<PAGE>
PROSPECTUS
8,000,000 Shares
Sun Company, Inc.
COMMON STOCK
-----------
ALL OF THE SHARES OF COMMON STOCK OFFERED HEREBY ARE BEING OFFERED BY THE
SELLING SHAREHOLDERS. SEE "SELLING SHAREHOLDERS." THE COMPANY WILL NOT RECEIVE
ANY PROCEEDS FROM THE SALE OF THE SHARES BEING OFFERED HEREBY. THE COMPANY'S
COMMON STOCK IS TRADED ON THE NEW YORK STOCK EXCHANGE UNDER THE SYMBOL "SUN."
ON NOVEMBER 22, 1994, THE LAST SALE PRICE OF THE COMMON STOCK AS REPORTED ON
THE NEW YORK STOCK EXCHANGE WAS $28 5/8 PER SHARE.
-----------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
-----------
PRICE $28 A SHARE
-----------
<TABLE>
<CAPTION>
UNDERWRITING PROCEEDS TO
PRICE TO DISCOUNTS AND SELLING
PUBLIC COMMISSIONS(1) SHAREHOLDERS(2)
-------- -------------- ---------------
<S> <C> <C> <C>
Per Share.......................... $28.00 $0.98 $27.02
Total(3)........................... $224,000,000 $7,840,000 $216,160,000
</TABLE>
- -----
(1) The Selling Shareholders and the Company have agreed to indemnify the
Underwriters against certain liabilities, including civil liabilities
under the Securities Act of 1933.
(2) Before deducting certain expenses payable by the Selling Shareholders
estimated at $130,566.
(3) The Selling Shareholders have granted to the Underwriters an option
exercisable within 30 days of the date hereof to purchase up to an
aggregate of 1,200,000 additional shares at the Price to Public less
Underwriting Discounts and Commissions for the purpose of covering over-
allotments, if any. If the Underwriters exercise such option in full,
the total Price to Public, Underwriting Discounts and Commissions and
Proceeds to Selling Shareholders will be $257,600,000, $9,016,000, and
$248,584,000, respectively.
-----------
The shares of Common Stock are offered subject to prior sale, when, as and if
accepted by the Underwriters named herein, and subject to the approval of
certain legal matters by Simpson Thacher & Bartlett, counsel for the
Underwriters. It is expected that delivery of the shares of Common Stock will
be made on or about November 30, 1994 at the offices of Morgan Stanley & Co.
Incorporated, New York, New York, against payment therefor in New York clearing
house funds.
-----------
MORGAN STANLEY & CO.
Incorporated
CS FIRST BOSTON
SMITH BARNEY INC.
November 22, 1994
<PAGE>
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS IN CONNECTION WITH
THE OFFERING MADE HEREBY AND, IF GIVEN OR MADE, ANY SUCH INFORMATION OR
REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE
COMPANY, BY ANY SELLING SHAREHOLDER OR BY ANY UNDERWRITER. THIS PROSPECTUS DOES
NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY OF THE
SECURITIES OFFERED HEREBY IN ANY JURISDICTION WHERE, OR TO ANY PERSON TO WHOM,
IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS
PROSPECTUS NOR ANY SALE MADE HEREBY SHALL, UNDER ANY CIRCUMSTANCES, IMPLY THAT
THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY DATE SUBSEQUENT TO THE
DATE HEREOF.
NO ACTION HAS BEEN OR WILL BE TAKEN IN ANY JURISDICTION BY THE COMPANY OR BY
ANY UNDERWRITER THAT WOULD PERMIT A PUBLIC OFFERING OF THE COMMON STOCK OR
POSSESSION OR DISTRIBUTION OF THIS PROSPECTUS IN ANY JURISDICTION WHERE ACTION
FOR THAT PURPOSE IS REQUIRED, OTHER THAN IN THE UNITED STATES. PERSONS INTO
WHOSE POSSESSION THIS PROSPECTUS COMES ARE REQUIRED BY THE COMPANY, THE SELLING
SHAREHOLDERS AND THE UNDERWRITERS TO INFORM THEMSELVES ABOUT, AND TO OBSERVE
ANY RESTRICTIONS AS TO, THE OFFERING OF THE COMMON STOCK AND THE DISTRIBUTION
OF THIS PROSPECTUS.
In this Prospectus, references to "dollar" and "$" are to United States
dollars, and the terms "United States" and "U.S." mean the United States of
America, its states, its territories, its possessions and all areas subject to
its jurisdiction.
----------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Available Information..................................................... 3
Incorporation of Certain Documents by Reference........................... 3
The Company............................................................... 4
Price Range and Dividends................................................. 7
Capitalization............................................................ 8
Summary of Financial Information.......................................... 8
Management's Discussion and Analysis of Financial Condition and Results of
Operations............................................................... 10
Selling Shareholders...................................................... 18
Capital Stock............................................................. 19
Certain United States Federal Tax Considerations for Non-U.S. Holders of
Common Stock............................................................. 20
Underwriters.............................................................. 23
Legal Opinions............................................................ 24
Experts................................................................... 25
</TABLE>
----------------
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK
OF THE COMPANY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH TRANSACTIONS MAY BE EFFECTED ON THE NEW YORK STOCK EXCHANGE, IN
THE OVER-THE-COUNTER MARKET OR OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY
BE DISCONTINUED AT ANY TIME.
2
<PAGE>
AVAILABLE INFORMATION
Sun Company, Inc. (the "Company") is subject to the informational
requirements of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), and in accordance therewith files reports, proxy statements and other
information with the Securities and Exchange Commission (the "Commission").
Such reports, proxy statements and other information can be inspected and
copied at the public reference facilities maintained by the Commission at 450
Fifth Street, N.W., Washington, D.C. 20549 and at the Commission's Regional
Offices at Citicorp Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661 and 7 World Trade Center, Suite 1300, New York, New York 10048.
Copies of such material can be obtained at prescribed rates from the
Commission's Public Reference Section, 450 Fifth Street, N.W., Washington, D.C.
20549. Reports, proxy material and other information concerning the Company
also may be inspected at the offices of the New York Stock Exchange, Inc., 20
Broad Street, New York, New York 10005 and the Philadelphia Stock Exchange,
Inc., 1900 Market Street, Philadelphia, Pennsylvania 19103.
The Company has filed with the Commission a registration statement on Form S-
3 under the Securities Act of 1933, as amended (the "Securities Act"), with
respect to the Securities offered hereby (together with all amendments and
exhibits, the "Registration Statement"). This Prospectus does not contain all
of the information set forth in the Registration Statement, certain parts of
which are omitted in accordance with the rules and regulations of the
Commission.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed by the Company with the Commission are
incorporated in this Prospectus by reference:
1. The Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1993, as amended by the Company's reports on Form 10-K/A dated
April 28, 1994 and June 23, 1994.
2. The Company's Quarterly Reports on Form 10-Q for the quarters ended
March 31, 1994, June 30, 1994 and September 30, 1994.
3. The Company's Current Reports on Form 8-K dated February 24, 1994 and
October 24, 1994.
All documents filed by the Company pursuant to Sections 13(a), 13(c), 14 or
15(d) of the Exchange Act after the date of this Prospectus and prior to the
termination of the offering made hereunder shall be deemed to be incorporated
by reference into this Prospectus and to be a part hereof from the date of
filing of such documents. Any statement contained in a document incorporated or
deemed to be incorporated by reference herein shall be deemed to be modified or
superseded for purposes of this Prospectus to the extent that a statement
contained herein or in any other subsequently filed document which also is or
is deemed to be incorporated by reference herein modifies or supersedes such
statement. Any such statement so modified or superseded shall not be deemed,
except as so modified or superseded, to constitute a part of this Prospectus.
THE COMPANY WILL FURNISH WITHOUT CHARGE TO EACH PERSON, INCLUDING ANY
BENEFICIAL OWNER, TO WHOM THIS PROSPECTUS IS DELIVERED, UPON WRITTEN OR ORAL
REQUEST, A COPY OF ANY OR ALL OF THE DOCUMENTS INCORPORATED HEREIN BY REFERENCE
(OTHER THAN EXHIBITS TO SUCH DOCUMENTS UNLESS SUCH EXHIBITS ARE SPECIFICALLY
INCORPORATED BY REFERENCE INTO SUCH DOCUMENTS). REQUESTS SHOULD BE DIRECTED TO:
SUN COMPANY, INC.
TEN PENN CENTER
1801 MARKET STREET
PHILADELPHIA, PENNSYLVANIA 19103-1699
ATTENTION: SHAREHOLDER RELATIONS
TELEPHONE: (215) 977-3000
3
<PAGE>
THE COMPANY
The Company is the largest independent U.S. refiner/marketer. It operates
five domestic refineries and is engaged in retail gasoline marketing,
principally in the northeastern U.S.; lubricants and petrochemical marketing
worldwide; and domestic pipeline and terminalling operations. The Company also
produces crude oil and natural gas internationally and is the majority owner of
Suncor Inc., a fully integrated Canadian oil company. These operations are
conducted through the Company's subsidiaries. Hereafter, the term "Sun" means
the Company and its subsidiaries.
Sun's petroleum refining and marketing operations include the manufacturing
and marketing of a full range of petroleum products, including fuels,
lubricants and petrochemicals, and the transportation of crude oil and refined
products. These operations are conducted in the United States and Canada. Sun's
oil and gas exploration and production operations consist of exploration for
and development, production and marketing of crude oil and condensate, natural
gas and natural gas liquids. Exploration activities are conducted in Canada
while development, production and marketing activities are conducted primarily
in Canada and the United Kingdom sector of the North Sea. Oil sands mining
operations, which consist of production of synthetic crude oil by mining oil
sands and upgrading the bitumen extracted from the oil sands, are conducted in
western Canada.
Sun is following a strategic plan, first announced in October 1992 (the
"Strategic Plan"), which focuses on growth in branded gasoline marketing
(primarily in the northeastern United States), lubricants, chemicals and
logistics and international oil and gas production activities (primarily in the
United Kingdom sector of the North Sea). Since the adoption of the Strategic
Plan, the following initiatives have been implemented:
. Sun has begun conversions of its existing ATLANTIC (R) gasoline outlets
to SUNOCO (R) and its SUNOCO FOOD MARKET (R) convenience stores to
APLUS (R). These conversions are expected to be completed by year-end
1995.
