UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~June~~March 3031, ~~2004~~2005

Commission file number 1-13018

PETRO STOPPING CENTERS, L.P.

(Exact name of the registrant as specified in its charter)

Delaware		74-2628339
(State or other jurisdiction of incorporation or organization)		(IRS Employer Identification No.)
6080 Surety Dr. El Paso, Texas		79905
(Address of principal executive offices)		(Zip Code)

6080 Surety Dr.

El Paso, Texas

79905

(Address of principal executive offices)

(Zip Code)

Registrant’s telephone number, including area code: (915) 779-4711

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 x No ¨

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No x

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date. Not applicable.

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

PETRO STOPPING CENTERS, L.P.

UNAUDITED CONSOLIDATED CONDENSED BALANCE SHEETS

(in thousands)

	December 31,2003			June 30,2004
	December 31,2004			March 31,2005
	(As Restated)
Assets
Current assets:
Cash and cash equivalents	$	1733,~~806~~843		$	2715,~~803~~439
Trade accounts receivable, net		12,~~315~~074			34,~~110~~567
Inventories, net		2527,~~410~~494			2631,~~900~~873
Other current assets		12,~~215~~491			12,~~552~~564
Due from affiliates		4,~~950~~017			34,~~412~~507
Total current assets		5069,~~696~~919			6258,~~777~~950
Property and equipment, net		~~202~~194,~~827~~605			~~197~~210,~~072~~597
Deferred debt issuance costs, net		410,~~245~~450			1110,~~226~~287
Other assets		13,~~072~~002			12,~~381~~939
Total assets	$	~~270~~287,~~840~~976		$	~~283~~292,~~456~~773
Liabilities and Partners’ Capital (Deficit)
Liabilities and Partners’ Deficit
Current liabilities:
Current portion of long-term debt	$	9,500		$	10,187
Trade accounts payable	$	15,334		$	19,631
Trade accounts payable		13,928			18,312
Accrued expenses and other current liabilities		31,484			25,807
Accrued expenses and other liabilities		25,691			29,381
Due to affiliates		12,420			11,341
Due to affiliates		19,104			12,603
Total current liabilities		59,238			56,779
Total current liabilities		68,223			70,483
Other liabilities		765			781
Other liabilities		789			799
Long-term debt		246,250			256,250
Long-term debt, excluding current portion		165,979			237,313
Total long-term liabilities		247,015			257,031
Total long-term liabilities		166,768			238,112
Total liabilities		306,253			313,810
Total liabilities		234,991			308,595
Commitments and contingencies
Partners’ capital (deficit):
Partners’ deficit
General partner’s		(~~210~~200	)		(~~220~~198	)
Limited partners’		36(18,~~059~~077	)		(2420,~~919~~839	)
Total partners’ capital (deficit)		35,849			(25,139	)
Total partners’ deficit		(18,277	)		(21,037	)
Total liabilities and partners’ capital (deficit)	$	270,840		$	283,456
Total liabilities and partners’ deficit	$	287,976		$	292,773

See accompanying notes to unaudited consolidated condensed financial statements.

PETRO STOPPING CENTERS, L.P.

UNAUDITED CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS

(in thousands)

	Three Months Ended June 30,						Six Months Ended June 30,
	Three Months Ended March 31,
	2003			2004			2003			2004
	2004			2005
Net revenues:
	(As Restated)
Fuel (including motor fuel taxes)	$	189,533		$	249,473		$	403,103		$	473,517
Net revenues:
Non-fuel		62,498			66,340			119,669			128,423
Fuel (including motor fuel taxes)	$	224,044		$	297,204
Total net revenues		252,031			315,813			522,772			601,940
Non-fuel		62,083			64,031
Costs and expenses:
Total net revenues		286,127			361,235
Cost of sales
Costs and expenses:
Fuel (including motor fuel taxes)		179,572			236,282			383,012			451,870
Cost of sales
Non-fuel		25,130			26,843			47,378			51,434
Fuel (including motor fuel taxes)		215,588			287,101
Operating expenses		32,216			34,888			64,231			68,399
Non-fuel		24,591			24,834
General and administrative		3,888			4,344			7,481			8,034
Operating expenses		33,511			34,324
Depreciation and amortization		3,824			3,840			7,652			7,670
General and administrative		3,690			4,436
Loss on disposition of fixed assets		9			29			9			33
Depreciation and amortization		3,839			3,888
Total costs and expenses		244,639			306,226			509,763			587,440
Loss on disposition of fixed assets		4			13
Operating income		7,392			9,587			13,009			14,500
Total costs and expenses		281,223			354,596
Loss on retirement of debt		—			—			—			(6,164	)
Operating income		4,904			6,639
Retired debt restructuring costs		—			—			—			(794	)
Loss on retirement of debt		(6,164	)		—
Equity in income of affiliate		201			182			158			158
Retired debt restructuring costs		(794	)		—
Interest income		17			24			30			51
Equity in loss of affiliate		(24	)		(163	)
Interest expense		(4,899	)		(6,114	)		(9,864	)		(11,651	)
Interest income		27			88
Income (loss) before cumulative effect of a change in accounting principle		2,711			3,679			3,333			(3,900	)
Interest expense		(5,537	)		(5,783	)
Cumulative effect of a change in accounting principle		—			—			(397	)		—
Net income (loss)	$	(7,588	)	$	781
Net income (loss)	$	2,711		$	3,679		$	2,936		$	(3,900	)

See accompanying notes to unaudited consolidated condensed financial statements.

PETRO STOPPING CENTERS, L.P.

UNAUDITED CONSOLIDATED CONDENSED STATEMENT OF CHANGES IN

~~CHANGES IN~~ PARTNERS’ ~~CAPITAL (~~DEFICIT)

For the ~~Six~~Three Months Ended ~~June~~March 3031, ~~2004~~2005

(in thousands)

	GeneralPartner’s(Deficit)			LimitedPartners’Capital(Deficit)			TotalPartners’Capital(Deficit)
	GeneralPartner’sDeficit			LimitedPartners’Deficit			TotalPartners’Deficit
Balances, December 31, 2003	$	(210	)	$	36,059		$	35,849
Balances, December 31, 2004 (As Previously Reported)	$	(198	)	$	(17,274	)	$	(17,474	)
Net loss		(10	)		(3,890	)		(3,900	)
Restatement adjustments - Note 2		(2	)		(803	)		(805	)
Partners’ operating distributions		—			(57,072	)		(57,072	)
Balances, December 31, 2004 (As Restated)		(200	)		(18,077	)		(18,277	)
Partners’ minimum tax distributions		—			(16	)		(16	)
Net income		2			779			781
Balances, June 30, 2004	$	(220	)	$	(24,919	)	$	(25,139	)
Partners’ operating distributions		—			(3,546	)		(3,546	)
Partners’ tax refund		—			5			5
Balances, March 31, 2005	$	(198	)	$	(20,839	)	$	(21,037	)

See accompanying notes to unaudited consolidated condensed financial statements.

PETRO STOPPING CENTERS, L.P.

UNAUDITED CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS

(in thousands)

	Six Months Ended June 30,
	Three Months Ended March 31,
	2003			2004
	2004			2005
	(As Restated)
Cash flows from operating activities:
Net income (loss)	$	2(7,~~936~~588	)	$	~~(3,900~~781	)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization		73,~~652~~839			73,~~670~~888
Write-off of deferred financing costs associated with retired debt		—4,009			~~4,009~~—
Cumulative effect of a change in accounting principle		397			—
Deferred debt issuance cost amortization		799			415
Deferred debt issuance cost amortization		903			1,249
Provision for bad debt		41			77
Provision for bad debt		88			80
Equity in loss of affiliate		24			163
Equity in income of affiliate		(158	)		(158	)
Loss on disposition of fixed assets		4			13
Loss on disposition of fixed assets		9			33
Other operating activities		10			11
Other operating activities		23			19
Increase (decrease) from changes in:
Trade accounts receivable		(~~317~~1,237	)		(12,~~875~~570	)
Inventories		2(1,~~030~~321	)		(14,~~490~~379	)
Other current assets		(~~524~~276	)		(~~337~~73	)
Due from affiliates		(1,~~159~~783	)		~~1,538~~(490	)
Due to affiliates		~~8,323~~813			(61,~~501~~079	)
Trade accounts payable		~~(141~~2,698	)		104,~~650~~297
Accrued expenses and other liabilities		924			3,681
Accrued expenses and other current liabilities		(2,262	)		(5,682	)
Net cash provided by operating activities		20,986			14,668
Net cash provided by (used in) operating activities		1,336			(4,628	)
Cash flows from investing activities:
Proceeds from disposition of fixed assets and land held for sale		18983			~~983~~1
Purchases of property and equipment		(~~1,742~~675	)		(219,~~151~~872	)
(Increase) decrease in other assets, net		204			(193	)
Increase in other assets, net		(116	)		(171	)
Net cash used in investing activities		(1,520	)		(1,361	)
Net cash provided by (used in) investing activities		192			(20,042	)
Cash flows from financing activities:
Repayments of bank debt		(16,500	)		(4,500	)
Repayments of bank revolver		(4,500	)		(9,200	)
Proceeds from bank debt		18,500			4,500
Proceeds from bank revolver		4,500			19,200
Repayments of long-term debt		(8177,~~210~~035	)		~~(178,285~~—	)
Proceeds from long-term debt issuance		—250,000			~~250,000~~—
Change in book cash overdraft		(798,323	)		~~(6,304~~—	)
Partners’ operating distribution		—			(57,072	)
Partners’ operating distributions		(56,505	)		(3,546	)
Partners’ minimum tax distributions		(49	)		(16	)
Partners’ tax refund (minimum tax distributions)		(4	)		5
Payment of debt issuance costs		—(11,633	)		(~~11,633~~193	)
Net cash used in financing activities		(6,338	)		(3,310	)
Net cash provided by (used in) financing activities		(3,500	)		6,266
Net increase in cash and cash equivalents		13,128			9,997
Net decrease in cash and cash equivalents		(1,972	)		(18,404	)
Cash and cash equivalents, beginning of period		817,~~221~~806			1733,~~806~~843
Cash and cash equivalents, end of period	$	2115,~~349~~834		$	2715,~~803~~439
Supplemental cash flow information:
Supplemental cash flow information - Interest paid during the period	$	8,063		$	10,568
Interest paid during the period	$	8,960		$	8,685
Non-cash activities:
Net change in unrealized loss on cash flow hedging derivative		(196	)		—

See accompanying notes to unaudited consolidated condensed financial statements.

PETRO STOPPING CENTERS, L.P.

NOTES TO UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

(1) Basis of Presentation

The accompanying unaudited consolidated condensed financial statements, which include the accounts of Petro Stopping Centers, L.P. and its wholly owned subsidiaries, Petro Financial Corporation and Petro Distributing, Inc. (the “Company”), have been prepared in accordance with the instructions to Form 10-Q and, therefore, certain financial information has been condensed and certain footnote disclosures have been omitted. Such information and disclosures are normally included in financial statements prepared in accordance with generally accepted accounting principles.

~~These~~Although ~~unaudited consolidated condensed financial statements should be read in conjunction with~~ the ~~consolidated~~ financial ~~statements~~information ~~and~~included ~~notes thereto~~ in the Annual Report of the Company on Form 10-K for the year ended December 31, ~~2003~~2004 (“~~2003~~2004 Form 10-K”). ~~Capitalized~~cannot be relied upon as a result of the restatement of the Company’s financial statements as described below in this Form 10-Q the capitalized terms used in this report and not defined herein have the meanings ascribed to such terms in the ~~2003~~2004 Form 10-K. In the opinion of management of the Company, the accompanying unaudited consolidated condensed financial statements contain all adjustments necessary to present fairly the consolidated condensed financial position of the Company at December 31, ~~2003~~2004 (as restated) and ~~June~~March 3031, ~~2004~~2005, the consolidated condensed results of operations and cash flows for the three ~~and six~~ months ended ~~June~~March 3031, ~~2003~~2004 (as restated) and ~~2004~~2005, and changes in partners’ ~~capital (~~deficit) for the ~~six months~~three ~~ended June 30, 2004, and the consolidated condensed cash flows for the six~~ months ended ~~June~~March 3031, ~~2003 and 2004~~2005. The results of operations for the three ~~and six~~ months ended ~~June~~March 3031, ~~2004~~2005 are not necessarily indicative of the results to be expected for the full calendar year.

The Company’s fuel revenues and related cost of sales include a significant amount of federal and state motor fuel taxes. Such taxes were $6164.34 million and $6566.84 million for the three months ended ~~June~~March 3031, ~~2003 and~~ 2004, ~~respectively,~~ and ~~$121.9 million and $130.2 million for the six months ended June 30~~2005, ~~2003 and 2004,~~ respectively.

The balance sheet as of December 31, 2004 reflects restated balances as a result of the adjustments described in Note (2) accordingly, those financial statements should no longer be relied upon. We anticipate filing an amended 10-K/A for the fiscal year ended December 31, 2004, ~~Refinancing~~subsequent ~~Transactions~~to the filing of this 10-Q.

OnReclassifications February 9, 2004, the Company completed its refinancing transactions (the “2004 Refinancing Transactions”) in which the Company and Petro Stopping Centers Holdings, L.P. (the “Holding Partnership”) refinanced substantially all of their existing indebtedness. The 2004 Refinancing Transactions consisted of the following components:

•Certain ~~The~~prior ~~issuance~~period ofamounts ~~$225.0~~have ~~million~~been ~~aggregate~~reclassified ~~principal~~to ~~amount~~conform ofto ~~9.0% senior secured notes due 2012 (~~the current ~~“9%~~year ~~Notes”);~~presentation.

