-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, WinpD05jZpK4Pd7uRp4qdsyfVXh7fKAi5O3XPEclf1KuwYhn0aeO2DhEUZsKBwQt d8SzbkbiBedswPh3EJTgmA== 0000950128-99-000017.txt : 19990115 0000950128-99-000017.hdr.sgml : 19990115 ACCESSION NUMBER: 0000950128-99-000017 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19981130 FILED AS OF DATE: 19990114 FILER: COMPANY DATA: COMPANY CONFORMED NAME: UNITED REFINING CO CENTRAL INDEX KEY: 0000101462 STANDARD INDUSTRIAL CLASSIFICATION: PETROLEUM REFINING [2911] IRS NUMBER: 251411751 STATE OF INCORPORATION: PA FISCAL YEAR END: 0831 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-06198 FILM NUMBER: 99506317 BUSINESS ADDRESS: STREET 1: 15 BRADLEY ST CITY: WARREN STATE: PA ZIP: 16365 BUSINESS PHONE: 8147231500 MAIL ADDRESS: STREET 1: 15 BRADLEY ST CITY: WARREN STATE: PA ZIP: 16365 FILER: COMPANY DATA: COMPANY CONFORMED NAME: KIANTONE PIPELINE CORP CENTRAL INDEX KEY: 0000830253 STANDARD INDUSTRIAL CLASSIFICATION: PETROLEUM REFINING [2911] IRS NUMBER: 251211902 STATE OF INCORPORATION: NY FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 333-35083-01 FILM NUMBER: 99506318 BUSINESS ADDRESS: STREET 1: 15 BRADLEY ST CITY: WARREN STATE: PA ZIP: 16365 BUSINESS PHONE: 8147231500 MAIL ADDRESS: STREET 1: 15 BRADLEY ST CITY: WARREN STATE: PA ZIP: 16365 FILER: COMPANY DATA: COMPANY CONFORMED NAME: UNITED REFINING CO /PA/ CENTRAL INDEX KEY: 0001040270 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 250850960 STATE OF INCORPORATION: PA FISCAL YEAR END: 0831 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 333-35083-02 FILM NUMBER: 99506319 BUSINESS ADDRESS: STREET 1: 15 BRADLEY ST CITY: WARREN STATE: PA ZIP: 16365 BUSINESS PHONE: 8147231500 MAIL ADDRESS: STREET 1: 15 BRADLEY ST CITY: WARREN STATE: PA ZIP: 16365 FILER: COMPANY DATA: COMPANY CONFORMED NAME: KIANTONE PIPELINE CO CENTRAL INDEX KEY: 0001045539 STANDARD INDUSTRIAL CLASSIFICATION: [] STATE OF INCORPORATION: PA FISCAL YEAR END: 0831 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 333-35083-03 FILM NUMBER: 99506320 BUSINESS ADDRESS: STREET 1: 15 BRADLEY ST CITY: WARREN STATE: PA ZIP: 16365 BUSINESS PHONE: 8147231500 MAIL ADDRESS: STREET 1: 15 BRADLEY ST CITY: WARREN STATE: PA ZIP: 16365 FILER: COMPANY DATA: COMPANY CONFORMED NAME: KWIK FIL INC CENTRAL INDEX KEY: 0001045540 STANDARD INDUSTRIAL CLASSIFICATION: [] STATE OF INCORPORATION: PA FISCAL YEAR END: 0831 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 333-35083-04 FILM NUMBER: 99506321 BUSINESS ADDRESS: STREET 1: 15 BRADLEY ST CITY: WARREN STATE: PA ZIP: 16365 BUSINESS PHONE: 8147231500 MAIL ADDRESS: STREET 1: 15 BRADLEY ST CITY: WARREN STATE: PA ZIP: 16365 FILER: COMPANY DATA: COMPANY CONFORMED NAME: KWIK FILL INC CENTRAL INDEX KEY: 0001045541 STANDARD INDUSTRIAL CLASSIFICATION: [] STATE OF INCORPORATION: PA FISCAL YEAR END: 0831 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 333-35083-05 FILM NUMBER: 99506322 BUSINESS ADDRESS: STREET 1: 15 BRADLEY ST CITY: WARREN STATE: PA ZIP: 16365 BUSINESS PHONE: 8147231500 MAIL ADDRESS: STREET 1: 15 BRADLEY ST CITY: WARREN STATE: PA ZIP: 16365 FILER: COMPANY DATA: COMPANY CONFORMED NAME: UNITED JET CENTER INC CENTRAL INDEX KEY: 0001045542 STANDARD INDUSTRIAL CLASSIFICATION: [] STATE OF INCORPORATION: PA FISCAL YEAR END: 0831 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 333-35083-06 FILM NUMBER: 99506323 BUSINESS ADDRESS: STREET 1: 15 BRADLEY ST CITY: WARREN STATE: PA ZIP: 16365 BUSINESS PHONE: 8147231500 MAIL ADDRESS: STREET 1: 15 BRADLEY ST CITY: WARREN STATE: PA ZIP: 16365 FILER: COMPANY DATA: COMPANY CONFORMED NAME: BELL OIL CORP CENTRAL INDEX KEY: 0001045543 STANDARD INDUSTRIAL CLASSIFICATION: [] STATE OF INCORPORATION: PA FISCAL YEAR END: 0831 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 333-35083-07 FILM NUMBER: 99506324 BUSINESS ADDRESS: STREET 1: 15 BRADLEY ST CITY: WARREN STATE: PA ZIP: 16365 BUSINESS PHONE: 8147231500 MAIL ADDRESS: STREET 1: 15 BRADLEY ST CITY: WARREN STATE: PA ZIP: 16365 FILER: COMPANY DATA: COMPANY CONFORMED NAME: PPC INC CENTRAL INDEX KEY: 0001045544 STANDARD INDUSTRIAL CLASSIFICATION: [] STATE OF INCORPORATION: PA FISCAL YEAR END: 0831 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 333-35083-08 FILM NUMBER: 99506325 BUSINESS ADDRESS: STREET 1: 15 BRADLEY ST CITY: WARREN STATE: PA ZIP: 16365 BUSINESS PHONE: 8147231500 MAIL ADDRESS: STREET 1: 15 BRADLEY ST CITY: WARREN STATE: PA ZIP: 16365 FILER: COMPANY DATA: COMPANY CONFORMED NAME: SUPER TEST PETROLEUM INC CENTRAL