Sunoco (SUN)

Analysis of Earnings Profile of Sunoco Businesses

In the three-month period ended March 31, 2009, the net income attributable to Sunoco Inc. shareholders was $12 million, or $.10 per share of common stock on a diluted basis versus a net loss attributable to Sunoco, Inc. shareholders of $59 million, or $.50 per share, in the first quarter of 2008.

The $71 million increase in results attributable to Sunoco, Inc. shareholders in the first quarter of 2009 was primarily due to higher margins in Sunoco’s Refining and Supply business ($151 million), lower expenses ($42 million), higher income attributable to the Logistics business ($15 million) and the absence of an unfavorable income tax consolidation adjustment that was recorded in 2008 ($9 million). Partially offsetting these positive factors were a provision for asset write-downs and other matters ($47 million), lower production of refined products ($46 million), lower average retail gasoline margins ($31 million), and lower results attributable to Sunoco’s Chemicals business ($22 million).

Included in the provision for asset write-downs and other matters is a $34 million after-tax charge attributable to a previously announced business improvement initiative to reduce costs and improve business processes that was approved by management in March 2009. Implementation of the first phase of the initiative is underway. The goal of the business improvement initiative is to reduce pretax costs by more than $300 million on an annualized basis by year-end 2009. The reduced costs are attributable to a workforce reduction of approximately 750 positions, or approximately 20 percent of the salaried workforce, as well as expected savings in energy costs, and the use of materials, equipment and contract services. This phase of the review included all business and operations support functions, as well as operations at the Philadelphia and Marcus Hook refineries. (See Note 2 to the condensed consolidated financial statements.)

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Analysis of Earnings Profile of Sunoco Businesses

Analysis of Earnings Profile of Sunoco Businesses

In the three-month period ended September 30, 2008, Sunoco earned $549 million, or $4.70 per share of common stock on a diluted basis, compared to $216 million, or $1.81 per share, in the third quarter of 2007.

The $333 million increase in results in the third quarter of 2008 was primarily due to higher margins in Sunoco’s Refining and Supply ($352 million) and Retail Marketing ($59 million) businesses, higher income attributable to Sunoco’s Coke ($22 million), Logistics ($6 million) and Chemicals ($6 million) businesses and a favorable income tax consolidation adjustment in the third quarter of 2008 ($11 million). Partially offsetting these increases in earnings were higher expenses ($44 million), lower production of refined products ($48 million), lower gains on asset divestments ($6 million), lower retail gasoline sales volumes ($7 million) and a provision for asset write-downs relating to a capital project which the Company has elected not to complete ($10 million).

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Analysis of Earnings Profile of Sunoco Businesses

Analysis of Earnings Profile of Sunoco Businesses

Analysis of Earnings Profile of Sunoco Businesses

In the three-month period ended June 30, 2008, Sunoco earned $82 million, or $.70 per share of common stock on a diluted basis, compared to $509 million, or $4.20 per share, in the second quarter of 2007.

The $427 million decrease in results in the second quarter of 2008 was primarily due to lower margins in Sunoco’s Refining and Supply business ($377 million). Also contributing to the decline in earnings were higher expenses ($36 million), lower average retail gasoline margins ($20 million), lower production of refined products ($18 million), lower chemicals margins and sales volumes ($9 million)

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and lower gains on asset divestments ($11 million). Partially offsetting these negative factors were lower net financing expenses ($7 million); higher income attributable to Sunoco’s Coke ($10 million) and Logistics ($11 million) businesses; and gains recognized in 2008 relating to an insurance recovery ($11 million) and certain income tax matters ($10 million).

Analysis of Earnings Profile of Sunoco Businesses

In the three-month period ended March 31, 2008, Sunoco had a net loss of $59 million, or $.50 per share of common stock on a diluted basis, compared to net income of $175 million, or $1.44 per share, in the first quarter of 2007.

The $234 million decrease in results in the first quarter of 2008 was primarily due to lower margins in Sunoco’s Refining and Supply business ($162 million), the absence of a gain recognized in 2007 related to the prior issuance of Sunoco Logistics Partners L.P. limited partnership units ($90 million), higher expenses ($31 million) and an unfavorable income tax consolidation adjustment in 2008 ($9 million). Partially offsetting these negative factors were higher average retail gasoline margins ($19 million), lower net financing expenses ($9 million) and higher income attributable to Sunoco’s Coke ($14 million), Chemicals ($9 million) and Logistics ($6 million) businesses.

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Analysis of Earnings Profile of Sunoco Businesses

Analysis of Earnings Profile of Sunoco Businesses

In the three-month period ended September 30, 2007, Sunoco earned $216 million, or $1.81 per share of common stock on a diluted basis, compared to $351 million, or $2.76 per share, in the third quarter of 2006.

The $135 million decrease in net income in the third quarter of 2007 was primarily due to lower margins in Sunoco’s Refining and Supply ($103 million) and Retail Marketing ($46 million) businesses and higher expenses ($25 million). Partially offsetting these negative factors were higher production of refined products ($17 million) and higher margins and sales volumes in Sunoco’s Chemicals business ($13 million).

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Analysis of Earnings Profile of Sunoco Businesses

In the three-month period ended June 30, 2007, Sunoco earned $509 million, or $4.20 per share of common stock on a diluted basis, compared to $426 million, or $3.22 per share, in the second quarter of 2006.

