TravelCenters of America LLC (TA)

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TravelCenters of America LLC (TA)

Q3 2010 Earnings Call

November 8, 2010 10:00 am ET

Executives

Thomas O’Brien – Chief Executive Officer

Andrew Rebholz – Chief Financial Officer

Timothy Bonang – Vice President, Investor Relations

Analysts

Smedes Rose – KBW

Bryan Maher – Citadel Securities

Jeff Geygan – Milwaukee Private Wealth Management

Presentation

Operator

Ladies and gentlemen, thank you for standing by and welcome to the TravelCenters of America Third Quarter conference call. At this time, all participants are in a listen-only mode. Later we will conduct a question and answer session. Instructions will be given at that time. If you should require assistance during the call, please press star then zero. As a reminder, today’s call is being recorded.

I would now like to turn the conference over to our host, Mr. Tim Bonang. Please go ahead.

Timothy Bonang

Thank you. 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, November 8, 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 cause 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 on any forward-looking statements.

I would note the recording and retransmission of today’s conference call is strictly prohibited without prior written consent of TA.

Now I would like to 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 third quarter. For that quarter, we generated net income of $4.5 million, a nearly $17 million improvement over the 2009 third quarter bottom line. EBITDAR for this period was about $80 million, which was a $20 million increase over the 2009 third quarter EBITDAR. Fuel gross margin per gallon was a significant contributing factor to the improvements in results between years for the third quarter.

A higher level of fuel gross margin per gallon and a 4.8% increase in fuel gallons sold combined to generate $14 million more fuel gross margin in the 2010 third quarter than in the 2009 third quarter. While fuel margin was a big part of the story in the third quarter, as it has tended to be recently, it was not the full story. A significant contributing factor to TA’s results this quarter was the continuing impact our internal efforts to increase revenue and EBITDAR. On a same site basis, fuel sales volume was up 5.6% for the quarter and non-fuel revenues were up 9.1%, each over the 2009 third quarter, while the non-fuel margin percentage increased and site level operating expenses were held in check. Site level operating expenses as a percentage of non-fuel revenues on a same site basis was 50.7% in the 2010 third quarter, 160 basis points better than in the 2009 third quarter.

TA’s third quarter 2010 results are encouraging in the current economic environment, one in which GDP has been estimated to be growing at only a 2% annual rate.

As I reported to you last quarter, TA’s operational efforts continue to emphasize TA’s competitive advantages, including our full service location size which provides benefits to our customers of ample parking and easier maneuverability; our Company-run restaurants which provide us with a direct connection with our customers; and the largest, most comprehensive truck service offering in the industry. Our UltraONE loyalty program introduced in late July of this year is already the number one customer loyalty program in our business. We intend to continue to focus on the advantages of the TA and Petro full service offering that will provide us with some of the keys to successfully operate in the future despite the challenging landscape of our industry, and I believe our efforts are showing up in the results reported today.

I’ll now turn the call over to Andy Rebholz, our Chief Financial Officer, who will review our third quarter results in detail; and after Andy’s comments, we’ll answer questions.

Andrew Rebholz

Thanks Tom, and good morning everybody. I will discuss some of our key financial results for the 2010 third quarter. In this discussion I will refer to same site results which are the results that only those sites that we have continuously operated since July 1, 2009.

In the third quarter of 2010, TA generated net income of $4.5 million or $0.26 per share. In the third quarter of 2009, TA had posted a net loss of $12.2 million or $0.73 per share. For the third quarter of 2010, TA also reported EBITDAR of $79.8 million, an increase of $19.9 million versus the third quarter of 2009.

Let me emphasize an important point – EBITDAR in the third quarter of 2010 exceeded cash rent and interest by about $27 million, and exceed GAAP rent and interest expense by about $15 million. In the third quarter of 2009, EBITDAR exceeded cash rent and interest by $12 million and fell short of GAAP rent and interest expense. All of these favorable comparisons to the prior year quarter results are largely attributable to the increase in fuel gross margin between quarters, as Tom noted earlier, but also are attributable to increases in non-fuel sales in gross margin and continued control over operating and SG&A expenses.

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