INDEX KEY: 0001045545 STANDARD INDUSTRIAL CLASSIFICATION: [] STATE OF INCORPORATION: PA FISCAL YEAR END: 0831 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 333-35083-09 FILM NUMBER: 99506326 BUSINESS ADDRESS: STREET 1: 15 BRADLEY ST CITY: WARREN STATE: PA ZIP: 16365 BUSINESS PHONE: 8147231500 MAIL ADDRESS: STREET 1: 15 BRADLEY ST CITY: WARREN STATE: PA ZIP: 16365 FILER: COMPANY DATA: COMPANY CONFORMED NAME: VULCAN ASPHALT REFINING CORP CENTRAL INDEX KEY: 0001045546 STANDARD INDUSTRIAL CLASSIFICATION: [] STATE OF INCORPORATION: PA FISCAL YEAR END: 0831 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 333-35083-10 FILM NUMBER: 99506327 BUSINESS ADDRESS: STREET 1: 15 BRADLEY ST CITY: WARREN STATE: PA ZIP: 16365 BUSINESS PHONE: 8147231500 MAIL ADDRESS: STREET 1: 15 BRADLEY ST CITY: WARREN STATE: PA ZIP: 16365 FILER: COMPANY DATA: COMPANY CONFORMED NAME: INDEPENDENT GASOLINE & OIL CO OF ROCHESTER CENTRAL INDEX KEY: 0001045547 STANDARD INDUSTRIAL CLASSIFICATION: [] STATE OF INCORPORATION: PA FISCAL YEAR END: 0831 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 333-35083-11 FILM NUMBER: 99506328 BUSINESS ADDRESS: STREET 1: 15 BRADLEY ST CITY: WARREN STATE: PA ZIP: 16365 BUSINESS PHONE: 8147231500 MAIL ADDRESS: STREET 1: 15 BRADLEY ST CITY: WARREN STATE: PA ZIP: 16365 10-Q 1 UNITED REFINING CO. 1 FORM 10-Q SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 (Mark One) [ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Period Ended November 30, 1998 [ ] 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 (I.R.S. Employer incorporation or organization) Identification No.) 15 Bradley Street Warren, Pennsylvania 16365 -------------------------------------------------- (address of principal executive office) (Zip Code) Registrant's telephone number, including area code 814-726-4674 --------------------------- 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 ----- ----- Number of shares outstanding of Registrant's Common Stock as of January 14, 1999: 100. 1 2
TABLE OF ADDITIONAL REGISTRANTS - ------------------------------------- ------------------------ ----------------------- ------------------ ------------------- Primary Standard State of Other Industrial IRS Employer Jurisdiction of Classification Identification Commission File Name Incorporation Number Number Number - ------------------------------------- ------------------------ ----------------------- ------------------ ------------------- Kiantone Pipeline Corporation New York 4612 25-1211902 333-35083-01 - ------------------------------------- ------------------------ ----------------------- ------------------ ------------------- Kiantone Pipeline Company Pennsylvania 4600 25-1416278 333-35083-03 - ------------------------------------- ------------------------ ----------------------- ------------------ ------------------- United Refining Company of Pennsylvania 5541 25-0850960 333-35083-02 Pennsylvania - ------------------------------------- ------------------------ ----------------------- ------------------ ------------------- United Jet Center, Inc. Delaware 4500 52-1623169 333-35083-06 - ------------------------------------- ------------------------ ----------------------- ------------------ ------------------- Kwik-Fill, Inc. Pennsylvania 5541 25-1525543 333-35083-05 - ------------------------------------- ------------------------ ----------------------- ------------------ ------------------- Independent Gas and Oil Company of New York 5170 06-1217388 333-35083-11 Rochester, Inc. - ------------------------------------- ------------------------ ----------------------- ------------------ ------------------- Bell Oil Corp. Michigan 5541 38-1884781 333-35083-07 - ------------------------------------- ------------------------ ----------------------- ------------------ ------------------- PPC, Inc. Ohio 5541 31-0821706 333-35083-08 - ------------------------------------- ------------------------ ----------------------- ------------------ ------------------- Super Test Petroleum, Inc. Michigan 5541 38-1901439 333-35083-09 - ------------------------------------- ------------------------ ----------------------- ------------------ ------------------- Kwik-Fil, Inc. New York 5541 25-1525615 333-35083-04 - ------------------------------------- ------------------------ ----------------------- ------------------ ------------------- Vulcan Asphalt Refining Corporation Delaware 2911 23-2486891 333-35083-10 - ------------------------------------- ------------------------ ----------------------- ------------------ -------------------