. Sun has acquired 23 gasoline outlets primarily in western Massachusetts
and has secured a 12-year contract to supply 21 high-volume service
stations along the Pennsylvania Turnpike.
. Sun has reconfigured its Tulsa refinery and modified its Yabucoa, Puerto
Rico refinery to emphasize lubricants manufacturing capability.
. Sun has purchased a 126-mile crude oil pipeline in Ohio and Michigan
which provides midwestern refineries, including Sun's Toledo refinery,
access to Canadian crude oil.
. Sun has essentially completed the withdrawal from oil and gas
exploration activities outside of Canada and has sold certain
exploration properties in the U.K. North Sea and production properties
in Dubai.
. Sun has acquired additional oil producing interests in the U.K. North
Sea.
. Sun has reduced its ownership interest in Suncor Inc., the Company's
Canadian petroleum subsidiary, from 68 percent to 55 percent. In
addition, Suncor has converted to a more flexible and efficient truck-
and-shovel method of mining oil sands.
. Sun has completed the sale of its western U.S. coal operations and
continues to actively pursue the sale of its remaining eastern U.S. coal
and cokemaking operations.
. Sun has significantly reduced its real estate portfolio and continues to
actively pursue a program of controlled disposition of its remaining
real estate investments.
The Company was incorporated in Pennsylvania in 1971 and it or its
predecessors have been active in the petroleum industry since 1886. Its
principal executive offices are located at Ten Penn Center, 1801 Market Street,
Philadelphia, PA 19103-1699.
4
<PAGE>
The following description summarizes Sun's principal business activities in a
general manner, is not complete and is qualified in its entirety by reference
to the descriptions contained in the documents incorporated in this Prospectus
by reference (see "Incorporation of Certain Documents by Reference").
DOMESTIC REFINING AND MARKETING
Sun manufactures and markets fuels, lubricants, and chemicals and transports
crude oil and refined products in the United States. Sun owns and operates five
domestic refineries with a total crude unit processing capacity of 777 thousand
barrels daily, including the Philadelphia refinery ("Girard Point") acquired
from Chevron U.S.A. Inc. ("Chevron") in August 1994 which has crude unit
processing capacity of 177 thousand barrels daily. Sun's domestic refining and
marketing operations are classified in the following business lines: Fuels,
Lubricants, Chemicals and Logistics.
Fuels
Sun manufactures and sells petroleum products, including gasoline,
distillates, jet fuel, residual fuel oil and asphalt to retail, wholesale,
commercial and industrial customers and to the United States government.
The refining operations of Sun's Fuels business are conducted at its Marcus
Hook, Pennsylvania, Philadelphia, Pennsylvania (two adjacent facilities), and
Toledo, Ohio refineries. Fuels are also produced at Sun's Tulsa, Oklahoma and
Yabucoa, Puerto Rico refineries; however, those refineries emphasize the
production of lubricants.
Sun's U.S. branded fuels marketing operations consist of the sale of gasoline
and middle distillates. Sun markets a full slate of retail gasoline products,
including high-octane premium gasoline represented by Sunoco's ULTRA(R)94 and
Atlantic's OPTIMA(R)93 grades, as well as several lower octane grades.
Sun sells fuels (principally gasoline) through SUNOCO(R) and ATLANTIC(R)
service stations and convenience stores. Virtually all of these stations are
independently operated. The SUNOCO(R) outlets are located largely within an 18-
state area in the Northeast and northern Midwest, with the greatest
concentration in Connecticut, New Jersey, New York, Massachusetts,
Pennsylvania, Rhode Island, Ohio and Michigan. The ATLANTIC(R) outlets are
located principally in New York and Pennsylvania. As of December 31, 1993, Sun
sold fuels through 4,442 service stations in the U.S. It is a leading supplier
of fuels in the geographic area in which it operates. Sun is the sole service
station operator on the New Jersey Turnpike, supplies 16 outlets on the New
York Thruway, 16 outlets on the Ohio Turnpike, and 21 stations on the
Pennsylvania Turnpike. Sun also sells branded fuels through its owned and
operated SUNOCO FOOD MARKET(R) and APLUS(R) convenience stores.
Sun is converting its ATLANTIC(R) stations to SUNOCO(R) stations and its
SUNOCO FOOD MARKET(R) stores to APLUS(R) stores. Some of the ATLANTIC(R)
locations are being converted to ULTRA SERVICE CENTER(R) stations. This
strategy focuses Sun's market presence and capitalizes on the individual
strengths of the SUNOCO(R), APLUS(R), and ULTRA SERVICE CENTERSM operations. As
of September 30, 1994, approximately one-third of the planned 465 ATLANTIC(R)
to SUNOCO(R) service station conversions and nearly half of the planned
conversions of SUNOCO FOOD MARKET(R) to APLUS(R) have been completed.
Lubricants
Sun manufactures and markets a complete line of automotive and industrial
lubricants, waxes and aromatic extracts. These lubricants are marketed directly
to end-users and, through distributors, to a wide variety of domestic and
foreign customers.
As part of its Strategic Plan, Sun refocused its Tulsa and Yabucoa refineries
toward the production of high-margin lubricants resulting in upgraded product
yields. Lubricants are manufactured at the Tulsa and Puerto Rico refineries and
are marketed under the SUNOCO (R) brand, as well as formulated
5
<PAGE>
and packaged for sale by other branded marketers under their labels. Sun has
lube service centers located in the Marcus Hook and Tulsa refineries. These
centers, supplied with base oils from the Puerto Rico and Tulsa refineries,
blend and package lubricants for Sun and other branded marketers.
Base lube oils manufactured by Sun are also sold to domestic or international
third parties who manufacture their own finished automotive and industrial
lubricants. In addition, Sun sells a line of specialty lube products such as
horticultural and agricultural oils, aromatic and paraffinic rubbers oils,
paper defoamers, asphalt recycling extracts, ink oils, textile oils and
finished waxes.
Chemicals
Sun manufactures, distributes, and markets base and intermediate commodity
petrochemicals, primarily light olefins (ethylene and propylene) and aromatics
(benzene, toluene and xylenes). Petrochemicals are manufactured at Sun's Marcus
Hook, Philadelphia, and Toledo refineries and at an ethylene oxide facility in
Brandenburg, Kentucky. Since 1992, Sun's ethylene oxide production capacity has
doubled to more than 200 million pounds per year. Sun is also a one-third
partner in a joint venture formed to construct, own and operate an MTBE
production facility in Mt. Belvieu, Texas. The construction of this facility,
which has a designed capacity of 12,600 barrels of MTBE, is essentially
completed and sustained start-up tests are underway.
Sun's petrochemical products are distributed and sold on a worldwide basis.
The majority of these sales are to manufacturers of intermediate products used
in the production of rubber, plastics, detergents, agricultural chemicals and
fibers. Significant volumes are also marketed to the solvents and fuels
industries.
Logistics
Sun transports crude oil and refined petroleum products by pipeline to
fifteen states in the eastern half of the United States. As of December 31,
1993, Sun had an interest in approximately 10,000 miles of pipeline which
transport either crude oil or refined products. It also conducts terminalling
operations in Nederland, Texas.
Sun's crude oil systems, concentrated in the Midwest, transport crude oil
gathered in Oklahoma, Texas, and Louisiana (as well as foreign crude from the
Gulf Coast and Canada) to refiners or to local trade points. The refined
product systems, located primarily in the Northeast, transport gasoline, jet
fuel, diesel fuel, home heating oil and other products to customers ranging
from Sun's fuels businesses to integrated petroleum companies, independent
marketers and distributors.
Sun's Nederland terminal provides in excess of ten million barrels of storage
and daily throughput terminalling capacity of in excess of one million barrels.
Its Gulf Coast location provides local and midwestern refiners access to
foreign crude oil. The facility is a key link in the distribution system for
United States government purchases and sales of crude oil for the Strategic
Petroleum Reserve storage facilities in Texas and Louisiana.
INTERNATIONAL PRODUCTION
Sun's production operations outside North America are focused on the
production of existing proved reserves and on the acquisition of currently
producing or near-term development assets primarily in the United Kingdom
Sector of the North Sea.
Sun has actively withdrawn from international exploration activities outside
of Canada pursuant to the Strategic Plan. The withdrawal from exploration
activities internationally has enabled Sun to enhance its operating profits in
the near term, to reduce significantly its investment risk profile, and to
position itself to make investments in currently producing properties and near-
term development projects in the future as financially attractive opportunities
are identified.
6
<PAGE>
As of December 31, 1993, outside North America, Sun had estimated proved
reserves of approximately 30 million barrels of crude oil and condensate and
approximately 109 billion cubic feet of natural gas. Outside North America,
Sun's 1993 crude oil and condensate production averaged 27,200 barrels per day
and its natural gas production averaged 56 million cubic feet per day.
CANADA (SUNCOR)
Suncor Inc. ("Suncor") is Sun's 55 percent owned, vertically integrated
Canadian petroleum subsidiary. Its operations consist of the exploration,
production and marketing of conventional crude oil and natural gas, the
production and marketing of synthetic crude oil from oil sands, and petroleum
refining and marketing.
Suncor's conventional crude oil and natural gas exploration and production
activities are concentrated in western Canada, with increasing emphasis on
natural gas. As of December 31, 1993, Suncor had approximately 30 million
barrels of estimated proved reserves of conventional crude oil and condensate
and approximately 492 billion cubic feet of estimated proved reserves of
natural gas.
Suncor produces synthetic crude oil by mining the Athabasca oil sands and
upgrading the extracted bitumen at its plant located near Fort McMurray in
northeastern Alberta. As of December 31, 1993, Suncor had approximately 231
million barrels of proved synthetic crude oil reserves.
Suncor owns and operates a 70,000 barrel-per-day refinery located in Sarnia,
Ontario which processes both synthetic and conventional crude oils. Gasoline,
distillates, jet fuel, residual fuel oil, propane and asphalt are generally
marketed under the SUNOCO (R) brand to retail, commercial and industrial
customers primarily in Ontario and Quebec. Suncor also supplies these products
to independent marketers. In addition, Suncor markets toluene, mixed xylenes
and orthoxylenes in Canada, the United States and Europe through a
petrochemicals marketing partnership with another Sun subsidiary.
