<PAGE>
<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1996
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
----------------- ----------------
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)
(215) 977-3000
----------------------------------------------------------------
(Registrant's telephone number, including area code)
NOT APPLICABLE
- --------------------------------------------------------------------------
(Former name, former address and former fiscal year, if changed since last
report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
YES X NO
------ ------
At September 30, 1996, there were 72,991,477 shares of Common Stock, $1 par
value and 12,460,550 shares of Cumulative Preference Stock--Series A, no
par value, outstanding.
<PAGE>
<PAGE> 2
SUN COMPANY, INC.
-----------------
INDEX
Page No.
--------
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Statements of Income
for the Nine Months Ended September 30, 1996
and 1995 3
Condensed Consolidated Statements of Income
for the Three Months Ended September 30, 1996
and 1995 4
Condensed Consolidated Balance Sheets at
September 30, 1996 and December 31, 1995 5
Condensed Consolidated Statements of Cash
Flows for the Nine Months Ended September 30,
1996 and 1995 6
Notes to Condensed Consolidated Financial
Statements 7
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of
Operations 15
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 24
Item 5. Other Information 24
Item 6. Exhibits and Reports on Form 8-K 25
SIGNATURE 26
<PAGE>
<PAGE> 3
PART I
FINANCIAL INFORMATION
Item 1. Financial Statements
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
Sun Company, Inc. and Subsidiaries
(Millions of Dollars Except Per Share Amounts)
- --------------------------------------------------------------------------
<TABLE>
<CAPTION>
For the Nine Months
Ended September 30
-------------------
1996 1995*
---- ----
(UNAUDITED)
<S> <C> <C>
REVENUES
Sales and other operating revenue (including consumer
excise taxes of $1,203 in 1996 and $1,360 in 1995) $8,220 $7,404
Interest income 12 9
Other income 41 25
------ ------
8,273 7,438
------ ------
COSTS AND EXPENSES
Cost of products sold and operating expenses 6,323 5,195
Selling, general and administrative expenses 440 477
Taxes, other than income taxes 1,267 1,435
Depreciation, depletion and amortization 197 195
Provision for write-down of assets and other
matters (Note 4) 85 93
Interest cost and debt expense 59 80
Interest capitalized (1) (2)
------ ------
8,370 7,473
------ ------
Loss from continuing operations before
income tax benefit and cumulative
effect of change in accounting principle (97) (35)
Income tax benefit (40) (26)
------ ------
Loss from continuing operations before cumulative
effect of change in accounting principle (57) (9)
Income from discontinued operations (Note 2) 166 218
Cumulative effect of change in accounting
principle (Note 5) -- (87)
------ ------
NET INCOME 109 122
Dividends on preference stock (34) (11)
------ ------
Net income attributable to common stockholders $ 75 $ 111
====== ======
Earnings per share of common stock:**
Loss from continuing operations before cumulative
effect of change in accounting principle $(1.23) $(.21)
Net income $1.02 $1.14
Cash dividends paid per share:
Preference stock*** $2.70 $.90
Common stock $.75 $1.15
</TABLE>
- -------------
*Restated to reflect the change in method of accounting for the
impairment of long-lived assets, effective January 1, 1995 (Note 5) and
to present International Production and Canadian Upstream Petroleum
operations as discontinued operations (Note 2).
**Represents both primary and fully diluted income per share (Note 6).
***Each share of preference stock is represented by two depositary shares.
Each depositary share accrues dividends quarterly at a rate of $.45 per
share, or one-half the rate paid on the preference stock.
(See Accompanying Notes)
<PAGE>
<PAGE> 4
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
Sun Company, Inc. and Subsidiaries
(Millions of Dollars Except Per Share Amounts)
- --------------------------------------------------------------------------
<TABLE>
<CAPTION>
For the Three Months
Ended September 30
--------------------
1996 1995*
------ ------
(UNAUDITED)
<S> <C> <C>
REVENUES
Sales and other operating revenue (including consumer
excise taxes of $416 in 1996 and $399 in 1995) $2,874 $2,347
Interest income 4 5
Other income 20 10
------ ------
2,898 2,362
------ ------
COSTS AND EXPENSES
Cost of products sold and operating expenses 2,240 1,609
Selling, general and administrative expenses 155 142
Taxes, other than income taxes 435 424
Depreciation, depletion and amortization 65 64
Interest and debt expense 19 25
------ ------
2,914 2,264
------ ------
Income (loss) from continuing operations before
income tax expense (benefit) (16) 98
Income tax expense (benefit) (5) 28
------ ------
Income (loss) from continuing operations (11) 70
Income from discontinued operations (Note 2) 128 8
------ ------
NET INCOME 117 78
Dividends on preference stock (11) (11)
------ ------
Net income attributable to common stockholders $ 106 $ 67
====== ======
Earnings per share of common stock (Note 6):
Primary:
Income (loss) from continuing operations $(.30) $.77
Net income $1.44 $.87
Fully diluted:
Income (loss) from continuing operations $(.11) $.68
Net income $1.19 $.76
Cash dividends paid per share:
Preference stock** $.90 $.90
Common stock $.25 $.25
</TABLE>
- -------------
*Restated to present International Production operations as discontinued
operations (Note 2).
**Each share of preference stock is represented by two depositary shares.
Each depositary share accrues dividends quarterly at a rate of $.45 per
share, or one-half the rate paid on the preference stock.