2 3 UNITED REFINING COMPANY AND SUBSIDIARIES
INDEX - ------------------------------------------------------------------------------------------ PART I. FINANCIAL INFORMATION PAGE(S) Item 1. Financial Statements Consolidated Balance Sheets - November 30, 1998 and August 31, 1998 4 Consolidated Statements of Operations - Quarters Ended November 30, 1998 and 1997 5 Consolidated Statements of Cash Flows - Quarters Ended November 30, 1998 and 1997 6 Notes to Consolidated Financial Statements 7-8 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 9-12 PART II. OTHER INFORMATION 13
3 4 PART 1 -- FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS UNITED REFINING COMPANY AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (IN THOUSANDS)
- --------------------------------------------------------------------------------------------------------------------- NOVEMBER 30, 1998 AUGUST 31, (UNAUDITED) 1998 - --------------------------------------------------------------------------------------------------------------------- ASSETS CURRENT: Cash and cash equivalents $ 17,753 $ 26,400 Accounts receivable, net 24,003 27,017 Inventories 48,461 55,124 Prepaid expenses and other assets 7,834 7,727 Deferred income taxes 5,024 5,024 - --------------------------------------------------------------------------------------------------------------------- TOTAL CURRENT ASSETS 103,075 121,292 - --------------------------------------------------------------------------------------------------------------------- PROPERTY, PLANT AND EQUIPMENT: Cost 262,299 256,895 Less: accumulated depreciation 60,559 58,918 - --------------------------------------------------------------------------------------------------------------------- NET PROPERTY, PLANT AND EQUIPMENT 201,740 197,977 - --------------------------------------------------------------------------------------------------------------------- RESTRICTED CASH AND CASH EQUIVALENTS AND INVESTMENTS 11,309 15,289 DEFERRED FINANCING COSTS, NET 7,023 7,244 OTHER ASSETS 761 777 - --------------------------------------------------------------------------------------------------------------------- $323,908 $342,579 ===================================================================================================================== LIABILITIES AND STOCKHOLDER'S EQUITY CURRENT: Current installments of long-term debt $ 258 $ 283 Accounts payable 14,268 25,298 Accrued liabilities 17,235 11,823 Sales, use and fuel taxes payable 13,049 26,026 - --------------------------------------------------------------------------------------------------------------------- TOTAL CURRENT LIABILITIES 44,810 63,430 LONG TERM DEBT: LESS CURRENT INSTALLMENTS 200,935 201,026 DEFERRED INCOME TAXES 17,036 16,889 DEFERRED GAIN ON SETTLEMENT OF PENSION PLAN OBLIGATIONS 2,151 2,205 DEFERRED RETIREMENT BENEFITS 12,133 12,350 OTHER NONCURRENT LIABILITIES 2,152 1,442 - --------------------------------------------------------------------------------------------------------------------- TOTAL LIABILITIES 279,217 297,342 - --------------------------------------------------------------------------------------------------------------------- COMMITMENTS AND CONTINGENCIES STOCKHOLDER'S EQUITY: Common stock, $.10 par value per share - shares authorized 100; issued and outstanding 100 -- -- Additional paid-in capital 7,150 7,150 Retained earnings 37,541 38,087 - --------------------------------------------------------------------------------------------------------------------- TOTAL STOCKHOLDER'S EQUITY 44,691 45,237 - --------------------------------------------------------------------------------------------------------------------- $323,908 $342,579 =====================================================================================================================
See accompanying notes to consolidated financial statements. 4 5 UNITED REFINING COMPANY AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS - (UNAUDITED) (IN THOUSANDS)
