Sunoco 2011 Annual Report Download - page 57

During the third quarter of 2011, the Company repurchased 14.41 million shares of its common stock for
$500 million. In 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 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.
In November 2011, Sunoco entered into an $800 million secured revolving credit agreement with a
syndicate of 17 participating banks (the “Secured Facility”) which matures in November 2012. Concurrent with
this agreement, the Company terminated its existing $1.2 billion revolving credit facility and transferred all
commitments outstanding under this facility to the Secured Facility. Borrowings under the Secured Facility may
be made up to the lesser of the total available commitments or the amount of a periodically adjusted borrowing
base which is calculated by reference to the value of collateral that includes the Company’s eligible crude oil and
refined product inventories; certain receivables from inventory sales (other 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. The Secured Facility includes a letter of credit sub-facility, limited to the lesser of the entire aggregate
commitment or the borrowing base, and a $125 million sub-facility for same-day borrowings (as defined in the
Secured Facility). Borrowings outstanding under the Secured Facility bear interest at a base rate plus an
applicable margin that varies based upon the Company’s credit rating (as defined in the Secured Facility). The
Secured Facility contains covenants which require the Company to maintain liquidity of at least $400 million and
collateral equal to at least 110 percent of borrowings outstanding under the Secured Facility. At December 31,
2011, there were no borrowings under the Secured Facility; however, the Secured Facility was being used at that
date to support letters of credit totaling $64 million and $103 million of floating-rate notes due in 2034. The
floating-rate notes were repaid in January 2012.
In July 2011, a wholly owned subsidiary of the Company, Sunoco Receivables Corporation, Inc. (“SRC”),
executed an agreement with four participating banks, extending its accounts receivable securitization facility that
was scheduled to expire in August 2011 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 $250 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, 2011, there was approximately $310 million of accounts receivable eligible to
support this facility; however, there were no borrowings outstanding under the facility as of that date. The facility
was being used to support letters of credit totaling $110 million at December 31, 2011.
In August 2011, the Partnership replaced its existing $458 million of credit facilities with two new credit
facilities totaling $550 million. The Partnership’s new credit facilities consist of a five-year $350 million
unsecured credit facility and a $200 million 364-day unsecured credit facility which is available to fund certain
inventory activities. There were no borrowings outstanding under the Partnership’s facilities at December 31,
2011. The $350 and $200 million credit facilities contain various covenants including the requirement that the
Partnership’s total debt to EBITDA ratio (each as defined in the facilities) not exceed 5.00 to 1. This ratio can
generally be increased to 5.50 to 1 during an acquisition period (as defined in the facilities). At December 31,
2011, the Partnership’s ratio of total debt to EBITDA was 3.1 to 1.
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