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Sunoco, Inc.
2011 Annual Report
and Form 10-K

Table of contents

  • Page 1
    Sunoco, Inc. 2011 Annual Report and Form 10-K

  • Page 2
    ...the Partnership's limited partner units. Sunoco Logistics Partners L.P. is an owner and operator of complementary pipeline, terminal and crude oil acquisition and marketing assets. Sunoco also has a network of approximately 4,900 retail locations in 23 states. Projections, estimates, business plans...

  • Page 3
    ... program; Completion of Sunoco's exit from the chemicals business with the sale of its remaining phenol manufacturing assets; Announcement of the Company's intent to exit the refining business either through a sale or idling of the main processing units at the Philadelphia and Marcus Hook refineries...

  • Page 4
    ... until the Sunoco annual meeting of shareholders in May 2012. At that time, Brian will become Chairman of both companies. Mike Hennigan, currently President and Chief Operating Officer of Sunoco Logistics Partners L.P., will become President and Chief Executive Officer of Sunoco Logistics Partners...

  • Page 5
    ... file number 1-6841 SUNOCO, INC. (Exact name of registrant as specified in its charter) Pennsylvania (State or other jurisdiction of incorporation or organization) 23-1743282 (I.R.S. Employer Identification No.) 1818 Market Street, Suite 1500, Philadelphia, PA (Address of principal executive...

  • Page 6

  • Page 7
    ..., and Director Independence ...Principal Accounting Fees and Services ...112 112 112 113 113 Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities ...Selected Financial Data ...Management's Discussion and Analysis of Financial Condition and...

  • Page 8

  • Page 9
    ... Financial Statements (Item 8). Sunoco owns, principally through Sunoco Logistics Partners L.P. (a master limited partnership) (the "Partnership"), a geographically diverse and complementary group of pipelines, terminal facilities which transport, terminal and store refined products and crude oil...

  • Page 10
    ... known as Eagle Point) in response to weak demand and increased global refining capacity and sold its refinery located in Tulsa, OK that primarily produced lubricants (see "Refining and Supply" below). During 2011, Sunoco completed its exit from the chemicals business by selling its facilities in...

  • Page 11
    ... United States, transport gasoline, jet fuel, diesel fuel, home heating oil and other products for Sunoco's other businesses and for third-party integrated petroleum companies, independent refiners, independent marketers and distributors. In May 2011, the Partnership obtained a controlling financial...

  • Page 12
    ... TX and Marysville, MI terminals and crude oil produced primarily in Oklahoma and Texas to refiners or to local trade points. The Partnership exercised its rights to acquire additional ownership interests in Mid-Valley Pipeline Company ("Mid-Valley") and West Texas Gulf Pipe Line Company ("WTG") for...

  • Page 13
    ..., New York, Maryland and Delaware. Of these outlets, 47 were Company-operated sites providing gasoline, diesel fuel and convenience store merchandise. Distributor outlets are sites in which the distributor takes delivery of fuel products at a terminal where branded products are available. Sunoco...

  • Page 14
    .... The Company sells these products to other Sunoco business units and to wholesale and industrial customers. In September 2011, Sunoco announced its decision to exit its refining business and initiated a formal process to sell its remaining refineries located in Philadelphia and Marcus Hook, PA...

  • Page 15
    ... discontinued operations due to Sunoco's expected continuing involvement with the Toledo refinery through a three-year agreement for the purchase of gasoline and distillate to supply Sunoco retail sites in this area. In 2009, Sunoco permanently shut down all process units at the Eagle Point refinery...

  • Page 16
    ...and operated by third parties. Approximately 25 percent of the Company's ocean-going tanker marine transportation requirements pertaining to its crude supply has been met through time charters. Approximately 50 percent of Sunoco's crude oil supply for its Philadelphia and Marcus Hook refineries came...

  • Page 17
    ... unfinished stocks, including butanes, naphtha, distillate blendstocks and gasoline blendstocks between the Philadelphia and Marcus Hook refineries. Finished products are delivered to customers via the pipeline and terminal network owned and operated by Sunoco Logistics Partners L.P. (see "Logistics...

  • Page 18
    ... located in Virginia and West Virginia. SunCoke Energy is also the operator of a metallurgical coke plant in Vitória, Brazil (Vitória). On July 26, 2011, an initial public offering of 13.34 million shares of SunCoke Energy common stock was completed at an offering price of $16 per share. Sunoco...

