<PAGE>   1

                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                              Washington, DC 20549

                                    FORM 10-K

[X]                 ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934

                   For the fiscal year ended December 31,1999

                        Commission file number 333-26497

                         TRAVELCENTERS OF AMERICA, INC.
             (Exact name of Registrant as specified in its charter)

          DELAWARE                                       36-3856519
(State or other jurisdiction of                        (IRS Employer
incorporation or organization)                       Identification No.)

                       24601 Center Ridge Road, Suite 200
                             Westlake, OH 44145-5634
          (Address of principal executive offices, including zip code)

                                 (440) 808-9100
              (Registrant's telephone number, including area code)

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

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

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

As of March 15, 2000, there were outstanding 881,059 shares of Common Stock, par
value $0.01 per share. The outstanding shares of Common Stock of the registrant
were issued in transactions not involving a public offering. As a result, there
is no public market for the registrant's Common Stock.


<PAGE>   2


                                      INDEX

<TABLE>
<CAPTION>
<S>                                                                                                           <C>
PART I
     Item 1.      Business......................................................................................2
     Item 2.      Properties...................................................................................10
     Item 3.      Legal Proceedings............................................................................11
     Item 4.      Submission of Matters to a Vote of Security Holders..........................................12

PART II
     Item 5.      Market for Registrant's Common Equity and Related Stockholder Matters........................12
     Item 6.      Selected Financial Data......................................................................13
     Item 7.      Management's Discussion and Analysis.........................................................15
     Item 7A.     Quantitative and Qualitative Disclosures About Market Risk...................................25
     Item 8.      Financial Statements and Supplementary Data..................................................26
     Item 9.      Changes in and Disagreements With Accountants................................................61

PART III
     Item 10.     Directors and Executive Officers of the Registrant...........................................62
     Item 11.     Executive Compensation.......................................................................62
     Item 12.     Security Ownership of Certain Beneficial Owners and Management...............................62
     Item 13.     Certain Relationships and Related Transactions...............................................62

PART I
     Item 14.     Exhibits, Financial Statement Schedules and Reports on Form 8-K..............................63

SIGNATURES        .............................................................................................65
</TABLE>




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                                     PART I

ITEM 1.  BUSINESS

BUSINESS OVERVIEW

         TravelCenters of America, Inc. (the "Company") owns, operates and
franchises more full-service travel centers in the United States than any of its
competitors, with 158 network sites located in 40 states nationwide, including
118 Company operated locations (the "Network"). The Company's travel centers are
full service facilities offering a broad range of fuel and nonfuel products,
services and amenities to trucking fleets, professional truck drivers and other
motorists. In addition to diesel fuel and gasoline, the travel centers provide
truck maintenance and repair services and products, full service and quick serve
restaurant ("QSR") dining, travel and convenience stores, telecommunications
services and various hospitality and rest-related amenities. This broad range of
products and services distinguishes the travel centers from traditional
truckstops, which focus on the sale of diesel fuel, and provides diverse revenue
sources for the Company. In addition, the Company is the only industry
participant with a centralized procurement, warehousing and distribution system.
The Company owns 147 of the sites in its Network and the other eleven sites are
owned by independent franchisees.

         The Company's broad range of products and services, together with its
comprehensive geographic coverage, has enabled the Company to become a leading
supplier of diesel fuel to many of the largest long-haul trucking fleets in the
United States. Management believes the Company's position as a leading supplier
of diesel fuel to major trucking fleets positions it to continue to increase its
sales of higher margin nonfuel products and services to fleets and their drivers
as well as to independent drivers.


         The travel centers feature a variety of well recognized national brands
which attract professional truck drivers, motorists and other customers who
often satisfy both fuel and nonfuel needs at the same stop. The Company's
nationally recognized QSR and motel brands include Burger King, Popeye's
Chicken, Dunkin' Donuts, Pizza Hut, Sbarro, Subway, Taco Bell, DayStop, HoJo
Inn, Rodeway and Travelodge. The Company also offers such well recognized
gasoline brands as Amoco, Arco, BP, Chevron, Conoco, Exxon, Mobil, Shell and
Unocal 76. This portfolio of brands strongly appeals to what market research
indicates are customers' priorities of quality, convenience and consistency of
product offerings, as well as cleanliness and safety.


HISTORY AND ORGANIZATION


         The Company was formed in 1992 by an institutional investor group (the
"Investor Group") led by The Clipper Group, L.P. ("Clipper"), as well as certain
then prospective franchisees and individuals who at the time were members of the
Company's management. The Company was originally incorporated as National
Auto/Truckstops Holdings Corporation but changed its name in March 1997. The
Company is a holding company whose sole assets consist of the stock of its four
direct wholly-owned subsidiaries: TA Operating Corporation, d/b/a TravelCenters
of America ("TA"), National Auto/Truckstops, Inc. ("National"), TA Franchise
Systems, Inc. ("TAFSI") and TA Licensing, Inc. ("TA Licensing"). TA has one
wholly-owned subsidiary, TA Travel, L.L.C. ("TA Travel"). Prior to March 1997,
the Company had two wholly-owned subsidiaries, National and TA Holdings
Corporation ("TA Holdings"). TA Holdings was the parent of TA, which itself was
the parent of TAFSI. In March 1997, a restructuring was completed whereby the
current structure was effected and TA Holdings was merged into the Company. TA
Travel was organized in October 1997. TA Licensing was acquired in June 1999.


         The Company's operations are conducted through three distinct types of
travel centers: sites owned or leased by the Company and operated by the Company
("Company-operated Sites"), sites owned or leased by the Company and leased to
independent lessee-franchisees ("Operators") of the Company who operate the
sites ("Leased Sites") and sites owned or leased and operated by independent
franchisees ("Franchisee-Owners") of the Company ("Franchisee-Owner Sites").



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<PAGE>   4

         In April 1993, the Company acquired (the "National Acquisition") the
truckstop network assets (the "National Network") of a subsidiary of Unocal
Corporation (together with its subsidiaries "Unocal") in a series of asset
purchase transactions. The National Network included a total of 139 facilities,
of which 95 were Leased Sites, 42 were Franchisee-Owner Sites, and two sites
were Company-operated Sites. As part of the National Acquisition, Unocal agreed
to indemnify the Company against certain environmental liabilities occurring
prior to 1993 (the "Unocal Environmental Agreement," see
"-Regulation-Environmental Regulation"), entered into a noncompetition agreement
for a ten-year period terminating on April 13, 2003, granted the Company a
license to use certain Unocal trademarks, and granted the Company a royalty-free
license to use the ACCESS on-line information retrieval and credit card system.
The National Network, which operates under the licensed "Unocal 76" and related
trademarks, has been providing quality products and services for over 35 years
and until 1997 had been the largest chain of full service travel centers or
truckstops, based on number of locations in the United States. Pure Oil Company
("Pure") founded the National Network and Unocal acquired the National Network
in connection with Unocal's merger with Pure in 1965.


         In December 1993, the Company acquired (the "TA Acquisition") the
truckstop network assets (the "TA Network") of certain subsidiaries of The
British Petroleum Company p.l.c. (together with its subsidiaries "BP"). The TA
Network included 38 Company-operated Sites and six Franchisee-Owner Sites. As
part of the TA Acquisition, BP agreed to indemnify the Company against certain
environmental liabilities with respect to which claims are made prior to
December 11, 2004 or December 11, 1996 (the relevant date depending upon the
nature of the underlying claim) ( the "BP Environmental Agreement," see
"-Regulation-Environmental Regulation"), entered into a noncompetition agreement
for a seven-year period commencing on December 10, 1993 and granted the Company
the right, title and interest in and to certain copyrights, trademarks, service
marks and other intellectual property, including, "Truckstops of America," "TA"
and "Country Pride." The TA Network, which now operates under the Company-owned
"TravelCenters of America" and "TA" trademarks, has been providing quality
products and services to the trucking industry and to nonprofessional travelers
for over 30 years, and is now the largest chain of full service travel centers
or truckstops, based on number of locations in the United States. BP, through
its subsidiary formerly known as The Standard Oil Company of Ohio ("Sohio"),
acquired TA from Ryder System, Inc. ("Ryder") in 1984. Ryder founded the TA
Network in 1973.

         In December 1998, the Company acquired (the "Burns Acquisition")
substantially all of the truckstop network assets (the "Burns Network") of Burns
Bros., Inc. and certain of its affiliates (collectively "Burns"). Specifically,
the Company acquired from Burns the land, buildings, equipment and inventories
at 17 of the 19 sites comprising the Travel Stops division of Burns (the two
remaining sites were closed by Burns); the equipment and inventory used in
Burns' fuel wholesaling and transportation businesses and certain accounts
receivable related to the acquired assets. The 17 acquired sites are located in
9 western and north western states.


         Effective June 1, 1999, the Company entered into a merger agreement
pursuant to which the Company acquired (the "TPOA Acquisition") 100% of the
stock of Travel Ports of America, Inc. ("TPOA"). TPOA operated a network (the
"TPOA Network") of 16 travel centers in seven states, primarily in the
northeastern U.S. Upon consummation of the merger, TPOA's subsidiary, Travel
Ports Systems Inc. (now known as TA Licensing), became a direct subsidiary of
the Company by way of a dividend to the Company and TPOA was merged into TA.

         In July 1999, the Company signed an agreement with Freightliner
Corporation ("Freightliner") to become an authorized provider of express
service, minor repair work and a specified menu of warranty repairs to
Freightliner's customers (the "ServicePoint Program"). Under the agreement, the
Company's truck repair facilities are being added to Freightliner's 24-hour
customer assistance center database to be a major referral point for emergency
and roadside repairs and also have access to Freightliner's parts distribution,
service and technical information systems. Freightliner, a DaimlerChrysler
Company, is the leading heavy truck manufacturer in North America. Freightliner
also acquired a minority ownership interest in the Company.




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<PAGE>   5



COMBINATION PLAN AND CAPITAL PROGRAM


         Historically, under the Company's ownership, each of the TA and
National Networks (the "Existing Networks") was separately managed and financed.
However, in January 1997 the Company's Board of Directors approved a management
proposal (the "Combination Plan") to integrate the Existing Networks into a
single network (the "Network") to be operated under the TA trademark under the
leadership of a single management team.

         From 1997 through 1999 the Company, pursuant to the Combination Plan,
significantly reshaped the composition of the Existing Networks as follows:


         -        32 Leased Sites were converted to Company-operated Sites, five
                  during 1998 and 27 during 1997,

         -        27 Franchisee-Owner Sites were terminated, all during 1997,

         -        22 Company-Owned Sites were sold, five during 1999, two during
                  1998 and 15 during 1997,


         -        All National Network Company-operated Sites were converted to
                  TA Network Company-operated Sites during 1997,

         -        Operators of 30 National Network Leased Sites terminated their
                  franchise agreements with National and signed franchise
                  agreements with TAFSI, one in 1999 and 29 in 1997.

         Consequently, and giving effect to the Burns Acquisition and the TPOA
Acquisition, as of December 31, 1999, the Company's Network was comprised of 158
sites, of which only one continued to operate under a National franchise
agreement.

         In 1997, the Company initiated a capital program to upgrade, rebrand
and reimage the Network's travel centers and to build new travel centers (the
"Capital Program"). Under this Capital Program, as revised as a result of the
Burns Acquisition and the TPOA Acquisition, the Company intends to invest
approximately $340 million in the Network's sites by the end of 2001, with $237
million having been spent by the end of 1999. The Operators and
Franchisee-Owners will also be investing additional amounts for reimaging and
other projects at the sites they operate.




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<PAGE>   6


The following table summarizes the changes in the composition of the Network
since the Combination Plan and Capital Program were implemented.

<TABLE>
<CAPTION>

                                           COMPANY-                     FRANCHISEE-
                                           OPERATED        LEASED          OWNER          TOTAL
                                             SITES          SITES          SITES          SITES
                                         -------------- -------------- -------------- --------------
<S>                                       <C>            <C>            <C>            <C>
Number of  sites at December 31, 1996          58             77             35             170

1997 Activity:
   -New sites                                   -              -              1              1
   -Conversions of Leased Sites to
     Company-operated Sites                    27            (27)             -              -
   -Sales of sites                              -            (15)             -            (15)
   -Terminations of Franchisee-
     Owner Sites                                -              -            (27)           (27)
                                             ------         ------         ------         -----
Number of sites at December 31, 1997           85             35              9             129

1998 Activity:
   -New sites                                   -              -              1              1
   -Conversions of Leased Sites to
     Company-operated Sites                     5             (5)             -              -
   -Sales of sites                             (2)             -              -             (2)
   -Burns Acquisition                          17              -              -             17
                                             ------         ------         ------         ----
Number of sites at December 31, 1998           105            30             10             145
                                             ------         ------         ------         -----

1999 Activity:
   -New sites                                   2              -              1              3
   -Sales of sites                             (4)            (1)             -             (5)
   -TPOA Acquisition                           16              -              -             16
                                             ------         ------         ------         ----
Number of sites at December 31, 1999           119            29             11             159


Closed sites (held for development)            (1)             -              -             (1)
Closed sites (held for sale)                   (2)             -              -             (2)
                                             ------         ------         ------         -----
Number of operating sites at
   December 31, 1999                           116            29             11             156
New sites under development                     2              -              -              2
                                             ------         ------         ------         ----
Total sites at December 31, 1999               118            29             11             158
                                             ======         ======         ======         =====
</TABLE>

REFINANCINGS

         To facilitate the Combination Plan and Capital Program, in March 1997
the Company refinanced the existing indebtedness of TA and National with new
borrowings by the Company (the "1997 Refinancing"). The Company issued $125
million aggregate principal amount of 10 1/4% Senior Subordinated Notes due
2007, entered into a Credit Agreement through which it obtained an $80 million
senior secured term loan facility (the "Term Loan") and a $40 million revolving
credit facility, redeemed all of the then outstanding Subordinated Notes of TA
and National, respectively, and a portion of the Senior Notes of TA (the "TA Old
Senior Notes"), and, pursuant to a Senior Secured Note Exchange Agreement,
exchanged $85.5 million aggregate principal amount of Senior Secured Notes
($35.5 million of Series I Senior Secured Notes and $50 million of Series II
Senior Secured Notes) of the Company for the Senior Notes of National and the
unredeemed TA Old Senior Notes.



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         In order to complete the Burns Acquisition and facilitate future
Network growth and development, including the TPOA Acquisition, in December 1998
the Company increased the Term Loan by $150 million (the "1998 Refinancing"). Of
the total amount borrowed, $50 million was utilized to retire the Company's
Series II Senior Secured Notes and $42 million was utilized during 1999 to
partially fund the TPOA Acquisition and to fund other planned capital
expenditures. See "Liquidity and Capital Resources" in Item 7 for further
discussion of the 1998 Refinancing.

SUPPLY

         The Company purchases fuel from various suppliers at rates that
fluctuate with market prices and reset daily, and resells fuel to certain
franchisees and to the public at prices that the Company establishes daily. By
contracting for only a portion of its monthly diesel fuel requirements and by
establishing supply relationships with an average of four or five alternate
suppliers per location, the Company has been able effectively to create
competition for the Company's business among the Company's various diesel fuel
suppliers on a daily basis. This flexibility has improved the Company's
purchasing position and helped it partially to offset the decline in retail
diesel fuel margins. Other than pipeline tenders, fuel purchases made by the
Company are delivered directly from suppliers' terminals to the travel centers.
The Company operates a small fleet of tankers to haul fuel to certain of its own
sites and to deliver supply to a select number of wholesale customers, but
contracts with common carriers for the majority of its fuel hauling needs. The
Company does not keep substantial quantities of fuel in inventory and is
therefore susceptible to price increases and interruptions in supply. In the
western United States the Company utilizes pipeline tenders and leased terminal
space to mitigate the risk of supply disruptions, while in the eastern United
States the Company owns and operates its own product terminal for this purpose.
The Company currently engages in only minimal hedging in connection with its
fuel purchases.

CENTRALIZED PURCHASING AND DISTRIBUTION

         The TA Network maintains a dedicated distribution and warehouse center
(the "Distribution Center"). The Distribution Center is the only dedicated
purchasing, warehousing and distribution center in the travel center and
truckstop industry. The Distribution Center is located in Nashville, Tennessee
and has approximately 85,000 square feet of storage space.

COMPETITION

         The travel center and truckstop industry is highly competitive and
fragmented. Based on industry data, the Company believes that there are
approximately 2,500 travel centers and truckstops nationwide, of which only
approximately 830 are sites within the 10 chains that operate 25 or more sites
and are therefore capable of providing at least regional coverage to trucking
fleet customers. In the United States, there are generally two types of
facilities designed to service the trucking industry: pumper-only truckstops,
which provide fuel, typically at discounted prices, with limited additional
services, and full service travel centers, such as those in the Company's
networks, which offer a broad range of products and services to fleet and
independent truck drivers and nontruck traffic, including fuel products, fast
food and casual dining restaurants; truck maintenance and repair products and
services; other driver amenities; and secure parking areas. Of the 2,500 sites
across the nation, only approximately 500 are considered full-service
facilities. Fuel and nonfuel products and services can be obtained by long-haul
truck drivers from a wide variety of sources other than the Company, including
regional full service travel center and pumper-only truckstop chains,
independently owned and operated truckstops, some large service stations and
fleet-operated fueling terminals.


         The Company believes that it experiences substantial competition from
pumper-only truckstop chains and that such competition is based principally on
diesel fuel prices. In the pumper-only truckstop segment, the largest networks
(based on number of facilities and gallons of diesel fuel sold) are Marathon
Ashland Petroleum LLC, selling primarily under the Speedway and SuperAmerica
brandnames, and Pilot Corporation. Additional substantial competition is
experienced from major full service networks and independent chains and is based
principally on diesel fuel prices, nonfuel product and service offerings and
customer service. In the full service travel center



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<PAGE>   8



segment, the largest networks (other than the Company) are operated by Flying J
Inc. ("Flying J") and Petro Stopping Centers, L.P.; however, only some of Flying
J's sites offer full service. The Company's vehicle products and truck
maintenance and repair service operations compete with regional full service
travel center and truckstop chains, full service independently owned and
operated truckstops, fleet maintenance terminals, independent garages, truck
dealerships and auto parts service centers. The Company's travel centers compete
with a variety of establishments located within walking distance of its sites,
including full service restaurants, QSRs and electronics, drug, health and
beauty aid and travel and convenience stores.

         A significant portion of all intercity diesel fuel consumption by
fleets and companies with their own trucking capability occurs through
self-fueling at both dedicated terminals and at fuel depots strategically
located across the country. Such terminals often provide facilities for truck
maintenance and repair. The Company's pricing decisions for diesel fuel and
repair services cannot be made without considering the existence of these
operations and their capacity for expansion. However, the Company believes that
a trucking industry trend has been to reduce the use of such terminals and to
outsource fuel and repair services in order to maximize the benefits of
competitive fuel pricing, superior driver amenities and reduced environmental
compliance expenditures.

RELATIONSHIPS WITH THE OPERATORS AND FRANCHISEE-OWNERS


         Pursuant to the Combination Plan, the Company offered a new TAFSI
franchise agreement (the "Network Franchise Agreement") and a new lease
agreement (the "Network Lease Agreement" or "Network Lease" and, together with
the Network Franchise Agreement, the "Network Agreements") to certain of
National's then existing Operators, and in connection therewith, upon such
franchisee's acceptance of such offer, terminated the then existing National
lease (the "National Lease Agreement") and National franchise agreement (the
"National Franchise Agreement," and, together with the National Lease Agreement,
the "National Agreements") at those locations. During 1997, 29 former National
Operators signed Network Agreements with the Company. During 1999, one of the
two remaining National Operators signed a Network Franchise Agreement with the
Company. Existing TA Franchisee-Owners will be allowed to continue their
franchises under the Network Franchise Agreement upon expiration of their
existing TA franchise agreements (the "Existing TA Franchise Agreements"), which
have an average remaining term of approximately seven years.

         TA Licensing licenses its trademarks to the Company, TA and TAFSI. The
Company enters into its franchise agreements with Operators and
Franchisee-Owners of travel centers in the TA Network through TAFSI, and TAFSI
collects franchise fees and royalties under such agreements. TAFSI's assets
consist primarily of the rights under the Existing TA Franchise Agreements, the
Network Franchise Agreements and its trademark licenses from TA Licensing. TAFSI
has no significant tangible assets. The National Franchise Agreement is between
National and the respective Operator.


REGULATION

         Franchise Regulation. The relationship between National and the
National Network Operator is governed by the Petroleum Marketing Practices Act
(the "PMPA"), 15 U.S.C. Section 2801 et.seq. The relationship between TAFSI and
the TA Network Operators and Franchisee-Owners is not governed by the PMPA
because TAFSI does not license its franchisees to sell fuel under a refiner's
brand. Among other things, the PMPA limits the circumstances under which
franchisors such as National may terminate or fail to renew a franchise
agreement, and it imposes notification and other requirements in those cases
where termination or nonrenewal is permissible.

         National and TAFSI are also subject to state franchise laws, some of
which require National and TAFSI to register with the state before it may offer
a franchise, require National and TAFSI to deliver specified disclosure
documentation to potential franchisees, and impose special regulations upon
petroleum franchises. Some state franchise laws also impose restrictions on
National's and TAFSI's ability to terminate or not to renew its respective
franchises, and impose other limitations on the terms of the franchise
relationship or the conduct of the franchisor.


                                       7
<PAGE>   9

The PMPA, which applies to the National Network Operator, preempts state laws
with respect to termination or nonrenewal unless such laws are consistent with
the PMPA. Finally, a number of states include, within the scope of their
petroleum franchising statutes, prohibitions against price discrimination and
other allegedly anticompetitive conduct. These provisions supplement applicable
antitrust laws at the federal and state levels.

         The Company is subject to regulation under the Federal Trade Commission
("FTC") rule entitled "Disclosure Requirements and Prohibitions Concerning
Franchising and Business Opportunity Ventures," and the FTC requires that
franchisors make extensive disclosure to prospective franchisees but does not
require registration.

         The Company cannot predict the effect of any future federal, state, or
local legislation or regulation on its franchising operations.

         Environmental Regulation. The Company's operations and properties are
subject to extensive regulation pursuant to federal, state and local laws,
regulations and ordinances ("Environmental Laws") that (i) govern activities and
operations that may have adverse environmental effects, such as discharges to
air, soil and water, as well as handling, storage and disposal practices for
petroleum products and other hazardous and toxic substances ("Hazardous
Substances") or (ii) impose liability and damages for the costs of cleaning up
sites affected by, and for damages resulting from, past spills and disposal or
other releases of Hazardous Substances.


         The Company owns and uses underground storage tanks ("USTs") and
aboveground storage tanks ("ASTs") at Company-operated Sites and Leased Sites to
store petroleum products and waste. These tanks must comply with requirements of
Environmental Laws regarding tank construction, integrity testing, leak
detection and monitoring, overfill and spill control, release reporting,
financial assurance and corrective action in case of a release from a UST or AST
into the environment. At certain locations, the Company also is subject to
Environmental Laws relating to vapor recovery and discharges to water. The
Company has made necessary upgrades to USTs to comply with federal regulations
that took effect on December 22, 1998, and believes that all of its travel
centers, including those acquired in the Burns Acquisition and the TPOA
Acquisition, are in material compliance with applicable requirements of
Environmental Laws.


         The Company has received notices of alleged violations of Environmental
Laws, or is aware of the need to undertake corrective actions to comply with
Environmental Laws, at Company-owned travel centers in a number of
jurisdictions. The Company does not expect that any financial penalties
associated with these alleged violations, instances of noncompliance, or
compliance costs incurred in connections therewith, will be material to the
Company's results of operations or financial condition. The Company is
conducting investigatory and/or remedial actions with respect to releases and/or
spills of Hazardous Substances that have occurred subsequent to the National
Acquisition and the TA Acquisition. While the Company cannot precisely estimate
the ultimate costs it will incur in connection with the investigation and
remediation of these properties, based on its current knowledge, the Company
does not expect that the costs to be incurred at these properties, individually
or in the aggregate, will be material to the Company's results of operations or
financial condition. While the aforementioned matters are, to the best knowledge
of the Company, the only proceedings for which the Company is currently exposed
to potential liability (particularly given the Unocal and BP indemnities
discussed below), there can be no assurance that additional contamination does
not exist at these or additional network properties, or that material liability
will not be imposed in the future. If additional environmental problems arise or
are discovered, or if additional environmental requirements are imposed by
government agencies, increased environmental compliance or remediation
expenditures may be required, which could have a material adverse effect on the
Company.

