UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended May 31, 2015

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

For the transition period from to

Commission File No. 001-06198

UNITED REFINING COMPANY

(Exact name of registrant as specified in its charter)


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

15 Bradley Street
Warren, Pennsylvania		16365
(Address of principal executive office)		(Zip Code)

814-723-1500

(Registrant’s telephone number, including area code)

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

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

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


Large accelerated filer ¨		Accelerated filer ¨
Non-accelerated filer x (Do not check if a smaller reporting company)		Smaller reporting company ¨

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

As of July 15, 2015, there were 100 shares of common stock, par value $.10 per share, of the Registrant outstanding.

TABLE OF ADDITIONAL REGISTRANTS


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

FORM 10-Q – CONTENTS


		PAGE
PART I. FINANCIAL INFORMATION			4

Item 1.	Financial Statements.		4

	Consolidated Balance Sheets – May 31, 2015 (unaudited) and August 31, 2014		4

	Consolidated Statements of Income – Quarter and Nine Months Ended May 31, 2015 and 2014 (unaudited)		5

	Consolidated Statements of Comprehensive Income – Quarter and Nine Months Ended May 31, 2015 and 2014 (unaudited)		6

	Consolidated Statements of Cash Flows – Nine Months Ended May 31, 2015 and 2014 (unaudited)		7

	Notes to Consolidated Financial Statements (unaudited)		8

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations.		16

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.		25

Item 1A.	Risk Factors.		25

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds.		25

Item 3.	Defaults Upon Senior Securities.		25

Item 4.	Mine Safety Disclosures.		25

Item 5.	Other Information.		25

Item 6.	Exhibits.		25

Signatures.			26

PART I. FINANCIAL INFORMATION

Item 1.

Financial Statements.

UNITED REFINING COMPANY AND SUBSIDIARIES

Consolidated Balance Sheets

(in thousands, except share amounts)


	May 31, 2015 (Unaudited)			August 31, 2014
Assets
Current:
Cash and cash equivalents	$	146,259		$	99,037
Accounts receivable, net		74,701			92,391
Refundable income taxes		10,912			6,000
Inventories, net		189,000			151,472
Prepaid income taxes		—			13,674
Prepaid expenses and other assets		22,010			67,168

Total current assets		442,882			429,742
Property, plant and equipment, net		332,579			317,519
Deferred financing costs, net		2,654			3,575
Goodwill		1,349			1,349
Tradename		10,500			10,500
Amortizable intangible assets, net		901			951
Deferred integrity and replacement costs, net		60,204			64,916
Deferred turnaround costs and other assets, net		34,114			41,912

	$	885,183		$	870,464

Liabilities and Stockholder’s Equity
Current:
Current installments of long-term debt	$	1,500		$	1,551
Accounts payable		43,765			91,881
Accrued liabilities		22,041			18,691
Income taxes payable		7,646			—
Sales, use and fuel taxes payable		23,751			20,550
Deferred income taxes		2,810			2,810
Amounts due to affiliated companies, net		359			1,521

Total current liabilities		101,872			137,004
Long term debt: less current installments		237,986			237,974
Deferred income taxes		67,034			44,140
Deferred retirement benefits		62,863			67,121

Total liabilities		469,755			486,239

Commitments and contingencies
Stockholder’s equity:
Common stock; $.10 par value per share – shares authorized 100; issued and outstanding 100		—			—
Series A Preferred stock; $1,000 par value per share – shares authorized 25,000; issued and outstanding 14,116		14,116			14,116
Additional paid-in capital		156,810			156,810
Retained earnings		254,809			222,495
Accumulated other comprehensive loss		(10,307	)		(9,196	)

Total stockholder’s equity		415,428			384,225

	$	885,183		$	870,464

See accompanying notes to consolidated financial statements.

UNITED REFINING COMPANY AND SUBSIDIARIES

Consolidated Statements of Income – (Unaudited)

(in thousands)


	Three Months Ended May 31,						Nine Months Ended May 31,
	2015			2014			2015			2014
Net sales	$	602,877		$	784,269		$	2,008,478		$	2,449,703

Costs and expenses:
Costs of goods sold (exclusive of depreciation and amortization)		485,906			722,327			1,741,703			2,183,453
Selling, general and administrative expenses		42,073			41,942			124,069			124,869
Depreciation and amortization expenses		10,444			7,199			31,321			21,329

		538,423			771,468			1,897,093			2,329,651

Operating income		64,454			12,801			111,385			120,052

Other expense:
Interest expense, net		(6,639	)		(6,597	)		(19,929	)		(19,700	)
Other, net		(907	)		(905	)		(3,064	)		(2,302	)

		(7,546	)		(7,502	)		(22,993	)		(22,002	)

Income before income tax expense		56,908			5,299			88,392			98,050
Income tax expense		22,201			2,067			34,468			38,235

Net income	$	34,707		$	3,232		$	53,924		$	59,815

See accompanying notes to consolidated financial statements.

UNITED REFINING COMPANY AND SUBSIDIARIES

Consolidated Statements of Comprehensive Income – (Unaudited)

(in thousands)


	Three Months Ended May 31,						Nine Months Ended May 31,
	2015			2014			2015			2014
Net income	$	34,707		$	3,232		$	53,924		$	59,815
Other comprehensive loss, net of taxes:
Unrecognized post retirement loss, net of taxes of $(236) and $(119) for the three months ended May 31, 2015 and 2014, respectively and $(710) and $(358) for the nine months ended May 31, 2015 and 2014, respectively		(371	)		(172	)		(1,111	)		(515	)

Other comprehensive loss		(371	)		(172	)		(1,111	)		(515	)

Total comprehensive income	$	34,336		$	3,060		$	52,813		$	59,300

See accompanying notes to consolidated financial statements.

