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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, 1994
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
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
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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, 1995, the aggregate market value of voting stock held
by nonaffiliates was $2,605 million.
At February 28, 1995, there were 106,941,633 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, 1994 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, 1994, 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 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 investing in
Sun's core domestic refining and marketing businesses. Sun will also
invest opportunistically in international oil and gas production activities
in the U.K. sector of the North Sea, if returns on such investments are
expected to exceed the Company's cost of capital for such projects. In
addition, Sun will continue to exit non-productive and non-strategic
businesses and improve productivity.
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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 1994 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, 1994, 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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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 Direction, and Note 2 to
the Consolidated Financial Statements in the Company's 1994 Annual Report
to Shareholders. Additional business segment and geographic information is
presented in Note 19 to the Consolidated Financial Statements in the
Company's 1994 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 777 thousand barrels daily as of December 31,
1994. On August, 4, 1994, Sun completed the acquisition of a 177,000
barrel-per-day refinery in Philadelphia ("Girard Point") from Chevron
U.S.A. Inc. ("Chevron"). The Girard Point facility and Sun's adjacent
refining facility at Point Breeze comprise the Philadelphia Refinery, which
is operated as a single 307,000 barrel-per-day refinery complex under one
management team.
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.
The following table sets forth certain information concerning Sun's
domestic refining operations during 1994:<PAGE>
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<TABLE>
<CAPTION>
Philadelphia, PA
---------------- Total Total Total
Marcus Girard Point Toledo, Fuels Tulsa, Puerto Lubes Domestic
Hook, PA Point Breeze OH Refineries OK Rico Refineries Refineries
-------- ------ ------ ----------------- ------ ------ ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Crude Unit
Capacity (MB/D) 175.0 177.0 130.0 125.0 607.0 85.0 85.0 170.0 777.0
===== ===== ===== ===== ===== ==== ==== ===== =====
Input to Crude
Units (MB/D) 141.0 78.9* 105.8 112.7 438.4 89.7 62.5 152.2 590.6
===== ===== ===== ===== ===== ==== ==== ===== =====
Products Manufactured:
(Percent)
Gasoline 50 40 46 62 50 17 19 18 43
Middle Distillates 20 29 12 10 17 16 17 17 17
Jet Fuel 8 -- 7 4 6 13 16 14 7
Residual Fuel 7 18 2 3 6 1 19 8 7
Petrochemicals 5 1 3 8 5 -- -- -- 4
Lubricants -- -- -- -- -- 11 18 14 3
Asphalt -- -- 18 3 5 -- -- -- 4
Propane 3 1 2 2 2 1 -- 1 2
Other 7 11 10 8 9 41** 11 28 13
--- --- --- --- --- --- --- --- ---
100 100 100 100 100 100 100 100 100
=== === === === === === === === ===
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*Reflects total input from August 4, 1994 through December 31, 1994 divided by 365 days. During this
150-day period, input to crude units at this facility actually totalled 191.9 thousand barrels daily.
**Includes approximately 30 thousand barrels daily of "lubes-extracted" intermediate streams which are
transported to the Toledo refinery for further processing.
</TABLE>
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A critical element for Sun 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 1994
were met largely through purchases from various foreign national oil
companies and traders. 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. Sun's domestic refineries process
approximately 85 percent light sweet crude oil and, in 1994, 81 percent of
Sun's domestic crude oil requirements were obtained from foreign sources.
The Company believes that ample supplies of light sweet crude oil will
continue to be available and that the price differential between sweet and
sour crude oils will remain relatively low. The Marcus Hook, Philadelphia
and Puerto Rico refineries process foreign crude oils, while Sun's Tulsa
refinery processes domestic crude oil. The Toledo refinery processes
domestic, Canadian and foreign crude oils. Supplies of feedstocks and
refined products also have been sufficient to meet Sun's refining and
marketing needs. Sun's refined product prices are generally determined by
both worldwide and regional supply and demand for such products, as well as
by crude oil prices.
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 1994. 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. Sun utilizes the services of various organizations and local
cooperatives in order to enable Sun to respond to potential oil spills in
specific geographic locations.
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 currently includes the retail sale of fuels (gasoline and
middle distillates) under Sun's SUNOCO(R) and ATLANTIC(R) brands (see
"Branded Fuels Marketing" below).
Wholesale Fuels
Total third-party fuels products sold at wholesale from Sun's Fuels
Refineries in 1994 were 301.1 thousand barrels daily compared to 217.0
thousand barrels daily in 1993. The 39 percent increase in 1994 was due to
the August 4, 1994 Girard Point acquisition, as the production from this
facility is principally sold to wholesale and industrial customers. For a
discussion of wholesale fuels marketing at Sun's Tulsa and Puerto Rico
lubricants refineries, see "Lubricants" below.
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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 operating results of the Lubricants business (see "Lubricants"
below).
Sun's Marcus Hook and Toledo refineries and the Girard Point facility
in the Philadelphia refinery complex refine predominantly light, low-sulfur
crude oils. The Point Breeze facility in the Philadelphia refinery complex
is able to process heavier, higher sulfur crude oils and is a major
producer of asphalt in Sun's northeastern United States marketing area.
Sun's Philadelphia and Marcus Hook refineries are interconnected by
barge, truck, rail and pipeline. The pipeline interconnection between the
two facilities was completed during the latter part of 1994 and is expected
to be operational in early 1995. Feedstocks currently being transferred
between these refineries include reformate, naphtha, light cycle oil and
butanes. See "Logistics" below for further discussion of the inter-
refinery pipeline project.
Environmental laws require Sun to make significant expenditures at its
refineries, of both a capital and expense nature. For example, a $110
million capital project to significantly upgrade the sewer system and close
an unlined impoundment at Sun's Marcus Hook refinery was substantially
completed in 1994.
Additionally, significant alterations in the composition of gasoline
sold in 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 continue to be phased in, significantly impact operations at Sun's
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 has been in the production of
motor gasolines which must meet strict reformulated fuels guidelines.
In response to the regulatory environment, the Company has undertaken
various initiatives to meet these requirements:
. Sun completed a project to expand its benzene extraction capacity by 60
million gallons per year at its Marcus Hook refinery (see "Chemicals"
below);
. Sun enhanced its East Coast alkylation capacity, a key refining process
in the production of reformulated fuels, through the 1994 acquisition of
the Girard Point facility; and
. 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).
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In addition, Sun's Toledo, Philadelphia and Yabucoa, Puerto Rico
refineries have the ability, without additional capital investment, to
produce low-sulfur diesel that meets the requirements, imposed in 1993, for
reduction of sulfur in on-road diesel. 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 believes
that the Company is well positioned to meet the new air toxics and
reformulated fuels requirements under present regulations as they continue
to be phased in over the next few years.
Sun also has an alternative fuels research and testing program
focusing on methanol/gasoline mixtures, liquefied petroleum gas and
compressed natural gas.
Branded 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 235.4 thousand barrels daily in 1994 compared to 245.0 thousand
barrels daily in 1993. The four percent decline was caused primarily by
the temporary closure of service stations during the Branded for Success
program (see below), the elimination of some marginal distributor accounts
and the completion in 1993 of a withdrawal from certain areas supplied by
the Tulsa refinery. Partially offsetting the adverse impact on volumes of
these factors was the addition of 16 high-volume service stations along the
Ohio turnpike during 1994. Sun's branded fuels marketing business also
includes the ownership and operation of the SUNOCO FOOD MARKET(R) and
APLUS(R) convenience stores.
In 1993, Sun announced a major program ("Branded for Success") to
upgrade and modernize its retail service station network and convert its
ATLANTIC(R) gasoline outlets to SUNOCO(R) and convert its SUNOCO FOOD
MARKET(R) convenience stores to APLUS(R) throughout the Sun marketing area.
Some ATLANTIC(R) locations will also 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 465 service stations and 240 convenience stores,
commenced in June 1993 and is expected to be completed in 1996. At year-
end 1994, 231 ATLANTIC(R) stations had been converted to SUNOCO(R), while
116 SUNOCO FOOD MARKET(R) stores had been converted to APLUS(R).
Sun sells fuels (principally gasoline) through 4,115 SUNOCO(R) and
ATLANTIC(R) retail gasoline outlets. All but 415 of these stations are
independently operated. The SUNOCO(R) outlets are located largely within a
17-state area in the Northeast and northern Midwest, with the greatest
concentration in Connecticut, New Jersey, New York, Massachusetts,
Pennsylvania, Rhode Island, Ohio and Michigan. The ATLANTIC(R) outlets are
located principally in New York and Pennsylvania. In 1994, Sun secured a
5-year lease for 16 high-volume gas stations on the Ohio turnpike. Sun is
also the sole service station operator on all 13 plazas on the New Jersey
turnpike, and supplies 16 outlets on the New York thruway, and all 22
outlets on the Pennsylvania turnpike.
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Sun's convenience stores are designed to support high-volume sales of
gasoline and provide a broad range of other goods and services. The number
of convenience stores at year-end 1994 totalled 610. In addition, the
number of Sunoco ULTRA SERVICE CENTER(SM) stations, which provide total
guaranteed car service, now totals 355.
In 1994, excluding environmental capital outlays, Sun invested
approximately $120 million in support of its branded outlets and
distribution systems as part of ongoing efforts to upgrade its facilities.
During 1994, Sun installed CardMatic(SM), its credit card activated
gasoline dispensing system, at approximately 500 high-volume service
stations, bringing the total number of outlets offering this system to 650.
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 34 terminals located in the Northeast and
Midwest portions of the United States that primarily support its branded
marketing system.
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.
Sun-manufactured base oils 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) Year-Round Pesticide Oil was introduced to the retail market in the
spring of 1994 and currently is being distributed nationwide. Also in
1994, Sun introduced its 260 line of automotive oils, which is sold under
the SUNOCO(R) brand name and aimed at the performance-minded customer
market, and reformulated its heavy duty low-sulfur diesel engine oil,
SUNOCO(R) Super C.
Sales of lubricant products totalled 22.3 thousand barrels daily in
1994 versus 19.5 thousand barrels daily in 1993. Total fuels by-products
sold to third parties from the Tulsa and Puerto Rico refineries were 91.2
thousand barrels per day in 1994 compared to 85.3 thousand barrels daily in
1993.
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Sun's Tulsa refinery runs a light, low-sulfur crude oil slate while
the Puerto Rico refinery is able to process heavier, higher sulfur crude
oils. As of December 31, 1994, 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 thousand barrels daily.
In late 1992, Sun reconfigured its 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 the production of intermediate streams ("lubes extracted"
feedstocks) which totalled 30.5 thousand barrels daily in 1994. These
volumes have been largely transported to the Toledo refinery for further
processing. In 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 intermediate feedstocks can result in the
production of reduced levels of high-sulfur residual fuels and other
wholesale fuels products when warranted by market conditions.
During 1994, the Puerto Rico and Tulsa refineries, as well as the lube
service centers located in the Marcus Hook and Tulsa refineries, received
ISO 9002 certification indicating they have passed the International
Standards Organization's standards for quality management and oversight.
Sun is the second United States manufacturer of lubricants to achieve this
certification.
CHEMICALS
Sun's Chemicals business consists of the manufacturing, distribution
and marketing of base and intermediate commodity petrochemicals. Such
chemicals include primarily light olefins (ethylene and propylene),
aromatics (benzene, toluene and xylenes), ethylene oxide, cumene and
cyclohexane. The Chemicals business also produces MTBE which is utilized
by the Wholesale Fuels business in manufacturing reformulated fuels.
Petrochemicals are manufactured at Sun's Marcus Hook, Philadelphia and
Toledo refineries and at an ethylene and ethylene oxide facility at
Brandenburg, Kentucky and an MTBE facility in Mont Belvieu, Texas.
Sun's petrochemical products are distributed and sold on a worldwide
basis. Sales of petrochemicals to third parties totalled 27.5 thousand
barrels daily in 1994 versus 28.8 thousand barrels daily in 1993. The
majority of these sales are to manufacturers of intermediate products that
are used in the production of plastics, detergents, specialty chemicals and
fibers. Significant volumes are also marketed as solvents. During 1994,
approximately 39 percent of Sun's third-party petrochemical sales volumes
were olefin-related, another 44 percent were aromatics-related and the
balance was composed of other products such as carbon dioxide and sulfur.
Overall, approximately 15 percent of Sun's petrochemical sales were made to
customers outside the United States during 1994.
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The ongoing development of Sun's Chemicals business continued during
1994 as follows:
. A project (the "Northeast Aromatics and Cyclohexane Project") was
completed, which included the expansion of benzene extraction capacity
by 60 million gallons per year and construction of a 34-million-gallon-
per-year cyclohexane plant at the Marcus Hook refinery. This project
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
pursuant to a contract with a major chemical company;
. The addition of the Girard Point facility to Sun's East Coast supply and
logistics network complements and enhances Sun's expanded northeast U.S.
chemicals presence. This acquisition included a cumene production unit
and benzene extraction facilities. Benzene is now extracted at Sun's
Marcus Hook and Girard Point facilities and combined with refinery-grade
propylene to produce cumene at Girard Point. The cumene is then sold
primarily to a third-party customer;
. The construction of the MTBE production facility owned and operated by
Belvieu Environmental Fuels ("BEF"), a joint venture in which Sun is a
one-third partner, is essentially completed. Pursuant to a 10-year off-
take agreement, Sun will purchase all of the MTBE production from the
BEF facility. This plant has a designed capacity of 12,600 barrels
daily. Production commenced in the second half of 1994, and the plant
is currently in a sustained start-up test phase. Production in 1994
during the start-up test phase averaged 7,800 barrels daily. In order
to secure permanent financing for this project, the plant must produce
at its designed capacity for a continuous 45-day period prior to May 31,
1995. If this or certain other conditions are not met, Sun may be
required to pay its $59 million share of the construction loan for this
project. For additional information concerning Sun's participation in
this joint venture, see Note 14 to the Consolidated Financial Statements
in the Company's 1994 Annual Report to Shareholders.
LOGISTICS
Sun's Logistics business consists of pipeline transportation of crude
oil and refined petroleum products to fifteen states in the northeastern
and midwestern U.S. and petroleum terminalling operations in Nederland,
Texas. 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, and Mid-Valley Pipeline Company, which is 55.3 percent
owned by Sun. In addition, Sun owns equity interests in the 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 agencies, are based
upon competition from other pipelines or alternate modes of transportation.
Sun's crude oil pipeline systems, located primarily 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 pipeline systems, located primarily in
the Northeast, transport gasoline, jet fuel, diesel fuel, home heating oil
and other products to many customers including Sun's Fuels businesses,
integrated petroleum companies and independent marketers and distributors.
In conjunction with the Girard Point acquisition from Chevron, in
October 1994, Sun purchased a one-third undivided interest in the Harbor
pipeline, an 80-mile refined petroleum products pipeline operating from
Woodbury, New Jersey to Linden, New Jersey, and acquired the Woodbury
pipeline, a seven-mile pipeline that connects Sun's Girard Point facility
to the Harbor pipeline. The Harbor pipeline provides Philadelphia-area
refineries, including Sun's Girard Point facility, access to the New York
harbor markets.
In 1994, Sun completed the pipeline construction phase of its 19-mile
inter-refinery project which connects Sun's Marcus Hook refinery and Point
Breeze facility. This project is scheduled to start up in the first
quarter of 1995 with the completion of the pump stations. Once
operational, this pipeline will provide Sun synergies in making
reformulated gasoline by enabling gasoline component streams from the Point
Breeze facility to move via pipeline to the Marcus Hook refinery.
In December 1994, Sun also completed a pipeline expansion project near
Williamsport, Pennsylvania which replaced seven miles of existing eight-
inch pipe with new fourteen-inch pipe. This expansion enables Sun to
transport additional volumes of refined petroleum products to central
Pennsylvania and western New York.
At December 31, 1994, Sun had an equity interest in 5,577 miles of
crude oil pipelines and 4,552 miles of refined product pipelines in the
United States. In 1994, crude oil and refined product shipments in the
United States, including Sun's share of shipments in which it had an
ownership interest, totalled 48.4 and 28.3 billions of barrel miles,
respectively, as compared to 50.4 and 30.7 billions of barrel miles in
1993.
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.
Additional information concerning Sun's domestic refining and
marketing operations is set forth on pages 59 through 62 in the Company's
1994 Annual Report to Shareholders.
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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 commenced a withdrawal from exploration activities outside of
Canada and focused its international production and near-term development
activities in the U.K. sector of the North Sea. This strategy has enabled
Sun to enhance its operating profits in the near term, and reduce
significantly its investment risk profile.
The Company's strategy is to opportunistically invest in producing
properties or near-term development projects in the U.K. sector of the
North Sea, if returns on such investments are expected to exceed the
Company's cost of capital for such projects. In the absence of such
acquisitions, income, reserves, and production from this business will
decline significantly by the end of the decade.
In support of this strategy, Sun has increased its oil producing
interests in the U.K. North Sea through the acquisition of additional
ownership interests in the Balmoral and Stirling fields in 1993, and the
acquisition of Lasmo's interest in Block 3/8a in the third quarter of 1994.
The Block 3/8a acquisition provides Sun Oil Britain Limited with a 12.93
percent interest in the producing Ninian field and a 45 percent interest in
the adjacent Columba field development. Net liquids production from the
Ninian and Columba fields is expected to exceed over 10 thousand barrels
daily during 1995.
During 1994, Sun disposed of its remaining interests in the Espinal
Block in Colombia, South America, and Blocks 211/22a, 16/12a and the East
Leman gas field in the U.K. North Sea. In addition, Sun relinquished its
remaining exploration interests outside North America, except for those in
Algeria, which will be relinquished in 1995.
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 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.
Sun is the operator and a 59-percent owner of a floating production
vessel ("FPV") which has been utilized in the successful development of the
Balmoral, Glamis and Stirling fields in the U.K. North Sea. Sun is one of
only a few companies experienced in the management and operation of this
state-of-the-art technology which can be used in producing small-to-medium
sized oil fields.
<PAGE>
<PAGE> 14
The following tables set forth certain information concerning Sun's
International Exploration and Production activities:
AVERAGE NET OIL AND GAS PRODUCTION
1994 1993 1992
---- ---- ----
Crude oil, condensate and natural gas
liquids (thousands of barrels daily)*.............. 29.0 28.0 42.7
==== ==== ====
Natural gas (millions of cubic feet daily)........... 46 56 46
== == ==
-----------
*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.
PROVED RESERVES AT DECEMBER 31
1994 1993 1992
---- ---- ----
Crude oil, condensate and natural gas
liquids (millions of barrels)*..................... 38 31 77
== == ==
Natural gas (billions of cubic feet)................. 96 109 104
== === ===
-----------
*Reflects impact of April 1993 sale of producing properties in Dubai.
NET OIL AND GAS WELLS DRILLED
1994 1993 1992
---- ---- ----
Net Exploratory Wells:*
Oil................................................ -- 1 3
Gas................................................ -- -- --
Dry ............................................... -- 3 4
-- -- --
-- 4 7
== == ==
Net Development Wells:**
Oil................................................ 1 2 --
Gas................................................ -- -- 1
Dry................................................ -- -- --
-- -- --
1 2 1
== == ==
-----------
*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, 1994, Sun was in the process of drilling or
participating in the drilling of 2 gross wells and 1 net well outside
North America.
<PAGE>
<PAGE> 15
PRODUCING OIL AND GAS WELLS
At December 31, 1994
--------------------
Gross Net
----- ---
Oil.................................................. 81 16
Gas.................................................. 54 6
--- --
135 22
=== ==
OIL AND GAS ACREAGE
Thousands of Acres at December 31
---------------------------------
1994 1993
------------- --------------
Gross Net Gross Net
----- --- ----- ---
Developed.............................. 277 65 359 99
=== == === ==
Undeveloped ........................... 1,843 505 13,627 9,849
===== === ====== =====
Additional information concerning Sun's international exploration and
production business is set forth on pages 63 through 66 in the Company's
1994 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 operations are concentrated in western Canada, with increasing
emphasis on natural gas. During 1994, Suncor continued to increase its
crude oil and natural gas portfolio through exploration and development
activities, which added proved reserves of 139 billion cubic feet of
natural gas and 9 million barrels of crude oil, condensate and natural gas
liquids. These reserve additions contributed to a reserve replacement
ratio of nearly 300 percent for the year. Suncor's goal is to have an
annual reserve replacement ratio of 150 percent. Exploration activities
are focused in northeast British Columbia, northwest Alberta and central
Alberta, while major production and development programs are located in the
central Alberta areas of Grande Prairie, Glacier, Boundary Lake South,
Simonette and Medicine River and in Blueberry in British Columbia.
<PAGE>
<PAGE> 16
Suncor's crude oil production is used in its refining operations,
exchanged for other crude oil, or sold to Canadian and U.S. purchasers.
Sales are generally made under contracts which are terminable by relatively
short notice or on a spot basis. Natural gas production is marketed under
direct sales arrangements to customers in eastern Canada, the U.S. midwest,
the U.S. Pacific northwest and California, and is used in Suncor's oil
sands and petroleum refining operations.
To ensure ongoing direct sales access to U.S. markets, Suncor has
entered into long-term pipeline transportation contracts. Suncor has 53
million cubic feet per day of capacity on the Northern Border Pipeline to
the U.S. midwest. This contract extends to the year 2003. Suncor also has
firm capacity of 40 million cubic feet per day contracted on the Pacific
Gas Transmission Pipeline to the California border, extending to the year
2023.
The following tables set forth certain information concerning Sun's
Exploration and Production activities in Canada:
AVERAGE NET OIL AND GAS PRODUCTION
1994 1993 1992
---- ---- ----
Crude oil, condensate and natural gas
liquids (thousands of barrels daily)............... 10.8 10.1 10.1
==== ==== ====
Natural gas (millions of cubic feet daily)........... 119 116 116
=== === ===
PROVED RESERVES AT DECEMBER 31
1994 1993 1992
---- ---- ----
Crude oil, condensate and natural gas
liquids (millions of barrels)...................... 40 34 34
== == ==
Natural gas (billions of cubic feet)................. 593 492 475
=== === ===
<PAGE>
<PAGE> 17
NET OIL AND GAS WELLS DRILLED
1994 1993 1992
---- ---- ----
Net Exploratory Wells:*
Oil................................................ 1 2 --
Gas................................................ 8 8 6
Dry ............................................... 12 9 7
-- -- --
21 19 13
== == ==
Net Development Wells:**
Oil................................................ 30 18 15
Gas................................................ 13 10 2
Dry................................................ 9 7 3
-- -- --
52 35 20
== == ==
-----------
*As of December 31, 1994, Suncor was in the process of drilling or
participating in the drilling of 15 gross and 13 net wells in Canada.
PRODUCING OIL AND GAS WELLS
At December 31, 1994
--------------------
Gross* Net
----- ---
Oil................................................. 3,016 421
Gas................................................. 290 86
----- ---
3,306 507
===== ===
-----------
*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
---------------------------------
1994 1993
------------- -------------
Gross Net Gross Net
----- --- ----- ---
Developed ............................. 649 345 660 350
=== === === ===
Undeveloped ........................... 1,728 853 1,715 809
===== === ===== ===
Additional information concerning Suncor's exploration and production
operations is set forth on pages 63 through 66 in the Company's 1994 Annual
Report to Shareholders.
<PAGE>
<PAGE> 18
OIL SANDS
Suncor produces synthetic crude oil by mining the Athabasca oil sands
and upgrading the bitumen extracted at its plant located near Fort
McMurray, Alberta. As part of strategic initiatives announced in 1992, the
bucketwheel excavator system has been replaced by a more flexible and
efficient truck and shovel mining method. This change in mining
technology, coupled with workforce reductions and increased production
volumes, resulted in a reduction in cash operating costs from approximately
$C19.50 per barrel in 1992 to $C14.00 per barrel in 1994.
Synthetic crude oil produced for shipment averaged 70.7 thousand
barrels daily in 1994, 60.5 thousand in 1993 and 58.5 thousand in 1992. A
major portion of Suncor's synthetic crude oil production is used in its
refining operations at Sarnia, Ontario, and during 1994, totalled 37
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.
Upgrader modifications were completed during 1993 which increased
synthetic crude oil production capability from 60,000 barrels to 68,000
barrels daily. Suncor intends to expand further the oil sands production
capability to over 80,000 barrels per day by 1998 at an estimated cost of
$185 million. The major part of this project, which is subject to
regulatory and Suncor board of directors approval, is expected to occur in
1997, after a scheduled maintenance turnaround.
Suncor has made substantial investments in recent years to improve the
reliability and flexibility of the oil sands operations, and these
investments contributed to making 1994 the best year for production in the
plant's 27-year history. Suncor continues efforts to maintain consistently
high levels of production. However, 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 oil sands operations are carried out on two leases
covering approximately six thousand acres. As of December 31, 1994, these
leases had remaining reserves of 205 million barrels of proven synthetic
crude oil, which are expected to be fully mined within approximately eight
years. Over the last three years, Suncor has acquired nine additional
leases, and in the fall of 1994 announced that feasibility studies will be
undertaken in 1995 to consider the opening of a new mine site on one of the
leases located across the Athabasca River from its existing mine site.
Geological and engineering assessments have confirmed the existence and
quality of reserves on this site and the feasibility studies will define
mine and facilities design, infrastructure requirements and cost estimates.
Subsequent to successful completion of the above assessments and studies,
approval from Suncor's board of directors and the Alberta government's
regulatory agencies would be required before work could commence.
<PAGE>
<PAGE> 19
Suncor's board of directors approved a capital investment of
approximately $145 million to equip its existing steam and electricity
generating facilities with limestone flue gas scrubbing technology to
reduce sulfur dioxide emissions. This project, which is expected to be
completed in 1996, will allow Suncor to comply with its air license
requirements.
