Sunoco Reports Fourth Quarter 2006 Results

PHILADELPHIA, Jan. 31 /PRNewswire-FirstCall/ -- Sunoco, Inc. today reported net income of $123 million ($1.00 per share diluted) for the fourth quarter of 2006 versus $287 million ($2.12 per share diluted) for the fourth quarter of 2005. Excluding special items, income was $297 million ($2.19 per share diluted) for the fourth quarter of 2005. There were no special items in the current fourth-quarter period.

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For the full-year 2006, Sunoco reported net income of $979 million ($7.59 per share diluted) versus $974 million ($7.08 per share diluted) for the full-year 2005. Excluding special items, Sunoco's income for 2005 was $1,012 million ($7.36 per share diluted). There were no special items in the 2006 full-year period.

"2006 was another very strong year for Sunoco," said John G. Drosdick, Sunoco Chairman and Chief Executive Officer. "Despite significant volatility in refined product markets and some maintenance downtime in our Refining system, our earnings per share were the highest in the Company's history and we generated a return on capital employed in excess of 28 percent.

"We earned $881 million in Refining and Supply and $205 million in our four non-refining businesses. With the introduction of ethanol-blended gasoline to much of our Northeast market and the shift to both low-sulfur gasoline and ultra-low-sulfur diesel fuel across the country, the year was one of significant transition for the industry. Our entire organization worked hard to ensure we remained a reliable supplier of quality transportation fuels in the markets we serve."

Commenting on the fourth quarter, Drosdick said, "Our Refining and Supply business earned $126 million as seasonal declines in gasoline margins and an unseasonably warm start to the winter heating oil season reduced realized refining margins from second and third quarter levels. In addition, scheduled and unscheduled maintenance activity reduced production available for sale by about five million barrels during the quarter.

"Retail Marketing had a loss of $11 million in the fourth quarter as retail gasoline prices declined and squeezed margins significantly versus record third-quarter levels. The Chemicals business rebounded from the third quarter to earn $16 million in the fourth quarter as lower average crude prices led to lower feedstock prices and expanded margins in both our polypropylene and phenol businesses.

"During the quarter, we continued to execute our ongoing share reduction program, repurchasing 2.1 million shares at a total cost of $137 million. As of December 31, we had 121.3 million shares outstanding, an 11.8 million reduction (9 percent) from the beginning of the year."

Commenting on 2007, Drosdick said, "Our two main capital projects in our Refining and Supply business remain on track for completion in the first half of the year. In February, our Philadelphia refinery will begin a scheduled two-month turnaround, during which the final tie-in work for our fluid catalytic cracking unit expansion and residual fuel upgrading project will be completed. We estimate the work will reduce production in our Northeast system by approximately eight million barrels in the first quarter. In addition, we expect to complete the Toledo crude debottleneck project in the second quarter. Both projects have largely completed construction and pre-turnaround work.

Drosdick continued, "The Company expects to complete the $40 million Toledo project at or near the budgeted level, while total capital for the Philadelphia project is now estimated at $500 million, up $100 million from prior estimates. The increased costs reflect more current cost estimates and the impact of some material delivery delays and related productivity issues. Despite the higher costs, these projects represent valuable upgrades to our refining system and should provide attractive returns on our investments. We expect to maintain overall capital spending for Refining and Supply at approximately $800 million for 2007 by deferring or eliminating discretionary projects."

DETAILS OF FOURTH QUARTER RESULTS REFINING AND SUPPLY

Refining and Supply earned $126 million in the fourth quarter of 2006 versus $286 million in the post-hurricane-impacted fourth quarter of 2005. The decrease was primarily due to lower realized margins and production across Sunoco's refining system, partially offset by a $16 million after-tax benefit attributable to LIFO inventory profits. In the Northeast, margins declined $2.95 per barrel, primarily attributable to wholesale gasoline. In the MidContinent, a $.93 per barrel decline due to much lower margins for diesel fuel was only partially offset by higher petrochemical and lubricants margins.

