Sunoco 2005 Annual Report Download - page 53

Logistics Assets—In August 2005, Sunoco Logistics
Partners L.P. (the “Partnership”) completed the acquis-
ition of a crude oil pipeline system and related storage fa-
cilities located in Texas from ExxonMobil for $100
million. In December 2005, the Partnership also com-
pleted the acquisition of an ownership interest in the
Mesa Pipeline from Chevron for $5 million, which, cou-
pled with the 7.2 percent interest it acquired from Suno-
co, gave it a 37.0 percent ownership interest. In 2004, the
Partnership completed the following acquisitions: in
March, certain pipeline and other logistics assets pre-
viously purchased by Sunoco with the Eagle Point refin-
ery for $20 million; in April, two ConocoPhillips refined
product terminals located in Baltimore, MD and Mana-
ssas, VA for $12 million; in June, an additional one-third
interest in the Harbor Pipeline from El Paso Corporation
for $7 million; and in November, a refined product
terminal located in Columbus, OH from a subsidiary of
Certified Oil Company for $8 million. During September
2003, the Partnership acquired an additional 3.1 percent
interest in West Shore Pipe Line Company for $4 mil-
lion, increasing its overall ownership interest in West
Shore to 12.3 percent. The purchase prices of the 2005
and 2004 acquisitions have been included in properties,
plants and equipment, while the purchase price of the
2003 acquisition has been included in investments and
long-term receivables in the consolidated balance sheets.
No pro forma information has been presented since the
acquisitions were not material in relation to Sunoco’s
consolidated results of operations.
Divestments
Retail Portfolio Management Program—A Retail
Portfolio Management (“RPM”) program is ongoing,
which is selectively reducing the Company’s invested
capital in Company-owned or leased marketing sites.
During the 2003-2006 period, selected sites, including
some of the Mobil®and Speedway®acquired outlets, are
being divested. Most of the sites are being converted to
contract dealers or distributors thereby retaining most of
the gasoline sales volume attributable to the divested sites
within the Sunoco branded business. The Company gen-
erated $170 million of divestment proceeds through 2005
related to the sale of 323 sites. During 2005, 2004 and
2003, net gains of $8, $11 and $12 million, respectively
($5, $7 and $8 million after tax, respectively) were
recognized as gains on divestments in other income
(loss), net, in the consolidated statements of income in
connection with the RPM program.
Midwest Marketing Divestment Program—In 2003,
Sunoco announced its intention to sell its interest in 190
retail sites in Michigan and the southern Ohio markets of
Columbus, Dayton and Cincinnati (“Midwest Marketing
Divestment Program”). During 2003, 75 Company-owned
or leased properties and contracts to supply 23 dealer-
owned sites were divested under this program. The cash
generated from these divestments totaled $46 million,
which represented substantially all of the proceeds from
the program. The remaining 92 sites, which were vir-
tually all dealer-owned locations, were converted to dis-
tributor outlets in 2004. During 2003, a $14 million gain
($9 million after tax) was recognized as a gain on divest-
ments in other income (loss), net, in the 2003 con-
solidated statement of income in connection with this
program.
Private Label Credit Card Program—During 2004,
Sunoco sold its private label consumer and commercial
credit card business and related accounts receivable to
Citibank. In connection with this divestment, Sunoco
received $100 million in cash proceeds, recognized a $3
million gain on the divestment ($2 million after tax) and
established a $3 million accrual ($2 million after tax) for
employee terminations under a postemployment plan and
for other exit costs. In addition, the two companies
signed a seven-year agreement for Citibank to operate
and service the Sunoco private label credit card program.
Belvieu Environmental Fuels—In 2004, Sunoco sold its
one-third partnership interest in Belvieu Environmental
Fuels (“BEF”), a joint venture that owns and operates an
MTBE production facility in Mont Belvieu, TX, to Enter-
prise Products Operating L.P. (“Enterprise”) for $15 mil-
lion in cash, resulting in a $13 million loss on divestment
($8 million after tax). This charge is included as a loss on
divestment in other income (loss), net, in the 2004 con-
solidated statement of income. In connection with the
sale, Sunoco has retained one-third of any liabilities and
damages exceeding $300 thousand in the aggregate aris-
ing from any claims resulting from the ownership of the
assets and liabilities of BEF for the period prior to the di-
vestment date, except for any on-site environmental
claims which are retained by Enterprise. Due to the na-
ture of this indemnification, the Company cannot esti-
mate the fair value, nor determine the total amount of
the indemnification, if any. During 2003, as a result of
various governmental actions which caused a material
adverse impact on MTBE industry demand, BEF recorded a
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