  • Page 19
    ... 31, 2011 and 2010. SunCoke Energy currently sells metallurgical coke to its three primary customers in the United States: ArcelorMittal, U.S. Steel, and AK Steel. The current coke sales agreements contain take-or-pay provisions, which require that the customers either take all coke production up to...

  • Page 20
    ... their refineries and new refineries continue to come on line internationally. These factors continue to affect the Company's competitive position and have contributed to its decision to exit the refining business no later than July 2012. Profitability in the refining and marketing industry depends...

  • Page 21
    ... diesel acquisition costs, site location, product price, selection and quality, site appearance and cleanliness, hours of operation, store safety, customer loyalty and brand recognition. Sunoco competes by pricing gasoline competitively, combining its retail gasoline business with convenience stores...

  • Page 22
    ... refineries. After our exit from the refining business, we will likely continue to require those services for the acquisition of gasoline and diesel for our retail marketing business. The cost of these services is significant and prevailing rates can be very volatile depending on market conditions...

  • Page 23
    ... of energy and raw materials, which can negatively impact our operations or those of our customers and suppliers. Prior to our exit from the refining business, our inability to obtain adequate supplies of crude oil could affect our business in a materially adverse way. We currently meet all...

  • Page 24
    ... supply of refined products such as gasoline and diesel for our retail marketing business. Currently, a substantial percentage of the refined products we sell in our retail marketing facilities in the northeast United States are manufactured at our refinery in Philadelphia, PA. After our exit from...

  • Page 25
    ... for terminalling and storing refined products and crude oil and by purchasing and selling crude oil and refined products. The Partnership serves our refineries under long-term pipelines and terminals, storage and throughput agreements. Furthermore, our financial statements include the consolidated...

  • Page 26
    ... recession or other adverse economic condition that results in lower purchases of refined petroleum products, higher refined products prices due to an increase in the market price of crude oil, changes in economic conditions or other factors, higher fuel taxes or other governmental or regulatory...

  • Page 27
    ... right to use or occupy the property on which its pipelines are located. We also have rental agreements for approximately 29 percent of the company- or dealer-operated retail service stations where we currently control the real estate and the Partnership has rental agreements for certain logistics...

  • Page 28
    ...obligations, related to substantially all current and former operations of the Company other than the current logistics and retail operations. These legacy sites include inactive or formerly owned terminals and other logistics assets, divested retail sites and current and previously owned refineries...

  • Page 29
    ... in the market for the sale of retail gasoline and merchandise. Our competitors include service stations operated by fully integrated major oil companies and other well-recognized national or regional retail outlets, often selling gasoline or merchandise at aggressively competitive prices. 21

  • Page 30
    ... petroleum companies, refining and marketing companies, independent terminal companies and distribution companies with marketing and trading operations. The actions of our competitors, including the impact of foreign imports, could lead to lower prices or reduced margins for the products we sell...

  • Page 31
    ... supply and customer demand. Any one or more of these factors could have a significant impact on our business. If we were unable to make up the delays associated with such factors or to recover the related costs, or if market conditions change, it could materially and adversely affect our financial...

  • Page 32
    ... a material adverse effect on our financial position. Our ability to meet our debt service obligations depends upon our future performance, which is subject to general economic conditions, industry cycles and financial, business and other factors affecting our operations, many of which are beyond...

  • Page 33
    ...would result in a material reduction in its anticipated cash flow and after-tax return to unitholders, including Sunoco. Current law may change so as to cause the Partnership to be treated as a corporation for federal income tax purposes or to otherwise subject it to a material level of entity level...

  • Page 34
    ...obligation of our funded defined benefit plans at December 31, 2011 (excluding amounts attributable to SunCoke Energy) exceeded the market value of our plan assets by $160 million. The Company expects that upon its exit from the refining business, defined benefit pension plans will be frozen for all...

  • Page 35
    ... for us, lead to reputational damage to our brand, increase our compliance costs, or otherwise harm our business. Our operations could be disrupted if our information systems fail, causing increased expenses and loss of sales. Our business is highly dependent on financial, accounting and other data...

  • Page 36
    ...and operated Toledo refinery for a six-month period commencing in November 2007, at the Eagle Point refinery for a six-month period commencing in June 2008 and at the Marcus Hook refinery for a six-month period commencing in January 2009. The inspections focused on the OSHA Process Safety Management...

