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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2004

Commission file number 1-13018

PETRO STOPPING CENTERS, L.P.

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

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

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

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

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

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

PETRO STOPPING CENTERS, L.P.

UNAUDITED CONSOLIDATED CONDENSED BALANCE SHEETS

(in thousands)

See accompanying notes to unaudited consolidated condensed financial statements.

1

PETRO STOPPING CENTERS, L.P.

UNAUDITED CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS

(in thousands)

See accompanying notes to unaudited consolidated condensed financial statements.

2

PETRO STOPPING CENTERS, L.P.

UNAUDITED CONSOLIDATED CONDENSED STATEMENTS OF

CHANGES IN PARTNERS’ CAPITAL (DEFICIT)

For the Three Months Ended March 31, 2004

(in thousands)

See accompanying notes to unaudited consolidated condensed financial statements.

3

PETRO STOPPING CENTERS, L.P.

UNAUDITED CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS

(in thousands)

See accompanying notes to unaudited consolidated condensed financial statements.

4

PETRO STOPPING CENTERS, L.P.

NOTES TO UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

(1) Basis of Presentation

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

These unaudited consolidated condensed financial statements should be read in conjunction with the consolidated financial statements and notes thereto in the Annual Report of the Company on Form 10-K for the year ended December 31, 2003 (“2003 Form 10-K”). Capitalized terms used in this report and not defined herein have the meanings ascribed to such terms in the 2003 Form 10-K. In the opinion of management of the Company, the accompanying unaudited consolidated condensed financial statements contain all adjustments necessary to present fairly the consolidated condensed financial position of the Company at December 31, 2003 and March 31, 2004, the consolidated condensed results of operations and cash flows for the three months ended March 31, 2003 and 2004, and changes in partners’ capital (deficit) for the three months ended March 31, 2004. The results of operations for the three months ended March 31, 2004 are not necessarily indicative of the results to be expected for the full calendar year.

The Company’s fuel revenues and related cost of sales include a significant amount of federal and state motor fuel taxes. Such taxes were $60.6 million and $64.5 million for the three months ended March 31, 2003 and 2004, respectively.

(2) Refinancing Transactions

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

In connection with the Refinancing Transactions, the repurchase of the majority of the Company’s 10 ¹/2% Notes and the Holding Partnership’s 15% Notes were accounted for as debt extinguishments resulting in the recognition of a loss of approximately $5.4 million and $9.3 million, respectively, which included the write-off of

(continued)

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PETRO STOPPING CENTERS, L.P.

NOTES TO UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

unamortized deferred debt issuance costs of approximately $2.8 million for each transaction. These losses are presented as a component of income (loss) before cumulative effect of a change in accounting principle on each company’s unaudited consolidated condensed statements of operations for the three months ended March 31, 2004. Additionally, the Company capitalized approximately $9.4 million of debt issuance costs related to the issuance of the 9% Notes through March 31, 2004. The Holding Partnership capitalized approximately $3.1 million of debt issuance costs related to its exchange offer through March 31, 2004.

Upon entering into the Company’s new senior credit facilities, the Company capitalized approximately $2.3 million of debt issuance costs through March 31, 2004 and wrote-off approximately $794,000 of unamortized deferred debt issuance costs associated with the refinancing of its retired senior credit facilities.

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

On March 12, 2004, the Company repurchased all of its remaining 10 ¹/2% Notes. In connection with this repurchase, the Company recognized a loss of approximately $724,000, which includes the write-off of approximately $379,000 of unamortized deferred debt issuance costs. This loss is presented as a component of income (loss) before cumulative effect of a change in accounting principle on the Company’s unaudited consolidated condensed statements of operations for the three months ended March 31, 2004.

After giving effect to the Refinancing Transactions and the repurchase of the Company’s remaining 10 ¹/2% Notes, the Company’s total consolidated debt increased $79.0 million and, as a result, the Company’s associated estimated annual interest expense will increase approximately $5.3 million.

