##### Table of Contents





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 February 28, 2009

or



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

For the transition period from  to

Commission File No. 001-06198







|     |  |                                                                               
|---- |  | ------------------------------------------------------------------------------
|LOGO |  | 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 is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of
accelerated filer and large accelerated filer in Rule 12b-2 of the Exchange Act.



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

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

As of April 20, 2009, there were 100 shares of common stock, par value $.10 per share, of the Registrant outstanding.









---

##### Table of Contents

TABLE OF ADDITIONAL REGISTRANTS



|                                                   |  |                                            |  |                                  |  |                      
|-------------------------------------------------- |  | ------------------------------------------ |  | -------------------------------- |  | ---------------------
|Name                                               |  | State of OtherJurisdiction ofIncorporation |  | IRS EmployerIdentificationNumber |  | CommissionFile 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



---

##### Table of Contents

FORM 10-Q  CONTENTS



|           |  |                                                                                                                          |  |        
|---------- |  | ------------------------------------------------------------------------------------------------------------------------ |  | -------
|           |  |                                                                                                                          |  | PAGE(S)
|PART I.    |  | FINANCIAL INFORMATION                                                                                                    |  |        
|           |  |                                                                                                                         
|Item 1.    |  | Financial Statements                                                                                                     |  |        
|           |  |                                                                                                                         
|           |  | Consolidated Balance Sheets  February 28, 2009 (unaudited) and August 31, 2008                                          |  | 4      
|           |  |                                                                                                                         
|           |  | Consolidated Statements of Operations  Quarter and Six Months Ended February 28, 2009 and February 29, 2008 (unaudited) |  | 5      
|           |  |                                                                                                                         
|           |  | Consolidated Statements of Cash Flows  Six Months Ended February 28, 2009 and February 29, 2008 (unaudited)             |  | 6      
|           |  |                                                                                                                         
|           |  | Notes to Consolidated Financial Statements (unaudited)                                                                   |  | 7      
|           |  |                                                                                                                         
|Item 2.    |  | Managements Discussion and Analysis of Financial Condition and Results of Operations                                    |  | 17     
|           |  |                                                                                                                         
|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.    |  | Submission of Matters to a Vote of Security Holders                                                                      |  | 27     
|           |  |                                                                                                                         
|Item 5.    |  | Other Information                                                                                                        |  | 27     
|           |  |                                                                                                                         
|Item 6.    |  | Exhibits                                                                                                                 |  | 27     
|           | 
|Signatures |  | 28                                                                                                                      



3



---

##### Table of Contents

|PART I. | FINANCIAL INFORMATION
|------- | ---------------------



|ITEM 1. | FINANCIAL STATEMENTS.
|------- | ---------------------



UNITED REFINING COMPANY AND SUBSIDIARIES



CONSOLIDATED BALANCE SHEETS

(in
thousands, except share amounts)



|                                                                                           |  |                             |         |   |                |   |         |  
|------------------------------------------------------------------------------------------ |  | --------------------------- | ------- | - | -------------- | - | ------- | -
|                                                                                           |  | February 28,2009(Unaudited) |         |   | August 31,2008 |  
|Assets                                                                                     |  |                             |         |   |                |   |         |  
|Current:                                                                                   |  |                             |         |   |                |   |         |  
|Cash and cash equivalents                                                                  |  | $                           | 17,864  |   |                | $ | 32,447  |  
|Accounts receivable, net                                                                   |  |                             | 57,625  |   |                |   | 124,022 |  
|Refundable income taxes                                                                    |  |                             | 28,662  |   |                |   | 35,913  |  
|Inventories                                                                                |  |                             | 182,788 |   |                |   | 94,708  |  
|Prepaid expenses and other assets                                                          |  |                             | 16,021  |   |                |   | 21,304  |  
|                                                                                           |  |                             |         |   |                |   |         |  
|Total current assets                                                                       |  |                             | 302,960 |   |                |   | 308,394 |  
|Property, plant and equipment, net                                                         |  |                             | 252,396 |   |                |   | 244,011 |  
|Investment in affiliated company                                                           |  |                             | 6,429   |   |                |   | 6,389   |  
|Deferred financing costs, net                                                              |  |                             | 4,164   |   |                |   | 4,544   |  
|Goodwill                                                                                   |  |                             | 1,349   |   |                |   | 1,349   |  
|Tradename                                                                                  |  |                             | 10,500  |   |                |   | 10,500  |  
|Amortizable intangible assets, net                                                         |  |                             | 1,536   |   |                |   | 1,713   |  
|Deferred turnaround costs and other assets, net                                            |  |                             | 10,349  |   |                |   | 13,120  |  
|Deferred income taxes                                                                      |  |                             | 11,567  |   |                |   | 11,773  |  
|                                                                                           |  |                             |         |   |                |   |         |  
|                                                                                           |  | $                           | 601,250 |   |                | $ | 601,793 |  
|                                                                                           |  |                             |         |   |                |   |         |  
|Liabilities and Stockholders (Deficit) Equity                                             |  |                             |         |   |                |   |         |  
|Current:                                                                                   |  |                             |         |   |                |   |         |  
|Revolving credit facility                                                                  |  | $                           | 18,000  |   |                | $ | 9,000   |  
|Current installments of long-term debt                                                     |  |                             | 2,357   |   |                |   | 2,184   |  
|Accounts payable                                                                           |  |                             | 42,558  |   |                |   | 46,912  |  
|Accrued liabilities                                                                        |  |                             | 13,451  |   |                |   | 16,377  |  
|Sales, use and fuel taxes payable                                                          |  |                             | 17,576  |   |                |   | 21,454  |  
|Deferred income taxes                                                                      |  |                             | 2,891   |   |                |   | 2,891   |  
|Amounts due to affiliated companies, net                                                   |  |                             | 2,016   |   |                |   | 2,591   |  
|                                                                                           |  |                             |         |   |                |   |         |  
|Total current liabilities                                                                  |  |                             | 98,849  |   |                |   | 101,409 |  
|Long term debt: less current installments                                                  |  |                             | 355,941 |   |                |   | 356,107 |  
|Deferred gain on settlement of pension plan obligations                                    |  |                             |        |   |                |   | 55      |  
|Deferred retirement benefits                                                               |  |                             | 87,613  |   |                |   | 86,146  |  
|Other noncurrent liabilities                                                               |  |                             | 11      |   |                |   | 18      |  
|                                                                                           |  |                             |         |   |                |   |         |  
|Total liabilities                                                                          |  |                             | 542,414 |   |                |   | 543,735 |  
|                                                                                           |  |                             |         |   |                |   |         |  
|Commitments and contingencies                                                              |  |                             |         |   |                |   |         |  
|Stockholders equity:                                                                      |  |                             |         |   |                |   |         |  
|Common stock; $.10 par value per share  shares authorized 100; issued and outstanding 100 |  |                             |        |   |                |   |        |  
|Additional paid-in capital                                                                 |  |                             | 24,665  |   |                |   | 24,665  |  
|Retained earnings                                                                          |  |                             | 56,326  |   |                |   | 56,338  |  
|Accumulated other comprehensive loss                                                       |  |                             | (22,155 | ) |                |   | (22,945 | )
|                                                                                           |  |                             |         |   |                |   |         |  
|Total stockholders equity                                                                 |  |                             | 58,836  |   |                |   | 58,058  |  
|                                                                                           |  |                             |         |   |                |   |         |  
|                                                                                           |  | $                           | 601,250 |   |                | $ | 601,793 |  
|                                                                                           |  |                             |         |   |                |   |         |  



See accompanying notes
to consolidated financial statements.



4



---

##### Table of Contents

UNITED REFINING COMPANY AND SUBSIDIARIES



CONSOLIDATED STATEMENTS OF OPERATIONS(Unaudited)

(in thousands)



|                                             |  |                    |         |   |                  |   |         |              |  |   |               |   |  |   |           |  
|-------------------------------------------- |  | ------------------ | ------- | - | ---------------- | - | ------- | ------------ |  | - | ------------- | - |  | - | --------- | -
|                                             |  | Three Months Ended |         |   | Six Months Ended |  
|                                             |  | February 28,       |         |   | February 29,     |   |         | February 28, |  |   | February 29,  |  
|                                             |  | 2009               |         |   | 2008             |   |         | 2009         |  |   | 2008          |  
|                                             |  |                    |         |   | (As adjusted)    |   |         |              |  |   | (As adjusted) |  
|Net sales                                    |  | $                  | 434,809 |   |                  | $ | 663,718 |              |  | $ | 1,205,280     |   |  | $ | 1,357,286 |  
|Costs of goods sold                          |  |                    | 390,596 |   |                  |   | 655,109 |              |  |   | 1,105,683     |   |  |   | 1,297,584 |  
|                                             |  |                    |         |   |                  |   |         |              |  |   |               |   |  |   |           |  
|Gross profit                                 |  |                    | 44,213  |   |                  |   | 8,609   |              |  |   | 99,597        |   |  |   | 59,702    |  
|                                             |  |                    |         |   |                  |   |         |              |  |   |               |   |  |   |           |  
|Expenses:                                    |  |                    |         |   |                  |   |         |              |  |   |               |   |  |   |           |  
|Selling, general and administrative expenses |  |                    | 35,924  |   |                  |   | 35,298  |              |  |   | 72,158        |   |  |   | 70,729    |  
|Depreciation and amortization expenses       |  |                    | 4,057   |   |                  |   | 4,041   |              |  |   | 8,176         |   |  |   | 8,080     |  
|                                             |  |                    |         |   |                  |   |         |              |  |   |               |   |  |   |           |  
|Total operating expenses                     |  |                    | 39,981  |   |                  |   | 39,339  |              |  |   | 80,334        |   |  |   | 78,809    |  
|                                             |  |                    |         |   |                  |   |         |              |  |   |               |   |  |   |           |  
|Operating income (loss)                      |  |                    | 4,232   |   |                  |   | (30,730 | )            |  |   | 19,263        |   |  |   | (19,107   | )
|                                             |  |                    |         |   |                  |   |         |              |  |   |               |   |  |   |           |  
|Other income (expense):                      |  |                    |         |   |                  |   |         |              |  |   |               |   |  |   |           |  
|Interest expense, net                        |  |                    | (9,094  | ) |                  |   | (7,550  | )            |  |   | (18,473       | ) |  |   | (14,231   | )
|Other, net                                   |  |                    | (642    | ) |                  |   | (749    | )            |  |   | (851          | ) |  |   | (1,095    | )
|Equity in net earnings of affiliate          |  |                    | 6       |   |                  |   | 208     |              |  |   | 40            |   |  |   | 894       |  
|                                             |  |                    |         |   |                  |   |         |              |  |   |               |   |  |   |           |  
|                                             |  |                    | (9,730  | ) |                  |   | (8,091  | )            |  |   | (19,284       | ) |  |   | (14,432   | )
|                                             |  |                    |         |   |                  |   |         |              |  |   |               |   |  |   |           |  
|Loss before income tax benefit               |  |                    | (5,498  | ) |                  |   | (38,821 | )            |  |   | (21           | ) |  |   | (33,539   | )
|Income tax benefit                           |  |                    | (2,351  | ) |                  |   | (15,916 | )            |  |   | (9            | ) |  |   | (13,750   | )
|                                             |  |                    |         |   |                  |   |         |              |  |   |               |   |  |   |           |  
|Net loss                                     |  | $                  | (3,147  | ) |                  | $ | (22,905 | )            |  | $ | (12           | ) |  | $ | (19,789   | )
|                                             |  |                    |         |   |                  |   |         |              |  |   |               |   |  |   |           |  





See accompanying notes to consolidated financial statements.



