TA Reports Net Loss, Revenue Dip in Q1
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TravelCenters of America reported a net loss and lower revenue in the first quarter as operations were limited due to the novel coronavirus pandemic and unseasonably mild weather.
Additionally, TA announced a companywide reorganization intended to improve efficiency and profitability, including the appointment of Sandy Rapp as chief information officer. Rapp most recently served in that same capacity at the Timken Co.
Westlake, Ohio-based TA is also reducing its corporate headcount by about 130 and eliminating certain positions. These changes are expected to generate net annual savings of approximately $13.1 million in selling, general and administrative (SG&A) expense. The one-time costs associated with executing the reorganization plan are expected to be approximately $4.2 million.
For the period ended March 31, TA reported a net loss of $18.5 million, or $2.23 per share, compared with a net loss of $12.7 million, or $1.58, a year earlier.
Revenue declined to $1.3 billion from $1.4 billion in the 2019 period.
“We navigated through a challenging first quarter, the latter part of which was heavily impacted by the COVID-19 pandemic,” CEO Jonathan Pertchik said. “Our fuel sales volume during the first quarter increased 3.6%, which was driven entirely by diesel fuel sales volume. Our gasoline sales volume, after being up most of the first quarter, declined significantly beginning mid-March as consumers responded to the COVID-19 pandemic.”
Stay-at-home orders were mandated across much of the nation in March as the coronavirus spread.
“Despite the decrease in gasoline sales volume, total fuel gross margin was strong in March as both diesel fuel and gasoline costs declined as a result of reduced demand, which resulted in a 9.6% increase in our fuel gross margin for the 2020 first quarter.”
Fuel revenue fell to $874.9 million compared with $983.1 million in the 2019 period.
Pertchik added: “In addition to dealing with the effects of the COVID-19 pandemic, the results from our truck service and stores were largely impacted by unseasonably mild weather experienced in the 2020 first quarter as compared to extreme cold weather in the 2019 first quarter.”
Revenue in the truck service segment fell 4.5% in the quarter to $153.9 million compared with $161.1 million a year earlier.
TA said it is following state mandates regarding dining areas in its full-service and quick-service restaurants. The company reported that as of May 6, dining rooms are open at locations in Georgia, Iowa, Missouri, Montana, Nebraska, Tennessee and Texas.
We're continuing to reopen our full-service restaurants for dine-in customers!
Join us for a meal at select locations in Georgia, Tennessee, Montana, Missouri, Iowa, Nebraska and Texas. See full restaurant availability: https://t.co/zGREXA9Vth pic.twitter.com/yS4j7owlcr — TravelCenters of America (@TATravelCenters) May 5, 2020
“I think the theme of this is limited hours, limited menus and limited service,” TA President Barry Richards said.
Overall, restaurant revenues were $94.2 million and decreased by 5.1%, or $5 million, compared with a year earlier.
“Given the lack of clarity on the depth and duration of this crisis, we have also agreed with IHOP to delay for a year, our plan to convert some of our full-service restaurants and our TravelCenters to IHOP,” Pertchik said during an earnings call. “We have also significantly reduced planned capital expenditures in 2020 to focus on maintenance and other essential items.”
He added TA is negotiating franchise agreements for an additional 13 travel centers and is engaged in the later stage of the discussion and negotiation with operators of another six locations. About 83 other sites are in various phases of the application and diligence process.
Meanwhile, key initiatives for reorganizing include the creation of a centralized procurement group to drive economies of scale in pricing, provide increased leverage in vendor negotiations, and ultimately lead to substantial purchasing savings and a streamlined operation. Other initiatives are focused on realizing both costs savings and increased revenues, including merchandising in the convenience stores, over-the-road delivery, truck repair training and staffing and IT systems.
The reorganization plan also added senior vice presidents for a newly created hospitality department, under which the areas of restaurants, gaming and convenience stores will be consolidated.
TA has travel centers in 44 states and in Canada, stand-alone truck service facilities in three states and stand-alone restaurants in 12 states.
TA’s travel centers operate under the TravelCenters of America, TA, TA Express, Petro Stopping Centers and Petro brand names.
They offer products and services including diesel fuel and gasoline, restaurants, truck repair and convenience stores. TA’s stand-alone truck service facilities operate under the TA Truck Service brand name.
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