Sunoco 2003 Annual Report Download - page 53

The reconciliation of income tax expense (benefit) at the
U.S. statutory rate to the income tax expense (benefit) is
as follows:
(Millions of Dollars) 2003 2002 2001
Income tax expense (benefit) at U.S.
statutory rate of 35 percent $173 $(26) $205
Increase (reduction) in income taxes
resulting from:
Income tax settlements —— (21)
State income taxes net of Federal
income tax effects 14 29
Dividend exclusion for affiliated
companies (4) (3) (3)
Nonconventional fuel credit (1) — (2)
Other 111
$183 $(26) $189
The tax effects of temporary differences which comprise
the net deferred income tax liability are as follows:
December 31
(Millions of Dollars) 2003 2002
Deferred tax assets:
Retirement benefit liabilities $ 205 $ 219
Environmental remediation liabilities 52 46
Other liabilities not yet deductible 209 261
Alternative minimum tax credit carryforward* 63 71
Other 87 72
Valuation allowance** (8) (15)
608 654
Deferred tax liabilities:
Properties, plants and equipment (1,043) (1,001)
Other (76) (49)
(1,119) (1,050)
Net deferred income tax liability $ (511) $ (396)
* Alternative minimum tax credit carryforwards may be carried forward indefinitely.
** The valuation allowance reduces the benefit of certain state net operating loss
carryforwards to the amount that will more likely than not be realized.
The net deferred income tax liability is classified in the
consolidated balance sheets as follows:
December 31
(Millions of Dollars) 2003 2002
Current asset $91 $94
Noncurrent liability (602) (490)
$(511) $(396)
Cash payments for (refunds of) income taxes were
$(42), $(49) and $100 million in 2003, 2002 and 2001,
respectively.
5. Earnings Per Share Data
The following table sets forth the reconciliation of the
weighted average number of common shares used to
compute basic earnings per share (“EPS”) to those used to
compute diluted EPS:
(In Millions) 2003 2002* 2001
Weighted average number of common
shares outstanding— basic 76.7 76.2 80.9
Add effect of dilutive stock incentive
awards .8 — 1.1
Weighted average number of shares—
diluted 77.5 76.2 82.0
* Since the assumed issuance of common stock under stock incentive awards would not
have been dilutive, the weighted average number of shares used to compute diluted
EPS is equal to the weighted average number of shares used in the basic EPS
computation.
6. Inventories
December 31
(Millions of Dollars) 2003 2002
Crude oil $150 $153
Petroleum and chemical products 203 227
Materials, supplies and other 121 111
$474 $491
The current replacement cost of all inventories valued at
LIFO exceeded their carrying value by $1,025 and $962
million at December 31, 2003 and 2002, respectively.
During 2002, Sunoco reduced certain inventory quanti-
ties which were valued at lower LIFO costs prevailing in
prior years. The effect of this reduction was to increase
2002 results of operations by $5 million after tax.
7. Investments and Long-Term Receivables
December 31
(Millions of Dollars) 2003 2002
Investments in and advances to affiliated
companies:
Belvieu Environmental Fuels (Note 2) $25 $51
Epsilon Products Company, LLC
(Notes 1, 2 and 12) 49 50
Pipeline joint ventures (Notes 2 and 3) 85 81
Other 12 16
171 198
Accounts and notes receivable 21 22
$192 $220
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