<PAGE>

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                                 UNITED STATES
                      SECURITIES AND EXCHANGE COMMISSION
                            Washington, D.C. 20549
                            -----------------------
                                   FORM 10-K

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

                     For the year ended December 31, 1999


                       Commission file number 333-87371

                     PETRO STOPPING CENTERS HOLDINGS, L.P.
          (Exact name of each registrant as specified in its charter)

               Delaware                                    74-2922482
   (State or other jurisdiction of                      (I.R.S. employer
    incorporation or organization)                    identification No.)


          6080 Surety Drive
           El Paso, Texas                                     79905
   (Address of principal executive offices)                 (zip code)


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

                          __________________________

       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.   Yes  X    No ___
                 ---

     State the aggregate market value of the voting stock and non-voting common
equity held by non-affiliates of the registrant.
                                Not Applicable

DOCUMENTS INCORPORATED BY REFERENCE:  Portions of Item 14 of Part IV are
incorporated by reference to: Petro Stopping Centers, L.P.'s Registration
Statement No. 33-76154, filed on April 26, 1994; Petro Stopping Centers, L.P.'s
Annual Report on Form 10-K for the fiscal year ended December 31, 1996, filed on
April 14, 1997; Petro Stopping Centers, L.P.'s Annual Report on Form 10-K for
the fiscal year ended December 31, 1997, filed on March 30, 1998; Petro Stopping
Centers, L.P.'s Quarterly Report on Form 10-Q for the quarter ended March 31,
1998, filed on May 15, 1998; Petro Stopping Centers, L.P.'s Annual Report on
Form 10-K for the fiscal year ended December 31, 1998, filed on March 31, 1999;
Petro Stopping Centers, L.P.'s Quarterly Report on Form 10-Q for the quarter
ended March 31, 1999, filed on May 14, 1999; Petro Stopping Centers, L.P.'s
Current Report on Form 8-K filed on August 6, 1999; and Petro Stopping Centers
Holdings, L.P.'s Registration Statement (Registration No. 333-87371).

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                                    PART I

Item 1.   Business

General

     We are a nationwide operator of large, multi-service truck stops with a
network of 53 facilities known as Petro Stopping Centers ("Stopping Centers"),
located in 30 states. Our business was founded by J.A. Cardwell Sr., who opened
the first truck stop in El Paso, Texas in 1975. We have built our reputation by
providing the "quality difference," which we believe to be a high level of
customer service and quality products delivered in a consistently clean and
friendly environment. Each Stopping Center offers a broad range of products,
services and amenities, including diesel fuel, gasoline, home-style restaurants
("Iron Skillet"), truck preventive maintenance centers ("Petro:Lubes") and
travel and convenience stores to commercial truck drivers, other highway
motorists and local residents. Of the 53 Stopping Centers, 23 are operated by
franchisees who are required to meet our high standards of quality and service.

     Our primary customers are commercial trucking fleets and professional truck
drivers that comprise the long-haul sector of the trucking industry. We sell
diesel fuel to approximately 9,000 trucking accounts.

     Our facilities are designed to offer a number of benefits to truck fleet
operators and drivers. These benefits generally include well-lit and fenced
parking lots to enhance security for drivers, trucks and freight; spacious
parking areas and traffic flow patterns designed to reduce accidents; and fewer
stops and out-of-route miles through the use of our one-stop, multi-service
facilities. As trucking fleets consolidate and outsource their fueling as well
as maintenance requirements, we expect that our facilities will experience
growth in diesel fuel volume and preventive maintenance revenues.

Recapitalization

     On July 23, 1999, Petro Stopping Centers, L.P. ("the Operating
Partnership"), certain of its partners and an affiliate of Volvo Trucks North
America, Inc. ("Volvo") consummated a transaction pursuant to which Petro
Stopping Centers Holdings, L.P. ("Holdings") was formed as a Delaware limited
partnership, and substantially all of the owners in the Operating Partnership at
that time (other than Petro Holdings G.P. Corp. and Petro Holdings L.P. Corp.,
each of which were affiliates of Chartwell Investments, Inc. (collectively,
"Chartwell") and Kirschner Investments, a company franchisee), including Petro,
Inc. (together with J.A. Cardwell Sr., James A. Cardwell Jr., and JAJCO II, Inc.
("JAJCO"), collectively, the "Cardwell Group"), exchanged their interests in the
Operating Partnership for identical interests in Holdings and became owners in
Holdings. Petro Holdings Financial Corporation was formed for the purpose of
serving as co-issuer of 15.0% new senior discount notes. Petro Holdings
Financial Corporation, the Operating Partnership and its subsidiary, Petro
Financial Corporation, became our subsidiaries. Petro Warrant Holdings
Corporation ("Warrant Holdings") was formed for the purpose of owning a common
limited partnership interest in Holdings and issuing the warrants that are
exchangeable into all of the common stock of Warrant Holdings. In addition,
Volvo Petro Holdings L.L.C. ("Volvo Trucks"), the affiliate of Volvo, invested
$30.0 million to acquire a 28.7% limited common partnership interest while Mobil
Long Haul, Inc., an affiliate of Mobil Oil Corporation, invested an additional
$5.0 million in Class B convertible preferred partnership interests. We
purchased 50.8% of common interest in the Operating Partnership owned by
affiliates of Chartwell for aggregate consideration of approximately $69.8
million, which consisted of a $55.0 million cash payment and the issuance to
Chartwell of approximately $14.8 million in accreted value ($11.2 million net of
an imputed market rate of interest discount) of 15.0% new senior discount notes
due 2008, without warrants. We also purchased the 2.0% of common interests in
the Operating Partnership owned by Kirschner for cash consideration of $2.8
million. The foregoing is referred to as the "Recapitalization." We accounted
for the acquisition of Chartwell's and Kirschner's interests under the purchase
method during the third quarter of 1999.

     As part of the Recapitalization, we issued 82,707 units each consisting of
$1,000 principal amount at stated maturity of our 15.0% senior discount notes
due 2008 and 82,707 exchangeable Warrant Holdings' warrants. As consideration
for issuance of the units, we received $40.0 million cash of which

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$30.3 million was allocated to the senior discount notes and $9.7 million was
allocated to the warrants. We had acquired the warrants from Warrant Holdings
for $9.7 million. Warrant Holdings, in turn, invested the $9.7 million to
acquire a 10.0% common limited partnership interest in us. The amount allocated
to the warrants is based on Warrants Holdings' 10.0% common limited partnership
interest and on our common equity value, net of an estimate of Recapitalization
costs not borne by Warrant Holdings, established in conjunction with the
admission of Volvo Trucks and the purchase of Chartwell's and Kirschner's
interests in the Operating Partnership. Upon an exchange event, such as a change
in control, IPO, a bankruptcy filing, the warrants will be exchanged, for no
additional consideration, for 100% of the common stock of Petro Warrant Holdings
Corporation, whose sole asset currently is approximately 10.0% of the common
limited partnership interests in us. Prior to August 1, 2002, we have the right
to repurchase the warrants at a price per warrant initially equal to $134.87 and
increasing to $155.87 on August 1, 2000 and $178.37 on August 1, 2001. If the
warrants have not been exchanged by August 1, 2004, we will be obligated to
repurchase the warrants at fair market value. As a result of the contingent
repurchase obligation, the warrants have been recorded outside partners' deficit
as contingently redeemable warrants in the audited consolidated balance sheets
included herein. Future changes (determined each balance sheet date in a manner
consistent with the determination of market price of partnership interests
described in Note 12 in our audited consolidated financial statements included
herein), if any, in the value of the warrants will be charged directly to
partners' capital (deficit).

     As a result of the Recapitalization, we own approximately 99.5% of the
common interests of the Operating Partnership. Our common limited partnership
interests are owned by the Cardwell Group (approximately 51.6%), Volvo Trucks
(approximately 28.7%), Mobil Long Haul (approximately 9.7%) and Warrant Holdings
(approximately 10.0%) and our mandatorily redeemable preferred partnership
interests are owned by Mobil Long Haul ($17.0 million) and the Cardwell Group
($7.6 million). Petro, Inc. and another affiliate of the Cardwell Group own the
remaining 0.5% of the Operating Partnership. Generally accepted accounting
principles require negative capital accounts of minority partners in
consolidated subsidiaries to be recorded in partners' capital (deficit).

     Our formation (whereby certain of the Operating Partnership's partners
exchanged their interests in the Operating Partnership for identical interests
in us) was recorded at predecessor basis and has been reflected in the
accompanying consolidated financial statements in a manner similar to a pooling-
of-interests. Accordingly, the accompanying consolidated financial statements
reflect the historical amounts and results of operations of our consolidated
subsidiaries as if the exchange referred to above had occurred on the first day
of the first period presented.

     The Operating Partnership also amended its senior collateralized credit
facility as part of the Recapitalization. The new senior credit facility
consists of an $85.0 million revolving credit facility and a $40.0 million term
loan B. The proceeds of the new term loan B were used to repay principal amounts
due under the term A and B loans and the expansion facility of the previous
senior credit facility of approximately $38.1 million, plus accrued interest.
The new senior credit facility is collateralized by substantially all of the
Operating Partnership's assets and contains certain covenants as described in
Note 7 to notes to consolidated financial statements included herein.

     We funded a portion of the purchase of the Chartwell and Kirschner
interests in the Operating Partnership with debt. We currently have no
operations of our own and, therefore are, dependent upon the earnings and cash
flows of the Operating Partnership to satisfy our obligations under the 15.0%
senior discount notes and warrants.

1997 Recapitalization

     On January 30, 1997, the Operating Partnership consummated a transaction
pursuant to which Chartwell and Mobil Long Haul invested $20.7 million and $15.0
million, respectively, to directly acquire the 40.0% common partnership
interests owned by The Fremont Group, Inc., an affiliate of Bechtel Group, Inc.
and then named Bechtel Investments, Inc. The respective Mobil Long Haul and
Chartwell investments were approximately $4.2 million and $5.8 million. The
Cardwell Group maintained its capital investment. Kirschner invested $1.0
million in exchange for a 2.0% common partnership interest. Immediately
thereafter, the Cardwell

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Group and Mobil Long Haul agreed to assign $19.6 million of their capital
balances to mandatorily redeemable preferred partnership interests.

     Following these investments, the Operating Partnership's common interests
were owned by:

     .    Chartwell (approximately 50.8%),
     .    Cardwell Group (approximately 39.9%),
     .    Mobil Long Haul (approximately 7.3%), and
     .    Kirschner (approximately 2.0%).

     The manditorily redeemable preferred partnership interests were owned by:

     .    Mobil Long Haul ($12.0 million) and
     .    Cardwell Group ($7.6 million).

     As a result of the 1997 recapitalization, Chartwell and the Cardwell Group
owned both general and limited partnership interests and Mobil Long Haul and
Kirschner owned only limited partnership interests. The Operating Partnership
also entered into certain supply and marketing agreements with Mobil Oil
Corporation.

     As part of the 1997 recapitalization, the Operating Partnership issued
$135.0 million of 10 1/2% notes due 2007 and repurchased approximately 94.0% of
the existing 12 1/2% notes due 2002 and approximately 100% of related
outstanding debt warrants. The Operating Partnership also amended our then
existing senior collateralized credit facility. The credit agreement consisted
of a $25.0 million revolving credit facility, a $14.0 million term loan A, a
$30.0 million term loan B and a $40.0 million expansion facility. In connection
with the issuance of the 10 1/2% notes, the Operating Partnership capitalized
approximately $14.5 million of debt issuance costs and wrote off, as an
extraordinary item, $12.7 million of debt restructuring costs. These costs
included the write-off of deferred financing costs relating to the replacement
of the prior credit agreement, the retirement of term A and B loans, the
replacement of the 12 1/2% notes, and the related debt warrants.

Petro Stopping Centers

     We have identified two reportable operating segments. They are our company-
operated truck stop and our franchise truck stop operations. We operate large,
multi-service truck stops in the United States. Our facilities, which are known
as Petro Stopping Centers, generally are built on fifteen to thirty acres
situated at a convenient location with easy interstate highway access. They can
accommodate 200 to 300 trucks and 100 to 175 cars or recreational vehicles in
spacious, well-lit and fenced parking lots, which are designed to provide good
traffic flow, reduce accidents, and enhance security for the drivers, their
trucks and freight. Within the Petro Stopping Center network, we offer
standardized and consistent products and services to accommodate the varied
needs of professional truck drivers and other motorists. These include separate
gas and diesel fueling islands, our home-style "Iron Skillet" restaurants, truck
preventative maintenance and repair services, and travel and convenience stores
offering an array of merchandise selected to cater to professional truck
drivers' needs during long periods away from home. Additionally, we provide
amenities such as telephone, fax, photocopying, computer, other communication
services and postal services. Petro Stopping Centers also offer certified truck
weighing scales, truck washes, laundry facilities, private showers, game,
television and movie rooms, barbershops, and at some sites, medical services. We
have aggregated our company truck stop operations into one reportable operating
segment based on the distribution of products and services under one common site
facility, classified as a multi-service truck stop.

     In addition to company operations, we are a franchisor to 23 Petro Stopping
Center locations. We collect royalties and fees in exchange for the use of our
name and for services provided to the franchisees. During 1997, 1998, and 1999,
these revenues were $4.0 million, $4.5 million, and $5.0 million, respectively,
and are included in non-fuel revenues reported on the accompanying consolidated
statements of operations. We do not allocate any expenses or assets in measuring
this segment's profit and loss.

                                       3
<PAGE>

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

                    SUMMARY OF HOLDINGS' SOURCES OF REVENUE

<TABLE>
<CAPTION>
                                    Year Ended December 31,
                     ----------------------------------------------------
                            1997             1998                1999
                     ----------------  ----------------   ---------------
                                   (dollars in thousands)

<S>                  <C>       <C>     <C>       <C>      <C>       <C>
Fuel                 $513,571   74.9%  $464,025   71.0%   $520,680   72.3%
Non-Fuel              122,609   17.9%   136,145   20.8%    143,468   19.9%
Restaurant             49,549    7.2%    53,246    8.2%     55,777    7.8%
                     --------  -----   --------  -----    --------  -----
Total Net Revenue    $685,729  100.0%  $653,416  100.0%   $719,925  100.0%
                     ========  =====   ========  =====    ========  =====
</TABLE>

     Of our 30 company-operated Petro Stopping Centers, 27 are full-size
locations and three are Petro:2 Centers. All of the company-operated Petro
Stopping Centers are owned or leased by us except for the Wheeler Ridge,
California facility which is jointly-owned with Tejon Development Corporation.
Of our 23 franchised facilities, eighteen are full-service locations and five
are Petro:2 Centers. Petro:2 Centers provide the same basic fuel and non-fuel
services as full-size Petro Stopping Centers, but on a smaller scale and with
fewer amenities.

Fuel

     Each Petro Stopping Center has a diesel fuel island, which is a self-
service facility for professional drivers and typically consists of eight to
sixteen fueling lanes. The fuel dispensers are computer driven, high speed
units. Each fueling lane permits simultaneous fueling of each of a truck's two
tanks. Pursuant to our strategic alliance with Mobil Oil Corporation, we sell
Mobil branded diesel fuel at all but one of the company-operated diesel fuel
islands. All Mobil branded diesel fuel islands and dispensers we operate carry
signage with both the "Petro" and "Mobil" brand names.

     In addition to the diesel fuel island for professional drivers, gasoline
and automobile diesel fuel are sold from a separate auto fuel island at 29 of
our 30 company-operated locations. The auto fuel islands are accessed by
separate "auto-only" entrances, which help to separate auto and truck traffic at
the facility. The typical auto fuel island is equipped with four to six fuel
dispensers for convenient and efficient fueling.

Non-fuel

     In 1983 we opened our first Petro:Lube facility to provide "while-you-wait"
preventive maintenance service for trucks. Since that time, Petro:Lubes have
been introduced at all but one of our company-operated Petro Stopping Centers.
In addition to Petro Stopping Center locations, we opened a stand-alone
Petro:Lube in 1996. Petro:Lube facilities offer oil, filter and lubrication
services, new, used and retread tires, as well as tire and other minor repairs.
We believe we were the first truck stop chain to offer these types of services
to truckers on an express basis.

     Each Petro:Lube sells a number of what we believe to be high-quality brands
such as: Mobil Delvac, Shell and Chevron heavy duty motor oils and Kelly,
Bridgestone, Michelin and Firestone tires. Petro:Lubes primarily feature Mobil's
Delvac brand lubricants as part of our marketing strategy with Mobil Oil
Corporation, See Item 13, "Certain Relationships and Related Transactions." Each
Petro:Lube honors manufacturers' warranties as well as our warranties for work
performed at any Petro:Lube throughout the country. Petro:Lube services are
primarily utilized by owner/operators and small fleets, but we believe that
larger fleets are increasingly looking to outsource their maintenance needs.

     To attract the business of drivers seeking a quick refueling stop, each
diesel fuel island includes a "mini-mart" offering an array of deli take-out
food, snack foods, beverages, toiletries and a basic selection of trucker
accessories and supplies. In addition, other services (including certified
scales, check cashing,

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permit services, faxing and copying) are available at the fuel islands. These
facilities enable the driver seeking a quick refueling stop to purchase
consumables and services while refueling.

     Each full size Petro Stopping Center also includes a "Travel Store,"
located in the main facility away from the fueling islands. Travel Stores
feature merchandise specifically selected to cater to a professional truck
driver's shopping needs during the long periods typically spent away from home.
Merchandise categories include food items, clothing, electronics such as
televisions, mobile satellite dishes, VCR's and CB radios as well as toiletries,
gifts and truck accessories such as cables, fuses, reflectors and antennae. A
Travel Store typically carries approximately 7,500 SKUs and averages 1,900
square feet of selling space.

     To meet the personal and business needs of commercial drivers and other
motorists, we provide numerous additional services at the main facility of our
Petro Stopping Centers. At the typical Petro Stopping Center, customers have
access to telephone, internet, money wire services, fax and other communication
services, overnight express drop boxes and ATMs. In addition, customers may
receive their paychecks and cash advances. At most locations, professional
drivers have convenient on-site access to a certified truck weighing scale and a
truck wash operated by a third-party that leases part of a Petro Stopping Center
to provide these services. For a driver's comfort and relaxation, Petro Stopping
Centers provide laundry facilities, game rooms, television viewing rooms and, at
nine Petro Stopping Centers, movie rooms. We also lease retail space at our
Petro Stopping Centers to independent merchants.

     Each full-size Petro Stopping Center features twelve to eighteen private
shower facilities. The showers are fully tiled for easy maintenance and are
professionally cleaned after each use. Each shower room is equipped with a lock
to provide privacy and security.

     Since June 1993 the Petro Stopping Centers located in Hammond and
Shreveport, Louisiana have featured video poker operations. The primary
customers for these activities are local area residents. The video poker
operations at each of these sites feature 50 machines and are conducted in a
stand-alone building, separated from other facilities. A third-party operator
manages the video poker operations and incurs all material related expenses
while paying a portion of each machine's "winnings" to us. During 1996, the
State of Louisiana enacted a statute requiring the cessation of video poker
operations unless the parish in which the operations were conducted voted to
allow the continued operations of video poker machines. On November 5, 1996, the
parish in which the Shreveport facility is located voted to continue to allow
video poker operations, while the parish in which the Hammond facility is
located voted to disallow video poker operations. Therefore, we were required to
and did phase out video poker operations at the Hammond facility at the end of
June 1999. As part of the video poker license for 1999-2000, we leased the
Shreveport fuel island operation to Petro Truckstops, Inc., in order to satisfy
state law requirements.

Restaurants

     Each full-size Petro Stopping Center includes our trademarked "Iron
Skillet" restaurant. This home-style, sit down restaurant typically seats
approximately 180 customers, and features counter and wait service, a soup and
salad bar and three "All-You-Can-Eat" buffets per day. The Iron Skillet prides
itself on "home cooked" items prepared fresh at each location. Recipes developed
at our test kitchen in El Paso are accessible from each location by computer.
Iron Skillet restaurants are open 24 hours per day, 365 days per year and have
"drivers only" sections, which are preferred by drivers who like to socialize
and exchange information with other drivers at our restaurants. Public
telephones are generally available throughout the dining area for customer
convenience.

     We have introduced nationally branded fast food concepts at twelve of our
locations. We currently operate, under franchise agreements, one Wendy's, two
Blimpie Subs & Salads, three Baskin-Robbins, one Tastee Freeze, three Noble
Romans, and seven Pizza Hut Express units and plan to selectively expand our
fast food program during the next several years. In addition, we have introduced
our own branded deli program in some Petro Stopping Centers known as "The
Filling Station." At December 31, 1999, we had twelve locations that offered
Filling Stations and plan to selectively expand the concept in the future.

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Competition

     The U.S. truck stop industry is large and highly fragmented. We believe
that there are approximately 2,000 truck stops located on interstate highways,
approximately 24.0% of which are operated by four national truck stop chains, of
which we are one. The other three chains are TravelCenters of America, Inc.,
(approximately 160 locations), Flying J Inc. (approximately 130 locations) and
Pilot Corporation (approximately 130 locations). We believe that, while we
compete with all truck stops, our principal competitors are increasingly these
nationwide, multi-service truck stop chains. We also believe that some of these
chains have substantially greater financial and marketing resources than we do.

     While we price our diesel fuel competitively, we believe our larger sites
with more amenities offer a competitive advantage. A number of other large,
multi-service truck stop chains build somewhat smaller and less expensive
facilities, emphasizing low-priced diesel fuel and fast food restaurants. Many
of the other truck stop chains employ discount pricing of diesel fuel to
compete. At the same time, increased competition and consolidation among
trucking companies in recent years have increased truck fleet owners' focus on
reducing their operating costs. This trend has put increased pressure on diesel
fuel margins for us and our competitors. In addition, from time to time, we face
intense price competition in some of our markets. Given that approximately two
out of every three stops made by a trucker is for a reason other than the
purchase of fuel, we believe that the variety of non-fuel services and products
we offer will continue to attract professional truck driver business and provide
us a competitive advantage in spite of continued fuel pricing competition.

Fuel and Lubricant Suppliers

     As part of the Recapitalization, we terminated our previous fuel and
lubricant supply agreements and entered into new ten-year supply agreements with
Mobil Oil Corporation under which Mobil Oil Corporation will supply the company-
operated Petro Stopping Centers' diesel fuel and gasoline requirements in those
markets in which Mobil branded gasoline is available for sale. Under the
lubricant supply agreement, we are allowed to purchase such quantities of
lubricants as we require at the prices set forth in the agreement. The diesel
fuel sold at all but one of our company-operated and some of our franchise
operated Petro Stopping Centers is branded Mobil Diesel, and all of our company-
operated Petro:Lubes feature Mobil Delvac lubricants. Under the new fuel supply
agreement and the agreement for the resale of oils and greases with Mobil Oil
Corporation, both dated July 23, 1999, we agreed to purchase Mobil branded
lubricant products and Mobil branded diesel fuel for sale and distribution under
Mobil's trademarks at our company-operated and eight of our franchise operated
truck stops and Mobil branded gasoline for sites as selected by Mobil Oil
Corporation as limited however, by existing contractual obligations to purchase
gasoline from other suppliers. The Mobil Supply Agreements require that we
purchase from Mobil-specified distribution terminals, a minimum number of
gallons of diesel fuel on an annual basis, depending on product availability and
reductions by Mobil Oil Corporation under described circumstances. For 1999, our
annual volume commitment was 172.3 million gallons of Mobil diesel under the
fuel supply agreement and 1.2 million gallons of Mobil lubricants under the
lubricant supply agreement. This constitutes approximately 37.4% of our current
diesel fuel requirements and approximately 63.1% of our lubricant requirements.
If we do not purchase any diesel fuel from Mobil Oil Corporation under our Mobil
Supply Agreements, our maximum penalty in any year would be $0.0035 per gallon
multiplied by the annual volume commitment as provided for in the Mobil Supply
Agreements, plus additional amounts for each new Petro Stopping Center we open
and which Mobil Oil Corporation agrees to supply. As a result of the Mobil
Supply Agreements and to comply with the laws governing the branding of diesel
fuel, if Mobil Oil Corporation is unable to supply 100% of our diesel fuel
demand due to limited product availability, Mobil Diesel Supply Corporation, a
wholly owned subsidiary of Mobil Oil Corporation, purchases additional diesel
fuel from third-party suppliers and then sells it to us. Under the terms of the
Mobil Supply Agreements, we negotiate with third parties regarding price and
other terms, and then designate them to Mobil Diesel Supply Corporation. Third
party suppliers are approved by Mobil Oil Corporation if the fuel to be supplied
by the third party meets all federal, state and local diesel requirements. Our
fuel purchase arrangement with Mobil Diesel Supply Corporation enables us to
meet our diesel fuel needs and to comply with branding laws, which require Mobil
Oil Corporation to first take possession of the fuel before it can be branded as
Mobil diesel.

                                       6
<PAGE>

     The Mobil Supply Agreements allow us to continue to negotiate for the
purchase of diesel fuel with third-party suppliers approved by Mobil Diesel
Supply Corporation. If we are able to obtain a lower diesel fuel price from a
third-party supplier in a particular market area, we may request that Mobil Oil
Corporation meet the lower price or allow a portion of our diesel fuel
requirements to be supplied from the Mobil Diesel Supply Corporation-approved
third-party supplier, in which case Mobil Diesel Supply Corporation would
purchase the diesel fuel from the supplier and resell the product to us. Any
change in supply source, other than a change resulting from Mobil Oil
Corporation's inability to supply, does not affect our requirement to purchase
the annual minimum number of gallons from Mobil-specified distribution terminals
fixed by the Mobil Supply Agreements. The Mobil Supply Agreements also place a
monthly limit on the maximum number of gallons of diesel fuel that we may lift
from Mobil-specified distribution terminals. Prices to be charged for fuel sold
to us under the Mobil Supply Agreements are based on referenced prices minus
discounts and plus delivery costs. See Item 13, "Certain Relationships and
Related Transactions." Upon the expiration of the ten year initial term, the
Mobil Supply Agreements are renewable for another five year term at the option
of Mobil Oil Corporation; however, we have the ability to terminate the
agreements at the end of the ten year term at a price based on a formula
discussed in the Mobil Supply Agreements.

     We purchase diesel fuel for each of our company-operated Petro Stopping
Centers on a daily basis. Each location typically maintains a one to three day
inventory of fuel. During 1999, we purchased 100% of our diesel fuel through
Mobil Diesel Supply Corporation, approximately 65.8% of which was third-party
fuel purchased through this arrangement. The approximate aggregate amount paid
under the Mobil Supply Agreements for the year ended December 31, 1999 totaled
$422.0 million.

Trademarks and Service Marks

     We are the owner in the United States of various registered trademarks and
service marks, including "Petro Stopping Centers," "Petro:Lube," "Iron Skillet"
and "Petro:2." We grant franchisees the non-exclusive right to use these
proprietary marks at franchised locations. We regard our trademarks and service
marks as valuable assets and believe that they have significant value in the
marketing of our products and services. We also have several applications to
register trademarks and service marks currently pending in the United States
Patent and Trademark Office.

Governmental Regulation

Environmental Regulation

     We conduct our operations under extensive federal and state laws,
regulations and requirements relating to environmental matters. We use
underground and above ground storage tanks to store petroleum products and waste
oils. Statutory and regulatory requirements for storage tank systems include
requirements for tank construction, integrity testing, leak detection and
monitoring, overfill and spill control, and mandate corrective action in case of
a release from a storage tank into the environment. We also face regulation
relating to vapor recovery and discharges into water. During 1998, we continued
the installation of cathodic protection and overfill equipment and devices in
our older storage tanks, as required by federal and state law, and all work was
completed in December 1998, except in the Corning, California location. The
Corning, California work was completed during the third quarter of 1999, and we
expended approximately $1.2 million during 1999 to complete this work. Some site
remediation will be required in Corning, California as a result of completion of
the upgrade work. We believe that all of our storage tanks are in compliance in
all material respects with applicable environmental laws, regulations and
requirements. Our expenditures for environmental matters were $154,000,
$385,000, and $156,000 for the years ended December 31, 1997, 1998, and 1999,
respectively.  See Note 2 to notes to consolidated financial statements for the
year ended December 31, 1999 for a discussion of our accounting policies
relating to environmental matters.

     Our ownership of the properties and the operation of our business, may
subject us to liability under various federal, state, and local environmental
laws, ordinances, and regulations relating to cleanup

                                       7
<PAGE>

and removal of hazardous substances (which may include petroleum and petroleum
products) on, under, or in our property. Some laws impose liability whether or
not the owner or operator knew of, or was responsible for, the presence of
hazardous or toxic substances. Persons who arrange, or are deemed to have
arranged, for the disposal or treatment of hazardous or toxic substances may
also be liable for the costs of removal or remediation of these substances at
the disposal or treatment site, regardless of whether the site is owned or
operated by that person.

     We are currently party to one proceeding with the United States
Environmental Protection Agency ("EPA") regarding a waste oil storage and
recycling plant located in Patterson, Stanislaus County, California (the
"Patterson Site"). In the ordinary course of our operations, waste oil products
are generated which are required to be transported to off-site facilities for
treatment and disposal. Between June 1991 and February 1995 we arranged for the
transportation of waste oil products from the Corning location to the Patterson
Site. Sometime in 1997 the owners of the Patterson Site abandoned operation of
the site, the condition of the site began to deteriorate, and in October 1997
the EPA responded to a request for assistance from the California Department of
Toxic Substances Control. Notwithstanding that our activities with regards to
use of the Patterson Site were lawfully conducted and have not been challenged
by the EPA, by Order issued by the EPA on August 12, 1998 ("Order"), we and 55
other companies were identified by the EPA as "generators, transporters or
arrangers for disposal of hazardous substances" as those terms are defined under
the Comprehensive Environmental Response, Compensation and Liability Act of
1980, 42 U.S.C., Sections 9601 to 9675, as amended by the Superfund Amendments
and Reauthorization Act of 1986 ("CERCLA"), and thus are named in the Order as
potentially responsible parties, strictly liable under CERCLA for removal
activities associated with the Patterson Site. We and approximately 20 of the
other 55 companies identified by the EPA are working together towards a
resolution and plan of action for completion of the removal activities required
by the EPA pursuant to the Order. Although we do not believe that our
involvement in the Patterson Site will have a material adverse effect on our
consolidated financial condition or results of operation, if a plan of action
cannot be agreed upon or if the EPA or the State of California imposes
remediation requirements beyond the scope presently contemplated based upon our
current understanding with the EPA, our liability could exceed our current
expectations. See Note 15 to notes to consolidated financial statements for the
year ended December 31, 1999.

     We are defendants in a lawsuit brought by adjoining land owners alleging
damage to their property resulting from the discharge of sewage and other run-
off at one of our Petro Stopping Centers. We do not believe that our involvement
in this matter will have a material adverse effect on our consolidated financial
condition or results of operation.