The Company’s total debt before and after the Refinancing Transactions and the repurchase of the Company’s remaining 10 ¹/2% Notes is as follows:

(3) Significant Accounting Policies

Land Held for Sale

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

Asset Retirement Obligations

On January 1, 2003, the Company adopted Statement of Financial Accounting Standards No. 143,

(continued)

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PETRO STOPPING CENTERS, L.P.

NOTES TO UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

“Accounting for Asset Retirement Obligations” (“SFAS No. 143”). SFAS No. 143 provides accounting guidance for retirement obligations, for which there is a legal obligation to settle, associated with tangible long-lived assets. SFAS No. 143 requires that asset retirement costs be capitalized as part of the cost of the related long-lived asset and such costs should be allocated to expense by using a systematic and rational method. The statement requires that the initial measurement of the asset retirement obligation be recorded at fair value and that an allocation approach be used for subsequent changes in the measurement of the liability. SFAS No. 143 changes the Company’s accounting for underground storage tank removal costs and sewage plant waste removal costs. An asset retirement obligation for $489,000 and $499,000 has been recorded as a liability at December 31, 2003 and March 31, 2004, respectively. The implementation of this standard resulted in a one-time cumulative effect of a change in accounting principle of $397,000 in 2003.

A reconciliation of the Company’s asset retirement obligation for the three months ended March 31, 2004 is as follows:

Partnership Interests Option Plan

The Holding Partnership has established an equity incentive plan (“Option Plan”) to attract and retain key personnel, including senior management, and to enhance their interest in the Company’s continued success, which is more fully described in Note 11 in Notes to Consolidated Financial Statements included in the Company’s 2003 Form 10-K. The Company applies Accounting Principles Board Opinion No. 25 in accounting for its Option Plan. Accordingly, compensation costs for partnership interest options are measured as the excess, if any, of the market price of the partnership interests at the date of grant over the amount an employee must pay to exercise the option. No such compensation cost was recognized during the three months ended March 31, 2003 and 2004. The Company provides the disclosures required by the Statement of Financial Accounting Standards (“SFAS”) No. 123, “Accounting for Stock-Based Compensation” (“SFAS No. 123”), as amended by the SFAS No. 148, “Accounting for Stock-Based Compensation-Transition and Disclosure, an amendment of FASB Statement No. 123”.

(continued)

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PETRO STOPPING CENTERS, L.P.

NOTES TO UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

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

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

Reclassifications

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

(4) Segments

The Company has two reportable operating segments, company-operated truck stops and franchise operations.

The Company operates 37 multi-service truck stops in the United States. Full-size Petro Stopping Centers are built on an average of 27 acres of land situated at a convenient location with easy highway access. They can each generally accommodate an average of 263 trucks and an average of 145 cars in spacious and well-lit parking areas. The Company’s locations are designed to provide good traffic flow, reduce accidents, and enhance security for the drivers, their trucks, and freight. Within the Petro Stopping Center network, the Company offers standardized and consistent products and services to accommodate the varied needs of professional truck drivers and other highway motorists. Generally, these include separate gas and diesel fueling islands, its home-style Iron Skillet restaurants, truck maintenance and repair services, and travel and convenience stores offering an array of merchandise selected to cater to professional truck drivers’ needs during long periods away from home. In addition, a typical Petro Stopping Center provides amenities and services such as telephone, fax, photocopying, Internet access, postal services, certified truck weighing scales, truck washes, laundry facilities, private showers, video games, and television and/or movie rooms. The Company has aggregated its company-operated truck stops into one reportable operating segment based on the distribution of products and services under one common site facility, classified as a multi-service truck stop. During the three months ended March 31, 2003 and 2004, the revenues generated from the company-operated truck stops were $269.6 million and $284.9 million, respectively.

