Sunoco 2003 Annual Report Download - page 57

The health care cost trend assumption used at December
31, 2003 to compute the APBO for the postretirement
benefit plans was an increase of 11.4 percent (12.2 per-
cent at December 31, 2002), which is assumed to decline
gradually to 5.5 percent in 2008 and to remain at that
level thereafter. A one-percentage point change each
year in assumed health care cost trend rates would have
the following effects at December 31, 2003:
(Millions of Dollars)
1-Percentage
Point Increase
1-Percentage
Point Decrease
Effect on total of service and interest
cost components of postretirement
benefits expense $1 $(1)
Effect on APBO $13 $(12)
Defined Contribution Pension Plans
Sunoco has defined contribution pension plans which
provide retirement benefits for most of its employees.
Sunoco’s contributions, which are principally based on
a percentage of employees’ annual base compensation
and are charged against income as incurred, amounted
to $20, $19 and $19 million in 2003, 2002 and 2001,
respectively.
Sunoco’s principal defined contribution plan is SunCAP.
Sunoco matches 100 percent of employee contributions
to this plan up to 5 percent of an employee’s base
compensation. SunCAP is a combined profit sharing and
employee stock ownership plan which contains a provi-
sion designed to permit SunCAP, only upon approval by
the Company’s Board of Directors (“Board”), to borrowin
order to purchase shares of Company common stock. As
of December 31, 2003, no such borrowings had been
approved.
10. Short-Term Borrowings and Credit Facilities
The Company has a revolving credit facility (the
“Facility”) totaling $785 million, which consists of a $385
million commitment through July 2005 and a $400 mil-
lion commitment that matures in July 2004. The Facility
provides the Company with access to short-term financ-
ing and is intended to support the issuance of commercial
paper and letters of credit. The Company also can borrow
directly from the participating banks under the Facility.
The Facility is subject to commitment fees, which are not
material. Under the terms of the Facility, Sunoco is re-
quired to maintain tangible net worth (as defined in the
Facility) in an amount greater than or equal to targeted
tangible net worth (targeted tangible net worth being
determined by adding $1.0 billion and 50 percent of the
excess of net income over share repurchases (as defined in
the Facility) for each quarter ended after March 31,
2002). At December 31, 2003, the Company’s tangible
net worth was $1.6 billion and its targeted tangible net
worth was $1.1 billion. The Facility also requires that
Sunoco’s ratio of consolidated net indebtedness, includ-
ing borrowings of Sunoco Logistics Partners L.P. (Notes
11 and 13), to consolidated capitalization (as those terms
are defined in the Facility) not exceed .60 to 1. At De-
cember 31, 2003, this ratio was .42 to 1. There were no
short-term borrowings at December 31, 2003 and 2002.
Sunoco Logistics Partners L.P. has a three-year $250 mil-
lion revolving credit facility through January 2005, which
is available to fund the Partnership’s working capital re-
quirements, to finance acquisitions, and for general part-
nership purposes. It includes a $20 million distribution
sublimit that is available for distributions to third-party
unitholders and Sunoco. At December 31, 2003 and
2002, $65 million was outstanding under this credit fa-
cility (Note 11). The credit facility contains covenants
requiring the Partnership to maintain a ratio of up to 4 to
1 of its consolidated total debt to its consolidated EBITDA
(each as defined in the credit facility) and an interest
coverage ratio (as defined in the credit facility) of at least
3.5 to 1. At December 31, 2003, the Partnership’s ratio of
its consolidated debt to its consolidated EBITDA was 3.0
to 1 and the interest coverage ratio was 5.1 to 1.
11. Long-Term Debt
December 31
(Millions of Dollars) 2003 2002
9
3
⁄ 8 % debentures, $20 payable annually
2007-2016 $ 200 $ 200
9% debentures due 2024 100 100
7¾% notes due 2009 200 200
7.60% environmental industrial revenue
bonds due 2024 100 100
7¼% notes due 2012 (Note 13) 250 250
7
1
⁄ 8 % notes due 2004 100 100
6
7
⁄ 8 % notes due 2006 150 150
6¾% notes due 2011 200 200
6¾% convertible debentures due 2012
(Note 14) 10 10
Revolving credit loan, floating interest
rate (1.85% at January 1, 2004) due
2005 (Note 10) 65 65
Other 85 87
1,460 1,462
Less: unamortized discount 77
current portion 103 2
$1,350 $1,453
The aggregate amount of long-term debt maturing and
sinking fund requirements in the years 2004 through
2008 is as follows (in millions of dollars):
2004 $103 2007 $28
2005 $68 2008 $25
2006 $154
55