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TravelCenters of America Inc. reported third-quarter net income soared as revenue slipped as the company worked to create additional efficiencies.
Net income for the period ending Sept. 30 jumped to $8.6 million, or 61 cents per diluted share, compared with $1.8 million, or 23 cents, a year earlier.
“I’m pleased to report that the earliest beginnings of our transformational playbook initiatives are starting to prove effective,” CEO Jon Pertchik said during the earnings call.
Revenue fell to $1.2 billion compared with $1.5 billion in the 2019 period.
Fuel sales contributed $791 million to total revenue compared with $1 billion a year earlier.
Nonfuel sales were $474 million compared with $492 million. Franchisees’ rent and royalties added $3.9 million to the total, compared with $3.7 million in the 2019 period.
“On the nonfuel side of the business, overall, our revenue was only down 3.7% versus the prior-year quarter, despite the fact that our full-service restaurants were dramatically affected by COVID,” Pertchik said. “In many states, these restaurants were deemed nonessential services by government authorities, which forced them to shut down. Additionally, even where and when not forced to shut down, demand at certain locations dropped so precipitously that we chose to shut down.”
In this category, diesel exhaust fluid sales increased to $27 million compared with $23 million a year earlier.
Overall fuel sales volume increased 8.5% thanks to an increase in trucking activity, the addition of new fleet customers and overall increased volume from existing customers due to the early success of a variety of initiatives, according to the Westlake, Ohio-based company.
Total fuel sales rose to 555 million gallons compared with 511 million gallons a year earlier.
Diesel sales climbed 12.6% to 485 million gallons compared with 431 million in the 2019 period. Gasoline volumes dropped 13.4% to 69 million compared with 80 million a year earlier.
The company operates a travel center network in more than 260 locations in 44 states and Canada, principally under the TA, Petro Stopping Centers and TA Express brands. Pertchik noted that beginning Oct. 1, TA began flexing its purchasing power to spot-buy diesel fuel in substantially larger volumes, compared with the previous inefficiency of purchasing in smaller increments.
“This is expected to reduce diesel fuel costs of goods sold and increased diesel gross margin without changing the risk profile of our purchasing at all,” he said. “As we have noted previously, we estimate every one penny of increase in fuel gross margin per gallon translates to approximately $20 million in increased earnings before interest, taxes, depreciation and amortization.”
EBITDA measures a company’s profitability from its core operations.
Meanwhile, truck service revenue — $189 million in the quarter compared with $186 million a year earlier — showed a solid improvement, driven by an increase in work orders, the company reported. Multiple changes are being tested and installed, intended to impose increased accountability through the creation of a new middle management role.
“Enhanced training and oversight has begun to make a meaningful difference,” Pertchik said.
TA noted truck service is the key competitive advantage and an opportunity to further increase its market share among fleet customers.
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