5



---

##### Table of Contents

UNITED REFINING COMPANY AND SUBSIDIARIES



CONSOLIDATED STATEMENTS OF CASH
FLOWS(Unaudited)

(in thousands)



|                                                                            |  |                  |         |   |                  |   |         |  
|--------------------------------------------------------------------------- |  | ---------------- | ------- | - | ---------------- | - | ------- | -
|                                                                            |  | Six Months Ended |        
|                                                                            |  | February 28,2009 |         |   | February 29,2008 |  
|                                                                            |  |                  |         |   | (As adjusted)    |  
|Cash flows from operating activities:                                       |  |                  |         |   |                  |   |         |  
|Net loss                                                                    |  | $                | (12     | ) |                  | $ | (19,789 | )
|Adjustments to reconcile net loss to net cash used in operating activities: |  |                  |         |   |                  |   |         |  
|Depreciation and amortization                                               |  |                  | 11,701  |   |                  |   | 10,405  |  
|Equity in net earnings of affiliate                                         |  |                  | (40     | ) |                  |   | (894    | )
|Deferred income taxes                                                       |  |                  | (344    | ) |                  |   | 1,171   |  
|Loss on asset dispositions                                                  |  |                  | 261     |   |                  |   | 783     |  
|Cash used in working capital items                                          |  |                  | (20,882 | ) |                  |   | (40,684 | )
|Change in operating assets and liabilities:                                 |  |                  |         |   |                  |   |         |  
|Other assets                                                                |  |                  | (492    | ) |                  |   | 16      |  
|Deferred retirement benefits                                                |  |                  | 2,807   |   |                  |   | 660     |  
|Other noncurrent liabilities                                                |  |                  | (7      | ) |                  |   | (22     | )
|Other, net                                                                  |  |                  | (1      | ) |                  |   | (3      | )
|                                                                            |  |                  |         |   |                  |   |         |  
|Total adjustments                                                           |  |                  | (6,997  | ) |                  |   | (28,568 | )
|                                                                            |  |                  |         |   |                  |   |         |  
|Net cash used in operating activities                                       |  |                  | (7,009  | ) |                  |   | (48,357 | )
|                                                                            |  |                  |         |   |                  |   |         |  
|Cash flows from investing activities:                                       |  |                  |         |   |                  |   |         |  
|Additions to property, plant and equipment                                  |  |                  | (15,878 | ) |                  |   | (22,974 | )
|Additions to deferred turnaround costs                                      |  |                  | (98     | ) |                  |   | (8,634  | )
|Proceeds from asset dispositions                                            |  |                  | 79      |   |                  |   |        |  
|                                                                            |  |                  |         |   |                  |   |         |  
|Net cash used in investing activities                                       |  |                  | (15,897 | ) |                  |   | (31,608 | )
|                                                                            |  |                  |         |   |                  |   |         |  
|Cash flows from financing activities:                                       |  |                  |         |   |                  |   |         |  
|Net borrowings on revolving credit facility                                 |  |                  | 9,000   |   |                  |   |        |  
|Proceeds from sale of investment securities                                 |  |                  |        |   |                  |   | 57,354  |  
|Proceeds from issuance of long term debt                                    |  |                  | 318     |   |                  |   | 178     |  
|Dividends to stockholder                                                    |  |                  |        |   |                  |   | (35,312 | )
|Principal reductions of long term debt                                      |  |                  | (770    | ) |                  |   | (633    | )
|Deferred financing costs                                                    |  |                  | (225    | ) |                  |   | (108    | )
|                                                                            |  |                  |         |   |                  |   |         |  
|Net cash provided by financing activities                                   |  |                  | 8,323   |   |                  |   | 21,479  |  
|                                                                            |  |                  |         |   |                  |   |         |  
|Net decrease in cash and cash equivalents                                   |  |                  | (14,583 | ) |                  |   | (58,486 | )
|Cash and cash equivalents, beginning of year                                |  |                  | 32,447  |   |                  |   | 135,441 |  
|                                                                            |  |                  |         |   |                  |   |         |  
|Cash and cash equivalents, end of period                                    |  | $                | 17,864  |   |                  | $ | 76,955  |  
|                                                                            |  |                  |         |   |                  |   |         |  
|Cash provided by (used in) working capital items:                           |  |                  |         |   |                  |   |         |  
|Accounts receivable, net                                                    |  | $                | 66,397  |   |                  | $ | (347    | )
|Refundable income taxes                                                     |  |                  | 7,251   |   |                  |   |        |  
|Inventories                                                                 |  |                  | (88,080 | ) |                  |   | 47,269  |  
|Prepaid expenses and other assets                                           |  |                  | 5,283   |   |                  |   | (41,433 | )
|Accounts payable                                                            |  |                  | (4,354  | ) |                  |   | (8,996  | )
|Accrued liabilities                                                         |  |                  | (2,926  | ) |                  |   | (2,634  | )
|Income taxes payable                                                        |  |                  |        |   |                  |   | (36,514 | )
|Sales, use and fuel taxes payable                                           |  |                  | (3,878  | ) |                  |   | (3,041  | )
|Amounts due from affiliated companies, net                                  |  |                  | (575    | ) |                  |   | 5,012   |  
|                                                                            |  |                  |         |   |                  |   |         |  
|Total change                                                                |  | $                | (20,882 | ) |                  | $ | (40,684 | )
|                                                                            |  |                  |         |   |                  |   |         |  
|Cash paid during the period for:                                            |  |                  |         |   |                  |   |         |  
|Interest                                                                    |  | $                | 19,067  |   |                  | $ | 18,649  |  
|Income taxes                                                                |  | $                | 21      |   |                  | $ | 42,059  |  
|                                                                            |  |                  |         |   |                  |   |         |  
|Non-cash investing activities:                                              |  |                  |         |   |                  |   |         |  
|Property additions & capital leases                                         |  | $                | 846     |   |                  | $ | 500     |  
|                                                                            |  |                  |         |   |                  |   |         |  



See accompanying notes
to consolidated financial statements.



6



---

##### Table of Contents

UNITED REFINING COMPANY AND SUBSIDIARIES



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)



|1. | Description of Business and Basis of Presentation
|-- | -------------------------------------------------



The consolidated financial statements include the accounts of United Refining Company and its subsidiaries, United Refining Company of Pennsylvania and
its subsidiaries, and Kiantone Pipeline Corporation (collectively, the Company). All significant intercompany balances and transactions have been eliminated in consolidation.



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



The wholesale segment is responsible for the acquisition of crude oil, petroleum refining,
supplying petroleum products to the retail segment and the marketing of petroleum products to wholesale and industrial customers. The retail segment sells petroleum products under the Kwik Fill®, Citgo® and Keystone® brand names through a network of Company-operated retail units and convenience and grocery items
through gasoline stations and convenience stores under the Red Apple Food Mart® and Country Fair® brand names.



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



The accompanying unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United
States of America for interim financial information and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted
in the United States of America for complete financial statements. In the opinion of management, all adjustments (consisting of only normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for
the three and six months ended February 28, 2009 are not necessarily indicative of the results that may be expected for the year ending August 31, 2009. For further information, refer to the consolidated financial statements and footnotes
thereto included in the Companys Form 10-K for the fiscal year ended August 31, 2008.



7



---

##### Table of Contents

UNITED REFINING COMPANY AND SUBSIDIARIES



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

(Unaudited)



|2. | Change in Accounting Policy
|-- | ---------------------------



During the quarter ended February 28, 2009 the Company changed its method of accounting for inventories during interim periods from adjusting the
inventory LIFO reserve on an annual basis to adjusting the inventory LIFO reserve on a quarterly basis. We believe this change in method of accounting better reflects interim results consistent with annual LIFO. Accordingly, the Company has
reflected the change in accounting in the current quarter and retrospectively applied this policy to its previously issued financial statements for the three months ended November 30, 2008 and 2007; and for the three and six month periods ended
February 29, 2008. This change does not impact cash flows and does not impact annual financial statements.



The following is a summary of the impact of the change in accounting policy has had on the Companys Consolidated Statements of Operations for the
three and six months ended February 29, 2008.



|                               |  |                                                    |         |   |             |   |         |             |  |   |         |  
|------------------------------ |  | -------------------------------------------------- | ------- | - | ----------- | - | ------- | ----------- |  | - | ------- | -
|                               |  | Three Months Ended February 29, 2008(in
thousands) |        
|                               |  | As PreviouslyReported                              |         |   | Adjustments |   |         | As adjusted | 
|Net sales                      |  | $                                                  | 663,718 |   |             | $ |        |             |  | $ | 663,718 |  
|Costs of goods sold            |  |                                                    | 632,795 |   |             |   | 22,314  |             |  |   | 655,109 |  
|                               |  |                                                    |         |   |             |   |         |             |  |   |         |  
|Gross profit                   |  |                                                    | 30,923  |   |             |   | (22,314 | )           |  |   | 8,609   |  
|Operating expenses             |  |                                                    | 39,339  |   |             |   |        |             |  |   | 39,339  |  
|                               |  |                                                    |         |   |             |   |         |             |  |   |         |  
|Operating loss                 |  |                                                    | (8,416  | ) |             |   | (22,314 | )           |  |   | (30,730 | )
|Other expenses                 |  |                                                    | 8,091   |   |             |   |        |             |  |   | 8,091   |  
|                               |  |                                                    |         |   |             |   |         |             |  |   |         |  
|Loss before income tax benefit |  |                                                    | (16,507 | ) |             |   | (22,314 | )           |  |   | (38,821 | )
|Income tax benefit             |  |                                                    | (6,768  | ) |             |   | (9,148  | )           |  |   | (15,916 | )
|                               |  |                                                    |         |   |             |   |         |             |  |   |         |  
|Net loss                       |  | $                                                  | (9,739  | ) |             | $ | (13,166 | )           |  | $ | (22,905 | )
|                               |  |                                                    |         |   |             |   |         |             |  |   |         |  



|                                                  |  |                                                  |           |             |   |         |             |  |   |           |  
|------------------------------------------------- |  | ------------------------------------------------ | --------- | ----------- | - | ------- | ----------- |  | - | --------- | -
|                                                  |  | Six Months Ended February 29, 2008(in
thousands) |          
|                                                  |  | As PreviouslyReported                            |           | Adjustments |   |         | As adjusted | 
|Net sales                                         |  | $                                                | 1,357,286 |             | $ |        |             |  | $ | 1,357,286 |  
|Costs of goods sold                               |  |                                                  | 1,257,818 |             |   | 39,766  |             |  |   | 1,297,584 |  
|                                                  |  |                                                  |           |             |   |         |             |  |   |           |  
|Gross profit                                      |  |                                                  | 99,468    |             |   | (39,766 | )           |  |   | 59,702    |  
|Operating expenses                                |  |                                                  | 78,809    |             |   |        |             |  |   | 78,809    |  
|                                                  |  |                                                  |           |             |   |         |             |  |   |           |  
|Operating income (loss)                           |  |                                                  | 20,659    |             |   | (39,766 | )           |  |   | (19,107   | )
|Other expenses                                    |  |                                                  | 14,432    |             |   |        |             |  |   | 14,432    |  
|                                                  |  |                                                  |           |             |   |         |             |  |   |           |  
|Income (loss) before income tax expense (benefit) |  |                                                  | 6,227     |             |   | (39,766 | )           |  |   | (33,539   | )
|Income tax expense (benefit)                      |  |                                                  | 2,553     |             |   | (16,303 | )           |  |   | (13,750   | )
|                                                  |  |                                                  |           |             |   |         |             |  |   |           |  
|Net income (loss)                                 |  | $                                                | 3,674     |             | $ | (23,463 | )           |  | $ | (19,789   | )
|                                                  |  |                                                  |           |             |   |         |             |  |   |           |  



8



---

##### Table of Contents

UNITED REFINING COMPANY AND SUBSIDIARIES



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

(Unaudited)



The following is a summary of the impact of the change in accounting policy has had on the
Companys Consolidated Statements of Operations for the quarters ended November 30, 2008 and 2007 (all amounts in thousands). These amounts will be reflected retrospectively in the Companys annual Form 10-K, as it relates to
presenting quarterly financial information.



