Refuel. Replenish. Refresh.
TRAVELCENTERS OF AMERICA Q1 2018
1 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 INCLUDES EBITDA AMOUNTS FOR TA. TA CALCULATES EBITDA AS EARNINGS BEFORE INTEREST, TAXES, DEPRECIATION AND AMORTIZATION. EBITDA IS NOT A MEASURE 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 TRAVELCENTERS OF AMERICA Q1 2018 INVESTMENT HIGHLIGHTS
Barriers to Entry Right Strategy Commercial Opportunity One of only three nationwide Our full service approach is a Trucking trends present an operators of travel centers in the competitive advantage that opportunity for truck stop United States. allows us to better address fleet companies with a full service company and professional driver strategy. TA is positioned to help a challenges. broader truck market.
Retail Opportunity Powerful Model Improvement Plan TA has identified operating TA ‘s strategy has resulted TA is focused on controlling costs initiatives designed to ramp up in increased nonfuel revenues and managing capital expenditures standalone convenience stores. and site level operating leverage. in 2018.
3 TRAVELCENTERS OF AMERICA Q1 2018 ONE OF ONLY THREE NATIONWIDE OPERATORS OF TRAVEL CENTERS IN THE UNITED STATES.
TA’s business includes 256 full service travel centers, 231 standalone convenience stores and 48 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.
SEGMENT MARGIN MIX (1) FUEL AND NONFUEL GROSS MARGIN MIX
$496,289 74%
Travel Center
Convenience Store LTM Fuel Gross Margin Corporate & Other LTM Nonfuel Gross Margin
26% $40,102
$9,314
4 Unless otherwise noted, data reflected in this presentation is as of 3/31/18 (1) Reflects Consolidated Site level gross margin in excess of operating expenses. TRAVELCENTERS OF AMERICA Q1 2018 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 Morein the than 13 50% states of withTA’s travelthe highest centers concentration are located in the 13 states withof truck the highest traffic. concentration of truck traffic. U.S. Freight # of TA / State Activity Rank (2) 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 6-13 59 Total 132
(1) In addition to the 231 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 TRAVELCENTERS OF AMERICA Q1 2018 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 STORE -Fresh Food Offerings. -Nationwide Truck Maintenance & Repair. -Premium Coffee. -Roadsquad: Roadside Emergency Service & Call -Tobacco. Center Services. -Lottery. -OnSITE: TA Truck Service on site. -Driver & Cab Retail Items. -Commercial Tire Network: Independent Tire Dealer. -Scales.
LARGE SITES FOOD SERVICE -A typical site includes ~200 truck parking spaces on -247 Casual Dining Restaurant. ~26 acres that provides more parking, showers, -689 Quick Service Restaurant(s) "QSR“. laundry, business center services, fitness and -Grab N Go options. entertainment options than primary competitors. -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 TRAVELCENTERS OF AMERICA Q1 2018 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.
(1) (1) (1) TRUCKS’ SHARE OF TOTAL TONNAGE TRUCKLOAD (“TL”) VOLUME TRUCKS SHARE OF TOTAL FREIGHT REVENUE
Average Annual Expansion. Estimated
70.7%
67.9% 67.1%
2017 2023 2028 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
7 American Trucking Associations & TA estimates. TRAVELCENTERS OF AMERICA Q1 2018 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 DRIVER HOURS OF ELECTRONIC LOGGING PENALTIES FOR PARKING ENFORCEMENT + SERVICE + DEVICES + ILLEGALLY
= Fleets Are Looking For Solutions To Increase Driver Satisfaction + Driver Efficiency Which Can Help Retain Drivers.
2011 2016 2017
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
8 (1) American Trucking Associations:. TRAVELCENTERS OF AMERICA Q1 2018 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.
TRUCKLOAD TONNAGE (2) GROWTH IN LESS-THAN-TRUCKLOAD (“LTL”) TONNAGE (2) 120%
1% 1% 2% 153.4 179.1 206.9 100% million million million 80% 49% 49% 48% Less-than-Truckload 60% Truckload
40% Private Truck
50% 50% 50% 20%
2018 2023 2028 0% (1) Stifel Nicolaus 2018 2023 2028 (2) American Trucking Associations: The U.S. Freight Transportation Forecast.
