<PAGE> 1
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------------
(Mark One)
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the Period Ended February 28, 1998
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
--------------------- -----------------------
Commission File No. 333-35083
UNITED REFINING COMPANY
- ------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Pennsylvania 25-1411751
- ------------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
15 Bradley Street
- ------------------
Warren, Pennsylvania 16365
- -------------------- -----
(address of principal (Zip Code)
executive office)
Registrant's telephone number, including area code 814-726-4674
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 No X
------- -------
Number of shares outstanding of Registrant's Common Stock as of April 14, 1998:
1,000.
1
<PAGE> 2
<TABLE>
<CAPTION>
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TABLE OF ADDITIONAL REGISTRANTS
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Primary Standard
State of Other Industrial IRS Employer
Jurisdiction of Classification Identification Commission
Name Incorporation Number Number File Number
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<S> <C> <C> <C> <C>
Kiantone Pipeline Corporation New York 4612 25-1211902 333-35083-01
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Kiantone Pipeline Company Pennsylvania 4600 25-1416278 333-35083-03
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United Refining Company of Pennsylvania 5541 25-0850960 333-35083-02
Pennsylvania
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United Jet Center, Inc. Delaware 4500 52-1623169 333-35083-06
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Kwik-Fill, Inc. Pennsylvania 5541 25-1525543 333-35083-05
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Independent Gas and Oil Company New York 5170 06-1217388 333-35083-11
of Rochester, Inc.
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Bell Oil Corp. Michigan 5541 38-1884781 333-35083-07
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PPC, Inc. Ohio 5541 31-0821706 333-35083-08
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Super Test Petroleum, Inc. Michigan 5541 38-1901439 333-35083-09
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Kwik-Fil, Inc. New York 5541 25-1525615 333-35083-04
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Vulcan Asphalt Refining Delaware 2911 23-2486891 333-35083-10
Corporation
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</TABLE>
2
<PAGE> 3
UNITED REFINING COMPANY
AND SUBSIDIARIES
INDEX
- -------------------------------------------------------------------------------
PART 1. FINANCIAL INFORMATION PAGE(S)
- ----------------------------------
Item 1. Financial Statements
Consolidated Balance Sheets-
February 28, 1998 and August 31, 1997 4
Consolidated Statements of Operations-
Six Months and Quarters Ended February 28, 1998 and 1997 5
Consolidated Statements of Cash Flows-
Six Months Ended February 28, 1998 and 1997 6
Notes to Consolidated Financial Statements 7
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 8-12
PART II. OTHER INFORMATION 13
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3
<PAGE> 4
PART 1 -- FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
UNITED REFINING COMPANY
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------
FEBRUARY 28,
1998 AUGUST 31,
(UNAUDITED) 1997
- ----------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
CURRENT:
Cash and cash equivalents $ 4,507 $ 11,024
Accounts receivable, net 22,042 29,762
Inventories 71,640 67,096
Prepaid expenses and other assets 7,697 6,786
Deferred income taxes 703 712
- ----------------------------------------------------------------------------------------------------
TOTAL CURRENT ASSETS 106,589 115,380
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PROPERTY, PLANT AND EQUIPMENT:
Cost 248,241 234,956
Less: accumulated depreciation 65,119 60,757
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NET PROPERTY, PLANT AND EQUIPMENT 183,122 174,199
- ----------------------------------------------------------------------------------------------------
RESTRICTED CASH AND CASH EQUIVALENTS AND INVESTMENTS 35,330 48,168
DEFERRED FINANCING COSTS 7,658 7,807
OTHER ASSETS 906 838
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$333,605 $346,392
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LIABILITIES AND STOCKHOLDER'S EQUITY
CURRENT:
Revolving credit facility $ 14,000 $ -
Current installments of long-term debt 220 218
Accounts payable 22,635 29,010
Accrued liabilities 11,487 13,753
Sales, use and fuel taxes payable 11,107 13,056
- ----------------------------------------------------------------------------------------------------
TOTAL CURRENT LIABILITIES 59,449 56,037
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LONG TERM DEBT: LESS CURRENT INSTALLMENTS 200,943 201,054
DEFERRED INCOME TAXES 11,487 17,390
DEFERRED GAIN ON SETTLEMENT OF PENSION PLAN OBLIGATIONS 2,312 2,420
DEFERRED RETIREMENT BENEFITS 11,359 10,797
OTHER NONCURRENT LIABILITIES 3,950 5,757
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TOTAL LIABILITIES 289,500 293,455
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COMMITMENTS AND CONTINGENCIES
STOCKHOLDER'S EQUITY:
Common stock, $.10 par value per share - shares authorized 100; issued
and outstanding 100 - -
Additional paid-in capital 7,150 7,150
Retained earnings 36,955 45,787
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TOTAL STOCKHOLDER'S EQUITY 44,105 52,937
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$333,605 $346,392
- ----------------------------------------------------------------------------------------------------
See accompanying notes to consolidated financial statements.
