TravelCenters of America Hurt by Pilot Flying J Investigation

WESTLAKE, Ohio -- Although some might believe the FBI and IRS investigation into Pilot Flying J for alleged rebate fraud would benefit competitor TravelCenters of America LLC (TA), that is definitely not the case, TA CEO Thomas M. O'Brien said today during the company's fiscal 2013 second-quarter earnings call.

TA's earnings decreased by nearly 50 percent in its latest quarter, a result that O'Brien called "disappointing." A main reason cited was the turmoil affecting Pilot Flying J, which has trickled down to TA as competitors swooped in to try and take advantage of Pilot Flying J's assumed weakened position.

In addition, Pilot Flying J is fiercely working hard to repair its image and defend its business, further negatively affecting TA, the chief executive explained. Although O'Brien acknowledged that TA is trying to turn the Pilot Flying J turmoil into a positive by taking market share from its competitor, his company is not "fighting an unarmed person," he noted.

"TA must defend its business," said O'Brien. "The future scenario that benefits us the most is the conclusion of this turmoil."

TA achieved a net profit of $15.9 million for its latest quarter ended June 30, compared to a $29.8-million profit during the same period in 2012.

O'Brien cited tire pricing as a second reason for the company's earnings decline. "We've seen tire pricing increase, but have not been able to pass on those cost increases to our customers," he said.

Also on the decline were same-store fuel margins, which dropped by $11 million year over year to $89.8 million. As for non-fuel items, sales and gross margins both improved, while non-fuel gross margins declined by approximately 1 percent.

Despite the large year-over-year earnings decrease, O'Brien stressed during today's call that he is steadfast in his belief that TA has a tremendous future and the problems that beset the latest quarterly earnings are definitely fixable.

Westlake, Ohio-based TravelCenters of America operates 192 truck stops under its TA, Petro Stopping Centers and eponymous brand names.