|                                                  |  |                                                    |          |   |             |   |          |             |  |   |        
|------------------------------------------------- |  | -------------------------------------------------- | -------- | - | ----------- | - | -------- | ----------- |  | - | -------
|                                                  |  | Three Months Ended November 30, 2008(in
thousands)
|                                                  |  | As PreviouslyReported                              |          |   | Adjustments |   |          | As adjusted
|Net sales                                         |  | $                                                  | 770,471  |   |             | $ |         |             |  | $ | 770,471
|Costs of goods sold                               |  |                                                    | 821,649  |   |             |   | (106,562 | )           |  |   | 715,087
|                                                  |  |                                                    |          |   |             |   |          |             |  |   |        
|Gross (loss) profit                               |  |                                                    | (51,178  | ) |             |   | 106,562  |             |  |   | 55,384 
|Operating expenses                                |  |                                                    | 40,353   |   |             |   |         |             |  |   | 40,353 
|                                                  |  |                                                    |          |   |             |   |          |             |  |   |        
|Operating (loss) income                           |  |                                                    | (91,531  | ) |             |   | 106,562  |             |  |   | 15,031 
|Other expenses                                    |  |                                                    | 9,554    |   |             |   |         |             |  |   | 9,554  
|                                                  |  |                                                    |          |   |             |   |          |             |  |   |        
|(Loss) income before income tax (benefit) expense |  |                                                    | (101,085 | ) |             |   | 106,562  |             |  |   | 5,477  
|Income tax (benefit) expense                      |  |                                                    | (41,448  | ) |             |   | 43,790   |             |  |   | 2,342  
|                                                  |  |                                                    |          |   |             |   |          |             |  |   |        
|Net (loss) income                                 |  | $                                                  | (59,637  | ) |             | $ | 62,772   |             |  | $ | 3,135  
|                                                  |  |                                                    |          |   |             |   |          |             |  |   |        



|                                 |  |                                                    |         |             |   |         |             |  |   |        
|-------------------------------- |  | -------------------------------------------------- | ------- | ----------- | - | ------- | ----------- |  | - | -------
|                                 |  | Three Months Ended November 30, 2007(in
thousands)
|                                 |  | As PreviouslyReported                              |         | Adjustments |   |         | As adjusted
|Net sales                        |  | $                                                  | 693,568 |             | $ |        |             |  | $ | 693,568
|Costs of goods sold              |  |                                                    | 625,023 |             |   | 17,452  |             |  |   | 642,475
|                                 |  |                                                    |         |             |   |         |             |  |   |        
|Gross profit                     |  |                                                    | 68,545  |             |   | (17,452 | )           |  |   | 51,093 
|Operating expenses               |  |                                                    | 39,470  |             |   |        |             |  |   | 39,470 
|                                 |  |                                                    |         |             |   |         |             |  |   |        
|Operating income                 |  |                                                    | 29,075  |             |   | (17,452 | )           |  |   | 11,623 
|Other expenses                   |  |                                                    | 6,341   |             |   |        |             |  |   | 6,341  
|                                 |  |                                                    |         |             |   |         |             |  |   |        
|Income before income tax expense |  |                                                    | 22,734  |             |   | (17,452 | )           |  |   | 5,282  
|Income tax expense               |  |                                                    | 9,321   |             |   | (7,155  | )           |  |   | 2,166  
|                                 |  |                                                    |         |             |   |         |             |  |   |        
|Net income                       |  | $                                                  | 13,413  |             | $ | (10,297 | )           |  | $ | 3,116  
|                                 |  |                                                    |         |             |   |         |             |  |   |        



|3. | Recent Accounting Pronouncements
|-- | --------------------------------



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



9



---

##### Table of Contents

UNITED REFINING COMPANY AND SUBSIDIARIES



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

(Unaudited)



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 an entitys financial position, financial performance and
cash flows. Statement 161 is effective for the Companys fiscal and interim periods beginning after November 15, 2008. The Company does not currently have any derivative instruments and is not involved in any hedging activities.



|4. | Inventories
|-- | -----------



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



Inventories consist of the following:



|                   |  |                  |         |                |   |       
|------------------ |  | ---------------- | ------- | -------------- | - | ------
|                   |  | February 28,2009 |         | August 31,2008
|                   |  | (in thousands)  
|Crude Oil          |  | $                | 35,876  |                | $ | 17,273
|Petroleum Products |  |                  | 109,441 |                |   | 39,836
|                   |  |                  |         |                |   |       
|Total @ LIFO       |  |                  | 145,317 |                |   | 57,109
|                   |  |                  |         |                |   |       
|Merchandise        |  |                  | 18,328  |                |   | 18,350
|Supplies           |  |                  | 19,143  |                |   | 19,249
|                   |  |                  |         |                |   |       
|Total @ FIFO       |  |                  | 37,471  |                |   | 37,599
|                   |  |                  |         |                |   |       
|Total Inventory    |  | $                | 182,788 |                | $ | 94,708
|                   |  |                  |         |                |   |       



10



---

##### Table of Contents

UNITED REFINING COMPANY AND SUBSIDIARIES



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

(Unaudited)



|5. | Subsidiary Guarantors
|-- | ---------------------



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



CONDENSED CONSOLIDATING BALANCE SHEETS

(in thousands)



|                                                                                          |  |                   |         |   |                 |   |         |              |  |   |              |   |  |        |         |   |            |   |         |              |  |   |              |   |  |   |          |   |  |   |         |  
|----------------------------------------------------------------------------------------- |  | ----------------- | ------- | - | --------------- | - | ------- | ------------ |  | - | ------------ | - |  | ------ | ------- | - | ---------- | - | ------- | ------------ |  | - | ------------ | - |  | - | -------- | - |  | - | ------- | -
|                                                                                          |  | February 28, 2009 |         |   | August 31, 2008 |  
|                                                                                          |  | Issuer            |         |   | Guarantors      |   |         | Eliminations |  |   | Consolidated |   |  | Issuer |         |   | Guarantors |   |         | Eliminations |  |   | Consolidated |  
|Assets                                                                                    |  |                   |         |   |                 |   |         |              |  |   |              |   |  |        |         |   |            |   |         |              |  |   |              |   |  |   |          |   |  |   |         |  
|Current:                                                                                  |  |                   |         |   |                 |   |         |              |  |   |              |   |  |        |         |   |            |   |         |              |  |   |              |   |  |   |          |   |  |   |         |  
|Cash and cash equivalents                                                                 |  | $                 | 7,364   |   |                 | $ | 10,500  |              |  | $ |             |   |  | $      | 17,864  |   |            | $ | 11,358  |              |  | $ | 21,089       |   |  | $ |         |   |  | $ | 32,447  |  
|Accounts receivable, net                                                                  |  |                   | 34,007  |   |                 |   | 23,618  |              |  |   |             |   |  |        | 57,625  |   |            |   | 75,524  |              |  |   | 48,498       |   |  |   |         |   |  |   | 124,022 |  
|Refundable income taxes                                                                   |  |                   | 28,593  |   |                 |   | 69      |              |  |   |             |   |  |        | 28,662  |   |            |   | 34,530  |              |  |   | 1,383        |   |  |   |         |   |  |   | 35,913  |  
|Inventories                                                                               |  |                   | 156,425 |   |                 |   | 26,363  |              |  |   |             |   |  |        | 182,788 |   |            |   | 64,614  |              |  |   | 30,094       |   |  |   |         |   |  |   | 94,708  |  
|Prepaid expenses and other assets                                                         |  |                   | 16,470  |   |                 |   | (449    | )            |  |   |             |   |  |        | 16,021  |   |            |   | 16,338  |              |  |   | 4,966        |   |  |   |         |   |  |   | 21,304  |  
|Intercompany                                                                              |  |                   | 109,054 |   |                 |   | 15,795  |              |  |   | (124,849     | ) |  |        |        |   |            |   | 163,202 |              |  |   | 17,001       |   |  |   | (180,203 | ) |  |   |        |  
|                                                                                          |  |                   |         |   |                 |   |         |              |  |   |              |   |  |        |         |   |            |   |         |              |  |   |              |   |  |   |          |   |  |   |         |  
|Total current assets                                                                      |  |                   | 351,913 |   |                 |   | 75,896  |              |  |   | (124,849     | ) |  |        | 302,960 |   |            |   | 365,566 |              |  |   | 123,031      |   |  |   | (180,203 | ) |  |   | 308,394 |  
|Property, plant and equipment, net                                                        |  |                   | 175,631 |   |                 |   | 76,765  |              |  |   |             |   |  |        | 252,396 |   |            |   | 166,266 |              |  |   | 77,745       |   |  |   |         |   |  |   | 244,011 |  
|Investment in affiliated company                                                          |  |                   | 6,429   |   |                 |   |        |              |  |   |             |   |  |        | 6,429   |   |            |   | 6,389   |              |  |   |             |   |  |   |         |   |  |   | 6,389   |  
|Deferred financing costs, net                                                             |  |                   | 4,164   |   |                 |   |        |              |  |   |             |   |  |        | 4,164   |   |            |   | 4,544   |              |  |   |             |   |  |   |         |   |  |   | 4,544   |  
|Goodwill and other non-amortizable assets                                                 |  |                   |        |   |                 |   | 11,849  |              |  |   |             |   |  |        | 11,849  |   |            |   |        |              |  |   | 11,849       |   |  |   |         |   |  |   | 11,849  |  
|Amortizable intangible assets, net                                                        |  |                   |        |   |                 |   | 1,536   |              |  |   |             |   |  |        | 1,536   |   |            |   |        |              |  |   | 1,713        |   |  |   |         |   |  |   | 1,713   |  
|Deferred turnaround costs & other assets                                                  |  |                   | 9,350   |   |                 |   | 999     |              |  |   |             |   |  |        | 10,349  |   |            |   | 11,984  |              |  |   | 1,136        |   |  |   |         |   |  |   | 13,120  |  
|Deferred income taxes                                                                     |  |                   | 16,906  |   |                 |   | (5,339  | )            |  |   |             |   |  |        | 11,567  |   |            |   | 15,778  |              |  |   | (4,005       | ) |  |   |         |   |  |   | 11,773  |  
|Investment in subsidiaries                                                                |  |                   | 8,374   |   |                 |   |        |              |  |   | (8,374       | ) |  |        |        |   |            |   | (5,922  | )            |  |   |             |   |  |   | 5,922    |   |  |   |        |  
|                                                                                          |  |                   |         |   |                 |   |         |              |  |   |              |   |  |        |         |   |            |   |         |              |  |   |              |   |  |   |          |   |  |   |         |  
|                                                                                          |  | $                 | 572,767 |   |                 | $ | 161,706 |              |  | $ | (133,223     | ) |  | $      | 601,250 |   |            | $ | 564,605 |              |  | $ | 211,469      |   |  | $ | (174,281 | ) |  | $ | 601,793 |  
|                                                                                          |  |                   |         |   |                 |   |         |              |  |   |              |   |  |        |         |   |            |   |         |              |  |   |              |   |  |   |          |   |  |   |         |  
|Liabilities and Stockholders Equity                                                      |  |                   |         |   |                 |   |         |              |  |   |              |   |  |        |         |   |            |   |         |              |  |   |              |   |  |   |          |   |  |   |         |  
|Current:                                                                                  |  |                   |         |   |                 |   |         |              |  |   |              |   |  |        |         |   |            |   |         |              |  |   |              |   |  |   |          |   |  |   |         |  
|Revolving credit facility                                                                 |  | $                 | 18,000  |   |                 | $ |        |              |  | $ |             |   |  | $      | 18,000  |   |            | $ | 9,000   |              |  | $ |             |   |  | $ |         |   |  | $ | 9,000   |  
|Current installments of long-term debt                                                    |  |                   | 1,393   |   |                 |   | 964     |              |  |   |             |   |  |        | 2,357   |   |            |   | 1,315   |              |  |   | 869          |   |  |   |         |   |  |   | 2,184   |  
|Accounts payable                                                                          |  |                   | 25,706  |   |                 |   | 16,852  |              |  |   |             |   |  |        | 42,558  |   |            |   | 24,550  |              |  |   | 22,362       |   |  |   |         |   |  |   | 46,912  |  
|Accrued liabilities                                                                       |  |                   | 8,441   |   |                 |   | 5,010   |              |  |   |             |   |  |        | 13,451  |   |            |   | 10,615  |              |  |   | 5,762        |   |  |   |         |   |  |   | 16,377  |  
|Sales, use and fuel taxes payable                                                         |  |                   | 14,587  |   |                 |   | 2,989   |              |  |   |             |   |  |        | 17,576  |   |            |   | 16,961  |              |  |   | 4,493        |   |  |   |         |   |  |   | 21,454  |  
|Deferred income taxes                                                                     |  |                   | 3,590   |   |                 |   | (699    | )            |  |   |             |   |  |        | 2,891   |   |            |   | 3,590   |              |  |   | (699         | ) |  |   |         |   |  |   | 2,891   |  
|Amounts due to affiliated companies, net                                                  |  |                   | 1,706   |   |                 |   | 310     |              |  |   |             |   |  |        | 2,016   |   |            |   | 1,297   |              |  |   | 1,294        |   |  |   |         |   |  |   | 2,591   |  
|Intercompany                                                                              |  |                   |        |   |                 |   | 124,849 |              |  |   | (124,849     | ) |  |        |        |   |            |   |        |              |  |   | 180,203      |   |  |   | (180,203 | ) |  |   |        |  
|                                                                                          |  |                   |         |   |                 |   |         |              |  |   |              |   |  |        |         |   |            |   |         |              |  |   |              |   |  |   |          |   |  |   |         |  
|Total current liabilities                                                                 |  |                   | 73,423  |   |                 |   | 150,275 |              |  |   | (124,849     | ) |  |        | 98,849  |   |            |   | 67,328  |              |  |   | 214,284      |   |  |   | (180,203 | ) |  |   | 101,409 |  
|Long term debt: less current installments                                                 |  |                   | 353,175 |   |                 |   | 2,766   |              |  |   |             |   |  |        | 355,941 |   |            |   | 353,098 |              |  |   | 3,009        |   |  |   |         |   |  |   | 356,107 |  
|Deferred gain on settlement of pension plan obligations                                   |  |                   |        |   |                 |   |        |              |  |   |             |   |  |        |        |   |            |   | 55      |              |  |   |             |   |  |   |         |   |  |   | 55      |  
|Deferred retirement benefits                                                              |  |                   | 87,333  |   |                 |   | 280     |              |  |   |             |   |  |        | 87,613  |   |            |   | 86,066  |              |  |   | 80           |   |  |   |         |   |  |   | 86,146  |  
|Other noncurrent liabilities                                                              |  |                   |        |   |                 |   | 11      |              |  |   |             |   |  |        | 11      |   |            |   |        |              |  |   | 18           |   |  |   |         |   |  |   | 18      |  
|                                                                                          |  |                   |         |   |                 |   |         |              |  |   |              |   |  |        |         |   |            |   |         |              |  |   |              |   |  |   |          |   |  |   |         |  
|Total liabilities                                                                         |  |                   | 513,931 |   |                 |   | 153,332 |              |  |   | (124,849     | ) |  |        | 542,414 |   |            |   | 506,547 |              |  |   | 217,391      |   |  |   | (180,203 | ) |  |   | 543,735 |  
|                                                                                          |  |                   |         |   |                 |   |         |              |  |   |              |   |  |        |         |   |            |   |         |              |  |   |              |   |  |   |          |   |  |   |         |  
|Commitment and contingencies                                                              |  |                   |         |   |                 |   |         |              |  |   |              |   |  |        |         |   |            |   |         |              |  |   |              |   |  |   |          |   |  |   |         |  
|Stockholders equity                                                                      |  |                   |         |   |                 |   |         |              |  |   |              |   |  |        |         |   |            |   |         |              |  |   |              |   |  |   |          |   |  |   |         |  
|Common stock, $.10 par value per share shares authorized 100; issued and outstanding 100 |  |                   |        |   |                 |   | 18      |              |  |   | (18          | ) |  |        |        |   |            |   |        |              |  |   | 18           |   |  |   | (18      | ) |  |   |        |  
|Additional paid-in capital                                                                |  |                   | 24,665  |   |                 |   | 10,651  |              |  |   | (10,651      | ) |  |        | 24,665  |   |            |   | 24,665  |              |  |   | 10,651       |   |  |   | (10,651  | ) |  |   | 24,665  |  
|Retained earnings                                                                         |  |                   | 56,326  |   |                 |   | (2,174  | )            |  |   | 2,174        |   |  |        | 56,326  |   |            |   | 56,338  |              |  |   | (16,464      | ) |  |   | 16,464   |   |  |   | 56,338  |  
|Accumulated other comprehensive loss                                                      |  |                   | (22,155 | ) |                 |   | (121    | )            |  |   | 121          |   |  |        | (22,155 | ) |            |   | (22,945 | )            |  |   | (127         | ) |  |   | 127      |   |  |   | (22,945 | )
|                                                                                          |  |                   |         |   |                 |   |         |              |  |   |              |   |  |        |         |   |            |   |         |              |  |   |              |   |  |   |          |   |  |   |         |  
|Total stockholders equity                                                                |  |                   | 58,836  |   |                 |   | 8,374   |              |  |   | (8,374       | ) |  |        | 58,836  |   |            |   | 58,058  |              |  |   | (5,922       | ) |  |   | 5,922    |   |  |   | 58,058  |  
|                                                                                          |  |                   |         |   |                 |   |         |              |  |   |              |   |  |        |         |   |            |   |         |              |  |   |              |   |  |   |          |   |  |   |         |  
|                                                                                          |  | $                 | 572,767 |   |                 | $ | 161,706 |              |  | $ | (133,223     | ) |  | $      | 601,250 |   |            | $ | 564,605 |              |  | $ | 211,469      |   |  | $ | (174,281 | ) |  | $ | 601,793 |  
|                                                                                          |  |                   |         |   |                 |   |         |              |  |   |              |   |  |        |         |   |            |   |         |              |  |   |              |   |  |   |          |   |  |   |         |  



