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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1994
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
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Commission file number 1-6841
SUN COMPANY, INC.
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(Exact name of registrant as specified in its charter)
PENNSYLVANIA 23-1743282
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(State or other jurisdiction of incorporation (I.R.S. Employer
or organization) Identification No.)
TEN PENN CENTER, 1801 MARKET STREET, PHILADELPHIA, PA 19103-1699
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(Address of principal executive offices)
(Zip Code)
(215) 977-3000
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(Registrant's telephone number, including area code)
NOT APPLICABLE
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(Former name, former address and former fiscal year, if changed since last
report)
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
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At June 30, 1994, 106,866,693 shares of common stock were outstanding.
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SUN COMPANY, INC.
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INDEX
Page No.
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PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Statements of Income
for the Six Months Ended June 30, 1994
and 1993 3
Condensed Consolidated Statements of Income
for the Three Months Ended June 30, 1994
and 1993 4
Condensed Consolidated Balance Sheets at
June 30, 1994 and December 31, 1993 5
Condensed Consolidated Statements of Cash
Flows for the Six Months Ended June 30,
1994 and 1993 6
Notes to Condensed Consolidated Financial
Statements 7
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of
Operations 13
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 24
Item 4. Submission of Matters to a Vote of Security
Holders 25
Item 5. Other Information 26
Item 6. Exhibits and Reports on Form 8-K 26
SIGNATURE 27
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PART I
FINANCIAL INFORMATION
Item 1. Financial Statements
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
Sun Company, Inc. and Subsidiaries
(Millions of Dollars Except Per Share Amounts)
- - --------------------------------------------------------------------------
For the Six Months
Ended June 30
-------------------
1994 1993
------ ------
(UNAUDITED)
REVENUES
Sales and other operating revenue (including consumer
excise taxes of $1,016 in 1994 and $889 in 1993) $4,274 $4,645
Gain on divestments (Note 2) 29 61
Interest income 7 9
Income (loss) from investments in operations
held for sale (Note 3) (6) --
Other income (Note 4) 16 28
------ ------
4,320 4,743
------ ------
COSTS AND EXPENSES
Cost of products sold and operating expenses 2,607 3,062
Selling, general and administrative expenses 331 300
Taxes, other than income taxes 1,081 972
Depreciation, depletion and amortization 178 171
Exploratory costs and leasehold impairment 11 12
Minority interest 13 14
Interest cost and debt expense 41 43
Interest capitalized (5) (5)
------ ------
4,257 4,569
------ ------
Income before provision for income taxes
and cumulative effect of change in
accounting principle 63 174
Provision for income taxes 17 69
------ ------
Income before cumulative effect of change
in accounting principle 46 105
Cumulative effect of change in accounting
principle (Note 5) (7) 5
------ ------
NET INCOME $ 39 $ 110
====== ======
Earnings per share of common stock:*
Income before cumulative effect of change in
accounting principle $ .43 $ .98
Cumulative effect of change in accounting principle (.07) .05
----- -----
Net income $ .36 $1.03
===== =====
Cash dividends paid per share of common stock $.90 $.90
==== ====
- - ----------------
*Based on the weighted average number of shares outstanding (in thousands)
of 107,119 in 1994 and 106,469 in 1993.
(See Accompanying Notes)
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CONDENSED CONSOLIDATED STATEMENTS OF INCOME
Sun Company, Inc. and Subsidiaries
(Millions of Dollars Except Per Share Amounts)
- - --------------------------------------------------------------------------
For the Three Months
Ended June 30
--------------------
1994 1993
------ ------
(UNAUDITED)
REVENUES
Sales and other operating revenue (including consumer
excise taxes of $545 in 1994 and $467 in 1993) $2,218 $2,360
Gain on divestments (Note 2) 23 58
Interest income 4 4
Income (loss) from investments in operations
held for sale (Note 3) (2) --
Other income (Note 4) 10 17
------ ------
2,253 2,439
------ ------
COSTS AND EXPENSES
Cost of products sold and operating expenses 1,380 1,548
Selling, general and administrative expenses 165 152
Taxes, other than income taxes 576 503
Depreciation, depletion and amortization 88 86
Exploratory costs and leasehold impairment 5 5
Minority interest 7 11
Interest cost and debt expense 21 21
Interest capitalized (3) (2)
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2,239 2,324
------ ------
Income before provision for income taxes 14 115
Provision for income taxes 2 45
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NET INCOME $ 12 $ 70
====== ======
Net Income per share of common stock* $.11 $.66
==== ====
Cash dividends paid per share of common stock $.45 $.45
==== ====
- - ----------------
*Based on the weighted average number of shares outstanding (in thousands)
of 107,148 in 1994 and 106,495 in 1993.
(See Accompanying Notes)
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CONDENSED CONSOLIDATED BALANCE SHEETS
Sun Company, Inc. and Subsidiaries
At At
June 30 December 31
1994 1993
(Millions of Dollars) (UNAUDITED)
- - --------------------------------------------------------------------------
ASSETS
Current Assets
Cash and cash equivalents, at cost which
approximates market $ 114 $ 118
Accounts and notes receivable, net of allowances 592 572
Inventories:
Crude oil 144 140
Refined products 263 244
Materials, supplies and other 80 80
Deferred income taxes 114 123
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Total Current Assets 1,307 1,277
Investment in Coal Operations Held for Sale (Note 3) 102 113
Investment in Real Estate Operations Held
for Sale (Note 3) 148 134
Long-Term Receivables and Investments 215 217
Properties, Plants and Equipment 7,834 7,753
Less Accumulated Depreciation, Depletion
and Amortization 4,017 3,922
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Properties, Plants and Equipment, net 3,817 3,831
Deferred Charges and Other Assets 325 328
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Total Assets $5,914 $5,900
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LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts payable $ 660 $ 641
Accrued liabilities 449 487
Short-term borrowings 196 110
Current portion of long-term debt 100 26
Taxes payable 240 241
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Total Current Liabilities 1,645 1,505
Long-Term Debt 727 726
Retirement Benefit Liabilities 521 523
Deferred Income Taxes 355 369
Other Deferred Credits and Liabilities 392 421
Commitments and Contingent Liabilities (Note 6)
Minority Interest 362 372
Stockholders' Equity (Note 7) 1,912 1,984
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Total Liabilities and Stockholders' Equity $5,914 $5,900
====== ======
- - ----------------
Sun follows the successful efforts method of accounting for oil and gas
exploration and production operations.