•(2) ~~The~~Restatement ~~repurchase~~ of ~~the~~Consolidated ~~majority~~Condensed Financial ofStatements ~~the Company’s 10½% senior notes due 2007 (the “10½% Notes”);~~

•Restatement ~~Entering~~– ~~into~~Accounting ~~the~~for new senior secured credit facilities of an aggregate principal amount of $50.0 million, consisting of a three year revolving credit facility of $25.0 million and a four year term loan facility of $25.0 million;leases

•Following ~~The~~a ~~repayment~~review ~~and~~of ~~retirement~~its ofaccounting policy, the Company’s has ~~retired~~determined ~~senior~~that ~~secured~~it ~~credit~~had ~~facilities~~incorrectly ofcalculated ~~approximately~~its ~~$40~~depreciation expenses on leasehold improvements.8 ~~million~~As a result, ~~plus~~the ~~accrued~~Company ~~interest;~~will restate its financial statements for the three-year period ended December 31, 2004.

• The ~~repurchase~~restatement ~~for~~relates ~~cash~~to the Company’s previous depreciation of ~~approximately~~its leasehold ~~54.8%~~improvements, in some cases, over a period greater than both the initial term of the ~~Holding~~lease ~~Partnership~~and its option periods, but not longer than the useful life of the asset. After an analysis of the Company’s ~~15.0%~~records ~~senior~~on ~~discount~~May ~~notes~~13, ~~due~~2005, ~~2008~~the Company has concluded that it should use the shorter of (1) the ~~“Holding~~initial ~~Partnership’s~~lease ~~15%~~term ~~Notes~~unless it believes that the penalty for not renewing the lease would be substantial enough that it was “reasonably assured”) ~~and~~that the ~~exchange~~Company would exercise the renewal, or (2) the useful life of ~~approximately~~the 42asset.2% The restatement relates, in part, to the February 7, 2005 letter issued by the Office of the ~~Holding~~Chief ~~Partnership’s~~Accountant ~~15%~~of ~~Notes~~the ~~for~~Securities ~~new~~and ~~senior~~Exchange ~~third~~Commission ~~secured~~to ~~discount~~the ~~notes;~~American Institute of Certified Public Accountants, which clarified the existing generally accepted accounting principles applicable to leases.

• The ~~extension~~Company bybelieves ~~the~~these ~~Holding~~non-cash ~~Partnership~~adjustments ofwill ~~the~~have ~~mandatory~~no ~~purchase~~material ~~date~~impact ofon the ~~warrants~~Company’s ~~issued~~previously inreported ~~July~~cash offlows, ~~1999~~cash byposition, revenues, ~~Petro~~or ~~Warrant~~EBITDA ~~Holdings~~in ~~Corporation~~any ~~from~~period, ~~August~~or 1,on ~~2004~~compliance towith ~~October~~the 1,covenants ~~2009;~~under its senior secured credit facilities and Indentures for the 9.0% senior secured notes due 2012.

• The reduction of the Company’s trade credit balance with Exxon Mobil Corporation (“ExxonMobil”).

(continued)

PETRO STOPPING CENTERS, L.P.

NOTES TO UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

InThe ~~connection~~Company ~~with~~currently ~~the~~estimates ~~2004 Refinancing Transactions,~~ the ~~repurchase~~cumulative effect of ~~the~~its ~~majority~~restatement of ~~the~~financial ~~Company’s~~statements ~~10½%~~through ~~Notes~~December ~~and~~31, ~~the~~2004 ~~Holding Partnership’s~~will ~~15%~~be ~~Notes~~to ~~were~~reduce ~~accounted~~retained earnings ~~for~~by asapproximately ~~debt~~$805,000, ~~extinguishments~~reflecting ~~resulting~~increased inaccumulated ~~the~~depreciation ~~recognition~~and ofdepreciation aand ~~loss~~amortization ~~of approximately $5~~expense.4 ~~million~~Of ~~and~~the $~~9.3 million~~805,000, ~~respectively~~$618,000 ~~which~~is ~~included~~anticipated ~~the~~to ~~write-off~~be ofreflected ~~unamortized~~in ~~deferred~~periods ~~debt~~prior ~~issuance~~to ~~costs~~December ~~of approximately~~31, $22002.8 ~~million~~The ~~for~~Company ~~each~~anticipates ~~transaction.~~that depreciation ~~These~~will ~~losses~~be ~~are~~increased ~~presented~~(and asoperating ~~a component of~~ income ~~(loss~~decreased) ~~before~~by ~~cumulative~~$128,000, ~~effect~~$21,000, ofand a$38,000 ~~change in accounting principle on each company’s unaudited consolidated condensed statements of operations~~ for the ~~six~~periods ~~months~~ending ~~ended~~December ~~June 30~~31, ~~2004. Additionally~~2002, ~~the Company capitalized approximately $9.6 million of debt issuance costs related to the issuance of the 9% Notes through June 30~~2003, ~~2004.~~and ~~The Holding Partnership capitalized approximately $3.2 million of debt issuance costs related to its exchange offer through June 30~~2004, ~~2004~~respectively.

~~The~~These estimates are subject to change as the Company ~~has~~completes ~~capitalized~~its ~~approximately~~preparation $2of the restated financial statements.3 The ~~million~~Company ofwill ~~debt~~amend ~~issuance~~the ~~costs~~appropriate ~~through~~filings ~~June~~with ~~30,~~the ~~2004~~Securities and ~~has~~Exchange ~~written~~Commission ~~off~~to ~~approximately~~include ~~$794~~the restated financial statements for the three-year period ended December 31,~~000~~ 2004. As a result of ~~unamortized~~the ~~deferred~~restatement, ~~debt~~the ~~issuance~~financial ~~costs~~statements contained ~~associated~~in the Company’s prior filings with the ~~refinancing~~ ofSecurities ~~its~~and ~~retired~~Exchange ~~senior~~Commission, ~~credit~~should ~~facilities~~no longer be relied upon.

In connection with the 2004 Refinancing Transactions, the Company reduced its trade credit balance and amended its agreement with the ExxonMobil Suppliers. The amendment provides that the penalty for failing to purchase the Company’s annual volume commitments under its agreement with the ExxonMobil Suppliers will be multiplied by a fraction, the numerator of which is the average of the Company’s trade credit with the ExxonMobil Suppliers during December of each year and the denominator of which is $30.0 million.

On March 12, 2004, the Company repurchased all of its remaining 10 1/2% Notes. In connection with this repurchase, the Company recognized a loss of approximately $724,000, which includes the write-off of approximately $379,000 of unamortized deferred debt issuance costs. This loss is presented as a component of income (loss) before cumulative effect of a change in accounting principle on the Company’s unaudited consolidated condensed statements of operations for the six months ended June 30, 2004.

After giving effect to the 2004 Refinancing Transactions and the repurchase of the Company’s remaining 10½% Notes, the Company’s total consolidated debt increased $79.0 million and, as a result, the Company’s associated estimated annual interest expense will increase approximately $5.6 million.

On July 19, 2004, the Company completed the exchange of substantially all of the unregistered 9% Notes for 9% Notes that were registered with the Securities and Exchange Commission, thereby satisfying the Company’s obligation to register the 9% Notes.

(continued)

PETRO STOPPING CENTERS, L.P.

NOTES TO UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

~~(3)~~The ~~Significant~~financial ~~Accounting~~impact ~~Policies~~of the adjustments described above for the periods presented is as follows:

~~Land~~December ~~Held~~31, ~~for~~2004 ~~Sale~~

~~The~~Balance ~~Company~~Sheet records long-lived assets held for sale at the lower of carrying amount or fair value less cost to sell. At December 31, 2003 and June 30, 2004, the Company reported land held for sale at its carrying value of $5.0 million and $4.3 million, respectively. The land held for sale consists of several parcels of undeveloped land considered by management as excess and no longer necessary for the operations of the Company. In March 2004, the Company sold all of its undeveloped land in Knowlton Township, New Jersey for a sales price of $1.1 million. Since the carrying amount of land in Knowlton Township, New Jersey was equal to the selling price less cost to sell, no gain or loss was recognized in 2004. These balances are included in other assets in the accompanying consolidated condensed balance sheets.

Asset Retirement Obligations


	As Previously Reported			Adjustment			As Restated
Assets
Current assets:
Cash and cash equivalents	$	33,843		$	—		$	33,843
Trade accounts receivable, net		2,074			—			2,074
Inventories, net		27,494			—			27,494
Other current assets		2,491			—			2,491
Due from affiliates		4,017			—			4,017

Total current assets		69,919			—			69,919
Property and equipment, net		195,410			(805	)		194,605
Deferred debt issuance costs, net		10,450			—			10,450
Other assets		13,002			—			13,002

Total assets	$	288,781		$	(805	)	$	287,976

Liabilities and Partners’ Deficit
Current liabilities:
Trade accounts payable	$	15,334		$	—		$	15,334
Accrued expenses and other current liabilities		31,484			—			31,484
Due to affiliates		12,420			—			12,420

Total current liabilities		59,238			—			59,238
Other liabilities		765			—			765
Long-term debt		246,250			—			246,250

Total long-term liabilities		247,015			—			247,015

Total liabilities		306,253			—			306,253

Commitments and contingencies
Partners’ deficit
General partner’s		(198	)		(2	)		(200	)
Limited partners’		(17,274	)		(803	)		(18,077	)

Total partners’ deficit		(17,472	)		(805	)		(18,277	)

Total liabilities and partners’ deficit	$	288,781		$	(805	)	$	287,976

On January 1, 2003, the Company adopted Statement of Financial Accounting Standards No. 143, “Accounting for Asset Retirement Obligations” (“SFAS No. 143”). SFAS No. 143 provides accounting guidance for retirement obligations, for which there is a legal obligation to settle, associated with tangible long-lived assets. SFAS No. 143 requires that asset retirement costs be capitalized as part of the cost of the related long-lived asset and such costs should be allocated to expense by using a systematic and rational method. The statement requires that the initial measurement of the asset retirement obligation be recorded at fair value and that an allocation approach be used for subsequent changes in the measurement of the liability. SFAS No. 143 changes the Company’s accounting for underground storage tank removal costs and sewage plant waste removal costs. An asset retirement obligation for $489,000 and $508,000 has been recorded as a liability at December 31, 2003 and June 30, 2004, respectively. The implementation of this standard resulted in a one-time cumulative effect of a change in accounting principle of $397,000 in 2003.

A reconciliation of the Company’s asset retirement obligation for the six months ended June 30, 2004 is as follows:

		Six Months Ended June 30, 2004
		(in thousands)
January 1, 2004		$ 489
Liabilities incurred		—
Liabilities settled		—
Revisions of estimate		—
Accretion expense		19
June 30, 2004		$ 508

Partnership Interests Option Plan

The Holding Partnership has established an equity incentive plan (“Option Plan”) to attract and retain key personnel, including senior management, and to enhance their interest in the Company’s continued success, which is more fully described in Note 11 in Notes to Consolidated Financial Statements included in the Company’s 2003 Form 10-K. The Company applies Accounting Principles Board Opinion No. 25 in accounting for its Option Plan. Accordingly, compensation costs for partnership interest options are measured as the excess, if any, of the market price of the partnership interests at the date of grant over the amount an employee must pay to exercise the option. No such compensation cost was recognized during the six months ended June 30, 2003 and 2004. The Company provides the disclosures required by the Statement of Financial Accounting Standards (“SFAS”) No. 123, “Accounting for Stock-Based Compensation” (“SFAS No. 123”), as amended by the SFAS No. 148, “Accounting for Stock-Based Compensation-Transition and Disclosure, an amendment of FASB Statement No. 123”.

(continued)

PETRO STOPPING CENTERS, L.P.

NOTES TO UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

IfThree ~~compensation~~Months ~~expense~~Ending ~~had~~March ~~been determined consistent with SFAS No. 123~~31, ~~the Company’s net income (loss) for the three and six months ended June 30, 2003 and~~ 2004 ~~(no options were granted during the six months ended June 30, 2003 or 2004) would have been recorded in the following pro forma amounts:~~

	Three Months Ended June 30,						Six Months EndedJune 30,
	2003			2004			2003			2004
	(in thousands)						(in thousands)
Net income (loss) - as reported	$	2,711		$	3,679		$	2,936		$	(3,900	)
Deduct: Total stock-based employee compensation determined under fair value based method for all awards		(6	)		(1	)		(12	)		(2	)
Net income (loss) - pro forma	$	2,705		$	3,678		$	2,924		$	(3,902	)

Statement of Operations

For pro forma disclosure purposes, the Company recognizes compensation cost on a straight-line basis over the related service period.


	As Previously Reported			Adjustment			As Restated
Net revenues:
Fuel (including motor fuel taxes)	$	224,044		$	—		$	224,044
Non-fuel		62,083			—			62,083

Total net revenues		286,127			—			286,127
Costs and expenses:
Cost of sales
Fuel (including motor fuel taxes)		215,588			—			215,588
Non-fuel		24,591			—			24,591
Operating expenses		33,511			—			33,511
General and administrative		3,690			—			3,690
Depreciation and amortization		3,830			9			3,839
Loss on disposition of fixed assets		4			—			4

Total costs and expenses		281,214			9			281,223

Operating income		4,913			(9	)		4,904
Loss on retirement of debt		(6,164	)		—			(6,164	)
Retired debt restructuring costs		(794	)		—			(794	)
Equity in loss of affiliate		(24	)		—			(24	)
Interest income		27			—			27
Interest expense		(5,537	)		—			(5,537	)

Net loss	$	(7,579	)	$	(9	)	$	(7,588	)

~~Reclassifications~~The restatement had no impact on net cash provided by operating activities for the three months ended March 31, 2004.

