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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(Mark One)
/X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended December 31, 1993
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from to
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Commission file number 1-6841
SUN COMPANY, INC.
(Exact name of registrant as specified in its charter)
Pennsylvania 23-1743282
(State or other jurisdiction of incorporation (I.R.S. Employer
or organization) Identification No.)
Ten Penn Center
1801 Market Street, Philadelphia, PA 19103-1699
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (215) 977-3000
Securities registered pursuant to Section 12(b) of the Act:
Name of each
Title of each class exchange on which registered
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Common Stock, $1 par value New York Stock Exchange
Philadelphia Stock Exchange
Alberta Stock Exchange
Basel Stock Exchange
Geneva Stock Exchange
Zurich Stock Exchange
Dusseldorf Stock Exchange
Frankfurt Stock Exchange
London Stock Exchange
Convertible Subordinated New York Stock Exchange
Debentures 6 3/4%,
Due June 15, 2012
Sinking Fund Debentures 9 3/8%, New York Stock Exchange
Due June 1, 2016
Notes 7.95%, New York Stock Exchange
Due December 15, 2001
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Securities registered pursuant to section 12(g) of the Act: None
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has
been subject to such filing requirements for the past 90 days.
Yes X No
--- ---
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form
10-K or any amendments of this Form 10-K. /X/
At February 28, 1994, the aggregate market value of voting stock held
by nonaffiliates was $2,676 million.
At February 28, 1994, there were 106,714,811 shares of Common Stock,
$1 par value, outstanding.
Selected portions of the Sun Company, Inc. Annual Report to
Shareholders for the Fiscal Year Ended December 31, 1993 are incorporated
by reference in Parts I, II and IV of this Form 10-K.
Selected portions of the Sun Company, Inc. definitive Proxy Statement,
which will be filed with the Securities and Exchange Commission within 120
days after December 31, 1993, are incorporated by reference in Part III of
this Form 10-K.
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PART I
ITEMS 1 AND 2. BUSINESS AND PROPERTIES
GENERAL
Sun Company, Inc.* 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 1801 Market Street,
Philadelphia, PA 19103-1699. Its telephone number is (215) 977-3000.
The Company, through its subsidiaries, is principally a petroleum
refiner and marketer with interests in oil and gas exploration and
production and oil sands mining.
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 also has interests in coal, real estate and leasing operations in
the United States. Each of these businesses is subject to a plan of
disposition which management is actively pursuing.
During October 1992, the Company announced a new strategic plan for
Sun (the "Strategic Plan"). The Strategic Plan 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 U.K. North Sea).
For information regarding certain initiatives implemented as part of
Sun's Strategic Plan, see Management's Discussion and Analysis of Financial
Condition and Results of Operations - Strategic Actions, and Note 2 to the
Consolidated Financial Statements in the Company's 1993 Annual Report to
Shareholders. Additional business segment and geographic information is
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*As used in this report, the term "Company" means Sun Company, Inc., and
the term "Sun" means Sun Company, Inc. and its subsidiaries. The use of
these terms is for convenience of discussion and is not intended to be a
precise description of corporate relationships. References in this Annual
Report on Form 10-K to material in the Company's 1993 Annual Report to
Shareholders and in the Company's definitive Proxy Statement, which will
be filed with the Securities and Exchange Commission within 120 days after
December 31, 1993, mean that such material is incorporated herein by
reference; other material in those documents is not deemed to be filed as
part of this Annual Report on Form 10-K.
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presented in Note 19 to the Consolidated Financial Statements in the
Company's 1993 Annual Report to Shareholders.
DOMESTIC REFINING AND MARKETING
The Company's domestic refining and marketing operations consist of
the manufacturing and marketing of fuels, lubricants and chemicals and the
transportation of crude oil and refined products. These operations are
managed by Sun Company, Inc. (R&M), a wholly owned subsidiary of the
Company, and are classified in the following business lines: Fuels,
Lubricants, Chemicals and Logistics.
Sun owns and operates five domestic refineries which had a total crude
unit processing capacity of 600 thousand barrels daily as of December 31,
1993. Sun's refineries in Marcus Hook, PA, Philadelphia, PA and Toledo, OH
produce fuels and chemicals while its refineries in Tulsa, OK and Yabucoa,
Puerto Rico emphasize lubricants production with fuels as a by-product.
Elements of supply and distribution of crude oil, feedstocks and refined
products that are common to the operations of all five refineries are
discussed below under the heading "Supply and Distribution."
FUELS
Sun's Fuels business consists primarily of the manufacture and sale of
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 for defense fuel supply.
This business includes the sale of fuels (gasoline and middle distillates)
under Sun's SUNOCO(R) and ATLANTIC(R) brands.
During 1993, Sun announced that it would convert its existing
ATLANTIC(R) outlets to SUNOCO(R) and convert its SUNOCO FOOD MARKET(R)
convenience stores to APLUS(R). This strategy is expected to be fully
implemented by year-end 1995 and is intended to capitalize on the
recognition and reputation of the SUNOCO(R) and APLUS(R) brand names (see
"Branded Fuels Marketing" below).
Fuels Refining
The refining operations of Sun's Fuels business are conducted at its
Marcus Hook, Philadelphia and Toledo refineries ("Fuels Refineries"). The
Company continues to operate its Tulsa, OK and Yabucoa, Puerto Rico
refineries to emphasize lubricants production. Accordingly, the related
wholesale fuels operations of these two lubricants refineries are included
in the Lubricants business and operating results (see "Lubricants" below).
During 1993, the Company reviewed various strategic options regarding
its Toledo refinery including a possible reconfiguration or joint venture
operation. The Company did not execute any of these options. Operating
improvements at the refinery along with better market conditions in the
Midwest, contributed to improved financial results at this facility in
1993.
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Sun's Marcus Hook and Toledo refineries run a relatively light, low-
sulfur crude slate. The refinery in Philadelphia is able to process
heavier, higher sulfur crudes and is a major producer of asphalt in Sun's
northeastern United States marketing area.
Sun's Marcus Hook and Philadelphia refineries are currently
interconnected by barge, truck and rail. Feedstocks currently being
transferred between these refineries include reformate, naphtha, light
cycle oil and butanes. Feedstock integration between the two facilities
will be enhanced by the construction of an inter-refinery pipeline
scheduled to be completed by early 1995. This pipeline will provide
opportunities for additional manufacturing synergies and cost efficiencies
from product movements between the two refineries. See "Logistics" below
for a further discussion of this project.
Environmental laws require Sun to make significant expenditures at its
refineries, of both a capital and expense nature. A $100 million project
to significantly upgrade the sewer system and close an unlined impoundment
was begun in 1992 at Sun's Marcus Hook refinery and is targeted for
completion during 1994. Additionally, significant alterations in the
composition of gasoline sold in most of Sun's northeastern U.S. branded
marketing area are required under the Clean Air Act of 1990, as amended
(the "Clean Air Act"), to reduce the maximum allowable benzene content,
reduce summertime Reid Vapor Pressure ("RVP") and increase the minimum
oxygenate content. These requirements, which are currently being phased
in, significantly impact operations at Sun's three Fuels Refineries, and to
a lesser extent at Sun's Tulsa and Puerto Rico refineries which generate
fuels and intermediate feedstocks as by-products of their lubricants
production. While the Clean Air Act covers all motor fuels, the major
impact of this legislation will be in the production of motor gasolines
which must meet strict reformulated fuels guidelines. It is expected that
all refiners will not be willing or able to make the significant capital
expenditures necessary to produce cleaner-burning reformulated fuels and
that a rationalization of U.S. refining capacity will occur.
In anticipation of additional requirements becoming effective in 1995,
the Company has undertaken various initiatives to compete effectively in
this environment. First, while Sun's Toledo and Marcus Hook refineries
already have substantial benzene extraction capacity, the Company is
currently in the process of further expanding such capacity at its Marcus
Hook refinery to permit it to extract benzene from gasoline streams from
Sun's Philadelphia refinery or from third parties (see "Chemicals" below).
Secondly, the Company has secured the majority of its required supply of
oxygenates through a 100 percent methyl tertiary butyl ether ("MTBE") off-
take agreement with Belvieu Environmental Fuels ("BEF"), a joint venture in
which Sun is a one-third partner, formed to construct, own and operate an
MTBE production facility. This off-take agreement will supplement Sun's
existing oxygenated gasoline production at its three Fuels Refineries. BEF
is expected to begin production in mid-1994 (see "Chemicals" below).
Thirdly, Sun's Toledo, Philadelphia and Yabucoa, Puerto Rico refineries
have the ability, without additional capital investment, to produce low-
sulfur diesel that meets the sulfur reduction requirements for on-road
diesel. Finally, as a result of the reconfiguration of Sun's Tulsa
refinery in 1992, the capital investment needed to comply with the Clean
Air Act has been significantly reduced (see "Lubricants" below). While
there is considerable uncertainty concerning the impact on Sun's future<PAGE>
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profitability of the implementation of the amendments to the Clean Air Act,
Sun's management believes that the Company is well positioned to meet the
new air toxics and reformulated fuels requirements under present
regulations as they are phased in over the next few years.
Sun has an alternative fuels research and testing program focusing on
methanol/gasoline mixtures, liquefied petroleum gas and compressed natural
gas. The results of this program are expected to assist Sun in meeting the
demand for such fuels in the future and in meeting environmental regulatory
requirements.
The Fuels business tends to be seasonal in nature, in that refining
margins often begin to increase in the second quarter and decrease in the
fourth quarter of the year, reflecting increased demand for gasoline and
other refined products during the summer driving season.
Wholesale Fuels Marketing
Sun sells gasoline, distillates, jet fuel, residual fuel oil and
asphalt to wholesale, commercial and industrial customers and to the United
States government for defense fuel supply. Total third-party fuels
products sold at wholesale from Sun's Fuels Refineries in 1993 were 219.6
thousand barrels daily compared to 234.1 thousand barrels daily in 1992.
For a discussion of wholesale fuels marketing at Sun's Tulsa and Puerto
Rico lubricants refineries, see "Lubricants" below.
Branded Fuels Marketing
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 gasolines represented by
Sunoco's ULTRA(R) 94 and Atlantic's OPTIMA(R) 93 grades, as well as a
choice of several lower octane gasolines. Domestic branded fuels sales
averaged 245.0 thousand barrels daily in 1993 compared to 255.7 thousand
barrels daily in 1992. Sun's branded fuels marketing business also
consists of the ownership and operation of the SUNOCO FOOD MARKET(R) and
APLUS(R) convenience stores.
In May 1993, Sun announced that its ATLANTIC(R) stations would be
converted to SUNOCO(R) and its SUNOCO FOOD MARKET(R) stores to APLUS(R)
throughout the Sun marketing area. Some ATLANTIC(R) locations will be
converted to ULTRA SERVICE CENTER(SM) stations. This strategy focuses
Sun's market presence and capitalizes on the individual strengths of the
SUNOCO(R), APLUS(R) and ULTRA SERVICE CENTER(SM) operations. The
conversion program, which will impact approximately 500 sites, commenced in
June 1993 and is expected to be completed by year-end 1995. At year-end
1993, 31 ATLANTIC(R) stations had been converted to SUNOCO(R), while 62
SUNOCO FOOD MARKET(R) stores had been converted to APLUS(R). Concurrently,
Sun began an image upgrade program which is expected to be completed in
1995 and will involve approximately 240 sites.
Sun sells fuels (principally gasoline) through 4,442 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
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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.
In 1993, Sun acquired 23 gasoline retail locations principally in western
Massachusetts, and secured a twelve-year lease for 21 high-volume gas
stations on the Pennsylvania turnpike. Sun is also the sole service
station operator on all thirteen plazas on the New Jersey turnpike and
supplies 16 outlets on the New York Thruway. During 1993, Sun completed
its previously announced withdrawal from branded marketing in Oklahoma,
Missouri and Iowa and sold the gasoline marketing assets and operations of
its marketing subsidiary in North Carolina. Sun is continuing to
rationalize its retail gasoline outlets. This rationalization will result
in a modest decline in the number of outlets, but an increase in average
site throughput.
Sun's convenience stores are designed for high-volume sales of
gasoline and a broad range of other goods and services. Convenience stores
offer a second source of revenue. The number of convenience stores at
year-end 1993 totalled 543. In addition, the number of Sunoco ULTRA
SERVICE CENTER(SM) stations which provide total guaranteed car service, now
totals 380.
In 1993, excluding environmental capital outlays, Sun invested
approximately $85 million in support of its branded outlets and
distribution systems as part of ongoing efforts to upgrade all of its
facilities. During 1993, Sun installed CARDMATIC(SM), its state-of-the-art
credit card activated gasoline dispensing system, at approximately 100
high-volume service stations, bringing the total number of outlets offering
this system to 156. In connection with the brand conversion program, Sun
is accelerating the timing of certain environmental capital expenditures,
such as underground storage tank replacements and tank top upgrades so as
to minimize station downtime.
Sun also owns and operates 38 terminals located in the Northeast and
Midwest portions of the United States that primarily support its branded
marketing system. During 1993, Sun continued to streamline its proprietary
distribution systems by realigning accounts to optimize deliveries and by
consolidating terminal operations. Streamlining efforts have improved both
the productivity and cost effectiveness of these systems.
LUBRICANTS
Sun's Lubricants business is comprised of the manufacturing and
marketing of paraffinic lubricants and fuels by-products. Lubricants are
manufactured at the Tulsa and Puerto Rico refineries and marketed under the
SUNOCO(R) brand label, as well as formulated and packaged for sale by other
branded marketers under their labels.
Sun produces 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. 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 sale by Sun and for sale by other branded marketers under
their labels.
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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 rubber oils, paper defoamers, asphalt recycling extracts, ink
oils, textile oils and finished waxes. Sun's horticultural spray oil,
SUNSPRAY(R) ULTRA-FINE(R) Horticultural Spray Oil, is expected to be
available to retail customers in the spring of 1994.
Sales of lubricant products totalled 16.9 thousand barrels daily in
1993 versus 17.4 thousand barrels daily in 1992. Total fuels by-products
sold to third parties from the Tulsa and Puerto Rico refineries were 85.3
thousand barrels daily in 1993 compared to 109.7 thousand barrels daily in
1992.
Sun's Tulsa refinery runs a light, low-sulfur crude slate while the
Puerto Rico refinery is able to process heavier, higher sulfur crudes. As
of December 31, 1993, these two lubricants refineries had a paraffinic
lubricant manufacturing capacity of 16.3 thousand barrels daily and a total
crude unit processing capacity of 170.0 thousand barrels daily.
In late 1992, Sun reconfigured the Tulsa refinery to place a greater
emphasis on the production of lubricants. As a result, fuels production
capacity was reduced from 77 thousand barrels daily to 45 thousand barrels
daily at this facility. Lubricants production at the Tulsa refinery now
also results in approximately 32 thousand barrels daily of "lubes
extracted" feedstock. These intermediate streams are transported to the
Toledo refinery for further processing or are sold to third parties.
Benefits attributable to this reconfiguration include a reduction in the
capital investment needed at the Tulsa refinery in order to comply with the
Clean Air Act, lower refinery operating expenses and a reduction in the
impact of fuels margins on the Tulsa refinery's profitability.
In the first quarter of 1993, Sun also completed the modification of
its Puerto Rico refinery to provide greater feedstock processing
flexibility. This modification has allowed the refinery to optimize
feedstock selection between crude oil and intermediate feedstocks depending
upon their relative profitability. The use of alternative feedstocks can
result in the production of reduced levels of high-sulfur residual fuels
and other wholesale fuels products when warranted by market conditions. In
addition, during the third quarter of 1993, Sun modernized its Puerto Rico
refinery's crude fractionalization facilities which has enabled an
additional upgrading of product yields.
CHEMICALS
Sun's Chemicals business consists of the manufacturing, distribution
and marketing of 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 and ethylene oxide
facility at Brandenburg, Kentucky that was purchased from the Olin
Corporation in 1992.
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Sun's petrochemical products are distributed and sold on a worldwide
basis. The majority of these sales are to manufacturers of intermediate
products that are used in the production of rubber, plastics, detergents,
agricultural chemicals and fibers. Significant volumes are also marketed
to the solvents and fuels industries. During 1993, approximately 45
percent of Sun's petrochemical sales volumes were aromatics-related,
another 44 percent were olefin-related and the balance was composed of
other products such as carbon dioxide and sulfur. Overall, approximately
10 percent of Sun's petrochemical sales were made to customers outside the
United States during 1993.
The ongoing development of Sun's Chemicals business continued during
1993. A joint venture marketing arrangement with Suncor that commenced in
1992 completed its first full year of operation. Also, in 1993, the first
full year of operation of the Brandenburg ethylene/ethylene oxide facility
was completed. Olin continues to operate the unit and purchase the
ethylene oxide it needs for its derivative businesses under a long-term
arrangement with Sun. This acquisition has doubled Sun's ethylene oxide
production capacity to over 200 million pounds per year, providing
feedstock supply synergies between the Marcus Hook and Brandenburg
facilities and a stable source of product for Sun's customers. In
addition, during 1992, Sun became a one-third partner in Belvieu
Environmental Fuels ("BEF"), a joint venture formed for the purpose of
constructing, owning and operating an MTBE facility in Mont Belvieu, TX.
The plant, which has a designed capacity of 12,600 barrels daily, is
presently under construction and is expected to begin production in mid-
1994. Sun has contracted to off-take all of the MTBE production from the
BEF facility. MTBE from BEF will provide the majority of Sun's oxygenate
supply as part of its overall effort to meet the Clean Air Act's
reformulated fuel requirements. For additional information concerning
Sun's participation in this joint venture, see Note 14 to the consolidated
financial statements.
The Chemicals business is also in the process of expanding its benzene
extraction capacity by 60 million gallons per year and constructing a 34-
million gallon per year cyclohexane plant at its Marcus Hook refinery.
These projects will enable Sun to enhance its existing benzene extraction
capability to help comply with mandated 1995 reformulated fuel requirements
for gasoline by permitting Sun to extract benzene from gasoline streams
from its Philadelphia refinery or from third parties. Benzene will be sold
or further upgraded into cyclohexane, the majority of which will be sold to
a major chemical purchaser under a contract to meet 100 percent of its
requirements. These projects are expected to be completed and operational
by the fourth quarter of 1994.
LOGISTICS
Sun's Logistics business consists of pipeline transportation of crude
oil and refined petroleum products to fifteen states in the eastern half of
the United States and petroleum terminalling operations in Nederland, TX.
These operations are conducted by Sun Pipe Line Company, Mid-Continent Pipe
Line Company, Sun Pipeline Services Co., Atlantic Pipeline Corp., and Sun
Oil Line Company of Michigan, all of which are wholly owned subsidiaries of
Sun. In addition, Sun owns equity interests in the Mid-Valley Pipeline
Company (55.3%), West Texas Gulf Pipe Line Company (17.3%), Inland
Corporation (10%) and Explorer Pipeline Company (9.4%) systems.
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The pipelines are principally common carriers and, as such, are
regulated by the Federal Energy Regulatory Commission for interstate
movements and by local regulatory agencies for intrastate movements. The
tariff rates charged, while regulated by the governing regulatory body, are
based upon competition from other pipelines or alternate modes of
transportation.
Sun's crude oil systems, concentrated in the Midwest, transport crude
oil gathered in Oklahoma, Texas and Louisiana (as well as foreign crude oil
from the Gulf Coast and Canada) to refiners or to local trade points. The
refined product systems, 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. In February 1993, Sun acquired a
126-mile crude oil pipeline operating from Marysville, MI to Toledo, OH.
This pipeline provides midwestern refineries, including Sun's Toledo
refinery, access to Canadian crude oil. In particular, this pipeline system
provides Sun's Toledo refinery access to Suncor's synthetic crude oil. In
December 1993, Sun sold a 300-mile refined products pipeline system
operating from Duncan, OK to Drumright, OK and Fort Smith, AR. At December
31, 1993, Sun had an equity interest in 5,579 miles of crude oil pipelines
and 4,303 miles of refined product pipelines in the United States. In
1993, crude oil and refined product shipments in the United States,
including Sun's share of shipments in which it had an ownership interest,
totalled 50.4 and 30.7 billions of barrel miles, respectively, as compared
to 48.7 and 28.8 billions of barrel miles in 1992.
In 1993, Sun finalized the right of way work on its 19-mile inter-
refinery pipeline project which will connect Sun's Marcus Hook and
Philadelphia refineries. This project is expected to be completed by early
1995. It will provide synergies in making reformulated gasoline by
enabling gasoline component streams from the Philadelphia refinery to move
via pipeline to the Marcus Hook refinery for benzene extraction.
Sun's Nederland, TX terminal provides in excess of ten million barrels
of storage and provides terminalling capacity exceeding one million barrels
per day of throughput. Its Gulf Coast location provides local and
midwestern refiners access to foreign crude oil. The facility is also 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.
SUPPLY AND DISTRIBUTION
A critical element of Sun's success is its ability to obtain the
proper mix and quality of crude oil, feedstocks and refined products using
both North American and worldwide markets. Sun's crude oil requirements
during 1993 were met largely through purchases from various foreign
national oil companies and traders. Crude oil supplied from foreign
sources represented 75 percent of Sun's domestic crude oil requirements in
1993. Despite periodic market disturbances, there is an ample supply of
crude oil available to meet worldwide refining needs, and Sun has been able
to readily supply its refineries with the proper mix and quality of crude
oils without disruption. The Marcus Hook, Philadelphia and Puerto Rico
refineries process foreign crude oils, while Sun's Tulsa refinery processes
domestic crude oil. The Toledo refinery runs domestic, Canadian and
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foreign crudes. Supplies of feedstocks and refined products also have been
sufficient to meet Sun's needs. Sun's refined product prices are generally
determined by both worldwide and regional supply and demand, as well as by
crude oil prices. The Company continually assesses the market forces
affecting supply and demand in the geographic areas in which it operates.
Feedstock supply and refined product transportation systems include:
four ocean-going tankers, a fleet of coastal distribution tankers, tugs and
barges, and a crude oil trucking operation. Sun supplements its own fleet
with charters that accounted for the majority of its marine transportation
requirements during 1993. Sun has implemented an extensive vessel
inspection review and evaluation program to assure appropriate quality of
the vessels chartered into Sun service. The crude oil trucking operation
supports Sun's crude oil acquisitions and pipeline operations throughout
the southwestern United States, primarily in Oklahoma and Texas.
Sun's supply and distribution operations have emphasized prevention of
oil spills. In support of this effort, in 1991, Sun joined the Marine
Preservation Association ("MPA"), a petroleum industry consortium formed to
fund regional response centers to handle oil spills on United States
waters. Sun funded the consortium with $5 million during 1993 and expects
to fund an additional $13 million by 1995. In addition to the MPA, Sun is
an active member of several local cooperatives formed to respond to oil
spills in specific geographic locations.
For data on refinery input, products manufactured, refined product
sales, the number of gasoline outlets, throughput per direct outlet, supply
and distribution, net sources of crude oil, inventories and petroleum
transportation operations in the United States for the five-year period
ended December 31, 1993, see pages 63 through 66 in the Company's 1993
Annual Report to Shareholders.
INTERNATIONAL EXPLORATION AND PRODUCTION
Sun's exploration and production operations outside North America are
conducted through Sun Oil Britain Limited and its affiliates. In October
1992, Sun announced that it was withdrawing from exploration activities
outside of Canada and focusing its international production and development
activities primarily in the United Kingdom sector of the North Sea. 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 if financially attractive opportunities are identified.
As part of this plan, during 1993, Sun completed essentially all of
its remaining exploration commitments, closed all exploration offices and
completed the disposition of certain exploration properties located
principally in the U.K. North Sea. At December 31, 1993, Sun retained
exploration interests in only eight licenses in three countries: five in
the United Kingdom sector of the North Sea; one in Thailand; and two in
Algeria.
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Sun's international production strategy focuses on the production of
existing proved reserves and on the acquisition of currently producing or
near-term development assets principally in the U.K. North Sea. This
strategy is intended to enable the business to sustain near-term
performance while providing sustainable growth in the future as development
projects mature.
During 1993, Sun's net production outside North America averaged 27.2
thousand barrels daily of crude oil and condensate and 56 million cubic
feet daily of natural gas compared to 1992 production of 42.1 thousand
barrels daily of crude oil and condensate and 46 million cubic feet daily
of natural gas. The decrease in crude oil production volumes was largely
due to the April 1993 sale of producing properties located in Dubai.
Results of operations from these properties were not significant.
In Colombia, additional appraisal of the currently producing
Purificacion field continues. One appraisal well was drilled during 1993
and an additional well is planned in early 1994. An early production
system was implemented at this field during the second quarter of 1993,
resulting in crude oil production of 4 thousand gross barrels daily during
the remainder of 1993. Installation of full production facilities should
enable production to increase to 6 thousand gross barrels daily in 1994.
Sun has a 13.3 percent interest in this field.
During 1993, Sun also acquired additional oil producing interests in
the Balmoral and Stirling fields in the U.K. North Sea increasing its
ownership interest in these fields from 52 and 37 percent to 59 and 55
percent, respectively. Sun added an estimated 2 million equivalent barrels
of proved reserves through this acquisition. In addition, during 1993, Sun
decided to retain its 5 percent interest in the Magnus field, which
previously had been targeted for divestment, as a result of favorable
changes in certain U.K. tax laws.
Sun's crude oil and natural gas production levels are not generally
affected by fluctuations in the prices received from these products. The
volumes produced are required to fulfill contractual agreements which
specify certain production levels independent of the prices received.
Sun sells its crude oil production in the worldwide crude oil market
where prices are affected by a wide variety of economic and political
factors. Sun's natural gas production, which consists of production from
the North Sea, is sold primarily to the British Gas Corporation. These
sales are seasonal in nature and are made pursuant to long-term contracts
which include annual price escalation clauses.
Outside North America, Sun had an estimated 31 million barrels of
proved reserves of crude oil, condensate and recoverable natural gas
liquids and an estimated 109 billion cubic feet of proved reserves of
natural gas as of December 31, 1993 compared to an estimated 77 million
barrels of crude oil, condensate and recoverable natural gas liquids and an
estimated 104 billion cubic feet of proved reserves of natural gas as of
December 31, 1992. The decrease in proved reserves of crude oil,
condensate and natural gas liquids was primarily attributable to the April
1993 sale of producing properties located in Dubai which contained
approximately 39 million barrels of crude oil reserves at the date of
disposition.
<PAGE>
<PAGE> 13
Additional information concerning Sun's International Exploration and
Production business is set forth on pages 67 through 74 in the Company's
1993 Annual Report to Shareholders.
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.
EXPLORATION AND PRODUCTION
Suncor's conventional crude oil and natural gas exploration and
production activities are concentrated in western Canada, with increasing
emphasis on natural gas. During 1993, Suncor participated in the drilling
of 19 net exploratory wells of which 2 discovered crude oil, 8 discovered
natural gas and 9 were dry. Suncor's net production averaged 9.3 thousand
barrels daily of conventional crude oil and condensate and 116 million
cubic feet daily of natural gas in both 1993 and 1992.
During 1993, Suncor divested of properties that were identified in
1992 as not being part of its core operation. Such properties accounted
for approximately 6 and 12 percent, respectively, of Suncor's crude oil and
natural gas production volumes during 1992.
In 1993, Suncor's major development programs were located in the
central Alberta areas of Simonette and Medicine River and in Blueberry in
British Columbia. Development activities added proved producing reserves
of 74 billion net cubic feet of natural gas and 4 million net barrels of
crude oil and natural gas liquids during 1993.
Prices for Canadian crude oil generally reflect the worldwide crude
oil market and thus, are affected by a wide variety of economic and
political factors. There are currently no significant crude oil or natural
gas pricing or marketing restrictions in Canada. Regulatory authorities
have instructed the major pipelines and local distribution companies to
provide natural gas transportation on a nondiscriminatory basis.
Significant volumes of natural gas are now sold directly by producers into
a variety of North American markets.
As of December 31, 1993, Suncor had an estimated 34 million barrels of
proved reserves of crude oil, condensate and recoverable natural gas
liquids and an estimated 492 billion cubic feet of proved reserves of
natural gas, compared to an estimated 34 million barrels of proved reserves
of crude oil, condensate and recoverable natural gas liquids and an
estimated 475 billion cubic feet of proved reserves of natural gas as of
December 31, 1992.
Additional information concerning Suncor's exploration and production
business is set forth on pages 67 through 74 in the Company's 1993 Annual
Report to Shareholders.
<PAGE>
<PAGE> 14
OIL SANDS
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. Since the commencement of operations in 1967, the
oil sands had been mined with large bucketwheel excavator systems and moved
to the extraction plant by conveyor systems. During 1993, as part of its
strategic initiatives announced in 1992, Suncor converted its method of
mining the oil sands to a more flexible and efficient truck-and-shovel
method.
Synthetic crude oil produced for shipment averaged 60.5 thousand
barrels daily in 1993, 58.5 thousand in 1992 and 60.6 thousand in 1991.
Suncor's average per barrel cost of production, which includes such
variable costs as royalties, was $13.99 in 1993, $17.95 in 1992 and $17.22
in 1991. During 1993, several new initiatives were undertaken to increase
production levels and to secure new markets which have enabled Suncor to
diversify its product mix. During a planned maintenance shutdown, upgrader
modifications were completed and production capability was increased to
68,000 barrels daily from 60,000 barrels daily. Intermediate products,
which require only partial upgrading and contain a higher sulfur content
than the plant's light, sweet blend, will be marketed on an ongoing basis.
This gives the plant flexibility to maintain production levels while
conducting partial maintenance shutdowns. Suncor continues efforts to
maintain consistently high levels of production. Equipment breakdowns and
failures at the oil sands operation from time to time cause partial or
complete loss of production due to the interdependence of the plant's
component systems. Severe climatic conditions such as extreme cold can
also cause reduced production. Under Sun's business interruption insurance
coverage, Suncor would bear at least the first $75 million of any loss
arising from a future insured incident at the oil sands operation.
Suncor's current operations are carried out on two leases covering a
total of seven thousand acres. As of December 31, 1993, these leases had
remaining reserves of 231 million barrels of proven synthetic crude oil.
A major portion of Suncor's synthetic crude oil production is used in
its refining operations at Sarnia, Ontario, and during 1993, totalled 41
percent. The remainder is either sold pursuant to a long-term contract to
an existing customer, or sold to others under year-to-year contracts or on
a spot basis.
In order to comply with new environmental emission standards, a joint
venture was formed in 1993 to evaluate the construction of a new utilities
plant that would meet the new standards. However, after further commercial
evaluation, it was decided that this option would not be pursued. Subject
to approval by Suncor's board of directors, management is planning instead
to equip its existing steam and electricity generating facilities in 1994
with sulfur recovery equipment and limestone scrubbing technology. The
scrubbing technology, to be utilized within the existing facility, will
allow Suncor to comply with the new standards. The technology will be added
to Suncor's existing boilers and is expected to cost approximately $155 to
$175 million over the next three years.
<PAGE>
<PAGE> 15
Site reclamation costs at the oil sands plant are estimated based upon
the reclamation plan submitted to the Province of Alberta. This plan
includes tailings ponds reclamation and all surface reclamation and
remediation at the site. The major component of the plan relates to the
tailings ponds. The current plan includes moving the fine tailings and
water in the four active ponds to a fifth pond designed for this purpose.
The aim of this fifth "wet pond" alternative is to reduce the volume of
solids and treat the water through biological means. Suncor is conducting
further testing on the "wet pond" and other alternatives to ensure that the
most cost-effective and environmentally acceptable reclamation plan is
followed. The viability and cost of other alternatives, which could be
more expensive, are being researched and evaluated on an ongoing basis.
Suncor is required to submit an update of its development and
reclamation plan with the Alberta government every five years, which can
result in changes to factors such as security requirements, the nature of
the plan itself and the timing of the work. The next plan is to be
submitted in 1994 for approval in 1995. With respect to the fine tailings
management component of the plan, in 1994 Suncor will make application for
a three-year extension to the plan to allow all parties to further study
and evaluate management options.
For data on oil sands proven reserves, synthetic crude oil production,
average price and net minable acreage for the five-year period ended
December 31, 1993, see page 75 in the Company's 1993 Annual Report to
Shareholders.
REFINING AND MARKETING
Suncor owns and operates one refinery which is located at Sarnia,
Ontario. This refinery had an economic crude unit processing capacity of
70 thousand barrels daily as of December 31, 1993. An alkylation unit,
capable of processing 6 thousand barrels daily, complements a petrochemical
plant for flexibility in gasoline, octane and chemical production.
Suncor's refining operation uses both synthetic and conventional crude
oil. In 1993, 69 percent of the crude oil processed at the Sarnia refinery
was synthetic crude oil compared with 65 percent in 1992. Of the synthetic
crude oil processed, 55 percent was from Suncor's oil sands plant
production in 1993 compared with 54 percent in 1992, with the balance
purchased from another producer under month-to-month contracts at market
prices. Conventional crude oil processed in Canadian refining operations
comes mainly from the production of Suncor and others in western Canada,
supplemented from time to time with crude oil from the United States which
is purchased or obtained in exchange for Canadian crude oil. Suncor
generally acquires its conventional crude oil on the Canadian spot market
or under contracts terminable on short notice.
Suncor's self-sufficiency ratio (net production of crude oil,
condensate and synthetic crude oil related to net input to crude units) was
105 percent in 1993 compared to 98 percent in 1992.
<PAGE>
<PAGE> 16
Suncor markets an extensive line of fuels and a variety of commodity
petrochemicals. 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; however, 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 Sun's aromatics-based chemicals
business at the Toledo refinery. Suncor's refined product sales volumes
were 81.9 thousand barrels daily in 1993 compared to 83.0 thousand barrels
daily in 1992.
During 1993, Suncor closed 46 low-volume retail locations as part of a
continuing strategy to increase average site throughput of its retail
network. This action was undertaken partly in recognition of the
industry's overcapacity in the Canadian downstream marketplace. Canadian
retail sales of gasoline, primarily under the SUNOCO(R) brand, are made
through 606 retail gasoline outlets, 351 of which are operated by
independent dealers. In 1993, Suncor announced a number of strategic
initiatives in its refining and marketing business designed to rationalize
and upgrade its service station portfolio and lower overhead costs while
maintaining retail volumes and market share. While the total number of
Suncor's retail sites will decrease as a result of this initiative,
management believes that total gasoline volumes sold will remain at current
levels due to exclusive supply agreements with joint venture partners and
higher overall retail network throughput.
Suncor owns and operates petroleum transportation and terminalling
assets in support of its refining and marketing activities. Such assets
include storage facilities and bulk distribution plants in Ontario and
Quebec and a 55-percent interest in a refined product pipeline between
Sarnia and Toronto. Suncor's petroleum transportation and terminalling
assets are sufficient for its current and foreseeable needs.
For data on Suncor's refinery input, products manufactured, refined
product sales, the number of gasoline outlets, throughput per outlet,
supply and distribution, net sources of crude oil, inventories and
petroleum transportation operations in Canada for the five-year period
ended December 31, 1993, see pages 63 through 66 in the Company's 1993
Annual Report to Shareholders.
COAL
Sun's coal mining and coke manufacturing operations are conducted by
Sun Coal Company and its affiliates. In January 1993, Sun decided to sell
its coal and cokemaking assets. In connection with this decision, Sun
completed the sale of both its western U.S. bituminous and subbituminous
coal operations during 1993. Sun continues to actively pursue the sale of
its eastern U.S. coal and cokemaking operations. As a result of the
decision to sell the coal business, Sun's coal mining and cokemaking
operations have been classified as operations held for sale in Sun's
consolidated financial statements.
<PAGE>
<PAGE> 17
Sun had 251 million tons of estimated coal reserves classified as
proven and probable at December 31, 1993 compared to 701 million tons at
December 31, 1992. Of the reserves at December 31, 1993, 47 percent were
metallurgical coal located in Virginia and 53 percent were bituminous steam
coal located in Kentucky. Sun's total coal production in 1993 was 12.9
million tons compared to 22.7 million tons in 1992.
In 1993, 44 percent of Sun's metallurgical coal production was
converted into coke at Sun facilities, 47 percent was sold under contract
to two customers and 9 percent was sold in spot transactions. Sun's
principal market for both metallurgical coal and coke is the domestic steel
industry. During 1993, 96 percent of Sun's coke sales were made under a
long-term contract to a single customer with the remainder sold in spot
transactions. Approximately 61 percent of Sun's bituminous steam coal
sales was under long-term contracts, with the remainder sold in spot
transactions. Sun's bituminous coal and coke sales contracts generally
provide for the periodic adjustment of price to reflect the changing costs
of labor, equipment and services.
Sun owns the Jewell/Thompson non-recovery cokemaking technology and
its related patents. The Jewell/Thompson technology produces high quality
coke and is environmentally superior to the by-product technology currently
used by most coke producers. Sun utilizes the Jewell/Thompson technology
in all of its cokemaking facilities.
Sun is subject to various environmental and other regulations setting
forth coke oven emission standards, and mining and reclamation standards
for all aspects of surface mining, as well as certain aspects of deep
mining. During 1993, 16 percent of Sun's bituminous coal production came
from surface mines.
Further information on Sun's proven and probable coal reserves, proven
reserves, production, sales, average price and net acreage is set forth on
page 75 in the Company's 1993 Annual Report to Shareholders.
LEASING
Sun's leasing and secured lending portfolio is managed through Helios
Capital Corporation and its subsidiaries (collectively "HCC") and consists
of investments in leases and secured loans involving approximately 20
businesses throughout the United States in a broad spectrum of industries
and equipment, including aircraft, railroad rolling stock, and various
other transportation and manufacturing equipment.
Sun has ceased making new investments in leases and secured loans, and
since 1990, has been liquidating the remaining HCC portfolio in an orderly
manner through scheduled cash recoveries of investments and through
divestment opportunities as they arise. The cash generated from
liquidating this portfolio will be used largely to satisfy HCC's financing
obligations. During 1993, HCC's portfolio was reduced by $58 million. HCC
had investments in leveraged, direct financing and sales-type leases and
secured loans at December 31, 1993 of $107 million, of which 75 percent
were leases and 25 percent were secured loans.
<PAGE>
<PAGE> 18
REAL ESTATE
Sun's real estate business is conducted through Radnor Corporation and
its subsidiaries (collectively "Radnor"). Radnor has a diversified
portfolio of real estate properties which were developed for investment or
immediate sale. Real estate developed for investment consists primarily of
office buildings, shopping centers and hotels. Projects developed for
immediate sale include single-family homes, condominiums, residential land
and business parks. The real estate portfolio is geographically
diversified as well, with projects in 14 states as of December 31, 1993.
In October 1991, the Company adopted a plan, which management is
actively pursuing, to dispose of its real estate operations through a
program of controlled disposition. As a result of the decision to sell the
real estate business, Sun's real estate operations have been classified as
operations held for sale in Sun's consolidated financial statements.
Since adoption of the disposition plan in October 1991, Radnor
divested 25 commercial properties and completed 13 housing and land
developments and reduced its total assets and debt by $476 and $438
million, respectively. Divestment activities in 1993 included Radnor's
sale of four office projects located in North Carolina, Georgia and
Arizona. This divestment, which had originally included a contract for the
sale of three Pennsylvania properties, closed in December 1993. The
Pennsylvania properties continue to be marketed for sale, along with
Radnor's remaining portfolio.
The following table sets forth Radnor's real estate portfolio by
property type and percent of total portfolio book value as of December 31,
1993:
Percent of
Property Type Portfolio
------------- ----------
Real Estate Held for Investment:
Office Buildings............................ 42
Shopping Centers............................ 20
Hotels...................................... 8
Other....................................... 4
Projects Developed for Immediate Sale......... 26
---
100
===
For additional information regarding Sun's real estate operations held
for sale, see Note 2 in the Consolidated Financial Statements in the
Company's 1993 Annual Report to Shareholders.
COMPETITION
Refining and marketing has generally become more competitive as demand
for gasoline, the primary refined product manufactured and sold in the
United States, has been relatively weak, while conversion capacity has been
expanding. The northeastern United States, Sun's principal geographic area
for branded fuels marketing, has been especially affected by the
recessionary U.S. economy and as a result, the market has experienced a
downturn in demand, heightening competition among marketers of petroleum
<PAGE>
<PAGE> 19
products. However, Sun believes that it is in a position to compete
effectively in the northeastern U.S. This region is a net gasoline
importing market, and marketers like Sun, whose refining operations are
located here, are impacted to a lesser extent by the costs of
transportation into this market.
Oil and gas exploration and production and coal mining operations are
also highly competitive. Many energy companies, as well as medium to small
size independent concerns are bidders for desirable exploration acreage and
oil, gas and coal properties, as well as the equipment and labor required
to operate such properties. Sun essentially completed its withdrawal from
oil and gas exploration activities outside of Canada during 1993 and is
actively pursuing the sale of its coal operations.
The availability of a ready market for Sun's refined products, as well
as its oil and gas and coal production, depends on numerous external
factors. Among other things, these factors include: the level of consumer
demand; the extent of industry production of oil and gas and coal, and
manufacture of refined products; the import levels of foreign refined
products; the cost and availability of alternative fuels; the cost and
proximity of refineries, pipelines and other transportation facilities that
support the retail gasoline marketing infrastructure; regulation by state,
federal, local and foreign authorities including those imposed by or
resulting from compliance with applicable environmental laws.
In addition, Sun's leasing business and real estate operations held
for sale operate in fragmented markets in which there are numerous
participants resulting in highly competitive environments.
RESEARCH AND DEVELOPMENT
In recent years, Sun's research and development activities have
focused on applied research, process and product development, and
engineering and technical services related to fuels, lubricants and
chemicals. Sun spent $9, $12 and $15 million on research and development
activities in 1993, 1992 and 1991, respectively. As of December 31, 1993,
approximately 150 scientists, engineers, technicians and support personnel
were employed in these activities. Sun owns or has made application for
numerous patents in the U.S. and abroad.
EMPLOYEES
As of December 31, 1993, Sun had approximately 14,500 employees
compared to approximately 14,200 employees as of December 31, 1992. The
above amounts exclude employees from real estate operations held for sale
totalling 487 in 1993 and 732 in 1992 and also excludes employees from coal
operations held for sale totalling 1,318 in 1993 and 1,719 in 1992.
Approximately 29 percent of Sun's employees were covered by 46 collective
bargaining agreements as of December 31, 1993. The collective bargaining
agreements have various terms and dates of expiration. In management's
opinion, Sun's relationship with its employees is generally satisfactory.
<PAGE>
<PAGE> 20
ENVIRONMENTAL MATTERS
As the first Fortune 500(R) Company to endorse the Coalition for
Environmentally Responsible Economies ("CERES") principles, Sun has
continued to focus on environmental requirements and practices. Sun is
subject to numerous federal, state, local and foreign laws which regulate
the discharge of materials into, or otherwise relate to the protection of,
the environment. These laws have required, and are expected to continue to
require, Sun to make significant expenditures of both a capital and expense
nature. As these laws evolve, it is expected that they will continue to
have a significant impact on the conduct of Sun's operations.
Sun has funded its environmental expenditures through cash generated
by operating activities. The following table summarizes Sun's expenditures
for environmental projects and compliance activities (in millions of
dollars):
1993 1992
---- ----
Pollution abatement capital*................. $123 $ 75
Remediation and reclamation.................. 53 48
Operations, maintenance
and administration......................... 108 116
---- ----
$284 $239
==== ====
- -----------
*Capital expenditures for pollution abatement are expected to approximate
$192 and $209 million in 1994 and 1995, respectively.
Certain environmental laws subject Sun to possible obligations to
remove or mitigate the effects on the environment of the disposal or
release of certain wastes and petroleum substances. Included are
remediation at Sun's refineries, service stations, terminals and pipeline
and truck transportation facilities, and third-party or formerly owned
sites at which contaminants generated by Sun may be located. Several of
the more significant federal laws applicable to the Company's operations
include the Clean Air Act, the Comprehensive Environmental Response,
Compensation and Liability Act ("CERCLA") and the Solid Waste Disposal Act,
as amended by the Resource Conservation and Recovery Act ("RCRA").
Additionally, various state and local governments have adopted or are
considering the adoption of similar laws and regulations.
The Clean Air Act establishes stringent criteria for regulating air
toxics at operating facilities by mandating major reductions in allowable
emissions and establishing a more comprehensive list of substances deemed
to be air toxics. The Clean Air Act requires refiners to market cleaner-
burning gasoline that reduces emissions of certain toxics and conventional
pollutants. Compliance with Clean Air Act requirements necessitates
significant alterations to the composition of gasoline sold in most of
Sun's northeastern U.S. branded marketing area by reducing the maximum
allowable benzene content, reducing summertime RVP and increasing the
minimum oxygenate content. It is expected that all refiners will not be
willing or able to make the significant capital expenditures necessary to
<PAGE>
<PAGE> 21
produce cleaner-burning reformulated fuels and that a rationalization of
U.S. refining capacity will occur. Despite uncertainties regarding the
impact on the future profitability of Sun's domestic petroleum businesses
of the Clean Air Act, as amended by additional regulations, management of
Sun believes these businesses are well positioned to meet the air toxics
and reformulated fuel requirements under present regulations as they are
phased in over the next few years.
Two other federal laws, CERCLA and RCRA, and related state laws
subject the Company to the potential obligation to remove or mitigate the
environmental effects of the disposal or release of certain pollutants at
various sites. Under CERCLA, Sun is subject to potential joint and several
liability for the costs of remediation at sites at which it has been
identified as a "potentially responsible party" ("PRP"). As of December
31, 1993, Sun had been named as a PRP at 40 sites identified or potentially
identifiable as "Superfund" sites under CERCLA. Sun has reviewed the
nature and extent of its involvement at each site and other relevant
circumstances and, based upon the other parties involved or Sun's
negligible participation therein, believes that its potential liability
associated with such sites will not be significant. Under RCRA and related
state laws, corrective remedial action has been initiated at some of its
facilities and will be required to be undertaken by the Company at various
of its other facilities. The cost of such remedial actions could be
significant but is expected to be incurred over an extended period of time.
Sun establishes accruals related to environmental remediation
activities for work at identified sites, including those under CERCLA and
RCRA and related state laws, where an assessment has indicated that cleanup
costs are probable and reasonably estimable. Such accruals are based on
currently available facts, estimated timing of remedial actions and related
inflation assumptions, existing technology and presently enacted laws and
regulations. Sun's international production and Canadian operations are
subject to less demanding environmental regulatory requirements than its
U.S. operations and these less stringent requirements are considered in
determining the accruals for those locations. Sun's accruals reflect the
Company's philosophy of aggressively managing remediation costs to ensure
the most cost-effective method of protecting the health, safety and
environment of affected communities. Sun's accrued liability for
environmental remediation was $259 and $258 million at December 31, 1993
and 1992, respectively. Sun also accrues estimated dismantlement,
restoration, reclamation and abandonment costs at its oil and gas
exploration and production and oil sands mining operations through a charge
against income primarily on a units of production basis. The accrued
liability for these activities, which are conducted primarily by Suncor,
Sun's 55 percent owned subsidiary, totalled $119 and $118 million at
December 31, 1993 and 1992, respectively. Pretax charges against income
for environmental remediation and reclamation totalled $45, $62 and $159
million for 1993, 1992 and 1991, respectively. Claims for recovery of
environmental liabilities that are probable of realization totalled $17
million at December 31, 1993 and are included in deferred charges and other
assets in the consolidated balance sheet.
Total future costs for environmental remediation activities will
depend upon, among other things, the identification of additional sites,
the determination of the extent of the contamination of each site, the
timing and nature of required remedial actions, the technology available
<PAGE>
<PAGE> 22
and needed to meet the various existing requirements, the nature and extent
of future environmental laws, inflation rates and the determination of
Sun's liability at multi-party sites, if any, in light of the number,
participation level and financial viability of other parties.
Management believes that the overall costs for environmental
activities are likely to be significant but are expected to be incurred
over an extended period of time and to be funded from Sun's net cash flow
from operating activities. Although potentially significant with respect
to results of operations, cash flow or liquidity for any one quarter or
year, management believes that such costs, including those required by
CERCLA and RCRA, will not have a material impact on Sun's consolidated
financial position or, over an extended period of time, on Sun's cash flow
or liquidity.
OTHER
Sun's financial condition and business operations are affected from
time to time by domestic and foreign political developments and laws and
regulations which relate to such matters as production, taxes, property,
product specifications, imports, pricing and environmental controls. Sun
makes no representations as to future events and developments which could
affect its operations and financial condition. Furthermore, Sun's
businesses and financial condition could be effected by, among other
things, the state of the U.S. economy, competition, future price changes or
controls, material and labor costs, legislation, labor conditions, new
regulations, tariffs, embargoes, armed conflicts, foreign exchange
restrictions and changes in exchange rates.