(See Accompanying Notes)
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CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Sun Company, Inc. and Subsidiaries
(Millions of Dollars)
- - -------------------------------------------------------------------------
For the Six Months
Ended June 30
------------------
1994 1993
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(UNAUDITED)
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 39 $ 110
Adjustments to reconcile net income to net
cash provided by (used in) operating activities:
Cumulative effect of change in accounting
principle 7 (5)
Gain on divestments (29) (61)
Depreciation, depletion and amortization 178 171
Dry hole costs and leasehold impairment 6 7
Deferred income taxes 4 27
Changes in working capital pertaining to
operating activities:
Accounts and notes receivable (21) 57
Inventories (23) (63)
Accounts payable and accrued liabilities (46) (248)
Taxes payable (1) (43)
Other 16 29
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Net cash provided by (used in) operating activities 130 (19)
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CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (243) (206)
Cash provided by coal operations held for sale 2 121
Cash used by real estate operations held for sale (11) (11)
Proceeds from divestments 42 247
Other (1) (8)
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Net cash provided by (used in) investing activities (211) 143
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CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds from (repayments of)
short-term borrowings 86 (112)
Proceeds from issuance of long-term debt 194 41
Repayments of long-term debt (112) (38)
Cash dividend payments (96) (96)
Other 5 2
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Net cash provided by (used in) financing activities 77 (203)
----- -----
Net decrease in cash and cash equivalents (4) (79)
Cash and cash equivalents at beginning of period 118 179
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Cash and cash equivalents at end of period $ 114 $ 100
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(See Accompanying Notes)<PAGE>
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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
----------------------------------------------------
1. General.
The accompanying condensed consolidated financial statements are
presented in accordance with the requirements of Form 10-Q and do not
include all disclosures normally required by generally accepted
accounting principles or those normally made in Form 10-K. In
management's opinion all adjustments necessary for a fair presentation
of the results of operations, financial position and cash flows for
the periods shown have been made. All such adjustments are of a
normal recurring nature except for the cumulative effect of change in
accounting principle (Note 5). Results for the three and six months
ended June 30, 1994 are not necessarily indicative of results for the
full year 1994.
2. Gain on Divestments.
In June 1994, Sun sold its remaining interest in an oil field located
in Colombia. In connection with this sale, Sun recognized a $20
million gain, which increased net income by $13 million, or $.12 per
share of common stock during the second quarter of 1994.
In May 1993, Sun sold 6.8 million shares of Suncor common stock in a
secondary offering in Canada, Europe and by private placement in the
United States. This sale reduced Sun's ownership interest in Suncor
from approximately 68 percent to 55 percent. In connection with this
sale, Sun recognized a $30 million gain, which increased results of
operations by $19 million after tax or $.18 per share of common stock
during the second quarter of 1993. Pretax cash proceeds from the
offering after underwriting and other fees and U.S. dollar translation
totaled $139 million.
During the second quarter of 1993, Sun also completed the sales of
certain oil and gas properties located in Dubai and Canada which
previously were identified for divestment as part of the Company's
1992 restructuring plan. In connection with these sales, Sun
recognized a $19 million gain, which increased results of operations
by $9 million after tax or $.08 per share of common stock.
3. 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 certain of its eastern U.S. coal operations
during 1994. Sun 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.
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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 $(10) and $4 million,
respectively, during the first half of 1994, 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 each totalled
$2 million during the first six months of 1994.
The net assets and liabilities relating to the coal and real estate
operations held for sale have been segregated on the condensed
consolidated balance sheets from their historic classifications to
separately identify them as investments in operations held for sale.
Such amounts are summarized as follows:
June 30 December 31
1994 1993
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(Millions of Dollars)
Coal Operations
Accounts receivable $ 27 $ 18
Inventories 21 27
Properties, plants and equipment 155 175
Other assets 30 32
Accounts payable and accrued liabilities (38) (40)
Retirement benefit liabilities (43) (44)
Other liabilities (50) (55)
----- -----
Investment in coal operations held for sale $ 102 $ 113
===== =====
Real Estate Operations
Receivable from property divestments $ 161 $ --
Inventories 156 158
Properties, plants and equipment 216 374
Other assets 25 49
Nonrecourse financing (72) (90)
Recourse debt (297) (324)
Other liabilities (41) (33)
----- -----
Investment in real estate operations
held for sale $ 148 $ 134
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In June 1994, Radnor divested three Pennsylvania office projects for
$161 million and two Florida shopping centers for $25 million. The
net proceeds, which will be used principally to repay Radnor debt,
were received in July 1994 and June 1994, respectively.
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 June 30, 1994, there was $32 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 $110 million at June 30, 1994, 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.
4. Other Income.
In June 1993, Suncor settled all claims arising from a 1987 fire at
its oil sands facility in Fort McMurray, Alberta. Sun recognized a
$17 million gain in connection with the settlement, which increased
net income and net income per share of common stock by $7 million and
$.07, respectively, during the second quarter of 1993.
5. Changes in Accounting Principles.
Postemployment Benefits
Effective January 1, 1994, Sun adopted the provisions of Statement of
Financial Accounting Standards No. 112 "Employers' Accounting for
Postemployment Benefits" ("SFAS No. 112"). It requires companies to
recognize the obligation to provide benefits to their former or
inactive employees after employment but before retirement. The
cumulative effect of this accounting change for years prior to 1994,
which is shown separately in the condensed consolidated statement of
income, decreased net income for the six months ended June 30, 1994 by
$7 million (after related income tax benefit of $4 million), or $.07
per share of common stock. Excluding the cumulative effect, this
change did not have a significant impact on Sun's net income for the
six months ended June 30, 1994.
