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Results of Operations
Earnings Profile of Sunoco Businesses (after tax)
(Millions of Dollars) 2005 2004 2003
Refining and Supply $947 $541 $261
Retail Marketing 30 68 91
Chemicals 94 94 53
Logistics 22 31 26
Coke 48 40 43
Corporate and Other:
Corporate expenses (84) (67) (40)
Net financing expenses and other (45) (78) (99)
Income tax matters 18 18 —
Midwest marketing divestment program ——9
Phenol supply contract dispute (56) ——
Asset write-downs and other matters —(8) (32)
Debt restructuring —(34) —
Consolidated net income $974 $605 $312
Analysis of Earnings Profile of Sunoco Businesses
In 2005, Sunoco earned $974 million, or $7.08 per share of common stock on a diluted
basis, compared to $605 million, or $4.04 per share, in 2004 and $312 million, or $2.01 per
share, in 2003.
The $369 million increase in net income in 2005 was primarily due to higher margins in
Sunoco’s Refining and Supply business ($467 million). Also contributing to the improve-
ment in earnings were higher margins from Sunoco’s Chemicals business ($34 million),
higher production of refined products ($41 million), the absence of a loss on early ex-
tinguishment of debt in connection with a debt restructuring in 2004 ($34 million) and
lower net financing expenses ($33 million). Partially offsetting these positive factors were
higher expenses ($124 million), primarily fuel and employee-related charges; a loss asso-
ciated with a phenol supply contract dispute ($56 million); lower margins in Retail
Marketing ($52 million); and lower chemical sales volumes ($13 million).
In 2004, the $293 million increase in net income was primarily due to an increase in mar-
gins in Sunoco’s Refining and Supply business ($234 million) and the income contribution
from the Eagle Point refinery acquired on January 13, 2004 ($135 million). Also con-
tributing to the improvement were higher production of refined products ($15 million),
higher margins from Sunoco’s Chemicals business ($35 million), income attributable to
the Mobil®retail gasoline outlets acquired from ConocoPhillips in April 2004 ($15
million), increased income from the Speedway®sites acquired from Marathon in June
2003 ($6 million), increased earnings related to the March 2003 propylene supply agree-
ment with Equistar ($12 million), lower net financing expenses ($21 million), a gain re-
lated to income tax matters recognized in 2004 ($18 million) and lower provisions for asset
write-downs and other matters ($24 million). Partially offsetting these positive factors were
higher expenses across the Company ($104 million), primarily fuel, depreciation and
employee-related charges, including pension and performance-related incentive compensa-
tion; lower non-gasoline income ($9 million); lower margins for retail gasoline ($27
million); an accrual for the estimated liability attributable to retrospective premiums re-
lated to certain insurance policies ($10 million); the absence of gains from a retail market-
ing divestment program in the Midwest ($9 million); the loss on early extinguishment of
debt in connection with a debt restructuring ($34 million); and a higher effective income
tax rate ($23 million).
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