         In connection with the National Acquisition, Phase I environmental
assessments of the then 97 Company-owned National Network properties were
conducted. Pursuant to the Unocal Environmental Agreement, Phase II
environmental assessments of all such National properties were completed by
Unocal by December 31, 1998. The Unocal Environmental Agreement provides that
Unocal is responsible for all costs incurred for remediation of environmental
contamination (the remediation must achieve compliance with the Environmental
Laws in effect on the date the remedial action is completed) and for otherwise
bringing the properties into compliance with



                                       8
<PAGE>   10

Environmental Laws (as in effect at the date of the National Acquisition) with
respect to environmental contamination or non-compliance identified in the Phase
I or Phase II environmental assessments, which environmental contamination or
non-compliance existed on or prior to the date of the National Acquisition.
Under the terms of the Unocal Environmental Agreement, Unocal also must
indemnify the Company against any other environmental liabilities that arise out
of conditions at, or ownership or operations of, the National Network prior to
the date of the National Acquisition. Pursuant to the Unocal Environmental
Agreement, Unocal is obligated to indemnify the Company for claims made before
April 14, 2004. Except as described above, Unocal does not have any
responsibility for any environmental liabilities arising out of the ownership or
operations of the National Network after the date of the National Acquisition.
There can be no assurance that, if additional environmental claims or
liabilities were to arise under the Unocal Environmental Agreement, Unocal would
not dispute the Company's claims for indemnification thereunder.

         Prior to the TA Acquisition, all of the then 38 TA locations were
subject to Phase I and Phase II environmental assessments, undertaken at BP's
expense. The BP Environmental Agreement provides that, with respect to
environmental contamination or non-compliance with Environmental Laws identified
in the Phase I or Phase II environmental assessments, BP is responsible for all
costs incurred for remediation of such environmental contamination (the
remediation must achieve compliance with the Environmental Laws in effect on the
date the remedial action is completed) and for otherwise bringing the properties
into compliance with Environmental Laws (as in effect at the date of the TA
Acquisition). The BP Environmental Agreement further provides that BP must
indemnify the Company against any other environmental liabilities that arise out
of conditions at, or ownership or operations of, the TA locations prior to the
date of the TA Acquisition. With respect to liabilities relating to the
investigation and remediation of environmental contamination, BP is obligated to
indemnify the Company for liabilities with respect to which claims are made
before December 11, 2004. With respect to liabilities otherwise relating to
non-compliance with Environmental Laws (for example, equipment), BP is obligated
to indemnify the Company for liabilities with respect to which claims were made
before December 11, 1996. Except as described above, BP does not have any
responsibility for any environmental liabilities arising out of the ownership or
operations of the TA Network after the date of the TA Acquisition. There can be
no assurance that, if additional environmental claims or liabilities were to
arise under the BP Environmental Agreement, BP would not dispute the Company's
claims for indemnification thereunder.


         In connection with the Burns Acquisition, all of the 17 sites acquired
were subject to Phase I environmental assessments. Based on the results of those
assessments, nine of the sites were subject to Phase II environmental
assessments. The purchase price paid to Burns was adjusted based on the findings
of the Phase I and Phase II environmental assessments. Under the asset purchase
agreement with Burns (the "Burns Agreement"), the Company released Burns from
any environmental liabilities that may have existed as of the Burns Acquisition
date, other than certain non-waived environmental claims as specified in the
Burns Agreement.

         In connection with the TPOA Acquisition, all of the 16 sites acquired
were subject to Phase I environmental assessments. Based on the results of those
assessments, five of the sites were subject to Phase II environmental
assessments. The results of these assessments were taken into account in
recognizing the related environmental contingency accrual for purchase
accounting purposes.


         Other Regulation. The Company, the Operators and the Franchisee-Owners
are required to comply with federal, state and local government regulations
applicable to service station and lubrication operations and consumer food
services businesses generally, including those relating to the preparation and
sale of food, minimum wage requirements, overtime, working, health, fire, safety
and sanitation conditions, mandated health insurance coverage and citizenship
requirements, as well as regulations relating to zoning, construction, business
licensing and employment. The Company believes that it is in material compliance
with the provisions applicable to it and has no knowledge of material violations
of these provisions by its Operators and Franchisee-Owners.



                                       9
<PAGE>   11


EMPLOYEES

         As of December 31, 1999, the Company employed approximately 11,000
people on a full- or part-time basis. Of this total, approximately 10,630 are
employees at the Company-operated Sites and in fuel transportation,
approximately 300 perform managerial, operational or support services at the
headquarters or elsewhere and approximately 70 employees staff the Distribution
Center. All of the Company's employees are non-union.

ITEM 2.  PROPERTIES

         The Company's principal executive offices are leased and are located at
24601 Center Ridge Road, Suite 200, Westlake, Ohio 44145-5634. The Distribution
Center is a leased 85,000 square foot facility located at 1450 Gould Boulevard,
LaVergne, Tennessee 37086-3535.

         Of the 158 Network locations as of December 31, 1999, 118 are
Company-operated Sites, 29 are Leased Sites and the remaining 11 sites are not
owned by the Company. In addition to these operating travel center locations,
the Company has two closed travel center facilities being held for sale and one
closed site being held for future development. Of these total 147 owned sites,
the land and improvements at nine are leased, the improvements but not the
land at four are leased, three are subject to ground leases of the entire site
and seven are subject to ground leases of portions of such sites. The Company
considers its facilities suitable and adequate for the purposes for which they
are used.

         Each of the Company's travel centers is a full service facility located
on or near an interstate highway and identified with TA, Unocal 76, Burns Bros.
Travel Stops or Travel Port signage. As part of the Combination Plan and Capital
Program, substantially all National Network, Burns Network and TPOA Network
travel centers that have been added to the Network have been rebranded under the
TA trademark or will be so rebranded during 2000. All fuel and nonfuel products
and services are generally available 24 hours per day and 365 days per year at
all Network locations.

         Property. The layouts of the Company-owned travel centers vary from
site to site. Generally, the Company-owned facilities are located on properties
averaging 22 acres, of which an average of approximately 19 acres are developed.
The majority of the developed acres contain the main building, housing one or
more restaurants, a travel and convenience store and driver amenities, a truck
maintenance and repair shop, separate truck and car fuel islands, separate truck
and car paved parking and, in some cases, motels. The remaining developed acres
contain landscaping and access roads.

         Fuel Islands. Company sites have diesel fuel islands that accommodate
ten pumps on average, most of which are dual fill pumps that can fill each of a
typical truck's two tanks simultaneously. In addition, travel centers generally
have a gasoline island which can accommodate four to eight automobiles
simultaneously. Certain locations also have one and sometimes two additional
convenience stores located at the fuel islands.


         Truck Maintenance and Repair Shop. Other than at the Burns Network and
TPOA Network sites, virtually all of the Company's travel centers have truck
maintenance and repair shops which operate 24 hours per day and 365 days per
year. Currently, only five Burns Network sites and 11 TPOA Network sites include
truck maintenance and repair shops. The typical travel center repair shop has
between two and four service bays, a parts storage room and fully trained
mechanics on duty at all times. These shops offer extensive maintenance and
emergency repair and road services, from basic services such as oil changes and
tire repair to specialty services such as diagnostics and repair of air
conditioning, air brake and electrical systems.

         In July 1999, TA entered into an operating agreement with Freightliner
to brand the TA truck repair shops as Freightliner ServicePoint facilities. As
ServicePoint facilities, the TA shops are authorized to perform a limited menu
of warranty repairs on trucks purchased from Freightliner and are being added to
Freightliner's 24-hour customer assistance center database to be a major
supplier of emergency and roadside repairs. TA shop employees


                                       10
<PAGE>   12

also have access to Freightliner's parts distribution, service and technical
information systems. This program is being implemented in a phased approach over
several months and is expected to be fully implemented by the end of 2000. As
part of the implementation at a TA site, the TA shop employees are trained at
Freightliner's training center, the necessary Freightliner systems software and
hardware are installed and the ServicePoint signage is installed. At December
31, 1999, there were 37 TA sites operating in the ServicePoint program.


         Main Building. The main building at each travel center contains a full
service restaurant and, in many instances, one or more QSRs; a travel and
convenience store; a fuel desk; driver amenity areas, including a lounge,
television room, private showers and laundry; and ATM machines, as well as
office space and training rooms for the employees of the travel center.

         Full Service and Fast Food Restaurants. Substantially all Company
travel centers have full service restaurants that offer seating for an average
of approximately 140 customers. The Network has associated its full service
restaurants with the Company-owned "Country Pride," "Buckhorn Family
Restaurants" and "Mrs. B's" brand names. The Company has also promoted the
installation of nationally branded fast food restaurants, such as Burger King,
Popeye's Chicken, Dunkin' Donuts, Pizza Hut, Sbarro, Subway and Taco Bell at its
travel centers. The Company generally attempts to locate QSR offerings within
the main travel center building (as opposed to constructing stand-alone
buildings). As of December 31, 1999, 89 of the 147 Company-owned travel centers
offered at least one branded QSR.

         Travel and Convenience Store. Each travel center has a travel and
convenience store that caters to truck drivers, motorists, recreational vehicle
and bus customers. The travel and convenience stores sell food and snack items,
beverages, non-prescription drug and beauty aids, batteries, automobile
accessories, music and audio products. In addition to complete convenience store
offerings, the travel and convenience stores also sell items specifically
designed for the truck driver's on-the-road lifestyle, including laundry
supplies and clothing as well as truck accessories. The typical Company-owned
store averages approximately 1,700 square feet.

         Motels. Twenty-one of TA's travel centers currently have Company-owned
motels, with an average capacity of 35 rooms. Fifteen of these motels are
operated under franchise grants from nationally branded motel chains, including
DayStop, HoJo Inn, Super 8, Rodeway and Travelodge. The remaining six motels are
TA branded motels.

         Additional Services. Most TA travel centers provide professional
drivers with access to specialized business services, including an information
center where drivers can send and receive faxes, overnight mail and other
communications, and a banking desk where drivers can cash checks and receive
funds transfers from fleet operators. Most sites have installed telephone rooms
with 20 to 25 pay telephones with AT&T long distance service. To meet the
personal needs of truck drivers, the typical travel center has designated "truck
driver only" areas, including a television room with a VCR and comfortable
seating for drivers, a barber shop, a laundry area with washers and dryers, 6 to
12 private showers and dressing rooms. Certain travel centers located in
Louisiana, Nevada and Oregon also feature gaming operations. All travel centers
have truck scales.


ITEM 3.  LEGAL PROCEEDINGS

         The Company is involved from time to time in various routine legal and
administrative proceedings and threatened legal and administrative proceedings
incidental to the ordinary course of its business. Management believes the
Company is not now involved in any litigation, individually, or in the
aggregate, which could have a material adverse effect on the Company's business,
financial condition, results of operations or cash flows.




                                       11
<PAGE>   13


ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

         No matters were submitted to a vote of security holders during the
fourth quarter of 1999.

                                     PART II

ITEM 5.  MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

         (a)      Market information. The outstanding shares of Common Stock of
                  the registrant were issued in transactions not involving a
                  public offering. As a result, there is no public market for
                  the registrant's Common Stock.


         (b)      Holders. As of March 15, 2000, the outstanding shares of
                  Common Stock were held of record by 52 stockholders, of which
                  26 stockholders have their shares included in a voting trust
                  (see Item 13-"Certain Relationships and Related
                  Transactions").


         (c)      Dividends. The registrant's senior indebtedness prohibits,
                  except in very limited circumstances, the payment of cash
                  dividends on, and sets limits on redemptions and repurchases
                  of, the registrant's Common Stock. In addition, the indenture
                  to which the registrant is a party prohibits, prior to April
                  1, 2007, the payment of cash dividends on, and sets limits on
                  redemptions and repurchases of, the registrant's Common Stock.
                  The registrant has not paid any cash dividends to holders of
                  Common Stock and does not expect to declare or pay cash
                  dividends to holders of Common Stock in the foreseeable
                  future.



                                       12
<PAGE>   14


ITEM 6.  SELECTED FINANCIAL DATA


         The following table sets forth selected historical financial data for
the Company. Such data presents the Company's investment in TA as net assets of
subsidiary held for disposition until September 30, 1996. Such data should be
read in conjunction with "Management's Discussion and Analysis" and the audited
financial statements of the Company included elsewhere in this Report. The
results of operations and other financial and operating data of the 17 sites
acquired in the Burns Acquisition and the 16 sites acquired in the TPOA
Acquisition are included in the Company's consolidated financial statements
beginning on December 4, 1998 and June 1, 1999, respectively.

<TABLE>
<CAPTION>

                                                                       YEAR ENDED DECEMBER 31,
                                               -----------------------------------------------------------------------
                                                  1999           1998            1997          1996(1)        1995(1)
                                               -----------    -----------    -----------    -----------    -----------
                                                             (DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S>                                            <C>            <C>            <C>            <C>            <C>
INCOME STATEMENT DATA(2):
     Revenues:
         Fuel ..............................   $   955,105    $   554,735    $   708,637    $   550,212    $   376,148
         Nonfuel ...........................       479,059        347,531        293,843         99,991         27,948
         Rent and royalties                         20,460         21,544         36,848         46,055         51,801
                                               -----------    -----------    -----------    -----------    -----------
             Total revenues ................   $ 1,454,624    $   923,810    $ 1,039,328    $   696,258    $   455,897
     Gross profit (excluding depreciation) .   $   403,544    $   296,661    $   266,244    $   127,564    $    79,074
     Income from operations ................   $    38,375    $    19,093    $    22,345    $    24,118    $    29,884
     Extraordinary loss ....................   $      --      $    (3,905)   $    (5,554)          --      $      --
     Net income (loss) .....................   $        99    $    (8,082)   $    (5,763)   $     5,533    $     9,926
     Income (loss) before
       extraordinary item per common
       share:
             Basic .........................   $    (12.96)   $    (21.12)   $     (7.56)   $     (0.81)   $      3.04
             Diluted .......................   $    (12.96)   $    (21.12)   $     (7.56)   $     (0.81)   $      0.57
BALANCE SHEET DATA (END OF PERIOD):
     Total assets ..........................   $   659,862    $   610,061    $   507,792        425,889    $   297,231
     Total debt (net of unamortized
        discount)..                            $   405,970    $   392,459    $   290,125    $   224,435    $   139,991
     Mandatorily redeemable preferred
        stock(3) ...........................   $    79,739    $    69,974    $    61,404    $    53,885    $    47,286
     Working capital .......................   $    35,232    $    99,568    $    86,103    $    23,766    $     9,872
OTHER FINANCIAL AND OPERATING DATA:
     Total diesel fuel sold (in thousands of
     gallons) ..............................     1,370,017        973,812        975,495        713,754        641,901
     Capital expenditures, excluding
        acquisitions of network assets .....   $    87,401    $    65,704    $    60,818    $    20,545    $    19,930
     EBITDA(4) .............................   $    97,976    $    68,708    $    63,553    $    60,940    $    63,198
     Cash flows (used in) provided by:
        Operating activities ...............   $    44,712    $    48,521    $    41,670    $    27,620    $    19,436
        Investing activities ...............   $  (136,016)   $  (125,505)   $   (37,987)   $   (22,254)   $   (17,601)
        Financing activities ...............   $    20,144    $    94,428    $    44,294    $    15,222    $   (14,141)
     Ratio of EBITDA to interest expense,
        net(5) .............................          2.63           2.71           2.78           2.82           2.95
NUMBER OF SITES (END OF PERIOD)(6):
     Company-operated Sites ................           118            103             83             58             46
     Leased Sites ..........................            29             30             35             77             89
     Franchisee-Owner Sites ................            11             10              9             35             38
                                               -----------    -----------    -----------    -----------    -----------
             Total Sites ...................           158            143            127            170            173
                                               ===========    ===========    ===========    ===========    ===========
</TABLE>





                                       13
<PAGE>   15


Notes to Selected Financial Data

(1)   For the period from January 1, 1994 to September 30, 1996, the Company's
      investment in TA was presented as net assets of subsidiary held for
      disposition and TA's results of operations were excluded from the
      Company's consolidated results of operations until December 31, 1994 and
      subsequently included therein as a single amount in the Company's
      consolidated income statement through September 30, 1996. Effective
      September 30, 1996, the decision was made to retain TA and, subsequently,
      the Company chose to pursue the Combination Plan. Accordingly, at such
      time TA was no longer carried as net assets of subsidiary held for
      disposition. At that date, the carrying value of the Company's investment
      in TA of $44.6 million was allocated to the identifiable assets and
      liabilities and was based on the estimated current fair values at that
      date. In addition, the results of operations and cash flows of TA are
      included in the consolidated results of operations and cash flows of the
      Company from October 1, 1996.

(2)   The Company completed the Burns Acquisition effective December 4, 1998 and
      the TPOA Acquisition effective June 1, 1999. The results of operations and
      cash flows from the sites acquired in the Burns Acquisition and the TPOA
      Acquisition are included beginning on those dates.

(3)   "Mandatorily redeemable preferred stock" is comprised of two series of
      convertible preferred stock which accumulate dividends semi-annually at a
      compound annual rate of 13.5%. Both series are mandatorily redeemable in
      2008 and are held by certain members of the Investor Group.


(4)   "EBITDA" is defined herein as income from operations plus the sum of (a)
      depreciation, amortization and other noncash charges, (b) transition
      expense, and (c) gains and losses on sales of property and equipment, and
      is presented because it is commonly used by certain investors and analysts
      to analyze and compare operating performance, and to determine a company's
      ability to service and incur debt. EBITDA should not be considered in
      isolation from, or a substitute for, net income, cash flows from operating
      activities or other consolidated income or cash flow statement data
      prepared in accordance with generally accepted accounting principles or as
      a measure of profitability or liquidity. The EBITDA amounts herein present
      the Company's results as though TA had not been accounted for as a
      subsidiary held for disposition and had, instead, been fully consolidated
      (see Note 1 above).

(5)   The ratio of EBITDA to interest expense, net set forth is different than
      the Consolidated Coverage Ratio (as defined in the indenture related to
      the Company's 10 1/4% Senior Subordinated Notes due 2007). The
      Consolidated Coverage Ratios for the years ended December 31, 1999, 1998
      and 1997 were 2.56, 2.21 and 2.08, respectively.


(6)  The number of sites data shown for all years reflects the total number of
     Company sites, regardless of the brand names under which they are
     operating.




                                       14
<PAGE>   16


ITEM 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS

The following discussion should be read in conjunction with the audited
financial statements.

OVERVIEW


         The Company is a holding company which, through its wholly-owned
subsidiaries, owns, operates and franchises more full-service travel centers in
the United States than any of its competitors with 158 network sites nationwide,
including 147 Company-owned locations. The Company was formed in December 1992
to facilitate the National Acquisition in April 1993. In December 1993, the
Company acquired the TA Network. In December 1998, the Company acquired the
Burns Network and in June 1999 the Company acquired the TPOA Network.
Historically, under the Company's ownership, National operated principally as a
fuel wholesaler and franchisor, with relatively few Company-operated sites. As a
result, its revenues consisted primarily of wholesale diesel fuel sales to
Operators and Franchisee-Owners, rent from Operators of Leased Sites and nonfuel
franchise royalty payments. In contrast, TA operated principally as an
owner-operator of travel centers, as did Burns and TPOA. Consequently, while
TA derived the majority of its revenues from retail diesel fuel sales, the
majority of its gross profit has been derived from, and its principal
strategic focus has been, the sale of higher margin nonfuel products and
services.


COMBINATION PLAN


         There are three primary elements to the Combination Plan that was
adopted in January 1997 and has been executed by the Company from 1997 through
1999: (1) integrating the management of the TA and National Networks, (2)
converting the Existing Network sites to one Network, and (3) rationalizing and
further developing the Company's Network. As a result of implementing the
Combination Plan, and integrating the Burns Network and TPOA Network sites, for
the years ended December 31, 1999, 1998 and 1997, the Company incurred
approximately $4.0 million, $3.6 million and $15.2 million, respectively, of
expense, included in transition expense in the Company's consolidated financial
statements. These expenses relate to, among other things, (i) employee
separations, (ii) the costs to convert National Network, Burns Network and TPOA
Network travel centers to Network travel centers, (iii) the costs to dispose of
travel centers or terminate lease or franchise agreements, and (iv) the costs of
integrating the management and operations of the various networks into the
Network, including relocation, travel, training, and legal expenses. Transition
expenses are expected to aggregate approximately $23.5 million, with the
remainder of the expenses to be incurred in 2000.


Integrating Management of the Existing Networks

         As part of the Combination Plan, the Company's headquarters was moved
from the National headquarters in Nashville, TN to the TA headquarters in
Westlake, OH and management of the Existing Networks was centralized under the
TA management team. Offers of employment in Westlake were made to several
National corporate-level employees, but most opted to remain in Nashville and,
accordingly, most of National's corporate-level employees were terminated. In
January 1997, certain of National's executive officers resigned and related
severance costs of $0.8 million were recognized. In May 1997, management
finalized its plans regarding employee terminations and, accordingly, the
related costs of $1.8 million were recognized. Termination benefits of
approximately $2.0 million and $0.6 million were paid to the 111 terminated
National employees in the years ended December 31, 1997 and 1998, respectively.
All such payments were made by March 31, 1998.



                                       15
<PAGE>   17


Rationalizing and Developing the Network

         At the time the Combination Plan was approved, there were 122 sites
operating in the National Network (19 Company-operated Sites, 76 Leased Sites
and 27 Franchisee-Owner Sites) and 48 sites operating in the TA Network (40
Company-operated Sites and eight Franchisee-Owner Sites). As a result of their
history as competitors, there were markets in which each of the Existing
Networks had a site. Certain markets can support such coverage, but others
cannot, so the Company reviewed its networks in order to rationalize the total
number of sites and reduce oversaturation in certain markets. As a result, the
Company identified up to 23 National Network Company-owned sites to be sold and
a minimum of 23 National Network Franchisee-Owner Sites to be terminated.


         During 1997, 15 National Network Leased Sites were sold to the
operators of those sites for a net gain on sale of $11.9 million and all 27 of
the National Network Franchisee-Owner Sites were terminated. In 1998, two
Company-operated Sites were sold for a net gain on sale of $0.7 million. In
1999, five Company-owned sites (including three sites obtained in the Burns
Acquisition or TPOA Acquisition) were sold for a net gain on sale of $1.5
million. At December 31, 1999, two closed sites were being held for sale. The
net carrying value of these two sites at December 31, 1999 is $1.5 million and
the Company expects them to be sold for a gain.

         In addition to the sites held for sale, the Company may sell other
operating sites. As the Company acquires additional sites, such as in the Burns
Acquisition and TPOA Acquisition, new market overlaps are created, thus
providing the opportunity to sell sites if buyers offering sufficient amounts
can be identified. Further, the Company's agreements with its franchisees
provide the franchisees with limited protected territories in which the Company
may not operate TA branded facilities. In such cases, sales of sites within
those territories may become necessary or economically attractive.

         In addition to the site sales and terminations, the Combination Plan,
as well as the Company's strategic plan, contemplates further development and
expansion of the Network into key markets where the Network is not adequately
represented, which involves constructing or acquiring new sites as well as
improving existing sites. Pursuant to the Capital Program, as adjusted for the
Burns Acquisition and the TPOA Acquisition, a significant amount of the capital
expenditures planned for 1999 through 2001 are for improvements at existing
sites such as reimaging, rebranding, constructing new QSRs, expanding the travel
stores and convenience stores, expanding existing and constructing additional
shop bays, and rebranding and upgrading the gasoline islands. Further, the
Company expects to continue developing its Network through the construction of
sites in new markets and the rebuilding of older sites.

