10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

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

For the quarterly period ended June 30, 2014

OR

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

Commission File Number 001-33274

TRAVELCENTERS OF AMERICA LLC

(Exact name of registrant as specified in its charter)

Delaware	20-5701514
(State or Other Jurisdiction of Incorporation or	(I.R.S. Employer Identification No.)
Organization)

24601 Center Ridge Road, Suite 200, Westlake, OH 44145-5639

(Address of Principal Executive Offices)

(440) 808-9100

(Registrant’s Telephone Number, Including Area Code)

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 o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  Yes x  No o

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

Large accelerated filer o	Accelerated filer x
Non-accelerated filer o	Smaller reporting company o
(Do not check if a smaller reporting company)

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

Number of Common Shares outstanding at September 26, 2014: 37,667,636 common shares.

TRAVELCENTERS OF AMERICA LLC

FORM 10-Q

June 30, 2014

INDEX

		Page
PART I — FINANCIAL INFORMATION
Item 1.	Financial Statements (Unaudited)
	Condensed Consolidated Balance Sheets as of June 30, 2014 and December 31, 2013	1
	Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) for the three months ended June 30, 2014 and 2013	2
	Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) for the six months ended June 30, 2014 and 2013	3
	Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2014 and 2013	4
	Notes to Condensed Consolidated Financial Statements	5
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	15
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	29
Item 4.	Controls and Procedures	29
	Warning Concerning Forward Looking Statements	31
PART II — OTHER INFORMATION
Item 1.	Legal Proceedings	35
Item 1A.	Risk Factors	35
Item 5.	Other Information	35
Item 6.	Exhibits	35
SIGNATURE		36

As used herein the terms “we”, “us”, “our” and “TA” include TravelCenters of America LLC and its consolidated subsidiaries unless otherwise expressly stated or the context otherwise requires.

Part I.  Financial Information

Item 1.  Financial Statements

TravelCenters of America LLC

Condensed Consolidated Balance Sheets (Unaudited)

(in thousands, except share data)

	June 30,			December 31,
	2014			2013
Assets
Current assets:
Cash and cash equivalents	$	105,394		$	85,657
Accounts receivable (less allowance for doubtful accounts of $1,533 as of June 30, 2014, and $1,304 as of December 31, 2013)	167,308			105,932
Inventories	187,414			199,201
Other current assets	72,555			79,604
Total current assets	532,671			470,394
Property and equipment, net	717,751			704,866
Goodwill and intangible assets, net	48,066			48,772
Other noncurrent assets	34,408			33,250
Total assets	$	1,332,896		$	1,257,282
Liabilities and Shareholders’ Equity
Current liabilities:
Accounts payable	$	196,346		$	149,645
Current HPT Leases liabilities	30,817			29,935
Other current liabilities	137,884			124,033
Total current liabilities	365,047			303,613
Noncurrent HPT Leases liabilities	338,126			343,926
Senior Notes due 2028	110,000			110,000
Other noncurrent liabilities	50,010			45,866
Total liabilities	863,183			803,405
Commitments and contingencies
Shareholders’ equity:
Common shares, no par value, 39,158,666 shares authorized at June 30, 2014, and December 31, 2013, and 37,669,546 and 37,625,366 shares issued and outstanding at June 30, 2014, and December 31, 2013, respectively	676,378			674,391
Accumulated other comprehensive income	852			834
Accumulated deficit	(207,517		)	(221,348		)
Total shareholders’ equity	469,713			453,877
Total liabilities and shareholders’ equity	$	1,332,896		$	1,257,282

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

1

TravelCenters of America LLC

Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) (Unaudited)

(in thousands, except per share data)

	Three Months Ended
	June 30,
	2014			2013
Revenues:
Fuel	$	1,658,172		$	1,635,400
Nonfuel	414,854			380,041
Rent and royalties	3,083			3,313
Total revenues	2,076,109			2,018,754
Cost of goods sold (excluding depreciation):
Fuel	1,559,049			1,545,588
Nonfuel	191,967			171,938
Total cost of goods sold (excluding depreciation)	1,751,016			1,717,526
Operating expenses:
Site level operating	203,526			190,646
Selling, general & administrative	25,100			24,482
Real estate rent	53,731			52,104
Depreciation and amortization	15,797			14,025
Total operating expenses	298,154			281,257
Income from operations	26,939			19,971
Acquisition costs	(149		)	(205		)
Interest income	45			307
Interest expense	(4,213		)	(4,430		)
Income before income taxes and income from equity investees	22,622			15,643
Provision for income taxes	9,673			382
Income from equity investees	685			723
Net income	$	13,634		$	15,984
Other comprehensive income (loss), net of tax:
Foreign currency translation adjustment, net of taxes of $83 and $(85), respectively	170			(199		)
Equity interest in investee’s unrealized gain (loss) on investments	21			(73		)
Other comprehensive income (loss)	191			(272		)
Comprehensive income	$	13,825		$	15,712
Net income per share:
Basic and diluted	$	0.36		$	0.54

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

2

TravelCenters of America LLC

Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) (Unaudited)

(in thousands, except per share data)

	Six Months Ended
	June 30,
	2014			2013
Revenues:
Fuel	$	3,247,818		$	3,260,507
Nonfuel	789,520			709,235
Rent and royalties	6,080			6,363
Total revenues	4,043,418			3,976,105
Cost of goods sold (excluding depreciation):
Fuel	3,056,378			3,093,767
Nonfuel	360,383			317,303
Total cost of goods sold (excluding depreciation)	3,416,761			3,411,070
Operating expenses:
Site level operating	403,097			374,579
Selling, general & administrative	51,896			47,709
Real estate rent	107,935			103,988
Depreciation and amortization	31,925			27,248
Total operating expenses	594,853			553,524
Income from operations	31,804			11,511
Acquisition costs	(759		)	(320		)
Interest income	84			542
Interest expense	(8,288		)	(8,495		)
Income before income taxes and income from equity investees	22,841			3,238
Provision for income taxes	9,949			552
Income from equity investees	939			1,159
Net income	$	13,831		$	3,845
Other comprehensive income (loss), net of tax:
Foreign currency translation adjustment, net of taxes of $(8) and $(138), respectively	(22		)	(325		)
Equity interest in investee’s unrealized gain (loss) on investments	40			(81		)
Other comprehensive income (loss)	18			(406		)
Comprehensive income	$	13,849		$	3,439
Net income per share:
Basic and diluted	$	0.37		$	0.13

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

3

TravelCenters of America LLC

Condensed Consolidated Statements of Cash Flows (Unaudited)

(in thousands)

	Six Months Ended
	June 30,
	2014			2013
Cash flows from operating activities:
Net income	$	13,831		$	3,845
Adjustments to reconcile net income to net cash provided by operating activities:
Noncash rent expense	(4,565		)	(4,400		)
Depreciation and amortization expense	31,925			27,248
Deferred income tax provision	4,032			180
Changes in assets and liabilities, net of effects of business acquisitions:
Accounts receivable	(61,732		)	(73,102		)
Inventories	11,987			(476		)
Other current assets	2,006			6,079
Accounts payable and other current liabilities	64,628			101,063
Other, net	1,447			2,584
Net cash provided by operating activities	63,559			63,021
Cash flows from investing activities:
Proceeds from sales of property and equipment	21,707			43,733
Investment in equity investee	(825		)	—
Acquisitions of businesses, net of cash acquired	(3,202		)	(27,887		)
Capital expenditures	(60,608		)	(84,703		)
Net cash used in investing activities	(42,928		)	(68,857		)
Cash flows from financing activities:
Proceeds from sale-leaseback transactions with HPT	301			1,535
Fees paid related to the issuance of common shares	(14		)	—
Proceeds from Senior Notes issuance	—			110,000
Sale-leaseback financing obligation payments	(1,183		)	(1,022		)
Payment of deferred financing fees	—			(4,749		)
Net cash (used in) provided by financing activities	(896		)	105,764
Effect of exchange rate changes on cash	2			(26		)
Net increase in cash	19,737			99,902
Cash and cash equivalents at the beginning of the period	85,657			35,189
Cash and cash equivalents at the end of the period	$	105,394		$	135,091
Supplemental disclosure of cash flow information:
Interest paid (including rent classified as interest and net of capitalized interest)	$	7,841		$	6,240
Income taxes paid (net of refunds)	$	630		$	685

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

4

TravelCenters of America LLC

Notes to Condensed Consolidated Financial Statements (Unaudited)

(in thousands, except share and per share amounts)

1.Basis of Presentation, Business Description and Organization

TravelCenters of America LLC, which we refer to as the Company or we, us and our, operates and franchises travel centers under the “TravelCenters of America,” “TA” and related brand names, or the TA brand, and the “Petro Stopping Centers” and “Petro” brand names, or the Petro brand, primarily along the U.S. interstate highway system.  Our travel center customers include trucking fleets and their drivers, independent truck drivers and motorists.  We also operate convenience stores with retail gasoline stations, primarily under the “Minit Mart” brand name, that generally serve motorists.  Our travel centers include, on average, over 25 acres of land and typically offer customers diesel fuel and gasoline as well as nonfuel products and services such as truck repair and maintenance services, full service restaurants, quick service restaurants, or QSRs, travel and convenience stores and various other driver amenities.  Our convenience stores have, on average, ten fueling positions and approximately 5,000 square feet of interior space offering merchandise and QSRs.  We also collect rents, royalties and other fees from our franchisees.

At June 30, 2014, our geographically diverse business included 248 travel centers in 43 U.S. states and in Canada, including 173 travel centers operated under the TA brand, and 75 travel centers operated under the Petro brand.  As of June 30, 2014, we operated 218 of these travel centers, which we refer to as Company operated sites, and our franchisees operated 30 of these travel centers. Of our 248 travel centers at June 30, 2014, we owned 34, we leased or managed 189, including 184 that we leased from Hospitality Properties Trust, or HPT, and franchisees owned or leased 25 from third parties.  We sublease to franchisees five of the travel centers we lease from HPT.

As of June 30, 2014, we operated 34 convenience stores in four states, primarily Kentucky.  Of our 34 convenience stores at June 30, 2014, we owned 27, and we leased or managed seven, including one that we leased from HPT.

We manage our business as one operating segment and, therefore, have one reportable segment. Our locations sell similar products and services, use similar processes to sell products and services, and sell products and services to similar customers. We sometimes make specific disclosures concerning fuel and nonfuel products and services because it facilitates our discussion of trends and operational initiatives within our business and industry.  We have only a single travel center located in a foreign country, Canada, and we do not consider the revenues and assets related to our operations in Canada to be material to us.

The accompanying condensed consolidated financial statements are unaudited.  These unaudited interim financial statements have been prepared in accordance with U.S. generally accepted accounting principles, or GAAP, applicable for interim financial statements.  The disclosures do not include all the information necessary for complete financial statements in accordance with GAAP.  These unaudited interim financial statements should be read in conjunction with the consolidated financial statements and notes contained in our Annual Report on Form 10-K for the fiscal year ended December 31, 2013, or our Annual Report.  In the opinion of our management, all adjustments, which include normal recurring adjustments, considered necessary for a fair presentation have been included.  All intercompany transactions and balances have been eliminated.  While our revenues are modestly seasonal, the quarterly variations in our operating results may reflect greater seasonal differences because our rent and certain other costs do not vary seasonally.  For this and other reasons, our operating results for interim periods are not necessarily indicative of the results that may be expected for a full year.

Certain prior year amounts have been reclassified in the Condensed Consolidated Statements of Cash Flows to be consistent with the current year presentation.

Recently Issued Accounting Pronouncements

In May 2014, the Financial Accounting Standards Board issued Accounting Standards Update 2014-09, Revenue from Contracts with Customers, which establishes a comprehensive revenue recognition standard under GAAP for virtually all industries. The new standard will apply for annual periods beginning after December 15, 2016, including interim periods therein. Early adoption is prohibited. We have not yet determined the effects, if any, adoption of this update may have on our consolidated financial statements.

5

TravelCenters of America LLC

Notes to Condensed Consolidated Financial Statements (Unaudited)

(in thousands, except share and per share amounts)

2.Earnings Per Share

Unvested shares issued under our share award plan are deemed participating securities because they participate equally in earnings with all of our other common shares.  The following table presents a reconciliation from net income to the net income available to common shareholders and the related earnings per share.

	Three Months Ended June 30,				Six Months Ended June 30,
	2014		2013		2014		2013
Net income, as reported	$	13,634	$	15,984	$	13,831	$	3,845
Less: net income attributable to participating securities	666		992		677		239
Net income available to common shareholders	$	12,968	$	14,992	$	13,154	$	3,606
Weighted average common shares(1)	35,791,850		27,716,024		35,787,657		27,707,211
Basic and diluted net income per share	$	0.36	$	0.54	$	0.37	$	0.13

(1)Excludes unvested shares granted under our share award plan, which shares are considered participating securities because they participate equally in earnings and losses with all of our other common shareholders.  The weighted average number of unvested shares outstanding for the three months ended June 30, 2014 and 2013, was 1,839,413 and 1,834,847, respectively.  The weighted average number of unvested shares outstanding for the six months ended June 30, 2014 and 2013, was 1,840,674 and 1,836,368, respectively.

3.Inventories

Inventories consisted of the following:

	June 30,		December 31,
	2014		2013
Nonfuel products	$	142,321	$	150,600
Fuel products	45,093		48,601
Total inventories	$	187,414	$	199,201

4.Acquisitions

During the six months ended June 30, 2014, we acquired a travel center for $3,242, and we accounted for this transaction using the acquisition method of accounting, which requires, among other things, that the assets acquired and liabilities assumed be recognized at their respective fair values as of the acquisition date.  The following table summarizes the amounts assigned, based on their fair values, to the assets we acquired and liabilities we assumed in the business combination described above.

Cash	$	40
Inventories	201
Property and equipment	3,074
Other assets	17
Other liabilities	(90		)
Total purchase price	$	3,242

We have included the results of this travel center in our consolidated financial statements from its date of acquisition.  The pro forma impact of including the results of operations of this acquisition from the beginning of the period is not material to our condensed consolidated financial statements.

As of June 30, 2014, we had entered agreements to acquire two travel center properties for approximately $21,500 plus saleable inventory at cost.  We completed these acquisitions during July and September 2014.

6

TravelCenters of America LLC

Notes to Condensed Consolidated Financial Statements (Unaudited)

(in thousands, except share and per share amounts)

During the three months ended June 30, 2014 and 2013, and the six months ended June 30, 2014 and 2013, we incurred and charged to expense $149, $205, $759 and $320, respectively, of acquisition costs for the legal, due diligence and related activities associated with our consideration and completion of possible and actual acquisitions.

5.Debt

Senior Notes

On January 15, 2013, we issued at par $110,000 aggregate principal amount of our 8.25% Senior Notes, or the Senior Notes, in an underwritten public offering.  The Senior Notes are our senior unsecured obligations.  The indenture governing our Senior Notes does not limit the amount of indebtedness we may incur.  We may issue additional debt from time to time.  The indenture also requires that we file our reports under the Securities and Exchange Act of 1934, as amended, or the Exchange Act, with the indenture trustee within a prescribed time period.  We did not maintain compliance with this covenant for the quarter ended June 30, 2014, but the filing of this Quarterly Report on Form 10-Q, or this Quarterly Report, cures this non-compliance.

We estimate the fair value of our Senior Notes was $113,432 based on the trading price (a Level 1 input) of our Senior Notes on June 30, 2014.

Revolving Credit Facility

Our $200,000 credit facility requires that we furnish our consolidated financial statements to our lenders within certain prescribed time periods.  We received a waiver, until September 30, 2014, from these lenders of the requirement to deliver our financial statements for the period ended June 30, 2014.

6.Accumulated Other Comprehensive Income

Accumulated other comprehensive income at June 30, 2014, consisted of the following:

	Foreign currency translation adjustment			Equity interest in investee’s unrealized gain (loss) on investments		Accumulated other comprehensive income
Balance at December 31, 2013	$	785		$	49	$	834
Foreign currency translation adjustment, net of tax of $(8)	(22		)	—		(22		)
Equity interest in investee’s unrealized loss on investments	—			40		40
Other comprehensive income (loss), net of tax	(22		)	40		18
Balance at June 30, 2014	$	763		$	89	$	852

7.Related Party Transactions

Relationship with HPT

HPT was our parent company until 2007 and is our principal landlord and our largest shareholder.  We were created as a separate public company in 2007 as a result of a spin off from HPT.  As of June 30, 2014, HPT owned 3,420,000 of our common shares, representing approximately 9.1% of our outstanding common shares.  One of our Managing Directors, Mr. Barry Portnoy, is a managing trustee of HPT.  Mr. Barry Portnoy’s son, Mr. Adam Portnoy, is also a managing trustee of HPT, and Mr. Barry Portnoy’s son-in-law, Mr. Ethan Bornstein, is an executive officer of HPT.  Our other Managing Director, Mr. Thomas O’Brien, who is also our President and Chief Executive Officer, is a former executive officer of HPT.  One of our Independent Directors, Mr. Arthur Koumantzelis, was an independent trustee of HPT prior to our spin-off from HPT.

We have two leases with HPT, the TA Lease and the Petro Lease, pursuant to which we lease 185 properties from HPT.  Our TA Lease is for 145 properties that we operate primarily under the TA brand.  Our Petro Lease is for 40 properties that we operate

7

TravelCenters of America LLC

Notes to Condensed Consolidated Financial Statements (Unaudited)

(in thousands, except share and per share amounts)

under the Petro brand.  The TA Lease expires on December 31, 2022.  The Petro Lease expires on June 30, 2024, and may be extended by us for up to two additional periods of 15 years each.  We have the right to use the “TA”, “TravelCenters of America” and other trademarks, which are owned by HPT, during the term of the TA Lease.  We refer to the TA Lease and Petro Lease collectively as the HPT Leases.

The HPT Leases are “triple net” leases that require us to pay all costs incurred in the operation of the leased properties, including costs related to personnel, utilities, acquiring inventories, providing services to customers, insurance, real estate and personal property taxes, environmental related expenses and ground lease payments at those properties at which HPT leases the property from the owner and subleases it to us.  We also are required generally to indemnify HPT for certain environmental matters and for liabilities which arise during the terms of the leases from ownership or operation of the leased properties and, at lease expiration, we are required to pay an amount equal to an estimate of the cost of removing underground storage tanks on the leased properties.

Effective January 2012 and 2013, we began to incur percentage rent payable to HPT under the TA Lease and the Petro Lease, respectively.  In each case, the percentage rent equals 3% of increases in nonfuel gross revenues and 0.3% of increases in gross fuel revenues at the leased properties over base amounts.  The increases in percentage rents attributable to fuel revenues are subject to a maximum each year calculated by reference to changes in the consumer price index.  Also, HPT has agreed to waive payment of the first $2,500 of percentage rent that may become due under our Petro Lease; HPT waived $117 and $269 of percentage rent under our Petro Lease for the three and six months ended June 30, 2014, respectively, pursuant to that waiver; and through the second quarter of 2014 HPT has cumulatively waived $636 of the $2,500 of percentage rent to be waived.  The total amount of percentage rent (net of the waived amount) that we incurred during the three and six months ended June 30, 2014 and 2013, was $729 and $1,622 and $593 and $1,282, respectively.

Under the HPT Leases, we may request that HPT purchase approved amounts for renovations, improvements and equipment at the leased properties in return for increases in our minimum annual rent according to the following formula: the minimum rent per year will be increased by an amount equal to the amount paid by HPT multiplied by the greater of (i) 8.5% or (ii) a benchmark U.S. Treasury interest rate plus 3.5%.  During the six months ended June 30, 2014 and 2013, pursuant to the terms of the HPT Leases, we sold to HPT $21,923 and $45,229, respectively, of improvements we previously made to properties leased from HPT, and, as a result, our minimum annual rent payable to HPT increased by approximately $1,863 and $3,844, respectively.  At June 30, 2014, our property and equipment balance included $36,269 of improvements of the type that we typically request that HPT purchase for an increase in rent in the future; however, HPT is not obligated to purchase these improvements. In September 2014, we sold to HPT $20,038 of improvements for an increase in minimum annual rent payable to HPT of $1,703.

8

TravelCenters of America LLC

Notes to Condensed Consolidated Financial Statements (Unaudited)

(in thousands, except share and per share amounts)

The following table details amounts related to the HPT Leases and other leases that are reflected in real estate rent expense in our condensed consolidated statements of operations and comprehensive income (loss).

	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2014			2013			2014			2013
Cash payments to HPT under the HPT Leases	$	55,603		$	54,139		$	110,749		$	107,125
Change in accrued estimated percentage rent	(21		)	(82		)	597			584
Adjustments to recognize expense on a straight line basis	(559		)	(523		)	(900		)	(900		)
Less sale-leaseback financing obligation amortization	(594		)	(512		)	(1,183		)	(1,022		)
Less portion of rent payments recognized as interest expense	(1,471		)	(1,743		)	(2,941		)	(3,484		)
Less deferred tenant improvements allowance amortization	(1,692		)	(1,692		)	(3,384		)	(3,384		)
Amortization of deferred gain on sale-leaseback transactions	(96		)	(77		)	(192		)	(153		)
Rent expense related to HPT Leases	51,170			49,510			102,746			98,766
Rent paid to others (1)	2,629			2,591			5,315			5,198
Adjustments to recognize expense on a straight line basis for other leases	(68		)	3			(126		)	24
Total real estate rent expense	$	53,731		$	52,104		$	107,935		$	103,988

(1)Includes rent paid directly to HPT’s landlords under leases for properties we sublease from HPT as well as rent related to properties we lease from landlords other than HPT.

The following table details amounts related to the HPT Leases that are included in our condensed consolidated balance sheets.

	June 30,		December 31,
	2014		2013
Current HPT Leases liabilities:
Accrued rent	$	18,789	$	18,041
Sale-leaseback financing obligation (1)	2,437		2,358
Straight line rent accrual (2)	2,437		2,382
Deferred gain on sale-leaseback transactions (3)	385		385
Deferred tenant improvements allowance (4)	6,769		6,769
Total Current HPT Leases liabilities	$	30,817	$	29,935
Noncurrent HPT Leases liabilities:
Deferred rent obligation (5)	$	150,000	$	150,000
Sale-leaseback financing obligation (1)	82,801		83,762
Straight line rent accrual (2)	51,638		52,901
Deferred gain on sale-leaseback transactions (3)	2,925		3,117
Deferred tenant improvements allowance (4)	50,762		54,146
Total Noncurrent HPT Leases liabilities	$	338,126	$	343,926

(1)Sale-leaseback Financing Obligation.  GAAP governing the transactions related to our entering the TA Lease required us to recognize in our consolidated balance sheets the leased assets at thirteen of the properties previously owned by our predecessor that we now lease from HPT because we subleased more than a minor portion of those properties to third parties, and one property that did not qualify for operating lease treatment for other reasons.  Accordingly, we recorded the leased assets at these properties at an amount equal to HPT’s recorded initial carrying amounts, which were equal to their fair values, and recognized an equal amount of liability that is presented as sale-leaseback financing obligation in our consolidated balance sheets.  In addition, sales to HPT of improvements at these properties are accounted for as sale-leaseback financing transactions and these liabilities are increased by the amount of proceeds we receive from HPT.  We

9

TravelCenters of America LLC

Notes to Condensed Consolidated Financial Statements (Unaudited)

(in thousands, except share and per share amounts)

recognize a portion of the total rent payments to HPT related to these assets as a reduction of the sale-leaseback financing obligation and a portion as interest expense in our consolidated statements of operations and comprehensive income.  We determined the allocation of these rent payments to the liability and to interest expense using the effective interest method.  The amounts allocated to interest expense were $1,471 and $1,743 for the three months ended June 30, 2014 and 2013, respectively, and $2,941 and $3,484 for the six months ended June 30, 2014 and 2013, respectively.

During 2012 and 2013, subleases to franchisees of ours at five of these properties were terminated and we began operating these properties directly.  The termination of these subleases qualified the properties for sale-leaseback accounting at which times we removed the related assets and liabilities from our consolidated balance sheet.  See note (3) below for further discussion regarding the deferred gains of $2,850 we recognized as part of these sublease terminations.

(2)Straight Line Rent Accrual.  The TA Lease included scheduled rent increases over the first six years of the lease term, as do certain of the leases for properties we sublease from HPT, the rent for which we pay directly to HPT’s landlords.  Also, under our leases with HPT, we are obligated to pay to HPT at lease expiration an amount equal to an estimate of the cost, calculated in accordance with GAAP, of removing the underground storage tanks we would have if we owned the underlying assets at those sites we lease from HPT.  We recognize the effects of scheduled rent increases and the future payment to HPT for the estimated cost of removing underground storage tanks in real estate rent expense over the lease terms on a straight line basis, with offsetting entries to this accrual balance.

