                                      Six Months Ended
                                                       June 30,                                                                               June 30,
                                               2020                2019                Change                 2020                   2019                  Change
Revenues:
Fuel                                       $ 577,410          $ 1,117,671                 (48.3) %       $ 1,452,339          $     2,100,812                 (30.9) %
Nonfuel                                      405,570              476,082                 (14.8) %           830,577                  916,956                  (9.4) %
Rent and royalties from franchisees            3,123                3,611                 (13.5) %             6,535                    6,888                  (5.1) %
Total revenues                               986,103            1,597,364                 (38.3) %         2,289,451                3,024,656                 (24.3) %

Gross margin:
Fuel                                          91,900               76,822                  19.6  %           173,855                  151,569                  14.7  %
Nonfuel                                      242,619              288,584                 (15.9) %           505,907                  561,190                  (9.9) %
Rent and royalties from franchisees            3,123                3,611                 (13.5) %             6,535                    6,888                  (5.1) %
Total gross margin                           337,642              369,017                  (8.5) %           686,297                  719,647                  (4.6) %

Site level operating expense                 197,522              234,645                 (15.8) %           434,086                  467,365                  (7.1) %
Selling, general and administrative
expense                                       37,976               39,562                  (4.0) %            75,204                   76,672                  (1.9) %
Real estate rent expense                      63,079               63,770                  (1.1) %           126,667                  130,183                  (2.7) %
Depreciation and amortization expense         28,254               23,213                  21.7  %            56,814                   47,972

18.4 %



Income (loss) from operations                 10,811                7,827                  38.1  %            (6,474)                  (2,545)               (154.4) %

Interest expense, net                          7,233                7,164                   1.0  %            14,689                   14,214                   3.3  %
Other expense (income), net                      335                 (144)                332.6  %               876                      430                 103.7  %
Income (loss) before income taxes              3,243                  807                 301.9  %           (22,039)                 (17,189)                (28.2) %
(Provision) benefit for income taxes          (1,087)                 402                (370.4) %             5,654                    5,669                  (0.3) %
Net income (loss)                              2,156                1,209                  78.3  %           (16,385)                 (11,520)                (42.2) %
Less: net income for
  noncontrolling interest                         32                   31                   3.2  %                52                       49                   6.1  %
Net income (loss) attributable to
 common stockholders                       $   2,124          $     1,178                  80.3  %       $   (16,437)         $       (11,569)                (42.1) %



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Three Months Ended June 30, 2020, as Compared to Three Months Ended June 30,
2019
Fuel Revenues. Fuel revenues for the three months ended June 30, 2020, decreased
by $540,261, or 48.3%, as compared to the three months ended June 30, 2019. The
decrease in fuel revenues was primarily due to a decrease in market prices for
fuel and a decrease in fuel sales volume. The table below presents the factors
causing the changes in total fuel sales volume and revenues between periods. See
"Effects of Fuel Prices and Supply and Demand Factors" for more information
regarding the impact market prices for fuel has on our financial results.
                                                       Gallons Sold

Fuel Revenues

Results for the three months ended June 30, 2019 502,346 $ 1,117,671


   Decrease due to petroleum products price changes

(500,330)


   Decrease due to same site volume changes               (24,260)

(34,900)


   Decrease in wholesale fuel sales volume                 (1,870)

(5,031)


   Net change from prior year period                      (26,130)

(540,261)

