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    Quarterly Earnings a Mixed Bag

    Earnings down for Marsh, Tesoro; up for Giant Industries.

    NEW YORK -- Marsh Supermarkets Inc. showed a sharp decrease in earnings for the 12 weeks ended June 25, 2005, with net income of $674,000 compared to $1.6 million last year. Operating income for the first quarter was $5.4 million compared to $6.9 million last year.

    The company, which is based in Indianapolis and operates 167 Village Pantry stores, had sales and other revenues for the first quarter of $409.8 million, a 2.5 percent increase over the prior year quarter's revenue of $399.4 million.

    Sales in comparable supermarkets and convenience stores were above last year by 1.6 percent, the fifth consecutive quarter of positive comparable-store sales. Comparable store merchandise sales, which excludes gasoline sales, improved 0.6 percent from last year. The company excludes gasoline sales from its analysis of comparable store merchandise sales because retail gasoline prices fluctuate widely and frequently, which make analytical comparisons difficult.

    During the quarter, the company opened one Arthur's Fresh Market and closed one Village Pantry.

    "First quarter results were not up to our expectations. We have identified a number of cost reduction and other profit improvement actions which we expect to implement during the remainder of fiscal 2006," said Don E. Marsh, chairman and CEO.

    "We will open a new lifestyle store in suburban Chicago during the second quarter. We are excited about the opportunities this presents, as we enter into a new, dynamic market. We believe our superior quality and service will continue to set us apart from other supermarkets as we enter the Chicago market."

    Tesoro Petroleum Corp.
    In other earnings news, Tesoro Petroleum Corp., which is based in San Antonio and operates 192 retail locations under the Tesoro, 2GO and Mirastar banners, reported net earnings of $183.9 million for the second quarter of 2005, down from net earnings of $213.1 million for the second quarter of 2004.

    As previously disclosed, results for the second quarter of 2005 include an after-tax charge of $1.8 million and the prepayment premium associated with the retirement of the company's $96.0 million senior secured term loans. Excluding this special item, net earnings were $185.7 million.

    For the first half of 2005, the company reported net earnings of $211.6 million, compared to net earnings of $263.5 million for the first six months of 2004.

    Results for the first half of 2005 include after-tax charges of $8.1 million for the charges associated with prepayment of debt, as well as expenses related to the termination and retirement of certain executive officers. This compares to after-tax charges of $1.2 million for debt financing costs incurred in the first half of 2004. Excluding special items, net earnings for the first half of 2005 were $219.7 million, compared with $264.7 million for the first six months of 2004.

    "Our refining system achieved record throughput rates during the quarter, even with the Hawaii turnaround," said Bruce A. Smith, chairman, president and CEO of Tesoro. "Increased utilization rates, continued margin strength and progress in achieving our stated objectives around earnings initiatives contributed to our solid results for the quarter. Increases in operating and administrative expenses, however, reduced operating income year-over-year."

    Overall refinery operating expenses were higher year-over-year mainly due to increased utility rates and throughput volumes, higher maintenance expenses and employee costs and allocation of information technology expenses.

    "Over the last twelve months, we have completed major turnaround work at our Golden Eagle, Anacortes and Hawaii refineries, allowing us to achieve new milestones in production. Not only did we run at a record 541,000 barrels per day during the quarter, but we set a monthly throughput record of 564,000 barrels per day in June. We were well positioned in the second quarter to capture historically strong margins and we continue to run well and capture today's strong margins. That's allowing us to generate significant free cash flow, which should make 2005 another banner year for Tesoro," Smith added.

    Giant Industries Inc.
    Finally, Giant Industries Inc. announced net earnings of $20.6 million for the second quarter ended June 30, 2005, vs, $5.0 million for the second quarter of the prior year.

    Fred Holliger, chairman and CEO of Scottsdale, Ariz.-based Giant, which operates 112 retail locations under the Giant banner, said, "The first six months of this year have certainly been strong from both an operating and earnings perspective. Our net earnings for the second quarter and year-to-date exceeded our financial performance for the same period last year. Our refining operations had operating income of $71.0 million in the first half of 2005 compared to $56.0 million for the same period last year. This improvement was primarily the result of improved refining margins and increased production at all three refineries.

    "Operationally, our retail group has also performed well in the first half of 2005. Year-to-date, same-store fuel sales are up almost 6.5 percent over the prior-year level and our same-store merchandise sales are up almost 3.0 percent over the prior-year level. Year-to-date operating income was negatively impacted by lower fuel margins in comparison to the first six months of 2004; however, operating income in the second quarter of 2005 exceeded the second quarter 2004 level.

    "Phoenix Fuel Company continued to experience strong growth in both wholesale and cardlock fuel sales that contributed to operating income growth of approximately 30 percent from approximately $5.0 million in the first six months of 2004 to $6.5 million in the first six months of 2005,” Holliger concluded.

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