As of December 31, 2003 and March 31, 2004, the Company was a franchisor to 23 Petro Stopping Center locations. The Company collects royalties and fees in exchange for the use of its tradenames and trademarks and for certain services provided to the franchisees. Franchise fees are based generally upon a percentage of the franchisee’s sales. During the three months ended March 31, 2003 and 2004, the revenues generated from the Company’s franchise operations were $1.1 million and $1.3 million, respectively. Franchise operations revenues, which include initial franchise fees and other revenue types, are combined in non-fuel revenues reported on the accompanying unaudited consolidated condensed statements of operations. The Company does not allocate any expenses in measuring this segment’s profit and loss, nor does it believe there are any significant financial commitments or obligations resulting from these franchise agreements.

(continued)

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(5) Partner’s Deficit

Under the Indenture for the 9% Notes and the agreement governing the new senior credit facilities, the company is permitted to make distributions to the Holding Partnership in an amount sufficient to allow the Holding Partnership to pay interest on the Holding Partnership’s 15% Notes and their new senior third secured discount notes due 2014 and to pay for administrative expenses. As of March 31, 2004, the Company paid approximately $28,000 with respect to these distributions. The Company expects to pay approximately $1.9 million related to these distributions for the year ended December 31, 2004.

As of March 31, 2004, the Company made distributions of approximately $56.5 million to the Holding Partnership in connection with the Refinancing Transactions as permitted under the Indenture for the 9% Notes and the agreement governing the new senior credit facilities. These distributions were made to allow the Holding Partnership to repurchase approximately 54.8% of the Holding Partnership’s 15% Notes.

9

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

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

Certain sections of this Form 10-Q, including “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Quantitative and Qualitative Disclosures about Market Risk,” contain various forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, which represent our expectations or beliefs concerning future events that involve risks and uncertainties. These statements may be accompanied by words such as “believe,” “intend,” “estimate,” “may,” “could,” “project,” “anticipate,” or “predict,” that convey the uncertainty of future events or outcomes. These statements are based on assumptions that we believe are reasonable; however, many important factors could cause our actual results in the future to differ materially from the results referred to in the forward-looking statements. In addition to the factors described in this Form 10-Q, important factors that could cause our actual results to differ materially from the results referred to in the forward-looking statements include, among others, the following:

All statements, other than statements of historical facts included in this Form 10-Q, may be considered forward-looking statements. The forward-looking statements are included in, without limitation, “—Transactions with Related-Parties,” “—Network Development,” “—Liquidity and Capital Resources,” “—Critical Accounting Policies,” and “—Results of Operations”. In addition, in the preparation of the financial statements, we make various estimates and assumptions that are by their nature forward-looking statements.

Reporting Format

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

We operate 37 multi-service truck stops in the United States. Full-size Petro Stopping Centers are built on an average of 27 acres of land situated at a convenient location with easy highway access. They can each generally accommodate an average of 263 trucks and an average of 145 cars in spacious and well-lit parking areas. Our locations are designed to provide good traffic flow, reduce accidents, and enhance security for the drivers, their trucks, and freight. Within the Petro Stopping Center network, we offer standardized and consistent products and services to accommodate the varied needs of professional truck drivers and other highway motorists. Generally, these include separate gas and diesel fueling islands, our home-style Iron Skillet restaurants, truck maintenance and repair services, and travel and convenience stores offering an array of merchandise selected to cater to professional truck drivers’ needs during long periods away from home. In addition, a typical Petro Stopping Center provides amenities and services such as telephone, fax, photocopying, Internet access, postal services, certified truck weighing scales, truck washes, laundry facilities, private showers, video games, and television and/or movie rooms. We have aggregated our company-operated truck stops into one reportable operating segment based on the distribution of products and services under one common site facility, classified as a multi-service truck stop. During the three months ended March 31, 2003 and 2004, the revenues generated from our company-operated truck stops were $269.6 million and $284.9 million, respectively.

As of December 31, 2003 and March 31, 2004, we are a franchisor to 23 Petro Stopping Center locations. We collect royalties and fees in exchange for the use of our tradenames and trademarks and for certain services provided to the franchisees. Franchise fees are based generally upon a percentage of the franchisee’s sales. During the three months ended March 31, 2003 and 2004, the revenues generated from our franchise operations were $1.1 million and $1.3 million, respectively. Franchise operations revenues, which include initial franchise fees and other revenue types, are combined in non-fuel revenues reported on the accompanying unaudited consolidated condensed statements of operations. We do not allocate any expenses in measuring this segment’s profit and loss, nor do we believe there are any significant financial commitments or obligations resulting from these franchise agreements.

