Sunoco 2009 Annual Report Download - page 86

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During 2009, 2008 and 2007, the Company recognized $2, $2 and $4 million, respectively, in interest on
unrecognized tax benefits. Accruals for interest and penalties totaled $11 million at both December 31, 2009 and
2008.
The Company’s federal income tax returns have been examined by the Internal Revenue Service for all
years through 2006. There are no outstanding controversies other than whether the Company is entitled to interest
on previously unpaid taxes. State and other income tax returns are generally subject to examination for a period
of three to five years after the filing of the respective returns. The state impact of any amended federal returns
remains subject to examination by various states for a period of up to one year after formal notification of such
amendments to the states. The Company and its subsidiaries have various state and other income tax returns in
the process of examination or administrative appeal. Among the issues applicable to those tax years which are
under examination is the deductibility of certain intercompany expenses that were claimed in the returns as filed
and whether certain Sunoco entities have economic nexus in various jurisdictions. The Company does not expect
that any unrecognized tax benefits pertaining to income tax matters will significantly increase or decrease in the
next twelve months.
5. Earnings Per Share Data
The following table sets forth the reconciliation of the weighted-average number of common shares used to
compute basic earnings per share (“EPS”) to those used to compute diluted EPS (in millions):
2009* 2008 2007
Weighted-average number of common shares
outstanding—basic ..................................... 116.9 117.0 119.7
Add effect of dilutive stock incentive awards ................... — .1 .3
Weighted-average number of shares—diluted .............. 116.9 117.1 120.0
*Since the assumed issuance of common stock under stock incentive awards would not have been dilutive, the weighted-average
number of shares used to compute diluted EPS is equal to the weighted-average number of shares used in the basic EPS
computation.
6. Inventories
Inventories consisted of the following components (in millions of dollars):
December 31
2009 2008
Crude oil ........................................................ $277 $303
Petroleum and chemical products .................................... 164 327
Materials, supplies and other ........................................ 194 191
$635 $821
The current replacement cost of all inventories valued at LIFO exceeded their carrying value by $2,725 and
$1,400 million at December 31, 2009 and 2008, respectively. During 2009 and 2008, Sunoco reduced certain
inventory quantities which were valued at either lower or higher LIFO costs prevailing in prior years. The effect
of these reductions was to increase (decrease) 2009 and 2008 results of operations by $86 and $(28) million after
tax, respectively. The 2009 amount includes $25 million after tax attributable to discontinued Tulsa refining
operations. In 2008, Sunoco also recorded a $20 million provision ($12 million after tax) to write down its
chemical products inventory to market value. In 2009, Sunoco reversed this lower of cost or market adjustment
as the market value of these inventories recovered.
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