10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended May 31, 2009

or

¨ 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. 001-06198

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)

814-723-1500

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

The Company believes that a control system, no matter how well designed and operated, cannot provide absolute assurance that the objectives of the control system are met, and no evaluation of controls can provide absolute assurance that all controls issues and instances of fraud, if any, within a Company are detected. The Company’s disclosure controls and procedures are designed to provide reasonable assurance of achieving their objectives and the Company’s CEO and CFO have concluded that such controls and procedures are effective at the “reasonable assurance” level.

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

Large accelerated filer  ¨	Accelerated filer  ¨
Non-accelerated filer  x	Smaller reporting company  ¨

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

As of July 15, 2009, there were 100 shares of common stock, par value $.10 per share, of the Registrant outstanding.

TABLE OF ADDITIONAL REGISTRANTS

Name	State of Other Jurisdiction of Incorporation	IRS Employer Identification Number	Commission File 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

2

FORM 10-Q – CONTENTS

		PAGE(S)
PART I.	FINANCIAL INFORMATION
Item 1.	Financial Statements
	Consolidated Balance Sheets – May 31, 2009 (unaudited) and August 31, 2008	4
	Consolidated Statements of Operations – Quarter and Nine Months Ended May 31, 2009 and 2008 (unaudited)	5
	Consolidated Statements of Cash Flows – Nine Months Ended May 31, 2009 and 2008 (unaudited)	6
	Notes to Consolidated Financial Statements (unaudited)	7
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	16
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	25
Item 4.	Controls and Procedures	25
PART II.	OTHER INFORMATION	26
Item 1.	Legal Proceedings	26
Item 1A.	Risk Factors	26
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	26
Item 3.	Defaults Upon Senior Securities	26
Item 4.	Submission of Matters to a Vote of Security Holders	26
Item 5.	Other Information	26
Item 6.	Exhibits	26
Signatures		27

3

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS.

UNITED REFINING COMPANY AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(in thousands, except share amounts)

	May 31, 2009 (Unaudited)			August 31, 2008
Assets
Current:
Cash and cash equivalents	$	19,887		$	32,447
Accounts receivable, net		77,759			124,022
Due from affiliated companies under a tax sharing agreement		4,602			35,913
Inventories		206,483			94,708
Prepaid expenses and other assets		24,951			21,304
Total current assets		333,682			308,394
Property, plant and equipment, net		251,683			244,011
Investment in affiliated company		6,427			6,389
Deferred financing costs, net		3,582			4,544
Goodwill		1,349			1,349
Tradename		10,500			10,500
Amortizable intangible assets, net		1,509			1,713
Deferred turnaround costs and other assets, net		8,870			13,120
Deferred income taxes		9,433			11,773
	$	627,035		$	601,793
Liabilities and Stockholder’s (Deficit) Equity
Current:
Revolving credit facility	$	22,000		$	9,000
Current installments of long-term debt		2,397			2,184
Accounts payable		43,753			46,912
Income taxes payable		9,033			—
Accrued liabilities		23,665			16,377
Sales, use and fuel taxes payable		21,759			21,454
Deferred income taxes		2,891			2,891
Amounts due to affiliated companies, net		1,756			2,591
Total current liabilities		127,254			101,409
Long term debt: less current installments		334,704			356,107
Deferred gain on settlement of pension plan obligations		—			55
Deferred retirement benefits		88,505			86,146
Other noncurrent liabilities		7			18
Total liabilities		550,470			543,735
Commitments and contingencies
Stockholder’s equity:
Common stock; $.10 par value per share – shares authorized 100; issued and outstanding 100		—			—
Additional paid-in capital		24,665			24,665
Retained earnings		73,659			56,338
Accumulated other comprehensive loss		(21,759	)		(22,945	)
Total stockholder’s equity		76,565			58,058
	$	627,035		$	601,793

See accompanying notes to consolidated financial statements.

4

UNITED REFINING COMPANY AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS—(Unaudited)

(in thousands)

	Three Months Ended						Nine Months Ended
	May 31,						May 31,
	2009			2008			2009			2008
				(As adjusted)						(As adjusted)
Net sales	$	498,312		$	788,949		$	1,703,592		$	2,146,235
Costs of goods sold		428,939			775,165			1,534,622			2,072,749
Gross profit		69,373			13,784			168,970			73,486
Expenses:
Selling, general and administrative expenses		35,779			36,116			107,937			106,845
Depreciation and amortization expenses		4,028			4,058			12,204			12,138
Total operating expenses		39,807			40,174			120,141			118,983
Operating income (loss)		29,566			(26,390	)		48,829			(45,497	)
Other income (expense):
Interest expense, net		(8,785	)		(8,595	)		(27,258	)		(22,826	)
Other, net		(627	)		(462	)		(1,479	)		(1,557	)
Equity in net earnings of affiliate		(3	)		618			38			1,512
Gain on extinguishment of debt		9,230			—			9,230			—
		(185	)		(8,439	)		(19,469	)		(22,871	)
Income (loss) before income tax expense (benefit)		29,381			(34,829	)		29,360			(68,368	)
Income tax expense (benefit)		12,048			(14,280	)		12,039			(28,030	)
Net income (loss)	$	17,333		$	(20,549	)	$	17,321		$	(40,338	)

See accompanying notes to consolidated financial statements.

5

UNITED REFINING COMPANY AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS—(Unaudited)

(in thousands)

