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Sunoco, Inc.
2010 Annual Report
and Form 10-K

Table of contents

  • Page 1
    Sunoco, Inc. 2010 Annual Report and Form 10-K

  • Page 2
    ...publicly traded master limited partnership which owns and operates 7,600 miles of refined product and crude oil pipelines and approximately 40 active product terminals. Many of Sunoco Logistics' pipelines and terminals and storage facilities are integrated with Sunoco's retail network and refineries...

  • Page 3
    ...in pretax profit in 2010. We also grew the business by adding more than 100 retail locations to our portfolio. Logistics had another strong year of earnings and a record year for growth capital. Coke improved the reliability of its manufacturing operations and had its best ever safety performance in...

  • Page 4
    ... to our retail network-sites on the Garden State Parkway in New Jersey, the Ohio Turnpike and in upstate New York-demonstrate that we are making some progress. For 2011, convenience and new site fuel margin dollars are growth opportunities for us. By adding locations and providing a great customer...

  • Page 5
    ... No.) 1818 Market Street, Suite 1500, Philadelphia, PA (Address of principal executive offices) 19103 (Zip Code) Registrant's telephone number, including area code (215) 977-3000 Securities registered pursuant to Section 12(b) of the Act: Title of each class Name of each exchange on which...

  • Page 6

  • Page 7
    ...9A. Item 9B. PART III Item 10. Item 11. Item 12. Item 13. Item 14. PART IV Item 15. Exhibits and Financial Statement Schedules ...116 120 121 Directors, Executive Officers and Corporate Governance ...Executive Compensation ...Security Ownership of Certain Beneficial Owners and Management and Related...

  • Page 8

  • Page 9
    ...into five business segments (Refining and Supply, Retail Marketing, Logistics, Chemicals and Coke) plus a holding company and a professional services group. Sunoco, Inc., the holding company, is a non-operating parent company which includes certain corporate officers. The professional services group...

  • Page 10
    ... at its Marcus Hook, Philadelphia and Toledo refineries. The Company sells these products to other Sunoco business units and to wholesale and industrial customers. In December 2010, Sunoco entered into an agreement to sell its Toledo refinery and related crude and refined product inventories. The...

  • Page 11
    ... weak demand and increased global refining capacity. As part of this decision, the Company shifted production from the Eagle Point refinery to the Marcus Hook and Philadelphia refineries which are now operating at higher capacity utilization. Approximately 380 employees were terminated in connection...

  • Page 12
    ... sub-lease options. The cost of the remaining marine transportation requirements reflects spot-market rates. Approximately 60 percent of Sunoco's crude oil supply for its Philadelphia and Marcus Hook refineries during 2010 came from Nigeria. Some of the crude oil producing areas of this West African...

  • Page 13
    ... and gasoline blendstocks between the Philadelphia and Marcus Hook refineries. Finished products are delivered to customers via the pipeline and terminal network owned and operated by Sunoco Logistics Partners L.P. (see "Logistics" below) as well as by third-party pipelines and barges and by truck...

  • Page 14
    ...States. The highest concentrations of outlets are located in Connecticut, Florida, Maryland, Massachusetts, Michigan, New Jersey, New York, Ohio, Pennsylvania and Virginia. In January 2011, Sunoco reached an agreement to begin operating the nine fuel stations at service plazas along the Garden State...

  • Page 15
    ... 2010, Sunoco signed an agreement to become the Official Fuel of the Indy Racing League for the 2011 through 2014 seasons. Sunoco's APlus® convenience stores are located principally in Florida, New York and Pennsylvania. These stores supplement sales of fuel products with a broad mix of merchandise...

  • Page 16
    ... fuel, home heating oil and other products for Sunoco's other businesses and for third-party integrated petroleum companies, independent refiners, independent marketers and distributors. Crude oil pipeline operations, located in Texas, Oklahoma and Michigan, transport foreign crude oil received...

  • Page 17
    ... crude oil terminal complex adjacent to Sunoco's Philadelphia refinery and a refined products terminal adjacent to Sunoco's Marcus Hook refinery. During 2010, 2009 and 2008, throughput at these other terminals totaled 465, 591 and 653 thousand barrels daily, respectively. The Partnership's Nederland...

  • Page 18
    ... WV, and Marcus Hook, PA, a propylene supply agreement and related inventory. Cash proceeds from this divestment of $348 million were received in the second quarter of 2010. Sunoco recognized a net loss of $44 million after tax related to the divestment. The loss is shown separately in Corporate and...

