WESTLAKE, Ohio -- TravelCenters of America LLC (TA) has announced financial results for the three-month period ended March 31, 2008. TA became a public company on Jan. 31, 2007. On May 30, 2007, it acquired Petro Stopping Centers LP. At March 31, 2008, TA's business included 236 sites, 167 of which were operated under the TravelCenters of America or TA brand names and 69 that were operated under the Petro brand name.
Revenues were $1.9 billion for the three months ended March 31, 2008, compared to revenues of $1.1 billion (which includes the results of TravelCenters of America Inc., TA's [image-nocss] predecessor, for the one month ended Jan. 31, 2007) for the three months ended March 31, 2007. For the three months ended March 31, 2008, it incurred a net loss of $48.5 million ($3.41 per share). For the three months ended March 31, 2007, TA and its predecessor combined had a net loss of $31.7 million.
For the three months ended March 31, 2008, it had EBITDAR and adjusted EBITDAR of $21.5 million and $31.5 million, respectively. EBITDAR and Adjusted EBITDAR increased by $56.4 million and decreased by $0.8 million, respectively, compared to it and its predecessor 's combined results for the comparable 2007 period.
"Our industry and market conditions in the first quarter of 2008 were difficult," the company said. "While diesel fuel prices continued to climb throughout the quarter, we were able to improve our fuel margins on a cents per gallon basis only modestly in the 2008 first quarter as compared to the comparable period in 2007, but our volume of fuel sold on a same site basis declined as a result of decreased demand from our customers. Our operating results for the three months ended March 31, 2008, were adversely affected by slowing economic growth in the United States generally and, in particular, within the trucking industry."
It added, "We believe that the weakness of the U.S. economy, especially the drop in housing construction and related durable goods shipments, the decline in imports which are delivered throughout the country by truck brought about by the depressed value of U.S. currency, the high cost of crude oil and other factors, have led to reduced demand by shippers for trucks to carry freight and in turn reduced demand by truckers for our products and services. Many U.S. trucking fleets have also reported reduced ability to pass through the increased cost of fuel to their customers; and we believe these factors have focused the attention of our customers on the cost of fuel and further reduced demand for fuel and other products and services we offer. These business conditions had an adverse effect on our financial results for the 2008 first quarter, and we expect they may continue to affect us during the remainder of 2008."
During first-quarter 2008, TA implemented a number of initiatives to improve its operating results, including a reduction in its corporate headquarters, regional and site-level workforce. That reduction in staffing occurred in March 2008 and included an adjustment of hourly labor staffing intended to create appropriate staffing for the current difficult business conditions. It recognized a severance charge of approximately $1.6 million during the 2008 first quarter as a result of this reduction in workforce.
It also continued to integrate the information systems and certain operating and administrative processes and functions of the TA and Petro brands. Further, as a result of winding down its fuel marketing arrangement with Simons Petroleum Inc., TA can now market directly to Simons customers, which the company said it believes may improve its operating results.
During first-quarter 2008, TA had discussions aimed at settling the antitrust litigation brought by Flying J Inc. These discussions led to an agreement for TA to pay $5 million to Flying J and begin to accept the TCH payment cards issued by an affiliate of Flying J, at its sites. It was dismissed from the case by the court on May 5, 2008, and the settlement payment was made on that date; however, TA recognized the expense related to the $5 million settlement payment in its selling, general and administrative expenses for the quarter ended March 31, 2008.
During first-quarter 2008, an arbitration panel issued a decision concerning our contract termination dispute with Simons. TA was ordered to pay Simons $900,000, and is required to accept new customers, if any, presented by Simons until Nov. 7, 2008, after which date TA will no longer be required to process fuel sales for Simons at TA locations. "We believe that our termination of the Simons contract may benefit our future financial results, if customers who now purchase fuel at our sites from Simons continue to buy fuel and other services and products at our sites," the company said. In connection with the results of the arbitration, TA recognized a charge of $900,0009 million plus related costs in fourth-quarter 2007 and it made the arbitration payment to Simons in April 2008.
For the three-month period ended March 31, 2008, TA's results showed significant differences as compared to the results for it and its predecessor combined for the comparable period of 2007, most of which were due to its acquisition of Petro on May 30, 2007. The acquisition of Petro accounted for a 47.7% increase in fuel revenue, a 40.4% increase in fuel gross margin, a 36.9% increase in nonfuel revenue, a 33.8% increase in non fuel gross margin, a 35.4% increase in total gross margin and a 37.8% increase in site level operating expenses.
For the three-month period ended March 31, 2008, as compared to the same period in 2007, the company's same-site TA and Petro sites experienced a decline in diesel fuel and gasoline sales volumes on a same site basis of 12.9% and an increase in margin of $0.004 per gallon, or 4.8%. Nonfuel revenue and nonfuel margin decreased $7 million, or 2.5%, and $2.2 million, or 1.4%, respectively, on a same-site basis, while site level operating expenses increased $3.7 million, or 2.5% on a same-site basis.
TA's current capital plan for 2008 anticipates expenditures of approximately $100 million, including $27 million for Operation Refresh, its program to improve the quality of its TA-branded sites by correcting certain deferred maintenance issues and upgrading the appearance and physical characteristics of these sites, and $73 million for other projects, the majority of which were begun in 2007 and which include projects it believes may be revenue enhancing or are necessary for the proper conduct of its continuing operations. For the three months ended March 31, 2008, TA invested $40.2 million in capital projects.
Westlake, Ohio-based TA's business includes travel centers located in 41 states and in Canada.Members help make our journalism possible. Become a CSP member today and unlock exclusive benefits, including unlimited access to all of our content. Sign up here.