AP NEWS

TravelCenters of America LLC Announces Second Quarter 2018 Financial Results; Robust Performance by Travel Centers Segment Including Truck Service Growth Programs; Quarterly Loss Due to Impairment Charge

August 6, 2018

WESTLAKE, Ohio--(BUSINESS WIRE)--Aug 6, 2018--TravelCenters of America LLC (Nasdaq:TA) today announced financial results for the three and six months ended June 30, 2018:

Andrew J. Rebholz, TA’s CEO, made the following statement regarding the 2018 second quarter results:

“During the 2018 second quarter, we continued to produce positive results from the growth and cost savings initiatives we have been pursuing. In our travel centers segment, each of nonfuel revenues and nonfuel gross margin grew at 5.5% and 6.7%, respectively, as compared to the 2017 second quarter, reflecting the continued growth in our commercial tire dealer, RoadSquad OnSite® mobile maintenance, and RoadSquad® roadside assistance and call center programs. On a same site basis, our consolidated site level gross margin in excess of site level operating expenses improved over the prior year quarter by 6.8% (up 7.4% in the travel center segment and slightly declined in the convenience store segment), reflecting our success in our truck service growth initiatives, the changes we are making in our restaurants and other initiatives to increase revenues and control costs.

“In addition, we are pleased to announce that we have commenced plans to more aggressively grow our travel center network, including by acquisition, development and franchising and also through the introduction of our newly developed smaller format TA Express concept that will be rolled out in the coming months. We are also pleased to announce that in July we began implementing our convenience store loyalty program and expect to have that program, named GoGo Rewards, fully implemented during the third quarter.

“We also recognized a $51.5 million charge during the second quarter to impair goodwill in our convenience stores segment. Despite this impairment charge, we expect that our convenience stores’ operating results will improve in the second half of 2018.”

Business Commentary

Fuel sales volume for the 2018 second quarter decreased by 1.6 million gallons, or 0.3%, due to a same site fuel sales volume decline of 5.2 million gallons, or 1.0%, and a net increase of 3.6 million gallons in fuel sales volume at sites opened or closed since the beginning of the 2017 second quarter, each as compared to the 2017 second quarter. TA believes the fuel sales volume decrease on a same site basis experienced during the 2018 second quarter primarily resulted from the continued effects of fuel efficiency gains and increased competition, partially offset by the effects of TA’s fuel pricing and marketing strategies. Fuel revenues increased by $321.5 million, or 32.9%, in the 2018 second quarter as compared to the 2017 second quarter, primarily due to higher market prices for fuel during the 2018 second quarter. Fuel gross margin decreased by $3.0 million, or 3.2%, as compared to the 2017 second quarter, primarily as a result of the slight fuel sales volume decline and TA’s loyalty program having a larger impact on fuel gross margin in the 2018 second quarter than it did in the 2017 second quarter.

Nonfuel revenues increased by $20.1 million, or 3.9%, in the 2018 second quarter as compared to the 2017 second quarter, including a $15.7 million same site increase and a $4.4 million increase attributable to new sites. The increase on a same site basis was primarily due to growth in TA’s truck service program and the positive impact of certain of TA’s marketing initiatives. Nonfuel gross margin increased by $16.7 million, or 5.7%, in the 2018 second quarter as compared to the 2017 second quarter, including a $13.9 million same site increase and a $2.8 million increase attributable to recently acquired and developed sites. The increase in nonfuel gross margin was primarily due to the increase in nonfuel revenues and an increase in the nonfuel gross margin percentage. The nonfuel gross margin percentage was 57.7% for the 2018 second quarter as compared to 56.7% for the 2017 second quarter; the increase in the nonfuel gross margin percentage was primarily due to a change in the mix of products and services sold, including the growth of TA’s truck service program.

Site level operating expenses increased by $3.3 million, or 1.3%, in the 2018 second quarter as compared to the 2017 second quarter due to a $2.6 million increase from new sites since the beginning of the 2017 second quarter and a $0.7 million same site increase. The increase on a same site basis was primarily due to increased labor costs to support the increase in nonfuel sales. Site level operating expenses as a percentage of nonfuel revenues improved to 47.6% for the 2018 second quarter as compared to 48.8% for the 2017 second quarter. The improvement in site level operating expenses as a percentage of nonfuel revenues was primarily the result of the growth in TA’s truck service program and TA’s cost saving initiatives, as well as excess transaction fees of $2.8 million charged by Comdata, Inc., or Comdata, in the 2017 second quarter, which excess transaction fees Comdata repaid to TA later in 2017 pursuant to a court order.