11



---

##### Table of Contents

UNITED REFINING COMPANY AND SUBSIDIARIES



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

(Unaudited)



CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS

(in thousands)



|                                                  |  |                                      |         |   |                                                   |   |         |              |  |   |              |   |  |        |         |   |            |   |         |              |  |   |              |   |  |   |          |   |  |   |         |  
|------------------------------------------------- |  | ------------------------------------ | ------- | - | ------------------------------------------------- | - | ------- | ------------ |  | - | ------------ | - |  | ------ | ------- | - | ---------- | - | ------- | ------------ |  | - | ------------ | - |  | - | -------- | - |  | - | ------- | -
|                                                  |  | Three Months Ended February 28, 2009 |         |   | Three Months Ended February 29, 2008(As
adjusted) |  
|                                                  |  | Issuer                               |         |   | Guarantors                                        |   |         | Eliminations |  |   | Consolidated |   |  | Issuer |         |   | Guarantors |   |         | Eliminations |  |   | Consolidated |  
|Net sales                                         |  | $                                    | 284,189 |   |                                                   | $ | 237,528 |              |  | $ | (86,908      | ) |  | $      | 434,809 |   |            | $ | 501,562 |              |  | $ | 337,769      |   |  | $ | (175,613 | ) |  | $ | 663,718 |  
|Costs of goods sold                               |  |                                      | 273,012 |   |                                                   |   | 204,492 |              |  |   | (86,908      | ) |  |        | 390,596 |   |            |   | 521,664 |              |  |   | 309,058      |   |  |   | (175,613 | ) |  |   | 655,109 |  
|                                                  |  |                                      |         |   |                                                   |   |         |              |  |   |              |   |  |        |         |   |            |   |         |              |  |   |              |   |  |   |          |   |  |   |         |  
|Gross profit (loss)                               |  |                                      | 11,177  |   |                                                   |   | 33,036  |              |  |   |             |   |  |        | 44,213  |   |            |   | (20,102 | )            |  |   | 28,711       |   |  |   |         |   |  |   | 8,609   |  
|                                                  |  |                                      |         |   |                                                   |   |         |              |  |   |              |   |  |        |         |   |            |   |         |              |  |   |              |   |  |   |          |   |  |   |         |  
|Expenses:                                         |  |                                      |         |   |                                                   |   |         |              |  |   |              |   |  |        |         |   |            |   |         |              |  |   |              |   |  |   |          |   |  |   |         |  
|Selling, general and administrative expenses      |  |                                      | 6,014   |   |                                                   |   | 29,910  |              |  |   |             |   |  |        | 35,924  |   |            |   | 5,232   |              |  |   | 30,066       |   |  |   |         |   |  |   | 35,298  |  
|Depreciation and amortization expenses            |  |                                      | 2,678   |   |                                                   |   | 1,379   |              |  |   |             |   |  |        | 4,057   |   |            |   | 2,631   |              |  |   | 1,410        |   |  |   |         |   |  |   | 4,041   |  
|                                                  |  |                                      |         |   |                                                   |   |         |              |  |   |              |   |  |        |         |   |            |   |         |              |  |   |              |   |  |   |          |   |  |   |         |  
|Total operating expenses                          |  |                                      | 8,692   |   |                                                   |   | 31,289  |              |  |   |             |   |  |        | 39,981  |   |            |   | 7,863   |              |  |   | 31,476       |   |  |   |         |   |  |   | 39,339  |  
|                                                  |  |                                      |         |   |                                                   |   |         |              |  |   |              |   |  |        |         |   |            |   |         |              |  |   |              |   |  |   |          |   |  |   |         |  
|Operating income (loss)                           |  |                                      | 2,485   |   |                                                   |   | 1,747   |              |  |   |             |   |  |        | 4,232   |   |            |   | (27,965 | )            |  |   | (2,765       | ) |  |   |         |   |  |   | (30,730 | )
|                                                  |  |                                      |         |   |                                                   |   |         |              |  |   |              |   |  |        |         |   |            |   |         |              |  |   |              |   |  |   |          |   |  |   |         |  
|Other income (expense):                           |  |                                      |         |   |                                                   |   |         |              |  |   |              |   |  |        |         |   |            |   |         |              |  |   |              |   |  |   |          |   |  |   |         |  
|Interest expense, net                             |  |                                      | (8,703  | ) |                                                   |   | (391    | )            |  |   |             |   |  |        | (9,094  | ) |            |   | (6,160  | )            |  |   | (1,390       | ) |  |   |         |   |  |   | (7,550  | )
|Other, net                                        |  |                                      | (835    | ) |                                                   |   | 193     |              |  |   |             |   |  |        | (642    | ) |            |   | (1,050  | )            |  |   | 301          |   |  |   |         |   |  |   | (749    | )
|Equity in net earnings of affiliate               |  |                                      | 6       |   |                                                   |   |        |              |  |   |             |   |  |        | 6       |   |            |   | 208     |              |  |   |             |   |  |   |         |   |  |   | 208     |  
|Equity in net earnings (loss) of subsidiaries     |  |                                      | 888     |   |                                                   |   |        |              |  |   | (888         | ) |  |        |        |   |            |   | (2,395  | )            |  |   |             |   |  |   | 2,395    |   |  |   |        |  
|                                                  |  |                                      |         |   |                                                   |   |         |              |  |   |              |   |  |        |         |   |            |   |         |              |  |   |              |   |  |   |          |   |  |   |         |  
|                                                  |  |                                      | (8,644  | ) |                                                   |   | (198    | )            |  |   | (888         | ) |  |        | (9,730  | ) |            |   | (9,397  | )            |  |   | (1,089       | ) |  |   | 2,395    |   |  |   | (8,091  | )
|                                                  |  |                                      |         |   |                                                   |   |         |              |  |   |              |   |  |        |         |   |            |   |         |              |  |   |              |   |  |   |          |   |  |   |         |  
|(Loss) income before income tax (benefit) expense |  |                                      | (6,159  | ) |                                                   |   | 1,549   |              |  |   | (888         | ) |  |        | (5,498  | ) |            |   | (37,362 | )            |  |   | (3,854       | ) |  |   | 2,395    |   |  |   | (38,821 | )
|Income tax (benefit) expense                      |  |                                      | (3,012  | ) |                                                   |   | 661     |              |  |   |             |   |  |        | (2,351  | ) |            |   | (14,457 | )            |  |   | (1,459       | ) |  |   |         |   |  |   | (15,916 | )
|                                                  |  |                                      |         |   |                                                   |   |         |              |  |   |              |   |  |        |         |   |            |   |         |              |  |   |              |   |  |   |          |   |  |   |         |  
|Net (loss) income                                 |  | $                                    | (3,147  | ) |                                                   | $ | 888     |              |  | $ | (888         | ) |  | $      | (3,147  | ) |            | $ | (22,905 | )            |  | $ | (2,395       | ) |  | $ | 2,395    |   |  | $ | (22,905 | )
|                                                  |  |                                      |         |   |                                                   |   |         |              |  |   |              |   |  |        |         |   |            |   |         |              |  |   |              |   |  |   |          |   |  |   |         |  



12



---

##### Table of Contents

UNITED REFINING COMPANY AND SUBSIDIARIES



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

(Unaudited)



CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS

(in thousands)



|                                                  |  |                                    |         |   |                                                 |   |         |              |  |   |              |   |  |        |           |   |            |   |           |              |  |   |              |   |  |   |          |   |  |   |           |  
|------------------------------------------------- |  | ---------------------------------- | ------- | - | ----------------------------------------------- | - | ------- | ------------ |  | - | ------------ | - |  | ------ | --------- | - | ---------- | - | --------- | ------------ |  | - | ------------ | - |  | - | -------- | - |  | - | --------- | -
|                                                  |  | Six Months Ended February 28, 2009 |         |   | Six Months Ended February 29, 2008(As
adjusted) |  
|                                                  |  |                                    |         |   |                                                 |   |         |              |  |   |              |   |  |        |          
|                                                  |  | Issuer                             |         |   | Guarantors                                      |   |         | Eliminations |  |   | Consolidated |   |  | Issuer |           |   | Guarantors |   |           | Eliminations |  |   | Consolidated |  
|Net sales                                         |  | $                                  | 857,520 |   |                                                 | $ | 599,978 |              |  | $ | (252,218     | ) |  | $      | 1,205,280 |   |            | $ | 1,030,141 |              |  | $ | 676,883      |   |  | $ | (349,738 | ) |  | $ | 1,357,286 |  
|Costs of goods sold                               |  |                                    | 845,862 |   |                                                 |   | 512,039 |              |  |   | (252,218     | ) |  |        | 1,105,683 |   |            |   | 1,025,979 |              |  |   | 621,343      |   |  |   | (349,738 | ) |  |   | 1,297,584 |  
|                                                  |  |                                    |         |   |                                                 |   |         |              |  |   |              |   |  |        |           |   |            |   |           |              |  |   |              |   |  |   |          |   |  |   |           |  
|Gross profit                                      |  |                                    | 11,658  |   |                                                 |   | 87,939  |              |  |   |             |   |  |        | 99,597    |   |            |   | 4,162     |              |  |   | 55,540       |   |  |   |         |   |  |   | 59,702    |  
|                                                  |  |                                    |         |   |                                                 |   |         |              |  |   |              |   |  |        |           |   |            |   |           |              |  |   |              |   |  |   |          |   |  |   |           |  
|Expenses:                                         |  |                                    |         |   |                                                 |   |         |              |  |   |              |   |  |        |           |   |            |   |           |              |  |   |              |   |  |   |          |   |  |   |           |  
|Selling, general and administrative expenses      |  |                                    | 11,701  |   |                                                 |   | 60,457  |              |  |   |             |   |  |        | 72,158    |   |            |   | 11,359    |              |  |   | 59,370       |   |  |   |         |   |  |   | 70,729    |  
|Depreciation and amortization expenses            |  |                                    | 5,356   |   |                                                 |   | 2,820   |              |  |   |             |   |  |        | 8,176     |   |            |   | 5,263     |              |  |   | 2,817        |   |  |   |         |   |  |   | 8,080     |  
|                                                  |  |                                    |         |   |                                                 |   |         |              |  |   |              |   |  |        |           |   |            |   |           |              |  |   |              |   |  |   |          |   |  |   |           |  
|Total operating expenses                          |  |                                    | 17,057  |   |                                                 |   | 63,277  |              |  |   |             |   |  |        | 80,334    |   |            |   | 16,622    |              |  |   | 62,187       |   |  |   |         |   |  |   | 78,809    |  
|                                                  |  |                                    |         |   |                                                 |   |         |              |  |   |              |   |  |        |           |   |            |   |           |              |  |   |              |   |  |   |          |   |  |   |           |  
|Operating (loss) income                           |  |                                    | (5,399  | ) |                                                 |   | 24,662  |              |  |   |             |   |  |        | 19,263    |   |            |   | (12,460   | )            |  |   | (6,647       | ) |  |   |         |   |  |   | (19,107   | )
|                                                  |  |                                    |         |   |                                                 |   |         |              |  |   |              |   |  |        |           |   |            |   |           |              |  |   |              |   |  |   |          |   |  |   |           |  
|Other income (expense):                           |  |                                    |         |   |                                                 |   |         |              |  |   |              |   |  |        |           |   |            |   |           |              |  |   |              |   |  |   |          |   |  |   |           |  
|Interest expense, net                             |  |                                    | (17,168 | ) |                                                 |   | (1,305  | )            |  |   |             |   |  |        | (18,473   | ) |            |   | (11,077   | )            |  |   | (3,154       | ) |  |   |         |   |  |   | (14,231   | )
|Other, net                                        |  |                                    | (1,358  | ) |                                                 |   | 507     |              |  |   |             |   |  |        | (851      | ) |            |   | (1,676    | )            |  |   | 581          |   |  |   |         |   |  |   | (1,095    | )
|Equity in net earnings of affiliate               |  |                                    | 40      |   |                                                 |   |        |              |  |   |             |   |  |        | 40        |   |            |   | 894       |              |  |   |             |   |  |   |         |   |  |   | 894       |  
|Equity in net earnings (loss) of subsidiaries     |  |                                    | 14,293  |   |                                                 |   |        |              |  |   | (14,293      | ) |  |        |          |   |            |   | (5,756    | )            |  |   |             |   |  |   | 5,756    |   |  |   |          |  
|                                                  |  |                                    |         |   |                                                 |   |         |              |  |   |              |   |  |        |           |   |            |   |           |              |  |   |              |   |  |   |          |   |  |   |           |  
|                                                  |  |                                    | (4,193  | ) |                                                 |   | (798    | )            |  |   | (14,293      | ) |  |        | (19,284   | ) |            |   | (17,615   | )            |  |   | (2,573       | ) |  |   | 5,756    |   |  |   | (14,432   | )
|                                                  |  |                                    |         |   |                                                 |   |         |              |  |   |              |   |  |        |           |   |            |   |           |              |  |   |              |   |  |   |          |   |  |   |           |  
|(Loss) income before income tax (benefit) expense |  |                                    | (9,592  | ) |                                                 |   | 23,864  |              |  |   | (14,293      | ) |  |        | (21       | ) |            |   | (30,075   | )            |  |   | (9,220       | ) |  |   | 5,756    |   |  |   | (33,539   | )
|Income tax (benefit) expense                      |  |                                    | (9,580  | ) |                                                 |   | 9,571   |              |  |   |             |   |  |        | (9        | ) |            |   | (10,286   | )            |  |   | (3,464       | ) |  |   |         |   |  |   | (13,750   | )
|                                                  |  |                                    |         |   |                                                 |   |         |              |  |   |              |   |  |        |           |   |            |   |           |              |  |   |              |   |  |   |          |   |  |   |           |  
|Net (loss) income                                 |  | $                                  | (12     | ) |                                                 | $ | 14,293  |              |  | $ | (14,293      | ) |  | $      | (12       | ) |            | $ | (19,789   | )            |  | $ | (5,756       | ) |  | $ | 5,756    |   |  | $ | (19,789   | )
|                                                  |  |                                    |         |   |                                                 |   |         |              |  |   |              |   |  |        |           |   |            |   |           |              |  |   |              |   |  |   |          |   |  |   |           |  



13



---

##### Table of Contents

UNITED REFINING COMPANY AND SUBSIDIARIES



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

(Unaudited)



CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS

(in thousands)



|                                                     |  |                                    |         |   |                                    |   |         |              |  |              |   |  |        |         |   |            |   |         |              |  |              |        |   |  |   |   |  |   |         |  
|---------------------------------------------------- |  | ---------------------------------- | ------- | - | ---------------------------------- | - | ------- | ------------ |  | ------------ | - |  | ------ | ------- | - | ---------- | - | ------- | ------------ |  | ------------ | ------ | - |  | - | - |  | - | ------- | -
|                                                     |  | Six Months Ended February 28, 2009 |         |   | Six Months Ended February 29, 2008 |  
|                                                     |  | Issuer                             |         |   | Guarantors                         |   |         | Eliminations |  | Consolidated |   |  | Issuer |         |   | Guarantors |   |         | Eliminations |  | Consolidated |       
|Net cash provided by (used in) operating activities  |  | $                                  | 1,503   |   |                                    | $ | (8,512  | )            |  | $            |  |  | $      | (7,009  | ) |            | $ | (53,649 | )            |  | $            | 5,292  |   |  | $ |  |  | $ | (48,357 | )
|                                                     |  |                                    |         |   |                                    |   |         |              |  |              |   |  |        |         |   |            |   |         |              |  |              |        |   |  |   |   |  |   |         |  
|Cash flows from investing activities:                |  |                                    |         |   |                                    |   |         |              |  |              |   |  |        |         |   |            |   |         |              |  |              |        |   |  |   |   |  |   |         |  
|Additions to property, plant and equipment           |  |                                    | (13,881 | ) |                                    |   | (1,997  | )            |  |              |  |  |        | (15,878 | ) |            |   | (18,930 | )            |  |              | (4,044 | ) |  |   |  |  |   | (22,974 | )
|Additions to deferred turnaround costs               |  |                                    | (87     | ) |                                    |   | (11     | )            |  |              |  |  |        | (98     | ) |            |   | (8,596  | )            |  |              | (38    | ) |  |   |  |  |   | (8,634  | )
|Proceeds from asset dispositions                     |  |                                    |        |   |                                    |   | 79      |              |  |              |  |  |        | 79      |   |            |   |        |              |  |              |       |   |  |   |  |  |   |        |  
|                                                     |  |                                    |         |   |                                    |   |         |              |  |              |   |  |        |         |   |            |   |         |              |  |              |        |   |  |   |   |  |   |         |  
|Net cash used in investing activities                |  |                                    | (13,968 | ) |                                    |   | (1,929  | )            |  |              |  |  |        | (15,897 | ) |            |   | (27,526 | )            |  |              | (4,082 | ) |  |   |  |  |   | (31,608 | )
|                                                     |  |                                    |         |   |                                    |   |         |              |  |              |   |  |        |         |   |            |   |         |              |  |              |        |   |  |   |   |  |   |         |  
|Cash flows from financing activities:                |  |                                    |         |   |                                    |   |         |              |  |              |   |  |        |         |   |            |   |         |              |  |              |        |   |  |   |   |  |   |         |  
|Net borrowings on revolving credit facility          |  |                                    | 9,000   |   |                                    |   |        |              |  |              |  |  |        | 9,000   |   |            |   |        |              |  |              |       |   |  |   |  |  |   |        |  
|Proceeds from sales of investment securities         |  |                                    |        |   |                                    |   |        |              |  |              |  |  |        |        |   |            |   | 57,354  |              |  |              |       |   |  |   |  |  |   | 57,354  |  
|Proceeds from issuance of long-term debt             |  |                                    |        |   |                                    |   | 318     |              |  |              |  |  |        | 318     |   |            |   |        |              |  |              | 178    |   |  |   |  |  |   | 178     |  
|Dividends to stockholder                             |  |                                    |        |   |                                    |   |        |              |  |              |  |  |        |        |   |            |   | (35,312 | )            |  |              |       |   |  |   |  |  |   | (35,312 | )
|Principal reductions of long-term debt               |  |                                    | (304    | ) |                                    |   | (466    | )            |  |              |  |  |        | (770    | ) |            |   | (218    | )            |  |              | (415   | ) |  |   |  |  |   | (633    | )
|Deferred financing costs                             |  |                                    | (225    | ) |                                    |   |        |              |  |              |  |  |        | (225    | ) |            |   | (108    | )            |  |              |       |   |  |   |  |  |   | (108    | )
|                                                     |  |                                    |         |   |                                    |   |         |              |  |              |   |  |        |         |   |            |   |         |              |  |              |        |   |  |   |   |  |   |         |  
|Net cash provided by (used in) financing activities  |  |                                    | 8,471   |   |                                    |   | (148    | )            |  |              |  |  |        | 8,323   |   |            |   | 21,716  |              |  |              | (237   | ) |  |   |  |  |   | 21,479  |  
|                                                     |  |                                    |         |   |                                    |   |         |              |  |              |   |  |        |         |   |            |   |         |              |  |              |        |   |  |   |   |  |   |         |  
|Net (decrease) increase in cash and cash equivalents |  |                                    | (3,994  | ) |                                    |   | (10,589 | )            |  |              |  |  |        | (14,583 | ) |            |   | (59,459 | )            |  |              | 973    |   |  |   |  |  |   | (58,486 | )
|Cash and cash equivalents, beginning of year         |  |                                    | 11,358  |   |                                    |   | 21,089  |              |  |              |  |  |        | 32,447  |   |            |   | 123,858 |              |  |              | 11,583 |   |  |   |  |  |   | 135,441 |  
|                                                     |  |                                    |         |   |                                    |   |         |              |  |              |   |  |        |         |   |            |   |         |              |  |              |        |   |  |   |   |  |   |         |  
|Cash and cash equivalents, end of period             |  | $                                  | 7,364   |   |                                    | $ | 10,500  |              |  | $            |  |  | $      | 17,864  |   |            | $ | 64,399  |              |  | $            | 12,556 |   |  | $ |  |  | $ | 76,955  |  
|                                                     |  |                                    |         |   |                                    |   |         |              |  |              |   |  |        |         |   |            |   |         |              |  |              |        |   |  |   |   |  |   |         |  



