United Store 10-Q 2013 Q3 Quarterly report

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended May 31, 2013

or

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

For the transition period from                     to                     

Commission File No. 001-06198

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

Pennsylvania	25-1411751
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
15 Bradley Street
Warren, Pennsylvania	16365
(Address of principal executive office)	(Zip Code)

814-723-1500

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x    No  ¨

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

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definition of “accelerated filer” “large accelerated filer” and “smaller 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)	Smaller reporting company  ¨

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

As of July 15, 2013, there were 100 shares of common stock, par value $.10 per share, of the Registrant outstanding.

TABLE OF ADDITIONAL REGISTRANTS

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

2

FORM 10-Q – CONTENTS

		PAGE(S)
PART I.    FINANCIAL INFORMATION			4
Item 1.	Financial Statements.		4
	Consolidated Balance Sheets – May 31, 2013 (unaudited) and August 31, 2012		4
	Consolidated Statements of Operations – Quarter and Nine Months Ended May 31, 2013 and 2012 (unaudited)		5
	Consolidated Statements of Comprehensive Income – Quarter and Nine Months Ended May 31, 2013 and 2012 (unaudited)		6
	Consolidated Statements of Cash Flows – Nine Months Ended May 31, 2013 and 2012 (unaudited)		7
	Notes to Consolidated Financial Statements (unaudited)		8
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations.		18
Item 3.	Quantitative and Qualitative Disclosures about Market Risk.		26
Item 4.	Controls and Procedures.		26
PART II.    OTHER INFORMATION			27
Item 1.	Legal Proceedings.		27
Item 1A.	Risk Factors.		27
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds.		27
Item 3.	Defaults Upon Senior Securities.		27
Item 4.	Mine Safety Disclosures.		27
Item 5.	Other Information.		27
Item 6.	Exhibits.		27
Signatures.			28

3

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements.

UNITED REFINING COMPANY AND SUBSIDIARIES

Consolidated Balance Sheets

(in thousands, except share amounts)

	May 31, 2013 (Unaudited)			August 31, 2012
Assets
Current:
Cash and cash equivalents	$	124,092		$	137,540
Accounts receivable, net		103,881			120,599
Inventories, net		226,461			156,220
Prepaid expenses and other assets		45,062			19,813
Deferred income taxes		—			1,048
Amounts due from affiliated companies, net		—			89
Total current assets		499,496			435,309
Property, plant and equipment, net		269,344			253,387
Deferred financing costs, net		7,217			8,471
Goodwill		1,349			1,349
Tradename		10,500			10,500
Amortizable intangible assets, net		1,084			1,164
Deferred turnaround costs and other assets, net		12,873			18,150
	$	801,863		$	728,330
Liabilities and Stockholder’s Equity
Current:
Current installments of long-term debt	$	1,622		$	1,318
Accounts payable		59,421			42,203
Derivative liability		—			9,098
Accrued liabilities		24,716			16,916
Income taxes payable		10,990			28,931
Sales, use and fuel taxes payable		20,966			21,892
Deferred income taxes		1,843			—
Amounts due to affiliated companies, net		744			—
Total current liabilities		120,302			120,358
Long term debt: less current installments		359,193			358,678
Deferred income taxes		15,351			15,022
Deferred retirement benefits		89,441			92,996
Total liabilities		584,287			587,054
Commitments and contingencies
Stockholder’s equity:
Common stock; $.10 par value per share – shares authorized 100; issued and outstanding 100		—			—
Additional paid-in capital		24,825			24,825
Retained earnings		211,698			135,988
Accumulated other comprehensive loss		(18,947	)		(19,537	)
Total stockholder’s equity		217,576			141,276
	$	801,863		$	728,330

See accompanying notes to consolidated financial statements.

4

UNITED REFINING COMPANY AND SUBSIDIARIES

Consolidated Statements of Operations – (Unaudited)

(in thousands)

	Three Months Ended May 31,						Nine Months Ended May 31,
	2013			2012			2013			2012
Net sales	$	883,520		$	935,798		$	2,710,691		$	2,728,673
Costs and expenses:
Costs of goods sold (exclusive of depreciation, amortization and losses/(gains) on derivative contracts)		752,047			762,810			2,259,321			2,378,062
Losses/(gains) on derivative contracts (See Note 3)		—			1,957			2,319			(37,495	)
Selling, general and administrative expenses		41,307			37,986			122,817			116,573
Depreciation and amortization expenses		6,478			6,132			19,900			18,069
		799,832			808,885			2,404,357			2,475,209
Operating income		83,688			126,913			306,334			253,464
Other income (expense):
Interest expense, net		(9,878	)		(10,275	)		(28,958	)		(30,788	)
Other, net		(738	)		(1,053	)		(2,326	)		(2,333	)
		(10,616	)		(11,328	)		(31,284	)		(33,121	)
Income before income tax expense		73,072			115,585			275,050			220,343
Income tax expense		28,513			47,484			107,282			90,433
Net income	$	44,559		$	68,101		$	167,768		$	129,910

See accompanying notes to consolidated financial statements.

5

UNITED REFINING COMPANY AND SUBSIDIARIES

Consolidated Statements of Comprehensive Income – (Unaudited)

(in thousands)

	Three Months Ended May 31,					Nine Months Ended May 31,
	2013		2012			2013		2012
Net income	$	44,559	$	68,101		$	167,768	$	129,910
Other comprehensive income (loss), net of taxes:
Unrecognized post retirement income (loss), net of taxes of $136 and $(5) for the three months ended May 31, 2013 and 2012, respectively, and $410 and $6,938 for the nine months ended May 31, 2013 and 2012, respectively		197		(9	)		590		9,982
Other comprehensive income (loss)		197		(9	)		590		9,982
Total comprehensive income	$	44,756	$	68,092		$	168,358	$	139,892

See accompanying notes to consolidated financial statements.

