Overview

The following discussion should be read in conjunction with the financial statements included elsewhere in this Quarterly Report on Form 10-Q and in our Annual Report on Form 10-K for the year ended December 31, 2008.

Our revenues and income are subject to potentially material changes as a result of the market prices of diesel fuel and gasoline, as well as the availability of these products. These factors are subject to the worldwide petroleum products supply chain, which historically has incurred shocks as a result of, among other things, severe weather, terrorism, political crises, wars and other military actions and variations in demand, which are often the result of changes in the macroeconomic environment. Over the past few years there has been significant volatility in the cost of diesel fuel and gasoline; first, as crude oil demand increased during the previous economic recovery in the United States and events such as Hurricane Katrina affected the supply system; then as economic growth in certain developing economies, such as China and India, increased demand for petroleum products; then, as the world value of the U.S. dollar declined and as speculation in the price of petroleum commodities increased; and, recently, as the price of diesel fuel and gasoline has declined dramatically, as the current worldwide recession has reduced demand for petroleum products. We expect that these significant changes in our costs for these products can largely be passed on to our customers, but increased volatility in the crude oil and refined products markets can result in negative effects on our sales and profitability and increases in our working capital requirements. We expect that the crude oil and refined product markets will continue to be volatile.

In addition to the factors cited above, our financial results during the quarter ended March 31, 2009, were, and our financial results in future periods may be, affected by the condition of the U.S. economy generally and, specifically, the financial condition and activity of the trucking industry in the U.S. The trucking industry is the primary customer for our goods and services. Freight and trucking demand in the U.S. generally reflect the amount of commercial activity in the U.S. economy. Because the U.S. economy is currently in a deep recession, demand for our products and services is declining. The decline in new home starts and the decline in import activity in the U.S. over the past year have contributed to reduced trucking industry activity in the U.S. generally and to declines in our fuel sales volume. If the U.S. economy continues to operate at the present rates or if it declines further, our financial results may not improve and may decline, which could result in our experiencing increased losses from our operations. Declining financial results may place further demands on our working capital and limit our ability to fund our business and operations. Although we produced net income in the last two quarters of 2008, the current economic conditions in the U.S. generally, and the trucking industry in particular, are making it increasingly difficult to produce profitable results from our operations.

Summary of Travel Center Site Counts



The following table summarizes the changes in the composition of our business
(company operated, franchisee leased and operated or franchisee owned and
operated) from December 31, 2007 through March 31, 2009:



                                                                     Franchisee
                                                                       Owned
                                           Company     Franchisee       and
                                           Operated     Operated      Operated      Total
Number of travel centers at
December 31, 2007                               189            10            37         236

January - March 2008 Activity:
No activity                                       -             -             -           -
Number of travel centers at March 31,
2008                                            189            10            37         236

April - December 2008 Activity:
Terminated franchised travel centers              -             -            (2 )        (2 )
Closed travel centers                            (1 )           -             -          (1 )
Number of travel centers at
December 31, 2008                               188            10            35         233

January - March 2009 Activity:
No activity                                       -             -             -           -
Number of travel centers at March 31,
2009                                            188            10            35         233

Relevance of Fuel Revenues

Due to volatile pricing of fuel products and our pricing arrangements with fuel customers, we believe that fuel revenue is not a reliable metric for analyzing our results of operations from period to period. As a result solely of changes in fuel prices, our fuel revenue may increase or decrease significantly versus our historical results of operations, in both absolute amounts and on a percentage basis, without a comparable change in fuel sales volumes or in gross margin per gallon. We consider fuel volumes and gross margin to be better measures of comparative performance than fuel revenues.

Results of Operations

Three months ended March 31, 2009 compared to March 31, 2008

The following table summarizes our results for the three month periods ended March 31, 2009 and 2008.