         To continue the Company's growth and amplify its national brand
identity, in 1995 the Company embarked on a project to design a prototype travel
center. The Company conducted extensive market research in order to design a
travel center that would appeal to the needs of the Company's core fleet
customer base and better position itself to capture more "four wheel" consumer
traffic, and developed a prototype travel center design (the "Prototype"). In
addition to the Prototype, the Company has designed a smaller format
("Protolite") to better match facility offering to market size in smaller
markets. The Prototype or Protolite designs will be used for all new travel
centers constructed. The Prototype design concepts are also being utilized in
all of the Company's site re-imaging projects. The first three newly constructed
Prototype travel centers opened for business in May, October and December of
1999, and the first Protolite travel center opened in December 1999. At December
31, 1999, there were two additional Prototype travel centers under construction
that are expected to open in the first half of 2000. During 2000 and 2001, the
Company intends to begin construction of at least five additional Prototype or
Protolite travel centers. Excluding land, the average costs of a Prototype
travel center and a Protolite travel center are approximately $8.0 million and
$5.0 million, respectively. To date, the completed and planned new or rebuilt
sites are being funded through a combination of capital expenditures and
build-to-suit operating leases.




                                       16
<PAGE>   18


Converting the Existing Networks into One Network


         As described above, there were 122 sites in the National Network at the
outset of the Combination Plan and a key component of the Combination Plan is to
integrate the Existing Networks into one. This task was partially completed by
the sales of 17 Leased Sites and the termination of 27 Franchisee-Owner sites
during 1997 and 1998. A second step was the conversion of all National Network
Company-operated Sites to TA Network Sites. This conversion involved significant
costs for activities such as hiring and training employees at the sites,
installing TA's store, shop and accounting systems and programs, implementing TA
management, marketing, operations, safety and training programs, relocating site
management employees and rebranding the sites as TA sites. The remaining step
was conversion of the Leased Sites, which has been accomplished in two ways:
acquiring the leasehold interests of the Operators at 32 Leased Sites (five in
1998 and 27 in 1997) and negotiating Network Agreements with the Operators at 30
Leased Sites (one in each of 1999 and 1998 and 28 in 1997), one of which was
sold to the operator during 1999. One Operator of a Leased Site who had signed
the Network Agreements sold his leasehold interest to the Company during 1998.
As a result of the above, at December 31, 1999, there remained only one site
operating under the National Agreements.

         The process of converting Leased Sites from the National Agreements to
the Network Agreements included rebranding of the travel centers, installation
of TA's store and shop programs, training of the franchisees in TA's operating
procedures and revisions to the franchise and lease agreements that reduced the
fixed rent payable by the Operators but increased the royalties to be paid by
the Operators (calculated as a percentage of nonfuel revenues and a rate per
gallon of fuel sold). Converting to the Network Agreements has resulted in
reduced revenue in the short term, but the Company believes that, in the long
term, total revenue will be increased as a result of the increased royalty rates
and increased franchisee fuel sales volume and nonfuel revenues.


NETWORK COMPOSITION


         The change in the number of sites within the Company's network is the
most significant factor driving the changes from the prior year in the Company's
results of operations. During the second and third quarters of 1998, the Company
converted five Leased Sites to Company-operated Sites and sold one closed site.
In December 1998, the Company acquired 17 Company-operated Sites in the Burns
Acquisition. In June 1999, the Company acquired 16 Company-operated Sites in the
TPOA Acquisition. Also during 1999, the Company sold three Company-operated
Sites, sold one Leased Site to the Operator who signed a franchise agreement to
brand the site as a Franchisee-owner Site, sold one closed site, closed two
Company-operated Sites now held for sale, and opened two newly-constructed
Company-operated Sites.


         The following table sets forth the number and type of ownership and
management of the travel centers operating in the Company's networks.

<TABLE>
<CAPTION>

                                                          DECEMBER 31,
                                                     -----------------------
                                                       1999          1998
                                                     --------       --------
<S>                                                 <C>            <C>
Company-owned and operated sites(1)                       118            103
Company-owned and leased sites                             29             30
                                                     --------       --------
         Total Company-owned sites                        147            133
Franchisee-owner sites                                     11             10
                                                     --------       --------
         Total                                            158            143
                                                     ========       ========
</TABLE>



(1)  Excludes three closed sites at December 31, 1999 and two closed sites at
     December 31, 1998.





                                       17
<PAGE>   19


RESULTS OF OPERATIONS

         The results of operations of the 17 sites acquired in the Burns
Acquisition and the 16 sites acquired in the TPOA Acquisition are included in
the following beginning December 4, 1998, and June 1, 1999, respectively, the
dates of the Burns Acquisition and TPOA Acquisition, respectively.

<TABLE>
<CAPTION>

                                                                           YEAR ENDED DECEMBER 31,
                                                                ----------------------------------------------
                                                                     1999           1998            1997
                                                                ------------------------------ ---------------
<S>                                                                <C>            <C>             <C>
Revenues:
     Fuel.......................................................   $  955.1       $  554.7        $  708.6
     Nonfuel....................................................      479.1          347.5           293.8
     Rent and royalties.........................................       20.5           21.5            36.8
                                                                   --------       --------        --------
     Total revenues.............................................    1,454.6          923.8         1,039.3
Cost of revenues (excluding depreciation).......................    1,051.1          627.1           773.1
                                                                   --------       --------        --------
Gross profit (excluding depreciation)...........................      403.5          296.7           266.2
Operating expenses..............................................      267.1          193.7           167.1
Selling, general and administrative expenses....................       38.5           34.3            35.6
Transition expense..............................................        4.0            3.6            15.2
Depreciation and amortization...................................       53.2           44.7            35.8
(Gain) on sales of property and equipment.......................       (2.6)          (1.2)          (11.2)
Stock compensation expense......................................        5.0            2.5             1.4
                                                                   --------       --------        --------
Income from operations..........................................       38.4           19.1            22.3
Interest expense, net...........................................      (37.2)         (25.4)          (22.9)
                                                                   --------       --------        --------
Income (loss) before income taxes and extraordinary item........        1.2           (6.3)           (0.6)
Provision (benefit) for income taxes............................        1.1           (2.1)           (0.3)
                                                                   --------       --------        --------
Income (loss) before extraordinary item.........................        0.1           (4.2)           (0.3)
Extraordinary item (net of taxes)...............................        -             (3.9)           (5.5)
                                                                   --------       --------        --------
Net income (loss)...............................................   $    0.1       $   (8.1)       $   (5.8)
                                                                   ========       ========        ========
EBITDA(1).......................................................   $   98.0       $   68.7        $   63.6
                                                                   ========       ========        ========
</TABLE>


(1) "EBITDA" is defined as set forth in Note 4 to Selected Financial Data in
Item 6.

1999 COMPARED TO 1998

Revenues

         The Company's consolidated revenues for 1999 were $1,454.6 million,
which represents an increase over the prior year of $530.8 million, or 57.5%.
This increase results from large increases in fuel and nonfuel revenues and a
small decrease in rent and royalty revenue.

         Fuel revenue for 1999 increased by $400.4 million, or 72.2%, from 1998.
The increase is attributable to increases in diesel and gasoline sales volumes
as well as an increase in average pump prices. Diesel and gasoline sales volumes
increased 40.7% and 53.9%, respectively, between years, due in large part to the
increased number of Network sites, but also due to increased sales volumes over
1998 on a same-site basis of 11.4% for diesel fuel and 8.9% for gasoline. For
the year ended December 31, 1999, the Company sold 1,370.0 million gallons of
diesel and 84.5 million gallons of gasoline. Average fuel sales prices for 1999
increased 21.8% over 1998. The increase in average retail prices corresponds
with the decreasing crude oil prices experienced throughout 1998 and the
increasing crude oil prices beginning in March 1999.


                                       18
<PAGE>   20

         Nonfuel revenue in 1999 of $479.1 million reflects an increase of
$131.6 million, or 37.9%, from 1998. The increase primarily results from the
increased number of Company-operated Sites in the Network. Further, on a
same-site basis, nonfuel revenue increased 8.8% in 1999 versus 1998, reflecting
the effects of the significant capital investments the Company has made in the
Network pursuant to the Capital Program.

         Rent and royalty revenue for 1999 reflects a $1.0 million, or 4.7%,
decrease from the prior year. This decrease is attributable to the rent and
royalty revenue lost as a result of the five conversions of Leased Sites to
Company-operated Sites during 1998 and the sale of one Leased Site in 1999,
somewhat offset by a same-site rent increase of 0.8% and a same-site increase of
5.7% in royalty revenue as a result of improved franchisee sales levels.

Gross Profit

         The Company's gross profit for 1999 was $403.5 million, compared to
$296.7 million for 1998, an increase of $106.8 million, or 36.0%. The increase
in the Company's gross profit was primarily due to increases in nonfuel
revenues, fuel margins and royalty revenue, partially offset by decreased rent
revenue, as discussed above.

Operating and Selling, General and Administrative Expenses

         Operating expenses include the direct expenses of Company-operated
Sites and the ownership and franchising-related costs of Leased Sites. Selling,
general and administrative expenses ("SG&A") include corporate overhead and
administrative costs.

         The Company's operating expenses for 1999 increased by $73.4 million,
or 37.9%, versus the prior year. This increase reflects the increased
number of Company-operated Sites and the increased level of nonfuel revenues on
a same-site basis. On a same-site basis, operating expenses as a percentage of
nonfuel revenues for 1999 were 54.0%, an improvement from the 54.7% for 1998.

         The Company's SG&A increased over 1998 by $4.2 million, or 12.2%, to
$38.5 million in 1999. The increased SG&A primarily reflects increased staffing
and other expenses (such as travel, insurance and advertising) to support the
Company's growth from the Burns Acquisition and the TPOA Acquisition.

Transition Expense

         Transition expense for 1999 increased from $3.6 million in 1998 to $4.0
million in 1999. The 1999 costs were incurred in substantially completing the
integration of the National Network, Burns Network and TPOA Network sites into
the Company's Network. The 1998 costs were incurred to continue the combination
of National and TA, as well as expenses incurred in beginning the integration of
the Burns Network into the Network. The Company anticipates less than $1.0
million of such costs to be incurred in 2000, primarily related to integrating
and converting the TPOA Network sites.

Depreciation and Amortization

         Depreciation and amortization of $53.2 million for 1999 increased $8.5
million from 1998. The increase in depreciation and amortization is primarily
attributable to the increased level of property and equipment and intangible
assets resulting from the Burns Acquisition and the TPOA Acquisition as well as
the significant capital additions made in 1999 and 1998. In addition, an
impairment reserve of $0.6 million recorded in 1997 with respect to certain
sites being held for sale was completely reversed in 1998 due to increases in
the estimated sales prices of the respective sites. These increases are offset
by a one-time depreciation charge recognized in 1998.




                                       19
<PAGE>   21



         During the first quarter of 1998, the estimated useful lives of certain
machinery, equipment, furniture and fixtures were revised downward from 10 years
to five years. The effect of this change in estimate resulted in a $9.5 million
charge to depreciation expense and reductions in income before extraordinary
items, net income and earnings per share of $9.5 million, $5.7 million and $9.08
per share, respectively. This change resulted in these assets becoming fully
depreciated at March 31, 1998.

Income From Operations

         Income from operations was $38.4 million for 1999, compared to $19.1
million for 1998, an increase of $19.3 million or 101.0%. In addition to the
increased size of the Network and the other contributing factors discussed
above, the increase is affected by a $1.4 million increase in gains on sales of
property and equipment and a $2.5 million increase in stock compensation
expense.

         EBITDA (defined as income from operations plus the sum of (a)
depreciation, amortization and other non-cash charges, (b) transition expense
and (c) gains and losses from sales of property and equipment) for the Company
for 1999 was $98.0 million, compared to $68.7 million for 1998. The increased
EBITDA reflects the significant increase in gross margin offset by increases in
operating expenses and SG&A, all of which is largely derived from the increase
in the size of the Network but also from an increase in same-site EBITDA of
$8.4 million or 12.0%.

Interest Expense, net

         Interest expense for 1999 was $37.2 million, $11.8 million higher than
for 1998. This is a result of increased levels of indebtedness and interest
rates after completing the 1998 Refinancing, increased debt from completing the
TPOA Acquisition (both as discussed in Liquidity and Capital Resources below),
and a general increase in interest rates throughout the credit markets.

Income taxes

         The Company's effective income tax rate for 1999 was 91.6%, which
differs from the federal statutory rate due primarily to state income taxes and
nondeductible expenses, partially offset by the benefit of certain tax credits.

1998 COMPARED TO 1997

Revenues

         The Company's consolidated revenues for 1998 were $923.8 million, which
represents a decrease from the prior year of $115.5 million, or 11.1%.

         Fuel revenue for 1998 reflects a decrease from 1997 of $153.9, or
21.7%. The decrease resulted from an approximately 21.9% decrease in average
retail prices and a decrease of 1.7 million gallons sold (0.2%). The decrease in
average retail prices primarily results from decreased crude oil prices and also
from competitive pressures. The slight volume decrease is the net of increases
in volumes at sites in operation in both 1997 and 1998 of 10.3%, offset by
reductions for sites sold in 1997.

         Nonfuel revenue in 1998 increased 18.3% from 1997 primarily as a result
of an increased number of Company-operated Sites offering nonfuel products and
services. There were 27 Leased Sites converted to Company-operated Sites
throughout 1997, resulting in a full year of operations for these sites in 1998.
An additional five Leased Sites were converted to Company-operated Sites during
1998. Further, on a same-site basis, nonfuel revenue increased 5.8% in 1998
versus 1997.



                                       20
<PAGE>   22


         Rent and royalty revenue for 1998 decreased $15.3 million as a result
of (i) conversions of Leased Sites to Company-operated Sites, (ii) sales of
Leased Sites and (iii) the rent reductions that became effective when former
National franchisees signed Network Agreements with the Company. These changes
occurred primarily throughout 1997, and the decreases in 1998 reflect the full
year effects of these changes. The new franchise and lease agreements provide
for reduced fixed rents but increased franchise royalty rates to be applied to
nonfuel revenues generated by the franchisees' operations. On a same-site basis,
rent revenue for 1998 reflects a decrease of $1.8 million, or 11.6%, from 1997,
while royalty revenue for 1998 reflects an increase of $2.2 million, or 55.3%,
over 1997.

Gross Profit

         The Company's gross profit for 1998 was $296.7 million, compared to
$266.2 million for 1997, an increase of $30.5 million, or 11.5%. The increase in
the Company's gross profit was primarily due to increases in nonfuel revenues,
diesel fuel margins, and royalty revenue, partially offset by decreased rent
revenue as discussed above.

Operating and Selling, General and Administrative Expenses

         Operating expenses include the direct expenses of Company-operated
Sites and selling, general and administrative expenses ("SG&A") include
corporate overhead and administrative costs.

         The Company's operating expenses increased by $27.4 million, or 16.3%,
to $195.8 million for 1998, as compared to 1997. The increase reflects a full
year of operations for the 27 Leased Sites that were converted to
Company-operated Sites during 1997, as well as increases from the five Leased
Sites converted to Company-operated Sites during 1998. In addition, the growth
in nonfuel revenue requires an increase in operating expenses, particularly
labor, to support the revenue growth.

         The Company's SG&A decreased 3.7% from $35.6 million in 1997 to $34.3
million in 1998 as a result of continued synergy savings as a result of the
Combination Plan.

Transition Expense

         Transition expense for 1998 decreased from $15.2 million in 1997 to
$3.6 million in 1998. The 1998 costs were incurred in continuing to effect the
combination of National and TA, as well as expenses incurred in beginning the
combination of the Burns Network into the Network. The decrease from 1997
reflects the relative level of effort in 1998 versus 1997 on transition
activities at the former National Network sites.

Depreciation and Amortization

         Depreciation and amortization of $44.7 million for 1998 increased $8.9
million from 1997. During the first quarter of 1998, the useful lives of certain
machinery, equipment and furniture were revised downward from 10 years to five
years to conform National's estimated useful lives to those of TA. The effect of
this change in estimate resulted in reductions in income before extraordinary
items, net income and earnings per share of $9.5 million, $5.7 million and $9.08
per share, respectively. In addition, an impairment charge of $0.6 million
recorded in the 1997 fourth quarter with respect to certain sites being held for
sale was completely reversed in the 1998 second quarter. This reversal was based
on increases in the estimated sales prices of the respective sites. In 1997,
impairment charges related to goodwill and certain sites being held for sale of
approximately $7.5 million were included in depreciation and amortization.
Exclusive of the above amounts, depreciation and amortization increased
approximately $8.1 million between years, primarily due to the significant level
of capital expenditures in 1998 and 1997.



                                       21
<PAGE>   23


Income From Operations

         Income from operations for the Company was $19.1 million for 1998 as
compared to $22.3 million in 1997, which is a decrease of $3.2 million, or
14.3%. The decrease is attributable to the increase in depreciation and
amortization and operating expenses and the decrease in gains on sales or
property and equipment and rent and royalty revenues, partially offset by
increased nonfuel sales margins, increased diesel margins and headquarters
synergies. EBITDA for the Company for 1998 was $68.7 million, compared to $63.6
million for 1997. The increased EBITDA for 1998 is largely derived from
increased gross profit as a result of a greater number of Company-operated Sites
and increased diesel margins, partially offset by the increased operating
expenses incurred by the increased revenue levels and reductions in rent and
royalty revenues.

Interest Expense, net

         Interest expense for 1998 was $25.4 million, $2.5 million higher than
1997. This is a result of the increased net debt balance after completing the
1998 Refinancing and a full year of interest expense on the increased net debt
balance from the 1997 Refinancing (both as discussed in Liquidity and Capital
Resources below).

Other Items

         The extraordinary loss of $3.9 million results from the 1998
Refinancing and represents the write-offs of the then remaining unamortized
balance of deferred financing costs related to the extinguished indebtedness
($5.9 million) and approximately $15.8 thousand of break funding fees paid to
holders of redeemed senior notes. The reported amount of the extraordinary loss
is net of the applicable income tax benefit of $2.0 million.

LIQUIDITY AND CAPITAL RESOURCES

         The Company's cash requirements consist principally of working capital
needs, payments of principal and interest on outstanding indebtedness and
capital expenditures, including expenditures for acquisitions, expansion and
environmental upgrades and compliance.

         Net cash provided by operating activities totaled $44.7 million in
1999, $48.5 million in 1998, and $41.7 million in 1997. The decrease in net cash
flows from operating activities for 1999 versus 1998 primarily results from a
$29.3 million increase in EBITDA that is more than offset by an $11.8 million
increase in interest expense and a $22.3 million increase in working capital
requirements. The increase in net cash flows provided by operating activities in
1998 versus 1997 is primarily attributable to increased EBITDA partially offset
by growth in working capital requirements primarily resulting from the increased
number of Company-operated sites and increased interest expense as a result of
the 1998 Refinancing.

         Net cash used in investing activities for 1999 was $136.0 million
versus $125.5 million in 1998 and $38.0 million in 1997. The cash used in
investing activities in 1999 includes $87.4 million for capital expenditures
pursuant to the Capital Program and $57.8 million for the TPOA Acquisition.
These outlays are partially offset by $9.1 million of cash proceeds from sales
of property and equipment, which primarily consist of the sales of five travel
center sites during 1999. The amount of net cash used in investing activities in
1998 reflects $65.7 million of capital expenditures in accordance with the
Capital Program and consistent with 1997, as well as $6.4 million for the
conversions of five leased sites to Company-operated Sites and approximately
$56.8 million for the Burns Acquisition. These uses of cash are partially offset
by $3.4 million of proceeds from sales of property and equipment comprised
primarily of the sales of two Company-operated sites and condemnation proceeds
related to a third Company-operated Site. The amount for 1997 reflects $75.9
million of expenditures related to capital additions and conversions of Leased
Sites to Company-operated Sites, as contemplated by the Capital Program,
partially offset by $38.0 million of proceeds from sales of property and
equipment primarily relating to the sales of 15 Leased Sites to the respective
Operators.


                                       22
<PAGE>   24

         Net cash flows provided by financing activities were $20.1 million in
1999, $94.4 million in 1998 and $44.3 million in 1997. The cash provided during
1999 was the result of a $6.7 million capital investment and net borrowings of
$15.0 million under the Company's revolving credit facility. The Company made
$1.6 million of scheduled debt repayments during 1999. The increased cash flows
from investing activities in 1998 versus 1997 reflects the 1998 Refinancing. The
financing activities cash flows in 1997 primarily related to the 1997
Refinancing.

         In order to provide for its growth, the Company, among other things,
has completed refinancings in each of 1998 and 1997. In the 1997 Refinancing,
completed on March 27, 1997, the Company repaid or exchanged all of its
previously existing indebtedness and issued $125 million principal amount of
Senior Subordinated Notes, $85.5 million principal amount of Senior Secured
Notes ($35.5 million of fixed-rate Series I and $50.0 million of floating-rate
Series II), and an $80 million term loan facility which was fully borrowed. The
Company also has a $40.0 million revolving credit facility. In the 1998
Refinancing, completed on December 3, 1998, the Company increased the term loan
facility, and its borrowings under the facility, by $150.0 million. The proceeds
of the borrowing were used to redeem the Series II Senior Secured Notes ($50.0
million), fund the Burns Acquisition (approximately $56.8 million), and prefund
$42.0 million of planned capital expenditures and business acquisitions, with
the remainder used for costs of the 1998 Refinancing and accrued interest. The
$42.0 million for prefunded capital expenditures and business acquisitions was
required to be maintained in a cash collateral account and to be used only for
such expenditures. Provisions of the debt agreements required the Company to use
$30.0 million of the cash collateral account balance for a business acquisition,
or to repay the $30.0 million in the event the Company did not enter a
definitive purchase agreement prior to March 31, 1999, and complete the
acquisition by December 31, 1999. The Company utilized the $30.0 million to
partially fund the TPOA Acquisition. The Senior Notes have no amortization
requirements until 2001, the Senior Subordinated Notes are due in 2007 and the
Term Loan facility has annual amortization requirements of $1.4 million until
2003, when the annual amortization requirements increase significantly. The
interest rate on the Term Loan was increased by a percentage point to LIBOR plus
3.75%. At December 31, 1999, the Company had available $23.5 million of its $40
million revolving credit facility.

         The Company expects to invest approximately $340 million in the Network
between 1997 and the end of 2001 (with $237 million of this amount having been
spent by the end of 1999) in connection with the Capital Program to upgrade,
rebrand, reimage and increase the number of travel centers. Approximately $50
million of the capital expenditures intended to be made represents normal
ongoing maintenance and related capital expenditures. The Company has budgeted
additional expenditures in order to add new sites, rebrand and reimage sites,
add additional nonfuel offerings (such as QSR offerings) at existing sites, make
required environmental improvements, and purchase, install and upgrade its
information systems. The capital expenditures budget for 2000 is approximately
$65 million.

         The Company anticipates that it will be able to fund its 2000 working
capital requirements and capital expenditures primarily from funds generated
from operations, funds generated from asset sales, and, to the extent
necessary, from borrowings under the revolving facility. The Company's
long-term liquidity requirements, including capital expenditures, are expected
to be financed by a combination of internally generated funds, borrowings and
other sources of external financing as needed.

FREIGHTLINER RELATIONSHIP

         In July 1999, the Company signed an agreement with Freightliner to
enter into the ServicePoint Program. Under the agreement, the Company's truck
repair facilities are being added to Freightliner's 24-hour customer assistance
center database to be a major referral point for emergency and roadside repairs
and also have access to Freightliner's parts distribution, service and technical
information systems. The Company believes the ServicePoint Program, which will
be implemented at substantially all of the Company's truck repair shops by the
end of 2000, will generate an increase in nonfuel revenues in 2000 but will have
a larger effect in 2001 and thereafter.