~~Certain~~(3) ~~prior~~Inventories ~~period amounts have been reclassified to conform to the current year presentation.~~

~~(4)~~As ~~Segments~~of December 31, 2004 and March 31, 2005, the Company’s reserve for obsolescence totaled $233,000. The majority of the reserve for obsolescence relates to merchandise and accessories and restaurant and other inventories. The motor fuels and lubricants inventories generally turn approximately every two to three days and do not become obsolete. The Company’s tires and tubes inventories also generally do not become obsolete.

~~The~~(4) ~~Company~~Operating ~~has~~Leases ~~two reportable operating segments, company-operated truck stops and franchise operations.~~

The Company ~~operates~~leases 37retail ~~multi-service~~space ~~truck~~to ~~stops~~independent inmerchants ~~the~~that ~~United~~operate States. Full-size Petro Stopping Centers are built on an average of 27 acres of land situated at a convenient location with easy highway access. They can each generally accommodate an average of 263 trucks and an average of 145 cars in ~~spacious~~some and well-lit parking areas. The Company’s locations are designed to provide good traffic flow, reduce accidents, and enhance security for the drivers, their trucks, and freight. Within the Petro Stopping Center network, the Company offers standardized and consistent products and services to accommodate the varied needs of ~~professional truck drivers and other highway motorists. Generally, these include separate gas and diesel fueling islands,~~ its ~~home-style Iron Skillet restaurants,~~ truck maintenance and repair services, and travel and convenience stores offering an array of merchandise selected to cater to professional truck drivers’ needs during long periods away from home. In addition, a typical Petro Stopping Center provides amenities and services such as telephone, fax, photocopying, Internet access, postal services, certified truck weighing scales, truck washes, laundry facilities, private showers, video games, and television and/or movie rooms. The Company has aggregated its company-operated truck stops into one reportable operating segment based on the distribution of products and services under one common site facility, classified as a multi-service truck stop. During the three months ended June 30, 2003 and 2004, the revenues generated from the company-operated truck stops were $250.7 million and $314.3 million, respectively, and $520.3 million and $599.2 million for the six months ended June 30, 2003 and 2004, respectively.

As of December 31, 2003 and June 30, 2004, the Company was a franchisor to 23 Petro Stopping

(continued)

PETRO STOPPING CENTERS, L.P.

NOTES TO UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

~~Center~~ locations. ~~The~~These ~~Company~~leases ~~collects~~relate ~~royalties~~to ~~and~~retail ~~fees~~space in ~~exchange for~~ the ~~use~~mall area of ~~its tradenames and trademarks and for certain services provided to~~ the ~~franchisees. Franchise~~main ~~fees~~building, ~~are~~free-standing ~~based~~brokerage ~~generally~~buildings ~~upon~~located aon ~~percentage of~~ the ~~franchisee’s sales. During the three months ended June 30~~property, ~~2003~~ and ~~2004,~~land ~~the~~lease ~~revenues~~agreements for ~~generated from~~ the ~~Company’s~~operation ~~franchise~~of ~~operations~~truck ~~were~~weighing ~~$1.4~~scales, ~~million~~truck ~~and $1.5 million~~washes, ~~respectively,~~ and ~~$2.5~~a ~~million~~free-standing ~~and~~motel $2operation.8 ~~million~~The ~~for~~type ~~the~~of ~~six~~space ~~months~~leased ~~ended~~at ~~June~~the ~~30,~~various ~~2003~~truck ~~and~~stop ~~2004,~~locations ~~respectively.~~is ~~Franchise~~dependent ~~operations~~upon ~~revenues,~~the ~~which~~physical ~~include~~layout ~~initial~~of ~~franchise~~each ~~fees~~site. ~~and~~The ~~other~~Company ~~revenue~~records ~~types,~~the ~~are combined in non-fuel~~ revenues generated ~~reported~~from ~~on the~~these ~~accompanying~~operating ~~unaudited~~leases ~~consolidated~~as ~~condensed~~“Other ~~statements~~Income” ofin ~~operations~~Non-Fuel Revenues. The ~~Company~~revenues ~~does~~received ~~not~~from ~~allocate~~the ~~any~~independent ~~expenses~~merchants in ~~measuring~~connection ~~this~~with ~~segment’s~~these ~~profit~~lease ~~and~~agreements ~~loss,~~were ~~nor~~$1.6 ~~does~~million itfor ~~believe~~each ~~there~~of ~~are~~the ~~any~~three ~~significant~~months ~~financial~~ended ~~commitments~~March or31, ~~obligations~~2004 ~~resulting~~and ~~from these franchise agreements~~2005.

(5) ~~Operating~~Segments ~~Leases~~

The Company ~~currently~~has ~~leases~~two ~~the~~reportable ~~land~~operating ~~and~~segments, ~~owns~~company-operated ~~the~~truck ~~building~~stops ~~in Hammond, Louisiana. This land lease expires in September 2004~~ and, ~~accordingly,~~franchise ~~to protect its interest, the Company has written a letter of intent stating that it will exercise its option to purchase the land~~operations. ~~The Company expects to consummate this transaction in September 2004 at a purchase price of $4.1 million.~~

~~(6)~~The ~~Partners~~Company operates 40 multi-service truck stops in the United States. Full-size Petro Stopping Centers are built on an average of 28 acres of land situated at a convenient location with easy highway access. They can each generally accommodate an average of 265 trucks and an average of 145 cars in spacious and well-lit parking areas. The Company’s ~~Deficit~~locations are designed to provide good traffic flow, reduce accidents, and enhance security for the drivers, their trucks, and freight. Within the Petro Stopping Center network, the Company offers standardized and consistent products and services to accommodate the varied needs of professional truck drivers and other highway motorists. Generally, these include separate gas and diesel fueling islands, its home-style Iron Skillet restaurants, truck maintenance and repair services, and travel and convenience stores offering an array of merchandise selected to cater to professional truck drivers’ needs during long periods away from home. In addition, a typical Petro Stopping Center provides amenities and services such as telephone, fax, photocopying, Internet access, postal services, certified truck weighing scales, truck washes, laundry facilities, private showers, video games, and television and/or movie rooms. The Company has aggregated its company-operated truck stops into one reportable operating segment based on the distribution of products and services under one common site facility, classified as a multi-service truck stop. During the three months ended March 31, 2004 and 2005, the revenues generated from the company-operated truck stops were $284.9 million and $359.9 million, respectively. The Company added three company-operated truck stops in the three months ended March 31, 2005. These truck stops were company-operated for an average of nineteen days during that period and two of them were previously operated by the Company’s franchisees.

~~Under~~As ~~the Indenture~~of ~~for~~December ~~the~~31, 9%2004 ~~Notes~~ and ~~the~~March ~~agreement~~31, ~~governing~~2005, the ~~new~~Company ~~senior~~was ~~secured~~a ~~credit~~franchisor ~~facilities~~to 24 and 22 Petro Stopping Center locations, ~~the~~respectively. ~~Company~~Each franchise location is ~~permitted~~required to ~~make~~meet ~~distributions~~the toCompany’s ~~the~~high ~~Holding~~standards ~~Partnership~~of inquality anand ~~amount~~service. ~~sufficient~~The toCompany ~~allow~~collects ~~the~~royalties ~~Holding~~and ~~Partnership~~fees toin ~~pay~~exchange ~~interest~~for on the ~~Holding~~use ~~Partnership’s~~of ~~15%~~its ~~Notes~~tradenames and trademarks ~~its~~and ~~new~~for ~~senior~~certain ~~third~~services ~~secured~~provided ~~discount~~to ~~notes~~the ~~due~~franchisees. ~~2014~~Franchise ~~and~~fees toare ~~pay~~based ~~for~~generally ~~administrative~~upon ~~expenses~~a percentage of the franchisee’s sales. ~~Through~~During ~~June~~the 30three months ended March 31, 2004 and 2005, the revenue generated from the Company’s ~~has~~franchise ~~paid~~operations ~~approximately~~was $~~539~~1.3 million for each quarter. Franchise operations revenues,~~000~~ ~~with~~which ~~respect~~include toinitial ~~these~~franchise ~~distributions~~fees and other revenue types, are combined in non-fuel revenues reported on the accompanying unaudited consolidated condensed statements of operations. The Company ~~expects~~does tonot ~~pay~~allocate ~~the~~any ~~Holding~~expenses ~~Partnership~~in ~~approximately~~measuring ~~$1.4~~this ~~million~~segment’s ~~related~~profit toand ~~these~~loss, ~~distributions~~nor ~~during~~does ~~the~~it ~~remainder~~believe ofthere ~~2004~~are any significant financial commitments or obligations resulting from these franchise agreements.

As(continued) of June 30, 2004, the Company made distributions of approximately $56.5 million to the Holding Partnership in connection with the 2004 Refinancing Transactions as permitted under the Indenture for the 9% Notes and the agreement governing the new senior secured credit facilities. These distributions were made to allow the Holding Partnership to repurchase approximately 54.8% of the Holding Partnership’s 15% Notes.

PETRO STOPPING CENTERS, L.P.

NOTES TO UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

The following table contains financial information of our reportable operating segments:

REPORTABLE OPERATING SEGMENT INFORMATION


	Three Months Ended March 31,
	2004		2005
	(As Restated)
	(in thousands)
Income Statement Data:
Net revenues:
Company-operated truck stops	$	284,867	$	359,896
Franchise operations		1,260		1,339

Total net revenues	$	286,127	$	361,235

Operating income:
Company-operated truck stops	$	3,644	$	5,300
Franchise operations		1,260		1,339

Total operating income	$	4,904	$	6,639

Balance Sheet Data:
(at end of period)
Total assets:
Company-operated truck stops	$	272,021	$	292,773
Franchise operations		—		—

Total assets	$	272,021	$	292,773

(6) Properties

During the first quarter of 2005, the Company entered into agreements for the acquisition of four sites. The Company completed the purchase of the New Paris, Ohio site in February 2005 and York, Nebraska and Kingsland, Georgia sites in March 2005. New Paris, Ohio and York, Nebraska were existing Petro Stopping Centers owned by one of the Company’s franchisees and became company-operated sites following the closing of the related transactions. The Kingsland, Georgia truck stop was independently owned and is a Petro:2 format site. The three sites were purchased for cash consideration totaling $20.7 million. The purchase price was primarily allocated to property and equipment of $18.6 million and to inventories. The Company has not yet completed the evaluation and allocation of the purchase price of the above mentioned acquisitions as the analysis associated with the valuation of certain assets are not yet complete. The company does not believe that the analysis will materially modify the preliminary purchase price allocation.

The fourth site is also an existing Petro Stopping Center owned by one of the Company’s franchisees. The purchase agreement with Bordentown Junction Truck Stop Joint Venture provides for the purchase by the Company of a Petro Stopping Center known as “Bordentown Junction Truck Stop” in Burlington County, New Jersey for a price of $23.9 million. The closing of the transaction is subject to customary conditions, including the consummation of satisfactory financing as well as satisfactory completion of due diligence. Following the closing of the transaction, this location will become a company-operated truck stop. The Company expects this purchase transaction to close during the second quarter of 2005.

(7) Partner’s Deficit

Under the Indenture for the 9.0% senior secured notes due 2012 and the agreement governing the senior secured credit facilities, the Company is permitted to make distributions to the Holding Partnership in amounts sufficient to allow the Holding Partnership to pay interest on the Holding Partnership’s 15.0% senior discount notes due 2008 (“15% Notes”) and its senior third secured discount notes due 2014 and to pay for taxes and administrative expenses. For the three months ended March 31, 2005, the Company paid approximately $3.5 million with respect to these distributions. These distributions were made to allow the Holding Partnership to repurchase all but $50,000 of the 15% Notes. The Holding Partnership repurchased the remaining $50,000 of the 15% Notes in May 2005. The Company believes it will distribute an additional $2.6 million to the Holding Partnership during the remainder of 2005 for interest payments, taxes, and administrative expenses.

(continued)

PETRO STOPPING CENTERS, L.P.

NOTES TO UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

(8) Financial Instruments

The Company is exposed to market risk due to changes in commodity prices and interest rates. For a complete discussion of its market risks and its market risk sensitive assets and liabilities, please refer to Note 13 of notes to consolidated financial statements in the Company’s 2004 Form 10-K. During the quarter ended March 31, 2005, there have been no material changes regarding our market risks from the discussion in the Company’s 2004 Form 10-K.

The following table reflects the carrying amount and estimated fair value of the Company’s financial instruments, as of December 31, 2004 and March 31, 2005:


	2004					2005
	Carrying Amount			Fair Value		Carrying Amount			Fair Value
	(dollars in thousands)
Long-term debt
Fixed rate	$	225,000		$	237,938	$	225,000		$	232,875
Average interest rate		9.0	%		—		9.0	%		—
Variable rate		21,250			21,250		31,250			31,250
Average interest rate		5.8	%		—		5.7	%		—

(9) Recently Issued Accounting Pronouncements

In December 2003, the Financial Accounting Standards Board issued Interpretation No. 46 (revised December 2003), “Consolidation of Variable Interest Entities, an Interpretation of ARB No. 51,” which replaces the original Interpretation No. 46 issued in January 2003. This Interpretation addresses the consolidation by business enterprises of variable interest entities as defined in the Interpretation. The effective dates vary depending on the type of reporting company and the type of entity that the company is involved with. Companies without publicly traded equity securities, such as the Company, must apply the revised Interpretation immediately to all entities created after December 31, 2003, and to all other entities no later than the beginning of the first reporting period beginning after December 15, 2004. Management has adopted this revised Interpretation and concluded that the Company does not own interests in any entities that meet the consolidation requirements.

In December 2004, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 123 (revised 2004), “Share-Based Payment,” which replaces the original Statement of Financial Accounting Standards No 123, “Accounting for Stock-Based Compensation,” issued in October 1995. This standard addresses the accounting for transactions where an entity obtains employee services in share-based payment transactions. The effective dates vary depending on the type of reporting entity. Non-public companies, such as the Company, must apply the revised standard as of the beginning of the first annual reporting period that begins after December 15, 2005. Management does not believe that the adoption of this revised standard will have a significant impact on the Company’s financial position or results of operations.