     Where required or believed by us to be warranted, we take action at our
locations to correct the effects on the environment of prior disposal practices
or releases of chemical or petroleum substances by us or other parties. In light
of our business and the quantity of petroleum products that we handle, there can
be no assurance that hazardous substance contamination does not exist or that
material liability will not be imposed in the future.

Other Regulations

     We also operate under local licensing ordinances. The issuance of permits
for service station and lubrication operations is generally a matter of
discretion and dependant on the underlying requirement that the granting of the
permit be consistent with the health, safety and moral welfare of the community.
Although we believe that careful planning and site selection reduces the
likelihood of significant zoning opposition, significant opposition to the
construction of a Petro Stopping Center, if encountered, may cause us to incur
substantial expenses and delay in the openings of new Petro Stopping Centers.

     Our restaurant operations are conducted under federal, state and local
regulations concerning health standards, sanitation, fire and general safety,
noncompliance with which could result in temporary or permanent curtailment or
termination of a restaurant's operations. In addition, difficulties in obtaining
the required licensing or approvals could result in delays or cancellations in
the openings of new restaurant facilities.

                                       8
<PAGE>

     In addition, state and local authorities oversee our video poker
operations. During 1996, the State of Louisiana enacted a statute requiring the
cessation of video poker operations unless the parish in which the operations
were conducted voted to allow the continued operations of video poker machines.
On November 5, 1996, the parish in which the Shreveport facility is located
voted to continue to allow video poker operations, while the parish in which the
Hammond facility is located voted to disallow video poker operations. Therefore,
we were required to and did phase out video poker operations at the Hammond
facility at the end of June 1999. As part of the video poker license for 1999-
2000, we leased the Shreveport fuel island operation to Petro Truckstops, Inc.,
in order to satisfy state law requirements.

     As a franchisor we also operate under federal and state regulation in the
states in which we offer franchises or where franchised Petro Stopping Centers
are currently operating. Federal regulations require that we provide each
prospective franchisee with a disclosure document that provides information
regarding the Operating Partnership and the relevant provisions of the franchise
agreement and other ancillary contracts. In addition, some state regulations
require that the franchisor be registered or be exempt from the applicable
registration requirements. Federal and state franchising laws prohibit
"deceptive trade practices" and, in some cases, impose fairness and "anti-
discrimination" standards on us.

     In addition to the franchise regulations outlined immediately above, our
operations are conducted under the Petroleum Marketing Practices Act. The
Petroleum Marketing Practices Act is a federal law that prohibits a franchisor
engaged in the sale, consignment or distribution of refiner-branded motor fuels
from terminating or failing to renew a "franchise" or "franchise relationship,"
except on specified grounds and only after compliance with the statute's
notification provisions. The Petroleum Marketing Practices Act expressly
preempts state law concerning the termination, nonrenewal and notice with
respect to motor fuel franchises. The Petroleum Marketing Practices Act is
enforced judicially through cases interpreting the statute.

     We are considered a franchisor under the Petroleum Marketing Practices Act
because we distribute and sell diesel fuel and gasoline under Mobil's trademarks
to some of our franchisees. Thus, we are subject, as a franchisor, to the
Petroleum Marketing Practices Act's termination, nonrenewal and notice
requirements in each of our individual motor fuel contracts with our
franchisees. At the same time, we are entitled to the Petroleum Marketing
Practices Act's protections in our branded supply agreements with Mobil Oil
Corporation as well as other branded suppliers. At December 31, 1999, we are not
party to any Petroleum Marketing Practices Act litigation.

     Under the Americans with Disabilities Act of 1990, all public
accommodations are required to meet federal requirements related to access and
use by disabled persons. While we believe our facilities are in compliance with
these requirements, a determination that we are not in compliance with the
Americans with Disabilities Act could result in the imposition of fines or an
award of damages, which could adversely affect us.

     We believe that all of our Petro Stopping Centers are in compliance in all
material respects with existing laws and regulations. However, new laws and
regulations could require us to incur significant additional costs.

Employees

     As of December 31, 1999, we had a total of 4,208 employees (all of whom are
employees of the Operating Partnership), of which 3,950 were full-time and 258
were part time. At that date, 600 of our employees were salaried and performed
executive, management, or administrative functions and the remaining 3,608
employees were hourly employees. Almost 95.7% of our employees worked at the
Petro Stopping Centers and most employees at the Petro Stopping Centers work on
an hourly basis.

     We have never had a work stoppage. We believe that we provide working
conditions, wages and benefits that are competitive with other providers of the
kinds of products and services offered by us. We believe that our relations with
our employees are good.

                                       9
<PAGE>

Item 2.  Properties

     Our corporate headquarters is located in a three-story building in El Paso,
Texas, which contains approximately 30,000 square feet of space. The office
building is owned by J.A. Cardwell, Sr., the President of Holdings and Chief
Executive Officer and Chairman of the Operating Company. We lease the entire
building under a lease expiring on December 31, 2005, paying monthly rent
totaling $336,000 per year, as well as taxes, maintenance and other operating
expenses. See Item 13, "Certain Relationships and Related Transactions."

     We own the underlying land and all facilities at 25 of our 30 company-
operated Petro Stopping Centers, own all but four acres of the West Memphis
site, own the facility and lease the land at the Hammond, Louisiana and Jackson,
Mississippi sites and lease both the Effingham, Illinois and North Baltimore,
Ohio sites in their entirety. The Petro Stopping Center located in Effingham,
Illinois, is leased from an entity owned by current and former employees of the
Operating Partnership. See Item 13, "Certain Relationships and Related
Transactions."

     In August and November of 1998, we purchased land in Mebane, North Carolina
and Glendale, Kentucky, respectively, and in September and October of 1999, we
also purchased land in North Las Vegas, Nevada and Marianna, Florida,
respectively, for the future construction of four new Petro Stopping Centers. We
also own a site in Green River, Wyoming which is suitable for the construction
of a new Petro Stopping Center. We have options, which expire in December 2006,
to purchase vacant land owned by the Cardwell Group or their affiliates that is
located adjacent to four existing Stopping Centers: Shreveport, Louisiana (seven
acres); Weatherford, Texas (thirty-four acres); Beaumont, Texas (seventeen
acres); and Oklahoma City, Oklahoma (thirty acres). See Item 13, "Certain
Relationships and Related Transactions."

                                       10
<PAGE>

     The following table outlines the company-operated Petro Stopping Centers at
December 31, 1999:

<TABLE>
<CAPTION>
                                                                                         Size of Main
                                                     Petro Stopping     Total Location     Building
Location                         Date Opened         Center Acreage         Acreage        (Sq. Ft.)
------------------------------------------------------------------------------------------------------
<S>                              <C>                 <C>                <C>              <C>
El Paso, Texas                   April 1975                 31                 51           20,000
Weatherford, Texas               September 1977             25                 25           21,000
Beaumont, Texas                  May 1981                   20                 20           13,500
San Antonio, Texas               September 1982             21                 21           13,200
Eloy/Casa Grande, Arizona        June 1984                  23                 36           12,300
Corning, California              May 1985                   18                 18           12,300
Amarillo, Texas                  June 1985                  20                 32           17,300
Shreveport, Louisiana            November 1985              18                 21           13,800
Hammond, Louisiana               January 1986               16                 21           12,300
West Memphis, Arkansas           August 1986                24                 63           15,700
Milan, New Mexico                November 1986              23                 30           13,800
Knoxville, Tennessee             March 1987                 25                 25           13,800
Kingman, Arizona                 December 1987              38                 67           18,200
Oklahoma City, Oklahoma          May 1988                   30                 30           14,600
Perrysburg/Toledo, Ohio          August 1988                33                 74           20,000
Kingdom City, Missouri           February 1989              25                 35           20,500
Bucksville, Alabama              February 1990              48                 51           14,400
Girard/Youngstown, Ohio          May 1990                   29                 98           20,000
Vinton, Texas                    January 1991                8                 19            4,800
Effingham, Illinois              March 1991                 30                 30           20,000
Kingston Springs, Tennessee      September 1991              9                 12            6,900
Shorter, Alabama                 September 1991              9                  9           12,700
Atlanta, Georgia                 March 1992                 64                 69           21,500
Laramie, Wyoming                 October 1993               35                 50           15,500
Medford, Oregon                  January 1995               15                 15           11,500
Ocala, Florida                   June 1995                  37                170           20,500
North Baltimore, Ohio            August 1997                17                 40           29,000
North Little Rock, Arkansas      September 1997             17                 24           16,000
Wheeler Ridge, California (1)    June 1999                  51                 76           27,900
Jackson, Mississippi             November 1999              17                 21           23,200
</TABLE>

(1)  The Wheeler Ridge facility is company-operated and jointly-owned with Tejon
     Development Corporation. See, "Agreement with Tejon."

     We also currently have under construction new Petro Stopping Centers in
Mebane, North Carolina and Glendale, Kentucky, which are to open in April and
June of 2000, respectively.

Franchises

     Each existing franchise agreement grants to the franchisee the right and
license to operate a Petro Stopping Center in a specified territory. The
franchise agreements require that the franchisee, at its expense, build and
operate the Petro Stopping Center in accordance with requirements, standards and
specifications prescribed by us, including site approval, and that the
franchisee purchase products from suppliers approved by us. We, in turn, are
obligated to provide the franchisee with, among other things, advisory
assistance with the operation of the Petro Stopping Center and advertising and
promotional programs.

     The agreements require the franchisee to pay us, in addition to initial
fees and training fees, a monthly royalty fee and a monthly advertising fee
(administered through an advertising fund for national and regional
advertising). In some instances, we may waive our contractual right to receive
royalties with

                                       11
<PAGE>

respect to a particular location for short periods of time. For the year ended
December 31, 1999, our revenues from our 23 franchise locations totaled $5.0
million. In addition, franchisees contributed $432,000 to the advertising
programs.

     While a majority of diesel purchases at Petro Stopping Centers are paid for
by third-party billing companies, a portion of diesel fuel purchases are paid
for through direct billing arrangements with particular trucking companies. As
provided in the franchise agreements, we purchase all of the receivables
generated by the franchisees from customers using direct billing arrangements.
These purchases are on a non-recourse basis to the franchisee.

     In addition, upon termination or expiration of the franchise agreement in
the event that the franchisee wishes to accept an offer from a third-party to
purchase its facility, each franchise agreement grants us a right of first
refusal to purchase the facility, at the price offered by the third party.
Similarly, in fourteen cases, we have the right to purchase the franchise for
fair market value, as determined by the parties or an independent appraiser,
upon termination or expiration of the franchise agreement.

     All franchises are operated under franchise agreements which, with the
exception of one, are for an initial ten-year term and are automatically renewed
for two consecutive five-year terms, unless the franchisee gives a termination
notice at least twelve months prior to the expiration of the franchise
agreement. As of December 31, 1999, we had 23 franchise locations open and
operating in the following markets:

                                                             Expiration of
Location                          Date Opened             Initial Franchise Term
--------------------------------------------------------------------------------

Elkton, Maryland                   Sept. 1985                   Sept. 1995(a)
Ft. Chiswell, Virginia             Mar.  1986                   Mar.  1996(a)
Portage, Wisconsin (b)             Sept. 1986                   Dec.  2001
Joplin, Missouri                   Oct.  1987                   Oct.  1997(a)
Lake Station, Indiana              Oct.  1987                   Oct.  1997(a)
Ruther Glen, Virginia              Mar.  1988                   Mar.  1998(a)
Benton Harbor, Michigan            July  1989                   July  1999(a)
New Paris, Ohio                    Oct.  1989                   Oct.  1999(a)
Salina, Kansas                     Feb.  1990                   Feb.  2000(a)
Jerome/Twin Falls, Idaho(c)        Dec.  1990                   Dec.  2000
Florence, South Carolina           Feb.  1991                   Feb.  2001
Rochelle, Illinois                 Apr.  1992                   Apr.  2002
Fargo, North Dakota                Nov.  1994                   Nov.  2004
Carnesville, Georgia               Jan.  1995                   Jan.  2005
Bordentown, New Jersey             Jan.  1996                   Jan.  2006
York, Nebraska                     Dec.  1996                   Dec.  2006
Dupont, Pennsylvania               May   1997                   May   2007
Claysville, Pennsylvania           Nov.  1997                   Nov.  2007
Breezewood, Pennsylvania           Feb.  1998                   Feb.  2008
Milton, Pennsylvania               Mar.  1998                   Mar.  2008
Monee, Illinois                    April 1998                   Apr.  2008
Lowell, Indiana                    April 1999                   Apr.  2009
Racine, Wisconsin                  Dec.  1999                   Dec.  2009

(a)  The initial ten year term provided for in eight of our oldest franchise
     agreements has elapsed. Under the terms of these agreements, unless written
     notice of termination is received from the franchisee twelve months prior
     to the tenth anniversary date of the opening of the franchise location, the
     franchise is automatically renewed for five additional years. With the
     exception of Jerome/Twin Falls, Idaho, no notices of termination were
     received from the affected franchisees. By agreement with the affected
     franchisees, execution of a renewal franchise agreement was delayed pending
     completion of the revised form franchise agreement. The revised franchise

                                       12
<PAGE>

     agreement has now been given to these franchisees for execution and each
     franchisee has been given the choice to either enter into the new agreement
     or remain as franchisees under the terms of their existing agreement.
(b)  The franchise agreement for the Portage, Wisconsin location has been
     amended so that its initial term is approximately fifteen years (expiring
     in December 2001). The agreement provides for only one five-year renewal.
(c)  As to the Jerome/Twin Falls franchise, timely notice of intent not to renew
     the franchise was received December 9, 1999 and accordingly this franchise
     agreement will terminate effective December 15, 2000. The Company has both
     a right of first refusal to acquire this location and the option to
     purchase it at fair market value. The Company is currently evaluating
     options regarding this site.

     Two franchisees operate four locations, one operates three locations, one
operates two locations, and ten operate one location each. All of the
franchisees are unaffiliated with us, except Highway Service Ventures, Inc.,
which operates four of our franchised locations. See Item 13, "Certain
Relationships and Related Transactions." In addition to our currently
operational 23 franchise locations, we have signed an agreement for an
additional franchise location in Frederick, Maryland.

Agreement with Tejon

     We have an agreement and formed a limited liability corporation, Petro
Travel Plaza LLC, with Tejon Development Corporation to build and operate a
Petro Stopping Center branded location in Southern California. Pursuant to the
terms of the Limited Liability Company Operating Agreement of Petro Travel Plaza
LLC, dated as of December 5, 1997, among the Operating Partnership, Tejon, and
Tejon Ranch Company, as guarantor, we made an initial capital contribution of
$2.0 million for working capital and inventory, which is our basis for the
investment in the LLC. Pursuant to the agreement, the LLC financed construction
of the location with a non-recourse credit facility, we receive a management fee
of $250,000 per annum and as a 40.0% member, we receive 40.0% of the location's
operating earnings. This location began operations in June 1999.

Item 3.  Legal Proceedings

     From time to time we are in ordinary routine litigation incidental to our
operations. We believe that the litigation currently pending or threatened
against us, including the EPA proceeding with respect to the Patterson Site
described in more detail in Item 1, "Business", will not have a material adverse
effect on our consolidated financial condition or results of operations.

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

     None.


                                    PART II

Item 5.  Market for Registrant's Common Equity and Related Stockholder Matters

     All of our general and limited partnership interests are owned by Mobil
Long Haul, Inc., Volvo Petro Holdings, L.L.C., Petro Warrant Holdings
Corporation and various affiliates of the Cardwell Group. See Note 1 to notes to
consolidated financial statements for the year ended December 31, 1999 included
elsewhere herein. Consequently, there is no established public trading market
for our equity.

Item 6.  Selected Financial Data

     The information set forth below should be read in conjunction with both
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" in Item 7 and the consolidated financial statements and notes
thereto included in Item 8. The selected consolidated financial data as of and
for the years ended December 29, 1995, December 31, 1996, December 31, 1997,
December 31, 1998, and December 31, 1999, have been derived from our audited
financial statements. The unaudited financial

                                       13
<PAGE>

data presented include, in the opinion of management, all necessary adjustments
required for fair presentation of such data. Beginning in 1996, we adopted a
calendar fiscal year, which ends on December 31. The opening or acquisition of
our operating properties during the periods reflected in the following selected
financial data materially effect the comparability of such data from one period
to another.

                SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA

<TABLE>
<CAPTION>
                                                      Year ended        Year ended       Year ended       Year ended     Year ended
                                                     December 29,      December 31,     December 31,     December 31,   December 31,
                                                         1995              1996             1997             1998          1999
                                                     ------------      -----------      -----------      -----------    ------------
                                                                                   (dollars in thousands)
                                                                                    --------------------
<S>                                                  <C>               <C>              <C>              <C>             <C>
Income Statement Data:
Net revenues:
  Fuel (including motor fuel taxes).................     $385,181         $478,312         $513,571         $464,025       $520,680
  Non-fuel..........................................      147,834          158,745          172,158          189,391        199,245
                                                         --------         --------         --------         --------       --------
    Total net revenues                                    533,015          637,057          685,729          653,416        719,925

Costs and expenses:
  Cost of sales
   Fuel (including motor fuel taxes)................      352,207          443,967          476,033          422,945        481,483
   Non-fuel ........................................       59,686           67,464           70,548           76,451         80,491
  Operating expenses................................       73,052           81,522           85,560           93,012        100,156
  General and administrative........................       12,053           13,832           17,004           19,329         19,154
  Employee severance, benefit and
    placement expenses..............................            -            2,534                -                -              -
  Depreciation and amortization.....................       11,144           12,204           14,315           15,749         14,972
  (Gain) loss on disposition of assets..............            -               93               31                6           (836)
                                                         --------         --------         --------         --------       --------
   Total costs and expenses.........................      508,142          621,616          663,491          627,492        695,420
                                                         --------         --------         --------         --------       --------
Operating income....................................       24,873           15,441           22,238           25,924         24,505

Recapitalization costs..............................            -            2,938                -                -          1,819
Equity in loss of affiliate.........................            -                -                -                -            593
Interest expense, net...............................       21,098           21,263           20,292           20,042         23,261
                                                         --------         --------         --------         --------       --------
  Income (loss) before extraordinary  item and
    cumulative effect of a change in accounting
    principle.......................................        3,775           (8,760)           1,946            5,882         (1,168)
Extraordinary item (a)..............................            -                -           12,745                -          2,016
Cumulative effect of a change in accounting
    principle (b)(c)................................            -                -            1,579            3,250              -
Minority interest in earnings (loss) of consolidated
    subsidiaries....................................        1,729           (3,969)          (6,642)           1,286          1,454
                                                         --------         --------         --------         --------       --------
Net income (loss) (d)(e)............................     $  2,046         $ (4,791)        $ (5,736)        $  1,346       $ (4,638)
                                                         ========         ========         ========         ========       ========
Balance Sheet Data:
(at end of period)
  Working capital...................................     $ (9,607)        $(13,863)        $  3,850         $ (3,060)      $ (8,715)
  Total assets......................................      221,699          209,100          235,953          223,523        301,544
  Total debt........................................      168,392          166,727          183,190          181,328        226,292
  Minority interest in consolidated subsidiaries....       39,685           35,716           21,051           21,290              -
  Mandatorily redeemable preferred partnership
    interests.......................................            -                -           21,202           23,172         30,552
  Contingently redeemable warrants..................            -                -                -                -          9,700
  Partners' capital (deficit).......................      (27,760)         (32,551)         (44,286)         (44,688)       (21,730)

Other Financial Data:
  Cash provided by operating activities.............     $ 12,766         $ 14,668         $ 30,328         $ 11,333       $ 30,981
  Cash (used in) investing activities...............      (21,130)          (5,337)         (15,779)         (19,659)       (95,992)
  Cash provided by (used in) financing activities...       10,229          (11,837)           7,065           (3,287)        66,569
  Capital expenditures(f)...........................       19,508            5,523           15,870           20,309        (36,564)
  Number of truck stops: (at end of period)
     Company-operated...............................           26               26               28               28             30
     Franchised.....................................           15               16               18               21             23
                                                         --------         --------         --------         --------       --------
  Total.............................................           41               42               46               49             53
                                                         ========         ========         ========         ========       ========
</TABLE>

                                       14
<PAGE>

(a)  Extraordinary item reflects the write-off of unamortized deferred debt
     issuance costs associated with retired debt.
(b)  Cumulative effect of a change in accounting principle in 1997 reflects
     expensing of costs related to process reengineering activities that were
     previously capitalized as required by Emerging Issues Task Force Issue
     No. 97-13.
(c)  Cumulative effect of a change in accounting principle in 1998 reflects
     expensing of organization and start up costs that were previously
     capitalized as required by AICPA Statement of Position 98-5.
(d)  No provision for income taxes is reflected in the financial statements as
     we are a partnership for which taxable income and tax deductions are passed
     through to the individual partners.
(e)  Management considers EBITDA to be meaningful to investors in understanding
     our operating performance because we have no publicly traded equity
     securities; we are capitalized largely with long-term debt (creating a
     significant amount of interest expense); and we operate as a partnership
     (we do not have a provision for income taxes). EBITDA represents operating
     income plus depreciation and amortization. EBITDA data, which is not a
     measure of financial performance under generally accepted accounting
     principles, is presented because such data is used by certain investors to
     determine a company's ability to meet historical debt service requirements.
     Such data should not be considered as an alternative to net income as an
     indicator of our operating performance or as an alternative to cash flows
     as a measure of liquidity. EBITDA results were $36.0 million, $32.1
     million, $36.6 million, $41.7 million, and $39.5 million in 1995, 1996,
     1997, 1998, and 1999, respectively. EBITDA results for fiscal 1996 exclude
     certain one-time charges related to our 1997 Recapitalization and the
     change in management and operations. Included in the one-time charges were
     $2.5 million related to severance and hiring costs; $1.4 million in
     obsolete inventory reserves, included in cost of sales; and $0.5 million in
     insurance related costs.
(f)  Capital expenditures primarily represent the cost of new Petro Stopping
     Centers and maintenance of existing Petro Stopping Centers. Capital
     expenditures related to new Petro Stopping Centers were $13.8 million, $1.9
     million, $7.3 million, $6.1 million, and $20.6 million in 1995, 1996, 1997,
     1998, and 1999, respectively.


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

     Certain sections of this Form 10-K, including "Business", "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
"Quantitative and Qualitative Disclosures about Market Risk," contain various
forward-looking statements within the meaning of Section 21E of the Securities
Exchange Act of 1934 which represent management's expectations or beliefs
concerning future events that involve risks and uncertainties.  All statements,
other than statements of historical facts included in this Form 10-K, may be
considered forward-looking statements.  Management cautions that these
statements are further qualified by important factors that could cause actual
results to differ materially from those in the forward-looking statements.  Such
factors include without limitation, general economic change, legislative
regulation and market change.

     The forward-looking statements are included in, without limitation,
"Business--Governmental Regulation," "--Liquidity and Capital Resources," "--
Environmental," and "--Recently Issued Accounting Pronouncements."  In the
preparation of the financial statements, management makes various estimates and
assumptions that are forward-looking statements.

Reporting Format

     In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 131, "Disclosures about Segments of an
Enterprise and Related Information" ("SFAS No. 131"), which we adopted in 1998.
SFAS No. 131 requires us to identify and report information regarding operating
segments of our business. The two reportable, operating segments identified are
our company-operated truck stops and our franchise truck stops operations.

                                       15
<PAGE>

     We operate large, multi-service truck stops in the United States. Our
facilities, which are known as Petro Stopping Centers, offer a broad range of
products, services and amenities, including diesel fuel, gasoline, home-style
restaurants, truck preventive maintenance centers and retail merchandise stores
to the highway motorist. We have aggregated our company truck stop operations
into one reportable operating segment based on the distribution of products and
services under one common site facility, classified as a multi-service truck
stop.

     In addition to company operations, we are a franchisor to 23 Petro Stopping
Center locations. We collect royalties and fees in exchange for the use of our
name and for services provided to the franchisees. During 1997, 1998, and 1999,
these revenues were $4.0 million, $4.5 million, and $5.0 million, respectively.
The increases in our franchise revenues are mostly due to the addition of seven
new franchise locations since January 1997. These revenues are included in non-
fuel revenues reported on the accompanying consolidated statements of
operations. We do not allocate any expenses or assets in measuring this
segment's profit and loss.

     We derive our revenues from:

     .    the sale of diesel and gasoline fuels;

     .    non-fuel items, including the sale of merchandise and offering of
          services including truck tire sales and preventative maintenance,
          weighing scales, showers, laundry, video games, franchise royalties
          and other operations; and

     .    restaurant operations which include Iron Skillet and fast-food
          operations.

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

                    SUMMARY OF HOLDINGS' SOURCES OF REVENUE

<TABLE>
<CAPTION>
                                                       Year Ended December 31,
                       ---------------------------------------------------------------------------------------------
                                   1997                          1998                            1999
                       ---------------------------     ----------------------------     ----------------------------
                                                      (dollars in thousands)
<S>                    <C>                             <C>                              <C>
Fuel                        $513,571          74.9%          $464,025          71.0%         $520,680           72.3%
Non-Fuel                     122,609          17.9%           136,145          20.8%          143,468           19.9%
Restaurant                    49,549           7.2%            53,246           8.2%           55,777            7.8%
                       -------------    ----------     --------------    ----------     -------------    -----------
Total Net Revenue           $685,729         100.0%          $653,416         100.0%         $719,925          100.0%
                       =============    ==========     ==============    ==========     =============    ===========
 </TABLE>

     Our fuel revenues and cost of sales include federal and state motor fuel
taxes. Such taxes were $192.7 million, $203.3 million, and $211.6 million for
the years ended December 31, 1997, 1998, and 1999, respectively.

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

General

Holdings Formation

     Holdings was formed in July 1999 as a holding partnership and conducts
substantially all of its operations through the Operating Partnership.  As a
result of the Recapitalization (described below), the partners of Holdings are
as follow:

                                       16
<PAGE>

          General Partner
           Petro, Inc.

          Limited Partners
           Various individuals and entities affiliated with the Cardwell Group
           Mobil Long Haul, Inc. an affiliate of Mobil Oil Corporation
           Volvo Petro Holdings, L.L.C., an affiliate of Volvo Trucks North
           America, Inc.
           Petro Warrant Holdings Corporation

     Petro, Inc. and various individuals and entities affiliated with Petro,
Inc. are controlled by the president of Holdings, J.A. Cardwell, Sr. Petro, Inc.
is a retailer of truck and passenger car tires and holds other investments that
include limited and general partner interests in Holdings and the Operating
Partnership and mandatorily redeemable preferred partnership interests in
Holdings.

Recapitalization

     On July 23, 1999, the Operating Partnership, its partners and Volvo Trucks
consummated a series of transactions pursuant to which:

     .    We were formed, and substantially all of the present owners in
          the Operating Partnership other than Chartwell and Kirschner,
          exchanged their interests in the Operating Partnership for identical
          interests in Holdings and became owners of Holdings;

     .    Petro Holdings Financial Corporation was formed for the purpose of
          serving as co-issuer of the 15.0% senior discount notes issued by
          Holdings;

     .    Petro Holdings Financial Corporation, the Operating Partnership and
          its subsidiary, Petro Financial Corporation, became subsidiaries of
          Holdings;

     .    Petro Warrant Holdings Corporation was formed for the purpose of
          owning a common limited partnership interest in Holdings and issuing
          the warrants that are exchangeable into all of the common stock of
          Petro Warrant Holdings Corporation;

     .    Volvo Trucks, an affiliate of Volvo, invested $30.0 million to acquire
          a 28.7% common limited partnership interest in Holdings;

     .    Mobil Long Haul, an affiliate of Mobil Oil Corporation, invested an
          additional $5.0 million in Class B convertible preferred partnership
          interests of Holdings;

     .    We purchased the 50.8% common interest in the Operating Partnership
          owned by affiliates of Chartwell for aggregate consideration of
          approximately $69.8 million, which consisted of a $55.0 million cash
          payment and the issuance to Chartwell of approximately $14.8 million
          in accreted value of 15.0% senior discount notes, without warrants;

     .    We purchased the 2.0% common interests in the Operating Partnership
          owned by Kirschner for cash consideration of $2.8 million; and

     .    We, together with co-issuer and wholly-owned subsidiary and Petro
          Holdings Financial Corporation sold for cash $82.7 million in
          principal amount at stated maturity 15.0% senior discount notes,
          together with warrants to purchase all the common stock of Petro
          Warrant Holdings Corporation.

                                       17
<PAGE>

     The foregoing is referred to as the "Recapitalization."  The acquisition of
Chartwell and Kirschner interest was accounted for under the purchase method,
which resulted in adjustments to the recorded value of land of $1.4 million,
buildings of $5.6 million, equipment of $1.9 million, and furniture and
fixtures of $1.9 million, and the recording of goodwill in the amount of $36.4
million that is being amortized over a period of 20 years.

     As part of the Recapitalization, Holdings issued 82,707 units each
consisting of $1,000 principal amount at stated maturity of 15.0% senior
discount notes due 2008 and one warrant. The warrants are exchangeable into all
of the common stock of Petro Warrant Holdings Corporation. As consideration for
the 15.0% notes and warrants, Holdings received cash proceeds of $40.0 million,
of which $30.3 million was allocated to the 15.0% notes and $9.7 million was
allocated to the warrants. Holdings acquired the warrants from Petro Warrant
Holdings Corporation for $9.7 million. Petro Warrant Holdings Corporation, in
turn, invested the $9.7 million to acquire a 10.0% common limited partnership
interest in Holdings. The amount allocated to the warrants is based on Petro
Warrant Holdings Corporation's 10.0% interest in Holdings and on Holdings'
common equity value, net of an estimate of Recapitalization costs not borne by
Petro Warrant Holdings Corporation, established in conjunction with the
admission of Volvo Trucks and the purchase of Chartwell's and Kirschner's
interests in the Operating Partnership. Upon an exchange event, such as a change
in control, IPO, or bankruptcy of Holdings, the warrants will be exchanged, for
no additional consideration, for 100.0% of the common stock of Petro Warrant
Holdings Corporation, whose sole asset currently is approximately 10.0% of the
common limited partnership interests in Holdings. Prior to August 1, 2002,
Holdings has the right to repurchase the warrants at a price per warrant
initially equal to $134.87 and increasing to $155.87 on August 1, 2000 and
$178.37 on August 1, 2001. If the warrants have not been exchanged by August 1,
2004, we will be obligated to repurchase the warrants at fair market value. As a
result of the contingent repurchase obligation, the warrants have been recorded
outside partners' deficit as contingently redeemable warrants in the audited
consolidated balance sheets included herein. Future changes (determined each
balance sheet date in a manner consistent with the determination of market price
of partnership interests described in Note 12 in our audited consolidated
financial statements included herein), if any, in the value of the warrants will
be charged directly to partners' capital (deficit).