  • Page 19
    ... 250,000-300,000 tons of coal annually. Current production volumes are contracted for sale through 2011. In the second quarter of 2010, Sunoco's Board of Directors authorized a plan to separate Sunoco's metallurgical cokemaking business, which is managed by SunCoke Energy, from the remainder of...

  • Page 20
    ..., all applicable taxes (excluding property and net income taxes), and coke transportation costs, as well as an operating cost component and fixed cost component. ArcelorMittal is entitled to receive under the Haverhill agreement, as a credit to the price of coke, an amount representing a percentage...

  • Page 21
    ... gas produced at Haverhill during the cokemaking process is used to generate low-cost steam that is sold to the adjacent chemical manufacturing complex owned and operated by Sunoco's Chemicals business and electricity for sale to AK Steel and into the regional power market. The cogeneration plant...

  • Page 22
    ... is currently unknown. SunCoke Energy has recently undertaken capital projects to improve reliability of the energy recovery systems and enhance environmental performance at its Haverhill and Gateway facilities. The projects will be carried out over the 2010-2012 period at an expected total cost of...

  • Page 23
    ...national or regional retail systems. The number of competitors varies depending on the geographical area. It also varies with gasoline and convenience store offerings. The principal competitive factors affecting Sunoco's retail marketing operations include site location, product price, selection and...

  • Page 24
    ... due to employee terminations, the impact of the ongoing Retail Portfolio Management program and the divestment of the polypropylene business. Approximately 4,000 of Sunoco's employees as of December 31, 2010 were employed in Company-operated convenience stores and service stations and approximately...

  • Page 25
    ...: • Cyclical nature of the businesses in which we operate: Refined product inventory levels and demand, crude oil price levels and availability and refinery utilization rates are all cyclical in nature. Historically, both the chemicals industry and the refining industry have experienced periods of...

  • Page 26
    ..., and in the prices for refined products and chemicals. This may place downward pressure on our results of operations. This is particularly true of developments in and relating to oil-producing countries, including terrorist activities, military conflicts, embargoes, internal instability or actions...

  • Page 27
    .... Changes in general economic, financial and business conditions could have a material effect on our business or results of operations. Weakness in general economic, financial and business conditions can lead to a decline in the demand for the refined products and chemicals that we sell. Such...

  • Page 28
    ... for terminalling and storing refined products and crude oil and by purchasing and selling crude oil and refined products. The Partnership serves our refineries under long-term pipelines and terminals, storage and throughput agreements. Furthermore, our financial statements include the consolidated...

  • Page 29
    ... primarily through the planned development of GHG emission inventories and/or regional GHG cap and trade programs. Most of these cap and trade programs work by requiring major sources of emissions, such as electric power plants, or major producers of fuels, such as petroleum refineries, to acquire...

  • Page 30
    ... industry is subject to stringent safety and health standards. Recent fatal mining accidents in West Virginia of another coal mining company have received national attention and have led to responses at the state and national levels that have resulted in increased scrutiny of coal mining operations...

  • Page 31
    ...significant expenditures, increasing the overall cost of operating our businesses, including capital costs to construct, maintain and upgrade equipment and facilities. To the extent these expenditures are not ultimately reflected in the prices of our products or services, our operating results would...

  • Page 32
    ..., refining and marketing companies, independent terminal companies and distribution companies with marketing and trading operations. Our chemicals business competes with local, regional, national and international companies, some of which have greater financial, research and development, production...

  • Page 33
    ... the impact of foreign imports, could lead to lower prices or reduced margins for the products we sell, which could have an adverse effect on our business or results of operations. The financial performance of our coke business is dependent upon customers in the steel industry whose failure to...

  • Page 34
    ... factors or to recover the related costs, or if market conditions change, it could materially and adversely affect our financial position, results of operations or cash flows. From time to time, our cash needs may exceed our internally generated cash flow, and our business could be materially and...

  • Page 35
    ... a material adverse effect on our financial position. Our ability to meet our debt service obligations depends upon our future performance, which is subject to general economic conditions, industry cycles and financial, business and other factors affecting our operations, many of which are beyond...

  • Page 36
    ... our funded defined benefit plans at December 31, 2010 exceeded the market value of our plan assets by $61 million. As a result of the workforce reduction, the sale of our Tulsa refinery, the shutdown of our Eagle Point refinery and the sale of the polypropylene chemicals business, we also incurred...

