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TA TravelCenters of America

Filed: 4 May 21, 11:25am
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended March 31, 2021
 or
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Commission File Number: 001-33274
TravelCenters of America Inc.
(Exact Name of Registrant as Specified in its Charter)
Maryland20-5701514
(State or Other Jurisdiction of Incorporation or Organization)(I.R.S. Employer Identification No.)

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)

Securities registered pursuant to Section 12(b) of the Act:
Title of Each ClassTrading SymbolsName of Each Exchange on Which Registered
Shares of Common Stock, $0.001 Par Value Per ShareTAThe Nasdaq Stock Market LLC
8.25% Senior Notes due 2028TANNIThe Nasdaq Stock Market LLC
8.00% Senior Notes due 2029TANNLThe Nasdaq Stock Market LLC
8.00% Senior Notes due 2030TANNZThe Nasdaq Stock Market LLC
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    No ☐
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   No ☐
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 ☐
Accelerated filer
Non-accelerated filer ☐Smaller reporting company ☒
Emerging growth company ☐
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
Number of the registrant's shares of common stock outstanding as of May 3, 2021: 14,561,859.


TABLE OF CONTENTS
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)
March 31,
2021
December 31,
2020
Assets:  
Current assets:  
Cash and cash equivalents$520,028 $483,151 
Accounts receivable (net of allowance for doubtful accounts of $1,141 and $1,016
   as of March 31, 2021 and December 31, 2020, respectively)
129,087 94,429 
Inventory163,397 172,830 
Other current assets27,658 35,506 
Total current assets840,170 785,916 
Property and equipment, net791,516 801,789 
Operating lease assets1,713,862 1,734,883 
Goodwill22,213 22,213 
Intangible assets, net11,365 11,529 
Other noncurrent assets117,219 87,530 
Total assets$3,496,345 $3,443,860 
Liabilities and Stockholders' Equity:  
Current liabilities:  
Accounts payable$213,157 $158,075 
Current operating lease liabilities111,866 111,255 
Other current liabilities178,650 175,867 
Total current liabilities503,673 445,197 
Long term debt, net525,229 525,397 
Noncurrent operating lease liabilities1,735,080 1,763,166 
Other noncurrent liabilities96,532 69,121 
Total liabilities2,860,514 2,802,881 
Stockholders' equity:  
Common stock, $0.001 par value, 216,000 shares of common stock authorized as of
   March 31, 2021 and December 31, 2020, and 14,564 and 14,574 shares of
   common stock issued and outstanding as of March 31, 2021 and
   December 31, 2020, respectively
14 14 
Additional paid-in capital782,524 781,841 
Accumulated other comprehensive loss(213)(205)
Accumulated deficit(146,903)(141,084)
Total TA stockholders' equity635,422 640,566 
Noncontrolling interest409 413 
Total stockholders' equity635,831 640,979 
Total liabilities and stockholders' equity$3,496,345 $3,443,860 
The accompanying notes are an integral part of these consolidated financial statements.
1



TravelCenters of America Inc.
Consolidated Statements of Operations and Comprehensive Loss (Unaudited)
(in thousands, except per share amounts)


Three Months Ended
March 31,
 20212020
Revenues:  
Fuel$1,077,258 $874,929 
Nonfuel447,914 425,007 
Rent and royalties from franchisees3,924 3,412 
Total revenues1,529,096 1,303,348 
Cost of goods sold (excluding depreciation):  
Fuel999,828 792,974 
Nonfuel172,222 161,719 
Total cost of goods sold1,172,050 954,693 
Site level operating expense227,230 236,564 
Selling, general and administrative expense35,930 37,228 
Real estate rent expense63,869 63,588 
Depreciation and amortization expense23,829 28,560 
Income (loss) from operations6,188 (17,285)
Interest expense, net11,384 7,456 
Other expense, net1,397 541 
Loss before income taxes(6,593)(25,282)
Benefit for income taxes850 6,741 
Net loss(5,743)(18,541)
Less: net income for noncontrolling interest76 20 
Net loss attributable to common stockholders$(5,819)$(18,561)
Other comprehensive loss, net of taxes:  
Foreign currency loss, net of taxes of $16 and $(107), respectively$(8)$(20)
Other comprehensive loss attributable to common stockholders(8)(20)
Comprehensive loss attributable to common stockholders$(5,827)$(18,581)
Net loss per share of common stock attributable to common stockholders:  
Basic and diluted$(0.40)$(2.23)
The accompanying notes are an integral part of these consolidated financial statements.

2



TravelCenters of America Inc.
Consolidated Statements of Cash Flows (Unaudited)
(in thousands)


Three Months Ended
March 31,
 20212020
Cash flows from operating activities:  
Net loss$(5,743)$(18,541)
Adjustments to reconcile net loss to net cash provided by operating activities:
Noncash rent credits, net(6,292)(5,335)
Depreciation and amortization expense23,829 28,560 
Deferred income tax benefit(850)(6,114)
Changes in operating assets and liabilities:  
Accounts receivable(34,760)(2,175)
Inventory9,439 27,420 
Other assets7,513 2,702 
Accounts payable and other liabilities56,009 (17,555)
Other, net2,431 2,041 
Net cash provided by operating activities51,576 11,003 
Cash flows from investing activities:  
Capital expenditures(12,277)(16,640)
Proceeds from other asset sales505 
Investment in equity investee(1,350)
Other105 
Net cash used in investing activities(13,522)(16,135)
Cash flows from financing activities:  
West Greenwich Loan borrowings16,600 
Payments on Revolving Credit Facility(7,900)
Payments on Term Loan Facility(500)
Distributions to noncontrolling interest(80)(32)
Acquisition of stock from employees(74)
Other, net(579)(523)
Net cash (used in) provided by financing activities(1,233)8,145 
Effect of exchange rate changes on cash56 99 
Net increase in cash and cash equivalents36,877 3,112 
Cash and cash equivalents at the beginning of the period483,151 17,206 
Cash and cash equivalents at the end of the period$520,028 $20,318 
Supplemental disclosure of cash flow information:  
Lease modification (operating to finance lease)$28,201 $
Interest paid, net of capitalized interest10,742 7,248 
Income taxes refunded675 464 
The accompanying notes are an integral part of these consolidated financial statements.
3



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
Loss
Accumulated
Deficit
Total TA
Stockholders'
Equity
Noncontrolling
Interest
Total
Stockholders'
Equity
December 31, 202014,574 $14 $781,841 $(205)$(141,084)$640,566 $413 $640,979 
Grants under share award plan and
   stock based compensation, net
(10)683 — — 683 — 683 
Distribution to
   noncontrolling interest
— — — — — — (80)(80)
Other comprehensive loss,
   net of taxes
— — — (8)— (8)— (8)
Net (loss) income— — — — (5,819)(5,819)76 (5,743)
March 31, 202114,564 $14 $782,524 $(213)$(146,903)$635,422 $409 $635,831 
December 31, 20198,307 $$698,402 $(172)$(127,185)$571,053 $1,483 $572,536 
Grants under share award plan and
   stock based compensation, net
12 1,089 — — 1,089 — 1,089 
Distribution to
   noncontrolling interest
— — — — — — (32)(32)
Other comprehensive loss,
   net of taxes
— — — (20)— (20)— (20)
Net (loss) income— — — — (18,561)(18,561)20 (18,541)
March 31, 20208,319 $$699,491 $(192)$(145,746)$553,561 $1,471 $555,032 
The accompanying notes are an integral part of these consolidated financial statements.

