TravelCenters of America Inc. /MD/ - Annual Report: 2007 (Form 10-K)

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Item 15. Exhibits and Financial Statement Schedules

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549

FORM 10-K

Commission file number 001-33274

TRAVELCENTERS OF AMERICA LLC
(Exact Name of Registrant as Specified in Its Charter)

         Securities registered pursuant to Section 12(b) of the Act:

         Securities registered pursuant to Section 12(g) of the Act: None

         Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes o    No ý

         Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes o    No ý

         Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ý    No o

         Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ý

         Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act.

         Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o    No ý

         The aggregate market value of the voting shares of the registrant held by non-affiliates was $572.8 million based on the closing price per common share of $40.45 on the American Stock Exchange on June 29, 2007. For purposes of this calculation, an aggregate of 327,589 shares of common stock are held by the directors and officers of the registrant and have been included in the number of shares of common stock held by affiliates.

         Number of the registrant's common shares outstanding as of March 14, 2008: 14,489,265.

         References in this Annual Report on Form 10-K, to "TA", "TravelCenters", the "Company", "we", "us" and "our" include TravelCenters of America LLC and its consolidated subsidiaries unless otherwise expressly stated or the context indicates otherwise.

         DOCUMENTS INCORPORATED BY REFERENCE

         Certain information required in Items 10, 11, 12, 13 and 14 of Part III of this Annual Report on Form 10-K is incorporated by reference from our definitive Proxy Statement for our 2008 Annual Meeting of Shareholders to be filed pursuant to Regulation 14A, or our definitive Proxy Statement.

WARNING CONCERNING FORWARD LOOKING STATEMENTS

        THIS ANNUAL REPORT ON FORM 10-K CONTAINS STATEMENTS WHICH CONSTITUTE FORWARD LOOKING STATEMENTS WITHIN THE MEANING OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995 AND OTHER FEDERAL SECURITIES LAWS. ALSO, WHENEVER WE USE WORDS SUCH AS "BELIEVE", "EXPECT", "ANTICIPATE", "INTEND", "PLAN", "ESTIMATE" OR SIMILAR EXPRESSIONS, WE ARE MAKING FORWARD LOOKING STATEMENTS. THESE FORWARD LOOKING STATEMENTS ARE BASED UPON OUR PRESENT INTENT, BELIEFS OR EXPECTATIONS, BUT FORWARD LOOKING STATEMENTS ARE NOT GUARANTEED TO OCCUR AND MAY NOT OCCUR. ACTUAL RESULTS MAY DIFFER MATERIALLY FROM THOSE CONTAINED IN OR IMPLIED BY OUR FORWARD LOOKING STATEMENTS AS A RESULT OF VARIOUS FACTORS. AMONG OTHERS, THE FORWARD LOOKING STATEMENTS WHICH APPEAR IN THIS ANNUAL REPORT ON FORM 10-K THAT MAY NOT OCCUR INCLUDE:

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WE MAY BE UNABLE TO OPERATE SITES WE HAVE RECENTLY PURCHASED OR DEVELOPED AS PROFITABLE TRAVEL CENTERS;



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THE CAPITAL REQUIRED TO FUND OUR MAINTENANCE AND IMPROVEMENT PLANS MAY EXCEED OUR EXPECTATIONS AND MAY NOT INCREASE OUR SALES OR MARGINS;



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OUR ENVIRONMENTAL LIABILITY MAY BE GREATER THAN WE CURRENTLY ANTICIPATE;



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WE MAY BE UNABLE TO SETTLE OR PREVAIL IN THE PENDING LITIGATION MATTERS AND ANY SETTLEMENT OR ADVERSE RULING MAY HAVE A MATERIAL ADVERSE EFFECT ON OUR BUSINESS;



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CERTAIN STATEMENTS MAY IMPLY THAT OUR STAFF REDUCTIONS AND EXPENSE CONTROLS MAY CAUSE IMPROVED FINANCIAL RESULTS. IN FACT, FUTURE MARKET CONDITIONS IN THE TRUCKING INDUSTRY OR OTHERWISE MAY BE WORSE THAN WE NOW EXPECT AND OUR FINANCIAL RESULTS MAY NOT IMPROVE OR WE MAY EXPERIENCE MATERIAL AND CONTINUING LOSSES; AND



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WE HAVE UNDERTAKEN A REVIEW OF OUR EXPANSION AND DEVELOPMENT PLANS WHICH IS EXPECTED TO RESULT IN THE ELIMINATION OR DEFERRAL OF SOME OF THOSE PLANS; BUT, IN FACT, SOME OF THESE PLANS MAY NOT BE ELIMINATED OR DEFERRED.

        CURRENTLY EXPECTED RESULTS COULD CHANGE BECAUSE OF VARIOUS FACTORS, SOME OF WHICH ARE BEYOND OUR CONTROL. FOR EXAMPLE:

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A CONTINUING SLOWING OR RECESSION IN THE U.S. ECONOMY GENERALLY MAY CAUSE OUR BUSINESS TO DECLINE MORE THAN WE CURRENTLY EXPECT;



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A CONTINUING LESSENING IN THE VALUE OF THE U.S. DOLLAR COMPARED TO OTHER CURRENCIES MAY REDUCE THE IMPORTS OF GOODS INTO THE U.S. WHICH ARE TRANSPORTED BY TRUCK MORE THAN WE CURRENTLY EXPECT; AND



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CONTINUING INCREASES IN FUEL PRICES MAY CAUSE SHIPPERS TO DIRECT FREIGHT TO TRANSPORT OTHER THAN TRUCKS; AND FUEL PRICE CHANGES MAY CAUSE OUR GROSS PROFIT MARGINS FOR OUR FUEL AND NONFUEL SALES TO DECLINE.

        RESULTS WHICH DIFFER FROM THOSE STATED OR IMPLIED BY OUR FORWARD LOOKING STATEMENTS ALSO MAY BE CAUSED BY VARIOUS CHANGES IN OUR BUSINESS OR MARKET CONDITIONS AS DESCRIBED MORE FULLY ELSEWHERE IN THIS ANNUAL REPORT ON FORM 10-K INCLUDING UNDER "ITEM 1A. RISK FACTORS."

        YOU SHOULD NOT PLACE UNDUE RELIANCE UPON FORWARD LOOKING STATEMENTS.

        EXCEPT AS REQUIRED BY LAW, WE UNDERTAKE NO OBLIGATION TO UPDATE OR REVISE ANY FORWARD LOOKING STATEMENT AS A RESULT OF NEW INFORMATION, FUTURE EVENTS OR OTHERWISE.

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TRAVELCENTERS OF AMERICA LLC
2007 FORM 10-K ANNUAL REPORT

Table of Contents

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PART I

Item 1.    Business

General

        We are a limited liability company formed under Delaware law on October 10, 2006, as a wholly owned subsidiary of Hospitality Properties Trust, or Hospitality Trust. Our initial capitalization in a nominal amount was provided by Hospitality Trust on our formation date. From that time through January 31, 2007, we conducted no business activities. On January 31, 2007, Hospitality Trust acquired TravelCenters of America, Inc., our predecessor, restructured this acquired business and distributed all of our then outstanding common shares to the shareholders of Hospitality Trust. In this Annual Report on Form 10-K we sometimes refer to these transactions as the HPT Transaction and refer to Hospitality Trust and the subsidiaries of Hospitality Trust from which we lease certain properties collectively as Hospitality Trust.

Business Overview

        We operate and franchise travel centers primarily along the U.S. interstate highway system. Our customers include long haul trucking fleets and their drivers, independent truck drivers and motorists. As of December 31, 2007, our business included 236 travel centers located in 41 states in the U.S. and the province of Ontario, Canada. Our travel centers include 167 that are operated under the "TravelCenters of America" or "TA" brand names, including 144 that we operate and 23 that franchisees operate, and 69 that are operated under the "Petro" brand name, including 45 that we operate and 24 that franchisees operate.

        Many of our travel centers were originally developed years ago when prime real estate locations along the interstate highway system were more readily available than they are today, a fact which we believe would make it difficult to replicate our business. We believe that our nationwide locations provide an advantage to long haul trucking fleets by enabling them to reduce the number of their suppliers by routing their trucks through our locations from coast to coast.

        We offer a broad range of products and services, including diesel fuel and gasoline, truck repair and maintenance services, full service restaurants, more than 20 different brands of quick serve restaurants, or QSRs, travel and convenience stores and other driver amenities.

        The U.S. travel center and truck stop industry in which we operate consists of travel centers, truck stops, diesel fuel outlets and similar properties. We believe that the travel center and truck stop industry is highly fragmented, with in excess of 6,000 travel centers and truck stops in the U.S.

History

        Our Predecessor.    Our predecessor was formed in December 1992 and in 1993 acquired two travel center businesses that had been operating since the 1970s. At the time of the HPT Transaction, our predecessor's business included 163 travel centers, of which 140 were operated by our predecessor, 10 were operated by franchisees on sites leased from our predecessor and 13 were operated by franchisees on sites they owned.

        The HPT Transaction.    We commenced business on January 31, 2007. In order to govern relations before and after the spin off, we entered into a transaction agreement with Hospitality Trust and Reit

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Management & Research LLC, or Reit Management. The material provisions of the HPT Transaction and the related transaction agreement that affected us are summarized as follows:

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Simultaneously with Hospitality Trust's closing of its acquisition of our predecessor, the business of our predecessor was restructured. As a result of the restructuring:



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the real property interests of 146 travel centers which we operate or franchise and certain other assets held by our predecessor were transferred to subsidiaries of Hospitality Trust that we did not own;



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we leased the 146 travel centers owned by Hospitality Trust;



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we continued to own all of our predecessor's working capital assets (primarily consisting of cash, receivables and inventory) and continued to be obligated for our predecessor's liabilities (primarily consisting of trade payables and accrued liabilities); and



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we owned one travel center in Ontario, Canada, and leased two travel centers from, and managed one travel center for, owners other than Hospitality Trust; we became the franchisor of 13 travel centers owned and operated by third parties; we owned certain other assets historically owned and used by our predecessor, including furniture, vehicles and substantially all other moveable equipment used at the travel centers that we operate and buildings that are situated on land owned by Hospitality Trust for nine travel centers that we operate.



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Hospitality Trust contributed cash to us so that the sum of our cash, receivables and inventory, net of trade payables and accrued liabilities, was about $200 million at the time of our spin off.



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On January 31, 2007, Hospitality Trust distributed all of our then outstanding shares to its shareholders.



