Sunoco Inc. CEO John G. Drosdick won't have some of the cushy perks this year that often accompany the top position at a multibillion-dollar company. More than a month after reporting fourth-quarter declines in profit and revenue, the Philadelphia-based oil refiner and an IndustryWeek 50 Best Manufacturer for 2006, said in a March 9 Security and Exchange Commission filing that executives voluntarily relinquished several perks. The benefits include tax payments on Drosdick's behalf for personal use of the corporate aircraft and use of a company-owned car, which the CEO returned in July 2006.
Drosdick and other executives also reimbursed Sunoco for country club dues and parking spaces at the company headquarters. Drosdick's total compensation for 2006 was nearly $23 million, according to the SEC filing. The company referred to 2006 as a "transition year for perquisites" in the SEC filing.
At the same time, stock value in 2006 plummeted from a Jan. 30 high of $97.25 a share to as low as $57.50 in October. For the year, net income was relatively flat at $979 million, or $7.59 per share. Fourth-quarter net income dropped nearly 60% from $287 million, or $2.12 per share, during the year-earlier period to $123 million, or $1 per share.
The company partly attributes the fourth-quarter losses to declines in gasoline margins from an unseasonably warm winter and maintenance activity, which reduced production available for sale by approximately 5 billion barrels, according to a statement by Drosdick.
In addition, capital costs increased $100 million from prior estimates to $500 million for a construction project at its Toledo, Ohio, refinery scheduled for completion in the second quarter of 2007, Drosdick said. The increase takes into account material delivery delays and related productivity issues along with updated cost estimates. The company also is on track to complete an expansion at its Philadelphia refinery in the second quarter.
At A Glance
Primary Industry: Petroleum and coal products
Number of Employees: 13,800
2005 In Review
Revenue: $33.7 billion
Profit Margin: 2.89%
Sales Turnover: 3.40
Inventory Turnover: 35.84
Revenue Growth: 32.4%
Return On Assets: 12.06%
Return On Equity: 60.61%
"Despite the higher costs, these projects represent valuable upgrades to our refining system and should provide attractive returns on our investments," Drosdick said in a statement. "We expect to maintain overall capital spending for refining and supply at approximately $800 million for 2007 by deferring or eliminating discretionary projects."
Refining and supply earnings declined 56% in the fourth quarter primarily due to lower realized margins and production.
In other recent news, the company said its Sun Coke Co. subsidiary plans to build a second heat recovery plant in Haverhill, Ohio. Sun Coke provides metallurgical coke for the steel industry. The facility is designed to produce and supply steam for the regional power market by capturing waste heat from the ovens, which will produce about 550,000 tons of blast furnace coke annually. Sun Coke utilizes technology "that virtually eliminates coke oven emissions," according to the company.
The company is taking advantage of state and local incentives to build the plant, according to Michael Dingus, senior vice president of Sunoco and president of Sun Coke. "For Sunoco, this marks the next step in the growth of our Coke business and will provide steady income and attractive returns to our shareholders," he said.
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