-----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, JF/MmzRkLSdpcaOb/W/u+UAsarWUDSFaPELJ2JnXRRUVaEbO+1O0vLzlT8qQv51a 0tGsIHmfd7V8hGhYBzxNTw== 0000950128-00-000018.txt : 20000202 0000950128-00-000018.hdr.sgml : 20000202 ACCESSION NUMBER: 0000950128-00-000018 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19991130 FILED AS OF DATE: 20000114 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: 507649 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: 507650 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: 507651 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: 507652 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: 507653 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: 507654 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: 507655 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: 507656 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: 507657 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: 507658 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: 507659 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: 507660 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 COMPANY FORM 10-Q 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, 1999 [ ] 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 (Zip Code) executive office) 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, 2000: 100. 2
TABLE OF ADDITIONAL REGISTRANTS -------------------------------------------------------------------------------------------------------------------------- Primary Standard State of Other Industrial IRS Employer Jurisdiction of Classification Number Identification Commission File Name Incorporation 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
PART I. FINANCIAL INFORMATION PAGE(S) Item 1. Financial Statements Consolidated Balance Sheets - November 30, 1999 and August 31, 1999 4 Consolidated Statements of Operations - Quarters Ended November 30, 1999 and 1998 5 Consolidated Statements of Cash Flows - Quarters Ended November 30, 1999 and 1998 6 Notes to Consolidated Financial Statements 7-9 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 10-13 PART II. OTHER INFORMATION 14
3 4 UNITED REFINING COMPANY AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (IN THOUSANDS)
------------------------------------------------------------------------------------------------------------------ NOVEMBER 30, 1999 AUGUST 31, (UNAUDITED) 1999 ------------------------------------------------------------------------------------------------------------------ ASSETS CURRENT: Cash and cash equivalents $ 10,619 $ 8,925 Accounts receivable, net 32,282 33,239 Inventories 70,398 70,728 Prepaid expenses and other assets 8,874 10,146 ------------------------------------------------------------------------------------------------------------------ TOTAL CURRENT ASSETS 122,173 123,038 ------------------------------------------------------------------------------------------------------------------ PROPERTY, PLANT AND EQUIPMENT: Cost 282,005 279,895 Less: accumulated depreciation 69,056 66,473 ------------------------------------------------------------------------------------------------------------------ NET PROPERTY, PLANT AND EQUIPMENT 212,949 213,422 ------------------------------------------------------------------------------------------------------------------ DEFERRED FINANCING COSTS 6,148 6,370 OTHER ASSETS 6,152 6,410 ------------------------------------------------------------------------------------------------------------------ $347,422 $349,240 ------------------------------------------------------------------------------------------------------------------ LIABILITIES AND STOCKHOLDER'S EQUITY CURRENT: Revolving credit facility $ 9,000 $ 5,000 Current installments of long-term debt 214 217 Accounts payable 24,689 34,727 Accrued liabilities 17,395 12,374 Sales, use and fuel taxes payable 15,049 16,856 Deferred income taxes 661 661 ------------------------------------------------------------------------------------------------------------------ TOTAL CURRENT LIABILITIES 67,008 69,835 LONG TERM DEBT: LESS CURRENT INSTALLMENTS 201,052 200,956 DEFERRED INCOME TAXES 13,777 13,515 DEFERRED GAIN ON SETTLEMENT OF PENSION PLAN OBLIGATIONS 1,936 1,990 DEFERRED RETIREMENT BENEFITS 14,790 14,055 OTHER NONCURRENT LIABILITIES 373 468 ------------------------------------------------------------------------------------------------------------------ TOTAL LIABILITIES 298,936 300,819 ------------------------------------------------------------------------------------------------------------------ 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 41,336 41,271 ------------------------------------------------------------------------------------------------------------------ TOTAL STOCKHOLDER'S EQUITY 48,486 48,421 ------------------------------------------------------------------------------------------------------------------ $347,422 $349,240 ------------------------------------------------------------------------------------------------------------------
4 5 UNITED REFINING COMPANY AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS - (UNAUDITED) (IN THOUSANDS)
