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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549



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FORM 10-Q



(Mark One)

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



FOR THE QUARTERLY PERIOD ENDED MAY 31, 2005



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. 333-35083



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LOGOUNITED REFINING COMPANY

(Exact name of registrant as specified in its charter)



|                                                              |  |                                    
|------------------------------------------------------------- |  | -----------------------------------
|Pennsylvania                                                  |  | 25-1411751                         
|(State or other jurisdiction ofincorporation or organization) |  | (I.R.S. EmployerIdentification No.)
|                                                              | 
|15 Bradley StreetWarren, Pennsylvania                         |  | 16365                              
|(address of principal executive office)                       |  | (Zip Code)                         



814-726-4674

Registrants telephone number, including area code



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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 an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).    Yes ̈No  x



Number of shares outstanding of Registrants Common Stock as of July 14, 2005: 100.



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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



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|         |  |                                                                                                                        |  |        
|-------- |  | ---------------------------------------------------------------------------------------------------------------------- |  | -------
|         |  |                                                                                                                        |  | PAGE(S)
|PART I.  |  | FINANCIAL INFORMATION                                                                                                  |  |        
|         |  |                                                                                                                       
|Item 1.  |  | Financial Statements                                                                                                   |  |        
|         |  |                                                                                                                       
|         |  | Consolidated Balance Sheets  May 31, 2005 (unaudited) and August 31, 2004                                             |  | 4      
|         |  |                                                                                                                       
|         |  | Consolidated Statements of Operations  Quarters and Nine Months Ended May 31, 2005 and 2004 (as restated) (unaudited) |  | 5      
|         |  |                                                                                                                       
|         |  | Consolidated Statements of Cash Flows  Nine Months Ended May 31, 2005 and 2004 (as restated) (unaudited)              |  | 6      
|         |  |                                                                                                                       
|         |  | Notes to Consolidated Financial Statements (unaudited)                                                                 |  | 7-15   
|         |  |                                                                                                                       
|Item 2.  |  | Managements Discussion and Analysis of Financial Condition and Results of Operations                                  |  | 16-24  
|         |  |                                                                                                                       
|Item 3.  |  | Quantitative and Qualitative Disclosures about Market Risk                                                             |  | 24     
|         |  |                                                                                                                       
|Item 4.  |  | Controls and Procedures                                                                                                |  | 24     
|         |  |                                                                                                                       
|PART II. |  | OTHER INFORMATION                                                                                                      |  | 25     
|         |  |                                                                                                                       
|Item 1.  |  | Legal Proceedings(None)                                                                                                |  | 25     
|         |  |                                                                                                                       
|Item 2.  |  | Unregistered Sales of Equity Securities and Use of Proceeds(None)                                                      |  | 25     
|         |  |                                                                                                                       
|Item 3.  |  | Defaults Upon Senior Securities(None)                                                                                  |  | 25     
|         |  |                                                                                                                       
|Item 4.  |  | Submission of Matters to a Vote of Security Holders(N/A)                                                               |  | 25     
|         |  |                                                                                                                       
|Item 5.  |  | Other Information(None)                                                                                                |  | 25     
|         |  |                                                                                                                       
|Item 6.  |  | Exhibits                                                                                                               |  | 25     



|             |  |                                                                                                                                                                              
|------------ |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|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



3



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UNITED REFINING COMPANY AND SUBSIDIARIES



CONSOLIDATED BALANCE SHEETS

(in thousands, except share amounts)



|                                                                                           |  |                        |         |   |                 |   |         |  
|------------------------------------------------------------------------------------------ |  | ---------------------- | ------- | - | --------------- | - | ------- | -
|                                                                                           |  | May 31,2005(Unaudited) |         |   | August 31, 2004 |  
|Assets                                                                                     |  |                        |         |   |                 |   |         |  
|Current:                                                                                   |  |                        |         |   |                 |   |         |  
|Cash and cash equivalents                                                                  |  | $                      | 24,761  |   |                 | $ | 11,552  |  
|Accounts receivable, net                                                                   |  |                        | 51,894  |   |                 |   | 44,596  |  
|Inventories                                                                                |  |                        | 115,314 |   |                 |   | 75,623  |  
|Prepaid expenses and other assets                                                          |  |                        | 32,158  |   |                 |   | 16,476  |  
|                                                                                           |  |                        |         |   |                 |   |         |  
|Total current assets                                                                       |  |                        | 224,127 |   |                 |   | 148,247 |  
|Property, plant and equipment, net                                                         |  |                        | 182,565 |   |                 |   | 184,705 |  
|Investment in affiliated company                                                           |  |                        | 1,319   |   |                 |   | 846     |  
|Deferred financing costs, net                                                              |  |                        | 7,045   |   |                 |   | 6,723   |  
|Goodwill                                                                                   |  |                        | 1,349   |   |                 |   | 1,349   |  
|Tradename                                                                                  |  |                        | 10,500  |   |                 |   | 10,500  |  
|Amortizable intangible assets, net                                                         |  |                        | 3,620   |   |                 |   | 3,874   |  
|Deferred turnaround costs and other assets, net                                            |  |                        | 8,872   |   |                 |   | 10,138  |  
|Deferred income taxes                                                                      |  |                        | 48      |   |                 |   |        |  
|                                                                                           |  |                        |         |   |                 |   |         |  
|                                                                                           |  | $                      | 439,445 |   |                 | $ | 366,382 |  
|                                                                                           |  |                        |         |   |                 |   |         |  
|Liabilities and Stockholders Equity                                                       |  |                        |         |   |                 |   |         |  
|Current:                                                                                   |  |                        |         |   |                 |   |         |  
|Revolving credit facility                                                                  |  | $                      | 35,000  |   |                 | $ | 13,000  |  
|Current installments of long-term debt                                                     |  |                        | 387     |   |                 |   | 452     |  
|Accounts payable                                                                           |  |                        | 55,711  |   |                 |   | 28,732  |  
|Accrued liabilities                                                                        |  |                        | 18,900  |   |                 |   | 16,300  |  
|Income tax payable                                                                         |  |                        |        |   |                 |   | 795     |  
|Sales, use and fuel taxes payable                                                          |  |                        | 19,514  |   |                 |   | 19,466  |  
|Deferred income taxes                                                                      |  |                        | 3,919   |   |                 |   | 3,919   |  
|Amounts due to affiliated companies, net                                                   |  |                        | 227     |   |                 |   | 132     |  
|                                                                                           |  |                        |         |   |                 |   |         |  
|Total current liabilities                                                                  |  |                        | 133,658 |   |                 |   | 82,796  |  
|Long term debt: less current installments                                                  |  |                        | 224,907 |   |                 |   | 199,496 |  
|Deferred income taxes                                                                      |  |                        |        |   |                 |   | 1,898   |  
|Deferred gain on settlement of pension plan obligations                                    |  |                        | 754     |   |                 |   | 915     |  
|Deferred retirement benefits                                                               |  |                        | 35,642  |   |                 |   | 32,402  |  
|Other noncurrent liabilities                                                               |  |                        | 1,463   |   |                 |   | 1,769   |  
|                                                                                           |  |                        |         |   |                 |   |         |  
|Total liabilities                                                                          |  |                        | 396,424 |   |                 |   | 319,276 |  
|                                                                                           |  |                        |         |   |                 |   |         |  
|Commitments and contingencies                                                              |  |                        |         |   |                 |   |         |  
|Stockholders equity:                                                                      |  |                        |         |   |                 |   |         |  
|Common stock; $.10 par value per share  shares authorized 100; issued and outstanding 100 |  |                        |        |   |                 |   |        |  
|Additional paid-in capital                                                                 |  |                        | 16,648  |   |                 |   | 16,648  |  
|Retained earnings                                                                          |  |                        | 28,677  |   |                 |   | 32,762  |  
|Accumulated other comprehensive loss                                                       |  |                        | (2,304  | ) |                 |   | (2,304  | )
|                                                                                           |  |                        |         |   |                 |   |         |  
|Total stockholders equity                                                                 |  |                        | 43,021  |   |                 |   | 47,106  |  
|                                                                                           |  |                        |         |   |                 |   |         |  
|                                                                                           |  | $                      | 439,445 |   |                 | $ | 366,382 |  
|                                                                                           |  |                        |         |   |                 |   |         |  



4



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UNITED REFINING COMPANY AND SUBSIDIARIES



CONSOLIDATED STATEMENTS OF OPERATIONS(Unaudited)

(in thousands)



|                                                  |  |                           |         |   |                             |   |         |      |  |   |                             |   |  |   |           |  
|------------------------------------------------- |  | ------------------------- | ------- | - | --------------------------- | - | ------- | ---- |  | - | --------------------------- | - |  | - | --------- | -
|                                                  |  | Three Months EndedMay 31, |         |   | Nine Months EndedMay 31,    |  
|                                                  |  | 2005                      |         |   | 2004(As Restatedsee Note 2) |   |         | 2005 |  |   | 2004(As Restatedsee Note 2) |  
|Net sales                                         |  | $                         | 479,548 |   |                             | $ | 374,320 |      |  | $ | 1,290,390                   |   |  | $ | 1,032,100 |  
|Costs of goods sold                               |  |                           | 426,813 |   |                             |   | 330,022 |      |  |   | 1,177,707                   |   |  |   | 909,670   |  
|                                                  |  |                           |         |   |                             |   |         |      |  |   |                             |   |  |   |           |  
|Gross profit                                      |  |                           | 52,735  |   |                             |   | 44,298  |      |  |   | 112,683                     |   |  |   | 122,430   |  
|                                                  |  |                           |         |   |                             |   |         |      |  |   |                             |   |  |   |           |  
|Expenses:                                         |  |                           |         |   |                             |   |         |      |  |   |                             |   |  |   |           |  
|Selling, general and administrative expenses      |  |                           | 30,343  |   |                             |   | 27,540  |      |  |   | 87,051                      |   |  |   | 82,474    |  
|Depreciation and amortization expenses            |  |                           | 3,348   |   |                             |   | 3,211   |      |  |   | 10,033                      |   |  |   | 9,618     |  
|                                                  |  |                           |         |   |                             |   |         |      |  |   |                             |   |  |   |           |  
|Total operating expenses                          |  |                           | 33,691  |   |                             |   | 30,751  |      |  |   | 97,084                      |   |  |   | 92,092    |  
|                                                  |  |                           |         |   |                             |   |         |      |  |   |                             |   |  |   |           |  
|Operating income                                  |  |                           | 19,044  |   |                             |   | 13,547  |      |  |   | 15,599                      |   |  |   | 30,338    |  
|                                                  |  |                           |         |   |                             |   |         |      |  |   |                             |   |  |   |           |  
|Other income (expense):                           |  |                           |         |   |                             |   |         |      |  |   |                             |   |  |   |           |  
|Interest expense, net                             |  |                           | (6,638  | ) |                             |   | (5,478  | )    |  |   | (18,292                     | ) |  |   | (15,947   | )
|Other, net                                        |  |                           | (639    | ) |                             |   | (283    | )    |  |   | (1,673                      | ) |  |   | (1,325    | )
|Equity in net earnings (loss) of affiliate        |  |                           | (195    | ) |                             |   | 67      |      |  |   | 473                         |   |  |   | 578       |  
|                                                  |  |                           |         |   |                             |   |         |      |  |   |                             |   |  |   |           |  
|                                                  |  |                           | (7,472  | ) |                             |   | (5,694  | )    |  |   | (19,492                     | ) |  |   | (16,694   | )
|                                                  |  |                           |         |   |                             |   |         |      |  |   |                             |   |  |   |           |  
|Income (loss) before income tax expense (benefit) |  |                           | 11,572  |   |                             |   | 7,853   |      |  |   | (3,893                      | ) |  |   | 13,644    |  
|Income tax expense (benefit)                      |  |                           | 4,627   |   |                             |   | 3,161   |      |  |   | (1,551                      | ) |  |   | 5,494     |  
|                                                  |  |                           |         |   |                             |   |         |      |  |   |                             |   |  |   |           |  
|Net income (loss)                                 |  | $                         | 6,945   |   |                             | $ | 4,692   |      |  | $ | (2,342                      | ) |  | $ | 8,150     |  
|                                                  |  |                           |         |   |                             |   |         |      |  |   |                             |   |  |   |           |  