                                       23
<PAGE>   25


ENVIRONMENTAL MATTERS

         The Company owns and operates USTs and ASTs at Company-operated Sites
and Leased Sites which must comply with certain statutory and regulatory
requirements that went into effect on December 22, 1998. The Company believes it
is in material compliance with those requirements. During 1999, approximately
$2.6 million of environmental-related expenditures were incurred with respect to
remediation, maintenance, compliance, monitoring and capital items. In addition,
the Company has estimated the current ranges of estimated remediation costs at
currently active sites and what it believes will be its ultimate share for such
costs after required indemnification and remediation is performed by Unocal and
BP under the respective Environmental Agreements and has a reserve for such
matters of $7.1 million as of December 31, 1999. While it is not possible to
quantify with certainty the environmental exposure, in the opinion of
management, the potential liability, beyond that considered in the reserve, for
all environmental proceedings, based on information known to date and
environmental laws currently enacted, will not have a material adverse effect on
the financial condition, results of operations or liquidity of the Company.

YEAR 2000 READINESS DISCLOSURE

         The Company did not experience any significant malfunctions or errors
in its operating or business systems when the date changed from 1999 to 2000.
Based on operations since January 1, 2000, the Company does not expect any
significant impact to its ongoing business as a result of the Year 2000 issue.
However, it is possible that the full impact of the date change, which was of
concern due to computer programs that use two digits instead of four digits to
define years, has not been fully recognized. For example, the Company could
still be negatively impacted if its customers, its suppliers or the third party
billing companies that service the trucking industry are adversely affected by
the Year 2000 or similar issues. The Company currently is not aware of any
significant year 2000 or similar problems that have arisen or are likely to
arise for its customers, its suppliers or the third party billing companies. The
incremental costs to the Company of the modifications to, and replacement of,
software or hardware as a result of the Year 2000 issue was not material to the
Company's financial position or results of operations.

RECENTLY ISSUED ACCOUNTING PRONOUNCEMENT

         In June 1998, the Financial Accounting Standards Board issued Financial
Accounting Standard No. 133, "Accounting for Derivative Instruments and Hedging
Activities" ("FAS 133"), which requires entities to recognize all derivatives as
either assets or liabilities in the balance sheet and measure those instruments
at fair value. Changes in the fair values are required to be recognized in
income when they occur, except for derivatives that qualify as hedges. For the
Company, adoption of this standard, as subsequently amended, is required for the
first quarter of 2001. At this time, the Company has not completed its analysis
of the effect on its financial statements of adopting FAS 133. However, as the
Company utilizes derivatives on a limited basis and only as hedges of either
commodity price risk or interest rate risk, the effect of FAS 133 on the
Company's statement of income is not expected to be material.

FORWARD-LOOKING STATEMENTS

         The Company is making this statement in order to satisfy the "safe
harbor" provision contained in the Private Securities Litigation Reform Act of
1995. The statements contained in this report that are not statements of
historical fact may include forward-looking statements that involve a number of
risks and uncertainties. Moreover, from time to time the Company may issue other
forward-looking statements. Such forward-looking statements are made based on
management's expectations and beliefs concerning future events impacting the
Company and are subject to uncertainties and factors relating to the Company's
operations and business environment, all of which are difficult to predict and
many of which are beyond the control of the Company, that could cause actual
results of the Company to differ materially from those matters expressed in or
implied by forward-looking statements. The following factors are among those
that could cause actual results to differ materially from the forward-looking
statements: competition from other travel center and truckstop operators,
including additional or improved services or facilities of competitors; the
economic condition of the trucking industry, which in turn is dependent on
general


                                       24
<PAGE>   26

economic factors; diesel and gasoline fuel pricing; availability of fuel supply;
and difficulties that may be encountered by the Company or its franchisees in
implementing the Combination Plan, integrating the Burns Network and TPOA
Network sites into the Network, and implementing the ServicePoint Program. The
forward-looking statements should be considered in light of these factors.


ITEM 7A.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK


         The Company is exposed to commodity price risk and interest rate risk.
The Company's fuel purchase contracts provide for purchase prices based on
average market prices for diesel and gasoline, exposing the Company to commodity
price risk. The Company mitigates this risk exposure in a few ways, but
primarily by maintaining only a few days of inventory on hand and selling a
large portion of its fuel volume under "cost plus" pricing formulae, which
minimize the effect on the Company's margins of sudden sharp changes in
commodity market prices. The Company manages the price exposure related to sales
volumes not covered by cost plus arrangements through the use, on a limited
basis, of derivative instruments designated by management as hedges of
anticipated purchases. The total volume covered by open derivative contracts at
any point in time during 1999 and at December 31,1999 was immaterial. The
interest rate risk faced by the Company results from the highly-leveraged
position of the Company and its level of variable rate indebtedness, the rates
for which are based on short-term lending rates, primarily the London Interbank
Offered Rate. The Company uses interest rate swap agreements to reduce its
exposure to market risks from changes in interest rates by fixing interest rates
on variable rate debt and reducing certain exposures to interest rate
fluctuation. Amounts currently due to or from interest rate swap counterparties
are recorded in interest expense in the period in which they accrue. At December
31, 1999, the Company was involved in interest rate swap agreements with a
notional principal amount of $160,250,000. Notional amounts do not quantify risk
or represent assets or liabilities of the Company, but are used in the
determination of cash settlements under the agreements. The Company is exposed
to credit losses from counterparty nonperformance, but does not anticipate any
loses from its agreements, all of which are with a major financial institution.

         The following table summarizes information about the Company's
financial instruments that are subject to changes in interest rates:

<TABLE>
<CAPTION>
                                                                  DECEMBER 31, 1999
                                            --------------------------------------------------------------
                                                      FIXED RATE                    VARIABLE RATE
                                                     INDEBTEDNESS                   INDEBTEDNESS
                                            ------------------------------- ------------------------------
                                                               WEIGHTED                      WEIGHTED
                                               PAYMENT         AVERAGE      PAYMENT           AVERAGE
                                                AMOUNT      INTEREST RATE   AMOUNT        INTEREST RATE
                                            --------------- --------------- ------------------------------
                                                               (DOLLARS IN THOUSANDS)
<S>                                        <C>                 <C>         <C>                <C>
Year Ended December 31:
     2000...................................  $        46         9.99%       $     1,446        9.875%
     2001...................................       17,803        10.02%             1,446
     2002...................................       17,809        10.15%             1,446
     2003...................................           66        10.28%            65,448
     2004...................................           74        10.28%           138,665
Thereafter..................................      127,730        10.35%            33,991
                                              -----------                     -----------
Total.......................................  $   163,528        10.19%       $   242,442
                                              ===========                     ===========
Fair value..................................  $   156,786                     $   242,442
                                              ===========                     ===========
</TABLE>





                                       25
<PAGE>   27


ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

<TABLE>
<CAPTION>

Index to Consolidated Financial Statements and Supplementary Data:                                           PAGE
                                                                                                             ----
<S>                                                                                                    <C>
   Financial Statements:
       Report of Independent Accountants.................................................................     27
       Consolidated Balance Sheet at December 31, 1999 and 1998..........................................     28
       Consolidated Statement of Income and Retained Earnings (Deficit) for the three years ended             29
         December 31, 1999...............................................................................
       Consolidated Statement of Cash Flows for the three years ended December 31, 1999..................     30
       Notes to the Consolidated Financial Statements....................................................     31
   Supplementary Data:
      Quarterly financial data - unaudited...............................................................     61
</TABLE>





                                       26
<PAGE>   28

                        REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors
and Stockholders of
TravelCenters of America, Inc.

         In our opinion, the consolidated financial statements listed in the
accompanying index present fairly, in all material respects, the financial
position of TravelCenters of America, Inc. and its subsidiaries at December 31,
1999 and 1998, and the results of their operations and their cash flows for each
of the three years in the period ended December 31, 1999, in conformity with
accounting principles generally accepted in the United States. These financial
statements are the responsibility of the Company's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these statements in accordance with
auditing standards generally accepted in the United States, which require that
we plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for the opinion expressed above.


PricewaterhouseCoopers LLP

Cleveland, Ohio
March 10, 2000



                                       27
<PAGE>   29


                         TRAVELCENTERS OF AMERICA, INC.

                           CONSOLIDATED BALANCE SHEET

<TABLE>
<CAPTION>

                                                                                                DECEMBER 31,
                                                                                        ------------------------------
                                                                                             1999           1998
                                                                                        ------------------------------
                                                                                          (IN THOUSANDS OF DOLLARS)
<S>                                                                                       <C>            <C>
                                         ASSETS
 Current assets:
    Cash..............................................................................    $    18,040    $    89,200
    Accounts receivable (less allowance for doubtful accounts of $2,894 for 1999 and
       $3,907 for 1998)...............................................................         66,439         61,012
    Inventories.......................................................................         59,043         42,952
    Deferred income taxes.............................................................          4,533          2,269
    Other current assets..............................................................         16,441         12,619
                                                                                          -----------    -----------
         Total current assets.........................................................        164,496        208,052
 Notes receivable, net................................................................          1,383          1,239
 Property and equipment, net..........................................................        454,093        361,803
 Intangible assets....................................................................         28,792         21,141
 Deferred financing costs.............................................................          8,411          9,284
 Deferred income taxes................................................................          1,879          5,114
 Other assets.........................................................................            808          3,428
                                                                                          -----------    -----------
         Total assets.................................................................    $   659,862    $   610,061
                                                                                          ===========    ===========
                          LIABILITIES AND STOCKHOLDERS' EQUITY
 Current liabilities:
    Current maturities of long-term debt..............................................    $     1,601    $     1,594
    Accounts payable..................................................................         60,920         46,652
    Other accrued liabilities.........................................................         66,743         62,428
                                                                                          -----------    -----------
         Total current liabilities....................................................        129,264        110,674
 Commitments and contingencies (Note 18)
 Long-term debt (net of unamortized discount).........................................        404,369        390,865
 Deferred income taxes................................................................          1,639            937
 Other long-term liabilities..........................................................         16,615          9,162
                                                                                          -----------    -----------
                                                                                              551,887        511,638
 Mandatorily redeemable senior convertible participating preferred stock..............         79,739         69,974
 Other preferred stock, common stock and other stockholders' equity...................         53,000         43,547
 Retained (deficit)...................................................................        (24,764)       (15,098)
                                                                                          -----------    -----------
                                                                                               28,236         28,449
                                                                                          -----------    -----------
         Total liabilities and stockholders' equity...................................    $   659,862    $   610,061
                                                                                          ===========    ===========
</TABLE>

  The accompanying notes are an integral part of these consolidated financial
                                  statements.



                                       28
<PAGE>   30


                         TRAVELCENTERS OF AMERICA, INC.
        CONSOLIDATED STATEMENT OF INCOME AND RETAINED EARNINGS (DEFICIT)
<TABLE>
<CAPTION>

                                                                                     YEAR ENDED DECEMBER 31,
                                                                           --------------------------------------------
                                                                               1999           1998           1997
                                                                           -------------- -------------- --------------
                                                                                    (IN THOUSANDS OF DOLLARS
                                                                                    EXCEPT PER SHARE AMOUNTS)
<S>                                                                          <C>            <C>            <C>
 Revenues:
    Fuel...................................................................  $  955,105     $  554,735     $  708,637
    Nonfuel................................................................     479,059        347,531        293,843
    Rent and royalties.....................................................      20,460         21,544         36,848
                                                                             ----------     ----------     ----------
        Total revenues.....................................................   1,454,624        923,810      1,039,328
 Cost of revenues (excluding depreciation).................................   1,051,080        627,149        773,084
                                                                             ----------     ----------     ----------
 Gross profit (excluding depreciation).....................................     403,544        296,661        266,244
 Operating expenses........................................................     267,107        193,697        167,072
 Selling, general and administrative expenses..............................      38,461         34,256         35,619
 Transition expense........................................................       3,952          3,648         15,212
 Depreciation and amortization expense.....................................      53,202         44,662         35,840
 (Gain) loss on sales of property and equipment............................      (2,615)        (1,195)       (11,244)
 Stock compensation expense................................................       5,062          2,500          1,400
                                                                             ----------     ----------     ----------
 Income from operations....................................................      38,375         19,093         22,345
 Interest (expense), net...................................................     (37,194)       (25,371)       (22,898)
                                                                             ----------     ----------     ----------
 Income (loss) before income taxes and extraordinary item..................       1,181         (6,278)          (553)
 Provision (benefit) for income taxes......................................       1,082         (2,101)          (344)
                                                                             ----------     ----------     ----------
 Income (loss) before extraordinary item...................................          99         (4,177)          (209)
 Extraordinary loss, less applicable income tax benefits of $2,012 in 1998
    and $3,608 in 1997 (Note 12)...........................................           -         (3,905)        (5,554)
                                                                             ----------     ----------     ----------
 Net income (loss).........................................................          99         (8,082)        (5,763)
    Less: preferred dividends..............................................      (9,765)        (8,570)        (7,520)
 Retained earnings (deficit) - beginning of the year.......................     (15,098)         1,554         14,837
                                                                             ----------     ----------     ----------
 Retained earnings (deficit) - end of the year.............................  $  (24,764)    $  (15,098)    $    1,554
                                                                             ==========     ==========     ==========
 Loss per common share (basic and diluted):
    Loss before extraordinary item                                           $  (12.96)     $  (21.12)     $   (7.56)
    Extraordinary loss                                                            -             (6.47)         (5.44)
                                                                             ---------      ---------      ---------
    Net income (loss)                                                        $  (12.96)     $  (27.59)     $  (13.00)
                                                                             =========      =========      =========
</TABLE>


  The accompanying notes are an integral part of these consolidated financial
                                  statements.



                                       29
<PAGE>   31


                         TRAVELCENTERS OF AMERICA, INC.
                      CONSOLIDATED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>

                                                                                      YEAR ENDED DECEMBER 31,
                                                                          ------------------------------------------------
                                                                               1999            1998            1997
                                                                          --------------- --------------------------------
                                                                                     (IN THOUSANDS OF DOLLARS)
<S>                                                                         <C>             <C>             <C>
 CASH FLOWS FROM OPERATING ACTIVITIES:
    Net income (loss) ....................................................  $        99     $    (8,082)    $    (5,763)
    Adjustments to reconcile net income (loss) to net cash provided by
       operating activities:
       Extraordinary loss.................................................            -           3,905           5,554
       Depreciation and amortization......................................       53,202          44,662          35,840
       Deferred income tax provision......................................       (3,151)         (7,691)         (4,330)
       Provision for doubtful accounts....................................        1,339           1,355           1,688
       Provision for stock compensation...................................        5,062           2,500           1,400
       (Gain) on sales of property and equipment..........................       (2,615)         (1,195)        (11,244)
       Changes in assets and liabilities, adjusted for the effects of
         business acquisitions:
         Accounts receivable..............................................       (1,428)         12,034         (20,773)
         Inventories......................................................       (9,933)         (4,028)          1,422
         Other current assets.............................................         (400)         (2,954)            448
         Accounts payable.................................................        7,367          (2,030)          8,327
         Other current liabilities........................................       (7,780)         10,572          29,957
       Other, net.........................................................        2,950            (527)           (856)
                                                                            -----------     -----------     -----------
       Net cash provided by operating activities..........................       44,712          48,521          41,670
                                                                            -----------     -----------     -----------
 CASH FLOWS FROM INVESTING ACTIVITIES:
    Business acquisitions.................................................      (57,762)        (63,215)        (15,127)
    Proceeds from sales of property and equipment.........................        9,147           3,414          37,958
    Capital expenditures..................................................      (87,401)        (65,704)        (60,818)
                                                                            -----------     -----------     -----------
       Net cash used in investing activities..............................     (136,016)       (125,505)        (37,987)
                                                                            -----------     -----------     -----------
 CASH FLOWS FROM FINANCING ACTIVITIES:
    Revolving loan borrowings.............................................       75,500               -           3,750
    Revolving loan repayments.............................................      (60,500)              -         (17,750)
    Long-term debt borrowings.............................................            -         229,250         205,000
    Long-term debt repayments.............................................       (1,594)       (129,987)       (126,675)
    Proceeds from issuance of stock.......................................        6,738               -             329
    Repurchase of common stock............................................            -            (475)         (7,456)
    Debt issuance costs...................................................            -          (4,360)        (12,904)
                                                                            -----------     -----------     -----------
       Net cash provided by financing activities..........................       20,144          94,428          44,294
                                                                            -----------     -----------     -----------
         Net increase (decrease) in cash..................................      (71,160)         17,444          47,977
 Cash at the beginning of the year........................................       89,200          71,756          23,779
                                                                            -----------     -----------     -----------
 Cash at the end of the year..............................................  $    18,040     $    89,200     $    71,756
                                                                            ===========     ===========     ===========
</TABLE>

  The accompanying notes are an integral part of these consolidated financial
                                  statements.



                                       30
<PAGE>   32


                         TRAVELCENTERS OF AMERICA, INC.
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

1.       BUSINESS DESCRIPTION AND SUMMARY OF OPERATING STRUCTURE

         The Company is a nationwide marketer of truck and auto fuel and related
products and services through 158 full-service travel centers in 40 states,
primarily operating under the "TravelCenters of America" or "TA" trademarks. Of
the network locations at December 31, 1999, the Company owns or leases 147
locations, 29 of which are leased to independent lessee-franchisees
("Operators") of the Company ("Leased Sites"), and 118 of which are operated by
the Company ("Company-operated Sites"). Eleven locations are owned or leased and
operated by independent franchisees ("Franchisee-Owners") of the Company
("Franchisee-Owner Sites"). The Company purchases and resells diesel fuel,
gasoline and other travel center products and services to consumers, commercial
fleets, operators and independent franchisees; provides fleet credit card and
customer information services through its proprietary ACCESS billing system;
conducts centralized purchasing programs; creates promotional programs; and, as
a franchisor, assists the Operators and Franchisee-Owners in providing service
to commercial fleets and the motoring public.

         The Company was incorporated on December 2, 1992 as National/Auto
Truckstops Holdings Corporation. The Company's name was changed to TravelCenters
of America, Inc. in March 1997. In April 1993, the Company acquired (the
"National Acquisition") the truckstop network assets (the "National Network") of
a subsidiary of Unocal Corporation (together with its subsidiaries "Unocal") and
in December 1993 acquired (the "TA Acquisition") the truckstop network assets
(the "TA Network") of certain subsidiaries of The British Petroleum Company
p.l.c. (together with its subsidiaries "BP"). In December 1998 the Company
acquired (the "Burns Acquisition") the truckstop network assets (the "Burns
Network") of Burns Bros., Inc., and certain of its affiliates (collectively
"Burns"). In June 1999 the Company acquired (the "TPOA Acquisition") Travel
Ports of America, Inc. ("TPOA"), which operated a network of truck stops (the
"TPOA Network"). See Note 3 for disclosure regarding the Burns Acquisition and
the TPOA Acquisition.

2.       SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

USE OF ESTIMATES

         The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.

PRINCIPLES OF CONSOLIDATION


         The consolidated financial statements include the accounts of
TravelCenters of America, Inc. and its wholly owned subsidiaries, TA Operating
Corporation ("TA"), TA Franchise Systems Inc. ("TAFSI"), National
Auto/Truckstops, Inc. ("National"), and TA Licensing, Inc., ("TA Licensing,"
formerly known as Travel Port Systems, Inc.) and TA Travel, L.L.C., a wholly
owned subsidiary of TA. Intercompany accounts and transactions have been
eliminated.


REVENUE RECOGNITION


         Sales revenues and related costs are recognized at the time of delivery
of motor fuel to customers at either the terminal or the customer's facility for
wholesale fuel sales and at the time of final sale to consumers at the
Company-operated Sites for retail fuel and nonfuel sales.




                                       31
<PAGE>   33

                         TRAVELCENTERS OF AMERICA, INC.
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS


         Franchise and royalty revenues are recognized at the point such
revenues are earned, typically when collectible and when the Company has
fulfilled substantially all of its obligations under the related agreements.

INVENTORIES

         Inventories are stated at cost, which approximates market value, cost
being determined on the first in, first out basis for petroleum products and
principally as the weighted average costs for nonfuel merchandise.

PROPERTY AND EQUIPMENT


         Property and equipment are stated at cost. Depreciation is computed on
a straight-line basis over the following estimated useful lives of the assets:

<TABLE>
<CAPTION>

<S>                                                                           <C>
 Buildings and site improvements............................................        15  years
 Pumps and underground storage tanks........................................      5-10  years
 Machinery and equipment....................................................      3-10  years
 Furniture and fixtures.....................................................      5-10  years
</TABLE>

         Repair and maintenance costs are charged to expense as incurred, while
major renewals and betterments are capitalized. The cost and related accumulated
depreciation of property and equipment sold, replaced or otherwise disposed are
removed from the accounts. Any resulting gains or losses are recognized in
operations.

DEFERRED FINANCING COSTS AND INTANGIBLE ASSETS

         Deferred financing costs were recorded in conjunction with issuing
long-term debt and are being amortized on a basis approximating the interest
method over the lives of the related debt instruments, ranging from five to ten
years (see Note 12). The intangible assets are being amortized on a
straight-line basis over their estimated lives, principally the terms of the
related contractual agreements giving rise to them (see Note 9).

INTERNAL-USE SOFTWARE COSTS

         During the application development stage of an internal-use computer
software project, the Company capitalizes (i) the external direct costs of
materials and services consumed in developing or obtaining the internal-use
computer software, (ii) to the extent of time spent directly on the project,
payroll costs of employees directly associated with and who devote time to the
project, and (iii) related interest costs incurred. Internal and external costs
incurred in the preliminary project stage and post-implementation stage, such as
for exploring alternative technologies, vendor selection and maintenance, are
expensed as incurred, as are all training costs. The costs of significant
upgrades and enhancements that result in additional functionality are accounted
for in the same manner as similar costs for new software projects. The costs of
all other upgrades and enhancements are expensed as incurred.

IMPAIRMENT OF LONG-LIVED ASSETS

         In accordance with Statement of Financial Accounting Standards No.
(SFAS) 121, "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to Be Disposed Of," impairment charges are recognized when the
carrying values of long-lived assets to be held and used in the business exceed
the estimated undiscounted future cash flows of those assets, and when the
carrying values of long-lived assets to be disposed of exceed the estimated fair
value less cost to sell for those assets. Such impairment charges are recognized
in the period during which the circumstances surrounding an asset to be held and
used have changed such that the carrying value is no longer recoverable, or
during which a commitment to a plan to dispose of the asset is made. Such tests



                                       32
<PAGE>   34
                         TRAVELCENTERS OF AMERICA, INC.
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

are performed at the individual travel center level. In addition, intangible
assets are subjected to further evaluation in accordance with Accounting
Principles Board Opinion 17, "Intangible Assets," and impairment charges are
recognized when events and circumstances indicate the carrying value of the
intangible asset exceeds the future benefit of the asset. Impairment charges are
included in depreciation and amortization in the income statement.

CLASSIFICATION OF COSTS AND EXPENSES

         Cost of revenues represents the costs of fuels and other products sold,
including freight. Operating expenses consist primarily of labor, maintenance,
supplies, utilities, warehousing, purchasing and occupancy costs. Transition
expenses represent the nonrecurring costs incurred by the Company in integrating
the TA Network, the National Network, the Burns Network and the TPOA Network
into a single network under one management. See Note 4 for a discussion of the
Combination Plan under which the majority of these costs have been incurred.
Costs of advertising are expensed as incurred.

ENVIRONMENTAL REMEDIATION

         The Company provides for remediation costs and penalties when the
responsibility to remediate is probable and the amount of associated costs is
reasonably determinable. Generally, the timing of remediation accruals coincides
with completion of a feasibility study or the commitment to a formal plan of
action. If recoveries of remediation costs from third parties are probable, a
receivable is recorded. Accruals are not recorded for the costs of remediation
activities undertaken on behalf of the Company by Unocal and BP, at Unocal's and
BP's sole expense (see Note 18).

INCOME TAXES

         Deferred income tax assets and liabilities are established to reflect
the future tax consequences of differences between the tax bases and financial
statement bases of assets and liabilities.

CASH AND CASH EQUIVALENTS

         For purposes of the statement of cash flows, the Company considers all
highly liquid investments with an initial maturity of three months or less to be
cash equivalents.

CONCENTRATION OF CREDIT RISK

         The Company grants credit to its customers and may require letters of
credit or other collateral.