LESS-THAN-TRUCKLOAD-VOLUME (“LTL”) Average Annual Expansion.
9 Commercial Strategy: Diesel Fuel and Truck Service
TRAVELCENTERS OF AMERICA Q1 2018 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 TRADITIONAL CUSTOMERS: EXPAND CUSTOMER NONTRADITIONAL CUSTOMERS: PRIVATE, FOR- CLASS 8 TRUCKS AT TERMINALS AND TRAILER COVERAGE TO INCLUDE CLASS 4-7 TRUCKS. HIRE FLEETS AND SMALL-TO-MEDIUM BUSINESSES YARDS. WITH CLASS 4-7 TRUCKS.
These initiatives as well as TA’s retail and restaurant TA Truck Service, Commercial Tire Network, OnSITE and initiatives should lead to higher growth rates for 2018 versus RoadSquad provide traditional and nontraditional 2017 for our consolidated nonfuel revenues and our site customers with a single source, nationwide solution for tires, quality parts, maintenance and repair services without level gross margin in excess of operating expenses in the limitation to where or when the service is performed. travel center segment and the convenience store segment than the growth rates experienced in 2017 compared to 2016.
10 Commercial Strategy: Diesel Fuel and Truck Service
TRAVELCENTERS OF AMERICA Q1 2018 TRUCK SERVICE: ONSITE
Locat ion Informat ion Extend maintenance, repair and inspection solutions beyond TA’s truck Services by Address bays with TA vehicles going to the customer.
SServiceervice Locations OnSit e
Truck & Trailer Maintenance, ELD Installations, Trailer Rebranding, Trailer Repairs, GPS Installation, DOT inspection, Certifications.
11 Commercial Strategy: Diesel Fuel and Truck Service
TRAVELCENTERS OF AMERICA Q1 2018 TRUCK SERVICE: COMMERCIAL TIRE NETWORK Locat ion Informat ion Services by Address Provide brands and capabilities of a tire dealer at customer locations.
Service Locations Service Commercial Tire Net work 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 Commercial Strategy: Diesel Fuel and Truck Service
TRAVELCENTERS OF AMERICA Q1 2018 TRUCK SERVICE: ROADSQUAD
Locat ion Informat ion Provide emergency service call center support and tire and roadside truck Services by Address repair service 24/7/365.
SServiceervice 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 Commercial Strategy: Diesel, Fuel and Truck Service
TRAVELCENTERS OF AMERICA Q1 2018 PROFILE
CUSTOMER
A company responsible for thousands of utility trucks utilize terminals across the 31 MIL COMMERCIAL TRUCKS 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
C U S T O M E R
3.6MIL ARE CLASS 8 TRUCKS Servicing fleet trailers at distribution centers of largest online retailer to ensure they are “road ready” for Amazon freight hauls where on time deliveries are essential.
Of which
CUSTOMER
~ 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 Retail Strategy: Gas, Retail Operations and Restaurants
TRAVELCENTERS OF AMERICA Q1 2018 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 2018.
LOYALTY MERCHANDISE EXPERIENCE Roll out Minit Mart Match Products to Market by Volume Optimizing Store Layouts. Rewards program 1H 2018. and Demographic.
ONLINE R E S E R V E I T VIDEO GAMING
Partner with Community Expand Reserve It! Parking at Expand and improve gaming and increase online sales (pizza truck stops. operations in states in which we programs etc). 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 and the convenience store segment than 15 the growth rates experienced in 2017 compared to 2016. Retail Strategy: Gas, Retail Operations and Restaurants
TRAVELCENTERS OF AMERICA Q1 2018 RESTAURANTS
TA ‘s Restaurant Group is focused on attracting more consumers and managing costs.