</TABLE>
4
<PAGE> 5
UNITED REFINING COMPANY
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS -- UNAUDITED
(IN THOUSANDS)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------
THREE MONTHS ENDED SIX MONTHS ENDED
FEBRUARY 28, FEBRUARY 28,
-----------------------------------------------------------
1998 1997 1998 1997
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<S> <C> <C> <C> <C>
NET SALES $ 163,263 $ 207,812 $ 376,565 $ 435,076
COST OF GOODS SOLD 154,314 190,284 340,435 392,009
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GROSS PROFIT 8,949 17,528 36,130 43,067
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EXPENSES:
Selling, general and administrative expenses 18,177 17,391 37,293 35,241
Depreciation and amortization expenses 2,273 2,132 4,547 4,265
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TOTAL OPERATING EXPENSES 20,450 19,523 41,840 39,506
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OPERATING INCOME (LOSS) (11,501) (1,995) (5,710) 3,561
- ------------------------------------------------------------------------------------------------------------------------------
OTHER INCOME (EXPENSE):
Interest income 760 297 1,714 635
Interest expense (5,508) (3,923) (11,016) (8,148)
Other, net 314 41 284 (134)
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(4,434) (3,585) (9,018) (7,647)
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LOSS BEFORE INCOME TAX
BENEFIT (15,935) (5,580) (14,728) (4,086)
INCOME TAX BENEFIT (6,378) (2,198) (5,896) (1,606)
- ------------------------------------------------------------------------------------------------------------------------------
NET LOSS $ (9,557) $ (3,382) $ (8,832) $ (2,480)
- ------------------------------------------------------------------------------------------------------------------------------
See accompanying notes to consolidated financial statements.
</TABLE>
5
<PAGE> 6
UNITED REFINING COMPANY
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS -- (UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------
SIX MONTHS ENDED
FEBRUARY 28,
------------------------
1998 1997
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<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (8,832) $ (2,480)
Adjustments to reconcile net loss to net
cash used in operating activities:
Depreciation and amortization 4,870 4,375
Post-retirement benefits 562 857
Change in deferred income taxes (5,894) (256)
(Gain) loss on asset dispositions 33 (121)
Cash used in working capital items (10,029) (8,666)
Other, net (171) (453)
- ----------------------------------------------------------------------------------------------
TOTAL ADJUSTMENTS (10,629) (4,264)
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NET CASH USED IN OPERATING ACTIVITIES (19,461) (6,744)
- ----------------------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property, plant and equipment (14,062) (2,214)
Proceeds from asset dispositions 560 124
Net cash provided by restricted cash, cash equivalents
and investments 12,838 -
- ----------------------------------------------------------------------------------------------
NET CASH USED IN INVESTING ACTIVITIES (664) (2,090)
- ----------------------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net borrowings on revolving credit facility 14,000 16,500
Principal reductions of long-term debt (109) (16,623)
Deferred financing costs (283) (75)
- ----------------------------------------------------------------------------------------------
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES 13,608 (198)
- ----------------------------------------------------------------------------------------------
NET DECREASE IN CASH AND CASH EQUIVALENTS (6,517) (9,032)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 11,024 15,511
- ----------------------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 4,507 $ 6,479
- ----------------------------------------------------------------------------------------------
CASH PROVIDED BY (USED IN) WORKING CAPITAL ITEMS:
Accounts receivable, net $ 8,070 $ 6,535
Inventories (4,544) (11,625)
Prepaid expenses and other assets (911) (525)
Accounts payable (6,725) 4,457
Accrued liabilities (3,970) (3,584)
Sales, use and fuel taxes payable (1,949) (3,924)
- ----------------------------------------------------------------------------------------------
TOTAL CHANGE $(10,029) $ (8,666)
- ----------------------------------------------------------------------------------------------
See accompanying notes to consolidated financial statements.
