Travelcenters of America Inc (TA) 2020 Q2 法說會逐字稿

Good morning. Welcome to TravelCenters of America's Second Quarter 2020 Financial Results Conference Call. Please note this event is being recorded. (Operator Instructions)

I would now like to turn the conference over to Kristin Brown, Director of Investor Relations. Please go ahead.

Thank you. Good morning, everyone. We will begin today's call with remarks from TA's Chief Executive Officer Jon Pertchik; followed by Chief Financial Officer Peter Crage; and President Barry Richards for our analyst Q&A.

Today's conference call contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and federal securities laws. These forward-looking statements are based on TA's present beliefs and expectations as of today, August 5, 2020. Forward-looking statements and their implications are not guaranteed to occur and they may not occur. TA undertakes no under obligation to revise or publicly release any revision to the forward-looking statements made today other than as required by law. Actual results may differ materially from those implied or included in these forward-looking statements.

Additional information concerning factors that could cause our forward-looking not to occur is contained in our filings with the Securities and Exchange Commission that are available free of charge at the SEC's website, or by referring to the Investor Relations section of TA's website. Investors are cautioned not to place undue reliance upon any forward-looking statement.

During this call, we will be discussing non-GAAP financial measures, including EBITDA, adjusted EBITDA, adjusted net income and adjusted fuel gross margin. The reconciliation of these non-GAAP measures to the most comparable GAAP amounts are available in our press release that can be found on our website. The financial and operating measures implied and/or stated on today's call, as well as any qualitative comments regarding performance, should be assumed to be in regard to the second quarter of 2020 as compared to the second quarter of 2019, unless otherwise noted.

Finally, I would like to remind you that the recording and retransmission of today's conference call is prohibited without the prior written consent of TA.

With that, Jon, I'll turn the call over to you.

Thanks, Kristin. Good morning, everyone, and thank you for joining us and for your interest in TA. I'm pleased to report that our newly constituted senior leadership team, combined with our broader organization, generated a 78.3% increase in net income, and a 24.2% increase in EBITDA in the 2020 second quarter over the prior year second quarter despite the dramatic adverse effects of COVID-19 on our top line performance as well as on the broader economy. I'm proud to say our transformation plan is showing the very earliest signs of company-wide improvement despite a historical pandemic.

The improved year-over-year net income and EBITDA performance was driven by increased discipline in managing expenses, our prompt response to COVID-19 by implementing furloughs and executing on business management improvements throughout the organization. While these results are positive and evidence of the changes we have begun to make, we have a long way to go to show the true and full impact of our transformational plan, some of which will not manifest for some time.

I will discuss our quarterly results further in a minute, but wanted to start off with the strategic progress we made during the second quarter, which I believe has set the groundwork to drive operational improvements we plan to achieve moving forward. First, we implemented a strategic reorganization in late April, with a focus on right-sizing historical SG&A growth, which had significantly outpaced revenue growth for many years. As I've talked about on previous calls, TA's SG&A had been growing at an unsustainable compounded annual growth rate of 7% since 2012, grossly outpacing top line performance in a declining overall fuel sale volume environment. The corporate reorganization resulted in a headcount reduction of approximately 130 and a corresponding annual reduction in corporate SG&A of $13.1 million.

In addition, and most significantly, our strategic reorganization was designed around assembling the right team to drive change and to create value. To that end, we brought on several new Senior Vice Presidents in the key areas of corporate development, hospitality, procurement and fuel, as well as a new Chief Information Officer. These new leaders bring close to a century of combined subject matter experience, as well as can-do attitudes and fresh outside perspective. They are beginning to serve as change agents.

By enhancing our overall leadership team with new key leaders and attacking operational efficiencies, we are on our way to creating a better-running organization with improved visibility and accountability, as well as improved financial performance. Our mission, vision and values work is nearly complete, and our transformation playbook includes nearly 50 distinct initiatives, many of which we have begun to formally pursue.

With this backdrop, we decided to raise equity to position the company to successfully carry out these initiatives and to create a foundation for allowing these initiatives to fully take hold. In early July, we raised approximately $80 million in an equity offering, intended primarily to create a liquidity cushion and to fund deferred maintenance and other catch-up capital expenditures necessary to update property conditions, deferred IT systems, as well as for general corporate purposes. While the company was sensitive to the dilutive effect of such a raise, it was an important part of positioning the company for long-term success and to create long-term shareholder value.

