SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

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

FOR THE QUARTERLY PERIOD ENDED ~~FEBRUARY~~NOVEMBER 2930, 2004

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

For the transition period from to

Commission File No. 333-35083

UNITED REFINING COMPANY

(Exact name of registrant as specified in its charter)


Pennsylvania		25-1411751
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

15 Bradley Street
Warren, Pennsylvania		16365
(address of principal executive office)		(Zip Code)

814-726-4674

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 ¨

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

Number of shares outstanding of Registrant’s Common Stock as of ~~April~~January 14, ~~2004~~2005: 100.

TABLE OF ADDITIONAL REGISTRANTS

Name	State of OtherJurisdiction ofIncorporation	IRS EmployerIdentificationNumber	CommissionFile Number
Kiantone Pipeline Corporation	New York	25-1211902	333-35083-01
Kiantone Pipeline Company	Pennsylvania	25-1416278	333-35083-03
United Refining Company of Pennsylvania	Pennsylvania	25-0850960	333-35083-02
United Jet Center, Inc.	Delaware	52-1623169	333-35083-06
Kwik-Fill Corporation	Pennsylvania	25-1525543	333-35083-05
Independent Gas and Oil Company of Rochester, Inc.	New York	06-1217388	333-35083-11
Bell Oil Corp.	Michigan	38-1884781	333-35083-07
PPC, Inc.	Ohio	31-0821706	333-35083-08
Super Test Petroleum, Inc.	Michigan	38-1901439	333-35083-09
Kwik-Fil, Inc.	New York	25-1525615	333-35083-04
Vulcan Asphalt Refining Corporation	Delaware	23-2486891	333-35083-10
Country Fair, Inc.	Pennsylvania	25-1149799	333-35083-12

			PAGE(S)	~~PAGE(S)~~
PART I.	FINANCIAL INFORMATION
Item 1.	Financial Statements
	Consolidated Balance Sheets – February 29, 2004 (unaudited) and August 31, 2003			5
	Consolidated Balance Sheets – November 30, 2004 (unaudited) and August 31, 2004		4
	Consolidated Statements of Operations – Six Months and Quarters Ended February 29, 2004 and February 28, 2003 (unaudited)			6
	Consolidated Statements of Operations – Three Months Ended November 30, 2004 and 2003 (unaudited)		5
	Consolidated Statements of Cash Flows – Six Months Ended February 29, 2004 and February 28, 2003 (unaudited)			7
	Consolidated Statements of Cash Flows – Three Months Ended November 30, 2004 and 2003 (unaudited)		6
	Notes to Consolidated Financial Statements (unaudited)		7-12	~~8-13~~
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		13-20	~~14-21~~
Item 3.	Quantitative and Qualitative Disclosures about Market Risk		20	22
Item 4.	Controls and Procedures		20	22
PART II.	OTHER INFORMATION		21	23
Item 1.	Legal Proceedings(None)		21	23
Item 2.	~~Changes~~Unregistered inSales ~~Securities, Use~~ of ~~Proceeds~~Equity Securities and ~~Issuer~~Use ~~Purchases~~ of ~~Equity Securities~~Proceeds(None)		21	23
Item 3.	Defaults Upon Senior Securities(None)		21	23
Item 4.	Submission of Matters to a Vote of Security Holders(N/A)		21	23
Item 5.	Other Information(None)		21	23
Item 6.	Exhibits ~~and Reports on Form 8-K~~		21	23
		Signatures		24-35
	Exhibit 31.1	Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
	(a)	Exhibit Index
	Exhibit 31.2	Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
		Exhibit 10.9	Amendment No. Four to Credit Agreement dated as of January 27, 2004 by and among UNITED REFINING COMPANY, a Pennsylvania corporation (“United Refining”), UNITED REFINING COMPANY OF PENNSYLVANIA, a Pennsylvania corporation (“United Refining of PA”), KIANTONE PIPELINE CORPORATION, a New York corporation (“Kiantone”), COUNTRY FAIR, INC., a Pennsylvania corporation (“Country Fair”) (United Refining, United Refining of PA, Kiantone and Country Fair are each referred to herein as a “Borrower” and collectively as the “Borrowers”), KWIK-FILL CORPORATION, a Pennsylvania corporation (“Guarantor”), the Banks that are parties hereto and PNC Bank, National Association, as Agent (“Agent”).
	Exhibit 32.1	Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
		Exhibit 31.1	Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

	Exhibit 31.2	Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
	Exhibit 32.1	Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906
(b)	Reports on Form 8-K
	On January 30, 2004, a Current Report on Form 8-K was filed reporting under Item 5, Other Events, and Required FD Disclosure, that the Company issued a press release announcing an amendment to its secured credit facility increasing the facility commitment from $50,000,000 to $75,000,000 effective January 27, 2004. The press release was filed as an Exhibit under Item 7(c) of the Form 8-K.

UNITED REFINING COMPANY AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(in thousands, except share amounts)

	February 29,2004(Unaudited)			August 31, 2003
	November 30, 2004 (Unaudited)			August 31, 2004
Assets
Current:
Cash and cash equivalents	$	1411,~~392~~524		$	1311,~~819~~552
Accounts receivable, net		4046,~~222~~041			4244,~~732~~596
Inventories		99105,~~775~~787			7675,~~123~~623
Prepaid expenses and other assets		1628,~~227~~362			1017,~~336~~247
Amounts due from affiliated companies, net		—			639
Total current assets		191,714			149,018
Total current assets		170,616			143,649
Property, plant and equipment, net		183,705			184,705
Property, plant and equipment, net		184,393			186,879
Investment in affiliated company		1,052			846
Investment in affiliated company		1,085			574
Deferred financing costs, net		6,479			6,723
Deferred financing costs, net		3,029			2,963
Goodwill		1,349			1,349
Tradename		10,500			10,500
Amortizable intangible assets, net		3,~~415~~728			3,~~588~~103
Deferred turnaround costs and other assets, net		79,~~886~~837			810,~~217~~138
Deferred income taxes		611			3,709
	$	408,364		$	366,382
	$	382,884		$	361,428
Liabilities and Stockholder’s Equity
Current:
Revolving credit facility	$	5032,000		$	3113,~~500~~000
Current installments of long-term debt		~~630~~454			~~683~~452
Accounts payable		3341,~~193~~544			3528,~~111~~732
Accrued liabilities		1619,~~795~~084			1516,~~707~~300
Sales, use and fuel taxes payable		16,171			17,853
Income tax payable		2,567			795
Deferred income taxes		5,157			5,157
Sales, use and fuel taxes payable		18,413			19,466
Amounts due to affiliated companies, net		1,381			—
Deferred income taxes		3,919			3,919
Total current liabilities		123,327			106,011
Amounts due to affiliated companies, net		1,003			132
Long term debt: less current installments		182,005			182,227
Total current liabilities		118,984			82,796
Deferred gain on settlement of pension plan obligations		1,022			1,130
Long term debt: less current installments		199,387			199,496
Deferred retirement benefits		27,584			28,398
Deferred income taxes		2,962			1,898
Other noncurrent liabilities		1,987			1,687
Deferred gain on settlement of pension plan obligations		861			915
Total liabilities		335,925			319,453
Deferred retirement benefits		33,194			32,402
Other noncurrent liabilities		1,638			1,769
Total liabilities		357,026			319,276
Commitments and contingencies
Stockholder’s equity:
Common stock; $.10 par value per share – shares authorized 100; issued and outstanding 100		—			—
Additional paid-in capital		16,648			16,648
Retained earnings		3136,~~351~~994			2632,~~367~~762
Accumulated other comprehensive loss		(12,~~040~~304	)		(12,~~040~~304	)
Total stockholder’s equity		4651,~~959~~338			4147,~~975~~106
	$	~~382~~408,~~884~~364		$	~~361~~366,~~428~~382

UNITED REFINING COMPANY AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS—(Unaudited)

(in thousands)

	Three Months Ended						Six Months Ended
	Three Months EndedNovember 30,
	February 29, 2004			February 28, 2003			February 29, 2004			February 28, 2003
	2004			2003
Net sales	$	~~326~~426,~~965~~053		$	~~311~~330,~~429~~815		$	~~657,780~~		$	~~604,734~~
Costs of goods sold		~~290~~381,~~088~~495			~~269~~287,~~887~~004			~~577,092~~			~~535,206~~
Gross profit		3644,~~877~~558			4143,~~542~~811			~~80,688~~			~~69,528~~
Expenses:
Selling, general and administrative expenses		2728,~~431~~139			27,~~016~~503			~~54,934~~			~~53,344~~
Depreciation and amortization expenses		3,~~203~~342			3,~~303~~204			~~6,407~~			~~6,606~~
Total operating expenses		3031,~~634~~481			30,~~319~~707			~~61,341~~			~~59,950~~
Operating income		613,~~243~~077			1113,~~223~~104			~~19,347~~			~~9,578~~
Other income (expense):
Interest expense, net		(5,~~299~~713	)		(5,~~262~~170	)		~~(10,469~~	)		~~(10,463~~	)
Other, net		(~~510~~523	)		(~~220~~532	)		~~(1,042~~	)		~~(288~~	)
Equity in net earnings of affiliate		~~445~~206			~~217~~66			~~511~~			~~268~~
		(5,364	)		(5,265	)		(11,000	)		(10,483	)
		(6,030	)		(5,636	)
Income (loss) before income tax expense (benefit)		879			5,958			8,347			(905	)
Income before income tax expense		7,047			7,468
Income tax expense (benefit)		352			2,296			3,363			(349	)
Income tax expense		2,815			3,011
Net income (loss)	$	527		$	3,662		$	4,984		$	(556	)
Net income	$	4,232		$	4,457

UNITED REFINING COMPANY AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS—(Unaudited)

(in thousands)