     As a result of the Recapitalization, we are the owner of approximately
99.5% of the common partnership interests of the Operating Partnership, and the
minority interest is owned by affiliates of the Cardwell Group. The common
limited partnership interests of Holdings are owned by:

     Cardwell Group:
       General partnership interest.................................      1.1%
       Limited partnership interest.................................     50.5%
     Volvo Trucks...................................................     28.7%
     Mobil Long Haul................................................      9.7%
     Petro Warrant Holdings Corporation.............................     10.0%

     The mandatorily redeemable preferred partnership interests of Holdings are
owned by Mobil Long Haul ($17.0 million) and the Cardwell Group ($7.6 million).

     The formation of Holdings has been reflected in our consolidated financial
statements in a manner similar to a pooling-of-interests.  Accordingly, our
consolidated financial statements reflect the historical amounts and results of
operations of Holdings' consolidated subsidiaries as if the exchange referred to
above had occurred on the first day of the first period presented.

     The Operating Partnership also amended its senior collateralized credit
facility as part of the Recapitalization. The new senior credit facility
consists of an $85.0 million revolving credit facility and a $40.0 million term
loan B. The proceeds of the new term loan B were used to repay principal amounts
due under the term loans A and B and the expansion facility of the previous
senior credit facility of approximately $38.1 million, plus accrued interest.
The new senior credit facility is collateralized by substantially all of the
Operating Partnership's assets and contains certain covenants as described in
Note 7 to the notes to the consolidated financial statements included herein.

                                       18
<PAGE>

     As further discussed above, Holdings funded a portion of its purchase of
the Chartwell and Kirschner interests in the Operating Partnership with debt.
Holdings currently has no operations of its own and is, therefore, dependent
upon the earnings and cash flows of the Operating Partnership to satisfy its
obligations under the 15.0% senior discount notes and warrants.

1997 Recapitalization

     On January 30, 1997, the Operating Partnership consummated a transaction
entered into in October 1996, under which:

     .    Chartwell invested $20.7 million and Mobil Long Haul invested $15.0
          million, to directly acquire the 40.0% common partnership interests of
          the Operating Partnership then owned by The Fremont Group, Inc.;

     .    The Cardwell Group maintained their capital investment in the
          Operating Partnership; and

     .    Kirschner, a company franchisee, invested $1.0 million in the
          Operating Partnership in exchange for a 2.0% common partnership
          interest.

     Following the investment by Mobil Long Haul, Chartwell and Kirschner, the
common partnership interests of the Operating Partnership were owned as follows:

               Chartwell..........................................   50.8%
               Cardwell Group.....................................   39.9%
               Mobil Long Haul....................................    7.3%
               Kirschner..........................................    2.0%

     The preferred partnership interests were owned by Mobil Long Haul ($12.0
million) and the Cardwell Group ($7.6 million). Chartwell and the Cardwell Group
owned both general and limited partnership interests and Mobil Long Haul and
Kirschner owned only limited partnership interests.

     As part of the 1997 recapitalization, the Operating Partnership issued
$135.0 million of 10 1/2% notes due 2007 and repurchased approximately 94.0% of
the existing 12 1/2% notes due 2002 and approximately 100% of related
outstanding debt warrants. The Operating Partnership also amended its then
existing senior collateralized credit facility. The credit agreement consisted
of a $25.0 million revolving credit facility, a $14.0 million term loan A, a
$30.0 million term loan B and a $40.0 million expansion facility. In connection
with the issuance of the 10 1/2% notes, the Operating Partnership capitalized
approximately $14.5 million of debt issuance costs and wrote off, as an
extraordinary item, $12.7 million of debt restructuring costs. These costs
included the write-off of deferred financing costs relating to the replacement
of the prior credit agreement, the retirement of term A and B loans, the
replacement of the 12 1/2% notes, and the related debt warrants.

     At December 31, 1996, the Operating Partnership had incurred and accrued
for $2.5 million of one-time severance and hiring costs attributable to the
removal and replacement prior to December 31, 1996 of the Operating
Partnership's pre-1997 recapitalization management. In connection with the 1997
recapitalization, the new partners required that old management be replaced, and
the Operating Partnership incurred costs and expenses with regard to their
termination as well as costs associated with their replacement with new
management. The termination costs, which were incurred during 1996, approximated
$1.2 million, were paid in January 1997, and related to four executive officers
and other members of management. The remaining costs were primarily related to
the hiring of new management, which occurred in 1996 and were expensed
accordingly. Additionally, during 1996 the Operating Partnership recognized $2.9
million of legal, accounting and other professional fees, which were incurred in
connection with the 1997 recapitalization.

                                       19
<PAGE>

Results of Operations

Year Ended December 31, 1999 Compared to Year Ended December 31, 1998

     Overview. Our net revenues increased 10.2% to $719.9 million from $653.4
million for the year ended December 31, 1999. The increase was primarily due to
a 12.2% or $56.7 million increase in fuel revenues from the prior year as a
result of a 9.7% increase in the average retail-selling price per fuel gallon
from the prior year and a 2.3% or 11.0 million gallon increase in fuel volumes.
Operating expenses increased 7.7% to $100.2 million from $93.0 million in the
prior year due mainly to employee-related costs, our customer loyalty program,
and system project costs and pre-opening expense. General and administrative
expenses decreased slightly to approximately $19.2 million compared to $19.3
million in the prior year. Total costs and expenses were offset by an $836,000
gain due primarily to the disposition of location scale equipment in June, as
part of our continued strategy to focus on our core business.

     Fuel. Revenues increased 12.2% to $520.7 million in 1999 from $464.0
million in 1998. Fuel revenues increased primarily due to a 9.7% increase in our
average retail-selling price per gallon stemming from higher fuel costs compared
to prior year. The increase in fuel revenues was also due to a 2.3% or 11.0
million gallon increase in fuel volumes. Management believes the increased
volume is due primarily to our  customer loyalty program implemented on
September 30, 1999.  Fuel margin decreased by 4.6% to $39.2 million in 1999
compared to $41.1 million for the prior year due mainly to rising fuel costs,
which we are not always able to immediately pass on to our customers.

     Non-Fuel. Revenues increased 5.4% to $143.5 million in 1999 from $136.1
million in the prior year. The increase in non-fuel revenues is primarily due to
an 8.8% or $2.5 million increase in oil, new and used tire and repair part sales
and a 5.7% or $2.5 million increase in sales at our retail stores. Gross margins
increased 5.5% to $78.8 million in 1999 from $74.7 million in the prior year. We
believe the improved margins reflect the result of our continued focus on
improving profitability in these areas by increasing efficiency through greater
procedural controls and improved retailing.

     Restaurant. Revenues increased 4.8% to $55.8 million in 1999 from $53.2
million in 1998. We believe revenues were enhanced by the implementation of new
menus and featured meal specials, resulting in the average ticket price
increasing by 4.5%. Gross margin in the restaurants improved by 4.5% or $1.7
million due to increased revenues resulting from the implementation of the menu
changes and featured meal specials.

     Costs and Expenses. Total costs and expenses increased 10.8% to $695.4
million in 1999 from $627.5 million in 1998. Cost of sales increased $62.6
million or 12.5% from the prior year primarily due to higher fuel costs in the
current year. Operating expenses increased $7.1 million or 7.7%, to $100.2
million in 1999. The increase is mainly due to a $4.2 million increase in
employee-related costs, a $1.1 million increase in our customer loyalty program,
and a $738,000 increase in system project costs and pre-opening expense. General
and administrative expenses decreased $175,000 or 0.9% compared to $19.3 million
in 1998. These costs and expenses were offset by a net gain of $836,000 mostly
related to the disposition of location scale equipment as part of our strategy
to focus on our core business.

     Recapitalization Costs. Our income was impacted by approximately $1.8
million of expenses, primarily related to legal, accounting and other
professional fees, incurred in connection with the Recapitalization.

     Equity in Loss of Affiliate. We recognized a $593,000 loss primarily from
startup costs related to our investment in the Wheeler Ridge facility in
Southern California, which opened in June 1999.

     Interest Expense, net. Interest expense, net increased to $23.3 million in
1999 compared to $20.0 million in 1998 primarily due to the issuance of the
15.0% senior discount notes by Holdings in July 1999.

                                       20
<PAGE>

     Extraordinary item. Extraordinary item reflects a charge to earnings of
$2.0 million for the write-off of unamortized deferred debt issuance costs
associated with retired debt and related to the Recapitalization.

Year Ended December 31, 1998 Compared to Year Ended December 31, 1997

     Overview. Our net revenues decreased 4.7% from $685.7 million to $653.4
million for the year ended December 31, 1998. The decrease was due primarily to
a 9.6% or $49.5 million decrease in fuel revenues from the prior year as a
result of a 14.0% decline in the average retail-selling price per fuel gallon
from the prior year which was partially offset by a 4.3% or 19.6 million gallon
increase in fuel volumes. The decrease in fuel revenues was partially offset by
an 11.0% or a $13.5 million increase in non-fuel sales and a 7.5% or a $3.7
million increase in restaurant sales from the prior year. Operating expenses
increased 8.7% to $93.0 million from $85.6 million in the prior year due mainly
to employee related costs and the full year effects of the addition of two new
company-operated locations in 1997. General and administrative expenses
increased 13.5% to approximately $19.3 million from $17.0 million for the same
period in the prior year. This increase was principally due to employee related
expenses from expanding operations and system costs.

     Fuel. Revenues decreased 9.6% to $464.0 million in 1998 from $513.6 million
in 1997. Fuel revenues decreased primarily due to a 14.0% decline in the average
retail-selling price per gallon compared to 1997. The decrease in fuel prices
was offset by a 4.3% or 19.6 million gallon increase in fuel volumes, which
management believes, together with improved pricing strategies, increased fuel
margin dollars by 9.4% or $3.5 million compared to the prior year. On a
comparable unit basis, fuel volumes increased 0.8% or 3.6 million gallons in
1998 compared to prior year and fuel margin dollars increased 5.8% or $2.2
million in 1998 compared to prior year. A Petro Stopping Center is considered a
"comparable unit" as to a particular period in the current year if it was open
during the same period of the prior year.

     Non-Fuel. Revenues increased 11.0% to $136.1 million in 1998 from $122.6
million in 1997. On a comparable unit basis, sales increased 8.0% or $9.9
million over the prior year. The increase in non-fuel revenues is primarily due
to a 21.5% increase in tire and repair part sales and a 9.3% increase in sales
at our retail stores and the full year effects of the addition of two new
company-operated locations in 1997. Gross margins increased 12.3% or $8.2
million to $74.7 million in 1998 from $66.5 million in 1997.

     Restaurant. Revenues increased 7.5% to $53.2 million in 1998 from $49.5
million in 1997. On a comparable unit basis, revenues increased 2.5% or $1.2
million compared to the prior year. Revenue increases were primarily due to the
full year effects of the two new locations added in 1997. Management believes
revenues were enhanced by the implementation of new menus and featured menu
specials. Gross margin in the restaurants improved by 8.9% or $3.1 million
overall and 4.0% or $1.4 million on a comparable unit basis, due to continued
management focus on costs and implementation of menu changes, resulting in the
average ticket price increasing by 1.5%.

     Costs and Expenses. Total costs and expenses decreased 5.4% to $627.5
million in 1998 from $663.5 million in 1997. On a comparable unit basis, total
costs and expenses decreased 8.6% or $57.3 million in 1998 compared to the prior
year. Costs of sales decreased $47.2 million or 8.6% from the prior year
primarily due to lower fuel costs experienced during the current year. Operating
expenses increased $7.5 million or 8.7% to $93.0 million in 1998. The increase
is mainly due to an 8.1% increase related to employee costs, including the full
year effect of our two new company-operated locations added in 1997.  During
1998 we also increased our provision for self-insurance claims by approximately
$1.0 million principally due to a change in estimates related to specific
claims, as well as the full year effects of having two new company-operated
locations which were opened in August and September of 1997. In addition, the
allowance for doubtful accounts was increased principally to reserve for a
specific customer who filed for bankruptcy protection. This specific reserve
approximated $180,000. General and administrative expenses increased 13.5% to
approximately $19.3 million from $17.0 million in 1997. This increase was
principally due to a $1.8 million or 18.5% increase in employee related expenses
from our expanding operations and system costs totaling $726,000.

                                       21
<PAGE>

     Interest Expense, net. Interest expense, net decreased 1.2% to $20.0
million in 1998 compared to 1997. This decrease was due primarily to lower debt
levels as a result of principal payments and a 0.25% per annum decrease in
interest rates on term loans A and B under the previous senior credit facility.

     Extraordinary item. Extraordinary item in 1997 reflects a charge to
earnings of $12.7 million for the write-off of debt restructuring costs relating
to the 1997 recapitalization.

     Cumulative effect of a change in accounting principle. Cumulative effect of
a change in accounting principle in 1998 reflects the write-off of $3.3 million
of previously capitalizable costs. These costs, mainly incurred in prior years,
were related to start-up and organization costs, and as required by the American
Institute of Certified Public Accountants (AICPA) Statement of Position (SOP)
98-5, were expensed upon adoption during the fourth quarter of 1998. Cumulative
effect of a change in accounting principle in 1997 also reflects the write-off
of $1.6 million of costs previously allowed to be capitalized. These costs are
related to process reengineering activities and, as required by Emerging Issues
Task Force (EITF) Issue No. 97-13, were written off during the fourth quarter of
1997.

Liquidity and Capital Resources

     In recent years, our principal sources of liquidity have been:

     .    The proceeds from the issuance of our debt securities, which raised
          gross proceeds of $135.0 million in 1997 (10 1/2% notes) and $40.0
          million in 1999 (the 15.0% notes of $30.3 million and warrants of $9.7
          million);

     .    Borrowings under our senior credit facility, which consists of an
          $85.0 million revolving credit facility and a $40.0 million term loan
          B, currently providing for an aggregate borrowing up to $125.0
          million;

     .    Sales of common and preferred partnership interests which raised $11.1
          million in 1997 and $35.0 million in 1999;

     .    Cash flows from operations, which provided $30.3 million, $11.3
          million, and $31.0 million in 1997, 1998, and 1999, respectively. The
          large increase for 1997 was primarily due to the 1997
          recapitalization, in which we redeemed approximately 94.0% of the
          outstanding 12 1/2% notes and issued our 10 1/2% notes on which
          initial interest payments of approximately $14.2 million per year,
          were not due until February 1, 1998, and normal fluctuations in the
          timing of payments to Mobil Diesel Supply for fuel purchases. The
          large increase for 1999 was primarily due to normal fluctuations in
          the timing of payments to Mobil Diesel Supply for fuel purchases and
          variations in the timing of payments related to trade payables; and

     .    Our cash flow used in investment activities were $15.8 million, $19.7
          million, and $96.0 million in 1997, 1998, and 1999, respectively. This
          increase is due primarily to additional investment in property and
          equipment of $15.9 million, $20.3 million, and $36.6 million in 1997,
          1998, and 1999, respectively. Also included for 1999 is the $57.8
          million related to the purchase of the common interests in the
          Operating Partnership owned by Kirschner and Chartwell.

     .    Cash flow (used in) or provided by financing activities were $7.1
          million, ($3.3) million, and $66.6 million in 1997, 1998, and 1999,
          respectively. These fluctuations are almost entirely due to our
          borrowings and repayments in the ordinary course of business with the
          exception of 1997 and 1999, which are related to the 1997
          recapitalization and the July 23, 1999 Recapitalization transaction,
          respectively.

     We had negative working capital of $3.1 million and $8.7 million at
December 31, 1998 and 1999, respectively.  Negative working capital is normal in
the truckstop industry.  Diesel fuel inventory turns

                                       22
<PAGE>

every two to three days, while payment is generally required in 12-15 days.
Approximately 74.0% of our sales are cash (or the equivalent in the case of
credit card sales or sales paid for by check on a daily basis by third-party
billing companies).

     The new senior credit facility consists of an $85.0 million revolving
credit facility and a $40.0 million term loan B. As part of the
Recapitalization, we used the proceeds from the term loan B to repay principal
amounts due under our previous senior credit facility of $38.1 million, plus
accrued interest.

     Under this new senior credit facility, subject to certain covenants, the
revolving credit facility may be used for working capital and to fund the
acquisition and development of new Petro Stopping Centers.  Any principal amount
up to $60.0 million outstanding at July 23, 2002 will automatically convert to a
term loan A.  Following this conversion, $25.0 million will continue to be
available on a revolving basis until maturity at July 23, 2004.  The outstanding
balance under term loan A, if any, will amortize in eight equal quarterly
installments following the conversion.  Interest on drawn funds is paid monthly
at 1.5% above the bank's base rate or 2.75% over the Eurodollar rate (the rate
is determined at time of borrowing, at our option).  Commitment fees of .5% on
undrawn funds are paid quarterly. At December 31, 1999, we had standby letters
of credit issued for approximately $2.4 million resulting in availability of
approximately $82.6 million on the revolving credit facility. As of December 31,
1999, there were no borrowings on the revolving credit facility.

     Principal payments on the new term loan B are due quarterly, beginning
September 30, 2000. The first sixteen quarterly payments due are $250,000 each.

     Any funds drawn on the new senior credit facility are secured by
substantially all of the Operating Partnership's assets and its subsidiaries and
the pledge by us of all the partnership interests in the Operating Partnership.
The new senior credit facility is guaranteed by us and all subsidiaries of the
Operating Partnership.

     Accrual of dividends on mandatorily redeemable preferred partnership
interests amounted to $2.4 million (including $.06 million from minority
partners in consolidated subsidiaries) for the year ended December 31, 1999. The
dividends are only payable in cash if permitted by our then existing debt
instruments.  The indenture, the notes and the new senior credit facility
restrict payment of dividends on mandatorily redeemable preferred partnership
interests.

     We are self-insured, paying our own employment practices, general
liability, workers' compensation, and group health benefit claims, up to stop-
loss amounts ranging from $50,000 to $250,000 on a per-occurrence basis. For the
year ended December 31, 1999, we paid $8.6 million on claims related to these
self-insurance programs.  Provisions for these self-insurance programs are made
for both estimated losses on known claims and claims incurred but not reported,
based on claims history.  For the year ended December 31, 1999, aggregated
provisions amounted to $8.3 million. At December 31, 1999, the aggregated
accrual amounted to approximately $4.3 million, which we believe is adequate to
cover both reported and incurred but not reported claims.

     Capital expenditures totaled $15.9 million, $20.3 million, and $36.6
million for 1997, 1998, and 1999, respectively.  Included in capital
expenditures for both 1998 and 1999 were funds spent on new and existing Petro
Stopping Centers, in addition to information systems projects.

     We currently expect to invest approximately $55.0 million during the year
2000 on capital expenditures. We currently plan to open four new truck stops,
during the year 2000, with a cost of approximately $10.0 million to $11.0
million per site including land acquisition costs. Approximately $10.0 million
will be spent on regular capital maintenance and volume building projects. These
capital outlays will be funded through additional bank financing under the new
senior credit facility and internally generated cash.

     Management believes that internally generated funds, together with amounts
available under the new senior credit facility, will be sufficient to satisfy
our cash requirements for operations through 2000

                                       23
<PAGE>

and the foreseeable future thereafter. We also expect that current and future
expansion and acquisitions will be financed from funds generated from
operations, the new senior credit facility and to the extent necessary,
additional financing.

Environmental

     Accruals for environmental matters are recorded in operating expenses when
it is probable that a liability has been incurred and the amount of the
liability can be reasonably estimated. The measurement of environmental
liabilities is based on an evaluation of currently available facts with respect
to each individual site and considers factors such as existing technology,
presently enacted laws and regulations and prior experience in remediation of
contaminated sites. Such liabilities are exclusive of claims against third
parties and are not discounted.

     Contingencies under environmental laws and regulations may require us to
take action to correct the effects on the environment of prior disposal
practices or releases of chemical or petroleum substances by us or other
parties. We have accrued liabilities for environmental remediation activities
consistent with the policy set forth in Note 2 to notes to consolidated
financial statements included herein. At December 31, 1998 and 1999, this
accrual amounted to approximately $274,000 and $122,000, respectively.  In
management's opinion, these accruals were appropriate based on existing facts
and circumstances. We accrue for environmental remediation expenses based upon
initial estimates obtained from contractors engaged to perform the remediation
work as required by local, state and federal authorities. It is often difficult
to predict the extent and the cost of environmental remediation until work has
commenced and the full scope of the contamination determined. Accruals are
periodically evaluated and updated as information regarding the nature of the
clean up work is obtained. In the event that future remediation expenditures are
in excess of amounts accrued, we do not anticipate that they will have a
material adverse effect on our consolidated financial position or results of
operations of Holdings. Actual results, however, could differ from estimated
amounts and those differences could be material. At December 31, 1999, we have
recognized approximately $162,000 in the consolidated balance sheet related to
recoveries of remediation costs from third parties.

Recently Issued Accounting Pronouncements

     In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, "Accounting for Derivative Instruments
and Hedging Activities" ("SFAS No. 133"). SFAS No. 133 establishes accounting
and reporting standards requiring that every derivative instrument (including
derivative instruments embedded in other contracts) be recorded in the balance
sheet as either an asset or liability measured at its fair value. SFAS No. 133
requires that changes in a derivative's fair value be recognized currently in
earnings unless specific hedge accounting criteria are met. Special accounting
for qualifying hedges allow a derivative's gain and loss to offset related
results on the hedged item in the income statement and requires that a company
must formally document, designate, and assess the effectiveness of transactions
that receive hedge accounting. SFAS No. 133 was originally effective for fiscal
years beginning after June 15, 1999, but has been postponed by Statement of
Financial Accounting Standard No. 137, "An Amendment of SFAS No. 133", for one
year with a mandatory effective date for fiscal years beginning after June 15,
2000. Additionally, SFAS 133 has been modified regarding recognition in the
balance sheet of an embedded derivative that is required to be separated from
the host contract. At the date of initial application of SFAS 133, an entity may
choose either to recognize these embedded derivatives or to select either
January 1, 1998 or January 1, 1999, as a transition date for embedded
derivatives. A company may also implement the statement as of the beginning of
any fiscal quarter after issuance (that is, fiscal quarters beginning June 16,
1999 and thereafter). SFAS No. 133 cannot be applied retroactively. Management
has not yet quantified the impact of adopting SFAS No. 133 on our financial
statements and has not determined the timing of, or method of, adoption.
However, the implementation of SFAS No. 133 could increase volatility in
earnings.

                                       24
<PAGE>

Item 7A.   Quantitative and Qualitative Disclosures about Market Risk

     Historically, we have not entered into significant long-term contracts with
fuel suppliers and engaged in only limited hedging activities.  On occasion, we
have purchased fuel in the forward contract market.  As part of the
Recapitalization, we terminated our previous fuel and lubricant supply
agreements and entered into new ten-year supply agreements with Mobil Oil
Corporation under which Mobil Oil Corporation will supply the company-operated
Petro Stopping Centers' diesel fuel requirements as well as gasoline
requirements in those markets in which Mobil branded diesel and gasoline are
available for sale.  Under the lubricant supply agreement, we are allowed to
purchase such quantities of lubricants as we require at the prices set forth in
the agreement.  See Note 9 to notes to consolidated financial statements for the
year ended December 31, 1999.

     As of December 31, 1998 and 1999, the carrying amounts of certain financial
instruments, employed by us, including cash and cash equivalents, accounts
receivable, trade accounts payable and amounts due from/to affiliates are
representative of fair value because of the short-term maturity of these
instruments. The carrying amounts of notes payable approximate fair value due to
the floating nature of the interest rate. Our principal market risk as it
relates to long term debt is exposure to changes in interest rates.  The fair
value of the 10 1/2%, 12 1/2% and the 15.0% notes has been estimated based on
quoted market prices for the same or similar issues or by discounting the future
cash flows using rates currently available for debt of similar terms and
maturity. The fair value of all derivative financial instruments is the amount
at which they could be settled, based on quoted market prices or estimates
obtained from dealers.

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

<TABLE>
<CAPTION>
                                         1998                   1999
                                       Carrying               Carrying
                                        Amount   Fair Value    Amount   Fair Value
                                       --------  -----------  --------  -----------
                                                    (in thousands)
<S>                                    <C>       <C>          <C>       <C>
Balance sheet financial instruments
 Long-term debt                        $181,328    $188,416   $226,292    $220,002
Other financial instruments
 Interest rate swap agreements               --        (153)        --        (264)
</TABLE>

     We have only limited involvement with derivative financial instruments and
do not use them for trading purposes. We use derivatives to manage well-defined
interest rate risks. At December 31, 1999, we were party to an interest rate
swap agreement with an aggregate principal amount of $30.0 million. Under the
agreement, we pay a fixed rate of 6.15% in exchange for a floating rate based on
LIBOR on the aggregate principal amount as determined in three-month intervals.
The transaction effectively changes a portion of our interest rate exposure from
a floating rate to a fixed rate basis. The effect of the swap was to increase
the rate we were required to pay by 0.66%, which resulted in additional interest
expense of approximately $264,000.

     The primary risks associated with swaps are the exposure to movements in
interest rates and the ability of the counterparties to meet the terms of the
contracts. Based on review and assessment of counterparty risk, we do not
anticipate non-performance by the other party. We do not obtain collateral or
other security to support financial instruments subject to credit risk, but
monitor the credit standing of counterparties.

                                       25
<PAGE>

Item 8.  Financial Statements and Supplementary Data


                     PETRO STOPPING CENTERS HOLDINGS, L.P.
                          CONSOLIDATED BALANCE SHEETS
                                (in thousands)

<TABLE>
<CAPTION>
                                                                                              December 31,           December 31,
                                                                                                 1998                   1999
                                                                                            ---------------        ---------------
                                                                                             (As Restated)
                                             Assets
<S>                                                                                         <C>                    <C>
Current assets:
  Cash and cash equivalents                                                                 $        13,183        $        14,741
  Trade accounts receivable, net                                                                     10,631                  7,439
  Inventories, net                                                                                   16,459                 21,989
  Other current assets                                                                                2,892                  3,120
  Due from affiliates                                                                                 1,163                  1,727
                                                                                            ---------------        ---------------
     Total current assets                                                                            44,328                 49,016

  Property and equipment, net                                                                       158,798                191,612
  Deferred debt issuance costs, net                                                                  11,229                 13,815
  Other assets                                                                                        9,168                 11,597
  Goodwill, net                                                                                           -                 35,504
                                                                                            ---------------        ---------------
     Total assets                                                                           $       223,523        $       301,544
                                                                                            ===============        ===============

                    Liabilities and Partners' Capital (Deficit)

Current liabilities:
  Current portion of long-term debt                                                         $         4,967        $         1,001
  Trade accounts payable                                                                              4,214                 10,767
  Accrued expenses and other liabilities                                                             21,439                 20,426
  Due to affiliates                                                                                  16,768                 25,537
                                                                                            ---------------        ---------------
     Total current liabilities                                                                       47,388                 57,731

  Long-term debt, excluding current portion                                                         176,361                225,291
                                                                                            ---------------        ---------------
     Total liabilities                                                                              223,749                283,022
                                                                                            ---------------        ---------------
  Commitments and contingencies

  Minority interest in consolidated subsidiaries                                                     21,290                      -

  Mandatorily redeemable preferred partnership interests                                             23,172                 30,552

  Contingently redeemable warrants                                                                        -                  9,700

  Partners' capital (deficit):
   General partners'                                                                                   (909)                (1,077)
   Limited partners'                                                                                (43,212)               (20,097)
   Negative capital accounts of minority partners in consolidated
    subsidiaries                                                                                       (567)                  (556)
                                                                                            ---------------        ---------------
     Total partners' capital (deficit)                                                              (44,688)               (21,730)
                                                                                            ---------------        ---------------

     Total liabilities and partners' capital (deficit)                                      $       223,523        $       301,544
                                                                                            ===============        ===============
</TABLE>

         See accompanying notes to consolidated financial statements.

                                       26
<PAGE>

                     PETRO STOPPING CENTERS HOLDINGS, L.P.
                     CONSOLIDATED STATEMENTS OF OPERATIONS
                                (in thousands)

<TABLE>
<CAPTION>
                                                                      Year Ended          Year Ended         Year Ended
                                                                     December 31,        December 31,       December 31,
                                                                         1997                 1998              1999
                                                                     -------------       -------------      -------------
                                                                     (As Restated)       (As Restated)
<S>                                                                  <C>                 <C>                <C>
Net revenues:
  Fuel (including motor fuel taxes):                                  $ 513,571            $ 464,025         $ 520,680
  Non-fuel                                                              172,158              189,391           199,245
                                                                      ---------            ---------         ---------
      Total net revenues                                                685,729              653,416           719,925
Costs and expenses:
  Cost of sales
     Fuel (including motor fuel taxes)                                  476,033              422,945           481,483
     Non-fuel                                                            70,548               76,451            80,491
  Operating expenses                                                     85,560               93,012           100,156
  General and administrative                                             17,004               19,329            19,154
  Depreciation and amortization                                          14,315               15,749            14,972
  (Gain) loss on disposition of fixed assets                                 31                    6              (836)
                                                                      ---------            ---------         ---------
    Total costs and expenses                                            663,491              627,492           695,420
                                                                      ---------            ---------         ---------

    Operating income                                                     22,238               25,924            24,505

Recapitalization costs                                                        -                    -            (1,819)
Equity in earnings (loss) of affiliate                                        -                    -              (593)
Interest income                                                             956                  729               609
Interest expense                                                        (21,248)             (20,771)          (23,870)
                                                                      ---------            ---------         ---------

    Income (loss) before extraordinary item and cumulative
       effect of a change in accounting principle                         1,946                5,882            (1,168)

Extraordinary item - write - off of debt
       restructuring costs associated with retired debt                 (12,745)                   -            (2,016)

Cumulative effect of a change in accounting principle                    (1,579)              (3,250)                -
                                                                      ---------            ---------         ---------
Income (loss) before minority interest                                  (12,378)               2,632            (3,184)

Minority interest in income (loss) of consolidated subsidiaries          (6,642)               1,286             1,454
                                                                      ---------            ---------         ---------
Net income (loss)                                                        (5,736)               1,346            (4,638)

Accrual of preferred return in mandatorily redeemable preferred
     partnership interests                                                 (760)                (935)           (1,762)
                                                                      ---------            ---------         ---------

Net income (loss) available to common partners                        $  (6,496)           $     411         $  (6,400)
                                                                      =========            =========         =========
</TABLE>

         See accompanying notes to consolidated financial statements.