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We entered into a management and shared services agreement with Reit Management.



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We provided Hospitality Trust a right of first refusal to purchase, lease, mortgage or otherwise finance any interest we own in a travel center before we sell, lease, mortgage or otherwise finance that travel center with another party.



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We granted Hospitality Trust and other entities to which Reit Management provides management services a right of first refusal to acquire or finance any real estate of the types in which they invest before we do.



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We agreed to not permit: the acquisition by any person or group of beneficial ownership of 9.8% or more of the voting shares or the power to direct the management and policies of us or any of our subsidiary tenants or guarantors under our leases with Hospitality Trust; the sale of a material part of the assets of us or any such tenant or guarantor; or the cessation of certain continuing directors constituting a majority of the board of directors of us or any such tenant or guarantor.



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We and Hospitality Trust agreed to cooperate in filing tax returns and addressing other tax matters including appropriate allocations of taxable income, expenses and other tax attributes associated with the HPT Transaction.



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We agreed to indemnify Hospitality Trust for liabilities relating to our business and operations for periods before and after the spin off.



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Hospitality Trust agreed to pay all of the costs and expenses of the spin off and the restructuring.

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        Activities Since January 31, 2007.    Since we began operations on January 31, 2007, we have completed or begun a number of business initiatives which we believe may improve our future financial performance, including:

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We entered retirement agreements with the president, the chief financial officer and the general counsel of our predecessor who continued in those positions immediately after we began operations. These agreements required us to make termination payments to these individuals through December 31, 2007. We appointed a new president, chief financial officer and general counsel in 2007.



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We began a strategic review of all our predecessor's contractual arrangements to determine if any should be discontinued or expanded. For example, we have given notice to terminate a contract under which a third party markets hedged sales contracts to trucking fleets that in turn purchase fuel at our TA locations in return for low pumping fee payments to us. See Item 3, "Legal Proceedings" for additional discussion of this matter.



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On May 30, 2007, we acquired Petro Stopping Centers, L.P., or Petro. Petro operates or franchises 69 travel centers along the U.S. interstate highways. These 69 centers are similar to the TA locations which we operate, except that they are generally larger and newer. We refer to this transaction as our Petro Acquisition. Simultaneously with our Petro Acquisition, Hospitality Trust acquired the real estate of 40 Petro centers and we leased these 40 locations from Hospitality Trust. In addition to the leasehold for these 40 locations, the Petro assets we acquired included:



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two travel centers owned and operated by Petro;



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two travel centers that Petro leased from parties other than Hospitality Trust;



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a minority interest in a joint venture which owns a travel center that is managed by Petro;



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contract rights as franchisor of 24 Petro travel centers;



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four land parcels which we believe are suitable for development of new travel centers; and



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various items of personal property, contract rights and working capital.



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After the Petro Acquisition, we began the integration of Petro into our business. While we expect to maintain both the TA and Petro brands, we have begun consolidating corporate office and various marketing and operational functions. This integration involves renegotiating supply arrangements with suppliers and revising processes and procedures in order to implement best practices across all of our locations.

Our Growth Strategy

        Deteriorating industry conditions in late 2007 and early 2008 have caused us to recently reevaluate our growth strategy. While we expect to limit our capital investments in the short term, as market conditions improve we may determine to grow our travel centers business. Capital investments we currently intend to pursue or consider include the following:

        Same site improvements.    We plan to improve many of our TA locations to increase the services we offer to attract professional truck drivers and motorists. In 2007 we invested $43.0 million to complete routine maintenance capital projects that had been deferred by our predecessor. We believe that by making these improvements these travel centers will be more attractive to both professional truck drivers and motorists and we may increase our sales and financial margins.

        Acquisitions.    In addition to the Petro acquisition, we purchased one travel center from a former TA franchisee in May 2007 for $3.1 million and two travel centers from unrelated parties in November

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and December 2007 for an aggregate of $17.8 million. We expect to invest $5.3 million in 2008 to remodel the travel centers acquired in the fourth quarter.

        Development.    We completed construction of new travel centers in Livingston, CA in March 2007 and in Laredo, TX in July 2007. These sites were being developed when we acquired our predecessor. The total cost of these two developments, including site acquisition costs, was $35.6 million. We have a minority interest in a joint venture that we expect will build a new travel center and we expect we may invest up to $7.0 million in this joint venture during 2008. This joint venture interest was acquired as part of the Petro Acquisition. We own several additional sites which we believe may be suitable to develop as travel centers. We estimate our total cost to develop these eight sites to be substantial; however, because of industry conditions, we have deferred substantially all of our development activities at this time.

        Franchising.    Forty seven of our travel centers are operated by our franchisees, 24 as Petro Stopping Centers® and 23 as TravelCenters of America®. Since January 31, 2007, we added one TravelCenters of America franchised location. We may expand our business by franchising.

Our Travel Center Locations

        At December 31, 2007, our travel centers consisted of:

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175 travel centers leased from Hospitality Trust and operated by us;



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10 travel centers leased from Hospitality Trust and subleased to and operated by our franchisees;



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nine travel centers we operate on sites we own;



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four travel centers that we operate on sites owned by parties other than Hospitality Trust;



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one travel center we operate for a joint venture in which we own a minority interest; and



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37 travel centers that are operated by our franchisees on sites they own or lease.

        Our travel centers include 167 that are operated under the TravelCenters of America or TA brand names and 69 that are operated under the Petro brand name. Our typical travel center includes:

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over 23 acres of land with parking for 190 tractor trailers and 100 cars;



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a full service restaurant and one or more QSRs operated by us as a franchisee under various brands;



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a truck repair facility and parts store;



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multiple diesel and gasoline fueling points; and



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a travel and convenience store, game room, lounge and other amenities for professional truck drivers and motorists.

        Substantially all of our travel centers are full service sites located on or near an interstate highway and offer fuel and nonfuel products and services 24 hours per day, 365 days per year.

        Properties.    The physical layouts of our travel centers vary from site to site. The majority of the developed acreage at our travel centers consists of truck and car fuel islands, separate truck and car parking lots, a main building, which contains a full service restaurant and one or more QSRs, a travel and convenience store, a truck maintenance and repair shop and other amenities. Most of our TA locations have one building with separate service areas and most of our Petro locations have several separate buildings.

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        Product and Service Offering.    We offer many products and services to complement our diesel fuel business, including:

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Gasoline. We sell branded and unbranded gasoline. Of our 236 travel centers as of December 31, 2007, we offer branded gasoline at 158 travel centers and unbranded gasoline at 59 travel centers. Gasoline is not sold at 19 of our travel centers.



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Full Service Restaurants and QSRs. Most of our travel centers have both full service restaurants and QSRs that offer customers a wide variety of nationally recognized branded food choices. The substantial majority of our full service restaurants are operated under our "Iron Skillet®," "Country Pride®," "Buckhorn Family Restaurants®" and "Fork in the Road®" brands and offer menu table service and buffets. We also offer more than 20 different brands of QSRs, including Arby's®, Burger King®, Pizza Hut®, Popeye's Chicken & Biscuits®, Starbuck's Coffee®, Subway® and Taco Bell®. As of December 31, 2007, 210 of our travel centers included a full service restaurant, 162 of our travel centers offered at least one QSR, and there were a total of 287 QSRs in our 236 travel centers. We operate most of these QSRs as a franchisee, and restaurants and QSRs in travel centers we operate are generally staffed by our employees.



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Truck Repair and Maintenance Shops. All but 13 of our travel centers have truck repair and maintenance shops. The typical repair and maintenance shop has between three and six service bays and a parts storage room and is staffed by our mechanics and service technicians. These shops generally operate 24 hours per day, 365 days per year, and offer extensive maintenance and emergency repair and road services, ranging from basic services such as oil changes and tire repair to specialty services such as diagnostics and repair of air conditioning, air brakes and electrical systems. Some of our repair and maintenance services are guaranteed by our warranties. Most of our TA truck repair and maintenance facilities provide some warranty work on Freightliner brand trucks through our participation in the Freightliner ServicePoint® program, as described below.



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Travel and Convenience Stores. Each of our travel centers has a travel and convenience store which offers merchandise to truck drivers, motorists, recreational vehicle operators and bus drivers and passengers. Each travel and convenience store has a selection of over 4,000 items, including food and snack items, beverages, non-prescription drug and beauty supplies, batteries, automobile accessories, and music and video products. In addition to complete travel and convenience store offerings, the stores sell items specifically designed for the truck driver's on the road lifestyle, including laundry supplies, clothing and truck accessories. Most of our stores also have a "to go" snack bar as an additional food offering.



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Additional Driver Services. We believe that trucking fleets can improve the retention and recruitment of truck drivers by directing them to visit high quality, full service travel centers. We try to provide a consistently high level of service and amenities to professional truck drivers at all of our travel centers, making our travel centers an attractive choice for trucking fleets. Most of our travel centers provide truck drivers with access to specialized business services, including an information center where drivers can send and receive faxes, overnight mail and other communications and a banking desk where drivers can cash checks and receive funds transfers from fleet operators. Our typical travel center also has a video game room, a laundry area with washers and dryers, private showers and areas designated for truck drivers only, including a theater or television room with a video player and comfortable seating. Some of our travel centers offer casino gaming.



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Marketing. We offer truck drivers "loyal fueler" programs, called the RoadKing Club^SM and the Petro Passport^SM, that are similar to the frequent flyer programs offered by airlines. Drivers receive a point for each gallon of diesel fuel purchased and each dollar spent on selected nonfuel products and services. These points can be redeemed for discounts on nonfuel products

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and services at our travel centers. We publish a magazine called Road King^SM which includes articles and advertising of interest to professional truck drivers.

Operations

        Fuel.    We purchase diesel fuel from various suppliers at rates that fluctuate with market prices and generally are reset daily, and we sell fuel to our customers at prices that we establish daily. By establishing supply relationships with several alternate suppliers per location, we believe we are able to effectively create competition for our purchases among various diesel fuel suppliers. We also believe that purchasing arrangements with multiple diesel fuel suppliers may help us avoid product outages during times of diesel fuel supply disruptions. At some locations, however, there are very few suppliers for diesel fuel in the market and we may have only one supplier. We have single sources of supply for gasoline at each of our travel centers that offer branded gasoline; we generally purchase gasoline from multiple sources for our travel centers that offer unbranded gasoline.