Income Taxes
Effective January 1, 1993, Sun adopted the provisions of Statement of
Financial Accounting Standards No. 109 "Accounting for Income Taxes"
("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
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credits and carryforwards. The cumulative effect of this accounting
change for years prior to 1993, which is shown separately in the
condensed consolidated statement of income, increased net income for
the six months ended June 30, 1993 by $5 million, or $.05 per share of
common stock. Excluding the cumulative effect, this change increased
net income for the first half of 1993 by $12 million, or $.11 per
share of common stock, primarily due to lower U.S. income tax expense
on foreign earnings. 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.
6. Commitments and Contingent Liabilities.
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 $225 million
methyl tertiary butyl ether ("MTBE") production facility in Mont
Belvieu, Texas. As of June 30, 1994, BEF had borrowed $176 million
against a construction loan facility of which the Company guarantees
one-third or $59 million. The plant, which had an original designed
capacity of 12,600 barrels daily of MTBE, should be able to run in
excess of this capacity when it becomes fully operational. After
completion of start-up tests in the second half of 1994, 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 fully
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 first 12,600 barrels daily of 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 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.
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"), 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
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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 June 30, 1994, Sun had been named as a PRP at
45 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 Sun's
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'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. 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. The accrued liability for environmental
remediation totalled $232 million at June 30, 1994 and $259 million at
December 31, 1993. 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 $121 million at
June 30, 1994 and $119 million at December 31, 1993. The accruals for
environmental remediation and reclamation activities are included
primarily in other deferred credits and liabilities in the condensed
consolidated balance sheets. Pretax charges against income for
environmental remediation and reclamation totalled $6 and $13 million
for the six months ended June 30, 1994 and 1993, respectively. Claims
for recovery of environmental liabilities that are probable of
realization totalled $11 million at June 30, 1994 and are included in
deferred charges and other assets in the condensed 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.
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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, cash flow or liquidity
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
June 30, 1994. Furthermore, management of Sun believes that the
overall costs for environmental activities will not have a material
impact, over an extended period of time, on Sun's cash flow or
liquidity.
7. Stockholders' Equity.
At At
June 30 December 31
1994 1993
-------- -----------
(Millions of Dollars)
Common stock, par value $1 per share $ 129 $ 129
Capital in excess of par value 1,307 1,303
Cumulative foreign currency translation
adjustment (82) (62)
Earnings employed in the business 1,579 1,636
------ ------
2,933 3,006
Less common stock held in treasury,
at cost 1,021 1,022
------ ------
Total $1,912 $1,984
====== ======
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Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
RESULTS OF OPERATIONS - SIX MONTHS
Earnings Profile of Sun Businesses (after tax)
- - ----------------------------------------------
Six Months Ended
June 30
----------------
1994 1993 Variance
---- ---- --------
(Millions of Dollars)
Fuels:
Wholesale fuels $(33) $(31) $ (2)
Branded marketing 13 32 (19)
Lubricants:
Lubes 31 33 (2)
Related fuels (15) (21) 6
Chemicals (1) 9 (10)
Logistics 23 24 (1)
International production 22 36 (14)
Canada (Suncor):*
Exploration and production 3 2 1
Oil sands 9 12 (3)
Refining and marketing 4 3 1
Corporate expenses** (2) (3) 1
Net financing expenses (2) (1) (1)
---- ---- ----
Total Canada (Suncor) 12 13 (1)
Corporate:
Corporate expenses (9) (8) (1)
Net financing expenses (14) (10) (4)
Income from operations held
for sale:***
Coal 2 -- 2
Real estate 2 -- 2
---- ---- ----
33 77 (44)
Gain on sale of Suncor stock -- 19 (19)
Gain on divestment of exploration
and production properties 13 9 4
Cumulative effect of change in
accounting principle+ (7) 5 (12)
---- ---- ----
Consolidated net income $ 39 $110 $(71)
==== ==== ====
- - ----------------
*Sun reduced its ownership interest in Suncor from approximately
68 percent to 55 percent in May 1993.
**Includes consolidation adjustments.
***Effective in the fourth quarter of 1993, coal and real estate operations
are accounted for as investments held for sale. During the first nine
months of 1993, as discontinued operations, earnings from these
businesses were excluded from Sun's consolidated results of operations.
+Consists of the impact of the cumulative effect of a change in the
method of accounting for postemployment benefits in 1994 and a change
in the method of accounting for income taxes in 1993.<PAGE>
<PAGE> 14
Analysis of Earnings Profile of Sun Businesses
- - ----------------------------------------------
In the six-month period ended June 30, 1994, Sun earned $39 million, or
$.36 per share of common stock, compared with earnings of $110 million, or
$1.03 per share for the first half of 1993. Excluding the special items
shown separately in the Earnings Profile of Sun Businesses, Sun earned $33
million during the first six months of 1994 compared to $77 million during
the first six months of 1993.
Fuels -- Results from Sun's domestic Fuels business, comprised primarily of
the manufacturing and marketing of petroleum products in the northeastern
U.S., declined from earnings of $1 million in the first half of 1993 to a
loss of $20 million in the first half of 1994. The decline was primarily
in Branded Marketing operations, where income decreased from $32 million in
the year-ago first half to $13 million in the first half of 1994. Losses
from Wholesale Fuels operations at Sun's Marcus Hook, PA, Philadelphia, PA
and Toledo, OH refineries increased from $31 million in the 1993 first half
to $33 million in the first six months of 1994.
The $2 million decrease in Wholesale Fuels results was due largely to
higher refinery operating expenses at the Company's three Fuels refineries
($10 million) and lower sales volumes ($3 million) caused largely by severe
winter weather conditions in the northeastern United States during the
first quarter of 1994. Partially offsetting this decrease were higher
average margins ($12 million) across most products, particularly middle
distillates and residual fuels.
In Branded Marketing, the $19 million decline was caused largely by higher
operating and administrative expenses ($10 million), due in part to severe
weather conditions in the 1994 first quarter, and to increased expenses
related to the ongoing conversion of the Atlantic brand to Sunoco and the
upgrading of the Sunoco image. A three percent decline in branded gasoline
sales volumes ($3 million) and lower margins ($3 million) also contributed
to the decrease in Branded Marketing earnings. The volume decline was
caused primarily by the elimination of some marginal distributor accounts,
Sun's 1993 withdrawal from areas supplied by the Tulsa Refinery and the
severe wintertime driving conditions which reduced gasoline sales.
