United Store 10-K 2009 FY Annual report

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

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

FOR THE FISCAL YEAR ENDED AUGUST 31, 2009

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

For the transition period from            to            

Commission File No. 333-35083

UNITED REFINING COMPANY (Exact name of registrant as specified in its charter)                                

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

See Table of Additional Subsidiary Guarantor Registrants

15 Bradley Street, Warren, PA	16365-3299
(Address of principal executive offices)	(Zip Code)

(814) 723-1500

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12 (b) of the Act:

None

Securities registered pursuant to Section 12 (g) of the Act:

None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.    Yes  ¨    No  x

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.    Yes  ¨    No  x

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 website, if any, every Interactive Date 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  ¨

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not be contained, to the best of the registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.  x

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

Large accelerated filer  ¨	Accelerated filer  ¨
Non-accelerated filer  x (Do not check if a smaller reporting company)		Small 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 November 30, 2009, 100 shares of the Registrant’s common stock, $0.10 par value per share, were outstanding. All shares of common stock of the Registrant’s are held by an affiliate. Therefore, the aggregate market value of the voting and non-voting common equity held by non-affiliates of the Registrant is zero.

DOCUMENTS INCORPORATED BY REFERENCE:    None

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

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FORM 10-K CONTENTS

		PAGE(S)
Item 1.	Business	4
Item 1A.	Risk Factors	13
Item 1B.	Unresolved Staff Comments	16
Item 2.	Properties	16
Item 3.	Legal Proceedings	16
Item 4.	Submission of Matters to a Vote of Security Holders	16
Item 5.	Market for Registrant’s Equity, Related Stockholder Matters and Issuer Purchase of Equity Securities	16
Item 6.	Selected Financial Data	17
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	17
Item 7A.	Quantitative and Qualitative Disclosures about Market Risk	30
Item 8.	Financial Statements and Supplementary Data	31
	Report of Independence Registered Public Accounting Firm	32
	Consolidated Financial Statements:
	Balance Sheets	33
	Statements of Operations	34
	Statements of Comprehensive Income	35
	Statements of Stockholder’s Equity	36
	Statements of Cash Flows	37
	Notes to Consolidated Financial Statements	38 thru 62
Item 9.	Changes in Disagreements with Accountants on Accounting and Financial Disclosure	63
Item 9A(T).	Controls and Procedures	63
Item 9B.	Other Information	64
Item 10.	Directors and Executive Officers of the Registrant	64
Item 11.	Executive Compensation	66
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	70
Item 13.	Certain Relationships and Related Transactions	70
Item 14.	Principal Accounting Fees and Services	71
Item 15.	Exhibits, Financial Statement Schedules	72
	Signatures	77

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ITEM 1. BUSINESS.

Introduction

United Refining Company is a Pennsylvania Corporation that began business operations in 1902. We are the leading integrated refiner and marketer of petroleum products in our primary market area, which encompasses western New York and northwestern Pennsylvania. We own and operate a medium complexity 70,000 barrel per day (“bpd”) petroleum refinery in Warren, Pennsylvania where we produce a variety of products, including various grades of gasoline, ultra low sulfur diesel fuel, kerosene, No. 2 heating oil and asphalt. 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^®, Keystone^® and Country Fair^® brand names at a network of Company-operated retail units and convenience and grocery items through convenience stores under the Red Apple Food Mart^® and Country Fair^® brand names. As of August 31, 2009, (sometimes referred to as “fiscal 2009”), we operated 367 units, of which, 184 units are owned, 120 units are leased, and the remaining stores are operated under a management agreement. Approximately 20% of the gasoline stations within this network are branded Citgo^® pursuant to a license agreement granting us the right to use Citgo’s applicable brand names, trademarks and other forms of Citgo’s identification. For fiscal 2009 approximately 59% and 22% of our gasoline and distillate production, respectively, was sold through our retail network.

For fiscal 2009, we had total net sales of $2.4 billion, of which approximately 51% were derived from gasoline sales, approximately 39% were from sales of other petroleum products and 10% were from sales of merchandise and other revenue. Our capacity utilization rates have averaged 93% for the last five years.

We believe that the location of our 70,000 bpd refinery in Warren, Pennsylvania provides us with a transportation cost advantage over our competitors, which is significant within an approximately 100 mile radius of our refinery. For example, in Buffalo, New York over our last five fiscal years, and including fiscal 2009, we have experienced approximately 1.8 cents per gallon transportation cost advantage over those competitors who are required to ship gasoline by pipeline and truck from New York Harbor sources to Buffalo. We own and operate the Kiantone Pipeline, a 78-mile long crude oil pipeline which connects the refinery to Canadian, U.S. and world crude oil sources through the Enbridge Pipelines Inc. and affiliates (collectively, “Enbridge”) pipeline system. Utilizing the storage capability of the pipeline, we are able to blend various grades of crude oil from different suppliers, allowing us to efficiently schedule production while managing feedstock mix and product yields in order to optimize profitability.

It is our view that the high construction costs and the stringent regulatory requirements inherent in petroleum refinery operations make it uneconomical for new competing refineries to be constructed in our primary market area. The nearest fuels refinery is over 160 miles from Warren, Pennsylvania and we believe that no significant production from such refinery is currently shipped into our primary market area.

Our primary market area is western New York and northwestern Pennsylvania and our core market area encompasses our Warren County base and the eight contiguous counties in New York and Pennsylvania. Our retail gasoline and merchandise sales are split approximately 60% / 40% between rural and urban markets. Margins on gasoline sales are traditionally higher in rural markets, while gasoline sales volume is greater in urban markets. Our urban markets include Buffalo, Rochester and Syracuse, New York and Erie, Pennsylvania.

As of August 31, 2009, 169 of our retail units were located in New York, 185 in Pennsylvania and 13 in Ohio. In fiscal year 2009, approximately 59% of the refinery’s gasoline production was sold through our retail network. In addition to gasoline, all units sell convenience merchandise, 107 are Quick Serve Restaurants (“QSRs”) including franchise operations and eight of the units are full-service truck stops. Customers may pay

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for purchases with credit cards including our own Kwik Fill^® credit card. In addition to this credit card, we maintain a fleet credit card catering to regional truck and automobile fleets. Sales of convenience products, which tend to have constant margins throughout the year, have served to reduce the effects of the seasonality inherent in gasoline retail margins.

Recent Developments

The Company continues to be impacted by the volatility in petroleum markets in fiscal year 2010. 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 consistently fluctuating 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 month of September in fiscal year 2010 was $2.74 as compared to $14.36 for the fourth quarter of fiscal year 2009, a decrease of $11.62 or 81%. The lagged crackspread for October of fiscal year 2010 was $11.20, a decrease of $3.16 or 22% as compared to the fourth quarter of fiscal year 2009.

Industry Overview

We are a regional refiner and marketer located primarily in Petroleum Administration for Defense Districts I (“PADD I”). As of January 1, 2009, there were 15 operable refineries operating in PADD I with a combined crude processing capacity of 1.7 million bpd, representing approximately 10% of U.S. refining capacity. Petroleum product consumption during calendar year 2008 in PADD I averaged 5.85 million bpd, representing approximately 30% of U.S. demand based on industry statistics reported by the Energy Information Administration (“EIA”). According to the EIA, prime supplier sales volume of gasoline in the region decreased by approximately 4.6% during the five-year period ending December 2008. Refined petroleum production in PADD I is insufficient to satisfy demand for such products in the region, making PADD I a net importer of such products. Domestic refinery capacity utilization decreased from 86% crude capacity utilization in 2007 to 83% in 2008 due to nationwide and global uncertainty.

Refining Operations

The Company’s refinery is located on a 92-acre site in Warren, Pennsylvania. The refinery has a nominal capacity of 70,000 bpd of crude oil processing and averaged saleable production of approximately 61,900 bpd during fiscal 2009.

We believe our geographic location in the product short PADD I is a significant marketing advantage. Our refinery is located in northwestern Pennsylvania and is geographically distant from the majority of PADD I refining capacity. The nearest fuels refinery is over 160 miles from Warren, Pennsylvania and we believe that no significant production from such refinery is currently shipped into our primary market area.

Products

We produce three primary petroleum products: gasoline, middle distillates, and asphalt. We presently produce two grades of unleaded gasoline, 87-octane regular and 93-octane premium. We also blend our 87 and 93 octane gasoline to produce a mid-grade 89-octane. In fiscal year 2009, approximately 59% of our gasoline production was sold through our retail network and the remaining 41% of such production was sold to wholesale customers.

Middle distillates include kerosene, ultra low sulfur diesel fuel, and No. 2 heating oil. For fiscal 2009, approximately 78% of our distillate production was sold to wholesale customers and the remaining 22% through our retail network.

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We optimize our bottom of the barrel processing by producing asphalt, a higher value alternative to residual fuel oil. Asphalt production as a percentage of all refinery production has exceeded 28% over the last five fiscal years due to our ability and decision to process a larger amount of less costly heavy higher sulfur content crude oil in order to realize higher overall refining margins.

Asphalt is a residual product of the crude oil refining process, which is used primarily for construction and maintenance of roads and highways and as a component of roofing shingles. Distribution of asphalt is localized, usually within a distance of 150 miles from a refinery or terminal, and demand is influenced by levels of federal, state, and local government funding for highway construction and maintenance and by levels of roofing construction activities. We believe that an ongoing need for highway maintenance and domestic economic growth will sustain asphalt demand.

Refining Process

Our production of petroleum products from crude oil involves many complex steps, which are briefly summarized below.

We seek to maximize refinery profitability by selecting crude oil and other feedstocks taking into account factors including product demand and pricing in our market areas as well as price, quality and availability of various grades of crude oil. We also consider product inventory levels and any planned turnarounds of refinery units for maintenance. The combination of these factors is optimized by a sophisticated proprietary linear programming computer model, which selects the most profitable feedstock and product mix. The linear programming model is continuously updated and improved to reflect changes in the product market place and in the refinery’s processing capability.

Blended crude is stored in a tank farm near the refinery, which has a capacity of approximately 200,000 barrels. The blended crude is then brought into the refinery where it is first distilled at low pressure into its component streams in the crude and preflash unit. This yields the following intermediate products: light products consisting of fuel gas components (methane and ethane) and LPG (propane and butane), naphtha or gasoline, kerosene, diesel or heating oil, heavy atmospheric distillate, and crude tower bottoms which are further distilled under vacuum conditions to yield light and heavy vacuum distillates and asphalt. The present capacity of the crude unit is 70,000 bpd.

The intermediate products are then processed in downstream units and blended to produce finished products. A naphtha hydrotreater treats naphtha and FCC light catalytic naptha with hydrogen across a fixed bed catalyst to remove sulfur before further treatment. The treated naphtha is then distilled into light and heavy naphtha at a prefractionator. Light naphtha is then sent to an isomerization unit and heavy naphtha is sent to a reformer, in each case for octane enhancement. The isomerization unit converts the light naphtha catalytically into a gasoline component with 83 octane. The reformer unit converts the heavy naphtha into another gasoline component with up to 94 octane depending upon the desired octane requirement for the grade of gasoline to be produced. The reformer also produces as a co-product all the hydrogen needed to operate hydrotreating units in the refinery.

Raw kerosene is treated with hydrogen at a distillate hydrotreater to remove sulfur to make finished kerosene. A distillate hydrotreater built in 1993 and modified in 2006 also treats raw distillates to produce ultra low sulfur diesel fuel.

The long molecular chains of the heavy atmospheric and vacuum distillates are broken or “cracked” in the FCC unit and separated and recovered in the gas concentration unit to produce fuel gas, propylene, butylene, LPG, light and heavy catalytic naptha gasoline, light cycle oil and clarified oil. Fuel gas is burned within the refinery, propylene is fed to a polymerization unit which polymerizes its molecules into a larger chain to produce an 87 octane gasoline component, butylene is fed into an alkylation unit to produce a gasoline component and LPG is treated to remove trace quantities of water and then sold. Clarified oil is burned in the refinery or sold.

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Various refinery gasoline components are blended together in refinery tankage to produce 87 octane and 93 octane finished gasoline. Likewise, light cycle oil is blended with other distillates to produce No. 2 heating oil. FCC light and heavy catalytic naptha is hydrotreated in order to meet new more stringent legally mandated limits on gasoline sulfur content which took effect January 1, 2008, and a portion of the light cycle oil is hydrotreated in order to meet new more stringent legally mandated limits on diesel fuel sulfur content which took effect June 1, 2006.

Our refining configuration allows the processing of a wide variety of crude oil inputs. During the past five years our inputs have been of Canadian origin and range from light low sulfur (38 degrees API, 0.5% sulfur) to high sulfur heavy asphaltic (21 degrees API, 3.5% sulfur). Our ability to market asphalt on a year round basis enables us to purchase selected heavier crude oils at higher differentials and thus at a lower cost.

Supply of Crude Oil

Even though our crude supply is substantially all Canadian, it is not dependent on this source alone. Within 90 days, we could shift up to 70% of our crude oil requirements to some combination of domestic and offshore crude. With additional time, 100% of our crude requirements could be obtained from non-Canadian sources. 61% of our term contracts with our crude suppliers are on a month-to-month evergreen basis, with 60-to-90 day cancellation provisions; 39% of our term crude contracts are on an annual basis (with month to month pricing provisions). As of August 31, 2009, we had supply contracts with 14 major suppliers for an aggregate of 56,200 bpd of crude oil. We have contracts with three suppliers amounting to 53% of daily crude oil supply (none more than 12,000 barrels per day). None of the remaining suppliers accounted for more than 10% of our crude oil supply.

We access crude through the Kiantone Pipeline, which connects with the Enbridge pipeline system in West Seneca, New York, which is near Buffalo. The Enbridge pipeline system provides access to most North American and foreign crude oils through two primary routes: (i) Canadian crude oils are transported eastward from Alberta and other points in Canada, (ii) foreign crude oils unloaded at the Louisiana Offshore Oil Port are transported north via the Capline and Chicap pipelines which connect to the Enbridge pipeline system at Mokena, Illinois.

The Kiantone Pipeline, a 78-mile Company-owned and operated pipeline, connects our West Seneca, New York terminal at the pipeline’s northern terminus to the refinery’s tank farm at its southern terminus. We completed construction of the Kiantone Pipeline in 1971 and have operated it continuously since then. We are the sole shipper on the Kiantone Pipeline, and can currently transport up to 70,000 bpd along the pipeline. Our right to maintain the pipeline is derived from approximately 265 separate easements, right-of-way agreements, licenses, permits, leases and similar agreements.

The pipeline operation is monitored by a computer at the refinery. Shipments of crude arriving at the West Seneca terminal are separated and stored in one of the terminal’s three storage tanks, which have an aggregate storage capacity of 485,000 barrels. The refinery tank farm has two additional crude storage tanks with a total capacity of 200,000 barrels. An additional 35,000 barrels of crude can be stored at the refinery.

Refinery Turnarounds

Turnaround cycles vary for different refinery units. A planned turnaround of each of the two major refinery units (the crude unit and the FCC) is conducted approximately every three to five years, during which time such units are shutdown for internal inspection and repair. The most recent turnarounds occurred in March and April 2007 at our crude unit and its related processing equipment, and in October and November 2007 at our FCC unit and its related processing equipment. A turnaround, which generally takes two to four weeks to complete in the case of the two major refinery units, consists of a series of moderate to extensive maintenance exercises. Turnarounds are planned and accomplished in a manner that allows for reduced production during maintenance

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instead of a complete plant shutdown. We defer the cost of turnarounds when incurred and amortized on a straight-line basis over the period of benefit, which ranges from 3 to 10 years (for tank turnarounds). Thus, we charge costs to production over the period most clearly benefited by the turnarounds.

The next scheduled turnarounds are currently scheduled to begin October 2010 at the FCC unit and March 2011 at the crude unit.

The scheduled maintenance turnarounds result in an inventory build of petroleum products to meet minimum sales demand during the maintenance shutdown period.

Marketing and Distribution

General

We have a long history of service within our market area. Our first retail service station was established in 1927 near the Warren, Pennsylvania refinery, and we have steadily expanded our distribution network over the years.

We maintain an approximate 60% / 40% split between sales at our rural and urban units. We believe this to be advantageous, balancing the higher gross margins and lower volumes often achievable due to decreased competition in rural areas with higher volumes and lower gross margins in urban areas. We believe that our network of rural convenience store units provide an important alternative to traditional grocery store formats. In fiscal year 2009, approximately 59% and 22% of our gasoline and distillate production, respectively, was sold through this retail network.

We deliver asphalt from the refinery to end user contractors by truck or railcar in addition to re-supplying our asphalt terminals in Rochester, New York and Pittsburgh, Pennsylvania.

Retail Operations

As of August 31, 2009, we operated a retail-marketing network (including those stores operated under a management agreement) that includes 367 retail units, of which 169 are located in western New York, 185 in northwestern Pennsylvania and 13 in eastern Ohio. We own 184 of these units. The retail segment sells petroleum products under the Kwik Fill^®, Citgo^® and Keystone^® brand names and grocery items under the Red Apple Food Mart^® and Country Fair^® brand names. We believe that Red Apple Food Mart^®, Kwik Fill^®, Country Fair^®, Keystone^® and Citgo^® are well-recognized names in our marketing areas. Approximately 20% of the gasoline stations within this network are branded Citgo^® pursuant to a license agreement granting us the right to use Citgo’s applicable brand names, trademarks and other forms of Citgo’s identification. We believe that the Company operation of our retail units provides us with a significant advantage over competitors that operate wholly or partly through dealer arrangements because we have greater control over pricing and operating expenses.

We classify our retail stores into four categories: convenience stores, limited gasoline stations, truck stop facilities, and other stores. Convenience stores sell a wide variety of foods, snacks, cigarettes and beverages and also provide self-service gasoline. One hundred and seven of our 367 retail outlets include QSRs where food is prepared on the premises for retail sales and also distribution to our other nearby units that do not have in-store delicatessens. Limited gasoline stations sell gasoline, cigarettes, oil and related car care products and provide full service for gasoline customers. Truckstop facilities sell gasoline and diesel fuel on a self-service and full-service basis. All truckstops include either a full or mini convenience store.

Total merchandise sales for fiscal year 2009 were $239.1 million, with a gross profit of approximately $61.7 million. Gross margins on the sale of convenience merchandise averaged 25.8% for fiscal 2009 and has been relatively constant at 27.0% for the last three years. Merchandise sales have shown continued positive growth.

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Merchandise Supply

Tripifoods, Buffalo, New York is our primary wholesale grocery supplier for our entire chain. During fiscal year 2009, we purchased approximately 72.0% of our convenience merchandise from this vendor. Tripifoods supplies us with products including tobacco, candy, deli, grocery, health and beauty products, and sundry items. We also purchase coffee, dairy products, beer, soda, snacks, and novelty goods from direct store vendors for resale. We annually review our suppliers’ costs and services versus those of alternate suppliers. We believe that alternative sources of merchandise supply at competitive prices are readily available.

Location Performance Tracking

We maintain a store tracking mechanism to collect operating data including sales and inventory levels for our retail network. Data transmissions are made using personal computers, which are available at each location. Once verified, the data interfaces with a variety of retail accounting systems, which support daily, weekly, and monthly performance reports. These different reports are then provided to both the field management and administrative personnel. Upon completion of a capital project, management tracks “before and after” performance, to evaluate the return on investment which has resulted from the improvements.

Wholesale Marketing and Distribution

In fiscal 2009, we sold on a wholesale basis approximately 40,800 bpd of gasoline, distillate and asphalt products to distributor, commercial, and government accounts. In addition, we sell approximately 1,000 bpd of propane to liquefied petroleum gas marketers. In fiscal year 2009, our production of gasoline, distillate, and asphalt sold at wholesale was 41%, 78%, and 100%, respectively. We sell approximately 98% of our wholesale gasoline and distillate products from our refinery in Warren, Pennsylvania, and our Company-owned and operated product terminals. The remaining 2% are sold through third-party exchange terminals.

Our wholesale gasoline customer base includes 44 branded dealer/distributor units operating under our proprietary “Keystone^®” and “Kwik Fill^®” brand names. Long-term dealer/distributor contracts accounted for approximately 17% of our wholesale gasoline sales in fiscal 2009. Supply contracts generally range from three to five years in length, with branded prices based on our prevailing wholesale rack price in Warren.

We believe that the location of our refinery provides us with a transportation cost advantage over our competitors, which is significant within an approximately 100-mile radius of our refinery. For example, in Buffalo, New York over our last five fiscal years, including fiscal 2009, we have experienced an approximately 1.8 cents per gallon transportation cost advantage over those competitors who are required to ship gasoline by pipeline and truck from New York Harbor sources to Buffalo.

Our ability to market asphalt is critical to the performance of our refinery. The timing and a consistent marketing effort enables the refinery to process lower cost higher sulfur content crude oils, which in turn affords us higher refining margins. Sales of paving asphalt generally occur during the period May 1 through October 31 based on weather conditions. In order to maximize our in season asphalt sales, we have made substantial investments to increase our asphalt storage capacity through the installation of additional tankage, as well as through the purchase or lease of outside terminals. Partially mitigating the seasonality of the asphalt paving business is our ability to sell asphalt year-round to roofing shingle manufacturers. In fiscal year 2009, we sold 6.7 million barrels of asphalt.

We have a significant share of the asphalt market in southwestern New York and western and central Pennsylvania as well as in the greater metro areas of Pittsburgh, Pennsylvania and Rochester and Buffalo, New York. We distribute asphalt from the refinery by railcar and truck transport to our owned and leased asphalt terminals in such cities or their suburbs. Asphalt can be purchased or exchanged in the Gulf Coast area and delivered by barge to third party or Company-owned terminals near Pittsburgh.

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We use a network of six terminals to store and distribute refined products. This network provides distillate, and asphalt storage capacities of approximately 1,217,000 barrels, as of August 31, 2009.

During fiscal 2009, approximately 88% of our refined products were transported from the refinery via truck transports, with the remaining 12% transported by rail. The majority of our wholesale and retail gasoline distribution is handled by common carrier trucking companies at competitive rates. We also operate a fleet of ten tank trucks that supply approximately 24% of our Kwik Fill^® retail stations.