	Nine Months Ended
	May 31, 2009			May 31, 2008
				(As adjusted)
Cash flows from operating activities:
Net income (loss)	$	17,321		$	(40,338	)
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Depreciation and amortization		17,486			15,664
Equity in net earnings of affiliate		(38	)		(1,512	)
Deferred income taxes		1,516			4,517
Gain on extinguishment of debt		(9,230	)		—
Loss on asset dispositions		587			1,068
Cash used in working capital items		(25,216	)		(91,217	)
Change in operating assets and liabilities:
Other assets		372			(20	)
Deferred retirement benefits		4,370			2,153
Other noncurrent liabilities		(11	)		(25	)
Other, net		(2	)		2
Total adjustments		(10,166	)		(69,370	)
Net cash provided by (used in) operating activities		7,155			(109,708	)
Cash flows from investing activities:
Additions to property, plant and equipment		(19,191	)		(34,471	)
Additions to deferred turnaround costs		(1,138	)		(9,520	)
Proceeds from asset dispositions		80			—
Net cash used in investing activities		(20,249	)		(43,991	)
Cash flows from financing activities:
Net borrowings on revolving credit facility		13,000			32,000
Proceeds from sale of investment securities		—			75,854
Proceeds from issuance of long term debt		318			178
Dividends to stockholder		—			(35,312	)
Principal reductions of long term debt		(12,559	)		(956	)
Deferred financing costs		(225	)		(108	)
Net cash provided by financing activities		534			71,656
Net decrease in cash and cash equivalents		(12,560	)		(82,043	)
Cash and cash equivalents, beginning of year		32,447			135,441
Cash and cash equivalents, end of period	$	19,887		$	53,398
Cash provided by (used in) working capital items:
Accounts receivable, net	$	46,263		$	(27,582	)
Refundable income taxes		31,311			—
Inventories		(111,775	)		35,098
Prepaid expenses and other assets		(3,647	)		(100,721	)
Accounts payable		(3,159	)		23,732
Accrued liabilities		7,288			9,084
Income taxes payable		9,033			(36,514	)
Sales, use and fuel taxes payable		305			818
Amounts due from affiliated companies, net		(835	)		4,868
Total change	$	(25,216	)	$	(91,217	)
Cash paid during the period for:
Interest	$	19,473		$	18,947
Income taxes	$	1,458		$	42,273
Non-cash investing activities:
Property additions & capital leases	$	1,148		$	598

See accompanying notes to consolidated financial statements.

6

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 Corp., 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 nine months ended May 31, 2009 are not necessarily indicative of the results that may be expected for the year ending August 31, 2009. For further information, refer to the consolidated financial statements and footnotes thereto included in the Company’s Form 10-K for the fiscal year ended August 31, 2008.

2. Change in Accounting Policy

During the quarter ended February 28, 2009 the Company changed its method of accounting for inventories during interim periods from adjusting the inventory LIFO reserve on an annual basis to adjusting the inventory LIFO reserve on a quarterly basis. We believe this change in method of accounting better reflects interim results consistent with annual LIFO. Accordingly, the Company has reflected the change in accounting in the current quarter and retrospectively applied this policy to its previously issued financial statements for the three and nine months ended May 31, 2008. This change does not impact cash flows and does not impact annual financial statements.

7

UNITED REFINING COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Unaudited)

The following is a summary of the impact of the change in accounting policy has had on the Company’s Consolidated Statements of Operations for the three and nine months ended May 31, 2008:

	Three Months Ended May 31, 2008 (in thousands)
	As Previously Reported		Adjustments			As adjusted
Net sales	$	788,949	$	—		$	788,949
Costs of goods sold		733,130		42,035			775,165
Gross profit		55,819		(42,035	)		13,784
Operating expenses		40,174		—			40,174
Operating income (loss)		15,645		(42,035	)		(26,390	)
Other expenses		8,439		—			8,439
Income (loss) before income tax expense (benefit)		7,206		(42,035	)		(34,829	)
Income tax expense (benefit)		2,955		(17,235	)		(14,280	)
Net income (loss)	$	4,251	$	(24,800	)	$	(20,549	)
	Nine Months Ended May 31, 2008 (in thousands)
	As Previously Reported		Adjustments			As adjusted
Net sales	$	2,146,235	$	—		$	2,146,235
Costs of goods sold		1,990,948		81,801			2,072,749
Gross profit		155,287		(81,801	)		73,486
Operating expenses		118,983		—			118,983
Operating income (loss)		36,304		(81,801	)		(45,497	)
Other expenses		22,871		—			22,871
Income (loss) before income tax expense (benefit)		13,433		(81,801	)		(68,368	)
Income tax expense (benefit)		5,508		(33,538	)		(28,030	)
Net income (loss)	$	7,925	$	(48,263	)	$	(40,338	)

3. Recent Accounting Pronouncements

In September 2006, the FASB issued Statement No. 157, Fair Value Measurements (“Statement 157”). Statement 157 provides guidance for using fair value to measure assets and liabilities. This statement clarifies the principle that fair value should be based on the assumptions that market participants would use when pricing the asset or liability. Statement 157 establishes a fair value hierarchy, giving the highest priority to quoted prices in active markets and the lowest priority to unobservable data. Statement 157 applies whenever other standards require assets or liabilities to be measured at fair value. This statement is effective in fiscal years beginning after November 15, 2007. In February 2008, the FASB provided a one year deferral for the implementation of Statement 157 for non-financial assets and liabilities recognized or disclosed at fair value on a non-recurring basis. The Company adopted Statement 157 for financial assets as of September 1, 2008 and it did not have a significant effect on the Company’s consolidated financial statements. Furthermore, the Company believes that the adoption of Statement 157 for non-financial assets and liabilities will not have a significant effect on the Company’s consolidated financial statements.

In December 2007, the FASB issued Statement No. 160, “Noncontrolling Interests in Consolidated Financial Statements – an Amendment of Accounting Research Bulletin No. 51” (“Statement 160”), which

8

UNITED REFINING COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Unaudited)

establishes accounting and reporting standards for ownership interests in subsidiaries held by parties other than the parent, the amount of consolidated net income attributable to the parent and to the noncontrolling interest, changes in a parent’s ownership interest and the valuation of retained noncontrolling equity investments when a subsidiary is deconsolidated. Statement 160 also establishes reporting requirements that provide sufficient disclosures that clearly identify and distinguish between the interest of the parent and the interests of the noncontrolling owner. Statement 160 is effective for fiscal years beginning after December 15, 2008. The Company is currently evaluating the potential impact, if any, of the adoption of Statement 160 on the Company’s consolidated financial position, results of operations and cash flows.

In March 2008, the FASB issued Statement No. 161 “Disclosure about Derivative Instruments and Hedging Activities-an amendment of FASB statements No. 133” (“Statement 161”) which provides revised guidance for enhanced disclosures about how and why an entity uses derivative instruments, how derivative instruments and related hedged items are accounted for under Statement 133, and how derivative instruments and the related hedged items affect an entity’s financial position, financial performance and cash flows. Statement 161 is effective for the Company’s fiscal and interim periods beginning after November 15, 2008. The Company does not currently have any derivative instruments and is not involved in any hedging activities.

4. Inventories

Inventories are stated at the lower of cost or market, with cost being determined under the Last-in, First-out (LIFO) method for crude oil and petroleum product inventories and the First-in, First-out (FIFO) method for merchandise. Supply inventories are stated at either lower of cost or market or replacement cost and include various parts for the refinery operations. (See note 2).