                                         Three Months Ended
                                              March 31,               $            %
(dollars in millions)                     2009         2008        Change       Change

Revenues:
Fuel                                   $    703.9    $ 1,619.3    $  (915.4 )      -56.5 %
Nonfuel                                     259.4        285.1        (25.7 )       -9.0 %
Rent and royalties                            3.3          3.5         (0.2 )       -4.8 %
Total revenues                              966.6      1,907.9       (941.3 )      -49.3 %

Cost of goods sold (excluding
depreciation):
Fuel                                        643.5      1,577.3       (933.8 )      -59.2 %
Nonfuel                                     106.6        118.1        (11.5 )       -9.7 %
Total cost of goods sold (excluding
depreciation)                               750.1      1,695.4       (945.3 )      -55.8 %

Operating expenses:
Site level operating expenses               144.9        158.6        (13.7 )       -8.6 %
Selling, general & administrative
expense                                      19.0         32.8        (13.8 )      -42.0 %
Real estate rent                             58.4         57.7          0.7          1.4 %
Depreciation and amortization
expense                                       9.7         10.9         (1.2 )      -11.4 %
Total operating expenses                    232.0        260.0        (28.0 )      -10.7 %

Loss from operations                        (15.5 )      (47.5 )       32.0        -67.4 %
Equity income in joint venture                0.1          0.1            -        -14.8 %
Interest income                               0.8          3.2         (2.4 )      -73.6 %
Interest expense                             (3.2 )       (4.1 )        0.9        -19.3 %
Loss before income taxes                    (17.8 )      (48.3 )       30.5        -63.1 %
Provision for income taxes                    0.2          0.2            -          7.6 %
Net loss                               $    (18.0 )  $   (48.5 )  $    30.5        -62.8 %

Same Site Comparisons. A travel center is included in the following same site comparisons if it was continuously operated by us from January 1, 2008 through March 31, 2009 or, in the case of rent revenues and royalty revenues, by a franchisee of ours for that same period. Travel centers are not excluded from the same site comparisons as a result of expansions in their size or in the services offered.

                                        Three Months Ended March 31,           $            %
(gallons and dollars in millions)         2009                2008           Change      Change

Number of company operated travel
centers                                          188                 188            -           -

Fuel sales volume (gallons) (1)                448.8               536.8        (88.0 )     -16.4 %
Fuel margin(1)                       $          61.3     $          43.1   $     18.2        42.3 %
Total nonfuel revenues (1)           $         262.4     $         287.6   $    (25.2 )      -8.7 %
Operating expenses (1) (2)           $         146.7     $         160.0   $    (13.3 )      -8.3 %

Number of franchisee operated
travel centers                                    44                  44            -           -
Rent and royalty revenues            $         3,352     $         3,403   $      (51 )      -1.5 %

(2) Excludes real estate rent expense.

Revenues. Revenues for the three month period ended March 31, 2009, were $966.6 million, which represented a decrease from the quarter ended March 31, 2008, of $941.3 million, or 49.3%, primarily related to decreases in fuel prices.

Fuel revenues were 72.8% of total revenues for the quarter ended March 31, 2009, as compared to 84.9% for the same period in 2008. Fuel revenue for the quarter ended March 31, 2009, decreased by $915.4 million, or 56.5%, as compared to the same period in 2008. This decrease was principally the result of decreases in fuel prices combined with reduced fuel sales volume. The table below shows the changes in fuel revenues between periods that resulted from price and volume changes:

                                                          Gallons          Fuel
(gallons and dollars in millions)                          Sold          Revenues

Results for three months ended March 31, 2008                 558.9    $    1,619.3

Decrease due to petroleum products price changes                  -          (767.8 )
Decrease due to same site volume changes                      (88.0 )        (134.2 )
Decrease due to the company operated site closed
since January 1, 2008                                          (1.6 )          (2.5 )
Decrease due to wholesale fuel business sales volume
variations                                                     (7.2 )         (10.9 )
Net decrease from prior year period                           (96.8 )        (915.4 )

Results for three months ended March 31, 2009                 462.1    $      703.9

On a same site basis for our company operated sites, fuel sales volume decreased by 88.0 million gallons, or 16.4%, during the three months ended March 31, 2009 compared to the same period in 2008. We believe the same site fuel sales volume decrease resulted primarily from a decline in trucking activity that was largely attributable to the significant decline in economic activity in the U.S. throughout 2008 and into 2009, particularly the declines in the shipments of durable goods, including new home building supplies, as well as a decline in imports into the U.S. that are transported by truck, combined with increase in fuel conservation efforts by truck operators throughout 2008 and into 2009 as a result of the historically high cost of fuel. We believe the same site fuel sales volume decrease also resulted from decreased demand from motorists as a result of the continued high cost of fuel to consumers as well as the general recessionary condition of the U.S. economy.