6

UNITED REFINING COMPANY AND SUBSIDIARIES

Consolidated Statements of Cash Flows – (Unaudited)

(in thousands)

	Nine Months Ended May 31,
	2013			2012
Cash flows from operating activities:
Net income	$	167,768		$	129,910
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		21,490			20,720
Unrealized gain on derivative contracts		—			(49,941	)
Deferred income taxes		2,810			29,108
Loss (gain) on asset dispositions		530			(1,517	)
Cash used in working capital items		(80,886	)		(15,454	)
Change in operating assets and liabilities:
Other assets, net		370			(3,257	)
Deferred retirement benefits		(2,555	)		(2,920	)
Total adjustments		(58,241	)		(23,261	)
Net cash provided by operating activities		109,527			106,649
Cash flows from investing activities:
Additions to property, plant and equipment		(29,466	)		(15,653	)
Additions to amortizable intangible assets		—			(240	)
Additions to deferred turnaround costs		(316	)		(2,810	)
Proceeds from asset dispositions		75			2,484
Net cash used in investing activities		(29,707	)		(16,219	)
Cash flows from financing activities:
Net reductions on revolving credit facility		—			(24,000	)
Dividends to stockholder		(92,058	)		(31,008	)
Principal reductions of long term debt		(1,210	)		(854	)
Net cash used in financing activities		(93,268	)		(55,862	)
Net (decrease) increase in cash and cash equivalents		(13,448	)		34,568
Cash and cash equivalents, beginning of year		137,540			16,660
Cash and cash equivalents, end of period	$	124,092		$	51,228
Cash provided by (used in) working capital items:
Accounts receivable, net	$	16,718		$	(10,897	)
Derivative asset/liability		(9,098	)		(3,962	)
Inventories, net		(70,241	)		1,799
Prepaid expenses and other assets		(25,249	)		(4,497	)
Amounts due from affiliated companies, net		833			4,577
Accounts payable		17,218			(38,258	)
Accrued liabilities		7,800			6,899
Income taxes payable		(17,941	)		23,663
Sales, use, and fuel taxes payable		(926	)		5,222
Total change	$	(80,886	)	$	(15,454	)
Cash paid during the period for:
Interest	$	19,368		$	20,088
Income taxes	$	122,774		$	38,034
Non-cash investing activities:
Property additions & capital leases	$	1,693		$	1,375

See accompanying notes to consolidated financial statements.

7

UNITED REFINING COMPANY AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(Unaudited)

1. Description of Business and Basis of Presentation

The consolidated financial statements include the accounts of United Refining Company and its subsidiaries, United Refining Company of Pennsylvania and its subsidiaries, United Biofuels, Inc. 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 operates a network of Company operated retail units under the Red Apple Food Mart^® and Country Fair^® brand names selling petroleum products under the Kwik Fill^®, Citgo^® and Keystone^® brand names, as well as convenience and grocery items.

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

The accompanying unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States of America for complete financial statements. In the opinion of management, all adjustments (consisting of only normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three and nine months ended May 31, 2013 are not necessarily indicative of the results that may be expected for the year ending August 31, 2013. For further information, refer to the consolidated financial statements and footnotes thereto included in the Company’s Form 10-K for the fiscal year ended August 31, 2012.

2. 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, historically crude oil option contracts (puts) and crackspread option contracts have been 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. The Company includes the carrying amounts of the contracts in derivative asset or derivative liability in its Consolidated Balance Sheet.

At May 31, 2013, the Company had no derivative investments outstanding as part of its risk management strategy.

8

UNITED REFINING COMPANY AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(Unaudited)

The fair value and balance sheet classification of our derivative instruments at May 31, 2013 and August 31, 2012 are as follows:

	May 31, 2013
	Notional Balance		Maturity Date	Derivative Liability
	(in thousands)
Not designated as hedges under ASC 815
Heating oil crackspread swaps		0 barrels	Not applicable	$	0
Total derivative instruments		0 barrels		$	0
	August 31, 2012
	Notional Balance		Maturity Date	Derivative Liability
	(in thousands)
Not designated as hedges under ASC 815
Heating oil and gasoline crackspread swaps		780 barrels	Monthly September 2012 through December 2012	$	9,098
Total derivative instruments		780 barrels		$	9,098

During the three months ended May 31, 2013 and 2012, the Company recognized $0 and $1,957,000 of losses in its Consolidated Statements of Operations, respectively. For the nine months ended May 31, 2013 and 2012, the Company recognized $2,319,000 and $(37,495,000) of losses/(gains) in its Consolidated Statements of Operations, respectively.

3. Inventories

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

9

UNITED REFINING COMPANY AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(Unaudited)

Inventories consist of the following:

	May 31, 2013		August 31, 2012
	(in thousands)
Crude Oil	$	48,177	$	40,419
Petroleum Products		128,110		66,296
Total @ LIFO		176,287		106,715
Merchandise		24,122		23,707
Supplies		26,052		25,798
Total @ FIFO		50,174		49,505
Total Inventory	$	226,461	$	156,220

As of May 31, 2013 and August 31, 2012, the replacement cost of LIFO inventories exceeded their LIFO carrying values by approximately $78,579,000 and $77,727,000, respectively.

10

UNITED REFINING COMPANY AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(Unaudited)

4. Subsidiary Guarantors

All of the Company’s wholly-owned subsidiaries fully and unconditionally guarantee on an unsecured basis, on a joint and several basis, the Company’s 10.50% Senior Secured Notes due 2018. There are no restrictions within the consolidated group on the ability of the Company or any of its subsidiaries to obtain loans from or pay dividends to other members of the consolidated group. Financial information of the Company’s wholly-owned subsidiary guarantors is as follows:

Condensed Consolidating Balance Sheets

(in thousands)