Inventories consist of the following:

	May 31, 2009			August 31, 2008
	(in thousands)
Crude Oil	$	64,197		$	17,273
Petroleum Products		135,995			39,836
Total @ LIFO		200,192			57,109
Merchandise		17,598			18,350
Supplies		21,686			19,249
Total @ FIFO		39,284			37,599
		239,476			94,708
Lower of cost or market reserve		(32,993	)		—
Total Inventory	$	206,483		$	94,708

At May 31, 2009, aggregated LIFO costs exceeded the current market costs by $33,000,000. Accordingly the Company recorded a $33,000,000 lower of cost or market reserve against LIFO cost. The net effect of the $33,000,000 change in this reserve for the nine month period from August 31, 2008 to May 31, 2009 to value the Company’s crude oil and petroleum products inventories to net realizable market values decreased operating income by $33,000,000. For the three month period ending May 31, 2009, the lower of cost or market reserve was reduced from $78,000,000 at February 28, 2009 to $33,000,000 at May 31, 2009. The net effect of this reduction for the three month period increased operating income by approximately $45,000,000.

9

UNITED REFINING COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Unaudited)

5. Subsidiary Guarantors

Certain of United Refining Company’s (the “issuer”) subsidiaries function as guarantors under the terms of the $350,000,000 Senior Unsecured Note Indenture due August 15, 2012. Financial information for the issuer and its wholly owned subsidiary guarantors is as follows:

CONDENSED CONSOLIDATING BALANCE SHEETS

(in thousands)

	May 31, 2009												August 31, 2008
	Issuer			Guarantors			Eliminations			Consolidated			Issuer			Guarantors			Eliminations			Consolidated
Assets
Current:
Cash and cash equivalents	$	6,193		$	13,694		$	—		$	19,887		$	11,358		$	21,089		$	—		$	32,447
Accounts receivable, net		47,444			30,315			—			77,759			75,524			48,498			—			124,022
Refundable income taxes		4,533			69			—			4,602			34,530			1,383			—			35,913
Inventories		181,123			25,360			—			206,483			64,614			30,094			—			94,708
Prepaid expenses and other assets		17,763			7,188			—			24,951			16,338			4,966			—			21,304
Intercompany		112,349			15,860			(128,209	)		—			163,202			17,001			(180,203	)		—
Total current assets		369,405			92,486			(128,209	)		333,682			365,566			123,031			(180,203	)		308,394
Property, plant and equipment, net		175,133			76,550			—			251,683			166,266			77,745			—			244,011
Investment in affiliated company		6,427			—			—			6,427			6,389			—			—			6,389
Deferred financing costs, net		3,582			—			—			3,582			4,544			—			—			4,544
Goodwill and other non-amortizable assets		—			11,849			—			11,849			—			11,849			—			11,849
Amortizable intangible assets, net		—			1,509			—			1,509			—			1,713			—			1,713
Deferred turnaround costs & other assets		7,942			928			—			8,870			11,984			1,136			—			13,120
Deferred income taxes		14,839			(5,406	)		—			9,433			15,778			(4,005	)		—			11,773
Investment in subsidiaries		6,675			—			(6,675	)		—			(5,922	)		—			5,922			—
	$	584,003		$	177,916		$	(134,884	)	$	627,035		$	564,605		$	211,469		$	(174,281	)	$	601,793
Liabilities and Stockholder’s Equity
Current:
Revolving credit facility	$	22,000		$	—		$	—		$	22,000		$	9,000		$	—		$	—		$	9,000
Current installments of long-term debt		1,392			1,005			—			2,397			1,315			869			—			2,184
Accounts payable		21,633			22,120			—			43,753			24,550			22,362			—			46,912
Income taxes payable		1,037			7,996			—			9,033			—			—			—			—
Accrued liabilities		18,137			5,528			—			23,665			10,615			5,762			—			16,377
Sales, use and fuel taxes payable		17,678			4,081			—			21,759			16,961			4,493			—			21,454
Deferred income taxes		3,590			(699	)		—			2,891			3,590			(699	)		—			2,891
Amounts due to affiliated companies, net		1,693			63			—			1,756			1,297			1,294			—			2,591
Intercompany		—			128,209			(128,209	)		—			—			180,203			(180,203	)		—
Total current liabilities		87,160			168,303			(128,209	)		127,254			67,328			214,284			(180,203	)		101,409
Long term debt: less current installments		332,046			2,658			—			334,704			353,098			3,009			—			356,107
Deferred gain on settlement of pension plan obligations		—			—			—			—			55			—			—			55
Deferred retirement benefits		88,232			273			—			88,505			86,066			80			—			86,146
Other noncurrent liabilities		—			7			—			7			—			18			—			18
Total liabilities		507,438			171,241			(128,209	)		550,470			506,547			217,391			(180,203	)		543,735
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		24,665			10,651			(10,651	)		24,665			24,665			10,651			(10,651	)		24,665
Retained earnings		73,659			(3,876	)		3,876			73,659			56,338			(16,464	)		16,464			56,338
Accumulated other comprehensive loss		(21,759	)		(118	)		118			(21,759	)		(22,945	)		(127	)		127			(22,945	)
Total stockholder’s equity		76,565			6,675			(6,675	)		76,565			58,058			(5,922	)		5,922			58,058
	$	584,003		$	177,916		$	(134,884	)	$	627,035		$	564,605		$	211,469		$	(174,281	)	$	601,793

10

UNITED REFINING COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Unaudited)

CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS

(in thousands)

	Three Months Ended May 31, 2009												Three Months Ended May 31, 2008 (As adjusted)
	Issuer			Guarantors			Eliminations			Consolidated			Issuer			Guarantors			Eliminations			Consolidated
Net sales	$	334,518		$	277,990		$	(114,196	)	$	498,312		$	611,314		$	405,648		$	(228,013	)	$	788,949
Costs of goods sold		295,061			248,074			(114,196	)		428,939			625,671			377,507			(228,013	)		775,165
Gross profit (loss)		39,457			29,916			—			69,373			(14,357	)		28,141			—			13,784
Expenses:
Selling, general and administrative expenses		5,395			30,384			—			35,779			5,534			30,582			—			36,116
Depreciation and amortization expenses		2,678			1,350			—			4,028			2,631			1,427			—			4,058
Total operating expenses		8,073			31,734			—			39,807			8,165			32,009			—			40,174
Operating income (loss)		31,384			(1,818	)		—			29,566			(22,522	)		(3,868	)		—			(26,390	)
Other income (expense):
Interest expense, net		(8,450	)		(335	)		—			(8,785	)		(7,711	)		(884	)		—			(8,595	)
Other, net		(905	)		278			—			(627	)		(743	)		281			—			(462	)
Gain on extinguishment of debt		9,230			—			—			9,230			—			—			—			—
Equity in net (loss) earnings of affiliate		(3	)		—			—			(3	)		618			—			—			618
Equity in net loss of subsidiaries		(1,703	)		—			1,703			—			(2,842	)		—			2,842			—
		(1,831	)		(57	)		1,703			(185	)		(10,678	)		(603	)		2,842			(8,439	)
Income (loss) before income tax expense (benefit)		29,553			(1,875	)		1,703			29,381			(33,200	)		(4,471	)		2,842			(34,829	)
Income tax expense (benefit)		12,220			(172	)		—			12,048			(12,651	)		(1,629	)		—			(14,280	)
Net income (loss)	$	17,333		$	(1,703	)	$	1,703		$	17,333		$	(20,549	)	$	(2,842	)	$	2,842		$	(20,549	)

