TravelCenters of America LLC (TA)

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TravelCenters of America LLC (TA)

Q3 2011 Earnings Call

November 07, 2011 10:00 am ET

Executives

Carlynn Finn - Manager Investor Relations

Andrew J. Rebholz - Chief Financial Officer, Principal Accounting Officer, Executive Vice President and Treasurer

Thomas M. O'Brien - Chief Executive Officer, President, Managing Director, Member of the Office of the Chairman and Director

Analysts

Michael Lasser - UBS Investment Bank, Research Division

Benjamin Brownlow - Morgan Keegan & Company, Inc., Research Division

Presentation

Operator

Good day, and welcome to the TravelCenters of America Third Quarter 2011 Financial Results Conference Call. This conference is being recorded. At this time, for opening remarks and introductions, I would like to turn the call over to the Senior Manager of Investor Relations, Ms. Carlynn Finn. Please go ahead.

Carlynn Finn

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 7, 2011. 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 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 M. O'Brien

Good morning, and thank you for joining our call today. I'm here to report our results for the 2011 third quarter.

We achieved net income of $21 million or $0.74 a share, pushing our year-to-date net income to $26 million or $1.13 a share. Overall fuel volume for the 2011 third quarter increased 4.8% versus the 2010 third quarter and 1.8% on a same-store basis.

Third quarter 2011 freight volumes were somewhat larger than in the same period in 2010, and we believe our marketing and sales efforts have also had positive impacts on our business as have our gasoline pricing and branding strategies.

Fuel margin per gallon during the 2011 third quarter was $0.15 versus $0.14.4 for the 2010 period. Falling somewhat volatile fuel prices during the 2011 quarter generally helped fuel margins throughout that quarter.

Our nonfuel sales increased 10.2% for the 2011 third quarter as compared to the 2010 quarter, and our nonfuel sales during the last 12 months at $1.24 billion are higher than they have ever been at any point in company history.

Third quarter 2011 EBITDAR increased 4% compared to the 2010 third quarter. We've now posted improvement in EBITDAR in each of the last 6 conservative quarters. Increased EBITDAR and the reduction in rent and interest payments that was effective January 2011 were the 2 factors principally responsible for the $16 million improvement in net income in the third quarter of 2011 versus the prior year.

Net income year-to-date, September 30, 2011, was $26 million, a marked improvement over the 2010 year-to-date period.

In a moment, Andy will take you through our same-store results, which we're again positive in the third quarter and a significant factor in our EBITDAR growth.

Another factor in our improving financial results were the results from the sites we have added to our business this year. As we've discussed previously, during the second quarter this year, we acquired 8 properties that we now operate as travel centers or as ancillary operations to preexisting travel centers.

Late in the third quarter, we completed several of our planned capital projects at these new sites. The remaining projects we expect to undertake include the construction and opening of 3 truck service and repair facilities and a near total redevelopment of a large property in Indiana. We estimate that we will invest an additional $20 million in these projects, and that these investments will commence during the 2011 fourth quarter or early in 2012.

During the third quarter, these new sites contributed to combine $4.5 million to our total gross margins. And today, we're not yet realizing the full benefit of the planned and completed improvements.

In addition to the company operated sites we've added, we're also pleased to have signed new franchise agreements for 4 additional locations so far in 2011. One began to operate under the Petro flag in January. Another opened in July. And the remaining 2, one to be a Petro and one to be a TA, are expected to come online before the current year end.

We're also continuing other capital investments. Before the end of 2011, I expect that 75 of our locations will have installed on-island diesel exhaust fluid or DEF dispensers, and that substantially all of our company and franchisee-operated locations will deliver this product on-Island before the end of the 2012. Although sales of DEF have been modest to date, the percentage of vehicles that require DEF has begun to increase to a material percentage of many trucking company fleets.

During 2011 to date, we've also rebranded 37 gasoline offers from unbranded or underperforming brands to market-leading national brands. Sales increases of gasoline at those sites have generally outperformed our other sites.

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