(3)Deferred Gain on Sale-Leaseback Transactions.  This gain arose from our 2012 and 2013 terminations of subleases to franchisees for five properties we lease from HPT, which qualified these properties for sale-leaseback accounting and required us to remove the related assets and liabilities from our consolidated balance sheets, as further described in note (1) above, and from the sales to HPT of certain assets at the five properties we lease from HPT that we continue to sublease to franchisees.  Under GAAP, the gain or loss from the sale portion of a sale-leaseback transaction is deferred and amortized into our real estate rent expense on a straight line basis over the then remaining term of the lease.

(4)Deferred Tenant Improvements Allowance.  HPT committed to fund up to $125,000 of capital projects at the properties we lease under the TA Lease without an increase in rent payable by us, which amount HPT had fully funded by September 30, 2010, net of discounting to reflect our accelerated receipt of those funds. In connection with this commitment, we recognized a liability for the rent deemed to be related to this tenant improvements allowance.  This deferred tenant improvements allowance was initially recorded at an amount equal to the leasehold improvements receivable we recognized for the discounted value of the then expected future amounts to be received from HPT, based upon our then expected timing of receipt of those payments.  We amortize the deferred tenant improvements allowance on a straight line basis over the term of the TA Lease as a reduction of real estate rent expense.

(5)Deferred Rent Obligation.  Pursuant to a rent deferral agreement with HPT, through December 31, 2010, we deferred a total of $150,000 of rent payable to HPT.  The deferred rent obligation is payable in two installments, $107,085 in December 2022 and $42,915 in June 2024.  This obligation does not bear interest, unless certain events of default or other events occur, including a change of control of us.

On August 13, 2013, the travel center located in Roanoke, VA that we leased from HPT under the TA Lease was taken by eminent domain proceedings brought by the Virginia Department of Transportation, or VDOT, in connection with planned highway construction.  The TA Lease provides that the annual rent payable by us is reduced by 8.5% of the amount of the proceeds HPT receives from the taking or, at HPT’s option, the fair market value rent of the property on the commencement date of the TA Lease.  In January 2014, HPT received proceeds from VDOT of $6,178, which is a substantial portion of VDOT’s estimate of the value of the property, and as a result our annual rent under the TA Lease was reduced by $525 effective January 6, 2014.  We and HPT have challenged VDOT’s estimate of this property’s value and expect that the ultimate resolution of this matter will take a prolonged period of time.  HPT entered a lease agreement with VDOT to lease for $40 per month this property through August 31, 2014, which lease term was recently extended through November 15, 2014.  We entered into a sublease for this property with HPT and, we plan to continue operating it as a travel center through November 15, 2014.  Under the terms of the TA Lease, we are responsible to pay the rent to VDOT under the lease agreement.

Relationship with RMR

Reit Management & Research LLC, or RMR, provides business management and shared services to us pursuant to a business management and shared services agreement, or our business management agreement, and building management services to us related to our headquarters office building, or our property management agreement.  One of our Managing Directors, Mr. Barry Portnoy, is Chairman, majority owner and an employee of RMR.  Mr. Barry Portnoy’s son, Mr. Adam Portnoy, is an owner of RMR and serves as

10

TravelCenters of America LLC

Notes to Condensed Consolidated Financial Statements (Unaudited)

(in thousands, except share and per share amounts)

President, Chief Executive Officer and a director of RMR.  Our other Managing Director, Mr. Thomas O’Brien, who is also our President and Chief Executive Officer, Mr. Andrew Rebholz, our Executive Vice President, Chief Financial Officer and Treasurer, and Mr. Mark Young, our Executive Vice President and General Counsel, are officers of RMR.  RMR provides management services to HPT and HPT’s executive officers are officers of RMR.  Two of our Independent Directors also serve as independent directors or independent trustees of other public companies to which RMR or its affiliates provide management services.  Mr. Barry Portnoy serves as a managing director or managing trustee of a majority of the public companies to which RMR or its affiliates provide management services and Mr. Adam Portnoy serves as a managing trustee of a majority of those companies.  In addition, officers of RMR serve as officers of those companies.

Pursuant to our business management agreement and property management agreement with RMR, we recognized aggregate fees of $3,148 and $2,899 for the three months ended June 30, 2014 and 2013, respectively, and $6,002 and $5,416 for the six months ended June 30, 2014 and 2013, respectively.  These amounts are included in selling, general and administrative expenses in our condensed consolidated statements of operations and comprehensive income (loss).

Relationship with AIC

We, RMR and five other companies to which RMR provides management services each owned 14.3% of Affiliates Insurance Company, or AIC, an Indiana insurance company as of June 30, 2014.  Each of our Directors and most of the trustees and directors of the other AIC shareholders currently serve on the board of directors of AIC.  RMR provides management and administrative services to AIC pursuant to a management and administrative services agreement with AIC.  As of June 30, 2014, we had invested $6,054 in AIC since its formation in 2008.  Although we own less than 20% of AIC, we use the equity method to account for this investment because we believe that we have significant influence over AIC as all of our Directors are also directors of AIC.  Our investment in AIC had a carrying value of $6,785 and $5,913 as of June 30, 2014 and December 31, 2013, respectively, which amounts are included in other noncurrent assets on our consolidated balance sheets.  We recognized income of $104 and $79 for the three months ended June 30, 2014 and 2013, respectively, and $7 and $155 for the six months ended June 30, 2014 and 2013, respectively, related to our investment in AIC.  In June 2014, we and the other shareholders of AIC renewed our participation in an insurance program arranged by AIC.  In connection with the renewal, we purchased a one-year property insurance policy providing $500,000 of coverage, with respect to which AIC is a reinsurer of certain coverage amounts.  We paid AIC a premium, including taxes and fees, of approximately $1,601 in connection with that policy, which amount may be adjusted from time to time as we acquire or dispose of properties that are included in the policy.  We periodically consider the possibilities for expanding our insurance relationships with AIC to include other types of insurance and may in the future participate in additional insurance offerings AIC may provide or arrange.  We may invest additional amounts in AIC in the future if the expansion of this insurance business requires additional capital, but we are not obligated to do so.  By participating in this insurance business with RMR and the other companies to which RMR provides management services, we expect that we may benefit financially by reducing our insurance expenses and by realizing our pro rata share of any profits of this insurance business.

On March 25, 2014, as a result of the removal, without cause, of all of the trustees of Equity CommonWealth (formerly known as CommonWealth REIT), or EQC, EQC underwent a change in control, as defined in the shareholders agreement among us, the other shareholders of AIC, and AIC.  As a result of that change in control and in accordance with the terms of the shareholders agreement, on May 9, 2014, we and the other non-EQC shareholders purchased pro rata the AIC shares EQC owned.  Pursuant to that purchase, we purchased 2,857 AIC shares from EQC for $825.  Following these purchases, we and the six other remaining shareholders each owned approximately 14.3% of AIC.

Directors’ and Officers’ Liability Insurance

In September 2014, we purchased a two year combined directors’ and officers’ insurance policy with HPT, RMR and four other companies managed by RMR that provides $10,000 in aggregate primary coverage, including certain errors and omission coverage.  At that time, we also purchased separate additional one year directors’ and officers’ liability insurance policies that provide $20,000 of aggregate excess coverage plus $5,000 of excess non-indemnifiable coverage.  The total premium payable by us for these policies was approximately $351.

Relationship with PTP

Petro Travel Plaza Holdings LLC, or PTP, is a joint venture between us and Tejon Development Corporation, or Tejon, that owns two travel centers and two convenience stores in California.  We own a 40% interest in PTP and operate the two travel centers and two convenience stores PTP owns for which we receive management and accounting fees.  The carrying value of our investment

11

TravelCenters of America LLC

Notes to Condensed Consolidated Financial Statements (Unaudited)

(in thousands, except share and per share amounts)

in PTP as of June 30, 2014 and December 31, 2013, was $18,604 and $17,672, respectively.  We recognized management and accounting fee income of $200 for each of the three month periods ended June 30, 2014 and 2013, and $400 for each of the six month periods ended June 30, 2014 and 2013.  At June 30, 2014, and December 31, 2013, we had net payables to PTP of $2,495 and $1,147, respectively.  We recognized income of $581 and $644 during the three months ended June 30, 2014 and 2013, respectively, and $932 and $1,004 during the six months ended June 30, 2014 and 2013, respectively, as our share of PTP’s net income.

Summarized financial information of PTP

The following table sets forth the aggregate summarized financial information of PTP and does not represent the amounts we have included in our consolidated financial statements in connection with our investment in PTP.

	Six Months Ended June 30,
	2014			2013
Total revenues	$	54,658		$	55,364
Total cost of sales (excluding depreciation)	$	43,604		$	44,712
Operating income	$	2,694		$	2,693
Interest expense, net	$	(243	)	$	(299	)
Net income	$	2,451		$	2,394

8.Commitments and Contingencies

Environmental Matters

Extensive environmental laws regulate our operations and properties.  These laws may require us to investigate and clean up hazardous substances, including petroleum or natural gas products, released at our owned and leased properties.  Governmental entities or third parties may hold us liable for property damage and personal injuries, and for investigation, remediation and monitoring costs incurred in connection with any contamination and regulatory compliance.  We use both underground storage tanks and above ground storage tanks to store petroleum products, natural gas and waste at our locations.  We must comply with environmental laws regarding tank construction, integrity testing, leak detection and monitoring, overfill and spill control, release reporting and financial assurance for corrective action in the event of a release.  At some locations we must also comply with environmental laws relative to vapor recovery or discharges to water.  Under the terms of our leases, we generally have agreed to indemnify HPT for any environmental liabilities related to properties that we lease from HPT and we are required to pay all environmental related expenses incurred in the operation of the properties.

From time to time we have received, and in the future likely will receive, notices of alleged violations of environmental laws or otherwise have become or will become aware of the need to undertake corrective actions to comply with environmental laws at our locations.  Investigatory and remedial actions were, and regularly are, undertaken with respect to releases of hazardous substances at our locations.  In some cases we received, and may receive in the future, contributions to partially offset our environmental costs from insurers, from state funds established for environmental clean up associated with the sale of petroleum products or from indemnitors who agreed to fund certain environmental related costs at locations purchased from those indemnitors.  To the extent we incur material amounts for environmental matters for which we do not receive or expect to receive insurance or other third party reimbursement or for which we have not previously recorded a reserve, our operating results may be materially adversely affected.  In addition, to the extent we fail to comply with environmental laws and regulations, or we become subject to costs and requirements not similarly experienced by our competitors, our competitive position may be harmed.

At June 30, 2014, we had a gross accrued liability of $5,533 for environmental matters as well as a receivable for expected recoveries of certain of these estimated future expenditures of $1,518, resulting in an estimated net amount of $4,015 that we expect to fund in the future.  Accrued liabilities related to environmental matters are recorded on an undiscounted basis due to the uncertainty associated with the timing of the related future payments.  We cannot precisely know the ultimate costs we will incur in connection with currently known or future potential environmental related violations, corrective actions, investigation and remediation; however, based on our current knowledge we do not expect that our net costs for such matters to be incurred at our locations, individually or in the aggregate, would be material to our financial condition or results of operations.

12

TravelCenters of America LLC

Notes to Condensed Consolidated Financial Statements (Unaudited)

(in thousands, except share and per share amounts)

In February 2014, we reached an agreement with the California State Water Resources Control Board, or the State Water Board, to settle certain claims the State Water Board had filed against us in California Superior Court in 2010 relating to alleged violations of underground storage tank laws and regulations for a cash payment of $1,800; suspended penalties of $1,000 that may become payable by us in the future if, prior to March 2019, we fail to comply with specified underground storage tank laws and regulations; and our agreement to invest, prior to March 2018, up to $2,000 of verified costs that are directly related to the development and implementation of a comprehensive California Enhanced Environmental Compliance Program for the underground storage tank systems at all of our California facilities that is above and beyond minimum requirements of California law and regulations related to underground storage tank systems.  To the extent that we do not incur the full $2,000 of eligible environmental compliance costs by March 2018, the difference between the amount we incur and $2,000 will be payable to the State Water Board.  The settlement, which was approved by the Superior Court on February 20, 2014, also included injunctive relief provisions requiring that we comply with certain California environmental laws and regulations applicable to underground storage tank systems.  We made the $1,800 cash payment during the first quarter of 2014.  As of June 30, 2014, we have a liability of $1,708 recorded with respect to this matter, which amount is included in the gross accrued liability for environmental matters referenced above.  We believe that the probability of triggering any portion of the $1,000 of suspended penalties is remote and have not recognized a loss or a liability for that amount, but it is possible that such events will occur and some portion or all of the $1,000 may become due and payable and would be recognized as an expense at the time of the future event or events.

We have insurance of up to $10,000 per incident and up to $40,000 in the aggregate for certain environmental liabilities, subject, in each case, to certain limitations and deductibles.  However, we can provide no assurance that we will be able to maintain similar environmental insurance coverage in the future on acceptable terms.

It is impossible to predict the ultimate effect changing circumstances and changing environmental laws may have on us in the future or the ultimate outcome of matters currently pending.  We cannot be certain that contamination presently unknown to us does not exist at our sites, or that material liability will not be imposed on us in the future.  If we discover additional environmental issues, or if government agencies impose additional environmental requirements, increased environmental compliance or remediation expenditures may be required, which could have a material adverse effect on us.  In addition, legislation and regulation regarding climate change, including greenhouse gas emissions and other environmental matters, and market reaction to any such legislation or regulation or to climate change concerns, may decrease the demand for our major product, diesel fuel, may require us to expend significant amounts and may negatively impact our business.  For instance, federal and state governmental requirements addressing emissions from trucks and other motor vehicles, such as the U.S. Environmental Protection Agency’s gasoline and diesel sulfur control requirements that limit the concentration of sulfur in motor vehicle gasoline and diesel fuel, as well as President Obama’s February 2014 order that his administration develop and implement new fuel efficiency standards for medium and heavy duty commercial trucks by March 2016, has caused us to add certain services and provide certain products to our customers at a cost to us and may decrease the demand for our fuel products and negatively impact our business.  Further, legislation and regulations that limit carbon emissions also may cause our energy costs at our locations to increase.

Legal Proceedings

Beginning in December 2006, a series of class action lawsuits was filed against numerous companies in the petroleum industry, including our predecessor and our subsidiaries, in U.S. district courts in over 20 states.  Major petroleum refiners and retailers were named as defendants in one or more of these lawsuits.  The plaintiffs in the lawsuits generally alleged that they are retail purchasers who purchased motor fuel at temperatures greater than 60 degrees Fahrenheit at the time of sale.  One theory alleged that the plaintiffs purchased smaller amounts of motor fuel than the amount for which defendants charged them because the defendants measured the amount of motor fuel they delivered by volumes which, at higher temperatures, contain less energy.  A second theory alleged that fuel taxes are calculated in temperature adjusted 60 degree gallons and are collected by governmental agencies from suppliers and wholesalers, who are reimbursed in the amount of the tax by the defendant retailers before the fuel is sold to consumers.  These “tax” cases allege that, when the fuel is subsequently sold to consumers at temperatures above 60 degrees, the retailers sell a greater volume of fuel than the amount on which they paid tax, and therefore reap unjust benefit because the customers pay more tax than the retailer pays.  A third theory alleged that all purchasers of fuel at any temperature are harmed because the defendants do not use equipment that adjusts for temperature or disclose the temperature of fuel being sold, and thereby deprive customers of information they allegedly require to make an informed purchasing decision.  All of these cases were consolidated in the U.S. District Court for the District of Kansas pursuant to multi-district litigation procedures.  On May 28, 2010, that Court ruled that, with respect to two cases originally filed in the U.S. District Court for the District of Kansas, it would grant plaintiffs’ motion to certify a class of plaintiffs seeking injunctive relief (implementation of fuel temperature equipment and/or posting of notices regarding the effect of temperature on fuel).  On January 19, 2012, the Court amended its prior ruling, and certified a class with respect to plaintiffs’ claims for damages as well.  A TA entity was named in one of those two Kansas cases, but the Court ruled that the named plaintiffs were not

13

TravelCenters of America LLC

Notes to Condensed Consolidated Financial Statements (Unaudited)

(in thousands, except share and per share amounts)

sufficient to represent a class as to TA.  TA was thereafter dismissed from the Kansas case.  Several defendants in the Kansas cases, including major petroleum refiners, have entered into multi-state settlements.  Following a September 2012 trial against the remaining defendants in the Kansas cases, the jury returned a unanimous verdict in favor of those Kansas defendants, and the judge likewise ruled in the Kansas defendants’ favor on the sole non-jury claim.  In early 2013, the Court announced its intention to remand three cases originally filed in federal district courts in California back to their original courts.  On April 9, 2013, the Court granted plaintiffs’ motion for class certification in connection with the California claims in the California cases.  On August 14, 2013, the Court granted summary judgment for the defendants with respect to all California claims in the California cases, and in February 2014, the U.S. District Court for the Northern District of California entered judgment in favor of the defendants with respect to those claims.  The plaintiffs in the California cases have all dismissed their non-California claims against TA, except for one individual plaintiff, who continues to assert claims based on purchases of fuel in states other than California.  In January 2014, TA was dismissed with prejudice in all the non-California cases in all states in which it remained a defendant at that time.  Therefore, the only case in which TA remains a defendant is the case in which one remaining plaintiff is pursuing non-California claims.  We believe there are substantial factual and legal defenses to the allegations made in this remaining case.  While we do not expect that we will incur a material loss in this case, we cannot estimate our ultimate exposure to loss or liability, if any, related to this lawsuit.

On April 6, 2009, five independent truck stop owners, who are plaintiffs in a purported class action suit against Comdata Network, Inc., or Comdata, in the U.S. District Court for the Eastern District of Pennsylvania, filed a motion to amend their complaint to add us as a defendant, which was allowed on March 25, 2010.  The amended complaint also added as defendants Ceridian Corporation, Pilot Travel Centers LLC and Love’s Travel Stops & Country Stores, Inc.  Comdata markets fuel cards which are used for payments by trucking companies at truck stops.  The amended complaint alleged antitrust violations arising out of Comdata’s contractual relationships with truck stops in connection with its fuel cards.  On February 28, 2014, we entered into a Definitive Master Class Settlement Agreement with the plaintiffs, or the settlement agreement.  The Court approved the settlement agreement on July 14, 2014.  The settlement agreement provides for the co-defendants, including us, to pay an aggregate of $130,000 to a settlement fund for class members, including $10,000 from us, and the dismissal with prejudice of the litigation and the unconditional release of all claims that class members brought, or could have brought, against us and the other settling co-defendants with respect to the litigation and related actions.  We recognized a $10,000 loss in connection with this matter in December 2013 and made the cash payment in March 2014.

In addition to the legal proceedings referenced above, we are routinely involved in various other legal and administrative proceedings, including tax audits, incidental to the ordinary course of our business, none of which we expect, individually or in the aggregate, to have a material adverse effect on our business, financial condition, results of operations or cash flows.

9.Income Taxes

The income tax provision for the six months ended June 30, 2014, reflects an effective tax rate of 41.8%, which is our current estimated annual effective tax rate for the year ending December 31, 2014.  Our current estimated annual effective tax rate is higher than the federal statutory tax rate primarily due to state income taxes and certain items that are not deductible for income tax purposes.

For the six months ended June 30, 2013, our income tax provision differed from the amount of benefit expected to be calculated at statutory rates primarily due to the impact of our valuation allowance, which was reversed in the fourth quarter of 2013.  For the six months ended June 30, 2013, we included in tax expense $372 for certain state taxes on operating income that were payable without regard to our tax loss carryforwards.  During the six months ended June 30, 2013, tax expense also included $180 related to a noncash deferred liability that arose from the amortization of indefinite lived intangible assets for tax purposes but not for GAAP purposes that were unavailable to offset our deferred tax assets while we maintained a valuation allowance against our net deferred tax assets.

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

The following discussion should be read in conjunction with the financial statements included elsewhere in this Quarterly Report and in our Annual Report.  Amounts are in thousands of dollars or gallons unless indicated otherwise.

Company Overview

We operate and franchise travel centers under the “TravelCenters of America,” “TA” and related brand names, or the TA brand, and the “Petro Stopping Centers” and “Petro” brand names, or the Petro brand, primarily along the U.S. interstate highway system.  Our travel center customers include trucking fleets and their drivers, independent truck drivers and motorists.  We also operate convenience stores with retail gasoline stations, primarily under the “Minit Mart” brand name, that generally serve motorists.  Our travel centers include, on average, over 25 acres of land and typically offer customers diesel fuel and gasoline as well as nonfuel products and services such as truck repair and maintenance services, full service restaurants, quick service restaurants, or QSRs, travel and convenience stores and various other driver amenities.  Our convenience stores have, on average, ten fueling positions and approximately 5,000 square feet of interior space offering merchandise and QSRs.  We also collect rents, royalties and other fees from our franchisees.

Executive Summary

Our revenues and income are subject to potentially material changes as a result of the market prices and availability of fuel.  These factors are subject to the worldwide petroleum products supply chain, which historically has incurred price and supply volatility and, in some cases, shocks as a result of, among other things, severe weather, terrorism, political crises, wars and other military actions and variations in demand that are often the result of changes in the macroeconomic environment.  During the first half of each of 2014 and 2013, fuel prices generally trended downward after relatively sharp increases early in the year, ending at a somewhat lower price than at the start of the year.  During the second quarter of 2014, fuel prices were generally at a higher level than those experienced during the second quarter of 2013, but at the end of the quarter approximated the prices experienced at the end of the second quarter of 2013.  Recent gains in fuel supplies and sources within the United States and Canada have helped to maintain relative market price stability, but as export markets and capabilities increase for fuel that price stability may wane.  We expect that changes in our costs for fuel products can largely be passed on to our customers, but often there are delays in passing on price changes that can affect our fuel gross margins.  Also, increased prices can result in our customers reducing their purchases of fuel and nonfuel goods and services.  Although other factors, such as competition, may have an effect, during periods of rising fuel commodity prices fuel gross margins per gallon tend to be lower than they otherwise may have been, and during periods of falling fuel commodity prices fuel gross margins per gallon tend to be higher than they otherwise may have been.  Also, fuel price increases and volatility can have negative effects on our sales and profitability and increase our working capital requirements.  For more information about fuel market risks that may affect us and our actions to mitigate those risks, see Part II, Item 4, “Quantitative and Qualitative Disclosures About Market Risk” in this Quarterly Report and Part II, Item 7A, “Quantitative and Qualitative Disclosures About Market Risk” in our Annual Report.

We believe that recent U.S. economic data has been generally positive, but that the strength and sustainability of any economic expansion is uncertain.  The condition of the U.S. economy generally, and the financial condition and activity of the trucking industry in the U.S. specifically, impacted our historical financial results, and we expect that they will continue to impact our financial results in future periods.  The trucking industry is the primary customer for our goods and services.  Freight and trucking demand in the U.S. historically has generally reflected the level of commercial activity in the U.S. economy.  During the period from 2013 through the first half of 2014, the U.S. economy slowly improved and the financial condition and activity level in the trucking industry similarly slowly improved; however, these improvements appear to be uneven and may not affect all market participants equally.  Further, recent improvements in U.S. export activity have been driven in large part by increased sales of natural resources, such as oil and gas, and by other products that typically are not transported by trucks; and, accordingly, such increased export activity has not resulted in proportional increases in trucking activity within the U.S.

We believe that during the second half of 2013 and continuing through the first half of 2014, demand for fuel by trucking companies was negatively affected as compared to the prior year periods by the new regulatory hours of service rules for truck drivers, which went into effect in July 2013, and the driver shortage in the trucking industry.  These factors increase trucking company costs and lead trucking companies to focus on cost savings, including fuel efficiency, and shippers to divert some business away from trucking.  Technological innovations that permit, and regulatory changes that encourage or require, improved fuel efficiency of motor vehicle engines and other fuel conservation practices employed by trucking companies continue to reduce demand for diesel fuel, including by reducing the amount of diesel fuel required to drive a given amount of trucking miles.

