Sunoco 2004 Annual Report Download - page 24

During 2002, Sunoco recorded a $14 million after-tax provision to write off a 200 million
pounds-per-year polypropylene line at Chemicals’ LaPorte, TX plant and a 170 million
pounds-per-year aniline and diphenylamine production facility at Chemicals’ Haverhill,
OH plant and to recognize related shutdown costs; recorded a $2 million after-tax provi-
sion in connection with the shutdown of certain processing units at Refining and Supply’s
Toledo refinery; recorded a $3 million after-tax provision to write off an idled Logistics
business refined products pipeline and terminal; and established a $3 million after-tax ac-
crual relating to a lawsuit concerning the Puerto Rico refinery, which was divested in
2001.
For a further discussion of the provisions for asset write-downs and other matters, see Notes
2 and 3 to the consolidated financial statements.
Debt Restructuring—In 2004, as discussed above, Sunoco recognized a $34 million after-tax
loss from the early extinguishment of outstanding debt with a par value of $352 million in
connection with a debt restructuring. (See “Financial Condition—Financial Capacity”
below and Note 11 to the consolidated financial statements.)
Analysis of Consolidated Statements of Operations
Revenues—Total revenues were $25.51 billion in 2004, $18.02 billion in 2003 and $14.38
billion in 2002. The 42 percent increase in 2004 was primarily due to significantly higher
refined product and chemical prices and to significantly higher refined product sales vol-
umes, largely attributable to the acquisitions of the Eagle Point refinery from El Paso
Corporation in January 2004, the Mobil®retail sites from ConocoPhillips in April 2004
and the Speedway®retail sites from Marathon Ashland Petroleum in June 2003. Also con-
tributing to the increase were higher consumer excise taxes and higher crude oil sales in
connection with the crude oil gathering and marketing activities of the Company’s Logis-
tics operations. In 2003, the 25 percent increase was primarily due to significantly higher
refined product prices. Also contributing to the increase in 2003 were higher crude oil sales
in connection with the crude oil gathering and marketing activities of the Company’s Lo-
gistics operations, higher refined product and convenience store merchandise sales volumes
largely due to the acquisition of the Speedway®retail sites and higher consumer excise
taxes.
Costs and Expenses—Total pretax costs and expenses were $24.51 billion in 2004, $17.52
billion in 2003 and $14.46 billion in 2002. The 40 percent increase in 2004 was primarily
due to significantly higher crude oil and refined product acquisition costs. The higher
crude oil acquisition costs reflect crude oil price increases and the Company’s higher crude
oil throughputs resulting from the acquisition of the Eagle Point refinery, while the higher
refined product acquisition costs reflect refined product price increases and purchases to
supply the recently acquired Mobil®retail sites located primarily in Delaware, Maryland,
Virginia and Washington, D.C. and the Speedway®retail sites located primarily in Florida
and South Carolina. Also contributing to the increase were higher consumer excise taxes,
higher selling, general and administrative expenses, higher refinery operating costs and
higher crude oil costs in connection with the crude oil gathering and marketing activities
of the Company’s Logistics operations. In 2003, the 21 percent increase was primarily due
to significantly higher crude oil and refined product acquisition costs, largely as a result of
crude oil price increases. Also contributing to the increase were higher crude oil costs in
connection with the crude oil gathering and marketing activities of the Company’s Logis-
tics operations, higher consumer excise taxes, higher selling, general and administrative
expenses and the cost of higher merchandise sales at the Company’s convenience store
outlets.
22