Refuel. Replenish. Refresh. - TravelCenters of America _FINAL.pdf · Refuel. Replenish. Refresh. 2...

1

TRAVELCENTERS OF AMERICA

Q4 2017

Refuel. Replenish. Refresh.

2

W A R N I N G C O N C E R N I N G F O R W A R D L O O K I N G S TAT E M E N T S

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.

3

INVESTMENT HIGHLIGHTS

T R A V E L C E N T E R S O F A M E R I C A Q 4 2 0 1 7

Barriers to Entry

One of only three nationwide

operators of travel centers in the

United States.

Powerful Model

TA ‘s strategy has resulted

in increased nonfuel revenues

and site level operating leverage.

Right Strategy

Our full service approach is a

competitive advantage that

allows us to better address

fleet company and professional

driver challenges.

Improvement Plan

TA is focused on controlling costs

and managing capital expenditures

in 2018.

Commercial Opportunity

Trucking trends present an

opportunity for truck stop

companies with a full service

strategy. TA is positioned to help

a broader truck market.

Retail Opportunity

TA has identified operating

initiatives designed to ramp up

standalone convenience stores.

4

ONE OF ONLY THREE NATIONWIDE

OPERATORS OF TRAVEL CENTERS

IN THE UNITED STATES.


TA’s business includes 256 full service travel centers, 233 standalone convenience stores and 49 standalone restaurants.

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.

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.

26%

74%

LTM Fuel Gross Margin

LTM Nonfuel Gross Margin

$463,833

$40,554

$10,253

Travel Center

Convenience Store

Corporate & Other

Unless otherwise noted, data reflected in this presentation is as of 12/31/17 (1) Reflects Consolidated Site level gross margin in excess of operating expenses.

SEGMENT MARGIN MIX (1) FUEL AND NONFUEL GROSS MARGIN MIX

5

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 in the 13 states with the highest

concentration of truck traffic.

(1) In addition to the 233 standalone Minit Mart locations, TA operates 256 convenience stores within the TravelCenters of America and Petro Stopping

Centers travel center locations. 67 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.

More than 50% of TA’s travel centers are

located in the 13 states with the highest

concentration of truck traffic.

State(2)

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

U.S. Freight

Activity Rank

# of TA /

Petro Sites

6

LARGE SITES

-A typical site includes ~200 truck parking spaces on ~26 acres that provides more parking,

showers, laundry, business center services, fitness and entertainment options than primary competitors.

STORE -Fresh Food Offerings. -Premium Coffee. -Tobacco. -Lottery. -Driver & Cab Retail Items. -Scales.

TRUCK SERVICE -Nationwide Truck Maintenance & Repair. -Roadsquad: Roadside Emergency Service & Call Center Services. -OnSITE: TA Truck Service on site. -Commercial Tire Network: Independent Tire Dealer.

FOOD SERVICE -246 Casual Dining Restaurant. -682 Quick Service Restaurant(s) "QSR“. -Grab N Go options. -Two proprietary casual dining brands Iron Skillet & Country Pride, fast casual offerings like Bob Evans and Fuddruckers. -47 QSR Brands.

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.

SMALLER SITES A typical site includes ~80 truck parking spaces on ~9-13 acres with fewer services and food service choices.

C O M P E T I T O R S I T E S

7

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.

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

3.6 mil are Class 8 trucks Of which

Around 1.6 mil are long haul trucks

ALL COMMERCIAL

TRUCKS

CLASS 8 TRUCKS

LONG HAUL TRUCKS

3.6MIL ARE CLASS 8 TRUCKS

Of which

~ 1 MIL ARE LONG HAUL TRUCKS

31 MIL COMMERCIAL TRUCKS

Of which

TRUCKLOAD (“TL”) VOLUME (1)

TRUCKS’ SHARE OF TOTAL TONNAGE (1)

Truckload tonnage growth reflects the anticipated

performance of key commodities and freight-

market segments.

70.6%

67.9%

67.1%

2016 2023 2028

TRUCKS SHARE OF TOTAL FREIGHT REVENUE (1)

Estimated

In absolute terms, while trucks’ total share will decline, its

total volume transported will still increase substantially

more than any other mode.

Average Annual Expansion.

(1) American Trucking Associations: The U.S. Freight Transportation Forecast.