  • Page 37
    ...operated Tulsa refinery. The civil penalty payment was paid in October 2011 and no other actions are required. (See also the Company's Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2011.) In addition, Sunoco Logistics Partners L.P. (the "Partnership"), the master limited...

  • Page 38
    ... occurred at the Colorado City, TX station on the West Texas Gulf Pipeline in June 2009. The Partnership has appealed the finding of violation and the proposed penalty. The time or outcome of this appeal cannot be reasonably determined at this time. (See also the Company's Annual Report on Form 10...

  • Page 39
    ... on results of operations for any future period. However, management does not believe that any additional liabilities which may arise pertaining to such matters would be material in relation to the consolidated financial position of Sunoco at December 31, 2011. ITEM 4. MINE SAFETY DISCLOSURES The...

  • Page 40
    ...of Directors of Sunoco Partners LLC after completion of the Annual Meetings of Shareholders in May 2012. Ms. Fox was elected Senior Vice President and General Counsel effective in March 2010 and was elected as Corporate Secretary in January 2011. She was Principal of The Roxbury Group LLC, a company...

  • Page 41
    ..., in 2011 and 2010 and a net after-tax gain related to the divestment of the Tulsa refinery totaling $41 million in 2009. (See Note 2 to the Consolidated Financial Statements under Item 8). **Includes after-tax gains related to the prior issuance of Sunoco Logistics Partners L.P. limited partnership...

  • Page 42
    ...units at the Eagle Point refinery in 2009 in response to weak demand and increased global refining capacity; and Completed the sale of the Tulsa refinery and related inventory in 2009 for $157 million in cash proceeds. • • • Chemicals: • Completed the exit from the chemicals businesses by...

  • Page 43
    ... from Sunoco Logistics Partners L.P. in exchange for the tank farm and related assets located at the Eagle Point refinery; Completed acquisitions in August 2011 totaling $295 million including inventory of a crude oil purchasing and marketing business from Texon L.P. and a refined products terminal...

  • Page 44
    ... of 2012. • • • Sunoco management believes that after its exit from the refining business, completion of these initiatives will allow the Company to be well-positioned to generate value for shareholders through the high-return logistics and retail businesses. The Company will be financially...

  • Page 45
    ... of businesses to reduce its exposure to refining and chemicals margins through the sale of its Tulsa and Toledo refineries and its chemicals operations. In addition, there has been significant capital investment to grow the logistics and retail operations. As a result, Sunoco's profitability has...

  • Page 46
    ... the United States. In addition, the Logistics business has an ownership interest in several refined product pipeline joint ventures. Substantially all logistics operations are conducted through Sunoco Logistics Partners L.P. (the "Partnership"), a consolidated master limited partnership. Sunoco is...

  • Page 47
    ... in Corporate and Other in the Earnings Profile of Sunoco Businesses. In July 2011, the Partnership issued 3.94 million deferred distribution units valued at $98 million and paid $2 million in cash to Sunoco in exchange for the tank farm and related assets located at the Eagle Point refinery. These...

  • Page 48
    ... agreements for 14 retail locations located in central Pennsylvania. Each site will be company operated and include an APlus® convenience store. In January 2011, Sunoco reached an agreement to begin operating the nine fuel stations at service plazas along the Garden State Parkway and announced...

  • Page 49
    ...main processing units at its Marcus Hook, PA refinery in December 2011. The Company expects to complete its exit from the refining business no later than July 2012. In 2009, Sunoco sold its discontinued Tulsa refining operations and permanently shut down all process units at the Eagle Point refinery...

  • Page 50
    ... agreement for the purchase of gasoline and distillate to supply Sunoco retail sites in this area. In September 2011, Sunoco announced its decision to exit its refining business and initiated a formal process to sell its remaining refineries located in Philadelphia and Marcus Hook, PA (together, the...

  • Page 51
    ... with its decision to sell the refinery or convert it to a terminal. In 2011, Sunoco recorded an $18 million gain ($11 million after tax) attributable to a partial settlement of a retained low sulfur diesel credit liability related to the discontinued Tulsa refining operations. This charge is...