UNITED REFINING COMPANY AND SUBSIDIARIES

Consolidated Statements of Cash Flows – (Unaudited)

(in thousands)


	Nine Months Ended May 31,
	2015			2014
Cash flows from operating activities:
Net income	$	53,924		$	59,815
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Depreciation and amortization		33,163			23,074
Deferred income taxes		23,604			2,225
Loss on asset dispositions		771			1,045
Cash provided by (used in) working capital items		27,631			(87,364	)
Change in operating assets and liabilities:
Other assets, net		306			507
Deferred retirement benefits		(6,079	)		(5,152	)

Total adjustments		79,396			(65,665	)

Net cash provided by (used in) operating activities		133,320			(5,850	)

Cash flows from investing activities:
Additions to property, plant and equipment		(31,202	)		(36,608	)
Additions to amortizable intangible assets		(100	)		—
Additions to deferred turnaround costs		(3,318	)		(32,219	)
Additions to deferred integrity and replacement costs		(28,630	)		—
Proceeds from asset dispositions		7			58

Net cash used in investing activities		(63,243	)		(68,769	)

Cash flows from financing activities:
Dividends to preferred shareholder and stockholder		(21,610	)		(35,218	)
Proceeds from issuance of long-term debt		—			1,426
Principal reductions of long-term debt		(1,245	)		(1,500	)
Distribution to parent under the tax sharing agreement		—			(2,593	)

Net cash used in financing activities		(22,855	)		(37,885	)

Net increase (decrease) in cash and cash equivalents		47,222			(112,504	)
Cash and cash equivalents, beginning of year		99,037			158,537

Cash and cash equivalents, end of period	$	146,259		$	46,033

Cash provided by (used in) working capital items:
Accounts receivable, net	$	17,690		$	17,178
Refundable income taxes		(4,912	)		20,890
Inventories, net		(37,528	)		(117,261	)
Prepaid income taxes		13,674			(6,532	)
Prepaid expenses and other assets		45,158			(15,043	)
Amounts due from/to affiliated companies, net		(1,162	)		389
Accounts payable		(19,486	)		11,099
Accrued liabilities		3,350			6,057
Income taxes payable		7,646			(8,587	)
Sales, use, and fuel taxes payable		3,201			4,446

Total change	$	27,631		$	(87,364	)

Cash paid during the period for:
Interest	$	12,893		$	12,954
Income taxes	$	396		$	48,950

Non-cash investing activities:
Property additions & capital leases	$	285		$	241

See accompanying notes to consolidated financial statements.

UNITED REFINING COMPANY AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(Unaudited)

1.	Description of Business and Basis of Presentation

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

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

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

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

The accompanying unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States of America for complete financial statements. In the opinion of management, all adjustments (consisting of only normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three and nine months ended May 31, 2015 are not necessarily indicative of the results that may be expected for the year ending August 31, 2015. 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, 2014.

2.	Inventories

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

Inventories consist of the following:


	May 31, 2015		August 31, 2014
	(in thousands)
Crude Oil	$	33,879	$	36,667
Petroleum Products		100,287		63,252

Total @ LIFO		134,166		99,919

Merchandise		24,159		23,983
Supplies		30,675		27,570

Total @ FIFO		54,834		51,553

Total Inventory	$	189,000	$	151,472

UNITED REFINING COMPANY AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(Unaudited)

As of May 31, 2015 the replacement cost of LIFO inventories was less than their LIFO carrying values by approximately $1,923,000. At August 31, 2014 the replacement cost of LIFO inventories exceeded their LIFO carrying value by approximately $109,711,000.

3.	Segments of Business

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


	Three Months Ended May 31,					Nine Months Ended May 31,
	2015			2014		2015		2014
Net Sales
Retail	$	320,740		$	436,564	$	998,562	$	1,243,048
Wholesale		282,137			347,705		1,009,916		1,206,655

	$	602,877		$	784,269	$	2,008,478	$	2,449,703

Intersegment Sales
Wholesale	$	134,881		$	240,360	$	431,487	$	657,951

Operating Income (Loss)
Retail	$	(1,249	)	$	3,238	$	16,550	$	(1,292	)
Wholesale		65,703			9,563		94,835		121,344

	$	64,454		$	12,801	$	111,385	$	120,052

Depreciation and Amortization
Retail	$	1,821		$	1,610	$	5,377	$	4,749
Wholesale		8,623			5,589		25,944		16,580

	$	10,444		$	7,199	$	31,321	$	21,329


	May 31, 2015		August 31, 2014
Total Assets	$	177,243	$	186,277
Retail		707,940		684,187

Wholesale	$	885,183	$	870,464

UNITED REFINING COMPANY AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(Unaudited)

4.	Subsidiary Guarantors

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

Condensed Consolidating Balance Sheets

(in thousands)


	May 31, 2015												August 31, 2014
	United Refining Company			Guarantors			Eliminations			United Refining Company & Subsidiaries			United Refining Company			Guarantors			Eliminations			United Refining Company & Subsidiaries
Assets
Current:
Cash and cash equivalents	$	132,450		$	13,809		$	—		$	146,259		$	79,356		$	19,681		$	—		$	99,037
Accounts receivable, net		42,812			31,889			—			74,701			51,452			40,939			—			92,391
Refundable income taxes		10,912			—			—			10,912			6,000			—			—			6,000
Inventories, net		160,013			28,987			—			189,000			122,161			29,311			—			151,472
Prepaid income taxes		—			—			—			—			16,918			(3,244	)		—			13,674
Prepaid expenses and other assets		16,981			5,029			—			22,010			62,889			4,279			—			67,168
Intercompany		117,556			(6,386	)		(111,170	)		—			127,105			1,116			(128,221	)		—

Total current assets		480,724			73,328			(111,170	)		442,882			465,881			92,082			(128,221	)		429,742
Property, plant and equipment, net		208,634			123,945			—			332,579			199,703			117,816			—			317,519
Deferred financing costs, net		2,654			—			—			2,654			3,575			—			—			3,575
Goodwill and other non-amortizable assets		—			11,849			—			11,849			—			11,849			—			11,849
Amortizable intangible assets, net		—			901			—			901			—			951			—			951
Deferred integrity and replacement costs, net		60,204			—			—			60,204			64,916			—			—			64,916
Deferred turnaround costs & other assets		29,057			5,057			—			34,114			39,302			2,610			—			41,912
Investment in subsidiaries		44,706			—			(44,706	)		—			35,811			—			(35,811	)		—