American Trucking Associations & TA estimates.

8

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:

DRIVER HOURS

OF SERVICE

ELECTRONIC LOGGING DEVICES

PENALTIES FOR PARKING

ILLEGALLY + +

= Fleets Are Looking For Solutions To Increase Driver Satisfaction + Driver Efficiency

Which Can Help Retain Drivers.

DRIVER SHORTAGE

2011 2016 2017

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

Driver Preference for TA and Petro vs.

Next Closest Truck Stop Brand

Area Category

(1) American Trucking Associations:.

SAFETY REGULATION

ENFORCEMENT +

9

Average Annual Expansion.

LESS-THAN-TRUCKLOAD-VOLUME (“LTL”)

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.

GROWTH IN LESS-THAN-TRUCKLOAD (“LTL”) TONNAGE (2)

2017 2023 2028

147.6

million 179.1

million 206.9

million

50% 50% 50%

49% 49% 48%

1% 1% 2%

0%

20%

40%

60%

80%

100%

120%

2018 2023 2028

TRUCKLOAD TONNAGE (2)

Less-than-Truckload

Truckload

Private Truck

(1) Stifel Nicolaus

(2) American Trucking Associations: The U.S. Freight Transportation Forecast.

10

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 CLASS 8 TRUCKS AT TERMINALS

AND TRAILER YARDS.

TRADITIONAL CUSTOMERS: EXPAND

CUSTOMER COVERAGE TO INCLUDE

CLASS 4-7 TRUCKS.

NONTRADITIONAL CUSTOMERS: PRIVATE,

FOR-HIRE FLEETS AND SMALL-TO-

MEDIUM BUSINESSES WITH CLASS 4-7

TRUCKS.

TA Truck Service, Commercial Tire Network, OnSITE

and RoadSquad provide traditional and nontraditional

customers with a single source, nationwide solution for

tires, quality parts, maintenance and repair services

without limitation to where or when the service is

performed.

Commercial Strategy: Diesel Fuel and Truck Service

These initiatives as well as TA’s retail and restaurant

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.

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Services by Address

Locat ion Informat ion

Service

OnSit e

TRUCK SERVICE: ONSITE


Extend maintenance, repair and inspection solutions beyond TA’s

truck bays with TA vehicles going to the customer.


Service Locations

Truck & Trailer Maintenance, ELD Installations, Trailer Rebranding, Trailer

Repairs, GPS Installation, DOT inspection, Certifications.

12

Services by Address


Service

Commercial Tire Net work

OnSit e

TRUCK SERVICE: COMMERCIAL TIRE NETWORK


Provide brands and capabilities of a tire dealer at customer

locations.


Service Locations

Independent Tire Dealer, Multiple Tire and Retread Brands, Location Deliveries, Casing Program

Management.



13

Services by Address


Service

Commercial Tire Net work

OnSit e

RoadSquad

TRUCK SERVICE: ROADSQUAD


Provide emergency service call center support and tire and roadside

truck repair service 24/7/365.


Independent Tire Dealer, Multiple Tire and Retread Brands, Location Deliveries, Casing Program

Management.

Service Locations



RoadSide Assistance, Call Center, Tire & Repair, Shift Support, Maintenance Centralization

14

PROFILE


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.

3.6MIL ARE CLASS 8 TRUCKS

Of which

~ 1 MIL ARE LONG HAUL TRUCKS

31 MIL COMMERCIAL TRUCKS

Of which

A company responsible for thousands of utility trucks utilize terminals across

the 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.

Combining services like fuel, roadside emergency

repair and call center support so a fleet can devote

resources to its core business.

C U S T O M E R

C U S T O M E R

C U S T O M E R

Commercial Strategy: Diesel, Fuel and Truck Service

http://knight-swift.com/



15

R E S E R V E I T

Expand Reserve It! Parking at

truck stops.

E X P E R I E N C E

Optimizing Store Layouts.

RETAIL OPERATIONS


Roll out Minit Mart

Rewards program 1H 2018.

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 the growth rates experienced in 2017 compared to 2016.

L O YA LT Y M E R C H A N D I S E

Match Products to Market by

Volume and Demographic.

Retail Strategy: Gas, Retail Operations and Restaurants

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.

Expand and improve gaming

operations in states in which we

operate gaming terminals.

