Sunoco 2008 Annual Report Download - page 59

Dividends and Share Repurchases
The Company has paid cash dividends regularly on a quarterly basis since 1904. The Company increased
the quarterly cash dividend paid on common stock from $.20 per share ($.80 per year) beginning with the second
quarter of 2005, to $.25 per share ($1.00 per year) beginning with the second quarter of 2006, to $.275 per share
($1.10 per year) beginning with the second quarter of 2007 and to $.30 per share ($1.20 per year) beginning with
the second quarter of 2008.
The Company repurchased in 2008, 2007 and 2006, 0.8, 4.0 and 12.2 million shares, respectively, of its
common stock for $49, $300 and $871 million, respectively. At December 31, 2008, the Company had a
remaining authorization from its Board to repurchase up to $600 million of Company common stock. Additional
repurchases of Company stock will be dependent on prevailing market conditions, available cash and the
attractiveness of repurchasing stock relative to other investment alternatives. The Company currently has no
plans to repurchase any of its common stock during 2009.
Critical Accounting Policies
A summary of the Company’s significant accounting policies is included in Note 1 to the Consolidated
Financial Statements (Item 8). Management believes that the application of these policies on a consistent basis
enables the Company to provide the users of the financial statements with useful and reliable information about
the Company’s operating results and financial condition. The preparation of Sunoco’s consolidated financial
statements requires management to make estimates and assumptions that affect the reported amounts of assets,
liabilities, revenues and expenses, and the disclosures of contingent assets and liabilities. Significant items that
are subject to such estimates and assumptions consist of retirement benefit liabilities, long-lived assets and
environmental remediation activities. Although management bases its estimates on historical experience and
various other assumptions that are believed to be reasonable under the circumstances, actual results may differ to
some extent from the estimates on which the Company’s consolidated financial statements are prepared at any
point in time. Despite these inherent limitations, management believes the Company’s Management’s Discussion
and Analysis of Financial Condition and Results of Operations and Consolidated Financial Statements provide a
meaningful and fair perspective of the Company. Management has reviewed the assumptions underlying its
critical accounting policies with the Audit Committee of Sunoco’s Board of Directors.
Retirement Benefit Liabilities
Sunoco has both funded and unfunded noncontributory defined benefit pension plans which provide
retirement benefits for approximately one-half of its employees. Sunoco also has postretirement benefit plans
which provide health care benefits for substantially all of its retirees. The postretirement benefit plans are
unfunded and the costs are shared by Sunoco and its retirees. The levels of required retiree contributions to these
plans are adjusted periodically, and the plans contain other cost-sharing features, such as deductibles and
coinsurance. In addition, there is a dollar cap on Sunoco’s future contributions for its principal postretirement
health care benefits plan, which significantly reduces the impact of future cost increases on the estimated
postretirement benefit expense and benefit obligation.
The principal assumptions that impact the determination of both expense and benefit obligations for
Sunoco’s pension plans are the discount rate, the long-term expected rate of return on plan assets and the rate of
compensation increase. The discount rate and the health care cost trend are the principal assumptions that impact
the determination of expense and benefit obligations for Sunoco’s postretirement health care benefit plans.
The discount rates used to determine the present value of future pension payments and medical costs are
based on a portfolio of high-quality (AA rated) corporate bonds with maturities that reflect the duration of
Sunoco’s pension and other postretirement benefit obligations. The present values of Sunoco’s future pension
and other postretirement obligations were determined using discount rates of 6.00 and 5.95 percent, respectively,
at December 31, 2008 and 6.25 and 6.10 percent, respectively, at December 31, 2007. Sunoco’s expense under
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