Product distribution costs to both retail and wholesale accounts are minimized through product exchanges. Through these exchanges, we have access to product supplies at approximately 18 sources located throughout our retail marketing area. We seek to minimize retail distribution costs through the use of a system wide distribution model.

Environmental Considerations

General

We are subject to extensive federal, state and local laws and regulations relating to fuel quality, pollution control and protection of the environment, such as those governing releases of certain materials to the air and water and the storage, treatment, transportation, disposal and clean-up of wastes located on land. As with the industry in general, compliance with existing and anticipated environmental laws and regulations increases the overall cost of business, including capital costs to construct, maintain and upgrade equipment and facilities.

Gasoline and Diesel Fuel Manufacturing Standards

United continues to manufacture low sulfur fuels such as 30 Parts per Million (“PPM”) sulfur gasoline and 15 PPM ultra-low sulfur diesel. Process modifications necessary to reduce sulfur in these products were successfully implemented and the industry wide standards were achieved before the required deadlines.

Changes in fuel manufacturing standards including mandatory renewable fuel blending requirements and benzene reduction in gasoline will continue to affect our operations.

In 2005, the U.S. Congress passed the Energy Policy Act creating a Renewable Fuel Standard (“RFS1”). This standard requires a certain volume each year of transportation fuel sold to be comprised of renewable fuel, such as ethanol. The renewable fuel volume requirement was increased through passage of Energy Independence and Security Act of 2007. We are required to comply with the Renewable Fuel Standard by January 2011. In order to comply we expect to blend 10% ethanol in all our gasoline.

In May of 2009 the United States Environmental Protection Agency (“USEPA”) issued proposed regulations to revise RFS1. The revision better known as RFS2 requires much larger volumes of renewable fuels with a focus on advanced biofuels, such as cellulosic and biomass-based diesel. The RFS2 obligated volume requirement is calculated on both our gasoline and on-road diesel sales volumes, unlike that of RFS1 where by the requirement was based only on our gasoline volumes. If the regulations are adopted as proposed, our projections show we would be required to blend 5% biodiesel in all our diesel fuels as well as 10% ethanol in all of our gasoline starting January 1, 2011. The proposed regulations also contain provisions that, if adopted, may allow us to seek an extension of the effective date of these requirements under certain circumstances beyond January 1, 2011.

On August 27, 2009 the Pennsylvania Departments of Agriculture and Transportation certified that there was sufficient infrastructure in the Commonwealth to meet the requirements as prescribed by the Biofuels Development and In–State Production Incentive Act 78 of 2008. This Act requires all on-road diesel fuel sold in Pennsylvania to contain a minimum of 2% biodiesel starting May 1, 2010. We intend to start the program earlier then required, mid-December, to capitalize on any economic benefits such as selling Renewable Identification Numbers (“RINs”).

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The estimated cost for projects associated with all renewable fuels legislation is $18 million, of which $1 million is for biodiesel and $17 million for ethanol.

The USEPA finalized another rule on February 26, 2007 under the Clean Air Act (“CAA”) known as the Mobile Source Air Toxics Rule No. 2 (“MSAT II”) intended to reduce emissions of benzene by, among other things, regulating gasoline quality. The rule requires us to reduce the amount of benzene in gasoline from a current average level of about 2.5% down to 0.62% by January 2011. The estimated cost of the project to reduce the benzene content is $8 million.

We are also monitoring closely all climate change and Greenhouse Gas (“GHG”) legislation, better known as Cap and Trade, that is currently being debated in Congress. The proposals vary and the final form of legislation, if any, is not yet certain. The core of the proposals generally require the capture and reporting of CO2 emissions data, leading to a baseline followed by mandatory CO2 emission reductions over time and the purchase of carbon credits under certain circumstances. On September 22, 2009 the U.S. Environmental Protection Agency adopted regulations governing the measurement and reporting GHG emissions commencing January 1, 2010. The Company believes compliance costs with these regulations will not be material. The ultimate cost of GHG reduction mandates and their effect on our business are, however, unknown until a more definitive proposal has been crafted by Congress and implementing regulations proposed.

Retail Gasoline Stations

We currently operate gasoline stations in three states with underground petroleum product storage tanks and in the past have operated gasoline stations that are now closed. Federal and state statutes and regulations govern the installation, operation and removal from service of these underground storage tanks and associated piping and product dispensing systems. The operation of underground storage tanks and systems carries the risk of contamination to soil and groundwater with petroleum products. We manage this risk by promptly responding to actual and suspected leaks and spills and implementing remedial action plans meeting regulatory requirements. In addition to prompt response and remediation, we receive reimbursement for response costs associated with leaks and spills in the Commonwealth of Pennsylvania through the Underground Storage Tank Indemnification Fund.

Competition

Petroleum refining and marketing is highly competitive. Our major retail gasoline c-store competitors include British Petroleum, Amerada Hess, Exxon-Mobil, Sunoco, Sheetz, Delta Sonic, Valero and Giant Eagle/GetGo. With respect to wholesale gasoline and distillate sales, we compete with Sunoco, Inc., Exxon-Mobil, and other refiners via their pipeline system. We primarily compete with Marathon Petroleum in the asphalt market, both in New York and Pennsylvania. Many of our principal competitors are integrated multinational oil companies that are substantially larger and better known than us. Because of their diversity, integration of operations, larger capitalization and greater resources, these major oil companies may be better able to withstand volatile market conditions, compete on the basis of price and more readily obtain crude oil in times of shortages.

The principal competitive factors affecting our refining operations are crude oil and other feedstock costs, refinery efficiency, refinery product mix and product distribution and transportation costs. Certain of our larger competitors have refineries, which are larger and more complex and, as a result, could have lower per barrel costs or higher margins per barrel of throughput. We have no crude oil reserves and are not engaged in exploration. We believe that we will continue to be able to obtain adequate crude oil and other feedstocks at generally competitive prices for the foreseeable future.

The principal competitive factors affecting our retail marketing network are location, product price, overall appearance and cleanliness of stores and brand identification. Competition from large, integrated oil companies, supermarkets, and “big box” convenience store chains such as Wal-Mart and Sam’s Club, is expected to be

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ongoing. The principal competitive factors affecting our wholesale marketing business are the price and quality of our products, as well as the reliability and availability of supply and the location of multiple distribution points.

Employees

As of August 31, 2009, we had approximately 4,469 employees; 1,925 full-time and 2,544 part-time employees. Approximately 3,783 persons were employed at our retail units, 339 persons at our refinery, Kiantone Pipeline and at terminals operated by us, with the remainder at our office in Warren, Pennsylvania. We have entered into collective bargaining agreements with International Union of Operating Engineers Local No. 95, United Steel Workers of America Local No. 2122-A and General Teamsters Local Union No. 397 covering 224, 6, and 21 employees, respectively. The agreements expire on February 1, 2012, January 31, 2012 and July 31, 2010, respectively. We believe that our relationship with our employees is good.

Intellectual Property

We own various federal and state service and trademarks used by us, including Kwik Fill^®, United^®, Country Fair^®, SuperKwik^®, Keystone^®, SubFare^® and PizzaFare^®. Our subsidiary, Country Fair, along with us, have licensing agreements with Citgo Petroleum Corporation (“Citgo”) for the right to use Citgo’s applicable brand names, trademarks and other forms of Citgo’s identification for petroleum products purchased under a distributor franchise agreement.

We have obtained the right to use the Red Apple Food Mart^® service mark to identify our retail units under a royalty-free, nonexclusive, nontransferable license from Red Apple Supermarkets, Inc., a corporation which is indirectly wholly owned by John A. Catsimatidis, the indirect sole stockholder, Chairman of the Board and Chief Executive Officer of the Company. The license is for an indefinite term. The licensor has the right to terminate this license in the event that we fail to maintain quality acceptable to the licensor. We license the right to use the Keystone^® trademark to approximately 44 independent distributors on a non-exclusive royalty-free basis.

We currently do not own any material patents. Management believes that the Company does not infringe upon the patent rights of others, nor does our lack of patent ownership impact our business in any material manner.

Governmental Approvals

We believe we have obtained all necessary governmental approvals, licenses, and permits to operate the refinery and convenience stores.

Financing

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 .5% to 0%; 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%. The applicable margin varies with our facility leverage ratio calculation. The Agent Bank’s prime rate at August 31, 2009 was 3.25%.

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During May 2007, the Company sold an additional $125,000,000 of 10 ¹/2% Senior Unsecured Notes due 2012 (the “Additional Notes”) for $130,312,500 resulting in a debt premium of $5,312,500 which will be amortized over the life of the Additional Notes using the effective interest method. These Additional Notes were issued under an indenture, dated as of August 6, 2004 (the “Indenture”), pursuant to which $200,000,000 of Notes of the same series were issued in August 2004 and an additional $25,000,000 in February 2005. The net proceeds of the offering were used and will continue to be used for capital expenditures and general corporate purposes. Additional Notes are hereinafter collectively called “the Senior Unsecured Notes” and are fully and unconditionally guaranteed on a senior unsecured basis by all of the Company’s subsidiaries (see Notes 9 and 16 to Consolidated Financial Statements, Item 8).

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 outstanding letters of credit of $3,232,000 and approximately $126,768,000 unused and available under the Revolving Credit Facility as of August 31, 2009.

Gain on Extinguishment of Debt

During the year ended August 31, 2009, the Company acquired $26,040,000 of its 10 ¹/2% Senior Unsecured Notes due 2012 at an average price of $59.38, resulting in a gain from extinguishment of debt of $10,096,000, which is net of $346,000 of deferred financing costs and $136,000 of debt discount.

ITEM 1A. RISK FACTORS.

Risks Relating to the Business

Substantial Leverage and Ability to Service and Refinance Debt

Our ability to pay interest and principal on the Senior Unsecured Notes and to satisfy our other debt obligations will depend upon our future operating performance, which will be affected by prevailing economic conditions and financial, business and other factors, most of which are beyond our control. We anticipate that our operating cash flow, together with borrowings under the Revolving Credit Facility, will be sufficient to meet our operating expenses and capital expenditures, to sustain operations and to service our interest requirements as they become due.

We use our Revolving Credit Facility to finance a portion of our operations. These on-balance sheet financial instruments, to the extent they provide for variable rates, expose us to interest rate risks resulting from changes in the PNC Prime rate, the Federal Funds rate or the LIBOR rate.

If we are unable to generate sufficient cash flow to service our indebtedness and fund our capital expenditures, we will be forced to adopt an alternative strategy that may include reducing or delaying capital expenditures, selling assets, restructuring or refinancing our indebtedness (including the notes) or seeking additional equity capital. There can be no assurance that any of these strategies could be affected on satisfactory terms, if at all. Our ability to meet our debt service obligations will be dependent upon our future performance which, in turn, is subject to future economic conditions and to financial, business and other factors, many of which are beyond our control.

Volatility of Crude Oil Prices and Refining Margins

We are engaged primarily in the business of refining crude oil and selling refined petroleum products. Our earnings and cash flows from operations are dependent upon us realizing refining and marketing margins at least sufficient to cover our fixed and variable expenses. The cost of crude oil and the prices of refined products depend upon numerous factors beyond our control, such as the supply of and demand for crude oil, gasoline and other refined products, which are affected by, among other things, changes in domestic and foreign economies,

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political events, and instability or armed conflict in oil producing regions, production levels, weather, the availability of imports, the marketing of gasoline and other refined petroleum products by our competitors, the marketing of competitive fuels, the impact of energy conservation efforts, and the extent of domestic and foreign government regulation and taxation. A large, rapid increase in crude oil prices would adversely affect our operating margins if the increased cost of raw materials could not be passed to our customers on a timely basis, and would adversely affect our sales volumes if consumption of refined products, particularly gasoline, were to decline as a result of such price increases. A sudden drop in crude oil prices would adversely affect our operating margins since wholesale prices typically decline promptly in response thereto, while we will be paying the higher crude oil prices until our crude supply at such higher prices is processed. The prices which we may obtain for our refined products are also affected by regional factors, such as local market conditions and the operations of competing refiners of petroleum products as well as seasonal factors influencing demand for such products. In addition, our refinery throughput and operating costs may vary due to scheduled and unscheduled maintenance shutdowns.

We do not manage the price risk related to all of our inventories of crude oil and refined products with a permanent hedging program; however, we do manage the risk exposure by managing inventory levels and by selectively applying hedging activities. At August 31, 2009, the Company had no open futures positions of crude oil puts.

At August 31, 2009, we were exposed to the risk of market price declines with respect to a substantial portion of our crude oil and refined product inventories.

Competition

Many of our competitors are fully integrated companies engaged on a national and/or international basis in many segments of the petroleum business, including exploration, production, transportation, refining and marketing, on scales much larger than ours. Large oil companies, because of the diversity and integration of their operations, larger capitalization and greater resources, may be better able to withstand volatile market conditions, compete on the basis of price, and more readily obtain crude oil in times of shortages.

We face strong competition in our market for the sale of refined petroleum products, including gasoline. Such competitors have in the past and may in the future engage in marketing practices that result in profit margin deterioration for us for periods of time, causing an adverse impact on us.

Concentration of Refining Operations

All of our refinery activities are conducted at our facility in Warren, Pennsylvania. In addition, we obtain substantially all of our crude oil supply through our owned and operated Kiantone Pipeline. Any prolonged disruption to the operations of our refinery or the Kiantone Pipeline, whether due to labor difficulties, destruction of or damage to such facilities, severe weather conditions, interruption of utilities service or other reasons, would have a material adverse effect on our business, results of operations or financial condition. In order to minimize the effects of any such incident, we maintain a full schedule of insurance coverage which includes, but is not limited to, property and business interruption insurance. The property insurance policy has a combined loss limit for a property loss at our refinery and business interruptions of $500 million. A deductible of $5 million applies to physical damage claims, with a 45-day wait period deductible for business interruption. We believe that our business interruption coverage is adequate. However, there can be no assurance that the proceeds of any such insurance would be paid in a timely manner or be in an amount sufficient to meet our needs if such an event were to occur.

Impact of Environmental Regulation; Government Regulation

Our operations and properties are subject to increasingly more stringent environmental laws and regulations, such as those governing the use, storage, handling, generation, treatment, transportation, emission, release,

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discharge and disposal of certain materials, substances and wastes, remediation of areas of contamination and the health and safety of employees. These laws may impose strict, and under certain circumstances, joint and several, liability for remediation costs and also can impose responsibility for natural resource damages. Failure to comply, including failure to obtain required permits, can also result in significant fines and penalties, as well as potential claims for personal injury and property damage.

We cannot predict the nature, scope or effect of environmental legislation or regulatory requirements that could be imposed or how existing or future laws or regulations will be administered or interpreted. The nature of our operations and previous operations by others at certain of our facilities exposes us to the risk of claims under those laws and regulations. There can be no assurance that material costs or liabilities will not be incurred in connection with such claims, including potential claims arising from discovery of currently unknown conditions.

Taxes

Our operations and products will be subject to taxes imposed by federal, state and local governments, which taxes have generally increased over time. There can be no certainty of the effect that increases in these taxes, or the imposition of new taxes, could have on us, or whether such taxes could be passed on to our customers.

Nature of Demand for Asphalt

In fiscal 2009, asphalt sales represented 18% of our total revenues. Over the same period, approximately 90% of our asphalt was produced for use in paving or repaving roads and highways. The level of paving activity is, in turn, dependent upon funding available from federal, state and local governments. Funding for paving has been affected in the past, and may be affected in the future, by budget difficulties at the federal, state or local levels. A decrease in demand for asphalt could cause us to sell asphalt at significantly lower prices or to curtail production of asphalt by processing more costly lower sulfur content crude oil which would adversely affect refining margins. In addition, paving activity in our marketing area generally ceases in the winter months. Therefore, much of our asphalt production during the winter must be stored until warmer weather arrives, resulting in delayed revenue recognition and inventory buildups each year.

Controlling Stockholder

John A. Catsimatidis indirectly owns all of our outstanding voting stock. By virtue of such stock ownership, Mr. Catsimatidis has the power to control all matters submitted to our stockholders and to elect all of our directors.

Restrictions Imposed by Terms of Indebtedness

The terms of the Revolving Credit Facility, the Indenture and the other agreements governing our indebtedness impose operating and financing restrictions on us and our subsidiaries. Such restrictions affect, and in many respects limit or prohibit, among other things, our ability and our subsidiaries’ ability to incur additional indebtedness, create liens, sell assets, or engage in mergers or acquisitions. These restrictions could limit our ability to plan for or react to market conditions or meet extraordinary capital needs or otherwise could restrict corporate activities. There can be no assurance that such restrictions will not adversely affect our ability to finance our future operations or capital needs or to engage in other business activities which will be in our interest.

Our Pension Plans are Currently Underfunded

Substantially all of our employees are covered by three noncontributory defined benefit pension plans. As of August 31, 2009, as measured under FAS 87 (which is not the same as the measure used for purposes of calculating required contributions and potential liability to the Pension Benefit Guaranty Corporation, or PBGC),

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the aggregate accumulated benefit obligation under our pension plans was approximately $85.2 million and the value of the assets of the plans was approximately $49.2 million. In fiscal 2009, we contributed $3.5 million to the three plans, and we have made additional contributions to our pension plans of $4.2 million in fiscal year 2010. If the performance of the assets in our pension plans does not meet our expectations or if other actuarial assumptions are modified, our contributions for future years could be higher than we expect.

Our pension plans are subject to the Employee Retirement Income Security Act of 1974, or ERISA. Under ERISA, the PBGC generally has the authority to terminate an underfunded pension plan if the possible long-run loss of the PBGC with respect to the plan may reasonably be expected to increase unreasonably if the plan is not terminated. In the event our pension plans are terminated for any reason while the plans are underfunded, we will incur a liability to the PBGC that may be equal to the entire amount of the underfunding.

ITEM 1B. UNRESOLVED STAFF COMMENTS.

Not Applicable

ITEM 2. PROPERTIES.

We own a 92-acre site in Warren, Pennsylvania upon which we operate our refinery. The site also contains an office building housing our principal executive office.

We own various real property in the states of Pennsylvania, New York, Ohio, and Alabama, upon which, as of August 31, 2009, we operated 184 retail units and two crude oil and six refined product storage terminals. We also own the 78-mile long Kiantone Pipeline, a pipeline which connects our crude oil storage terminal to the refinery’s tank farm. Our right to maintain the pipeline is derived from approximately 265 separate easements, right-of-way agreements, leases, permits, and similar agreements. We also have easements, right-of-way agreements, leases, permits, and similar agreements that would enable us to build a second pipeline on property contiguous to the Kiantone Pipeline.

As of August 31, 2009, we also lease an aggregate of 183 sites in Pennsylvania, New York, and Ohio upon which we operate retail units.

ITEM 3. LEGAL PROCEEDINGS.

The Company and its subsidiaries are from time to time parties to various legal proceedings that arise in the ordinary course of their respective business operations. These proceedings include various administrative actions relating to federal, state and local environmental laws and regulations as well as civil matters before various courts seeking money damages. The Company believes that if the legal proceedings in which it is currently involved were determined against the Company, there would be no material adverse effect on the Company’s operations or its consolidated financial condition. In the opinion of management, all such matters are adequately covered by insurance, or if not so covered, are without merit or are of such kind, or involve such amounts that an unfavorable disposition would not have a material adverse effect on the consolidated operations or financial position of the Company.

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

None.

ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES.

None.

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ITEM 6. SELECTED FINANCIAL DATA.

The following table sets forth certain historical financial and operating data (the “Selected Information”) as of the end of and for each of the years in the five-year period ended August 31, 2009. The selected income statement, balance sheet, financial and ratio data as of and for each of the five-years ended August 31, 2009 has been derived from our audited consolidated financial statements. The operating information for all periods presented has been derived from our accounting and financial records. The Selected Information set forth below should be read in conjunction with, and is qualified by reference to, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Item 7 and our Consolidated Financial Statements and Notes thereto in Item 8 and other financial information included elsewhere herein.

	Year Ended August 31,
	2009			2008			2007			2006			2005
	(in thousands)
Income Statement Data:
Net sales	$	2,387,171		$	3,208,012		$	2,405,063		$	2,437,052		$	1,890,189
Gross margin (1)		379,253			261,413			449,451			418,426			294,173
Refining operating expenses (2)		126,531			152,521			130,164			145,117			120,573
Selling, general and administrative expenses		144,943			145,770			136,474			129,522			116,240
Operating income (loss)		91,468			(52,595	)		168,394			130,597			42,134
Interest expense		(36,006	)		(36,934	)		(28,178	)		(24,645	)		(24,661	)
Interest income		134			4,966			4,384			750			133
Other, net		(1,471	)		(3,706	)		(825	)		(429	)		(1,658	)
Equity in net earnings of affiliate		41			2,879			1,611			2,190			864
Gain on early extinguishment of debt		10,096			—			—			—			—
Income (loss) before income tax expense (benefit)		64,262			(85,390	)		145,386			108,463			16,812
Income tax expense (benefit)		26,235			(35,485	)		59,680			44,449			6,900
Net income (loss)		38,027			(49,905	)		85,706			64,014			9,912
Balance Sheet Data (at end of period):
Total assets		670,854			601,793			731,566			516,771			418,837
Total debt		331,576			367,291			358,952			228,014			227,141
Total stockholder’s equity		70,814			58,058			142,910			91,853			50,873

(1) Gross margin is defined as gross profit plus refining operating expenses. Refinery operating expenses are expenses incurred in refining and included in costs of goods sold in our consolidated financial statements. Refining operating expense equals refining operating expenses per barrel, multiplied by the volume of total saleable products per day, multiplied by the number of days in the period.

(2) Refinery operating expenses include refinery fuel produced and consumed in refinery operations.

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

Forward Looking Statements

This Annual Report on Form 10-K 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 Annual Report on Form 10-K.

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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, current reports on Form 8-K, etc. In addition to the factors discussed elsewhere in this Annual Report 10-K, 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 effect of the current banking and credit crisis on the Company and our customers and suppliers;

• repayment of debt;

• general economic, business and market conditions;

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

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

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

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

• the availability and cost of financing to us;

• environmental, tax and tobacco legislation or regulation;

• volatility of gasoline prices, margins and supplies;

• merchandising margins;

• labor costs;

• level of capital expenditures;

• customer traffic;

• weather conditions;

• acts of terrorism and war;

• business strategies;

• expansion and growth of operations;

• future projects and investments;

• 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 Annual Report on Form 10K.