As a result of the aforesaid factors, fuel sales volumes on a same site basis for the first six months of 2014 declined compared to the prior year.  Despite the year over year declines in fuel sales volumes, our fuel gross margins for the first six months of 2014 increased on a same site basis over the comparable period of the prior year.  We believe fuel margin per gallon in the first half of 2014

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was affected by (i) the pricing under our fuel supply contracts, which favorably impacted our fuel purchase costs during periods of certain fuel market supply disruptions during the first quarter of 2014, which abated prior to the start of the second quarter of 2014, and (ii) our continued focus on managing our fuel pricing to balance sales volume and profitability considerations.

The increase in income before taxes and income from equity investees during the three and six month periods ended June 30, 2014, as compared to the same periods of the prior year is largely due to an increase in fuel gross margin per gallon and the continued improvement of operations at sites we acquired in 2011 through 2013.

Factors Affecting Comparability

Recently Acquired Sites

We have invested or expect to invest $336,221 in the aggregate since the beginning of 2011 to acquire and improve 31 travel centers and 31 gasoline/convenience stores.  While the interest, depreciation, maintenance and similar expenses related to or resulting from our acquisitions and ownership of these sites are reflected in our results for the periods since each acquisition, our expected financial results from these acquired properties are not yet fully reflected in our results of operations.  We believe that the improvements we have made and plan to make at these travel centers may continue to improve the financial results at these locations.  Typical improvements we make at acquired travel centers include adding truck repair facilities and national branded QSRs, paving parking lots, replacing outdated fuel dispensers, installing diesel exhaust fluid dispensing systems, changing signage, installing point of sale and other IT systems and general building and cosmetic upgrades.  The improvements to travel center properties we acquire are often substantial and require a long period of time to plan, design, permit and complete, and after completed then require a period of time to become part of our customers’ supply networks and produce stabilized financial results.  We estimate that the travel centers we acquire generally will achieve stabilized financial results in approximately the third year after acquisition, but actual results can vary widely from this estimate due to many factors, some of which are outside our control.

We acquired 31 gasoline/convenience store properties for $67,922 on December 16, 2013.  These convenience stores are high volume fuel locations with larger interior space for merchandise and food offerings than typical convenience stores and have limited need for near term capital investment.  In addition, we do not expect these convenience stores to require a lengthy period to achieve stabilized financial results.  Most of these convenience stores’ customer offerings are similar to the products and food services available at our travel centers and nearly all of our existing travel centers currently offer gasoline for motorists.  As a result of these business similarities we currently expect we may be able to realize synergies in purchasing and merchandising customer offerings at these convenience stores, which may make the financial returns we realize on our investment in these convenience stores similar to that expected for our travel center acquisitions.

The table below shows the number of properties we acquired by year of acquisition, the amounts we have invested in these properties through June 30, 2014, and the amounts we currently expect to invest in the near term in these properties after June 30, 2014.

	Site Count	Cash Acquisition Cost(1)		Renovation Cost Incurred Through June 30, 2014		Additional Estimated Renovation Cost to be Spent
Properties acquired in 2011	6	$	36,333	$	47,737	$	—
Properties acquired in 2012	14	46,910		33,603		—
Properties acquired in 2013(2)	41	111,602		25,259		26,060
Properties acquired in 2014 first half	1	2,999		1,706		4,012
Total	62	$	197,844	$	108,305	$	30,072

(1)Includes only cash amounts paid that were recorded as property and equipment or intangible assets.  Excludes acquired working capital assets and asset retirement obligation assets.

(2)Includes 31 convenience stores acquired in December 2013.

The operations at many of the 31 travel centers acquired since the beginning of 2011 have not yet reached the stabilized financial results we currently expect to ultimately achieve.  As of June 30, 2014, the travel centers we have acquired since the beginning of 2011 have been owned by us for an average of 22 months, and the planned renovations have been completed at only 24 of these properties for an average of 19 months.  The 31 convenience stores we acquired on December 16, 2013, did not require significant renovations at the time we acquired them.

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The table below shows for the periods presented the gross revenues in excess of cost of goods sold and site level operating expenses for the properties we began to operate for our own account since the beginning of 2011, whether by way of acquisition from franchisees or others or takeover of operations upon termination of a franchisee sublease, from the beginning of the period shown or the date we began to operate such property for our own account, if later.  Because sites were acquired at various dates during the periods presented, these amounts are intended to indicate directional trends only.

	Revenues in Excess of Cost of Goods Sold and Site Level Operating Expenses
	Three Months EndedJune 30,				Twelve Months Ended June 30,
	2014		2013		2014			2013
Properties acquired in 2011 (6 sites)	$	3,858	$	1,848	$	13,693		$	6,018
Properties acquired in 2012 (14 sites)	5,434		4,208		17,312			7,083
Properties acquired in 2013 (41 sites)	4,646		593		9,832			855
Properties acquired in 2014 (1 site)	52		—		(146		)	—
Total	$	13,990	$	6,649	$	40,691		$	13,956

Summary of Site Counts

The changes in the number of our sites and in their method of operation (company operated, franchisee subleased and operated, or franchisee owned and operated) can be significant factors influencing the changes in our results of operations.  The following table summarizes the changes in the composition of our business from December 31, 2012 through June 30, 2014:

	Company	Franchisee Subleased and		Franchisee Owned and				Company
	Operated	Operated		Operated		Total		Operated
	Travel	Travel		Travel		Travel		Convenience		Total
	Centers(1)	Centers		Centers		Centers(1)		Stores(2)		Sites
Number of locations at December 31, 2012	206	6		29		241		4		245
January — June 2013 Activity:
Acquired sites	4	—		—		4		—		4
Acquisition of franchised travel centers	2	—		(2	)	—		—		—
Number of locations at June 30, 2013	212	6		27		245		4		249
July - December 2013 Activity:
Acquired sites	2	—		—		2		31		33
Acquisition of franchised travel centers	2	(1	)	(1	)	—		—		—
Conversion of convenience store to travel center	1	—		—		1		(1	)	—
Terminated franchised travel centers	—	—		(1	)	(1	)	—		(1	)
Number of locations at December 31, 2013	217	5		25		247		34		281
January — June 2014 Activity:
Acquired sites	1	—		—		1		—		1
Number of locations at June 30, 2014	218	5		25		248		34		282

(1)Includes in each period presented two travel centers we operate that are owned by a joint venture that we account for under the equity method.

(2)Includes in each period presented two convenience stores we operate that are owned by a joint venture that we account for under the equity method.

Fuel Revenues

Due to volatile pricing of our fuel products purchases and our pricing of fuel products to customers, we believe that fuel revenue is not a useful basis for analyzing our results of operations from period to period.  As a result solely of changes in commodity

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fuel prices, our fuel revenue may materially increase or decrease, in both absolute amounts and on a percentage basis, without a comparable change in fuel sales volumes or in fuel gross margin.  We consider fuel volumes and fuel gross margin to be better measures of comparative performance than fuel revenues.

Same Site Comparisons

As part of this discussion and analysis of our operating results we refer to increases and decreases in results on a same site basis.  For purposes of these comparisons, we include a location in the following same site comparisons only if we continuously operated it for the entire duration of both comparative periods presented, or, for rent and royalty revenues, if during that period the location was continuously operated by one of our franchisees.  We do not exclude locations from the same site comparisons as a result of expansions in their size, capital improvements to the site or changes in the services offered.  We excluded from the same site comparisons the two travel centers and two convenience stores we operate for a joint venture in which we own a 40% interest because we account for this investment using the equity method of accounting and, therefore, the related revenues and expenses are not included in the respective line items in our consolidated results of operations.

Seasonality

Assuming little variation in fuel prices, our revenues are usually lowest in the first quarter of the calendar year when movement of freight by professional truck drivers and motorist travel are typically at their lowest levels of the year, and our revenues in the fourth quarter of the year are often somewhat lower than those of the second and third quarters because, although the beginning of the fourth quarter is often positively impacted by increased movement of freight in preparation for various national holidays, that positive impact is often more than offset by a reduction in freight movement caused by vacation time associated with those holidays taken by professional truck drivers toward the end of the year.  While our revenues are modestly seasonal, the quarterly variations in our operating results may reflect greater seasonal differences because our rent and certain other costs do not vary seasonally.

Inflation and Deflation

Inflation, or a general increase in prices, will likely have more negative than positive impacts on our business.  Rising prices may allow us to increase revenues, but also will likely increase our operating costs.  Also, rising prices for fuel and other products we sell increase our working capital requirements, typically reduce our fuel margins and in the past have caused some of our customers to reduce their purchases of our goods and services.  Because significant components of our expenses are fixed, we may not be able to realize expense reductions that match declines in general price levels, or deflation.

Operating Segment

We manage our business on the basis of one operating segment.  Please refer to the condensed consolidated financial statements included in Item 1 of this Quarterly Report for revenue, operating profit and asset data.  We have only a single travel center located in a foreign country, Canada, and the revenues and assets related to our operations in Canada are not material to us.  The following table sets forth the composition of our total revenues by type for each of the three and six months ended June 30, 2014 and 2013.

	Three Months Ended June 30,				Six Months Ended June 30,
	2014		2013		2014		2013
Revenues:
Fuel	79.9	%	81.0	%	80.3	%	82.0	%
Nonfuel	20.0	%	18.8	%	19.5	%	17.8	%
Rent and royalties from franchisees	0.1	%	0.2	%	0.2	%	0.2	%
Total revenues	100.0	%	100.0	%	100.0	%	100.0	%

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Results of Operations

Three months ended June 30, 2014 compared to June 30, 2013

The following table presents changes in our operating results for the three months ended June 30, 2014, as compared to the three months ended June 30, 2013.

	Three Months Ended June 30,						$			%
(dollars in thousands)	2014			2013			Change			Change
Revenues:
Fuel	$	1,658,172		$	1,635,400		$	22,772		1.4	%
Nonfuel	414,854			380,041			34,813			9.2	%
Rent and royalties	3,083			3,313			(230		)	(6.9	)%
Total revenues	2,076,109			2,018,754			57,355			2.8	%
Cost of goods sold (excluding depreciation):
Fuel	1,559,049			1,545,588			13,461			0.9	%
Nonfuel	191,967			171,938			20,029			11.6	%
Total cost of goods sold (excluding depreciation)	1,751,016			1,717,526			33,490			1.9	%
Operating expenses:
Site level operating expenses	203,526			190,646			12,880			6.8	%
Selling, general & administrative expense	25,100			24,482			618			2.5	%
Real estate rent	53,731			52,104			1,627			3.1	%
Depreciation and amortization expense	15,797			14,025			1,772			12.6	%
Total operating expenses	298,154			281,257			16,897			6.0	%
Income from operations	26,939			19,971			6,968			34.9	%
Acquisition costs	(149		)	(205		)	56			(27.3	)%
Interest income	45			307			(262		)	(85.3	)%
Interest expense	(4,213		)	(4,430		)	217			(4.9	)%
Income before income taxes and income from equity investees	22,622			15,643			6,979			44.6	%
Provision for income taxes	9,673			382			9,291			2,432.2	%
Income from equity investees	685			723			(38		)	(5.3	)%
Net income	$	13,634		15,984			$	(2,350	)	(14.7	)%

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The following table presents our same site operating results for the three months ended June 30, 2014, as compared to the three months ended June 30, 2013.

										% Change
	Three Months Ended June 30,						$			Favorable/
(gallons and dollars in thousands)	2014			2013			Change			(Unfavorable)
Number of company operated locations	207			207			—
Fuel: (1)
Fuel sales volume (gallons)	484,207			509,312			(25,105		)	(4.9	)%
Fuel revenues	$	1,553,320		$	1,599,072		$	(45,752	)	(2.9	)%
Fuel gross margin	$	93,224		$	89,229		$	3,995		4.5	%
Fuel gross margin per gallon	$	0.193		$	0.175		$	0.018		10.3	%
Nonfuel: (1)
Nonfuel revenues	$	384,735		$	377,124		$	7,611		2.0	%
Nonfuel gross margin	$	211,346		$	206,405		$	4,941		2.4	%
Nonfuel gross margin percentage	54.9		%	54.7		%				20	pts
Total gross margin	$	304,570		$	295,634		$	8,936		3.0	%
Site level operating expenses (1)	$	192,486		$	188,609		$	3,877		2.1	%
Site level operating expenses as a percentage of nonfuel revenues(1)	50.0		%	50.0		%				—	pts
Site level gross margin in excess of site level operating expenses(1)	$	112,084		$	107,025		$	5,059		4.7	%
Number of franchisee operated locations	30			30			—
Rent and royalty revenues	$	3,055		$	2,943		$	112		3.8	%

(1)               Includes fuel volume, gross margin, revenues and expenses of locations that were company operated during the entirety of each of the periods presented.

Revenues.  Revenues for the three month period ended June 30, 2014, were $2,076,109, which represented an increase from the quarter ended June 30, 2013, of $57,355, or 2.8%, that primarily resulted from increased sales at our recently acquired sites.

Fuel revenues for the quarter ended June 30, 2014, were $1,658,172, which represented an increase of $22,772 or 1.4% from the same period in 2013.  The table below shows the changes in fuel revenues between periods that resulted from price and volume changes:

	Gallons		Fuel
(gallons and dollars in thousands)	Sold		Revenues
Results for three months ended June 30, 2013	521,086		$	1,635,400
Increase due to petroleum products price changes	—		34,987
Decrease due to same site volume changes	(25,105	)	(80,739		)
Increase due to locations opened	23,009		73,365
Decrease in sales on a wholesale basis	(1,785	)	(4,841		)
Net change from prior year period	(3,881	)	22,772
Results for three months ended June 30, 2014	517,205		$	1,658,172

Fuel revenue for the 2014 period reflected increases in sales volume resulting from sites we acquired since April 1, 2013 and market prices for fuel, which increases were partially offset by decreased same site sales volume and fuel volume sold on a wholesale

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basis as compared to the prior year period.  On a same site basis, fuel sales volume for our company operated locations decreased by 25,105 gallons, or 4.9%, during the three months ended June 30, 2014, compared to the same period in 2013.  We believe that the effect of the new truck driver hours of service rules on miles driven and truck utilization, the trend of improved fuel efficiency of heavy truck engines and other fuel conservation efforts by trucking customers and our decision to avoid certain lower margin fuel sales all contributed to the decreased same site fuel sales volume.  The decreased level of wholesale fuel sales volume primarily resulted from our acquisition in October 2013 of a subtenant franchisee who previously had been purchasing diesel fuel from us.

Nonfuel revenues for the three months ended June 30, 2014, were $414,854, an increase of $34,813, or 9.2%, compared to the same period in 2013.  The majority of the change between periods resulted from increases in revenues at sites we acquired since April 1, 2013, but also reflected a same site nonfuel revenue increase.  On a same site basis for our company operated sites, nonfuel revenues increased by $7,611, or 2.0%, during the three months ended June 30, 2014, compared to the same period in 2013.  We believe this same site increase is attributable to the improved results at those sites we acquired during 2011 and 2012, as well as certain price increases we have instituted as a result of increased prices we paid for nonfuel inventory purchases and the effects of certain of our marketing initiatives, which increases were partially offset by decreases in same site nonfuel revenues as a result of our decision to avoid certain lower margin business.

Rent and royalty revenues for the three months ended June 30, 2014, were $3,083, a decrease of $230, or 6.9%, compared to the same period in 2013.  Rent and royalties decreased largely as a result of our acquisitions since April 1, 2013 of three franchise locations that we now operate, including one that we had subleased to a franchisee.  This decrease was partially offset by increased rents that became effective during the second half of 2013 at the five sites we continue to sublease to franchisees.

Cost of goods sold (excluding depreciation). Cost of goods sold for the three months ended June 30, 2014, was $1,751,016, an increase of $33,490, or 1.9%, compared to the same period in 2013.

Fuel cost of goods sold for the quarter ended June 30, 2014, was $1,559,049, an increase of $13,461, or 0.9%, compared to the same period in 2013.  This increase in fuel cost of goods sold primarily resulted from the same factors as described above for fuel revenue.  Fuel gross margin for the three months ended June 30, 2014, was $99,123, compared to $89,812 during the comparable 2013 period.  The fuel gross margin per gallon of $0.193 on a same site basis for the three months ended June 30, 2014, was $0.018  per gallon higher than for the same period of 2013.

Nonfuel cost of goods sold for the three months ended June 30, 2014, was $191,967, an increase of $20,029, or 11.6%, compared to the same period in 2013.  Nonfuel cost of goods sold increased primarily due to the same factors as described above for nonfuel revenues.  Nonfuel gross margin for the three months ended June 30, 2014, was $222,887, compared to $208,103 during the same period of 2013.  Nonfuel gross margin was 53.7% and 54.8% of nonfuel revenues during the second quarters of 2014 and 2013, respectively.  The nonfuel gross margin percentage decreased largely as a result of a change in the mix of products and services sold, primarily as a result of our December 2013 acquisition of 31 convenience stores.  On a same site basis, the nonfuel gross margin percentage improved to 54.9% from 54.7%.

Site level operating expenses.  Site level operating expenses for the three months ended June 30, 2014, were $203,526, an increase of $12,880, or 6.8%, compared to the same period in 2013.  The increase in site level operating expenses was primarily due to the locations we acquired during 2013 and 2014.  Site level operating expenses included $178 and $590 of start up expenses at recently acquired and/or renovated sites during the three months ended June 30, 2014 and 2013, respectfully.

On a same site basis for our company operated sites, site level operating expenses increased by $3,877, or 2.1%, for the three months ended June 30, 2014, compared to the same period in 2013, primarily due to labor costs that increased as the level of nonfuel sales grew and increased utilities expenses.  Site level operating expenses as a percentage of nonfuel revenues on a same site basis for the quarter ended June 30, 2014, were flat compared to the same period in 2013.

Selling, general and administrative expenses.  Selling, general and administrative expenses for the three months ended June 30, 2014, were $25,100, compared to $24,482 during the same period of 2013, an increase of $618 or 2.5%.  The increase in selling, general and administrative expenses was primarily the result of increased personnel costs and contractor fees and was partially offset by lower legal costs.  Personnel costs increased due to annual compensation increases and increased headcount in support of the growth in our business, including the acquisition of the Minit Mart convenience stores in December 2013.  Contractor fees increased $616 largely due to fees paid in connection with completing our 2013 income tax provision and related calculations, for temporary accounting staffing needed to assist in completing our 2013 annual and 2014 quarterly financial reporting, and fees paid in connection with improving the design and documentation of our internal control over financial reporting.

Real estate rent expense.  Rent expense for the three months ended June 30, 2014, was $53,731, an increase of $1,627, or 3.1%, compared to the same period in 2013 that is attributable to rent increases related to improvements we sold to HPT since April 1,

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2013, and increases in percentage rent recognized under the HPT Leases based on increases in 2014 fuel and nonfuel revenues over base amounts at the properties leased from HPT.

Depreciation and amortization expense.  Depreciation and amortization expense for the three months ended June 30, 2014, was $15,797, an increase of $1,772, or 12.6%, compared to the same period in 2013, that primarily resulted from the location acquisitions and other capital investments we completed (and did not subsequently sell to HPT) since June 30, 2013.

Income tax provision.  Our provision for income taxes was $9,673 and $382 for the three month periods ended June 30, 2014 and 2013, respectively.  The income tax provision for the 2014 second quarter reflects an effective tax rate of 41.5%, which is lower than our current estimated annual effective tax rate of 41.8% for the year ending December 31, 2014.  Our current estimated annual effective tax rate of 41.8% is higher than the federal statutory tax rate primarily due to state income taxes and certain items that are not deductible for income tax purposes.  For the three months ended June 30, 2013, our income tax provision differed from the amount of benefit expected to be calculated at statutory rates primarily due to the impact of our valuation allowance, which was reversed in the fourth quarter of 2013.  For the 2013 second quarter, we included in tax expense $287 for certain state taxes on operating income that were payable without regard to our tax loss carryforwards.  During the three months ended June 30, 2013, tax expense also included $96 related to a noncash deferred liability that arose from the amortization of indefinite lived intangible assets for tax purposes but not for GAAP purposes that were unavailable to offset our deferred tax assets while we maintained a valuation allowance against our net deferred tax assets.

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Six months ended June 30, 2014 compared to June 30, 2013

The following table presents changes in our operating results for the six months ended June 30, 2014, as compared to the six months ended June 30, 2013.

	Six Months Ended June 30,						$			%
(dollars in thousands)	2014			2013			Change			Change
Revenues:
Fuel	$	3,247,818		$	3,260,507		$	(12,689	)	(0.4	)%
Nonfuel	789,520			709,235			80,285			11.3	%
Rent and royalties	6,080			6,363			(283		)	(4.4	)%
Total revenues	4,043,418			3,976,105			67,313			1.7	%
Cost of goods sold (excluding depreciation):
Fuel	3,056,378			3,093,767			(37,389		)	(1.2	)%
Nonfuel	360,383			317,303			43,080			13.6	%
Total cost of goods sold (excluding depreciation)	3,416,761			3,411,070			5,691			0.2	%
Operating expenses:
Site level operating expenses	403,097			374,579			28,518			7.6	%
Selling, general & administrative expense	51,896			47,709			4,187			8.8	%
Real estate rent	107,935			103,988			3,947			3.8	%
Depreciation and amortization expense	31,925			27,248			4,677			17.2	%
Total operating expenses	594,853			553,524			41,329			7.5	%
Income from operations	31,804			11,511			20,293			176.3	%
Acquisition costs	(759		)	(320		)	(439		)	137.2	%
Interest income	84			542			(458		)	(84.5	)%
Interest expense	(8,288		)	(8,495		)	207			(2.4	)%
Income before income taxes and income from equity investees	22,841			3,238			19,603			605.4	%
Provision for income taxes	9,949			552			9,397			1,702.4	%
Income from equity investees	939			1,159			(220		)	(19.0	)%
Net income	$	13,831		$	3,845		$	9,986		259.7	%

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The following table presents our same site operating results for the six months ended June 30, 2014, as compared to the six months ended June 30, 2013.

										% Change
	Six Months Ended June 30,						$			Favorable/
(gallons and dollars in thousands)	2014			2013			Change			(Unfavorable)
Number of company operated locations	205			205			—
Fuel: (1)
Fuel sales volume (gallons)	940,157			989,216			(49,059		)	(5.0	)%
Fuel revenues	$	3,022,221		$	3,173,728		$	(151,507	)	(4.8	)%
Fuel gross margin	$	179,345		$	165,142		$	14,203		8.6	%
Fuel gross margin per gallon	$	0.191		$	0.167		$	0.024		14.4	%
Nonfuel: (1)
Nonfuel revenues	$	728,422		$	702,916		$	25,506		3.6	%
Nonfuel gross margin	$	405,051		$	388,326		$	16,725		4.3	%
Nonfuel gross margin percentage	55.6		%	55.2		%				40	pts
Total gross margin	$	584,396		$	553,468		$	30,928		5.6	%
Site level operating expenses (1)	$	378,933		$	370,058		$	8,875		2.4	%
Site level operating expenses as a percentage of nonfuel revenues(1)	52.0		%	52.6		%				60	pts
Site level gross margin in excess of site level operating expenses(1)	$	205,463		$	183,410		$	22,053		12.0	%
Number of franchisee operated locations	30			30			—
Rent and royalty revenues	$	5,994		$	5,661		$	333		5.9	%

(1)         Includes fuel volume, gross margin, revenues and expenses of locations that were company operated during the entirety of each of the periods presented.

Revenues.  Revenues for the six month period ended June 30, 2014, were $4,043,418, which represented an increase from the six months ended June 30, 2013, of $67,313, or 1.7%, that primarily resulted from an increase in nonfuel revenue.

Fuel revenues for the six months ended June 30, 2014, were $3,247,818, which represented a decrease of $12,689 or 0.4% from the same period in 2013.  The table below shows the changes in fuel revenues between periods that resulted from price and volume changes:

	Gallons		Fuel
(gallons and dollars in thousands)	Sold		Revenues
Results for six months ended June 30, 2013	1,016,799		$	3,260,507
Increase due to petroleum products price changes	—		6,706
Decrease due to same site volume changes	(49,059	)	(158,213		)
Increase due to locations opened	48,426		152,233
Decrease in sales on a wholesale basis	(4,114	)	(13,415		)
Net change from prior year period	(4,747	)	(12,689		)
Results for six months ended June 30, 2014	1,012,052		$	3,247,818

Fuel revenue for the 2014 period reflected decreases in same site sales volume and fuel volume sold on a wholesale basis as compared to the prior year period, which decreases were partially offset by increases in sales volume resulting from sites we acquired since January 1, 2013, and market prices for fuel.  On a same site basis, fuel sales volume for our company operated locations

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decreased by 49,059 gallons, or 5.0%, during the six months ended June 30, 2014, compared to the same period in 2013.  We believe that the effect of the new truck driver hours of service rules on miles driven and truck utilization, the trend of improved fuel efficiency of heavy truck engines and other fuel conservation efforts by trucking customers and our decision to avoid certain lower margin fuel sales all contributed to the decreased same site fuel sales volume.  In addition, we believe the colder temperatures, greater snowfall and a contraction in retail inventories throughout the U.S. economy generally in the 2014 first quarter as compared to the prior year quarter contributed to the same site fuel sales volume decline.  The decreased level of wholesale sales volume primarily resulted from our acquisition in October 2013 of a subtenant franchisee who previously had been purchasing diesel fuel from us.