14



---

##### Table of Contents

UNITED REFINING COMPANY AND SUBSIDIARIES



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

(Unaudited)



|6. | Segments of Business
|-- | --------------------



Intersegment revenues are calculated using estimated market prices and are eliminated upon consolidation. Summarized financial information regarding the
Companys reportable segments is presented in the following tables (in thousands):



|                              |  |                    |         |                  |                  |         |                  |  |   |                  |   |  |   |           |  
|----------------------------- |  | ------------------ | ------- | ---------------- | ---------------- | ------- | ---------------- |  | - | ---------------- | - |  | - | --------- | -
|                              |  | Three Months Ended |         |                  | Six Months Ended |        
|                              |  | February 28,2009   |         | February 29,2008 |                  |         | February 28,2009 |  |   | February 29,2008 |  
|                              |  |                    |         | (As adjusted)    |                  |         |                  |  |   | (As adjusted)    |  
|Net Sales                     |  |                    |         |                  |                  |         |                  |  |   |                  |   |  |   |           |  
|Retail                        |  | $                  | 236,318 |                  | $                | 336,628 |                  |  | $ | 597,577          |   |  | $ | 674,668   |  
|Wholesale                     |  |                    | 198,491 |                  |                  | 327,090 |                  |  |   | 607,703          |   |  |   | 682,618   |  
|                              |  |                    |         |                  |                  |         |                  |  |   |                  |   |  |   |           |  
|                              |  | $                  | 434,809 |                  | $                | 663,718 |                  |  | $ | 1,205,280        |   |  | $ | 1,357,286 |  
|                              |  |                    |         |                  |                  |         |                  |  |   |                  |   |  |   |           |  
|Intersegment Sales            |  |                    |         |                  |                  |         |                  |  |   |                  |   |  |   |           |  
|Wholesale                     |  | $                  | 85,878  |                  | $                | 174,472 |                  |  | $ | 249,817          |   |  | $ | 347,523   |  
|                              |  |                    |         |                  |                  |         |                  |  |   |                  |   |  |   |           |  
|Operating (Loss) Income       |  |                    |         |                  |                  |         |                  |  |   |                  |   |  |   |           |  
|Retail                        |  | $                  | 3,325   |                  | $                | (3,314  | )                |  | $ | 29,883           |   |  | $ | (7,282    | )
|Wholesale                     |  |                    | 907     |                  |                  | (27,416 | )                |  |   | (10,620          | ) |  |   | (11,825   | )
|                              |  |                    |         |                  |                  |         |                  |  |   |                  |   |  |   |           |  
|                              |  | $                  | 4,232   |                  | $                | (30,730 | )                |  | $ | 19,263           |   |  | $ | (19,107   | )
|                              |  |                    |         |                  |                  |         |                  |  |   |                  |   |  |   |           |  
|Depreciation and Amortization |  |                    |         |                  |                  |         |                  |  |   |                  |   |  |   |           |  
|Retail                        |  | $                  | 1,281   |                  | $                | 1,310   |                  |  | $ | 2,626            |   |  | $ | 2,619     |  
|Wholesale                     |  |                    | 2,776   |                  |                  | 2,731   |                  |  |   | 5,550            |   |  |   | 5,461     |  
|                              |  |                    |         |                  |                  |         |                  |  |   |                  |   |  |   |           |  
|                              |  | $                  | 4,057   |                  | $                | 4,041   |                  |  | $ | 8,176            |   |  | $ | 8,080     |  
|                              |  |                    |         |                  |                  |         |                  |  |   |                  |   |  |   |           |  



|                                          |  |                  |         |                |   |        
|----------------------------------------- |  | ---------------- | ------- | -------------- | - | -------
|                                          |  | February 28,2009 |         | August 31,2008
|Total Assets                              |  |                  |         |                |   |        
|Retail                                    |  | $                | 135,404 |                | $ | 179,119
|Wholesale                                 |  |                  | 465,846 |                |   | 422,674
|                                          |  |                  |         |                |   |        
|                                          |  | $                | 601,250 |                | $ | 601,793
|                                          |  |                  |         |                |   |        
|Capital Expenditures (including non-cash) |  |                  |         |                |   |        
|Retail                                    |  | $                | 1,951   |                | $ | 8,359  
|Wholesale                                 |  |                  | 14,773  |                |   | 35,029 
|                                          |  |                  |         |                |   |        
|                                          |  | $                | 16,724  |                | $ | 43,388 
|                                          |  |                  |         |                |   |        



15



---

##### Table of Contents

UNITED REFINING COMPANY AND SUBSIDIARIES



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

(Unaudited)



|7. | Employee Benefit Plans
|-- | ----------------------



For the periods ended February 28, 2009 and February 29, 2008, net pension and other postretirement benefit costs were comprised of the
following:



|                                      |  |                    |        |   |                  |   |        |                  |  |   |                  |   |  |   |        |  
|------------------------------------- |  | ------------------ | ------ | - | ---------------- | - | ------ | ---------------- |  | - | ---------------- | - |  | - | ------ | -
|                                      |  | Pension Benefits   |       
|                                      |  | Three Months Ended |        |   | Six Months Ended |  
|                                      |  | February 28,2009   |        |   | February 29,2008 |   |        | February 28,2009 |  |   | February 29,2008 |  
|                                      |  | (in thousands)     |       
|Service cost                          |  | $                  | 734    |   |                  | $ | 715    |                  |  | $ | 1,425            |   |  | $ | 1,330  |  
|Interest cost on benefit obligation   |  |                    | 1,395  |   |                  |   | 1,244  |                  |  |   | 2,707            |   |  |   | 2,293  |  
|Expected return on plan assets        |  |                    | (1,164 | ) |                  |   | (1,306 | )                |  |   | (2,258           | ) |  |   | (2,413 | )
|Amortization of transition obligation |  |                    |       |   |                  |   |       |                  |  |   |                 |   |  |   | 35     |  
|Amortization and deferral of net loss |  |                    | 206    |   |                  |   | 21     |                  |  |   | 469              |   |  |   | 102    |  
|                                      |  |                    |        |   |                  |   |        |                  |  |   |                  |   |  |   |        |  
|Net periodic benefit cost             |  | $                  | 1,171  |   |                  | $ | 674    |                  |  | $ | 2,343            |   |  | $ | 1,347  |  
|                                      |  |                    |        |   |                  |   |        |                  |  |   |                  |   |  |   |        |  



|                                      |  |                                |       |                  |   |                  |  |                  |       |  |   |      
|------------------------------------- |  | ------------------------------ | ----- | ---------------- | - | ---------------- |  | ---------------- | ----- |  | - | -----
|                                      |  | Other Post-Retirement Benefits
|                                      |  | Three Months Ended             |       | Six Months Ended
|                                      |  | February 28,2009               |       | February 29,2008 |   | February 28,2009 |  | February 29,2008
|                                      |  | (in thousands)                
|Service cost                          |  | $                              | 669   |                  | $ | 680              |  | $                | 1,339 |  | $ | 1,312
|Interest cost on benefit obligation   |  |                                | 1,116 |                  |   | 1,104            |  |                  | 2,232 |  |   | 2,131
|Expected return on plan assets        |  |                                |      |                  |   |                 |  |                  |      |  |   |     
|Amortization of transition obligation |  |                                | 149   |                  |   | 149              |  |                  | 298   |  |   | 298  
|Amortization and deferral of net loss |  |                                | 244   |                  |   | 191              |  |                  | 487   |  |   | 507  
|                                      |  |                                |       |                  |   |                  |  |                  |       |  |   |      
|Net periodic benefit cost             |  | $                              | 2,178 |                  | $ | 2,124            |  | $                | 4,356 |  | $ | 4,248
|                                      |  |                                |       |                  |   |                  |  |                  |       |  |   |      



As of
February 28, 2009, $2,485,000 of contributions have been made to the Company pension plans for the fiscal year ending August 31, 2009.



|8. | Subsequent Event
|-- | ----------------



During March and April 2009, the Company acquired $19,040,000 of its 101/2% Senior Unsecured Notes due 2012 at an average price of $52.27, resulting in a gain from extinguishment of debt of $8,828,000,
which is net of $260,000 deferred financing costs.



16



---

##### Table of Contents

|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;
| | - |  | -----------------------------------



17



---

##### Table of Contents

| |  |  | future projects and investments;
| | - |  | --------------------------------



| |  |  | 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;
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | future operating results and financial condition; and
| | - |  | -----------------------------------------------------



| |  |  | the effectiveness of our disclosure controls and procedures and internal control over financial reporting.
| | - |  | ----------------------------------------------------------------------------------------------------------



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



Recent Developments



The Company continues to be impacted by the volatility of the petroleum market in fiscal year 2009. Crude prices in the third quarter of fiscal year 2009
have continued to fall as compared to the second quarter of fiscal year 2009. The average NYMEX crude price for the third quarter based on values published on March 27, 2009 was $46.67/bbl, $.46/bbl or 1% lower than the average price for the
second fiscal quarter of 2009 which was $47.13/bbl.



The lagged
3-2-1 crackspread as measured by the difference between the price of crude oil contracts traded on the NYMEX for the proceeding month to the prices of NYMEX gasoline and heating oil contracts in the current trading month, have been positively
affected by improving 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
third quarter of fiscal year 2009 based on values as of March 27, 2009, is $15.56, a $12.45 or a 401% improvement over the lagged crackspread for the second quarter of fiscal year 2009 which was $3.11.



The Company has completed its scheduled shutdown involving the distillate
hydrotreater catalyst change and the regeneration of the reformer unit catalyst. Production at the refinery continued at reduced run rates during the 17 days the shutdown was conducted. The refinery is currently operating at normal run rates.



Results of Operations



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



The wholesale segment is responsible for the acquisition of crude oil, petroleum refining,
supplying petroleum products to the retail segment and the marketing of petroleum products to wholesale and industrial customers. The retail segment sells petroleum products under the Kwik Fill®, Citgo® and Keystone® brand names through a network of Company-operated retail units and convenience and grocery items
through gasoline stations and convenience stores under the Red Apple Food Mart® and Country Fair® brand names.



A discussion and analysis of the factors contributing to the Companys
results of operations are presented below. The accompanying Consolidated Financial Statements and related Notes, together with the following information, are intended to supply investors with a reasonable basis for evaluating the Companys
operations, but should not serve as the only criteria for predicting the Companys future performance.



As discussed in Note 2 to the Consolidated Financial Statements, the Company changed its method of accounting for inventories during interim periods from
adjusting the inventory LIFO reserve on an annual basis to adjusting the inventory LIFO reserve on a quarterly basis. Accordingly, the Company has reflected the change in accounting in the current quarter and retrospectively applied this policy to
its previously issued financial statements for the three months ended November 30, 2008 and 2007; and for the three and six month periods ended February 29, 2008.



18



---

##### Table of Contents

Retail Operations:



|                                       |  |                        |         |   |                  |   |         |              |  |   |               |   |  |   |         |  
|-------------------------------------- |  | ---------------------- | ------- | - | ---------------- | - | ------- | ------------ |  | - | ------------- | - |  | - | ------- | -
|                                       |  | Three Months Ended     |         |   | Six Months Ended |  
|                                       |  | February 28,           |         |   | February 29,     |   |         | February 28, |  |   | February 29,  |  
|                                       |  | 2009                   |         |   | 2008             |   |         | 2009         |  |   | 2008          |  
|                                       |  | (dollars in thousands) |        
|                                       |  |                        |         |   | (As adjusted)    |   |         |              |  |   | (As adjusted) |  
|Net Sales                              |  |                        |         |   |                  |   |         |              |  |   |               |   |  |   |         |  
|Petroleum                              |  | $                      | 183,440 |   |                  | $ | 286,715 |              |  | $ | 488,105       |   |  | $ | 570,842 |  
|Merchandise and other                  |  |                        | 52,878  |   |                  |   | 49,913  |              |  |   | 109,472       |   |  |   | 103,826 |  
|                                       |  |                        |         |   |                  |   |         |              |  |   |               |   |  |   |         |  
|Total Net Sales                        |  | $                      | 236,318 |   |                  | $ | 336,628 |              |  | $ | 597,577       |   |  | $ | 674,668 |  
|Costs of Goods Sold                    |  | $                      | 201,959 |   |                  | $ | 308,701 |              |  | $ | 504,909       |   |  | $ | 620,248 |  
|                                       |  |                        |         |   |                  |   |         |              |  |   |               |   |  |   |         |  
|Gross Profit                           |  | $                      | 34,359  |   |                  | $ | 27,927  |              |  | $ | 92,668        |   |  | $ | 54,420  |  
|Operating Expenses                     |  | $                      | 31,034  |   |                  | $ | 31,241  |              |  | $ | 62,785        |   |  | $ | 61,702  |  
|                                       |  |                        |         |   |                  |   |         |              |  |   |               |   |  |   |         |  
|Segment Operating Income (Loss)        |  | $                      | 3,325   |   |                  | $ | (3,314  | )            |  | $ | 29,883        |   |  | $ | (7,282  | )
|                                       |  |                        |         |   |                  |   |         |              |  |   |               |   |  |   |         |  
|Petroleum Sales (thousands of gallons) |  |                        | 93,159  |   |                  |   | 89,547  |              |  |   | 190,487       |   |  |   | 184,436 |  
|                                       |  |                        |         |   |                  |   |         |              |  |   |               |   |  |   |         |  
|Gross Profit                           |  |                        |         |   |                  |   |         |              |  |   |               |   |  |   |         |  
|Petroleum (a)                          |  | $                      | 20,716  |   |                  | $ | 14,700  |              |  | $ | 64,139        |   |  | $ | 26,788  |  
|Merchandise and other                  |  |                        | 13,643  |   |                  |   | 13,227  |              |  |   | 28,529        |   |  |   | 27,632  |  
|                                       |  |                        |         |   |                  |   |         |              |  |   |               |   |  |   |         |  
|                                       |  | $                      | 34,359  |   |                  | $ | 27,927  |              |  | $ | 92,668        |   |  | $ | 54,420  |  
|                                       |  |                        |         |   |                  |   |         |              |  |   |               |   |  |   |         |  
|Petroleum margin ($/gallon) (b)        |  |                        | .2223   |   |                  |   | .1642   |              |  |   | .3367         |   |  |   | .1452   |  
|Merchandise margin (percent of sales)  |  |                        | 25.8    | % |                  |   | 26.5    | %            |  |   | 26.1          | % |  |   | 26.6    | %