  • Page 37
    ... 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. We have outsourced various functions to third-party service providers, which...

  • Page 38
    ... significant disruptions and costs to our operations, which could materially adversely affect our business, financial condition, operating results and cash flow and our ability to file our financial statements with the Securities and Exchange Commission in a timely or accurate manner. Our failure to...

  • Page 39
    ... Safety and Health Administration ("OSHA") announced a National Emphasis Program under which it is inspecting domestic oil refinery locations. OSHA conducted inspections at Sunoco, Inc. (R&M)'s Toledo refinery for a six-month period commencing in November 2007, at the Eagle Point refinery...

  • Page 40
    ... and the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2009.) The Partnership's Sunoco Pipeline L.P. subsidiary operates the West Texas Gulf Pipeline on behalf of West Texas Gulf Pipe Line Company and its shareholders pursuant to an Operating Agreement. Sunoco Pipeline...

  • Page 41
    ... New York $3.425 million. (See also the Company's Annual Reports on Form 10-K for the fiscal years ended December 31, 2009 and 2008.) Many other legal and administrative proceedings are pending or may be brought against Sunoco arising out of its current and past operations, including matters related...

  • Page 42
    ...54 Senior Vice President, Refining Lynn L. Elsenhans, 54 Chairman, Chief Executive Officer and President, Sunoco, Inc., and Chairman of the Board of Directors and Chief Executive Officer, Sunoco Partners LLC Stacy L. Fox, 56 Senior Vice President, General Counsel and Corporate Secretary Frederick...

  • Page 43
    ... by reference to the Quarterly Financial and Stock Market Information on page 108 of this report. ITEM 6. SELECTED FINANCIAL DATA (Millions of Dollars or Shares, Except Per-Share Amounts) 2010 2009 2008 2007 2006 Statement of Operations Data: Sales and other operating revenue (including consumer...

  • Page 44
    ...collectively, "Sunoco" or the "Company") and of significant trends that may affect its future performance. It should be read in conjunction with Sunoco's consolidated financial statements and related notes under Item 8. Those statements in Management's Discussion and Analysis that are not historical...

  • Page 45
    ...to sell the Toledo refinery and related inventory for approximately $400 million (consisting of $200 million in cash proceeds and a $200 million note) plus crude oil and refined product inventory associated with the refinery which will be valued at market prices near the time of closing. The sale is...

  • Page 46
    ... operations in 2008 at a $269 million, second 550 thousand tons-per-year cokemaking facility and associated cogeneration power plant located at the Company's Haverhill, OH site. • • • • • Sunoco also: • Entered into an agreement in 2010 to outsource some back office processes...

  • Page 47
    ... flows from the incentive distribution rights; Sold 2.2 million of its Sunoco Logistics Partners L.P. limited partnership units to the public in February 2010 generating approximately $145 million of net proceeds; Enhanced the funded status of its defined benefit plans in 2010 with $234 million of...

  • Page 48
    ... operations ...Income tax matters ...LIFO inventory profits ...Sale of discontinued Tulsa operations ...Sale of retail heating oil and propane distribution business ...Issuance of Sunoco Logistics Partners L.P. limited partnership units ...Net income (loss) attributable to Sunoco, Inc. shareholders...

  • Page 49
    ...Eagle Point refinery ($55 million) and the gain on the sale of the discontinued Tulsa refining operations ($41 million). Refining and Supply-Continuing Operations The Refining and Supply business manufactures petroleum products and commodity petrochemicals at its Marcus Hook, Philadelphia and Toledo...

  • Page 50
    ...Sunoco retail sites in this area. In 2009, Sunoco permanently shut down all process units at the Eagle Point refinery due to weak demand and increased global refining capacity which have created margin pressure on the entire refining industry. As part of this decision, the Company shifted production...

  • Page 51
    ... Management program ($11 million). Retail gasoline margins in 2008 benefited from the rapid decrease in wholesale prices during the second half of 2008. During 2009, Sunoco sold its retail heating oil and propane distribution business for $83 million and recognized a $26 million net after-tax gain...

  • Page 52
    ... Profile of Sunoco Businesses (see Note 2 to the Consolidated Financial Statements under Item 8). In the third quarter of 2009, the Partnership acquired Excel Pipeline LLC, the owner of a crude oil pipeline which services Gary Williams' Wynnewood, OK refinery and a refined products terminal in...

