TravelCenters of America Q3 Revenue Plunges

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TravelCenters of America Q3 Revenue Plunges

WESTLAKE, Ohio -- TravelCenters of America (TA) saw third-quarter revenues of $1.281 billion, down from $2.157 billion the year before, as the recession continued to impact sales.

For the quarter ended Sept. 30, 2009, TA, which includes 233 TravelCenters of America and Petro Stopping locations, recorded a net loss of $12.237 million, compared to a net income of $16.655 million the year before.

Total fuel sales were $984.8 million, down from $1.832 billion during the same quarter in 2008. Gross margin on fuel was $60.465 million, down from $85.308 million.

Total non-fuel sales were $293.5 million, down from $321.4 million during the same period a year before. Gross non-fuel margin reached $168.579 million, down from $186.438 million.

However, losses appear to be slowing. Looking at same-site fuel sales volume quarterly: volume was down 16.3 percent in the first quarter 2009 compared to 2008, down 10.7 percent in the second quarter, and a smaller 3.6 percent in the third quarter.

During the nine months ended Sept. 30, 2009, TA invested $23.3 million in capital projects and received $5.7 million of cash from its principal landlord, Hospitality Properties Trust, from the sale of qualifying leasehold improvements with no corresponding increase in rent. The chain anticipates capital expenditures for the year to hit $35 million to $40 million, down from a previously announced capital plan of approximately $60 million.

As of Sept. 30, 2009, TA had approximately $185.3 million in cash and cash equivalents. The operator also maintains a $100 million revolving secured bank credit facility. As of the report, no amounts were outstanding under this facility, but a portion was used to support letters of credit required by TA in the ordinary course of its business. TA also owns various unencumbered real estate and other assets that may be additional sources of liquidity over time.

In other financial news, Western Refining Inc., the El Paso, Texas-based operator of Giant, Mustang and Sundial service stations and c-stores in Arizona, Colorado and New Mexico, reported a net loss of $4.8 million for its third quarter 2009, down from a net income of $109.2 million for the same period in 2008. The refiner/marketer said it plans to consolidate refinery operations and make other cost-cutting moves.

The year-over-year decline in Western's net income was primarily due to lower refined product margins, which were driven by weakness in finished product prices relative to crude and feedstock costs, the company said in a statement. Heavy and sour crude differentials remained tight, which negatively impacted margins at its Yorktown refinery and, to a lesser extent, its El Paso refinery.
In the quarter, Western generated cash flow from operations of approximately $28 million. Year to date, the company has generated cash flow from operations of $148.6 million.

"Refining margins were depressed during the third quarter, historically a strong quarter for refiners, primarily due to the prolonged economic slowdown," said Paul Foster, Western's CEO. "Overall, margins declined substantially in the latter part of the quarter. However, we are pleased that fuel volumes and margins remained stable in our wholesale operations and that our retail unit had a strong quarter despite the challenging marketplace."

Western plans to consolidate the operations of its two Four Corners refineries into one at the Gallup refinery. The consolidation is expected to eliminate operating costs of approximately $25 million per year beginning in the first quarter 2010.

As a result of the refinery consolidation, Western expects to take pre-tax charges against earnings in the fourth quarter of approximately $55 million to $65 million, the majority of which will be non-cash. These charges are primarily related to asset impairment and idling costs.

"The decision to idle the Bloomfield refinery was a difficult, but necessary decision to ensure that Western remains well positioned for the future, despite the weak industry dynamics," Foster said. "Western appreciates the dedication of our employees, and is committed to treating them fairly and with respect as we work through this transition."

The company identified a number of other cost-savings initiatives, expected to generate some $25 million in annualized savings.

"The market is certainly challenging, but we are continuing to take decisive actions to ensure we are running our operations in a reliable and cost effective manner, which we believe will allow us to be profitable over the long run in a variety of market conditions." Foster said.

Meanwhile, San Antonio-based Tesoro Corp., refiner and operator of more than 300 Tesoro, Shell, Mirastar and USA sites, reported third quarter 2009 net earnings of $33 million, compared to net earnings of $259 million for the third quarter of 2008. For the nine months, net income was $39 million vs. $181 million for the period the year before.

Third quarter segment operating income was $137 million compared to $510 million in the third quarter of 2008 as a result of lower gross margins.

"We were pleased to report a quarterly profit in this difficult economic environment," said Bruce Smith, chairman, president and CEO. "Although economic concerns persist in light of high unemployment rates and weak industrial activity, the West Coast region has remained in better balance to current demand as gasoline and diesel inventories remain near their five-year average.

"We continue to view the West Coast as an attractive market in which to do business, especially with the increasing stability in gasoline demand we are experiencing through our retail channels."

The company's realized gross margin of $9.59 per barrel decreased by $7.10 per barrel from a year ago, primarily as a result of lower margins for distillates and narrowing differentials for heavy crudes. West Coast diesel margins averaged less than $10 per barrel, down from more than $24 barrel in the third quarter a year ago.

Total system throughput for the third quarter was 564 thousand barrels per day, down 9 percent from the 2008 third quarter.

The retail marketing business recorded $53 million in operating income vs. $34 million a year ago. The 2008 results included a write down and other expenses associated with the closing of certain retail sites. The company's fuel gross margins in the quarter averaged 28 cents per gallon, slightly down from 30 cents a year ago.

Operating costs in the retail segment were lower by $7 million, due to lower credit card fees associated with lower fuel prices and lower employee costs.

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