Nonfuel revenues for the six months ended June 30, 2014, were $789,520, an increase of $80,285, or 11.3%, compared to the same period in 2013.  The majority of the change between periods resulted from increases in revenues at we acquired since January 1, 2013, but also reflected a same site nonfuel revenue increase.  On a same site basis for our company operated sites, nonfuel revenues increased by $25,506, or 3.6%, during the six months ended June 30, 2014, compared to the same period in 2013.  We believe this same site increase is attributable to the improved results at those sites we acquired during 2011 and 2012, as well as certain price increases we have instituted as a result of increased prices we paid for nonfuel inventory purchases and the effects of certain of our marketing initiatives, which increases were partially offset by decreases in same site nonfuel revenues as a result of our decision to avoid certain lower margin business.

Rent and royalty revenues for the six months ended June 30, 2014, were $6,080, a decrease of $283, or 4.4%, compared to the same period in 2013.  Rent and royalties decreased largely as a result of our acquisitions during 2013 of four franchise locations that we now operate, including one that we had subleased to a franchisee.  This decrease was partially offset by increased rents that became effective during the second half of 2013 at the five sites we continue to sublease to franchisees.

Cost of goods sold (excluding depreciation). Cost of goods sold for the six months ended June 30, 2014, was $3,416,761, an increase of $5,691, or 0.2%, compared to the same period in 2013.

Fuel cost of goods sold for the six months ended June 30, 2014, was $3,056,378, a decrease of $37,389, or 1.2%, compared to the same period in 2013.  This decrease in fuel cost of goods sold primarily resulted from the same factors as described above for fuel revenue.  Fuel gross margin for the six months ended June 30, 2014, was $191,440, compared to $166,740 during the comparable 2013 period.  The fuel gross margin per gallon of $0.191 on a same site basis for the six months ended June 30, 2014, was $0.024 per gallon higher than for the same period of 2013, primarily as a result of pricing under our fuel supply contracts, which favorably impacted our fuel purchase costs during periods of certain fuel market supply disruptions during the first quarter of 2014 that abated prior to the start of the second quarter of 2014.  The positive impact of improved fuel margin per gallon exceeded the negative impact of the difficult weather conditions during the first quarter of 2014.  During the first six months of 2013, we recognized $3,334 as a reduction of our fuel cost of sales in connection with a retroactive reinstatement in January 2013 of certain federal biodiesel and renewable diesel credits for the year 2012.

Nonfuel cost of goods sold for the six months ended June 30, 2014, was $360,383, an increase of $43,080, or 13.6%, compared to the same period in 2013.  Nonfuel cost of goods sold increased primarily due to the same factors as described above for nonfuel revenues.  Nonfuel gross margin for the six months ended June 30, 2014, was $429,137, compared to $391,932 during the same period of 2013.  Nonfuel gross margin was 54.4% and 55.3% of nonfuel revenues during the second quarters of 2014 and 2013, respectively.  The nonfuel gross margin percentage decreased largely as a result of a change in the mix of products and services sold, primarily as a result of the December 2013 acquisition of 31 convenience stores.  On a same site basis, the nonfuel gross margin percentage improved to 55.6% from 55.2%.

Site level operating expenses.  Site level operating expenses for the six months ended June 30, 2014, were $403,097, an increase of $28,518, or 7.6%, compared to the same period in 2013.  The increase in site level operating expenses was primarily due to the locations we acquired during 2013 and 2014.  Site level operating expenses included $383 and $879 of start up expenses at recently acquired and/or renovated sites during the six months ended June 30, 2014 and 2013, respectfully.

On a same site basis for our company operated sites, site level operating expenses increased by $8,875, or 2.4%, for the six months ended June 30, 2014, compared to the same period in 2013, primarily due to labor costs that increased as the level of nonfuel sales grew and increased utilities expenses.  Site level operating expenses as a percentage of nonfuel revenues on a same site basis for the six months ended June 30, 2014, were 52.0%, compared to 52.6% for the same period in 2013.

Selling, general and administrative expenses.  Selling, general and administrative expenses for the six months ended June 30, 2014, were $51,896, compared to $47,709 during the same period of 2013, an increase of $4,187 or 8.8%.  The increase in selling, general and administrative expenses was primarily the result of increased audit fees, personnel costs and contractor fees and was partially offset by a decrease in legal costs.  Audit fees increased $1,813 in connection with additional audit work in connection with the delayed filing of our Annual Report.  Personnel costs increased due to annual compensation increases, increased headcount in

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support of the growth in our business, including the acquisition of the Minit Mart convenience stores in December 2013, and as a result of $508 of a planned transition bonus expense recognized and paid to certain Minit Mart corporate employees in connection with the acquisition of the Minit Mart sites.  Contractor fees increased $1,357 largely due to fees paid in connection with completing our 2013 income tax provision and related calculations, temporary accounting staffing needed to assist in completing our 2013 annual and 2014 quarterly financial reporting, and fees paid in connection with improving the design and documentation of our internal control over financial reporting.

Real estate rent expense.  Rent expense for the six months ended June 30, 2014, was $107,935, an increase of $3,947, or 3.8%, compared to the same period in 2013 that is attributable to rent increases related to improvements we sold to HPT since January 1, 2013, and increases in percentage rent recognized under the HPT Leases based on increases in 2014 fuel and nonfuel revenues over base amounts at the properties leased from HPT.

Depreciation and amortization expense.  Depreciation and amortization expense for the six months ended June 30, 2014, was $31,925, an increase of $4,677, or 17.2%, compared to the same period in 2013, that primarily resulted from the location acquisitions and other capital investments we completed (and did not subsequently sell to HPT) since June 30, 2013.

Income tax provision.  Our provision for income taxes was $9,949 and $552 for the six month periods ended June 30, 2014 and 2013, respectively.  The income tax provision for the 2014 first half reflects an effective tax rate of 41.8%, which is our current estimated annual effective tax rate for the year ending December 31, 2014.  Our current estimated annual effective tax rate is higher than the federal statutory tax rate primarily due to state income taxes and certain items that are not deductible for income tax purposes.  For the six months ended June 30, 2013, our income tax provision differed from the amount of benefit expected to be calculated at statutory rates primarily due to the impact of our valuation allowance, which was reversed in the fourth quarter of 2013.  For the 2013 first half, we included in tax expense $372 for certain state taxes on operating income that were payable without regard to our tax loss carryforwards.  During the 2013 first half, tax expense also included $180 related to a noncash deferred liability that arose from the amortization of indefinite lived intangible assets for tax purposes but not for GAAP purposes that were unavailable to offset our deferred tax assets while we maintained a valuation allowance against our net deferred tax assets.

Liquidity and Capital Resources

Our principal liquidity requirements are to meet our operating and financing expenses and to fund our capital expenditures, acquisitions and working capital requirements.  Our principal sources of liquidity to meet these requirements are:

·our cash balance;

·our operating cash flow;

·our credit facility;

·our ability to offer to sell to HPT, for an increase in our rent, tenant improvements we make to the sites we lease from HPT, as further described in Note 7 to our condensed consolidated financial statements included in Part I, Item I of this Quarterly Report; and

·our ability to issue new debt and equity securities; however, due to our failure to timely file with the Securities and Exchange Commission, or SEC, our Annual Report, our Quarterly Report on Form 10-Q for the quarter ended March 31, 2014, or our First Quarter 10-Q and this Quarterly Report, we currently are unable to utilize our shelf registration statement that allows us to issue public securities on an expedited basis.

Additionally, the unencumbered operating real estate and vacant land that we own may be financed or sold as a source of additional liquidity over time.

We believe that the primary risks we currently face with respect to our operating cash flow are:

·decreased demand for our fuel products resulting from regulatory and market efforts for fuel conservation and improved engine fuel efficiency;

·economic conditions in the U.S. and the trucking industry and the risk of a renewed economic slowdown or recession;

·decreased demand for our products and services that we may experience as a result of competition, particularly competition from the other two large companies in our industry, Pilot Flying J and Love’s Travel Stops & Country Stores, Inc.;

·the negative impacts of the volatility and high level of prices for petroleum products on our gross margins and working capital requirements;

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·the inability of acquired properties to generate the stabilized financial results we expect; and

·the potential negative impacts of inflation on our nonfuel cost of goods sold, on our nonfuel gross margins and on our working capital requirements.

A reduction in our revenue without an offsetting reduction in our operating expenses may cause us to use our cash at a rate that we cannot sustain for extended periods.  Further, a significant portion of our expenses are fixed in nature, which may restrict our ability to realize a reduction in our operating expenses to offset a reduction in our revenues.

Our business requires substantial amounts of working capital, including cash liquidity, and our working capital requirements are especially large because of the level and volatility of fuel prices that have existed in the past several years and that we expect will continue.  Further, our growth strategy of selectively acquiring additional properties and businesses requires us to expend substantial additional capital.  In addition, our properties are high traffic areas with many large trucks and customers entering and exiting our properties daily, which requires us to expend capital to make improvements, repairs and maintenance to our properties.  Although we had a cash balance of $105,394 on June 30, 2014, and generated net income in the first half of 2014, there can be no assurances that we will generate future profits or positive cash flows or that we will be able to obtain additional financing to fund and grow our business.

On August 12, 2014, we filed a Form 12b-25 with the SEC indicating that as a result of the delay in completing our Annual Report and our First Quarter 10-Q, we were also unable to file this Quarterly Report within the time period prescribed by the Exchange Act.  Our failure to timely file our Annual Report, our First Quarter 10-Q and this Quarterly Report, our consequent inability to use our shelf registration statement on Form S-3 and material weaknesses in our internal control over financial reporting as discussed further in Item 9A — “Controls and Procedures” of our Annual Report filed with the SEC on June 6, 2014, and Item 4 — “Controls and Procedures” of this Quarterly Report, may negatively impact our ability to issue new debt and equity securities and thus adversely impact our liquidity.  Furthermore, the indenture governing our Senior Notes requires that we file our Exchange Act reports with the indenture trustee within a prescribed time period. We did not maintain compliance with this covenant for the quarter ended June 30, 2014, but the filing of this Quarterly Report cured this breach.  When and if we are unable to borrow under our credit facility, we may become unable to meet our business obligations or to grow our business.

Revolving Credit Facility

We have a revolving credit agreement, or credit facility, with a group of commercial banks.  Under this credit facility, a maximum of $200,000 may be drawn, repaid and redrawn until maturity in October 2016.  The availability of this maximum amount is subject to limits based on our qualified collateral.  Subject to available collateral and lender participation, the maximum amount may be increased to $300,000.  The credit facility may be used for general business purposes and provides for the issuance of letters of credit.  Generally, no principal payments are due until maturity.  Borrowings under the credit facility bear interest at a rate based on, at our option, LIBOR or a base rate, plus a premium (which premium is subject to adjustment based upon facility availability, utilization and other matters).  The annual interest rate for our credit facility was 4.5% as of June 30, 2014.  Pursuant to the credit facility, we pay a monthly unused line fee which is subject to adjustment according to the average daily principal amount of unused commitment under the credit facility.

The credit facility requires us to maintain certain levels of collateral, limits our ability to incur debt and liens, restricts us from making certain investments and paying dividends and other distributions, requires us to maintain a minimum fixed charge ratio under certain circumstances and contains other customary covenants and conditions.  Our credit facility also requires that we furnish certain of our financial statements to our lenders within specified time periods.  As a result of an agreement with these lenders the time for us to deliver our financial statements for the period ended June 30, 2014, was extended until September 30, 2014.  The credit facility provides for the acceleration of principal and interest payments upon an event of default including, but not limited to, failure to pay interest or other amounts due, a change in control of us, as defined in the credit facility, and our default under certain contracts, including the HPT Leases and our business management and shared services agreement with RMR.

Our credit facility is secured by substantially all of our cash, accounts receivable, inventory, equipment and intangible assets and the amount available to us is determined by reference to a borrowing base calculation based on eligible collateral.  At June 30, 2014, a total of $170,561 was available to us for loans and letters of credit under the credit facility.  At June 30, 2014, there were no loans outstanding under the credit facility but we had outstanding $41,866 of letters of credit issued under that facility, securing certain purchases, insurance, fuel tax and other trade obligations.

Sources and Uses of Cash

At June 30, 2014, and December 31, 2013, we had cash and cash equivalents of $105,394 and $85,657, respectively.  The increase in our cash balance during the first six months of 2014 was attributable to cash generated from our operations, including

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$16,889 of working capital changes, that was partially offset by $42,928 used in investment activities.  Accounts receivable and accounts payable increased due to increased sales levels during the last part of June 2014, as compared to the last part of December 2013, as a result of the typically lower trucking activity during the December holiday season.

Investment Activities

Our business of operating high sales volume travel centers open 24 hours every day requires that we make regular capital investments in our business to maintain our competitiveness.  During six months ended June 30, 2014, we made capital expenditures of $60,608, including $10,858 to improve the travel centers and businesses we acquired in 2011 through 2014.  During the first six months of 2014 we purchased one location for an aggregate of approximately $3,242.  During the third quarter of 2014 to date, we completed two acquisitions for approximately $22,571 and we entered agreements to acquire three travel center properties and seven gasoline/convenience stores for an aggregate amount of approximately $22,000.  We currently intend to continue our efforts to selectively acquire additional properties.

During the first six months of 2014, we received $21,923 of proceeds from the sale to HPT of improvements we previously made to locations leased from HPT, and as a result our annual rent increased by $1,863, pursuant to the terms of our HPT Leases.  At June 30, 2014, our property and equipment balance included $36,269 of improvements of the type that we typically request that HPT purchase for an increase in rent in the future; however, HPT is not obligated to purchase those assets.

Litigation Settlement

In January 2014, we reached a settlement with the plaintiffs in a long running litigation (for further details, see Note 8 to the Notes to Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report).  We made our related $10,000 payment in March 2014.

Off Balance Sheet Arrangements

As of June 30, 2014, we had no off balance sheet arrangements that have had or are reasonably likely to have a current or future material effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources, other than with respect to the debt and the indemnification obligations described below owed by an entity in which we own a minority interest.  We own a 40% interest in a joint venture, PTP, which owns travel centers and convenience stores that we operate.  These locations were encumbered by debt of approximately $16,988 as of June 30, 2014, that is secured by PTP’s real property and that matures in December 2018.  We account for our investment in PTP under the equity method of accounting and, therefore, we have not recorded a liability for this debt.  We are not directly liable for this debt, but the carrying value of our investment in this joint venture ($18,604 at June 30, 2014) could be adversely affected if PTP defaulted on this debt and PTP’s property was used to satisfy this debt.  Also, in connection with the loan agreement entered by PTP, we and Tejon, the owner of the majority interest in PTP, each agreed to indemnify the lender against liability from environmental matters related to PTP’s sites.

Related Party Transactions

Relationships with HPT, RMR and AIC

We have relationships and historical and continuing transactions with our Directors, our executive officers, HPT, RMR, AIC and other companies to which RMR provides management services and others affiliated with them.  For example: HPT is our former parent company, our principal landlord and our largest shareholder and RMR provides management services to both us and HPT; we, RMR, HPT and four other companies to which RMR provides management services, each currently own approximately 14.3% of AIC, and we and the other shareholders of AIC have property insurance in place providing $500,000 of coverage pursuant to an insurance program arranged by AIC and with respect to which AIC is a reinsurer of certain coverage amounts; and RMR, a company that employs our President and Chief Executive Officer, our Executive Vice President, Chief Financial Officer and Treasurer, our Executive Vice President and General Counsel, and both of our Managing Directors and which is majority owned by one of our Managing Directors, assists us with various aspects of our business pursuant to a business management and shared services agreement and provides building management services at our headquarters office building pursuant to a property management agreement.  For further information about these and other such relationships and related person transactions, please see Note 7 to our condensed consolidated financial statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q, which is incorporated herein by reference.  In addition, for more information about these transactions and relationships, please see elsewhere in this Quarterly Report on Form 10-Q, including “Warning Concerning Forward Looking Statements” in Part I, and our Annual Report, our Proxy Statement for our 2014 Annual Meeting of Shareholders, or our Proxy Statement, and our other filings with the SEC, including Note 17 to our consolidated financial statements included in our Annual Report, the sections captioned “Business,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Related Party Transactions” and “Warning Concerning Forward Looking Statements” of our Annual Report and the section captioned “Related Person Transactions and Company Review of Such Transactions” and the information regarding our Directors and executive officers in our Proxy Statement.  In addition, please see the

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section captioned “Risk Factors” of our Annual Report for a description of risks that may arise as a result of these and other related person transactions and relationships.  Our filings with the SEC, including our Annual Report and our Proxy Statement, are available at the SEC’s website at www.sec.gov.  Copies of certain of our agreements with our related parties, including our leases and related amendments with HPT, our business management and shared services agreement and property management agreement with RMR and our shareholders agreement with AIC and its shareholders, are also publicly available as exhibits to our public filings with the SEC and accessible at the SEC’s website.

We believe that our agreements with HPT, RMR and AIC are on commercially reasonable terms.  We also believe that our relationships with HPT, RMR and AIC and their affiliated and related persons and entities benefit us, and, in fact, provide us with competitive advantages in operating and growing our business.

Relationship with PTP

We own a 40% interest in PTP and operate the two locations that PTP owns.  Additional information regarding our relationship and transactions with PTP can be found above in “Off Balance Sheet Arrangements” and in Note 7 to our condensed consolidated financial statements included in Part 1, Item 1 of this Quarterly Report, both of which are incorporated herein by reference.

Environmental and Climate Change Matters

At June 30, 2014, we had an accrued liability of $5,533 for environmental matters as well as a receivable for expected recoveries of certain of these estimated future expenditures of $1,518, resulting in an estimated net amount of $4,015 that we expect to fund in the future.  Accrued liabilities related to environmental matters are recorded on an undiscounted basis because of the uncertainty associated with the timing of the related future payments.  We cannot precisely know the ultimate costs we will incur in connection with currently known or future potential environmental related violations, corrective actions, investigation and remediation; however, based on our current knowledge we do not expect that our net costs for such matters to be incurred at our locations, individually or in the aggregate, would be material to our financial condition or results of operations.

There have recently been severe weather activities in different parts of the country that some observers believe to be evidence of global climate change, including Hurricane Sandy that impacted portions of the eastern United States in October 2012.  Such severe weather that may result from climate change may have an adverse effect on individual properties we own, lease or operate.  We mitigate these risks by owning, leasing and operating a geographically diversified portfolio of properties, by procuring insurance coverage we believe adequate to protect us from material damages and losses and by attempting to monitor and be prepared for such activities.  However, there can be no assurance that our mitigation efforts will be sufficient or that storms that may occur due to future climate change or otherwise will not have a material adverse effect on our business.

For further information about these and other environmental and climate change matters, see the disclosure under the heading “Environmental Matters” in Note 8 to our condensed consolidated financial statements included in Part I, Item 1 of this Quarterly Report, which disclosure is incorporated herein by reference.

Item 3.  Quantitative and Qualitative Disclosures About Market Risk

For quantitative and qualitative disclosures about market risk affecting us, see Item 7A. — “Quantitative and Qualitative Disclosures About Market Risk” in our Annual Report, filed with the SEC on June 6, 2014.  Our exposure to market risks has not changed materially from that set forth in our Annual Report.

Item 4.  Controls and Procedures

As of the end of the period covered by this report, our management carried out an evaluation, under the supervision and with the participation of our Chief Executive Officer and our Chief Financial Officer, of the effectiveness of our disclosure controls and procedures pursuant to Exchange Act Rule 13a-15 and Rule 15d-15.  Based upon that evaluation, our Chief Executive Officer and our Chief Financial Officer concluded that our disclosure controls and procedures were not effective at June 30, 2014, as a result of the continuing existence of the material weaknesses in our internal control over financial reporting described in Item 9A of our Annual Report.  We determined that we had a material weakness in our internal controls over accounting for income taxes; specifically, our internal controls did not provide for timely and thorough reconciliation and review of the income tax accounts and related disclosures.  We also determined we had a material weakness in our internal controls due to a lack of sufficient personnel with requisite accounting competencies.  In addition, we identified deficiencies in both design and operating effectiveness of certain of our internal controls, which, when aggregated, represent a material weakness in our financial statement close process.

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Remediation of Material Weakness in Internal Control over Financial Reporting

We are in the process of designing and implementing improved internal controls to remediate the material weaknesses that continued to exist as of June 30, 2014, as set forth above.

With respect to our lack of sufficient personnel with requisite accounting competencies, we have expanded the size of our accounting department, have hired experienced accounting and tax executives and other professionals into open positions and continue to recruit for remaining positions. With respect to the other identified material weaknesses, we believe that augmenting our staff as described above is part of the remediation effort.  In addition, we have engaged a prominent accounting firm (different from the firm responsible for reviewing and auditing our financial statements) to assist us in our effort to improve the design, operation and documentation of our internal control over financial reporting, including with respect to income taxes and our financial statement close process.

Certain of the changes described above were in process as of June 30, 2014, but had not yet been completed, documented and tested.  We believe these changes to our control environment are responsive to the material weaknesses and we expect them to be in place and functioning by the end of 2014. However, certain of the newly designed controls may not be in place for a sufficient period in 2014 to conclude that they are operating effectively as of December 31, 2014.