(See Accompanying Notes)
<PAGE>
<PAGE> 5
CONDENSED CONSOLIDATED BALANCE SHEETS
Sun Company, Inc. and Subsidiaries
<TABLE>
<CAPTION>
At At
September 30 December 31
1996 1995*
(Millions of Dollars) (UNAUDITED)
- --------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Current Assets
Cash and cash equivalents $ 235 $ 11
Note receivable from divestment of Suncor
common stock -- 130
Accounts and other notes receivable, net 793 637
Inventories:
Crude oil 137 184
Refined products 319 272
Materials, supplies and other 66 66
Deferred income taxes 130 132
Investment in discontinued operations (Note 2) -- 143
------ ------
Total Current Assets 1,680 1,575
Investment in Real Estate Operations Held
for Sale (Note 3) 85 87
Long-Term Receivables and Investments 102 104
Properties, Plants and Equipment 5,671 5,794
Less Accumulated Depreciation, Depletion
and Amortization 2,682 2,746
------ ------
Properties, Plants and Equipment, net 2,989 3,048
Deferred Charges and Other Assets 254 271
------ ------
Total Assets $5,110 $5,085
====== ======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts payable $ 966 $ 776
Accrued liabilities 517 502
Short-term borrowings -- 54
Current portion of long-term debt 3 3
Taxes payable 126 131
------ ------
Total Current Liabilities 1,612 1,466
Long-Term Debt 886 888
Retirement Benefit Liabilities 502 506
Deferred Income Taxes 42 94
Other Deferred Credits and Liabilities 377 432
Commitments and Contingent Liabilities (Note 7)
Stockholders' Equity (Note 8) 1,691 1,699
------ ------
Total Liabilities and Stockholders' Equity $5,110 $5,085
====== ======
</TABLE>
- --------------
*Restated to conform to the 1996 presentation (Note 2).
(See Accompanying Notes)
<PAGE>
<PAGE> 6
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Sun Company, Inc. and Subsidiaries
(Millions of Dollars)
- -------------------------------------------------------------------------
<TABLE>
<CAPTION>
For the Nine Months
Ended September 30
------------------
1996 1995*
----- -----
(UNAUDITED)
<S> <C> <C>
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 109 $ 122
Adjustments to reconcile net income to net
cash provided by operating activities:
Income from discontinued operations (166) (218)
Cumulative effect of change in accounting
principle -- 87
Provision for write-down of assets and other
matters 85 93
Depreciation, depletion and amortization 197 195
Deferred income tax expense (benefit) (39) 3
Changes in working capital pertaining to
operating activities:
Accounts and notes receivable (156) (108)
Inventories (2) (67)
Accounts payable and accrued liabilities 183 (16)
Taxes payable (5) (67)
Other (20) (21)
----- -----
Net cash provided by continuing operations 186 3
Net cash provided by discontinued operations 17 172
----- -----
Net cash provided by operating activities 203 175
----- -----
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (207) (285)
Cash provided by operations held for sale 2 --
Proceeds from divestments:
International Production operations 278 --
Suncor common stock 135 635
Other 21 48
Investing activities of discontinued operations (13) (90)
Other -- (10)
----- -----
Net cash provided by investing activities 216 298
----- -----
CASH FLOWS FROM FINANCING ACTIVITIES:
Net repayments of short-term borrowings (54) (193)
Repayments of long-term debt (2) (127)
Cash dividend payments on preference stock (34) (11)
Cash dividend payments on common stock (55) (115)
Purchases of preference stock for retirement (2) --
Purchases of common stock for treasury (31) (210)
Financing activities of discontinued operations -- 15
Other (17) 96
----- -----
Net cash used in financing activities (195) (545)
----- -----
Net increase (decrease) in cash and cash equivalents 224 (72)
Cash and cash equivalents at beginning of period 11 86
----- -----
Cash and cash equivalents at end of period $ 235 $ 14
===== =====
</TABLE>
- ---------------
*Restated to conform to the 1996 presentation (Note 2).
(See Accompanying Notes)
<PAGE>
<PAGE> 7
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
----------------------------------------------------
1. General.
The accompanying condensed consolidated financial statements are
presented in accordance with the requirements of Form 10-Q and
generally accepted accounting principles for interim financial
reporting. They do not include all disclosures normally made in
financial statements contained in Form 10-K. In management's opinion
all adjustments necessary for a fair presentation of the results of
operations, financial position and cash flows for the periods shown
have been made. All such adjustments are of a normal recurring nature
except for the provisions for write-down of assets and other matters
(Note 4) and the cumulative effect of change in accounting principle
(Note 5). Results for the three and nine months ended September 30,
1996 are not necessarily indicative of results for the full year 1996.
2. Discontinued Operations.
On September 30, 1996, Sun completed the sale of its international oil
and gas production business to Agip (U.K.) Limited for $278 million in
cash. The sale of this business completes the Company's withdrawal
from oil and gas exploration and production activities. The Company
withdrew from international exploration activities in 1992 and
divested its remaining 55-percent interest in Suncor Inc., its
Canadian integrated oil company, on June 8, 1995. Sun received $770
million in cash from the sale of Suncor, after commissions and
discounts, of which $635 million was received in June 1995 and $135
million was received in June 1996.
As a result of the sale of the international oil and gas production
business, this business and the previously divested Canadian synthetic
oil production and conventional oil and gas exploration and production
operations (collectively, "Canadian Upstream Petroleum operations")
have been classified as discontinued operations for all periods
presented in the condensed consolidated financial statements and
related footnotes. The following is a summary of income from
discontinued operations for the nine months ended September 30, 1996
and 1995 (in millions of dollars):
<PAGE>
<PAGE> 8
<TABLE>
<CAPTION>
Canadian
International Upstream
Production Petroleum
Operations Operations Total
------------ ------------ -----
1996
----
<S> <C> <C> <C>
Income before income tax benefit $152 $ -- $152
Income tax benefit 14 -- 14
---- ---- ----
Income from discontinued operations $166 $ -- $166
==== ==== ====
1995
----
Income before income tax expense $ 60 $286 $346
Income tax expense 20 108 128
---- ---- ----
Income from discontinued operations $ 40 $178 $218
==== ==== ====
</TABLE>
Income from discontinued International Production operations in 1996
includes a $125 million gain on divestment of this business (comprised
of a pretax gain of $93 million and an income tax benefit of $32
million). Earnings after July 24, 1996, the date the agreement of
sale was consummated, are included in the gain on divestment. Income
from discontinued Canadian Upstream Petroleum operations in 1995
includes a $157 million gain on the divestment of Suncor (comprised of
a pretax gain of $242 million and income tax expense of $85 million).
Sales and other operating revenue from discontinued International
Production operations totalled $187 and $175 million for the nine
months ended September 30, 1996 and 1995, respectively, and $56 and
$52 million, respectively, for the quarters then ended. Sales and
other operating revenue from discontinued Canadian Upstream Petroleum
operations totalled $271 million during 1995 prior to the completion
of the Suncor sale on June 8.