                                       27
<PAGE>

                     PETRO STOPPING CENTERS HOLDINGS, L.P.
       CONSOLIDATED STATEMENTS OF CHANGES IN PARTNERS' CAPITAL (DEFICIT)
                                (in thousands)

<TABLE>
<CAPTION>
                                                                                               Negative Capital
                                                                General          Limited          Accounts of          Total
                                                               Partners'        Partners'      Minority Partners      Partners'
                                                                Capital          Capital        in Consolidated       Capital
                                                               (Deficit)        (Deficit)        Subsidiaries        (Deficit)
                                                               ---------        ---------      -----------------     ----------
<S>                                                            <C>              <C>            <C>                   <C>

Balance, December 31, 1996                                      $(8,685)        $(23,351)           $(515)           $(32,551)

  Conversion of Cardwell interests in connection
      with the 1997 Recapitalization                              7,972           (7,939)               -                  33
  Direct purchase of its share of Operating Partnership
      interests formerly owned by The Fremont Group, Inc.
      by Mobil in connection with the 1997                            -           10,110                -              10,110
       Recapitalization
  Capital contribution by Mobil in connection with the
      1997 Recapitalization                                           -            4,218                -               4,218
  Assignment of mandatorily redeemable preferred
      partnership interests in connection with the
      1997 Recapitalization                                           -          (19,600)               -             (19,600)
  Accrual of preferred return on mandatorily
      redeemable preferred partnership interests                    (15)            (745)               -                (760)

  Net loss                                                         (172)          (5,500)             (64)             (5,736)
                                                                -------         --------            -----            --------
Balance, December 31, 1997 (as Restated)                           (900)         (42,807)            (579)            (44,286)
   Accrual of preferred return on mandatorily
      redeemable preferred partnership interests                    (18)            (917)               -                (935)
   Accrual of partner minimum tax distributions                     (18)            (795)               -                (813)

  Net income                                                         27            1,307               12               1,346
                                                                -------         --------            -----            --------
Balance, December 31, 1998 (as Restated)                           (909)         (43,212)            (567)            (44,688)
   Accrual of preferred return on mandatorily
      redeemable preferred partnership interests                    (27)          (1,735)               -              (1,762)
   Partners' minimum tax distributions                                -             (642)               -                (642)
   Cash contributions                                                 -           39,700                -              39,700
   Net loss                                                         (34)          (4,615)              11              (4,638)
   Assignment of fair value of contingently redeemable
      warrants                                                     (107)          (9,593)               -              (9,700)
                                                                -------         --------            -----            --------
Balance, December 31, 1999                                      $(1,077)        $(20,097)           $(556)           $(21,730)
                                                                =======         ========            =====            ========
</TABLE>

         See accompanying notes to consolidated financial statements.

                                       28
<PAGE>

                     PETRO STOPPING CENTERS HOLDINGS, L.P.
                     CONSOLIDATED STATEMENTS OF CASH FLOWS
                                (in thousands)

<TABLE>
<CAPTION>
                                                                               Year Ended         Year Ended          Year Ended
                                                                              December 31,       December 31,        December 31,
                                                                                  1997               1998                1999
                                                                             -------------       ------------        ------------
                                                                             (As Restated)       (As Restated)
<S>                                                                          <C>                 <C>                 <C>
Cash flows provided by operating activities:
 Net income (loss)                                                             $  (5,736)           $  1,346           $ (4,638)
 Adjustments to reconcile net income (loss) to net cash provided by
     operating activities:
   Minority interest in earnings of consolidated subsidiaries                     (6,642)              1,286              1,454
   Depreciation and amortization                                                  14,315              15,749             14,972
   Extraordinary item-write-off of deferred financing costs associated with
     retired debt                                                                 12,745                   -              2,016
   Cumulative effect of a change in accounting principle                           1,579               3,250                  -
   Deferred debt issuance cost amortization                                        1,749               1,637              1,681
   Accretion of original issue discount                                               47                   -              3,440
   Bad debt expense                                                                  271                 236                246
   Equity in loss of affiliate                                                         -                   -                593
   Gain on disposition of assets                                                       -                   -               (836)
 Increase (decrease) from changes in:
   Trade accounts receivable                                                      (2,418)              1,681              2,946
   Inventories                                                                    (1,167)                (97)            (5,530)
   Other current assets                                                           (1,147)               (341)              (228)
   Due from affiliates                                                             1,111                 114               (564)
   Due to affiliates                                                              16,663              (3,340)             9,889
   Trade accounts payable                                                         (6,373)             (5,136)             6,553
   Accrued expenses and other liabilities                                          5,331              (5,052)            (1,013)
                                                                               ---------            --------           --------
     Net cash provided by operating activities                                    30,328              11,333             30,981
                                                                               ---------            --------           --------
Cash flows provided by (used in) investing activities:
 Purchases of property and equipment                                             (15,870)            (20,309)           (36,564)
 Proceeds from disposition of assets                                               3,102               2,165              1,425
 Purchase of minority interests in consolidated subsidiary                             -                   -            (57,756)
 Increase in other assets, net                                                    (3,011)             (1,515)            (3,097)
                                                                               ---------            --------           --------
     Net cash used in investing activities                                       (15,779)            (19,659)           (95,992)
                                                                               ---------            --------           --------
Cash flows provided by (used in) financing activities:
 Repayment of expansion loan                                                     (23,639)                  -             (1,400)
 Proceeds from expansion loan                                                      2,000                   -              1,400
 Repayments of long-term debt and capital lease                                 (152,800)             (3,287)           (39,374)
 Proceeds from long-term debt issuance                                           185,190                   -             70,300
 Purchase of warrants from Warrant Holdings                                            -                   -             (9,700)
 Proceeds from the sale of warrants                                                    -                   -              9,700
 Minimum tax distributions to partners                                                 -                   -             (2,100)
 Cash contributions--preferred                                                         -                   -              5,000
 Cash contributions--common                                                        4,218                   -             39,700
 Capital contributions from minority partners of consolidated
     subsidiaries                                                                  6,829                   -                  -
 Payment of debt issuance and consent costs                                      (14,733)                  -             (6,957)
                                                                               ---------            --------           --------
     Net cash provided by (used in) financing activities                           7,065              (3,287)            66,569
                                                                               ---------            --------           --------
Net increase (decrease) in cash and cash equivalents                              21,614             (11,613)             1,558
Cash and cash equivalents, beginning of period                                     3,182              24,796             13,183
                                                                               ---------            --------           --------
Cash and cash equivalents, end of period                                       $  24,796            $ 13,183           $ 14,741
                                                                               =========            ========           ========
</TABLE>

         See accompanying notes to consolidated financial statements.

                                       29
<PAGE>

                     PETRO STOPPING CENTERS HOLDINGS, L.P.
               CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)
                                (in thousands)

<TABLE>
<CAPTION>
                                                                                Year Ended       Year Ended       Year Ended
                                                                               December 31,     December 31,     December 31,
                                                                                 1997               1998            1999
                                                                               ------------     ------------     ------------
<S>                                                                            <C>              <C>              <C>
Supplemental cash flow information--
Interest paid during the period, net of capitalized interest of  $0, $0 and
    $299 in 1997, 1998 and 1999                                                    $14,028          $20,771          $18,256
Non-cash transactions--
Acquisition of property and equipment through capital lease                              -            1,425                -
Preferred return on mandatorily redeemable preferred partnership interests             760              935            1,762
Minimum tax distributions to partners                                                    -              813                -
Assignment of mandatorily redeemable preferred partnership interests
    and accrued but unpaid preferred returns to partners' capital                        -                -           24,331
Preferred return from minority partners of consolidated subsidiaries
   on mandatorily redeemable preferred partnership interests                           875            1,037              617
Partner minimum tax distributions to minority partners of consolidated
     subsidiaries                                                                        -               10                -
Issuance of accreted value of 15.0% New Senior Discount Notes due
     2008, without Warrants to Chartwell                                                 -                -           11,272

Accrual of Fair Value of contingently redeemable warrants                                -                -            9,700
Assignment of mandatorily redeemable preferred partnership interests
    in connection with the 1997 Recapitalization                                    19,600                -                -
Conversion of Cardwell general and limited partner interest in connection
    with the 1997 Recapitalization                                                   7,972                -                -
Direct purchase of interests formerly owned by The Fremont Group, Inc.
    by Mobil in connection with the 1997 Recapitalization                           10,110                -                -
</TABLE>

         See accompanying notes to consolidated financial statements.

                                       30
<PAGE>

                     PETRO STOPPING CENTERS HOLDINGS, L.P.
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


(1) Company Formation and Description of Business

Company Formation

     Petro Stopping Centers Holdings, L.P. ("Holdings"), a Delaware limited
partnership, was formed on July 23, 1999, as a holding partnership and conducts
substantially all of its operations through Petro Stopping Centers, L.P. (the
"Operating Partnership"), which holds the operating assets of Holdings.  As a
result of the Recapitalization (described below), the partners of Holdings are
as follows:

        General Partner
            Petro, Inc.

        Limited Partners
            Various individuals and entities affiliated with the Cardwell Group.
            Mobil Long Haul, Inc., an affiliate of Mobil Oil Corporation
            Volvo Petro Holdings, L.L.C., an affiliate of Volvo Trucks North
             America, Inc.
            Petro Warrant Holdings Corporation

     Petro, Inc. and various individuals and entities affiliated with Petro,
Inc. are controlled by the President of Holdings and are collectively referred
to as the Cardwell Group. Petro, Inc. is a retailer of truck and passenger car
tires and also holds investments that include the general partner interest and a
limited partner interest in Holdings, a general partner interest in the
Operating Partnership, and a portion of Holdings' mandatorily redeemable
preferred partnership interests. For the period from January 30, 1997 to July
23, 1999, the general partners of the Operating Partnership were Petro, Inc. and
an affiliate of Chartwell (described below). Prior to January 30, 1997, the
general partners of the Operating Partnership were Petro, Inc. and Roadside,
Inc., an entity owned by The Fremont Group, Inc.

Recapitalization

     On July 23, 1999, the Operating Partnership, certain of its partners and
Volvo Trucks North America, Inc. ("Volvo") consummated a transaction pursuant to
which Holdings was formed, and substantially all of the present owners in the
Operating Partnership (other than Petro Holdings G.P. Corp. and Petro Holdings
L.P. Corp., each of which were affiliates of Chartwell Investments, Inc.
(collectively, "Chartwell") and Kirschner Investments ("Kirschner"), a company
franchisee), including Petro, Inc. (together with J.A. Cardwell Sr., James A.
Cardwell Jr., and JAJCO II, Inc. ("JAJCO"), collectively, the "Cardwell Group")
exchanged their interests in the Operating Partnership for identical interests
in Holdings and became owners in Holdings. Petro Holdings Financial Corporation
("Financial Holdings") was formed for the purpose of serving as co-issuer of
15.0% senior discount notes due 2008 (as defined below). Financial Holdings, the
Operating Partnership and its subsidiary, Petro Financial Corporation, became
subsidiaries of Holdings. Petro Warrant Holdings Corporation ("Warrant
Holdings") was formed for the purpose of owning a common limited partnership
interest in Holdings and issuing the warrants (see below) that are exchangeable
into all of the common stock of Warrant Holdings. In addition, Volvo Petro
Holdings L.L.C. ("Volvo Trucks"), an affiliate of Volvo, invested $30.0 million
to acquire a 28.7% limited common partnership interest in Holdings while Mobil
Long Haul, Inc., an affiliate of Mobil Oil Corporation, invested an additional
$5.0 million in Class B convertible preferred partnership interests of Holdings.
Holdings purchased the 50.8% common interest in the Operating Partnership owned
by affiliates of Chartwell for aggregate consideration of approximately $69.8
million, which consisted of a $55.0 million cash payment and the issuance to
Chartwell of approximately $14.8 million in accreted value ($11.2 million net of
an imputed market rate of interest discount) of 15.0% senior discount notes due
2008 (as defined below), without warrants. Holdings also purchased the 2.0%
common interests in the Operating Partnership owned by Kirschner for cash
consideration of $2.8 million. The foregoing is referred to as the
"Recapitalization." The acquisition of Chartwell's and Kirschner's interests was
accounted for by Holdings under the purchase method during the third quarter of
1999.

                                       31
<PAGE>

                     PETRO STOPPING CENTERS HOLDINGS, L.P.
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(1) Company Formation and Description of Business - continued

     As part of the Recapitalization, Holdings issued 82,707 units, each
consisting of $1,000 principal amount at stated maturity of Holdings' 15.0%
senior discount notes due 2008 ("15% Notes") and one warrant.  As consideration
for issuance of the units, Holdings received $40.0 million cash of which $30.3
million was allocated to the 15% Notes and $9.7 million was allocated to the
warrants. Holdings acquired the warrants from Warrant Holdings for $9.7 million.
Warrant Holdings, in turn, invested the $9.7 million to acquire a 10.0% common
limited partnership interest in Holdings. The amount allocated to the warrants
is based on Warrants Holdings' 10.0% common limited partnership interest in
Holdings and on Holdings' common equity value, net of an estimate of
Recapitalization costs not borne by Warrant Holdings, established in conjunction
with the admission of Volvo Trucks and the purchase of Chartwell's and
Kirschner's interests in the Operating Partnership.  Upon an exchange event,
such as a change in control, IPO, or bankruptcy of Holdings, the warrants will
be exchanged, for no additional consideration, for 100% of the common stock of
Warrant Holdings, whose sole asset currently is approximately 10.0% of the
common limited partnership interests in Holdings. As a result of this contingent
repurchase obligation, the warrants will be reflected outside partners' deficit
as contingently redeemable warrants in the audited consolidated balance sheets
included herein.  The warrants are callable by Holdings prior to August 1, 2002,
at increasing amounts over time from $11.2 million to $14.8 million.  If not
exchanged by August 1, 2004, the warrants must be repurchased by Holdings at
their then fair value.  Future changes (determined each balance sheet date in a
manner consistent with the determination of market price of partnership
interests described in Note (12)), if any, in the value of the warrants will be
charged directly to partners' capital (deficit).

     As a result of the Recapitalization, Holdings is the owner of approximately
99.5% of the common interests of the Operating Partnership.  The common limited
partnership interests of Holdings are owned by the Cardwell Group (approximately
51.6%), Volvo Trucks (approximately 28.7%), Mobil Long Haul (approximately 9.7%)
and Warrant Holdings (approximately 10.0%) and the mandatorily redeemable
preferred partnership interests of Holdings are owned by Mobil Long Haul ($17.0
million) and the Cardwell Group ($7.6 million).  Petro, Inc. and another
affiliate of the Cardwell Group own the remaining 0.5% of the Operating
Partnership.  Generally accepted accounting principles require negative capital
accounts of minority partners in consolidated subsidiaries to be recorded in
partners' capital (deficit).

     The formation of Holdings (whereby certain of the Operating Partnership's
partners exchanged their interests in the Operating Partnership for identical
interests in Holdings) was recorded at predecessor basis and has been reflected
in the accompanying consolidated financial statements in a manner similar to a
pooling-of-interests. Accordingly, the accompanying consolidated financial
statements reflect the historical amounts and results of operations of Holdings'
consolidated subsidiaries as if the exchange referred to above had occurred on
the first day of the first period presented.

     The Operating Partnership also amended its prior senior collateralized
credit facility (the "Existing Senior Credit Facility" and, as amended, the "New
Senior Credit Facility") as part of the Recapitalization. The New Senior Credit
Facility consists of an $85.0 million revolving credit facility and a $40.0
million term loan B. The proceeds of the term loan B were used to repay
principal amounts due under the term A and B loans and the expansion facility of
the then Existing Senior Credit Facility of approximately $38.1 million, plus
accrued interest. The New Senior Credit Facility is collateralized by
substantially all of the Operating Partnership's assets and contains certain
covenants as described in Note (7).

     Holdings funded a portion of its purchase of the Chartwell and Kirschner
interests in the Operating Partnership with debt. Holdings currently has no
operations of its own and is, therefore, dependent upon the Operating
Partnership's earnings and cash flows to satisfy its obligations under the 15.0%
Notes and warrants.

     Unless otherwise noted, Holdings and its subsidiaries are herein referred
to as the "Company."

                                       32
<PAGE>

                     PETRO STOPPING CENTERS HOLDINGS, L.P.
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


(1)  Company Formation and Description of Business - continued

1997 Recapitalization

     On January 30, 1997, the Operating Partnership consummated a transaction
entered into in October 1996, under which Chartwell and Mobil Long Haul invested
$20.7 million and $15.0 million, respectively, to directly acquire the 40.0%
common partnership interests of the Operating Partnership owned by The Fremont
Group, Inc. The respective Mobil Long Haul and Chartwell investments in the
Operating Partnership were approximately $4.2 million and $5.8 million.  Mobil
Long Haul's $10.1 million share of the direct cost of acquiring The Fremont
Group, Inc.'s interest in the Operating Partnership has been reflected in the
accompany consolidated financial statements as an increase in partners' capital
and a corresponding decrease in minority interest in consolidated subsidiaries.
The Cardwell Group maintained its capital investment in the Company. Kirschner,
a Company franchisee, invested $1.0 million in the Operating Partnership in
exchange for a 2.0% common partnership interest.  Immediately thereafter, the
Cardwell Group and Mobil Long Haul agreed to assign $19.6 million of their
capital balances to mandatorily redeemable preferred partnership interests.

     Following these investments, the common partnership interests of the
Operating Partnership were owned by:

     .    Chartwell (approximately 50.8%),
     .    Cardwell Group (approximately 39.9%),
     .    Mobil Long Haul (approximately 7.3%), and
     .    Kirschner (approximately 2.0%).

     The mandatorily redeemable preferred partnership interests were owned by:

     .    Mobil Long Haul ($12.0 million) and
     .    Cardwell Group ($7.6 million).

     As a result of the 1997 recapitalization, Chartwell and the Cardwell Group
owned both general and limited partnership interests and Mobil Long Haul and
Kirschner owned only limited partnership interests. Mobil Oil Corporation and
the Operating Partnership also entered into certain supply and marketing
agreements.

     As part of the 1997 recapitalization, the Company issued $135.0 million of
10 1/2% senior unsecured notes due 2007, and repurchased approximately 94.0% of
the outstanding 12 1/2% senior notes due 2002 and approximately 100% of
outstanding debt warrants. The Operating Partnership also amended its then
existing senior collateralized credit facility. The credit agreement consisted
of a $25.0 million revolving credit facility, a $14.0 million term loan A, a
$30.0 million term loan B and a $40.0 million expansion facility. In connection
with the issuance of the 10 1/2% notes, the Company capitalized approximately
$14.5 million of debt issuance costs and wrote off, as an extraordinary item,
$12.7 million of debt restructuring costs. These costs included the write-off of
deferred financing costs relating to the replacement of its previous credit
agreement, the 12 1/2% senior notes, and the related debt warrants.

     The 1997 recapitalization has been reflected in the accompanying
consolidated financial statements using recapitalization accounting, which
results in the carryforward of historic book values of assets and liabilities.

Description of Business

The Company, through the Operating Partnership, operates large, multi-service
truck stops known as "Petro Stopping Centers" ("Stopping Centers"), that are
located along interstate highways and typically offer diesel fuel, gasoline,
home-style restaurants ("Iron Skillet"), truck preventative maintenance centers

                                       33
<PAGE>

                     PETRO STOPPING CENTERS HOLDINGS, L.P.
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


(1) Company Formation and Description of Business - continued

("Petro:Lubes"), travel and convenience stores and a range of other products,
services and amenities to professional truck drivers, other highway motorists
and local residents. At December 31, 1999, the Company's network consisted of 53
Stopping Centers located in 30 states, of which 30 were operated by the
Operating Partnership and 23 were franchised.

(2) Summary of Significant Accounting Policies

Basis of Presentation

     The accompanying consolidated financial statements include the accounts of
the Company and its majority-owned subsidiaries.  All significant intercompany
balances have been eliminated in consolidation.  Minority interest in
consolidated subsidiaries represents (i) prior to the Recapitalization,  the
interests in the Operating Partnership owned by Chartwell (50.8%) and Kirschner
(2.0%), and (ii) prior to January 30, 1997, the interests in the Operating
Partnership owned by The Fremont Group, Inc. (40.0%).  Petro, Inc. and another
affiliate of the Cardwell Group own the remaining 0.5% of the Operating
Partnership.  Generally accepted accounting principles require negative capital
accounts of minority partners in consolidated subsidiaries to be recorded on
partners' capital (deficit).

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.

Concentration of Credit Risk

     Financial instruments which potentially subject the Company to
concentrations of credit risk consist principally of cash and accounts
receivable. Accounts receivable are primarily due from national and regional
commercial trucking companies, and include accounts receivable purchased for a
fee from franchisees. The receivables are not collateralized. The risk, however,
is limited due to the large number of entities comprising the customer base and
their dispersion across geographic regions. At December 31, 1999, the Company
had no significant concentrations of credit risk.

Cash and Cash Equivalents

     The Company considers as cash equivalents all highly liquid investments
with an original maturity of three months or less.

Allowance for Uncollectible Accounts

     Accounts receivable are reviewed on a regular basis and the allowance for
uncollectible accounts is established to reserve for specific accounts believed
to be uncollectible. In addition, the allowance provides a reserve for the
remaining accounts not specifically identified. At December 31, 1998 and 1999,
the allowance for uncollectible accounts totaled $627,000 and $742,000,
respectively.

                                       34
<PAGE>

                     PETRO STOPPING CENTERS HOLDINGS, L.P.
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


(2) Summary of Significant Accounting Policies - continued

Inventories

     Inventories are stated at the lower of cost or market as determined by the
first-in, first-out method.

Land Held for Sale

     In the fourth quarter of 1997, management committed to a plan to dispose of
certain real estate holdings. Statement of Financial Accounting Standards
("SFAS") No. 121, "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to Be Disposed Of," requires that long-lived assets held for
sale be reported at the lower of carrying amount or fair value less cost to
sell. At December 31, 1998 and 1999, the Company reported land held for sale at
its net book value of $6.1 million for each year.  The land held for sale
consists of several parcels of undeveloped land considered by management as
excess and no longer necessary for the operations of the Company.  All of the
1998 and 1999 balances are included in other assets in the accompanying
consolidated balance sheets.

Property and Equipment

     Property and equipment are recorded at historical cost. Depreciation and
amortization are generally provided using the straight-line method over the
estimated useful lives of the respective assets. Repairs and maintenance are
charged to expense as incurred, and amounted to $3.5 million, $4.5 million, and
$4.2 million for the years ended December 31, 1997, 1998, and 1999,
respectively. Renewals and betterments are capitalized. Gains or losses on
disposal of property and equipment are credited or charged to income.

     Leased equipment meeting certain criteria is capitalized and the present
value of the related lease payments is recorded as a liability.  Amortization of
capitalized leased assets is computed on the straight-line method over the term
of the lease.

     Facilities under development are recorded at cost, and include capitalized
interest costs associated with the development of a project. These costs are
classified as facilities under development until the project is completed, at
which time the costs are transferred to the appropriate property and equipment
accounts.

Debt Issuance Costs

     Costs incurred in obtaining long-term financing are amortized over the life
of the related debt using a method that approximates the interest method. At
December 31, 1998 and 1999, accumulated amortization of debt issuance costs were
$3.1 million and $1.7 million, respectively.

Self-Insurance

     The Company is self-insured for employment practices, general liability,
workers' compensation, and group health benefit claims, up to stop-loss amounts
ranging from $50,000 to $250,000 on a per-occurrence basis. For the years ended
December 31, 1997, 1998, and 1999, the Company paid $4.1 million, $6.8 million,
and $8.6 million, respectively, on claims related to these self-insurance
programs.  Provisions for these self-insurance programs are made for both
estimated losses on known claims and claims incurred but not reported, based on
claims history. At December 31, 1998 and 1999, such aggregated provisions
amounted to approximately $6.0 million and $8.3 million, respectively. At
December 31, 1998 and 1999, the aggregated accrual amounted to approximately
$4.6 million and $4.3 million, respectively.  The Company believes it provides
an accrual adequate to cover both reported and incurred but not reported claims.

                                       35
<PAGE>

                     PETRO STOPPING CENTERS HOLDINGS, L.P.
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


(2) Summary of Significant Accounting Policies - continued

Advertising and Promotion

     Costs incurred in connection with advertising and promotion are expensed as
incurred, net of reimbursements from franchisees. Net advertising and promotion
expenses of $2.5 million, $2.8 million, and $2.6 million were incurred for the
years ended December 31, 1997, 1998, and 1999, respectively, and are included in
operating expenses in the accompanying consolidated statements of operations.
Advertising and promotion reimbursements from franchisees totaled $334,000,
$401,000, and $432,000 for the years ended December 31, 1997, 1998, and 1999,
respectively.

Motor Fuel Taxes

     Certain motor fuel taxes are collected from consumers and remitted to
governmental agencies by the Company. Such taxes were $192.7 million, $203.3
million, and $211.6 million for the years ended December 31, 1997, 1998, and
1999, respectively, and are included in net revenues and cost of sales in the
accompanying consolidated statements of operations.

Environmental Liabilities and Expenditures

     Accruals for environmental remediation activities are recorded in operating
expenses when it is probable that a liability has been incurred and the amount
of the liability can be reasonably estimated.  The measurement of environmental
liabilities is based on an evaluation of currently available facts with respect
to each individual site and considers factors such as existing technology,
presently enacted laws and regulations, and prior experience in remediation of
contaminated sites.  At December 31, 1998 and 1999, such accrual amounted to
$274,000 and $122,000, respectively.   These liabilities are exclusive of claims
against third parties and are not discounted.

Revenue Recognition

     The Company recognizes revenue from the sale of fuel and non-fuel products
and services at the time delivery has occurred and services have been performed.

Franchise Revenues

     The Company recognizes net revenue from individual franchises and initial
training fees when substantially all significant services to be provided by the
Company have been performed. Continuing franchise fees, which are based
generally upon a percentage of the franchisees' sales, are recognized monthly as
earned. Given the insignificance of initial franchise fees and other revenue
types, the Company reports a total combined revenue amount. Fees earned from
franchises aggregated $4.0 million, $4.5 million, and $5.0 million during the
years ended December 31, 1997, 1998, and 1999, respectively. There were 18, 21,
and 23 franchise locations in operation during the years ended December 31,
1997, 1998, and 1999, respectively. The Company does not allocate any expenses
or assets in measuring its franchise segment's profit and loss, nor does it
believe there are any significant commitments or obligations resulting from
these franchise agreements.

Financial Instruments with Off-Balance Sheet Risk

     The Company occasionally utilizes futures and options contracts with the
objective of minimizing fuel cost risk due to market fluctuations. Gains and
losses resulting from changes in the market value of these contracts are
recognized when the related inventory is sold. The Company also may occasionally
enter into futures and options contracts that are not specific hedges and gains
or losses resulting from changes in market value of these types of futures
contracts are recognized in income currently. At December 31, 1999, the Company
was not a party to any futures or options contracts. Interest rate swap
agreements are utilized from time to time to manage interest rate exposures. The
amount to be paid or received on these agreements is accrued as interest rates
change and is recognized over the lives of the

                                       36
<PAGE>

                     PETRO STOPPING CENTERS HOLDINGS, L.P.
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(2) Summary of Significant Accounting Policies - continued

respective agreements. At December 31, 1999, the Company was party to an
interest rate swap agreement with an aggregate principal amount of $30.0
million, which effectively changes a portion of the Company's interest rate
exposure from a floating rate to a fixed rate basis. The effect of the swap was
to increase the rate the Company paid of 6.15% by 0.66%, which resulted in
additional interest expense of approximately $264,000 for the year ended
December 31, 1999.

Income Taxes

       The Company is not subject to federal or state income taxes. Results of
operations are allocated to the partners in accordance with the provisions of
Holdings' Partnership Agreement and reported by each partner on their respective
federal and state income tax returns. The taxable income or loss allocated to
the partners in any one year generally varies substantially from income or loss
for financial reporting purposes due to differences between the periods in which
such items are reported for financial reporting and income tax purposes.

Change in Accounting Principles

       In April 1998, the American Institute of Certified Public Accountants
issued Statement of Position 98-5 "Reporting the Costs of Start-up Activities"
("SOP 98-5"). SOP 98-5 requires the costs of start-up activities (including,
among other things, pre-opening costs related to the development of new sites
and organization costs) be expensed as incurred and that previously
capitalizable costs expensed in the initial adoption be reported as a cumulative
effect of a change in accounting principle. The adoption of SOP 98-5 resulted
in a charge to income of $3.3 million in 1998 and is presented as a cumulative
effect of a change in accounting principle, as required.

       In the fourth quarter of 1997 the Financial Accounting Standards Board
issued, and the Company adopted, Emerging Issues Task Force Issue No. 97-13,
"Accounting for Costs Incurred in Connection with a Consulting Contract that
Combines Business Process Reengineering and Information Technology
Transformation" ("EITF No. 97-13"). EITF No. 97-13 required the immediate write-
off, during the Company's fourth quarter, of cumulative costs related to process
reengineering activities that were previously allowed to be capitalized.
Prospective costs of a similar nature are also required to be expensed as
incurred. The adoption of EITF No. 97-13 resulted in a charge to income of $1.6
million in 1997 and is presented as a cumulative effect of a change in
accounting principle, as required.

Reclassifications

       Certain prior year amounts have been reclassified to conform to the
current year presentation.

(3) Inventories


       The following is a summary of inventories at December 31, 1998 and 1999:

                                                     1998          1999
                                                     ----          ----
                                                       (in thousands)

Motor fuels and lubricants                          $ 3,704      $ 7,222
Tires and tubes                                       4,141        4,453
Merchandise and accessories                           7,827        9,668
Restaurant and other                                  1,244        1,103
Less reserve for obsolescence                          (457)        (457)
                                                    -------      -------
    Inventories, net                                $16,459      $21,989
                                                    =======      =======

                                       37
<PAGE>

                     PETRO STOPPING CENTERS HOLDINGS, L.P.
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

       During 1998, the Company wrote off a majority of its inventories that had
been deemed to be obsolete.

(4) Property and Equipment

          Property and equipment is summarized at December 31, 1998 and 1999, as
 follows:

<TABLE>
<CAPTION>
                                                       Estimated
                                                         Useful
                                                          Lives
                                                         (years)       1998              1999
                                                         ------        ----              ----
                                                                          (in thousands)
<S>                                                    <C>           <C>                <C>
Land and improvements                                       10       $ 27,707           $ 29,571
Buildings and improvements                                  30        104,265            128,672
Furniture and equipment including capital lease           3-10         60,018             69,792
Leasehold improvements                                    7-30         20,234             19,810
Facilities under development                                 -              -              9,636
                                                                     --------           --------
                                                                      212,224            257,481
Less accumulated depreciation and amortization                        (53,426)           (65,869)
                                                                     --------           --------
   Property and equipment, net                                       $158,798           $191,612
                                                                     ========           ========
</TABLE>

       The Company currently has equipment under a capital lease. Facilities
under development include costs associated with new facilities and major
renovations of existing facilities. Other than as related to Mebane, North
Carolina and Glendale, Kentucky, there were no future construction commitments
at December 31, 1999.