FULL SERVICE QUICK SERVICE P R O C E S S RESTAURANTS RESTAURANTS IMPROVEMENT
Replace Casual Dining Restaurant Brand Add QSR restaurants at Travel Centers. Utilize new technology to better manage food with better known Consumer Brand. and labor costs. Replace QSR brand at Convenience Stores. Optimize Operating Hours 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 segment and the convenience store segment than the growth rates experienced in 2017 compared to 2016.
16 Retail Strategy: Gas, Retail Operations and Restaurants
TRAVELCENTERS OF AMERICA Q1 2018 STRATEGY IN ACTION
EFFICIENCY HEADWINDS COMPETITION
Case Study: Case Study: Travel Centers Standalone Convenience Stores Attract more local motorists. Match products to market. Standardize Stores. Petro Travel Center Bucksville, AL 59 Minit Marts Kansas City, MO By June 2016 Refaced exterior to better highlight quick service brands. By August 2017 Rebranded Foodmart to Minit Mart. Added "Kick Back" loyalty program.
Last Twelve Months ended Q2 2017 vs Last Twelve Months By November 2017 Ended Q2 2016: Adjusted sales to space by volume and demographic. Created consistent shopping experience across locations. Gasoline sales volume increased ~14% Quarter Ending December 31, 2017 vs Quarter Ending December 31, 2016: Site Gross Margin in Excess of Site Level Operating Expenses increased ~13% Nonfuel Gross Margin increased 6.1%
Site Gross Margin in Excess of Site Level Operating Expenses Increased 29.5%
17 TRAVELCENTERS OF AMERICA Q1 2018 POWERFUL MODEL
Focused on Expanding TA’s Full Service Strategy
Consolidated Same Site Nonfuel Revenue As Reported
$1,836 - % $2,000 $1,698 60.0% $1,679 (0.1%) +5% $1,800 $1,482 +4% $1,600 $1,354 58.0% $1,289 +3% +3% $1,400 56.4% 56.4%
$1,200 55.9% 56.0% 55.6% 55.5% 55.3% 55.0% (Millions) $1,000
$800 54.0%
$600
$400 52.0%
Consolidated Same Site Nonfuel Revenue As Reported Consolidated Same Site Nonfuel Margin As Reported
18 TRAVELCENTERS OF AMERICA Q1 2018 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") 54.0
50.0 CAGR 53.2 3.6% 46.0
42.0
38.0 36.3 34.0
30.0
26.0
22.0
19 TRAVELCENTERS OF AMERICA Q1 2018 OPERATING LEVERAGE
Growing Core Full Service Business Faster than We’re Spending.
$2,400 51.8%
51.4% $2,000 50.0% 50.1% 50.4%
$1,600
$1,200
52.7% 51.8% $800
$400 2013 2014 2015 2016 2017 Q1 Q1 2017 2018
Consolidated Nonfuel Revenue (Same Site) Consolidated Site Level Operating Expenses as a Percentage of Nonfuel Revenue (Same Site)
20 TRAVELCENTERS OF AMERICA Q1 2018 IMPROVEMENT PLAN
While TA positions itself to compete in a broader market, the company is focused on managing costs and expenditures.
CONTROL COSTS MANAGE SPENDING 2018 2018
Site Level Operating Expense: Opportunistic Travel Center Acquisitions. - Ctuit implementation - IT/Automation Estimate Sustaining Capital Amounts of ~$55 million. -Site level labor efficiencies Expect improvement sales at leased HPT sites of ~$50 million. Depreciation and Amortization Expense: - Project & capital expenditure completions Maintain net Capital Expenditure amounts (Sustaining Capital + Internal Growth Capital – HPT improvement sales) similar to 2017.
As programs to drive nonfuel revenues and control costs progress, TA believes site level operating expenses as a percentage of nonfuel revenues may decrease.