------------------------------------------------------------------------------------------------------------ THREE MONTHS ENDED NOVEMBER 30, ---------------------------- 1999 1998 ------------------------------------------------------------------------------------------------------------ (RESTATED) NET SALES $245,084 $187,092 COSTS OF GOODS SOLD 216,995 161,883 ------------------------------------------------------------------------------------------------------------ GROSS PROFIT 28,089 25,209 ------------------------------------------------------------------------------------------------------------ EXPENSES: Selling, general and administrative expenses 19,936 19,624 Depreciation and amortization expenses 2,589 2,356 ------------------------------------------------------------------------------------------------------------ TOTAL OPERATING EXPENSES 22,525 21,980 ------------------------------------------------------------------------------------------------------------ OPERATING INCOME 5,564 3,229 ------------------------------------------------------------------------------------------------------------ OTHER INCOME (EXPENSE): Interest income 64 515 Interest expense (5,572) (5,435) Other, net 51 957 ------------------------------------------------------------------------------------------------------------ (5,457) (3,963) ------------------------------------------------------------------------------------------------------------ INCOME (LOSS) BEFORE INCOME TAX EXPENSE (BENEFIT) 107 (734) INCOME TAX EXPENSE (BENEFIT) 42 (284) ------------------------------------------------------------------------------------------------------------ NET INCOME (LOSS) $ 65 $ (450) ------------------------------------------------------------------------------------------------------------
5 6 UNITED REFINING COMPANY AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS - (UNAUDITED) (IN THOUSANDS)
------------------------------------------------------------------------------------------------------ THREE MONTHS ENDED NOVEMBER 30, ----------------------- 1999 1998 ------------------------------------------------------------------------------------------------------ (RESTATED) CASH FLOWS FROM OPERATING ACTIVITIES: Net income (loss) $ 65 $ (450) Adjustments to reconcile net income (loss) to net cash used in operating activities: Depreciation and amortization 3,350 3,098 Post-retirement benefits 735 (217) Change in deferred income taxes 262 210 Gain on asset dispositions (70) (1,078) Cash used in working capital items (4,265) (8,964) Other, net (430) (69) ------------------------------------------------------------------------------------------------------ TOTAL ADJUSTMENTS (418) (7,020) ------------------------------------------------------------------------------------------------------ NET CASH USED IN OPERATING ACTIVITIES (353) (7,470) ------------------------------------------------------------------------------------------------------ CASH FLOWS FROM INVESTING ACTIVITIES: Additions to property, plant and equipment (2,148) (7,039) Proceeds from asset dispositions 102 1,998 Decrease in restricted cash, cash equivalents and investments -- 3,980 ------------------------------------------------------------------------------------------------------ NET CASH USED IN INVESTING ACTIVITIES (2,046) (1,061) ------------------------------------------------------------------------------------------------------ CASH FLOWS FROM FINANCING ACTIVITIES: Net borrowings on revolving credit facility 4,000 -- Proceeds from issuance of long term debt 152 -- Principal reductions of long term debt (59) (116) ------------------------------------------------------------------------------------------------------ NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES 4,093 (116) ------------------------------------------------------------------------------------------------------ NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 1,694 (8,647) CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 8,925 26,400 ------------------------------------------------------------------------------------------------------ CASH AND CASH EQUIVALENTS, END OF PERIOD $ 10,619 $ 17,753 ------------------------------------------------------------------------------------------------------ CASH PROVIDED BY (USED IN) WORKING CAPITAL ITEMS: Accounts receivable, net $ 957 $ 3,014 Inventories 330 6,663 Prepaid expenses and other assets 1,272 (107) Accounts payable (10,038) (11,030) Accrued liabilities 5,021 5,473 Sales, use and fuel taxes payable (1,807) (12,977) ------------------------------------------------------------------------------------------------------ TOTAL CHANGE $ (4,265) $ (8,964) ------------------------------------------------------------------------------------------------------
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, 1999 are not necessarily indicative of the results that may be expected for the year ending August 31, 2000. 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 29, 1999. 2. DERIVATIVE INSTRUMENTS AND In June 1998, the Financial Accounting HEDGING ACTIVITIES Standards Board ("FASB") issued Statement of Financial Accounting Standards No. 133 ("Statement 133"), "Accounting for Derivative Instruments and Hedging Activities". Statement 133 establishes accounting and reporting standards for derivative instruments, including certain derivative instruments embedded in other contracts, and for hedging activities. It requires that an entity recognize all derivatives as either assets or liabilities in the statement of financial position and measure these instruments at fair value. The accounting for changes in the fair value of a derivative, that is, gains and losses, depends on the intended use of the derivative and its resulting designation. Statement 133 is effective for all fiscal quarters of fiscal years beginning after June 15, 2000. Management believes that the adoption of Statement 133 will not have a material effect on the Company's financial position or results of operations. 3. RESTATEMENT Effective September 1, 1998, the Company changed its method of accounting for major maintenance turnarounds. Accordingly, the Company has restated its financial statements for the three months ended November 30, 1998 to reflect this change as follows (in thousands):