  • Page 52
    ...2 to the Consolidated Financial Statements under Item 8). Discontinued chemicals operations had pretax earnings of $1, $56 and $1 million in 2011, 2010 and 2009, respectively. Coke The Coke business, through SunCoke Energy, Inc. ("SunCoke Energy") and its affiliates, makes highquality, blast-furnace...

  • Page 53
    ... assets at the Philadelphia and Marcus Hook refineries to their estimated fair values and recorded provisions for severance, contract terminations and idling expenses of $243 million ($144 million after tax) in connection with Sunoco's decision to exit its refining business; recorded a $13 million...

  • Page 54
    ... Tulsa refining operations and established $6 million of accruals ($4 million after tax) related to the shutdown of the discontinued chemicals polypropylene plant in Bayport, TX (see Note 2 to the Consolidated Financial Statements under Item 8). Sale of Toledo Refinery-During 2011, Sunoco...

  • Page 55
    ...the first quarter of 2011 and operational issues at the Northeast Refineries. The 23 percent increase in 2010 was primarily due to higher refined product prices as well as higher crude oil sales in connection with the crude oil acquisition and marketing activities of the Company's Logistics business...

  • Page 56
    ... chemicals operations and related inventory in 2011 and 2010, and the Tulsa refinery and related inventory and the retail heating oil and propane distribution business in 2009 as well as the sale of retail gasoline outlets throughout the 2009-2011 period. During 2011, 2010 and 2009, Sunoco received...

  • Page 57
    ... February 2012, the Board of Directors approved a plan to repurchase up to 19.9 percent of Sunoco's outstanding common stock at the time, or approximately 21.25 million shares. The planned repurchase is expected to occur over the next 12 to 18 months. Financial Capacity-Management currently believes...

  • Page 58
    ... to SunCoke Energy which was spun-off on January 17, 2012) as of December 31, 2011 (in millions of dollars): Payment Due Dates Total 2012 2013-2014 2015-2016 Thereafter Total debt: Principal ...Interest ...Operating leases* ...Purchase obligations: Crude oil, other feedstocks and refined products...

  • Page 59
    ..., plants and equipment as well as the Company's acquisitions and other capital outlays (in millions of dollars): 2012 Plan 2011 2010 2009 Logistics* ...Retail Marketing** ...Refining and Supply: Continuing operations ...Discontinued Tulsa operations ...Discontinued chemicals operations ...Coke...

  • Page 60
    ... related to the purchase by the Logistics business of a crude oil pipeline in Oklahoma and a refined products terminal in Michigan. Retirement Benefit Plans The following table sets forth the components of the change in market value of the investments in Sunoco's defined benefit pension plans...

  • Page 61
    ... of the participants in these plans at which time the Company instituted a discretionary profit-sharing contribution on behalf of these employees in its defined contribution plan. The Company expects that upon its exit from the refining business, defined benefit pension plans will be frozen for all...

  • Page 62
    ... margins for various refined products and to lock in the price of a portion of the Company's electricity and natural gas purchases or sales and transportation costs. Sunoco does not hold or issue derivative instruments for speculative purposes. Sunoco is at risk for possible changes in the market...

  • Page 63
    ... that Sunoco's new dividend level is sustainable under current conditions. During the third quarter of 2011, the Company repurchased 14.41 million shares of its outstanding common stock for $500 million. In 2010 and 2009, the Company did not repurchase any of its common stock in the open market. In...

  • Page 64
    ...of pension or postretirement benefits expense generally over the average remaining service period of plan participants still employed with the Company, which currently is approximately 9 years for the pension plans (excluding service periods attributable to SunCoke Energy). At December 31, 2011, the...

  • Page 65
    ... permanent shutdown of the Eagle Point refinery, the Company incurred pretax noncash settlement losses totaling $56, $56 and $111 million with respect to its defined benefit plans in 2011, 2010 and 2009, respectively. In addition, as a result of the above-noted changes, the service cost and interest...

  • Page 66
    ... with Sunoco's decision to exit its refining business and at the Company's discontinued chemicals facilities prior to their divestments. The impairments in 2010 and 2009 related primarily to asset writedowns of the Eagle Point refinery which was permanently shut down in the fourth quarter of...

  • Page 67
    ... future. Sunoco currently owns or operates certain retail gasoline outlets where releases of petroleum products have occurred. Federal and state laws and regulations require that contamination caused by such releases at these sites and at formerly owned sites be assessed and remediated to meet the...