4


TravelCenters of America Inc.
Notes to Consolidated Financial Statements (Unaudited)
(dollars and shares in thousands, except per share amounts)

1.Business Description and Basis of Presentation
TravelCenters of America Inc. is a Maryland corporation. As of March 31, 2021, we operated or franchised 317 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 March 31, 2021, our business included 272 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 these travel centers, we owned 51, we leased 181, we operated 2 for a joint venture in which we owned a noncontrolling interest and 38 were owned or leased from others by our franchisees. We operated 232 of our travel centers and franchisees operated 40 travel centers, including 2 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, diesel exhaust fluid, full service restaurants, quick service restaurants and various customer amenities.
As of March 31, 2021, our business included 3 standalone truck service facilities operated under the "TA Truck Service" brand name. Of these standalone truck service facilities, we leased 2 and owned 1. Our standalone truck service facilities offer extensive maintenance and emergency repair and roadside services to large trucks.
As of March 31, 2021, our business included 42 standalone restaurants in 12 states in the United States operated primarily under the "Quaker Steak & Lube," or QSL, brand name. Of these standalone restaurants, we operated 14 restaurants (4 we owned, 8 we leased, 1 we operated for 1 of our franchisees and 1 we operated for a joint venture in which we owned a noncontrolling interest) and 28 were owned by or leased from others and operated by our franchisees. On April 21, 2021, we completed the sale of our QSL business for $5,000, excluding costs to sell and certain closing adjustments. See Note 3 for more information about the sale of our QSL business.
We manage our business as 1 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.
The accompanying interim consolidated financial statements are unaudited. These unaudited interim consolidated 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, 2020, or our Annual Report. In the opinion of our management, the accompanying unaudited interim 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. The COVID-19 pandemic and current economic conditions have, and may in the future, significantly alter the seasonal aspects of our business. 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.
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 March 31, 2021, was $342,980.

5


TravelCenters of America Inc.
Notes to Consolidated Financial Statements (Unaudited)
(dollars and shares in thousands, except per share amounts)
Recently Issued Accounting Pronouncement and Other Accounting Matters
In December 2019, the Financial Accounting Standards Board issued Accounting Standards Update 2019-12, Income Taxes – Simplifying the Accounting for Income Taxes, which eliminates certain exceptions related to the approach for intraperiod tax allocation, the methodology for calculating income taxes in an interim period and the recognition of deferred tax liabilities for outside basis differences. It also clarifies and simplifies other aspects of the accounting for income taxes. We adopted this standard on January 1, 2021, using the prospective transition method. The implementation of this update did not have a material impact on our consolidated financial statements.
On March 27, 2020, the United States enacted the Coronavirus Aid, Relief, and Economic Security Act, or the CARES Act, as a response to the economic uncertainty resulting from the COVID-19 pandemic, which, among other things, the CARES Act included several temporary changes to corporate income tax provisions such as modifications to limitations on deductibility of net operating losses and business interest, provisions relating to the deferral of the employer portion of social security taxes incurred through December 31, 2020, and employee retention tax credit, which is a refundable payroll credit for certain qualified wages and health benefits. As of March 31, 2021, we have deferred $23,340 of an employer social security payments, and have included this amount in other current liabilities. On December 27, 2020 and March 11, 2021, the CARES Act was modified by the Consolidated Appropriations Act of 2021 and the American Rescue Plan Act of 2021, respectively, extending the employee retention tax credit through December 31, 2021. During the year ended December 31, 2020, we recognized $3,268 relating to the employee retention tax credit for credits evaluated through June 30, 2020. We are in the process of evaluating the amount of any credits for which we may be eligible for the periods subsequent to June 30, 2020, and we are currently unable to estimate that amount, if any. We will continue to evaluate the impact of this legislation on our operations and consolidated financial statements in future periods and to the extent additional guidance and regulations are issued.

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 loss. Nonfuel revenues disaggregated by type of good or service for the three months ended March 31, 2021 and 2020, were as follows:
Three Months Ended
March 31,
20212020
Nonfuel revenues:
Store and retail services$171,772 $151,818 
Truck service171,131 153,967 
Restaurant73,869 94,212 
Diesel exhaust fluid31,142 25,010 
Total nonfuel revenues$447,914 $425,007 

6


TravelCenters of America Inc.
Notes to Consolidated Financial Statements (Unaudited)
(dollars and shares in thousands, except per share amounts)
Contract Liabilities
Our contract liabilities, which are presented in our consolidated balance sheets in other current and other noncurrent liabilities, primarily include deferred revenues related to our customer loyalty programs, gift cards, rebates payable to customers and other deferred revenues. The following table shows the changes in our contract liabilities between periods.
Customer
Loyalty
Programs
OtherTotal
December 31, 2019$17,993 $4,822 $22,815 
Increases due to unsatisfied performance obligations
arising during the period
115,792 15,791 131,583 
Revenues recognized from satisfied performance
obligations during the period
(98,147)(12,879)(111,026)
Other(12,817)(589)(13,406)
December 31, 202022,821 7,145 29,966 
Increases due to unsatisfied performance obligations
arising during the period
31,149 4,143 35,292 
Revenues recognized from satisfied performance
obligations during the period
(26,048)(3,487)(29,535)
Other(3,680)(175)(3,855)
March 31, 2021$24,242 $7,626 $31,868 
As of March 31, 2021, we expect the unsatisfied performance obligations relating to our customer loyalty programs will generally be satisfied within 12 months.

3.    Disposition Activity
On April 21, 2021, we completed the sale of our QSL business for $5,000, excluding costs to sell and certain closing adjustments. We had classified our QSL business as held for sale as of December 31, 2020. We do not believe that this sale represents a strategic shift in our business. As of March 31, 2021, our QSL business included 41 standalone restaurants in 11 states in the United States operated primarily under the QSL brand name.
During the three months ended March 31, 2021, we recorded an additional impairment charge of $650, primarily resulting from the change in fair value of underlying assets held for sale, gross, which was included in depreciation and amortization expense in our consolidated statement of operations and comprehensive loss, to reduce the carrying value of our QSL net asset disposal group to $4,222. Impairment charges relating to our QSL net asset disposal group total $14,365, which includes the $13,715 impairment charge recognized during the year ended December 31, 2020. Our estimated fair value of our QSL net assets is based on the purchase price, pursuant to the purchase and sale agreement, less costs to sell and certain closing adjustments as of March 31, 2021.