DERIVATIVE INSTRUMENTS


         On a limited basis, the Company engages in commodity risk management
activities within the normal course of its business as an end-user of derivative
instruments. These commodity-based instruments are used to manage exposure to
price fluctuations related to the anticipated purchase of diesel fuel and
gasoline. Changes in market value of derivative instruments are deferred and are
subsequently recognized in income in the same period as the underlying
transaction. Recorded deferred gains or losses are reflected within other
current assets or other current liabilities. At December 31, 1999 the amount of
open derivative contracts and the related fair market value and deferred gains
and losses were immaterial. At December 31, 1998 there were no open derivative
contracts.

         The Company uses interest rate swap agreements to reduce its exposure
to market risks from changes in interest rates by fixing interest rates on
variable rate debt and reducing certain exposures to interest rate fluctuation.
Amounts currently due to or from interest rate swap counterparties are recorded
in interest expense in the period in



                                       33
<PAGE>   35
                         TRAVELCENTERS OF AMERICA, INC.
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

which they accrue. At December 31, 1999, the Company was involved in interest
rate swap agreements with a notional principal amount of $160,250,000. Notional
amounts do not quantify risk or represent assets or liabilities of the Company,
but are used in the determination of cash settlements under the agreements. The
Company is exposed to credit losses from counterparty nonperformance, but does
not anticipate any loses from its agreements, all of which are with a major
financial institution.

FAIR VALUE OF FINANCIAL INSTRUMENTS

         The following methods and assumptions were used to estimate the fair
value of each class of financial instruments for which estimation is
practicable:

         Cash and short-term investments, accounts receivable and accounts
payable: The fair values of financial instruments classified as current assets
or liabilities approximate the carrying values due to the short-term maturity of
the instruments.

         Long-term debt: The fair value of the Company's fixed-rate indebtedness
that is publicly traded is estimated based on the quoted price for those notes.
The fair value of the Company's fixed-rate indebtedness that is not publicly
traded is estimated based on the current borrowing rates available to the
Company for financings with similar terms and maturities. The fair values of the
Company's variable-rate indebtedness approximates the carrying value of that
indebtedness. (See Note 12.)

         Interest Rate Swap Agreements: The fair value of the interest rate swap
agreements is based on bank-quoted market prices.

RECLASSIFICATIONS

         Certain reclassifications of prior years' data have been made to
conform with the current year presentation.

3.       ACQUISITIONS

         All business acquisitions have been accounted for under the purchase
method. The results of operations of the acquired businesses are included in the
consolidated financial statements from the respective dates of the acquisitions.

         TPOA Acquisition. Effective June 1, 1999, the Company consummated the
TPOA Acquisition by acquiring 100 percent of the common stock of TPOA at a price
of $4.30 per share. Under the terms of the related merger agreement and certain
ancillary agreements, the Company paid cash of approximately $27,760,000 for all
of TPOA's outstanding common shares and common stock equivalents except
approximately 653,000 common shares that were exchanged for 85,000 shares of the
Company's common stock. In addition, the Company paid cash of approximately
$31,007,000 to retire all of TPOA's indebtedness outstanding as of the merger
date. TPOA operated a network of 16 travel centers in seven states, primarily in
the northeastern U.S., and a single fuel terminal in Pennsylvania. Upon
consummation of the acquisition, TPOA was merged into TA.

         The total cost of the acquisition was $86,003,000. This was comprised
of cash paid to purchase the TPOA stock and repay the TPOA debt of $58,767,000,
the value of the 85,000 shares of the Company's common stock issued in exchange
for TPOA shares of $2,808,000, liabilities assumed of $22,124,000 and direct
costs of the acquisition of $2,304,000. The cost was allocated to the assets and
liabilities acquired on the basis of their estimated fair values at the
acquisition date, including $27,585,000 of assets other than the property and
equipment acquired. The excess of purchase price over the estimated fair values
of the net assets acquired, in the amount of $9,907,000, has been recorded as
goodwill and is being amortized on a straight-line basis over 15 years. The cash
portion of the


                                       34
<PAGE>   36
                         TRAVELCENTERS OF AMERICA, INC.
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS


TPOA Acquisition was initially funded with $30,000,000 of the restricted cash
provided by the 1998 Refinancing (see Note 12), $25,000,000 of borrowings under
the Company's revolving credit facility and other available cash.

         Burns Acquisition. On December 3, 1998, the Company completed the Burns
Acquisition, whereby the Company acquired from Burns the land, buildings,
equipment and inventories at 17 of the 19 sites comprising the Travel Stops
division of Burns, the equipment and inventories used in Burns' fuel wholesaling
and transportation businesses and certain accounts receivable related to the
acquired assets.

         The total cost of the assets acquired was $60,728,000, comprised of the
cash consideration paid to Burns of $56,240,000, liabilities assumed of
$3,920,000 and direct costs of the acquisition of $568,000. The cost was
allocated to the assets and liabilities acquired on the basis of their estimated
fair values at the acquisition date. The Burns Acquisition was funded with
borrowings under the Company's long-term bank term loan facility as part of the
1998 Refinancing.

         The following unaudited pro forma information presents the results of
operations of the Company as if the TPOA Acquisition and the Burns Acquisition
had each taken place on January 1, 1998.

<TABLE>
<CAPTION>
                                                                         YEAR ENDED DECEMBER 31,
                                                              -----------------------------------------------
                                                                       1999                    1998
                                                              ----------------------- -----------------------
                                                             (IN THOUSANDS OF DOLLARS EXCEPT PER SHARE AMOUNTS)
<S>                                                                <C>                     <C>
Total revenue.................................................     $   1,511,083           $   1,205,835
Gross profit..................................................     $     428,070           $     389,069
Income from operations........................................     $      42,281           $      30,259
Net income (loss).............................................     $       1,808           $     (2,152)
Loss per common share (basic and diluted).....................     $     (10.67)           $     (17.76)
</TABLE>

         These pro forma results of operations have been prepared for
comparative purposes only and do not purport to be indicative of the results of
operations that actually would have resulted had the acquisitions occurred on
January 1, 1998, or that may result in the future.

4.            COMBINATION PLAN AND TRANSITION EXPENSE

         In January 1997, the Company adopted a plan (the "Combination Plan") to
combine the operations of the Company's two networks. There are three primary
elements to the Combination Plan that have been implemented by the Company
throughout 1998 and 1999: (1) integrating the management of the TA and National
Networks, (2) converting the Existing Network sites to one Network, and (3)
rationalizing and further developing the Company's Network. These expenses
relate to, among other things, (i) employee separations, (ii) the costs to
convert National Network travel centers to Network travel centers, (iii) the
costs to dispose of travel centers or terminate lease or franchise agreements,
and (iv) the costs of integrating the management and operations of the Existing
Networks into the Network, including relocation, travel, training, and legal
expenses. In January 1997, certain of National's executive officers resigned and
related severance costs of approximately $774,000 were recognized. In May 1997,
management finalized its plans regarding the employee terminations and,
accordingly, the related expense of approximately $1,833,000 was recognized.


         The Company has also incurred transition expenses as a result of the
Burns Acquisition and the TPOA Acquisition, primarily related to converting the
acquired sites to Network travel centers. As a result of implementing the
Combination Plan and integrating the Burns Network and TPOA Network sites, for
the years ended December 31, 1999, 1998 and 1997, the Company incurred
approximately $3,952,000, $3,648,000 and $15,212,000, respectively, of expense,
included in transition expense in the Company's consolidated financial
statements.


                                       35
<PAGE>   37

                         TRAVELCENTERS OF AMERICA, INC.
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

5.       EARNINGS PER SHARE


         The computation of basic earnings per common share is based upon the
weighted-average number of shares of common stock outstanding. A reconciliation
of the income or loss and shares used in the computation follows:

<TABLE>
<CAPTION>
                                                                             FOR THE YEAR ENDED DECEMBER 31, 1999
                                                                        INCOME (LOSS)      SHARES          PER-SHARE
                                                                         (NUMERATOR)    (DENOMINATOR)       AMOUNT
                                                                       -------------------------------- ----------------
                                                                              (DOLLARS AND SHARES IN THOUSANDS)
<S>                                                                      <C>            <C>              <C>
         Net income....................................................  $         99
         Less:  Preferred stock dividends..............................        (9,765)
                                                                         ------------
         Basic EPS and Diluted EPS
              Income (loss) available to common stockholders...........  $     (9,666)            746     $   (12.96)
                                                                         ============    ============     ==========
</TABLE>
<TABLE>
<CAPTION>

                                                                             FOR THE YEAR ENDED DECEMBER 31, 1998
                                                                        INCOME (LOSS)      SHARES          PER-SHARE
                                                                         (NUMERATOR)    (DENOMINATOR)       AMOUNT
                                                                       -------------------------------- ----------------
                                                                              (DOLLARS AND SHARES IN THOUSANDS)
<S>                                                                      <C>             <C>              <C>
         Income (loss) before extraordinary item.......................  $     (4,177)
         Less:  Preferred stock dividends..............................        (8,570)
                                                                         ------------
         Basic EPS and Diluted EPS
              Income (loss) available to common stockholders...........  $    (12,747)            604     $   (21.12)
                                                                         ============    ============     ==========
</TABLE>
<TABLE>
<CAPTION>
                                                                           FOR THE YEAR ENDED DECEMBER 31, 1997
                                                                       INCOME (LOSS)      SHARES        PER-SHARE
                                                                        (NUMERATOR)   (DENOMINATOR)       AMOUNT
                                                                       ------------------------------ ---------------
                                                                             (DOLLARS AND SHARES IN THOUSANDS)
<S>                                                                       <C>            <C>           <C>
         Income (loss) before extraordinary item.......................   $     (209)
         Less:  Preferred stock dividends..............................       (7,520)
                                                                          ----------
         Basic EPS
              Income (loss) available to common stockholders...........   $   (7,729)         1,022      $    (7.56)
                                                                          ==========     ==========      ==========
</TABLE>


         The assumed conversion of stock options, warrants and convertible
series of preferred stock would have an anti-dilutive effect on earnings per
share for 1999, 1998 and 1997. Effective January 1, 2000, 175,000 options to
purchase common stock were granted to management and non-employee directors.




                                       36
<PAGE>   38

                         TRAVELCENTERS OF AMERICA, INC.
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

6.       INVENTORIES

         Inventories consist of the following:
<TABLE>
<CAPTION>
                                                                                       DECEMBER 31,
                                                                             -------------------------------
                                                                                   1999            1998
                                                                             --------------- ---------------
                                                                                 (IN THOUSANDS OF DOLLARS)
<S>                                                                             <C>             <C>
         Nonfuel merchandise.................................................   $   51,043      $   39,973
         Petroleum products..................................................        8,000           2,979
                                                                                ----------      ----------
              Total inventories..............................................   $   59,043      $   42,952
                                                                                ==========      ==========
</TABLE>

7.            NOTES RECEIVABLE

         The Company has notes receivable agreements with certain Operators and
Franchisee-Owners to finance on a long-term basis past due accounts receivable
owed by those customers and, in one case, to finance the purchase of the related
travel center site. Certain of these customers are related parties (see Note
17). The notes have terms ranging from six months to six years and principally
accrue interest at a variable rate of the prime lending rate plus 2 percent. The
Company also has notes receivable from management stockholders received as
partial consideration for purchases of common stock (see Note 15). These notes
have terms of nine years and accrue interest at fixed rates between 4.86 and 7.0
percent.


        Notes receivable consists of the following:
<TABLE>
<CAPTION>

                                                                                     DECEMBER 31,
                                                                             ------------------------------
                                                                                 1999            1998
                                                                             --------------  --------------
                                                                               (IN THOUSANDS OF DOLLARS)
<S>                                                                            <C>             <C>
        Principal amount of notes outstanding...............................   $   5,169       $   2,351
        Less: allowance for doubtful accounts...............................         586             280
                                                                               ---------       ---------
                                                                                   4,583           2,071
        Less: amounts due within one year...................................       3,200             832
                                                                               ---------       ---------
        Notes receivable, net...............................................   $   1,383       $   1,239
                                                                               =========       =========
</TABLE>

         The amount due within one year is included within other current assets
on the balance sheet.



                                       37
<PAGE>   39

                         TRAVELCENTERS OF AMERICA, INC.
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS


8.       PROPERTY AND EQUIPMENT

         Property and equipment consist of the following:
<TABLE>
<CAPTION>
                                                                                   DECEMBER 31,
                                                                       --------------------------------------
                                                                             1999                1998
                                                                       ------------------ -------------------
                                                                             (IN THOUSANDS OF DOLLARS)
<S>                                                                        <C>                <C>
         Land .............................................................$    61,091        $    57,997
         Buildings and improvements....................................        316,392            221,091
         Machinery, equipment and furniture............................        192,423            113,680
         Construction in progress......................................         38,220             80,586
                                                                           -----------        -----------
              Total cost...............................................        608,126            473,354
         Less: accumulated depreciation................................        154,033            111,551
                                                                           -----------        -----------
              Property and equipment, net..............................    $   454,093        $   361,803
                                                                           ===========        ===========
</TABLE>

         Pursuant to the Combination Plan, nine Company-operated Sites were
being held for sale as of December 31, 1997. Based on the Company's estimated
sales proceeds and costs of selling these sites, an impairment charge totalling
$559,000 was recognized in 1997 with respect to two of the sites. This
impairment charge is included in depreciation and amortization in the income
statement. As a result of revised estimates of probable sale proceeds, this
impairment reserve was reversed in the second quarter of 1998. During 1998, two
of these sites were sold, and condemnation proceeds were received for a portion
of a third site that was condemned by the state as part of a highway
construction project. The Company re-evaluated the remaining seven sites and
determined that it would no longer actively market for sale six of those sites.
The remaining site was sold during the fourth quarter of 1999. At December 31,
1999, the Company was holding for sale two sites that had been closed during
1999. The total carrying value of the two sites held for sale at December 31,
1999 was $1,535,000. As of December 31, 1999, the estimated net sales proceeds
of the two sites held for sale exceed the respective carrying values. During
1999, these two sites generated a loss from operations of $130,000.

         During the first quarter of 1998, the estimated useful lives of certain
machinery, equipment and furniture were revised downward from 10 years to five
years in order to conform National's estimated useful lives to those of TA. The
effect of this change in estimate resulted in reductions in income before
extraordinary items, net income and earnings per share of $9.5 million, $5.7
million and $9.08, respectively. This change resulted in these assets becoming
fully depreciated at March 31, 1998.



                                       38
<PAGE>   40

                         TRAVELCENTERS OF AMERICA, INC.
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS


9.       INTANGIBLE ASSETS

         Intangible assets consist of the following:
<TABLE>
<CAPTION>
                                                                                            DECEMBER 31,
                                                                                -------------------------------------
                                                                                      1999               1998
                                                                                ------------------ ------------------
                                                                                     (IN THOUSANDS OF DOLLARS)
<S>                                                                               <C>                <C>
         Noncompetition agreements..........................................      $     26,200       $     26,200
         Leasehold interest ................................................             1,724              1,724
         Trademarks.........................................................             2,713              2,313
         Goodwill...........................................................            28,310             16,631
                                                                                  ------------       ------------
              Total cost....................................................            58,947             46,868
         Less:  accumulated amortization....................................            30,155             25,727
                                                                                  ------------       ------------
              Intangible assets, net........................................      $     28,792       $     21,141
                                                                                  ============       ============
</TABLE>

         As part of the National and TA Acquisitions, the Company entered into
noncompetition agreements with Unocal and BP pursuant to which Unocal and BP
each agreed to refrain from re-entering the truckstop business for periods of
ten and seven years, respectively, from the acquisition dates. The intangible
assets related to these noncompetition agreements represent the present values
of the estimated cash flows the Company would lose due to competition resulting
from re-entry of Unocal or BP into the travel center market were they not
constrained from doing so. These intangible assets are being amortized over the
ten and seven year periods.

         Leasehold interest represents the value, obtained through the TA
Acquisition, of favorable lease provisions at one TA Network location, the lease
for which extended 11 1/2 years from the TA Acquisition. The leasehold interest
is being amortized over the 11 1/2 year period. Trademarks relates primarily to
the Company's purchase of the "Truckstops of America" and "Country Pride"
trademarks, service marks, trade names and commercial symbols. The trademarks
are being amortized over their estimated economic life of 15 years.


         Goodwill results from acquisitions of network assets, including the
TPOA Acquisition in 1999 and the acquisitions of the businesses and operating
assets related to Leased Sites in prior years, and represents the excess of
amounts paid to the related sellers over the fair values of the tangible assets
acquired. For the years ended December 31, 1999, 1998 and 1997, the Company
recorded acquired goodwill of $11,679,000, $9,283,000, and $6,354,000,
respectively. The goodwill recognized during 1999 includes both the excess
purchase price from the TPOA Acquisition (see Note 3) and $1,772,000 of goodwill
from prior acquisitions completed by TPOA prior to the TPOA Acquisition. This
goodwill is amortized on a straight-line basis over fifteen years. During the
fourth quarter of 1997, as a result of a review of the operations of the
acquired travel centers, an impairment charge of $6,941,000 was recorded with
respect to the goodwill. This charge is included in depreciation and
amortization in the income statement.




                                       39
<PAGE>   41

                         TRAVELCENTERS OF AMERICA, INC.
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS


10.      OTHER ACCRUED LIABILITIES

         Other accrued liabilities consist of the following:
<TABLE>
<CAPTION>

                                                                              DECEMBER 31,
                                                                  --------------------------------------
                                                                         1999               1998
                                                                  ------------------- ------------------
                                                                        (IN THOUSANDS OF DOLLARS)
<S>                                                                  <C>                 <C>
         Taxes payable, other than income taxes...................   $    18,265         $    14,422
         Accrued wages and benefits...............................        14,967              13,366
         Interest payable.........................................         5,096               4,852
         Other accrued liabilities................................        28,415              29,788
                                                                     -----------         -----------
         Total other accrued liabilities..........................   $    66,743         $    62,428
                                                                     ===========         ===========
</TABLE>

11.      REVOLVING LOAN

         The Company has available a revolving loan facility of $40,000,000 (see
Note 12). The interest rate for borrowings under this revolving loan facility is
based on either an alternate base rate (ABR) plus 1.75 percent or an adjusted
London Interbank Offered Rate (LIBOR) plus 2.75 percent. Commitment fees are
calculated as 1/2 of 1 percent of the daily average unused amount of the
revolving loan commitment. At December 31, 1999, there were outstanding
borrowings under this facility of $15,000,000, including $2,000,000 of swingline
loans. There were no borrowings outstanding under the revolving loan facility at
December 31, 1998. There were $1,529,000 of available borrowings reserved for
letters of credit at both December 31, 1999 and 1998. The revolving loan
facility matures in March 2004.

12.      LONG-TERM DEBT

         In March 1997 the Company completed a refinancing (the "1997
Refinancing"), whereby it refinanced the existing indebtedness of TA and
National with new borrowings by the Company. The Company issued $125,000,000
aggregate principal amount of 10 1/4% Senior Subordinated Notes due 2007,
entered into a Credit Agreement through which it obtained an $80,000,000 senior
secured term loan facility (the "Term Loan") and a $40,000,000 revolving credit
facility, redeemed all of the outstanding Subordinated Notes of TA and National,
respectively, and a portion of the Senior Notes of TA (the "TA Old Senior
Notes"), and, pursuant to a Senior Secured Note Exchange Agreement, exchanged
$85,500,000 aggregate principal amount of Senior Secured Notes ($35,500,000 of
Series I Senior Secured Notes and $50,000,000 of Series II Senior Secured Notes)
of the Company for the Senior Notes of National and the unredeemed TA Old Senior
Notes.

         In December 1998 the Company refinanced its indebtedness (the "1998
Refinancing") by increasing the Term Loan by $150,000,000. Of the total amount
borrowed, $50,000,000 was utilized to retire the Company's Series II Senior
Secured Notes and $42,000,000 was specified to prefund planned capital
expenditures and business acquisitions and required to be placed in a cash
collateral account until used for such expenditures. Provisions of the debt
agreements required the Company to use $30,000,000 of the cash collateral
account balance for a business acquisition, or to use the $30,000,000 to repay
indebtedness in the event that an acquisition was not completed by December 31,
1999. The Company utilized the $30,000,000 to partially fund the TPOA
Acquisition (see Note 3).



                                       40
<PAGE>   42

                         TRAVELCENTERS OF AMERICA, INC.
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

         Long-term debt consists of the following:
<TABLE>
<CAPTION>
                                                                                         DECEMBER 31,
                                                                                  ---------------------------

                                                        INTEREST      MATURITY         1999           1998
                                                      ------------  ------------  --------------  -----------
                                                                                  (IN THOUSANDS OF DOLLARS)
<S>                                                  <C>               <C>         <C>           <C>
         Term Loan (a)...............................     (b)          2005        $  227,442    $  228,889
         Revolving Credit Facility (a)...............     (c)          2004            15,000             -
         Series I Senior Secured Notes (d)...........    8.94%         2002            35,500        35,500
         Senior Subordinated Notes (e)...............   10.25%         2007           125,000       125,000
         Note payable (f)............................    5.0%          2018             4,771         4,919
                                                                                   ----------    ----------
                 Total...............................                                 407,713       394,308
         Less: amounts due within one year...........                                   1,601         1,594
         Less: unamortized discount..................                                   1,743         1,849
                                                                                   ----------    ----------
                 Total...............................                              $  404,369    $  390,865
                                                                                  -==========    ==========
</TABLE>

(a)  On March 21, 1997, in connection with the 1997 Refinancing, the Company
     entered into a Credit Agreement with a group of lenders. On November 24,
     1998, in connection with the 1998 Refinancing, the Company amended its
     Credit Agreement. The Credit Agreement consists of three components: Term
     Loans of a maximum $230,000,000 (increased from $80,000,000 in the 1998
     Refinancing), swingline loans not to exceed $5,000,000, and revolving loans
     (see Note 11) not to exceed $40,000,000 (including any swingline loans
     outstanding and letters of credit issued). Payments of principal, interest
     and commitment fees related to the Credit Agreement are scheduled quarterly
     in installments of principal ranging from $362,000 to $34,000,000, with the
     first payment under the amended agreement due on December 31, 1998, and the
     last quarterly payment due on March 27, 2005. Optional prepayments are
     allowed under the Credit Agreement and, in addition, annual prepayments of
     principal may be required based, among other things, on excess cash flows
     generated by the Company.


(b)  Interest accrues at variable rates based on either an ABR or an adjusted
     LIBOR. The rate at which interest accrues is calculated as either the ABR
     rate plus 2.75 percent or the LIBOR rate plus 3.75 percent. Management has
     the option to select which rate is to be applied at the beginning of each
     loan period, the term of which varies from one month to six months for
     LIBOR borrowings. The interest rate was set on December 3, 1999 at 9.875
     percent for six months. The average effective interest rate for 1999 was
     9.16 percent.


(c)  Interest accrues at variable rates based on either an ABR or an adjusted
     LIBOR. The rate at which interest accrues is calculated as either the ABR
     rate plus 1.75 percent or the LIBOR rate plus 2.75 percent. Management has
     the option to select which rate is to be applied at the beginning of each
     loan period, the term of which varies from one month to six months for
     LIBOR borrowings. The interest rate was set on December 2, 1999 at 9.25
     percent for one month for a $13,000,000 LIBOR borrowing and on December
     29,1999 at 10.25 percent for a $2,000,000 swingline facility ABR borrowing.
     The average effective interest rate for 1999 was 8.2 percent.

(d)  On March 21, 1997, in connection with the 1997 Refinancing, the Company
     issued $35,500,000 of Series I Senior Secured Notes. Interest payments on
     these notes are due semiannually on June 30 and December 31. Optional
     prepayments are allowed under the note purchase agreement, and required
     payments are due on June 30, 2001, December 31, 2001, June 30, 2002 and
     December 31, 2002 in the amount of $8,875,000 each, such amounts to be
     reduced by certain other prepayments. In the event of certain prepayments,
     the Company may be subject to the make-whole provision of the note
     agreement, which requires payment of a prepayment premium to the holders of
     the Series I Senior Secured Notes. In addition, annual prepayments of
     principal may be required based, among other things, on excess cash flows
     generated by the Company.