Selling, general and administrative expenses for the 2018 second quarter decreased by $8.3 million, or 21.8%, as compared to the 2017 second quarter, primarily attributable to $10.1 million of reimbursed litigation expenses collected from Comdata during the 2018 second quarter, partially offset by a $1.8 million increase in compensation expense due to the retirement of TA’s former Chief Executive Officer as well as annual salary increases and increased headcount, and a $1.4 million increase in legal fees in connection with matters unrelated to Comdata.

Real estate rent expense increased by $2.1 million, or 3.1%, in the 2018 second quarter as compared to the 2017 second quarter, primarily from TA’s sale to, and lease back from, Hospitality Properties Trust, or HPT, of one travel center in May 2017 and improvements at leased sites since the beginning of the 2017 second quarter.

Depreciation and amortization expense increased by $1.3 million, or 4.4%, in the 2018 second quarter as compared to the 2017 second quarter primarily resulting from write offs of certain assets and the growth in depreciable assets as a result of the locations acquired and other capital investments TA completed (and did not subsequently sell to HPT) since the beginning of the 2017 second quarter.

TA recognized a goodwill impairment charge of $51.5 million during the 2018 second quarter in its convenience stores segment. Prior to this impairment charge, the total amount of convenience store segment assets was approximately $466.6 million, including $69.9 million of goodwill. The impairment charge reflects the amount by which the carrying value of the segment exceeded its estimated fair value. More specifically, this charge primarily is due to the results in this segment failing to meet TA’s projections in connection with convenience store acquisitions completed in 2013 through 2016, as well as changes in certain assumptions that affect the business valuations, including an increase in the discount rate applied.

Net loss for the 2018 second quarter was $33.9 million as compared $2.9 million for the 2017 second quarter. Adjusted net loss for the 2018 second quarter was $2.4 million as compared to adjusted net income of $0.4 million for the 2017 second quarter. The change in adjusted net loss was primarily due to a slight decline in site level gross margin in excess of site level operating expenses in TA’s convenience store segment and in corporate and other of $0.2 million and $0.4 million, respectively, as well as the increase in selling, general and administrative expenses of $3.3 million and in real estate rent expense of $2.1 million, partially offset by a $7.5 million increase in site level gross margin in excess of site level operating expenses in TA’s travel center segment.

Net loss per common share attributable to common shareholders for the 2018 second quarter was $0.85 as compared to $0.08 for the 2017 second quarter. Adjusted net loss per common share attributable to common shareholders for the 2018 second quarter was $0.05 as compared to adjusted net income per common share attributable to common shareholders for the 2017 second quarter of $0.01.

Adjusted EBITDA for the 2018 second quarter decreased by $0.3 million as compared to the 2017 second quarter.

Travel Centers Segment

Fuel sales volume increased modestly for the 2018 second quarter as compared to the 2017 second quarter due to new locations. Same site fuel sales volume decreased by 4.5 million gallons, or 1.0%, due to the continued effects of fuel efficiency gains and increased competition, partially offset by TA’s fuel pricing and marketing strategies. Fuel revenues increased by $289.6 million, or 34.7%, in the 2018 second quarter as compared to the 2017 second quarter primarily due to higher market prices for fuel and from sites acquired since the beginning of the 2017 second quarter. Fuel gross margin decreased by $2.3 million, or 3.0%, to $73.9 million due to lower fuel gross margin per gallon.

Nonfuel revenues increased by $23.9 million, or 5.5%, in the 2018 second quarter as compared to the 2017 second quarter primarily due to an $18.8 million, or 4.3%, increase on a same site basis primarily as a result of growth in TA’s truck service program and the positive impact of certain of TA’s marketing initiatives. Nonfuel gross margin increased by $17.5 million, or 6.7%, in the 2018 second quarter as compared to the 2017 second quarter due to an increase in nonfuel revenues and an increase in the nonfuel gross margin percentage. Nonfuel gross margin percentage was 60.8% in the 2018 second quarter as compared to 60.1% in the 2017 second quarter; the increased nonfuel gross margin percentage was primarily the result of changes in TA’s mix of products and services sold.

Site level gross margin in excess of site level operating expenses increased by $10.3 million, or 8.4%, in the 2018 second quarter as compared to the 2017 second quarter primarily due to an increase at same sites. On a same site basis, (224 locations) site level gross margin in excess of site level operating expenses increased in the 2018 second quarter by $9.0 million, or 7.4%, as compared to the 2017 second quarter, primarily due to the following factors:

an increase in nonfuel gross margin due to the increase in nonfuel revenues and an increase in nonfuel gross margin percentage that primarily was due to the change in the mix of products and services sold; and an improvement in site level operating expenses as a percentage of nonfuel revenues that primarily was due to growth in TA’s truck service programs, cost savings initiatives and the excess transaction fees charged by Comdata in 2017, which excess transaction fees Comdata subsequently repaid to TA pursuant to a court order.

