CROWN
(registered trademark)
Crown Central Petroleum Corporation
Refiners / marketers of petroleum products & petrochemicals
One North Charles Street, P.O. Box 1168, Baltimore, Maryland
21203, (410) 539-7400
EXHIBIT 20
October 31, 1996
RESULTS THIRD QUARTER 1996
Dear Shareholders:
For the third quarter of 1996, Crown Central
Petroleum had a net loss of $3.6 million ($.37
per share) compared to a net income of $.3 million
($.03 per share) for the same period in 1995.
Sales and operating revenues in the quarter
amounted to $398 million compared to $367 million
last year. For the nine months, Crown is
reporting a net loss of $13.6 million ($1.40 per
share) on revenues of $1.2 billion. This
compares to net income of $.4 million ($.04 per
share) before an extraordinary charge for the
early retirement of debt of $3.3 million ($.33 per
share) on revenues of $1.1 billion for the same
period in 1995.
The reported loss for the third quarter was
primarily the result of higher costs for crude and
feed stocks in the world market due to a number of
factors, including unrest in the Middle East.
During the quarter, commodity crude traded in the
range of $20 to $24 per barrel. Henry A.
Rosenberg, Jr., Chairman of the Board, Chief
Executive Officer and President observed,
``
Gasoline and distillate prices lagged the
dramatic crude oil prices increase resulting in
pressure on the company's gross refining margin.''
During this period of rapidly rising crude
oil prices, the company's reported operating
results were negatively impacted by its use of the
LIFO (last-in, first-out) method of valuing
inventory. For the third quarter of 1996, LIFO
negatively impacted net income by $4.3 million,
compared with a $1.6 million favorable impact for
the same period last year when prices decreased
during the quarter. Accordingly, the company's
cash flow from operations, EBITDAAL (earnings
before interest, taxes, depreciation,
amortization, abandonment and LIFO) was markedly
stronger in the current quarter at $13.9 million
compared to $10.2 million in 1995.
The refining margins on the Gulf Coast
continued during this period at historically low
levels. In order to minimize exposure to price
volatility, refiners have kept crude inventories
at historic low levels. This has necessitated
more spot purchases of crude supplies which adds
further
pressure on pricing. Current supplies of U.S.
oil stocks are about 79 days versus a historic
average of 93 days 10 years ago.
Even with the difficult operating
environment, CrownCen, Crown's marketing unit,
continued to produce positive results.
Merchandise sales at comparable stores were 4.3%
higher and gasoline volumes were 2.2% over the
same period last year. Gasoline and merchandise
margins rose 2.8% and 15.4% respectively over last
year's extraordinary gains. Retail net profit, at
$5.7 million in both periods, remained steady even
though operating expenses increased due to higher
labor costs associated with the new minimum wage
law and the need to maintain a competitive
compensation scale.
Despite this challenging environment,
innovative and creative refining/marketing
strategies can be developed. For example, Crown's
recent arrangements for processing with Statoil
and an ethylene sales agreement with Shell
Chemical provide enhanced opportunities for
reducing the effects of prolonged refining down
cycles to which Crown continues to have exposure.
Crown will actively consider other opportunities
to increase its profitability and market share.
These are challenging times in our industry and
Crown personnel have learned it is not business as
usual
At the Pasadena refinery, the lock-out
continues. On several occasions, Crown has
offered, through the federal mediation service, to
reopen negotiations to discuss the company's July
12 proposal. Unfortunately, the OCAW (Oil,
Chemical and Atomic Workers Union) has failed to
respond. Meanwhile, the maintenance program is on
schedule and refining production at Pasadena is
being maintained at the optimum operating level.
Crown is pleased by the NLRB (National Labor
Relations Board) dismissal of all unfair labor
practice charges filed by OCAW, most notably the
decision that the lock-out was not illegal. While
OCAW has appealed several of the decisions, we are
confident the NLRB's original findings will be
affirmed.
Performance of all our personnel, under
difficult circumstances, has been excellent and in
the finest traditions of the company. We owe a
debt of gratitude and recognition to all those
involved.
Sincerely,
HENRY A. ROSENBERG, JR.
Chairman of the Board, Chief Executive Officer,
and President
____
NOTE
Due to a revision in recording intracompany
sales transactions during the third quarter of
1996, Sales and operating revenues for the
three and nine months ended September 30, 1996
as originally reported in the Letter to the
Shareholders dated October 31, 1996, have been
revised to exclude the effects of these
transactions. This revision had no effect on
net loss or net loss per share as originally
reported for the three and nine months ended
September 30, 1996.
