Sunoco 2003 Annual Report Download - page 29

to its acquisition. In addition to normal infrastructure and maintenance capital require-
ments, base spending includes several economic return projects to upgrade Sunoco’s exist-
ing asset base. These projects include $70 million for new processing equipment, boilers and
reinstrumentation projects at the Company’s refineries and $23 million for additional
investments to upgrade Sunoco’s existing retail network and enhance its APlus
®
con-
venience store presence. Base spending also includes $11 million to complete conversion of
the Speedway sites acquired in 2003 to Sunoco branded outlets. With respect to clean fuels
spending, the Company estimates that total capital outlays to comply with Tier II gasoline
and diesel specifications will be in the range of $400-$500 million, including amounts
attributable to the Eagle Point refinery. The Company expects that most of this spending
will occur through 2006. Through year-end 2003, the Company’s Tier II spending totaled
$25 million. The Company plans to meet the new gasoline specifications with new gasoline
hydrotreaters at its Marcus Hook, Philadelphia, Toledo and Eagle Point facilities. Spending
in 2004 will include continued engineering and construction work associated with these
efforts. The income improvement projects include capital for refinery projects including
expenditures to restart an alkylation unit at the Philadelphia refinery and for various cata-
lytic cracker upgrades and energy projects. These projects also include capital for new retail
units and for production upgrades in certain chemicals facilities.
In addition to the purchase of the 193 service stations in the Southeast and the transaction
with Equistar, the 2003 capital outlays included $284 million for base infrastructure and
maintenance, $88 million for refinery turnarounds, $23 million for spending to comply
with the Tier II low-sulfur gasoline and diesel fuel requirements and $30 million for various
income improvement projects. Base infrastructure spending included $50 million related to
the construction of a sulfur plant at the Marcus Hook refinery.
In addition to the purchase of interests in three Midwestern and Western U.S. products
pipeline companies from Unocal and the increased interest in the West Texas Gulf pipe-
line, the 2002 capital outlays included $248 million for base infrastructure, maintenance
and regulatory spending, $82 million for refinery turnarounds and $55 million for various
income improvement projects.
In addition to the Aristech acquisition and the purchase of retail gasoline outlets from The
Coastal Corporation, the 2001 capital outlays included $233 million for base infrastructure
and legally required spending, $54 million for turnarounds at the Company’s refineries and
$44 million for income improvement projects. The income improvement projects included
expenditures to improve refinery efficiency, growSunoco’s retail marketing network and
expand certain logistics assets.
Pension Plan Funded Status
The following table sets forth the components of the change in market value of the invest-
ments in Sunoco’s defined benefit pension plans for 2003 and 2002:
December 31
(Millions of Dollars) 2003 2002
Market value of investments at beginning of year $ 930 $1,110
Increase (reduction) in market value of investments resulting from:
Net investment income (loss) 211 (91)
Company contributions 89 52
Plan benefit payments (159) (141)
$1,071 $ 930
At December 31, 2002, the accumulated benefit obligations of these plans exceeded the
market value of plan assets. Accordingly, the Company was required to record an after-tax
charge totaling $176 million to the accumulated other comprehensive loss component of
shareholders’ equity in its consolidated balance sheet at December 31, 2002. The increase
in the market value of investments during 2003 was substantially offset by an increase in
the accumulated benefit obligations, primarily due to a decline in the discount rate from
27