The settlement of this offering is expected to occur on Friday, May 27, 2011. The underwriters have been granted a 30-day option to purchase up to an additional 1.5 million shares to cover overallotments, [image-nocss] if any.
According to a filing with the U.S. Securities & Exchange Commission (SEC), since the beginning of 2011, TA has purchased or agreed to purchase eight travel centers (one of which was acquired prior to March 31, 2011) for $37 million; it expects to invest $15 million to $20 million to improve these travel centers during 2011. It expects to operate five of these as Petro brand travel centers, one of these as a TA brand travel center and two of these as facilities ancillary to existing TA travel centers in their immediate vicinity.
On May 12, 2011, it sold to Hospitality Trust improvements it made to travel centers it leases from Hospitality Trust for $36 million, resulting in an increase in its annual rent of approximately $3 million. It has also begun discussions with lenders participating in its existing credit line to expand that line to as much as $200 million and extend its maturity date to 2016 from a current limit of $100 million and maturity in 2012.
In the future, it may request that Hospitality Trust fund additional amounts for renovation and improvements at the leased travel centers in return for rent increases; however, Hospitality Trust is not obligated to fund such amounts. Its existing $100 million credit facility, expiring in 2012, has historically been used to issue letters of credit and for short-term borrowings. It has begun discussions with lenders participating in its existing credit line to expand that line to as much as $200 million and extend its maturity date to 2016.
"We believe that the U.S. economy is currently in the early stages of a prolonged period of economic recovery and expansion," TA said. "We believe that, historically, improvements in the U.S. economy have led to increased truck freight and motorist travel. We believe we have designed a business plan that may allow us to take advantage of what may be a prolonged period of economic recovery and expansion. As part of these plans, we have identified a number of improvements to our existing travel centers that we designed with a goal to make our travel centers attract additional customers and thereby increase our share of the interstate highway market for fuel and non-fuel products and services."
It added, "Also, we believe that the recent recession has caused many of our competitors to suffer irreversible financial difficulties. For example, in 2008, a large competitor of ours, Flying J Inc., filed for bankruptcy protection and was subsequently acquired by Pilot Travel Centers LLC, another large competitor in 2010. In addition in 2011, a regional gasoline station and travel center company [Gas City] based in the Midwest filed for bankruptcy protection and was subsequently liquidated to multiple purchasers, including us."
"We believe that numerous other travel center operators have encountered difficulty in refinancing their specialized real estate in current market conditions and that stress has led to, or may lead to further, opportunities for acquisition at attractive prices. We have recently purchased or agreed to purchase eight travel centers at what we believe are attractive prices.... We believe that acquiring these travel centers will enhance our ability to take advantage of the economic expansion that we anticipate."
In March 2011, TA spent $7.2 million to acquire and improve a new travel center in Texas that was purchased at a foreclosure auction. The property was renovated as a Petro Stopping Center and opened for business on May 1, 2011.
Also during March 2011, it exercised its right to purchase a former Petro franchisee's travel center in Kansas for approximately $5.5 million; it expects to close on this purchase and begin to operate this site for its own account during second-quarter 2011.
In April 2011, it agreed to acquire six new travel centers (five in Indiana and one in Illinois) in a bankruptcy auction. Staggered closings for these travel centers began on May 2, 2011, and are expected to be completed during second-quarter 2011. One of these travel centers has been operated as a Petro franchise site since 1990, and TA intends to continue its operation as a Petro Stopping Center for its own account upon closing. Three of these six travel centers are expected to be rebranded prior to the end of 2011, two as Petro Stopping Centers and one as a TA. Two of these travel centers are adjacent to, and are expected to function as ancillary facilities to, existing TA travel centers. It agreed to purchase these six travel centers for an aggregate of approximately $24.5 million, which it estimated equates to slightly over four times the historically generated annual cash flow at these travel centers. In addition to this purchase price, it expects to spend between $15 million and $20 million to renovate these travel centers; and it expects that the cash flow from these travel centers may improve when they are renovated and operated by TA.
TA's business of operating high-sales-volume travel centers open 24 hours every day requires that it make regular capital investments to its existing sites to maintain their competitive attractiveness to customers. During the three months ended March 31, 2011, it spent approximately $15 million on improvements to existing sites. As its business enters what it believes may be a prolonged recovery, it expects to continue the refurbishment program, and it expects to continue programs designed to enhance its future operating results. Increases in sales at the travel centers it operate also will increase the amounts it needs to invest in its inventory and receivables.
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