  • Page 53
    ..., both within its current system and with third-party acquisitions. Chemicals-Continuing Operations The Chemicals business manufactures, distributes and markets phenol and related products at chemical plants in Philadelphia, PA and Haverhill, OH. The financial and operating data presented in the...

  • Page 54
    ..., OH. Third-party investors in the Indiana Harbor cokemaking operations are currently entitled to a noncontrolling interest amounting to 34 percent of the partnership's net income, which declines to 10 percent by 2038. During the second quarter of 2010, Sunoco's Board of Directors authorized a plan...

  • Page 55
    ... than converting to "requirements" in the fourth quarter of 2012. This extension provides SunCoke a guaranteed outlet for this coke production through 2020. If the amendments to the Jewell and Haverhill coke supply agreements had been in place during 2010, SunCoke's pretax earnings would have been...

  • Page 56
    ... upon market conditions in the steel industry. Corporate and Other Corporate Expenses-Corporate administrative expenses increased $35 million in 2010 largely due to higher accruals for performance-related incentive compensation resulting from the Company's improved financial performance compared...

  • Page 57
    ...of the Eagle Point refinery. Sale of Discontinued Tulsa Operations-During 2009, Sunoco recognized a $41 million net after-tax gain related to the divestment of the discontinued Tulsa operations (see Note 2 to the Consolidated Financial Statements under Item 8). Sale of Retail Heating Oil and Propane...

  • Page 58
    ... business in 2010 and the Tulsa refinery and related inventory and the retail heating oil and propane distribution business in 2009 as well as the sale of retail gasoline outlets throughout the 2008-2010 period. In 2009, Sunoco Logistics Partners L.P. issued 2.25 million limited partnership...

  • Page 59
    ...December 31, 2010, the Company's tangible net worth was $3.6 billion and its targeted tangible net worth was $2.1 billion. The Facility also requires that Sunoco's ratio of consolidated net indebtedness, including borrowings of Sunoco Logistics Partners L.P., to consolidated capitalization (as those...

  • Page 60
    ... to secure wastewater treatment services at the Toledo refinery and coal handling services at the Indiana Harbor cokemaking facility. Sunoco's operating leases include leases for marine transportation vessels, service stations, office space and other property and equipment. Operating leases include...

  • Page 61
    ..., plants and equipment as well as the Company's acquisitions and other capital outlays (in millions of dollars): 2011 Plan 2010 2009 2008 Refining and Supply: Continuing operations ...Discontinued Tulsa operations ...Retail Marketing ...Logistics ...Chemicals: Continuing operations ...Discontinued...

  • Page 62
    ... City, IL and Middletown, OH; and $41 million for various other income improvement projects. The $50 million of outlays for acquisitions related to the purchase by the Logistics business of a crude oil pipeline in Oklahoma and a refined products terminal in Michigan. The Company's 2008 capital...

  • Page 63
    ... the change in market value of the investments in Sunoco's defined benefit pension plans (in millions of dollars): December 31 2010 2009 Balance at beginning of year ...Increase (reduction) in market value of investments resulting from: Net investment income ...Company contributions ...Plan benefit...

  • Page 64
    ... at the Company's refineries. Pollution abatement capital outlays are expected to approximate $98 and $101 million in 2011 and 2012, respectively, excluding amounts attributable to the Toledo refinery after the expected closing of the sale in the first quarter of 2011 and the Marcus Hook Consent...

  • Page 65
    ... these credit limits are reached. As a result, the Company had no significant derivative counterparty credit exposure at December 31, 2010 (see Note 18 to the Consolidated Financial Statements under Item 8). Interest Rate Risk Sunoco has market risk exposure for changes in interest rates relating to...

  • Page 66
    ... 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...

  • Page 67
    ... the Eagle Point refinery and the sale of the polypropylene chemicals business, the Company incurred noncash settlement losses totaling $56 and $111 million with respect to its defined benefit plans in 2010 and 2009, respectively. In addition, as a result of the above-noted changes, the service cost...

  • Page 68
    accelerated amortization of deferred gains and losses, will be recognized in the future as previously earned lump sum payments are made. Sunoco has unrecognized prior service benefits related to its postretirement benefit plans of $56 million at December 31, 2010 which is primarily attributable to ...

  • Page 69
    ...goodwill related to the Company's polypropylene business; and certain retail marketing properties held for sale in the Company's Retail Portfolio Management program. For a further discussion of these asset impairments, see Note 2 to the Consolidated Financial Statements (Item 8). The Toledo refinery...

