Sunoco 2005 Annual Report Download - page 61

In 2004, the Company repurchased long-term debt with a
par value of $352 million utilizing the net proceeds from
the issuance under its shelf registration statement of the
4
7
⁄ 8 percent notes due 2014 and $154 million of cash. Of
the debt repurchased, $240 million was attributable to
tender offer purchases of the 9
3
⁄ 8 percent debentures and
the 6
7
⁄ 8 percent notes and $112 million was attributable
to open market purchases of the 9 percent debentures,
7
3
⁄ 4 percent notes and 6
3
⁄ 4 percent notes. Sunoco recog-
nized a $53 million loss ($34 million after tax) on the
early extinguishment of this debt, which is reflected in
other income (loss), net, in the 2004 consolidated state-
ment of income (Note 3).
In 2004, the Company issued $103 million of floating-
rate notes due in 2034 and used the proceeds to redeem
its 7.60 percent environmental industrial revenue bonds
that were due in 2024. These floating-rate notes, which
are remarketed weekly, have been classified as long-term
debt as the Company intends to continue the remarket-
ing of the notes. In the event the notes are not remar-
keted, the Company can refinance them on a long-term
basis utilizing its revolving credit facility (Note 10). In
2004, the Company also issued $100 million of commer-
cial paper and used the proceeds to repay its maturing 7
1
⁄ 8
percent notes. The commercial paper was repaid in 2005.
Cash payments for interest related to short-term borrow-
ings and long-term debt (net of amounts capitalized) were
$67, $98 and $111 million in 2005, 2004 and 2003,
respectively.
The following table summarizes Sunoco’s long-term debt
(including current portion) by issuer:
December 31
(Millions of Dollars) 2005 2004
Sunoco, Inc. $ 700 $ 702
Sunoco Logistics Partners L.P. 356 313
Epsilon Products Company, LLC 120 126
Other 235 241
$1,411 $1,382
12. Commitments and Contingent Liabilities
Leases and Other Commitments
Sunoco, as lessee, has noncancelable operating leases for
marine transportation vessels, service stations, office
space and other property and equipment. Total rental
expense for such leases for the years 2005, 2004 and 2003
amounted to $198, $197 and $144 million, respectively,
which include contingent rentals totaling $12, $15 and
$17 million, respectively. Approximately 6 percent of
total rental expense was recovered through related
sub-lease rental income during 2005.
The aggregate amount of future minimum annual rentals
applicable to noncancelable operating leases, including
amounts pertaining to lease extension options which are
assumed to be exercised, are as follows (in millions of
dollars):
Current
Lease
Term
Lease
Extension
Options Total
Year ending December 31:
2006 $166 $ 1 $ 167
2007 153 3 156
2008 120 5 125
2009 94 7 101
2010 85 10 95
Thereafter 271 220 491
Future minimum lease payments $889 $246 1,135
Less: Sub-lease rental income (22)
Net minimum lease payments $1,113
Approximately 36 percent of the aggregate amount of
future minimum annual rentals applicable to non-
cancelable operating leases relates to time charters for
marine transportation vessels. Most of these time charters
contain terms of between three to seven years with
renewal and sublease options. The time charter leases
typically require a fixed-price payment or a fixed-price
minimum and a variable component based on spot-
market rates. In the table above, the variable component
of the lease payments has been estimated utilizing the
average spot-market prices for the year 2005. The actual
variable component of the lease payments attributable to
these time charters could vary significantly from the
estimates included in the table.
Sunoco is contingently liable under various arrangements
which guarantee debt of third parties aggregating to ap-
proximately $7 million at December 31, 2005. At this
time, management does not believe that it is likely that
the Company will have to perform under any of these
guarantees.
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