Changes in Internal Control over Financial Reporting

Except as described in this Item 4, there have been no changes in our internal control over financial reporting during the quarter ended June 30, 2014, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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WARNING CONCERNING FORWARD LOOKING STATEMENTS

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

·THIS QUARTERLY REPORT STATES THAT WE HAVE INVESTED OR EXPECT TO INVEST $336.2 MILLION IN THE AGGREGATE SINCE THE BEGINNING OF 2011, TO ACQUIRE AND IMPROVE 31 TRAVEL CENTERS AND 31 CONVENIENCE STORES, THAT WE BELIEVE THAT THE POTENTIAL RETURNS FROM THESE ACQUIRED PROPERTIES ARE GREATER THAN THE RETURNS REFLECTED IN OUR HISTORICAL RESULTS OF OPERATIONS AND THAT WE BELIEVE THAT THE IMPROVEMENTS WE HAVE MADE AND PLAN TO MAKE PRINCIPALLY AT OUR ACQUIRED TRAVEL CENTERS MAY CONTINUE TO IMPROVE THE FINANCIAL RESULTS AT THESE PROPERTIES IN THE FUTURE.  HOWEVER, ACTUAL RESULTS CAN VARY WIDELY DUE TO MANY FACTORS, SOME OF WHICH ARE OUTSIDE OUR CONTROL;

·THIS QUARTERLY REPORT STATES THAT THE OPERATIONS AT MANY SITES ACQUIRED SINCE THE BEGINNING OF 2011 HAVE NOT YET REACHED THE STABILIZED FINANCIAL RESULTS WE CURRENTLY EXPECT, THAT WE ESTIMATE THAT ACQUIRED TRAVEL CENTERS GENERALLY WILL REACH STABILIZATION IN APPROXIMATELY THE THIRD YEAR AFTER ACQUISITION AND THAT THE IMPROVEMENTS IN OUR OPERATING RESULTS FOR THE FIRST SIX MONTHS OF 2014 AS COMPARED TO THE SAME PERIOD IN 2013 ARE PARTIALLY ATTRIBUTABLE TO THE IMPROVED RESULTS AT RECENTLY ACQUIRED SITES.  THESE STATEMENTS MAY IMPLY THAT OUR EXPECTED STABILIZATION WILL IN FACT BE REALIZED AND WILL RESULT IN INCREASES IN NET INCOME IN THE FUTURE.  HOWEVER, OUR ABILITY TO OPERATE THESE LOCATIONS PROFITABLY DEPENDS UPON MANY FACTORS, INCLUDING OUR ABILITY TO SUCCESSFULLY INTEGRATE NEW OPERATIONS INTO OUR EXISTING OPERATIONS AND OTHER FACTORS, SOME OF WHICH ARE BEYOND OUR CONTROL;

·THIS QUARTERLY REPORT STATES THAT THE 31 CONVENIENCE STORES WE ACQUIRED IN DECEMBER 2013 APPEAR TO HAVE LIMITED NEED FOR NEAR TERM CAPITAL INVESTMENT, THAT WE DO NOT EXPECT THOSE CONVENIENCE STORES TO REQUIRE A LENGTHY PERIOD TO ACHIEVE STABILIZED RESULTS AND THAT WE CURRENTLY EXPECT WE MAY BE ABLE TO REALIZE SYNERGIES IN PURCHASING AND MERCHANDISING CUSTOMER OFFERINGS AT THESE CONVENIENCE STORES, WHICH MAY MAKE THE FINANCIAL RETURNS WE REALIZE ON OUR INVESTMENT SIMILAR TO THAT EXPECTED FOR TRAVEL CENTER ACQUISITIONS. HOWEVER, THERE CAN BE NO ASSURANCE THAT THESE EXPECTATIONS WILL BE REALIZED.  THESE CONVENIENCE STORES MAY REQUIRE MORE CAPITAL IMPROVEMENTS THAN WE EXPECT, WE MAY FAIL TO ACHIEVE ANTICIPATED STABILIZED RETURNS WITHIN THE TIME EXPECTED OR AT ALL, AND THE PURCHASING AND MERCHANDISING SYNERGIES WE CURRENTLY EXPECT MAY NOT BE ACHIEVED;

·      THIS QUARTERLY REPORT REFERENCES ACQUISITIONS THAT HAVE BEEN AGREED BUT THAT HAVE NOT BEEN COMPLETED AS OF THE DATE OF THIS QUARTERLY REPORT.  IMPLICATIONS OF THIS STATEMENT MAY BE THAT THESE ACQUISITIONS WILL BE COMPLETED AND THAT THEY MAY INCREASE OUR FUTURE PROFITS.  HOWEVER, THESE ACQUISITIONS ARE SUBJECT TO CONDITIONS AND MAY NOT BE COMPLETED OR MAY BE DELAYED OR THEIR TERMS MAY CHANGE.  MOREOVER, ACQUISITIONS AND MANAGING AND INTEGRATING ACQUIRED OPERATIONS CAN BE DIFFICULT, TIME CONSUMING AND/OR MORE EXPENSIVE THAN ANTICIPATED AND INVOLVE RISKS OF FINANCIAL LOSSES.  CHANGES OF OWNERSHIP FREQUENTLY RESULT IN PERSONNEL CHANGES AND IN REQUIREMENTS FOR NEW SUPPLY AND SALES ARRANGEMENTS.  THESE OR OTHER FACTORS MAY RESULT IN WEAKER FINANCIAL PERFORMANCE THAN EXPECTED OR FINANCIAL LOSSES.  WE MAY NOT OPERATE THESE ACQUIRED PROPERTIES AS PROFITABLY AS WE NOW EXPECT;

·THIS QUARTERLY REPORT STATES THAT WE AND HPT HAVE CHALLENGED THE VDOT VALUATION OF THE PROPERTY WE LEASED FROM HPT AND OPERATE IN ROANOKE, VA, THAT WAS TAKEN BY EMINENT DOMAIN PROCEEDINGS BY THE VDOT.  THE IMPLICATIONS OF THIS STATEMENT MAY BE THAT WE AND HPT WILL RECOVER ADDITIONAL AMOUNTS FROM VDOT THAT WOULD FURTHER REDUCE OUR RENT PAYABLE TO HPT AND/OR PROVIDE US A CASH PAYMENT.  HOWEVER, WE MAY NOT BE SUCCESSFUL IN OUR CHALLENGE AND WE EXPECT THAT THE ULTIMATE RESOLUTION OF THIS MATTER WILL TAKE A PROLONGED PERIOD OF TIME;

·WE STATE IN THIS QUARTERLY REPORT OUR CURRENT OBSERVATIONS OF ECONOMIC AND INDUSTRY CONDITIONS AND OUR BELIEFS THAT WHILE RECENT ECONOMIC DATA HAS BEEN GENERALLY POSITIVE, THE STRENGTH AND SUSTAINABILITY OF ANY ECONOMIC EXPANSION IS UNCERTAIN.  IMPROVEMENTS, IF ANY, IN THE U.S. ECONOMY, IN GENERAL, OR IN THE TRUCKING OR TRAVEL CENTER INDUSTRIES SPECIFICALLY, MAY NOT CONTINUE, AND OUR FUEL AND NONFUEL SALES VOLUMES MAY DECLINE;

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·OUR ENVIRONMENTAL LIABILITY MAY BE GREATER THAN WE CURRENTLY ANTICIPATE.  LEGISLATION AND REGULATION REGARDING CLIMATE CHANGE, INCLUDING GREENHOUSE GAS EMISSIONS, AND OTHER ENVIRONMENTAL MATTERS MAY BE ADOPTED, ADMINISTERED OR ENFORCED DIFFERENTLY IN THE FUTURE AND ANY SUCH CHANGES, THE MARKET REACTION TO THOSE CHANGES, OR ANY GLOBAL CLIMATE CHANGES COULD ADVERSELY IMPACT OUR OPERATIONS, CAUSE US TO EXPEND SIGNIFICANT AMOUNTS AND CAUSE OUR BUSINESS AND FINANCIAL CONDITION TO DECLINE MATERIALLY;

·THIS QUARTERLY REPORT STATES THAT WE CURRENTLY INTEND TO CONTINUE OUR EFFORTS TO SELECTIVELY ACQUIRE ADDITIONAL PROPERTIES.  THE IMPLICATIONS OF THIS STATEMENT MAY BE THAT WE WILL BE ABLE TO IDENTIFY AND COMPLETE ADDITIONAL ACQUISITIONS.  HOWEVER, WE MAY NOT SUCCEED IN ACQUIRING OTHER PROPERTIES;

·THIS QUARTERLY REPORT STATES THAT OUR BUSINESS REQUIRES REGULAR CAPITAL EXPENDITURES.  THE AMOUNT AND TIMING OF CAPITAL EXPENDITURES ARE OFTEN DIFFICULT TO PREDICT.  SOME CAPITAL PROJECTS COST MORE THAN ANTICIPATED AND THE PROCEEDS FROM THE SALES OF IMPROVEMENTS, IF ANY, TO HPT MAY BE LESS THAN ANTICIPATED.  CURRENTLY UNANTICIPATED PROJECTS THAT WE MAY BE REQUIRED TO COMPLETE IN THE FUTURE, AS A RESULT OF GOVERNMENT PROGRAMS OR REGULATION, ADVANCES OR CHANGES MADE BY OUR COMPETITION, DEMANDS OF OUR CUSTOMERS, ACQUISITIONS OR OTHER MATTERS, MAY ARISE AND CAUSE US TO SPEND MORE OR LESS THAN CURRENTLY ANTICIPATED.  SOME CAPITAL PROJECTS TAKE MORE TIME TO COMPLETE THAN ANTICIPATED.  AS A RESULT OF MARKET CONDITIONS OR CAPITAL CONSTRAINTS, WE MAY DEFER CERTAIN CAPITAL PROJECTS AND SUCH DEFERRAL MAY HARM OUR BUSINESS OR REQUIRE US TO MAKE LARGER CAPITAL EXPENDITURES IN THE FUTURE;

·THIS QUARTERLY REPORT STATES THAT WE HAD $105.4 MILLION OF CASH AND CASH EQUIVALENTS AT JUNE 30, 2014, THAT THERE WERE NO LOANS OUTSTANDING UNDER OUR BANK CREDIT FACILITY AS OF THAT DATE, THAT DURING THE FIRST SIX MONTHS OF 2014, WE RECEIVED $21.9 MILLION FROM HPT FOR SALES TO HPT OF QUALIFYING IMPROVEMENTS, THAT WE EXPECT TO SELL TO HPT ADDITIONAL IMPROVEMENTS WE HAVE MADE, THAT WE MAY REQUEST TO SELL TO HPT ADDITIONAL CAPITAL IMPROVEMENTS WE MAY MAKE IN THE FUTURE TO THE PROPERTIES WE LEASE FROM HPT, AND THAT WE OWN UNENCUMBERED REAL ESTATE THAT MAY BE AN ADDITIONAL SOURCE OF LIQUIDITY OVER TIME.  THESE STATEMENTS MAY IMPLY THAT WE HAVE ABUNDANT WORKING CAPITAL LIQUIDITY.  IN FACT, OUR REGULAR OPERATIONS REQUIRE LARGE AMOUNTS OF WORKING CASH.  AS OF JUNE 30, 2014, $41.9 MILLION OF OUR BANK CREDIT FACILITY WAS USED TO PROVIDE LETTERS OF CREDIT TO OUR SUPPLIERS, INSURERS AND TAXING AUTHORITIES AND WE HAVE COLLATERALIZED OUR BANK FACILITY WITH SUBSTANTIALLY ALL OF OUR CASH, ACCOUNTS RECEIVABLE, INVENTORIES, EQUIPMENT AND INTANGIBLE ASSETS.  IN ADDITION, OUR BUSINESS REQUIRES US TO MAKE SIGNIFICANT CAPITAL EXPENDITURES TO MAINTAIN OUR COMPETITIVENESS, HPT IS NOT OBLIGATED TO PURCHASE THE IMPROVEMENTS WE MAY REQUEST AND WE ARE OBLIGATED TO PAY ADDITIONAL RENT TO HPT FOR CAPITAL IMPROVEMENTS IT ACQUIRES FROM US, WE MAY BE UNABLE TO SELL ADDITIONAL DEBT OR EQUITY SECURITIES IN THE FUTURE, AND WE DO NOT KNOW THE EXTENT TO WHICH WE COULD MONETIZE OUR EXISTING UNENCUMBERED REAL ESTATE.  ACCORDINGLY, WE MAY NOT HAVE SUFFICIENT WORKING CAPITAL OR CASH LIQUIDITY;

·THIS QUARTERLY REPORT STATES SOME OF OUR BELIEFS WITH RESPECT TO VARIOUS PENDING LITIGATION.  THESE STATEMENTS MAY IMPLY THAT WE WILL PREVAIL IN OUR LITIGATION OR SUCCESSFULLY SETTLE THE REFERENCED MATTERS.  IN FACT, WE MAY BE UNABLE TO PREVAIL IN OUR PENDING LITIGATION OR COMPLETE SETTLEMENTS AND ANY SETTLEMENTS OR ADVERSE RULINGS MAY HAVE A MATERIAL ADVERSE EFFECT ON OUR BUSINESS.  ALSO, THE LEGAL AND OTHER EXPENSES WE MAY INCUR IN CONNECTION WITH LITIGATION WILL DEPEND, IN PART, UPON ACTIONS TAKEN BY OTHER PARTIES, WHICH ACTIONS ARE NOT WITHIN OUR CONTROL.  OUR LITIGATION COSTS MAY HAVE A MATERIAL ADVERSE EFFECT ON OUR BUSINESS;

·THIS QUARTERLY REPORT STATES THAT WE HAVE A CREDIT FACILITY WITH A CURRENT MAXIMUM AVAILABILITY OF $200 MILLION.  HOWEVER, OUR BORROWING AND LETTER OF CREDIT AVAILABILITY IS SUBJECT TO OUR HAVING QUALIFIED COLLATERAL, INCLUDING ELIGIBLE CASH, ACCOUNTS RECEIVABLE AND INVENTORIES THAT VARY IN AMOUNT FROM TIME TO TIME.  ACCORDINGLY, OUR BORROWING AND LETTER OF CREDIT AVAILABILITY AT ANY TIME MAY BE LESS THAN $200 MILLION.  FOR EXAMPLE, WE HAD $170.6 MILLION OF BORROWING AND LETTER OF

32

CREDIT AVAILABILITY UNDER OUR CREDIT FACILITY AS OF JUNE 30, 2014, OF WHICH $41.9 MILLION WAS UTILIZED FOR OUTSTANDING LETTERS OF CREDIT.  ALSO, THIS QUARTERLY REPORT STATES THAT THE MAXIMUM AMOUNT AVAILABLE UNDER THE CREDIT FACILITY MAY BE INCREASED TO $300 MILLION, SUBJECT TO AVAILABLE COLLATERAL AND LENDER PARTICIPATION.  IF WE DO NOT HAVE SUFFICIENT COLLATERAL OR IF WE ARE UNABLE TO IDENTIFY LENDERS WILLING TO INCREASE THEIR COMMITMENTS OR JOIN OUR CREDIT FACILITY, WE MAY NOT BE ABLE TO INCREASE THE CREDIT FACILITY OR THE AVAILABILITY OF BORROWINGS WHEN WE MAY NEED OR WANT TO DO SO;

·THIS QUARTERLY REPORT STATES THAT WE ARE IN THE PROCESS OF DESIGNING AND IMPLEMENTING IMPROVED INTERNAL CONTROL OVER FINANCIAL REPORTING TO REMEDIATE THE MATERIAL WEAKNESSES THAT EXISTED AS OF DECEMBER 31, 2013 AND JUNE 30, 2014, AND THAT WE EXPECT TO COMPLETE THE REMEDIATION IN 2014.  HOWEVER, WE MAY NOT BE SUCCESSFUL IN OUR REMEDIATION EFFORTS, IT MAY TAKE US LONGER THAN EXPECTED TO COMPLETE THE REMEDIATION AND WE MAY DISCOVER OTHER MATERIAL WEAKNESSES IN INTERNAL CONTROL OVER FINANCIAL REPORTING;

·THIS QUARTERLY REPORT STATES THAT WE EXPECT TO BENEFIT FINANCIALLY BY PARTICIPATING IN AIC WITH RMR AND OTHER COMPANIES TO WHICH RMR PROVIDES MANAGEMENT SERVICES.  HOWEVER, THERE CAN BE NO ASSURANCE THAT WE WILL BENEFIT FINANCIALLY FROM THIS PARTICIPATION; AND

·THIS QUARTERLY REPORT STATES OUR BELIEF THAT OUR CONTINUING RELATIONSHIPS WITH HPT, RMR, AIC AND THEIR AFFILIATED AND RELATED PERSONS AND ENTITIES MAY BENEFIT US AND PROVIDE US WITH ADVANTAGES IN OPERATING AND GROWING OUR BUSINESS.  IN FACT, THE ADVANTAGES WE BELIEVE WE MAY REALIZE FROM THESE RELATIONSHIPS MAY NOT MATERIALIZE.

THESE AND OTHER UNEXPECTED RESULTS MAY BE CAUSED BY VARIOUS FACTORS, SOME OF WHICH ARE BEYOND OUR CONTROL, INCLUDING:

·THE TREND TOWARDS IMPROVED FUEL EFFICIENCY BY OUR CUSTOMERS MAY CONTINUE TO REDUCE THE DEMAND FOR FUEL AND MAY ADVERSELY AFFECT OUR BUSINESS;

·THE IMPACT OF CHANGES IN THE ECONOMY AND THE CAPITAL MARKETS ON US, OUR CUSTOMERS AND OUR FRANCHISEES;

·COMPLIANCE WITH, AND CHANGES TO, FEDERAL, STATE AND LOCAL LAWS AND REGULATIONS, ACCOUNTING RULES, TAX RATES, ENVIRONMENTAL REGULATIONS AND SIMILAR MATTERS;

·COMPETITION WITHIN THE TRAVEL CENTER AND CONVENIENCE STORE INDUSTRIES;

·FUTURE FUEL PRICE INCREASES, FUEL PRICE VOLATILITY OR OTHER FACTORS MAY CAUSE US TO NEED MORE WORKING CAPITAL TO MAINTAIN OUR INVENTORIES AND CARRY OUR ACCOUNTS RECEIVABLE THAN WE NOW EXPECT;

·ACQUISITIONS MAY SUBJECT US TO ADDITIONAL OR GREATER RISKS THAN OUR CONTINUING OPERATIONS, INCLUDING THE ASSUMPTION OF UNKNOWN LIABILITIES;

·FUTURE INCREASES IN FUEL PRICES MAY REDUCE THE DEMAND FOR THE PRODUCTS AND SERVICES THAT WE SELL BECAUSE HIGH FUEL PRICES MAY ENCOURAGE FUEL CONSERVATION, DIRECT FREIGHT BUSINESS AWAY FROM TRUCKING OR OTHERWISE ADVERSELY AFFECT THE BUSINESS OF OUR CUSTOMERS.  SOME OF THESE FACTORS MAY OCCUR OR CONTINUE EVEN IF FUEL PRICES DO NOT INCREASE;

·OUR SUPPLIERS MAY BE UNWILLING OR UNABLE TO MAINTAIN THE CURRENT CREDIT TERMS FOR OUR PURCHASES.  IF WE ARE UNABLE TO PURCHASE GOODS ON REASONABLE CREDIT TERMS, OUR REQUIRED WORKING CAPITAL MAY INCREASE AND WE MAY INCUR MATERIAL LOSSES.  IN TIMES OF RISING FUEL AND NONFUEL PRICES OUR SUPPLIERS MAY BE UNWILLING OR UNABLE TO INCREASE THE CREDIT AMOUNTS THEY EXTEND TO US, WHICH MAY REQUIRE OUR WORKING CAPITAL NEEDS TO INCREASE.  THE AVAILABILITY AND THE TERMS OF ANY CREDIT WE MAY BE ABLE TO OBTAIN ARE UNCERTAIN;

33

·MOST OF OUR TRUCKING COMPANY CUSTOMERS TRANSACT BUSINESS WITH US BY USE OF FUEL CARDS, MOST OF WHICH ARE ISSUED BY THIRD PARTY FUEL CARD COMPANIES.  THE FUEL CARD INDUSTRY HAS ONLY A FEW SIGNIFICANT PARTICIPANTS.  FUEL CARD COMPANIES FACILITATE PAYMENTS TO US AND CHARGE US FEES FOR THESE SERVICES.  COMPETITION, OR LACK THEREOF, AMONG FUEL CARD COMPANIES MAY RESULT IN FUTURE INCREASES IN OUR TRANSACTION FEE EXPENSES OR WORKING CAPITAL REQUIREMENTS, OR BOTH;

·OUR FAILURE TO TIMELY FILE OUR ANNUAL REPORT, OUR FIRST QUARTER 10-Q AND THIS QUARTERLY REPORT, AND OUR CONSEQUENT INABILITY TO USE OUR SHELF REGISTRATION STATEMENT ON FORM S-3 UNTIL WE HAVE BEEN CURRENT IN OUR FILINGS UNDER THE EXCHANGE ACT FOR A PERIOD OF NOT LESS THAN ONE YEAR MAY NEGATIVELY IMPACT OUR ABILITY TO ISSUE NEW DEBT AND EQUITY SECURITIES;

·WE ARE ROUTINELY INVOLVED IN LITIGATION AND OTHER LEGAL MATTERS INCIDENTAL TO THE ORDINARY COURSE OF OUR BUSINESS.  DISCOVERY AND COURT DECISIONS DURING LITIGATION OFTEN HAVE UNANTICIPATED RESULTS.  LITIGATION IS USUALLY EXPENSIVE AND DISTRACTING TO MANAGEMENT.  WE CAN PROVIDE NO ASSURANCE AS TO THE OUTCOME OF ANY OF THE LITIGATION MATTERS IN WHICH WE ARE OR MAY BECOME INVOLVED;

·ACTS OF TERRORISM, GEOPOLITICAL RISKS, WARS OR OTHER MANMADE OR NATURAL DISASTERS BEYOND OUR CONTROL MAY ADVERSELY AFFECT OUR FINANCIAL RESULTS;

·ALTHOUGH WE BELIEVE THAT WE BENEFIT FROM OUR CONTINUING RELATIONSHIPS WITH HPT, RMR, AIC AND THEIR AFFILIATED AND RELATED PERSONS AND ENTITIES, ACTUAL AND POTENTIAL CONFLICTS OF INTEREST WITH HPT, RMR, AIC AND THEIR AFFILIATED AND RELATED PERSONS AND ENTITIES MAY PRESENT A CONTRARY PERCEPTION OR RESULT IN LITIGATION;

·AS A RESULT OF CERTAIN TRADING IN OUR SHARES DURING 2007, WE EXPERIENCED AN OWNERSHIP CHANGE AS DEFINED BY SECTION 382 OF THE INTERNAL REVENUE CODE, OR THE CODE; CONSEQUENTLY, WE MAY BE UNABLE TO USE OUR NET OPERATING LOSS GENERATED IN 2007 TO OFFSET FUTURE TAXABLE INCOME WE MAY GENERATE AND MAY OTHERWISE SUFFER LIMITATION OF TAX BENEFITS.  IF WE EXPERIENCE ADDITIONAL OWNERSHIP CHANGES, AS DEFINED IN THE CODE, OUR ABILITY TO USE OUR NET OPERATING LOSSES GENERATED AFTER 2007 COULD BE LIMITED OR ELIMINATED; AND

·OUR LIMITED LIABILITY COMPANY AGREEMENT AND BYLAWS AND CERTAIN OF OUR OTHER AGREEMENTS AND BUSINESS LICENSES, INCLUDING OUR LICENSES TO OPERATE GAMING ACTIVITIES, INCLUDE VARIOUS PROVISIONS WHICH MAY DETER A CHANGE OF CONTROL OF US AND, AS A RESULT, OUR SHAREHOLDERS MAY BE UNABLE TO REALIZE A TAKEOVER PREMIUM FOR THEIR SHARES.

RESULTS THAT DIFFER FROM THOSE STATED OR IMPLIED BY OUR FORWARD LOOKING STATEMENTS MAY ALSO BE CAUSED BY VARIOUS CHANGES IN OUR BUSINESS OR MARKET CONDITIONS AS DESCRIBED MORE FULLY IN OUR ANNUAL REPORT, INCLUDING UNDER “WARNING CONCERNING FORWARD LOOKING STATEMENTS” AND “ITEM 1A.  RISK FACTORS,” AND ELSEWHERE IN THIS QUARTERLY REPORT.

YOU SHOULD NOT PLACE UNDUE RELIANCE UPON FORWARD LOOKING STATEMENTS.  EXCEPT AS REQUIRED BY LAW, WE UNDERTAKE NO OBLIGATION TO UPDATE OR REVISE ANY FORWARD LOOKING STATEMENT AS A RESULT OF NEW INFORMATION, FUTURE EVENTS OR OTHERWISE.

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Part II. Other Information

Item 1.  Legal Proceedings (dollars in thousands)

There have been no material developments in the legal proceedings that we disclosed in our First Quarter 10-Q.  For further information regarding these matters, see the disclosures in Note 8 to our Condensed Consolidated Financial Statements in Part I of this Quarterly Report under the headings “Environmental Matters” and “Legal Proceedings,” which disclosures are incorporated herein by reference, and in Note 8 to our Condensed Consolidated Financial Statements in the First Quarter 10-Q and Note 18 to our consolidated financial statements included in our Annual Report.

Item 1A.  Risk Factors

There have been no material changes during the period covered by this Quarterly Report to the risk factors previously disclosed in Part I, Item 1A. “Risk Factors” in our Annual Report.

Item 5. Other Information.

Appointment of Chief Accounting Officer

On September 26, 2014, our board of directors appointed William Myers to the position of Chief Accounting Officer of the Company.  Mr. Myers, age 47, previously served as Vice President, Technical Accounting and Reporting for Eaton Corporation plc, a diversified manufacturing company, from November 2010 to August 2014.  From November 2007 to October 2010, Mr. Myers served as the Director of External Reporting for Whirlpool Corporation, a multinational manufacturer of household appliances.  Prior to that time, Mr. Myers held various positions of increasing responsibility with a number of companies including Delta Airlines, Inc., BDO Seidman, LLP, Smithfield Foods, Inc. and KPMG LLP.  Mr. Myers holds a B.B.A. in Accounting from Northwood University and an M.B.A. from The College of William and Mary, Mason School of Business.

Under the terms of his employment, Mr. Myers is to receive an annual base salary of $265,000, which is subject to future adjustment in accordance with our salary administration guidelines.  Mr. Myers is eligible for an annual cash bonus, which is to be paid at the discretion of our board of directors and based on several factors, including our and Mr. Myers’s performance.  For the year ended December 31, 2014, we have guaranteed Mr. Myers that his bonus will be $120,000.  To compensate Mr. Myers for benefits he forfeited with his former employer to take a position with the Company, we paid him $50,000 on August 31, 2014 and have agreed to pay him buyout bonuses of $150,000, $100,000 and $100,000 on December 31, 2014, December 31, 2015 and December 31, 2016, respectively, contingent upon Mr. Myers being employed by us at the time of such payment.  Mr. Myers is also eligible for share awards, granted at the discretion of the Compensation Committee of our board of directors.  Mr. Myers’s employment with us is at-will, which means that either Mr. Myers or we are free to end the relationship at any time, for any reason.