7


TravelCenters of America Inc.
Notes to Consolidated Financial Statements (Unaudited)
(dollars and shares in thousands, except per share amounts)
Our QSL net asset disposal group was included as assets held for sale, net in other current assets on our consolidated balance sheets and was comprised of the following as of March 31, 2021 and December 31, 2020:
March 31,
2021
December 31,
2020
Current assets$3,783 $4,313 
Property and equipment, net11,943 11,745 
Operating lease assets6,927 6,927 
Intangible assets, net7,301 7,301 
Current liabilities(1,602)(1,967)
Current operating lease liabilities(1,284)(1,307)
Long term debt, net(838)(868)
Noncurrent operating lease liabilities(7,597)(7,907)
Other noncurrent liabilities(46)(51)
Assets held for sale, gross18,587 18,186 
Impairment charges(14,365)(13,715)
Assets held for sale, net$4,222 $4,471 

4.    Stockholders' Equity
The following table presents a reconciliation of net loss attributable to common stockholders to net loss available to common stockholders and the related earnings per share of common stock for the three months ended March 31, 2021 and 2020.
 Three Months Ended
March 31,
 20212020
Net loss attributable to common stockholders$(5,819)$(18,561)
Less: net loss attributable to participating securities(137)(909)
Net loss available to common stockholders$(5,682)$(17,652)
Weighted average shares of common stock(1)
14,227 7,905 
Basic and diluted net loss per share of common stock attributable to
 common stockholders
$(0.40)$(2.23)
(1) 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 March 31, 2021 and 2020, was 344 and 407, respectively.


8


TravelCenters of America Inc.
Notes to Consolidated Financial Statements (Unaudited)
(dollars and shares in thousands, except per share amounts)
5.    Leasing Transactions
As a Lessee
We have lease agreements covering many of our properties, as well as various equipment, with the most significant leases being our 5 leases with Service Properties Trust, or SVC, which are further described below. Certain of our leases include renewal options, and certain leases include escalation clauses 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 March 31, 2021, our SVC Leases (as defined below), the leases covering our other properties and most of our equipment leases were classified as operating leases and certain of our other equipment leases were classified as finance leases. As of March 31, 2021, our finance lease assets and liabilities were immaterial to our consolidated financial statements. Finance lease assets were included in other noncurrent assets, with the corresponding current and noncurrent finance lease liabilities included in other current liabilities and other noncurrent liabilities, respectively, on our consolidated balance sheets.
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.
Our lease costs are included in various balances in our consolidated statements of operations and comprehensive loss, as shown in the following table. For the three months ended March 31, 2021 and 2020, our lease costs consisted of the following:
Classification in our Consolidated
Statements of Operations
and Comprehensive Loss
Three Months Ended
March 31,
20212020
Operating lease costs: SVC LeasesReal estate rent expense$59,137 $59,501 
Operating lease costs: otherReal estate rent expense2,684 2,833 
Variable lease costs: SVC LeasesReal estate rent expense1,866 1,096 
Variable lease costs: otherReal estate rent expense182 158 
Total real estate rent expense63,869 63,588 
Operating lease costs: equipment and other
Site level operating expense and selling,
   general and administrative expense
846 966 
Financing lease costs: equipment and otherSite level operating expense22 
Short-term lease costs
Site level operating expense and selling,
   general and administrative expense
167 539 
Amortization of finance lease assets:
   SVC Leases
Depreciation and amortization expense184 
Amortization of finance lease assets: otherDepreciation and amortization expense250 
Interest on finance lease liabilities:
   SVC Leases
Interest expense, net103 
Interest on finance lease liabilities: otherInterest expense, net82 
Sublease incomeNonfuel revenues(487)(496)
Net lease costs$65,036 $64,597 

9


TravelCenters of America Inc.
Notes to Consolidated Financial Statements (Unaudited)
(dollars and shares in thousands, except per share amounts)
Maturities of our operating lease liabilities that had remaining noncancelable lease terms in excess of one year as of March 31, 2021, were as follows:
SVC Leases(1)
OtherTotal
Years ended December 31:
2021$201,893 $3,587 $205,480 
2022268,936 3,706 272,642 
2023255,344 1,768 257,112 
2024251,150 620 251,770 
2025250,667 490 251,157 
Thereafter1,783,837 2,288 1,786,125 
Total operating lease payments3,011,827 12,459 3,024,286 
Less: present value discount(2)
(1,175,395)(1,945)(1,177,340)
Present value of operating lease liabilities$1,836,432 $10,514 $1,846,946 
(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 for our operating leases as of March 31, 2021, was approximately 12 years. Our weighted average discount rate for our operating leases as of March 31, 2021, was approximately 9.1%.
During the three months ended March 31, 2021 and 2020, we paid $70,161 and $68,923, respectively, for amounts that had been included in the measurement of our operating lease liabilities.
As of March 31, 2021 and December 31, 2020, our operating lease assets and liabilities consisted of the following:
March 31,
2021
December 31,
2020
Operating lease assets:
SVC Leases$1,704,013 $1,724,428 
Other9,849 10,455 
Total operating lease assets$1,713,862 $1,734,883 
Current operating lease liabilities:
SVC Leases$107,470 $106,788 
Other4,396 4,467 
Total current operating lease liabilities$111,866 $111,255 
Noncurrent operating lease liabilities:
SVC Leases$1,728,962 $1,756,449 
Other6,118 6,717 
Total noncurrent operating lease liabilities$1,735,080 $1,763,166 
On March 9, 2021, we and SVC amended 1 of the SVC Leases, as defined below, pursuant to which, a separate but related third party ground lease at 1 of the 179 travel center properties that we lease from SVC which was previously accounted for as an operating lease is now accounted for as a finance lease. As a result of this lease modification, as of March 31, 2021, we recorded $28,201 in other noncurrent assets, $1,158 in other current liabilities and $27,046 in other noncurrent liabilities on our consolidated balance sheet in relation to this lease.
10


TravelCenters of America Inc.
Notes to Consolidated Financial Statements (Unaudited)
(dollars and shares in thousands, except per share amounts)
Leasing Agreements with SVC. As of March 31, 2021, we leased from SVC a total of 179 properties under 5 leases that expire between 2029 and 2035, subject to our right to extend those leases. We refer to these 5 leases collectively as the SVC Leases.
We recognized total real estate rent expense under the SVC Leases of $61,003 and $60,597 for the three months ended March 31, 2021 and 2020, respectively. Included in these rent expense amounts are percentage rent payable of $1,386 and $725 respectively, which amounts are based on a percentage of the increases in total nonfuel revenues at each leased property over base year levels, deferred rent of $4,404 that we paid for each three month period and adjustments for future increases in minimum annual rent on a straight line basis and estimated future payments by us for the cost of removing underground storage tanks on a straight line basis. The remaining balance of our deferred rent obligations was $35,229 as of March 31, 2021.
Pursuant to the SVC Leases, we may request that SVC purchase qualifying capital improvements we make at the leased travel centers in return for increased annual minimum rent. We did 0t sell to SVC any improvements we made to properties leased from SVC for the three months ended March 31, 2021 and 2020.
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 $487 and $496 for the three months ended March 31, 2021 and 2020, respectively.
As a Lessor
We leased 2 travel centers to franchisees as of March 31, 2021 and 2020. Rent revenues from these operating leases totaled $584 and $572 for the three months ended March 31, 2021 and 2020, respectively. Future minimum lease payments due to us for the 2 leased sites under these operating leases as of March 31, 2021, were $1,752 for the remainder of 2021 and $1,168 for 2022. See above for information regarding certain travel centers that we lease from SVC in which we sublease a portion of the travel centers to third parties to operate other retail operations.