10

We derive our revenues from:

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

Our fuel revenues and related cost of sales include a significant amount of federal and state motor fuel taxes. Such taxes were $60.6 million and $64.5 million for the three months ended March 31, 2003 and 2004, respectively.

On January 1, 2003, we adopted Statement of Financial Accounting Standards No. 143, “Accounting for Asset Retirement Obligations” (“SFAS No. 143”). SFAS No. 143 provides accounting guidance for retirement obligations, for which there is a legal obligation to settle, associated with tangible long-lived assets. SFAS No. 143 requires that asset retirement costs be capitalized as part of the cost of the related long-lived asset and such costs should be allocated to expense by using a systematic and rational method. The statement requires that the initial measurement of the asset retirement obligation be recorded at fair value and that an allocation approach be used for subsequent changes in the measurement of the liability. SFAS No. 143 changes our accounting for underground storage tank removal costs and sewage plant waste removal costs. An asset retirement obligation of $489,000 and $499,000 has been recorded as a liability at December 31, 2003 and March 31, 2004, respectively. The implementation of this standard resulted in a one-time cumulative effect of a change in accounting principle of $397,000 in 2003.

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

Transactions with Related-Parties

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

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

11

Network Development

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

The following table sets forth information on currently existing Petro Stopping Centers opened from March 31, 2000 through March 31, 2004, all but three of which are full-sized facilities.

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

Liquidity and Capital Resources

At March 31, 2004, our principal sources of liquidity were:

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

On February 9, 2004, we entered into new senior secured credit facilities of an aggregate principal amount of $50.0 million, consisting of a three year revolving credit facility of $25.0 million and a four year term loan facility of $25.0 million. We refer to these credit facilities as the new senior secured credit facilities. Any funds drawn on our new secured senior credit facilities are secured by substantially all of our assets and the guarantees of Petro, Inc. and each of our subsidiaries. We have capitalized approximately $2.3 million of debt issuance costs through March 31, 2004 related to our new secured senior credit facilities and wrote-off approximately $794,000 of unamortized deferred debt issuance costs associated with the refinancing of our retired senior credit facilities.

At March 31, 2004, we had $23.8 million outstanding under our term loan facility. We made our first scheduled quarterly principal payment of approximately $1.3 million on March 31, 2004. The first four scheduled quarterly principal payments under the term facilities are approximately $1.3 million each, the next four quarterly principal payments are approximately $1.5 million each, and the last eight quarterly installments are approximately $1.8 million each.

Under the revolving credit portion of our new secured credit facilities, $25.0 million is available on a revolving basis until maturity at February 9, 2007. Interest on drawn funds is paid at maturity or quarterly if the term is greater than three months at a current spread of 2.75% above the bank’s base rate or 4.25% over the Eurodollar rate (the rate determined at the time of borrowing, at our option). Commitment fees of 0.75% on undrawn funds are paid quarterly. At March 31, 2004, we had no borrowings outstanding under this portion of our new secured credit facilities and had $9.7 million in standby letters of credit outstanding, which reduce our borrowing capacity under this portion of our new senior secured credit facilities on a dollar for dollar basis. Approximately $7.6 million of these letters of credit are required to be posted with our insurance carriers in connection with our obtaining liability and other insurance coverage. As of March 31, 2004, we are in compliance with all financial covenants under our new secured credit facilities.

In connection with the Refinancing Transactions, the repurchase of the majority of our 10 ¹/2% Notes and the Holding Partnership’s 15% Notes were accounted for as debt extinguishments resulting in the recognition of a loss of approximately $5.4 million and $9.3 million, respectively, which included the write-off of unamortized deferred debt issuance costs of approximately $2.8 million for each transaction. These losses are presented as a component of income (loss) before cumulative effect of a change in accounting principle on each company’s unaudited consolidated condensed statements of operations for the three months ended March 31, 2004.