11

UNITED REFINING COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Unaudited)

CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS

(in thousands)

	Nine Months Ended May 31, 2009												Nine Months Ended May 31, 2008 (As adjusted)
	Issuer			Guarantors			Eliminations			Consolidated			Issuer			Guarantors			Eliminations			Consolidated
Net sales	$	1,192,038		$	877,968		$	(366,414	)	$	1,703,592		$	1,641,455		$	1,082,531		$	(577,751	)	$	2,146,235
Costs of goods sold		1,140,923			760,113			(366,414	)		1,534,622			1,651,650			998,850			(577,751	)		2,072,749
Gross profit (loss)		51,115			117,855			—			168,970			(10,195	)		83,681			—			73,486
Expenses:
Selling, general and administrative expenses		17,096			90,841			—			107,937			16,893			89,952			—			106,845
Depreciation and amortization expenses		8,034			4,170			—			12,204			7,894			4,244			—			12,138
Total operating expenses		25,130			95,011			—			120,141			24,787			94,196			—			118,983
Operating income (loss)		25,985			22,844			—			48,829			(34,982	)		(10,515	)		—			(45,497	)
Other income (expense):
Interest expense, net		(25,618	)		(1,640	)		—			(27,258	)		(18,788	)		(4,038	)		—			(22,826	)
Other, net		(2,263	)		785			—			(1,478	)		(2,419	)		862			—			(1,557	)
Gain on extinguishment of debt		9,230			—			—			9,230			—			—			—			—
Equity in net earnings of affiliate		37			—			—			37			1,512			—			—			1,512
Equity in net earnings (loss) of subsidiaries		12,590			—			(12,590	)		—			(8,598	)		—			8,598			—
		(6,024	)		(855	)		(12,590	)		(19,469	)		(28,293	)		(3,176	)		8,598			(22,871	)
Income (loss) before income tax expense (benefit)		19,961			21,989			(12,590	)		29,360			(63,275	)		(13,691	)		8,598			(68,368	)
Income tax expense (benefit)		2,640			9,399			—			12,039			(22,937	)		(5,093	)		—			(28,030	)
Net income (loss)	$	17,321		$	12,590		$	(12,590	)	$	17,321		$	(40,338	)	$	(8,598	)	$	8,598		$	(40,338	)

12

UNITED REFINING COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Unaudited)

CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS

(in thousands)

	Nine Months Ended May 31, 2009											Nine Months Ended May 31, 2008
	Issuer			Guarantors			Eliminations		Consolidated			Issuer			Guarantors			Eliminations		Consolidated
Net cash provided by (used in) operating activities	$	20,488		$	(3,817	)	$	—	$	16,671		$	(121,918	)	$	12,210		$	—	$	(109,708	)
Cash flows from investing activities:
Additions to property, plant and equipment		(15,945	)		(3,246	)		—		(19,191	)		(27,973	)		(6,498	)		—		(34,471	)
Additions to deferred turnaround costs		(1,127	)		(11	)		—		(1,138	)		(9,481	)		(39	)		—		(9,520	)
Proceeds from asset dispositions		—			80			—		80			—			—			—		—
Net cash used in investing activities		(17,072	)		(3,177	)		—		(20,249	)		(37,454	)		(6,537	)		—		(43,991	)
Cash flows from financing activities:
Net borrowings on revolving credit facility		13,000			—			—		13,000			32,000			—			—		32,000
Proceeds from sales of investment securities		—			—			—		—			75,854			—			—		75,854
Proceeds from issuance of long-term debt		—			318			—		318			—			178			—		178
Dividends to stockholder		—			—			—		—			(35,312	)		—			—		(35,312	)
Principal reductions of long-term debt		(21,356	)		(719	)		—		(22,075	)		(328	)		(628	)		—		(956	)
Deferred financing costs		(225	)		—			—		(225	)		(108	)		—			—		(108	)
Net cash (used in) provided by financing activities		(8,581	)		(401	)		—		(8,982	)		72,106			(450	)		—		71,656
Net (decrease) increase in cash and cash equivalents		(5,165	)		(7,395	)		—		(12,560	)		(87,266	)		5,223			—		(82,043	)
Cash and cash equivalents, beginning of year		11,358			21,089			—		32,447			123,858			11,583			—		135,441
Cash and cash equivalents, end of period	$	6,193		$	13,694		$	—	$	19,887		$	36,592		$	16,806		$	—	$	53,398

13

UNITED REFINING COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Unaudited)

6. Segments of Business

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):

	Three Months Ended May 31,						Nine Months Ended May 31,
	2009			2008			2009		2008
				(As adjusted)					(As adjusted)
Net Sales
Retail	$	276,938		$	404,593		$	874,515	$	1,079,261
Wholesale		221,374			384,356			829,077		1,066,974
	$	498,312		$	788,949		$	1,703,592	$	2,146,235
Intersegment Sales
Wholesale	$	77,144		$	226,958		$	362,961	$	574,481
Operating (Loss) Income
Retail	$	(2,718	)	$	(4,910	)	$	27,165	$	(12,192	)
Wholesale		32,284			(21,480	)		21,664		(33,305	)
	$	29,566		$	(26,390	)	$	48,829	$	(45,497	)
Depreciation and Amortization
Retail	$	1,252		$	1,328		$	3,878	$	3,947
Wholesale		2,776			2,730			8,326		8,191
	$	4,028		$	4,058		$	12,204	$	12,138

