Sunoco 2006 Annual Report Download - page 20

Corporate and Other
Corporate Expenses—Corporate administrative expenses decreased $26 million in 2006
primarily due to lower accruals for performance-related incentive compensation and the
absence of a $6 million after-tax accrual for the adoption of a new accounting inter-
pretation related to asset retirement obligations that was recorded in 2005. In 2005, corpo-
rate administrative expenses increased $17 million primarily due to higher accruals for
performance-related incentive compensation and the $6 million after-tax accrual for asset
retirement obligations. Partially offsetting these negative factors in 2005 were lower ac-
cruals for retrospective insurance premiums.
Net Financing Expenses and Other—Net financing expenses and other increased $4 million
in 2006 primarily due to $5 million of net after-tax charges consisting of a $3 million
after-tax loss pertaining to the purchase of the minority interest in the Jewell cokemaking
operations, a $7 million after-tax charge attributable to the correction of an error in the
computation of the preferential return of third-party investors in Sunoco’s cokemaking
operations and a $5 million net after-tax gain attributable to income tax matters (see
Notes 2, 4 and 15 to the consolidated financial statements). Higher interest income
($7 million) was essentially offset by a decrease in capitalized interest ($6 million). In
2005, net financing expenses and other decreased $33 million in part due to lower interest
expense ($9 million) as the savings from debt restructuring activities that occurred in
2004 were partially offset by higher borrowings at Sunoco Logistics Partners L.P. Higher
capitalized interest ($9 million), higher interest income ($8 million) and lower expense
attributable to the preferential return of third-party investors in Sunoco’s cokemaking
operations ($4 million) also contributed to the decline in net financing expenses and other
in 2005.
Income Tax Matters—During 2005, Sunoco settled certain federal income tax issues and
established a provision for certain state and local tax matters, the net effect of which was
to increase net income by $18 million. During 2004, Sunoco settled a dispute concerning
the computation of interest on numerous federal income tax issues which increased net
income by $18 million. (See Note 4 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 Note 2 to the con-
solidated 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 di-
vestment. (See Note 2 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 12 to the consolidated financial statements.)
Analysis of Consolidated Statements of Income
Revenues—Total revenues were $38.72 billion in 2006, $33.76 billion in 2005 and $25.51
billion in 2004. The 15 percent increase in 2006 was primarily due to significantly higher
refined product prices. Also contributing to the increase in 2006 were higher crude oil sales
in connection with the crude oil gathering and marketing activities of the Company’s Lo-
gistics operations. Partially offsetting these positive factors were lower refined product sales
volumes. In 2005, the 32 percent increase was primarily due to significantly higher refined
product and chemical prices. Also contributing to the increase in total revenues in 2005
were higher refined product sales volumes, in part due to the acquisition of the Mobil®re-
tail 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 consumer excise taxes.
Costs and Expenses—Total pretax costs and expenses were $37.14 billion in 2006, $32.18
billion in 2005 and $24.51 billion in 2004. The 15 percent increase in 2006 was primarily
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