</TABLE>
6
<PAGE> 7
UNITED REFINING COMPANY
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
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1. BASIS OF PRESENTATION The accompanying unaudited consolidated
financial statements have been prepared in
accordance with generally accepted accounting
principles 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 generally accepted
accounting principles for complete financial
statements. In the opinion of management, all
adjustments (consisting of only normal
recurring accruals) considered necessary for
a fair presentation have been included.
Operating results for the three and six month
periods ended February 28, 1998 are not
necessarily indicative of the results that
may be expected for the year ending August
31, 1998. For further information, refer to
the consolidated financial statements and
footnotes thereto incorporated by reference
in the Company's Form 10-K filing dated
November 28, 1997.
2. CREDIT FACILITY The Company's revolving credit facility
contains certain covenants which provide for
the maintenance of a minimum net worth and
fixed charges. As of February 28, 1998, the
company was not in compliance with the
minimum fixed charge ratio contained in its
revolving credit agreement. The Company has
received a waiver from the banks for this
period.
7
<PAGE> 8
UNITED REFINING COMPANY
AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(UNAUDITED)
- -------------------------------------------------------------------------------
Recent Developments
World crude oil prices, as indicated by New York Mercantile Exchange
(NYMEX) contract prices, which had declined steadily since October 1997, reached
a low in mid March. The decline caused decreases in the pricing of the Company's
working inventories, which had a negative effect on reported earnings. Also,
because the Company's monthly crude oil pricing is typically determined
approximately 30 days in advance of the pricing of products produced from crude,
the steady price decline had the effect of reducing refinery gross margins, as
products were produced from more expensive crude oil purchased the previous
month. Since the mid March low, NYMEX crude oil contract prices have recovered
over $2 per barrel, with corresponding recoveries in world prices of petroleum
products. Early April prices of the Company's gasoline and distillate sales,
both retail and wholesale, have increased versus March lows. With April crude
oil costs established at lower prices during March, the Company's early April
gross margins are the strongest since October 1997. Continued recovery in
selling prices would also be expected to result in pricing gains on the
Company's working inventories.
Certain refinery improvements originally scheduled to be completed
during a shutdown for refinery maintenance in May will be rescheduled for a
later date. The rescheduled improvements are primarily those designed to
increase long term refinery crude oil throughput capacity and are part of the
refinery upgrade portion of the Company's Capital Improvement Plan. These
improvements are being rescheduled pending completion of additional permitting
requirements and their subsequent approval by regulatory agencies. The Company
expects to complete these improvements following receipt of the necessary
permits. Also, the Company expects to complete in May, as originally scheduled,
a number of other refinery upgrade items included in the Capital Improvement
Plan. These items will improve refinery yields, reduce refinery energy
consumption, and reduce refinery emissions.
Results of Operations
Matters discussed below should be read in conjunction with the
accompanying unaudited financial information. Certain statements contained in
this report are forward-looking. Although management believes that its
expectations are based on reasonable assumptions within the bounds of its
knowledge of its business and operations, there can be no assurance that actual
results will not differ materially from its expectations. Factors that could
cause actual results to differ from expectations include general economic,
business and market conditions, volatility of gasoline prices, merchandise
margins, customer traffic, weather conditions, labor costs and the level of
capital expenditures. For other important factors that may cause actual results
to differ materially from expectations and underlying assumptions, see the
Company's periodic filings with the Securities and Exchange Commission.
