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SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

FOR THE FISCAL YEAR ENDED AUGUST 31, 2003

For the transition period from              to             

Commission File No. 333-35083

UNITED REFINING COMPANY

(Exact name of registrant as specified in its charter)

See Table of Additional Subsidiary Guarantor Registrants

(814) 723-1500

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12 (b) of the Act:

None

Securities registered pursuant to Section 12 (g) of the Act:

None

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 if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.  x

Indicate by check mark whether the registrant is an accelerated filer (as defined in Exchange Act Rule 12-b – 2).    Yes  ¨    No  x

As of December 1, 2003, 100 shares of the Registrant’s common stock, $0.10 par value per share, were outstanding. All shares of common stock of the Registrant’s are held by an affiliate. Therefore, the aggregate market value of the voting and non-voting common equity held by non-affiliates of the Registrant is zero.

Documents Incorporated by Reference: None

TABLE OF ADDITIONAL REGISTRANTS

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ITEM 1.    BUSINESS.

Introduction

United Refining Company (together with its consolidated subsidiaries, collectively herein referred to as the “Company”) is a leading integrated refiner and marketer of petroleum products in its primary market area, which encompasses western New York and northwestern Pennsylvania. The Company owns and operates a medium complexity 65,000 barrel per day (“bpd”) petroleum refinery in Warren, Pennsylvania where it produces a variety of products, including various grades of gasoline, diesel fuel, kerosene, No. 2 heating oil, and asphalt. 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 Company also sells its petroleum products to long-standing regional wholesale customers.

The retail segment sells petroleum products under the Kwik Fill^®, Citgo^® and Keystone^® brand names at 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. As of August 31, 2003, the Company operated 372 units, of which, 184 units are owned, 128 units are leased and the remaining stores are operated under a management agreement. Approximately 22% of the gasoline stations within this network are branded Citgo^® pursuant to a license agreement granting the Company the right to use Citgo’s applicable brand names, trademarks and other forms of Citgo’s identification. For the year ended August 31, 2003 (sometimes referred to as “fiscal 2003”), approximately 87% and 28% of the Company’s gasoline and diesel fuel production, respectively, was sold through this network. These percentage increases from last fiscal year, are primarily attributable to the increased volume needed to supply Country Fair^® locations for an entire year and to reduced yields resulting from the Company’s scheduled maintenance turnaround during late October and early November 2002. For more on the scheduled maintenance turnaround, See Refining Operations—Refinery Turnarounds.

For the fiscal year ended August 31, 2003, the Company had total revenues of approximately $1.3 billion, of which approximately 52% were derived from gasoline sales, approximately 34% were from sales of other petroleum products and approximately 14% were from sales of merchandise and other revenue. The Company’s capacity utilization rates have ranged from approximately 90% to approximately 100% over the last five years. In fiscal 2003, approximately 69% of the Company’s refinery output consisted of higher value products such as gasoline and distillates.

The Company believes that the location of its 65,000 bpd refinery in Warren, Pennsylvania provides it with a transportation cost advantage over its competitors, which is significant within an approximately 100-mile radius of its refinery. For example, in Buffalo, New York over its last five fiscal years, the Company has experienced approximately 1.84 cents per gallon transportation cost advantage over those competitors who are required to ship gasoline by pipeline and truck from New York Harbor sources to Buffalo. The Company owns and operates the Kiantone Pipeline, a 78-mile long crude oil pipeline which connects the refinery to Canadian, U.S. and world crude oil sources through the Enbridge Pipelines Inc. and affiliates (collectively, “Enbridge”) pipeline system. Utilizing the storage facilities of the pipeline, the Company is able to blend various grades of crude oil from different suppliers, allowing it to efficiently schedule production while managing feedstock mix and product yields in order to optimize profitability.

It is the Company’s view that the high construction costs and the stringent regulatory requirements inherent in petroleum refinery operations make it uneconomical for new competing refineries to be constructed in the Company’s primary market area. The nearest fuels refinery is over 160 miles from Warren, Pennsylvania and the Company believes that no significant production from such refinery is currently shipped into its primary market area.

The Company’s primary market area is western New York and northwestern Pennsylvania and its core market area encompasses its Warren County base and the eight contiguous counties in New York and

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Pennsylvania. The Company’s retail gasoline and merchandise sales are split approximately 59% / 41% between rural and urban markets. Margins on gasoline sales are traditionally higher in rural markets, while gasoline sales volume is greater in urban markets. The Company’s urban markets include Buffalo, Rochester and Syracuse, New York and Erie, Pennsylvania.

