Sunoco 2004 Annual Report Download - page 31

various growth opportunities in the Logistics business, including the acquisition of refined
product terminals in Baltimore, MD, Manassas, VA and Columbus, OH and the purchase
of an additional one-third interest in the Harbor Pipeline, as well as $31 million for various
other income improvement projects across the Company.
In addition to the purchase of the 193 service stations in the Southeast and the transaction
with Equistar, the 2003 capital outlays included $286 million for base infrastructure and
maintenance, $88 million for refinery turnarounds, $23 million for spending to comply
with the Tier II low-sulfur gasoline and diesel fuel requirements and $30 million for various
income improvement projects. Base infrastructure spending included $50 million related to
the construction of a sulfur plant at the Marcus Hook refinery.
In addition to the purchase of interests in three Midwestern and Western U.S. products
pipeline companies from Unocal and the increased interest in the West Texas Gulf Pipe-
line, the 2002 capital outlays included $248 million for base infrastructure, maintenance
and regulatory spending, $82 million for refinery turnarounds and $55 million for various
income improvement projects.
Pension Plan Funded Status
The following table sets forth the components of the change in market value of the invest-
ments in Sunoco’s defined benefit pension plans:
December 31
(Millions of Dollars) 2004 2003
Balance at beginning of year $1,071 $ 930
Increase (reduction) in market value of investments resulting from:
Net investment income 123 211
Company contributions 95 89
Plan benefit payments (131) (159)
Balance at end of year $1,158 $1,071
The increase in the market value of investments during 2004 more than offset an increase
in the accumulated benefit obligations that resulted from a decline in the discount rate
from 6.00 percent at December 31, 2003 to 5.75 percent at December 31, 2004. As a re-
sult, the accumulated other comprehensive loss component of shareholders’ equity related
to pensions declined by $24 million at December 31, 2004.
Management currently anticipates making $50 million of voluntary contributions to its
funded benefit plans in 2005. In March 2002, a temporary interest-rate-relief bill was
enacted by Congress that mitigated the impact of a decline in interest rates used in pension
funding calculations. In April 2004, Congress enacted additional legislation that continues
the use of more favorable interest rates for determining funding requirements through
2005. The new bill replaces the interest rate on 30-year Treasury bonds with a rate based
on corporate bonds.
Management believes any additional contributions to the pension plans can be funded
without a significant impact on liquidity. Future changes in the financial markets and/or
interest rates could result in additional significant increases or decreases to the accumu-
lated other comprehensive loss component of shareholders’ equity and to future pension
expense and funding requirements.
Environmental Matters
General
Sunoco is subject to extensive and frequently changing federal, state and local laws and
regulations, including, but not limited to, those relating to the discharge of materials into
the environment or that otherwise deal with the protection of the environment, waste
29