ITEM 3. LEGAL PROCEEDINGS
In April 1993, Sun Company, Inc. (R&M) ("Sun (R&M)"), a wholly owned
subsidiary of the Company, was advised by the Department of Justice,
Environmental Enforcement Division ("DOJ") and the United States
Environmental Protection Agency ("EPA") that they contemplated the filing
of a lawsuit against Sun, seeking civil penalties and certain remedial
action regarding certain alleged violations of federal and state air
emissions regulations at its Philadelphia refinery. Sun (R&M) has
participated in discussions with the DOJ and EPA in an effort to review and
settle these allegations. A settlement in principle has been reached, and
it is anticipated that any negotiated settlement will involve the payment
of a civil fine in excess of $100,000 and an additional obligation to
undertake certain remedial activities at the facility.
Sun and several other energy companies have been negotiating with the
New York Department of Environmental Compliance ("NY DEC") regarding the
terms of certain environmental remediation which the NY DEC is requiring to
be conducted at certain facilities owned by Sun and other energy companies
in Syracuse, NY. The companies and the NY DEC are discussing the
provisions of the draft consent agreement. However, should these
negotiations prove unsuccessful, the NY DEC has indicated that it will
issue administrative action against Sun and the other energy companies to
seek to compel environmental remediation at the facilities, and to seek
civil penalties in excess of $100,000.
<PAGE>
<PAGE> 23
On March 17, 1992, Region III of the EPA issued a Compliance Order to
Sun (R&M) as a result of Sun (R&M)'s inability to meet the deadline for
implementing required marine vapor controls pertaining to the loading of
benzene at its refinery in Marcus Hook, Pennsylvania. The deadline was
missed primarily because of the need to resolve several related matters
with the U.S. Coast Guard. Although a civil settlement in principle was
reached with EPA whereby Sun (R&M) expects to make a payment in excess of
$100,000, the negotiated consent decree has not yet been signed by the
government, pending the resolution of certain issues involving the testing
and monitoring procedures related to Sun's vapor recovery system.
On July 7, 1992, the EPA issued a Complaint and Compliance Order to
Cordero Mining Co. ("Cordero"), then a wholly owned subsidiary of the
Company, alleging violations of the Resource Conservation and Recovery Act
with regard to the handling and disposal of spent solvents. The EPA had
sought a civil penalty in excess of $100,000 from Cordero. On June 4,
1993, the Company completed the divestment of all of the common stock of
Cordero.
Many other legal and administrative proceedings are pending against
Sun. Although the ultimate outcome of these proceedings cannot be
ascertained at this time, it is reasonably possible that some of them could
be resolved unfavorably to Sun. Management of Sun believes that any
liabilities which may arise from such proceedings, including those
discussed above, would not be material in relation to the consolidated
financial position of Sun at December 31, 1993.
<PAGE>
<PAGE> 24
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
EXECUTIVE OFFICERS OF SUN COMPANY, INC.
NAME, AGE AND PRESENT
POSITION WITH
SUN COMPANY, INC.
----------------------<PAGE>
BUSINESS EXPERIENCE DURING
PAST FIVE YEARS
--------------------------
Robert M. Aiken, Jr., 51
Senior Vice President
and Chief Financial
Officer<PAGE>
Mr. Aiken was named to his present
position in May 1992. From September
1990 until May 1992, he held the
position of Senior Vice President,
Finance, and from April 1979 to
September 1990, he was Comptroller.
Robert H. Campbell, 56
Chairman of the Board,
Chief Executive Officer
and President<PAGE>
Mr. Campbell was elected Chairman of the
Board in May 1992, Chief Executive
Officer in September 1991 and President
and Chief Operating Officer in February
1991. From November 1988 to February
1991, he was Executive Vice President.
He has been a Director since November
1988.
Richard L. Cartlidge, 39
Comptroller<PAGE>
Mr. Cartlidge has been in his present
position since October 1991. From July
1989 to October 1991, he was Controller
of Sun's domestic refining and marketing
subsidiary, and from 1988 to July 1989,
Manager, Corporate Financial Analysis.
Jack L. Foltz, 58
Vice President
and General Counsel<PAGE>
Mr. Foltz has been in his present
position since October 1992, and from
December 1991 to October 1992, he was
Assistant General Counsel, Refining and
Marketing. From December 1989 to
December 1991, he was Vice President and
General Counsel, Sun Refining and
Marketing Company. From 1985 to
December 1989, he was Assistant General
Counsel, Sun Company, Inc.
<PAGE>
<PAGE> 25
NAME, AGE AND PRESENT
POSITION WITH
SUN COMPANY, INC.
----------------------<PAGE>
BUSINESS EXPERIENCE DURING
PAST FIVE YEARS
--------------------------
David E. Knoll, 50
Senior Vice President
Marketing and Logistics<PAGE>
Mr. Knoll has been in his present
position since October 1992 and from
October 1991 to October 1992, he was
Group Vice President, Refining and
Marketing. From November 1988 to
October 1991, he was President, Sun
Refining and Marketing Company.
Harwood S. Roe, Jr., 49
Senior Vice President
Operations<PAGE>
Mr. Roe has been in his present position
since October 1992. From 1991 to
October 1992, he was Vice President,
Operations and from 1988 to 1991, he was
Vice President, Refining of Sun's
domestic refining and marketing
subsidiary.
Malcolm I. Ruddock, 51
Treasurer<PAGE>
Mr. Ruddock has been in his present
position since July 1989. He was
Director, Finance from November 1988 to
July 1989.
Sheldon L. Thompson, 55
Senior Vice President
and Chief Administrative
Officer<PAGE>
Mr. Thompson has been in his present
position since October 1992. Prior to
assuming this position, he served in
various capacities within Sun's domestic
refining and marketing subsidiary: from
1991 to October 1992, he was its Vice
President for Chemicals, Lubricants and
Technology; from 1989 to 1991, Vice
President for Chemicals and Technology;
and from 1988 to 1989, Vice President
for Chemicals.
Robert H. Writz, Jr., 51
Senior Vice President
Other Businesses<PAGE>
Mr. Writz has been in his present
position since October 1992. From
October 1991 to October 1992, he was
Group Vice President, Additional
Businesses. From February 1991 to
October 1991, he was Vice President,
Business Development. From 1987 to
February 1991, he was Executive Vice
President, Resources Group, of Suncor
Inc., a subsidiary.
<PAGE>
<PAGE> 26
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
Market for Sun Company, Inc. Stock and Related Security Holder Matters
on page 77 of the Company's 1993 Annual Report to Shareholders is
incorporated herein by reference. The market exchanges on which the
Company's stock is traded are listed on the cover page of this Annual
Report on Form 10-K.
ITEM 6. SELECTED FINANCIAL DATA
The information required by this Item is incorporated herein by
reference to the Selected Financial Data on page 25 of the Company's 1993
Annual Report to Shareholders.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The information required by this Item is incorporated herein by
reference to pages 26-40 in the Company's 1993 Annual Report to
Shareholders.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The following information in the Company's 1993 Annual Report to
Shareholders is incorporated herein by reference: the Consolidated
Financial Statements on pages 41-44; the Notes to Consolidated Financial
Statements on pages 45-61; the Report of Independent Accountants on page
62; and Supplemental Financial and Operating Information on pages 67-73
(excluding the sections on Exploration Expenses, Revenues Per Unit of Oil
and Gas Production and Average Net Oil and Gas Production) and 75-76.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information on directors required by this Item is incorporated
herein by reference to the Company's definitive Proxy Statement which will
be filed with the Securities and Exchange Commission ("SEC") within 120
days after December 31, 1993.
Information concerning the Company's executive officers appears in
Part I of this Annual Report on Form 10-K.
ITEM 11. EXECUTIVE COMPENSATION
The information required by this Item is incorporated herein by
reference to the Company's definitive Proxy Statement which will be filed
with the SEC within 120 days after December 31, 1993.
<PAGE>
<PAGE> 27
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required by this Item is incorporated herein by
reference to the Company's definitive Proxy Statement which will be filed
with the SEC within 120 days after December 31, 1993.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by this Item is incorporated herein by
reference to the Company's definitive Proxy Statement which will be filed
with the SEC within 120 days after December 31, 1993.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) The following documents are filed as a part of this report:
1. Consolidated Financial Statements:
The information appearing in the Company's 1993 Annual
Report to Shareholders as described in Item 8 is incorporated
herein by reference.
2. Financial Statement Schedules:
Page
----
Report of Independent Accountants.................. 33
Schedule V - Properties, Plants and Equipment..... 34
Schedule VI - Accumulated Depreciation, Depletion
and Amortization of Properties,
Plants and Equipment................. 35
Schedule VIII - Valuation Accounts................. 37
Schedule IX - Short-Term Borrowings................ 38
Schedule X - Supplementary Income Statement
Information.......................... 39
Other schedules are omitted because the required information
is shown elsewhere in this report, is not required or is not
applicable.
<PAGE>
<PAGE> 28
3. Exhibits:
3.(i) - Articles of Incorporation of Sun Company, Inc., as
restated and amended.
3.(ii) - Sun Company, Inc. Bylaws, as amended July 5, 1990
(incorporated by reference to Exhibit 3(b) of the
Form SE filed March 15, 1991).
4 - Instruments defining the rights of security holders
of long-term debt of the Company and its subsidiaries
are not being filed since the total amount of
securities authorized under each such instrument does
not exceed 10 percent of the total assets of the
Company and its subsidiaries on a consolidated basis.
The Company will provide the SEC a copy of any
instruments defining the rights of holders of long-
term debt of the Company and its subsidiaries upon
request.
10.1* - Long-Term Incentive Plan, as amended (incorporated by
reference to Exhibit 10(c) of the Form SE filed
March 15, 1989).
10.2* - Executive Retirement Plan, as amended September 6,
1991 (incorporated by reference to Exhibit 10(d) of
the Form SE filed March 13, 1992).
10.3* - Directors' Deferred Compensation Plan as amended and
restated, effective September 5, 1991 (incorporated
by reference to Exhibit 10.5 of the Form SE filed
March 11, 1993).
10.4* - Deferred Compensation Plan (incorporated by reference
to Exhibit 10(e) of the Form SE filed March 20, 1986,
File No. 1-6841).
10.5* - Pension Restoration Plan as amended and restated
effective January 1, 1991 and amended September 6,
1991 (incorporated by reference to Exhibit 10(g) of
the Form SE filed March 13, 1992).
10.6* - Special Executive Severance Plan (incorporated by
reference to Exhibit 10(g) of the Form SE filed
March 20, 1986, File No. 1-6841).
10.7* - Executive Incentive Plan, as amended and restated,
effective January 1, 1992 and revised November 5,
1992 (incorporated by reference to Exhibit 10.9 of
the Form SE filed March 11, 1993).
10.8* - Sun Company, Inc. Savings Restoration Plan
(incorporated by reference to Exhibit 10(j) of the
Company's Annual Report on Form 10-K, as amended, for
the fiscal year ended December 31, 1987, File No.
1-6841).
<PAGE>
<PAGE> 29
10.9* - Sun Company, Inc. Savings Restoration Plan II,
effective April 6, 1989 (incorporated by reference to
Exhibit 10(k) of the Company's Annual Report on
Form 10-K, as amended, for the fiscal year ended
December 31, 1989).
10.10* - Sun Company, Inc. Non-Employee Directors Retirement
Plan (incorporated by reference to Exhibit 10(k) of
the Company's Annual Report on Form 10-K, as amended,
for the fiscal year ended December 31, 1988, File No.
1-6841).
10.11* - Sun Company, Inc. Deferred Compensation and Benefits
Trust (incorporated by reference to Exhibit 10(l) of
the Form SE filed March 15, 1989).
10.12* - Sun Company, Inc. Retainer Stock Plan for Outside
Directors, as amended and restated effective April 1,
1992 (incorporated by reference to Exhibit 10.14 of
the Form SE filed March 11, 1993).
10.13* - Sun Company, Inc. Executive Long-Term Stock
Investment Plan, as amended November 1, 1993.
10.14* - Memorandum of Agreement between Alexander B.
Trowbridge and Sun Company, Inc. (incorporated by
reference to Exhibit 10.16 of the Form SE filed
March 11, 1993).
11 - Statements re Sun Company, Inc. and Subsidiaries
Computation of Per Share Earnings for the Years Ended
December 31, 1993, 1992 and 1991.
12 - Statement re Sun Company, Inc. and Subsidiaries
Computation of Ratio of Earnings to Fixed Charges for
the Year Ended December 31, 1993.
13 - Sun Company, Inc. 1993 Annual Report to Shareholders
Financial Section.
21 - Subsidiaries of Sun Company, Inc.
23 - Consent of Independent Accountants.
24.1 - Power of Attorney executed by certain officers and
directors of Sun Company, Inc.
24.2 - Certified copy of the resolution authorizing certain
officers to sign on behalf of Sun Company, Inc.
- -----------
*These exhibits constitute the Executive Compensation Plans and
Arrangements of the Company.
<PAGE>
<PAGE> 30
(b) Reports on Form 8-K:
The Company did not file any reports on Form 8-K during the
quarter ended December 1993.
A report on Form 8-K dated February 24, 1994 was filed to
disclose under Item 5, "Other Events," that Sun has signed a letter of
intent with Chevron U.S.A. Products Co. to purchase Chevron's 177,000-
barrel-a-day Philadelphia refinery plus Chevron's one-third interest
in a petroleum pipeline connecting the refinery to the New York
Harbor, for approximately $170 million, including inventory.
Note: Copies of each Exhibit to this Form 10-K are available upon
request, at $2 per copy.
<PAGE>
<PAGE> 31
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934, THE REGISTRANT HAS DULY CAUSED THIS REPORT TO BE
SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED.
SUN COMPANY, INC.
By s/ROBERT M. AIKEN, JR.
Robert M. Aiken, Jr.
Senior Vice President and Chief Financial Officer
Date March 3, 1994
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934,
THIS REPORT HAS BEEN SIGNED BELOW BY OR ON BEHALF OF THE FOLLOWING PERSONS
ON BEHALF OF THE REGISTRANT AND IN THE CAPACITIES INDICATED ON MARCH 3,
1994:
Signatures Titles
---------- ------
ROBERT M. AIKEN, JR.* Senior Vice President and Chief
--------------------- Financial Officer
Robert M. Aiken, Jr. (Principal Financial Officer)
ROBERT H. CAMPBELL* Chairman of the Board, Chief Executive
------------------- Officer, President and Director
Robert H. Campbell (Principal Executive Officer)
RAYMOND E. CARTLEDGE* Director
---------------------
Raymond E. Cartledge
RICHARD L. CARTLIDGE* Comptroller
--------------------- (Principal Accounting Officer)
Richard L. Cartlidge
ROBERT E. CAWTHORN* Director
-------------------
Robert E. Cawthorn
MARY J. EVANS* Director
--------------
Mary J. Evans
THOMAS P. GERRITY* Director
------------------
Thomas P. Gerrity
JAMES G. KAISER* Director
----------------
James G. Kaiser
THOMAS W. LANGFITT* Director
-------------------
Thomas W. Langfitt
<PAGE>
<PAGE> 32
R. ANDERSON PEW* Director
----------------
R. Anderson Pew
ALBERT E. PISCOPO* Director
------------------
Albert E. Piscopo
WILLIAM F. POUNDS* Director
------------------
William F. Pounds
B. RAY THOMPSON, JR.* Director
---------------------
B. Ray Thompson, Jr.
ALEXANDER B. TROWBRIDGE* Director
------------------------
Alexander B. Trowbridge
*By s/ROBERT M. AIKEN, JR. Individually and as Attorney-in-Fact
----------------------
Robert M. Aiken, Jr.
<PAGE>
<PAGE> 33
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders and Board of Directors, Sun Company, Inc.:
Our report on the consolidated financial statements of Sun Company,
Inc. and its subsidiaries has been incorporated by reference in this
Form 10-K from page 62 of the Sun Company, Inc. 1993 Annual Report to
Shareholders. In connection with our audits of such financial statements,
we have also audited the related financial statement schedules listed in
the index on page 27 of this Form 10-K.
In our opinion, the financial statement schedules referred to above,
when considered in relation to the basic financial statements taken as a
whole, present fairly, in all material respects, the information required
to be included therein.
Coopers & Lybrand
2400 Eleven Penn Center
Philadelphia, PA 19103
February 15, 1994
<PAGE>
<PAGE> 34
<TABLE>
SUN COMPANY, INC. AND SUBSIDIARIES
SCHEDULE V--PROPERTIES, PLANTS AND EQUIPMENT
FOR THE YEARS ENDED DECEMBER 31, 1993, 1992 AND 1991
(MILLIONS OF DOLLARS)
<CAPTION>
OTHER BALANCE
CHANGES AT
BALANCE AT ADDI- RETIRE- ADD END
BEGINNING TIONS MENTS (DEDUCT) OF
CLASSIFICATION OF PERIOD AT COST OR SALES (A) PERIOD
-------------- --------- ------- -------- ------- -------
<S> <C> <C> <C> <C> <C>
For the year ended
December 31, 1993:
Refining and marketing...... $5,112 $381 $204 $ (24) $5,265
Exploration and production.. 1,683 120 283(B) (42) 1,478
Oil sands mining............ 965 111 11 (65) 1,000
Corporate................... 20 -- 10 -- 10
------ ---- ---- ----- ------
$7,780 $612 $508 $(131) $7,753
====== ==== ==== ===== ======
For the year ended
December 31, 1992:
Refining and marketing...... $5,002 $275 $ 83 $ (82) $5,112
Exploration and production.. 1,658 175 87(B) (63) 1,683
Oil sands mining............ 1,027 80 11 (131) 965
Corporate................... 35 -- 11 (4) 20
------ ---- ---- ----- ------
$7,722 $530 $192 $(280) $7,780
====== ==== ==== ===== ======
For the year ended
December 31, 1991:
Refining and marketing...... $4,765 $323 $ 79 $ (7) $5,002
Exploration and production.. 1,533 202 81(B) 4 1,658
Oil sands mining............ 983 89 18 (27) 1,027
Corporate................... 29 1 6 11 35
------ ---- ---- ----- ------
$7,310 $615 $184 $ (19) $7,722
====== ==== ==== ===== ======
<FN>
Notes:
(A) Includes foreign currency translation adjustments and intersegment
transfers. In 1992, also includes $(8) million in refining and
marketing, $(10) million in oil sands mining and $(3) million in
corporate attributable to a provision for write-down of assets and
other matters. (See Note 2 to the Consolidated Financial Statements
in the Company's 1993 Annual Report to Shareholders.)
(B) Includes dry hole costs.
</TABLE>
<PAGE>
<PAGE> 35
<TABLE>
SUN COMPANY, INC. AND SUBSIDIARIES
SCHEDULE VI--ACCUMULATED DEPRECIATION,
DEPLETION AND AMORTIZATION OF
PROPERTIES, PLANTS AND EQUIPMENT
FOR THE YEARS ENDED DECEMBER 31, 1993, 1992 AND 1991
(MILLIONS OF DOLLARS)
<CAPTION>
ADDITIONS
CHARGED OTHER BALANCE
TO COSTS RETIRE- CHANGES AT
BALANCE AT AND MENTS ADD END
BEGINNING EXPENSES OR (DEDUCT) OF
CLASSIFICATION OF PERIOD (A)(B) SALES (C) PERIOD
-------------- ---------- --------- ------- -------- -------
<S> <C> <C> <C> <C> <C>
For the year ended
December 31, 1993:
Refining and marketing...... $2,344 $237 $168 $(10) $2,403
Exploration and production.. 1,199 89 254 (15) 1,019
Oil sands mining............ 487 32 5 (20) 494
Corporate................... 11 1 6 -- 6
------ ---- ---- ---- ------
$4,041 $359 $433 $(45) $3,922
====== ==== ==== ==== ======
For the year ended
December 31, 1992:
Refining and marketing...... $2,130 $245 $ 60 $ 29 $2,344
Exploration and production.. 834 105 52 312 1,199
Oil sands mining............ 436 37 10 24 487
Corporate................... 22 2 10 (3) 11
------ ---- ---- ---- ------
$3,422 $389 $132 $362 $4,041
====== ==== ==== ==== ======
For the year ended
December 31, 1991:
Refining and marketing...... $1,943 $237 $ 56 $ 6 $2,130
Exploration and production.. 706 152 21 (3) 834
Oil sands mining............ 408 40 13 1 436
Corporate................... 25 9 6 (6) 22
------ ---- ---- ---- ------
$3,082 $438 $ 96 $ (2) $3,422
====== ==== ==== ==== ======
</TABLE>
<PAGE>
<PAGE> 36
SUN COMPANY, INC. AND SUBSIDIARIES
SCHEDULE VI--ACCUMULATED DEPRECIATION,
DEPLETION AND AMORTIZATION OF
PROPERTIES, PLANTS AND EQUIPMENT
FOR THE YEARS ENDED DECEMBER 31, 1993, 1992 AND 1991--(CONTINUED)
(MILLIONS OF DOLLARS)
Notes: YEARS ENDED DECEMBER 31
-----------------------
1993 1992 1991
---- ---- ----
(A) Depreciation, depletion and amortization.....$354 $385 $433
Leasehold impairment......................... 5 4 5
---- ---- ----
Total additions............................ 359 389 438
Dry hole costs............................... 9 30 48
---- ---- ----
Amounts shown in the consolidated
statements of cash flows as depreciation,
depletion and amortization and dry hole
costs and leasehold impairment...........$368 $419 $486
==== ==== ====
(B) A summary of the principal annual rates utilized in computing the
annual provision for depreciation, depletion and amortization is not
considered practicable because of the varying types of property and
the rates applied thereto.
(C) Includes foreign currency translation adjustments and intersegment
transfers. In 1992, also includes $59 million in refining and
marketing, $350 million in exploration and production and $67 million
in oil sands mining attributable to a provision for write-down of
assets and other matters. (See Note 2 to the Consolidated Financial
Statements in the Company's 1993 Annual Report to Shareholders.)
<PAGE>
<PAGE> 37
SUN COMPANY, INC. AND SUBSIDIARIES
SCHEDULE VIII--VALUATION ACCOUNTS
FOR THE YEARS ENDED DECEMBER 31, 1993, 1992 AND 1991
(MILLIONS OF DOLLARS)
ADDITIONS
BALANCE AT CHARGED TO BALANCE
BEGINNING COSTS AND DEDUC- AT END
OF PERIOD EXPENSES TIONS OF PERIOD
---------- ---------- ------ ---------
For the year ended
December 31, 1993:
Deducted from asset in
balance sheet--allowance
for doubtful accounts and
notes receivable.......... $11 $ 2 $ 2 $11
=== === === ===
For the year ended
December 31, 1992:
Deducted from asset in
balance sheet--allowance
for doubtful accounts and
notes receivable.......... $12 $ 7 $ 8 $11
=== === === ===
For the year ended
December 31, 1991:
Deducted from asset in
balance sheet--allowance
for doubtful accounts and
notes receivable.......... $11 $14 $13 $12
=== === === ===
<PAGE>
<PAGE> 38
SUN COMPANY, INC. AND SUBSIDIARIES
SCHEDULE IX--SHORT-TERM BORROWINGS
FOR THE YEARS ENDED DECEMBER 31, 1993, 1992 AND 1991
(DOLLARS IN MILLIONS)
MAXIMUM AVERAGE WEIGHTED
AMOUNT AMOUNT AVERAGE
WEIGHTED OUT- OUT- INTEREST
BALANCE AVERAGE STANDING STANDING RATE
AT END INTEREST DURING DURING DURING
OF PERIOD RATE PERIOD PERIOD(A) PERIOD(B)
--------- -------- ------- --------- ---------
For the year ended
December 31, 1993:
Commercial paper.... $ 50 3.6% $308 $127 3.5%
Amounts due to
banks and others.. 60 3.5% $ 65 15 3.4%
---- ----
$110 3.5% $142 3.5%
==== ====
For the year ended
December 31, 1992:
Commercial paper.... $215 3.7% $307 $173 4.1%
==== ====
For the year ended
December 31, 1991:
Commercial paper.... $143 5.2% $340 $211 6.2%
Amounts due to
banks and others.. -- N/A $ 17 1 12.4%
---- ----
$143 5.2% $212 6.3%
==== ====
Notes:
(A) Determined from daily balances.
(B) Represents the ratio of actual interest to average amounts
outstanding.
<PAGE>
<PAGE> 39
SUN COMPANY, INC. AND SUBSIDIARIES
SCHEDULE X--SUPPLEMENTARY INCOME STATEMENT INFORMATION
FOR THE YEARS ENDED DECEMBER 31, 1993, 1992 AND 1991
(MILLIONS OF DOLLARS)
1993 1992 1991
---- ---- ----
Maintenance and repairs........................ $223 $295 $335
==== ==== ====
<PAGE>
<PAGE> 40
APPENDIX
The Company's Management's Discussion and Analysis of Financial
Condition and Results of Operations included in its 1993 Annual Report to
Shareholders contains three bar charts concerning Sun's: (1) improvement in
income before special items (page 26); (2) capitalization (page 37); and
(3) capital expenditures (page 37). Descriptions of these bar charts have
been provided within Exhibit 13.
<PAGE>
<PAGE> 1
INDEX TO EXHIBITS
Exhibit
Number Exhibit
- ------- -------
3.(i) - Articles of Incorporation of Sun Company, Inc., as restated
and amended.
3.(ii) - Sun Company, Inc. Bylaws, as amended July 5, 1990
(incorporated by reference to Exhibit 3(b) of the Form SE
filed March 15, 1991).
4 - Instruments defining the rights of security holders of long-
term debt of the Company and its subsidiaries are not being
filed since the total amount of securities authorized under
each such instrument does not exceed 10 percent of the total
assets of the Company and its subsidiaries on a consolidated
basis. The Company will provide the SEC a copy of any
instruments defining the rights of holders of long-term debt
of the Company and its subsidiaries upon request.
10.1* - Long-Term Incentive Plan, as amended (incorporated by
reference to Exhibit 10(c) of the Form SE filed March 15,
1989).
10.2* - Executive Retirement Plan, as amended September 6, 1991
(incorporated by reference to Exhibit 10(d) of the Form SE
filed March 13, 1992).
10.3* - Directors' Deferred Compensation Plan as amended and
restated, effective September 5, 1991 (incorporated by
reference to Exhibit 10.5 of the Form SE filed March 11,
1993).
10.4* - Deferred Compensation Plan (incorporated by reference to
Exhibit 10(e) of the Form SE filed March 20, 1986, File No.
1-6841).
10.5* - Pension Restoration Plan as amended and restated effective
January 1, 1991 and amended September 6, 1991 (incorporated
by reference to Exhibit 10(g) of the Form SE filed March 13,
1992).
10.6* - Special Executive Severance Plan (incorporated by reference
to Exhibit 10(g) of the Form SE filed March 20, 1986, File
No. 1-6841).
10.7* - Executive Incentive Plan, as amended and restated, effective
January 1, 1992 and revised November 5, 1992 (incorporated by
reference to Exhibit 10.9 of the Form SE filed March 11,
1993).
10.8* - Sun Company, Inc. Savings Restoration Plan (incorporated by
reference to Exhibit 10(j) of the Company's Annual Report on
Form 10-K, as amended, for the fiscal year ended December 31,
1987, File No. 1-6841).
<PAGE>
<PAGE> 2
10.9* - Sun Company, Inc. Savings Restoration Plan II, effective
April 6, 1989 (incorporated by reference to Exhibit 10(k) of
the Company's Annual Report on Form 10-K, as amended, for the
fiscal year ended December 31, 1989).
10.10* - Sun Company, Inc. Non-Employee Directors Retirement Plan
(incorporated by reference to Exhibit 10(k) of the Company's
Annual Report on Form 10-K, as amended, for the fiscal year
ended December 31, 1988, File No. 1-6841).
10.11* - Sun Company, Inc. Deferred Compensation and Benefits Trust
(incorporated by reference to Exhibit 10(l) of the Form SE
filed March 15, 1989).
10.12* - Sun Company, Inc. Retainer Stock Plan for Outside Directors,
as amended and restated effective April 1, 1992 (incorporated
by reference to Exhibit 10.14 of the Form SE filed March 11,
1993).
10.13* - Sun Company, Inc. Executive Long-Term Stock Investment Plan,
as amended November 1, 1993.
10.14* - Memorandum of Agreement between Alexander B. Trowbridge and
Sun Company, Inc. (incorporated by reference to Exhibit 10.16
of the Form SE filed March 11, 1993).
11 - Statements re Sun Company, Inc. and Subsidiaries Computation
of Per Share Earnings for the Years Ended December 31, 1993,
1992 and 1991.
12 - Statement re Sun Company, Inc. and Subsidiaries Computation
of Ratio of Earnings to Fixed Charges for the Year Ended
December 31, 1993.
13 - Sun Company, Inc. 1993 Annual Report to Shareholders
Financial Section.
21 - Subsidiaries of Sun Company, Inc.
23 - Consent of Independent Accountants.
24.1 - Power of Attorney executed by certain officers and directors
of Sun Company, Inc.
24.2 - Certified copy of the resolution authorizing certain officers
to sign on behalf of Sun Company, Inc.
- -----------
*These exhibits constitute the Executive Compensation Plans and
Arrangements of the Company.
<PAGE>
<PAGE> 1
EXHIBIT 3.(i)
Articles of Incorporation
of Sun Company, Inc.
<PAGE>
<PAGE> 2
Articles of Incorporation of Sun Company, Inc.
First: The name of the Corporation is "Sun Company, Inc."
Second: The location and post office address of its registered office in
this Commonwealth is 1801 Market Street, Philadelphia, Pennsylvania 19103.
Third: The Corporation shall have unlimited power to engage in and to do
any lawful act concerning any or all lawful business for which corporations
may be incorporated under the provisions of the Act of May 5, 1933 (P.L.
364, as amended). The Corporation is incorporated under the provisions of
said Act.
Fourth: The total number of shares of capital stock which this
Corporation shall have authority to issue is Two Hundred Fifteen Million
(215,000,000) to be divided into two classes consisting of Fifteen Million
(15,000,000) shares designated as "Cumulative Preference Stock"
(hereinafter called "Preference Stock"), without par value, and Two Hundred
Million (200,000,000) shares designated as "Common Stock,"(hereinafter
called "Common Stock"), $1 par value.
The following is a description of each class of capital stock and a
statement of the preferences, qualifications, privileges, limitations,
restrictions, and other special or relative rights granted to or imposed
upon the shares of each class-:
Preference Stock
1. Authority of Board of Directors. Authority is hereby vested in the
Board of Directors, by resolution, to divide any or all of the authorized
shares of Preference Stock into series and, within the limitations provided
by law and this Article Fourth, to fix and determine the designations,
preferences, qualifications, privileges, limitations, options, conversion
rights, and other special rights of each such series, including but not
limited to the right to fix and determine:
(a) the designation of and the number of shares issuable in each such
series;
(b) the annual dividend rate, expressed in a dollar amount per share, for
each such series;
(c) the right, if any, of the Corporation to redeem shares of any such
series, and the terms and conditions on which shares of each such series
may be redeemed;
(d) the amounts payable upon shares of each such series in the event of
the voluntary or involuntary liquidation, dissolution or winding up of the
Corporation;
(e) the sinking fund provisions, if any, for the redemption or purchase
of shares of each such series;
(f) the voting rights, if any, for the shares of each such series;
provided, however, that the number of votes per share of Preference Stock
shall in no event exceed one (1);
(g) the terms and conditions, if any, on which shares of each such series
may be converted into shares of stock of this Corporation; provided,
however, that shares of Preference Stock shall not be convertible into
shares of any class of stock of the Corporation other than Common Stock and
shall not be convertible into more than one share of Common Stock, or such
greater or lesser number as will reflect the effect of stock dividends,
stock splits or stock combinations affecting Common Stock and occurring
after May 9, 1980, subject to such terms and conditions, including
provision for fractional shares, as the Board of Directors shall authorize;
<PAGE>
<PAGE> 3
(h) the stated value per share for each such series; and
(i) any and all such other provisions as may be fixed or determined by
the Board of Directors of the Corporation pursuant to Pennsylvania law.
2. Parity of Series of Preference Stock and Shares Within Series;
Priority of Preference Stock. 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 at different times
may differ as to the dates from which dividends thereon shall be
cumulative. Except as determined by the Board of Directors as permitted by
the provisions of paragraph 1 hereof, all series of Preference Stock shall
rank equally with and be identical in all respects to each other series.
Preference Stock shall rank, as to dividends and upon liquidation,
dissolution or winding up, prior to Common Stock and to any other capital
stock of the Corporation hereafter authorized, other than capital stock
which shall by its terms rank prior to or on a parity with Preference Stock
and which shall be authorized pursuant to subparagraph 9(a) hereof.
3. Dividends. Before any dividends (other than dividends payable in stock
ranking junior to Preference Stock) on any class or classes of stock of the
Corporation ranking junior to Preference Stock as to dividends or upon
liquidation shall be declared and set apart for payment or paid, the
holders of shares of Preference Stock of each series shall be entitled to
receive cash dividends, when and as declared by the Board of Directors at
the annual rate, and no more, fixed in the resolution adopted by the Board
of Directors providing for the issue of such series. Such dividends shall
be payable in cash quarterly, each such quarterly payment to be in respect
of the quarterly period ending with the day next preceding the date of such
payment (except in the case of the first dividend which shall be in respect
of the period beginning with the initial date of issue of such shares and
ending with the day next preceding the date of such payment), to holders of
Preference Stock of record on the respective dates, not exceeding forty
(40) days preceding such quarterly dividend payment dates, fixed for that
purpose by the Board of Directors. With respect to each series of
Preference Stock, such dividends shall be cumulative from the date or dates
of issue of such series, which date or dates may be set by the Board of
Directors pursuant to the provisions of paragraph 1 hereof. No dividends
shall be declared or paid or set apart for payment on any series of
Preference Stock in respect of any quarterly dividend period unless there
shall likewise be or have been declared and paid or set apart for payment
on all shares of Preference Stock of each other series at the time
outstanding like dividends in proportion to the respective annual dividend
rates fixed therefor as hereinbefore provided for all quarterly dividend
periods coinciding with or ending before such quarterly dividend period.
Accruals of dividends shall not bear interest.
4. Redemption. The Corporation, at the option of the Board of Directors,
may, at any time permitted by the resolution adopted by the Board of
Directors providing for the issue of any series of Preference Stock and at
the redemption price or prices stated in said resolution, redeem the whole
or any part of the shares of such series at the time outstanding. If at
any time less than all of the shares of Preference Stock then outstanding
are to be called for redemption, the shares to be redeemed may be selected
by lot or by such other equitable method as the Board of Directors in its
discretion may determine. Notice of every redemption, stating the
redemption date, the redemption price, and the placement of payment
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thereof, shall be given by mailing a copy of such notice at least thirty
(30) days and not more than sixty (60) days prior to the date fixed for
redemption to the holders of record of the shares of Preference Stock to be
redeemed at their addresses as the same shall appear on the books of the
Corporation. The Corporation, upon mailing notice of redemption as
aforesaid or upon irrevocably authorizing the bank or trust company
hereinafter mentioned to mail such notice, may deposit or cause to be
deposited in trust with a bank or trust company in the City of
Philadelphia, Commonwealth of Pennsylvania, or in the Borough of Manhattan,
City and State of New York, an amount equal to the redemption price of the
shares to be redeemed plus any accrued and unpaid dividends thereon, which
amount shall be payable to the holders of the shares to be redeemed upon
surrender of certificates therefor on or after the date fixed for
redemption or prior thereto if so directed by the Board of Directors. Upon
such deposit, or if no such deposit is made, then from and after the date
fixed for redemption unless the Board of Directors shall default in making
payment of the redemption price plus accrued and unpaid dividends upon
surrender of certificates as aforesaid, the shares called for redemption
shall cease to be outstanding and the holders thereof shall cease to be
stockholders with respect to such shares and shall have no interest in or
claim against the Corporation with respect to such shares other than the
right to receive the redemption price plus accrued and unpaid dividends
from such bank or trust company or from the Corporation, as the case may
be, without interest thereon, upon surrender of certificates as aforesaid;
provided, that conversion rights, if any, of shares called for redemption
shall terminate at the close of business on the business day prior to the
date fixed for redemption. Any funds so deposited which shall not be
required for such redemption because of the exercise of conversion rights
subsequent to the date of such deposit shall be returned to the
Corporation. In case any holder of shares of Preference Stock which have
been called for redemption shall not, within six (6) years after the date
of such deposit, have claimed the amount deposited with respect to the
redemption thereof, such bank or trust company, upon demand, shall pay over
to the Corporation such unclaimed amount and shall thereupon be relieved of
all responsibility in respect thereof to such holder, and thereafter such
holder shall look only to the Corporation for payment thereof. Any
interest which may accrue on funds so deposited shall be paid to the
Corporation from time to time.
5. Status of Shares of Preference Stock Redeemed or Acquired. Unless
otherwise specifically provided in the resolutions of the Board of
Directors authorizing the issue of any series of Preference Stock, shares
of any series of Preference Stock which have been redeemed, purchased or
acquired by the Corporation by means other than conversion (whether through
the operation of a sinking fund or otherwise) shall have the status of
authorized and unissued shares of Preference Stock and may be reissued as a
part of the series of which they were originally a part or may be
reclassified and reissued as part of a new series of Preference Stock to be
created by resolution of the Board of Directors or as part of any other
series of Preference Stock. Shares of any series of Preference Stock
converted shall not be reissued and the Board of Directors shall take
appropriate actions to reflect the conversion of Preference Stock from time
to time by effecting reductions in the number of shares of Preference Stock
which the Corporation is authorized to issue.
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6. Redemption or Acquisition of Preference Stock During Default in
Payment of Dividends. If at any time the Corporation shall have failed to
pay dividends in full on Preference Stock, thereafter and until dividends
in full including all accrued and unpaid dividends on shares of all series
of Preference Stock at the time outstanding, shall have been declared and
set apart for payment or paid, (i) the Corporation, without the affirmative
vote or consent of the holders of at least a majority of the shares of
Preference Stock at the time outstanding, voting or consenting separately
as a class without regard to series, given in person or by proxy, either in
writing or by resolution adopted at a meeting, shall not redeem less than
all the shares of Preference Stock at such time outstanding, regardless of
series, other than in accordance with paragraph 8 hereof and (ii) neither
the Corporation nor any subsidiary shall purchase any shares of Preference
Stock except in accordance with a purchase offer made in writing or by
publication, as determined by the Board of Directors, in their sole
discretion after consideration of the respective annual dividend rates and
other relative rights and preferences of the respective series, shall
determine (which determination shall be final and conclusive) will result
in fair and equitable treatment among the respective series; provided,
however, that (iii) unless prohibited by the provisions applicable to any
series, the Corporation, to meet the requirements of any sinking fund
provision with respect to any series, may use shares of such series
acquired by it prior to such failure and then held by it as treasury stock,
and (iv) nothing shall prevent the Corporation from completing the purchase
or redemption of shares of Preference Stock for which a purchase contract
was entered into for any sinking fund purposes or the notice of redemption
of which was mailed to the holders thereof, prior to such default.
7. Dividends and Distributions on and Redemption and Acquisition of
Junior Classes of Stock. So long as any shares of Preference Stock are
outstanding, the Corporation shall not declare or set apart for payment or
pay any dividends (other than stock dividends payable on shares of stock
ranking junior to Preference Stock) or make any distribution on any other
class or classes of stock of the Corporation ranking junior to Preference
Stock as to dividends or upon liquidation and shall not redeem, purchase or
otherwise acquire, or permit any subsidiary to purchase or otherwise
acquire, any shares of any such junior class if at the time of making such
declaration, payment, distribution, redemption, purchase or acquisition the
Corporation shall be in default with respect to any dividend payable on, or
any obligation to purchase, shares of any series of Preference Stock;
provided, however, that, notwithstanding the foregoing, the Corporation may
at any time redeem, purchase or otherwise acquire shares of stock of any
such junior class in exchange for, or out of the net cash proceeds from the
sale of, other shares of stock of any junior class.
8. Retirement of Shares. If in any case the amounts payable with respect
to any obligations to retire shares of Preference Stock are not paid in
full in the case of all series with respect to which such obligations
exist, the number of shares of the various series to be retired shall be in
proportion to the respective amounts which would be payable on account of
such obligations if all amounts payable were discharged in full.
9. Action by Corporation Requiring Approval of Preference Stock. The
Corporation shall not, without the affirmative vote or consent of the
holders of at least 66 2/3% of the number of shares of Preference Stock at
the time outstanding, voting or consenting (as the case may be) separately
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<PAGE> 6
as a class without regard to series, given in person or by proxy, either in
writing or by resolution adopted at a meeting:
(a) create any class of stock ranking prior to or on a parity with
Preference Stock as to dividends or upon liquidation or increase the
authorized number of shares of any such previously authorized class of
stock;
(b) alter or change any of the provisions hereof so as adversely to
affect the preferences, special rights or powers given to the Preference
Stock;
(c) increase the number of shares of Preference Stock which the
Corporation is authorized to issue; or
(d) alter or change any of the provisions hereof or of the resolution
adopted by the Board of Directors providing for the issue of such series so
as adversely to affect the preferences, special rights or powers given to
such series.
10. Special Voting Rights. If the Corporation shall have failed to pay,
or declare and set apart for payment, dividends on Preference Stock in an
aggregate amount equivalent to six (6) full quarterly dividends on all
shares of Preference Stock at the time outstanding, the number of Directors
of the Corporation shall be increased by two (2) at the first annual
meeting of the shareholders of the Corporation held thereafter, and at such
meeting and at each subsequent annual meeting until dividends payable for
all past quarterly dividend periods on all outstanding shares of Preference
Stock shall have been paid, or declared and set apart for payment, in full,
the holders of the shares of Preference Stock shall have, in addition to
any other voting rights which they otherwise may have, the exclusive and
special right, voting separately as a class without regard to series, each
share of Preference Stock entitling the holder thereof to one (1) vote per
share, to elect two (2) additional members of the Board of Directors to
hold office for a term of one (1) year; provided, that the right to vote as
a class upon the election of such two (2) additional Directors shall not
limit the right of holders of any series of Preference Stock to vote upon
the election of all other Directors and upon other matters if and to the
extent that such holders are entitled to vote pursuant to the resolution
adopted by the Board of Directors pursuant to paragraph 1 hereof, providing
for the issue of such series. Upon such payment, or declaration and
setting apart for payment, in full, the terms of the two (2) additional
Directors so elected shall forthwith terminate, and the number of Directors
of the Corporation shall be reduced by two (2) and such voting right of the
holders of shares of Preference Stock shall cease, subject to increase in
the number of Directors as aforesaid and to revesting of such voting right
in the event of each and every additional failure in the payment of
dividends in an aggregate amount equivalent to six (6) full quarterly
dividends as aforesaid.
11. Liquidation of the Corporation. Upon the voluntary or involuntary
liquidation, dissolution or winding up of the Corporation, Preference Stock
shall be preferred as to assets over Common Stock and any other class or
classes of stock ranking junior to Preference Stock so that the holders of
shares of Preference Stock of each series shall be entitled to be paid or
to have set apart for payment, before any distribution is made to the
holders of Common Stock and any other class or classes of stock ranking
junior to Preference Stock, the amount fixed in accordance with paragraph 1
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<PAGE> 7
hereof plus an amount equal to all dividends accrued and unpaid up to and
including the date fixed for such payment and the holders of Preference
Stock shall not be entitled to any other payment.
If upon any such liquidation, dissolution or winding up of the
Corporation, its net assets shall be insufficient to permit the payment in
full of the respective amounts to which the holders of all outstanding
shares of Preference Stock are entitled as above provided, the entire
remaining net assets of the Corporation shall be distributed among the
holders of Preference Stock in amounts proportionate to the full
preferential amounts to which they are respectively entitled.
For the purposes of this paragraph 11, the voluntary sale, lease,
exchange or transfer for cash, shares of stock (securities or other
consideration) of all or substantially all the Corporation's property or
assets to, or its consolidation or merger with, one or more corporations
shall not be deemed to be a voluntary or involuntary liquidation,
dissolution or winding up of the Corporation.
12. Voting Rights. Except as otherwise provided by the provisions of this
Article Fourth or by statute or when fixed in accordance with the
provisions of paragraph 1 hereof, the holders of shares of Preference Stock
shall not be entitled to any voting rights.
13. Definitions. For the purposes of this Article Fourth and of any
resolution of the Board of Directors providing for the issue of any series
of Preference Stock or of any statement filed with the Secretary of State
of the Commonwealth of Pennsylvania (unless otherwise provided in any such
resolution or statement):
(a) The term "outstanding," when used in reference to shares of stock,
shall mean issued shares excluding:
(i) shares held by the Corporation or a subsidiary; and
(ii) shares called for redemption if funds for the redemption
thereof have been deposited in trust.
(b) Any class or classes of stock of the Corporation shall be deemed to
rank:
(i) prior to Preference Stock, either as to dividends or upon
liquidation, if the holders of such class or classes shall be entitled to
the receipt of dividends or amounts distributable upon liquidation,
dissolution or winding up, as the case may be, in preference or priority to
the holders of Preference Stock;
(ii) on a parity with Preference Stock, either as to dividends or upon
liquidation, whether or not the dividend rates or dividend payment dates or
the redemption or liquidation prices per share thereof be different from
those of Preference Stock, if the holders of such class or classes shall be
entitled to the receipt of dividends or of amounts distributable upon
liquidation, dissolution or winding up, as the case may be, in proportion
to their respective dividend rates or liquidation prices, without
preference or priority one (1) over the other as between the holders of
such class or classes and the holders of Preference Stock; and
(iii) junior to Preference Stock, either as to dividends or upon
liquidation, if the rights of the holders of such class or classes shall be
subject or subordinate to the rights of the holders of Preference Stock in
respect of the receipt of dividends or of amounts distributable upon
liquidation, dissolution or winding up, as the case may be.
(c) The term "subsidiary" as used herein shall mean any corporation 51%
or more of the outstanding stock having voting rights of which is at the
time owned or controlled directly or indirectly by the Corporation.
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Common Stock
Each holder of record of Common Stock shall have the right to one (1)
vote for each share of Common Stock standing in his name on the books of
the Corporation. Except as required by law or as otherwise specifically
provided in this Article Fourth, the holders of Preference Stock having
voting rights and holders of Common Stock shall vote together as one class.
Preemptive Rights
Neither the holders of Preference Stock nor the holders of Common Stock
shall have any preemptive rights, and the Corporation shall have the right
to issue and to sell to any person or persons any shares of its capital
stock or any option rights or any securities having conversion or option
rights, without first offering such shares, rights or securities to any
holders of Preference Stock or Common Stock.
Fifth: 1. The affirmative vote of the holders of not less than 75% of the
outstanding shares of "Voting Stock" held by shareholders other than a
"Related Person" shall be required for the approval or authorization of any
"Business Combination" of the Corporation with any Related Person;
provided, however, that the 75% voting requirement shall not be applicable
if:
(i) The "Continuing Directors" of the Corporation by at least a two-
thirds vote of such Continuing Directors have expressly approved such
Business Combination either in advance of or subsequent to such Related
Person's having become a Related Person; or
(ii) The cash or fair market value (as determined by at least two-thirds
of the Continuing Directors) of the property, securities or other
consideration to be received per share by holders of Voting Stock of the
Corporation in the Business Combination is not less than the "Highest Per
Share Price" or the "Highest Equivalent Price" paid by the Related Person
in acquiring any of its holdings of the Corporation's Voting Stock.
2. For purposes of this Article FIFTH:
(i) The term "Business Combination" shall mean (a) any merger or
consolidation of the Corporation or a subsidiary of the Corporation with or
into a Related Person, (b) any sale, lease, exchange, transfer or other
disposition, including without limitation a mortgage or any other security
device, of all or any "Substantial Part" of the assets either of the
Corporation (including without limitation any voting securities of a
subsidiary) or of a subsidiary of the Corporation to a Related Person, (c)
any merger or consolidation of a Related Person with or into the
Corporation or a subsidiary of the Corporation, (d) any sale, lease,
exchange, transfer or other disposition, including without limitation a
mortgage or other security device, of all or any Substantial Part of the
assets of a Related Person to the Corporation or a subsidiary of the
Corporation, (e) the issuance of any securities of the Corporation or a
subsidiary of the Corporation to a Related Person other than the issuance
on a pro rata basis to all holders of shares of the same class pursuant to
a stock split or stock dividend, or a distribution of warrants or rights,
(f) any recapitalization that would have the effect of increasing the
voting power of a Related Person, and (g) any agreement, contract or other
arrangement providing for any of the transactions described in this
definition of Business Combination.
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(ii) The term "Related Person" shall mean and include any individual,
corporation, partnership or other person or entity which, together with its
"Affiliates" and "Associates" becomes the "Beneficial Owner" of an
aggregate of 10% or more of the outstanding Voting Stock of the
Corporation, and any Affiliate or Associate of any such individual,
corporation, partnership or other person or entity; provided, however, that
the term "Related Person" shall not include (1) a person or entity whose
acquisition of such aggregate percentage of Voting Stock was approved in
advance by two-thirds of the Continuing Directors or (2) any trustee or
fiduciary when acting in such capacity with respect to any employee benefit
plan of the Corporation or a wholly owned subsidiary of the Corporation.
