Sunoco 2008 Annual Report Download - page 45

During the 2006-2008 period, Sunoco generated $133 million of divestment proceeds related to the sale of
181 sites under a Retail Portfolio Management (“RPM”) program to selectively reduce the Company’s invested
capital in Company-owned or leased sites. Most of the sites were converted to contract dealers or distributors
thereby retaining most of the gasoline sales volume attributable to the divested sites within the Sunoco branded
business. During 2008, 2007 and 2006, net after-tax gains totaling $3, $21 and $10 million, respectively, were
recognized in connection with the RPM program. In early 2009, Sunoco announced the addition of
approximately 150 sites to the RPM program. There are currently approximately 200 sites in the program, of
which approximately 110 are company-operated locations. These sites are expected to be divested or converted
to contract dealers or distributors primarily over the next two years, generating an estimated $180 million of
divestment proceeds.
Chemicals
The Chemicals business manufactures phenol and related products at chemical plants in Philadelphia, PA
and Haverhill, OH; and polypropylene at facilities in LaPorte, TX, Neal, WV, Bayport, TX and Marcus Hook,
PA. The Chemicals business also distributes and markets these products. Sunoco intends to permanently shut
down the Bayport polypropylene facility no later than April 30, 2009. Sunoco also intends to sell its Chemicals
business if it can obtain an appropriate value.
2008 2007 2006
Income (millions of dollars) ........................................... $36 $26 $43
Margin* (cents per pound):
All products** ..................................................... 10.7¢ 9.8¢ 9.9¢
Phenol and related products ........................................ 9.6¢ 8.5¢ 8.0¢
Polypropylene** .................................................. 12.1¢ 11.6¢ 12.4¢
Sales (millions of pounds):
Phenol and related products ........................................ 2,274 2,508 2,535
Polypropylene .................................................... 2,204 2,297 2,243
Other ........................................................... 65 80 88
4,543 4,885 4,866
*Wholesale sales revenue less the cost of feedstocks, product purchases and related terminalling and transportation divided by sales
volumes.
**The polypropylene and all products margins include the impact of a long-term supply contract with Equistar Chemicals, L.P. which is
priced on a cost-based formula that includes a fixed discount.
Chemicals segment income increased $10 million in 2008 due primarily to higher margins ($31 million) and
lower expenses ($17 million), partially offset by lower sales volumes ($24 million) and a provision to write down
polypropylene inventory to market value ($12 million). The lower expenses were largely due to the transfer of
cumene and propylene splitter assets to Refining and Supply, effective January 1, 2008.
Chemicals segment income decreased $17 million in 2007 primarily due to higher expenses ($9 million),
lower margins ($3 million) and the absence of a deferred tax benefit recognized in 2006 as a result of a state tax
law change ($4 million).
During January 2009, Sunoco decided that it will permanently shut down its Bayport, TX polypropylene
plant which has become uneconomic to operate and in 2008 also determined that the goodwill related to its
polypropylene business no longer had value. In connection therewith, the Company recorded a $54 million
after-tax provision to write down the affected Bayport assets to estimated fair value and to write off the
remaining polypropylene business goodwill. During 2007, Sunoco decided to permanently shut down a
previously idled phenol production line at its Haverhill, OH plant that had become uneconomic to restart. In
connection with this shutdown, the Company recorded an $8 million after-tax provision to write off the affected
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