(continued)

PETRO STOPPING CENTERS, L.P.

NOTES TO UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

In March 2005, the Financial Accounting Standards Board issued Interpretation No. 47, “Accounting for Conditional Asset Retirement Obligations.” This Interpretation clarifies that the term “conditional” as used in Statement of Financial Accounting Standards No. 143, “Accounting for Asset Retirement Obligations,” which refers to a legal obligation to perform an asset retirement activity even in the timing and/or settlement are conditional on a future event that may or may not be within the control of an entity. Accordingly, the entity must record a liability for the conditional asset retirement obligation if the fair value of the obligation can be reasonably estimated. The Interpretation is effective for companies no later than the end of the fiscal year ending after December 15, 2005. Management is evaluating the impact of this Interpretation on its consolidated financial statements.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

~~The information contained in this Item 2 updates, and should be read in conjunction with, the information set forth in Part II, Item 7 of our 2003 Form 10~~Forward-K.Looking Statements

Certain sections of this Form 10-Q, including “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Quantitative and Qualitative Disclosures about Market Risk,” contain various forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934 as amended, which represent ~~our~~management’s expectations or beliefs concerning future events that involve risks and uncertainties. These statements may be accompanied by words such as “believe,” “intend,” “estimate,” “may,” “could,” “project,” “anticipate,” “expect,” or “predict,” that convey the uncertainty of future events or outcomes. These statements are based on assumptions that we believe are reasonable; however, many important factors could cause our actual results in the future to differ materially from the results referred to in the forward-looking statements. InThese ~~addition~~forward-looking statements are subject to numerous assumptions, risks, and uncertainties that may cause our actual results to be materially different from any future results expressed or implied by us in those statements. Some of these risks are described in Part II, Item 7 of our Annual Report on Form 10-K for the ~~factors~~year ended December 31, 2004 (“2004 Form 10-K”). Although the financial information included in our 2004 Form 10-K cannot be relied upon as a result of the restatement of our financial statements as described below in this Form 10-Q, ~~important~~the ~~factors~~cautionary ~~that~~statements ~~could~~and ~~cause~~risk factors identified on our ~~actual~~Form ~~results~~10-K tofiling ~~differ~~are ~~materially~~still ~~from~~representative ~~the~~of ~~results~~those ~~referred~~risks to which we are subject. These risk factors should be considered in ~~the~~connection with any subsequent written or oral forward-looking statements ~~include,~~that ~~among~~we ~~others,~~or ~~the following:~~persons acting on our behalf may issue.

•All ~~volatility~~statements, other than statements of ~~fuel~~historical ~~prices;~~facts included in this Form 10-Q, may be considered forward-looking statements. The forward-looking statements are included in, without limitation, “—Overview of Operating Results,” “—Consolidated Revenues,” “—Results of Operations,” “—Network Development,” “—Liquidity and Capital Resources,” and “—Critical Accounting Policies.” In addition, in the preparation of our unaudited consolidated condensed financial statements, we make various estimates and assumptions that are by their nature forward-looking statements.

•Restatement ~~availability of fuel;~~

•Following ~~the~~a ~~economic~~review ~~condition~~ of ~~the~~our ~~long-haul~~accounting ~~trucking~~policy, ~~industry~~we ~~and~~determined ~~the~~that Uwe had incorrectly calculated our depreciation expenses on leasehold improvements.S. ~~economy~~As ina ~~general;~~result, we will restate our financial statements for the three-year period ended December 31, 2004.

•The ~~competition~~restatement ~~from~~relates ~~other~~to ~~truck~~our ~~stops~~previous depreciation of our leasehold improvements, ~~convenience~~in ~~stores~~some cases, ~~fast~~over ~~food~~a ~~retailers~~period greater than both the initial term of the lease and its option periods, ~~restaurants~~but not longer than the useful life of the asset. After an analysis of our records on May 13, ~~and~~2005, ~~truck~~we ~~maintenance~~have ~~and~~concluded ~~repair~~that ~~facilities;~~we should use the shorter of (1) the initial lease term unless we believe that the penalty for not renewing the lease would be substantial enough that it was “reasonably assured” that we would exercise the renewal, or (2) the useful life of the asset. The restatement relates, in part, to the February 7, 2005 letter issued by the Office of the Chief Accountant of the Securities and Exchange Commission to the American Institute of Certified Public Accountants, which clarified the existing generally accepted accounting principles applicable to leases.

•We ~~environmental~~believe ~~regulations~~these non-cash adjustments will have no material impact on our previously reported cash flows, cash position, revenues, or EBITDA in any period, or on compliance with the covenants under our senior secured credit facilities and Indentures for our 9.0% senior secured notes due 2012.

~~All~~We ~~statements,~~currently ~~other~~estimate ~~than~~the ~~statements~~cumulative effect of ~~historical~~the ~~facts~~restatement ~~included~~of inour financial ~~this~~statements ~~Form~~through ~~10-Q~~December 31, ~~may~~2004 will be ~~considered~~to ~~forward-looking~~reduce ~~statements.~~retained ~~The~~earnings ~~forward-looking statements~~by ~~are~~approximately ~~included in~~$805, ~~without limitation~~000, ~~“—Transactions~~reflecting ~~with~~increased ~~Related-Parties,”~~accumulated ~~“—Network~~depreciation ~~Development,”~~and ~~“—Liquidity~~depreciation and ~~Capital~~amortization ~~Resources,”~~expense. “—Of ~~Critical~~the ~~Accounting~~$805,000, ~~Policies~~$618,”000 ~~and~~is anticipated to be ~~“—Results~~reflected ofin ~~Operations”.~~periods Inprior ~~addition~~to December 31, in2002. ~~the~~We ~~preparation~~anticipate ofthat ~~the~~depreciation ~~financial~~will ~~statements,~~be weincreased ~~make~~(and ~~various~~operating ~~estimates~~income decreased) by $128,000, $21,000, and ~~assumptions~~$38,000 ~~that~~for ~~are~~the byperiods ~~their~~ending ~~nature~~December ~~forward-looking~~31, ~~statements~~2002, 2003, and 2004, respectively.

As a result of the restatement, as of December 31, 2004, property and equipment, net and total assets, as restated, are $805,000 less than as previously reported and total partners’ deficit and total liabilities and partners’ deficit were reduced by $805,000. Additionally, for the three months ended March 31, 2004, depreciation and amortization expense and total costs and expenses, as restated, increased by $9,453 and operating income and net income (loss) decreased by $9,453 as compared to the amounts as previously recorded. The restatement had no impact in net cash provided by operating activities for the three months ended March 31, 2004.

These estimates are subject to change as we complete our preparation of the restated financial statements. We will amend the appropriate filings with the Securities and Exchange Commission to include our

restated financial statements for the three-year period ended December 31, 2004. As a result of the restatement, the financial statements contained in our prior filings with the Securities and Exchange Commission, should no longer be relied upon.

Reporting Format

We have two reportable operating segments, company-operated truck stops and franchise operations.

WeAs ~~operate 37 multi-service truck stops in the United States. Full-size Petro Stopping Centers are built on an average~~ of 27March acres of land situated at a convenient location with easy highway access. They can each generally accommodate an average of 263 trucks and an average of 145 cars in spacious and well-lit parking areas. Our locations are designed to provide good traffic flow31, ~~reduce accidents~~2005, ~~and enhance security for the drivers, their trucks, and freight. Within the Petro Stopping Center network,~~ we ~~offer~~operated ~~standardized~~40 and consistent products and services to accommodate the varied needs of professional truck drivers and other highway motorists. Generally, these include separate gas and diesel fueling islands, our homemulti-~~style~~service ~~Iron Skillet restaurants,~~ truck ~~maintenance~~stops ~~and~~in ~~repair~~the ~~services,~~United ~~and travel and convenience stores offering an array of merchandise selected to cater to professional truck drivers’ needs during long periods away from home~~States. In addition, a typical Petro Stopping Center provides amenities and services such as telephone, fax, photocopying, Internet access, postal services, certified truck weighing scales, truck washes, laundry facilities, private showers, video games, and television and/or movie rooms. We have aggregated our company-operated truck stops into one reportable operating segment based on the distribution of products and services under one common site facility, classified as a multi-service truck stop. During the three months ended ~~June~~March 3031, ~~2003~~2004 and ~~2004~~2005, the revenues generated from our company-operated truck stops were $~~250~~284.79 million and $~~314~~359.39 million, respectively,. ~~and~~We ~~$520.3~~added ~~million~~three ~~and~~company-operated ~~$599.2~~truck ~~million~~stops ~~for~~in the ~~six~~three months ended ~~June~~March 3031, ~~2003~~2005. These truck stops were company-operated for an average of nineteen days during that period and ~~2004,~~two ~~respectively.~~of them were previously operated by franchisees.

As of December 31, ~~2003~~2004 and ~~June~~March 3031, ~~2004~~2005, we ~~are~~were a franchisor to 2324 and 22 Petro Stopping Center locations, respectively. Each franchise location is required to meet our high standards of quality and service. We collect royalties and fees in exchange for the use of our tradenames and trademarks and for certain services provided to the franchisees. Franchise fees are based generally upon a percentage of the franchisee’s sales. During the three months ended March 31, 2004 and 2005, the revenue generated from our franchise operations was $1.3 million for each quarter. Franchise operations revenues, which include initial franchise fees and other revenue types, are combined in non-fuel revenues reported on our accompanying unaudited consolidated condensed statements of operations. We do not allocate any expenses in measuring this segment’s profit and loss, nor do we believe there are any significant financial commitments or obligations resulting from these franchise agreements.

10No provision for income taxes is reflected in the accompanying unaudited consolidated condensed financial statements because we are a partnership for which taxable income and tax deductions are passed through to our partners.

~~certain~~14 services provided to the franchisees. Franchise fees are based generally upon a percentage of the franchisee’s sales. During the three months ended June 30, 2003 and 2004, the revenues generated from our franchise operations were $1.4 million and $1.5 million, respectively, and $2.5 million and $2.8 million for the six months ended June 30, 2003 and 2004, respectively. Franchise operations revenues, which include initial franchise fees and other revenue types, are combined in non-fuel revenues reported on the accompanying unaudited consolidated condensed statements of operations. We do not allocate any expenses in measuring this segment’s profit and loss, nor do we believe there are any significant financial commitments or obligations resulting from these franchise agreements.

The following table contains financial information of our reportable operating segments:

REPORTABLE OPERATING SEGMENT INFORMATION


	Three Months Ended March 31,
	2004		2005
	(As Restated)
	(in thousands)
Income Statement Data:
Net revenues:
Company-operated truck stops	$	284,867	$	359,896
Franchise operations		1,260		1,339

Total net revenues	$	286,127	$	361,235

Operating income:
Company-operated truck stops	$	3,644	$	5,300
Franchise operations		1,260		1,339

Total operating income	$	4,904	$	6,639

Balance Sheet Data:
(at end of period)
Total assets:
Company-operated truck stops	$	272,021	$	292,773
Franchise operations		—		—

Total assets	$	272,021	$	292,773

Overview of Operating Results

We are pleased with our financial results for the quarter ended March 31, 2005. During the first quarter of 2005, our net revenues were $361.2 million, a 26.2% increase over prior year. The increase was mostly due to higher fuel revenues as a result of an increase in our average retail-selling price of fuel and increased fuel gallons sold, in addition to our three new sites. Our net income of $781,000 was $8.4 million higher than our net loss for the three months ended March 31, 2004 (as restated), due to costs associated with our 2004 refinancing transactions.

We derive our revenues from:

•

The sale of diesel and gasoline fuels;

• Non-fuel items, including the sale of merchandise and offering of services including truck tire sales and installation, truck maintenance and repair services, on-site vendor lease income, showers, laundry, video games, franchise revenues, fast-food operations, and other operations; and

•

Iron Skillet restaurant operations.

Consolidated Revenues

The following table sets forth our total consolidated revenues by major source:

	Three Months Ended June 30,							Six Months Ended June 30,
	Three Months Ended March 31,
	2003				2004			2003			2004
	2004					2005
	(dollars in thousands)							~~(dollars in thousands)~~
Fuel	$~~189,533~~	224,044	~~75.2%~~	78.3	~~$249,473~~%	~~79.0%~~$	297,204	~~$403,103~~	82.3	~~77.1~~%	~~$473,517~~	~~78.7%~~
Maintenance Services and Retail(Non-Fuel excluding Restaurant)	45,938		18.2%		48,045	15.2%		87,232		16.7%	92,467	15.3%
Non-Fuel (excluding restaurant)		44,422		15.5	%		46,598		12.9	%
Restaurant	~~16,560~~	17,661	~~6.6%~~	6.2	~~18,295~~%	~~5.8%~~	17,433	~~32,437~~	4.8	~~6.2~~%	~~35,956~~	~~6.0%~~
Total Net Revenues	$~~252,031~~	286,127	~~100.0%~~	100.0	~~$315,813~~%	~~100.0%~~$	361,235	~~$522,772~~	100.0	~~100.0~~%	~~$601,940~~	~~100.0%~~

Our fuel revenues and related cost of sales include a significant amount of federal and state motor fuel taxes. Such taxes were $6164.34 million and $6566.84 million for the three months ended ~~June~~March 3031, ~~2003 and~~ 2004, ~~respectively,~~ and ~~$121.9 million and $130.2 million for the six months ended June 30~~2005, ~~2003 and 2004,~~ respectively.