Results for the three months ended June 30, 2020 476,216 $

577,410




Nonfuel Revenues. Nonfuel revenues for the three months ended June 30, 2020,
decreased by $70,512, or 14.8%, as compared to the three months ended June 30,
2019, primarily as a result of a decrease in revenues at both our standalone
restaurants and the restaurants in our travel centers due to the temporary
closure or limitation of services at those locations, as well as a decrease in
our truck service and store and retail services businesses in April and May 2020
due to a decrease in trucking activity and consumer travel, all of which were
primarily the result of the COVID-19 pandemic. As governments began to lift stay
in place orders, we started to reopen our full service restaurants and in June
2020 we recognized increases in our truck service and store and retail services
revenues as compared to June 2019.
Rent and Royalties from Franchisees. Rent and royalties from franchisees for the
three months ended June 30, 2020, decreased by $488, or 13.5%, as compared to
the three months ended June 30, 2019, primarily as a result of the closure of
four franchised standalone restaurants, our purchase of one standalone
restaurant from a former franchisee since June 30, 2019, and the temporary
closures of certain franchised standalone restaurants as a result of the
COVID-19 pandemic, partially offset by the 10 franchised travel centers and five
franchised standalone restaurants that began operations after June 30, 2019.
Fuel Gross Margin. Fuel gross margin for the three months ended June 30, 2020,
increased by $15,078, or 19.6%, as compared to the three months ended June 30,
2019, primarily as a result of a more favorable fuel purchasing environment and
the $7,715 benefit recognized in connection with the federal biodiesel blenders'
tax credit in the three months ended June 30, 2020, partially offset by a
decrease in fuel sales volume, primarily during April and May of 2020.
Nonfuel Gross Margin. Nonfuel gross margin for the three months ended June 30,
2020, decreased by $45,965, or 15.9%, as compared to the three months ended
June 30, 2019, primarily due to the decrease in nonfuel revenues as a result of
the COVID-19 pandemic. Nonfuel gross margin percentage for the three months
ended June 30, 2020, declined to 59.8% from 60.6% for the three months ended
June 30, 2019, primarily due to a change in the mix of products and services
sold and certain pricing and marketing initiatives.
Site Level Operating Expense. Site level operating expense for the three months
ended June 30, 2020, decreased by $37,123, or 15.8%, as compared to the three
months ended June 30, 2019, primarily due to the furloughing of approximately
4,300 field employees in response to the COVID-19 pandemic and a decrease in
nonlabor costs such as maintenance, certain utilities and supplies, partially
offset by increased labor costs as a result of an increase in technician count
in our truck service department to support an anticipated increase in sales and
cash bonuses we paid to certain employees who continued to work at our locations
during the COVID-19 pandemic. Site level operating expense as a percentage of
nonfuel revenues improved to 48.7% for the three months ended June 30, 2020,
from 49.3% for the three months ended June 30, 2019, primarily due to a decrease
in nonlabor costs such as maintenance, certain utilities and supplies.
Selling, General and Administrative Expense. Selling, general and administrative
expense for the three months ended June 30, 2020, decreased by $1,586, or 4.0%,
as compared to the three months ended June 30, 2019. The decrease was primarily
attributable to the elimination of approximately 130 positions during the three
months ended June 30, 2020, as part of the Reorganization Plan, the furloughing
of approximately 120 corporate employees in response to the COVID-19 pandemic
and a reduction in travel related expenses and marketing expenses. These
decreases were largely offset by $3,884 of non-recurring costs associated with
the Reorganization Plan.
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Real Estate Rent Expense. Real estate rent expense for the three months ended
June 30, 2020, decreased by $691, or 1.1%, as compared to the three months ended
June 30, 2019. The decrease was primarily the result of a decrease in percentage
rent due to SVC as a result of the decrease in our nonfuel revenues during the
three months ended June 30, 2020, as compared to the three months ended June 30,
2019.
Depreciation and Amortization Expense. Depreciation and amortization expense
for the three months ended June 30, 2020, increased by $5,041, or 21.7%, as
compared to the three months ended June 30, 2019. The increase was primarily the
result of a $3,046 goodwill impairment charge recognized with respect to our QSL
business, the $834 write off of intangible assets associated with three
franchised standalone restaurants that closed during the three months ended
June 30, 2020, and the $539 write off of certain assets related to programs that
were canceled.
(Provision) Benefit for Income Taxes. We had a provision for income taxes of
$1,087 for the three months ended June 30, 2020, as compared to a benefit for
income taxes of $402 for the three months ended June 30, 2019. The change in the
(provision) benefit for income taxes is primarily due to larger pretax income
recognized in the three months ended June 30, 2020, as compared to the three
months ended June 30, 2019.
Six Months Ended June 30, 2020, as Compared to Six Months Ended June 30, 2019
Fuel Revenues. Fuel revenues for the six months ended June 30, 2020, decreased
by $648,473, or 30.9%, as compared to the six months ended June 30, 2019. The
decrease in fuel revenues was primarily due to a decrease in market prices for
fuel and a decrease in fuel sales volume. The table below presents the factors
causing the changes in total fuel sales volume and revenues between periods. See
"Effects of Fuel Prices and Supply and Demand Factors" for more information
regarding the impact market prices for fuel has on our financial results.
                                                       Gallons Sold

