Sunoco 2011 Annual Report Download - page 55

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Analysis of Consolidated Statements of Operations
Revenues—Total revenues were $46.92, $36.40 and $29.70 billion in 2011, 2010 and 2009, respectively.
The 29 percent increase in 2011 was primarily due to higher refined product prices and higher crude oil sales in
connection with the crude oil acquisition and marketing activities of the Company’s Logistics business. Partially
offsetting these positive factors were lower refined product sales volumes largely attributable to the sale of the
Toledo refinery in the first quarter of 2011 and operational issues at the Northeast Refineries. The 23 percent
increase in 2010 was primarily due to higher refined product prices as well as higher crude oil sales in connection
with the crude oil acquisition and marketing activities of the Company’s Logistics business. Partially offsetting
these positive factors were lower refined product sales volumes.
Costs and Expenses—Total pretax costs and expenses were $49.32, $35.84 and $30.29 billion in 2011, 2010
and 2009, respectively. The 38 percent increase in 2011 was primarily due to higher crude oil and refined product
acquisition costs resulting from price increases, higher refined product acquisition volumes, higher crude oil
costs in connection with the crude oil acquisition and marketing activities of the Company’s Logistics business
and higher provisions for asset write-downs and other matters. Partially offsetting these negative factors were
lower crude oil acquisition volumes largely attributable to the sale of the Toledo refinery in the first quarter of
2011 and operational issues at the Northeast Refineries. The 18 percent increase in 2010 was primarily due to
higher crude oil and refined product acquisition costs resulting from price increases and higher costs in
connection with the crude oil gathering and marketing activities of the Company’s Logistics business. Partially
offsetting these negative factors were lower crude oil and refined product acquisition volumes and lower
provisions for asset write-downs and other matters.
Financial Condition
Capital Resources and Liquidity
Cash and Working Capital—At December 31, 2011, Sunoco had cash and cash equivalents of $2,064
million compared to $1,485 million at December 31, 2010 and $377 million at December 31, 2009. Sunoco had a
working capital surplus of $638 million at December 31, 2011 compared to $797 million at December 31, 2010
(including assets held for sale) and a working capital deficit of $654 million at December 31, 2009. The $579
million increase in cash and cash equivalents in 2011 was due to $540 million of net cash provided by financing
activities and $137 million of net cash provided by operating activities (“cash generation”), partially offset by
$98 million of net cash used in investing activities. The $1,108 million increase in cash and cash equivalents in
2010 was due to $1,694 million of cash generation and $61 million of net cash provided by financing activities,
partially offset by a $647 million net use of cash in investing activities. Management believes that the current
levels of cash and working capital are adequate to support Sunoco’s ongoing operations. Sunoco’s working
capital position is considerably stronger than indicated because of the relatively low historical costs assigned
under the LIFO method of accounting for most of the inventories reflected in the consolidated balance sheets.
The current replacement cost of all such inventories exceeded their carrying value at December 31, 2011 by
$2.92 billion. Inventories valued at LIFO, which consist primarily of crude oil and petroleum products, are
readily marketable at their current replacement values. The Company expects to realize approximately $2 billion
of this value through the liquidation of crude and refined product inventories in connection with its exit from the
refining business.
Certain pending legislative and regulatory proposals effectively could limit, or even eliminate, use of the
LIFO inventory method for financial and income tax purposes. Although the final outcome of these proposals
cannot be ascertained at this time, the ultimate impact to Sunoco of the transition from LIFO to another inventory
method could be material. However, Sunoco’s exit from the refining business should significantly reduce the
Company’s exposure to this issue.
Cash Flows from Operating Activities—In 2011, Sunoco’s cash generation was $137 million compared to
$1,694 and $548 million in 2010 and 2009, respectively. The $1,557 million decrease in cash generation in 2011
was largely due to a decrease in operating results and an increase in cash used to fund working capital changes
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