TravelCenters of America. September 2014

Transcription

1 TravelCenters of America September 2014

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 FEDERAL SECURITIES LAWS. ALSO, WHENEVER TA USES WORDS SUCH AS BELIEVE, EXPECT, ANTICIPATE, INTEND, PLAN, ESTIMATE, 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 THESE FORWARD LOOKING STATEMENTS. THIS PRESENTATION INCLUDES EBITDA, EBITDAR AND ADJUSTED EBITDAR AMOUNTS FOR TA. TA CALCULATES EBITDA AS EARNINGS BEFORE INTEREST, TAXES, DEPRECIATION AND AMORTIZATION AND EBITDAR AS EBITDA PLUS RENT AND ADJUSTED EBITDAR AS EBITDAR EXCLUDING CERTAIN ONE-TIME ITEMS. EBITDA, EBITDAR AND ADJUSTED EBITDAR ARE NOT MEASURES PRESCRIBED BY ACCOUNTING PRINCIPLES GENERALLY ACCEPTED IN THE UNITED STATES, OR U.S. GAAP, AND THIS INFORMATION SHOULD NOT BE CONSIDERED AS AN ALTERNATIVE TO NET INCOME, INCOME FROM CONTINUING OPERATIONS, OPERATING PROFIT, CASH FLOW FROM OPERATIONS OR ANY OTHER OPERATING OR LIQUIDITY PERFORMANCE MEASURE PRESCRIBED BY U.S. GAAP. 2

3 Investment Highlights TA believes the economy is in a period of modest but steady growth. TA believes it has significant competitive advantages in the travel center industry. National footprint. Large facilities. Strong truck repair service offering. Broad food service offering. Large convenience stores and driver special services. TA believes it is well positioned for growth. External investment opportunities at attractive prices. Travel centers: New acquisitions and greenfield development. Continued ramp up of recently acquired locations. Complementary businesses (like convenience stores) that leverage TA s buying power, nationwide geographic footprint and existing expertise. Investments at existing travel centers are expected to produce attractive returns. 3 TA believes it has a proven track record and multiple opportunities to pursue future growth.

4 TravelCenters of America 40 year history; publicly traded since Operates two nationwide full service brands of travel centers: TravelCenters of America or TA and Petro Stopping Centers or Petro. 248 travel centers located in 43 U.S. states and Canada: 173 operated under TA brand; 75 under Petro brand. 218 Company operated; 30 franchisee operated. 34 owned by TA; 189 leased or managed by TA, including 184 leased from Hospitality Properties Trust (HPT); 25 owned or leased by franchisees. Typical TA / Petro Location: 25 acres of land with parking for 189 trucks and 100 cars. Fuel: 10 truck fueling lanes, 5 car fueling positions. Food: table service and quick service restaurants (QSR). Large convenience store. Truck maintenance and repair facility. Other driver/motorist services: showers, laundry area, business center, truck scales, video game room, casinos, fitness facilities and Wi-Fi internet access. 34 convenience stores with retail gasoline stations including the Minit Mart brand name located in 4 states, primarily Kentucky. 4

5 Broad Geographic Footprint TA s travel centers, with few exceptions, are located at U.S. Interstate Highway System exits. Approx. 50% of TA s sites are in the 10 states with the highest concentration of truck traffic. State U.S. Freight Activity Rank (1) # of TA / Petro Sites California 1 13 Texas 2 20 Illinois 3 10 Florida 4 7 Georgia 5 10 Ohio 6 17 Pennsylvania 7 12 New York 8 6 Indiana 9 14 Tennessee Total ) Source: Bureau of Transportation Statistics 2007 Commodity Flows Survey

6 Competitive Advantages Large facilities: The typical TA / Petro location offers 189 truck parking spaces on 25 acres (typical location of TA s largest chain competitor offers 91 truck parking spaces on 16 acres). Broad truck repair service offering: TA s large truck repair business includes over 1,000 repair bays and over 2,600 technicians, dwarfing TA s chain competitors. TA is authorized to provide warranty work for Daimler/Freightliner, a leading U.S. truck manufacturer. Broad food service operating model: TA s food service business offers 217 table service and 359 quick service restaurants operated directly by TA (TA s largest chain competitor offers table service restaurants in only 20% of its locations and these are generally operated by third parties). Full service chain: TA operates more full-service travel centers in the U.S. and there are more driver amenities at TA and Petro sites than at most sites of TA s chain competitors. TA operates 7/24/365. 6