	Six Months Ended
	Three Months Ended November 30,
	February 29, 2004			February 28, 2003
	2004			2003
Cash flows from operating activities:
Net income (loss)	$	4,984		$	(556	)
Net income	$	4,232		$	4,457
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Adjustments to reconcile net income to net cash (used in) provided by operating activities:
Depreciation and amortization		84,~~293~~334			84,~~429~~146
Equity in net earnings of affiliate		(~~511~~206	)		(~~268~~66	)
Deferred income taxes		31,~~098~~064			~~(865~~2,881	)
Loss on asset dispositions		9464			3994
Cash used in working capital items		(2725,~~525~~538	)		(239,~~244~~967	)
Change in operating assets and liabilities:
Deferred retirement benefits		~~(814~~792	)		~~732~~282
Other noncurrent liabilities		~~179~~(903	)		~~(450~~224	)
Total adjustments		(1720,~~186~~393	)		(152,~~627~~406	)
Net cash used in operating activities		(12,202	)		(16,183	)
Net cash (used in) provided by operating activities		(16,161	)		2,051
Cash flows from investing activities:
Additions to property, plant and equipment		(32,~~604~~259	)		(32,~~659~~217	)
Additions to turnaround costs		(1,231	)		(5,277	)
Additions to deferred turnaround costs		(415	)		(643	)
Net cash used in investing activities		(42,~~835~~674	)		(82,~~936~~860	)
Cash flows from financing activities:
Net borrowings on revolving credit facility		18,500			21,686
Net borrowings (reductions) on revolving credit facility		19,000			(1,000	)
Deferred financing costs		(498	)		—
Principal reductions of long-term debt		(190	)		(199	)
Principal reductions of long-term debt		(392	)		(113	)
Deferred financing costs		(3	)		—
Net cash provided by financing activities		17,610			21,573
Net cash provided by (used in) financing activities		18,807			(1,199	)
Net increase (decrease) in cash and cash equivalents		573			(3,546	)
Net decrease in cash and cash equivalents		(28	)		(2,008	)
Cash and cash equivalents, beginning of year		1311,~~819~~552			13,~~515~~819
Cash and cash equivalents, end of period	$	1411,~~392~~524		$	911,~~969~~811
Cash used in working capital items:
Accounts receivable, net	$	2(1,~~510~~445	)	$	(15,~~984~~454	)
Refundable income taxes		—			3,300
Inventories		(30,164	)		(13,420	)
Inventories		(23,652	)		(9,657	)
Prepaid expenses and other assets		(11,115	)		(6,087	)
Prepaid expenses and other assets		(5,891	)		(1,283	)
Accounts payable		12,812			(259	)
Accounts payable		(1,918	)		(12,037	)
Accrued liabilities		2,784			4,883
Accrued liabilities		1,088			2,002
Amounts due to affiliated companies, net		871			1,065
Amounts due to affiliated companies, net		2,020			685
Income taxes payable		1,772			—
Sales, use and fuel taxes payable		(1,~~682~~053	)		(41,~~270~~603	)
Total change	$	(2725,~~525~~538	)	$	(239,~~244~~967	)
Cash paid (received) during the period for:
Cash paid during the period for:
Interest	$	~~10,604~~412		$	~~10,604~~515
Income taxes	$	~~512~~110		$	~~(3,133~~145	)

UNITED REFINING COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

1. Description of Business and Basis of Presentation

The consolidated financial statements include the accounts of United Refining Company and its subsidiaries, United Refining Company of Pennsylvania and its subsidiaries, and Kiantone Pipeline Corporation (collectively, the “Company”). All significant intercompany balances and transactions have been eliminated in consolidation.

The Company is a petroleum refiner and marketer in its primary market area of Western New York and Northwestern Pennsylvania. Operations are organized into two business segments: wholesale and retail.

The wholesale segment is responsible for the acquisition of crude oil, petroleum refining, supplying petroleum products to the retail segment and the marketing of petroleum products to wholesale and industrial customers. The retail segment sells petroleum products under the Kwik Fill^®, Citgo^® and Keystone^® brand names through a network of Company-operated retail units and convenience and grocery items through gasoline stations and convenience stores under the Red Apple Food Mart^® and Country Fair^® brand names.

The Company is a wholly-owned subsidiary of United Refining, Inc., a wholly-owned subsidiary of United Acquisition Corporation, which in turn is a wholly-owned subsidiary of Red Apple Group, Inc. (the “Parent”).

The accompanying unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States of America for complete financial statements. In the opinion of management, all adjustments (consisting of only normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three ~~and~~months ~~six month periods~~ ended ~~February~~November 2930, 2004 are not necessarily indicative of the results that may be expected for the year ending August 31, ~~2004~~2005. For further information, refer to the consolidated financial statements and footnotes thereto included in the Company’s Form 10-K filing dated ~~December~~November 124, ~~2003~~2004.

2. Recent Accounting Pronouncements

In ~~January~~March ~~2003~~2004, the ~~FASB~~Emerging ~~issued~~Issues ~~Interpretation~~Task Force (“~~FIN~~EITF”) ~~No.~~reached ~~46, “Consolidation of Variable Interest Entities” and in December 2003,~~ a ~~revised~~consensus ~~interpretation~~on ~~was~~Issue ~~issued (FIN~~ No. ~~46(R)). In general~~03-1, a ~~variable interest entity (~~“~~VIE”)~~The isMeaning aof ~~corporation,~~Other-Than-Temporary ~~partnership,~~Impairments ~~trust,~~and orIts ~~any~~Application ~~other~~to ~~legal~~Certain ~~structure~~Investments” (“EITF ~~used~~03-1”). ~~for~~EITF ~~business~~03-1 ~~purposes~~provides ~~that~~a ~~either~~three-step ~~does~~impairment ~~not~~model ~~have equity investors with voting rights or has equity investors that do not provide sufficient financial resources~~ for ~~the~~determining ~~entity~~whether toan ~~support~~investment ~~its~~is ~~activities.~~other-than-temporarily ~~FIN~~impaired 46and requires athe ~~VIE~~Company to berecognize ~~consolidated~~such byimpairments ~~a company if that company is designated~~ as ~~the~~an ~~primary~~impairment ~~beneficiary.~~loss ~~The~~equal ~~interpretation applies~~ to ~~VIEs~~the ~~created~~difference between ~~after~~the ~~January~~investment’s ~~31, 2003,~~cost and ~~for~~fair ~~all~~value ~~financial~~at ~~statements~~the ~~issued~~reporting ~~after December 15, 2003 for VIEs in which an enterprise held a variable interest that it acquired before February 1, 2003~~date. The adoption of ~~FIN~~EITF 4603-1 did not have a material effect on ~~the~~its ~~Company’s~~ financial position or results of operations.

3. ~~Subsidiary~~Inventories ~~Guarantors~~

~~Certain~~As of ~~United~~November ~~Refining~~30, ~~Company’s~~2004 (and August 31, 2004, the ~~“issuer”)~~replacement ~~subsidiaries~~cost ~~function~~of asLIFO ~~guarantors~~inventories ~~under~~exceeded ~~the~~their ~~terms~~LIFO ofcarrying ~~the~~values by approximately $~~200~~28,825,000 and $19,515,000, ~~Senior~~respectively. ~~Unsecured~~The ~~Note~~November ~~Indenture~~30, ~~due~~2004 ~~June~~LIFO 9,calculation ~~2007.~~was ~~Financial~~computed ~~information~~using ~~for~~quantities and prices which are not necessarily indicative of the ~~issuer~~actual quantities and ~~its~~prices ~~wholly~~which will exist at fiscal year-end. Due to anticipated decreases in ~~owned~~inventory ~~subsidiary~~levels ~~guarantors~~and the many factors which enter into the LIFO calculation which are beyond management’s control, it is asthe ~~follows:~~policy of the Company to record the LIFO inventory adjustment only at fiscal year-end.

84. Subsidiary Guarantors

Certain of United Refining Company’s (the “issuer”) subsidiaries function as guarantors under the terms of the $200,000,000 Senior Unsecured Note Indenture due August 15, 2012. Financial information for the issuer and its wholly owned subsidiary guarantors is as follows:

UNITED REFINING COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Unaudited)

CONDENSED CONSOLIDATING BALANCE SHEETS

(in thousands)

	February 29, 2004												August 31, 2003
	November 30, 2004												August 31, 2004
	Issuer			Guarantors			Eliminations			Consolidated			Issuer			Guarantors			Eliminations			Consolidated
Assets
Current:
Cash and cash equivalents	$	23,~~644~~444		$	118,~~748~~080		$	—		$	1411,~~392~~524		$	34,~~383~~709		$	106,~~436~~843		$	—		$	1311,~~819~~552
Accounts receivable, net		3033,~~597~~292			912,~~625~~749			—			4046,~~222~~041			3133,~~780~~459			1011,~~952~~137			—			4244,~~732~~596
Inventories		8083,~~189~~217			1922,~~586~~570			—			99105,~~775~~787			5554,~~435~~481			2021,~~688~~142			—			7675,~~123~~623
Prepaid expenses and other assets		1123,~~284~~243			45,~~943~~119			—			1628,~~227~~362			912,~~453~~090			~~883~~5,157			—			1017,~~336~~247
Amounts due from affiliated companies, net		—			—			—			—			1,186			(547	)		—			639
Intercompany		94,022			18,894			(112,916	)		—			87,468			19,223			(106,691	)		—
Intercompany		96,025			18,823			(114,848	)		—			88,123			19,467			(107,590	)		—
Total current assets		237,218			67,412			(112,916	)		191,714			192,207			63,502			(106,691	)		149,018
Total current assets		220,739			64,725			(114,848	)		170,616			189,360			61,879			(107,590	)		143,649
Property, plant and equipment, net		114,429			69,276			—			183,705			115,363			69,342			—			184,705
Property, plant and equipment, net		115,175			69,218			—			184,393			117,149			69,730			—			186,879
Investment in affiliated company		1,052			—			—			1,052			846			—			—			846
Investment in affiliated company		1,085			—			—			1,085			574			—			—			574
Deferred financing costs, net		6,479			—			—			6,479			6,723			—			—			6,723
Deferred financing costs, net		3,029			—			—			3,029			2,963			—			—			2,963
Goodwill and other non-amortizable assets		—			11,849			—			11,849			—			11,849			—			11,849
Amortizable intangible assets, net		—			3,~~415~~728			—			3,~~415~~728			—			3,~~588~~103			—			3,~~588~~103
Deferred turnaround costs & other assets, net		79,~~157~~214			1,~~900~~794			(1,171	)		79,~~886~~837			89,~~204~~462			1,~~184~~847			(1,171	)		810,~~217~~138
Deferred income taxes		—			611			—			611			7,455			(3,746	)		—			3,709
	$	368,392		$	154,059		$	(114,087	)	$	408,364		$	324,601		$	149,643		$	(107,862	)	$	366,382
	$	347,185		$	151,718		$	(116,019	)	$	382,884		$	325,705		$	144,484		$	(108,761	)	$	361,428
Liabilities and Stockholder’s Equity
Current:
Revolving credit facility	$	5032,000		$	—		$	—		$	5032,000		$	3113,~~500~~000		$	—		$	—		$	3113,~~500~~000
Current installments of long-term debt		90(179	)		~~540~~633			—			~~630~~454			89(181	)		~~594~~633			—			~~683~~452
Accounts payable		2128,~~570~~235			1113,~~623~~309			—			3341,~~193~~544			1914,~~906~~530			1514,~~205~~202			—			3528,~~111~~732
Accrued liabilities		13,225			3,570			—			16,795			11,708			3,999			—			15,707
Income taxes payable		2,659			(92	)		—			2,567			958			(163	)		—			795
Sales, use and fuel taxes payable		13,724			2,447			—			16,171			14,891			2,962			—			17,853
Accrued liabilities		13,841			5,243			—			19,084			11,100			5,200			—			16,300
Deferred income taxes		5,123			34			—			5,157			5,123			34			—			5,157
Sales, use and fuel taxes payable		15,236			3,177			—			18,413			16,217			3,249			—			19,466
Amounts due to affiliated companies, net		1,260			121			—			1,381			—			—			—			—
Deferred income taxes		4,363			(444	)		—			3,919			4,363			(444	)		—			3,919
Intercompany		—			114,848			(114,848	)		—			—			107,590			(107,590	)		—
Amounts due to affiliated companies, net		812			191			—			1,003			(206	)		338			—			132
Total current liabilities		104,992			133,183			(114,848	)		123,327			83,217			130,384			(107,590	)		106,011
Intercompany		—			112,916			(112,916	)		—			—			106,691			(106,691	)		—
Long term debt: less current installments		180,329			1,676			—			182,005			180,375			1,852			—			182,227
Total current liabilities		96,967			134,933			(112,916	)		118,984			59,781			129,706			(106,691	)		82,796
Deferred income taxes		(3,315	)		3,315			—			—			1,037			(1,037	)		—			—
Long term debt: less current installments		198,121			1,266			—			199,387			198,076			1,420			—			199,496
Deferred gain on settlement of pension plan obligations		1,022			—			—			1,022			1,130			—			—			1,130
Deferred income taxes		(836	)		3,798			—			2,962			(1,845	)		3,743			—			1,898
Deferred retirement benefits		26,508			1,076			—			27,584			27,174			1,224			—			28,398
Deferred gain on settlement of pension plan obligations		861			—			—			861			915			—			—			915
Other noncurrent liabilities		—			1,987			—			1,987			—			1,687			—			1,687
Deferred retirement benefits		32,316			878			—			33,194			31,236			1,166			—			32,402
Total liabilities		309,536			141,237			(114,848	)		335,925			292,933			134,110			(107,590	)		319,453
Other noncurrent liabilities		—			1,638			—			1,638			—			1,769			—			1,769
Total liabilities		327,429			142,513			(112,916	)		357,026			288,163			137,804			(106,691	)		319,276
Commitment and contingencies
Stockholder’s equity
Common stock, $.10 par value per share—shares authorized 100; issued and outstanding 100		—			18			(18	)		—			—			18			(18	)		—
Additional paid-in capital		7,150			10,651			(1,153	)		16,648			7,150			10,651			(1,153	)		16,648
Retained earnings		3136,~~539~~061			~~(188~~933	)		—			3136,~~351~~994			2631,~~662~~536			~~(295~~1,226	)		—			2632,~~367~~762
Accumulated other comprehensive loss		(12,~~040~~248	)		—(56	)		—			(12,~~040~~304	)		(12,~~040~~248	)		—(56	)		—			(12,~~040~~304	)
Total stockholder’s equity		3740,~~649~~963			1011,~~481~~546			(1,171	)		4651,~~959~~338			3236,~~772~~438			1011,~~374~~839			(1,171	)		4147,~~975~~106
	$	~~347~~368,~~185~~392		$	~~151~~154,~~718~~059		$	(~~116~~114,~~019~~087	)	$	~~382~~408,~~884~~364		$	~~325~~324,~~705~~601		$	~~144~~149,~~484~~643		$	(~~108~~107,~~761~~862	)	$	~~361~~366,~~428~~382

