During the first three quarters of 2015, TA invested $319.4 million to acquire and renovate a combined 153 travel centers and convenience stores.
TravelCenters of America LLC has announced financial results for the three and nine months ended Sept. 30, 2015:
Business Commentary
Fuel sales volume for the 2015 third quarter increased by 36.7 million gallons, or 7.1%, compared to the 2014 third quarter due to sites acquired since the beginning of the 2014 third quarter and increased same site fuel sales volume. Fuel revenue for the 2015 third quarter declined by $544.6 million, or 34.6%, primarily due to the significantly lower market prices for fuel in the 2015 third quarter than in the 2014 third quarter. Fuel gross margin per gallon for the 2015 third quarter decreased to $0.186 compared to $0.191 for the 2014 third quarter, primarily due to a favorable purchasing experience in 2014 that did not recur in 2015. In total, fuel gross margin for the 2015 third quarter increased by $4.2 million, or 4.3%, compared to the 2014 third quarter.
Nonfuel revenue for the 2015 third quarter increased by $44.4 million, or 10.3%, compared to the 2014 third quarter due to both increases in sales at sites acquired since the beginning of the 2014 third quarter and a $20.8 million, or 4.9%, increase on a same site basis due to favorable marketing initiatives.
Adjusted EBITDAR for the 2015 third quarter increased by $1.9 million, or 1.9%, compared to the 2014 third quarter due to sites acquired since the beginning of the 2014 third quarter and a 2.5% increase in site level gross margin in excess of site level operating expense on a same site basis.
Net income for the 2015 third quarter was $9.8 million, or 26 cents per share, compared to $12.8 million, or 34 cents per share for the 2014 third quarter. The change in net income is primarily due to increased operating expenses associated with newly acquired sites and higher rent expense as a result of the transactions with Hospitality Properties Trust, or HPT, as described below, partially offset by increases in fuel gross margin and nonfuel gross margin. Net income for the 2015 third quarter was also impacted by acquisition costs of $1.8 million and site staff training and other integration costs primarily associated with the 153 sites that TA acquired during the first nine months of 2015.
“Our 2015 third quarter operating results were solid, with fuel margin per gallon of $0.186, fuel volume up 7.1%, and nonfuel revenue growth of 10.3% and Adjusted EBITDAR up 1.9%,” said Thomas O’Brien, TA’s CEO. “During the first three quarters of 2015, TA invested $319.4 million to acquire and renovate a combined 153 travel centers and convenience stores. While I am pleased with the progress we are making with these acquisitions and renovations to date, I expect their contribution to our operating results will increase as we continue the integration of these sites into our purchasing and marketing programs.”
Investment Activity
Acquisition and Development Activity
Financial results for the 218 locations (37 travel centers and 181 convenience stores) TA has acquired from 2011 through the third quarter of 2015 continued to improve as the capital improvements at those locations were completed and their operations continued to stabilize. Capital improvements to recently purchased travel centers are often substantial and require a long period of time to plan, design, permit and complete; and, after being completed, the improved travel centers require a period of time to become part of our customers’ supply networks and produce stabilized financial results. TA estimates that the travel centers it acquires generally will reach stabilization in approximately the third year after acquisition and that the convenience stores it acquires generally will reach stabilization in approximately one year after acquisition, but actual results can vary widely from these estimates due to many factors, some of which are outside TA’s control. The table below shows the number of properties acquired by year, the amounts TA has invested in these properties through Sept. 30, 2015, and the total estimated additional amounts TA currently intends to invest in the near future in these properties.
The 37 travel centers and 181 convenience stores acquired by TA since the beginning of 2011 through September 30, 2015, have produced, from the beginning of each period or, if later, the dates TA began to operate them, the following amounts of revenues in excess of cost of goods sold and site level operating expenses:
During the fourth quarter of 2015 to date, TA completed the purchase of eight convenience stores located in Wisconsin, for an aggregate of $23 million. TA currently has agreements to acquire an additional 36 convenience stores for an aggregate of $60.5 million. These 36 sites are located in Wisconsin (17), Ohio (10), Illinois (5), Kansas (2) and Missouri (2). TA currently intends to continue to selectively acquire additional travel centers and convenience stores and to otherwise expand its business.
As of Sept. 30, 2015, TA had begun construction of three travel centers and has plans to develop an additional two travel centers. These five development properties, which TA expects to sell to, and lease back from, HPT, upon their completion, are on land parcels TA owns. Through Sept. 30, 2015, TA has spent $33.4 million (including land costs) on the five travel center sites under construction or where construction is planned. TA estimates that the remaining development costs of these five travel centers as of September 30, 2015, was $75.4 million. TA currently expects development of three of these travel centers to be completed during the first half of 2016 and development of the other two travel centers to be completed during the second half of 2016, or early 2017.