5



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UNITED REFINING COMPANY AND SUBSIDIARIES



CONSOLIDATED STATEMENTS OF CASH FLOWS(Unaudited)

(in thousands)



|                                                                                     |  |                          |         |   |                             |   |         |  
|------------------------------------------------------------------------------------ |  | ------------------------ | ------- | - | --------------------------- | - | ------- | -
|                                                                                     |  | Nine Months EndedMay 31, |        
|                                                                                     |  | 2005                     |         |   | 2004(As Restatedsee Note 2) |  
|Cash flows from operating activities:                                                |  |                          |         |   |                             |   |         |  
|Net income (loss)                                                                    |  | $                        | (2,342  | ) |                             | $ | 8,150   |  
|                                                                                     |  |                          |         |   |                             |   |         |  
|Adjustments to reconcile net income (loss) to net cash used in operating activities: |  |                          |         |   |                             |   |         |  
|Depreciation and amortization                                                        |  |                          | 13,003  |   |                             |   | 12,484  |  
|Equity in net earnings of affiliate                                                  |  |                          | (473    | ) |                             |   | (578    | )
|Deferred income taxes                                                                |  |                          | (1,946  | ) |                             |   | 4,092   |  
|Loss on asset dispositions                                                           |  |                          | 818     |   |                             |   | 94      |  
|Cash used in working capital items                                                   |  |                          | (33,744 | ) |                             |   | (33,954 | )
|Change in operating assets and liabilities:                                          |  |                          |         |   |                             |   |         |  
|Deferred retirement benefits                                                         |  |                          | 3,240   |   |                             |   | 480     |  
|Other assets                                                                         |  |                          | (185    | ) |                             |   | (64     | )
|Other noncurrent liabilities                                                         |  |                          | (306    | ) |                             |   | 261     |  
|                                                                                     |  |                          |         |   |                             |   |         |  
|Total adjustments                                                                    |  |                          | (19,593 | ) |                             |   | (17,185 | )
|                                                                                     |  |                          |         |   |                             |   |         |  
|Net cash used in operating activities                                                |  |                          | (21,935 | ) |                             |   | (9,035  | )
|                                                                                     |  |                          |         |   |                             |   |         |  
|Cash flows from investing activities:                                                |  |                          |         |   |                             |   |         |  
|Distribution from affiliated company                                                 |  |                          |        |   |                             |   | 400     |  
|Additions to property, plant and equipment                                           |  |                          | (8,268  | ) |                             |   | (6,593  | )
|Additions to deferred turnaround costs                                               |  |                          | (885    | ) |                             |   | (3,696  | )
|                                                                                     |  |                          |         |   |                             |   |         |  
|Net cash used in investing activities                                                |  |                          | (9,153  | ) |                             |   | (9,889  | )
|                                                                                     |  |                          |         |   |                             |   |         |  
|Cash flows from financing activities:                                                |  |                          |         |   |                             |   |         |  
|Net borrowings on revolving credit facility                                          |  |                          | 22,000  |   |                             |   | 26,500  |  
|Proceeds from issuance of long term debt                                             |  |                          | 25,750  |   |                             |   |        |  
|Dividend to stockholder                                                              |  |                          | (1,743  | ) |                             |   |        |  
|Principal reductions of long-term debt                                               |  |                          | (623    | ) |                             |   | (596    | )
|Deferred financing costs                                                             |  |                          | (1,087  | ) |                             |   | (498    | )
|                                                                                     |  |                          |         |   |                             |   |         |  
|Net cash provided by financing activities                                            |  |                          | 44,297  |   |                             |   | 25,406  |  
|                                                                                     |  |                          |         |   |                             |   |         |  
|Net increase in cash and cash equivalents                                            |  |                          | 13,209  |   |                             |   | 6,482   |  
|Cash and cash equivalents, beginning of year                                         |  |                          | 11,552  |   |                             |   | 13,819  |  
|                                                                                     |  |                          |         |   |                             |   |         |  
|Cash and cash equivalents, end of period                                             |  | $                        | 24,761  |   |                             | $ | 20,301  |  
|                                                                                     |  |                          |         |   |                             |   |         |  
|Cash used in working capital items:                                                  |  |                          |         |   |                             |   |         |  
|Accounts receivable, net                                                             |  | $                        | (7,298  | ) |                             | $ | (617    | )
|Inventories                                                                          |  |                          | (39,691 | ) |                             |   | (41,940 | )
|Prepaid expenses and other assets                                                    |  |                          | (15,682 | ) |                             |   | (5,483  | )
|Accounts payable                                                                     |  |                          | 26,979  |   |                             |   | 4,880   |  
|Accrued liabilities                                                                  |  |                          | 2,600   |   |                             |   | 6,904   |  
|Income taxes payable                                                                 |  |                          | (795    | ) |                             |   | 729     |  
|Sales, use and fuel taxes payable                                                    |  |                          | 48      |   |                             |   | 638     |  
|Amounts due to affiliated companies, net                                             |  |                          | 95      |   |                             |   | 935     |  
|                                                                                     |  |                          |         |   |                             |   |         |  
|Total change                                                                         |  | $                        | (33,744 | ) |                             | $ | (33,954 | )
|                                                                                     |  |                          |         |   |                             |   |         |  
|Cash paid during the period for:                                                     |  |                          |         |   |                             |   |         |  
|Interest                                                                             |  | $                        | 12,618  |   |                             | $ | 11,156  |  
|Income taxes                                                                         |  | $                        | 1,849   |   |                             | $ | 1,192   |  
|                                                                                     |  |                          |         |   |                             |   |         |  



6



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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 Corporation, which in turn is a
wholly-owned subsidiary of Red Apple Group, Inc. (the Parent).



The accompanying unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and with
the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States of America for complete financial
statements. In the opinion of management, all adjustments (consisting of only normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three and nine months ended May 31, 2005 are not
necessarily indicative of the results that may be expected for the year ending August 31, 2005. 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, 2004.



|2. | Restatement of Financial Statements
|-- | -----------------------------------



During the quarter ended February 28, 2005 the Companys management reviewed its application of generally accepted accounting principles for
inventory pricing. The Company has decided to restate its previously issued financial statements for the three and nine month periods ended May 31, 2004.



Historically, on an interim basis, the Company has recorded a portion of its refined product inventories at net realizable value, reduced by the LIFO
Reserve. The Company has restated its financial statements to record all refined product inventories using the first-in first-out cost (FIFO), reduced by the LIFO reserve. The resulting restatements have no impact on cash flows. The following is a
summary of the impact of the Restatement on the Companys Statements of Operations for the periods affected (all amounts in thousands).



|                                 |  |                                 |         |   |                        |   |        |             |  |   |         |  
|-------------------------------- |  | ------------------------------- | ------- | - | ---------------------- | - | ------ | ----------- |  | - | ------- | -
|                                 |  | Three Months Ended May 31, 2004 |        
|                                 |  | As Previously Reported          |         |   | RestatementAdjustments |   |        | As Restated | 
|Net sales                        |  | $                               | 374,320 |   |                        | $ |        |             |  | $ | 374,320 |  
|Costs of goods sold              |  |                                 | 325,894 |   |                        |   | 4,128  |             |  |   | 330,022 |  
|                                 |  |                                 |         |   |                        |   |        |             |  |   |         |  
|Gross profit                     |  |                                 | 48,426  |   |                        |   | (4,128 | )           |  |   | 44,298  |  
|Operating expenses               |  |                                 | 30,751  |   |                        |   |        |             |  |   | 30,751  |  
|                                 |  |                                 |         |   |                        |   |        |             |  |   |         |  
|Operating income                 |  |                                 | 17,675  |   |                        |   | (4,128 | )           |  |   | 13,547  |  
|Other expenses                   |  |                                 | (5,694  | ) |                        |   |        |             |  |   | (5,694  | )
|                                 |  |                                 |         |   |                        |   |        |             |  |   |         |  
|Income before income tax expense |  |                                 | 11,981  |   |                        |   | (4,128 | )           |  |   | 7,853   |  
|Income tax expense               |  |                                 | 4,823   |   |                        |   | (1,662 | )           |  |   | 3,161   |  
|                                 |  |                                 |         |   |                        |   |        |             |  |   |         |  
|Net income                       |  | $                               | 7,158   |   |                        | $ | (2,466 | )           |  | $ | 4,692   |  
|                                 |  |                                 |         |   |                        |   |        |             |  |   |         |  



7



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UNITED REFINING COMPANY AND SUBSIDIARIES



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

(Unaudited)



|                                 |  |                                |           |   |                        |   |        |             |  |   |           |  
|-------------------------------- |  | ------------------------------ | --------- | - | ---------------------- | - | ------ | ----------- |  | - | --------- | -
|                                 |  | Nine Months Ended May 31, 2004 |          
|                                 |  | As Previously Reported         |           |   | RestatementAdjustments |   |        | As Restated | 
|Net sales                        |  | $                              | 1,032,100 |   |                        | $ |        |             |  | $ | 1,032,100 |  
|Costs of goods sold              |  |                                | 902,986   |   |                        |   | 6,684  |             |  |   | 909,670   |  
|                                 |  |                                |           |   |                        |   |        |             |  |   |           |  
|Gross profit                     |  |                                | 129,114   |   |                        |   | (6,684 | )           |  |   | 122,430   |  
|Operating expenses               |  |                                | 92,092    |   |                        |   |        |             |  |   | 92,092    |  
|                                 |  |                                |           |   |                        |   |        |             |  |   |           |  
|Operating income                 |  |                                | 37,022    |   |                        |   | (6,684 | )           |  |   | 30,338    |  
|Other expenses                   |  |                                | (16,694   | ) |                        |   |        |             |  |   | (16,694   | )
|                                 |  |                                |           |   |                        |   |        |             |  |   |           |  
|Income before income tax expense |  |                                | 20,328    |   |                        |   | (6,684 | )           |  |   | 13,644    |  
|Income tax expense               |  |                                | 8,186     |   |                        |   | (2,692 | )           |  |   | 5,494     |  
|                                 |  |                                |           |   |                        |   |        |             |  |   |           |  
|Net income                       |  | $                              | 12,142    |   |                        | $ | (3,992 | )           |  | $ | 8,150     |  
|                                 |  |                                |           |   |                        |   |        |             |  |   |           |  



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



In November 2004, the Financial Accounting Standard Board (FASB) issued Statement No. 151, Inventory Costs (Statement 151).
Statement 151 amends prior guidelines for inventory pricing by clarifying that abnormal amounts of idle facility expense, freight, handling costs, and wasted material (spoilage) be recognized as current period charges regardless of magnitude. In
addition, Statement 151 requires that the allocation of fixed production overhead costs to the costs of conversion be based on the normal capacity of the production facilities.



