Sunoco 2011 Annual Report Download - page 42

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ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Management’s Discussion and Analysis is management’s analysis of the financial performance of Sunoco,
Inc. and subsidiaries (collectively, “Sunoco” or the “Company”) and of significant trends that may affect its
future performance. It should be read in conjunction with Sunoco’s consolidated financial statements and related
notes under Item 8. Those statements in Management’s Discussion and Analysis that are not historical in nature
should be deemed forward-looking statements that are inherently uncertain. See “Forward-Looking Statements”
on page 60 for a discussion of the factors that could cause actual results to differ materially from those
projected.
Strategy Overview
Historically, Sunoco’s profitability has primarily been determined by refined product and chemical margins
and the reliability and efficiency of its operations. However, the Company carried out several strategic actions
during 2011 and the early part of 2012 in executing its fundamental shift away from manufacturing. In addition
to its decision to exit the refining business by mid-2012, the exit from the chemicals business during 2011 and
the spin-off of SunCoke Energy, Inc. (“SunCoke Energy”) in January 2012, Sunoco also conducted a
comprehensive strategic review to determine the best way to deliver value to shareholders, including how best to
utilize its strong cash position and maximize the potential for Sunoco’s logistics and retail businesses. Sunoco
retained a third party advisor to assist in this strategic review which was completed in February 2012. The
Company has identified a number of initiatives outlined below which management believes should position the
Company to generate value for shareholders through the logistics and retail businesses.
2009-2011 Strategic Actions
In connection with its fundamental shift away from manufacturing and the repositioning of its portfolio of
businesses, Sunoco has completed the following strategic actions:
Refining and Supply:
• Announced its decision to exit its refining business no later than July 2012. The main processing
units at the Marcus Hook, PA refinery were indefinitely idled in December 2011. The Company
continues to seek a buyer and/or pursue options for alternative uses for both the Marcus Hook and
Philadelphia, PA facilities;
• Completed the sale of the Toledo refinery and related inventory for $1,037 million in net
proceeds. The purchase agreement also includes a participation payment of up to $125 million
based on the future profitability of the refinery;
• Permanently shut down all process units at the Eagle Point refinery in 2009 in response to weak
demand and increased global refining capacity; and
• Completed the sale of the Tulsa refinery and related inventory in 2009 for $157 million in cash
proceeds.
Chemicals:
• Completed the exit from the chemicals businesses by divesting its phenol and acetone chemicals
manufacturing facilities and related inventories in Philadelphia, PA and Haverhill, OH during the
second half of 2011. The sale of the common stock of the polypropylene chemicals business was
completed in March 2010. Sunoco received total proceeds of $529 million related to these
divestments.
Coke:
• Completed an IPO of 13.34 million shares of SunCoke Energy common stock on July 26, 2011 at
an offering price of $16 per share; and
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