Q2 2020 was an important quarter. Through the quarter, we have been able to put in place the plan, the team and the capital necessary for the company to focus on execution and improving operational and financial efficiency. The company has provided important early improvements over Q2 2019, a net income of 78.3% and EBITDA of 24.2% despite a global pandemic. And going forward, we are focused on execution. Many initiatives will not realize material results for some time. However, Q2 2020 has shown we are beginning down the right path.

Turning to our results in the second quarter, we were pleased with what we were able to achieve despite the challenges presented by COVID-19 and the corresponding shutdown of major portions of the U.S. economy, which impacted different areas of our business to varying degrees.

Our overall fuel sales volume decreased 5.2% due to a decrease in trucking activity and consumer travel as a result of the pandemic primarily during April and May. Despite these volume reductions, our trend line revealed diesel volumes improving to levels that post-Q2 July are better than same period prior year. And in fact, our diesel volumes have remained significantly ahead of reported national averages and anecdotal evidence from our private competitors throughout the pandemic.

Fuel gross margin for the quarter increased by 19.6% versus prior year, driven partly by a favorable fuel purchasing environment, the biodiesel tax credit, as well as changes to our approach to pricing and purchasing.

On the nonfuel side of the business, the full service restaurants were impacted the most significantly by the pandemic, leading to the difficult but necessary decision in mid-April to temporarily shut most of our full service restaurants and furlough approximately 4,000 employees. These difficult decisions contributed significantly to our favorable EBITDA and net income results. Sharp declines in revenue for the full-service restaurants more than offset positive year-over-year result from our quick service restaurants.

Within truck service, year-over-year performance was below prior year due to a decline in work orders and oil change counts as a result of the pandemic. The company has responded by creating a new VP role that performs compliance reviews on a site-by-site basis to ensure established processes are being followed. This bottoms-up approach is beginning to show early positive results.

Through the second quarter, the first 2 months' shortfall in truck service gross margin relatively improved during the third month of the quarter, June, so that the EBITDA shortfall run rate to prior year reduced significantly. Post-Q2, sales for truck services have been better than prior year same period. Truck service remains a top focus for the company and an early improvement trend may be revealing itself.

Our store division continues to benefit from strong demand for diesel exhaust fluid or DEF, and we expect the demand for DEF to continue growing, as more pre-2011 model year trucks are retired each year. Overall, the sharpest impact to our business was in April and May, with a marked improvement in June, as government-mandated closures and stay-in-place orders started to lift.

Through August 3, TA has cautiously reopened 129 of our full service restaurants, and have also taken the opportunity to streamline menu offerings in order to focus on more popular and higher-margin items, reducing inventory requirements and carefully controlling labor costs. Also, retail revenue in June 2020 was better than prior years.

Finally, a word on our first steps toward aggressive network expansion, which remains an important priority going forward. We have signed 21 new franchise agreements since the beginning of 2019; 4 began operations during 2019; 9 have opened year-to-date. And we anticipate the additional 8 locations will open by the end of 2021. In addition, we currently are negotiating franchise agreements for an additional 14 travel centers, and are engaged in later stages of discussion and negotiation with operators of another 2 locations, with approximately 52 other sites in various phases of the application and diligence process.

But to conclude, I'm very proud of the broader company and the positive impact they have shown through the quarter. We have our team, our mission-vision values, our plan and capital in place, and can now focus on carrying out our range from the transformational initiatives to generate long-term stockholder value.

I would also to thank the many heroes in our ranks, our employees and our franchisees, for their hard work and dedication, as well as all the professional drivers and fleet customers for allowing us to serve you as we continue to navigate through this unprecedented and uncertain time together.

And with that, I'll hand the call over to Peter to discuss the quarter's financial results in detail. Peter?

Thank you, Jon, and good morning, everyone. As Jon mentioned, we are very pleased with our results in the second quarter, particularly given the challenges that the last several months have brought. For the second quarter, we generated net income of $2.2 million or $0.26 per share compared to $1.2 million or $0.15 per share last year. Excluding several onetime items, we generated adjusted net income of $5 million compared to adjusted net income of $1.2 million in the second quarter last year.

Adjusted EBITDA was $38.1 million for the quarter, an increase of approximately $6.9 million or 22.1% compared to the prior year. The increase in adjusted EBITDA was primarily due to increased fuel gross margin, reductions in site-level operating expense and selling, general and administrative expense, partially offset by a decline in nonfuel gross margin.