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Business Strategy and Overview

Our strategy is to strengthen our position as a leading producer and marketer of high quality refined petroleum products within our market area. We plan to accomplish this strategy through continued attention to optimizing our operations, resulting in the lowest possible crude and overhead costs, and continuing to improve and enhance our retail and wholesale positions. More specifically, we intend to:

• Maximize the favorable economic impact of our transportation cost advantage by increasing our retail and wholesale market shares within our market area.

• Optimize profitability by managing feedstock costs, product yields, and inventories through our refinery feedstock management program and our system-wide distribution model.

• Continue to investigate additional strategic acquisitions and capital improvements to our existing facilities.

Company Background

Critical Accounting Policies

The accompanying consolidated financial statements and supplementary information were prepared in accordance with accounting principles generally accepted in the United States of America. Significant accounting policies are discussed in Note 1 to the Consolidated Financial Statements, Item 8. Inherent in the application of many of these accounting policies is the need for management to make estimates and judgments in the determination of certain revenues, expenses, assets and liabilities. As such, materially different financial results can occur as circumstances change and additional information becomes known. The policies with the greatest potential effect on our results of operation and financial position include:

Revenue Recognition

Revenues for products sold by the wholesale segment are recorded upon delivery of the products to our customers, at which time title to those products is transferred and when payment has either been received or collection is reasonably assured. At no point do we recognize revenue from the sale of product prior to transfer of its title. Title to product is transferred to the customer at the shipping point, under predetermined contracts for sale at agreement upon or posted prices to customers of which collectibility is reasonably assured.

Revenues for products sold by the retail segment are recognized immediately upon sale to the customer. Revenue derived from other sources including freight charges are recognized when the related product revenue is recognized.

Collectibility of Accounts Receivable

For accounts receivable we estimate the net collectibility considering both historical and anticipated trends relating to our customers and the possibility of non-collection due to their financial position. While such non-collections have been historically within our expectations and the allowances the Company has established, the Company cannot guarantee that it will continue to experience non-collection rates that it has experienced in the past. A significant change in the financial position of our customers could have a material impact on the quality of our accounts receivable and our future operating results.

Goodwill and Other Non-Amortizable Assets

In accordance with Statement of Financial Accounting Standard No. 142, “Goodwill and Other Intangible Assets”, goodwill and intangible assets deemed to have indefinite lives are no longer amortized but are subject to annual impairment tests. We assess the impairment of goodwill and other indefinite-lived intangible assets annually.

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The Company performed separate impairment tests on June 1, 2009 for its tradename and other intangible assets using discounted and undiscounted cash flow methods, respectively. The fair value of the tradename and other intangible assets exceeded their respective carrying values. The Company has noted no subsequent indication that would require testing the tradename and intangible assets for impairment.

There were no material changes in the gross carrying amounts of goodwill, tradename, or other intangible assets for fiscal 2009.

Long-Lived Assets

Whenever events or changes in circumstances indicate that the carrying value of any of these assets may not be recoverable, the Company will assess the recoverability of such assets based upon estimated undiscounted cash flow forecasts. When any such impairment exists, the related assets will be written down to fair value.

Value of Pension Assets

The Company maintains three noncontributory defined benefit retirement plans for substantially all its employees. The assets of the plans are invested with a financial institution that follows an investment policy drafted by the Company. The investment guidelines provide a percentage range for each class of assets to be managed by the financial institution. The historic performance of these asset classes supports the Company’s expected return on the assets. The asset classes are rebalanced periodically should they fall outside the range allocations.

The percentage of total asset allocation range is as follows:

Asset Class	Minimum		Maximum
Equity	55	%	75	%
Fixed Income	25	%	35	%
Cash or Cash Equivalents	0	%	10	%

The discount rate utilized in valuing the benefit obligations of the plans was derived from the rate of return on high quality bonds as of August 31, 2009. Similarly, the rate of compensation utilizes historic increases granted by the Company and the industry as well as future compensation policies. See Note 10 to Consolidated Financial Statements, Item 8.

Environmental Remediation and Litigation Reserve Estimations

Management also makes judgments and estimates in recording liabilities for environmental cleanup and litigation. Liabilities for environmental remediation are subject to change because of matters such as changes in laws, regulations and their interpretation; the effect of additional information on the extent and nature of site contamination; and improvements in technology. Likewise, actual litigation costs can vary from estimates based on the facts and circumstance and application of laws in individual cases.

The above assessment of critical accounting policies is not meant to be an all-inclusive discussion of the uncertainties to financial results that occur from the application of the full range of the Company’s accounting policies. Materially different financial results could occur in the application of other accounting policies as well. Likewise, materially different results can occur upon the adoption of new accounting standards promulgated by the various rule-making bodies.

General

The Company is engaged in the refining and marketing of petroleum products. In fiscal 2009, approximately 59% and 22% of the Company’s gasoline and distillate production, respectively, was sold through the

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Company’s network of service stations and truck stops. The balances of the Company’s refined products were sold to wholesale customers. In addition to transportation and heating fuels, primarily gasoline and distillate, the Company is a major regional wholesale marketer of asphalt. The Company also sells convenience merchandise at convenience stores located at most of its service stations. The Company’s profitability is influenced by fluctuations in the market prices of crude oils and refined products. Although the Company’s product sales mix helps to reduce the impact of large short-term variations in crude oil price, net sales and costs of goods sold can fluctuate widely based upon fluctuations in crude oil prices. Specifically, the margins on wholesale gasoline and distillate tend to decline in periods of rapidly declining crude oil prices, while margins on asphalt, retail gasoline and distillate tend to improve. During periods of rapidly rising crude oil prices, margins on wholesale gasoline and distillate tend to improve, while margins on asphalt and retail gasoline and distillate tend to decline. Gross margins on the sale of convenience merchandise averaged 25.8% for fiscal 2009 and have been between 25.8% and 28.0% for the last five years and are essentially unaffected by variations in crude oil and petroleum products prices.

The Company includes in costs of goods sold operating expenses incurred in the refining process. Therefore, operating expenses reflect only selling, general and administrative expenses, including all expenses of the retail network, and depreciation and amortization.

Recent Developments

The Company continues to be impacted by the volatility in petroleum markets in fiscal year 2010. 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 consistently fluctuating 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 month of September in fiscal year 2010 was $2.74 as compared to $14.36 for the fourth quarter of fiscal year 2009, a decrease of $11.62 or 81%. The lagged crackspread for October of fiscal year 2010 was $11.20, a decrease of $3.16 or 22% as compared to the fourth quarter of fiscal year 2009.

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 at a network of Company-operated retail units and convenience and grocery items through Company-owned 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 (see Item 8), 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.

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Retail Operations:

	Fiscal Year Ended August 31,
	2009			2008			2007
	(in thousands)
Net Sales
Petroleum	$	974,419		$	1,328,832		$	982,624
Merchandise and other		239,127			220,723			208,966
Total Net Sales	$	1,213,546		$	1,549,555		$	1,191,590
Costs of Goods Sold	$	1,053,081		$	1,424,629		$	1,068,264
Gross Profit	$	160,465		$	124,926		$	123,326
Operating Expenses	$	126,854		$	126,141		$	117,775
Segment Operating Income/(Loss)	$	33,611		$	(1,215	)	$	5,551
Petroleum Sales (thousands of gallons)		390,843			380,285			371,418
Gross Profit
Petroleum (a)	$	98,807		$	66,522		$	66,728
Merchandise and other		61,658			58,404			56,598
	$	160,465		$	124,926		$	123,326
Petroleum margin ($/gallon) (b)		.2528			.1749			.1797
Merchandise margin (percent of sales)		25.8	%		26.5	%		27.1	%
Average number of stations (during period)
Owned and leased		304			306			308
Managed		63			63			63
		367			369			371

(a) Includes the effect of intersegment purchases from our wholesale segment at prices which approximate market.

(b) Company management calculates petroleum margin per gallon by dividing petroleum gross profit 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.

Net Sales

2009 vs. 2008

Retail sales decreased during fiscal 2009 by $336.0 million, or 21.7%, from $1,549.6 million in fiscal 2008 to $1,213.6 million in fiscal 2009. The retail sales decrease was a result of a $354.4 million decrease in petroleum sales, offset by an $18.4 million increase in merchandise sales. The petroleum sales decrease was due to a 28.7% decrease in retail selling price per gallon, offset by an increase of 10.6 million gallons or 2.8% in volume. The decrease in price generally reflects the decline in world wide petroleum prices. The merchandise sales increase is primarily due to increased prepared food, beverages and cigarette sales due to promotional campaigns and increased selling prices.

2008 vs. 2007

Retail sales increased during fiscal 2008 by $358.0 million, or 30.0%, from $1,191.6 million in fiscal 2007 to $1,549.6 million in fiscal 2008. The retail sales increase was a result of a $346.2 million increase in petroleum sales, and an $11.8 million increase in merchandise sales. The petroleum sales increase is due to an 8.9 million

22

gallon or 2.4% increase in retail petroleum volume and a 32.1% increase in retail selling price. The merchandisesales increase is primarily due to increased prepared food, beverages and cigarette sales due to promotional campaigns and increased selling prices.

Costs of Goods Sold

2009 vs. 2008

Retail costs of goods sold decreased during fiscal 2009 by $371.5 million, or 26.1%, from $1,424.6 million in fiscal 2008 to $1,053.1 million in fiscal 2009. This was primarily due to decreases in: petroleum purchase prices of $377.9 million, inventory pricing of $10.1 million and freight of $.5 million offset by increases in: merchandise costs of $15.2 million and fuel tax of $1.8 million.

2008 vs. 2007

Retail costs of goods sold increased during fiscal 2008 by $356.3 million, or 33.4%, from $1,068.3 million in fiscal 2007 to $1,424.6 million in fiscal 2008. This was primarily due to increases in petroleum purchases volume and price of $327.9, merchandise costs of $9.9 million, fuel taxes of 9.5 million, inventory costs of $5.8 million and freight costs of $3.2 million.

Gross Profit

2009 vs. 2008

Retail gross profit increased during fiscal 2009 by $35.6 million or 28.4% from $124.9 million in fiscal 2008 to $160.5 million in fiscal 2009. Gross profit on petroleum increased as a percent of sales from 4.3% in fiscal 2008 to 8.1% in fiscal 2009. Petroleum margins increased by $32.3 million, or 48.5%, due primarily to lower cost of goods on petroleum products. Merchandise margin increased by $3.3 million, or 5.6%, primarily due to a 8.3% increase in merchandise sales.

2008 vs. 2007

Retail gross profit increased during fiscal 2008 by $1.6 million or 1.3% from $123.3 million in fiscal 2007 to $124.9 million in fiscal 2008. Gross profit on petroleum decreased as a percent of sales from 5.6% in fiscal 2007 to 4.3% in fiscal 2008. Petroleum costs of goods sold increased substantially faster than the petroleum selling prices. Petroleum margins decreased by $.2 million, or .3%, due primarily to higher cost of goods on petroleum products. Merchandise margin increased by $1.8 million, or 3.2%, primarily due to a 5.6% increase in merchandise sales.

Operating Expenses

2009 vs. 2008

Retail operating expenses remained relatively constant during fiscal 2009 and fiscal 2008 due to the Company’s effort to keep overheads at the previous year level.

2008 vs. 2007

Retail operating expenses increased during fiscal 2008 by $8.4 million or 7.1% from $117.8 million in fiscal 2007 to $126.1 million in fiscal 2008. The primary contributing factor was increased payroll and related payroll costs of $4.2 million due to a Pennsylvania minimum wage increase effective July 1, 2007 from $6.25 to $7.15 per hour. Other increases were related to maintenance costs of $.2 million, credit/customer service costs of $2.6 million, supplies of $.3 million, legal/professional fees of $.1 million, insurance/utilities/taxes of $.7 million and advertising/promotion costs of $.4 million offset by a decrease in other miscellaneous costs of $.1 million.

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Wholesale Operations:

	Fiscal Year Ended August 31,
	2009		2008			2007
	(in thousands)
Net Sales (a)	$	1,173,625	$	1,658,457		$	1,213,473
Costs of Goods Sold		1,081,368		1,674,491			1,017,512
Gross Profit (Loss)		92,257		(16,034	)		195,961
Operating Expenses		34,400		35,346			33,118
Segment Operating Income (Loss)	$	57,857	$	(51,380	)	$	162,843
Crude throughput (thousand barrels per day)		61.9		59.6			61.7

Refinery Product Yield

	Fiscal Year Ended August 31,
	2009		2008		2007
	(thousands of barrels)
Gasoline and gasoline blendstock	9,363		8,990		10,209
Distillates	5,387		5,446		5,442
Asphalt	6,791		6,535		6,604
Butane, propane, residual products, internally produced fuel and other	2,381		2,559		2,360
Total Product Yield	23,922		23,530		24,615
% Heavy Crude Oil of Total Refinery Throughput (b)	61	%	60	%	59	%

Product Sales (a)

	Fiscal Year Ended August 31,
	2009		2008		2007
	(in thousands)
Gasoline and gasoline blendstock	$	389,226	$	620,983	$	487,852
Distillates		331,284		577,743		365,582
Asphalt		425,538		407,708		338,262
Other		27,577		52,023		21,777
	$	1,173,625	$	1,658,457	$	1,213,473

Product Sales (a)

	Fiscal Year Ended August 31,
	2009	2008	2007
	(thousands of barrels)
Gasoline and gasoline blendstock	5,556	5,568	6,163
Distillates	4,289	4,351	4,523
Asphalt	6,724	7,592	7,427
Other	807	824	549
	17,376	18,335	18,662

(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.

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Net Sales

2009 vs. 2008

Wholesale sales decreased during fiscal 2009 by $484.8 million, or 29.2%, from $1,658.5 million in fiscal 2008 to $1,173.6 million in fiscal 2009. The wholesale sales decrease was due to a 25.4% decrease in wholesale prices and a 5.2% decrease in wholesale volume.

2008 vs. 2007

Wholesale sales increased during fiscal 2008 by $445.0 million, or 36.7%, from $1,213.5 million in fiscal 2007 to $1,658.5 million in fiscal 2008. The wholesale sales increase was due to a 39.1% increase in wholesale prices offset by a 1.7% decrease in wholesale volume. The increase in wholesale price was primarily due to the volatility of the energy market.

Costs of Goods Sold

2009 vs. 2008

Wholesale costs of goods sold decreased during fiscal 2009 by $593.1 million, or 35.4%, from $1,674.5 million in fiscal 2008 to $1,081.4 million in fiscal 2009. The decrease in wholesale costs of goods sold was primarily due to the 31% decrease in the cost of purchased crude.

2008 vs. 2007

Wholesale costs of goods sold increased during fiscal 2008 by $657.0 million, or 64.6%, from $1,017.5 million in fiscal 2007 to $1,674.5 million in fiscal 2008. The increase in wholesale costs of goods sold was primarily due to a 39.1% increase in wholesale prices due to the volatility of the energy market.

Gross Profit

2009 vs. 2008

Wholesale gross profit increased during fiscal 2009 by $108.3 million or 675.4% from $(16.0) million in fiscal 2008 to $92.3 million in fiscal 2009. Gross profit increased as a percent of sales from (1.0) % in fiscal 2008 to 7.9% in fiscal 2009. Costs of goods sold decreased primarily due to the 31% decrease in the cost of purchased crude.

2008 vs. 2007

Wholesale gross profit decreased during fiscal 2008 by $211.9 million or 108.2% from $195.9 million in fiscal 2007 to $(16.0) million in fiscal 2008. Gross profit decreased as a percent of sales from 16.1% in fiscal 2007 to (1.0) % in fiscal 2008. Costs of goods sold increased primarily due to an increase in costs due to the volatility of the energy market and by the year-end impact of valuing the Company’s inventories under the LIFO cost method.

Operating Expenses

2009 vs. 2008

Wholesale operating expenses remained relatively constant during the fiscal 2008 and fiscal 2009 due to the Company’s effort to keep overheads at the previous years level. For fiscal 2009 operating expenses were $34.4 million, or 2.9% of net wholesale sales, compared to $35.3 million or 2.1% of net wholesale sales for fiscal 2008.

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2008 vs. 2007

Wholesale operating expenses increased during fiscal 2008 by $2.2 million or 6.7% from $33.1 million in fiscal 2007 to $35.3 million in fiscal 2008. This increase was primarily due to pension expense, corporate administrative overhead, credit fees and depreciation on capital additions made in fiscal 2007. For fiscal 2008 operating expenses were $35.3 million, or 2.1% of net wholesale sales, compared to $33.1 million or 2.7% of net wholesale sales for fiscal 2007.

Interest Expense, Net

Net interest expense (interest expense less interest income) increased during fiscal 2009 by $3.9 million from $32.0 million for fiscal 2008 to $35.9 million for fiscal 2009. The increase was due to a decrease in interest income due to lower interest rates.

Net interest expense (interest expense less interest income) increased during fiscal 2008 by $8.2 million from $23.8 million for fiscal 2007 to $32.0 million for fiscal 2008. The increase was due to increased usage of short term borrowings under the Revolving Credit Facility throughout the fiscal year and a full year’s interest on Senior Unsecured Notes due 2012.

Income Tax Expense / (Benefit)

Our fiscal 2009, 2008 and 2007 effective tax rate remained consistent at 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:

	August 31, 2009		August 31, 2008
	(in thousands)
Cash and cash equivalents	$	31,062	$	32,447
Working capital	$	229,627	$	206,985
Current ratio		2.6		3.0
Debt	$	331,576	$	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. We continuously evaluate our capital budget; however, management does not foresee any significant increase in maintenance and non-discretionary capital expenditures during fiscal 2010 that would impact future liquidity or capital resources. Maintenance and non-discretionary capital expenditures have averaged approximately $6 million annually over the last three years for the refining and marketing operations and management currently projects this capital expenditure to be approximately $5 million for fiscal 2010.

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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. During fiscal 2009, significant uses of cash are summarized in the following table:

	Fiscal Year Ended August 31, 2009
	(in millions)
Significant uses of cash
Investing activities:
Property, plant and equipment
Residual upgrade	$	(5.7	)
Computers and equipment upgrade		(2.2	)
Renewable fuels		(2.1	)
Waste water treatment plant upgrade		(2.0	)
Retail maintenance (blacktop, roof, HVAL, rehab)		(1.7	)
#4 boiler upgrade		(1.4	)
Upgrade to additive system—loading rack		(1.4	)
Retail petroleum upgrade		(1.2	)
Replace existing boiler—Springdale		(.8	)
Miscellaneous equipment replacement		(.7	)
Asbestos abatement phase 1		(.5	)
Environmental upgrade		(.5	)
Other general capital items (tank repairs, refinery piping projects, etc.)		(3.8	)
Total property, plant and equipment	$	(24.0	)
Additions to refinery turnaround costs	$	(1.2	)
Net cash (used in) investing activities	$	(25.2	)
Financing activities:
Principal reductions of long-term debt	$	(16.9	)
Net reductions borrowings on revolving credit facility		(9.0	)
Distribution (to) parent under the tax sharing agreement		(2.7	)
Net cash (used in) financing activities	$	(28.6	)
Working capital items:
Accounts receivable decrease	$	38.6
Accounts payable increase		36.7
Refundable income taxes increase		35.9
Prepaid expense decrease		6.7
Income taxes payable increase		5.1
Accrued liabilities increase		.7
Other		.7
Increase in inventory		(142.8	)
Amounts due to affiliated companies		(3.4	)
Cash (used in) working capital items	$	(21.8	)

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.

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

27

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 .5% to 0%; 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%. The applicable margin varies with our facility leverage ratio calculation. The Agent Bank’s prime rate at August 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 outstanding letters of credit of $3,232,000 as of August 31, 2009. As of August 31, 2009, we had no outstanding borrowings under the Revolving Credit Facility resulting in net availability of $126,768,000.

The following is a summary of our significant contractual cash obligations for the periods indicated that existed as of August 31, 2009 and is based on information appearing in the Notes to the Consolidated Financial Statements in Item 8:

	Payments due by period
Contractual Obligations	Total		Less Than 1 Year		1 – 3 Years		3 – 5 Years		More than 5 Years
	(in thousands)
Long-term debt	$	329,158	$	1,509	$	325,481	$	866	$	1,302
Operating leases		91,574		11,810		22,175		16,183		41,406
Interest on 10.5% Senior Notes due 8/15/2012 (a) (b)		134,573		34,016		68,032		32,525		—
Total contractual cash obligations (c)	$	555,305	$	47,335	$	415,688	$	49,574	$	42,708

(a) Amounts do not reflect amortization of debt discount of $2.7 million, debt premium of $.8 million and debt premium of $5.3 million, respectively, on $200 million of Senior Unsecured Notes issued August 6, 2004, $25 million of Senior Unsecured Notes issued February 15, 2005, and $125 million of Senior Unsecured Notes issued May 4, 2007, respectively, which will be amortized over the life of the notes using the effective interest method (see Note 9 to Consolidated Financial Statements, Item 8).

(b) Does not include interest on the Revolving Credit Facility. The applicable margin varies with our facility leverage ratio calculation. Under the amended Revolving Credit Facility, for base rate borrowings, interest is calculated at the greater of the Agent Bank’s prime rate less an applicable margin of 0% to .5% or federal funds rate plus 1%. For Euro-Rate borrowings, interest is calculated at the LIBOR rate plus an applicable margin of 1.25% to 1.75%. The applicable margin varies with our facility’s average unused availability calculation (see Notes 8 and 9 to Consolidated Financial Statements, Item 8).

(c) Pension obligations are not included since payments are not known.

Although we are not aware of any pending circumstances which would change our expectations, changes in the tax laws, the imposition of and changes in federal and state clean air and clean fuel requirements and other

28

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.

Related Party Transactions

See Item 13, Certain Relationships and Related Transactions.

Seasonal Factors

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

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

Inflation

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

Recent Accounting Pronouncements

In 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 believes that the adoption of Statement 157 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 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.

29

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 and 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.