Total crude unit throughput averaged 813.7 thousand barrels daily (90 percent utilization) for the current quarter, with total production available for sale approximating 81 million barrels. A combination of accelerated turnaround work and opportunistic maintenance in our Northeast system early in the quarter was the main reason for the decline in crude throughputs versus last year's fourth quarter. In addition, a power interruption from the local utility resulted in lost production at the Toledo refinery in December.

RETAIL MARKETING

Retail Marketing had a loss of $11 million in the fourth quarter of 2006 versus income of $25 million in the fourth quarter of 2005. The decrease was primarily due to much lower retail gasoline margins and a $6 million after-tax charge related to an environmental litigation claim. Monthly gasoline and diesel throughput per company owned or leased outlet was up 14 percent from the fourth quarter of 2005.

CHEMICALS

Chemicals earned $16 million in the fourth quarter of 2006 versus $8 million in the prior-year period. The increase in earnings was due primarily to higher sales volumes and lower operating expenses and purchased fuel costs, partially offset by lower margins.

LOGISTICS

Earnings for the Logistics segment were $11 million in the fourth quarter of 2006 versus $3 million in the prior-year period. The improvement is primarily related to higher earnings from Sunoco Logistics Partners L.P. and the absence of $4 million of after-tax charges recorded in the fourth quarter of 2005 for environmental remediation activities, asset impairments and insurance settlements.

COKE

The Coke business earned $17 million in the fourth quarter of 2006 versus $10 million in the fourth quarter of 2005. The increase was primarily due to tax credits, including a $3 million investment tax credit adjustment relating to the Haverhill facility. As a result of lower crude oil prices, the current quarter results included a $2 million favorable adjustment to the partial phase-out of tax credits accrued earlier in 2006. For the full year, Sun Coke recorded only 65 percent of the benefit of the tax credits that otherwise would have been available without regard to the phase-out associated with high crude oil prices, reducing income by $8 million.

CORPORATE AND OTHER

Corporate administrative expenses were $20 million after tax in the current quarter versus $27 million in the comparable quarter last year. The decrease was largely due to lower accruals for stock-related incentive compensation. The current quarter results included after-tax expenses of $3 million related to the corporate portion of charges associated with the accelerated recognition of share-based incentive compensation for retirement-eligible employees under SFAS No. 123R.

Net financing expenses and other were $16 million after tax in the fourth quarter of 2006 versus $8 million in the fourth quarter of 2005 due primarily to lower interest income, higher long-term debt expenses and a $3 million after-tax loss related to the Company's December 2006 purchase of the Jewell coke partnership minority interest for $155 million.

SPECIAL ITEM

During the fourth quarter of 2005, Sunoco recognized a $10 million after-tax loss associated with an arbitration decision related to a phenol pricing dispute.

TWELVE MONTH RESULTS

Sunoco earned $979 million, or $7.59 per share of common stock on a diluted basis, for the full-year 2006 versus $974 million, or $7.08 per share, for the full-year 2005. The increase was primarily due to higher margins in Sunoco's Refining and Supply and Retail Marketing businesses and the absence of a loss associated with a phenol supply contract dispute. Partially offsetting these positive factors were higher expenses, including fuel charges; lower margins from Sunoco's Chemicals business; and lower production of refined products.

Sunoco, Inc., headquartered in Philadelphia, PA, is a leading manufacturer and marketer of petroleum and petrochemical products. With 900,000 barrels per day of refining capacity, nearly 4,700 retail sites selling gasoline and convenience items, approximately 5,500 miles of crude oil and refined product owned and operated pipelines and 38 product terminals, Sunoco is one of the largest independent refiner-marketers in the United States. Sunoco is a significant manufacturer of petrochemicals with annual sales of approximately five billion pounds, largely chemical intermediates used to make fibers, plastics, film and resins. Utilizing a unique, patented technology, Sunoco also has the capacity to manufacture over 2.5 million tons annually of high-quality metallurgical-grade coke for use in the steel industry.

Anyone interested in obtaining further insights into the fourth quarter's results can monitor the Company's quarterly teleconference call, which is scheduled for 3:00 p.m. ET on February 1, 2007. It can be accessed through Sunoco's Web site - http://www.sunocoinc.com/. It is suggested that you visit the site prior to the teleconference to ensure that you have downloaded any necessary software.