V I D E O G A M I N G

Partner with Community

and increase online sales (pizza

programs etc).

O N L I N E

16

RESTAURANTS


F U L L S E R V I C E

R E S TA U R A N T S

Replace Casual Dining Restaurant

Brand with better known Consumer

Brand.

Optimize Operating Hours and Labor

Costs.

P R O C E S S

I M P R O V E M E N T

Add QSR restaurants at Travel Centers.

Replace QSR brand at Convenience

Stores.

Q U I C K S E R V I C E

R E S TA U R A N T S


TA ‘s Restaurant Group is focused on attracting more consumers and managing costs.

Utilize new technology to better manage

food 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.

17

STRATEGY IN ACTION


Case Study:

Travel Centers

Attract more local motorists.

Petro Travel Center

Bucksville, AL

By June 2016

Refaced exterior to better highlight quick service brands.

Rebranded Foodmart to Minit Mart.

Last Twelve Months ended Q2 2017 vs Last Twelve Months

Ended Q2 2016:

Gasoline sales volume increased ~14%

Site Gross Margin in Excess of Site Level Operating Expenses

increased ~13%

E F F I C I E N C Y

H E A D W I N D S

Case Study:

Standalone Convenience Stores

Match products to market.

Standardize Stores.

59 Minit Marts

Kansas City, MO

By August 2017

Added "Kick Back" loyalty program.

By November 2017

Adjusted sales to space by volume and demographic.

Created consistent shopping experience across locations.

Quarter Ending December 31, 2017 vs Quarter Ending December 31, 2016:

Nonfuel Gross Margin increased 6.1%

Site Gross Margin in Excess of Site Level Operating Expenses Increased 29.5%

C O M P E T I T I O N


18

POWERFUL MODEL


Focused on Expanding TA’s Full Service Strategy

Consolidated Same Site Nonfuel Revenue As Reported

52.0%

54.0%

56.0%

58.0%

60.0%

$400

$600

$800

$1,000

$1,200

$1,400

$1,600

$1,800

$2,000

(Mill

ion

s)

Consolidated Same Site Nonfuel Revenue As Reported Consolidated Same Site Nonfuel Margin As Reported

$1,289

+3%

$1,698

(0.1%) $1,679

+5%

$1,482

+4%

$1,354

+3%

$1,836

- %

55.5%

55.0%

55.6%

55.3%

56.4%

55.9%

19

22.0

26.0

30.0

34.0

38.0

42.0

46.0

50.0

54.0

Nonfuel Gross Margin Cents per Gallon ("NF CPG") (Cents)

POWERFUL MODEL


TA’s growth programs and sales strategies have helped nonfuel gross

margin per gallon profitability increase over time.

50.4

36.3

CAGR

3.3%

20

OPERATING LEVERAGE


Growing Core Full Service Business Faster

than We’re Spending.

51.8%

51.4%

50.0% 50.1% 50.4%

50.8% 50.4%

$400

$800

$1,200

$1,600

$2,000

$2,400

2013 2014 2015 2016 2017 Q42016

Q42017

Consolidated Nonfuel Revenue (Same Site) Consolidated Site Level Operating Expenses as a Percentage of Nonfuel Revenue (Same Site)

21

IMPROVEMENT PLAN


C O N T R O L C O S T S

2 0 1 8

Site Level Operating Expense:

- Ctuit implementation

- IT/Automation

-Site level labor efficiencies

Depreciation and Amortization Expense:

- Project & capital expenditure completions

M A N A G E S P E N D I N G

2 0 1 8

Opportunistic Travel Center Acquisitions.

Estimate Sustaining Capital Amounts of ~$55 million.

Expect improvement sales at leased HPT sites of ~$50

million.

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.

While TA positions itself to compete in a broader market, the

company is focused on managing costs and expenditures.

22

Exhibits

23

EXHIBIT A

(1) See Exhibit B for a reconciliation of EBITDA to net income.