Lubricants -- Results from Sun's Lubricants business, comprised of the
manufacturing, packaging and marketing of lubricants and specialty oil
products as well as the related manufacturing and wholesale marketing of
fuels produced at Sun's Tulsa and Puerto Rico refineries, increased $4
million over the 1994 first half. Income from sales of lubricant products
was $31 million in the current half, down from $33 million in the year-ago
half. Lower margins ($9 million), particularly for base oils, and higher
operating expenses ($4 million) resulting primarily from increased refinery
production levels were largely offset by the favorable impact of 13 percent
higher lubricants sales volumes ($9 million). Losses from Related Fuels
operations were $15 million during the first half of 1994, representing a
$6 million improvement from the 1993 first half loss of $21 million. The
improvement was due to higher margins on wholesale fuels products ($6
million) and higher sales volumes ($2 million), partially offset by higher
operating expenses ($2 million) resulting primarily from increased refinery
production levels.<PAGE>
<PAGE> 15
Chemicals -- Sun's domestic Chemicals business had a loss of $1 million in
the 1994 first half, versus income of $9 million in the prior year period.
The $10 million decrease in Chemicals results was due to 14 percent lower
sales volumes ($5 million) and higher operating expenses ($5 million)
during the first six months of 1994. Production curtailments at the
Company's three Fuels refineries contributed to the decline in sales
volumes.
Logistics -- Logistics (pipeline transportation and petroleum terminalling
operations) income was $23 million, a decrease of $1 million versus the
year-ago first half.
International Production -- International Production earnings were $22
million in the 1994 first half versus $36 million in the first half of
1993. The $14 million decline was due largely to lower crude oil prices
($9 million) and natural gas volumes ($4 million) and an increase in after-
tax foreign exchange losses ($3 million). The favorable impact of higher
North Sea crude oil production volumes ($10 million) was essentially offset
by higher depreciation and cost and operating expenses.
The average price received for Sun's international crude oil production was
$14.61 per barrel in the first six months of 1994 compared to $17.28 per
barrel for the first half of 1993. Sun's average net production of crude
oil was 25.1 thousand barrels daily during the first six months of 1994
compared to average net production of 27.7 thousand barrels daily for the
first half of 1993. The production decline is the result of the absence of
volumes from properties located in Dubai which were sold in April 1993.
Excluding the Dubai volumes, crude production increased 33 percent from the
prior year first half due to improved operations and Sun's increased
ownership interests in the Balmoral and Stirling fields in the U.K. North
Sea.
The average price received for Sun's international natural gas production
was $2.88 per thousand cubic feet for the current half compared to $2.77
per thousand cubic feet in the 1993 first half. Sun's average net
production of natural gas was 54 million cubic feet daily in the first half
of 1994 compared to 65 million cubic feet daily in the first half of 1993.
The production decline is the result of maintenance activities in the
Thames and Hewett fields in the U.K. North Sea during the second quarter of
1994.
Canada (Suncor) -- Canadian exploration and production results increased $1
million from the year-ago half as lower operating and administrative
expenses ($1 million) and higher natural gas prices ($2 million) were
partially offset by lower crude oil prices ($1 million) and natural gas
volumes ($1 million). Oil sands results decreased $3 million due to the
absence of a $7 million after-tax gain from an insurance settlement
recorded in the 1993 second quarter. Operationally, the favorable impact
of higher synthetic crude oil production volumes ($12 million) was
partially offset by a 17-percent decline in synthetic crude oil prices to
$14.85 per barrel ($9 million). Synthetic crude oil production volumes
increased 29 percent from 52.1 thousand barrels daily during the 1993 first
half to 67.4 thousand barrels daily during the first six months of 1994.
The increase in production was due, in part, to modifications made to the
oil sands plant's upgrader in 1993 and to a planned maintenance shutdown in
April 1993, resulting in the stoppage of production until late May 1993.
Canadian refining and marketing income increased $1 million due primarily
to a 3 percent increase in refined product sales volumes. <PAGE>
<PAGE> 16
Corporate -- Net financing expenses were up $4 million versus the year-ago
half primarily due to the absence of a $3 million after-tax gain on the
sale of an equity investment recognized in the first quarter of 1993.
Income from Operations Held for Sale -- For a discussion of Sun's coal and
real estate operations held for sale, see Note 3 to the condensed
consolidated financial statements.
Gain on Sale of Suncor Stock -- In the second quarter of 1993, Sun
recognized a $19 million after-tax gain, or $.18 per share of common stock,
on the sale of 6.8 million shares of Suncor common stock. This sale
reduced Sun's ownership interest in Suncor from approximately 68 percent to
55 percent.
Gain on Divestment of Exploration and Production Properties -- During the
second quarter of 1994, Sun sold its remaining interest in a Colombian oil
field. An after-tax gain of $13 million, or $.12 per share of common
stock, was recognized in connection with this sale. During the second
quarter of 1993, Sun disposed of certain oil and gas properties located in
Dubai and Canada which previously were identified for divestment as part of
the Company's 1992 restructuring plan. An after-tax gain of $9 million, or
$.08 per share of common stock, was recognized in connection with these
sales.
Cumulative Effect of Change in Accounting Principle -- For information
concerning changes in accounting principles, see Note 5 to the condensed
consolidated financial statements.
Analysis of Consolidated Statements of Income
- - ---------------------------------------------
Sales and other operating revenue decreased $371 million, or 8 percent,
principally due to lower refined product sales prices ($341 million) and
lower revenues from resales of purchased oil and refined products ($171
million), partially offset by an increase in consumer excise taxes ($127
million). The $32 million decrease in gain on divestments is primarily due
to the absence of a $30 million pretax gain on the sale of Suncor stock and
a $19 million pretax gain on the sale of certain oil and gas properties in
Dubai and Canada both recognized during the first half of 1993, partially
offset by a $20 million pretax gain on the sale of Sun's remaining interest
in a Colombian oil field recognized during the second quarter of 1994.
