All's Quiet on Acquisition Front for TravelCenters of America

Will continue to selectively seek new properties as it improves previously acquired sites

By 
Greg Lindenberg, Editor, CSP

TravelCenters of America Thomas O'Brien (CSP Daily News / Convenience Stores / Truckstops)

Thomas O'Brien

WESTLAKE, Ohio -- During the six months ended June 30, 2014, TravelCenters of America LLC (TA) purchased a travel center for $3.2 million and made capital investments of $60.6 million, including $10.9 million to improve locations TA purchased since the beginning of 2011.

During third-quarter of 2014, TA completed two acquisitions of travel centers for an aggregate amount of approximately $22.6 million. The company intends to continue its efforts to selectively acquire additional properties, CEO Thomas O'Brien said.

"It was a pretty boring quarter," O'Brien said during the company's earnings call. "While the 2014 second quarter was quiet on the acquisition front, our team did not pause delivering solid advances both in ramping up results at previously acquired sites as contributions more than doubled in the 2014 second quarter versus the same quarter in 2013 and on internal growth initiatives like Reserve-It Parking, which is a good example of making money from previously non-productive physical assets, and our RoadSquadOnSite repair and mobile maintenance initiatives, which are both good examples of further capitalizing on our employees’ vast capabilities regarding truck service and repair."

For the three and six months ended June 30, 2014, TA reported that earnings before interest, taxes, depreciation, amortization and rent (EBITDAR) increased by approximately $10.4 million, or 12%, to $97 million, versus EBITDAR for second-quarter 2013 of $86.6 million.

The company attributed this primarily to an increase in fuel gross margin per gallon, which averaged 19.2 cents during the second-quarter 2014 versus 17.2 cents during the 2013 second quarter, and the continued improvements in the results of sites TA acquired in 2011 through 2013.

Income before income taxes for second-quarter 2014 was $22.6 million, reflecting a $7 million, or 44.6% increase over income before income taxes for second-quarter 2013 of $15.6 million. The dollar amount of this increase was less than the dollar amount of the increase in EBITDAR for second-quarter 2014 versus the second-quarter 2013 due to increased depreciation associated with the company's investments in new and existing sites and rent expense principally associated with sales of improvements to principal landlord Hospitality Properties Trust (HPT).

Net income for second-quarter 2014 was $13.6 million, down $2.4 million from second-quarter 2013 net income of $16 million.

"Our second-quarter 2014 results included strong growth in key measures like EBITDAR and pre-tax income, and continued the growth of financial contributions from our recently acquired sites, including travel centers and convenience stores. Since the end of the second quarter, we closed the acquisitions of two additional travel center properties and entered agreements to acquire three travel centers and seven gasoline/convenience stores," said O'Brien.

Fuel gross margin for second-quarter 2014 increased by $9 million or 10% over the prior year quarter, fuel gross margin per gallon for second-quarter 2014 increased by two cents a gallon or 11% over the prior year quarter.

"This increase was due to continued discipline in pricing decisions which helps us avoid certain lower margin sales and new marketing programs that I believe effectively dampened the impact felt acutely in the 2013 second quarter of competitor loyalty points programs," he said. "We did continue to experience fuel volume declines on the same-site basis, I believe largely due to customer fuel efficiency gains combined with the volume impact of the pricing discipline."

Non-fuel revenue for second-quarter 2014 was up by $35 million or 9% over the prior year quarter. Non-fuel gross margins for second-quarter 2014 increased by $15 million or 7% versus prior year quarter.

Site-level operating expenses increased over the prior year quarter largely due to acquired sites. And on the same-site basis the ratio of site level operating expenses to non-fuel revenues was consistent with the prior year quarter and the increase in non-fuel revenue. The company has generated contributions of $14 million during second-quarter 2014 at the 62 properties--31 travel centers and 31 gas station/convenience stores--it has acquired since the beginning of 2011. For the 12 months ended June 30, 2014, these properties generated contribution of $41 million, an increase of $27 million over that generated by acquired sites for the 12 month ended June 30, 2013.

Westlake, Ohio-based TA's business includes 248 travel centers in 43 U.S. states and in Canada, 173 of which were operated under the TravelCenters of America or TA brand names and 75 of which were operated under the Petro Stopping Center brand name. TA also operates 34 convenience stores with retail gas stations, primarily under the Minit Mart brand name.

 

Part of CSP's 2014 Convenience Top 101 retailers