Fuel Revenues

Results for the six months ended June 30, 2019 974,248 $ 2,100,812


   Decrease due to petroleum products price changes

(626,736)


   Decrease due to same site volume changes                (7,113)

(16,380)


   Decrease in wholesale fuel sales volume                 (2,133)

(5,357)


   Net change from prior year period                       (9,246)

(648,473)

Results for the six months ended June 30, 2020 965,002 $ 1,452,339




Nonfuel Revenues. Nonfuel revenues for the six months ended June 30, 2020,
decreased by $86,379, or 9.4%, as compared to the six months ended June 30,
2019, primarily as a result of a decrease in revenues at both our standalone
restaurants and the restaurants in our travel centers due to the temporary
closure or limitation of services, as well as a decrease in our truck service
and store and retail services businesses due to a reduction in trucking activity
and consumer travel, all of which were a result of the COVID-19 pandemic. In
addition, the six months ended June 30, 2019, benefited from a particularly
strong financial performance in truck service and store and retail services as a
result of the extreme cold weather experienced in some parts of the United
States during the beginning of 2019, as compared to unseasonably mild weather
experienced during the beginning of 2020. These decreases were partially offset
by an increase in diesel exhaust fluid, or DEF, sales as a result of an increase
in newer trucks on the road that require DEF and the positive impact of certain
of our marketing initiatives in our quick service restaurants.
Rent and Royalties from Franchisees. Rent and royalties from franchisees for the
six months ended June 30, 2020, decreased by $353, or 5.1%, as compared to the
six months ended June 30, 2019, primarily as a result of the closure of five
franchised standalone restaurants, our purchase of one standalone restaurant
from a former franchisee since the beginning of 2019, and the temporary closures
of certain franchised standalone restaurants as a result of the COVID-19
pandemic, partially offset by 11 franchised travel centers and five franchised
standalone restaurants that began operations since the beginning of 2019.
Fuel Gross Margin. Fuel gross margin for the six months ended June 30, 2020,
increased by $22,286, or 14.7%, as compared to the six months ended June 30,
2019, primarily as a result of a more favorable fuel purchasing environment and
the $11,230 benefit recognized in connection with the federal biodiesel
blenders' tax credit in the six months ended June 30, 2020, partially offset by
a decrease in fuel sales volume and $2,840 of a one time benefit due to the
reversal of loyalty award accruals recognized in connection with introducing a
revised customer loyalty program during the six months ended June 30, 2019.
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Nonfuel Gross Margin. Nonfuel gross margin for the six months ended June 30,
2020, decreased by $55,283, or 9.9%, as compared to the six months ended
June 30, 2019, primarily due to the decrease in nonfuel revenues as a result of
the COVID-19 pandemic. Nonfuel gross margin percentage for the six months ended
June 30, 2020, declined to 60.9% from 61.2% for the six months ended June 30,
2019, primarily due to a change in the mix of products and services sold and
certain pricing and marketing initiatives.
Site Level Operating Expense. Site level operating expense for the six months
ended June 30, 2020, decreased by $33,279, or 7.1%, as compared to the six
months ended June 30, 2019, primarily due to the furloughing of approximately
4,300 field employees in response to the COVID-19 pandemic and a decrease in
nonlabor costs such as maintenance, certain utilities and supplies, partially
offset by increased labor costs as a result of an increase in technician count
in our truck service department to support an anticipated increase in sales,
cash bonuses we paid to certain employees who continued to work at our locations
during the COVID-19 pandemic and an increase in medical and workers compensation
claims expense. Site level operating expense as a percentage of nonfuel revenues
declined to 52.3% for the six months ended June 30, 2020, from 51.0% for the six
months ended June 30, 2019, due to the increased labor costs and a decrease in
nonfuel revenues.
Selling, General and Administrative Expense. Selling, general and administrative
expense for the six months ended June 30, 2020, decreased by $1,468, or 1.9%, as
compared to the six months ended June 30, 2019. The decrease was primarily due
to the elimination of approximately 130 positions during the six months ended
June 30, 2020, as part of the Reorganization Plan, the furloughing of
approximately 120 corporate employees in response to the COVID-19 pandemic and a
reduction in travel related expenses and marketing expenses. These decreases
were largely offset by $4,288 of non-recurring costs associated with the
Reorganization Plan.
Real Estate Rent Expense. Real estate rent expense for the six months ended
June 30, 2020, decreased by $3,516, or 2.7%, as compared to the six months ended
June 30, 2019. The decrease was primarily the result of our purchase of 20
travel centers we previously leased from SVC in January 2019, which reduced our
annual minimum rent due to SVC by $43,148, and a decrease in percentage rent due
to SVC as a result of the decrease in our nonfuel revenues during the six months
ended June 30, 2020, as compared to the six months ended June 30, 2019.
Depreciation and Amortization Expense. Depreciation and amortization expense
for the six months ended June 30, 2020, increased by $8,842, or 18.4%, as
compared to the six months ended June 30, 2019. The increase primarily resulted
from the $5,701 write off of certain assets related to programs that were
canceled, a $3,046 goodwill impairment charge recognized during the six months
ended June 30, 2020, with respect to our QSL business and the $834 write off of
intangible assets associated with three franchised standalone restaurants that
closed during the six months ended June 30, 2020.
Benefit for Income Taxes. We had a benefit for income taxes of $5,654 and $5,669
for the six months ended June 30, 2020 and 2019, respectively. The decrease in
the benefit for income taxes is primarily due a reduction in certain income tax
credits for the six months ended June 30, 2020, as compared to the six months
ended June 30, 2019. This decrease was partially offset by a larger pretax loss
recognized in the six months ended June 30, 2020, as compared to the six months
ended June 30, 2019.