UNITED REFINING COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Unaudited)

CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS

(in thousands)

	Three Months Ended February 29, 2004												Three Months Ended February 28, 2003
	Three Months Ended November 30, 2004												Three Months Ended November 30, 2003
	Issuer			Guarantors			Eliminations			Consolidated			Issuer			Guarantors			Eliminations			Consolidated
Net sales	$	~~215~~294,~~170~~205		$	~~173~~218,~~962~~419		$	(6286,~~167~~571	)	$	~~326~~426,~~965~~053		$	~~201~~205,~~020~~274		$	~~171~~183,~~409~~089		$	(6157,~~000~~548	)	$	~~311~~330,~~429~~815
Costs of goods sold		~~198~~275,~~800~~237			~~153~~192,~~455~~829			(6286,~~167~~571	)		~~290~~381,~~088~~495			~~181~~191,~~596~~224			~~149~~153,~~291~~328			(6157,~~000~~548	)		~~269~~287,~~887~~004
Gross profit		1618,~~370~~968			2025,~~507~~590			—			3644,~~877~~558			1914,~~424~~050			2229,~~118~~761			—			4143,~~542~~811
Expenses:
Selling, general and administrative expenses		4,~~201~~428			23,~~230~~711			—			2728,~~431~~139			4,~~082~~698			22,~~934~~805			—			27,~~016~~503
Depreciation and amortization expenses		2,~~144~~218			1,~~059~~124			—			3,~~203~~342			2,~~170~~144			1,~~133~~060			—			3,~~303~~204
Total operating expenses		6,~~345~~646			24,~~289~~835			—			3031,~~634~~481			6,~~252~~842			2423,~~067~~865			—			30,~~319~~707
Operating income (loss)		10,025			(3,782	)		—			6,243			13,172			(1,949	)		—			11,223
Operating income		12,322			755			—			13,077			7,208			5,896			—			13,104
Other income (expense):
Interest expense, net		(4,~~323~~443	)		(~~976~~1,270	)		—			(5,~~299~~713	)		(4,~~206~~231	)		(~~1,056~~939	)		—			(5,~~262~~170	)
Other, net		(~~604~~614	)		9490			—			(~~510~~524	)		(~~335~~572	)		~~115~~40			—			(~~220~~532	)
Equity in net earnings of affiliate		~~445~~207			—			—			~~445~~207			~~217~~66			—			—			~~217~~66
		(4,482	)		(882	)		—			(5,364	)		(4,324	)		(941	)		—			(5,265	)
		(4,850	)		(1,180	)		—			(6,030	)		(4,737	)		(899	)		—			(5,636	)
Income (loss) before income tax expense (benefit)		57,~~543~~472			(~~4,664~~425	)		—			~~879~~7,047			82,~~848~~471			(24,~~890~~997	)		—			57,~~958~~468
Income tax expense (benefit)		2,~~171~~947			(~~1,819~~132	)		—			~~352~~2,815			~~3,413~~966			(12,~~117~~045	)		—			23,~~296~~011
Net income (loss)	$	34,~~372~~525		$	(~~2,845~~293	)	$	—		$	~~527~~4,232		$	51,~~435~~505		$	(12,~~773~~952	)	$	—		$	34,~~662~~457

109

UNITED REFINING COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Unaudited)

CONDENSED CONSOLIDATING STATEMENTS OF ~~OPERATIONS~~CASH FLOWS

(in thousands)

	Six Months Ended February 29, 2004														Six Months Ended February 28, 2003
	Three Months Ended November 30, 2004													Three Months Ended November 30, 2003
	Issuer			Guarantors			Eliminations			Consolidated	~~Consolidated~~			Issuer	~~Issuer~~			Guarantors	~~Guarantors~~			Eliminations	~~Eliminations~~		Consolidated		~~Consolidated~~
Net sales	$	420,444		$	357,051		$	(119,715	)		$	657,780			$	374,280			$	347,966			$	(117,512	)		$	604,734
Net cash (used in) provided by operating activities	$	(18,527	)	$	2,366		$	—		$	(16,161	)		$	2,071			$	(20	)		$	—		$	2,051
Costs of goods sold		390,024			306,783			(119,715	)			577,092				352,365				300,353				(117,512	)			535,206
Cash flows from investing activities:
Gross profit		30,420			50,268			—				80,688				21,915				47,613				—				69,528
Additions to property, plant and equipment		(1,284	)		(975	)		—			(2,259	)			(1,425	)			(792	)			—			(2,217	)
Expenses:
Additions to deferred turnaround costs		(415	)		—			—			(415	)			(149	)			(494	)			—			(643	)
Selling, general and administrative expenses		8,899			46,035			—				54,934				8,117				45,227				—				53,344
Net cash used in investing activities		(1,699	)		(975	)		—			(2,674	)			(1,574	)			(1,286	)			—			(2,860	)
Depreciation and amortization expenses		4,288			2,119			—				6,407				4,340				2,266				—				6,606
Cash flows from financing activities:
Total operating expenses		13,187			48,154			—				61,341				12,457				47,493				—				59,950
Net borrowings (reductions) on revolving credit facility		19,000			—			—			19,000				(1,000	)			—				—			(1,000	)
Operating income (loss)		17,233			2,114			—				19,347				9,458				120				—				9,578
Principal reductions of long-term debt		(36	)		(154	)		—			(190	)			(21	)			(178	)			—			(199	)
Other income (expense):
Deferred financing costs		(3	)		—			—			(3	)			—				—				—			—
Interest expense, net		(8,554	)		(1,915	)		—				(10,469	)			(8,331	)			(2,132	)			—				(10,463	)
Net cash provided by (used in) financing activities		18,961			(154	)		—			18,807				(1,021	)			(178	)			—			(1,199	)
Other, net		(1,176	)		134			—				(1,042	)			(605	)			317				—				(288	)
Net (decrease) increase in cash and cash equivalents		(1,265	)		1,237			—			(28	)			(524	)			(1,484	)			—			(2,008	)
Equity in net earnings of affiliate		511			—			—				511				268				—				—				268
Cash and cash equivalents, beginning of year		4,709			6,843			—			11,552				3,383				10,436				—			13,819
		(9,219	)		(1,781	)		—				(11,000	)			(8,668	)			(1,815	)			—				(10,483	)
Cash and cash equivalents, end of period	$	3,444		$	8,080		$	—		$	11,524			$	2,859			$	8,952			$	—		$	11,811
Income (loss) before income tax expense (benefit)		8,014			333			—				8,347				790				(1,695	)			—				(905	)
Income tax expense (benefit)		3,137			226			—				3,363				224				(573	)			—				(349	)
Net income (loss)	$	4,877		$	107		$	—			$	4,984			$	566			$	(1,122	)		$	—			$	(556	)

1110

UNITED REFINING COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Unaudited)

~~CONDENSED~~5. Segments ~~CONSOLIDATING~~of ~~STATEMENTS~~Business ~~OF CASH FLOWS~~

Intersegment revenues are calculated using estimated market prices and are eliminated upon consolidation. Summarized financial information regarding the Company’s reportable segments is presented in the following tables (in thousands):

	Six Months Ended February 29, 2004												Six Months Ended February 28, 2003
	Three Months EndedNovember 30,
	Issuer				Guarantors			Eliminations		Consolidated			Issuer			Guarantors			Eliminations		Consolidated
	2004			2003
Net cash (used in) provided by operating activities	$	(15,932	)		$	3,730		$	—	$	(12,202	)	$	(14,727	)	$	(1,456	)	$	—	$	(16,183	)
Net Sales
Cash flows from investing activities:
Retail	$	217,277		$	181,863
Additions to property, plant and equipment		(2,318	)			(1,286	)		—		(3,604	)		(3,042	)		(617	)		—		(3,659	)
Wholesale		208,776			148,952
Additions to deferred turnaround costs		(446	)			(785	)		—		(1,231	)		(5,277	)		—			—		(5,277	)
	$	426,053		$	330,815
Net cash used in investing activities		(2,764	)			(2,071	)		—		(4,835	)		(8,319	)		(617	)		—		(8,936	)
Intersegment Sales
Cash flows from financing activities:
Wholesale	$	85,429		$	56,322
Net borrowings on revolving credit facility		18,500				—			—		18,500			21,686			—			—		21,686
Operating Income
Deferred financing costs		(498	)			—			—		(498	)		—			—			—		—
Retail	$	552		$	5,789
Principal reductions of long-term debt		(45	)			(347	)		—		(392	)		(37	)		(76	)		—		(113	)
Wholesale		12,525			7,315
Net cash provided by (used in) financing activities		17,957				(347	)		—		17,610			21,649			(76	)		—		21,573
	$	13,077		$	13,104
Net increase (decrease) in cash and cash equivalents		(739	)			1,312			—		573			(1,397	)		(2,149	)		—		(3,546	)
Depreciation and Amortization
Cash and cash equivalents, beginning of year		3,383				10,436			—		13,819			4,254			9,261			—		13,515
Retail	$	1,074		$	1,012
Cash and cash equivalents, end of period	$	2,644			$	11,748		$	—	$	14,392		$	2,857		$	7,112		$	—	$	9,969
Wholesale		2,268			2,192
	$	3,342		$	3,204