  • Page 70
    ...focus is on remediating discrete interior areas to attain regulatory closure. Sunoco owns or operates certain retail gasoline outlets where releases of petroleum products have occurred. Federal and state laws and regulations require that contamination caused by such releases at these sites and at 62

  • Page 71
    ... of Sunoco's liability at the sites, if any, in light of the number, participation level and financial viability of the other parties. Deferred Income Taxes The Company recognizes benefits in income and related deferred tax assets for net operating loss carryforwards ("NOLs") and tax credit...

  • Page 72
    ..., without limitation General economic, financial and business conditions which could affect Sunoco's financial condition and results of operations; Changes in refining, marketing and chemical margins; Changes in coal and coke prices; Variation in crude oil and petroleum-based commodity prices and...

  • Page 73
    ...Changes in financial markets impacting pension expense and funding requirements; Risks related to labor relations and workplace safety; Nonperformance or force majeure by, or disputes with or changes in contract terms with, major customers, suppliers, dealers, distributors or other business partners...

  • Page 74
    ...Public Accounting Firm on Financial Statements To the Shareholders and Board of Directors, Sunoco, Inc. We have audited the accompanying consolidated balance sheets of Sunoco, Inc. and subsidiaries as of December 31, 2010 and 2009, and the related consolidated statements of operations, comprehensive...

  • Page 75
    ... December 31 2010 2009* 2008* Revenues Sales and other operating revenue (including consumer excise taxes) ...Interest income ...Gain on remeasurement of pipeline equity interests (Note 2) ...Other income, net (Notes 2, 3 and 17) ...Costs and Expenses Cost of products sold and operating expenses...

  • Page 76
    ...Accounts and notes receivable, net ...Inventories (Note 6) ...Income tax refund receivable ...Deferred income taxes (Note 4) ...Toledo refinery and related assets held for sale (Note 2) ...Total current assets ...Investments and long-term receivables (Note 7) ...Properties, plants and equipment, net...

  • Page 77
    ... ...Cash Flows from Investing Activities: Capital expenditures ...Acquisitions (Note 2) ...Proceeds from divestments: Polypropylene operations ...Tulsa refinery and related inventory ...Retail heating oil and propane distribution business ...Other ...Other ...Net cash used in investing activities...

  • Page 78
    ...on available-for-sale securities (net of related tax expense of $1) ...Cash dividends and distributions ...Issued under stock-based incentive plans ...Net increase in equity related to unissued shares under stock-based incentive plans ...Net proceeds from Sunoco Logistics Partners L.P. public equity...

  • Page 79
    ...Net increase in unrealized gain on available-for-sale securities (net of related tax expense of $-) ...Cash dividends and distributions ...Issued under stock-based incentive plans ...Net increase in equity related to unissued shares under stock-based incentive plans ...Contribution to pension plans...

  • Page 80
    ... chemicals business to Braskem S.A. The assets sold as part of this transaction included the polypropylene manufacturing facilities in LaPorte, TX, Neal, WV, and Marcus Hook, PA, a propylene supply agreement and related inventory. On June 1, 2009, Sunoco completed the sale of its Tulsa refinery...

  • Page 81
    ... into primarily to acquire crude oil and refined products of a desired quality or at a desired location, are netted in cost of products sold and operating expenses in the consolidated statements of operations. Consumer excise taxes on sales of refined products and merchandise are included in both...

  • Page 82
    ... pricing of crude oil purchases, to convert certain expected refined product sales to fixed or floating prices, to lock in what Sunoco considers to be acceptable margins for various refined products and to lock in the price of a portion of the Company's electricity and natural gas purchases or sales...

  • Page 83
    ... rights. These gains are reported separately in the consolidated statement of operations. In December 2010, Sunoco acquired 25 retail locations consisting of assets located in the Buffalo, Syracuse, Albany, and Rochester markets of central and northern New York for $25 million including inventory...

  • Page 84
    ...TX, Neal, WV, and Marcus Hook, PA, a propylene supply agreement and related inventory. Cash proceeds from this divestment of $348 million were received in the second quarter of 2010. In December 2008, Sunoco announced its intention to sell the Tulsa refinery or convert it to a terminal by the end of...

  • Page 85
    ... the Company to direct resources and management focus toward growing Sunoco's retail marketing and logistics businesses. Sunoco does not expect a material impact on its 2011 net income as a result of the closing of this transaction. At December 31, 2010, the Toledo refinery and its related assets...