Liquidity and Capital Resources
Our principal liquidity requirements are to meet our operating and financing
costs and to fund our capital expenditures, acquisitions and working capital
requirements. Our principal sources of liquidity to meet these requirements are
our:
•cash balance;
•operating cash flow;
•our Credit Facility with a current maximum availability of $200,000 subject to
limits based on our qualified collateral;
•potential sales to SVC of improvements we make to the sites we lease from SVC;
•potential issuances of new debt and equity securities; and
•potential financing or selling of unencumbered real estate that we own.
We believe that the primary risks we currently face with respect to our
operating cash flow are:
•the potential negative impacts from the COVID-19 pandemic, including if the
United States experiences a prolonged and significant decline in economic
activity that reduces demand for our products and services;
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•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;
•increased cost of fleet card fees;
•increases in our cost of capital that may result if there is a return to
increasing market interest rates;
•increased costs we may need to incur to operate our business in response to the
COVID-19 pandemic, including enhancing sanitation and other preventative
measures; 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 business requires substantial amounts of working capital, including cash
liquidity, and our working capital requirements can be especially large because
of the volatility of fuel prices. Selectively acquiring additional properties
and businesses and developing new sites requires us to expend substantial
capital for any such properties, businesses or developments. In addition, our
properties are high traffic sites with many customers and large trucks entering
and exiting our properties daily, requiring us to expend capital to maintain,
repair and improve our properties. Although we had a cash balance of $142,786 at
June 30, 2020, and net cash provided by operating activities of $145,433 for the
six months ended June 30, 2020, we cannot be sure that we will maintain
sufficient amounts of cash, that we will generate future profits or positive
cash flows or that we will be able to obtain additional financing, if and when
it becomes necessary or desirable to pursue business opportunities. We believe
we have sufficient financial resources to fund operations for the foreseeable
future.
Lease Amendments and Travel Center Purchases
In January 2019, we acquired from SVC 20 travel centers we previously leased
from SVC for $309,637, which includes $1,437 of transaction related costs, and
we and SVC amended our five leases, which provided for, among other things, a
$43,148 reduction in our annual minimum rent payments and payment by us in 16
equal quarterly installments, which began on April 1, 2019, of deferred rent
that aggregate to $70,458 to fully satisfy and discharge our previous deferred
rent obligation. See Note 6 to the Consolidated Financial Statements included in
Item 1 of this Quarterly Report for more information about these lease
amendments.
Revolving Credit Facility
We have a Credit Facility with a group of commercial banks that matures on
July 19, 2024. Under the Credit Facility, a maximum of $200,000 may be drawn,
repaid and redrawn until maturity. The availability of this 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). At
June 30, 2020, based on our qualified collateral, a total of $102,446 was
available to us for loans and letters of credit under the Credit Facility. At
June 30, 2020, there were no borrowings outstanding under the Credit Facility
but we had outstanding $18,142 of letters of credit issued under that facility,
which reduced the amount available for borrowing under the Credit Facility,
leaving $84,304 available for our use as of that date. At June 30, 2020, we were
in compliance with all covenants of the Credit Facility. As of August 4, 2020,
there were no borrowings outstanding under the Credit Facility and $84,304
available under the Credit Facility for our use as of that date.
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IHOP Secured Advance Note
Concurrent with entering into the IHOP Agreement, we entered into a Secured
Advance Note with IHOP, or the IHOP Note, pursuant to which we can borrow up to
$10,000 in connection with the costs to convert our full service restaurants to
IHOP restaurants. As of June 30, 2020, there were no loans outstanding under the
IHOP Note.
West Greenwich Loan
On February 7, 2020, we entered into a 10 year term loan for $16,600 with The
Washington Trust Company, or the West Greenwich Loan. The West Greenwich Loan is
secured by a mortgage encumbering one of our travel centers located in West
Greenwich, Rhode Island. The interest rate is fixed at 3.85% for five years
based on the five year Federal Home Loan Bank rate plus 198 basis points, and
will reset thereafter. The West Greenwich Loan requires us to make principal and
interest payments monthly. The proceeds from the West Greenwich Loan were used
for general business purposes. We may, at our option with 60 days prior written
notice, repay the loan in full prior to the end of the 10 year term plus, if
repaid prior to February 7, 2023, a nominal penalty. See Note 7 to the
Consolidated Financial Statements included in Item 1 of this Quarterly Report
for more information about the West Greenwich Loan.
Underwritten Public Equity Offering
On July 6, 2020, we received net proceeds of $80,056, after $220 of offering
costs and $5,124 of underwriting discounts and commissions, from the sale and
issuance of 6,100 shares of common stock in an underwritten public equity
offering. We intend to use the net proceeds from this offering to fund deferred
maintenance and other capital expenditures necessary to enhance property
conditions and implement growth initiatives, for working capital and for general
corporate purposes. See Note 4 to the Consolidated Financial Statements included
in Item 1 of this Quarterly Report for more information about the underwritten
public equity offering.

