Refuel. Replenish. Refresh. TRAVELCENTERS OF AMERICA Q2 2018

Transcription

1 Refuel. Replenish. Refresh. TRAVELCENTERS OF AMERICA Q

2 WARNING CONCERNING FORWARD LOOKING STATEMENTS THIS PRESENTATION CONTAINS STATEMENTS THAT CONSTITUTE FORWARD LOOKING STATEMENTS WITHIN THE MEANING OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995 AND OTHER SECURITIES LAWS. WHENEVER TA USES WORDS SUCH AS "BELIEVE," "EXPECT," "ANTICIPATE," "INTEND," "PLAN," "ESTIMATE," "WILL," "MAY" AND NEGATIVES OR DERIVATIVES OF THESE OR SIMILAR EXPRESSIONS, TA IS MAKING FORWARD LOOKING STATEMENTS. THESE FORWARD LOOKING STATEMENTS ARE BASED UPON TA'S PRESENT INTENT, BELIEFS OR EXPECTATIONS, BUT FORWARD LOOKING STATEMENTS ARE NOT GUARANTEED TO OCCUR AND MAY NOT OCCUR. ACTUAL RESULTS MAY DIFFER MATERIALLY FROM THOSE CONTAINED IN OR IMPLIED BY TA'S FORWARD LOOKING STATEMENTS AS A RESULT OF VARIOUS FACTORS. YOU SHOULD NOT PLACE UNDUE RELIANCE UPON FORWARD LOOKING STATEMENTS. EXCEPT AS REQUIRED BY LAW, TA DOES NOT INTEND TO UPDATE OR CHANGE ANY FORWARD LOOKING STATEMENT AS A RESULT OF NEW INFORMATION, FUTURE EVENTS OR OTHERWISE. THIS PRESENTATION CONTAINS NON GAAP FINANCIAL METRICS INCLUDING ADJUSTED EBITDA AND EBITDA IN THE EXHIBITS SECTION. RECONCILIATION FOR THOSE METRICS TO THE CLOSEST U.S. GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (GAAP) ARE INCLUDED HERE TO. 2

3 INVESTMENT HIGHLIGHTS Barriers to Entry One of only three nationwide operators of travel centers in the United States. Right Strategy Our full service approach is a competitive advantage that allows us to better address fleet company and professional driver challenges. Commercial Opportunity Trucking trends present an opportunity for truck stop companies with a full service strategy. TA is positioned to help a broader truck market. Retail Opportunity TA has identified operating initiatives designed to ramp up standalone convenience stores. Powerful Model TA s strategy has resulted in increased nonfuel revenues and site level operating leverage. Improvement Plan TA is focused on controlling costs and managing capital expenditures in

4 ONE OF ONLY THREE NATIONWIDE OPERATORS OF TRAVEL CENTERS IN THE UNITED STATES. TA s business includes 257 full service travel centers, 230 standalone convenience stores and 46 standalone restaurants. TA sells over the road diesel fuel, principally to long haul truckers at TA s truck stops (under the TA and Petro Stopping Centers brands) and gasoline at both truck stops and convenience stores. TA s convenience stores sell branded gasoline and the stores themselves are primarily operated under TA s Minit Mart brand name. TA s non fuel revenue comes from truck repair and maintenance, convenience and travel stores, casual dining restaurants, quick service restaurants and a broad array of other amenities and services designed to appeal to the professional driver and other highway travelers. LTM SEGMENT MARGIN MIX (1) FUEL AND NONFUEL GROSS MARGIN MIX (2) $507,428 78% Travel Center Convenience Store Corporate & Other LTM Fuel Gross Margin LTM Nonfuel Gross Margin $39,878 22% $8,537 Unless otherwise noted, data reflected in this presentation is as of 6/30/18 (1) Reflects Consolidated Site level gross margin in excess of operating expenses (2) The federal biodiesel tax credit of $23.3 million was not added in the fuel gross margin calculation 4