Those statements made in this release that are not historical facts are forward-looking statements intended to be covered by the safe harbor provisions of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Although Sunoco believes that the assumptions underlying these statements are reasonable, investors are cautioned that such forward-looking statements are inherently uncertain and necessarily involve risks that may affect Sunoco's business prospects and performance, causing actual results to differ materially from those discussed in the foregoing release. Such risks and uncertainties include, by way of example and not of limitation: general economic, financial and business conditions which could affect Sunoco's financial condition and results of operations; changes in competition and competitive practices, including the impact of foreign imports; effects of weather conditions and natural disasters on the Company's operating facilities and on product supply and demand; changes in refining, marketing and chemical margins; variation in petroleum-based commodity prices and availability of crude oil and feedstock supply or transportation; effects of transportation disruptions; changes in the price differentials between light-sweet and heavy-sour crude oils; changes in the marketplace which may affect supply and demand for Sunoco's products; changes in the level of capital or operating expenses; changes in product specifications; availability and pricing of ethanol; changes in the expected level of environmental capital, operating or remediation expenditures; age of, and changes in, the reliability, efficiency and capacity of, the Company's operating facilities or those of third parties; effects of adverse events relating to the operation of the Company's facilities and to the transportation and storage of hazardous materials (including equipment malfunction, explosions, fires, spills, and the effects of severe weather conditions); risks related to labor relations and workplace safety; changes in applicable statutes and government regulations or their interpretations, including those relating to the environment and global warming; changes in tax laws or their interpretations, including pension funding requirements; ability to identify acquisitions, execute them under favorable terms and integrate them into the Company's existing businesses; ability to enter into joint ventures and other similar arrangements under favorable terms; delays and/or costs related to construction, improvements and/or repairs of facilities (including shortages of skilled labor, the issuance of applicable permits and inflation); nonperformance or force majeure by, or disputes with, major customers, suppliers, dealers, distributors or other business partners; changes in financial markets impacting pension expense and funding requirements; political and economic conditions in the markets in which the Company, its suppliers or customers operate, including the impact of potential terrorist acts and international hostilities; military conflicts between, or internal instability in, one or more oil producing countries, governmental actions and other disruptions in the ability to obtain crude oil; and changes in the status of, or initiation of new, litigation, arbitration or other proceedings to which the Company is a party or liability resulting from such litigation, arbitration or other proceedings, including natural resource damage claims. These and other applicable risks and uncertainties have been described more fully in Sunoco's Third Quarter 2006 Form 10-Q filed with the Securities and Exchange Commission on November 2, 2006 and in other periodic reports filed with the Securities and Exchange Commission. Sunoco undertakes no obligation to update any forward-looking statements in this release, whether as a result of new information or future events.

