Hello, and welcome to the TravelCenters of America Third Quarter 2019 Financial Results Conference Call. . Please note that today's event is being recorded. At this time, I would like to turn the conference over to Kristin Brown, Director of Investor Relations. Please proceed.

Thank you. Good morning, everyone. We will begin today's call with remarks from TA's Chief Executive Officer Andy Rebholz; followed by Chief Operating Officer, Barry Richards; and Chief Financial Officer, Bill Myers. We'll also have enough time for questions from analysts. Today's conference call contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and federal securities laws.

Thanks, Kristin. Good morning, everyone. And thank you for joining us and for your interest in TA. Our operating results showed positive momentum in the 2019 third quarter, showing improvements in virtually every important metric, despite certain headwinds from the overall freight market. We had net income of $1.9 million compared to a net loss of $70.5 million last year. Our income from continuing operations this year increased 17.8% from last year. The third quarter's adjusted EBITDA of $31.9 million improved by $0.5 million over the 2018 third quarter. Fuel sales volume increased by 4.3% in total and by 3.9% on a same-site basis. This is the third consecutive quarter of healthy same site growth in fuel sales volume that I believe reflects the success of our business initiatives. Dating back to the second quarter of last year, we've had a steady improvement in same site fuel sales volume. Nonfuel revenues improved by 2% in total and by 1.8% on a same-site basis. Truck service revenues increased by 2% versus the decline of 1.5% last quarter, as we rebounded from a rough second quarter that we believed was something of an anomaly.

Thanks, Andy, good morning to everyone. We saw some good momentum from our travel center operations in the third quarter, with nonfuel revenues trending positively despite continuing softness in overall freight trends. Higher unit sales increased versus the same year quarter -- versus the same quarter last year. Growth in our remote service programs was strong with certain large customers looking to add services in new locations, which has led to our higher inactivity ahead of the sales growth. Although, we saw revenue improvement in the nonfuel areas of our business, expansion of our call center staff and our continuing effort to recruit and train technicians to both generate and support increased sales as was well increases in maintenance, insurance and property taxes expenses headway on gross margin and excess of operating expenses this quarter. Overall fuel sales volume increased by 21.2 million gallons or 4.3%, primarily due to a same-site fuel volume increase of 18.7 million gallons or 3.9%. We believe these increases are driven in part by our UltraONE customer loyalty program, which was introduced in January and continues to be embraced by professional drivers. Total loyalty member gallons and average sale increased 4.2% and 6.9% over the prior year, respectively. Our goals with the program are reward loyalty and grow membership in customer count, and our results this quarter continue to demonstrate solid progress.

Thank you, Barry, and good morning, everyone. For the third quarter of 2019, we reported net income of $1.9 million or $0.23 per share compared to net loss of $70.5 million or $8.87 per share in the third quarter of 2018. The net loss last year was largely due to a $72.1 million loss from discontinued operations, net of taxes. For the third quarter of 2019, we reported adjusted EBITDA of $31.9 million, an increase of approximately $500,000. The improvement in adjusted EBITDA was primarily due to a decline in real estate rent expense as well as the increases in fuel and nonfuel gross margin Barry just discussed. Fuel gross margin increased by $2.6 million or 3.4%. Diesel fuel gross margin declined slightly due to an almost 1% drop in margin per gallon that was largely offset by the 4.3% increase in diesel gallon sold. Gasoline margin increased as we managed sales pricing to balance sales volume and profitability. On a same-site basis, fuel gross margin increased by $2.5 million or 3.3%. The decline in diesel fuel gross margin per gallon primarily was due to the higher cost associated with increased rewards under our new loyalty program to incentivize drivers to purchase higher fuel volumes and from a reduced benefit realized from biodiesel blending. Nonfuel revenues increased by $9.5 million or 2%, primarily as a result of an $8.8 million increase on a same-site basis in sales at new sites. The increase on a same-site basis was primarily due to an increase in DEF revenue as a result of a higher number of trucks on the road compared to the prior year as well as the positive impact of our pricing and marketing initiatives. Nonfuel gross margin increased by $4.4 million or 1.5% due to the $9.5 million increase in nonfuel revenues, partially offset by a 30 basis point decline in nonfuel gross margin percentage to 59.8%. The nonfuel gross margin percentage experienced a decline in due to the change in mix of products and services sold. Site level operating expense, as percentage of nonfuel revenues on same-site basis, was 48.8% as compared to 48.2% for the 2018 third quarter. In total, site level operating expense increased by $8.4 million or 3.6%, of which, $1.3 million was due to new sites. The balance of this increase on a same-site basis was primarily due to increased labor costs to support our growth in nonfuel revenues as well as higher maintenance, insurance and property tax expense.