The provisions of Statement 151 are effective for inventory costs incurred during fiscal years beginning after June 15,
2005. The Company does not believe that the adoption of Statement 151 will have a material effect on its financial position or results of operations.



In December 2004, the FASB issued Statement No 153, Exchange of Nonmonetary Assets (Statement 153). Statement 153 eliminates prior
guidance for nonmonetary transactions by eliminating the exception for nonmonetary exchanges of similar production assets and replaces it with a general exception for exchange of nonmonetary assets lacking commercial substance.



The provisions of Statement 153 are effective for nonmonetary asset exchanges
occurring in fiscal years beginning after June 15, 2005. The Company does not believe that the adoption of Statement 153 will have a material effect on its financial position or results of operations.



In March 2005, the FASB issued Interpretation No. 47, Accounting for
Conditional Asset Retirement Obligation (Interpretation 47). Interpretation 47 clarifies that the term conditional asset retirement obligation refers to a legal obligation to perform an asset retirement activity in which the timing
and (or) method of settlement are conditional as a future event that may or may not be within the contract of the entity. The obligation to perform the asset retirement activity is unconditional even though uncertainty exists about the timing and
(or) methods of settlement. Thus, the timing and (or) method of settlement may be conditional as a future event. Accordingly, an entity is required to recognize a liability for the fair value of a conditional asset retirement obligation if the fair
value of the liability can be reasonably estimated. Interpretation 47 specifies when a liability is incurred; generally upon acquisition, construction, or development of the asset.



Interpretation 47 is effective for fiscal years ending after December 15, 2005. The Company is currently evaluating the
possible impact of Interpretation 47 on its financial position or its results of operations.



8



---

UNITED REFINING COMPANY AND SUBSIDIARIES



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

(Unaudited)



In May 2005, the FASB issued FASB Statement No. 154, Accounting Changes and Error
Corrections (Statement 154). Statement 154 requires companies to recognize changes in accounting principle, including changes required by a new accounting pronouncement when the pronouncement does not include specific transition
provisions, retrospectively to prior periods financial statements.



Statement 154 is effective for accounting changes and corrections of errors made in fiscal years beginning after December 15, 2005. The Company does not believe that the adoption of Statement 154 will have a material
effect on its financial position or results of operations.



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



As of May 31, 2005 and August 31, 2004, the replacement cost of LIFO inventories exceeded their LIFO carrying values by approximately $21,706,000 and
$19,515,000, respectively. The May 31, 2005 LIFO calculation was computed using quantities and prices which are not necessarily indicative of the actual quantities and prices which will exist at fiscal year-end. Due to anticipated decreases in
inventory levels and the many factors which enter into the LIFO calculation which are beyond managements control, it is the policy of the Company to record the LIFO inventory adjustment only at fiscal year-end.



9



---

UNITED REFINING COMPANY AND SUBSIDIARIES



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

(Unaudited)



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



Certain of United Refining Companys (the issuer) subsidiaries function as guarantors under the terms of the $225,000,000 Senior
Unsecured Note Indenture due August 15, 2012. Financial information for the issuer and its wholly owned subsidiary guarantors is as follows:



CONDENSED CONSOLIDATING BALANCE SHEETS

(in thousands)



|                                                                                         |  |              |         |   |                 |   |         |              |  |   |              |   |  |        |         |   |            |   |         |              |  |   |              |   |  |   |          |   |  |   |         |  
|---------------------------------------------------------------------------------------- |  | ------------ | ------- | - | --------------- | - | ------- | ------------ |  | - | ------------ | - |  | ------ | ------- | - | ---------- | - | ------- | ------------ |  | - | ------------ | - |  | - | -------- | - |  | - | ------- | -
|                                                                                         |  | May 31, 2005 |         |   | August 31, 2004 |  
|                                                                                         |  | Issuer       |         |   | Guarantors      |   |         | Eliminations |  |   | Consolidated |   |  | Issuer |         |   | Guarantors |   |         | Eliminations |  |   | Consolidated |  
|Assets                                                                                   |  |              |         |   |                 |   |         |              |  |   |              |   |  |        |         |   |            |   |         |              |  |   |              |   |  |   |          |   |  |   |         |  
|Current:                                                                                 |  |              |         |   |                 |   |         |              |  |   |              |   |  |        |         |   |            |   |         |              |  |   |              |   |  |   |          |   |  |   |         |  
|Cash and cash equivalents                                                                |  | $            | 13,794  |   |                 | $ | 10,967  |              |  | $ |             |   |  | $      | 24,761  |   |            | $ | 4,709   |              |  | $ | 6,843        |   |  | $ |         |   |  | $ | 11,552  |  
|Accounts receivable, net                                                                 |  |              | 36,583  |   |                 |   | 15,311  |              |  |   |             |   |  |        | 51,894  |   |            |   | 33,459  |              |  |   | 11,137       |   |  |   |         |   |  |   | 44,596  |  
|Inventories                                                                              |  |              | 93,175  |   |                 |   | 22,139  |              |  |   |             |   |  |        | 115,314 |   |            |   | 54,481  |              |  |   | 21,142       |   |  |   |         |   |  |   | 75,623  |  
|Prepaid expenses and other assets                                                        |  |              | 25,571  |   |                 |   | 6,587   |              |  |   |             |   |  |        | 32,158  |   |            |   | 12,090  |              |  |   | 4,386        |   |  |   |         |   |  |   | 16,476  |  
|Intercompany                                                                             |  |              | 102,786 |   |                 |   | 18,918  |              |  |   | (121,704     | ) |  |        |        |   |            |   | 87,468  |              |  |   | 19,223       |   |  |   | (106,691 | ) |  |   |        |  
|                                                                                         |  |              |         |   |                 |   |         |              |  |   |              |   |  |        |         |   |            |   |         |              |  |   |              |   |  |   |          |   |  |   |         |  
|Total current assets                                                                     |  |              | 271,909 |   |                 |   | 73,922  |              |  |   | (121,704     | ) |  |        | 224,127 |   |            |   | 192,207 |              |  |   | 62,731       |   |  |   | (106,691 | ) |  |   | 148,247 |  
|Property, plant and equipment, net                                                       |  |              | 113,234 |   |                 |   | 69,331  |              |  |   |             |   |  |        | 182,565 |   |            |   | 115,363 |              |  |   | 69,342       |   |  |   |         |   |  |   | 184,705 |  
|Investment in affiliated company                                                         |  |              | 1,319   |   |                 |   |        |              |  |   |             |   |  |        | 1,319   |   |            |   | 846     |              |  |   |             |   |  |   |         |   |  |   | 846     |  
|Deferred financing costs, net                                                            |  |              | 7,045   |   |                 |   |        |              |  |   |             |   |  |        | 7,045   |   |            |   | 6,723   |              |  |   |             |   |  |   |         |   |  |   | 6,723   |  
|Goodwill and other non-amortizable assets                                                |  |              |        |   |                 |   | 11,849  |              |  |   |             |   |  |        | 11,849  |   |            |   |        |              |  |   | 11,849       |   |  |   |         |   |  |   | 11,849  |  
|Amortizable intangible assets, net                                                       |  |              |        |   |                 |   | 3,620   |              |  |   |             |   |  |        | 3,620   |   |            |   |        |              |  |   | 3,874        |   |  |   |         |   |  |   | 3,874   |  
|Deferred turnaround costs & other assets, net                                            |  |              | 8,357   |   |                 |   | 1,686   |              |  |   | (1,171       | ) |  |        | 8,872   |   |            |   | 9,462   |              |  |   | 1,847        |   |  |   | (1,171   | ) |  |   | 10,138  |  
|Deferred income taxes                                                                    |  |              | 48      |   |                 |   |        |              |  |   |             |   |  |        | 48      |   |            |   |        |              |  |   |             |   |  |   |         |   |  |   |        |  
|                                                                                         |  |              |         |   |                 |   |         |              |  |   |              |   |  |        |         |   |            |   |         |              |  |   |              |   |  |   |          |   |  |   |         |  
|                                                                                         |  | $            | 401,912 |   |                 | $ | 160,408 |              |  | $ | (122,875     | ) |  | $      | 439,445 |   |            | $ | 324,601 |              |  | $ | 149,643      |   |  | $ | (107,862 | ) |  | $ | 366,382 |  
|                                                                                         |  |              |         |   |                 |   |         |              |  |   |              |   |  |        |         |   |            |   |         |              |  |   |              |   |  |   |          |   |  |   |         |  
|Liabilities and Stockholders Equity                                                     |  |              |         |   |                 |   |         |              |  |   |              |   |  |        |         |   |            |   |         |              |  |   |              |   |  |   |          |   |  |   |         |  
|Current:                                                                                 |  |              |         |   |                 |   |         |              |  |   |              |   |  |        |         |   |            |   |         |              |  |   |              |   |  |   |          |   |  |   |         |  
|Revolving credit facility                                                                |  | $            | 35,000  |   |                 | $ |        |              |  | $ |             |   |  | $      | 35,000  |   |            | $ | 13,000  |              |  | $ |             |   |  | $ |         |   |  | $ | 13,000  |  
|Current installments of long-term debt                                                   |  |              | (76     | ) |                 |   | 463     |              |  |   |             |   |  |        | 387     |   |            |   | (181    | )            |  |   | 633          |   |  |   |         |   |  |   | 452     |  
|Accounts payable                                                                         |  |              | 42,063  |   |                 |   | 13,648  |              |  |   |             |   |  |        | 55,711  |   |            |   | 14,530  |              |  |   | 14,202       |   |  |   |         |   |  |   | 28,732  |  
|Accrued liabilities                                                                      |  |              | 14,237  |   |                 |   | 4,663   |              |  |   |             |   |  |        | 18,900  |   |            |   | 11,100  |              |  |   | 5,200        |   |  |   |         |   |  |   | 16,300  |  
|Income taxes payable                                                                     |  |              |        |   |                 |   |        |              |  |   |             |   |  |        |        |   |            |   | 958     |              |  |   | (163         | ) |  |   |         |   |  |   | 795     |  
|Sales, use and fuel taxes payable                                                        |  |              | 15,998  |   |                 |   | 3,516   |              |  |   |             |   |  |        | 19,514  |   |            |   | 16,217  |              |  |   | 3,249        |   |  |   |         |   |  |   | 19,466  |  
|Deferred income taxes                                                                    |  |              | 4,363   |   |                 |   | (444    | )            |  |   |             |   |  |        | 3,919   |   |            |   | 4,363   |              |  |   | (444         | ) |  |   |         |   |  |   | 3,919   |  
|Amounts due to affiliated companies, net                                                 |  |              | (481    | ) |                 |   | 708     |              |  |   |             |   |  |        | 227     |   |            |   | (206    | )            |  |   | 338          |   |  |   |         |   |  |   | 132     |  
|Intercompany                                                                             |  |              |        |   |                 |   | 121,704 |              |  |   | (121,704     | ) |  |        |        |   |            |   |        |              |  |   | 106,691      |   |  |   | (106,691 | ) |  |   |        |  
|                                                                                         |  |              |         |   |                 |   |         |              |  |   |              |   |  |        |         |   |            |   |         |              |  |   |              |   |  |   |          |   |  |   |         |  
|Total current liabilities                                                                |  |              | 111,104 |   |                 |   | 144,258 |              |  |   | (121,704     | ) |  |        | 133,658 |   |            |   | 59,781  |              |  |   | 129,706      |   |  |   | (106,691 | ) |  |   | 82,796  |  
|Long term debt: less current installments                                                |  |              | 223,822 |   |                 |   | 1,085   |              |  |   |             |   |  |        | 224,907 |   |            |   | 198,076 |              |  |   | 1,420        |   |  |   |         |   |  |   | 199,496 |  
|Deferred income taxes                                                                    |  |              | (3,619  | ) |                 |   | 3,619   |              |  |   |             |   |  |        |        |   |            |   | (1,845  | )            |  |   | 3,743        |   |  |   |         |   |  |   | 1,898   |  
|Deferred gain on settlement of pension plan obligations                                  |  |              | 754     |   |                 |   |        |              |  |   |             |   |  |        | 754     |   |            |   | 915     |              |  |   |             |   |  |   |         |   |  |   | 915     |  
|Deferred retirement benefits                                                             |  |              | 34,522  |   |                 |   | 1,120   |              |  |   |             |   |  |        | 35,642  |   |            |   | 31,236  |              |  |   | 1,166        |   |  |   |         |   |  |   | 32,402  |  
|Other noncurrent liabilities                                                             |  |              |        |   |                 |   | 1,463   |              |  |   |             |   |  |        | 1,463   |   |            |   |        |              |  |   | 1,769        |   |  |   |         |   |  |   | 1,769   |  
|                                                                                         |  |              |         |   |                 |   |         |              |  |   |              |   |  |        |         |   |            |   |         |              |  |   |              |   |  |   |          |   |  |   |         |  
|Total liabilities                                                                        |  |              | 366,583 |   |                 |   | 151,545 |              |  |   | (121,704     | ) |  |        | 396,424 |   |            |   | 288,163 |              |  |   | 137,804      |   |  |   | (106,691 | ) |  |   | 319,276 |  
|                                                                                         |  |              |         |   |                 |   |         |              |  |   |              |   |  |        |         |   |            |   |         |              |  |   |              |   |  |   |          |   |  |   |         |  
|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                                                               |  |              | 7,150   |   |                 |   | 10,651  |              |  |   | (1,153       | ) |  |        | 16,648  |   |            |   | 7,150   |              |  |   | 10,651       |   |  |   | (1,153   | ) |  |   | 16,648  |  
|Retained earnings                                                                        |  |              | 30,427  |   |                 |   | (1,750  | )            |  |   |             |   |  |        | 28,677  |   |            |   | 31,536  |              |  |   | 1,226        |   |  |   |         |   |  |   | 32,762  |  
|Accumulated other comprehensive loss                                                     |  |              | (2,248  | ) |                 |   | (56     | )            |  |   |             |   |  |        | (2,304  | ) |            |   | (2,248  | )            |  |   | (56          | ) |  |   |         |   |  |   | (2,304  | )
|                                                                                         |  |              |         |   |                 |   |         |              |  |   |              |   |  |        |         |   |            |   |         |              |  |   |              |   |  |   |          |   |  |   |         |  
|Total stockholders equity                                                               |  |              | 35,329  |   |                 |   | 8,863   |              |  |   | (1,171       | ) |  |        | 43,021  |   |            |   | 36,438  |              |  |   | 11,839       |   |  |   | (1,171   | ) |  |   | 47,106  |  
|                                                                                         |  |              |         |   |                 |   |         |              |  |   |              |   |  |        |         |   |            |   |         |              |  |   |              |   |  |   |          |   |  |   |         |  
|                                                                                         |  | $            | 401,912 |   |                 | $ | 160,408 |              |  | $ | (122,875     | ) |  | $      | 439,445 |   |            | $ | 324,601 |              |  | $ | 149,643      |   |  | $ | (107,862 | ) |  | $ | 366,382 |  
|                                                                                         |  |              |         |   |                 |   |         |              |  |   |              |   |  |        |         |   |            |   |         |              |  |   |              |   |  |   |          |   |  |   |         |  