Comparison of the Fiscal Quarters ended February 28, 1998 and
February 28, 1997
Net Sales. Net sales decreased $44.5 million or 21.4% from $207.8
million for the fiscal quarter ended February 28, 1997 to $163.3 million for the
fiscal quarter ended February 28, 1998. The decrease was due to 25.1% and 21.5%
decreases in wholesale and retail petroleum selling prices respectively and a
14.7% decrease in wholesale petroleum volume, partially offset by a 1.3%
increase in retail petroleum volume and a 9.7% increase in retail merchandise
sales. The price decreases were primarily due to lower
8
<PAGE> 9
UNITED REFINING COMPANY
AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(UNAUDITED)
- -------------------------------------------------------------------------------
prices for petroleum products worldwide which accompanied a 25.2% decrease in
world crude oil prices, as indicated by prices of NYMEX crude oil contracts. The
reduction in wholesale sales volume allowed a portion of the refinery production
to be used to build inventory to assure availability of product for customers
during the scheduled May 1998 shutdown of a portion of the refinery for
maintenance and upgrading. For the fiscal quarter ended February 28, 1998,
refinery production decreased 0.4%.
Cost of Goods Sold. Cost of goods sold decreased $36.0 million or 18.9%
from $190.3 million for the fiscal quarter ended February 28, 1997 to $154.3
million for the fiscal quarter ended February 28, 1998. This decrease was
primarily due to a 25.2% decline in world crude oil prices for the quarter ended
February 28, 1998 as compared to crude oil prices for the quarter ended February
28, 1997. The decline in the Company's cost of goods sold due to lower world
crude oil prices was partially offset by increased charges to cost of goods sold
for changes in inventory prices. The per barrel value of the Company's
inventories declined during the quarter ended February 28, 1998 as a result of
the declining world petroleum prices during that quarter. This loss of inventory
value generated an $8.2 million charge to cost of goods sold, which partially
offset the effect of lower crude oil costs. For the quarter ended February 28,
1997, corresponding changes in inventory prices had the effect of decreasing the
Company's cost of goods sold by approximately $0.3 million. The Company
maintains certain volumes of working inventory necessary to support normal
operations and changes in the valuation of this inventory occur with
fluctuations in world petroleum prices. The lower pricing of the Company's
working inventories on February 28, 1998, for example, was the result of world
petroleum prices which ended February approximately 20% below the average for
the Company's last five full fiscal years.
Operating Expenses. Operating expenses increased $0.9 million or 4.7%
from $19.5 million for the fiscal quarter ended February 28, 1997 to $20.5
million for the fiscal quarter ended February 28, 1998. The increase was
primarily due to retail sales promotions, including a "frequent fueler" program
to increase retail gasoline volume; to higher retail station wages resulting
from an increase in the federal minimum wage, and to increased professional and
consulting fees.
Operating Income. Operating income decreased $9.5 million from a $2.0
million operating loss for the fiscal quarter ended February 28, 1997 to a $11.5
million operating loss for the fiscal quarter ended February 28, 1998. This was
primarily due to a decline in gross profit as the result of the $8.2 million
charge to the cost of goods sold for changes in inventory prices.
Interest Expense. Net interest expense (interest expense less interest
income) increased $1.1 million from $3.6 million for the fiscal quarter ended
February 28, 1997 to $4.7 million for the fiscal quarter ended February 28,
1998. The increase was primarily due to an increase in the amount of long-term
debt outstanding following the Company's sale of $200 million of Senior
Unsecured Notes in June 1997. This was partially offset by a reduction in the
average interest rate on long-term debt outstanding and by interest income
received on restricted cash and investments.