        Generally our fuel purchases are delivered directly from suppliers' terminals to our travel centers. We do not contract to purchase substantial quantities of fuel to hold as inventory. We generally have less than three days of diesel fuel inventory at our travel centers. We are exposed to price increases and interruptions in supply. We believe our exposure to market price increases for diesel fuel is partially mitigated by the significant percentage of our total diesel fuel sales volume that is sold under pricing formulae that are indexed to market prices, which reset daily. We do not engage in any fixed price fuel contracts with customers. We may engage, from time to time, in a minimal level of hedging of the price of our fuel purchases with futures and other derivative instruments.

        Nonfuel products.    We have many sources for the large variety of nonfuel products that we sell. We have developed strategic relationships with several suppliers of key nonfuel products, including Daimler Trucks North America LLC, formerly Freightliner LLC, for truck parts, Bridgestone/Firestone Tire Sales Company for truck tires and ExxonMobil Oil Corporation for lubricants and oils. We believe that our relationships with these and our other suppliers are satisfactory. We maintain a distribution center near Nashville, Tennessee, with 85,000 square feet of space. Our distribution center distributes certain nonfuel and non perishable products to our travel centers using a combination of contract carriers and our fleet of trucks and trailers.

        Freightliner Agreement.    We are party to an agreement with Daimler Trucks North America. Daimler is a leading manufacturer of heavy trucks in North America. We are an authorized provider of repair work and specified warranty repairs to Daimler's customers through the Freightliner ServicePoint® program. Most of our TA truck maintenance and repair facilities are part of Freightliner's 24 hour customer assistance database for emergency and roadside repair referrals and we have access to Daimler's parts distribution, service and technical information systems. This agreement does not presently include our Petro locations.

Our Leases With Hospitality Trust

        We have two leases with Hospitality Trust, the TA lease for 145 TA travel centers, which became effective on January 31, 2007, and the Petro lease for 40 Petro travel centers, which became effective on May 30, 2007. Two of our subsidiaries are the tenants under the leases, and we, and in the case of our TA lease certain of our subsidiaries, guarantee the tenants' obligations under the leases. The following are summaries of the material terms of these leases:

        Term.    The TA lease expires on December 31, 2022. The Petro lease expires on June 30, 2024, and may be extended by us for up to two additional periods of 15 years each.

        Operating Costs.    The leases are so called "triple net" leases, which require us to pay all costs incurred in the operation of the leased travel centers, including personnel, utilities, acquiring

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inventories, service to customers, insurance, real estate and personal property taxes and ground lease payments, if any.

        Rent.    The TA lease requires us to pay minimum rent to Hospitality Trust in increasing amounts starting at $153.5 million for the first lease year and increasing to $175.0 million for the sixth and subsequent lease years, plus, starting in 2012, additional rent calculated as follows: an amount equal to 3% of increases in nonfuel gross revenues and 0.3% of increases in gross fuel revenues at each leased travel center over the respective gross revenue amounts for the year 2011. The Petro lease requires us to pay minimum annual rent to Hospitality Trust of $62.2 million and additional rent calculated using the same formula as in the TA lease, except that such payments start in 2013 and are calculated using the revenues of the 40 Petro travel centers in excess of revenues for the year 2012. Additional rent attributable to fuel sales in each lease is subject to a maximum each year calculated by reference to changes in the consumer price index.

        The following table sets forth the amounts of minimum rent required under the two leases with Hospitality Trust in each of the years shown.

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The TA Lease amount shown is for the eleven months ended December 31, 2007.



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The Petro Lease amount shown is for the seven months ended December 31, 2007.

        Improvements.    Hospitality Trust has agreed to provide up to $25 million of funding annually for the first five years of the TA lease for certain improvements to these leased properties. This funding is cumulative, meaning if some portion of the $25 million is not spent in one year it may be drawn by us from Hospitality Trust in subsequent years; provided, however, none of the $125 million of funding is available to be drawn after December 31, 2015. All improvements purchased with this funding are owned by Hospitality Trust. There will be no adjustment in our minimum rent as these amounts are funded by Hospitality Trust.

        Maintenance and Alterations.    Except for Hospitality Trust's commitment to fund up to $125 million as described above, we must maintain, at our expense, the leased travel centers, including maintenance of structural and non-structural components. The leases require us to submit an annual budget for capital expenditures at the leased travel centers to Hospitality Trust for approval. We may request that Hospitality Trust fund approved amounts for renovations, improvements and equipment at the leased travel centers, in addition to the $125 million described above, in return for minimum annual rent increases according to a formula: the minimum rent per year will be increased by an amount equal to the amount funded by Hospitality Trust times the greater of (i) 8.5% or (ii) a benchmark U.S. Treasury interest rate plus 3.5%. At the end of each lease we must surrender the leased travel centers in substantially the same conditions as existed at the commencement of the lease subject to any permitted alterations and reasonable wear and tear.

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        Assignment and Subletting.    Hospitality Trust's consent is required for any direct or indirect assignment or sublease of any of the leased travel centers. We remain liable under the leases for subleased travel centers.

        Environmental Matters.    Generally, we have agreed to indemnify Hospitality Trust from liabilities which may arise from any violation of any environmental law or regulation.

        Indemnification and Insurance.    With limited exceptions, we indemnify Hospitality Trust from liabilities which arise during the terms of the leases from ownership or operation of the leased travel centers. We generally must maintain commercially reasonable insurance. Our insurance coverage includes:

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property insurance in an amount equal to the full replacement cost of at risk improvements at our leased travel centers;



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business interruption insurance;



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general liability insurance, including bodily injury and property damage, in amounts as are generally maintained by companies operating travel centers;



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flood insurance for any travel center located in whole or in part in a flood plain;



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worker's compensation insurance if required by law; and



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such additional insurance as may be generally maintained by companies operating travel centers, including certain environmental insurance.

The leases generally require that Hospitality Trust be named as an additional insured under our insurance policies.

        Damage, Destruction or Condemnation.    If any leased travel center is damaged by fire or other casualty or taken by eminent domain, we are generally obligated to rebuild. If the leased travel center cannot be restored, Hospitality Trust will generally receive all insurance or taking proceeds, we are liable to Hospitality Trust for any deductible or deficiency between the replacement cost and the amount of such proceeds, and the annual minimum rent will be reduced by (i) in the case of the TA lease, at Hospitality Trust's option, either 8.5% of the net proceeds paid to Hospitality Trust or the fair market rental of the damaged, destroyed or condemned property, or portion thereof, as of the commencement date of the TA lease; (ii) in the case of a casualty under the Petro lease, 8.5% of the net proceeds paid to Hospitality Trust plus the fair market value of the land; and (iii) in the case of a taking under the Petro lease, 8.5% of the amount of the net proceeds paid to Hospitality Trust.

        Events of Default.    Events of default under each lease include the following:

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our failure to pay rent or any other sum when due;



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our failure to maintain the insurance required under the lease;



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the occurrence of certain events with respect to our insolvency;



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the institution of a proceeding for our bankruptcy or dissolution;



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our failure to continuously operate any leased travel center without Hospitality Trust's consent;



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the acquisition by any person or group of beneficial ownership of 9.8% or more of the voting shares or the power to direct the management and policies of us or any of our subsidiary tenants or guarantors; the sale of a material part of the assets of us or any such tenant or guarantor; or the cessation of certain continuing directors constituting a majority of the board of directors of us or any such tenant or guarantor; in each case without the consent of Hospitality Trust;

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our default under any indebtedness of $10 million or more for the TA lease, or $20 million or more for the Petro lease, that gives the holder the right to accelerate the maturity of the indebtedness; and



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our failure to perform certain other covenants or agreements of the lease and the continuance thereof for a specified period of time after written notice.

        Remedies.    Following the occurrence of any event of default, each lease provides that, among other things, Hospitality Trust may, to the extent legally permitted:

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accelerate the rent;



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terminate the lease; and/or



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make any payment or perform any act required to be performed by us under the lease and receive from us, on demand, an amount equal to the amount so expended by Hospitality Trust plus interest.

        We are also obligated to reimburse Hospitality Trust for all costs and expenses incurred in connection with any exercise of the foregoing remedies.

        Lease Subordination.    Each lease may be subordinated to any mortgages of the leased travel centers by Hospitality Trust, but Hospitality Trust is required to obtain nondisturbance agreements for our benefit.

        Financing Limitations; Security.    Without Hospitality Trust's prior written consent, our tenant subsidiaries may not incur debt secured by any of their assets used in the operation of the leased travel centers; provided, however, our tenant subsidiaries may incur purchase money debt to acquire assets used in these operations and we may encumber such assets to obtain a line of credit secured by our tenant subsidiaries' receivables, inventory or certain other assets used in these operations.

        Lease Termination.    When a lease terminates, any equipment, furniture, fixtures, inventory and supplies at the leased travel centers that we own may be purchased by Hospitality Trust at then fair market value. Also at termination of the TA lease, Hospitality Trust has the right to license any of our software used in the operation of the leased travel centers thereunder at its then fair market value and to offer employment to employees at the leased travel centers thereunder; and under both leases we have agreed to cooperate in the transfer of permits, agreements and the like necessary for the operation of the leased travel centers thereunder.

        Territorial Restrictions.    Under the terms of each lease, we generally cannot own, franchise, finance, operate, lease or manage any travel center or similar property within 75 miles in either direction along the primary interstate on which the leased travel center is located without the consent of Hospitality Trust.

        Non-Economic Properties.    If during a lease term the continued operation of any leased travel center becomes non-economic as defined in the lease, we may offer such travel center for sale including a sale of Hospitality Trust's interest in the property, free and clear of our leasehold interests. The net sale proceeds received will be paid to Hospitality Trust and the annual minimum rent payable shall be reduced. In the case of the TA lease, this reduction will be, at Hospitality Trust's option, either the amount of such proceeds times 8.5% or the fair market rental for such property as of the commencement date of the lease; in the case of the Petro lease, this reduction will be the amount of such proceeds times 8.5%. No more than a total of 15 properties subject to the TA lease and no more than five properties subject to the Petro lease may be offered for sale as non-economic properties during the applicable lease term. No sale of a travel center leased from Hospitality Trust may be completed without Hospitality Trust's consent; provided, however, if Hospitality Trust does not consent,

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that property will no longer be part of the lease and the minimum rent will be reduced as if the sale had been completed.