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 to reduce the
volume of solids and treat the water through biological means. Suncor is
conducting further testing on this "wet pond" approach and other
alternatives, including non-segregating tailings technology, 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.
Sun estimates the total cost for reclamation of the site will be
approximately $120 million, based on the current development and
reclamation plan which will expire in 1995. At December 31, 1994, $78
million was accrued for such reclamation.
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. Suncor's current operating
licenses, including its development and reclamation plan, expire on April
25, 1995. Suncor anticipates the necessary licenses will be renewed upon
expiry.
Additional information concerning Suncor's oil sands operations is set
forth on page 67 in the Company's 1994 Annual Report to Shareholders.
REFINING AND MARKETING
Suncor owns and operates one refinery which is located in Sarnia,
Ontario. As of December 31, 1994, this refinery had a crude unit
processing capacity of approximately 70,000 barrels daily and cracking
capacity of 40,200 barrels daily. An alkylation unit, capable of producing
5,500 barrels daily of alkylate, complements a petrochemical plant for
flexibility in gasoline, octane and chemical production.
Suncor's refining operation uses both synthetic and conventional crude
oil. In 1994, 68 percent of the crude oil processed at the Sarnia refinery
was synthetic crude oil compared to 69 percent in 1993. Of the synthetic
crude oil processed, 58 percent was from Suncor's oil sands plant
production in 1994 compared with 55 percent in 1993, 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. Crude oil
from other countries can also be delivered via pipeline from the United
<PAGE>
<PAGE> 20
States Gulf Coast providing additional flexibility and security of supply.
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
118 percent in 1994 compared to 105 percent in 1993.
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 84.5 thousand barrels daily in 1994 compared to 81.9 thousand barrels
daily in 1993.
Canadian retail sales of gasoline, primarily under the SUNOCO(R)
brand, are made through 500 retail gasoline outlets, 252 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. Pursuant to this
strategy, Suncor closed 106 low-volume retail locations during 1994.
Despite its smaller network, Suncor increased retail gasoline sales by
eight percent.
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.
Additional information concerning Suncor's refining and marketing
operations is set forth on pages 59 through 62 in the Company's 1994 Annual
Report to Shareholders.
COAL
Sun's coal mining and coke manufacturing operations are conducted by
Sun Coal Company and its affiliates ("Sun Coal"). As a result of Sun's
1993 decision to sell its coal business, Sun's coal mining and cokemaking
operations have been classified as operations held for sale in Sun's
consolidated financial statements. Sun completed the sale of its western
U.S. coal operations during 1993, and in 1994, sold certain of its eastern
U.S. coal assets. Sun is pursuing the sale of its remaining coal and
cokemaking operations.
<PAGE>
<PAGE> 21
Sun had 187 million tons of estimated coal reserves classified as
proven and probable at December 31, 1994, compared to 251 million tons at
December 31, 1993. Of the reserves at December 31, 1994, 62 percent were
metallurgical coal located in Virginia and 38 percent were bituminous steam
coal located in Kentucky. Sun's total coal production in 1994 was 6.6
million tons, compared to 12.9 million tons in 1993.
In 1994, 56 percent of Sun's metallurgical coal production was
converted into coke at Sun facilities, 31 percent was sold under contract
to a single customer and 13 percent was sold in spot transactions. Sun's
principal market for both metallurgical coal and coke is the domestic steel
industry. During 1994, 73 percent of Sun's coke sales were made under a
long-term contract to a single customer with the remainder sold in spot
transactions. When this long-term contract expires in March of 1995, it
will be replaced with one-year contracts with two other customers totalling
over 600 thousand tons. Approximately 63 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 Coal produces high quality coke at its cokemaking facilities,
using its Jewell/Thompson non-recovery cokemaking technology and related
patents. This technology is environmentally superior to the by-product
technology currently used by most coke producers.
Additional information concerning Sun's coal and cokemaking operations
is set forth on page 67 in the Company's 1994 Annual Report to
Shareholders.
LEASING
Sun's leasing and secured lending portfolio is managed through Helios
Capital Corporation and its subsidiaries (collectively "HCC"). 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. Pursuant to this strategy, during 1994, HCC's
portfolio was reduced by $71 million. At December 31, 1994, HCC had
remaining investments in leases and secured loans totalling $40 million.
REAL ESTATE
Sun's real estate business is conducted through Radnor Corporation and
its subsidiaries (collectively "Radnor"). As of December 31, 1994, Radnor
had a diversified portfolio of real estate developed for investment (mainly
office buildings, shopping centers and hotels) or immediate sale (including
single-family homes, condominiums, residential land and business parks),
located in 11 states.
As a result of Sun's decision to sell its real estate business through
a program of controlled disposition, such 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 has divested
<PAGE>
<PAGE> 22
47 commercial properties and completed 23 housing and land developments and
reduced its total assets and debt by $694 and $648 million, respectively.
At December 31, 1994, Radnor's total assets and debt were $363 and $204
million, respectively. Divestment activities in 1994 included Radnor's
sale of three office projects located in Pennsylvania and two shopping
centers located in Florida.
The following table sets forth Radnor's real estate portfolio by
property type and percent of total portfolio book value as of December 31,
1994:
Percent of
Property Type Portfolio
------------- ----------
Real Estate Held for Investment:
Office Buildings................................ 22
Shopping Centers................................ 25
Hotels.......................................... 6
Other........................................... 7
Projects Developed for Immediate Sale............. 40
---
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 1994 Annual Report to Shareholders.
COMPETITION
Refining and marketing has generally become more competitive due to
low growth in product demand and the increase in gasoline supply and
manufacturing cost attributable to the roll-out of reformulated gasoline.
However, Sun believes that it is in a position to compete effectively, due
in part to the fact that the northeastern United States, Sun's principal
geographic area for branded fuels marketing, is a net gasoline importing
market, and manufacturers, like Sun, who are located here, are affected to
a lesser extent by the costs of transportation into this market. Sun also
believes that as a result of recent strategic initiatives, including the
enhancement of its alkylation capacity through the Girard Point acquisition
and the expansion of its benzene extraction capacity at the Marcus Hook
refinery, Sun is well positioned to meet the new reformulated fuels
requirements as they continue to be phased in over the next few years. In
addition, Sun believes that its competitive position is enhanced by its
considerable distribution flexibility resulting from the location of its
three Northeast refineries, which are well integrated with its proprietary
distribution system.
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 has essentially completed its withdrawal
from oil and gas exploration activities outside of Canada and is pursuing
the sale of its remaining coal operations.
<PAGE>
<PAGE> 23
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; and regulations by
state, federal, local and foreign authorities including those imposed by or
resulting from compliance with applicable environmental laws.
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 $8, $9 and $12 million on research and development
activities in 1994, 1993 and 1992, respectively. As of December 31, 1994,
approximately 150 scientists, engineers, technicians and support personnel
participated in these activities. Sun owns or has made application for
numerous patents in the U.S. and abroad.
EMPLOYEES
As of December 31, 1994 and 1993, Sun had approximately 14,500
employees, excluding employees from real estate operations held for sale
totalling 383 in 1994 and 487 in 1993 and employees from coal operations
held for sale totalling 1,027 in 1994 and 1,318 in 1993. Approximately 31
percent of Sun's employees were covered by 47 collective bargaining
agreements as of December 31, 1994. The collective bargaining agreements
have various terms and dates of expiration. In management's opinion, Sun's
relationship with its employees is generally satisfactory.
ENVIRONMENTAL MATTERS
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.
The following table summarizes Sun's expenditures for environmental
projects and compliance activities (in millions of dollars):
1994 1993 1992
---- ---- ----
Pollution abatement capital*.......... $245 $123 $ 75
Remediation and reclamation........... 60 53 48
Operations, maintenance
and administration.................. 112 108 116
---- ---- ----
$417 $284 $239
- ---------- ==== ==== ====
*Capital expenditures for pollution abatement are expected to approximate
$170 and $158 million in 1995 and 1996, respectively.
<PAGE>
<PAGE> 24
The increase in pollution abatement capital expenditures during 1994 was
due primarily to outlays relating to the wastewater treatment and Northeast
Aromatics and Cyclohexane projects at the Marcus Hook refinery and to
enhancements to the steam and electricity generating facilities at Suncor's
oil sands plant.
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 the requirements of the Clean Air Act
necessitates significant alterations to the composition of gasoline sold in
Sun's northeastern U.S. branded marketing area by reducing the maximum
allowable benzene content, reducing summertime RVP and increasing the
minimum oxygenate content. 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 continue
to be phased in over the next few years.
CERCLA and RCRA, and related state laws subject Sun 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, 1994, Sun had been named as
a PRP at 47 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 Sun 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. In addition, Sun is currently involved in
a legal action initiated by a private party to determine responsibility for
remediation at a formerly owned refinery in Oklahoma. Sun believes it is
fully indemnified for this potential liability.
<PAGE>
<PAGE> 25
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. The accruals reflect Sun'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, which totalled $246 and $259 million at December 31, 1994 and
1993, respectively, was classified in the consolidated balance sheets as
follows:
December 31
--------------
1994 1993
---- ----
Accrued Liabilities........................ $ 55 $ 55
Other Deferred Credits and Liabilities..... 191 204
---- ----
$246 $259
==== ====
Sun also accrues estimated dismantlement, restoration, reclamation and
abandonment costs at its oil sands mining and oil and gas exploration and
production operations through a charge against income primarily on a units
of production basis. The accrued liability for these activities, which
totalled $126 and $119 million at December 31, 1994 and 1993, respectively,
are classified primarily in other deferred credits and liabilities in the
consolidated balance sheets. Of the $126 million accrued liability at
December 31, 1994, $78 million relates to Sun's oil sands mining operations
and $48 million is attributable to oil and gas exploration and production
operations. Sun estimates that the total cost for reclamation at these
operations will be approximately $120 and $157 million, respectively.
Pretax charges against income for environmental remediation and
reclamation totalled $24, $45 and $62 million at December 31, 1994, 1993
and 1992, respectively. Claims for recovery of environmental liabilities
that are probable of realization totalled $11 million at December 31, 1994
and are included in deferred charges and other assets in the consolidated
balance sheets.
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.
<PAGE>
<PAGE> 26
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 flows
from operating activities. Although potentially significant with respect
to results of operations or cash flow 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 and pricing. 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 affected 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
On December 29, 1994, the United States Environmental Protection
Agency ("EPA") filed an administrative action alleging that Puerto Rico Sun
Oil Company ("PRSOC"), an indirect subsidiary of the Company, failed to
file a SARA/EPCRA Form R for the year 1989. Additionaly, the EPA alleged
that, for the years 1990, 1991, and 1992, PRSOC failed to report specific
chemicals in its Form R submittals. The EPA has made a preliminary civil
penalty demand in excess of $100,000.
On December 6, 1994, Tosco Corporation ("Tosco") filed an action
against the Company in the United States District Court for the Northern
District of California, seeking only a judicial declaration regarding
Tosco's rights and obligations (including, in particualr, Tosco's
indemnification obligations with respect to environmental remediation under
CERCLA and/or RCRA) under its November 1, 1980 agreement with Sun Company,
Inc. (R&M) ("Sun R&M") for the sale to Tosco of Sun R&M's formerly-owned
Duncan, OK, refinery. Management believes it is likely that the court will
find that Tosco has a contractual obligation to fully indemnify Sun R&M for
any costs incurred in connection with contamination at this site.
On October 27, 1994, an agreement in principle was reached with the
Ohio EPA which will settle numerous allegations of violations of Ohio air
regulations at Sun's Toledo refinery. Sun will enter into a judicial
Consent Order which will be filed together with an enforcement Complaint in
the Lucas County, Ohio Court of Common Pleas. Part of the Consent Order
requires Sun to pay a civil penalty of $200,000.
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 positions of Sun at December 31, 1994.
<PAGE>
<PAGE> 27
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., 52
Senior Vice President
and Chief Financial
Officer<PAGE>
Mr. Aiken was named to his present
position in May 1992. He assumed
additional responsibility for Sun's
Materials Management function and Real
Estate and Coal operations in August
1994. From September 1990 until May
1992, he was Senior Vice President,
Finance and from April 1979 to September
1990, he was Comptroller.
Robert H. Campbell, 57
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, 40
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.
John G. Driscoll, 48
Senior Vice President
Marketing<PAGE>
Mr. Driscoll has been in his present
position since August 1994. Prior to
assuming this position, he served in
various capacities within Sun's domestic
refining and marketing subsidiary: from
May 1993 to August 1994, he was Vice
President of Chemicals; from October
1992 to May 1993, Vice President,
Branded Marketing & Development; and
from 1989 to October 1992, Director,
Business Development & Strategic
Planning in Fuels, and Director,
Planning & New Product Development.<PAGE>
<PAGE> 28
NAME, AGE AND PRESENT
POSITION WITH
SUN COMPANY, INC.
----------------------<PAGE>
BUSINESS EXPERIENCE DURING
PAST FIVE YEARS
--------------------------
Jack L. Foltz, 59
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 of Sun's domestic
refining and marketing subsidiary.
Deborah M. Fretz, 46
Senior Vice President
Logistics<PAGE>
Ms. Fretz has been in her present
position since August 1994. In
addition, she has been President of Sun
Pipe Line Company, a subsidiary, since
October 1991. From 1989 to October
1991, she served as General Manager,
Wholesale Fuels Marketing and
Distribution.
David E. Knoll, 51
Senior Vice President
Corporate Development<PAGE>
Mr. Knoll has been in his present
position, which includes responsibility
for Sun's International Production
operations, since August 1994. From
October 1992 to August 1994, he was
Senior Vice President, Marketing and
Logistics and from October 1991 to
October 1992, Group Vice President,
Refining and Marketing. From November
1988 to October 1991, he was President
of Sun's domestic refining and marketing
subsidiary.
Harwood S. Roe, Jr., 50
Senior Vice President
Operations<PAGE>
Mr. Roe has been in his present position
since October 1992 and assumed
additional responsibility for Sun's
Public Affairs function in August 1994.
From 1991 to October 1992, he was Vice
President, Operations. From 1988 to
1991, he was Vice President, Refining of
Sun's domestic refining and marketing
subsidiary.
Malcolm I. Ruddock, 52
Treasurer<PAGE>
Mr. Ruddock has been in his present
position for the past five years.<PAGE>
<PAGE> 29
NAME, AGE AND PRESENT
POSITION WITH
SUN COMPANY, INC.
----------------------<PAGE>
BUSINESS EXPERIENCE DURING
PAST FIVE YEARS
--------------------------
Sheldon L. Thompson, 56
Senior Vice President
and Chief Administrative
Officer<PAGE>
Mr. Thompson has been in his present
position since October 1992 and he
assumed additional responsibility for
Sun's Research and Development function
in August 1994. From 1991 to October
1992, he was Vice President, Chemicals,
Lubricants and Technology and from 1989
to 1991, Vice President, Chemicals and
Technology for Sun's domestic refining
and marketing subsidiary.
<PAGE>
<PAGE> 30
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
The information required by this Item is incorporated herein by
reference to the Quarterly Financial and Stock Market Information on page
68 of the Company's 1994 Annual Report to Shareholders. 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 1994
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 26-37 in the Company's 1994 Annual Report to
Shareholders.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The following information in the Company's 1994 Annual Report to
Shareholders is incorporated herein by reference: the Consolidated
Financial Statements on pages 38-41; the Notes to Consolidated Financial
Statements on pages 42-57; the Report of Independent Accountants on page
58; the Supplemental Financial and Operating Information on pages 63-67
(excluding the sections on Revenues Per Unit of Oil and Gas Production and
Average Net Oil and Gas Production); and the Quarterly Financial
Information on page 68.
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 Items 401 and 405 of
Regulation S-K is incorporated herein by reference to the Company's
definitive Proxy Statement ("Proxy Statement") which will be filed with the
Securities and Exchange Commission ("SEC") within 120 days after
December 31, 1994.
Information concerning the Company's executive officers appears in
Part I of this Annual Report on Form 10-K.
<PAGE>
<PAGE> 31
ITEM 11. EXECUTIVE COMPENSATION
The information required by Item 402 of Regulation S-K is incorporated
herein by reference to the Company's Proxy Statement which will be filed
with the SEC within 120 days after December 31, 1994, except that the
Report of the Compensation Committee and the Stock Performance Graphs
contained in the Proxy Statement are specifically excluded from
incorporation by reference herein.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required by Item 403 of Regulation S-K is incorporated
herein by reference to the Company's Proxy Statement which will be filed
with the SEC within 120 days after December 31, 1994.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by Item 404 of Regulation S-K is incorporated
herein by reference to the Company's Proxy Statement which will be filed
with the SEC within 120 days after December 31, 1994.
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 1994 Annual
Report to Shareholders as described in Item 8 is incorporated
herein by reference.
2. Financial Statement Schedules:
Page
----
Report of Independent Accountants.................. 37
Schedule II - Valuation Accounts................... 38
Other schedules are omitted because the required information
is shown elsewhere in this report, is not required or is not
applicable.
3. Exhibits:
3.(i) - Articles of Incorporation of Sun Company, Inc., as
restated and amended (incorporated by reference to
Exhibit 3.(i) of the Company's Annual Report on Form
10-K, as amended, for the fiscal year ended
December 31, 1993, File No. 1-6841).
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, File No. 1-6841).
<PAGE>
<PAGE> 32
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, File No. 1-6841).
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, File No. 1-6841).
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, File No. 1-6841).
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, File No. 1-6841).
10.6* - 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, File No. 1-6841).
10.7* - 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), as amended effective January 1, 1994.
10.8* - Sun Company, Inc. Savings Restoration Plan II
(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, File No.
1-6841), as amended effective January 1, 1994.
10.9* - 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).
<PAGE>
<PAGE> 33
10.10* - Sun Company, Inc. Deferred Compensation and Benefits
Trust (incorporated by reference to Exhibit 10(l) of
the Form SE filed March 15, 1989, File No. 1-6841).
10.11* - 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, File No. 1-6841).
10.12* - Sun Company, Inc. Executive Long-Term Stock
Investment Plan (incorporated by reference to Exhibit
10.13 of the Company's Annual Report on Form 10-K, as
amended, for the fiscal year ended December 31, 1993,
File No. 1-6841), as amended March 20, 1994.
10.13* - 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, File No. 1-6841).
10.14* - Consulting Agreement between James G. Kaiser and Sun
Company, Inc.
10.15* - Termination Agreement and General Release and Waiver
between Robert H. Writz and Sun Company, Inc.
11 - Statements re Sun Company, Inc. and Subsidiaries
Computation of Per Share Earnings for the Years Ended
December 31, 1994, 1993 and 1992.
12 - Statement re Sun Company, Inc. and Subsidiaries
Computation of Ratio of Earnings to Fixed Charges for
the Year Ended December 31, 1994.
13 - Sun Company, Inc. 1994 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.
27 - Article 5 of Regulation S-X, Financial Data Schedule.
- -----------
*These exhibits constitute the Executive Compensation Plans and
Arrangements of the Company.
<PAGE>
<PAGE> 34
(b) Reports on Form 8-K:
A report on Form 8-K dated October 24, 1994 was filed to disclose
under Item 5, "Other Events," the Company's press release discussing
earnings for the period ended September 30, 1994.
Note: Copies of each Exhibit to this Form 10-K are available upon request,
at $2 per copy.
<PAGE>
<PAGE> 35
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 2, 1995
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 2,
1995:
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
ROBERT D. KENNEDY* Director
------------------
Robert D. Kennedy
<PAGE>
<PAGE> 36
THOMAS W. LANGFITT* Director
-------------------
Thomas W. Langfitt
R. ANDERSON PEW* Director
----------------
R. Anderson Pew
ALBERT E. PISCOPO* Director
------------------
Albert E. Piscopo
WILLIAM F. POUNDS* Director
------------------
William F. Pounds
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> 37
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 58 of the Sun Company, Inc. 1994 Annual Report to
Shareholders. In connection with our audits of such financial statements,
we have also audited the related financial statement schedule listed in the
index on page 31 of this Form 10-K.
In our opinion, the financial statement schedule 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 L.L.P.
2400 Eleven Penn Center
Philadelphia, PA 19103
February 14, 1995
<PAGE>
<PAGE> 38
SUN COMPANY, INC. AND SUBSIDIARIES
SCHEDULE II--VALUATION ACCOUNTS
FOR THE YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992
(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, 1994:
Deducted from asset in
balance sheet--allowance
for doubtful accounts and
notes receivable.......... $11 $ 2 $ 1 $12
=== === === ===
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
=== === === ===
<PAGE>
<PAGE>
<PAGE> 1
INDEX TO EXHIBITS
Exhibit
Number Exhibit
- ------- -------
3.(i) - Articles of Incorporation of Sun Company, Inc., as restated
and amended (incorporated by reference to Exhibit 3.(i) of
the Company's Annual Report on Form 10-K, as amended, for the
fiscal year ended December 31, 1993, File No. 1-6841).
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, File No. 1-6841).
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, File No. 1-6841).
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, File No. 1-6841).
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, File No. 1-6841).
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, File No. 1-6841).
10.6* - 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, File No. 1-6841).
10.7* - 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), as amended effective January 1, 1994.
<PAGE>
<PAGE> 2
10.8* - Sun Company, Inc. Savings Restoration Plan II (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, File No. 1-6841), as amended effective
January 1, 1994.
10.9* - 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).
10.10* - Sun Company, Inc. Deferred Compensation and Benefits Trust
(incorporated by reference to Exhibit 10(l) of the Form SE
filed March 15, 1989, File No. 1-6841).
10.11* - 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, File No. 1-6841).
10.12* - Sun Company, Inc. Executive Long-Term Stock Investment Plan
(incorporated by reference to Exhibit 10.13 of the Company's
Annual Report on Form 10-K, as amended, for the fiscal year
ended December 31, 1993, File No. 1-6841), as amended
March 20, 1994.
10.13* - 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, File No. 1-6841).
10.14* - Consulting Agreement between James G. Kaiser and Sun Company,
Inc.
10.15* - Termination Agreement and General Release and Waiver between
Robert H. Wrtiz and Sun Company, Inc.
11 - Statements re Sun Company, Inc. and Subsidiaries Computation
of Per Share Earnings for the Years Ended December 31, 1994,
1993 and 1992.
12 - Statement re Sun Company, Inc. and Subsidiaries Computation
of Ratio of Earnings to Fixed Charges for the Year Ended
December 31, 1994.
13 - Sun Company, Inc. 1994 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.
<PAGE>
<PAGE> 3
27 - Article 5 of Regulation S-X, Financial Data Schedule.
- -----------
*These exhibits constitute the Executive Compensation Plans and
Arrangements of the Company.
<PAGE>
<PAGE> 1
EXHIBIT 10.7
SUN COMPANY, INC.
SAVINGS RESTORATION PLAN
Amendment No. 1994-1
--------------------
1. The last sentence of Section IV.1 of the Plan is amended to read as
follows:
"Notwithstanding the foregoing, an election made by a participant
under this Plan will be void if made after the beginning of the
calendar year to which the election relates or the participant reduces
his Basic Pre-Tax Contributions or Basic Post-Tax Contributions (as
these terms are defined in SunCAP) during the calendar year to which
the election relates."
2. This Amendment No. 1994-1 to the Plan is effective January 1, 1994.
<PAGE>
<PAGE> 1
EXHIBIT 10.8
SUN COMPANY, INC.
SAVINGS RESTORATION PLAN II
Amendment No. 1994-1
--------------------
1. The last sentence of Section IV.1 of the Plan is amended to read as
follows:
"Notwithstanding the foregoing, an election made by a participant
under this Plan will be void if made after the beginning of the
calendar year to which the election relates or the participant reduces
his Basic Pre-Tax Contributions or Basic Post-Tax Contributions (as
these terms are defined in SunCAP) during the calendar year to which
the election relates."
2. This Amendment No. 1994-1 to the Plan is effective January 1, 1994.
<PAGE>
<PAGE> 1
EXHIBIT 10.12
SUN COMPANY, INC.
EXECUTIVE LONG-TERM STOCK INVESTMENT PLAN
1. The fourth sentence of Section 2.6 of the Plan is deleted and replaced
with the following:
The number of shares subject to the restrictions shall be
determined based on the optionee's method of financing the
payment of the option price. If the optionee finances the option
exercise by borrowing money which is secured by unrestricted
shares of Common Stock which will be sold to repay the loan, the
number of shares subject to the restrictions shall be equal to
the total number of shares received in the exercise of the option
minus (i) the number of shares that needed to be sold in order to
satisfy the loan, including interest thereupon, and any brokerage
commissions involved in the sale of such stock 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 option exercise. If the optionee
finances the payment of the option price by any other method, the
number of shares subject to the restrictions shall be equal to
the total number of shares received in the exercise of the option
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 option exercise.
<PAGE>
<PAGE> 1
EXHIBIT 10.14
CONSULTING AGREEMENT
THIS AGREEMENT, made July 7, 1994, covers the consulting arrangements
between SUN COMPANY, INC. ("Sun"), and JAMES G. KAISER ("Consultant"), an
independent consultant.
SCOPE OF WORK
Consultant is being engaged to assist Sun for the benefit and support
of Sun's Chairman's Committee on Diversity and Human Resources Department.
Such services will include advice and counsel as well as assistance in
implementing Sun's diversity program. Sun's Senior Vice-President and
Chief Administrative Officer will have sole responsibility for initiating
and managing requests for specific services.
TERM
This Agreement is effective as of July 1, 1994 and will remain in
effect until December 31, 1994, with renewal at the mutual consent of the
parties, and termination by either party upon thirty (30) days written
notice. Consultant will act as an independent contractor and not as an
employee of Sun, and nothing in this Agreement will be deemed to create an
employer-employee relationship between the parties hereto.
