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TravelCenters' Acquisitions Yield Positive Results


WESTLAKE, Ohio — TravelCenters of America LLC closed 2016 with encouragement that its focus on improving non-fuel growth is paying off.

"During the 2016 fourth quarter, our business strategies resulted in gains in non-fuel gross margin, as well as continued improvement in operating efficiencies, as reflected in lower site-level operating expenses on a same-site basis," CEO Thomas O'Brien stated Tuesday as the company reported its 2016 fourth-quarter and year-end financial results. "We grew site-level gross margin in excess of site-level operating expenses in total and on a same-site basis."

The company's convenience store segment saw fuel and non-fuel revenue increase 22.8 percent to total revenues of $34.1 million during the fourth quarter compared to one year ago. This was due to the acquisition of 49 locations purchased since the beginning of the 2015 fourth quarter, according to TravelCenters.

The c-store segment's site-level gross margin in excess of site-level operating expenses increased by 97 percent, or $4.7 million, during the quarter due to improvements at same sites and the addition of locations acquired in 2015 and 2016.

TravelCenters also saw fuel and non-fuel revenue increase in its travel centers segment, increasing by 2.6 percent to $30.6 million in total revenues during the fourth quarter, due to increases in fuel prices on a same-site basis and the addition of new locations during the year. Site-level gross margin in excess of site-level operating expenses increased by 2.4 percent to $2.7 million during the quarter, mainly due to an increase in non-fuel gross margin and a decrease in operating expenses on a same-site basis. This was partially offset by a decrease in fuel gross margin.

"Our results also reflect continued improvement in financial contributions from our recently acquired sites, and I remain confident in the prospect of realizing the expected results from these investments," O'Brien said. He also cited the company's enhanced marketing efforts as a factor behind TravelCenters' retail segment improvements.

Overall, TravelCenters' fuel sales volume decreased by 1.6 percent, or 8.6 million gallons during the quarter, compared to one year ago due to a decrease in same-site fuel volume attributed to fuel efficiency gains by the company's commercial diesel fuel customers, new sites opened by competition, and a relatively soft trucking freight environment. Fuel revenue increased by 5.1 percent, or $45.8 million, due to newly acquired locations and same-site results.

Total non-fuel revenue increased by 5.8 percent, or $26.2 million, and non-fuel gross margin increased by 6.5 percent, or $15.7 million, during the fourth quarter compared to Q4 2015.

The company saw a net loss for the fourth quarter of $6.5 million, compared to $1.6 million one year ago. TravelCenters attributed the change in net loss primarily to increases in depreciation and amortization expenses, and expenses related to financing and managing newly acquired and developed locations (including real estate rent, interest and selling, general and administrative expenses), a decrease in fuel gross margin, and increased competition. These decreases were partially offset by an increase in non-fuel gross margin in excess of site-level operating expenses. Adjusted EBITDA for Q4 2016 increased by 13.9 percent, or $2.9 million, compared to Q4 2015.

Company officials expressed confidence in TravelCenters' long-term future, citing good management practices that indicate its current strategies are moving the company in the right direction.

O'Brien added that he believes "2016 was the right year to make these investments."

TravelCenters officials reported that the company is currently undertaking several internal growth initiatives that officials believe have the potential to grow its profitability and that are geared toward a combination of developing and deploying new products and services to be delivered to existing customers, and delivering existing and new products and services to new customers.

During the earnings call, company officials discussed the development of TravelCenters' commercial tire network, which is currently being developed and assembling staff, and the expansion of the company's restaurant offerings. TravelCenters added 14 quick-service and three full-service restaurants in 2016.

O'Brien also mentioned TravelCenters' ongoing litigation with fuel card operator FleetCor Technologies and its subsidiary Comdata Inc. TravelCenters previously accused FleetCor of trying to change the terms of an existing agreement that allows truckers to use FleetCor's fuel cards at TravelCenters locations, unilaterally increasing its fees. A trial is currently set for April in Delaware.

Although he did not take questions on the matter, O'Brien expressed confidence that TravelCenters would prevail, while acknowledging this is not a certainty.

TravelCenters of America operates in 43 states and Canada. The TA Restaurant Group includes more than 785 quick-service and full-service restaurants, along with other food outlets.

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