No person who became a Related Person prior to December 31, 1983 shall be
treated as a Related Person for the purpose of voting on any amendment,
alteration, change or repeal of this Article FIFTH or voting on any
Business Combination to which such Related Person is not a party.
(iii) The term "Substantial Part" shall mean an amount equal to 10% or
more of the fair market value as determined by two-thirds of the Continuing
Directors of the total consolidated assets of the Corporation and its
subsidiaries taken as a whole as of the end of its most recent fiscal year
ended prior to the time the determination is being made.
(iv) The term "Beneficial Owner" shall mean any person (1) who
beneficially owns shares of Voting Stock within the meaning ascribed in
Rule 13d-3 of the General Rules and Regulations under the Securities
Exchange Act of 1934, as in effect on the date of adoption of this Article
FIFTH by the shareholders of the Corporation, or (2) who has the right to
acquire Voting Shares (whether or not such right is exercisable
immediately) pursuant to any agreement, contract, arrangement or
understanding or upon the exercise of conversion rights, exchange rights,
warrants or options, or otherwise.
(v) For purposes of subparagraph 1(ii) of this Article FIFTH, the term
"other consideration to be received" shall include, without limitation, the
value per share of Common Stock or other capital stock of the Corporation
retained by its existing shareholders as adjusted to give effect to the
proposed Business Combination in the event of any Business Combination in
which the Corporation is a surviving corporation.
(vi) The term "Voting Stock" shall mean all of the outstanding shares of
Common Stock entitled to vote on each matter on which the holders of record
of Common Stock shall be entitled to vote, and each reference to a
proportion of shares of Voting Stock shall refer to such proportion of the
votes entitled to be cast by such shares.
(vii) The term "Continuing Director" shall mean a Director who was a
member of the Board of Directors of the Corporation immediately prior to
the time that the Related Person involved in a Business Combination became
a Related Person. As to any person who became a Related Person prior to
December 31, 1983, a Continuing Director shall mean a Director who was a
member of the Board of Directors on December 31, 1983.
(viii) A Related Person shall be deemed to have acquired a share of the
Voting Stock of the Corporation at the time when such Related Person became
the Beneficial Owner thereof. With respect to the shares owned by
Affiliates, Associates or other persons whose ownership is attributed to a
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Related Person under the foregoing definition of Related Person, if the
price paid by such Related Person for such shares is not determinable by
two-thirds of the Continuing Directions, the price so paid shall be deemed
to be the higher of (a) the price paid upon the acquisition thereof by the
Affiliate, Associate or other person or (b) the market price of the shares
in question at the time when the Related Person became the Beneficial Owner
thereof.
(ix) The terms "Highest Per Share Price" and "Highest Equivalent Price"
as used in this Article FIFTH shall mean the following: If there is only
one (1) class of capital stock of the Corporation issued and outstanding,
the Highest Per Share Price shall mean the highest price that can be
determined to have been paid at any time by the Related Person for any
share or shares of that class of capital stock. If there is more than one
class of capital stock of the Corporation issued and outstanding, the
Highest Equivalent Price shall mean, with respect to each class and series
of capital stock of the Corporation, the amount determined by two-thirds of
the Continuing Directors, on whatever basis they believe is appropriate, to
be the highest per share price equivalent of the highest price that can be
determined to have been paid at any time by the Related Person for any
share or shares of any class of series of capital stock of the Corporation.
In determining the Highest Per Share Price and Highest Equivalent Price,
all purchases by the Related Person shall be taken into account regardless
of whether the shares were purchased before or after the Related Person
became a Related Person. Also, the Highest Per Share Price and the Highest
Equivalent Price shall include any brokerage commissions, transfer taxes
and soliciting dealers' fees or other value paid by the Related Person with
respect to the shares of capital stock of the Corporation acquire by the
Related Person.
(x) The terms "Affiliate" and "Associate" shall have the same meaning as
in Rule 12b-2 of the General Rules and Regulations under the Securities
Exchange Act of 1934 as on the date of the adoption of this Article FIFTH
by the shareholders of the Corporation.
3. The provisions set forth in this Article FIFTH may not be amended,
altered, changed or repealed in any respect unless such action is approved
by the affirmative vote of the holders of not less than 75% of the
outstanding shares of Voting Stock of the Corporation at a meeting of the
shareholders duly called for the consideration of such amendment,
alteration, change or repeal; provided, however, that if there is a Related
Person, such action must also be approved by the affirmative vote of the
holders of not less than 75% of the outstanding shares of Voting Stock not
held by any Related Person.
Sixth: The duration of the Corporation shall be perpetual.
Seventh: The business and affairs of the Corporation shall be managed by
a Board of Directors. The number of Directors of the Corporation shall be
fixed from time to time by the Bylaws but shall not be fixed at less than
five (5). The number of the Directors may be increased or diminished (but
not to less than five (5)), as may from time to time be provided in the
Bylaws. In case of any increase in the number of Directors the additional
Directors shall be elected as may be provided in the Bylaws, either by the
Directors or by the shareholders.
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The shareholders of the Corporation shall not be entitled to cumulative
voting rights in the election of Directors.
Any officer elected or appointed by the Board of Directors may be removed
at any time by affirmative vote of a majority of the whole Board of
Directors.
The Board of Directors, by the affirmative vote of a majority of the
whole Board, may appoint from the Directors an Executive Committee, of
which a majority shall constitute a quorum, and to such extent as shall be
provided in the Bylaws such Committee shall have and may exercise all or
any of the powers of the Board of Directors, including the power to cause
the seal of the Corporation to be affixed to all papers that may require
it.
The Board of Directors, by the affirmative vote of a majority of the
whole Board, may appoint any other standing committees, and such standing
committees shall have and may exercise such powers as shall be conferred or
authorized by the Bylaws.
The Board of Directors shall have power from time to time to fix and to
determine and to vary the amount of the working capital of the Corporation
and to direct and determine the use and disposition of any surplus or net
profits over and above the capital stock paid in.
Subject always to alteration and repeal by the shareholders, and to
Bylaws made by the shareholders, the Board of Directors may make Bylaws and
from time to time to time may alter, amend or repeal any Bylaws; and any
Bylaws made by the Board of Directors may be so altered or repealed by the
shareholders at any annual meeting or at any special meeting, provided
notice of such proposed alteration or repeal be included in the notice of
the special meeting.
Eighth: 1. Any direct or indirect purchase or other acquisition by the
Corporation of any "Equity Security" of any class or series from any "Five
Percent Holder", if such Five Percent Holder has been the "Beneficial
Owner" of such security for less than two years prior to the earlier of the
date of such purchase or any agreement in respect thereof at a price in
excess of the "Fair Market Value" thereof, shall, except as hereinafter
expressly provided, require the affirmative vote of the holders of at least
a majority of the "Voting Stock" excluding Voting Stock of which such Five
Percent Holder is the Beneficial Owner; provided, however, that the
foregoing majority voting requirement shall not be applicable with respect
to (i) any purchase or other acquisition of an Equity Security made as part
of a tender or exchange offer by the Corporation to purchase Equity
Securities of the same class made on the same terms to all holders of such
security, or (ii) a purchase program effected on the open market and not
the result of a privately-negotiated transaction, or (iii) any optional or
required redemption of an Equity Security pursuant to the terms of such
security.
2. For purposes of this Article EIGHTH:
(i) The term "Equity Security" means an equity security of the
Corporation within the meaning ascribed to such term in Section 3(a)(11) of
the Securities Exchange Act of 1934, as in effect on January 1, 1985.
(ii) The term "Fair Market Value" means, in the case of any Equity
Security, the closing sale price on the trading day immediately preceding
the earlier of the date of any purchase subject to Paragraph 1 of this
Article EIGHTH, or the date of any agreement in respect thereof (such
earlier date, the "Valuation Date"), of a share of such Equity Security on
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the Composite Tape for New York Stock Exchange Listed Stocks, or, if such
security is not quoted on the Composite Tape, on the New York Stock
Exchange, or, if such security is not listed on such Exchange, on the
principal United States securities exchange registered under the Securities
Exchange Act of 1934 on which such security is listed, or, if such security
is not listed on any such Exchange, the closing bid quotation with respect
to such security on the trading day immediately preceding the Valuation
Date on the National Association of Securities Dealers, Inc. Automated
Quotations System or any system then in use, or if no such quotations are
available, the Fair Market Value on the Valuation Date of such security as
determined by the Board of Directors in good faith.
(iii) The term "Person" shall mean any individual, corporation,
partnership or other entity and shall include any group comprised of any
Person and any other Person with whom such Person or any Affiliate or
Associate of such Person has any agreement, arrangement or understanding,
directly or indirectly, for the purpose of acquiring, holding, voting or
disposing of Voting Stock, and any member of such group.
(iv) The term "Five Percent Holder" shall mean and include any Person
which, together with its "Affiliates" and "Associates" becomes the
Beneficial Owner of an aggregate of five percent (5%) or more of any class
of Voting Stock of the Corporation, and any Affiliate or Associate of any
such Person; provided, however, that for purposes of this Article EIGHTH,
including, without limitation, Paragraphs 1 and 4 hereof, the term Five
Percent Holder shall not include (1) any trustee or fiduciary when acting
in such capacity with respect to any employee benefit plan of the
Corporation or a wholly owned subsidiary of the Corporation or (2) any
Person that would have been a Five Percent Holder on December 31, 1984 if
this Article EIGHTH were then in effect.
(v) The terms "Affiliate" and "Associate" shall have the meanings
ascribed to them in Rule 12b-2 of the General Rules and Regulations under
the Securities Exchange Act of 1934, as in effect on May 3, 1984.
(vi) The term "Beneficial Owner" shall mean any person (1) who
beneficially owns shares of Voting Stock within the meaning ascribed in
Rule 13d-3 of the General Rules and Regulations under the Securities
Exchange Act of 1934, as in effect on May 3, 1984, or (2) who has the right
to acquire Voting Stock (whether or not such right is exercisable
immediately) pursuant to any agreement, contract, arrangement or
understanding, or upon the exercise of conversion rights, exchange rights,
warrants or options, or otherwise.
(vii) The term "Voting Stock" shall mean all of the outstanding share of
Common Stock, and the outstanding shares of any class or series of stock
having a preference over the Common Stock as to dividends or upon
liquidation entitled to vote on each matter on which the holders of Common
Stock shall be entitled to vote, and each reference to a vote of a
proportion of shares of Voting Stock shall refer to such proportion of the
votes entitled to be cast by such shares.
(viii) In any determination whether a Person is a Five Percent Holder for
purposes of this Article EIGHTH, the relevant class of securities
outstanding shall be deemed to comprise all such securities deemed owned by
such Person and its Affiliates and Associates through application of
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Paragraph 2(vi)(2) of this Article EIGHTH, but shall not include any other
securities of such class which may be issuable pursuant to any agreement,
contract, arrangement or understanding, or upon exercise of conversion
rights, exchange rights, warrants or options, or otherwise.
3. The Board of Directors shall have the power to interpret all the
provisions of this Article EIGHTH and their application to a particular
transaction, including, without limitation, the power to determine (a)
whether a Person is a Five Percent Holder, (b) the number of shares of
Voting Stock or other Equity Securities of which any Person and its
Affiliates and Associates are the Beneficial Owners, (c) whether a Person
is an Affiliate or Associate of another, and (d) what is Fair Market Value
and whether a price is above Fair Market Value as of a given date. Any
such determination made by the Board of Directors shall be conclusive and
binding to the fullest extent permitted by law.
4. The provisions set forth in this Article EIGHTH may not be amended,
altered, changed or repealed in any respect and no provision inconsistent
herewith shall be adopted unless such action is approved by the affirmative
vote of the holders of at least 75% of the Voting Stock of the Corporation
at any annual meeting of shareholders or at any special meeting duly called
for that purpose, provided notice of such amendment, alteration, change or
repeal or adoption be included in the notice of the special meeting;
provided, however, that if there is a Five Percent Holder such action must
also be approved by the affirmative vote of the holders of at least 75% of
the Voting Stock excluding Voting Stock of which any Five Percent Holder is
the Beneficial Owner.
Ninth: 1. Directors and Officers as Fiduciaries. A Director or Officer
of the Corporation shall stand in a fiduciary relation to the Corporation
and shall perform his or her duties as a Director or officer, including his
or her duties as a member of any committee of the board upon which he or
she may serve, in good faith, in a manner he or she reasonably believes to
be in the best interests of the Corporation, and with such care, including
reasonable inquiry, skill and diligence, as a person of ordinary prudence
would use under similar circumstances. In performing his or her duties, a
Director or officer shall be entitled to rely in good faith on information,
opinions, reports or statements, including financial statements and other
financial data, in each case prepared or presented by one or more officers
of employees of the Corporation whom the Director or officer reasonably
believes to be reliable and competent with respect to the matters
presented, counsel, public accountants or other persons as to matters that
the Director or officer reasonably believes to be within the professional
or expert competence of such person, or a committee of the Board of
Directors upon which the Director or officer does not serve, duly
designated in accordance with law, as to matters within its designated
authority, which committee the Director or officer reasonably believes to
merit confidence. A Director or officer shall not be considered to be
acting in good faith if he or she has knowledge concerning the matter in
question that would cause his or her reliance to be unwarranted. Absent
breach of fiduciary duty, lack of good faith or self-dealing, actions taken
as a Director or officer of the Corporation or any failure to take any
action shall be presumed to be in the best interests of the Corporation.
2. Personal Liability of Directors. A Director of the Corporation shall not
be personally liable, as such, for monetary damages (including without
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<PAGE> 14
limitation, any judgment, amount paid in settlement, penalty, punitive
damages or expense of any nature (including, without limitation, attorneys'
fees and disbursements)) for any action taken, or any failure to take any
action, unless (1) the Director has breached the duties of his or her
office or has failed to perform his or her duties as a Director in good
faith, in a manner he or she reasonably believed to be in the best
interests of the Corporation and with such care, including reasonable
inquiry, skill and diligence, as a person of ordinary prudence would use
under similar circumstances; and (2) the breach or failure to perform
constitutes self-dealing, willful misconduct or recklessness.
3. Personal Liability of Officers. An officer of the Corporation shall not
be personally liable, as such, to the Corporation or its shareholders for
monetary damages (including without limitation, any judgment, amount paid
in settlement, penalty, punitive damages or expense or any nature
(including, without limitation, attorneys' fees and disbursements)) for any
action taken, or any failure to take any action, unless (1) the officer has
breached the duties of his or her office or has failed to perform his or
her duties as an officer in good faith, in a manner he or she reasonably
believed to be in the best interests of the Corporation and with such care,
including reasonable inquiry, skill and diligence, as a person of ordinary
prudence would use under similar circumstances; and (2) the breach or
failure to perform constitutes self-dealing, willful misconduct or
recklessness.
Tenth: Statement with Respect to Continuation of Procedure. Effective
October 1, 1989:
1. On the petition of a qualified shareholder, as defined in Section 107(f)
of the General Association Act of 1988, which petition shall be directed
to, and filed with the Board of Directors, the entire Board of Directors,
or a class of the Board, where the Board is classified with respect to the
power to elect Directors (which term includes Directors elected for terms
of more than one (1) year and Directors elected by holders of specified
classes or series of shares), or any individual Director may be removed
from office without assigning any cause by the vote of shareholders
entitled to cast at least a majority of the votes which all shareholders
would be entitled to cast at any annual election of Directors or of such
class of Directors.
2. Special meetings of the shareholders may be called at any time by a
qualified shareholder as defined in Section 107(f) of the General
Association Act of 1988.
3. Every amendment to the articles shall be proposed by either the Board of
Directors by the adoption of a resolution setting forth the proposed
amendment or by petition of any qualified shareholder as defined in Section
107(f) of the General Association Act of 1988, setting forth the proposed
amendment, which petition shall be directed to, and filed with, the Board
of Directors.
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Approved and Filed: August 4, 1971
Amended and Restated: March 30, 1990
Amended: December 23, 1992
I, Secretary of Sun Company,
Inc. hereby certify that the foregoing is a true and correct copy of the
Articles of Incorporation of Sun Company, Inc.
Date:
Secretary
- -----------------------------------
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<PAGE> 1
EXHIBIT 10.13
AMENDMENT TO THE
SUN COMPANY, INC. EXECUTIVE LONG-TERM STOCK INVESTMENT PLAN
(effective November 7, 1991)
8.7 Definitions.
Subsection (c), "Fair market value" is amended to read (with new language
underlined):
"Fair market value" as of any date and in respect of any share of
Common Stock means the opening price on such date of a share of Common
-------
Stock (which price shall be the closing price on the previous trading
--------------------------------------------------------------
day of a share of Common Stock on the New York Stock Exchange
-------------------------------------------------------------
Composite Transactions as reflected in the consolidated trading tables
----------------------
of the Wall Street Journal or any other publication selected by the
Committee), provided that, if shares of Common Stock shall not have
been traded on the New York Stock Exchange for more than 10 days
immediately preceding such date or if deemed appropriate by the
Committee for any other reason, the fair market value of shares of
Common Stock shall be as determined by the Committee in such other
manner as it may deem appropriate. In no event shall the fair market
value of any share of Common Stock be less than its par value.
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<PAGE> 2
SUN COMPANY, INC.
EXECUTIVE LONG-TERM STOCK INVESTMENT PLAN
ARTICLE I
General
1.1 Purpose. The purposes of this Sun Company, Inc. Executive Long-
Term Stock Investment Plan (the "Plan") are to: (1) better align the
interests of shareholders and management of Sun Company, Inc. and its
subsidiaries and affiliates (collectively referred to as the "Company") by
creating a direct linkage between participants' rewards and shareholders'
gains; (2) provide management with an equity ownership in Sun Company, Inc.
commensurate with Company performance, as reflected in increased
shareholder value; (3) maintain competitive compensation levels; and (4)
provide an incentive to management for continuous employment with the
Company.
1.2 Administration. (a) The Plan shall be administered by a
Committee of disinterested persons appointed by the Board of Directors of
Sun Company, Inc. (the "Committee"), as constituted from time to time. The
Committee shall consist of at least two members of the Board of Directors.
During the year prior to commencement of service on the Committee, the
Committee members will not have participated in, and while serving on the
Committee, such members shall not be eligible for selection as persons to
whom stock may be allocated or to whom stock options or stock appreciation
rights may be granted under the Plan or any other discretionary plan of the
Company under which participants are entitled to acquire stock, stock
options or stock appreciation rights of Sun Company, Inc.
(b) The Committee shall have the authority, in its sole discretion
and from time to time to: (i) designate the employees or classes of
employees eligible to participate in the Plan; (ii) grant awards provided
in the Plan in such form and amount as the Committee shall determine; (iii)
impose such limitations, restrictions and conditions upon any such award as
the Committee shall deem appropriate; and (iv) interpret the Plan, adopt,
amend and rescind rules and regulations relating to the Plan, and make all
other determinations and take all other action necessary or advisable for
the implementation and administration of the Plan.
(c) Decisions and determinations of the Committee on all matters
relating to the Plan shall be in its sole discretion and shall be
conclusive. No member of the Committee shall be liable for any action
taken or decision made in good faith relating to the Plan or any award
thereunder.
1.3 Eligibility for Participation. Participants in the Plan shall be
selected by the Committee from the executive officers and other key
employees of the Company who occupy responsible managerial or professional
positions and who have the capability of making a substantial contribution
to the success of the Company. In making this selection and in determining
the form and amount of awards, the Committee shall consider any factors
deemed relevant, including the individual's functions, responsibilities,
value of services to the Company and past and potential contributions to
the Company's profitability and sound growth.
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<PAGE> 3
1.4 Types of Awards Under Plan. Awards under the Plan may be in the
form of any one or more of the following:
(i) Stock Options, as described in Article II;
(ii) Incentive Stock Options, as described in Article III;
(iii) Reload Options (referred to and generally described as "Equity
options"), as described in Article IV;
(iv) Alternate Appreciation Rights, as described in Article V;
(v) Limited Rights, as described in Article VI; and/or
(vi) Restricted Stock Units, as described in Article VII.
1.5 Aggregate Limitation on Awards. (a) Shares of stock
which may be issued under the Plan shall be authorized and unissued or
treasury shares of Common Stock of Sun Company, Inc. ("Common Stock"). The
maximum number of shares of Common Stock which may be issued under the Plan
shall be 5.8 million.
(b) For purposes of calculating the maximum number of shares of
Common stock which may be issued under the Plan: (i) all the shares issued
(including the shares, if any, withheld for tax withholding requirements)
shall be counted when cash is used as full payment for shares issued upon
exercise of a Stock Option, Incentive Stock Option or Reload option; (ii)
only the shares issued (including the shares, if any, withheld for tax
withholding requirements) as a result of an exercise of Alternate
Appreciation Rights shall be counted; and (iii) only the net shares issued
(including the shares, if any, withheld for tax withholding requirements)
shall be counted when shares of Common Stock are used as full or partial
payment for shares issued upon exercise of a Stock Option, Incentive Stock
Option or Reload Option.
(c) In addition to shares of Common Stock actually issued pursuant to
the exercise of Stock Options, Incentive Stock Options, Reload Options or
Alternate Appreciation Rights, there shall be deemed to have been issued a
number of shares equal to the sum of (i) the number of shares of Common
Stock in respect of which Limited Rights (as described in Article VI) shall
have been exercised, and (ii) the number of Restricted Stock Units (as
described in Article VII), the value of which the Company shall have paid
under the Plan.
(d) Shares tendered by a participant as payment for shares issued
upon exercise of a Stock Option, Incentive Stock Option or Reload Option
shall be available for issuance under the Plan. Any shares of Common Stock
subject to a Stock Option, Incentive Stock Option or Reload Option which
for any reason is terminated unexercised or expires shall again be
available for issuance under the Plan, but shares subject to a Stock
Option, Incentive Stock Option or Reload Option which are not issued as a
result of the exercise of Limited Rights shall not again be available for
issuance under the Plan.
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<PAGE> 4
1.6 Effective Date and Term of Plan. (a) The Plan shall become
effective on the date approved by the holders of a majority of the shares
of Common Stock voting at the 1991 Annual Meeting of Shareholders of Sun
Company, Inc.
(b) No awards shall be made under the Plan after the last day of the
Company's 1996 fiscal year provided, however, that the Plan and all awards
made under the Plan prior to such date shall remain in effect until such
awards have been satisfied or terminated in accordance with the Plan and
the terms of such awards.
1.7 Prior Plan. Effective on December 31, 1991, no further awards
shall be made under the Sun Company, Inc. Long-Term Incentive Plan adopted
in May, 1986 provided, however, that any rights theretofore granted under
that plan shall not be affected.
ARTICLE II
Stock Options
2.1 Award of Stock Options. The Committee may from time to time, and
subject to the provisions of the Plan and such other terms and conditions
as the Committee may prescribe, grant to any participant in the Plan one or
more options to purchase for cash or shares the number of shares of Common
Stock ("Stock Options") allotted by the Committee. The date a Stock Option
is granted shall mean the date selected by the Committee as of which the
Committee allots a specific number of options to a participant pursuant to
the Plan.
2.2 Stock Option Agreements. The grant of a Stock Option shall be
evidenced by a written Stock Option Agreement, executed by the Company and
the holder of a Stock Option (the "optionee"), stating the number of shares
of Common Stock subject to the Stock Option evidenced thereby, and in such
form as the Committee may from time to time determine.
2.3 Stock Option Price. The option price per share of Common Stock
deliverable upon the exercise of a Stock Option shall be 100% of the fair
market value of a share of Common Stock on the date the Stock Option is
granted.
2.4 Term and Exercise. Each Stock Option shall be fully exercisable
six months from the date of its grant and unless a shorter period is
provided by the Committee or by another Section of this Plan, may be
exercised during a period of ten years from the date of grant thereof (the
"option term"). No Stock Option shall be exercisable after the expiration
of its option term.
2.5 Manner of Payment. Each Stock Option Agreement shall set forth
the procedure governing the exercise of the Stock Option granted
thereunder, and shall provide that, upon such exercise in respect of any
shares of Common Stock subject thereto, the optionee shall pay to the
Company, in full, the option price for such shares with cash or with Common
Stock. All shares of Common Stock issued under the Sun Company, Inc.
Executive Long-Term Incentive Plan, the Sun Company, Inc. Long-Term
Incentive Plan or this Plan must be held at least six months before they
may be used as payment of the option price.
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<PAGE> 5
2.6 Restrictions on Certain Shares. As soon as practicable after
receipt of payment, the Company shall deliver to the optionee a certificate
or certificates for such shares of Common Stock. The optionee shall become
a shareholder of the Company with respect to Common Stock represented by
share certificates so issued and as such shall be fully entitled to receive
dividends, to vote and to exercise all other rights of a shareholder.
Notwithstanding the foregoing, a number of shares of Common Stock received
upon the exercise of the options shall be subject to certain restrictions.
The number of shares subject to the restrictions shall be equal to the
total number of shares received in the exercise of the options minus (i)
the number of shares which have a fair market value on the date of the
option exercise equal to the total amount paid for all the shares received
in the option exercise and (ii) the number of shares which have a fair
market value on the date of the option exercise equal to the applicable
federal, state and local withholding tax on the total option exercise and
any brokerage commission or interest charges, if applicable, to the
exercise. The restrictions on these shares of Common Stock shall be as
follows:
(a) The optionee shall be prohibited from the sale, exchange,
transfer, pledge, hypothecation, gift or other disposition of
such shares of Common Stock until the earlier of the expiration
of the option term or termination of the optionee's employment
for any reason. Notwithstanding the foregoing, six months after
the exercise of the option, such shares of Common Stock may be
used as payment of the option price of shares issued upon the
exercise of other Stock Options. However, all such shares issued
will be restricted shares.
(b) The restrictions shall apply to any new, additional or different
securities the optionee may become entitled to receive with
respect to such shares by virtue of a stock split or stock
dividend or any other change in the corporate or capital
structure of the Company.
(c) Until such time as the restrictions hereunder lapse, the share
certificate representing such shares shall contain a restrictive
legend evidencing said restrictions. Alternatively, the optionee
shall be required to deposit the share certificate with the
Company or its agent, endorsed in blank or accompanied by a duly
executed irrevocable stock power or other instrument of transfer.
2.7 Death of Optionee. (a) Upon the death of the
optionee, any rights to the extent exercisable on the date of death may be
exercised by the optionee's estate, or by a person who acquires the right
to exercise such Stock Option by bequest or inheritance or by reason of the
death of the optionee, provided that such exercise occurs within both the
remaining option term of the Stock Option and one year after the optionee's
death.
(b) The provisions of this Section shall apply notwithstanding the
fact that the optionee's employment may have terminated prior to death, but
only to the extent of any Stock Options exercisable on the date of death.
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<PAGE> 6
2.8 Retirement or Disability. Upon termination of the optionee's
employment by reason of retirement or permanent disability (as each is
determined by the Committee), the optionee may, within 36 months from the
date of termination, exercise any Stock Options to the extent such options
are exercisable during such 36-month period.
2.9 Termination for Other Reasons. Except as provided in Sections
2.7 and 2.8, or except as otherwise determined by the Committee, all Stock
Options shall terminate upon the termination of the optionee's employment.
2.10 Effect of Exercise. The exercise of any Stock Option shall
cancel that number of related Alternate Appreciation Rights and/or Limited
Rights, if any, which is equal to the number of shares of Common Stock
purchased pursuant to said options.
ARTICLE III
Incentive Stock options
3.1 Award of Incentive Stock Options. The Committee may, from time
to time and subject to the provisions of the Plan and such other terms and
conditions as the Committee may prescribe, grant to any participant in the
Plan one or more "incentive stock options" (intended to qualify as such
under the provisions of Section 422 of the Internal Revenue Code of 1986,
as amended ("Incentive Stock Options")) to purchase for cash or shares the
number of shares of Common Stock allotted by the Committee. The date an
Incentive Stock Option is granted shall mean the date selected by the
Committee as of which the Committee allots a specific number of options to
a participant pursuant to the Plan. Notwithstanding the foregoing,
Incentive Stock Options shall not be granted to any owner of 10% or more of
the total combined voting power of the Company and its subsidiaries.
3.2 Incentive Stock Option Agreements. The grant of an Incentive
Stock Option shall be evidenced by a written Incentive Stock Option
Agreement, executed by the Company and the holder of an Incentive Stock
Option (the "optionee"), stating the number of shares of Common Stock
subject to the Incentive Stock Option evidenced thereby, and in such form
as the Committee may from time to time determine.
3.3 Incentive Stock Option Price. The option price per share of
Common Stock deliverable upon the exercise of an Incentive Stock Option
shall be 100% of the fair market value of a share of Common Stock on the
date the Incentive Stock Option is granted.
3.4 Term and Exercise. Each Incentive Stock Option shall be fully
exercisable six months from the date of its grant and unless a shorter
period is provided by the Committee or another Section of this Plan, may be
exercised during a period of ten years from the date of grant thereof (the
"option term") . No Incentive Stock Option shall be exercisable after the
expiration of its option term.
3.5 Maximum Amount of Incentive Stock Option Grant. The aggregate
fair market value (determined on the date the option is granted) of Common
Stock subject to an Incentive Stock Option granted to an optionee by the
Committee in any calendar year shall not exceed $100,000.
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<PAGE> 7
3.6 Death of Optionee. (a) Upon the death of the optionee, any
Incentive Stock Option exercisable on the date of death may be exercised by
the optionee's estate or by a person who acquires the right to exercise
such Incentive Stock Option by bequest or inheritance or by reason of the
death of the optionee, provided that such exercise occurs within both the
remaining option term of the Incentive Stock Option and one year after the
optionee's death.
(b) The provisions of this Section shall apply notwithstanding the
fact that the optionee's employment may have terminated prior to death, but
only to the extent of any Incentive Stock Options exercisable on the date
of death.
3.7 Retirement or Disability. Upon the termination of the optionee's
employment by reason of permanent disability or retirement (as each is
determined by the Committee), the optionee may, within 36 months from the
date of such termination of employment, exercise any Incentive Stock
Options to the extent such Incentive Stock Options are exercisable during
such 36-month period. Notwithstanding the foregoing, the tax treatment
available pursuant to Section 422 of the Internal Revenue Code of 1986 upon
the exercise of an Incentive Stock option will not be available to an
optionee who exercises any Incentive Stock Options more than (i) 12 months
after the date of termination of employment due to permanent disability or
(ii) three months after the date of termination of employment due to
retirement.
3.8 Termination for Other Reasons. Except as provided in Sections
3.6 and 3.7 or except as otherwise determined by the Committee, all
Incentive Stock Options shall terminate upon the termination of the
optionee's employment.
3.9 Applicability of Stock Options Sections. Sections 2.5, Manner of
Payment; 2.6, Restrictions on Certain Shares; and 2.10, Effect of Exercise,
applicable to Stock Options, shall apply equally to Incentive Stock
Options. Said Sections are incorporated by reference in this Article III
as though fully set forth herein.
ARTICLE IV
Reload Options
4.1 Authorization of Reload Options. Concurrently with the award of
Stock Options and/or the award of Incentive Stock Options to any
participant in the Plan, the Committee may authorize reload options
("Reload Options") to purchase for cash or shares a number of shares of
Common Stock. The number of Reload Options (which are referred to and
generally described as "Equity Options") shall equal (i) the number of
shares of Common Stock used to exercise the underlying Stock Options or
Incentive Stock Options and (ii) to the extent authorized by the Committee,
the number of shares of Common Stock used to satisfy any tax withholding
requirement incident to the exercise of the underlying Stock Options or
Incentive Stock Options. The grant of a Reload Option will be effected
upon the exercise of underlying Stock Options, Incentive Stock Options or
Reload Options through the use of shares of Common Stock held by the
optionee for at least 12 months. Notwithstanding the fact that the
underlying option may be an Incentive Stock Option, a Reload Option is not
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<PAGE> 8
intended to qualify as an "incentive stock option" under Section 422 of the
Internal Revenue Code of 1986.
4.2 Reload Option Amendment. Each Stock Option Agreement and
Incentive Stock Option Agreement shall state whether the Committee has
authorized Reload Options with respect to the underlying Stock Options
and/or Incentive Stock Options. Upon the exercise of an underlying Stock
Option, Incentive Stock Option or other Reload Option, the Reload Option
will be evidenced by an amendment to the underlying Stock Option Agreement
or Incentive Stock Option Agreement.
4.3 Reload Option Price. The option price per share of Common Stock
deliverable upon the exercise of a Reload Option shall be the fair market
value of a share of Common Stock on the date of grant of the Reload option.
4.4 Term and Exercise. Each Reload Option is fully exercisable six
months from the effective date of grant. The term of each Reload Option
shall be equal to the remaining option term of the underlying Stock Option
and/or Incentive Stock Option.
4.5 Termination of Employment. No additional Reload Options shall be
granted to optionees when Stock Options, Incentive Stock Options and/or
Reload Options are exercised pursuant to the terms of this Plan following
termination of the optionee's employment.
4.6 Applicability of Stock Options Sections. Sections 2.5, Manner of
Payment; 2.6, Restrictions on Certain Shares; 2.7, Death of Optionee; 2.8,
Retirement or Disability; 2.9, Termination for Other Reasons; and 2.10,
Effect of Exercise, applicable to Stock Options, shall apply equally to
Reload Options. Said Sections are incorporated by reference in this
Article IV as though fully set forth herein.
ARTICLE V
Alternate Appreciation Rights
5.1 Award of Alternate Appreciation Rights. Concurrently with or
subsequent to the award of any Stock Option, Incentive Stock Option or
Reload Option to purchase one or more shares of Common Stock, the Committee
may, subject to the provisions of the Plan and such other terms and
conditions as the Committee may prescribe, award to the optionee with
respect to each share of Common Stock, a related alternate appreciation
right ("Alternate Appreciation Right"), permitting the optionee to be paid
the appreciation on the option in lieu of exercising the option.
5.2 Alternate Appreciation Rights Agreement. Alternate Appreciation
Rights shall be evidenced by written agreements in such form as the
Committee may from time to time determine.
5.3 Exercise. An optionee who has been granted Alternate
Appreciation Rights may, from time to time, in lieu of the exercise of an
equal number of options, elect to exercise one or more Alternate
Appreciation Rights and thereby become entitled to receive from the Company
payment in Common Stock the number of shares determined pursuant to
Sections 5.4 and 5.5. Alternate Appreciation Rights shall be exercisable
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<PAGE> 9
only to the same extent and subject to the same conditions as the options
related thereto are exercisable, as provided in this Plan. The Committee
may, in its discretion, prescribe additional conditions to the exercise of
any Alternate Appreciation Rights.
5.4 Amount of Payment. The amount of payment to which an optionee
shall be entitled upon the exercise of each Alternate Appreciation Right
shall be equal to 100% of the amount, if any, by which the fair market
value of a share of Common Stock on the exercise date exceeds the fair
market value of a share of Common Stock on the date the option related to
said Alternate Appreciation Right was granted.
5.5 Form of Payment. The number of shares to be paid shall be
determined by dividing the amount of payment determined pursuant to Section
5.4 by the fair market value of a share of Common Stock on the exercise
date of such Alternate Appreciation Rights. As soon as practicable after
exercise, the Company shall deliver to the optionee a certificate or
certificates for such shares of Common Stock. All such shares shall be
issued with the rights and restrictions specified in Section 2.6.
5.6 Effect of Exercise. The exercise of any Alternate Appreciation
Rights shall cancel an equal number of Stock Options, Incentive Stock
Options, Reload Options and Limited Rights, if any, related to said
Alternate Appreciation Rights.
5.7 Retirement or Disability. Upon termination of the optionee's
employment (including employment as a director of the Company after an
optionee terminates employment as an officer or key employee of the
Company) by reason of permanent disability or retirement (as each is
determined by the Committee), the optionee may, within six months from the
date of such termination, exercise any Alternate Appreciation Rights to the
extent such Alternate Appreciation Rights are exercisable during such six-
month period.
5.8 Death of Optionee or Termination for Other Reasons. Except as
provided in Section 5.7. or except as otherwise determined by the
Committee, all Alternate Appreciation Rights shall terminate upon the
termination of the optionees employment or upon the death of the optionee.
ARTICLE VI
Limited Rights
6.1 Award of Limited Rights. Concurrently with or subsequent to the
award of any Stock Option, Incentive Stock Option, Reload Option or
Alternate Appreciation Right, the Committee may, subject to the provisions
of the Plan and such other terms and conditions as the Committee may
prescribe, award to the optionee with respect to each share of Common
Stock, a related limited right permitting the optionee, during a specified
limited time period, to be paid the appreciation on the option in lieu of
exercising the option ("Limited Right").
6.2 Limited Rights Agreement. Limited Rights granted under the Plan
shall be evidenced by written agreements in such forms as the Committee may
from time to time determine.
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6.3 Exercise Period. Limited Rights are exercisable in full for a
period of seven months following the date of a Change in Control of Sun
Company, Inc. (the "Exercise Period"); provided, however, that Limited
Rights may not be exercised under any circumstances until the expiration of
the six-month period following the date of grant.
As used in the Plan, a "Change in Control" shall be deemed to have
occurred if (a) individuals who were directors of Sun Company, Inc.
immediately prior to a Control Transaction shall cease, within one year of
such Control Transaction, to constitute a majority of the Board of
Directors of Sun Company, Inc. (or of the Board of Directors of any
successor to Sun Company, Inc. or to all or substantially all of its
assets), or
(b) any entity, person or Group other than Sun Company, Inc. or a
subsidiary of Sun Company, Inc. acquires shares of Sun Company, Inc. in a
transaction or series of transactions that result in such entity, person or
Group directly or indirectly owning beneficially 51% or more of the
outstanding shares.
As used herein, "Control Transaction" shall be (i) any tender offer
for or acquisition of capital stock of Sun Company, Inc., (ii) any merger,
consolidation, or sale of all or substantially all of the assets of Sun
Company, Inc. which has been approved by the shareholders, (iii) any
contested election of directors of Sun Company, Inc. or (iv) any
combination of the foregoing which results in a change in voting power
sufficient to elect a majority of the Board of Directors of Sun Company,
Inc. As used herein, "Group" shall mean persons who act in concert as
described in Sections 13(d)(3) and/or 14(d)(2) of the Securities Exchange
Act of 1934, as amended.
6.4 Amount of Payment. The amount of payment to which an optionee
shall be entitled upon the exercise of each Limited Right shall be equal to
100% of the amount, if any, which is equal to the difference between the
price per share of Common Stock covered by the related option on the date
the option was granted and the market price of a share of such Common
Stock. Market price is defined to be the greater of (i) the highest price
per share of Common Stock paid in connection with any Change in Control and
(ii) the highest price per share of Common Stock reflected in the
consolidated trading tables of the Wall Street Journal (presently the New
York Stock Exchange Composite Transactions quotations) during the 60-day
period prior to the Change in Control.
6.5 Form of Payment. Payment of the amount to which an optionee is
entitled upon the exercise of Limited Rights, as determined pursuant to
Section 6.4, shall be made solely in cash.
6.6 Effect of Exercise. If Limited Rights are exercised, the Stock
Options, Incentive Stock Options, Reload Options and Alternate Appreciation
Rights, if any, related to such Limited Rights cease to be exercisable to
the extent of the number of shares with respect to which the Limited Rights
were exercised. Upon the exercise or termination of the options, and
Alternate Appreciation Rights, if any, related to such Limited Rights, the
Limited Rights granted with respect thereto terminate to the extent of the
number of shares as to which the related options and Alternate Appreciation
Rights were exercised or terminated.
<PAGE>
<PAGE> 11
6.7 Retirement or Disability. Upon termination of the optionees
employment (including employment as a director of this Company after an
optionee terminates employment as an officer or key employee of this
Company) by reason of permanent disability or retirement (as each is
determined by the Committee), the optionee may, within six months from the
date of termination, exercise any Limited Right to the extent such Limited
Right is exercisable during such six-month period.
6.8 Death of Optionee or Termination for Other Reasons. Except as
provided in Sections 6.7 and 6.9, or except as otherwise determined by the
Committee, all Limited Rights granted under the Plan shall terminate upon
the termination of the optionee's employment or upon the death of the
optionee.
6.9 Termination Related to a Change in Control. The requirement that
an optionee be terminated by reason of retirement or permanent disability
or be employed by the Company at the time of exercise pursuant to Sections
6.7 and 6.8 respectively, is waived during the Exercise Period as to any
optionee who (i) was employed by the Company at the time of the Change in
Control and (ii) is subsequently terminated by the Company other than for
just cause or who voluntarily terminates if such termination was the result
of a good faith determination by the optionee that as a result of the
Change in Control he is unable to effectively discharge his present duties
or the duties of the position which he occupied just prior to the Change in
Control. As used herein "just cause" shall mean willful misconduct or
dishonesty or conviction of or failure to contest prosecution for a felony,
or excessive absenteeism unrelated to illness.
ARTICLE VII
Restricted Stock Units
7.1 Award of Restricted Stock Units. The Committee may from time to
time, and subject to the provisions of the Plan and such other terms and
conditions as the Committee may prescribe, grant to any participant
restricted rights to receive either cash or shares of Common Stock
("Restricted Stock Units"). At the time it grants any Restricted Stock
Units, the Committee shall determine whether the payment of such Restricted
Stock Units shall be conditioned upon either (i) the participant's
continued employment with the Company throughout a stated period; or (ii)
the attainment of certain predetermined performance targets during a stated
period.
7.2 Restricted Stock Unit Agreements. Restricted Stock Units granted
under the Plan shall be evidenced by written agreements in such form as the
Committee may from time to time determine.
7.3 Length of Restriction Period. Upon making an award, the
Committee shall determine (and the Restricted Stock Unit Agreement shall
state) the length of the applicable period during which employment must be
maintained or certain performance targets must be attained (the
"Restriction Period"). Restriction Periods will normally be from three to
five years; however, the Committee may establish other time periods in its
sole discretion.
<PAGE>
<PAGE> 12
7.4 Number of Restricted Stock Units. Upon making an award, the
Committee shall determine (and the Restricted Stock Unit Agreement shall
state) the number of Restricted Stock Units granted. The initial number of
Restricted Stock Units granted may be adjusted by a performance factor, in
accordance with Section 7.8, to be applied at the conclusion of the
Restriction Period to determine the final number of Restricted Stock Units
to be paid.
7.5 Dividend Equivalent. At the Committee's discretion, a holder of
Restricted Stock Units will be entitled to receive payment from the Company
in an amount equal to each cash dividend ("Dividend Equivalent") the
Company would have paid to such holder had he, on the record date for
payment of such dividend, owned of record shares of Common Stock equal to
the number of Restricted Stock Units which had been awarded to such holder
as of the close of business on such record date. Payment of the Dividend
Equivalent is expressly conditioned on continued employment with the
Company at the time of payment. Each such payment shall be made by the
Company on the payment date of the cash dividend in respect of which it is
to be made, or as soon as practicable thereafter.
7.6 Payment of Restricted Stock Units. (a) Payment in respect of
Restricted Stock Units conditioned solely upon the participant's continued
employment with the Company throughout the Restriction Period shall be made
within 90 days after the Restriction Period for such units has ended.
(b) Payment in respect of Restricted Stock Units conditioned upon the
attainment of performance targets shall be made to the holder thereof
within 90 days after the Restriction Period for such units has ended, but
only to the extent the Committee determines that the applicable performance
targets have been met and subject to any adjustment made to the number of
Restricted Stock Units which shall be paid, pursuant to Section 7.8(b).
7.7 Form of Payment. Payment for Restricted Stock Units shall be
made in cash, shares of Common Stock or partly in cash and partly in Common
Stock as the Committee shall determine in its sole discretion. To the
extent that payment is made in cash, the amount shall be determined by
multiplying the number of Restricted Stock Units paid out by the fair
market value of a share of Common Stock as of the close of business on the
day after the Restriction Period has ended. To the extent that payment is
made in Common Stock, the number of shares paid shall be equal to the
number of Restricted Stock Units so paid out.
7.8 Performance Targets. (a) Upon the award of Restricted Stock
Units, the Committee may establish (and the Restricted Stock Unit Agreement
shall state) the performance targets to be attained within the Restriction
Period as a condition of such units being paid out. Performance targets
may be based entirely on each participant's business unit goals, or
partially on business unit goals and partially on corporate goals, or
entirely on corporate goals. Goals may include qualitative as well as
quantitative measures. Performance targets may be adjusted during the
Restriction Period, at the Committee's sole discretion, to reflect
extraordinary events beyond management's control.
<PAGE>
<PAGE> 13
(b) Attainment by the participant of performance targets in respect
of a Restriction Period will result in 100% of the Restricted Stock Units
being paid out. Attainment of performance below the performance targets in
respect of a Restriction Period shall result in a proportionate amount of
the value of the units (on a scale from 0 to 100%) being paid out, as
determined by the Committee.
7.9 Termination of Employment. Except as provided in Sections 7.10
and 7.11, or except as otherwise determined by the Committee, all
Restricted Stock Units granted to a participant under the Plan shall
terminate upon termination of the participant's employment with the Company
prior to the end of the Restriction Period applicable to such Restricted
Stock Units, and in such event the participant shall not be entitled to
receive any payment in respect thereof.
7.10 Death, Disability or Retirement. In the event that the
employment of a holder of Restricted Stock Units shall terminate during a
Restriction Period by reason of death, permanent disability or retirement
(as disability and retirement are determined by the Committee), such holder
shall be entitled to receive upon the expiration of the Restriction Period,
payment in respect of said Restricted Stock Units, as adjusted. Such units
shall be adjusted by multiplying the amount thereof by a fraction, the
numerator of which shall be the number of full and partial calendar months
between the date of award of the Restricted Stock Units and the date that
employment terminated, and the denominator of which shall be the number of
full and partial calendar months from the date of award to the end of the
Restriction Period.
7.11 Acceleration of Restricted Stock Units. (a) Notwithstanding any
provisions to the contrary in Restricted Stock Unit Agreements or the
provisions of Sections 7.1 through 7.8, if there is a Change in Control of
the Company all outstanding Restricted Stock Units shall be payable in
shares of Common Stock, regardless of whether the applicable Restriction
Period has expired and regardless of whether the applicable performance
targets have been met.
(b) In the event of the occurrence of a Change in Control, the holder
of Restricted Stock Units shall be entitled to receive payment thereunder
within 90 days following the date of occurrence of such event.
(c) If a participant was employed by the Company at the time of the
Change in Control and is subsequently terminated by the Company other than
for just cause or who voluntarily terminates if such termination is the
result of a good faith determination by the participant that as a result of
the Change in Control he is unable to effectively discharge the duties of
the position which he occupied just prior to the Change in Control, within
the 90-day period as described in subsection (b), he shall be eligible to
receive payment of Restricted Stock Units as provided in subsections (a)
and (b). As used herein, "just cause" shall mean willful misconduct or
dishonesty or conviction of or failure to contest prosecution for a felony,
or excessive absenteeism unrelated to illness.
<PAGE>
<PAGE> 14
ARTICLE VIII
Miscellaneous
8.1 General Restriction. Each award under the Plan shall be subject
to the requirement that, if at any time the Committee shall determine that
(i) the listing, registration or qualification of the shares of Common
Stock subject or related thereto upon any securities exchange or under any
state or Federal law, or (ii) the consent or approval of any government
regulatory body, or (iii) an agreement by the recipient of an award with
respect to the disposition of shares of Common Stock, is necessary or
desirable as a condition of, or in connection with, the granting of such
award or the issue or purchase of shares of Common Stock thereunder, such
award may not be consummated in whole or in part unless such listing,
registration, qualification, consent, approval or agreement shall have been
effected or obtained free of any conditions not acceptable to the
Committee.
8.2 Non-Assignability. No award under the Plan shall be assignable
or transferable by the recipient thereof, except by will or by the laws of
descent and distribution. During the life of the recipient, such award
shall be exercisable only by such person or by such person's guardian or
legal representative.
8.3 Withholding Taxes. Whenever the Company proposes or is required
to issue or transfer shares of Common Stock under the Plan, the Company
shall have the right to require the participant to remit to the Company an
amount sufficient to satisfy any Federal, state and/or local withholding
tax requirements prior to the delivery of any certificate or certificates
for such shares. Alternatively, the Company may issue or transfer such
shares of Common Stock net of the number of shares sufficient to satisfy
the withholding tax requirements. For withholding tax purposes, the shares
of Common Stock shall be valued on the date the withholding obligation is
incurred.
8.4 Right to Terminate Employment. Nothing in the Plan or in any
agreement entered into pursuant to the Plan shall confer upon any
participant the right to continue in the employment of the Company or
effect any right which the Company may have to terminate the employment of
such participant.
8.5 Non-Uniform Determinations. The Committee's determinations under
the Plan (including without limitation determinations of the persons to
receive awards, the form, amount and timing of such awards, the terms and
provisions of such awards and the agreements evidencing same) need not be
uniform and may be made by it selectively among persons who receive, or are
eligible to receive, awards under the Plan, whether or not such persons are
similarly situated.