On January 1, 2003, we adopted Statement of Financial Accounting Standards No. 143, “Accounting for Asset Retirement Obligations” (“SFAS No. 143”). SFAS No. 143 provides accounting guidance for retirement obligations, for which there is a legal obligation to settle, associated with tangible long-lived assets. SFAS No. 143 requires that asset retirement costs be capitalized as part of the cost of the related long-lived asset and such costs should be allocated to expense by using a systematic and rational method. The statement requires that the initial measurement of the asset retirement obligation be recorded at fair value and that an allocation approach be used for subsequent changes in the measurement of the liability. SFAS No. 143 changes our accounting for underground storage tank removal costs and sewage plant waste removal costs. An asset retirement obligation of $489,000 and $508,000 has been recorded as a liability at December 31, 2003 and June 30, 2004, respectively. The implementation of this standard resulted in a one-time cumulative effect of a change in accounting principle of $397,000 in 2003.

No provision for income taxes is reflected in the accompanying unaudited consolidated condensed financial statements because we are a partnership for which taxable income and tax deductions are passed through to the individual partners.

Transactions with Related-Parties

Our related-party transactions are described in our 2003 Form 10-K under Item 13, “Certain Relationships and Related Transactions”. We believe that all of our existing related-party transactions are on terms comparable to those that could have been received in an arms-length transaction.

Our most significant related-party transactions are the two ten-year supply agreements with ExxonMobil entered into in July 1999. Under the terms of one of these agreements, the ExxonMobil Suppliers will supply the company-operated Petro Stopping Centers’ diesel fuel and gasoline requirements at certain of our locations and under the other of these agreements, we purchase lubricants, based upon minimum purchase commitments, at the prices set forth in the agreement.

Network Development

The following table sets forth the development of our Petro Stopping Centers network since 2000:

	As of June 30,
	2000	2001	2002	2003	2004
Company-operated	32	35	35	37	37
Franchise operation	23	23	21	23	23
Total Petro Stopping Centers	55	58	56	60	60

The following table sets forth information on currently existing Petro Stopping Centers opened from June 30, 2000 through June 30, 2004, all but three of which are full-sized facilities.

Location		Date Opened
Company-operated:
Carlisle, Pennsylvania		September 2000
Los Banos, California		November 2000
North Las Vegas, Nevada		January 2001
Angola, Indiana		August 2002
Sparks, Nevada		December 2002
Franchise operation:
Oak Grove, Missouri		April 2001
Glade Spring, Virginia		October 2001
Greensburg, Indiana		June 2002
Morton’s Gap, Kentucky		October 2002
Gaston, Indiana		October 2002

We own land held for sale which consists of several parcels of undeveloped land considered by management as excess and no longer necessary for our operations. In March 2004, we sold all of our undeveloped land in Knowlton Township, New Jersey for a sales price of $1.1 million. Since the carrying amount of land in Knowlton Township, New Jersey was equal to the selling price less cost to sell, no gain or loss was recognized in 2004.

We currently lease the land and own the building in Hammond, Louisiana. This land lease expires in September 2004 and, accordingly, to protect our interest, we have written a letter of intent stating that we will exercise our option to purchase the land. We expect to consummate this transaction in September 2004 at a purchase price of $4.1 million.

As of June 30, 2004, the diesel fuel sold at all but eighteen company-operated Petro Stopping Centers is branded Mobil Diesel.

Liquidity and Capital Resources

At June 30, 2004, our principal sources of liquidity were:

• $14.4 million in available borrowing capacity under the revolving credit portion of our new senior secured credit facility;

• Cash flows from operations of $14.7 million for the six months ended June 30, 2004. The decrease in cash flows from operations, from $21.0 million for the six months ended June 30, 2003, was due to an increase in accounts receivable and inventory and the change in the timing of payments for fuel, offset by variations in the timing of payments for trade accounts payable and an increase in accrued expenses, in addition to a reduction in our amounts due from affiliates related to distributions made to the Holding Partnership in connection with the 2004 refinancing transactions (the “2004 Refinancing Transactions”) and to the increase in operating income; and

• Cash flows used in financing activities of $3.3 million for the six months ended June 30, 2004. The decrease in cash flows used in financing activities, from $6.3 million for the six months ended June 30, 2003, was entirely due to the 2004 Refinancing Transactions which includes the operating distribution of $57.1 million to the Holding Partnership.

On February 9, 2004, we completed our 2004 Refinancing Transactions in which we refinanced substantially all of our existing indebtedness and the indebtedness of our parent, Petro Stopping Centers Holdings, L.P. (the “Holding Partnership”). The 2004 Refinancing Transactions consisted of the following components:

• The issuance of $225.0 million aggregate principal amount of 9.0% senior secured notes due 2012 (the “9% Notes”);

• The repurchase of the majority of our 10½% senior notes due 2007 (the “10½% Notes”);

• Entering into the new senior secured credit facilities of an aggregate principal amount of $50.0 million, consisting of a three year revolving credit facility of $25.0 million and a four year term loan facility of $25.0 million;

• The repayment and retirement of our retired senior secured credit facilities of approximately $40.8 million, plus accrued interest;

• The repurchase for cash of approximately 54.8% of the Holding Partnership’s 15.0% senior discount notes due 2008 (the “Holding Partnership’s 15% Notes”) and the exchange of approximately 42.2% of the Holding Partnership’s 15% Notes for new senior third secured discount notes;

• The extension by the Holding Partnership of the mandatory purchase date of the warrants issued in July of 1999 by Petro Warrant Holdings Corporation from August 1, 2004 to October 1, 2009; and

• The reduction of our trade credit balance with Exxon Mobil Corporation (“ExxonMobil”).

On February 9, 2004, we entered into new senior secured credit facilities of an aggregate principal amount of $50.0 million, consisting of a three year revolving credit facility of $25.0 million and a four year term loan facility of $25.0 million. We refer to these credit facilities as the new senior secured credit facilities. Any funds drawn on our new senior secured credit facilities are secured by substantially all of our assets and the guarantees of Petro, Inc. and each of our subsidiaries. We have capitalized approximately $2.3 million of debt issuance costs through June 30, 2004 related to our new senior secured credit facilities and have written off approximately $794,000 of unamortized deferred debt issuance costs associated with the refinancing of our retired senior credit facilities.

At June 30, 2004, we had $22.5 million outstanding under our term loan facility. We made two scheduled quarterly principal payments of approximately $1.3 million each on March 31, 2004 and June 30, 2004. The first four scheduled quarterly principal payments under the term facilities are approximately $1.3 million each, the next four quarterly principal payments are approximately $1.5 million each, and the last eight quarterly installments are approximately $1.8 million each.

Under the revolving credit portion of our new senior secured credit facilities, $25.0 million is available on a revolving basis until maturity at February 9, 2007. Interest on drawn funds is paid at maturity or quarterly if the term is greater than three months at a current spread of 2.75% above the bank’s base rate or 4.25% over the Eurodollar rate (the rate to be determined at the time of borrowing, at our option). Commitment fees of 0.75% per annum on undrawn funds are paid quarterly. At June 30, 2004, we had no borrowings outstanding under this portion of our new senior secured credit facilities and had $10.6 million in standby letters of credit outstanding, which reduce our borrowing capacity under this portion of our new senior secured credit facilities on a dollar for dollar basis. Approximately $7.6 million of these letters of credit are required to be posted with our insurance carriers in connection with our obtaining liability and other insurance coverage. As of June 30, 2004, we are in compliance with all financial covenants under our new senior secured credit facilities.

In connection with the 2004 Refinancing Transactions, the repurchases of the majority of our 10½% Notes and the Holding Partnership’s 15% Notes were accounted for as debt extinguishments resulting in the recognition of a loss of approximately $5.4 million and $9.3 million, respectively, which included the write-off of unamortized deferred debt issuance costs of approximately $2.8 million for each transaction. These losses are presented as a component of income (loss) before cumulative effect of a change in accounting principle on each company’s unaudited consolidated condensed statements of operations for the six months ended June 30, 2004. Additionally, we capitalized approximately $9.6 million of debt issuance costs related to the issuance of the 9% Notes through June 30, 2004. The Holding Partnership capitalized approximately $3.2 million of debt issuance costs related to its exchange offer through June 30, 2004.

In connection with the 2004 Refinancing Transactions, we reduced our trade credit balance and amended our agreement with the ExxonMobil Suppliers. The amendment provides that the penalty for failing to purchase our annual volume commitments under our agreement with the ExxonMobil Suppliers will be multiplied by a fraction, the numerator of which is the average of our trade credit with the ExxonMobil Suppliers during December of each year and the denominator of which is $30.0 million.

On March 12, 2004, we repurchased all of our remaining 10½% Notes. In connection with this repurchase, we recognized a loss of approximately $724,000, which includes the write-off of approximately $379,000 of unamortized deferred debt issuance costs. This loss is presented as a component of income (loss) before cumulative effect of a change in accounting principle on our unaudited consolidated condensed statements of operations for the six months ended June 30, 2004.

After giving effect to the 2004 Refinancing Transactions and the repurchase of our remaining 10½% Notes, our total consolidated debt increased $79.0 million and, as a result, our estimated associated annual interest expense will increase approximately $5.6 million.

On July 19, 2004, we completed the exchange of substantially all of our unregistered 9% Notes for 9% Notes that were registered with the Securities and Exchange Commission, thereby satisfying our obligation to register the 9% Notes.

The following is a summary of our contractual cash obligations as of June 30, 2004:

Contractual Cash Obligations	Total		Less Than 1 Year		1-3 Years		4-5 Years		After 5 Years
	(in thousands)
Long-term debt	$	247,500	$	10,187	$	9,778	$	2,535	$	225,000
Operating leases		39,183		4,478		7,715		6,561		20,429
Total	$	286,683	$	14,665	$	17,493	$	9,096	$	245,429

In addition to the above, we have an annual volume commitment associated with the ExxonMobil Supply Agreements. See Note 8 in Notes to Consolidated Financial Statements included in our 2003 Form 10-K for additional discussion.

Under our Indenture for the 9% Notes and the agreement governing our new senior secured credit facilities, we are permitted to make distributions to the Holding Partnership in an amount sufficient to allow the Holding Partnership to pay interest on the Holding Partnership’s 15% Notes and its new senior third secured discount notes due 2014 and to pay for administrative expenses. Through June 30, 2004, we have paid approximately $539,000 with respect to these distributions. We expect to pay the Holding Partnership approximately $1.4 million related to these distributions during the remainder of 2004.

As of June 30, 2004, we made distributions of approximately $56.5 million to the Holding Partnership in connection with the 2004 Refinancing Transactions as permitted under our Indenture for the 9% Notes and the agreement governing our new senior secured credit facilities. These distributions were made to allow the Holding Partnership to repurchase approximately 54.8% of the Holding Partnership’s 15% Notes.

We guaranteed a portion of our Joint Venture, Petro Travel Plaza LLC’s debt under a Repayment Guaranty dated as of June 4, 1999 and last modified on September 10, 2003. The guaranteed amount is reduced as the outstanding principal balance of the loan is reduced. The guarantee is reduced to zero when the loan to value ratio is equal to or less than 0.5 to 1.00. As of June 30, 2004, the maximum potential amount of future payments related to the guarantee was $342,000. The fair value of the guarantee is insignificant.

Additionally, we guaranteed a portion of Petro Travel Plaza, LLC’s debt under a Continuing Guaranty dated as of May 12, 2003, which was modified by an Amended and Restated Guaranty Agreement on September 10, 2003. The guaranteed amount is reduced as the outstanding principal balance of the loan is reduced. The guarantee is reduced to zero when the loan to value ratio is equal to or less than 0.5 to 1.0. As of June 30, 2004, the maximum potential amount of future payments related to the guarantee was $75,000. The fair value of the guarantee is insignificant.

We had negative working capital of $17.5 million and $7.7 million at December 31, 2003 and June 30, 2004, respectively. Negative working capital is normal in the truck stop industry since diesel fuel inventory turns approximately every two to three days, but payment for fuel purchases can generally be made over a longer period of time. Approximately 91.0% of our total sales are cash sales (or the equivalent in the case of sales paid for on credit, which are funded on a daily basis by third-party billing companies).

Capital expenditures on our truck stop network totaled $2.2 million for the six months ended June 30, 2004. We currently expect to invest approximately $7.8 million during the remainder of 2004 on capital expenditures, the majority of which will be related to the purchase of the land at the Hammond, Louisiana site and to a lesser extent to regular capital maintenance and improvement projects on existing Petro Stopping Centers. These capital outlays will be funded through borrowings under our new senior secured credit facilities and internally generated cash.

We are partially self-insured, paying our own employment practices, general liability, workers’ compensation, and group health benefit claims, up to stop-loss amounts ranging from $100,000 to $250,000 on a per occurrence basis. During the six months ended June 30, 2004, we paid approximately $4.2 million on claims related to these partial self-insurance programs. Provisions established under these partial self insurance programs are made for both estimated losses on known claims and claims incurred but not reported, based on claims history. For the six months ended June 30, 2004, aggregated provisions amounted to approximately $4.6 million. At June 30, 2004, the aggregated accrual amounted to approximately $7.8 million, which we believe is adequate to cover both reported and incurred but not reported claims.