	May 31, 2013												August 31, 2012
	United Refining Company			Guarantors			Eliminations			United Refining Company  & Subsidiaries			United Refining Company			Guarantors			Eliminations			United Refining Company  & Subsidiaries
Assets
Current:
Cash and cash equivalents	$	110,751		$	13,341		$	—		$	124,092		$	122,219		$	15,321		$	—		$	137,540
Accounts receivable, net		63,930			39,951			—			103,881			79,870			40,729			—			120,599
Inventories, net		197,196			29,265			—			226,461			127,469			28,751			—			156,220
Prepaid expenses and other assets		39,849			5,213			—			45,062			16,311			3,502			—			19,813
Deferred income taxes		—			—			—			—			(114	)		1,162			—			1,048
Amounts due from affiliated companies		—			—			—			—			344			(255	)		—			89
Intercompany		136,814			6,924			(143,738	)		—			117,992			16,703			(134,695	)		—
Total current assets		548,540			94,694			(143,738	)		499,496			464,091			105,913			(134,695	)		435,309
Property, plant and equipment, net		175,304			94,040			—			269,344			176,282			77,105			—			253,387
Deferred financing costs, net		7,217			—			—			7,217			8,471			—			—			8,471
Goodwill and other non-amortizable assets		—			11,849			—			11,849			—			11,849			—			11,849
Amortizable intangible assets, net		—			1,084			—			1,084			—			1,164			—			1,164
Deferred turnaround costs & other assets		10,097			2,776			—			12,873			15,173			2,977			—			18,150
Investment in subsidiaries		15,302			—			(15,302	)		—			17,018			—			(17,018	)		—
	$	756,460		$	204,443		$	(159,040	)	$	801,863		$	681,035		$	199,008		$	(151,713	)	$	728,330
Liabilities and Stockholder’s Equity
Current:
Current installments of long-term debt	$	911		$	711		$	—		$	1,622		$	939		$	379		$	—		$	1,318
Accounts payable		38,199			21,222			—			59,421			22,528			19,675			—			42,203
Derivative liability		—			—			—			—			9,098			—			—			9,098
Accrued liabilities		19,375			5,341			—			24,716			11,147			5,769			—			16,916
Income taxes payable		12,150			(1,160	)		—			10,990			25,866			3,065			—			28,931
Sales, use and fuel taxes payable		16,657			4,309			—			20,966			17,622			4,270			—			21,892
Deferred income taxes		3,004			(1,161	)		—			1,843			—			—			—			—
Amounts due to affiliated companies		—			744			—			744			—			—			—			—
Intercompany		—			143,738			(143,738	)		—			—			134,695			(134,695	)		—
Total current liabilities		90,296			173,744			(143,738	)		120,302			87,200			167,853			(134,695	)		120,358
Long term debt: less current installments		356,414			2,779			—			359,193			356,448			2,230			—			358,678
Deferred income taxes		5,435			9,916			—			15,351			5,753			9,269			—			15,022
Deferred retirement benefits		86,739			2,702			—			89,441			90,358			2,638			—			92,996
Total liabilities		538,884			189,141			(143,738	)		584,287			539,759			181,990			(134,695	)		587,054
Commitment and contingencies Stockholder’s equity
Common stock, $.10 par value per share – shares authorized 100; issued and outstanding 100		—			18			(18	)		—			—			18			(18	)		—
Additional paid-in capital		24,825			10,651			(10,651	)		24,825			24,825			10,651			(10,651	)		24,825
Retained earnings		211,698			6,260			(6,260	)		211,698			135,988			8,123			(8,123	)		135,988
Accumulated other comprehensive loss		(18,947	)		(1,627	)		1,627			(18,947	)		(19,537	)		(1,774	)		1,774			(19,537	)
Total stockholder’s equity		217,576			15,302			(15,302	)		217,576			141,276			17,018			(17,018	)		141,276
	$	756,460		$	204,443		$	(159,040	)	$	801,863		$	681,035		$	199,008		$	(151,713	)	$	728,330

11

UNITED REFINING COMPANY AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(Unaudited)

Condensed Consolidating Statements of Operations

(in thousands)

	Three Months Ended May 31, 2013												Three Months Ended May 31, 2012
	United Refining Company			Guarantors			Eliminations			United Refining Company  & Subsidiaries			United Refining Company			Guarantors			Eliminations			United Refining Company  & Subsidiaries
Net sales	$	676,765		$	437,885		$	(231,130	)	$	883,520		$	722,897		$	458,135		$	(245,234	)	$	935,798
Costs and expenses:
Costs of goods sold (exclusive of depreciation, amortization and losses on derivative contracts)		584,966			398,211			(231,130	)		752,047			590,847			417,197			(245,234	)		762,810
Losses on derivative contracts		—			—			—			—			1,957			—			—			1,957
Selling, general and administrative expenses		5,900			35,407			—			41,307			5,203			32,783			—			37,986
Depreciation and amortization expenses		4,813			1,665			—			6,478			4,590			1,542			—			6,132
		595,679			435,283			(231,130	)		799,832			602,597			451,522			(245,234	)		808,885
Operating income		81,086			2,602			—			83,688			120,300			6,613			—			126,913
Other income (expense):
Interest expense, net		(9,751	)		(127	)		—			(9,878	)		(10,145	)		(130	)		—			(10,275	)
Other, net		(895	)		157			—			(738	)		(1,234	)		181			—			(1,053	)
Equity in net income of subsidiaries		1,666			—			(1,666	)		—			3,985			—			(3,985	)		—
		(8,980	)		30			(1,666	)		(10,616	)		(7,394	)		51			(3,985	)		(11,328	)
Income before income tax expense		72,106			2,632			(1,666	)		73,072			112,906			6,664			(3,985	)		115,585
Income tax expense		27,547			966			—			28,513			44,805			2,679			—			47,484
Net income	$	44,559		$	1,666		$	(1,666	)	$	44,559		$	68,101		$	3,985		$	(3,985	)	$	68,101

12

UNITED REFINING COMPANY AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(Unaudited)

Condensed Consolidating Statements of Operations

(in thousands)