Other income decreased $12 million primarily as a result of the absence of
a $17 million pretax gain from the insurance settlement recorded by Suncor
in the 1993 second quarter. Cost of products sold and operating expenses
decreased $455 million, or 15 percent, primarily due to lower resales of
purchased oil and refined products ($172 million) and lower domestic crude
oil and refined product acquisition costs ($323 million) resulting
primarily from lower average crude oil prices. Selling, general and
administrative expenses increased $31 million, or 10 percent, primarily due
to higher expenses in Sun's domestic refining and marketing operations ($19
million) and at Suncor ($5 million). This increase was due in part to
higher distribution and operating expenses caused by the severe winter
weather in the northeastern United States during 1994 and to increased
expenses associated with the conversion of the Atlantic brand to Sunoco and
the upgrading of the Sunoco image. Taxes, other than income taxes <PAGE>
<PAGE> 17
increased $109 million, or 11 percent, as higher consumer excise taxes
($127 million) were partially offset by lower crude oil and natural gas
production taxes ($9 million). Depreciation, depletion and amortization
increased $7 million, or 4 percent, primarily as a result of increased
crude oil production in the U.K. North Sea. Interest cost and debt expense
decreased $2 million, or 5 percent, due to a lower borrowing position at
Helios Capital Corporation, Sun's leasing subsidiary. For a discussion of
the cumulative effect of change in accounting principle, see Note 5 to the
condensed consolidated financial statements.
<PAGE>
<PAGE> 18
RESULTS OF OPERATIONS - THREE MONTHS
Earnings Profile of Sun Businesses (after tax)
- - ----------------------------------------------
Three Months Ended
June 30
------------------
1994 1993 Variance
---- ---- --------
(Millions of Dollars)
Fuels:
Wholesale fuels $(22) $-- $(22)
Branded marketing 5 13 (8)
Lubricants:
Lubes 17 14 3
Related fuels (19) (8) (11)
Chemicals 2 2 --
Logistics 12 14 (2)
International production 8 11 (3)
Canada (Suncor):*
Exploration and production 2 1 1
Oil sands 7 6 1
Refining and marketing (1) -- (1)
Corporate expenses** (1) -- (1)
Net financing expenses (1) -- (1)
---- ---- ----
Total Canada (Suncor) 6 7 (1)
Corporate:
Corporate expenses (4) (4) --
Net financing expenses (8) (7) (1)
Income from operations held
for sale:***
Coal 2 -- 2
Real estate -- -- --
---- ---- ----
(1) 42 (43)
Gain on sale of Suncor stock -- 19 (19)
Gain on divestment of exploration
and production properties 13 9 4
---- ---- ----
Consolidated net income $ 12 $ 70 $(58)
==== ==== ====
- - ----------------
*Sun reduced its ownership interest in Suncor from approximately
68 percent to 55 percent in May 1993.
**Includes consolidation adjustments.
***Effective in the fourth quarter of 1993, coal and real estate operations
are accounted for as investments held for sale. During the first nine
months of 1993, as discontinued operations, earnings from these
businesses were excluded from Sun's consolidated results of operations.
<PAGE>
<PAGE> 19
Analysis of Earnings Profile of Sun Businesses
- - ----------------------------------------------
In the three-month period ended June 30, 1994, Sun earned $12 million, or
$.11 per share of common stock, compared with earnings of $70 million, or
$.66 per share for the second quarter of 1993. Excluding the special items
shown separately in the Earnings Profile of Sun Businesses, Sun recorded a
loss of $1 million during the second quarter of 1994 compared to income of
$42 million during the second quarter of 1993.
Fuels -- Sun's domestic Fuels business recorded a loss of $17 million in
the second quarter of 1994 versus income of $13 million in the second
quarter of 1993. Losses from Wholesale Fuels operations were $22 million
in the current quarter compared with break-even results in the second
quarter of 1993. Income from Branded Marketing operations decreased from
$13 million in the year-ago quarter to $5 million in the second quarter of
1994.
The $22 million decrease in Wholesale Fuels results was due to lower
margins ($22 million) across most products, particularly wholesale gasoline
and distillates. The lower margins were caused largely by the rapid
increase in crude oil prices during the recent quarter that were not
matched by similar increases in refined product prices. Also contributing
to the margin decline was an unscheduled three-week maintenance shutdown at
the Marcus Hook catalytic cracking unit during the second quarter of 1994.
In Branded Marketing, the $8 million decline was caused largely by lower
margins ($4 million). Higher expenses ($2 million) associated with the
ongoing conversion of the Atlantic brand to Sunoco and the upgrading of the
Sunoco image and a 2 percent decline in branded gasoline sales volumes ($1
million) also contributed to the decrease in Branded Marketing earnings.
The volume decline was caused primarily by the elimination of some marginal
distributor accounts.
Lubricants -- Results from Sun's Lubricants business decreased $8 million
from the 1993 second quarter. Income from sales of lubricant products was
$17 million in the current quarter, an increase of $3 million from the
year-ago quarter. The improvement was due to 13 percent higher sales
volumes ($6 million), particularly for base oils, partially offset by lower
margins ($4 million). Losses from Related Fuels operations were $19
million during the second quarter of 1994, representing an $11 million
decline from the 1993 second quarter loss of $8 million. The decline was
largely due to lower margins on wholesale fuels ($10 million), particularly
middle distillates.
Chemicals -- Sun's domestic Chemicals business earned $2 million in both
the 1994 and 1993 second quarters. Higher aromatics and propylene margins
($4 million) were offset by lower sales volumes ($2 million) and higher
operating expenses ($2 million). The decline in sales volumes was due
largely to the unplanned three-week maintenance shutdown of the Marcus Hook
catalytic cracking unit.
Logistics -- Logistics income was $12 million, a decrease of $2 million
versus the year-ago quarter. Higher maintenance expenses due to increased
right-of-way clearing programs in the eastern U.S. contributed to the
decline.