Income Taxes. The provisions for income taxes for the fiscal quarters
ended February 28, 1997 and February 28, 1998 have been computed based upon
management's estimate of its annualized effective tax rate of approximately
39.4% and 40.0% respectively.
9
<PAGE> 10
UNITED REFINING COMPANY
AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(UNAUDITED)
- -------------------------------------------------------------------------------
Comparison of the Six Months ended February 28, 1998 and
February 28, 1997
Net Sales. Net sales decreased $58.5 million or 13.4% from $435.1
million for the six months ended February 28, 1997 to $376.6 million for the six
months ended February 28, 1998. The decrease was due to 15.4% and 12.1%
decreases in wholesale and retail petroleum sales prices respectively and 8.0%
and 1.9% decreases in wholesale and retail petroleum volume respectively,
partially offset by a 9.0% increase in retail merchandise sales. However, on a
per store basis, retail petroleum volumes increased slightly. The price
decreases were primarily due to lower prices for petroleum products worldwide
which accompanied a 19.6% decrease in world crude oil prices, as indicated by
prices of NYMEX crude oil contracts. The reduction in sales volumes was the
result of lower production due to the shutdown of certain major refinery
processing units for maintenance and upgrading in the quarter ended November 30,
1997, and of a reduction of wholesale sales in the quarter ended February 28,
1998 which allowed a portion of refinery production to be used to build
inventory to assure availability of product for customers during the scheduled
May 1998 shutdown of a portion of the refinery for maintenance and upgrading.
For the six months ended February 28, 1998, refinery production decreased 2.6%.
Cost of Goods Sold. Cost of goods sold decreased $51.6 million or 13.2%
from $392.0 million for the six months ended February 28, 1997 to $340.4 million
for the six months ended February 28, 1998. This decrease was primarily due to a
19.6% decline in world crude oil prices for the six months ended February 28,
1998 as compared to crude oil prices for the six months ended February 28, 1997.
The decline in the Company's cost of goods due to lower world crude oil prices
was partially offset by increased charges to cost of goods sold for changes in
inventory prices. The per barrel value of the Company's inventories declined
during the six months ended February 28, 1998 as a result of declining world
petroleum prices during that six months. This loss of inventory value generated
a $9.3 million charge to cost of goods sold, which partially offset the effect
of lower crude oil costs. For the six months ended February 28, 1997,
corresponding changes in inventory prices had the effect of decreasing the
Company's cost of goods sold by approximately $2.1 million. The Company
maintains certain volumes of working inventory necessary to support normal
operations and changes in the valuation of this inventory occur with
fluctuations in the world petroleum prices. The lower pricing of the Company's
working inventories on February 28, 1998, for example, was the result of world
petroleum prices which ended February approximately 20% below the average for
the Company's last five full fiscal years.
Operating Expenses. Operating expenses increased $2.3 million or 5.9%
from $39.5 million for the six months ended February 28, 1997 to $41.8 million
for the six months ended February 28, 1998. The increase was primarily due to
increased professional and consulting fees and to increased retail expenses for
sales promotions, retail station wages and maintenance and environmental
expense. Increased retail station wages were primarily due to an increase in the
federal minimum wage, while increased retail environmental expenses were
primarily connected with the upgrading of underground storage tanks to new
federal standards and will be partially recovered through future reimbursement
received from indemnification funds from the states of Ohio and Pennsylvania.
Increased retail promotions expenses were primarily in connection with a
"frequent fueler" program to increase retail gasoline volume.
10
<PAGE> 11
UNITED REFINING COMPANY
AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(UNAUDITED)
- -------------------------------------------------------------------------------
Operating Income. Operating income decreased $9.3 million from a $3.6
million operating income for the six months ended February 28, 1997 to a $5.7
million operating loss for the six months ended February 28, 1998. This was
primarily due to a decline in gross profit as the result of the $9.3 million
charge to cost of goods sold for changes in inventory pricing.
Interest Expense. Net interest expense (interest expense less interest
income) increased $1.8 million from $7.5 million for the six months ended
February 28, 1997 to $9.3 million for the six months ended February 28, 1998.
