Sunoco 2010 Annual Report Download - page 36

of, and interest on, our indebtedness and is not available for other purposes. If we are unable to generate
sufficient cash flow from operations, we may have to sell assets, refinance all or a portion of our indebtedness or
obtain additional financing. Any of these actions could have a material adverse effect on our financial position.
Any reduction in our credit ratings or in the Partnership’s credit ratings could materially and adversely affect
our business, financial condition, liquidity or ability to raise capital, and results of operations.
We currently maintain investment grade ratings by Fitch, Moody’s and S&P. (Ratings from credit agencies
are not recommendations to buy, sell or hold our securities. Each rating should be evaluated independently of any
other rating.) It is possible that our current ratings could be lowered or withdrawn entirely by a rating agency if,
in its judgment, circumstances so warrant. Specifically, if Fitch, Moody’s or S&P were to downgrade our long-
term rating below investment grade, our borrowing costs would increase, which could adversely affect our ability
to attract potential investors and our funding sources could decrease. In addition, our suppliers may not extend
favorable credit terms to us or may require us to provide collateral, letters of credit or other forms of security
which would drive up our operating costs. As a result, a downgrade in our credit ratings could have a materially
adverse impact on our future operations and financial position.
Distributions from our subsidiaries may be inadequate to fund our capital needs, make payments on our
indebtedness, and pay dividends on our equity securities.
As a holding company, we derive substantially all of our income from, and hold substantially all of our
assets through, our subsidiaries. As a result, we depend on distributions of funds from our subsidiaries to meet
our capital needs and our payment obligations with respect to our indebtedness. Our operating subsidiaries are
separate and distinct legal entities and have no obligation to pay any amounts due with respect to our
indebtedness or to provide us with funds for our capital needs or our debt payment obligations, whether by
dividends, distributions, loans or otherwise. In addition, provisions of applicable law, such as those restricting the
legal sources of dividends, could limit our subsidiaries’ ability to make payments or other distributions to us, or
our subsidiaries could agree to contractual restrictions on their ability to make distributions.
Our rights with respect to the assets of any subsidiary and, therefore, the rights of our creditors with respect
to those assets are effectively subordinated to the claims of that subsidiary’s creditors. In addition, if we were a
creditor of any subsidiary, our rights as a creditor would be subordinate to any security interest in the assets of
that subsidiary and any indebtedness of that subsidiary senior to that held by us.
If we cannot obtain funds from our subsidiaries as a result of restrictions under our debt instruments,
applicable laws and regulations, or otherwise, and are unable to meet our capital needs, pay interest or principal
with respect to our indebtedness when due or pay dividends on our equity securities, we cannot be certain that we
will be able to obtain the necessary funds from other sources, or on terms that will be acceptable to us.
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, 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 noncash settlement
and curtailment losses in these plans during 2009 and 2010 totaling approximately $75 and $30 million after tax,
respectively. In 2010, we contributed $234 million to our funded defined benefit plans consisting of $144 million
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