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Results of Operations
Earnings Profile of Sunoco Businesses (after tax)
(Millions of Dollars) 2006 2005 2004
Refining and Supply $881 $947 $541
Retail Marketing 76 30 68
Chemicals 43 94 94
Logistics 36 22 31
Coke 50 48 40
Corporate and Other:
Corporate expenses (58) (84) (67)
Net financing expenses and other (49) (45) (78)
Income tax matters —18 18
Phenol supply contract dispute —(56) —
Asset write-downs and other matters —— (8)
Debt restructuring —— (34)
Consolidated net income $979 $974 $605
Analysis of Earnings Profile of Sunoco Businesses
In 2006, Sunoco earned $979 million, or $7.59 per share of common stock on a diluted
basis, compared to $974 million, or $7.08 per share, in 2005 and $605 million, or $4.04 per
share, in 2004.
The $5 million increase in net income in 2006 was primarily due to higher margins in
Sunoco’s Refining and Supply ($73 million) and Retail Marketing ($50 million) busi-
nesses, a benefit attributable to LIFO inventory profits in Sunoco’s Refining and Supply
business ($16 million) and the absence of a loss associated with a phenol supply contract
dispute ($56 million). Partially offsetting these positive factors were higher expenses ($75
million), including fuel charges and refinery operating expenses; lower margins from Suno-
co’s Chemicals business ($67 million); and lower production of refined products ($48
million).
In 2005, the $369 million increase in net income 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 Sunoco’s Re-
tail Marketing business ($52 million); and lower chemical sales volumes ($13 million).
Refining and Supply
The Refining and Supply business manufactures petroleum products and commodity pet-
rochemicals at its Marcus Hook, Philadelphia, Eagle Point and Toledo refineries and petro-
leum and lubricant products at its Tulsa refinery and sells these products to other Sunoco
businesses and to wholesale and industrial customers. Refining operations are comprised of
10