~~Based~~We onlease ~~the~~retail ~~foregoing,~~space weto ~~believe~~independent merchants that ~~internally~~operate ~~generated~~in ~~funds,~~some ~~together~~of ~~with~~our ~~amounts~~truck ~~available~~stop ~~under~~locations. These ~~our~~leases ~~new~~relate ~~senior~~to ~~secured~~retail ~~credit~~space ~~facilities,~~in ~~will~~the bemall ~~sufficient~~area toof ~~satisfy~~the ~~our~~main ~~cash~~building, ~~requirements~~free-standing ~~for~~brokerage ~~operations~~buildings ~~and~~located ~~debt~~on ~~service~~the ~~through~~property, ~~2004~~retail space within company-operated profit centers, and ~~the~~land ~~foreseeable~~lease ~~future~~agreements ~~thereafter;~~for ~~provided~~the ~~however~~operation of truck weighing scales, ~~that~~truck ~~our~~washes, ~~ability~~and toa ~~satisfy~~free-standing ~~such~~motel ~~obligations~~operation. ~~and maintain~~The ~~covenant~~type ~~compliance~~of ~~under~~space ~~our~~leased ~~new~~at ~~senior~~the ~~secured~~various ~~credit~~truck ~~facilities~~stop locations is dependent upon athe ~~number~~physical layout of ~~factors,~~each ~~some~~site. ofWe ~~which~~record ~~are~~the ~~beyond~~revenues ~~our~~generated ~~control,~~from ~~including~~these ~~economic,~~operating ~~capital~~leases ~~market~~as “Other Income” in Non-Fuel Revenues. The revenues received from the independent merchants in connection with these lease agreements were $1.6 million for each of the three months ended March 31, 2004 and ~~competitive conditions~~2005.

Results of Operations

~~Six~~Three Months Ended ~~June~~March 3031, ~~2004~~2005 Compared to ~~Six~~Three Months Ended ~~June~~March 3031, ~~2003~~2004 (As Restated)

Overview. Net income ~~decreased~~increased ~~for~~by ~~the~~$8.4 ~~six~~million ~~months~~to $781,000 for the quarter ended ~~June~~March 3031, ~~2004~~ 2005 compared to ~~the~~a ~~six~~net ~~months~~loss of $7.6 million for the quarter ended ~~June~~March 3031, ~~2003~~2004, due primarily to costs of approximately $7.0 million associated with our 2004 Refinancing Transactions ~~and increased interest costs~~. Our net revenues ofincreased 26.2% to $~~601~~361.92 million ~~increased 15.1%~~ for the ~~six~~quarter ~~months~~ ended ~~June~~March 3031, ~~2004~~2005 from $~~522~~286.81 million in the prior year ~~period~~quarter. The increase was mainly due to higher fuel revenues, as a result of ~~increased fuel gallons sold and~~ an increase in our average retail-selling price of fuel, inrelated ~~addition~~ to ~~improved~~market conditions, ~~non-fuel~~which ~~sales.~~may ~~Operating expenses~~only ~~increased~~be ~~6.5%~~temporary, toand ~~$68.4~~increased ~~million~~fuel ~~from~~gallons ~~$64.2~~sold, ~~million~~ in ~~the~~addition ~~prior year period due primarily~~ to ~~higher~~improved ~~employee~~non-~~related~~fuel ~~costs,~~sales ~~increased~~and ~~telephone~~the ~~and~~addition ~~utility~~of ~~costs,~~three ~~and~~new ~~higher~~sites. ~~credit~~As ~~card~~discussed ~~fees~~in ~~associated~~Note ~~with~~3 ~~the~~in ~~increased~~notes ~~fuel~~to ~~revenues.~~ unaudited

~~Fuel.~~consolidated ~~Revenues~~condensed ~~increased~~financial ~~17.5%~~statements toincluded ~~$473.5~~herein, ~~million~~we incompleted the ~~six~~ ~~months~~purchase ~~ended~~of ~~June~~two 30previously franchised operated locations at New Paris, ~~2004~~Ohio ~~compared~~and toYork, Nebraska ~~$403.1~~and ~~million~~a innew ~~the~~Petro:2 ~~prior~~location ~~year~~at ~~period.~~Kingsland, ~~Fuel~~Georgia ~~revenues~~during ~~increased~~this ~~due~~quarter. toOn a 6comparable unit basis, net revenues increased by 24.6% ~~increase~~to in$356.4 ~~our~~million ~~total~~from ~~fuel~~$286.1 ~~gallons~~million ~~sold~~in ~~compared to~~ the prior year ~~period~~quarter, asdue ~~well~~to asan ~~a 10.2%~~ increase in our average retail-selling price ~~per~~of ~~gallon~~fuel ~~from~~and ~~the~~increased ~~prior~~fuel ~~year~~gallons ~~period~~sold. ~~Gross~~A ~~profit~~Petro ~~increased~~Stopping byCenter ~~7.8%~~is toconsidered ~~$21.6~~a ~~million~~comparable unit in 2005 if we operated it for twelve months in 2004. During the ~~six~~quarter ~~months~~ended March 31, 2005, we had 36 company-operated comparable units out of a total of 39 company-operated units for the quarter ended ~~June~~March 3031, ~~2004~~2005, ~~compared~~in each case excluding our jointly-owned Wheeler Ridge facility, which is reflected in equity in loss of affiliates. Operating expenses increased 2.4% to $2034.13 million from $33.5 million in the prior year ~~period,~~quarter ~~despite~~due aprimarily ~~10.6%~~to ~~increase~~the inaddition of our ~~cost~~three ofnew ~~fuel~~sites.

~~Maintenance Services and Retail (Non-fuel excluding Restaurant)~~Fuel. Revenues increased 632.07% to $92297.52 million for the ~~six~~quarter ~~months~~ ended ~~June~~March 3031, ~~2004~~2005 ~~from~~compared to $87224.20 million in the quarter ended March 31, 2004. Fuel revenues increased due to a 29.4% increase in our average retail-selling price per gallon compared to the prior year ~~period~~quarter related to market conditions, as well as a 2.5% increase in our total fuel gallons sold from the prior year quarter and the addition of our three new sites. Gross profit increased 6by 19.15% to $5210.1 million for the ~~six~~quarter ~~months~~ ended ~~June~~March 3031, ~~2004~~2005 ~~from~~compared to $498.15 million in the prior year ~~period.~~quarter, ~~These~~despite ~~increases~~a 33.2% increase in ~~revenues~~our ~~and~~cost ~~gross~~of ~~profit~~fuel. ~~were~~On ~~due~~a ~~primarily~~comparable unit basis, fuel revenues increased 30.9% due to a 629.63% orincrease $5in our average retail-selling price per gallon as well as a 1.3% ~~million~~ increase in ~~general~~our ~~merchandise~~total ~~sales~~fuel atgallons ~~our~~sold ~~retail~~compared ~~stores~~to ~~and~~the prior year quarter. On a comparable unit basis, gross profit increased ~~sales~~by at17.8% ~~our~~or ~~Petro:Lubes~~$1.5 million for the quarter ended March 31, 2005 compared to the prior year quarter.

~~Restaurant~~Non-Fuel (excluding restaurant). Revenues increased 104.89% to $3646.06 million for the ~~six months~~quarter ended ~~June~~March 3031, ~~2004~~2005 compared to $3244.4 million in the prior year ~~period,~~quarter. ~~due~~Gross toprofit increased ~~customer~~7.2% ~~traffic~~to ~~and~~$27.0 anmillion ~~increase~~for the quarter ended March 31, 2005 from $25.2 million in the ~~average~~prior ~~ticket~~year ~~price~~quarter. ~~Gross~~The ~~profit~~increases in ~~the~~revenues ~~restaurants~~and ~~improved~~gross byprofit were due primarily to a 4.7%, or $1.9 million, increase in general merchandise sales at our retail stores and increased sales at our Petro:Lubes, in addition to our three new sites. On a comparable unit basis, revenues increased 3.5%, or $1.75 million, ~~from~~compared to the prior year ~~period due~~quarter toand ~~the~~gross ~~increase~~profit increased ~~in revenues~~5.9%, ~~partially~~or ~~offset~~$1.5 bymillion ancompared ~~increase~~to inthe ~~food~~prior ~~costs~~year quarter.

~~Costs and Expenses~~Restaurant. ~~Total~~Revenues ~~costs~~decreased ~~and expenses increased 15~~1.23% to $~~587~~17.4 million for the ~~six~~quarter ~~months~~ ended ~~June~~March 3031, ~~2004~~2005 compared to $~~509~~17.87 million in the prior year ~~period.~~quarter, ~~Cost~~due ofto ~~sales~~a ~~increased $72~~5.~~9 million or 16.9~~3% ~~from~~decrease ~~the~~in ~~prior~~our ~~year~~customer ~~period~~count, ~~mainly~~offset ~~due~~by toan aincrease 10of 4.65%, ~~increase~~or in$.36, in our ~~cost~~average ofticket ~~fuel~~price. ~~Operating~~Gross ~~expenses~~profits ~~increased~~in ~~6.5%~~the orrestaurant ~~$4.2~~decreased ~~million~~by ~~to $68~~1.40%, ~~million~~or $122,000, compared to the prior year ~~period~~quarter, due ~~primarily~~ to ~~higher~~the ~~employee-related~~decrease ~~costs,~~in ~~increased telephone~~revenues. ~~and~~On ~~utility~~a ~~costs,~~comparable ~~and~~unit ~~higher~~basis, ~~credit~~revenues ~~card~~decreased ~~fees~~2.9%, ~~associated~~or ~~with~~$519,000, from the ~~increased~~prior ~~fuel~~year quarter, ~~revenues.~~due ~~General~~to ~~and~~a ~~administrative~~6.9% ~~expenses~~decrease ~~increased~~in ~~7.4%~~our tocustomer ~~$8.0~~count, ~~million~~offset ~~for~~by ~~the~~an ~~six~~increase ~~months~~of ~~ended~~4.5%, ~~June~~or 30$.36, ~~2004~~in ~~compared~~our toaverage $7ticket price.5 ~~million~~On ina ~~the~~comparable ~~prior year~~unit ~~period~~basis, ~~due~~gross ~~primarily~~profit todecreased an2.5%, ~~increase~~or in$307,000, ~~professional~~from ~~services~~the ~~expenses~~prior year quarter.

Loss on Retirement of Debt. We recognized a loss of $6.2 million related to the repurchase and redemption of all of our 10½% Notes in connection with our 2004 Refinancing Transactions.

~~Retired~~Costs ~~Debt~~and ~~Restructuring~~Expenses. ~~Costs~~Total costs and expenses increased 26.1% Weto ~~recognized~~$354.6 million for the quarter ended March 31, 2005 compared to $281.2 million in the prior year quarter. Cost of sales increased 29.9%, or $71.8 million from the prior year quarter mainly due to a ~~loss~~33.2% increase in our cost of fuel, in addition to our three new sites. Operating expenses increased 2.4%, or $~~794~~812,000 onto $34.3 million compared to the ~~write-off~~prior year quarter, due primarily to the addition of ~~unamortized~~our three new sites. General and administrative expenses increased 20.2% to $4.4 million compared to $3.7 million in the prior ~~deferred~~year ~~debt~~quarter, ~~issuance~~due primarily to higher employee-related costs ~~associated~~and ~~with~~an increase in professional expenses related to our Sarbanes-Oxley Act Section 404 compliance requirements and legal expenses. On a comparable unit basis, total costs and expenses increased 24.4%, or $68.5 million, from the ~~refinancing~~prior year quarter. On a comparable unit basis, cost of ~~our~~sales ~~retired~~increased ~~senior~~28.1%, ~~credit~~or ~~facilities~~$67.6 ~~related~~million, from the prior year quarter, due primarily to a 31.4% increase in our ~~2004~~cost ~~Refinancing~~of ~~Transactions~~fuel. On a comparable unit basis, operating expenses increased 0.5%, or $175,000 to $33.7 million compared to the prior year quarter, due primarily to higher employee-related costs, increased utility costs, and higher credit card fees associated with the increased fuel revenues, offset by lower loyalty expenses.

Equity in ~~Income~~ Loss of Affiliate. WeFor the quarter ended March 31, 2005, we recognized ~~income~~a loss of $~~158~~163,000 related to our investment in the Wheeler Ridge facility in Southern California ~~in both~~compared ~~the~~to ~~current~~a ~~and~~loss of $24,000 for the prior year ~~periods~~quarter.

Interest Expense. Interest expense increased 184.14% orto $15.8 million compared to $115.75 million ~~compared~~in to the prior year ~~period~~quarter, due ~~primarily~~ to ~~the~~an increase in our debt outstanding in the current ~~year associated with our 2004 Refinancing Transactions~~quarter.

~~Three~~Network ~~Months~~Development ~~Ended June 30, 2004 Compared to Three Months Ended June 30, 2003~~

~~Overview.~~The ~~Net~~following ~~income~~table ~~increased~~sets ~~for~~forth the ~~three months~~development ended June 30, 2004 compared to the three months ended June 30, 2003, due primarily to increased fuel gross profit and improved non-fuel sales, partially offset by increased interest expense. Our net revenues of $315.8 million increased 25.3% for the quarter ended June 30, 2004 from $252.0 million in the prior year quarter. The increase was mainly due to higher fuel revenues, as a result of increased fuel gallons sold and an increase in our ~~average~~Petro ~~retail-selling~~Stopping ~~price~~Centers ofnetwork ~~fuel,~~since ~~in addition~~2001: to improved non-fuel sales. Operating expenses increased 8.3% to $34.9 million from $32.2 million in the prior year quarter due primarily to higher employee-related costs, increased telephone and utility costs, and higher credit card fees associated with the increased fuel revenues.

Fuel. Revenues increased 31.6% to $249.5 million for the quarter ended June 30, 2004 compared to $189.5 million in the prior year quarter. Fuel revenues increased due to a 7.2% increase in our total fuel gallons sold compared to the prior year quarter, as well as a 22.8% increase in our average retail-selling price per gallon from the prior year quarter. Gross profit increased by 32.4% to $13.2 million for the quarter ended June 30, 2004 compared to $10.0 million in the prior year quarter, in spite of a 22.8% increase in our cost of fuel.