FEE
Sun will pay Consultant Two Thousand Dollars ($2,000.00) per day for
time spent providing services, plus expenses. Such payment will be made
within ten (10) days of Sun's receipt of an invoice from Consultant.
GOVERNING LAW
This Agreement will be governed by and construed in accordance with
the laws of the Commonwealth of Pennsylvania.
IN WITNESS WHEREOF, the parties have duly executed this Agreement.
SUN COMPANY, INC.
s/JAMES G. KAISER By s/SHELDON L. THOMPSON
- ----------------- ---------------------
James G. Kaiser Sheldon L. Thompson
Senior Vice President and
Chief Administrative Officer
<PAGE>
<PAGE> 1
EXHIBIT 10.15
TERMINATION AGREEMENT
AND
GENERAL RELEASE AND WAIVER
This Termination Agreement and General Release and Waiver
("Agreement") is made and entered into this 19th day of September 1994,
between Robert H. Writz (hereinafter "you" or "your") and Sun Company,
Inc., on behalf of itself and its subsidiaries ("Company").
WHEREAS, you are an employee of the Company who will be terminating
employment effective February 28, 1995; and
WHEREAS, the Company has agreed to offer to you enhanced termination
benefits in connection with such termination, and you have agreed to a
release and waiver of claims.
NOW, THEREFORE, in consideration of the mutual promises hereinafter
set forth, this Agreement replaces and supersedes all other agreements,
oral or written, between you and the Company concerning your employment,
separation or retirement, and you and the Company agree as follows:
A. BASIC TERMS
1. Effective March 1, 1995, you will retire from the Company. Your
retirement benefit will be calculated based upon the terms and
conditions of the Sun Company, Inc. Retirement Plan (SCIRP).
2. Effective March 1, 1995, you will be entitled to receive a
supplemental retirement benefit equal to the difference between
the benefit calculated under the Sun Executive Retirement Plan
(SERP) (which is adjusted by providing an additional five (5)
years, allocated between age and service in such a manner as
produces the maximum benefit) and the basic retirement benefit
payable under the Sun Company, Inc. Retirement Plan. In the
event of your death, your spouse will be entitled to receive
fifty percent (50%) of the preceding supplemental retirement
benefit. Exhibit A delineates your total retirement benefits.
3. Effective March, 1995, you (or your beneficiary in the event of
your death) will begin to receive salary continuation payments of
$6,397 per month for 116 months until you reach age 62.
Alternatively, you may elect to receive a single lump sum payment
as illustrated in Exhibit B.
4. You will be considered for an award under the 1994 Sun Company,
Inc. Executive Incentive Plan. Your award will be determined on
the basis of an assessment of both Company and individual
performance. For purposes of the individual performance
assessment, a factor of 100 will be used. The Company factor
will be determined by the Compensation Committee of the Board of
Directors in accordance with an assessment against previously
defined and communicated performance criteria. Any such award so
determined will be paid approximately March 15, 1995.
<PAGE>
<PAGE> 2
5. If first approved by the Compensation Committee of the Board of
Directors of Sun Company, Inc., you may continue to exercise any
stock options that are exercisable (which may take into account
any proration upon retirement) for up to thirty-six (36) months
following retirement. In lieu of exercising certain stock
options granted to you under the Sun Company, Inc. Long-Term
Incentive Plan, you may exercise related alternate appreciation
rights (AARs) for a period of up to six (6) months after
retirement. Exercise of these AARs will automatically cancel a
corresponding number of stock options. Limited rights associated
with each stock option will automatically be terminated six (6)
months from your retirement date, in accordance with the terms
and conditions of the Sun Company, inc. Long-Term Incentive Plan
and Executive Long-Term Stock Investment Plan.
6. You are entitled to medical insurance in accordance with the
retiree medical program.
7. You are entitled to permanent, unreduced retiree life insurance
coverage equal to $371,000.
8. Your eligibility for reimbursement of qualified expenses under
the Company's Club Guidelines will cease on December 31, 1994.
9. You may continue to utilize the financial counseling program
until December 31, 1995. (Your account balance available for use
from July 1, 1994 through December 31, 1995 is $6,826.85.) Any
balance remaining in your account as of December 31, 1995, will
be paid to you in a single lump sum payment.
10. You will be provided individual outplacement assistance through
Manchester Associates program for senior executives.
11. Any unused vacation remaining at the time of your retirement (up
to a maximum of twenty-five (25) days), will be paid to you in a
single lump sum after February 28, 1995.
12. You will be entitled to a parking space at 11PC as currently
provided through February 28, 1995.
13. You agree to make yourself available through 1995 to consult with
the Company on an as needed basis with regard to the disposition
of certain assets associated with Radnor Corporation and Sun Coal
Company. In consideration for your availability to provide
consultation, the Company agrees to pay you a sum of $75,000.
Such payment will be made on July 1, 1995.
14. Subject to Canadian legal requirements, you agree to remain on
the Suncor Board of Directors until the earliest of the following
occurs: (1) March 1, 1995; (2) the acceptance by you of
employment with another entity in the oil or a related industry;
or (3) the ownership interest of Sun in Suncor becomes less than
controlling.
<PAGE>
<PAGE> 3
15. Except with respect to unlawful or unauthorized activities, the
Company agrees to indemnify you and hold you harmless with
respect to all of your acts as an employee of the Company during
your term of employment.
16. You will be entitled to keep your car phone; however, the Company
will cease reimbursement of related expenses for car phone
services after February 28, 1995.
17. All questions or requests for further information should be
referred to Jim Nocito at (215) 246-8342, who will work with you
on arrangements and payments.
B. GENERAL RELEASE
1. You acknowledge that there are various local, state and federal
laws that prohibit employment discrimination based on age, sex,
race, color, national origin, citizenship, religion, disability
or veteran status and that these laws are enforced through the
Equal Employment Opportunity Commission (EEOC), Department of
Labor, and state human rights agencies.
2. In consideration of the enhanced benefits provided to you under
this Agreement, in particular with respect to Paragraphs A.2, A.3
and A.13, you agree to completely release, relinquish, waive and
discharge the Company, its subsidiaries and all other related
corporate entities, its and their employees, officers, directors,
agents and successors (hereinafter "Company") from all claims,
liabilities, demands and causes of action known or unknown, fixed
or contingent (including claims or rights arising under the Age
Discrimination in Employment Act of 1967, as amended), which you
may have or claim to have against the Company arising out of or
in any way related to your employment with Company or the
termination of that employment. This includes, but is not
limited to, a release of any rights or claims you may have under:
(a) The Age Discrimination in Employment Act, which prohibits
age discrimination in employment;
(b) Title VII of the Civil Rights Act of 1964, as amended by the
Civil Rights Act of 1991, which prohibits discrimination in
employment based on race, color, national origin, religion
or sex;
(c) Any other federal, state or local laws or regulations
prohibiting employment discrimination;
(d) Breach of any express or implied contract claims;
(e) Wrongful termination or any other tort claims, including
claims for attorney's fees, whether based on common law, or
otherwise.
Exceptions: By signing this release, you do not waive your right
to: (a) Claims arising under any applicable Worker's Compensation
laws; (b) any claims which the law states may not be waived; and
(c) your vested rights under the regular employment plans of the
Company, in effect as of the date this Release was given to you.
<PAGE>
<PAGE> 4
3. It is mutually understood that this release does not have any
effect on any claims that you may have that arise after the date
this Agreement is signed.
4. You promise not to file any lawsuit asserting any cause of action
or claims released in Paragraph B.2. If you violate this release
by suing the Company, you agree that you will pay all costs and
expenses of defending against the suit by the Company, including
reasonable attorneys' fees.
5. You agree to keep all the terms of this Agreement completely
confidential, and you will not disclose any information
concerning this Agreement to anyone other than your immediate
family and your personal legal and tax advisors.
6. You agree that nothing in this Agreement shall, in any way, be
construed as an admission by the Company of any acts of
impermissible discrimination against you or any other person; and
the Company specifically disclaims any liability to you or any
acts of impermissible discrimination against you or any other
person on the part of itself, its employees, or its agents.
7. This release and waiver includes, but is not limited to, any and
all claims by you for attorneys' fees and costs incurred by you
in connection with your employment termination.
8. This Agreement will be construed in accordance with the laws of
the Commonwealth of Pennsylvania.
9. You agree that if any term or provision of this Release is
determined by a court or other appropriate authority to be
invalid, void, or unenforceable for any reason, the remainder of
the terms and provisions of this Release shall remain in full
force and effect and shall in no way be affected, impaired or
invalidated.
10. You are advised to consult with an attorney prior to your signing
this Agreement.
11. You will have a period of twenty-one (21) days within which to
consider this Agreement.
12. You will be permitted to revoke this Agreement for a period of at
least seven (7) days following your execution of this Agreement,
and the Agreement shall not become effective or enforceable until
the revocation period has expired.
13. You acknowledge and agree that you have carefully read and fully
understand all the provisions of this Agreement which sets forth
the entire agreement between you and the Company on the subjects
covered herein, and you acknowledge that you have not relied upon
any representation or statement, written or oral, not set forth
in this Agreement.
<PAGE>
<PAGE> 5
IN WITNESS WHEREOF, we the undersigned, either individually or on
behalf of the Company, declare that we have read the foregoing and
voluntarily agree to the conditions and obligations set forth herein,
effective the 19th day of September, 1994.
Dated: September 27, 1994 s/ROBERT H. WRITZ
-----------------
Robert H. Writz
Dated: September 27, 1994 s/CAROL G. DRIVER
-----------------
Carol G. Driver
Notary Public
(Seal)
Dated: September 19, 1994 s/A. LITTLE, JR.
-----------------
A. Little, Jr.
Vice President - Human Resources
Sun Company, Inc.
Subscribed to and sworn before me:
Dated: September 19, 1994 s/THOMAS BROWNLIE, JR.
----------------------
Thomas Brownlie, Jr.
Notary Public
(Seal)
<PAGE>
<PAGE> 6
EXHIBIT A
ROBERT H. WRITZ
ESTIMATED RETIREMENT BENEFIT*
SERP / 5:
Monthly $11,079
Lump Sum $1,609,000
Section 415 of the IRS code limits amounts that can be paid from a
qualified plan and hence subject to favorable tax treatment. Of the totals
above, the following Section 415 limits have been estimated:
Monthly $1,663
Lump Sum $239,000
- -----------
*Projected benefits as of 3/1/95 and based upon August, 1994 PBGC factors.
Actual retirement benefit for March 1, 1995 retirement will be calculated
on or about February 15, 1995. At this time the PBGC factor for March,
1995 retirements will be known.
<PAGE>
<PAGE> 7
EXHIBIT B
ROBERT H. WRITZ
SALARY CONTINUATION
$ 5082 Base per Week
x 52.14
--------
$265,000 Annualized Base (Cash Plus RSU's)
x 1.40 Guideline Bonus of 40% for 3352 HP
--------
$371,000 Base Plus Bonus (1x TCC)
x 2
--------
$742,000 2x TCC
/ 116 # of Months to Age 62
--------
* $ 6,397 Per Month for 116 ** Months to Age 62
======== for a Total Payment Stream of $742,052
========
- -----------
*Alternately a lump sum payment may be elected based upon the discount
factor in effect for March, 1995 retirements. To illustrate; using 120%
of the July 1994 PBGC factor of 5.5% yields a lump sum amount of
$547,498.
**Based upon a 03/1/95 retirement.
95:03 62:00
- - 42:11 D.O.B. - 52:04
- ------- -------
52:04 Age at Retirement 9:08 or 116 Months to Age 62
<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
---------------------------
1994 1993 1992
----- ------ -------
Income (loss) from continuing operations
before cumulative effect of
change in accounting principle(1) $96.7 $283.0 $(316.6)
Income from discontinued
operations (2) -- -- 19.0 (a)
Cumulative effect of change in
accounting principle (3) (6.8) 5.0(b) (261.0)(b)
----- ------ -------
Net income (loss)(4) $89.9 $288.0 $(558.6)
===== ====== =======
Weighted average number of shares
of common stock and common stock
equivalents outstanding (5) 107,043 106,561 106,212
======= ======= =======
Earnings (loss) per share of common stock:
Income (loss) from continuing operations
before cumulative effect of
change in accounting principle (1)/(5) $ .91 $2.65 $(2.98)
Income from discontinued
operations (2)/(5) -- -- .18
Cumulative effect of change in
accounting principle (3)/(5) (.07) .05 (2.46)
----- ----- ------
Net income (loss) (4)/(5) $ .84 $2.70 $(5.26)
===== ===== ======
Weighted average number of shares of
common stock and common stock
equivalents outstanding on a fully
diluted basis (6) 107,062 106,573 106,212
======= ======= =======
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) $ .91 $2.65 $(2.98)
Income from discontinued
operations (2)/(6) -- -- .18
Cumulative effect of change in
accounting principle (3)/(6) (.07) .05 (2.46)
----- ----- ------
Net income (loss) (4)/(6) $ .84 $2.70 $(5.26)
===== ===== ======
<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 1994
Annual Report to Shareholders.)
(b) Includes impact of the cumulative effect of a change in the method of
accounting for postemployment benefits in 1994, income taxes in 1993
and postretirement health care and life insurance benefits in 1992.
(See Note 7 to the Consolidated Financial Statements in the Company's
1994 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, 1994
-----------------------
Fixed Charges:
Consolidated interest cost and debt expense........ $ 97
Interest cost and debt expense of operations held
for sale......................................... 22
Interest allocable to rental expense(b)............ 35
----
Total.......................................... $154
====
Earnings:
Consolidated income before provision for income
taxes and cumulative effect of change in
accounting principle............................. $120
Minority interest in net income of subsidiaries
having fixed charges............................. 35
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.............. (7)
Dividends received from less than 50 percent owned
but not controlled affiliated companies.......... 5
Fixed charges...................................... 154
Interest capitalized............................... (15)
Amortization of previously capitalized interest.... 31
----
Total.......................................... $326
====
Ratio of Earnings to Fixed Charges................... 2.12
====
- ------------
(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 2 to the
Consolidated Financial Statements in the Company's 1994 Annual Report
to Shareholders.) Affiliated companies over which the Company has the
ability to exercise significant influence but that are not controlled
(generally 20 to 50 percent owned) 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.
<PAGE>
EXHIBIT 13
FINANCIAL Selected Financial Data 25
SECTION Management's Discussion and Analysis 26
CONTENTS Consolidated Statements of Income 38
Consolidated Balance Sheets 39
Consolidated Statements of Cash Flows 40
Consolidated Statements of Changes in Stockholders' Equity 41
Notes to Consolidated Financial Statements 42
Reports of Management and of Independent Accountants 58
Supplemental Financial and Operating Information 59
Quarterly Financial and Stock Market Information 68
Statement of Cash Flows of Sun Businesses 68
SELECTED FINANCIAL DATA
(Millions of Dollars Except Per Share Amounts)
<TABLE>
<CAPTION>
1994 1993 1992 1991 1990
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
STATEMENT OF INCOME DATA:
Sales and other operating revenue (including
consumer excise taxes) $9,818 $9,180 $10,445 $11,493 $12,573
Income (loss) from continuing operations before cumulative
effect of change in accounting principle* $97 $283 $(317) $(130)** $190
Income (loss) from discontinued operations*** $-- $-- $19 $(257) $9
Cumulative effect of change in accounting principle+ $(7) $5 $(261) $-- $30
Net income (loss)* $90 $288 $(559) $(387)** $229
- ----------------------------------------------------------------------------------------------------------------------------------
PER SHARE DATA:
Income (loss) from continuing operations before cumulative
effect of change in accounting principle $.91 $2.65 $(2.98) $(1.23) $1.78
Net income (loss) $.84 $2.70 $(5.26) $(3.65) $2.14
Cash dividends $1.80 $1.80 $1.80 $1.80 $1.80
Stockholders' equity $17.42 $18.60 $17.82 $25.41 $30.81
- ----------------------------------------------------------------------------------------------------------------------------------
BALANCE SHEET DATA:
Total assets $6,465 $5,900 $6,071 $7,017 $7,852
Long-term debt $1,073 $726 $792 $852 $832
Stockholders' equity $1,863 $1,984 $1,896 $2,696 $3,274
- ----------------------------------------------------------------------------------------------------------------------------------
*Includes after-tax income (loss) attributable to gain on divestments, gain on Iranian litigation settlement and provision for
write-down of assets and other matters totalling $7, $109 and $(333) million for 1994, 1993 and 1992, respectively. (See
Notes 2 and 3 to the consolidated financial statements.)
**Includes impact of a $103 million after-tax provision for write-down of assets and other matters and a $78 million after-tax
provision for environmental remediation work at various domestic refining and marketing sites.
***For a discussion of these operations, see Note 2 to the consolidated financial statements.
+Consists of impact of the cumulative effect of a change in the method of accounting for postemployment benefits in 1994, income
taxes in 1993, postretirement health care and life insurance benefits in 1992 and refinery turnaround costs in 1990. (See
Note 7 to the consolidated financial statements.)
</TABLE>
25
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
INDUSTRY OUTLOOK
The petroleum industry is a highly competitive global business
subject to significant volatility due to numerous external market
forces. Although Sun cannot be certain the Company's assump-
tions will prove accurate, its fundamental beliefs for the industry
and anticipated near-term market trends are enumerated below:
o The Company believes that refining margins in 1995, on
average, will approximate the weak margins realized in 1994.
o The Company believes that ample supplies of light sweet crude
oil will continue to be available and that the price differential
between sweet and sour crude oils will remain relatively low.
As Sun's domestic refineries process approximately 85 percent
light sweet crude oil, the availability of light sweet crude oil
and its price relative to alternative heavy sour crude oil are
important to Sun's profitability and competitive position.
o The Company believes that retail gasoline marketing in the
northeastern U.S. offers attractive investment returns and its
strategy is to aggressively improve market position and profit-
ability in the mature markets in which it competes. As a result
of its logistically advantaged refining and marketing assets and
its strong branded marketing presence in this region, manage-
ment continues to believe it is well positioned to compete
effectively.
o The Company believes that market conditions for chemicals
will remain strong due to the improving worldwide economy.
In recent years, the Company has undertaken numerous strategic
initiatives which are consistent with this outlook. See "Strategic
Direction" and "Analysis of Earnings Profile of Sun Businesses"
below for a discussion of these strategic actions.
STRATEGIC DIRECTION
In October 1992, the Company announced a new strategic direc-
tion for Sun. This strategy focuses on investing in Sun's core
domestic refining and marketing businesses. Sun will also invest
opportunistically in international oil and gas production activities
in the U.K. North Sea, if returns on such investments are expected
to exceed the Company's cost of capital for such projects. In
addition, Sun will continue to exit non-productive/non-strategic
businesses and improve productivity. During 1994, the Company
continued to implement this plan through the following strategic
initiatives:
o Sun acquired a 177,000 barrel-per-day refinery in Philadelphia
("Girard Point"), related inventory and certain pipeline interests
from Chevron U.S.A. Inc. ("Chevron").
o Sun continued a major program ("Branded for Success") to
upgrade and modernize its retail service station network and
convert its existing ATLANTIC(R) gasoline outlets to SUNOCO(R) and
convert its SUNOCO FOOD MARKET(R) convenience stores to APLUS(R).
o Sun completed a project ("Northeast Aromatics and Cyclo-
hexane Project") to expand benzene extraction capacity and
construct a 34-million-gallon-per-year cyclohexane plant at its
Marcus Hook refinery.
o Sun constructed a pipeline connecting its Philadelphia and
Marcus Hook facilities, which should be operational in the
first quarter of 1995.
o Sun acquired an interest in Block 3/8a (Ninian and Columba
fields) in the U.K. North Sea, which is expected to produce
over 10 thousand net barrels daily of crude oil during 1995.
In 1995, Sun expects to reduce the level of capital spending on
growth projects as it fully integrates the above noted projects into
its asset base. This decrease is consistent with the Company's
1995 goal of maintaining its total debt (excluding borrowings at
Suncor Inc., the Company's 55-percent-owned Canadian inte-
grated oil company) at approximately the year-end 1994 level.
26
<PAGE>
RESULTS OF OPERATIONS
EARNINGS PROFILE OF SUN BUSINESSES (after tax)
(Millions of Dollars)
<TABLE>
<CAPTION>
1994 1993 1992
- -----------------------------------------------------------------------------
<S> <C> <C> <C>
Fuels:
Wholesale fuels $(115) $(49) $ (91)
Branded marketing 64 92 76
Lubricants:
Lubes 61 50 64
Related fuels (49) (32) (55)
Chemicals 32 13 28
Logistics 46 56 47
International exploration and production:
Exploration -- -- (41)
Production 60 73 50
Canada (Suncor):*
Exploration and production 6 5 7
Oil sands 30 28 9
Refining and marketing 9 9 2
Corporate expenses** (5) (6) (10)
Net financing expenses (3) (3) (3)
---- ---- ----
Total Canada (Suncor) 37 33 5
Corporate:
Corporate expenses (20) (18) (19)
Net financing expenses (32) (25) (34)
Income from operations held for sale:
Coal 15 2 19
Real Estate 2 1 --
- -----------------------------------------------------------------------------
101 196 49
Special items:***
Gain (loss) on sale of Suncor stock -- 19 (8)
Gain on divestment of exploration and
production properties 28 80 --
Iranian litigation settlement -- -- 117
Provision for write-down of assets
and other matters (32) (12) (456)
Cumulative effect of change in
accounting principle (7) 5 (261)
- -----------------------------------------------------------------------------
Consolidated net income (loss) $ 90 $288 $(559)
- -----------------------------------------------------------------------------
*Sun reduced its ownership interest in Suncor from 75 percent to approxi-
mately 68 percent in March 1992 and to 55 percent in May 1993.
**Includes consolidation adjustments.
***For a discussion of special items, see Notes 2, 3 and 7 to the consolidated
financial statements.
+Consists of the impact of the cumulative effect of a change in the method of
accounting for postemployment benefits in 1994, income taxes in 1993 and
postretirement health care and life insurance benefits in 1992.
</TABLE>
ANALYSIS OF EARNINGS PROFILE OF SUN BUSINESSES
In 1994, Sun Company, Inc. and its subsidiaries recorded net
income of $90 million, or $.84 per share of common stock
compared to net income of $288 million, or $2.70 per share in
1993 and a net loss of $559 million, or $5.26 per share in 1992.
Excluding the special items shown separately in the Earnings
Profile of Sun Businesses, Sun's income was $101 million in
1994, compared to $196 million in 1993 and $49 million in 1992.
The $95 million decline in earnings before special items in 1994
was primarily due to lower earnings in Sun's domestic Fuels
business. This decline was largely as a result of lower average
wholesale product margins, lower retail sales volumes and higher
operating and administrative expenses.
The $147 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 that were
made in connection with the implementation of the Company's
strategic plan adopted in October 1992. 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 lubri-
cants products) were largely offset by favorable changes in other
product markets (branded gasoline, asphalt and residual fuels).
See individual businesses below for a more detailed discussion of
the key factors affecting Sun's income.
FUELS--Income(loss) attributable to the manufacture of fuels
at Sun's Marcus Hook, PA, Philadelphia, PA and Toledo, OH
refineries and from the sale of fuels from these refineries to
<PAGE>
wholesale, commercial and industrial customers is reflected in
the Wholesale Fuels business, while income from the retail sale
of gasoline and middle distillates in the United States and from
domestic convenience-store operations is reflected in the Branded
Marketing business.
27
<PAGE>
Wholesale Fuels
<TABLE>
<CAPTION>
1994 1993 1992
- -----------------------------------------------------------------------------
<S> <C> <C> <C>
Losses (millions of dollars) $(115) $(49) $(91)
Wholesale margin* (per barrel) $2.65 $3.07 $2.65
Wholesale sales (thousands of
barrels daily):
To unaffiliated customers:
Gasoline 63.9 29.9 38.2
Middle distillates 88.3 59.2 68.3
Jet fuel 37.2 46.2 42.2
Residual fuel 38.2 27.1 29.7
Asphalt 29.3 28.1 26.1
Other 44.2 26.5 27.4
- -----------------------------------------------------------------------------
301.1 217.0 231.9
To affiliates 260.2 266.8 266.2
- -----------------------------------------------------------------------------
561.3 483.8 498.1
- -----------------------------------------------------------------------------
Crude unit capacity (thousands of
barrels daily) at December 31 607.0 430.0 430.0
Crude unit capacity utilized 87% 86% 91%
Catalytic cracking unit capacity
(thousands of barrels daily) at
December 31 305.0 235.0 235.0
Catalytic cracking capacity utilized 85% 90% 92%
- -----------------------------------------------------------------------------
*Wholesale sales price less cost of crude oil, other feedstocks and purchased
refined products.
</TABLE>
Sun completed the acquisition of Chevron's Girard Point refinery
in Philadelphia and related inventory on August 4, 1994 and its
interest in the Woodbury and Harbor pipelines, which connect the
refinery to the New York Harbor, on October 26, 1994. (See Note
2 to the consolidated financial statements.) The Girard Point
facility, which manufactures primarily gasoline, distillates and
petrochemicals, contributed $1 million in earnings to Wholesale
Fuels results in 1994. (See "Chemicals" below for discussion of
the income contribution to this business attributable to the Girard
Point acquisition.)
Excluding activity from the Girard Point facility, Wholesale Fuels
results declined $67 million during 1994 primarily due to lower
average wholesale fuels product margins ($49 million) and higher
operating and administrative expenses ($12 million). Partially
offsetting these negative factors was a $5 million after-tax gain
recognized in connection with the settlement of various inventory
hedging contracts.
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 for 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 essen-
tially offset by lower administrative expenses and other matters.