<PAGE>
<PAGE> 20
International Production -- International Production earnings were $8
million in the current quarter versus $11 million in the second quarter of
1993. The $3 million decline was due largely to lower crude oil prices ($4
million). The favorable impact of higher North Sea crude oil production
volumes ($4 million) and reduced after-tax foreign exchange losses ($2
million) was essentially offset by lower natural gas volumes ($2 million)
and higher depreciation and operating expenses ($4 million) largely
associated with the increased crude oil production volumes.
The average price received for Sun's international crude oil production was
$15.45 per barrel in the second quarter of 1994 compared to $18.38 per
barrel for the second quarter of 1993. Sun's average net production of
crude oil was 23.8 thousand barrels daily during the second quarter of 1994
compared to average net production of 19.1 thousand barrels daily for the
second quarter of 1993. The production increase is the result of improved
operations and increased ownership interests in the Balmoral and Stirling
fields in the U.K. North Sea.
The average price received for Sun's international natural gas production
was $2.94 per thousand cubic feet for the current quarter compared to $3.00
per thousand cubic feet in the 1993 second quarter. Sun's average net
production of natural gas was 46 million cubic feet daily in the current
quarter of 1994 compared to 55 million cubic feet daily in the second
quarter of 1993.
Canada (Suncor) -- Oil sands results increased $1 million as the impact of
higher production volumes ($8 million) was largely offset by the absence of
a $7 million after-tax gain from an insurance settlement recorded in the
second quarter of 1993. Synthetic crude oil production volumes increased
44 percent from 47.3 thousand barrels daily during the 1993 second quarter
to 68.3 thousand barrels daily during the second quarter of 1994. The 1994
production level was a second-quarter record for the oil sands plant while
1993 second-quarter production was curtailed by a planned maintenance
shutdown which resulted in the stoppage of production for approximately one
month. Canadian refining and marketing income decreased $1 million
primarily due to lower retail gasoline margins.
Income from Operations Held for Sale -- For a discussion of Sun's coal and
real estate operations held for sale, see Note 3 to the condensed
consolidated financial statements.
Gain on Sale of Suncor Stock -- See "Analysis of Earnings Profile of Sun
Businesses - Gain on Sale of Suncor Stock" under "Results of Operations -
Six Months" for a discussion of the $19 million after-tax gain recorded in
the second quarter of 1993.
Gain on Divestment of Exploration and Production Properties -- See
"Analysis of Earnings Profile of Sun Businesses - Gain on Divestment of
Exploration and Production Properties" under "Results of Operations - Six
Months" for a discussion of the these gains.
<PAGE>
<PAGE> 21
Analysis of Consolidated Statements of Income
- - ---------------------------------------------
Sales and other operating revenue decreased $142 million, or 6 percent,
principally due to lower refined product sales prices ($155 million) and
lower revenues from resales of purchased oil and refined products ($85
million), partially offset by an increase in consumer excise taxes ($78
million). The $35 million decrease in gain on divestments is primarily due
to the absence of the $30 million pretax gain on the sale of Suncor stock
and the $19 million pretax gain on the sale of certain oil and gas
properties in Dubai and Canada both recognized during the 1993 second
quarter, partially offset by the $20 million pretax gain on the sale of
Sun's remaining interest in a Colombian oil field recognized during the
second quarter of 1994. Other income decreased $7 million primarily as a
result of the absence of the $17 million gain from the oil sands insurance
settlement recorded in the 1993 second quarter, partially offset by lower
foreign exchange losses ($3 million) and higher miscellaneous income from
Sun's domestic refining and marketing operations ($5 million). Cost of
products sold and operating expenses decreased $168 million, or 11 percent,
primarily due to lower resales of purchased oil and refined products ($86
million) and lower domestic crude oil and refined product acquisition costs
($104 million) resulting primarily from lower average crude oil prices.
Selling, general and administrative expenses increased $13 million, or 9
percent, primarily due to higher expenses in Sun's domestic refining and
marketing operations ($5 million) and at Suncor ($3 million). Taxes, other
than income taxes increased $73 million, or 15 percent, as higher consumer
excise taxes ($78 million) were partially offset by lower property and
other taxes ($6 million) in domestic refining and marketing operations.
Depreciation, depletion and amortization increased $2 million, or 2
percent, primarily as a result of increased crude oil production in the
U.K. North Sea. The $4 million decrease in minority interest is primarily
due to lower earnings at Suncor. <PAGE>
<PAGE> 22
FINANCIAL CONDITION
Cash and Working Capital
- - ------------------------
At June 30, 1994, cash and cash equivalents were $114 million compared to
$118 million at December 31, 1993, a decrease of 3 percent. At June 30,
1994, Sun had a working capital deficit of $338 million compared to a
working capital deficit of $228 million at December 31, 1993. This $110
million increase in the working capital deficit is due largely to a $74
million increase in the current portion of long-term debt and an $86
million increase in short-term borrowings, partially offset by an increase
in accounts and notes receivable ($20 million) and a decrease in accrued
liabilities ($38 million). 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 condensed consolidated balance sheet. The
current replacement cost of all such inventories exceeds the carrying value
at June 30, 1994, by approximately $530 million. Inventories valued at
LIFO, which consist of crude oil and refined products, are readily
marketable at their current replacement values. Management believes that
the current levels of Sun's cash and working capital provide adequate
support for its ongoing operations.
Cash Generation and Financial Capacity
- - --------------------------------------
In the first half of 1994, Sun's net cash provided by (used in) operating
activities ("cash generation") was $130 million compared to $(19) million
in the first half of 1993. The $149 improvement in cash generation is
largely due to a $206 million decrease in working capital uses pertaining
to operating activities, partially offset by a $44 million decrease in
income before special items. Divestment activities also have enhanced
Sun's cash flow and liquidity. During the first six months of 1994 and
1993, proceeds from divestments totalled $42 and $247 million,
respectively.
Net cash provided by operating and divestment activities has enabled Sun to
sustain the current cash dividend, pursue its capital program and fulfill
its current financing obligations. Management believes that cash
generation is expected to provide most of Sun's future ongoing cash
requirements. However, 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 June 30, 1994.
These facilities support Sun's commercial paper borrowings, which amounted
to $166 million at June 30, 1994. The Company also has access to
short-term financing under non-committed money market facilities. At June
30, 1994, $30 million was borrowed through these facilities. Suncor also
has a revolving term credit facility available for its own use aggregating
$289 million. At June 30, 1994, Suncor had no borrowings 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.