As of August 31, 2003, the Company operated 372 retail units, of which 177 are located in New York, 182 in Pennsylvania and 13 in Ohio. In fiscal 2003, approximately 87% of the refinery’s gasoline production was sold through the Company’s retail network. In addition to gasoline, all units sell convenience merchandise, 94 are quick serve restaurants (QSR’s) including franchise operations and seven of the units are full-service truck stops. Customers may pay for purchases with credit cards including the Company’s own Kwik Fill^® credit card. In addition to this credit card, the Company maintains a fleet credit card catering to regional truck and automobile fleets. Sales of convenience products, which tend to have constant margins throughout the year, have served to reduce the effects of the seasonality inherent in gasoline retail margins.

Recent Developments

On October 8, 2003, the Pennsylvania Department of Environmental Protection (“DEP”) issued air and water permits to the Company at its Warren, Pennsylvania Refinery authorizing the construction and operation of a delayed coker unit among other refinery upgrades. The coker and other improvements, if financed and constructed, will allow the refinery to increase crude oil throughput to 70,000 bpd and will allow it to meet new low sulfur fuel requirements. On November 7, 2003, an appeal of the October 8, 2003 air permit was filed with the Pennsylvania Environmental Hearing Board. The Company intends to defend the permit in all respects, and presently believes that the appeal will have no material impact on United’s ability to proceed with the project as planned. The Company continues to develop its engineering and developmental plans related to this project.

On March 24, 2003, the Company and the participating banks amended the credit facility (“the facility”), allowing for a temporary increase in the facility commitment from $50,000,000 to $70,000,000. From the effective date of the amendment to and including July 31, 2003, the facility commitment was $70,000,000. From August 1, 2003 through and including September 30, 2003, the facility commitment was $60,000,000. The temporary increase expired as of September 30, 2003. Additionally, the amendment revised select covenant calculations, including the fixed charge coverage ratio and redefined select definitions. The Company is currently negotiating with the Agent Bank to increase the facility commitment to $75,000,000 on a permanent basis; however, there are no assurances that such increase will be granted.

The Company applied for and was granted additional time to reduce the sulfur content of gasoline. This relief was granted in the form of a three-phase compliance approach giving the Company until January 2008 to fully comply with the Industry Standard. The Company successfully produced low sulfur gasoline in mid-October 2003 and is prepared to meet the first of the three-phase compliance requirement to be effective January 2004. See Environmental Considerations—Gasoline and Diesel Fuel Sulfur Content in Item 1, page 9.

Industry Overview

The Company is a regional refiner and marketer located primarily in Petroleum Administration for Defense District I (“PADD I”). As of January 1, 2003, there were 16 refineries operating in PADD I with a combined crude processing capacity of 1.7 million bpd, representing approximately 10% of U.S. refining capacity. Petroleum product consumption during calendar year 2002 in PADD I averaged 5.9 million bpd, representing approximately 30% of U.S. demand based on industry statistics reported by the U.S. Energy Information Administration (the “EIA”). According to the EIA, prime supplier sales volume of gasoline in the region grew by approximately 4.9% during 2002. Refined petroleum production in PADD I is insufficient to satisfy demand for such products in the region, making PADD I a net importer of such products.

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The Company believes that domestic refining capacity utilization is close to maximum sustainable limits because of the existing high throughput coupled with a minimal change in refining capacity. The Company believes that high utilization rates coupled with little anticipated crude capacity expansion is likely to result in improved operating margins in the refining industry over the long term.

Asphalt is a residual product of the crude oil refining process, which is used primarily for construction and maintenance of roads and highways and as a component of roofing shingles. Distribution of asphalt is localized, usually within a distance of 150 miles from a refinery or terminal, and demand is influenced by levels of federal, state, and local government funding for highway construction and maintenance and by levels of roofing construction activities. The Company believes that an ongoing need for highway maintenance and domestic economic growth will sustain asphalt demand.

Business Strategy

The Company’s goal is to strengthen its position as a leading producer and marketer of high quality refined petroleum products within its primary market area. The Company plans to accomplish this goal through continued attention to optimizing the Company’s operations at the lowest possible cost, improving, and enhancing the profitability of the Company. More specifically, the Company intends to:

Refining Operations

The Company’s refinery is located on a 92-acre site in Warren, Pennsylvania. The refinery has a nominal capacity of 65,000 bpd of crude oil processing. The refinery averaged saleable production of approximately 60,300 bpd during fiscal 2003 and approximately 63,000 bpd during fiscal 2002. This decrease is primarily attributable to the Company’s scheduled maintenance turnaround during late October and early November 2002. For more on the scheduled maintenance turnaround, See Refining Operations—Refinery Turnarounds. The Company produces three primary petroleum products: gasoline, middle distillates, and asphalt. The Company believes its geographic location in the product short PADD I is a marketing advantage. The Company’s refinery is located in northwestern Pennsylvania and is geographically distant from the majority of PADD I refining capacity. The nearest fuels refinery is over 160 miles from Warren, Pennsylvania and the Company believes that no significant production from such refinery is currently shipped into the Company’s primary market area. See Footnote 16 to Consolidated Financial Statements, Item 8, for financial information with respect to the Company’s refining operations, or the wholesale segment of the Company, for the three years ended August 31, 2003, 2002, and 2001.

