TravelCenters of America Puts Plan in Motion to Increase Shareholder Value
WESTLAKE, Ohio — Five years ago, TravelCenters of America LLC (TA) gained a foothold in the standalone convenience store business when it acquired 31 Minit Mart c-stores in December 2013.
In late 2018, TA exited that business — which it grew to 225 standalone sites — with the sale of the Minit Mart portfolio to EG Group for more than $300 million. This sale signaled a change in focus for TA, putting its core travel center business at the forefront.
"The fourth quarter of 2018 and first few weeks of 2019 were a momentous time for TA, capping off a year of change and setting the stage for greater success in the years ahead," CEO Andrew Rebholz said during the company's fourth-quarter and full-year 2018 earnings call. "Our team succeeded in accomplishing the things we set out to do during 2018, all of which were aimed at creating shareholder value."
A year ago, TA set out to work on improving its convenience store business, but subsequently concluded that exiting the business was the right move.
In May, its board approved a strategic plan coalesced around two key concepts: focus on TA's core travel center business and reduce leverage.
"There are multiple elements to the strategy, but pursuant to this plan, we commenced marketing of our convenience store business; embarked on creating a smaller-format travel center brand; began proactively pursuing travel center franchisee prospects; began actively engaging potential travel center acquisition targets; and invested capital and human resources to grow our industry-leading truck services business — especially with respect to our offsite services like our roadside assistance, mobile maintenance and commercial tire dealer programs," Rebholz said. "I'm happy to report that the actions we took have borne the expected fruit."
In addition to completing the Minit Mart sale, the company introduced the smaller-format TA Express brand by converting four existing sites — two of which had been larger Minit Mart stores — to the new brand in September.
As far as numbers go, TA grew its non-fuel revenue from continuing operations by 4.5 percent year over year in 2018. Truck service revenue grew by 4.5 percent, with significant growth seen in its RoadSquad and onsite and commercial tire business lines.
2018 also saw the company complete a series of transactions with its largest shareholder, Hospitality Properties Trust, to reduce TA's annual minimum rent by $43 million, acquire ownership of 20 previously leased travel centers for $308 million, and reduce its deferred obligation from $150 million to $70.5 million.
"All in all, an excellent use of the proceeds from the convenience store sale," Rebholz noted.
"We did what we set out to do and what we said we would do. I am very proud of what our employees have accomplished thus far under the leadership of our new management team and am pleased with our financial results for both the fourth quarter and full-year 2018," he added.
2019 Agenda Items
Going forward, TA's primary focus is still on increasing shareholder value.
Along with expanding its travel center network, as Convenience Store News previously reported, three other key elements make up the company's value creation plan: grow its non-fuel business, grow customer service, and remain cost conscious.
According to Rebholz, most of the non-fuel business growth will come from the company's truck service business, but TA also has plans in place to grow its restaurants, store services and retail services businesses.
"By ramping [up] existing customers and adding new ones to our RoadSquad, onsite and TA commercial tire network programs, we can satisfy the increasing demand for services provided offsite," he explained.
TA also will continue to improve its customer service and marketing programs, the chief executive said.
"Our primary customers are trucking fleets and professional truck drivers, and we provide these customers with a more comprehensive menu of products and services than other large truck stop providers operating along the interstate highway system," he pointed out.
"Because drivers might be on the road for up to weeks at a time, we've modeled our travel centers to provide drivers much more than just fuel with the greatest choice in non-fuel products, services and customer service meant to improve their efficiency, productivity, satisfaction and respect while on the road and away from home," Rebholz added.
To this end, one of TA's 2019 initiatives is its driver loyalty program. In January, TA unveiled an improved UltraONE loyalty program to reward professional drivers. The volume-based incentive program rewards the company's most loyal customers with the greatest amount of points and with the greatest flexibility in redemption choices.
"Although it's very early into the new program, we are seeing positive, desired changes in fueling behavior, and our analysis of the data collected to date gives us reason to expect a lift in diesel fuel volume in 2019," TA's President and Chief Operating Officer Barry Richards explained.
Despite its full agenda, TA will remain cost conscious, Rebholz assured. Notably, the company is nearing the end of a project to centralize certain accounting functions for a significant cost savings. In addition, throughout 2018, TA implemented a new IT application to help reduce costs in its restaurants that will have a larger effect in 2019.
"While we don't have projects of similar significance underway for this year, we have a number of initiatives for automating or changing processes in order to improve efficiency and reduce costs," Rebholz said.
TA is likewise focused on reducing its capital expenditures in 2019 as compared to prior years, and selling fewer site improvements to HPT than in years past in order to minimize rent increases.
"This year, we will provide more locations and, within each location, a more relevant array of products, services and customer service for drivers and their trucks, which we believe is key to delighting our customers," the chief executive said.
Westlake-based TravelCenters of America conducts business in 43 states and Canada, principally under the TA, Petro Stopping Centers and TA Express brands. Its standalone restaurants operate principally under the Quaker Steak & Lube brand name.