Continuing downward pressure on wholesale gasoline margins
has been a major factor affecting Wholesale Fuels results during
the 1992-94 period. Sluggish demand, generally high refinery
utilization rates and an abundance of gasoline refining capacity in
the market, which has been exacerbated by the inclusion of higher
levels of oxygenates in gasoline, have resulted in wholesale gaso-
line margins being squeezed throughout this period. In addition,
wholesale gasoline margins were adversely impacted by an
estimated $25 million after tax during the roll-out of reformulated
gasoline in the fourth quarter of 1994 as the higher cost making
this fuel was not fully recovered.
The 1994 acquisition of the Girard Point refinery was a major
step in the implementation of the Company's strategy of strength-
ening its northeastern U.S. refinery system. This acquisition is an
attractive low-cost addition which provides immediate synergies
and efficiencies, including an enhancement to Sun's East Coast
alkylation capacity, a key refining process in the production of
reformulated fuels. Other recent strategic actions, including the
expansion of benzene extraction capacity at the Marcus Hook
refinery and the construction of an MTBE production facility by
the Belvieu Environmental Fuels ("BEF") joint venture in which
Sun is a one-third partner, have also strengthened the Company's
ability to meet the reformulated fuel requirements (see "Chemi-
cals" below).
The profitability of Sun's Wholesale Fuels operations will con-
tinue to be affected by sales volumes and margins, the reliability
and efficiency of its production facilities, the level of operating,
environmental and other expenses and the impact of the imple-
mentation of the amendments to the Clean Air Act. While there is
considerable uncertainty concerning the impact of the Clear Air
Act on Sun's future profitability, management believes that the
Company is well positioned to meet the requirements under
present regulations as they continue to be phased in over the next
few years. In 1995, the Company will focus on reducing cash
operating costs per barrel by improving the reliability of its
refinery operations and containing expenses.
Branded Marketing
<TABLE>
<CAPTION>
1994 1993 1992
- ---------------------------------------------------------------------------------------
<S> <C> <C> <C>
Income (millions of dollars) $64 $92 $76
Gasoline margin* (per barrel) $4.63 $4.70 $4.23
Sales (thousands of barrels daily):
Gasoline 214.9 223.6 233.9
Middle distillates 20.5 21.4 21.8
- ---------------------------------------------------------------------------------------
235.4 245.0 255.7
- ---------------------------------------------------------------------------------------
Retail gasoline outlets 4,115 4,442 5,389
- ---------------------------------------------------------------------------------------
*Retail sales price less wholesale sales price. The retail sales price is the weighted
average price received by Sun through its various branded marketing distribution
channels.
</TABLE>
The $28 million decline in Branded Marketing earnings in 1994
was caused largely by lower sales volumes ($11 million) and
higher operating and administrative expenses ($18 million) in part
due to increased expenses related to the Branded for Success
28
<PAGE>
program. The adverse impact of lower retail gasoline margins in
1994 was essentially offset by higher margins on middle distil-
lates sold at retail. The four percent decline in branded gasoline
sales volumes during 1994 was caused primarily by the temporary
closure of service stations during the Branded for Success
program, the elimination of some marginal distributor accounts
and the completion in 1993 of a withdrawal from certain areas
supplied by the Tulsa refinery. Partially offsetting the adverse
impact on volumes of these factors was the addition of 16 high-
volume service stations along the Ohio Turnpike during the
second quarter of 1994.
Branded Marketing results increased $16 million in 1993 as
higher retail gasoline margins ($26 million) were partially offset
by lower sales volumes. The volume decline in 1993 was due
largely to Sun's withdrawal from branded gasoline marketing in
areas supplied by the Tulsa refinery 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 in
western Massachusetts; the addition in the second quarter of 1993
of a contract to supply 22 high-volume service stations along the
Pennsylvania Turnpike; and increased sales in Sunoco's core
distribution channels.
During 1993, Sun announced its Branded for Success program, a
major initiative to upgrade and modernize the Company's retail
service station network and convert its existing ATLANTIC(R)
gasoline outlets to SUNOCO(R) and its SUNOCO FOOD MARKET(R)
convenience stores to APLUS(R). As of year-end 1994, 231 of the
planned 465 ATLANTIC(R)-to-SUNOCO(R) service station conversions
and 116 of the planned 240 SUNOCO FOOD MARKET(R)-to-APLUS(R)
convenience store conversions were completed. Initial results
indicate that gasoline and convenience store sales at these
locations are meeting or exceeding expectations. The conversions
of the remaining locations are expected to be completed in 1996.
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 level of operating, environmental and other
expenses and the Company's ability to successfully implement its
brand conversion and growth strategies. In 1995, the Company
will continue to focus on implementing its Branded for Success
program and increasing market share and income in its key
northeastern U.S. marketing area.
LUBRICANTS--Sun's Lubricants business includes income (loss)
attributable to the manufacturing, packaging and marketing of
lubricant products produced at Sun's Tulsa and Puerto Rico
refineries as well as the results of operations attributable to the
related manufacturing and wholesale marketing of fuels produced
at these facilities.
Lubes
<TABLE>
<CAPTION>
1994 1993 1992
- ------------------------------------------------------------------------------
<S> <C> <C> <C>
Income (millions of dollars) $61 $50 $64
Lubes margin* (per barrel) $23.67 $24.99 $26.79
Lubricant sales (thousands of
barrels daily):
Base oils 8.9 6.6 7.2
Specialty oils 9.8 9.5 8.8
Other 3.6 3.4 3.6
- ------------------------------------------------------------------------------
22.3 19.5 19.6
- ------------------------------------------------------------------------------
*Wholesale sales price less feedstock costs.
</TABLE>
Income from the sale of lubricant products increased $11 million
in 1994 due primarily to a 14 percent increase in sales volumes
($16 million) and a lower effective tax rate ($6 million). Partially
offsetting these positive factors were lower margins ($6 million),
particularly on base oils, and higher refinery expenses ($8
million) resulting primarily from 13 percent higher production
levels in 1994. Although margins were, on average, lower than in
1993, lubricants demand and prices were stronger at year-end
1994 than at year-end 1993. 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
($1 million) caused by generally weak market conditions.
Related Fuels
<TABLE>
<CAPTION>
1994 1993 1992
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Losses (millions of dollars) $(49) $(32) $(55)
Related fuels margin* (per barrel) $1.27 $1.64 $1.61
Wholesale sales (thousands of
barrels daily):
To unaffiliated customers:
Gasoline 31.2 26.8 41.8
Middle distillates 26.5 24.9 21.8
Jet fuel 14.1 10.1 14.9
Residual fuel 13.3 13.7 20.8
Other 6.1 9.8 10.4
- --------------------------------------------------------------------------------
91.2 85.3 109.7
To affiliates 61.4 58.8 45.2
- --------------------------------------------------------------------------------
152.6 144.1 154.9
- --------------------------------------------------------------------------------
*Wholesale sales price less cost of crude oil and other purchased feedstocks and
refined products.
</TABLE>
29
<PAGE>
The $17 million decline in Related Fuels operating results during
1994 was due to lower margins on wholesale fuels products ($13
million), particularly on middle distillates, and higher operating
expenses ($5 million) resulting primarily from increased refinery
production levels. Partially offsetting these negative factors were
higher sales volumes ($3 million). In 1993, losses from Related
Fuels operations decreased $23 million 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.
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.
The profitability of Sun's Lubricants business will continue to
be affected by sales volumes and margins, the reliability and
efficiency of its lubricants production facilities and the level
of operating, environmental and other expenses. Management
believes that near-term market conditions for lubricants should
remain strong due to favorable prospects for worldwide economic
growth. In addition, technical improvements made to Sun's
lubricants refineries during the 1992-93 period have enhanced
the flexibility and reliability of these facilities and increased
their capacity to produce paraffinic lubricants. Sun's strategy is
to strengthen its Lubricants business, particularly in value-added
branded and specialty oil channels.
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 an ethylene
oxide plant in Brandenburg, KY and are sold on a worldwide
basis to chemical derivative manufacturers and other customers.
<TABLE>
<CAPTION>
1994 1993 1992
- ------------------------------------------------------------------------------
<S> <C> <C> <C>
Income (millions of dollars) $32 $13 $28
Chemicals margin* (per barrel) $15.08 $10.05 $11.36
Petrochemical sales (thousands of
barrels daily):
Aromatics 12.1 12.9 12.2
Propylene 8.4 10.2 11.1
Ethylene/ethylene oxide 2.3 2.4 1.7
Other 4.7 3.3 3.9
- ------------------------------------------------------------------------------
27.5 28.8 28.9
- ------------------------------------------------------------------------------
*Wholesale sales price less feedstock costs.
</TABLE>
Income from Sun's domestic Chemicals business increased $19
million in 1994 due to higher margins ($27 million) and a $10
million contribution from the sale of petrochemicals produced at
the Girard Point refinery. A strengthening in the worldwide
economy and a cyclical upturn in most petrochemical product
markets in the second half of 1994 led to the improved product
margins. Partially offsetting these positive factors were lower
sales volumes ($12 million) and higher operating expenses ($6
million). Production curtailments at the Company's northeastern
U.S. refineries during the first half of 1994 were responsible for
the decline in sales volumes.
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.
In 1992, Sun acquired the ethylene and ethylene oxide businesses
and assets of Olin Corporation's chemical complex. The acquisi-
tion 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 $225 million MTBE production facility
in Mont Belvieu, TX. Construction of the plant, which has a
designed capacity of 12,600 barrels daily, is essentially com-
pleted. Production commenced in the second half of 1994 and
the plant is currently in a sustained start-up test phase. Pursuant to
a 10-year off-take agreement with BEF, Sun will purchase all of
the MTBE production from the plant. 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. (See
discussion concerning the BEF joint venture in Note 14 to the
consolidated financial statements.)
The Company has also recently completed its Northeast Aromat-
ics and Cyclohexane Project which included the expansion of its
benzene extraction capacity and construction of a 34-million-
gallon-per-year cyclohexane plant at its Marcus Hook refinery.
This project 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 pursuant to a
contract with a major chemical company. Additionally, the August
1994 acquisition of the Girard Point refinery included a 450
million-pounds-per-year cumene unit which complements and
enhances Sun's expanded northeast U.S. chemicals presence.
The profitability of Sun's Chemicals business will continue to be
affected by petrochemical sales volumes, manufacturing reliabil-
ity, 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. Management believes that near-
term market conditions for chemicals will remain strong due to
the improving worldwide economy.
30
<PAGE>
Sun expects to continue to grow and enhance its Chemicals
business as market conditions warrant through logical extensions
of its existing refinery-based chemicals operations and through
moderate-sized investments. In 1995, the Company will focus on
improving Chemicals production reliability, reducing cash
operating costs per barrel and further implementing the synergies
resulting from its recent growth investments.
LOGISTICS--Sun's Logistics business consists of pipeline trans-
portation of crude oil and refined petroleum products through
wholly owned and partially owned entities and petroleum
terminalling operations in Nederland, TX.
<TABLE>
<CAPTION>
1994 1993 1992
- ------------------------------------------------------------------------------
<S> <C> <C> <C>
Income (millions of dollars) $46 $56 $47
Throughput (thousands of barrels daily):
Unaffiliated customers 565.0 567.0 465.6
Affiliated customers 715.0 687.0 704.3
- ------------------------------------------------------------------------------
1,280.0 1,254.0 1,169.9
- ------------------------------------------------------------------------------
</TABLE>
Logistics income decreased $10 million in 1994 due to the
absence of 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.
In addition to the aforementioned divestment gain, Logistics
results for 1993 compared to 1992 were favorably impacted by
higher throughput volumes at Sun's Nederland, TX terminal
($1 million) and higher equity income ($3 million). 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. Equity income totalled $11, $10 and $7 million during
1994, 1993 and 1992, respectively.
During 1994, the Company constructed a pipeline between its
Philadelphia and Marcus Hook facilities. This pipeline, which
is expected to be operational in the first quarter of 1995, will
enhance the profitability of Sun's Logistics business and provide
opportunities for additional manufacturing synergies and cost
efficiencies from product movements between these 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. Sun's strategy
is to actively seek opportunities to grow its Logistics business,
particularly in areas which can support Sun's major refinery
systems and marketing areas, either through expansion of existing
product lines or through acquisitions.
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 interna-
tional production and development activities in the United
Kingdom sector of the North Sea. The withdrawal from inter-
national exploration activities 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 the 1993-94 period, Sun completed all
of its remaining exploration commitments outside of Canada and
disposed of certain exploration properties located principally in
the U.K. North Sea and certain production properties in Dubai
and Colombia. After-tax gains on the disposition of these
properties, which are reported as part of the Gain on Divestment
of Exploration and Production Properties in the Earnings Profile
of Sun Businesses, amounted to $28 and $75 million in 1994 and
1993, respectively. In addition, Sun has increased its oil produc-
ing interests in the U.K. North Sea through the acquisition of
additional ownership interests in the Balmoral and Stirling fields
in 1993 and the purchase of an interest in Block 3/8a in
1994. The Block 3/8a acquisition provided Sun with a 12.93
percent interest in the Ninian field and a 45 percent interest in the
adjacent Columba field. (See Note 2 to the consolidated financial
statements.)
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 those commitments
were charged against this accrual and excluded from exploration
costs.
<TABLE>
<CAPTION>
1994 1993 1992
- ------------------------------------------------------------------------------
<S> <C> <C> <C>
Income (loss) (millions of dollars):
Exploration $-- $-- $(41)
Production 60 73 50
- ------------------------------------------------------------------------------
$60 $73 $ 9
- ------------------------------------------------------------------------------
Crude oil, condensate and natural
gas liquids:
Proved reserves (millions of
barrels) at December 31 38 31 77
Net production (thousands of
barrels daily) 29.0 28.0 42.7
Average price (per barrel) $15.73 $16.75 $18.52
Natural gas:
Proved reserves (billions of
cubic feet) at December 31 96 109 104
Net production (millions of cubic
feet daily) 46 56 46
Average price (per thousand
cubic feet) $2.96 $2.93 $3.21
- ------------------------------------------------------------------------------
</TABLE>
Income from International Production activities declined $13
million in 1994 due largely to lower crude oil prices ($7 million)
and natural gas volumes ($8 million) and an increase in after-tax
foreign exchange translation losses ($7 million). Partially
offsetting these negative factors were a $2 million after-tax gain
recognized on the redetermination of the Pickerill field in the
U.K. North Sea and $6 million of after-tax income attributable to
crude oil production from Block 3/8a, which was acquired in the
1994 third quarter.
31
<PAGE>
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 opera-
tions from these properties were not significant. Also contributing
to the production decline during 1993 were planned maintenance
activities at the Balmoral field and temporary operating problems
at the Glamis production facility, each located in the U.K. North
Sea.
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 and cash flow will also be affected by the Company's
ability to acquire and produce crude oil and natural gas reserves
economically. The Company's strategy is to opportunistically
invest in producing properties or near-term development projects
in the U.K. North Sea, if returns on such investments are expected
to exceed the Company's cost of capital for such projects. In the
absence of such acquisitions, income, reserves and production
from this business will decline significantly by the end of the
decade.
CANADA (SUNCOR)--Suncor's results 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 reported separately in
the Earnings Profile of Sun Businesses. 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.
Exploration and Production
<TABLE>
<CAPTION>
1994 1993 1992
- ------------------------------------------------------------------------------
<S> <C> <C> <C>
Income (millions of dollars) $6 $5 $7
Crude oil, condensate and natural
gas liquids:
Proved reserves (millions of
barrels) at December 31 40 34 34
Net production (thousands of
barrels daily) 10.8 10.1 10.1
Average price (per barrel) $13.62 $14.49 $16.41
Natural gas:
Proved reserves (billions of
cubic feet) at December 31 593 492 475
Net production (millions of cubic
feet daily) 119 116 116
Average price (per thousand
cubic feet) $1.40 $1.42 $1.08
- ------------------------------------------------------------------------------
</TABLE>
Canadian Exploration and Production results increased $1 million
in 1994 due to lower operating and administrative expenses.
Results decreased $2 million in 1993 primarily due to lower crude
oil prices ($3 million) and a higher effective tax rate ($2 million),
partially offset by higher natural gas prices ($4 million). A
disposition of non-core properties was completed during 1993
which 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.
Suncor's exploration and production strategy is to continue to
grow through focused exploration and property acquisitions,
with an emphasis on natural gas.
Oil Sands
<TABLE>
<CAPTION>
1994 1993 1992
- ------------------------------------------------------------------------------
<S> <C> <C> <C>
Income (millions of dollars) $30 $28 $9
Proven reserves (millions of barrels)
at December 31 205 231 256
Synthetic crude oil produced for shipment
(thousands of barrels daily) 70.7 60.5 58.5
Average price (per barrel) $16.18 $16.61 $19.03
- ------------------------------------------------------------------------------
</TABLE>
Oil Sands results increased $2 million in 1994 due to an increase
in synthetic crude oil production volumes to record levels ($19
million). Partially offsetting this improvement were higher
operating and administrative expenses due to the higher produc-
tion volumes ($4 million), lower synthetic crude oil prices ($3
million), lower gains from hedging activities ($4 million) and the
absence of a $7 million after-tax gain recorded in 1993 from the
settlement of claims resulting from a 1987 fire at the oil sands
plant. The increase in production was due, in part, to modifica-
tions made to the oil sands plant upgrader in 1993 and to a
planned maintenance shutdown which resulted in the stoppage of
production for approximately one month during 1993.
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 the gain ($7 million)
from the litigation settlement noted above. Partially offsetting
these positive factors were lower synthetic crude oil prices ($16
million). Production volumes in 1992 were constrained by a fire
that occurred in the upgrader section of the oil sands plant in
32
<PAGE>
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 1993 and 1994, the following strategic initiatives were
undertaken at the oil sands operation:
o A new truck-and-shovel mining system was phased in six
months ahead of schedule and was fully operational in 1993.
o Upgrader modifications were completed during 1993 which
increased synthetic crude oil production capability from 60,000
barrels to 68,000 barrels daily. In November 1994, Suncor
announced plans to spend an additional $185 million to increase
production capability to over 80,000 barrels daily by 1998 and
position the plant for possible further expansion in the future.
The major part of this project, which is subject to approval by
regulatory authorities and Suncor's board of directors, is planned
to occur in 1997 after a scheduled maintenance period.
o Existing steam and electricity generating facilities at the oil
sands plant are being equipped with sulfur recovery equipment
and limestone scrubbing technology. The technology, which will
allow Suncor to comply with new environmental standards, is
expected to be fully implemented in 1996 at a total cost of
approximately $145 million. Project expenditures through year-
end 1994 totalled $18 million.
o Suncor announced that feasibility studies will be undertaken in
1995 to consider the opening of a new mine site across the
Athabasca River from Suncor's existing mine site. Geological
and engineering assessments have confirmed the existence and
quality of reserves on this site and the feasibility studies will
define mine and facilities design, infrastructure requirements
and cost estimates. Subsequent to successful completion of the
above assessments and studies, approval from Suncor's board of
directors and the Alberta government's regulatory agencies
would be required before work could commence.
These and other initiatives have resulted in a decline of approxi-
mately 500 employees and contractors over the past two years and
a reduction in cash operating costs from approximately $C19.50
per barrel in 1992 to $C14.00 per barrel in 1994. Cash costs per
barrel are expected to increase slightly over the next few years
due to the higher level of capital spending (including the above
noted projects) but are targeted to be approximately $C12.00 per
barrel in 1998 when production is expected to increase to over
80,000 barrels daily.
Refining and Marketing
<TABLE>
<CAPTION>
1994 1993 1992
- ------------------------------------------------------------------------------
<S> <C> <C> <C>
Income (millions of dollars) $9 $9 $2
Refined product margin* (per barrel) $7.61 $7.92 $7.84
Refined product sales (thousands
of barrels daily) 84.5 81.9 83.0
Input to crude units (thousands
of barrels daily) 68.3 68.5 71.3
Refinery crude unit capacity utilized 98% 98% 102%
- ------------------------------------------------------------------------------
*Sales price less cost of products sold.
</TABLE>
Canadian Refining and Marketing earnings were unchanged in
1994 as higher refined product sales volumes ($2 million) were
offset by higher tax and other expenses. Earnings increased $7
million in 1993 primarily due to lower operating and admin-
istrative expenses ($8 million) and a lower effective tax rate
($3 million), partially offset by lower refined product sales
volumes ($2 million).
In September 1993, Suncor announced a restructuring of its re-
fining and marketing business designed to rationalize and upgrade
its service station portfolio and lower overhead costs while main-
taining 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 $1 million in 1994 and $4
million in 1993 due to lower administrative expenses.
Canadian net financing expenses were unchanged during the
1992-94 period but are expected to increase in 1995 due to higher
interest rates and a higher borrowing position resulting from the
strategic capital expenditures at the oil sands plant.
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 results of Suncor's hedging
program (see Note 17 to the consolidated financial statements),
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, enviromental and other
expenses.
CORPORATE--Corporate expenses increased $2 million in 1994 in
part due to higher administrative expenses and were essentially
unchanged during the 1992-93 period.
Net financing expenses increased $7 million in 1994 due prima-
rily to the absence of a gain on the sale of an equity investment
recognized in 1993 ($3 million) and a higher average borrowing
position ($9 million), partially offset by higher earnings from
leasing operations ($5 million). At December 31, 1994, Sun had
liquidated substantially all of its remaining portfolio of leases and
secured loans. The higher average borrowing position, which
was due in part to increased growth capital spending in 1994, is
expected to result in a further $25 million increase in net financ-
ing expenses in 1995. Net financing expenses decreased $9 mil-
lion in 1993 primarily due to increased capitalized interest ($3
million), lower corporate debt expense ($3 million) and the gain
on the equity investment sale ($3 million), partially offset by
lower earnings from leasing operations ($2 million).
INCOME FROM OPERATIONS HELD FOR SALE--For a discussion of
Sun's coal and real estate operations held for sale, see Note 2 to
the consolidated financial statements.
33
<PAGE>
SPECIAL ITEMS--For a discussion of the special items shown
separately in the Earnings Profile of Sun Businesses, see Notes 2,
3 and 7 to the consolidated financial statements.
ANALYSIS OF CONSOLIDATED STATEMENTS OF INCOME
1994 VS. 1993--Sales and other operating revenue increased
$638 million, or 7 percent, principally due to higher refined
product sales volumes ($644 million) and an increase in consumer
excise taxes ($233 million), partially offset by lower refined
product sales prices ($158 million) and lower revenues from
resales of purchased oil and refined products ($90 million). The
higher refined product sales volumes were primarily due to the
acquisition of the Girard Point refinery on August 4, 1994. The
$123 million decrease in gain on divestments is primarily due to
the absence of gains recognized in 1993 on the sales of Suncor
stock ($30 million), a products pipeline system ($17 million) and
oil and gas properties located in Dubai, Canada and the U.K.
North Sea ($109 million), partially offset by gains recognized in
1994 on the sales of oil and gas properties located in Colombia
and the U.K. North Sea ($40 million). Interest income decreased
$2 million, or 11 percent, primarily due to lower average invest-
ment balances. Other income decreased $22 million primarily as a
result of the absence of a $17 million gain attributable to the 1993
settlement of claims arising from a 1987 fire at the oil sands plant
and lower foreign exchange gains ($6 million).
Cost of products sold and operating expenses increased $455
million, or 8 percent, primarily due to higher domestic crude oil
and refined product acquisition costs ($463 million) and higher
refinery operating expenses ($95 million), partially offset by
lower resales of purchased oil and refined products ($90 million).
The increase in product acquisition costs and refinery operating
expenses was primarily due to the acquisition of the Girard Point
refinery on August 4, 1994. Selling, general and administrative
expenses increased $56 million, or 9 percent, primarily due to
higher expenses in Sun's domestic refining and marketing
operations. This increase was due in part to higher employee-
related expenses and to increased expenses associated with the
Branded for Success program. Taxes, other than income taxes
increased $229 million, or 11 percent, due to higher consumer
excise taxes ($233 million). Depreciation, depletion and amortiza-
tion increased $5 million, or 1 percent, primarily as a result of a
higher depreciable asset base in Sun's domestic refining and
marketing operations. For a discussion of the provision for write-
down of assets and other matters recorded in 1994 and 1993, see
Note 2 to the consolidated financial statements. Interest cost and
debt expense increased $16 million, or 20 percent, due largely to
higher average corporate borrowings.
For a discussion of 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.
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 the aforementioned gains recog-
nized in 1993 on the sales of Suncor stock ($30 million), the
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 $17 million litigation settlement
recognized by Suncor in 1993.
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 and refined product acquisition 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 milllion 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.
FINANCIAL CONDITION
CAPITAL RESOURCES AND LIQUIDITY
CASH AND WORKING CAPITAL--At December 31, 1994, Sun
had cash and cash equivalents of $117 million compared to $118
million at December 31, 1993 and had a working capital deficit
of $407 million versus a working capital deficit of $228 million at
December 31, 1993. Sun's working capital position is con-
siderably stronger than indicated because of the relatively low
34
<PAGE>
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, 1994 by $459
million. Inventories valued at LIFO, which consist of crude oil and
refined products, are readily marketable at their current replace-
ment 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 1994, Sun's
net cash provided by operating activities ("cash generation") was
$481 million compared to $413 million in 1993 and $305 million
in 1992. The fluctuations in cash generation during the 1992-94
period were primarily due to changes in income before special
items and in working capital pertaining to operating activities.
Cash generation was significantly greater than net income (loss)
during the 1992-94 period primarily due to the significant
amounts of 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 1992-94 period, proceeds from divestments
totalled $604 million, including $198 million received in the
1992-93 period from the sale of Suncor stock and $141 million
received in the 1993-94 period from the sale of certain explora-
tion and production properties located in Dubai, Colombia,
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.