10



---

UNITED REFINING COMPANY AND SUBSIDIARIES



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

(Unaudited)



CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS

(in thousands)



|                                                  |  |                                 |         |   |                                                          |   |         |              |  |   |              |   |  |        |         |   |            |   |         |              |  |   |              |   |  |   |         |   |  |   |         |  
|------------------------------------------------- |  | ------------------------------- | ------- | - | -------------------------------------------------------- | - | ------- | ------------ |  | - | ------------ | - |  | ------ | ------- | - | ---------- | - | ------- | ------------ |  | - | ------------ | - |  | - | ------- | - |  | - | ------- | -
|                                                  |  | Three Months Ended May 31, 2005 |         |   | Three Months Ended May 31, 2004 (As Restated see Note 2) |  
|                                                  |  | Issuer                          |         |   | Guarantors                                               |   |         | Eliminations |  |   | Consolidated |   |  | Issuer |         |   | Guarantors |   |         | Eliminations |  |   | Consolidated |  
|Net sales                                         |  | $                               | 341,477 |   |                                                          | $ | 234,328 |              |  | $ | (96,257      | ) |  | $      | 479,548 |   |            | $ | 249,091 |              |  | $ | 203,124      |   |  | $ | (77,895 | ) |  | $ | 374,320 |  
|Costs of goods sold                               |  |                                 | 313,641 |   |                                                          |   | 209,429 |              |  |   | (96,257      | ) |  |        | 426,813 |   |            |   | 228,939 |              |  |   | 178,978      |   |  |   | (77,895 | ) |  |   | 330,022 |  
|                                                  |  |                                 |         |   |                                                          |   |         |              |  |   |              |   |  |        |         |   |            |   |         |              |  |   |              |   |  |   |         |   |  |   |         |  
|Gross profit (loss)                               |  |                                 | 27,836  |   |                                                          |   | 24,899  |              |  |   |             |   |  |        | 52,735  |   |            |   | 20,152  |              |  |   | 24,146       |   |  |   |        |   |  |   | 44,298  |  
|                                                  |  |                                 |         |   |                                                          |   |         |              |  |   |              |   |  |        |         |   |            |   |         |              |  |   |              |   |  |   |         |   |  |   |         |  
|Expenses:                                         |  |                                 |         |   |                                                          |   |         |              |  |   |              |   |  |        |         |   |            |   |         |              |  |   |              |   |  |   |         |   |  |   |         |  
|Selling, general and administrative expenses      |  |                                 | 5,632   |   |                                                          |   | 24,711  |              |  |   |             |   |  |        | 30,343  |   |            |   | 3,947   |              |  |   | 23,593       |   |  |   |        |   |  |   | 27,540  |  
|Depreciation and amortization expenses            |  |                                 | 2,218   |   |                                                          |   | 1,130   |              |  |   |             |   |  |        | 3,348   |   |            |   | 2,144   |              |  |   | 1,067        |   |  |   |        |   |  |   | 3,211   |  
|                                                  |  |                                 |         |   |                                                          |   |         |              |  |   |              |   |  |        |         |   |            |   |         |              |  |   |              |   |  |   |         |   |  |   |         |  
|Total operating expenses                          |  |                                 | 7,850   |   |                                                          |   | 25,841  |              |  |   |             |   |  |        | 33,691  |   |            |   | 6,091   |              |  |   | 24,660       |   |  |   |        |   |  |   | 30,751  |  
|                                                  |  |                                 |         |   |                                                          |   |         |              |  |   |              |   |  |        |         |   |            |   |         |              |  |   |              |   |  |   |         |   |  |   |         |  
|Operating income (loss)                           |  |                                 | 19,986  |   |                                                          |   | (942    | )            |  |   |             |   |  |        | 19,044  |   |            |   | 14,061  |              |  |   | (514         | ) |  |   |        |   |  |   | 13,547  |  
|                                                  |  |                                 |         |   |                                                          |   |         |              |  |   |              |   |  |        |         |   |            |   |         |              |  |   |              |   |  |   |         |   |  |   |         |  
|Other income (expense):                           |  |                                 |         |   |                                                          |   |         |              |  |   |              |   |  |        |         |   |            |   |         |              |  |   |              |   |  |   |         |   |  |   |         |  
|Interest expense, net                             |  |                                 | (4,982  | ) |                                                          |   | (1,656  | )            |  |   |             |   |  |        | (6,638  | ) |            |   | (4,455  | )            |  |   | (1,023       | ) |  |   |        |   |  |   | (5,478  | )
|Other, net                                        |  |                                 | (598    | ) |                                                          |   | (41     | )            |  |   |             |   |  |        | (639    | ) |            |   | (418    | )            |  |   | 135          |   |  |   |        |   |  |   | (283    | )
|Equity in net earnings (loss) of affiliate        |  |                                 | (195    | ) |                                                          |   |        |              |  |   |             |   |  |        | (195    | ) |            |   | 67      |              |  |   |             |   |  |   |        |   |  |   | 67      |  
|                                                  |  |                                 |         |   |                                                          |   |         |              |  |   |              |   |  |        |         |   |            |   |         |              |  |   |              |   |  |   |         |   |  |   |         |  
|                                                  |  |                                 | (5,775  | ) |                                                          |   | (1,697  | )            |  |   |             |   |  |        | (7,472  | ) |            |   | (4,806  | )            |  |   | (888         | ) |  |   |        |   |  |   | (5,694  | )
|                                                  |  |                                 |         |   |                                                          |   |         |              |  |   |              |   |  |        |         |   |            |   |         |              |  |   |              |   |  |   |         |   |  |   |         |  
|Income (loss) before income tax expense (benefit) |  |                                 | 14,211  |   |                                                          |   | (2,639  | )            |  |   |             |   |  |        | 11,572  |   |            |   | 9,255   |              |  |   | (1,402       | ) |  |   |        |   |  |   | 7,853   |  
|Income tax expense (benefit)                      |  |                                 | 5,646   |   |                                                          |   | (1,019  | )            |  |   |             |   |  |        | 4,627   |   |            |   | 3,639   |              |  |   | (478         | ) |  |   |        |   |  |   | 3,161   |  
|                                                  |  |                                 |         |   |                                                          |   |         |              |  |   |              |   |  |        |         |   |            |   |         |              |  |   |              |   |  |   |         |   |  |   |         |  
|Net income (loss)                                 |  | $                               | 8,565   |   |                                                          | $ | (1,620  | )            |  | $ |             |   |  | $      | 6,945   |   |            | $ | 5,616   |              |  | $ | (924         | ) |  | $ |        |   |  | $ | 4,692   |  
|                                                  |  |                                 |         |   |                                                          |   |         |              |  |   |              |   |  |        |         |   |            |   |         |              |  |   |              |   |  |   |         |   |  |   |         |  



11



---

UNITED REFINING COMPANY AND SUBSIDIARIES



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

(Unaudited)



CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS

(in thousands)



|                                                  |  |                                |         |   |                                                         |   |         |              |  |   |              |   |  |        |           |   |            |   |         |              |  |   |              |   |  |   |          |   |  |   |           |  
|------------------------------------------------- |  | ------------------------------ | ------- | - | ------------------------------------------------------- | - | ------- | ------------ |  | - | ------------ | - |  | ------ | --------- | - | ---------- | - | ------- | ------------ |  | - | ------------ | - |  | - | -------- | - |  | - | --------- | -
|                                                  |  | Nine Months Ended May 31, 2005 |         |   | Nine Months Ended May 31, 2004 (As Restated see Note 2) |  
|                                                  |  | Issuer                         |         |   | Guarantors                                              |   |         | Eliminations |  |   | Consolidated |   |  | Issuer |           |   | Guarantors |   |         | Eliminations |  |   | Consolidated |  
|Net sales                                         |  | $                              | 895,382 |   |                                                         | $ | 652,432 |              |  | $ | (257,424     | ) |  | $      | 1,290,390 |   |            | $ | 669,535 |              |  | $ | 560,175      |   |  | $ | (197,610 | ) |  | $ | 1,032,100 |  
|Costs of goods sold                               |  |                                | 858,109 |   |                                                         |   | 577,022 |              |  |   | (257,424     | ) |  |        | 1,177,707 |   |            |   | 621,764 |              |  |   | 485,516      |   |  |   | (197,610 | ) |  |   | 909,670   |  
|                                                  |  |                                |         |   |                                                         |   |         |              |  |   |              |   |  |        |           |   |            |   |         |              |  |   |              |   |  |   |          |   |  |   |           |  
|Gross profit                                      |  |                                | 37,273  |   |                                                         |   | 75,410  |              |  |   |             |   |  |        | 112,683   |   |            |   | 47,771  |              |  |   | 74,659       |   |  |   |         |   |  |   | 122,430   |  
|                                                  |  |                                |         |   |                                                         |   |         |              |  |   |              |   |  |        |           |   |            |   |         |              |  |   |              |   |  |   |          |   |  |   |           |  
|Expenses:                                         |  |                                |         |   |                                                         |   |         |              |  |   |              |   |  |        |           |   |            |   |         |              |  |   |              |   |  |   |          |   |  |   |           |  
|Selling, general and administrative expenses      |  |                                | 14,503  |   |                                                         |   | 72,548  |              |  |   |             |   |  |        | 87,051    |   |            |   | 12,846  |              |  |   | 69,628       |   |  |   |         |   |  |   | 82,474    |  
|Depreciation and amortization expenses            |  |                                | 6,653   |   |                                                         |   | 3,380   |              |  |   |             |   |  |        | 10,033    |   |            |   | 6,432   |              |  |   | 3,186        |   |  |   |         |   |  |   | 9,618     |  
|                                                  |  |                                |         |   |                                                         |   |         |              |  |   |              |   |  |        |           |   |            |   |         |              |  |   |              |   |  |   |          |   |  |   |           |  
|Total operating expenses                          |  |                                | 21,156  |   |                                                         |   | 75,928  |              |  |   |             |   |  |        | 97,084    |   |            |   | 19,278  |              |  |   | 72,814       |   |  |   |         |   |  |   | 92,092    |  
|                                                  |  |                                |         |   |                                                         |   |         |              |  |   |              |   |  |        |           |   |            |   |         |              |  |   |              |   |  |   |          |   |  |   |           |  
|Operating income (loss)                           |  |                                | 16,117  |   |                                                         |   | (518    | )            |  |   |             |   |  |        | 15,599    |   |            |   | 28,493  |              |  |   | 1,845        |   |  |   |         |   |  |   | 30,338    |  
|                                                  |  |                                |         |   |                                                         |   |         |              |  |   |              |   |  |        |           |   |            |   |         |              |  |   |              |   |  |   |          |   |  |   |           |  
|Other income (expense):                           |  |                                |         |   |                                                         |   |         |              |  |   |              |   |  |        |           |   |            |   |         |              |  |   |              |   |  |   |          |   |  |   |           |  
|Interest expense, net                             |  |                                | (13,968 | ) |                                                         |   | (4,324  | )            |  |   |             |   |  |        | (18,292   | ) |            |   | (13,009 | )            |  |   | (2,938       | ) |  |   |         |   |  |   | (15,947   | )
|Other, net                                        |  |                                | (1,757  | ) |                                                         |   | 84      |              |  |   |             |   |  |        | (1,673    | ) |            |   | (1,594  | )            |  |   | 269          |   |  |   |         |   |  |   | (1,325    | )
|Equity in net earnings of affiliate               |  |                                | 473     |   |                                                         |   |         |              |  |   |             |   |  |        | 473       |   |            |   | 578     |              |  |   |             |   |  |   |         |   |  |   | 578       |  
|                                                  |  |                                |         |   |                                                         |   |         |              |  |   |              |   |  |        |           |   |            |   |         |              |  |   |              |   |  |   |          |   |  |   |           |  
|                                                  |  |                                | (15,252 | ) |                                                         |   | (4,240  | )            |  |   |             |   |  |        | (19,492   | ) |            |   | (14,025 | )            |  |   | (2,669       | ) |  |   |         |   |  |   | (16,694   | )
|                                                  |  |                                |         |   |                                                         |   |         |              |  |   |              |   |  |        |           |   |            |   |         |              |  |   |              |   |  |   |          |   |  |   |           |  
|Income (loss) before income tax expense (benefit) |  |                                | 865     |   |                                                         |   | (4,758  | )            |  |   |             |   |  |        | (3,893    | ) |            |   | 14,468  |              |  |   | (824         | ) |  |   |         |   |  |   | 13,644    |  
|Income tax expense (benefit)                      |  |                                | 231     |   |                                                         |   | (1,782  | )            |  |   |             |   |  |        | (1,551    | ) |            |   | 5,647   |              |  |   | (153         | ) |  |   |         |   |  |   | 5,494     |  
|                                                  |  |                                |         |   |                                                         |   |         |              |  |   |              |   |  |        |           |   |            |   |         |              |  |   |              |   |  |   |          |   |  |   |           |  
|Net income (loss)                                 |  | $                              | 634     |   |                                                         | $ | (2,976  | )            |  | $ |             |   |  | $      | (2,342    | ) |            | $ | 8,821   |              |  | $ | (671         | ) |  | $ |         |   |  | $ | 8,150     |  
|                                                  |  |                                |         |   |                                                         |   |         |              |  |   |              |   |  |        |           |   |            |   |         |              |  |   |              |   |  |   |          |   |  |   |           |  



12



---

UNITED REFINING COMPANY AND SUBSIDIARIES



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

(Unaudited)



CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS

(in thousands)



|                                                     |  |                                |         |   |                                                        |   |        |              |  |              |   |  |        |         |   |            |   |         |              |  |              |        |   |  |   |   |  |   |        |  
|---------------------------------------------------- |  | ------------------------------ | ------- | - | ------------------------------------------------------ | - | ------ | ------------ |  | ------------ | - |  | ------ | ------- | - | ---------- | - | ------- | ------------ |  | ------------ | ------ | - |  | - | - |  | - | ------ | -
|                                                     |  | Nine Months Ended May 31, 2005 |         |   | Nine Months Ended May 31, 2004(As Restated see Note 2) |  
|                                                     |  | Issuer                         |         |   | Guarantors                                             |   |        | Eliminations |  | Consolidated |   |  | Issuer |         |   | Guarantors |   |         | Eliminations |  | Consolidated |       
|Net cash (used in) provided by operating activities  |  | $                              | (30,277 | ) |                                                        | $ | 8,342  |              |  | $            |  |  | $      | (21,935 | ) |            | $ | (19,747 | )            |  | $            | 10,712 |   |  | $ |  |  | $ | (9,035 | )
|                                                     |  |                                |         |   |                                                        |   |        |              |  |              |   |  |        |         |   |            |   |         |              |  |              |        |   |  |   |   |  |   |        |  
|Cash flows from investing activities:                |  |                                |         |   |                                                        |   |        |              |  |              |   |  |        |         |   |            |   |         |              |  |              |        |   |  |   |   |  |   |        |  
|Distribution from affiliated company                 |  |                                |        |   |                                                        |   |       |              |  |              |  |  |        |        |   |            |   | 400     |              |  |              |       |   |  |   |   |  |   | 400    |  
|Additions to property, plant and equipment           |  |                                | (4,555  | ) |                                                        |   | (3,713 | )            |  |              |  |  |        | (8,268  | ) |            |   | (4,397  | )            |  |              | (2,196 | ) |  |   |  |  |   | (6,593 | )
|Additions to deferred turnaround costs               |  |                                | (885    | ) |                                                        |   |       |              |  |              |  |  |        | (885    | ) |            |   | (2,899  | )            |  |              | (797   | ) |  |   |  |  |   | (3,696 | )
|                                                     |  |                                |         |   |                                                        |   |        |              |  |              |   |  |        |         |   |            |   |         |              |  |              |        |   |  |   |   |  |   |        |  
|Net cash used in investing activities                |  |                                | (5,440  | ) |                                                        |   | (3,713 | )            |  |              |  |  |        | (9,153  | ) |            |   | (6,896  | )            |  |              | (2,993 | ) |  |   |  |  |   | (9,889 | )
|                                                     |  |                                |         |   |                                                        |   |        |              |  |              |   |  |        |         |   |            |   |         |              |  |              |        |   |  |   |   |  |   |        |  
|Cash flows from financing activities:                |  |                                |         |   |                                                        |   |        |              |  |              |   |  |        |         |   |            |   |         |              |  |              |        |   |  |   |   |  |   |        |  
|Net borrowings on revolving credit facility          |  |                                | 22,000  |   |                                                        |   |       |              |  |              |  |  |        | 22,000  |   |            |   | 26,500  |              |  |              |       |   |  |   |  |  |   | 26,500 |  
|Proceeds from issuance of long term debt             |  |                                | 25,750  |   |                                                        |   |       |              |  |              |   |  |        | 25,750  |   |            |   |        |              |  |              |       |   |  |   |  |  |   |       |  
|Dividend to stockholder                              |  |                                | (1,743  | ) |                                                        |   |       |              |  |              |  |  |        | (1,743  | ) |            |   |        |              |  |              |       |   |  |   |  |  |   |       |  
|Principal reductions of long-term debt               |  |                                | (118    | ) |                                                        |   | (505   | )            |  |              |  |  |        | (623    | ) |            |   | (71     | )            |  |              | (525   | ) |  |   |  |  |   | (596   | )
|Deferred financing costs                             |  |                                | (1,087  | ) |                                                        |   |       |              |  |              |  |  |        | (1,087  | ) |            |   | (498    | )            |  |              |       |   |  |   |  |  |   | (498   | )
|                                                     |  |                                |         |   |                                                        |   |        |              |  |              |   |  |        |         |   |            |   |         |              |  |              |        |   |  |   |   |  |   |        |  
|Net cash provided by (used in) financing activities  |  |                                | 44,802  |   |                                                        |   | (505   | )            |  |              |  |  |        | 44,297  |   |            |   | 25,931  |              |  |              | (525   | ) |  |   |  |  |   | 25,406 |  
|                                                     |  |                                |         |   |                                                        |   |        |              |  |              |   |  |        |         |   |            |   |         |              |  |              |        |   |  |   |   |  |   |        |  
|Net increase (decrease) in cash and cash equivalents |  |                                | 9,085   |   |                                                        |   | 4,124  |              |  |              |  |  |        | 13,209  |   |            |   | (712    | )            |  |              | 7,194  |   |  |   |  |  |   | 6,482  |  
|Cash and cash equivalents, beginning of year         |  |                                | 4,709   |   |                                                        |   | 6,843  |              |  |              |  |  |        | 11,552  |   |            |   | 3,383   |              |  |              | 10,436 |   |  |   |  |  |   | 13,819 |  
|                                                     |  |                                |         |   |                                                        |   |        |              |  |              |   |  |        |         |   |            |   |         |              |  |              |        |   |  |   |   |  |   |        |  
|Cash and cash equivalents, end of period             |  | $                              | 13,794  |   |                                                        | $ | 10,967 |              |  | $            |  |  | $      | 24,761  |   |            | $ | 2,671   |              |  | $            | 17,630 |   |  | $ |  |  | $ | 20,301 |  
|                                                     |  |                                |         |   |                                                        |   |        |              |  |              |   |  |        |         |   |            |   |         |              |  |              |        |   |  |   |   |  |   |        |  