(5) Operating Leases

       The Company has entered into various operating leases. The operating
leases are for the leases on two Stopping Center locations, an office building,
truck leases and various equipment leases. The leases contain renewal options
varying from automatic annual renewals to multiple five-year options. A summary
of future minimum rental payments on operating leases which have initial or
remaining noncancelable lease terms in excess of one year as of December 31,
1999, is as follows:

                                    Related         Third
Fiscal Year Ending                   Party          Party           Total
------------------                   -----          -----           -----
                                                (in thousands)

2000                                $1,409         $   858         $ 2,267
2001                                 1,409             843           2,252
2002                                 1,409             843           2,252
2003                                 1,409             843           2,252
2004                                 1,409             751           2,160
Later years                          1,806           9,078          10,884
                                    ------         -------         -------
Total minimum lease payments        $8,851         $13,216         $22,067
                                    ======         =======         =======

       Rent expense under all operating leases was $2.3 million, $2.6 million,
and $2.3 million for 1997, 1998, and 1999, respectively. Of these rentals, $1.5
million were paid to related parties for each of the years ended December 31,
1997, 1998, and 1999. The related-party operating leases, which are more fully
described in Note (9), are:

                                       38
<PAGE>

                     PETRO STOPPING CENTERS HOLDINGS, L.P.
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(5) Operating Leases - continued

       .    The Company leases a facility in El Paso, Texas, from a trust in
            which J.A. Cardwell, Sr. is a 50% beneficiary, to operate the
            Company's retread plant and made lease payments of $72,000 for each
            of the fiscal years ended December 31, 1997, 1998, and 1999.

       .    The office building in which the Company's principal executive
            offices are located is owned by J.A. Cardwell, Sr. The Company made
            annual rent payments of $336,000 for each of the years ended
            December 31, 1997, 1998, and 1999.

       .    The Stopping Center located in Effingham, Illinois, is leased by the
            Company from Truck Stop Property Owners, Inc., which is partially
            owned by Travis Roberts, a current officer of the Operating
            Partnership. The Company made rental payments of $1.1 million for
            each of the years ended December 31, 1997, 1998, and 1999.

(6) Notes Payable

       At December 31, 1998, the Company had available a five-year revolving
credit facility and a three-year expansion facility (collectively, "Credit
Facility"), under which up to $25.0 million and $40.0 million were available,
respectively.  At December 31, 1998, the balance available on the Credit
Facility, net of letters of credit outstanding, was $22.6 million and the
Company did not have a balance outstanding on the expansion facility.

       As discussed in Note (1), as part of the Recapitalization, the Company
amended its Existing Senior Credit Facility.  Under the New Senior Credit
Facility, the Company, subject to certain covenants, has available an $85.0
million revolving credit facility that may be used for working capital and to
fund the acquisition and development of new Stopping Centers.  Any principal
amount up to $60.0 million outstanding at July 23, 2002, will automatically
convert to a term loan A.  Following this conversion, $25.0 million will
continue to be available on a revolving basis until maturity at July 23, 2004.
The outstanding amounts under term loan A, if any, will amortize in eight equal
quarterly installments following the conversion.  Interest on drawn funds is
paid monthly at 1.5% above the bank's base rate or 2.75% over the Eurodollar
rate (the rate is determined at time of borrowing at Holdings' option).
Commitment fees of .5% on undrawn funds are paid quarterly.  At December 31,
1999, the Company did not have a balance outstanding on the revolving credit
facility.

       The Company did have standby letters of credit outstanding under the
respective revolving credit facilities at December 31, 1998 and 1999. For each
of the years ended December 31, 1998 and 1999, the standby letters of credit,
principally related to unfunded insurance claims were $2.0 million. Various
other standby letters of credit totaled $427,000 for each year ended December
31, 1998 and 1999.

       Any funds drawn on the New Senior Credit Facility are secured by
substantially all of the Operating Partnership's assets and the partnership
interest of Mobil Long Haul, the Cardwell Group, and Volvo Trucks are guaranteed
by each of the Company's subsidiaries, whose guarantees in turn are
collateralized by substantially all of such subsidiaries' assets.

                                       39
<PAGE>

                     PETRO STOPPING CENTERS HOLDINGS, L.P.
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(7) Long-Term Debt

         Long-term debt at December 31, 1998 and 1999, is presented below.


<TABLE>
<CAPTION>
                                                                                           December 31,            December 31,
                                                                                               1998                    1999
                                                                                               ----                    ----
                                                                                                      (in thousands)
                                                                                                       -------------
<S>                                                                                        <C>                     <C>
Four-year term note to a bank in an original amount of $20.0 million maturing
September 30, 2001. The note was payable in 18 consecutive quarterly installments
commencing September 30, 1997.  Interest at either the bank's prime rate plus
1.5% or the Eurodollar rate plus 2.75% was payable monthly.  The rate was
7.75% at December 31, 1998.  The note was repaid July 23, 1999.                               $  9,973                 $      -

Six-year term note to a bank in an original amount of $30.0 million maturing
September 30, 2003. The note was payable in 26 consecutive quarterly
installments commencing September 30, 1997.   Interest at either the bank's
prime rate plus 2.0% or the Eurodollar rate plus 3.25% was payable monthly.
The effective rate was 8.3125% at December 31, 1998, as a result of an interest
swap agreement (the "Swap") with the lender as required under the loan agreement.
This note was repaid July 23, 1999, and the Swap was transferred to the New
Senior Credit Facility.                                                                         28,933                        -

Seven-year term note to a bank in an original amount of $40.0 million maturing
July 23, 2006.  The note is payable in 24 consecutive quarterly installments
varying from $250,000 to $600,000 commencing September 30, 2000.  Interest at
either the bank's prime rate plus 1.5% or the Eurodollar rate plus 3.0% is
payable monthly.  The effective rate was 7.83% at December 31, 1999, as a
result of the Swap with the lender as required under the loan agreement.  The
Swap expires on January 1, 2000.  The note is collateralized by substantially
all of the Company's assets.                                                                         -                   40,000

12 1/2% Senior Notes due 2002 (the "12 1/2 Notes") in an original aggregate
principal amount of $100.0 million, net of original issue discount.  As part
of the 1997 recapitalization, approximately 94.0% of the 12 1/2 Notes were
retired.  Interest on the 12 1/2 Notes is payable on June 1 and December 1
of each year beginning December 1, 1994.                                                         6,190                    6,190

10 1/2% Senior Notes due 2007 (the "10 1/2 Notes") in an original aggregate
principal amount of $135.0 million, net of unamortized discount of $656,000.
Interest on the 10 1/2 Notes is payable on February 1 and August 1 of each year,
beginning August 1, 1997. The 10 1/2 Notes are effectively subordinate to the
loans outstanding under the New Senior Credit Facility to the extent of the
value of the assets securing such loans.                                                       135,000                  134,344

15% Senior Discount Notes ("15 Notes"), due 2008, net of an unamortized discount
of $68.3 million to yield an effective rate of 18.2%.  Interest on the 15 Notes
is payable on February 1 and August 1 of each year, beginning August 1, 2004.
The 15 Notes will be effectively subordinated to the loans outstanding under
the New Senior Credit Facility, the 10 1/2 Notes and the 12 1/2 Notes.                               -                   44,994

Obligation under equipment capital lease                                                         1,232                      764
                                                                                              --------                 --------

Total long-term debt                                                                           181,328                  226,292
Less current portion                                                                             4,967                    1,001
                                                                                              --------                 --------
Long-term debt, excluding current portion                                                     $176,361                 $225,291
                                                                                              ========                 ========
</TABLE>

                                       40
<PAGE>

                     PETRO STOPPING CENTERS HOLDINGS, L.P.
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(7) Long-Term Debt - continued

          The 12 1/2 Notes may be redeemed at the option of the Company, in
whole or in part, at any time on or after June 1, 1999, upon not less than 30
and no more than 60 days notice at the following redemption prices (expressed as
percentages of the principal amount to be redeemed) as set forth below, plus
accrued interest:

                                             Redemption
                  Year                          Price
                  ----                       ----------
                  1999                         103.57%
                  2000                         101.79%
                  2001                         100.00%

          The 10 1/2 Notes may be redeemed at the option of the Company, in
whole or in part, at any time on or after February 1, 2002, upon not less than
30 and no more than 60 days notice at the following prices (expressed as
percentages of the principal amount to be redeemed) as set forth below, plus
accrued interest:

                                             Redemption
                  Year                          Price
                  ----                       ----------
                  2002                         105.2%
                  2003                         103.5%
                  2004                         101.7%
           2005 and thereafter                 100.0%

          In addition, prior to February 1, 2000, the Company may, with the net
proceeds of one or more public equity offerings of qualified capital interest in
the Company, redeem up to 35.0% of aggregate principal amount of the outstanding
10 1/2 Notes at a redemption price of 110.5%, plus accrued interest.

          The 15 Notes may be redeemed at the option of the Company, in whole
or in part, at any time on or after August 1, 2004, upon not less than 30 and no
more than 60 days notice at the following prices (expressed as percentages of
the principal amount to be redeemed) as set forth below, plus accrued interest:

                                             Redemption
                  Year                          Price
                  ----                       ----------
                  2004                         107.5%
                  2005                         105.0%
                  2006                         102.5%
           2007 and thereafter                 100.0%

          In addition, prior to February 1, 2000, the Company may, with the net
proceeds of one or more public equity offerings of qualified capital interest in
the Company, redeem 100% of the notes at the accreted value of the outstanding
15% Notes at a redemption price of 115.0%, plus accrued interest.

          The Indentures for the Long-Term Debt and the New Senior Credit
Facility agreement each contain certain covenants, including without limitation,
covenants with respect to the following matters: (i) limitation on indebtedness;
(ii) limitation on restricted payments; (iii) limitation on sales of restricted
subsidiary stock; (iv) limitation on transactions with affiliates; (v)
limitation on liens; (vi) limitation on disposition of proceeds of asset sales;
(vii) limitation on distributions and other payment restrictions affecting
restricted subsidiaries; (viii) restrictions on mergers and certain transfers of
assets and (ix) in the case of the New Senior Credit Facility financial
covenants covering leverage, cash flows, interest coverage, and minimum net
worth. At December 31, 1997, 1998, and 1999, the Company was in compliance with
all debt covenants.

                                       41
<PAGE>

                     PETRO STOPPING CENTERS HOLDINGS, L.P.
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(7) Long-Term Debt - continued

          Estimated principal payment requirements on long-term debt and a
capital lease obligation are as follows:

Fiscal Year Ending                                          (in thousands)
------------------                                          --------------
2000                                                           $  1,001
2001                                                              1,263
2002                                                              7,190
2003                                                              1,000
2004                                                              6,500
Thereafter                                                      278,370
Less unamortized discount                                       (69,032)
                                                            --------------
   Total                                                       $226,292
                                                            ==============

(8) Accrued Expenses and Other Liabilities

          The following is a summary of accrued expenses and other liabilities
at December 31, 1998 and 1999:

<TABLE>
<CAPTION>
                                                                 1998            1999
                                                                 ----            ----
                                                                    (in thousands)
                                                                    --------------
<S>                                                         <C>              <C>
Accrued expenses:
  Employee related expenses                                    $  9,794        $  7,117
  Taxes payable-sales, fuel and property                          2,594           2,578
  Other                                                           6,934          10,731
  Due to franchisees                                              2,117               -
                                                            --------------   -----------
   Total                                                       $ 21,439        $ 20,426
                                                            ==============   ===========
</TABLE>

                                       42
<PAGE>

                     PETRO STOPPING CENTERS HOLDINGS, L.P.
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(9) Related-Party Transactions

          Amounts due to and from affiliates as of December 31, 1998 and 1999,
consist of the following:

<TABLE>
<CAPTION>
                                                                    1998                     1999
                                                                    ----                     ----
                                                                            (in thousands)
                                                                            --------------
<S>                                                             <C>                      <C>
Due from affiliates:
   C&R Distributing, Inc.                                         $    39                  $   161
   Petro Truckstops, Inc.                                             181                      159
   Petro Travel Plaza, LLC (Wheeler Ridge)                              -                      535
   Highway Service Ventures, Inc.                                      39                       88
   Cardwell Group                                                     647                      647
   Other                                                              257                      137
                                                                -----------              -----------
       Total                                                      $ 1,163                  $ 1,727
                                                                ===========              ===========

Due to affiliates:
   El Paso Amusement Company                                      $   189                  $   131
   Highway Service Ventures, Inc.                                     481                        -
   C&R Distributing, Inc.                                              83                       57
   Mobil Diesel Supply Corporation                                 13,177                   21,338
   Mobil Oil Corporation                                            1,718                    4,011
   Cardwell Group                                                   1,058                        -
   Other                                                               62                        -
                                                                -----------              -----------
       Total                                                      $16,768                  $25,537
                                                                ===========              ===========
</TABLE>

          In connection with the Recapitalization, the Company entered into new
ten-year supply agreements with Mobil Oil Corporation under which Mobil Oil
Corporation will supply the company-operated Stopping Centers' diesel fuel
requirements and gasoline requirements in those markets in which Mobil branded
gasoline is available for sale. Under the lubricant supply agreement, the
Company is allowed to purchase such quantities of lubricants as the Company
requires at the prices set forth in the agreement. The diesel fuel sold at all
but one company-operated Stopping Centers and some of the Company's franchise
operated Stopping Centers are branded Mobil Diesel, and all of the company-
operated Petro:Lubes feature Mobil Delvac lubricants. Under the new fuel supply
agreement and the agreement for the resale of oils and greases with Mobil Oil
Corporation, both dated July 23, 1999, the Company agreed to purchase Mobil
branded lubricant products and Mobil branded diesel fuel for sale and
distribution under Mobil's trademarks at the company-operated Stopping Centers
and eight of the Company's franchise operated truck stops and Mobil branded
gasoline for sites as selected by Mobil Oil Corporation, as limited however, by
existing contractual obligations to purchase gasoline from other suppliers. The
Mobil Supply Agreements require that the Company purchase from Mobil-specified
distribution terminals, a minimum number of gallons of diesel fuel on an annual
basis, depending on product availability and reductions by Mobil Oil Corporation
under described circumstances. For 1999, the Company's annual volume commitment
was 172.3 million gallons of Mobil diesel under the fuel supply agreement and
1.2 million gallons of Mobil lubricants under the lubricant supply agreement.
This constitutes approximately 37.4% of the Company's current diesel fuel
requirements and approximately 63.1% of the Company's lubricant requirements. If
the Company does not purchase any diesel fuel from Mobil Oil Corporation under
the Mobil Supply Agreements, the maximum penalties in any year would be $0.0035
per gallon multiplied by the annual volume commitment as provided for in the
Mobil Supply Agreements, plus additional amounts for each new Stopping Center
opened and which Mobil Oil Corporation agrees to supply. As a result of the
Mobil Supply Agreements and to comply with the laws governing the branding of
diesel fuel, if Mobil Oil Corporation is unable to supply 100% of the Company's
diesel fuel demand due to limited product availability, Mobil Diesel Supply
Corporation ("MDS"), a wholly owned subsidiary of

                                       43
<PAGE>

                     PETRO STOPPING CENTERS HOLDINGS, L.P.
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(9) Related-Party Transactions - continued

Mobil Oil Corporation, purchases additional diesel fuel from third-party
suppliers and then sells it to the Company. Under the terms of the Mobil Supply
Agreements, the Company may continue to negotiate with third parties regarding
price and other terms, and then designate them to MDS. Third-party suppliers are
approved by Mobil Oil Corporation if the fuel to be supplied by the third party
meets all federal, state and local diesel requirements. The Company's fuel
purchase arrangement with MDS enables the Company to meet its diesel fuel needs
and to comply with branding laws, which require Mobil Oil Corporation to first
take possession of the fuel before it can be branded as Mobil diesel.

          The Mobil Supply Agreements allow the Company to continue to negotiate
for the purchase of diesel fuel with third-party suppliers approved by MDS. If
the Company is able to obtain a lower diesel fuel price from a third-party
supplier in a particular market area, the Company may request that Mobil Oil
Corporation meet the lower price or allow a portion of its diesel fuel
requirements to be supplied from the MDS approved third-party supplier, in which
case MDS would purchase the diesel fuel from the supplier and resell the product
to the Company. Any change in supply source, other than a change resulting from
Mobil Oil Corporation's inability to supply, does not affect the Company's
requirement to purchase the annual minimum number of gallons from Mobil-
specified distribution terminals fixed by the Mobil Supply Agreements. The Mobil
Supply Agreements also place a monthly limit on the maximum number of gallons of
diesel fuel that the Company may lift from Mobil-specified distribution
terminals. Prices to be charged for fuel sold to the Company under the Mobil
Supply Agreements are based on referenced prices minus discounts and plus
delivery costs. Upon the expiration of the ten-year initial term, the Mobil
Supply Agreements are renewable for another five-year term at the option of
Mobil Oil Corporation; however, the Company has the ability to terminate the
agreements at the end of the ten-year term at a price based on a formula
discussed in the Mobil Supply Agreements.

          The Company purchases diesel fuel for each of its company-operated
Stopping Centers on a daily basis. During 1999, the Company purchased 100% of
diesel fuel through MDS, approximately 65.8% of which was third-party fuel
purchased through this arrangement. The approximate aggregate amount paid under
the Mobil Supply Agreements for the year ended December 31, 1999, totaled $422.0
million.

          The office building in which the Company's principal executive offices
are located is owned by J.A. Cardwell, Sr., the President of Holdings and Chief
Executive Officer and Chairman of the Operating Company. The Company leases the
entire building under a lease expiring on December 31, 2005, paying monthly rent
totaling $336,000 per year, as well as taxes, maintenance and other operating
expenses. For each of the years ended December 31, 1997, 1998, and 1999, the
Company made annual rental payments of $336,000.

          The Stopping Center located in Effingham, Illinois, is owned by Truck
Stop Property Owners, Inc. ("Truck Stop"), a corporation owned by Travis
Roberts, and five former employees of the Operating Partnership. Mr. Roberts is
a current officer of the Operating Partnership and owns 22.0% of the stock of
Truck Stop. The Company leases the Effingham Center under a lease expiring in
May 2006, which provides for basic rent payments, plus taxes and operating
expenses. The Company has three consecutive options to renew the lease for terms
of five years each at rental rates equal to the base rent, plus certain
adjustments at the time of renewal. The Company also has the right of first
refusal to purchase the Petro Stopping Center at any purchase price agreed upon
between Truck Stop and a third party. The Company made rental payments to Truck
Stop of $1.1 million on this property in each of the years ended December 31,
1997, 1998, and 1999.

          The Company entered into an agreement with Chartwell Investments,
Inc., providing for the payment of fees and reimbursement of certain expenses to
Chartwell Investments, Inc. for acting as financial advisor with respect to the
1997 recapitalization, including soliciting, structuring and arranging the
financing of the 1997 recapitalization. The fees, totaling approximately $3.0
million, equal to 1.0% of the total capitalization of the Company, plus .5% of
the expansion facility and the reimbursement of

                                       44
<PAGE>

                     PETRO STOPPING CENTERS HOLDINGS, L.P.
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(9) Related-Party Transactions - continued

certain expenses, were paid at the closing. These costs were deferred and are
being amortized over the terms of the respective debt instruments to which they
relate.

          Under the terms of an agreement with C&R Distributing, Inc. ("C&R"),
the Company currently purchases Chevron branded gasoline and motor oils at cost
for three of its facilities from C&R. The sole shareholder of C&R Distributing
is Nevada Trio, Inc., a Nevada Corporation, which is 100% owned by the Cardwell
Group. The C&R fuel agreement requires the Company to keep Chevron unleaded
gasoline, regular gasoline and motor oils continuously stocked and offered for
sale in quantities sufficient to meet demand. In 1997, the Company entered into
a product services agreement with C&R which terminates in December 2004, under
which C&R provides the Company with fuel hauling and fuel pump maintenance and
services within the El Paso, Texas, metropolitan area. The C&R agreement
provides that C&R will charge the Company for these services at the lowest rates
charged by C&R for similar services and, in any event, at rates that will not
exceed rates available from unrelated parties providing similar services. The
C&R fuel agreement is exclusive but allows the Company to cancel the agreement
with 30 days prior notice. The C&R services agreement is non-exclusive and
allows the Company to enter into similar agreements with other parties. Fuel
sales aggregating $3.3 million, $169,000, and $100,000 for the years ended
December 31, 1997, 1998, and 1999, respectively, were made to C&R Distributing,
Inc. at the Company's cost. C&R sales of fuel and lubricants and truck hauling
fees, aggregating $5.1 million, $4.0 million, and $3.7 million for the years
ended December 31, 1997, 1998, and 1999, respectively, were charged to the
Company.

          At the time of the Recapitalization, Volvo and the Company entered
into an Operating Agreement related to the warranty, maintenance and service
work the Company will provide to Volvo managed vehicles, the sale by the Company
of all the truck parts, on a preferred basis, joint advertising and marketing
initiatives and the co-development of Stopping Centers by Volvo and the Company
to utilize truckstop space for Volvo truck sales and marketing.

          Highway Service Ventures, Inc., a corporation in which J.A. Cardwell,
Sr. owns a 32.5% interest, operates four franchised Stopping Centers located in
Elkton, Maryland; Ruther Glen, Virginia; Florence, South Carolina; and
Carnesville, Georgia pursuant to franchise agreements with Holdings. None of
these franchise agreements contain terms that are any more favorable to the
franchisee than the terms in any of the Company's other franchise agreements.

          In May 1992, the Company leased a facility in El Paso, Texas, from a
trust in which J.A. Cardwell, Sr. is a 50.0% beneficiary, to operate the
Company's retread plant, which produces retread tires for sale at Stopping
Centers (including franchisees) and to others. The Company made lease payments
of $72,000 for each of the years ended December 31, 1997, 1998, and 1999. In
addition, the Company sells retread tires to El Paso Tire Center, Inc., a
corporation owned 100% by J.A. Cardwell, Sr. Such sales amounted to $47,000,
$60,000, and $33,000 for the years ended December 31, 1997, 1998, and 1999,
respectively.

          The Company has an agreement and formed a limited liability
corporation, Petro Travel Plaza LLC, with Tejon Development Corporation to build
and operate a Petro Stopping Center branded location in Southern California.
Pursuant to the terms of the Limited Liability Company Operating Agreement of
Petro Travel Plaza LLC, dated as of December 5, 1997, among the Operating
Partnership, Tejon, and Tejon Ranch Company, as guarantor, we made an initial
capital contribution of $2.0 million for working capital and inventory, which is
our basis for the investment in the joint venture. Pursuant to the agreement the
LLC financed construction of the location with a non-recourse credit facility,
and the Company receives a management fee of $250,000 per annum and as a 40.0%
member in the joint venture, the Company receives 40.0% of the location's
operating earnings. This location began operations in June 1999.

          In connection with the formation of the Operating Partnership in May
1992, J.A. Cardwell, Sr. and James A. Cardwell, Jr., officers and Directors of
the Company, executed an Option and Right of First

                                       45
<PAGE>

                     PETRO STOPPING CENTERS HOLDINGS, L.P.
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(9) Related-Party Transactions - continued

Refusal Agreement which granted to the Company and other parties the options
which expire in December 2006, to purchase certain properties owned by the
Cardwell Group that are located near or adjacent to certain of the Company's
Stopping Centers, and a right of first refusal on these properties. The price at
which an option property may be purchased will be equal to the fair market value
of the property when the option is exercised as determined by an appraisal.

          J.A. Cardwell, Sr., James A. Cardwell, Jr. and Mrs. J.A. Cardwell, Sr.
own 60.0%, 30.0% and 10.0%, respectively, of the stock of C&PPR, Inc. ("C&PPR").
J.A. Cardwell, Sr. is the sole shareholder of CYMA Development Corporation
("CYMA") and James A. Cardwell, Jr. is the sole shareholder of Petro Truckstops,
Inc. ("Petro Truckstops") and Petro Beverage, Inc. The Company entered into
agreements with CYMA, C&PPR, Petro Truckstops, and Petro Beverage, Inc. to
engage in retail sales of beer, wine or wine coolers at a limited number of its
facilities. The agreements continue in effect until terminated by either party.
Under the agreements with CYMA, C&PPR, Petro Truckstops, and Petro Beverage,
Inc., the Company agreed to operate the alcohol sales business at these
locations in exchange for 15.0% of the gross receipts generated from alcoholic
beverage sales of which 5.0% is the Company's reimbursement of all related
operating expenses as defined under the agreements. In each of the agreements,
the net payments to the Company are approximately equal to the gross profit
received by the above entities. The Company's revenues in connection with its
agreement with C&PPR were $47,000, $59,000, and $74,000 for the years ended
December 31, 1997, 1998, and 1999, respectively. The Company's revenues relating
to the CYMA agreement were $1,200, $1,000, and $0 for the years ended December
31, 1997, 1998, and 1999, respectively. The Company's revenues in connection
with its agreement with Petro Beverage, Inc. were $4,600, $5,900, and $5,600 for
the years ended December 31, 1997, 1998, and 1999, respectively. The Company's
revenues in connection with the Petro Truckstops agreement were $16,000,
$36,000, and $29,000 for the years ended December 31, 1997, 1998, and 1999,
respectively.

          In connection with the formation of the Operating Partnership in May
1992, Motor Media, Inc. ("Motor Media"), which is owned 100% by James A.
Cardwell, Jr., entered into a five-year agreement with the Company (the "Motor
Media Agreement"), under which Motor Media leases floor and wall space at all
Stopping Centers operated by the Company and sells space for in-store
advertising to third parties. Under the agreement, the Company and Motor Media
are entitled to 25.0% and 75.0%, respectively, of the gross revenues generated.
Motor Media received $234,000, $215,000, and $177,000, before its selling,
maintenance and administrative expenses, for the years ended December 31, 1997,
1998, and 1999, respectively, representing its share of the gross receipts
generated. Motor Media has entered into similar floor and wall space leases with
other truck stops nationwide. The Company and Motor Media have extended the term
of the Motor Media Agreement through April 2002, which will be automatically
extended until cancelled by either party with 60 days written notice.

          Under an existing agreement (the "Amusement Agreement") between El
Paso Vending and Amusement Company ("EPAC"), of which J.A. Cardwell, Sr. and
James A. Cardwell, Jr. own 99.0% and 1.0%, respectively, and the Company, EPAC
furnishes video and other games to four of the Company's Stopping Centers and
services these games. Pursuant to the Amusement Agreement, which expires in May
2002 or until earlier terminated by either party, the Company paid 60.0% of the
revenues generated by the games to EPAC and retained the remaining 40.0%.
Beginning November 1994, the arrangement was modified to pay 50.0% of the
revenue generated by the games to EPAC and 50.0% to the Company. The Company
amended the Amusement Agreement to cause EPAC to contract directly with the
Company to furnish and service video and other games at an additional 12
Stopping Centers. Subsequent thereto, EPAC began furnishing and servicing games
at an additional six Stopping Centers under the terms of the Amusement Agreement
of which one site agreement guarantees a minimum annual revenue to the Company
of $180,000. Subsequent to December 1, 1998, EPAC began furnishing and servicing
video and other games to two additional Stopping Centers under the terms of the
Amusement Agreement, of which the Company pays 40.0% of the revenues generated
by the games to EPAC and retains the remaining 60.0%. EPAC received $2.4
million, $2.6 million, and $2.7 million in revenues, respectively, generated
from the furnishing and servicing games located at the Stopping Centers for the
years ended December 31, 1997, 1998, and 1999.

                                       46
<PAGE>

                     PETRO STOPPING CENTERS HOLDINGS, L.P.
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(9) Related-Party Transactions - continued

          Beginning in June 1993 the two Stopping Centers located in Louisiana
featured video poker games housed in a separate on-site facility and operated by
a third party, Petro Truckstops, Inc., an affiliate, who, under terms of a
contract, turns over 20.0%-70.0% of the revenue generated from the machines.
Petro Truckstops, Inc. pays 95.0% of revenue collected to the Company and
retains 5.0% for operating expenses in accordance with a lease agreement. The
Amusement Agreement has been amended to extend its term through May 2002.
Payments to the Company under this arrangement aggregated $2.1 million, $2.2
million, and $1.7 million for the years ended December 31, 1997, 1998, and 1999,
respectively.  During 1996, the State of Louisiana enacted a statute requiring
the cessation of video poker operations unless the parish in which the
operations were conducted voted to allow the continued operation of video poker
machines. On November 5, 1996, the parish in which the Shreveport facility is
located voted to continue to allow video poker operations, while the parish in
which the Hammond facility is located voted to disallow video poker operations.
The video poker operations at the Hammond facility were required to be, and
were, phased out at the end of June 1999. During the years ended December 31,
1998 and 1999, the Hammond location generated approximately $1.1 million and
$603,000 of revenue from video poker, respectively. As part of the video poker
license for 1999-2000, we leased the Shreveport fuel island operation to Petro
Truckstops, Inc., in order to satisfy state law requirements.

          Management fees of $300,000 for each of the years ended December 31,
1997 and 1998, and $175,000 for the year ended December 31, 1999, were earned by
Mobil Oil Corporation, in accordance with the terms of the Operating
Partnership's Partnership Agreement. Subsequent to the Recapitalization
discussed in Note (1), these fees were discontinued.

          The Company entered into a management consulting agreement with
Chartwell Investments, commencing January 30, 1997, pursuant to which Chartwell
Investments provided the Company with certain management, advisory and
consulting services for a fee of $600,000 for each fiscal year of the Company
during the term of the agreement, plus reimbursement of certain expenses. For
the years ended December 31, 1997, 1998, and 1999, the Company paid Chartwell
Investments $600,000, $714,000, and $408,000, respectively, under this
agreement. Subsequent to the Recapitalization discussed in Note (1), those fees
were discontinued.

          In connection with the Recapitalization, and in compliance with
applicable Internal Revenue Code and Treasury Regulation provisions dealing with
recourse debt, J.A. Cardwell, Sr., James A. Cardwell, Jr., Petro, Inc., and
JAJCO II, Inc. each entered into an indemnity agreement under which each agreed
to indemnify the Operating Partnership and Holdings, and the general and limited
partners thereof in the event that the indemnified parties are required to pay
any current indebtedness or any other liabilities of Holdings or the Operating
Partnership after a default, acceleration by the creditor and exhaustion of any
collateral securing the credit facility. No payments have been made under these
agreements.