Management believes that cash generation will be sufficient to
satisfy Sun's future base infrastructure and legally required capital
requirements, and to sustain the current cash dividend. However,
from time to time, the Company's short-term cash requirements
may exceed its cash generation due to various factors including
volatility in crude and refined product markets and increases in
capital spending and working capital levels. During those periods,
the Company may supplement its cash generation with proceeds
from divestment and financing activities. Growth capital outlays
will be funded with excess cash generation and proceeds from the
ongoing divestment of non-strategic/non-core assets.
In the event that cash generation is insufficient to satisfy near-term
cash requirements, the Company has access to $500 million of
short-term financing for operations in the form of commercial
paper and revolving credit agreements from commercial banks.
The Company also has access to short-term financing under non-
committed money market facilities and $150 million of con-
firmed lines of credit. In addition, Suncor has a revolving term
credit facility available for its own use aggregating $285 million.
The following table sets forth Sun's total borrowings at:
<TABLE>
<CAPTION>
December 31
----------------------
(Millions of Dollars) 1994 1993
- -----------------------------------------------------------------------------
<S> <C> <C>
Short-term borrowings:
Commercial paper $ 216 $ 50
Non-committed money market facilities 5 60
- -----------------------------------------------------------------------------
221 110
Current portion of long-term debt 99 26
Long-term debt 1,073 726*
- -----------------------------------------------------------------------------
Total borrowings $1,393 $862
- -----------------------------------------------------------------------------
*Includes Suncor revolving term credit loans of $91 million.
</TABLE>
The $531 million increase in total borrowings during 1994 was
caused, in part, by the high level of capital spending on growth
projects.
As of December 31, 1994, Sun's long-term debt to long-term
capitalization ratio was 36.5 percent. Although Sun plans to
maintain the current debt level (excluding Suncor) through 1995,
management believes there is sufficient borrowing capacity
available to provide for cash requirements. 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. Further-
more, 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.
CAPITAL EXPENDITURES
(Millions of Dollars)
<TABLE>
<CAPTION>
1995 PLAN 1994 1993 1992
- ---------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Fuels:
Wholesale fuels $153 $191 $148 $121
Branded marketing 134 169 107 77
Lubricants:
Lubes 5 5 11 4
Related fuels 51 19 41 16
Chemicals 46 63 23 21
Logistics 34 81 29 12
International exploration
and production 32 100 51 85*
Canada (Suncor) 310 220 202 194
- ---------------------------------------------------------------------------------
Consolidated capital expenditures $765 $848** $612 $530
- ---------------------------------------------------------------------------------
*Includes exploration-related capital expenditures of $58 million, which were
spent prior to the Company's decision to withdraw from oil and gas exploration
activities outside of Canada, effective September 30, 1992.
**Excludes $164 million attributable to the purchase of the Girard Point refinery,
related inventory and pipeline interests from Chevron.
</TABLE>
35
<PAGE>
Capital expenditures for 1994 totalled $848 million, an increase
of 39 and 60 percent from 1993 and 1992 levels, respectively. The
increase was largely due to significantly higher spending on
growth projects in Sun's core domestic refining and marketing
and international production businesses and an increase in
environmental capital outlays primarily resulting from $58
million spent in 1994 to substantially complete the $110 million
upgrade of the waste water treatment processing facilities at the
Marcus Hook refinery. In addition to the acquisition of the Girard
Point refinery and related assets, major growth capital expendi-
tures in 1994 included: approximately $50 million spent in
branded marketing principally related to the Branded for Success
service station conversion and modernization program; $58
million spent to complete the Northeast Aromatics and Cyclo-
hexane Project at Sun's Marcus Hook refinery and $43 million
spent to complete the construction of a pipeline connecting Sun's
Philadelphia and Marcus Hook facilities. During 1994, Sun also
acquired an interest in Block 3/8a (Ninian and Columba fields)
in the U.K. North Sea for $78 million. (See "Strategic Direction"
and "Analysis of Earnings Profile of Sun Businesses" above for
additional information concerning these projects.)
Suncor's capital spending in 1994 consisted of $115 million for
conventional oil and gas exploration and production activities,
$83 million for oil sands operations and $22 million for refining
and marketing. Oil sands expenditures included $35 million of
environmental outlays.
Sun's capital outlays are expected to decrease in 1995 as the
Company focuses on fully integrating the acquisitions and growth
projects discussed above and maintaining debt (excluding Suncor)
at approximately the year-end 1994 level. The 1995 capital
expenditures include $130 million for growth projects in Sun's
core businesses. Significant projects include the continuation of
the Branded for Success program, the expansion of units at Sun's
Marcus Hook refinery to produce propylene and ethoxylate and
the development of the Columba field in the U.K. North Sea. An
additional $325 million is designated for legally required and base
infrastructure spending in 1995 primarily at Sun's domestic
refinery operations and branded marketing outlets.
Expenditures by Suncor account for the remaining $310 million
of the 1995 capital program. The increase in Suncor's capital
spending over the 1994 level is due largely to additional environ-
mental expenditures to enhance the steam and electricity generat-
ing facilities at the oil sands plant. 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. During 1995, Suncor borrowings are
expected to increase approximately $100 million largely as a
result of the higher environmental outlays.
See "Environmental Matters" below for a discussion of Sun's
capital expenditures in connection with pollution abatement
activities.
ENVIRONMENTAL MATTERS
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.
The following table summarizes Sun's expenditures for environ-
mental projects and compliance activities (in millions of dollars):
<TABLE>
<CAPTION>
1994 1993 1992
- ----------------------------------------------------------------------------------
<S> <C> <C> <C>
Pollution abatement capital* $245 $123 $ 75
Remediation and reclamation 60 53 48
Operations, maintenance and administration 112 108 116
- ----------------------------------------------------------------------------------
$417 $284 $239
- ----------------------------------------------------------------------------------
*Capital expenditures for pollution abatement are expected to approximate $170 and
$158 million in 1995 and 1996, respectively.
</TABLE>
The increase in pollution abatement capital expenditures during
1994 was primarily due to outlays relating to the waste water
treatment and Northeast Aromatics and Cyclohexane projects at
the Marcus Hook refinery and to enhancements to the steam and
electricity generating facilities at Suncor's oil sands plant.
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 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. 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
continue to be phased in over the next few years.
36
<PAGE>
CERCLA and RCRA, and related state laws subject Sun 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, 1994, Sun had been named as a PRP at 47 sites
identified or potentially identifiable as "Superfund" sites under
CERCLA. Sun has reviewed the nature and extent of its involve-
ment 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 Sun 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 as-
sumptions, 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 environ-
mental remediation, which totalled $246 and $259 million at
December 31, 1994 and 1993, respectively was classified in the
consolidated balance sheets as follows:
<TABLE>
<CAPTION>
December 31
-------------------
(Millions of Dollars) 1994 1993
- ------------------------------------------------------------------------------
<S> <C> <C>
Accrued liabilities $ 55 $ 55
Other deferred credits and liabilities 191 204
- ------------------------------------------------------------------------------
$246 $259
- ------------------------------------------------------------------------------
</TABLE>
Sun also accrues estimated dismantlement, restoration, reclama-
tion and abandonment costs at its oil sands mining and oil and gas
exploration and production operations through a charge against
income primarily on a units of production basis. The accrued
liability for these activities, which totalled $126 and $119 million
at December 31, 1994 and 1993, respectively, are classified
primarily in other deferred credits and liabilities in the consoli-
dated balance sheets. Of the $126 million accrued liability at
December 31, 1994, $78 million relates to Sun's oil sands mining
operations and $48 million is attributable to oil and gas explora-
tion and production operations. Sun estimates that the total cost
for reclamation at these operations will be approximately $120
and $157 million, respectively.
Pretax charges against income for environmental remediation and
reclamation totalled $24, $45 and $62 million at December 31,
1994, 1993 and 1992, respectively. Claims for recovery of
environmental liabilities that are probable of realization totalled
$11 million at December 31, 1994 and are included in deferred
charges and other assets in the consolidated balance sheets.
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 expenditures for environ-
mental 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 poten-
tially significant with respect to results of operations or cash flow
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.
COMMODITY AND FOREIGN CURRENCY CONTRACTS
Sun uses commodity futures, options, forward, swap and other
similar contracts primarily as hedging instruments to help meet
strategic pricing objectives for purchases and sales of crude oil,
refined products and natural gas. Sun also uses foreign currency
futures, options, forward, swap and other similar contracts
(primarily at Suncor) to hedge the impact on future transactions
of fluctuations in foreign currency rates. Hedging strategies are
reviewed and approved by management before being imple-
mented. Policy controls limit the aggregate commodity and
foreign currency price exposure as well as the maximum volume
and/or dollar amount of positions that can be entered.
Suncor uses hedging strategies to reduce fluctuations in sales and
other operating revenue by locking in fixed exchange rates and/or
prices on a portion of its oil and natural gas sales. Sun's domestic
refining and marketing operations use hedging strategies prima-
rily to achieve ratable pricing of its crude oil purchases and
refined product sales. Gains and losses resulting from the above
strategic pricing programs have not been material.
Suncor uses financial instruments to achieve its hedging objec-
tives while Sun's domestic refining and marketing operations
generally use contracts which may be settled by the delivery of
commodities and therefore are not financial instruments. (See
Note 17 to the consolidated financial statements.)
CASH DIVIDENDS
The Company has paid cash dividends on a regular quarterly basis
since 1904. During the 1992-94 period, annual cash dividends of
$1.80 per share ($.45 per share each quarter) were paid on the
Company's common stock. The Company expects to continue to
sustain the quarterly cash dividend at its current level.
37
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF INCOME Sun Company, Inc. and Subsidiaries
(Millions of Dollars Except Per Share Amounts)
For the Years Ended December 31 1994 1993 1992
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
REVENUES
Sales and other operating revenue (including consumer excise taxes of $2,116 in 1994,
$1,883 in 1993, and $1,819 in 1992) $9,818 $9,180 $10,445
Gain on divestments (Note 2) 51 174 5
Gain on litigation settlement (Note 3) -- -- 178
Interest income 16 18 22
Income (loss) from investments in operations held for sale (Note 2) (1) (1) --
Other income (Note 4) 24 46 32
- -----------------------------------------------------------------------------------------------------------------------------------
9,908 9,417 10,682
COSTS AND EXPENSES
Cost of products sold and operating expenses 6,276 5,821 7,192
Selling, general and administrative expenses 703 647 661
Taxes, other than income taxes (Note 5) 2,253 2,024 1,977
Depreciation, depletion and amortization 359 354 385
Exploratory costs and leasehold impairment 24 22 60
Provision for write-down of assets and other matters (Note 2) 54 23 745
Minority interest 35 27 3
Interest cost and debt expense 97 81 97
Interest capitalized (13) (8) (6)
- -----------------------------------------------------------------------------------------------------------------------------------
9,788 8,991 11,114
Income (loss) from continuing operations before provision (credit) for income taxes and
cumulative effect of change in accounting principle 120 426 (432)
Provision (credit) for income taxes (Note 6) 23 143 (115)
- -----------------------------------------------------------------------------------------------------------------------------------
Income (loss) from continuing operations before cumulative effect of change in accounting principle 97 283 (317)
Income from discontinued operations (Note 2) -- -- 19
Cumulative effect of change in accounting principle (Note 7) (7) 5 (261)
- -----------------------------------------------------------------------------------------------------------------------------------
NET INCOME (LOSS) $ 90 $ 288 $ (559)
- -----------------------------------------------------------------------------------------------------------------------------------
Earnings (loss) per share of common stock:*
Income (loss) from continuing operations before cumulative effect of change in accounting principle $.91 $2.65 $(2.98)
Income from discontinued operations -- -- .18
Cumulative effect of change in accounting principle (.07) .05 (2.46)
- -----------------------------------------------------------------------------------------------------------------------------------
NET INCOME (LOSS) $.84 $2.70 $(5.26)
- -----------------------------------------------------------------------------------------------------------------------------------
Cash dividends paid on common stock $192 $192 $191
Cash dividends per share of common stock $1.80 $1.80 $1.80
- -----------------------------------------------------------------------------------------------------------------------------------
*Based on the weighted average number of shares outstanding (in thousands) of 107,043 in 1994, 106,561 in 1993 and 106,212 in 1992.
(See Accompanying Notes)
</TABLE>
38
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED BALANCE SHEETS Sun Company, Inc. and Subsidiaries
(Millions of Dollars)
At December 31 1994 1993
- -----------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 117 $ 118
Accounts and notes receivable, net of allowances of $12 in 1994 and $11 in 1993 655 572
Inventories (Note 8) 613 464
Deferred income taxes (Note 6) 123 123
- -----------------------------------------------------------------------------------------------
TOTAL CURRENT ASSETS 1,508 1,277
- -----------------------------------------------------------------------------------------------
INVESTMENT IN COAL OPERATIONS HELD FOR SALE (Note 2) 51 113
INVESTMENT IN REAL ESTATE OPERATIONS HELD FOR SALE (Note 2) 123 134
LONG-TERM RECEIVABLES AND INVESTMENTS (Note 9) 143 217
PROPERTIES, PLANTS AND EQUIPMENT, net (Note 10) 4,348 3,831
DEFERRED CHARGES AND OTHER ASSETS 292 328
- -----------------------------------------------------------------------------------------------
TOTAL ASSETS $6,465 $5,900
- -----------------------------------------------------------------------------------------------
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 776 $ 641
Accrued liabilities (Note 14) 540 487
Short-term borrowings (Note 11) 221 110
Current portion of long-term debt (Note 12) 99 26
Taxes payable 279 241
- -----------------------------------------------------------------------------------------------
TOTAL CURRENT LIABILITIES 1,915 1,505
- -----------------------------------------------------------------------------------------------
LONG-TERM DEBT (Note 12) 1,073 726
RETIREMENT BENEFIT LIABILITIES (Note 13) 515 523
DEFERRED INCOME TAXES (Note 6) 301 369
OTHER DEFERRED CREDITS AND LIABILITIES (Note 14) 429 421
COMMITMENTS AND CONTINGENT LIABILITIES (Note 14)
MINORITY INTEREST 369 372
STOCKHOLDERS' EQUITY (Notes 15 and 16)
Common stock, par value $1 per share
Authorized - 200,000,000 shares; Issued, 1994 - 129,521,449 shares;
Issued, 1993 - 129,312,735 shares 130 129
Capital in excess of par value 1,309 1,303
Cumulative foreign currency translation adjustment (89) (62)
Earnings employed in the business 1,534 1,636
- -----------------------------------------------------------------------------------------------
2,884 3,006
Less common stock held in treasury, at cost
1994 - 22,583,733 shares; 1993 - 22,629,825 shares 1,021 1,022
- -----------------------------------------------------------------------------------------------
TOTAL STOCKHOLDERS' EQUITY 1,863 1,984
- -----------------------------------------------------------------------------------------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $6,465 $5,900
- -----------------------------------------------------------------------------------------------
(See Accompanying Notes)
</TABLE>
39
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF CASH FLOWS Sun Company, Inc. and Subsidiaries
(Millions of Dollars)
For the Years Ended December 31 1994 1993 1992
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 90 $ 288 $(559)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Income from discontinued operations -- -- (19)
Cumulative effect of change in accounting principle 7 (5) 261
Provision for write-down of assets and other matters 54 23 745
Gain on litigation settlement -- -- (178)
Gain on divestments (51) (174) (5)
Depreciation, depletion and amortization 359 354 385
Dry hole costs and leasehold impairment 14 14 34
Deferred income taxes (60) 59 (265)
Changes in working capital pertaining to operating activities:
Accounts and notes receivable (85) 106 132
Inventories (41) (13) 13
Accounts payable and accrued liabilities 107 (277) (298)
Taxes payable 47 (3) (2)
Other 40 41 61
- -----------------------------------------------------------------------------------------------------------------
Net cash provided by operating activities 481 413 305
- -----------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (848) (612) (530)
Acquisition of Girard Point refinery and related assets (Note 2) (164) -- --
Cash provided by coal operations held for sale 30 161 42
Cash provided by (used in) real estate operations held for sale 13 (7) (72)
Proceeds from divestments 131 370 103
Proceeds from litigation settlement -- -- 130
Other 2 (26) 1
- -----------------------------------------------------------------------------------------------------------------
Net cash used in investing activities (836) (114) (326)
- -----------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds from (repayments of) short-term borrowings 111 (105) 72
Proceeds from issuance of long-term debt 543 26 88
Repayments of long-term debt (115) (97) (140)
Cash dividend payments (192) (192) (191)
Other 7 8 8
- -----------------------------------------------------------------------------------------------------------------
Net cash provided by (used in) financing activities 354 (360) (163)
- -----------------------------------------------------------------------------------------------------------------
Net decrease in cash and cash equivalents (1) (61) (184)
Cash and cash equivalents at beginning of year 118 179 363
- -----------------------------------------------------------------------------------------------------------------
Cash and cash equivalents at end of year $ 117 $ 118 $ 179
- -----------------------------------------------------------------------------------------------------------------
(See Accompanying Notes)
</TABLE>
40
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY Sun Company, Inc. and Subsidiaries
(Dollars in Millions, Shares in Thousands)
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, 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 translation 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 translation adjustment -- -- -- (15) -- -- --
- -------------------------------------------------------------------------------------------------------------------
AT DECEMBER 31, 1993 129,313 $129 $1,303 $(62) $1,636 22,630 $1,022
Net income -- -- -- -- 90 -- --
Cash dividend payments -- -- -- -- (192) -- --
Issued under management incentive plans 208 1 6 -- -- -- --
Sales to dividend reinvestment plan -- -- -- -- -- (46) (1)
Foreign currency translation adjustment -- -- -- (27) -- -- --
- -------------------------------------------------------------------------------------------------------------------
AT DECEMBER 31, 1994 129,521 $130 $1,309 $(89) $1,534 22,584 $1,021
- -------------------------------------------------------------------------------------------------------------------
(See Accompanying Notes)
</TABLE>
41
<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. Effec-
tive in the fourth quarter of 1993, such operations are accounted
for as investments held for sale (Note 2). Affiliated companies
over which the Company has the ability to exercise 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. 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 deter-
mined principally using the last-in, first-out method ("LIFO").
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 connec-
tion 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 explora-
tion operations outside North America (Note 2). Actual costs
incurred to satisfy these exploration commitments were charged
to the accrual.
CAPITALIZATION POLICY--Acquisition costs for proved and un-
proved properties are capitalized when incurred. Costs of un-
proved properties are transferred to proved properties when
proved reserves are found. Exploration costs, including geological
and geophysical costs and costs of carrying and retaining un-
proved properties, are charged against income as incurred. Ex-
ploratory 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. Develop-
ment 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 individu-
ally 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 produc-
ing 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 capi-
talized. 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 capi-
talized. 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 acquisi-
tions are capitalized.
Overburden removal costs are deferred and expensed as the un-
derlying reserves are mined.
DEPRECIATION AND DEPLETION--Property acquisition costs and
capitalized development costs are depleted by the unit of produc-
tion method based on proven reserves. Capitalized plant and
equipment are generally depreciated over their useful lives princi-
pally on a straight-line basis.
42
<PAGE>
DISMANTLEMENT, RESTORATION, RECLAMATION AND ABAN-
DONMENT 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 accu-
mulated 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 identi-
fied 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.
TAXES
Effective January 1, 1993, Sun adopted the provisions of State-
ment 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 differ-
ences 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 ex-
pense 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 undis-
tributed earnings of foreign subsidiaries deemed not to be perma-
nently 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 affili-
ated companies.
POSTRETIREMENT HEALTH CARE AND LIFE INSURANCE BENEFITS
Sun provides health care and life insurance benefits for substan-
tially 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 exist-
ing 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
(Notes 7 and 13).
FOREIGN CURRENCY TRANSLATION
Foreign exchange gains and losses as a result of translating a
foreign entity's balance sheet from its functional currency into
U.S. dollars are included as a separate component of stock-
holders' equity. The functional currency for all foreign operations,
except Canada, is the U.S. dollar. Gains or losses incurred on
currency transactions in other than a country's functional currency
are included in income.
COMMODITY AND FOREIGN CURRENCY CONTRACTS
Sun uses commodity and foreign currency futures, forward, swap
and other similar contracts to hedge the impact on future transac-
tions of fluctuations in oil and natural gas prices and foreign
currency exchange rates. Gains and losses on these contracts are
generally deferred and recognized as a component of the related
transactions, except that gains and losses resulting from changes
in the market value of foreign currency contracts for which no
firm commitments have been identified are included in income
currently. The cash flows from hedge contracts are included in
operating activities in the consolidated statements of cash flows.
2. CHANGES IN BUSINESS
The following is a summary of Sun's significant changes in busi-
ness during the three-year period ended December 31, 1994:
ACQUISITION OF GIRARD POINT REFINERY AND RELATED ASSETS
Sun concluded the purchase from Chevron U.S.A. Inc.
("Chevron") of its 177,000 barrel-per-day refinery ("Girard
Point") and related inventory located in Philadelphia, PA on Au-
gust 4, 1994 and its interest in the Woodbury and Harbor Pipe-
lines, which connect the refinery to the New York Harbor, on
October 26, 1994. As part of the acquisition, Sun assumed certain
43
<PAGE>
liabilities. The acquisition has been accounted for as a purchase
and, accordingly, the results of operations of these assets have
been included in the consolidated statement of income since their
respective acquisition dates. The purchase price of $164 million
has been allocated to the assets acquired and liabilities assumed
on the basis of their relative fair market values (Note 18).
The unaudited pro forma sales and other operating revenue (ex-
cluding consumer excise taxes) of Sun for the years ended De-
cember 31, 1994 and 1993, as if the acquisition of these assets
had occurred on January 1, 1993, were $8,417 and $8,757 mil-
lion, respectively. The unaudited pro forma net income and net
income per share of common stock of Sun for the years ended
December 31, 1994 and 1993 were $102 million ($.95 per share
of common stock) and $315 million ($2.96 per share of common
stock), respectively. The pro forma information does not purport
to be indicative of the results that actually would have been ob-
tained if the combined operations had been conducted during the
periods presented and is not intended to be a projection of future
results.
Actual sales and other operating revenue (excluding consumer
excise taxes) and net income attributable to these assets from their
respective acquisition dates through December 31, 1994
amounted to $644 and $11 million, respectively.
DIVESTMENTS
During 1994, Sun completed the disposition of its remaining
interests in an exploration block in the U.K. North Sea and explo-
ration and production properties in Colombia.
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 divestment as part of the Company's 1992 restruc-
turing plan. The properties divested in Dubai accounted for ap-
proximately 42 percent of Sun's 1992 crude oil production out-
side North America while those divested in Canada represented
approximately 6 and 12 percent, respectively, of Sun's 1992 Ca-
nadian crude oil and natural gas production. Results of operations
from these properties were not significant.
Also in 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 million and 6.8 million
shares, respectively, of Suncor common stock in secondary offer-
ings 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, to-
talled $139 million. These proceeds were received in 1993.
The following sets forth summary divestment information:
<TABLE>
<CAPTION>
Gains (Losses) on After-Tax
Divestments Gains (Losses)
(Millions of Dollars Except ------------------------ Per Share of
Per Share Amounts) Pretax After Tax Common Stock
- ------------------------------------------------------------------------------
<S> <C> <C> <C>
1994
North Sea exploration property $ 15 $ 15 $ .14
Colombian exploration and
producing properties 20 13 .12
Other 16 11 .10
- ------------------------------------------------------------------------------
$ 51 $ 39 $ .36
- ------------------------------------------------------------------------------
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
- ------------------------------------------------------------------------------
*Net of minority interest share of gain on divestments.
</TABLE>
WRITE-DOWNS OF ASSETS AND OTHER MATTERS
During 1994, Sun recorded a provision primarily attributable to a
write-down to estimated net realizable value of its investment in
coal operations held for sale and established accruals related to
certain litigation and other matters.
During 1993, Sun recorded a provision associated with the re-
structuring 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, dur-
ing 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).
44
<PAGE>
In 1992, Sun also recorded a provision associated with its deci-
sion to downsize and reconfigure the Company's Tulsa, Okla-
homa refining and marketing operations as well as miscellaneous
asset write-downs and accruals related to other Sun domestic
facilities and operations.
The following is a summary of the provisions for write-down of
assets and other matters:
<TABLE>
<CAPTION>
After-Tax Losses
(Millions of Dollars Except Income Tax After-Tax Per Share of
Per Share Amounts) Provisions Benefits Losses Common Stock
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1994
Coal operations held
for sale $ 36 $ 16 $ 20 $ .19
Other 18 6 12 .11
- -------------------------------------------------------------------------------
$ 54 $ 22 $ 32 $ .30
- -------------------------------------------------------------------------------
1993
Canadian operations $ 15* $ 8 $ 7 $ .06
Leasing operations 8 3 5 .05
- -------------------------------------------------------------------------------
$ 23 $ 11 $ 12 $ .11
- -------------------------------------------------------------------------------
1992
Exploration and produc-
tion 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
- -------------------------------------------------------------------------------
*Net of minority interest share of provision for write-down of assets and other
matters.
</TABLE>
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 west-
ern U.S. coal operations during 1993 and certain of its eastern
U.S. coal operations during 1994. Sun continues to 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 Corpora-
tion ("Radnor"), its wholly owned real estate development subsid-
iary. In connection with this plan, the Company is actively pursu-
ing 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 opera-
tions 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 ("SEC") issued Staff Accounting Bulletin
No. 93 which requires discontinued operations that have not been
divested within one year of their measurement dates to be ac-
counted for prospectively as investments held for sale. As a result,
pretax income (loss) from Sun's coal and real estate operations,
which totalled $(4) and $3 million, respectively, during the year
ended 1994 and $(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 $15 and $2
million, respectively, during the year ended 1994 and $2 and $1
million, respectively, during the fourth quarter of 1993.