8.6 Rights as a Shareholder. The recipient of any award under the
Plan shall have no rights as a shareholder with respect thereto unless and
until certificates for shares of Common Stock are issued to such recipient.
8.7 Definitions. In this Plan the following definitions shall apply:
(a) "Subsidiary" means any corporation of which, at the time more than 50%
of the shares entitled to vote generally in an election of directors are
owned directly or indirectly by Sun Company, Inc. or any subsidiary
thereof.
<PAGE>
<PAGE> 15
(b) "Affiliate" means any person or entity which directly, or
indirectly through one or more intermediaries, controls, is controlled by,
or is under common control with Sun Company, Inc.
(c) "Fair market value" as of any date and in respect of any share of
Common Stock means the closing price on such date or on the next business
day, if such date is not a business day, of a share of Common Stock
reflected in the consolidated trading tables of The Wall Street Journal
(presently the New York Stock Exchange Composite Transactions quotations)
or any other publication selected by the Committee, provided that, if
shares of Common Stock shall not have been traded on the New York Stock
Exchange for more than 10 days immediately preceding such date or if deemed
appropriate by the Committee for any other reason, the fair market value of
shares of Common Stock shall be as determined by the Committee in such
other manner as it may deem appropriate. In no event shall the fair market
value of any share of Common Stock be less than its par value.
(d) "Option" means Stock Option, Incentive Stock Option or Reload
Option.
(e) "Option price" means the purchase price per share of Common Stock
deliverable upon the exercise of a Stock Option, Incentive Stock option or
Reload Option.
8.8 Leaves of Absence. The Committee shall be entitled to make such
rules, regulations and determinations as it deems appropriate under the
Plan in respect of any leave of absence taken by the recipient of any
award. Without limiting the generality of the foregoing, the Committee
shall be entitled to determine (i) whether or not any such leave of absence
shall constitute a termination of employment within the meaning of the Plan
and (ii) the impact, if any, of any such leave of absence on awards under
the Plan theretofore made to any recipient who takes such leave of absence.
8.9 Newly Eligible Employees. The Committee shall be entitled to
make such rules, regulations, determinations and awards as it deems
appropriate in respect of any employee who becomes eligible to participate
in the Plan or any portion thereof after the commencement of an award or
incentive period.
8.10 Adjustments. In any event of any change in the outstanding
Common Stock by reason of a stock dividend or distribution,
recapitalization, merger, consolidation, split-up, combination, exchange of
shares or the like, the Committee may appropriately adjust the number of
shares of Common Stock which may be issued under the Plan, the number of
shares of Common Stock subject to options theretofore granted under the
Plan, the option price of options theretofore granted under the Plan, the
amount of Restricted Stock Units theretofore awarded under the Plan, the
performance targets referred to in section 7.8 and any and all other
matters deemed appropriate by the Committee.
8.11 Amendment of the Plan. (a) The Committee may, without further
action by the shareholders and without receiving further consideration from
the participants, amend this Plan or condition or modify awards under this
Plan in response to changes in securities or other laws or rules,
regulations or regulatory interpretations thereof applicable to this Plan
or to comply with stock exchange rules or requirements.
<PAGE>
<PAGE> 16
(b) The Committee may at any time and from time to time terminate or
modify or amend the Plan in any respect, except that without shareholder
approval the Committee may not (i) increase the maximum number of shares of
Common Stock which may be issued under the Plan (other than increases
pursuant to Section 8.10), (ii) extend the period during which any award
may be granted or exercised, or (iii) extend the term of the Plan. The
termination or any modification or amendment of the Plan, except as
provided in subsection (a), shall not without the consent of a participant,
affect the participant's rights under an award previously granted.
<PAGE>
<PAGE> 1
EXHIBIT 11
STATEMENTS RE COMPUTATION OF PER SHARE EARNINGS
Sun Company, Inc. and Subsidiaries
(Dollars in Millions Except Per Share Amounts, Shares in Thousands)
- -------------------------------------------------------------------------
For the Years Ended
December 31
----------------------------
1993 1992 1991
------- -------- ------
Income (loss) from continuing operations
before cumulative effect of
change in accounting principle(1) $ 283.0 $(316.6) $(130.2)
Income (loss) from discontinued
operations (2) -- 19.0 (a) (257.2)(a)
Cumulative effect of change in
accounting principle (3) 5.0(b) (261.0)(b) --
------- ------- -------
Net income (loss)(4) $ 288.0 $(558.6) $(387.4)
======= ======= =======
Weighted average number of shares
of common stock and common stock
equivalents outstanding (5) 106,561 106,212 106,070
======= ======= =======
Earnings (loss) per share of common stock:
Income (loss) from continuing operations
before cumulative effect of
change in accounting principle (1)/(5) $2.65 $(2.98) $(1.23)
Income (loss) from discontinued
operations (2)/(5) -- .18 (2.42)
Cumulative effect of change in
accounting principle (3)/(5) .05 (2.46) --
----- ------ ------
Net income (loss) (4)/(5) $2.70 $(5.26) $(3.65)
===== ====== ======
Weighted average number of shares of
common stock and common stock
equivalents outstanding on a fully
diluted basis (6) 106,573 106,212 106,070
======= ======= =======
Earnings (loss) per share of common stock
on a fully diluted basis:
Income (loss) from continuing operations
before cumulative effect of change in
accounting principle (1)/(6) $2.65 $(2.98) $(1.23)
Income (loss) from discontinued
operations (2)/(6) -- .18 (2.42)
Cumulative effect of change in
accounting principle (3)/(6) .05 (2.46) --
----- ------ ------
Net income (loss) (4)/(6) $2.70 $(5.26) $(3.65)
===== ====== ======
<PAGE>
<PAGE> 2
- ------------
(a) Includes impact of discontinued coal and real estate operations. (See
Note 2 to the Consolidated Financial Statements in the Company's 1993
Annual Report to Shareholders.)
(b) Includes impact of the cumulative effect of a change in the method of
accounting for income taxes in 1993 and a change in the method of
accounting for postretirement health care and life insurance benefits
in 1992. (See Note 7 to the Consolidated Financial Statements in the
Company's 1993 Annual Report to Shareholders.
<PAGE>
<PAGE> 1
EXHIBIT 12
STATEMENT RE COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES--
UNAUDITED(a)
Sun Company, Inc. and Subsidiaries
(Millions of Dollars Except Ratio)
- ---------------------------------------------------------------------------
For the Year
Ended December 31, 1993
-----------------------
Fixed Charges:
Consolidated interest cost and debt expense........ $ 81
Interest cost and debt expense of operations held
for sale......................................... 8
Interest allocable to rental expense(b)............ 22
----
Total.......................................... $111
====
Earnings:
Consolidated income from continuing operations
before provision for income taxes and cumulative
effect of change in accounting principle......... $426
Minority interest in net income of subsidiaries
having fixed charges............................. 25
Proportionate share of provision for income taxes
of 50 percent owned but not controlled affiliated
companies........................................ 3
Equity in income of less than 50 percent owned but
not controlled affiliated companies.............. (6)
Dividends received from less than 50 percent owned
but not controlled affiliated companies. 5
Fixed charges...................................... 111
Interest capitalized............................... (9)
Amortization of previously capitalized interest.... 16
----
Total.......................................... $571
====
Ratio of Earnings to Fixed Charges................... 5.14
====
- ------------
(a) The consolidated financial statements of Sun Company, Inc. and
subsidiaries contain the accounts of all subsidiaries that are
controlled (generally more than 50 percent owned) except those engaged
in coal and real estate operations which are subject to a plan of
disposition. Prior to the fourth quarter of 1993, such operations were
accounted for as discontinued operations and, accordingly, were
excluded from the computation of the ratio of earnings to fixed
charges. Effective in the fourth quarter of 1993, coal and real estate
operations are being accounted for as investments held for sale with
their results of operations now included in continuing operations.
Accordingly, beginning October 1, 1993, coal and real estate operations
are included in the computation of the ratio of earnings to fixed
charges. Affiliated companies (20 to 50 percent owned but not
controlled) are accounted for by the equity method.
<PAGE>
<PAGE> 2
(b) Represents one-third of total operating lease rental expense which is
that portion deemed to be interest.
<PAGE>
<PAGE>
EXHIBIT 13
FINANCIAL SECTION -- CONTENTS
Selected Financial Data 25
Management's Discussion and Analysis 26
Consolidated Statements of Income 41
Consolidated Balance Sheets 42
Consolidated Statements of Cash Flows 43
Consolidated Statements of Changes in Stockholders' Equity 44
Notes to Consolidated Financial Statements 45
Reports of Management and of Independent Accountants 62
Supplemental Financial and Operating Information 63
Quarterly Financial Information 76
Cash Flow Information 77
Market for Sun Company, Inc. Stock and
Related Security Holder Matters 77
Profile of Sun Businesses, 1993 Inside Back Cover
SELECTED FINANCIAL DATA
(Millions of Dollars Except Per Share Amounts)
1993 1992 1991 1990 1989
- ------------------------------------------------------------------------------
For the Years Ended December 31:
Sales and other operating
revenue (including
consumer excise taxes) $9,180 $10,445 $11,493 $12,573 $10,494
Income (loss) from
continuing operations
before cumulative
effect of change in
accounting principle* $283** $(317)*** $(130)+ $190 $110
Income (loss) from dis-
continued operations++ $-- $19 $(257) $9 $(12)
Cumulative effect of change
in accounting principle+++ $5 $(261) $-- $30 $--
Net income (loss)* $288** $(559)*** $(387)+ $229 $98
Return on average
stockholders' equity 14.8% (24.3)% (13.0)% 7.0% 3.0%
Income (loss) per share of
common stock from continuing
operations before cumulative
effect of change in
accounting principle $2.65 $(2.98) $(1.23) $1.78 $1.03
Net income (loss) per share
of common stock $2.70 $(5.26) $(3.65) $2.14 $.92
Cash dividends per share
of common stock $1.80 $1.80 $1.80 $1.80 $1.80
Capital expenditures $612 $530 $615 $637 $599
At December 31:
Cash and cash equivalents
and short-term investments $118 $179 $363 $288 $408
Total assets $5,900 $6,071 $7,017 $7,852 $7,647
Long-term debt $726 $792 $852 $832 $887
Long-term debt to long-term
capitalization# 26.8% 29.5% 24.0% 20.3% 21.4%
Stockholders' equity $1,984 $1,896 $2,696 $3,274 $3,254
Common stockholders'
equity per share $18.60 $17.82 $25.41 $30.81 $30.46
- ------------------------------------------------------------------------------
*Includes impact of $12, $456, $103 and $103 million after-tax provisions
for write-down of assets and other matters in 1993, 1992, 1991 and 1989,
respectively. (See Note 2 to the consolidated financial statements.)
**Includes impact of a $121 million after-tax gain on divestments. (See
Note 2 to the consolidated financial statements.)
***Includes impact of a $117 million after-tax gain on Iranian litigation
settlement. (See Note 3 to the consolidated financial statements.)
+Includes impact of a $78 million after-tax provision for environmental
remediation work at various domestic refining and marketing sites.
++Consists of income (loss) from coal and real estate development
operations prior to the adoption of plans to dispose of these
businesses. In 1991, includes after-tax provisions for write-down of
assets in coal and real estate operations of $21 and $93 million,
respectively, and an estimated $130 million after-tax loss on
disposition of real estate operations. (See Note 2 to the consolidated
financial statements.) In 1989, includes after-tax provision for
write-down of assets in coal of $74 million.
+++Consists of impact of the cumulative effect of a change: in the method
of accounting for income taxes in 1993; in the method of accounting for
postretirement health care and life insurance benefits in 1992; and in
the method of accounting for refinery turnaround costs in 1990. (See
Note 7 to the consolidated financial statements.)
#Long-term capitalization consists of long-term debt and stockholders'
equity.
25
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
STRATEGIC ACTIONS
During October 1992, the Company announced a new strategic direction for
Sun. This strategy focuses on growth in Sun's branded gasoline marketing
(primarily in the northeastern United States), lubricants, chemicals and
logistics businesses and international oil and gas production activities
(primarily in the U.K. North Sea). Since the adoption of the plan, the
following strategic 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 $163 million increase in earnings before special items in 1993 was
largely attributable to the implementation of these strategic actions and
ongoing cost reduction efforts. Additional information regarding these
actions is contained in the Analysis of Earnings Profile of Sun Businesses
which follows.
RESULTS OF OPERATIONS
EARNINGS PROFILE OF SUN BUSINESSES (AFTER TAX)
(Millions of Dollars)
1993 1992* 1991*
- ------------------------------------------------------------------------------
Fuels:
Wholesale fuels $(49) $ (91) $ (12)
Branded marketing 92 76 22
Lubricants:
Lubes 50 64 64
Related fuels (32) (55) (50)
Chemicals 13 28 38
Logistics 56 47 43
International exploration and production:
Exploration -- (41) (77)
Production 73 50 39
Canada (Suncor):**
Exploration and production 5 7 1
Oil sands 28 9 30
Refining and marketing 9 2 19
Corporate expenses*** (6) (10) --
Net financing expenses (3) (3) (3)
---- ---- ----
Total Canada (Suncor) 33 5 47
Corporate:
Corporate expenses (18) (19) (38)
Net financing expenses (25) (34) (25)
- ------------------------------------------------------------------------------
193 30 51
Gain (loss) on sale of Suncor stock 19 (8) --
Gain on divestment of exploration and
production properties 80 -- --
Iranian litigation settlement -- 117 --
Provision for write-down of assets
and other matters (12) (456) (103)
Accrual for environmental remediation -- -- (78)+
Income (loss) from operations held for sale:
Coal 2++ 19 (2)
Real estate 1++ -- (255)
Cumulative effect of change in
accounting principle 5 (261) --
- ------------------------------------------------------------------------------
Consolidated net income (loss) $288 $(559) $(387)
- ------------------------------------------------------------------------------
*Restated to conform to 1993 presentation.
**Sun reduced its ownership interest in Suncor from 75 percent to
approximately 68 percent in March 1992 and to 55 percent in May 1993.
***Includes consolidation adjustments.
+Represents accrual for environmental remediation work at various
domestic refining and marketing sites recorded in the third quarter of
1991.
++Consists of fourth quarter 1993 income from operations held for sale.
See further discussion under "Analysis of Earnings Profile of Sun
Businesses".
ID: GRAPHIC -- STAIRSTEP CHART
IMPROVEMENT IN INCOME
BEFORE SPECIAL ITEMS
IN MILLIONS OF DOLLARS
1992 INCOME solid vertical rule connecting to the number -- 30
Market Change screened box with an arrow descending from number -- (17)
International Exploration screened box with arrow ascending to number -- 41
International Production screened box with arrow ascending to number -- 48
U.S. Refinery Operations screened box with arrow ascending to number -- 35
Suncor screened box with arrow ascending to number -- 35
Other screened box with arrow ascending to number -- 21
1993 INCOME solid vertical rule connecting to the number -- 193
26
<PAGE>
ANALYSIS OF EARNINGS PROFILE OF SUN BUSINESSES
In 1993, Sun Company, Inc. and its subsidiaries recorded net income of $288
million, or $2.70 per share of common stock compared to a net loss of $559
million, or $5.26 per share in 1992 and a net loss of $387 million, or
$3.65 per share in 1991. Excluding the special items shown separately in
the Earnings Profile of Sun Businesses, Sun's income was $193 million in
1993, compared to $30 million in 1992 and $51 million in 1991.
The $163 million increase in earnings before special items in 1993 was
largely attributable to significant changes in the cost and operating
structures of Sun's various businesses. These changes were made by the
Company in connection with the implementation of its October 1992 strategic
plan. The higher results in 1993 were achieved despite market conditions
which did not change significantly from 1992 as declines in crude oil
prices and some product markets (wholesale gasoline, petrochemical and
lubricant products) were largely offset by favorable changes in other
product markets (branded gasoline, asphalt and residual fuels).
The $21 million decrease in earnings before special items in 1992 compared
to 1991 was primarily due to significantly lower wholesale fuels margins
and a decline in earnings at Suncor resulting largely from lower synthetic
crude oil prices and volumes and lower margins on refined product sales.
Partially offsetting these negative factors were higher earnings in
International Exploration and Production and lower corporate administrative
expenses.
See individual businesses below for a more detailed discussion of the key
factors affecting Sun's income.
FUELS -- Sun's domestic Fuels business consists primarily of the
acquisition and refining of crude oil and its derivatives at refineries
located in Marcus Hook, PA, Philadelphia, PA and Toledo, OH and the sale of
petroleum products produced at these refineries, including gasoline, middle
distillates, jet fuel, residual fuel oil and asphalt. Income(loss) from
operations at these refineries and from the sale of such petroleum products
to wholesale, commercial, governmental and industrial customers are
reflected in the Wholesale Fuels business, while income(loss) from the
retail sale of gasoline and middle distillates under the SUNOCO(R) and
ATLANTIC(R) brands in the United States and from domestic convenience-store
operations are reflected in the Branded Marketing business.
WHOLESALE FUELS
1993 1992 1991
- ------------------------------------------------------------------------------
Losses (millions of dollars) $(49) $(91) $(12)
Wholesale margin* (per barrel) $3.07 $2.65 $3.52
Wholesale sales (thousands of
barrels daily):
To unaffiliated customers:
Gasoline 29.9 38.2 42.1
Middle distillates 59.2 68.3 66.2
Jet fuel 46.2 42.2 35.5
Asphalt 28.1 26.1 21.7
Other 56.2 59.3 53.2
- ------------------------------------------------------------------------------
219.6 234.1 218.7
To affiliates 266.8 266.2 267.6
- ------------------------------------------------------------------------------
486.4 500.3 486.3
- ------------------------------------------------------------------------------
Crude unit capacity (thousands of
barrels daily) 430.0 430.0 430.0
Crude unit capacity utilized 86% 91% 92%
Catalytic cracking unit capacity
(thousands of barrels daily) 235.0 235.0 235.0
Catalytic cracking capacity utilized 90% 92% 93%
- ------------------------------------------------------------------------------
*Wholesale sales price less cost of crude oil, other feedstocks and
purchased refined products.
The $42 million improvement in Wholesale Fuels results in 1993 was due
largely to higher margins on wholesale fuels products ($51 million),
partially offset by lower sales volumes ($11 million). The improvement in
wholesale fuels margins was primarily due to better market conditions on
residual fuel and asphalt partially offset by significantly weaker market
conditions for wholesale gasoline. Higher refinery operating expenses
primarily due to increases in natural gas fuel costs were essentially
offset by lower administrative expenses and other matters.
The $79 million decrease in Wholesale Fuels results during 1992 was
primarily due to significantly lower margins ($103 million), particularly
on wholesale gasoline and distillate sales. Partially offsetting this
negative factor were lower operating and selling, general and
administrative expenses ($18 million) and higher sales volumes ($10
million). The decline in expenses reflects the impact of a restructuring
program initiated in the latter part of 1991 (see "Provision for Write-down
of Assets and Other Matters" below).
Continuing downward pressure on wholesale gasoline margins has been a major
factor affecting Wholesale Fuels results during the 1991-93 period. An
abundance of gasoline refining capacity in the market and generally weak
demand due to a sluggish U.S. economy have resulted in wholesale gasoline
margins being squeezed throughout this period. The Company's decision to
reconfigure its Tulsa and Puerto Rico refineries to emphasize lubricants
production and reduce the level of wholesale fuels production was
implemented as part of its strategy to lessen its dependence on fuels
refining economics (see "Lubricants" below).
27
<PAGE>
During 1993, margins on residual fuel and asphalt rebounded considerably
from the low levels experienced throughout 1991 and most of 1992. The
improvement in residual fuel margins was due to increased demand as a
result of fuel switching attributable to higher natural gas prices, as well
as tighter supply due to increased upgrading capacity in the industry. The
improvement in asphalt margins was due to higher demand caused by increased
governmental spending in the U.S. on roads and highways and lower supply in
Sun's northeastern U.S. marketing area. Sun's Philadelphia refinery
particularly benefitted from this market change as it is a major producer
of asphalt in Sun's northeastern U.S. marketing area.
During 1993, the Company reviewed various strategic options regarding its
Toledo refinery including a possible reconfiguration or joint venture
operation. The Company did not execute any of these options. Operating
improvements at the refinery, along with better market conditions in the
Midwest, contributed to improved financial results at this facility in
1993.
During 1994, wholesale gasoline margins in the industry are likely to
continue at low levels as only modest growth in demand is forecasted and
rationalization of refineries in the U.S. has been slow to occur. However,
the Company expects its Wholesale Fuels results to be favorably impacted in
1994 by an anticipated increase in the refinery utilization rate at its
three Fuels refineries. Another key factor expected to affect Sun's
Wholesale Fuels results in 1994 is the level of operating, environmental
and other expenses.
In anticipation of reformulated fuels requirements becoming effective, the
Company has undertaken several initiatives to compete effectively in this
environment. First, while Sun's Toledo and Marcus Hook refineries already
have substantial benzene extraction capacity, the Company is currently in
the process of further expanding such capacity at its Marcus Hook refinery
to permit it to extract benzene from gasoline streams from Sun's
Philadelphia refinery or from third parties (see "Chemicals" below).
Secondly, the Company has secured the majority of its required oxygenate
supply through a 100 percent MTBE off-take agreement with Belvieu
Environmental Fuels ("BEF"), a joint venture in which Sun is a one-third
partner, that was formed to construct, own and operate an MTBE production
facility. The plant is expected to begin production in mid-1994 (see
"Chemicals" below). Thirdly, Sun's Toledo, Philadelphia and Yabucoa
refineries have the ability, without additional capital investment, to
produce low-sulfur diesel fuel that meets the sulfur reduction requirements
for on-road diesel. Finally, as a result of the reconfiguration of Sun's
Tulsa refinery in 1992, the capital investment needed to comply with the
Clean Air Act has been significantly reduced (see "Lubricants" below).
While there is considerable uncertainty concerning the impact on Sun's
future profitability of the implementation of the amendments to the Clean
Air Act, management of Sun believes that the Company is well positioned to
meet the new air toxics and reformulated fuels requirements under present
regulations as they are phased in over the next few years.
BRANDED MARKETING
1993 1992 1991
- -------------------------------------------------------------------------
Income (millions of dollars) $92 $76 $22
Retail margin* (per barrel) $4.74 $4.21 $3.67
Retail sales (thousands of barrels daily):
Gasoline 223.6 233.9 235.3
Middle distillates 21.4 21.8 20.6
- -------------------------------------------------------------------------
245.0 255.7 255.9
- -------------------------------------------------------------------------
Retail gasoline outlets 4,442 5,389 5,854
- -------------------------------------------------------------------------
*Retail sales price less wholesale sales price.
Branded Marketing results increased $16 million in 1993 as higher retail
gasoline margins ($32 million) were partially offset by lower sales
volumes. The volume decline in 1993 was due largely to Sun's August 1992
decision to withdraw from branded gasoline marketing in Oklahoma, Missouri
and Iowa which was partially offset by: the addition in the second quarter
of 1992 of a contract to supply 13 high-volume service stations along the
New Jersey Turnpike; the acquisition in the first quarter of 1993 of 23
service stations primarily in western Massachusetts; the addition in the
second quarter of 1993 of a contract to supply 21 high-volume service
stations along the Pennsylvania Turnpike; and increased sales in Sunoco's
core distribution channels.
The $54 million increase in Branded Marketing results during 1992 was due
to higher retail margins ($33 million) and a decline in selling, general
and administrative expenses ($25 million). Retail gasoline sales volumes
were essentially unchanged as significant increases in direct unit
throughput in the northeastern United States and the addition of the New
Jersey Turnpike contract were offset by lower distributor volumes due to
the withdrawal from branded gasoline marketing in Oklahoma, Missouri and
Iowa.
The profitability of Sun's Branded Marketing operations will continue to be
affected by retail gasoline sales volumes and margins as well as the
economic, competitive and environmental conditions in Sun's primary
marketing areas in the northeastern United States and in Ohio and Michigan.
Future profitability will also be affected by the Company's ability to
successfully implement its brand conversion and growth strategies.
Management's actions are designed to improve market position and
profitability in the mature markets in which it competes.
28
<PAGE>
During 1993, Sun announced that it would convert its existing ATLANTIC(R)
gasoline outlets to SUNOCO(R) and convert its SUNOCO FOOD MARKET(R)
convenience stores to APLUS(R). These conversions, which will impact
approximately 500 sites, are expected to capitalize on the value of the
SUNOCO(R) and APLUS(R) names throughout the entire marketing area. This
strategy is expected to be fully implemented by year-end 1995.
Sun is continuing to rationalize its retail gasoline outlets. This
rationalization will result in a modest decline in the number of outlets
but an increase in average site throughput. As a result of its
logistically advantaged refining and marketing assets and its strong
branded marketing presence in the northeastern U.S., management continues
to believe it is well positioned to compete effectively.
LUBRICANTS -- Sun's Lubricants business consists of the manufacturing,
packaging and marketing of lubricating and specialty oil products for
customers throughout the United States and worldwide. Lubricants are
manufactured at Sun's Tulsa and Puerto Rico refineries and marketed under
the SUNOCO(R) brand name, as well as formulated and packaged for sale by
other branded marketers under their labels. Sun's Lubricants business also
includes the results of operations attributable to the related
manufacturing and wholesale marketing of fuels produced at the Tulsa and
Puerto Rico refineries.
LUBES
1993 1992 1991
- ------------------------------------------------------------------------------
Income (millions of dollars) $50 $64 $64
Lubes margin* (per barrel) $24.99 $26.79 $32.48
Lubricant sales (thousands of
barrels daily):
Base oils 6.6 7.2 7.7
Specialty oils 8.5 7.9 7.7
Other 1.8 2.3 2.0
- ------------------------------------------------------------------------------
16.9 17.4 17.4
- ------------------------------------------------------------------------------
*Wholesale sales price less feedstock costs.
Income from the sale of lubricant products decreased $14 million in 1993
due to lower margins ($8 million), particularly on base oils, and lower
sales volumes ($3 million) caused by generally weak market conditions.
Income from the sale of lubricant products was unchanged in 1992, as lower
operating and administrative expenses resulting from restructuring efforts
in 1991 ($17 million) were essentially offset by a decline in lubricant
product margins ($19 million) from the record levels attained in 1991.
RELATED FUELS
1993 1992 1991
- ------------------------------------------------------------------------------
Losses (millions of dollars) $(32) $(55) $(50)
Related fuels margin* (per barrel) $1.64 $1.61 $1.89
Wholesale sales (thousands of
barrels daily):
To unaffiliated customers:
Gasoline 26.8 41.8 36.5
Middle distillates 24.9 21.8 23.7
Jet fuel 10.1 14.9 15.7
Residual fuel 13.7 20.8 23.2
Other 9.8 10.4 12.7
- ------------------------------------------------------------------------------
85.3 109.7 111.8
To affiliates 58.8 45.2 43.0
- ------------------------------------------------------------------------------
144.1 154.9 154.8
- ------------------------------------------------------------------------------
*Wholesale sales price less crude oil cost and other purchased feedstocks
and refined products.
The $23 million improvement in Related Fuels operations during 1993 was due
to lower operating costs ($21 million) at Sun's Tulsa and Puerto Rico
operations resulting from modifications commencing in the fourth quarter of
1992 at these facilities to focus production on lubricants. Lower
wholesale gasoline margins and volumes were generally offset by higher
margins on residual fuel at Sun's Puerto Rico refinery and improved
refining operations. In 1992, losses from Related Fuels operations
increased $5 million due largely to lower wholesale margins ($10 million)
on fuels produced at the Tulsa refinery, partially offset by lower
operating expenses ($6 million).
Results from Sun's Lubricants business for 1992 exclude a $61 million
after-tax charge related to the Company's decision to reconfigure its Tulsa
operations, which is reported as part of the 1992 Provision for Write-down
of Assets and Other Matters in the Earnings Profile of Sun Businesses.
As part of the Tulsa refinery reconfiguration, in December 1992, certain
major processing units that were critically linked to the production of
fuels were shut down. As a result, fuels production capacity was reduced
from 77 thousand barrels daily to 45 thousand barrels daily at this
facility. Lubes production at the Tulsa refinery now also results in
approximately 32 thousand barrels daily of "lube-extracted" feedstock,
which is transported to Sun's Toledo refinery for further processing or
sold to third parties. Modifications were also made to the Puerto Rico
refinery to permit lubricants production using intermediate feedstocks in
lieu of crude oil. These alternative feedstocks are utilized when
warranted by market conditions and result in the production of reduced
levels of high-sulfur residual fuels and other wholesale fuels products. In
addition, a modernization of the Puerto Rico refinery's crude
fractionalization facilities during the third quarter of 1993 has enabled
an additional upgrading of product yields.
The key factors expected to impact the future profitability of the
Lubricants business are product margins and vol-
29
<PAGE>
umes (including those related to wholesale fuels), product mix and quality,
manufacturing efficiency and the levelof operating, environmental and other
expenses. Future profitability will also be affected by the Company's
ability to continue to grow this business successfully. In 1994, Sun's
Lubricants operations will focus on increasing sales of value-added
specialty oils (branded lubricants, process oils, packaged goods and waxes)
by exploiting niches in the marketplace, developing new product lines and
more aggressively seeking international business. The technical
improvements made to Sun's lubricants refineries during the 1992-93 period
are expected to enhance the reliability and flexibility of the refining
operations and significantly increase the production of paraffinic
lubricants in 1994. Margins for wholesale gasoline, middle distillates,
jet fuel and residual fuel products will continue to be the primary
determinants of Related Fuels profitability (see "Wholesale Fuels" above).
CHEMICALS -- Sun's domestic Chemicals business consists of the
manufacturing and marketing of commodity and intermediate petrochemicals.
Petrochemicals are manufactured at the Marcus Hook, Philadelphia and Toledo
refineries as well as at the ethylene oxide plant in Brandenburg, KY and
are sold on a worldwide basis to chemical derivative manufacturers and
other customers.
1993 1992 1991
- ------------------------------------------------------------------------------
Income (millions of dollars) $13 $28 $38
Chemicals margin* (per barrel) $10.05 $11.36 $15.14
Petrochemical sales (thousands of
barrels daily):
Aromatics 12.9 12.2 8.8
Propylene 10.2 11.1 10.5
Ethylene/ethylene oxide 2.4 1.7 1.5
Other 3.3 3.9 4.5
- ------------------------------------------------------------------------------
28.8 28.9 25.3
- ------------------------------------------------------------------------------
*Wholesale sales price less feedstock costs.
Chemicals income decreased $15 million in 1993 due primarily to lower
propylene ($11 million), aromatics ($3 million) and ethylene/ethylene oxide
($2 million) margins resulting from weak worldwide product demand for
derivative products and higher feedstock costs attributable to increased
natural gas costs. These negative factors were partially offset by a full
year of ethylene oxide production from Sun's Brandenburg, KY facility
acquired in November 1992 and higher aromatics sales volumes.
Chemicals income decreased $10 million in 1992 due primarily to lower
margins ($23 million). Partially offsetting this negative factor were
lower administrative expenses ($4 million) and higher sales volumes ($10
million). Margins decreased primarily due to lower product prices
resulting from weak product demand. Propylene margins declined due to weak
overseas and domestic demand for its major derivative, polypropylene.
Aromatics margins decreased in the second half of 1992 due to weak
worldwide demand.
Sun expects to continue to grow and enhance its Chemicals business as
market conditions warrant. In 1992, in order to streamline operations and
optimize its distribution network, a marketing partnership was established
between the aromatics-based chemicals businesses at Sun's Toledo and
Suncor's Sarnia, Ontario refineries. In 1992, Sun also acquired the
ethylene and ethylene oxide businesses and assets of an Olin Corporation
chemical complex. The acquisition has doubled Sun's ethylene oxide
production capacity to over 200 million pounds per year. In addition,
during 1992, Sun became a one-third partner in Belvieu Environmental Fuels
("BEF"), a joint venture formed for the purpose of constructing, owning and
operating a $220 million MTBE production facility in Mont Belvieu, TX. The
plant, which has a designed capacity of 12,600 barrels daily, is expected
to begin production in mid-1994. Sun has contracted to off-take all of the
MTBE production from the BEF facility. MTBE from BEF will provide the
majority of Sun's oxygenate supply as part of its overall effort to meet
the Clean Air Act's new reformulated fuel requirements.
The Company is also in the process of expanding its benzene extraction
capacity and constructing a 34-million gallon per year cyclohexane plant at
its Marcus Hook refinery. These projects will enable Sun to enhance its
existing benzene extraction capability to help comply with mandated 1995
reformulated fuel requirements by permitting Sun to extract benzene from
gasoline streams from its Philadelphia refinery and from third parties.
Benzene will be sold or further upgraded into cyclohexane, the majority of
which will be sold to a major chemical purchaser under a contract to meet
100 percent of its requirements.
The profitability of Sun's Chemicals business will continue to be affected
by petrochemical sales volumes, manufacturing reliability, margins (which
are significantly impacted by the worldwide economy), the level of
operating and other expenses and the impact of regulatory and environmental
legislation. Future profitability will also be affected by the Company's
ability to grow this business successfully and by the price of MTBE and the
profitability of the BEF joint venture. (See discussion concerning the BEF
joint venture in Note 14 to the consolidated financial statements.)
LOGISTICS -- Sun's Logistics business consists of pipeline transportation
of crude oil and refined petroleum products through wholly owned and
partially owned entities and petroleum terminalling operations in
Nederland, TX.
1993 1992 1991
- ------------------------------------------------------------------------------
Income (millions of dollars) $56 $47 $43
Throughput (thousands of barrels daily):
Unaffiliated customers 567.0 465.6 474.8
Affiliated customers 687.0 704.3 693.0
- ------------------------------------------------------------------------------
1,254.0 1,169.9 1,167.8
- ------------------------------------------------------------------------------
30
<PAGE>
Logistics income increased $9 million in 1993 primarily due to a $10
million after-tax gain recognized in December 1993 on the sale of Sun's
midwestern refined products pipeline system operating in Oklahoma and
Arkansas. Income attributable to this refined products pipeline system was
not significant. Higher throughput volumes at Sun's Nederland, TX terminal
($1 million) and higher equity income from pipelines in which Sun has an
ownership interest ($3 million) also contributed to the improved Logistics
results in 1993. Partially offsetting these positive factors was the
absence of a $6 million after-tax gain recognized in 1992 on the sale of a
pipeline terminal. Results for 1992 increased $4 million due to the gain
on the sale of the pipeline terminal, partially offset by lower equity
income. Equity income totalled $10, $7 and $9 million during 1993, 1992
and 1991, respectively.
During 1994, the Company will begin construction of an inter-refinery
pipeline between its Philadelphia and Marcus Hook refineries. This
project, which is expected to be completed by early 1995, will enhance the
profitability of Sun's Logistics business and provide opportunities for
additional manufacturing synergies and cost efficiencies from product
movements between the two Sun refineries.
The profitability of Sun's Logistics operations will continue to be
affected by the demand for products transported, operational safety and
efficiency, the level of operating and other expenses and the competitive
and regulatory environment. In addition, Sun is actively seeking
opportunities to grow its Logistics business particularly in areas which
can support Sun's major refinery systems and marketing areas.
INTERNATIONAL EXPLORATION AND PRODUCTION -- In October 1992, Sun announced
that it was withdrawing from oil and gas exploration activities outside of
Canada and focusing its international production and development activities
primarily in the United Kingdom sector of the North Sea. The withdrawal
from exploration activities internationally has enabled Sun to enhance its
operating profits in the near term and to reduce its investment risk
profile.
As part of this plan, during 1993, Sun essentially completed all of its
remaining exploration commitments outside of Canada and completed the
disposition of certain exploration properties located principally in the
U.K. North Sea and certain production properties in Dubai (see "Gain on
Divestment of Exploration and Production Properties" below). In addition,
Sun acquired additional oil producing interests in the Balmoral and
Stirling fields in the U.K. North Sea increasing its ownership interest in
these fields from 52 and 37 percent to 59 and 55 percent, respectively. Sun
also decided to retain its 5 percent interest in the Magnus field, which
previously had been targeted for divestment, as a result of favorable
changes in certain U.K. tax laws.
1993 1992 1991
- ------------------------------------------------------------------------------
Income (loss) (millions of dollars):
Exploration $-- $(41) $(77)
Production 73 50 39
- ------------------------------------------------------------------------------
$73 $ 9 $(38)
- ------------------------------------------------------------------------------
Crude oil and condensate:
Proved reserves (millions of
barrels) at December 31 30 75 79
Net production (thousands of
barrels daily) 27.2 42.1 47.6
Average price (per barrel) $16.85 $18.57 $18.58
Natural gas:
Proved reserves (billions of
cubic feet) at December 31 109 104 101
Net production (millions of cubic
feet daily) 56 46 56
Average price (per thousand
cubic feet) $2.93 $3.21 $3.58
- ------------------------------------------------------------------------------
Expenses from International Exploration declined in the 1991-93 period due
to Sun's decision to withdraw from such activities outside of Canada,
effective September 30, 1992. As part of the Provision for Write-down of
Assets and Other Matters recorded in the third quarter of 1992, Sun
established an accrual for all future exploration commitments related to
those properties subject to the plan of disposition. Actual costs incurred
subsequent to September 30, 1992 to satisfy these commitments have been
charged against this accrual and, accordingly, are excluded from
exploration costs.
Results from International Exploration for 1993 exclude a $68 million
after-tax gain from the divestment of certain exploration properties
located principally in the U.K. North Sea, which is reported as part of
the Gain on Divestment of Exploration and Production Properties in the
Earnings Profile of Sun Businesses.
Income from International Production activities increased $23 million in
1993 primarily due to higher natural gas volumes ($8 million), lower costs
and operating expenses resulting, in part, from a weaker British pound ($25
million) and a lower effective tax rate ($23 million). The increase in
natural gas production volumes was largely due to the commencement of
production in August 1992 from the Pickerill field in the U.K. North Sea.
The lower effective income tax rate was largely due to a decline in U.S.
income tax expense on foreign earnings that resulted from a change made by
Sun, effective January 1, 1993, in the method of computing deferred income
taxes. (See Note 7 to the consolidated financial statements.) Partially
offsetting these positive factors were lower North Sea crude oil production
volumes ($7 million) and prices ($14 million) and a decrease in after-tax
foreign exchange gains ($8 million). The decrease in overall international
crude oil production volumes was largely due to the April 1993 sale of
producing properties located in Dubai. Results of operations from these
properties were not
31
<PAGE>
significant. Also contributing to the production decline were planned
maintenance activities at the Balmoral field in the U.K. North Sea, which
were completed in April 1993, and operating problems at the Glamis
production facility also in the U.K. North Sea. The Glamis production
facility was returned to full operation by the end of the third quarter of
1993.
Income from International Production activities increased $11 million in
1992 primarily due to the recognition of a $9 million after-tax foreign
exchange gain in 1992 compared with a $6 million after-tax foreign exchange
loss recorded in 1991. Also contributing to the improvement were lower
operating and administrative expenses ($3 million) and a decrease in
depreciation expense ($20 million). Partially offsetting these positive
factors were decreases in crude oil ($12 million) and natural gas ($5
million) production volumes and lower crude oil ($2 million) and natural
gas ($3 million) prices. The decrease in crude oil production volumes was
largely attributable to natural production declines and maintenance
activities in the U.K. North Sea.
At December 31, 1993, Sun had an estimated 30 million barrels of proved
reserves of crude oil and condensate and an estimated 109 billion cubic
feet of proved reserves of natural gas outside North America. Sun
anticipates that it will have produced these proved reserves in
approximately 14 years.
The profitability of Sun's International Production business will continue
to be affected by crude oil and natural gas production volumes, the prices
received for such production and exchange rates between the U.S. dollar and
the British pound. Future profitability will also be affected by the
Company's ability to acquire and produce crude oil and natural gas reserves
economically. The Company is seeking to increase its reserves position,
primarily in the U.K. North Sea where it can capitalize on its operating
strength and experience, by acquiring currently producing properties and
near-term development projects if financially attractive opportunities are
identified.
CANADA (SUNCOR) -- Suncor's results contained in the Earnings Profile of
Sun Businesses exclude a $19 million after-tax gain for 1993 and an $8
million after-tax loss for 1992 on sales by Sun of Suncor stock, which are
separately discussed below. These sales reduced Sun's ownership interest
in Suncor from 75 percent to approximately 68 percent in March 1992 and to
55 percent in May 1993.
Several initiatives designed to improve the efficiency and future
profitability of Suncor's operations were included in Sun's strategic plan
announced in October 1992. Charges associated with the implementation of
this plan were included in the 1992 Provision for Write-down of Assets and
Other Matters, which is reported separately in the Earnings Profile of Sun
Businesses. For additional information concerning this provision, see the
discussion below and Note 2 to the consolidated financial statements.
EXPLORATION AND PRODUCTION
1993 1992 1991
- ------------------------------------------------------------------------------
Income (millions of dollars) $5 $7 $1
Crude oil and condensate:
Proved reserves (millions of
barrels) at December 31 30 30 29
Net production (thousands of
barrels daily) 9.3 9.3 8.6
Average price (per barrel) $15.00 $17.12 $18.09
Natural gas:
Proved reserves (billions of
cubic feet) at December 31 492 475 407
Net production (millions of cubic
feet daily) 116 116 83
Average price (per thousand
cubic feet) $1.42 $1.08 $1.22
- ------------------------------------------------------------------------------
Canadian Exploration and Production results decreased $2 million in 1993
primarily due to lower crude oil prices ($3 million) and a higher effective
tax rate ($2 million). Partially offsetting these negative factors were
higher natural gas prices ($4 million).
Results increased $6 million in 1992 primarily due to higher crude oil ($1
million) and natural gas ($5 million) volumes and increased gains on asset
divestments ($2 million). These positive factors were partially offset by
lower natural gas prices ($2 million). The increases in production
volumes, particularly in natural gas, were largely attributable to
acquisitions in the Rosevear and Simonette areas in Alberta.
Suncor's exploration and production strategy is to continue to grow through
focused exploration and property acquisitions while disposing of non-core
assets. The disposition of non-core properties was completed during 1993
and resulted in a $5 million after-tax gain. This gain is reported as part
of the Gain on Divestment of Exploration and Production Properties in the
Earnings Profile of Sun Businesses. The properties divested accounted for
approximately 6 and 12 percent, respectively, of Suncor's crude oil and
natural gas production volumes in 1992. The properties subject to the plan
of disposition as well as Suncor's Burnt Lake heavy oil property in
northeastern Alberta were written down to estimated net realizable value as
part of the 1992 Provision for Write-down of Assets and Other Matters.
OIL SANDS
1993 1992 1991
- ------------------------------------------------------------------------------
Income (millions of dollars) $28 $9 $30
Proven reserves (millions of barrels)
at December 31 231 256 276
Synthetic crude oil produced for shipment
(thousands of barrels daily) 60.5 58.5 60.6
Average price (per barrel) $16.61 $19.03 $20.03
- ------------------------------------------------------------------------------
Oil Sands results increased $19 million in 1993 primarily due to lower
operating and administrative expenses ($27 million), higher synthetic crude
oil volumes ($3 million) and a gain ($7 million) from the settlement of
claims resulting from a 1987 fire at the oil sands plant. Partially
32
<PAGE>
offsetting these positive factors were lower synthetic crude oil prices
($16 million). Production volumes increased 3 percent in 1993 to near
record levels despite a partial freeze-up of the plant in late December
1992 and a planned maintenance turnaround during the second quarter of 1993
which resulted in the stoppage of production for approximately one month.
Oil Sands results declined $21 million in 1992 largely due to lower
synthetic crude oil prices ($8 million), lower synthetic crude oil volumes
($7 million) compared to 1991 record levels, and higher Crown royalty
expenses ($7 million). The higher Crown royalty expenses were attributable
to an increase in the royalty rate, effective January 1, 1992. The decline
in prices and volumes and an increase in per barrel production costs were
partially attributable to a fire that occurred in the upgrader section of
the oil sands plant in April 1992. The fire and related operating problems
limited the plant's ability to produce fully processed synthetic crude oil
and necessitated the sale or third-party upgrading of lower value
semi-processed synthetic crude oil production for most of the 1992 second
quarter.
During 1992, Suncor announced several strategic initiatives with respect to
its oil sands operation. These initiatives included, among other things,
the conversion from the bucketwheel method of mining oil sands to a more
flexible and efficient truck-and-shovel method; the development of
operating efficiencies and production improvements, including upgrader
modifications, which were expected to reduce operating costs and increase
production capability; and the study of the viability of constructing a new
utilities plant which would utilize a new combustion technology to supply
electricity and steam to the oil sands operation and meet more stringent
environmental standards. During 1993, the strategic initiatives were
implemented as follows:
. The new truck-and-shovel mining system was phased in six months ahead of
schedule and is now fully operational.
. Upgrader modifications have been completed and have increased synthetic
crude oil production capability from 60,000 barrels to 68,000 barrels
daily.
. Management decided against construction of a new utilities plant and is
planning instead to enhance its existing steam and electricity generating
facilities in 1994 with sulfur recovery equipment and limestone scrubbing
technology (see "Capital Expenditures" below). Installation of this
equipment along with modifications to the sulfur plant in the upgrader
should reduce plant-wide sulfur dioxide emissions by at least 75 percent
and permit compliance with new environmental requirements which become
effective in mid-1996.
These actions are expected to result in a reduction of approximately 450
employees and contractors (400 of which were terminated during 1993) and
are designed to reduce future cash costs by approximately $4-$6 per barrel
by 1996.
REFINING AND MARKETING
1993 1992 1991
- ------------------------------------------------------------------------------
Income (millions of dollars) $9 $2 $19
Refined product margin* (per barrel) $7.92 $7.84 $9.34
Refined product sales (thousands
of barrels daily) 81.9 83.0 80.0
Input to crude units (thousands
of barrels daily) 68.5 71.3 72.1
Refinery crude unit capacity utilized 98% 102% 103%
- ------------------------------------------------------------------------------
*Sales price less cost of products sold.
Canadian Refining and Marketing earnings increased $7 million in 1993
primarily due to lower operating and administrative expenses ($8 million)
and a lower effective tax rate ($3 million). Partially offsetting these
positive factors were lower refined product sales volumes ($2 million).
Canadian Refining and Marketing earnings decreased $17 million in 1992 as a
result of lower refined product margins ($23 million) and the absence of a
gain on the sale of an ocean-going vessel ($6 million) recognized in 1991.
Partially offsetting these negative factors were higher refined product
sales volumes ($4 million) and lower operating costs ($13 million).
In September 1993, Suncor announced a restructuring of its refining and
marketing business designed to rationalize and upgrade its service station
portfolio and lower overhead costs while maintaining retail volumes and
market share. An after-tax charge of $7 million associated with the
implementation of this plan was included in the 1993 Provision for
Write-down of Assets and Other Matters, which is reported separately in the
Earnings Profile of Sun Businesses.
Canadian corporate expenses declined $4 million in 1993 largely due to
lower administrative expenses. In 1992, Canadian corporate expenses
increased $10 million primarily due to the absence of a favorable
intercompany profit elimination consolidation adjustment recognized in
1991.
Canadian net financing expenses were essentially unchanged during the
1991-93 period.
In addition to the success of the implementation of its various strategic
initiatives, the overall profitability of Suncor will be impacted by
synthetic and conventional crude oil and natural gas production volumes and
prices, the ability to add and produce crude oil and natural gas reserves
economically, the margin realized by Suncor on the sale of refined products
and the level of operating, environmental and other expenses.
CORPORATE -- Corporate expenses decreased during the 1991-93 period
primarily due to the impact of the restructuring programs initiated in 1991
and 1992.
Net financing expenses decreased $9 million in 1993 primarily due to
increased capitalized interest ($3 million),
33
<PAGE>
lower corporate debt expense ($3 million), and a gain on the sale of an
equity investment ($3 million), partially offset by lower earnings from
leasing operations ($2 million).
Net financing expenses increased $9 million in 1992 in part due to lower
interest income ($10 million) and leasing portfolio income ($7 million),
partially offset by lower interest and debt expense ($5 million) and the
absence of a loss recognized in 1991 on the sale of ECC Financial Group
Corporation ("ECC") ($5 million). With the sale of ECC, Sun ceased making
new investments in its leasing and secured lending businesses and is in the
process of liquidating, in an orderly manner, its remaining portfolio of
leases and secured loans.
GAIN (LOSS) ON SALE OF SUNCOR STOCK -- In March 1992, Sun recognized an $8
million after-tax loss on the sale of 4 million shares of Suncor common
stock, which reduced Sun's ownership interest in Suncor from 75 percent to
approximately 68 percent.
In May 1993, Sun sold an additional 6.8 million shares of Suncor common
stock which further reduced Sun's ownership interest to 55 percent. In
connection with this sale, Sun recognized a $19 million after-tax gain.
GAIN ON DIVESTMENT OF EXPLORATION AND PRODUCTION PROPERTIES -- During 1993,
Sun disposed of certain oil and gas producing properties located in Dubai
and Canada and certain exploration properties located principally in the
U.K. North Sea, which previously were identified for disposal as part of
the Company's 1992 restructuring plan. An after-tax gain of $80 million
was recognized in connection with these disposals. (See Note 2 to the
consolidated financial statements.)