PRICE RANGE AND DIVIDENDS
The Company's Common Stock is principally traded on the New York Stock
Exchange, Inc. under the symbol "SUN." The following table shows the high and
low sales prices of the Common Stock, as reported in the New York Stock
Exchange Composite Transactions quotations, as well as the cash dividends paid
per share for the periods indicated.
<TABLE>
<CAPTION>
HIGH LOW DIVIDEND
------- ------- --------
<S> <C> <C> <C>
1994
Third Quarter....................................... $29 1/4 $25 7/8 $.45
Second Quarter...................................... 34 3/8 25 1/8 .45
First Quarter....................................... 35 1/4 29 3/8 .45
1993
Fourth Quarter...................................... 32 3/4 28 1/2 .45
Third Quarter....................................... 28 7/8 23 7/8 .45
Second Quarter...................................... 27 1/8 22 1/4 .45
First Quarter....................................... 30 1/4 24 1/2 .45
1992
Fourth Quarter...................................... 28 1/2 22 1/2 .45
Third Quarter....................................... 26 1/2 24 1/8 .45
Second Quarter...................................... 29 1/2 25 .45
First Quarter....................................... 30 3/4 26 3/4 .45
</TABLE>
On November 22, 1994, the last reported sale price for the Common Stock, as
reported in the New York Stock Exchange Composite Transactions quotations, was
$28 5/8.
7
<PAGE>
The Company has paid cash dividends on a regular basis for many years. On
October 6, 1994, the Company declared a dividend of $.45 per share of Common
Stock, payable on December 9, 1994, to shareholders of record on November 10,
1994. The Company expects to continue to sustain the quarterly cash dividend at
its current level.
At September 30, 1994, there were approximately 53,000 record holders of the
Common Stock.
CAPITALIZATION
The following table sets forth the capitalization of Sun as of September 30,
1994. The capitalization table should be read in conjunction with the financial
statements of the Company and its consolidated subsidiaries including the notes
thereto, included in the Corporation's Quarterly Report on Form 10-Q for the
quarter ended September 30, 1994, which is incorporated by reference herein.
<TABLE>
<CAPTION>
AT SEPTEMBER 30, 1994
---------------------
(MILLIONS OF DOLLARS)
<S> <C>
Short-Term Borrowings and Current Portion of Long-Term
Debt.................................................... $ 529
======
Long-Term Debt........................................... $ 984*
------
Stockholders' Equity
Common Stock, $1 par value per share (Issued--
129,458,083 shares)................................... 129
Capital in excess of par value......................... 1,308
Cumulative foreign currency translation adjustment..... (70)
Earnings employed in the business...................... 1,579
Less common stock held in treasury, at cost (22,581,809
shares)............................................... (1,021)
------
Total Stockholders' Equity............................. 1,925
------
Total Stockholders' Equity and Long-Term Debt............ $2,909
======
</TABLE>
- --------
* On November 1, 1994, the Company issued $150 million of 8 1/8 percent 5-year
notes and $100 million of 9 percent 30-year debentures. The proceeds from
these borrowings will be used to repay commercial paper as it matures.
Accordingly, $250 million of commercial paper was classified as long-term
debt at September 30, 1994.
SUMMARY OF FINANCIAL INFORMATION
The following table represents selected financial data of Sun for the nine
months ended September 30, 1994 and 1993 and for each of the last five years.
Reference is made to the detailed information and financial statements
available in the documents described above under "Incorporation of Certain
Documents by Reference." The financial information for the nine months ended
September 30, 1994 and 1993 and as of those dates is unaudited but, in the
opinion of the Company, all adjustments necessary for a fair presentation have
been made. All such adjustments are of a normal recurring nature except for the
cumulative effect of changes in accounting principles discussed below. The
results of operations for the nine months ended September 30, 1994 are not
necessarily indicative of the results for the full year 1994.
Prior to the fourth quarter of 1993, Sun Coal Company and Elk River
Resources, Inc. and its subsidiaries (collectively, "Sun Coal") and Radnor
Corporation ("Radnor") had been classified as discontinued operations in Sun's
consolidated statements of income. In accordance therewith, results of
operations of Sun Coal and Radnor subsequent to their measurement dates of
December 31, 1992 and September 30, 1991, respectively, had been excluded from
the consolidated statements of income. In November 1993, the Commission issued
Staff Accounting Bulletin No. 93 which requires discontinued operations that
have not been divested within one year of their measurement dates to be
accounted for prospectively as investments held for sale. As a result, the
results of operations for Sun Coal and Radnor for the fourth quarter of 1993
and subsequent periods have been included in income from continuing operations.
In addition, the net assets and liabilities
8
<PAGE>
relating to Sun Coal and Radnor have been segregated on the consolidated
balance sheets to separately identify them as investments in operations held
for sale. The following financial data reflects this method of presentation (in
millions of dollars, except per share amounts):
<TABLE>
<CAPTION>
NINE
MONTHS ENDED
SEPTEMBER 30 YEAR ENDED DECEMBER 31
------------------ -------------------------------------------------
1994 1993 1993 1992 1991 1990 1989
------- ------- ------ ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Sales and other operating revenue
(including consumer excise taxes)............ $ 6,973 $ 6,918 $9,180 $10,445 $11,493 $12,573 $10,494
Income (loss) from continuing operations
before provision (credit) for income
taxes and cumulative effect of change in
accounting principle(1)...................... $ 123(2) $ 335(3) $ 426(4) $ (432)(5) $ (108)(6) $ 393 $ 236
Net income (loss) (1)(7)(8)................... $ 87(2) $ 224(3) $ 288(4) $ (559)(5) $ (387)(6) $ 229 $ 98
Net income (loss) per share................... $ .81 $ 2.10 $ 2.70 $ (5.26) $ (3.65) $ 2.14 $ .92
Capital expenditures.......................... $ 518(9) $ 372 $ 612 $ 530 $ 615 $ 637 $ 599
<CAPTION>
AT SEPTEMBER 30 AT DECEMBER 31
------------------ -------------------------------------------------
1994 1993 1993 1992 1991 1990 1989
------- ------- ------ ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Total assets.................................. $ 6,635 $ 5,869 $5,900 $ 6,071 $ 7,017 $ 7,852 $ 7,647
Long-term debt................................ $ 984 $ 785 $ 726 $ 792 $ 852 $ 832 $ 887
Stockholders' equity.......................... $ 1,925 $ 1,958 $1,984 $ 1,896 $ 2,696 $ 3,274 $ 3,254
Common stockholders' equity per share......... $ 18.01 $ 18.37 $18.60 $ 17.82 $ 25.41 $ 30.81 $ 30.46
</TABLE>
- --------
(1) Includes impact of provisions for write-down of assets and other matters of
$39 million ($22 million after tax) in the nine months ended September 30,
1994, $23 million ($12 million after tax) in the nine months ended September
30, 1993 and in the full year 1993, $745 million ($456 million after tax) in
1992, $156 million ($103 million after tax) in 1991 and $162 million ($103
million after tax) in 1989. (See Note 6 to the Consolidated Financial
Statements in the Company's Quarterly Report on Form 10-Q for the quarter
ended September 30, 1994 and Note 2 to the Consolidated Financial Statements
in the Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1993, as amended, incorporated by reference herein.)
(2) Includes impact of gain on divestments of $49 million ($37 million after
tax).
(3) Includes impact of gain on divestments of $148 million ($101 million after
tax).
(4) Includes impact of gain on divestments of $174 million ($121 million after
tax).
(5) Includes impact of gain on Iranian litigation settlement of $178 million
($117 million after tax).
(6) Includes impact of provision for environmental remediation work at various
domestic refining and marketing sites of $118 million ($78 million after
tax).
(7) Includes income (loss) from operations held for sale of $10 million for the
nine months ended September 30, 1994 and $3, $19, $(257), $9 and $(12)
million in 1993, 1992, 1991, 1990 and 1989, respectively. (See Note 4 to the
Consolidated Financial Statements in the Company's Quarterly Report on Form
10-Q for the quarter ended September 30, 1994 and Note 2 to the Consolidated
Financial Statements in the Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 1993, as amended, incorporated by reference
herein.)
(8) Includes impact of the cumulative effect of a change: in the method of
accounting for postemployment benefits in the nine months ended September
30, 1994 ($7 million after tax charge); in the method of accounting for
income taxes in the nine months ended September 30, 1993 and in the full
year 1993 ($5 million tax benefit); in the method of accounting for
postretirement health care and life insurance benefits in 1992 ($261 million
after-tax charge); and in the method of accounting for refinery turnaround
costs in 1990 ($30 million after-tax benefit). (See Note 7 to the
Consolidated Financial Statements in the Company's Quarterly Report on Form
10-Q for the quarter ended September 30, 1994 and in the Company's Annual
Report on Form 10-K for the fiscal year ended December 31, 1993, as amended,
incorporated by reference herein.)
(9) Excludes $151 million attributable to the purchase of the Girard Point
refinery in Philadelphia and related inventory.
9
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS--NINE MONTHS
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30
EARNINGS PROFILE OF SUN BUSINESSES (AFTER TAX) ------------------
1994 1993 VARIANCE
-------- -------- --------
(MILLIONS OF DOLLARS)
<S> <C> <C> <C>
Fuels:
Wholesale fuels................................. $ (56) $ (34) $ (22)
Branded marketing............................... 38 61 (23)
Lubricants:
Lubes........................................... 50 42 8
Related fuels................................... (25) (30) 5
Chemicals......................................... 9 12 (3)
Logistics......................................... 35 34 1
International production.......................... 38 55 (17)
Canada (Suncor):*
Exploration and production...................... 4 4 --
Oil sands....................................... 23 25 (2)
Refining and marketing.......................... 7 7 --
Corporate expenses**............................ (4) (5) 1
Net financing expenses.......................... (3) (2) (1)
-------- -------- -----
Total Canada (Suncor)......................... 27 29 (2)
Corporate:
Corporate expenses.............................. (16) (12) (4)
Net financing expenses.......................... (22) (19) (3)
Income from operations held for sale:***
Coal............................................ 8 -- 8
Real estate..................................... 2 -- 2
-------- -------- -----
88 138 (50)
Gain on sale of Suncor stock...................... -- 19 (19)
Gain on divestment of exploration and production
properties....................................... 28 74 (46)
Provision for write-down of assets and other mat-
ters............................................. (22) (12) (10)
Cumulative effect of change in accounting princi-
ple+............................................. (7) 5 (12)
-------- -------- -----
Consolidated net income........................... $ 87 $ 224 $(137)
======== ======== =====
</TABLE>
- --------
* Sun reduced its ownership interest in Suncor from approximately 68 percent
to 55 percent in May 1993.