6.    Business Management Agreement with RMR
The RMR Group LLC, or RMR, provides us certain services that we require to operate our business, and which relate to various aspects of our business, pursuant to a business management agreement. We incurred aggregate fees and certain cost reimbursements payable to RMR of $2,935 and $3,104 for the three months ended March 31, 2021 and 2020, respectively. These amounts are included in selling, general and administrative expense in our consolidated statements of operations and comprehensive loss. For more information about our relationship with RMR, see Note 7 of this Quarterly Report and our Annual Report.

7.    Related Party Transactions
We have relationships and historical and continuing transactions with SVC, RMR and others related to them, including other companies to which RMR or its subsidiaries provide management services and some of which have directors, trustees or officers who are also our Directors or officers. RMR is a majority owned subsidiary of The RMR Group Inc. The Chair of our Board of Directors and 1 of our Managing Directors, 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. Mr. Portnoy is also a managing director and the president and chief executive officer of The RMR Group Inc. and an officer and employee of RMR. Jonathan M. Pertchik, our other Managing Director and Chief Executive Officer, also serves as an officer and employee of RMR. Certain of our other officers and SVC's officers also serve as officers and employees of RMR. Some of our Independent Directors also serve as independent trustees or independent directors of other public companies to which RMR or its subsidiaries provide management services. Mr. Portnoy serves as chair of the boards of trustees or boards of directors of several of these public companies and as a managing director or managing trustee of these public companies. Other officers of RMR, including certain of our officers, serve as managing trustees, managing directors or officers of certain of these companies.
As of March 31, 2021, Mr. Portnoy beneficially owned 656 shares of our common stock (including indirectly through RMR), representing approximately 4.5% of our outstanding shares of common stock.
11


TravelCenters of America Inc.
Notes to Consolidated Financial Statements (Unaudited)
(dollars and shares in thousands, except per share amounts)
Relationship with SVC
We are SVC's largest tenant and SVC is our principal landlord and second largest stockholder. As of March 31, 2021, SVC owned 1,185 shares of our common stock, representing approximately 8.1% of our outstanding shares of common stock. As of March 31, 2021, we leased from SVC a total of 179 travel center properties under the SVC Leases. See Note 5 for more information about our lease agreements with SVC. Mr. Portnoy serves as a managing trustee and chair of the board of trustees of SVC.
Our Manager, RMR
RMR provides certain services we require to operate our business. We have a business management agreement with RMR to provide management services to us, which relates to various aspects of our business generally. See Note 6 for more information about our business management agreement with RMR.
Retirement and Separation Arrangements
In December 2019, we and RMR entered into a retirement agreement with Andrew J. Rebholz. Pursuant to his retirement agreement, Mr. Rebholz continued to serve, through June 30, 2020, as a non-executive employee in order to assist in transitioning his duties and responsibilities to his successor. Under Mr. Rebholz's retirement agreement, consistent with past practice, we paid Mr. Rebholz his current annual base salary of $300 until June 30, 2020, a cash bonus in the amount of $1,000 in December 2019 and an additional cash payment in the amount of $1,000 in June 2020, and we fully accelerated the vesting of any unvested shares of our common stock previously awarded to Mr. Rebholz.
In February 2020, we and RMR entered into a separation agreement with our former Executive Vice President, Chief Financial Officer and Treasurer, William E. Myers. Pursuant to his separation agreement, in 2020, we paid Mr. Myers $300 and fully accelerated the vesting of any unvested shares of our common stock previously awarded to Mr. Myers.
For more information about these and other such relationships and certain other related person transactions, see our Annual Report.

8.    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 arrangements in which we have agreed to indemnify third parties for environmental liabilities and expenses resulting from our operations.
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TravelCenters of America Inc.
Notes to Consolidated Financial Statements (Unaudited)
(dollars and shares in thousands, except per share amounts)
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 March 31, 2021, we had an accrued liability of $2,995 for environmental matters as well as a receivable for expected recoveries of certain of these estimated future expenditures of $906, resulting in an estimated net amount of $2,089 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. Our current insurance policy expires in June 2021 and 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 of 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 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.

9.    Inventory
Inventory as of March 31, 2021 and December 31, 2020, consisted of the following:
March 31,
2021
December 31,
2020
Nonfuel products$134,094 $143,440 
Fuel products29,303 29,390 
Total inventory$163,397 $172,830 


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Item 2.  Management's Discussion and Analysis of Financial Condition and Results of Operations
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, 2020, or our Annual Report. Unless indicated otherwise, amounts are in thousands of dollars, gallons and shares of common stock, as applicable, other than percentage amounts.

