Sunoco 2006 Annual Report Download - page 14

million, including inventory. In connection with this transaction, Sunoco also assumed
certain environmental and other liabilities. The Eagle Point refinery is located in West-
ville, NJ, near the Company’s existing Northeast Refining operations. The acquisition of
the Eagle Point refinery complements and enhances the Company’s refining operations in
the Northeast and enables the capture of significant synergies in Northeast Refining. The
related assets acquired include certain pipeline and other logistics assets associated with
the refinery which Sunoco subsequently sold in March 2004 to Sunoco Logistics Partners
L.P., the consolidated master limited partnership that is 43 percent owned by Sunoco. (See
Note 2 to the consolidated financial statements.)
Retail Marketing
The Retail Marketing business sells gasoline and middle distillates at retail and operates
convenience stores in 25 states, primarily on the East Coast and in the Midwest region of
the United States.
2006 2005 2004
Income (millions of dollars) $76 $30 $68
Retail margin* (per barrel):
Gasoline $4.16 $3.39 $4.13
Middle distillates $4.69 $4.49 $4.40
Sales (thousands of barrels daily):
Gasoline 303.2 298.3 296.3
Middle distillates 42.9 45.3 42.7
346.1 343.6 339.0
Retail gasoline outlets 4,691 4,763 4,804
*Retail sales price less related wholesale price and terminalling and transportation costs per barrel. The retail sales price is the weighted-
average price received through the various branded marketing distribution channels.
Retail Marketing segment income increased $46 million in 2006 primarily due to higher
average retail gasoline margins ($50 million), higher gasoline sales volumes ($4 million)
and higher gains attributable to the Retail Portfolio Management program ($5 million).
Partially offsetting these positive factors were a charge related to an environmental liti-
gation accrual ($6 million) and lower non-gasoline income ($6 million).
Retail Marketing segment income decreased $38 million in 2005. Excluding income from
the Mobil®retail sites acquired from ConocoPhillips in April 2004, the decrease in results
was primarily due to lower average retail gasoline margins ($52 million) and lower gains
attributable to the Retail Portfolio Management program ($2 million), partially offset by
lower expenses ($22 million). Income from the Mobil®sites amounted to $10 and $15 mil-
lion for 2005 and 2004, respectively.
During the 2004-2006 period, Sunoco generated $189 million of divestment proceeds re-
lated to the sale of 338 sites under a retail portfolio management (“RPM”) program to se-
lectively reduce the Company’s invested capital in Company-owned or leased sites. Most
of the sites were converted to contract dealers or distributors thereby retaining most of the
gasoline sales attributable to the divested sites within the Sunoco branded business. During
2006, 2005 and 2004, net after-tax gains totaling $10, $5 and $7 million, respectively,
were recognized in connection with the RPM program. Sunoco expects to continue to
identify sites for divestment in the future.
During the second quarter of 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 (primarily due to the sale of
existing accounts receivable), recognized a $2 million after-tax gain on the divestment and
established a $2 million after-tax accrual that has been paid out for employee terminations
and 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.
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