WESTLAKE, Ohio -- Troubled truckstop operator TravelCenters of America LLC has announced financial results for the fourth quarter and year ended Dec. 31, 2007. Revenues were $1.8 billion for the three months ended December 31, and $6.2 billion for the year ended December 31 (which includes the results of TravelCenters of America Inc., its predecessor, for the one month ended Jan. 31, 2007) compared with its predecessor's revenues of $1.1 billion and $4.8 billion, respectively, for the comparable 2006 periods.
For the three and 11 months ended December 31, it incurred net losses of $68.9 [image-nocss] million ($4.86 per share) and $101.3 million ($8.68 per share), respectively. For the year ended December 31, TA and its predecessor combined had a net loss of $123.4 million compared to its predecessor's net income in 2006 of $31 million.
For the three months ended December 31, 2007, we had EBITDAR and Adjusted EBITDAR of $20.3 million and $27.9 million, respectively. EBITDAR and Adjusted EBITDAR decreased by $23.5 million and $14.8 million, respectively, compared to our predecessor's results for the comparable 2006 periods.
For the year ended Dec. 31, 2007, TA and its predecessor combined had EBITDAR and Adjusted EBITDAR of $82.4 million and $173.7 million, respectively. EBITDAR for 2007 declined by $96.7 million as compared to 2006 principally due to costs incurred by its predecessor in January 2007 associated with its merger with TA and difficult industry conditions. Adjusted EBITDAR for 2007 decreased by $15.4 million as compared to our predecessor's results for 2006.
Industry and economic conditions in fourth-quarter 2007 were difficult, the company said. While diesel fuel prices moderated somewhat and it improved fuel margins on a cents-per-gallon basis in the 2007 fourth quarter as compared to the comparable period in 2006, volume of fuel sold on a same-site basis declined because of decreased demand from customers.
Operating results for the three months ended December 31 were adversely affected by slowing economic growth in the United States generally and, in particular, within the trucking industry, TA said. "We believe that the weakness of the U.S. economy, the slowing in the housing market and durable goods orders, the decline in imports brought about by the depressed value of U.S. currency and 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," it said. (See related story in this issue of CSP Daily News.)
Total miles driven by trucks were down for fourth-quarter 2007 as compared to the 2006 fourth quarter. Many U.S. trucking fleets have reported reduced ability to pass through the increased cost of fuel to their customers. "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 2007 fourth quarter, and we expect they may continue to affect us in 2008," said TA.
TA became a public company on Jan. 31, 2007. On May 30, 2007, TA acquired Petro Stopping Centers LP. Its 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.
During fourth-quarter 2007, TA reviewed its goodwill and other intangible assets originally recorded upon the date of its spinoff from Hospitality Properties Trust (HPT) and upon its acquisition of Petro to determine whether they were impaired. Due to current industry conditions, it concluded that the carrying amount of goodwill, or $15.4 million, was impaired and, accordingly, this amount was written off to expense in fourth-quarter 2007.
TA's fourth-quarter results, particularly operating expenses, were impacted by the staffing reorganization it implemented in September 2007. Retraining and realignment of functions, particularly at site-level operating units, increased labor costs. Fourth-quarter results were also adversely affected by the cost integration of the Petro acquisition.
During first-quarter 2008, TA implemented a reduction in its corporate headquarters, regional and site-level workforce. That reduction in staffing involved the layoff of approximately 190 managerial personnel and an adjustment of hourly labor staffing intended to create appropriate staffing for the current difficult business conditions.
Click hereto view previous CSP Daily News coverage of TA.
The company expects to recognize a severance charge of approximately $1.5 million during the 2008 first quarter as a result of this reduction in workforce. "Although we believe this staff reorganization, the Petro integration efforts and the current cost control measures we are implementing may improve our financial results beginning in the second quarter of 2008, we can provide no assurance that they will improve our financial results, and such actions may adversely affect our business or may be inadequate to produce improved results especially if the economy generally or trucking industry conditions deteriorate," it said.
During first-quarter 2008, an arbitration panel issued a decision concerning a contract termination dispute with Simons Petroleum Inc. "We have been ordered to pay Simons $900,000 and will no longer be required to process fuel sales for Simons at TA locations after Nov. 7, 2008. We believe that our termination of the Simons contract may benefit our future financial results, but we can provide no assurance that it will if customers who now purchase fuel at our sites from Simons cease to buy fuel and other services at our sites."
For the three months ended December 31, results showed significant differences as compared to the results of TA's predecessor for the comparable period of 2006, most of which were due to its acquisition of Petro on May 30, 2007. The acquisition of Petro accounted for a 43.7% increase in fuel revenue, a 40% increase in fuel gross margin, a 38.7% increase in nonfuel revenue, a 35.6% increase in nonfuel gross margin, a 36.9% increase in total gross margin and a 41.1% increase in site-level operating expenses.
For the three months ended December 31, as compared to the same period in 2006, TA and Petro sites combined experienced a decline in diesel fuel and gasoline sales volumes on a same site basis of 10.7% and an increase in margin of $0.004 per gallon, or 5.2%. Nonfuel revenue and nonfuel margin decreased $3.1 million, or 1.1%, and $2.7 million, or 1.6%, respectively, on a same site basis, while site-level operating expenses increased $15.1 million or 10.7% on a same-site basis.
For the three months ended December 31, as compared to the same period in 2006, TA sites experienced a decline in diesel fuel and gasoline sales volumes on a same site basis of 9.7% and an increase in margin of $0.003 per gallon, or 4.8%. Nonfuel revenue and nonfuel margin decreased $2.5 million, or 1.2%, and $1.1 million, or 0.9%, respectively, on a same-site basis, while site-level operating expenses increased $15.1 million or 15.2%, on a same site basis.
For the three months ended December 31, as compared to the same period in 2006, Petro sites experienced a decline in diesel fuel and gasoline sales volumes on a same site basis of 13.1% and an increase in margin of $0.005 per gallon, or 6.4%. Nonfuel revenue and nonfuel margin decreased $0.6 million, or 0.7%, and $1.5 million, or 3.4%, respectively, on a same-site basis, while site-level operating expenses increased $100,000 or 0.1% on a same-site basis.
Selling, general and administrative expenses for the three-month period ended December 31 were $28.7 million, representing an increase from the same period in 2006 of $15.9 million, of which $3.2 million resulted from the Petro acquisition and $800,000 resulted from separation payments under employment agreements with various former executive officers and retention payments to certain employees who remained in TA's employ through specified dates.
For the three months ended December 31, TA invested $80.3 million in capital projects. Included in this amount are $18.4 million invested in two operating sites it acquired, $17.8 million invested in projects expected to provide incremental revenue and cash flow and $12.6 million invested in maintenance/sustaining capital. Also included in this amount is $31.5 million of capitalized expenditures related to Operation Refresh.
In 2007, TA implemented Operation Refresh to improve the quality of TA-branded sites by correcting certain deferred maintenance issues and upgrading these sites. Previously, TA has stated its intent to invest approximately $40 million during 2007 and $70 million during 2008 on these projects. It invested approximately $46 million during 2007, $43 million of which was capitalized and $3 million of which was expensed.
The Westlake, Ohio-based company operates under the TravelCenters of America, TA and Petro brand names and offer diesel and gasoline fueling services, restaurants, heavy-truck repair facilities, stores and other services. Its nationwide business includes travel centers located in 41 U.S. 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.