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Additionally, we capitalized approximately $9.4 million of debt issuance costs related to the issuance of the 9% Notes through March 31, 2004. The Holding Partnership capitalized approximately $3.1 million of debt issuance costs related to its exchange offer through March 31, 2004.

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

On March 12, 2004, we repurchased all of our remaining 10 ¹/2% Notes. In connection with this repurchase, we recognized a loss of approximately $724,000, which includes the write-off of approximately $379,000 of unamortized deferred debt issuance costs. This loss is presented as a component of income (loss) before cumulative effect of a change in accounting principle on our unaudited consolidated condensed statements of operations for the three months ended March 31, 2004.

After giving effect to the Refinancing Transactions and the repurchase of our remaining 10 ¹/2% Notes, our total consolidated debt increased $79.0 million and, as a result, our estimated associated annual interest expense will increase approximately $5.3 million.

The Company’s total debt before and after the Refinancing Transactions and the repurchase of our remaining 10 ¹/2% Notes is as follows:

The following is a summary of our contractual cash obligations as of March 31, 2004:

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

Under our Indenture for the 9% Notes and the agreement governing our new senior credit facilities, we are permitted to make distributions to the Holding Partnership in an amount sufficient to allow the Holding Partnership to pay interest on the Holding Partnership’s 15% Notes and their new senior third secured discount notes due 2014 and to pay for administrative expenses. As of March 31, 2004, we paid approximately $28, 000 with respect to these distributions. We expect to pay approximately $1.9 million related to these distributions for the year ended December 31, 2004.

As of March 31, 2004, we made distributions of approximately $56.5 million to the Holding Partnership in connection with the Refinancing Transactions as permitted under our Indenture for the 9% Notes and the agreement governing our new senior credit facilities. These distributions were made to allow the Holding Partnership to repurchase approximately 54.8% of the Holding Partnership’s 15% Notes.

We guaranteed a portion of our Joint Venture, Petro Travel Plaza LLC’s debt under a Repayment Guaranty dated as of June 4, 1999 and last modified on September 10, 2003. The guaranteed amount is reduced as the outstanding principal balance of the loan is reduced. The guarantee is reduced to zero when the loan to value ratio is equal to or less than 0.5 to 1.00. As of March 31, 2004, the maximum potential amount of future payments related to the guarantee was $346,000. The fair value of the guarantee is insignificant.

Additionally, we guaranteed a portion of Petro Travel Plaza, LLC’s debt under a Continuing Guaranty dated as of May 12, 2003, which was modified by an Amended and Restated Guaranty Agreement on September

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10, 2003. The guaranteed amount is reduced as the outstanding principal balance of the loan is reduced. The guarantee is reduced to zero when the loan to value ratio is equal to or less than 0.5 to 1.0. As of March 31, 2004, the maximum potential amount of future payments related to the guarantee was $75,000. The fair value of the guarantee is insignificant.

We had negative working capital of $17.5 million and $11.5 million at December 31, 2003 and March 31, 2004, respectively. Negative working capital is normal in the truck stop industry since diesel fuel inventory turns approximately every two to three days, but payment for fuel purchases can generally be made over a longer period of time. Approximately 90.7% of our total sales are cash sales (or the equivalent in the case of sales paid for on credit, which are funded on a daily basis by third-party billing companies).

Capital expenditures on our truck stop network totaled $675,000 for the three months ended March 31, 2004. We currently expect to invest approximately $9.3 million during the remainder of 2004 on capital expenditures, the majority of which will be related to regular capital maintenance and improvement projects on existing Petro Stopping Centers. These capital outlays will be funded through borrowings under our new senior secured credit facilities and internally generated cash.