<PAGE>
<PAGE> 23
As of June 30, 1994, Sun's long-term debt to long-term capitalization ratio
was 27.5 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.
On August 4, 1994, the Company concluded the purchase from Chevron U.S.A.
Inc. of a 177,000-barrel-per-day refinery and related inventory located in
Philadelphia, PA. This facility will be operated as an addition to Sun's
Delaware Valley Refining Complex, which is comprised of the Company's
Philadelphia and Marcus Hook refineries. The purchase did not include
Chevron's interest in the Woodbury Pipeline and the Harbor Pipeline, which
connects the refinery to the New York harbor. Pending resolution of
certain statutory requirements, the Company anticipates the completion of
the purchase of these pipeline interests at a later date. The purchase
price of the above assets is expected to approximate $170 million. Chevron
U.S.A. Inc. has agreed to repair the moderate damage sustained in a fire
which occurred at the refinery prior to closing.
In the first quarter of 1994, Sun also signed an agreement to acquire from
LASMO plc a 45 percent interest in Block 3/8A located in the North Sea for
$59 million plus Sun's 20 percent interest in Block 16/12a also located in
the North Sea. Production from Block 3/8A is expected to approximate
11,000 net barrels of crude oil per day. It is anticipated that this
acquisition will be concluded in the third quarter.
The Company expects that these acquisitions will enhance Sun's earnings and
cash flow in the second half of 1994.
<PAGE>
<PAGE> 24
PART II
OTHER INFORMATION
Item 1. Legal Proceedings
On March 11, 1994, Sun 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 two lawsuits against Sun Company, Inc. (R&M) ("Sun(R&M)"),
and a single suit against Atlantic Refining & Marketing Corp.
("Atlantic"), both wholly owned subsidiaries of the Company. The
threatened action against both Sun(R&M) and Atlantic involved certain
alleged violations of a National Pollution Discharge Elimination
System ("NPDES") Permit at Sun's Philadelphia refinery. The second
threatened action, against Sun(R&M) only, involved certain alleged
violations of federal pre-treatment regulations under the Clean Water
Act. Sun has participated in discussions with the DOJ and the EPA in
an effort to review and settle these allegations. A settlement in
principle, in the form of a Consent Decree, has been reached, and once
finalized and signed by the parties, it will involve the payment of a
civil fine in excess of $100,000.
In April 1993, Sun(R&M) was advised by the DOJ and the EPA that they
contemplated the filing of a lawsuit against Sun, seeking civil
penalties and certain remedial action regarding the alleged violation
of certain federal and state air emissions regulations at its
Philadelphia refinery. As a result of discussions between Sun, the
DOJ and the EPA, a negotiated settlement was entered into and the
final Consent Order was entered on July 27, 1994. This settlement
entailed Sun's payment of a civil penalty in the amount of $1.4
million and the implementation of specific emission reductions.
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. A settlement in principle was
reached with the EPA whereby Sun(R&M) expects to pay civil fines
amounting to more than $100,000; however, the negotiated consent
decree has not yet been signed by the government.
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 June 30, 1994.
<PAGE>
<PAGE> 25
Item 4. Submission of Matters to a Vote of Security Holders
The Annual Meeting of the Company's shareholders was held on May 5,
1994. Proxies for the meeting were solicited pursuant to Section
14(a) of the Securities Exchange Act of 1934 and there was no
solicitation in opposition to the Company's solicitations. At this
meeting, the shareholders were requested (1) to act upon the
appointment of independent accountants, (2) to act upon a shareholder
proposal to establish a shareholders' advisory committee to provide
non-binding recommendations to the Board of Directors pertaining to
certain interests of shareholders on policy matters and (3) to elect a
Board of Directors. The following action was taken by the Company's
shareholders with respect to each of the above items:
1. Concerning the motion to appoint Coopers & Lybrand as the
Company's independent accountants, there was a total of
85,657,709 votes cast, with an aggregate of 84,125,916 votes cast
in favor of such appointment, 1,531,793 against and 389,899
withheld (abstentions). There were no broker non-votes.
2. Concerning the proposal to establish a shareholders' advisory
committee to provide non-binding recommendations to the Board of
Directors pertaining to certain interests of shareholders on
policy matters, there was a total of 77,582,316 votes cast, with
an aggregate of 6,038,327 votes cast in favor of such proposal,
71,543,989 against and 1,718,947 withheld (abstentions). There
were 6,746,345 broker non-votes.
3. Concerning the election of a Board of Directors of the Company,
there was a total of 85,922,971 votes cast. Each of the
following individuals continued his or her term of office as a
director of the Company and was re-elected to the Board of
Directors. The tabulation below sets forth the number of votes
cast for, against or withheld (abstentions) for each director.
There were no broker non-votes.
Number
Number Number "WITHHELD"
NAME "FOR" "AGAINST" (ABSTENTIONS)
---- ---------- --------- -----------
R. H. Campbell 85,625,418 297,553 124,637
R. E. Cartledge 85,642,867 276,806 127,935
R. E. Cawthorn 85,659,468 263,434 124,706
M. J. Evans 85,437,205 474,792 135,611
T. P. Gerrity 85,614,183 305,059 128,366
J. G. Kaiser 85,542,568 362,168 142,872
T. W. Langfitt 83,811,718 2,091,957 143,933
R. A. Pew 84,110,507 1,810,451 126,650
A. E. Piscopo 83,837,572 2,070,292 139,744
W. F. Pounds 85,574,915 338,691 134,002
B. R. Thompson, Jr. 60,054,907 25,795,589 197,112
A. B. Trowbridge 85,491,366 340,457 215,785
<PAGE>
<PAGE> 26
Item 5. Other Information
Effective July 22, 1994, B.R. Thompson, Jr. resigned from the Board of
Directors for personal reasons.
Item 6. Exhibits and Reports on Form 8-K
Exhibits:
11 - Statements re Sun Company, Inc. and Subsidiaries Computation of
Per Share Earnings for the Six-Month and Three-Month Periods
Ended June 30, 1994 and 1993.
