Sunoco 2008 Annual Report Download - page 44

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Refining and Supply segment results decreased $257 million in 2008 primarily due to higher expenses ($145
million) and lower production volumes ($85 million). Also contributing to the decline were lower realized
margins ($21 million). The higher expenses were largely the result of increased prices for purchased fuel and
utilities. Production volumes decreased approximately 17 million barrels in 2008 compared to 2007. Planned and
unplanned maintenance work and economically driven rate reductions in 2008 reduced production throughout the
refining system, while production in 2007 was negatively impacted by major turnaround and expansion work at
the Philadelphia refinery as well as a turnaround at the Tulsa refinery. In 2008, Sunoco announced its intention to
sell its Tulsa refinery or convert it to a terminal by the end of 2009 and, as a result, recorded a $95 million
after-tax provision to write down the affected assets to their estimated fair values. This charge is reported as part
of the Asset Write-Downs and Other Matters shown separately in Corporate and Other in the Earnings Profile of
Sunoco Businesses (see Note 2 to the Consolidated Financial Statements under Item 8).
Refining and Supply segment results decreased $109 million in 2007 largely due to higher expenses ($92
million) and lower realized margins ($44 million), partially offset by higher production volumes ($6 million) and
a lower effective income tax rate ($18 million). The lower margins reflect the negative impact of higher average
crude oil costs, while the higher expenses were largely the result of costs associated with the major turnaround
and expansion work at the Philadelphia refinery and the turnaround work at the Tulsa refinery as well as
increased operating costs to produce low-sulfur fuels.
Retail Marketing
The Retail Marketing business sells gasoline and middle distillates at retail and operates convenience stores
in 26 states, primarily on the East Coast and in the Midwest region of the United States.
2008 2007 2006
Income (millions of dollars) ........................................... $201 $69 $76
Retail margin* (per barrel):
Gasoline ........................................................ $6.30 $3.92 $4.16
Middle distillates .................................................. $7.20 $5.05 $4.69
Sales (thousands of barrels daily):
Gasoline ........................................................ 287.4 301.0 303.2
Middle distillates .................................................. 37.7 40.6 42.9
325.1 341.6 346.1
Retail gasoline outlets ............................................... 4,720 4,684 4,691
*Retail sales price less related wholesale price and terminalling and transportation costs per barrel. The retail sales price is the weighted-
average price received through the various branded marketing distribution channels.
Retail Marketing segment income increased $132 million in 2008 primarily due to higher retail gasoline
($159 million) and distillate ($19 million) margins, partially offset by lower retail gasoline ($18 million) and
distillate ($4 million) sales volumes and lower divestment gains attributable to the Retail Portfolio Management
program ($18 million), in part due to the recognition in 2008 of impairment losses and associated costs totaling
$6 million after tax on certain properties held for sale.
Retail Marketing segment income decreased $7 million in 2007 primarily due to lower average retail
gasoline margins ($15 million) and higher expenses ($6 million), which include a $3 million after-tax charge
associated with a litigation settlement in 2007 and a $6 million after-tax charge related to an environmental
litigation accrual in 2006. Partially offsetting these negative factors were higher gains attributable to the Retail
Portfolio Management program ($11 million) and higher average distillate margins ($3 million).
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