2017 2016 2017 2016

($ in thousands)

Revenues:

Fuel 1,109,758$ 941,852$ 4,090,912$ 3,530,149$

Non fuel 471,158 462,579 1,944,181 1,903,623

Rent and royalties 3,849 4,217 16,500 17,352

Total revenues 1,584,765 1,408,648 6,051,593 5,451,124

Gross margin:

Fuel 97,775 101,050 394,179 404,777

Non fuel 263,932 256,353 1,084,352 1,053,077

Rent and royalties 3,849 4,217 16,500 17,352

Total gross margin 365,556 361,620 1,495,031 1,475,206

Site level operating expense 237,727 233,653 980,749 959,407

Selling, general & administrative 39,352 37,265 154,663 139,052

Rent expense 70,385 67,460 277,127 262,298

(Loss) Income from equity investees (643) 972 1,088 4,544

Acquisition costs 11 165 247 2,451

EBITDA (1) 17,438$ 24,049$ 83,333$ 116,542$

Net income (loss) attributable to common (20,625)$ (6,493)$ 9,394$ (1,929)$

shareholders

Net income (loss) per share (0.52)$ (0.17)$ 0.23$ (0.05)$

December 31,December 31,

Three Months Ended Year Ended

Consolidated Statements of Operations

24

EXHIBIT B

($ in thousands) 2017 2016 2017 2016

Net income $ (20,593) $ (6,545) $ 9,394 $ (1,929)

Add: (benefit) income taxes (6,476) (4,304) (84,439) (1,733)

Add: depreciation and amortization 37,253 27,844 128,416 92,389

Add: interest expense, net 7,254 7,054 29,962 27,815

EBITDA $ 17,438 $ 24,049 $ 83,333 $ 116,542

Add: biodiesel tax credit (absence of) 6,300 -- 23,300 --

Add: retirement agreements 1,089 -- 1,089 --

Add: Comdata legal fees -- -- 9,706 --

EBITDA net of discreet items $ 24,827 $ 24,049 $ 117,428 $ 116,542

Calculation of EBITDA:

Consolidated Calculation of EBITDA

Three Months Ended Year Ended

December 31, December 31,

25

EXHIBIT C

Change from Change from

Q4 2017 Q4 2016 Q4 2017 Q4 2016

($ in thousands) $ % $ %

Revenues:

Fuel 965,366$ 19% 125,141$ 14%

Non fuel 399,011 3% 63,715 (3%)

Rent and royalties 2,917 (5%) 53 (7%)

Gross margin: 322,297$ 1% 36,317$ 3%

Site level operating expenses 207,067$ 1% 26,588$ 3%

115,230$ (0.03%) 9,729$ 3%

Travel Centers Business Segment Convenience Stores Business Segment

Site level gross margin in excess of

site level operating expenses

Segment Operating Statements: Fourth Quarter 2017

26

EXHIBIT D

Full Year Change from Full Year Change from

2017 FY 2016 2017 FY 2016

($ in thousands) $ % $ %

Revenues:

Fuel 3,533,121$ 16% 480,917$ 14%

Non fuel 1,636,009 1% 269,854 2%

Rent and royalties 12,304 (10%) 215 (30%)

Gross margin: 1,312,995$ (0.05%) 151,958$ 7%

Site level operating expenses 849,162$ 1% 111,404$ 6%

463,833$ (1%) 40,554$ 11%

Site level gross margin in excess of

site level operating expenses

Travel Centers Business Segment Convenience Stores Business Segment

Segment Operating Statements: Full Year 2017

27

EXHIBIT E

($ in thousands)

Assets

Cash and Cash equivalents 36,082$ 61,312$

Accounts receivable, net 125,501 107,246

Inventory 209,640 204,145

Other current assets 27,295 29,358

Total current assets 398,518 402,061

Property and equipment, net 1,001,090 1,082,022

Goodwill & other intangible assets, net 128,242 126,280

Other noncurrent assets 90,004 49,478

Total assets 1,617,854$ 1,659,841$

Liabilities and Shareholders' Equity

Accounts payable 155,581$ 157,964$

Current HPT Leases liabilities 41,389 39,720

Other current liabilities 130,140 132,648

Total current liabilities 327,110 330,332

Long Term debt 319,634 318,739

Noncurrent HPT Leases liabilities 368,782 381,854

Other noncurrent liabilities 35,029 75,837

Total liabilities 1,050,555 1,106,762

567,299 553,079

Total liabilities and shareholders' equity 1,617,854$ 1,659,841$

December 31,

2017

December 31,

2016

Shareholders' equity (39,984 and 39,523 common shares outstanding

at December 31, 2017 and 2016, respectively)

Consolidated Balance Sheet

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