	May 31, 2009		August 31, 2008
Total Assets
Retail	$	150,230	$	179,119
Wholesale		476,805		422,674
	$	627,035	$	601,793
Capital Expenditures (including non-cash)
Retail	$	3,189	$	8,359
Wholesale		17,150		35,029
	$	20,339	$	43,388

14

UNITED REFINING COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Unaudited)

7. Employee Benefit Plans

For the periods ended May 31, 2009 and May 31, 2008, net pension and other postretirement benefit costs were comprised of the following:

	Pension Benefits
	Three Months Ended May 31,						Nine Months Ended May 31,
	2009			2008			2009			2008
	(in thousands)
Service cost	$	647		$	715		$	2,072		$	2,045
Interest cost on benefit obligation		1,228			1,243			3,935			3,536
Expected return on plan assets		(1,024	)		(1,307	)		(3,282	)		(3,720	)
Amortization of transition obligation		2			70			2			105
Amortization and deferral of net loss		319			(48	)		788			54
Net periodic benefit cost	$	1,172		$	673		$	3,515		$	2,020
	Other Post-Retirement Benefits
	Three Months Ended May 31,						Nine Months Ended May 31,
	2009			2008			2009			2008
	(in thousands)
Service cost	$	669		$	679		$	2,008		$	1,991
Interest cost on benefit obligation		1,116			1,105			3,348			3,236
Expected return on plan assets		—			—			—			—
Amortization of transition obligation		150			150			448			448
Amortization and deferral of net loss		243			190			730			697
Net periodic benefit cost	$	2,178		$	2,124		$	6,534		$	6,372

As of May 31, 2009, $2,485,000 of contributions have been made to the Company pension plans for the fiscal year ending August 31, 2009.

8. Gain on Extinguishment of Debt

During the three months ended May 31, 2009, the Company acquired $21,040,000 of its 10 ¹/2% Senior Unsecured Notes due 2012 at an average price of $54.24, resulting in a gain from extinguishment of debt of $9,230,000, which is net of $286,000 of deferred financing costs and $112,000 of debt discount.

15

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

Forward Looking Statements

This Quarterly Report on Form 10-Q contains certain statements that constitute “forward looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. These forward looking statements may include, among other things, United Refining Company and its subsidiaries current expectations with respect to future operating results, future performance of its refinery and retail operations, capital expenditures and other financial items. Words such as “expects”, “intends”, “plans”, “projects”, “believes”, “estimates”, “may”, “will”, “should”, “shall”, “anticipates”, “predicts”, and similar expressions typically identify such forward looking statements in this Quarterly Report on Form 10-Q.

By their nature, all forward looking statements involve risk and uncertainties. All phases of the Company’s operations involve risks and uncertainties, many of which are outside of the Company’s control, and any one of which, or a combination of which, could materially affect the Company’s results of operations and whether the forward looking statements ultimately prove to be correct. Actual results may differ materially from those contemplated by the forward looking statements for a number of 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 on Form 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:

• 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;

• 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 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;

16

• 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 become aware of, after the date of this Quarterly Report on Form 10-Q.

Recent Developments

The Company continues to be impacted by the volatility of the petroleum market in fiscal year 2009. Crude prices in the fourth quarter of fiscal year 2009 have risen as compared to the third quarter of fiscal year 2009. The average NYMEX crude price for the fourth quarter based on values published on July 2, 2009 was $65.21/bbl, $19.46/bbl or 42.5% higher than the average price for the third fiscal quarter of 2009 which was $45.76/bbl.

The lagged 3-2-1 crackspread as measured by the difference between the price of crude oil contracts traded on the NYMEX for the proceeding month to the prices of NYMEX gasoline and heating oil contracts in the current trading month, have been negatively affected by falling petroleum prices. The Company uses a lagged crackspread as a margin indicator as it reflects the time period between the purchase of crude oil and its delivery to the refinery for processing. The lagged crackspread for the fourth quarter of fiscal year 2009 based on values as of July 2, 2009, is $10.87, a $5.47 or a 33.5% decrease over the lagged crackspread for the third quarter of fiscal year 2009 which was $16.34. However, the average lagged crackspread for the last two quarters of fiscal year 2009 show a marked improvement over the first six months of fiscal year 2009. The average lagged crackspread for the second half of the year, as measured on July 2, 2009, is $13.61, an $18.81 or 361.2% improvement from the negative $5.21 average for the first six months of the fiscal year.

Results of Operations

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.

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.

As discussed in Note 2 to the Consolidated Financial Statements, the Company changed its method of accounting for inventories during interim periods from adjusting the inventory LIFO reserve on an annual basis to adjusting the inventory LIFO reserve on a quarterly basis. Accordingly, the Company has reflected the change in accounting in the current quarter and retrospectively applied this policy to its previously issued financial statements for the three and nine month periods ended May 31, 2008.

17

Retail Operations:

	Three Months Ended May 31,						Nine Months Ended May 31,
	2009			2008			2009			2008
	(dollars in thousands)
				(As adjusted)						(As adjusted)
Net Sales
Petroleum	$	215,214		$	350,233		$	703,318		$	921,076
Merchandise and other		61,724			54,360			171,197			158,185
Total Net Sales		276,938			404,593			874,515			1,079,261
Costs of Goods Sold		248,153			377,731			753,062			997,979
Gross Profit		28,785			26,862			121,453			81,282
Operating Expenses		31,503			31,772			94,288			93,474
Segment Operating Income (Loss)	$	(2,718	)	$	(4,910	)	$	27,165		$	(12,192	)
Petroleum Sales (thousands of gallons)		98,306			95,641			288,793			280,077
Gross Profit
Petroleum (a)	$	13,090		$	12,418		$	77,229		$	39,206
Merchandise and other		15,695			14,444			44,224			42,076
	$	28,785		$	26,862			121,453		$	81,282
Petroleum margin ($/gallon) (b)		.1332			.1298			.2674			.1400
Merchandise margin (percent of sales)		25.4	%		26.6	%		25.8	%		26.6	%

(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 of Fiscal Quarters Ended May 31, 2009 and May 31, 2008

Net Sales

Retail sales decreased during the fiscal quarter ended May 31, 2009 by $127.7 million or 31.6% from $404.6 million to $276.9 million for the comparable period in fiscal 2008. The decrease was primarily due to: $135.0 million in petroleum sales offset by a $7.3 million increase in merchandise sales. The petroleum sales decrease resulted from a 40.2% decrease in retail selling prices per gallon, offset by a 2.7 million gallon or 2.8% increase in retail petroleum volume. The decrease in prices generally reflects the decline in world wide petroleum prices. Merchandise sales increase is primarily due to increased prepared food, beverages and cigarette sales due to promotional campaigns and increased selling prices.