Relationships with Franchisees

        We have lease and franchise agreements with lessees and owners of travel centers. We collect rent, franchise, royalty and other fees under these agreements. As of December 31, 2007, 47 of our travel centers were operated by our franchisees. Ten of these travel centers are leased by us from Hospitality Trust and subleased by us to a franchisee. Thirty-seven of these travel centers are owned, or leased from others, by our franchisees. As of December 31, 2007, two franchisees operated four locations each, two operated three locations each, two operated two locations each, and 29 operated one location each. Branding and ownership of our franchised locations by state as of December 31, 2007, are generally described in the chart below:

Franchise Agreements

        Material provisions of our franchise agreements include the following:

        Initial Franchise Fee.    The initial franchise fee for a new franchise is $100,000 for a TA franchise and $50,000 for a Petro franchise.

        Term of Agreement.    The initial term of a franchise agreement is generally ten years for a TA franchise and 15 years for a Petro franchise. Our franchise agreements generally provide for two five year renewals on the terms then being offered to prospective franchisees at the time of the franchise renewal. As of December 31, 2007, our franchise agreements had an average remaining term excluding renewal options of five years and an average remaining term including renewal options of 14 years.

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        Protected Territory.    Under the terms of our franchise agreements for TA travel centers, generally we have agreed not to operate, or allow another person to operate, a travel center or travel center business that uses the TravelCenters of America or TA brand in a specified territory for that TA branded franchise location. Under the terms of our franchise agreements for Petro travel centers, generally we have agreed not to operate, or allow another person to operate, a travel center or travel center business that uses the Petro brand in a specified territory for that Petro branded franchise location.

        Restrictive Covenants.    Generally our franchisees may not operate any travel center or truck stop related business under a franchise agreement, licensing agreement or marketing plan or system of another person or entity. If the franchisee owns the franchised premises, generally for a two year period after termination of our franchise agreement the franchisee may not operate the premises with a competitive brand.

        Fuel Purchases, Sales and Royalties.    Our TA franchisees that operate travel centers that they sublease from us must purchase all of their diesel fuel from us. Our franchisees that do not sublease from us the travel centers they operate are not required to purchase their diesel fuel from us; however, our franchise agreements which do not require the franchisee to purchase fuel from us generally do require the franchisee to pay us a royalty fee based on sales of certain fuels at the franchised travel center. We also purchase receivables generated by some of our franchisees on a non-recourse basis in return for a fee.

        Nonfuel Product Offerings.    Franchisees are required to operate their travel centers in conformity with guidelines that we establish and offer any products and services that we deem to be a standard product or service in our centers.

        Royalty Payments on Nonfuel Revenues.    Franchisees are required to pay us a royalty fee generally equal to between 3.5% and 4% of nonfuel revenues. Generally if a TA franchisee operates one or more QSRs on the franchised premises, the franchisee must pay us 3% of all revenues in connection with those sales, net of royalties paid to QSR franchisors.

        Advertising, Promotion and Image Enhancement.    Our franchisees are required to make additional payments to us as contribution to the applicable brand wide advertising, marketing and promotional expenses we incur.

        Termination/Nonrenewal.    Generally, we may terminate or refuse to renew a franchise agreement for default by the franchisee. Generally, we may also refuse to renew if we determine that renewal would not be in our economic interest or if the franchisee will not agree to the terms in our then current form of franchise agreement for the concerned brand.

        Rights of First Refusal.    During the term of each franchise agreement, we generally have a right of first refusal to purchase that facility at the price offered by a third party. In addition, we generally have the right to purchase franchised Petro centers for fair market value, as determined by the parties or an independent appraiser, upon termination of a Petro franchise agreement.

Franchisee Lease Agreements

        In addition to franchise fees, we also collect rent from franchisees for ten travel centers operated by TA franchisees that sublease travel centers from us. The material provisions of these lease agreements include the following:

        Operating Costs.    The franchisee is responsible for the payment of all costs and expenses in connection with the operation of the leased travel centers, typically excluding certain environmental costs, certain maintenance costs and real property taxes.

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        Term of Agreement.    The subleases have an initial term of ten years and allow for two renewals of five years each. The current terms of these sublease agreements end in 2012. The average remaining term of these agreements as of December 31, 2007, including all renewal periods, was 15 years.

        Rent.    The sublessee must pay annual fixed rent equal to the sum of:

•

base rent;



•

improvement rent, if any, which is defined as an amount equal to a percentage of the cost of certain capital improvements we fund after we and the sublessee agree the improvements may enhance the value of the leased premises; and



•

an annual inflator generally equal to the percentage increase in the consumer price index.

        Use of the Leased Travel Center.    The leased travel center must be operated as a travel center in compliance with all laws, including all environmental laws.

        Termination/Nonrenewal.    The subleases contain terms and provisions regarding termination and nonrenewal, which are substantially the same as the terms and provisions of the related franchise agreements. The subleases are cross defaulted with the related franchise agreements. In certain circumstances, we may reimburse the franchisee for a portion of the franchisee's cost of certain capital improvements upon termination of the lease.

Franchise Regulation

        Some states require state registration and delivery of specified disclosure documentation to potential franchisees and impose special regulations on petroleum franchises. Some state laws also impose restrictions on our ability to terminate or not to renew franchises and impose other limitations on the terms of our franchise relationships or the conduct of our franchise business. A number of states include, within the scope of their petroleum franchising statutes, prohibitions against price discrimination and other allegedly anticompetitive conduct. These provisions supplement applicable federal and state antitrust laws. Federal Trade Commission regulations require that we make extensive disclosure to prospective franchisees. We believe that we are in compliance with all franchise laws applicable to our business.

Competition

        The travel center and truck stop industry is fragmented and highly competitive. We believe that there are in excess of 6,000 travel center and truck stops nationwide.

        Fuel and nonfuel products and services can be obtained by truck drivers from a variety of sources, including regional full service travel center and pumper only truck stop chains, independently owned and operated truck stops and some large service stations. In addition, some trucking companies operate their own terminals to provide fuel and services to their own trucking fleets.

        There are generally two types of fueling stations designed to serve the trucking industry:

•

full service travel centers, such as ours, which offer a broad range of products and services to trucking fleets and their drivers, independent truck drivers and motorists, including: diesel fuel and gasoline; full service restaurants; QSRs; truck repair and maintenance; travel and convenience stores; parking areas; and various driver amenities; and



•

so called "pumper only" truck stops, which provide diesel fuel, typically at discounted prices, with limited additional services. A pumper only chain may include a majority of travel centers which typically contain few, if any, QSRs, limited store facilities; few, if any, truck repair and maintenance facilities; and few, if any, full service restaurants.

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        We consider our TA and Petro travel centers to be full service travel centers. Our largest competitor in the full service segment operates travel centers under the brand "Flying J." Our two largest competitors in the pumper only segment operate centers under the brands "Pilot" and "Love's."

        We experience substantial competition from pumper only truck stop chains based principally on diesel fuel prices. We also experience substantial competition from full service travel center chains and independent full service travel centers, that is based principally on diesel fuel prices and nonfuel product and service offerings.

        Our truck repair and maintenance facilities compete with regional full service travel center and truck stop chains, full service independently owned and operated truck stops, fleet maintenance terminals, independent garages, truck dealerships, truck quick lube facilities and other parts and service centers. None of our largest competitors, Flying J, Pilot or Love's, operate as many truck repair facilities as we operate.

        We also compete with other full service restaurants, QSRs, mass merchandisers, electronics stores, drugstores and travel and convenience stores.

        Some truck fleets own their own fuel, repair and maintenance facilities. Although we believe the long term trend has been toward a reduction in these facilities in favor of obtaining fuel, repair and maintenance services from third parties like us, during the last few years of historically volatile and rising fuel prices, this long term trend appears to have slowed and may be reversing.

        An additional source of competition in the future could result from commercialization of state owned interstate highway rest areas. Some state governments have historically requested that the federal government allow these rest areas to offer fuel and nonfuel products and services similar to that offered at a travel center. If commercialized, these rest areas may increase the number of locations competing with us.

        Some states have begun to privatize their toll roads which are part of the interstate highway system. We believe it is likely that tolls will increase on privatized highways. In addition, some states may increase tolls for their own account. Whenever tolls are increased on highways in proximity to our locations, our business at those affected locations may decline because truckers may seek alternative routes serviced by our competitors.

        We believe we will be able to compete successfully for the following reasons:

•

Because we offer consistent, high quality products and services in our nationwide locations we may be able to attract fleet and independent professional truck drivers and motorists.



•

Many of our employees have substantial experience in operating our business.



•

As a publicly owned company we may have stronger capitalization and opportunities to raise capital than some of our competitors.



•

Our continuing relationship with Hospitality Trust may provide us opportunities to expand our business in the future.

        Although we believe our management team is highly talented, our senior management has been assembled from Reit Management, our predecessor and Petro and they do not have extensive experience working together. Hospitality Trust is not obligated to provide us with opportunities to lease additional properties, and we may not be able to find other sources of capital sufficient to maintain or grow our travel center business. Also, some of our competitors have substantially more resources than we do; and some of our competitors have vertically integrated fuel businesses which may provide them competitive advantages. For all of these reasons and others, we can provide no assurance that we will be able to compete successfully.

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Environmental Matters

        Our operations and properties are extensively regulated by environmental laws. We may be required to investigate and clean up hazardous substances, including petroleum products, released at our owned and leased properties. We may be held liable to governmental entities or to third parties for property damage and personal injuries and for investigation and clean up costs incurred in connection with any contamination. We use underground storage tanks and above ground storage tanks to store petroleum products and waste at our travel centers. We must comply with environmental laws regarding tank construction, integrity testing, leak detection and monitoring, overfill and spill control, release reporting and financial assurance for corrective action in case of a release. At some locations, we must also comply with environmental laws relating to vapor recovery or discharges to water.

        From time to time we have received, and in the future likely will receive, notices of alleged violations of environmental laws or otherwise became aware of the need to undertake corrective actions to comply with environmental laws at our travel centers. Investigatory and remedial actions were, and regularly are, undertaken with respect to releases of hazardous substances at our travel centers. In some cases contributions were, and may be, received to partially offset environmental costs from insurers, from state funds established for environmental clean up associated with the sale of petroleum products or from indemnitors who agreed to fund certain environmental related costs at travel centers purchased from such indemnitors.

        As of December 31, 2007, we had a reserve of $12.8 million for known unindemnified environmental matters for which we will be responsible, and we had a receivable for estimated insurance recoveries of these estimated future expenditures of $3.9 million and $3.3 million of cash in an escrow account to fund certain of these estimated expenditures, leaving an estimated net amount of $5.6 million to be funded by us in the future. We do not have a reserve for potential unknown or future environmental matters. We cannot precisely know the ultimate costs we will incur in connection with currently known or future potential environmental related violations, corrective actions, investigation and remediation; however, based on our current knowledge we do not expect that the costs to be incurred at our travel centers, individually or in the aggregate, would be material to our financial condition, results of operations or cash flow.