- -------------------------------------------------------------------------------------------------------------- THREE MONTHS ENDED NOVEMBER 30, ------------------------------- 1998 1997 - -------------------------------------------------------------------------------------------------------------- NET SALES $187,092 $213,302 COSTS OF GOODS SOLD 162,042 186,121 - -------------------------------------------------------------------------------------------------------------- GROSS PROFIT 25,050 27,181 - -------------------------------------------------------------------------------------------------------------- EXPENSES: Selling, general and administrative expenses 19,624 19,116 Depreciation and amortization expenses 2,356 2,274 - -------------------------------------------------------------------------------------------------------------- TOTAL OPERATING EXPENSES 21,980 21,390 - -------------------------------------------------------------------------------------------------------------- OPERATING INCOME 3,070 5,791 - -------------------------------------------------------------------------------------------------------------- OTHER INCOME (EXPENSE): Interest income 515 954 Interest expense (5,435) (5,508) Other, net 957 (30) - -------------------------------------------------------------------------------------------------------------- (3,963) (4,584) - -------------------------------------------------------------------------------------------------------------- INCOME (LOSS) BEFORE INCOME TAX EXPENSE (BENEFIT) (893) 1,207 INCOME TAX EXPENSE (BENEFIT) (347) 482 - -------------------------------------------------------------------------------------------------------------- NET INCOME (LOSS) $ (546) $ 725 ==============================================================================================================
5 6 UNITED REFINING COMPANY AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS - (UNAUDITED) (IN THOUSANDS)
- ---------------------------------------------------------------------------------------------------------------------------------- THREE MONTHS ENDED NOVEMBER 30, -------------------------------------- 1998 1997 - ---------------------------------------------------------------------------------------------------------------------------------- CASH FLOWS FROM OPERATING ACTIVITIES: Net income (loss) $ (546) $ 725 Adjustments to reconcile net income/(loss) to net cash provided by (used in) operating activities: Depreciation and amortization 2,524 2,436 Post-retirement benefits (217) (251) Change in deferred income taxes 147 472 (Gain) on asset dispositions (1,078) (72) Cash provided by (used in) working capital items (8,231) 2,812 Other, net (69) (167) - ---------------------------------------------------------------------------------------------------------------------------------- TOTAL ADJUSTMENTS (6,924) 5,230 - ---------------------------------------------------------------------------------------------------------------------------------- NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES (7,470) 5,955 - ---------------------------------------------------------------------------------------------------------------------------------- CASH FLOWS FROM INVESTING ACTIVITIES: Decrease in restricted cash, cash equivalents and investments 3,980 3,378 Additions to property, plant and equipment (7,039) (7,222) Proceeds from asset dispositions 1,998 120 - ---------------------------------------------------------------------------------------------------------------------------------- NET CASH USED IN INVESTING ACTIVITIES (1,061) (3,724) - ---------------------------------------------------------------------------------------------------------------------------------- CASH FLOWS FROM FINANCING ACTIVITIES: Principal reductions of long-term debt (116) (54) Deferred financing costs -- (124) - ---------------------------------------------------------------------------------------------------------------------------------- NET CASH USED IN FINANCING ACTIVITIES (116) (178) - ---------------------------------------------------------------------------------------------------------------------------------- NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (8,647) 2,053 CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 26,400 11,024 - ---------------------------------------------------------------------------------------------------------------------------------- CASH AND CASH EQUIVALENTS, END OF PERIOD $ 17,753 $13,077 - ---------------------------------------------------------------------------------------------------------------------------------- CASH PROVIDED BY (USED IN) WORKING CAPITAL ITEMS: Accounts receivable, net $ 3,014 5,747 Inventories 6,663 1,371 Prepaid expenses and other assets (107) 611 Accounts payable (11,030) (8,396) Accrued liabilities 6,206 4,967 Sales, use and fuel taxes payable (12,977) (1,488) - ---------------------------------------------------------------------------------------------------------------------------------- TOTAL CHANGE $ (8,231) $ 2,812 - ----------------------------------------------------------------------------------------------------------------------------------