Prior to its measurement date, during 1992, revenues from coal
operations totalled $356 million and income from coal operations
totalled $19 million (after related income tax benefit of $18
million).
The net assets and liabilities relating to the coal and real
estate operations held for sale have been segregated on the
consolidated balance sheets to separately identify them as
investments in operations held for sale. Such amounts are
detailed as follows:
<TABLE>
<CAPTION>
December 31
-------------------
(Millions of Dollars) 1994 1993
- --------------------------------------------------------------------------
<S> <C> <C>
COAL OPERATIONS
Accounts receivable $ 18 $ 18
Inventories 12 27
Properties, plants and equipment 142 175
Other assets 13 32
Accounts payable and accrued liabilities (45) (40)
Retirement benefit liabilities (41) (44)
Other liabilities (48) (55)
- --------------------------------------------------------------------------
Investment in coal operations held for sale $ 51 $ 113
- --------------------------------------------------------------------------
REAL ESTATE OPERATIONS
Inventories $ 144 $ 158
Properties, plants and equipment 198 374
Other assets 21 49
Nonrecourse financing -- (90)
Recourse debt (204) (324)
Other liabilities (36) (33)
- --------------------------------------------------------------------------
Investment in real estate operations held for sale $ 123 $ 134
- --------------------------------------------------------------------------
</TABLE>
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, 1994, there was
$8 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 $108 million at December 31, 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.
45
<PAGE>
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 Revo-
lution. 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
<TABLE>
<CAPTION>
(Millions of Dollars) 1994 1993 1992
- -----------------------------------------------------------------------------
<S> <C> <C> <C>
Equity in earnings of affiliated companies $13 $11 $ 9
Foreign exchange gains (losses) (3) 3 16
Oil sands litigation settlement -- 17 --
Other 14 15 7
- -----------------------------------------------------------------------------
$24 $46 $32
- -----------------------------------------------------------------------------
</TABLE>
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
<TABLE>
<CAPTION>
(Millions of Dollars) 1994 1993 1992
- -----------------------------------------------------------------------------
<S> <C> <C> <C>
Consumer excise $2,116 $1,883 $1,819
Production 27 25 38
Payroll, property and other 110 116 120
- -----------------------------------------------------------------------------
$2,253 $2,024 $1,977
- -----------------------------------------------------------------------------
</TABLE>
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:
<TABLE>
<CAPTION>
(Millions of Dollars) 1994 1993 1992
- -----------------------------------------------------------------------------
<S> <C> <C> <C>
U.S. $(79) $138 $(174)
Foreign 199 288 (258)
- -----------------------------------------------------------------------------
$120 $426 $(432)
- -----------------------------------------------------------------------------
</TABLE>
Effective January 1, 1993, deferred income taxes have been pro-
vided utilizing the liability method. Previously, deferred income
taxes were provided utilizing the deferred method (Note 7).
Components of provision (credit) for income taxes from continu-
ing operations before cumulative effect of change in accounting
principle are as follows:
<TABLE>
<CAPTION>
(Millions of Dollars) 1994 1993 1992
- --------------------------------------------------------------------------------------
<S> <C> <C>
Income taxes currently payable:
U.S. federal $ 17 $ 29 $ 36
Foreign and other 66 55 114
- --------------------------------------------------------------------------------------
83 84 150
- --------------------------------------------------------------------------------------
Deferred taxes:
U.S. federal (86) 11 (124)
Foreign and other 26 48 (141)
- --------------------------------------------------------------------------------------
(60) 59 (265)
- --------------------------------------------------------------------------------------
$ 23 $143* $(115)
- --------------------------------------------------------------------------------------
*Includes a $17 million benefit resulting from the realization of a deferred tax asset
for which a valuation allowance previously had been provided.
</TABLE>
During 1992, Sun established a $27 million U.S. income tax
provision for Suncor's undistributed earnings. At Decem-
ber 31, 1994 and 1993, U.S. income taxes have been provided
on all undistributed earnings of foreign subsidiaries.
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:
<TABLE>
<CAPTION>
(Millions of Dollars) 1994 1993 1992
- -----------------------------------------------------------------------------
<S> <C> <C> <C>
Income taxes at U.S. statutory rate $ 42 $149 $(147)
Increase (reduction) in taxes resulting from:
Tax expense of foreign operations
in excess of statutory rate 13 4 37
Benefit of nonconventional
fuels credit (18) (4) --
Benefit of Puerto Rico tax exemption
(expires in 2007) (6) (6) (5)
Impact of change in U.S. statutory rates
on deferred income taxes (2) 3 --
Other (6) (3) --
- -----------------------------------------------------------------------------
$ 23 $143 $(115)
- -----------------------------------------------------------------------------
</TABLE>
The tax effects of temporary differences which comprise the
deferred tax assets and liabilities are as follows:
<TABLE>
<CAPTION>
December 31
-------------------
(Millions of Dollars) 1994 1993
- ------------------------------------------------------------------------------
<S> <C> <C>
Deferred tax debits:
Retirement benefit liabilities $ 166 $ 162
Other liabilities not yet deductible 272 252
Alternative minimum tax credit carryforward 90 53
Investments in operations held for sale 113 100
Other 96 70
Valuation allowance (106) (94)
- ------------------------------------------------------------------------------
631 543
- ------------------------------------------------------------------------------
Deferred tax credits:
Properties, plants and equipment (711) (655)
Investments in foreign subsidiaries (27) (24)
Investment in leases (12) (45)
Other (59) (65)
- ------------------------------------------------------------------------------
(809) (789)
- ------------------------------------------------------------------------------
Net deferred income tax liability $(178) $(246)
- ------------------------------------------------------------------------------
</TABLE>
46
<PAGE>
The following table sets forth the net deferred income tax
liabilities in the consolidated balance sheets at:
<TABLE>
<CAPTION>
December 31
--------------------
(Millions of Dollars) 1994 1993
- -----------------------------------------------------------------------------
<S> <C> <C>
Current assets $ 123 $ 123
Noncurrent liabilities (301) (369)
- -----------------------------------------------------------------------------
$(178) $(246)
- -----------------------------------------------------------------------------
</TABLE>
7. CHANGES IN ACCOUNTING PRINCIPLES
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 required companies to recognize the obli-
gation 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 decreased net
income for 1994 by $7 million (after related income tax bene-
fit of $4 million), or $.07 per share of common stock. Exclud-
ing the cumulative effect, this change did not have a significant
impact on Sun's net income during 1994.
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 tempo-
rary 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 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.
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 deter-
mined 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 insur-
ance premiums which provided the benefits were due. The accu-
mulated postretirement benefit obligation existing at January 1,
1992 was recognized as a cumulative effect of change in account-
ing principle, resulting in a charge of $261 million (after related
income tax benefit of $140 million), or $2.46 per share of com-
mon stock. The cumulative effect included a $26 million charge
(after related income 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 adop-
tion of SFAS NO. 106 decreased results from continuing operations
by $9 million after tax or $.08 per share of common stock and
reduced results from discontinued coal operations by $3 million
after tax or $.03 per share of common stock (Note 13).
8. INVENTORIES
<TABLE>
<CAPTION>
December 31
----------------
(Millions of Dollars) 1994 1993
- ------------------------------------------------------------------------------
<S> <C> <C>
Crude oil $193 $140
Refined products 335 244
Materials, supplies and other 85 80
- ------------------------------------------------------------------------------
$613 $464
- ------------------------------------------------------------------------------
</TABLE>
The current replacement cost of all inventories valued at LIFO
exceeded their carrying value by $459 and $390 million at
December 31, 1994 and 1993, respectively.
9. LONG-TERM RECEIVABLES AND INVESTMENTS
<TABLE>
<CAPTION>
December 31
----------------
(Millions of Dollars) 1994 1993
- ------------------------------------------------------------------------------
<S> <C> <C>
Investment in:
Direct financing and sales-type leases $ 34 $ 69
Leveraged leases -- 21
- ------------------------------------------------------------------------------
34 90
Accounts and notes receivable 22 47
Investments in affiliated companies 78 72
Other investments, at cost 9 8
- ------------------------------------------------------------------------------
$143 $217
- ------------------------------------------------------------------------------
</TABLE>
Dividends received from affiliated companies amounted to
$10, $9 and $7 million in 1994, 1993, and 1992, respectively.
Earnings employed in the business at December 31, 1994
include $20 million of undistributed earnings of affiliated
companies.
47
<PAGE>
10. PROPERTIES, PLANTS AND EQUIPMENT
<TABLE>
<CAPTION>
Accumulated
Gross Depreciation,
(Millions of Dollars) Investment Depletion and Net
December 31 at Cost Amortization Investment
- ------------------------------------------------------------------------------
<S> <C> <C> <C>
1994
Refining and marketing* $5,872 $2,587 $3,285
Exploration and production 1,572 1,016 556
Oil sands mining 983 477 506
Corporate 3 2 1
- ------------------------------------------------------------------------------
$8,430 $4,082 $4,348
- ------------------------------------------------------------------------------
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
- ------------------------------------------------------------------------------
*Includes amounts leased to third parties totalling $631 and $527 million at
December 31, 1994 and 1993, respectively. Related accumulated depreciation
totalled $246 and $209 million at December 31, 1994 and 1993, respectively.
</TABLE>
Annual future minimum rentals due Sun, as lessor, on non-
cancelable operating leases at December 31, 1994 are as follows
(in millions of dollars):
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------
<S> <C>
Year ending December 31:
1995 $ 54
1996 37
1997 21
1998 8
1999 3
Later years 2
- ------------------------------------------------------------------------------
$125
- ------------------------------------------------------------------------------
</TABLE>
11. SHORT-TERM BORROWINGS AND LINES OF CREDIT
<TABLE>
<CAPTION>
December 31
----------------
(Millions of Dollars) 1994 1993
- ------------------------------------------------------------------------------
<S> <C> <C>
Commercial paper $216 $ 50
Non-committed money market facilities 5 60
- ------------------------------------------------------------------------------
$221 $110
- ------------------------------------------------------------------------------
</TABLE>
The Company had $700 million of credit facilities as of Decem-
ber 31, 1994. These facilities consisted of revolving credit agree-
ments from commercial banks totalling $500 million which pro-
vide for revolving credit through August 1996 and confirmed
lines of credit totalling $200 million. In January 1995, a $50
million confirmed line of credit expired and was not renewed by
the Company. The revolving credit facilities support Sun's com-
mercial paper borrowings. All of the above facilities are subject to
commitment fees, the amounts of which are not material. The
Company also has access to short-term financing under non-
committed money market facilities.
At December 31, 1994, Suncor also had a revolving term credit
facility available for its own use aggregating approximately $285
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, 1994, there
were no borrowings against this facility.
12. LONG-TERM DEBT
<TABLE>
<CAPTION>
December 31
------------------
(Millions of Dollars) 1994 1993
- ------------------------------------------------------------------------------
<S> <C> <C>
SUN COMPANY, INC.
9-3/8% debentures due 2016 $ 200 $200
9% debentures due 2024 100 --
8-1/8% notes due 1999 150 --
7.95% notes due 2001 150 150
7-1/8% notes due 2004 100 --
Medium-term notes, at 7.03% to 7.10%,
due 1997 50 50
6-3/4% convertible debentures due 2012
(Note 16) 10 10
- ------------------------------------------------------------------------------
760 410
- ------------------------------------------------------------------------------
CANADA (SUNCOR)
12% debentures due 2003 49 57
7.40% debentures due 2004 90 --
Revolving term credit loans (Note 11) -- 91
- ------------------------------------------------------------------------------
139 148
- ------------------------------------------------------------------------------
OTHER SUBSIDIARIES OF SUN COMPANY, INC.
7.60% environmental industrial revenue
bonds due 2024 100 --
Leasing subsidiary notes:
8-5/8% due 1997 21 29
9.73% due 1998 43 53
9.55% due 1995 75 75
Other 37 41
- ------------------------------------------------------------------------------
276 198
- ------------------------------------------------------------------------------
1,175 756
Less: unamortized discount 3 4
current portion 99 26
- ------------------------------------------------------------------------------
$1,073 $726
- ------------------------------------------------------------------------------
</TABLE>
The aggregate amount of long-term debt maturing and sinking
fund requirements in the years 1995 through 1999 is as follows
(in millions of dollars):
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------
<S> <C> <C> <C>
1995 $99 1998 $ 25
1996 $25 1999 $154
1997 $75
- ------------------------------------------------------------------------------
</TABLE>
48
<PAGE>
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 ben-
efits 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 em-
ployees 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 $20, $17 and $9 million for 1994, 1993 and
1992, respectively, which consisted of the following components
(in millions of dollars):
<TABLE>
<CAPTION>
1994 1993 1992
- -------------------------------------------------------------------------------------
<S> <C> <C> <C>
Service cost (cost of benefits
earned during the year) $ 33 $ 30 $ 30
Interest cost on projected
benefit obligation 102 103 103
Actual return on plan assets* (8) (182) (47)
Net amortization and deferral* (107) 66 (77)
- -------------------------------------------------------------------------------------
$ 20 $ 17 $ 9
- -------------------------------------------------------------------------------------
*Estimated returns on assets are used in determining net periodic pension cost.
Differences between estimated and actual returns are included in net amortiza-
tion 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.
</TABLE>
The following table sets forth the funded status of the plans and
amounts recognized in the balance sheets at:
<TABLE>
<CAPTION>
DECEMBER 31, 1994 December 31, 1993
------------------------------ ------------------------------
Plans in Which Plans in Which Plans in Which Plans in Which
Assets Exceed Accumulated Assets Exceed Accumulated
Accumulated Benefits Accumulated Benefits
(Millions of Dollars) Benefits Exceed Assets Benefits Exceed Assets
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Actuarial present value of benefit obligation:
Vested $ 875 $204 $ 978 $226
Nonvested 32 10 33 13
- --------------------------------------------------------------------------------------------------------------------------------
Accumulated benefit obligation 907 214 1,011 239
Effect of projected future salary increases 117 15 140 33
- --------------------------------------------------------------------------------------------------------------------------------
Projected benefit obligation 1,024 229 1,151 272
Less plan assets at fair value* 1,095 88 1,177 95
- --------------------------------------------------------------------------------------------------------------------------------
Projected benefit obligation in excess of (less than) plan assets (71) 141 (26) 177
Unrecognized net asset (obligation) at January 1, 1986 102 (21) 120 (24)
Unrecognized prior service cost (27) -- (21) (4)
Unrecognized net loss (8) (19) (81) (51)
Additional minimum liability** -- 38 -- 55
- --------------------------------------------------------------------------------------------------------------------------------
Pension liability (asset)*** $ (4) $139 $ (8) $153
- --------------------------------------------------------------------------------------------------------------------------------
*Plan assets consist principally of commingled trust funds, marketable equity securities, corporate and government debt
securities and real estate. Less than 1 percent of plan assets was invested in Company common stock at both December 31, 1994
and 1993.
**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.
</TABLE>
As of December 31, 1994 and 1993, the projected benefit obliga-
tions were determined using weighted average assumed discount
rates of 8.5 and 7.25 percent, respectively, and a rate of compen-
sation increase of 5.0 percent. The weighted average expected
long-term rate of return on plan assets was 9.25 percent in 1994
and 9.5 percent in 1993. All of these rates are subject to change in
the future as economic conditions change.
DEFINED CONTRIBUTION PENSION PLANS
Sun has defined contribution plans which provide retirement
benefits for most of its employees. Sun's contributions, which
are principally based on a percentage of employees' annual
compensation and are charged against income as incurred,
amounted to $16, $9 and $15 million in 1994, 1993 and 1992,
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 in-
vested 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, 1994, no such
borrowing had been approved.
49
<PAGE>
POSTRETIREMENT HEALTH CARE AND
LIFE INSURANCE BENEFITS
Sun has plans which provide health care and life insurance ben-
efits for substantially all retirees. Aggregate charges against in-
come for such benefits amounted to $18, $22 and $37 million in
1994, 1993 and 1992, respectively. Effective in the second quarter
of 1993, changes were made to Sun's principal postretirement
medical benefit plan which cap Sun's future 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 accumulated postretirement benefit obligation
("APBO") by $82 million. Postretirement benefits expense for
1994, 1993 and 1992 consisted of the following components (in
millions of dollars):
<TABLE>
<CAPTION>
1994 1993 1992
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Service cost (cost of benefits
earned during the year) $ 4 $ 5 $ 8
Interest cost on APBO 22 23 29
Net amortization* (8) (6) --
- --------------------------------------------------------------------------------
$18 $22 $37
- --------------------------------------------------------------------------------
*Consists of amortization of the unrecognized prior service benefit and net gain
or loss.
</TABLE>
The following table sets forth the funded status of the plans
and amounts recognized in the balance sheets at:
<TABLE>
<CAPTION>
December 31
----------------------
(Millions of Dollars) 1994 1993
- ------------------------------------------------------------------------------
<S> <C> <C>
APBO:
Retirees $185 $206
Fully eligible active participants 15 17
Other active participants 55 69
- ------------------------------------------------------------------------------
255 292
Unrecognized prior service benefit 76 77
Unrecognized net gain 49 9
- ------------------------------------------------------------------------------
Accrued postretirement benefit obligation* $380 $378
- ------------------------------------------------------------------------------
*Accrued postretirement benefit obligation is included in retirement benefit
liabilities in the consolidated balance sheets.
</TABLE>
As of December 31, 1994 and 1993, the APBO was determined
using weighted average assumed discount rates of 8.5 and 7.25
percent, respectively. The initial health care cost trend rate as-
sumptions used at December 31, 1994 and 1993 were 9.3 and 11
percent, respectively, which are assumed to decline gradually to
5.5 and 6 percent, respectively, for the years 2004 and 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 in-
creased the APBO by $11 million at December 31, 1994 and
would have increased the service and interest components of
postretirement benefits expense in the aggregate by $1, $3 and
$4 million for the years ended December 31, 1994, 1993 and
1992, respectively.
14. COMMITMENTS AND CONTINGENT LIABILITIES
Sun, as lessee, has noncancellable operating leases for service
stations, office space and other property and equipment. Total
rental expense for such leases for the years 1994, 1993 and 1992
amounted to $104, $88 and $98 million, respectively. Approxi-
mately 13 percent of total rental expense was recovered through
related rental income from subleases during 1994. Under con-
tracts existing as of December 31, 1994, future minimum annual
rentals applicable to noncancellable operating leases are as fol-
lows (in millions of dollars):
<TABLE>
<CAPTION>
- ---------------------------------------------------------
<S> <C>
Year ending December 31:
1995 $ 72
1996 63
1997 60
1998 58
1999 42
Later years 223
- ---------------------------------------------------------
$518
- ---------------------------------------------------------
</TABLE>
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 oper-
ating a $225 million methyl tertiary butyl ether ("MTBE") produc-
tion facility in Mont Belvieu, Texas. As of December 31, 1994,
BEF had borrowed $176 million, the total amount available under
a construction loan facility, of which the Company guarantees
one-third or $59 million. The plant has a designed capacity of
12,600 barrels daily of MTBE. The construction of the facility is
essentially completed. Production commenced in the second half
of 1994 and the plant is currently in a sustained start-up test
phase. Production in 1994 during the start-up test phase averaged
7,800 barrels daily. The construction loan will be converted into
a five-year, nonrecourse term loan with a first priority lien on all
project assets if the plant is able to produce at its designed capac-
ity for a continuous 45-day period prior to May 31, 1995. If this
or certain other conditions are not met, Sun may be required to
pay its $59 million share of the construction loan for this project.
In order to obtain a secure supply of oxygenates for the manufac-
ture of reformulated fuels, Sun has entered into a 10-year off-take
agreement with BEF. Pursuant to this agreement, Sun will pur-
chase 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
seven years the off-take agreement is in effect which will be based
upon the market conditions existing at such time.
50
<PAGE>
Sun is also contingently liable under various other arrangements
which guarantee debt of associated companies and others aggre-
gating approximately $31 million at December 31, 1994 and
maturing at various dates through 2014.
Sun is subject to federal, state, local and foreign laws regulating
the discharge of materials into, or otherwise relating to the protec-
tion of, the environment. These laws result in loss contingencies
for remediation at Sun'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 accrued liability for environmental
remediation, which totalled $246 and $259 million at December
31, 1994 and 1993, respectively, was classified in the consolidated
balance sheets as follows:
<TABLE>
<CAPTION>
December 31
-------------------
(Millions of Dollars) 1994 1993
- ------------------------------------------------------------------------
<S> <C> <C>
Accrued liabilities $ 55 $ 55
Other deferred credits and liabilities 191 204
- ------------------------------------------------------------------------
$246 $259
- ------------------------------------------------------------------------
</TABLE>
The accrued liability for dismantlement, restoration, reclamation
and abandonment at Sun's oil sands mining and oil and gas explo-
ration and production operations totalled $126 and $119 million
at December 31, 1994 and 1993, respectively. This accrual is
included primarily in other deferred credits and liabilities in the
consolidated balance sheets. Of the $126 million accrued liability
at December 31, 1994, $78 million relates to Sun's oil sands
mining operations and $48 million is attributable to oil and gas
exploration and production operations. Sun estimates that the total
cost for reclamation at these operations will be approximately
$120 and $157 million, respectively. Pretax charges against in-
come for environmental remediation and reclamation totalled $24,
$45 and $62 million in 1994, 1993 and 1992, respectively. Claims
for recovery of environmental liabilities that are probable of realiza-
tion totalled $11 million at December 31, 1994 and are included in
deferred charges and other assets in the consolidated balance sheets.
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 tech-
nology available and needed to meet the various existing require-
ments, the nature and extent of future environmental laws, infla-
tion rates and the determination of Sun's liability at multi-party
sites, if any, in light of the number, participation levels and finan-
cial viability of other parties.
Sun is currently involved in a legal action initiated by a private
party to determine responsibility for remediation at a formerly
owned refinery in Oklahoma. Management believes that Sun is
fully indemnified for this potential liability.
Many other legal and administrative proceedings are pending
against Sun. The ultimate outcome of these proceedings and the
matters discussed above cannot be ascertained at this time; how-
ever, it is reasonably possible that some of them could be resolved
unfavorably to Sun. Management believes that any expenditures
attributable to these matters will be incurred over an extended
period of time and be funded from Sun's net cash flow from oper-
ating 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 liabili-
ties which may arise pertaining to such matters would not be
material in relation to the consolidated financial position of Sun
at December 31, 1994.
15. MANAGEMENT INCENTIVE PLANS
Sun's principal management incentive plans are the Executive
Incentive Plan ("EIP") and the Executive Long-Term Stock Invest-
ment 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, share-
holders 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 outstand-
ing 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 adminis-
tered by a committee of five nonemployee members of the Board
of Directors ("Compensation Committee").
Outstanding awards under LTIP and ELTIP consist of stock options,
alternate appreciation rights and limited rights. Awards under ELSIP
may also include incentive stock options, equity options and
restricted stock units.
Stock options, incentive stock options and equity options (collec-
tively, "options") permit optionees to purchase Company common
stock at the fair market value on the date of grant. If authorized
under ELSIP, 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 appre-
ciation of Company common stock from the date of grant. Lim-
ited 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 com-
mon 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.
51
<PAGE>
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 sub-
ject 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 ap-
proximate 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 manage-
ment incentive plans for the years 1994 and 1993 were $2 and
$7 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 con-
vertible 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, 1994,
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 Direc-
tors ("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, 1994, none of this
class of preference stock had been issued.
In December 1992, the Board approved the adoption of the Em-
ployee 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 com-
mon stock are authorized for issuance under the EOP. In 1994 and
1993, stock option awards totalling 241,895 and 1,721,385, re-
spectively, were made to eligible employees.
The following table summarizes information with respect to
common stock option awards under EOP and Sun's manage-
ment incentive plans (Note 15):
<TABLE>
<CAPTION>
Shares Option Price
Under Option Per Share
- ----------------------------------------------------------------------------------
<S> <C> <C>
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
Granted 868,105 $28.00-$30.19
Exercised (219,318)* $27.88-$31.50
Cancelled (334,055)
- ----------------------------------------------------------------------------------
OUTSTANDING, DECEMBER 31, 1994 5,259,867
- ----------------------------------------------------------------------------------
EXERCISABLE, DECEMBER 31
- ----------------------------------------------------------------------------------
1992 1,880,433 $27.88-$41.13
1993 2,552,166 $25.38-$41.13
1994 2,687,316 $25.38-$41.13
- ----------------------------------------------------------------------------------
AVAILABLE FOR GRANT, DECEMBER 31
- ----------------------------------------------------------------------------------
1992 7,217,890**
1993 4,439,545**
1994 3,618,940**
- ----------------------------------------------------------------------------------
*Includes 23,023, 41,050 and 26,178 options cancelled during 1994, 1993 and 1992,
respectively, due to the exercise of related alternate appreciation rights which
resulted in the issuance of 1,939, 482 and 2,646 shares in 1994, 1993 and 1992,
respectively. In addition, 10,480, 13,900 and 3,990 shares were issued for
matured restricted stock units during 1994, 1993 and 1992, respectively.
**Consists of shares available for grant under EOP and ELSIP totalling 125,020 and
3,493,920 shares, respectively, at December 31, 1994, 336,325 and 4,103,220
shares, respectively, at December 31, 1993 and 2,000,000 and 5,217,890 shares,
respectively, at December 31, 1992.
