Sunoco 2010 Annual Report Download - page 104

lawsuit in the near future asserting natural resource damages claims. The plaintiffs in all of the cases are seeking
to recover compensatory damages, and in some cases, injunctive relief, punitive damages and attorneys’ fees.
As of December 31, 2010, Sunoco was a defendant in approximately 10 lawsuits involving seven states and
Puerto Rico. Nine of the cases are venued in a multidistrict proceeding in a New York Federal Court. The
remaining lawsuit is pending in a state court. In that case, an appellate court recently ruled that in addition to
pursuing damages for MTBE contamination to public water supplies, the state may also attempt to recover
damages for MTBE contamination to private water supplies, but cautioned that the lower court must carefully
consider whether it is appropriate for the state to recover damages in instances where MTBE contamination of
private water supplies is below the state’s MTBE maximum contaminant level and ambient groundwater quality
standards.
In all of the cases, discovery is proceeding and there has been insufficient information developed about the
plaintiffs’ legal theories or the facts that would be relevant to an analysis of the ultimate liability of Sunoco in
these matters. Accordingly, no accrual has been established for any potential damages at December 31, 2010.
However, Sunoco does not believe that the cases will have a material adverse effect on its consolidated financial
position.
During the third quarter of 2010, the Company reached agreement concerning insurance coverage for certain
previously incurred and potential future costs related to MTBE litigation, including the matters described above.
In connection with this settlement, the Company recognized a $9 million after-tax gain. The Company reached a
similar agreement with another insurer in 2008 which resulted in recognition of an $11 million after-tax gain.
Conclusion
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 to commercial and tax disputes, product liability,
antitrust, employment claims, leaks from pipelines and underground storage tanks, natural resource damage
claims, premises-liability claims, allegations of exposures of third parties to toxic substances (such as benzene or
asbestos) and general environmental claims. Although the ultimate outcome of these proceedings and other
matters identified above cannot be ascertained at this time, it is reasonably possible that some of these matters
could be resolved unfavorably to Sunoco. Management believes that these matters could have a significant
impact on results of operations for any future period. However, management does not believe that any additional
liabilities which may arise pertaining to such matters would be material in relation to the consolidated financial
position of Sunoco at December 31, 2010.
15. Shareholders’ Equity
Each share of Company common stock is entitled to one full vote. The $7 million of outstanding 6.75
percent subordinated debentures are convertible into shares of Sunoco common stock at any time prior to
maturity at a conversion price of $20.41 per share and are redeemable at the option of the Company. At
December 31, 2010, there were 351,299 shares of common stock reserved for this potential conversion (Note 12).
The Company reduced the quarterly cash dividend on its common stock from $.30 per share ($1.20 per year)
to $.15 per share ($.60 per 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 Company repurchased 0.8 million shares of its common stock for $49 million. At December 31, 2010, the
Company had a remaining authorization from its Board to repurchase up to $600 million of Company common
stock.
96