IRANIAN LITIGATION SETTLEMENT -- In 1992, Sun recognized a $117 million
after-tax gain in connection with the settlement of all disputes with the
government of Iran and the National Iranian Oil Company relating to the
expropriation of Sun's oil production interests in Iran following the
Iranian Revolution. As part of the settlement, Sun received a net cash
payment of $130 million.
PROVISION FOR WRITE-DOWN OF ASSETS AND OTHER MATTERS -- In 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.
In 1992, a $456 million after-tax provision was established largely
associated with the change in Sun's strategic direction announced by the
Company in October 1992. This provision included a $200 million after-tax
charge related to the Company's decision to withdraw from oil and gas
exploration activities outside of Canada and to dispose of certain crude
oil producing properties in Dubai and Argentina; a $148 million after-tax
charge related to restructuring efforts at Suncor which resulted in the
write-down to net realizable value of certain oil and gas properties and
oil sands assets; a $61 million after-tax charge related to the Company's
decision to downsize and reconfigure its Tulsa refining and marketing
operations; and a $47 million after-tax charge for miscellaneous
write-downs and accruals related to various Sun facilities and operations.
In 1991, a $103 million after-tax provision was established for employee
terminations, office closings and other matters related to the
restructuring and consolidation of Sun's corporate headquarters and
domestic refining and marketing businesses. The restructuring and
consolidation resulted in the elimination of approximately 1,100 salaried
positions and saved over $100 million on a pretax basis during 1992,
principally in the domestic refining and marketing businesses. (See Note 2
to the consolidated financial statements.)
ACCRUAL FOR ENVIRONMENTAL REMEDIATION -- In the third quarter of 1991, Sun
added $118 million ($78 million after tax) to its accrual for environmental
remediation relating to work at various domestic refineries, terminals and
Sun-owned and leased retail gasoline sales locations. Sun's policy is to
accrue environmental remediation costs for work at identified sites when an
assessment has indicated that cleanup costs are probable and reasonably
estimable.
INCOME (LOSS) FROM COAL OPERATIONS HELD FOR SALE -- In January 1993, Sun
decided to sell its coal and cokemaking assets. In connection with this
decision, Sun sold its western U.S. coal operations during 1993 and
continues to actively pursue the sale of its remaining eastern U.S. coal
and cokemaking operations.
The $2 million of after-tax earnings from coal operations during 1993
represents the income recognized by such operations in the fourth quarter.
As a discontinued operation, income from the coal business was excluded
from Sun's consolidated results of operations during the first nine months
of 1993.
Earnings from coal operations include after-tax provisions for write-down
of certain assets to net realizable value of $3 and $21 million in 1992 and
1991, respectively. Excluding these write-downs, earnings improved during
1992 due to the absence of losses from Oneida Coal Company, a wholly owned
subsidiary located in West Virginia which was sold in February 1992.
For additional information concerning Sun's coal operations held for sale,
see Note 2 to the consolidated financial statements.
INCOME (LOSS) FROM REAL ESTATE OPERATIONS HELD FOR SALE -- In October 1991,
the Company announced a plan to dispose of its investment in Radnor
Corporation ("Radnor"), its wholly owned real estate development
34
<PAGE>
subsidiary. In connection with this plan, the Company has significantly
reduced its real estate portfolio and continues to actively pursue a
program of controlled disposition of its remaining real estate investments.
Losses from real estate operations, prior to the measurement date of
September 30, 1991, amounted to $125 million after tax in 1991. This loss
included a $93 million after-tax provision for write-down of portions of
the Company's real estate development portfolio (principally land and
housing projects) to estimated net realizable value and $32 million of
other operating losses largely from housing projects and rental properties.
Also in 1991, the Company recorded a $130 million after-tax write-down to
reflect the estimated loss on disposition of real estate operations.
Results of operations after the measurement date through September 30, 1993
were charged against the accrual for loss on disposition. Effective
September 30, 1993, income from real estate operations, which totalled $1
million after tax during the fourth quarter, has been included in Sun's
consolidated net income.
As part of a restructuring of Radnor's recourse debt obligations during
1992, the Company, through its wholly owned subsidiary, The Claymont
Investment Company, has provided Radnor with a $100 million credit
facility. As of December 31, 1993, there was $23 million borrowed against
this facility. Amounts borrowed by Radnor under this facility are not
collateralized by any of its assets.
Radnor's recourse debt obligations require that its stockholder's equity,
which totalled $103 million at December 31, 1993, equal at least $100
million. In the event that Radnor's stockholder's equity declines below
this amount, the Company would have the option to make a capital
contribution to Radnor to avoid default by Radnor on these obligations or
to advance the remaining amount available under the $100 million credit
facility.
For additional information concerning Sun's real estate operations held for
sale, see Note 2 to the consolidated financial statements.
CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE -- The 1993 tax benefit
of $5 million reflects the cumulative effect for years prior to 1993 of a
change in the method of computing deferred income taxes from a deferred to
a liability approach. The 1992 after-tax charge of $261 million reflects
the cumulative effect for years prior to 1992 of a change in the method of
accounting for the cost of postretirement health care and life insurance
benefits.
For additional information concerning these changes in accounting
principles, see Notes 6, 7 and 13 to the consolidated financial statements.
ANALYSIS OF CONSOLIDATED STATEMENTS OF INCOME
1993 VS. 1992 -- Sales and other operating revenue decreased $1,265
million, or 12 percent, principally due to lower refined product sales
volumes ($457 million) and prices ($315 million) and lower revenues from
resales of purchased oil and refined products ($395 million). The $169
million increase in gain on divestments is primarily due to gains
recognized in 1993 on the sales of Suncor stock ($30 million), a products
pipeline system ($17 million), and oil and gas properties located primarily
in Dubai, Canada and the U.K. North Sea ($109 million) and the absence of
a loss on the sale of Suncor stock recognized in 1992 ($18 million). See
Note 3 to the consolidated financial statements for a discussion of the
gain on litigation settlement recorded in 1992. The $14 million increase
in other income is primarily due to the 1993 settlement of claims arising
from a 1987 fire at the oil sands plant ($17 million).
Cost of products sold and operating expenses decreased $1,371 million, or
19 percent, primarily due to lower resales of purchased oil and refined
products ($395 million) and lower domestic crude oil costs ($880 million)
in part due to an 8 percent decline in domestic refined product sales
volumes. Selling, general and administrative expenses decreased $14
million, or 2 percent, as a result of expense reductions at Sun's Canadian
operations, in part, due to a weaker Canadian dollar. Taxes, other than
income taxes increased $47 million, or 2 percent, as higher consumer excise
taxes ($64 million) were partially offset by lower crude oil and natural
gas production taxes ($12 million). Depreciation, depletion and
amortization decreased $31 million, or 8 percent, primarily as a result of
29 percent lower conventional crude oil production volumes and a lower
depreciable asset base at the Company's Tulsa refinery due to the
reconfiguration of this facility in 1992. Exploratory costs and leasehold
impairment decreased $38 million, or 63 percent, primarily due to the
absence of exploration expenses outside North America ($42 million). See
Note 2 to the consolidated financial statements for a discussion of the
provision for write-down of assets and other matters recorded in 1993 and
1992. The $24 million increase in minority interest is due to higher
earnings at Suncor and a reduction in the Company's ownership interest in
this Canadian subsidiary. Interest cost and debt expense decreased $16
million due principally to lower average interest rates at Suncor ($4
million) and a lower average debt balance at Helios Capital Corporation,
Sun's leasing subsidiary ($6 million).
For a discussion of the income from operations held for sale and the
cumulative effect of change in accounting principle, see Notes 2 and 7,
respectively, to the consolidated financial statements.
1992 VS. 1991 -- Sales and other operating revenue decreased $1,048
million, or 9 percent, principally due to lower refined product sales
prices ($522 million) and lower revenues from resales of purchased oil and
refined
35
<PAGE>
products ($759 million), partially offset by higher refined product sales
volumes ($208 million) and higher consumer excise taxes ($135 million). The
$1 million decrease in gain on divestments is primarily due to the loss on
the sale of Suncor stock recognized in 1992 ($18 million), partially offset
by the gain on the sale of a pipeline terminal ($9 million) and the absence
of the loss on the sale of substantially all of the assets of ECC
recognized in 1991 ($7 million). For a discussion of the gain on
litigation settlement recorded in 1992, see Note 3 to the consolidated
financial statements. Interest income decreased $24 million, or 52
percent, primarily due to a lower average loan portfolio at Helios Capital
Corporation ($10 million) and lower average investment balances and
interest rates ($14 million). The $24 million increase in other income was
primarily due to higher foreign exchange gains ($26 million).
Cost of products sold and operating expenses decreased $997 million, or 12
percent, primarily due to lower domestic crude oil costs ($116 million),
lower resales of purchased oil and refined products ($759 million) and
lower environmental remediation costs at domestic refinery locations ($47
million). Selling, general and administrative expenses decreased $157
million, or 19 percent, principally due to the impact of the 1991
restructuring and lower environmental remediation costs at domestic
terminals and retail gasoline sales locations ($78 million). Taxes, other
than income taxes increased $137 million, or 7 percent, due to higher
consumer excise taxes ($135 million). Depreciation, depletion and
amortization decreased $48 million, or 11 percent, as a result of lower
international crude oil and natural gas production volumes and an upward
revision at December 31, 1991 of a previous estimate of Sun's international
proved crude oil reserve base. Exploratory costs and leasehold impairment
decreased $42 million, or 41 percent, principally due to lower cash
exploration expenses ($23 million) and dry hole costs ($18 million) in part
due to Sun's decision to withdraw from all exploration activities outside
of Canada effective September 30, 1992. See Note 2 to the consolidated
financial statements for a discussion of the provision for write-down of
assets and other matters recorded in 1992 and 1991. Interest cost and debt
expense decreased $15 million, or 13 percent, due in part to a lower
borrowing position at Sun's leasing subsidiary.
For a discussion of the income (loss) from operations held for sale and the
cumulative effect of change in accounting principle, see Notes 2 and 7,
respectively, to the consolidated financial statements.
FINANCIAL CONDITION
CAPITAL RESOURCES AND LIQUIDITY
CASH GENERATION AND DIVESTMENT ACTIVITIES -- In 1993, Sun's net cash
provided by operating activities ("cash generation") was $413 million
compared to $305 million in 1992 and $695 million in 1991. The $108
million improvement in cash generation in 1993 was largely due to the $163
million increase in income before special items which primarily resulted
from the implementation of Sun's 1992 strategic plan. Partially offsetting
this positive factor was a $32 million increase in working capital
pertaining to operating activities. The $390 million decline in cash
generation in 1992 was largely attributable to significantly lower refined
product margins ($129 million) and an increase in working capital
pertaining to operating activities ($246 million). Cash generation was
significantly greater than net income (loss) during the 1991-93 period
primarily due to the significant amounts of noncash charges associated with
the special items shown separately in the Earnings Profile of Sun
Businesses and to the noncash charges which result from the capital
intensive nature of Sun's businesses.
Divestment activities also have enhanced Sun's cash flow and liquidity.
During the 1991-93 period, proceeds from divestments totalled $702 million,
including $124 million received in 1991 from the sale of ECC, $198 million
received in the 1992-93 period from the sale of Suncor stock and $92
million received in 1993 from the sale of certain exploration and
production properties located in Dubai, Canada and the U.K. North Sea. In
1992, Sun also received a $130 million net cash payment which settled all
disputes with the government of Iran and the National Iranian Oil Company
relating to the expropriation of Sun's oil production interests in Iran
following the Iranian Revolution. In addition, coal operations held for
sale provided $161 million of cash in 1993 primarily as a result of the
sale of Sun's western U.S. coal operations.
Net cash provided by operating and divestment activities has enabled, and
is expected to continue to enable, Sun to sustain the current cash
dividend, pursue its capital program and fulfill current financing
obligations.
CASH, WORKING CAPITAL AND FINANCIAL CAPACITY -- At December 31, 1993, cash
and cash equivalents and short-term investments were $118 million compared
to $179 million at December 31, 1992, a decrease of 34 percent. At the end
of 1993, Sun had a working capital deficit of $228 million compared to a
working capital deficit of $415 million at December 31, 1992. This
reduction in the working capital deficit primarily reflects the impactof
the various divestment activities during 1993. Sun's working capital
position is considerably stronger than indicated because of the relatively
low historical costs assigned under the LIFO method of accounting to a
significant portion of the inventories reflected in the consolidated
balance sheet. The current replacement cost of all such inventories
exceeds the carrying value at December 31, 1993 by $390 million.
Inventories valued at LIFO, which consist of crude oil and refined
products, are
36
<PAGE>
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 will continue to be subject to volatility primarily due to
fluctuations in refined product margins and crude oil prices. 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. There were no borrowings against
these revolving credit agreements at December 31, 1993. These facilities
support Sun's commercial paper borrowings, which amounted to $50 million at
December 31, 1993. The Company also has access to short-term financing
under non-committed money market facilities. At December 31, 1993, $60
million was borrowed through these facilities. Suncor also has a revolving
term credit facility available for its own use aggregating $302 million. At
December 31, 1993, Suncor had borrowed $91 million against this facility.
In addition, Sun's capital spending levels from time to time are adjusted
in response to changes in cash generation as a portion of capital spending
is discretionary in nature.
As of December 31, 1993, Sun's long-term debt to long-term capitalization
ratio was 26.8 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. In addition, the Company has the option of issuing additional
common stock and up to 15 million shares of preference stock without par
value as a means of increasing its equity base. However, there are no
current plans to issue either common stock or preference stock.
Furthermore, no commitments have been made with respect to any investment
opportunity which would require the use of a major portion of Sun's
financial capacity.
ID: GRAPHIC (BAR GRAPH)
CAPITALIZATION
IN MILLIONS OF DOLLARS
(SOLID PORTION OF BAR) (SCREENED PORTION OF BAR)
91 ... 3,548 24% Long-Term Debt 76% Stockholders' Equity
92 ... 2,688 29% Long-Term Debt 71% Stockholders' Equity
93 ... 2,710 27% Long-Term Debt 73% Stockholders' Equity
<PAGE>
CAPITAL EXPENDITURES
IN MILLIONS OF DOLLARS
<TABLE>
<CAPTION>
(Solid Portion(Screened Portion(Solid Portion(Screened Portion
of Bar) of Bar) of Bar) of Bar)
<S> <C> <C> <C> <C>
91 ... 61535% Suncor32% Base Infrastructure13% Legally Required20% Growth
92 ... 53037% Suncor29% Base Infrastructure15% Legally Required19% Growth
93 ... 61233% Suncor25% Base Infrastructure19% Legally Required23% Growth
94 plan 79029% Suncor19% Base Infrastructure15% Legally Required37% Growth
</TABLE>
<PAGE>
CAPITAL EXPENDITURES
(Millions of Dollars)
1994 Plan 1993 1992* 1991*
- ----------------------------------------------------------------------------
Fuels:
Wholesale fuels $134 $148 $121 $126
Branded marketing 145 107 77 82
Lubricants:
Lubes 3 11 4 17
Related fuels 20 41 16 37
Chemicals 69 23 21 9
Logistics 88 29 12 19
International exploration
and production 103 51 85** 107**
Canada (Suncor) 228 202 194 217
Corporate -- -- -- 1
- ----------------------------------------------------------------------------
Consolidated capital expenditures $790 $612 $530 $615
- ----------------------------------------------------------------------------
*Restated to conform to 1993 presentation.
**Includes exploration-related capital expenditures of $58 and $70 million
in 1992 and 1991, respectively, which were spent prior to the Company's
decision to withdraw from oil and gas exploration activities outside of
Canada, effective September 30, 1992.
Sun's capital expenditures are expected to increase significantly in 1994
largely due to greater spending on income growth projects in Branded
Marketing, Logistics, Chemicals and International Production, either
through upgrade and expansion of existing sites and facilities or through
acquisitions and joint ventures when market opportunities warrant. In
addition, higher environmental outlays at Suncor's oil sands plant are
expected to contribute to the increase in 1994 capital spending.
In the Wholesale Fuels business, capital expenditures during the 1991-94
period reflect a continuing emphasis on required spending for environmental
related projects and enhancements to the base infrastructure at Sun's three
northeastern U.S. refineries. Environmental spending for Wholesale Fuels
averaged $51 million per year during the 1991-93 period and should
approximate $84 million in 1994. Projects for 1994 include ongoing work
being done to comply with amendments to the Clean Air Act and to complete
the $100 million upgrade of the waste water processing facilities at Sun's
Marcus Hook refinery. A similar $40 million project to upgrade the waste
water treatment facilities at the Toledo refinery was completed in 1993.
Capital spending in the Branded Marketing business during 1993 was largely
concentrated on ongoing upgrades of service stations, acquisitions and the
replacement of underground storage tanks. During 1994, Branded Marketing
capital outlays will be focused on the conversion of the Company's existing
ATLANTIC(R) gasoline outlets to SUNOCO(R) and the conversion of its SUNOCO
FOOD MARKET(R) convenience stores to APLUS(R). These conversions are
expected to be completed by year-end 1995. The Company is also continuing
to seek opportunities to increase market share in the northeastern United
States where Sun believes it has certain logistical and competitive
advantages. In
37
<PAGE>
pursuit of this strategy, in 1993, Sun acquired 23 service stations in
western Massachusetts and has secured a 12-year contract to supply 21
high-volume service stations along the Pennsylvania Turnpike. Environmental
capital outlays continue to be significant to Branded Marketing operations
and have been made largely to replace underground storage tanks at retail
service stations. Such spending averaged $19 million during the 1991-93
period and should approximate $52 million in 1994. The increase in 1994
environmental capital spending reflects the Company's effort to minimize
station downtime by accelerating the replacement of underground storage
tanks as it converts its existing ATLANTIC(R) gasoline outlets to
SUNOCO(R). Environmental regulations require that such replacements be
completed by 1998.
In the Lubricants business, capital spending during 1994 will be
concentrated on minor infrastructure and environmental expenditures at
Sun's Tulsa and Puerto Rico refineries in support of the Company's strategy
to focus operations at these facilities on lubricants manufacturing. The
changes will allow both refineries to continue to emphasize lube oil
production while significantly reducing the level of fuels produced.
Capital spending during 1993 was also focused on modifications to support
the Company's strategy to emphasize lubricants production. Capital
spending in the Chemicals business is expected to increase significantly in
1994, primarily due to the construction of a 34-million gallon per year
cyclohexane plant at Sun's Marcus Hook refinery and the completion of a
project begun in 1993 to expand benzene extraction capacity at this
refinery. These projects are targeted for completion by the end of 1994 at
an estimated total cost of $65 million. During 1992, Sun expanded its
Chemicals business through the acquisition of the ethylene and ethylene
oxide businesses and assets of Olin Corporation's chemical complex in
Brandenburg, KY for $15 million. In addition, during 1992, Sun became a
one-third partner in bef, a joint venture formed for the purpose of
constructing, owning and operating a mtbe production facility in Mont
Belvieu, Texas. The plant, which has a designed capacity of 12,600 barrels
daily, is presently under construction and is expected to begin production
in mid-1994. Approximately 80 percent of the estimated $220 million
required to construct this facility is being financed through external
borrowings by the partnership of which one-third ($43 million at December
31, 1993) is guaranteed by the Company. Sun made capital contributions of
$8 and $5 million to the joint venture in 1993 and 1992, respectively, and
expects to make a final contribution of $2 million in 1994. For additional
information concerning Sun's participation in this joint venture, see Note
14 to the consolidated financial statements.
In the Logistics business during 1994, capital spending will include
outlays on an ongoing project to construct an inter-refinery pipeline
between Sun's Philadelphia and Marcus Hook refineries. This project, which
is expected to be completed by early 1995, will provide opportunities for
additional manufacturing synergies and cost efficiencies from product
movements between the two refineries. Sun will continue to pursue
opportunities to strengthen and grow its Logistics business, particularly
in areas which can support Sun's major refinery systems and marketing
areas. In 1993, Sun acquired a 126-mile crude oil pipeline for $9 million.
This pipeline operates from Marysville, MI to Toledo, OH, has a capacity of
110 thousand barrels daily and provides midwestern refineries (including
Sun's Toledo refinery) access to Canadian crude oil.
As a result of Sun's October 1992 decision to withdraw from all oil and gas
exploration activities outside of Canada, International Exploration and
Production capital expenditures in the 1993-94 period are limited to
production, development and acquisition activities principally in the U.K.
North Sea. As part of this strategy, during 1993, Sun acquired additional
oil producing interests in the Balmoral and Stirling fields in the U.K.
North Sea. During 1993, the Company also spent $30 million which
essentially satisfied its remaining exploration commitments. These costs
were charged against an accrual established as part of the Provision for
Write-down of Assets and Other Matters recorded in 1992. In 1994, the
Company will continue to develop its existing reserve base principally in
the U.K. North Sea and will seek additional financially attractive
opportunities for increasing its reserves position in this area.
In Canada, capital expenditures have been funded from Suncor's own cash
generation and, when necessary, from external borrowings by Suncor which
are not guaranteed by the Company. Suncor's capital spending for 1994 is
budgeted at $228 million and consists of $97 million for conventional oil
and gas exploration and production activities, $95 million for oil sands
operations and $36 million for refining and marketing. The 13 percent
increase in overall Canadian 1994 capital spending is largely due to an
anticipated increase in the level of environmental spending at Suncor's oil
sands plant in Fort McMurray, Alberta. Expenditures include outlays to
reduce odorous emissions and for the addition of limestone scrubbing
technology to reduce sulfur dioxide emissions from the plant's steam and
electricity generating facilities. The total cost of this project, which
is subject to approval by
38
<PAGE>
Suncor's board of directors, is $155-$175 million over a three-year period,
with expenditures of approximately $30 million expected in 1994. This
project replaces a prior plan to construct a new utilities plant at the
site, which after further commercial evaluation in 1993, was not pursued.
Capital expenditures in the oil sands business for 1993 were primarily for
the investment in new mining equipment required to convert the oil sands
operation to a more flexible and efficient truck-and-shovel mining method,
which is now fully operational. The truck-and-shovel system replaced the
bucketwheel excavation process which had been in place since the plant
began operations in 1967. Oil sands capital expenditures in 1992 included
$11 million required to rebuild the gas oil unifiner damaged in a fire at
the plant in April 1992. Suncor's exploration and production operations
are expected to continue to grow through a focused exploration, development
and acquisition program. Capital outlays for the 1991-93 period included
$59 million for the acquisition of proved properties which increased Sun's
proved reserves by an estimated 6 million barrels of crude oil and 180
billion cubic feet of natural gas. Capital expenditures for Canadian
refining and marketing during the 1991-93 period have focused on programs
to upgrade the retail gasoline network and improve refinery performance. In
1994, Suncor will increase its investment in these programs as it
implements its downstream strategy announced in September 1993 to
rationalize and upgrade its service station portfolio, improve existing
refining operations, and take advantage of Suncor's ability to custom-blend
crude oil at its oil sands plant and upgrade it into higher-value products
at its Sarnia, Ontario refinery.
The major factors affecting Sun's actual 1994 capital expenditures are
expected to be the amount of 1994 cash generation, which will be determined
largely by refined product margins and crude oil prices, and the amount of
1994 proceeds from divestment activities. If actual 1994 net cash provided
by operating and divestment activities is significantly lower than
projected amounts, capital outlays may reflect a corresponding decrease
from the planned amount.
See "Environmental Matters" below for a discussion of Sun's capital
expenditures in connection with pollution abatement activities.
ENVIRONMENTAL MATTERS
As the first Fortune 500(R) Company to endorse the Coalition for
Environmentally Responsible Economies ("CERES") principles, Sun has
continued to focus on environmental requirements and practices. Sun is
subject to numerous federal, state, local and foreign laws which regulate
the discharge of materials into, or otherwise relate to the protection of,
the environment. These laws have required, and are expected to continue to
require, Sun to make significant expenditures of both a capital and expense
nature. As these laws evolve, it is expected that they will continue to
have a significant impact on the conduct of Sun's operations.
Sun has funded its environmental expenditures through cash generated by
operating activities. The following table summarizes Sun's expenditures
for environmental projects and compliance activities (in millions of
dollars):
1993 1992
- ------------------------------------------------------------------------------
Pollution abatement capital* $123 $ 75
Remediation and reclamation 53 48
Operations, maintenance and administration 108 116
- ------------------------------------------------------------------------------
$284 $239
- ------------------------------------------------------------------------------
*Capital expenditures for pollution abatement are expected to approximate
$192 and $209 million in 1994 and 1995, respectively.
Certain environmental laws subject Sun to possible obligations to remove or
mitigate the effects on the environment of the disposal or release of
certain wastes and petroleum substances. Included are remediation at Sun's
refineries, service stations, terminals and pipeline and truck
transportation facilities, and third-party or formerly owned sites at which
contaminants generated by Sun may be located. Several of the more
significant federal laws applicable to the Company's operations include the
Clean Air Act, the Comprehensive Environmental Response, Compensation and
Liability Act ("CERCLA") and the Solid Waste Disposal Act, as amended by
the Resource Conservation and Recovery Act ("RCRA"). Additionally, various
state and local governments have adopted or are considering the adoption of
similar laws and regulations.
The Clean Air Act establishes stringent criteria for regulating air toxics
at operating facilities by mandating major reductions in allowable
emissions and establishing a more comprehensive list of substances deemed
to be air toxics. The Clean Air Act requires refiners to market
cleaner-burning gasoline that reduces emissions of certain toxic and
conventional pollutants. Compliance with Clean Air Act requirements
necessitates significant alterations to the composition of gasoline sold in
most of Sun's northeastern U.S. branded marketing area by reducing the
maximum allowable benzene content, reducing summertime Reid Vapor Pressure
("RVP") and increasing the minimum oxygenate content. It is expected that
all refiners will not be willing or able to make the significant capital
expenditures necessary to produce cleaner-burning reformulated fuels and
that a rationalization of U. S. refining capacity will occur. Despite
uncertainties regarding the impact on the future profitability of Sun's
domestic petroleum businesses of the Clean Air Act, as amended by
additional regulations, management of Sun believes these businesses are
well positioned to meet the air toxics and reformulated fuel requirements
under present regulations as they are phased in over the next few years.
39
<PAGE>
Two other federal laws, CERCLA and RCRA, and related state laws subject the
Company to the potential obligation to remove or mitigate the environmental
effects of the disposal or release of certain pollutants at various sites.
Under CERCLA, Sun is subject to potential joint and several liability for
the costs of remediation at sites at which it has been identified as a
"potentially responsible party" ("PRP"). As of December 31, 1993, Sun had
been named as a PRP at 40 sites identified or potentially identifiable as
"Superfund" sites under CERCLA. Sun has reviewed the nature and extent of
its involvement at each site and other relevant circumstances and, based
upon the other parties involved or Sun's negligible participation therein,
believes that its potential liability associated with such sites will not
be significant. Under RCRA and related state laws, corrective remedial
action has been initiated at some of its facilities and will be required to
be undertaken by the Company at various of its other facilities. The cost
of such remedial actions could be significant but is expected to be
incurred over an extended period of time.
Sun establishes accruals related to environmental remediation activities
for work at identified sites, including those under CERCLA and RCRA and
related state laws, where an assessment has indicated that cleanup costs
are probable and reasonably estimable. Such accruals are based on
currently available facts, estimated timing of remedial actions and related
inflation assumptions, existing technology and presently enacted laws and
regulations. Sun's international production and Canadian operations are
subject to less demanding environmental regulatory requirements than its
U.S. operations and these less stringent requirements are considered in
determining the accruals for those locations. Sun's accruals reflect the
Company's philosophy of aggressively managing remediation costs to ensure
the most cost-effective method of protecting the health, safety and
environment of affected communities. Sun's accrued liability for
environmental remediation was $259 and $258 million at December 31, 1993
and 1992, respectively. Sun also accrues estimated dismantlement,
restoration, reclamation and abandonment costs at its oil and gas
exploration and production and oil sands mining operations through a charge
against income primarily on a units of production basis. The accrued
liability for these activities, which are conducted primarily by Suncor,
Sun's 55 percent owned subsidiary, totalled $119 and $118 million at
December 31, 1993 and 1992, respectively. Pretax charges against income
for environmental remediation and reclamation totalled $45, $62 and $159
million for 1993, 1992 and 1991, respectively. Claims for recovery of
environmental liabilities that are probable of realization totalled $17
million at December 31, 1993 and are included in deferred charges and other
assets in the consolidated balance sheet.
Total future costs for environmental remediation activities will depend
upon, among other things, the identification of additional sites, the
determination of the extent of the contamination of each site, the timing
and nature of required remedial actions, the technology available and
needed to meet the various existing requirements, the nature and extent of
future environmental laws, inflation rates and the determination of Sun's
liability at multi-party sites, if any, in light of the number,
participation level and financial viability of other parties.
Management believes that the overall costs for environmental activities are
likely to be significant but are expected to be incurred over an extended
period of time and to be funded from Sun's net cash flow from operating
activities. Although potentially significant with respect to results of
operations, cash flow or liquidity for any one quarter or year, management
believes that such costs, including those required by CERCLA and RCRA, will
not have a material impact on Sun's consolidated financial position or,
over an extended period of time, on Sun's cash flow or liquidity.
CASH DIVIDENDS
The Company paid cash dividends on common stock at an annual rate of $1.80
per share during the 1991-93 period. Sun expects to continue to sustain
the current cash dividend.
POSTEMPLOYMENT BENEFITS
In November 1992, Statement of Financial Accounting Standards No. 112,
"Employers' Accounting for Postemployment Benefits" ("SFAS No. 112") was
issued. It requires companies to recognize the obligation to provide
benefits to their former or inactive employees after employment but before
retirement. The new accounting standard will be adopted in 1994 and is not
expected to have a material impact on Sun's income from continuing
operations or financial position. Implementation of SFAS No. 112 will not
affect Sun's cash flow or liquidity.
INFLATION ACCOUNTING
In recent years, the rate of inflation has declined to a more modest rate;
however, continued inflation over a period of years distorts conventional
measures of financial performance and condition. Financial statements
report historical costs and do not reflect subsequent price changes in the
general purchasing power of the dollar or the price changes of specific
assets.
Sun's results of operations adjusted for inflation would be significantly
less than historical cost results of operations due to the higher
inflation-adjusted depreciation, depletion and amortization resulting from
the inflation-adjusted amount of properties, plants and equipment exceeding
the historical amount.
Inflation also affects monetary assets, such as cash and receivables, since
these assets will purchase fewer goods and services in time. Conversely,
debtors benefit during periods of higher-than-expected inflation because
less purchasing power will be required to satisfy their obligations. Since
Sun's monetary liabilities are greater than its monetary assets, there are
unrealized purchasing power gains.
40
<PAGE>
CONSOLIDATED STATEMENTS OF INCOME Sun Company, Inc. and Subsidiaries
(Millions of Dollars Except Per Share Amounts)
For the Years Ended December 31 1993 1992* 1991*
- ------------------------------------------------------------------------------
REVENUES
Sales and other operating revenue
(including consumer excise taxes
of $1,883 in 1993, $1,819 in 1992
and $1,684 in 1991) $9,180 $10,445 $11,493
Gain on divestments (Note 2) 174 5 6
Gain on litigation settlement (Note 3) -- 178 --
Interest income 18 22 46
Income (loss) from investments in
operations held for sale (Note 2) (1) -- --
Other income (Note 4) 46 32 8
- ------------------------------------------------------------------------------
9,417 10,682 11,553
COSTS AND EXPENSES
Cost of products sold and
operating expenses 5,821 7,192 8,189
Selling, general and administrative
expenses 647 661 818
Taxes, other than income taxes (Note 5) 2,024 1,977 1,840
Depreciation, depletion and amortization 354 385 433
Exploratory costs and leasehold
impairment 22 60 102
Provision for write-down of assets
and other matters (Note 2) 23 745 156
Minority interest 27 3 16
Interest cost and debt expense 81 97 112
Interest capitalized (8) (6) (5)
- ------------------------------------------------------------------------------
8,991 11,114 11,661
Income (loss) from continuing
operations before provision (credit)
for income taxes and cumulative effect
of change in accounting principle 426 (432) (108)
Provision (credit) for income
taxes (Note 6) 143 (115) 22
- ------------------------------------------------------------------------------
Income (loss) from continuing
operations before cumulative effect
of change in accounting principle 283 (317) (130)
Income (loss) from discontinued
operations (Note 2) -- 19 (257)
Cumulative effect of change in
accounting principle (Note 7) 5 (261) --
- ------------------------------------------------------------------------------
NET INCOME (LOSS) $ 288 $ (559) $ (387)
- ------------------------------------------------------------------------------
Earnings (loss) per share of
common stock:**
Income (loss) from continuing
operations before cumulative
effect of change in
accounting principle $2.65 $(2.98) $(1.23)
Income (loss) from discontinued
operations -- .18 (2.42)
Cumulative effect of change in
accounting principle .05 (2.46) --
- ------------------------------------------------------------------------------
NET INCOME (LOSS) $2.70 $(5.26) $(3.65)
- ------------------------------------------------------------------------------
Cash dividends paid on common stock $192 $191 $191
Cash dividends per share of common stock $1.80 $1.80 $1.80
- ------------------------------------------------------------------------------
*Reclassified to conform to 1993 presentation.
**Based on the weighted average number of shares outstanding (in thousands)
of 106,561 in 1993, 106,212 in 1992 and 106,070 in 1991.
(See Accompanying Notes)
41
<PAGE>
CONSOLIDATED BALANCE SHEETS Sun Company, Inc. and Subsidiaries
(Millions of Dollars)
At December 31 1993 1992*
- ------------------------------------------------------------------------------
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 118 $ 179
Accounts and notes receivable, net of allowances
of $11 in both 1993 and 1992 572 701
Inventories (Note 8) 464 451
Deferred income taxes (Note 6) 123 --
- ------------------------------------------------------------------------------
TOTAL CURRENT ASSETS 1,277 1,331
- ------------------------------------------------------------------------------
INVESTMENT IN COAL OPERATIONS HELD FOR SALE (Note 2) 113 282
INVESTMENT IN REAL ESTATE OPERATIONS HELD FOR
SALE (Note 2) 134 126
LONG-TERM RECEIVABLES AND INVESTMENTS (Note 9) 217 259
PROPERTIES, PLANTS AND EQUIPMENT, net (Note 10) 3,831 3,739
DEFERRED CHARGES AND OTHER ASSETS 328 334
- ------------------------------------------------------------------------------
TOTAL ASSETS $5,900 $6,071
- ------------------------------------------------------------------------------
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 641 $ 747
Accrued liabilities 487 640
Short-term borrowings (Note 11) 110 215
Current portion of long-term debt (Note 12) 26 45
Taxes payable 241 99
- ------------------------------------------------------------------------------
TOTAL CURRENT LIABILITIES 1,505 1,746
- ------------------------------------------------------------------------------
LONG-TERM DEBT (Note 12) 726 792
RETIREMENT BENEFIT LIABILITIES (Note 13) 523 514
DEFERRED INCOME TAXES (Note 6) 369 400
OTHER DEFERRED CREDITS AND LIABILITIES 421 464
COMMITMENTS AND CONTINGENT LIABILITIES (Note 14)
MINORITY INTEREST (Note 2) 372 259
STOCKHOLDERS' EQUITY (Notes 15 and 16)
Common stock, par value $1 per share
Authorized - 200,000,000 shares;
Issued, 1993 - 129,312,735 shares;
Issued, 1992 - 129,244,929 shares 129 129
Capital in excess of par value 1,303 1,302
Cumulative foreign currency translation adjustment (62) (47)
Earnings employed in the business 1,636 1,540
- ------------------------------------------------------------------------------
3,006 2,924
Less common stock held in treasury, at cost
1993 - 22,629,825 shares; 1992 - 22,832,247 shares 1,022 1,028
- ------------------------------------------------------------------------------
TOTAL STOCKHOLDERS' EQUITY 1,984 1,896
- ------------------------------------------------------------------------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $5,900 $6,071
- ------------------------------------------------------------------------------
*Reclassified to conform to 1993 presentation.
Sun follows the successful efforts method of accounting for oil and gas
exploration and production operations.
(See Accompanying Notes)
42
<PAGE>
CONSOLIDATED STATEMENTS OF CASH FLOWS Sun Company, Inc. and Subsidiaries
(Millions of Dollars)
For the Years Ended December 31 1993 1992* 1991*
- ------------------------------------------------------------------------------
INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 288 $(559) $(387)
Adjustments to reconcile net income
(loss) to net cash provided by
operating activities:
(Income) loss from discontinued
operations -- (19) 257
Cumulative effect of change in
accounting principle (5) 261 --
Provision for write-down of assets
and other matters 23 745 156
Gain on litigation settlement -- (178) --
Gain on divestments (174) (5) (6)
Accrual for environmental
remediation -- -- 118
Depreciation, depletion and
amortization 354 385 433
Dry hole costs and leasehold
impairment 14 34 53
Deferred income taxes 59 (265) (123)
Changes in working capital
pertaining to operating activities:
Accounts and notes receivable 106 132 370
Inventories (13) 13 71
Accounts payable and accrued
liabilities (277) (298) (351)
Taxes payable (3) (2) 1
Other 41 61 103
- ------------------------------------------------------------------------------
Net cash provided by operating activities 413 305 695
- ------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (612) (530) (615)
Cash provided by coal operations
held for sale 161 42 1
Cash used by real estate operations
held for sale (7) (72) (22)
Proceeds from divestments 370 103 229
Proceeds from litigation settlement -- 130 --
Other (26) 1 18
- ------------------------------------------------------------------------------
Net cash used in investing activities (114) (326) (389)
- ------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds from (repayments of)
short-term borrowings (105) 72 (69)
Proceeds from issuance of long-term debt 26 88 163
Repayments of long-term debt (97) (140) (114)
Cash dividend payments (192) (191) (191)
Other 8 8 (5)
- ------------------------------------------------------------------------------
Net cash used in financing activities (360) (163) (216)
- ------------------------------------------------------------------------------
Net increase (decrease) in cash and
cash equivalents (61) (184) 90
Cash and cash equivalents at
beginning of year 179 363 273
- ------------------------------------------------------------------------------
Cash and cash equivalents at end of year $ 118 $ 179 $ 363
- ------------------------------------------------------------------------------
*Reclassified to conform to 1993 presentation.
(See Accompanying Notes)
43
<PAGE>
<PAGE>
CONSOLIDATED STATEMENTS OF
CHANGES IN STOCKHOLDERS' EQUITY Sun Company, Inc. and Subsidiaries
(Dollars in Millions, Shares in Thousands)
<TABLE>
<CAPTION>
Capital Common Stock
Common Stock in Earnings Held in
------------------ Excess Employed Treasury
Number of Par of Par Translation in the --------------
Shares Value Value Adjustment Business Shares Cost
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
AT DECEMBER 31, 1990 129,138 $129 $1,300 $ 9 $2,868 22,950 $1,032
Net loss -- -- -- -- (387) -- --
Cash dividend payments -- -- -- -- (191) -- --
Purchases for treasury -- -- -- -- -- 196 6
Issued under management
incentive plans 24 -- 1 -- -- -- --
Sales to dividend
reinvestment plan -- -- -- -- -- (80) (3)
Foreign currency trans-
lation adjustment -- -- -- 2 -- -- --
Other -- -- -- -- -- (2) --
- ---------------------------------------------------------------------------------------------
AT DECEMBER 31, 1991 129,162 $129 $1,301 $ 11 $2,290 23,064 $1,035
Net loss -- -- -- -- (559) -- --
Cash dividend payments -- -- -- -- (191) -- --
Issued under management
incentive plans 83 -- 2 -- -- -- --
Sales to dividend
reinvestment plan -- -- (1) -- -- (207) (6)
Foreign currency trans-
lation adjustment -- -- -- (58) -- -- --
Other -- -- -- -- -- (25) (1)
- ---------------------------------------------------------------------------------------------
AT DECEMBER 31, 1992 129,245 $129 $1,302 $(47) $1,540 22,832 $1,028
Net income -- -- -- -- 288 -- --
Cash dividend payments -- -- -- -- (192) -- --
Issued under management
incentive plans 68 -- 2 -- -- -- --
Sales to dividend
reinvestment plan -- -- (1) -- -- (202) (6)
Foreign currency trans-
lation adjustment -- -- -- (15) -- -- --
- ---------------------------------------------------------------------------------------------
AT DECEMBER 31, 1993 129,313 $129 $1,303 $(62) $1,636 22,630 $1,022
- ---------------------------------------------------------------------------------------------
(See Accompanying Notes)
</TABLE>
<PAGE>
44
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Sun Company, Inc. and
Subsidiaries
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION
The accompanying consolidated financial statements contain the accounts of
Sun Company, Inc. ("Company") and all subsidiaries that are controlled
(generally more than 50 percent owned) except those engaged in coal and
real estate operations (collectively, "Sun"). Prior to the fourth quarter
of 1993, coal and real estate operations were accounted for as discontinued
operations. Effective in the fourth quarter of 1993, such operations are
accounted for as investments held for sale (Note 2). Affiliated companies
over which the Company exercises significant influence but that are not
controlled (generally 20 to 50 percent owned) are accounted for by the
equity method.
CASH EQUIVALENTS AND INVESTMENTS
Sun considers all highly liquid investments with a remaining maturity of
three months or less at the time of purchase to be cash equivalents. Sun's
cash equivalents consist principally of time deposits and certificates of
deposit. Investments with maturities from greater than three months to one
year are classified as short-term investments while those with maturities
in excess of one year are classified as long-term investments. Cash
equivalents and investments are stated at cost which approximates market
value.
INVENTORIES
Inventories of crude oil and refined products are valued at the lower of
cost or market. The cost of such inventories is determined principally
using the last-in, first-out method ("LIFO"). Effective January 1, 1991,
Sun changed its method of accounting for the cost of crude oil and re-fined
product inventories at Suncor Inc. ("Suncor"), the Company's Canadian
subsidiary, from the first-in, first-out method ("FIFO") to the LIFO method
(Notes 7 and 8).
Materials, supplies and other inventories are valued principally at the
lower of average cost or market.
OIL AND GAS EXPLORATION AND PRODUCTION OPERATIONS
The successful efforts method of accounting is followed for costs incurred
in oil and gas exploration and production operations. In October 1992, Sun
announced that it was withdrawing from oil and gas exploration activities
outside North America. In connection therewith, Sun recorded a write-down
to net realizable value of the assets affected by this decision and
established an accrual for existing exploration commitments associated with
its exploration operations outside North America (Note 2). Actual costs
incurred to satisfy these exploration commitments have been charged to the
accrual.
CAPITALIZATION POLICY -- Acquisition costs for proved and unproved
properties are capitalized when incurred. Costs of unproved properties are
transferred to proved properties when proved reserves are found.
Exploration costs, including geological and geophysical costs and costs of
carrying and retaining unproved properties, are charged against income as
incurred. Exploratory drilling costs are capitalized initially; however,
if an exploratory well is plugged and abandoned, such capitalized costs are
charged to expense, as dry hole costs, at that time. Development costs are
capitalized. Costs incurred to operate and maintain wells and equipment
and to lift oil and gas to the surface are generally expensed.
LEASEHOLD IMPAIRMENT AND DEPRECIATION, DEPLETION AND AMORTIZATION --
Unproved properties whose costs are individually significant are evaluated
for impairment by management. Impairment of unproved properties whose
acquisition costs are not individually significant is provided for through
amortization of the portion of such properties not expected to become
producing over their projected holding periods; costs of such properties
surrendered or abandoned are charged to accumulated amortization.
The acquisition costs of proved properties are depleted by the unit of
production method based on proved reserves. Capitalized exploratory
drilling costs which result in the discovery of proved reserves and
development costs are amortized/depreciated by the unit of production
method based on proved developed reserves. The unit determination is by
field.
DISMANTLEMENT, RESTORATION AND ABANDONMENT COSTS -- Estimated costs of
future dismantlement, restoration and abandonment are accrued as part of
depreciation, depletion and amortization expense on a unit of production
basis; actual costs are charged to the accrual.
MINING OPERATIONS
CAPITALIZATION POLICY -- Property acquisition costs are capitalized.
Exploration costs and costs of carrying and retaining undeveloped
properties are charged against income as incurred. Mine development costs
incurred prior to the operating stage or to increase the capacity or
productivity of operating mines are capitalized. Mine development costs
incurred to maintain current production are generally expensed.
Expenditures for plant and mine equipment for significant additions and
replacements are capitalized. Other plant and mining equipment costs are
generally charged against income as incurred. Mobile equipment
acquisitions are capitalized.
Overburden removal costs are deferred and expensed as the underlying
reserves are mined.
45
<PAGE>
DEPRECIATION AND DEPLETION -- Property acquisition costs and capitalized
development costs are depleted by the unit of production method based on
proven reserves. Capitalized plant and equipment are generally depreciated
over their useful lives principally on a straight-line basis.
DISMANTLEMENT, RESTORATION, RECLAMATION AND ABANDONMENT COSTS -- Estimated
costs of future dismantlement, restoration, reclamation and abandonment are
accrued through a charge against income currently on a unit of production
basis; actual costs are charged to the accrual.
DEPRECIATION AND RETIREMENTS
Plants and equipment, other than those relating to oil and gas exploration
and production and mining operations, are generally depreciated on a
straight-line basis over their estimated useful lives.
Gains and losses on the disposals of fixed assets are generally reflected
in income. For certain property groups the cost, less salvage value, of
property sold or abandoned is charged to accumulated depreciation,
depletion and amortization, except that gains and losses for these groups
are taken into income for unusual retirements or retirements involving an
entire property group.
ENVIRONMENTAL REMEDIATION
Sun accrues environmental remediation costs for work at identified sites
where an assessment has indicated that cleanup costs are probable and
reasonably estimable. Such accruals are based on currently available
facts, estimated timing of remedial actions and related inflation
assumptions, existing technology and presently enacted laws and
regulations.
REFINERY MAINTENANCE SHUTDOWNS
Maintenance and repair costs incurred in connection with major refinery
maintenance shutdowns which exceed $500 thousand are capitalized when
incurred and then charged against income over the period benefitted by the
major maintenance shutdown (usually 3 to 4 years).
TAXES
Effective January 1, 1993, Sun adopted the provisions of Statement of
Financial Accounting Standards No. 109 "Accounting for Income Taxes" ("SFAS
NO. 109"). SFAS NO. 109 changed the method of computing deferred income
taxes from a deferred to a liability approach. Under the liability method,
deferred income taxes are determined based on temporary differences between
the financial statement and tax bases of assets and liabilities, using
enacted tax rates in effect during the years in which the differences are
expected to reverse, and on available tax credits and carryforwards.
Previously, under the deferred method, deferred income taxes were provided
using the rates in effect when the timing differences occurred for those
items of revenue and expense which were recognized for financial reporting
in different periods than for income tax purposes (Notes 6 and 7).
U.S. income and foreign withholding taxes are provided on undistributed
earnings of foreign subsidiaries deemed not to be permanently invested to
the extent that taxes on distribution of such earnings would not be offset
by foreign tax credits. In addition, U.S. income taxes are provided on
undistributed earnings of affiliated companies.
POSTRETIREMENT HEALTH CARE AND LIFE INSURANCE BENEFITS
Sun provides health care and life insurance benefits for substantially all
retirees. Such benefits are provided through insurance policies which have
premiums based on benefits paid during the year. These premiums are
prefunded or funded currently.
Sun adopted Statement of Financial Accounting Standards No. 106,
"Employers' Accounting for Postretirement Benefits Other than Pensions"
("SFAS NO. 106") effective January 1, 1992. Under SFAS NO. 106, the
expected cost of the benefits provided by existing postretirement plans is
actuarially determined and accrued ratably from the date of hire to the
date the employee is fully eligible to receive the benefits. Previously,
postretirement benefits expense was recognized when the insurance premiums
were due (Note 7).
FOREIGN CURRENCY TRANSLATION
Management has determined the U.S. dollar to be the functional currency for
all foreign operations except for those in Canada for which the functional
currency is the Canadian dollar.
FUTURES AND FORWARD EXCHANGE HEDGE CONTRACTS
Sun periodically uses commodity futures contracts to hedge the impact of
crude oil and natural gas price fluctuations and forward exchange contracts
to hedge the risk associated with fluctuations in foreign currency exchange
rates. Gains and losses on commodity futures hedge contracts are included
as part of product cost and recognized in income when the products are
sold. Gains and losses on foreign currency forward exchange contracts are
deferred and recognized in income when the related item being hedged is
recognized. The cash flows from such contracts are included in operating
activities in the consolidated statements of cash flows.
46
<PAGE>
2. CHANGES IN BUSINESS
The following is a summary of Sun's significant changes in business during
the three-year period ended December 31, 1993:
DIVESTMENTS
During 1993, Sun completed the disposition of certain oil and gas
exploration and production properties located principally in the U.K.