        Despite our present expectation, we cannot be certain that we know of all existing contamination present in our travel centers, or that material liability will not be imposed on us in the future. If additional environmental problems arise or are discovered, or if additional environmental requirements are imposed by government agencies, increased environmental compliance or remediation expenditures may be required, which could have a material adverse effect on us.

        We have implemented and expect to continue programs to monitor and remediate our exposures to environmental liabilities. Also, we have insurance of up to $35 million for unanticipated costs regarding certain known environmental liabilities and of up to $60 million regarding certain unknown or future environmental liabilities subject to certain limitations and deductibles. However, as noted above, we can provide no assurance that:

•

we or a prior owner, operator or occupant of our travel centers did not create a material environmental condition not known to us at this time;



•

future uses or circumstances (including changes in applicable environmental laws and regulations) will not result in the imposition of additional environmental liability upon us; or



•

we will be able to maintain similar environmental insurance coverage in the future on acceptable terms.

        Under the terms of our leases, we generally have agreed to indemnify Hospitality Trust for any environmental liabilities related to travel centers which we lease from Hospitality Trust.

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Intellectual Property

        We own no patents. We own the "Petro" name and related trademarks. We have the right to use the "TA", "TravelCenters of America" and other trademarks historically used by our predecessor, which are owned by Hospitality Trust, during the term of the TA lease. We also license certain trademarks used in the operation of our QSRs. We believe that these trademarks are important to our business, but could be replaced with alternative marks without significant disruption in our business.

Seasonality

        Our revenues during a year are often lowest in the first quarter when movement of freight by professional truck drivers and motorist travel are historically at their lowest seasonal levels. Our revenues in the fourth quarter of a year are often somewhat lower than those of the second and third quarters because although the fourth quarter is often positively impacted by increased movement of freight in preparation for various 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. Also, the historical increased freight movement during the fourth quarter of the year has moderated somewhat during recent years. The effect of seasonality is sometimes masked or magnified however, by other market forces, such as changes in the economy generally and in trucking industry conditions.

Employees

        As of December 31, 2007, we employed approximately 16,000 people on a full or part time basis. Of this total, approximately 15,400 were employees at our company operated sites, 550 performed managerial, operational or support services at our headquarters or elsewhere and 50 employees staffed our distribution center. Except for 22 employees at two sites, none of our employees are represented by unions. We believe that our relationship with our employees is satisfactory.

        In March 2008, as a result of deteriorating business conditions, we terminated 192 salaried employees, at our headquarters and other locations, including operating sites; additional reductions are expected to be made to our site level hourly workforce, mostly by attrition.

Item 1A.    Risk Factors

        Our business faces many risks. The risks described below or referred to elsewhere in this Annual Report may not be the only risks we face. Additional risks that we do not yet know of, or that we currently think are immaterial, may also adversely impact our business operations or financial results. If any of the events or circumstances described in the following risks occurs, our business, financial condition or results of operations could suffer and the trading price of our equity securities likely will decline. Investors and prospective investors should carefully consider the following risks, the risks referred to elsewhere in this Annual Report and the information contained under the heading "Warning Concerning Forward Looking Statements" before deciding whether to invest in our securities.

Risks in our business

Our operations have consistently produced losses.

        Since we began operations on January 31, 2007, our business has consistently produced losses. Although some of our losses have resulted from management transition, reorganization and other costs which we do not expect to continue, until our operations begin to show profits we can not provide any assurance that we will be able to operate profitably.

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Our financial results are being impacted by the current slowing or recession in the U.S. economy.

        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 slowing or is in recession, demand for our products and services is slowing. For example, the recent decline in housing construction has led to less lumber and construction materials being shipped, and these reduced shipments have resulted in fewer customers and lower sales volumes at our travel centers. If the U.S. economy continues to operate at the present rates or if it declines further, our financial results may not improve or our losses may increase.

The weak U.S. dollar compared to other currencies appears to have resulted in less imported consumer goods into the U.S. and less business at our travel centers.

        During the past 20 years, increasing world trade has resulted in large increases in the importation of consumer goods into the U.S., many of which are transported within the U.S. by truck. Recent declines in the value of the U.S. dollar versus other currencies appears to have lessened the demand for consumer goods imported into the U.S. and this decline is adversely affecting our business of supplying goods and services to truckers. Increases in U.S. exports has not offset this lost business, as many U.S. exports, for example commodities and heavy equipment, generally are not shipped via truck. If the value of the U.S. dollar continues to be weak versus other currencies or if that value declines further, our financial results may not improve or our losses may increase.

Recent fuel price increases and fuel price volatility are negatively affecting our business.

        Fuel prices and price volatility are currently very high. These high prices and the inability to project future prices has had several adverse impacts upon our business. First, high fuel prices have resulted in higher truck shipping costs. This causes shippers to consider alternative means for transporting freight, which reduces trucking business and, in turn, reduces our business. Second, high fuel prices have caused our trucking customers to seek cost savings throughout their businesses. This has resulted in some customers concentrating their fuel business with some of our competitors who are vertically integrated fuel refiners and retailers who may offer lower prices than we offer. Third, higher fuel prices may result in less disposable income for some truckers to purchase our non-fuel goods and services. Fourth, higher and more volatile fuel prices have increased the working capital needed to maintain our fuel inventories, and this increases our costs of doing business. If fuel prices remain high and volatile or if fuel prices or fuel price volatility increase, our financial results may not improve and our losses may increase.

Our labor costs are difficult to control.

        We have recently made reductions in our salaried workforce and we are attempting to implement additional labor costs savings in our hourly workforce to match the recent declines in our business volumes. However, our travel centers operate 24 hours per day, 365 days per year. To maintain and manage our operations requires certain minimum staffing levels. We believe it may be increasingly difficult for us to make staff reductions without adversely affecting our business prospects. Also, certain opportunities for sales may be lost when labor is reduced. For these reasons, our labor costs are difficult to control and we may suffer continuing losses.

Our properties require regular and expensive maintenance and capital investments.

        As noted above, our travel centers are open for business 24 hours per day, 365 days per year. Also, many of our locations were originally constructed more than 25 years ago. Because of the age of many of our properties, especially some of our TA sites, and because of the nature and intensity of our uses of these properties, our properties require regular and expensive maintenance and capital investments

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to remain functional and attractive to customers. When we commenced business we determined that some of our TA sites required significant capital investments and we obtained a commitment from Hospitality Trust to invest $125 million in our leased TA sites as part of the HPT Transaction. After the HPT Transaction was completed, we determined to accelerate this investment and we raised additional capital, in part, to do so. Recently, because of the slowing U.S. economy and our losses we have determined to defer some of these capital expenditures; our continuing losses are restraining our maintenance and capital expenditures plans. If our financial results do not improve or if we can not access capital necessary to maintain our properties, our business may decline and our losses may increase.

Our operating margins are narrow.

        Our total operating revenues for the year ended December 31, 2007, were $6.2 billion; while the sum of our cost of goods sold (excluding depreciation) and site level operating expenses for the same period totaled $5.9 billion. Fuel sales in particular generate low gross margins. Our fuel sales for the year ended December 31, 2007, were $5.1 billion and our gross profit on fuel sales was $171 million. A small percentage decline in our future revenues or increase in our future expenses, especially revenues and expenses related to fuel, may cause us to continue to experience losses or our losses to increase.

An interruption in our fuel supplies would materially adversely affect our business.

        To mitigate the risks arising from fuel price volatility, we generally maintain limited inventories of fuel. Accordingly, an interruption in our fuel supplies would materially adversely affect our business. Interruptions in fuel supplies may be caused by local conditions, such as a malfunction in a particular pipeline or terminal, by weather related events, or by national or international conditions, such as government rationing, acts of terrorism, war and the like. Any limitation in available fuel supplies which causes a decline in truck freight shipments or which caused a limit on the fuel we can offer for sale may cause us to experience losses or our losses to increase.

We are involved in litigation which is expensive and may have adverse impacts upon our business.

        We are currently involved in litigation which is expensive and which may have adverse consequences to us. For example:

•

We are a defendant in a civil antitrust case brought by Flying J and its affiliates against us and others. This case was commenced against our predecessor, but we are responsible for its continued defense and any damages which may result. Antitrust litigation is expensive to defend and damages may include triple the amount of injury which has been allegedly incurred plus recovery by the plaintiff of its legal fees.



•

We are involved in litigation with shareholders who are attempting to make nominations to our Board of Directors and to present proposals of other business for our annual meeting which may be disruptive of our business operations. The dissident shareholders have made proposals and public statements which, if they were implemented, may cause us to default under our Hospitality Trust leases and to default under our existing revolving credit facility.

        If these litigations and others continue for extended periods or if they result in judgments adverse to us, we may continue to experience losses or our losses may increase. See below Item 3—Legal Proceedings.

We rely upon trade creditors for a significant amount of our working capital.

        Our fuel purchases are our largest operating cost. In 2007, we purchased $4.9 billion of fuel. Historically, we have paid for our fuel purchases after delivery. During the past year as our fuel costs

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have increased some of our fuel suppliers have been unwilling to adjust the amounts of our available trade credit to accommodate the increased costs of the fuel volumes which we purchase; for example, a $10 million amount of trade credit will allow us to purchase five million gallons of fuel at $2.00 per gallon, but only 3.33 million gallons at $3.00 per gallon. Also, our financial results and business conditions in the U.S. financial markets generally have caused some fuel suppliers to request letters of credit or other forms of security for our purchases. As a result, our investment in our working capital has increased. Any increased investment in working capital decreases our financial flexibility to use our capital for other business purposes and may cause us to continue to experience losses or our losses to increase.

Our storage and dispensing of petroleum products create the potential for environmental damages, and compliance with environmental laws may be costly.

        Our business is subject to laws relating to the protection of the environment. The travel centers we operate include fueling areas, truck repair and maintenance facilities and tanks for the storage of petroleum products and other hazardous substances, all of which create the potential for environmental damage. As a result, we regularly incur environmental clean up costs. Our balance sheet as of December 31, 2007, included an accrued liability of $12.8 million for environmental remediation and related costs. Because of the uncertainties associated with environmental expenditures, it is possible that future expenditures could be substantially higher than this amount. Environmental laws expose us to the possibility that we may become liable to reimburse the government or others for damages and costs they incur in connection with environmental hazards. We cannot predict what environmental legislation or regulations may be enacted or how existing laws or regulations will be administered or interpreted with respect to our products or activities in the future; more stringent laws, more vigorous enforcement policies or stricter interpretation of existing laws in the future could cause us to experience losses. In addition, under the leases between us and Hospitality Trust, we have agreed generally to indemnify Hospitality Trust from environmental liabilities it may incur arising at any of our leased travel centers.