Products

The Company presently produces two grades of unleaded gasoline, 87-octane regular and 93-octane premium. The Company also blends its 87 and 93 octane gasoline to produce a mid-grade 89 octane. In fiscal 2003, approximately 87% of the Company’s gasoline production was sold through its retail network and the remaining 13% of such production was sold to wholesale customers.

Middle distillates include kerosene, diesel fuel, and heating oil (No. 2 oil). In fiscal 2003, the Company sold approximately 79% of its middle distillate production to wholesale customers and the remaining 21% at its retail units, primarily at its seven truck stops.

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The Company optimizes its bottom of the barrel processing by producing asphalt, a higher value alternative to residual fuel oil. Asphalt production as a percentage of all refinery production has increased over the last five fiscal years due to the Company’s ability and decision to process a larger amount of less costly heavy higher sulfur content crude oil in order to realize higher overall refining margins.

Refining Process

The Company’s production of petroleum products from crude oil involves many complex steps, which are briefly summarized below.

The Company seeks to maximize refinery profitability by selecting crude oil and other feedstocks taking into account factors including product demand and pricing in the Company’s market areas as well as price, quality and availability of various grades of crude oil. The Company also considers product inventory levels and any planned turnarounds of refinery units for maintenance. The combination of these factors is optimized by a sophisticated proprietary linear programming computer model, which selects the most profitable feedstock and product mix. The linear programming model is continuously updated and improved to reflect changes in the product market place and in the refinery’s processing capability.

Blended crude is stored in a tank farm near the refinery, which has a capacity of approximately 200,000 barrels. The blended crude is then brought into the refinery where it is first distilled at low pressure into its component streams in the crude and preflash unit. This yields the following intermediate products: light products consisting of fuel gas components (methane and ethane) and LPG (propane and butane), naphtha or gasoline, kerosene, diesel or heating oil, heavy atmospheric distillate, and crude tower bottoms which are further distilled under vacuum conditions to yield light and heavy vacuum distillates and asphalt. The present capacity of the crude unit is 65,000 bpd.

The intermediate products are then processed in downstream units that are blended to produce finished products. A naphtha hydrotreater treats naphtha with hydrogen across a fixed bed catalyst to remove sulfur before further treatment. The treated naphtha is then distilled into light and heavy naphtha at a prefractionator. Light naphtha is then sent to an isomerization unit and heavy naphtha is sent to a reformer in each case for octane enhancement. The isomerization unit converts the light naphtha catalytically into a gasoline component with 83 octane. The reformer unit converts the heavy naphtha into another gasoline component with up to 94 octane depending upon the desired octane requirement for the grade of gasoline to be produced. The reformer also produces as a co-product all the hydrogen needed to operate hydrotreating units in the refinery.

Raw kerosene or heating oil is treated with hydrogen at a distillate hydrotreater to remove sulfur and make finished kerosene and No. 2 fuel oil. A distillate hydrotreater built in 1993 also treats raw distillates to produce low sulfur diesel fuel.

The long molecular chains of the heavy atmospheric and vacuum distillates are broken or “cracked” in the fluidized catalytic cracking unit and separated and recovered in the gas concentration unit to produce fuel gas, propylene, butylene, LPG, gasoline, light cycle oil and clarified oil. Fuel gas is burned within the refinery, propylene is fed to a polymerization unit which polymerizes its molecules into a larger chain to produce an 87 octane gasoline component, butylene is fed into an alkylation unit to produce a gasoline component and LPG is treated to remove trace quantities of water and then sold. Clarified oil is burned in the refinery or sold. Various refinery gasoline components are blended together in refinery tankage to produce 87 octane and 93 octane finished gasoline. Likewise, light cycle oil is blended with other distillates to produce low sulfur diesel and No. 2 fuel oil.

The Company’s refining configuration allows the processing of a wide variety of crude oil inputs. During the past five years the Company’s inputs have been of Canadian origin and range from light low sulfur (38 degrees API, 0.5% sulfur) to high sulfur heavy asphaltic (21 degrees API, 3.5% sulfur). The Company’s ability to market asphalt enables it to purchase selected heavier crude oils at a lower cost.

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Supply of Crude Oil

Even though the Company’s crude supply is currently nearly all Canadian, it is not dependent on this source alone. Within 60 days, the Company could shift up to 80% of its crude oil requirements to some combination of domestic and offshore crude. With additional time, 100% of its crude requirements could be obtained from non-Canadian sources. Eighty percent of the Company’s contracts with its crude suppliers are on a month-to-month evergreen basis, with 30-to-60 day cancellation provisions; twenty percent of the Company’s crude contracts are on an annual basis (with month to month pricing provisions). As of August 31, 2003, the Company had supply contracts with 31 different suppliers for an aggregate of 61,400 bpd of crude oil. The Company has contracts with three vendors amounting to 53% of daily crude oil supply (none more than 16,000 barrels per day). As of such date, the Company had no other contract covering more than 10% of its crude oil supply.