  • Page 68
    ...without limitation General economic, financial and business conditions which could affect Sunoco's financial condition and results of operations; Changes in refining and marketing margins; Variation in crude oil and petroleum-based commodity prices and availability of crude oil and feedstock supply...

  • Page 69
    ... product specifications; Availability and pricing of ethanol and related RINs (Renewable Identification Numbers) used to demonstrate compliance with the renewable fuels standard for credits and trading; Political and economic conditions in the markets in which the Company, its suppliers or customers...

  • Page 70
    ... terms with, major customers, suppliers, dealers, distributors or other business partners; Changes in, or new, statutes and government regulations or their interpretations, including those relating to the environment and global warming; Claims of the Company's noncompliance with statutory and...

  • Page 71
    ... of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the...

  • Page 72
    Sunoco, Inc. and Subsidiaries Consolidated Statements of Operations (Millions of Dollars and Shares, Except Per-Share Amounts) For the Years Ended December 31, 2011 2010* 2009* Revenues Sales and other operating revenue (including consumer excise taxes) ...Interest income ...Gain on remeasurement ...

  • Page 73
    ... ...Accounts and notes receivable, net ...Inventories (Note 6) ...Deferred income taxes (Note 4) ...Assets held for sale (Note 2) ...Total current assets ...Note receivable from sale of Toledo refinery (Note 2) ...Investments and long-term receivables (Note 7) ...Properties, plants and equipment...

  • Page 74
    ... expenditures ...Acquisitions (Note 2) ...Proceeds from divestments: Discontinued chemicals operations ...Toledo refinery and related inventory ...Tulsa refinery and related inventory ...Retail heating oil and propane distribution business ...Other divestments ...Other ...Net cash used in investing...

  • Page 75
    ...-for- sale securities (net of related tax expense of $1) ...Cash dividends and distributions ...Issued under stock-based incentive plans ...Net increase in equity related to unissued shares under stock-based incentive plans ...Net proceeds from Sunoco Logistics Partners L.P. public equity offering...

  • Page 76
    ... incentive plans ...Net increase in equity related to unissued shares under stock-based incentive plans ...Noncontrolling interest attributable to the consolidation of pipeline acquisition (Note 16) ...SunCoke Energy, Inc. initial public offering (Note 16) ...Issuance of Sunoco Logistics Partners...

  • Page 77
    ... Company sells various refined products (including gasoline, middle distillates, residual fuel and petrochemicals), coke and coal and also sells crude oil in connection with the crude oil acquisition and marketing activities of its publicly traded limited partnership. In addition, the Company sells...

  • Page 78
    ... into primarily to acquire crude oil and refined products of a desired quality or at a desired location, are netted in cost of products sold and operating expenses in the consolidated statements of operations. Consumer excise taxes on sales of refined products and merchandise are included in both...

  • Page 79
    ..., to lock in what Sunoco considers to be acceptable margins for various refined products and to lock in the price of a portion of the Company's electricity and natural gas purchases or sales and transportation costs. Sunoco also uses interest rate swaps from time to time to manage interest costs and...

  • Page 80
    ... mining operations, include two active underground mines and one active surface and highwall mine currently producing between 250 and 300 thousand tons of coal annually. In May 2011, Sunoco Logistics Partners L.P. (the "Partnership") obtained a controlling financial interest in Inland Corporation...

  • Page 81
    ... of a lease crude business and gathering assets in 16 states, primarily in the western United States. The current crude oil volume of the business is approximately 75 thousand barrels per day at the wellhead. Also in August 2011, the Partnership acquired a refined products terminal located in East...

  • Page 82
    ... of a crude oil pipeline which services Gary Williams' Wynnewood, OK refinery and a refined products terminal in Romulus, MI for a total of $50 million. The allocation of the purchase price of these acquisitions was $29 million to properties, plants and equipment and $21 million to a supply contract...

  • Page 83
    ... Company's decision to exit its refining business (see below), Sunoco notified Honeywell in December 2011 that it will terminate this agreement effective June 30, 2012. In October 2011, Sunoco completed the sale of its phenol manufacturing facility in Haverhill, OH ("Haverhill Facility") and related...

  • Page 84
    ... Divestments Toledo Refinery-In March 2011, Sunoco completed the sale of its Toledo refinery and related crude and refined product inventories to a wholly owned subsidiary of PBF Holding Company LLC. The Company received $1,037 million in net proceeds consisting of $546 million in cash at closing...