Our franchisees may become unable to pay our rents and royalties and we have limited control of our franchisees.

        Ten travel centers which we lease from Hospitality Trust are subleased to franchisees. An additional 37 travel centers not owned by us or Hospitality Trust are operated by franchisees. Because we have historically experienced losses, the rent and royalties we receive from these franchisees may be significant to us. For the year ended December 31, 2007, the rent and royalty revenue generated from these franchisee relationships was $12.9 million. We believe the deteriorating business conditions which have recently affected the locations which we operate, including the impact of the slowing U.S. economy, the weak U.S. dollar and the high and volatile fuel prices, are also adversely affecting our franchisees and may make it difficult for our franchisees to pay the rent and royalties due to us. Also, various laws and our existing franchise contracts limit the control we may exercise over our franchisees' business activities. A failure by our franchisees to pay rents and royalties to us may cause us to continue to experience losses or cause our losses to increase.

Risks arising from our formation and certain relationships

We have been recently reorganized.

        We are a recently reorganized business. Our board and senior management include persons associated with Hospitality Trust and its affiliates and with Reit Management as well as former executives of our predecessor and of Petro. This management team has no prior experience working together and they may not be able to do so successfully.

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We are obligated to pay material amounts of rent to Hospitality Trust.

        The terms of our leases with Hospitality Trust require us to pay all of our operating costs and generally fixed amounts of rent. During periods of industry decline, like the one we are currently experiencing, our revenues may decrease but our rents due Hospitality Trust do not decline. A decline in our revenues or an increase in our expenses may make it difficult or impossible for us to meet all of our obligations and, if we default our Hospitality Trust leases, we expect that we may be unable to continue our business.

Our business is subject to possible conflicts of interest with Hospitality Trust and Reit Management.

        Our creation was, and our continuing business is, subject to possible conflicts of interest, as follows:

•

Two of our directors were trustees of Hospitality Trust at the time we were created.



•

We have five directors, one of whom, Barry M. Portnoy, also is a trustee of Hospitality Trust and the majority owner of Reit Management, one of whom, Arthur G. Koumantzelis, is a former trustee of Hospitality Trust, and one of whom, Thomas M. O'Brien, is a former executive officer of Hospitality Trust and an employee of Reit Management.



•

Mr. O'Brien, who serves as our President and Chief Executive Officer, is also an employee of Reit Management. Andrew J. Rebholz, our Executive Vice President, Chief Financial Officer and Treasurer and John R. Hoadley, another of our Executive Vice Presidents, are also Reit Management employees. Reit Management is the manager for Hospitality Trust and we purchase services from Reit Management pursuant to our management and shared services agreement.

        We believe that our historical and ongoing business dealings with Hospitality Trust and Reit Management have benefited us and that, despite the foregoing possible conflicts of interest, the transactions we have entered with Hospitality Trust and Reit Management since the HPT Transaction have been commercially reasonable and not less favorable than otherwise available to us.

Ownership limitations and anti-takeover provisions may prevent you from receiving a takeover premium.

        Our limited liability company agreement, or LLC agreement, includes various provisions which may make it difficult for anyone to cause a change of control of us by means of a tender offer, open market share purchases, a proxy fight or otherwise, without the approval of our board of directors. Among others, these provisions include the following:

•

a prohibition on the ownership of more than 9.8% of any class or type of our equity securities by any person or group;



•

staggered terms for members of our board of directors;



•

the power of our board of directors, without shareholders' approval, to authorize and issue additional shares of any class or type on terms that it determines;



•

advance notice procedures for shareholder nominations and other proposals;



•

a 75% shareholders' vote and cause requirements for removal of the entire board of directors; and



•

a 75% shareholders' vote requirement for shareholder nominations and other proposals which are not approved by our board of directors.

        In addition, our leases with Hospitality Trust and our management and shared services agreement with Reit Management each provide that our rights and benefits under those agreements may be terminated in the event that anyone acquires more than 9.8% of our shares or we experience a change

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in control, as defined, without the consent of Hospitality Trust or Reit Management, respectively. For these reasons, among others, shareholders may be unable to realize a change of control premium for their common shares.

We may be unable to meet financial reporting and internal control standards for a publicly owned company.

        Our management is responsible for establishing and maintaining adequate internal control over financial reporting. Internal control over financial reporting is the process designed by, or under the supervision of, our Chief Executive Officer and Chief Financial Officer, and implemented by our board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with U.S. generally accepted accounting principles, or GAAP, and includes those policies and procedures that (i) pertain to the maintenance of records that in reasonable detail accurately and fairly reflect our transactions and dispositions of assets; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with GAAP, and that our receipts and expenditures are being made only in accordance with the authorization of our management and directors; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on our financial statements.

        We may identify material weaknesses in our internal control over financial reporting in the future. Beginning with this Annual Report on Form 10-K for the year ended December 31, 2007, pursuant to Section 404 of the Sarbanes Oxley Act of 2002, our management was required to assess the effectiveness of our internal control over financial reporting, and, beginning for the year ending December 31, 2008, we will be required to have our independent registered public accounting firm attest to the design and operating effectiveness of our internal control over financial reporting. As described in Item 9A(T) of this Annual Report on Form 10-K, we have adjusted the way we account for certain elements of our leases in our 2007 quarterly financial statements which constituted a material weakness in our internal control over financial reporting for those quarterly periods related to our lease accounting practices. Although this weakness was corrected and we believe related amounts are properly reflected in our financial statements and data included in this Annual Report on Form 10-K, if we or our independent registered public accounting firm were to either identify any other material weakness or otherwise conclude in their reports that our internal control over financial reporting was not effective, investors could lose confidence in our reported financial information and the price of our traded securities may decline.

Item 1B.    Unresolved Staff Comments

        None.

Item 2.    Properties

        Our principal executive offices are leased and are located at 24601 Center Ridge Road, Suite 200, Westlake, Ohio 44145-5639. Our distribution center is a leased facility located at 1450 Gould Boulevard, LaVergne, Tennessee 37086-3535.

        As of March 15, 2008, our travel center business consisted of 236 travel centers, 185 of which are leased from Hospitality Trust, nine of which we own, four of which are owned by parties other than Hospitality Trust and leased to or managed by us, 37 of which are owned or leased by our franchisees and one travel center we operate for a joint venture in which we own a minority interest. We operate 189 of these travel centers and our franchisees operate 47 of these travel centers. We own eight parcels of land on which we may decide to build additional travel centers in the future. Also, we own one site that is closed and held for sale.

23

        The table below summarizes information regarding branding and ownership of the travel centers we operate by state and excludes those travel centers operated by our franchisees:

⁽¹⁾

We lease these sites from, or manage these sites for, parties other than Hospitality Trust.

24

Item 3.    Legal Proceedings

        In February 2006 a subsidiary of our predecessor and Pilot Travel Centers, LLC, a competitor of ours, were sued by Flying J, Inc., another one of our competitors, and its affiliates in the U.S. District Court for the District of Utah. In essence, the lawsuit claims that we, Pilot and others participated in an unlawful concerted antitrust action to refuse to accept a payment card issued by a Flying J affiliate. Flying J and its affiliates are seeking damages in amounts to be determined at trial and other relief. We believe that we have substantial factual and legal defenses to Flying J's claims and are defending this litigation. In October 2007, the Court denied our motion for judgment on the pleadings and the case is headed toward what we believe may be lengthy and expensive discovery under terms agreed to by our predecessor, possibly followed by a jury trial. We incurred approximately $5.1 million in discovery and defense costs related to this case in 2007, all of which have been expensed.

        In May 2007 we terminated a contract with Simons Petroleum, Inc., or Simons, that had been entered by our predecessor. The contract allowed Simons to market fuel to trucking customers and to distribute that fuel through our TA branded locations in exchange for low pumping fees to us. The termination was made at our option as provided in the contract and required an 18 month wind down period during which, as provided by the contract, Simons is allowed to continue to market and distribute fuel through our locations. During the wind down period, a dispute arose between us and Simons regarding the proper conduct of the parties during the wind down period. In February 2008, we and Simons participated in a binding arbitration, under the auspices of the American Arbitration Association, or AAA. During the arbitration, Simons claimed damages in excess of $10 million and sought a ruling allowing Simons greater flexibility to continue to sell and deliver fuel through our locations and we claimed damages in excess of $6 million and sought to clarify the limits of Simons's rights during the wind down period. On March 14, 2008, we received the AAA arbitration ruling, which ordered us to pay Simons $0.9 million and to accept new customers, if any, presented to us by Simons until the end of the 18 month wind down period, or November 7, 2008. We have not yet paid the amount of this award, and we are considering whether to seek to modify or clarify certain aspects of the AAA ruling but have not yet made a determination as to whether we will do so. We incurred approximately $0.3 million in legal costs related to this dispute in 2007, all of which have been expensed. We recognized the $0.9 million expense related to the AAA ruling in the fourth quarter of 2007.

        On May 2, 2007, a purported class action lawsuit was filed against us in the United States District Court for the Northern District of Indiana by one individual alleging violations of the Federal Fair and Accurate Transaction Act which provides for damages of $100 to $1,000 (plus plaintiff's litigation costs) for each electronically printed receipt which discloses certain information in violation of that Act. After initial pleadings in this litigation, on February 28, 2008, we settled with three identified customers and the plaintiff's claims were dismissed with prejudice. We incurred approximately $0.8 million in costs related to our defense and settlement of this case in 2007, all of which have been expensed.

        On February 1, 2008, we commenced litigation against E² Investment Partners LLC, or E², and related entities and individuals in the Delaware Court of Chancery. On December 31, 2007, E² forwarded a letter to us proposing to nominate directors and present other matters for consideration at our 2008 annual meeting of shareholders. We are seeking a court order declaring that E² did not comply with our LLC agreement and that therefore E²'s notice was invalid and its proposed nominees and other matters were not properly presented for consideration at our 2008 annual meeting. A trial has been scheduled for April 4, 2008, and we expect that a decision may be achieved prior to our 2008 annual meeting.