	As of March 31,
	2001	2002	2003	2004	2005
Company-operated	35	35	37	37	40
Franchise operation	22	20	23	23	22

Total Petro Stopping Centers	57	55	60	60	62

~~Maintenance~~The ~~Services~~following ~~and~~table sets ~~Retail~~forth ~~(Non-fuel~~information ~~excluding~~on ~~Restaurant).~~currently ~~Revenues~~existing ~~increased~~Petro ~~4.6%~~Stopping toCenters ~~$48.0~~opened ~~million~~or ~~for~~acquired ~~the~~from ~~quarter~~March ~~ended June 30~~31, ~~2004~~2001 ~~from~~through ~~$45.9~~March ~~million~~31, ~~in the prior year quarter. Gross profit increased 5.0% to $26.9 million for the quarter ended June 30~~2005, ~~2004~~all ~~from~~but ~~$25.6~~three ~~million~~of inwhich ~~the~~are ~~prior~~full-sized ~~year quarter~~facilities. ~~These increases in revenues and gross profit were due primarily to a 4.8% or $2.0 million increase in general merchandise sales at our retail stores and increased sales at our Petro:Lubes.~~

Restaurant. Revenues increased 10.5% to $18.3 million for the quarter ended June 30, 2004 compared to $16.6 million in the prior year quarter, due to increased customer traffic and an increase in the average ticket price. Gross profit in the restaurants improved by 7.2% or $849,000 from the prior year quarter due to the increase in revenues, partially offset by an increase in food costs.


Location		Date Opened
Company-operated:
Angola, Indiana		August 2002
Sparks, Nevada		December 2002
New Paris, Ohio (1)		February 2005
York, Nebraska (2)		March 2005
Kingsland, Georgia		March 2005

Franchise operation:
Oak Grove, Missouri		April 2001
Glade Spring, Virginia		October 2001
Greensburg, Indiana		June 2002
Morton’s Gap, Kentucky		October 2002
Gaston, Indiana		October 2002
Waterloo, New York		November 2004

~~Costs~~(1) ~~and~~Previously Expenses. Total costs and expenses increased 25.2% to $306.2 million for the quarter ended June 30, 2004 compared to $244.6 million in the prior year quarter. Cost of sales increased $58.4 million or 28.5% from the prior year quarter mainly due to a ~~22.8%~~franchised ~~increase~~location insince ~~our cost of fuel~~1989. Operating expenses increased 8.3% or $2.7 million to $34.9 million compared to the prior year quarter due primarily to higher employee-related costs, increased telephone and utility costs, and higher credit card fees associated with the increased fuel revenues. General and administrative expenses increased 11.8% to $4.3 million for the quarter ended June 30, 2004 compared to $3.9 million in the prior year quarter due primarily to higher employee-related costs and an increase in professional services expenses.

~~Equity~~(2) inPreviously ~~Income~~a offranchised ~~Affiliate.~~location Wesince ~~recognized income of $182,000 related to our investment in the Wheeler Ridge facility in Southern California compared to $201,000 of income in the prior year quarter~~1996.

Interest Expense. Interest expense increased 24.8% or $1.2 million to $6.1 million compared to the prior year quarter, due primarily to the increase in the amount of debt outstanding in the current year associated with our 2004 Refinancing Transactions.

Liquidity and Capital Resources

Our principal sources of liquidity are cash flows from our operations and the available borrowing under the revolving credit portion of our senior secured credit facility.

Cash Flows From Operations

We had cash flows from operations of $1.3 million and cash flows used in operations of $4.6 million for the quarters ended March 31, 2004 and 2005, respectively. The decrease in cash flows was due primarily to variations in the timing of payments for other current liabilities, increased inventory due to higher fuel costs and our three new sites, timing of payments due to affiliates for fuel purchases, and timing of receipts related to trade accounts receivables, offset by variations in the timing of payments for trade accounts payable and the increase in operating income for the quarter ended March 31, 2005.

We had working capital of $10.7 million and $2.2 million at December 31, 2004 and March 31, 2005, respectively. Negative working capital is normal in the truck stop industry since diesel fuel inventory turns approximately every two to three days, but payment for fuel purchases can generally be made over a longer period of time; however, due to our senior secured credit facility and the associated reduction in our current portion of long-term debt, we had positive working capital at December 31, 2004 and March 31, 2005. Approximately 91.4% of our total sales are cash sales (or the equivalent in the case of sales paid for on credit, which are funded on a daily basis by third-party billing companies).

Available Borrowings Under the Revolving Credit Facilities

Available borrowing capacity under the revolving credit portion of our senior secured credit facility was $14.4 million and $19.4 million at December 31, 2004 and March 31, 2005, respectively, subject to certain conditions.

At March 31, 2005, we have senior secured credit facilities in an aggregate principal amount of $61.3 million, consisting of a four-year revolving credit facility of $40.0 million ($5.0 million of which is restricted to the issuance of letters of credit), and a four-year term loan facility of $21.3 million. Any funds drawn on our senior secured credit facilities are secured by substantially all of our assets and the guarantees of each of our subsidiaries. As of March 31, 2005, we were in compliance with all financial covenants under our senior secured credit facilities.

Under the revolving credit portion of our senior secured credit facilities, $40.0 million is available on a revolving basis until maturity at February 9, 2008. Interest on drawn funds is paid at maturity or quarterly if the term is greater than three months at a current spread of 1.50% above the bank’s base rate or 2.25% over the Eurodollar rate (the rate is determined at the time of borrowing, at our option). Commitment fees of 0.50% per quarter on undrawn funds are paid quarterly. At March 31, 2005, we had $10.0 million outstanding under the revolving credit portion of our senior secured credit facilities and had $10.6 million in standby letters of credit outstanding, which reduce our borrowing capacity under the revolving credit portion of our senior secured credit facilities on a dollar for dollar basis. Approximately $7.6 million of these letters of credit are required to be posted with our insurance carriers in connection with our obtaining liability and other insurance coverage.

As of March 31, 2005, we had $21.3 million outstanding under our term loan facility, which matures on February 9, 2008.

Liquidity and Capital Resource Requirements

The following is a summary of our contractual obligations as of March 31, 2005:


Contractual Obligations	Total		Less Than 1 Year		1-3 Years		4-5 Years		After 5 Years
	(in thousands)
Long-term debt (including interest)	$	403,060	$	21,999	$	75,061	$	40,500	$	265,500
Operating distributions to the Holding Partnership (1)		47,812		2,658		5,481		7,923		31,750
New site capital expenditures		23,850		23,850		—		—		—
Operating leases		36,358		4,535		6,905		6,671		18,247
Employment agreements		1,148		1,148		—		—		—
Purchase agreements		3,190		1,160		2,030		—		—
Other long-term liabilities (2)		5,562		70		329		—		5,163

Total	$	520,980	$	55,420	$	89,806	$	55,094	$	320,660

(1)

Represents distributions to the Holding Partnership, as permitted by our debt agreements, to allow the Holding Partnership to pay interest on its long-term debt obligations and administrative expenses. Also included is a distribution to allow the Holding Partnership to repurchase the remaining Holding Partnership’s 15% Notes which occurred in May 2005.

(2)

Represents cash outflows by period for certain of our long-term liabilities in which cash outflows could be reasonably estimated. The primary items included are estimates of our asset retirement obligations for our underground storage tank removal costs and sewage plant waste removal costs, as well as accrued environmental expenditures.

In addition to the above, we have an annual volume commitment associated with contracts with the ExxonMobil Suppliers (the “ExxonMobil Supply Agreements”) as discussed in more detail in Note 8 to notes to consolidated financial statements included in our 2004 Form 10-K. These purchase obligations are made by the ExxonMobil Suppliers for us on the open market at prices determined largely by supply and competitive conditions. We have excluded these purchase obligations from the table above as they cannot reasonably be estimated.

Short-Term Requirements

Our primary short-term cash requirements include working capital, employment agreements, distributions to the Holding Partnership, interest on our debt, and capital expenditures. We believe that cash flow from operations and our revolving credit facilities should be sufficient to satisfy our short-term operating and capital needs.

Capital expenditures on our truck stop network totaled $19.9 million for the three months ended March 31, 2005. These costs were primarily associated with the acquisition of the three new sites as described below. We currently expect to invest approximately $9.2 million during 2005 on capital expenditures related to regular capital maintenance and improvement projects on existing Petro Stopping Centers, as well as volume building projects. The $9.2 million does not include potential new site acquisitions. These capital outlays will be funded through borrowings under our senior secured credit facilities and other debt financing.

During the first quarter of 2005, we entered into agreements for the acquisition of four sites. We completed the purchase of our New Paris, Ohio site in February 2005 and our York, Nebraska and Kingsland, Georgia sites in March 2005. New Paris, Ohio and York, Nebraska were existing Petro Stopping Centers owned by one of our franchisees and became company-operated sites following the closing of the related transactions. The Kingsland, Georgia truck stop was independently owned and is a Petro:2 format site. The three sites were purchased for cash consideration totaling $20.7 million. The purchase price was primarily allocated to property and equipment of $18.6 million and to inventories. Management has not yet completed the evaluation and allocation of the purchase price of the above mentioned acquisitions as the analysis associated with the valuation of certain assets are not yet complete. Management does not believe that the analysis will materially modify the preliminary purchase price allocation.

The fourth site is also an existing Petro Stopping Center owned by one of our franchisees. The purchase agreement with Bordentown Junction Truck Stop Joint Venture provides for the purchase by us of a Petro Stopping Center known as “Bordentown Junction Truck Stop” in Burlington County, New Jersey for a price of $23.9 million. The closing of the transaction is subject to customary conditions, including the consummation of satisfactory financing as well as satisfactory completion of due diligence. Following the closing of the transaction, this location will become a company-operated truck stop. We expect this purchase transaction to close during the second quarter of 2005.

Under our Indenture for the 9.0% senior secured notes due 2012 (“9% Notes”) and the agreement governing our senior secured credit facilities, we are permitted to make distributions to Petro Stopping Centers Holdings, L.P. (the “Holding Partnership”) in amounts sufficient to allow the Holding Partnership to pay interest on the Holding Partnership’s 15.0% senior discount notes due 2008 (“15% Notes”) and their senior third secured discount notes due 2014 and to pay for taxes and administrative expenses. For the three months ended March 31, 2005, we paid approximately $3.5 million with respect to these distributions. These distributions were made to allow the Holding Partnership to repurchase all but $50,000 of the 15% Notes. The Holding Partnership repurchased the remaining $50,000 of the 15% Notes in May 2005. We believe we will distribute an additional $2.6 million to the Holding Partnership during the remainder of 2005 for interest payments, taxes, and administrative expenses.

Long-Term Requirements

Our anticipated long-term cash requirements include indebtedness and operating leases. Other long-term uses of cash include:

•

expansion of our network through building or acquiring new sites;

•

distributions to the Holding Partnership; and

•

capital improvements to existing locations.

Based on the foregoing, we believe that internally generated funds, together with amounts available under our senior secured credit facilities and additional debt financing, will be sufficient to satisfy our cash requirements for operations and debt service through 2005 and the foreseeable future thereafter; provided however, that our ability to satisfy such obligations and maintain covenant compliance under our senior secured credit facilities is dependent upon a number of factors, some of which are beyond our control, including economic, capital market, and competitive conditions. We will also need to obtain the lenders’ agreement to amend our senior secured credit facility in connection with the purchase of the Bordentown Junction Truck Stop. Some of these risks are described in Part II, Item 7 of our 2004 Form 10-K.

Critical Accounting Policies

The preparation of our unaudited consolidated condensed financial statements in conformity with generally accepted accounting principles requires us to make estimates and assumptions that affect our reported amounts of assets and liabilities, revenues and expenses, and related disclosures of contingent assets and liabilities in our unaudited consolidated condensed financial statements and accompanying notes. The U.S. Securities and Exchange Commission has defined a company’s critical accounting policies as the ones that are most important to the portrayal of the company’s financial condition and results of operations, and which require the company to make its most difficult and subjective judgments, often as a result of the need to make estimates about matters that are inherently uncertain. Based on this definition, we have identified our critical accounting policies as including those addressed below. We also have other key accounting policies that involve the use of estimates, judgments, and assumptions. See Note 2 in Notes to Consolidated Financial Statements included in our ~~2003~~2004 Form 10-K for additional discussion of these accounting policies. We believe that our estimates and assumptions are reasonable, based upon information presently available, however, actual results may differ from these estimates under different assumptions or conditions.

Partial Self-Insurance

We are partially self-insured, paying our own employment practices, general liability, workers’ compensation, and group health benefit claims, up to stop-loss amounts ranging from $100,000 to $250,000 on a per- occurrence basis. Provisions established under these partial self-insurance programs are made for both estimated losses on known claims and claims incurred but not reported, in both cases based on claims history. The most significant risk of this methodology is its dependence on claims history, which is not always indicative of future claims. Revisions of estimates based on historical claims data have the effect of increasing or decreasing the related required provisions and thus may impact our net income (loss) for the period. If our estimates are inaccurate, our expenses and net income (loss) will be understated or overstated. Although some variation to actual results occurs, historically such variability has not been material. At March 31, 2005, the aggregated liability was approximately $8.6 million, which we believe is adequate to cover both reported and incurred but not reported claims.

Loyalty Program

We utilize estimates in accounting for our Petro Passport loyalty program. We record a liability for the estimated redemption of Petro points based upon our estimates about the future redemption rate of Petro points outstanding. AThe ~~change~~most tosignificant ~~these~~risk of this methodology is its dependence on using historical redemption rates, which are not always indicative of future redemption rates. If our estimates are inaccurate, our related expenses and net income (loss) could ~~have~~be anunderstated ~~impact~~or onoverstated. Although some variation to actual results occurs, historically such variability has not been material. At March 31, 2005, we believe our liability inrelated ~~the~~to ~~year~~our ofPetro ~~the~~Passport ~~change~~loyalty ~~as well~~program asis inadequate to cover future ~~years~~point redemptions.