Costs of Goods Sold

Retail costs of goods sold decreased during the fiscal quarter ended May 31, 2009 by $129.6 million or 34.3% for the comparable period in fiscal 2008 from $377.7 million to $248.1 million. The decrease was primarily due to $132.6 million in petroleum purchase prices and a $3.1 million decrease in inventory pricing, offset by an increase in fuel tax of $.3 million, freight cost of $.6 million, and merchandise cost of $6.1 million.

Gross Profit

Retail gross profit increased during the fiscal quarter ended May 31, 2009 by $1.9 million or 7.2% for the comparable period in fiscal 2008. The Company increased its petroleum margins by $.7 million or 5.4% and merchandise margin increased by $1.2 million or 8.7%.

18

Operating Expenses

Retail operating expenses remained relatively constant during the fiscal quarter ended May 31, 2009 and the comparable period in fiscal 2008, due to the Company’s effort to keep overhead at the previous year’s level.

Comparison of Nine Months Ended May 31, 2009 and May 31, 2008

Net Sales

Retail sales decreased during the nine months ended May 31, 2009 by $204.7 million or 19.0% from $1,079.3 million to $874.6 million for the comparable period in fiscal 2008. The decrease was primarily due to $217.7 million in petroleum sales, offset by a $13.0 million increase in merchandise sales. The decrease in prices generally reflects the decline in world wide petroleum prices. The petroleum sales decrease resulted from a 25.9% decrease in retail selling prices per gallon this was offset by 8.7 million gallon or 3.1% increase in sales volume. The merchandise sales increase is primarily due to increased prepared food, beverages and cigarette sales due to promotional campaigns and increased selling prices.

Costs of Goods Sold

Retail costs of goods sold decreased during the nine months ended May 31, 2009 by $244.9 million or 24.5% from $998.0 million to $753.1 million for the comparable period in fiscal 2008. The decrease was primarily due to $245.6 million in petroleum purchase prices and $12.6 million decrease in inventory pricing offset by increases in: fuel taxes of $2.3 million, freight costs of $.1 million, and merchandise costs of $10.9 million.

Gross Profit

Retail gross profit increased during the nine months ended May 31, 2009 by $40.2 million or 49.4% for the comparable period in fiscal 2008. The Company increased its petroleum margins by $38.0 million or 97.0% and merchandise margin by $2.2 million or 5.1%.

Operating Expenses

Retail operating expenses remained relatively constant during the nine months ended May 31, 2009 and the comparable period in fiscal 2008, due to the Company’s effort to keep overhead at the previous year’s level.

Wholesale Operations:

	Three Months Ended May 31,					Nine Months Ended May 31,
	2009		2008			2009		2008
	(dollars in thousands)
			(As adjusted)					(As adjusted)
Net Sales (a)	$	221,374	$	384,356		$	829,077	$	1,066,974
Costs of Goods Sold		180,786		397,434			781,560		1,074,770
Gross Profit (Loss)	$	40,588	$	(13,078	)	$	47,517	$	(7,796	)
Operating Expenses		8,304		8,402			25,853		25,509
Segment Operating Income (Loss)	$	32,284	$	(21,480	)	$	21,664	$	(33,305	)
Crude throughput (thousand barrels per day)		55.1		55.9			61.0		58.1

19

Refinery Product Yield

(thousands of barrels)

	Three Months Ended May 31,						Nine Months Ended May 31,
	2009			2008			2009			2008
Gasoline and gasoline blendstock		2,064			2,033			6,972			6,776
Distillates		1,206			1,249			4,057			3,902
Asphalt		1,504			1,482			5,006			4,771
Butane, propane, residual products, internally produced fuel and other (“Other”)		676			782			1,701			1,901
Total Product Yield		5,450			5,546			17,736			17,350
% Heavy Crude Oil of Total Refinery Throughput (b)		62	%		57	%		61	%		59	%
Product Sales (dollars in thousands) (a)
	Three Months Ended May 31,						Nine Months Ended May 31,
	2009			2008			2009			2008
Gasoline and gasoline blendstock	$	81,270		$	160,487		$	272,733		$	436,448
Distillates		64,968			137,959			252,087			377,968
Asphalt		70,032			72,288			282,539			216,910
Other		5,104			13,622			21,718			35,648
Total Product Sales	$	221,374		$	384,356		$	829,077		$	1,066,974
Product Sales (thousand of barrels) (a)
	Three Months Ended May 31,						Nine Months Ended May 31,
	2009			2008			2009			2008
Gasoline and gasoline blendstock		1,320			1,353			4,092			4,176
Distillates		1,064			932			3,269			3,118
Asphalt		1,478			1,501			4,357			5,407
Other		194			218			619			606
Total Product Sales Volume		4,056			4,004			12,337			13,307

(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.

20

Comparison of Fiscal Quarters Ended May 31, 2009 and May 31, 2008

Net Sales

Wholesale sales decreased during the three months ended May 31, 2009 by $163.0 million or 42.4% for the comparable period in fiscal 2008 from $384.4 million to $221.4 million. The decrease was due to a 43.2% decrease in wholesale prices offset by a 1.3% increase in wholesale volume. The decrease in prices generally reflects the decline in world wide petroleum prices.

Costs of Goods Sold

Wholesale costs of goods sold decreased during the three months ended May 31, 2009 by $216.6 million or 54.5% for the comparable period in fiscal 2008 from $397.4 million to $180.8 million. The decrease in wholesale costs of goods sold during this period was primarily due to a decrease in cost of raw materials.

Gross Profit

Wholesale gross profit increased during the three months ended May 31, 2009 by $53.7 million or 410.4% for the comparable period in fiscal 2008 from $(13.1) million to $40.6 million. The increase was primarily due to the changing oil market pricing.

Operating Expenses

Operating expenses remained relatively constant during the fiscal quarter ended May 31, 2009 and the comparable period in fiscal 2008, due to the Company’s effort to keep overhead at the previous year’s level. The operating expense for the fiscal quarter ended May 31, 2009 was $8.3 million or 3.8% of net wholesale sales compared to $8.4 million or 2.2% of net wholesale sales for the comparable period in 2008.

Comparison of Nine Months Ended May 31, 2009 and May 31, 2008

Net Sales

Wholesale sales decreased during the nine months ended May 31, 2009 by $237.9 million or 22.3% from $1,067.0 million to $829.1 million for the comparable period in fiscal 2008. The decrease was due to a 7.3% decrease in wholesale volume and a 16.2% decrease in wholesale selling prices. The decrease in prices generally reflects the decline in world wide petroleum prices.