3. Operations Held for Sale.
Real Estate Operations
Sun has been pursuing the disposition of its investment in Radnor
Corporation, its wholly owned real estate development subsidiary,
since October 1991. This business is accounted for as an investment
held for sale. As a result, pretax income (loss) from real estate
operations, which totalled breakeven and $(1) million for the nine
months ended September 30, 1996 and 1995, respectively, has been
included as a single amount in other income in the condensed
consolidated statements of income.
The assets and liabilities relating to real estate operations have
been segregated in the condensed consolidated balance sheets and
separately reflected as an investment in operations held for sale.
Such amounts are detailed as follows: <PAGE>
<PAGE> 9
<TABLE>
<CAPTION>
At At
September 30 December 31
1996 1995
------------ -----------
(Millions of Dollars)
<S> <C> <C>
Inventories $ 76 $ 83
Properties, plants and equipment, net 139 144
Other assets 21 20
Debt (Note 7) (124) (132)
Other liabilities (27) (28)
----- -----
Investment in real estate operations
held for sale $ 85 $ 87
===== =====
</TABLE>
Coal and Cokemaking Operations
In January 1993, Sun decided to sell 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. Prior to June 30, 1995, Sun's coal and
cokemaking operations had been accounted for as an investment held for
sale. However, effective June 30, 1995, the remaining coal and
cokemaking business became one of the Company's ongoing business units
and is no longer held for sale. Accordingly, the condensed
consolidated balance sheets of Sun as of September 30, 1996 and
December 31, 1995 contain the accounts of its coal and cokemaking
operations on a fully consolidated basis. The accompanying condensed
consolidated statements of income and cash flows reflect coal and
cokemaking operations on a fully consolidated basis after June 30,
1995 and as an operation held for sale prior to that date.
4. Write-downs of Assets and Other Matters.
During the second quarter of 1996, Sun recorded an $85 million ($53
million after-tax) provision primarily to write-off redundant
processing units in connection with a refinery reconfiguration project
designed to complete the integration of what had been two separate
facilities (Point Breeze and Girard Point) located next to each other
in Philadelphia. The integration, which should be substantially
completed by the end of 1996, is expected to improve operating
efficiencies, lower fixed costs, and reduce on-going capital spending
and working capital requirements. The provision also includes an
accrual for environmental remediation activities associated with the
reconfiguration.
During the second quarter of 1995, Sun recorded a provision to write
down to net realizable value certain assets in the refining and
marketing business and to establish accruals for employee terminations
and related costs. The following is a summary of the provision for
write-down of assets and other matters in the condensed consolidated
statement of income for the nine months ended September 30, 1995 (in
millions of dollars):
<PAGE>
<PAGE> 10
<TABLE>
<CAPTION>
Provision for Write-Down
of Assets and Other Matters
---------------------------
Pretax After-Tax
------ ---------
<S> <C> <C>
Refining and marketing
assets $43 $28
Employee terminations
and related costs 50* 33
--- ---
$93 $61
=== ===
</TABLE>
---------------
*Includes $38 million attributable to termination benefits and $12
million related to future rental payments for vacated office space.
5. Change in Accounting Principle.
Effective January 1, 1995, Sun adopted the provisions of Statement of
Financial Accounting Standards No. 121, "Accounting for the Impairment
of Long-Lived Assets and for Long-Lived Assets to be Disposed Of."
This statement requires companies to write down long-lived assets that
are impaired to estimated fair value. The write-downs recognized in
the first quarter of 1995 are reflected as a cumulative effect of
change in accounting principle in the condensed consolidated statement
of income and relate to properties to be disposed of in the Company's
real estate, coal and refining and marketing operations. The
following table sets forth summary information concerning these write-
downs (in millions of dollars):
<TABLE>
<CAPTION>
Cumulative Effect
of Accounting Change
---------------------
Pretax After-tax
------ ---------
<S> <C> <C>
Real estate $ 33 $15
Coal 45 29
Refining and marketing* 67 43
---- ---
$145 $87
==== ===
</TABLE>
-------------
*Primarily service stations and terminals.
Other than the cumulative effect, this change did not have a
significant impact on Sun's results of operations during the first
nine months of 1995. The results of operations during the first nine
months of 1995 and 1996 for all properties to be disposed of were not
significant.
<PAGE>
<PAGE> 11
6. Earnings Per Share.
The following table sets forth the computation of earnings per share
for the nine-month and three-month periods ending September 30, 1996
and 1995 (in millions except per share amounts):
<TABLE>
<CAPTION>
Nine Months Three Months
Ended Ended
September 30 September 30
-------------- --------------
1996* 1995* 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net income attributable to common
stockholders:
Primary (after deduction of
dividends on preference stock) $75 $111 $106 $67
=== ==== ==== ===
Fully diluted $75 $111 $117 $78
=== ==== ==== ===
Weighted average number of shares
outstanding:
Primary 73.8 97.0 73.6 77.1
Fully diluted 73.8 97.0 98.6 102.1
Earnings per common share:
Primary:
Income (loss) from continuing
operations before cumulative effect
of change in accounting principle $(1.23) $(.21) $(.30) $.77
Income from discontinued operations 2.25 2.25 1.74 .10
Cumulative effect of change in
accounting principle -- (.90) -- --
------ ----- ----- ----
Net Income $ 1.02 $1.14 $1.44 $.87
====== ===== ===== ====
Fully diluted:
Income (loss) from continuing
operations before cumulative effect
of change in accounting principle $(1.23) $(.21) $(.11) $.68
Income from discontinued operations 2.25 2.25 1.30 .08
Cumulative effect of change
in accounting principle -- (.90) -- --
------ ----- ----- ----
Net Income $ 1.02 $1.14 $1.19 $.76
====== ===== ===== ====
</TABLE>
- -------------
*Since the assumed redemption of preference shares would have resulted in
an increase in earnings per share during the nine months ended September
30, 1996 and 1995, fully diluted amounts are equal to those reported on a
primary basis for these periods.