        On February 1, 2008, a purported holder of our shares, Alan R. Kahn, filed a purported derivative action in the Delaware Court of Chancery on behalf of TA against members of our board of directors, Reit Management and Hospitality Trust. The action alleges that our directors breached their fiduciary

25

duties in connection with the Petro Acquisition and seeks an award of unspecified damages and/or reformation of the lease we entered with Hospitality Trust in connection with the Petro Acquisition. This action also appears to allege that Reit Management and Hospitality Trust aided and abetted our directors. Under our LLC agreement and agreements with Reit Management and Hospitality Trust, we may be liable to indemnify our directors, Hospitality Trust and Reit Management for liabilities, costs and expenses incurred by them in connection with this litigation. We have not yet responded to this action, but believe it is without merit.

        Beginning in mid December 2006, a series of class action lawsuits was filed against numerous companies in the petroleum industry, including our predecessor and subsidiaries, in United States District Courts in over 20 states. Major petroleum refineries and retailers have been named as defendants in one or more of these lawsuits. The plaintiffs in the lawsuits generally allege that they are retail purchasers who purchased motor fuel at temperatures greater than 60 degrees Fahrenheit at the time of sale. One theory alleges that the plaintiffs purchased smaller quantities of motor fuel than the amount for which defendants charged them because the defendants measured the amount of motor fuel they delivered by volumes which, at higher temperatures, contain less energy. These "temperature" cases seek, among other relief, an order requiring the defendants to install temperature correcting equipment on their retail fuel pumps, damages, and attorneys' fees. A second theory alleges that fuel taxes are calculated in temperature adjusted 60 degree gallons and are collected by the government from suppliers and wholesalers, who are reimbursed in the amount of the tax by the defendant retailers before the fuel is sold to consumers. These "tax" cases allege that, when the fuel is subsequently sold to consumers at temperatures above 60 degrees, the retailers sell a greater volume of fuel than the amount on which they paid tax, and therefore reap unjust benefit because the customers pay more tax than the retailer paid. These "tax" cases seek, among other relief, recovery of excess taxes paid and punitive damages. We believe that there are substantial factual and legal defenses to the theories alleged in these so called "hot fuel" lawsuits. The cases are at an early stage, having been consolidated with one court pursuant to multi district litigation procedures and, because discovery has only recently commenced, we cannot estimate our ultimate exposure to loss or liability, if any, related to these lawsuits. We incurred approximately $0.5 million in costs related to our defense of these cases in 2007, all of which has been expensed.

        In November 2006 Great American Insurance Company of New York and Novartis Pharmaceuticals Corporation, or Novartis, filed a complaint, in the United States District Court for the Southern District of New York, against our predecessor and an unrelated party Prime, Inc. in connection with the alleged theft of a tractor trailer operated by Prime which contained Novartis pharmaceutical products. The alleged theft occurred at our Bloomsbury, New Jersey travel center. Novartis seeks damages up to or exceeding $30 million together with interest and costs, attorneys' fees and disbursements. On January 5, 2007, our predecessor answered Novartis' complaint and asserted a cross claim for contribution and indemnification against Prime. We believe that there are substantial defenses to these claims and that any liability arising from this matter may be covered by one or more of our existing insurance policies or by Prime.

        We are involved in a negotiation regarding a dispute over environmental compliance matters with several counties in the State of California. While the outcome of this negotiation is uncertain, these counties have asked us to pay approximately $2 million and incur significant remediation expenses to settle the dispute; and only a portion of any settlement is expected to be covered by insurance. If we are unsuccessful in settling these matters through negotiation, we may be exposed to pay greater amounts.

        We are involved from time to time in various legal and administrative proceedings and threatened legal and administrative proceedings incidental to the ordinary course of our business. Except for the litigation described above, we believe that we are not now involved in any litigation which, individually or in the aggregate, would have a material adverse affect on our business, financial condition, results of operations or cash flows.

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Item 4.    Submission of Matters to a Vote of Security Holders

        None.

PART II

Item 5.    Market for Our Common Equity, Related Shareholder Matters and Issuer Purchases of Equity Securities

        Market information.    Our outstanding limited liability company interests represented by common shares, or common shares, were distributed on January 31, 2007 by Hospitality Trust by a declaration and payment of a distribution to its common shareholders of record on January 26, 2007. Our common shares were first traded on the American Stock Exchange, or AMEX (symbol: TA), on January 29, 2007, on a "when issued" basis and have traded "regular way" on AMEX since February 1, 2007. The following table sets forth for the periods indicated the high and low sale prices for our common shares reported by AMEX.

        The closing price of our common shares on AMEX on March 14, 2008 was $6.80 per share.

        Holders.    As of March 14, 2008, there were 957 shareholders of record of our common shares and we believe that there are several thousand beneficial owners of our common shares.

        Dividends.    We have never paid or declared any cash dividends on our common shares. At present, we intend to retain our future earnings, if any, to fund the development and growth of our business. Our future decisions concerning the payment of dividends on the common shares will depend upon our results of operations, financial condition and capital expenditure plans, as well as other factors as the board of directors, in its discretion, may consider relevant.

        Recent sales of unregistered securities.    On October 10, 2006 we sold one common share for nominal consideration to Hospitality Trust prior to the distribution of all of these shares by Hospitality Trust to its common shareholders on January 31, 2007. No underwriters were used in the foregoing transaction. The sale to Hospitality Trust was made in reliance upon the exemption from registration provided by Section 4(2) of the Securities Act of 1933, as amended, or Securities Act, for transactions by an issuer not involving a public offering. The distribution of our shares by Hospitality Trust was completed pursuant to an effective registration statement under the federal securities laws.

        On August 20, 2007, pursuant to our equity compensation plan, we granted 1,500 common shares, valued at $33.32 per share, the closing price of our common shares on the AMEX on that day, to each of our five directors as part of their annual compensation. On September 18, 2007, we granted 1,500 common shares, valued at $33.90 per share, the closing price of our common shares on the AMEX on that day, to our Director of Internal Audit as part of his annual compensation. On November 26, 2007, pursuant to our equity compensation plan, we issued 336,600 common shares valued at $14.99 per share, the closing price of our common shares on the AMEX on that day, to certain employees and others who provide services to us. All of these grants were made pursuant to an exemption from registration contained in section 4(2) of the Securities Act.

        The equity compensation plan information set forth in Item 12 of this Annual Report on Form 10-K is incorporated by reference herein.

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Item 6.    Selected Financial Data

        From the time of our formation on October 10, 2006 to January 31, 2007, we had no operations, revenues, expenses, liabilities or assets except the nominal initial capitalization provided by Hospitality Trust.

        TravelCenters of America, Inc. is considered to be our predecessor under applicable rules and regulations of the Securities and Exchange Commission. The HPT Transaction caused our assets, liabilities, financial position, results of operations and cash flows to be materially different than those of our predecessor. Among other things, these differences will cause us to incur substantial expenses which were not incurred by our predecessor, for example, rent payments to Hospitality Trust and costs associated with operating as a public company, while allowing us to avoid the interest and depreciation expenses our predecessor historically incurred. In addition, we completed the Petro Acquisition on May 30, 2007. For all of these reasons, the historical financial information of our predecessor is not indicative of our current or future financial position, results of operations or cash flows.

        The following table presents selected historical financial information of us or our predecessor for each of the last five fiscal years. The information set forth below with respect to fiscal years 2007, 2006 and 2005 was derived from, and should be read in conjunction with, the audited consolidated financial statements included elsewhere in this Annual Report on Form 10-K. The following information should

28

also be read in conjunction with "Management's Discussion and Analysis of Financial Condition and Results of Operations" included elsewhere in this Annual Report on Form 10-K.

Notes to Selected Financial Data

⁽¹⁾

Includes the operating results of Petro since the Petro Acquisition, which was completed on May 30, 2007.

⁽²⁾

In connection with a refinancing our predecessor completed during 2005, our predecessor recognized expenses of $39,566.

⁽³⁾

Includes the operating results of 11 sites our predecessor acquired on December 1, 2004, beginning on the acquisition date.

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Item 7.    Management's Discussion and Analysis of Financial Condition and Results of Operations

Overview

        We were formed in October 2006 as a Delaware limited liability company. We were formed as a 100% owned subsidiary of Hospitality Trust to succeed to the operating business of TravelCenters of America, Inc. which we refer to as our predecessor and which Hospitality Trust acquired on January 31, 2007. Until January 31, 2007, we were an inactive subsidiary of Hospitality Trust.

        Because of the HPT Transaction and the Petro Acquisition, the historical financial information of our predecessor is not indicative of our future financial position, results of operations or cash flows. You should read the following discussion in conjunction with the historical financial statements included elsewhere in this Annual Report on Form 10-K.

        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 crude oil 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 a significant increase 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, or India, increased demand for petroleum products; and, more recently, as the world value of the U.S. dollar has declined and as speculation in the price of these commodities has increased. We expect that these significant increases in our costs for these products can largely be passed on to our customers over time, but the increased prices 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, but we also expect that prices for these products may decline during the next 12 months from historically high levels as a result of the slowing of the U.S. and other economies.

Summary of Travel Center Site Counts

        The changes in the number of our sites and in their method of operation (company operated, franchisee leased and operated or franchisee owned and operated) are significant factors influencing

30

the changes in our results of operations. The following table summarizes the changes in the composition of our business from December 31, 2004 through December 31, 2007:

Historical Results of Operations

Relevance of Fuel Revenues and Fuel Volumes

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

2007 Compared to 2006

        We were spun out of Hospitality Trust on January 31, 2007, and had no operations prior to that time. For the purpose of discussing the historical results of operations, the following table adds our results for the eleven months ended December 31, 2007, to the results of our predecessor for the one month ended January 31, 2007, without pro forma adjustments, and compares these combined results of operations to those of our predecessor for 2006. The data has been presented to facilitate our discussion below of the trends and changes affecting our operating results. It has been prepared for comparative purposes only and is not intended to be indicative of the results of operations that actually would have resulted had the HPT Transaction occurred on January 1, 2006, and is not indicative of our future results of operations. The amounts in the following table for the eleven months ended

31

December 31, 2007 include the results of Petro branded travel centers since May 30, 2007, the date we completed the Petro Acquisition.

Same Site Results Comparisons

        As part of the discussion and analysis of our operating results we refer to increases and decreases in results on a same site basis. For purposes of these comparisons, a travel center is included in the following same site comparisons only if it was continuously operated by us or our predecessor from January 1, 2006, through December 31, 2007. Travel centers are not excluded from the same site

32

comparisons as a result of expansions in their buildings or parking areas or changes in the services offered.