Sunoco, Inc. 2006 Fourth Quarter and Twelve-Month Financial Summary (Unaudited) Fourth Quarter 2006 2005 Revenues $9,036,000,000 $9,270,000,000 Net Income $123,000,000 $287,000,000 Net Income Per Share of Common Stock*: Basic $1.01 $2.13 Diluted $1.00 $2.12 Weighted-Average Number of Shares Outstanding* (In Millions): Basic 122.2 134.6 Diluted 122.7 135.6 Twelve Months Revenues $38,715,000,000 $33,764,000,000 Net Income $979,000,000 $974,000,000 Net Income Per Share of Common Stock*: Basic $7.63 $7.13 Diluted $7.59 $7.08 Weighted-Average Number of Shares Outstanding* (In Millions): Basic 128.3 136.6 Diluted 129.0 137.5 * Share and per-share data presented for all periods reflect the effect of a two-for-one stock split, which was effected in the form of a common stock dividend distributed on August 1, 2005. Sunoco, Inc. Earnings Profile of Sunoco Businesses (after tax) (Millions of Dollars, Except Per-Share Amounts) (Unaudited) Three Months Ended December 31 2006 2005 Variance Refining and Supply $126 $286 $(160) Retail Marketing (11) 25 (36) Chemicals 16 8 8 Logistics 11 3 8 Coke 17 10 7 Corporate and Other: Corporate expenses (20) (27) 7 Net financing expenses and other (16) (8) (8) 123 297 (174) Special items -- (10) 10 Consolidated net income $123 $287 $(164) Earnings (loss) per share of common stock (diluted): Income before special items $1.00 $2.19 $(1.19) Special items -- (.07) .07 Net income $1.00 $2.12 $(1.12) Sunoco, Inc. Earnings Profile of Sunoco Businesses (after tax) (Millions of Dollars, Except Per-Share Amounts) (Unaudited) Twelve Months Ended December 31 2006 2005 Variance Refining and Supply $881 $947 $(66) Retail Marketing 76 30 46 Chemicals 43 94 (51) Logistics 36 22 14 Coke 50 48 2 Corporate and Other: Corporate expenses (58) (84) 26 Net financing expenses and other (49) (45) (4) 979 1,012 (33) Special items -- (38) 38 Consolidated net income $979 $ 974 $5 Earnings (loss) per share of common stock (diluted): Income before special items $7.59 $7.36 $.23 Special items -- (.28) .28 Net income $7.59 $7.08 $.51 Sunoco, Inc. Financial and Operating Statistics (Unaudited) For the Three For the Twelve Months Ended Months Ended December 31 December 31 2006 2005 2006 2005 TOTAL REFINING AND SUPPLY Income (Millions of Dollars) $126 $286 $881 $947 Realized Wholesale Margin* (Per Barrel of Production Available for Sale) $7.51 $9.96 $9.09 $8.65 Crude Inputs as Percent of Crude Unit Rated Capacity 90 99 93 98 Throughputs (Thousand Barrels Daily): Crude Oil 813.7 892.6 840.6 881.0 Other Feedstocks 78.4 64.8 72.8 59.4 Total Throughputs 892.1 957.4 913.4 940.4 Products Manufactured (Thousand Barrels Daily): Gasoline 420.5 459.7 436.2 443.4 Middle Distillates 306.5 330.7 305.5 319.5 Residual Fuel 77.0 74.9 74.0 76.2 Petrochemicals 36.3 35.8 35.6 36.8 Lubricants 10.6 13.8 13.2 13.2 Other 73.4 78.7 82.2 86.6 Total Production 924.3 993.6 946.7 975.7 Less: Production Used as Fuel in Refinery Operations 41.8 50.3 43.9 48.6 Total Production Available for Sale 882.5 943.3 902.8 927.1 * Wholesale sales revenue less related cost of crude oil, other feedstocks, product purchases and terminalling and transportation divided by production available for sale. Sunoco, Inc. Financial and Operating Statistics (Unaudited) For the Three For the Twelve Months Ended Months Ended December 31 December 31 2006 2005 2006 2005 Northeast Refining* Realized Wholesale Margin (Per Barrel of Production Available for Sale) $6.23 $9.18 $7.92 $8.35 Market Benchmark 6-3-2-1 (Per Barrel) $3.68 $9.23 $5.55 $7.76 Crude Inputs as Percent of Crude Unit Rated Capacity 92 101 94 99 Throughputs (Thousand Barrels Daily): Crude Oil 602.6 658.9 616.1 650.6 Other Feedstocks 69.3 57.3 64.2 52.8 Total