THREE MONTHS ENDED NOVEMBER 30, 1998 ------------------------------- AS REPORTED AS RESTATED - --------------------------------------------------------------------------- Loss before income tax benefit $(893) $(734) Net loss $(546) $(450) - ---------------------------------------------------------------------------
7 8 UNITED REFINING COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - -------------------------------------------------------------------------------- 4. SUBSIDIARY GUARANTORS Summarized financial information for the Company's wholly owned subsidiary guarantors is as follows (in thousands):
NOVEMBER 30, 1999 (UNAUDITED) AUGUST 31, 1999 - ----------------------------------------------------------------------------------- Current assets $ 48,019 $ 45,027 Noncurrent assets 88,492 88,431 Current liabilities 129,771 125,789 Noncurrent liabilities 10,042 10,312 - -----------------------------------------------------------------------------------
THREE MONTHS ENDED NOVEMBER 30, (UNAUDITED) ---------------------------------- 1999 1998 - -------------------------------------------------------------------------------- Net sales $134,959 $105,170 Gross profit 18,775 16,601 Operating income(loss) 684 (1,189) Net loss (659) (872) - --------------------------------------------------------------------------------
5. SEGMENTS OF BUSINESS 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, and the marketing of petroleum products to wholesale and industrial customers. The retail segment sells petroleum products and convenience and grocery items through company owned gasoline stations and convenience stores under the Kwik Fill(R) and Red Apple Food Mart(R) brand names. 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 table. 8 9 UNITED REFINING COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - --------------------------------------------------------------------------------
THREE MONTHS ENDED NOVEMBER 30, (UNAUDITED) ---------------------------------- 1999 1998 - ------------------------------------------------------------------------ (IN THOUSANDS) Net Sales Retail $133,770 $103,919 Wholesale 111,314 83,173 ---------------------------------- $245,084 $187,092 ---------------------------------- Intersegment Sales Wholesale $ 55,578 $ 33,334 ---------------------------------- Operating Income (Loss) Retail $ 99 $ (1,502) Wholesale 5,465 4,731 ---------------------------------- $ 5,564 $ 3,229 ---------------------------------- Depreciation and Amortization Retail $ 723 $ 660 Wholesale 1,866 1,696 ---------------------------------- $ 2,589 $ 2,356 ----------------------------------
NOVEMBER 30, 1999 (UNAUDITED) AUGUST 31, 1999 - --------------------------------------------------------------------------- (IN THOUSANDS) Total Assets Retail $117,595 $113,599 Wholesale 229,827 235,641 ------------------------------------- $347,422 $349,240 ------------------------------------- Capital Expenditures $ 782 $ 18,698 Retail 1,366 7,526 ------------------------------------- Wholesale $ 2,148 $ 26,224 -------------------------------------
9 10 UNITED REFINING COMPANY AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (UNAUDITED) - -------------------------------------------------------------------------------- Recent Developments The Company's results for fiscal 1999 were negatively impacted by reduced discounts for heavy, high sulfur grades of crude oil and by the resulting reduction in the Company's crude cost advantage versus refiners processing light, low sulfur crude oils. In the fiscal quarter ended November 30, 1999, reduced crude price discounts continued to negatively impact the Company's results, but the discounts, while smaller than the year earlier quarter, were improved significantly from average fiscal 1999 levels. With continued increases in world crude oil prices for December 1999 and January 2000, preliminary information indicates further improvement in crude oil price discounts, and the Company anticipates its crude cost advantage will be greater than for those same months one year earlier. Results of Operations Comparison of Fiscal Quarters ended November 30, 1999 and November 30, 1998 Net Sales. Net sales increased $58.0 million or 31.0% from $187.1 million for the fiscal quarter ended November 30, 1998 to $245.1 million for the fiscal quarter ended November 30, 1999. Retail sales increased $29.9 million, or 28.7% from $103.9 million to $133.8 million, while wholesale sales increased $28.1 million or 33.8% from $83.2 million to $111.3 million. The retail sales increase was due to a 4.8% increase in retail petroleum volume, a 23.6% increase in retail petroleum prices, and a 25.7% increase in retail merchandise sales. The wholesale sales increase was due to a 33.8% increase in wholesale prices which more than offset a 6.1% decrease in wholesale volume. The higher retail and wholesale prices were primarily the result of a 58.4% increase in