In May 2009, the FASB issued Statement No. 165, “Subsequent Events” (“Statement 165”), which establishes general standards of accounting for and disclosure of subsequent events that occur after the balance sheet data but before the financial statements are issued or available for use. The Company adopted Statement 165 during the fourth quarter of 2009. In accordance with Statement 165, the Company has evaluated subsequent events through the date and time the financial statements were issued on November 30, 2009.

In June 2009, the FASB issued Statement No. 167, “Amendments to FASB Interpretation No. 46(R)” (“Statement 167”). Statement 167 amended FASB Interpretation No. 46, “Consolidation of Variable Interest Entities,” to require a company to determine whether the Company’s variable interest or interests give it a controlling financial interest in a variable interest entity. Additionally, Statement 167 requires ongoing reassessment of whether it is the primary beneficiary of a variable interest entity and is effective for fiscal years beginning after November 15, 2009, and interim periods within that fiscal year. The Company believes that the adoption of Statement 167 will not have a significant effect on the Company’s consolidated financial position.

In June 2009, the FASB issued Statement No. 168, “The FASB Accounting Standards Codification and the Hierarchy of General Accepted Accounting Principles” (“Statement 168”). Statement 168 establishes the Codification as the single source of GAAP to be applied in preparing financial statements in conformity with GAAP. Statement 168 is effective for financial statements issued for interim and annual periods ending after September 15, 2009 and will supersede all existing non Securities and Exchange Commission (“SEC”) accounting and reporting standards. Rules and interpretative releases of the SEC under the authority of federal securities laws are also authoritative GAAP for SEC registrants. The Company believes that the adoption of Statement 168 will not have a significant impact on its consolidated financial position, results of operations and cash flows.

ITEM 7A.     QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

We use our Revolving Credit Facility to finance a portion of our operations. These on-balance sheet financial instruments, to the extent they provide for variable rates, expose us to interest rate risk resulting from changes in the PNC Prime rate, the Federal Funds rate or the LIBOR rate.

We have exposure to price fluctuations of crude oil and refined products. We do not manage the price risk related to all of our inventories of crude oil and refined products with a permanent formal hedging program, but we do manage our risk exposure by managing inventory levels and by selectively applying hedging activities. At August 31, 2009, the Company had no future positions.

At August 31, 2009, we were exposed to the risk of market price declines with respect to a substantial portion of our crude oil and refined product inventories.

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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

INDEX TO FINANCIAL STATEMENTS

	Page
Report of Independent Registered Public Accounting Firm	32
Consolidated Financial Statements:
Balance Sheets	33
Statements of Operations	34
Statements of Comprehensive Income (Loss)	35
Statements of Stockholder’s Equity	36
Statements of Cash Flows	37
Notes to Consolidated Financial Statements	38 thru 62

31

Report of Independent Registered Public Accounting Firm

The Board of Directors and Stockholder

United Refining Company

Warren, Pennsylvania

We have audited the accompanying consolidated balance sheets of United Refining Company and subsidiaries as of August 31, 2009 and 2008, and the related consolidated statements of operations, comprehensive income (loss), stockholder’s equity and cash flows for each of the three years in the period ended August 31, 2009. These consolidated financial statements are the responsibility of the management of United Refining Company and its subsidiaries. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of United Refining Company and subsidiaries as of August 31, 2009 and 2008, and the results of their operations and their cash flows for each of the three years in the period ended August 31, 2009, in conformity with accounting principles generally accepted in the United States of America.

As discussed in Note 10 to the accompanying financial statements, the Company has adopted Statement of Financial Accounting Standards No. 158 “Employer’s Accounting for Defined Benefit Pension and Other Postretirement Plans” as of August 31, 2007.

/s/ BDO Seidman, LLP

New York, New York

November 30, 2009

32

UNITED REFINING COMPANY AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(in thousands, except share amounts)

	August 31,
	2009			2008
Assets
Current:
Cash and cash equivalents	$	31,062		$	32,447
Accounts receivable, net		85,382			124,022
Refundable income taxes		—			35,913
Inventories		237,541			94,708
Prepaid expenses and other assets		14,561			21,304
Amounts due from affiliated companies, net		809			—
Total current assets		369,355			308,394
Property, plant and equipment, net		252,048			244,011
Investment in affiliated company		—			6,389
Deferred financing costs, net		3,254			4,544
Goodwill		1,349			1,349
Tradename		10,500			10,500
Amortizable intangible assets, net		1,483			1,713
Deferred turnaround costs and other assets, net		7,452			13,120
Deferred income taxes		25,413			11,773
	$	670,854		$	601,793
Liabilities and Stockholder’s Equity
Current:
Revolving credit facility	$	—		$	9,000
Current installments of long-term debt		2,327			2,184
Accounts payable		83,497			46,912
Accrued liabilities		17,017			16,377
Income taxes payable		5,149			—
Sales, use and fuel taxes payable		22,134			21,454
Deferred income taxes		9,604			2,891
Amounts due to affiliated companies, net		—			2,591
Total current liabilities		139,728			101,409
Long term debt: less current installments		329,249			356,107
Deferred gain on settlement of pension plan obligations		—			55
Deferred retirement benefits		131,059			86,146
Other noncurrent liabilities		4			18
Total liabilities		600,040			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		21,998			24,665
Retained earnings		94,365			56,338
Accumulated other comprehensive loss		(45,549	)		(22,945	)
Total stockholder’s equity		70,814			58,058
	$	670,854		$	601,793

See accompanying notes to consolidated financial statements.

33

UNITED REFINING COMPANY AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands)

	Year Ended August 31,
	2009			2008			2007
Net sales	$	2,387,171		$	3,208,012		$	2,405,063
Costs of goods sold		2,134,449			3,099,120			2,085,776
Gross profit		252,722			108,892			319,287
Expenses:
Selling, general and administrative expenses		144,943			145,770			136,474
Depreciation and amortization expenses		16,311			15,717			14,419
Total operating expenses		161,254			161,487			150,893
Operating income (loss)		91,468			(52,595	)		168,394
Other income (expense):
Interest expense, net		(35,872	)		(31,968	)		(23,794	)
Other, net		(1,471	)		(3,706	)		(825	)
Equity in net earnings of affiliate		41			2,879			1,611
Gain on extinguishment of debt		10,096			—			—
		(27,206	)		(32,795	)		(23,008	)
Income (loss) before income tax expense (benefit)		64,262			(85,390	)		145,386
Income tax expense (benefit):
Current		17,455			(28,274	)		59,705
Deferred		8,780			(7,211	)		(25	)
		26,235			(35,485	)		59,680
Net income (loss)	$	38,027		$	(49,905	)	$	85,706

See accompanying notes to consolidated financial statements.

34

UNITED REFINING COMPANY AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(in thousands)

	Year Ended August 31,
	2009			2008			2007
Net income (loss)	$	38,027		$	(49,905	)	$	85,706
Other comprehensive (loss) income, net of taxes:
Minimum pension liability		—			—			1,579
Unrecognized post retirement costs		(22,604	)		(2,269	)		—
Other comprehensive (loss) income		(22,604	)		(2,269	)		1,579
Total comprehensive income (loss)	$	15,423		$	(52,174	)	$	87,285

See accompanying notes to consolidated financial statements.

35

UNITED REFINING COMPANY AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDER’S EQUITY

(in thousands, except share data)

	Common Stock			Additional Paid-In Capital			Retained Earnings			Accumulated Other Comprehensive Income (Loss)			Total Stockholder’s Equity
	Shares	Amount
Balance at August 31, 2006	100	$	—	$	14,244		$	79,188		$	(1,579	)	$	91,853
Dividends to stockholder	—		—		—			(23,339	)		—			(23,339	)
Other comprehensive income	—		—		—			—			1,579			1,579
Contribution from Parent under the Tax Sharing Agreement	—		—		7,787			—			—			7,787
Adjustment to initially apply Statement 158, net of taxes	—		—		—			—			(20,676	)		(20,676	)
Net income	—		—		—			85,706			—			85,706
Balance at August 31, 2007	100		—		22,031			141,555			(20,676	)		142,910
Dividends to stockholder	—		—		—			(35,312	)		—			(35,312	)
Other comprehensive loss	—		—		—			—			(2,269	)		(2,269	)
Contribution from Parent under the Tax Sharing Agreement	—		—		2,634			—			—			2,634
Net loss	—		—		—			(49,905	)		—			(49,905	)
Balance at August 31, 2008	100		—		24,665			56,338			(22,945	)		58,058
Other comprehensive loss	—		—		—			—			(22,604	)		(22,604	)
Distribution to Parent under the Tax Sharing Agreement	—		—		(2,667	)		—			—			(2,667	)
Net income	—		—		—			38,027			—			38,027
Balance at August 31, 2009	100	$	—	$	21,998		$	94,365		$	(45,549	)	$	70,814

See accompanying notes to consolidated financial statements.

36

UNITED REFINING COMPANY AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

	Year Ended August 31,
	2009			2008			2007
Cash flows from operating activities:
Net income (loss)	$	38,027		$	(49,905	)	$	85,706
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Depreciation and amortization		23,180			22,165			18,044
Equity in net earnings of affiliate		(41	)		(2,879	)		(1,611	)
Dissolution proceeds from affiliate		6,430			—			—
Gain on extinguishment of debt		(10,096	)		—			—
Deferred income taxes		8,780			(7,211	)		(25	)
Loss on asset dispositions		1,012			1,967			1,932
Cash used in working capital items		(21,816	)		(70,794	)		(25,195	)
Other, net		2			(1	)		(2	)
Change in operating assets and liabilities:
Other assets		375			(28	)		61
Deferred retirement benefits		6,535			4,994			8,059
Other noncurrent liabilities		(14	)		(28	)		(555	)
Total adjustments		14,347			(51,815	)		708
Net cash provided by (used in) operating activities		52,374			(101,720	)		86,414
Cash flows from investing activities:
Additions to property, plant and equipment		(23,970	)		(42,143	)		(43,590	)
Marketable securities purchased		—			—			(75,854	)
Proceeds from sale of marketable securities		—			75,854			—
Additions to turnaround costs		(1,246	)		(10,077	)		(6,023	)
Dividends received		—			—			1,000
Proceeds from asset dispositions		17			9			11
Net cash (used in) provided by investing activities		(25,199	)		23,643			(124,456	)
Cash flows from financing activities:
Distribution (to) from Parent under the Tax Sharing Agreement		(2,667	)		2,634			7,787
Proceeds from issuance of long-term debt		318			178			131,956
Principal reductions of long-term debt		(16,986	)		(1,309	)		(947	)
Net (reductions) borrowings on revolving credit facility		(9,000	)		9,000			—
Dividends to stockholder		—			(35,312	)		(23,339	)
Deferred financing costs		(225	)		(108	)		(1,171	)
Net cash (used in) provided by financing activities		(28,560	)		(24,917	)		114,286
Net (decrease) increase in cash and cash equivalents		(1,385	)		(102,994	)		76,244
Cash and cash equivalents, beginning of year		32,447			135,441			59,197
Cash and cash equivalents, end of year	$	31,062		$	32,447		$	135,441
Cash provided by (used in) working capital items:
Accounts receivable, net	$	38,640		$	(44,319	)	$	5,333
Refundable income taxes		35,913			(35,913	)		—
Inventories		(142,833	)		71,316			(35,391	)
Prepaid expenses and other assets		6,743			(4,347	)		4,852
Accounts payable		36,652			(22,894	)		(14,463	)
Accrued liabilities		640			734			(4,249	)
Income taxes payable		5,149			(36,514	)		15,082
Sales, use and fuel taxes payable		680			729			581
Amounts due affiliated companies		(3,400	)		414			3,060
Total change	$	(21,816	)	$	(70,794	)	$	(25,195	)
Cash paid during the period for:
Interest	$	38,852		$	37,582		$	30,758
Income taxes	$	12,339		$	42,320		$	34,438
Non-cash investing and financing activities:
Property additions and capital leases	$	1,179		$	1,245		$	24

See accompanying notes to consolidated financial statements.

37

UNITED REFINING COMPANY

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. Description of Business and Summary of Significant Accounting Policies

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 at a network of Company-operated retail units and convenience and grocery items through Company-owned 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”).

Cash and Cash Equivalents

For purposes of the consolidated statements of cash flows, the Company considers all highly liquid investment securities with maturities of three months or less at date of acquisition to be cash equivalents.

Derivative Financial Instruments

From time to time the Company uses derivatives to reduce its exposure to fluctuations in crude oil purchase costs and refining margins. Derivative products, specifically crude oil option contracts and crack spread option contracts are used to hedge the volatility of these items. The Company does not enter such contracts for speculative purposes.

The Company accounts for changes in the fair value of its contracts by marking them to market and recognizing any resulting gains or losses in its statement of operations. During the fiscal years ended August 31, 2009, 2008, and 2007, the Company realized net (losses) / gains from its trading activities of $0, $(3,518,000), and $4,114,000, respectively, which is included as an increase or reduction to costs of goods sold. The Company includes the carrying amounts of the contracts in prepaid expenses and other assets in the Consolidated Balance Sheet.

At August 31, 2009 and 2008, the Company had no open future positions that will expire in future periods.

Inventories and Exchanges

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. If the cost of inventories exceeds their market value, provisions are made currently for the difference between the cost and the market value.

38

UNITED REFINING COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Property, Plant and Equipment

Property, plant and equipment is stated at cost and depreciated by the straight-line method over the respective estimated useful lives. The costs of funds used to finance projects during construction are capitalized. Routine current maintenance, repairs and replacement costs are charged against income. Expenditures which materially increase values expand capacities or extend useful lives are capitalized. A summary of the principal useful lives used in computing depreciation expense is as follows:

	Estimated Useful Lives (Years)
Refining	20-30
Marketing	15-30
Transportation	20-30

Leases

The Company leases land, buildings, and equipment under long-term operating and capital leases and accounts for the leases in accordance with Financial Account Standard No. 13, “Accounting for Leases”. Lease expense for operating leases is recognized on a straight-line basis over the expected lease term. The lease term begins on the date the Company has the right to control the use of the leased property pursuant to the terms of the lease.

Deferred Maintenance Turnarounds

The cost of maintenance turnarounds, which consist of complete shutdown and inspection of significant units of the refinery at intervals of two or more years for necessary repairs and replacements, are deferred when incurred and amortized on a straight-line basis over the period of benefit, which ranges from 2 to 10 years. As of August 31, 2009 and 2008, deferred turnaround costs included in deferred turnaround costs and other assets, amounted to $6,786,000 and $12,079,000, net of accumulated amortization of $13,738,000 and $9,368,000, respectively. Amortization expense included in costs of goods sold for the fiscal years ended August 31, 2009, 2008 and 2007 amounted to $6,539,000, $6,239,000, and $2,757,000, respectively.

Amortizable Intangible Assets

The Company amortizes identifiable intangible assets such as brand names, non-compete agreements, leasehold covenants and deed restrictions on a straight line basis over their estimated useful lives which range from 5 to 25 years.

Revenue Recognition

Revenues for products sold by the wholesale segment are recorded upon delivery of the products to our customers, at which time title to those products is transferred and when payment has either been received or collection is reasonably assured. At no point do we recognize revenue from the sale of products prior to the transfer of its title. Title to product is transferred to the customer at the shipping point, under pre-determined contracts for sale at agreed upon or posted prices to customers of which collectibility is reasonably assured. Revenues for products sold by the retail segment are recognized immediately upon sale to the customer. Included in Net Sales and Costs of Goods Sold are consumer excise taxes of $215,670,000, $213,829,000 and $206,885,000 for the years ended August 31, 2009, 2008 and 2007, respectively.

39

UNITED REFINING COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Product Shipping and Handling Costs

Costs incurred for shipping and handling of products are included in costs of goods sold in the Consolidated Statements of Operations.

Income Taxes

The Company accounts for income taxes using the asset and liability method. Under the asset and liability method, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.

The Company’s results of operations are included in the consolidated Federal Income tax return of the Parent and separately in various state jurisdictions. Income taxes are calculated on a separate return basis with consideration of the Tax Sharing Agreement between the Parent and its subsidiaries. The Company is open to examination for tax years 2002 through 2008 and there is a federal tax audit in process for the tax years 2006 through 2008. There are currently no state tax audits in process and there are no unsettled income tax assessments outstanding. The Company’s policy is to recognize interest and penalties accrued on any unrecognized tax positions as a component of interest expense, net and other, net, respectively. No amounts of such expenses are currently accrued.

Post-Retirement Healthcare and Pension Benefits

The Company provides at no cost to retirees, post-retirement healthcare benefits to salaried and certain hourly employees. The benefits provided are hospitalization, medical coverage and dental coverage for the employee and spouse until age 65. After age 65, benefits continue until the death of the retiree, which results in the termination of benefits for all dependent coverage. If an employee leaves the Company as a terminated vested member of a pension plan prior to normal retirement age, the person is not entitled to any post-retirement healthcare benefits. Benefits payable under this program are secondary to any benefits provided by Medicare or any other governmental programs.

The Company accrues post-retirement benefits other than pensions, during the years that the employee renders the necessary service, of the expected cost of providing those benefits to an employee and the employee’s beneficiaries and covered dependents. The Company has elected to amortize the transition obligation of approximately $12,000,000 on a straight-line basis over a 20-year period.

Use of Estimates

The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Allowance for Doubtful Accounts

The Company records an allowance for doubtful accounts based on specifically identified amounts that we believe to be uncollectible. The Company also recorded additional allowances based on historical collection

40

UNITED REFINING COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

experience and its assessment of the general financial conditions affecting the customer base. Senior management reviews accounts receivable on a weekly basis to determine if any receivables will potentially be uncollectible. After all attempts to collect a receivable have failed, the receivable is written off against the allowance.

Concentration Risks

Financial instruments which potentially subject the Company to concentrations of credit risk consist principally of temporary cash investments.

The Company places its temporary cash investments with quality financial institutions. At times, such investments were in excess of FDIC insurance limits. The Company has not experienced any losses in such accounts.

The Company purchased approximately 33% of its cost of goods sold from 3 vendor during the year ended August 31, 2009 and approximately 13% from one vendor during the year ended August 31, 2008. The Company is not obligated to purchase from these vendors, and, if necessary, there are other vendors from which the Company can purchase crude oil and other petroleum based products. The Company had approximately $24,194,000 and $14,451,000 in accounts payable for the years ended August 31, 2009 and 2008 to these respective vendors.

Environmental Matters

The Company expenses environmental expenditures related to existing conditions resulting from past or current operations and from which no current or future benefit is discernible. Expenditures, which extend the life of the related property or mitigate or prevent future environmental contamination are capitalized. The Company determines its liability on a site by site basis and records a liability at the time when it is probable and can be reasonably estimated. The Company’s estimated liability is reduced to reflect the anticipated participation of other potentially responsible parties in those instances where it is probable that such parties are legally responsible and financially capable of paying their respective shares of the relevant costs. The estimated liability of the Company is not reduced for possible recoveries from insurance carriers and is recorded in accrued liabilities.

Goodwill and Other Non-Amortizable Assets

In accordance with Statement of Financial Accounting Standard No. 142, “Goodwill and Other Intangible Assets” (“Statement 142”), goodwill and intangible assets deemed to have indefinite lives are no longer amortized but are subject to annual impairment tests in accordance with Statement 142. Other intangible assets continue to be amortized over their estimated useful lives.

The Company performed separate impairment tests for its goodwill and tradename using the discounted cash flow method. The fair value of the goodwill and tradename exceeded their respective carrying values. The Company has noted no subsequent indication that would require testing its goodwill and tradename for impairment.

Long-Lived Assets

Whenever events or changes in circumstances indicate that the carrying value of any of these assets (other than goodwill and tradename) may not be recoverable, the Company will assess the recoverability of such assets

41

UNITED REFINING COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

based upon estimated undiscounted cash flow forecasts. When any such impairment exists, the related assets will be written down to fair value.

Other Comprehensive Income (Loss)

The Company reports comprehensive income (loss) in accordance with Statement of Financial Accounting Standard No. 130, “Reporting Comprehensive Income” (“Statement 130”). Statement 130 establishes guidelines for the reporting and display of comprehensive income (loss) and its components in financial statements. Comprehensive loss includes charges and credits to equity that is not the result of transactions with the shareholder. Included in other comprehensive loss for the Company is a charge for unrecognized post retirement costs, which is net of taxes in accordance with Statement 158.

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 believes that the adoption of Statement 157 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 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 and 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.

In May 2009, the FASB issued Statement No. 165, “Subsequent Events” (“Statement 165”), which establishes general standards of accounting for and disclosure of subsequent events that occur after the balance sheet data but before the financial statements are issued or available for use. The Company adopted Statement 165 during the fourth quarter of 2009. In accordance with Statement 165, the Company has evaluated subsequent events through the date and time the financial statements were issued on November 30, 2009.

42

UNITED REFINING COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

In June 2009, the FASB issued Statement No. 167, “Amendments to FASB Interpretation No. 46(R)” (“Statement 167”). Statement 167 amended FASB Interpretation No. 46, “Consolidation of Variable Interest Entities,” to require a company to determine whether the Company’s variable interest or interests give it a controlling financial interest in a variable interest entity. Additionally, Statement 167 requires ongoing reassessment of whether it is the primary beneficiary of a variable interest entity and is effective for fiscal years beginning after November 15, 2009, and interim periods within that fiscal year. The Company believes that the adoption of Statement 167 will not have a significant effect on the Company’s consolidated financial position.

In June 2009, the FASB issued Statement No. 168, “The FASB Accounting Standards Codification and the Hierarchy of General Accepted Accounting Principles” (“Statement 168”). Statement 168 establishes the Codification as the single source of GAAP to be applied in preparing financial statements in conformity with GAAP. Statement 168 is effective for financial statements issued for interim and annual periods ending after September 15, 2009 and will supersede all existing non Securities and Exchange Commission (“SEC”) accounting and reporting standards. Rules and interpretative releases of the SEC under the authority of federal securities laws are also authoritative GAAP for SEC registrants. The Company believes that the adoption of Statement 168 will not have a significant impact on its consolidated financial position, results of operations and cash flows.

Reclassification

Certain amounts in the prior year’s consolidated financial statements have been reclassified to conform with the presentation in the current year.