13



---

UNITED REFINING COMPANY AND SUBSIDIARIES



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

(Unaudited)



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



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



|                                          |  |                           |         |         |                              |   |         |             |  |   |                              |   |  |   |          
|----------------------------------------- |  | ------------------------- | ------- | ------- | ---------------------------- | - | ------- | ----------- |  | - | ---------------------------- | - |  | - | ---------
|                                          |  | Three Months EndedMay 31, |         |         | Nine Months EndedMay 31,    
|                                          |  | 2005                      |         |         | 2004 (As Restatedsee Note 2) |   |         | 2005        |  |   | 2004 (As Restatedsee Note 2)
|Net Sales                                 |  |                           |         |         |                              |   |         |             |  |   |                              |   |  |   |          
|Retail                                    |  | $                         | 233,083 |         |                              | $ | 201,923 |             |  | $ | 648,874                      |   |  | $ | 556,567  
|Wholesale                                 |  |                           | 246,465 |         |                              |   | 172,397 |             |  |   | 641,516                      |   |  |   | 475,533  
|                                          |  |                           |         |         |                              |   |         |             |  |   |                              |   |  |   |          
|                                          |  | $                         | 479,548 |         |                              | $ | 374,320 |             |  | $ | 1,290,390                    |   |  | $ | 1,032,100
|                                          |  |                           |         |         |                              |   |         |             |  |   |                              |   |  |   |          
|Intersegment Sales                        |  |                           |         |         |                              |   |         |             |  |   |                              |   |  |   |          
|Wholesale                                 |  | $                         | 95,012  |         |                              | $ | 76,694  |             |  | $ | 253,866                      |   |  | $ | 194,002  
|                                          |  |                           |         |         |                              |   |         |             |  |   |                              |   |  |   |          
|Operating Income (loss)                   |  |                           |         |         |                              |   |         |             |  |   |                              |   |  |   |          
|Retail                                    |  | $                         | (988    | )       |                              | $ | (834    | )           |  | $ | (673                         | ) |  | $ | 1,239    
|Wholesale                                 |  |                           | 20,032  |         |                              |   | 14,381  |             |  |   | 16,272                       |   |  |   | 29,099   
|                                          |  |                           |         |         |                              |   |         |             |  |   |                              |   |  |   |          
|                                          |  | $                         | 19,044  |         |                              | $ | 13,547  |             |  | $ | 15,599                       |   |  | $ | 30,338   
|                                          |  |                           |         |         |                              |   |         |             |  |   |                              |   |  |   |          
|Depreciation and Amortization             |  |                           |         |         |                              |   |         |             |  |   |                              |   |  |   |          
|Retail                                    |  | $                         | 1,080   |         |                              | $ | 1,019   |             |  | $ | 3,230                        |   |  | $ | 3,041    
|Wholesale                                 |  |                           | 2,268   |         |                              |   | 2,192   |             |  |   | 6,803                        |   |  |   | 6,577    
|                                          |  |                           |         |         |                              |   |         |             |  |   |                              |   |  |   |          
|                                          |  | $                         | 3,348   |         |                              | $ | 3,211   |             |  | $ | 10,033                       |   |  | $ | 9,618    
|                                          |  |                           |         |         |                              |   |         |             |  |   |                              |   |  |   |          
|                                          |  |                           |         |        
|                                          |  |                           |         |         |                              |   |         | May 31,2005 |  |   | August 31,2004              
|Total Assets                              |  |                           |         |         |                              |   |         |             |  |   |                              |   |  |   |          
|Retail                                    |  |                           | $       | 133,768 |                              |   | $       | 123,069    
|Wholesale                                 |  |                           |         | 305,677 |                              |   |         | 243,313    
|                                          |  |                           |         |         |                              |   |         |             |  |   |                              |   |  |   |          
|                                          |  |                           |         |         |                              |   |         |             |  | $ | 439,445                      |   |  | $ | 366,382  
|                                          |  |                           |         |         |                              |   |         |             |  |   |                              |   |  |   |          
|Capital Expenditures (including non-cash) |  |                           |         |         |                              |   |         |             |  |   |                              |   |  |   |          
|Retail                                    |  |                           | $       | 3,165   |                              |   | $       | 3,559      
|Wholesale                                 |  |                           |         | 5,103   |                              |   |         | 7,206      
|                                          |  |                           |         |         |                              |   |         |             |  |   |                              |   |  |   |          
|                                          |  |                           |         |         |                              |   |         |             |  | $ | 8,268                        |   |  | $ | 10,765   
|                                          |  |                           |         |         |                              |   |         |             |  |   |                              |   |  |   |          



14



---

UNITED REFINING COMPANY AND SUBSIDIARIES



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

(Unaudited)



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



For the periods ended May 31, 2005 and 2004, net pension and other postretirement benefit costs were comprised of the following:



|                                      |  |                          |        |   |                                |   |        |      |  |      |       |  |   |      
|------------------------------------- |  | ------------------------ | ------ | - | ------------------------------ | - | ------ | ---- |  | ---- | ----- |  | - | -----
|                                      |  | Pension Benefits         |        |   | Other Post-Retirement Benefits
|                                      |  | Nine Months EndedMay 31, |        |   | Nine Months EndedMay 31,      
|                                      |  | 2005                     |        |   | 2004                           |   |        | 2005 |  | 2004
|                                      |  |                          |        |   | (in thousands)                 |   |       
|Service cost                          |  | $                        | 1,924  |   |                                | $ | 1,624  |      |  | $    | 1,192 |  | $ | 1,114
|Interest cost on benefit obligation   |  |                          | 2,871  |   |                                |   | 2,601  |      |  |      | 1,838 |  |   | 1,858
|Expected return on plan assets        |  |                          | (2,596 | ) |                                |   | (2,101 | )    |  |      |      |  |   |     
|Amortization of transition obligation |  |                          | 105    |   |                                |   | 105    |      |  |      | 448   |  |   | 448  
|Amortization and deferral of net loss |  |                          | 516    |   |                                |   | 471    |      |  |      | 374   |  |   | 405  
|                                      |  |                          |        |   |                                |   |        |      |  |      |       |  |   |      
|Net periodic benefit cost             |  | $                        | 2,820  |   |                                | $ | 2,700  |      |  | $    | 3,852 |  | $ | 3,825
|                                      |  |                          |        |   |                                |   |        |      |  |      |       |  |   |      



As of May 31, 2005,
$3,706,000 of contributions have been made to the Company pension plans. The Company presently anticipates contributing an additional $527,000 to fund its pension plans in fiscal 2005 for a total of $4,233,000.



|8. | Secured Credit Facility
|-- | -----------------------



Effective April 19, 2005 the Company amended its secured credit facility to increase the maximum facility commitment from $75,000,000 to $100,000,000 on a
permanent basis. The facility expires on May 9, 2007, and is secured by certain cash accounts, accounts receivable, and inventory. The interest rate on borrowings varies with the Companys earnings and is based on the higher of the banks
prime rate or Federal funds rate for base rate borrowings and the LIBOR rate for Euro-Rate borrowings.



The Company had outstanding letters of credit of $810,000 and approximately $64,190,000 unused and available on the facility as of May 31, 2005.



15



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UNITED REFINING COMPANY AND SUBSIDIARIES



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



16



---

| |  |  | expansion and growth of operations;
| | - |  | -----------------------------------



| |  |  | 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s results for the 2005 third fiscal quarter ended May 31, 2005, benefited from improving product margins but were still subject to a
continuing volatile crude market. The 2005 third fiscal quarter saw worldwide crude oil prices, as indicated by prices of crude oil contacts on the New York Mercantile Exchange (NYMEX) for delivery in the third quarter averaging $51.96/BBL, 44.6%
higher than the prior year third fiscal quarter. For the third fiscal quarter, ended May 31, 2004, comparable NYMEX crude oil prices averaged $35.94/BBL. NYMEX crude oil prices for delivery in the 2005 fourth fiscal quarter, to date, are averaging
approximately $56.40/BBL.



Industry-wide wholesale margins on
gasoline and distillate for the 2005 third fiscal quarter versus the comparable 2004 fiscal quarter, as indicated by the difference between the prices of crude oil contacts traded on the NYMEX and the prices of NYMEX gasoline and heating oil
contracts, increased 32.9% for gasoline and increased 60.0% for heating oil. Diesel prices as reported by Platts at the New York Harbor have also improved for the third fiscal quarter 2005 as compared to the third fiscal quarter 2004, increasing
55.7%. The margin increase associated with distillate is highly unusual entering the summer season. Higher margins for distillate have resulted in the refinery optimizing its production of distillate rather than producing the maximum amount of
gasoline which is usually done during the summer driving season.



While margins on products have improved, the volatility of NYMEX crude oil prices continued. Prices for NYMEX crude oil contracts for delivery in June ranged from $46.80 to $52.07 during the month. Prices of NYMEX crude oil contracts for
delivery in July have shown similar volatility with prices reaching a high of $60.54 on June 27th.



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.



17



---

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.



Retail Operations:



|                                       |  |                           |         |   |                             |   |         |      |  |   |                             |   |  |   |         |  
|-------------------------------------- |  | ------------------------- | ------- | - | --------------------------- | - | ------- | ---- |  | - | --------------------------- | - |  | - | ------- | -
|                                       |  | Three Months EndedMay 31, |         |   | Nine Months EndedMay 31,    |  
|                                       |  | 2005                      |         |   | 2004(As Restatedsee Note 2) |   |         | 2005 |  |   | 2004(As Restatedsee Note 2) |  
|                                       |  | (dollars in thousands)    |        
|Net Sales                              |  |                           |         |   |                             |   |         |      |  |   |                             |   |  |   |         |  
|Petroleum                              |  | $                         | 186,055 |   |                             | $ | 156,978 |      |  | $ | 512,886                     |   |  | $ | 425,403 |  
|Merchandise and other                  |  |                           | 47,028  |   |                             |   | 44,945  |      |  |   | 135,988                     |   |  |   | 131,164 |  
|                                       |  |                           |         |   |                             |   |         |      |  |   |                             |   |  |   |         |  
|Total Net Sales                        |  |                           | 233,083 |   |                             |   | 201,923 |      |  |   | 648,874                     |   |  |   | 556,567 |  
|                                       |  |                           |         |   |                             |   |         |      |  |   |                             |   |  |   |         |  
|Costs of Goods Sold                    |  |                           | 208,406 |   |                             |   | 178,247 |      |  |   | 574,124                     |   |  |   | 482,975 |  
|                                       |  |                           |         |   |                             |   |         |      |  |   |                             |   |  |   |         |  
|Gross Profit                           |  |                           | 24,677  |   |                             |   | 23,676  |      |  |   | 74,750                      |   |  |   | 73,592  |  
|                                       |  |                           |         |   |                             |   |         |      |  |   |                             |   |  |   |         |  
|Operating Expenses                     |  |                           | 25,665  |   |                             |   | 24,510  |      |  |   | 75,423                      |   |  |   | 72,353  |  
|                                       |  |                           |         |   |                             |   |         |      |  |   |                             |   |  |   |         |  
|Segment Operating Income / (Loss)      |  | $                         | (988    | ) |                             | $ | (834    | )    |  | $ | (673                        | ) |  | $ | 1,239   |  
|                                       |  |                           |         |   |                             |   |         |      |  |   |                             |   |  |   |         |  
|Petroleum Sales (thousands of gallons) |  |                           | 85,915  |   |                             |   | 86,157  |      |  |   | 251,764                     |   |  |   | 253,673 |  
|Gross Profit                           |  |                           |         |   |                             |   |         |      |  |   |                             |   |  |   |         |  
|Petroleum (a)                          |  | $                         | 11,580  |   |                             | $ | 10,724  |      |  | $ | 36,859                      |   |  | $ | 35,968  |  
|Merchandise and other                  |  |                           | 13,097  |   |                             |   | 12,952  |      |  |   | 37,891                      |   |  |   | 37,624  |  
|                                       |  |                           |         |   |                             |   |         |      |  |   |                             |   |  |   |         |  
|                                       |  | $                         | 24,677  |   |                             | $ | 23,676  |      |  | $ | 74,750                      |   |  | $ | 73,592  |  
|                                       |  |                           |         |   |                             |   |         |      |  |   |                             |   |  |   |         |  
|Petroleum margin ($/gallon) (b)        |  |                           | .1348   |   |                             |   | .1245   |      |  |   | .1464                       |   |  |   | .1418   |  
|Merchandise margin (percent of sales)  |  |                           | 27.8    | % |                             |   | 28.8    | %    |  |   | 27.9                        | % |  |   | 28.7    | %