<PAGE>
<PAGE> 12
7. Commitments and Contingent Liabilities.
In 1992, a wholly owned subsidiary of the Company became a one-third
partner in Belvieu Environmental Fuels ("BEF"), a joint venture formed
for the purpose of constructing, owning and operating a $225 million
methyl tertiary butyl ether ("MTBE") production facility in Mont
Belvieu, Texas. Completed in 1995, the facility currently has a
production capacity of 14,000 barrels of MTBE per day.
In order to obtain a secure supply of oxygenates for the manufacture
of reformulated fuels, Sun entered into an off-take agreement with BEF
whereby Sun agreed to purchase all of the MTBE production from the
plant. For the first 14,000 barrels daily of production, Sun has
agreed to pay BEF prices through May 1997 based on the market value of
MTBE feedstocks (methanol and butane) plus a fixed amount per gallon
(the "formula price"), and thereafter through May 2000 based on the
then-existing MTBE prices per gallon in the long-term market (the
"long-term market price"). However, the price to be paid by Sun for
the first 12,600 barrels daily of MTBE production through May 2000, at
a minimum, will equal the sum of BEF's annual raw material and
operating costs associated with this production plus BEF's debt
service payments (collectively, the "minimum price") if the minimum
price per gallon exceeds the formula price or long-term market price.
After May 2000, Sun and BEF will negotiate a new price for the last
four years of the agreement based upon the market conditions existing
at that time.
Historically, the formula prices paid by Sun under this agreement are
believed to have approximated those of other MTBE long-term sales
agreements in the marketplace. Management now believes that the long-
term market is changing as feedstock-plus-fixed-priced contracts
expire and are being replaced by spot-market-price-based or gasoline-
indexed contracts, which are currently more favorable to the
purchaser. Management also believes that the spot market for MTBE is
becoming more developed. While it is uncertain that Sun could satisfy
all of its MTBE requirements in the developing spot market, recent
spot market prices for MTBE are approximately $.20 per gallon less
than the net pretax cost to Sun under the joint venture and off-take
agreements. However, management cannot reasonably estimate at this
time what the impact of these agreements will be on future results of
operations.
The Company guarantees the outstanding debt of Radnor Corporation, its
real estate operation held for sale. Such debt, which is due in
January 2001, totalled $124 million at September 30, 1996 (Note 3).
Sun is subject to numerous federal, state, local and foreign laws
regulating the discharge of materials into, or otherwise relating to
the protection of, the environment. The Comprehensive Environmental
Response Compensation and Liability Act ("CERCLA") and the Solid Waste
Disposal Act as amended by the Resource Conservation and Recovery Act
("RCRA"), and related state laws subject Sun to the potential
obligation to remove or mitigate the environmental effects of the
disposal or release of certain pollutants at Sun's facilities
including refineries, service stations, terminals, pipelines and truck
transportation facilities as well as at third-party or formerly-owned
<PAGE>
<PAGE> 13
sites at which contaminants generated by Sun may be located. 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 September 30, 1996,
Sun had been named as a PRP at 48 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 litigation with 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.
Sun establishes accruals related to environmental remediation
activities for work at identified sites where an assessment has
indicated that cleanup costs are probable and reasonably estimable.
The accrued liability for environmental remediation was classified in
the condensed consolidated balance sheets as follows (in millions of
dollars):
<TABLE>
<CAPTION>
At At
September 30 December 31
1996 1995
------------ -----------
<S> <C> <C>
Accrued liabilities $ 66 $ 55
Other deferred credits and
liabilities 134 144
---- ----
$200 $199
==== ====
</TABLE>
Pretax charges against income for environmental remediation totalled
$23 and $8 million for the nine months ended September 30, 1996 and
1995, respectively. The $15 million increase was largely attributable
to an accrual for remediation activities associated with the
reconfiguration of the Philadelphia refinery (Note 4). Claims for
recovery of environmental liabilities that are probable of realization
totalled $8 million at September 30, 1996 and are included in deferred
charges and other assets in the condensed 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 contamination of each site,
the timing and nature of required remedial actions, the technology
<PAGE>
<PAGE> 14
available and needed to meet the various existing legal requirements,
the nature and extent of future environmental laws, inflation rates
and the determination of Sun's liability at multi-party sites, if any,
in light of the number, participation levels and financial viability
of other parties.
Many other legal and administrative proceedings are pending against
Sun. The ultimate outcome of these proceedings and the matters
discussed above cannot be ascertained at this time; however, it is
reasonably possible that some of them could be resolved unfavorably to
Sun. Management believes that any expenditures attributable to these
matters will be incurred over an extended period of time and will be
funded from Sun's net cash flow from operating activities. Although
the ultimate impact of these matters could have a significant impact
on results of operations or cash flow for any future quarter or year,
management believes that any liabilities which may arise pertaining to
such matters would not be material in relation to the consolidated
financial position of Sun at September 30, 1996. Furthermore,
management believes that the overall costs for environmental
activities will not have a material impact, over an extended period of
time, on Sun's cash flow or liquidity.
8. Stockholders' Equity.
<TABLE>
<CAPTION>
At At
September 30 December 31
1996 1995
------------ -----------
(Millions of Dollars)
<S> <C> <C>
Cumulative preference stock - Series A,
no par value $ 748 $ 750
Common stock, par value $1 per share 130 130
Capital in excess of par value 1,315 1,310
Earnings employed in the business 1,538 1,518
------ ------
3,731 3,708
Less common stock held in treasury,
at cost 2,040 2,009
------ ------
Total $1,691 $1,699
====== ======
</TABLE>
<PAGE>
<PAGE> 15
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
RESULTS OF OPERATIONS - NINE MONTHS
Earnings Profile of Sun Businesses (after tax)
- ----------------------------------------------
<TABLE>
<CAPTION>
Nine Months Ended
September 30
------------------
1996 1995 Variance
---- ---- --------
(Millions of Dollars)
<S> <C> <C> <C>
Sun Northeast Refining $(44) $(21) $ (23)
Sunoco Northeast Marketing 9 32 (23)
Sunoco Chemicals 30 59 (29)
Sunoco Lubricants (7) (10) 3
Sunoco MidAmerica Marketing &
Refining (4) (6) 2
Sunoco Logistics 39 40 (1)
Sun Coal and Coke 25 19 6
Corporate expenses (17) (18) 1
Net financing expenses (35) (45) 10
Real estate operations held
for sale -- -- --
Sun International Production* 41 40 1
Canada (Suncor) -- 23 (23)
---- ---- -----
37 113 (76)
Special items:**
Gain on divestment of International
Production business* 125 -- 125
Gain on divestment of Suncor
common stock -- 157 (157)
Provision for write-down of assets
and other matters (53) (61) 8
Cumulative effect of change in
accounting principle -- (87) 87
---- ---- -----
Consolidated net income $109 $122 $ (13)
==== ==== =====
</TABLE>
- ----------------
*Sun completed the sale of its International Production business on
September 30, 1996. Earnings after July 24, 1996, the date the agreement
of sale was consummated, are included in the gain on divestment.