  • Page 86
    ... Company's invested capital in Company-owned or leased retail sites. Most of the sites were converted to contract dealers or distributors thereby retaining most of the gasoline sales volume attributable to the divested sites within the Sunoco branded business. During 2010, 2009 and 2008, net gains...

  • Page 87
    ... the Eagle Point shutdown. In 2009, management implemented a business improvement initiative to reduce costs and improve business processes. The initiative included all business and operations support functions, as well as operations at the Philadelphia and Marcus Hook refineries and hourly workers...

  • Page 88
    ... components of other income, net, are as follows (in millions of dollars): 2010 2009 2008 Gain on divestments (Note 2) ...Equity income (loss): Pipeline joint ventures (Notes 2 and 7) ...Other ...Gain related to issuance of Sunoco Logistics Partners L.P. limited partnership units (Note 17) ...Other...

  • Page 89
    ... of its 2009 net operating loss. During 2010, Sunoco recorded a $9 million charge related to an increase in deferred state income taxes attributable to the transfer of assets related to its continuing phenol chemicals operations to a different legal entity subsequent to the sale of the stock of the...

  • Page 90
    ...tax benefits) related to tax positions which, if recognized, would impact the Company's effective tax rate. Accruals for interest and penalties totaled $9 and $11 million at December 31, 2010 and 2009, respectively. The Company's federal income tax returns have been examined by the Internal Revenue...

  • Page 91
    6. Inventories Inventories (excluding those attributable to the Toledo refinery which are included in assets held for sale at December 31, 2010) consisted of the following components (in millions of dollars): December 31 2010 2009 Crude oil ...Petroleum and chemical products ...Coal and coke ......

  • Page 92
    ...$3,514 709 1,540 824 1,039 $7,626 Refining and supply ...Retail marketing ...Logistics ...Chemicals ...Coke ... $ 5,943 1,355 2,183 1,253 1,333 $12,067 9. Retirement Benefit Plans Defined Benefit Pension Plans and Postretirement Health Care Plans Sunoco has both funded and unfunded noncontributory...

  • Page 93
    ... amounts attributable to discontinued polypropylene chemicals and Tulsa refining operations) consisted of the following components (in millions of dollars): Defined Benefit Plans 2010 2009 2008 Postretirement Benefit Plans 2010 2009 2008 Service cost (cost of benefits earned during the year...

  • Page 94
    ... Plans 2009 Unfunded Plans Postretirement Benefit Plans 2010 2009 Benefit obligations at beginning of year* ...Service cost ...Interest cost ...Actuarial losses ...Plan amendments ...Benefits paid ...Divestments ...Premiums paid by participants ...Special termination benefits and curtailment (gains...

  • Page 95
    ... Funded Unfunded Plans Plans Plans Plans Plans Plans Postretirement Benefit Plans 2010 2009 2008 Cumulative amounts not yet recognized in net income (loss): Prior service costs (benefits) ...$ 1 Actuarial losses ...356 Accumulated other comprehensive loss (before related tax benefit) ...$357...

  • Page 96
    ...on plan assets: Assets held at end of year ...Assets sold during the year ...Purchases and sales, net ...Balance at end of year ... $56 $59 13 - 8 (7) - 4 $77 $56 Investments in equity and fixed income securities that are publicly traded are valued at the closing market prices on the last business...

  • Page 97
    ... Pension Plans $- $1 $- $(1) Sunoco has defined contribution pension plans which provide retirement benefits for most of its employees. Sunoco's contributions are principally based on a percentage of employees' annual base compensation and, effective June 30, 2010, a discretionary profit sharing...

  • Page 98
    ...December 31, 2010, the Company's tangible net worth was $3.6 billion and its targeted tangible net worth was $2.1 billion. The Facility also requires that Sunoco's ratio of consolidated net indebtedness, including borrowings of Sunoco Logistics Partners L.P., to consolidated capitalization (as those...

  • Page 99
    ... in 2011 exclude $31 million outstanding under the Partnership's $63 million revolving credit facility since the Partnership has the ability and intent to refinance this amount on a long-term basis (see Note 11). Cash payments for interest related to short-term borrowings and long-term debt (net of...

  • Page 100
    ... 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 2010, 2009 and 2008 amounted...

  • Page 101
    ..., Sunoco has sold thousands of retail gasoline outlets as well as refineries, terminals, coal mines, oil and gas properties and various other assets. In connection with these sales, the Company has indemnified the purchasers for potential environmental and other contingent liabilities related to...