</TABLE>
17. DISCLOSURES ABOUT FINANCIAL INSTRUMENTS
The estimated fair value of financial instruments has been deter-
mined 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 carry-
ing amounts of these financial instruments approximate their
estimated fair value. The following table summarizes estimated
fair value information for Sun's other financial instruments in-
cluded in the consolidated balance sheets at:
<TABLE>
<CAPTION>
DECEMBER 31, 1994 December 31, 1993
------------------- -------------------
Estimated Estimated
Carrying Fair Carrying Fair
(Millions of Dollars) Amount Value Amount Value
- ------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Long-term accounts and
notes receivable $ 22 $ 22 $ 47 $ 47
Other assets* $ 19 $ 19 $ 18 $ 18
Long-term debt $1,073 $1,051 $726 $809
- ------------------------------------------------------------------------------------
*Included primarily in deferred charges and other assets in the consolidated balance
sheets.
</TABLE>
52
<PAGE>
Long-term accounts and notes receivable have been valued by
discounting the projected cash flows at December 31, 1994 and
1993, using the then current rates at which similar loans would
be made to borrowers with similar credit ratings and for similar
maturities. Other assets consist primarily of special purpose funds
which have been valued using discounted cash flows. Long-term
debt which is publicly traded was valued based on quoted market
prices. The fair value of other debt issues was estimated by man-
agement 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 affili-
ate, BEF and the debt of associated companies and others (Note
14). Due to the complexity of these guarantees and the absence of
any market for these financial instruments, the Company does not
believe it is practicable to estimate their fair value.
Swap contracts are used at Suncor to reduce fluctuations in sales
and other operating revenue by locking in fixed exchange rates
and prices on a portion of its oil and natural gas sales. These
contracts result in cash receipts (payments) by Suncor for the
difference between the contract and market rates for the appli-
cable dollars and volumes hedged during the contract term. Such
cash receipts (payments) offset corresponding decreases (in-
creases) in Suncor's sales revenues. Outstanding contracts with
respect to these financial instruments were as follows at:
<TABLE>
<CAPTION>
DECEMBER 31, 1994 December 31, 1993
--------------------------------------- ----------------------------------------
Contract Amount Contract Amount
--------------------- ----------------------
(Dollars in Millions Except Average Revenue Hedge Average Revenue Hedge
Average Price Amounts) Quantity Price Hedged Period Quantity Price Hedged Period
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Crude oil swaps* 35.0 $C25.53 $C326** 1995 12.5 $C26.00 $C119 1994
3.0 $C26.63 $C 29 1996
2.0 $C28.13 $C 21 1997
Foreign currency swaps $US 60 $C 1.37 $C 82 1995 $US100 $C 1.32 $C132 1994
$US240*** $C 1.38 $C331 1996 $US 25 $C 1.35 $C 34 1995
$US155*** $C 1.40 $C216 1997 $US 25 $C 1.35 $C 34 1996
- -----------------------------------------------------------------------------------------------------------------------------
*Quantities are reflected in thousands of barrels daily; average prices are reflected in Canadian dollars per barrel.
**Includes the effects of U.S. dollar-denominated crude oil swaps which have been converted to $C199 million revenue using
$US145 million foreign currency swaps at an average price of $C1.37.
***Includes $US125 and $US35 million of contracts in 1996 and 1997, respectively, for which no firm commitments have been
identified.
</TABLE>
Sun does not anticipate nonperformance by the counterparties
to these contracts as they are major international financial
institutions. The estimated fair value of the contracts are the
amounts based on brokers' quotes that Suncor would receive
(pay) to terminate the contracts. Such amounts, which also
approximate the unrecognized gain (loss) on the contracts, were
as follows at:
<TABLE>
<CAPTION>
December 31
-------------------
(Millions of Dollars) 1994 1993
- ------------------------------------------------------------------------
<S> <C> <C>
Crude oil swaps $ 8 $17
Foreign currency swaps $(9) $--
- ------------------------------------------------------------------------
</TABLE>
18. SUPPLEMENTAL CASH FLOW INFORMATION
During 1994, Sun acquired from Chevron the Girard Point
refinery located in Philadelphia, related inventory and certain
pipeline interests (Note 2) and in 1992, Sun settled its dispute
with the Iranian government concerning the expropriation of
Sun's oil production interests in Iran (Note 3). The following is
a summary of the effects of these transactions on Sun's con-
solidated financial position (in millions of dollars):
<TABLE>
<CAPTION>
Acquisition of
Girard Point Refinery Iranian
and Related Assets Settlement
- ------------------------------------------------------------------------------
<S> <C> <C>
(Increase) decrease in:
Inventories $(108) $ --
Properties, plants and equipment (149) --
Increase (decrease) in:
Accounts payable and accrued liabilities 10 (48)
Taxes payable -- 33
Retirement benefit liabilities 22 --
Deferred income taxes -- 28
Other deferred credits and liabilities 61 --
Earnings employed in the business -- 117
- ------------------------------------------------------------------------------
Net increase (decrease) in cash and cash
equivalents $(164) $130
- ------------------------------------------------------------------------------
</TABLE>
53
<PAGE>
Cash payments for income taxes were $58, $116 and $94 million
in 1994, 1993 and 1992, respectively. Cash payments for inter-
est, net of amounts capitalized, were $74, $73 and $91 million
in 1994, 1993 and 1992, respectively.
19. BUSINESS SEGMENT INFORMATION
Sun is principally a petroleum refiner and marketer with inter-
ests 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 refining operations and
for sale to third parties. Sun's oil and gas exploration and
production operations consist of exploration for and develop-
ment, production and marketing of crude oil, natural gas and
natural gas liquids. Exploration activities are conducted in
Canada while development, production and marketing activi-
ties are conducted primarily in Canada and the United King-
dom sector of the North Sea. Oil sands mining operations,
which consist of the production of synthetic crude oil by mining
oil sands and upgrading 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 activi-
ties have been conducted in the United States. In April 1991,
Sun ceased making new investments in leasing and secured
lending and at December 31, 1994, had liquidated substan-
tially all of its remaining portfolio of leases and secured loans.
<TABLE>
<CAPTION>
SEGMENT INFORMATION
(Millions of Dollars)
Refining and Exploration and Oil Sands
Marketing Production Mining Corporate Consolidated*
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1994
Sales and other operating revenue
(including consumer excise taxes):
Unaffiliated customers $9,651 $156 $ -- $ 11 $9,818
- ------------------------------------------------------------------------------------------------------------------------------
Intersegment $ -- $206 $416 $ -- $ --
- ------------------------------------------------------------------------------------------------------------------------------
Operating profit $ 36 $144 $ 68 $(34) $ 214
Equity income 13 -- -- -- 13
Related income taxes (13) (50) (38) 34 (67)
- ------------------------------------------------------------------------------------------------------------------------------
Profit contribution before net
financing expenses and after tax** $ 36 $ 94 $ 30 $ --*** 160
- ---------------------------------------------------------------------------------------------------------------
Corporate expenses (after taxes) (25)
Net financing expenses (after taxes) (38)***
Cumulative effect of change in accounting principle (7)+
------
Net income $ 90
------
Depreciation, depletion and amortization $ 246 $ 96++ $ 31 $ -- $ 373
- ------------------------------------------------------------------------------------------------------------------------------
Capital expenditures $ 550 $215 $ 83 $ -- $ 848
- ------------------------------------------------------------------------------------------------------------------------------
Identifiable assets $4,807 $647 $592 $486+++ $6,465
- ------------------------------------------------------------------------------------------------------------------------------
*After elimination of intersegment amounts.
**Includes after-tax gain from the disposal of certain oil and gas properties of $28 million in exploration and production
and after-tax provision for write-down of assets and other matters of $12 million in refining and marketing and $20
million in corporate (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 $15 and $2 million, respectively (Note 2).
+Reflects the cumulative effect for years prior to 1994 of a change in the method of accounting for postemployment 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 investments in coal and real estate operations held for sale of $51 and $123 million, respectively (Note 2).
</TABLE>
54
<PAGE>
<TABLE>
<CAPTION>
SEGMENT INFORMATION
(Millions of Dollars)
Refining and Exploration and Oil Sands
Marketing Production Mining Corporate Consolidated*
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
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 mil-
lion 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).
</TABLE>
<TABLE>
<CAPTION>
Refining and Exploration and Oil Sands
Marketing Production Mining Corporate Consolidated*
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
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 discontinued 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).
</TABLE>
55
<PAGE>
GEOGRAPHIC INFORMATION
(Millions of Dollars)
<TABLE>
<CAPTION>
Outside
North
U.S. Canada America Corporate Consolidated*
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1994
Sales and other operating revenue
(including consumer excise taxes of $1,601
in U.S. and $515 in Canada):
Unaffiliated customers $7,963 $1,397 $ 447 $ 11 $9,818
- ---------------------------------------------------------------------------------------------------------------------
Intergeographic $ 9 $ 5 $2,454 $ -- $ --
- ---------------------------------------------------------------------------------------------------------------------
Profit contribution before net financing
expenses and after tax** $ 21 $ 45 $ 94 $ --*** $ 160
- ------------------------------------------------------------------------------------------------------
Corporate expenses (after taxes) (25)
Net financing expenses (after taxes) (38)***
Cumulative effect of change in accounting principle (7)+
------
Net income $ 90
------
Depreciation, depletion and amortization $ 218 $ 104++ $ 51 $ -- $ 373
- ---------------------------------------------------------------------------------------------------------------------
Capital expenditures $ 528 $ 220 $ 100 $ -- $ 848
- ---------------------------------------------------------------------------------------------------------------------
Identifiable assets $4,138 $1,541 $ 703 $486+++ $6,465
- ---------------------------------------------------------------------------------------------------------------------
*After elimination of intergeographic amounts.
**Includes after-tax gain from the disposal of certain oil and gas properties of $28 million outside North America
and after-tax provision for write-down of assets and other matters of $12 million in U.S. and $20 million in
corporate (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 $15 and $2 million, respectively (Note 2).
+Reflects the cumulative effect for years prior to 1994 of a change in the method of accounting for postemployment
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 $33 million and outside North America of $13 million. Also includes
investments in coal and real estate operations held for sale of $51 and $123 million, respectively (Note 2).
</TABLE>
<TABLE>
<CAPTION>
Outside
North
U.S. Canada America Corporate Consolidated*
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1993
Sales and other operating revenue
(including consumer excise taxes of $1,381
in U.S. and $502 in Canada):
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).
</TABLE>
56
<PAGE>
GEOGRAPHIC INFORMATION
(Millions of Dollars)
<TABLE>
<CAPTION>
Outside
North
U.S. Canada America Corporate Consolidated*
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1992
Sales and other operating revenue
(including consumer excise taxes of $1,317
in U.S. and $502 in Canada):
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 discontinued 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).
</TABLE>
Income tax expenses give effect to 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 and 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 reve-
nue 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.
57
<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 account-
ing principles deemed appropriate in the circumstances. Manage-
ment 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 account-
ability for assets. The system of internal accounting controls is
subject to ongoing evaluation of its continuing effectiveness.
Sun's independent accountants, Coopers & Lybrand L.L.P., 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 on
this page.
The Audit Committee of the Board of Directors is comprised of
directors who are not employees of Sun and meets a minimum of
four times annually. It assists the Board of Directors in discharg-
ing its duties relating to accounting and reporting practices and
internal controls, and it assesses the performance and recom-
mends the appointment of independent accountants. Both
Coopers & Lybrand L.L.P. and Sun's internal auditors have
unrestricted access to the Committee to discuss audit findings and
other financial matters.
s/ROBERT H. CAMPBELL
ROBERT H. CAMPBELL
Chairman, Chief Executive
Officer and President
s/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, 1994
and 1993, 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, 1994. 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
38 to 57) present fairly, in all material respects, the consolidated
financial position of Sun Company, Inc. and its subsidiaries as of
December 31, 1994 and 1993 and the consolidated results of their
operations and their cash flows for each of the three years in the
period ended December 31, 1994, 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 post-
employment benefits in 1994; its method of accounting for
income taxes in 1993; and, its method of accounting for the cost
of postretirement health care and life insurance benefits in 1992.
s/COOPERS & LYBRAND L.L.P.
2400 Eleven Penn Center
Philadelphia, PA 19103
February 14, 1995
58
<PAGE>
SUPPLEMENTAL FINANCIAL AND OPERATING INFORMATION (Unaudited)
REFINING AND MARKETING DATA
<TABLE>
<CAPTION>
1994 1993 1992 1991 1990
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 554.5 66.4 620.9 471.6 63.3 534.9 525.9 62.7 588.6 519.7 62.8 582.5 551.2 57.5 608.7
Crude oil
inventory
change (3.0) (.3) (3.3) (5.8) -- (5.8) 5.7 (.8) 4.9 4.1 .5 4.6 (2.5) (.5) (3.0)
Refined
product
purchases 147.4 17.7 165.1 133.6 19.2 152.8 125.8 19.7 145.5 111.5 14.9 126.4 101.8 21.4 123.2
- ----------------------------------------------------------------------------------------------------------------------------------
698.9 83.8 782.7 599.4 82.5 681.9 657.4 81.6 739.0 635.3 78.2 713.5 650.5 78.4 728.9
- ----------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTION
Refined
product
sales 677.5 84.5 762.0 595.6 81.9 677.5 645.8 83.0 728.8 629.1 80.0 709.1 640.5 78.0 718.5
Refined
product
inventory
change 8.2 .3 8.5 (2.5) 1.1 (1.4) 5.5 (1.1) 4.4 -- (.8) (.8) (3.5) .5 (3.0)
Internal
consumption
and other 13.2 (1.0) 12.2 6.3 (.5) 5.8 6.1 (.3) 5.8 6.2 (1.0) 5.2 13.5 (.1) 13.4
- ----------------------------------------------------------------------------------------------------------------------------------
698.9 83.8 782.7 599.4 82.5 681.9 657.4 81.6 739.0 635.3 78.2 713.5 650.5 78.4 728.9
- ----------------------------------------------------------------------------------------------------------------------------------
*Thousands of barrels daily; excludes trading activities.
</TABLE>
<TABLE>
<CAPTION>
1994 1993 1992 1991 1990
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 19% -- 17% 25% 1% 22% 28% 1% 25% 27% 3% 24% 31% 3% 28%
Canada 9 100% 19 10 99 20 10 99 20 8 97 18 8 97 17
Other foreign:
Arabian Gulf 15 -- 13 9 -- 8 10 -- 9 10 -- 9 11 -- 10
South and
Central
America 9 -- 8 17 -- 15 16 -- 14 16 -- 14 18 -- 16
North Sea 23 -- 21 20 -- 18 10 -- 9 3 -- 3 2 -- 2
Africa 25 -- 22 19 -- 17 26 -- 23 36 -- 32 30 -- 27
- ----------------------------------------------------------------------------------------------------------------------------------
100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100%
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
1994 1993 1992 1991 1990
-------------------- --------------------- ---------------------- ---------------------- ----------------------
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 17.6 1.4 19.0 16.5 1.3 17.8 14.4 1.3 15.7 16.5 1.0 17.5 18.0 1.2 19.2
Refined
products 23.8 2.3 26.1 20.8 2.2 23.0 21.7 1.8 23.5 19.7 2.2 21.9 19.7 2.5 22.2
- ----------------------------------------------------------------------------------------------------------------------------------
*Millions of barrels at December 31; excludes trading inventories.
</TABLE>
59
<PAGE>
<TABLE>
<CAPTION>
Thousands of Barrels Daily
-----------------------------------------
REFINERY INPUT 1994 1993 1992 1991 1990
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Refinery crude unit capacity at December 31:
United States:
Marcus Hook, Pennsylvania 175.0 175.0 175.0 175.0 175.0
Philadelphia, Pennsylvania
Girard Point 177.0* -- -- -- --
Point Breeze 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
- --------------------------------------------------------------------------------------------------------------------------
777.0 600.0 600.0 600.0 600.0
Canada:
Sarnia, Ontario 70.0 70.0 70.0 70.0 70.0
- --------------------------------------------------------------------------------------------------------------------------
847.0 670.0 670.0 670.0 670.0
- --------------------------------------------------------------------------------------------------------------------------
Total input to crude units:
United States:
Marcus Hook, Pennsylvania 141.0 152.5 157.2 161.6 161.1
Philadelphia, Pennsylvania
Girard Point 78.9** -- -- -- --
Point Breeze 105.8 100.7 116.5 112.0 118.1
Toledo, Ohio 112.7 117.5 117.7 123.7 114.3
Tulsa, Oklahoma 89.7 84.7 84.4 78.1 83.5
Yabucoa, Puerto Rico 62.5 46.7 61.0 55.7 77.3
- --------------------------------------------------------------------------------------------------------------------------
590.6 502.1 536.8 531.1 554.3
Canada:
Sarnia, Ontario 68.3 68.5 71.3 72.1 66.9
- --------------------------------------------------------------------------------------------------------------------------
Input to Sun crude units 658.9 570.6 608.1 603.2 621.2
Less input for others - Sarnia, Ontario -- 1.8 1.2 1.2 1.6
- --------------------------------------------------------------------------------------------------------------------------
Sun's total net input to crude units 658.9 568.8 606.9 602.0 619.6
- --------------------------------------------------------------------------------------------------------------------------
Sun's total input to crude units:
Crude oil 617.6 530.9 594.7 588.3 607.3
Other feedstocks 41.3*** 39.7*** 13.4 14.9 13.9
- --------------------------------------------------------------------------------------------------------------------------
658.9 570.6 608.1 603.2 621.2
- --------------------------------------------------------------------------------------------------------------------------
Refinery crude unit capacity utilized:
United States 88% 84% 89% 89% 92%
Canada 98% 98% 102% 103% 96%
Total 89% 85% 91% 90% 93%
- --------------------------------------------------------------------------------------------------------------------------
Catalytic cracking capacity at December 31:
United States 305.0 235.0 235.0*** 270.0 260.0
Canada 40.0 40.0 40.0 40.0 37.0
- --------------------------------------------------------------------------------------------------------------------------
Total 345.0 275.0 275.0 310.0 297.0
- --------------------------------------------------------------------------------------------------------------------------
Catalytic cracking capacity utilized:
United States 85% 90% 90% 91% 83%
Canada 95% 90% 90% 92% 90%
Total 86% 90% 90% 91% 84%
- --------------------------------------------------------------------------------------------------------------------------
*Effective August 4, 1994 with the acquisition of Chevron U.S.A. Inc.'s Philadelphia refinery ("Girard Point") which is
adjacent to Sun's existing Point Breeze refining facilities. (See Note 2 to the consolidated financial statements.)
**Reflects total input from August 4, 1994 through December 31, 1994 divided by 365 days. During this 150-day period,
input to crude units at these facilities actually totalled 191.9 thousand barrels daily.
***Includes 30.5 and 28.9 thousand barrels daily in 1994 and 1993, respectively, 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.
</TABLE>
60
<PAGE>
<TABLE>
<CAPTION>
1994 1993 1992 1991 1990
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 43% 53% 44% 44% 54% 45% 46% 54% 47% 48% 55% 49% 45% 50% 46%
Middle
distillates 17 24 18 15 24 16 16 21 17 17 13 17 15 14 15
Jet fuel 7 8 7 8 7 8 9 4 8 6 4 6 8 4 7
Residual fuel 7 3 6 6 2 5 7 4 7 5 4 5 6 6 6
Petrochemicals 4 6 4 5 7 5 5 8 5 4 9 4 4 9 4
Lubricants 3 -- 3 3 -- 3 3 -- 3 3 -- 2 4 -- 4
Asphalt 4 2 4 4 1 4 4 1 4 4 1 4 5 2 5
Propane 2 3 2 2 2 2 2 3 2 2 3 2 2 3 2
Other 13 1 12 13 3 12 8 5 7 11 11 11 11 12 11
- ----------------------------------------------------------------------------------------------------------------------------------
100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100%
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
REFINED 1994 1993 1992 1991 1990
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 95.1 19.1 114.2 56.7 17.3 74.0 80.0 18.7 98.7 78.6 18.2 96.8 71.3 17.1 88.4
Retail 214.9 27.7 242 6 223.6 25.6 249.2 233.9 25.1 259.0 235.3 25.1 260.4 242.9 24.0 266.9
Middle dis-
tillates 135.3 18.1 153.4 105.5 20.5 126.0 111.9 18.2 130.1 110.5 16.3 126.8 110.5 15.6 126.1
Jet fuel 51.3 6.9 58.2 56.3 5.7 62.0 57.1 4.0 61.1 51.2 3.2 54.4 48.6 3.0 51.6
Residual
fuel 51.5 2.4 53.9 40.8 1.7 42.5 50.5 3.3 53.8 43.0 2.2 45.2 38.3 4.3 42.6
Petro-
chemicals 27.5 4.9 32.4 28.8 5.0 33.8 28.9 6.0 34.9 25.3 6.2 31.5 24.7 6.1 30.8
Lubricants 22.3 -- 22.3 19.5 -- 19.5 19.6 -- 19.6 19.1** -- 19.1 26.7** .6 27.3
Asphalt 29.3 1.2 30.5 29.9 .9 30.8 29.3 .6 29.9 25.2 1.5 26.7 32.0 1.1 33.1
Propane 13.8 3.2 17.0 11.6 2.8 14.4 14.5 2.6 17.1 13.3 2.6 15.9 11.8 2.5 14.3
Other 36.5 1.0 37.5 22.9 2.4 25.3 20.1 4.5 24.6 27.6 4.7 32.3 33.7 3.7 37.4
- ----------------------------------------------------------------------------------------------------------------------------------
677.5 84.5 762.0 595.6 81.9 677.5 645.8 83.0 728.8 629.1 80.0 709.1 640.5 78.0 718.5
- ----------------------------------------------------------------------------------------------------------------------------------
*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>
<TABLE>
<CAPTION>
REFINED 1994 1993 1992 1991 1990
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 $ .53 $ .55 $ .53 $ .54 $ .52 $ .54 $ .61 $ .59 $ .61 $ .67 $ .74 $ .68 $ .74 $ .78 $ .75
Retail .65 .72 .66 .66 .80 .68 .72 .89 .74 .77 .95 .79 .85 1.03 .86
Middle dis-
tillates .53 .56 .54 .57 .59 .57 .60 .63 .60 .64 .69 .65 .71 .77 .72
Jet fuel .53 .54 .53 .56 .58 .56 .60 .62 .60 .64 .71 .64 .75 .80 .75
Residual
fuel .34 .26 .34 .32 .26 .32 .31 .28 .31 .30 .28 .30 .39 .34 .39
Petro-
chemicals .89 .94 .89 .74 .78 .75 .74 .91 .77 .82 1.01 .86 1.01 1.13 1.03
Lubricants 1.40 -- 1.40 1.46 -- 1.46 1.48 -- 1.48 1.62 -- 1.62 1.34 2.61 1.36
Asphalt .33 .25 .33 .35 .31 .35 .26 .22 .26 .26 .25 .26 .36 .32 .36
Propane .34 .37 .35 .35 .41 .36 .33 .39 .34 .34 .47 .36 .40 .40 .40
Other .42 .33 .42 .49 .45 .49 .52 .48 .51 .56 .52 .55 .64 .66 .64
- -----------------------------------------------------------------------------------------------------------------------------------
Average-total
refined
products $ .58 $ .61 $ .58 $ .60 $ .63 $ .61 $ .63 $ .68 $ .64 $ .68 $ .78 $ .69 $ .76 $ .85 $ .77
- -----------------------------------------------------------------------------------------------------------------------------------
*Dollars per gallon; excludes consumer excise taxes and refined product trading activities.
</TABLE>
<TABLE>
<CAPTION>
1994 1993 1992 1991 1990
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 $24.31 $25.52 $24.44 $25.39 $26.44 $25.52 $26.47 $28.74 $26.73 $28.48 $32.59 $28.94 $31.76 $35.59 $32.18
Average cost
of products
sold** $18.70 $17.91 $18.62 $19.08 $18.52 $19.01 $20.96 $20.90 $20.96 $22.11 $23.25 $22.24 $25.28 $24.44 $25.19
- -----------------------------------------------------------------------------------------------------------------------------------
*Dollars per barrel.
**Includes crude oil and other purchased feedstocks and refined products.
</TABLE>
61
<PAGE>
<TABLE>
<CAPTION>
RETAIL 1994 1993 1992 1991 1990
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 593 356 949 700 404 1,104 733 433 1,166 761 461 1,222 830 474 1,304
Ultra service
centers 322 -- 322 337 -- 337 360 -- 360 375 -- 375 380 -- 380
Convenience
stores 604 10 614 540 8 548 552 6 558 538 6 544 494 5 499
- ----------------------------------------------------------------------------------------------------------------------------------
1,519 366 1,885 1,577 412 1,989 1,645 439 2,084 1,674 467 2,141 1,704 479 2,183
- ----------------------------------------------------------------------------------------------------------------------------------
Dealer owned:
Tradi-
tional 619 93 712 703 153 856 836 171 1,007 920 217 1,137 1,079 245 1,324
Ultra service
centers 33 -- 33 35 -- 35 40 -- 40 47 -- 47 45 -- 45
Convenience
stores 6 41 47 3 41 44 4 41 45 6 41 47 4 40 44
- ----------------------------------------------------------------------------------------------------------------------------------
658 134 792 741 194 935 880 212 1,092 973 258 1,231 1,128 285 1,413
- ----------------------------------------------------------------------------------------------------------------------------------
Total direct
outlets 2,177 500 2,677 2,318 606 2,924 2,525 651 3,176 2,647 725 3,372 2,832 764 3,596
Distributor
outlets 1,938 -- 1,938 2,124 -- 2,124 2,864 -- 2,864 3,207 -- 3,207 3,222 -- 3,222
- ----------------------------------------------------------------------------------------------------------------------------------
4,115 500 4,615 4,442 606 5,048 5,389 651 6,040 5,854 725 6,579 6,054 764 6,818
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
THROUGHPUT 1994 1993 1992 1991 1990
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 97.2 67.9 91.3 93.5 55.7 85.6 89.4 50.9 81.1 83.9 45.5 75.5 81.2 42.7 73.0
Dealer
owned 70.3 54.6 67.3 63.6 44.7 59.8 58.6 38.8 54.5 52.9 38.7 50.0 51.0 35.5 47.9
- -----------------------------------------------------------------------------------------------------------------------------------
Average-total
direct
outlets 88.8 64.0 83.9 83.5 52.2 77.1 78.3 46.7 71.7 72.0 43.0 65.8 69.2 39.9 63.1
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
*Thousands of gallons of gasoline monthly.