Nonfuel revenues were 26.8% of total revenues for the quarter ended March 31, 2009, as compared to 14.9% for the same period in 2008. Nonfuel revenues for the three months ended March 31, 2009, were $259.4 million, a decrease of $25.7 million, or 9.0%, as compared to the same period in 2008. The change between years is primarily related to the decline in unit sales at those sites

we operated during both periods, partially offset by our price increases. On a same site basis for our company operated sites, nonfuel revenues decreased by $25.2 million, or 8.7% during the three months ended March 31, 2009, compared to the same period in 2008. We believe the same site nonfuel revenue decrease reflects decreased customer traffic in our travel centers as a result of many of the factors affecting our fuel sales volumes, partially offset by the impact of our sales and marketing initiatives and the attractiveness of our nonfuel product and service offerings to customers regardless of where they choose to purchase fuel.

Rent and royalty revenues for the three months ended March 31, 2009 were $3.3 million, a decrease of $0.2 million, or 4.8%, as compared to the same period in 2008. This decrease was primarily the result of lower royalties resulting from reduced nonfuel revenues at our franchisee locations and the termination of two franchise sites in the fourth quarter of 2008, partially offset by scheduled increases in rent revenues at our franchisee operated locations.

Cost of goods sold (excluding depreciation). Cost of goods sold for the three months ended March 31, 2009, was $750.1 million, a decrease of $945.3 million, or 55.8%, as compared to the same period in 2008, which was primarily attributable to decreased fuel costs. Fuel cost of goods sold for the quarter ended March 31, 2009 of $643.5 million decreased by $933.8 million, or 59.2% as compared to the same period in 2008. The decrease in fuel cost of goods sold for the quarter ended March 31, 2009 as compared to the same period in 2008 primarily resulted from commodity price decreases combined with the fuel sales volumes decreases described above.

Nonfuel cost of goods sold for the three months ended March 31, 2009 was $106.6 million, a decrease of $11.5 million, or 9.7%, as compared to the same period in 2008. Nonfuel cost of goods sold decreased due to the same site nonfuel sales decreases noted above, partially offset by increases in product unit costs. Nonfuel cost of goods sold as a percentage of nonfuel revenue was 41.1% for the quarter ended March 31, 2009 compared to 41.4% for the same period in 2008.

Site level operating expenses. Site level operating expenses for the three months ended March 31, 2009, were $144.9 million, a decrease of $13.7 million, or 8.6%, as compared to the same period in 2008. This decrease was primarily due to our March 2008 workforce reduction, our expense control initiatives and our efforts to adjust our labor costs to offset lower sales volumes.

On a same site basis for our company operated sites, site level operating expenses decreased by $13.3 million, or 8.3% in the three months ended March 31, 2009 compared to the same period in 2008. The decrease in site level operating expenses on a same site basis was primarily the result of decreases in labor and related benefits and payroll tax expense as a result of our March 2008 workforce reduction, other expense control initiatives and our efforts to adjust our labor costs to offset lower sales volumes. This decrease was partially offset by increases over the prior year in expenses that are not as directly related to our volume of business such as real estate taxes and other taxes not based on income, the unit cost of labor and related benefits, and certain costs of maintaining our operating locations. On a same site basis, site level operating expenses as a percentage of nonfuel revenues for the quarter ended March 31, 2009 were 55.9%, compared to 55.7% for the same period in 2008. The increase in operating expenses as a percentage of nonfuel revenues results from the fact that certain of our expenses are fixed in nature so decreases in our revenues do not result in a corresponding decrease in site level operating expenses.