The increase was primarily due to an increase in the amount of long-term debt
outstanding following the Company's sale of $200 million of Senior Unsecured
Notes in June 1997. This was partially offset by a reduction in the average
interest rate for long-term debt outstanding and by interest income received on
restricted cash and investments.
Income Taxes. The provisions for income taxes for the six months ended
February 28, 1997 and February 28, 1998 have been computed based on management's
estimate of its annualized effective tax rate of approximately 39.3% and 40.0%
respectively.
Liquidity and Capital Resources
Working Capital (current assets minus current liabilities) at February
28, 1998 was $47.1 million and at August 31, 1997 was $59.3 million. The
Company's current ratio (current assets divided by current liabilities) was
1.8:1 at February 28, 1998 and was 2.1:1 at August 31, 1997.
Net cash used in operating activities totaled $19.5 million for the six
months ended February 28, 1998 compared to net cash used in operating activities
of $6.7 million for the six months ended February 28, 1997. This decrease is
primarily a result of the net loss of $8.8 million, the Company's planned
build-up of inventories for the refinery turnaround in May 1998, and decreases
in accounts payable and accrued expenses, offset by an increase in receivables.
However, the $8.8 million net loss was primarily due to a charge of $9.3 million
representing a loss of inventory value. Such changes in the carrying value of
the Company's inventory are the result of fluctuations in world petroleum prices
and do not have a material effect on the Company's operating cash flow.
Net cash used in investing activities for purchases of property, plant
and equipment totaled $14.1 million and $2.2 million for the six months ended
February 28, 1998 and 1997, respectively. For the six months ended February 28,
1998, the Company used $12.8 million of restricted cash, cash equivalents and
investments to fund the Company's Capital Improvement Plan.
Net cash provided by financing activities was $13.6 million for the six
months ended February 28, 1998 compared to a use of $0.2 million for the six
months ended February 28, 1997. The cash was provided by net borrowings on the
Company's revolving credit facility of $14 million. As of February 28, 1998, the
Company was in default of the minimum fixed charge ratio covenant. The bank has
granted the Company a waiver for this default.
The Company reviews its capital expenditures on an ongoing basis. The
Company currently has budgeted approximately $28.2 million for capital
expenditures in fiscal 1998 with $3.3 million for completion of projects
relating to underground storage tanks. The remaining $24.9 million for fiscal
1998
11
<PAGE> 12
UNITED REFINING COMPANY
AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(UNAUDITED)
- -------------------------------------------------------------------------------
is budgeted for the refinery expansion and retail capital improvement program,
refinery environmental compliance and routine maintenance. The refinery
expansion and retail capital improvement program is expected to be completed in
fiscal 1999. Maintenance and non-discretionary capital expenditures have
averaged approximately $4 million annually over the last three years for the
refining and marketing operations.
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. The Company expects
to be able to meet its working capital, capital expenditure and debt service
requirements out of cash flow from operations, cash on hand and borrowings under
the Company's bank credit facility with PNC Bank. Although the Company is not
aware of any pending circumstances which would change its 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. The
Company continues to investigate strategic acquisitions and capital improvements
to its existing facilities.
Federal, state and local laws and regulations relating to the
environment affect nearly all the operations of the Company. As is the case with
all companies engaged in similar industries, the Company faces 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 uncertainties as to required
remediation methods and related clean-up cost estimates. The Company 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 the 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.
Also, because winter weather in the Company's market is not favorable
for paving activity, the Company's asphalt sales in winter months are composed
of a much lower percentage of paving asphalt and a correspondingly higher
percentage of roofing asphalt whose demand is much less seasonal. In addition,
the Company stores a significant portion of winter asphalt production for sale
the following spring and summer.