  • Page 102
    ...): Pipelines Retail and Chemicals Hazardous Refineries Sites Terminals Facilities Waste Sites Other Total At December 31, 2007 ...Accruals ...Payments ...Other ...At December 31, 2008 ...Accruals ...Payments ...At December 31, 2009 ...Accruals ...Payments ...Other ...At December 31, 2010 ... $ 35...

  • Page 103
    ...is on remediating discrete interior areas to attain regulatory closure. Sunoco owns or operates certain retail gasoline outlets where releases of petroleum products have occurred. Federal and state laws and regulations require that contamination caused by such releases at these sites and at formerly...

  • Page 104
    ... year) beginning with the first quarter of 2010. The Company had previously increased the quarterly cash dividend from $.275 per share to $.30 per share beginning with the second quarter of 2008. The Company did not repurchase any of its common stock in the open market in 2010 and 2009. In 2008, the...

  • Page 105
    ... defined benefit pension plans in February 2010. The shares contributed to the defined benefit plans were removed from treasury on a last-in, first-out basis resulting in a $251 million reduction in treasury stock and a $161 million charge to capital in excess of par value. The Company's Articles...

  • Page 106
    ...of an equivalent number of Sunoco common shares at the end of the period) with any change in fair value recognized as an increase or decrease in income. For service-based awards to be settled in common stock, the grant-date fair value is based on the closing price of the Company's shares on the date...

  • Page 107
    ... **Consists of adjustments to vested performance-based awards to reflect actual performance. The adjustments are required since the original grants of these awards were at 100 percent of the targeted amounts. ***Cash payments for vested awards are made in the first quarter of the following year. 99

  • Page 108
    ...the total compensation cost related to nonvested awards not yet recognized reflect the Company's estimates of performance factors pertaining to performance-based common stock unit awards. In addition, equity-based compensation expense attributable to Sunoco Logistics Partners L.P. for 2010, 2009 and...

  • Page 109
    ...expected to be approximately 46 percent at the Partnership's current quarterly cash distribution rate. The accounts of the Partnership continue to be included in Sunoco's consolidated financial statements. Since the issuance/sale of the limited partnership units subsequent to January 1, 2009 and the...

  • Page 110
    ... to the Company's consolidated balance sheets. Sunoco's other current assets (other than inventories, deferred income taxes and Toledo refinery and related assets held for sale) and current liabilities (other than the current portion of retirement benefit liabilities) are financial instruments and...

  • Page 111
    ...petrochemicals at Sunoco's Marcus Hook, Philadelphia and Toledo refineries and sells these products to other Sunoco businesses and to wholesale and industrial customers. In the fourth quarter of 2009, Refining and Supply permanently shut down all process units at its Eagle Point refinery in response...

  • Page 112
    ...several refined product pipeline joint ventures. Substantially all logistics operations are conducted through Sunoco Logistics Partners L.P. (Note 17). The Chemicals segment manufactures, distributes and markets phenol and related products at chemical plants in Philadelphia, PA and Haverhill, OH. In...

  • Page 113
    ... 4). ***Excludes $25 million relating to an acquisition of retail marketing sites in New York and $243 million relating to acquisitions of a butane blending business and additional ownership interests in pipeline joint ventures in Logistics (Note 2). †Consists of Sunoco's $129 million consolidated...

  • Page 114
    ...million after tax of LIFO inventory profits (Note 2). ***Excludes $50 million acquisition of a crude oil pipeline in Oklahoma and a refined products terminal in Michigan (Note 2). †Consists of Sunoco's $394 million consolidated income tax refund receivable, $96 million consolidated deferred income...

  • Page 115
    ... chemicals and Tulsa refining operations) (in millions of dollars): 2010 2009 2008 Gasoline: Wholesale ...Retail ...Middle distillates ...Residual fuel ...Petrochemicals ...Other refined products ...Convenience store merchandise ...Other products and services ...Resales of purchased crude oil...

  • Page 116
    ...the divestment of the discontinued Tulsa operations and a $55 million after-tax gain from the liquidation of LIFO inventories in connection with the permanent shutdown of the Eagle Point refinery. @The Company's common stock is principally traded on the New York Stock Exchange, Inc. under the symbol...

  • Page 117
    ... be disclosed in company reports filed under the Exchange Act is accumulated and communicated to management, including the Company's Chairman, Chief Executive Officer and President and the Company's Senior Vice President and Chief Financial Officer as appropriate, to allow timely decisions regarding...