	$	825,979		$	215,080		$	(155,876	)	$	885,183		$	809,188		$	225,308		$	(164,032	)	$	870,464

Liabilities and Stockholder’s Equity
Current:
Current installments of long-term debt	$	500		$	1,000		$	—		$	1,500		$	519		$	1,032		$	—		$	1,551
Accounts payable		22,902			20,863			—			43,765			64,965			26,916			—			91,881
Accrued liabilities		15,356			6,685			—			22,041			12,315			6,376			—			18,691
Income taxes payable		3,881			3,765			—			7,646			—			—			—			—
Sales, use and fuel taxes payable		18,900			4,851			—			23,751			16,037			4,513			—			20,550
Deferred income taxes		3,770			(960	)		—			2,810			3,770			(960	)		—			2,810
Amounts due to affiliated companies, net		—			359			—			359			—			1,521			—			1,521
Intercompany		—			111,170			(111,170	)		—			—			128,221			(128,221	)		—

Total current liabilities		65,309			147,733			(111,170	)		101,872			97,606			167,619			(128,221	)		137,004
Long term debt: less current installments		233,716			4,270			—			237,986			232,946			5,028			—			237,974
Deferred income taxes		50,023			17,011			—			67,034			28,816			15,324			—			44,140
Deferred retirement benefits		61,503			1,360			—			62,863			65,595			1,526			—			67,121

Total liabilities		410,551			170,374			(111,170	)		469,755			424,963			189,497			(128,221	)		486,239

Commitment and contingencies
Stockholder’s equity
Common stock; $.10 par value per share – shares authorized 100; issued and outstanding 100		—			18			(18	)		—			—			18			(18	)		—
Series A Preferred stock; $1,000 par value per share – shares authorized 25,000; issued and outstanding 14,116		14,116			—			—			14,116			14,116			—			—			14,116
Additional paid-in capital		156,810			16,626			(16,626	)		156,810			156,810			16,626			(16,626	)		156,810
Retained earnings		254,809			28,987			(28,987	)		254,809			222,495			20,143			(20,143	)		222,495
Accumulated other comprehensive loss		(10,307	)		(925	)		925			(10,307	)		(9,196	)		(976	)		976			(9,196	)

Total stockholder’s equity		415,428			44,706			(44,706	)		415,428			384,225			35,811			(35,811	)		384,225

	$	825,979		$	215,080		$	(155,876	)	$	885,183		$	809,188		$	225,308		$	(164,032	)	$	870,464

UNITED REFINING COMPANY AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(Unaudited)

Condensed Consolidating Statements of Income

(in thousands)


	Three Months Ended May 31, 2015												Three Months Ended May 31, 2014
	United Refining Company			Guarantors			Eliminations			United Refining Company & Subsidiaries			United Refining Company			Guarantors			Eliminations			United Refining Company & Subsidiaries
Net sales	$	417,018		$	321,909		$	(136,050	)	$	602,877		$	588,065		$	437,393		$	(241,189	)	$	784,269

Costs and expenses:
Costs of goods sold (exclusive of depreciation and amortization)		336,576			285,380			(136,050	)		485,906			566,498			397,018			(241,189	)		722,327
Selling, general and administrative expenses		6,006			36,067			—			42,073			6,201			35,741			—			41,942
Depreciation and amortization expenses		8,332			2,112			—			10,444			5,333			1,866			—			7,199

		350,914			323,559			(136,050	)		538,423			578,032			434,625			(241,189	)		771,468

Operating income (loss)		66,104			(1,650	)		—			64,454			10,033			2,768			—			12,801

Other income (expense):
Interest expense, net		(6,403	)		(236	)		—			(6,639	)		(6,347	)		(250	)		—			(6,597	)
Other, net		(586	)		(321	)		—			(907	)		(818	)		(87	)		—			(905	)
Equity in net (loss) income of subsidiaries		(1,070	)		—			1,070			—			1,283			—			(1,283	)		—

		(8,059	)		(557	)		1,070			(7,546	)		(5,882	)		(337	)		(1,283	)		(7,502	)

Income (loss) before income tax expense (benefit)		58,045			(2,207	)		1,070			56,908			4,151			2,431			(1,283	)		5,299
Income tax expense (benefit)		23,338			(1,137	)		—			22,201			919			1,148			—			2,067

Net income (loss)	$	34,707		$	(1,070	)	$	1,070		$	34,707		$	3,232		$	1,283		$	(1,283	)	$	3,232


	Nine Months Ended May 31, 2015												Nine Months Ended May 31, 2014
	United Refining Company			Guarantors			Eliminations			United Refining Company & Subsidiaries			United Refining Company			Guarantors			Eliminations			United Refining Company & Subsidiaries
Net sales	$	1,441,403		$	1,002,092		$	(435,017	)	$	2,008,478		$	1,864,606		$	1,246,280		$	(661,183	)	$	2,449,703

Costs and expenses:
Costs of goods sold (exclusive of depreciation and amortization)		1,301,330			875,390			(435,017	)		1,741,703			1,707,098			1,137,538			(661,183	)		2,183,453
Selling, general and administrative expenses		18,759			105,310			—			124,069			19,205			105,664			—			124,869
Depreciation and amortization expenses		25,108			6,213			—			31,321			15,812			5,517			—			21,329

		1,345,197			986,913			(435,017	)		1,897,093			1,742,115			1,248,719			(661,183	)		2,329,651

Operating income (loss)		96,206			15,179			—			111,385			122,491			(2,439	)		—			120,052

Other income (expense):
Interest expense, net		(19,218	)		(711	)		—			(19,929	)		(18,976	)		(724	)		—			(19,700	)
Other, net		(3,103	)		39			—			(3,064	)		(2,538	)		236			—			(2,302	)
Equity in net income (loss) of subsidiaries		8,844			—			(8,844	)		—			(1,793	)		—			1,793			—

		(13,477	)		(672	)		(8,844	)		(22,993	)		(23,307	)		(488	)		1,793			(22,002	)