These increases were partially offset by a decrease in fuel gross margin due to the decline in fuel sales volume and TA’s loyalty program having a larger impact on fuel gross margin in the 2018 second quarter as compared to the 2017 second quarter.

Convenience Stores Segment

Fuel sales volume decreased by 1.2 million gallons, or 1.9%, for the 2018 second quarter as compared to the 2017 second quarter. This decrease was primarily due to the continued effects of increased competition at same sites and three locations TA closed in 2018. Fuel revenues increased by $27.3 million, or 22.3%, in the 2018 second quarter as compared to the 2017 second quarter primarily due to higher market prices for fuel, partially offset by a decrease in fuel sales volume on a same site basis due to competition and three locations TA closed in 2018. Fuel gross margin decreased by $0.7 million, or 4.5%, to $14.8 million as a result of the decrease in fuel sales volume.

Nonfuel revenues decreased by $2.3 million, or 3.2%, in the 2018 second quarter as compared to the 2017 second quarter primarily due to a decrease in nonfuel revenues on a same site basis primarily due to increased competition. Nonfuel gross margin decreased by $0.2 million, or 0.7 %, in the 2018 second quarter as compared to the 2017 second quarter. Nonfuel gross margin percentage was 35.8% in the 2018 second quarter as compared to 34.9% in the 2017 second quarter. The increase in the nonfuel gross margin percentage was primarily the result of changes in TA’s mix of products sold.

Site level gross margin in excess of site level operating expenses decreased in the 2018 second quarter by $0.2 million, or 1.9%, as compared to the 2017 second quarter due to three locations TA closed in 2018 and a decrease on a same site basis. On a same site basis (226 locations) site level gross margin in excess of site level operating expenses decreased in the 2018 second quarter by 0.1% as compared to the 2017 second quarter.

Conference Call:

On Monday, August 6, 2018, at 10:00 a.m. Eastern time, TA will host a conference call to discuss its financial results and other activities for the three months ended June 30, 2018. Following management’s remarks, there will be a question and answer period.

The conference call telephone number is 877-329-4614. Participants calling from outside the United States and Canada should dial 412-317-5437. No pass code is necessary to access the call from either number. Participants should dial in about 15 minutes prior to the scheduled start of the call. A replay of the conference call will be available for about a week after the call. To hear the replay, dial 412-317-0088. The replay pass code is 10121848.

A live audio webcast of the conference call will also be available in a listen only mode on TA’s website at www.ta-petro.com. To access the webcast, participants should visit TA’s website about five minutes before the call. The archived webcast will be available for replay on TA’s website for about one week after the call. The transcription, recording and retransmission in any way of TA’s second quarter conference call is strictly prohibited without the prior written consent of TA. The Company’s website is not incorporated as part of this press release.

About TravelCenters of America LLC:

TA’s nationwide business includes travel centers located in 43 U.S. states and in Canada, standalone convenience stores in 11 states and standalone restaurants in 13 states. TA’s travel centers operate under the “TravelCenters of America,” “TA,” “Petro Stopping Centers” and “Petro” brand names and offer diesel and gasoline fueling, restaurants, truck repair services, travel/convenience stores and other services which are designed to provide attractive and efficient travel experiences to professional drivers and other motorists. TA’s convenience stores operate principally under the “Minit Mart” brand name and offer gasoline fueling as well as nonfuel products and services such as coffee, groceries, some fresh foods and other convenience items. TA’s standalone restaurants operate principally under the “Quaker Steak & Lube” brand name.

WARNING CONCERNING FORWARD LOOKING STATEMENTS

THIS PRESS RELEASE CONTAINS STATEMENTS THAT CONSTITUTE FORWARD LOOKING STATEMENTS WITHIN THE MEANING OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995 AND OTHER SECURITIES LAWS. WHENEVER TA USES WORDS SUCH AS “BELIEVE,” “EXPECT,” “ANTICIPATE,” “INTEND,” “PLAN,” “ESTIMATE,” “WILL,” “MAY” AND NEGATIVES OR DERIVATIVES OF THESE OR SIMILAR EXPRESSIONS, TA IS MAKING FORWARD LOOKING STATEMENTS. THESE FORWARD LOOKING STATEMENTS ARE BASED UPON TA’S 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 TA’S FORWARD LOOKING STATEMENTS AS A RESULT OF VARIOUS FACTORS. AMONG OTHERS, THE FORWARD LOOKING STATEMENTS WHICH APPEAR IN THIS PRESS RELEASE THAT MAY NOT OCCUR INCLUDE:

IN THIS PRESS RELEASE, TA’S CHIEF EXECUTIVE OFFICER, ANDREW REBHOLZ, STATES THAT TA CONTINUED TO PRODUCE POSITIVE RESULTS FROM THE GROWTH AND COST SAVINGS INITIATIVES TA HAS BEEN PURSUING AND HE REFERENCED VARIOUS EXAMPLES IN SUPPORT OF HIS STATEMENTS. THESE STATEMENTS MAY IMPLY THAT TA WILL CONTINUE TO PURSUE ITS GROWTH AND COST SAVINGS INITIATIVES AND THAT THOSE INITIATIVES WILL PRODUCE POSITIVE RESULTS FOR TA IN THE FUTURE. HOWEVER, TA’S BUSINESS IS SUBJECT TO VARIOUS RISKS, INCLUDING RISKS OUTSIDE ITS CONTROL. TA MAY FAIL TO SUCCESSFULLY EXECUTE ON THESE INITIATIVES IN THE FUTURE OR THESE INITIATIVES MAY NOT PRODUCE POSITIVE RESULTS FOR TA. FURTHER, TA MAY DETERMINE NOT TO CONTINUE TO PURSUE THESE INITIATIVES; IN THIS PRESS RELEASE, MR. REBHOLZ STATES THAT TA HAS COMMENCED PLANS TO MORE AGGRESSIVELY GROW ITS TRAVEL CENTER NETWORK, INCLUDING BY ACQUISITION, DEVELOPMENT AND FRANCHISING AND ALSO THROUGH THE INTRODUCTION OF ITS NEWLY DEVELOPED SMALLER FORMAT TA EXPRESS CONCEPT THAT WILL BE ROLLED OUT IN THE COMING MONTHS. THIS MAY IMPLY THAT TA WILL SUCCESSFULLY EXECUTE THIS STRATEGY AND THAT TA’S OPERATING RESULTS AND PROFITABILITY WILL IMPROVE AS A RESULT. HOWEVER, TA MAY FAIL TO EXECUTE THIS GROWTH STRATEGY SUCCESSFULLY AND TA’S OPERATING RESULTS AND PROFITABILITY MAY NOT IMPROVE AND COULD DECLINE AS A RESULT OF TA’S PURSUIT OF THIS STRATEGY; IN THIS PRESS RELEASE, MR. REBHOLZ STATES THAT TA HAS BEGUN IMPLEMENTING ITS CONVENIENCE STORE LOYALTY PROGRAM AND THAT IT EXPECTS TO HAVE THAT PROGRAM FULLY IMPLEMENTED DURING THE THIRD QUARTER OF 2018. MR. REBHOLZ FURTHER STATES THAT TA EXPECTS ITS CONVENIENCE STORES’ OPERATING RESULTS WILL IMPROVE IN THE SECOND HALF OF 2018. TA MAY FAIL TO SUCCESSFULLY IMPLEMENT ITS LOYALTY PROGRAM AND ITS CONVENIENCE STORES’ OPERATING RESULTS MAY NOT IMPROVE AS A RESULT OF THIS PROGRAM OR OTHERWISE; AND STATEMENTS IN THIS PRESS RELEASE ABOUT IMPROVED OPERATING RESULTS, COST SAVINGS AND INCREASING GROSS MARGINS MAY IMPLY THAT TA’S BUSINESS MAY BE PROFITABLE IN THE FUTURE. HOWEVER, CERTAIN OF THOSE IMPROVEMENTS RESULTED FROM UNIQUE ITEMS THAT MAY NOT OCCUR AGAIN. IN ADDITION, SINCE TA BECAME PUBLICLY OWNED IN 2007, TA’S OPERATIONS HAVE GENERATED LOSSES AND ONLY OCCASIONALLY GENERATED PROFITS. TA MAY BE UNABLE TO PRODUCE FUTURE PROFITS AND TA’S LOSSES MAY INCREASE.

THE INFORMATION CONTAINED IN TA’S PERIODIC REPORTS, INCLUDING TA’S ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 2017, WHICH HAS BEEN FILED WITH THE U.S. SECURITIES AND EXCHANGE COMMISSION, OR SEC, AND TA’S QUARTERLY REPORTS ON FORM 10-Q FOR THE PERIODS ENDED MARCH 31, 2018 AND JUNE 30, 2018, WHICH HAVE BEEN OR WILL BE FILED WITH THE SEC, UNDER THE CAPTION “RISK FACTORS,” OR ELSEWHERE IN THOSE REPORTS, OR INCORPORATED THEREIN, IDENTIFIES OTHER IMPORTANT FACTORS THAT COULD CAUSE DIFFERENCES FROM TA’S FORWARD LOOKING STATEMENTS. TA’S FILINGS WITH THE SEC ARE AVAILABLE ON THE SEC’S WEBSITE AT WWW.SEC.GOV.

YOU SHOULD NOT PLACE UNDUE RELIANCE UPON FORWARD LOOKING STATEMENTS.

This article has been truncated. You can see the rest of this article by visiting http://www.businesswire.com/news/home/20180806005188/en.

AP RADIO
Update hourly