21 Exhibits
22 EXHIBIT A
Consolidated Statements of Operations
Three Months Ended March 31, 2018 2017 ($ in thousands) Revenues: Fuel $ 1,100,127 $ 922,874 Non fuel 480,397 464,168 Rent and royalties 4,163 4,630 Total revenues 1,584,687 1,391,672
Gross margin: Fuel 93,559 73,163 Non fuel 282,402 267,797 Rent and royalties 4,163 4,630 Total gross margin 380,124 345,590
Site level operating expense 249,560 245,915 Selling, general & administrative 38,035 41,303 Rent expense 70,812 67,999 Loss (Income) from equity investees 1,285 (278) Acquisition costs - 140 EBITDA (1) $ 20,432 $ (9,489) Net income (loss) attributable to common $ (10,112) $ (29,398) shareholders Net income (loss) per share $ (0.25) $ (0.74)
23 (1) See Exhibit B for a reconciliation of EBITDA to net income. EXHIBIT B
Consolidated Calculation of EBITDA
Three Months Ended March 31, ($ in thousands) 2018 2017 Calculation of EBITDA: Net Loss $ (10,078) $ (29,375) Add: (Benefit) for income taxes (4,626) (19,298) Add: Depreciation and amortization 27,548 31,800 Add: Interest expense, net 7,588 7,384 EBITDA $ 20,432 $ (9,489) Add: Federal biodiesel tax credit(1) (23,251) - Add: Comdata legal expenses(2) 78 6,372 Add: Comdata excess transaction fee(3) - 1,813 Add: Incremental share based compensation expense(4) 1,027 173 EBITDA net of discreet items $ (1,714) $ (1,131)
(1) 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 three months ended March 31, 2018. (2) Comdata legal expenses. During the three months ended March 31, 2018 and 2017, TA incurred $0.1 million and $6.4 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 March 31, 2018. 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 is 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 April 2018. Comdata has 30 days from the date of the Order to file a notice of appeal. If Comdata does not appeal, TA believes legal fees that it may incur for this matter during the remainder of 2018 will not be material. (3) Comdata excess transaction fees. From February 1, 2017, until mid-September 2017, Comdata unilaterally withheld increased fees from the 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 months ended March 31, 2017, TA incurred $1.8 million 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) 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. For the three months ended March 31, 2018 and 2017, this acceleration resulted in $1.0 million and $0.2 million, respectively, of incremental share based compensation expense as compared to what TA would have expensed in the 24 absence of these retirement agreements. EXHIBIT C
Segment Operating Statements: First Quarter 2018
Travel Centers Business Segment Convenience Stores Business Segment Change from Change from Q1 2018 Q1 2017 Q1 2018 Q1 2017 ($ in thousands) $ % $ % Revenues: Fuel $ 966,026 20% $ 115,002 11% Non fuel 414,376 5% 58,412 (4%) Rent and royalties 3,128 (8%) 53 (2%)
Gross margin: $ 341,579 12% $ 32,271 (0%)
Site level operating expenses $ 217,560 2% $ 27,360 1%
Site level gross margin in excess of site level operating expenses $ 124,019 34% $ 4,911 (8%)
25 EXHIBIT D
Consolidated Balance Sheet March 31, December 31, ($ in thousands) 2018 2017 Assets Cash and Cash equivalents $ 52,139 $ 36,082 Accounts receivable, net 153,488 125,501 Inventory 207,686 209,640 Other current assets 24,652 27,295 Total current assets 437,965 398,518
Property and equipment, net 984,396 1,001,090 Goodwill & other intangible assets, net 127,536 128,242 Other noncurrent assets 93,468 90,004 Total assets $ 1,643,365 $ 1,617,854
Liabilities and Shareholders' Equity Accounts payable $ 166,886 $ 155,581 Current HPT Leases liabilities 41,706 41,389 Other curent liabilities 155,657 130,140 Total current liabilities 364,249 327,110
Long Term debt 319,853 319,634 Noncurrent HPT Leases liabilities 365,122 368,782 Other noncurrent liabilities 35,861 35,029 Total liabilities 1,085,085 1,050,555
Shareholders' equity (40,000 and 39,984 common shares outstanding at Marchr 31, 2018 and Decemeber 31, 2017, respectively) 558,280 567,299 Total liabilities and shareholders' equity $ 1,643,365 $ 1,617,854
26