**For a discussion of special items, see Notes 2, 4 and 5 to the condensed
consolidated financial statements.<PAGE>
<PAGE> 16
Analysis of Earnings Profile of Sun Businesses
- ----------------------------------------------
In the nine-month period ended September 30, 1996, Sun had net income of
$109 million, or $1.02 per share of common stock, compared with net income
of $122 million, or $1.14 per share of common stock, for the first nine
months of 1995. Excluding the special items shown separately in the
Earnings Profile of Sun Businesses, Sun earned $37 million in the first
nine months of 1996 compared to $113 million in the first nine months of
1995.
In order to improve its competitive position, the Company is currently
pursuing a strategy of upgrading its product slate, improving the
reliability and efficiency of its refining facilities and reducing
operating and administrative costs. However, the Company is also
considering other strategic options including possible sale, joint venture,
shutdown and additional reconfiguration of certain of its refining
facilities.
Sun Northeast Refining -- The Sun Northeast Refining business, which
consists of the manufacturing and wholesale marketing of fuels produced at
Sun's Marcus Hook, PA and Philadelphia, PA refineries, had a loss of $44
million in the first nine months of 1996 compared to a loss of $21 million
in the first nine months of 1995. The increase in the operating loss was
due primarily to higher refinery operating expenses ($14 million) and lower
sales volumes ($5 million). Increased planned refinery maintenance
activity also adversely impacted operating results. The higher operating
expenses were due largely to higher refinery fuel costs (both produced and
purchased) resulting from higher crude oil and natural gas prices. Average
wholesale fuels margins were essentially unchanged during the period as the
favorable impact of stronger market conditions for distillate products was
offset by lower margins for wholesale gasoline and asphalt.
Sunoco Northeast Marketing -- The Sunoco Northeast Marketing business,
which consists of the retail sale of gasoline and middle distillates in New
England and the Mid-Atlantic states and convenience-store operations in
these regions, earned $9 million in the current nine-month period versus
$32 million in the first nine months of 1995. The decrease in operating
results was primarily due to lower retail gasoline margins ($14 million)
and an increase in operating, marketing and administrative expenses ($13
million), partially offset by an increase in sales volumes ($1 million).
Sunoco Chemicals -- The Sunoco Chemicals business consists of the
manufacturing and marketing of commodity and intermediate petrochemicals
produced at the Marcus Hook and Philadelphia refineries, at an ethylene
oxide plant in Brandenburg, KY and at a joint venture MTBE facility in Mont
Belvieu, TX. Sunoco Chemicals earned $30 million in the first nine months
of 1996 versus $59 million in the 1995 nine month period. The decline in
earnings was primarily due to significantly lower margins ($27 million) for
most petrochemicals products compared to the strong margins experienced in
the first nine months of 1995. Production shortfalls due to maintenance
activities at Sun's operating facilities also negatively impacted Sunoco
Chemicals.
Sunoco Lubricants -- The Sunoco Lubricants business, which is comprised of
the manufacturing, packaging and marketing of lubricating and specialty
oils produced at Sun's Tulsa, OK and Puerto Rico refineries as well as the
<PAGE>
<PAGE> 17
related manufacturing and wholesale marketing of fuels produced at these
facilities, had a loss of $7 million in the 1996 nine-month period,
compared to a loss of $10 million in the first nine months of 1995. The
improvement in operating results was primarily due to higher sales volumes
of both lubricants ($14 million) and wholesale fuels ($6 million),
reflecting an increase in refinery production levels, and to higher margins
on wholesale fuels products ($9 million), primarily resulting from a
stronger market for distillate products. These positive factors were
essentially offset by the impact of lower lubricant margins ($9 million)
and higher operating and administrative expenses ($17 million) largely
attributable to an increase in refinery fuel costs and production levels.
Sunoco MidAmerica Marketing & Refining -- The Sunoco MidAmerica Marketing &
Refining business consists of the retail sale of gasoline and middle
distillates and convenience-store operations in the midwestern U.S.
(primarily Ohio and Michigan) as well as the manufacturing and wholesale
marketing of fuels and petrochemicals produced at Sun's Toledo, OH
refinery. Sunoco MidAmerica Marketing & Refining had a loss of $4 million
during the first nine months of 1996, compared to a loss of $6 million in
the 1995 nine-month period. Improved wholesale fuel margins ($11 million)
and sales volumes ($6 million) were partially offset by the decline in
margins on petrochemicals (largely xylene) produced at the Toledo refinery
($11 million). An increase in refinery expenses due to higher refinery
fuel cost was partially offset by lower retail marketing expenses.
Sunoco Logistics -- The Sunoco Logistics business, which consists of
pipeline transportation of crude oil and refined petroleum products,
domestic crude oil acquisition from third-party leases, crude oil trucking
and the Nederland, TX crude oil terminalling operation, earned $39 million
in the first nine months of 1996 versus $40 million in the year-ago period.
The decrease was due largely to lower throughput in Sun's eastern product
pipeline system.
Sun Coal and Coke -- The Sun Coal and Coke business consists of coal
production from mines in Virginia and Kentucky and coke manufacturing at
the Company's facility in Vansant, VA. Sun Coal and Coke earned $25
million in the first nine months of 1996 versus $19 million in the same
prior year period. The improvement in income is primarily due to improved
operations and a gain recognized in the third quarter of 1996 from the sale
of a coal mining operation in Kentucky, which had been inactive since March
1995.
Net Financing Expenses -- Net financing expenses decreased $10 million
versus the year-ago period due to lower average total borrowings as the
Company substantially reduced its debt level in the second half of 1995.