  • Page 85
    ... gasoline and distillate to supply Sunoco retail sites in this area. The following table sets forth the components of the Toledo refinery and related assets that were classified as held for sale at December 31, 2010 (in millions of dollars): Inventories: Crude oil ...Petroleum and chemical products...

  • Page 86
    ... to sell its remaining refineries located in Philadelphia and Marcus Hook, PA (together, the "Northeast Refineries"). Sunoco indefinitely idled the main processing units at its Marcus Hook refinery in December 2011 due to deteriorating refining market conditions. As the Company has received no...

  • Page 87
    ... freeze of pension benefits for most participants in the Company's defined benefit pension plans and a phase down or elimination of postretirement medical benefits (Note 9). The following table summarizes the changes in the accrual for employee terminations and other exit costs during 2011, 2010 and...

  • Page 88
    ...): December 31, 2011 2010 Deferred tax assets: Retirement benefit liabilities ...Environmental remediation liabilities ...Other liabilities not yet deductible ...Inventories ...Federal net operating loss carryforward* ...Federal tax credit carryforwards** ...State net operating loss carryforwards...

  • Page 89
    .... During 2011, Sunoco recorded a $16 million increase (net of federal income tax benefit) in the valuation allowance on state net operating loss carryforwards in connection with the decision to exit its refining business. The following table sets forth the changes in unrecognized tax benefits (in...

  • Page 90
    ... those attributable to the Toledo refinery which are included in assets held for sale at December 31, 2010) consisted of the following components (in millions of dollars): December 31, 2011 2010 Crude oil ...Petroleum and chemical products ...Coal and coke ...Materials, supplies and other ... $204...

  • Page 91
    ...965 $2,138 714 2,565 425 1,213 $7,055 Logistics ...Retail marketing ...Refining and supply ...Discontinued chemicals ...Coke ... $ 2,841 1,388 4,787 694 1,553 $11,263 9. Retirement Benefit Plans Defined Benefit Pension Plans and Postretirement Health Care Plans Sunoco has both funded and unfunded...

  • Page 92
    ... benefit plans and postretirement benefit plans expense (including amounts attributable to discontinued chemicals and Tulsa refining operations) consisted of the following components (in millions of dollars): Defined Benefit Plans 2011 2010 2009 Postretirement Benefit Plans 2011 2010 2009 Service...

  • Page 93
    ... Plans Funded Plans 2010 Unfunded Plans Postretirement Benefit Plans 2011 2010 Benefit obligations at beginning of year* ...Service cost ...Interest cost ...Actuarial (gains) losses ...Plan amendments ...Benefits paid ...Divestments ...Premiums paid by participants ...Special termination benefits...

  • Page 94
    ... by an independent investment manager and reinvested in accordance with the targeted investment allocation of the plans. The liquidation of Sunoco common stock was completed during 2011. The Company expects to make voluntary cash contributions of $80 million during 2012. The following table sets...

  • Page 95
    ... which are held to manage duration in connection with fixed income investment strategies. At December 31, 2011, also includes cash held in anticipation of a transfer to SunCoke Energy's pension trust. The investment strategy of the Company's funded defined benefit plans is to achieve consistent...

  • Page 96
    ... the per retiree dollar cap on Sunoco's annual contributions and the plan structure changes announced in February 2012. Defined Contribution Pension Plans Sunoco has defined contribution pension plans which provide retirement benefits for most of its employees. Sunoco's contributions are principally...

  • Page 97
    ... and other assets (excluding amounts attributable to the Toledo refinery which are included in assets held for sale at December 31, 2010) consist of the following (in millions of dollars): December 31, 2011 2010 Goodwill* ...Customer contracts and other intangible assets** ...Other ... $140 298...

  • Page 98
    ... than receivables generated from sales of refined products subject to the Company's existing securitization facility); 3.25 million common units, representing limited partnership interests in Sunoco Logistics Partners L.P.; and eligible cash and cash equivalent balances. At December 31, 2011, the...

  • Page 99
    ... 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...

  • Page 100
    ...amount of future minimum annual rentals applicable to noncancelable operating leases relates to time charters for marine transportation vessels. Over the years, Sunoco has sold thousands of retail gasoline outlets as well as refineries, terminals, coal mines, oil and gas properties and various other...