The $83 million increase in net income in the second quarter of 2007 was primarily due to higher margins in Sunoco’s Refining and Supply business ($116 million). Also contributing to the improvement were higher margins in Sunoco’s Retail Marketing ($12 million) and Chemicals ($8 million) businesses and higher gains on asset divestments ($12 million). Partially offsetting these positive factors were lower production of refined products ($34 million) and higher expenses ($33 million).

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Analysis of Earnings Profile of Sunoco Businesses

In the three-month period ended March 31, 2007, Sunoco earned $175 million, or $1.44 per share of common stock on a diluted basis, compared to $79 million, or $.59 per share, for the first quarter of 2006.

The $96 million increase in net income in the first quarter of 2007 was primarily due to a $90 million after-tax gain recognized in the first quarter of 2007 related to the prior issuance of Sunoco Logistics Partners L.P. limited partnership units. Also contributing to the improvement were higher margins in Sunoco’s Refining and Supply ($41 million) and Retail Marketing ($15 million) businesses. Partially offsetting these positive factors were lower production of refined products ($25 million); higher expenses ($19 million); and lower chemical margins and volumes ($7 million).

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Analysis of Earnings Profile of Sunoco Businesses

In the three-month period ended September 30, 2006, Sunoco earned $351 million, or $2.76 per share of common stock on a diluted basis, compared to $329 million, or $2.39 per share, for the third quarter of 2005.

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The $22 million increase in net income in the third quarter of 2006 was primarily due to higher retail gasoline margins ($68 million) and the absence of a loss associated with a phenol supply contract dispute ($46 million). Partially offsetting these positive factors were lower wholesale fuels margins ($33 million); higher expenses ($23 million); lower chemical margins ($17 million); a higher effective income tax rate ($8 million); and lower earnings from cokemaking operations ($6 million).

Analysis of Earnings Profile of Sunoco Businesses

In the three-month period ended June 30, 2006, Sunoco earned $426 million, or $3.22 per share of common stock on a diluted basis, compared to $242 million, or $1.75 per share, for the second quarter of 2005.

The $184 million increase in net income in the second quarter of 2006 was primarily due to higher wholesale fuels margins ($233 million). Also contributing to the improvement in earnings were a lower effective income tax rate ($5 million), higher retail gasoline margins ($4 million) and higher earnings from Sunoco’s Logistics business ($3 million). Partially offsetting these positive factors were lower chemical margins ($30 million); higher expenses ($21 million), including fuel charges; and lower production of refined products ($9 million).

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Analysis of Earnings Profile of Sunoco Businesses

In the three-month period ended March 31, 2006, Sunoco earned $79 million, or $.59 per share of common stock on a diluted basis, compared to $116 million, or $.83 per share, for the first quarter of 2005.

The $37 million decrease in net income in the first quarter of 2006 was primarily due to higher expenses ($40 million), including fuel charges; lower chemical margins ($13 million); and lower production of refined products ($7 million). Partially offsetting these negative factors were higher wholesale fuels margins ($10 million); higher retail gasoline margins ($7 million) and higher earnings from Sunoco’s Coke ($4 million) and Logistics ($3 million) businesses.

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Analysis of Earnings Profile of Sunoco Businesses

In the three-month period ended September 30, 2005, Sunoco earned $329 million, or $2.39 per share of common stock on a diluted basis, compared to $104 million, or $.69 per share, for the third quarter of 2004.

The $225 million increase in net income in the third quarter of 2005 was primarily due to higher margins in Sunoco’s Refining and Supply business ($258 million) and the absence of a loss on early extinguishment of debt in connection with a debt restructuring ($34 million). Also contributing to the improvement in earnings were higher production of refined products ($20 million), lower net financing expenses ($9 million) and the absence of a provision for asset write-downs and other matters ($8 million). Partially offsetting these positive factors were a loss associated with a phenol supply contract dispute ($46 million); lower margins in Retail Marketing ($15 million); and higher expenses ($43 million), primarily fuel and employee-related charges.

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Analysis of Earnings Profile of Sunoco Businesses

In the three-month period ended June 30, 2005, Sunoco earned $242 million, or $1.75 per share of common stock on a diluted basis, compared to $234 million, or $1.53 per share, for the second quarter of 2004.

The $8 million increase in net income in the second quarter of 2005 was primarily due to higher margins in Sunoco’s Refining and Supply ($14 million) and Chemicals ($24 million) businesses. Also contributing to the improvement in earnings were higher production of refined products ($5 million) and lower net financing expenses ($7 million). Partially offsetting these positive factors were lower margins in Retail Marketing ($23 million); higher expenses ($18 million), primarily fuel and employee-related charges; and a higher effective income tax rate ($3 million).

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Analysis of Earnings Profile of Sunoco Businesses

In the three-month period ended March 31, 2005, Sunoco earned $116 million, or $1.67 per share of common stock on a diluted basis, compared to $89 million, or $1.17 per share, for the first quarter of 2004.

The $27 million increase in net income in the first quarter of 2005 was primarily due to higher margins in Sunoco’s Refining and Supply ($12 million) and Chemicals ($27 million) businesses. Also contributing to the improvement in earnings were higher production of refined products ($9 million), largely due to lower scheduled maintenance activity in MidContinent Refining, and lower net financing expenses ($10 million). Partially offsetting these positive factors were lower margins in Retail Marketing ($10 million); higher expenses ($12 million), primarily fuel, depreciation and employee-related charges; and a higher effective income tax rate ($6 million).

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