5 THE TA FOOTPRINT TA has the geographic footprint in place to support professional drivers and highway motorists. More than 50% of TA s travel centers are located More in the than 1350% states of with TA s travel the highest centers concentration are located in the 13 states with of truck the highest traffic. concentration of truck traffic. State U.S. Freight Activity Rank (2) # of TA / Petro Sites Texas 1 23 California 2 13 Illinois 3 11 Ohio 4 15 Pennsylvania 5 11 NY, NJ, FL, MI, GA, IN, NC, LA Total 132 (1) In addition to the 230 standalone Minit Mart locations, TA operates 256 convenience stores within the TravelCenters of America and Petro Stopping Centers travel center locations. 74 of these 256 convenience stores carry the Minit Mart brand name. (2) Source: Bureau of Transportation Statistics 2012 Commodity Flows Survey. Freight activity is ranked by dollar value of total shipment. 5

6 ABOVE THE COMPETITION For 45 years, TA has been focused on full service due to the value it brings customers and TA. Our two competitors recognize this and they are trying to catch up. TRUCK SERVICE Nationwide Truck Maintenance & Repair. Roadsquad: Roadside Emergency Service & Call Center Services. OnSITE: TA Truck Service on site. Commercial Tire Network: Independent Tire Dealer. STORE Fresh Food Offerings. Premium Coffee. Tobacco. Lottery. Driver & Cab Retail Items. Scales. LARGE SITES A typical site includes ~200 truck parking spaces on ~26 acres that provides more parking, showers, laundry, business center services, fitness and entertainment options than primary competitors. FOOD SERVICE 247 Casual Dining Restaurant. 689 Quick Service Restaurant(s) "QSR. Grab N Go options. Two proprietary casual dining brands Iron Skillet & Country Pride, fast casual offerings like Bob Evans and Fuddruckers. 49 QSR Brands. COMPETITOR SITES SMALLER SITES A typical site includes ~80 truck parking spaces on ~9 13 acres with fewer services and food service choices. 6

7 SOLID LONG TERM INDUSTRY OUTLOOK In absolute terms, while trucks' share of total tonnage is projected to decline, its total volume transported is projected to increase substantially more than any other transportation mode. TRUCKS SHARE OF TOTAL TONNAGE (1) TRUCKLOAD ( TL ) VOLUME (1) Average Annual Expansion. TRUCKS SHARE OF TOTAL FREIGHT REVENUE (1) Estimated 70.7% 67.9% 67.1% Truckload tonnage growth reflects the anticipated performance of key commodities and freight market segments. (1) American Trucking Associations: The U.S. Freight Transportation Forecast. TA s primary focus has been to provide fuel and nonfuel products and services to long haul truck drivers. 31 MIL COMMERCIAL TRUCKS Of which 3.6MIL ARE CLASS 8 TRUCKS Of which ~ 1 MIL ARE LONG HAUL TRUCKS American Trucking Associations & TA estimates. 7

8 DRIVER SHORTAGE In many cases, fleets are looking for solutions like TA to help them maximize driver retention. There is a driver shortage in the for hire truckload industry (1). Increasing federal regulation and restrictions are contributing to the shortage and affecting driver/fleet profitability: SAFETY REGULATION ENFORCEMENT + DRIVER HOURS OF SERVICE ELECTRONIC LOGGING + DEVICES + PENALTIES FOR PARKING ILLEGALLY = Fleets Are Looking For Solutions To Increase Driver Satisfaction + Driver Efficiency Which Can Help Retain Drivers Area Category Driver Preference for TA and Petro vs. Next Closest Truck Stop Brand Overall Best Truck Stop Experience 3 to 1 5 to 1 6 to 1 Most Comprehensive Driver Services 4 to 1 5 to 1 7 to 1 Parking Lots Largest 3 to 1 7 to 1 8 to 1 Easiest to Maneuver 3 to 1 6 to 1 7 to 1 Restaurants Best Overall Experience - 5 to 1 8 to 1 Best Overall Food 4 to 1 6 to 1 7 to 1 Truck Repair & Best Overall Maintenance Shops 4 to 1 4 to 1 4 to 1 Maintenance Most Complete Services 5 to 1 7 to 1 8 to 1 Best Roadside Assistance 4 to 1 4 to 1 Most Skilled and Best Equipped for New Truck Technologies 6 to 1 7 to 1 (1) American Trucking Associations:. 8