North Sea, Dubai and Canada which previously had been identified for
disposal as part of the Company's 1992 restructuring plan. The properties
divested in Dubai accounted for approximately 42 percent of Sun's 1992
crude oil production outside North America while those divested in Canada
represented approximately 6 and 12 percent, respectively, of Sun's 1992
Canadian crude oil and natural gas production. Results of operations from
these properties were not significant.
In December 1993, Sun completed the sale of its midwestern refined products
pipeline system operating in Oklahoma and Arkansas. In March 1992 and May
1993, Sun sold 4 and 6.8 million shares, respectively, of Suncor common
stock in secondary offerings in Canada, Europe and by private placement in
the United States. The sale during 1992 reduced Sun's ownership interest
in Suncor from 75 percent to approximately 68 percent. Pretax cash
proceeds from this offering, after underwriting and other fees and U.S.
dollar exchange, totalled $59 million of which $29 million was received in
1992 and $30 million was received in 1993. The sale during 1993 further
reduced Sun's ownership interest in Suncor to 55 percent. Pretax cash
proceeds from this offering, after underwriting and other fees and U.S.
dollar exchange, totalled $139 million. These proceeds were received in
1993.
In 1991, Sun sold substantially all of the assets of ECC Financial Group
Corporation ("ECC"), a wholly owned subsidiary engaged in equipment sales
financing. ECC's principal assets were secured loans in the form of
collateralized finance receivables. The effect of the divestment of ECC on
Sun's financial position is set forth in Note 18. The results of
operations of ECC were not material to Sun's consolidated results of
operations.
The following sets forth summary divestment information:
Gains (Losses) on After-Tax
Divestments Gains (Losses)
(Millions of Dollars Except ------------------------ Per Share of
Per Share Amounts) Pretax After Tax Common Stock
- ------------------------------------------------------------------------------
1993
North Sea and other exploration
properties $ 88 $ 68 $ .64
Dubai producing properties 11 7 .07
Canadian producing properties 10* 5 .05
Suncor common stock 30 19 .18
Refined products pipeline system 17 10 .09
Other 18 12 .11
- ------------------------------------------------------------------------------
$174 $121 $1.14
- ------------------------------------------------------------------------------
1992
Suncor common stock $ (18) $ (8) $(.08)
Other 23 14 .14
- ------------------------------------------------------------------------------
$ 5 $ 6 $ .06
- ------------------------------------------------------------------------------
1991
ECC Financial Group Corporation $ (7) $ (5) $(.05)
Other 13 12 .12
- ------------------------------------------------------------------------------
$ 6 $ 7 $ .07
- ------------------------------------------------------------------------------
*Net of minority interest share of gain on divestments.
WRITE-DOWNS OF ASSETS AND OTHER MATTERS
During 1993, Sun recorded a provision associated with the restructuring of
its Canadian refining and marketing operations and established additional
loss accruals related to the recoverability of its remaining leasing and
secured lending portfolio.
During 1992, the Company's Board of Directors approved a new strategic
direction for Sun. As part of this strategy, Sun announced that it was
withdrawing from oil and gas exploration activities outside of North
America and disposing of certain producing properties in Dubai and
Argentina. In connection therewith, during 1992, Sun recorded a write-down
to net realizable value of the assets affected by this change in strategy
and established accruals for exploration commitments, employee terminations
and office closings.
In 1992, Suncor announced that it was converting from the "bucketwheel"
method of mining oil sands to a more flexible and efficient
truck-and-shovel method. In connection therewith, Suncor recorded a
write-down of related assets to net realizable value and established an
accrual for employee terminations. Suncor also recorded write-downs to net
realizable value for certain oil and gas properties and other oil sands
assets during 1992. In addition, Sun established a U.S. income tax
provision for Suncor's undistributed earnings (Note 6).
In 1992, Sun also recorded a provision associated with its decision to
downsize and reconfigure the Company's Tulsa, Oklahoma refining and
marketing operations as well as miscellaneous asset write-downs and
accruals related to other Sun domestic facilities and operations.
47
<PAGE>
During 1991, Sun completed a study of its operations and decided to
restructure and consolidate its corporate headquarters and domestic
refining and marketing unit. The restructuring and consolidation resulted
in the elimination of approximately 1,100 salaried positions. In
connection therewith, a provision was recorded for employee terminations,
office closings and other matters.
The following is a summary of the provisions for write-down of assets and
other matters:
After-Tax Losses
(Millions of Dollars Except Income Tax After-Tax Per Share of
Per Share Amounts) Provisions Benefits Losses Common Stock
- ------------------------------------------------------------------------------
1993
Canadian operations $ 15* $ 8 $ 7 $ .06
Leasing operations 8 3 5 .05
- ------------------------------------------------------------------------------
$ 23 $ 11 $ 12 $ .11
- ------------------------------------------------------------------------------
1992
Exploration and production
operations outside North
America $335 $135 $200 $1.88
Canadian operations 247* 99 148 1.39
Tulsa refining and
marketing operations 95 34 61 .58
Other 68 21 47 .44
- ------------------------------------------------------------------------------
$745 $289 $456 $4.29
- ------------------------------------------------------------------------------
1991
Employee terminations, office
closings and other matters $156 $ 53 $103 $ .97
- ------------------------------------------------------------------------------
*Net of minority interest share of provision for write-down of assets
and other matters.
INVESTMENTS IN OPERATIONS HELD FOR SALE
In January 1993, Sun decided to sell the assets of the Company's coal and
cokemaking operations comprised of Sun Coal Company and Elk River
Resources, Inc. and its subsidiaries (collectively, "Sun Coal"). In
connection with this decision, Sun sold its western U.S. coal operations
during 1993 and continues to actively pursue the sale of its remaining
eastern U.S. coal and cokemaking operations.
In October 1991, the Company's Board of Directors approved a plan to
dispose of the Company's investment in Radnor Corporation ("Radnor"), its
wholly owned real estate development subsidiary. In connection with this
plan, the Company is actively pursuing a program of controlled disposition.
Prior to the fourth quarter of 1993, coal and real estate operations had
been classified as discontinued operations in the consolidated financial
statements. In accordance therewith, results of operations of Sun's coal
and real estate businesses 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
Securities and Exchange 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, pretax income (loss) from Sun's
coal and real estate operations, which totalled $(2) and $1 million,
respectively, during the fourth quarter of 1993, has been included as a
single amount in income from continuing operations. On an after-tax basis,
income from Sun's coal and real estate operations totalled $2 and $1
million, respectively, during the fourth quarter of 1993.
The following is a summary of results of operations of these businesses
prior to their measurement dates as well as the estimated loss on
disposition of real estate operations:
Real
(Millions of Dollars) Coal Estate Total
- ------------------------------------------------------------------------------
1992
Income from operations before credit
for income taxes $ 1 $-- $ 1
Credit for income taxes (18) -- (18)
- ------------------------------------------------------------------------------
Income from discontinued operations $ 19 $-- $ 19
- ------------------------------------------------------------------------------
1991
Loss from operations before credit
for income taxes $(21) $(188) $(209)
Credit for income taxes (19) (63) (82)
- ------------------------------------------------------------------------------
Loss from operations* (2) (125) (127)
- ------------------------------------------------------------------------------
Estimated loss on disposition before
credit for income taxes -- (223) (223)
Credit for income taxes -- (93) (93)
- ------------------------------------------------------------------------------
Estimated loss on disposition -- (130) (130)
- ------------------------------------------------------------------------------
Loss from discontinued operations $ (2) $(255) $(257)
- ------------------------------------------------------------------------------
*Includes after-tax provision for write-down of assets to net realizable
value of $21 million in coal and $93 million in real estate.
Prior to their measurement dates, revenues from coal operations totalled
$356 and $377 million in 1992 and 1991, respectively, while revenues from
real estate operations totalled $212 million in 1991.
48
<PAGE>
The net assets and liabilities relating to the coal and real estate
operations held for sale have been segregated on the consolidated balance
sheets from their historic classifications to separately identify them as
investments in operations held for sale. Such amounts are summarized as
follows:
December 31
--------------------
(Millions of Dollars) 1993 1992
- --------------------------------------------------------------------------
COAL OPERATIONS
Accounts receivable $ 18 $ 27
Inventories 27 29
Properties, plants and equipment 175 355
Other assets 32 36
Accounts payable and accrued liabilities (40) (52)
Retirement benefit liabilities (44) (43)
Other liabilities (55) (70)
- --------------------------------------------------------------------------
Investment in coal operations held for sale $ 113 $ 282
- --------------------------------------------------------------------------
REAL ESTATE OPERATIONS
Inventories $ 158 $ 211
Properties, plants and equipment 374 594
Other assets 49 49
Nonrecourse financing (90) (109)
Recourse debt (324) (493)
Other liabilities (including Sun's
estimated loss on disposition) (33) (126)
- --------------------------------------------------------------------------
Investment in real estate operations held for sale $ 134 $ 126
- --------------------------------------------------------------------------
As part of a restructuring of Radnor's recourse debt obligations during
1992, the Company, through its wholly owned subsidiary, The Claymont
Investment Company, has provided Radnor with a $100 million credit
facility. As of December 31, 1993, there was $23 million borrowed against
this facility. Amounts borrowed by Radnor under this facility are not
collateralized by any of its assets.
Radnor's recourse debt obligations require that its stockholder's equity,
which totalled $103 million at December 31, 1993, equal at least $100
million. In the event that Radnor's stockholder's equity declines below
this amount, the Company would have the option to make a capital
contribution to Radnor to avoid default by Radnor on these obligations or
to advance the remaining amount available under the $100 million credit
facility.
3. GAIN ON LITIGATION SETTLEMENT
During 1992, Sun received a $130 million net cash payment which settled all
disputes with the government of Iran and the National Iranian Oil Company
relating to the expropriation of Sun's oil production interests in Iran
following the Iranian Revolution. In connection with this settlement, Sun
recognized a $178 million gain which increased 1992 results of operations
by $117 million after tax or $1.10 per share of common stock. The effect
of the settlement on Sun's financial position is set forth in Note 18.
4. OTHER INCOME
(Millions of Dollars) 1993 1992 1991
- -----------------------------------------------------------------------------
Oil sands litigation settlement $17 $-- $--
Equity in earnings of affiliated companies 11 9 10
Foreign exchange gains (losses) 3 16 (10)
Other 15 7 8
- -----------------------------------------------------------------------------
$46 $ 32 $ 8
- -----------------------------------------------------------------------------
In 1993, Suncor settled all claims arising from a 1987 fire at its oil
sands facility in Fort McMurray, Alberta.
5. TAXES, OTHER THAN INCOME TAXES
(Millions of Dollars) 1993 1992 1991
- -----------------------------------------------------------------------------
Consumer excise $1,883 $1,819 $1,684
Production 25 38 34
Payroll, property and other 116 120 122
- -----------------------------------------------------------------------------
$2,024 $1,977 $1,840
- -----------------------------------------------------------------------------
6. INCOME TAXES
Components of income (loss) from continuing operations before provision
(credit) for income taxes and cumulative effect of change in accounting
principle are as follows:
(Millions of Dollars) 1993 1992 1991
- -----------------------------------------------------------------------------
U.S. $138 $(174) $(226)
Foreign 288 (258) 118
- -----------------------------------------------------------------------------
$426 $(432) $(108)
- -----------------------------------------------------------------------------
Effective January 1, 1993, deferred income taxes have been provided
utilizing the liability method. Previously, deferred income taxes were
provided utilizing the deferred method (Note 7).
Components of provision (credit) for income taxes from continuing
operations before cumulative effect of change in accounting principle are
as follows:
(Millions of Dollars) 1993 1992 1991
- -----------------------------------------------------------------------------
Income taxes currently payable:
U.S. federal $ 29 $ 36 $ 33
Foreign and other 55 114 112
- -----------------------------------------------------------------------------
84 150 145
- -----------------------------------------------------------------------------
Deferred taxes:
U.S. federal 11 (124) (146)
Foreign and other 48 (141) 23
- -----------------------------------------------------------------------------
59 (265) (123)
- -----------------------------------------------------------------------------
$143* $(115) $ 22
- -----------------------------------------------------------------------------
*Includes a $3 million provision attributable to a change in the U.S.
statutory rate and a $17 million benefit resulting from the realization
of a deferred tax asset for which a valuation allowance previously had
been provided.
49
<PAGE>
Reconciliation of income taxes at the U.S. statutory rate to the provision
(credit) for income taxes from continuing operations before cumulative
effect of change in accounting principle is as follows:
(Millions of Dollars) 1993 1992 1991
- -----------------------------------------------------------------------------
Income taxes at U.S. statutory rate $149 $(147) $(37)
Increase (reduction) in taxes resulting from:
Tax expense of foreign operations
in excess of statutory rate 4 37 68
Benefit of Puerto Rico tax exemption
(expires in 2007) (6) (5) (5)
Impact of change in U.S. statutory
rate on deferred income taxes 3 -- --
Other (7) -- (4)
- -----------------------------------------------------------------------------
$143 $(115) $ 22
- -----------------------------------------------------------------------------
Under the liability method, the tax effects of temporary differences which
comprise the deferred tax assets and liabilities are as follows:
December 31 January 1
(Millions of Dollars) 1993 1993
- ------------------------------------------------------------------------------
Deferred tax debits:
Retirement benefit liabilities $ 162 $ 156
Other liabilities not yet deductible 252 278
Alternative minimum tax credit carryforward 53 79
Investments in operations held for sale 100 104
Other 70 43
Valuation allowance (94) (98)
- ------------------------------------------------------------------------------
543 562
- ------------------------------------------------------------------------------
Deferred tax credits:
Depreciation and depletion (655) (598)
Investments in foreign subsidiaries (24) (27)
Investment in leases (45) (58)
Other (65) (64)
- ------------------------------------------------------------------------------
(789) (747)
- ------------------------------------------------------------------------------
Net deferred income tax liability $(246) $(185)
- ------------------------------------------------------------------------------
Of the $246 million net deferred income tax liability at December 31, 1993,
$123 million is reflected as a current asset and $369 million is reflected
as a noncurrent liability in the consolidated balance sheet.
Under the deferred method, during 1992 and 1991, deferred income taxes were
provided for those items of revenue and expense which were recognized for
financial reporting in different periods than for income tax purposes. The
effect of timing differences on income taxes from continuing operations
before cumulative effect of change in accounting principle was as follows:
(Millions of Dollars) 1992 1991
- ------------------------------------------------------------------------------
U.S. federal:
Intangible drilling costs $(10) $ (11)
Depreciation and depletion -- 6
Write-down of assets and other matters (93) (37)
Tax over book gain on divestments (29) (31)
Litigation settlement 28 --
Alternative minimum tax 10 (12)
Environmental remediation -- (39)
Other (30) (22)
- ------------------------------------------------------------------------------
(124) (146)
- ------------------------------------------------------------------------------
Foreign and other:
Depreciation and depletion 15 20
Write-down of assets and other matters (146) --
Other (10) 3
- ------------------------------------------------------------------------------
(141) 23
- ------------------------------------------------------------------------------
$(265) $(123)
- ------------------------------------------------------------------------------
During 1992, Sun established a $27 million U.S. income tax provision for
Suncor's undistributed earnings. At December 31, 1993 and 1992, U.S.
income taxes have been provided on all undistributed earnings of foreign
subsidiaries.
7. CHANGES IN ACCOUNTING PRINCIPLES
Effective January 1, 1993, Sun adopted the provisions of SFAS NO. 109 which
changed the method of computing deferred income taxes from a deferred to a
liability approach. Under the liability method, deferred income taxes are
determined based on temporary differences between the financial statement
and tax bases of assets and liabilities, using enacted tax rates in effect
during the years in which the differences are expected to reverse, and on
available tax credits and carryforwards. The cumulative effect of this
accounting change for years prior to 1993, which is shown separately in the
consolidated statement of income for 1993, increased net income for 1993 by
$5 million, or $.05 per share of common stock. Excluding the cumulative
effect, this change increased net income for 1993 by $45 million or $.42
per share of common stock, primarily due to lower U.S. income tax expense
on foreign earnings including a $22 million reduction in deferred income
tax expense attributable to the 1993 sale of certain exploration properties
in the U.K. North Sea (Note 2). Since the deferred income tax assets and
liabilities will have to be adjusted for any enacted change in tax rate,
Sun's net income may be subject to increased volatility.
50
<PAGE>
Effective January 1, 1992, Sun adopted the provisions of SFAS NO. 106 which
resulted in a change in the method of accounting for postretirement health
care and life insurance benefits. Under SFAS NO. 106, the expected cost of
these benefits is actuarially determined and accrued ratably from the date
of hire to the date the employee is fully eligible to receive the benefits.
Previously, postretirement benefits expense was recognized when the
insurance premiums which provided the benefits were due. The accumulated
postretirement benefit obligation existing at January 1, 1992 was
recognized separately in the consolidated statement of income for the year
ended December 31, 1992 as a cumulative effect of change in accounting
principle, resulting in a charge of $261 million (after related income tax
benefit of $140 million), or $2.46 per share of common stock. The
cumulative effect includes a $26 million charge (after related tax benefit
of $15 million) attributable to Sun's coal operations held for sale.
Excluding the cumulative effect, during 1992, the incremental expense
attributable to adoption of SFAS NO. 106 decreased results from continuing
operations by $9 million after tax or $.08 per share of common stock and
results from discontinued coal operations by $3 million after tax or $.03
per share of common stock (Note 13).
Effective January 1, 1991, Sun changed its method of accounting for the
cost of crude oil and refined product inventories at Suncor from the FIFO
method to the LIFO method. Sun believes that the use of the LIFO method
better matches current costs with current revenues. The cumulative effect
of this accounting change for years prior to 1991 is not determinable, nor
are the pro forma effects of retroactive application of the LIFO method to
prior years. This change decreased the 1991 net loss and net loss per
share of common stock by $3 million and $.03, respectively.
8. INVENTORIES
December 31
----------------
(Millions of Dollars) 1993 1992
- ------------------------------------------------------------------------------
Crude oil $140 $109
Refined products 244 261
Materials, supplies and other 80 81
- ------------------------------------------------------------------------------
$464 $451
- ------------------------------------------------------------------------------
The current replacement cost of all inventories valued at LIFO exceeded
their carrying value by $390 and $530 million at December 31, 1993 and
1992, respectively.
9. LONG-TERM RECEIVABLES AND INVESTMENTS
December 31
----------------
(Millions of Dollars) 1993 1992
- ------------------------------------------------------------------------------
Investment in:
Leveraged leases $21 $ 43
Direct financing and sales-type leases 69 87
- ------------------------------------------------------------------------------
90 130
Accounts and notes receivable 47 64
Investments in affiliated companies 72 56
Other investments, at cost 8 9
- ------------------------------------------------------------------------------
$217 $259
- ------------------------------------------------------------------------------
Sun, as lessor, has entered into leveraged, direct financing and sales-type
leases of a wide variety of equipment including aircraft, railroad rolling
stock and various other transportation and manufacturing equipment. The
components of Sun's investment in these leases at December 31, 1993 and
1992 are set forth below (in millions of dollars):
Direct Financing
Leveraged and Sales-Type
Leases Leases
---------------- ----------------
December 31 1993 1992 1993 1992
- ------------------------------------------------------------------------------
Minimum rentals receivable $ 6* $ 28* $91 $114
Estimated unguaranteed
residual value of leased
assets 19 30 11 15
Unearned and deferred income (4) (15) (33) (42)
- ------------------------------------------------------------------------------
Investment in leases 21 43 $69 $ 87
----------------
Deferred taxes arising from
leveraged leases (18) (29)
- ---------------------------------------------------
Net investment in leveraged
leases $ 3 $ 14
- ---------------------------------------------------
*Net of principal of and interest on related nonrecourse debt aggregating
$38 and $65 million in 1993 and 1992, respectively.
The following is a schedule of minimum rentals receivable by years at
December 31, 1993:
Direct Financing
Leveraged and Sales-Type
(Millions of Dollars) Leases Leases
- ------------------------------------------------------------------------------
Year ending December 31:
1994 $1 $14
1995 1 15
1996 1 13
1997 1 9
1998 -- 9
Later years 2 31
- ------------------------------------------------------------------------------
$6 $91
- ------------------------------------------------------------------------------
Dividends received from affiliated companies amounted to $9, $7 and $10
million in 1993, 1992 and 1991, respectively. Earnings employed in the
business at December 31, 1993 include $16 million of undistributed earnings
of affiliated companies.
51
<PAGE>
10. PROPERTIES, PLANTS AND EQUIPMENT
Accumulated
Gross Depreciation,
(Millions of Dollars) Investment Depletion and Net
December 31 at Cost* Amortization* Investment
- ------------------------------------------------------------------------------
1993
Refining and marketing $5,265 $2,403 $2,862
Exploration and production 1,478 1,019 459
Oil sands mining 1,000 494 506
Corporate 10 6 4
- ------------------------------------------------------------------------------
$7,753 $3,922 $3,831
- ------------------------------------------------------------------------------
1992
Refining and marketing $5,112 $2,344 $2,768
Exploration and production 1,683 1,199 484
Oil sands mining 965 487 478
Corporate 20 11 9
- ------------------------------------------------------------------------------
$7,780 $4,041 $3,739
- ------------------------------------------------------------------------------
*Includes amounts subject to operating leases totaling $527 million in
refining and marketing and $1 million in corporate at December 31, 1993
and $508 million in refining and marketing and $11 million in corporate
at December 31, 1992. Related accumulated depreciation totaled $209 and
$198 million at December 31, 1993 and 1992, respectively.
Annual future minimum rentals due Sun, as lessor, on noncancelable
operating leases at December 31, 1993 are as follows (in millions of
dollars):
- ------------------------------------------------------------------------------
Year ending December 31:
1994 $ 51
1995 35
1996 16
1997 6
1998 6
Later years 8
- ------------------------------------------------------------------------------
$122
- ------------------------------------------------------------------------------
11. SHORT-TERM BORROWINGS AND LINES OF CREDIT
December 31
----------------
(Millions of Dollars) 1993 1992
- ------------------------------------------------------------------------------
Commercial paper $50 $215
Other 60 --
- ------------------------------------------------------------------------------
$110 $215
- ------------------------------------------------------------------------------
The Company had $500 million of credit facilities as of December 31, 1993
in the form of revolving credit agreements from commercial banks which
provide for revolving credit through August 1996. These facilities support
Sun's commercial paper borrowings. All of the above facilities are subject
to commitment fees, the amounts of which are not material. As of December
31, 1993, there were no borrowings against these revolving credit
agreements. The Company also has access to short-term financing under
non-committed money market facilities. At December 31, 1993, $60 million
was borrowed through these facilities.
At December 31, 1993, Suncor had a revolving term credit facility available
for its own use aggregating approximately $302 million. Committed
revolving credit will be available through October 1998. The facility
provides for commitment fees, the amounts of which are not material. At
December 31, 1993, $91 million was borrowed against this facility which was
classified as long-term debt as it is Suncor's intention to refinance that
amount on a long-term basis (Note 12).
12. LONG-TERM DEBT
December 31
----------------
(Millions of Dollars) 1993 1992
- ------------------------------------------------------------------------------
SINKING FUND DEBENTURES
Sun Company, Inc.:
9-3/8% payable $20,000,000 annually 2007-2016 $200 $200
7-1/8% redeemed in 1993 -- 51
6-3/4% convertible, payable $7,500,000 annually
1997-2011, $37,500,000 in 2012 (Note 16) 10* 10*
Subsidiaries of Sun Company, Inc.:
12% payable in Canadian dollars $5,000,000 annually
1994-2002, $30,000,000 in 2003 57 63
NOTES AND MORTGAGES PAYABLE
Sun Company, Inc.:
7.95% notes payable in 2001 150 150
Medium-term notes, at interest rates ranging from
7.03% to 7.10%, payable in 1997 50 50
Subsidiaries of Sun Company, Inc.:
Revolving term credit loans, floating interest rate
(5.14% at January 1, 1994) payable in Canadian
dollars by 1998 (Note 11) 91 72
Leasing subsidiary notes:
8-5/8% payable $7,143,000 annually 1994-1997 29 36
9.73% payable $10,714,000 annually 1994-1998 53 64
9.55% payable in 1995 75 75
Other -- 8
Other, including capitalized lease obligations,
due in varying amounts through 2007, at various
interest rates 41 62
- ------------------------------------------------------------------------------
756 841
Less: unamortized discount 4 4
current portion 26 45
- ------------------------------------------------------------------------------
$726 $792
- ------------------------------------------------------------------------------
*Net of debentures held in treasury.
52
<PAGE>
The aggregate amount of long-term debt maturing and sinking fund
requirements in the years 1994 through 1998 is as follows (in millions of
dollars):
- ------------------------------------------------------------------------------
1994 $ 26 1997 $ 75
1995 $100 1998 $116
1996 $ 26
- ------------------------------------------------------------------------------
The following table summarizes Sun's total borrowings (including current
portion):
December 31
----------------
(Millions of Dollars) 1993 1992
- ------------------------------------------------------------------------------
Sun Company, Inc. $406 $ 457
Short-term borrowings (Note 11) 110 215
Canada (Suncor) 148 142
Leasing 157 183
Other 41 55
- ------------------------------------------------------------------------------
$862 $1,052
- ------------------------------------------------------------------------------
13. RETIREMENT BENEFIT PLANS
DEFINED BENEFIT PENSION PLANS
Sun has noncontributory defined benefit pension plans which provide
retirement benefits for most of its employees. Plan benefits are generally
based on years of service, age at retirement and employees' compensation.
For Sun's principal defined benefit pension plans, the benefit for
employees hired prior to January 1, 1987 is determined based on either
final or total career average compensation, whichever produces the greater
benefit. For employees hired on or after January 1, 1987, the benefit is
determined based on total career average compensation. It is Sun's policy
to fund defined benefit pension contributions, at a minimum, in accordance
with the requirements of the Internal Revenue Code.
The cost of Sun's defined benefit pension plans included in results of
operations was $17, $9 and $13 million for 1993, 1992 and 1991,
respectively, which consisted of the following components (in millions of
dollars):
1993 1992 1991
- ------------------------------------------------------------------------------
Service cost (cost of benefits
earned during the year) $ 30 $30 $ 31
Interest cost on projected
benefit obligation 103 103 105
Actual return on plan assets* (182) (47) (241)
Net amortization and deferral* 66 (77) 118
- ------------------------------------------------------------------------------
$ 17 $ 9 $ 13
- ------------------------------------------------------------------------------
*Estimated returns on assets are used in determining net periodic pension
cost. Differences between estimated and actual returns are included in
net amortization and deferral. Also included in net amortization and
deferral are amortization of the unrecognized net asset or obligation at
January 1, 1986 and amortization of the unrecognized prior service cost
and net gain or loss.
The following table sets forth the funded status of the plans and amounts
recognized in the balance sheets at:
December 31, 1993 December 31, 1992
------------------------ ------------------------
Plans in Plans in Plans in Plans in
Which Which Which Which
Assets Accumulated Assets Accumulated
Exceed Benefits Exceed Benefits
Accumulated Exceed Accumulated Exceed
(Millions of Dollars) Benefits Assets Benefits Assets
- ------------------------------------------------------------------------------
Actuarial present value of
benefit obligation:
Vested $ 978 $226 $ 869 $202
Nonvested 33 13 59 11
- ------------------------------------------------------------------------------
Accumulated benefit obligation 1,011 239 928 213
Effect of projected future
salary increases 140 33 121 20
- ------------------------------------------------------------------------------
Projected benefit obligation 1,151 272 1,049 233
Less plan assets at fair value* 1,177 95 1,120 87
- ------------------------------------------------------------------------------
Projected benefit obligation
in excess of (less than)
plan assets (26) 177 (71) 146
Unrecognized net asset
(obligation) at
January 1, 1986 120 (24) 139 (28)
Unrecognized prior service
(cost) benefit (21) (4) (32) 5
Unrecognized net gain (loss) (81) (51) (38) (32)
Additional minimum liability** -- 55 -- 48
- ------------------------------------------------------------------------------
Pension liability (asset)*** $ (8) $153 $ (2) $139
- ------------------------------------------------------------------------------
*Plan assets consist principally of commingled trust funds, marketable
equity securities, corporate and government debt securities and real
estate. Approximately 1 percent of plan assets was invested in Company
common stock at both December 31, 1993 and 1992.
**An equivalent intangible asset is included in deferred charges and other
assets in the consolidated balance sheets.
***Pension liability (asset) is included in retirement benefit liabilities
in the consolidated balance sheets.
As of December 31, 1993 and 1992, the projected benefit obligations were
determined using weighted average assumed discount rates of 7.25 and 8.0
percent, respectively, and a rate of compensation increase of 5.0 percent.
The weighted average expected long-term rate of return on plan assets was
9.5 percent in both 1993 and 1992. All of these rates are subject to
change in the future as economic conditions change.
53
<PAGE>
DEFINED CONTRIBUTION PENSION PLANS
Sun has defined contribution plans which provide retirement benefits for
most of its domestic employees. Sun's contributions, which are principally
based on a percentage of employees' annual compensation and are charged
against income as incurred, amounted to $9, $15 and $17 million in 1993,
1992 and 1991, respectively.
Sun's principal defined contribution plan is the Sun Company, Inc. Capital
Accumulation Plan ("SunCAP"). Sun matches 100 percent of employee
contributions to the plan up to 5 percent of an employee's base
compensation. Effective January 1, 1993, the matching contribution was
reduced to 50 percent for a period of one year. Sun's contributions to
SunCAP are invested initially in the common stock of the Company. SunCAP
is a combined profit sharing and employee stock ownership plan which
contains a provision designed to permit SunCAP, only upon approval by the
Company's Board of Directors, to borrow in order to purchase a significant
number of shares of Company common stock. As of December 31, 1993, no such
borrowings had been approved.
POSTRETIREMENT HEALTH CARE AND
LIFE INSURANCE BENEFITS
Sun has plans which provide health care and life insurance benefits for
substantially all retirees. Aggregate charges against income for such
benefits amounted to $22, $37 and $21 million in 1993, 1992 and 1991,
respectively. The adoption of the provisions of SFAS NO. 106 as of January
1, 1992, increased Sun's 1992 postretirement health care and life insurance
benefits expense by $15 million (Note 7). The increase was primarily due
to the accrual of benefits earned by active employees and interest on the
accumulated postretirement benefit obligation ("APBO"). Effective in the
second quarter of 1993, changes were made to Sun's principal postretirement
medical benefit plan which will cap Sun's contribution at twice the amount
at that time for each retiree coverage category. These changes reduced
postretirement benefits expense for 1993 by $14 million and the APBO by $82
million. Postretirement benefits expense for 1993 and 1992 consisted of
the following components (in millions of dollars):
1993 1992
- ------------------------------------------------------------------------------
Service cost (cost of benefits
earned during the year) $ 5 $ 8
Interest cost on APBO 23 29
Net amortization* (6) --
- ------------------------------------------------------------------------------
$22 $37
- ------------------------------------------------------------------------------
*Consists of amortization of the unrecognized prior service benefit and
unrecognized net gain (loss).
The following table sets forth the funded status of the plans and amounts
recognized in the balance sheets at:
December 31 December 31
(Millions of Dollars) 1993 1992
- ------------------------------------------------------------------------------
APBO:
Retirees $206 $255
Fully eligible active participants 17 21
Other active participants 69 103
- ------------------------------------------------------------------------------
292 379
Unrecognized prior service benefit 77 --
Unrecognized net gain (loss) 9 (2)
- ------------------------------------------------------------------------------
Accrued postretirement benefit obligation* $378 $377
- ------------------------------------------------------------------------------
*Accrued postretirement benefit obligation is included in retirement
benefit liabilities in the consolidated balance sheets.
As of December 31, 1993 and 1992, the APBO was determined using weighted
average assumed discount rates of 7.25 and 8.0 percent, respectively. The
health care cost trend rate is assumed to decrease gradually from 11 and 13
percent at December 31, 1993 and 1992, respectively, to 6 percent at 2004
and remain at that level thereafter. All of these rates are subject to
change in the future as economic conditions change. An increase in the
assumed health care cost trend rate by one percentage point in each year
would have increased the APBO by $28 and $42 million at December 31, 1993
and 1992, respectively, and would have increased the service and interest
components of postretirement benefits expense in the aggregate by $3 and $4
million for the years ended December 31, 1993 and 1992, respectively.
14. COMMITMENTS AND CONTINGENT LIABILITIES
Sun, as lessee, has noncancelable operating leases for service stations,
office space and other property and equipment. Total rental expense for
such leases for the years 1993, 1992 and 1991 amounted to $68, $87 and $85
million, respectively. Approximately 20 percent of total rental expense
was recovered through related rental income from subleases during 1993.
Under contracts existing as of December 31, 1993, future minimum annual
rentals applicable to noncancelable operating leases are as follows (in
millions of dollars):
- -------------------------------------
Year ending December 31:
1994 $ 46
1995 39
1996 32
1997 23
1998 28
Later years 105
- -------------------------------------
$273
- -------------------------------------
In 1992, a wholly owned subsidiary of the Company became a one-third
partner in Belvieu Environmental Fuels ("BEF"), a joint venture formed for
the purpose of constructing, owning and operating a $220 million methyl
tertiary butyl ether ("MTBE") production facility in Mont Belvieu, Texas.
As of December 31, 1993, BEF had borrowed $128 million against a
construction loan facility of
54
<PAGE>
which the Company guarantees one-third or $43 million. The plant, which
has a designed capacity of 12,600 barrels daily of MTBE, is expected to
begin production in mid-1994. When production commences, the construction
loan will be converted into a five-year, nonrecourse term loan with a first
priority lien on all project assets.
In order to obtain a secure supply of oxygenates for the manufacture of
reformulated fuels, Sun has entered into a 10-year off-take agreement with
BEF which commences when the plant becomes operational. Pursuant to this
agreement, Sun will purchase all of the MTBE production from the plant.
The minimum per unit price to be paid for the MTBE production while the
nonrecourse term loan is outstanding will be equal to BEF's annual raw
material and operating costs and debt service payments divided by the
plant's annual designed capacity. Notwithstanding this minimum price, Sun
has agreed to pay BEF a price during the first three years of the off-take
agreement which approximates prices included in current MTBE long-term
sales agreements in the marketplace. This price is expected to exceed the
minimum price required by the loan agreement. Sun will negotiate a new
pricing arrangement with BEF for the remaining years the off-take agreement
is in effect which will be based upon the expected market conditions
existing at such time.
Sun is also contingently liable under various other arrangements which
guarantee debt of associated companies and other aggregating approximately
$26 million at December 31, 1993 and maturing at various dates through
2012.
Sun is subject to federal, state, local and foreign laws regulating the
discharge of materials into, or otherwise relating to the protection of,
the environment. These laws result in loss contingencies for Sun's
remediation at the Company's refineries, service stations, terminals,
pipelines and truck transportation facilities as well as third-party or
formerly owned sites at which contaminants generated by Sun may be located.
Sun's policy is to accrue environmental remediation costs for work at
identified sites where an assessment has indicated that cleanup costs are
probable and reasonably estimable. Such accruals are based on currently
available facts, estimated timing of remedial actions and related inflation
assumptions, existing technology and presently enacted laws and
regulations. The accrued liability for environmental remediation totalled
$259 and $258 million at December 31, 1993 and 1992, respectively. Sun
also accrues estimated dismantlement, restoration, reclamation and
abandonment costs at its oil and gas exploration and production and oil
sands mining operations through a charge against income primarily on a
units of production basis. The accrued liability for these activities,
which are conducted primarily by Suncor, Sun's 55 percent owned subsidiary,
totalled $119 and $118 million at December 31, 1993 and 1992, respectively.
The accruals for environmental remediation and reclamation activities are
included primarily in other deferred credits and liabilities in the
consolidated balance sheets. Pretax charges against income for
environmental remediation and reclamation totalled $45, $62 and $159
million in 1993, 1992 and 1991, respectively. Claims for recovery of
environmental liabilities that are probable of realization totalled $17
million at December 31, 1993 and are included in deferred charges and other
assets in the consolidated balance sheet.
Total future cost for environmental remediation activities will depend
upon, among other things, the identification of additional sites, the
determination of the extent of contamination of each site, the timing and
nature of required remedial actions, the technology available and needed to
meet the various existing requirements, the nature and extent of future
environmental laws, inflation rates and the determination of Sun's
liability at multi-party sites, if any, in light of the number,
participation levels and financial viability of other parties.
Many other legal and administrative proceedings are pending against Sun.
The ultimate outcome of these proceedings and the environmental matters
discussed above cannot be ascertained at this time; however, it is
reasonably possible that some of them could be resolved unfavorably to Sun.
Management believes that any costs attributable to the matters discussed
above are expected to be incurred over an extended period of time and to be
funded from Sun's net cash flow from operating activities. Although the
ultimate impact of these matters could have a significant impact on results
of operations for any one quarter or year, management of Sun believes that
any liabilities which may arise pertaining to such matters would not be
material in relation to the consolidated financial position of Sun at
December 31, 1993.
15. MANAGEMENT INCENTIVE PLANS
Sun's principal management incentive plans are the Executive Incentive Plan
("EIP") and the Executive Long-Term Stock Investment Plan ("ELSIP"). The
EIP provides for the payment of annual incentive awards in cash and/or
Company common stock and the ELSIP provides for the award of stock options
and related rights to officers and other key employees of Sun. On May 2,
1991, shareholders of the Company approved the adoption of the ELSIP as a
successor to the Long-Term Incentive Plan ("LTIP"). The first awards under
the ELSIP were made in January 1992. No awards will be made under ELSIP
after December 31, 1996. All outstanding awards granted under LTIP and
LTIP's predecessor plan, the Executive Long-Term Incentive Plan ("ELTIP"),
will remain in effect in accordance with their terms. These plans are
administered by a committee of four nonemployee members of the Board of
Directors ("Compensation Committee").
55
<PAGE>
Outstanding awards under LTIP and ELTIP consist of stock options, alternate
appreciation rights, limited rights and restricted stock units. ELSIP also
provides for incentive stock options and equity options.
Stock options, incentive stock options and equity options (collectively,
"options") permit optionees to purchase Company common stock at the fair
market value on the date of grant. If authorized, equity options are
granted when payment for an option exercise is made using Company common
stock held by the optionee for at least one year. Alternate appreciation
rights permit the optionee to receive in cash or common stock the
appreciation of Company common stock from the date of grant. Limited
rights are similar to alternate appreciation rights except that they are
payable in cash only and exercisable only in the event of a change in
control of the Company. Restricted stock units are awards which entitle
the holder to receive cash or Company common stock upon completion of a
restriction period during which the recipient must remain continuously
employed by Sun or upon attainment of predetermined performance targets
established by the Compensation Committee.
Options, alternate appreciation rights and limited rights are issued in
various tandem combinations so that the exercise of any one of them will
reduce the others, on a one-for-one basis.
Under ELSIP, certain shares of common stock issued upon the exercise of
options and alternate appreciation rights will be subject to restrictions
which prohibit the sale, exchange, transfer, pledge, gift or other
disposition until the earlier of the holder's termination of employment or
the end of the related option term. The number of such restricted shares
will be determined on the date of exercise. If restricted shares are used
as payment for the exercise of options, all shares issued upon the exercise
will be restricted. Otherwise, the number of restricted shares will
approximate the number of shares with a fair market value equal to the
difference between the market value and the amount paid for all shares
issued upon exercise.
Aggregate charges against income for Sun's principal management incentive
plans for the years 1993 and 1991 were $7 and $9 million, respectively.
There were no charges against income in 1992 due to the absence of cash
incentive awards under EIP for the 1992 plan year.
16. STOCKHOLDERS' EQUITY
Each share of Company common stock is entitled to one full vote. The $10
million of outstanding 6-3/4 percent debentures are convertible into shares
of common stock of the Company at any time prior to maturity at a
conversion price of $40.81 per share and are redeemable at the option of
the Company. At December 31, 1993, there were 246,166 shares of common
stock reserved for this potential conversion (Note 12).
The Company's Articles of Incorporation authorize the issuance of up to
15,000,000 shares of a class of preference stock without par value, subject
to approval of issuance by its Board of Directors ("Board"). The Board
also has authority to fix the number , designation, rights, preferences and
limitations of the shares of each series, subject to applicable laws and
the provisions of the Articles of Incorporation. As of December 31, 1993,
none of this class of preference stock had been issued.
In December 1992, the Board approved the adoption of the Employee Option
Plan ("EOP") which provides for the award of stock options to all employees
(other than executives) of the Company and certain subsidiaries. The
awards, which have a ten-year term and are exercisable two years from the
date of grant, permit optionees to purchase Company common stock at the
fair market value on the date of grant. Two million shares of Company
common stock are authorized for issuance under the EOP. On January 4,
1993, stock option awards totalling 1,721,385 were made to eligible
employees.
The following table summarizes information with respect to common stock
option awards under EOP and Sun's management incentive plans (Note 15):
Shares Option Price
Under Option Per Share
- ------------------------------------------------------------------------------
OUTSTANDING, DECEMBER 31, 1990 1,778,891 $24.02-$41.13
Granted 456,040 $27.88
Exercised (24,524) $24.02-$31.50
Cancelled (157,587)
- ------------------------------------------------------------------------------
OUTSTANDING, DECEMBER 31, 1991 2,052,820 $24.02-$41.13
Granted 597,510 $25.38-$30.50
Exercised (102,433)* $24.02-$28.50
Cancelled (234,486)
- ------------------------------------------------------------------------------
OUTSTANDING, DECEMBER 31, 1992 2,313,411 $25.38-$41.13
Granted 2,835,415 $28.00-$31.38
Exercised (94,474)* $27.88-$31.50
Cancelled (109,217)
- ------------------------------------------------------------------------------
OUTSTANDING, DECEMBER 31, 1993 4,945,135 $25.38-$41.13
- ------------------------------------------------------------------------------
EXERCISABLE, DECEMBER 31
- ------------------------------------------------------------------------------
1991 1,250,993 $24.02-$41.13
1992 1,880,433 $27.88-$41.13
1993 2,552,166 $25.38-$41.13
- ------------------------------------------------------------------------------
AVAILABLE FOR GRANT, DECEMBER 31
- ------------------------------------------------------------------------------
1991 5,800,000**
1992 7,217,890***
1993 4,439,545***
- ------------------------------------------------------------------------------
*Includes 41,050 and 26,178 options cancelled during 1993 and 1992,
respectively, due to the exercise of related alternate appreciation
rights which resulted in the issuance of 482 and 2,646 shares in 1993
and 1992, respectively. In addition, 13,900 and 3,990 shares were
issued for matured restricted stock units during 1993 and 1992,
respectively.
**Represents the number of shares authorized under ELSIP. No awards may
be granted under LTIP after December 31, 1991.
***Consists of 2,000,000 and 5,217,890 shares available for grant under EOP
and ELSIP, respectively, at December 31, 1992 and 336,325 and 4,103,220
shares available for grant under EOP and ELSIP, respectively, at
December 31, 1993.
56
<PAGE>
17. DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS
Effective December 31, 1992, Sun adopted Statement of Financial Accounting
Standards No. 107, "Disclosures about Fair Value of Financial Instruments"
which requires certain disclosures concerning the estimated fair value of
financial instruments. The estimated fair value amounts have been
determined based on the Company's assessment of available market
information and appropriate valuation methodologies. However, these
estimates may not necessarily be indicative of the amounts that the Company
could realize in a current market exchange. Most of Sun's current assets
(excluding inventories and deferred income taxes) and current liabilities
are financial instruments. The carrying amounts of these financial
instruments approximate their estimated fair value. The following table
summarizes estimated fair value information for Sun's other financial
instruments included in the consolidated balance sheets at:
December 31, 1993 December 31, 1992
------------------- -------------------
Estimated Estimated
Carrying Fair Carrying Fair
(Millions of Dollars) Amount Value Amount Value
- ------------------------------------------------------------------------------
Long-term accounts and
notes receivable $ 47 $ 47 $64 $ 57
Other assets* $ 18 $ 18 $45 $ 45
Long-term debt $726 $809 $792 $837
- ------------------------------------------------------------------------------
*Included primarily in deferred charges and other assets in the
consolidated balance sheets.
Long-term accounts and notes receivable have been valued by discounting the
projected cash flows at December 31, 1993 and 1992, using the then current
rates at which similar loans would be made to borrowers with similar credit
ratings and for similar maturities. The majority of these receivables are
collateralized. Other assets consist primarily of special purpose funds
and restricted cash which have been valued using discounted cash flows or
prices quoted by financial institutions, as appropriate. Long-term debt
which is publicly traded was valued based on quoted market prices. The
fair value of other debt issues was estimated by management based upon
current interest rates available to Sun at the respective balance sheet
dates for similar issues.
The Company guarantees one-third of the borrowings of its affiliate, BEF
(Note 14). Due to the complexity of the guarantee and the absence of any
market for this financial instrument, the Company does not believe it is
practicable to estimate its fair value. Sun also is a party to certain
other off-balance sheet financial instruments consisting of guarantees of
debt of associated companies and others and foreign exchange contracts.
The fair value of these instruments, which is the estimated amount at which
they could be settled, was not material at December 31, 1993 and 1992.
At December 31, 1993 and 1992, Sun had entered into forward exchange and
swap contracts in order to hedge $200 and $220 million, respectively, of
Canadian dollar foreign exchange exposure. The contracts had an aggregate
face amount of $150 and $168 million at December 31, 1993 and 1992,
respectively, and mature at various dates through 1996. Sun does not
anticipate nonperformance by the counterparty to these contracts as it is a
major international financial institution.
18. SUPPLEMENTAL CASH FLOW INFORMATION
During 1992, Sun settled its dispute with the Iranian government concerning
the expropriation of Sun's oil production interests in Iran (Note 3) and in
1991, Sun sold substantially all of the assets of ECC (Note 2). The
following is a summary of the effects of these transactions on Sun's
consolidated financial position (in millions of dollars):
Iranian Sale
Settlement of ECC
- ------------------------------------------------------------------------------
(Increase) decrease in:
Accounts and notes receivable $ -- $ 16
Long-term receivables and investments -- 107
Other noncurrent assets -- 7
Increase (decrease) in:
Accounts payable and accrued liabilities (48) 1
Taxes payable 33 (2)
Deferred income taxes 28 --
Earnings employed in the business 117 (5)
- ------------------------------------------------------------------------------
Net increase in cash and cash equivalents $130 $124
- ------------------------------------------------------------------------------
Cash payments for income taxes were $116, $94 and $140 million in 1993,
1992 and 1991, respectively. Cash payments for interest, net of amounts
capitalized, were $73, $91 and $91 million in 1993, 1992 and 1991,
respectively.
19. BUSINESS SEGMENT INFORMATION
Sun is principally a petroleum refiner and marketer with interests in oil
and gas exploration and production and oil sands mining. Sun also has
interests in leasing operations and coal and real estate operations held
for sale (Note 2).
Sun's petroleum refining and marketing operations include the refining of
crude oil and its derivatives; the marketing of crude oil and a full range
of petroleum products, including fuels, lubricants and petrochemicals, and
the transportation of crude oil and refined products. Such operations are
conducted in the United States and Canada. Petroleum refining and
marketing operations outside North America involve purchasing crude oil and
refined products for United States and Canadian refining operations and for
sale to third parties. 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
outside the United States, primarily in Canada and the United Kingdom
sector of the North Sea. In October 1992, Sun announced that it was
withdrawing from oil and gas exploration activities outside North America.
As of December 31, 1993, essentially all remaining exploration commitments
out side North America have been satisfied. Oil sands mining operations,
which consist of the production of synthetic crude oil by mining oil sands
and upgrading
57
<PAGE>
the bitumen extracted from the oil sands, are conducted in western Canada.
Corporate includes Sun's coal and real estate operations held for sale as
well as its equipment leasing and secured lending activities. Such
activities have been conducted in the United States. Sun ceased making new
investments in leasing and secured lending in April 1991 and expects, over
time, to liquidate in an orderly manner, its remaining portfolio of leases
and secured loans.
SEGMENT INFORMATION
(Millions of Dollars)
Refining Exploration Oil
and and Sands Consoli-
Marketing Production Mining Corporate dated*
- ---------------------------------------------------------------------------
1993
Sales and other
operating revenue
(including consumer
excise taxes):
Unaffiliated
customers $8,975 $194 $ -- $ 11 $9,180
- ---------------------------------------------------------------------------
Intersegment $ -- $164 $363 $ -- $ --
- ---------------------------------------------------------------------------
Operating profit $ 189 $234 $ 63 $ 17 $ 503
Equity income 11 -- -- -- 11
Related income taxes (68) (76) (35) (2) (181)
- ---------------------------------------------------------------------------
Profit contribution before
net financing expenses
and after tax** $ 132 $158 $ 28 $15*** 333
- -----------------------------------------------------------------
Corporate expenses
(after taxes) (24)
Net financing expenses
(after taxes) (26)***
Cumulative effect of
change in accounting
principle 5+
------
Net income $ 288
------
Depreciation, depletion
and amortization $ 237 $ 98++ $ 32 $ 1 $ 368
- ---------------------------------------------------------------------------
Capital expenditures $ 381 $120 $111 $ -- $ 612
- ---------------------------------------------------------------------------
Identifiable assets $4,175 $554 $580 $641+++ $5,900
- ---------------------------------------------------------------------------
*After elimination of intersegment amounts.
