Sunoco 2005 Annual Report Download - page 21

Midwest Marketing Divestment Program—During 2003, Sunoco recognized a $9 million
after-tax gain from Retail Marketing’s divestment of certain sites in connection with its
Midwest Marketing Divestment program. (See Note 2 to the consolidated financial
statements.)
Phenol Supply Contract Dispute—During 2005, Sunoco recognized a $56 million after-tax
loss associated with Chemicals’ phenol supply contract dispute. (See Notes 2 and 3 to the
consolidated financial statements.)
Asset Write-Downs and Other Matters—During 2004, Sunoco sold Chemicals’ one-third
interest in BEF and, in connection therewith, recorded an $8 million after-tax loss on
divestment.
During 2003, as a result of various governmental actions which caused a material adverse
impact on MTBE industry demand, the BEF joint venture recorded a provision to write
down its MTBE production facility to its estimated fair value at that time. Sunoco’s share of
this provision amounted to $15 million after tax. In 2003, Sunoco also recorded a $17 mil-
lion after-tax charge to write down Chemicals’ plasticizer assets that were held for sale at
December 31, 2003 to their estimated fair values less costs to sell and to establish accruals
for employee terminations and other required exit costs.
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, Sunoco recognized a $34 million after-tax loss from the early
extinguishment of debt in connection with a debt restructuring. (See “Financial Con-
dition—Financial Capacity” below and Note 11 to the consolidated financial statements.)
Analysis of Consolidated Statements of Income
Revenues—Total revenues were $33.76 billion in 2005, $25.51 billion in 2004 and $18.02
billion in 2003. The 32 percent increase in 2005 was primarily due to significantly higher
refined product and chemical prices. Also contributing to the increase in 2005 were higher
refined product sales volumes, in part due to the acquisition of the Mobil®retail sites from
ConocoPhillips in April 2004, higher crude oil sales in connection with the crude oil
gathering and marketing activities of the Company’s Logistics operations and higher con-
sumer excise taxes. In 2004, the 42 percent increase was primarily due to significantly
higher refined product and chemical prices and to significantly higher refined product sales
volumes, largely attributable to the acquisitions of the Mobil®sites as well as the Eagle
Point refinery from El Paso Corporation in January 2004 and the Speedway®retail sites
from Marathon in June 2003. Also contributing to the increase were higher consumer ex-
cise taxes and higher crude oil sales in connection with the crude oil gathering and
marketing activities of the Company’s Logistics operations.
Costs and Expenses—Total pretax costs and expenses were $32.18 billion in 2005, $24.51
billion in 2004 and $17.52 billion in 2003. The 31 and 40 percent increases in 2005 and
2004, respectively, were primarily due to significantly higher crude oil and refined product
acquisition costs. The higher crude oil acquisition costs reflect crude oil price increases and
higher crude oil throughputs, while the higher refined product acquisition costs reflect re-
fined product price increases and purchases to supply the Mobil®retail sites acquired in
April 2004 located primarily in Delaware, Maryland, Virginia and Washington, D.C. and
the Speedway®retail sites acquired in June 2003 located primarily in Florida and South
Carolina. Also contributing to the increase during the 2003-2005 period were higher con-
sumer 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.
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