                                       41
<PAGE>   43
                         TRAVELCENTERS OF AMERICA, INC.
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(e)  On March 27, 1997, in connection with the 1997 Refinancing, the Company
     issued $125,000,000 of Senior Subordinated Notes. Interest payments on
     these notes are due semiannually on April 1 and October 1. Optional
     prepayments are allowed under certain circumstances under the note purchase
     agreement, any such payments reducing the required payment of $125,000,000
     due April 1, 2007.

(f)  On September 1, 1998, in connection with the purchase of the operating
     assets of a Leased Site, the Company issued a note payable to the former
     Operator of the site for $4,919,000. The note bears interest at 5% and
     requires quarterly payments of principal and interest of $98,000 thru
     October 1, 2018. The note was recorded net of a discount of $1,875,000.
     This note is secured by a mortgage interest in the related travel center.

         Debt Extinguishments and Issuance Costs. Upon the early extinguishment
of the Company's prior indebtedness as a result of the 1997 Refinancing, the
Company recognized an extraordinary loss, net of applicable income taxes, of
$5,554,000. This extraordinary loss consisted of the write-off of the remaining
unamortized balances of deferred financing costs and debt discount related to
the prior indebtedness of $7,847,000 and $1,315,000, respectively. Approximately
$12,904,000 of financing costs associated with the new indebtedness issued as
part of the 1997 Refinancing were capitalized. As part of the 1998 Refinancing,
the Company retired the Series II Senior Secured Notes and substantially
modified the Credit Agreement, resulting in the early extinguishment of the
outstanding balances of both the Series II Senior Secured Notes and the term
loan facilities of the Credit Agreement. Accordingly, the deferred financing
costs related to these borrowings were written off as an extraordinary loss, net
of applicable income taxes, of $3,905,000. Approximately $4,360,000 of financing
costs related to the Credit Agreement modification were incurred as part of the
1998 Refinancing.

         Pledged Assets. The borrowings under the Credit Agreement and Senior
Secured Note Exchange Agreement are secured by mortgages on substantially all of
the Company's property and equipment in the manner described in the Master
Collateral and Intercreditor Agreement negotiated between the lending banks
under the Credit Agreement and the Senior Secured Note holders. In the event of
a change in control (as defined in the relevant instruments) of the Company, the
total amount outstanding under the debt agreements described above may be
declared immediately due and payable.

         Debt Covenants. Under the terms of the Credit Agreement and the Senior
Secured Note Exchange Agreement, the Company is required to maintain certain
affirmative and negative covenants, including minimum interest coverage, minimum
consolidated net worth, minimum current ratio, maximum leverage ratio and
maximum amounts of capital expenditures. The Company was in compliance with the
covenants throughout 1999 and at December 31, 1999.

         Under the terms of the Indenture for the Senior Subordinated Notes due
2007, the Company is required to maintain certain affirmative and negative
covenants that, among other things, provide for a minimum coverage ratio. The
Company was in compliance with the covenants throughout 1999 and at December 31,
1999.

         Future Payments. Scheduled payments of long-term debt in the next five
years are $1,601,000 in 2000; $19,359,000 in 2001; $19,367,000 in 2002;
$65,628,000 in 2003 and $138,854,000 in 2004.


         Fair Value. Based on the borrowing rates currently available to the
Company for bank loans and other indebtedness with similar terms and average
maturities and the year-end quoted market price of the Senior Subordinated
Notes, the fair value of long-term debt at December 31, 1999 and 1998
approximated the recorded value. Based on bank-quoted market prices, the fair
value of the interest rate swap agreement the Company has in place as of
December 31, 1999 was a liability of $3,000,000. There were no such agreements
in place at December 31, 1998. These derivative instruments have no carrying
value.



                                       42
<PAGE>   44
                         TRAVELCENTERS OF AMERICA, INC.
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

13.      LEASE COMMITMENTS


         The Company has entered into lease agreements covering certain of its
travel center locations, warehouse and office space, computer and office
equipment and vehicles. Most long-term leases include renewal options and, in
certain cases, purchase options. Future minimum lease payments required under
operating leases that have remaining noncancelable lease terms in excess of one
year, as of December 31, 1999, were as follows:

<TABLE>
<CAPTION>

        YEAR ENDING
        DECEMBER 31,                                                            (IN THOUSANDS OF DOLLARS)
        ------------                                                            -------------------------
<S>                                                                                  <C>
        2000...................................................................         $    10,297
        2001...................................................................               9,752
        2002...................................................................               8,920
        2003...................................................................               7,497
        2004...................................................................               6,503
        Thereafter.............................................................              40,433
                                                                                        -----------
                                                                                        $    83,402

</TABLE>

         Total rental expenses on all operating leases were approximately
$9,576,000, $6,743,000, and $5,658,000 for the years ended December 31, 1999,
1998 and 1997, respectively.

14.      MANDATORILY REDEEMABLE SENIOR CONVERTIBLE PARTICIPATING PREFERRED STOCK

<TABLE>
<CAPTION>
                                                                                     DECEMBER 31,
                                                                            -------------------------------
                                                                                 1999            1998
                                                                            --------------- ---------------
                                                                              (IN THOUSANDS OF DOLLARS)
<S>                                                                          <C>              <C>
         Series I-3,000,000 shares authorized, $0.01 par value;
              2,680,656 shares issued and outstanding, shown at
              redemption value..............................................   $   59,129      $   51,888
         Series II-1,000,000 shares authorized, $0.01 par value;
              934,344 shares issued and outstanding, shown at
              redemption value..............................................       20,610          18,086
                                                                               ----------      ----------
                Total.......................................................   $   79,739      $   69,974
                                                                               ==========      ==========
</TABLE>

         Voting Rights. Holders of Series I Mandatorily Redeemable Senior
Convertible Preferred Stock are entitled to vote on all matters, other than the
election of directors (see Note 15-Common Stock-Voting Rights below), submitted
to a vote of the Company's stockholders. Series II Mandatorily Redeemable Senior
Convertible Preferred Stock is non-voting.

         Dividends. Dividends accumulate on the original $10.00 per share
purchase price at a rate of 13.5 percent per annum, compounded semi-annually,
and are not paid currently but accumulate and increase the liquidation
preference. Such dividends accrue whether or not declared by the Board of
Directors. Accrued dividends totaled $43,589,000 and $33,824,000 at December 31,
1999 and 1998, respectively. Holders also participate pro rata, on a share for
share basis, with the outstanding Convertible Preferred Stock and Common Stock,
in dividends and distributions, other than liquidating distributions.



                                       43
<PAGE>   45
                         TRAVELCENTERS OF AMERICA, INC.
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS


         Conversion. The conversion rights of the holders are the same as those
for holders of the Series I and Series II Convertible Preferred Stock,
respectively, (see Note 15-Convertible Preferred Stock-Conversion below) except,
if the Company consummates an underwritten public offering of Common Stock
pursuant to which the net offering price per share is equal to or greater than
the Trigger Price (defined as an amount equal to $10.00 plus interest at a rate
of 13.5 percent per annum, compounded semi-annually, from the closing date of
the TA Acquisition to the date of such public offering) and the net proceeds
raised in the offering are at least $50 million, the Company will have the right
to require that each share of Series I Mandatorily Redeemable Senior Convertible
Participating Preferred Stock be converted into one share of Series I
Convertible Preferred Stock and that each share of Series II Mandatorily
Redeemable Senior Convertible Participating Preferred Stock be converted into
one share of Series II Convertible Preferred Stock.

         Liquidation Preference. Upon liquidation, holders are entitled to
receive the Senior Liquidation Preference, defined as $10.00 plus the amount of
all accrued and unpaid dividends to the liquidation date, before any payment is
made to holders of Convertible Preferred Stock or Common Stock. Any remaining
amounts available for distribution to the Company's equity holders will be
distributed in the following order of priority:

         (i) holders of Convertible Preferred Stock shall be entitled to receive
$10.00 for each outstanding share,

         (ii) holders of Common Stock shall be entitled to receive $10.00 for
each outstanding share of Common Stock,

         (iii) holders of Convertible Preferred Stock and Common Stock shall be
entitled to receive an amount such that, including such amounts distributed in
(i) and (ii) above, they have each received an amount equal to the Senior
Liquidation Preference,

         (iv) holders of Mandatorily Redeemable Senior Convertible Participating
Preferred Stock, Convertible Preferred Stock and Common Stock shall be entitled
to receive amounts such that the amount distributed in respect of each
outstanding share of Mandatorily Redeemable Senior Convertible Participating
Preferred Stock pursuant to this clause shall equal 50 percent of the amount
distributed in respect of each outstanding share of Convertible Preferred Stock
and Common Stock pursuant to this clause.

         Optional Redemption. If the Company proposes to declare and pay any
dividends or other distributions in respect of Convertible Preferred Stock or
Common Stock, the Company shall first offer to utilize such proceeds to redeem
shares of the Mandatorily Redeemable Senior Convertible Participating Preferred
Stock at a redemption price per share equal to the Senior Liquidation
Preference. Any portion not used to redeem shares of Mandatorily Redeemable
Senior Convertible Participating Preferred Stock may be utilized by the Company
to pay dividends pari passu to the holders of outstanding shares of Mandatorily
Redeemable Senior Convertible Participating Preferred Stock, Convertible
Preferred Stock and Common Stock.

         Call Option. The Company may, at its option and at any time, call for
redemption all (but not less than all) of the outstanding shares at a price per
share equal to the Senior Liquidation Preference. The holders will be provided
an opportunity to convert such shares into shares of Common Stock prior to the
redemption.

         Mandatory Redemption. The Company shall redeem all of the then
outstanding shares on December 10, 2008, at a redemption price per share equal
to the Senior Liquidation Preference.



                                       44
<PAGE>   46

15.      OTHER PREFERRED STOCK, COMMON STOCK AND OTHER STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>

                                                                               DECEMBER 31,
                                                                       -----------------------------
                                                                           1999           1998
                                                                       -------------- --------------
                                                                        (IN THOUSANDS OF DOLLARS)
<S>                                                                     <C>             <C>
         Convertible Preferred Stock:
         Series I-3,000,000 shares authorized, $0.01 par value;
            2,594,876 shares outstanding...............................   $     26       $     26
         Series II-1,500,000 shares authorized, $0.01 par value;
            1,237,374 shares outstanding...............................         12             12
         Common Stock - 30,000,000 shares authorized, $0.01
            Par value;  881,059 and 599,877 shares outstanding at
            December 31, 1999 and 1998, respectively...................         17             14
         Additional paid-in capital                                         62,003         52,382
         Treasury stock-at cost; 827,700 and 817,700 shares at
            December 31, 1999 and 1998, respectively...................    (9,058)        (8,887)
                                                                          -------        -------
                 Total.................................................   $ 53,000       $ 43,547
                                                                          ========       ========
</TABLE>

         In April 1993, to partially fund the National Acquisition, the Company
issued 1,167,750 shares of Common Stock, and 3,832,250 shares of Convertible
Preferred Stock, which consists of 2,594,876 shares of Series I Convertible
Preferred Stock and 1,237,374 shares of Series II Convertible Preferred Stock.
In December 1993, to partially fund the TA Acquisition, the Company issued
165,520 shares of Common Stock and 3,615,000 shares of Mandatorily Redeemable
Senior Convertible Participating Preferred Stock, which consists of 2,680,656
shares of Series I Mandatorily Redeemable Senior Convertible Participating
Preferred Stock and 934,344 shares of Series II Mandatorily Redeemable Senior
Convertible Participating Preferred Stock (see Note 14).

         During the years ended December 31, 1999, 1998 and 1997 the Company
issued 6,182; 3,864 and 35,339, respectively, shares of Common Stock to certain
members of management for cash and notes receivable (see Note 17) aggregating
$154,000, $77,000 and $655,000, respectively.

         In June 1999, the Company issued 85,000 shares of Common Stock valued
at $2,808,000 in exchange for common shares of TPOA as part of the TPOA
Acquisition (see Note 3). In July 1999, the Company issued 200,000 shares of
Common Stock to Freightliner for cash consideration of $6,660,000 and also
issued to Freightliner an option to purchase an additional 100,000 shares at the
same price per share.

CONVERTIBLE PREFERRED STOCK

         Voting Rights. Each share of Series I Convertible Preferred Stock
entitles the holder to one vote on all matters submitted to a vote of the
Company's stockholders. Series II Convertible Preferred Stock is non-voting.

         Dividends. See Common Stock-Dividends below.

         Conversion. Each share of Series I Convertible Preferred Stock is
convertible into a share of Common Stock at any time at the option of the
holder.

         Each share of Series II Convertible Preferred Stock is convertible at
any time at the option of the holder into such number of shares of Common Stock
that in the aggregate do not exceed the lesser of (i) one share of Common Stock
for each share of Series II Convertible Preferred Stock converted or (ii) the
number that equals 25 percent of the outstanding shares of Common Stock
immediately following such conversion (a total of 293,686 at


                                       45
<PAGE>   47

                         TRAVELCENTERS OF AMERICA, INC.
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

December 31, 1999 for all Series II preferred shares). Following the conversion
of at least 75 percent of the outstanding Convertible Preferred Stock into
Common Stock, the Company is entitled to convert each remaining share of
Convertible Preferred Stock into a share of Common Stock.


         Liquidation Preference.  See Note 14 - Liquidation Preference above.

COMMON STOCK

         Voting Rights. Each share of Common Stock entitles the holder to one
vote on all matters submitted to a vote of the Company's stockholders.

         Dividends. Holders of Common Stock are entitled to receive dividends
if, and when, declared by the Board of Directors of the Company. The Company is
precluded from paying dividends or making distributions to the holders of any of
its equity securities while any shares of Convertible Preferred Stock or
Mandatorily Redeemable Senior Convertible Participating Preferred Stock are
outstanding except for dividends and distributions of capital stock of the
Company; unless (i) in any fiscal year the dividends and distributions do not
exceed 50 percent of the Company's net income for the prior fiscal year and (ii)
if immediately after payment of such dividends or the making of any such
distributions, the value of the Company's stockholder equity would exceed the
value of the aggregate liquidation preference of the outstanding shares of
Convertible Preferred Stock and Mandatorily Redeemable Senior Convertible
Participating Preferred Stock by at least one dollar.

         Liquidation Preference.  See Note 14 - Liquidation Preference above.

         Warrants. In April 1993 the Company issued warrants with an exercise
price of $0.01 per share which are exercisable for 128,206 shares of Common
Stock.

         Repurchase Rights. Certain members of the Company's senior management
have purchased shares of the Company's Common Stock pursuant to individual
management subscription agreements. The Company has the right to repurchase, and
the employees have the right to require the Company to repurchase, at formula
prices, the Common Stock upon termination of employment. The formula prices are
based on the consolidated operating results and indebtedness of the Company. At
December 31, 1999, 1998 and 1997, the formula prices were $33.30, $25.00 and
$23.25 per share, respectively. Compensation expense recognized with regard to
these shares during the years ended December 31, 1999, 1998 and 1997 was
$96,000, $62,000 and $54,000, respectively.

TREASURY STOCK

         From time to time the Company has acquired shares of its Common Stock
from former members of management and Operator Stockholders. For the years ended
December 31, 1999, 1998 and 1997, the Company purchased 10,000; 37,500 and
692,000 treasury shares, respectively. These shares were recorded at their
acquisition costs of $170,000, $475,000 and $7,456,000 for the years ended
December 31, 1999, 1998 and 1997, respectively.

STOCK AWARD AND OPTION PLANS

         1997 Stock Plan. During 1997, the Board of Directors approved the
adoption of the 1997 Stock Incentive Plan (the "1997 Stock Plan"). The principal
terms and conditions of the 1997 Stock Plan are as follows: a maximum of 750,000
shares of Common Stock (subject to adjustment) may be issued pursuant to options
and stock appreciation rights granted to officers, non-employee directors and
key employees of the Company designated by the Compensation Committee; the
option exercise price for each option granted will be the stated market value of
the stock on the respective grant date, such stated market value to be
determined annually based on a formula, specified in the 1997 Stock Plan, that
is, based on the consolidated operating results and indebtedness of the Company;
the


                                       46
<PAGE>   48

                         TRAVELCENTERS OF AMERICA, INC.
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

options will vest on the December 31 of the year of grant upon the attainment of
performance targets (outstanding options and options with respect to shares
reserved for future awards will vest upon a "change of control" or "initial
public offering" of the Company (as such terms are defined in the 1997 Stock
Plan)), and remain exercisable for limited periods following termination of
employment; shares of Common Stock acquired upon exercise of options are subject
to call and put options upon termination of employment; if a change of control
occurs within six months after termination of the employment of a former
employee for "good reason," death, "disability" or termination other than for
"cause" (as defined), an adjustment will be made to the amount paid upon
exercise of any call options or put options (but, in the case of put options,
only to the extent the proceeds received by the former employee upon exercise of
the put option are used to repay indebtedness to the Company) so that the former
employee will be able to receive any amounts in excess of the call or put price
payable in the change of control transaction.


         1993 Stock Plan. The 1993 Stock Incentive Plan (the "1993 Stock Plan")
was approved by the Board of Directors and was effective as of December 10,
1993. The 1993 Stock Plan provided for the granting of stock options and other
stock-based awards to employees and directors of the Company. Stock awards
granted under the 1993 Stock Plan could be in the form of (i) stock options,
(ii) stock appreciation rights related to an option ("SAR"), and (iii) unrelated
SAR's. Stock options granted under the 1993 Stock Plan allow the purchase of
Common Stock (formerly Class B Common Stock) at prices generally not less than
fair market value at the time of the grant as determined by the Compensation
Committee of the Board of Directors. The total number of shares of Common Stock
with respect to which awards could be granted was 572,000. Common stock obtained
as a result of the exercise of the options is subject to call and put rights at
formula prices upon termination of employment. The formula prices are based on
the consolidated operating results and indebtedness of the Company. A portion of
the options vested at the end of each year in the five year period ending
December 31, 1997, based on attainment of certain specified financial objectives
at the end of each year, but no more quickly than ratably from the date of grant
through December 31, 1996. Vested options must be exercised within 10 years of
the date of grant. All unvested options under the 1993 Plan at December 31, 1996
were cancelled upon the adoption of the 1997 Stock Plan.


         The purchase prices at December 31, 1999, 1998 and 1997 used to
determine compensation expense related to options granted under the Company's
stock plans were $33.30, $25.00 and $23.25, respectively. Based on these prices
and the number of vested options in each year, compensation expense recognized
in relation to these options for the years ended December 31, 1999, 1998 and
1997 were $4,966,000, $2,438,000 and $1,346,000, respectively.

         The following table reflects the status and activity of options under
the 1997 Stock Plan and the 1993 Stock Plan:
<TABLE>
<CAPTION>

                                                                     YEAR ENDED DECEMBER 31,
                                                   ------------------------------------------------------------
                                                        1999                  1998                  1997
                                                   ----------------      ----------------      ----------------
<S>                                                <C>                   <C>                   <C>
Options outstanding beginning of year..........           538,529               376,779               531,181
Granted........................................           238,751               161,750               161,750
Canceled.......................................                 -                     -              (316,152)
                                                      -----------           -----------           -----------

Options outstanding, end of year...............           777,280               538,529               376,779
                                                      ===========           ===========           ===========
Options exercisable, end of year...............           777,280               538,529               376,779
Options available for grant, end of year.......           187,749               426,500               588,250
</TABLE>

         The weighted-average exercise price was $25.00 and $23.25 for those
options granted during 1999 and 1998, respectively, and $21.35 and $19.74 for
all outstanding options as of December 31, 1999 and 1998, respectively. The
weighted-average exercise price of the options cancelled in 1997 and all
outstanding options as of December 31, 1996, was $19.04 The weighted-average
remaining contractual life of all options outstanding at December 31, 1999 was
6.9 years.


                                       47
<PAGE>   49

                         TRAVELCENTERS OF AMERICA, INC.
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

         The following table summarizes information about options outstanding at
December 31, 1999:
<TABLE>
<CAPTION>
         EXERCISE                                                           OPTIONS           OPTIONS
         PRICE                                                            OUTSTANDING       EXERCISABLE
         --------                                                      ------------------ -----------------
<S>                                                                      <C>               <C>
         $10.00........................................................        67,988            67,988
         $17.49........................................................        71,757            71,757
         $20.00........................................................       161,750           161,750
         $22.50........................................................        75,284            75,284
         $23.25........................................................       161,750           161,750
         $25.00........................................................       238,751           238,751
                                                                          -----------        ----------
                                                                              777,280           777,280
                                                                          ===========        ==========
</TABLE>


16.      INCOME TAXES

         The (benefit) provision for income taxes is as follows:
<TABLE>
<CAPTION>
                                                                         YEAR ENDED DECEMBER 31,
                                                              ----------------------------------------------
                                                                   1999           1998            1997
                                                              ------------------------------ ---------------

<S>                                                           <C>             <C>             <C>
         Current:
            Federal...........................................  $    3,335     $    4,089      $    3,524
            State.............................................         898          1,501             462
                                                                ----------     ----------      ----------
                                                                     4,233          5,590           3,986
                                                                ----------     ----------      ----------
         Deferred:
            Federal...........................................      (3,047)        (6,565)         (3,880)
            State.............................................        (104)        (1,126)           (450)
                                                                ----------     ----------      ----------
                                                                    (3,151)        (7,691)         (4,330)
                                                                ----------     ----------      ----------
                 Total........................................  $    1,082     $   (2,101)     $     (344)
                                                                ==========     ==========      ==========
</TABLE>

         The difference between taxes calculated at the U. S. federal statutory
tax rate of 35 percent and the Company's total income tax provision is as
follows:

<TABLE>
<CAPTION>
                                                                          YEAR ENDED DECEMBER 31,
                                                              ----------------------------------------------
                                                                   1999           1998            1997
                                                              ------------------------------ ---------------
                                                                        (IN THOUSANDS OF DOLLARS)
<S>                                                             <C>            <C>             <C>
         U.S. federal statutory rate applied to income before   $     413      $  (2,198)      $    (194)
            taxes and extraordinary items.....................
         State income taxes, net of federal income tax benefit        518            243               8
         Non-deductible meals and entertainment...............        336            129              65
         Non-deductible amortization..........................        140              -               -
         Benefit of tax credits...............................       (377)          (320)           (227)
         Other - net..........................................         52             45               4
                                                                ---------      ---------       ---------
                 Total........................................  $   1,082      $  (2,101)      $    (344)
                                                                =========      =========       =========
</TABLE>


                                       48
<PAGE>   50
                         TRAVELCENTERS OF AMERICA, INC.
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

         For 1998, income tax benefits of $2,012,000 allocated to the
extraordinary loss of $5,917,000 differ from the amount calculated at the
federal statutory rate of 35 percent by $59,000. This difference is due to
graduated tax rates. For 1997, income tax benefits of $3,608,000 allocated to
the extraordinary loss of $9,162,000 differ from the amount calculated at the
federal statutory rate of 35 percent by $401,000. This difference is the result
of state tax benefits, net of the federal effect and graduated tax rates.

         Deferred income tax assets and liabilities resulted from the following:
<TABLE>
<CAPTION>

                                                                                     DECEMBER 31,
                                                                            -------------------------------
                                                                                 1999            1998
                                                                            --------------- ---------------
                                                                              (IN THOUSANDS OF DOLLARS)
<S>                                                                         <C>              <C>
         Deferred tax assets:
            Accounts receivable.............................................  $    1,459      $    1,199
            Inventory.......................................................         566             299
            Intangible assets...............................................      11,421          11,511
            Deferred revenues...............................................       1,806             887
            Minimum tax credit..............................................       7,494           5,472
            General business credits (expiring 2009-2012)...................       2,140           1,561
            Other accrued liabilities.......................................       8,297           4,039
                                                                              ----------      ----------
                 Total deferred tax assets..................................      33,183          24,968
                                                                              ----------      ----------
         Deferred tax liabilities:
            Property and equipment..........................................     (28,410)        (18,522)
                                                                              ----------      ----------
                 Total deferred tax liabilities.............................     (28,410)        (18,522)
                                                                              ----------      ----------
                 Net deferred tax assets (liabilities)......................  $    4,773      $    6,446
                                                                              ==========      ==========
</TABLE>

         The tax returns of the Company for 1996 through 1999 are subject to
examination by the Internal Revenue Service and state tax authorities. The
Company believes it has made adequate provision for income taxes and interest
that may become payable for years not yet examined.