The Company accesses crude through the Kiantone Pipeline, which connects with the Enbridge pipeline system in West Seneca, New York, which is near Buffalo. The Enbridge pipeline system provides access to most North American and foreign crude oils through three primary routes: (i) Canadian crude oils are transported eastward from Alberta and other points in Canada; (ii) various mid-continent crude oils from Texas, Oklahoma and Kansas are transported northeast along the Cushing-Chicago Pipeline (foreign crude oils shipped on the Seaway system can also access this route), which connects to the Enbridge pipeline system at Griffith, Indiana; and (iii) foreign crude oils unloaded at the Louisiana Offshore Oil Port are transported north via the Cap line and Chicago pipelines which connect to the Enbridge pipeline system at Mokena, Illinois.

The Kiantone Pipeline, a 78-mile Company-owned and operated pipeline, connects the Company’s West Seneca, New York terminal at the pipeline’s northern terminus to the refinery’s tank farm at its southern terminus. The Company completed construction of the Kiantone Pipeline in 1971 and has operated it continuously since then. The Company is the sole shipper on the Kiantone Pipeline, and can currently transport up to 70,000 bpd along the pipeline. The Company’s right to maintain the pipeline is derived from approximately 265 separate easements, right-of-way agreements, licenses, permits, leases and similar agreements.

The pipeline operation is monitored by a computer at the refinery. Shipments of crude arriving at the West Seneca terminal are separated and stored in one of the terminal’s three storage tanks, which have an aggregate storage capacity of 485,000 barrels. The refinery tank farm has two additional crude storage tanks with a total capacity of 200,000 barrels. An additional 35,000 barrels of crude can be stored at the refinery.

Refinery Turnarounds

Turnaround cycles vary for different refinery units. A planned turnaround of each of the two major refinery units (the crude unit and the fluid catalytic cracking unit) is conducted approximately every three to five years, during which time such units are shut down for internal inspection and repair. The most recent turnaround occurred in October and November 2002. A turnaround, which generally takes two to four weeks to complete in the case of the two major refinery units, consists of a series of moderate to extensive maintenance exercises. Turnarounds are planned and accomplished in a manner that allows for reduced production during maintenance instead of a complete plant shutdown. The Company defers the cost of turnarounds when incurred and amortizes on a straight-line basis over the period of benefit, which ranges from 3 to 10 years. Thus, the Company charges costs to production over the period most clearly benefited by the turnaround.

The scheduled maintenance turnaround during late October and early November 2002 resulted in an inventory build-up (starting in August 2002) of petroleum products to meet minimum sales demand during the maintenance shutdown period.

Marketing and Distribution

General

The Company has a long history of service within its market area. The Company’s first retail service station was established in 1927 near the Warren refinery, and it has steadily expanded its distribution network over the years.

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The Company maintains an approximate 59% / 41% split between sales at its rural and urban units. The Company believes this to be advantageous, balancing the higher gross margins and lower volumes often achievable due to decreased competition in rural areas with higher volumes and lower gross margins in urban areas. The Company believes that its network of rural convenience store units provide an important alternative to traditional grocery store formats. In fiscal 2003, approximately 87% and 28% of the Company’s gasoline and diesel fuel production, respectively, was sold through this retail network.

The Company also has a 50% interest in a joint venture with an entity for the marketing of asphalt products. This joint venture is accounted for using the equity method of accounting.

Retail Operations

As of August 31, 2003 the Company operated a retail-marketing network (including those stores operated under a management agreement) that includes 372 retail units, of which 177 are located in western New York, 182 in northwestern Pennsylvania and 13 in eastern Ohio. The Company owns 184 of these units. The retail segment sells petroleum products under the Kwik Fill^®, Citgo^® and Keystone^® brand names at 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. The Company believes that Red Apple Food Mart^®, Kwik Fill^®, Country Fair^®, Keystone^® and Citgo^® are well-recognized names in the Company’s marketing areas. Approximately 22% of the gasoline stations within this network are branded Citgo^® pursuant to a license agreement granting the Company the right to use Citgo’s applicable brand names, trademarks and other forms of Citgo’s identification. The Company believes that the operation of its retail units provides it with a significant advantage over competitors that operate wholly or partly through dealer arrangements because the Company has greater control over pricing and operating expenses, thus establishing a potential for improved margins.

