TA Serves Up Improved Revenue And Income Despite Slower Truck Maintenance Business

Travel Centers of America Inc. TA, which operates more than 240 truck centers in 43 states, reported higher net income and revenues for the second quarter despite earning less on fuel sales and truck maintenance.

"Net second quarter income was $1.2 million. That was a $35.1 million improvement over the same quarter a year ago when the company lost $42.6 million before taxes from discontinued operations and reported a net $8.8 million pre-tax benefit. Per share diluted earnings were 15 cents compared with 24 cents a year ago.

Shares traded at $15.28, down 79 cents, or 4.92 percent lower on Monday, August 5.

"We believe that through the first six months of 2019 our strategy to refocus our efforts on our core travel center operations have been successful," said Andrew J. Rebholz, TA's CEO. Cooler temperatures and wetter weather negatively affected the company's truck service business. 

Lower tire sales accounted for 83 percent of the service business decline because of so many new trucks on the road, he said.

TA signed franchise agreements for five additional travel centers during the second quarter. So far this year, TA has signed seven franchise agreements with four franchisees under TA's travel center brand names. One opened in the second quarter. The remainder will join the network by the end of the first quarter of 2020.

"We expect to acquire one operating travel center and two development parcels before the end of this year," Rebholz said.

On August 1, TA converted from a limited liability corporation (LLC) to a Maryland-based corporation. TA's board of directors approved a one (1)-for-five (5) reverse stock split. Rebholz said the moves were made to attract index funds and electronic trading funds unable to invest in LLCs.

Fuel margins

Fuel revenues decreased by $31.8 million, or 2.8 percent, in the second quarter compared with a year ago. TA said that was primarily due to falling fuel prices partially offset by higher volume fuel sales. The gross margin for fuel in the quarter increased $2.4 million or 3.3 percent. The diesel fuel margin was flat with a year ago, though volume sales grew 4.6 percent.

TA said it believes the U.S. government may retroactively reinstate the federal biodiesel blenders' tax credit for 2018 or 2019 before the end of the year. If that happens, the company expects to reduce its fuel cost of goods sold by $35 million for 2018 and $17 million for the first six months of 2019.

Stores and restaurants

Non-fuel revenues increased by $4.6 million, or 1 percent, in the 2019 second quarter compared to the 2018 second quarter. Revenue rose $3.3 million at sites opened and closed since the beginning of the 2018 second quarter. 

Marketing initiatives, including a customer loyalty program, led to $1.3 million same-site sales, partially offset by lower demand due to cooler weather.

Image Sourced by Pixabay