	November 30, 2004		August 31, 2004
Total Assets
Retail	$	127,601	$	123,069
Wholesale		280,763		243,313

	$	408,364	$	366,382

Capital Expenditures (including non-cash)
Retail	$	925	$	3,559
Wholesale		1,334		7,206

	$	2,259	$	10,765

UNITED REFINING COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Unaudited)

46. ~~Segments~~Employee ofBenefit ~~Business~~Plans

~~Intersegment~~For ~~revenues~~the ~~are~~periods ~~calculated~~ended ~~using~~November ~~estimated~~30, ~~market~~2004 ~~prices~~ and ~~are~~2003, ~~eliminated~~net ~~upon~~pension ~~consolidation.~~and ~~Summarized~~other ~~financial~~postretirement ~~information~~benefit ~~regarding~~costs ~~the~~were ~~Company’s~~comprised ~~reportable~~of ~~segments is presented in~~ the following ~~tables (in thousands)~~:

	Three Months Ended						Six Months Ended
	Pension Benefits						Other Post-Retirement Benefits
	February 29, 2004			February 28, 2003			February 29, 2004		February 28, 2003
	Three Months EndedNovember 30,						Three Months Ended November 30,
Net Sales
	2004			2003			2004		2003
Retail	$	172,781		$	170,255		$	354,644	$	345,914
	(in thousands)
Wholesale		154,184			141,174			303,136		258,820
Service cost	$	598		$	541		$	386	$	372
	$	326,965		$	311,429		$	657,780	$	604,734
Interest cost on benefit obligation		885			867			595		619
Intersegment Sales
Expected return on plan assets		(801	)		(700	)		—		—
Wholesale	$	60,986		$	59,846		$	117,308	$	115,460
Amortization of transition obligation		35			35			149		149
Operating Income (Loss)
Amortization and deferral of net loss		223			157			121		135
Retail	$	(3,961	)	$	(2,482	)	$	1,828	$	(328	)
Net periodic benefit cost	$	940		$	900		$	1,251	$	1,275
Wholesale		10,204			13,705			17,519		9,906
	$	6,243		$	11,223		$	19,347	$	9,578
Depreciation and Amortization
Retail	$	1,010		$	1,071		$	2,022	$	2,142
Wholesale		2,193			2,232			4,385		4,464
	$	3,203		$	3,303		$	6,407	$	6,606

	February 29, 2004		August 31, 2003
Total Assets
Retail	$	125,824	$	119,709
Wholesale		257,060		241,719
	$	382,884	$	361,428
Capital Expenditures (including non-cash)
Retail	$	1,320	$	2,456
Wholesale		2,401		6,768
	$	3,721	$	9,224

As of November 30, 2004, $2,782,000 of contributions have been made to the Company pension plans. The Company presently anticipates contributing an additional $1,167,000 to fund its pension plans in fiscal 2005 for a total of $3,949,000.

57. ~~Secured Credit~~Derivative ~~Facility~~Financial Instruments

~~Effective~~At ~~January~~August 2731, 2004, the Company ~~amended~~ ~~its~~had ~~secured~~net ~~credit~~open ~~facility~~future topositions ~~increase~~of ~~the maximum facility commitment from $50~~750,000~~,000~~ barrels toof ~~$75,000,000~~crude ~~on a permanent basis. The facility expires on May 9~~oil, ~~2007,~~all ~~and~~of iswhich ~~secured~~expired byduring ~~certain~~the ~~cash~~first ~~accounts,~~quarter ~~accounts~~of ~~receivable, and inventory~~2005. The ~~interest~~resulting ~~rate~~loss on ~~borrowings varies with~~ the ~~Company’s~~expiration ~~earnings and is based on the higher~~ of the ~~bank’s~~future ~~prime~~positions ~~rate~~amounts orto ~~Federal~~$1,495,000. ~~funds~~The ~~rate~~Company ~~for~~has ~~base~~no ~~rate~~open ~~borrowings~~future ~~and~~positions ~~the~~at ~~LIBOR~~November ~~rate~~30, ~~for Euro-Rate borrowings~~2004.

~~The~~12 ~~Company had outstanding letters of credit of $615,000 and approximately $24,385,000 unused and available on the facility as of February 29, 2004.~~

UNITED REFINING COMPANY AND SUBSIDIARIES

ITEM 2.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Forward Looking Statements

This Quarterly Report on Form ~~10Q~~10-Q ~~includes~~contains certain statements that constitute “forward looking statements” within the meaning of ~~Section 27A of~~ the Private Securities Litigation Reform Act of ~~1933~~1995. ~~and~~These ~~Section~~forward ~~21E~~looking ofstatements ~~the~~may ~~Securities~~include, ~~Exchange~~among ~~Act~~other ofthings, ~~1934~~United Refining Company and ~~that~~its ~~are~~subsidiaries ~~intended~~current toexpectations ~~come~~with ~~within~~respect ~~the~~to ~~safe~~future ~~harbor~~operating ~~protection~~results, ~~provided~~future byperformance ~~those~~of ~~sections.~~its refinery Byand ~~their~~retail ~~nature~~operations, ~~all~~capital ~~forward~~expenditures ~~looking~~and ~~statements~~other ~~involve~~financial ~~risk~~items. ~~and~~Words ~~uncertainties. Actual~~such ~~results~~as “expects”, “intends”, “plans”, “projects”, “believes”, “estimates”, “may”, “will”, ~~differ~~“should”, ~~materially~~“shall”, ~~from~~“anticipates”, ~~those~~“predicts”, ~~contemplated~~and bysimilar ~~the~~expressions typically identify such forward looking statements ~~for~~in athis ~~number~~Quarterly ofReport ~~reasons~~on Form 10-Q.

~~Although~~By ~~the~~their ~~Company believes that its expectations are based on reasonable assumptions within the bounds of its knowledge~~nature, ~~investors~~all ~~and~~forward ~~prospective investors~~looking ~~are cautioned that such~~ statements ~~are~~involve ~~only~~risk ~~projections~~ and ~~that actual events or results may differ materially from those expressed in any such forward-looking statements~~ uncertainties. InAll ~~addition~~phases toof the ~~factors discussed elsewhere in this report, the~~ Company’s ~~actual~~operations ~~consolidated~~involve quarterly or annual operating results have been affected in the past, or could be affected in the future, by additional factors, including, without limitation, general economic, business and market conditions; risks and uncertainties, ~~with~~many ~~respect to the actions~~ of ~~actual~~which orare ~~potential~~outside ~~competitive suppliers~~ of ~~refined petroleum products in~~ the Company’s ~~markets~~control, ~~the demand for~~ and ~~supply~~any one of ~~crude oil and refined products~~which, ~~the~~or ~~spread~~a ~~between~~combination ~~market prices~~of ~~for~~which, ~~refined~~could ~~products~~materially ~~and~~affect ~~market prices for crude oil,~~ the ~~possibility~~Company’s results of ~~inefficiencies or shutdowns in refinery~~ operations orand ~~pipelines,~~whether the ~~availability~~forward ~~and~~looking ~~cost~~statements ofultimately ~~financing~~prove to ~~the~~be ~~Company,~~correct. ~~environmental,~~Actual ~~tax~~results ~~and~~may ~~tobacco~~differ ~~legislation~~materially ~~or regulation;~~from ~~volatility~~those ofcontemplated ~~gasoline~~by ~~prices,~~the ~~margins~~forward ~~and~~looking ~~supplies;~~statements ~~merchandising~~for ~~margins;~~a ~~labor~~number ~~costs; level~~ of ~~capital expenditures; customer traffic; weather conditions; acts of terrorism and war~~ reasons.

Although we believe our expectations are based on reasonable assumptions within the bounds of its knowledge, investors and prospective investors are cautioned that such statements are only projections and that actual events or results may differ materially depending on a variety of factors described in greater detail in the Company’s filings with the SEC, including quarterly reports on Form 10-Q, annual reports on Form 10-K, reports on Form 8-K, etc. In addition to the factors discussed elsewhere in this Quarterly Report 10-Q, the Company’s actual consolidated quarterly or annual operating results have been affected in the past, or could be affected in the future, by additional factors, including, without limitation:

•

repayment of debt;

•

general economic, business and market conditions;

•

risks and uncertainties with respect to the actions of actual or potential competitive suppliers of refined petroleum products in our markets;

•

the demand for and supply of crude oil and refined products;

•

the spread between market prices for refined products and market prices for crude oil;

•

the possibility of inefficiencies or shutdowns in refinery operations or pipelines;

•

the availability and cost of financing to us;

•

environmental, tax and tobacco legislation or regulation;

•

volatility of gasoline prices, margins and supplies;

•

merchandising margins;

•

labor costs;

•

level of capital expenditures;

•

customer traffic;

•

weather conditions;

•

acts of terrorism and war;

•

business strategies;

•

expansion and growth of operations;

•

future projects and investments;

•

future exposure to currency devaluations or exchange rate fluctuations;

•

expected outcomes of legal and administrative proceedings and their expected effects on our financial position, results of operations and cash flows;

•

future operating results and financial condition; and

•

the effectiveness of our disclosure controls and procedures and internal control over financial reporting.

All subsequent written and oral forward looking statements attributable to the Company or persons acting on its behalf are expressly qualified in their entirety by the foregoing. We undertake no obligation to update any information contained herein or to publicly release the results of any revisions to any such forward looking statements that may be made to reflect events or circumstances that occur, or which we becomes aware of, after the date of this Quarterly Report on Form 10-Q.