Selling, general and administrative expenses. Selling, general and administrative expenses for the three months ended March 31, 2009 were $19.0 million, a decrease of $13.8 million, or 42.0%, as compared to the same period in 2008. This decrease primarily resulted from the elimination of costs associated with Petro's El Paso, Texas headquarters, which was closed in 2008, a reduction of expense related to severance and retention payments to certain former employees, our cost saving strategies, including our March 2008 workforce reduction and a decrease in legal fees and other costs related to litigation matters including a $5.0 million litigation settlement expense charge in the first quarter of 2008.

Real estate rent expense. Rent expense for the three months ended March 31, 2009 was $58.4 million, an increase of $0.7 million as compared to the same period in 2008. Under our real estate leases, we paid rent of $45.2 million during the three months ended March 31, 2009 of which $2.3 million was recognized as interest expense and $0.6 million was recognized as a reduction of our capital lease obligation. We accrued $2.8 million of noncash rent expense to recognize rent expense on a straight line basis over the terms of those leases that include rent escalation provisions and amortized $1.7 million of our deferred leasehold improvement allowance as a reduction of rent expense. In addition, we accrued $15.0 million of rent expense which was not paid in cash pursuant to our rent deferral agreement with Hospitality Trust.

Depreciation and amortization expense. Depreciation and amortization expense for the three months ended March 31, 2009 was $9.7 million, a decrease of $1.2 million, or 11.4%, as compared to the same period in 2008. This decrease was the result of a $1.6 million charge in 2008 in connection with the cancellation of contracts and letters of intent for various development projects and acquisitions we decided not to pursue offset by increases from asset additions.

Loss from operations. Our loss from operations for the three months ended March 31, 2009, was $15.5 million, an improvement of $32.0 million as compared to the same period in 2008. This decrease was the result of the changes in revenues and expenses described above.

Interest income and expense. Interest income and expense consisted of the following:

                                                    Three Months Ended March 31,             $
(dollars in millions)                                2009                 2008            Change

Accretion of leasehold improvement
receivable                                      $           0.2      $           1.2    $      (1.0 )
Interest income on restricted investments                     -                  1.2           (1.2 )
Other interest income                                       0.6                  0.8           (0.2 )
Total interest income                           $           0.8      $           3.2    $      (2.4 )

Interest on notes defeased as part of the
Petro Acquisition                               $             -      $           1.3    $      (1.3 )
Rent expense classified as interest                         2.3                  2.3              -
Amortization of deferred financing costs                    0.5                    -            0.5
Other interest expense                                      0.4                  0.5           (0.1 )
Total interest expense                          $           3.2      $           4.1    $      (0.9 )

The restricted investments referred to in the table above were used to repay the defeased notes in full on February 15, 2008. The decrease in other interest income was primarily attributable to reduced interest income on our lower cash balances in the first quarter of 2009 as compared to the same period in 2008, and lower prevailing interest rates.

Income tax provision (benefit). Our effective tax rates for the three month periods ended March 31, 2009 and 2008 were provisions of 1.2% and 0.4%, respectively. The rate for these periods differ from the statutory rate due to an increase in the valuation allowance against our net deferred tax assets, and to state income taxes net of the federal tax effect.

Seasonality

Assuming little variation in fuel prices, our revenues are usually lowest in the first quarter of the year when movement of freight by professional truck drivers and motorist travel are typically at their lowest levels of the year. Assuming little variation in fuel prices, our revenues in the fourth quarter of a year are often somewhat lower than those of the second and third quarters because, while the beginning of the fourth quarter is often positively impacted by increased movement of freight in preparation for various national holidays, that positive impact is often more than offset by a reduction in freight movement caused by vacation time associated with those holidays taken by professional truck drivers toward the end of the year. While our revenues are modestly seasonal, the quarterly variations in our operating results may reflect greater seasonal differences because our rent and certain other costs do not vary seasonally.

Inflation and Deflation

Inflation, or a general increase in prices, will likely have more negative than positive impacts on our business. Rising prices may allow us to increase revenues, but also likely will increase our operating costs. Also, rising prices for fuel and other products we sell increase our working capital requirements and appear to cause some of our customers to reduce their purchases of our goods and services. Because significant components of our expenses are fixed, we may not be able to realize expense reductions which match declines in general price levels, or deflation.