⁽¹⁾

Includes fuel volume, revenues and expenses of company operated travel centers only.

        Revenues.    Revenues for 2007 were $6,166.2 million, which represented an increase from 2006 of $1,382.6 million, or 28.9%, that is primarily attributable to the Petro Acquisition.

        Fuel revenue for 2007 increased by $1,158.2 million, or 29.7%, as compared to 2006. This increase was principally the result of sites added in 2006 and 2007, primarily the Petro Acquisition, and increased fuel prices. The table below shows the changes in fuel revenues between periods that resulted from price and volume factors:

⁽¹⁾

Results include our predecessor's results.

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        We believe the same site diesel fuel sales volume decrease resulted primarily from a decline in trucking activity that is largely attributable to slowing economic activity in the United States, as evidenced by, among other things, a decline in durable goods orders and new home building, lower U.S. import activity attributed largely to the decline in value of the U.S. dollar and lowered demand for fuel due to historically high prices for commodities, including diesel, during 2007 as compared to 2006. The economic slowdown was more pronounced in the latter part of 2007 and early 2008 and we expect it to continue into 2008. Fuel revenues were 82.1% of total revenues for 2007 as compared to 81.6% for 2006 principally as a result of higher fuel prices in 2007.

        Nonfuel revenues for 2007 were $1,089.9 million, an increase of $221.5 million, or 25.5%, as compared to 2006. Of this increase, $200.7 million relates to the company operated sites added in the Petro Acquisition on May 30, 2007, and $17.3 million related to the net six sites added in 2006 and 2007. Same site nonfuel revenues increased by $8.6 million, or 1.0% at company operated sites open in both 2007 and 2006 despite the decrease in same site diesel fuel volumes noted above. We believe the same site nonfuel revenue increase reflected increased customer traffic in our truck repair shops resulting, in part, from the repair shop bays we added in 2006 and 2007 as well as from variations in the levels in new truck purchases. The increase related to truck repair shops was partially offset by decreased customer traffic in our other nonfuel areas that generally coincides with declines in fuel sales volumes. Nonfuel revenues were 17.7% of total revenues for the year ended December 31, 2007, as compared to 18.2% for the same period in 2006, principally as a result of higher fuel prices in 2007.

        Rent and royalty revenues for 2007 were $12.9 million, an increase of $2.9 million, or 28.8%, as compared to 2006. This was primarily the result of royalty revenues for the Petro franchisee sites for the period subsequent to the Petro Acquisition, combined with a same site rent increase of $0.2 million, or 3.6%.

        Cost of goods sold (excluding depreciation).    Cost of goods sold for 2007 was $5,354.4 million, an increase of $1,230.9 million, or 29.9%, as compared to 2006, which was primarily attributable to sales at the Petro locations for the period subsequent to the Petro Acquisition.

        Fuel cost of goods sold for 2007 of $4,892.3 million increased by $1,130.7 million, or 30.1%, over 2006, including a $899.2 million increase from fuel purchases at the Petro locations for the period subsequent to the Petro Acquisition. The increase in fuel cost of goods sold for 2007 as compared to 2006 also resulted from commodity price increases partially offset by the fuel sales volumes decreases described above.

        Nonfuel cost of goods sold for 2007 was $462.1 million, an increase of $100.2 million, or 27.7%, as compared to 2006 of which $92.9 million resulted from nonfuel purchases at the Petro locations for the period subsequent to the Petro Acquisition. The nonfuel cost of goods sold increase was also due to the same site nonfuel revenue increase discussed above and the net addition of six sites in 2007 and 2006.

        Site level operating expenses.    Site level operating expenses included the direct expenses of company operated sites, of which approximately 60% was labor costs, and the ownership costs of sites we sublease to franchisees. Site level operating expenses for 2007 were $561.9 million, an increase of $146.0 million, or 35.1%, as compared to 2006, which was primarily attributable to the $100.9 million in site level operating expenses at the Petro locations for the period subsequent to the Petro Acquisition, $8.9 million from company operated locations added in 2007 and 2006 and a $25.4 million same site increase. The same site increase was primarily attributable to retraining and realignment of functions as a result of our September 2007 staffing reorganization. Additionally, in June 2006 and December 2006 our predecessor recognized a reduction of site level operating expenses of $4.4 million and $1.3 million, respectively. These reductions were related to the settlement of two claims made in connection with certain transactions our predecessor completed in November 2000 and a partial refund of assets seized

34

by the Internal Revenue Service in 2005. On a same site basis, site level operating expenses as a percentage of nonfuel revenues for 2007 were 51.0% compared to 48.5% for 2006.

        Selling, general and administrative expenses.    Selling, general and administrative expenses for 2007 were $107.7 million, an increase of $46.4 million, or 75.6%, as compared to 2006. This increase primarily resulted from the following:

•

$8.9 million resulting from the Petro Acquisition;



•

$17.2 million of separation payments to former executive officers and retention bonus payments that were or are required to be made to certain employees who remained or remain in our employ through specified dates that extend to January 31, 2009;



•

a $6.6 million decrease in share based compensation;



•

$7.8 million of legal fees and settlement expenses related to the litigation matters discussed in Item 3—Legal Proceedings of this Annual Report on Form 10-K; and



•

other increases including annual salary adjustments, increases which result from our operating as a publicly traded company and including the costs of our management and shared services agreement with Reit Management, all net of various cost savings we initiated.

        Real estate rent expense.    Rent expense for 2007 was $190.9 million, an increase of $179.9 million as compared to 2006. This increase was primarily attributable to our leases with Hospitality Trust that became effective on January 31, 2007, and May 30, 2007. Under the leases we paid rent of $177.1 million during the eleven months ended December 31, 2007, of which $8.8 million was recognized as interest expense and $1.8 million was recognized as a reduction of our capital lease obligation, we accrued an additional $15.8 million of rent expense in order to recognize the rent expense related to the TA lease on a straight line basis over the lease term and amortized $6.2 million of our deferred rental allowance as a reduction of rent expense.

        Depreciation and amortization expense.    Depreciation and amortization expense for 2007 was $39.7 million, a decrease of $31.7 million, or 44.4%, as compared to 2006. This decrease was attributable to the significant decrease in depreciable assets on our balance sheet after the HPT Transaction on January 31, 2007, partially offset by assets we acquired in the Petro Acquisition. Our property and equipment balance at December 31, 2007 was $397.3 million, as compared to our predecessor's property and equipment balance as of December 31, 2006 of $653.7 million, a 39.2% decrease. The decline in expense due to the decreased level of depreciable assets was somewhat offset by a $3.8 million increase in amortization expense related to the intangible assets created in the HPT Transaction and the Petro Acquisition and a $2.0 million charge to write off amounts capitalized through December 31, 2007 in connection with acquisitions and other development projects that were cancelled.

        Impairment of goodwill.    As required by GAAP, in connection with our annual assessment of impairment of goodwill and intangible assets with indefinite lives, we reviewed the carrying value of our goodwill and other intangibles originally recorded as a result of the HPT Transaction. Due to current industry conditions, we concluded our goodwill was fully impaired and, therefore, the carrying amount of our goodwill, or $15.4 million, was written off to expense in the fourth quarter of 2007.

        Merger related expenses.    During January 2007, our predecessor recognized a charge of $45.0 million related to expenses incurred in marketing itself for sale and consummating the HPT Transaction. These costs primarily consisted of investment banking fees, other transaction advisory fees and our predecessor's management bonus payments.

35

        Income (loss) from operations.    Our loss from operations for 2007 was $148.8 million (including a loss from operations for January 2007 realized by our predecessor of $42.2 million), as compared to income from operations of $95.5 million in 2006. This change was the net result of the changes in revenues and expenses described above, primarily the changes in site level operating expenses, real estate rent expense, depreciation and amortization expense, goodwill impairment merger related expenses, severance and retention expenses and legal fees.

        Interest income and expense.    Interest income for 2007 was $20.3 million, an increase of $18.1 million as compared to 2006. This increase was primarily attributable to the accretion into interest income of our leasehold improvement receivable of $5.6 million and to $5.5 million of interest income on restricted investments combined with an increase in interest income that resulted from the increase in our cash balance from that of our predecessor in 2006. Interest expense for 2007 was $20.8 million, as compared to $49.6 million for 2006. This $28.9 million, or 58.3%, decrease primarily resulted from the repayment of our predecessor's indebtedness on January 31, 2007 as part of the HPT Transaction. This decline was partially offset by $5.6 million of interest expense on certain notes we assumed and defeased as part of the Petro Acquisition and our recognition as interest expense of $10.6 million of rent allocated under GAAP to those assets we lease from Hospitality Trust that GAAP requires us to include in our consolidated balance sheet.

        Debt extinguishment expense.    In connection with the repayment of its indebtedness as a result of the HPT Transaction, our predecessor charged to expense the remaining unamortized balance of its previously incurred debt issuance costs of $15.2 million and the remaining unamortized debt discount of $0.9 million related to a note payable.

        Income tax provision (benefit).    Our effective tax rate for the eleven months ended December 31, 2007, was a benefit of 0.7% which differed from the statutory rate primarily due to an increase in our valuation allowance of $32.0 million recorded in 2007, and also due to state income taxes. Our predecessor's effective tax rates for the one month ended January 31, 2007, and the year ended December 31, 2006, were a benefit of 64.7% and a provision of 37.1%, respectively. Our predecessor's rate for the one month ended January 31, 2007, differed from the statutory rate primarily due to the deductibility for tax purposes of expenses related to share options that were not expensed for financial reporting purposes, which was partially offset by certain merger related expenses recognized in the financial statements which were not deductible for income tax purposes. Our predecessor's tax rate for 2006 differed from the statutory rate primarily due to state income taxes, net of the federal tax effect. The differences in the effective tax rates among these periods primarily resulted from the effects of the HPT Transaction on our predecessor's results for the one month ended January 31, 2007, as well as the effects of the HPT Transaction on our results and our other tax attributes.

2006 compared to 2005 (Historical Results of Operations of Our Predecessor)

Same Site Results Comparisons

        As part of the discussion and analysis of our predecessor's operating results we refer to increases and decreases in results on a same site basis. For purposes of these comparisons, a travel center is included in the following same site comparisons only if it was continuously operated by our predecessor from January 1, 2005 through December 31, 2006. Travel centers are not excluded from the same site

36

comparisons as a result of expansions of their buildings or parking areas or changes in the services offered.