We are partially self-insured, paying our own employment practices, general liability, workers’ compensation, and group health benefit claims, up to stop-loss amounts ranging from $100,000 to $250,000 on a per occurrence basis. During the three months ended March 31, 2004, we paid approximately $2.3 million on claims related to these partial self-insurance programs. Provisions established under these partial self-insurance programs are made for both estimated losses on known claims and claims incurred but not reported, based on claims history. For the three months ended March 31, 2004, aggregated provisions amounted to approximately $2.5 million. At March 31, 2003, the aggregated accrual amounted to approximately $7.6 million, which we believe is adequate to cover both reported and incurred but not reported claims.

Based on the foregoing, we believe that internally generated funds, together with amounts available under our new senior secured credit facilities, will be sufficient to satisfy our cash requirements for operations and debt service through 2004 and the foreseeable future thereafter; provided however, that our ability to satisfy such obligations and maintain covenant compliance under our new senior secured credit facilities is dependent upon a number of factors, some of which are beyond our control, including economic, capital market, and competitive conditions.

Results of Operations

Three Months Ended March 31, 2004 Compared to Three Months Ended March 31, 2003

Overview. Net income decreased for the three months ended March 31, 2004 compared to the three months ended March 31, 2003, due primarily to costs associated with our Refinancing Transactions. Our net revenues of $286.1 million increased 5.7% for the quarter ended March 31, 2004 from $270.7 million in the quarter ended March 31, 2003. The increase was mainly due to higher fuel revenues, as a result of increased fuel gallons sold, and improved non-fuel sales, which was partially offset by a decrease in our average retail-selling price of fuel. Operating expenses increased 4.7% to $33.5 million from $32.0 million in the prior year quarter due primarily to higher employee-related costs, increased utility costs, and higher credit card fees associated with the increased fuel revenues. General and administrative expenses increased 2.7% from the prior year quarter.

Fuel. Revenues increased 4.9% to $224.0 million for the quarter ended March 31, 2004 compared to $213.6 million in the prior year quarter. Fuel revenues increased due to a 6.1% increase in our total fuel gallons sold compared to the prior year quarter, which was partially offset by a 1.1% decrease in our average retail-selling price per gallon from the prior year quarter. Gross profit decreased by 16.5% to $8.5 million for the quarter ended March 31, 2004 compared to $10.1 million in the prior year quarter, due primarily to a 6.0% increase in our cost of fuel.

Maintenance Services and Retail (Non-fuel excluding Restaurant). Revenues increased 7.6% to $44.4 million for the quarter ended March 31, 2004 from $41.3 million in the quarter ended March 31, 2003. Gross

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profit increased 7.3% to $25.2 million for the quarter ended March 31, 2004 from $23.5 million in the prior year quarter. The increases in these revenues and gross profit were due primarily to an 8.6% or $3.3 million increase in general merchandise sales at our retail stores and increased sales at our Petro:Lubes.

Restaurant. Revenues increased 11.2% to $17.7 million for the quarter ended March 31, 2004 compared to $15.9 million in the quarter ended March 31, 2003, due to increased customer traffic and an increase in the average ticket price. Gross profit in the restaurants improved by 7.4% or $845,000 from the prior year quarter due to the increase in revenues partially offset by an increase in food costs.

Costs and Expenses. Total costs and expenses increased 6.1% to $281.2 million for the quarter ended March 31, 2004 compared to $265.1 million in the prior year quarter. Cost of sales increased $14.5 million or 6.4% from the prior year quarter mainly due to a 6.0% increase in our cost of fuel. Operating expenses increased 4.7% or $1.5 million to $33.5 million compared to the prior year quarter due primarily to higher employee-related costs, increased utility costs, and higher credit card fees associated with the increased fuel revenues. General and administrative expenses increased 2.7% to $3.7 million for the quarter ended March 31, 2004 compared to $3.6 million for the quarter ended March 31, 2003.

Loss on Retirement of Debt. We recognized a loss of $6.2 million related to the repurchase and redemption of all of our 10 ¹/2% Notes in connection with our Refinancing Transactions.

Retired Debt Restructuring Costs. We recognized a loss of $794,000 on the write-off of unamortized deferred debt issuance costs associated with the refinancing of our retired senior credit facilities related to our Refinancing Transactions.