---

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

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



Comparison of Fiscal Quarters Ended May 31, 2005 and May 31, 2004



Net Sales



Retail sales increased during the fiscal quarter ended May 31, 2005 by $31.2 million or 15.4% from $201.9 million to $233.1
million over the comparable period in fiscal 2004. The retail sales increase resulted from a $29.1 million increase in petroleum sales and a $2.1 million increase in merchandise sales. The petroleum sales increase resulted from an 18.9% increase in
retail selling prices per gallon, offset by a .2 million gallon or .3% decrease in retail petroleum volume. The decrease in petroleum volume was mainly attributed to a retail store being closed for remodeling during this time period. The increase in
merchandise sales was due to increased promotions, increased cigarette sales and increased selling prices of certain deli items.



Costs of Goods Sold



Retail costs of goods sold increased during the fiscal quarter ended May 31, 2005 by $30.2 million or 16.9% over the comparable period in fiscal 2004 from
$178.2 million to $208.4 million. The cost of gasoline increased



18



---

21.0%, on a per gallon basis, over the fiscal quarter ended May 31, 2004. The cost of distillates increased 55.6%, on a per gallon basis, over the prior year
fiscal quarter. As a result, costs of goods sold for petroleum purchases increased $24.7 million, fuel taxes increased $3.2 million, freight costs increased $.5 million and merchandise costs increased $1.9 million.



Gross Profit



Retail gross profit increased during the fiscal quarter ended May 31, 2005 by $1.0 million or 4.2% over the comparable
period in fiscal 2004. The Company increased its petroleum margins by $.9 million and merchandise margins increased by $.1 million. The increased petroleum margins were due to increased retail prices offset by a slight .2 million gallon decrease in
fuel sales.



Operating Expenses



Retail operating expenses increased during the fiscal quarter ended May 31,
2005 by $1.2 million or 5.0% over the comparable period in fiscal 2004. Primarily contributing to the increases were increased payroll and payroll costs of $.3 million, increased maintenance costs of $.3 million, and increased credit/customer
service costs of $.3 million.



Comparison of Nine Months Ended May 31, 2005
and May 31, 2004



Net Sales



Retail sales increased during the nine months ended May 31, 2005 by $92.3
million, or 16.6% over the comparable period in fiscal 2004 from $556.6 million to $648.9 million. The retail sales increase resulted from a $87.5 million increase in petroleum sales and a $4.8 million increase in merchandise sales. The petroleum
sales increase results from a 21.5% increase in retail selling prices per gallon, offset by a 1.9 million gallon or .8% decrease in retail petroleum volume. The decrease in volume resulted from new competition and promotional pricing in certain
areas of the Companys market.



Costs of Goods Sold



Retail costs of goods sold increased during the nine months ended May 31,
2005 by $91.1 million or 18.9% from $483.0 million to $574.1 million. The cost of gasoline increased 28.9%, on a per gallon basis, over the nine months ended May 31, 2004. The cost of distillates increased 56.1%, on a per gallon basis, over the
comparable nine month period. As a result, costs of goods sold for petroleum purchases increased $79.9 million. In addition, fuel taxes increased $5.9 million and merchandise costs increased $4.5 million.



Gross Profit



Retail gross profit increased during the nine months ended May 31, 2005 by $1.2 million or 1.6% over the comparable period
in fiscal 2004. The Company increased its petroleum margins by $.9 million or 2.5% while merchandise margin decreased by $.3 million. The increased petroleum margins were due to increased retail selling prices offset by a slight 1.9 million gallon
decrease in fuel sales.



Operating Expenses



Retail operating expenses increased during the nine months ended May 31,
2005 by $3.1 million or 4.3% over the comparable period in fiscal 2004. Primarily contributing to the increases were increased payroll and payroll costs of $.6 million, increased credit/customer service costs of $.8 million, increased rent expense
of $.1 million, increased legal/professional services of $.1 million, increased pension costs of $.1 million, increased maintenance costs of $.3 million, and increased advertising costs of $.2 million.



19



---

Wholesale Operations:



|                                                                                |  |                           |         |   |                             |   |         |      |  |   |                             |   |  |   |         |  
|------------------------------------------------------------------------------- |  | ------------------------- | ------- | - | --------------------------- | - | ------- | ---- |  | - | --------------------------- | - |  | - | ------- | -
|                                                                                |  | Three Months EndedMay 31, |         |   | Nine Months EndedMay 31,    |  
|                                                                                |  | 2005                      |         |   | 2004(As Restatedsee Note 2) |   |         | 2005 |  |   | 2004(As Restatedsee Note 2) |  
|                                                                                |  | (dollars in thousands)    |        
|Net Sales (a)                                                                   |  | $                         | 246,465 |   |                             | $ | 172,397 |      |  | $ | 641,516                     |   |  | $ | 475,533 |  
|Costs of Goods Sold                                                             |  |                           | 218,407 |   |                             |   | 151,775 |      |  |   | 603,583                     |   |  |   | 426,695 |  
|                                                                                |  |                           |         |   |                             |   |         |      |  |   |                             |   |  |   |         |  
|Gross Profit                                                                    |  | $                         | 28,058  |   |                             |   | 20,622  |      |  | $ | 37,933                      |   |  |   | 48,838  |  
|                                                                                |  |                           |         |   |                             |   |         |      |  |   |                             |   |  |   |         |  
|Operating Expenses                                                              |  |                           | 8,026   |   |                             |   | 6,241   |      |  |   | 21,661                      |   |  |   | 19,739  |  
|                                                                                |  |                           |         |   |                             |   |         |      |  |   |                             |   |  |   |         |  
|Segment Operating Income                                                        |  | $                         | 20,032  |   |                             | $ | 14,381  |      |  | $ | 16,272                      |   |  | $ | 29,099  |  
|                                                                                |  |                           |         |   |                             |   |         |      |  |   |                             |   |  |   |         |  
|Crude throughput (thousand barrels per day)                                     |  |                           | 64.8    |   |                             |   | 61.7    |      |  |   | 62.5                        |   |  |   | 62.9    |  
|                                                                                |  |                           |         |   |                             |   |         |      |  |   |                             |   |  |   |         |  
|                                                                               
|Refinery Product Yield (thousands of barrels)                                   | 
|                                                                                |  | Three Months Ended May31, |         |   | Nine Months EndedMay 31,    |  
|                                                                                |  | 2005                      |         |   | 2004                        |   |         | 2005 |  |   | 2004                        |  
|Gasoline and gasoline blendstock                                                |  |                           | 2,559   |   |                             |   | 2,233   |      |  |   | 7,449                       |   |  |   | 7,532   |  
|Distillates                                                                     |  |                           | 1,656   |   |                             |   | 1,505   |      |  |   | 4,712                       |   |  |   | 4,488   |  
|Asphalt                                                                         |  |                           | 1,741   |   |                             |   | 1,508   |      |  |   | 4,946                       |   |  |   | 4,679   |  
|Butane, propane, residual products, internally producedfuel and other (Other) |  |                           | 611     |   |                             |   | 920     |      |  |   | 1,681                       |   |  |   | 2,075   |  
|                                                                                |  |                           |         |   |                             |   |         |      |  |   |                             |   |  |   |         |  
|Total Product Yield                                                             |  |                           | 6,567   |   |                             |   | 6,166   |      |  |   | 18,788                      |   |  |   | 18,774  |  
|                                                                                |  |                           |         |   |                             |   |         |      |  |   |                             |   |  |   |         |  
|% Heavy Crude Oil of Total Refinery Throughput (b)                              |  |                           | 53      | % |                             |   | 52      | %    |  |   | 54                          | % |  |   | 54      | %
|                                                                                |  |                           |         |   |                             |   |         |      |  |   |                             |   |  |   |         |  
|                                                                               
|Product Sales (dollars in thousands) (a)                                        | 
|                                                                                |  | Three Months Ended May31, |         |   | Nine Months EndedMay 31,    |  
|                                                                                |  | 2005                      |         |   | 2004                        |   |         | 2005 |  |   | 2004                        |  
|Gasoline and gasoline blendstock                                                |  | $                         | 98,956  |   |                             | $ | 74,520  |      |  | $ | 254,845                     |   |  | $ | 196,413 |  
|Distillates                                                                     |  |                           | 92,187  |   |                             |   | 54,805  |      |  |   | 236,875                     |   |  |   | 152,158 |  
|Asphalt                                                                         |  |                           | 51,120  |   |                             |   | 39,619  |      |  |   | 138,371                     |   |  |   | 115,799 |  
|Other                                                                           |  |                           | 4,202   |   |                             |   | 3,453   |      |  |   | 11,425                      |   |  |   | 11,163  |  
|                                                                                |  |                           |         |   |                             |   |         |      |  |   |                             |   |  |   |         |  
|                                                                                |  | $                         | 246,465 |   |                             | $ | 172,397 |      |  | $ | 641,516                     |   |  | $ | 475,533 |  
|                                                                                |  |                           |         |   |                             |   |         |      |  |   |                             |   |  |   |         |  



20



---

|                                        |  |                           |  |                          |  |        |  |       
|--------------------------------------- |  | ------------------------- |  | ------------------------ |  | ------ |  | ------
|Product Sales (thousand of barrels) (a)
|                                        |  | Three Months EndedMay 31, |  | Nine Months EndedMay 31,
|                                        |  | 2005                      |  | 2004                     |  | 2005   |  | 2004  
|Gasoline and gasoline blendstock        |  | 1,594                     |  | 1,426                    |  | 4,473  |  | 4,385 
|Distillates                             |  | 1,391                     |  | 1,242                    |  | 3,849  |  | 3,689 
|Asphalt                                 |  | 1,986                     |  | 1,750                    |  | 5,351  |  | 5,160 
|Other                                   |  | 138                       |  | 150                      |  | 391    |  | 459   
|                                        |  |                           |  |                          |  |        |  |       
|                                        |  | 5,109                     |  | 4,568                    |  | 14,064 |  | 13,693
|                                        |  |                           |  |                          |  |        |  |       

---

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

|(b) | The Company defines heavy crude oil as crude oil with an American Petroleum Institute specific gravity of 26 or less.
|--- | -----------------------------------------------------------------------------------------------------------------------



Comparison of Fiscal Quarters Ended May 31, 2005 and May 31, 2004



Net Sales



Wholesale sales increased during the three months ended May 31, 2005 by $74.1 million or 43.0% over the comparable period in
fiscal 2004 from $172.4 million to $246.5 million. The wholesale sales increase was due to a 27.9% increase in wholesale prices and an 11.8% increase in wholesale volume.