The Company classifies its stores into four categories: convenience stores, limited gasoline stations, truck stop facilities and other stores. Convenience stores have a wide variety of foods, snacks, cigarettes and beverages and self-service gasoline. Ninety-four of such units are QSR’s where food (primarily submarine sandwiches, pizza, chicken and lunch platters) is prepared on the premises for retail sales and also distribution to other nearby Company units which do not have in-store delicatessens. Limited gasoline stations sell gasoline, cigarettes, oil and related car care products and provide full service for gasoline customers. Truckstop facilities sell gasoline and diesel fuel on a self-service and full-service basis. All truckstops include either a full or mini convenience store and one has a truck repair garage.

On December 21, 2001 the Company acquired 100% of the operations and working capital assets of Country Fair. The fiscal year ended August 31, 2003 included the additional sales from Country Fair for the entire period versus the fiscal year ended August 31, 2002 in which Country Fair sales were only included from the acquisition date of December 21, 2001. See Footnotes 5 and 14 to Consolidated Financial Statements, Item 8.

Total merchandise sales for fiscal year 2003 were $182.6 million, with a gross profit of approximately $51.3 million. Fiscal 2002 merchandise sales were $149.8 million, with a gross profit of approximately $42.5 million Gross margins on the sale of convenience merchandise averaged 28.1% for fiscal 2003 and have been between 25% and 28.5% for the last five years and are essentially unaffected by variations in crude oil and petroleum products prices. See Footnote 16 to Consolidated Financial Statements, Item 8, for additional information on the retail segment of the Company for the three years ended August 31, 2003, 2002, and 2001.

Merchandise Supply

The Company’s primary merchandise vendor is Tripifoods, which is located in Buffalo, New York. During fiscal 2003, the Company purchased approximately 84% of its convenience merchandise from this vendor. Tripifoods supplies the Company with tobacco products, candy, deli foods, grocery, health and beauty products, and sundry items on a cost plus basis for resale. The Company also purchases coffee, dairy products, beer, soda,

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snacks, and novelty goods from direct store vendors for resale. The Company annually reviews its suppliers’ costs and services versus those of alternate suppliers. The Company believes that alternative sources of merchandise supply at competitive prices are readily available.

Location Performance Tracking

The Company maintains a store tracking mechanism to collect operating data including sales and inventory levels for the Company’s retail network. Data transmissions are made using personal computers, which are available at each location. Once verified, the data interfaces with a variety of retail accounting systems, which support daily, weekly and monthly performance reports. These different reports are then provided to both the field management and office staff. Upon completion of a capital project, management tracks “before and after” performance, to evaluate the return on investment which has resulted from the improvements.

Wholesale Marketing and Distribution

The Company sold in fiscal year 2003, on a wholesale basis, approximately 42,800 bpd of gasoline, distillate and asphalt products to distributor, commercial and government accounts. In addition, the Company sells approximately 1,000 bpd of propane to liquefied petroleum gas marketers. In fiscal 2003, the Company’s production of gasoline, distillate, and asphalt sold at wholesale was 13%, 79%, and 100%, respectively. The Company sells approximately 98% of its wholesale gasoline and distillate products from its refinery in Warren, PA and its Company-owned and operated product terminals. The remaining 2% are sold through third-party exchange terminals.

The Company’s wholesale gasoline customer base includes 57 branded dealer/distributor units operating under the Company’s proprietary “Keystone^®” (including one Company operated location) and “Kwik Fill^®” brand names. Long-term dealer/distributor contracts accounted for approximately 20% of the Company’s wholesale gasoline sales in fiscal 2003. Supply contracts generally range from three to five years in length, with branded prices based on the prevailing Company wholesale rack price in Warren.

The Company believes that the location of its refinery provides it with a transportation cost advantage over its competitors, which is significant within an approximately 100-mile radius of the Company’s refinery. For example, in Buffalo, New York over its last five fiscal years, the Company has experienced an approximately 1.84 cents per gallon transportation cost advantage over those competitors who are required to ship gasoline by pipeline and truck from New York Harbor sources to Buffalo. In addition to this transportation cost advantage, the Company’s proximity to local accounts allows it a greater range of shipment options, including the ability to deliver truckload quantities of approximately 210 barrels versus much larger 25,000 barrel pipeline batch deliveries, and faster response time, which the Company believes help it provide enhanced service to its customers.

The Company’s ability to market asphalt is critical to the performance of its refinery, since such marketing ability enables the Company to process lower cost higher sulfur content crude oils which in turn affords the Company higher refining margins. Sales of paving asphalt generally occur during the summer months due primarily to weather conditions. In order to maximize its asphalt sales, the Company has made substantial investments to increase its asphalt storage capacity through the installation of additional tanks, as well as through the purchase or lease of outside terminals. Partially mitigating the seasonality of the asphalt paving business is the Company’s ability to sell asphalt year-round to roofing shingle manufacturers. In fiscal 2003, the Company sold 6.7 million barrels of asphalt while producing 6.0 million barrels. This difference is primarily attributed to the Company’s purchasing product for resale.