Throughputs 671.9 716.2 680.3 703.4 Products Manufactured (Thousand Barrels Daily): Gasoline 313.7 348.4 323.5 330.5 Middle Distillates 234.3 249.0 230.2 242.1 Residual Fuel 72.6 70.1 69.8 71.7 Petrochemicals 28.0 28.2 28.3 28.6 Other 44.6 46.9 51.2 55.8 Total Production 693.2 742.6 703.0 728.7 Less: Production Used as Fuel in Refinery Operations 31.6 37.9 32.8 36.7 Total Production Available for Sale 661.6 704.7 670.2 692.0 * Comprised of the Marcus Hook, Philadelphia and Eagle Point refineries. MidContinent Refining* Realized Wholesale Margin (Per Barrel of Production Available for Sale) $11.32 $12.25 $12.46 $9.54 Market Benchmark 3-2-1 (Per Barrel) $8.58 $11.95 $12.31 $11.04 Crude Inputs as Percent of Crude Unit Rated Capacity 86 95 92 94 Throughputs (Thousand Barrels Daily): Crude Oil 211.1 233.7 224.5 230.4 Other Feedstocks 9.1 7.5 8.6 6.6 Total Throughputs 220.2 241.2 233.1 237.0 * Comprised of the Toledo and Tulsa refineries. Sunoco, Inc. Financial and Operating Statistics (Unaudited) For the Three For the Twelve Months Ended Months Ended December 31 December 31 2006 2005 2006 2005 MidContinent Refining (continued) Products Manufactured (Thousand Barrels Daily): Gasoline 106.8 111.3 112.7 112.9 Middle Distillates 72.2 81.7 75.3 77.4 Residual Fuel 4.4 4.8 4.2 4.5 Petrochemicals 8.3 7.6 7.3 8.2 Lubricants 10.6 13.8 13.2 13.2 Other 28.8 31.8 31.0 30.8 Total Production 231.1 251.0 243.7 247.0 Less: Production Used as Fuel in Refinery Operations 10.2 12.4 11.1 11.9 Total Production Available for Sale 220.9 238.6 232.6 235.1 RETAIL MARKETING Income (Loss) (Millions of Dollars) $(11) $25 $76 $30 Retail Margin* (Per Barrel): Gasoline $2.85 $4.60 $4.16 $3.39 Middle Distillates $5.66 $5.66 $4.69 $4.49 Sales of Petroleum Products (Thousand Barrels Daily): Gasoline 305.0 288.4 303.2 298.3 Middle Distillates 42.9 46.9 42.9 45.3 347.9 335.3 346.1 343.6 Total Retail Gasoline Outlets, End of Period 4,691 4,763 4,691 4,763 Gasoline and Diesel Throughput per Company Owned or Leased Outlet (M Gal/Site/Month) 149 131 144 136 Convenience Stores: Total Stores, End of Period 739 746 739 746 Merchandise Sales (M$/Store/Month) $80 $76 $80 $78 Merchandise Margin (Company Operated) (% of Sales) 28% 28% 27% 28% * 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. Sunoco, Inc. Financial and Operating Statistics (Unaudited) For the Three For the Twelve Months Ended Months Ended December 31 December 31 2006* 2005 2006* 2005 CHEMICALS Income (Millions of Dollars) $16 $8 ** $43 $94 ** Margin*** (Cents per Pound): All Products# 10.5 11.4 9.9 12.1 Phenol and Related Products 8.7 9.3 8.0 10.9 Polypropylene# 12.9 14.3 12.4 13.9 Sales (Millions of Pounds): Phenol and Related Products 632 619 2,535 2,579 Polypropylene 562 512 2,243 2,218 Other 25 22 88 91 1,219 1,153 4,866 4,888 * The income and margin data reflect a new pricing formula for 2006 sales of phenol to Honeywell International Inc. based upon the outcome of arbitration decisions in 2005 and 2006. ** Excludes a $10 million after-tax loss recognized in the fourth quarter of 2005 and a $56 million after-tax loss recognized in the full-year 2005 associated with the phenol supply contract dispute. *** Wholesale sales revenue less 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. LOGISTICS Income (Millions of Dollars) $11 $3 $36 $22 Pipeline and Terminal Throughput (Thousand Barrels Daily)*: Unaffiliated Customers 1,040 911 1,033 838 Affiliated Customers 1,623 1,707 1,644 1,663 2,663 2,618 2,677 2,501 * Excludes joint-venture operations. COKE* Income (Millions of Dollars) $17 $10 $50 $48 Coke Production (Thousands of Tons) 632 634 2,510 2,405 Coke Sales (Thousands of Tons) 637 610 2,534 2,375 * Includes amounts attributable to the