7 Growth -- Travel Center Acquisitions The travel center industry experienced distressed conditions during the most recent recession. Specialized, environmentally challenged real estate remains difficult to refinance, particularly for locations owned by small companies or families. One of TA s major competitors (Flying J) went bankrupt in It was acquired by TA s one remaining nationwide competitor (Pilot), which now has large amounts of floating rate debt and is burdened by well publicized government investigations and litigation. Product offering advances (e.g., diesel exhaust fluid required for new truck engines) and aging facilities continue to hamper efforts of independent travel centers to remain competitive. Since the beginning of 2011, TA has purchased or agreed to purchase 35 travel centers and 31 convenience/gasoline stores through March 31, Renovation Cost Incurred Through March 31, 2014 Estimated Renovation Cost to be Spent Cash Acquisition Site Count Cost (1) Properties acquired in $36,333 $47,737 $ Properties acquired in ,910 33,630 Properties acquired in 2013 (2) ,602 20,446 32,095 Properties acquired in 2014 first quarter 1 2, ,902 Total 62 $197,844 $102,629 $36,997 (1) Includes only cash amounts paid that were recorded as property and equipment or intangible assets. Excludes working capital assets and asset retirement obligation assets. (2) Includes 31 convenience stores acquired in December Total investment returns are accelerating. 7 Revenues in Excess of Cost of Goods Sold and Site Level Operating Expenses Three Months Ended Twelve Months Ended March 31, March 31, Properties acquired in 2011 (6 sites) $ 3,858 $ 1,611 $ 11,684 $ 5,917 Properties acquired in 2012 (14 sites) 4,089 2,103 16,086 2,897 Properties acquired in 2013 (41 sites) (1) 2, , Properties acquired in 2014 (1 site) (184) - (199) - Total $ 9,995 $ 3,775 $ 32,684 $ 9,202 (1) Includes 31 convenience stores purchased in December 2013.

8 Growth -- Travel Center Development TA owns 7 parcels of vacant land (total 348 acres) it believes are suitable for development as travel centers. TA has selected two of these locations for potential development in the near future; those sites offer the right contribution of: Location/potential business. Projected economic returns. Lack of acquisition alternatives in those markets. Estimated cost of the two new greenfield locations is $37.5 million, excluding land costs. 8 Hillsboro, TX, I-35, exit 370 (Located where the main highway heading north from Mexico splits toward Dallas and Ft. Worth.) Columbia, SC, I-77, exit 5 (A location close to the University of South Carolina, which may attract local business as well as interstate travelers.)

9 Growth -- Convenience Stores Convenience Stores. Minit Mart: 31 gasoline/convenience stores for $67 million ($2.2 million per location). Typical store size of 5,000 sq. ft. with 10 fueling positions. High fuel volumes: 38 million gallons of fuel, or average of 1.3 million per location sold in 2012 (1.9% of TA s 2013 total gallons of fuel sold). Strong store sales, including typical c-store products plus deli and pizza prepared foods. Potential Synergies for TA. Management, operational and logistical synergies. Buying power. 9

10 Internal Growth Opportunities and Recent Projects TA/Shell LNG Agreement. Reserve-It! parking program, building on TA s large site competitive advantage. RoadSquad expansion, building on TA s truck repair competitive strength. Migration to branded from unbranded gasoline. New high speed fuel dispensers, including for diesel exhaust fluid, cuts trucker waiting times and supplies additive required for most new engines. Truck repair bay additions where waiting times are longest. New electronic price signs attract both four wheel motorists and independent truckers. Site / restaurant remodeling improves business from locals as well as interstate travelers. 10

11 TA/Shell LNG Agreement TA announced in April 2013 that it had reached a definitive agreement with Shell to build up to 200 LNG fueling lanes on up to 100 of TA s TravelCenters. Shell has agreed to construct and TA has agreed to operate the LNG fueling stations. First 100 locations are expected to cover the most heavily used freight corridors. We expect to add locations as the market grows. TA opened its first location in Ontario, CA in May and expects that 6 to 8 LNG fueling lanes will be operational by end of Currently considering CNG initiatives with Shell and others. 11