          Each of the affiliates, with the exception of Mobil Diesel Supply
Corporation, Mobil Oil Corporation, Chartwell, Volvo, Volvo Trucks and Petro
Travel Plaza LLC is owned or controlled to some degree by a member or members of
the Cardwell Group. Related-party transactions, other than those specifically
discussed above, generally arise in the ordinary course of business as a result
of the Company's purchase of trade accounts receivable or receipt of franchisee
fees from Highway Service Ventures, Inc., a corporation in which J.A. Cardwell,
Sr. owns an interest, which owns properties that are part of the Company's truck
stop network. For the years ended December 31, 1997, 1998, and 1999, the Company
purchased receivables from an affiliated franchisee in the amounts of $18.2
million, $16.9 million, and $17.1 million, respectively and received franchise
fees from an an affiliated franchisee of approximately $1.0 million in each of
the years.

                                       47
<PAGE>

                     PETRO STOPPING CENTERS HOLDINGS, L.P.
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(10) Partners' Capital (Deficit)

Ownership

          As a result of the Recapitalization and purchase of Chartwell's and
Kirschner's interests, discussed in Note (1), Holdings is the owner of
approximately 99.5% of the common interests of the Operating Partnership.  The
common limited partnership interests of Holdings are owned by the Cardwell Group
(approximately 51.6%), Volvo Trucks (approximately 28.7%), Mobil Long Haul
(approximately 9.7%) and Warrant Holdings (approximately 10.0%) and the
mandatorily redeemable preferred partnership interests of Holdings are owned by
Mobil Long Haul ($17.0 million) and the Cardwell Group ($7.6 million).

          Under the Holdings' partnership agreement (the "Holdings' Partnership
Agreement"), the partners delegated management authority to a seven member Board
of Directors. The Cardwell Group, Volvo Trucks, and Mobil Long Haul have the
right to appoint two persons each to the Board of Directors.  These three
partners also have the right to veto certain major partnership decisions.  The
seventh member is Mr. Larry Zine, who served as the Operating Partnership's
executive vice president and chief financial officer from December 1996 to July
1999, and also as its president from January 1999 to July 1999.

Mandatorily Redeemable Preferred Partnership Interests

          The Holdings' Partnership Agreement provides for two classes of
preferred partnership interests. The Class A preferred partnership interests
held by the Cardwell Group accrue cumulative preferred returns at a rate of 8.0%
per annum. The Class A preferred partnership interests held by Mobil Long Haul
accrue cumulative preferred returns at a rate of 9.5% per annum. The preferred
returns accrue, but are only payable in cash if permitted by the Operating
Partnership's then existing debt instruments. Accrued but unpaid returns
compound semiannually. The Class A preferred partnership interests will be
mandatorily redeemable by the Company on October 27, 2008. The Class A preferred
partnership interests are not convertible into common partnership interests. The
Class A preferred partnership interests as well as the Class B preferred
partnership interests described below have liquidation preferences equal to all
their accrued and unpaid preferred return plus to all their unrecovered capital.

          The Class B preferred partnership interests are owned by Mobil Long
Haul and accrue cumulative preferred returns at a rate of 12.0% per annum and
are convertible into 3.9% of the common partnership interests in Holdings at any
time prior to mandatory redemption on the tenth anniversary date of the closing
of the Recapitalization. Upon conversion into a common partnership interest (or
as soon thereafter as cash may be available) the accrued preferred return on the
Class B preferred partnership interest will be paid.

          The Company had accrued and unpaid preferred returns on the
mandatorily redeemable preferred partnership interest totaling to $3.6 million
and $6.0 million at December 31, 1998 and 1999, respectively.

Distributions

          Under the terms of the Holdings' Partnership Agreement (and prior to
the Recapitalization, the Operating Partnership agreement), Holdings is required
to make distributions to each of its partners in an amount sufficient to allow
each partner to pay federal, state and local taxes with respect to the
allocation of taxable income to such partner by Holdings. Tax distributions are
based on the taxable income of Holdings. Distributions for the years ended
December 31, 1997, 1998, and 1999, of both the Operating and Holdings
Partnerships were $0, $823,000 and $980,000, respectively.

          As of December 31, 1999, the historical net book value of assets and
liabilities was approximately $12.0 million greater than the associated net tax
basis of those assets and liabilities.

Allocations of Income

          In any fiscal year, Holdings' profits shall be allocated among the
preferred limited partners according to their preferred sharing percentages
until the cumulative amount of cash distributed equals the

                                       48
<PAGE>

                     PETRO STOPPING CENTERS HOLDINGS, L.P.
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(10) Partners' Capital (Deficit) - continued

cumulative amount of cash distributed in payment of unpaid preferred return to
the preferred limited partners.  Profits for any fiscal year are allocated first
to those partners to which losses have previously been allocated, then pro rata
to the common limited partners.  Losses for any fiscal year shall be allocated
first to common partners then to preferred partners.

          Upon liquidation of Holdings, the proceeds will be distributed first
to creditors; next to Class A and Class B preferred interests, next, pro rata,
to partners who have distribution shortfalls; then to common partnership
interests to the extent of unrecovered capital, and lastly, pro rata, to the
partners in accordance with their positive capital account balances.

(11) Employee Benefits

          The Company sponsors a defined contribution retirement plan under
Internal Revenue Code Section 401(k) covering substantially all of its employees
(the "Plan"). Company contributions equal 50.0% of the participants'
contributions up to 4.0% of the participants' annual salary and aggregated
approximately $189,000, $318,000, and $350,000 for the years ended
December 31, 1997, 1998, and 1999, respectively. Other than those discussed
below, there were no other post employment or retirement plans at December 31,
1998 and 1999.

          The Plan failed to correctly perform the requirements under Section
401(k)(3)(ii) of the Internal Revenue Code of 1986, as amended (the "Code"),
Section 401(m) of the Code and the underlying Treasury Regulations (hereinafter
referred to as the ADP/ACP Test) for the Plan years 1990-1996. In addition, the
Plan failed to allocate forfeitures of employee contributions in accordance with
the terms of the Plan since its inception. Management of the Company believes it
has identified all operational defects of the Plan, and has taken corrective
actions to ensure future compliance. The Plan administrator submitted a request
for a compliance statement to the IRS on December 19, 1996, under the IRS
Voluntary Compliance Resolution Program (VCR). On August 20, 1998, the IRS
notified the Plan that due to certain technical legal issues under the Plan, the
submission could not be accepted under the VCR Program, and should be redirected
to the Walk in Closing Agreement Program (Walk in CAP). Under the Walk in CAP,
the Plan will be permitted to take corrective actions with respect to the
operational defects and receive a compliance statement from the IRS
acknowledging such action. In April 1999, the Internal Revenue Service issued a
ruling allowing the Company to take corrective action with regards to the Plan
pursuant to the Walk in Cap. Under the approved Walk in Cap settlement, the
Company will pay $250,000 in contributions and $35,000 in penalties. The Company
completed this settlement in March 2000.  The Company's liability is reflected
in the accompanying consolidated balance sheet as of December 31, 1999.

          During 1998, the Company established the Petro Stopping Centers
Deferred Compensation Plan (the "Comp Plan") for key employees. Under the Comp
Plan, the participants may defer base compensation and earn interest on their
deferred amounts. The program is not qualified under Section 401 of the Internal
Revenue Code. The Company will credit matching deferrals for each participant
equal to 50.0% of the first 4.0% of the participant's compensation up to $9,500
per year. Company matched deferrals will vest at 20.0% after one year of service
and an additional 20.0% for each year thereafter. The Plan Trustee will invest
each participant's account balance in a separate account. The participants are
general creditors of the Company with respect to these benefits. The total of
participant deferrals, which is reflected in accrued expenses and other
liabilities, was $160,000 and $463,000 at December 31, 1998 and 1999,
respectively. The Company's matched deferral expenses for the years ended
December 31, 1998 and 1999, totaled $9,900 and $27,000, respectively.

(12) Partnership Interests Option Plan

          The Company has established an equity incentive plan ("Option Plan")
to attract and retain key personnel, including senior management, and to enhance
their interest in the Company's continued success. The Company applies
Accounting Principles Board Opinion No. 25 in accounting for its plan.
Accordingly,

                                       49
<PAGE>

                     PETRO STOPPING CENTERS HOLDINGS, L.P.
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(12) Partnership Interests Option Plan- continued

compensation costs for partnership interest options are measured as the excess,
if any, of the market price of the partnership interests at the date of grant
over the amount an employee must pay to exercise the option. The Company
provides the disclosures required by SFAS No. 123.

          Effective upon the consummation of the Recapitalization, all options,
pursuant to their terms, became sponsored by Holdings, and all then outstanding
options granted under the Option Plan and Mr. Zine's options were converted on
an equivalent economic basis to options for equity interests in Holdings on the
same terms and conditions, including their vesting schedule. Accordingly, all
historical amounts and percentages have been restated to reflect this
conversion.

          Options are granted at an exercise price not less than market price at
the date of grant. As an entity without publicly traded equity securities, the
Board of Directors must determine in good faith the market price of the option
at the date of grant. In the event of very recent transactions involving the
Company's partnership interests, the market price of the option is based on the
value of the interests determined in those transactions. In the absence of very
recent transactions, the plan provides a formula for determining an
approximation of market price based on a multiple of the Company's latest four
quarters of EBITDA, less indebtedness and the mandatorily redeemable preferred
partnership interests. The 1997 grants were made at or about the time of the
1997 recapitalization and, therefore, the market price ($2,814 per .01%
interest) was based on the valuation of the Company's common partners' capital
determined in connection with the 1997 recapitalization. The 1998 market price
($3,010 per .01% interest) was determined by the provisions of the plan since
there were no very recent transactions. Based on facts and circumstances at the
time, the Board of Directors concluded the amount as determined by the
provisions of the plan was a reasonable determination of market price. No
options have been granted since 1998.

          Vesting occurs over four years at 25.0% per year. At December 31,
1999, approximately 5.49% of the partnership interests were exercisable, all at
an exercise price of $2,913, and all of which expire in 2007. Participants
become fully vested upon the occurrence of a Change in Control (as defined in
the plan), upon a sale of substantially all of the assets of the Company, upon
the liquidation of the Company, upon the Company's consummation or adoption of a
plan to make an Extraordinary Distribution of Redemption (as defined in the
plan) or a closing of an initial public offering of equity securities. Options
may be exercised at any time, to the extent that such options are exercisable.
All options expire on the earlier to occur of (i) the tenth anniversary of the
date the option was granted, (ii) one year after the participant ceases to be an
employee of the Company due to retirement, death or disability, (iii)
immediately, if the participant ceases to be an employee of the Company for
cause, or (iv) ninety days after the occurrence of the termination of the
participant's employment with the Operating Partnership, for any reason other
than (ii) or (iii) above. A participant, as defined in the plan, shall have no
rights as a limited partner until the date the participant is duly admitted into
the partnership. In general, a Class B Common Limited Partner may not
participate in partnership profits, losses or gains, or participate in
distributions from operations or receive tax distributions; however, a
participant may participate in liquidating distributions. Additionally, a Class
B Common Limited Partner shall not have any voting rights.

          The Company has also awarded options to Mr. Larry Zine to purchase
3.91% of the common limited partnership interests of the Company at a price of
$2,814 per each 0.01 (one hundredth) percent granted pursuant to the terms of
Mr. Zine's employment agreement; 25.0% of the options become exercisable on each
of December 31, 1997, 1998, 1999, and 2000. However, as a result of the purchase
of Chartwell's interests described in Note (1), these options became fully
exercisable.

          The Company anticipates that the aggregate equity issued pursuant to
any current and future arrangements will be between 5.0% and 10.0% of the fully
diluted equity of the Company. A summary of the status of the Company's
outstanding partnership interest options as of December 31, 1996, 1997, 1998,
and 1999, and changes during the years then ended is as follows:

                                       50
<PAGE>

                     PETRO STOPPING CENTERS HOLDINGS, L.P.
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


(12) Partnership Interests Option Plan - continued

<TABLE>
<CAPTION>
                                                                                    Percentage       Exercise
                                                                                     Interests       Price (1)
                                                                                    -----------      ---------
<S>                                                                                 <C>              <C>
Options outstanding at December 31, 1996..........................................           -       $      -
                                                                                       -------       --------
     Granted......................................................................       12.65       $  2,814
     Exercised....................................................................           -       $      -
     Expired/Cancelled/Forfeited .................................................        (.21)      $  2,814
                                                                                       -------       --------
Options outstanding at December 31, 1997..........................................       12.44       $  2,814
     Granted......................................................................        1.89       $  4,221
     Exercised....................................................................           -       $      -
     Expired/Cancelled/Forfeited .................................................        (.75)      $  2,814
                                                                                       -------       --------
Options outstanding at December 31, 1998..........................................       13.57       $  3,010
     Granted......................................................................           -       $      -
     Exercised....................................................................           -       $      -
     Expired/Cancelled/Forfeited .................................................       (1.82)      $  3,089
                                                                                       -------       --------
     Options outstanding at December 31, 1999.....................................       11.75       $  2,998

</TABLE>

     (1)  Weighted average per .01% interest

     Had compensation expense been determined consistent with SFAS No. 123, the
Company's net income for 1997, 1998 and 1999 (No options were granted in 1999)
would have been recorded in the following pro forma amounts:


                                                       1997     1998     1999
                                                       ----     ----     ----
                                                           (in thousands)
     Net income (loss) - as reported...............  $(5,736)  $1,346  $(4,612)
     Net income (loss) - pro forma.................  $(6,478)  $1,180  $(4,612)

     The fair value of each option grant ($1,248 per .01% interest in 1997 and
$1,872 per .01% interest in 1998) for the purposes of the pro forma disclosures
is estimated using the minimum value method with the following assumptions used
for grants in 1997 and 1998 of all options:

                                                            1997   1998
                                                            ----   ----
     Risk-free interest rate .............................  5.86%  5.86%
     Dividend yield.......................................     -      -
     Expected lives in years..............................    10     10

(13) Commitments and Contingencies

     The Company is involved in various litigation incidental to the business
for which estimates of losses have been accrued, when appropriate. In the
opinion of management, such proceedings will not have a material adverse effect
on the consolidated financial position or results of operations.

     The Company has an agreement with Tejon Development Corporation ("Tejon")
to build and operate a Petro Stopping Center branded location in Southern
California. Pursuant to the terms of the Limited Liability Company Operating
Agreement of Petro Travel Plaza LLC ("LLC"), dated as of December 5, 1997, among
the Company, Tejon and Tejon Ranch Company, as guarantor (the "Agreement"), the
Company made an initial capital contribution of $2.0 million for working capital
and inventory. Pursuant to the Agreement, the LLC financed construction of the
location with a non-recourse credit facility, the Company receives a management
fee of $250,000 per annum and receives 40.0% of the location's operating
earnings which is accounted for using the equity method. This Petro branded
location began operations in June 1999.

                                       51
<PAGE>

                    PETRO STOPPING CENTERS HOLDINGS, L.P.
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(14) Financial Instruments

     As of December 31, 1998 and 1999, the carrying amounts of certain financial
instruments employed by the Company, including cash and cash equivalents,
accounts receivable, trade accounts payable and amounts due from/to affiliates
are representative of fair value because of the short-term maturity of these
instruments. The carrying amounts of notes payable approximate fair value due to
the floating nature of the interest rate. The Company's principal market risk as
it relates to long term debt is its exposure to changes in interest rates. The
fair value of the 10 1/2%, 12 1/2% and 15% Notes has been estimated based on
quoted market prices for the same or similar issues or by discounting the future
cash flows using rates currently available for debt of similar terms and
maturity. The fair value of all derivative financial instruments is the amount
at which they could be settled, based on quoted market prices or estimates
obtained from dealers.

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

<TABLE>
<CAPTION>
                                           1998                   1999
                                         Carrying               Carrying
                                          Amount   Fair Value    Amount   Fair Value
                                         --------  ----------   --------  ----------
                                                      (in thousands)
<S>                                      <C>       <C>          <C>       <C>
Balance sheet financial instruments -
 Long-term debt                          $181,328     188,416   $226,292    $220,002
Other financial instruments -
 Interest rate swap agreements                 --        (153)        --        (264)

</TABLE>

     The Company has only limited involvement with derivative financial
instruments and does not use them for trading purposes. The Company uses
derivatives to manage well-defined interest rate risks. At December 31, 1999,
the Company was party to an interest rate swap agreement with an aggregate
principal amount of $30.0 million. Under the agreement, the Company pays a fixed
rate of 6.15% in exchange for a floating rate based on LIBOR on the aggregate
principal amount as determined in three-month intervals. The transaction
effectively changes a portion of the Company's interest rate exposure from a
floating rate to a fixed rate basis. The effect of the swap was to increase the
rate the Company was required to pay by 0.66%, which resulted in additional
interest expense of approximately $264,000.

     The primary risks associated with swaps are the exposure to movements in
interest rates and the ability of the counterparties to meet the terms of the
contracts. Based on review and assessment of counterparty risk, the Company does
not anticipate non-performance by the other party. The Company does not obtain
collateral or other security to support financial instruments subject to credit
risk, but monitors the credit standing of counterparties.

(15) Environmental Matters

     The Company operations and property are subject to extensive federal and
state legislation and regulations relating to environmental matters. The Company
uses underground and above ground storage tanks (each a "UST") to store
petroleum products and waste oils. Statutory and regulatory requirements for UST
systems include requirements for tank construction, integrity testing, leak
detection and monitoring, overfill and spill control, and mandate corrective
action in case of a release from a UST into the environment. The Company is also
subject to regulation in certain locations relating to vapor recovery and
discharges into the water. Management believes that all of its USTs are
currently in compliance in all material respects with applicable environmental
laws, regulations and requirements. During 1998, the Company continued the
installation of cathodic protection and overfill equipment and devices in its
older USTs, as required by federal and state law, and all such work was
completed in December 1998, except in

                                       52
<PAGE>

                    PETRO STOPPING CENTERS HOLDINGS, L.P.
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(15) Environmental Matters - continued

the Corning, California location. The Corning, California work was completed
during the third quarter of 1999, and the Company expended approximately $1.2
million during 1999 to complete this work. Some site remediation will be
required in Corning, California as a result of completion of the upgrade work.
Management believes that all of the Company's storage tanks are in compliance in
all material respects with applicable environmental laws, regulations and
requirements. For the years ended December 31, 1997, 1998, and 1999, the
Company's expenditures for environmental matters were $154,000, $385,000, and
$156,000, respectively. See Note (2) for a discussion of its accounting policies
relating to environmental matters.

     In connection with its ownership of the properties and operation of its
business, the Company may be subject to liability under various federal, state,
and local environmental laws, ordinances and regulations relating to cleanup and
removal of hazardous substances (which may include petroleum and petroleum
products) on, under, or in such property. Certain laws typically impose
liability whether or not the owner or operator knew of, or was responsible for,
the presence of such hazardous or toxic substances. Persons who arrange, or are
deemed to have arranged, for the disposal or treatment of hazardous or toxic
substances may also be liable for the costs of removal or remediation of such
substances at the disposal or treatment site, regardless of whether such site is
owned or operated by such person.

     The Company is currently party to one proceeding with the United States
Environmental Protection Agency ("EPA") regarding a waste oil storage and
recycling plant located in Patterson, Stanislaus County, California (the
"Patterson Site"). In the ordinary course of Company operations, waste oil
products are generated which are required to be transported to off-site
facilities for treatment and disposal. Between June 1991 and February 1995 the
Company arranged for the transportation of waste oil products from the Corning
location to the Patterson Site. Sometime in 1997 the owners of the Patterson
Site abandoned operation of the site, the condition of the site began to
deteriorate, and in October 1997 the EPA responded to a request for assistance
from the California Department of Toxic Substances Control. Notwithstanding that
the Company's activities with regards to use of the Patterson Site were lawfully
conducted and have not been challenged by the EPA, by Order issued by the EPA on
August 12, 1998 ("Order"), the Company and 55 other companies were identified by
the EPA as "generators, transporters or arrangers for disposal of hazardous
substances" as those terms are defined under the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, 42 U.S.C., Section 9601 to
9675, as amended by the Superfund Amendments and Reauthorization Act of 1986
("CERCLA"), and thus are named in the Order as potentially responsible parties,
strictly liable under CERCLA for removal activities associated with the
Patterson Site. The Company and approximately 20 of the other 55 companies
identified by the EPA are working together toward a resolution and plan of
action for completion of the removal activities required by the EPA pursuant to
the Order. Although the Company does not believe that its involvement in the
Patterson Site will have a material adverse effect on the Company's consolidated
financial condition or results of operations, if a plan of action cannot be
agreed upon or if the EPA or the State of California imposes remediation
requirements beyond the scope presently contemplated based upon the Company's
current understanding with the EPA, the liability could be higher.

     The Company has accrued for certain environmental remediation activities
consistent with the policy set forth in Note (2). At December 31, 1998 and 1999,
such accrual amounted to approximately $274,000 and $122,000 respectively, and
in management's opinion, was appropriate based on existing facts and
circumstances. The Company's accrual for environmental remediation expenses is
based upon initial estimates obtained from contractors engaged to perform the
remediation work as required by local, state, and federal authorities. It is
often difficult to predict the extent and the cost of environmental remediation
until work has commenced and the full scope of the contamination determined.
Accruals are periodically evaluated and updated as information regarding the
nature of the clean up work is obtained. In the event that future remediation
expenditures are in excess of amounts accrued, management does not anticipate
that they will have a material adverse effect on the consolidated financial
position or results of operations of the Company. Actual results, however, could
differ from estimated amounts and those differences could be material. At
December 31, 1998 and 1999, the Company has recognized approximately $160,000
and $162,000, respectively, in the consolidated balance sheet related to
recoveries of certain remediation costs from third parties.

                                       53
<PAGE>

                    PETRO STOPPING CENTERS HOLDINGS, L.P.
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(16) Segments

     In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 131, "Disclosures about Segments of an
Enterprise and Related Information" ("SFAS No. 131"), which the Company adopted
in 1998. The new rules establish revised standards for public companies relating
to the reporting of financial information about operating segments. The adoption
of SFAS No. 131 did not have a material effect on either the Company's primary
consolidated financial statements or segment information disclosures.

     SFAS No. 131 requires the Company to identify and report certain
information on its reportable operating segments. The Company identified two
reportable operating segments in adopting SFAS No. 131. The two reportable,
operating segments identified are the Company's company-operated truck stops and
its franchise truck stop operations.

     The Company operates large, multi-service truck stops in the United States.
The Company's facilities, which are known as Petro Stopping Centers, offer a
broad range of products, services, and amenities, including diesel fuel,
gasoline, home-style restaurants, truck preventive maintenance centers and
retail merchandise stores to the highway motorist. The Company has aggregated
its corporate truck stop operations into one reportable operating segment based
on the distribution of products and services under one common site facility,
classified as a multi-service truck stop. During the years ended December 31,
1997, 1998 and 1999, the revenues generated from the Company's truck-stop
operations were $681.8 million, $648.9 million and $714.9 million, respectively.

     In addition to company operations, the Company is a franchisor to 23 Petro
Stopping Center locations. The Company collects royalties and fees in exchange
for the use of its name and for certain services provided to the franchisees.
Franchise fees are based generally upon a percentage of franchisee's sales.
Given the insignificance of initial franchise fees and other revenue types, the
Company reports a total combined revenue amount. For the years ended December
31, 1997, 1998, and 1999, the revenues generated from the Company's franchise
operations were $4.0 million, $4.5 million, and $5.0 million, respectively.
These revenues are included in net revenues reported on the accompanying
consolidated statements of operations. The Company does not allocate any
expenses or assets in measuring this segment's profit and loss, nor does it
believe there are any significant commitments or obligations resulting from
these franchise agreements.

(17) Recently Issued Accounting Pronouncements

     In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, "Accounting for Derivative Instruments
and Hedging Activities" ("SFAS No. 133"). SFAS No. 133 establishes accounting
and reporting standards requiring that every derivative instrument (including
certain derivative instruments embedded in other contracts) be recorded in the
balance sheet as either an asset or liability measured at its fair value. SFAS
No. 133 requires that changes in a derivative's fair value be recognized
currently in earnings unless specific hedge accounting criteria are met. Special
accounting for qualifying hedges allow a derivative's gain and loss to offset
related results on the hedged item in the income statement and requires that a
company must formally document, designate, and assess the effectiveness of
transactions that receive hedge accounting. SFAS No. 133 was originally
effective for fiscal years beginning after June 15, 1999, but has been postponed
by Statement of Financial Accounting Standard No. 137, "An Amendment of SFAS No.
133," for one year with a mandatory effective date for fiscal years beginning
after June 15, 2000. Additionally, SFAS No. 133 has been modified regarding
recognition in the balance sheet of an embedded derivative that is required to
be separated from the host contract. At the date of initial application of SFAS
No. 133, an entity may choose either to recognize such embedded derivatives or
to select either January 1, 1998 or January 1, 1999, as a transition date for
embedded derivatives. A company may also implement the statement as of the
beginning of any fiscal quarter after issuance (that is, fiscal quarters
beginning June 16, 1999 and thereafter). SFAS No. 133 cannot be applied
retroactively. Management has not yet quantified the impact of adopting SFAS No.
133 on the Company's financial statements and

                                       54
<PAGE>

                     PETRO STOPPING CENTERS HOLDINGS, L.P.
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(17) Recently Issued Accounting Pronouncements - continued

has not determined the timing of, or method of, adoption. However, the
implementation of SFAS No. 133 could increase volatility in earnings.

(18) Restatement of 1997 and 1998 Financial Statements

       Subsequent to the original issuance of its consolidated financial
statements, the Company reclassified the minority interests in earnings and
losses of consolidated subsidiaries applicable to minority partners with deficit
capital accounts to the majority interests, and it also discovered an error in
the predecessor basis amount of Mobil Long Haul's limited partner capital
account recorded in connection with the formation of Holdings.  The revision
made to Mobil Long Haul's predecessor basis also resulted in a reduction in
property and equipment, net.  The 1997 and 1998 consolidated financial
statements have been restated to address these matters, the effect of which (i)
decreased net loss in 1997 from $(5.9 million) to $(5.7 million) due to reduced
depreciation expense of $187,000 offset by minority interest losses of $(64,000)
charged to the majority interests, (ii) increased net income in 1998 from $1.1
million to $1.3 million due to reduced depreciation expense of $204,000 and
minority interest earnings of $12,000 credited to the majority interests, (iii)
decreased limited partner's capital at December 31, 1997, from $39.2 million to
$42.9 million, (iv) decreased limited partners' capital at December 31, 1998,
from $39.8 million to $43.3 million, (v) decreased property and equipment, net
at December 31, 1997, from $153.4 million to $149.7 million, and (vi) decreased
property and equipment, net at December 31, 1998 from $162.3 million to $158.8
million.

(19)  Selected Quarterly Financial Data (unaudited)

<TABLE>
<CAPTION>
                                         First             Second               Third               Fourth
1998                                    Quarter            Quarter             Quarter              Quarter
----                                    ------             -------             -------              -------
                                                                  (in thousands)
                                                                   -----------
<S>                                     <C>                <C>                 <C>                  <C>
Net revenues......................       $162,932            $165,157           $167,288             $158,039
Operating income..................          5,260               6,995              7,892                5,777
Net income (loss).................             95                 968              1,380               (1,097)  (a)

                                         First             Second              Third                Fourth
1999                                    Quarter            Quarter             Quarter              Quarter
----                                    -------            -------             -------              -------
                                                                   (in thousands)
Net revenues......................       $153,573            $168,440           $183,748             $214,164   (c)
Operating income..................          5,737               7,793              6,241                4,734
Net income (loss).................            775               1,875             (3,278)  (b)         (2,556)
</TABLE>

(a)    A charge of $3.3 million was recorded in the fourth quarter of 1998 as a
       result of the adoption of SOP No. 98-5, which required the costs of
       start-up activities and organization costs to be expensed as incurred
       rather than capitalized and amortized. In accordance with SOP No. 98-5,
       the charge was recorded as a cumulative effect of a change in accounting
       principle.

(b)    A charge of $2.0 million was recorded in the third quarter of 1999 as a
       result of the write-off of previously deferred financing costs related to
       the Recapitalization discussed in Note (1).

(c)    The significant increase in net revenues for the fourth quarter of 1999
       is mostly due to a $53.1 million increase in fuel revenues due primarily
       to a 26.9% increase in average pump prices stemming from higher fuel
       costs in addition to a 16.7% increase in fuel volumes.

                                       55
<PAGE>

                   REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

The Board of Directors and Partners
Petro Stopping Centers Holdings, L.P.

         We have audited the accompanying consolidated balance sheets of Petro
Stopping Centers Holdings, L.P. (a Delaware limited partnership) and
subsidiaries as of December 31, 1998 (as restated see Note 18) and 1999, and the
related consolidated statements of operations, changes in partners' capital
(deficit) and cash flows for each of the three years in the period ended
December 31, 1999 (1997 and 1998 as restated - see Note 18). 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 in accordance with generally accepted auditing
standards. Those standards 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. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

         In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of Petro Stopping
Centers Holdings, L.P. and subsidiaries as of December 31, 1998 (as restated -
see Note 18) and 1999, and the results of their operations and their cash flows
for each of the three years in the period ended December 31, 1999 (1997 and 1998
as restated - see Note 18), in conformity with generally accepted accounting
principles.

         As discussed in Note 2 to the consolidated financial statements,
effective October 1, 1997, the Company changed its method of accounting for
process reengineering costs.

         As discussed in Note 2 to the consolidated financial statements,
effective October 1, 1998, the Company changed its method of accounting for
start-up activities.

         Our audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The schedule listed in the index to
consolidated financial statements is presented for purposes of complying with
the Securities and Exchange Commissions rules and is not part of the basic
financial statements. This schedule has been subjected to the auditing
procedures applied in the audit of the basic financial statements and, in our
opinion, fairly states in all material respects the financial data required to
be set forth therein in relation to the basic financial statements taken as a
whole.



                                                     ARTHUR ANDERSEN LLP

Dallas, Texas,
   February 16, 2000

                                       56
<PAGE>

                     PETRO STOPPING CENTERS HOLDINGS, L.P.

                Schedule II - Valuation and Qualifying Accounts


                 Years Ended December 31, 1999, 1998 and 1997
                                (in thousands)

<TABLE>
<CAPTION>
                                           Balance at        Charged to
                                          beginning of       costs and         Write-off/     Balance at end
              Description                     year            expenses         (Recovery)         of year
-------------------------------------------------------------------------------------------------------------
<S>                                       <C>                <C>               <C>            <C>
Year Ended December 31, 1999:
    Allowance for doubtful accounts           $  627              246              131            $  742
    Inventory Reserve                            457                -                -               457

Year Ended December 31, 1998:
    Allowance for doubtful accounts           $  330              236              (61)           $  627
    Inventory Reserve                          1,128                -              671               457

Year Ended December 31, 1997:
    Allowance for doubtful accounts           $  321              271              262            $  330
    Inventory Reserve                          1,129                -                1             1,128
</TABLE>


Item 9.  Change in and Disagreements with Accountants on Accounting and
         Financial Disclosure

         None

                                       57
<PAGE>

                                   PART III

Item 10.   Directors and Executive Officers of the Registrant

         The following sets forth certain information with respect to the
persons who are members of the Board of Directors and senior management team of
Holdings, Petro Holdings Financial Corporation and the Operating Partnership as
of February 1, 2000.