9 THE CHANGING LANDSCAPE The maturation of online spending continues and this is contributing to how goods are trucked. It is expected there will be more trucks delivering more packages via shorter hauls. These deliveries are occurring through LTL, TL with LTL capabilities and private truck companies at the expense of certain long hauls. (1) But TL carriers are expected to remain significant. GROWTH IN LESS THAN TRUCKLOAD ( LTL ) TONNAGE (2) 120% TRUCKLOAD TONNAGE (2) million million million 100% 80% 60% 40% 1% 1% 2% 49% 49% 48% Less than Truckload Truckload Private Truck 20% 50% 50% 50% (1) Stifel Nicolaus (2) American Trucking Associations: The U.S. Freight Transportation Forecast % LESS THAN TRUCKLOAD VOLUME ( LTL ) Average Annual Expansion. 9

10 Commercial Strategy: Diesel Fuel and Truck Service NEW SOLUTIONS. NEW CUSTOMERS. TA is investing in truck service to (1) meet the expanding needs of TA s traditional customers as they participate in long haul and LTL deliveries and (2) to expand the universe of customers TA is able to serve. TRADITIONAL CUSTOMERS: SOLUTIONS FOR CLASS 8 TRUCKS AT TERMINALS AND TRAILER YARDS. TRADITIONAL CUSTOMERS: EXPAND CUSTOMER COVERAGE TO INCLUDE CLASS 4 7 TRUCKS. NONTRADITIONAL CUSTOMERS: PRIVATE, FOR HIRE FLEETS AND SMALL TO MEDIUM BUSINESSES WITH CLASS 4 7 TRUCKS. TA Truck Service, Commercial Tire Network, OnSITE and RoadSquad provide traditional and nontraditional customers with a single source, nationwide solution for tires, quality parts, maintenance and repair services without limitation to where or when the service is performed. These initiatives as well as TA s retail and restaurant initiatives should lead to higher growth rates for 2018 versus 2017 for our consolidated nonfuel revenues and our site level gross margin in excess of operating expenses in the travel center segment. 10

11 Commercial Strategy: Diesel Fuel and Truck Service TRUCK SERVICE: ONSITE Extend maintenance, repair and inspection solutions beyond TA s truck bays with TA vehicles going to the customer. Ser Service vice Locations OnSit e Truck & Trailer Maintenance, ELD Installations, Trailer Rebranding, Trailer Repairs, GPS Installation, DOT inspection, Certifications. 11

12 Commercial Strategy: Diesel Fuel and Truck Service TRUCK SERVICE: COMMERCIAL TIRE NETWORK Provide brands and capabilities of a tire dealer at customer locations. Service Locations Ser vice Commercial Tire Network OnSit e Truck & Trailer Maintenance, ELD Installations, Trailer Rebranding, Trailer Repairs, GPS Installation, DOT inspection, Certifications. Independent Tire Dealer, Multiple Tire and Retread Brands, Location Deliveries, Casing Program Management. 12

13 Commercial Strategy: Diesel Fuel and Truck Service TRUCK SERVICE: ROADSQUAD Provide emergency service call center support and tire and roadside truck repair service 24/7/365. Ser Service vice Locations Commercial Tire Net work OnSit e RoadSquad Truck & Trailer Maintenance, ELD Installations, Trailer Rebranding, Trailer Repairs, GPS Installation, DOT inspection, Certifications. Independent Tire Dealer, Multiple Tire and Retread Brands, Location Deliveries, Casing Program Management. RoadSide Assistance, Call Center, Tire & Repair, Shift Support, Maintenance Centralization 13

14 Commercial Strategy: Diesel, Fuel and Truck Service PROFILE C U S T O M E R 31 MIL COMMERCIAL TRUCKS A company responsible for thousands of utility trucks utilize terminals across the country to service their boom and lift equipment. They are pleased to meet a coast to coast provider that can perform traditional chassis work. Altec also needs help debranding and inspecting vehicles being turned in from leasing programs. Of which 3.6MIL ARE CLASS 8 TRUCKS Of which C U S T O M E R ~ 1 MIL ARE LONG HAUL TRUCKS Combining services like fuel, roadside emergency repair and call center support so a fleet can devote resources to its core business. 14