17.      RELATED PARTY TRANSACTIONS


         The Company leases one of its travel centers from a realty company
owned by two individuals, one of whom is a stockholder and director of the
Company. This lease relationship commenced during 1999 and total rent expense
related to this lease for the year ended December 31, 1999 was $263,000.

         During 1999 and 1998 certain shareholders of the Company were paid fees
aggregating $650,000 as consideration for their financial advisory services
provided in completing the Burns Acquisition, the 1998 Refinancing and the TPOA
Acquisition.

         Certain members of the Company's senior management have purchased
common stock of the Company pursuant to management subscription agreements (see
Note 15 - Repurchase Rights). As a result of such purchases, the Company has
notes and related interest receivable from the management stockholders totaling
$1,062,000 and $967,000 at December 31, 1999 and 1998, respectively.


                                       49
<PAGE>   51

                         TRAVELCENTERS OF AMERICA, INC.
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS


18.      COMMITMENTS AND CONTINGENCIES

ENVIRONMENTAL MATTERS

         The Company's operations and properties are subject to extensive
regulation pursuant to federal, state and local laws, regulations and ordinances
("Environmental Laws") that (i) govern activities and operations that may have
adverse environmental effects, such as discharges to air, soil and water, as
well as handling, storage and disposal practices for petroleum products and
other hazardous and toxic substances ("Hazardous Substances") or (ii) impose
liability and damages for the costs of cleaning up sites affected by, and for
damages resulting from, past spills and disposal or other releases of Hazardous
Substances.

         The Company owns and uses underground storage tanks ("USTs") and
aboveground storage tanks ("ASTs") at Company-operated Sites and Leased Sites to
store petroleum products and waste. These tanks must comply with requirements of
Environmental Laws regarding tank construction, integrity testing, leak
detection and monitoring, overfill and spill control, release reporting,
financial assurance and corrective action in case of a release from a UST or AST
into the environment. At certain locations, the Company also is subject to
Environmental Laws relating to vapor recovery and discharges to water. The
Company believes that all of its travel centers are in material compliance with
applicable requirements of Environmental Laws. While the costs of compliance for
these matters have not had a material adverse impact on the Company, it is
impossible to predict accurately the ultimate effect these changing laws and
regulations may have on the Company in the future. The Company incurred capital
expenditures, maintenance, remediation and other environmental related costs of
approximately $2,635,000, $6,721,000 and $8,867,000 in 1999, 1998 and 1997,
respectively.

         The Company has received notices of alleged violations of Environmental
Laws, or is aware of the need to undertake corrective actions to comply with
Environmental Laws, at Company-owned travel centers in a number of
jurisdictions. The Company does not expect that any financial penalties
associated with these alleged violations, instances of noncompliance, or
compliance costs incurred in connection therewith, will be material to the
Company's results of operation or financial condition. The Company is conducting
investigatory and/or remedial actions with respect to releases and/or spills of
Hazardous Substances. While the Company cannot precisely estimate the ultimate
costs it will incur in connection with the investigation and remediation of
these matters, based on its current knowledge, the Company does not expect that
the costs to be incurred for these matters, individually or in the aggregate,
will be material to the Company's results of operation or financial condition.
While the aforementioned matters are, to the best knowledge of the Company, the
only proceedings for which the Company is currently exposed to potential
liability (particularly given the Unocal and BP indemnities discussed below),
there can be no assurance that additional contamination does not exist at these
or additional Network properties, or that material liability will not be imposed
in the future. If additional environmental problems arise or are discovered, or
if additional environmental requirements are imposed by government agencies,
increased environmental compliance or remediation expenditures may be required,
which could have a material adverse effect on the Company.

         The Company has estimated the current ranges of remediation costs at
currently active sites and what it believes will be its ultimate share for such
costs after required indemnification and remediation is performed by Unocal and
BP under the environmental agreements and has a reserve of $7,125,000, for such
matters. While it is not possible to quantify with certainty the environmental
exposure, in the opinion of management, the potential liability, beyond that
considered in the reserve, for all environmental proceedings, based on
information known to date, will not have a material adverse effect on the
financial condition, results of operations or liquidity of the Company.

         Pursuant to an environmental agreement entered into with Unocal at the
time of the National Acquisition (the "Unocal Environmental Agreement"), Unocal
is responsible for all costs incurred for remediation of environmental
contamination (the remediation must achieve compliance with the Environmental
Laws in effect on


                                       50
<PAGE>   52

                         TRAVELCENTERS OF AMERICA, INC.
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

the date the remedial action is completed) and for otherwise
bringing the properties into compliance with Environmental Laws (as in effect at
the date of the National Acquisition) with respect to environmental
contamination or non-compliance identified in the Phase I or Phase II
environmental assessments conducted at each of the sites acquired from Unocal,
which environmental contamination or non-compliance existed on or prior to the
date of the National Acquisition. Under the terms of the Unocal Environmental
Agreement, Unocal also must indemnify the Company against any other
environmental liabilities that arise out of conditions at, or ownership or
operations of, the National Network prior to the date of the National
Acquisition. Pursuant to the Unocal Environmental Agreement, Unocal is obligated
to indemnify the Company for claims made before April 14, 2004. Except as
described above, Unocal does not have any responsibility for any environmental
liabilities arising out of the ownership or operations of the National Network
after the date of the National Acquisition. There can be no assurance that, if
additional environmental claims or liabilities were to arise under the Unocal
Environmental Agreement, Unocal would not dispute the Company's claims for
indemnification thereunder.

         An environmental agreement entered into with BP at the time of the TA
Acquisition (the "BP Environmental Agreement") provides that, with respect to
environmental contamination or non-compliance with Environmental Laws identified
in the Phase I or Phase II environmental assessments conducted at each of the
sites acquired from BP, BP is responsible for all costs incurred for remediation
of such environmental contamination (the remediation must achieve compliance
with the Environmental Laws in effect on the date the remedial action is
completed) and for otherwise bringing the properties into compliance with
Environmental Laws (as in effect at the date of the TA Acquisition). The BP
Environmental Agreement further provides that BP must indemnify the Company
against any other environmental liabilities that arise out of conditions at, or
ownership or operations of, the TA locations prior to the date of the TA
Acquisition. With respect to liabilities relating to the investigation and
remediation of environmental contamination, BP is obligated to indemnify the
Company for liabilities with respect to which claims are made before December
11, 2004. With respect to liabilities otherwise relating to non-compliance with
Environmental Laws (for example, equipment), BP is obligated to indemnify the
Company for liabilities with respect to which claims were made before December
11, 1996. Except as described above, BP does not have any responsibility for any
environmental liabilities arising out of the ownership or operations of the TA
Network after the date of the TA Acquisition. There can be no assurance that, if
additional environmental claims or liabilities were to arise under the BP
Environmental Agreement, BP would not dispute the Company's claims for
indemnification thereunder.

PENDING LITIGATION

         The Company is involved from time to time in various routine legal and
administrative proceedings and threatened legal and administrative proceedings
incidental to the ordinary course of its business. The Company is not involved
in any litigation, individually, or in the aggregate, which could have a
material adverse effect on the Company's business, financial condition, results
of operations or cash flows.

19.      OPERATING LEASE COMMITMENTS

         Thirty of the travel centers owned by the Company as of December 31,
1999, are leased to Operators under operating lease arrangements. Of these
Leased Sites, 22 are leased to Operator Stockholders (see Note 17). The lease
agreements offered to related parties are the same as those offered to unrelated
parties. These cancelable lease arrangements generally are for terms of five
years. Rent revenue from such operating lease arrangements totaled $13,023,000,
$14,271,000 and $29,433,000 for 1999, 1998 and 1997, respectively.



                                       51
<PAGE>   53


                         TRAVELCENTERS OF AMERICA, INC.
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS


20.      OTHER INFORMATION
<TABLE>
<CAPTION>

                                                                                     YEAR ENDED DECEMBER 31,
                                                                       ----------------------------------------------
                                                                            1999            1998           1997
                                                                       ----------------------------------------------
                                                                                 (IN THOUSANDS OF DOLLARS)
<S>                                                                      <C>             <C>            <C>
         Operating and Selling, general and administrative expenses
            include the following:
            Repairs and maintenance expenses...........................  $   11,008      $    9,223     $    8,528
            Advertising expenses.......................................  $   10,106      $    8,722     $    9,141
            Taxes other than payroll and income taxes..................  $    5,817      $    5,585     $    5,099
         Interest expense, net consists of the following:

            Interest expense...........................................  $  (38,944)     $  (28,285)    $  (26,418)
            Interest income............................................       1,750           2,914          3,520
                                                                         ----------      ----------     ----------
                                                                         $  (37,194)     $  (25,371)    $  (22,898)
                                                                         ==========      ==========     ==========

</TABLE>

21.      SUPPLEMENTAL CASH FLOW INFORMATION
<TABLE>
<CAPTION>


                                                                                  YEAR ENDED DECEMBER 31,
                                                                       ----------------------------------------------
                                                                            1999            1998           1997
                                                                       --------------- ---------------  -------------
                                                                                 (IN THOUSANDS OF DOLLARS)
<S>                                                                    <C>             <C>             <C>
         Cash paid during the year for:
            Interest................................................... $    36,951     $    27,804    $    24,611
            Income taxes (net of refunds).............................. $     3,386     $    (1,224)   $     3,445
         Inventory, property and equipment, and treasury
              stock received in liquidation of trade
              accounts and notes receivable                             $       170     $     1,068    $     5,023
         Note received from sale of property and equipment              $     2,650     $         -    $         -
</TABLE>

         In 1999, the Company issued $2,808,000 of Common Stock as part of the
consideration for the TPOA Acquisition. During 1998, the Company issued a note
payable for $3,044,000 (net of a discount of $1,875,000) in exchange for
property and goodwill acquired (see Note 12). Pursuant to the 1997 Refinancing,
the Company extinguished $85,500,000 of Senior Secured Notes through the
issuance of Series I Senior Secured Notes and Series II Senior Secured Notes of
an aggregate equal face amount (see Note 12).


22.      CONDENSED CONSOLIDATING FINANCIAL STATEMENT SCHEDULES

         The following schedules set forth the condensed consolidating balance
sheet schedules of the Company as of December 31, 1999 and 1998 and condensed
consolidating statement of income and retained earnings (deficit) schedules and
condensed consolidating statement of cash flows schedules of the Company for the
years ended December 31, 1999, 1998 and 1997. In the following schedules,
"Parent Company" refers to the unconsolidated balances of TravelCenters of
America, Inc., "Guarantor Subsidiaries" refers to the combined unconsolidated
balances of TA, National and TA Licensing, and "Nonguarantor Subsidiary" refers
to the balances of TAFSI. "Eliminations" represent the adjustments necessary to
(a) eliminate intercompany transactions and (b) eliminate the Company's
investments in its subsidiaries.

         The Guarantor Subsidiaries, (TA, National and TA Licensing), are
wholly-owned subsidiaries of the Company and have fully and unconditionally,
jointly and severally, guaranteed the Company's indebtedness. In the 10-K
filing, the Company has not presented separate financial statements and other
disclosures concerning the Guarantor Subsidiaries because management has
determined such information is not material to investors.



                                       52
<PAGE>   54


                         TRAVELCENTERS OF AMERICA, INC.
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

CONDENSED CONSOLIDATING BALANCE SHEET SCHEDULES:
<TABLE>
<CAPTION>

                                                                         DECEMBER 31, 1999
                                            -----------------------------------------------------------------------------
                                                PARENT       GUARANTOR      NONGUARANTOR
                                               COMPANY      SUBSIDIARIES     SUBSIDIARY    ELIMINATIONS    CONSOLIDATED
                                            ------------------------------ ------------------------------ ---------------
                                                                     (IN THOUSANDS OF DOLLARS)
<S>                                           <C>            <C>             <C>           <C>              <C>
 Current assets:
    Cash..................................    $        -     $   18,040      $        -    $         -      $   18,040
    Accounts receivable, net..............             -         66,331           1,095           (987)         66,439
    Inventories...........................             -         59,043               -              -          59,043
    Deferred income taxes.................             -          4,533               -              -           4,533
    Other current assets..................           278         16,239               -            (76)         16,441
                                              ----------     ----------      ----------    -----------      ----------
         Total current assets.............           278        164,186           1,095         (1,063)        164,496
 Notes receivable, net....................         1,062          2,099               -         (1,778)          1,383
 Property and equipment, net..............             -        454,093               -              -         454,093
 Intangible assets........................             -         28,792               -              -          28,792
 Deferred financing costs.................         8,411              -               -              -           8,411
 Deferred income taxes....................           880            999               -              -           1,879
 Other assets...........................               -          4,508               -         (3,700)            808
 Investment in subsidiaries...............       341,821              -               -       (341,821)              -
                                              ----------     ----------      ----------    -----------      ----------
         Total assets.....................    $  352,452     $  654,677      $    1,095    $  (348,362)     $  659,862
                                              ==========     ==========      ==========    ===========      ==========
 LIABILITIES AND STOCKHOLDERS' EQUITY
 Current liabilities:
    Current maturities of long-term debt..    $    1,446     $      155      $        -    $         -      $    1,601
    Accounts payable......................             -         60,660             260              -          60,920
    Other accrued liabilities.............         6,592         61,106             108         (1,063)         66,743
                                              ----------     ----------      ----------    -----------      ----------
         Total current liabilities........         8,038        121,921             368         (1,063)        129,264
 Long-term debt (net of unamortized
    discount).............................       401,495          4,652               -         (1,778)        404,369
 Deferred income taxes....................             -          1,639               -              -           1,639
 Intercompany advances....................      (166,311)       172,966          (6,655)             -               -
 Other liabilities........................             -        240,019               -       (223,404)         16,615
                                              ----------     ----------      ----------    -----------      ----------
         Total liabilities................       243,222        541,197          (6,287)      (226,245)        551,887
 Mandatorily redeemable senior convertible
    participating preferred stock.........        79,739              -               -              -          79,739
 Other preferred stock, common stock and
    other stockholders' equity............        54,255         88,539               -        (89,794)         53,000
 Retained earnings (deficit)..............       (24,764)        24,941           7,382        (32,323)        (24,764)
                                              ----------     ----------      ----------    -----------      ----------
                                                  29,491        113,480           7,382       (122,117)         28,236
                                              ----------     ----------      ----------    -----------      ----------
         Total liabilities and
            stockholders' equity..........    $  352,452     $  654,677      $    1,095    $  (348,362)     $  659,862
                                              ==========     ==========      ==========    ===========      ==========
</TABLE>





                                       53
<PAGE>   55

                         TRAVELCENTERS OF AMERICA, INC.
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

<TABLE>
<CAPTION>


                                                                         DECEMBER 31, 1998
                                            -----------------------------------------------------------------------------
                                                PARENT       GUARANTOR      NONGUARANTOR
                                               COMPANY      SUBSIDIARIES     SUBSIDIARY    ELIMINATIONS    CONSOLIDATED
                                              ----------     ----------      ----------    -----------      ----------
                                                                     (IN THOUSANDS OF DOLLARS)
<S>                                           <C>            <C>             <C>           <C>              <C>
 Current assets:
    Cash..................................    $   59,665     $   29,535      $        -    $         -      $   89,200
    Accounts receivable, net..............             -         60,176             836              -          61,012
    Inventories...........................             -         42,952               -              -          42,952
    Deferred income taxes.................             -          2,269               -              -           2,269
    Other current assets..................        98,323         29,210           7,860       (122,774)         12,619
                                              ----------     ----------      ----------    -----------      ----------
         Total current assets.............       157,988        164,142           8,696       (122,774)        208,052
 Notes receivable, net....................           967            272               -              -           1,239
 Property and equipment, net..............             -        361,803               -              -         361,803
 Intangible assets........................             -         21,141               -              -          21,141
 Deferred financing costs.................         9,284              -               -              -           9,284
 Deferred income taxes....................           879          4,235               -              -           5,114
 Other assets...........................             730          6,398               -         (3,700)          3,428
 Investment in subsidiaries...............       338,205              -               -       (338,205)              -
                                              ----------     ----------      ----------    -----------      ----------
         Total assets.....................    $  508,053     $  557,991      $    8,696    $  (464,679)     $  610,061
                                              ==========     ==========      ==========    ===========      ==========
 LIABILITIES AND STOCKHOLDERS' EQUITY
 Current liabilities:
    Current maturities of long-term debt..    $    1,446     $      148      $        -    $         -      $    1,594
    Accounts payable......................             -         46,645               7              -          46,652
    Other accrued liabilities.............        18,988        163,285           2,916       (122,761)         62,428
                                              ----------     ----------      ----------    -----------      ----------
         Total current liabilities........        20,434        210,078           2,923       (122,761)        110,674
 Long-term debt (net of unamortized
    discount).............................       387,942          2,923               -              -         390,865
 Deferred income taxes....................             -            937               -              -             937
 Other liabilities........................             -        232,566               -       (223,404)          9,162
                                              ----------     ----------      ----------    -----------      ----------
         Total liabilities................       408,376        446,504           2,923       (346,165)        511,638
 Mandatorily redeemable senior convertible
    participating preferred stock.........        69,974              -               -              -          69,974
 Other preferred stock, common stock and
    other stockholders' equity............        44,801         84,880               -        (86,134)         43,547
 Retained earnings........................       (15,098)        26,607           5,773        (32,380)        (15,098)
                                              ----------     ----------      ----------    -----------      ----------
                                                  29,703        111,487           5,773       (118,514)         28,449
                                              ----------     ----------      ----------    -----------      ----------
         Total liabilities and
            stockholders' equity..........    $  508,053     $  557,991      $    8,696    $  (464,679)     $  610,061
                                              ==========     ==========      ==========    ===========      ==========
</TABLE>




                                       54
<PAGE>   56

                         TRAVELCENTERS OF AMERICA, INC.
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

CONDENSED CONSOLIDATING STATEMENT OF INCOME AND RETAINED EARNINGS (DEFICIT)
SCHEDULES:


<TABLE>
<CAPTION>
                                                                     YEAR ENDED DECEMBER 31, 1999
                                            -------------------------------------------------------------------------------
                                               PARENT         GUARANTOR      ONGUARANTOR
                                               COMPANY       SUBSIDIARIES    NSUBSIDIARY    ELIMINATIONS    CONSOLIDATED
                                            -------------- -------------- ---------------- -------------- -----------------
                                                                      (IN THOUSANDS OF DOLLARS)
<S>                                           <C>            <C>              <C>            <C>            <C>
 Revenues:
    Fuel...................................   $        -     $   955,105      $        -     $        -     $    955,105
    Nonfuel................................            -         477,786           1,476           (203)         479,059
    Rent and royalties.....................            -          33,775           7,326        (20,641)          20,460
                                              ----------     -----------      ----------     ----------     ------------
    Total revenues.........................            -       1,466,666           8,802        (20,844)       1,454,624
 Cost of revenues (excluding depreciation).            -       1,051,080               -              -        1,051,080
                                              ----------       ---------      ----------     ----------     ------------
 Gross profit (excluding depreciation).....            -         415,586           8,802        (20,844)         403,544
 Operating expenses........................            -         287,267             481        (20,641)         267,107
 Selling, general and
     administrative expenses...............          806          32,099           5,759           (203)          38,461
 Transition expense........................            -           3,952               -              -            3,952
 Depreciation and amortization expense.....        1,349          51,853               -              -           53,202
 (Gain) loss on sale of property and
    equipment..............................            -          (2,615)              -              -           (2,615)
 Stock compensation expense................            -           5,062               -              -            5,062
                                              ----------     -----------      ----------     ----------     ------------
 Income (loss) from operations.............       (2,155)         37,968           2,562              -           38,375
 Interest expense, net.....................            -         (37,191)             (3)             -          (37,194)
 Equity income (loss)......................        1,318               -               -         (1,318)               -
                                              ----------     -----------      ----------     ----------     ------------
 (Loss) income before income taxes.........         (837)            777           2,559         (1,318)           1,181
 (Benefit) provision for income taxes......         (936)          1,068             950              -            1,082
                                              ----------     -----------      ----------     ----------     ------------
 Net (loss) income.........................           99            (291)          1,609         (1,318)              99
 Less: preferred dividends.................       (9,765)              -               -              -           (9,765)
 Less: intercompany dividends..............            -          (1,375)              -          1,375                -
 Retained earnings (deficit) - beginning of
    the year...............................      (15,098)         26,607           5,773        (32,380)         (15,098)
                                              ----------     -----------      ----------     ----------     ------------
 Retained earnings' (deficit)-end of the
    year                                      $  (24,764)    $    24,941      $    7,382     $  (32,323)    $    (24,764)
                                              ==========     ===========      ==========     ==========     ============
</TABLE>




                                       55
<PAGE>   57

                         TRAVELCENTERS OF AMERICA, INC.
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

<TABLE>
<CAPTION>

                                                                  YEAR ENDED DECEMBER 31, 1998
                                            -------------------------------------------------------------------------
                                               PARENT        GUARANTOR     NONGUARANTOR
                                               COMPANY     SUBSIDIARIES    SUBSIDIARY    ELIMINATIONS     CONSOLIDATED
                                              ----------     ----------     ----------   ------------     ------------
                                                                   (IN THOUSANDS OF DOLLARS)
<S>                                           <C>            <C>            <C>           <C>            <C>
 Revenues:
    Fuel...................................   $        -     $  554,735     $        -    $        -     $  554,735
    Nonfuel................................            -        346,504          1,257          (230)       347,531
    Rent and royalties.....................            -         32,949          6,875       (18,280)        21,544
                                              ----------     ----------     ----------    ----------     ----------
    Total revenues.........................            -        934,188          8,132       (18,510)       923,810
 Cost of revenues (excluding depreciation).            -        627,149              -             -        627,149
                                              ----------     ----------     ----------    ----------     ----------
 Gross profit (excluding depreciation).....            -        307,039          8,132       (18,510)       296,661
 Operating expenses........................          160        210,476          1,571       (18,510)       193,697
 Selling, general and
     administrative expense................          829         32,556            871             -         34,256
 Transition expense........................            -          3,648              -             -          3,648
 Depreciation and amortization expense.....        1,482         43,180              -             -         44,662
 (Gain) loss on sale of property and
    equipment..............................            -         (1,195)             -             -         (1,195)
 Stock compensation expense................            -          2,500              -             -          2,500
                                              ----------     ----------     ----------    ----------     ----------
 Income (loss) from operations.............       (2,471)        15,874          5,690             -         19,093
 Interest expense, net.....................            -        (25,368)            (3)            -        (25,371)
 Equity income (loss)......................       (2,155)             -              -         2,155              -
                                              ----------     ----------     ----------    ----------     ----------
 (Loss) income before income taxes and
      extraordinary items..................       (4,626)        (9,494)         5,687         2,155         (6,278)
 (Benefit) provision for income taxes......         (449)        (3,774)         2,122             -         (2,101)
                                              ----------     ----------     ----------    ----------     ----------
 (Loss) income before extraordinary item          (4,177)        (5,720)         3,565         2,155         (4,177)
 Extraordinary loss (less applicable income
    tax benefit)...........................       (3,905)             -              -             -         (3,905)
                                              ----------     ----------     ----------    ----------     ----------
 Net (loss) income.........................       (8,082)        (5,720)         3,565         2,155         (8,082)
 Less: preferred dividends.................       (8,570)             -              -             -         (8,570)
 Retained earnings (deficit) - beginning of
    the year...............................        1,554         32,327          2,208       (34,535)         1,554
                                              ----------     ----------     ----------    ----------     ----------
 Retained earnings (deficit) - end of the
    year                                      $  (15,098)    $   26,607     $    5,773    $  (32,380)    $  (15,098)
                                              ==========     ==========     ==========    ==========     ==========
</TABLE>




                                       56
<PAGE>   58

                         TRAVELCENTERS OF AMERICA, INC.
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