Real Estate Operations Held for Sale -- Real estate operations held for
sale were breakeven for both nine-month periods. For a further discussion
of Sun's real estate operations held for sale, see Note 3 to the condensed
consolidated financial statements.
Sun International Production -- In the third quarter of 1996, Sun sold its
International Production business to Agip (U.K.) Limited for $278 million
in cash resulting in a $125 million after-tax gain. Operating income
through July 24, 1996, the date the agreement of sale was consummated,
<PAGE>
<PAGE> 18
totalled $41 million compared to $40 million for the entire nine months of
1995. For additional information, see Note 2 to the condensed consolidated
financial statements.
Analysis of Consolidated Statements of Income
- ---------------------------------------------
Sales and other operating revenue increased $816 million, or 11 percent,
principally due to higher domestic refined product sales prices ($400
million) and volumes ($285 million), higher revenues from resales of
purchased crude oil ($521 million) and higher sales and other operating
revenue attributable to Sun's coal and cokemaking business ($82 million)
due to the presentation of this business as an operation held for sale
during the first half of 1995 (see Note 3 to the condensed consolidated
financial statements). Partially offsetting these positive factors were
lower sales and other operating revenue attributable to Canadian refining
and marketing operations ($525 million, including Canadian consumer excise
taxes of $207 million) as a result of the divestment of Suncor on June 8,
1995. Interest income increased $3 million principally due to higher
interest earned on the installment note receivable from the divestment of
Suncor, which was collected in June 1996. Other income increased $16
million due to higher gains on divestments ($9 million) and higher equity
in earnings of affiliated companies ($8 million).
Cost of products sold and operating expenses increased $1,128 million, or
22 percent, primarily due to higher domestic crude oil and refined product
costs ($712 million) largely as a result of an increase in crude oil
prices, higher resales of purchased crude oil ($521 million), higher
domestic refinery operating expenses, principally refinery fuel costs ($64
million) and higher costs attributable to Sun's coal and cokemaking
business ($56 million). The increase in cost of products sold and
operating expenses was partially offset by lower costs and operating
expenses attributable to the divestment of Canadian refining and marketing
operations ($281 million). Selling, general and administrative expenses
decreased $37 million, or 8 percent, due to lower Canadian refining and
marketing expenses as a result of the Suncor divestment ($51 million),
partially offset by higher domestic marketing expenses. Taxes, other than
income taxes decreased $168 million, or 12 percent, principally due to
lower consumer excise taxes ($157 million) largely attributable to the
Suncor divestment. Depreciation, depletion and amortization increased $2
million, or 1 percent, primarily as a result of higher depreciation at
Sun's domestic refining and marketing and coal and cokemaking operations,
partially offset by the decline resulting from the Suncor divestment. For
a discussion of the provisions for write-down of assets and other matters
recorded in the second quarters of 1996 and 1995, see Note 4 to the
condensed consolidated financial statements. Interest cost and debt
expense decreased $21 million, or 26 percent, due to lower average
borrowings. For a discussion of the cumulative effect of change in
accounting principle, see Note 5 to the condensed consolidated financial
statements.
<PAGE>
<PAGE> 19
RESULTS OF OPERATIONS - THREE MONTHS
Earnings Profile of Sun Businesses (after tax)
- ----------------------------------------------
<TABLE>
<CAPTION>
Three Months Ended
September 30
------------------
1996 1995 Variance
---- ---- --------
(Millions of Dollars)
<S> <C> <C> <C>
Sun Northeast Refining $(20) $ 16 $(36)
Sunoco Northeast Marketing 3 27 (24)
Sunoco Chemicals 12 17 (5)
Sunoco Lubricants (6) 1 (7)
Sunoco MidAmerica Marketing &
Refining (5) 6 (11)
Sunoco Logistics 13 15 (2)
Sun Coal and Coke 10 7 3
Corporate expenses (6) (6) --
Net financing expenses (11) (13) 2
Real estate operations held
for sale (1) -- (1)
Sun International Production* 3 8 (5)
---- ---- ----
(8) 78 (86)
Gain on divestment of International
Production business* 125 -- 125
---- ---- ----
Consolidated net income $117 $ 78 $ 39
==== ==== ====
</TABLE>
- ----------------
*Sun completed the sale of its International Production business on
September 30, 1996. Earnings after July 24, 1996, the date the agreement
of sale was consummated, are included in the gain on divestment.
<PAGE>
<PAGE> 20
Analysis of Earnings Profile of Sun Businesses
- ----------------------------------------------
In the three-month period ended September 30, 1996, Sun had net income of
$117 million compared with net income of $78 million for the third quarter
of 1995. Primary earnings per share were $1.44 in the current quarter
versus $.87 per share in the third quarter of 1995. On a fully diluted
basis, which assumes the redemption of the preference shares for common
stock, Sun earned $1.19 per share in the third quarter of 1996 versus $.76
per share in the year-ago period. Excluding the $125 million after-tax
gain on the sale of the International Production business shown separately
in the Earnings Profile of Sun Businesses, Sun had a loss of $8 million in
the third quarter of 1996 compared to income of $78 million in the third
quarter of 1995.
Sun Northeast Refining -- The Sun Northeast Refining business had a loss of
$20 million in the third quarter of 1996 versus income of $16 million in
the third quarter of 1995. The decline was due primarily to significantly
lower average wholesale fuels product margins ($30 million), principally on
wholesale gasoline and asphalt, and lower sales volumes ($5 million),
partially offset by lower refinery operating expenses ($1 million). Sun is
withdrawing in 1997 from the asphalt business, which had sales of over
26,000 barrels daily during the third quarter of 1996, as part of the
reconfiguration project underway at the Point Breeze refining facilities at
Sun's Philadelphia refinery.
Sunoco Northeast Marketing -- The Sunoco Northeast Marketing business
earned $3 million in the current quarter versus $27 million in the third
quarter of 1995. The decrease in earnings was due largely to lower average
retail gasoline margins ($22 million), which were more than 5 cents per
gallon lower than the year-ago period, and to higher operating, marketing
and administrative expenses ($4 million), partially offset by a 3 percent
increase in retail gasoline sales volumes.