15 Retail Strategy: Gas, Retail Operations and Restaurants RETAIL OPERATIONS In addition to the things we do every day to manage retail operations at our travel centers and standalone convenience stores, TA is focused on a number of initiatives to drive growth and improvement in LOYALTY Roll out Minit Mart Rewards program 1H MERCHANDISE Match Products to Market by Volume and Demographic. EXPERIENCE Optimizing Store Layouts. ONLINE Partner with Community and increase online sales (pizza programs etc). RESERVE IT Expand Reserve It! Parking at truck stops. VIDEO GAMING Expand and improve gaming operations in states in which we operate gaming terminals. These initiatives as well as TA s restaurant and truck service initiatives should lead to higher growth rates for 2018 versus 2017 for our consolidated nonfuel revenues and our site level gross margin in excess of operating expenses in the travel center segment. 15

16 Retail Strategy: Gas, Retail Operations and Restaurants RESTAURANTS TA s Restaurant Group is focused on attracting more consumers and managing costs. FULL SERVICE RESTAURANTS Replace Casual Dining Restaurant Brand with better known Consumer Brand. Optimize Operating Hours and Labor Costs. QUICK SERVICE RESTAURANTS Add QSR restaurants at Travel Centers. Replace QSR brand at Convenience Stores. PROCESS IMPROVEMENT Utilize new technology to better manage food and labor costs. These initiatives as well as TA s truck service and retail initiatives should lead to higher growth rates for 2018 versus 2017 for our consolidated nonfuel revenues and our site level gross margin in excess of operating expenses in the travel center. 16

17 POWERFUL MODEL Focused on Expanding TA s Full Service Strategy Consolidated Same Site Nonfuel Revenue As Reported $2,000 $1,800 $ % $1, % $1,836 % 60.0% $1,600 $1,400 $1,289 +3% $1,354 +3% $ % 56.4% 56.4% 56.4% 58.1% 58.0% (Millions) $1,200 $1, % 55.5% 55.0% 55.6% 55.6% 55.3% 55.3% 55.9% 55.9% $1,002 +3% 56.0% 55.0% $ % $600 $ % Consolidated Same Site Nonfuel Revenue As Reported Consolidated Same Site Nonfuel Margin As Reported 17

18 POWERFUL MODEL TA s growth programs and sales strategies have helped nonfuel gross margin per gallon profitability increase over time. (Cents) Nonfuel Gross Margin Cents per Gallon ("NF CPG") (1) CAGR 4.0% (1) Reflects As Reported Nonfuel Gross Margins. 18

19 OPERATING LEVERAGE Growing Core Full Service Business Faster than We re Spending. $2, % $2, % 50.0% 50.1% 50.4% $1,600 $1,200 $ % 47.3% $ Q Q Consolidated Nonfuel Revenue (Same Site) Consolidated Site Level Operating Expenses as a Percentage of Nonfuel Revenue (Same Site) 19

20 IMPROVEMENT PLAN While TA positions itself to compete in a broader market, the company is focused on managing costs and expenditures. CONTROL COSTS 2018 Site Level Operating Expense: Ctuit implementation IT/Automation Site level labor efficiencies Depreciation and Amortization Expense: Project & capital expenditure completions MANAGE SPENDING 2018 Opportunistic Travel Center Acquisitions. Estimate Sustaining Capital Amounts of ~$55 million. Expect improvement sales at leased HPT sites of ~$50 million. Maintain net Capital Expenditure amounts (Sustaining Capital + Internal Growth Capital HPT improvement sales) similar to As programs to drive nonfuel revenues and control costs progress, TA believes site level operating expenses as a percentage of nonfuel revenues may decrease. 20

21 Exhibits 21

22 EXHIBIT A Consolidated Statements of Operations Three Months Ended June 30, ($ in thousands) Revenues: Fuel $ 1,297,721 $ 976,219 Non fuel 538, ,768 Rent and royalties 4,101 4,772 Total revenues 1,840,685 1,499,759 Gross margin: Fuel 88,792 91,764 Non fuel 310, ,175 Rent and royalties 4,101 4,772 Total gross margin 403, ,711 Site level operating expense 256, ,946 Selling, general & administrative 29,959 38,299 Rent expense 71,257 69,144 Depreciation and amortization 29,198 28,649 Impairment of goodwill 51,500 - EBITDA (1) $ 45,314 $ 31,184 Net income (loss) attributable to common $ (33,978) $ (2,986) shareholders Net income (loss) per share $ (0.85) $ (0.08) (1) See Exhibit B for a reconciliation of EBITDA to net income. 22