Fuel gross margin increased by $15.1 million or 19.6% as compared to the prior year. Excluding a $7.7 million benefit from the federal biodiesel blenders tax credit in the quarter, fuel gross margin increased by $7.4 million or 9.6% as compared to the prior year due to a more favorable fuel purchasing environment, primarily in April and May.

While fuel sales volume declined 5.2% and fuel revenues declined over 48% during the quarter, fuel gross margin per gallon increased 26.1% inclusive of the federal biodiesel blenders tax credit and 15.7% excluding the credit when compared to last year.

Nonfuel revenues for the quarter decreased by $70.5 million or 14.8% as compared to last year. The decrease was primarily due to the temporary closure or limitation of services at both our standalone and TravelCenter restaurants, as well as a decrease in our truck service and store and retail services businesses primarily in April and May. These declines were due a decrease in trucking activity and consumer travel as a result of the pandemic, and were partially offset by a 4.2% increase in diesel exhaust fluid revenues.

As governments began to lift stay-in-place orders, we began reopening our full service restaurants in June. And we saw signs of improvement in our truck service and store and retail services revenues as compared to June of last year.

Nonfuel gross margin decreased $46 million or 15.9% primarily due to the decrease in nonfuel revenues previously mentioned.

Rents and royalties from franchisees in the quarter decreased by about $0.5 million or 13.5% as compared to the prior year as a result of the permanent closure of 4 franchise standalone restaurants, as well as the temporary closures of certain franchise standalone restaurants as a result of the pandemic. The impact from these closures was partially offset by the 10 franchised TravelCenter and 5 franchise standalone restaurants that began operations after the second quarter of last year.

Site-level operating expense decreased by $37.1 million or 15.8%, as we made the difficult but necessary decision to furlough approximately 4,000 field employees in response to the decline in business brought on by the pandemic. Additionally, we reduced non-labor costs, such as maintenance, certain utilities and supplies. These reductions were partially offset by cash bonuses paid to field employees who continued to work at our travel centers during the pandemic to ensure adequate staffing.

SG&A expense for the quarter decreased by $1.6 million or 4% compared to last year. The decrease was primarily due to the elimination of approximately 130 positions as part of the late April Reorganization Plan and the furloughing of approximately 120 corporate employees in response to the pandemic and a reduction in travel-related and marketing expenses. These reductions were largely offset by $3.9 million of nonrecurring costs associated with the Reorganization Plan.

Real estate rent expense for the quarter decreased by approximately $700,000 or 1.1% as compared to last year. The decrease was primarily the result of a decrease in the percentage rent as a result of a decrease in nonfuel revenues in the quarter. Given our current leasing arrangements, we continue to expect our real estate rent expense to run at a quarterly rate of approximately $64 million.

Depreciation and amortization expense increased by $5 million or 21.7%, primarily due to a $3 million goodwill impairment charge recognized from our Quaker Steak & Lube or QSL business. During the second quarter, we evaluated the goodwill associated with QSL for impairment, and determined that the decline in site-level gross margin in excess of site-level operating expenses, in conjunction with the impact of the pandemic, were indicators of impairment for that business. So accordingly, we performed an impairment assessment of the goodwill of QSL.

Turning to our balance sheet for a moment, at June 30, our cash balance was $142.8 million. We have no amounts outstanding on our $200 million credit facility as of July 31, 2020, and we have no near-term debt maturities. We have collected $68.4 million of the $70.2 million in cash refunds related to the federal biodiesel blenders tax credit during the second quarter, well ahead of our expectations, with approximately only $1.8 million remaining to be collected.

As of June 30, 2020, we owned 50 travel centers, 4 standalone restaurants and a standalone truck service facility that were unencumbered by debt. We successfully financed 1 location in West Greenwich in February of this year at an attractive rate, and continue to evaluate opportunities for additional financings on owned locations.

Lastly, we invested $10.9 million in capital expenditures during the quarter, bringing the year-to-date total to $27.6 million. We've also revised our 2020 capital investment plan to be approximately $68 million, as we have deferred all nonessential projects to 2021 in order to preserve capital and maintain our financial flexibility. However, now that we have closed on our equity raise, we are carefully considering projects to improve facilities and our IT systems infrastructure, consistent with our planned use of these funds, including those that could potentially be deployed in the latter part of this year.

And that concludes our prepared remarks, operator, and we're now ready to take questions.

(Operator Instructions) The first question comes from Bryan Maher of B. Riley FBR.

