Sunoco 2011 Annual Report Download - page 56

pertaining to operating activities, partially offset by an increase in noncash charges. An increase in working
capital during 2011 was largely attributable to increases in coal and coke inventories and the repayment of
retained crude payables from the Toledo refinery. The $1,146 million increase in cash generation in 2010 was
primarily due to higher net income and a decrease in working capital levels pertaining to operating activities.
Cash generation in 2010 includes federal income tax refunds totaling $526 million received by the Company for
the carryback of its 2009 net operating loss. Partially offsetting these positive factors were cash contributions to
the Company’s defined benefit pension plans.
Other Cash Flow Information—Divestment activities also have been a source of cash. During the 2009-2011
period, proceeds from divestments totaled $1,821 million and related primarily to the divestments of the Toledo
refinery and related inventory in 2011, discontinued 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 $98, $91 and $98 million, respectively, from the Partnership
representing 47, 48 and 57 percent, respectively, of the Partnership’s total cash distributions. These amounts
include $50, $46 and $48 million, respectively, 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 49
percent, assuming the Partnership’s current quarterly cash distribution rate and no additional unit issuances, when
the deferred distribution units convert to common units in the third quarter of 2012 (see below).
In 2009, Sunoco Logistics Partners L.P. issued 6.75 million limited partnership units in a public offering,
generating $110 million of net proceeds. In February 2010, Sunoco received $201 million in cash from the
Partnership in connection with a modification of the incentive distribution rights and sold 6.60 million of its
limited partnership units to the public, generating $145 million of net proceeds. In August 2010, the Partnership
issued 6.04 million limited partnership units in a public offering, generating $144 million of net proceeds.
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 units will not participate in Partnership distributions until they convert into common units on the one-year
anniversary of their issuance. Upon completion of this transaction, Sunoco’s interest in the Partnership’s limited
partner units increased to the current 32 percent.
The Partnership acquired interests in various pipelines and other logistics assets during the 2009-2011
period (see “Capital Program” below). The Partnership expects to finance future growth opportunities with a
combination of borrowings and the issuance of additional limited partnership units to the public to maintain a
balanced capital structure. Any issuance of limited partnership units to the public would dilute Sunoco’s
ownership interest in the Partnership.
On July 12, 2011, Sunoco borrowed $300 million from an affiliate of one of SunCoke Energy’s IPO
underwriters. On July 26, 2011, an IPO of 13.34 million shares of SunCoke Energy common stock was completed
at an offering price of $16 per share. Sunoco’s $300 million borrowing was satisfied at the closing of the IPO
through an exchange of the 13.34 million shares of SunCoke Energy stock valued at $213 million and a cash
payment of $87 million. Sunoco incurred underwriters’ commissions and other expenses totaling $21 million in
connection with the offering. Also in July 2011, concurrent with its IPO, SunCoke Energy issued $400 million
aggregate principal of 7.625 percent senior notes which mature in 2019 and borrowed $300 million under a senior
secured term loan credit facility which matures in 2018. The term loan credit facility provides for incremental
borrowings up to $75 million which are available subject to the satisfaction of certain conditions. SunCoke Energy
borrowed an additional $30 million under the term loan credit facility in December 2011. The senior notes and the
term loan credit facility are guaranteed by each direct and indirect, existing and future, domestic material restricted
subsidiary of SunCoke Energy. SunCoke Energy used a portion of the proceeds from its borrowings to repay $575
million of intercompany debt payable to a subsidiary of Sunoco (see “Financial Capacity” below for additional debt
activity).
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