Sources and Uses of Cash
During the six months ended June 30, 2020 and 2019, we had net cash inflows from
operating activities of $145,433 and $58,913, respectively. The $86,520 increase
was primarily due to the collection of $68,446 of the federal biodiesel
blenders' tax credit recognized during 2019 and an increase in cash generated
from working capital during the six months ended June 30, 2020, as compared to
the six months ended June 30, 2019.
During the six months ended June 30, 2020 and 2019, we had net cash outflows
from investing activities of $27,732 and $347,436, respectively. The $319,704
decrease primarily resulted from our purchase for $309,637 of 20 travel centers
we previously leased from SVC during the six months ended June 30, 2019, and a
reduction in capital expenditures during the six months ended June 30, 2020, as
compared to the six months ended June 30, 2019. See Note 6 to the Consolidated
Financial Statements included in Item 1 of this Quarterly Report for more
information about our transactions with SVC.
In response to the COVID-19 pandemic and the current economic conditions, we
reduced our capital expenditure plan for 2020 in order to preserve our liquidity
from the previous budget of $118,905 to approximately $68,000. As revised, our
current budget for 2020 capital expenditures is largely focused on maintenance
and essential items.
During the six months ended June 30, 2020 and 2019, we had cash inflows and
outflows from financing activities of $7,795 and $160, respectively. The $7,955
change primarily resulted from the $16,600 proceeds received under the West
Greenwich Loan during the six months ended June 30, 2020, partially offset by a
$7,900 repayment of our borrowings under our Credit Facility during the six
months ended June 30, 2020.


