TravelCenters of America LLC Q2 2009 Earnings Call Transcript

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2009-08-05 12:40:53.0

Tags: Morgan Keegan & Co., Call Transcript, Earnings, TravelCenters Of America LLC, Diesel, Sales Strategy, Benefits, Sales Force Management, Sales, Human Resources, Seeking Alpha, TravelCenters of America LLC

Question-and-Answer Session

Operator

Thank you. (Operator instructions) And we’ll pause for one moment to assemble our roster. And we'll take our first question from Ben Brownlow, please go ahead, with Morgan Keegan.

Ben Brownlow - Morgan Keegan

Hi. Good morning. I was just wondering if you could talk a little bit more on your non-fuel gross margins, just a little color behind that decline. And are you doing anything different for Q3 that may help lift these margins? Just talk about your outlook there.

Tom O'Brien

I think that the principle changes in margins on the non-fuel side really came from the -- we attribute most of that to the shop side of our business. We got a very, very good second quarter 2008 in the shop. And when I'm talking about shop, I'm talking about the heavy truck repair business. 2009 was not as strong for a couple reasons. One, cooler temperatures will tend to reduce the amount of tires, which is a pretty high-margin business, as well as air-conditioning work for example. And 2009 second quarter was cooler, and that changes the mix a little bit.

The second reason is, the competition in that particular area is pretty fierce as well. If you follow any original equipment manufacturers’ -- they’re not selling trucks. And dealers are finding -- trying to find profits where they can. And have stepped up their aggressiveness, if you will, on repair business. And we’ve had to compete. And that has led to a little bit of discounting to maintain sales levels. Those are the two major things.

I think, generally speaking, in the future we may see some of that pressure for a while. But as trucks -- despite the fact that there are less trucks on the road, overall, as they age, as drain intervals for oil have been extended almost universally from 15,000 miles to 25 thousand miles, or even more, that will have a maintenance impact. And ultimately, I think we will benefit from that. We haven't yet seen the full measure of that benefit, which I think is coming.

Ben Brownlow - Morgan Keegan

Okay. Great. And then you obviously seem a little bit more optimistic on just demand trends. Did I hear right that fuel comps were positive quarter-end?

Tom O'Brien

A quarter-end gasoline comps were positive. Diesel’s still negative, but less so in the -- near the end of the quarter than the beginning of the quarter.

 

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