A couple of questions on my end. Let's start with the June numbers. To clarify, the truck service, store and retail services for June were all up year-over-year over last year's June, is that correct?

Peter, do you have that?

I would not say up over last year. We saw a sequential improvement, particularly in the restaurants as they opened up. But for example, in the restaurants, no, we still had a number of restaurants close. In truck service, as Jon mentioned, yes, we saw improvement in that in the June time frame, so hopefully, that answers your question.

Right. And I...

And Bryan, just to add, it's Jon. The trend line for sure between April and May into June, we saw improvements. Putting aside the full service restaurants and gaming, which appears in Other for us, the other nonfuel areas were improving through the end of the quarter. In early results in July, we've seen that improvement to continue.

Okay. And then moving on to the full service restaurants, I think you said that there were 129 that have reopened now. How many are still closed?

That roughly gets us through 50% are open, 50% are closed. And the ones that are open are open on, as we pointed out, just to give a little more color, are open on very much more limited menu items, which gives us, in turn, some benefits in terms of labor costs, limited hours in most places. So we're running them more efficiently, but approximately half are open and half are closed. And we monitor that very carefully, as changes in both demand and then also the state treatment of our ability to open or not. But both demand and ability to open, we look at, obviously, very, very regularly and we're making changes accordingly.

Okay. And given the experience that you had with closing all these restaurants and then reopening them, are there full service restaurants in the portfolio that were just such clear money-losers, that they may open in a different way, or not reopen at all, or have a dramatic change in the menus? And what are your thoughts on the IHOP conversions, speeding them up or not, based upon the experience you had with the first one that opened?

That's a great question, Bryan. As a transformation or turnaround guy, you don't often get the opportunity -- and I say this sort of carefully or cautiously. But you're not given the opportunity to turn something like that off and see what happens. And COVID, while it's been horrible for the country and in every other respect, it gave us the opportunity to learn and we're very much focused on using this opportunity to learn.

And so it's premature to say, will we close any restaurants, I'm not sure about that. But what I know for sure is we need to operate very differently. We need to operate with a lot more discipline, with a lot more focus and rigor around measuring things, not just what we think are right things, looking at a variety of potential brands and other areas where we can improve, obviously, including continuing down the path of IHOP. We're looking very carefully now at re-engaging, I'd say, and looking very carefully at the timing and pace of continuing that plan with respect to IHOP.

We made no sort of formal choices yet. Right now, we're still watching the effect of this pandemic as it seems to bounce around and get better, and maybe get worse in some areas. So we're obviously watching that very carefully as we're sort of continuing to learn from where we are. And so we haven't made any final, formal decisions, but I can tell you generally speaking, we will operate our restaurants significantly differently and with a lot more discipline.

And again, discipline, I have a feeling going forward, we won't have quite as many menu items as we've had in the past. There's a lot more labor, there's a lot more waste. There's a lot more inventory to manage when you have many more items, particularly ones that aren't selling very well. So we will be operating very differently going forward at a minimum on the full service restaurant side.

Okay. And that kind of leads me to my next question on the 4,000-plus furloughed employees. I guess if you've reopened about half your restaurants, is it safe to say you've brought back 30% or 40% or 45% of those furloughed employees? What's the thought there with respect to size and timing of bringing those employees back? And is there, do you think, some sustainably lower level that you ultimately end up with when everything is reopened?

Sure. And again, it's hard to get to a real fundamental punch line of will we operate with less people and all that. It's just too early to say anything like that. But right now, I believe we still have about 2,600 people on furlough; I think that's the approximate number right now. And again, while it's half-and-half open/not open, we are open with fewer hours, again, fewer menu items. So that's why the numbers, there's -- we brought back less than -- it's a little -- it's slightly disproportionate, the number of restaurants open versus the number of people that have been brought back.

Okay. And then moving on to the G&A, I just wanted to clarify. So we all know the 130 position eliminations, and then I guess there was another 120 corporate furloughs. How are those getting layered back on? I'm assuming some of them have already started to come back on?

Yes. And so starting where we began with this, we identified people and made those choices with respect to the 120 based on demand, and demand mostly not exclusively, but mostly related to the full service restaurants and gaming. And so as we've seen some demand come back in some places, that demand then dictates who we bring back and when.

I don't have the number sitting in front of me on how many of the 120 have come back. I know some number have come back and I wouldn't venture a guess off the top of my head because I don't know. And Peter or Barry, if you know, please chime in behind me. But I just don't know and I don't want to give a number with that, that I don't have confidence in.