2. Accounts Receivable, Net

As of August 31, 2009 and 2008, accounts receivable were net of allowance for doubtful accounts of $2,525,000 and $2,892,000, respectively.

3. Inventories

Inventories consist of the following:

	August 31,
	2009			2008
	(in thousands)
Crude Oil	$	92,972		$	17,273
Petroleum Products		110,573			39,836
Lower of cost or market reserve		(6,104	)		—
Total @ LIFO		197,441			57,109
Merchandise		18,597			18,350
Supplies		21,503			19,249
Total @ FIFO		40,100			37,599
Total Inventory	$	237,541		$	94,708

Included in petroleum product inventories are exchange balances either held for or due from other petroleum marketers. These balances are not significant.

The Company does not own sources of crude oil and depends on outside vendors for its needs.

43

UNITED REFINING COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Inventories at the lower of last-in, first-out (“LIFO”) cost or market reflect a market valuation reserve of $6,104,000 and $0 at August 31, 2009 ad 2008, respectively. As of August 31, 2009 and 2008, the replacement cost of LIFO inventories exceeded their LIFO carrying values by approximately $5,278,000 and $153,347,000, respectively. For the fiscal year ended August 31, 2009 and 2008, the Company recorded a gain from a LIFO layer liquidation of $0 and $10,899,000, respectively.

4. Property, Plant and Equipment

Property, plant and equipment is summarized as follows:

	August 31,
	2009		2008
	(in thousands)
Refinery equipment, including construction-in-progress	$	297,028	$	278,556
Marketing (i.e. retail outlets)		103,068		100,088
Transportation		13,326		12,538
		413,422		391,182
Less: Accumulated depreciation		161,374		147,171
	$	252,048	$	244,011

5. Goodwill and Intangible Assets

As of August 31, 2009 and 2008, the Company’s intangible assets and goodwill, included in the Company’s retail segment, were as follows:

	Weighted Average Remaining Life	August 31, 2009				August 31, 2008
		Gross Carrying Amount		Accumulated Amortization		Gross Carrying Amount		Accumulated Amortization
	(in thousands)
Amortizable intangible assets:
Vendor contracts	—	$	—	$	—	$	2,600	$	2,476
Deed restrictions	17 yrs.		800		245		800		213
Leasehold covenants	14 yrs.		1,490		562		1,490		488
		$	2,290	$	807	$	4,890	$	3,177
Non-amortizable assets:
Tradename		$	10,500	$	—	$	10,500	$	—
Goodwill		$	1,349	$	—	$	1,349	$	—

Amortization expense for the fiscal years ended August 31, 2009, 2008, and 2007 amounted to $230,000, $478,000, and $505,000, respectively.

Amortization expense for intangible assets subject to amortization for each of the years in the five-year period ending August 31, 2014 is estimated to be $106,000 in 2010, $106,000 in 2011, $106,000 in 2012, $106,000 in 2013, and $106,000 in 2014.

44

UNITED REFINING COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

6. Accrued Liabilities

Accrued liabilities include the following:

	August 31,
	2009		2008
	(in thousands)
Interest	$	1,476	$	1,645
Payrolls and benefits		13,615		12,654
Other		1,926		2,078
	$	17,017	$	16,377

7. Leases

The Company occupies premises, primarily retail gas stations and convenience stores and office facilities under long-term leases which require minimum annual rents plus, in certain instances, the payment of additional rents based upon sales. The leases generally are renewable for one to three five-year periods.

As of August 31, 2009 and 2008, capitalized lease obligations, included in long-term debt, amounted to $1,282,000 and $1,464,000, respectively, inclusive of current portion of $205,000 and $182,000, respectively. The related assets (retail gas stations and convenience stores) as of August 31, 2009 and 2008 amounted to $936,000 and $1,104,000, net of accumulated amortization of $1,278,000 and $1,110,000, respectively. Lease amortization amounting to $168,000, $169,000, and $168,000 for the years ended August 31, 2009, 2008, and 2007, respectively, is included in depreciation and amortization expense.

Future minimum lease payments as of August 31, 2009 are summarized as follows:

Year ended August 31,	Capital Leases		Operating Leases
	(in thousands)
2010	$	341	$	11,810
2011		275		11,500
2012		195		10,675
2013		155		8,574
2014		161		7,609
Thereafter		970		41,406
Total minimum lease payments		2,097		91,574
Less: Minimum sublease rents		—		172
Net minimum sublease payments		2,097	$	91,402
Less: Amount representing interest		815
Present value of net minimum lease payments	$	1,282

Net rent expense for operating leases amounted to $11,342,000, $11,564,000, and $11,094,000 for the years ended August 31, 2009, 2008 and 2007, respectively.

45

UNITED REFINING COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

8. Credit Facility

In November 2006, the Company extended the term of its $100,000,000 Revolving Credit Facility from May 9, 2007 to November 27, 2011. In November 2008, the Company amended its Revolving Credit Facility to increase the maximum facility commitment from $100,000,000 to $130,000,000 on a permanent basis and amended certain terms and provisions thereof, including an increase in the interest rate and a modification to the Net Worth Covenant. Under the amended Revolving Credit Facility, interest is calculated as follows: (a) for base rate borrowings, at the greater of the Agent Bank’s prime rate plus an applicable margin of .5% to 0% or, the Federal Funds Open Rate plus .5% or the Daily LIBOR rate plus 1%; and (b) for euro-rate based borrowings, at the LIBOR Rate plus an applicable margin of 2.35% to 1.75%. The applicable margin will vary depending on a formula calculating our average unused availability under the facility. The Revolving Credit Facility is secured primarily by certain cash accounts, accounts receivable and inventory which amounted to $249,000,000 as of August 31, 2009. Until maturity, the Company may borrow on a borrowing base formula as set forth in the facility.

As of August 31, 2009, no Base-Rate borrowings and no Euro-Rate borrowings were outstanding under the agreement. As of August 31, 2008, $9,000,000 of Base-Rate borrowing and no Euro-Rate borrowings were outstanding under the agreement. $3,233,000 and $432,000 of letters of credit were outstanding under the agreement at August 31, 2009 and 2008, respectively. The weighted average interest rate for Base-Rate borrowing for the years ended August 31, 2009 and 2008 was 3.8% and 4.7%, respectively. The weighted average interest rate for Euro-Rate borrowings was 0% for the fiscal years ended August 31, 2009 and 2008, respectively. The Company pays a commitment fee of 3/8% per annum on the unused balance of the facility. All bank related charges are included in Other, net in the Consolidated Statements of Operations.

9. Long-Term Debt

During May 2007, the Company sold an additional $125,000,000 of 10 ¹/2% Senior Unsecured Notes (the “Senior Unsecured Notes”) due 2012 for $130,312,500, resulting in a debt premium of $5,312,500 which will be amortized over the life of the notes using the interest method. These additional notes were issued under an indenture, dated as of August 6, 2004, pursuant to which $200,000,000 of notes of the same series were issued in August 2004. The net proceeds of the offering were used for capital expenditures and general corporate purposes.

During February 2005, the Company sold an additional $25,000,000 of 10 ¹/2% Senior Unsecured Notes due 2012 for $25,750,000, resulting in a debt premium of $750,000 which is being amortized over the life of the notes using the interest method. These additional notes were issued under an indenture, dated as of August 6, 2004, pursuant to which $200,000,000 of notes of the same series were issued in August 2004. The net proceeds of the offering were used to pay down a portion of the Company’s outstanding indebtedness under its existing revolving credit facility.

During August 2004, the Company sold $200,000,000 of 10 ¹/2% Senior Unsecured Notes due 2012 for $197,342,000, resulting in debt discount of $2,658,000 which is being amortized over the life of the notes using the interest method.

Such notes are fully and unconditionally guaranteed on a senior unsecured basis by all of the Company’s subsidiaries (see Footnote 16 to Consolidated Financial Statements).

Both the Indenture of the Senior Unsecured Notes and the facility (See Footnote 8 to Consolidated Financial Statements) require that the Company maintain certain financial covenants. The facility requires the Company to meet certain financial covenants, as defined in the facility, a minimum Fixed Charge Coverage Ratio and a

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minimum Consolidated Net Worth. In addition, the facility limits the amount the Company can distribute for capital and operating leases. Both the facility and the Indenture of the Senior Unsecured Notes restrict the amount of dividends payable and the incurrence of additional Indebtedness. As of August 31, 2009 the Company is in compliance with covenants under the facility and the Indenture.

During the year ended August 31, 2009, the Company acquired $26,040,000 of its 10 ¹/2% Senior Unsecured Notes due 2012 at an average price of $59.38, resulting in a gain from extinguishment of debt of $10,096,000, which is net of $346,000 of deferred financing costs and $136,000 of debt discount.

A summary of long-term debt is as follows:

	August 31,
	2009		2008
	(in thousands)
Long-term debt:
10.50% Senior Unsecured Notes due August 15, 2012	$	326,378	$	353,065
Other long-term debt		5,198		5,226
		331,576		358,291
Less: Current installments of long-term debt, net of unamortized premium		2,327		2,184
Total long-term debt, less current installments	$	329,249	$	356,107

The principal amount of long-term debt matures as follows:

	Year ended August 31,
	(in thousands)
2010	$	1,509
2011		879
2012		324,602
2013		493
2014		373
Thereafter		1,302
		329,158
Unamortized premium, net		2,418
Total	$	331,576

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The following financing costs have been deferred and are being amortized to expense over the term of the related debt:

	August 31,
	2009		2008
	(in thousands)
Beginning balance	$	8,552	$	8,444
Current year additions		225		108
Total financing costs		8,777		8,552
Less:
Deferred financing costs associated with debt retirement		346		—
Accumulated amortization		5,177		4,008
	$	3,254	$	4,544

Amortization expense for the fiscal years ended August 31, 2009, 2008 and 2007 amounted to $1,169,000, $1,199,000, and $1,182,000, respectively.

10. Employee Benefit Plans

Substantially all employees of the Company are covered by noncontributory defined benefit retirement plans. The benefits are based on each employee’s years of service and compensation. The Company’s policy is to contribute the minimum amounts required by the Employee Retirement Income Security Act of 1974 (ERISA), as amended, and any additional amounts for strategic financial purposes or to meet other goals relating to plan funded status. The assets of the plans are invested in an investment trust fund and consist of interest-bearing cash, separately managed accounts and bank common/collective trust funds.

In addition to the above, the Company provides certain post-retirement healthcare benefits to salaried and certain hourly employees. These post-retirement benefit plans are unfunded and the costs are paid by the Company from general assets.

Net periodic pension cost and post-retirement healthcare benefit cost consist of the following components for the years ended August 31, 2009, 2008, and 2007:

	Pension Benefits									Other Post-Retirement Benefits
	2009			2008			2007			2009		2008		2007
	(in thousands)
Service cost	$	2,738		$	2,639		$	2,611		$	2,642	$	2,588	$	2,275
Interest cost on benefit obligation		5,205			4,542			4,187			4,487		4,085		3,398
Expected return on plan assets		(4,362	)		(4,786	)		(4,240	)		—		—		—
Amortization of transition obligation		2			65			140			597		597		597
Amortization and deferrals		1,104			360			762			978		1,299		975
Net periodic benefit cost	$	4,687		$	2,820		$	3,460		$	8,704	$	8,569	$	7,245

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The Company adopted Statement 158 effective August 31, 2007. Statement 158 requires an employer to recognize the funded status of each of its defined pension and postretirement benefit plans as a net asset or liability in its statement of financial position with an offsetting amount in accumulated other comprehensive income, and to recognize changes in that funded status in the year in which changes occur through comprehensive income. The provisions of Statement 158 are to be applied on a prospective basis; therefore, prior periods presented are not restated. The incremental change due to the adoption of Statement 158 at August 31, 2007 is as follows:

Pension Benefits	Balance Prior to Statement 158 Adjustments			Statement 158 Adjustments			Balance After Statement 158 Adjustments
	(in thousands)
Intangible pension asset	$	(576	)	$	576		$	—
Accrued and minimum pension liability	$	6,643		$	8,825		$	15,468
Accumulated other comprehensive income, pre-tax	$	—		$	(8,825	)	$	(8,825	)
Deferred tax assets		—			3,618			3,618
Accumulated other comprehensive income, net of tax	$	—		$	(5,207	)	$	(5,207	)
Other Post-Retirement Benefits
Accrued and minimum liability	$	37,609		$	26,218		$	63,827
Accumulated other comprehensive income, pre-tax	$	—		$	(26,218	)	$	(26,218	)
Deferred tax assets		—			10,749			10,749
Accumulated other comprehensive income, net of tax	$	—		$	(15,469	)	$	(15,469	)

Other changes in plan assets and benefit obligation recognized in Other Comprehensive Income consist of the following for the fiscal years ending August 31, 2009 and 2008 (in thousands):

	Pension Benefits				Other Post-Retirement Benefits
	2009			2008	2009			2008
Current year actuarial (gain) / loss	$	28,094		$8,778	$	12,898		$(2,610)
Amortization of actuarial gain / (loss)		(826	)	(81)		(978	)	(1,300)
Current year prior service (credit) / cost		—		—		—		—
Amortization of prior service credit / (cost)		(278	)	(278)		—		—
Amortization of transition asset / (obligation)		(2	)	(65)		(597	)	(597)
Total recognized in other comprehensive income	$	26,988		$8,354	$	11,323		$(4,507)
Total recognized in net periodic benefit cost and other comprehensive income	$	31,675		$11,173	$	20,027		$4,062

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The following table summarizes the change in benefit obligations and fair values of plan assets for the years ended August 31, 2009 and 2008:

	Pension Benefits						Other Post-Retirement Benefits
	2009			2008			2009			2008
	(in thousands)
Change in benefit obligation:
Benefit obligation @ beginning of year	$	76,542		$	71,270		$	65,464		$	63,827
Service cost		2,738			2,639			2,642			2,588
Interest cost		5,205			4,542			4,487			4,085
Medicare act subsidy effect		—			—			67			194
Actuarial (gains) / losses		18,364			53			12,897			(2,610	)
Benefits paid		(2,399	)		(1,962	)		(2,986	)		(2,620	)
Benefit obligation @ end of year		100,450			76,542			82,571			65,464
Change in plan assets:
Fair values of plan assets @ beginning of year		53,501			55,802			—			—
Actual return on plan assets		(5,367	)		(3,939	)		—			—
Company contributions		3,488			3,600			2,919			2,426
Benefits paid		(2,399	)		(1,962	)		(2,986	)		(2,620	)
Medicare act subsidy effect		—			—			67			194
Fair values of plan assets @ end of year		49,223			53,501			—			—
Funded status	$	51,227		$	23,041		$	82,571		$	65,464
Amounts recognized in the balance sheet consist of:
Current liability	$	—		$	—		$	3,095		$	2,750
Noncurrent liability		51,227			23,041			79,476			62,714
Net amount recognized	$	51,227		$	23,041		$	82,571		$	65,464
Note: For plans with assets less than the accumulated benefit obligation (ABO), the aggregate ABO is $85,158,000 while the aggregate asset value is $49,223,000.

Amounts recognized in Accumulated Other Comprehensive Income:

	Pension Benefits						Other Post-Retirement Benefits
	2009			2008			2009			2008
	(in thousands)
Accumulated net actuarial loss	$	(43,133	)	$	(15,864	)	$	(30,647	)	$	(18,727	)
Accumulated prior service cost		(1,029	)		(1,308	)		—			—
Accumulated transition obligation		(5	)		(7	)		(2,387	)		(2,984	)
Net amount recognized, before tax effect	$	(44,167	)	$	(17,179	)	$	(33,034	)	$	(21,711	)

The preceding table presents two measures of benefit obligations for the pension plans. Accumulated benefit obligation (ABO) generally measures the value of benefits earned to date. Projected benefit obligation (PBO) also includes the effect of assumed future compensation increases for plans in which benefits for prior service are affected by compensation changes. Each of the three pension plans, whose information is aggregated above, have asset values less than these measures. Plan funding amounts are calculated pursuant to ERISA and Internal Revenue Code rules. The postretirement benefits are not funded.

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UNITED REFINING COMPANY AND SUBSIDIARIES

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Weighted average assumptions:	Pension Benefits		Other Post-Retirement Benefits
	2009	2008	2009	2008
Discount rate	5.15% - 5.65%	6.40% - 6.70%	5.60%	6.70%
Expected return on plan assets	8.00%	8.25%
Rate of compensation increase	4.00%	4.00%

The discount rate assumptions at August 31, 2009 and 2008 were determined independently for each plan. A yield curve was produced for a universe containing the majority of U.S.-issued Aa-graded corporate bonds, all of which were non-callable (or callable with make-whole provisions), and after exclusion of the 10% of the bonds with the highest yields and the 10% with the lowest yields. For each plan, the discount rate was developed as the level equivalent rate that would produce the same present value as that using spot rates aligned with the projected benefit payments.

	Pension Benefits		Other Post-Retirement Benefits
	2009	2008	2009	2008
Discount rate	6.40% - 6.70%	6.00% - 6.30%	6.70%	6.25%
Expected return on plan assets	8.00%	8.25%	N/A	N/A
Rate of compensation increase	4.00%	3.50%	N/A	N/A
Health care cost trend rate
—Initial trend	N/A	N/A	8.00%	9.00%
—Ultimate trend	N/A	N/A	5.00%	5.00%
—Year ultimate reached	N/A	N/A	2015	2012

For measurement purposes, the assumed annual rate of increase in the per capita cost of covered medical and dental benefits was 8% and 5% for 2009 and 9% and 5%, respectively, for 2008. The rates were assumed to decrease gradually to 5% for medical benefits until 2015 and remain at that level thereafter. The healthcare cost trend rate assumption has a significant effect on the amounts reported. To illustrate, a 1 percentage point change in the assumed healthcare cost trend rate would have the following effects:

	1% Point Increase		1% Point Decrease
	(in thousands)
Effect on total of service and interest cost components	$	1,203	$	(978	)
Effect on post-retirement benefit obligation		12,759		(10,466	)

The expected return on plan assets is a long-term assumption established by considering historical and anticipated returns of the asset classes invested in by the pension plans and the allocation strategy currently in place among those classes.

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A reconciliation of the above accrued benefit costs to the consolidated amounts reported on the Company’s balance sheets follows:

	August 31,
	2009			2008
	(in thousands)
Accrued pension benefits	$	51,227		$	23,041
Accrued other post-retirement benefits		82,571			65,464
		133,798			88,505
Current portion of above benefits, included in payrolls and benefits in accrued liabilities		(3,095	)		(2,750	)
Supplemental pension and other deferred compensation benefits		356			391
Deferred retirement benefits	$	131,059		$	86,146

The pension plans weighted-average target allocation for the year ended August 31, 2010 and strategic asset allocation matrix as of August 31, 2009 and 2008 are as follows:

	Target Allocation		Plan Assets @ 8/31
Asset Category	2009		2009	2008
Equity Securities	55 – 75	%	69%	68%
Debt Securities	25 – 35	%	31%	31%
Cash/Cash Equivalents	0 – 10	%	—	1%
			100%	100%

The investment policy for the plans is formulated by the Company’s Pension Plan Committee (the “Committee”). The Committee is responsible for adopting and maintaining the investment policy, managing the investment of plan assets and ensuring that the plans’ investment program is in compliance with all provisions of ERISA, as well as the appointment of any investment manager who is responsible for implementing the plans’ investment process.

In drafting a strategic asset allocation policy, the primary objective is to invest assets in a prudent manner to meet the obligations of the plans to the Company’s employees, their spouses and other beneficiaries, when the obligations come due. The stability and improvement of the plans’ funded status is based on the various reasons for which money is funded. Other factors that are considered include the characteristics of the plans’ liabilities and risk-taking preferences.

The asset classes used by the plan are the United States equity market, the international equity market, the United States fixed income or bond market and cash or cash equivalents. Plan assets are diversified to minimize the risk of large losses. Cash flow requirements are coordinated with the custodian trustees and the investment manager to minimize market timing effects. The asset allocation guidelines call for a maximum and minimum range for each broad asset class as noted above.

The target strategic asset allocation and ranges established under the asset allocation represents a long-term perspective. The Committee will rebalance assets to ensure that divergences outside of the permissible allocation ranges are minimal and brief as possible.

The net of investment manager fee asset return objective is to achieve a return earned by passively managed market index funds, weighted in the proportions identified in the strategic asset allocation matrix. Each investment manager is expected to perform in the top one-third of funds having similar objectives over a full market cycle.

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The investment policy is reviewed by the Committee at least annually and confirmed or amended as needed.

Under Statement 158 beginning at Fiscal Year Ended August 31, 2007, the transition obligation, prior service costs, and actuarial (gains)/losses are recognized in Accumulated Other Comprehensive Income each August 31 or any interim measurement date, while amortization of these amounts through net periodic benefit cost will occur in accordance with FAS 87 and FAS 106. The estimated amounts that will be amortized in 2010 follow:

Estimated 2010 Amortization	Pension Benefits		Other Post-Retirement Benefits
	(in thousands)
Transition obligation amortization	$	2	$	597
Prior service cost (credit) amortization		278		—
Net loss amortization		3,288		1,842
Total	$	3,568	$	2,439

The following contributions and benefit payments, which reflect expected future service, as appropriate, are expected to be paid:

	Pension Benefits		Other Post-Retirement Benefits
Employer Contributions			Gross		(Subsidy receipts)
	(in thousands)
FYE 8/31/2010 (expected)	$	4,216	$	3,095	$	(221	)
Expected Benefit Payments for FYE 8/31
2010	$	3,391	$	3,095	$	(221	)
2011		3,714		3,496		(250	)
2012		4,175		3,892		(285	)
2013		4,650		4,342		(321	)
2014		5,159		4,856		(358	)
2015 - 2019		33,457		31,749		(2,350	)

The pension plan contributions are deposited into a trust, and the pension plan benefit payments are made from trust assets. For the postretirement benefit plan, the contributions and the benefit payments are the same and represent expected benefit amounts, which are paid from general assets.