See accompanying notes to consolidated financial statements. 6 7 UNITED REFINING COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) =============================================================================== 1. BASIS OF PRESENTATION The accompanying unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting principles 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 generally accepted accounting principles 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 month period ended November 30, 1998 are not necessarily indicative of the results that may be expected for the year ending August 31, 1999. For further information, refer to the consolidated financial statements and footnotes thereto incorporated by reference in the Company's Form 10-K filing dated November 30, 1998. 2. COMPREHENSIVE INCOME The Company has adopted Statement of Financial Accounting Standards (SFAS) No. 130, REPORTING COMPREHENSIVE INCOME, which establishes standards for reporting and display of comprehensive income, its components and accumulated balances. Comprehensive income is defined to include all changes in equity except those resulting from investments by owners and distributions to owners. Among other disclosures, SFAS No. 130 requires that all items that are required to be recognized under current accounting standards as components of comprehensive income be reported in a financial statement that is displayed with the same prominence as other financial statements. For interim reporting purposes, SFAS No. 130 requires disclosure of total comprehensive income. Total comprehensive income for the three months ended November 30, 1998 and 1997 is the same as the reported net income. 7 8 UNITED REFINING COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) =============================================================================== 3. SUBSIDIARY GUARANTORS Summarized financial information for the Company's wholly owned subsidiary guarantors is as follows:
NOVEMBER 30, 1998 (UNAUDITED) AUGUST 31, 1998 - -------------------------------------------------------------------------------------- Current assets $ 38,675 $ 39,901 Noncurrent assets 77,367 73,666 Current liabilities 107,461 103,977 Noncurrent liabilities 10,403 10,651 - --------------------------------------------------------------------------------------
THREE MONTHS ENDED NOVEMBER 30, 1998 NOVEMBER 30, 1997 (UNAUDITED) (UNAUDITED) - -------------------------------------------------------------------------------------- Net sales $105,170 115,156 Gross profit 16,601 17,441 Operating income (loss) (1,189) 568 Net income (loss) (872) (162) - --------------------------------------------------------------------------------------
8 9 UNITED REFINING COMPANY AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (UNAUDITED) ================================================================================ Recent Developments The decline in world crude oil prices continued in December 1998, with the average prices of NYMEX crude oil contracts traded during December reaching the lowest level in well over a decade. However, prices increased significantly in early January 1999, with NYMEX crude oil contracts as of January 11 trading approximately $2 per barrel above the December average. Results of Operations For the fiscal quarter ended November 30, 1998, the Company's Costs of Goods Sold, Gross Profit and Operating Income continued to be negatively affected by the reduction in the valuation of working inventories as a result of falling petroleum prices. The reduction in the valuation of working inventories for the quarter ended November 30, 1998 was approximately $1.4 million, compared to a reduction in valuation of approximately $1.2 million in the fiscal quarter ended November 30, 1997. However, such changes in inventory valuation did not have a material effect on the Company's operating cash flow. Matters discussed below should be read in conjunction with the accompanying unaudited financial information. Certain statements contained in this report are forward-looking. Although management believes that its expectations are based on reasonable assumptions within the bounds of its knowledge of its business and operations, there can be no assurance that actual results