Sunoco Chemicals -- Sunoco Chemicals earned $12 million in the third
quarter of 1996 versus $17 million in the third quarter of 1995. The
decline in earnings was primarily due to lower margins ($5 million),
particularly on propylene, compared to the strong margins experienced in
the third quarter of 1995. Although average prices for chemicals did
increase somewhat from the second quarter of 1996, higher feedstock costs,
particularly for aromatics, largely offset these increases.
Sunoco Lubricants -- The Sunoco Lubricants business had a loss of $6
million in the 1996 third quarter, compared to earnings of $1 million in
the 1995 third quarter. Lower prices for base oils and the impact of
significantly higher average crude oil costs on lubricants and residual
fuel margins and on refinery fuel costs were partially offset by a 22
percent increase in lubricants sales volumes and higher refinery production
volumes. Operations at the Puerto Rico refinery were adversely affected by
hurricanes which resulted in approximately 12 days of lost production in
each quarter.
<PAGE>
<PAGE> 21
During the third quarter of 1996, Sun signed a definitive contract to
acquire the Kendall and Amalie lubricants business from Witco Corporation.
The acquisition will enable Sun to increase by approximately 3,600 barrels
per day its value-added lubricant sales by increasing the amount of
existing base oil production it upgrades into value-added lubricants. This
acquisition was completed on November 1, 1996 for $74 million, including
$46 million for working capital. The Company expects to reduce the ongoing
level of working capital invested in this business by $10-$15 million
during the fourth quarter of 1996.
Sunoco MidAmerica Marketing & Refining -- Sunoco MidAmerica Marketing &
Refining had a loss of $5 million during the 1996 third quarter, compared
to earnings of $6 million in the 1995 third quarter. The decline was due
to lower fuels margins in the wholesale market ($7 million), lower
chemicals margins ($2 million) and higher refinery expenses ($3 million),
partially offset by record production levels.
Sunoco Logistics -- The Sunoco Logistics business earned $13 million in the
third quarter of 1996 versus $15 million in the year-ago period. The
decrease was largely due to lower throughput in Sun's eastern product
pipeline system.
Sun Coal and Coke -- Sun Coal and Coke earned $10 million in the third
quarter of 1996 versus $7 million in the third quarter of 1995. The
improvement in income was primarily due to the gain recognized in the third
quarter of 1996 on the sale of an inactive coal mining operation.
Net Financing Expenses -- Net financing expenses totalled $11 million for
the third quarter of 1996 compared to $13 million for the third quarter of
1995. The decrease was due in part to lower average borrowings.
Real Estate Operations Held for Sale -- Real estate operations held for
sale had a loss of $1 million in the third quarter of 1996 versus break-
even results for the year-ago period. For a further discussion of Sun's
real estate operations held for sale, see Note 3 to the condensed
consolidated financial statements.
Sun International Production -- In the third quarter of 1996, Sun sold its
International Production business to Agip (U.K.) Limited for $278 million
in cash resulting in a $125 million after-tax gain. Operating income in
the third quarter through July 24, 1996, the date the agreement of sale was
consummated, totalled $3 million compared to $8 million for the entire 1995
third quarter.
Analysis of Consolidated Statements of Income
- ---------------------------------------------
Sales and other operating revenue increased $527 million, or 22 percent,
principally due to higher domestic refined product sales prices ($201
million) and volumes ($34 million) and higher revenues from resales of
purchased crude oil ($271 million). Other income increased $10 million
primarily due to higher gains on divestments ($6 million) and higher equity
in earnings of affiliated companies ($4 million).
<PAGE>
<PAGE> 22
Cost of products sold and operating expenses increased $631 million, or 39
percent, primarily due to higher domestic crude oil and refined product
costs ($351 million) largely as a result of an increase in crude oil
prices, higher resales of purchased crude oil ($271 million) and higher
domestic refinery operating expenses ($10 million). Selling, general and
administrative expenses increased $13 million, or 9 percent, primarily due
to higher marketing expenses. Taxes, other than income taxes increased $11
million, or 3 percent, principally due to higher consumer excise taxes.
Depreciation, depletion and amortization increased $1 million, or 2
percent, primarily as a result of higher depreciation at Sun's coal and
cokemaking operations. Interest and debt expense decreased $6 million, or
24 percent, in part due to lower average borrowings.
FINANCIAL CONDITION
Cash and Working Capital
- ------------------------
At September 30, 1996, Sun had cash and cash equivalents of $235 million
compared to $11 million at December 31, 1995, and had working capital of
$68 million compared to working capital of $109 million at December 31,
1995. Sun's working capital position is considerably stronger than
indicated because of the relatively low historical costs assigned under the
LIFO method of accounting for most of the inventories reflected in the
condensed consolidated balance sheet. The current replacement cost of all
such inventories exceeds the carrying value at September 30, 1996 and
December 31, 1995 by $708 million and $528 million, respectively.
Inventories valued at LIFO, which consist of crude oil and refined
products, are readily marketable at their current replacement values.
Management believes that the current levels of Sun's cash and working
capital provide adequate support for ongoing operations.
Cash Flows and Financial Capacity
- ---------------------------------
In the first nine months of 1996, Sun's net cash provided by operating
activities was $203 million compared to $175 million in the first nine
months of 1995. This $28 million improvement was largely due to a decrease
in working capital uses pertaining to operating activities, partially
offset by a decline in net cash provided by discontinued operations and a
reduction in income before special items.
Divestment activities have also been a source of cash and have enhanced
liquidity. In September 1996, Sun received $278 million in cash from the
sale of its International Production business. As a result of the Suncor
sale, Sun received total cash proceeds of $770 million, of which $635
million was received in June 1995 and $135 million was received in June
1996.
Management believes that future cash provided by continuing operations
("cash generation") will be sufficient to satisfy Sun's capital
requirements and to pay the current cash dividends on common and preference
<PAGE>
<PAGE> 23
stock. 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 oil 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 financing
activities. In the event that cash generation is insufficient to satisfy
near-term cash requirements, the Company has access to $600 million of
short-term financing 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.