Recent Developments

~~Fiscal~~The ~~second~~Company’s results for first fiscal quarter ~~2004~~2005 were impacted by high worldwide crude oil prices. Fiscal first quarter 2005 worldwide crude oil prices, as indicated by prices of crude oil contracts on the New York Mercantile Exchange (NYMEX), ~~increased~~for ~~steadily~~delivery ~~from~~in ~~December~~the ~~2003~~fiscal atquarter, averaged $3147.0697/BBL, ~~to February 2004 at $34~~59.~~22/BBL~~4% orhigher bythan ~~about~~the ~~10%.~~prior ~~For~~year ~~the~~first ~~recent~~fiscal quarter. ~~compared~~The tocomparable ~~the~~first ~~prior~~fiscal ~~year~~ quarter, 2004 ~~average~~NYMEX crude oil prices ~~have~~averaged ~~increased about 10% from~~ $2930.4309/BBL to, $3217.4788/BBL. ~~NYMEX~~less ~~Crude~~than ~~oil~~the ~~prices~~current ~~have~~three ~~continued~~month toaverage ~~increase with prices in late March~~ for ~~May crude delivery hovering just under $36/BBL~~2005. ~~March 2004 will likely record the highest average calendar month~~ NYMEX crude ~~price~~oil ~~(about~~prices ~~$36.50/BBL) since~~for ~~futures~~delivery ~~trading began~~ in ~~1983.~~the ~~The~~second ~~current~~fiscal ~~record~~quarter ~~average~~2005, ~~price~~to ~~is $35.92/BBL set in October 1990~~date, ~~two~~are ~~months~~averaging ~~after~~approximately ~~Iraq’s invasion of Kuwait~~$46/BBL.

~~For~~Industry-wide ~~second~~wholesale ~~quarter~~margins ofon gasoline and distillate for the fiscal quarter ~~2004~~ended ~~compared~~November to30, 2004 versus the ~~prior~~comparable ~~year~~fiscal quarter ended November 30, 2003, as indicated by the ~~Company’s~~difference ~~average~~between ~~crude~~the ~~run~~prices ~~cost~~of ~~per~~crude ~~barrel~~oil ~~increased~~contracts ~~5.2%~~traded ~~reflecting~~on the ~~10%~~ ~~market~~NYMEX ~~trend~~and ~~mentioned~~the ~~above.~~prices ~~When~~of ~~comparing~~NYMEX ~~the~~gasoline ~~second~~and ~~quarter~~heating ~~fiscal~~oil ~~2004~~contracts, increased to45% ~~the~~for ~~first~~gasoline ~~quarter~~and ~~fiscal~~64% ~~2004~~for heating oil, ~~the~~as ~~Company’s~~increases ~~average~~in ~~crude~~wholesale ~~run~~gasoline ~~cost~~and ~~per~~distillate ~~barrel~~prices ~~increased~~kept 4pace with rising crude oil prices.~~5%.~~

~~Recent~~Increasing crude oil ~~prices~~and ~~remain~~product ~~volatile~~prices asreached ~~shown~~their byhighest ~~prompt~~point ~~futures~~in onNYMEX ~~the~~trading ~~New~~in ~~York~~late ~~Mercantile~~October. ~~Exchange~~This ~~(NYMEX)~~had ~~falling from~~ a ~~high~~limited ofimpact ~~$38.50/BBL~~ on ~~March~~our 19fiscal toquarter crude aoil ~~low~~cost ofas ~~$34.75/BBL~~our onNovember ~~March~~crude 26cost inwas ~~reaction~~largely toestablished ~~the~~by ~~fifth~~trading ~~crude~~prior ~~stock~~to ~~build in~~ the USlate ~~during~~October ~~the~~price ~~past six weeks~~peak. ~~Increased~~However, ~~demand~~fiscal ~~stemming~~quarter ~~from~~wholesale ~~robust~~product ~~economic~~prices ~~activity in the US~~ and ~~the~~margin ~~developing~~were ~~economies~~impacted ~~of Asia~~by ~~(particularly~~NYMEX ~~China)~~price ~~has~~declines ~~contributed~~following tothe ~~crude’s~~late ~~recent~~October ~~rise to nearly $40/BBL~~price peak.

~~The~~September ~~higher~~and ~~crude~~October ~~prices~~2004 ~~are~~retail ~~keeping~~product ~~gasoline~~margins ~~and~~were pressured ~~diesel~~by ~~prices~~rising ~~high.~~NYMEX ~~Oil~~ prices ~~have~~and ~~remained~~declined ~~high~~versus ~~partly~~the ~~due~~comparable toperiod ~~demand~~in ~~(led~~first byquarter ~~China)~~2004. ~~and~~This tois ~~the~~somewhat ~~market’s~~typical ~~impression~~in ~~that~~a ~~OPEC~~rising ~~will~~crude ~~keep~~oil ~~its~~price ~~commitment~~market toas ~~cut supply~~there ~~starting~~is ~~April~~a 1,lag ~~plus~~between ~~ongoing~~increased ~~civil~~crude ~~unrest~~oil inprices ~~Venezuela~~and ~~that~~corresponding ~~intensified~~retail ~~supply~~product prices. ~~concerns~~November ~~given~~retail ~~expectations~~product ofmargins, aby ~~tight market~~contrast, ~~and~~benefited from the ~~relatively~~reduced ~~low~~wholesale ~~gasoline~~prices ~~inventory~~resulting ~~and~~from ~~perceived~~the ~~tightness~~NYMEX inprice ~~gasoline~~declines ~~supply~~late ~~heading~~in ~~into~~ the ~~summer driving~~fiscal ~~season~~quarter. ~~Freezing~~As ~~temperatures~~a ~~across~~result, ~~much~~November of2004 ~~the~~retail USproduct ~~East~~margins ~~Coast~~improved inwhen ~~January~~compared ~~and~~to November ~~February~~2003.

Current NYMEX crude and product prices continue to be volatile and have declined from first quarter 2005 levels. This trend continues to pressure our wholesale margins for December while benefiting retail product margins.

We continue to benefit from our ability to process a significant percentage of heavy, high sulfur grades of crude oil. The first fiscal quarter of 2005 showed the price spread between heavy high sulfur crude oils and light low sulfur crude oil was 60% greater than the first fiscal quarter of 2004, on average. As a result of this increase

~~boosted~~in ~~winter~~crude ~~fuel~~price ~~consumption~~discounts, ~~and~~our ~~depleted~~average ~~regional~~crude ~~heating~~cost ~~oil~~relative ~~stocks.~~to ~~Unseasonably~~the ~~strong~~NYMEX ~~gasoline~~average ~~demand~~crude ~~and~~cost ~~attempts~~was lower by ~~refiners~~$6.53/BBL tofor ~~cut~~the ~~winter-grade~~first fiscal quarter 2005. For the ~~stocks~~first ~~ahead~~fiscal ofquarter 2004, our average crude cost was $2.94/BBL lower than the ~~summer~~NYMEX ~~driving~~average ~~season~~crude ~~hurt~~cost. ~~already~~The ~~low~~benefit ~~gasoline~~of ~~stocks~~increased ~~and~~crude ~~drove~~oil ~~gasoline~~price ~~prices~~discounts continues to ~~record~~positively ~~high~~impact ~~recently~~wholesale margins.

Compared to the prior year quarter, retail distillate margins per gallon increased 22.7%, but were offset by a 16.1% decrease in retail gasoline margins on a per gallon basis that unfavorably impacted gross profit. Additionally, when comparing the second quarter fiscal 2004 to the first quarter fiscal 2004, the Company realized a 48.9% decrease in retail gasoline margins per gallon and a 31.4% decrease in retail distillate margins per gallon.

Also, for the quarter ended February 29, 2004 compared to the prior year quarter price increases in the wholesale sector were realized for wholesale gasoline and distillate while asphalt prices decreased.

The Company has completed Phase 1 of the USEPA approved Tier 2 Sulfur in Gasoline Compliance Plan which has resulted in reducing the total gasoline pool sulfur to the required level starting January 1, 2004. Phase 2 of the Gasoline Sulfur Plan does not require further reductions until June 2006. The Company is investigating several options to meet these low sulfur gasoline requirements.

Another factor creating upward price and margin volatility in calendar 2004 is the introduction of new gasoline specifications. More stringent requirements on fuel sulfur content mandated by the EPA will result in a tighter supply of refined products. Some experts predict a continuing tight market for gasoline, which will probably set a record for demand in calendar 2004. As of late March, US gasoline demand is more than 4% higher than last year. Although US production in 2004 is higher by about 2.4% compared to 2003, imports have decreased since fewer foreign refiners can produce the Tier 2 low sulfur gasoline now required by law.

Given the variety of different gasoline types (about 18) now produced in the US and the state bans on MTBE in New York and Connecticut, the division within the gasoline market continues, making it more difficult to supply the growing market and reducing the flexibility to deal with crises like the recent Venezuelan strike, or even the effect of extreme weather. The upcoming anticipated gasoline supply imbalance is not expected to be eased by talks that the government might relax the clean-air requirements in certain states. Industry experts indicate that the waivers would not have much of a short-term impact since refineries and distributors have already made their configurations to meet summer gasoline specifications.

The Company’s results continued to be influenced by the price discounts on heavy sour crude oils. Since the Company’s crude supply is comprised of approximately equal proportions of sour and sweet crude, the difference between their prices (“sweet-sour differential”) impacts the costs of goods sold and hence gross profit.

For the recent quarter compared to the prior year quarter and compared to the first quarter of 2004, the Company realized a favorable 41.7% increase and a 12.8% increase, respectively in the light/heavy crude price differential. This differential was $10.64/BBL for the second quarter of fiscal 2004 and is the highest differential since the third quarter of 2001 ($12.48/BBL).

Results of Operations

A discussion and analysis of the factors contributing to the Company’s results of operations are presented below. The accompanying Consolidated Financial Statements and related Notes, together with the following information, are intended to supply investors with a reasonable basis for evaluating the Company’s operations, but should not serve as the only criteria for predicting the Company’s future performance.

Retail Operations:

	Three Months Ended						Six Months Ended
	Three Months EndedNovember 30,
	February 29, 2004			February 28, 2003			February 29, 2004			February 28, 2003
	2004			2003
	(dollars in thousands)
Net Sales
Petroleum	$	~~131~~171,~~157~~032		$	~~128~~137,~~174~~268		$	~~268,426~~		$	~~258,405~~
Merchandise and other		4146,~~624~~245			4244,~~081~~595			~~86,218~~			~~87,509~~
Total Net Sales	$	~~172~~217,~~781~~277		$	~~170~~181,~~255~~863		$	~~354,644~~		$	~~345,914~~
Costs of Goods Sold	$	~~152~~192,~~608~~054		$	~~148~~152,~~824~~365		$	~~304,973~~		$	~~299,061~~
Gross Profit	$	2025,~~173~~223		$	2129,~~431~~498		$	~~49,671~~		$	~~46,853~~
Operating Expenses	$	24,~~134~~671		$	23,~~913~~709		$	~~47,843~~		$	~~47,181~~
Segment Operating Income / (Loss)	$	(3,961	)	$	(2,482	)	$	1,828		$	(328	)
Segment Operating Income	$	552		$	5,789
Petroleum Sales (thousands of gallons)		8185,~~502~~523			8386,~~297~~013			~~167,515~~			~~173,067~~
Gross Profit
Petroleum (a)	$	812,~~333~~150		$	916,~~731~~668		$	~~25,001~~		$	~~22,168~~
Merchandise and other		1113,~~840~~073			1112,~~700~~830			~~24,670~~			~~24,685~~
	$	2025,~~173~~223		$	2129,~~431~~498		$	~~49,671~~		$	~~46,853~~
Petroleum margin ($/gallon) (b)		.~~1022~~1421			.~~1168~~1938			~~.1492~~			~~.1281~~
Merchandise margin (percent of sales)		28.43	%		2728.8	%		~~28.6~~	%		~~28.2~~	%

(a)

Includes the effect of intersegment purchases from the Company’s wholesale segment at prices, which approximate market.