Costs of Goods Sold

Wholesale costs of goods sold decreased during the nine months ended May 31, 2009 by $293.2 million or 27.3% from $1,074.8 million to $781.6 million for the comparable period in fiscal 2008. The decrease in wholesale costs of goods sold was primarily a result of the volatile changing oil market pricing in the first fiscal quarter.

Gross Profit

Wholesale gross profit increased during the nine months ended May 31, 2009 by $55.3 million or 709.5% from $(7.8) million to $47.5 million for the comparable period in fiscal 2008. The increase was primarily due to the changing oil market pricing.

Operating Expenses

Operating expenses remained relatively constant during the nine months ended May 31, 2009 and the comparable period in fiscal 2008, due to the Company’s effort to keep overhead at the previous year’s level. For 2009 operating expenses were $25.8 million, or 3.1% of net wholesale sales, compared to $25.5 million, or 2.4% of net wholesale sales for the comparable period in fiscal 2008.

21

Consolidated Expenses:

Interest Expense, net

Net interest expense (interest expense less interest income) for the three months ended May 31, 2009 increased $.2 million or 2.2% to $8.8 million from $8.6 million for the comparable period in fiscal 2008, primarily due to the decrease of interest income as a result of less cash available for investing.

Net interest expense (interest expense less interest income) for the nine months ended May 31, 2009 increased $4.4 million or 19.3% to $27.2 million from $22.8 million for the comparable period in fiscal 2008, primarily due to the decrease of interest income as a result of less cash available for investing.

Income Tax Expense / (Benefit)

The Company’s effective tax rate for the three months and nine months ended May 31, 2009 and May 31, 2008 remained relatively constant at approximately 41%.

Liquidity and Capital Resources

We operate in an environment where our liquidity and 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 our control. Included in such factors are, among others, the level of customer product demand, weather conditions, governmental regulations, worldwide political conditions and overall market and economic conditions.

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

	May 31, 2009		August 31, 2008
Cash and cash equivalents	$	19,887	$	32,447
Working capital	$	206,428	$	206,985
Current ratio		2.6		3.0
Debt	$	359,101	$	367,291

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

22

Our cash and cash equivalents consist of bank balances and investments in money market funds. These investments have staggered maturity dates, none of which exceed three months. They have a high degree of liquidity since the securities are traded in public markets.

	Nine Months Ended May 31, 2009
	(in millions)
Significant uses of cash Investing activities:
Additions to deferred turnaround costs	$	1.0
Property, plant and equipment
Residual upgrade		5.7
Waste water treatment plant upgrade		2.0
Upgrade to additive system/loading rack		1.4
Computers and equipment upgrade		1.4
Renewable fuels – cost estimates		1.4
#4 boiler upgrade		1.2
Miscellaneous equipment replacement		1.0
Replace existing boiler – Springdale		.9
Retail maintenance (black top, roof, HVAC, rehab)		.8
Retail petroleum upgrade		.7
Environmental upgrade		.6
Other general capital items (tank repairs, refinery piping projects, etc.)		2.1
Total property, plant and equipment		19.2
Net cash provided by investing activities	$	20.2
Financing activities:
Net borrowings on revolving credit facility	$	13.0
Principal reductions of long term debt		(12.6	)
Other		.1
Net cash provided by financing activities	$	.5
Working capital items:
Accounts receivable decrease	$	46.3
Refundable income tax decrease		31.3
Income taxes payable increase		9.0
Accrued liabilities increase		7.3
Sales, use and fuel taxes payable decrease		.3
Increase in inventory		(111.8	)
Prepaid expense increase		(3.6	)
Accounts payable decrease		(3.2	)
Amounts due from affiliated companies, net decrease		(.8	)
Cash used in working capital items	$	(25.2	)

We require a substantial investment in working capital which is susceptible to large variations during the year resulting from purchases of inventory and seasonal demands. Inventory purchasing activity is a function of sales activity and turnaround cycles for the different refinery units.

Maintenance and non-discretionary capital expenditures have averaged approximately $6.0 million annually over the last three years for the refining and marketing operations. Management does not foresee any increase in these maintenance and non-discretionary capital expenditures during fiscal year 2009.

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

23

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 our Revolving Credit Facility with PNC Bank, N.A. as Agent Bank. In November 2008, we increased the limit of our revolving credit facility with PNC Bank, N.A., as Agent Bank (the “Revolving Credit Facility”) from $100,000,000 to $130,000,000. This amendment provides the Company greater flexibility relative to its cash flow requirements in light of market fluctuations, particularly involving crude oil prices and seasonal business cycles. The improved liquidity resulting from the expansion of the facility will assist the Company in meeting its working capital, ongoing capital expenditure needs and for general corporate purposes. The term of the agreement does not change. It will expire on November 27, 2011. The amendment to the Revolving Credit Facility affected certain terms and provisions thereof, including an increase in the interest rate and a modification to the Net Worth covenant. Under the new amendment to the Revolving Credit Facility effective November 21, 2008, the applicable margin will continue to be calculated on the average unused availability as follows: (a) for base rate borrowing, at the greater of the Agent Bank’s prime rate plus an applicable margin of 0% to .5%; the Federal Funds Open Rate plus .5%; or the Daily LIBOR rate plus 1%; (b) for euro-rate based borrowings, at the LIBOR Rate plus an applicable margin of 2.35% to 1.75%. Prior to this amendment of the Revolving Credit Facility, commencing May 7, 2007, interest was calculated as follows: (a) for base rate borrowings, at the greater of the Agent Bank’s prime rate less an applicable margin of 0% to .5% or the federal funds rate plus 1%; (b) for euro-rate borrowings, at the LIBOR rate plus an applicable margin of 1.25% to 1.75%. The Agent Bank’s prime rate at May 31, 2009 was 3.25%.

The Revolving Credit Facility is secured primarily by certain cash accounts, accounts receivable and inventory. Until maturity, we may borrow on a borrowing base formula as set forth in the facility. We had standby letters of credit of $3.2 million as of May 31, 2009 and there were outstanding borrowings under the Revolving Credit Facility in the amount of $22.0 million resulting in net availability of $104.8 million. As of July 15, 2009 there was $6.0 million on the $130 million Revolving Credit Facility and standby letters of credit in the amount of $3.2 million, resulting in a net availability of $120.8 million and the Company had full access to it. The Company’s working capital ratio was 2.6 as of May 31, 2009.