Company Overview
As of March 31, 2021, we operated or franchised 272 travel centers, three standalone truck service facilities and 42 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 Pandemic
In March 2020, the World Health Organization declared the outbreak of COVID-19 a pandemic, and, in response to the outbreak, the U.S. Health and Human Services Secretary and many states and municipalities declared public health emergencies. Various governmental responses attempting to contain and mitigate the spread of the virus have negatively impacted, and continue to negatively impact, the global economy, including the U.S. economy.
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. Our business has benefited from an increased demand for e-commerce and from being recognized by various governmental authorities as a provider of services essential to businesses, which allowed us to continue operating our travel centers through the pandemic. Further, we also benefited from increased initial demand by businesses and households to stock up on certain products in response to the pandemic, which resulted in increased trucking activity to transport those goods across the United States. However, if there is another economic downturn as a result of the continued impact of the pandemic, 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 negatively impacted. Further, these economic conditions may result in trucking companies being unable to continue as going concerns.
We have taken various actions in response to the pandemic to address its operating and financial impact and to protect the health and safety of our customers, employees and other persons who visit our travel centers and restaurants. In addition, we are continuing to closely monitor the impact of the pandemic on all aspects of our business. See our Annual Report for further information regarding these actions and monitoring activities.
The U.S. economy has been growing as COVID-19 vaccinations are increasingly administered, commercial activities increasingly return to pre-pandemic practices and operations, and as a result of recent and expected future government spending on pandemic relief, infrastructure and other matters. This recent economic growth may have had some impact on our first quarter of 2021 as diesel fuel sales volume increased 13.6% and total nonfuel revenues increased 5.4%, as compared to the prior year quarter. Excluding full service restaurants, many of which remain closed due to governmental mandates and our own precautions and decisions taken in response to the pandemic, total nonfuel revenues increased 12.0% over the prior year quarter driven by significant growth in store and retail services, truck service and diesel exhaust fluid, or DEF. However, there remains uncertainty as to the ultimate duration and severity of the pandemic on commercial activities, including risks that may arise from mutations or related strains of the virus, the ability to successfully administer vaccinations to sufficient number of persons or attain immunity to the virus by natural or other means to achieve herd immunity and the impact on the U.S. economy that may result from the inability of other countries to administer vaccinations to their citizens or their citizens’ ability to otherwise achieve immunity to the virus.
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 on the impact the pandemic has had on our business and risks relating to the pandemic and its aftermath on us and our business, see Item 1A. "Risk Factors" in our Annual Report.
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Executive Summary of Financial Results
During the three months ended March 31, 2021 and 2020, we generated a loss before income taxes of $6,593 and $25,282, respectively. The $18,689 change in loss before income taxes was primarily due to the following factors:
site level gross margin in excess of site level operating expense increased $17,725, which primarily resulted from an increase in nonfuel revenues and a decrease in site level operating expense, partially offset by a decrease in fuel gross margin;
depreciation and amortization expense decreased $4,731, which primarily resulted from the $5,162 write off of certain assets related to truck service programs that were canceled during the three months ended March 31, 2020, partially offset by a $650 held for sale impairment charge related to Quaker Steak & Lube, or QSL, during the three months ended March 31, 2021; and
selling, general and administrative expense decreased by $1,298, which primarily resulted from the elimination of approximately 130 positions as part of the reorganization plan we committed to and initiated, or the Reorganization Plan, in April 2020, $1,710 of expenses related to executive officer retirement and separation agreements and executive recruitment fees recognized in the three months ended March 31, 2020, and a $719 reduction in marketing expenses, partially offset by a $2,005 increase in consultant fees to assist with identifying and implementing cost and other reduction opportunities.
The above factors were partially offset by a $3,928 increase in interest expense, net, which primarily resulted from the Term Loan Facility that was entered into December 2020.
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, as well as other actions by governments regarding trade policies, may impact fuel prices.
Although there are several components that comprise and impact our fuel costs of goods sold, including the cost of fuel, freight and mix, the cost of fuel is the primary driver. Over the past several years there have been significant changes in the cost of fuel. During the three months ended March 31, 2021, fuel prices trended upward, increasing 18.8% as compared to the beginning of the period. During the three months ended March 31, 2020, fuel prices trended downward, ending at a 51.5% lower price than at the beginning of the period. The decrease in fuel prices for the three months ended March 31, 2020, primarily resulted from a 36.1% decrease in March 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 months ended March 31, 2021, was 6.4% higher than the average fuel price during the three months ended March 31, 2020. 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 March 31, 2021. 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. Although we believe these factors, combined with competitive pressures, impact the level of fuel sales volume we realize, fuel sales volume increased during the three months ended March 31, 2021, as compared to the three months ended March 31, 2020. These increases primarily resulted from improved market conditions within the freight industry and the success of our marketing initiatives. In addition, we have created a new business division focused on non-fossil fuels, and we have hired a senior leader and have begun to onboard additional dedicated internal resources, as well as create relationships within the supply, storage and distribution chain, with respect to this initiative.
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Factors Affecting Comparability
COVID-19 Pandemic
See our discussion regarding the COVID-19 pandemic and its impact on us and our business above.
Growth and Cost Control Strategies
During the 2020 second quarter, we commenced a strategic transformation, or our Transformation Plan, consisting of numerous initiatives across our organization for the purpose of expanding our travel center network, improving and enhancing operational efficiencies and profitability, strengthening our financial position and in support of our core mission to "Return every traveler to the road better than they came." Among these initiatives was a corporate restructuring that resulted in immediate selling, general and administrative expense savings and included significant leadership appointments of qualified candidates who bring new and valuable experiences as well as initiative, critical skills and new visions and approaches to our business. Key among these initiatives was the creation of a centralized procurement group to drive economies of scale in pricing, increased leverage in vendor negotiations and ultimately lead to substantial purchasing savings and a streamlined operation. Other key initiatives are focused in areas of liquidity, expanding our franchise base, increasing diesel fuel and gasoline gross margin and fuel sales volume, increasing market share in the truck service business, improving merchandising and increasing gross margin in store and retail services, improving operating effectiveness in our food service offerings and improving information technology systems, while focusing on opportunities to rationalize and control costs.
Since the beginning of 2019, we have entered into franchise agreements covering 38 travel centers to be operated under our travel center brand names; four of these franchised travel centers began operations during 2019, 10 began operations during 2020, one began operations during the 2021 first quarter, one began operations in the 2021 second quarter to date and we expect the remaining 22 to open by the 2022 second quarter.
Our capital expenditures plan for 2021 contemplates aggregate investments in the range of $175,000 to $200,000 targeted towards improving and growing our core travel center business. The 2021 capital expenditures plan includes projects to upgrade our travel center locations and technology systems infrastructure as well as growth initiatives. Approximately half of our capital expenditure plan for 2021 is focused on growth initiatives that we expect will meet or exceed our 15% to 20% cash on cash return hurdle.
Importantly, we are committed to embracing environmentally friendly sources of energy and have formed a new business division, eTA, that will seek to deliver sustainable and alternative energy to the marketplace and focus on partnering with the public sector, private companies and customers to facilitate industry transformation. This business division will extend our commitment to providing the widest range of non-fuel offerings across our sites. Recent accomplishments include continued expansion of our biodiesel blending capabilities and availability of DEF at the pump. Moreover, as noted above, we have hired a senior leader and have begun to onboard additional dedicated internal resources, as well as create relationships within the supply, storage and distribution chain, with respect to our alternative energy initiative. We believe our large, well-located sites and our focus as a pure supplier may provide us with the opportunity to make both fossil and, eventually, non-fossil fuels available and to potentially balance or adjust our product and service offerings as we may determine and subject to availability.

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.


16

Results of Operations
All of our company operated locations are same site locations with the exception of one standalone truck service facility. 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 months ended March 31, 2021, as compared to the three months ended March 31, 2020.
 Three Months Ended
March 31,
 20212020$ Change% Change
Revenues:   
Fuel$1,077,258 $874,929 $202,329 23.1 %
Nonfuel447,914 425,007 22,907 5.4 %
Rent and royalties from franchisees3,924 3,412 512 15.0 %
Total revenues1,529,096 1,303,348 225,748 17.3 %
Gross margin:
Fuel77,430 81,955 (4,525)(5.5)%
Nonfuel275,692 263,288 12,404 4.7 %
Rent and royalties from franchisees3,924 3,412 512 15.0 %
Total gross margin357,046 348,655 8,391 2.4 %
Site level operating expense227,230 236,564 (9,334)(3.9)%
Selling, general and administrative expense35,930 37,228 (1,298)(3.5)%
Real estate rent expense63,869 63,588 281 0.4 %
Depreciation and amortization expense23,829 28,560 (4,731)(16.6)%
Income (loss) from operations6,188 (17,285)23,473 135.8 %
Interest expense, net11,384 7,456 3,928 52.7 %
Other expense, net1,397 541 856 158.2 %
Loss before income taxes(6,593)(25,282)18,689 73.9 %
Benefit for income taxes850 6,741 (5,891)(87.4)%
Net loss(5,743)(18,541)12,798 69.0 %
Less: net income for noncontrolling interest76 20 56 280.0 %
Net loss attributable to
 common stockholders
$(5,819)$(18,561)$12,742 68.6 %