Income (loss) before income tax expense (benefit)		82,729			14,507			(8,844	)		88,392			99,184			(2,927	)		1,793			98,050
Income tax expense (benefit)		28,805			5,663			—			34,468			39,369			(1,134	)		—			38,235

Net income (loss)	$	53,924		$	8,844		$	(8,844	)	$	53,924		$	59,815		$	(1,793	)	$	1,793		$	59,815

UNITED REFINING COMPANY AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(Unaudited)

Condensed Consolidating Statements of Cash Flows

(in thousands)


	Nine Months Ended May 31, 2015											Nine Months Ended May 31, 2014
	United Refining Company			Guarantors			Eliminations		United Refining Company and Subsidiaries			United Refining Company			Guarantors			Eliminations		United Refining Company and Subsidiaries
Net cash provided by (used in) operating activities	$	123,127		$	10,193		$	—	$	133,320		$	(16,866	)	$	11,016		$	—	$	(5,850	)

Cash flows from investing activities:
Additions to property, plant and equipment		(18,656	)		(12,546	)		—		(31,202	)		(25,150	)		(11,458	)		—		(36,608	)
Additions to amortizable intangible assets		—			(100	)		—		(100	)		—			—			—		—
Additions to deferred turnaround costs		(687	)		(2,631	)		—		(3,318	)		(32,028	)		(191	)		—		(32,219	)
Additions to deferred integrity and replacement costs		(28,630	)		—			—		(28,630	)		—			—			—		—
Proceeds from asset dispositions		5			2			—		7			56			2			—		58

Net cash used in investing activities		(47,968	)		(15,275	)		—		(63,243	)		(57,122	)		(11,647	)		—		(68,769	)

Cash flows from financing activities:
Dividends to preferred shareholder and common stockholder		(21,610	)		—			—		(21,610	)		(35,218	)		—			—		(35,218	)
Proceeds from issuance of long-term debt		—			—			—		—			—			1,426			—		1,426
Principal reductions of long-term debt		(455	)		(790	)		—		(1,245	)		(706	)		(794	)		—		(1,500	)
Distribution to parent under the tax sharing agreement		—			—			—		—			(2,593	)		—			—		(2,593	)

Net cash (used in) provided by financing activities		(22,065	)		(790	)		—		(22,855	)		(38,517	)		632			—		(37,885	)

Net increase (decrease) in cash and cash equivalents		53,094			(5,872	)		—		47,222			(112,505	)		1			—		(112,504	)
Cash and cash equivalents, beginning of year		79,356			19,681			—		99,037			141,386			17,151			—		158,537

Cash and cash equivalents, end of period	$	132,450		$	13,809		$	—	$	146,259		$	28,881		$	17,152		$	—	$	46,033

UNITED REFINING COMPANY AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(Unaudited)

5.	Employee Benefit Plans

For the periods ended May 31, 2015 and 2014, net pension and other postretirement benefit costs were comprised of the following:


	Pension Benefits
	Three Months Ended May 31,						Nine Months Ended May 31,
	2015			2014			2015			2014
	(in thousands)
Service cost	$	157		$	149		$	470		$	447
Interest cost on benefit obligation		1,213			1,312			3,638			3,934
Expected return on plan assets		(1,588	)		(1,404	)		(4,763	)		(4,210	)
Amortization and deferral of net loss		180			175			541			526

Net periodic benefit cost	$	(38	)	$	232		$	(114	)	$	697


	Other Post-Retirement Benefits
	Three Months Ended May 31,						Nine Months Ended May 31,
	2015			2014			2015			2014
	(in thousands)
Service cost	$	(151	)	$	194		$	(453	)	$	581
Interest cost on benefit obligation		(413	)		518			(1,239	)		1,554
Amortization and deferral of net loss		786			(465	)		2,358			(1,395	)

Net periodic benefit cost	$	222		$	247		$	666		$	740

As of May 31, 2015, $3,257,000 of contributions have been made to the Company pension plans for the fiscal year ending August 31, 2015.

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

6.	Fair Value Measurements

The carrying values of all financial instruments classified as a current asset or a current liability approximate fair value because of the short maturity of these instruments. The fair value of marketable securities is determined by available market prices. The fair value exceeded the carrying value of the long term debt at May 31, 2015 and August 31, 2014 by $12,514,000 and $28,041,000, respectively.

7.	Put and Call Option Agreement

On April 8, 2015 (the “Execution Date”), the Company entered into a Put and Call Option Agreement with each of Enbridge Energy Limited Partnership (“Enbridge LP”) and Enbridge Pipelines Inc. (“Enbridge Inc.” and, together with Enbridge LP, the “Carriers”). The Put and Call Option Agreement entered into with Enbridge LP (the “U.S. Agreement”) is substantially similar to the Put and Call Option Agreement entered into with Enbridge

UNITED REFINING COMPANY AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(Unaudited)

Inc. (the “Canadian Agreement” and, together with the U.S. Agreement, the “Put and Call Agreement”). The Put and Call Agreement was contemplated in that certain Letter Agreement, originally executed on July 31, 2014 and last amended on April 8, 2015 (the “Letter Agreement”), between the Company and the Carriers relating to approximately 88.85 miles of pipeline owned by the Carriers, which transports crude oil from Canada to the Company’s Kiantone Pipeline in West Seneca, New York, and serves the Company’s refinery in Warren, Pennsylvania (“Line 10”). The Letter Agreement related to the parties’ agreement concerning funding certain integrity and replacement costs for Line 10.

The Carriers own the pipeline facilities generally identified as Line 10, including real property interests through and under which Line 10 passes, the Carriers’ assignable permits related to the ownership and operation of Line 10, as well as personal property, contract rights, records and incidental rights held solely in connection with Line 10 (collectively, the “Assets”).