The Company has a significant share of the asphalt market in the cities of Pittsburgh, Pennsylvania and Rochester and Buffalo, New York. The Company distributes asphalt from the refinery by railcar and truck transport to its owned and leased asphalt terminals in such cities or their suburbs. Asphalt can be purchased in the Gulf Coast area and delivered by barge to third party or Company-owned terminals near Pittsburgh.

The Company also has a 50% interest in a joint venture with an entity for the marketing of asphalt products. This joint venture is accounted for using the equity method of accounting.

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The Company uses a network of six terminals to store and distribute refined products. This network provides gasoline, distillate, and asphalt storage capacities (in thousands of barrels) of approximately 505, 930 and 1,750 barrels, respectively, as of August 31, 2003.

During fiscal 2003, approximately 91% of the Company’s refined products were transported from the refinery via truck transports, with the remaining 9% transported by rail. The majority of the Company’s wholesale and retail gasoline distribution is handled by common carrier trucking companies at competitive costs. The Company also operates a fleet of ten gasoline tank trucks that supply approximately 25% of its Kwik Fill^® retail stations.

Product distribution costs to both retail and wholesale accounts are minimized through product exchanges. Through these exchanges, the Company has access to product supplies at approximately 38 sources located throughout the Company’s retail marketing area. The Company seeks to minimize retail distribution costs through the use of a system wide distribution model.

Environmental Considerations

General

The Company is subject to extensive federal, state and local laws and regulations relating to pollution and protection of the environment such as those governing releases of certain materials into the environment and the storage, treatment, transportation, disposal and clean-up of wastes, including, but not limited to, the Federal Clean Water Act as amended, the Clean Air Act as amended (“CAA”), the Resource Conservation and Recovery Act of 1976 as amended, the Comprehensive Environmental Response Compensation and Liability Act of 1980 as amended (“CERCLA”), and analogous state and local laws and regulations. As with the industry in general, compliance with existing and anticipated environmental laws and regulations increases the overall cost of business, including capital costs to construct, maintain and upgrade equipment and facilities.

The Clean Air Act Amendments of 1990

In 1990, the CAA was amended to greatly expand the role of the government in controlling product quality and air emissions. The legislation included provisions that have significantly impacted the manufacture of both gasoline and diesel fuel including the requirement for significantly lower sulfur content. In regards to emissions, the government has required increasingly stringent emission controls on process equipment. For example, the Company will need to comply with the second phase of regulations establishing Maximum Achievable Control Technologies for petroleum refineries. These regulations, adopted in April 2002, may require additional emission controls on certain refinery units. The Company believes it will be able to satisfy these requirements.

Gasoline and Diesel Fuel Sulfur Content

In February 2000, the United States Environmental Protection Agency (“USEPA”) issued a final rule requiring a phased reduction of the sulfur content in gasoline to ultimately achieve 30 Parts Per Million (“PPM”). Many refiners will have to make this reduction by January 2004, but some smaller refiners and those in certain Western states will be allowed to phase down sulfur more slowly, reaching the 30 PPM level as late as January 2008. Although the Company is of comparable size to some of the small refiners granted more time to comply, the Company was not classified as a small refiner for this purpose, nor are the Company’s operations located in any of the Western states given additional time. However, the rule allows individual refiners to seek additional time to comply on a case-by-case basis at the discretion of the USEPA. The Company applied for and was granted additional time to phase down the sulfur content of gasoline. USEPA granted this relief in the form of a three-phase compliance approach giving the Company until January 2008 to meet the 30 PPM sulfur limit.

The USEPA promulgated another set of regulations under the CAA in January 2001 that limits allowable sulfur content in highway diesel fuel. By June 1, 2006, the sulfur content in highway diesel fuel must be reduced to 15 PPM. Furthermore, USEPA has proposed a comprehensive national program to reduce emissions from non-road diesel engines by forcing the eventual reduction of sulfur in non-road diesel to 15 PPM by 2010.

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The Company anticipates that a material investment of funds will be required before 2008 to comply with the low sulfur fuel requirements for both gasoline and diesel. It is believed that compliance with the low sulfur gasoline and diesel fuel mandates will require an estimated expenditure of approximately $30 million in capital improvements.

Competition

Petroleum refining and marketing is highly competitive. The Company’s major retail competitors include British Petroleum, Amerada Hess, Mobil, Sunoco, Sheetz, Delta Sonic, and Uni-Marts. With respect to wholesale gasoline and distillate sales, the Company competes with Sunoco, Inc., Mobil, and other major refiners. The Company primarily competes with Marathon Oil Company and Ashland Oil Company in the asphalt market. Many of the Company’s principal competitors are integrated multinational oil companies that are substantially larger and better known than the Company. Because of their diversity, integration of operations, larger capitalization and greater resources, these major oil companies may be better able to withstand volatile market conditions, compete on the basis of price and more readily obtain crude oil in times of shortages.