**Includes after-tax provision for write-down of assets and other matters
of $7 million in refining and marketing and $5 million in corporate. In
addition, exploration and production includes an after-tax gain of $80
million from the disposal of certain oil and gas properties and
corporate includes an after-tax gain of $19 million on the sale of
Suncor stock (Note 2).
***Net financing expenses of leasing operations are included in corporate.
In addition, corporate includes net income from coal and real estate
operations held for sale of $2 and $1 million, respectively (Note 2).
+Reflects the cumulative effect for years prior to 1993 of a change in
the method of accounting for income taxes (Note 7).
++Includes dry hole costs and leasehold impairment which are included in
exploratory costs and leasehold impairment in the consolidated
statements of income.
+++Includes investments in coal and real estate operations held for sale of
$113 and $134 million, respectively (Note 2).
58
<PAGE>
SEGMENT INFORMATION
(Millions of Dollars)
Refining Exploration Oil
and and Sands Consoli-
Marketing Production Mining Corporate dated*
- ---------------------------------------------------------------------------
1992
Sales and other
operating revenue
(including consumer
excise taxes):
Unaffiliated
customers $10,127 $304 $ -- $ 14 $10,445
- ---------------------------------------------------------------------------
Intersegment $ -- $165 $407 $ -- $ --
- ---------------------------------------------------------------------------
Operating profit (loss) $ (42) $(185) $(72) $(40) $ (339)
Equity income 9 -- -- -- 9
Related income taxes -- 41 19 19 79
- ---------------------------------------------------------------------------
Profit contribution
(loss) before net
financing expenses
and after tax** $ (33) $(144) $(53) $(21)*** (251)
- -----------------------------------------------------------------
Corporate expenses
(after taxes) (29)
Net financing expenses
(after taxes) (37)***
Income from discon-
tinued operations 19+
Cumulative effect of
change in accounting
principle (261)++
------
Net loss $ (559)
------
Depreciation, depletion
and amortization $ 245 $ 135+++ $ 37 $ 2 $ 419
- ---------------------------------------------------------------------------
Capital expenditures $ 275 $ 175 $ 80 $ -- $ 530
- ---------------------------------------------------------------------------
Identifiable assets $4,085 $ 559 $553 $914# $6,071
- ---------------------------------------------------------------------------
*After elimination of intersegment amounts.
**Includes after-tax provision for write-down of assets and other matters
of $104 million in refining and marketing, $277 million in exploration
and production, $62 million in oil sands mining and $13 million in
corporate. In addition, exploration and production includes an
after-tax gain of $117 million on litigation settlement and corporate
includes an after-tax loss of $8 million on the sale of Suncor stock
(Notes 2 and 3).
***Net financing expenses of leasing operations are included in corporate.
+Consists of income from discontinued coal operations which includes a $3
million after-tax provision for write-down of assets. Results of
discontinued real estate operations were charged against the accrual for
loss on disposition established in 1991 (Note 2).
++Reflects the cumulative effect for years prior to 1992 of a change in
the method of accounting for the cost of postretirement health
care and life insurance benefits (Note 7). Excluding the cumulative
effect, this change decreased operating profit by $11 million in
refining and marketing and $1 million in oil sands mining.
+++Includes dry hole costs and leasehold impairment which are included in
exploratory costs and leasehold impairment in the consolidated
statements of income.
#Includes investments in coal and real estate operations held for sale of
$282 and $126 million, respectively (Note 2).
Refining Exploration Oil
and and Sands Consoli-
Marketing Production Mining Corporate dated*
- ---------------------------------------------------------------------------
1991
Sales and other
operating revenue
(including consumer
excise taxes):
Unaffiliated
customers $11,121 $348 $ 4 $ 20 $11,493
- ---------------------------------------------------------------------------
Intersegment $ 3 $177 $450 $ -- $ --
- ---------------------------------------------------------------------------
Operating profit
(loss) $ (69) $ 30 $ 54 $(28) $ (13)
Equity income 10 -- -- -- 10
Related income taxes 17 (69) (24) 17 (59)
- ---------------------------------------------------------------------------
Profit contribution
(loss) before net
financing expenses
and after tax** $ (42) $(39) $ 30 $(11)*** (62)
- ----------------------------------------------------------------
Corporate expenses
(after taxes) (38)
Net financing expenses
(after taxes) (30)***
Loss from discontinued
operations (257)+
------
Net loss $ (387)
------
Depreciation, depletion
and amortization $ 237 $200++ $ 40 $ 9 $ 486
- ---------------------------------------------------------------------------
Capital expenditures $ 323 $202 $ 89 $ 1 $ 615
- ---------------------------------------------------------------------------
Identifiable assets $ 4,307 $945 $687 $1,118+++ $ 7,017
- ---------------------------------------------------------------------------
*After elimination of intersegment amounts.
**Includes after-tax provision for write-down of assets and other matters
of $88 million in refining and marketing, $2 million in exploration and
production and $13 million in corporate (Note 2).
***Net financing expenses of leasing operations are included in corporate.
+Consists of losses from discontinued coal and real estate operations of
$2 and $255 million, respectively. Includes $21 and $93 million
after-tax provisions for write-down of assets in coal and real estate
operations, respectively, and an estimated $130 million after-tax loss
on disposition of real estate operations (Note 2).
++Includes dry hole costs and leasehold impairment which are included in
exploratory costs and leasehold impairment in the consolidated
statements of income.
+++Includes investments in coal and real estate operations held for sale of
$353 and $34 million, respectively (Note 2).
59
<PAGE>
GEOGRAPHIC INFORMATION
(Millions of Dollars)
Outside
North Consoli-
U.S. Canada America Corporate dated*
- ---------------------------------------------------------------------------
1993
Sales and other
operating revenue
(including consumer
excise taxes):
Unaffiliated
customers $ 7,262 $1,373 $ 534 $ 11 $ 9,180
- ---------------------------------------------------------------------------
Intergeographic $ 1 $ 6 $2,003 $ -- $ --
- ---------------------------------------------------------------------------
Profit contribution
before net financing
expenses and after
tax** $ 121 $ 40 $ 157 $15*** $ 333
- ----------------------------------------------------------------
Corporate expenses
(after taxes) (24)
Net financing
expenses (after taxes) (26)***
Cumulative effect of
change in accounting
principle 5+
-------
Net income $ 288
-------
Depreciation, depletion
and amortization $ 209 $ 106++ $ 52++ $ 1 $ 368
- ---------------------------------------------------------------------------
Capital expenditures $ 359 $ 202 $ 51 $ -- $ 612
- ---------------------------------------------------------------------------
Identifiable assets $ 3,442 $1,522 $514 $641+++ $ 5,900
- ---------------------------------------------------------------------------
*After elimination of intergeographic amounts.
**Includes after-tax provision for write-down of assets and other matters
of $7 million in Canada and $5 million in corporate. In addition,
Canada and outside North America include after-tax gains of $5 and $75
million, respectively, from the disposal of certain oil and gas
properties and corporate includes an after-tax gain of $19 million on
the sale of Suncor stock (Note 2).
***Net financing expenses of leasing operations are included in corporate.
In addition, corporate includes net income from coal and real estate
operations held for sale of $2 and $1 million, respectively (Note 2).
+Reflects the cumulative effect for years prior to 1993 of a change in
the method of accounting for income taxes (Note 7).
++Includes dry hole costs and leasehold impairment which are included in
exploratory costs and leasehold impairment in the consolidated
statements of income.
+++Includes corporate assets in Canada of $16 million and outside North
America of $83 million. Also includes investments in coal and real
estate operations held for sale of $113 and $134 million, respectively
(Note 2).
Outside
North Consoli-
U.S. Canada America Corporate dated*
- ---------------------------------------------------------------------------
1992
Sales and other
operating revenue
(including consumer
excise taxes):
Unaffiliated
customers $ 7,944 $1,446 $1,041 $ 14 $10,445
- ---------------------------------------------------------------------------
Intergeographic $ 5 $ 12 $3,046 $ -- $ --
- ---------------------------------------------------------------------------
Profit contribution
(loss) before net
financing expenses
and after tax** $ (32) $ (130) $ (68)
$(21)*** $ (251)
- ---------------------------------------------------------------
Corporate expenses
(after taxes) (29)
Net financing expenses
(after taxes) (37)***
Income from discon-
tinued operations 19+
Cumulative effect of
change in accounting
principle (261)++
------
Net loss $ (559)
------
Depreciation, depletion
and amortization $ 216 $ 112+++ $ 89+++ $ 2 $ 419
- ---------------------------------------------------------------------------
Capital expenditures $ 251 $ 194 $ 85 $ -- $ 530
- ---------------------------------------------------------------------------
Identifiable assets $ 3,325 $1,541 $ 620 $914# $6,071
- ---------------------------------------------------------------------------
*After elimination of intergeographic amounts.
**Includes after-tax provision for write-down of assets and other matters
of $95 million in U.S., $148 million in Canada, $200 million outside
North America and $13 million in corporate. In addition, outside North
America includes an after-tax gain of $117 million on litigation
settlement and corporate includes an after-tax loss of $8 million on the
sale of Suncor stock (Notes 2 and 3).
***Net financing expenses of leasing operations are included in corporate.
+Consists of income from discontinued coal operations which includes a $3
million after-tax provision for write-down of assets. Results of
discontinued real estate operations were charged against the accrual for
loss on disposition established in 1991 (Note 2).
++Reflects the cumulative effect for years prior to 1992 of a change in
the method of accounting for the cost of postretirement health care and
life insurance benefits (Note 7).
+++Includes dry hole costs and leasehold impairment which are included in
exploratory costs and leasehold impairment in the consolidated
statements of income.
#Includes corporate assets in Canada of $16 million and outside North
America of $49 million. Also includes investments in coal and real
estate operations held for sale of $282 and $126 million, respectively
(Note 2).
60
<PAGE>
GEOGRAPHIC INFORMATION
(Millions of Dollars)
Outside
North Consoli-
U.S. Canada America Corporate dated*
- ---------------------------------------------------------------------------
1991
Sales and other
operating revenue
(including consumer
excise taxes):
Unaffiliated
customers $ 8,444 $1,477 $1,552 $ 20 $11,493
- ---------------------------------------------------------------------------
Intergeographic $ 5 $ 9 $3,434 $ -- $ --
- ---------------------------------------------------------------------------
Profit contribution
(loss) before net
financing expenses
and after tax** $ (68) $ 50 $ (33) $ (11)*** $ (62)
- ---------------------------------------------------------------
Corporate expenses
(after taxes) (38)
Net financing expenses
(after taxes) (30)***
Loss from discon-
tinued operations (257)+
-------
Net loss $ (387)
-------
Depreciation, depletion
and amortization $ 207 $ 116++ $ 154++ $ 9 $ 486
- ---------------------------------------------------------------------------
Capital expenditures $ 290 $ 217 $ 107 $ 1 $ 615
- ---------------------------------------------------------------------------
Identifiable assets $ 3,408 $1,955 $ 889 $1,118+++ $ 7,017
- ---------------------------------------------------------------------------
*After elimination of intergeographic amounts.
**Includes after-tax provision for write-down of assets and other matters
of $88 million in U.S., $2 million outside North America and $13 million
in corporate (Note 2).
***Net financing expenses of leasing operations are included in corporate.
+Consists of losses from discontinued coal and real estate operations of
$2 and $255 million, respectively. Includes $21 and $93 million
after-tax provisions for write-down of assets in coal and real estate
operations, respectively, and an estimated $130 million after-tax loss
on disposition of real estate operations (Note 2).
++Includes dry hole costs and leasehold impairment which are included in
exploratory costs and leasehold impairment in the consolidated
statements of income.
+++Includes corporate assets in Canada of $16 million and outside North
America of $171 million. Also includes investments in coal and real
estate operations held for sale of $353 and $34 million, respectively
(Note 2).
Income tax expenses give effect to permanent differences and tax credits
and allowances in each of the designated industry segments and geographic
areas. Overhead expenses that can be identified with Sun's operations in
the designated industry segments an d geographic areas have been included
as deductions in determining operating profits and profit contributions.
Net financing expenses consist of interest cost and debt expense less
interest income, interest capitalized, dividends and gains (losses) on
sales of securities held for investment. Net financing expenses related to
leasing are included in corporate. Intersegment and intergeographic sales
and other operating revenue are accounted for based on the prices
negotiated between the parties which approximate market. Identifiable
assets are those assets that are utilized within a specific segment or
geographic area.
61
<PAGE>
REPORT OF MANAGEMENT
To the Shareholders of Sun Company, Inc.:
The accompanying consolidated financial statements of Sun Company, Inc. and
its subsidiaries ("Sun") and the related information are the responsibility
of management. The financial statements, which include amounts based on
informed estimates and judgments, were prepared using generally accepted
accounting principles deemed appropriate in the circumstances. Management
believes these financial statements present fairly, in all material
respects, Sun's financial position, results of operations and cash flows.
Other financial information presented in this Annual Report is consistent
with that in the financial statements.
To fulfill its responsibility for the financial statements, Sun maintains a
system of internal accounting controls which in management's opinion
provides reasonable assurance of achieving the objectives of internal
accounting control. These objectives include safeguarding of assets from
loss through unauthorized use or disposition and maintaining reliable
records permitting the preparation of financial statements and
accountability for assets. The system of internal accounting controls is
subject to ongoing evaluation of its continuing effectiveness.
Sun's independent accountants, Coopers & Lybrand, have expressed an opinion
on the fairness of management's financial statements by conducting their
audit in accordance with generally accepted auditing standards and issuing
the report presented below.
The Audit Committee of the Board of Directors is comprised of directors who
are not employees of the Company and meets a minimum of five times
annually. It assists the Board of Directors in discharging its duties
relating to accounting and reporting practices and internal controls, and
it assesses the performance and recommends the appointment of independent
accountants. Both Coopers & Lybrand and the Company's internal auditors
have unrestricted access to the Committee to discuss audit findings and
other financial matters.
[ROBERT H. CAMPBELL]
ROBERT H. CAMPBELL
Chairman, Chief Executive
Officer and President
[ROBERT M. AIKEN, JR.]
ROBERT M. AIKEN, JR.
Senior Vice President and
Chief Financial Officer
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders and Board of Directors, Sun
Company, Inc.:
We have audited the accompanying consolidated balance sheets of
Sun Company,
Inc. and its subsidiaries as of December 31, 1993 and 1992, and
the related
consolidated statements of income, changes in stockholders'
equity and cash
flows for each of the three years in the period ended December
31, 1993.
These financial statements are the responsibility of the
Company's management.
Our responsibility is to express an opinion on these financial
statements
based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above (pages 41 to 61)
present fairly, in all material respects, the consolidated financial
position of Sun Company, Inc. and its subsidiaries as of December 31, 1993
and 1992 and the consolidated results of their operations and their cash
flows for each of the three years in the period ended December 31, 1993, in
conformity with generally accepted accounting principles.
As discussed in Note 7 to the consolidated financial statements, the
Company changed: its method of accounting for income taxes in 1993; its
method of accounting for the cost of postretirement health care and life
insurance benefits in 1992; and, its method of accounting for the cost of
crude oil and refined product inventories at Suncor Inc., the Company's
Canadian subsidiary, in 1991.
[COOPERS & LYBRAND]
2400 Eleven Penn Center
Philadelphia, PA 19103
February 15, 1994
62
<PAGE>
<PAGE>
SUPPLEMENTAL FINANCIAL AND OPERATING INFORMATION (Unaudited)
REFINING AND MARKETING DATA
<TABLE>
<CAPTION>
1993 1992 1991 1990 1989
SUPPLY AND -------------------- --------------------- ---------------------- ---------------------- ----------------------
DISTRIBUTION* U.S. Canada Total U.S. Canada Total U.S. Canada Total U.S. Canada Total U.S. Canada Total
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
SUPPLY
Crude oil
purchases 471.6 63.3 534.9 525.9 62.7 588.6 519.7 62.8 582.5 551.2 57.5 608.7 560.3 61.5 621.8
Crude oil
inventory
change (5.8) -- (5.8) 5.7 (.8) 4.9 4.1 .5 4.6 (2.5) (.5) (3.0) (4.9) .3 (4.6)
Refined
product
purchases 133.6 19.2 152.8 125.8 19.7 145.5 111.5 14.9 126.4 101.8 21.4 123.2 107.6 15.3 122.9
- ----------------------------------------------------------------------------------------------------------------------------------
599.4 82.5 681.9 657.4 81.6 739.0 635.3 78.2 713.5 650.5 78.4 728.9 663.0 77.1 740.1
- ----------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTION
Refined
product
sales 595.6 81.9 677.5 645.8 83.0 728.8 629.1 80.0 709.1 640.5 78.0 718.5 655.1 77.6 732.7
Refined
product
inventory
change (2.5) 1.1 (1.4) 5.5 (1.1) 4.4 -- (.8) (.8) (3.5) .5 (3.0) (5.5) -- (5.5)
Internal
consumption
and other 6.3 (.5) 5.8 6.1 (.3) 5.8 6.2 (1.0) 5.2 13.5 (.1) 13.4 13.4 (.5) 12.9
- ----------------------------------------------------------------------------------------------------------------------------------
599.4 82.5 681.9 657.4 81.6 739.0 635.3 78.2 713.5 650.5 78.4 728.9 663.0 77.1 740.1
- ----------------------------------------------------------------------------------------------------------------------------------
*Thousands of barrels daily; excludes trading activities.
</TABLE>
<TABLE>
<CAPTION>
1993 1992 1991 1990 1989
NET SOURCES -------------------- --------------------- ---------------------- ---------------------- ----------------------
OF CRUDE OIL U.S. Canada Total U.S. Canada Total U.S. Canada Total U.S. Canada Total U.S. Canada Total
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
United States 25% 1% 22% 28% 1% 25% 27% 3% 24% 31% 3% 28% 32% 4% 29%
Canada 10 99 20 10 99 20 8 97 18 8 97 17 8 95 16
Other foreign:
Arabian Gulf 9 -- 8 10 -- 9 10 -- 9 11 -- 10 12 1 11
South and
Central
America 17 -- 15 16 -- 14 16 -- 14 18 -- 16 13 -- 12
North Sea 20 -- 18 10 -- 9 3 -- 3 2 -- 2 7 -- 7
Africa 19 -- 17 26 -- 23 36 -- 32 30 -- 27 28 -- 25
- ----------------------------------------------------------------------------------------------------------------------------------
100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100%
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
1993 1992 1991 1990 1989
-------------------- --------------------- ---------------------- ---------------------- ----------------------
INVENTORIES U.S. Canada Total U.S. Canada Total U.S. Canada Total U.S. Canada Total U.S. Canada Total
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Crude oil 16.5 1.3 17.8 14.4 1.3 15.7 16.5 1.0 17.5 18.0 1.2 19.2 17.1 1.0 18.1
Refined
products 20.8 2.2 23.0 21.7 1.8 23.5 19.7 2.2 21.9 19.7 2.5 22.2 21.0 2.3 23.3
- ----------------------------------------------------------------------------------------------------------------------------------
*Millions of barrels at December 31; excludes trading inventories.
</TABLE>
63
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
Thousands of Barrels Daily
-----------------------------------------
REFINERY INPUT 1993 1992 1991 1990 1989
- ------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Refinery crude unit capacity at
December 31:
United States:
Marcus Hook, Pennsylvania 175.0 175.0 175.0 175.0 170.0
Philadelphia, Pennsylvania 130.0 130.0 130.0 130.0 130.0
Toledo, Ohio 125.0 125.0 125.0 125.0 125.0
Tulsa, Oklahoma 85.0 85.0 85.0 85.0 85.0
Yabucoa, Puerto Rico 85.0 85.0 85.0 85.0 85.0
- ------------------------------------------------------------------------------
600.0 600.0 600.0 600.0 595.0
Canada:
Sarnia, Ontario 70.0 70.0 70.0 70.0 70.0
- ------------------------------------------------------------------------------
670.0 670.0 670.0 670.0 665.0
- ------------------------------------------------------------------------------
Total input to crude units:
United States:
Marcus Hook, Pennsylvania 152.5 157.2 161.6 161.1 175.4
Philadelphia, Pennsylvania 100.7 116.5 112.0 118.1 118.4
Toledo, Ohio 117.5 117.7 123.7 114.3 110.8
Tulsa, Oklahoma 84.7 84.4 78.1 83.5 77.4
Yabucoa, Puerto Rico 46.7 61.0 55.7 77.3 79.2
- ------------------------------------------------------------------------------
502.1 536.8 531.1 554.3 561.2
Canada:
Sarnia, Ontario 68.5 71.3 72.1 66.9 68.9
- ------------------------------------------------------------------------------
Input to Sun crude units 570.6 608.1 603.2 621.2 630.1
Less input for others --
Sarnia, Ontario 1.8 1.2 1.2 1.6 1.0
- ------------------------------------------------------------------------------
Sun's total net input
to crude units 568.8 606.9 602.0 619.6 629.1
- ------------------------------------------------------------------------------
Sun's total input to crude units:
Crude oil 530.9 594.7 588.3 607.3 618.2
Other feedstocks 39.7* 13.4 14.9 13.9 11.9
- ------------------------------------------------------------------------------
570.6 608.1 603.2 621.2 630.1
- ------------------------------------------------------------------------------
Refinery crude unit capacity
utilized:
United States 84% 89% 89% 92% 94%
Canada 98% 102% 103% 96% 98%
Total 85% 91% 90% 93% 95%
- ------------------------------------------------------------------------------
Catalytic cracking capacity at
December 31:
United States 235.0 235.0* 270.0 260.0 260.0
Canada 40.0 40.0 40.0 37.0 37.0
- ------------------------------------------------------------------------------
Total 275.0 275.0 310.0 297.0 297.0
- ------------------------------------------------------------------------------
Catalytic cracking capacity
utilized:
United States 90% 90% 91% 83% 88%
Canada 90% 90% 92% 90% 87%
Total 90% 90% 91% 84% 88%
- ------------------------------------------------------------------------------
</TABLE>
*Refinery crude unit feedstocks in 1993 include 28.9 thousand barrels daily
of "lubes-extracted" intermediate streams which are produced at the Tulsa
refinery and transported to the Toledo refinery for further processing.
In the fourth quarter of 1992, Sun reconfigured its Tulsa refinery to
place greater emphasis on the production of paraffinic lubricants. As
part of the reconfiguration, several major processing units were
mothballed that were critically linked to the production of fuels at the
Tulsa refinery.
64
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
1993 1992 1991 1990 1989
PRODUCTS ---------------------- ---------------------- ---------------------- ---------------------- ----------------------
MANUFACTURED U.S. Canada Total U.S. Canada Total U.S. Canada Total U.S. Canada Total U.S. Canada Total
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Gasoline 44% 54% 45% 46% 54% 47% 48% 55% 49% 45% 50% 46% 46% 49% 47%
Middle
distillates 15 24 16 16 21 17 17 13 17 15 14 15 17 18 17
Jet fuel 8 7 8 9 4 8 6 4 6 8 4 7 5 2 5
Residual fuel 6 2 5 7 4 7 5 4 5 6 6 6 7 4 7
Petrochemicals 5 7 5 5 8 5 4 9 4 4 9 4 4 12 4
Lubricants 3 -- 3 3 -- 3 3 -- 2 4 -- 4 4 -- 3
Asphalt 4 1 4 4 1 4 4 1 4 5 2 5 4 2 4
Propane 2 2 2 2 3 2 2 3 2 2 3 2 2 3 2
Other 13 3 12 8 5 7 11 11 11 11 12 11 11 10 11
- ----------------------------------------------------------------------------------------------------------------------------------
100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100%
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
REFINED 1993 1992 1991 1990 1989
PRODUCT ---------------------- ---------------------- ---------------------- ---------------------- -----------------------
SALES* U.S. Canada Total U.S. Canada Total U.S. Canada Total U.S. Canada Total U.S. Canada Total
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Gasoline:
Wholesale 56.7 17.3 74.0 80.0 18.7 98.7 78.6 18.2 96.8 71.3 17.1 88.4 72.0 14.0 86.0
Retail 223.6 25.6 249.2 233.9 25.1 259.0 235.3 25.1 260.4 242.9 24.0 266.9 261.4 24.2 285.6
Middle dis-
tillates 105.5 20.5 126.0 111.9 18.2 130.1 110.5 16.3 126.8 110.5 15.6 126.1 117.6 17.0 134.6
Jet fuel 56.3 5.7 62.0 57.1 4.0 61.1 51.2 3.2 54.4 48.6 3.0 51.6 42.1 1.7 43.8
Residual
fuel 40.8 1.7 42.5 50.5 3.3 53.8 43.0 2.2 45.2 38.3 4.3 42.6 43.9 4.0 47.9
Petro-
chemicals 28.8 5.0 33.8 28.9 6.0 34.9 25.3 6.2 31.5 24.7 6.1 30.8 23.7 6.0 29.7
Lubricants 16.9 -- 16.9 17.4 -- 17.4 17.4** -- 17.4 23.9** .6 24.5 23.1 1.0 24.1
Asphalt 29.9 .9 30.8 29.3 .6 29.9 25.2 1.5 26.7 32.0 1.1 33.1 28.2 1.2 29.4
Propane 11.6 2.8 14.4 14.5 2.6 17.1 13.3 2.6 15.9 11.8 2.5 14.3 13.2 4.1 17.3
Other 25.5 2.4 27.9 22.3 4.5 26.8 29.3 4.7 34.0 36.5 3.7 40.2 29.9 4.4 34.3
- ---------------------------------------------------------------------------------------------------------------------------------
595.6 81.9 677.5 645.8 83.0 728.8 629.1 80.0 709.1 640.5 78.0 718.5 655.1 77.6 732.7
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
*Thousands of barrels daily; excludes refined product trading activities.
**Includes sales of 1.9 and 4.7 thousand barrels daily of naphthenic lube oils
in 1991 and 1990, respectively. In the first quarter of 1991, Sun
discontinued manufacturing naphthenic lube oils and closed the related
facility at its Marcus Hook refinery.
<TABLE>
<CAPTION>
REFINED 1993 1992 1991 1990 1989
PRODUCT ---------------------- ----------------------- ---------------------- ---------------------- ----------------------
SALES* U.S. Canada Total U.S. Canada Total U.S. Canada Total U.S. Canada Total U.S. Canada Total
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Gasoline:
Wholesale $ .54 $ .52 $ .54 $ .61 $ .59 $ .61 $.67 $ .74 $ .68 $ .74 $ .78 $ .75 $ .61 $ .65 $.62
Retail .66 .80 .68 .72 .89 .74 .77 .95 .79 .85 1.03 .86 .71 .85 .72
Middle dis-
tillates .57 .59 .57 .60 .63 .60 .64 .69 .65 .71 .77 .72 .59 .58 .59
Jet fuel .56 .58 .56 .60 .62 .60 .64 .71 .64 .75 .80 .75 .58 .61 .58
Residual
fuel .32 .26 .32 .31 .28 .31 .30 .28 .30 .39 .34 .39 .37 .36 .37
Petro-
chemicals .74 .78 .75 .74 .91 .77 .82 1.01 .86 1.01 1.13 1.03 1.10 1.20 1.12
Lubricants 1.61 -- 1.61 1.60 -- 1.60 1.70 -- 1.70 1.41 2.61 1.44 1.28 2.46 1.33
Asphalt .35 .31 .35 .26 .22 .26 .26 .25 .26 .36 .32 .36 .34 .39 .35
Propane .35 .41 .36 .33 .39 .34 .34 .47 .36 .40 .40 .40 .28 .28 .28
Other .49 .45 .48 .53 .48 .52 .57 .52 .57 .64 .66 .64 .46 .44 .45
- ---------------------------------------------------------------------------------------------------------------------------------
Average-total
refined
products $ .60 $ .63 $ .61 $ .63 $ .68 $ .64 $.68 $ .78 $ .69 $ .76 $ .85 $ .77 $ .64 $ .71 $.65
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
*Dollars per gallon; excludes consumer excise taxes and refined product
trading activities.
<TABLE>
<CAPTION>
1993 1992 1991 1990 1989
REFINED ---------------------- ----------------------- ---------------------- ---------------------- ----------------------
PRODUCTS* U.S. Canada Total U.S. Canada Total U.S. Canada Total U.S. Canada Total U.S. Canada Total
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Average sales
price $25.39 $26.44 $25.52 $26.47 $28.74 $26.73 $28.48 $32.59 $28.94 $31.76 $35.59 $32.18 $26.96 $29.78 $27.26
Average cost
of products
sold** $19.08 $18.52 $19.01 $20.96 $20.90 $20.96 $22.11 $23.25 $22.24 $25.28 $24.44 $25.19 $21.04 $19.60 $20.89
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
*Dollars per barrel.
**Includes crude oil and other purchased feedstocks and refined products.
65
<PAGE>
<TABLE>
<CAPTION>
RETAIL 1993 1992 1991 1990 1989
GASOLINE ---------------------- ----------------------- ---------------------- ---------------------- ---------------------
OUTLETS U.S. Canada Total U.S. Canada Total U.S. Canada Total U.S. Canada Total U.S. Canada Total
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Direct outlets:
Company owned
or leased:
Tradi-
tional 700 404 1,104 733 433 1,166 761 461 1,222 830 474 1,304 1,032 457 1,489
Ultra service
centers 337 -- 337 360 -- 360 375 -- 375 380 -- 380 322 -- 322
Convenience
stores 540 8 548 552 6 558 538 6 544 494 5 499 421 5 426
- --------------------------------------------------------------------------------------------------------------------------------
1,577 412 1,989 1,645 439 2,084 1,674 467 2,141 1,704 479 2,183 1,775 462 2,237
- --------------------------------------------------------------------------------------------------------------------------------
Dealer owned:
Tradi-
tional 703 153 856 836 171 1,007 920 217 1,137 1,079 245 1,324 1,134 269 1,403
Ultra service
centers 35 -- 35 40 -- 40 47 -- 47 45 -- 45 52 -- 52
Convenience
stores 3 41 44 4 41 45 6 41 47 4 40 44 4 39 43
- --------------------------------------------------------------------------------------------------------------------------------
741 194 935 880 212 1,092 973 258 1,231 1,128 285 1,413 1,190 308 1,498
- --------------------------------------------------------------------------------------------------------------------------------
Total direct
outlets 2,318 606 2,924 2,525 651 3,176 2,647 725 3,372 2,832 764 3,596 2,965 770 3,735
Distributor
outlets 2,124 -- 2,124 2,864 -- 2,864 3,207 -- 3,207 3,222 -- 3,222 3,480 -- 3,480
- --------------------------------------------------------------------------------------------------------------------------------
4,442 606 5,048 5,389 651 6,040 5,854 725 6,579 6,054 764 6,818 6,445 770 7,215
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
THROUGHPUT 1993 1992 1991 1990 1989
PER DIRECT ---------------------- ----------------------- ---------------------- ---------------------- ----------------------
OUTLET* U.S. Canada Total U.S. Canada Total U.S. Canada Total U.S. Canada Total U.S. Canada Total
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Company owned
or leased: 93.5 55.7 85.6 89.4 50.9 81.1 83.9 45.5 75.5 81.2 42.7 73.0 81.4 41.8 73.4
Dealer
owned 63.6 44.7 59.8 58.6 38.8 54.5 52.9 38.7 50.0 51.0 35.5 47.9 51.2 36.8 48.3
- ---------------------------------------------------------------------------------------------------------------------------------
Average-total
direct
outlets 83.5 52.2 77.1 78.3 46.7 71.7 72.0 43.0 65.8 69.2 39.9 63.1 69.2 39.8 63.2
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
*Thousands of gallons of gasoline monthly.
<TABLE>
<CAPTION>
1993 1992 1991 1990 1989
TRANS- ---------------------- ----------------------- ---------------------- ---------------------- ----------------------
PORTATION U.S. Canada Total U.S. Canada Total U.S. Canada Total U.S. Canada Total U.S. Canada Total
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PIPELINE MILEAGE
Crude lines in
which Sun has
has an
interest 5,579 266 5,845 5,493 266 5,759 5,493 266 5,759 5,686 266 5,952 5,729 266 5,995
Product lines
in which
Sun has an
interest 4,303 368 4,671 4,605 368 4,973 4,704 401 5,105 4,704 401 5,105 4,824 401 5,225
PIPELINE
SHIPMENTS*
Crude oil
(billions of
barrel
miles) 50.4 5.8 56.2 48.7 5.7 54.4 55.8 6.0 61.8 54.2 5.0 59.2 49.3 5.5 54.8
Refined products
(billions of
barrel
miles) 30.7 2.9 33.6 28.8 2.7 31.5 27.3 2.6 29.9 29.9 2.6 32.5 31.9 2.5 34.4
OCEAN TANKERS
Owned and
operated 4 -- 4 4 -- 4 4 -- 4 4 -- 4 5 -- 5
Capacity
(thousands of
barrels) 1,158 -- 1,158 1,158 -- 1,158 1,158 -- 1,158 1,158 -- 1,158 2,028 -- 2,028
Deadweight
tonnage
(thousands
of tons) 157 -- 157 157 -- 157 157 -- 157 157 -- 157 281 -- 281
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
*Includes equity in shipments through pipelines in which Sun has an ownership
interest.
66
<PAGE>
<PAGE>
OIL AND GAS DATA
CAPITALIZED COSTS*
(Millions of Dollars)
Outside
Canada North America Total
- ------------------------------------------------------------------------------
AT DECEMBER 31, 1993
Proved properties $477 $ 799 $1,276
Unproved properties 143 59 202
- ------------------------------------------------------------------------------
Total capitalized costs 620 858 1,478
Accumulated depreciation,
depletion and amortization 353 666 1,019
- ------------------------------------------------------------------------------
Net capitalized costs $267 $ 192 $ 459
- ------------------------------------------------------------------------------
AT DECEMBER 31, 1992
Proved properties $519 $ 855 $1,374
Unproved properties 160 149 309
- ------------------------------------------------------------------------------
Total capitalized costs 679 1,004 1,683
Accumulated depreciation,
depletion and amortization 403 796 1,199
- ------------------------------------------------------------------------------
Net capitalized costs $276 $ 208 $ 484
- ------------------------------------------------------------------------------
*Includes capitalized costs of support equipment and facilities.
COSTS INCURRED IN OIL AND GAS PRODUCING ACTIVITIES*
(Millions of Dollars)
Outside
Canada North America Total
- ------------------------------------------------------------------------------
1993
Property acquisition costs:
Proved $ 3 $ 22 $ 25
Unproved $ 9 $ -- $ 9
Exploration costs $26 $ --** $ 26
Development costs $38 $ 29 $ 67
- ------------------------------------------------------------------------------
1992
Property acquisition costs:
Proved $30 $ -- $ 30
Unproved $ 3 $ 7 $ 10
Exploration costs $25 $ 75** $100
Development costs $41 $ 18 $ 59
- ------------------------------------------------------------------------------
1991
Property acquisition costs:
Proved $26 $ -- $ 26
Unproved $10 $ 9 $ 19
Exploration costs $22 $111 $133
Development costs $44 $ 25 $ 69
- ------------------------------------------------------------------------------
*Consists of both capitalized and expensed costs incurred in oil and gas
producing activities.
**Reflects exploration costs incurred prior to the Company's decision to
withdraw from oil and gas exploration activities outside North America,
effective September 30, 1992. As part of the provision for write-down of
assets and other matters recorded in the third quarter of 1992, the
Company established an accrual for all future exploration commitments.
Actual costs incurred subsequent to September 30, 1992 to satisfy these
commitments have been charged against this accrual and excluded from
costs incurred in oil and gas producing activities. (See Note 2 to the
consolidated financial statements.)
67
<PAGE>
ESTIMATED NET QUANTITIES OF PROVED
OIL AND GAS RESERVES
Proved reserves are the estimated quantities which geological and
engineering data demonstrate with reasonable certainty to be recoverable in
future years from known reservoirs under economic and operating conditions
existing at the time the estimate is m ade. Proved developed reserves are
the quantities expected to be recovered through existing wells with
existing equipment and operating methods. The estimates of reserves in
Canada were prepared by Coles Gilbert Associates Ltd., independent
petroleum consultants, while the estimates of reserves outside North
America were prepared by Sun engineers. These estimates are based on the
then current technology and economic conditions. Sun considers such
estimates to be reasonable; however, due to inherent uncertainties and the
limited nature of reservoir data, estimates of underground reserves are
imprecise and subject to change over time as additional information becomes
available.
<TABLE>
<CAPTION>
Recoverable
Crude Oil Natural Gas
and Condensate Liquids Natural Gas
(Millions of (Millions of (Billions of
Barrels) (Barrels) Cubic Feet)
------------------- ------------------ ------------------
Outside Outside Outside
North North North
PROVED Can- Amer- Can- Amer- Can- Amer-
RESERVES ada ica Total ada ica Total ada ica Total
- -----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCE AT
DECEMBER 31,
1989 32 92 124 3 2 5 297 99 396
Revisions of
previous
estimates 1 12 13 -- -- -- 9 (4) 5
Purchases of
minerals in
place 1 -- 1 -- -- -- 42 -- 42
Sales of
minerals in
place -- -- -- -- -- -- (3) -- (3)
Extensions
and dis-
coveries 1 -- 1 -- -- -- 18 54 72
Production (3) (20) (23) -- -- -- (26) (22) (48)
- -----------------------------------------------------------------------------
BALANCE AT
DECEMBER 31,
1990 32 84 116 3 2 5 337 127 464
Revisions of
previous
estimates (1) 8 7 -- -- -- (10) (6) (16)
Purchases of
minerals in
place 1 -- 1 -- -- -- 86 -- 86
Sales of
minerals in
place (2) -- (2) -- -- -- (2) -- (2)
Extensions
and dis-
coveries 2 4 6 -- -- -- 26 -- 26
Production (3) (17) (20) -- -- -- (30) (20) (50)
- -----------------------------------------------------------------------------
BALANCE AT
DECEMBER 31,
1991 29 79 108 3 2 5 407 101 508
Revisions of
previous
estimates 1 8 9 -- -- -- 1 20 21
Purchases of
minerals in
place 4 -- 4 1 -- 1 89 -- 89
Sales of
minerals in
place (2) -- (2) -- -- -- (8) -- (8)
Extensions
and dis-
coveries 1 3 4 -- -- -- 28 -- 28
Production (3) (15) (18) -- -- -- (42) (17) (59)
- -----------------------------------------------------------------------------
BALANCE AT
DECEMBER 31,
1992 30 75 105 4 2 6 475 104 579
Revisions of
previous
estimates -- 5 5 -- -- -- 26 26 52
Purchases of
minerals in
place 1 2 3 -- -- -- 5 -- 5
Sales of
minerals in
place* (2) (42) (44) -- -- -- (46) -- (46)
Extensions
and dis-
coveries 4 -- 4 -- -- -- 74 -- 74
Production (3) (10) (13) -- (1) (1) (42) (21) (63)
- -----------------------------------------------------------------------------
BALANCE AT
DECEMBER 31,
1993 30 30 60 4 1 5 492 109 601
- -----------------------------------------------------------------------------
PROVED DEVELOPED
RESERVES AT
DECEMBER 31
- -----------------------------------------------------------------------------
1989 29 92 121 3 2 5 185 99 284
1990 28 84 112 2 2 4 197 73 270
1991 26 75 101 2 2 4 256 55 311
1992 27 72 99 3 2 5 370 104 474
1993 27 24 51 3 1 4 338 100 438
- -----------------------------------------------------------------------------
</TABLE>
*Consists of proved reserves in Canada and Dubai which were subject to
disposition as part of a restructuring plan adopted in 1992. (See Note 2
to the consolidated financial statements.)
There has been no major discovery or other favorable or adverse event that
has caused a significant change in estimated proved reserves since December
31, 1993. Sun has no long-term supply agreements or contracts with
governments or authorities in which it acts as producer nor does it have
any interest in oil and gas operations accounted for by the equity method.
In 1992, Sun sold on an installment basis 4 million shares of common stock
of Suncor which increased the minority interest in Sun's reserves in Canada
from 25 percent to approximately 32 percent. In 1993, Sun sold an
additional 6.8 million shares of Suncor common stock which further
increased the minority interest in Sun's reserves in Canada to 45 percent.
68
<PAGE>
RESULTS OF OPERATIONS FOR OIL AND GAS PRODUCTION
(Millions of Dollars and Dollars Per Barrel of Net Production*)
Outside
Total Canada North America
- ------------------------------------------------------------------------------
1993
Revenues:
Sales to unaffiliated
customers $ 182 $ 48 $134
Transfers to other
Sun operations 162 65 97
- ------------------------------------------------------------------------------
Revenues from oil
and gas production 344 $14.15 113 $ 10.56 231 $16.96
Gain on divestment of
exploration and
production properties** 109 4.50 10 .93 99 7.32
- ------------------------------------------------------------------------------
453 18.65 123 11.49 330 24.28
Expenses:
Production:
Taxes 25 1.02 -- -- 25 1.82
Operating costs 82 3.37 25 2.30 57 4.20
Depreciation, depletion
and amortization 84 3.48 32 3.07 52 3.80
Exploration 22 .89 22 2.03 -- --
Other related costs*** 6 .29 17 1.56 (11) (.70)
- ------------------------------------------------------------------------------
219 9.05 96 8.96 123 9.12
- ------------------------------------------------------------------------------
Operating profit before
income taxes 234 9.60 27 2.53 207 15.16
Related income taxes 76 3.11 17 1.59 59 4.31
- ------------------------------------------------------------------------------
Results of operations
from exploration and
production $ 158 $ 6.49 $ 10 $ .94 $148 $10.85
- ------------------------------------------------------------------------------
1992
Revenues:
Sales to unaffiliated
customers $ 290 $ 40 $250
Transfers to other
Sun operations 159 67 92
- ------------------------------------------------------------------------------
Revenues from oil and
gas production 449 $15.41 107 $ 9.90 342 $18.64
Gain on litigation
settlement+ 178 6.11 -- -- 178 9.68
- ------------------------------------------------------------------------------
627 21.52 107 9.90 520 28.32
Expenses:
Production:
Taxes 38 1.29 -- -- 38 2.05
Operating costs 109 3.74 29 2.71 80 4.35
Depreciation, depletion
and amortization 101 3.49 37 3.45 64 3.50
Provision for write-
down of assets and
other matters++ 491 16.83 156 14.48 335 18.21
Exploration 60 2.07 18 1.67 42 2.30
Other related costs*** 13 .41 7 .63 6 .29
- ------------------------------------------------------------------------------
812 27.83 247 22.94 565 30.70
- ------------------------------------------------------------------------------
Operating profit (loss)
before income taxes (185) (6.31) (140) (13.04) (45) (2.38)
Related income taxes (41) (1.38) (70) (6.48) 29 1.60
- ------------------------------------------------------------------------------
Results of operations
from exploration and
production $(144) $(4.93) $(70) $(6.56) $(74) $(3.98)
- ------------------------------------------------------------------------------
*Natural gas is included by conversion to crude oil equivalent using the
relative energy content method (conversion factor 6.0 thousand cubic
feet per barrel).
**Consists of gains on the divestment of certain oil and gas producing
properties in Canada and Dubai and certain exploration properties
principally in the United Kingdom sector of the North Sea which
previously had been identified for divestment as part of the Company's
1992 restructuring plan. The after-tax effect of these divestments
increased results of operations from oil and gas exploration and
production by $5 million or $.42 per barrel of production in Canada and
by $75 million or $5.54 per barrel of production outside North America.
(See Note 2 to the consolidated financial statements.)
***Consists principally of exploration and production direct general and
administrative costs and other revenues and expenses including foreign
exchange gains (losses).
+The after-tax effect of this litigation settlement increased results of
operations from oil and gas exploration and production outside North
America by $117 million or $6.36 per barrel of production.
++The after-tax effect of these charges reduced results of operations from
oil and gas exploration and production by $77 million or $7.15 per
barrel of production in Canada and by $200 million or $10.88 per barrel
of production outside North America. (See Note 2 to the consolidated
financial statements.)
69
<PAGE>
RESULTS OF OPERATIONS FOR OIL AND GAS PRODUCTION
(Millions of Dollars and Dollars Per Barrel of Net Production*)
Outside
Total Canada North America
- ------------------------------------------------------------------------------
1991
Revenues:
Sales to unaffiliated
customers $324 $ 22 $302
Transfers to other
Sun operations 172 73 99
- ------------------------------------------------------------------------------
Revenues from oil
and gas production 496 $16.84 95 $11.31 401 $19.06
Expenses:
Production:
Taxes 34 1.15 -- -- 34 1.61
Operating costs 127 4.33 27 3.24 100 4.76
Depreciation, depletion
and amortization 147 4.99 36 4.30 111 5.27
Exploration 102 3.46 18 2.09 84 4.01
Other related costs** 56 1.86 9 1.04 47 2.19
- ------------------------------------------------------------------------------
466 15.79 90 10.67 376 17.84
- ------------------------------------------------------------------------------
Operating profit before
income taxes 30 1.05 5 .64 25 1.22
Related income taxes 69 2.35 4 .46 65 3.10
- ------------------------------------------------------------------------------
Results of operations from
exploration and production $(39) $(1.30) $ 1 $ .18 $(40) $(1.88)
- ------------------------------------------------------------------------------
*Natural gas is included by conversion to crude oil equivalent using the
relative energy content method (conversion factor 6.0 thousand cubic feet
per barrel).
**Consists principally of exploration and production direct general and
administrative costs and other revenues and expenses including foreign
exchange gains (losses). Also includes a $3 million provision for
employee termination costs outside North America.
70
<PAGE>
EXPLORATION EXPENSES
(Millions of Dollars)
Outside
Canada North America* Total
- ------------------------------------------------------------------------------
1993
Dry hole costs $ 9 $-- $ 9
Leasehold impairment 5 -- 5
Geological and geophysical 7 -- 7
Other 1 -- 1
- ------------------------------------------------------------------------------
$22 $-- $ 22
- ------------------------------------------------------------------------------
1992
Dry hole costs $ 5 $25 $ 30
Leasehold impairment 4 -- 4
Geological and geophysical 8 17 25
Other 1 -- 1
- ------------------------------------------------------------------------------
$18 $42 $ 60
- ------------------------------------------------------------------------------
1991
Dry hole costs $ 6 $42 $ 48
Leasehold impairment 4 1 5
Geological and geophysical 7 41 48
Other 1 -- 1
- ------------------------------------------------------------------------------
$18 $84 $102
- ------------------------------------------------------------------------------
*Reflects exploration expenses prior to the Company's decision to
withdraw from oil and gas exploration activities outside North America,
effective September 30,1992. See "Costs Incurred in Oil and Gas
Producing Activities" under "Supplemental Financial and Operating
Information - Oil and Gas Data" for additional discussion concerning
this decision.
REVENUES PER UNIT OF OIL AND GAS PRODUCTION
Outside
Canada North America
- ------------------------------------------------------------------------------
1993
Revenues, including transfers:
Crude oil and condensate ($ per barrel) $15.00 $16.85
Crude oil, condensate and natural gas
liquids ($ per barrel) $14.49 $16.75
Natural gas ($ per MCF) $ 1.42 $ 2.93
- ------------------------------------------------------------------------------
1992
Revenues, including transfers:
Crude oil and condensate ($ per barrel) $17.12 $18.57
Crude oil, condensate and natural gas
liquids ($ per barrel) $16.41 $18.52
Natural gas ($ per MCF) $ 1.08 $ 3.21
- ------------------------------------------------------------------------------
1991
Revenues, including transfers:
Crude oil and condensate ($ per barrel) $18.09 $18.58
Crude oil, condensate and natural gas
liquids ($ per barrel) $17.33 $18.59
Natural gas ($ per MCF) $ 1.22 $ 3.58
- ------------------------------------------------------------------------------
71
<PAGE>
STANDARDIZED MEASURE OF DISCOUNTED FUTURE NET CASH FLOWS FROM ESTIMATED
PRODUCTION OF PROVED OIL AND GAS RESERVES AFTER INCOME TAXES
The standardized measure of discounted future net cash flows from estimated
production of proved oil and gas reserves after income taxes is presented
in accordance with the provisions of Statement of Financial Accounting
Standards No. 69, "Disclosures about Oil and Gas Producing Activities"
("SFAS NO. 69"). In computing this data, assumptions other than those
mandated by SFAS NO. 69 could produce substantially different results. Sun
cautions against viewing this information as a forecast of future economic
conditions or revenues.
The standardized measure of discounted future net cash flows is determined
by using estimated quantities of proved reserves and taking into account
the future periods in which they are expected to be developed and produced
based on year-end economic conditions. The estimated future production is
priced at year-end prices, except that future gas prices are increased,
where applicable, for fixed and determinable price escalations provided by
contract or regulation. The resulting estimated future cash inflows are
reduced by estimated future costs to develop and produce the proved
reserves based on year-end cost levels. In addition, Sun has also deducted
certain other estimated costs deemed necessary to derive the estimated
pretax future net cash flows from the proved reserves including direct
general and administrative costs of exploration and production operations
and abandonment/dismantlement costs. The estimated pretax future net cash
flows are then reduced further by deducting future income tax expenses.