. Today's first question comes from Bryan Maher from B. Riley FBR.

On the IHOP conversions, which we applaud, we think that, that was going to get some more demand into the property. Can you talk a little bit about the analysis though between that and the status quo relative to spending over $100 million over the next few years to convert those properties? Also what is the annual franchise fee per unit if you could share? And who approached who on that deal?

Starting at the end, I guess, as we've talked about on few calls now we -- we've hit upon the idea or the strategy or an initiative to change the branding of some of our sitdown restaurants in order to increase the appeal of our facilities to more than just the truckers. Iron Skillet and Country Pride are well-known and respected brands amongst truck drivers, but not something that sort of local residents and others -- motorists driving on the highway, not something that they necessarily know about or care about. And we've started down that path of rebranding restaurants. And we had gotten in touch with IHOP to do this site in Georgia that coincidently opened as an IHOP the day that we signed the IHOP agreement, but that's a process that had been underway for a number of months now. And I think that given those conversations, the success that IHOP had seen at the -- well when we first started talking to them two of the three franchise sites, where they've had a similar conversion. Honestly, they were the ones that came to us with hey, let's do a much bigger deal. And that led to a lot of conversations. On the franchise agreement, pretty sure -- I'm looking at to Bill correct me, that's 4.5% -- is the -- what the -- of the sales is the franchise fee. But as far as why do this as opposed to not doing this with the restaurants. I mean as I started out, we think that with the changes happening maybe and just the logistics system generally, the average length on hauls for truckers are declining each of the past few years, and that's likely to continue. And I think that it's important for us if we're going to maximize the amount of earnings that we generate at each one of the properties to appeal as best we can to customer segments other than just the truck drivers. And I think to do that one of the things we've done for years and years is, say, the branded gasoline to draw in those motorists. So the branded fast food restaurants or quick service restaurants as we call them. And this is I think just another step in that continuum. And I think it's something we need to continue to watch and continue to some extent experiment with. We have always operated essentially all of the restaurants that we have at our site, certainly all the sitdown restaurants, almost all of the QSRs. And we're looking at possibilities for instead of operating certain of those restaurants, leasing out that space to maybe a local, as an example and not necessarily one that we're talking to, but I don't know that detail. A local McDonald's franchisee or something like that. Right now, we're not allowed to operate McDonald's or Wendy's outlets because we have relationship with Burger King. So if we want to get one of those brands into a travel center, then may be we need to lease the space. And so we're looking at testing those kinds of things as well with the -- sort of just the restaurant part of our business. So another part of these projects that I talked about with the IHOPs, will just also do some called general updating of the buildings. I mean we have some great locations out there that we're -- built on the interstate highways or the interstate highways were being built, but some of them are old and tired looking. And I think there'll be some sprucing up as part of these projects. If all of that together, we think we can get a very good return on the investment. And as I said, increase our appeal to other customer segments.

And when we think about the relationship with IHOP and the $1.1 million per property, roughly I'm sure it's give or take. But repeating anything to this at all kind of in lodging is it like -- is there any key money? Are they giving you signage? What is their contribution of anything? And aside from the 4.4% are there any upfront costs for the franchise relationship?

No. Their contributions really come in the form of whatever reductions we were able to negotiate with them in the -- sort of the initial franchise fees and start up training costs, things like that. And this $10 million sort of financing facility that they've made available to us, but as far as the straight investment contribution, really nothing towards the construction cost. And as far as the upfront fees, that $1.1 million number I gave, kind of included -- includes all the -- like the initial franchise fee per restaurant. That may even have some of our initial startup expenses and it -- like the training and things like that so.

And then kind of moving on to the biodiesel fuel credit. Who is the main driver? Like the key guy in Congress pushing this forward? And is there a chance that we get to the end of the year and they say, okay, look, this is water down the river, we're not going to do '18, we're just going to do '19?

