Sunoco 2003 Annual Report Download - page 7

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Ohio. The coke production will be sold to
International Steel Group under a long-term
contract and the heat recovery steam
associated with the facility will provide
lower cost energy to our adjacent chemical
manufacturing complex. This agreement is
a tangible step forward in our development
plans for Sun Coke and our efforts to
realize added value for our advantaged
cokemaking technology. In addition, we are
much further along in discussions to
expand the use of our technology around
the world which could improve Sun Coke’s
contribution to Sunoco’s earnings.
The actions taken over the past year will
significantly increase the asset base of
each of our five businesses. Upon the
closing of a pending acquisition of retail
sites from ConocoPhillips and the early
2005 completion of our new coke plant in
Haverhill, Ohio, we will have added over
$900 million of new assets and investments
across our businesses and, we believe,
increased the Company’s earnings power
by over $1.65 per share. We have been
patient, opportunistic and value-driven in
our pursuit of growth.
In 2003, we also continued to return signifi-
cant cash to our shareholders. We
increased our dividend by 10 percent (to
$1.10 per share annually) and repurchased
2.9 million shares ($136 million) of common
stock during the year. We consider our
share repurchase program as an invest-
ment in the Company we know best – and
a way for each shareholder to own an
increasing percentage of a bigger, better
and more diversified Sunoco. A competitive
dividend and an active and opportunistic
share repurchase program have been an
integral part of our plan to increase the
share price and reduce price volatility for
long-term owners of Sunoco.
Financially, we enter 2004 on a solid foun-
dation with $431 million in cash, no short-
term borrowings and a balance sheet
improved from a year ago. In 2003, we
were able to meet our ongoing capital
needs, and fund substantial acquisition and
share repurchase activity, while reducing
our net debt-to-capital ratio from 43 percent
at the beginning of the year to 40 percent
at year end. While our capital needs are
higher in 2004 as we spend to meet new
Clean Fuels specifications, complete the
construction of the Haverhill coke plant
and fund our refining and retail marketing
acquisitions, we expect to follow the same
model – strong operating cash flow, pru-
dent divestments and effective management
of working capital – to fund our capital
needs and continue to opportunistically
grow the Company.
The outlook for our businesses is favorable,
particularly for Refining and Supply and
Chemicals, where we are most leveraged
to changing market conditions and margins.
Strong demand growth and various regula-
tory changes to gasoline specifications
have clearly tightened the supply/demand
balance and increased the complexity to
manufacture and distribute refined prod-
ucts in our markets. We expect refining
margins to remain strong. With the
Eagle Point refinery acquisition,
we have increased our
refining capacity by
over 20 percent
5