Sunoco 2010 Annual Report Download - page 71

formerly owned sites be assessed and remediated to meet the applicable standards. The obligation for Sunoco to
remediate this type of contamination varies, depending on the extent of the release and the applicable laws and
regulations. A portion of the remediation costs may be recoverable from the reimbursement fund of the
applicable state, after any deductible has been met.
In summary, total future costs for environmental remediation activities will depend upon, among other
things, the identification of any additional sites, the determination of the extent of the contamination at each site,
the timing and nature of required remedial actions, the nature of operations at each site, the technology available
and needed to meet the various existing legal requirements, the nature and terms of cost-sharing arrangements
with other potentially responsible parties, the availability of insurance coverage, the nature and extent of future
environmental laws and regulations, inflation rates, terms of consent agreements or remediation permits with
regulatory agencies and the determination 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 carryforwards. If necessary, a charge to income and a related valuation
allowance are recorded to reduce deferred tax assets to an amount that is more likely than not to be realized by
the Company in the future. Deferred income tax assets attributable to state NOLs and federal tax credit
carryforwards totaling $89 million (net of federal income tax effects) and $55 million, respectively, have been
recognized in Sunoco’s consolidated balance sheet as of December 31, 2010. The state NOLs begin to expire in
2019 with a substantial portion expiring in 2029 and 2030, while $19 million of the federal tax credit
carryforwards expires in 2030 and the balance has no expiration date. The Company has determined that a
valuation allowance totaling $22 million (net of federal income tax effects) is required for the state NOLs at
December 31, 2010 primarily due to significant restrictions on their use in the Commonwealth of Pennsylvania.
No valuation allowance has been established for the federal tax credit carryforwards. In making the assessment
of the realizability of the state NOLs and federal tax credit carryforwards, the Company relies on future reversals
of existing taxable temporary differences, tax planning strategies and forecasted taxable income based on
historical and projected future operating results. The potential need for valuation allowances is regularly
reviewed by management. If it is more likely than not that the recorded asset will not be realized, additional
valuation allowances which increase income tax expense may be recognized in the period such determination is
made. Likewise, if it is more likely than not that additional deferred tax assets will be realized, an adjustment to
the deferred tax asset will increase income in the period such determination is made.
New Accounting Pronouncements
There are no recently issued accounting pronouncements requiring adoption subsequent to December 31,
2010, that would have a significant impact on the Company’s results of operations or financial position.
Forward-Looking Statements
Some of the information included in this report contains “forward-looking statements” (as defined in
Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934). These
forward-looking statements discuss estimates, goals, intentions and expectations as to future trends, plans, events,
results of operations or financial condition, or state other information relating to the Company, based on current
beliefs of management as well as assumptions made by, and information currently available to, Sunoco. Forward-
looking statements generally will be accompanied by words such as “anticipate,” “believe,” “budget,” “could,”
“estimate,” “expect,” “forecast,” “intend,” “may,” “plan,” “possible,” “potential,” “predict,” “project,”
“scheduled,” “should,” or other similar words, phrases or expressions that convey the uncertainty of future events
or outcomes. Although management believes these forward-looking statements are reasonable, they are based
upon a number of assumptions concerning future conditions, any or all of which may ultimately prove to be
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