There are no arrangements or understandings between Mr. Myers and any other persons pursuant to which he was appointed as Chief Accounting Officer of the Company. There are no family relationships between Mr. Myers and any director, executive officer or any person nominated or chosen by us to become a director or executive officer. Except as set forth above, no information is required to be disclosed with respect to Mr. Myers pursuant to Item 404(a) of Regulation S-K.

Item 6.  Exhibits

Exhibit 3.1	Certificate of Formation of TravelCenters of America LLC (Incorporated by reference to Exhibit 3.1 to our Registration Statement on Form S-1 filed on December 12, 2006, File No. 333-139272)
Exhibit 3.2	Amended and Restated Limited Liability Company Agreement of TravelCenters of America LLC (Incorporated by reference to Exhibit 3.1 to our Current Report on Form 8-K filed on May 24, 2013)
Exhibit 3.3	Amended and Restated Bylaws of TravelCenters of America LLC, as amended and restated on February 21, 2013 (Incorporated by reference to Exhibit 3.3 to our Current Report on Form 8-K filed on February 27, 2013)
Exhibit 4.1	Form of Share Certificate (Incorporated by reference to Exhibit 4.1 to our Annual Report on Form 10-K for the year ended December 31, 2009, filed on February 24, 2010)
Exhibit 4.2	Indenture by and between TravelCenters of America LLC and U.S. Bank National Association, as trustee, dated as of January 15, 2013 (incorporated by reference to Exhibit 4.1 of our Current Report on Form 8-K filed January 15, 2013)
Exhibit 4.3	First Supplemental Indenture by and between TravelCenters of America LLC and U.S. Bank National Association, as trustee, dated as of January 15, 2013 (incorporated by reference to Exhibit 4.2 of our Current Report on Form 8-K filed January 15, 2013)
Exhibit 12.1	Statement of Computation of Ratio of Earnings to Fixed Charges (filed herewith)
Exhibit 31.1	Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer (filed herewith)
Exhibit 31.2	Rule 13a-14(a)/15d-14(a) Certification of Chief Financial Officer (filed herewith)
Exhibit 32.1	Section 1350 Certification of Chief Executive Officer and Chief Financial Officer (furnished herewith)
Exhibit 101.1	The following materials from TravelCenters of America LLC’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2014, formatted in XBRL (eXtensible Business Reporting Language): (i) the Consolidated Balance Sheets, (ii) the Consolidated Statements of Operations and Comprehensive Income, (iii) the Consolidated Statements of Cash Flows, and (iv) related notes to these financial statements, tagged as blocks of text.  (furnished herewith.)

35

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.

	TRAVELCENTERS OF AMERICA LLC
	By:	/s/ Andrew J. Rebholz
September 30, 2014		Name:	Andrew J. Rebholz
		Title:	Executive Vice President,
			Chief Financial Officer and Treasurer
			(Principal Financial Officer and
			Principal Accounting Officer)

36

EX-12.1

Exhibit 12.1

TravelCenters of America LLC

Statement of Computation of Ratio of Earnings to Fixed Charges

	Six Months Ended
	June 30,			Years Ended December 31,
	2014			2013			2012		2011		2010			2009
	(in thousands, except ratio amounts)
Income (loss) before income taxes and income from equity investees	$	22,841		$	2,331		$	31,812	$	23,784	$	(66,560	)	$	(94,363	)
Distributions received from equity investees	—			—			4,800		—		960			—
Fixed charges	45,876			90,880			79,161		75,471		106,603			96,350
Amortization of capitalized interest	15			31			—		—		—			—
Capitalized interest	(429		)	(1,033		)	—		—		—			—
Total earnings	$	68,303		$	92,209		$	115,773	$	99,255	$	41,003		$	1,987
Interest expense(1)	$	8,288		$	17,650		$	10,358	$	9,005	$	25,653		$	15,440
Estimated interest within rent expense(2)	37,159			72,197			68,803		66,466		80,950			80,910
Capitalized interest	429			1,033			—		—		—			—
Total fixed charges	$	45,876		$	90,880		$	79,161	$	75,471	$	106,603		$	96,350
Ratio of earnings to fixed charges	1.49			1.01			1.46		1.32		—			—
Deficiency of earnings available to cover fixed charges	$	N/A		$	N/A		$	N/A	$	N/A	$	(65,600	)	$	(94,363	)

(1)Includes interest expense and amortization of premiums and discounts related to indebtedness.

(2)Estimated interest within rent expense includes one third of rental expense, which approximates the interest component of operating leases.

EX-31.1

Exhibit 31.1

CERTIFICATION PURSUANT TO EXCHANGE ACT RULES 13a-14(a) AND 15d-14(a)

I, Thomas M. O’Brien, certify that:

1.I have reviewed this Quarterly Report on Form 10-Q of TravelCenters of America LLC;

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c)Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: September 30, 2014	/s/ THOMAS M. O’BRIEN
	Thomas M. O’Brien
	President and Chief Executive Officer

EX-31.2

Exhibit 31.2

CERTIFICATION PURSUANT TO EXCHANGE ACT RULES 13a-14(a) AND 15d-14(a)

I, Andrew J. Rebholz, certify that:

1.I have reviewed this Quarterly Report on Form 10-Q of TravelCenters of America LLC;

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c)Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: September 30, 2014	/s/ ANDREW J. REBHOLZ
	Andrew J. Rebholz
	Executive Vice President, Chief Financial
	Officer and Treasurer

EX-32.1

Exhibit 32.1

Certification Pursuant to 18 U.S.C. Sec. 1350

(Section 906 of the Sarbanes — Oxley Act of 2002)

In connection with the filing by TravelCenters of America LLC (the “Company”) of the Quarterly Report on Form 10-Q for the period ended June 30, 2014 (the “Report”), each of the undersigned hereby certifies, to the best of his knowledge:

1.The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2.The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: September 30, 2014	/s/ Thomas M. O’Brien
	Thomas M. O’Brien
	President and Chief Executive Officer
	/s/ Andrew J. Rebholz
	Andrew J. Rebholz
	Executive Vice President, Chief Financial Officer and Treasurer

XML

Acquisitions (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2014	Jun. 30, 2013	Jun. 30, 2014	Jun. 30, 2013
Summary of the amounts assigned, based on their fair values, to the assets acquired and liabilities assumed in the business combinations
Cash	$ 40		$ 40
Inventories	201		201
Property and equipment	3,074		3,074
Other assets	17		17
Other liabilities	(90)		(90)
Total purchase price	3,242		3,242
Acquisition costs	149	205	759	320
Travel centers
Acquisitions
Purchase price paid			3,242
Two travel centers | Pending Acquisition
Summary of the amounts assigned, based on their fair values, to the assets acquired and liabilities assumed in the business combinations
Number of travel center properties acquired as per the agreement			2
Cost of acquisition			$ 21,500

XML

Inventories

6 Months Ended

Jun. 30, 2014

Inventories

Inventories

3. Inventories

Inventories consisted of the following:

	June 30,		December 31,
	2014		2013
Nonfuel products	$	142,321	$	150,600
Fuel products	45,093		48,601
Total inventories	$	187,414	$	199,201

XML

Commitments and Contingencies (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended	1 Months Ended	3 Months Ended		1 Months Ended	6 Months Ended	1 Months Ended	6 Months Ended	1 Months Ended
	Dec. 31, 2013	Feb. 28, 2014 Litigation by California State Water Resources Control Board	Mar. 31, 2014 Litigation by California State Water Resources Control Board	Jun. 30, 2014 Litigation by California State Water Resources Control Board	May 31, 2010 Numerous companies in the petroleum industry, including predecessor and subsidiaries against which litigations were filed case	Jun. 30, 2014 Numerous companies in the petroleum industry, including predecessor and subsidiaries against which litigations were filed lawsuit fahrenheit	May 31, 2010 Numerous companies in the petroleum industry, including predecessor and subsidiaries against which litigations were filed TA entity case	Jun. 30, 2014 Numerous companies in the petroleum industry, including predecessor and subsidiaries against which litigations were filed TA entity case item	Mar. 31, 2014 Purported class action suit against Comdata	Dec. 31, 2013 Purported class action suit against Comdata	Apr. 30, 2011 Purported class action suit against Comdata plaintiffs	Apr. 30, 2009 Purported class action suit against Comdata plaintiffs	Jun. 30, 2014 Minimum Numerous companies in the petroleum industry, including predecessor and subsidiaries against which litigations were filed state	Jun. 30, 2014 Environmental Matters	Jun. 30, 2014 Environmental Matters Maximum
Commitments and contingencies
Gross accrued liability														$ 5,533
Less-expected recoveries of future expenditures, included in other noncurrent assets														1,518
Net estimated environmental costs to be funded by future operating cash flows														4,015
Suspended penalties amount		1,000
Maximum verified costs, prior to March 2018		2,000
Loss contingency, liability				1,708
Insurance per incident for certain environmental liabilities															10,000
Insurance for certain environmental liabilities															40,000
Number of states													20
Number of lawsuits in which major petroleum refineries and retailers have been named as defendants						1
Temperature of motor fuel at the time of sale, at which it was allegedly purchased by retail purchasers (in Fahrenheit)						60
Number of cases filed					2		1
Number of cases remanded								3
Number of plaintiffs pursuing non-California claims								1
Number of independent truck stop owners, who are plaintiffs											4	5
Cash paid for settlement									130,000
Settlement amount		1,800
Cash paid by the entity for settlement			1,800
Cash to be paid by the entity for settlement									10,000
Net expense recorded	$ 10,000									$ 10,000

XML

Related Party Transactions (Details) (USD $) In Thousands, except Share data, unless otherwise specified	3 Months Ended		6 Months Ended			3 Months Ended		6 Months Ended		24 Months Ended		1 Months Ended			0 Months Ended	1 Months Ended	3 Months Ended		6 Months Ended				3 Months Ended	6 Months Ended		0 Months Ended	1 Months Ended	3 Months Ended		6 Months Ended			1 Months Ended	3 Months Ended		6 Months Ended
	Jun. 30, 2014	Jun. 30, 2013	Jun. 30, 2014	Jun. 30, 2013	Dec. 31, 2013	Jun. 30, 2014 HPT installment leasedsite lease	Jun. 30, 2013 HPT	Jun. 30, 2014 HPT installment leasedsite lease	Jun. 30, 2013 HPT	Dec. 31, 2013 HPT item	Dec. 31, 2010 HPT	Sep. 30, 2014 HPT Subsequent event	Jun. 30, 2014 HPT Deferred rent obligation payable in December 2022	Jun. 30, 2014 HPT Deferred rent obligation payable in June 2024	Jan. 06, 2014 HPT TA Lease	Jan. 31, 2014 HPT TA Lease	Jun. 30, 2014 HPT TA Lease leasedsite	Jun. 30, 2013 HPT TA Lease	Jun. 30, 2014 HPT TA Lease leasedsite property	Jun. 30, 2013 HPT TA Lease	Dec. 31, 2013 HPT TA Lease property	Sep. 30, 2010 HPT TA Lease	Jun. 30, 2014 HPT Petro Lease leasedsite	Jun. 30, 2014 HPT Petro Lease leasedsite	Jun. 30, 2014 HPT Petro Lease Maximum option	May 09, 2014 AIC	Jun. 30, 2014 AIC item	Jun. 30, 2014 AIC item	Jun. 30, 2013 AIC	Jun. 30, 2014 AIC item	Jun. 30, 2013 AIC	Dec. 31, 2013 AIC	Sep. 30, 2014 RMR Subsequent event item	Jun. 30, 2014 PTP item travelcenter	Jun. 30, 2013 PTP	Jun. 30, 2014 PTP item travelcenter	Jun. 30, 2013 PTP	Dec. 31, 2013 PTP
Related Party
Number of common shares owned						3,420,000		3,420,000
Percentage of outstanding common shares owned						9.10%		9.10%
Number of leases						2		2
Number of properties under lease						185		185									145		145				40	40
Number of renewal options available																									2
Term of renewal option																								15 years
Percentage of non-fuel revenue																	3.00%		3.00%				3.00%	3.00%
Percentage of fuel revenue																	0.30%		0.30%				0.30%	0.30%
Percentage rent to be waived																								$ 2,500
Percentage rent waived																							117	269
Cumulative percentage rent waived																							636	636
Annual percentage rent recognized as an expense																	729	593	1,622	1,282
Rate of increase in annual amount (as a percent)						8.50%		8.50%
Rate of increase in annual amount, basis								U.S. Treasury interest rate
Rate of increase in annual amount, basis spread (as a percent)						3.50%		3.50%
Improvements sold								21,923	45,229			20,038
Increase to annual rent payable								1,863	3,844			1,703
Improvements included in property and equipment						36,269		36,269
Summary of details amounts related to the HPT Leases and other leases that are reflected in real estate rent expense in condensed consolidated statements of operations and comprehensive income (loss)
Cash payments to HPT under the HPT Leases						55,603	54,139	110,749	107,125
Change in accrued estimated percentage rent						(21)	(82)	597	584
Adjustments to recognize expense on a straight line basis						(559)	(523)	(900)	(900)
Less sale-leaseback financing obligation amortization			(1,183)	(1,022)		(594)	(512)	(1,183)	(1,022)
Less portion of rent payments recognized as interest expense	1,471	1,743	2,941	3,484		(1,471)	(1,743)	(2,941)	(3,484)
Less deferred tenant improvements allowance amortization						(1,692)	(1,692)	(3,384)	(3,384)
Amortization of deferred gain on sale-leaseback transactions						(96)	(77)	(192)	(153)
Rent expense related to HPT Leases						51,170	49,510	102,746	98,766
Rent paid to others	2,629	2,591	5,315	5,198
Adjustments to recognize expense on a straight line basis for other leases	(68)	3	(126)	24
Total real estate rent expense	53,731	52,104	107,935	103,988
Current HPT Leases liabilities:
Accrued rent						18,789		18,789		18,041
Sale-leaseback financing obligation						2,437		2,437		2,358
Straight line rent accrual						2,437		2,437		2,382
Deferred gain on sale-leaseback transactions						385		385		385
Deferred tenant improvements allowance						6,769		6,769		6,769
Total Current HPT Leases liabilities	30,817		30,817		29,935	30,817		30,817		29,935
Noncurrent HPT Leases liabilities:
Deferred rent obligation						150,000		150,000		150,000	150,000		107,085	42,915
Sale-leaseback financing obligation						82,801		82,801		83,762
Straight line rent accrual						51,638		51,638		52,901
Deferred gain on sale-leaseback transactions						2,925		2,925		3,117
Deferred tenant improvements allowance						50,762		50,762		54,146
Total Noncurrent HPT Lease liabilities	338,126		338,126		343,926	338,126		338,126		343,926
Other related party transactions
Number of real estate properties leased to be recognized																					13
Number of real estate properties not qualifying for operating lease treatment																					1
Gain on business acquisition										2,850
The term of scheduled rent increase from the initial lease term																			6 years
Number of real estate properties for which subleases were terminated										5
Amount funded for leasehold improvements																						125,000
Number of installments in which deferred rent is payable						2		2
Reduction of annual rent payable as a percentage of amount received by lessor by eminent domain proceedings or fair market value rent of property																			8.50%
Proceeds from VDOT																6,178
Decrease to annual rent payable related to a lease agreement															(525)
Rent for Ground Leases Subleased from HPT																	40		40
Aggregate fees	3,148	2,899	6,002	5,416
Number of other companies which are shareholders of related party																											5	5		5
Ownership interest (as a percent)																										14.30%	14.30%	14.30%		14.30%				40.00%		40.00%
Amount invested in equity investee																											6,054	6,054		6,054
Equity method investments, carrying value																											6,785	6,785		6,785		5,913		18,604		18,604		17,672
Income (loss) recognized related to equity investments	685	723	939	1,159																								104	79	7	155			581	644	932	1,004
Period of property insurance program																											1 year
Coverage of property insurance																														500,000
Premiums paid under property insurance program																											1,601
Common shares purchased																										2,857
Purchase price of shares			825																							825
Period for directors' and officers' insurance coverage																																	2 years
Number of entities to who RMR manages																																	4
Aggregate coverage of combined directors' and officers' liability insurance policy purchased with the related party																																	10,000
Period for additional directors' and officers' insurance coverage																																	1 year
Combined directors' and officers' liability insurance policy purchased with related party aggregate excess layer coverage																																	20,000
Aggregate excess non-indemnifiable coverage of combined directors' and officers' liability insurance policy purchased with the related party																																	5,000
Premium payable for combined directors' and officers' liability insurance policy																																	351
Number of travel centers built																																		2		2
Number of convenience stores built																																		2		2
Number of travel centers operated																																		2		2
Number of convenience stores operated																																		2		2
Management and accounting fee income recognized																																		200	200	400	400
Net payables																																		2,495		2,495		1,147
Summarized financial information
Total revenues	2,076,109	2,018,754	4,043,418	3,976,105																																54,658	55,364
Total cost of sales (excluding depreciation)	1,751,016	1,717,526	3,416,761	3,411,070																																43,604	44,712
Operating income	26,939	19,971	31,804	11,511																																2,694	2,693
Interest expense, net																																				(243)	(299)
Net income	$ 13,634	$ 15,984	$ 13,831	$ 3,845																																$ 2,451	$ 2,394

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Income Taxes (Details) (USD $) In Thousands, unless otherwise specified	6 Months Ended
	Jun. 30, 2014	Jun. 30, 2013
Income Taxes
Effective tax rate (as a percent)	41.80%
State taxes based on operating income		$ 372
Tax expense related to a noncash deferred liability arising from foreign currency translation adjustments		$ 180

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Earnings Per Share

6 Months Ended

Jun. 30, 2014

Earnings Per Share

Earnings Per Share

2. Earnings Per Share

Unvested shares issued under our share award plan are deemed participating securities because they participate equally in earnings with all of our other common shares.  The following table presents a reconciliation from net income to the net income available to common shareholders and the related earnings per share.

	Three Months Ended June 30,				Six Months Ended June 30,
	2014		2013		2014		2013
Net income, as reported	$	13,634	$	15,984	$	13,831	$	3,845
Less: net income attributable to participating securities	666		992		677		239
Net income available to common shareholders	$	12,968	$	14,992	$	13,154	$	3,606
Weighted average common shares(1)	35,791,850		27,716,024		35,787,657		27,707,211
Basic and diluted net income per share	$	0.36	$	0.54	$	0.37	$	0.13

(1) Excludes unvested shares granted under our share award plan, which shares are considered participating securities because they participate equally in earnings and losses with all of our other common shareholders.  The weighted average number of unvested shares outstanding for the three months ended June 30, 2014 and 2013, was 1,839,413 and 1,834,847, respectively.  The weighted average number of unvested shares outstanding for the six months ended June 30, 2014 and 2013, was 1,840,674 and 1,836,368, respectively.

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Condensed Consolidated Balance Sheets (USD $) In Thousands, unless otherwise specified	Jun. 30, 2014	Dec. 31, 2013
Current assets:
Cash and cash equivalents	$ 105,394	$ 85,657
Accounts receivable (less allowance for doubtful accounts of $1,533 as of June 30, 2014, and $1,304 as of December 31, 2013)	167,308	105,932
Inventories	187,414	199,201
Other current assets	72,555	79,604
Total current assets	532,671	470,394
Property and equipment, net	717,751	704,866
Goodwill and intangible assets, net	48,066	48,772
Other noncurrent assets	34,408	33,250
Total assets	1,332,896	1,257,282
Current liabilities:
Accounts payable	196,346	149,645
Current HPT Leases liabilities	30,817	29,935
Other current liabilities	137,884	124,033
Total current liabilities	365,047	303,613
Noncurrent HPT Leases liabilities	338,126	343,926
Senior Notes due 2028	110,000	110,000
Other noncurrent liabilities	50,010	45,866
Total liabilities	863,183	803,405
Commitments and contingencies
Shareholders' equity:
Common shares, no par value, 39,158,666 shares authorized at June 30, 2014, and December 31, 2013, and 37,669,546 and 37,625,366 shares issued and outstanding at June 30, 2014, and December 31, 2013, respectively	676,378	674,391
Accumulated other comprehensive income	852	834
Accumulated deficit	(207,517)	(221,348)
Total shareholders' equity	469,713	453,877
Total liabilities and shareholders' equity	$ 1,332,896	$ 1,257,282

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Condensed Consolidated Statements of Cash Flows (USD $) In Thousands, unless otherwise specified	6 Months Ended
	Jun. 30, 2014	Jun. 30, 2013
Cash flows from operating activities:
Net income	$ 13,831	$ 3,845
Adjustments to reconcile net income to net cash provided by operating activities:
Noncash rent expense	(4,565)	(4,400)
Depreciation and amortization expense	31,925	27,248
Deferred income tax provision	4,032	180
Changes in assets and liabilities, net of effects of business acquisitions:
Accounts receivable	(61,732)	(73,102)
Inventories	11,987	(476)
Other current assets	2,006	6,079
Accounts payable and other current liabilities	64,628	101,063
Other, net	1,447	2,584
Net cash provided by operating activities	63,559	63,021
Cash flows from investing activities:
Proceeds from sales of property and equipment	21,707	43,733
Investment in equity investee	(825)
Acquisitions of businesses, net of cash acquired	(3,202)	(27,887)
Capital expenditures	(60,608)	(84,703)
Net cash used in investing activities	(42,928)	(68,857)
Cash flows from financing activities:
Proceeds from sale-leaseback transactions with HPT	301	1,535
Fees paid related to the issuance of common shares	(14)
Proceeds from Senior Notes issuance		110,000
Sale-leaseback financing obligation payments	(1,183)	(1,022)
Payment of deferred financing fees		(4,749)
Net cash (used in) provided by financing activities	(896)	105,764
Effect of exchange rate changes on cash	2	(26)
Net increase in cash	19,737	99,902
Cash and cash equivalents at the beginning of the period	85,657	35,189
Cash and cash equivalents at the end of the period	105,394	135,091
Supplemental disclosure of cash flow information:
Interest paid (including rent classified as interest and net of capitalized interest)	7,841	6,240
Income taxes paid (net of refunds)	$ 630	$ 685

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Basis of Presentation, Business Description and Organization (Details)	6 Months Ended
	Jun. 30, 2014 item
Basis of presentation, business description and organization
Number of operating segments	1
Number of reportable segments	1
HPT
Basis of presentation, business description and organization
Number of sites under leases	185
Travel centers
Basis of presentation, business description and organization
Number of locations	248
Number of states in which the entity operates	43
Number of locations owned	34
Number of sites under leases	189
Travel centers | Minimum
Basis of presentation, business description and organization
Area of property	25
Travel centers | HPT
Basis of presentation, business description and organization
Number of sites under leases	184
Travel centers | Travel Centers of America brand
Basis of presentation, business description and organization
Number of locations	173
Travel centers | Petro Stopping Center brand
Basis of presentation, business description and organization
Number of locations	75
Travel centers | Company operated sites
Basis of presentation, business description and organization
Number of locations	218
Travel centers | Franchisee operated sites
Basis of presentation, business description and organization
Number of locations	30
Travel centers | Franchised sites
Basis of presentation, business description and organization
Number of locations owned and operated	25
Travel centers | Franchisee subleased sites | HPT
Basis of presentation, business description and organization
Number of locations	5
Convenience stores
Basis of presentation, business description and organization
Area of property	5,000
Number of fueling stations	10
Number of locations	34
Number of states in which the entity operates	4
Number of locations owned	27
Number of sites under leases	7
Convenience stores | HPT
Basis of presentation, business description and organization
Number of sites under leases	1

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Inventories (Details) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2014	Dec. 31, 2013
Inventories
Nonfuel products	$ 142,321	$ 150,600
Fuel products	45,093	48,601
Total inventories	$ 187,414	$ 199,201

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Basis of Presentation, Business Description and Organization

6 Months Ended

Jun. 30, 2014

Basis of Presentation, Business Description and Organization

Basis of Presentation, Business Description and Organization

1. Basis of Presentation, Business Description and Organization

TravelCenters of America LLC, which we refer to as the Company or we, us and our, operates and franchises travel centers under the “TravelCenters of America,” “TA” and related brand names, or the TA brand, and the “Petro Stopping Centers” and “Petro” brand names, or the Petro brand, primarily along the U.S. interstate highway system.  Our travel center customers include trucking fleets and their drivers, independent truck drivers and motorists.  We also operate convenience stores with retail gasoline stations, primarily under the “Minit Mart” brand name, that generally serve motorists.  Our travel centers include, on average, over 25 acres of land and typically offer customers diesel fuel and gasoline as well as nonfuel products and services such as truck repair and maintenance services, full service restaurants, quick service restaurants, or QSRs, travel and convenience stores and various other driver amenities.  Our convenience stores have, on average, ten fueling positions and approximately 5,000 square feet of interior space offering merchandise and QSRs.  We also collect rents, royalties and other fees from our franchisees.