Costs of Goods Sold



Wholesale costs of goods sold increased during the three months ended May 31, 2005 by $66.6 million or 43.9% over the comparable period in fiscal 2004
from $151.8 million to $218.4 million. Cost of goods sold increased due to crude throughput increase of 5.0%. In addition, crude oil prices increased by 32.3% on a quarter to quarter basis.



Gross Profit



Wholesale gross profit increased $7.5 million to $28.1 million for the fiscal quarter ended May 31, 2005 from $20.6 million
for fiscal quarter ended May 31, 2004. This increase was primarily due to increased product selling prices which exceeded the increase in crude costs during this period.



Operating Expenses



Operating expenses increased during the three months ended May 31, 2005 by $1.8 million over such expenses for the comparable period in fiscal 2004. For
fiscal 2005, operating expenses were $8.0 million, or 3.2% of net wholesale sales, compared to $6.2 million, or 3.6% of net wholesale sales for fiscal 2004.



Comparison of Nine Months Ended May 31, 2005 and May 31, 2004



Net Sales



Wholesale sales increased during the nine months ended May 31, 2005 by $166.0 million or 34.9% over the comparable period in fiscal 2004 from $475.5
million to $641.5 million. The wholesale sales increase was due to a 31.4% increase in wholesale prices and a 2.7% increase in wholesale volume.



21



---

Costs of Goods Sold



Wholesale costs of goods sold increased during the nine months ended May 31, 2005 by $176.9 million or 41.4% over the comparable period in fiscal 2004
from $426.7 million to $603.6 million. The increase in wholesale costs of goods was primarily due to a 39.4% increase in the Companys average crude oil purchase price for the nine months ended May 31, 2005 as compared to the prior year period.



Gross Profit



Wholesale gross profit decreased for the nine months ended May 31, 2005 by
$10.9 million or 22.3% to $37.9 million from $48.8 million during the comparable period in fiscal 2004. This decrease was primarily due to the increase in crude oil costs.



Operating Expenses



Operating expenses increased during the nine months ended May 31, 2005 by $2.0 million over such expenses for the comparable period in fiscal 2004. For
fiscal 2005, operating expenses were $21.7 million, or 3.4% of net wholesale sales, compared to $19.7 million, or 4.2% of net wholesale sales for fiscal 2004.



Consolidated Expenses:



Interest Expense, net



Net interest expense (interest expense less interest income) increased $1.1 million or 21.2% to $6.6 million for fiscal quarter ended May 31, 2005 from
$5.5 million for fiscal quarter ended May 31, 2004. This increase is primarily attributed to an increase in the amount of long-term debt outstanding as of May 31, 2005 compared to May 31, 2004.



Net interest expense increased $2.3 million or 14.7% for the nine months
ended May 31, 2005 as compared to the nine months ended May 31, 2004. This increase is primarily attributed to an increase in the amount of long-term debt outstanding as of May 31, 2005 compared to May 31, 2004.



Income Tax Expense / (Benefit)



For the three months ended May 31, 2005, the Companys effective tax
rate was 40.0% compared to a rate of 40.3% for the three months ended May 31, 2004. The effective tax rate for the nine months ended May 31, 2005 was approximately 39.8% compared to a rate of 40.0% for the nine months ended May 31, 2004. The
decrease is primarily due to an increase in various permanent differences.



Liquidity and Capital Resources



The Company
operates in an environment where its 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 the
Companys 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. For further
information related to risks and other factors, see Forward-Looking Statements in Item 2.



22



---

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



|                          |  |              |         |                 |   |        
|------------------------- |  | ------------ | ------- | --------------- | - | -------
|                          |  | May 31, 2005 |         | August 31, 2004
|Cash and cash equivalents |  | $            | 24,761  |                 | $ | 11,552 
|Working capital           |  | $            | 90,469  |                 | $ | 65,451 
|Current ratio             |  |              | 1.7     |                 |   | 1.8    
|Debt                      |  | $            | 260,294 |                 | $ | 212,948



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 its working capital, debt service, and capital
expenditure requirements for existing operations.



Our cash and
cash equivalents consist of bank balances and investments in money market funds. These investments have staggered maturity dates, none of which exceed three months. They have a high degree of liquidity since the securities are traded in public
markets. During the nine months ended May 31, 2005, significant uses of cash include $8.3 million for purchases of property, plant and equipment, $.6 million for reductions to debt, $.9 million for additions to deferred turnaround costs, $1.7
million dividend to stockholder, $1.1 million for deferred financing costs and $21.9 million used in operating activities principally for increased inventories and prepaid expenses. This use of cash was funded primarily from net borrowings of $22.0
million on the revolving credit facility and net proceeds of $25.7 million from the issuance of $25 million Senior Notes due 2012. The net effect from operating, investing and financing activities for the nine months ended May 31, 2005 was an
increase of cash and cash equivalents by $13.2 million from $11.6 million as of August 31, 2004 to $24.8 million as of May 31, 2005.



The Company requires 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 $4 million annually over the last three years for the refining and
marketing operations. Management may increase these maintenance and non-discretionary capital expenditures during fiscal year 2005.



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 (the facility) with PNC Bank, N.A. as Agent Bank. This is a $100,000,000 revolving facility, which expires May 9, 2007. 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. For Base Rate borrowings, interest is calculated at the greater of the agent banks prime rate or federal fund
rate plus 1%, plus an applicable margin of .25% to .75%. For Euro-Rate borrowings, interest is calculated at the LIBOR rate plus an applicable margin of 1.75% to 3.00%. The applicable margin varies with our facility leverage ratio calculation. As of
May 31, 2005, $35,000,000 of Euro-Rate borrowings and no Base Rate borrowings were outstanding under the agreement. As of July 1, 2005, there were no Euro-Rate borrowings and $10,000,000 of Base Rate borrowings outstanding under the agreement.



We had outstanding letters of credit of $810,000 and
approximately $64,190,000 unused and available on the facility as of May 31, 2005. As of July 1, 2005, we had outstanding letters of credit of $810,000 and approximately $89,190,000 of unused and available on the facility.



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.



23



---

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



Seasonal Factors



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



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



Inflation



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



|ITEM 3. | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
|------- | ----------------------------------------------------------



The Company uses its revolving credit facility to finance a portion of its operations. 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. At May 31, 2005 the Company was exposed to the risk of market price declines with respect to a
substantial portion of its crude oil and refined product inventories.



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
|------- | -----------------------



|(a) | 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 Securities
Exchange Act of 1934, as amended), as of the end of the Companys fiscal quarter ended May 31, 2005, (the Evaluation Date) the Companys Chief Executive Officer and Chief Financial Officer (its principal executive officer and
principal financial officer, respectively) have concluded that the Companys disclosure controls and procedures were effective as of the Evaluation Date .
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(b) | There have not been any significant changes in the Companys internal controls over financial reporting that occurred during the Companys fiscal quarter ended May 31,
2005 that has materially affected, or is reasonably likely to materially affect, the Companys internal controls over financial reporting.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(c) | As described in Note 2 to the consolidated financial statements, the Company has restated its financial statements for the three and nine month periods ended May 31, 2004, and three
and six month periods ended February 29, 2004 and the three months ended November 30, 2004 and 2003 in order to record all refined product inventories using the first-in first-out cost (FIFO), reduced by the LIFO reserve. Such restatement has been
identified as a material weakness by the Companys independent registered public accounting firm. Management believes the actions taken in the second quarter of fiscal 2005 have effectively addressed the issue identified by the Companys
independent registered public accounting firm.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



24



---

PART IIOTHER INFORMATION



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



| | (None)
| | ------



|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
|------- | ---------------------------------------------------



| | (N/A)
| | -----



|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



25



---

SIGNATURES



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



Date: July 14, 2005



UNITED REFINING COMPANY(Registrant)/s/  Myron L. TurfittMyron L. TurfittPresident/s/  James E. MurphyJames E. MurphyChief Financial Officer




26



---

SIGNATURES



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



Date: July 14, 2005



KIANTONE PIPELINE CORPORATION(Registrant)/s/  Myron L. TurfittMyron L. TurfittPresident/s/  James E. MurphyJames E. MurphyChief Financial Officer




27



---

SIGNATURES



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



Date: July 14, 2005



UNITED REFINING COMPANY OF PENNSYLVANIA(Registrant)/s/  Myron L. TurfittMyron L. TurfittPresident/s/  James E. MurphyJames E. MurphyChief Financial Officer




28



---

SIGNATURES



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



Date: July 14, 2005



KIANTONE PIPELINE COMPANY(Registrant)/s/  Myron L. TurfittMyron L. TurfittPresident/s/  James E. MurphyJames E. MurphyChief Financial Officer




29



---

SIGNATURES



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



Date: July 14, 2005



UNITED JET CENTER, INC.(Registrant)/s/  Myron L. TurfittMyron L. TurfittPresident/s/  James E. MurphyJames E. MurphyChief Financial Officer




30



---

SIGNATURES



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



Date: July 14, 2005



KWIK-FILL CORPORATION(Registrant)/s/  Myron L. TurfittMyron L. TurfittPresident/s/  James E. MurphyJames E. MurphyChief Financial Officer




31



---

SIGNATURES



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



Date: July 14, 2005



INDEPENDENT GASOLINE AND OIL COMPANY OF ROCHESTER, INC.(Registrant)/s/  Myron L. TurfittMyron L. TurfittPresident/s/  James E. MurphyJames E. MurphyChief Financial Officer




32



---

SIGNATURES



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



Date: July 14, 2005



BELL OIL CORP.(Registrant)/s/  Myron L. TurfittMyron L. TurfittPresident/s/  James E. MurphyJames E. MurphyChief Financial Officer




33



---

SIGNATURES



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



Date: July 14, 2005



PPC, INC.(Registrant)/s/  Myron L. TurfittMyron L. TurfittPresident/s/  James E. MurphyJames E. MurphyChief Financial Officer




34



---

SIGNATURES



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



Date: July 14, 2005



SUPER TEST PETROLEUM, INC.(Registrant)/s/  Myron L. TurfittMyron L. TurfittPresident/s/  James E. MurphyJames E. MurphyChief Financial Officer




35



---

SIGNATURES



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



Date: July 14, 2005



KWIK-FIL, INC.(Registrant)/s/  Myron L. TurfittMyron L. TurfittPresident/s/  James E. MurphyJames E. MurphyChief Financial Officer




36



---

SIGNATURES



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



Date: July 14, 2005



VULCAN ASPHALT REFINING CORPORATION(Registrant)/s/  Myron L. TurfittMyron L. TurfittPresident/s/  James E. MurphyJames E. MurphyChief Financial Officer




37



---

SIGNATURES



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



Date: July 14, 2005



COUNTRY FAIR, INC.(Registrant)/s/  Myron L. TurfittMyron L. TurfittPresident and Chief Operating Officer/s/  James E. MurphyJames E. MurphyVice President  Finance




38