	Nine Months Ended May 31, 2013												Nine Months Ended May 31, 2012
	United Refining Company			Guarantors			Eliminations			United Refining Company  & Subsidiaries			United Refining Company			Guarantors			Eliminations			United Refining Company  & Subsidiaries
Net sales	$	2,113,470		$	1,272,938		$	(675,717	)	$	2,710,691		$	2,122,791		$	1,280,800		$	(674,918	)	$	2,728,673
Costs and expenses:
Costs of goods sold (exclusive of depreciation, amortization and losses/(gains) on derivative contracts)		1,768,975			1,166,063			(675,717	)		2,259,321			1,880,948			1,172,032			(674,918	)		2,378,062
Losses/(gains) on derivative contracts		2,319			—			—			2,319			(37,495	)		—			—			(37,495	)
Selling, general and administrative expenses		18,384			104,433			—			122,817			17,294			99,279			—			116,573
Depreciation and amortization expenses		14,887			5,013			—			19,900			13,411			4,658			—			18,069
		1,804,565			1,275,509			(675,717	)		2,404,357			1,874,158			1,275,969			(674,918	)		2,475,209
Operating income (loss)		308,905			(2,571	)		—			306,334			248,633			4,831			—			253,464
Other income (expense):
Interest expense, net		(28,584	)		(374	)		—			(28,958	)		(30,427	)		(361	)		—			(30,788	)
Other, net		(2,805	)		479			—			(2,326	)		(2,963	)		630			—			(2,333	)
Equity in net loss of subsidiaries		(1,863	)		—			1,863			—			2,893			—			(2,893	)		—
		(33,252	)		105			1,863			(31,284	)		(30,497	)		269			(2,893	)		(33,121	)
Income (loss) before income tax expense (benefit)		275,653			(2,466	)		1,863			275,050			218,136			5,100			(2,893	)		220,343
Income tax expense (benefit)		107,885			(603	)		—			107,282			88,226			2,207			—			90,433
Net income (loss)	$	167,768		$	(1,863	)	$	1,863		$	167,768		$	129,910		$	2,893		$	(2,893	)	$	129,910

13

UNITED REFINING COMPANY AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(Unaudited)

Condensed Consolidating Statements of Cash Flows

(in thousands)

	Nine Months Ended May 31, 2013											Nine Months Ended May 31, 2012
	Issuer			Guarantors			Eliminations		Consolidated			Issuer			Guarantors			Eliminations		Consolidated
Net cash provided by operating activities	$	90,216		$	19,311		$	—	$	109,527		$	100,173		$	6,476		$	—	$	106,649
Cash flows from investing activities:
Additions to property, plant and equipment		(8,641	)		(20,825	)		—		(29,466	)		(8,106	)		(7,547	)		—		(15,653	)
Additions to amortizable intangible assets		—			—			—		—			—			(240	)		—		(240	)
Additions to deferred turnaround costs		(268	)		(48	)		—		(316	)		(1,325	)		(1,485	)		—		(2,810	)
Proceeds from asset dispositions		65			10			—		75			40			2,444			—		2,484
Net cash used in investing activities		(8,844	)		(20,863	)		—		(29,707	)		(9,391	)		(6,828	)		—		(16,219	)
Cash flows from financing activities:
Net reductions on revolving credit facility		—			—			—		—			(24,000	)		—			—		(24,000	)
Dividends to stockholder		(92,058	)		—			—		(92,058	)		(31,008	)		—			—		(31,008	)
Principal reductions of long-term debt		(782	)		(428	)		—		(1,210	)		(587	)		(267	)		—		(854	)
Net cash used in financing activities		(92,840	)		(428	)		—		(93,268	)		(55,595	)		(267	)		—		(55,862	)
Net (decrease) increase in cash and cash equivalents		(11,468	)		(1,980	)		—		(13,448	)		35,187			(619	)		—		34,568
Cash and cash equivalents, beginning of year		122,219			15,321			—		137,540			5,927			10,733			—		16,660
Cash and cash equivalents, end of period	$	110,751		$	13,341		$	—	$	124,092		$	41,114		$	10,114		$	—	$	51,228

14

UNITED REFINING COMPANY AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(Unaudited)

5. Segments of Business

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 tables (in thousands):

	Three Months Ended May 31,				Nine Months Ended May 31,
	2013		2012		2013			2012
Net Sales
Retail	$	436,697	$	457,005	$	1,269,271		$	1,277,162
Wholesale		446,823		478,793		1,441,420			1,451,511
	$	883,520	$	935,798	$	2,710,691		$	2,728,673
Intersegment Sales
Wholesale	$	229,942	$	244,104	$	672,050		$	671,280
Operating Income (Loss)
Retail	$	2,678	$	6,514	$	(1,985	)	$	4,698
Wholesale		81,010		120,399		308,319			248,766
	$	83,688	$	126,913	$	306,334		$	253,464
Depreciation and Amortization
Retail	$	1,453	$	1,385	$	4,378		$	4,183
Wholesale		5,025		4,747		15,522			13,886
	$	6,478	$	6,132	$	19,900		$	18,069
Capital Expenditures (including non-cash)
Retail	$	1,789	$	3,273	$	10,538		$	6,773
Wholesale		14,110		3,050		20,621			10,255
	$	15,899	$	6,323	$	31,159		$	17,028

	May 31, 2013		August 31, 2012
Total Assets
Retail	$	175,632	$	169,935
Wholesale		626,231		558,395
	$	801,863	$	728,330

15

UNITED REFINING COMPANY AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(Unaudited)

6. Employee Benefit Plans

For the periods ended May 31, 2013 and 2012, net pension and other postretirement benefit costs were comprised of the following:

	Pension Benefits
	Three Months Ended May 31,						Nine Months Ended May 31,
	2013			2012			2013			2012
	(in thousands)
Service cost	$	163		$	215		$	491		$	978
Interest cost on benefit obligation		1,280			914			3,845			4,904
Expected return on plan assets		(1,463	)		(860	)		(4,395	)		(4,582	)
Amortization and deferral of net loss		335			124			1,005			549
Net periodic benefit cost	$	315		$	393		$	946		$	1,849

	Other Post-Retirement Benefits
	Three Months Ended May 31,					Nine Months Ended May 31,
	2013		2012			2013		2012
	(in thousands)
Service cost	$	235	$	249		$	708	$	866
Interest cost on benefit obligation		471		543			1,418		1,886
Amortization and deferral of net loss		31		(149	)		93		(515	)
Net periodic benefit cost	$	737	$	643		$	2,219	$	2,237

As of May 31, 2013, $4,248,000 of contributions has been made to the Company pension plans for the fiscal year ending August 31, 2013.