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

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



Comparison of Fiscal Quarters Ended February 28, 2009 and February 29, 2008



Net Sales



Retail sales decreased during the fiscal quarter ended February 28,
2009 by $100.3 million or 29.8% from $336.6 million to $236.3 million for the comparable period in fiscal 2008. The decrease was primarily due to: $103.3 million in petroleum sales offset by a $3.0 million increase in merchandise sales. The
petroleum sales decrease resulted from a 38.5% decrease in retail selling prices per gallon, offset by a 3.6 million gallon or 4.0% increase in retail petroleum volume. Merchandise sales increase is primarily due to increased prepared food,
beverages and cigarette sales due to promotional campaigns and increased selling prices.



Costs of Goods Sold



Retail costs of goods sold decreased during the fiscal quarter ended February 28, 2009 by $106.7 million or 34.6% for the comparable period in fiscal 2008 from $308.7 million to $202.0 million. The decrease was primarily due to $107.0
million in petroleum purchase prices offset by increases in: fuel tax of $.8 million, freight cost of $.1 million, merchandise cost of $2.5 million and a $3.1 million decrease in inventory pricing.



Gross Profit



Retail gross profit increased during the fiscal quarter ended February 28, 2009 by $6.4 million or 23.0% for the
comparable period in fiscal 2008. The Company increased its petroleum margins by $6.0 million or 40.9% and merchandise margin increased by $.4 million or 3.1%.



19



---

##### Table of Contents

Operating Expenses



Retail operating expenses remained relatively constant during the fiscal quarter ended February 28, 2009 and the comparable period in fiscal 2008,
due to the Companys effort to keep overhead at the previous years level.



Comparison of Six Months Ended February 28, 2009 and February 29, 2008



Net Sales



Retail sales
decreased during the six months ended February 28, 2009 by $77.1 million or 11.4% from $674.6 million to $597.5 million for the comparable period in fiscal 2008. The decrease was primarily due to $82.7 million in petroleum sales, offset by a
$5.6 million increase in merchandise sales. The petroleum sales decrease resulted from a 17.2% decrease in retail selling prices per gallon this was offset by 6.1 million gallon or 3.3% increase in sales volume. The merchandise sales increase
is primarily due to increased prepared food, beverages and cigarette sales due to promotional campaigns and increased selling prices.



Costs of Goods Sold



Retail costs of goods sold decreased during the six months ended February 28, 2009 by $115.3 million or 18.6% from $620.2 million to $504.9 million
for the comparable period in fiscal 2008. The decrease was primarily due to $111.0 million in petroleum purchase prices offset by increases in: fuel taxes of $2.6 million, freight costs of $.7 million, merchandise costs of $4.7 million and $12.3
million decrease in inventory pricing.



Gross Profit



Retail gross profit increased during the six months ended February 28,
2009 by $38.2 million or 70.3% for the comparable period in fiscal 2008. The Company increased its petroleum margins by $37.3 million or 139.4% and merchandise margin by $.9 million or 3.2%.



Operating Expenses



Retail operating expenses increased during the six months ended February 28, 2009 by $1.1 million or 1.8% for the
comparable period in fiscal 2008. The increase was due to the following: credit/customer service costs of $.4 million, payroll costs of $.5 million, maintenance costs of $.4 million, advertising of $.2 million and pension/post retirement costs of
$.2 million, offset by a reduction in environmental costs of $.6 million.



Wholesale Operations:



|                                            |  |                        |         |               |                  |         |              |  |   |               |   |  |   |         |  
|------------------------------------------- |  | ---------------------- | ------- | ------------- | ---------------- | ------- | ------------ |  | - | ------------- | - |  | - | ------- | -
|                                            |  | Three Months Ended     |         |               | Six Months Ended |        
|                                            |  | February 28,           |         | February 29,  |                  |         | February 28, |  |   | February 29,  |  
|                                            |  | 2009                   |         | 2008          |                  |         | 2009         |  |   | 2008          |  
|                                            |  | (dollars in thousands) |        
|                                            |  |                        |         | (As adjusted) |                  |         |              |  |   | (As adjusted) |  
|Net Sales (a)                               |  | $                      | 198,491 |               | $                | 327,090 |              |  | $ | 607,703       |   |  | $ | 682,618 |  
|Costs of Goods Sold                         |  |                        | 188,637 |               |                  | 346,408 |              |  |   | 600,774       |   |  |   | 677,336 |  
|                                            |  |                        |         |               |                  |         |              |  |   |               |   |  |   |         |  
|Gross Profit (Loss)                         |  | $                      | 9,854   |               | $                | (19,318 | )            |  | $ | 6,929         |   |  | $ | 5,282   |  
|                                            |  |                        |         |               |                  |         |              |  |   |               |   |  |   |         |  
|Operating Expenses                          |  |                        | 8,947   |               |                  | 8,098   |              |  |   | 17,549        |   |  |   | 17,107  |  
|                                            |  |                        |         |               |                  |         |              |  |   |               |   |  |   |         |  
|Segment Operating Income (Loss)             |  | $                      | 907     |               | $                | (27,416 | )            |  | $ | (10,620       | ) |  | $ | (11,825 | )
|                                            |  |                        |         |               |                  |         |              |  |   |               |   |  |   |         |  
|Crude throughput (thousand barrels per day) |  |                        | 64.7    |               |                  | 60.7    |              |  |   | 64.0          |   |  |   | 59.3    |  
|                                            |  |                        |         |               |                  |         |              |  |   |               |   |  |   |         |  



20



---

##### Table of Contents

Refinery Product Yield

(thousands of barrels)



|                                                                                 |  |                    |   |  |                  |   |  |              |   |  |              |  
|-------------------------------------------------------------------------------- |  | ------------------ | - |  | ---------------- | - |  | ------------ | - |  | ------------ | -
|                                                                                 |  | Three Months Ended |   |  | Six Months Ended |  
|                                                                                 |  | February 28,       |   |  | February 29,     |   |  | February 28, |   |  | February 29, |  
|                                                                                 |  | 2009               |   |  | 2008             |   |  | 2009         |   |  | 2008         |  
|Gasoline and gasoline blendstock                                                 |  | 2,573              |   |  | 2,624            |   |  | 4,907        |   |  | 4,744        |  
|Distillates                                                                      |  | 1,455              |   |  | 1,373            |   |  | 2,851        |   |  | 2,652        |  
|Asphalt                                                                          |  | 1,652              |   |  | 1,602            |   |  | 3,502        |   |  | 3,288        |  
|Butane, propane, residual products, internally produced fuel and other (Other) |  | 534                |   |  | 541              |   |  | 1,026        |   |  | 1,120        |  
|                                                                                 |  |                    |   |  |                  |   |  |              |   |  |              |  
|Total Product Yield                                                              |  | 6,214              |   |  | 6,140            |   |  | 12,286       |   |  | 11,804       |  
|                                                                                 |  |                    |   |  |                  |   |  |              |   |  |              |  
|% Heavy Crude Oil of Total Refinery Throughput (b)                               |  | 58                 | % |  | 58               | % |  | 61           | % |  | 60           | %



Product Sales

(dollars in thousands) (a)



|                                 |  |                    |         |                  |   |              |  |              |         |  |   |        
|-------------------------------- |  | ------------------ | ------- | ---------------- | - | ------------ |  | ------------ | ------- |  | - | -------
|                                 |  | Three Months Ended |         | Six Months Ended
|                                 |  | February 28,       |         | February 29,     |   | February 28, |  | February 29,
|                                 |  | 2009               |         | 2008             |   | 2009         |  | 2008        
|Gasoline and gasoline blendstock |  | $                  | 65,057  |                  | $ | 139,807      |  | $            | 191,464 |  | $ | 275,961
|Distillates                      |  |                    | 70,535  |                  |   | 126,798      |  |              | 187,119 |  |   | 240,009
|Asphalt                          |  |                    | 57,595  |                  |   | 45,435       |  |              | 212,507 |  |   | 144,622
|Other                            |  |                    | 5,304   |                  |   | 15,050       |  |              | 16,613  |  |   | 22,026 
|                                 |  |                    |         |                  |   |              |  |              |         |  |   |        
|Total Product Sales              |  | $                  | 198,491 |                  | $ | 327,090      |  | $            | 607,703 |  | $ | 682,618
|                                 |  |                    |         |                  |   |              |  |              |         |  |   |        



Product Sales

(thousand of barrels) (a)



|                                 |  |                    |  |                  |  |              |  |             
|-------------------------------- |  | ------------------ |  | ---------------- |  | ------------ |  | ------------
|                                 |  | Three Months Ended |  | Six Months Ended
|                                 |  | February 28,       |  | February 29,     |  | February 28, |  | February 29,
|                                 |  | 2009               |  | 2008             |  | 2009         |  | 2008        
|Gasoline and gasoline blendstock |  | 1,360              |  | 1,389            |  | 2,772        |  | 2,823       
|Distillates                      |  | 1,139              |  | 1,111            |  | 2,205        |  | 2,187       
|Asphalt                          |  | 1,264              |  | 1,493            |  | 2,879        |  | 3,906       
|Other                            |  | 218                |  | 252              |  | 425          |  | 387         
|                                 |  |                    |  |                  |  |              |  |             
|Total Product Sales Volume       |  | 3,981              |  | 4,245            |  | 8,281        |  | 9,303       
|                                 |  |                    |  |                  |  |              |  |             



|(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.
|--- | -----------------------------------------------------------------------------------------------------------------------



21



---

##### Table of Contents

Comparison of Fiscal Quarters Ended February 28, 2009 and February 29, 2008



Net Sales



Wholesale sales decreased during the three months ended February 28, 2009 by $128.6 million or 39.3% for the comparable
period in fiscal 2008 from $327.1 million to $198.5 million. The decrease was due to a 35.3% decrease in wholesale prices and a 6.2% decrease in wholesale volume.



Costs of Goods Sold



Wholesale costs of goods sold decreased during the three months ended February 28, 2009 by $157.8 million or 45.5% for the comparable period in
fiscal 2008 from $346.4 million to $188.6 million. The decrease in wholesale costs of goods sold during this period was primarily due to a decrease in cost of raw materials.



Gross Profit



Wholesale gross profit increased during the three months ended February 28, 2009 by $29.2 million or 151.0% for the comparable period in fiscal 2008
from $(19.3) million to $9.9 million. The increase was primarily due to the changing oil market pricing.



Operating Expenses



Operating expenses increased during the three months ended February 28, 2009 by $.8 million or 10.5% over the comparable period in fiscal 2008. This increase is due to the following: credit costs of $.3 million, professional services
of $.6 million, pension/post retirement costs of $.2 million and miscellaneous costs of $.1 million offset by a reduction in payroll costs of $.4 million. The operating expense for the fiscal quarter ended February 28, 2009 was $8.9 million or
4.5% of net wholesale sales compared to $8.1 million or 2.5% of net wholesale sales for the comparable period in 2008.



