Sunoco 2009 Annual Report Download - page 54

Financial Capacity—Management currently believes that future cash generation is expected to be
sufficient to satisfy Sunoco’s ongoing capital requirements, to fund its pension obligations (see “Retirement
Benefit Plans” below) and to pay cash dividends on Sunoco’s common stock. However, from time to time, the
Company’s short-term cash 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 acquisitions)
and working capital. During those periods, the Company may supplement its cash generation with proceeds from
financing activities.
The Company has a $1.3 billion revolving credit facility with a syndicate of 19 participating banks (the
“Facility”), of which $1.2245 billion matures in August 2012 with the balance to mature in August 2011. The
Facility provides the Company with access to short-term financing and is intended to support the issuance of
commercial paper, letters of credit and other debt. The Company also can borrow directly from the participating
banks under the Facility. The Facility is subject to commitment fees, which are not material. Under the terms of
the Facility, Sunoco is required to maintain tangible net worth (as defined in the 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 percent of the excess of net income attributable to Sunoco, Inc. shareholders over share
repurchases (as defined in the Facility) for each quarter ended after March 31, 2004). At December 31, 2009, the
Company’s tangible net worth was $3.0 billion and its targeted tangible net worth was $2.1 billion. The Facility
also requires that Sunoco’s ratio of consolidated net indebtedness, including borrowings of Sunoco Logistics
Partners L.P., to consolidated capitalization (as those terms are defined in the Facility) not exceed .60 to 1. At
December 31, 2009, this ratio was .41 to 1. At December 31, 2009, the Facility was being used to support $282
million of commercial paper and $115 million of floating-rate notes due in 2034. Floating rate notes totaling
$103 million were issued in April 2009 to replace similar notes that were redeemed during the first quarter of
2009. The Company remarkets the floating-rate notes on a weekly basis. However, any inability to remarket the
floating-rate notes would have no impact on the Company’s liquidity as they currently represent a reduction in
funds under the Facility which would be available for future borrowings if the notes were repaid.
Sunoco Logistics Partners L.P. has a $400 million revolving credit facility with a syndicate of 11
participating banks, which expires in November 2012. This facility is available to fund the Partnership’s working
capital requirements, to finance acquisitions, and for general partnership purposes. Amounts outstanding under
this facility totaled $238 and $323 million at December 31, 2009 and 2008, respectively. In March 2009, the
Partnership entered into an additional $63 million revolving credit facility with two participating banks, which
expires in September 2011. At December 31, 2009, there was $31 million outstanding under this facility. The
$400 million facility contains a covenant requiring the Partnership to maintain a ratio not to exceed 4.75 to 1 of
its consolidated total debt (including letters of credit) to its consolidated EBITDA (each as defined in the
facility). The $63 million facility contains a similar covenant but the ratio in this covenant may not exceed 4 to 1.
At December 31, 2009, the Partnership’s ratio of its consolidated debt to its consolidated EBITDA was 2.4 to 1.
In August 2009, a wholly owned subsidiary of the Company, Sunoco Receivables Corporation, Inc.
(“SRC”), executed an agreement with two participating banks, extending an existing accounts receivable
securitization facility that was scheduled to expire in August 2009, by an additional 364 days. The updated
facility permits borrowings and supports the issuance of letters of credit by SRC up to a total of $300 million.
Under the receivables facility, certain subsidiaries of the Company will sell their accounts receivable from time
to time to SRC. In turn, SRC may sell undivided ownership interests in such receivables to commercial paper
conduits in exchange for cash or letters of credit. The Company has agreed to continue servicing the receivables
for SRC. Upon the sale of the interests in the accounts receivable by SRC, the conduits have a first priority
perfected security interest in such receivables and, as a result, the receivables will not be available to the creditors
of the Company or its other subsidiaries. At December 31, 2009, there were no borrowings under the receivables
facility.
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