In November 2011, the Company reached an agreement with the International Union of Operating Engineers Local 95, which represents the employees operating the refinery. The new agreement was effective February 1, 2012 and expires on February 1, 2017. Under the new collective bargaining agreement (Agreement), changes were made to healthcare and pension benefits provided by the Company. Effective February 1, 2012, medical benefits in retirement for new hires and active employees covered under the Agreement were eliminated. For employees covered under the Agreement meeting certain age and service requirements, the Company will contribute a defined dollar amount towards the cost of retiree healthcare based upon the employee’s length of service. Similarly, effective February 1, 2012, benefits under the Company’s defined benefit pension plan sponsored for employees covered under the agreement were frozen. The Company will provide an enhanced contribution under its defined contribution 401 (k) plan as well as a transition contribution for older employees. Additionally, deductibles and co-payments will be added to the medical benefits for employees covered under the Agreement.

As a result of the agreement and related plan design changes, a remeasurement of fiscal year 2012 expense pursuant to ASC 715-30 and ASC 715-60 was required, resulting in plan curtailments. As a result of such curtailments during the quarter ended November 30, 2011, the pension liability was reduced by $4,743,000 with a credit to accumulated other comprehensive loss (AOCL) of $4,552,000 and a credit to income of $191,000. Further, the postretirement welfare plan liability was reduced by $12,161,000 and AOCL credited for $12,298,000, with a charge to income of $137,000. The activity in AOCL was recorded net of related income tax effects.

16

UNITED REFINING COMPANY AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(Unaudited)

The Company accrues post-retirement benefits other than pensions, during the years that the employees render the necessary service, of the expected cost of providing those benefits to an employee and the employee’s beneficiaries and covered dependents.

7. Fair Value Measurements

The carrying values of all financial instruments classified as a current asset or a current liability 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 exceeded the carrying value of the long term debt at May 31, 2013 and August 31, 2012 by $48,302,000 and $20,804,000, respectively.

17

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Forward Looking Statements

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

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

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

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

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

• repayment of debt;

• general economic, business and market conditions;

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

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

• the availability and cost of financing to us;

• environmental, tax and tobacco legislation or regulation;

• volatility of gasoline prices, margins and supplies;

• merchandising margins;

• labor costs;

• level of capital expenditures;

• customer traffic;

• weather conditions;

• acts of terrorism and war;

• business strategies;

• expansion and growth of operations;

• future projects and investments;

18

• future exposure to currency devaluations or exchange rate fluctuations;

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

• future operating results and financial condition.

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

Recent Developments

The Company continues to be impacted by the volatility in petroleum markets in fiscal 2013. The lagged 3-2-1 crackspread is measured by the difference between the prices of crude oil contracts traded on the NYMEX for the preceding month to the prices of NYMEX gasoline and heating oil contracts in the current trading month. The Company uses a lagged crackspread as a margin indicator as it reflects the margin during the time period between the purchase of crude oil and its delivery to the refinery for processing. The lagged crackspread for the third quarter of fiscal 2013 was $29.28. Through July 5, 2013 the indicated lagged crackspread for the fourth quarter ending August 31, 2013 was $23.55, a $5.73 decrease from the average for the third quarter of fiscal 2013.

The Company and its lenders recently agreed on the terms of an amendment to the existing capital line of credit in the amount of $175,000,000 (including temporary availability up to $225,000,000). Effective June 18, 2013, the annual Commitment Fee is reduced to .25% and the Letter of Credit Fee, Revolving Credit Base Rate Spread and Revolving Credit Spread have been reduced as described in Amendment No. 1 to Amended and Restated Credit Agreement (the “Amendment”) dated as of June 18, 2013 attached hereto as Exhibit 10.8. The effect of these changes reduces the cost of future borrowing compared with the original terms of the Credit Agreement dated May 18, 2011. In addition, the Amendment extends the term of the Credit Agreement with the lenders to November 29, 2017 from an original expiration date of May 8, 2016. The Amendment also contains additional terms and conditions primarily of a regulatory, administrative and operational nature.

Results of Operations

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

The wholesale segment is responsible for the acquisition of crude oil, petroleum refining, supplying petroleum products to the retail segment and the marketing of petroleum products to wholesale and industrial customers. The retail segment sells petroleum products under the Kwik Fill^®, Citgo^® and Keystone^® brand names through a network of Company-operated retail units and convenience and grocery items through 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, together with the following information, are intended to supply investors with a reasonable basis for evaluating the Company’s operations, but does not serve to predict the Company’s future performance.

19

Retail Operations:

	Three Months Ended May 31,						Nine Months Ended May 31,
	2013			2012			2013			2012
	(dollars in thousands)
Net Sales
Petroleum	$	367,088		$	386,768		$	1,069,721		$	1,075,015
Merchandise and other		69,609			70,237			199,550			202,147
Total Net Sales		436,697			457,005			1,269,271			1,277,162
Costs of goods sold		397,270			416,432			1,162,774			1,169,340
Selling, general and administrative expenses		35,296			32,674			104,104			98,941
Depreciation and amortization expenses		1,453			1,385			4,378			4,183
Segment Operating Gain (Loss)	$	2,678		$	6,514		$	(1,985	)	$	4,698
Retail Operating Data:
Petroleum sales (thousands of gallons)		99,455			98,765			285,329			290,635
Petroleum margin (a)	$	21,969		$	22,946		$	56,037		$	56,964
Petroleum margin ($/gallon) (b)		.2209			.2323			.1964			.1960
Merchandise and other margins	$	17,456		$	17,625		$	50,460		$	50,858
Merchandise margin (percent of sales)		25.1	%		25.1	%		25.3	%		25.2	%

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

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

Comparison of Fiscal Quarters Ended May 31, 2013 and 2012

Net Sales

Retail sales decreased during the fiscal quarter ended May 31, 2013 by $20.3 million or 4.4% from the comparable period in fiscal 2012 from $457.0 million to $436.7 million. The decrease was primarily due to $19.7 million in petroleum sales and $.6 million in merchandise sales. The petroleum sales decrease resulted from a 5.7% decrease in retail selling prices per gallon offset by a .7 million gallon or a .7% increase in retail petroleum volume.