Equity in Loss of Affiliate. We recognized a loss of $24,000 related to our investment in the Wheeler Ridge facility in Southern California compared to a loss of $43,000 in the prior year quarter.

Interest Expense. Interest expense increased 11.5% or $572,000 to $5.5 million compared to the quarter ended March 31, 2003, due primarily to the increase in the amount of debt outstanding in the current year associated with our Refinancing Transactions.

Critical Accounting Policies

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

Partial Self-Insurance

We are partially self-insured, paying our own employment practices, general liability, workers’ compensation, and group health benefit claims, up to stop-loss amounts ranging from $100,000 to $250,000 on a per-occurrence basis. Provisions established under these partial self-insurance programs are made for both estimated losses on known claims and claims incurred but not reported, based on claims history.

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Loyalty Program

We utilize estimates in accounting for our Petro Passport loyalty program. We record a liability for the estimated redemption of Petro points based upon our estimates about the future redemption rate of Petro points outstanding. A change to these estimates could have an impact on our liability in the year of the change as well as in future years.

Recently Issued Accounting Pronouncements

In December 2003, the FASB issued Interpretation No. 46 (revised December 2003), “Consolidation of Variable Interest Entities, an Interpretation of ARB No. 51,” which replaces the original Interpretation No. 46 issued in January 2003. This Interpretation addresses the consolidation by business enterprises of variable interest entities as defined in the Interpretation. The effective dates vary depending on the type of reporting company and the type of entity that the company is involved with. Non-public companies, such as ourselves, must apply the revised Interpretation immediately to all entities created after December 31, 2003, and to all other entities no later than the beginning of the first reporting period beginning after December 15, 2004. We do not believe that the adoption of this revised Interpretation will have a significant impact on our consolidated financial position or results of operations.

Item 3. Quantitative and Qualitative Disclosures about Market Risk

We are exposed to market risk due to changes in commodity prices and interest rates. For a complete discussion of our market risks and our market risk sensitive assets and liabilities, please refer to Item 7A, “Quantitative and Qualitative Disclosures about Market Risk,” included in our 2003 Form 10-K. During the quarter ended March 31, 2004, there have been no material changes regarding our market risks from the discussion in our 2003 Form 10-K.

Item 4. Controls and Procedures

As of March 31, 2004, we completed an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer and President and our Treasurer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures. Based upon that evaluation, our Chief Executive Officer and President and our Treasurer and Chief Financial Officer concluded that our disclosure controls and procedures are effective in timely alerting them to material information relating to us which is required to be included in our periodic Securities and Exchange Commission filings.

There has been no change in our internal control over financial reporting during the quarterly period covered by this report that has materially affected, or is reasonably likely to materially effect, our internal control over financial reporting.

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PART II. OTHER INFORMATION

Item 1. Legal Proceedings

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

Item 6. Exhibits and Reports on Form 8-K

Incorporated herein by reference is a list of Exhibits contained in the Exhibit Index on page 20 through 21 of this Quarterly Report.

The Registrant filed a report on Form 8-K on January 23, 2004 reporting on Other Events, the issuance of a press release announcing the commencement of Petro Stopping Centers, L.P. and Petro Financial Corporation’s offer to purchase for cash all of their outstanding $135,000,000 aggregate principal amount at maturity 10 ¹/2% Notes.

The Registrant filed a report on Form 8-K on January 30, 2004 reporting on Other Events, the issuance of a press release announcing the receipt of the requisite consents required to adopt the proposed amendments to the indenture governing the outstanding $135,000,000 aggregate principal amount at maturity 10 ¹/2% Notes.

The Registrant filed a report on Form 8-K on February 23, 2004 reporting on Other Events, the issuance of a press release announcing the closing of a series of transactions pursuant to which the Holding Partnership and its affiliated entities, Petro Holdings Financial Corporation, Petro Warrant Holdings Corporation, Petro Stopping Centers, L.P. and Petro Financial Corporation have refinanced substantially all of their existing indebtedness.

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SIGNATURE

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

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EXHIBIT INDEX

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