Haverhill facility, which commenced operations in March 2005. Sunoco, Inc. Financial and Operating Statistics (Unaudited) For the Three For the Twelve Months Ended Months Ended December 31 December 31 2006 2005 2006 2005 CAPITAL EXPENDITURES (Millions of Dollars) Refining and Supply $236 $177 $712 $687 Retail Marketing 48 45 112 117 Chemicals 21 19 62 * 55 Logistics 34 43 *** 119 ** 79 ***# Coke 5 ## 4 14 ## 32 $344 $288 $1,019 $970 * Excludes a $14 million purchase price adjustment to the 2001 Aristech Chemical Corporation acquisition attributable to an earn- out payment made in April 2006. The earn out, which relates to 2005, was due to realized margins for phenol exceeding certain agreed-upon threshold amounts. ** Excludes the acquisition of two separate crude oil pipeline systems and related storage facilities located in Texas, one from Alon USA Energy, Inc. for $68 million and the other from Black Hills Energy, Inc. for $41 million. *** Excludes $5 million acquisition from Chevron of an ownership interest in the Mesa Pipeline. # Excludes $100 million acquisition from ExxonMobil of a crude oil pipeline system and related storage facilities located in Texas. ## Excludes $155 million acquisition of the minority interest in the Jewell cokemaking operation. DEPRECIATION, DEPLETION AND AMORTIZATION (Millions of Dollars) Refining and Supply $55 $54 $225 $201 Retail Marketing 29 26 104 105 Chemicals 19 18 74 71 Logistics 10 11 38 36 Coke 5 4 18 16 $118 $113 $459 $429 Sunoco, Inc. Earnings Profile of Sunoco Businesses (after tax) (Millions of Dollars, Except Per-Share Amounts) (Unaudited) 2005 1st 2nd 3rd 4th Total Refining and Supply $108 $212 $341 $286 $947 Retail Marketing (8) 7 6 25 30 Chemicals 33 30 23 8 94 Logistics 3 9 7 3 22 Coke 10 13 15 10 48 Corporate and Other: Corporate expenses (16) (16) (25) (27) (84) Net financing expenses and other (14) (13) (10) (8) (45) 116 242 357 297 1,012 Special items -- -- (28) (10) (38) Consolidated net income $116 $242 $329 $287 $974 Earnings (loss) per share of common stock (diluted): Income before special items $.83 $1.75 $2.60 $2.19 $7.36 Special items -- -- (.21) (.07) (.28) Net income $.83 $1.75 $2.39 $2.12 $7.08 Sunoco, Inc. Earnings Profile of Sunoco Businesses (after tax) (Millions of Dollars, Except Per-Share Amounts) (Unaudited) 2006 1st 2nd 3rd 4th Total Refining and Supply $73 $409 $273 $126 $881 Retail Marketing -- 10 77 (11) 76 Chemicals 14 8 5 16 43 Logistics 6 12 7 11 36 Coke 14 10 9 17 50 Corporate and Other: Corporate expenses (16) (11) (11) (20) (58) Net financing expenses and other (12) (12) (9) (16) (49) 79 426 351 123 979 Special items -- -- -- -- -- Consolidated net income $79 $426 $351 $123 $979 Earnings per share of common stock (diluted): Income before special items $.59 $3.22 $2.76 $1.00 $7.59 Special items -- -- -- -- -- Net income $.59 $3.22 $2.76 $1.00 $7.59 Sunoco, Inc. Consolidated Statements of Income (Millions of Dollars) (Unaudited) 2005 1st 2nd 3rd 4th Total REVENUES Sales and other operating revenue (including consumer excise taxes) $7,191 $7,970 $9,345 $9,248 $33,754 Interest income 3 3 6 11 23 Other income (loss), net 15 17 (56) 11 (13) 7,209 7,990 9,295 9,270 33,764 COSTS AND EXPENSES Cost of products sold and operating expenses 6,059 6,581 7,702 7,686 28,028 Consumer excise taxes 585 640 675 688 2,588 Selling, general and administrative expenses 209 225 242 270 946 Depreciation, depletion and amortization 105 102 109 113 429 Payroll, property and other taxes 36 28 33 27 124 Interest cost and debt expense 23 23 25 23 94 Interest capitalized (6) (6) (8) (5) (25) 7,011 7,593 8,778 8,802 32,184 Income before income tax expense 198 397 517 468 1,580 Income tax expense 82 155 188 181 606 