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TravelCenters' C-store Ops on an Upswing


WESTLAKE, Ohio — TravelCenters of America LLC's efforts to boost non-fuel growth are paying off, as reflected in the company's third-quarter 2016 financial results.

"In the third quarter, we continued to execute our integration and ramp-up plans for our newly acquired standalone convenience store and restaurant sites. We also continued to improve operations at our existing locations," Thomas O'Brien, CEO of TravelCenters of America, reported during the company's third-quarter earnings call Tuesday morning.

These efforts produced consolidated third-quarter results that included increases in fuel volume (up 3.1 percent), fuel gross margin (up 7.3 percent), and non-fuel gross margin (up 10.9 percent). In addition, net income was up 11.7 percent and adjusted EBITDA rose 14.7 percent vs. the third quarter of 2015, he explained.

"These results were achieved in the face of continued pressure on volume from increased fuel efficiency and a more recent softness in freight volume, both of which contributed to a 4.7-percent decline in same-site fuel volume," O'Brien explained.

Still, TravelCenters "successfully outpaced these headwinds in key operating areas," he added. Specifically, the company managed fuel gross margin by balancing fuel pricing decisions with their impact on fuel sales volume. As a result, TravelCenters increased per-gallon fuel gross margin on a consolidated basis to 19.4 cents, or $110 million in total. That amounted to an increase of 7.3 percent compared to a year ago.

According to O'Brien, "positive change in fuel gross margin was achieved on a consolidated basis, while same-site fuel gross margin experienced a modest decline of 0.7 percent."

Gains in the same-site travel centers segment overwhelmed the per-gallon margin decline in the same-site convenience store segment, he noted.

Looking beyond the forecourt, TravelCenters grew non-fuel revenue by 10.7 percent and non-fuel gross margin by 10.9 percent year over year during the third quarter. At the same time, site-level operating expenses increased by only 8 percent in the latest quarter, according to the executive.

"I believe the third quarter of 2016 is another indication that our non-fuel and expense strategies are continuing to move us in the right direction," he said, adding that the potential for increased contribution to operating results from the continued ramp-up of TravelCenters' recent acquisitions is the most obvious of the potential drivers to bottom-line growth in the near term. 

Since the company's acquisition program began in 2011, the company has invested nearly $800 million to purchase and improve travel centers, standalone c-stores and standalone restaurants. These investments have produced site-level gross margin in excess of site-level operating expenses of $90 million for the 12 months ended Sept. 30 — $10.7 million, or 13.4 percent, over the amount generated over the 12 months ended June 30.

"I've been pleased with how things are coming together and our convenience store segment represented 12 percent of the consolidated fuel volume and 16 percent of the consolidated fuel revenue in the 2016 third quarter, compared to 6 percent and 9 percent, respectively, during the same period last year," O'Brien said.

With only 77 of TravelCenters' 233 standalone c-stores included in the same-site measures, the chief executive believes the company will see additional contributions from this segment going forward.

"I'm confident that we can realize the expected results from these sites as planned improvements in terms of both capital investments and operating and marketing programs are completed at these locations," he said.


With respect to additional acquisitions, O'Brien said TravelCenters continues to look, "but currently — particularly in convenience stores — seller expectations of price remain high in our view. While this can obviously change quickly, unless and until it does, we have plenty to do."

TravelCenters' already-agreed-upon transactions total roughly $19 million, and the company remains focused on ramp-up and integration plans.

O'Brien anticipates the company's efforts to drive internal growth opportunities "will continue unabated."

Westlake-based TravelCenters of America operates travel centers in 43 states in the United States and in Canada, standalone convenience stores in 11 states, and standalone restaurants in 15 states.

Its travel centers operate under the TravelCenters of America, TA, Petro Stopping Centers and Petro brand names and offer diesel and gasoline fueling, restaurants, truck repair services, travel/convenience stores and other services that are designed to provide attractive and efficient travel experiences to professional drivers and other motorists. 

The company's convenience stores operate principally under the Minit Mart brand name and offer gasoline fueling, as well as nonfuel products and services such as coffee, groceries, fresh food offerings and other convenience items.

Its standalone restaurants operate principally under the Quaker Steak & Lube brand name.

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