<TABLE>
<CAPTION>

                                                                   YEAR ENDED DECEMBER 31, 1997
                                             -------------------------------------------------------------------------
                                                PARENT        GUARANTOR    NONGUARANTOR
                                                COMPANY     SUBSIDIARIES    SUBSIDIARY    ELIMINATIONS     CONSOLIDATED
                                               ----------     ----------     ----------   ------------     ------------
                                                                    (IN THOUSANDS OF DOLLARS)
<S>                                            <C>            <C>            <C>            <C>            <C>
 Revenues:
    Fuel.....................................  $        -     $  715,852     $        -     $   (7,215)    $  708,637
    Nonfuel..................................           -        293,874              7            (38)       293,843
    Rent and royalties.......................           -         41,656          3,414         (8,222)        36,848
                                               ----------     ----------     ----------     ----------     ----------
    Total revenues...........................           -      1,051,382          3,421        (15,475)     1,039,328
 Cost of revenues (excluding depreciation)...           -        780,299             -          (7,215)       773,084
                                               ----------     ----------     ----------     ----------     ----------
 Gross profit (excluding depreciation)                  -        271,083          3,421         (8,260)       266,244
 Operating expenses..........................           -        175,088            244         (8,260)       167,072
 Selling, general and administrative expenses         814         33,934            871              -         35,619
 Transition expense..........................           -         14,961            251              -         15,212
 Depreciation and amortization expense.......       1,119         34,721              -              -         35,840
 (Gain) loss on sales of property and
    equipment................................           -        (11,244)             -              -        (11,244)
 Stock compensation expense..................           -          1,400              -              -          1,400
                                               ----------     ----------     ----------     ----------     ----------
 Income of subsidiary held for disposition...      (1,933)        22,223          2,055              -         22,345
                                                   (2,629)       (20,269)             -              -        (22,898)
 Income from operations......................      (5,153)             -              -          5,153              -
                                               ----------     ----------     ----------     ----------     ----------
 (Expense), net..............................      (9,715)         1,954          2,055          5,153           (553)
 Equity income (loss)........................      (3,952)           509            802          2,297           (344)
                                               ----------     ----------     ----------     ----------     ----------
 Income before provision for income taxes
    and extraordinary items..................      (5,763)         1,445          1,253          2,856           (209)
 (Benefit) Provision for income taxes........           -         (5,554)             -              -         (5,554)
                                               ----------     ----------     ----------     ----------     ----------
 Net (loss) income...........................      (5,763)        (4,109)         1,253          2,856         (5,763)
 Less: preferred dividends...................      (7,520)             -              -              -         (7,520)
 Retained earnings (deficit) - beginning of
    the year.................................      14,837         36,436            955        (37,391)        14,837
                                               ----------     ----------     ----------     ----------     ----------
 Retained earnings (deficit) - end of the
    year.....................................  $    1,554     $   32,327     $    2,208     $  (34,535)    $    1,554
                                               ==========     ==========     ==========     ==========     ==========
</TABLE>




                                       57
<PAGE>   59

                         TRAVELCENTERS OF AMERICA, INC.
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS SCHEDULES:
<TABLE>
<CAPTION>

                                                                   YEAR ENDED DECEMBER 31, 1999
                                           -------------------------------------------------------------------------
                                              PARENT        GUARANTOR     NONGUARANTOR
                                              COMPANY     SUBSIDIARIES    SUBSIDIARY     ELIMINATIONS    CONSOLIDATED
                                             ----------   ------------    ------------   ------------    ------------
                                                                  (IN THOUSANDS OF DOLLARS)
<S>                                          <C>            <C>            <C>           <C>            <C>
 CASH FLOWS (USED IN) PROVIDED BY
    OPERATING ACTIVITIES:                    $    6,780     $   37,932     $        -    $        -     $   44,712
                                             ----------     ----------     ----------    ----------     ----------
 CASH FLOWS FROM INVESTING ACTIVITIES:
    Business acquisitions.................            -        (57,762)             -             -        (57,762)
    Proceeds from sales of property and
       equipment..........................            -          9,147              -             -          9,147
    Capital expenditures..................            -        (87,401)             -             -        (87,401)
                                             ----------     ----------     ----------    ----------     ----------
       Net cash used in investing
         activities                                   -       (136,016)             -             -       (136,016)
                                             ----------     ----------     ----------    ----------     ----------
 CASH FLOWS FROM FINANCING ACTIVITIES:
    Revolving loan borrowings.............       75,500              -              -             -         75,500
    Revolving loan repayments.............      (60,500)             -              -             -        (60,500)
    Long-term debt repayments.............       (1,446)          (148)             -             -         (1,594)
    Proceeds from issuance of common
       stock............................          6,738              -              -             -          6,738
    Intercompany advances...............        (86,737)        86,737              -             -              -
                                             ----------     ----------     ----------    ----------     ----------
       Net cash (used in) provided by
         financing activities.............      (66,445)        86,589              -             -         20,144
                                             ----------     ----------     ----------    ----------     ----------
         Net increase/(decrease) in cash..      (59,665)       (11,495)             -             -        (71,160)
 Cash at the beginning of the year........       59,665         29,535              -             -         89,200
                                             ----------     ----------     ----------    ----------     ----------
 Cash at the end of the year..............   $        -     $   18,040     $        -    $        -     $   18,040
                                             ==========     ==========     ==========    ==========     ==========
</TABLE>



                                       58
<PAGE>   60

                         TRAVELCENTERS OF AMERICA, INC.
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS


<TABLE>
<CAPTION>
                                                                 YEAR ENDED DECEMBER 31, 1998
                                           ------------------------------------------------------------------------
                                              PARENT        GUARANTOR    NONGUARANTOR
                                              COMPANY     SUBSIDIARIES    SUBSIDIARY   ELIMINATIONS    CONSOLIDATED
                                           -------------- -------------- ------------  ------------    ------------
                                                                  (IN THOUSANDS OF DOLLARS)
<S>                                          <C>            <C>            <C>           <C>            <C>
 CASH FLOWS (USED IN) PROVIDED BY
    OPERATING ACTIVITIES:                    $   (2,396)    $   50,917     $        -    $        -     $   48,521
                                             ----------     ----------     ----------    ----------     ----------
 CASH FLOWS FROM INVESTING ACTIVITIES:
    Business acquisitions.................            -        (63,215)             -             -        (63,215)
    Proceeds from sales of property and
       equipment..........................            -          3,414              -             -          3,414
    Capital expenditures..................            -        (65,704)             -             -        (65,704)
                                             ----------     ----------     ----------    ----------     ----------
       Net cash used in investing
         activities.......................            -       (125,505)             -             -       (125,505)
                                             ----------     ----------     ----------    ----------     ----------
 CASH FLOWS FROM FINANCING ACTIVITIES:
    Long-term debt borrowings.............      229,250              -              -             -        229,250
    Long-term debt repayments.............     (129,987)             -              -             -       (129,987)
    Repurchase of common stock..........           (475)             -              -             -           (475)
    Debt issuance costs.................         (4,360)             -              -             -         (4,360)
    Intercompany advances...............        (91,959)        91,959              -             -              -
                                             ----------     ----------     ----------    ----------     ----------
       Net cash (used in) provided by
         financing activities.............        2,469         91,959              -             -         94,428
                                             ----------     ----------     ----------    ----------     ----------
         Net increase in cash.............           73         17,371              -             -         17,444
 Cash at the beginning of the year........       59,592         12,164              -             -         71,756
                                             ----------     ----------     ----------    ----------     ----------
 Cash at the end of the year..............   $   59,665     $   29,535     $        -    $        -     $   89,200
                                             ==========     ==========     ==========    ==========     ==========
</TABLE>




                                       59
<PAGE>   61

                         TRAVELCENTERS OF AMERICA, INC.
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

<TABLE>
<CAPTION>

                                                                 YEAR ENDED DECEMBER 31, 1997
                                           ------------------------------------------------------------------------
                                              PARENT        GUARANTOR     NONGUARANTOR
                                              COMPANY     SUBSIDIARIES    SUBSIDIARY   ELIMINATIONS    CONSOLIDATED
                                           -------------- -------------- ------------- -------------   ------------
                                                                  (IN THOUSANDS OF DOLLARS)
<S>                                          <C>            <C>            <C>           <C>            <C>
 CASH FLOWS (USED IN) PROVIDED BY
    OPERATING ACTIVITIES:                    $   13,898     $   27,772     $        -    $        -     $   41,670
                                             ----------     ----------     ----------    ----------     ----------
 CASH FLOWS FROM INVESTING ACTIVITIES:
    Business acquisitions.................            -        (15,127)             -             -        (15,127)
    Proceeds from sales of property and
       equipment..........................            -         37,958              -             -         37,958
    Capital expenditures..................            -        (60,818)             -             -        (60,818)
                                             ----------     -----------    ----------    ----------     ----------
       Net cash used in investing
         activities.......................            -        (37,987)             -             -        (37,987)
                                             ----------     ----------     ----------    ----------     ----------
 CASH FLOWS FROM FINANCING ACTIVITIES:
    Revolving loan borrowings.............            -          3,750              -             -          3,750
    Revolving loan repayments.............            -        (17,750)             -             -        (17,750)
    Long-term debt borrowings.............      205,000              -              -             -        205,000
    Long-term debt repayments.............         (375)      (126,300)             -             -       (126,675)
    Proceeds from issuance of stock.....            329              -              -             -            329
    Repurchase of common stock..........         (7,456)             -              -             -         (7,456)
    Debt issuance costs.................        (12,904)             -              -             -        (12,904)
    Intercompany advances...............       (138,900)       138,900              -             -              -
                                             ----------     ----------     ----------    ----------     ----------
       Net cash (used in) provided by
         financing activities.............       45,694         (1,400)             -             -         44,294
                                             ----------     ----------     ----------    ----------     ----------
         Net increase (decrease) in cash..       59,592        (11,615)             -             -         47,977
 Cash at the beginning of the year........            -         23,779              -             -         23,779
                                             ----------     ----------     ----------    ----------     ----------
 Cash at the end of the year..............   $   59,592     $   12,164     $        -    $        -     $   71,756
                                             ==========     ==========     ==========    ==========     ==========
</TABLE>







                                       60
<PAGE>   62



QUARTERLY FINANCIAL DATA - UNAUDITED

<TABLE>
<CAPTION>
                                                          FIRST          SECOND          THIRD           FOURTH
                                                         QUARTER        QUARTER         QUARTER        QUARTER(a)
                                                      -------------  -------------    ------------    -------------
                                                           (IN THOUSANDS OF DOLLARS EXCEPT PER SHARE AMOUNTS)
<S>                                                    <C>             <C>             <C>             <C>
1999 Data:
     Total Revenue                                     $   268,228     $   342,371     $   421,874     $   422,151
     Gross Profit                                      $    86,551     $   100,804     $   112,152     $   104,037
     Net income (loss)                                 $    (1,677)    $     1,790     $       106     $      (120)
     Income (loss) per common share
         (basic and diluted)                           $     (6.73)    $     (0.91)    $     (2.75)    $     (2.57)

1998 Data:
     Total Revenue                                     $   213,324     $   229,537     $   238,335     $   242,614
     Gross Profit                                      $    66,174     $    72,164     $    78,975     $    79,348
     Income (loss) before extraordinary item           $    (7,283)    $       678     $     2,387     $        41
     Net income (loss)                                 $    (7,283)    $       678     $     2,387     $    (3,864)
     Earnings per common share:
         Income (loss) before extraordinary item:
              Basic                                    $    (14.97)    $     (2.34)    $      0.29     $     (3.63)
              Diluted                                  $    (14.97)    $     (2.34)    $      0.05     $     (3.63)
         Net income (loss):
              Basic                                    $    (14.97)    $     (2.34)    $      0.29     $    (10.16)
              Diluted                                  $    (14.97)    $     (2.34)    $      0.05     $    (10.16)
</TABLE>


(a)  In the fourth quarter of 1998, the Company recognized an extraordinary
     loss, net of the applicable income tax benefit of $2,012,000, of $3,905,000
     with respect to the early extinguishment of indebtedness.

ITEM 9.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS

         Not applicable.



                                       61
<PAGE>   63


                                    PART III

ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

         Information concerning the directors and executive officers of the
Company required by this item is incorporated by reference to the material
appearing under the heading "Directors and Officers of the Registrant" in
Exhibit 99.1 to this Report.

ITEM 11.  EXECUTIVE COMPENSATION

         Information concerning executive compensation required by this item is
incorporated by reference to the material appearing under the heading "Executive
Compensation" in Exhibit 99.1 to this Report.

ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

         Information concerning security ownership of certain beneficial owners
and management of the Company required by this item is incorporated by reference
to the material appearing under the heading "Security Ownership of Certain
Beneficial Owners and Management" in Exhibit 99.1 to this Report.

ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

         Information concerning certain relationships and related transactions
required by this item is incorporated by reference to the material appearing
under the heading "Certain Relationships and Related Transactions" in Exhibit
99.1 to this Report.



                                       62
<PAGE>   64


                                     PART IV

ITEM 14.  EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K

A.       Documents filed as part of this report:

1.       Financial Statements

         Financial statements filed as part of this report are listed in the
         Index to Consolidated Financial Statements and Supplementary Data on
         page 26.

2.       Financial Statement Schedules

         All schedules are omitted because they are not applicable, not material
         or the required information is shown in the financial statements listed
         above.

3.       Exhibits

         Reference is made to the Exhibit Index set forth at page i of this
report.

B.       Reports on Form 8-K

         No reports on Form 8-K were filed during the fourth quarter of the year
ended December 31, 1999.



                                       63
<PAGE>   65


      SUPPLEMENTAL 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

         No annual report or proxy statement has been furnished to the
registrant's security holders. The registrant shall furnish to the Commission
for its information, at the time copies of such material are furnished to its
security holders, four copies of every proxy statement, form of proxy or other
proxy soliciting material sent to more than ten of the registrant's security
holders with respect to the registrant's annual meeting. The foregoing material
shall not be deemed to be "filed" with the Commission or otherwise subject to
the liabilities of Section 18 of the Act, except to the extent that the
registrant specifically incorporates it in this Form 10-K by reference.



                                       64
<PAGE>   66


                                   SIGNATURES

         Pursuant to the requirements of Section 13 or 15(d) 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.
<TABLE>
<CAPTION>
<S>                                                         <C>
                                                             TRAVELCENTERS OF AMERICA, INC.


                  March 30, 2000                             By:    /s/  James W. George
         --------------------------------------------               --------------------
                          (Date)                                  Name:  James W. George
                                                                  Title: Senior Vice President,
                                                                         Chief Financial Officer and Secretary
</TABLE>


         Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant and in the capacities on the date indicated.
<TABLE>
<CAPTION>


               Signature                                    Title                                  Date
               ---------                                    -----                                  ----
<S>                                     <C>                                               <C>
   /s/      Edwin P. Kuhn                President, Chief Executive Officer and               March 30, 2000
   ------------------------------        Director (Principal Executive Officer)
            Edwin P. Kuhn

   /s/     James W. George               Senior Vice President, Chief Financial               March 30, 2000
   ------------------------------        Officer and Secretary (Principal
           James W. George               Financial Officer and Principal
                                         Accounting Officer)

   /s/    Margaret M. Eisen              Director                                             March 30, 2000
   ------------------------------
          Margaret M. Eisen

   /s/ Robert B. Calhoun, Jr.            Chairman of the Board of Directors and               March 30, 2000
   ------------------------------        Director
       Robert B. Calhoun, Jr.

   /s/     Eugene P. Lynch               Director                                             March 30, 2000
   ------------------------------
           Eugene P. Lynch

   /s/   Louis J. Mischianti             Director                                             March 30, 2000
   ------------------------------
         Louis J. Mischianti

   /s/      Rolf H. Towe                 Director                                             March 30, 2000
   ------------------------------
            Rolf H. Towe

   /s/    Harrison T. Bubb               Director                                             March 30, 2000
   ------------------------------
          Harrison T. Bubb

   /s/   E. Philip Saunders              Director                                             March 30, 2000
   ------------------------------
         E. Philip Saunders

   /s/      James L. Hebe                Director                                             March 30, 2000
   ------------------------------
            James L. Hebe
</TABLE>




                                       65
<PAGE>   67



                                  EXHIBIT INDEX
<TABLE>
<CAPTION>

  Exhibit
  Number                                              Exhibit                                                      Page
---------     ------------------------------------------------------------------------------------------        ----------
<S>          <C>                                                                                                <C>
    2.1       Asset Purchase Agreement, dated October 17, 1998, between TA and Burns Bros. Inc.................    (f)

    2.2       Amendment to Asset Purchase Agreement, dated December 3, 1998, between TA and Burns
              Bros. Inc........................................................................................    (f)

    2.3       Agreement and Plan of Merger by and among the Company, TP Acquisition, Inc. and TPOA,
              dated as of February 26, 1999....................................................................    (e)

    2.4       Share Exchange Agreement by and among the Company and E. Philip Saunders, dated as of
              February 26, 1999................................................................................    (e)

    2.5       Voting Agreement, dated as of February 26, 1999, among the Company, TP Acquisition,
              Inc. and E. Philip Saunders and John M. Holohan..................................................    (e)

    3.1       Restated Certificate of Incorporation of the Company.............................................    (a)

    3.2       Certificate of Amendment to the Restated Certificate of Incorporation of the Company.............    (d)

    3.3       Restated Certificate of Incorporation of National Auto/Truckstops, Inc...........................    (b)

    3.4       Restated Certificate of Incorporation of TA Operating Corporation................................    (b)

    3.5       Second Amended and Restated By-laws of the Company...............................................    (b)

    3.6       Amended and Restated By-laws of National Auto/Truckstops, Inc....................................    (b)

    3.7       Amended and Restated By-laws of TA Operating Corporation.........................................    (b)

    4.1       Indenture, dated March 27, 1997, among the Company, TA, National and Fleet National
              Bank as Trustee..................................................................................    (a)

    4.2       Exchange and Registration Rights Agreement, dated March 27, 1997, among the Company,
              the TA Subsidiary, the National Subsidiary and Chase Securities, Inc.............................    (a)

    4.3       Form of Face of Initial Security (included in Exhibit 4.1 as Exhibit A)..........................    (a)

    4.4       Form of Face of Exchange Security (included in Exhibit 4.1 as Exhibit B).........................    (a)

    4.5       Supplemental Indenture, dated March 1, 1998, among the Company, TA, National, TA Travel
              and State Street Bank and Trust Company as Trustee...............................................    (b)

    4.6       Investment and Option Agreement dated July 21, 1999 between the Company and
              Freightliner Corporation.........................................................................    (g)

    4.7       Supplemental Indenture, dated as of January 12, 2000, among Travel Port Systems, Inc.
              (now known as LA Licensing), the Company and State Street Bank and Trust Company as
              Trustee..........................................................................................

    9.1       Voting Trust Agreement, dated April 14, 1993, among the Company, the Voting Trustee and
              the Operator Stockholders named therein..........................................................    (a)

</TABLE>



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<TABLE>
<CAPTION>

  Exhibit
  Number                                              Exhibit                                                      Page
---------     ------------------------------------------------------------------------------------------        ----------
<S>          <C>                                                                                                <C>

    9.2       Amendment No. 1 to Voting Trust Agreement, dated November 29, 1993, among the Company,
              the Voting Trustee and the Operator Stockholders.................................................     (a)

    9.3       Amendment No. 2 to Voting Trust Agreement, dated March 6, 1997, among the Company, the
              Voting Trustee and the Operator Stockholders.....................................................     (a)

   10.1       Amended and Restated Registration Agreement among the Company, National I, National II,
              National III, Clipper Truckstops, L.P., Clipper/Merchant, Olympus, Barclays Bank,
              Barclays, Mellon Bank, N.A. as Trustee for First Plaza, UBS, Phoenix  Insurance Company
              and Travelers dated as of December 10, 1993......................................................     (a)

   10.2*      1993 Stock Incentive Plan of the Company.........................................................     (a)

   10.3*      Form of the Company's 1993 Stock Incentive Plan--Nonqualified Stock Option
              Agreement--National Awards.......................................................................     (a)

   10.4*      Form of the Company's 1993 Stock Incentive Plan--Nonqualified Stock Option Agreement--TA
              Awards ..........................................................................................     (a)

   10.5       Credit Agreement, dated as of March 21, 1997, as amended and restated as of
              November 24, 1998, among the Company, the Chase Manhattan Bank as agent, fronting bank
              and swingline lender and the Lenders party thereto...............................................     (f)

   10.6       Senior Note Exchange Agreement as of March 21, 1997, among the Company,  TA, National
              and the Noteholders listed on Schedule 1 thereto.................................................     (a)

   10.7       Amendment and Waiver Agreement dated as of March 1, 1998, amending the Senior Note
              Exchange Agreement, dated March 21, 1997.........................................................     (b)

   10.8       Supplemental Agreement, dated as of November 24, 1998, amending the Senior Secured Note
              Exchange Agreement dated as of March 21, 1997 (as amended).......................................     (f)

   10.9       Stockholders' Agreement, dated as of March 6, 1996, among the Company, the voting trust
              certificate holders named therein, the Voting Trustee, the management stockholders of
              the Company named therein, the additional stockholders named therein, Clipper, National
              I, National II, National III and Clipper/Merchant...............................................      (a)

   10.10*     Form of Executive Employment Agreement...........................................................     (b)

   10.11*     Schedule of Executive Employment Agreements omitted pursuant to Instruction 2 to Item
              601 of Regulation S-K............................................................................     (b)

   10.12*     1997 Stock Incentive Plan of the Company.........................................................     (c)

   10.13*     Form of Company's 1997 Stock Incentive Plan - Nonqualified Stock Option Agreement................     (b)

   10.14*     Form of Management Subscription Agreement........................................................     (b)

   10.15*     Schedule of Management Subscription Agreements omitted pursuant to Instruction 2 to
              Item 601 of Regulation S-K.......................................................................     (f)

   10.16*     Form of Note.....................................................................................     (f)

</TABLE>



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<TABLE>
<CAPTION>

  Exhibit
  Number                                              Exhibit                                                      Page
---------     ------------------------------------------------------------------------------------------        ----------
<S>          <C>                                                                                                <C>

   10.17*     Schedule of Notes omitted pursuant to Instruction 2 to Item 601 of Regulation S-K................    (f)

   10.18      Operating Agreement of Freightliner Corporation and the Company, dated July 21, 1999.............    (g)

   10.19      Agreement for Lease, dated as of September 9, 1999, among TA, National and TCA Network
              Funding, LP......................................................................................    (g)

   10.20      Lease Agreement, dated as of September 9, 1999, among TA, National and TCA Network
              Funding, LP......................................................................................    (g)

   10.21      Institutional Stockholders' Agreement, dated as of July 21, 1999, among the Company and
              the stockholders named therein, Clipper, National,  National III, Clipper/Merchant,
              Olympus, Olympus II and Freightliner.............................................................

   21         List of Subsidiaries of the Company..............................................................

   27.1       Financial Data Schedule..........................................................................

   99.1       Information Required by Part III of Form 10-K....................................................

</TABLE>


(a)      Incorporated herein by reference to exhibits filed with the Company's
         Registration Statement on Form S-4 (File No. 333-26497) effective July
         17, 1997.

(b)      Incorporated by reference to exhibits filed with the Company's Annual
         Report on Form 10-K for the year ended December 31, 1997.

(c)      Incorporated herein by reference to an exhibit filed with the Company's
         Quarterly Report on Form 10-Q for the quarter ended September 30, 1997.

(d)      Incorporated herein by reference to an exhibit filed with the Company's
         Quarterly Report on Form 10-Q for the quarter ended June 30, 1998.

(e)      Incorporated herein by reference to exhibits filed with the Company's
         Schedule 13D dated as of February 26, 1999.

(f)      Incorporated herein by reference to exhibits filed with the Company's
         Annual Report on Form 10-K for the year ended December 31, 1998.


(g)      Incorporated herein by reference to exhibits filed with the Company's
         Quarterly Report on Form 10-Q for the quarter ended September 30, 1999.


*        Executive compensation plans.