Net income $116 $242 $329 $287 $974 Sunoco, Inc. Consolidated Statements of Income (Millions of Dollars) (Unaudited) 2006 1st 2nd 3rd 4th Total REVENUES Sales and other operating revenue (including consumer excise taxes) $8,569 $10,575 $10,480 $9,012 $38,636 Interest income 10 8 11 5 34 Other income, net 14 7 5 19 45 8,593 10,590 10,496 9,036 38,715 COSTS AND EXPENSES Cost of products sold and operating expenses 7,454 8,858 8,867 7,768 32,947 Consumer excise taxes 628 663 679 664 2,634 Selling, general and administrative expenses 210 210 215 246 881 Depreciation, depletion and amortization 112 114 115 118 459 Payroll, property and other taxes 34 31 33 27 125 Interest cost and debt expense 26 27 25 27 105 Interest capitalized (1) (4) (5) (6) (16) 8,463 9,899 9,929 8,844 37,135 Income before income tax expense 130 691 567 192 1,580 Income tax expense 51 265 216 69 601 Net income $79 $426 $351 $123 $979 Sunoco, Inc. Consolidated Balance Sheets (Millions of Dollars) (Unaudited) At At December 31 December 31 2006 2005 ASSETS Current Assets Cash and cash equivalents $263 $919 Accounts and notes receivable, net 2,440 1,754 Inventories 1,219 799 Deferred income taxes 93 215 Total Current Assets 4,015 3,687 Investments and long-term receivables 129 143 Properties, plants and equipment, net 6,365 5,658 Deferred charges and other assets 473 443 Total Assets $10,982 $9,931 LIABILITIES AND SHAREHOLDERS' EQUITY Current Liabilities Accounts payable and accrued liabilities $ 4,174 $3,656 Short-term borrowings 275 -- Current portion of long-term debt 7 177 Taxes payable 299 338 Total Current Liabilities 4,755 4,171 Long-term debt 1,705 1,234 Retirement benefit liabilities 523 525 Deferred income taxes 829 817 Other deferred credits and liabilities 477 486 Minority interests 618 647 Shareholders' equity 2,075 2,051 Total Liabilities and Shareholders' Equity $10,982 $9,931 Sunoco, Inc. Consolidated Statements of Cash Flows (Millions of Dollars) (Unaudited) For the Twelve Months Ended December 31 2006 2005 INCREASES (DECREASES) IN CASH AND CASH EQUIVALENTS CASH FLOWS FROM OPERATING ACTIVITIES: Net income $979 $974 Adjustments to reconcile net income to net cash provided by operating activities: Phenol supply contract dispute loss (payment) (95) 95 Proceeds from power contract restructuring -- 48 Depreciation, depletion and amortization 459 429 Deferred income tax expense 117 3 Payments in excess of expense for retirement plans (32) (39) Changes in working capital pertaining to operating activities, net of effect of acquisitions (470) 494 Other 26 65 Net cash provided by operating activities 984 2,069 CASH FLOWS FROM INVESTING ACTIVITIES: Capital expenditures (1,019) (970) Acquisitions (123) (105) Proceeds from divestments 50 55 Other 3 (15) Net cash used in investing activities (1,089) (1,035) CASH FLOWS FROM FINANCING ACTIVITIES: Net proceeds from (repayments of) short-term borrowings 275 (100) Net proceeds from issuance of long-term debt 778 99 Repayments of long-term debt (481) (70) Net proceeds from issuance of Sunoco Logistics Partners L.P. limited partnership units 110 160 Purchase of minority interest in Jewell cokemaking operations (155) -- Cash distributions to investors in cokemaking operations (43) (38) Cash distributions to investors in Sunoco Logistics Partners L.P. (48) (28) Cash dividend payments (123) (103) Purchases of common stock for treasury (871) (435) Proceeds from issuance of common stock under management incentive plans 7 14 Other -- (19) Net cash used in financing activities (551) (520) Net increase (decrease) in cash and cash equivalents (656) 514 Cash and cash equivalents at beginning of period 919 405 Cash and cash equivalents at end of period $263 $919