will not differ materially from its expectations. Factors that could cause actual results to differ from expectations include general economic, business and market conditions, volatility of gasoline prices, merchandise margins, customer traffic, weather conditions, labor costs and the level of capital expenditures. For other important factors that may cause actual results to differ materially from expectations and underlying assumptions, see the Company's periodic filings with the Securities and Exchange Commission. Comparison of Fiscal Quarters ended November 30, 1998 and November 30, 1997 Net Sales. Net Sales decreased $26.2 million or 12.3% from $213.3 million for the fiscal quarter ended November 30, 1997 to $187.1 million for the fiscal quarter ended November 30, 1998. The decline was due to 27.9% and 26.5% decreases in wholesale and retail petroleum sales prices respectively, partially offset by 16.3% and 5.3% increases in wholesale and retail petroleum volume respectively and by an 8.7% increase in retail merchandise sales. The price decreases were primarily due to lower prices for petroleum products worldwide which accompanied a 29.9% decrease in world crude oil prices, as indicated by average prices of NYMEX crude oil contracts in the fiscal quarter ended November 30, 1998 as compared to average prices of these contracts in the quarter ended November 30, 1997. Costs of Goods Sold. Costs of goods sold decreased $24.1 million or 12.9% from $186.1 million for the fiscal quarter ended November 30, 1997 to $162.0 million for the fiscal quarter ended November 30, 1998. This decrease was primarily due to a 29.9% decline in world crude oil prices for the quarter ended November 30, 1998 as compared to crude oil prices for the quarter ended November 30, 1997. The decline in the Company's costs of goods due to lower world crude oil prices was partially offset by an 9 10 UNITED REFINING COMPANY AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (UNAUDITED) ================================================================================ increase in the volume of crude oil processed at the Company's refinery in the quarter ended November 30, 1998 as compared to the quarter ended November 30, 1997. Operating Expenses. Operating expenses increased $0.6 million or 2.8% from $21.4 million for the fiscal quarter ended November 30, 1997 to $22.0 million for the fiscal quarter ended November 30, 1998. The increase was primarily due to increased retail expenses for sales promotions and environmental expenses. Increased retail environmental expenses were primarily connected with the upgrading of underground storage tanks to new federal standards. Increased retail promotions expenses were primarily in connection with a "frequent fueler" program which has been effective in increasing retail gasoline volume. This program was first introduced in June, 1997 and was extended to include all retail locations in February, 1998. Operating Income. Operating income decreased $2.7 million from $5.8 million for the fiscal quarter ended November 30, 1997 to $3.1 million for the fiscal quarter ended November 30, 1998. This was primarily due to lower gross profit in terms of total dollars, as the result of lower industry wide petroleum margins, only partially offset by the Company's higher petroleum sales volumes. However, gross profit increased as a percentage of sales, primarily because of an increase in retail merchandise sales, which historically achieve a higher percentage gross margin than petroleum. Other Income/Expense. Net interest expense (interest expense less interest income) increased $0.4 million from $4.5 million for the fiscal quarter ended November 30, 1997 to $4.9 million for the fiscal quarter ended November 30, 1998. The increased net interest expense was due to a decrease in interest income earned, as a result of lower balances of restricted cash and investments. Other income/expense, net changed from an expense of approximately $30,000 for the quarter ended November 30, 1997 to income of approximately $1.0 million for the quarter ended November 30, 1998. This was primarily due to a gain of approximately $1.1 million on the sale of certain assets. Income Taxes. The provisions for income taxes for the fiscal quarters ended November 30, 1997 and November 30, 1998 have been computed based upon management's estimate of its annualized effective tax rate of approximately 39.9% and 38.9% respectively. Liquidity and Capital Resources Working capital (current assets minus current liabilities) at November 30, 1998 was $58.3 million and at August 31, 1998 was $57.9 million. The Company's current ratio (current assets divided by current liabilities) was 2.3:1 at November 30, 1998 and was 1.9:1 at August 31, 1998. Net cash used in operating activities totaled $7.5 million for the three months ended November 30, 1998 compared to net cash provided by operating activities of $6.0 million for the three months ended November 30, 1997. Net cash used in investing activities for purchases of property, plant and equipment totaled $7.0 million and $7.2 million for the three months ended November 30, 1998 and 1997, respectively. For the three months ended November 30, 1998, the Company used $4.0 million of restricted cash, cash equivalents and investments to fund the Company's Capital Improvement Plan. 10 11 UNITED REFINING COMPANY AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (UNAUDITED) ================================================================================ The Company reviews its capital expenditures on an ongoing basis. The Company currently has budgeted approximately $20.0 million for capital expenditures in fiscal 1999 with $3.1 million for the completion of projects relating to underground storage tanks. The remaining $16.9 million for fiscal 1999 is budgeted for the refinery expansion and retail capital improvement program, refinery environmental compliance and routine maintenance. These capital expenditures will be financed in part by the capital expenditure escrow account of $11.3 million. The refinery expansion and retail capital improvement program is expected to be completed in fiscal 1999. Maintenance 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 1999. 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. The Company expects to be able to meet its working capital, capital expenditure and debt service requirements out of cash flow from operations, cash on hand and borrowings under the Company's bank credit facility with PNC Bank, N.A. as Agent Bank. Although the Company is not aware of any pending circumstances which would change its 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 Company continues to investigate strategic acquisitions and capital improvements to its existing facilities. Federal, state and local laws and regulations relating to the environment affect nearly all the operations of the Company. As is the case with all companies engaged in similar industries, the Company 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 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. 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 the 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. Also, because winter weather in the Company's market is not favorable for paving activity, the Company's asphalt sales in winter months are composed of a much lower percentage of paving asphalt and a correspondingly higher percentage of roofing asphalt whose demand is much less seasonal. In addition, the Company stores a significant portion of winter asphalt production for sale the following spring and summer. 11 12 UNITED REFINING COMPANY AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (UNAUDITED) ================================================================================ Inflation The effect of inflation on the Company has not been significant during the last five fiscal years. Year 2000 Computer Issues The year 2000 presents many challenges to our industry with respect to, among other things, date-related functions in some computer systems. Historically, certain computer programs have been written using two digits rather than four to define the applicable year, which could result in the computer recognizing a date using "00" as the year 1900 rather than the year 2000. This in turn could result in major system failures or miscalculations and is generally referred to as the "Year 2000" problem. The Company is examining all areas of our business to ensure Year 2000 readiness, including computer hardware and software applications. The Company is addressing Year 2000 issues primarily with internal resources to ensure that the transition to the Year 2000 will not disrupt the Company's operations. The Company anticipates that essentially all of its systems will be compliant by calendar year end 1998, including its non-information technology systems. In addition, the Company has communicated with and evaluated the systems of its customers, suppliers, financial institutions and others with which it does business to identify any Year 2000 issues. Costs incurred by the Company to date to implement its plan have not been material and are not expected to have a material effect on the Company's financial condition or results of operations. There can be no assurance, however, that the Year 2000 issue will not adversely affect the Company and its business. 