12 - Statement re Sun Company, Inc. and Subsidiaries Computation of
Ratio of Earnings to Fixed Charges for the Six-Month Period Ended
June 30, 1994.
Reports on Form 8-K:
The Company has not filed any reports on Form 8-K during the quarter
ended June 30, 1994.
We are pleased to furnish this report to shareholders who request it by
writing to:
Sun Company, Inc.
Shareholder Relations
Ten Penn Center
1801 Market Street
Philadelphia, PA 19103-1699
<PAGE>
<PAGE> 27
SIGNATURE
Pursuant to the requirements 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/ RICHARD L. CARTLIDGE
-----------------------
Richard L. Cartlidge
Comptroller
(Principal Accounting Officer)
DATE August 12, 1994
<PAGE>
<PAGE> 1
EXHIBIT INDEX
Exhibit
Number Exhibit
- - ------- -----------------------------------------
11 Statements re Sun Company, Inc. and Subsidiaries Computation
of Per Share Earnings for the Six-Month and Three-Month
Periods Ended June 30, 1994 and 1993.
12 Statement re Sun Company, Inc. and Subsidiaries Computation
of Ratio of Earnings to Fixed Charges for the Six-Month
Period Ended June 30, 1994.
<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 Six Months
Ended June 30
-------------------
1994 1993
------- -------
(UNAUDITED)
Income before cumulative effect of change
in accounting principle (1) $45.6 $105.2
Cumulative effect of change in
accounting principle (2) (6.8)(a) 5.0(a)
----- ------
Net income (3) $38.8 $110.2
===== ======
Weighted average number of shares
of common stock and common stock
equivalents outstanding (4) 107,119 106,469
======= =======
Income per share of common stock:
Income before cumulative effect of change
in accounting principle (1)/(4) $ .43 $ .98
Cumulative effect of change in
accounting principle (2)/(4) (.07) .05
----- -----
Net income (3)/(4) $ .36 $1.03
===== =====
Weighted average number of shares of
common stock and common stock
equivalents outstanding on a
fully diluted basis (5) 107,123 106,470
======= =======
Income per share of common stock
on a fully diluted basis:
Income before cumulative effect of change
in accounting principle (1)/(5) $ .43 $ .98
Cumulative effect of change in
accounting principle (2)/(5) (.07) .05
----- -----
Net income (3)/(5) $ .36 $1.03
===== =====
- - ----------------
(a) Includes impact of the cumulative effect of a change in the method of
accounting for postemployment benefits in 1994 and a change in the
method of accounting for income taxes in 1993. (See Note 5 to the
condensed consolidated financial statements.)
<PAGE>
<PAGE> 2
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 Three Months
Ended June 30
--------------------
1994 1993
------- -------
(UNAUDITED)
Net income (1) $11.7 $70.5
===== =====
Weighted average number of shares
of common stock and common stock
equivalents outstanding (2) 107,148 106,495
======= =======
Net income per share of common stock (1)/(2) $.11 $.66
==== ====
Weighted average number of shares of
common stock and common stock
equivalents outstanding on a
fully diluted basis (3) 107,151 106,495
======= =======
Net income per share of common stock
on a fully diluted basis (1)/(3) $.11 $.66
==== ====
<PAGE>
<PAGE> 1
EXHIBIT 12
STATEMENT RE COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES(a)
Sun Company, Inc. and Subsidiaries
(Millions of Dollars Except Ratio)
- - --------------------------------------------------------------------------
For the Six Months
Ended June 30, 1994
-------------------
(UNAUDITED)
Fixed Charges:
Consolidated interest cost and debt expense $ 41
Interest cost and debt expense of operations
held for sale 14
Interest allocable to rental expense(b) 11
----
Total $ 66
====
Earnings:
Consolidated income before provision for
income taxes and cumulative effect of
change in accounting principle $ 63
Minority interest in net income
of subsidiaries having fixed charges 13
Proportionate share of provision for income
taxes of 50 percent owned but not controlled
affiliated companies 2
Equity in income of less than 50 percent owned
but not controlled affiliated companies (4)
Dividends received from less than 50 percent
owned but not controlled affiliated companies 2
Fixed charges 66
Interest capitalized (6)
Amortization of previously capitalized interest 21
----
Total $157
====
Ratio of Earnings to Fixed Charges 2.38
====
- - ----------------
(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. Coal and real estate operations are accounted for as
investments in operations held for sale. (See Note 3 to the condensed
consolidated financial statements.) Affiliated companies (20 to 50
percent owned but not controlled) are accounted for by the equity
method.
(b) Represents one-third of total operating lease rental expense which is
that portion deemed to be interest.
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<PAGE>
<PAGE> 1
DATA STATED IN MILLIONS
VOLUNTARY SCHEDULE - CERTAIN FINANCIAL INFORMATION
<CAPTION>
SECOND QTR SECOND QTR -- YEAR TO DATE --
REGULATION STATEMENT 1994 1993 1994 1993
<S> <C> <C> <C> <C> <C>
5-02(1) Cash and cash items 114 100
5-02(2) Marketable securities -- --
5-02(6)(a)(1) Finished goods 263 309
5-02(9) Total current assets 1,307 1,374
5-02(18) Total assets 5,914 5,927
5-02(21) Total current liabilities 1,645 1,530
5-02(22) Bonds, mortgages & other long term debt 727 803
5-02(23) Indebtedness to related parties -- --
5-02(29) Preferred stock-no mandatory redemption -- --
5-02(30) Common stock 129 129
5-02(31)(a)(1) Additional paid in capital 1,307 1,302
5-02(31)(a)(3)(ii) Retained earnings - unappropriated 1,579 1,554
5-03(b)(1)(a) Net sales tangible products 2,218 2,360 4,274 4,645
5-03(b)(8) Interest & amortization of debt discount 18 19 36 38
5-03(b)(10) Income before taxes and other items 14 115 63 174
5-03(b)(11) Income tax expense 2 45 17 69
5-03(b)(18) Cumulative effect - change in acctg. prin. -- -- (7) 5
5-03(b)(19) Net income 12 70 39 110