12
<PAGE> 13
PART II - OTHER INFORMATION
- ---------------------------
Item 1. Legal Proceedings
None
Item 2. Changes in Securities
None
Item 3. Defaults upon Senior Securities
None
Item 4. Submission of Matters to a Vote of Security Holders
None
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8K
(a) Exhibit 27 - Financial Data Schedule
(b) No reports on Forms 8-K have been filed for
quarter for which this report is being filed.
13
<PAGE> 14
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Date: April 14, 1998
UNITED REFINING COMPANY
----------------------------------------
(Registrant)
/s/ MYRON L. TURFITT
----------------------------------------
Myron L. Turfitt
President
/s/ JAMES E. MURPHY
----------------------------------------
James E. Murphy
Chief Financial Officer
14
<PAGE> 15
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Date: April 14, 1998
KIANTONE PIPELINE CORPORATION
----------------------------------------
(Registrant)
/s/ MYRON L. TURFITT
----------------------------------------
Myron L. Turfitt
President
/s/ JAMES E. MURPHY
----------------------------------------
James E. Murphy
Chief Financial Officer
15
<PAGE> 16
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Date: April 14, 1998
UNITED REFINING COMPANY OF PENNSYLVANIA
----------------------------------------
(Registrant)
/s/ MYRON L. TURFITT
----------------------------------------
Myron L. Turfitt
President
/s/ JAMES E. MURPHY
----------------------------------------
James E. Murphy
Chief Financial Officer
16
<PAGE> 17
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Date: April 14, 1998
KIANTONE PIPELINE COMPANY
----------------------------------------
(Registrant)
/s/ MYRON L. TURFITT
----------------------------------------
Myron L. Turfitt
President
/s/ JAMES E. MURPHY
----------------------------------------
James E. Murphy
Chief Financial Officer
17
<PAGE> 18
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Date: April 14, 1998
UNITED JET CENTER, INC.
----------------------------------------
(Registrant)
/s/ MYRON L. TURFITT
----------------------------------------
Myron L. Turfitt
President
/s/ JAMES E. MURPHY
----------------------------------------
James E. Murphy
Chief Financial Officer
18
<PAGE> 19
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Date: April 14, 1998
KWIK-FILL, INC.
----------------------------------------
(Registrant)
/s/ MYRON L. TURFITT
----------------------------------------
Myron L. Turfitt
President
/s/ JAMES E. MURPHY
----------------------------------------
James E. Murphy
Chief Financial Officer
19
<PAGE> 20
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Date: April 14, 1998
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
20
<PAGE> 21
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Date: April 14, 1998
BELL OIL CORP.
----------------------------------------
(Registrant)
/s/ MYRON L. TURFITT
----------------------------------------
Myron L. Turfitt
President
/s/ JAMES E. MURPHY
----------------------------------------
James E. Murphy
Chief Financial Officer
21
<PAGE> 22
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Date: April 14, 1998
PPC, INC.
----------------------------------------
(Registrant)
/s/ MYRON L. TURFITT
----------------------------------------
Myron L. Turfitt
President
/s/ JAMES E. MURPHY
----------------------------------------
James E. Murphy
Chief Financial Officer
22
<PAGE> 23
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Date: April 14, 1998
SUPER TEST PETROLEUM, INC.
----------------------------------------
(Registrant)
/s/ MYRON L. TURFITT
----------------------------------------
Myron L. Turfitt
President
/s/ JAMES E. MURPHY
----------------------------------------
James E. Murphy
Chief Financial Officer
23
<PAGE> 24
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Date: April 14, 1998
KWIK-FIL, INC.
----------------------------------------
(Registrant)
/s/ MYRON L. TURFITT
----------------------------------------
Myron L. Turfitt
President
/s/ JAMES E. MURPHY
----------------------------------------
James E. Murphy
Chief Financial Officer
24
<PAGE> 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: April 14, 1998
VULCAN ASPHALT REFINING CORPORATION
----------------------------------------
(Registrant)
/s/ MYRON L. TURFITT
----------------------------------------
Myron L. Turfitt
President
/s/ JAMES E. MURPHY
----------------------------------------
James E. Murphy
Chief Financial Officer
25
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