(b)

Company management calculates petroleum margin per gallon by dividing petroleum gross margin by petroleum sales volumes. Management uses fuel margin per gallon calculations to compare profitability to other companies in the industry. Petroleum margin per gallon may not be comparable to similarly titled measures used by other companies in the industry.

~~Comparison~~15 ~~of Fiscal Quarters Ended February 29, 2004 and February 28, 2003~~

Comparison of Fiscal Quarters Ended November 30, 2004 and November 30, 2003

Net Sales

Retail sales increased during the fiscal quarter ended November 30, 2004 by $235.54 million, or 119.5% from $~~170~~181.3 9 million to $~~172~~217.83 million over the comparable period in fiscal 2004. The retail sales increase ~~was~~resulted ~~primarily~~from ~~due to~~ a $333.07 million increase in petroleum sales, ~~offset~~and by a $1.57 million ~~decrease~~increase in merchandise sales. The petroleum sales increase results from a 425.63% increase in retail selling prices per gallon, offset by a 1.85 million gallon or 2.26% decrease in retail petroleum volume. The decrease in volume resulted from new competition and promotional pricing in certain areas of the Company’s market.

Costs of Goods Sold

Retail costs of goods sold increased during the fiscal quarter ended November ~~February 29~~30, 2004 by $339.87 million or 226.51% over the comparable period in fiscal 2004 from $~~148~~152.84 million to $~~152~~192.61 million. The cost of gasoline increased 1046.45%, on a per gallon basis, over the fiscal quarter ended ~~February~~ 28November 30, 2003. The cost of distillates increased 72.92%, on a per gallon basis, over the prior year fiscal quarter. As a result, costs of goods sold for petroleum purchases increased $537.01 million, fuel taxes increased $1.1 million, ~~Offsetting~~freight ~~these~~costs ~~increases~~increased ~~were~~$.1 ~~decreased~~million ~~fuel~~and ~~taxes~~merchandise ofcosts increased $1.4 million, ~~and~~for ~~decreased~~a ~~merchandise~~total ~~costs~~increase of $39.67 million.

16Gross Profit

~~Gross~~Retail ~~Profit/(Loss)~~gross profit decreased during the fiscal quarter ended November 30, 2004 by $4.3 million or 14.5% over the comparable period in fiscal 2004. The Company decreased its petroleum margins by $4.5 million offset by a merchandise margin increase of $.2 million. The decreased petroleum margins of 27% were due to rising crude oil prices which typically pressure retail product margins as well as a .5 million gallon decrease in fuel sales resulting from promotional pricing of new competitors.

Retail gross profit decreased during 2004 by $1.3 million or 5.9%. The Company decreased its petroleum margins by $1.4 million offset by a merchandise margin increase of $.1 million.

Operating Expenses

Retail operating expenses increased during the fiscal quarter ended November 30, 2004 by $1.20 million or 14.0%. over the comparable period in fiscal 2004. Primarily contributing to the increases were increased payroll and payroll costs of $.17 million and increased credit/customer service costs of $.14 million offset by a $.1 million reduction to other expenditures.

Comparison of Six Months Ended February 29, 2004 and February 28, 2003

Net Sales

Retail sales increased during 2004 by $8.7 million, or 2.5% from $345.9 million to $354.6 million. The retail sales increase was primarily due to a $10.0 million increase in petroleum sales, offset by a $1.3 million decrease in merchandise sales. The petroleum sales increase results from a 7.3% increase in retail selling prices per gallon, offset by a 5.6 million gallon or 3.2% decrease in retail petroleum volume.

Costs of Goods Sold

Retail costs of goods sold increased during the six months ended February 29, 2004 by $5.9 million or 2.0% from $299.1 million to $305.0 million. The cost of gasoline increased 11.0%, on a per gallon basis, over the six months ended February 28, 2003. The cost of distillates increased 2.2%, on a per gallon basis, over the prior six months. As a result, costs of goods sold for petroleum purchases increased $9.2 million. Another increase to costs of goods sold was increased freight costs of $.1 million. Offsetting these increases were decreased fuel taxes of $2.0 million and decreased merchandise costs of $1.3 million.

Gross Profit/(Loss)

Retail gross profit increased during 2004 by $2.8 million or 6%. The Company increased its petroleum margins by $2.8 million or 16.5% while merchandise margin remained relatively constant.

Operating Expenses

Retail operating expenses increased during 2004 by $.7 million or 1.4%. Primarily contributing to the increases were increased payroll and payroll costs of $.1 million, increased credit/customer service costs of $.1 million, increased rent expense of $.2 million and insurance, utilities and taxes of $.1 million.

Wholesale Operations:

Three Months Ended

Six Months Ended

Three Months EndedNovember 30,

February 29, 2004

February 28, 2003

February 29, 2004

February 28, 2003

2004

2003

(dollars in thousands)

Net Sales (a)

~~154~~208,~~184~~776

~~141~~148,~~174~~952

~~303,136~~

~~258,820~~

Costs of Goods Sold

~~137~~189,~~480~~441

~~121~~134,~~063~~639

~~272,119~~

~~236,145~~

Gross Profit

1619,~~704~~335

2014,~~111~~313

~~31,017~~

~~22,675~~

Operating Expenses

6,~~500~~810

6,~~406~~998

~~13,498~~

~~12,769~~

Segment Operating Income

1012,~~204~~525

137,~~705~~315

~~17,519~~

~~9,906~~

Crude throughput (thousand barrels per day)

6259.89

6164.13

~~63.6~~

~~54.3~~

1716

Refinery Product Yield

(thousands of barrels)

Three Months Ended

Six Months Ended

Three Months EndedNovember 30,

February 29, 2004

February 28, 2003

February 29, 2004

February 28, 2003

2004

2003

Gasoline and gasoline blendstock

2,~~631~~458

2,~~429~~668

~~5,299~~

~~4,659~~

Distillates

1,~~525~~510

1,~~565~~458

~~2,983~~

~~2,517~~

Asphalt

1,~~585~~513

1,~~529~~586

~~3,171~~

~~2,697~~

Butane, propane, residual products, internally produced

fuel and other (“Other”)

525

516

1,155

1,075

fuel and other

566

630

Total Product Yield

6,~~266~~047

6,~~039~~342

~~12,608~~

~~10,948~~

% Heavy Crude Oil of Total Refinery Throughput (b)

5952

5953


Product Sales (dollars in thousands) (a)
	Three Months Ended November 30,
	2004		2003
Gasoline and gasoline blendstock	$	81,499	$	56,618
Distillates		68,876		39,645
Asphalt		53,918		49,678
Other		4,483		3,011

	$	208,776	$	148,952

Product Sales

(dollars in thousands) (a)

	Three Months Ended				Six Months Ended
	February 29, 2004		February 28, 2003		February 29, 2004		February 28, 2003
Gasoline and gasoline blendstock	$	65,274	$	51,685	$	121,893	$	95,564
Distillates		57,709		59,035		97,353		90,556
Asphalt		26,502		26,117		76,180		65,633
Other		4,699		4,337		7,710		7,067
	$	154,184	$	141,174	$	303,136	$	258,820

Product Sales

(thousand of barrels) (a)

	Three Months Ended		Six Months Ended
	Three Months EndedNovember 30,
	February 29, 2004	February 28, 2003	February 29, 2004	February 28, 2003
	2004	2003
Gasoline and gasoline blendstock	1,~~524~~452	1,~~332~~435	~~2,959~~	~~2,567~~
Distillates	1,~~363~~136	1,~~436~~084	~~2,447~~	~~2,327~~
Asphalt	1,~~400~~875	12,~~312~~010	~~3,410~~	~~2,909~~
Other	~~165~~145	~~184~~145	~~309~~	~~328~~
	4,452	4,264	9,125	8,131
	4,608	4,674

(a)

Sources of total product sales include products manufactured at the refinery located in Warren, Pennsylvania and products purchased from third parties.

(b)

The Company defines “heavy” crude oil as crude oil with an American Petroleum Institute specific gravity of 26 or less.

Comparison of Fiscal Quarters Ended ~~February~~November 2930, 2004 and ~~February~~November 2830, 2003

Net Sales

Wholesale sales increased during the three months ended November 30, 2004 by $1359.09 million or 940.2% ~~from~~over ~~$141.2 million~~the tocomparable ~~$154.2~~period ~~million.~~in ~~The~~fiscal ~~wholesale~~2004 ~~sales~~from ~~increase~~$148.9 ~~was~~million ~~due~~ to ~~a 4~~$208.6%8 ~~increase in wholesale prices and a 4~~million.4% ~~increase~~The in wholesale ~~volume. Contributing to the increased~~ sales ~~volume was a 3.9%~~ increase ~~in crude runs for the three months ended~~ ~~February 29, 2004 as compared to the prior year period.~~

1817

was due to a 42.2% increase in wholesale prices offset by a 1.4% decrease in wholesale volume. Contributing to the decreased sales volume was a 6.8% decrease in crude runs for the three months ended November 30, 2004 as compared to the prior year period. The decline in crude runs resulted in part from our decision to shut down the crude unit for minor maintenance during the period of our most recent reformer unit regeneration. The crude unit was shut down for 5 days from November 3 to November 8. The crude unit maintenance enables us to defer the crude units major turnaround from October 2005 to October 2006.

Costs of Goods Sold

Wholesale costs of goods sold increased during the three months ended November 30, 2004 by $1654.48 million or 1340.67% over the comparable period in fiscal 2004 from $~~121~~134.16 million to $~~137~~189.54 million. The increase in wholesale costs of goods sold was primarily due to a 356.91% increase in ~~crude throughput volume and a 5.2% increase in~~ the Company’s average crude oil purchase price for the fiscal quarter ended ~~February 29~~November 30, 2004 as compared to the prior year period. Offsetting this increase was a 6.8% decrease in crude throughput volume. The refinery throughput volume decrease for the first fiscal quarter of 2005 resulted from the fact that the Company had a 5 day shutdown of its crude unit from November 3 to November 8 (See Net Sales on page 21). Worldwide crude oil prices, as indicated by NYMEX crude oil contract prices, increased 1059.4% as compared to the prior year period.

Gross Profit

Wholesale gross profit ~~decreased~~increased $35.40 million ~~from~~to $2019.13 million for the fiscal quarter ended ~~February~~November 2830, ~~2003~~2004 tofrom $1614.7 3 million for ~~the~~ fiscal quarter ended ~~February~~November 2930, ~~2004~~2003. This ~~decrease~~increase was primarily due to ~~crude~~increased ~~costs~~product ~~increasing~~selling ~~more~~prices ~~than~~which ~~product~~exceeded ~~selling prices~~the increase in crude costs during this period.