world crude oil prices as indicated by prices of NYMEX crude oil contracts for the fiscal quarter ended November 30, 1999 compared to contracts for the year earlier quarter. The higher retail sales volumes were primarily the result of the performance of retail locations upgraded under the Company's Capital Improvement Plan, the retail portion of which was completed in the final quarter of fiscal 1999. The lower wholesale volume was primarily the result of lower refinery crude oil processing, which was reduced in November 1999 due to the planned maintenance shutdown of certain refinery processing units. Costs of Goods Sold. Costs of goods sold increased $55.1 million or 34.0% from $161.9 million for the fiscal quarter ended November 30, 1998 to $217.0 million for the fiscal quarter ended November 30, 1999. Retail costs of goods sold increased $27.9 million or 31.8% from $87.8 million to $115.7 million, while wholesale costs of goods sold increased $27.2 million or 36.7% from $74.1 million to $101.3 million. The increase in consolidated costs of goods sold was primarily the result of the increase in world crude oil prices, partially offset by lower refinery crude oil processing and by the beneficial impact on costs of goods sold of increases in the value of the Company's working inventories. The value of the working inventories increased approximately $4.7 million in the fiscal quarter ended November 30, 1999, which reduced costs of goods sold. In the fiscal quarter ended November 30, 1998, the value of working inventories decreased $1.4 million, which increased costs of goods sold. Gross Profit. Gross profit increased $2.9 million from $25.2 for the fiscal quarter ended November 30, 1998 to $28.1 million for the fiscal quarter ended November 30, 1999. Gross profit as a percentage of sales, however, declined from 13.5% for the fiscal quarter ended November 30, 1998 to 10 11 UNITED REFINING COMPANY AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (UNAUDITED) - -------------------------------------------------------------------------------- 11.5% for the fiscal quarter ended November 30, 1999 due primarily to asphalt and retail petroleum selling prices which did not keep pace with increases in crude costs. Operating Expenses. Operating expenses increased $0.5 million or 2.5% from $22.0 million for the fiscal quarter ended November 30, 1998 to $22.5 million for the fiscal quarter ended November 30, 1999. This increase was primarily due to increased depreciation on new capital equipment installed under the Company's Capital Improvement Plan, and to increased retail expenses for sales promotions and for credit card processing, partially offset by lower retail maintenance and environmental expenses. Increased retail promotions expenses were primarily in connection with a "frequent fueler" program which has been effective in increasing retail gasoline volume. Increased credit card processing expenses were primarily due to increased customer use of credit cards at stations offering recently installed "Pay at the Pump" service. Reduced retail environmental expenses were primarily due to the completion in December 1998 of the Federally mandated program of replacing or upgrading underground storage tanks. Operating Income. As a result of the above, operating income increased $2.4 million from $3.2 million for the fiscal quarter ended November 30, 1998 to $5.6 million for the fiscal quarter ended November 30, 1999. Interest Expense. Net interest expense (interest expense less interest income) increased $0.6 million from $4.9 million for the fiscal quarter ended November 30, 1998 to $5.5 million for the fiscal quarter ended November 30, 1999. The increased net interest expense was primarily due to a decrease in interest income earned, as a result of lower balances of restricted cash and investments. Income Taxes. The Company's effective tax rate for the fiscal quarter ended November 30, 1999 was approximately 39.3% compared to a rate of 38.7% for the fiscal quarter ended November 30, 1998. Liquidity and Capital Resources Working capital (current assets minus current liabilities) at November 30, 1999 was $55.2 million and at August 31, 1999 was $53.2 million. The Company's current ratio (current assets divided by current liabilities) was 1.8:1 at November 30, 1999 and August 31, 1998 respectively. Net cash used in operating activities totaled $.4 million and $7.5 million for the three months ended November 30, 1999 and 1998 respectively. Net cash used in investing activities for purchases of property, plant and equipment totaled $2.1 million and $7.0 million for the three months ended November 30, 1999 and 1998 respectively. The Company reviews its capital expenditures on an ongoing basis. The Company currently has budgeted approximately $5.0 million for capital expenditures in fiscal 2000. 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 2000. 11 12 UNITED REFINING COMPANY AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (UNAUDITED) - -------------------------------------------------------------------------------- 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. 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. 