No New Movement on TravelCenters Being Acquired
WESTLAKE, Ohio — TravelCenters of America LLC (TA) has not heard from a private equity firm believed to be interested in purchasing the travel center and convenience store operator in some time, CEO Thomas O’Brien stated Monday during the company’s 2016 fiscal second-quarter earnings conference call.
O’Brien was asked by a Wall Street analyst in the call why the company rejected an offer — reported to be $14 per share from San Francisco-based Golden Gate Capital — despite the large premium price to where TA is currently trading, about $8 per share.
O’Brien responded that TA never received an official offer to purchase his company. Instead, the company only received a letter regarding the possibility of discussing a potential acquisition.
“An invitation to talk about things and an offer are very different things,” he said.
As CSNews Online reported, TA confirmed it received a non-binding letter in December. The Westlake-based company issued a response in mid-June, stated its board “agreed with the private equity firm that TA’s assets, business model and competitive position have tremendous potential.”
During the conference call, O’Brien revealed he has not heard from the private equity firm since its response was issued in June.
“We believe in our business plan,” O’Brien said regarding its future without a takeover bid. “We’ve got the plans, management and resources to create value.”
He added that talks of an acquisition is an “interesting exercise.”
EARNINGS DECLINE
TA’s earnings took a dip in its 2016 fiscal second quarter, ended June 30. Net income came in at $3.52 million, vs. $3.77 million in year-ago period. EBITDA also declined by more than $6 million year over year to $33.5 million.
O’Brien attributed these drops to a “slightly softer trucking industry backdrop.”
There were certainly some good signs, however. Fuel sales volumes increased from 534 million gallons to 561 million gallons, despite a drop-off in diesel gallons. Fuel gross margins improved by 5.9 percent year over year to nearly $102 million, with a slight uptick in fuel gross margins per gallons to 18.2 cents per gallon.
Nonfuel sales also had a good quarter. Total nonfuel revenues increased approximately $55 million to $509.5 million, while nonfuel gross margins rose 10.5 percent to $272 million.
Nonfuel gross margins did take a dip from 54.2 percent to 53.4 percent, however.
"During the second quarter of 2016, our plans to offset any decline in diesel fuel sales due to improving truck engine efficiency and a modest recent decline in over the road freight volume with increasing gasoline sales at our growing convenience store business and to increase profits by growing our nonfuel businesses seemed to begin to show results,” said O’Brien. “I believe that many of our acquisitions are not yet performing to their full stabilized potential. I remain confident that the continued improvements in recently acquired sites and businesses, including our recent acquisition of Quaker Steak & Lube restaurants, will prove that our investments have been done at attractive multiples of operating earnings."
Looking at same-store convenience store data, which comprises 58 sites, fuel sales volume decreased by 6 percent year over year to 16.8 million gallons, while fuel revenues dropped by 21 percent year over year to $29.2 million.
Fuel gross margins rose 8.3 percent year over year to $3.3 million, while fuel gross margins per gallon increased by 15 percent to 19.8 cents per gallon.
On a nonfuel basis, revenues declined by 2.8 percent to $29.3 million, with nonfuel gross margins dropping a similar 2.1 percent to $9.5 million.
Nonfuel gross margin percentage saw a lift of 20 basis points year over year to 32.3 percent.
TravelCenters of America operates travel centers in 43 states as well as Canada. Its convenience store operations, branded Minit Mart, are located in 11 states, and the company also has standalone restaurants in 15 states.