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Three Months Ended March 31, 2021, as Compared to Three Months Ended March 31, 2020
Fuel Revenues. Fuel revenues for the three months ended March 31, 2021, increased by $202,329, or 23.1%, as compared to the three months ended March 31, 2020. The increase in fuel revenues was primarily due to an increase in fuel sales volume in addition to an increase in market prices for fuel. 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 SoldFuel Revenues
Results for the three months ended March 31, 2020488,786 $874,929 
Increase due to petroleum products price changes95,360 
Increase due to volume changes54,278 105,613 
Increase in wholesale fuel sales volume708 1,356 
Net change from prior year period54,986 202,329 
Results for the three months ended March 31, 2021543,772 $1,077,258 
Nonfuel Revenues. Nonfuel revenues for the three months ended March 31, 2021, increased by $22,907, or 5.4%, as compared to the three months ended March 31, 2020, primarily as a result of increases in our store and retail services and truck service revenue and an increase in DEF sales as a result of increased diesel fuel sales volume combined with growth in newer trucks on the road that require DEF, partially offset by a decrease in revenues at both our standalone restaurants and the restaurants in our travel centers, primarily a result of the COVID-19 pandemic.
Rent and Royalties from Franchisees. Rent and royalties from franchisees for the three months ended March 31, 2021, increased by $512, or 15.0%, as compared to the three months ended March 31, 2020, primarily as a result of the 11 franchised travel centers and four franchised standalone QSL restaurants that began operations after March 31, 2020, partially offset by the closure of three franchised standalone QSL restaurants since March 31, 2020.
Fuel Gross Margin. Fuel gross margin for the three months ended March 31, 2021, decreased by $4,525, or 5.5%, as compared to the three months ended March 31, 2020, primarily as a result of a more favorable fuel purchasing environment during the three months ended March 31, 2020, as compared to the three months ended March 31, 2021, partially offset by an increase in fuel sales volume.
Nonfuel Gross Margin. Nonfuel gross margin for the three months ended March 31, 2021, increased by $12,404, or 4.7%, as compared to the three months ended March 31, 2020, due to the increase in total nonfuel revenues. Nonfuel gross margin percentage for the three months ended March 31, 2021, declined slightly to 61.6% from 61.9% for the three months ended March 31, 2020, 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 March 31, 2021, decreased by $9,334, or 3.9%, as compared to the three months ended March 31, 2020, primarily due to the furloughing of field employees in response to the COVID-19 pandemic and continued focus on cost control in addition to $1,388 of bonuses paid to support those who continued to work at our locations during the COVID-19 pandemic during the three months ended March 31, 2020. Site level operating expense as a percentage of nonfuel revenues improved to 50.7% for the three months ended March 31, 2021, from 55.7% for the three months ended March 31, 2020, primarily due to the factors discussed above.
Selling, General and Administrative Expense. Selling, general and administrative expense for the three months ended March 31, 2021, decreased by $1,298, or 3.5%, as compared to the three months ended March 31, 2020. The decrease was primarily attributable to the elimination of approximately 130 positions as part of the Reorganization Plan in April 2020, $1,710 of expenses related to executive officer retirement and separation agreements and executive recruitment fees recognized in the three months ended March 31, 2020, and a $719 reduction in marketing expenses, partially offset by a $2,005 increase in consultant fees to assist with identifying and implementing cost and other reduction opportunities.
Real Estate Rent Expense. Real estate rent expense for the three months ended March 31, 2021, increased by $281, or 0.4%, as compared to the three months ended March 31, 2020, primarily due to an increase in percentage rent due to SVC as a result of the increase in total nonfuel revenues during the three months ended March 31, 2021.
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Depreciation and Amortization Expense. Depreciation and amortization expense for the three months ended March 31, 2021, decreased by $4,731, or 16.6%, as compared to the three months ended March 31, 2020. The decrease primarily resulted from the $5,162 write off of certain assets related to programs that were canceled during the three months ended March 31, 2020, partially offset by a $650 held for sale impairment charge related to QSL during the three months ended March 31, 2021.
Interest Expense, Net. Interest expense, net for the three months ended March 31, 2021, increased by $3,928, or 52.7%, as compared to the three months ended March 31, 2020. The increase primarily resulted from Term Loan Facility that was entered into December 2020.
Benefit for Income Taxes. We had a benefit for income taxes of $850 for the three months ended March 31, 2021, as compared to $6,741 for the three months ended March 31, 2020. The change in the benefit for income taxes is primarily due to larger pretax loss recognized in the three months ended March 31, 2020, as compared to the three months ended March 31, 2021.

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 continuing 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;
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 costs;
increased cost of fleet card fees;
increased costs for nonfuel products that we may not be able to pass through to our customers;
increases in our cost of capital due 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.
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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 $520,028 at March 31, 2021, and net cash provided by operating activities of $51,576 for the three months ended March 31, 2021, 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 and required capital expenditures for greater than 12 months.
Our Investment and Financing Liquidity and Resources
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 March 31, 2021, based on our qualified collateral, a total of $101,061 was available to us for loans and letters of credit under the Credit Facility. At March 31, 2021, there were no borrowings outstanding under the Credit Facility but we had outstanding $16,757 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 March 31, 2021, we were in compliance with all covenants of the Credit Facility. As of May 3, 2021, there were no borrowings outstanding under the Credit Facility and approximately $84,300 available under the Credit Facility for our use as of that date.
Term Loan Facility
On December 14, 2020, we entered into a $200,000 Term Loan Facility which is secured by a pledge of all the equity interests of substantially all of our wholly owned subsidiaries, a pledge, subject to the prior interest of the lenders under our Credit Facility, of substantially all of our other assets and the assets of such wholly owned subsidiaries and mortgages on certain of our fee owned real properties. We expect to use the $190,062 in net proceeds from our Term Loan Facility for general business purposes, including the funding of deferred capital expenditures, updates to key information technology infrastructure and growth initiatives consistent with our Transformation Plan. Interest on amounts outstanding under the Term Loan Facility are calculated at LIBOR, with a LIBOR floor of 100 basis points, plus 600 basis points, and the Term Loan Facility matures on December 14, 2027. Our Term Loan Facility requires monthly interest payments and quarterly principal payments of $500, or 1.0% of the original principal amount annually. Remaining principal amounts outstanding under the Term Loan Facility may be prepaid beginning on December 14, 2022.
Underwritten Public Equity Offering
On July 6, 2020, we received net proceeds of $79,980, after $296 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.
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 our travel center 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.
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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 March 31, 2021, there were no loans outstanding under the IHOP Note.

