Sunoco 2011 Annual Report Download - page 3
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To Our Shareholders:
In 2011, Sunoco continued to face challenging market conditions in the refining business, which led to
disappointing financial results. Excluding special items, Sunoco ended the year with a net loss of $3 million1.
Excluding the results of Refining and Supply as well as the businesses which we have now exited—chemicals
and coke—Sunoco’s pretax income before special items improved over $100 million in 2011 as compared to the
full year 2010.
Sunoco’s Transformation Continues
During the course of 2011 and early 2012, Sunoco significantly repositioned the Company and delivered
value to shareholders. This important work was conducted through a series of transformative actions, including:
• The separation of SunCoke Energy from Sunoco through an initial public offering in July 2011 and the
spin-off which was completed through a special stock dividend to Sunoco shareholders in early 2012;
• The repurchase of approximately 12 percent of outstanding Sunoco common stock in the third quarter
through a $500 million share repurchase program;
• Completion of Sunoco’s exit from the chemicals business with the sale of its remaining phenol
manufacturing assets;
• Announcement of the Company’s intent to exit the refining business either through a sale or idling of
the main processing units at the Philadelphia and Marcus Hook refineries; and
• Initiation and completion of a comprehensive strategic review to determine how best to use the
Company’s strong cash position and maximize the potential for Sunoco’s logistics and retail
businesses.
Strategic Review Outcomes
In early February 2012, Sunoco completed the strategic review and announced plans to undertake a series of
initiatives intended to improve future earnings potential, reduce the impact of legacy liabilities, and provide the
Company with a well-positioned financial and operational platform to focus on its high-performing logistics and
retail businesses.
The initiatives are as follows:
• Repurchase up to 19.9 percent of Sunoco common shares over the next 12 to 18 months;
• Increase the quarterly dividend by 33 percent from $.15 to $.20 per share;
• Spend approximately $400 million over the next year to reduce debt;
• Reduce the need for future pension fund contributions by making a tax-deductible contribution of
approximately $80 million pretax to Sunoco’s qualified pension plans;
• Establish a funding trust for the Company’s postretirement benefit liabilities by making a tax-
deductible contribution of approximately $200 million and restructuring the postretirement medical
plan to eliminate Sunoco’s liability beyond this funded amount; and
• Contribute approximately $250 million pretax to establish a segregated environmental fund via a
captive insurance company to be used for the remediation of legacy environmental obligations.
1In 2011, Sunoco reported a net loss attributable to Sunoco shareholders of $1,684 million, which includes a net charge for special items of
$1,681 million.