Such income taxes are determined by applying the appropriate year-end
statutory tax rates, with consideration of future tax rates already
legislated, to the future pretax net cash flows relating to Sun's proved
oil and gas reserves less the tax basis of the properties involved. The
future income tax expenses give effect to permanent differences and tax
credits and allowances relating to Sun's proved oil and gas reserves. The
resultant future net cash flows are reduced to present value amounts by
applying the SFAS NO. 69 mandated ten percent discount factor. The result
is referred to as the "Standardized Measure of Discounted Future Net Cash
Flows from Estimated Production of Proved Oil and Gas Reserves after Income
Taxes."
Outside
(Millions of Dollars) Canada* North America Total
- ------------------------------------------------------------------------------
1993
Future cash inflows $1,294 $ 724 $ 2,018
Future production and development costs (415) (442) (857)
Other related future costs (67) (8) (75)
Future income tax expenses (231) (117) (348)
- ------------------------------------------------------------------------------
Future net cash flows 581 157 738
Discount at 10 percent (251) (28) (279)
- ------------------------------------------------------------------------------
Standardized measure of discounted
future net cash flows from estimated
production of proved oil and gas
reserves after income taxes $ 330 $ 129 $ 459
- ------------------------------------------------------------------------------
1992
Future cash inflows $1,217 $1,648 $ 2,865
Future production and development costs (446) (789) (1,235)
Other related future costs (55) (18) (73)
Future income tax expenses (197) (495) (692)
- ------------------------------------------------------------------------------
Future net cash flows 519 34 865
Discount at 10 percent (229) (66) (295)
- ------------------------------------------------------------------------------
Standardized measure of discounted
future net cash flows from estimated
production of proved oil and gas
reserves after income taxes $ 290 $ 280 $ 570
- ------------------------------------------------------------------------------
1991
Future cash inflows $1,100 $1,725 $ 2,825
Future production and development costs (431) (783) (1,214)
Other related future costs (79) (29) (108)
Future income tax expenses (103) (523) (626)
- ------------------------------------------------------------------------------
Future net cash flows 487 390 877
Discount at 10 percent (209) (89) (298)
- ------------------------------------------------------------------------------
Standardized measure of discounted
future net cash flows from estimated
production of proved oil and gas
reserves after income taxes $ 278 $ 301 $ 579
- ------------------------------------------------------------------------------
*In 1992, Sun sold on an installment basis 4 million shares of common stock
of Suncor which increased the minority interest in Sun's standardized
measure of discounted future net cash flows in Canada from 25 percent to
approximately 32 percent. In 1993, Sun sold an additional 6.8 million
shares of Suncor common stock which further increased the minority
interest in Sun's standardized measure of discounted future net cash flows
in Canada to 45 percent.
72
<PAGE>
SUMMARY OF CHANGES IN THE STANDARDIZED MEASURE OF DISCOUNTED FUTURE NET
CASH FLOWS FROM ESTIMATED PRODUCTION OF PROVED OIL AND GAS RESERVES
AFTER INCOME TAXES
(Millions of Dollars)
1993 1992 1991
- ------------------------------------------------------------------------------
Balance, beginning of year $ 570 $579 $ 796
Increase (decrease) in discounted
future net cash flows:
Sales and transfers of oil and
gas net of related costs (237) (302) (335)
Revisions to estimates of proved reserves:
Prices (54) 52 (542)
Development costs (8) (10) (41)
Production costs 82 -- 119
Quantities 23 73 25
Other (57) (15) (97)
Extensions, discoveries and improved
recovery less related costs 62 24 27
Development costs incurred during the period 67 59 69
Purchases of reserves in place 21 30 27
Sales of reserves in place (289) (6) (8)
Accretion of discount 80 98 162
Income taxes 199 (12) 377
- ------------------------------------------------------------------------------
Balance, end of year $ 459 $570 $ 579
- ------------------------------------------------------------------------------
AVERAGE NET OIL AND GAS PRODUCTION
Thousands of Barrels Daily 1993 1992 1991 1990 1989
- -----------------------------------------------------------------------
Crude oil and condensate:
Canada 9.3 9.3 8.6 8.9 9.0
Outside North America* 27.2 42.1 47.6 54.7 50.6
- -----------------------------------------------------------------------
36.5 51.4 56.2 63.6 59.6
- -----------------------------------------------------------------------
Processed natural gas liquids:
Canada .8 .8 .6 .4 .3
Outside North America .8 .6 .7 .7 .5
- -----------------------------------------------------------------------
1.6 1.4 1.3 1.1 .8
- -----------------------------------------------------------------------
38.1 52.8 57.5 64.7 60.4
- -----------------------------------------------------------------------
Millions of Cubic Feet Daily
- -----------------------------------------------------------------------
Natural gas:
Canada 116 116 83 70 67
Outside North America 56 46 56 62 58
- -----------------------------------------------------------------------
172 162 139 132 125
- -----------------------------------------------------------------------
*Reflects impact of the April 1993 sale of producing properties in
Dubai. Production from these properties averaged 4.4 thousand barrels
daily during 1993 (based on a 365-day period) and 17.8 thousand barrels
daily during 1992.
73
<PAGE>
NET OIL AND GAS WELLS DRILLED
Outside
NET EXPLORATORY WELLS Canada North America* Total
- -----------------------------------------------------------------
1993
Oil 2 1 3
Gas 8 -- 8
Dry 9 3 12
- -----------------------------------------------------------------
19 4 23
- -----------------------------------------------------------------
1992
Oil -- 3 3
Gas 6 -- 6
Dry 7 4 11
- -----------------------------------------------------------------
13 7 20
- -----------------------------------------------------------------
1991
Oil 2 2 4
Gas 3 1 4
Dry 10 6 16
- -----------------------------------------------------------------
15 9 24
- -----------------------------------------------------------------
1990
Oil 4 1 5
Gas 4 -- 4
Dry 7 9 16
- -----------------------------------------------------------------
15 10 25
- -----------------------------------------------------------------
1989
Oil 3 2 5
Gas 1 -- 1
Dry 11 4 15
- -----------------------------------------------------------------
15 6 21
- -----------------------------------------------------------------
NET DEVELOPMENT WELLS
- -----------------------------------------------------------------
1993
Oil 18 2 20
Gas 10 -- 10
Dry 7 -- 7
- -----------------------------------------------------------------
35 2 37
- -----------------------------------------------------------------
1992
Oil 15 -- 15
Gas 2 1 3
Dry 3 -- 3
- -----------------------------------------------------------------
20 1 21
- -----------------------------------------------------------------
1991
Oil 23 1 24
Gas 6 1 7
Dry 3 -- 3
- -----------------------------------------------------------------
32 2 34
- -----------------------------------------------------------------
1990
Oil 13 1 14
Gas 6 -- 6
Dry 7 -- 7
- -----------------------------------------------------------------
26 1 27
- -----------------------------------------------------------------
1989
Oil 22 1 23
Gas 1 -- 1
Dry 3 -- 3
- -----------------------------------------------------------------
26 1 27
- -----------------------------------------------------------------
*The net exploratory wells drilled in 1993 essentially completed
all remaining exploration commitments related to properties subject to
disposition as part of the Company's plan adopted in 1992 to withdraw
from exploration activities outside North America.
As of December 31, 1993, Sun was in the process of drilling or
participating in the drilling of 4 gross wells and 3 net wells in Canada
and 2 gross wells and 1 net well outside North America.
PRODUCING OIL AND GAS WELLS
At December 31, 1993
-----------------------------------
Outside
GROSS PRODUCING WELLS* Canada North America Total
- ---------------------------------------------------------------------------
- -
Oil 2,962 26 2,988
Gas 271 132 403
- ---------------------------------------------------------------------------
3,233 158 3,391
- ---------------------------------------------------------------------------
NET PRODUCING WELLS
- ---------------------------------------------------------------------------
Oil 386 9 395
Gas 81 6 87
- ---------------------------------------------------------------------------
467 15 482
- ---------------------------------------------------------------------------
*Gross producing wells include 30 multiple completion wells (more than
one formation producing into the same well bore).
OIL AND GAS ACREAGE
Thousands of Acres at December 31
-----------------------------------------------
1993 1992
-----------------------------------------------
GROSS Developed Undeveloped Developed Undeveloped
- ---------------------------------------------------------------------------
Canada 600 1,715 1,002 1,836
Outside North America 359 13,627* 157 25,139
- ---------------------------------------------------------------------------
1,019 15,342 1,159 26,975
- ---------------------------------------------------------------------------
NET ACREAGE
- ---------------------------------------------------------------------------
Canada 350 809 447 851
Outside North America 99 9,849* 17 16,611
- ---------------------------------------------------------------------------
449 10,658 464 17,462
- ---------------------------------------------------------------------------
*The decrease in 1993 reflects the disposition of properties which were
subject to disposal as part of the Company's decision to withdraw from
exploration activities outside North America. The Company continues to
actively pursue the disposition of most of its remaining undeveloped
acreage outside North America.
74
<PAGE>
MINING DATA
1993 1992 1991 1990 1989
- ------------------------------------------------------------------------------
OIL SANDS (CANADA)
Proven reserves* (millions of barrels)
at December 31 231 256 276 283 298
Synthetic crude oil produced for ship-
ment (thousands of barrels daily)** 60.5 58.5 60.6 52.0 57.2
Average price (per barrel) $16.61 $19.03 $20.03 $24.48 $18.52
Net mineable acreage (in thousands)
at December 31:
Developed 7 6 6 6 6
Undeveloped 70 70 15 15 15
- ------------------------------------------------------------------------------
*Before crown and other royalties; reflects (3), 1, 15, 4 and 3 million
barrel revisions of previous estimates during 1993, 1992, 1991, 1990 and
1989, respectively.
**Planned maintenance shutdowns in 1993 and 1990 resulted in the
stoppage of production for approximately one month in each of these
years. In addition, production for 1992 includes 2.3 thousand barrels
daily of semi-processed synthetic crude oil. A fire on April 3, 1992
damaged the unifiner at the oil sands plant limiting the plant's ability
to produce fully processed synthetic crude oil. The plant resumed full
operations on June 28, 1992.
- ---------------------------------------------------------------------------
COAL (CANADA)
Net undeveloped subbituminous acreage
(in thousands) at December 31 -- 17 17 17 17
- ------------------------------------------------------------------------------
COAL OPERATIONS HELD FOR SALE (UNITED STATES)
Proven and probable reserves
(millions of tons) at December 31:
Bituminous:
Metallurgical 117 120 116 118 127
Steam 134 197 266 273 283
Subbituminous -- 384 397 415 428
- ------------------------------------------------------------------------------
251* 701 779 806 838
- ------------------------------------------------------------------------------
Proven reserves (million of tons)
at December 31 147 564 577 605 635
- ------------------------------------------------------------------------------
*In January 1993, Sun decided to sell the assets of its coal and
cokemaking operations. In connection with this decision, Sun sold its
western U.S. coal operations which resulted in a reduction in proven and
probable reserves of 451 million tons. Sun continues to actively pursue
the sale of its remaining eastern U.S. coal and cokemaking operations.
(See Note 2 to the consolidated financial statements.)
1993 1992 1991 1990 1989
- ------------------------------------------------------------------------------
Production (thousands of tons):
Bituminous:
Metallurgical 1,959 2,047 2,090 2,242 2,056
Steam 6,209 7,265 7,969 8,901 8,199
Subbituminous 4,690 13,338 13,743 12,941 12,527
- ------------------------------------------------------------------------------
12,858 22,650 23,802 24,084 22,782
- ------------------------------------------------------------------------------
Coke 642 640 622 567 600
- ------------------------------------------------------------------------------
Sales (thousands of tons):
Bituminous:
Metallurgical 1,033 1,197 1,265 1,392 1,206
Steam 6,214 7,385 8,116 9,062 8,186
Subbituminous 4,690 13,338 13,743 12,941 12,527
- ------------------------------------------------------------------------------
11,937 21,920 23,124 23,395 21,919
- ------------------------------------------------------------------------------
Coke 622 634 537 571 592
- ------------------------------------------------------------------------------
Average price of coal and
coke (per ton) $21.49* $15.86 $15.79 $17.77 $17.55
Net acreage (in thousands)
at December 31:
Developed:
Bituminous 45 49 53 50 48
Subbituminous -- 8 8 8 8
Undeveloped bituminous 154 163 257 259 262
- ------------------------------------------------------------------------------
*Reflects a significant decrease in the sale of lower-value
subbituminous coal as a result of the divestment of Sun's western U.S.
coal operations during 1993.
75
<PAGE>
QUARTERLY FINANCIAL INFORMATION
(Millions of Dollars Except Per Share Amounts)
Quarter Ended
-------------------------------------------
March 31 June 30 Sept. 30 Dec. 31 Total
- ------------------------------------------------------------------------------
Sales and other operating
revenue (including
consumer excise taxes):
1993 $2,285 $2,360 $2,273 $2,262 $ 9,180
1992 $2,426 $2,600 $2,782 $2,637 $10,445
Gross profit:*
1993 $227 $233 $285 $275 $1,020
1992 $183 $211 $239 $259 $ 892
Income (loss) from
continuing operations
before cumulative effect
of change in accounting
principle:
1993 $35 $70** $ 114 *** $64+ $ 283
1992 $(28)++ $-- $(322)+++ $33 $(317)
Income (loss) before
cumulative effect of
change in accounting
principle:
1993 $35 $70 $ 114 $64 $ 283
1992 $(21) $ 6 $(320) $37 $(298)
Net income (loss):
1993 $40# $70 $ 114 $64 $ 288
1992 $(282)## $ 6 $(320) $37 $(559)
Income (loss) per share
of common stock from
continuing operations
before cumulative effect
of change in accounting
principle:
1993 $ .32 $.66 $ 1.07 $.60 $ 2.65
1992 $(.26) $ -- $(3.03) $.31 $(2.98)
Income (loss) per share
of common stock before
cumulative effect of
change in accounting
principle:
1993 $ .32 $.66 $ 1.07 $.60 $ 2.65
1992 $(.20) $.06 $(3.01) $.35 $(2.80)
Net income (loss) per
share of common stock:
1993 $ .37# $.66 $ 1.07 $.60 $ 2.70
1992 $(2.66)## $.06 $(3.01) $.35 $(5.26)
- ------------------------------------------------------------------------------
*Gross profit equals sales and other operating revenue less cost of
products sold and operating expenses; depreciation, depletion and
amortization; exploratory costs and leasehold impairment; and
production, consumer excise and other applicable taxes.
**Includes a $19 million increase due to a gain on the sale of 6.8
million shares of common stock of Suncor Inc., the Company's Canadian
subsidiary, a $9 million increase due to a gain on the disposal of
certain oil and gas production properties and a $7 million increase due
to a gain on the settlement of claims arising from a 1987 fire at
Suncor's oil sands facility.
***Includes a $65 million increase due to a gain on the disposal of
certain oil and gas exploration and production properties and a $12
million decrease due to a provision for write-down of assets and other
matters.
+Includes a $10 million increase due to a gain on the sale of a
products pipeline system and a $6 million increase due to a gain on the
disposal of certain oil and gas exploration properties.
++Includes an $8 million decrease due to a loss on the sale of 4
million shares of Suncor common stock.
+++Includes a $456 million decrease due to a provision for write-down of
assets and other matters and a $117 million increase due to a gain on
the settlement of litigation with the government of Iran.
#Reflects an increase in results of operations of $5 million or $.05
per share of common stock due to the cumulative effect for years prior
to 1993 of a change in the method of accounting for income taxes.
##Reflects a decrease in results of operations of $261 million or $2.46
per share of common stock due to the cumulative effect for years prior
to 1992 of a change in the method of accounting for the cost of
postretirement health care and life insurance benefits.
76
<PAGE>
<PAGE>
CASH FLOW INFORMATION
(Millions of Dollars)
<TABLE>
<CAPTION>
Fuels Lubricants
--------------- --------------
Whole- Branded Inter-
For the Year Ended sale Market- Related Chem- Logis- national Canada Corpo- Consoli-
December 31, 1993 Fuels ing Lubes Fuels icals tics Production (Suncor)* rate** dated
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Cash flows from operating
activities:
Income (loss) $(49) $ 92 $50 $(32) $13 $56 $ 73 $ 33 $ 52 $288
Noncash items included
in income (loss) 80 95 7 22 -- 4 64 178 (138) 312
- ----------------------------------------------------------------------------------------------------------------------------
Net cash provided by
operating activities
before working capital
changes $ 31 $187 $57 $(10) $13 $60 $137 $211 $ (86) 600
- ----------------------------------------------------------------------------------------------------------------
Changes in working capital
pertaining to operating activities (187)
- ----------------------------------------------------------------------------------------------------------------------------
Net cash provided by operating activities 413
- ----------------------------------------------------------------------------------------------------------------------------
Cash flows from investing activities:
Capital expenditures (612)
Cash provided by operations held for sale 154
Proceeds from divestments 370
Other (26)
- ----------------------------------------------------------------------------------------------------------------------------
Net cash used in investing activities (114)
- ----------------------------------------------------------------------------------------------------------------------------
Cash flows from financing activities:
Cash used for debt repayments
net of borrowings (176)
Cash dividend payments (192)
Other 8
- ----------------------------------------------------------------------------------------------------------------------------
Net cash used in financing activities (360)
- ----------------------------------------------------------------------------------------------------------------------------
Decrease in cash and cash equivalents $ (61)
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
*Includes Canadian corporate overhead and net financing expenses.
**Includes leasing operations, coal and real estate operations held for
sale and the impact of the provision for write-down of assets and other
matters. Also includes the impact of a gain on divestment of exploration
and production properties and the cumulative effect of change in
accounting principle. (See Notes 2 and 7 to the consolidated financial
statements.)
MARKET FOR SUN COMPANY, INC. STOCK AND RELATED SECURITY HOLDER MATTERS
The Company's common stock is principally traded on the New York Stock
Exchange, Inc. under the symbol "SUN." Its market price range, as reported
in the New York Stock Exchange Composite Transactions quotations, was as
follows:
High Low
- ---------------------------------
1993
1st Quarter 30-1/4 24-1/2
2nd Quarter 27-1/8 22-1/4
3rd Quarter 28-7/8 23-7/8
4th Quarter 32-3/4 28-1/2
1992
1st Quarter 30-3/4 26-3/4
2nd Quarter 29-1/2 25
3rd Quarter 26-1/2 24-1/8
4th Quarter 28-1/2 22-1/2
- ---------------------------------
The Company had approximately 59,000 holders of record of common stock as
of January 31, 1994. The Company has paid cash dividends on a regular
quarterly basis for many years. During 1992 and 1993, cash dividends of
$1.80 per share ($.45 per share each quarter) were paid on the Company's
common stock. Management expects to continue to sustain the current
quarterly cash dividend.
77
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
PROFILE OF SUN BUSINESSES, 1993
Fuels Lubricants
--------------------- -------------------
Wholesale Branded Related International
Fuels Marketing Lubes Fuels Chemicals Logistics Production
====================================== ========= ========= ======== ======== ========= ========= =============
<S> <C> <C> <C> <C> <C> <C> <C>
Sales and other operating revenue
(including consumer excise taxes)
Unaffiliated customers $2,138 $4,001 $414 $723 $316 $59 $145
Intergroup 2,634 8 22 426 24 106 97
--------- --------- -------- -------- --------- --------- -------------
($ millions) $4,772 $4,009 $436 $1,149 $340 $165 $242
====================================== ========= ========= ======== ======== ========= ========= =============
Income (loss) before net financing
expenses and after tax
($ millions) $(49) $92 $50 $(32) $13 $56 $73
====================================== ========= ========= ======== ======== ========= ========= =============
Income (loss) per share (6) (dollars) $(.46) $.86 $.47 $(.30) $.12 $.53 $.69
====================================== ========= ========= ======== ======== ========== ========= =============
Capital expenditures
($ millions)
$148 $107 $11 $41 $23 $29 $51
====================================== ========= ========= ======== ======== ========== ========= =============
Capital employed at December 31 (7)
($ millions)
$805 $491 $148 $277 $139 $190 $223
====================================== ========= ========= ======== ======== ========== ========= =============
Number of employees (8)
3,098 6,703 575 330 51 541 137
====================================== ========= ========= ======== ======== ========== ========= =============
(1) Consists of a $19 million after-tax gain on sale of Suncor stock, an $80 million after-tax gain on the divestment of
exploration and production properties, a $12 million after-tax provision for write-down of assets and other matters,
$3 million of after-tax income from coal and real estate operations held for sale and a $5 million tax benefit for
the cumulative effect of a change in accounting principle.
(2) Includes leasing operations.
(3) After elimination of intergroup amounts.
(4) Includes Canadian corporate expenses of $6 million after tax or $.06 per share of common stock.
(5) Includes Canadian net financing expenses of $3 million after tax or $.03 per share of common stock.
(6) Based on 106.561 million shares.
(7) Consists of total borrowings (including current portion) and stockholders' equity.
(8) Excludes 122 individuals receiving severance payments at December 31, 1993. Also excludes 1,805 individuals employed
in coal and real estate operations held for sale.
<PAGE>
PROFILE OF SUN BUSINESSES, 1993
Canada (Suncor) Corporate Activities
---------------------------------- ---------------------
Exploration Refining Net
and and Corporate Financing
Production Oil Sands Marketing Expenses Expenses Other (1) Consolidated
====================================== =========== ========= ========== ========= ========= ========== =============
Sales and other operating revenue
(including consumer excise taxes)
Unaffiliated customers $49 $ - $1,324 $11 $9,180
Intergroup 67 363 - - -
----------- --------- ---------- --------- --------- ---------- ------------
($ millions) $116 $363 $1,324 $11 (2) $9,180(3)
====================================== =========== ========= ========== ========= ========= ========== ============
Income (loss) before net financing
expenses and after tax
($ millions) $5 $28 $9 $(24)(4) $(28)(2,5) $95 $288
====================================== =========== ========= ========== ========= ========= ========== ============
Income (loss) per share (6) (dollars) $.05 $.26 $.08 $(.23) $(.26) $.89 $2.70
====================================== =========== ========= ========== ========= ========= ========== ============
Capital expenditures
($ millions)
$69 $111 $22 $612
====================================== =========== ========= ========== ========= ========= ========== ============
Capital employed at December 31 (7)
($ millions)
$139 $203 $234 $(3) $2,846
====================================== =========== ========= ========== ========= ========= ========== ============
Number of employees (8)
257 1,448 1,188 229 14,557
====================================== =========== ========= ========== ========= ========= ========== ============
</TABLE>
<PAGE>
<PAGE> 1
EXHIBIT 21
50.10% SUN COMPANY, INC. DECEMBER 31, 1993
SUBSIDIARIES OF THE REGISTRANT
COMPANY NAME: INC/REG
- ------------- -------
BRITISH SUN OIL COMPANY LIMITED GB
CARIBE SUN OIL COMPANY DE
(NAME SAVER COMPANY)
COS CORPORATION IL
ELK RIVER RESOURCES,INC. DE
- --ELK RIVER MINERALS CORPORATION DE
- --JEWELL RESOURCES CORPORATION VA
- ----DOMINION COAL CORPORATION VA
- ----JEWELL COAL AND COKE COMPANY, INC. VA
- ----JEWELL SMOKELESS COAL CORPORATION VA
- ----OAKWOOD RED ASH COAL CORPORATION VA
(NAME SAVER COMPANY)
- ----VANSANT COAL CORPORATION VA
- --RAY COAL COMPANY, INC. KY
- ----WHITAKER COAL CORPORATION KY
- --SHAMROCK COAL COMPANY, INCORPORATED DE
HELIOS CAPITAL CORPORATION DE
- --BENECO LEASING ONE, INC. DE
- --HCC INVESTMENT GROUP, INC. DE
- ----BENECO LEASING TWO, INC. OH
- ------BENECO LEASING THREE, INC. OH
- ----SUNOCO LEASING, INC. DE
- ------HELEASCO ONE, INC. DE
- ------HELEASCO THREE, INC. DE
- --------THREE COMPANY, INC. DE
- ----------H3 COMPANY TRUST PA
- ------HELEASCO FIVE, INC. DE
- ------HELEASCO SEVEN, INC. DE
- ------HELEASCO EIGHT, INC. DE
- ------HELEASCO ELEVEN, INC. DE
- ------HELEASCO TWELVE, INC. DE
- ------HELEASCO FOURTEEN, INC. DE
- ------HELEASCO FIFTEEN, INC. DE
- ------HELEASCO SIXTEEN, INC. DE
- ------HELEASCO EIGHTEEN, INC. DE
- ------HELEASCO TWENTY, INC. DE
- ------HELEASCO TWENTY-ONE, INC. DE
- ------HELEASCO TWENTY-TWO, INC. DE
- ------HELEASCO TWENTY-THREE, INC. DE
- ------HELEASCO TWENTY-FOUR, INC. DE
- ------HELEASCO THIRTY, INC. DE
- ------HELEASCO THIRTY-ONE, INC. DE
- ------HELEASCO THIRTY-TWO, INC. DE
- ------HELEASCO THIRTY-FIVE, INC. DE
- ------HELEASCO THIRTY-EIGHT, INC. DE
- ------HCC FINANCIAL GROUP, INC. DE
<PAGE>
<PAGE> 2
- --HELIOS INVESTMENT CORPORATION DE
- --HELIOS SERVICE COMPANY DE
- --KEE LEASING COMPANY DE
- --SUN LEASING COMPANY DE
- --650 LEASING COMPANY DE
- --652 LEASING COMPANY DE
- --653 LEASING COMPANY DE
- --666 LEASING COMPANY DE
- --667 LEASING COMPANY DE
MARINE INVESTMENT COMPANY OF DELAWARE DE
- --ALASKA BULK CARRIERS, INC. PA
- --ASTON SHIPPING COMPANY DE
- --CAN-AM BARGE COMPANY, INC. DE
(NAME SAVER COMPANY)
- --EASTERN SUN BARGE COMPANY DE
- --FLORIDA BARGE COMPANY DE
- --NEW YORK SUN SHIPPING CO., INC. DE
- --PHILADELPHIA SUN SHIPPING CO., INC. DE
- --SUN BARGE COMPANY DE
- --SUN TRANSPORT, INC. DE
- ----SARNIA SHIPPING COMPANY, INC. LI
(NAME SAVER COMPANY)
- ----WELLAND SHIPPING COMPANY, INC. LI
- --TEXAS SUN SHIPPING, INC. DE
- --TROPIC SUN SHIPPING CO., INC. DE
MASCOT PETROLEUM COMPANY, INC. DE
MOHAWK VALLEY OIL, INC. NY
RADNOR CORPORATION PA
- --ELEVEN PENN CENTER BUSINESS TRUST PA
- ------11 PC, INC. PA
- --ELEVEN PENN CENTER INVESTMENT COMPANY DE
- --LF COUNTRY CLUB, INC. DE
- --MORGAN'S RUN INVESTMENT COMPANY DE
- ----RADNOR CORPORATE CENTER BUSINESS TRUST PA
- --RADNOR ASSET MANAGEMENT CORPORATION DE
- --RADNOR DEVELOPMENT CORPORATION DE
- --RADNOR HOSPITALITY SERVICES CORPORATION DE
- --RADNOR MIDATLANTIC CORPORATION PA
- --RADNOR MIDSOUTH, INC. DE
- --RADNOR MIDWEST CORPORATION DE
- --RADNOR SUNCOAST CORPORATION DE
- --RADNOR WEST, INC. DE
- --RADNOR/AIRE CORPORATION PA
- --RADNOR/ALEXANDRIA CORPORATION DE
- ----#1 RADNOR/ALEXANDRIA CORPORATION DE
- --RADNOR/ANNAPOLIS CORPORATION DE
- --RADNOR/ARAGON CORPORATION DE
- --RADNOR/ARGYLE CORPORATION DE
- --RADNOR/ARLINGTON CORPORATION DE
- --RADNOR/BALLSTON CORPORATION DE
- --RADNOR/BARCLAY CORPORATION DE
- --RADNOR/BEACHWAY CORPORATION DE
- --RADNOR/BERKSHIRE CORPORATION DE
<PAGE>
<PAGE> 3
- --RADNOR/BLUEGRASS CORPORATION DE
- --RADNOR/BOWIE CORPORATION DE
- --RADNOR/BRENTWOOD CORPORATION DE
- --RADNOR/BROWN STREET CORPORATION DE
- --RADNOR/CALAIS CORPORATION DE
- --RADNOR/CALIFORNIA CORPORATION DE
- --RADNOR/CALIFORNIA SERVICE CORPORATION DE
- --RADNOR/CARLSBAD CORPORATION DE
- --RADNOR/CENTRE CORPORATION DE
- --RADNOR/COLLEGE PARK I CORPORATION DE
- --RADNOR/COLLIER CORPORATION DE
- --RADNOR/COOPER CITY CORPORATION DE
- --RADNOR/CREDIT CORPORATION DE
- --RADNOR/DELAWARE AVENUE CORPORATION PA
- --RADNOR/DEVON GREEN CORPORATION DE
- --RADNOR/DUNES CORPORATION DE
- --RADNOR/DUTTON MILL CORPORATION PA
- --RADNOR/EAST PEORIA CORPORATION DE
- --RADNOR/EDGEWATER, INC. DE
- --#1 RADNOR/ELLIPSE CORPORATION DE
- --RADNOR/ENCORE COLLECTION CORPORATION DE
- --RADNOR/FRANKLIN CORPORATION DE
- --RADNOR/FULTON INDUSTRIAL CORPORATION DE
- --RADNOR/GASPARILLA CORPORATION DE
- --RADNOR/GEORGIA CORPORATION DE
- --RADNOR/GRAND OAKS CORPORATION DE
- --RADNOR/GREEN MEADOWS CORPORATION DE
- --RADNOR/GREENWAY CORPORATION DE
- --RADNOR/HAMPTON CORPORATION DE
- --RADNOR/HIDDEN LAGOON CORPORATION DE
- --RADNOR/HIGHVIEW CORPORATION DE
- --RADNOR/HOUSING CORPORATION DE
- --RADNOR/HUNTERS POINTE CORPORATION DE
- --RADNOR/I-95 INDUSTRIAL PARK CORPORATION PA
- --RADNOR/INDIANAPOLIS CORPORATION DE
- --RADNOR/INVESTMENT CORPORATION DE
- --RADNOR/ISLAND CORPORATION DE
- --RADNOR/JACKSONVILLE CORPORATION DE
- --RADNOR/JUPITER BEACH CORPORATION DE
- --RADNOR/JUPITER INLET CORPORATION DE
- --RADNOR/KEARNY MESA CORPORATION DE
- --RADNOR/LA JOLLA CENTRE CORPORATION DE
- --RADNOR/LA JOLLA CORPORATION DE
- --RADNOR/LAGUNA CORPORATION DE
- --RADNOR/LAKESIDE CORPORATION DE
- --RADNOR/LANTANA CORPORATION DE
- --RADNOR/LEHIGH CORPORATION PA
- --RADNOR/LEMON GROVE CORPORATION DE
- --RADNOR/LEXON CORPORATION DE
- --RADNOR/LOUDOUN CORPORATION DE
- ----RADNOR/LOUDOUN DAY CARE CORPORATION DE
- --RADNOR/MAIN ST. CORPORATION DE
- --RADNOR/MANDARIN CORPORATION DE
- --RADNOR/MAPLE CORPORATION DE
- --RADNOR/MARINA CORPORATION PA
- --RADNOR/MATSONFORD CORPORATION PA
- --RADNOR/MERIDIAN CORPORATION DE
<PAGE>
<PAGE> 4
- --RADNOR/MONTCLAIR CORPORATION DE
- --RADNOR/MURRIETA CORPORATION DE
- --RADNOR/NORTHMARK CORPORATION DE
- --RADNOR/NORTHRIDGE CORPORATION DE
- --RADNOR/OAKLAND CORPORATION DE
- --RADNOR/OLD HICKORY CORPORATION DE
- --RADNOR/ORANGE CREST CORPORATION DE
- --RADNOR/ORANGE GROVE CORPORATION DE
- --RADNOR/ORANGE HILLS CORPORATION DE
- --RADNOR/PACIFIC CORPORATE CENTER CORPORATION DE
- --RADNOR/PAINTED DESERT CORPORATION DE
- --RADNOR/PARKE EAST CORPORATION DE
- --RADNOR/PEACHTREE POINT CORPORATION DE
- --RADNOR/PEACHTREE-DUNWOODY CORPORATION DE
- --RADNOR/PHILLIPS INDUSTRIAL PARK CORPORATION DE
- --RADNOR/PIER 5 CORPORATION PA
- --RADNOR/PLANTATION CORPORATION DE
- ----RADNOR REALTY, INC. DE
- --RADNOR/PLYMOUTH CORPORATION PA
- --I RADNOR/PLYMOUTH INVESTMENT COMPANY DE
- ----PLYMOUTH BUILDING I BUSINESS TRUST PA
- --III RADNOR/PLYMOUTH INVESTMENT COMPANY DE
- ----PLYMOUTH BUILDING II BUSINESS TRUST PA
- --IV RADNOR/PLYMOUTH CORPORATION PA
- --RADNOR/PLYMOUTH LEASING CORPORATION PA
- --RADNOR/PORTSMOUTH CORPORATION DE
- --RADNOR/RALEIGH #1 CORPORATION DE
- --RADNOR/RALEIGH #2 CORPORATION DE
- --RADNOR/RALEIGH #3 CORPORATION DE
- --RADNOR/RANCHO CALIFORNIA CORPORATION DE
- --RADNOR/ROCKY POINT CORPORATION DE
- --RADNOR/ROUTE 100 CORPORATION PA
- --RADNOR/SARASOTA CORPORATION DE
- ----LAUREL OAK MANAGEMENT CORPORATION DE
- ----LAUREL OAK REALTY CORPORATION DE
- --RADNOR/SECOR CORPORATION DE
- --RADNOR/SERVICE CORPORATION PA
- --RADNOR/SORRENTO MESA CORPORATION DE
- --RADNOR/SPRING RIDGE CORPORATION DE
- ---- RADNOR/FREDERICK CORPORATION DE
- --RADNOR/SPRING VALLEY CORPORATION DE
- --RADNOR/SUN VILLAGE CONSTRUCTION CORPORATION DE
- --RADNOR/SUN VILLAGE CORPORATION DE
- --RADNOR/SVA CORPORATION DE
- --RADNOR/TEMPE CORPORATION DE
- --RADNOR/THE ORCHARDS CORPORATION DE
- --RADNOR/UWCHLAN CORPORATION PA
- --RADNOR/VAIL RANCH CORPORATION DE
- --RADNOR/VALENCIA CORPORATION DE
- --RADNOR/VANGUARD CORPORATION DE
- --RADNOR/VICTORVILLE CORPORATION DE
- --RADNOR/VILLA TRINIDAD CORPORATION DE
- --RADNOR/VISTA MAR CORPORATION DE
- --RADNOR/WESTGATE CORPORATION DE
- --RADNOR/WESTON CORPORATION DE
- --RADNOR/WHITNEY RANCH CORPORATION DE
- --RADNOR/WILLOUGHBY CORPORATION DE
<PAGE>
<PAGE> 5
- --RADNOR/YORBA LINDA-I CORPORATION DE
- --RIVERVIEW TERRACE CORPORATION DE
- --RSV ADVERTISING, INC. DE
- --STRIKER BUSINESS TRUST PA
SCANDINAVIAN SUN OIL COMPANY A/S NW
STOP-N-GO FOODS, INC. DE
- --BUCKEYE MARKETERS, INC. OH
- --CASUAL FOOD STORES, INC. KY
- --DIVERSIFIED RETAILERS, INC. OH
- --J.M.J. ENTERPRISES, INC. OH
- --KING KWIK MINIT MARKET INC. OH
- ----DRIVE-IN GROCERIES, INC. OH
- ----KWIK SAV, INC. OH
- --STOP-N-GO FOODS OF DAYTON, INC. OH
- --STOP-N-GO OF OHIO, INC. OH
- --SUPER-GO MARKETERS, INC. OH
SUN ALTERNATE ENERGY CORPORATION DE
SUN ATLANTIC REFINING AND MARKETING COMPANY DE
- --SUN ATLANTIC REFINING AND MARKETING B.V. NL
- ----ATLANTIC PETROLEUM MAATSCHAPPIJ B.V. NL
- ------ATLANTIC PETROLEUM CORPORATION DE
- --------ATLANTIC PIPELINE CORP. DE
- --------ATLANTIC REFINING & MARKETING CORP. DE
SUN AUSTRALIAN OIL COMPANY, INC. DE
SUN CANADA, INC. DE
- --HELIOS ASSURANCE COMPANY LIMITED BA
- --PETROSUN LIMITED GB
- --SUN INTERNATIONAL LIMITED BA
- --SUN OIL EXPLORATION #4, LTD. BA
- --SUN OIL EXPLORATION #5, LTD. BA
- --SUN OIL GHADAMES ALGERIE LIMITED BA
- --SUNCOR INC. CN
- ----ATHABASCA REALTY COMPANY LIMITED AB
- ----MAYWELLE PROPERTIES LTD. ON
- ----SMS PETROLEUM LTD. ON
- ----SUN OIL COMPANY OF CANADA LIMITED CN
- ----SUNOCO HOME COMFORT INC. ON
- ----SUNOCO INC. ON
- ------CHEMSUN INC. ON
- ------133950 CANADA INC. CN
- ------1044287 INC. ON
- ------SUNCHEM INC. ON
- ------388022 ALBERTA LTD. AB
- ----333817 ALBERTA LTD. AB
- --SUNOCO LIMITED GB
SUN COAL COMPANY DE
SUN COLOMBIA OIL COMPANY DE
- --SUN OIL ESPINAL COLOMBIA LIMITED BA
<PAGE>
<PAGE> 6
SUN COMPANY, INC. DE
(NAME SAVER COMPANY)
SUN COMPANY, INC. (R&M) PA
- --HEMISPHERE OIL COMPANY, INC. DE
- --MID-STATE OIL COMPANY DE
- --PUERTO RICO SUN OIL COMPANY DE
- --SUN BEF, INC. TX
- --SUN FAR EAST TRADING, INC. DE
- --SUN FSC, INC. VI
- --SUN LUBRICANTS AND SPECIALTY PRODUCTS INC. QU
- --SUN OIL FAR EAST, INC. DE
- --SUN PETROCHEMICALS, INC. DE
- --SUNMARKS, INC. DE
SUN EUROPE OIL COMPANY DE
SUN EXECUTIVE SERVICES COMPANY PA
SUN FRENCH OIL COMPANY DE
SUN GABON OIL COMPANY DE
- --SUN OIL M'PIRA GABON LIMITED BA
- --SUN OIL MAKOK GABON LIMITED BA
- --SUN OIL N'KOMI GABON LIMITED BA
- --SUN OIL OYAN GABON LIMITED BA
- --SUN OIL PANGA GABON LIMITED BA
- --SUN OIL TASSI GABON LIMITED BA
SUN HISPANIC OIL COMPANY DE
SUN INDONESIA OIL COMPANY DE
SUN LAHAT, INC. DE
SUN MALAYSIA PETROLEUM COMPANY DE
SUN NOORDZEE OIL COMPANY DE
SUN OCEAN VENTURES, INC. DE
SUN OIL ARGENTINA LIMITED BA
SUN OIL ARGENTINA LIMITED S.A. AT
SUN OIL BERAU INDONESIA LIMITED BA
SUN OIL BOLIVIA LIMITED BA
SUN OIL BRITAIN LIMITED DE
- --SUN OIL COMPANY (U.K.) LTD. DE
- --SUN OIL NORTH SEA LIMITED EN
SUN OIL COMPANY DE
(NAME SAVER COMPANY)
<PAGE>
<PAGE> 7
SUN OIL EXPLORATION #2, LTD. BA
SUN OIL EXPLORATION #3, LTD. BA
SUN OIL EXPORT COMPANY DE
SUN OIL HALRUT YEMEN LIMITED BA
SUN OIL INTERNATIONAL, INC. DE
SUN OIL LARGEAU CHAD LIMITED BA
SUN OIL MUTURI INDONESIA LIMITED BA
SUN OIL NEW ZEALAND LIMITED BA
SUN OIL PARAGUAY LIMITED BA
SUN OIL SHABWA YEMEN LIMITED BA
SUN OIL (THAILAND) LIMITED TH
SUN OIL TRADING COMPANY DE
SUN ORIENT EXPLORATION COMPANY DE
SUN PETROLEUM PRODUCTS COMPANY, INC. PA
(NAME SAVER COMPANY)
SUN PIPE LINE COMPANY OF DELAWARE DE
- --MID-CONTINENT PIPE LINE COMPANY OK
- --MID-VALLEY PIPELINE COMPANY OH
- --SUN OIL LINE COMPANY OF MICHIGAN MI
- --SUN PIPE LINE COMPANY PA
- --SUN PIPE LINE SERVICES CO. DE
SUN REFINING AND MARKETING COMPANY DE
(NAME SAVER COMPANY)
SUN SERVICES CORPORATION PA
SUN SHIP, INC. PA
- --LESLEY CORPORATION DE
- --660 LEASING COMPANY DE
- --663 LEASING COMPANY DE
- --TTT, INC DE
SUN TECH, INC. DE
(NAME SAVER COMPANY)
SUN VENTURES, INC. PA
SUN VIETNAM OIL COMPANY DE
SUN-DEL SERVICES, INC. DE
<PAGE>
<PAGE> 8
SUNCREST INDUSTRIES, INC. PA
SUNMARK INDUSTRIES, INC. PA
(NAME SAVER COMPANY)
SUNOCO ENERGY DEVELOPMENT CO. DE
(NAME SAVER COMPANY)
SUNOCO OVERSEAS, INC. DE
- --LUGRASA, S.A. PN
SUNOCO SCIENCE AND TECHNOLOGICAL SERVICES, INC. NY
(NAME SAVER COMPANY)
SUNTIDE REFINING COMPANY DE
THE CLAYMONT INVESTMENT COMPANY DE
- --SUNOCO CREDIT CORPORATION DE
TRIAD CARRIERS, INC. PA
- --BBQ, INC. PA
- --CARRIER SYSTEMS MOTOR FREIGHT, INC. DE
- --SCI INVESTMENTS, INC. DE
YABUCOA SUN OIL COMPANY, INC. DE
(NAME SAVER COMPANY)
<PAGE>
<PAGE> 1
EXHIBIT 23
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference of our reports dated
February 15, 1994 (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 at Suncor Inc., the Company's Canadian subsidiary, in 1991) on
our audits of the consolidated financial statements and financial statement
schedules of Sun Company, Inc. and subsidiaries as of December 31, 1993 and
1992 and for each of the three years in the period ended December 31, 1993,
which reports are included or incorporated by reference in this Annual
Report on Form 10-K, in the following registration statements:
Sun Company, Inc. Capital Accumulation Plan Form S-8
Registration Statement (Registration No. 33-9931);
Sun Company, Inc. Long-Term Incentive Plan Form S-8
Registration Statement (Registration No. 33-10055);
Sun Company, Inc. & Subsidiaries Stock Supplement Plan
Form S-8 Registration Statement (Registration
No. 2-53283);
Sun Company, Inc. Executive Long-Term Stock Investment
Plan Form S-8 Registration Statement (Registration
No. 33-44059);
Sun Company, Inc. Employee Option Plan Form S-8
Registration Statement (Registration No. 33-49275);
Sun Company, Inc. Form S-3 Registration Statement
(Registration No. 2-98425); and
Sun Company, Inc. Dividend Reinvestment Plan Form S-3
Registration Statement (Registration No. 33-39834).
Coopers & Lybrand
2400 Eleven Penn Center
Philadelphia, PA 19103
March 2, 1994
<PAGE>
<PAGE> 1
EXHIBIT 24.1
POWER OF ATTORNEY
-----------------
KNOW ALL MEN BY THESE PRESENTS, that the undersigned officers and/or
directors of Sun Company, Inc., a Pennsylvania corporation, do and each of
them does hereby constitute and appoint Robert M. Aiken, Jr., Richard L.
Cartlidge and Jack L. Foltz his or her true and lawful attorneys-in-fact
and agents, and each of them with full power to act without the others, for
him or her and in his or her name, place and stead, to sign the Sun
Company, Inc. Form 10-K for the year ending December 31, 1993 and any and
all future amendments thereto; and to file said Form 10-K and any such
amendments, with all exhibits thereto, and any and all other documents in
connection therewith, with the Securities and Exchange Commission, hereby
ratifying and confirming all that said attorneys-in-fact and agents, or any
of them, may lawfully do or cause to be done by virtue hereof.
<PAGE>
<PAGE> 2
IN WITNESS WHEREOF, the undersigned have hereunto set their hands
and seals this 3rd day of March, 1994.
s/ROBERT M. AIKEN, JR.
Robert M. Aiken, Jr.
Senior Vice President and Chief
Financial Officer
(Principal Financial Officer)
s/ROBERT H. CAMPBELL
Robert H. Campbell
Chairman of the Board, Chief
Executive Officer, President and
Director (Principal Executive
Officer)
s/RAYMOND E. CARTLEDGE
Raymond E. Cartledge
Director
s/RICHARD L. CARTLIDGE
Richard L. Cartlidge
Comptroller
(Principal Accounting Officer)
s/ROBERT E. CAWTHORN
Robert E. Cawthorn
Director
s/MARY J. EVANS
Mary J. Evans
Director
s/THOMAS P. GERRITY
Thomas P. Gerrity
Director
s/JAMES G. KAISER
James G. Kaiser
Director
<PAGE>
s/THOMAS W. LANGFITT
Thomas W. Langfitt
Director
s/R. ANDERSON PEW
R. Anderson Pew
Director
s/ALBERT E. PISCOPO
Albert E. Piscopo
Director
s/WILLIAM F. POUNDS
William F. Pounds
Director
s/B. RAY THOMPSON, JR.
B. Ray Thompson, Jr.
Director
s/ALEXANDER B. TROWBRIDGE
Alexander B. Trowbridge
Director
<PAGE>
<PAGE> 1
EXHIBIT 24.2
I, Donald J. Ainsworth, Secretary of Sun Company, Inc., a Pennsylvania
corporation, hereby certify that the following is a full, true and complete
copy of a resolution adopted at a meeting of the Board of Directors of Sun
Company, Inc., duly called and held on March 3, 1994, at which a quorum was
present and acting throughout and that no action has been taken to rescind
or amend said resolution and that the same is now in full force and effect:
RESOLVED, That the Sun Company, Inc. Annual Report to the
Securities and Exchange Commission on Form 10-K, for the year
ended December 31, 1993, is approved in the form presented to
this meeting, subject to such changes or amendments as may be
approved by any one of the following officers of the Company: the
Chief Executive Officer, the Senior Vice President and Chief
Financial Officer, the Senior Vice President and Chief
Administrative Officer or the Vice President and General Counsel,
and
FURTHER RESOLVED, That each of the above named officers and
the Comptroller is authorized to sign the Form 10-K on behalf of
the Corporation.
(Corporate Seal) s/DONALD J. AINSWORTH
---------------------
Donald J. Ainsworth
Secretary
March 3, 1994
Philadelphia, Pennsylvania
<PAGE>
<PAGE> 1
<TABLE>
DATA STATED IN MILLIONS
<CAPTION>
VOLUNTARY SCHEDULE - CERTAIN FINANCIAL INFORMATION
REGULATION STATEMENT CAPTION 1993 1992 1991
<S> <C> <C> <C> <C>
5-02(1) Cash and cash items 118 179 363
5-02(2) Marketable securities -- -- --
5-02(6)(a)(1) Finished goods 244 261 229
5-02(9) Total current assets 1,277 1,331 1,632
5-02(18) Total assets 5,900 6,071 7,017
5-02(21) Total current liabilities 1,505 1,746 1,899
5-02(22) Bonds, mortgages & other long-term debt 726 792 852
5-02(23) Indebtedness to related parties -- -- --
5-02(29) Preferred stock-no mandatory redemption -- -- --
5-02(30) Common stock 129 129 129
5-02(31)(a)(1) Additional paid in capital 1,303 1,302 1,301
5-02(31)(a)(3)(ii) Retained earnings-unappropriated 1,636 1,540 2,290
5-03(b)(1)(a) Net sales tangible products 9,180 10,445 11,493
5-03(b)(8) Interest & amortization of debt discount 73 91 107
5-03(b)(10) Income (loss) before taxes and other items 426 (432) (108)
5-03(b)(11) Income tax expense (benefit) 143 (115) 22
5-03(b)(14) Income (loss) from continuing operations 283 (317) (130)
5-03(b)(15) Income (loss) from discontinued operations -- 19 (257)
5-03(b)(18) Cumulative effect-change in acctg. prin. 5 (261) --
5-03(b)(19) Net income or loss 288 (559) (387)
</TABLE>