Costs of Goods Sold

Retail costs of goods sold decreased during the fiscal quarter ended May 31, 2013 by $19.1 million or 4.6% from the comparable period in fiscal 2012 from $416.4 million to $397.3 million. The decrease was primarily due to $19.4 million in petroleum purchase prices and merchandise cost of $.5 million, offset by an increase in freight cost of $.2 million and fuel tax of $.5 million.

Selling, General and Administrative Expenses

Retail Selling, General and Administrative (“SG&A”) expenses increased during the fiscal quarter ended May 31, 2013 by $2.6 million or 8.0% from the comparable period in fiscal 2012 from $32.7 million to $35.3 million. This increase was primarily due to maintenance costs of $.3 million, credit/customer service costs of $.1 million, pension/post-retirement costs of $.2 million and a gain on the sale of fixed assets in fiscal 2012 that reduced SG&A during that period.

20

Comparison of Nine Months Ended May 31, 2013 and 2012

Net Sales

Retail sales decreased during the nine months ended May 31, 2013 by $7.9 million or .6% for the comparable period in fiscal 2012 from $1,277.2 million to $1,269.3 million. The decrease was primarily due to $5.3 million in petroleum sales, and $2.6 million in merchandise sales. The petroleum sales decrease resulted from a 5.3 million gallon or 1.8% decrease in sales volume offset by a 1.4% increase in retail selling prices per gallon.

Costs of Goods Sold

Retail costs of goods sold decreased during the nine months ended May 31, 2013 by $6.5 million or .6% for the comparable period in fiscal 2012 from $1,169.3 million to $1,162.8 million. The decrease was primarily due to $3.8 million in petroleum purchase prices, merchandise costs of $2.2 million and freight costs of $1.3 million offset by an increase in fuel taxes of $.7 million.

Selling, General and Administrative Expenses

Retail SG&A expenses increased during the nine months ended May 31, 2013 by $5.2 million or 5.2% for the comparable period in fiscal 2012 from $98.9 million to $104.1 million. The increase was due to payroll costs of $.7 million, credit/customer service costs of $.6 million, environmental costs of $.6 million, supply costs of $.2 million, maintenance costs of $.7 million, pension/post-retirement costs of $.5 million and a gain on the sale of fixed assets in fiscal 2012 that reduced SG&A during that period.

Wholesale Operations:

	Three Months Ended May 31,				Nine Months Ended May 31,
	2013		2012		2013		2012
	(dollars in thousands)
Net Sales (a)	$	446,823	$	478,793	$	1,441,420	$	1,451,511
Costs of goods sold (exclusive of depreciation and amortization and losses /(gains) on derivative contracts)		354,777		346,378		1,096,547		1,208,722
Losses / (gains) on derivative contracts		—		1,957		2,319		(37,495	)
Selling, general and administrative expenses		6,011		5,312		18,713		17,632
Depreciation and amortization expenses		5,025		4,747		15,522		13,886
Segment Operating Income	$	81,010	$	120,399	$	308,319	$	248,766

21

Key Wholesale Operating Statistics:

	Three Months Ended May 31,						Nine Months Ended May 31,
	2013			2012			2013			2012
Refinery Product Yield (thousands of barrels)
Gasoline and gasoline blendstock		2,311			2,294			7,575			7,568
Distillates		1,310			1,210			4,137			4,127
Asphalt		1,754			1,648			5,468			5,372
Butane, propane, residual products, internally produced fuel and other (“Other”)		736			780			1,817			1,727
Total Product Yield		6,111			5,932			18,997			18,794
% Heavy Crude Oil of Total Refinery Throughput (b)		60	%		61	%		60	%		60	%
Crude throughput (thousand barrels per day)		61.9			59.0			64.7			63.8
Product Sales (thousand of barrels) (a)
Gasoline and gasoline blendstock		1,469			1,455			4,670			4,627
Distillates		1,048			1,056			3,389			3,291
Asphalt		1,659			1,568			4,987			5,190
Other		208			188			577			559
Total Product Sales Volume		4,384			4,267			13,623			13,667
Product Sales (dollars in thousands) (a)
Gasoline and gasoline blendstock	$	174,109		$	183,785		$	564,086		$	549,574
Distillates		132,926			139,001			450,433			428,119
Asphalt		128,673			143,461			395,088			438,572
Other		11,115			12,546			31,813			35,246
Total Product Sales	$	446,823		$	478,793		$	1,441,420		$	1,451,511

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

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

Comparison of Fiscal Quarters Ended May 31, 2013 and 2012

Net Sales

Wholesale sales decreased during the three months ended May 31, 2013 by $32.0 million or 6.7% from the comparable period in fiscal 2012 from $478.8 million to $446.8 million. The decrease was due to a 6.7% decrease in wholesale prices offset by a 2.7% increase in wholesale volumes.

Costs of Goods Sold (exclusive of depreciation and amortization and losses/(gains) on derivative contracts)

Wholesale costs of goods sold increased during the three months ended May 31, 2013 by $8.4 million or 2.4% from the comparable period in fiscal 2012 from $346.4 million to $354.8 million. The increase in wholesale costs of goods sold during this period was primarily due to an increase in cost and volume of raw materials.

Losses / (Gains) on Derivative Contracts

During the three months ended May 31, 2013 and 2012, the Company recognized $0 million and $2.0 million of losses in its Consolidated Statements of Operations, respectively. See also Footnote 2 to the Company’s Consolidated Financial Statements.

22

Selling, General and Administrative Expenses

Wholesale SG&A expenses increased during the three months ended May 31, 2013 by $.7 million or 13.2% from the comparable period in fiscal 2012 from $5.3 million or 1.1% of net wholesale sales to $6.0 million or 1.3% of net wholesale sales. The increase was primarily due to payroll costs and professional services.

Comparison of Nine Months Ended May 31, 2013 and 2012

Net Sales

Wholesale sales decreased during the nine months ended May 31, 2013 by $10.1 million or .7% from the comparable period in fiscal 2012 from $1,451.5 million to $1,441.4 million. The decrease was due to a .3% decrease in wholesale prices and volumes.