The Company’s postretirement benefit plan is likely to be affected by The Medicare Prescription Drug, Improvement and Modernization Act of 2003 (the “Act”). Beginning in 2006, the Act provides a Federal subsidy payment to companies providing benefit plans that meet certain criteria regarding their generosity. The Company expects to receive those subsidy payments. The Company has accounted for the Act in accordance with FASB Staff Position No. 106-2 “Accounting and Disclosure Requirements Related to the Medicare Prescription Drug, Improvement and Modernization Act of 2003”, which requires, in the Company’s case, recognition on August 31, 2004. The benefit obligation as of that date reflects the effect of the federal subsidy, and this amount is identified in the table reconciling the change in benefit obligation above. The estimated effect of the subsidy on cash flow is shown in the accompanying table of expected benefit payments above. The expected subsidy reduced net periodic postretirement benefit cost by $939,000, as compared with the amount calculated without considering the effects of the subsidy.

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UNITED REFINING COMPANY AND SUBSIDIARIES

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The Company’s deferred gain on settlement of past pension plan obligations amounted to $0 and $55,000 as of August 31, 2009 and 2008, respectively, and is being amortized over 23 years. The related amortization amounted to $55,000, $215,000 and $215,000 for each of the years ended August 31, 2009, 2008 and 2007, respectively.

The Company also contributes to voluntary employee savings plans through regular monthly contributions equal to various percentages of the amounts invested by the participants. The Company’s contributions to these plans amounted to $894,000, $1,011,000, and $937,000 for the years ended August 31, 2009, 2008 and 2007, respectively.

11. Income Taxes

Income tax expense (benefit) consists of:

	Year Ended August 31,
	2009		2008			2007
	(in thousands)
Federal:
Current	$	14,393	$	(28,379	)	$	44,752
Deferred		5,469		1,271			391
		19,862		(27,108	)		45,143
State:
Current		3,062		105			14,953
Deferred		3,311		(8,482	)		(416	)
		6,373		(8,377	)		14,537
	$	26,235	$	(35,485	)	$	59,680

Reconciliation of the differences between income taxes computed at the Federal statutory rate and the provision for income taxes attributable to income before income tax expense (benefit) is as follows:

	Year Ended August 31,
	2009			2008			2007
	(in thousands)
U. S. federal income taxes (benefits) at the statutory rate	$	22,494		$	(29,877	)	$	50,885
State income taxes (benefits), net of Federal benefit		4,124			(5,443	)		9,469
Domestic production activity deduction		(700	)		(169	)		(1,015	)
Nondeductible expenses		300			564			238
Other		17			(560	)		103
Income tax attributable to income before income tax expense	$	26,235		$	(35,485	)	$	59,680

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UNITED REFINING COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Deferred income tax liabilities (assets) are comprised of the following:

	August 31,
	2009			2008
	(in thousands)
Current deferred income tax liabilities (assets):
Inventory valuation	$	11,001		$	4,442
Accounts receivable allowance		(1,036	)		(1,206	)
Accrued liabilities		(3,603	)		(900	)
Other		3,242			555
		9,604			2,891
Deferred income tax liabilities (assets):
Property, plant and equipment		38,254			34,761
Accrued liabilities		(54,232	)		(36,060	)
Federal carryforwards		—			(264	)
State net operating loss carryforwards		(8,607	)		(9,771	)
Valuation allowance		—			—
Other		(828	)		(439	)
		(25,413	)		(11,773	)
Net deferred income tax (asset) liability	$	(15,809	)	$	(8,882	)

The Company’s results of operations are included in the consolidated Federal tax return of the Parent (See Footnote 13 to Consolidated Financial Statements). The Company has no Federal net operating loss carryforwards for regular tax purposes. For state purposes, two entities have Pennsylvania net operating loss carryforwards of $81,000,000 and $45,000,000, respectively, which will expire between fiscal year 2019 and fiscal year 2028. Pennsylvania limits the amount of net operating loss carryforwards which can be used to offset Pennsylvania taxable income to the greater of $3,000,000 or 15% of Pennsylvania taxable income prior to the net operating loss deduction. The Company believes that the Pennsylvania net operating loss carryforwards will be utilized to offset future Pennsylvania taxable income.

12. Disclosures About Fair Value of Financial Instruments

The following methods and assumptions were used to estimate the fair value of each class of financial instrument for which it is practicable to estimate that value.

The carrying amount of cash and cash equivalents, trade accounts receivable, the revolving credit facility and current liabilities approximate fair value because of the short maturity of these instruments. The fair value of marketable securities is determined by available market prices.

The fair value of long-term debt (See Footnote 9 to Consolidated Financial Statements) was determined using the fair market value of the individual debt instruments. As of August 31, 2009, the carrying amount and estimated fair value of these debt instruments approximated $331,577,000 and $267,627,000, respectively.

13. Transactions with Affiliated Companies

On December 21, 2001, the Company acquired the operations and working capital assets of Country Fair. The fixed assets of Country Fair were acquired by related entities controlled by John A. Catsimatidis, the indirect

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UNITED REFINING COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

sole shareholder of the Company. These assets are being leased to the Company at an annual aggregate rental which management, based on an independent third party valuation believes is fair, over a period ranging from 10 to 20 years. During the fiscal years ended August 31, 2009, 2008 and 2007, $5,102,000, $5,102,000, and $5,102,000 of rent payments were made to these related entities. The Company is not a guarantor on the underlying mortgages on the properties.

Concurrent with the above acquisition of Country Fair, the Company entered into a management agreement with a non-subsidiary affiliate to operate and manage 18 of the retail units owned by the non-subsidiary affiliate on a turn-key basis. For the years ended August 31, 2009, 2008 and 2007, the Company billed the affiliate $1,219,000, $1,147,000, and $1,018,000 for management fees and overhead expenses incurred in the management and operation of the retail units which amount was deducted from expenses. As of August 31, 2009 and 2008, the Company had a (payable) / receivable (to) / from the affiliate of $(306,259) and $27,000, respectively, under the terms of the agreement, which is included in Amounts Due to/from Affiliated Companies, Net.

Effective June 1, 2001, the Company entered into a 50% joint venture with an unrelated entity for the marketing of asphalt products. The joint venture is accounted for using the equity method of accounting. As of July 31, 2008 the joint venture ceased operations due to the insolvency of the joint venture partner. For the years ended August 31, 2009, 2008 and 2007, net sales to the joint venture amounted to $0, $15,419,000, and $12,596,000, respectively. As of August 31, 2009 and 2008, the Company had a (payable) receivable (to) from the joint venture of $0 and $(1,931,000), respectively, under the terms of the agreement, which is included in Amounts Due to/from Affiliated Companies, Net.

On September 29, 2000, the Company sold 42 retail units to an affiliate for $23,870,000. Concurrent with this asset sale, the Company terminated the leases on 8 additional retail locations which it had previously leased from a non-subsidiary affiliate. The Company has entered into a management agreement with the non-subsidiary affiliate to operate and manage the retail units owned by the non-subsidiary affiliate on a turnkey basis. For the years ended August 31, 2009, 2008 and 2007, the Company billed the affiliate $2,245,000, $2,037,000, and $1,976,000, respectively, for management fees and overhead expenses incurred in the management and operation of the 50 retail units, which amount was deducted from expenses. For the fiscal years ended August 31, 2009, 2008 and 2007, net sales to the affiliate amounted to $112,878,000, $173,190,000, and $116,240,000, respectively. As of August 31, 2009 and 2008, the Company had accounts payable to the affiliate of $614,000 and $1,321,000, respectively, under the terms of the agreement.

The Company paid a service fee relating to certain costs incurred by its Parent for the Company’s New York office. During the years ended August 31, 2009, 2008 and 2007, such fees amounted to approximately $2,000,000, $2,000,000, and $2,000,000, respectively, which is included in Selling, General and Administrative Expenses.

The Company joins with the Parent and the Parent’s other subsidiaries in filing a Federal income tax return on a consolidated basis. Income taxes are calculated on a separate return basis with consideration of the Tax Sharing Agreement between the Parent and its subsidiaries. Amounts related to the Tax Sharing Agreement for the utilization by the Company of certain tax attributes of the Parent and other subsidiaries related to the tax years ended August 31, 2009 and 2008 amounted to $(2,667,000) and $2,634,000, respectively and have been recorded as a capital (distribution) contribution. As of August 31, 2009 and 2008, the Company had a receivable from the Parent of $1,728,000 and $634,000, respectively, under the terms of the Tax Sharing Agreement.

During the years ended August 31, 2009, 2008 and 2007, the Company incurred $372,000 in each year as its share of occupancy expenses for our offices in New York that it shares with affiliates of the Company. Such offices are located in a building owned by John Catsimatidis.

56

UNITED REFINING COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

During the years ended August 31, 2009, 2008, and 2007, the Company shared certain costs with an affiliate of the Company for aircraft owned by another affiliate of the Company and incurred $0, $180,000 and $332,000, respectively, as its share of such costs.

14. Environmental Matters and Other Contingencies

The Company is subject to federal, state and local laws and regulations relating to pollution and protection of the environment such as those governing releases of certain materials into the environment and the storage, treatment, transportation, disposal and clean-up of wastes, including, but not limited to, the Federal Clean Water Act, as amended, the Clean Air Act, as amended, the Resource Conservation and Recovery Act of 1976, as amended, the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended, and analogous state and local laws and regulations.

Due to the nature of the Company’s business, the Company is and will continue to be subject to various environmental claims, legal actions and actions by regulatory authorities. In the opinion of management, all current matters are without merit or are of such kind or involve such amounts that an unfavorable disposition would not have a material adverse effect on the consolidated financial condition or operations of the Company.

The management of the Company believes that remediation and related environmental response costs incurred during the normal course of business, including contractual obligations as well as activities required under applicable law and regulation, will not have a material adverse effect on its consolidated financial condition or operations.

In addition to the foregoing proceedings, the Company and its subsidiaries are parties to various legal proceedings that arise in the ordinary course of their respective business operations. In the opinion of management, all such matters are adequately covered by insurance, or if not so covered, are without merit or are of such kind, or involve such amounts that unfavorable dispositions would not have a material adverse effect on the consolidated financial position or results of operations of the Company.

15. 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, 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 at a network of Company-operated retail units and convenience and grocery items through Company-owned gasoline stations and convenience stores under the, Red Apple Food Mart^® and Country Fair^® brand names.

57

UNITED REFINING COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

The accounting policies of the reportable segments are the same as those described in Footnote 1 to Consolidated Financial Statements. Intersegment revenues are calculated using market prices and are eliminated upon consolidation. Summarized financial information regarding the Company’s reportable segments is presented in the following table.

	Year Ended August 31,
	2009		2008			2007
	(in thousands)
Net Sales
Retail	$	1,213,546	$	1,549,555		$	1,191,590
Wholesale		1,173,625		1,658,457			1,213,473
	$	2,387,171	$	3,208,012		$	2,405,063
Intersegment Sales
Wholesale	$	512,384	$	829,577		$	546,981
Operating Income (Loss)
Retail	$	33,611	$	(1,215	)	$	5,551
Wholesale		57,857		(51,380	)		162,843
	$	91,468	$	(52,595	)	$	168,394
Total Assets
Retail	$	150,082	$	179,119		$	158,164
Wholesale		520,772		422,674			573,402
	$	670,854	$	601,793		$	731,566
Depreciation and Amortization
Retail	$	5,273	$	5,044		$	4,609
Wholesale		11,038		10,673			9,810
	$	16,311	$	15,717		$	14,419
Capital Expenditures (including non-cash portion)
Retail	$	5,161	$	8,359		$	7,783
Wholesale		19,988		35,029			35,831
	$	25,149	$	43,388		$	43,614

16. 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 Company’s wholly-owned subsidiary guarantors is as follows:

58

UNITED REFINING COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

CONDENSED CONSOLIDATING BALANCE SHEETS

(in thousands)

	August 31, 2009												August 31, 2008
	Issuer			Guarantors			Eliminations			Consolidated			Issuer			Guarantors			Eliminations			Consolidated
Assets
Current:
Cash and cash equivalents	$	21,265		$	9,797		$	—		$	31,062		$	11,358		$	21,089		$	—		$	32,447
Accounts receivable, net		52,726			32,656			—			85,382			75,524			48,498			—			124,022
Refundable income taxes		—			—			—			—			34,530			1,383			—			35,913
Inventories		209,729			27,812			—			237,541			64,614			30,094			—			94,708
Prepaid expenses and other assets		8,733			5,828			—			14,561			16,338			4,966			—			21,304
Amounts due from affiliated companies		1,728			(919	)		—			809			—			—			—			—
Intercompany		106,025			15,527			(121,552	)		—			163,202			17,001			(180,203	)		—
Total current assets		400,206			90,701			(121,552	)		369,355			365,566			123,031			(180,203	)		308,394
Property, plant and equipment, net		174,629			77,419			—			252,048			166,266			77,745			—			244,011
Investment in affiliated company		—			—			—			—			6,389			—			—			6,389
Deferred financing costs, net		3,254			—			—			3,254			4,544			—			—			4,544
Goodwill and other non-amortizable assets		—			11,849			—			11,849			—			11,849			—			11,849
Amortizable intangible assets		—			1,483			—			1,483			—			1,713			—			1,713
Deferred turnaround costs & other assets		6,577			875			—			7,452			11,984			1,136			—			13,120
Deferred income taxes		29,658			(4,245	)		—			25,413			15,778			(4,005	)		—			11,773
Investment in subsidiaries		9,872			—			(9,872	)		—			(5,922	)		—			5,922			—
	$	624,196		$	178,082		$	(131,424	)	$	670,854		$	564,605		$	211,469		$	(174,281	)	$	601,793
Liabilities and Stockholder’s Equity
Current:
Revolving credit facility	$	—		$	—		$	—		$	—		$	9,000		$	—		$	—		$	9,000
Current installments of long-term debt		1,350			977			—			2,327			1,315			869			—			2,184
Accounts payable		62,789			20,708			—			83,497			24,550			22,362			—			46,912
Accrued liabilities		10,864			6,153			—			17,017			10,615			5,762			—			16,377
Income taxes payable		(4,861	)		10,010			—			5,149			—			—			—			—
Sales, use and fuel taxes payable		17,703			4,431			—			22,134			16,961			4,493			—			21,454
Deferred income taxes		9,538			66			—			9,604			3,590			(699	)		—			2,891
Amounts due to affiliated companies		—			—			—			—			1,297			1,294			—			2,591
Intercompany		—			121,552			(121,552	)		—			—			180,203			(180,203	)		—
Total current liabilities		97,383			163,897			(121,552	)		139,728			67,328			214,284			(180,203	)		101,409
Long term debt: less current installments		326,822			2,427			—			329,249			353,098			3,009			—			356,107
Deferred gain on settlement of pension plan obligations		—			—			—			—			55			—			—			55
Deferred retirement benefits		129,177			1,882			—			131,059			86,066			80			—			86,146
Other noncurrent liabilities		—			4			—			4			—			18			—			18
Total liabilities		553,382			168,210			(121,552	)		600,040			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		21,998			10,651			(10,651	)		21,998			24,665			10,651			(10,651	)		24,665
Retained earnings (deficit)		94,365			210			(210	)		94,365			56,338			(16,464	)		16,464			56,338
Accumulated other comprehensive loss		(45,549	)		(1,007	)		1,007			(45,549	)		(22,945	)		(127	)		127			(22,945	)
Total stockholder’s equity		70,814			9,872			(9,872	)		70,814			58,058			(5,922	)		5,922			58,058
	$	624,196		$	178,082		$	(131,424	)	$	670,854		$	564,605		$	211,469		$	(174,281	)	$	601,793

59

UNITED REFINING COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS

(in thousands)

	Year Ended August 31, 2009												Year Ended August 31, 2008												Year Ended August 31, 2007
	Issuer			Guarantors			Eliminations			Consolidated			Issuer			Guarantors			Eliminations			Consolidated			Issuer			Guarantors			Eliminations			Consolidated
Net sales	$	1,686,009		$	1,218,224		$	(517,062	)	$	2,387,171		$	2,488,034		$	1,554,041		$	(834,063	)	$	3,208,012		$	1,760,454		$	1,196,266		$	(551,657	)	$	2,405,063
Costs of goods sold		1,590,899			1,060,612			(517,062	)		2,134,449			2,507,529			1,425,654			(834,063	)		3,099,120			1,564,431			1,073,002			(551,657	)		2,085,776
Gross profit (loss)		95,110			157,612			—			252,722			(19,495	)		128,387			—			108,892			196,023			123,264			—			319,287
Expenses:
Selling, general and administrative expenses		22,786			122,157			—			144,943			24,115			121,655			—			145,770			22,773			113,701			—			136,474
Depreciation and amortization expenses		10,625			5,686			—			16,311			10,273			5,444			—			15,717			9,506			4,913			—			14,419
Total operating expenses		33,411			127,843			—			161,254			34,388			127,099			—			161,487			32,279			118,614			—			150,893
Operating income (loss)		61,699			29,769			—			91,468			(53,883	)		1,288			—			(52,595	)		163,744			4,650			—			168,394
Other income (expense):
Interest expense, net		(33,879	)		(1,993	)		—			(35,872	)		(26,791	)		(5,177	)		—			(31,968	)		(13,229	)		(10,565	)		—			(23,794	)
Other, net		(2,599	)		1,128			—			(1,471	)		(4,829	)		1,123			—			(3,706	)		(2,144	)		1,319			—			(825	)
Equity in net earnings of affiliate		41			—			—			41			2,879			—			—			2,879			1,611			—			—			1,611
Gain on extinguishment of debt		10,096			—			—			10,096			—			—			—			—			—			—			—			—
Equity in net earnings of subsidiaries		16,677			—			(16,677	)		—			(1,783	)		—			1,783			—			(3,252	)		—			3,252			—
		(9,664	)		(865	)		(16,677	)		(27,206	)		(30,524	)		(4,054	)		1,783			(32,795	)		(17,014	)		(9,246	)		3,252			(23,008	)
Income (loss) before income tax expense (benefit)		52,035			28,904			(16,677	)		64,262			(84,407	)		(2,766	)		1,783			(85,390	)		146,730			(4,596	)		3,252			145,386
Income tax expense (benefit):
Current		6,845			10,610			—			17,455			(27,722	)		(552	)		—			(28,274	)		60,880			(1,175	)		—			59,705
Deferred		7,163			1,617			—			8,780			(6,780	)		(431	)		—			(7,211	)		144			(169	)		—			(25	)
		14,008			12,227			—			26,235			(34,502	)		(983	)		—			(35,485	)		61,024			(1,344	)		—			59,680
Net income (loss)	$	38,027		$	16,677		$	(16,677	)	$	38,027		$	(49,905	)	$	(1,783	)	$	1,783		$	(49,905	)	$	85,706		$	(3,252	)	$	3,252		$	85,706

60

UNITED REFINING COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS

(in thousands)

	Year Ended August 31, 2009											Year Ended August 31, 2008											Year Ended August 31, 2007
	Issuer			Guarantors			Eliminations		Consolidated			Issuer			Guarantors			Eliminations		Consolidated			Issuer			Guarantors			Eliminations		Consolidated
Net cash provided by (used in) operating activities	$	57,222		$	(4,848	)	$	—	$	52,374		$	(120,501	)	$	18,781		$	—	$	(101,720	)	$	70,591		$	15,823		$	—	$	86,414
Cash flows from investing activities:
Additions to property, plant and equipment		(18,198	)		(5,772	)		—		(23,970	)		(33,566	)		(8,577	)		—		(42,143	)		(32,104	)		(11,486	)		—		(43,590	)
Marketable securities purchased		—			—			—		—			—			—			—		—			(75,854	)		—			—		(75,854	)
Proceeds from sale of investment securities		—			—			—		—			75,854			—			—		75,854			—			—			—		—
Additions to turnaround costs		(1,219	)		(27	)		—		(1,246	)		(10,038	)		(39	)		—		(10,077	)		(5,928	)		(95	)		—		(6,023	)
Dividends received		—			—			—		—			—			—			—		—			1,000			—			—		1,000
Proceeds from asset dispositions		2			15			—		17			4			5			—		9			—			11			—		11
Net cash (used in) provided by investing activities		(19,415	)		(5,784	)		—		(25,199	)		32,254			(8,611	)		—		23,643			(112,886	)		(11,570	)		—		(124,456	)
Cash flows from financing activities:
Distribution from (to) Parent under the Tax Sharing Agreement		(2,667	)		—			—		(2,667	)		2,634			—			—		2,634			7,787			—			—		7,787
Proceeds from issuance of long-term debt		—			318			—		318			—			178			—		178			130,711			1,245			—		131,956
Principal reductions of long-term debt		(16,008	)		(978	)		—		(16,986	)		(467	)		(842	)		—		(1,309	)		(210	)		(737	)		—		(947	)
Net (reductions) borrowings on revolving credit facility		(9,000	)		—			—		(9,000	)		9,000			—			—		9,000			—			—			—		—
Dividends to stockholder		—			—			—		—			(35,312	)		—			—		(35,312	)		(23,339	)		—			—		(23,339	)
Deferred financing costs		(225	)		—			—		(225	)		(108	)		—			—		(108	)		(1,171	)		—			—		(1,171	)
Net cash (used in) provided by financing activities		(27,900	)		(660	)		—		(28,560	)		(24,253	)		(664	)		—		(24,917	)		113,778			508			—		114,286
Net increase (decrease) in cash and cash equivalents		9,907			(11,292	)		—		(1,385	)		(112,500	)		9,506			—		(102,994	)		71,483			4,761			—		76,244
Cash and cash equivalents, beginning of year		11,358			21,089			—		32,447			123,858			11,583			—		135,441			52,375			6,822			—		59,197
Cash and cash equivalents, end of year	$	21,265		$	9,797		$	—	$	31,062		$	11,358		$	21,089		$	—	$	32,447		$	123,858		$	11,583		$	—	$	135,441

61

UNITED REFINING COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

17. Quarterly Financial Data (unaudited)

	Net Sales		Gross Profit (Loss) (as adjusted)		Net Income (Loss) (as adjusted)
	(in thousands)
2009
First Quarter	$	770,471	$	55,384	$	3,135
Second Quarter		443,809		44,213		(3,147	)
Third Quarter		498,312		69,373		17,333
Fourth Quarter		674,579		83,752		20,706
2008
First Quarter	$	693,568	$	51,093	$	3,116
Second Quarter		663,718		8,609		(22,905	)
Third Quarter		788,949		13,784		(20,549	)
Fourth Quarter		1,061,777		35,406		(9,567	)

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. This change in method of accounting better reflects interim results consistent with annual LIFO. Accordingly, the Company reflected this change in accounting policy in the three and six month periods ended February 28, 2009 and retrospectively applied this policy to its previously issued financial statements for its fiscal year ended August 31, 2008.