** Includes consolidation adjustments.
*** Effective in the fourth quarter of 1993, coal and real estate operations
are accounted for as investments held for sale. During the first nine
months of 1993, as discontinued operations, earnings from these businesses
were excluded from Sun's consolidated results of operations.
+ Consists of the impact of the cumulative effect of a change in the method of
accounting for postemployment benefits in 1994 and a change in the method of
accounting for income taxes in 1993.
ANALYSIS OF EARNINGS PROFILE OF SUN BUSINESSES
In the nine-month period ended September 30, 1994, Sun earned $87 million, or
$.81 per share of common stock, compared with earnings of $224 million, or
$2.10 per share for the first nine months of 1993. Excluding the special items
shown separately in the Earnings Profile of Sun Businesses, Sun earned $88
million during the first nine months of 1994 compared to $138 million during
the first nine months of 1993.
10
<PAGE>
Fuels--Results from Sun's domestic Fuels business, comprised primarily of
the manufacturing and marketing of petroleum products in the northeastern
U.S., declined from earnings of $27 million in the first nine months of 1993
to a loss of $18 million in the first nine months of 1994. Losses from Sun's
northeastern U.S. Wholesale Fuels operations increased from $34 million in the
first nine months of 1993 to $56 million in the first nine months of 1994.
Income from Branded Marketing operations decreased from $61 million in the
year-ago nine month period to $38 million in the first nine months of 1994.
On August 4, 1994, the Company completed the acquisition of the 177,000
barrel-per-day Girard Point refinery and related inventory in Philadelphia
from Chevron. (See Note 2 to the condensed consolidated financial statements
in the Company's Quarterly Report on Form 10-Q for the quarter ended September
30, 1994, incorporated by reference herein.) This refinery, which manufactures
primarily gasoline, distillates and petrochemicals for distribution to
wholesale and industrial customers, contributed $1 million in earnings to
Wholesale Fuels results in the 1994 third quarter. (See also Chemicals below).
Excluding activity from the Girard Point refinery, Wholesale Fuels results
declined $23 million primarily due to higher refinery operating expenses ($12
million) caused largely by severe winter weather conditions in the
northeastern United States during the first quarter of 1994, lower sales
volumes ($6 million) and lower average wholesale fuels product margins ($9
million). Partially offsetting this decrease was a $5 million after-tax gain
recognized in connection with the settlement of various inventory hedge
contracts.
In Branded Marketing, the $23 million decline was caused largely by higher
operating and administrative expenses ($15 million), due in part to severe
weather conditions in the 1994 first quarter, and to increased expenses
related to the ongoing conversion of the ATLANTIC(R) brand to SUNOCO(R) and
the upgrading of the SUNOCO(R) image. A three percent decline in branded
gasoline sales volumes also contributed to the decrease in Branded Marketing
earnings. The volume decline was caused primarily by the elimination of some
marginal distributor accounts, Sun's 1993 withdrawal from areas supplied by
the Tulsa Refinery and the severe wintertime driving conditions which reduced
gasoline sales.
Lubricants--Results from Sun's Lubricants business, comprised of the
manufacturing, packaging and marketing of lubricants and specialty oil
products as well as the related manufacturing and wholesale marketing of fuels
produced at Sun's Tulsa and Puerto Rico refineries, increased $13 million over
the first nine months of 1993. Income from sales of lubricant products was $50
million in the current nine-month period compared with $42 million in the
first nine months of 1993. The favorable impact of 16 percent higher
lubricants sales volumes ($24 million) was partially offset by lower average
margins ($11 million), particularly for base oils, and higher operating
expenses ($6 million) resulting primarily from increased refinery production
levels. Losses from Related Fuels operations were $25 million during the first
nine months of 1994, representing a $5 million improvement from the $30
million loss in the year-ago period. The improvement was due to higher margins
on wholesale fuels products ($6 million) and higher sales volumes ($4
million), partially offset by higher operating expenses ($5 million) resulting
primarily from increased refinery production levels.
Chemicals--Income from Sun's domestic Chemicals business was $9 million in
the first nine months of 1994 versus $12 million in the prior year period. The
$3 million decrease in Chemicals results was due to lower sales volumes ($8
million) and higher operating expenses ($6 million) during the first nine
months of 1994. Production curtailments at the Company's northeastern
refineries during the first half of 1994 were largely responsible for the
decline in sales volumes. Partially offsetting these negative factors were
higher margins ($7 million) and a $4 million income contribution from the sale
of petrochemicals produced at the Girard Point refinery.
Logistics--Logistics (pipeline transportation and petroleum terminalling
operations) income was $35 million in the first nine months of 1994 compared
to $34 million in the year-ago period. The $1 million increase was due
principally to improved operating performance.
11
<PAGE>
International Production--International Production earnings were $38 million
in the first nine months of 1994 versus $55 million in the first nine months of
1993. The $17 million decline was due largely to lower crude oil prices ($9
million) and natural gas volumes ($5 million) and an increase in after-tax
foreign exchange translation losses ($5 million). Partially offsetting these
negative factors were a $2 million after-tax gain recognized on the
redetermination of the Pickerill field in the U.K. North Sea and $2 million of
after-tax income attributable to the acquisition of a 45 percent interest in
Block 3/8A (Ninian and Columba fields) finalized in the 1994 third quarter. The
favorable impact of higher North Sea crude oil production volumes, resulting in
part from the Block 3/8A acquisition, was essentially offset by higher
depreciation and cost and operating expenses.
The average price received for Sun's international crude oil production was
$15.50 per barrel in the first nine months of 1994 compared to $17.16 per
barrel for the first nine months of 1993. Sun's average net production of crude
oil was 26.7 thousand barrels daily during the first nine months of 1994
compared to average net production of 27.0 thousand barrels daily for the first
nine months of 1993. The production decline is the result of the absence of
volumes from properties located in Dubai which were sold in April 1993.
Excluding the Dubai volumes, crude production increased 25 percent from the
prior year first nine months due to improved operations, increased ownership
interests in the Balmoral and Stirling fields in the U.K. North Sea and the
added production from the Ninian field acquired in the 1994 third quarter.
The average price received for Sun's international natural gas production was
$2.95 per thousand cubic feet for the current nine-month period compared to
$2.97 per thousand cubic feet in the first nine months of 1993. Sun's average
net production of natural gas was 46 million cubic feet daily in the first nine
months of 1994 compared to 55 million cubic feet daily in the 1993 period. The
production decline was largely due to maintenance activities in the Thames and
Hewett fields in the U.K. North Sea during 1994.
Canada (Suncor)--Canadian exploration and production results were flat versus
the year-ago nine-month period as lower operating and administrative expenses
($1 million) and higher natural gas prices ($2 million) were offset by lower
crude oil prices ($1 million) and higher income tax expense ($2 million). Oil
sands results decreased $2 million due to the absence of a $7 million after-tax
gain from an insurance settlement recorded in the 1993 second quarter.
Operationally, the favorable impact of higher synthetic crude oil production
volumes ($14 million) was partially offset by a 7-percent decline in synthetic
crude oil prices to $15.96 per barrel ($6 million). Synthetic crude oil
production volumes increased 18 percent from 58.5 thousand barrels daily during
the 1993 first nine months to 69.2 thousand barrels daily during the first nine
months of 1994. The increase in production was due, in part, to modifications
made to the oil sands plant's upgrader in 1993 and to a planned maintenance
shutdown in April 1993, resulting in the stoppage of production until late May
1993. Canadian refining and marketing income was flat versus the year-ago nine
month period as higher refined product volumes and margins were offset by
higher administrative and tax expenses.
Corporate--Corporate expenses increased $4 million in part due to higher
administrative expenses. Net financing expenses were up $3 million versus the
year-ago period due to the absence of a $3 million after-tax gain on the sale
of an equity investment recognized in the first quarter of 1993.
Income from Operations Held for Sale--For a discussion of Sun's coal and real
estate operations held for sale, see Note 4 to the condensed consolidated
financial statements in the Company's Quarterly Report on Form 10-Q for the
quarter ended September 30, 1994, incorporated by reference herein.
Gain on Sale of Suncor Stock--In the second quarter of 1993, Sun recognized a
$19 million after-tax gain, or $.18 per share of common stock, on the sale of
6.8 million shares of Suncor common stock. This sale reduced Sun's ownership
interest in Suncor from approximately 68 percent to 55 percent.
Gain on Divestment of Exploration and Production Properties--During the first
nine months of 1994, Sun disposed of its interest in a North Sea exploration
block and also sold its remaining interest in a Colombian oil field. An after-
tax gain of $28 million, or $.26 per share of common stock, was recognized in
12
<PAGE>
connection with these sales. During the prior year nine-month period, Sun
disposed of certain oil and gas producing properties located in Dubai and
Canada and certain exploration properties located in the U.K. North Sea which
previously were identified for divestment as part of the Company's 1992
restructuring plan. An after-tax gain of $74 million, or $.69 per share of
common stock, was recognized in connection with these sales.
Provision for Write-down of Assets and Other Matters--During the third
quarter of 1994, Sun recorded a $22 million after-tax charge primarily
attributable to a write-down to estimated net realizable value of its
investment in coal operations held for sale. During the third quarter of 1993,
Sun recorded a $12 million after-tax provision which included a $7 million
after-tax charge associated with the restructuring of Suncor's refining and
marketing business and a $5 million after-tax loss accrual related to the
recoverability of the Company's remaining leasing and secured lending
portfolio.
Cumulative Effect of Change in Accounting Principle--For information
concerning changes in accounting principles, see Note 7 to the condensed
consolidated financial statements in the Company's Quarterly Report on Form 10-
Q for the quarter ended September 30, 1994, incorporated by reference herein.