Crown Central Petroleum Corporation and Subsidiaries
Dollars in thousands, except per share data
Nine Months Ended Three Months Ended
September 30 September 30
1996 1995 1996 1995
--------- -------- --------- --------
Sales and operating $ $ 397,889
$ 367,120
$
revenues 1,200,188 1,092,078
(Loss) income before (20,970) 1,929 (4,343) (290)
income taxes
(Loss) income before (13,634) 416 )
(3,636 304
extraordinary item
(Loss) from extraordinary
__
1/
item
---- )
(3,257 ---- ----
Net (loss) income __
2/ (13,634) (2,841) (3,636) 304
(Loss) income per share (1.40) .04 )
(.37 .03
before extraordinary item
(Loss) per share from ---- )
(.33 ---- ----
extraordinary item
Net (loss) income per )
(1.40 )
(.29 )
(.37 .03
share
Weighted average shares
used in the computation of 9,718,152 9,697,598 9,718,152 9,697,598
(loss) income per share
<FN>
During the first quarter of 1995, the Company incurred an
__
1/
extraordinary loss as a result of the early retirement of its
outstanding 10.42% Senior Notes (Notes). The outstanding
Notes were retired on January 24, 1995 from the proceeds
received from the sale of $125 million of unsecured 10 7/8%
Senior Notes due February 1, 2005.
As a result of decreased crude oil requirement at the
__
2/
Pasadena
refinery, the Company achieved a reduction in LIFO
inventories
during the third quarter of 996 which is expected to be
replaced
by year-end. The impact of this interim LIFO inventory
reduction
was to reduce the net loss for the three and nine months
ended
September 30, 1996 by approximately $2.1 million ($.22
per share).
____
NOTE
Due to a revision in recording intracompany
sales transactions during the third quarter of
1996, Sales and operating revenues for the
three and nine months ended September 30, 1996
as originally reported in the Letter to the
Shareholders dated October 31, 1996, have been
revised to exclude the effects of these
transactions. This revision had no effect on
net loss or net loss per share as originally
reported for the three and nine months ended
September 30, 1996.
CROWN CENTRAL PETROLEUM CORPORATION
OPERATING STATISTICS
Nine Months Ended Three Months Ended
September 30 September 30
1996 1995 1996 1995
--------- ---------- --------- ---------
COMBINED REFINERY
OPERATIONS
-----------------------
Production (BPD - M) 151 156 152 159
Production (MMbbl) 41.4 42.5 14.0 14.6
Sales (MMbbl) 43.9 40.2 13.8 15.0
Gross Margin ($/bbl) 2.20 2.72 2.46 1.98
Gross Profit ($MM) 96.6 109.3 33.9 29.7
Operating Cost ($/bbl) 2.19 2.47 2.32 2.16
Operating Cost ($MM) 96.3 99.2 32.1 32.4
Net Refining Profit 0.3 10.1 1.8 (2.7)
(Loss) ($MM)
RETAIL
-----------------------
Number Stores 344 348 344 348
Volume (pmps - Mgal) 129 122 133 128
Volume (MMgal) 398 381 138 133
Gasoline Gross Margin 0.13 0.12 0.14 0.14
($/gal)
Gasoline Gross Profit 51.1 45.5 19.2 18.6
($MM)
Merchandise Sales (pmps 24.9 23.9 26.1 24.5
- $M)
Merchandise Sales ($MM) 77.2 74.7 26.9 25.6
Merchandise Gross 28.9 26.3 29.2 27.2
Margin (%)
Merchandise Gross 22.3 19.7 7.9 7.0
Profit ($MM)
Retail Gross Profit 73.4 65.2 27.1 25.6
($MM)
Retail Operating Costs (19.4) )
(16.7 (20.0) (17.5)
(pmps - $M)
Retail Operating Costs (59.9) )
(52.3 (20.6) )
(18.3
($MM)
Retail Non-Operating
Income (Expense) ($MM) 0.0 (3.0) (0.8) (1.6)
Retail Net Profit ($MM) 13.5 9.9 5.7 5.7
WHOLESALE / TERMINAL
NET PROFIT (LOSS) 1.0 0.8 1.3 (0.1)
($MM)
OTHER
----------
LIFO (Provision) (15.7) 0.3 )
(6.8 2.5
Recovery ($MM)
Corporate Overhead / (20.0) )
(19.1 (6.3) )
(5.7
Other ($MM)
Income Tax Benefit 7.3 )
(1.5 0.7 0.6
(Expense) ($MM)
(Loss) from )
(3.3
Extraordinary Item
($MM)
Total Net (Loss) Income (13.6) )
(2.8 )
(3.6 0.3
($MM)
Depreciation & 24.0 28.6 8.0 9.7
Amortization ($MM)
Net Interest Expense 9.5 8.5 3.3 3.1
($MM)
LIFO Provision 15.7 )
(0.3 6.8 )
(2.5
(Recovery) ($MM)
Loss from Asset 0.1 0.0 0.1 0.2
Disposals ($MM)
Loss from Extraordinary 3.3
Item ($MM)
EBITDAAL ($MM) 28.3 38.8 13.9 10.2
Capital Expenditures 19.8 27.1 5.0 12.4
($MM)
<FN>
BPD = Barrels Per Day
bbl = barrel or barrels as applicable
gal = gallon or gallons as applicable
pmps = per month per store
M = in thousands
MM = in millions