  • Page 101
    ... to environmental assessments include formerly owned terminals and other logistics assets, retail sites that Sunoco no longer operates, closed and/or sold refineries and other formerly owned sites. Sunoco's accruals for environmental remediation activities reflect management's estimates of the most...

  • Page 102
    ... future. Sunoco owns or operates certain retail gasoline outlets where releases of petroleum products have occurred. Federal and state laws and regulations require that contamination caused by such releases at these sites and at formerly owned sites be assessed and remediated to meet the applicable...

  • Page 103
    ... tax benefits that they earned as limited partners. Based on the partnerships' statute of limitations, as well as published filings of the limited partners, SunCoke Energy believes that tax audits for years 2006 and 2007 may still be open for the limited partners and subject to examination. Sunoco...

  • Page 104
    ...common stock for $500 million. The Company did not repurchase any of its common stock in the open market in 2010 and 2009. In February 2012, the Board approved a plan to repurchase up to 19.9 percent of Sunoco's outstanding common stock at the time, or approximately 21.25 million shares. The planned...

  • Page 105
    ... of an equivalent number of Sunoco common shares at the end of the period) with any change in fair value recognized as an increase or decrease in earnings. For service-based awards to be settled in common stock, the grant-date fair value is based on the closing price of the Company's shares on the...

  • Page 106
    ... of the targeted amounts. ***Cash payments for vested awards were made in the first quarter of the following year. For the years 2011, 2010 and 2009, the Company recognized stock-based compensation expense of $15, $15 and $5 million, respectively, and related tax benefits of $5, $6 and $2 million...

  • Page 107
    ... under SunCoke Energy's incentive stock compensation plan. Sunoco is currently evaluating the accounting impact of these modifications on its future stock-based compensation expense. 16. Noncontrolling Interests Logistics Operations Sunoco is the general partner of the Partnership, which consists...

  • Page 108
    ..., in 2011, 2010 and 2009 attributable to Sunoco's general partner interest and incentive distribution rights. Sunoco's share of Partnership distributions is expected to be 47 percent at the Partnership's current quarterly cash distribution rate but is expected to increase to approximately...

  • Page 109
    ...of record on January 5, 2012 to receive 0.53 of a share of SunCoke Energy common stock for each share of Sunoco common stock held. The results of operations of the Coke business will be classified as discontinued operations in the consolidated statements of operations effective with the distribution...

  • Page 110
    ...publicly traded was valued based on quoted market prices while the fair value of other debt issues was estimated by management based upon current interest rates available at the respective balance sheet dates for similar issues. Sunoco also had a long-term note receivable from the sale of the Toledo...

  • Page 111
    ... crude oil and refined products, 240 thousand pounds of soy beans and 240 thousand MMBTUs of natural gas at December 31, 2011, which vary in duration but generally do not extend beyond December 31, 2012. The following table sets forth the impact of derivatives on the Company's financial performance...

  • Page 112
    ... idled the main processing units at its Marcus Hook, PA refinery. In March 2011, Sunoco completed the sale of its Toledo refinery. During 2009, the Company permanently shut down all process units at its Eagle Point refinery and sold its discontinued Tulsa refining operations (Note 2). Prior...

  • Page 113
    ...'s reportable segments. Previously, after-tax operating results attributable to Sunoco, Inc. shareholders were provided to the chief operating decision maker. Segment Information (millions of dollars) Retail Marketing Refining and Supply Corporate and Other Logistics Coke Consolidated 2011 Sales...

  • Page 114
    ... of dollars) Retail Marketing Refining and Supply Corporate and Other Logistics Coke Consolidated 2010 Sales and other operating revenue (including consumer excise taxes): Unaffiliated customers ...Intersegment ...Pretax income (loss) from continuing operations attributable to Sunoco, Inc...

  • Page 115
    ... chemicals and Tulsa refining operations) (in millions of dollars): 2011 2010 2009 Gasoline: Retail ...Wholesale ...Middle distillates ...Residual fuel ...Petrochemicals ...Other refined products ...Convenience store merchandise ...Other products and services ...Resales of purchased crude oil...

  • Page 116
    ... that were sold during 2011 as discontinued operations. †Includes a $4 million after-tax provision for asset write-downs and other matters, a $4 million after-tax gain related to the divestment of the Toledo refinery, a $26 million after-tax gain from the reduction of crude oil and refined product...