ANALYSIS OF CONSOLIDATED STATEMENTS OF INCOME
Sales and other operating revenue increased $55 million, or 1 percent,
principally due to higher refined product sales volumes ($305 million) and an
increase in consumer excise taxes ($199 million), partially offset by lower
refined product sales prices ($286 million) and lower revenues from resales of
purchased oil and refined products ($145 million). The $99 million decrease in
gain on divestments is primarily due to the absence of pretax gains recognized
in 1993 on the sales of Suncor stock ($30 million), oil and gas properties
located in Dubai ($11 million) and Canada ($14 million), and certain
exploration blocks in the U.K. North Sea ($80 million), partially offset by a
$15 million pretax gain on the sale of Sun's interest in Block 16/12a in the
U.K. North Sea recognized in the third quarter of 1994 and a $20 million pretax
gain on the sale of Sun's remaining interest in a Colombian oil field
recognized during the second quarter of 1994. Other income decreased $30
million primarily as a result of the absence of $23 million of pretax gains
from insurance and litigation settlements recorded by Suncor in 1993.
Cost of products sold and operating expenses decreased $126 million, or 3
percent, primarily due to lower resales of purchased oil and refined products
($147 million) and lower domestic crude oil and refined product acquisition
costs ($20 million), partially offset by higher refinery operating expenses
($54 million). The increase in refinery operating expenses was primarily due to
the severe winter weather conditions in the northeastern United States during
the first quarter of 1994 and to operating expenses attributable to the Girard
Point refinery acquired on August 4, 1994. Selling, general and administrative
expenses increased $47 million, or 10 percent, primarily due to higher expenses
in Sun's domestic refining and marketing operations ($37 million). This
increase was due in part to higher distribution and operating expenses caused
by the severe winter weather in the northeastern United States during 1994 and
to increased expenses associated with the conversion of the Atlantic brand to
Sunoco and the upgrading of the Sunoco image. Taxes, other than income taxes
increased $191 million, or 13 percent, due to higher consumer excise taxes
($199 million). Depreciation, depletion and amortization increased $5 million,
or 2 percent, primarily as a result of increased crude oil production in the
U.K. North Sea. For a discussion of the provision for write-down of assets and
other matters recorded in 1994 and 1993, see Note 6 to the condensed
consolidated financial statements in the Company's Quarterly Report on Form 10-
Q for the quarter ended September 30, 1994, incorporated by reference herein.
Interest cost and debt expense increased $4 million, or 6 percent, due to
higher average short-term borrowings, partially offset by a lower borrowing
position at Helios Capital Corporation, Sun's leasing subsidiary. For a
discussion of the cumulative effect of change in accounting principle, see Note
7 to the condensed consolidated financial statements in the Company's Quarterly
Report on Form 10-Q for the quarter ended September 30, 1994, incorporated by
reference herein.
13
<PAGE>
RESULTS OF OPERATIONS--THREE MONTHS
<TABLE>
<CAPTION>
THREE MONTHS ENDED
SEPTEMBER 30
EARNINGS PROFILE OF SUN BUSINESSES (AFTER TAX) --------------------
1994 1993 VARIANCE
--------- --------- --------
(MILLIONS OF DOLLARS)
<S> <C> <C> <C>
Fuels:
Wholesale fuels............................... $ (23) $ (3) $(20)
Branded marketing............................. 25 29 (4)
Lubricants:
Lubes......................................... 19 9 10
Related fuels................................. (10) (9) (1)
Chemicals....................................... 10 3 7
Logistics....................................... 12 10 2
International production........................ 16 19 (3)
Canada (Suncor):
Exploration and production.................... 1 2 (1)
Oil sands..................................... 14 13 1
Refining and marketing........................ 3 4 (1)
Corporate expenses*........................... (2) (2) --
Net financing expenses........................ (1) (1) --
--------- --------- ----
Total Canada (Suncor)....................... 15 16 (1)
Corporate:
Corporate expenses............................ (7) (4) (3)
Net financing expenses........................ (8) (9) 1
Income from operations held for sale:**
Coal.......................................... 6 -- 6
Real estate................................... -- -- --
--------- --------- ----
55 61 (6)
Gain on divestment of exploration and production
properties..................................... 15 65 (50)
Provision for write-down of assets and other
matters........................................ (22) (12) (10)
--------- --------- ----
Consolidated net income......................... $ 48 $ 114 $(66)
========= ========= ====
</TABLE>
- --------
* Includes consolidation adjustments.
** Effective in the fourth quarter of 1993, coal and real estate operations are
accounted for as investments held for sale. During the first nine months of
1993, as discontinued operations, earnings from these businesses were
excluded from Sun's consolidated results of operations.
ANALYSIS OF EARNINGS PROFILE OF SUN BUSINESSES
In the three-month period ended September 30, 1994, Sun earned $48 million,
or $.45 per share of common stock, compared with earnings of $114 million, or
$1.07 per share for the third quarter of 1993. Excluding the special items
shown separately in the Earnings Profile of Sun Businesses, Sun earned $55
million during the third quarter of 1994 compared to income of $61 million
during the third quarter of 1993.
Fuels--Sun's domestic Fuels business recorded income of $2 million in the
third quarter of 1994 versus income of $26 million in the third quarter of
1993. Losses from Wholesale Fuels operations were $23 million in the current
quarter compared with a loss of $3 million in the third quarter of 1993. Income
from Branded Marketing operations decreased from $29 million in the year-ago
quarter to $25 million in the third quarter of 1994.
Wholesale Fuels results for the current quarter include $1 million of after-
tax income from operations at Sun's Girard Point refinery acquired from Chevron
on August 4, 1994 (see Chemicals below and Note 2 to
14
<PAGE>
the condensed consolidated financial statements in the Company's Quarterly
Report on Form 10-Q for the quarter ended September 30, 1994, incorporated by
reference herein).
Excluding results of operations from the Girard Point refinery, Wholesale
Fuels results declined due to lower margins ($20 million) across most products,
particularly wholesale gasoline, middle distillates and asphalt, and lower
sales volumes ($3 million). Partially offsetting this decrease was a $5 million
after-tax gain recognized in connection with the settlement of various
inventory hedge contracts.
In Branded Marketing, the $4 million decline was caused largely by higher
selling, general and administrative expenses ($5 million). Branded gasoline
sales volumes declined four percent versus the year-ago quarter due primarily
to Sun's strategy of eliminating marginal distributor accounts. The impact of
these lower volumes on net income was minimal.
Lubricants--Results from Sun's Lubricants business increased $9 million from
the 1993 third quarter. Income from sales of lubricant products was $19 million
in the current quarter, an increase of $10 million from the year-ago quarter.
The improvement was due to 16 percent higher sales volumes ($15 million),
particularly for base oils, partially offset by lower margins ($2 million).
Lubes production at Sun's Tulsa and Puerto Rico refineries averaged 20,700
barrels a day, an increase of nearly 60 percent from the 1993 third quarter,
when there was a scheduled maintenance shutdown at Puerto Rico. Losses from
Related Fuels operations were $10 million during the third quarter of 1994,
representing a $1 million increase in the 1993 third quarter loss of $9
million. A decline in margins on middle distillates was largely offset by
improved refinery operations at Sun's Puerto Rico and Tulsa refineries.
Chemicals--Sun's domestic Chemicals business earned $10 million in the 1994
third quarter, compared with income of $3 million in the third quarter of 1993.
Higher aromatics and propylene margins ($8 million) were partially offset by
lower sales volumes ($3 million) and higher operating expenses ($3 million).
New chemicals production resulting from the acquisition of the Girard Point
refinery also contributed $4 million to the improved earnings.
Logistics--Logistics income was $12 million, an increase of $2 million versus
the year-ago quarter, due principally to improved operating performance.
International Production--International Production earnings were $16 million
in the current quarter versus $19 million in the third quarter of 1993. The $3
million decline in earnings was due largely to lower natural gas prices and
volumes ($2 million), the absence of certain tax benefits recorded in the prior
year third quarter ($5 million) and an increase in after-tax foreign exchange
translation losses ($2 million). Partially offsetting these negative factors
were a $2 million after-tax gain from the redetermination of the Pickerill
field in the U.K. North Sea and $2 million of after-tax income from the Ninian
field recognized in the third quarter of 1994.
The average price received for Sun's international crude oil production was
$16.96 per barrel in the third quarter of 1994 compared to $16.89 per barrel
for the third quarter of 1993. Sun's average net production of crude oil was
29.9 thousand barrels daily during the third quarter of 1994 compared to
average net production of 25.2 thousand barrels daily for the third quarter of
1993. This increase reflects the added production from the Ninian field which
averaged approximately eight thousand net barrels daily during the quarter.
When fully developed, production from the acquired block is expected to exceed
11 thousand net barrels of crude oil per day. Production declines at the
Balmoral field due to scheduled maintenance partially offset the added volumes
associated with the Ninian field.
The average price received for Sun's international natural gas production was
$3.16 per thousand cubic feet for the current quarter compared to $3.67 per
thousand cubic feet in the 1993 third quarter. Sun's average net production of
natural gas was 31 million cubic feet daily in the current quarter of 1994
compared to 35 million cubic feet daily in the third quarter of 1993.
15
<PAGE>
Canada (Suncor)--Canadian exploration and production results decreased $1
million, as higher income tax expense ($2 million) was partially offset by an
increase in natural gas production volumes ($1 million). Oil sands results
increased $1 million as the impact of higher synthetic crude oil prices ($3
million) and production volumes ($2 million) was largely offset by the absence
of a $3 million after-tax gain from an insurance settlement received in the
third quarter of 1993. Synthetic crude oil production volumes increased 2
percent to 72.7 thousand barrels daily during the third quarter of 1994.
Canadian refining and marketing income decreased $1 million, as higher refined
product sales volumes ($1 million) were more than offset by increased
administrative ($1 million) and tax ($1 million) expenses.
Income from Operations Held for Sale--For a discussion of Sun's coal and real
estate operations held for sale, see Note 4 to the condensed consolidated
financial statements in the Company's Quarterly report on Form 10-Q for the
quarter ended September 30, 1994, incorporated by reference herein.