Liquidity and Capital Resources

Our principal liquidity requirements are to meet our operating expenses, including rent, and to fund our capital expenditures and other working capital requirements as well as to pay to Hospitality Trust the total amount of deferred rent and related accrued interest no later than July 2011. Our principal sources of liquidity to meet these requirements are our operating cash flow, our cash balance, our credit facility, our ability to sell qualified leasehold improvements to Hospitality Trust under the terms of our leases with Hospitality Trust and our ability to defer up to $5.0 million of rent payments to Hospitality Trust each month through December 2010. We also own a portfolio of operating real estate and developable land which may be a source of additional liquidity over time to the extent it can be financed or sold.

Under the TA Lease, we can sell to Hospitality Trust certain capital improvements we make to properties owned by Hospitality Trust with no increase in our rent payable to Hospitality Trust. These sales were originally limited to $125 million with no more than $25 million in any year. In May 2008 we and Hospitality Trust amended the TA Lease to permit us to sell these capital improvements to Hospitality Trust earlier than previously permitted. In the event that we elect to sell these capital improvements before the time contractually permitted by the original lease terms, Hospitality Trust's purchase commitment is discounted to reflect the accelerated receipt of funds by us according to a present value formula established in the amended lease. During the first three months of 2009, we sold capital improvements to Hospitality Trust with no increase in our rent, for total cash proceeds, after the discounts for accelerated receipts, of $2.8 million. As of March 31, 2009, an undiscounted amount of $13.5 million of the $125 million maximum amount remained available for sale by us to Hospitality Trust.

As of March 31, 2009, under our rent deferral arrangement with Hospitality Trust, we had deferred $45.0 million of rent that is due to Hospitality Trust not later than July 1, 2011.

The primary risks we face with respect to our operating cash flow are decreased demand for our products and services which may be caused by the volatility and high prices for petroleum based products and the economic recession in the U.S. and in the U.S. trucking industry, as well as increased working capital which may be associated with increases in fuel costs. A reduction of our revenue without an offsetting reduction in our operating expenses may cause us to use our cash at a rate that we cannot sustain for extended periods. Also, a significant increase in the prices we must pay to obtain fuel or decrease in the time we have to pay our trade creditors may increase our cash working capital requirements materially. In addition, the global credit markets have been experiencing substantial disruption and, as a result, credit has become more expensive and difficult to obtain, which may limit the availability of our sources of financing and impact our ability to repay deferred rent to Hospitality Trust by no later than July 2011, the date by which the deferred rent amount must be paid.

Assets and Liabilities

Our total current assets at March 31, 2009, were $424.4 million, compared to our total current assets of $409.0 million at December 31, 2008. At March 31, 2009, and December 31, 2008, we had cash and cash equivalents of $167.9 million and $145.5 million, respectively. Our current liabilities were $210.7 million at March 31, 2009, compared to our current liabilities of $201.0 million at December 31, 2008. Changes in accounts receivable, inventories and accounts payable and other current liabilities were primarily the result of higher volumes of fuel and nonfuel goods sold in March 2009 as compared to December 2008 as well as higher fuel prices in March 2009 as compared to December 2008.

During the three months ended March 31, 2009, we had a net loss of $18.0 million, net cash inflows from operating activities of $28.7 million and, net cash outflows from investing activities of $6.4 million that resulted in a $22.3 million increase in our cash balance between December 31, 2008 and March 31, 2009. At March 31, 2009, we had cash and cash equivalents of $167.9 million.

At March 31, 2009, we had a leasehold improvement receivable totaling $11.8 million that represents the estimated discounted amount of funds as of that date that we expect to receive from Hospitality Trust in connection with our sales of leasehold improvements to Hospitality Trust under our lease with Hospitality Trust for TA branded travel centers.

There can be no assurance that industry conditions will not decline further or that any one or more of the risks identified under the section "Risk Factors" or "Warning Regarding Forward Looking Statements" in our Annual Report on Form 10-K for the year ended December 31, 2008, or under "Warning Regarding Forward Looking Statements" or elsewhere in this Quarterly Report on Form 10-Q, or some other unidentified risk will not manifest itself in a manner which is material and adverse to our results of operations, cash flow or financial position.

. . .