Comparison of Six Months Ended February 28, 2009 and February 29, 2008



Net Sales



Wholesale sales decreased during the six months ended February 28, 2009 by $74.9 million or 11.0% from $682.6 million to $607.7 million for the
comparable period in fiscal 2008. The decrease was due to an 11.0% decrease in wholesale volume.



Costs of Goods Sold



Wholesale costs of goods sold decreased during the six months ended February 28, 2009 by $76.5 million or 11.3% from $677.3 million to $600.8 million for the comparable period in fiscal 2008. The decrease in wholesale costs of goods
sold was primarily a result of the volatile changing oil market pricing in the first fiscal quarter.



Gross Profit



Wholesale
gross profit increased during the six months ended February 28, 2009 by $1.6 million or 30.2% from $5.3 million to $6.9 million for the comparable period in fiscal 2008. The increase was primarily due to the changing oil market pricing.



22



---

##### Table of Contents

Operating Expenses



Operating expenses increased during the six months ended February 28, 2009 by $.4 million or 2.6% over the comparable period in fiscal 2008. This was
due to increased credit fees of $.4 million, professional services of $.4 million and pension/post retirement costs of $.3 million offset by a reduction in payroll costs of $.7 million. For 2009 operating expenses were $17.5 million, or 2.9% of net
wholesale sales, compared to $17.1 million, or 2.5% of net wholesale sales for the comparable period in fiscal 2008.



Consolidated Expenses:



Interest Expense, net



Net interest expense (interest expense less interest income) for the three months ended February 28, 2009 increased $1.6 million or 21.3% to $9.1 million from $7.5 million for the comparable period in fiscal 2008, primarily due to the
decrease of interest income as a result of less cash available for investing.



Net interest expense (interest expense less interest income) for the six months ended February 28, 2009 increased $4.2 million or 29.6% to $18.4 million from $14.2 million for the comparable period in fiscal
2008, primarily due to the decrease of interest income as a result of less cash available for investing.



Income Tax Expense / (Benefit)



The Companys effective tax rate for the three months and six months ended February 28, 2009 and February 29, 2008 remained relatively constant at approximately 41%.



Liquidity and Capital Resources



We operate in an environment where our liquidity and capital resources are
impacted by changes in the price of crude oil and refined petroleum products, availability of credit, market uncertainty and a variety of additional factors beyond our control. Included in such factors are, among others, the level of customer
product demand, weather conditions, governmental regulations, worldwide political conditions and overall market and economic conditions.



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



|                          |  |                  |         |                |   |        
|------------------------- |  | ---------------- | ------- | -------------- | - | -------
|                          |  | February 28,2009 |         | August 31,2008
|Cash and cash equivalents |  | $                | 17,864  |                | $ | 32,447 
|Working capital           |  | $                | 204,111 |                | $ | 206,985
|Current ratio             |  |                  | 3.1     |                |   | 3.0    
|Debt                      |  | $                | 376,298 |                | $ | 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.



23



---

##### Table of Contents

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.



|                                                    |  |                                 |       |  
|--------------------------------------------------- |  | ------------------------------- | ----- | -
|                                                    |  | Six MonthsEndedFebruary 28,2009 |      
|                                                    |  | (in millions)                   |      
|Significant uses of cash                            |  |                                 |       |  
|Investing activities:                               |  |                                 |       |  
|Property, plant and equipment                       |  |                                 |       |  
|Residual upgrade                                    |  | $                               | 5.6   |  
|Waste water treatment plant upgrade                 |  |                                 | 1.9   |  
|Renewable fuels  cost estimates                    |  |                                 | 1.3   |  
|#4 boiler upgrade                                   |  |                                 | 1.1   |  
|Replace existing boiler Springdale                 |  |                                 | .9    |  
|Environmental upgrade                               |  |                                 | .8    |  
|Computers and equipment upgrade                     |  |                                 | .8    |  
|Miscellaneous equipment replacement                 |  |                                 | .7    |  
|Retail maintenance (black top, roof, HVAC, rehab)   |  |                                 | .7    |  
|Retail petroleum upgrade                            |  |                                 | .5    |  
|Other general capital items                         |  |                                 |       |  
|(tank repairs, refinery piping projects, etc.)      |  |                                 | 1.6   |  
|                                                    |  |                                 |       |  
|Total property, plant and equipment                 |  | $                               | 15.9  |  
|                                                    |  |                                 |       |  
|Net cash provided by investing activities           |  | $                               | 15.9  |  
|                                                    |  |                                 |       |  
|Financing activities:                               |  |                                 |       |  
|Net borrowings on revolving credit facility         |  |                                 | 9.0   |  
|Principal reductions of long term debt              |  |                                 | (.8   | )
|Other                                               |  |                                 | .1    |  
|                                                    |  |                                 |       |  
|Net cash provided by financing activities           |  | $                               | 8.3   |  
|                                                    |  |                                 |       |  
|Working capital items:                              |  |                                 |       |  
|Accounts receivable decrease                        |  | $                               | 66.4  |  
|Refundable income tax                               |  |                                 | 7.3   |  
|Prepaid expense decrease                            |  |                                 | 5.3   |  
|Increase in inventory                               |  |                                 | (88.1 | )
|Accounts payable decrease                           |  |                                 | (4.4  | )
|Sales, use and fuel taxes payable decrease          |  |                                 | (3.9  | )
|Accrued liabilities decrease                        |  |                                 | (2.9  | )
|Amounts due from affiliated companies, net decrease |  |                                 | (.6   | )
|                                                    |  |                                 |       |  
|Cash used in working capital items                  |  | $                               | (20.9 | )
|                                                    |  |                                 |       |  



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



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



24



---

##### Table of Contents

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 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%. Prior to
this amendment of the Revolving Credit Facility, commencing May 7, 2007, interest was calculated as follows: (a) for base rate borrowings, at the greater of the Agent Banks prime rate less an applicable margin of .5% to 0% or the
federal funds rate plus 1%; (b) for euro-rate borrowings, at the LIBOR rate plus an applicable margin of 1.25% to 1.75%. The Agent Banks prime rate at February 28, 2009 was 3.25%.



The Revolving Credit Facility is secured primarily by certain cash accounts,
accounts receivable and inventory. Until maturity, we may borrow on a borrowing base formula as set forth in the facility. We had standby letters of credit of $.4 million as of February 28, 2009 and there were outstanding borrowings under the
Revolving Credit Facility in the amount of $18.0 million resulting in net availability of $111.6 million. As of April 20, 2009 there were no borrowings on the $130 million Revolving Credit Facility and standby letters of credit in the amount of
$3.2 million, resulting in a net availability of $126.8 million and the Company had full access to it. The Companys working capital ratio was 3.1 as of February 28, 2009.



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



Federal, state and local laws and regulations relating to the environment affect nearly all of our operations. As is the case with all the companies
engaged in similar industries, we face significant exposure from actual or potential claims and lawsuits involving environmental matters. Future expenditures related to environmental matters cannot be reasonably quantified in many circumstances due
to the uncertainties as to required remediation methods and related clean-up cost estimates. We cannot predict what additional environmental legislation or regulations will be enacted or become effective in the future or how existing or future laws
or regulations will be administered or interpreted with respect to products or activities to which they have not been previously applied.



Seasonal Factors



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



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



25



---

##### Table of Contents

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 revolving credit facility to
finance a portion of its operations. As of April 20, 2009, there were no borrowings outstanding under the revolving line of credit. These on-balance sheet financial instruments, to the extent they provide for variable rates, expose the Company
to interest rate risk resulting from changes in the PNC Prime rate, the Federal Funds or LIBOR rate.



The Company has exposure to price fluctuations of crude oil and refined products. The Company does not manage the price risk related to all of its
inventories of crude oil and refined products with a permanent formal hedging program, but does manage its risk exposures by managing inventory levels.The Company had no open future positions at February 28, 2009.



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



|ITEM 4. | CONTROLS AND PROCEDURES.
|------- | ------------------------



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



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



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



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



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



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



Based on an evaluation by management of the Companys disclosure controls and procedures (as defined in Rules 13(a)  15(e) and 15(d)  15(e) of the Exchange Act), as of the end of the Companys
fiscal quarter ended February 28, 2009, (the Evaluation Date) the Companys CEO and CFO (its principal executive officer and principal financial officer, respectively) have concluded that these controls and procedures are
effective in providing reasonable assurance that information requiring disclosure is recorded, processed, summarized and reported with the timeframe specified by the SECs rules and forms.



There have not been any changes in the Companys internal controls over
financial reporting that occurred during the Companys fiscal quarter ended February 28, 2009 that has materially affected, or is reasonably likely to materially affect, the Companys internal controls over financial reporting.



26



---

##### Table of Contents

PART II OTHER INFORMATION



|ITEM 1. | LEGAL PROCEEDINGS.
|------- | ------------------



None.



|ITEM 1A. | RISK FACTORS.
|-------- | -------------



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



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



None.



|ITEM 3. | DEFAULTS UPON SENIOR SECURITIES.
|------- | --------------------------------



None.



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



None.



|ITEM 5. | OTHER INFORMATION.
|------- | ------------------



None.



|ITEM 6. | EXHIBITS.
|------- | ---------



|             |  |                                                                                                                                                                              
|------------ |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|             | 
|Exhibit 31.1 |  | Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002                                                                           
|             | 
|Exhibit 31.2 |  | Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002                                                                           
|             | 
|Exhibit 32.1 |  | Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
|             | 
|Exhibit 99.1 |  | Preferability Letter of Independent Registered Public Accounting Firm                                                                                                        



27



---

##### Table of Contents

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:
April 20, 2009



UNITED REFINING COMPANY (Registrant)/s/  Myron L. TurfittMyron L. Turfitt President/s/  James E. MurphyJames E. Murphy Chief Financial Officer




28



---

##### Table of Contents

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: April 20, 2009



KIANTONE PIPELINE CORPORATION (Registrant)/s/  Myron L. TurfittMyron L. Turfitt President/s/  James E. MurphyJames E. Murphy Chief Financial Officer




29



---

##### Table of Contents

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:
April 20, 2009



UNITED REFINING COMPANY OF PENNSYLVANIA (Registrant)/s/  Myron L. TurfittMyron L. Turfitt President/s/  James E. MurphyJames E. Murphy Chief Financial Officer




30



---

##### Table of Contents

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:
April 20, 2009



KIANTONE PIPELINE COMPANY (Registrant)/s/  Myron L. TurfittMyron L. Turfitt President/s/  James E. MurphyJames E. Murphy Chief Financial Officer




31



---

##### Table of Contents

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:
April 20, 2009



UNITED JET CENTER, INC. (Registrant)/s/  Myron L. TurfittMyron L. Turfitt President/s/  James E. MurphyJames E. Murphy Chief Financial Officer




32



---

##### Table of Contents

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:
April 20, 2009



KWIK-FILL CORPORATION (Registrant)/s/  Myron L. TurfittMyron L. Turfitt President/s/  James E. MurphyJames E. Murphy Chief Financial Officer




33



---

##### Table of Contents

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: April 20, 2009



INDEPENDENT GASOLINE AND OIL COMPANY OF ROCHESTER, INC. (Registrant)/s/  Myron L. TurfittMyron L. Turfitt President/s/  James E. MurphyJames E. Murphy Chief Financial Officer




34



---

##### Table of Contents

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: April 20, 2009



BELL OIL CORP. (Registrant)/s/  Myron L. TurfittMyron L. Turfitt President/s/  James E. MurphyJames E. Murphy Chief Financial Officer




35



---

##### Table of Contents

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: April 20, 2009



PPC, INC. (Registrant)/s/  Myron L. TurfittMyron L. Turfitt President/s/  James E. MurphyJames E. Murphy Chief Financial Officer




36



---

##### Table of Contents

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:
April 20, 2009



SUPER TEST PETROLEUM, INC. (Registrant)/s/  Myron L. TurfittMyron L. Turfitt President/s/  James E. MurphyJames E. Murphy Chief Financial Officer




37



---

##### Table of Contents

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: April 20, 2009



KWIK-FIL, INC. (Registrant)/s/  Myron L. TurfittMyron L. Turfitt President/s/  James E. MurphyJames E. Murphy Chief Financial Officer




38



---

##### Table of Contents

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: April 20, 2009



VULCAN ASPHALT REFINING CORPORATION (Registrant)/s/  Myron L. TurfittMyron L. Turfitt President/s/  James E. MurphyJames E. Murphy Chief Financial Officer




39



---

##### Table of Contents

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: April 20, 2009



COUNTRY FAIR, INC. (Registrant)/s/  Myron L. TurfittMyron L. Turfitt President and Chief Operating Officer/s/  James E. MurphyJames E. Murphy Vice President  Finance




40