Operating Expenses

Operating expenses ~~increased~~decreased during the three months ended November 30, 2004 by $.12 million over such expenses for ~~2003.~~the ~~For~~comparable period in fiscal 2004. For 2005 operating expenses were $6.58 million, or 43.23% of net wholesale sales, compared to $67.40 million, or 4.57% of net wholesale sales for ~~2003~~2004.

Comparison of Six Months Ended February 29, 2004 and February 28, 2003

Net Sales

Wholesale sales increased during 2004 by $44.3 million or 17.1% from $258.8 million to $303.1 million. The wholesale sales increase was due to a 4.4% increase in wholesale prices and a 12.2% increase in wholesale volume. Contributing to the increased sales volume was a 17.7% increase in crude runs for the six months ended February 29, 2004 as compared to the prior year period.

Costs of Goods Sold

Wholesale costs of goods sold increased during 2004 by $36.0 million or 15.2% from $236.1 million to $272.1 million. The increase in wholesale costs of goods was primarily due to a 17.7% increase in crude throughput volume and a 3.8% increase in the Company’s average crude oil purchase price for the six months ended February 29, 2004 as compared to the prior year period. The refinery throughput volume increase for the first six months of 2004 resulted from the fact that the Company had a 21 day shutdown of units at the refinery during the prior year period ending February 28, 2003. Worldwide crude oil prices, as indicated by NYMEX crude oil contract prices, increased 7.2% as compared to the prior year period.

Gross Profit

Wholesale gross profit increased $8.3 million from $22.7 million for the six months ended February 28, 2003 to $31.0 million for the six months ended February 29, 2004. This increase was primarily due to the increase in wholesale sales volume, increased wholesale selling prices and to 33.9% higher discounts on heavy high-sulfur crude oil grades processed by the Company.

Operating Expenses

Operating expenses increased during 2004 by $.7 million over such expenses for 2003. For 2004 operating expenses were $13.5 million, or 4.5% of net wholesale sales, compared to $12.8 million, or 4.9% of net wholesale sales for 2003.

Interest Expense, net

Net interest expense (interest expense less interest income) ~~remained~~increased ~~relatively~~by ~~consistent~~$.5 million between ~~the~~fiscal ~~six~~quarter ~~months~~ ended ~~February~~November 2930, 2004 and ~~the~~fiscal ~~six~~quarter ~~months~~ ended ~~February~~November 2830, 2003. The increase is primarily due to additional interest on the private placement offering of $200,000,000 in Senior Notes due 2012.

Income Tax Expense~~/(Benefit)~~

The Company’s effective tax rate for the ~~six~~three months ended ~~February~~November 2930, 2004 was approximately 40.30% compared to a rate of 3840.63% for the ~~six~~ three months ended ~~February~~November 2830, 2003. ~~The increase is primarily due to an increase in various permanent differences.~~

Liquidity and Capital Resources

~~The~~We ~~Company~~operate ~~operates~~ in an environment where ~~its~~our liquidity and ~~capital~~ capital resources are impacted by changes in the price of crude oil and refined petroleum products, availability of credit, market uncertainty and a variety of additional factors beyond ~~the~~our ~~Company’s~~ control. Included in such factors are, among others, ~~the~~ the level of customer product demand, weather conditions, governmental regulations, worldwide political conditions and overall market and economic conditions. ~~For further information related to risks and other factors, see “Forward-Looking Statements” in Item 2.~~

~~The~~18 ~~following table summarizes selected measure of liquidity and capital sources (in thousands):~~

	February 29, 2004		August 31, 2003
Cash and cash equivalents	$	14,392	$	13,819
Working capital	$	47,289	$	37,638
Current ratio		1.4		1.4
Debt	$	232,635	$	214,410

The following table summarizes selected measures of liquidity and capital sources (in thousands):

Primary sources of liquidity have been cash and cash equivalents, cash flows from operations and borrowing availability under a revolving line of credit. The Company believes available capital resources will be adequate to meet our working capital, debt service, and capital expenditure requirements for existing operations.


	November 30, 2004		August 31, 2004
Cash and cash equivalents	$	11,524	$	11,552
Working capital	$	72,730	$	66,222
Current ratio		1.6		1.8
Debt	$	231,841	$	212,948

~~The~~Primary sources of ~~Company’s~~liquidity have been cash and cash equivalents, ~~consist~~cash offlows ~~bank~~from ~~balances~~operations and ~~investments~~borrowing inavailability ~~money~~under ~~market funds. These investments have staggered maturity dates, none of which exceed three months. They have~~ a ~~high~~revolving ~~degree~~line of ~~liquidity since the securities are traded in public markets~~credit. ~~During~~We ~~the~~believe ~~six~~available ~~months~~capital ~~ended~~resources ~~February~~will ~~29,~~be ~~2004,~~adequate ~~significant~~to ~~uses~~meet ofour ~~cash~~working ~~include $3.6 million for purchases of property~~capital, ~~plant~~debt ~~and equipment~~service, ~~$.4 million of reductions to debt~~ and ~~$1.2 million for additions to refinery~~capital ~~turnaround~~expenditure ~~costs~~requirements ~~and $12.2 million used in operating activities principally~~ for ~~increased~~existing ~~inventories~~operations. ~~This use of cash was funded primarily from net borrowings of $18.5 million on the revolving credit facility.~~

~~The~~Our ~~Company~~cash ~~requires~~and cash aequivalents ~~substantial~~consist ~~investment~~of inbank ~~working~~balances ~~capital~~and ~~which~~investments ~~is susceptible~~in tomoney ~~large~~market ~~variations~~funds. ~~during~~These ~~the~~investments ~~year~~have ~~resulting~~staggered ~~from~~maturity ~~purchases~~dates, none of ~~inventory~~which ~~and~~exceed ~~seasonal~~three ~~demands~~months. ~~Inventory~~They ~~purchasing~~have ~~activity is~~ a ~~function~~high degree of ~~sales~~liquidity ~~activity~~since ~~and turnaround cycles for~~ the ~~different~~securities ~~refinery~~are ~~units.~~traded ~~Maintenance~~in ~~and~~public ~~non-discretionary~~markets. ~~capital~~During ~~expenditures~~the ~~have~~fiscal ~~averaged~~quarter ~~approximately~~ended $4November ~~million~~30, ~~annually~~2004, ~~over~~significant ~~the~~uses ~~last~~of ~~three~~cash ~~years~~include ~~for the refining and marketing operations~~$2.3 ~~Management~~million ~~does~~for ~~not~~purchases ~~foresee~~of ~~any~~property, ~~increase~~plant ~~in maintenance~~ and ~~non-discretionary~~equipment, ~~capital expenditures~~$.4 ~~during~~million ~~fiscal~~for ~~2004.~~additions ~~The~~to ~~Company~~refinery ~~spent~~turnaround ~~approximately~~costs, $4.2 million ~~as part~~ of ~~its~~reductions ~~Tier~~to 2debt ~~Gasoline~~and an ~~Sulfur~~increase ~~Program~~in ~~under~~cash 40used ~~CFR~~by ~~Part~~working ~~80,~~capital ~~Subpart~~items Hincluding ~~during fiscal year 2003, and expects to spend approximately~~ $11.1 million ~~during~~for ~~fiscal~~prepaid ~~2004, primarily~~expenses ~~during~~and ~~activities~~$30.2 ~~requiring~~million ~~a shutdown of the FCC Unit, which is scheduled~~ for ~~April 2004~~inventories.

~~Future~~We ~~liquidity,~~require ~~both~~a ~~short~~substantial ~~and~~investment ~~long-term,~~in ~~will~~working ~~continue~~capital towhich beis ~~primarily~~susceptible ~~dependent~~to onlarge ~~realizing~~variations aduring ~~refinery~~the ~~margin~~year ~~sufficient~~resulting tofrom ~~cover~~purchases ~~fixed~~of ~~and~~inventory ~~variable~~and ~~expenses,~~seasonal ~~including planned capital expenditures~~demands. ~~The~~Inventory ~~Company~~purchasing ~~expects~~activity tois bea ~~able~~function toof ~~meet~~sales ~~its~~activity ~~working~~and ~~capital,~~turnaround ~~capital~~cycles ~~expenditure,~~for ~~contractual~~the ~~obligations,~~different ~~letter~~refinery ofunits. ~~credit and~~

20Maintenance and non-discretionary capital expenditures have averaged approximately $4 million annually over the last three years for the refining and marketing operations. Management does not foresee any increase in maintenance and non-discretionary capital expenditures during fiscal year 2005.

Future liquidity, both short and long-term, will continue to be primarily dependent on realizing a refinery margin sufficient to cover fixed and variable expenses, including planned capital expenditures. We expect to be able to meet our working capital, capital expenditure, contractual obligations, letter of credit and debt service requirements out of cash flow from operations, cash on hand and borrowings under ~~the~~our ~~Company’s~~Revolving ~~secured~~Credit ~~revolving~~Facility ~~credit facility (the “facility”)~~ with PNC Bank, N.A. as Agent Bank. This is a $75,000,000 revolving facility, which ~~was~~expires ~~renewed~~May ~~for~~9, ~~five~~2007. ~~years~~The onRevolving ~~July~~Credit 12Facility is secured primarily by certain cash accounts, ~~2002~~accounts receivable, and ~~amended~~inventory. Until maturity, we may borrow on ~~November~~a ~~27,~~borrowing ~~2002~~base ~~and~~formula ~~February~~as 19set forth in the facility. For Base Rate borrowings, ~~2003~~interest is calculated at the greater of the agent bank’s prime rate or federal fund rate plus 1%, ~~March~~plus 24an applicable margin of .25% to .75%. For Euro-Rate borrowings, ~~2003~~interest ~~and~~is ~~January~~calculated 27at the LIBOR rate plus an applicable margin of 1.75% to 3.00%. The applicable margin varies with our facility leverage ratio calculation. As of November 30, 2004., $22,000,000 of Euro-Rate borrowings and $10,000,000 of Base Rate borrowings were outstanding under the agreement.

~~Effective~~We ~~January~~had ~~27,~~outstanding ~~2004,~~letters ~~the~~of ~~Company amended its secured~~ credit ~~facility~~of ~~to increase the maximum facility commitment from~~ $50810,000~~,000~~ toas ~~$75,000,000~~of onNovember ~~a permanent basis. The facility expires on May 9~~30, ~~2007, and is secured by certain cash accounts, accounts receivable, and inventory~~2004. The interest rate on borrowings varies with the Company’s earnings and is based on the higher of the bank’s prime rate or Federal funds rate for base rate borrowings and the LIBOR rate for Euro-Rate borrowings.

~~The~~As ~~Company~~of ~~had~~November 30, 2004 the outstanding ~~letters~~borrowings ofunder ~~credit~~the ofRevolving ~~$615,000~~Credit ~~and~~Facility ~~approximately~~ were $2432,~~385~~810,000 ~~unused~~resulting ~~and~~in ~~available~~net availability ~~on the facility as~~ of ~~February 29~~$42, ~~2004~~190,000.

