Sunoco 2011 Annual Report Download - page 104

2010. In February 2012, the Company announced a 33 percent increase in its quarterly dividend to $.20 per share
($.80 per year). The higher dividend is effective for the dividend payable in March 2012.
During the third quarter of 2011, Sunoco repurchased 14.41 million shares of its outstanding 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 repurchase is expected to occur
over the next 12 to 18 months.
In February 2010, the Company contributed 3.59 million shares of Sunoco common stock out of treasury
valued at $90 million to its funded defined benefit pension plans. The shares contributed to the defined benefit
plans were removed from treasury on a last-in, first-out basis resulting in a $251 million reduction in treasury
stock and a $161 million charge to capital in excess of par value.
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, 2011, no such shares had been issued.
The following table sets forth the components (net of related income taxes) of the accumulated other
comprehensive loss balances in equity (in millions of dollars):
December 31,
2011 2010
Retirement benefit plans funded status adjustment (Notes 1 and 9) .............. $(260) $(248)
Hedging activities (Note 17) ............................................ 1 (2)
Available-for-sale securities ............................................. 1 1
$(258) $(249)
15. Stock-Based Incentive Plans
Sunoco’s principal stock-based incentive plans are the Long-Term Performance Enhancement Plan II
(“LTPEP II”) and, as approved by shareholders of Sunoco on May 6, 2010, the Long-Term Performance
Enhancement Plan III (“LTPEP III”). LTPEP II and LTPEP III authorize the use of eight and 3.5 million shares
of common stock for awards, respectively. LTPEP II and LTPEP III provide for the award of stock options,
common stock units and related rights to officers and other key employees of Sunoco. No awards may be granted
under LTPEP II and LTPEP III after December 31, 2013 and December 31, 2020, respectively. At December 31,
2011, there were 1,324,985 and 2,988,710 shares of common stock available for awards under LTPEP II and
LTPEP III, respectively.
The stock options that have been granted under LTPEP II have a 10-year term and permit optionees to
purchase Company common stock at its fair market value on the date of grant. Options that were granted prior to
December 2008 are exercisable two years after the date of grant, while the options granted in December 2008 and
thereafter become exercisable over a three-year period in one-third increments on each anniversary date after the
date of grant. The fair value of the stock options is estimated using the Black-Scholes option pricing model. Use
of this model requires the Company to make certain assumptions regarding the term that the options are expected
to be outstanding (“expected life”), as well as regarding the risk-free interest rate, the Company’s expected
dividend yield and the expected volatility of the Company’s stock price during the period the options are
expected to be outstanding. The expected life and dividend yield are estimated based on historical experience.
The risk-free interest rate is based on the U.S. Treasury yield curve at the date of grant for periods that are
approximately equal to the expected life. The Company uses historical share prices, for a period equivalent to the
96