  • Page 118
    ... over financial reporting. Report of Independent Registered Public Accounting Firm on Internal Control over Financial Reporting To the Shareholders and Board of Directors, Sunoco, Inc. We have audited Sunoco, Inc and subsidiaries' internal control over financial reporting as of December 31, 2010...

  • Page 119
    ...management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company's assets that could have a material effect on the financial statements. Because of its inherent limitations, internal...

  • Page 120
    ... ended December 31, 2010, Sunoco Inc.'s operating subsidiaries received no written notice from MSHA of: (a) a flagrant violation under section 110(b)(2) of the Mine Act for failure to make reasonable efforts to eliminate a known violation of a mandatory safety or health standard that substantially...

  • Page 121
    ... or closed unless they received a citation or order issued by MSHA, (ii) permitted mining sites where we have not begun operations, or (iii) mines that are operated on our behalf by contracors who hold the MSHA numbers and have the MSHA liabilities. Alleged violations of health or safety standards...

  • Page 122
    ... I of this Annual Report on Form 10-K. Sunoco, Inc. has a Code of Business Conduct and Ethics (the "Code"), which applies to all officers, directors and employees, including the chief executive officer, the principal financial officer, the principal accounting officer and persons performing similar...

  • Page 123
    ... the section "Director Independence," both under the heading "Governance Matters" in the Company's Proxy Statement, which will be filed with the SEC within 120 days after December 31, 2010, are incorporated herein by reference. ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES The information required...

  • Page 124
    ...report: 1. Consolidated Financial Statements: The consolidated financial statements are set forth under Item 8 of this report. 2. Financial Statement... Stock Unit Agreement under the Sunoco, Inc. Long-Term Performance Enhancement Plan II (incorporated by reference to Exhibit 10.3 of the Company's...

  • Page 125
    ... 10.5 of the Company's Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2010 filed May 6, 2010, File No. 1-6841). -Amendment No. 2011-1 to Sunoco, Inc. Executive Involuntary Deferred Compensation Plan. -Sunoco, Inc. Senior Executive Incentive Plan, effective as of January...

  • Page 126
    ... 8, 2002, among Sunoco, Inc., Sunoco, Inc. (R&M), Sun Pipe Line Company of Delaware, Atlantic Petroleum Corporation, Sunoco Texas Pipe Line Company, Sun Pipe Line Services (Out) LLC, Sunoco Logistics Partners L.P., Sunoco Logistics Partners Operations L.P., and Sunoco Partners LLC (incorporated by...

  • Page 127
    ... Company of Delaware LLC, Atlantic Petroleum Corporation, Sunoco Pipeline L.P., Sunoco Logistics Partners L.P., Sunoco Logistics Partners Operations L.P., and Sunoco Partners LLC. -Product Terminal Services Agreement, dated as of May 1, 2007, among Sunoco, Inc. (R&M) and Sunoco Partners Marketing...

  • Page 128
    ... by the undersigned, thereunto duly authorized. SUNOCO, INC. BY /S/ BRIAN P. MACDONALD Brian P. MacDonald Senior Vice President and Chief Financial Officer Date February 28, 2011 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by or on behalf of...

  • Page 129
    ... and report financial information; and Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. b) Lynn L. Elsenhans Chairman, Chief Executive Officer and President February 28, 2011...

  • Page 130
    ... and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the...

  • Page 131
    ...of the Securities Exchange Act of 1934 and that the information contained in the periodic report fairly presents, in all material respects, the financial condition and results of operations of Sunoco, Inc. Lynn L. Elsenhans Chairman, Chief Executive Officer and President February 28, 2011 I, Brian...

  • Page 132
    ... stock price and dividends), plotted on an annual basis, with Sunoco's performance peer group's cumulative total returns and the S&P 500 Stock Index (a performance indicator of the overall stock market). **Western was included in the Peer Group commencing on January 18, 2006, the date the company...

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  • Page 135
    ... and Safety Sunoco's Corporate Responsibility Report is available at our website. CustomerFirst For customer service inquiries, write the Company, call 1-800-SUNOCO1 or email [email protected]. Certifications The Certifications of Lynn L. Elsenhans, Chairman, Chief Executive Officer and...

  • Page 136
    Sunoco, Inc., 1818 Market Street, Suite 1500, Philadelphia, PA 19103 Printed on recycled paper