Sunoco 2011 Annual Report Download - page 29

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business practices. There has been insufficient information developed about the plaintiffs’ legal theories or the
facts that would be relevant to an analysis of the ultimate liability to us. These allegations or other product
liability claims against us could have a material adverse effect on our business or results of operations.
Federal and state legislation and/or regulation could have a significant impact on market conditions and/or
adversely affect our business and results of operations.
From time to time, new legislation or regulations are adopted by the federal government and various states
or other regulatory bodies. Any such federal or state legislation or regulations, including but not limited to any
potential environmental rules and regulations, tax legislation, energy policy legislation or legislation affecting
trade or commercial practices, could have a significant impact on market conditions and could adversely affect
our business or results of operations in a material way. For example, certain pending legislative and regulatory
proposals effectively could limit, or even eliminate, use of the LIFO inventory method for financial and income
tax purposes. Although the final outcome of these proposals cannot be ascertained at this time, the ultimate
impact to us of the transition from LIFO to another inventory method could be material. However, Sunoco’s exit
from the refining business should significantly reduce the Company’s exposure to this issue.
Disputes under long-term contracts could affect our business and future operations in a materially adverse
way.
We have numerous long-term contractual arrangements across our businesses that frequently include
complex provisions. Interpretation of these provisions may, at times, lead to disputes with customers and/or
suppliers. Unfavorable resolutions of these disputes could have a significant adverse effect on our business and
results of operations.
Competition from companies having greater financial and other resources than we do could materially and
adversely affect our business and results of operations.
We compete with domestic refiners and marketers in the northeastern and midwestern United States and
with foreign refiners that import products into the United States. In addition, we compete with producers and
marketers in other industries that supply alternative forms of energy and fuels to satisfy the requirements of our
industrial, commercial and individual consumers. Certain of our competitors have larger and more complex
refineries, and may be able to realize lower per-barrel costs or higher margins per barrel of throughput. Several of
our principal competitors are integrated national or international oil companies that are larger and have
substantially greater resources than we do. Unlike these competitors, which have access to proprietary sources of
controlled crude oil production, we obtain substantially all of our feedstocks from unaffiliated sources. Because
of their integrated operations and larger capitalization, these companies may be more flexible in responding to
volatile industry or market conditions, such as shortages of crude oil and other feedstocks or intense price
fluctuations.
We have taken significant measures to expand and upgrade units in our refineries by installing new
equipment and redesigning older equipment to improve refinery capacity. However, these actions involve
significant uncertainties, since upgraded equipment may not perform at expected throughput levels, the yield and
product quality of new equipment may differ from design specifications and modifications may be needed to
correct equipment that does not perform as expected. Any of these risks associated with new equipment,
redesigned older equipment, or repaired equipment could lead to lower revenues or higher costs or otherwise
have an adverse effect on future results of operations and financial condition. Newer facilities owned by
competitors will often be more efficient than some of our facilities, which may put us at a competitive
disadvantage. Over time, some of our facilities may become obsolete, or be unable to compete, because of the
construction of new, more efficient facilities.
We also face strong competition 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.
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