No, I don't know an exact number. There are still though some still on furlough. We're being -- obviously, we're being careful.

Okay. And then last for me -- and I'm sure from reading prior reports, you know that this has been a sore spot for me. But with site-level operating expenses at 48.7% for 2Q down from 49.3% in Q2 of last year, but with annual numbers having consistently been running [about] 50% prior to your joining the firm, do you get the sense that as you kind of work through 2020 and move into 2021, that we could see site-level operating expenses sustainably at a below-50% level? And can you give any thoughts on level of magnitude?

Sure. Let me start with this, just repeating part of what you said, Bryan. Obviously, you know we've sort of attacked, with a lot of focus and some rigor, corporate SG&A. And that's not your question, but that sort of checked that box. We've done that, we're enjoying the benefit of it now coursing through the system. We're now starting to put our attention to site-level SG&A. As you look at site-level SG&A, it approaches $1 billion; I think it's $948 million and Peter can correct me if I'm wrong there, but it's in that order of magnitude at least.

And the way those expenses have been tracked and managed historically, we've had very little visibility over them, and we're changing that now.

And Peter's team is changing that now. That's a big priority and we're thinking really hard about how best not only to create visibility around it with a P&L for site-level expenses that's granular enough and gives us the ability to see things without creating a massive burden on the site-level organization to be able to track and see a visible P&L. So that's something we're balancing and Peter's team is working on right now.

We're also considering, we're evaluating, we're thinking about possibly getting some outside help to really dig into because it's such a big number. And I agree with you, Bryan, it's a little mini-sore spot for me. The fact that we haven't had visibility is a frustration historically. But it also suggests to me, with such a big number without the visibility, we're going to find -- we're going to make some really significant findings.

So wrapping that all together, we're very focused on it. Peter's team is focused on creating the visibility and then separately, we're evaluating how and who potentially gets some supplemental outside onetime help to really dig into these things to help us kind of inform really good choices on how to -- maybe I'll put it in quotes -- "right-size" that site-level SG&A somewhat along the lines of what we did at corporate. It's too early to say what's sort of a new normal; we're just not there yet, but we are focused on it and we will get there.

Peter, anything to add to that?

Yes, I would just emphasize what Jon said on identifying that metric, that percentage, that's appropriate. We obviously had this burning platform. We've made some decent inroads here and preserved profitability. As we go through these next steps, not only the accountability and making individual business owners responsible, but also identifying those costs that we can keep out of the system. Only after that analysis, which will happen, and that will happen over the next several weeks to a few months, when we have a better feel for that. And then we can report back on that.

Okay. And being the only current official analyst covering the company, I'll take a liberty with one more question and time. Can you give us any thoughts on what you're seeing as it relates to July, which just having ended here, given what we saw in lodging, which was kind of a slowdown in the recovery in July with a pickup in the cases of COVID, what can you share with us on what you saw at TA in July, if anything?

Yes, that's great. So I shared earlier this trend line. Just this within-quarter, first of all, to set the stage to answer your question about July, within-quarter, pretty much across the nonfuel board, we saw improvements business-by-business. So from April to May then to June, there was an uptick pretty consistently across nonfuel, again, putting -- I'm sort of excluding from that, although there was an uptick, full service and gaming, which appears in Other for us.

Moving into July, the sort of preliminary or early results, business-by-business, again, putting aside the FSRs, full service restaurants, and gaming, which appears in Other, the other businesses actually have shown signs of improving, not just continuing that trend line, but actually on the sales level, doing better than prior year July. So the truck service, the store, QSR, are showing low-positives to prior year same period, meaning July. So we've seen a nice upward trend line.

And I'm not going to suggest to anybody that that's necessarily going to sustain -- again, I'm talking about top line sales -- just because COVID is still uncertain. We're all seeing, in certain places, spikes and it's so heavily politicized as well. But staying apolitical in that comment, just not knowing what that'll mean for demand, it's hard to say if that'll continue. But the good news for this company right now is we're making choices within that context that are allowing us to at least see a positive trend line.

The next question comes from Jim Sullivan of BTIG.

Apologize if you get a scratchy signal here probably from New England, and the systems are pretty unreliable today. I had a question on the fuel margin. There was this nice 26% boost to the margin, and that was primarily due to the fuel purchasing environment. But you also cited in the release, the new approach to pricing. But I just wondered if you can help us understand how much of the increase in the margin was attributable to that new approach to pricing?