Pursuant to the Letter Agreement, the Company agreed to fund certain integrity costs necessary to maintain Line 10 (the “Integrity Costs”), by August 14, 2014, which aggregated $36 million for the calendar year 2014. The Carriers reconciled their actual expenses for the integrity maintenance as of June 30, 2015 and the Carriers will refund any excess payments made by the Company and the Company will fund the Carriers’ expenses in excess of the $36 million. Assuming the Company and the Carriers entered into a Put and Call Agreement on or before December 31, 2014, (as that date was extended) for each subsequent calendar year through the earlier of the expiration or closing of the purchase rights granted to the Company pursuant to the Put and Call Agreement, the Carriers will provide the Company with an invoice for the Integrity Costs for such calendar year (“Subsequent Year Integrity Costs”). The Carriers’ actual expenses with respect to the integrity maintenance will be reconciled against the Subsequent Year Integrity Costs similarly to the reconciliation for calendar year 2014.

In addition, the Company agreed to pay for half the cost of replacing certain portions of Line 10 in accordance with a plan agreed to between the Company Parties and the Carriers. The Company will pay 50% of the estimated expenses of the replacement project for each segment of Line 10 to be replaced (the “Replacement Costs”) within 30 days of its receipt of an invoice for the same, along with a project management fee of 2 ¹/₄%. Each Carrier will initially fund the remaining 50% of the Replacement Costs during construction, provided that the Company will reimburse the Carriers for their actual cost of funds during the construction process. Once construction is complete and each replaced segment of Line 10 is put into service, and assuming the Company has not exercised its rights to purchase Line 10 pursuant to the Put and Call Agreement, the Company will repay the Carriers the 50% of the Replacement Costs they funded over a 10 year period.

Pursuant to the Put and Call Agreement, the Carriers granted the Company a right (the “Call Option”) to purchase all of the Assets and the Company granted the Carriers the right to put all the Assets to the Company (the “Put Option” and, together with the Call Option, the “Purchase Options”) subject to the terms and conditions of the Put and Call Agreement.

The Carrier’s Put Option is exercisable beginning on the date that is the earlier of (a) January 1, 2026 and (b) the date that is 30 days after the latest of (i) the date on which the Carriers give notice that the Line 10 replacement work performed pursuant to the Letter Agreement is sufficiently completed (as contemplated in the Call and Put Agreement) and (ii) the ninth (9^th) anniversary of the Execution Date (the “Put Option Commencement Date”). The Put Option terminates on the date that is 24 months after either (a) the Put Option Commencement Date if such date is the first of a month or (b) the first day of the calendar month immediately following the Put Option Commencement Date if it is not the first day of the month (the “Put/Call Option Expiry Date”). The Company’s Call Option is exercisable at any time beginning on the Execution Date and ending on the Put/Call Option Expiry Date.

UNITED REFINING COMPANY AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(Unaudited)

The purchase price of the Assets (the “Purchase Price”) shall be calculated as follows: the sum of (a) 70% of the book value of the Assets as of July 31, 2014 minus annual depreciation, (b) 100% of total replacement costs for any segment replacements on the Pipeline commenced by the Carrier, whether completed or ongoing on the date of Asset sale is consummated (the “Closing Date”), minus any of such expenses paid by the Company and (c) 100% of the total regulatory requirements costs for any regulatory work commenced by the Carrier, whether completed or ongoing at the Closing Date, minus any of such expenses paid by the Company. The Purchase Price shall be subject to adjustment pursuant to the Put and Call Agreement with respect to certain work ongoing at the Closing Date.

Among other customary conditions to closing, Carrier’s obligation to close the sale of the Assets is conditioned on the Company’s payment of all obligations outstanding pursuant to the Put and Call Agreement and the Letter Agreement. In addition, the sale of Assets pursuant to the U.S. Agreement shall close concurrently with the sale of the Assets pursuant to the Canadian Agreement.

The Company and the Carrier agreed that certain work must be undertaken in order to carve out portions of Line 10 in Canada from the Enbridge mainline system and allow it to operate independently. In the event any work is required to similarly separate the U.S. portion of Line 10 from the Enbridge mainline system (the “Carve-Out Work”), a plan to perform such Carve-Out Work that would result in expenses greater than $38.5 million will require the approval of the Company.

In the event any of the maintenance, regulatory requirement, or replacement work contemplated in the Letter Agreement or the Put and Call Agreement (collectively, the “Work”) is outstanding at the Closing Date, concurrently with the closing of the Asset sale, the Company and the Carriers will enter into an operating agreement (the “Operating Agreement”) pursuant to which the Carriers will provide certain operational and administrative services (the “Services”) while the Work is ongoing and complete such Work. As payment for the Services and completion of the Work, the Carriers shall be: (i) reimbursed for all expenses of providing the Services, (ii) paid a fixed fee of on an annual basis, which shall be subject to a 2% increase for each successive year following the first year of the Operating Agreement, and (ii) paid for all expenses of the Work not previously paid, as well as a 2.25% construction management fee.

The Put and Call Agreement may be terminated by the mutual consent of the Company and the Carriers and shall automatically terminate if neither Purchase Option is exercised prior to the Put/Call Option Expiry Date. Moreover, either the Company or a Carrier may terminate the Put and Call Agreement if a closing of the Asset sale shall not have occurred on or before December 31, 2028 assuming the terminating party is not then in breach of the Put and Call Agreement and if a party has breached a representation, such breach has not been cured within the time periods allotted by the Put and Call Agreement. Finally, the Company may terminate the Put and Call Agreement by notifying the Carriers to cease the replacement work contemplated in the Letter Agreement. The Company has assessed the accounting impact of the Put and Call Agreement and determined there is no impact until the time when it becomes probable that the Put or Call will be exercised.

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, current reports on Form 8-K, etc. In addition to the factors discussed elsewhere in this Quarterly Report on Form 10-Q, the Company’s actual consolidated quarterly or annual operating results have been affected in the past, or could be affected in the future, by additional factors, including, without limitation:

•

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

•

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

•

repayment of debt;

•

general economic, business and market conditions;

•

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

•

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

•

the availability and cost of financing to us;

•

environmental, tax and tobacco legislation or regulation;

•

volatility of gasoline prices, margins and supplies;

•

merchandising margins;

•

labor costs;

•

level of capital expenditures;

•

customer traffic;

•

weather conditions;

•

acts of terrorism and war;

•

business strategies;

•

expansion and growth of operations;

•

future projects and investments;

•

future exposure to currency devaluations or exchange rate fluctuations;

•

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

•

future operating results and financial condition.