  • Page 117
    ... Executive Officer and President and the Company's Senior Vice President and Chief Financial Officer. Management previously identified a material weakness in internal control over financial reporting related to accounting for income taxes, which is described below and in the Company's Annual Report...

  • Page 118
    ...'s internal control over financial reporting was effective. During 2011, the Company has taken action to implement remediation steps to address the material weakness in its internal control over financial reporting related to accounting for income taxes that existed at December 31, 2010. Management...

  • Page 119
    ... express an opinion on the Company's internal control over financial reporting based on our audit. We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable...

  • Page 120
    ... which applies to all officers, directors and employees, including the chief executive officer, the principal financial officer, the principal accounting officer and persons performing similar functions. A copy of the Code can be found on Sunoco's website (www.SunocoInc.com). It is also available in...

  • Page 121
    ... of Ernst & Young LLP as Independent Registered Public Accounting Firm for the Fiscal Year 2012" under the heading "Proposals on Which You May Vote" in the Company's Proxy Statement, which will be filed with the SEC within 120 days after December 31, 2011, is incorporated herein by reference. 113

  • Page 122
    ...total assets of the Company and its subsidiaries on a consolidated basis. The Company will provide the SEC a copy of any instruments defining the rights of holders of long-term debt of the Company and its subsidiaries upon request. -Sunoco, Inc. Long-Term Performance Enhancement Plan, as amended and...

  • Page 123
    ...'s Current Report on Form 8-K dated May 11, 2010, File No. 1-6841). -Amendment No. 2011-1 to Sunoco, Inc. Senior Executive Incentive Plan (incorporated by reference to Exhibit 10.13.1 of the Company's 2010 Form 10-K filed February 28, 2011, File No. 1-6841). -Sunoco, Inc. Long-Term Performance...

  • Page 124
    ... 10-Q for the quarterly period ended September 30, 2010 filed November 4, 2010, File No. 1-6841). -Separation and Distribution Agreement, dated as of July 18, 2011, by and between SunCoke Energy, Inc. and Sunoco, Inc. (incorporated by reference to Exhibit 10.1 of the Company's Current Report on Form...

  • Page 125
    ...Atlantic Petroleum Corporation, Sunoco Pipeline L.P., Sunoco Logistics Partners L.P., Sunoco Logistics Partners Operations L.P., and Sunoco Partners LLC (incorporated by reference to Exhibit 10.23.1 of the Company's 2010 Form 10-K filed February 28, 2011, File No. 1-6841). -Product Terminal Services...

  • Page 126
    ... following financial statements from Sunoco, Inc.'s Annual Report on Form 10-K for the year ended December 31, 2011, filed with the Securities and Exchange Commission on February 28, 2012, formatted in XBRL (eXtensible Business Reporting Language): (i) the Consolidated Statements of Operations; (ii...

  • Page 127
    ... by the undersigned, thereunto duly authorized. SUNOCO, INC. BY /s/ BRIAN P. MACDONALD Brian P. MacDonald Senior Vice President and Chief Financial Officer Date February 28, 2012 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by or on behalf of...

  • Page 128
    ... and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the...

  • Page 129
    ... and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the...

  • Page 130
    ... respects, the financial condition and results of operations of Sunoco, Inc. Lynn L. Elsenhans Chairman, Chief Executive Officer and President February 28, 2012 In connection with this Annual Report on Form 10-K of Sunoco, Inc. for the fiscal year ended December 31, 2011, I, Brian P. MacDonald...

  • Page 131
    ...The "New Peer Group" was established as a performance peer group effective January 1, 2011 and incorporates companies with more significant interests in logistics and retail businesses in response to Sunoco's exit from the chemicals and coke businesses and its planned exit from the refining business...

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  • Page 135
    ... INTEREST TO SUNOCO SHAREHOLDERS Principal Office 1818 Market Street Philadelphia, PA 19103 215-977-3000 e-mail: [email protected] Website: www.SunocoInc.com Annual Meeting Thursday, May 3, 2012, 9:30 a.m. CT The Woodlands Resort and Conference Center 2301 North Millbond Drive The Woodlands...

  • Page 136
    Sunoco, Inc., 1818 Market Street, Suite 1500, Philadelphia, PA 19103 Printed on recycled paper 002CSN0633