Sources and Uses of Cash
The following is a summary of our sources and uses of cash for the three months ended March 31, 2021 and 2020, as reflected in our consolidated statements of cash flows:
Three Months Ended
March 31,
(in thousands)20212020$ Change
Cash and cash equivalents at the beginning of the period$483,151 $17,206 $465,945 
Net cash provided by (used in):
Operating activities51,576 11,003 40,573 
Investing activities(13,522)(16,135)2,613 
Financing activities(1,233)8,145 (9,378)
Effect of exchange rate changes on cash56 99 (43)
Cash and cash equivalents at the end of the period$520,028 $20,318 $499,710 
Cash Flows from Operating Activities. During the three months ended March 31, 2021 and 2020, we had net cash inflows from operating activities of $51,576 and $11,003, respectively. The $40,573 change was primarily due to an increase in cash generated from working capital and an increase in operating cash flow during the three months ended March 31, 2021, as compared to the three months ended March 31, 2020.
Cash Flows from Investing Activities. During the three months ended March 31, 2021 and 2020, we had net cash outflows from investing activities of $13,522 and $16,135, respectively. The $2,613 change primarily resulted from a decrease in capital expenditures during the three months ended March 31, 2021, as compared to the three months ended March 31, 2020.
Cash Flows from Financing Activities. During the three months ended March 31, 2021 and 2020, we had cash outflows and inflows from financing activities of $1,233 and $8,145, respectively. The $9,378 change primarily resulted from $16,600 proceeds received under the West Greenwich Loan during the three months ended March 31, 2020, partially offset by a $7,900 repayment of our borrowings under our Credit Facility during the three months ended March 31, 2020.

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 further information about these and other such relationships and related party transactions, see Notes 5, 6 and 7 to the Consolidated Financial Statements included in Item 1. of this Quarterly Report, our Annual Report, our definitive Proxy Statement for our 2021 Annual Meeting of Stockholders and our other filings with the Securities and Exchange Commission. In addition, see Item 1A. "Risk Factors" in our Annual Report for a description of risks that may arise as a result of these and other related party transactions and relationships. We may engage in additional transactions with related parties, including businesses to which RMR or its subsidiaries provide management services.


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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. Environment 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 intended to phase in more stringent greenhouse gas emission and fuel efficiency standards for medium and heavy duty trucks. Under the Trump Administration, the EPA and the U.S. Department of Transportation rolled back various rules relating to greenhouse gas emissions and fuel efficiency standards for trucks and other motor vehicles, including portions of the rule discussed above. President Biden has signed executive orders requiring federal agencies to review certain actions taken by the Trump Administration with respect to fuel efficiency standards, but it is difficult to predict what, if any, changes to existing rules will occur under the Biden Administration or as a result of federal legislative action or due to 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. The Trump Administration challenged CARB's ability to take such actions, and legal challenges remain to the enforceability of CARB's rulemaking. 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.
Some observers believe severe weather activities in different parts of the country over the last few years are evidence of global climate change. Such severe weather 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 certain 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 8 to the Consolidated Financial Statements included in Item 1. of this Quarterly Report, which disclosure is incorporated herein by reference.

Item 3.  Quantitative and Qualitative Disclosures About Market Risk
Not applicable.

Item 4.  Controls and Procedures
Disclosure Controls and Procedures
As of the end of the period covered by this report, our management carried out an evaluation, under the supervision and with the participation of our Chief Executive Officer and our Chief Financial Officer, of the effectiveness of our disclosure controls and procedures pursuant to Rule 13a-15 and Rule 15d-15 of the Securities Exchange Act of 1934, as amended. Based upon that evaluation, our Chief Executive Officer and our Chief Financial Officer concluded that our disclosure controls and procedures were effective at March 31, 2021.