Recently Issued Accounting Pronouncements

In December 2003, the Financial Accounting Standards Board issued Interpretation No. 46 (revised December 2003), “Consolidation of Variable Interest Entities, an Interpretation of ARB No. 51,” which replaces the original Interpretation No. 46 issued in January 2003. This Interpretation addresses the consolidation by business enterprises of variable interest entities as defined in the Interpretation. The effective dates vary depending on the type of reporting company and the type of entity that the company is involved with. ~~Non-public~~ ~~companies~~Companies without publicly traded equity securities, such as ourselves, must apply the revised ~~Interpretation immediately to all entities created after December 31, 2003, and to all other entities no later than the beginning of the first reporting period beginning after December~~ ~~15, 2004. We do not believe that the adoption of this revised~~ Interpretation ~~will have a significant impact on our consolidated financial position or results of operations.~~

immediately to all entities created after December 31, 2003, and to all other entities no later than the beginning of the first reporting period beginning after December 15, 2004. We have adopted this revised Interpretation and concluded that we do not own interests in any entities that meet the consolidation requirements.

In December 2004, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 123 (revised 2004), “Share-Based Payment,” which replaces the original Statement of Financial Accounting Standards No 123, “Accounting for Stock-Based Compensation,” issued in October 1995. This standard addresses the accounting for transactions where an entity obtains employee services in share-based payment transactions. The effective dates vary depending on the type of reporting entity. Non-public companies, such as ourselves, must apply the revised standard as of the beginning of the first annual reporting period that begins after December 15, 2005. We do not believe that the adoption of this revised standard will have a significant impact on our consolidated financial position or results of operations.

Item 3. Quantitative and Qualitative Disclosures about Market Risk

We are exposed to market risk due to changes in commodity prices and interest rates. For a complete discussion of our market risks and our market risk sensitive assets and liabilities, please refer to Item 7A, “Quantitative and Qualitative Disclosures about Market Risk,” included in our ~~2003~~2004 Form 10-K. During the ~~six~~quarter ~~months~~ ended ~~June~~March 3031, ~~2004~~2005, there have been no material changes regarding our market risks from the discussion in our ~~2003~~2004 Form 10-K.

The following table reflects the carrying amount and estimated fair value of our financial instruments, as of December 31, 2004 and March 31, 2005:


	2004					2005
	Carrying Amount			Fair Value		Carrying Amount			Fair Value
	(dollars in thousands)
Long-term debt
Fixed rate	$	225,000		$	237,938	$	225,000		$	232,875
Average interest rate		9.0	%		—		9.0	%		—
Variable rate		21,250			21,250		31,250			31,250
Average interest rate		5.8	%		—		5.7	%		—

Item 4. Controls and Procedures

AsWe ~~of June 30, 2004, we~~ completed an evaluation, under the supervision and with the participation of our management, including our Chairman and Chief Executive Officer and ~~President and~~ our Treasurer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures. ~~Based~~On ~~upon~~May ~~that~~13, ~~evaluation~~2005, the ~~our~~Company ~~Chief~~concluded ~~Executive~~that ~~Officer~~its ~~and~~historical ~~President~~financial ~~and~~statements ~~our~~should ~~Treasurer~~be ~~and~~restated ~~Chief~~to ~~Financial~~correct ~~Officer~~certain ~~concluded~~errors relating to accounting for leased properties, and that ~~our~~such ~~disclosure~~financial ~~controls~~statements should no longer be relied upon. As a result, the Company will restate its financial statements for the three-year period ended December 31, 2004. The restatement is further discussed in the section entitled “Restatement” in Management’s Discussion and ~~procedures~~Analysis ~~are~~of Financial Condition and ~~effective~~Results of Operations included in ~~timely~~Item ~~alerting~~2 ~~them~~of tothis ~~material~~Form ~~information~~10-Q ~~relating~~and toin usNote ~~which~~2, is“Restatement ~~required~~of Consolidated Condensed Financial Statements” under Notes to beUnaudited Consolidated Condensed Financial Statements included in ~~our~~Item ~~periodic~~1, ~~Securities~~“Financial Statements” of this Form 10-Q. As a result of the need to restate previously issued financial statements, we have concluded that the Company’s disclosure controls and ~~Exchange~~procedures ~~Commission~~were ~~filings~~not effective as of March 31, 2005.

There has been no change in our internal control over financial reporting ~~during~~in connection with the ~~quarterly~~evaluation ~~period~~required ~~covered~~ by ~~this~~the ~~report~~ paragraph (d) of the Securities Exchange Act of 1934, as amended, Rules 13a-15 or 15d-15 during the first fiscal quarter, that has materially affected, or is reasonably likely to materially effect, our internal control over financial reporting. However, prior to the filing of this report, management has implemented necessary changes to the Company’s internal controls in order to address the lease accounting matters referred to above.

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

From time to time we are involved in ordinary routine litigation incidental to our operations. Based on the existence of insurance coverage, we believe that any litigation currently pending or threatened against us will not have a material adverse effect on our unaudited consolidated condensed financial position or results of operations.

Item 6. Exhibits ~~and Reports on Form 8-K~~

(Incorporated herein by reference is a) ~~Exhibits~~list of exhibits contained in the Exhibit Index on pages 24 through 25 of this quarterly report.

~~Incorporated herein by reference is a list of Exhibits contained in the Exhibit Index on page 21 through~~ 22 ~~of this Quarterly Report.~~

(b) The Registrant filed no report on Form 8-K during the quarter ended June 30, 2004.

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	PETRO STOPPING CENTERS, L.P.
	(Registrant)
Date: August 10, 2004	By:	/s/ Edward Escudero
Date: May 20, 2005	By:	/s/ Edward Escudero
		Edward Escudero
		Treasurer and Chief Financial Officer
		(On behalf of the Registrant and as Registrant’s
		Principal Financial and Chief Accounting Officer)

20Supplemental Information to be Furnished with Reports Filed Pursuant to Section 15(d) of the Act by Registrants which have not Registered Securities Pursuant to Section 12 of the Act.

The Company has not sent and will not send a quarterly report or proxy materials to its limited or general partners.

EXHIBIT INDEX

Exhibit No.		Exhibit Description
3.1(aa)		Amended and Restated Certificate of Limited Partnership of Petro Stopping Centers, L.P.
3.01 (a)		Amended and Restated Certificate of Limited Partnership of Petro Stopping Centers, L.P.
3.2(gg)		Fourth Amended and Restated Limited Partnership Agreement of Petro Stopping Centers, L.P., dated July 23, 1999, by and among Petro Inc., as a General Partner and Petro Stopping Centers Holdings, L.P., Petro Holdings GP, L.L.C., and James A. Cardwell, Jr., as Limited Partners.
3.02 (b)		Certificate of Incorporation of Petro Financial Corporation.
3.3(bb)		Certificate of Incorporation of Petro Financial Corporation.
3.03 (b)		Bylaws of Petro Financial Corporation.
3.4(bb)		Bylaws of Petro Financial Corporation.
3.04 (f)		Fourth Amended and Restated Limited Partnership Agreement of Petro Stopping Centers, L.P., dated July 23, 1999, by and among Petro Inc., as a General Partner and Petro Stopping Centers Holdings, L.P., Petro Holdings GP, L.L.C., and James A. Cardwell, Jr., as Limited Partners.
4.2(aa)		Indenture, dated as of January 30, 1997 among Petro Stopping Centers, L.P., Petro Financial Corporation and State Street Bank and Trust Company, as trustee, relating to Petro Stopping Centers, L.P.’s $135.0 million principal amount 10 1/2% Senior Notes due 2007.
4.01 (q)		Revolving Credit and Term Loan Agreement, dated February 9, 2004, among Petro Stopping Centers, L.P., Petro Stopping Centers Holdings, L.P., Petro Holdings Financial Corporation, Petro Distributing, Inc., and Petro Financial Corporation, Wells Fargo Bank, N.A., as Administrative Agent, Collateral Agent, and L/C Issuer, Bank of America, N.A., as Syndication Agent and the other lenders party thereto.
4.3(aa)		Form of 10 1/2% Senior Note due 2007.
4.02 (g)		Indenture, dated as of February 9, 2004, by and among Petro Stopping Centers, L.P. and Petro Financial Corporation, as Issuers, Petro Stopping Centers Holdings, L.P., Petro Holdings Financial Corporation, and Petro Distributing, Inc., as Guarantors, and The Bank of New York, as Trustee, relating to Petro Stopping Centers, L.P.’s $225 million aggregate principal amount 9.0% Senior Secured Notes due 2012.
4.5 (hh)		Supplemental Indenture, dated July 23, 1999, by and among Petro Stopping Centers, L.P., Petro Financial Corporation and State Street Bank and Trust Company, relating to Petro Stopping Centers, L.P.’s 10 1/2% Senior Notes due 2007.
4.03 (q)		First Supplemental Indenture, dated as of February 9, 2004, by and among Petro Stopping Centers, L.P. and Petro Financial Corporation, as Issuers, Petro Stopping Centers Holdings, L.P., Petro Holdings Financial Corporation, and Petro Distributing, Inc., as Guarantors, and The Bank of New York, as Trustee, relating to Petro Stopping Centers, L.P.’s $225 million aggregate principal amount 9.0% Senior Secured Notes due 2012.
4.7 (ll)		Third Amended and Restated Revolving Credit and Term Loan Agreement, dated as of March 30, 2001, among Petro Stopping Centers, L.P., Fleet National Bank (formerly known as BankBoston, N.A.) and the other lending institutions listed on Schedule 1 hereto and Fleet National Bank (formerly known as BankBoston, N.A.), as Agent, First Union National Bank, as Documentation Agent and Fleet Securities, Inc., as Arranger.
4.05 (r)		First Amendment to Credit Agreement, entered into as of January 21, 2005, among Petro Stopping Centers, L.P., Petro Stopping Centers Holdings, L.P., Petro Holdings Financial Corporation, Petro Distributing, Inc., and Petro Financial Corporation, the Lenders, and Wells Fargo Bank, N.A., as Administrative Agent, Collateral Agent and L/C Issuer.
4.8 (rr)		Revolving Credit and Term Loan Agreement, dated February 9, 2004, among Petro Stopping Centers, L.P., Petro Stopping Centers Holdings, L.P., Petro Holdings Financial Corporation, Petro Distributing, Inc., and Petro Financial Corporation, Wells Fargo Bank, N.A., as Administrative Agent, Collateral Agent, and L/C Issuer, Bank of America, N.A., as Syndication Agent and the other lenders party thereto.
31.01*		Chairman and Chief Executive Officer’s Certification pursuant to Rule 13a-14(a) or 15d-14(a).
4.9 (rr)		Indenture, dated as of February 9, 2004, by and among Petro Stopping Centers, L.P. and Petro Financial Corporation, as Issuers, Petro Stopping Centers Holdings, L.P., Petro Holdings Financial Corporation, and Petro Distributing, Inc., as Guarantors, and The Bank of New York, as Trustee, relating to Petro Stopping Centers, L.P.’s $225 million aggregate principal amount 9.0% Senior Secured Notes due 2012.
31.02*		Treasurer and Chief Financial Officer’s Certification pursuant to Rule 13a-14(a) or 15d-14(a).
4.10 (rr)		First Supplemental Indenture, dated as of February 9, 2004, by and among Petro Stopping Centers, L.P. and Petro Financial Corporation, as Issuers, Petro Stopping Centers Holdings, L.P., Petro Holdings Financial Corporation, and Petro Distributing, Inc., as Guarantors, and The Bank of New York, as Trustee, relating to Petro Stopping Centers, L.P.’s $225 million aggregate principal amount 9.0% Senior Secured Notes due 2012.
32*		Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
4.11 (rr)		Second Supplemental Indenture, dated as of February 9, 2004, by and among Petro Stopping Centers, L.P. and Petro Financial Corporation, as Issuers, and U.S. Bank National Association, as successor to State Street Bank and Trust Company, as Trustee, relating to Petro Stopping Centers, L.P.’s $135 million aggregate principal amount 10½% Senior Notes due 2007.

21(a) Incorporated by reference to Petro Stopping Centers, L.P.’s Annual Report on Form 10-K for the year ended December 31, 1996.

31.1*		Chairman, Chief Executive Officer, and President’s Certification pursuant to Rule 13a-14(a) or 15d-14(a).
31.2*		Treasurer and Chief Financial Officer’s Certification pursuant to Rule 13a-14(a) or 15d-14(a).
32*		Certification of Chief Executive Officer and Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

(b)	Incorporated by reference to Petro Stopping Centers, L.P.’s Registration Statement on Form S-1 (Registration No. 33-76154).

(aaf) Incorporated by reference to Petro Stopping Centers, L.P.’s ~~Annual~~Current Report on Form 108-K, ~~for~~filed ~~the~~on ~~year~~August ~~ended December 31~~6, ~~1996~~1999.

~~(bb)~~24 ~~Incorporated by reference to Petro Stopping Centers, L.P.’s Registration Statement on Form S-1 (Registration No. 33-76154).~~

(ggq) Incorporated by reference to Petro Stopping Centers, L.P.’s Current Report on Form 8-K, filed on ~~August~~February 623, ~~1999~~2004.

(hhr) Incorporated by reference to Petro Stopping Centers ~~Holdings~~, L.P.’s ~~Registration~~Current ~~Statement~~Report on Form S8-4K, ~~(Registration~~filed ~~No.~~on ~~333-87371)~~January 27, 2005.

(ll) Incorporated by reference to Petro Stopping Centers, L.P.’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2001.

(rr) Incorporated by reference to Petro Stopping Centers, L.P.’s Current Report on Form 8-K, filed on February 23, 2004.

*	Filed herewith

2225

Filing Compare · PETRO STOPPING CENTERS L P