The principal competitive factors affecting the Company’s refining operations are crude oil and other feedstock costs, refinery efficiency, refinery product mix and product distribution and transportation costs. Certain of the Company’s larger competitors have refineries which are larger and more complex and, as a result, could have lower per barrel costs or higher margins per barrel of throughput. The Company has no crude oil reserves and is not engaged in exploration. The Company believes that it will be able to obtain adequate crude oil and other feedstocks at generally competitive prices for the foreseeable future.

The principal competitive factors affecting the Company’s retail marketing network are location of stores, product price and quality, appearance and cleanliness of stores and brand identification. Competition from large, integrated oil companies, as well as from convenience stores which sell motor fuel, is expected to continue. The principal competitive factors affecting the Company’s wholesale marketing business is product price and quality, reliability and availability of supply and location of distribution points.

Employees

As of August 31, 2003 the Company had approximately 4,233 employees; 1,973 full-time and 2,260 part-time employees. Approximately 3,525 persons were employed at the Company’s retail units, 382 persons at the Company’s refinery, Kiantone Pipeline and at terminals operated by the Company, with the remainder at the Company’s office in Warren, Pennsylvania. The Company has entered into collective bargaining agreements with International Union of Operating Engineers Local No. 95, United Steel Workers of America Local No. 2122-A, the International Union of Plant Guard Workers of America Local No. 502 and General Teamsters Local Union No. 397 covering 211, 9, 22 and 19 employees, respectively. The agreements expire on February 1, 2006, January 31, 2006, June 25, 2005 and July 31, 2005, respectively. The Company believes that its relationship with its employees is good.

Intellectual Property

The Company owns various federal and state service and trademarks used by the Company, including Kwik Fill^®, United^®, Country Fair^®, SuperKwik^®, Keystone^®, SubFare^® and PizzaFare^®. The Company, and its subsidiary Country Fair, Inc. (“Country Fair”), licensed from Citgo Petroleum Corporation (“Citgo”) the right to use Citgo’s applicable brand names, trademarks and other forms of Citgo’s identification for petroleum products purchased under a distributor franchise agreement.

The Company has obtained the right to use the Red Apple Food Mart^® service mark to identify its retail units under a royalty-free, nonexclusive, nontransferable license from Red Apple Supermarkets, Inc., a corporation which is indirectly wholly owned by John A. Catsimatidis, the indirect sole stockholder, Chairman of

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the Board and Chief Executive Officer of the Company. The license is for an indefinite term. The licensor has the right to terminate this license in the event that the Company fails to maintain quality acceptable to the licensor. The Company licenses the right to use the Keystone^® trademark to approximately 57 independent distributors on a non-exclusive royalty-free basis.

The Company does not own any patents. Management believes that the Company does not infringe upon the patent rights of others, nor does the Company’s lack of patents have a material adverse effect on the business of the Company.

Governmental Approvals

The Company has obtained all necessary governmental approvals, licenses and permits to operate the refinery and convenience stores.

Financing

On June 9, 1997, the Company completed the sale (the “Private Offering”) of $200 million principal amount 10 ³/4% Series A Senior Notes due 2007 to Dillon, Read & Co. Inc. and Bear, Stearns & Co. Inc. in a transaction exempt from registration under the Securities Act of 1933, as amended. Subsequent to this issue, the Company exchanged the Series A Senior Notes for its 10- ³/4% Series B Senior Notes due 2007 which were previously registered under the Securities Act of 1933, as amended. An aggregate of $200 million in principal amount of Series A Senior Notes were exchanged for Series B Senior Notes effective January 16, 1998. The form and terms of the Series B Senior Notes are identical in all material respects to the form and terms of the Series A Senior Notes except that the Series B Senior Notes are registered under the Securities Act and, therefore, do not bear legends restricting the transfer thereof. The Series B Senior Notes do not represent additional indebtedness of the Company and are entitled to the benefits of the Indenture, which is the same Indenture as the one under which the Series A Senior Notes were issued. During the fiscal year ending August 31, 2001, the Company purchased $19,865,000 of these notes for $14,185,000 in cash. A gain of $5,210,000 was recorded as a result of the early retirement of debt, consisting of $5,680,000 less $470,000 of associated debt issuance costs. See Footnote 1 to Consolidated Financial Statements, Item 8.