The following table sets forth amounts outstanding related to the above
short-term borrowing arrangements as well as to Sun's other borrowings at:
<TABLE>
<CAPTION>
September 30 December 31
1996 1995
------------ -----------
(Millions of Dollars)
<S> <C> <C>
Short-term borrowings
Commercial paper $ -- $ 4
Non-committed money market
facilities -- 50
---- ----
-- 54
Current portion of long-term debt 3 3
Long-term debt 886 888
---- ----
Total borrowings $889 $945
==== ====
</TABLE>
As of September 30, 1996, Sun's debt-to-capital ratio was 34.5 percent.
Management believes there is sufficient borrowing capacity available to
provide for Sun's future cash requirements.
<PAGE>
<PAGE> 24
PART II
OTHER INFORMATION
Item 1. Legal Proceedings
Many 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 would not be
material in relation to the consolidated financial position of Sun at
September 30, 1996.
Item 5. Other Information
CAUTIONARY STATEMENT FOR PURPOSES OF THE "SAFE HARBOR" PROVISIONS OF
THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
The Company desires to take advantage of the "safe harbor" provisions
contained in Section 27A of the Private Securities Litigation Reform
Act and is including this statement in its third quarter 1996 Form
10-Q in order to do so.
From time to time, Sun's management may wish to provide forward-
looking information to existing and potential security holders. Such
forward-looking information is subject to certain risks and
uncertainties. The factors, among others, which could cause actual
amounts to differ materially from projections include: a significant
change in industry-wide refining margins, a sharp change in crude oil
and other raw material costs, actions taken by competitors (including
both pricing and expansion and retirement of refinery capacity in
response to market conditions), the reliability and efficiency of
operating facilities, the level of operating expenses, changes in
labor relations, the effect of current or amended state and federal
environmental and other governmental regulations (including
particularly regulations dealing with gasoline composition and
characteristics) or the judicial interpretation of such regulations,
general economic conditions, changes in the domestic or international
political climate, market supply and demand for Sun's products, and
hazards common to operating facilities (including explosions, fires,
oil spills and the effects of severe weather conditions).
The factors identified in this statement are believed to be important
factors (but not necessarily all of the important factors) that could
cause actual results to differ materially from those expressed in any
forward-looking statement made by or on behalf of the Company.
Unpredictable or unknown factors not discussed herein could also have
material adverse effects on forward-looking projections.
<PAGE>
<PAGE> 25
Item 6. Exhibits and Reports on Form 8-K
Exhibits:
12 - Statement re Sun Company, Inc. and Subsidiaries Computation of
Ratio of Earnings to Fixed Charges for the Nine-Month Period
Ended September 30, 1996.
27 - Article 5 of Regulation S-X, Financial Data Schedule.
Reports on Form 8-K:
The Company has not filed any reports on Form 8-K during the quarter
ended September 30, 1996.
*****************************
We are pleased to furnish this report to shareholders who request it by
writing to:
Sun Company, Inc.
Investor Relations
Ten Penn Center
1801 Market Street
Philadelphia, PA 19103-1699
<PAGE>
<PAGE> 26
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by
the undersigned thereunto duly authorized.
SUN COMPANY, INC.
BY s/ THOMAS W. HOFMANN
-----------------------
Thomas W. Hofmann
Comptroller
(Principal Accounting Officer)
DATE November 5, 1996
<PAGE>
<PAGE> 1
EXHIBIT INDEX
Exhibit
Number Exhibit
- ------- -----------------------------------------
12 Statement re Sun Company, Inc. and Subsidiaries Computation
of Ratio of Earnings to Fixed Charges for the Nine-Month
Period Ended September 30, 1996.
27 Article 5 of Regulation S-X, Financial Data Schedule.
<PAGE>
<PAGE> 1
<TABLE>
<CAPTION>
EXHIBIT 12
STATEMENT RE COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES(a)
Sun Company, Inc. and Subsidiaries
(Millions of Dollars)
- --------------------------------------------------------------------------
For the Nine Months
Ended September 30, 1996
------------------------
(UNAUDITED)
<S> <C>
Fixed Charges:
Consolidated interest cost and debt expense $ 59
Interest cost and debt expense of real estate
operations held for sale 6
Interest allocable to rental expense(b) 22
----
Total $ 87
====
Earnings:
Consolidated loss from continuing operations
before income tax benefit and cumulative
effect of change in accounting principle $(97)
Proportionate share of income tax expense of
50 percent owned but not controlled
affiliated companies 4
Equity in income of less than 50 percent owned
affiliated companies (12)
Dividends received from less than 50 percent
owned affiliated companies 4
Fixed charges 87
Interest capitalized (2)
Amortization of previously capitalized interest 5
----
Total $(11)
====
Ratio of Earnings to Fixed Charges N/A(c)
====
</TABLE>
- ----------------
(a) The consolidated financial statements of Sun Company, Inc. and
subsidiaries for the above period contain the accounts of all
subsidiaries that are controlled (generally more than 50 percent owned)
except those engaged in real estate and international production
operations. Real estate operations are accounted for as an investment
held for sale and included in the computation of the ratio of earnings
to fixed charges, while international production operations are being
treated as a discontinued operation and excluded from the computation.
(See Notes 2 and 3 to the condensed consolidated financial statements.)
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.
(c) Earnings are inadequate to cover fixed charges by $98 million.
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> SEP-30-1996
<CASH> 235
<SECURITIES> 0
<RECEIVABLES> 812
<ALLOWANCES> 19
<INVENTORY> 522
<CURRENT-ASSETS> 1,680
<PP&E> 5,671
<DEPRECIATION> 2,682
<TOTAL-ASSETS> 5,110
<CURRENT-LIABILITIES> 1,612
<BONDS> 886
<COMMON> 130
0
748
<OTHER-SE> 813
<TOTAL-LIABILITY-AND-EQUITY> 5,110
<SALES> 8,220
<TOTAL-REVENUES> 8,273
<CGS> 6,323
<TOTAL-COSTS> 6,323
<OTHER-EXPENSES> 1,981
<LOSS-PROVISION> 7
<INTEREST-EXPENSE> 59
<INCOME-PRETAX> (97)
<INCOME-TAX> (40)
<INCOME-CONTINUING> (57)
<DISCONTINUED> 166
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 109
<EPS-PRIMARY> 1.02
<EPS-DILUTED> 1.02
</TABLE>