Name                      Age     Position
----                      ---     --------
J.A. Cardwell, Sr.        67      President, Chairman(a), Chief Executive
                                  Officer(a), Member of the Executive
                                  Committee(a) and Director
James A. Cardwell, Jr.    39      Senior Vice President of Marketing and
                                  Business Development(a) and Director
Evan C. Brudahl           44      Senior Vice President of Operations(a)
David A. Appleby          33      Vice President of Finance, Treasurer and
                                  Assistant Secretary(a)
Nancy C. Santana          43      Vice President and General Counsel(a) and
                                  Secretary
Travis R. Roberts         64      Vice President of Real Estate Acquisitions(a)
David Latimer             41      Vice President of Petro:Lube(a)
Kevin T. Weir             43      Director and Member of the Audit Committee and
                                  Executive Committee(a)
Robert Grussing IV        41      Director and Member of the Audit Committee and
                                  Executive Committee(a)
Larry J. Zine             45      Director
Martha P. Boyd            38      Director
Nancy B. Carlson          44      Director

(a) Position held only with the Operating Partnership

         J.A. Cardwell, Sr.- J.A. Cardwell, Sr. opened the first Petro Stopping
Center in 1975 and has been serving as our Chairman and Chief Executive Officer
since May 1992. J.A. Cardwell, Sr. has responsibility for our overall
performance, defining our image in the marketplace, identifying growth
opportunities and overseeing employee and customer retention. J.A. Cardwell, Sr.
served as the Chairman of the National Association of Truck Stop Operators in
1983 and 1984 and has worked on various committees of the association since that
time. J.A. Cardwell, Sr. currently serves as a trustee for Archstone Communities
and as a director of El Paso Electric Company (both publicly traded companies).
J.A. Cardwell, Sr. is the father of James A. Cardwell, Jr.

         James A. Cardwell, Jr. - James A. Cardwell, Jr. is Senior Vice
President of Marketing and Business Development, responsible for marketing fleet
business and the Iron Skillet and branded fast food operations. Mr. Cardwell has
been involved with the Operating Partnership full time for 15 years and has held
various positions including operations management as Vice President of
Operations from 1986 to 1992. Prior to his current position, Mr. Cardwell served
as Senior Vice President of Operations and Marketing in 1998, and Vice President
of National Sales and Promotions from June 1993 to January 1997. Mr. Cardwell
studied Management and Finance at the University of North Texas. He is currently
the Chairman of the Board of Directors of NATSO. James A. Cardwell, Jr. is the
son of J.A. Cardwell, Sr.

         Evan C. Brudahl - Evan Brudahl is the Senior Vice President of
Operations. Mr. Brudahl is responsible for our operations, overseeing
engineering, fuel purchasing and transportation, franchise operations and the
diesel fuel island, travel and convenience stores and Petro:Lube operations.
Prior to his employment with us, Mr. Brudahl worked for Mobil Oil Corporation
for 21 years and was most recently the Manager of U.S. Diesel Retail Marketing
and Travel Center Business at Mobil Oil Corporation. He received a B.B.A. in
Marketing from the University of Wisconsin at Whitewater.

                                       58
<PAGE>

         David A. Appleby - David Appleby has been the Vice President of
Finance, Treasurer and Assistant Secretary since March 1999 and is responsible
for all accounting, finance, treasury and credit operations. Prior to assuming
this position, Mr. Appleby was the Controller for the Operating Partnership, a
position he had held since February 1998. Prior to his position with the
Operating Partnership, Mr. Appleby was a Senior Audit Manager with KPMG Peat
Marwick, LLP from 1991 to 1998. He received a B.B.A. in Accounting from the
University of Texas at El Paso and is a Certified Public Accountant in the State
of Texas.

         Nancy C. Santana - Nancy Santana joined the Operating Partnership
effective July 1, 1998 in the capacity of Vice President, General Counsel and
Secretary, after a sixteen-year legal career in private practice. Prior to
joining us, Ms. Santana was the Chairman of the Real Estate, Banking and Lending
section at Kemp, Smith, Duncan & Hammond, P.C., in El Paso, Texas. Ms. Santana
is responsible for coordination of all our legal matters, real estate
acquisitions and risk management.

         Travis R. Roberts - Travis Roberts is Vice President of Real Estate
Acquisitions. Mr. Roberts oversees new site selections. Mr. Roberts has been
involved with the Operating Partnership since 1975 and prior to his current
position, he served as Vice President of Engineering from 1992 to 1998.

         David Latimer - David Latimer joined the Operating Partnership in 1983,
and has been serving as Vice President of Petro:Lube since April 1995. Mr.
Latimer also serves as our representative to the National Tire Dealers and
Retreaders Association and The Maintenance Council.

         Kevin T. Weir - Kevin Weir has been a Director of the Operating
Partnership since January 1999. Mr. Weir currently serves as Manager of the
North American Distillate Business for Mobil Oil Corporation. Prior to his
current position at Mobil Oil Corporation, Mr. Weir served as Retail Dealer
Operations Manager and Surface Transportation Manager of Mobil Oil Corporation's
North America Marketing and Refining division. Mr. Weir has been an employee of
Mobil Oil Corporation for 20 years.

         Robert Grussing IV- Robert Grussing has been a Director of the
Operating Partnership since July 1999. Mr. Grussing currently serves as Senior
Vice President, Business Development and Strategic Planning for Volvo Trucks
North America in Greensboro, NC. From 1992 to 1997, he served in a number of
executive positions at Mack Trucks, Inc. in Allentown, PA. From 1980 to 1992,
Mr. Grussing was an employee of General Electric Company. Mr. Grussing currently
serves as Chairman of the Board for Volvo Trucks Canada, Inc. and is a director
of Volvo Trucks de Mexico, S.A. de C.V. and Arrow Truck Sales, Inc.

         Larry J. Zine - Larry Zine has been a Director of the Operating
Partnership since January 1999. He served as Executive Vice President and Chief
Financial Officer of the Operating Partnership from December 1996 until January
1999 when he was elected President and a member of the Board of Directors. Mr.
Zine resigned from the Operating Partnership effective upon the consummation of
the Recapitalization, although, he remains on the Board of Directors of the
Operating Partnership. Mr. Zine currently serves as Executive Vice President and
Chief Financial Officer of Blockbuster, Inc. Prior to joining the Operating
Partnership, Mr. Zine was the Executive Vice President and Chief Financial
Officer for The Circle K Corporation, the second largest chain of convenience
stores in the United States, from 1988 to 1996. Mr. Zine is a director of MMH
Holdings, Inc., a holding company whose sole direct subsidiary is Morris
Material Handling, Inc. He was educated at the University of North Dakota and
holds a M.S. degree in Accounting and a B.B.S. in Marketing.

         Martha P. Boyd - Martha Boyd has been a Director of the Operating
Partnership since July 1999. Ms. Boyd is employed by Volvo Trucks of North
America, Inc. as Special Counsel, Strategic Support. In her current role, Ms.
Boyd acts as liaison between Volvo Trucks of North America and companies in
which it holds a substantial interest. Ms. Boyd has been employed in the legal
department of Volvo Trucks of North America for nine years, most recently as
Vice President, General Counsel and Secretary. Prior to joining Volvo Trucks of
North America, Ms. Boyd practiced commercial litigation with the law firm of
Balch & Bingham.

                                       59
<PAGE>

         Nancy B. Carlson - Nancy Carlson has been a Director of the Operating
Partnership since May 1999. Ms. Carlson currently serves as the Manager of the
Automotive Lubricant Business for Mobil Oil Corporation's North American
business. Prior to her current position, Ms. Carlson served as the Global Brand
Manager for Mobil Oil Corporation. Prior to these positions, Ms. Carlson held
several marketing positions within North America's Marketing and Refining
division. Ms. Carlson has been an employee of Mobil Oil Corporation for 20
years. Ms. Carlson rendered her resignation from the Board effective February
23, 2000 and David A. Parsons was appointed by Mobil as her replacement.

                                       60
<PAGE>

     Item 11. Executive Compensation

     Executive Compensation

          The following tables present information concerning the compensation
     paid for services rendered to the Operating Partnership for the years ended
     December 31, 1997, 1998, and 1999, to the Chief Executive Officer of the
     Operating Partnership and the four other most highly paid executive
     officers employed by the Operating Partnership at the end of 1999,
     collectively, the "Named Executive Officers." After the Recapitalization,
     the individuals listed below, other than Mr. Zine, continued to hold the
     same positions with the Operating Partnership, but the option award
     obligation described below were assumed on an equivalent economic basis by
     Holdings.

<TABLE>
<CAPTION>
                           Summary Compensation Table
                                                                                                Long-Term
                                                                                               Compensation
                                                                                                  Awards
           Name and                            Annual Compensation           Other Annual        Options             All Other
                                      ----------------------------------
       Principal Position             Year             Salary      Bonus     Compensation    (% Interest) (1)       Compensation
       ------------------             ----             ------      -----     ------------    ----------------       ------------
<S>                                   <C>              <C>        <C>        <C>             <C>                    <C>
J.A. Cardwell, Sr..................   1999             417,154     83,431         -                                  253,508 (2)
Chief Executive Officer               1998             398,566    240,000         -                                  248,242 (2)
                                      1997             362,700          -         -                                  247,177 (2)

Larry Zine.........................   1999             224,077          -         -                                    8,807 (3)
Former President & Chief              1998             328,462    198,000         -                                    3,049 (3)
Financial Officer                     1997 (4)         290,000    174,000         -                  3.91 (5)         64,728 (6)


Evan Brudahl.......................   1999             171,655     37,920         -                                   40,811 (7)
Senior Vice President-                1998             160,000     96,000         -
Operations                            1997 (4)         135,000     81,000         -                  1.28 (8)

James A. Cardwell, Jr..............   1999             177,154     35,431         -                                    5,601 (9)
Senior Vice President -               1998             160,135     96,000         -                                    4,692 (9)
Marketing & Business                  1997             135,000     81,000         -                  1.28 (8)          1,326 (10)
Development

David Latimer......................   1999             134,793     29,654         -                                    2,591 (11)
Vice President-                       1998             131,101     64,704         -                                    2,772 (11)
Lube Operations                       1997             128,516     90,959         -                  0.36 (8)          3,166 (10)
</TABLE>


    ______________
     (1)  Options granted to the Named Executive Officers in the Company,
          expressed as a percent of the Company's equity. As noted below under
          "Partnership Interests Option Plan," effective upon the consummation
          of the Recapitalization, the option plan as well as the options
          granted to Mr. Zine, under their terms, became sponsored by Holdings
          and were converted on an equivalent economic basis on the same terms
          and conditions, including their vesting schedule. Accordingly, the
          historical amounts and percentages have been restated to reflect this
          conversion.
     (2)  Represents employer contributions to a 401(k) Plan of $3,637, $4,702,
          and $3,468, in 1997, 1998, and 1999, respectively, and life insurance
          premiums paid for the benefit of J.A. Cardwell, Sr. in the amount of
          $243,540 annually for 1997, 1998, and 1999. Additionally, 1999
          includes $6,500 related to employer contributions to a Nonqualified
          Deferred Compensation Plan.
     (3)  Represents employer contributions to a Nonqualified Deferred
          Compensation Plan for 1998 and also for employer contributions to a
          401(k) Plan for 1999 of $5,000 and $3,807 respectively.
     (4)  Mr. Zine's employment commenced December 1996 and Mr. Brudahl's
          commenced January 30, 1997, as a seconded employee on loan from Mobil
          Oil Corporation until April 1, 1999 when he retired from Mobil Oil
          Corporation and became an employee.
     (5)  Represents options to purchase 3.91% of the common partnership
          interests of the Company granted under the terms of his employment
          agreement; 25% of the options became exercisable on each of

                                       61
<PAGE>

          December 31, 1997 and 1998. As a result of the Recapitalization, these
          options became fully vested and exercisable to purchase partnership
          interests in Holdings.
     (6)  Represents payments in connection with relocation expenses incurred by
          Mr. Zine.
     (7)  Mr. Brudahl received a one-time signing bonus of $38,000 upon
          execution of his employment agreement which became effective April 1,
          1999. In addition, he received $2,811 of employer contributions to a
          Nonqualified Deferred Compensation Plan.
     (8)  Represents options to purchase the indicated percentage of the Class B
          limited partnership interests of the Company granted under the option
          plan; 25% of the options become exercisable on each of January 30,
          1998, 1999, 2000, and 2001. The options were originally granted as
          options to purchase equity in the Operating Partnership. As noted
          below under "Partnership Interest Option Plan," effective upon the
          consummation of the Recapitalization, the options granted under the
          option plan, by their terms become sponsored by Holdings and were
          converted on an equivalent economic basis on the same terms and
          conditions, including their vesting schedule.
     (9)  Represents employer contributions to a 401(k) Plan and a Nonqualified
          Deferred Compensation Plan of $3,459 and $1,233, respectively for 1998
          and $2,225 and $3,376 respectively for 1999.
     (10) Represents employer contributions to a 401(k) Plan.
     (11) Represents employer contributions to a 401(k) Plan and a Nonqualified
          Deferred Compensation Plan of $1,450 and $1,322, respectively for 1998
          and $1,348 and $1,243, respectively for 1999.


              Aggregated Option/SAR Exercises in Last Fiscal Year
                     and Fiscal Year-end Option/SAR Values

<TABLE>
<CAPTION>
                                                                     Interests Underlying           Value of Unexercised
                                                                   Unexercised Options/SARs       In-The-Money Options/SARs
                                                                          at Fiscal                       at Fiscal
                            Amount Acquired         Value               Year-end(%)(2)                 Year-end($)(3)
Name                       on Exercise(%)(1)    Realized($)(1)    Exercisable/Unexercisable       Exercisable/Unexercisable
----                       -----------------    --------------    ------------------------        -------------------------
<S>                        <C>                  <C>               <C>                             <C>
J.A. Cardwell, Sr.                 --                 --                             --                              --
Larry J. Zine                      --                 --                         3.91/0(4)             $    2,692,250/0
Evan C. Brudahl                    --                 --                        .64/.64                 440,550/440,550
James A. Cardwell, Jr.             --                 --                        .64/.64                 440,550/440,550
David Latimer                      --                 --                       .18/.18                  122,375/122,375
</TABLE>

----------
(1)  No options were exercised in 1999.
(2)  Options granted to the Named Executive Officers in the Company, expressed
     as a percent of Holdings' equity.
(3)  No market exists for the partnership interests under option. Fair value for
     purposes of this table has been determined based on the values received by
     Kirschner and Chartwell for their interests in connection with the
     Recapitalization.
(4)  Mr. Zine's options became 100% exercisable as a result of the
     Recapitalization.

Partnership Interests Option Plan

     We have established an equity incentive plan to attract and retain key
personnel, including senior management, and to enhance their interest in our
continued success. We apply Accounting Principles Board Opinion No. 25 in
accounting for our equity incentive plan.

     Effective upon the consummation of the Recapitalization, all options,
pursuant to their terms, became sponsored by Holdings, and all then outstanding
options granted under the option plan and Mr. Zine's options were converted on
an equivalent economic basis to options for equity interests in Holdings on the
same terms and conditions, including their vesting schedules. Except where
noted, all historical amounts and percentages have been restated to reflect this
conversion.

     The original plan permitted the grant of options to purchase up to 7.25% of
the limited partnership interests in the Operating Partnership. Generally,
options to purchase between 0.03 to 0.90 percent of the Class B common limited
partnership interests were granted to eligible employees at an exercise price
that was not less

                                       62
<PAGE>

than 100% of the fair market value of the limited partnership interests
determined as the date the option is granted, subject to adjustments in the
event of distributions or redemptions. Accordingly, no compensation cost has
been recognized in the consolidated statement of operations from options issued
under the partnership interest option plan. Class B common limited partnership
interests represent ownership interests, but do not include any other rights
such as voting, tax distribution, etc. of common limited partnership interests.

     Options generally become vested at a rate of 25.0% per year. Participants
become fully vested upon:

     .  the occurrence of a change in control;

     .  a sale of substantially all of the assets of the Operating Partnership;

     .  the liquidation of the Operating Partnership;

     .  the Operating Partnership's consummation or adoption of a plan to make
        an extraordinary distribution or redemption; or

     .  a closing of an initial public offering of equity securities. Options
        may be exercised at any time, to the extent that such options are
        vested.

     All options expire on the earliest to occur of

          (a)  the tenth anniversary of the date the option was granted;

          (b)  one year after the participant ceases to be an employee of the
               Operating Partnership due to retirement, death or disability;

          (c)  immediately, if the participant ceases to be an employee of the
               Operating Partnership for cause; or

          (d)  ninety days after the occurrence of the termination of the
               participant's employment with the Operating Partnership, for any
               reason other than (b) or (c) above.

     If a participant ceases to be an employee, all nonvested options are
forfeited.

     Due to the necessity of a cash outlay in order to exercise the options and
the illiquid nature of the equity interest which may thereby be obtained, we are
considering the adoption of a phantom option plan. We believe that the phantom
option plan would be more effective in promoting the goals of equity
compensation, while avoiding the practical and administrative problems inherent
in the current option plan.

     It is anticipated that the phantom option plan would be structured
similarly to the option plan, with the exception that awards would be paid in
cash, and no equity interest issued. Under the phantom option plan, the vesting
schedule would be increased to no fewer than six years. However, employees would
be guaranteed awards under the phantom option plan which would be at least equal
to the difference between the current value of equity interest subject to their
option award, minus the current exercise price. Participants in the current
option plan would not be eligible to participate in the proposed phantom option
plan unless they agreed to waive any rights under the option plan. Employees who
do not elect to participate in the phantom option plan within a specified period
of time following its adoption would not be permitted to enter the plan at a
later date.

     We anticipate that the aggregate equity-related interests under the option
plan, the phantom option plan and any future plans will be between 5.0% and
10.0% of the fully diluted equity interests of Holdings.  At December 31,1999,
options covering 7.84% of the partnership interest in Holdings were

                                       63
<PAGE>

outstanding. At December 31, 1999, approximately 5.49% of the partnership
interests were vested. No options were granted or exercised during 1999.

     Mr. Zine was granted options separate from the option plan to acquire an
ownership interest in the Operating Partnership, which options became fully
vested and exercisable to purchase partnership interests in Holdings as a result
of the Recapitalization.

Compensation of Members of the Boards of Directors

     Members of the Boards of Directors of Holdings, Petro Holdings Financial
Corporation or the Operating Partnership who are not full-time employees of the
Operating Partnership receive a payment of $3,500 per meeting from the Operating
Partnership for their services. Members who are our full-time employees or
employees of our partners do not receive a salary or any other payment for their
services on the Boards of Directors.

Compensation Committee

     The Operating Partnership does not maintain a formal Compensation
Committee.  Executive level compensation is established by the Board of
Directors while other levels of compensation are established pursuant to
established policies and procedures. The officers administer any bonus plan
adopted by the Board of Directors. The Chief Executive Officer's salary is
determined by the Executive Committee of the Board of Directors. The members of
the Executive Committee are J.A. Cardwell, Sr., Robert Grussing and Kevin Weir.

Employment Agreements

     The Operating Partnership has entered into three employment agreements with
company executives: J.A. Cardwell, Sr., James A. Cardwell, Jr. and Evan C.
Brudahl.

     J.A. Cardwell, Sr.'s employment agreement commenced on February 10, 1999
and will expire on February 10, 2002. J.A. Cardwell, Sr.'s employment agreement
is automatically renewable each year for one additional year, unless either
party gives at least three months prior written notice not to renew the
agreement. Under his employment agreement, J.A. Cardwell, Sr.'s annual base
salary is $420,000 and may be increased by the Operating Partnership's Board of
Directors or compensation committee, if one is elected. J.A. Cardwell, Sr. is
entitled to receive an annual bonus of between 0%-120% of his annual base salary
based on our financial performance measured by EBITDA targets. The EBITDA
targets are mutually agreed upon between J.A. Cardwell, Sr. and the Operating
Partnership's Board of Directors. Under the terms of his employment agreement,
J.A. Cardwell, Sr. also receives a car, life insurance, tax preparation advice
and a country club membership, which, in the aggregate, costs the Operating
Partnership approximately $33,000 per annum.

     The employment of J.A. Cardwell, Sr. may be terminated either with cause,
which includes termination for felony conviction, misconduct or continued
failure to use reasonable best efforts, or without cause. He may elect to
terminate his employment agreement at any time with 60 days notice; and in any
of these cases, he will be entitled to receive his base salary and accrued
vacation pay. If the Operating Partnership terminates J.A. Cardwell, Sr. because
of a disability, he will be entitled to his base salary and accrued vacation pay
through the date of termination, offset dollar for dollar by any disability
insurance benefits he receives from insurance the Operating Partnership
provides. J.A. Cardwell, Sr.'s employment agreement contains customary non-
solicitation provisions upon termination of the agreement.

     James A. Cardwell, Jr.'s employment agreement commenced on February 10,
1999 and will expire on February 10, 2002. Under his employment agreement, the
annual base salary of James A. Cardwell, Jr. is $180,000 and may be increased by
the Operating Partnership's Board of Directors or compensation committee, if one
is elected. James A. Cardwell, Jr. is entitled to receive an annual bonus of
between 0%-110% of his annual base salary based on our financial performance
measured by EBITDA targets. The EBITDA targets are determined at the sole
discretion of the Operating Partnership's Board of Directors.

                                       64
<PAGE>

Under the terms of his employment agreement, James A. Cardwell, Jr. also
receives life and disability insurance and a country club membership, which, in
the aggregate, costs the Operating Partnership approximately $11,000 per annum.

     Under his employment agreement, the Operating Partnership may terminate
James A. Cardwell, Jr.'s employment with cause, which includes termination for
felony conviction, misconduct or continued failure to use reasonable best
efforts, without cause, or due to his disability. James A. Cardwell, Jr. may
terminate his employment either for good reason, which includes a reduction in
base salary or the Operating Partnership's failure to provide the material
benefits due to him, or without good reason. Generally termination of the
employment agreement by the Operating Partnership without cause or by James A.
Cardwell, Jr. for good reason entitles him to receive his base salary and
accrued vacation pay through the date of termination, a lump-sum payment equal
to one times his then-current base salary, specified benefits for twelve months
following the date of termination, and his annual bonus for the year his
employment terminates which he would have otherwise received, pro-rated to the
date of termination. Termination of the employment agreement by the Operating
Partnership with cause or by James A. Cardwell, Jr. without good reason entitles
him to receive only his base salary and accrued vacation pay through the date of
termination. If the Operating Partnership terminates James A. Cardwell, Jr.
because of his disability, he will be entitled to his base salary and accrued
vacation pay through the date of termination, offset dollar for dollar by any
disability insurance benefits he receives from insurance the Operating
Partnership provides. James A. Cardwell, Jr.'s employment agreement contains
non-solicitation provisions upon termination of the agreement.

     Evan C. Brudahl's employment agreement commenced on April 1, 1999 and will
expire on December 31, 2003. Mr. Brudahl received a one-time signing bonus of
$38,000 upon execution of his employment agreement. Mr. Brudahl's annual base
salary is $189,600 and may be increased by the Operating Partnership's Board of
Directors or compensation committee, if one is elected. Mr. Brudahl is entitled
to receive an annual bonus of between 0%-120% of his annual base salary based on
our financial performance measured by EBITDA targets. The EBITDA targets are
determined at the sole discretion of the Operating Partnership's Board of
Directors. Under the terms of his employment agreement, Mr. Brudahl also
receives disability insurance and a country club membership, which, in the
aggregate, costs the Operating Partnership approximately $10,000 per annum.

     Under his employment agreement, the Operating Partnership may terminate his
employment with cause, which includes termination for felony conviction,
misconduct or continued willful failure to use reasonable best efforts, without
cause, or due to his disability. Mr. Brudahl may terminate his employment for
good reason, which includes a reduction in base salary or the Operating
Partnership's failure to provide the material benefits due to him. Generally,
termination of the employment agreement by the Operating Partnership without
cause or by Mr. Brudahl for good reason entitles him to receive his base salary
and accrued vacation pay through the date of termination, a lump-sum payment
equal to two times his then-current base salary, specified benefits for twelve
months following the date of termination, and his annual bonus for the year his
employment terminates which he would have otherwise received, pro-rated to the
date of termination and an additional cash payment of $50,000. Failure by the
Operating Partnership to negotiate the renewal of Mr. Brudahl's employment
agreement in good faith prior to its expiration will also entitle him to a lump
sum payment equal to his annual base salary plus an additional payment of
$50,000.

     Termination of the employment agreement by the Operating Partnership with
cause or by Mr. Brudahl without good reason entitles him to receive only his
base salary and accrued vacation pay through the date of termination. If the
Operating Partnership terminates him because of his disability, Mr. Brudahl will
be entitled to his base salary and accrued vacation pay through the date of
termination, offset dollar for dollar by any disability insurance benefits he
receives from insurance the Operating Partnership provides. The employment
agreement contains customary non-solicitation provisions upon termination of the
agreement.

     Generally, if a third party acquires more than 50.0% of the common
partnership interests in the Operating Partnership, or the Operating Partnership
transfers more than 50.0% of its equity interests to an unrelated third party,
and any payments made to Mr. Brudahl as a result of this change in control are

                                       65
<PAGE>

subject to the excise tax imposed under the Internal Revenue Code on "excess
parachute payments" (as defined in the Code), Mr. Brudahl's employment agreement
provides that the Operating Partnership will make an additional tax gross-up
payment to Mr. Brudahl to reimburse him for all excise taxes imposed on all such
payments and for any income taxes imposed on the additional gross-up payment.

Item 12. Security Ownership of Certain Beneficial Owners and Management

     As a result of the Recapitalization, Holdings is the owner of approximately
99.5% of the common limited partnership interests of the Operating Partnership.
Petro, Inc. owns 100% of the general partnership interest of the Operating
Partnership. The following table sets forth certain information regarding
beneficial ownership of Holdings' common partnership interests by each general
partner, each limited partner who owns more than 5% of Holdings' common
partnership interests, each director who beneficially owns partnership
interests, each executive officer who beneficially owns partnership interests
and all directors and executive officers of Holdings as a group. Except as
discussed in the footnotes to the table, each partner listed below has informed
us that it will have (1) sole voting and investment power with respect to its
partnership interests, except to the extent that authority is shared by spouses
under applicable law and (2) record and beneficial ownership with respect to
such partner's partnership interests.

<TABLE>
<CAPTION>
                                        Type of         Class of     Percentage
     Names                             Interest         Interest    of Class (1)
     -----                             --------         --------    ------------
<S>                                  <C>                <C>         <C>
J.A. Cardwell, Sr.                   General Partner      Common       1.1%(2)
   6080 Surety Drive                 Limited Partner      Common      45.6%(3)
   El Paso, Texas 79905

James A. Cardwell, Jr.               Limited Partner      Common       4.9%(4)
   6080 Surety Drive
   El Paso, Texas 79905

Mobil Long Haul Inc.                 Limited Partner      Common       9.7%
   3225 Gallows Road
   Fairfax, Virginia 22037

Volvo Petro Holdings, L.L.C.         Limited Partner      Common      28.7%
   7900 National Service Road
   Greensboro, NC 27402-6115

Petro Warrant Holdings Corporation   Limited Partner      Common      10.0%(5)
   6080 Surety Drive
   El Paso, Texas 79905

All directors and officers as a group                                 51.6%
</TABLE>

-----------
1.   Does not assume conversion of the convertible preferred limited partnership
     interests to be owned by Mobil Long Haul or the exercise of management-held
     options. If conversion of Mobil Long Haul's interests is assumed, Mobil
     Long Haul's percentage of the common limited partnership interests would
     increase to 13.2% and the interests of the other partners would be J.A.
     Cardwell, Sr. (1.0% general partner and 44.0% limited partner), James A.
     Cardwell, Jr. (4.6%), Volvo Trucks (27.6%) and Petro Warrant Holdings
     Corporation (9.6%). In addition to the convertible preferred limited
     partnership interests, preferred limited partnership interests are owned by
     Mobil Long Haul, Inc. ($12.0 million) and the Cardwell Group ($7.6 million)
     that are entitled to cumulative preferred returns at the rate of 9.5% and
     8.0%, respectively, and at December 31, 1999 had aggregate accrued unpaid
     preferred returns of $6.0 million. See Note 10 of notes to consolidated
     financial statements.

                                       66
<PAGE>

2.   Represents partnership interests owned of record by Petro, Inc. Petro, Inc.
     is a wholly owned subsidiary of Nevada Trio, Inc., a Nevada corporation,
     which is a wholly owned subsidiary of Card Partners, L.P., a Texas limited
     partnership of which J.A. Cardwell, Sr. and Mrs. J.A. Cardwell, Sr. are
     limited partners and of which Texas Mec, Inc., a Texas corporation, is the
     general partner. J.A. Cardwell, Sr. is the sole shareholder of Texas Mec,
     Inc. Accordingly, J.A. Cardwell, Sr. may be deemed to have beneficial
     ownership of the partnership interests owned by Petro, Inc.

3.   Represents only partnership interests owned of record by Petro, Inc. and
     interests owned individually by J.A. Cardwell, Sr. Until the exchange of
     the warrants, which are exchangeable for all common stock of Petro Warrant
     Holdings Corporation, an affiliate of J.A. Cardwell, Sr. will be the
     nominal holder of the only outstanding share of Petro Warrant Holdings
     Corporation, which share will be redeemed for $1.00 upon the exchange of
     the warrants. J.A. Cardwell, Sr. disclaims any benefit interest in the
     limited partnership interests in Holdings held by Petro Warrant Holdings
     Corporation because of the limitations on the economic and voting rights of
     the holder of that share prior to the exchange of the warrants and the
     acquisition of all the equity interest in Petro Warrant Holdings
     Corporation by the holders of the warrants.

4.   Represents partnership interests owned of record by JAJCO II, Inc. as well
     as interests owned individually by James A. Cardwell, Jr. James A.
     Cardwell, Jr. is the sole shareholder of JAJCO II, Inc. and may be deemed
     to have beneficial ownership of the partnership interest owned by JAJCO II,
     Inc.

5.   Until the exchange of the warrants, which are exchangeable for all common
     stock of Petro Warrant Holdings Corporation, an affiliate of J.A. Cardwell,
     Sr. will be the nominal holder of the only outstanding share of Petro
     Warrant Holdings Corporation, which share will be redeemed for $1.00 upon
     the exchange of the warrants. J.A. Cardwell, Sr. disclaims any benefit
     interest in the limited partnership interests in Holdings held by Petro
     Warrant Holdings Corporation because of the limitations on the economic and
     voting rights of the holder of that share prior to the exchange of the
     warrants and the acquisition of all the equity interest in Petro Warrant
     Holdings Corporation by the holders of the warrants.