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

Recent Developments

The Company continues to be impacted by the volatility in petroleum markets in fiscal 2015. NYMEX crude prices decreased $48 per barrel or 47% from August 31, 2014 to May 31, 2015. This decrease in crude price is reflected in decreased selling prices and subsequent net sales for the Company.

The lagged 3-2-1 crackspread is measured by the difference between the prices of crude oil contracts traded on the NYMEX for the preceding month to the prices of NYMEX gasoline and heating oil contracts in the current trading month. The Company uses a lagged crackspread as a margin indicator as it reflects the margin during the time period between the purchase of crude oil and its delivery to the refinery for processing. The lagged crackspread for the third quarter of fiscal 2015 was $28.68. Through July 2, 2015 the indicated lagged crackspread for the fourth quarter ending August 31, 2015 was $24.15, a $4.53 decrease from the average for the third quarter of fiscal 2015.

Results of Operations

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

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

Retail Operations:


	Three Months Ended May 31,						Nine Months Ended May 31,
	2015			2014			2015			2014
	(dollars in thousands)
Net Sales
Petroleum	$	251,640		$	368,495		$	798,590		$	1,044,956
Merchandise and other		69,100			68,069			199,972			198,092

Total Net Sales		320,740			436,564			998,562			1,243,048
Costs of goods sold		284,205			396,073			871,657			1,134,228
Selling, general and administrative expenses		35,963			35,643			104,978			105,363
Depreciation and amortization expenses		1,821			1,610			5,377			4,749

Segment Operating Income (Loss)	$	(1,249	)	$	3,238		$	16,550		$	(1,292	)

Retail Operating Data:
Petroleum sales (thousands of gallons)		92,917			97,416			275,099			286,546
Petroleum margin (a)	$	18,711		$	23,196		$	75,652		$	58,951
Petroleum margin ($/gallon) (b)		.2014			.2381			.2750			.2057
Merchandise and other margins	$	17,825		$	17,294		$	51,254		$	49,867
Merchandise margin (percent of sales)		25.8	%		25.4	%		25.6	%		25.2	%

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

(b)

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

Comparison of Fiscal Quarters Ended May 31, 2015 and 2014

Net Sales

Retail sales decreased during the fiscal quarter ended May 31, 2015 by $115.8 million or 26.5% from the comparable period in fiscal 2014 from $436.5 million to $320.7 million. The decrease was due to a $116.8 million decrease in petroleum sales offset by an increase in merchandise sales of $1.0 million. The petroleum sales decrease resulted from a 4.5 million gallon or a 4.6% decrease in retail petroleum volume and a 28.4% decrease in retail selling prices per gallon.

Costs of Goods Sold

Retail costs of goods sold decreased during the fiscal quarter ended May 31, 2015 by $111.9 million or 28.2% from the comparable period in fiscal 2014 from $396.1 million to $284.2 million. The decrease was primarily due to $114.8 million in petroleum purchase costs and $.2 million in freight costs offset by an increase of $.5 million in merchandise costs and fuel taxes of $2.6 million.

Selling, General and Administrative Expenses

Retail Selling, General and Administrative (“SG&A”) expenses remained relatively constant during the fiscal quarters ended May 31, 2015 and 2014.

Comparison of Nine Months Ended May 31, 2015 and 2014

Net Sales

Retail sales decreased during the nine months ended May 31, 2015 by $244.4 million or 19.7% from the comparable period in fiscal 2014 from $1,243.0 million to $998.6 million. The decrease was primarily due to $246.3 million in petroleum sales, offset by an increase of $1.9 million in merchandise sales. The petroleum sales decrease resulted from a 20.4% decrease in retail selling prices per gallon and a 11.4 million gallon or 4.0% decrease in sales volume.

Costs of Goods Sold

Retail costs of goods sold decreased during the nine months ended May 31, 2015 by $262.6 million or 23.2% from the comparable period in fiscal 2014 from $1,134.2 million to $871.6 million. The decrease was primarily due to $271.3 million in petroleum purchase prices and freight costs of $.5 million, offset by an increase in fuel taxes of $8.7 million, and .$5 million in merchandise.

Selling, General and Administrative Expenses

Retail Selling, General and Administrative (“SG&A”) expenses remained relatively constant during the nine months ended May 31, 2015 and 2014.

Wholesale Operations:


	Three Months Ended May 31,				Nine Months Ended May 31,
	2015		2014		2015		2014
	(dollars in thousands)
Net Sales (a)	$	282,137	$	347,705	$	1,009,916	$	1,206,655
Costs of goods sold (exclusive of depreciation, amortization)		201,701		326,254		870,046		1,049,225
Selling, general and administrative expenses		6,110		6,299		19,091		19,506
Depreciation and amortization expenses		8,623		5,589		25,944		16,580

Segment Operating Income	$	65,703	$	9,563	$	94,835	$	121,344

Key Wholesale Operating Statistics:


	Three Months Ended May 31,						Nine Months Ended May 31,
	2015			2014			2015			2014
Refinery Product Yield (thousands of barrels)
Gasoline and gasoline blendstock		2,421			1,393			7,613			6,525
Distillates		1,306			855			3,937			3,492
Asphalt		1,698			1,104			5,286			4,791
Butane, propane, residual products, internally produced fuel and other (“Other”)		682			682			1,896			1,872

Total Product Yield		6,107			4,034			18,732			16,680

% Heavy Crude Oil of Total Refinery Throughput (b)		61	%		60	%		61	%		61	%
Crude throughput (thousand barrels per day)		61.0			39.7			62.5			55.7

Product Sales (thousand of barrels) (a)
Gasoline and gasoline blendstock		1,430			1,198			4,598			3,983
Distillates		1,017			693			3,201			2,661
Asphalt		1,639			1,272			4,746			4,498
Other		146			123			499			588

Total Product Sales Volume		4,232			3,286			13,044			11,730

Product Sales (dollars in thousands) (a)
Gasoline and gasoline blendstock	$	105,247		$	144,216		$	361,379		$	459,110
Distillates		82,421			91,413			293,101			351,590
Asphalt		91,104			105,673			337,626			360,272
Other		3,365			6,403			17,810			35,683

Total Product Sales	$	282,137		$	347,705		$	1,009,916		$	1,206,655

(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, 2015 and 2014

Net Sales

Wholesale sales decreased during the three months ended May 31, 2015 by $65.6 million or 18.9% from the comparable period in fiscal 2014 from $347.7 million to $282.1 million. The decrease was due primarily to a 37.0% decrease in wholesale prices offset by an increase of 28.8% in wholesale volume.

