TravelCenters of America LLC (TA)

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TravelCenters of America LLC (TA)

Q1 2010 Earnings Call

May 10, 2010 10:00 am ET

Executives

Carlynn Finn – Manager Investor Relations

Thomas O’Brien – President, Chief Executive Officer

Andrew Rebholz – Chief Financial Officer

Analysts

[Scott Fahey – Rockwood Investment Management]

[Antwan Fick – Goldman Sachs]

Smedes Rose – KBW

[Carlos Singh – Sand Partners]

[Dennis Worst – Silkstone Capital Group]

[Tom Williams – Amhurst Alpha]

[Max November – Triangle Partners]

[Jeff Gagan – Milwaukee Private Management]

Presentation

Operator

Welcome to the TravelCenters of America LLC first quarter 2010 financial results conference call. Today’s call is being recorded. At this time for opening remarks and introductions, I’d like to turn the conference over to TA’s Manager of Investor Relations, Miss Carlynn Finn.

Carlynn Finn

Good morning and welcome everyone. Our agenda today includes remarks by Tom O’Brien, our Chief Executive Officer, and Andy Rebholz, our Chief Financial Officer. After the presentation, there will be a question and answer session.

Today’s conference call contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and Federal Securities Laws. These forward-looking statements are based on TA’s present beliefs and expectations as of today, May 10, 2010. TA undertakes no obligation to revise or publicly release the results of any revisions to the forward-looking statements made today other than as required by law.

Actual results may differ materially from those implied or included in these forward-looking statements. Additional information concerning factors that could our forward-looking statements not to occur, is contained in our filings with the Securities and Exchange Commission. Investors are cautioned not to place undue reliance upon any forward-looking statements.

The recording and retransmission of today’s conference call is strictly prohibited without the prior written consent of TA. Now, I will turn the call over to Tom O’Brien.

Thomas O’Brien

Good morning, and thank you for joining our call today. I’m here to report our financial results for the 2010 first quarter. For that quarter, our net loss was $41.2 million. EIBTDA for this period was $33.2 million.

Each of these measures compares unfavorably to the 2009 first quarter. The single biggest factor contributing to declines and results for 2010 versus 2009 is lower fuel gross margin per gallon, which accounted for $14 million of the $23 million increase in our net loss and the $20 million decrease in our EBITDA, despite a very encouraging 9.1% positive increase in fuel volumes. Lower gross fuel margins in the 2010 first quarter are largely attributable to the outsized fuel margins earned during the first quarter of 2009 of $13.50 per gallon.

While the bottom line results for the first quarter did not compare favorably with the prior year first quarter, the fuel volume increase, a modest increase of 1.1% in non-fuel revenue, and a gross fuel margin in excess of $0.10 per gallon are all encouraging signs for TA.

EBITDA in the first quarter 2010, was about the same as ETIBDA for the fourth quarter of 2009, and historically, the fourth quarter has been seasonally stronger than the first quarter while the second and third quarters have been TA’s strongest.

Recent economic news appears to be turning less negative, although there certainly is still caution and uncertainty evident in the U.S. economy. I am growing more confident that the economy may be rebounding at a time when we believe our marketing efforts may be increasing TA’s market share.

While these are all good early signs, it is clear to me that for TA to become profitable, there’s more work to do. Our business levels are down considerably from the pre-recession levels, and while we have aggressively cut and controlled costs in both the site operations and in our overhead, sales growth must continue to accelerate and margins must remain stable.

I do continue to have anxiety over the prospect of the proposed merger of the two largest companies in TA’s industry; namely, Pilot and Flying J. Until those two companies either one, consummate their proposed transaction or two, abandon that proposed transaction, I cannot be certain that TA is seeing the landscape clearly.

We believe TA offers the best array of products and services in our industry, and that we have the best-trained employees. This means that TA should be well positioned to benefit from the increased trucking activity that should accompany a recovering, growing economy provided our competition does not achieve monopoly status, which can demand business from the trucking industry.

Before I continue, I will turn the call over to Any Rebholz, our Chief Financial Officer who will review our first quarter results in detail. After Andy’s comments, we’ll answer questions.

Andrew Rebholz

Good morning, everybody. I’ll discuss some of our key financial results for the 2010 first quarter. In this discussion, I will refer to same site results, which are the results of only those sites that we have continuously operated since January 2009.

In the first quarter of 2010, TA generated a net loss of about $41 million or $2.39 per share. In the first quarter of 2009, TA posted a net loss of $18 million or $1.08 per share. For the first quarter of 2010, TA also reported EBITDA of $33 million, a decrease of about $20 million versus the first quarter of 2009.

EBITDA in the first quarter of 2010 fell short of cash rent by about $12.5 million and fell short of GAAP rent expense by about $25 million. The unfavorable comparisons to the prior quarter results for net loss and EBITA, are primarily attributable to the decline in fuel gross margin per gallon between quarters as Tom noted earlier, and also to an increase in operating expenses that I will discuss further in a moment.

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