Sunoco 2004 Annual Report Download - page 27

requirements may exceed its cash generation due to various factors including reductions in
margins for products sold and increases in the levels of capital spending (including acquis-
itions) and working capital. During those periods, the Company may supplement its cash
generation with proceeds from financing activities.
In June 2004, the Company entered into a new revolving credit facility (the “New
Facility”) totaling $900 million, which matures in June 2009. The New Facility replaces a
prior $785 million facility. The New Facility provides the Company with access to short-
term financing and is intended to support the issuance of commercial paper and letters of
credit. The Company also can borrow directly from the participating banks under the New
Facility. The New Facility is subject to commitment fees, which are not material. Under
the terms of the New Facility, Sunoco is required to maintain tangible net worth (as de-
fined in the New Facility) in an amount greater than or equal to targeted tangible net
worth (targeted tangible net worth being determined by adding $1.125 billion and 50 per-
cent of the excess of net income over share repurchases (as defined in the New Facility) for
each quarter ended after March 31, 2004). At December 31, 2004, the Company’s tangible
net worth was $1.7 billion and its targeted tangible net worth was $1.2 billion. The New
Facility also requires that Sunoco’s ratio of consolidated net indebtedness, including bor-
rowings of Sunoco Logistics Partners L.P., to consolidated capitalization (as those terms are
defined in the New Facility) not exceed .60 to 1. At December 31, 2004, this ratio was .37
to 1. At December 31, 2004, the New Facility is being used to support $100 million of
commercial paper and $103 million of floating-rate notes due 2034.
In November 2004, Sunoco Logistics Partners L.P. replaced its three-year $250 million re-
volving credit facility with a new $250 million revolving credit facility, which matures in
November 2009. This facility is available to fund the Partnership’s working capital require-
ments, to finance acquisitions, and for general partnership purposes. It includes a $20 million
distribution sublimit that is available for distributions to third-party unitholders and Sunoco.
At December 31, 2004 and 2003, $65 million was outstanding under these facilities. The
current credit facility contains covenants requiring the Partnership to maintain a ratio of up
to 4.5 to 1 of its consolidated total debt to its consolidated EBITDA (each as defined in the
current credit facility) and an interest coverage ratio (as defined in the current credit fa-
cility) of at least 3 to 1. At December 31, 2004, the Partnership’s ratio of its consolidated
debt to its consolidated
EBITDA was 2.8 to 1 and the interest coverage ratio was 5.4 to 1.
Epsilon, the Company’s consolidated joint venture, has a $40 million revolving credit fa-
cility that matures in September 2006. The credit facility contains restrictive covenants
which, among other things, limit the incurrence of additional debt and the sale of assets by
Epsilon. At December 31, 2004, $6 million was outstanding under this credit facility,
which is guaranteed by Sunoco, Inc. Sunoco, Inc. also guarantees Epsilon’s $120 million
term loan due in September 2006.
The following table sets forth Sunoco’s outstanding debt:
December 31
(Millions of Dollars) 2004 2003
Short-term borrowings $ 100 $—
Current portion of long-term debt 3103
Long-term debt 1,379 1,498
Total debt $1,482 $1,601
In September 2004, the Company repurchased outstanding long-term debt with a par
value of $352 million through a series of tender offers and open market purchases utilizing
the net proceeds from the issuance of $250 million of 4
7
⁄ 8 percent, 10-year notes under its
shelf registration statement (see below) and $154 million of cash. The Company recog-
nized a $34 million after-tax loss in 2004 due to the early extinguishment of this debt,
which is reported separately in Corporate and Other in the Earnings Profile of Sunoco
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