<TABLE>
<CAPTION>
1994 1993 1992 1991 1990
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 an
interest 5,577 266 5,843 5,579 266 5,845 5,493 266 5,759 5,493 266 5,759 5,686 266 5,952
Product lines
in which
Sun has an
interest 4,552 368 4,920 4,303 368 4,671 4,605 368 4,973 4,704 401 5,105 4,704 401 5,105
PIPELINE
SHIPMENTS*
Crude oil
(billions
of barrel
miles) 48.4 6.8 55.2 50.4 5.8 56.2 48.7 5.7 54.4 55.8 6.0 61.8 54.2 5.0 59.2
Refined products
(billions
of barrel
miles) 28.3 3.2 31.5 30.7 2.9 33.6 28.8 2.7 31.5 27.3 2.6 29.9 29.9 2.6 32.5
OCEAN
TANKERS
Owned and
operated 4 -- 4 4 -- 4 4 -- 4 4 -- 4 4 -- 4
Capacity
(thousands of
barrels) 1,158 -- 1,158 1,158 -- 1,158 1,158 -- 1,158 1,158 -- 1,158 1,158 -- 1,158
Deadweight
tonnage
(thousands
of tons) 157 -- 157 157 -- 157 157 -- 157 157 -- 157 157 -- 157
- -----------------------------------------------------------------------------------------------------------------------------------
*Includes equity in shipments through pipelines in which Sun has an ownership interest.
</TABLE>
62
<PAGE>
OIL AND GAS DATA
<TABLE>
<CAPTION>
CAPITALIZED COSTS*
(Millions of Dollars) AT DECEMBER 31, 1994 At December 31, 1993
------------------------ -----------------------
Outside Outside
North North
Canada America Total Canada America Total
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Proved properties $518 $883 $1,401 $477 $799 $1,276
Unproved properties 147 24 171 143 59 202
- -------------------------------------------------------------------------------------------------------
Total capitalized costs 665 907 1,572 620 858 1,478
Accumulated depreciation, depletion and amortization 346 670 1,016 353 666 1,019
- -------------------------------------------------------------------------------------------------------
Net capitalized costs $319 $237 $ 556 $267 $192 $ 459
- -------------------------------------------------------------------------------------------------------
*Includes capitalized costs of support equipment and facilities.
</TABLE>
<TABLE>
<CAPTION>
COSTS INCURRED IN OIL AND GAS PRODUCING ACTIVITIES*
(Millions of Dollars) 1994 1993 1992
---------------------- ---------------------- -----------------------
Outside Outside Outside
North North North
Canada America Total Canada America Total Canada America Total
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Property acquisition costs:
Proved $ 6 $66 $72 $ 3 $22 $25 $30 $-- $ 30
Unproved $19 $12 $31 $ 9 $-- $ 9 $ 3 $ 7 $ 10
Exploration costs $32 $--** $32 $26 $--** $26 $25 $75** $100
Development costs $65 $22 $87 $38 $29 $67 $41 $18 $ 59
- ---------------------------------------------------------------------------------------------------------------------------------
*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 were charged against this accrual and excluded from costs
incurred in oil and gas producing activities. (See Note 2 to the consolidated financial statements.)
</TABLE>
<TABLE>
<CAPTION>
RESULTS OF OPERATIONS FOR OIL AND GAS PRODUCTION
(Millions of Dollars) 1994 1993 1992
---------------------- ---------------------- -----------------------
Outside Outside Outside
North North North
Canada America Total Canada America Total Canada America Total
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues:
Sales to unaffiliated customers $ 57 $ 67 $124 $ 48 $134 $182 $ 40 $250 $ 290
Transfers to other Sun operations 57 149 206 65 97 162 67 92 159
- ---------------------------------------------------------------------------------------------------------------------------------
Revenues from oil and gas production 114 216 330 113 231 344 107 342 449
Gain on divestment of exploration and production properties* -- 35 35 10 99 109 -- -- --
Gain on litigation settlement** -- -- -- -- -- -- -- 178 178
- ---------------------------------------------------------------------------------------------------------------------------------
114 251 365 123 330 453 107 520 627
Expenses:
Production:
Taxes -- 27 27 -- 25 25 -- 38 38
Operating costs 25 76 101 25 57 82 29 80 109
Depreciation, depletion and amortization 31 51 82 32 52 84 37 64 101
Provision for write-down of assets and other matters*** -- -- -- -- -- -- 156 335 491
Exploration 24 -- 24 22 -- 22 18 42 60
Other related costs+ 16 (29) (13) 17 (11) 6 7 6 13
- ---------------------------------------------------------------------------------------------------------------------------------
96 125 221 96 123 219 247 565 812
- ---------------------------------------------------------------------------------------------------------------------------------
Operating profit (loss) before income taxes 18 126 144 27 207 234 (140) (45) (185)
Related income taxes 12 38 50 17 59 76 (70) 29 (41)
- ---------------------------------------------------------------------------------------------------------------------------------
Results of operations from exploration and production $ 6 $ 88 $ 94 $ 10 $148 $158 $ (70) $(74) $(144)
- ---------------------------------------------------------------------------------------------------------------------------------
*Consists of gains on the disposition of Sun's interests in an exploration block in the North Sea and in exploration and
production properties in Colombia during 1994 and in certain oil and gas producing properties in Canada and Dubai and certain
exploration properties in the North Sea during 1993. The after-tax effect of these divestments increased results of
operations from oil and gas exploration and production outside North America by $28 million in 1994 and in Canada and outside
North America by $5 and $75 million, respectively, in 1993. (See Note 2 to the consolidated financial statements.)
**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. (See Note 3 to the consolidated financial statements.)
***The after-tax effect of these charges reduced results of operations from oil and gas exploration and production by $77 million
in Canada and by $200 million outside North America. (See Note 2 to the consolidated financial statements.)
+Consists principally of exploration and production general and administrative costs, pipeline tariff revenue and foreign
exchange gains and losses.
</TABLE>
REVENUES PER UNIT OF OIL AND GAS PRODUCTION
<TABLE>
<CAPTION>
1994 1993 1992
--------------------- --------------------- ---------------------
Outside Outside Outside
Canada North America Canada North America Canada North America
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Revenues, including transfers:
Crude oil, condensate and natural gas liquids ($ per barrel) $13.62 $15.73 $14.49 $16.75 $16.41 $18.52
Natural gas ($ per thousand cubic feet) $ 1.40 $ 2.96 $ 1.42 $ 2.93 $ 1.08 $ 3.21
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
63
<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 eco-
nomic and operating conditions existing at the time the estimate is
made. 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 condi-
tions. 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>
Crude Oil, Condensate and
Recoverable Natural Gas Liquids Natural Gas
(Millions of Barrels) (Billions of Cubic Feet)
------------------------------- ------------------------
Outside Outside
North North
PROVED RESERVES Canada America Total Canada America Total
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
BALANCE AT DECEMBER 31, 1990 35 86 121 337 127 464
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 discoveries 2 4 6 26 -- 26
Production (3) (17) (20) (30) (20) (50)
- --------------------------------------------------------------------------------------------------
BALANCE AT DECEMBER 31, 1991 32 81 113 407 101 508
Revisions of previous estimates 1 8 9 1 20 21
Purchases of minerals in place 5 -- 5 89 -- 89
Sales of minerals in place (2) -- (2) (8) -- (8)
Extensions and discoveries 1 3 4 28 -- 28
Production (3) (15) (18) (42) (17) (59)
- --------------------------------------------------------------------------------------------------
BALANCE AT DECEMBER 31, 1992 34 77 111 475 104 579
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 discoveries 4 -- 4 74 -- 74
Production (3) (11) (14) (42) (21) (63)
- --------------------------------------------------------------------------------------------------
BALANCE AT DECEMBER 31, 1993 34 31 65 492 109 601
Revisions of previous estimates 3 9 12 34 15 49
Purchases of minerals in place 1 16 17 5 -- 5
Sales of minerals in place -- (7) (7) -- (11) (11)
Extensions and discoveries 6 -- 6 105 -- 105
Production (4) (11) (15) (43) (17) (60)
- --------------------------------------------------------------------------------------------------
BALANCE AT DECEMBER 31, 1994 40 38 78 593 96 689
- --------------------------------------------------------------------------------------------------
PROVED DEVELOPED
RESERVES AT DECEMBER 31
- --------------------------------------------------------------------------------------------------
1990 30 86 116 197 73 270
1991 28 77 105 256 55 311
1992 30 74 104 370 104 474
1993 30 25 55 338 100 438
1994 33 28 61 357 87 444
- --------------------------------------------------------------------------------------------------
*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.)
</TABLE>
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, 1994. 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.
64
<PAGE>
AVERAGE NET OIL AND GAS PRODUCTION
<TABLE>
<CAPTION>
Thousands of Barrels Daily 1994 1993 1992 1991 1990
- -------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Crude oil, condensate and
processed natural gas liquids:
Canada 10.8 10.1 10.1 9.2 9.3
Outside North America* 29.0 28.0 42.7 48.3 55.4
- -------------------------------------------------------------------------------------
39.8 38.1 52.8 57.5 64.7
- -------------------------------------------------------------------------------------
Millions of Cubic Feet Daily
- -------------------------------------------------------------------------------------
Natural gas:
Canada 119 116 116 83 70
Outside North America 46 56 46 56 62
- -------------------------------------------------------------------------------------
165 172 162 139 132
- -------------------------------------------------------------------------------------
*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.
</TABLE>
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, "Disclo-
sures 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 con-
ditions. The estimated future production is priced at year-end
prices, except that future gas prices are increased, where appli-
cable, for fixed and determinable price escalations provided by
contract or regulation. The resulting estimated future cash in-
flows are reduced by estimated future costs to develop and pro-
duce the proved reserves based on year-end cost levels. In addi-
tion, 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 adminis-
trative costs of exploration and production operations and aban-
donment/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 tax credits and allowances relating to Sun's proved
oil and gas reserves. The resultant future net cash flows are re-
duced 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."
<TABLE>
<CAPTION>
Outside
(Millions of Dollars) Canada* North America Total
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
1994
Future cash inflows $1,386 $1,055 $ 2,441
Future production and development costs (503) (658) (1,161)
Other related future costs (73) (69) (142)
Future income tax expenses (234) (118) (352)
- ----------------------------------------------------------------------------------------------------------------------------------
Future net cash flows 576 210 786
Discount at 10 percent (232) (21) (253)
- ----------------------------------------------------------------------------------------------------------------------------------
Standardized measure of discounted future net cash flows from estimated
production of proved oil and gas reserves after income taxes $ 344 $ 189 $ 533
- ----------------------------------------------------------------------------------------------------------------------------------
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 519 346 865
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
- ----------------------------------------------------------------------------------------------------------------------------------
*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.
</TABLE>
65
<PAGE>
<TABLE>
<CAPTION>
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)
1994 1993 1992
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Balance, beginning of year $ 459 $ 570 $ 579
Increase (decrease) in discounted future net cash flows:
Sales and transfers of oil and gas net of related costs (202) (237) (302)
Revisions to estimates of proved reserves:
Prices 88 (54) 52
Development costs (40) (8) (10)
Production costs (31) 82 --
Quantities 59 23 73
Other (30) (57) (15)
Extensions, discoveries and improved recovery less related costs 84 62 24
Development costs incurred during the period 87 67 59
Purchases of reserves in place 56 21 30
Sales of reserves in place (6) (289) (6)
Accretion of discount 65 80 98
Income taxes (56) 199 (12)
- ----------------------------------------------------------------------------------------------------------------------------------
Balance, end of year $ 533 $ 459 $ 570
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
66
<PAGE>
MINING DATA
<TABLE>
<CAPTION>
1994 1993 1992 1991 1990
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
OIL SANDS (CANADA)
Proven reserves* (millions of barrels) at December 31 205 231 256 276 283
Synthetic crude oil produced for shipment (thousands of barrels daily)** 70.7 60.5 58.5 60.6 52.0
Average price (per barrel) $16.18 $16.61 $19.03 $20.03 $24.48
Net mineable acreage (in thousands) at December 31:
Developed 6 6 6 6 6
Undeveloped 87 70 70 15 15
- ----------------------------------------------------------------------------------------------------------------------------------
*Before crown and other royalties and reflects (3), 1, 15, and 4 million barrel revisions of previous estimates during 1993,
1992, 1991 and 1990, 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 OPERATIONS HELD FOR SALE
Proven and probable reserves (millions of tons) at December 31:
Bituminous:
Metallurgical 116 117 120 116 118
Steam 71 134 197 266 273
Subbituminous -- -- 384 397 415
- ----------------------------------------------------------------------------------------------------------------------------------
187* 251* 701 779 806
- ----------------------------------------------------------------------------------------------------------------------------------
Proven reserves (million of tons) at December 31 104 147 564 577 605
- ----------------------------------------------------------------------------------------------------------------------------------
*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 during 1993 and certain of its eastern U.S. coal operations during 1994, which resulted in
a reduction in proven and probable reserves of 508 million tons in the 1993-94 period. Sun continues to pursue the sale of its
remaining eastern U.S. coal and cokemaking operations. (See Note 2 to the consolidated financial statements.)
</TABLE>
<TABLE>
<CAPTION>
1994 1993 1992 1991 1990
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Production (thousands of tons):
Bituminous:
Metallurgical 1,633 1,959 2,047 2,090 2,242
Steam 4,962 6,209 7,265 7,969 8,901
Subbituminous -- 4,690 13,338 13,743 12,941
- ----------------------------------------------------------------------------------------------------------------------------------
6,595 12,858 22,650 23,802 24,084
- ----------------------------------------------------------------------------------------------------------------------------------
Coke 678 642 640 622 567
- ----------------------------------------------------------------------------------------------------------------------------------
Sales (thousands of tons):
Bituminous:
Metallurgical 772 1,033 1,197 1,265 1,392
Steam 5,537 6,214 7,385 8,116 9,062
Subbituminous -- 4,690 13,338 13,743 12,941
- ----------------------------------------------------------------------------------------------------------------------------------
6,309 11,937 21,920 23,124 23,395
- ----------------------------------------------------------------------------------------------------------------------------------
Coke 782 622 634 537 571
- ----------------------------------------------------------------------------------------------------------------------------------
Average price of coal and coke (per ton) $34.00* $21.49* $15.86 $15.79 $17.77
Net acreage (in thousands) at December 31:
Developed:
Bituminous 34 45 49 53 50
Subbituminous -- -- 8 8 8
Undeveloped bituminous 113 154 163 257 259
- ----------------------------------------------------------------------------------------------------------------------------------
*Reflects the absence of lower-value subbituminous coal sales subsequent to the divestment of Sun's western U.S. coal operations
during 1993.
</TABLE>
67
<PAGE>
QUARTERLY FINANCIAL AND STOCK MARKET INFORMATION
(Millions of Dollars Except Per Share Amounts
and Common Stock Prices)
<TABLE>
<CAPTION>
1994 1993
------------------------------------------------------------------------------------
First Second Third Fourth First Second Third Fourth
Quarter Quarter Quarter Quarter Quarter Quarter Quarter Quarter
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Sales and other operating revenue
(including consumer excise taxes) $2,056 $2,218 $2,699 $2,845 $2,285 $2,360 $2,273 $2,262
Gross profit* $244 $181 $302 $234 $227 $233 $285 $275
Income before cumulative effect of
change in accounting principle $34 $12** $48*** $3+ $35 $70++ $114+++ $64#
Net income $27## $12 $48 $3 $40### $70 $114 $64
Income per share of common stock
before cumulative effect of change
in accounting principle $.32 $.11 $.45 $.03 $.32 $.66 $1.07 $.60
Net income per share of common stock $.25## $.11 $.45 $.03 $.37### $.66 $1.07 $.60
Cash dividends per share of common stock $.45 $.45 $.45 $.45 $.45 $.45 $.45 $.45
Common stock price range@--high $35-1/4 $34-3/8 $29-1/4 $32-1/2 $30-1/4 $27-1/8 $28-7/8 $32-3/4
--low $29-3/8 $25-1/8 $25-7/8 $26-3/8 $24-1/2 $22-1/4 $23-7/8 $28-1/2
- ----------------------------------------------------------------------------------------------------------------------------------
*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 $13 million increase due to a gain on the sale of certain oil and gas exploration and production properties.
***Includes a $15 million increase due to a gain on the sale of certain oil and gas exploration properties and a $22 million
decrease due to a provision for write-down of assets and other matters.
+Includes a $10 million decrease due to a provision for write-down of assets and other matters.
++Includes a $19 million increase due to a gain on the sale of 6.8 million shares of Suncor common stock, 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.
##Reflects a decrease in net income of $7 million or $.07 per share of common stock due to the cumulative effect for years
prior to 1994 of a change in the method of accounting for the cost of postemployment benefits.
###Reflects an increase in net income 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.
@The Company's common stock is principally traded on the New York Stock Exchange, Inc. under the symbol "SUN." The
Company had approximately 49,000 holders of record of common stock as of January 31, 1995.
</TABLE>
STATEMENT OF CASH FLOWS OF SUN BUSINESSES
(Millions of Dollars)
<TABLE>
<CAPTION>
Fuels Lubricants
-------------------- ------------
For the Year Wholesale Branded Related International Canada
Ended December 31, 1994 Fuels Marketing Lubes Fuels Chemicals Logistics Production (Suncor)* Corporate** Consolidated
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Cash flows from
operating activities:
Income (loss) $(115) $ 64 $61 $(49) $ 32 $ 46 $ 60 $ 37 $ (46) $ 90
Depreciation, depletion
and amortization 110 59 13 13 11 12 51 90 -- 359
Other noncash items
included in income (loss) (30) 20 (4) (1) (2) 5 (11) 84 (57) 4
Changes in working
capital pertaining
to operating activities 24 (3) (7) (2) (18) 8 (19) 47 (2) 28
- ----------------------------------------------------------------------------------------------------------------------------------
Net cash provided by
operating activities (11) 140 63 (39) 23 71 81 258 (105) 481
- ----------------------------------------------------------------------------------------------------------------------------------
Cash flows from
investing activities:
Capital expenditures (191) (169) (5) (19) (63) (81) (100) (220) -- (848)
Acquisition of Girard
Point refinery and
related assets (137) -- -- -- (11) (16) -- -- -- (164)
Cash provided by operations
held for sale -- -- -- -- -- -- -- -- 43 43
Proceeds from divestments 2 13 -- -- -- -- 5 7 104 131
Other 1 (7) -- -- (2) (2) -- 2 10 2
- ----------------------------------------------------------------------------------------------------------------------------------
Net cash used in investing
activities (325) (163) (5) (19) (76) (99) (95) (211) 157 (836)
- ----------------------------------------------------------------------------------------------------------------------------------
Net cash generated (used) $(336) $ (23) $58 $(58) $(53) $(28) $ (14) $ 47 $ 52 (355)
- --------------------------------------------------------------------------------------------------------------------
Cash flows from financing
activities:
Cash provided by borrowings
net of debt repayments 539
Cash dividend payments (192)
Other 7
- ----------------------------------------------------------------------------------------------------------------------------------
Decrease in cash and cash
equivalents $ (1)
- ----------------------------------------------------------------------------------------------------------------------------------
*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.)
</TABLE>
68
<PAGE>
<PAGE> 1
EXHIBIT 21
50.10% SUN COMPANY, INC. DECEMBER 31, 1994
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 & 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
- ----Sunoco Leasing, Inc. DE
- ------Heleasco One, Inc. DE
- ------Heleasco Three, Inc. DE
- --------Three Company, Inc. DE
- ------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 Investment Company DE
- ----11 PC, Inc. PA
- --Morgan's Run Investment Company DE
- --Radnor Asset Management Corporation DE
- --Radnor Development Corporation DE
- --Radnor Hospitality Services Corporation DE
- --Radnor MidAtlantic Corporation PA
- --Radnor Midsouth, Inc. 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
- --Radnor/Bluegrass Corporation DE
- --Radnor/Bowie Corporation DE
- --Radnor/Brentwood Corporation DE
<PAGE>
<PAGE> 3
- --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/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/Montclair Corporation DE
- --Radnor/Murrieta Corporation DE
- --Radnor/Northmark Corporation DE
- --Radnor/Northridge Corporation DE
<PAGE>
<PAGE> 4
- --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
- --IV Radnor/Plymouth Corporation PA
- --Radnor/Plymouth Leasing Corporation PA
- --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/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
- --Radnor/Yorba Linda-I Corporation DE
- --RSV Advertising, Inc. DE
- --Striker Investment Company DE
Scandinavian Sun Oil Company A/S NW
<PAGE>
<PAGE> 5
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 Canada, Inc. DE
- --Helios Assurance Company Limited BA
- --Petrosun Limited GB
- --Sun International Limited BA
- --Sun Mexico One, Inc. DE
- ----Sunoco de Mexico, S.A. de C.V. MX
- --Sun Mexico Two, Inc. DE
- --Sun Oil Exploration #4, Ltd. BA
- --Sun Oil Exploration #5, Ltd. BA
- --Sun Oil Ghadames Algerie Limited BA
- --Suncor Inc. CN
- ----Maywelle Properties Ltd. ON
- ----SMS Petroleums Ltd. CN
- ----Sun Oil Company of Canada Limited CN
- ----Sunoco Home Comfort Inc. ON
- ----Sunoco Inc. ON
- ------Chemsun Inc. ON
- ------133950 Canada Inc. CN
- ------1044287 Ontario Inc. ON
- ------Sunchem Inc. ON
- ------388022 Alberta Ltd. AB
- ----333817 Alberta Ltd. AB
- ----566406 Alberta Ltd. AB
- --Sunoco Limited GB
Sun Coal Company DE
Sun Company, Inc. DE
(Name Saver Company)
<PAGE>
<PAGE> 6
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 Executive Services Company PA
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)
Sun Oil Espinal Colombia Limited BA
Sun Oil Exploration #2, Ltd. BA
Sun Oil Exploration #3, Ltd. BA
Sun Oil Export 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 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
<PAGE>
<PAGE> 7
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-Del Services, Inc. DE
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.
Sunoco Science and Technological Services, Inc. NY
(Name Saver Company)
Suntide Refining Company DE
The Claymont Investment Company DE
- --Sunoco Credit Corporation DE
<PAGE>
<PAGE> 8
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 report dated
February 14, 1995 (which includes an explanatory paragraph regarding the
Company's change in method of accounting for postemployment benefits in
1994, the Company's change in method of accounting for income taxes in 1993
and the Company's change in method of accounting for the cost of
postretirement health care and life insurance benefits in 1992) on our
audits of the consolidated financial statements and of our report dated
February 14, 1995 on our audits of the financial statement schedule of Sun
Company, Inc. and subsidiaries as of December 31, 1994 and 1993 and for
each of the three years in the period ended December 31, 1994, 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. 33-53717);
Sun Company, Inc. Dividend Reinvestment Plan Form S-3
Registration Statement (Registration No. 33-52615); and
Sun Company, Inc. Form S-3 Registration Statement
(Registration No. 33-56317).
Coopers & Lybrand L.L.P.
2400 Eleven Penn Center
Philadelphia, PA 19103
March 2, 1995
<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, 1994 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 2nd day of March, 1995.
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/ROBERT D. KENNEDY
Robert D. Kennedy
Director
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/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 2, 1995, 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, 1994, is approved in the form presented to
this meeting, subject to such changes or amendments as may be
approved (as so amended, the "Form 10-K") by any one of the
following officers of the Company: The Chief Executive Officer,
Senior Vice President and Chief Financial Officer, Senior Vice
President and Chief Administrative Officer or Vice President and
General Counsel;
FURTHER RESOLVED; That each of the above named officers and the
Comptroller (collectively, the "Authorized Officers") is authorized to
sign and file, or cause to be filed, on behalf of the Corporation, the
Form 10-K, together with any such other certificates, documents,
instruments or notices as may be necessary or as any such officer may
deem necessary or desirable in order to effectuate or carry out the
purposes, and intent of the foregoing resolutions; and that all such
actions heretofore taken by any one or more of the Authorized Officers
in order to effectuate or carry out the purposes and intent of the
foregoing resolutions are hereby ratified, adopted and approved.
(Corporate Seal) s/DONALD J. AINSWORTH
---------------------
Donald J. Ainsworth
Secretary
March 2, 1995
Philadelphia, Pennsylvania
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000,000
<PAGE> 1
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-START> JAN-01-1994
<PERIOD-END> DEC-31-1994
<CASH> 117
<SECURITIES> 0
<RECEIVABLES> 667
<ALLOWANCES> 12
<INVENTORY> 613
<CURRENT-ASSETS> 1,508
<PP&E> 8,430
<DEPRECIATION> 4,082
<TOTAL-ASSETS> 6,465
<CURRENT-LIABILITIES> 1,915
<BONDS> 1,073
<COMMON> 130
0
0
<OTHER-SE> 1,733
<TOTAL-LIABILITY-AND-EQUITY> 6,465
<SALES> 9,818
<TOTAL-REVENUES> 9,908
<CGS> 6,276
<TOTAL-COSTS> 6,979
<OTHER-EXPENSES> 2,712
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 97
<INCOME-PRETAX> 120
<INCOME-TAX> 23
<INCOME-CONTINUING> 97
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> (7)
<NET-INCOME> 90
<EPS-PRIMARY> .84
<EPS-DILUTED> .84