18. Dissolution Proceeds From Affiliate.

During the fiscal year ended August 31, 2009, the Company received $6,430,000 upon the dissolution of its 50% interest in Vulcan-Sem Materials Asphalt Marketing, LLC.

19. Legal Proceedings.

The Company and its subsidiaries are from time to time parties to various legal proceedings that arise in the ordinary course of their respective business operations. These proceedings include various administrative actions relating to federal, state and local environmental laws and regulations as well as civil matters before various courts seeking money damages. The Company believes that if the legal proceedings in which it is currently involved were determined against the Company, there would be no material adverse effect on the Company’s operations or its consolidated financial condition. In the opinion of management, all such matters are adequately covered by insurance, or if not so covered, are without merit or are of such kind, or involve such amounts that an unfavorable disposition would not have a material adverse effect on the consolidated operations or financial position of the Company.

62

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.

None.

ITEM 9A(T). CONTROLS AND PROCEDURES.

Evaluation of Disclosure Controls and Procedures

Based on an evaluation of the Company’s disclosure controls and procedures (as defined in Rules 13a– 15(e) and 15d– 15(e) of the Securities Exchange Act of 1934, as amended), as of August 31, 2009, the Company’s Chief Executive Officer and Chief Financial Officer (its principal executive officer and principal financial and accounting officer, respectively) have concluded that the Company’s disclosure controls and procedures were effective at a reasonable assurance level.

Limitations on the Effectiveness of Controls

A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Because of the inherent limitations in all controls systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within a company have been detected. Our disclosure controls and procedures are designed to provide reasonable assurance of achieving its objectives. Our Chief Executive Officer and our Chief Financial Officer concluded that our disclosure controls and procedures are effective at that reasonable assurance level.

Management’s Report on Internal Control over Financial Reporting

The Company’s management is responsible for establishing and maintaining adequate internal control over financial reporting as such term is defined in Exchange Act Rule 13a- 15(f). Internal control over financial reporting is a process used to provide reasonable assurance regarding the reliability of financial reporting and the preparation of the Company’s financial statements for external reporting in accordance with generally accepted accounting principles in the United States of America (“GAAP”). Internal control over financial reporting includes policies and procedure 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 transactions are recorded as necessary to permit preparation of our financial statements in accordance with GAAP; that our receipts and expenditures are being made only in accordance with the authorization of the Company’s board of directors; and provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company’s assets that could have a material effect on the Company’s financial statements.

Management evaluates the effectiveness of the company’s internal control over financial reporting using the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control Integrated Framework. Management, under the supervision and with the participation of the Company’s Chief Executive Officer and Chief Financial Officer, assessed the effectiveness of the company’s internal control over financial reporting as of August 31, 2009 and concluded that it is effective.

An internal control system over financial reporting has inherent limitations and may not prevent or detect misstatements. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. However, these inherent limitations are known features of the financial reporting process. Therefore, it is possible to design into the process safeguards to reduce, though not eliminate, the risk.

This annual report does not include an attestation report of the Company’s registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by the

63

Company’s registered public accounting firm pursuant to temporary rules of the Securities and Exchange Commission that permit the company to provide only management’s report in this annual report.

Changes in Internal Control over Financial Reporting

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

ITEM 9B. OTHER INFORMATION.

On November 21, 2008, the Company amended its Revolving Credit Agreement with PNC Bank, N.A. as Agent Bank. The amendment increased the line limit from $100,000,000 to $130,000,000. The amendment also includes changes to the interest rates charged and increases the minimum Net Worth level from $40,000,000 to $75,000,000 without taking into effect a LIFO inventory adjustment. For additional information, (see “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Liquidity and Capital Resources”, Item 7).

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.

Set forth below is certain information as of November 30, 2009 with respect to all directors and executive officers of the Company.

Name	Age	Position
John A. Catsimatidis	61	Chairman of the Board, Chief Executive Officer, Director
Myron L. Turfitt	57	President, Chief Operating Officer, Director
Ashton L. Ditka	68	Senior Vice President—Marketing
Thomas E. Skarada	67	Vice President—Refining
Frederick J. Martin, Jr.	55	Vice President—Supply and Transportation
James E. Murphy	64	Vice President, Chief Financial Officer and Treasurer
John R. Wagner	50	Vice President, General Counsel and Secretary
Martin R. Bring	67	Director
Jacob Feinstein	66	Director
Kishore Lall	62	Director
Douglas Lemmonds	62	Director
Andrew Maloney	78	Director
Dennis Mehiel	65	Director

John A. Catsimatidis has been Chairman of the Board and Chief Executive Officer since February 1986, when his wholly-owned company, United Acquisition Corp., purchased our parent. He also served as President from February 1986 until September 1996. He also is Chairman of the Board, Chief Executive Officer, President, and the founder of Red Apple Group, Inc. (a holding company for certain businesses, including the Company and corporations which operate supermarkets in New York).

Myron L. Turfitt has been President and Chief Operating Officer since September 1996. From June 1987 to September 1996 he was Chief Financial Officer and Executive Vice President. From August 1983 until June 1987 he was Senior Vice President-Finance and from July 1981 to August 1983, Mr. Turfitt held the position of Vice President, Accounting and Administration. Mr. Turfitt is a CPA with over 30 years of financial and operations experience in all phases of the petroleum business including exploration and production, refining and retail marketing. His experience covers both fully-integrated major oil companies and large independents.

Ashton L. Ditka has been Senior Vice President-Marketing since July 1990. From December 1989 to July 1990 he was Vice President-Wholesale & Retail Marketing and from August 1976 until December 1989 he was Vice President-Wholesale Marketing. Mr. Ditka has over 38 years of experience in the petroleum industry, including 11 years in retail marketing with Atlantic Richfield Company.

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Thomas E. Skaradahas been Vice President-Refining since February 1996. From September 1994 to February 1996 he was Assistant Vice President-Refining and from March 1993, when he joined us, to September 1994 he was Director of Regulatory Compliance. Over his 38 year refining and marketing career, Mr. Skarada has worked in virtually every segment of the downstream business including supply, distribution, refinery operations, economics, planning, research and development. He has 18 years of managerial experience with Sun Refining and Marketing Co. and one year consulting with Muse Stancil and Co. in Dallas, Texas.

Frederick J. Martin, Jr. has been Vice President-Supply and Transportation since February 1993. From 1980 to January 1993 he held other positions with us involving transportation, product supply, crude supply and pipeline and terminal administration.

James E. Murphyhas been Chief Financial Officer since January 1997 and in January 2009 also became Treasurer. He was Vice President-Finance from April 1995 to December 1996 and since May 1982 has held other accounting and internal auditing positions with us, including Director of Internal Auditing since April 1986. Mr. Murphy is a CPA and prior to joining us he had over 15 years experience in accounting and auditing with banking, public accounting and manufacturing companies.

John R. Wagnerhas been Vice President, General Counsel and Secretary since August 1997. Prior to joining us, Mr. Wagner served as Counsel to Dollar Bank, F.S.B. from 1988 to August 1997.

Martin R. Bringhas served as a Director since 1988. Since November 2004, he has been a partner at the law firm of Ellenoff, Grossman & Schole, LLP. Previously he was a stockholder in Anderson, Kill & Olick, P.C., a New York law firm, from February 2002 to November 2004. Prior thereto Mr. Bring was a partner in the law firm of Wolf, Block, Schorr and Solis-Cohen LLP, a Philadelphia, Pennsylvania law firm and its predecessor law firm for more than 5 years.

Jacob Feinsteinhas served as a Director since 2006. Since 1999, he has been employed as a Consultant to the electric power industry in disciplines such as management, transmission, generation interconnection and power system operation and control. From 1998 to 1999, he was employed by Cogen Technologies, Inc. as a Vice President. From 1991 to 1998, he was employed by Consolidated Edison Company of New York, Inc. as a Vice President.

Kishore Lall has served as a Director since 1997. He is currently Managing Director & Global Head/ Diamonds & Jewelry with Standard Chartered Bank, London. He was Global Head, Business Development, International Diamond and Jewelry Group of ABN AMRO Bank in New York from September 2005 to September 2008. He served as Chief Financial Officer of Gristede’s Foods, Inc. an affiliate of the Company from August 2003 to August 2005 and Executive Vice President-Finance and Administration and Secretary of Gristede’s Foods, Inc. from May 2002 to August 2005. From January 1997 to October 1997 he served as a consultant to Red Apple Group, Inc. From June 1994 to December 1996 was a private investor. From January 1991 to May 1994 he was Senior Vice President and Head of Commercial Banking of ABN AMRO Bank (New York branch).

Douglas Lemmondshas served as a Director since 1997. He has also served as Executive Vice President at SunTrust Bank (Washington D.C.) since 2002. From May 1996 to 2002 he served as Managing Director and the Chief Operating Officer, Private Banking-Americas of the Deutsche Bank Group. Private Banking-Americas operates across four separate legal entities, including a registered investment advisor, a broker-dealer, a trust company and a commercial bank. From June 1991 to May 1996 Mr. Lemmonds was the Regional Director of Private Banking of the Northeast Regional Office of the Bank of America and from August 1973 to June 1991 he held various other positions with Bank of America.

Andrew Maloneyhas served as a Director since 1997. He has also been counsel to De Feis O’Connell & Rose, a New York law firm since January 2003. From April 1998 to December 2002, Mr. Maloney was counsel to Kramer Levin Naftalis & Frankel LLP, a New York law firm. From December 1992 to April 1998 was a partner at Brown & Wood LLP, a New York law firm. From June 1986 to December 1992 he was the United States Attorney for the Eastern District of New York.

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Dennis Mehielhas served as a Director since 2006 and previously was a director from 1997 to 2005. He has also been Chairman and Chief Executive Officer of The Fonda Group, Inc. since 1988. Since 1966 he has been the Chairman of Four M, a converter and seller of interior packaging, corrugated sheets and corrugated containers which he co-founded, and since 1977 (except during a leave of absence from April 1994 through July 1995) he has been the Chief Executive Officer of Four M. W. Mehiel is also the Chairman of MannKraft Corporation, a manufacturer of corrugated containers, and Chief Executive Officer and Chairman of Creative Expressions, Group, Inc.

Audit Committee

We do not have a class of securities listed on a national securities exchange or national securities association subject to the requirements of Rule 10A-3 of the Securities Exchange Act of 1934, as amended. Consequently, the Company does not have an audit committee at this time, and has not designated an audit committee financial expert. However, the Company is reviewing whether it would be appropriate to appoint an audit committee consisting of independent members of its board of directors.

Code Of Ethics

We have adopted a Code of Ethics pursuant to Section 406 of the Sarbanes-Oxley Act of 2002 which is filed as Exhibit 14.1 in the Company’s Annual Report on Form 10-K for the fiscal year ended August 31, 2003. A copy of the Code of Ethics is available for review on the Company’s website at www.urc.com.

Section 16(a) Beneficial Ownership Reporting Compliance

Not Applicable

ITEM 11. EXECUTIVE COMPENSATION.

COMPENSATION DISCUSSION AND ANALYSIS

The Summary Compensation Table and supplementary tables that follow describe the compensation paid to our Chairman of the Board and Chief Executive Officer (“CEO”), Vice President and Chief Financial Officer (“CFO”), President and Chief Operating Officer (“COO”), Senior Vice President Marketing and Vice President Refining for 2009.

Compensation Objectives and Components

The objective of the Company’s compensation program is to motivate, retain and attract management, linking incentives to financial and personal performance and enhanced shareholder value. The compensation program for the named executive officers consists of the following components:

• Salary

• Annual performance-based cash awards; and

• Other fringe benefits and perquisites.

There is no Compensation Committee of the Board of Directors; however, the CEO and COO review and approve any proposed changes in salary, as well as discretionary bonuses for the other named executive officers.

Salary

Salaries for the named executive officers have been established by the CEO and COO. There is no policy to provide any scheduled increase to these individuals and increases may be awarded at the discretion of the CEO. There is no deferred compensation program for the named individuals or any other executives of the Company. The salaries of the CEO and COO are set by the CEO after reviewing comparable salaries for similar positions within the industry.

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Annual Cash Bonus Awards

While there is no formal bonus program for the named executives, bonuses have been paid to them on an annual basis. The amount of the bonus is determined by the CEO and may vary based on the performance of the Company.

Other Fringe Benefits and Perquisites

The Company provides several fringe benefit plans including the United Refining Company Pension Plan for Salaried Employees (the “Pension Plan”) and the United Refining Company Employees’ 401(k) Plan (the “401(k) Plan”) to its named executive officers. Additionally, the Company provides other benefits, including medical and dental plans, life and accidental death insurance, short-term and long-term disability insurance, paid sick leave and vacation and paid holidays.

Potential Payments upon Termination or Change in Control

The Company does not have any change in control agreements with any of the named executive officers.

Estimated Benefits upon Termination Related to Other Than a Change in Control

The Company does not have a severance policy for benefits paid upon termination of employment.

Indemnification of Directors and Officers

The Company’s By-laws provide an open-ended indemnity of all officers and directors to the fullest extent permitted by law.

The following table sets forth the compensation paid by the Company to its principal executive officer and principal financial officer and each of the three other most highly compensated executive officers of the Company whose salary and bonus exceeded $100,000 for the fiscal year ended August 31, 2009.

SUMMARY COMPENSATION TABLE

Name & Principal Position	Year	Annual Compensation				Change in Pension Value ($) (1)		Other Compensation ($) (2)		Total ($)
		Salary ($)		Bonus ($)
John A. Catsimatidis	2009	$	650,000	$	1,000,000	$	96,841	$	3,564	$	1,750,405
Chairman of the Board &
Chief Executive Officer
James E. Murphy	2009	$	120,025	$	40,000	$	106,076	$	13,833	$	279,934
Vice President &
Chief Financial Officer
Myron L. Turfitt	2009	$	420,000	$	650,000	$	197,754	$	8,069	$	1,275,823
President &
Chief Operating Officer
Ashton L. Ditka	2009	$	193,833	$	70,000	$	—	$	8,165	$	271,998
Senior Vice President
Marketing
Thomas E. Skarada	2009	$	148,140	$	70,000	$	34,013	$	19,051	$	271,204
Vice President
Refining

(1) Amounts in this column reflect the actuarial increase in the present value at August 31, 2009 compared to August 31, 2008 of the named executive officer’s benefits under the Defined Benefit Plan.

(2) Amounts in this column represent the total of all perquisites (non-cash benefits and perquisites such as the use of employer-owned automobiles, membership dues and other personal benefits), employee benefits (employer cost of life insurance), and employer contributions to defined contribution plans (the 401(K) Plan). Amounts are reported separately under the “All Other Compensations” table below.

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2009 ALL OTHER COMPENSATION

Name	Automobile Usage		Company Match on Qualified 401(k) Plan		Life Insurance Premium		Total All Other
John A. Catsimatidis	$	—	$	—	$	3,564	$	3,564
James E. Murphy	$	5,140	$	3,601	$	5,092	$	13,833
Myron L. Turfitt	$	5,747	$	—	$	2,322	$	8,069
Ashton L. Ditka	$	3,014	$	—	$	5,151	$	8,165
Thomas E. Skarada	$	6,399	$	4,444	$	8,208	$	19,051

2009 PENSION BENEFITS

Name	Plan Name	Number of Years of Credited Service	Present Value of Accumulated Benefits		Payments During Last Fiscal Year
John A. Catsimatidis	United Refining Company Pension Plan for Salaried Employees	23.53	$	789,113	$	—
James E. Murphy	United Refining Company Pension Plan for Salaried Employees	27.29	$	523,765	$	—
Myron L. Turfitt	United Refining Company Pension Plan for Salaried Employees	31.17	$	971,405	$	—
Ashton L. Ditka	United Refining Company Pension Plan for Salaried Employees	33.08	$	890,600	$	—
Thomas E. Skarada	United Refining Company Pension Plan for Salaried Employees	16.42	$	466,409	$	—

The Pension Plan is a tax-qualified, non-contributory defined benefit plan established to provide pension benefits to employees of the Company, including the named executive officers, meeting Pension Plan eligibility criteria. The criteria states that employees are eligible to participate in, and will be enrolled in, the Pension Plan on the first day of the month coincident with or next following the later of the completion of one Year of Service and attainment of age twenty-one years. Years of service for benefits purposes are measured based on the number of years in which at least 1,000 hours are worked.

A participant’s normal retirement date is the first of the month coinciding with or following the attainment of age 65. Participants who are actively employed may also elect an unreduced early retirement option at age 59 ¹/2. In addition to a single life annuity, benefits can be paid as other actuarially equivalent annuities.

The benefit formula is based on the average earnings of the participant for the three years in which such participant’s earnings were the highest. Earnings include salary and bonus up to a maximum of the IRC 401(a)(17) limit, which for 2008 is $225,000. Benefits are calculated by multiplying the sum of (a) 1.1% of average earnings up to the Social Security compensation base, plus (b) 1.25% of average earnings in excess of Social Security compensation base, by (c) the number of years of service. Payments of retirement benefits are not reduced by any Social Security benefits received by the participant. Effective May 2001, for purposes of calculating retirement benefits, the Company has fixed the earnings subject to tax under the Federal Insurance Contribution Act at $76,200.00 for years after 2001 for purposes of calculating Social Security compensation base.

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In connection with a transaction in 1984, a portion of the benefits from the plan are provided through an annuity contract with an insurance company. The benefits shown in the table are gross amounts before off-setting the insured benefit and thereby represent the total benefit earned with the Company.

Vested benefits are those amounts to which participants are entitled regardless of future services to the Company. A participant is credited with a year of service for vesting purposes for each Pension Plan year during which at least 1,000 hours of service are completed, commencing with year of hire. Each executive is currently vested in his accumulated benefit.

In addition to vested benefits, the Pension Plan provides certain death benefits. Upon the death of a participant, the beneficiary is entitled to receive a portion of the vested interest of the participant’s accrued benefit in the form of a monthly annuity amount, subject to eligibility requirements stipulated in the Pension Plan.

The present value of accumulated benefits in the table above has been determined by an independent actuary. These assumptions for August 31, 2009 include a 5.60% discount rate and the RP 2000 mortality table projected to 2015 with a 15-year phase-in and no collar adjustment, each of which is consistent with the assumptions used for FAS 87 financial reporting. Further, it was assumed that benefits will commence at the earliest age in which an unreduced benefit is available (age 59.5 or current age if later) and there will be no turnover or death prior to retirement. The foregoing actuarial assumptions are also based on the presumption that the Pension Plan will continue. If the Pension Plan were to terminate or be frozen, different actuarial assumptions and other factors might be applicable in determining the present value of accumulated benefits.

DIRECTOR COMPENSATION

The Company pays its non-officer Directors an annual retainer of $15,000 per year and $1,000 for meetings attended. Directors are reimbursed for reasonable travel, meals, lodging and other expenses incidental to attendance at meetings.

2009 Director Compensation

Name	Fees Earned or Paid in Cash ($)		Option Awards ($)		Total ($)
Martin R. Bring (1)	$	—	$	—	$	—
John A. Catsimatidis (2)	$	—	$	—	$	—
Jacob Feinstein	$	15,000	$	—	$	15,000
Douglas Lemmonds	$	15,000	$	—	$	15,000
Kishore Lall	$	15,000	$	—	$	15,000
Andrew Maloney	$	15,000	$	—	$	15,000
Dennis Mehiel	$	15,000	$	—	$	15,000
Myron L. Turfitt (3)	$	—	$	—	$	—

Fees and expenses paid to Directors are recorded as expense in the period in which the meetings are held, and deducted for income tax purposes in the year incurred.

(1) Martin R. Bring is a partner in the firm of Ellenoff, Grossman and Schole, LLP. Mr. Bring was paid $204,000 on a retainer basis for legal and consulting services during fiscal 2009.

(2) Chairman of the Board and Chief Executive Officer of the Company.

(3) President and Chief Operating Officer of the Company.

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ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS.

The following table sets forth certain information regarding ownership of Common Stock on November 30, 2009 by: (i) each stockholder known to the Company to own beneficially, directly or indirectly, more than 5% of the outstanding shares of Common Stock; (ii) each of the Company’s directors; and (iii) all officers and directors of the Company as a group. The Company believes that ownership of the shares by the persons named below is both of record and beneficial and such persons have sole voting and investing power with respect to the shares indicated.

Name and Address of Beneficial Owner	Number of Shares	Percent of Class
John A. Catsimatidis 823 Eleventh Avenue New York, NY 10019	100	100	%
All officers and directors as a group (23 persons)	0	100	%

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, DIRECTOR INDEPENDENCE.

On December 21, 2001, the Company acquired the operations and working capital assets of Country Fair. The fixed assets of Country Fair were acquired by related entities controlled by John A. Catsimatidis, the indirect sole shareholder of the Company. These assets are being leased to the Company at an annual aggregate rental which management, based on an independent third party valuation believes is fair, over a period ranging from 10 to 20 years. During the fiscal years ended August 31, 2009, 2008 and 2007, $5,102,000, $5,102,000, and $5,102,000 of rent payments were made to these related entities. The Company is not a guarantor on the underlying mortgages on the properties.

Concurrent with the above acquisition of Country Fair, the Company entered into a management agreement with a non-subsidiary affiliate to operate and manage 18 of the retail units owned by the non-subsidiary affiliate on a turn-key basis. For the years ended August 31, 2009, 2008 and 2007, the Company billed the affiliate $1,219,000, $1,147,000, and $1,018,000 for management fees and overhead expenses incurred in the management and operation of the retail units which amount was deducted from expenses. As of August 31, 2009 and 2008, the Company had a (payable) / receivable (to) / from the affiliate of $(306,259) and $27,000, respectively, under the terms of the agreement, which is included in Amounts Due to/from Affiliated Companies, Net.

