TravelCenters Of America LLC's CEO Discusses Q1 2012 Results - Earnings Call Transcript

TravelCenters of America LLC (TA)

Q1 2012 Earnings Call

May 07, 2012 10:00 am ET

Executives

Carlynn Finn -

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

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

Analysts

Michael Lasser - UBS Investment Bank, Research Division

Benjamin Brownlow - Raymond James & Associates, Inc., Research Division

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

Smedes Rose - Keefe, Bruyette, & Woods, Inc., Research Division

Presentation

Operator

Good day, and welcome to the TravelCenters of America LLC First Quarter 2012 Financial Results Call. This call 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, May 7, 2012. 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 written consent of TravelCenters.

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. Our results for the 2012 first quarter continued our trend of year-over-year improvements. As expected, we generated a seasonal net loss for the first quarter of 2012 that was $14 million or about $0.49 per share.

An important thing to note is that this loss represents a $2.4 million or $0.43 per share improvement from the net loss we realized for the first quarter of 2011. Importantly, our 2012 first quarter EBITDAR was $49.7 million, an increase of $5 million or 12% over the 2011 quarter. EBITDAR exceeded our rent expense in the 2012 first quarter versus a shortfall in that measure of nearly $3 million in the 2011 period.

During the last 12 months ended March 31, 2012, our net income was $26 million, a $68 million increase over the 12 months ended March 31, 2011. We believe the improved results we achieved for the first quarter of 2012 result from the travel centers we added to our business during 2011, the capital investments we've made in our properties and our industry-leading customer service.

Our nonfuel sales, in particular, were strong versus the prior year and I believe that this is because our full service model and focus on customer service strikes a chord with our customers.

Our trucking company customers businesses appear to be growing, albeit, slowly in some cases and I believe they're focused more than ever on driver satisfaction and on maximizing miles per truck. I believe our full-service travel center provides customers with the best opportunity among all travel centers to positively impact these and other aspects of their business.

For the 2012 first quarter, we realized same-site growth in nonfuel revenues of 5.9% and in nonfuel gross margin of 2%. These improvements were achieved despite the modestly negative impact on our truck repair and service business of mild weather this winter.

We also managed site level operating expenses down by 30 basis points on a same-site basis. Our fuel sales volume on a same-site basis was slightly down versus the prior year quarter, and we believe this is at least partially a result of the dispensers that were out of service at times during the quarter, as we continued to install new diesel and diesel exhaust fluid equipment throughout our network. We expect that these dispenser projects will persist at certain sites throughout the remainder of the year and that by year end, we will have on island both diesel exhaust fluid available at all of our travel centers. Despite the slightly lower volume on a same-site basis, fuel gross margin increased by 9% over the 2011 first quarter.

As you may be aware, our results are typically weakest in the first quarter of the year and are strongest during the second and third quarters. For this reason, we're not at all surprised of the net loss for the first quarter and we don't think anyone who studies our business should be either.

We continue to expect to post net income for the full year of 2012 that will exceed the net income generated for 2011. During the 2012 first quarter, TA again opportunistically took advantage of the distressed market conditions affecting specialized real estate by buying or agreeing to buy 6 travel centers for about $26 million. On March 7, we invested $5 million to purchase 1 travel center in Carnesville, Georgia and branded this travel center as a Petro Stopping Center. On April 30, we invested $7.1 million to purchase a travel center in Scranton, Pennsylvania that had been previously operated as a Petro Stopping Center by a former franchisee. During the first quarter of 2012, we agreed to acquire 4 travel centers in Indiana for $14 million. 3 of these travel centers are currently operated as Petro Stopping Centers by our franchisee. We expect to keep them branded as Petros and to brand the 4th travel center as a TA. We expect to close on this acquisition during the third quarter of 2012.

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