Sunoco 2004 Annual Report Download - page 16

industry inventory levels, stronger product demand, the exceptionally cold winter weather
in early 2003 and industry-related operating problems in part due to an electrical power
failure in the Northeast. Partially offsetting these positive factors were higher expenses
($53 million), primarily refinery fuel and utility costs and employee-related expenses.
Effective January 13, 2004, Sunoco completed the purchase of the 150 thousand barrels-
per-day Eagle Point refinery and related assets from El Paso Corporation for $250 million,
including inventory. In connection with this transaction, Sunoco also assumed certain
environmental and other liabilities. The Eagle Point refinery is located in Westville, NJ,
near the Company’s existing Northeast refining operations. Management believes the ac-
quisition of the Eagle Point refinery complements and enhances the Company’s refining
operations in the Northeast and enables the capture of significant synergies in Northeast
Refining. The related assets acquired include certain pipeline and other logistics assets
associated with the refinery which Sunoco subsequently sold in March 2004 to Sunoco
Logistics Partners L.P., the master limited partnership that is 62.6 percent owned by Suno-
co. (See Note 2 to the consolidated financial statements.)
During 2002, Sunoco recorded a $2 million after-tax charge to write off certain processing
units at its Toledo refinery that were shut down as part of its decision to eliminate less effi-
cient production capacity and established a $3 million after-tax accrual relating to a law-
suit concerning the Puerto Rico refinery, which was divested in December 2001. These
amounts are reported as part of the Asset Write-Downs and Other Matters shown sepa-
rately in Corporate and Other in the Earnings Profile of Sunoco Businesses (see Note 2 to
the consolidated financial statements).
Retail Marketing
The Retail Marketing business sells gasoline and middle distillates at retail and operates
convenience stores in 24 states, primarily on the East Coast and in the Midwest region of
the United States.
2004 2003 2002
Income (millions of dollars) $68 $91 $20
Retail margin* (per barrel):
Gasoline $4.13 $4.34 $3.14
Middle distillates $4.40 $4.73 $4.14
Sales (thousands of barrels daily):
Gasoline 296.3 276.5 262.3
Middle distillates 42.7 40.3 36.4
339.0 316.8 298.7
Retail gasoline outlets 4,804 4,528 4,381
*Retail sales price less related wholesale price and terminalling and transportation costs per barrel. The retail sales price is the weighted
average price received through the various branded marketing distribution channels.
Retail Marketing segment income decreased $23 million in 2004. Excluding income from
the Mobil®and Speedway®acquired sites, the decrease in results was primarily due to a
lower average retail gasoline margin ($27 million), which was down 0.5 cents per gallon, or
5 percent, versus 2003. Also contributing to the decline were lower gasoline sales volumes
($4 million), lower distillate margins ($3 million) and lower non-gasoline income ($9
million). Partially offsetting these negative factors were income attributable to the Mobil®
sites (acquired from ConocoPhillips in April 2004) of $15 million and a $6 million in-
crease in income attributable to the Speedway®sites (acquired from Marathon Ashland
Petroleum in June 2003).
Retail marketing segment income increased $71 million in 2003 primarily due to a higher
average retail gasoline margin ($73 million), which was up 2.9 cents per gallon, or 38 per-
cent, versus 2002. Also contributing to the improvement were higher retail distillate mar-
gins ($5 million), higher gasoline and distillate sales volumes ($5 million) and $7 million
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