At June 30, 2014, our geographically diverse business included 248 travel centers in 43 U.S. states and in Canada, including 173 travel centers operated under the TA brand, and 75 travel centers operated under the Petro brand.  As of June 30, 2014, we operated 218 of these travel centers, which we refer to as Company operated sites, and our franchisees operated 30 of these travel centers. Of our 248 travel centers at June 30, 2014, we owned 34, we leased or managed 189, including 184 that we leased from Hospitality Properties Trust, or HPT, and franchisees owned or leased 25 from third parties.  We sublease to franchisees five of the travel centers we lease from HPT.

As of June 30, 2014, we operated 34 convenience stores in four states, primarily Kentucky.  Of our 34 convenience stores at June 30, 2014, we owned 27, and we leased or managed seven, including one that we leased from HPT.

We manage our business as one operating segment and, therefore, have one reportable segment. Our locations sell similar products and services, use similar processes to sell products and services, and sell products and services to similar customers. We sometimes make specific disclosures concerning fuel and nonfuel products and services because it facilitates our discussion of trends and operational initiatives within our business and industry.  We have only a single travel center located in a foreign country, Canada, and we do not consider the revenues and assets related to our operations in Canada to be material to us.

The accompanying condensed consolidated financial statements are unaudited.  These unaudited interim financial statements have been prepared in accordance with U.S. generally accepted accounting principles, or GAAP, applicable for interim financial statements.  The disclosures do not include all the information necessary for complete financial statements in accordance with GAAP.  These unaudited interim financial statements should be read in conjunction with the consolidated financial statements and notes contained in our Annual Report on Form 10-K for the fiscal year ended December 31, 2013, or our Annual Report.  In the opinion of our management, all adjustments, which include normal recurring adjustments, considered necessary for a fair presentation have been included.  All intercompany transactions and balances have been eliminated.  While our revenues are modestly seasonal, the quarterly variations in our operating results may reflect greater seasonal differences because our rent and certain other costs do not vary seasonally.  For this and other reasons, our operating results for interim periods are not necessarily indicative of the results that may be expected for a full year.

Certain prior year amounts have been reclassified in the Condensed Consolidated Statements of Cash Flows to be consistent with the current year presentation.

Recently Issued Accounting Pronouncements

In May 2014, the Financial Accounting Standards Board issued Accounting Standards Update 2014-09, Revenue from Contracts with Customers, which establishes a comprehensive revenue recognition standard under GAAP for virtually all industries. The new standard will apply for annual periods beginning after December 15, 2016, including interim periods therein. Early adoption is prohibited. We have not yet determined the effects, if any, adoption of this update may have on our consolidated financial statements.

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Condensed Consolidated Balance Sheets (Parenthetical) (USD $) In Thousands, except Share data, unless otherwise specified	Jun. 30, 2014	Dec. 31, 2013
Condensed Consolidated Balance Sheets
Accounts receivable, allowance for doubtful accounts (in dollars)	$ 1,533	$ 1,304
Common shares, par value (in dollars per share)
Common shares, shares authorized	39,158,666	39,158,666
Common shares, shares issued	37,669,546	37,625,366
Common shares, shares outstanding	37,669,546	37,625,366

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Earnings Per Share (Tables)

6 Months Ended

Jun. 30, 2014

Earnings Per Share

Schedule of reconciliation from net income to the net income available to common shareholders and the related earnings per share

	Three Months Ended June 30,				Six Months Ended June 30,
	2014		2013		2014		2013
Net income, as reported	$	13,634	$	15,984	$	13,831	$	3,845
Less: net income attributable to participating securities	666		992		677		239
Net income available to common shareholders	$	12,968	$	14,992	$	13,154	$	3,606
Weighted average common shares(1)	35,791,850		27,716,024		35,787,657		27,707,211
Basic and diluted net income per share	$	0.36	$	0.54	$	0.37	$	0.13

(1) Excludes unvested shares granted under our share award plan, which shares are considered participating securities because they participate equally in earnings and losses with all of our other common shareholders.  The weighted average number of unvested shares outstanding for the three months ended June 30, 2014 and 2013, was 1,839,413 and 1,834,847, respectively.  The weighted average number of unvested shares outstanding for the six months ended June 30, 2014 and 2013, was 1,840,674 and 1,836,368, respectively.

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Document and Entity Information	6 Months Ended
	Jun. 30, 2014	Sep. 26, 2014
Document and Entity Information
Entity Registrant Name	TRAVELCENTERS OF AMERICA LLC
Entity Central Index Key	0001378453
Document Type	10-Q
Document Period End Date	Jun. 30, 2014
Amendment Flag	false
Current Fiscal Year End Date	--12-31
Entity Current Reporting Status	Yes
Entity Filer Category	Accelerated Filer
Entity Common Stock, Shares Outstanding		37,667,636
Document Fiscal Year Focus	2014
Document Fiscal Period Focus	Q2

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Inventories (Tables)

6 Months Ended

Jun. 30, 2014

Inventories

Schedule of inventories

	June 30,		December 31,
	2014		2013
Nonfuel products	$	142,321	$	150,600
Fuel products	45,093		48,601
Total inventories	$	187,414	$	199,201

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Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) (USD $) In Thousands, except Per Share data, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2014	Jun. 30, 2013	Jun. 30, 2014	Jun. 30, 2013
Revenues:
Fuel	$ 1,658,172	$ 1,635,400	$ 3,247,818	$ 3,260,507
Nonfuel	414,854	380,041	789,520	709,235
Rent and royalties	3,083	3,313	6,080	6,363
Total revenues	2,076,109	2,018,754	4,043,418	3,976,105
Cost of goods sold (excluding depreciation):
Fuel	1,559,049	1,545,588	3,056,378	3,093,767
Nonfuel	191,967	171,938	360,383	317,303
Total cost of goods sold (excluding depreciation)	1,751,016	1,717,526	3,416,761	3,411,070
Operating expenses:
Site level operating	203,526	190,646	403,097	374,579
Selling, general & administrative	25,100	24,482	51,896	47,709
Real estate rent	53,731	52,104	107,935	103,988
Depreciation and amortization	15,797	14,025	31,925	27,248
Total operating expenses	298,154	281,257	594,853	553,524
Income from operations	26,939	19,971	31,804	11,511
Acquisition costs	(149)	(205)	(759)	(320)
Interest income	45	307	84	542
Interest expense	(4,213)	(4,430)	(8,288)	(8,495)
Income before income taxes and income from equity investees	22,622	15,643	22,841	3,238
Provision for income taxes	9,673	382	9,949	552
Income from equity investees	685	723	939	1,159
Net income	13,634	15,984	13,831	3,845
Other comprehensive income (loss), net of tax:
Foreign currency translation adjustment, net of taxes of $83 and $(85) for three month ended June 30, 2014 and 2013 and $(8) and $(138) for six months ended June 30, 2014 and 2013, respectively	170	(199)	(22)	(325)
Equity interest in investee's unrealized gain (loss) on investments	21	(73)	40	(81)
Other comprehensive income (loss)	191	(272)	18	(406)
Comprehensive income	$ 13,825	$ 15,712	$ 13,849	$ 3,439
Net income per share:
Basic and diluted (in dollars per share)	$ 0.36	$ 0.54	$ 0.37	$ 0.13

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Accumulated Other Comprehensive Income

6 Months Ended

Jun. 30, 2014

Accumulated Other Comprehensive Income

Accumulated Other Comprehensive Income

6. Accumulated Other Comprehensive Income

Accumulated other comprehensive income at June 30, 2014, consisted of the following:

	Foreign currency translation adjustment			Equity interest in investee’s unrealized gain (loss) on investments		Accumulated other comprehensive income
Balance at December 31, 2013	$	785		$	49	$	834
Foreign currency translation adjustment, net of tax of $(8)	(22		)	—		(22		)
Equity interest in investee’s unrealized loss on investments	—			40		40
Other comprehensive income (loss), net of tax	(22		)	40		18
Balance at June 30, 2014	$	763		$	89	$	852

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Debt

6 Months Ended

Jun. 30, 2014

Debt

Debt

5. Debt

Senior Notes

On January 15, 2013, we issued at par $110,000 aggregate principal amount of our 8.25% Senior Notes, or the Senior Notes, in an underwritten public offering.  The Senior Notes are our senior unsecured obligations.  The indenture governing our Senior Notes does not limit the amount of indebtedness we may incur.  We may issue additional debt from time to time.  The indenture also requires that we file our reports under the Securities and Exchange Act of 1934, as amended, or the Exchange Act, with the indenture trustee within a prescribed time period.  We did not maintain compliance with this covenant for the quarter ended June 30, 2014, but the filing of this Quarterly Report on Form 10-Q, or this Quarterly Report, cures this non-compliance.

We estimate the fair value of our Senior Notes was $113,432 based on the trading price (a Level 1 input) of our Senior Notes on June 30, 2014.

Revolving Credit Facility

Our $200,000 credit facility requires that we furnish our consolidated financial statements to our lenders within certain prescribed time periods.  We received a waiver, until September 30, 2014, from these lenders of the requirement to deliver our financial statements for the period ended June 30, 2014.

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Earnings Per Share (Details) (USD $) In Thousands, except Share data, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2014	Jun. 30, 2013	Jun. 30, 2014	Jun. 30, 2013
Computation of Basic and Diluted Earnings Per Share
Net income, as reported	$ 13,634	$ 15,984	$ 13,831	$ 3,845
Less: net income attributable to participating securities	666	992	677	239
Net income available to common shareholders	$ 12,968	$ 14,992	$ 13,154	$ 3,606
Weighted average common shares	35,791,850	27,716,024	35,787,657	27,707,211
Basic and diluted net income per share	$ 0.36	$ 0.54	$ 0.37	$ 0.13
Number of unvested participating shares	1,839,413	1,834,847	1,840,674	1,836,368

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Acquisitions (Tables)

6 Months Ended

Jun. 30, 2014

Acquisitions

Summary of the amounts assigned, based on their fair values, to the assets acquired and liabilities assumed in the business combinations

Cash	$	40
Inventories	201
Property and equipment	3,074
Other assets	17
Other liabilities	(90		)
Total purchase price	$	3,242

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Income Taxes

6 Months Ended

Jun. 30, 2014

Income Taxes

Income Taxes

9. Income Taxes

The income tax provision for the six months ended June 30, 2014, reflects an effective tax rate of 41.8%, which is our current estimated annual effective tax rate for the year ending December 31, 2014.  Our current estimated annual effective tax rate is higher than the federal statutory tax rate primarily due to state income taxes and certain items that are not deductible for income tax purposes.

For the six months ended June 30, 2013, our income tax provision differed from the amount of benefit expected to be calculated at statutory rates primarily due to the impact of our valuation allowance, which was reversed in the fourth quarter of 2013.  For the six months ended June 30, 2013, we included in tax expense $372 for certain state taxes on operating income that were payable without regard to our tax loss carryforwards.  During the six months ended June 30, 2013, tax expense also included $180 related to a noncash deferred liability that arose from the amortization of indefinite lived intangible assets for tax purposes but not for GAAP purposes that were unavailable to offset our deferred tax assets while we maintained a valuation allowance against our net deferred tax assets.

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Related Party Transactions

6 Months Ended

Jun. 30, 2014

Related Party Transactions

Related Party Transactions

7. Related Party Transactions

Relationship with HPT

HPT was our parent company until 2007 and is our principal landlord and our largest shareholder.  We were created as a separate public company in 2007 as a result of a spin off from HPT.  As of June 30, 2014, HPT owned 3,420,000 of our common shares, representing approximately 9.1% of our outstanding common shares.  One of our Managing Directors, Mr. Barry Portnoy, is a managing trustee of HPT.  Mr. Barry Portnoy’s son, Mr. Adam Portnoy, is also a managing trustee of HPT, and Mr. Barry Portnoy’s son-in-law, Mr. Ethan Bornstein, is an executive officer of HPT.  Our other Managing Director, Mr. Thomas O’Brien, who is also our President and Chief Executive Officer, is a former executive officer of HPT.  One of our Independent Directors, Mr. Arthur Koumantzelis, was an independent trustee of HPT prior to our spin-off from HPT.

We have two leases with HPT, the TA Lease and the Petro Lease, pursuant to which we lease 185 properties from HPT.  Our TA Lease is for 145 properties that we operate primarily under the TA brand.  Our Petro Lease is for 40 properties that we operate under the Petro brand.  The TA Lease expires on December 31, 2022.  The Petro Lease expires on June 30, 2024, and may be extended by us for up to two additional periods of 15 years each.  We have the right to use the “TA”, “TravelCenters of America” and other trademarks, which are owned by HPT, during the term of the TA Lease.  We refer to the TA Lease and Petro Lease collectively as the HPT Leases.

The HPT Leases are “triple net” leases that require us to pay all costs incurred in the operation of the leased properties, including costs related to personnel, utilities, acquiring inventories, providing services to customers, insurance, real estate and personal property taxes, environmental related expenses and ground lease payments at those properties at which HPT leases the property from the owner and subleases it to us.  We also are required generally to indemnify HPT for certain environmental matters and for liabilities which arise during the terms of the leases from ownership or operation of the leased properties and, at lease expiration, we are required to pay an amount equal to an estimate of the cost of removing underground storage tanks on the leased properties.

Effective January 2012 and 2013, we began to incur percentage rent payable to HPT under the TA Lease and the Petro Lease, respectively.  In each case, the percentage rent equals 3% of increases in nonfuel gross revenues and 0.3% of increases in gross fuel revenues at the leased properties over base amounts.  The increases in percentage rents attributable to fuel revenues are subject to a maximum each year calculated by reference to changes in the consumer price index.  Also, HPT has agreed to waive payment of the first $2,500 of percentage rent that may become due under our Petro Lease; HPT waived $117 and $269 of percentage rent under our Petro Lease for the three and six months ended June 30, 2014, respectively, pursuant to that waiver; and through the second quarter of 2014 HPT has cumulatively waived $636 of the $2,500 of percentage rent to be waived.  The total amount of percentage rent (net of the waived amount) that we incurred during the three and six months ended June 30, 2014 and 2013, was $729 and $1,622 and $593 and $1,282, respectively.

Under the HPT Leases, we may request that HPT purchase approved amounts for renovations, improvements and equipment at the leased properties in return for increases in our minimum annual rent according to the following formula: the minimum rent per year will be increased by an amount equal to the amount paid by HPT multiplied by the greater of (i) 8.5% or (ii) a benchmark U.S. Treasury interest rate plus 3.5%.  During the six months ended June 30, 2014 and 2013, pursuant to the terms of the HPT Leases, we sold to HPT $21,923 and $45,229, respectively, of improvements we previously made to properties leased from HPT, and, as a result, our minimum annual rent payable to HPT increased by approximately $1,863 and $3,844, respectively.  At June 30, 2014, our property and equipment balance included $36,269 of improvements of the type that we typically request that HPT purchase for an increase in rent in the future; however, HPT is not obligated to purchase these improvements. In September 2014, we sold to HPT $20,038 of improvements for an increase in minimum annual rent payable to HPT of $1,703.

The following table details amounts related to the HPT Leases and other leases that are reflected in real estate rent expense in our condensed consolidated statements of operations and comprehensive income (loss).

	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2014			2013			2014			2013
Cash payments to HPT under the HPT Leases	$	55,603		$	54,139		$	110,749		$	107,125
Change in accrued estimated percentage rent	(21		)	(82		)	597			584
Adjustments to recognize expense on a straight line basis	(559		)	(523		)	(900		)	(900		)
Less sale-leaseback financing obligation amortization	(594		)	(512		)	(1,183		)	(1,022		)
Less portion of rent payments recognized as interest expense	(1,471		)	(1,743		)	(2,941		)	(3,484		)
Less deferred tenant improvements allowance amortization	(1,692		)	(1,692		)	(3,384		)	(3,384		)
Amortization of deferred gain on sale-leaseback transactions	(96		)	(77		)	(192		)	(153		)
Rent expense related to HPT Leases	51,170			49,510			102,746			98,766
Rent paid to others (1)	2,629			2,591			5,315			5,198
Adjustments to recognize expense on a straight line basis for other leases	(68		)	3			(126		)	24
Total real estate rent expense	$	53,731		$	52,104		$	107,935		$	103,988

(1) Includes rent paid directly to HPT’s landlords under leases for properties we sublease from HPT as well as rent related to properties we lease from landlords other than HPT.

The following table details amounts related to the HPT Leases that are included in our condensed consolidated balance sheets.

	June 30,		December 31,
	2014		2013
Current HPT Leases liabilities:
Accrued rent	$	18,789	$	18,041
Sale-leaseback financing obligation (1)	2,437		2,358
Straight line rent accrual (2)	2,437		2,382
Deferred gain on sale-leaseback transactions (3)	385		385
Deferred tenant improvements allowance (4)	6,769		6,769
Total Current HPT Leases liabilities	$	30,817	$	29,935
Noncurrent HPT Leases liabilities:
Deferred rent obligation (5)	$	150,000	$	150,000
Sale-leaseback financing obligation (1)	82,801		83,762
Straight line rent accrual (2)	51,638		52,901
Deferred gain on sale-leaseback transactions (3)	2,925		3,117
Deferred tenant improvements allowance (4)	50,762		54,146
Total Noncurrent HPT Leases liabilities	$	338,126	$	343,926

(1) Sale-leaseback Financing Obligation.  GAAP governing the transactions related to our entering the TA Lease required us to recognize in our consolidated balance sheets the leased assets at thirteen of the properties previously owned by our predecessor that we now lease from HPT because we subleased more than a minor portion of those properties to third parties, and one property that did not qualify for operating lease treatment for other reasons.  Accordingly, we recorded the leased assets at these properties at an amount equal to HPT’s recorded initial carrying amounts, which were equal to their fair values, and recognized an equal amount of liability that is presented as sale-leaseback financing obligation in our consolidated balance sheets.  In addition, sales to HPT of improvements at these properties are accounted for as sale-leaseback financing transactions and these liabilities are increased by the amount of proceeds we receive from HPT.  We recognize a portion of the total rent payments to HPT related to these assets as a reduction of the sale-leaseback financing obligation and a portion as interest expense in our consolidated statements of operations and comprehensive income.  We determined the allocation of these rent payments to the liability and to interest expense using the effective interest method.  The amounts allocated to interest expense were $1,471 and $1,743 for the three months ended June 30, 2014 and 2013, respectively, and $2,941 and $3,484 for the six months ended June 30, 2014 and 2013, respectively.

During 2012 and 2013, subleases to franchisees of ours at five of these properties were terminated and we began operating these properties directly.  The termination of these subleases qualified the properties for sale-leaseback accounting at which times we removed the related assets and liabilities from our consolidated balance sheet.  See note (3) below for further discussion regarding the deferred gains of $2,850 we recognized as part of these sublease terminations.

(2) Straight Line Rent Accrual.  The TA Lease included scheduled rent increases over the first six years of the lease term, as do certain of the leases for properties we sublease from HPT, the rent for which we pay directly to HPT’s landlords.  Also, under our leases with HPT, we are obligated to pay to HPT at lease expiration an amount equal to an estimate of the cost, calculated in accordance with GAAP, of removing the underground storage tanks we would have if we owned the underlying assets at those sites we lease from HPT.  We recognize the effects of scheduled rent increases and the future payment to HPT for the estimated cost of removing underground storage tanks in real estate rent expense over the lease terms on a straight line basis, with offsetting entries to this accrual balance.

(3) Deferred Gain on Sale-Leaseback Transactions.  This gain arose from our 2012 and 2013 terminations of subleases to franchisees for five properties we lease from HPT, which qualified these properties for sale-leaseback accounting and required us to remove the related assets and liabilities from our consolidated balance sheets, as further described in note (1) above, and from the sales to HPT of certain assets at the five properties we lease from HPT that we continue to sublease to franchisees.  Under GAAP, the gain or loss from the sale portion of a sale-leaseback transaction is deferred and amortized into our real estate rent expense on a straight line basis over the then remaining term of the lease.

(4) Deferred Tenant Improvements Allowance.  HPT committed to fund up to $125,000 of capital projects at the properties we lease under the TA Lease without an increase in rent payable by us, which amount HPT had fully funded by September 30, 2010, net of discounting to reflect our accelerated receipt of those funds. In connection with this commitment, we recognized a liability for the rent deemed to be related to this tenant improvements allowance.  This deferred tenant improvements allowance was initially recorded at an amount equal to the leasehold improvements receivable we recognized for the discounted value of the then expected future amounts to be received from HPT, based upon our then expected timing of receipt of those payments.  We amortize the deferred tenant improvements allowance on a straight line basis over the term of the TA Lease as a reduction of real estate rent expense.

(5) Deferred Rent Obligation.  Pursuant to a rent deferral agreement with HPT, through December 31, 2010, we deferred a total of $150,000 of rent payable to HPT.  The deferred rent obligation is payable in two installments, $107,085 in December 2022 and $42,915 in June 2024.  This obligation does not bear interest, unless certain events of default or other events occur, including a change of control of us.

On August 13, 2013, the travel center located in Roanoke, VA that we leased from HPT under the TA Lease was taken by eminent domain proceedings brought by the Virginia Department of Transportation, or VDOT, in connection with planned highway construction.  The TA Lease provides that the annual rent payable by us is reduced by 8.5% of the amount of the proceeds HPT receives from the taking or, at HPT’s option, the fair market value rent of the property on the commencement date of the TA Lease.  In January 2014, HPT received proceeds from VDOT of $6,178, which is a substantial portion of VDOT’s estimate of the value of the property, and as a result our annual rent under the TA Lease was reduced by $525 effective January 6, 2014.  We and HPT have challenged VDOT’s estimate of this property’s value and expect that the ultimate resolution of this matter will take a prolonged period of time.  HPT entered a lease agreement with VDOT to lease for $40 per month this property through August 31, 2014, which lease term was recently extended through November 15, 2014.  We entered into a sublease for this property with HPT and, we plan to continue operating it as a travel center through November 15, 2014.  Under the terms of the TA Lease, we are responsible to pay the rent to VDOT under the lease agreement.

Relationship with RMR

Reit Management & Research LLC, or RMR, provides business management and shared services to us pursuant to a business management and shared services agreement, or our business management agreement, and building management services to us related to our headquarters office building, or our property management agreement.  One of our Managing Directors, Mr. Barry Portnoy, is Chairman, majority owner and an employee of RMR.  Mr. Barry Portnoy’s son, Mr. Adam Portnoy, is an owner of RMR and serves as President, Chief Executive Officer and a director of RMR.  Our other Managing Director, Mr. Thomas O’Brien, who is also our President and Chief Executive Officer, Mr. Andrew Rebholz, our Executive Vice President, Chief Financial Officer and Treasurer, and Mr. Mark Young, our Executive Vice President and General Counsel, are officers of RMR.  RMR provides management services to HPT and HPT’s executive officers are officers of RMR.  Two of our Independent Directors also serve as independent directors or independent trustees of other public companies to which RMR or its affiliates provide management services.  Mr. Barry Portnoy serves as a managing director or managing trustee of a majority of the public companies to which RMR or its affiliates provide management services and Mr. Adam Portnoy serves as a managing trustee of a majority of those companies.  In addition, officers of RMR serve as officers of those companies.

Pursuant to our business management agreement and property management agreement with RMR, we recognized aggregate fees of $3,148 and $2,899 for the three months ended June 30, 2014 and 2013, respectively, and $6,002 and $5,416 for the six months ended June 30, 2014 and 2013, respectively.  These amounts are included in selling, general and administrative expenses in our condensed consolidated statements of operations and comprehensive income (loss).