Gain on Divestment of Exploration and Production Properties--During the third
quarter of 1994, Sun disposed of its interest in U.K. North Sea exploration
Block 16/12a which resulted in an after-tax gain of $15 million, or $.14 per
share of common stock. During the third quarter of 1993, Sun completed the
sales of certain exploration properties in the U.K. North Sea and crude oil
producing properties in Canada. In connection with these sales, Sun recognized
an after-tax gain of $65 million, or $.61 per share of common stock.
Provision for Write-down of Assets and Other Matters--See "Analysis of
Earnings Profile of Sun Businesses--Provision for Write-down of Assets and
Other Matters" under "Results of Operations--Nine Months" for a discussion of
the $22 and $12 million after-tax provisions for write-down of assets and other
matters recorded in the third quarters of 1994 and 1993, respectively.
ANALYSIS OF CONSOLIDATED STATEMENTS OF INCOME
Sales and other operating revenue increased $426 million, or 19 percent,
principally due to higher refined product sales volumes ($251 million) and
prices ($55 million), an increase in consumer excise taxes ($72 million) and
higher revenues from resales of purchased oil and refined products ($26
million). The $67 million decrease in gain on divestments is primarily due to
the absence of a pretax gain recognized in 1993 on the sale of certain
exploration blocks in the U.K. North Sea ($80 million), partially offset by a
pretax gain recognized in 1994 on the sale of exploration Block 16/12a in the
U.K. North Sea ($15 million). Other income decreased $18 million in part due to
the absence of various insurance and litigation settlements recorded by Suncor
in the 1993 third quarter.
Cost of products sold and operating expenses increased $329 million, or 24
percent, primarily due to higher domestic crude oil and refined product
acquisition costs ($264 million), higher refinery operating expenses ($27
million) and higher resales of purchased oil and refined products ($23
million). The increase in product acquisition costs and refinery operating
expenses was primarily attributable to the acquisition of the Girard Point
refinery on August 4, 1994. Selling, general and administrative expenses
increased $16 million, or 10 percent, primarily due to higher expenses in Sun's
domestic refining and marketing operations ($18 million). Taxes, other than
income taxes increased $82 million, or 16 percent, primarily due to higher
consumer excise taxes ($72 million). Interest cost and debt expense increased
$6 million, or 32 percent, due to higher average short-term borrowings.
FINANCIAL CONDITION
CASH AND WORKING CAPITAL
At September 30, 1994, Sun had cash and cash equivalents of $142 million
compared to $118 million at December 31, 1993 and had a working capital deficit
of $265 million versus a working capital deficit of $228 million at December
31, 1993. Sun's working capital position is considerably stronger than
indicated because
16
<PAGE>
of the relatively low historical costs assigned under the LIFO method of
accounting to a significant portion
of the inventories reflected in the condensed consolidated balance sheet. The
current replacement cost of all such inventories exceeds the carrying value at
September 30, 1994, by approximately $425 million. Inventories valued at LIFO,
which consist of crude oil and refined products, are readily marketable at
their current replacement values. Management believes that the current levels
of Sun's cash and working capital provide adequate support for its ongoing
operations.
CASH GENERATION AND FINANCIAL CAPACITY
In the first nine months of 1994, Sun's net cash provided by operating
activities ("cash generation") was $85 million compared to $168 million in the
first nine months of 1993. The $83 million decrease in cash generation is
largely due to a $50 million decline in income before special items and a $44
million increase in working capital uses pertaining to operating activities.
Divestment activities also have enhanced Sun's cash flow and liquidity. During
the first nine months of 1994 and 1993, proceeds from divestments totalled $65
and $317 million, respectively.
Management believes that cash generation will be sufficient to satisfy Sun's
future ongoing cash requirements to sustain the current cash dividend, pursue
its capital program and fulfill its financing obligations. However, from time
to time, the Company's short-term cash requirements may exceed its cash
generation due to various factors including volatility in crude and refined
product markets and increases in capital spending and working capital levels.
During those periods, the Company may supplement its cash generation with
proceeds from divestment and financing activities. In addition, Sun's capital
spending levels may be adjusted in response to changes in cash generation as a
portion of capital spending is discretionary in nature.
In the event that cash generation is insufficient to satisfy near-term cash
requirements, the Company has access to $500 million of short-term financing
for operations in the form of commercial paper and revolving credit agreements
from commercial banks. The Company also has access to short-term financing
under non-committed money market facilities and a $50 million confirmed line of
credit. In addition, Suncor has a revolving term credit facility available for
its own use aggregating $298 million.
The following table sets forth Sun's total borrowings (in millions of
dollars) at:
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1994 1993
------------- ------------
<S> <C> <C>
Short-term borrowings:
Commercial paper................................ $ 200 $ 50
Confirmed line of credit........................ 50 --
Non-committed money market facilities........... 180 60
------ ----
430 110
------ ----
Current portion of long-term debt................. 99 26
------ ----
Long-term debt:
Commercial paper................................ 250* --
Suncor revolving term credit.................... 3 91
Other........................................... 731 635
------ ----
984 726
------ ----
Total borrowings.................................. $1,513 $862
====== ====
</TABLE>
- --------
* On November 1, 1994, the Company issued $150 million of 8 1/8 percent 5-year
notes and $100 million of 9 percent 30-year debentures. The proceeds from
these borrowings will be used to repay commercial paper as it matures.
Accordingly, $250 million of commercial paper was classified as long-term
debt at September 30, 1994.
17
<PAGE>
The $651 million increase in total borrowings was largely used to fund a
portion of Sun's significant capital program ($669 million, including $151
million attributable to the acquisition of the Girard Point refinery) and the
increase in inventory levels during the first nine months of 1994. Sun expects
to reduce its inventory levels during the fourth quarter of 1994.
As of September 30, 1994, Sun's long-term debt to long-term capitalization
ratio was 33.8 percent. As indicated by this ratio, management believes that
Sun has substantial long-term borrowing capacity which is available to pursue
strategic and other operational investment opportunities as they arise.
SELLING SHAREHOLDERS
The following table sets forth (a) the number and percentage of outstanding
shares of Common Stock (i) owned by each of the Selling Shareholders
immediately prior to this offering, and (ii) to be owned by the Selling
Shareholders assuming completion of this offering, and (b) the number of shares
of Common Stock to be sold by the Selling Shareholders pursuant to this
offering:
<TABLE>
<CAPTION>
BENEFICIAL BENEFICIAL
OWNERSHIP PRIOR SHARES TO OWNERSHIP AFTER
TO OFFERING BE SOLD (3) OFFERING (3)
NAME AND ADDRESS OF ---------------- ----------- ---------------
BENEFICIAL OWNER (1) SHARES %(2) SHARES %(2)
-------------------- ---------- ----- ---------- ----
<S> <C> <C> <C> <C> <C>
The Pew Memorial Trust......................... 15,326,747 14.34 5,192,000 10,134,747 9.48
The J. Howard Pew Freedom Trust................ 3,611,942 3.38 1,224,000 2,387,942 2.23
The Mabel Pew Myrin Trust...................... 2,056,581 1.92 696,000 1,360,581 1.27
The J. N. Pew, Jr. Charitable Trust............ 1,831,825 1.71 624,000 1,207,825 1.13
The Medical Trust (4).......................... 790,649 0.74 264,000 526,649 0.49
</TABLE>
- --------
(1)The Glenmede Trust Company, a trust company without banking powers,
organized under the laws of the Commonwealth of Pennsylvania and located at
One Liberty Place, 12th Floor, 1650 Market Street, Philadelphia,
Pennsylvania 19103 ("Glenmede"), in its fiduciary capacity as trustee or co-
trustee, is the beneficial owner of all of the Common Stock owned by the
Selling Shareholders. As of October 31, 1994, Glenmede, in its fiduciary
capacity for other trusts and estates, is the beneficial owner of additional
shares of Common Stock, none of which are being sold in this offering
(Glenmede owns no shares of Common Stock for its own account). Of such
additional shares of Common Stock, Glenmede has sole voting power as to
237,092 shares (constituting 0.22% of the outstanding shares of Common
Stock), shared voting power as to 520,638 shares (constituting 0.49% of the
outstanding shares of Common Stock), sole investment power as to 103,317
shares (constituting 0.10% of the outstanding shares of Common Stock) and
shared investment power as to 703,371 shares (constituting 0.66% of the
outstanding shares of Common Stock). The foregoing percentages assume
106,876,274 shares of outstanding Common Stock.
(2)Assumes 106,876,274 shares of outstanding Common Stock.
(3)Does not give effect to the possible exercise of the Underwriters' over-
allotment option. Pursuant to such over-allotment option, if exercised in
full, the Selling Shareholders will sell an aggregate of 1,200,000
additional shares of Common Stock to be allocated amongst the various
Selling Shareholders ratably in proportion to the number of shares of Common
Stock set forth opposite their respective names in the above table under the
caption "Shares to be Sold."
(4)Francis M. Richards, Jr. is the co-trustee with Glenmede and, as a result,
has shared voting and investment power along with Glenmede with respect to
the shares of Common Stock owned by The Medical Trust.
Upon the completion of the offering (without giving effect to the possible
exercise of the Underwriters' over-allotment option), the Selling Shareholders
will retain ownership of 15,617,744 shares of Common Stock (the "Retained
Shares"), all of which will be deemed to be "restricted" securities (as defined
in Rule 144 promulgated under the Act) if they are held by an affiliate of the
Company. Glenmede, who is currently an affiliate of the Company, is deemed to
be the beneficial owner of the Retained Shares and, accordingly, the
18
<PAGE>
Retained Shares are restricted securities. All of the Retained Shares may be
sold publicly in the future only if such shares of Common Stock are sold
pursuant to an effective registration statement under the Act or in compliance
with Rule 144. In general, Rule 144 provides that any person, including an
"affiliate," as that term is defined below, who has owned shares beneficially
for at least two years is entitled to sell, within any three-month period, a
number of shares that does not exceed the greater of (i) the average weekly
trading volume of such class of securities during the four calendar weeks
immediately preceding such sale, and (ii) one percent of the number of
outstanding shares of such class, provided that certain other conditions are
met, including the availability of current public information concerning the
Company and the filing of a notice of sale. A person (or persons whose shares
are aggregated) who is not an "affiliate" of the Company, and who has
beneficially owned shares for at least three years, is entitled to sell such
shares under Rule 144 without regard to the volume limitations described above.