12 TA Has A Strong Management Team In aggregate, management (listed executives below) owns 6.3% of TA s common shares as of March 31, Tom O Brien (age 47). President & Chief Executive Officer. Mr. O Brien has been a managing director of TA since 2006, and its President & CEO since Mr. O Brien is also an Executive Vice President of Reit Management & Research LLC (RMR) and has been a senior officer of RMR and its related companies since Prior to 1996, Mr. O Brien was a senior manager with Arthur Andersen & Co LLP. Andy Rebholz (age 48). Chief Financial Officer. Mr. Rebholz has been Executive Vice President, Treasurer & CFO since Mr. Rebholz is also a Senior Vice President of RMR. Prior to 2007, Mr. Rebholz held various senior financial and accounting positions with TA s predecessor since Prior to 1997, Mr. Rebholz was a senior manager with Price Waterhouse LLP. Mark Young (age 50). General Counsel. Mr. Young has been Executive Vice President & General Counsel since Mr. Young is also a Senior Vice President of RMR. Prior to 2007, Mr. Young held senior legal positions at RMR since Prior to 2001, Mr. Young worked as an attorney at CGMI, Inc., Staples, Inc., and Hale and Dorr LLP (now known as Wilmer Hale). Michael Lombardi (age 61). Executive Vice President (Sales). Mr. Lombardi has been with TA since Prior to 2006, Mr. Lombardi held senior marketing and customer service positions with Ford Motor Company since Prior to 2000, Mr. Lombardi held various marketing and sales positions with British Petroleum plc since Barry Richards (age 60). Executive Vice President (Operations). Mr. Richards has been with TA since Prior to 2001, Mr. Richards held various positions in the food service industry since John (Skip) McGary (age 56). Senior Vice President (Truck Service). Mr. McGary has been with TA since 1982 in various capacities, most recently as Senior Vice President of Stores and prior to this, Vice President of Truck Service. 12

13 Investment Opportunity TA believes the economy generally is in a period of modest but steady recovery and growth. TA believes its execution in recovery periods suggests superior execution in expansionary periods Trucking Freight Volume and Revenue (Jan Dec. 2012, Index = 100 as of January 2000) Last period of industry expansion: 7 years. Volume CAGR: 5.7%. Revenue CAGR: 10.2% TA Retail Fuel Volume (1) (billions of gallons) Total Tons Total Revenue 1.0 (2) Source: American Trucking Association. $1,500 $1,400 $1,300 $1,200 $1, % CAGR $1,227 $1,190 TA Nonfuel Revenues ($ in millions) $1,097 $1,159 $1,271 $1,345 $1,451 $350 $300 $250 $200 $ % CAGR $173.7 TA Total EBITDAR ($ in millions) $260.3 $201.8 $237.1 $272.4 $293.0 $299.6 $1,000 (2) $100 (2) (1) See Exhibit B for a reconciliation of retail fuel volume to total fuel volume. (2) Includes the operating results of our predecessor and Petro for periods prior to the respective dates of the acquisitions on January 31, 2007, and May 30, 2007.

14 Average gross margin per gallon sold (cents per gallon) Track Record Of Margin Expansion TA s gross margin per gallon has significantly increased Avg. gross margin 12.6 Avg. gross margin Avg. gross margin Q14 14 Note: See Exhibit B for calculation of average gross margin per gallon sold.

15 Operating Results Three Months Ended March 31, ($ in thousands) Revenues: Fuel $ 1,589,646 $ 1,625,107 Non fuel 374, ,194 Rent and royalties 2,997 3,050 Total revenues 1,967,309 1,957,351 Gross margin: Fuel 92,317 76,928 Non fuel 206, ,829 Rent and royalties 2,997 3,050 Total gross margin 301, ,807 Site level operating 199, ,933 Selling, general & administrative 26,796 23,227 Income from equity investees Acquisition costs (610) (115) EBITDAR (1) $ 74,763 $ 56,968 Rent expense 54,126 51,884 (1) EBITDA $ 20,637 $ 5,084 Net income $ 197 $ (12,139) Net income per share $ 0.01 $ (0.41) (1) See Exhibit A for a reconciliation of EBITDAR and EBITDA to net income. 15

16 Investment Highlights TA believes the economy is in a period of modest but steady growth. TA believes it has significant competitive advantages in the travel center industry. National footprint. Large facilities. Strong truck repair service offering. Broad food service offering. Large convenience stores and driver special services. TA believes it is well positioned for growth. External investment opportunities at attractive prices. Travel centers: New acquisitions and greenfield development. Continued ramp up of recently acquired locations. Complementary businesses (like convenience stores) that leverage TA s buying power, nationwide geographic footprint and existing expertise. Investments at existing travel centers are expected to produce attractive returns. 16 TA believes it has a proven track record and multiple opportunities to pursue future growth.