Costs of Goods Sold (exclusive of depreciation and amortization)

Wholesale costs of goods sold decreased during the three months ended May 31, 2015 by $124.6 million or 38.2% from the comparable period in fiscal 2014 from $326.3 million to $201.7 million. The decrease in wholesale costs of goods sold during this period was primarily due to a decrease in cost of raw materials.

Selling, General and Administrative Expenses

Wholesale SG&A expenses remained relatively constant during the three months ended May 31, 2015 and 2014.

Depreciation and Amortization

Depreciation, amortization increased during the three months ended May 31, 2015 by $3.0 million for the comparable period for fiscal 2014 from $5.6 million to $8.6 million. The increase was primarily due to increases of $1.5 million in turnaround cost amortization and $1.5 million in amortization of integrity and replacement costs.

Comparison of Nine Months Ended May 31, 2015 and 2014

Wholesale sales decreased during the nine months ended May 31, 2015 by $196.8 million or 16.3% from the comparable period in fiscal 2014 from $1,206.7 million to $1,009.9 million. The decrease was due to a 24.8% decrease in wholesale prices offset by an 11.2% increase in wholesale volume.

Costs of Goods Sold (exclusive of depreciation and amortization)

Wholesale costs of goods sold decreased during the nine months ended May 31, 2015 by $179.2 million or 17.1% from the comparable period in fiscal 2014 from $1,049.2 million to $870.0 million. The decrease in wholesale costs of goods sold was primarily due to a decrease in the cost of raw materials.

Selling, General and Administrative Expenses

Wholesale SG&A expenses remained relatively constant during the nine months ended May 31, 2015 and 2014.

Depreciation and Amortization

Depreciation, amortization increased during the nine months ended May 31, 2015 by $9.4 million for the comparable period for fiscal 2014 from $16.5 million to $25.9 million. The increase was primarily due to increases of $4.7 million in turnaround cost amortization and $4.7 million in amortization of integrity and replacement costs.

Consolidated Expenses:

Interest Expense, net

Net interest expense (interest expense less interest income) remained relatively constant during the three and nine months ended May 31, 2015 and 2014.

Income Tax Expense

The Company’s effective tax rate remained approximately 39% for the three and nine months ended May 31, 2015 and 2014.

Liquidity and Capital Resources

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

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


	May 31, 2015
Cash and cash equivalents	$	146,259
Working capital	$	341,010
Current ratio		4.3
Debt	$	239,486

Primary sources of liquidity have been cash and cash equivalents, and borrowing availability under our revolving credit facility (the “Amended and Restated Revolving Credit Facility”) with PNC Bank, N.A. as Administrator (the “Agent Bank”). We believe available capital resources are adequate to meet our working capital, debt service, and capital expenditure requirements for existing operations.

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

Significant Uses of Cash

The changes in cash for the nine months ended May 31, 2015 are described below.

The cash used in working capital is shown below:


	Nine Months Ended May 31, 2015
	(in millions)
Cash used in working capital items:
Prepaid expense decrease	$	45.2
Accounts receivable decrease		17.7
Prepaid income taxes decrease		13.7
Income taxes payable increase		7.6
Accrued liabilities increase		3.3
Sales, use and fuel taxes payable increase		3.2
Inventory increase		(37.5	)
Accounts payable decrease		(19.5	)
Refundable income taxes increase		(4.9	)
Amounts due from affiliated companies, net		(1.2	)

Total change	$	27.6

Available cash on hand increased by $47.2 million. Other cash uses included:

•

Fund operating activities used in working capital items of $27.6 million

•

Fund capital expenditures and deferred turnaround costs of $34.5 million

•

Dividends to preferred shareholder and common stockholder of $21.6 million

•

Scheduled long-term debt repayments of $1.2 million

•

Fund deferred integrity and replacement costs of $28.6 million

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

Maintenance and non-discretionary capital expenditures have averaged approximately $6.0 million annually over the last three years for the refining and marketing operations. Management does not foresee any increase in these maintenance and non-discretionary capital expenditures during fiscal year 2015 at this time.

Future liquidity, both short and long-term, will continue to be primarily dependent on realizing a refinery margin sufficient to cover fixed and variable expenses, including planned capital expenditures. We expect to be able to meet our working capital, capital expenditure, contractual obligations, letter of credit and debt service requirements out of cash flow from operations, cash on hand and borrowings under our Amended and Restated Revolving Credit Facility of $175,000,000. This provides the Company with flexibility relative to its cash flow requirements in light of market fluctuations, particularly involving crude oil prices and seasonal business cycles and will assist the Company in meeting its working capital, ongoing capital expenditure needs and for general corporate purposes. The agreement expires on November 29, 2017. Under the Amended and Restated Revolving Credit Facility, the applicable margin is calculated on the average unused availability as follows: (a) for base rate borrowing, at the greater of the Agent Bank’s prime rate or the Federal Funds Open Rate plus .75%; or the Daily LIBOR rate plus 2.75%; plus an applicable margin of 0% to .5%; (b) for euro-rate based borrowings, at the LIBOR Rate plus an applicable margin of 2.25% to 3.25%. The Agent Bank’s prime rate at May 31, 2015 was 3.25%.

The Amended and Restated Revolving Credit Facility is secured primarily by certain cash accounts, accounts receivable and inventory. Until maturity, we may borrow on a borrowing base formula as set forth in the facility. We had standby letters of credit of $8.8 million as of May 31, 2015 and there were no outstanding borrowings under the Amended and Restated Revolving Credit Facility resulting in net availability of $166.2 million. As of July 15, 2015, there were no outstanding borrowings under the Amended and Restated Revolving Credit Facility and there were standby letters of credit in the amount of $8.8 million, resulting in a net availability of $166.2 million and the Company had full access to it. The Company’s working capital ratio was 4.3 as of May 31, 2015.