Costs of Goods Sold (exclusive of depreciation and amortization)

Wholesale costs of goods sold decreased during the nine months ended May 31, 2013 by $112.2 million or 9.3% for the comparable period in fiscal 2012 from $1,208.7 million to $1,096.5 million. The decrease in wholesale costs of goods sold was primarily due to a decrease in the cost of raw materials and volumes.

Losses / (Gains) on Derivative Contracts

For the nine months ended May 31, 2013, the Company recognized $2.3 million and $(37.5) million of losses/(gains) in its Consolidated Statements of Operations, respectively. See also Footnote 2 to the Company’s Consolidated Financial Statements.

Selling, General and Administrative Expenses

Wholesale SG&A expenses increased during the nine months ended May 31, 2013 by $1.1 million or 6.1% from the comparable period in fiscal 2012 from $17.6 million or 1.2% of net wholesale sales to $18.7 or 1.3% of net wholesale sales. The increase was primarily due to payroll costs and professional services.

Consolidated Expenses:

Interest Expense, net

Net interest expense for the three months ended May 31, 2013 and fiscal 2012 remained relatively consistent at $9.9 million.

Net interest expense for the nine months ended May 31, 2013 decreased $.3 million or 5% from the comparable period in fiscal 2012 from $29.3 million to $29.0 million.

Income Tax Expense

The Company’s effective tax rate for both the three and nine months ended May 31, 2013 and 2012 was approximately 39% and 41%, respectively. This change is primarily due to the recognition of permanent book to tax adjustments.

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.

23

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

	May 31, 2013
Cash and cash equivalents	$	124,092
Working capital	$	379,194
Current ratio		4.2
Debt	$	360,815

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

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

	Nine Months Ended May 31, 2013
	(in millions)
Significant uses of cash
Investing activities:
Additions to deferred turnaround cost	$	(.3	)
Property, plant and equipment
Purchase of United Biofuels Assets		(10.1	)
Other general capital items (tank repairs, refinery piping, etc)		(4.9	)
Retail maintenance (blacktop, roof, HVAC, rehab)		(4.0	)
Retail purchase		(2.7	)
Non refinery capital equipment		(2.3	)
Environmental		(2.1	)
New 300 thousand barrel crude tank		(1.2	)
Natural gasoline/ethanol/truck unloading		(1.2	)
Retail petroleum upgrade		(.9	)
Total property, plant and equipment		(29.4	)
Net cash used in investing activities		(29.7	)
Financing activities:
Dividend to stockholder	$	(92.1	)
Principal reductions of long term debt		(1.2	)
Net cash used in financing activities	$	(93.3	)
Working capital items:
Accounts payable increase	$	17.2
Accounts receivable decrease		16.7
Accrued liabilities increase		7.8
Amounts due from affiliated companies, net		.8
Increase in inventory		(70.2	)
Prepaid expense increase		(25.3	)
Income taxes payable decrease		(17.9	)
Derivative asset/liability		(9.1	)
Sales, use and fuel taxes payable decrease		(.9	)
Cash provided by working capital items	$	(80.9	)

24

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

Maintenance and non-discretionary capital expenditures have averaged approximately $6.0 million annually over the last three years for the refining and marketing operations. Management does not foresee any increase in these maintenance and non-discretionary capital expenditures during fiscal year 2013 at this time.

Future liquidity, both short and long-term, will continue to be primarily dependent on realizing a refinery margin sufficient to cover fixed and variable expenses, including planned capital expenditures. We expect to be able to meet our working capital, capital expenditure, contractual obligations, letter of credit and debt service requirements out of cash flow from operations, cash on hand and borrowings under our Amended and Restated Revolving Credit Facility of $175,000,000. This provides the Company with flexibility relative to its cash flow requirements in light of market fluctuations, particularly involving crude oil prices and seasonal business cycles and will assist the Company in meeting its working capital, ongoing capital expenditure needs and for general corporate purposes. The agreement expires on May 18, 2016. Under the Amended and Restated Revolving Credit Facility, the applicable margin is calculated on the average unused availability as follows: (a) for base rate borrowing, at the greater of the Agent Bank’s prime rate or the Federal Funds Open Rate plus 1.5%; or the Daily LIBOR rate plus 3%; plus an applicable margin of 0% to .5%; (b) for euro-rate based borrowings, at the LIBOR Rate plus an applicable margin of 2.75% to 3.25%. The Agent Bank’s prime rate at May 31, 2013 was 3.25%.

The Amended and Restated Revolving Credit Facility is secured primarily by certain cash accounts, accounts receivable and inventory. Until maturity, we may borrow on a borrowing base formula as set forth in the facility. We had standby letters of credit of $6.5 million as of May 31, 2013 and there were no outstanding borrowings under the Amended and Restated Revolving Credit Facility resulting in net availability of $168.5 million. As of July 15, 2013, there were no outstanding borrowings under the Amended and Restated Revolving Credit Facility and there were standby letters of credit in the amount of $6.5 million, resulting in a net availability of $168.5 million and the Company had full access to it. The Company’s working capital ratio was 4.2 as of May 31, 2013.

The Company and its lenders recently agreed on the terms of an amendment to the existing capital line of credit in the amount of $175,000,000 (including temporary availability up to $225,000,000). Effective June 18, 2013, the annual Commitment Fee is reduced to .25% and the Letter of Credit Fee, Revolving Credit Base Rate Spread and Revolving Credit Spread have been reduced as described in Amendment No. 1 to Amended and Restated Credit Agreement (the “Amendment”) dated as of June 18, 2013 attached hereto as Exhibit 10.8. The effect of these changes reduces the cost of future borrowing compared with the original terms of the Credit Agreement dated May 18, 2011. In addition, the Amendment extends the term of the Credit Agreement with the lenders to November 29, 2017 from an original expiration date of May 8, 2016. The Amendment also contains additional terms and conditions primarily of a regulatory, administrative and operational nature.