Item 13. Certain Relationships and Related Transactions

     Since 1997, all new related-party transactions or the renewal of existing
related-party transactions have been subject to a process whereby the project is
competitively bid, and, if awarded to a related-party, is reviewed by a member
of senior management not affiliated with the Cardwell Group, Mobil Oil
Corporation, Volvo, Volvo Trucks or Petro Travel Plaza LLC to ensure that the
contracts contain arms-length terms and competitive pricing. We believe this
process ensures that our current affiliated transactions are on arms-length
terms.

     Many of the relationships described below between the Operating Partnership
and entities affiliated with the Cardwell Group were entered into prior to 1992,
when the Cardwell Group or their affiliates owned 100% of the Operating
Partnership. Prior to 1997, other than Board of Director approval, there was no
formal procedure to ensure that related-party contracts contained arms-length
terms and competitive pricing. We believe that all of our existing related-party
transactions are on terms comparable to those which could have been received in
an arms-length transaction.

Recapitalization Agreements

     On July 23, 1999, Holdings consummated an agreement with Chartwell, Mobil
Long Haul, Volvo Trucks, the Cardwell Group, the Operating Partnership and Petro
Warrant Holdings Corporation. Under this agreement:

 .  Holdings purchased the partnership interests held by Chartwell in exchange
   for $55.0 million in cash and a note with an accreted value on the date of
   issuance of $14.8 million;

                                       67
<PAGE>

 .  the Cardwell Group and Mobil Long Haul contributed all or a portion of their
   common limited and preferred limited partnership interests in the Operating
   Partnership, as the case may be, to Holdings, in exchange for like
   partnership interests in Holdings;

 .  Mobil Long Haul invested an additional $5.0 million in Holdings in exchange
   for a Class B preferred limited partnership interest in Holdings;

 .  Volvo Trucks invested $30.0 million in Holdings in exchange for a common
   limited partnership interest in Holdings; and

 .  Petro Warrant Holdings Corporation invested $9.7 million in Holdings in
   exchange for a common limited partnership interest.

   Concurrently with the consummation of these transactions, the Operating
Partnership also entered into agreements with Mobil Long Haul and Volvo, which
are described below.

   On July 23, 1999, Holdings also consummated an agreement with Kirschner,
under which Holdings purchased the common limited partnership interest held by
Kirschner in the Operating Partnership in exchange for $2.8 million in cash.

Tax Reimbursements

     The Holdings partnership agreement (and prior to the Recapitalization, the
Operating Partnership agreement) requires us to make distributions to each of
Holdings' partners in an amount sufficient to allow each partner to pay federal,
state and local taxes with respect to the allocation of taxable income to each
partner by us. Tax distributions are based on separate allocations of the
taxable income of Holdings. For the years ended December 31, 1998 and 1999, tax
distributions made to the partners of both the Operating and Holdings
Partnerships were $823,000 and $980,000, respectively. No tax distributions were
made to the partners of the Operating Partnership in the fiscal year ending
December 31, 1997.

Principal Executive Offices

     The office building in which our principal executive offices are located is
owned by J.A. Cardwell, Sr., the President of Holdings and Chief Executive
Officer and Chairman of the Operating Company. We lease the entire building
under a lease expiring on December 31, 2005, paying monthly rent totaling
$336,000 per year, as well as taxes, maintenance and other operating expenses.
For each of the years ended December 31, 1997, 1998, and 1999, we made annual
rental payments of $336,000.

Effingham, Illinois Stopping Center

     The Stopping Center located in Effingham, Illinois is owned by Truck Stop
Property Owners, Inc. ("Truck Stop"), a corporation owned by Travis Roberts, and
five former employees of the Operating Partnership. Mr. Roberts is a current
officer of the Operating Partnership and owns 22.0% of the stock of Truck Stop.
We lease the Effingham Center under a lease expiring in May 2006, which provides
for basic rent payments, plus taxes and operating expenses. We have three
consecutive options to renew the lease for terms of five years each at rental
rates equal to the base rent, plus certain adjustments at the time of renewal.
We also have the right of first refusal to purchase the Petro Stopping Center at
any purchase price agreed upon between Truck Stop and a third party. We made
rental payments to Truck Stop of $1.1 million on this property in each of years
ended December 31, 1997, 1998, and 1999.

Highway Service Ventures, Inc.

     Highway Service Ventures, Inc. ("HSV"), a corporation in which J.A.
Cardwell, Sr. owns a 32.5% interest, operates four franchised Stopping Centers
located in Elkton, Maryland; Ruther Glen, Virginia; Florence, South Carolina;
and Carnesville, Georgia. The original franchise agreements with respect to two
of these Petro Stopping Centers have expired and HSV and the Company are in the
process of completing an extension of these franchise agreements. HSV continues
to operate all four locations as Petro Stopping Centers under the terms of the
prior agreements.  We have finalized a new form of franchise agreement

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<PAGE>

with input from HSV, and we expect HSV to enter into this new agreement.
Alternatively, HSV has been given the choice to continue to operate under the
terms of its existing franchise agreement. None of these franchise agreements
contains terms more favorable to HSV than the terms in any of our other
franchise agreements.

Petro:Tread

     In May 1992, we leased a facility in El Paso, Texas, from a trust in which
J.A. Cardwell, Sr. is a 50.0% beneficiary, to operate our retread plant, which
produces retread tires for sale at Stopping Centers (including franchisees) and
to others. The lease, which expired in October 1995, provided for two
consecutive renewal options for terms of five years each. We exercised our first
renewal option in October 1995 to renew the lease for five years commencing
November 1, 1995. We made lease payments of $72,000 for the years ended December
31, 1997, 1998, and 1999, respectively. In addition, we had sold retread tires
to El Paso Tire Center, Inc., a corporation in which J.A. Cardwell, Sr. owns
100%. Such sales amounted to $47,000, $60,000, and $33,000 for the years ended
December 31, 1997, 1998, and 1999, respectively.

Product Services Agreement and Fuel Sales Agreement

     Under an exemption from the exclusive terms of the Mobil Gasoline Supply
Agreement and under the terms of three petroleum products agreements with C&R
Distributing, Inc. ("C&R"), we currently purchase Chevron branded gasoline and
motor oils at cost for three of our facilities from C&R. The sole shareholder of
C&R Distributing is Nevada Trio, Inc., a Nevada Corporation, which is 100% owned
by the Cardwell Group. The C&R fuel agreement requires us to keep Chevron
unleaded gasoline, regular gasoline and motor oils continuously stocked and
offered for sale in quantities sufficient to meet demand. In 1997, we entered
into a product services agreement with C&R which terminates in December 2004,
under which C&R provides us with fuel hauling and fuel pump maintenance and
services within the El Paso, Texas metropolitan area. The C&R agreement provides
that C&R will charge us for these services at the lowest rates charged by C&R
for similar services and, in any event, at rates that will not exceed rates
available from unrelated parties providing similar services. The C&R Fuel
Agreement is exclusive but allows us to cancel the agreement with 30 days prior
notice. The C&R Services Agreement is non-exclusive and allows us to enter into
similar agreements with other parties. Fuel sales aggregating $3.3 million,
$169,000, and $100,000 for the years ended December 31, 1997, 1998, and 1999,
respectively, were made to C&R Distributing, Inc. ("C&R") at our cost. C&R sales
of fuel and lubricants and truck hauling fees, aggregating $5.1 million, $4.0
million, and $3.7 million for the years ended December 31, 1997, 1998, and 1999,
respectively, were charged to us.

Option and Right of First Refusal Agreement

     Concurrently with the formation of the Operating Partnership in May 1992,
J.A. Cardwell, Sr. and James A. Cardwell, Jr., officers and Directors of the
Operating Partnership, executed an Option and Right of First Refusal Agreement
which granted to the Operating Partnership and other third parties the option,
which expire in December 2006, to purchase certain properties owned by the
Cardwells that are located near or adjacent to certain of our Petro Stopping
Centers located in Shreveport, Louisiana (seven acres), Weatherford, Texas
(thirty-four acres), Beaumont, Texas (seventeen acres) and Oklahoma City,
Oklahoma (thirty acres), and a right of first refusal on these properties. The
price at which an Option Property may be purchased will be equal to the fair
market value of the property when the option is exercised as determined by an
appraisal.

Alcohol Sales and Servicing Agreements

     To continue engaging in retail sales of beer, wine or wine coolers at seven
of our facilities after the formation of the Operating Partnership in 1992, we
entered into agreements with C and PPR, Inc. ("C&PPR"), Petro Truckstops, Inc.
("Petro Truckstops"), CYMA Development Corporation ("CYMA"), and Petro Beverage,
Inc., which collectively hold permits or licenses to sell alcoholic beverages in
the states of Louisiana, Texas and Oregon. J.A. Cardwell, Sr. owns 60.0% of the
stock, James A. Cardwell, Jr.

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<PAGE>

owns 30.0% of the stock and Mrs. J.A. Cardwell, Sr. owns 10.0% of the stock of
C&PPR. James A. Cardwell, Jr. is the sole shareholder of CYMA, Petro Truckstops
and Petro Beverage, Inc. The agreements continue in effect until terminated by
either party. Under the servicing and license agreements with C&PPR dated April
30, 1992, we have agreed to operate the alcohol sales business at four locations
in exchange for 15.0% of the gross receipts generated from alcoholic beverage
sales, of which 5.0% is the Operating Partnership's reimbursement of all related
operating expenses. Under similar agreements with Petro Truckstops, dated
January 26, 1995, and April 8, 1994, and with Petro Beverage, Inc., dated
February 10, 1995, and CYMA dated April 30, 1992, each of which has a one year
initial term and continues in effect until terminated by either party, we
receive 15.0% of gross receipts generated from alcoholic beverage sales, of
which 5.0% is the Operating Partnership's reimbursement of all related operating
expenses. In each of the agreements, the net payments to us are approximately
equal to the gross profit received by the above entities.

     The amounts collected to date under each of these agreements is:

          C&PPR, Inc.                                   $343,400
          Petro Beverage, Inc.                          $ 21,000
          Petro Truckstops, Inc.                        $108,300
          CYMA Development Corporation                  $ 16,000

Motor Media Arrangements

     Concurrently with the formation of the Operating Partnership in May 1992,
Motor Media, Inc. ("Motor Media"), a company owned 100% by James A. Cardwell,
Jr., entered into a five-year agreement with us (the "Motor Media Agreement"),
under which Motor Media leases floor and wall space at all Stopping Centers
operated by us and sells space for in-store advertising to third parties. Under
the agreement, Motor Media pays the Operating Partnership 25.0% of the gross
revenues generated by the advertising. Motor Media received $234,000, $215,000,
and $177,000, before its selling, maintenance and administrative expenses, for
the years ended December 31, 1997, 1998, and 1999, respectively, representing
its share of the gross receipts generated. Motor Media has entered into similar
floor and wall space leases with other truck stops nationwide. The Operating
Partnership and Motor Media have extended the term of the Motor Media Agreement
through April 2002, which will be automatically extended until canceled by
either party with 60 days written notice.

Amusement and Video Poker Games Agreements

     Under an agreement (the "Amusement Agreement") between us and El Paso
Vending and Amusement Company ("EPAC"), of which J.A. Cardwell, Sr. and James A.
Cardwell, Jr. own 99.0% and 1.0%, respectively, EPAC furnishes video and other
games to 24 of our Petro Stopping Centers and services these games. Under the
Amusement Agreement, 50.0%, of the revenues from the games operations goes to
EPAC and 50.0% goes to us. Although most of the sites are serviced under the
terms of the Amusement Agreement (as amended), at one site, we are guaranteed a
minimum annual revenue of $180,000. At two sites, we pay 40.0% of the revenues
generated by the games to EPAC and we retain the remaining 60.0%. EPAC received
$2.4 million, $2.6 million, and $2.7 million in revenues, respectively,
generated from the furnishing and servicing games located at the Petro Stopping
Centers for the years ended December 31, 1997, 1998, and 1999. The Amusement
Agreement with EPAC has been amended to extend its term through May 2002.

     Since June 1993, the two Petro Stopping Centers located in Louisiana have
featured video poker games housed in a separate on-site facility and operated by
a third party under terms of a contract, which pays to us from 20% to 70% of the
revenue generated from the machines. The licenses to operate video gaming in
Louisiana are issued to Petro Truckstops, Inc., a company wholly owned by James
A. Cardwell, Jr. Previously, Petro Truckstops, Inc. leased from the Operating
Partnership only that portion of the facility premises in Shreveport and Hammond
whereat the video gaming was conducted. As a result of meetings with the
Louisiana State Gaming Commission and in order to satisfy state gaming law
requirements, the Operating Partnership and Petro Truckstops, Inc. have now
entered into a property lease agreement for the

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<PAGE>

entire truck stop facility premises, exclusive of the portions of the property
where the Petro:Lube, truck scales and truck wash facilities are located. Petro
Truckstops, Inc. pays to the Operating Partnership a fair market value rental
under the terms of the lease. Petro Truckstops, Inc. contracts with a third
party operator to run the video games. During 1996, the State of Louisiana
enacted a statute requiring the cessation of video poker operations unless the
parish in which the operations were conducted voted to allow the continued
operation of video poker machines. On November 5, 1996, the parish in which the
Shreveport facility is located voted to continue to allow video poker
operations, while the parish in which the Hammond facility is located voted to
disallow video poker operations. Therefore, we were required to and did phase
out video poker operations at the Hammond facility at the end of June 1999. As
part of the video poker license for 1999-2000, we leased the Shreveport fuel
island operation to Petro Truckstops, Inc., in order to satisfy state law
requirements.

Agreement with Tejon

     We have an agreement and formed a limited liability corporation, Petro
Travel Plaza LLC, with Tejon Development Corporation to build and operate a
Petro Stopping Center branded location in Southern California. Pursuant to the
terms of the Limited Liability Company Operating Agreement of Petro Travel Plaza
LLC, dated as of December 5, 1997, among the Operating Partnership, Tejon, and
Tejon Ranch Company, as guarantor, we made an initial capital contribution of
$2.0 million for working capital and inventory, which is our basis for the
investment in the LLC. Pursuant to the Agreement, the LLC financed construction
of the location with a non-recourse credit facility, we receive a management fee
of $250,000 per annum and as a 40.0% member in the joint venture, we receive
40.0% of the location's operating earnings. This location began operations in
June 1999.

Indemnity Agreements

     Concurrently with the Recapitalization, and in compliance with applicable
Internal Revenue Code and Treasury Regulation provisions dealing with recourse
debt, J.A. Cardwell, Sr., James A. Cardwell, Jr., Petro, Inc., and JAJCO II,
Inc. each entered into an indemnity agreement under which each agreed to
indemnify the Operating Partnership and Holdings, and the general and limited
partners thereof in the event that the indemnified parties are required to pay
any current indebtedness or any other liabilities of Holdings or the Operating
Partnership after a default, acceleration by the creditor and exhaustion of any
collateral securing the credit facility.

Motor Fuels Franchise Agreement

     On July 23, 1999, the Operating Partnership and Mobil Oil Corporation
entered into a new ten-year fuel supply agreement whereby we agreed to purchase
Mobil branded gasoline for sale and distribution, to the extent available, at
our truck stops. Under our fuel supply agreement with Mobil Oil Corporation, we
purchased diesel fuel and gasoline from Mobil Diesel Supply Corporation ("MDS")
for the years ended December 31, 1997, 1998, and 1999, totaling $178.3 million,
$214.9 million, and $418.9 million, respectively.

Master Supply Contract for Resale of Oils and Greases

     On July 23, 1999, the Operating Partnership and Mobil Oil Corporation
entered into a new ten year supply agreement whereby we agree to purchase and
feature Mobil branded oils and lubricants under Mobil's trademarks at our truck
stop locations. Under our supply agreement with Mobil Oil Corporation, we
purchased Mobil branded oils and lubricants from Mobil Oil Corporation for the
years ended December 31, 1997, 1998, and 1999, totaling $3.3 million, $5.0
million, and $3.1 million, respectively.

                                       71

<PAGE>

Marketing Relationships

     Contemporaneously with the consummation of the Recapitalization, Volvo and
the Operating Partnership entered into an Operating Agreement which reflects the
desire and intention of both companies to cooperate in business activities
which:

     .    enhance each company's brand image and awareness;

     .    expands the truck parts and service support segment of each company's
          business;

     .    develops closer ties with Volvo Trucks' franchised dealers;

     .    improves the lifestyle of truck drivers and results in innovative
          approaches to customer services; and

     .    supports both companies' growth and expansion.

     The Volvo Operating Agreement addresses the warranty, maintenance and
service work Petro will provide to Volvo managed vehicles, the sale by Petro of
Volvo truck parts, on a preferred basis, joint advertising and marketing
initiatives, and the co-development of truck stops by Volvo and Petro so as to
utilize truck stop space for Volvo truck sales and marketing. In addition, under
the terms of the Volvo Operating Agreement, Volvo and Petro have committed to
work together to develop a common maintenance system or data link between
Volvo's and Petro's respective maintenance systems in order to provide
individualized customer service to the truck drivers.

Relationships Between Related Parties, Affiliated Entities and the Cardwell
Group and their Affiliates

     Each of the related parties and/or affiliates of Holdings involved in the
transactions described in this section, with the exception of Mobil Diesel
Supply Corporation, Mobil Oil Corporation, Volvo, Volvo Trucks, the Effingham,
Illinois Stopping Center and Petro Travel Plaza, LLC, is owned or controlled to
some degree by the Cardwell Group.  Related-party transactions, other than
those specifically discussed above, generally arise in the ordinary course of
business as a result of our purchase of trade accounts receivable or receipt of
franchisee fees from Highway Service Ventures, Inc., a corporation in which J.A.
Cardwell, Sr. owns an interest, which owns properties that are part of our truck
stop network. For the years ended December 31, 1997, 1998, and 1999, we
purchased receivables from affiliated franchises in the amounts of $18.2
million, $16.9 million, and $17.1 million, respectively and received franchise
fees from related parties of approximately $1.0 million for each of the years.

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<PAGE>

PART IV

ITEM 14.  Exhibits, Financial Statement Schedules, and Reports on Form 8-K

        (a)  The following documents are filed as a part of this report:
        1.  Financial statements
The following consolidated financial statements of the Company are included in
Part II, Item 8 of this report:

                                                                            Page
                                                                            ----
            Consolidated Balance Sheets                                      26
            Consolidated Statements of Operations                            27
            Consolidated Statements of Changes in Partners' Capital
              (Deficit)                                                      28
            Consolidated Statements of Cash Flows                         29-30
            Notes to Consolidated Financial Statements                    31-55
            Report of Independent Public Accounts                            56

        2.  Financial statement schedule and supplementary information
            required to be submitted.
            Schedule II-Valuation and Qualifying Accounts                    57

        All other schedules are omitted because they are not applicable, or not
        required, or because the required information is included in the audited
        consolidated financial statements or notes thereto.

        3.  Exhibits

        Incorporated herein by reference is a list of Exhibits contained in the
        Exhibit Index on pages 75 through 78 of this Annual Report.

        (b)  Reports on Form 8-K:  None



<PAGE>

                                   SIGNATURES

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


                                           PETRO STOPPING CENTERS HOLDINGS, L.P.
                                                         Registrant

                                              By /s/  J.A. Cardwell, Sr.
                                          -----------------------------------
                                                    J.A. Cardwell, Sr.
                                                   President and Director
                                               (Principal Executive Officer)
March 29, 2000

     Pursuant to the requirements of the Securities Act of 1934, this report has
been signed by the following persons on behalf of Petro Stopping Centers
Holdings, L.P. and in the capacities and on the dates indicated.

<TABLE>
<CAPTION>

          Signature                             Title                         Date
          ---------                             -----                         ----
<S>                             <C>                                       <C>
 /s/ J.A.  Cardwell, Sr.        President and Director                    March 29, 2000
-----------------------------
    (J.A. Cardwell, Sr.)        (Principal Executive Officer)

 /s/ David A. Appleby           Vice President of Finance and Treasurer   March 29, 2000
-----------------------------
    (David A. Appleby)          (Principal Financial and Chief
                                Accounting Officer)

 /s/ James A. Cardwell, Jr.     Director                                  March 29, 2000
-----------------------------
    (James A. Cardwell, Jr.)

 /s/ Larry J. Zine              Director                                  March 29, 2000
-----------------------------
    (Larry J. Zine)

 /s/ Kevin T. Weir              Director                                  March 29, 2000
-----------------------------
    (Kevin T. Weir)

 /s/ Robert Grussing IV         Director                                  March 29, 2000
-----------------------------
    (Robert Grussing IV)

 /s/ Martha P. Boyd             Director                                  March 29, 2000
-----------------------------
    (Martha P. Boyd)

 /s/ David A. Parsons           Director                                  March 29, 2000
-----------------------------
    (David A. Parsons)
</TABLE>

                                       74
<PAGE>

                     Petro Stopping Centers Holdings, L.P.
                                 Exhibit Index


Exhibit
  No.     Description
-------   -----------

  1.1 (hh)  Purchase Agreement, dated as of July 19, 1999, by and among Petro
            Stopping Centers Holdings, L.P., Petro Holdings Financial
            Corporation, Petro Warrant Financial Corporation, First Union
            Capital Markets Corp. and CIBC World Markets Corp.

  3.1 (hh)  Certificate of Limited Partnership of Petro Stopping Centers
            Holdings, L.P.

  3.2 (hh)  Limited Partnership Agreement of Petro Stopping Centers Holdings,
            L.P., dated July 23, 1999.

  3.3 (hh)  Certificate of Incorporation of Petro Holdings Financial
            Corporation.

  3.4 (hh)  Bylaws of Petro Holdings Financial Corporation.

  4.1 (hh)  Indenture, dated as of July 23, 1999, by and among Petro Stopping
            Centers Holdings, L.P., Petro Holdings Financial Corporation and
            State Street Bank and Trust Company, as Trustee.

  4.2 (hh)  Form of 15% Senior Discount Note due 2008 (included in Exhibit 4.1).

  4.3 (hh)  Registration Rights Agreement, dated as of July 23, 1999, by and
            among Petro Stopping Centers Holdings, L.P., Petro Holdings
            Financial Corporation, First Union Capital Markets Corp. and CIBC
            World Markets Corp.

  4.4 (hh)  Registration Rights and Partners' Agreement, dated as of July 23,
            1999, by and among Petro Stopping Centers Holdings, L.P., Petro
            Warrant Financial Corporation, Permitted Holders of Petro Stopping
            Centers Holdings, L.P., Sixty Eighty, LLC, First Union Capital
            Markets Corp. and CIBC World Markets Corp.

  4.5 (hh)  Warrant Agreement, dated as of July 23, 1999, by and among Petro
            Stopping Centers Holdings, L.P., Petro Warrant Financial
            Corporation, Sixty Eighty, LLC, First Union Capital Markets Corp.,
            CIBC World Markets Corp. and State Street Bank and Trust Company.

  4.6 (hh)  Form of 15% Series B Senior Discount Note due 2008 (included
            in Exhibit 4.1).

 10.1 (bb)  Surety Drive lease agreement, dated April 30, 1992, between James
            A. Cardwell and Petro Stopping Centers, L.P.

 10.2 (cc)  Form of Petro Stopping Centers, L.P.'s Franchise Agreement.

                                       75
<PAGE>

 10.3 (cc)  Lease relating to the Effingham, Illinois, Stopping Center, dated
            May 23, 1990, between Truck Stop Property Owners, Inc. and Petro
            Inc.

 10.4 (bb)  Lease with Option to purchase, dated September 9, 1983, among Vaughn
            O. Seale, Francine S. Dodson, Hazel S. Darouse and Metro Hammond,
            Inc.

 10.5 (bb)  Profit Participation Agreement, dated March 1, 1993, between Pelican
            Gaming, Inc. and Petro Truckstops, Inc.

 10.6 (bb)  Amended and Restated Sublease and Services Agreement dated to be
            effective as of February 26, 1993 between Petro Stopping Centers,
            L.P. and Petro Truckstops, Inc.

 10.7 (aa)  Amended Split Dollar Life Insurance Agreement, dated as of May 1,
            1995, among the Company, James A. Cardwell, Jr., Trustee of the
            James A., and Evonne Cardwell Trust Number Two and James A.
            Cardwell, Jr., Trustee of the James A. Cardwell Trust No. Three.

 10.8 (aa)  Product Services Agreement, dated January 30, 1997, by and between
            C&R Distributing, Inc., a Texas corporation, and Petro Stopping
            Centers, L.P.

 10.9 (aa)  Petro/El Paso Amusement Services Agreement, dated January 30, 1997,
            by and between El Paso Vending and Amusement Company and Petro
            Stopping Centers, L.P.

 10.10 (aa) Display Space Agreement, dated January 30, 1997, by and between
            Motor Media, Inc. and Petro Stopping Centers, L.P.

 10.11 (dd) Limited Liability Company Operating Agreement of Petro Travel Plaza,
            LLC, dated as of December 5, 1997, among the Company, Tejon Ranch
            Company, as Guarantor.

 10.12 (ee) Petro Stopping Centers Deferred Compensation Plan Agreement, dated
            November 26, 1997.

 10.13 (ff) Employment Agreement, dated February 10, 1999, by and between James
            A. Cardwell, Sr. and Petro Stopping Centers, L.P.

 10.14 (ff) Employment Agreement, dated February 10, 1999, by and between James
            A. Cardwell, Jr. and Petro Stopping Centers, L.P.

 10.15 (ff) Employment Agreement, dated March 1, 1999, by and between Evan
            Brudahl and Petro Stopping Centers, L.P.

                                       76
<PAGE>

 10.16 (gg) Fourth Amended and Restated Limited Partnership Agreement of the
            Company, a Delaware Limited Partnership, dated July 23, 1999, by and
            among Petro Inc., as a General Partner and Petro Stopping Centers
            Holdings, L.P., Petro Holdings G.P., L.L.C. and James A. Cardwell,
            Jr., as Limited Partners.

 10.17 (gg) Limited Partnership Agreement of Petro Stopping Centers Holdings,
            L.P., a Delaware Limited Partnership, dated July 15, 1999, by and
            among Petro, Inc., as General Partner and James A. Cardwell, Sr.,
            James A. Cardwell, Jr., JAJCO II, Inc., Petro, Inc., Mobil Long Haul
            Inc., Volvo Petro Holdings, LLC and Petro Warrant Holdings
            Corporation, as Limited Partners.

 10.18 (gg) Second Amended and Restated Revolving Credit and Term Loan
            Agreement, dated as of July 23, 1999, among Petro Stopping Centers,
            L.P., Bankboston, N.A. (formerly known as The First National Bank of
            Boston) and the other lending institutions listed as Fleet Business
            Credit Corporation, Merrill Lynch Prime Rate Portfolio, Merrill
            Lynch Senior Floating Rate Fund, Inc., Morgan Stanley Dean Witter
            Prime Income Trust, Natexis Banque, KZH Crescent-3 LLC, KZH
            Crescent-2 LLC, KZH Crescent LLC, United of Omaha Life Insurance
            Company, Sequils I, Ltd., Wells Fargo Bank, N.A. and Bank of
            Boston), as Agent, Union Bank of California, N.A., as Co-Agent,
            First Union National Bank, as Documentation Agent and BancBoston
            Robertson Stephens Inc., as Arranger.

 10.19 (gg) Amended and Restated PMPA Motor Fuels Franchise Agreement, dated
            July 23, 1999, by and between Mobil Oil Corporation and Petro
            Stopping Centers, L.P.

 10.20 (gg) Master Supply Contract for Resale of Oils and Greases, dated July
            23, 1999, by and between Mobil Oil Corporation and Petro Stopping
            Centers, L.P.

 10.21      Pledge Agreement, dated as of July 29, 1999, entered into by Petro
            Stopping Centers Holdings, Inc. in favor of BankBoston N.A.

 10.22      Guaranty, dated as of July 29, 1999, entered into by Petro Stopping
            Centers Holdings, Inc. in favor of BankBoston, N.A.

 10.23*     Agreement with Securities and Exchange Commission pursuant to Item
            601(b)(4)(iii)(a) of Regulation S-K to furnish certain documents
            relating to the 12 1/2% Senior Notes due 2002.

 10.24 (aa) Indenture, dated as of January 30, 1997 among Petro Stopping
            Centers, L.P., Petro Financial Corporation and State Street Bank and
            Trust Company, as trustee, relating to Petro Stopping Centers,
            L.P.'s $135.0 million principal amount 10 1/2% Senior Notes due
            2007.

 10.25 (aa) Form of 10 1/2% Senior Note due 2007.

 10.26 (aa) Supplemental Indenture, dated as of January 29, 1997, by and among
            Petro Stopping Centers, L.P., Petro Financial Corporation and First
            Trust National Association, relating to Petro Stopping Centers,
            L.P.'s $100.0 million principal amount 12 1/2% Senior Notes due
            2002.

                                       77
<PAGE>

 10.27      Supplemental Indenture, dated July 23, 1999, by and among Petro
            Stopping Centers, L.P., Petro Financial Corporation and State Street
            Bank and Trust Company, relating to Petro Stopping Centers, L.P.'s
            10 1/2% Senior Notes due 2007.

 21.1       Subsidiaries of the Company

 24.1       Power of Attorney (included as part of the signature page of this
            Annual Report)

 27.1*      Financial Data Schedule

________
(aa)  Incorporated by reference to Petro Stopping Centers, L.P.'s Annual Report
      on Form 10-K for the year ended December 31, 1996.
(bb)  Incorporated by reference to Petro Stopping Centers, L.P.'s Registration
      Statement on Form S-1 (Registration No. 33-76154).
(cc)  Incorporated by reference to Petro Stopping Centers, L.P.'s Annual Report
      on Form 10-K for the year ended December 31, 1997.
(dd)  Incorporated by reference to Petro Stopping Centers, L.P.'s Quarterly
      Report on Form 10-Q for the quarter ended March 31, 1998.
(ee)  Incorporated by reference to Petro Stopping Centers, L.P.'s Annual Report
      on Form 10-K for the year ended December 31, 1998.
(ff)  Incorporated by reference to Petro Stopping Centers, L.P.'s Quarterly
      Report on Form 10-Q for the quarter ended March 31, 1999.
(gg)  Incorporated by reference to Petro Stopping Centers, L.P.'s Current Report
      on Form 8-K, filed on August 6, 1999.
(hh)  Incorporated by reference to Petro Stopping Centers Holdings, L.P.'s
      Registration Statement on Form S-4 (Registration No. 333-87371).


*    Filed herewith

                                       78