Although we are not aware of any pending circumstances which would change 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. We continue to investigate strategic acquisitions and capital improvements to our existing facilities.

Federal, state and local laws and regulations relating to the environment affect nearly all of our operations. As is the case with all the companies engaged in similar industries, we face 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. 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.

24

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

The Company uses its revolving credit facility to finance a portion of its operations. As of July 15, 2009, there was $6.0 million outstanding under the revolving line of credit. 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. The Company had no open future positions at May 31, 2009.

See also Recent Developments section of Item 2 – Management’s Discussion and Analysis of Financial Condition and Results of Operations.

ITEM 4. CONTROLS AND PROCEDURES.

Our Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”), are responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Rule 13a-15(f) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”).

Internal control over financial reporting is promulgated under the Exchange Act as a process designed by, or under the supervision of, our CEO and CFO and effected by our board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles and includes those policies and procedures that:

• Pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of our assets;

• Provide reasonable assurance that transaction are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that our receipts and expenditures are being made only in accordance with authorizations of our management and directors; and

• Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition or disposition of our assets that could have a material effect on the financial statements.

Readers are cautioned that internal control over financial reporting, no matter how well designed, has inherent limitations and may not prevent or detect misstatements. Therefore, even effective internal control over financial reporting can only provide reasonable assurance with respect to the financial statement preparation and presentation.

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 Exchange Act), as of the end of the Company’s fiscal quarter ended May 31, 2009, (the “Evaluation Date”) the Company’s CEO and CFO (its principal executive officer and principal financial officer, respectively) have concluded that these controls and procedures are effective in providing reasonable assurance that information requiring disclosure is recorded, processed, summarized and reported with the timeframe specified by the SEC’s rules and forms.

There have not been any changes in the Company’s internal controls over financial reporting that occurred during the Company’s fiscal quarter ended May 31, 2009 that has materially affected, or is reasonably likely to materially affect, the Company’s internal controls over financial reporting.

25

PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS.

None.

ITEM 1A. RISK FACTORS.

There have been no material changes in our Risk Factors disclosed in the Form 10-K for the year ended August 31, 2008.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.

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.

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 of the Sarbanes-Oxley Act of 2002

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: July 15, 2009

UNITED REFINING COMPANY

(Registrant)

/s/  Myron L. Turfitt

Myron L. Turfitt

President

/s/  James E. Murphy

James E. Murphy

Chief Financial Officer

27

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: July 15, 2009

KIANTONE PIPELINE CORPORATION

(Registrant)

/s/  Myron L. Turfitt

Myron L. Turfitt

President

/s/  James E. Murphy

James E. Murphy

Chief Financial Officer

28

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: July 15, 2009

KIANTONE PIPELINE COMPANY

(Registrant)

/s/  Myron L. Turfitt

Myron L. Turfitt

President

/s/  James E. Murphy

James E. Murphy

Chief Financial Officer

29

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: July 15, 2009

UNITED REFINING COMPANY OF PENNSYLVANIA

(Registrant)

/s/  Myron L. Turfitt

Myron L. Turfitt

President

/s/  James E. Murphy

James E. Murphy

Chief Financial Officer

30

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: July 15, 2009

UNITED JET CENTER, INC.

(Registrant)

/s/  Myron L. Turfitt

Myron L. Turfitt

President

/s/  James E. Murphy

James E. Murphy

Chief Financial Officer

31

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: July 15, 2009

KWIK-FILL CORPORATION

(Registrant)

/s/  Myron L. Turfitt

Myron L. Turfitt

President

/s/  James E. Murphy

James E. Murphy

Chief Financial Officer

32

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: July 15, 2009

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

33

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: July 15, 2009

BELL OIL CORP.

(Registrant)

/s/  Myron L. Turfitt

Myron L. Turfitt

President

/s/  James E. Murphy

James E. Murphy

Chief Financial Officer

34

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: July 15, 2009

PPC, INC.

(Registrant)

/s/  Myron L. Turfitt

Myron L. Turfitt

President

/s/  James E. Murphy

James E. Murphy

Chief Financial Officer

35

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: July 15, 2009

SUPER TEST PETROLEUM, INC.

(Registrant)

/s/  Myron L. Turfitt

Myron L. Turfitt

President

/s/  James E. Murphy

James E. Murphy

Chief Financial Officer

36

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: July 15, 2009

KWIK-FIL, INC.

(Registrant)

/s/  Myron L. Turfitt

Myron L. Turfitt

President

/s/  James E. Murphy

James E. Murphy

Chief Financial Officer

37

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: July 15, 2009

VULCAN ASPHALT REFINING CORPORATION

(Registrant)

/s/  Myron L. Turfitt

Myron L. Turfitt

President

/s/  James E. Murphy

James E. Murphy

Chief Financial Officer

38

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: July 15, 2009

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

39

EX-31.1

Exhibit 31.1

CERTIFICATION

Pursuant to 18 U.S.C. Section 1350,

As adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

I, John A. Catsimatidis, certify that:

1. I have reviewed this quarterly report on Form 10-Q of United Refining Company (the “registrant”);

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

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

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

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

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

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

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

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

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

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

Date: July 15, 2009	Signature:	/s/ John A. Catsimatidis
		John A. Catsimatidis
		Principal Executive Officer

EX-31.2

Exhibit 31.2

CERTIFICATION

Pursuant to 18 U.S.C. Section 1350,

As adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

I, James E. Murphy, certify that:

1. I have reviewed this quarterly report on Form 10-Q of United Refining Company (the “registrant”);

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

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

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

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

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

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

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

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

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

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

Date: July 15, 2009	Signature:	/s/ James E. Murphy
		James E. Murphy
		Principal Financial Officer

EX-32.1

Exhibit 32.1

CERTIFICATION

Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

(subsections (a) and (b) of Section 1350, Chapter 63 of Title 18, United States Code)

Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (subsections (a) and (b) of Section 1350, Chapter 63 of Title 18, United States Code), each of the undersigned officers of United Refining Company, a Pennsylvania corporation (the “Company”), does hereby certify, to such officer’s knowledge, that:

The Quarterly Report on Form 10-Q for the quarter ended May 31, 2009 (the “Form 10-Q”) of the Company fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and information contained in the Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of the Company.

Dated: July 15, 2009	By:	/s/ John A. Catsimatidis
		John A. Catsimatidis Principal Executive Officer
Dated: July 15, 2009	By:	/s/ James E. Murphy
		James E. Murphy Principal Financial Officer