12 13 UNITED REFINING COMPANY AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (UNAUDITED) - -------------------------------------------------------------------------------- Year 2000 risks exist in both information technology ("IT") systems which employ computer hardware and software and in non-information technology systems such as embedded computer chips or microcontrollers that control the operation of the equipment in which they are installed. Potential computer failures due to the Year 2000 problem could adversely affect the Company either in its operations and record keeping or from suppliers and/or customers of the Company that experience Year 2000 computer problems. The Company is examining all areas of our business to ensure Year 2000 readiness, including computer hardware and software application testing. 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 or record keeping. The Company has completed an inventory of its non-IT systems for Year 2000 compliance relative to embedded equipment used in the Company's operations. The Company believes that these systems have been identified and those at risk for failure due to Year 2000 problems have been corrected through replacement or remediation with Year 2000 compliant third party software and/or devices. Because of the nature of the non-IT systems, there can be no assurance that the Company has correctly identified all non-IT systems that are subject to failure due to the Year 2000 problem. Any failure of non-IT systems resulting from the Year 2000 problem could adversely affect the Company's operations and record keeping. 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. The Company has a contingency plan to respond to the possible effects of the Year 2000 problem on third parties that are important to the Company's operations. The Company has communicated with its critical suppliers, vendors, customers, utilities, financial institutions and telecommunication providers with whom it does significant business to identify any Year 2000 issues. The Company will continue to communicate with and review the progress of these third party enterprises in resolving their Year 2000 issues. The ability to accurately assess the Company's third parties' readiness is dependent in large part upon the reliability and completeness of their representations. The Company feels the most significant risk to its results of operations and financial condition is that third party supplier(s) of essential inputs (such as power to operate the refinery) would be unable to perform their normal services for an extended period of time because of difficulties created by the Year 2000 problem. This type scenario could cause the Company to suspend the affected operations until the supplier solves the problem or in some cases until an alternative supply could be arranged. The Company, in the event that a particular supplier appears to be vulnerable, will seek to obtain alternative supplies to the extent they are available. However, in the case of some inputs, alternative supplies may not realistically be available even if the supply problem is identified months in advance. In other cases, an unexpected third party failure could occur despite extensive prior communication and assurances from key suppliers. To the extent possible, the Company has either tested or received certifications with respect to all significant IT and non-IT systems. While the Company believes that it has made adequate arrangements to deal with these contingencies, it continues to update such plans as additional information becomes available. 13 14 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. 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, 2000 UNITED REFINING COMPANY -------------------------------------------- (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, 2000 KIANTONE PIPELINE CORPORATION -------------------------------------------- (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, 2000 UNITED REFINING COMPANY OF PENNSYLVANIA -------------------------------------------- (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, 2000 KIANTONE PIPELINE COMPANY -------------------------------------------- (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, 2000 UNITED JET CENTER, 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, 2000 KWIK-FILL, 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, 2000 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 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, 2000 BELL OIL CORP. -------------------------------------------- (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, 2000 PPC, 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, 2000 SUPER TEST PETROLEUM, 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, 2000 KWIK-FIL, INC. -------------------------------------------- (Registrant) /s/ Myron L. Turfitt -------------------------------------------- Myron L. Turfitt President /s/ James E. Murphy -------------------------------------------- James E. Murphy Chief Financial Officer 25 26 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, 2000 VULCAN ASPHALT REFINING CORPORATION -------------------------------------------- (Registrant) /s/ Myron L. Turfitt -------------------------------------------- Myron L. Turfitt President /s/ James E. Murphy -------------------------------------------- James E. Murphy Chief Financial Officer 26 EX-27 2 FINANCIAL DATA SCHEDULE WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
5 1,000 3-MOS AUG-31-2000 SEP-01-1999 NOV-30-1999 10,619 0 32,282 437 70,398 122,173 282,005 69,056 347,422 67,008 201,052 0 0 0 48,486 347,422 245,084 245,084 216,995 19,936 0 112 5,794 107 42 65 0 0 0 65 0 0
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