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Changes in Internal Control over Financial Reporting
During the three months ended March 31, 2021, there were no changes to our internal controls over financial reporting that materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.
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Warning Concerning Forward-Looking Statements
This Quarterly Report contains statements that constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and other securities laws. Whenever we use words such as "believe," "expect," "anticipate," "intend," "plan," "estimate," "will," "may" and negatives and derivatives of these or similar expressions, we are making forward-looking statements. These forward-looking statements are based upon our present intent, beliefs or expectations, but forward-looking statements are not guaranteed to occur and may not occur. Actual results may differ materially from those contained in or implied by our forward-looking statements. Forward-looking statements involve known and unknown risks, uncertainties and other factors, some of which are beyond our control. Among others, the forward-looking statements that appear in this Quarterly Report include statements that:
Our expectations about our and the trucking industry's ability to operate through the COVID-19 pandemic and current economic conditions;
The duration and severity of the economic downturn resulting from the COVID-19 pandemic and its impact on us and our customers, suppliers and other stakeholders;
Our operating results for the three months ended March 31, 2021, reflect certain improvements, as compared to the three months ended March 31, 2020. This may imply that we will increase or maintain these improvements and that we will be profitable in the future. However, certain of these improvements resulted from unique items that may not occur in the future. Moreover, despite these improvements, we recognized a net loss for the three months ended March 31, 2021. In addition, customer demand and competitive conditions, among other factors, may significantly impact our fuel and nonfuel revenues and the costs of our fuel and nonfuel products may increase in the future because of inflation or other reasons. If fuel gross margin per gallon, or fuel or nonfuel sales volume, decline, if we are not able to pass increases in fuel or nonfuel costs to our customers or if our nonfuel sales mix changes in a manner that negatively impacts our nonfuel gross margin, our nonfuel revenues or our fuel and nonfuel gross margin may decline. In fact, since we became a public company in 2007, we have been able to produce only occasional profits and we have accumulated significant losses. We may be unable to produce future profits and our losses may increase;
Our travel centers have been recognized as a provider of services to essential businesses by many public authorities, which has allowed us to continue operating most of our businesses during the COVID-19 pandemic. This may imply that we will continue to be designated as a provider of services to essential businesses; however, we could lose that designation, which could result in our having to close or reduce operations at certain or all of our travel centers for an indefinite period;
We have commenced our Transformation Plan, which includes numerous initiatives that we believe will improve and enhance our operational efficiencies and profitability, increase diesel fuel and gasoline gross margin and fuel sales volume, increase market share in the truck service industry, improve merchandising and gross margin in store and retail services, improve operating effectiveness in our full service restaurants and expand our franchise base. However, we may not be able to recognize the improvements to our operating results that we anticipate. In addition, the costs incurred to complete the initiatives may cost more than we anticipate;
We have incurred costs to support our anticipated business growth. This statement may imply that these costs will result in increased revenues and us receiving the expected return on our investments in growing our business. However, these costs may exceed any increased revenue we may receive from this growth or the returns on these investments may be less than expected;
We expect to invest capital into relationships with companies that supply, distribute or store electric, hydrogen or other non-fossil fuel, alternative energy resources. We may decide not to invest capital into these relationships and these relationships may not materialize or become beneficial, and if we do further pursue this business or make these investments, we may not realize the returns or other benefits we may expect and we could realize losses;
Our belief that our sites are large and well-located may prove otherwise and, if so, we may not realize the benefits we expect based on the characteristics of our sites;
We may make acquisitions and develop new locations in the future including adding sites through franchising. Managing and integrating acquired, developed or franchised locations can be difficult, time consuming and/or more expensive than anticipated and involve risks of financial losses. We may not operate our acquired or developed locations as profitably as we may expect. In addition, acquisitions or property development may subject us to greater risks than our continuing operations, including the assumption of unknown liabilities;
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Our belief that, as of the date of this Quarterly Report, we had sufficient financial resources to fund operations for the foreseeable future. The COVID-19 pandemic has significantly negatively impacted the U.S. economy; if the current economic conditions continue for a sustained period or worsen, our business, results of operations and financial condition may be materially adversely impacted, which may result in our not having sufficient financial resources to fund operations for the foreseeable future;
We expect to expand our network by entering into new franchise agreements. However, we may not succeed in entering these agreements and the commencement and stabilization of any new franchisees may not occur or may be delayed, and these franchises may not be successful or generate the royalties for us that we expect;
We have a Credit Facility with a current maximum availability of $200.0 million. The availability of this maximum amount is subject to limits based on our qualified collateral, including our eligible cash, accounts receivable, inventory, equipment and intangible assets that varies in amount from time to time. Accordingly, our borrowing and letter of credit availability at any time may be less than $200.0 million. At March 31, 2021, based on our eligible collateral at that date, our borrowing and letter of credit availability was $101.1 million, of which we had used $16.8 million for outstanding letters of credit. The maximum amount available under the Credit Facility may be increased to $300.0 million, the availability of which is subject to limits based on our available collateral and lender participation. However, if we do not have sufficient collateral or if we are unable to identify lenders willing to increase their commitments or join our Credit Facility, we may not be able to increase the size of our Credit Facility or the availability of borrowings when we may want or need to do so; and
We may not spend the $175.0 million to $200.0 million of capital expenditures in 2021 that we currently expect to spend, and we spend more or less that these amounts.
These and other unexpected results may be caused by various factors, some of which are beyond our control, including:
Continued improved fuel efficiency of motor vehicle engines and other fuel conservation and alternative fuel practices and sources employed or used by our customers and alternative fuel technologies or other means of transportation that may be developed and widely adopted in the future may continue to reduce the demand for the fuel that we sell and may adversely affect our business;
Competition within the travel center, truck repair and restaurant industries may adversely impact our financial results. Our business requires substantial amounts of working capital and our competitors may have greater financial and other resources than we do;
Future increases in fuel prices may reduce the demand for the products and services that we sell;
Future commodity fuel price increases, fuel price volatility or other factors may cause us to need more working capital to maintain our inventory and carry our accounts receivable at higher balances than we now expect and the general availability of, demand for and pricing of motor fuels may change in ways which lower the profitability associated with our selling motor fuels;
Our suppliers may be unwilling or unable to maintain the current credit terms for our purchases. If we are unable to purchase goods on reasonable credit terms, our required working capital may increase and we may incur material losses. Also, in times of rising fuel and nonfuel prices, our suppliers may be unwilling or unable to increase the credit amounts they extend to us, which may increase our working capital requirements. The availability and the terms of any credit we may be able to obtain are uncertain;
Most of our trucking company customers transact business with us by use of fuel cards issued by third party fuel card companies. Fuel card companies facilitate payments to us and charge us fees for these services. The fuel card industry has only two significant participants. We believe almost all trucking companies use only a single fuel card provider and have become increasingly dependent upon services provided by their respective fuel card provider to manage their fleets. Continued lack of competition among fuel card companies may result in future increases in our transaction fee expenses or working capital requirements, or both;
Our labor costs may continue to increase in response to business and market demands and conditions, business opportunities or pursuant to legal requirements;
The costs we have incurred and expect to incur to support our planned and expected growth of our business may exceed any increased revenue we may receive from this growth or result in our returns on these investments being less than we expect and target;
Fuel supply disruptions may occur, which may limit our ability to purchase fuel for resale;
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If trucking companies are unable to satisfy market demands for transporting goods or if the use of other means of transporting goods increases, the trucking industry may experience reduced business, which would negatively affect our business, results of operations and liquidity;
Trucking companies have incurred, and may incur additional, increased labor costs to retain and hire truck drivers, which may reduce the amount these companies are willing to pay for our services;
Compliance with, and changes to, federal, state and local laws and regulations, including those related to tax, employment and environmental matters, accounting rules and financial reporting standards, payment card industry requirements and similar matters may increase our operating costs and reduce or eliminate our profits;
We are routinely involved in litigation. Discovery during litigation and court decisions often have unanticipated results. Litigation is usually expensive and can be distracting to management. We cannot be sure of the outcome of any of the litigation matters in which we are or may become involved;
Acts of terrorism, geopolitical risks, wars, public health crises, such as the ongoing COVID-19 pandemic, or other man made or natural disasters beyond our control may adversely affect our financial results; and
Although we believe that we benefit from our relationships with our related parties, including SVC, RMR and others affiliated with them, actual and potential conflicts of interest with related parties may present a contrary perception or result in litigation, and the benefits we believe we may realize from the relationships may not materialize.
Results that differ from those stated or implied by our forward-looking statements may also be caused by various changes in our business or market conditions as described more fully in our Annual Report, including under "Warning Concerning Forward-Looking Statements" and Item 1A. "Risk Factors," and elsewhere in this Quarterly Report.
You should not place undue reliance upon forward-looking statements. Except as required by law, we undertake no obligation to update or revise any forward-looking statement as a result of new information, future events or otherwise.

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Part II. Other Information

Item 1A.  Risk Factors
There have been no material changes during the period covered by this Quarterly Report on Form 10-Q to the risk factors previously disclosed under the "Risk Factors" section of our Annual Report on Form 10-K for the fiscal year ended December 31, 2020.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Issuer Purchases of Equity Securities
The following table provides information about our purchases of our equity securities during the quarter ended March 31, 2021.
Calendar
Month
Number of
Shares
Purchased(1)
Average Price
Paid per Share
Total Number of Shares
Purchased as Part of Publicly
Announced Plans or
Programs
Maximum Approximate
Dollar Value of Shares That
May Yet Be Purchased Under
the Plans or Programs
January 2021156 $30.95 — $— 
February 2021281 31.94 — — 
March 20212,325 25.94 — — 
Total2,762 $26.84 — $— 
(1) During the quarter ended March 31, 2021, all common stock purchases were made to satisfy share award recipients' tax withholding and payment obligations in connection with the vesting of awards of shares of common stock, which were repurchased by us based on their fair market value on the repurchase date.

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Item 6.  Exhibits
*
*
101.INSXBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document
101.SCHXBRL Taxonomy Extension Schema Document (filed herewith)
101.CALXBRL Taxonomy Extension Calculation Linkbase Document (filed herewith)
101.DEFXBRL Taxonomy Extension Definition Linkbase Document (filed herewith)
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101.LABXBRL Taxonomy Extension Label Linkbase Document (filed herewith)
101.PREXBRL Taxonomy Extension Presentation Linkbase Document (filed herewith)
104Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)
* Portions of this exhibit (indicated by asterisks) have been omitted in accordance with the rules of the Securities and Exchange Commission.
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
 TravelCenters of America Inc.
  
 By:/s/ Peter J. Crage
 Date:May 4, 2021  Name:Peter J. Crage
   Title:Executive Vice President,
Chief Financial Officer and Treasurer
(Principal Financial Officer and Principal Accounting Officer)

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