As defined in Rule 144, an "affiliate" of an issuer is a person that directly,
or indirectly through the use of one or more intermediaries, controls, or is
controlled by, or is under the common control with, such issuer.
Notwithstanding the foregoing, the Selling Shareholders have agreed that they
will not, without the prior consent of Morgan Stanley & Co. Incorporated, sell,
contract to sell, or otherwise dispose of any Retained Shares for a period of
90 days after the date of this Prospectus (the "Lock-up Period"). In addition,
the Selling Shareholders have advised the Company that they have no current
plan to sell or dispose of any of the Retained Shares upon the expiration of
the Lock-up Period. However, Glenmede, in the exercise of its fiduciary duties
as trustee or co-trustee of each of the Selling Shareholders, will evaluate and
determine, from time to time, whether to continue to hold or sell any or all of
the Retained Shares after expiration of the Lock-up Period. Such determination
will be made based upon the needs of a particular Selling Shareholder and the
market conditions existing at the time.
CAPITAL STOCK
The authorized capital stock of the Company consists of 200,000,000 shares of
Common Stock, $1 par value, of which 106,876,274 shares were outstanding on
September 30, 1994 and 15,000,000 shares of Cumulative Preference Stock without
par value, none of which are outstanding.
COMMON STOCK
All shares of Common Stock presently outstanding are duly authorized, fully
paid and nonassessable. Holders of the Common Stock are entitled to one vote
per share on any matter submitted to the stockholders and do not have
cumulative voting rights. The Common Stock is not redeemable or convertible and
the holders of Common Stock do not have any pre-emptive right to purchase
securities of the Company. Upon dissolution of the Company, the holders of
Common Stock are entitled to receive ratably all of the assets, if any, which
remain legally available for distribution to the Company's stockholders after
the liquidation preferences of the Company's Preference Stock, if any, have
been satisfied in full. Subject to the prior dividend rights of the holders of
any Preference Stock, the holders of the Common Stock outstanding from time to
time are entitled to receive dividends as and when declared by the Board of
Directors of the Company out of funds legally available therefor.
PREFERENCE STOCK
The Board of Directors of the Company is authorized without further
stockholder action to provide for the issuance of up to 15,000,000 shares of
Preference Stock in one or more series and to determine the designations,
preferences, dividend rates, liquidation rights, voting rights, conversion
rights, redemption rights, sinking funds, stated value and such other
provisions as may be determined by the Board of Directors pursuant to
Pennsylvania law. However, each share of Preference Stock may not be converted
into more than one share of Common Stock (as adjusted pursuant to certain
events) or entitle the holder thereof to more than one vote.
The Company's Articles of Incorporation provide that all shares of the same
series of Preference Stock shall be identical with each other share of such
series in all respects except that shares of any one series issued
19
<PAGE>
at different times may differ as to the date from which dividends shall be
cumulative. Holders of any shares of Preference Stock shall rank in priority to
holders of Common Stock or any other junior class or classes of stock with
respect to the receipt of cash dividends, and no dividends shall be paid to any
other such holder before the Preference Stock holders have received any cash
dividends to which they may be entitled. In the event of any liquidation,
dissolution or winding up of the Company, Preference Stock shall rank in
priority to Common Stock or any other capital stock of the Company.
Absent the approval of 66 2/3% of the number of shares of outstanding
Preference Stock, the Company may not create a prior class of stock, or take
certain actions which would alter or change the preferences, special rights or
powers, or the number of authorized shares of Preference Stock. The Company
retains the right to redeem any series of Preference Stock in whole or in part,
at the option of the Board of Directors subject to certain conditions set forth
in the Company's Articles of Incorporation, and upon any such redemption, such
shares have the status of authorized and unissued shares.
PROCEDURES WITH RESPECT TO CERTAIN BUSINESS COMBINATIONS
Under the Company's Articles of Incorporation, a business combination or
other specified transaction entered into with a holder (with certain
exceptions) of more than 10% of the voting stock of the Company (a "Related
Person") must either (i) be approved by a vote of the holders of not less than
75% of the outstanding shares of the Company's voting stock held by
stockholders other than the Related Person; (ii) be approved by two-thirds of
the members of the Board of Directors not affiliated with the Related Person;
or (iii) satisfy certain minimum price criteria and procedural requirements
with respect to the remaining stockholders.
QUALIFYING SHAREHOLDER STATUS
Glenmede, as a "qualifying shareholder" under the Pennsylvania General
Associations Act of 1988, has the right to call a special meeting of the
Company's shareholders and the right to propose amendments to the Company's
Articles of Incorporation. Upon the completion of this offering, Glenmede will
no longer be a "qualifying shareholder" under the Pennsylvania General
Associations Act of 1988 and neither Glenmede nor any other shareholder of the
Company shall be entitled to exercise the rights referred to in this paragraph.
The Company's Board of Directors has approved for submission to the Company's
shareholders at the Company's next regular annual meeting of shareholders an
amendment to the Company's Articles of Incorporation that would provide these
rights to any holder of 10% or more of the Company's outstanding voting stock.
Following the completion of the offering, Glenmede will beneficially own in
excess of 10% of the Company's outstanding voting stock.
CERTAIN UNITED STATES FEDERAL TAX CONSIDERATIONS
FOR NON-U.S. HOLDERS OF COMMON STOCK
The following discussion concerns the material United States federal income
and estate tax consequences of the ownership and disposition of shares of
Common Stock applicable to Non-U.S. Holders of such shares of Common Stock. In
general, a "Non-U.S. Holder" is any holder other than (i) a citizen or
resident, as specifically defined for U.S. federal income and estate tax
purposes, of the United States, (ii) a corporation, partnership or any entity
treated as a corporation or partnership for U.S. federal income tax purposes
created or organized in the United States or under the laws of the United
States or of any State, or (iii) an estate or trust whose income is includible
in gross income for United States federal income tax purposes regardless of its
source. The discussion is based on current law, which is subject to change
retroactively or prospectively, and is for general information only. The
discussion does not address all aspects of federal income and estate taxation
and does not address any aspects of state, local or foreign tax laws. The
discussion does not consider any specific facts or circumstances that may apply
to a particular Non-U.S. Holder (including the fact that in the case of a Non-
U.S. Holder that is a partnership, the United States tax consequences of
holding and disposing of shares of Common Stock may be affected by certain
determinations made at the partner level).
20
<PAGE>
Accordingly, prospective investors are urged to consult their tax advisors
regarding the United States federal, state, local and non-U.S. income and other
tax consequences of holding and disposing of shares of Common Stock.
Dividends. In general, dividends paid to a Non-U.S. Holder will be subject to
United States withholding tax at a 30% rate (or a lower rate as may be
prescribed by an applicable tax treaty) unless the dividends are either (i)
effectively connected with a trade or business carried on by the Non-U.S.
Holder within the United States, or (ii) if a tax treaty applies, attributable
to a United States permanent establishment maintained by the Non-U.S. Holder.
Dividends effectively connected with such a trade or business or attributable
to such permanent establishment (if a tax treaty applies) and so treated as
effectively connected income will generally not be subject to withholding (if
the Non-U.S. Holder files certain forms annually with the payor of the
dividend) and will generally be subject to United States federal income tax on
a net income basis at the applicable graduated individual or corporate rates.
In the case of a Non-U.S. Holder which is a corporation, such effectively
connected income also may be subject to the 30 percent branch profits tax
(which is generally imposed on a foreign corporation on the repatriation from
the United States of effectively connected earnings and profits except to the
extent an applicable tax treaty otherwise provides). The branch profits tax may
not apply if the recipient is a qualified resident of certain countries with
which the United States has an income tax treaty.
To determine the applicability of a tax treaty providing for a lower rate of
withholding, dividends paid to an address in a foreign country are presumed
under current Treasury Regulations to be paid to a resident of that country,
unless the payor has definite knowledge that such presumption is not warranted
or an applicable tax treaty (or United States Treasury Regulations thereunder)
requires some other method for determining a Non-U.S. Holder's residence.
Treasury Regulations proposed in 1984, if finally adopted, however, would
require Non-U.S. Holders to file certain forms to obtain the benefit of any
applicable tax treaty providing for a lower rate of withholding tax on
dividends. Such forms would be required to contain the holder's name, address
and other pertinent information subject to a de minimis payment exception and
an official statement by the competent authority in the foreign country (as
designated in the applicable tax treaty) attesting to the holder's status as a
resident thereof. Under current regulations, the Company must report annually
to the Internal Revenue Service and to each Non-U.S. Holder the amount of
dividends paid to, and the tax withheld with respect to, each Non-U.S. Holder.
These information reporting requirements apply regardless of whether
withholding was reduced or eliminated by an applicable tax treaty. Copies of
these reports also may be made available under the provisions of a specific
treaty or agreement with the tax authorities in the country in which the Non-
U.S. Holder resides.
Sale or Exchange of Common Stock. Generally, a Non-U.S. Holder will not be
subject to United States federal income tax on any gain realized upon the
disposition of such holder's shares of Common Stock unless (i) the gain is
effectively connected with a trade or business carried on by the Non-U.S.
Holder within the United States or, if a tax treaty applies, attributable to a
permanent establishment maintained by the Non-U.S. Holder in the United States;
(ii) the Non-U.S. Holder is an individual who holds the shares of Common Stock
as a capital asset and is present in the United States for 183 days or more in
the taxable year of the disposition, and either (a) such Non-U.S. Holder has a
"tax home" (as specifically defined for U.S. federal income tax purposes) in
the United States (unless the gain from the disposition is attributable to an
office or other fixed place of business maintained by such Non-U.S. Holder in a
foreign country and such gain has been subject to a foreign tax equal to at
least 10%), or (b) the gain from the disposition is attributable to an office
or fixed place of business maintained by such Non-U.S. Holder in the United
States; (iii) the Non-U.S. Holder is subject to tax pursuant to the provisions
of U.S. tax law applicable to certain United States expatriates; or (iv) the
Company is or has been during certain periods a "U.S. real property holding
corporation" as defined for U.S. federal income tax purposes and the Non-U.S.
Holder held, at any time during the five year period ending on the date of
disposition (or such shorter period that such shares were held), directly or
indirectly, more than five percent of the Common Stock (assuming that the
Common Stock is regularly traded on an established securities market). The
Company believes that it may be a U.S. real property holding corporation.
