Sunoco 2005 Annual Report Download - page 67

Sunoco is a party to various agreements with the Partner-
ship which require Sunoco to pay for minimum storage
and throughput usage of certain Partnership assets. These
agreements also establish fees for administrative services
provided by Sunoco to the Partnership and provide in-
demnifications by Sunoco for certain environmental,
toxic tort and other liabilities.
The following table sets forth the minority interest
balance and the changes to this balance attributable to
the third-party investors’ interests in Sunoco Logistics
Partners L.P.:
(Millions of Dollars) 2005 2004 2003
Balance at beginning of year $232 $104 $100
Net proceeds from public offerings 160 129 —
Minority interest share of income* 28 19 15
Increase attributable to Partnership
management incentive plan 5——
Cash distributions to third-party
investors** (28) (20) (11)
Balance at end of year $397 $232 $104
* Included in selling, general and administrative expenses in the consolidated
statements of income.
** During the 2002-2005 period, the Partnership increased its quarterly cash
distribution per unit from $.45 to $.7125.
Epsilon Joint Venture Operations
Epsilon Products Company, LLC (“Epsilon”) is a joint
venture that consists of polymer-grade propylene oper-
ations at Sunoco’s Marcus Hook, PA refinery and an ad-
jacent polypropylene plant. The joint venture is a
variable interest entity for which the Company is the
primary beneficiary. As such, the accounts of Epsilon are
included in Sunoco’s consolidated financial statements.
The following table sets forth the minority interest bal-
ance and the changes to this balance attributable to the
other joint venture partner’s interest in Epsilon:
(Millions of Dollars) 2005 2004 2003
Balance at beginning of year $11 $8 $8
Minority interest share of income* 53—
Balance at end of year $16 $11 $ 8
*Included in selling, general and administrative expenses in the consolidated
statements of income.
14. Shareholders’ Equity
Each share of Company common stock is entitled to one
full vote. The $7 million of outstanding 6
3
⁄ 4 percent sub-
ordinated debentures are convertible into shares of
Sunoco common stock at any time prior to maturity at a
conversion price of $20.41 per share and are redeemable
at the option of the Company. At December 31, 2005,
there were 363,400 shares of common stock reserved for
this potential conversion (Note 11).
On July 7, 2005, the Company’s Board of Directors
(“Board”) approved a two-for-one split of Sunoco’s com-
mon stock to be effected in the form of a stock dividend.
The shares were distributed on August 1, 2005 to share-
holders of record as of July 18, 2005. In connection with
the common stock split, the number of authorized shares
of common stock was increased from 200 million to
400 million, and the shares of common stock reserved for
issuance pertaining to Sunoco’s 6
3
⁄ 4 percent convertible
debentures and various employee benefit plans were pro-
portionally increased in accordance with the terms of
those respective agreements and plans.
The Company increased the quarterly dividend paid on
common stock from $.125 per share ($.50 per year) to
$.1375 per share ($.55 per year) beginning with the
fourth quarter of 2003 and then to $.15 per share ($.60
per year) beginning with the third quarter of 2004, to
$.20 per share ($.80 per year) beginning with the second
quarter of 2005 and to $.25 per share ($1.00 per year)
beginning with the second quarter of 2006.
The Company repurchased in 2005, 2004 and 2003, 6.7,
15.9 and 5.8 million shares, respectively, of its common
stock for $435, $568 and $136 million, respectively. In
March 2005, the Company announced that its Board had
approved an additional $500 million share repurchase
authorization. At December 31, 2005, the Company had
a remaining authorization from its Board to purchase up
to $306 million of Company common stock in the open
market from time to time depending on prevailing market
conditions and available cash.
The Company’s Articles of Incorporation authorize the
issuance of up to 15 million shares of preference stock
without par value, subject to approval by the Board. The
Board also has authority to fix the number, designation,
rights, preferences and limitations of these shares, subject
to applicable laws and the provisions of the Articles of
Incorporation. At December 31, 2005, no such shares had
been issued.
The following table sets forth the components (net of re-
lated income taxes) of the accumulated other compre-
hensive loss balances in shareholders’ equity:
December 31
(Millions of Dollars) 2005 2004
Minimum pension liability adjustment $(191) $(166)
Hedging activities (1) 2
$(192) $(164)
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