Thanks, Jim, and hi. Hopefully, you're safe up there with the way the storm I know hit pretty hard in New England. I don't know and I'm going to turn it to Peter and maybe Barry in a moment. I'm not sure we're able to parse that out right now. I know we made changes in who was handling pricing. And historically, I learned early on, many months back, that pricing was led by -- and the decisions day-to-day were made by the same person who was heading an entire other part of our business. And so we unbundled that just before the quarter began, right when COVID was getting started, and gave it its due with a full time dedicated attention. And we know that had an impact. I'm not sure we're able to parse out what portion was related to that versus a favorable market.

But Peter or Barry, chime in behind me if you disagree, or if there's more to tell.

No, Jon, it's Peter. We are not able to do that. Going forward obviously, that's our hope, as we deploy some initiatives in the fuel area. But no, the volatility in the market, it would be difficult to correlate [particularly soon.]

What is the...

And I just wanted to mention one other quick . . .

Sorry, go ahead.

Just a quick point is one of the fundamental areas we're very focused on is measuring stuff, measuring results, using data to make good decisions. We've never -- I shouldn't say never -- in a long time, we haven't -- at least in a long time, we haven't done that as a company. And it's going to take some time to get a place where we have data that's sitting sort of in a repository that we can quickly and easily make sense of. So we're a little bit hamstrung today; that won't be the case forever.

Is it fair to assume, Jon, however, that the positive impact of the fuel purchasing environment has dissipated or changed as fuel prices have risen?

That change started, I think, roughly 2/3 of the way through the quarter. So like April and May, if I'm not mistaken, we were -- we received the benefit of that. And as we got into June, it really dissipated and it's sort of bounced around a little bit ever since.

Okay. Moving over to the nonfuel margin, it declined slightly in the second quarter year-over-year. And part of that was due to pricing and marketing strategies. And so my question is, should we expect the nonfuel gross margins to trend lower year-over-year, and perhaps be below 60% going forward?

Peter, do you want to jump in on that?

Sure, sure. Jim, given the dramatic decline in revenue, we have great operating margin leverage on the way up. And on the way down, a dramatic decline in revenue can affect the percentage. We were able to cut costs, but not at the rate that we needed to, to maintain the margin. But the answer to your question is no, I don't believe that we will see a declining margin. Our goal, obviously, through not only making these decisions on costs, the new management team focusing on margins and preserving margins, net margins, and then of course, our further work along, as Jon mentioned, with regard to OpEx, our goal is to get those margins to increase over time. So that's where we are.

And let me add, if I could, Jim, just another point to that. We have entirely new leadership in procurement. We didn't even have a procurement function, a centralized, consolidated procurement function. We do now. We have an incredible leader, Jamie Hubbard, there; we have a new leader, Kevin Kelly -- these are both from just a couple of months ago -- who heads Hospitality, which includes c-store, QSRs, etc. I think their leadership alone, again, will take some time to making choices that will cause those areas of the business to really improve. And that'll, I think, whatever other countervailing forces there are, I think we've got, we're really equipped to lead through some of this stuff.

Last, but not least, while your question was nonfuel and margins, I'll just say with our new SVP of Fuel, we're really focused on optimizing yield and sort of that balance between driving volume, which is on the diesel side, looking great for us year-over-year, as we get particularly into -- through July, driving volume while not [sacrificing] price and sort of optimizing yield. So with all that new leadership -- and obviously, the more we drive diesel volume, the more we fill our stores, the more people purchase. Again, I know your question was nonfuel margin; that's more of a volume or sales point, but just to give full context.

I think my long enough point is that our new senior leadership team is just barely getting started. Most of them got here May 1. A couple, like our head of procurement and fuel, came about a month later. So we're really just getting started in terms of changing how we make choices through those new leaders.

Okay. Appreciate that color, Jon. And then also on the item of SG&A costs, it was noted in the release, the $3.9 million of nonrecurring costs that were incurred in the quarter for the Reorg Plan. So my question is, will there be any additional costs in that respect over the second half of the year, or are you done?

So those, I think Peter...

Yes, the...

Go ahead, Peter. Go ahead.

Yes, a very small amount, maybe a couple of hundred thousand dollars, but we're largely past that.

This concludes our question-and-answer session. I would like to turn the conference back over to Jon Pertchik, Chief Executive Officer, for any closing remarks.

Again, thank you for your interest in TA, and your attention this morning. Have a great day. Bye-bye.

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