Although ~~the~~we ~~Company~~are is not aware of any pending circumstances which would change ~~its~~our expectation, changes in the tax laws, the imposition of and changes in federal and state clean air and clean fuel requirements and other changes in environmental laws and regulations may also increase future capital expenditure levels. Future capital expenditures are also subject to business conditions affecting the industry. ~~The~~We ~~Company~~continue ~~continues~~ to investigate strategic acquisitions and capital improvements to ~~its~~our existing facilities.

Federal, state and local laws and regulations relating to the environment affect nearly all ~~the operations~~ of ~~the~~our ~~Company~~operations. As is the case with all the companies engaged in similar industries, ~~the~~we ~~Company~~face ~~faces~~ significant exposure from actual or potential claims and lawsuits involving environmental matters. Future expenditures related to environmental matters cannot be reasonably quantified in many circumstances due to the uncertainties as to required remediation methods and related clean-up cost estimates. The Company cannot predict what additional environmental legislation or regulations will be enacted or become effective in the future or how existing or future laws or regulations will be administered or interpreted with respect to products or activities to which they have not been previously applied.

potential claims and lawsuits involving environmental matters. Future expenditures related to environmental matters cannot be reasonably quantified in many circumstances due to the uncertainties as to required remediation methods and related clean-up cost estimates. We cannot predict what additional environmental legislation or regulations will be enacted or become effective in the future or how existing or future laws or regulations will be administered or interpreted with respect to products or activities to which they have not been previously applied.

Seasonal Factors

Seasonal factors affecting the Company’s business may cause variation in the prices and margins of some of the Company’s products. For example, demand for gasoline tends to be highest in spring and summer months, while demand for home heating oil and kerosene tends to be highest in winter months.

As a result, the margin on gasoline prices versus crude oil costs generally tends to increase in the spring and summer, while margins on home heating oil and kerosene tend to increase in winter.

Inflation

The effect of inflation on the Company has not been significant during the last five fiscal years.

Recent Accounting Pronouncements

In ~~January~~March ~~2003~~2004, the ~~FASB~~Emerging ~~issued~~Issues ~~Interpretation~~Task Force (“~~FIN~~EITF”) ~~No.~~reached ~~46, “Consolidation of Variable Interest Entities” and in December 2003,~~ a ~~revised~~consensus ~~interpretation~~on ~~was~~Issue ~~issued (FIN~~ No. ~~46(R)). In general~~03-1, ~~a variable interest entity (~~“~~VIE”)~~The isMeaning aof ~~corporation,~~Other-Than-Temporary ~~partnership,~~Impairments ~~trust,~~and orIts ~~any~~Application ~~other~~to ~~legal structure~~Certain ~~used~~Investments” ~~for~~(“EITF ~~business~~03-1”). ~~purposes~~EITF ~~that~~03-1 ~~either~~provides ~~does~~a ~~not~~three-step ~~have~~impairment ~~equity~~model ~~investors with voting rights or has equity investors that do not provide sufficient financial resources~~ for determining ~~the~~whether ~~entity~~an toinvestment ~~support~~is ~~its~~other-than-temporarily ~~activities.~~impaired ~~FIN~~and 46 requires athe ~~VIE~~Company to ~~be consolidated~~recognize bysuch aimpairments ~~company if that company is designated~~ as ~~the~~an ~~primary~~impairment ~~beneficiary.~~loss ~~The~~equal ~~interpretation applies~~ to ~~VIEs~~the ~~created~~difference ~~after~~between ~~January~~the ~~31,~~investment’s ~~2003,~~cost and ~~for~~fair ~~all~~value ~~financial~~at ~~statements~~the ~~issued~~reporting ~~after December 15, 2003 for VIEs in which an enterprise held a variable interest that it acquired before February 1, 2003~~date. The adoption of ~~FIN~~EITF 4603-1 did not have a material effect on ~~the~~its ~~Company’s~~ financial position or results of operations.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The Company uses its revolving credit facility to finance a portion of its operations. These on-balance sheet financial instruments, to the extent they provide for variable rates, expose the Company to interest rate risk resulting from changes in the PNC Prime rate, the Federal Funds or LIBOR rate.

The Company has exposure to price fluctuations of crude oil and refined products. The Company does not manage the price risk related to all of its inventories of crude oil and refined products with a permanent formal hedging program, but does manage its risk exposures by managing inventory levels. At ~~February~~August 2931, 2004, the Company had net open future positions of 750,000 barrels of crude oil that expired during the first quarter of 2005. The resulting loss on the expiration of the future positions amounts to $1,495,000. At November 30, 2004, the Company was exposed to the risk of market price declines with respect to a substantial portion of its crude oil and refined product inventories. The Company has no open future positions at November 30, 2004.

ITEM 4. CONTROLS AND PROCEDURES

(a) Based on an evaluation by management of the Company’s disclosure controls and procedures (as defined in Rules 13(a) – 15(e) and 15(d) – 15(e) of the Securities Exchange Act of 1934, as amended), as of the end of the Company’s fiscal quarter ended ~~February~~November 2930, 2004, (the “Evaluation Date”) the Company’s Chief Executive Officer and Chief Financial Officer (its principal executive officer and principal financial officer, respectively) have concluded that the Company’s disclosure controls and procedures were effective as of the Evaluation Date .

(b) There have not been any significant changes in the Company’s internal controls over financial reporting that occurred during the Company’s fiscal quarter ended ~~February~~November 2930, 2004 that has materially affected, or is reasonably likely to materially affect, the Company’s internal controls over financial reporting.

2220

PART II—OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

(None)

ITEM 2. UNREGISTERED ~~CHANGES~~SALES INOF EQUITY SECURITIES, AND USE OF PROCEEDS ~~AND ISSUER PURCHASES OF EQUITY SECURITIES~~

(None)

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

(None)

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

(N/A)

ITEM 5. OTHER INFORMATION

(None)

ITEM 6. EXHIBITS ~~AND REPORTS ON FORM 8-K~~

(a)	Exhibits
Exhibit 31.1	Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
	Exhibit 10.9	Amendment No. Four to Credit Agreement dated as of January 27, 2004 by and among UNITED REFINING COMPANY, a Pennsylvania corporation (“United Refining”), UNITED REFINING COMPANY OF PENNSYLVANIA, a Pennsylvania corporation (“United Refining of PA”), KIANTONE PIPELINE CORPORATION, a New York corporation (“Kiantone”), COUNTRY FAIR, INC., a Pennsylvania corporation (“Country Fair”) (United Refining, United Refining of PA, Kiantone and Country Fair are each referred to herein as a “Borrower” and collectively as the “Borrowers”), KWIK-FILL CORPORATION, a Pennsylvania corporation (“Guarantor”), the Banks that are parties hereto and PNC Bank, National Association, as Agent (“Agent”).
Exhibit 31.2	Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
	Exhibit 31.1	Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
Exhibit 32.1	Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
	Exhibit 31.2	Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
	Exhibit 32.1	Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906
(b)	Reports on Form 8-K
	On January 30, 2004, a Current Report on Form 8-K was filed reporting under Item 5, OtherEvents, and Required FD Disclosure, that the Company issued a press release announcing anamendment to its secured credit facility increasing the facility commitment from $50,000,000 to$75,000,000 effective January 27, 2004. The press release was filed as an Exhibit under Item7(c) of the Form 8-K.

2321

SIGNATURES

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.

Date: January ~~April~~ 14, ~~2004~~2005

UNITED REFINING COMPANY

(Registrant)

/s/ Myron L. Turfitt

Myron L. Turfitt

President

/s/ James E. Murphy

James E. Murphy

Chief Financial Officer

2422

SIGNATURES

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.

Date: ~~April~~January 14, ~~2004~~2005

KIANTONE PIPELINE CORPORATION

(Registrant)

/s/ Myron L. Turfitt

Myron L. Turfitt

President

/s/ James E. Murphy

James E. Murphy

Chief Financial Officer

2523

SIGNATURES

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.

Date: ~~April~~January 14, ~~2004~~2005

UNITED REFINING COMPANY OF PENNSYLVANIA

(Registrant)

/s/ Myron L. Turfitt

Myron L. Turfitt

President

/s/ James E. Murphy

James E. Murphy

Chief Financial Officer

2624

SIGNATURES

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.

Date: ~~April~~January 14, ~~2004~~2005

KIANTONE PIPELINE COMPANY

(Registrant)

/s/ Myron L. Turfitt

Myron L. Turfitt

President

/s/ James E. Murphy

James E. Murphy

Chief Financial Officer

2725

SIGNATURES

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.

Date: ~~April~~January 14, ~~2004~~2005

UNITED JET CENTER, INC.

(Registrant)

/s/ Myron L. Turfitt

Myron L. Turfitt

President

/s/ James E. Murphy

James E. Murphy

Chief Financial Officer

2826

SIGNATURES

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.

Date: ~~April~~January 14, ~~2004~~2005

KWIK -FILL CORPORATION (Registrant) /s/ Myron L. Turfitt Myron L. Turfitt President /s/ James E. Murphy James E. Murphy Chief Financial Officer

2927

SIGNATURES

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.

Date: ~~April~~January 14, ~~2004~~2005

INDEPENDENT GASOLINE AND OIL

COMPANY OF ROCHESTER, INC.

(Registrant)

/s/ Myron L. Turfitt

Myron L. Turfitt

President

/s/ James E. Murphy

James E. Murphy

Chief Financial Officer

3028

SIGNATURES

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.

Date: ~~April~~January 14, ~~2004~~2005

BELL OIL CORP.

(Registrant)

/s/ Myron L. Turfitt

Myron L. Turfitt

President

/s/ James E. Murphy

James E. Murphy

Chief Financial Officer

3129

SIGNATURES

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.

Date: ~~April~~January 14, ~~2004~~2005

PPC, INC.

(Registrant)

/s/ Myron L. Turfitt

Myron L. Turfitt

President

/s/ James E. Murphy

James E. Murphy

Chief Financial Officer

3230

SIGNATURES

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.

Date: ~~April~~January 14, ~~2004~~2005

SUPER TEST PETROLEUM, INC.

(Registrant)

/s/ Myron L. Turfitt

Myron L. Turfitt

President

/s/ James E. Murphy

James E. Murphy

Chief Financial Officer

3331

SIGNATURES

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.

Date: ~~April~~January 14, ~~2004~~2005

KWIK-FIL, INC.

(Registrant)

/s/ Myron L. Turfitt

Myron L. Turfitt

President

/s/ James E. Murphy

James E. Murphy

Chief Financial Officer

3432

SIGNATURES

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.

Date: ~~April~~January 14, ~~2004~~2005

VULCAN ASPHALT REFINING CORPORATION

(Registrant)

/s/ Myron L. Turfitt

Myron L. Turfitt

President

/s/ James E. Murphy

James E. Murphy

Chief Financial Officer

3533

SIGNATURES

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.

Date: January 14, 2005

COUNTRY FAIR, INC.

(Registrant)

/s/ Myron L. Turfitt

Myron L. Turfitt

President and Chief Operating Officer

/s/ James E. Murphy

James E. Murphy

Vice President - Finance

Filing Compare · UNITED STORE HOLDINGS, INC.