12 13 PART II - OTHER INFORMATION Item 1. Legal Proceedings None Item 2. Changes in Securities None Item 3. Defaults upon Senior Securities None Item 4. Submission of Matters to a Vote of Security Holders None Item 5. Other Information None Item 6. Exhibits and Reports on Form 8K (a) Exhibit 27 - Financial Data Schedule (b) No reports on Forms 8-K have been filed for the quarter for which this report is being filed. 13 14 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, 1999 UNITED REFINING COMPANY ----------------------- (Registrant) /s/ Myron L. Turfitt ----------------------- Myron L. Turfitt President /s/ James E. Murphy ----------------------- James E. Murphy Chief Financial Officer 14 15 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, 1999 KIANTONE PIPELINE CORPORATION ----------------------------- (Registrant) /s/ Myron L. Turfitt ----------------------------- Myron L. Turfitt President /s/ James E. Murphy ----------------------------- James E. Murphy Chief Financial Officer 15 16 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, 1999 UNITED REFINING COMPANY OF PENNSYLVANIA --------------------------------------- (Registrant) /s/ Myron L. Turfitt --------------------------------------- Myron L. Turfitt President /s/ James E. Murphy --------------------------------------- James E. Murphy Chief Financial Officer 16 17 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, 1999 KIANTONE PIPELINE COMPANY ------------------------- (Registrant) /s/ Myron L. Turfitt ------------------------- Myron L. Turfitt President /s/ James E. Murphy ------------------------- James E. Murphy Chief Financial Officer 17 18 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, 1999 UNITED JET CENTER, INC. ----------------------- (Registrant) /s/ Myron L. Turfitt ----------------------- Myron L. Turfitt President /s/ James E. Murphy ----------------------- James E. Murphy Chief Financial Officer 18 19 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, 1999 KWIK-FILL, INC. ----------------------- (Registrant) /s/ Myron L. Turfitt ----------------------- Myron L. Turfitt President /s/ James E. Murphy ----------------------- James E. Murphy Chief Financial Officer 19 20 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, 1999 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 20 21 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, 1999 BELL OIL CORP. ----------------------- (Registrant) /s/ Myron L. Turfitt ----------------------- Myron L. Turfitt President /s/ James E. Murphy ----------------------- James E. Murphy Chief Financial Officer 21 22 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, 1999 PPC, INC. ----------------------- (Registrant) /s/ Myron L. Turfitt ----------------------- Myron L. Turfitt President /s/ James E. Murphy ----------------------- James E. Murphy Chief Financial Officer 22 23 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, 1999 SUPER TEST PETROLEUM, INC. -------------------------- (Registrant) /s/ Myron L. Turfitt -------------------------- Myron L. Turfitt President /s/ James E. Murphy -------------------------- James E. Murphy Chief Financial Officer 23 24 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, 1999 KWIK-FIL, INC. ----------------------- (Registrant) /s/ Myron L. Turfitt ----------------------- Myron L. Turfitt President /s/ James E. Murphy ----------------------- James E. Murphy Chief Financial Officer 24 25 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, 1999 VULCAN ASPHALT REFINING CORPORATION ----------------------------------- (Registrant) /s/ Myron L. Turfitt ----------------------------------- Myron L. Turfitt President /s/ James E. Murphy ----------------------------------- James E. Murphy Chief Financial Officer 25 EX-27 2 UNITED REFINING CO. WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
5 3-MOS AUG-31-1999 NOV-30-1998 17,753 0 24,003 481 48,461 103,075 262,299 60,559 323,908 44,810 200,935 0 0 0 44,691 323,908 187,092 187,092 162,042 19,624 0 111 5,657 (893) (347) (546) 0 0 0 (546) 0 0
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