23 EXHIBIT B Consolidated Calculation of EBITDA Three Months Ended June 30, ($ in thousands) Calculation of EBITDA: Net Loss $ (33,924) (2,939) Less: Benefit for income taxes (9,040) (2,364) Add: Depreciation and amortization 29,918 28,649 Add: Interest expense, net 6,860 7,838 Add: Impairment of goodwill 51,500 EBITDA $ 45,314 $ 31,184 Add: Incremental share based compensation 1, expense(1) - - (Less) add: Comdata legal expenses(2) (10,045) 2,527 Add: Comdata excess transaction fees(3) - 2,798 Less: Federal biodiesel tax credit(4) - Adjusted EBITDA $ 36,308 $ 36,622 1) Incremental share based compensation expense. As part of TA's retirement agreements with certain former officers, TA agreed to accelerate the vesting of previously granted share awards. This acceleration resulted in incremental share based compensation expense of $1.0 million and $2.1 million for the three and six months ended June 30, 2018, respectively, and $0.1 million and $0.3 million for the three and six months ended June 30, 2017, respectively, as compared to what TA would have expensed in the absence of these retirement agreements. 2) Comdata legal expenses. During the three and six months ended June 30, 2018, TA incurred $37 thousand and $0.1 million, respectively, of legal fees in its litigation with Comdata. During the three and six months ended June 30, 2017, TA incurred $2.5 million, and $8.9 million, respectively, of legal fees in its litigation with Comdata. TA's attorneys' fees and costs related to this matter totaled $10.6 million through June 30, On April 9, 2018, the Court of Chancery of the State of Delaware, or the Court, entered its final order and judgment, or the Order. Pursuant to the Order, Comdata was required to, among other things, reimburse TA for attorneys' fees and costs, together with interest, in the amount of $10.7 million, which TA collected in May As a result, TA recognized a $10.1 million reduction in selling, general and administrative expenses and $0.6 million of interest income for the three and six months ended June 30, ) Comdata excess transaction fees. From February 1, 2017, until mid September 2017, Comdata unilaterally withheld increased fees from transaction settlement payments due to TA under an agreement between TA and Comdata under which TA agreed to accept Comdata issued fuel cards through January 2, 2022, for certain purchases by TA's customers in exchange for fees payable by TA to Comdata, or the Merchant Agreement. During the three and six months ended June 30, 2017, TA incurred $2.8 million and $4.6 million, respectively, of excess transaction fees. On September 11, 2017, the Court issued its post trial Memorandum Opinion. The Court found that TA was entitled to, among other things, an order requiring Comdata to specifically perform under the Merchant Agreement, and awarded damages to TA and against Comdata for the difference between the higher transaction fees paid to Comdata since February 1, 2017, and what TA would have paid during this period under the fee structure in the Merchant Agreement. In November 2017, TA recovered $6.9 million for the amount of excess transaction fees. 4) Federal biodiesel tax credit. On February 8, 2018, legislation was passed that retroactively reinstated the 2017 federal biodiesel tax credit. The federal biodiesel tax credit for 2017 was $23.3 million and was recognized in the six months ended June 30,

24 EXHIBIT C 24

25 EXHIBIT D Consolidated Balance Sheet June 30, 2018 ($ in thousands) Assets Cash and Cash equivalents 78,189 June 30, 2017 $ $ 36,082 Accounts receivable, net 162, ,501 Inventory 216, ,640 Other current assets 26,446 27,295 Total current assets 483, ,518 Property and equipment, net 980,894 1,001,090 Goodwill 43,099 93,859 Other noncurrent assets 101,688 90,282 Total assets $ 1,640,913 $ 1,618,132 Liabilities and Shareholders' Equity Accounts payable $ 193,232 $ 155,581 Current HPT Leases liabilities 41,693 41,389 Other current liabilities 162, ,328 Total current liabilities 397, ,298 Long term debt, net 320, ,634 Noncurrent HPT Leases liabilities 361, ,782 Other noncurrent liabilities 35,743 35,923 Total liabilities 1,114,546 1,051,637 Shareholders' equity (39,771 and 39,984 common shares outstanding 526, ,495 at June 30, 2018 and December 31, 2017, respectively) Total liabilities and shareholders' equity $ 1,640,913 $ 1,618,132 25