In July 2002, the Company renewed a $50,000,000 secured revolving credit facility (the “facility”) with a syndicate of banks with PNC Bank, N.A. as Agent Bank. On March 24, 2003, the Company and the participating banks amended the facility, allowing for a temporary increase in the facility commitment from $50,000,000 to $70,000,000. From the effective date of the amendment to and including July 31, 2003, the facility commitment was $70,000,000. From August 1, 2003 through and including September 30, 2003, the facility commitment was $60,000,000. The temporary increase expired as of September 30, 2003. Additionally, the amendment revised select covenant calculations, including the fixed charge coverage ratio and redefined select definitions. The Company is currently negotiating with the Agent Bank to increase the facility commitment to $75,000,000 on a permanent basis; however, there are no assurances that such increase will be granted.

The facility expires on May 9, 2007 and is secured by certain cash accounts, accounts receivable, and inventory. Until maturity, the Company may borrow on a borrowing base formula as set forth in the facility. For Base Rate borrowings, interest is calculated at the greater of the agent bank’s prime rate or federal fund rate plus 1%, plus an applicable margin of .25% to .75%, which was 4.75% and 5.50% at August 31, 2003 and 2002, respectively. For Euro-Rate borrowings, interest is calculated at the LIBOR rate plus an applicable margin of 1.75% to 3.00%. The applicable margin varies with the Company’s facility leverage ratio calculation. As of August 31, 2003, $30,000,000 of Euro-Rate borrowings and $1,500,000 of Base Rate borrowings were outstanding under the agreement. As of August 31, 2002, no Euro-Rate borrowings and $24,314,000 of Base Rate borrowings were outstanding under the agreement. $615,000 and $850,000 of letters of credit were outstanding under the agreement at August 31, 2003 and 2002, respectively. The weighted average interest rate for Base Rate borrowings for the years ended August 31, 2003 and 2002 was 4.8% and 5.5%, respectively. The

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weighted average interest rate for Euro-Rate borrowings was 4.1% for the fiscal year ending August 31, 2003. The Company pays a commitment fee of 3/8% per annum on the unused balance of the facility. See Footnote 8 to Consolidated Financial Statements, Item 8.

ITEM 2.    PROPERTIES.

The Company owns a 92-acre site in Warren, Pennsylvania upon which it operates its refinery. The site also contains an office building housing the Company’s principal executive office.

The Company owns various real property in the states of Pennsylvania, New York, Ohio and Alabama as of August 31, 2003, upon which it operates 184 retail units and two crude oil and six refined product storage terminals. The Company also owns the 78-mile long Kiantone Pipeline, a pipeline which connects the Company’s crude oil storage terminal to the refinery’s tank farm. The Company’s right to maintain the pipeline is derived from approximately 265 separate easements, right-of-way agreements, leases, permits, and similar agreements. The Company also has easements, right-of-way agreements, leases, permits and similar agreements that would enable the Company to build a second pipeline on property contiguous to the Kiantone Pipeline.

The Company also leases an aggregate of 128 sites in Pennsylvania, New York and Ohio upon which it operates retail units. As of August 31, 2003, 67 of these leases had an average remaining term of 55 months, exclusive of option terms, and 61 leased Country Fair locations had terms from 10 to 20 years remaining.

ITEM 3.    LEGAL PROCEEDINGS.

The United States Environmental Protection Agency (“USEPA”) has issued certain Notices of Violation, an Administrative Order, and has asserted certain additional claims arising under federal and state statutory and regulatory law through and including June 2001 (collectively the “Claims”). The Claims arise from allegations that (1) the Company failed in the past to properly and consistently monitor, report and control emissions of Volatile Organic Compounds (“VOCs”) from its refining facility in Warren, Pennsylvania; (2) fuel gas used in the refining process has in the past contained levels of hydrogen sulfide in excess of permitted parameters; (3) the Company in the past has failed to properly calculate and report emissions of benzene from its refining facility; and (4) the Company violated certain statutory and regulatory law in the past in connection with (a) certain construction activities within the Company’s Warren, Pennsylvania physical plant; and (b) operation by the Company of certain equipment within the physical plant. The Claims allege violations of the Federal Clean Air Act, as amended, and associated federal and state regulatory requirements. The Company has been in negotiation with USEPA and believes that the Claims will be resolved on terms that will not have a material adverse effect upon the operations or consolidated financial position of the Company.

In addition to the foregoing proceedings, the Company and its subsidiaries are from time to time parties to various legal proceedings that arise in the ordinary course of their respective business operations. These proceedings include various administrative actions relating to federal, state and local environmental laws and regulations. The Company believes that if these legal proceedings in which it is currently involved are determined against the Company, they would not result in a material adverse effect on the Company’s operations or its consolidated financial condition. In the opinion of management, all such matters are adequately covered by insurance, or if not so covered, are without merit or are of such kind, or involve such amounts that an unfavorable disposition would not have a material adverse effect on the consolidated operations or financial position of the Company.

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

NONE

NONE

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ITEM 6.    SELECTED FINANCIAL DATA.