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Related Party Transactions
We have relationships and historical and continuing transactions with SVC, The
RMR Group LLC, or RMR, and others related to them. For example: SVC is our
former parent company, our principal landlord and one of our largest
stockholders; RMR provides management services to both us and to SVC; Adam. D.
Portnoy, the Chair of our Board of Directors and one of our Managing Directors,
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,
president and chief executive officer of The RMR Group Inc. and an officer and
employee of RMR; and, as of June 30, 2020, SVC and RMR owned approximately 8.2%
and 3.6%, respectively, of our outstanding shares of common stock. Our other
Managing Director and Chief Executive Officer, Jonathan M. Pertchik, and certain
of our other officers and SVC's managing trustees and officers are also officers
and employees of RMR. We also have relationships and historical and continuing
transactions with other companies to which RMR or its subsidiaries provide
management services and some of which may have directors, trustees and officers
who are also directors, trustees or officers of us, SVC or RMR and some of our
Directors and officers serve as trustees, directors or officers of these
companies.
For further information about these and other such relationships and related
party transactions, see Notes 6, 8 and 9 to the Consolidated Financial
Statements included in Item 1 of this Quarterly Report, our Annual Report, our
definitive Proxy Statement for our 2020 Annual Meeting of Stockholders and our
other filings with the Securities and Exchange Commission, or SEC. In addition,
please see the section captioned "Risk Factors" of our Annual Report for a
description of risks that may arise as a result of these and other related party
transactions and relationships. Our filings with the SEC and copies of certain
of our agreements with these related parties, including our business management
agreement with RMR and our various agreements with SVC are available as exhibits
to our filings with the SEC and accessible at the SEC's website, www.sec.gov. We
may engage in additional transactions with related parties, including businesses
to which RMR or its subsidiaries provide management services.

Environmental and Climate Change Matters
Legislation and regulation regarding climate change, including greenhouse gas
emissions, and other environmental matters and market reaction to any such
legislation or regulation or to climate change concerns, may decrease the demand
for our fuel products, may require us to expend significant amounts and may
otherwise negatively impact our business. For instance, federal and state
governmental requirements addressing emissions from trucks and other motor
vehicles, such as the U.S. Environmental Protection Agency's, or EPA's, gasoline
and diesel sulfur control requirements that limit the concentration of sulfur in
motor fuel, as well as new fuel efficiency standards for medium and heavy duty
commercial trucks, have caused us to add certain services and provide certain
products to our customers at a cost to us that we may be unable to pass through
to our customers. Also, various private initiatives and government regulations
to promote fuel efficiency and control air pollutant emissions from the trucking
industry may raise the cost of trucking as compared to other types of freight
transport, as a result decreasing the demand for our fuel products and
negatively impacting our business.
For example, in August 2016 the EPA and the National Highway Traffic Safety
Administration established final regulations that will phase in more stringent
greenhouse gas emission and fuel efficiency standards for medium and heavy duty
trucks beginning in model year 2021 (model year 2018 for certain trailers)
through model year 2027, and these regulations are estimated to reduce fuel
usage between 9% and 25% (depending on vehicle category) by model year 2027.
Under the current Presidential Administration, the EPA and the U.S. Department
of Transportation have publicly announced that they will review and reconsider
various rules relating to greenhouse gas emissions and fuel efficiency standards
for trucks and other motor vehicles, including portions of the rule discussed
above, and have proposed, for example, changes to the rule's application to
certain types of vehicles. It is difficult to predict what, if any, changes to
the existing rule will ultimately occur as a result of the Presidential
Administration's review or as a result of related legal challenges and, if
changes occur, what impact those changes would have on our industry, us or our
business. In addition, the California Air Resources Board, or CARB, routinely
considers rulemaking activity the purpose of which is to make heavy duty truck
fleets operating in the state more fuel efficient and less polluting. Because of
the size of the California market and economy, fleet rules adopted by CARB
frequently have influence throughout the United States. We may not be able to
completely offset the loss of business we may suffer as a result of increasing
engine efficiency and other fuel conservation and pollution reduction efforts
under federal or state rules or as a result of other existing or future
regulation or changes in customer demand.
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Some observers believe severe weather activities in different parts of the
country over the last few years evidence global climate change. Such severe
weather that may result from climate change may have an adverse effect on
individual properties we own, lease or operate, or the volume of business at our
locations. We mitigate these risks by owning, leasing and operating a
diversified portfolio of properties, by procuring insurance coverage we believe
adequately protects us from material damages and losses and by attempting to
monitor and be prepared for such events. However, we cannot be sure that our
mitigation efforts will be sufficient or that future storms, rising sea levels
or other changes that may occur due to future climate change or otherwise could
not have a material adverse effect on our business.
For further information about these and other environmental and climate change
matters, and the related risks that may arise, see the disclosure under the
heading "Environmental Contingencies" in Note 10 to the Consolidated Financial
Statements included in Item 1 of this Quarterly Report, which disclosure is
incorporated herein by reference.

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