Effective June 1, 2001, the Company entered into a 50% joint venture with an unrelated entity for the marketing of asphalt products. The joint venture is accounted for using the equity method of accounting. As of July 31, 2008 the joint venture ceased operations due to the insolvency of the joint venture partner. For the years ended August 31, 2009, 2008 and 2007, net sales to the joint venture amounted to $0, $15,419,000, and $12,596,000, respectively. As of August 31, 2009 and 2008, the Company had a (payable) receivable (to) from the joint venture of $0 and $(1,931,000), respectively, under the terms of the agreement, which is included in Amounts Due to/from Affiliated Companies, Net.

On September 29, 2000, the Company sold 42 retail units to an affiliate for $23,870,000. Concurrent with this asset sale, the Company terminated the leases on 8 additional retail locations which it had previously leased from a non-subsidiary affiliate. The Company has entered into a management agreement with the non-subsidiary affiliate to operate and manage the retail units owned by the non-subsidiary affiliate on a turnkey basis. For the years ended August 31, 2009, 2008 and 2007, the Company billed the affiliate $2,245,000, $2,037,000, and $1,976,000, respectively, for management fees and overhead expenses incurred in the management and operation

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of the 50 retail units, which amount was deducted from expenses. For the fiscal years ended August 31, 2009, 2008 and 2007, net sales to the affiliate amounted to $112,878,000, $173,190,000, and $116,240,000, respectively. As of August 31, 2009 and 2008, the Company had accounts payable to the affiliate of $614,000 and $1,321,000, respectively, under the terms of the agreement.

The Company paid a service fee relating to certain costs incurred by its Parent for the Company’s New York office. During the years ended August 31, 2009, 2008 and 2007, such fees amounted to approximately $2,000,000, $2,000,000, and $2,000,000, respectively, which is included in Selling, General and Administrative Expenses.

The Company joins with the Parent and the Parent’s other subsidiaries in filing a Federal income tax return on a consolidated basis. Income taxes are calculated on a separate return basis with consideration of the Tax Sharing Agreement between the Parent and its subsidiaries. Amounts related to the Tax Sharing Agreement for the utilization by the Company of certain tax attributes of the Parent and other subsidiaries related to the tax years ended August 31, 2009 and 2008 amounted to $(2,667,000) and $2,634,000, respectively and have been recorded as a capital (distribution) contribution. As of August 31, 2009 and 2008, the Company had a receivable from the Parent of $1,728,000 and $634,000, respectively, under the terms of the Tax Sharing Agreement.

During the years ended August 31, 2009, 2008 and 2007, the Company incurred $372,000 in each year as its share of occupancy expenses for our offices in New York that it shares with affiliates of the Company. Such offices are located in a building owned by John Catsimatidis.

During the years ended August 31, 2009, 2008, and 2007, the Company shared certain costs with an affiliate of the Company for aircraft owned by another affiliate of the Company and incurred $0, $180,000 and $332,000, respectively, as its share of such costs.

ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES.

The following represents amounts billed and amounts expected to be billed to the Company for the professional services of BDO Seidman, LLP rendered during fiscal years 2009 and 2008:

	2009		2008
Audit Fees	$	529,000	$	493,000
Audit—Related Fees(1)		—		1,000
Tax Fees		—		—
All Other Fees		—		—
Total	$	529,000	$	494,000

(1) Services provided under this category consist of $1,000 related to Sarbanes Oxley Act-Section 404 compliance consultation in 2008.

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ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES.

(a)(1)Financial Statements

A list of all financial statements filed as part of this report is contained in the index to Item 8, which index is incorporated herein by reference.

     (2)Financial Statement Schedules

Report of Independent Registered Public Accounting Firm

Schedule II – Valuation and Qualifying Accounts

     (3)Exhibits

Number	Description
3.1	Certificate of Incorporation of United Refining Company (“URC”). Incorporated by reference to Exhibit 3.1 to the Registrant’s Registration Statement on Form S-4 (File No. 333-35083) (the “Registration Statement”).
3.2	Bylaws of URC. Incorporated by reference to Exhibit 3.2 to the Registration Statement.
3.3	Certificate of Incorporation of United Refining Company of Pennsylvania (“URCP”). Incorporated by reference to Exhibit 3.3 to the Registration Statement.
3.4	Bylaws of URCP. Incorporated by reference to Exhibit 3.4 to the Registration Statement.
3.5	Certificate of Incorporation of Kiantone Pipeline Corporation (“KPC”). Incorporated by reference to Exhibit 3.5 to the Registration Statement.
3.6	Bylaws of KPC. Incorporated by reference to Exhibit 3.6 to the Registration Statement.
3.7	Certificate of Incorporation of Kiantone Pipeline Company (“KPCY”). Incorporated by reference to Exhibit 3.7 to the Registration Statement.
3.8	Bylaws of KPCY. Incorporated by reference to Exhibit 3.8 to the registration Statement.
3.9	Certificate of Incorporation of Kwik Fill Corporation. (“K-FC”). Incorporated by reference to Exhibit 3.9 to the Registration Statement.
3.10	Bylaws of K-FC. Incorporated by reference to Exhibit 3.10 to the Registration Statement.
3.11	Certificate of Incorporation of Independent Gasoline & Oil Company of Rochester, Inc. (“IGOCRI”). Incorporated by reference to Exhibit 3.11 to the Registration Statement.
3.12	Bylaws of IGOCRI. Incorporated by reference to Exhibit 3.12 to the Registration Statement.
3.13	Certificate of Incorporation of Bell Oil Corp. (“BOC”). Incorporated by reference to Exhibit 3.13 to the Registration Statement.
3.14	Bylaws of BOC. Incorporated by reference to Exhibit 3.14 to the Registration Statement.
3.15	Certificate of Incorporation of PPC, Inc. (“PPCI”). Incorporated by reference to Exhibit 3.15 to the Registration Statement.
3.16	Bylaws of PPCI. Incorporated by reference to Exhibit 3.16 to the Registration Statement.
3.17	Certificate of Incorporation of Super Test Petroleum, Inc. (“STPI”). Incorporated by reference to Exhibit 3.17 to the Registration Statement.
3.18	Bylaws of STPI. Incorporated by reference to Exhibit 3.18 to the Registration Statement.
3.19	Certificate of Incorporation of Kwik-Fil, Inc. (“K-FI”). Incorporated by reference to Exhibit 3.19 to the Registration Statement.

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Number	Description
3.20	Bylaws of K-FI. Incorporated by reference to Exhibit 3.20 to the Registration Statement.
3.21	Certificate of Incorporation of Vulcan Asphalt Refining Corporation (“VARC”). Incorporated by reference to Exhibit 3.21 to the Registration Statement.
3.22	Bylaws of VARC. Incorporated by reference to Exhibit 3.22 to the Registration Statement.
3.23	Certificate of Incorporation of United Jet Center, Inc. (“UJCI”). Incorporated by reference to Exhibit 3.23 to the Registration Statement.
3.24	Bylaws of UJCI. Incorporated by reference to Exhibit 3.24 to the Registration Statement.
4.1	Indenture dated as of August 6, 2004 between URC, Country Fair, Inc, (“CFI”), KPC, KPCY, UJCI, URCP, K-FC, IGOCRI, BOC, PPCI, STPI, K-FI, VARC and The Bank of New York (“BONY”), relating to the 10 1/2% Series A Senior Notes due 2012. Incorporated by reference to Exhibit 4.1 to the Registration Statement.
4.2	Form of Note. Incorporated by reference to Exhibit 4.2 to the Registration Statement.
10.1	Purchase Agreement dated August 6, 2004 between URC, CFI, KPC, KPCY, UJCI, URCP, K-FC, IGOCRI, BOC, PPCI, STPI, K-FI, VARC, Citigroup (“CITI”), Goldman, Sachs & Co. (“GSC”), and PNC Capital Markets, Inc. (“PNCCMI”). Incorporated by reference to Exhibit 10.1 to the Registration Statement.
10.2	Registration Rights Agreement dated August 6, 2004 between URC, CFI, KPC, KPCY, UJCI, URCP, K-FC, IGOCRI, BOC, PPCI, STPI, K-FI, VARC, CITI, GSC, and PNCCMI. Incorporated by reference to Exhibit 10.2 to the Registration Statement.
10.3	Servicing Agreement dated June 9, 1997 between URC and Red Apple Group, Inc. Incorporated by reference to Exhibit 10.4 to the Registration Statement.
10.4	Amended and Restated Credit Agreement dated July 12, 2002 by and among URC, URCP, KPC, CFI and the Banks party thereto and PNC Bank, National Association, as Agent. Incorporated by reference to Exhibit 10.21 of Registrant’s Quarterly Report on Form 10-Q for fiscal quarter ended May 31, 2002.
10.5	Amendment to Credit Agreement dated as of July 12, 2002 by and among URC, URCP, KPC, CFI and the Banks party thereto and PNC Bank, National Association, as Agent. Incorporated by reference to Exhibit 10.12 of Registrant’s Annual Report on Form 10-K for fiscal year ended August 31, 2002.
10.6	Limited Waiver and Amendment No 3 to Credit Agreement dated as of March 24, 2003 by and among, URC, URCP, KPC, CFI and the Banks thereto and PNC Bank, National Association, as Agent. Incorporated by reference to Exhibit 10.13 of Registrant’s Quarterly Report on Form 10-Q for fiscal quarter ended May 31, 2003.
10.7	Amendment to Credit Agreement dated as of January 27, 2004 by and among URC, URCP, KPC, CFI, K-FC and the Banks party thereto and PNC Bank, National Association, as Agent. Incorporated by reference to Exhibit 10.9 of Registrant’s Quarterly Report on Form 10-Q for fiscal quarter ended February 29, 2004.
10.8	Amendment No. 5 to Credit Agreement dated as of August 6, 2004 by and among URC, URCP, KPC, CFI., K-FI., and the Banks party thereto and PNC Bank, National Association, as Agent. Incorporated by reference to Exhibit 10.8 to the Registration Statement.

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Number	Description
10.9	Purchase Agreement dated February 10, 2005 between URC, CFI, KPC, KPCY, USCF, URCP, K-FC, IGOCRI, BOC, PPCI, STPI, K-FI, VARC and Citigroup Global Markets, Inc. (CGMI). Incorporated by reference to Exhibit 10.1 of Registrant’s Quarterly Report on Form 10-Q for fiscal quarter ended February 28, 2005.
10.10	Registrant’s Rights Agreement dated February 17, 2005 between URC, CFI, KPC, KPCY, UJCI, URCP, K-FC, IGOCRI, BOC, PPCI, STPI, K-FI, VARC and CGMI. Incorporated by reference to Exhibit 10.2 of Registrants Quarterly Report on Form 10-Q for fiscal quarter ended February 28, 2005.
10.11	Amendment No. 6 to Credit Agreement dated as of April 19, 2005 by and among URC, URCP, KPC, CFI, K-FI and the Banks party thereto and PNC Bank, National Association, as Agent. Incorporated by reference to Exhibit 10.1 to Registrant’s Current Report on Form 8-K, filed on April 22, 2005.
10.12	Amendment No. 7 to Credit Agreement dated as of November 27, 2006 by and among URC, URCP, KPC, CFI, K-FC and the Banks party thereto and PNC Bank, National Association, as Agent.
10.13	Purchase Agreement dated May 1, 2007 between URC, CFI, KPC, KPCY, UJCI, URCP, K-FC, IGOCRI, BOC, PPCI, STPI, K-FI, VARC and Morgan Stanley & Co. Incorporated. Incorporated by reference to Exhibit 10.1 of Registrant’s Quarterly Report on Form 10-Q for fiscal quarter ended May 31, 2007.
10.14	Registrant’s Rights Agreement dated May 4, 2007 between URC, CFI, KPC, KPCY, UJCI, URCP, K-FC, IGOCRI, BOC, PPCI, STPI, K-FI, VARC and Morgan Stanley & Co. Incorporated. Incorporated by reference to Exhibit10.2 of Registrant’s Quarterly Report on Form 10-Q for fiscal quarter ended May 31, 2007.
*10.15	Amendment No. 8 to Credit Agreement dated as of November 21, 2008 by and among URC, URCP, KPC, CFI, K-FC and the Banks party thereto and PNC Bank, National Association, as Agent.
14.1	Code of Ethics pursuant to Section 406 of the Sarbanes-Oxley Act of 2002. Incorporated by reference to Exhibit 14.1 in Registrant’s Annual Report on Form 10-K for fiscal year ended August 31, 2003.
21.1	Subsidiaries of the Registrants. A) Incorporated by reference to Exhibit 21.1 to the Registration Statement. B) Country Fair, Inc. Incorporated in the Commonwealth of Pennsylvania in 1965, doing business as “Country Fair”.
*31.1	Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
*31.2	Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
*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.

* Filed herewith.

74

Report of Independent Registered Public Accounting Firm

To the Board of Directors and

Stockholder of United Refining Company

Warren, Pennsylvania

The audits referred to in our report dated November 30, 2009 relating to the consolidated financial statements of United Refining Company, which is contained in Item 8 of this Form 10-K also included the audit of the financial statement schedule listed in the accompanying index. This financial statement schedule is the responsibility of the Company’s management. Our responsibility is to express an opinion on this financial statement schedule based on our audits.

In our opinion such financial statement schedule, when considered in relation to the consolidated financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein.

/s/ BDO Seidman, LLP

New York, New York

November 30, 2009

75

UNITED REFINING COMPANY AND SUBSIDIARIES

SCHEDULE II—VALUATION AND QUALIFYING ACCOUNTS

(in thousands)

Description	Balance at Beginning of Period		Charged to Costs and Expenses		Deductions			Balance at End Of Period
Year ended August 31, 2007:
Reserves and allowances deducted from asset accounts:
Allowance for uncollectible Accounts	$	740	$	1,015	$	(915	)	$	840
Year ended August 31, 2008:
Reserves and allowances deducted from asset accounts:
Allowance for uncollectible Accounts	$	840	$	2,645	$	593		$	2,892
Year ended August 31, 2009:
Reserves and allowances deducted from asset accounts:
Allowance for uncollectible Accounts	$	2,892	$	2,929	$	3,296		$	2,525

76

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	UNITED REFINING COMPANY
Dated: November 30, 2009	By:	/S/ MYRON L. TURFITT
		Myron L. Turfitt President and Chief Operating Officer

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated:

Signature	Title	Date
/S/ JOHN A. CATSIMATIDIS John A. Catsimatidis	Chairman of the Board, Chief Executive Officer and Director	November 30, 2009
/S/ MYRON L. TURFITT Myron L. Turfitt	President, Chief Operating Officer and Director	November 30, 2009
/S/ JAMES E. MURPHY James E. Murphy	Vice President and Chief Financial Officer (Principal Accounting Officer)	November 30, 2009
/S/ MARTIN R. BRING Martin R. Bring	Director	November 30, 2009
/S/ JACOB FEINSTEIN Jacob Feinstein	Director	November 30, 2009
/S/ KISHORE LALL Kishore Lall	Director	November 30, 2009
/S/ DOUGLAS LEMMONDS Douglas Lemmonds	Director	November 30, 2009
/S/ ANDREW MALONEY Andrew Maloney	Director	November 30, 2009
/S/ DENNIS MEHIEL Dennis Mehiel	Director	November 30, 2009

77

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	UNITED REFINING COMPANY OF PENNSYLVANIA
Dated:   November 30, 2009	By:	/S/ MYRON L. TURFITT
		Myron L. Turfitt President and Chief Operating Officer

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated:

Signature	Title	Date
/S/ JOHN A. CATSIMATIDIS John A. Catsimatidis	Chairman of the Board, Chief Executive Officer and Director	November 30, 2009
/S/ MYRON L. TURFITT Myron L. Turfitt	President, Chief Operating Officer	November 30, 2009
/S/ JAMES E. MURPHY James E. Murphy	Vice President and Chief Financial Officer (Principal Accounting Officer)	November 30, 2009

78

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	KIANTONE PIPELINE CORPORATION
Dated:  November 30, 2009	By:	/S/ MYRON L. TURFITT
		Myron L. Turfitt President and Chief Operating Officer

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated:

Signature	Title	Date
/S/ JOHN A. CATSIMATIDIS John A. Catsimatidis	Chairman of the Board, Chief Executive Officer and Director	November 30, 2009
/S/ MYRON L. TURFITT Myron L. Turfitt	President, Chief Operating Officer and Director	November 30, 2009
/S/ JAMES E. MURPHY James E. Murphy	Vice President and Chief Financial Officer (Principal Accounting Officer)	November 30, 2009

79

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	KIANTONE PIPELINE COMPANY
Dated:  November 30, 2009	By:	/S/ MYRON L. TURFITT
		Myron L. Turfitt Executive Vice President

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated:

Signature	Title	Date
/S/ JOHN A. CATSIMATIDIS John A. Catsimatidis	Chairman of the Board, Chief Executive Officer and Director	November 30, 2009
/S/ MYRON L. TURFITT Myron L. Turfitt	Executive Vice President	November 30, 2009
/S/ JAMES E. MURPHY James E. Murphy	Vice President and Chief Financial Officer (Principal Accounting Officer)	November 30, 2009

80

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	UNITED JET CENTER, INC.
Dated: November 30, 2009	By:	/S/ MYRON L. TURFITT
		Myron L. Turfitt Executive Vice President

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated:

Signature	Title	Date
/S/ JOHN A. CATSIMATIDIS John A. Catsimatidis	Chairman of the Board, Chief Executive Officer and Director	November 30, 2009
/S/ MYRON L. TURFITT Myron L. Turfitt	Executive Vice President	November 30, 2009
/S/ JAMES E. MURPHY James E. Murphy	Vice President and Chief Financial Officer (Principal Accounting Officer)	November 30, 2009

81

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	VULCAN ASPHALT REFINING CORPORATION
Dated: November 30, 2009	By:	/S/ MYRON L. TURFITT
		Myron L. Turfitt Executive Vice President

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated:

Signature	Title	Date
/S/ JOHN A. CATSIMATIDIS John A. Catsimatidis	Chairman of the Board, Chief Executive Officer and Director	November 30, 2009
/S/ MYRON L. TURFITT Myron L. Turfitt	Executive Vice President	November 30, 2009
/S/ JAMES E. MURPHY James E. Murphy	Vice President and Chief Financial Officer (Principal Accounting Officer)	November 30, 2009

82

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	KWIK-FIL, INC.
Dated: November 30, 2009	By:	/S/ MYRON L. TURFITT
		Myron L. Turfitt Executive Vice President

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated:

Signature	Title	Date
/S/ JOHN A. CATSIMATIDIS John A. Catsimatidis	Chairman of the Board, Chief Executive Officer and Director	November 30, 2009
/S/ MYRON L. TURFITT Myron L. Turfitt	Executive Vice President	November 30, 2009
/S/ JAMES E. MURPHY James E. Murphy	Vice President and Chief Financial Officer (Principal Accounting Officer)	November 30, 2009

83

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	KWIK-FILLCORPORATION
Dated:  November 30, 2009	By:	/S/ MYRON L. TURFITT
		Myron L. Turfitt Executive Vice President

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated:

Signature	Title	Date
/S/ JOHN A. CATSIMATIDIS John A. Catsimatidis	Chairman of the Board, Chief Executive Officer and Director	November 30, 2009
/S/ MYRON L. TURFITT Myron L. Turfitt	Executive Vice President	November 30, 2009
/S/ JAMES E. MURPHY James E. Murphy	Vice President and Chief Financial Officer (Principal Accounting Officer)	November 30, 2009

84

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	INDEPENDENT GASOLINE & OIL COMPANY OF ROCHESTER, INC.
Dated:  November 30, 2009	By:	/S/ MYRON L. TURFITT
		Myron L. Turfitt Executive Vice President

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated:

Signature	Title	Date
/S/ JOHN A. CATSIMATIDIS John A. Catsimatidis	Chairman of the Board, Chief Executive Officer and Director	November 30, 2009
/S/ MYRON L. TURFITT Myron L. Turfitt	Executive Vice President	November 30, 2009
/S/ JAMES E. MURPHY James E. Murphy	Vice President and Chief Financial Officer (Principal Accounting Officer)	November 30, 2009

85

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	BELL OIL CORP.
Dated: November 30, 2009	By:	/S/ MYRON L. TURFITT
		Myron L. Turfitt Executive Vice President

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated:

Signature	Title	Date
/S/ JOHN A. CATSIMATIDIS John A. Catsimatidis	Chairman of the Board, Chief Executive Officer and Director	November 30, 2009
/S/ MYRON L. TURFITT Myron L. Turfitt	Executive Vice President	November 30, 2009
/S/ JAMES E. MURPHY James E. Murphy	Vice President and Chief Financial Officer (Principal Accounting Officer)	November 30, 2009

86

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	PPC, INC.
Dated: November 30, 2009	By:	/S/ MYRON L. TURFITT
		Myron L. Turfitt Executive Vice President

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated:

Signature	Title	Date
/S/ JOHN A. CATSIMATIDIS John A. Catsimatidis	Chairman of the Board, Chief Executive Officer and Director	November 30, 2009
/S/ MYRON L. TURFITT Myron L. Turfitt	Executive Vice President	November 30, 2009
/S/ JAMES E. MURPHY James E. Murphy	Vice President and Chief Financial Officer (Principal Accounting Officer)	November 30, 2009

87

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	SUPER TEST PETROLEUM, INC.
Dated: November 30, 2009	By:	/S/ MYRON L. TURFITT
		Myron L. Turfitt Executive Vice President

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated:

Signature	Title	Date
/S/ JOHN A. CATSIMATIDIS John A. Catsimatidis	Chairman of the Board, Chief Executive Officer and Director	November 30, 2009
/S/ MYRON L. TURFITT Myron L. Turfitt	Executive Vice President	November 30, 2009
/S/ JAMES E. MURPHY James E. Murphy	Vice President and Chief Financial Officer (Principal Accounting Officer)	November 30, 2009

88

SUPPLEMENTAL INFORMATION TO BE FURNISHED WITH REPORTS FILED PURSUANT TO SECTION 15(d) OF THE ACT BY REGISTRANTS WHICH HAVE NOT REGISTERED SECURITIES PURSUANT TO SECTION 12 OF THE ACT

No annual report or proxy material was sent to security holders by the Corporation during the fiscal year ended August 31, 2009.

89