Relationship with AIC

We, RMR and five other companies to which RMR provides management services each owned 14.3% of Affiliates Insurance Company, or AIC, an Indiana insurance company as of June 30, 2014.  Each of our Directors and most of the trustees and directors of the other AIC shareholders currently serve on the board of directors of AIC.  RMR provides management and administrative services to AIC pursuant to a management and administrative services agreement with AIC.  As of June 30, 2014, we had invested $6,054 in AIC since its formation in 2008.  Although we own less than 20% of AIC, we use the equity method to account for this investment because we believe that we have significant influence over AIC as all of our Directors are also directors of AIC.  Our investment in AIC had a carrying value of $6,785 and $5,913 as of June 30, 2014 and December 31, 2013, respectively, which amounts are included in other noncurrent assets on our consolidated balance sheets.  We recognized income of $104 and $79 for the three months ended June 30, 2014 and 2013, respectively, and $7 and $155 for the six months ended June 30, 2014 and 2013, respectively, related to our investment in AIC.  In June 2014, we and the other shareholders of AIC renewed our participation in an insurance program arranged by AIC.  In connection with the renewal, we purchased a one-year property insurance policy providing $500,000 of coverage, with respect to which AIC is a reinsurer of certain coverage amounts.  We paid AIC a premium, including taxes and fees, of approximately $1,601 in connection with that policy, which amount may be adjusted from time to time as we acquire or dispose of properties that are included in the policy.  We periodically consider the possibilities for expanding our insurance relationships with AIC to include other types of insurance and may in the future participate in additional insurance offerings AIC may provide or arrange.  We may invest additional amounts in AIC in the future if the expansion of this insurance business requires additional capital, but we are not obligated to do so.  By participating in this insurance business with RMR and the other companies to which RMR provides management services, we expect that we may benefit financially by reducing our insurance expenses and by realizing our pro rata share of any profits of this insurance business.

On March 25, 2014, as a result of the removal, without cause, of all of the trustees of Equity CommonWealth (formerly known as CommonWealth REIT), or EQC, EQC underwent a change in control, as defined in the shareholders agreement among us, the other shareholders of AIC, and AIC.  As a result of that change in control and in accordance with the terms of the shareholders agreement, on May 9, 2014, we and the other non-EQC shareholders purchased pro rata the AIC shares EQC owned.  Pursuant to that purchase, we purchased 2,857 AIC shares from EQC for $825.  Following these purchases, we and the six other remaining shareholders each owned approximately 14.3% of AIC.

Directors’ and Officers’ Liability Insurance

In September 2014, we purchased a two year combined directors’ and officers’ insurance policy with HPT, RMR and four other companies managed by RMR that provides $10,000 in aggregate primary coverage, including certain errors and omission coverage.  At that time, we also purchased separate additional one year directors’ and officers’ liability insurance policies that provide $20,000 of aggregate excess coverage plus $5,000 of excess non-indemnifiable coverage.  The total premium payable by us for these policies was approximately $351.

Relationship with PTP

Petro Travel Plaza Holdings LLC, or PTP, is a joint venture between us and Tejon Development Corporation, or Tejon, that owns two travel centers and two convenience stores in California.  We own a 40% interest in PTP and operate the two travel centers and two convenience stores PTP owns for which we receive management and accounting fees.  The carrying value of our investment in PTP as of June 30, 2014 and December 31, 2013, was $18,604 and $17,672, respectively.  We recognized management and accounting fee income of $200 for each of the three month periods ended June 30, 2014 and 2013, and $400 for each of the six month periods ended June 30, 2014 and 2013.  At June 30, 2014, and December 31, 2013, we had net payables to PTP of $2,495 and $1,147, respectively.  We recognized income of $581 and $644 during the three months ended June 30, 2014 and 2013, respectively, and $932 and $1,004 during the six months ended June 30, 2014 and 2013, respectively, as our share of PTP’s net income.

Summarized financial information of PTP

The following table sets forth the aggregate summarized financial information of PTP and does not represent the amounts we have included in our consolidated financial statements in connection with our investment in PTP.

	Six Months Ended June 30,
	2014			2013
Total revenues	$	54,658		$	55,364
Total cost of sales (excluding depreciation)	$	43,604		$	44,712
Operating income	$	2,694		$	2,693
Interest expense, net	$	(243	)	$	(299	)
Net income	$	2,451		$	2,394

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Commitments and Contingencies

6 Months Ended

Jun. 30, 2014

Commitments and Contingencies

Commitments and Contingencies

8. Commitments and Contingencies

Environmental Matters

Extensive environmental laws regulate our operations and properties.  These laws may require us to investigate and clean up hazardous substances, including petroleum or natural gas products, released at our owned and leased properties.  Governmental entities or third parties may hold us liable for property damage and personal injuries, and for investigation, remediation and monitoring costs incurred in connection with any contamination and regulatory compliance.  We use both underground storage tanks and above ground storage tanks to store petroleum products, natural gas and waste at our locations.  We must comply with environmental laws regarding tank construction, integrity testing, leak detection and monitoring, overfill and spill control, release reporting and financial assurance for corrective action in the event of a release.  At some locations we must also comply with environmental laws relative to vapor recovery or discharges to water.  Under the terms of our leases, we generally have agreed to indemnify HPT for any environmental liabilities related to properties that we lease from HPT and we are required to pay all environmental related expenses incurred in the operation of the properties.

From time to time we have received, and in the future likely will receive, notices of alleged violations of environmental laws or otherwise have become or will become aware of the need to undertake corrective actions to comply with environmental laws at our locations.  Investigatory and remedial actions were, and regularly are, undertaken with respect to releases of hazardous substances at our locations.  In some cases we received, and may receive in the future, contributions to partially offset our environmental costs from insurers, from state funds established for environmental clean up associated with the sale of petroleum products or from indemnitors who agreed to fund certain environmental related costs at locations purchased from those indemnitors.  To the extent we incur material amounts for environmental matters for which we do not receive or expect to receive insurance or other third party reimbursement or for which we have not previously recorded a reserve, our operating results may be materially adversely affected.  In addition, to the extent we fail to comply with environmental laws and regulations, or we become subject to costs and requirements not similarly experienced by our competitors, our competitive position may be harmed.

At June 30, 2014, we had a gross accrued liability of $5,533 for environmental matters as well as a receivable for expected recoveries of certain of these estimated future expenditures of $1,518, resulting in an estimated net amount of $4,015 that we expect to fund in the future.  Accrued liabilities related to environmental matters are recorded on an undiscounted basis due to the uncertainty associated with the timing of the related future payments.  We cannot precisely know the ultimate costs we will incur in connection with currently known or future potential environmental related violations, corrective actions, investigation and remediation; however, based on our current knowledge we do not expect that our net costs for such matters to be incurred at our locations, individually or in the aggregate, would be material to our financial condition or results of operations.

In February 2014, we reached an agreement with the California State Water Resources Control Board, or the State Water Board, to settle certain claims the State Water Board had filed against us in California Superior Court in 2010 relating to alleged violations of underground storage tank laws and regulations for a cash payment of $1,800; suspended penalties of $1,000 that may become payable by us in the future if, prior to March 2019, we fail to comply with specified underground storage tank laws and regulations; and our agreement to invest, prior to March 2018, up to $2,000 of verified costs that are directly related to the development and implementation of a comprehensive California Enhanced Environmental Compliance Program for the underground storage tank systems at all of our California facilities that is above and beyond minimum requirements of California law and regulations related to underground storage tank systems.  To the extent that we do not incur the full $2,000 of eligible environmental compliance costs by March 2018, the difference between the amount we incur and $2,000 will be payable to the State Water Board.  The settlement, which was approved by the Superior Court on February 20, 2014, also included injunctive relief provisions requiring that we comply with certain California environmental laws and regulations applicable to underground storage tank systems.  We made the $1,800 cash payment during the first quarter of 2014.  As of June 30, 2014, we have a liability of $1,708 recorded with respect to this matter, which amount is included in the gross accrued liability for environmental matters referenced above.  We believe that the probability of triggering any portion of the $1,000 of suspended penalties is remote and have not recognized a loss or a liability for that amount, but it is possible that such events will occur and some portion or all of the $1,000 may become due and payable and would be recognized as an expense at the time of the future event or events.

We have insurance of up to $10,000 per incident and up to $40,000 in the aggregate for certain environmental liabilities, subject, in each case, to certain limitations and deductibles.  However, we can provide no assurance that we will be able to maintain similar environmental insurance coverage in the future on acceptable terms.

It is impossible to predict the ultimate effect changing circumstances and changing environmental laws may have on us in the future or the ultimate outcome of matters currently pending.  We cannot be certain that contamination presently unknown to us does not exist at our sites, or that material liability will not be imposed on us in the future.  If we discover additional environmental issues, or if government agencies impose additional environmental requirements, increased environmental compliance or remediation expenditures may be required, which could have a material adverse effect on us.  In addition, legislation and regulation regarding climate change, including greenhouse gas emissions and other environmental matters, and market reaction to any such legislation or regulation or to climate change concerns, may decrease the demand for our major product, diesel fuel, may require us to expend significant amounts and may negatively impact our business.  For instance, federal and state governmental requirements addressing emissions from trucks and other motor vehicles, such as the U.S. Environmental Protection Agency’s gasoline and diesel sulfur control requirements that limit the concentration of sulfur in motor vehicle gasoline and diesel fuel, as well as President Obama’s February 2014 order that his administration develop and implement new fuel efficiency standards for medium and heavy duty commercial trucks by March 2016, has caused us to add certain services and provide certain products to our customers at a cost to us and may decrease the demand for our fuel products and negatively impact our business.  Further, legislation and regulations that limit carbon emissions also may cause our energy costs at our locations to increase.

Legal Proceedings

Beginning in December 2006, a series of class action lawsuits was filed against numerous companies in the petroleum industry, including our predecessor and our subsidiaries, in U.S. district courts in over 20 states.  Major petroleum refiners and retailers were named as defendants in one or more of these lawsuits.  The plaintiffs in the lawsuits generally alleged that they are retail purchasers who purchased motor fuel at temperatures greater than 60 degrees Fahrenheit at the time of sale.  One theory alleged that the plaintiffs purchased smaller amounts of motor fuel than the amount for which defendants charged them because the defendants measured the amount of motor fuel they delivered by volumes which, at higher temperatures, contain less energy.  A second theory alleged that fuel taxes are calculated in temperature adjusted 60 degree gallons and are collected by governmental agencies from suppliers and wholesalers, who are reimbursed in the amount of the tax by the defendant retailers before the fuel is sold to consumers.  These “tax” cases allege that, when the fuel is subsequently sold to consumers at temperatures above 60 degrees, the retailers sell a greater volume of fuel than the amount on which they paid tax, and therefore reap unjust benefit because the customers pay more tax than the retailer pays.  A third theory alleged that all purchasers of fuel at any temperature are harmed because the defendants do not use equipment that adjusts for temperature or disclose the temperature of fuel being sold, and thereby deprive customers of information they allegedly require to make an informed purchasing decision.  All of these cases were consolidated in the U.S. District Court for the District of Kansas pursuant to multi-district litigation procedures.  On May 28, 2010, that Court ruled that, with respect to two cases originally filed in the U.S. District Court for the District of Kansas, it would grant plaintiffs’ motion to certify a class of plaintiffs seeking injunctive relief (implementation of fuel temperature equipment and/or posting of notices regarding the effect of temperature on fuel).  On January 19, 2012, the Court amended its prior ruling, and certified a class with respect to plaintiffs’ claims for damages as well.  A TA entity was named in one of those two Kansas cases, but the Court ruled that the named plaintiffs were not sufficient to represent a class as to TA.  TA was thereafter dismissed from the Kansas case.  Several defendants in the Kansas cases, including major petroleum refiners, have entered into multi-state settlements.  Following a September 2012 trial against the remaining defendants in the Kansas cases, the jury returned a unanimous verdict in favor of those Kansas defendants, and the judge likewise ruled in the Kansas defendants’ favor on the sole non-jury claim.  In early 2013, the Court announced its intention to remand three cases originally filed in federal district courts in California back to their original courts.  On April 9, 2013, the Court granted plaintiffs’ motion for class certification in connection with the California claims in the California cases.  On August 14, 2013, the Court granted summary judgment for the defendants with respect to all California claims in the California cases, and in February 2014, the U.S. District Court for the Northern District of California entered judgment in favor of the defendants with respect to those claims.  The plaintiffs in the California cases have all dismissed their non-California claims against TA, except for one individual plaintiff, who continues to assert claims based on purchases of fuel in states other than California.  In January 2014, TA was dismissed with prejudice in all the non-California cases in all states in which it remained a defendant at that time.  Therefore, the only case in which TA remains a defendant is the case in which one remaining plaintiff is pursuing non-California claims.  We believe there are substantial factual and legal defenses to the allegations made in this remaining case.  While we do not expect that we will incur a material loss in this case, we cannot estimate our ultimate exposure to loss or liability, if any, related to this lawsuit.

On April 6, 2009, five independent truck stop owners, who are plaintiffs in a purported class action suit against Comdata Network, Inc., or Comdata, in the U.S. District Court for the Eastern District of Pennsylvania, filed a motion to amend their complaint to add us as a defendant, which was allowed on March 25, 2010.  The amended complaint also added as defendants Ceridian Corporation, Pilot Travel Centers LLC and Love’s Travel Stops & Country Stores, Inc.  Comdata markets fuel cards which are used for payments by trucking companies at truck stops.  The amended complaint alleged antitrust violations arising out of Comdata’s contractual relationships with truck stops in connection with its fuel cards.  On February 28, 2014, we entered into a Definitive Master Class Settlement Agreement with the plaintiffs, or the settlement agreement.  The Court approved the settlement agreement on July 14, 2014.  The settlement agreement provides for the co-defendants, including us, to pay an aggregate of $130,000 to a settlement fund for class members, including $10,000 from us, and the dismissal with prejudice of the litigation and the unconditional release of all claims that class members brought, or could have brought, against us and the other settling co-defendants with respect to the litigation and related actions.  We recognized a $10,000 loss in connection with this matter in December 2013 and made the cash payment in March 2014.

In addition to the legal proceedings referenced above, we are routinely involved in various other legal and administrative proceedings, including tax audits, incidental to the ordinary course of our business, none of which we expect, individually or in the aggregate, to have a material adverse effect on our business, financial condition, results of operations or cash flows.

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Basis of Presentation, Business Description and Organization (Policies)

6 Months Ended

Jun. 30, 2014

Basis of Presentation, Business Description and Organization

Reclassifications

Certain prior year amounts have been reclassified in the Condensed Consolidated Statements of Cash Flows to be consistent with the current year presentation.

Recently Issued Accounting Pronouncements

Recently Issued Accounting Pronouncements

In May 2014, the Financial Accounting Standards Board issued Accounting Standards Update 2014-09, Revenue from Contracts with Customers, which establishes a comprehensive revenue recognition standard under GAAP for virtually all industries. The new standard will apply for annual periods beginning after December 15, 2016, including interim periods therein. Early adoption is prohibited. We have not yet determined the effects, if any, adoption of this update may have on our consolidated financial statements.

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Related Party Transactions (Tables)

6 Months Ended

Jun. 30, 2014

Related Party Transactions

Schedule of details amounts related to the HPT Leases and other leases that are reflected in real estate rent expense in our condensed consolidated statements of operations and comprehensive income (loss)

	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2014			2013			2014			2013
Cash payments to HPT under the HPT Leases	$	55,603		$	54,139		$	110,749		$	107,125
Change in accrued estimated percentage rent	(21		)	(82		)	597			584
Adjustments to recognize expense on a straight line basis	(559		)	(523		)	(900		)	(900		)
Less sale-leaseback financing obligation amortization	(594		)	(512		)	(1,183		)	(1,022		)
Less portion of rent payments recognized as interest expense	(1,471		)	(1,743		)	(2,941		)	(3,484		)
Less deferred tenant improvements allowance amortization	(1,692		)	(1,692		)	(3,384		)	(3,384		)
Amortization of deferred gain on sale-leaseback transactions	(96		)	(77		)	(192		)	(153		)
Rent expense related to HPT Leases	51,170			49,510			102,746			98,766
Rent paid to others (1)	2,629			2,591			5,315			5,198
Adjustments to recognize expense on a straight line basis for other leases	(68		)	3			(126		)	24
Total real estate rent expense	$	53,731		$	52,104		$	107,935		$	103,988

(1) Includes rent paid directly to HPT’s landlords under leases for properties we sublease from HPT as well as rent related to properties we lease from landlords other than HPT.

Schedule of details amounts related to the HPT Leases

	June 30,		December 31,
	2014		2013
Current HPT Leases liabilities:
Accrued rent	$	18,789	$	18,041
Sale-leaseback financing obligation (1)	2,437		2,358
Straight line rent accrual (2)	2,437		2,382
Deferred gain on sale-leaseback transactions (3)	385		385
Deferred tenant improvements allowance (4)	6,769		6,769
Total Current HPT Leases liabilities	$	30,817	$	29,935
Noncurrent HPT Leases liabilities:
Deferred rent obligation (5)	$	150,000	$	150,000
Sale-leaseback financing obligation (1)	82,801		83,762
Straight line rent accrual (2)	51,638		52,901
Deferred gain on sale-leaseback transactions (3)	2,925		3,117
Deferred tenant improvements allowance (4)	50,762		54,146
Total Noncurrent HPT Leases liabilities	$	338,126	$	343,926

(1) Sale-leaseback Financing Obligation.  GAAP governing the transactions related to our entering the TA Lease required us to recognize in our consolidated balance sheets the leased assets at thirteen of the properties previously owned by our predecessor that we now lease from HPT because we subleased more than a minor portion of those properties to third parties, and one property that did not qualify for operating lease treatment for other reasons.  Accordingly, we recorded the leased assets at these properties at an amount equal to HPT’s recorded initial carrying amounts, which were equal to their fair values, and recognized an equal amount of liability that is presented as sale-leaseback financing obligation in our consolidated balance sheets.  In addition, sales to HPT of improvements at these properties are accounted for as sale-leaseback financing transactions and these liabilities are increased by the amount of proceeds we receive from HPT.  We recognize a portion of the total rent payments to HPT related to these assets as a reduction of the sale-leaseback financing obligation and a portion as interest expense in our consolidated statements of operations and comprehensive income.  We determined the allocation of these rent payments to the liability and to interest expense using the effective interest method.  The amounts allocated to interest expense were $1,471 and $1,743 for the three months ended June 30, 2014 and 2013, respectively, and $2,941 and $3,484 for the six months ended June 30, 2014 and 2013, respectively.

During 2012 and 2013, subleases to franchisees of ours at five of these properties were terminated and we began operating these properties directly.  The termination of these subleases qualified the properties for sale-leaseback accounting at which times we removed the related assets and liabilities from our consolidated balance sheet.  See note (3) below for further discussion regarding the deferred gains of $2,850 we recognized as part of these sublease terminations.

(2) Straight Line Rent Accrual.  The TA Lease included scheduled rent increases over the first six years of the lease term, as do certain of the leases for properties we sublease from HPT, the rent for which we pay directly to HPT’s landlords.  Also, under our leases with HPT, we are obligated to pay to HPT at lease expiration an amount equal to an estimate of the cost, calculated in accordance with GAAP, of removing the underground storage tanks we would have if we owned the underlying assets at those sites we lease from HPT.  We recognize the effects of scheduled rent increases and the future payment to HPT for the estimated cost of removing underground storage tanks in real estate rent expense over the lease terms on a straight line basis, with offsetting entries to this accrual balance.

(3) Deferred Gain on Sale-Leaseback Transactions.  This gain arose from our 2012 and 2013 terminations of subleases to franchisees for five properties we lease from HPT, which qualified these properties for sale-leaseback accounting and required us to remove the related assets and liabilities from our consolidated balance sheets, as further described in note (1) above, and from the sales to HPT of certain assets at the five properties we lease from HPT that we continue to sublease to franchisees.  Under GAAP, the gain or loss from the sale portion of a sale-leaseback transaction is deferred and amortized into our real estate rent expense on a straight line basis over the then remaining term of the lease.

(4) Deferred Tenant Improvements Allowance.  HPT committed to fund up to $125,000 of capital projects at the properties we lease under the TA Lease without an increase in rent payable by us, which amount HPT had fully funded by September 30, 2010, net of discounting to reflect our accelerated receipt of those funds. In connection with this commitment, we recognized a liability for the rent deemed to be related to this tenant improvements allowance.  This deferred tenant improvements allowance was initially recorded at an amount equal to the leasehold improvements receivable we recognized for the discounted value of the then expected future amounts to be received from HPT, based upon our then expected timing of receipt of those payments.  We amortize the deferred tenant improvements allowance on a straight line basis over the term of the TA Lease as a reduction of real estate rent expense.

(5) Deferred Rent Obligation.  Pursuant to a rent deferral agreement with HPT, through December 31, 2010, we deferred a total of $150,000 of rent payable to HPT.  The deferred rent obligation is payable in two installments, $107,085 in December 2022 and $42,915 in June 2024.  This obligation does not bear interest, unless certain events of default or other events occur, including a change of control of us.

Summary of financial information

	Six Months Ended June 30,
	2014			2013
Total revenues	$	54,658		$	55,364
Total cost of sales (excluding depreciation)	$	43,604		$	44,712
Operating income	$	2,694		$	2,693
Interest expense, net	$	(243	)	$	(299	)
Net income	$	2,451		$	2,394

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Debt (Details) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2014	Jan. 15, 2013
Senior Notes
Debt
Aggregate principal amount		$ 110,000
Interest rate (as a percent)		8.25%
Fair value of debt instrument	113,432
Credit facility
Debt
Maximum borrowing capacity	$ 200,000

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Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) (Parenthetical) (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2014	Jun. 30, 2013	Jun. 30, 2014	Jun. 30, 2013
Condensed Consolidated Statements of Operations and Comprehensive Income (Loss)
Foreign currency translation adjustment, taxes	$ 83	$ (85)	$ (8)	$ (138)

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Acquisitions

6 Months Ended

Jun. 30, 2014

Acquisitions

Acquisitions

4. Acquisitions

During the six months ended June 30, 2014, we acquired a travel center for $3,242, and we accounted for this transaction using the acquisition method of accounting, which requires, among other things, that the assets acquired and liabilities assumed be recognized at their respective fair values as of the acquisition date.  The following table summarizes the amounts assigned, based on their fair values, to the assets we acquired and liabilities we assumed in the business combination described above.

Cash	$	40
Inventories	201
Property and equipment	3,074
Other assets	17
Other liabilities	(90		)
Total purchase price	$	3,242

We have included the results of this travel center in our consolidated financial statements from its date of acquisition.  The pro forma impact of including the results of operations of this acquisition from the beginning of the period is not material to our condensed consolidated financial statements.

As of June 30, 2014, we had entered agreements to acquire two travel center properties for approximately $21,500 plus saleable inventory at cost.  We completed these acquisitions during July and September 2014.

During the three months ended June 30, 2014 and 2013, and the six months ended June 30, 2014 and 2013, we incurred and charged to expense $149, $205, $759 and $320, respectively, of acquisition costs for the legal, due diligence and related activities associated with our consideration and completion of possible and actual acquisitions.

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Accumulated Other Comprehensive Income (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2014	Jun. 30, 2013	Jun. 30, 2014	Jun. 30, 2013
Accumulated Other Comprehensive Income
Balance at the beginning of the period			$ 834
Foreign currency translation adjustment, net of tax of $(8)	170	(199)	(22)	(325)
Equity interest in investee's unrealized loss on investments	21	(73)	40	(81)
Other comprehensive income (loss), net of tax	191	(272)	18	(406)
Balance at the end of the period	852		852
Foreign currency translation adjustment, taxes	83	(85)	(8)	(138)
Foreign currency translation adjustment
Accumulated Other Comprehensive Income
Balance at the beginning of the period			785
Foreign currency translation adjustment, net of tax of $(8)			(22)
Other comprehensive income (loss), net of tax			(22)
Balance at the end of the period	763		763
Equity interest in investee's unrealized gain (loss) on investments
Accumulated Other Comprehensive Income
Balance at the beginning of the period			49
Equity interest in investee's unrealized loss on investments			40
Other comprehensive income (loss), net of tax			40
Balance at the end of the period	$ 89		$ 89

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Accumulated Other Comprehensive Income (Tables)

6 Months Ended

Jun. 30, 2014

Accumulated Other Comprehensive Income

Schedule of accumulated other comprehensive income

	Foreign currency translation adjustment			Equity interest in investee’s unrealized gain (loss) on investments		Accumulated other comprehensive income
Balance at December 31, 2013	$	785		$	49	$	834
Foreign currency translation adjustment, net of tax of $(8)	(22		)	—		(22		)
Equity interest in investee’s unrealized loss on investments	—			40		40
Other comprehensive income (loss), net of tax	(22		)	40		18
Balance at June 30, 2014	$	763		$	89	$	852