17 17 Appendix

18 Factors Which May Be Used To Understand TA s Business Because TA sells large volumes of motor fuels and the price of motor fuels has become highly volatile, TA believes that the number of gallons of fuel sold and gross margins from fuel sales are generally better measures of TA s business success than fuel revenue or total revenue. TA believes that nonfuel dollar sales are an important measure of TA s performance, as are gross margins from nonfuel sales. TA believes that its site level nonfuel margins less costs classified as operating expenses is another important measure of its operating performance because most of the site level costs of operating TA s business (other than fuel and nonfuel cost of goods) arise from TA s nonfuel businesses. TA s business is seasonal: The first calendar quarter generally produces TA s weakest financial results for the fiscal year because there is less freight shipped and less over the road travel in the winter months. The second and third calendar quarters have historically produced TA s best financial results for the fiscal year. Historically, the fourth calendar quarter usually starts strong with heavy freight shipments and benefits mid quarter from some holiday sales, but almost always ends with weaker results in December when trucking activity slows due to holidays and winter storms. 18

19 TA s Core Business Is Motor Fuel Approximately 85% of TA s retail fuel sales for the year ended December 31, 2013, are diesel. Diesel is sold unbranded. TA s largest suppliers by volume include Shell, Valero, Marathon, Conoco, ExxonMobil and BP. A significant portion of TA s diesel sales are on a contract basis. TA has contractual arrangements with almost all of the 100 largest trucking companies in the U.S. and with many smaller fleet owners and independent trucker buying cooperatives. Contract diesel sales prices are generally set at cost plus, with cost determined by reference to publicly available quotes of average wholesale prices, commonly referred to as OPIS Averages. Approximately 15% of TA s retail fuel sales for the year ended December 31, 2013, are gasoline. The vast majority of TA s gasoline is sold and supplied by brand owners: BP, Shell, ExxonMobil, Valero and others selected by TA because of brand strengths in different market areas. Most of TA s customers coordinate their purchases of nonfuel goods and services with fuel purchases. TA s locations are designed to attract professional truckers, who are legally required to be off the road for 13 hours every 24 hours and, as a result, are increasingly seeking ways to ensure their efficiency. 19

20 20 Exhibits

21 Exhibit A Three Months Ended ($ in thousands) March 31, Calculation of EBITDA and EBITDAR: Net income (loss) $ 197 $ (12,139) Add: income taxes Add: depreciation and amortization 16,128 13,223 Deduct: interest income (39) (235) Add: interest expense 4,075 4,065 EBITDA $ 20,637 $ 5,084 Add: real estate rent expense 54,126 51,884 EBITDAR $ 74,763 $ 56,968 21

22 Exhibit B (1) (in millions, except per gallon data) Q14 Fuel sales $ 5,678 $ 6,454 $ 3,589 $ 4,791 $ 6,603 $ 6,636 $ 6,481 $ 1,590 Less: Cost of fuel sold 5,482 6,179 3,359 4,531 6,302 6,310 6,139 1,497 Fuel gross margin $ 196 $ 275 $ 230 $ 260 $ 301 $ 326 $ 342 $ 93 Divided by: Total fuel volume sold 2,472 2,078 1,933 2,037 2,087 2,040 2, Gross margin per gallon $ $ $ $ $ $ $ $ Retail fuel volume sold 2,309 1,752 1,857 1,958 1,984 1,957 1, Plus: Wholesale fuel volume sold Total fuel volume sold 2,472 2,078 1,933 2,037 2,087 2,040 2, (1) Includes the operating results of our predecessor and Petro for periods prior to the respective dates of the acquisitions on January 31, 2007, and May 30,

23 TravelCenters of America September 2014