Sunoco 2009 Annual Report Download - page 33

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Poor performance in the financial markets could have a material adverse effect on the level of funding of our
pension obligations, on the level of pension expense and on our financial position. In addition, any use of
current cash flow to fund our pension and postretirement health care obligations could have a significant
adverse effect on our financial position.
We have substantial benefit obligations in connection with our noncontributory defined benefit pension
plans. We have made contributions to the plans each year over the past several years to improve their funded
status, and we expect to make additional contributions to the plans in the future as well. The projected benefit
obligation of our funded defined benefit plans at December 31, 2009 exceeded the market value of our plan
assets by $319 million. Poor investment results for the plans during 2008 resulted in an increase of approximately
$50 million after tax in pension expense for 2009 due to lower expected returns on plan assets and higher
amortization of actuarial losses. As a result of the workforce reduction, the sale of our Tulsa refinery and the
shutdown of our Eagle Point refinery, we also incurred noncash settlement and curtailment losses in these plans
during 2009 totaling approximately $75 million after tax. In early 2010, we contributed $230 million to our
funded defined benefit plans consisting of $140 million of cash and 3.59 million shares of our own common
stock valued at $90 million. We also may make additional contributions to our funded defined benefit plans
during the remainder of 2010 if we have available cash. Continued poor performance of the financial markets, or
decreases in interest rates, could result in additional significant charges to shareholders’ equity and additional
significant increases in future pension expense and funding requirements.
We also have substantial benefit obligations in connection with our postretirement health care plans that
provide health care benefits for substantially all of our current retirees. These plans are unfunded and the costs
are shared by us and our retirees.
To the extent that we have to fund our pension and postretirement health care obligations with cash from
operations, we may be at a disadvantage to some of our competitors who do not have the same level of retiree
obligations that we have.
A portion of our workforce is unionized, and we may face labor disruptions that could materially and
adversely affect our operations.
Approximately 22 percent of our employees are covered by many collective bargaining agreements with
various terms and dates of expirations. All of the contracts at our refineries expire in the first quarter of 2012. We
cannot assure you that we will not experience a work stoppage in the future as a result of labor disagreements. A
labor disturbance at any of our major facilities could have a material adverse effect on our operations.
Acquisitions, divestitures and other significant transactions may adversely affect our business.
We regularly review acquisition, divestiture and other strategic opportunities that would further our business
objectives, diversity, upgrade or grow our asset base, or eliminate assets that do not meet our
return-on-investment criteria. The anticipated benefits of our acquisitions, divestitures and other strategic
transactions may not be realized or may be realized more slowly than we expected. Acquisitions, divestitures and
other strategic opportunities have resulted in, and in the future could result in, a number of financial
consequences, including without limitation: reduced cash balances and related interest income; higher fixed
expenses; the incurrence of debt and contingent liabilities, including indemnification obligations; restructuring
actions, which could result in charges that have a material effect on our results of operations and our financial
position; loss of customers, suppliers, distributors, licensors or employees of the acquired company; legal,
accounting and advisory fees; and one-time write-offs of large amounts.
ITEM 1B. UNRESOLVED STAFF COMMENTS
None.
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