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

Federal, state and local laws and regulations relating to the environment affect nearly all of our operations. As is the case with all the companies engaged in similar industries, we face significant exposure from actual or potential claims and lawsuits involving environmental matters. Future expenditures related to environmental matters cannot be reasonably quantified in many circumstances due to the uncertainties as to required remediation methods and related clean-up cost estimates. We cannot predict what additional environmental

25

legislation or regulations will be enacted or become effective in the future or how existing or future laws or regulations will be administered or interpreted with respect to products or activities to which they have not been previously applied.

Seasonal Factors

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

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

Inflation

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

Item 3. Quantitative and Qualitative Disclosures about Market Risk.

The Company uses its Amended and Restated Revolving Credit Facility to finance a portion of its operations. This on-balance sheet financial instrument, to the extent it provides for variable rates, exposes the Company to interest rate risk resulting from changes in the Agent Bank’s Prime rate, the Federal Funds or LIBOR rate. As of July 15, 2013, there were no outstanding borrowings under the Amended and Restated Revolving Credit Facility.

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 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.

At the quarter ended May 31, 2013, the Company had no derivative investments outstanding as part of its risk management strategy. See also Footnote 2 to the Company’s Consolidated Financial Statements.

Item 4. Controls and Procedures.

Our management, with the participation of our chief executive officer and chief financial officer, evaluated the effectiveness of our disclosure controls and procedures as of May 31, 2013. The term “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, means controls and other procedures of a company that are designed to ensure that information required to be disclosed by a company in the reported, within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the company’s management, including its principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure. Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Based on the evaluation of our disclosure controls and procedures as of May 31, 2013, our chief executive officer and chief financial officer concluded that, as of such date, our disclosure controls and procedures were effective at the reasonable assurance level.

There have not been any changes in the Company’s internal controls over financial reporting that occurred during the Company’s fiscal quarter ended May 31, 2013 that have materially affected, or are reasonably likely to materially affect, the Company’s internal controls over financial reporting.

26

Part II OTHER INFORMATION

Item 1. Legal Proceedings.

None.

Item 1A. Risk Factors.

There have been no material changes in our Risk Factors disclosed in the Form 10-K for the year ended August 31, 2012.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

None.

Item 3. Defaults Upon Senior Securities.

None.

Item 4. Mine Safety Disclosures.

Not applicable.

Item 5. Other Information.

None.

Item 6. Exhibits.

Exhibit 10.1	Amended and Restated Credit Agreement, dated June 18, 2013, by and among United Refining Company, United Refining Company of Pennsylvania, Kiantone Pipeline Corporation, Country Fair, Inc., the lenders party thereto, PNC Bank, National Association, as Administrative Agent, Bank of America, N.A., as Documentation Agent, Manufacturers and Traders Trust Company and Bank Leumi, USA.
Exhibit 31.1	Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
Exhibit 31.2	Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
Exhibit 32.1	Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
Exhibit 101	Interactive XBRL Data

27

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

Date:July 15, 2013

UNITED REFINING COMPANY

(Registrant)

/s/ Myron L. Turfitt

Myron L. Turfitt

President

/s/ James E. Murphy

James E. Murphy

Chief Financial Officer

28

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

Date:July 15, 2013

KIANTONE PIPELINE CORPORATION

(Registrant)

/s/ Myron L. Turfitt

Myron L. Turfitt

President

/s/ James E. Murphy

James E. Murphy

Chief Financial Officer

29

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

Date:July 15, 2013

UNITED REFINING COMPANY OF

PENNSYLVANIA

(Registrant)

/s/ Myron L. Turfitt

Myron L. Turfitt

President

/s/ James E. Murphy

James E. Murphy

Chief Financial Officer

30

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

Date:July 15, 2013

KIANTONE PIPELINE COMPANY

(Registrant)

/s/ Myron L. Turfitt

Myron L. Turfitt

President

/s/ James E. Murphy

James E. Murphy

Chief Financial Officer

31

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

Date:July 15, 2013

UNITED JET CENTER, INC.

(Registrant)

/s/ Myron L. Turfitt

Myron L. Turfitt

President

/s/ James E. Murphy

James E. Murphy

Chief Financial Officer

32

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

Date:July 15, 2013

KWIK-FILL CORPORATION

(Registrant)

/s/ Myron L. Turfitt

Myron L. Turfitt

President

/s/ James E. Murphy

James E. Murphy

Chief Financial Officer

33

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

Date:July 15, 2013

INDEPENDENT GASOLINE AND OIL

COMPANY OF ROCHESTER, INC.

(Registrant)

/s/ Myron L. Turfitt

Myron L. Turfitt

President

/s/ James E. Murphy

James E. Murphy

Chief Financial Officer

34

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

Date:July 15, 2013

BELL OIL CORP.

(Registrant)

/s/ Myron L. Turfitt

Myron L. Turfitt

President

/s/ James E. Murphy

James E. Murphy

Chief Financial Officer

35

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

Date:July 15, 2013

PPC, INC.

(Registrant)

/s/ Myron L. Turfitt

Myron L. Turfitt

President

/s/ James E. Murphy

James E. Murphy

Chief Financial Officer

36

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

Date:July 15, 2013

SUPER TEST PETROLEUM, INC.

(Registrant)

/s/ Myron L. Turfitt

Myron L. Turfitt

President

/s/ James E. Murphy

James E. Murphy

Chief Financial Officer

37

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

Date:July 15, 2013

KWIK-FIL, INC.

(Registrant)

/s/ Myron L. Turfitt

Myron L. Turfitt

President

/s/ James E. Murphy

James E. Murphy

Chief Financial Officer

38

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

Date:July 15, 2013

VULCAN ASPHALT REFINING CORPORATION

(Registrant)

/s/ Myron L. Turfitt

Myron L. Turfitt

President

/s/ James E. Murphy

James E. Murphy

Chief Financial Officer

39

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

Date:July 15, 2013

COUNTRY FAIR, INC.

(Registrant)

/s/ Myron L. Turfitt

Myron L. Turfitt

President and Chief Operating Officer

/s/ James E. Murphy

James E. Murphy

Vice President Finance

40