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

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

Seasonal Factors

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

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

Inflation

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

Item 3.

Quantitative and Qualitative Disclosures about Market Risk.

The Company uses its Amended and Restated Revolving Credit Facility to finance a portion of its operations. This on-balance sheet financial instrument, to the extent it provides for variable rates, exposes the Company to interest rate risk resulting from changes in the Agent Bank’s Prime rate, the Federal Funds or LIBOR rate. As of July 15, 2015, there were no outstanding borrowings under the Amended and Restated Revolving Credit Facility.

From time to time, the Company uses derivatives to reduce its exposure to fluctuations in crude oil purchase costs and refining margins. Derivative products, specifically crude oil option contracts and crack spread option contracts are used to hedge the volatility of these items. The Company accounts for changes in the fair value of its contracts by marking them to market and recognizing any resulting gains or losses in its Consolidated Statements of Income. There has been no derivative activity in fiscal 2015.

Item 4.

Controls and Procedures.

Our management, with the participation of our chief executive officer and chief financial officer, evaluated the effectiveness of our disclosure controls and procedures as of May 31, 2015. The term “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, means controls and other procedures of a company that are designed to ensure that information required to be disclosed by a company in the reported, within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the company’s management, including its principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure. Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Based on the evaluation of our disclosure controls and procedures as of May 31, 2015, our chief executive officer and chief financial officer concluded that, as of such date, our disclosure controls and procedures were effective at the reasonable assurance level.

There have not been any changes in the Company’s internal controls over financial reporting that occurred during the Company’s fiscal quarter ended May 31, 2015 that have materially affected, or are reasonably likely to materially affect, the Company’s internal controls over financial reporting.

Part II

OTHER INFORMATION

Item 1.

Legal Proceedings.

None.

Item 1A.

Risk Factors.

There have been no material changes in our Risk Factors disclosed in the Form 10-K for the year ended August 31, 2014.

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds.

None.

Item 3.

Defaults Upon Senior Securities.

None.

Item 4.

Mine Safety Disclosures.

Not applicable.

Item 5.

Other Information.

None.

Item 6.

Exhibits.



Exhibit 10.1		Put and Call Option Agreement between United Refining Company and Enbridge Energy Limited Partnership

Exhibit 10.2		Put and Call Option Agreement between United Refining Company and Enbridge Pipelines Inc.

Exhibit 31.1		Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

Exhibit 31.2		Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

Exhibit 32.1		Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

Exhibit 101		Interactive XBRL Data

SIGNATURES

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

Date: July 15, 2015

UNITED REFINING COMPANY

(Registrant)

/s/ Myron L. Turfitt

Myron L. Turfitt

President

/s/ James E. Murphy

James E. Murphy

Chief Financial Officer

SIGNATURES

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

Date: July 15, 2015

KIANTONE PIPELINE CORPORATION

(Registrant)

/s/ Myron L. Turfitt

Myron L. Turfitt

President

/s/ James E. Murphy

James E. Murphy

Chief Financial Officer

SIGNATURES

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

Date: July 15, 2015

UNITED REFINING COMPANY OF PENNSYLVANIA

(Registrant)

/s/ Myron L. Turfitt

Myron L. Turfitt

President

/s/ James E. Murphy

James E. Murphy

Chief Financial Officer

SIGNATURES

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

Date: July 15, 2015

KIANTONE PIPELINE COMPANY

(Registrant)

/s/ Myron L. Turfitt

Myron L. Turfitt

President

/s/ James E. Murphy

James E. Murphy

Chief Financial Officer

SIGNATURES

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

Date: July 15, 2015

UNITED JET CENTER, INC.

(Registrant)

/s/ Myron L. Turfitt

Myron L. Turfitt

President

/s/ James E. Murphy

James E. Murphy

Chief Financial Officer

SIGNATURES

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

Date: July 15, 2015

KWIK-FILL CORPORATION

(Registrant)

/s/ Myron L. Turfitt

Myron L. Turfitt

President

/s/ James E. Murphy

James E. Murphy

Chief Financial Officer

SIGNATURES

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

Date: July 15, 2015

INDEPENDENT GASOLINE AND OIL

COMPANY OF ROCHESTER, INC.

(Registrant)

/s/ Myron L. Turfitt

Myron L. Turfitt

President

/s/ James E. Murphy

James E. Murphy

Chief Financial Officer

SIGNATURES

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

Date: July 15, 2015

BELL OIL CORP.

(Registrant)

/s/ Myron L. Turfitt

Myron L. Turfitt

President

/s/ James E. Murphy

James E. Murphy

Chief Financial Officer

SIGNATURES

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

Date: July 15, 2015

PPC, INC.

(Registrant)

/s/ Myron L. Turfitt

Myron L. Turfitt

President

/s/ James E. Murphy

James E. Murphy

Chief Financial Officer

SIGNATURES

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

Date: July 15, 2015

SUPER TEST PETROLEUM, INC.

(Registrant)

/s/ Myron L. Turfitt

Myron L. Turfitt

President

/s/ James E. Murphy

James E. Murphy

Chief Financial Officer

SIGNATURES

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

Date: July 15, 2015

KWIK-FIL, INC.

(Registrant)

/s/ Myron L. Turfitt

Myron L. Turfitt

President

/s/ James E. Murphy

James E. Murphy

Chief Financial Officer

SIGNATURES

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

Date: July 15, 2015

VULCAN ASPHALT REFINING CORPORATION

(Registrant)

/s/ Myron L. Turfitt

Myron L. Turfitt

President

/s/ James E. Murphy

James E. Murphy

Chief Financial Officer

SIGNATURES

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

Date: July 15, 2015

COUNTRY FAIR, INC.

(Registrant)

/s/ Myron L. Turfitt

Myron L. Turfitt

President and Chief Operating Officer

/s/ James E. Murphy

James E. Murphy

Vice President Finance

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KWIK FILL CORP 10-Q