21
<PAGE>
Estate Tax. Shares of Common Stock owned or treated as owned by an individual
who is not a citizen or resident (as defined for United States federal estate
tax purposes) of the United States at the time of death will be includible in
such individual's gross estate for United States federal estate tax purposes,
unless an applicable tax treaty provides otherwise, and may be subject to
United States federal estate tax.
Backup Withholding and Information Reporting. Under current United States
federal income tax law, backup withholding (which generally is a withholding
tax imposed at the rate of 31 percent on certain payments to persons that fail
to furnish the information required under the U.S. information reporting
requirements) and information reporting requirements apply to payments of
actual and certain constructive dividends. Backup withholding and information
reporting requirements will generally not apply to dividends paid on Common
Stock to Non-U.S. Holders to which the Company is required to withhold at a 30
percent rate or, if applicable, a lower treaty rate, as described under "--
Dividends."
The payment of the proceeds from the disposition of shares of Common Stock to
or through the United States office of a broker will be subject to information
reporting and backup withholding unless the holder or beneficial owner
certifies, under penalties of perjury, among other things, as to its status as
a Non-U.S. Holder, or otherwise establishes an exemption. Generally, the
payment of the proceeds from the disposition of shares of Common Stock to or
through a non-U.S. office of a broker will not be subject to backup withholding
and will not be subject to information reporting. In the case of the payment of
proceeds from the disposition of shares of Common Stock to or through a non-
U.S. office of a broker that is a U.S. person or a "U.S.-related person,"
existing regulations require information reporting on the payment unless the
broker receives a statement from the owner, signed under penalties of perjury,
certifying, among other things, its status as a Non-U.S. Holder, or the broker
has documentary evidence in its files that the owner is a Non-U.S. Holder and
the broker has no actual knowledge to the contrary. For this purpose, a "U.S.-
related person is (i) a "controlled foreign corporation" for United States
federal income tax purposes or (ii) a foreign person 50% or more of whose gross
income from all sources for the three year period ending with the close of its
taxable year preceding the payment (or for such part of the period that the
broker has been in existence) is derived from activities that are effectively
connected with the conduct of a United States trade or business. The backup
withholding and information reporting rules are currently under review by the
United States Treasury Department and Internal Revenue Service, and their
application to the shares of Common Stock is subject to change. Non-U.S.
Holders should consult their tax advisors regarding the application of these
rules to their particular situations, the availability of an exemption
therefrom, and the procedure for obtaining such an exemption, if available.
A Non-U.S. Holder generally may obtain a refund of any excess amounts
withheld by filing the appropriate claim for refund with the IRS.
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<PAGE>
UNDERWRITERS
Under the terms and subject to the conditions contained in the Underwriting
Agreement dated the date hereof, the Underwriters named below have severally
agreed to purchase, and the Selling Shareholders have agreed to sell to them,
the number of shares of Common Stock set forth opposite the names of each
Underwriter below.
<TABLE>
<CAPTION>
NUMBER
OF SHARES
---------
<S> <C>
Morgan Stanley & Co. Incorporated............................. 1,333,334
CS First Boston Corporation................................... 1,333,333
Smith Barney Inc. ............................................ 1,333,333
Robert W. Baird & Co. Incorporated............................ 100,000
Bear, Stearns & Co. Inc....................................... 200,000
Sanford C. Bernstein & Co., Inc............................... 200,000
Alex. Brown & Sons Incorporated............................... 200,000
Dean Witter Reynolds Inc...................................... 200,000
Dillon, Read & Co. Inc........................................ 200,000
Donaldson, Lufkin & Jenrette Securities Corporation........... 200,000
Goldman, Sachs & Co........................................... 200,000
Howard, Weil, Labouisse, Friedrichs Incorporated.............. 200,000
Janney Montgomery Scott Inc................................... 100,000
Kemper Securities, Inc........................................ 100,000
Ladenburg, Thalmann & Co. Inc................................. 100,000
C.J. Lawrence/Deutsche Bank Securities Corporation............ 100,000
Lehman Brothers Inc........................................... 200,000
McDonald & Company Securities, Inc............................ 100,000
Merrill Lynch, Pierce, Fenner & Smith Incorporated............ 200,000
Oppenheimer & Co., Inc........................................ 200,000
PaineWebber Incorporated...................................... 200,000
Prudential Securities Incorporated............................ 200,000
Pryor, McClendon, Counts & Co., Inc........................... 100,000
Rauscher Pierce Refsnes, Inc.................................. 100,000
Salomon Brothers Inc.......................................... 200,000
Scott & Stringfellow, Inc..................................... 100,000
Sturdivant & Co., Inc......................................... 100,000
Wertheim Schroder & Co. Incorporated.......................... 200,000
---------
Total....................................................... 8,000,000
=========
</TABLE>
The Underwriting Agreement provides that the obligations of the several
Underwriters to pay for and accept delivery of the shares of Common Stock
offered hereby are subject to the approval of certain legal matters by their
counsel and to certain other conditions. The Underwriters are obligated to take
and pay for all the shares of Common Stock offered hereby (other than those
covered by the over-allotment option described below) if any such shares are
taken.
The Underwriters propose to offer part of the shares of Common Stock directly
to the public at the public offering price set forth on the cover page hereof
and part to certain dealers at a price which represents a concession of not in
excess of $.58 per share below the public offering price. The Underwriters may
allow, and such dealers may reallow, a concession not in excess of $.10 per
share to other Underwriters or to certain dealers.
Pursuant to the Underwriting Agreement, the Selling Shareholders have granted
the Underwriters an option, exercisable for 30 days from the date of this
Prospectus, to purchase up to 1,200,000 additional shares
23
<PAGE>
of Common Stock at the public offering price set forth on the cover page
hereof, less underwriting discounts and commissions. The Underwriters may
exercise such option solely for the purpose of covering over-allotments, if
any, made in connection with the offering of the shares of Common Stock offered
hereby. To the extent such option is exercised, each Underwriter will become
obligated, subject to certain conditions, to purchase approximately the same
percentage of such additional shares as the number set forth next to such
Underwriter's name in the preceding table bears to the total number of shares
of Common Stock offered by the Underwriters hereby.
Except with respect to the United States, no action has been taken by the
Company, the Selling Shareholders or the Underwriters that would permit a
public offering of the Common Stock in any country or jurisdiction where action
for that purpose is required. Accordingly, the Common Stock may not be offered,
sold or delivered, directly or indirectly, and neither this document or other
offering material may be distributed or published in any other such country or
jurisdiction except under circumstances that will result in compliance with any
applicable laws and regulations and the Underwriters have represented that all
offers, sales and deliveries by them will be made on these terms.
The Company has agreed that, without the prior written consent of Morgan
Stanley & Co. Incorporated, it will not offer, sell, contract to sell or
otherwise dispose of any shares of Common Stock or any securities convertible
into or exercisable or exchangeable for Common Stock for a period of 90 days
after the date of this Prospectus, other than (i) any shares of Common Stock
issuable pursuant to the exercise of stock options, warrants or other
convertible securities and outstanding on the date of this Prospectus, (ii)
options and similar instruments granted to employees of the Company to acquire
Common Stock and other interests in shares of Common Stock, in each case
granted pursuant to the Company's employee benefit plans or (iii) shares issued
pursuant to the Company's Dividend Reinvestment Plan. The Selling Shareholders,
as holders of 14,417,744 shares of Common Stock (after the consummation of this
offering and assuming the exercise of the over-allotment option by the
Underwriters) have agreed not to offer, sell, contract to sell or otherwise
dispose of any shares of Common Stock or any securities convertible into or
exercisable or exchangeable for Common Stock for a period of 90 days after the
date of this Prospectus without the prior consent of Morgan Stanley & Co.
Incorporated.
The Company, the Selling Shareholders, and the Underwriters have agreed to
indemnify each other against certain liabilities, including civil liabilities
under the Federal securities laws. In the view of the Commission,
indemnification for liabilities arising under the Federal securities laws is
against public policy and is, therefore, unenforceable.
The Underwriters and /or their affiliates have in the past and may in the
future provide investment and commercial banking and other related services to
the Company in the ordinary course of business for which the Underwriters
and/or their affiliates have received or may receive customary fees and
reimbursement of their out-of-pocket expenses.
LEGAL OPINIONS
The validity of the Common Stock offered hereby will be passed upon for the
Company by Jack L. Foltz, Esq., Vice President and General Counsel of the
Company or Jonathan C. Waller, Esq., Assistant General Counsel of the Company;
certain legal matters will be passed on for the Selling Shareholders by Pepper,
Hamilton & Scheetz, Philadelphia, Pennsylvania; and certain matters will be
passed on for the Underwriters by Simpson Thacher & Bartlett (a partnership
which includes professional corporations), New York, New York. Simpson Thacher
& Bartlett will rely upon the opinion of Mr. Foltz or Mr. Waller, as the case
may be, as to all matters of Pennsylvania law. Mr. Foltz and Mr. Waller, in
their respective capacities as Vice President and General Counsel and Assistant
General Counsel of the Company, participate in various employee benefit plans
offered by the Company and in connection with certain of such benefit plans
receive Common Stock and options to purchase Common Stock. Pepper, Hamilton &
Scheetz from time to time has provided legal services to the Company. Richard
C. Sorlein, Esq., "of counsel" to Pepper, Hamilton & Scheetz, is a stockholder
of the parent corporation of Glenmede.
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<PAGE>
EXPERTS
The consolidated balance sheets of Sun at December 31, 1993 and 1992, the
consolidated statements of income, changes in stockholders' equity and cash
flows for each of the three years in the period ended December 31, 1993, and
the financial statement schedules included in the Company's Annual Report on
Form 10-K for the fiscal year ended December 31, 1993, as amended, incorporated
by reference in this Prospectus, have been incorporated herein in reliance upon
the reports (which include an explanatory paragraph regarding the Company's
change in method of accounting for income taxes in 1993, the Company's change
in method of accounting for the cost of postretirement health care and life
insurance benefits in 1992 and the Company's change in method of accounting for
the cost of crude oil and refined product inventories of Suncor Inc., the
Company's Canadian subsidiary in 1991) of Coopers & Lybrand L.L.P., independent
accountants, given on the authority of that firm as experts in auditing and
accounting.
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