I think that the -- Senator Grassley is I think probably the primary component of at least this particular one of the tax extenders. There are a number of them out there, and there are some that -- leading Democrats support and other ones that on both sides of the aisle that have their fans. Senator Grassley, happens to be from Iowa and the biodiesel is an important one to his constituent, and he has supported that particular one of the extenders. But I think the extenders kind of end up getting negotiated as a package. And as I understand and as I've been told, there has been good discussion going on between maybe sort of Senator Grassley's camp and then Representative Neal in the house. I think they are the 2 who sort of -- negotiating a lot of this package of the tax extenders that would hopefully become part of an overall tax provision. And I think you need to get the agreement on what are the tax provisions. And then the second important step is the need to the some other legislative vehicle to which the tax provisions can be attached. And it looks like right now -- I mean the current -- the continuing resolution that right now is funding the government expires on November 21. And so that's really the next opportunity where Congress is going to have to do something, pass a short term, another CR short term to kick the can down the path a little bit to December. And maybe give themselves another month to deal with something and come up with something longer term or maybe they strike a longer-term deal then or maybe they shut down the government again. I mean who knows what could happen. And -- but that -- so there's a potential bite at the apple there late November. If that -- if it doesn't happen then, there's probably another chance in December. If it doesn't happen then, then we're in the next year. And I believe that our -- the likelihood of 2018 being -- having retroactively reinstated for '18 I think does go down quite a bit. I mean who knows what will happen, but I mean there a lot of businesses out there biodiesel, industry-related businesses that -- laying off employees and shutting down and things like that, and that's never a good thing in your district. So we'll see how well that plays out in Congress. But the other big wildcard here is the whole impeachment process. How long that takes and maybe how ugly that gets, but the house very quickly votes to impeach and all that, then the Senate kind of is required to take that up. And that could just -- that could push the whole tax provisions, including the extenders, which includes hopefully our particular credit here to a back burner. And the longer it would sit on a back burner, as I said, I think that's not good for us. So certainly a less probable situation than last quarter or the quarter before that, but from everything that we're hearing, it's still alive and there is still a chance.

Okay. And then lastly for me and maybe this is more of a comment than a question. But look, the stock's down 50% or so year-to-date. And as I'm sure you saw in our note this morning, I mean continued to be an issue. And I do know that you guys are making efforts to control cost, but the bottom line is you're down below $100 million cap in the company valuation. I'm the last covering analyst, I think, 2 drops since the last call or so. What can be done here from an extreme effort standpoint to keep cost down? I mean you guys do $6 billion a year in revenue. If you could just generate $8 million to $16 million in profit -- net profit on $6 billion at the $1 or $2 per share per earnings. I don't think that, that's a stretch. And I get a zillion phone calls and emails from the buy side, who are involved in the name constantly driving about cost. What more besides what you announced today can still be done?

I think there are lots of things that can be done. I don't think that there are lots of things that can be done necessarily tomorrow, but I think that this management change that we just instituted is going to allow us to bring much more day-to-day everyday focus at the site level, which for whatever initiatives we then pursue from a revenue enhancing and/or cost reducing perspective to improve the results of those initiatives. I think we have opportunities to do more things with how we merchandise in market and price products in the various parts of our business, different things like that, but when I look at the numbers here for the third quarter, I think our issue this quarter really wasn't with the labor. I mean the labor as a percentage of the nonfuel sales for -- on a same-site basis was exactly the same as last year. Really, all of this 60 basis point increase in that ratio this quarter versus last year's third quarter is related to maintenance expense, insurance and property taxes. And yes, the property taxes are up roughly $2 million a year, almost entirely because of the sites that we acquire. So saving $43 million in rent, but it's costing us $2 million in operating expenses. So we're still coming out ahead there, but it's just one of those things we didn't necessarily foresee such a large increase occurring in property taxes as an example. So some of it is getting things like that just sort of baked into our expectations. And I do think that we have a lot of opportunity to, I'll say, rightsize our ratios. But quite honestly, I see it as, I don't know if I'll say more an issue, but it's at least as much an issue of increasing revenue as it is in cutting costs, particularly in the truck service area. We've talked the last few quarters about what's been going on there. And we have been making those investments in the people. And we saw in this third quarter the beginnings of that -- I want to use the word turnaround, so I don't mean it that way. That has some connotations, but the beginning of that rebound or the payoff, if you will, on those investments in those people. And we need to keep that going. And we need to improve our retention of particularly those employees, but really -- all of our site employees, turnover's always a costly thing. And over the past few months, indications are we're moving in the right direction, but it may take more than the quarter we've had rebounding so far.

This concludes our question-and-answer session. At this time, I would like to turn the conference back over to Andy Rebholz for any closing remarks.

Thanks, Chris. Again, everybody, thank you for your attention this morning, your interest in TA. Have a great day. And we'll talk to you after the fourth quarter.

The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.